Jul 23, 2013
Executives
Paulo Faustino da Costa - Department Officer and Member of the Executive Board Luiz Carlos Angelotti - Managing Director, Investor Relations Officer and Member of the Executive Board
Analysts
Saul Martinez - JP Morgan Chase & Co, Research Division Mark Jason Mario Pierry - Deutsche Bank AG, Research Division Regina Longo Sanchez - Itaú Corretora de Valores S.A., Research Division Marcelo Telles - Crédit Suisse AG, Research Division
Operator
Good morning, ladies and gentlemen. We would like to welcome everyone to Banco Bradesco's Second Quarter 2013 Earnings Results Conference Call.
This call is being broadcasted simultaneously through the internet and the website, www.bradesco.com.br/ir. In that address, you can also find a banner through which the presentation will be available for download.
[Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Banco Bradesco's management and on information currently available to the company.
Forward-looking statements are not guarantees of performance. 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 differ materially from those expressed in such forward-looking statements. Now I would turn the conference over to Mr.
Paulo Faustino da Costa, Market Relations Department Director.
Paulo Faustino da Costa
Good morning, everyone, and thank you for participating in our second quarter conference call. We are here to provide you with all the information you need about our numbers.
And this is line with our goal of always increasing the transparency of information disclosed to the market. We have here today, Mr.
Julio de Siqueira Carvalho de Araujo, Executive Vice President; Mr. Marco Antonio Rossi, the Chief Executive Officer of Bradesco Seguros Group and Bradesco Executive Vice President; Mr.
Luiz Carlos Angelotti, Executive Managing Director and Investor Relations Officer. Mr.
Moacir Nachbar Junior, Deputy Officer. I will now turn to Mr.
Luiz Carlos Angelotti, who will lead our conference call. And after his presentation, we will be open to answer your questions.
Mr. Angelotti, please go ahead.
Luiz Carlos Angelotti
Good morning, everyone, and thank you for joining our second quarter 2013 conference call. I will now deal with some highlights of and deal [ph] with strong our financial statements, point out that they were prepared under 100% Central Bank accounting rules.
Slide 2 and 3 show our main highlights, amongst which I would particularly like to draw your attention on Slide 2 to our adjusted net income of BRL 5,921,000,000 in the first half of 2013, 3.7% up on the same period last year. Another highlight was the 10% increase in the field of our net credit margin, that is the booking provision for loan loss, and our total assets, which came to BRL 897 billion, 8% up on June in 2012.
On Slide 3, it is especially worth noting our assets under management, which ended the quarter at BRL 1.234 trillion, a 9.1% increase over June 2012. And our 90-day delinquency ratio, which recorded an important 50 basis points reduction in the last 12 months, closing the quarter at 3.7%.
As well, the extension of our 90- and 60-day coverage ratios. Slide 4 shows the reconciliation between our book net income and the adjusted net incomes.
This quarter, the only nonrecurring event was the provision for civil contingencies in the gross amount of BRL 48 million. Adjusting for this event, our second quarter additional net income came to BRL 2,978,000,000.
Also on this slide, you can see that our adjusted return on average equity assets came to 18.8% in the first half of 2013. Slide 5 shows a historical series of our quarterly net income.
Net income growth in the second quarter of 2013 was mainly due, first, to a higher business volume, which provided for an increase in fee income; second, to our reduction in the delinquencies; and third, to the fact that the operating expenses were below inflation rating in annual terms. These positive factors were offset by reduced net interest income due to lower gains shown in the noninterest earning portion.
In comparison with the first half of 2012, adjusted net income moved up by BRL 290 million or 3.7% due to: first, the upturn in the interest earning portion of the net interest income due to the increase in volume of operations; second, the extension of the customer base, which helped push up fee income as a result of an increase in transaction volume; third, an increased revenue from insurance operation; and the fourth, reductions in delinquencies. Earnings per share in the last 12 months increased by 3.3% from BRL 2.70 to BRL 2.79.
In slide 6, we can see that the increase in both the 12 months and second quarter efficiency ratios was essentially due to the reduction in the net interest income incurred mainly due to lower gains from the market upsurge in the quarter. The blue line shows the efficiency ratio adjusted to risk, which remained flat over the previous quarter at 52.6%.
On Slide 7, we show that our shareholders' equity had a reduction in the period due to the mark-to-market of securities accounted for as available-for-sale. This procedure had no effect in the business results, nor did it have any positive or negative economic effect, since the securities are linked to the company's liabilities aiming at eliminating risks and ensuring that the returns and the rates match.
