May 6, 2022
Operator
Good afternoon, ladies and gentlemen and thank you for waiting. We would like to welcome everyone to Bradesco First Quarter 2022 Earnings Conference Call.
This call is being broadcasted simultaneously through the Internet in the Investor Relations website, bradescori.com.br/en. 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 company’s presentation. [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 the information currently available to the company.
They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Banco Bradesco and could cause the results to differ materially from those expressed in such forward-looking statements.
Now I will turn the conference over to Mr. Carlos Firetti, Business Controller and Market Relations Director.
Please proceed.
Carlos Firetti
Hello, everybody. Welcome to our conference call for the discussion of our first Q 2022 results.
We have today with us our CEO, Octavio de Lazari, Jr.; our Executive Vice President and CFO, André Cano; Leandro Miranda, Executive Director and Investor Relations Officer; Oswaldo Fernandes, Executive Director; Ivan Gontijo, Bradesco Seguros Chief Executive Officer; Renato Ejnisman, Banco next Chief Executive Officer; Curt Zimmermann, Bitz Chief Executive Officer; and Carlos Giovane Neves, Banco Digio’s Chief Executive Officer. I turn the floor now to Leandro.
Leandro Miranda
Thank you, Firetti. Good morning, everyone.
Thank you for joining us in our first Q ‘22 earnings conference call. The economic landscape in the first quarter made a slight advance with GDP forecast picking up a bit and the creation of additional jobs.
Inflation remains a worry global phenomenon. It’s a significant challenge for all economies, including Brazil.
The war in Ukraine created pressure on the oil and other commodities prices, and there are low expectations of any restrain in price trends over the near term. The Central Bank of Brazil has moved forward with its monetary policies, and we expect to see a slowdown in inflation during the year.
However, interest rates are likely to remain high for a long period, which should impact GDP growth. Given the scenario, Bradesco performed well this quarter, with a net income of BRL6.8 billion and this represents an ROE of 18% and an increase of 3.1% in relation to our previous quarter.
The highlight of the period was the net interest income, which grew 9.5% compared to the same period of 2021. Declines in NII rose 19.6% within the same comparison period, resulting from an increase in spreads, a repricing of the portfolio and an increase of Selic on our marginal deposits.
The loan portfolio also posted a good performance, expanding by 2.7% compared to our 4Q ‘21 and 18.3% compared to our first Q ‘21. The most significant movement took place in the portfolio for individuals, which grew 3.3% in the quarter and 22.6% year-on-year, particularly in the lines with the highest margin.
There was an expected slowdown of growth in mortgage financing due to the rise in interest rates. However, this is a line that will continue to smoothly evolve and add value to our business due to the cross-sell it generates.
Fees and commissions income performed well, up 6.7% year-on-year. Total customer controls, especially considering inflation pressures.
There was a growth of 4.4% compared to the previous year and a 9.1% drop compared to the previous quarter. In line with our expectations, delinquencies rose in this quarter.
We already expected this indicator to return to pre-pandemic levels. It should be pointed that the growth in higher marketing – higher-margin business also carries a controlled growth of this indicator, and we are always ready to make the right adjustments of cost and return.
Insurance operating income reached BRL3.3 billion in the quarter, a growth of 4.7% over 12 months. The result indicates that there is a continued recovery in the insurance area, and it should be even greater over future quarters with movement in premiums, the control of the pandemic and improvements to the financial results.
Due to all these factors, we revise our guidance and we’ll talk about it on the last slide. Moving on to Slide 3, we note that there was an event this quarter classified as a nonrecurring due to its nature, and it was a net income of BRL231 million that we had from the demutualization process of SIP, that our interbanking payment chamber.
Now we turn to Slide 4 to our expanded loan portfolio that grew 18.3% compared to the same period last year, with double-digit growth in all lines. Demand for credit remains although in a lower level but with recovery in our NIMs.
This performance is a consequence of our commercial positioning based on the intensive use of data and analytics in a risk analysis, which allow us to be more assertive in defining price limits and credit approvals. One highlight was credit cards with a growth of 45.6% compared to the first Q of ‘21.