The accounting rules provide for the mark-to-market of the securities but do not permit the mark-to-market of the respective liabilities to which these assets are linked. If it were permitted, there wouldn't have been a reduction in shareholders' equity.
As you have already seen, our total assets reached to BRL 897 billion, BRL 66 billion or 8% up on June 2012 in the 6-month period. The term of average assets is totaling 1.3%, while the adjusted return on average stood at 18.8%.
The BIS ratio closed the quarter at 15.4%. The reduction was basically due to a lower subordinated debt volume and the negative mark-to-market adjustments of securities classified as available for sale.
This reduction was partially offset by the decrease in the capital requirement for loan operations to large corporates. On Slide 7, you can also see a simulation assuming full implementation of Basel III requirements as of June 3, 2013.
This slide shows the company enjoys a comfortable position, what enables a full implementation with no lending debt. Slide 8 shows the relative share of our main operations in net income.
Both in the quarter and the annual comparison, it's worth mentioning the increased relative share of loans boosted by a reduction in delinquencies and also the increased share of fees due to an increase in the customer and card base, which consequently helped push up transaction volumes. In the annual comparison, the reduced share of securities was mainly due to lower gains from market arbitrage.
On Slide 9, we see that this quarter, unrealized gains totaled BRL 12 billion, BRL 8.3 billion down on the previous quarter. The reduction was basically due to the negative mark-to-market adjustments of our fixed income secureds classified as available-for-sale and linked to our liabilities as we mentioned.
The reduction had no impact on our results and it was offset by the appreciation of our investments, especially the Cielo shares. On Slide 10, we show the evolution of our unrealized gains for the past 5 years.
The highlight is the strong growth of June 2011 until the end of 2012. During this period, our unrealized gains went from BRL 10.6 billion to BRL 24.9 billion, an increase of BRL 14.3 billion, which basically refers to the reduction in Selic base rate.
Starting January of 2013, expectations are of interest rate increases became strong with increases taking place in April and May 2013, which provided for a return of partial business generated on realized gains. On Slide 11, we show the evolution of our net interest income shown both noninterest and interest earning operations.
This quarter, the reduction in the total net interest income came from the noninterest earnings portion, reflecting lower gains from the market arbitrage. It is included in noninterest earnings, gains from the partial sale of BM&F shares, amounting to BRL 148 million pretax.
In the annual comparison, the 1.6% increase in the interest earning portion was mainly due to the upturn in average business volumes led by loans and insurance. Let's look at Slide 12.
The annualized net interest margin reached 7.2% in the period, remaining stable over the previous period. We expected this period to record a gradual reduction by the end of 2013 as it may reach 7%, mainly due to higher pressure on the spreads arriving from the stronger competitiveness.
This is roughly offset by lower provisions for loan losses due to the decrease in the delinquency ratio. Slide 13 gives a breakdown of the interest-earning portion of the interest income, which was positively affected this quarter by: first, loans due to the increase in business volumes; and second, funding reflected the upturn in the interest rates.
The highlights in the annual comparison were long-standing insurance fees, which were positively affected by the increase in business volumes. The decline in the funding margin was due to the reduction in interest rates during the period.
Looking at Slide 14, I'd like to call your attention to the net credit margin, the blue area of the chart, which went up by 5.5% in the quarter and 10% in the 6-months period, and was positively affected by higher business volumes and also by the reduction in delinquency cost, which fell for the fourth consecutive quarter. And it is shown in the red area of the chart, thereby producing a lower negative impact on the gross margin representing 40.5%.
Moving to Slide 15, our extended loan portfolio totaled BRL 402 billion in June 2013, 2.8% up in the quarter and 10.2% up in the annual comparison. These increases were mainly due to the increase in operations originated by individuals and the micro, small and medium companies.
This segment reached 11.2% increase. Confirming our expectations, Slide 16 shows a 1/3 point reduction in the delinquency ratio to 3.7%, the level we were expecting to achieve by December 2013.
It is worth to emphasize that this reduction was evident in all segments, led by the individual ratio, which fell by 50 basis points. We believe that this ratio will remain stable, plus reach a downward bias once short-term delinquencies post a downward trend in now this segment.
And we expect stability in the unemployment rate. Slide 17 shows that our provisioning levels remained solid, exceeding Central Bank requirements by BRL 4 billion.