This was the result of structured efforts aimed at increasing the presence in use of cards by more of our 74 million client base. One of the core points for the success of this work was the creation of new products targeting a digital-friendly audience.
Real estate financing line posted a growth of 23.3% in 1 year. As expected, this performance is not likely to be repeated in 2022.
The growth will continue but at a pace that is more compatible with the new context of higher interest rates. Credit for companies increased 15.7% in 12 months.
The main categories were working capital, machinery, vehicles financing and agribusiness loans. Digital channels contributed BRL24 billion of our origination in the quarter, an increase of 44%.
The role of digital channels in the production of the portfolio is growing, and our expectation is for increasing client engagement in customer credit through these channels. It’s a natural trend and we are committed to offer a more user-friendly journey to boost our digital origination.
However, you can see that originations are already lower than the fourth quarter of ‘21 as a result of higher interest rates and increase in level in risk analysis. Turning now to Slide 5, you can see that we are at a stage where credit conditions are returning to normal and delinquency rates were at historical low levels.
These risk-adjusted returns on credit are at appropriate levels, given the credit repricing movements. Provision expenses grew this quarter, reaching 2.3% of the portfolio.
Total provisions represent 7.6% of the portfolio, an extension from the previous quarter. Nevertheless, we continue to maintain a comfortable level of reserve on our balance sheet with a coverage ratio of 235% and 105% including a full renegotiated portfolio duration.
Now we turn to Slide 6. The renegotiated portfolio amounted to 4.9% of the loan portfolio.
Compared to March 2021, it posted a growth of 3.1%, below the 17.1% growth of the loan portfolio this period. Given the growth we see in the loan portfolio, we believe that this increase in the renegotiated portfolio is normal and controlled.
Our provisions for the renegotiated portfolio, represents 62.3% of the total. The delinquency rate for the portfolio was 18.7%, which is still below the historical level.
Now we move to Slide 7. The total delinquency ratio came to 3.2%, an increase of 40 bps compared to the previous periods.
This is primarily due to the normalization process of delinquencies, which we had predicted would occur and the effect of growth – credit growth mix. In the second quarter, we are expecting a smaller growth, I would say, 10 to 20 bps and a relative stability throughout the second half of the year.
For individuals, the acceleration this quarter came with the expansion of portfolio with higher spreads, especially credit cards. We understand that the growth of the delinquency indicator from 15 to 90 days is seasonal without any exceptionality.
Gross provision expenses accounted for 96% of the NPL creation. Lastly, we’d like to reinforce that we continue with our own management process and sale of nonperforming and active portfolios, but just whenever such a transaction is an economic requisite.
However, this quarter, we did not sell active portfolios in a material way. The total amount was only BRL120 million.
We now turn to Slide 8. The total net interest income performed solidly in the first quarter, growing 0.6% compared to 4Q and 9.5% in the 12 months.
The main driver was the client NII, which rose 7% in the quarter and 19.6% over the year. The growth in deposits income is pushing the rise in the clients NII under the impact of a higher Selic than in ‘21.
Additionally, client NII did better than our initial expectations due to better spreads, the speed of the portfolio turnover and the expansion in high-return operations. Gross client NIM grew this quarter by 60 bps, and the net NIM, despite an increase in provision, by 30 bps.
For the market NII, we posted a reduction of 43.1% during the quarter, resulting in BRL1.2 billion, reflecting the increase in CDI on our ALM positions. Now we go to Slide 9 that illustrates the fee and commission income, which grew 6.7% in the annual comparison.
There was a seasonal decrease in this quarter. Cards had the greatest contribution with 19.1% growth.
We saw a boost in the number of cards, mainly for sales in digital channels which grew 206% compared to a year ago. The end of the pandemic brought an increase in the amount transacted in cards.
Interestingly, the amount was higher in this quarter than the fourth quarter, which seasonally is usually highest. The consortia segment is also notable.
We are leaders in the market and 27% of sales have been made through digital channels. We will now take a look at Slide 10.
Cost discipline is a constant on our management practices. Operating expenses advanced at 4.4% compared to our first Q ‘21, well below inflation in the period, even with the investments in client acquisition and digital evolution.