Assuming the maintenance of the 12-months gross and the net loss ratios as from June 2012, we have booked provisions of BRL 8.3 billion, above expected gross losses in the next 12 months. The dotted part of the blue lines, or even BRL 11.4 billion in relation to losses net of recoveries, the dotted part of the purple line, also for the next 12 months.
These figures advance that our provision level under Central Bank regulation is consistent to our risk assessment and provisioning policies. Reinforcing what we mentioned in the previous slide, Slide 19 shows the coverage ratios of the allowance for loan loss in relation to credits overdue by more than 90 and 60 days, which have remained at very comfortable levels.
In fact, both ratios moved up, reflecting the field reduction in delinquencies. On Slide 19, we show that the second quarter fee income totaled BRL 4,983,000,000, 8.3% up on the previous quarter, mostly due to the excellent performance of fees from our investment banking activities.
In comparison with the first half of 2012, fees from our investment bank activities increased by 54.5%, followed by cards, consortiums and checking accounts. It is worth noting our investments in organic growth with the expansion and the modernization of the service channels, which led to an increase in our customer and card fees, in turn, allowing us to continually increase the transaction volumes, going up by 12% in the last 12 months, thereby pushed up fee income.
Slide 20 shows the second quarter operating expense increased by 3.9% over the previous quarter. Basically reflecting higher: first, the personnel expense impacted by the lower concentration of vacations when compared to the first quarter; and second, the administrative expense due to the increased volume of business and services, and more business days in the period.
In comparison with the first 6 months of the last year, operating expenses increased by 4%. Once again, reflecting our strong cost controls in this context.
It is particularly worth mentioning the activity role played by our internal efficiency committee. The upturn in personnel expenses was mainly due to the salary increase of 7.5%, in line with the collective bargaining agreements.
Moving on to Slide 21. We can see that the 3.6% increase in administrative expense in the quarter was basically due to higher business and service volumes.
In comparison with the same period last year, the slight 2.8% upturn, if compared to an inflation rate of 6%, was a result of our continuous efforts to control this expense, which partially softened the impact generated by the upturn in the expenses arising from higher business and service volumes and the extension in the number of service points. Slide 22 shows revenues from our insurance/pension plan and the capitalization bond activities, which increased by 20.9% over the previous quarter, largely as a result of the life/pension plans segment, which grew by 32.2%.
The annual comparison, the increase came to 15.3%, led by life and pension plans, health and saving bond segment, all of which recorded double-digit growth. Second quarter net income remained virtually flat over the previous quarter.
The 4.2% upturn in net income in the annual comparison was essentially due to: first, the revenue growth; second, the reduction in the expense ratio; and third, the greater administrative efficiency. Slide 23 shows some of the main things from our insurance activities.
The combined ratio came to 85.5% in the second quarter of 2013, a 50-basis-point decrease over the first quarter. Financial assets totaled BRL 142 billion while the technical provisions came to BRL 132 billion, BRL 114 billion of which from life/pension plan products.
Slide 24 shows our revised guidance for 2013 based on the macro economic scenario and the business environment in the first half and our expectations for the rest of the year. We reduced our growth projections for loans when compared to our beginning-of-the-year projections.
As a result, we revised downwards our growth projections for the interest-earning portion of net interest income. On the other hand, we revised upwards our growth projections for fee income as a result of an increase in our customer and card base, and in turn, in the volume of transactions.
We revised downward our growth projections for operating expense to below expected attrition level, giving the first half performance fee of these 2 lines and our constant search for the group efficiency. For insurance premiums, we are maintaining our initial projections.
In conclusion, given the events that impacted the macro economic scenario, this quarter, we believe we had a quarter of healthy results. It is also worth mentioning that our results and indicators are sustainable, irrespective of the internal and external economic challenges we are currently facing.
Certainly, these results were possible thanks to our broad business diversification and strong penetration, allowing us to pursue our business opportunities in the banking and insurance segment. Finally, Bradesco maintains its positive outlook for Brazil in the long term, which can be seen by its investments-growing strategy, which are focused on organic and consistent growth.
Thank you very much for the attention and we are now available to answer any questions you may have.
Operator
[Operator Instructions] Mr. Martinez, your line is open.
Saul Martinez - JP Morgan Chase & Co, Research Division
This is Saul Martinez from JPMorgan. So I have 2 questions.
First of all, on net interest income. If I X out -- if I look at net interest income on interest-earning or interest-bearing net interest income, including the noninterest component, it rose 0.6% Q-on-Q.
And you had, I believe, 3 or 4 more business days this quarter than last quarter. Your current guidance of 4% to 8%, obviously, it's a reduction.