Personnel expenses grew 8.5% in the annual comparison despite the collective agreement of 10.97% that occurred in September 2021. We will continue to promote growth in IT, dev engineers and business teams, such as investment specialists.
Even with all the investments we are making in the bank, the total number of staff has been brought down by 1.3% in 1 year. Administrative expenses grew 5.6% in the annual comparison, demonstrating that we absorbed much of the accumulated inflation, 11.3% of the IPCA and 14.7% of IGPM, in addition to the increase in business volumes, which has an impact on our variable expenses.
Some of the factors that played a role in the solid performance of administrative expenses included activities such as the optimization of the ATM network, which was reduced by 4,200 machines or 13.9% in 1 year. We have also continued to review our fiscal presence in an effort to upgrade our customer service towards an increasingly consulted and less transactional model.
This year, the optimization of 491 branches, all of which 269 conversions to business units and 134 conversions to PA and 88% will be entirely closed or merged. It should also be pointed out that our personnel and administrative expenses include investments related to the expansion of our digital initiatives such as NEXT, Ágora, Bitz and [indiscernible].
Without these investments, the growth of our total expenses would have been half. It’s also worth noting that in our digital initiatives for the year, we are making a trade-off in growth by favoring client activation, retention and loyalty.
The other expenses line shrank by 15.5%, mainly due to higher levels of provisions we did last year. Our expectation is that this line will post a reduction in ‘22.
Turning now to Slide 11, we can see that Group experienced a revenue increase of 13.2%, seen in all lines of business due to the increasing number of contracts as well as number of vehicles and in the annual comparison. All distribution channels and business partners contributed to these results.
In particular, the digital channels had an expansion of 56% in the first quarter of ‘22. Income from insurance operations posted an annual improvement in its performance in the first Q ‘22 due to the growth in revenue and improvement in financial income over the period.
The volume of COVID-related claims in the first Q of ‘22 was BRL512 million, the lowest since the beginning of 2021, and 54.7% lower than the same period last year. Despite the recent increase in demand due to the new Omicron variant, we did not see the same severity in this in the previous periods.
Hospitalization cases are much less frequent and recovery has taken place in a shorter time. Turning now to Slide 12.
The Tier 1 remained at the same level as in the previous periods, well above the regulatory minimum. The profit for the period was enough to absorb distribution to shareholders in the form of interest on shareholders’ equity adjustments in the gross loan portfolio.
Indicators for our liquidity also remain at rather comfortable levels. Moving now to Slide 13.
Let’s talk about our digital growth. Over the last 2 years, we have spoken quite a bit about our movement towards technological acceleration, and this has been intensified by the pandemic.
Today, as life gets closer to normal, we want to talk to you about another stage, that of the loyalty for experience and autonomy. If before, particularly the financial system, many people were fearful or prefer to use channels to make transactions and purchase products and services, this situation is entirely different today.
Many of our clients now prioritize the digital experience. Proof of this is that of our total transactions, 98% are performance through Bradesco digital channels.
Of this total, 90% are concentrating mobile app and Internet banking and the growth continues to accelerate. Looking solely at the comparison of the first 3 months of the year with the same period last year, we saw a significant growth of 92% in mobile financial transactions.
This boost in the digital experience is also reflecting the number of digital checking account clients, which stands at 7% of total clients. It’s a number that keeps rising and must continue to evolve.
The number of accounts opened through the app has also been trending upwards. And we ended the first quarter of this year with a growth that was 5x higher than in the same period in ‘21.
It’s worthy to highlight a 72% growth in MEI account openings, demonstrating the strength of our positioning in the microentrepreneur segment. Turning now to Slide 14.
The relationship with a more digital customer has led us to a landscape of new and greater business opportunities, and we are continually focused on sustainable developments. Over this quarter, we saw digital channels leading the way in the supply of credit.
Among the individuals, the number of loan operations granted through Bradesco’s digital channels now sits at 73% of the total. We have also seen a lot of movement from entrepreneurs focused on resuming this after the pandemic.
We are constantly evolving our platforms oriented towards companies, including partnering with In the annual comparison, the authorization of corporate digital credit evolved by 48%, reaching BRL10.1 billion. Turning now to Slide 15.