But it does imply that net interest income will grow off of current levels pretty nicely in 3Q and 4Q. Given the macro environment, why do you feel confident that, that net interest income is going to grow at the rate that will allow you to get to your guidance?
Secondly, on asset quality. I understand you can't talk about specific exposures.
There've been a lot of speculation in the press about your exposures to one group. You've also indicated that your loan loss provisions for 2013 in the past will be about BRL 13 billion, more or less, maybe a little bit less than that.
Is there any risk that, that specific corporate exposures could put that loan loss provision guidance at risk? Are you worried that, that could be the case?
Luiz Carlos Angelotti
Thank you for the question. About the net interest income growth, we revised our guidance.
Now the guidance that we have is 4% to 8%. This guidance normally is considered is, basing our budgets, we revised the growth for this year.
But we understand that in the component that we have in our net interest earning portion, net interest income, we have the main component is loans. In this line, in this first half, we have some effects from the new credit card points that we adopt for the interest rates.
We reduced the interest rates for the credit card revolving operations. And the new format that we have now, we understand that the clients will use more.
And this is a one-off effect that will help to improve more the revenues in the loan side. We have now, we have all the products that we understand that will continue to grow, payroll loans, mortgage operations, and these parts are growing more than 30% in the mortgage case.
And the payroll loans, our internal production is growing more than 6% in the annual basis. For companies, we have the auto loans operation, the truck loans that, that is growing more than 20%.
Export financing is another product that is growing higher. Mortgage for companies is going more than 30%.
Then we need to understand that to reaching the growth that we expect for our credit portfolio, that we expect to finish the year around 13%. Then we expect more on better increasing the first line that is loans.
In the funding revenues that we have in the net interest earnings, we did the modification in the Selic rate, that is in the expectation that we have for the Selic rate for the year. Probably, we'll have there some additional revenue that will improve the growth.
Insurance margin, we expect that to be better when you compare with 2012. Then we expect more and more growth in this line.
And interest line, there are [indiscernible] orders as we talked that we expect that, that will -- that the revenues in this line will just improve a little more. But the final impact that we expect in the growth when you compare 2013 with 2012 in the net interest earnings growth, we expect to reach around the 6%, the center of the guidance.
Then the main component is the credit role. And this first half is affected with the credit card points that, in the next quarter, we expect more revenues from this segment.
And about the asset quality, we talked about the expectation for the expense for 2013 was -- the limit that we expected was BRL 13 billion compared the same level that we had in 2012, but now with the new level of the delinquency ratio, that is the target or the number that we expect for the end of the year, we reached it now in the first half. Then probably, the expense will be less than BRL 13 billion.
Probably something around the 12 point -- BRL 500 million -- BRL 12.5 billion, something around that. We cannot talk about our exposures of our clients because the best products [ph] is in the rules here that we have here in Brazil.
But we revise our positions, our portfolio constantly and we adjust it according to our analysis that we have about the risk. Then we revise it now in the first half, the total portfolio that we have, and we are comfortable with the level of provisions.
Saul Martinez - JP Morgan Chase & Co, Research Division
Okay. If I could follow up on the first question.
To get -- if my math is right, to get to 4% NII growth, you need to grow in the second half, each quarter, 5% quarter on quarter your net interest income excluding noninterest income, 3Q versus 2Q, 4Q versus 3Q, an average 5% sequentially. It seems -- doesn't that seem to be a little bit aggressive?
I understand all the different variables you highlighted but it seems a bit aggressive, does it not?
Luiz Carlos Angelotti
In this half, this first half, in the last year, when you compare the revenues that we had last year, the funding line, we had more revenues because the level of the rates. Then in this first half of the year last year, we had some additional impacts from the more funding revenues and a little more security orders revenues.
This year, we expect to have more, to go up, the funding line, we'll grow more. And the loan side, we expect that will have an additional revenues that will come from cards.
And the additional, other part of that, as I mentioned, that we expect to have a better growth. You understand that we have how to get to stay in accordance with our guidance, and we expect to be, to stay more closer to the same period of the guidance.
[Operator Instructions] Our next question comes from Mr. Mark Jason with Invesco.
Mark Jason
My question is relating to the adjustment necessary for the difference in working days. So it seems that your fees were up something like 8.4% quarter-over-quarter and that was impacted by advisory fees.
But if we exclude the advisory fees, it was up something like 6.2%. But there was an increase in working days.
So what I'm trying to understand is, like, what would be the adjusted growth rate in fees given the impact from the additional working days? And what other areas would you see significant impact from the additional days?
Luiz Carlos Angelotti
This second quarter, when you compare with the first quarter, in many lines, even you have this effect of the working days in expenditures, in fees and in some revenues that we have in the loans. But if you compare in the annual basis, we -- this affect is neutral.
Then we understand that, okay, we have these more business days when you compare quarter with quarter, the second quarter with the first quarter. But when you look at the annual basis, this problem, we don't have this problem because the difference here is very small, I think, 1 day or 2 days.
Then I think the better growth, the better numbers that you can see above grows in the annual base. And then in fees, expenditures, these the main lines that we have this effect.
Operator
Our next question comes from Mr. Mario Pierry with Deutsche Bank.
Mario Pierry - Deutsche Bank AG, Research Division
Let me ask 2 questions also related to net interest income and asset quality. First, on net interest income, on your prepared remarks, you expect your net interest margin to be down to about 7% from 7.2% because of competitive pressure on spreads.
Can you just elaborate on that? Are you still seeing the state-owned banks being very aggressive?
Is that your expectation that they will continue to gain market share throughout the year? Or are you already seeing a more rational behavior by them?
And then second question is related to asset quality. Just looking forward, right, we are seeing that the economy in Brazil is much weaker than expected.
It seems like you still expect nonperforming loans to continue to decline throughout the year. So I'm just wondering why do you feel comfortable that we're not going to see a pickup in NPL, especially in the SME segment.
You continue to show the fastest growth in your loans. Your loan growth is actually being driven by the SME portfolio.
So if you can just elaborate your level of comfort in that segment in a weaker economic environment.
Luiz Carlos Angelotti
Okay. Thank you for the question, Mario.
Talk about the net interest, the NIM, we finished the quarter with 7.2%. We are working hard to maintain the spreads table.
If you look our number that we have in our comments, in our book, we maintained, in the first quarter, the spreads. In the second quarter, compared with the first quarter, it was 10.3%.
We are working in [indiscernible] for the 2 months in the spreads table. We expected more competition.
We understand that this year, that the private banking, they will -- they are more -- they are expecting to grow more. They are trying to grow more.
And we had some pressures. But we understand that the -- our NIM, until the end of the year, could reach at the maximum to 7%, not less than that, this number.
This effect is, that we talked about, is because these pressures in the spreads because of the competition. We see that the public banks, they are working to grow hard, but not to -- we're still BRL 7 billion over last year, or they are perhaps more rational spreads, more in the level and more in the market level.
About the asset quality. Okay, the economy is weaker than we expected in the beginning.
They are -- our GDP growth was -- our expectation was 3.5%. Now we have it 2.2%.
But if you compare with 2012, we have a better year for the expectation for growth. Then we, in this quarter, we finished the quarter with a delinquency ratio around 3.7%.
We expect that we probably will maintain this level. We expect stability for this level of our delinquency ratio.
But with some bias downward for the quality, the short delinquency ratio that we have in our portfolio is decreasing. Then probably, some good effect we expect for the future.
But we are -- we understand that we probably will have more stability in the delinquency ratio because the economy there, one factor is the unemployment rate is in the lower level now, 5.6%, 5.7%. And we don't expect, for the next year, a strong modification of our economy.
The fact of matter is they expect that if we have some modification in these unemployment rates, it will be only 0.1% increase. Then we understand that we have conditions now for 2 months in the stability in the delinquency ratio.
And inside the bank here, our credit policy, we are working continually for to maintain the better quality in the assets, to grow its quality this year, and the brokerage quality, and we see good margins. We are investing in to improve the quality of our internal models for to -- for credit approval.
Then we understand that we have for to maintain this quality in our assets. I'm talking about the SMEs, is one segment that we are investing for to have a good growth.
When you annualize the segment and the expectations for the future in the Brazilian economy, that's -- these are small companies, they will have good growth for the future. And then in this segment, you have the good margins for to do operations.
And we understand that we have to grow in this segment with quality. Normally our operations that we have here in SMEs or big corporates, but we have the guarantees of the company or of the owner.
Then we have another thing, that is our managers in debentures, they are responsible for to know the clients. They go into the companies, they do a visit.
They know the clients, the company. Normally, we started the relationship with small tickets.
And the -- according the relation, the start of the clients, we start to improve a little more the tickets. But our timing with the better quarter analysis, the -- it's guaranteed.
Then we understand that we have how to grow. If you analyze the Bradesco performance in the last years, you can see that in this segment, we are having growth and we are maintaining a stable delinquency ratio on this segment.
Then we understand that we have how to grow with quality in this segment and in the legal segment and in the corporate segment.
Mario Pierry - Deutsche Bank AG, Research Division
All right. So let me just go back into what you then -- to your answer to the net interest margin.
Basically, you said, right, that you expect NIM to reach 7% by the end of the year. But you are seeing a more rational behavior by the public sector banks.
Also, we're seeing a much higher Selic rate. So is it fair to assume that the 7% from your part seems conservative?
Especially, as Saul was asking you, about the net interest income growth that you're forecasting for the year, 4% to 8%, it seems like in order for you to get that rate...
Luiz Carlos Angelotti
It's conservative. This position is conservative.
Because we understand that we have this competition. We are working side -- if you compare our numbers, you -- we could maintain stable the spreads in the first half.
Then we will work in the second half in the same way. If we have success, we understand that we have this guidance, 7%, is conservative, very conservative.
Operator
Our next question comes from Ms. Regina Sanchez with Itaú.
Regina Longo Sanchez - Itaú Corretora de Valores S.A., Research Division
I also have 2 questions. The first one is that we observed the large corporate loans classified as rating D presented an increase to 2.5% from 1% of large corporate loans or approximately BRL 2.4 billion in the second quarter.
We saw that on Page 40 of the MD&A. I know you won't mention specific names of companies that have been downgraded.
But we'd like to know whether you consider this downgrade as a one-off event or, in other words, that loan-loss provision expenses would have been even lower, I mean, in around BRL 200 million if it's downgraded. Did it happen?
And if we could expect even lower levels of loan-loss provision expenses as a percentage of average lower in the coming quarters? Or if there's a chance that we could see more downgrades in the following quarters related to these or other large corporate loans?
And then I have a second question.
Luiz Carlos Angelotti
Okay. We can't comment about our clients.
We're constantly revising our portfolio about the risks. And we do the adjustments that we understand are necessary to force our clients and our portfolio.
Then there's a normal policy that we have, and we do this every month. Our spread department, they are responsible for these.
I understand inside of the company, we maintain this portfolio in the better relation or in the better position that we understand in the -- according to the risks that we -- according to our spreads analysis. We cannot comment about the clients because the Central Bank, our rules in accounting and the best practice.
And for this year, what we expect is that our expenses, considering that now we have the new level for the delinquency ratio, we understand that probably our expense will be something around, in the year, around the BRL 12.5 billion or something around that. Because we understand that we will maintain stable delinquency ratio this year with some expectations to have a better -- some decrease.
Then we understand that, probably, the expense will reduce a little more for the future.
Regina Longo Sanchez - Itaú Corretora de Valores S.A., Research Division
Okay. So you're saying that it should be lower than the BRL 13 billion that we saw in 2012?
Luiz Carlos Angelotti
Yes. Our expectations was something around BRL 13 billion.
But now, considering this new situation that we have, probably something around the BRL 12.5 billion. This number is net of recoveries.
These are considering the net of recoveries.
Regina Longo Sanchez - Itaú Corretora de Valores S.A., Research Division
Okay, perfect. And my second question is that, if you could share with us the asset and liability management trends that you predict regarding the banking book, as well as for the affiliated companies, I mean, mainly the insurance and pension business.
Because we understand that more than half of this mark-to-market of available-for-sale securities in the equity is related to the insurance and pension business, which does have a match with liabilities that are not mark-to-market in the equity. But part of this asset-liability management strategy also is increasing the developed risk of the bank and the market risk that is also accounted for the capital ratio of the bank.
And also, because it called my attention, if this is part of the asset-liability management of the bank to carry the national treasury notes that we saw a significant increase in this quarter. I mean, on the explanatory notes, we saw the outstanding balance going up from BRL 28 billion to BRL 41 billion in this quarter.
So is this a new strategy of Bradesco? And now, it's matched with the funding of the bank in terms of deposits, in saving deposits, that the bank decided already to walk a spread and bought these national treasury notes at a yield that was now -- was lower than the current market price and that's why we saw the negative impact in the equity of the bank.
I'm not sure if I was clear, and you can ask me if it wasn't.
Luiz Carlos Angelotti
Okay. This asset-liability management is not a new strategy of the bank.
If you annualize last year, we had the same similar position in these bonds. We worked for to mitigate the maturity rates in mismatched risk.
And this portfolio that we have in the available-for-sale is in the -- around the totalities related to this asset-liability management. We have the insurance business and we have the bank insurance and the -- we have the banking business.
We work for to maintain this, the liabilities to help there with the assets, to maintain, to protect, to mitigate the risks. We are -- we have this book, these bonds that we have.
And I'm talking about the insurance business. We have some liabilities in the insurance business that we have 10 years, 20 years, 40 years.
Then we have -- we need to have the bonds with long-term maturities for to protect the requirements, the liabilities that we have in the insurance business. For the bank, we have the liabilities related to savings, financial ladders, subordinated debts that we do this liability -- the asset-liability management.
And we need maintain these bonds for to protect these liabilities that we have in the banking. It's not a new policy that we have.
And this portfolio, the majority is in the available-for-sale. And therefore, in the accounting rules, you need to mark-to-market these bonds, these assets, every policy that you have.
But you cannot do, in the liability, the same mark-to-market valuation. Then the problem when you analyze the shareholders' records is that we have only the mark-to-market assets.
If it was possible, were possible to have the mark-to-market liabilities, the effect that you have in the shareholders' record will be neutral. Then we understand that in the future, probably, we will continue having these effects.
But these effects start to lose any economic impact in our results. The important thing is that we maintain these bonds for to mitigate the maturing rates mismatched risk.
Regina Longo Sanchez - Itaú Corretora de Valores S.A., Research Division
Okay. So if you're maintaining these bonds to match with these liabilities, with the savings, and subordinate that, was there a particular reason to increase the national treasury notes outstanding balance from BRL 28 billion, what was the outstanding balance in March 31, to BRL 41 billion in June 30?
I mean, was it increased also on the funding of the bank?
Luiz Carlos Angelotti
We -- every time we analyze the opportunities, we -- when we had these movements in the second quarter, with the increase in the rates, we understood that it was one good moment for to do this asset management liabilities. And then we understand that to -- we have now our position that we have.
We understand that we are confident with this position and the perspective that we have for the future. And we -- understand that we work hard to mitigate this maturity in the rates mismatched risk.
Operator
Our next question comes from Mr. Marcelo Telles with Credit Suisse.
Marcelo Telles - Crédit Suisse AG, Research Division
I had some follow-up questions on my question in the Portuguese call. They're both related, I mean, to the mark-to-market of the bond portfolio.
Regarding the BRL 9 billion in unrealized losses that you had in the quarter, about BRL 4.5 billion took place at the bank. And you mentioned that this is part of the asset-liability management and that, for that reason, there will be -- the actual economic impact will not be -- would actually be 0, right?
But I have to disagree with that, because when you look at the mark-to-market of all your financial abilities, and this is second page, 203 from your MD&A, we actually see that the difference in mark-to-market was only, on a pretax basis, BRL 830 million. And I'm including the subordinated debt here and borrowing and lending, all the main liabilities.
And you lost BRL 4.5 billion. So it shows, I mean, there was really -- it was not an asset-liability management position, it was indeed more like a treasury position.
So I don't know if you could explain in more detail, and how do you see that approach regarding your treasury changing going forward, because, of course, this has implications in terms of what the trade result is going to be in the quarters to come. I think you mentioned before that you expect to be back again at BRL 300 million, but -- per quarter.
But I think this is -- I mean, do you think this is realistic given that you had interest rates coming down over the years, but so the available-for-sale securities which had an impact over time in your trading result. So how do you see that line going forward?
And my second question is regarding the sale of available-for-sale securities. You mentioned in the Portuguese call that there was no -- that Bradesco did not sell available-for-sale securities.
But looking at the cash flow statement of the bank, this is in the MD&A as well, we actually saw that there was almost BRL 7 billion of available-for-sale instruments that were actually sold. And that information is there.
So I'd like to know, what was the P&L impact arising from the sale of those available-for-sale instruments? Because my sense is that your trading result would actually be much lower, or far more negative, than what was, again, just the BRL 18 million that you reported in the quarter.
Luiz Carlos Angelotti
Talk about the first question. The subordinate debts that we have in this calculation that we have in Page 203, the criteria that we have for to do the present value is different than we have for to do the mark-to-market in the bonds.
In these calculations that we have in Page 2003 [sic] (203) the rate that we used in this case is the rates that we had in the last negotiation after this paper. Then considering the -- not the mark-to-market, the marketing rates that we have is the rates that we have for this paper in the last negotiation.
Then it's a different criteria for to do this comparison between the asset and the liability. And this position that we have in the asset-liability management, we are confident that we don't have any kind affecting in -- that represented economic impact.
These adjustments that we have in the equity is because this accounting effect that we have, that we need to mark-to-market only the assets and not -- we can't mark-to-market the liabilities. And we will talk about today, about the available-for-sale operations.
That is the majority of this portfolio that we have in the available-for-sale is related to the operations that we have in the asset-liability management. A small part that we have, you're seeing our trading position.
Then in the trading positions, a small part, but they do the -- our spreads department, they have their strategy and they do their movement. But in this position that we have for asset-liability management, it did not change the position of our sale bonds.
We maintained a similar position that we had last year, and we had only some increasing in the second quarter because we saw -- we understood that we had an opportunity for improve this asset-liability management policy.
Marcelo Telles - Crédit Suisse AG, Research Division
But at the end of the day, I mean, you had -- you sold BRL 7 billion of available-for-sale instruments, so that must have had an impact on your P&L, regardless. And regarding the first point on the mark-to-market regarding subordinated debt, I mean, the notes in the financial statement says that they are based on market prices.
And in the absence of the market prices, I mean, they should be estimated in terms of price given by the distributor at pricing models. So it seems that, I mean, at the end of the day, I mean, the market -- what you call market value of your subordinated debt is actually -- will not be very different.
Maybe have some difference or so if you're to be, let's say, less conservative, but to make up for the difference, from BRL 4.5 billion to BRL 800 million, there's a long way to go. Well, that will be -- that will be my point.
And finally, just another question. The -- I mean, your assumptions going forward, they seem still to be based on some recovery in the Brazilian economy in over the next -- this year and next year as well.
And -- but now, I mean, I think we could all agree that the risks are definitely on the downside for the Brazilian economy. So do you have a sensitivity of what 1.5% GDP growth would do to your, like, NPL ratio and loan growth?
Would that change your scenario a lot?
Luiz Carlos Angelotti
Our expectation for the GDP growth is 2.3%. Then this result is what our economic department, they have now.
And we changed our guidance for that and we're considering this expectation. Our NPL, we reach now in the lower level, 3.7%.
And we understand that we will have a more established in this year and probably in 2014. Because we understand that the scenario that we have for next year is that the economy will grow something on 2.5%, a little better than we -- our expectation for this year.
And the unemployment rate will be -- we can consider stable, for the only 0.1% increase. Then...
Marcelo Telles - Crédit Suisse AG, Research Division
I understand your scenario. My question is in -- I mean, have you done some analysis in a more bear-ish scenario?
I mean does that change the strategy or lead to maybe an increase in NPLs this year or much lower growth in the loan portfolio?
Luiz Carlos Angelotti
Can you repeat, the NPL?
Marcelo Telles - Crédit Suisse AG, Research Division
The NPL ratio. My question is, I mean, I understand this scenario that you've laid out and you've become more conservative.
But my point is that, what if the scenario is worse than what we are seeing today? And I think there is downside to that scenario.
So my question is, have you done any analysis, what would happen if the economy grows much less? And I mean, do you consider that in your worst-case analysis?
I mean, have you done something in that regard, and what sort of increase in the NPLs could we expect?
Luiz Carlos Angelotti
I don't think that scenario will be worse. What you have is less growth in the economy, but it is a good growth.
And probably, the quiet growth, the loan portfolio growth will be less than we have in the past here. And sometimes, in the past, we have 25%, 30%.
And now, probably, the new level that they will have for the economy is something on a more lower level, probably between 10% to 15%, 10% to 13%. What you have now is a new scenario for the economy, but not a bad scenario.
We understand that -- we expect to, in our case, a stability in our NPL ratio, considering the scenario that we have for 2013 and the year that we will have after. Our economy department, they expect the GDP growth, similar grow.
And it's something that we understand, too, we have more stability now in the delinquency ratio because these new structures that we have in the system. Lower growth for the credit portfolio, but a more stable situation in these ratios.
Operator
Ladies and gentlemen, since there are no further questions, I would like to invite Mr. Paulo Faustino da Costa to proceed.
Paulo Faustino da Costa
Thank you, all, for participating in this conference call. I would like to take this opportunity to remind you that there are marked [ph] relations department and our IR team are at your disposal, and get all the contents of our second quarter 2013 and other information concerning Bradesco in our website.
Thank you, all.
Operator
This concludes Banco Bradesco's audio conference for today. Thank you very much for your participation and have a good day.