In addition to the indicators on digital developments we have presented in the previous slides, we’d like to also show that it’s not only loan products that we are making significant progress. Consortia, investments, insurance products and others posted a consistent growth.
Another contributing factor to the bump in sales was the introduction of new features. This included the issuance of credit cards in Date+O and the opportunity for clients to add the new card to their phones wallet immediately after approval without the need to wait for any physical issuance.
We are going now to Slide 16, when we can discuss our digital initiatives. Ágora grew its net funding by 50% 1 year and reached 785,000 clients.
Next grew its client base by 153% in 1 year and reached 11 million clients. The volume traded practically doubled in the same period.
Next is coming to this year more focus on client monetization. Bitz hit the 9.5 million downloads and 6 million accounts mark.
It has become the gateway for our clients in the banking phase. This quarter, we completed the transaction, which is already fully embedded in our numbers.
It has 3.9 million accounts and posted a TPV of BRL2.5 billion in the first quarter. Our digital initiatives will continue to grow this year in an effort to deepen the relationship with customer but focus on profitability.
We now go on to Slide 17 to talk about sustainability. We have updated our sustainability strategy, which is now based on 3 strategic pillars: sustainable business, climate agenda and financial season ship, as the segments and teams require an agenda featuring more active change and greater strategic focus.
For each of these three pillars, we made public commitments to leverage our contribution to a sustainable development. In the pillar of financial for example, we have just signed on to the commitment to education financial inclusion of the United Nations, and are the only Brazilian bank to be part of this select group of 28 signatory banks on our public declaration space that we are driven to increasingly contribute to financial inclusion and to promote the financial health of clients and society as a whole.
We remain committed to the target of channeling BRL250 billion to sectors and assets with a positive social environmental impact by ‘25. As of March 22, we have already topped BRL107 billion or 43% of the goal.
In terms of the climate agenda, we have been active in both the United Nations through the Net Zero Banking Alliance and the GF ANZ, a global alliance that institution in the financial accelerated position to a cleaner economy. Sustainability is one of our 4 pillars in the corporate strategy.
It’s aligned with our of opportunities for people to achieve their goals and for the sustainable development of companies and society, and we want to continue as leaders and pioneers of this agenda at a global level. Moving now to Page 18, that’s our last slide.
And we are going to discuss here a little bit of the guidance and we can move on to the questions afterwards, if you wish. Given the significant changes in the dynamics of the markets we are active in, we have revised our guidance to reflect current performance and expectations.
Spreads have remained above the levels we were expecting, and we don’t see any additional pressure in ‘22. This has favored the faster repricing of our loan portfolio.
Also, we have seen growth in products with higher spreads in the mix. We have also captured a great benefit and estimating the income with deposits, which makes up the client NII.
As such, we have significantly updated our client NII guidance to 18% to 22% growth versus 8% to 12% previously. For credit provisions, given the intensification of growth in higher return portfolio, we shifted our expectations from BRL15 billion to BRL19 billion to a new range of BRL17 billion to BRL21 billion due to the change of mix.
For fee and commission income, considering the performance seen at the beginning of the year and our expectations for the rest of the year, we have updated the range of this line to a growth of 4% to 8%. Regarding operating expenses, as we continue to focus on efficiency and full control of expenses, even as we consider investments in our digital initiatives and the technological growth of our business, we have updated previous guidance to a new range between 1% and 5% for the reasons mentioned earlier when discussing.
We maintain the guidance for the insurance and expanding lower portfolio lines. In insurance, we shall move towards the center to the top of the guidance.
Income is expected to benefit from a growth in premiums, more favorable financial ratios and a lower comparison base than some quarters of ‘21, which were impacted by the pandemic. In March, for example, the insurance group had a performance of 16%, already very close to the guidance.
In the expanded loan portfolio, we are seeing a growth of compatible where with the range presented from 10% to 14% due to the growth in the previous year but featuring a more favorable mix. For now, we continue to follow our policy of not providing official guidance for the market NII.
This is something that we are about to change next year. And I’d say that for the sake of transparency, we report that we do not expect this line to post any incremental income over the next quarters of 2022.
Thank you for your time. And we will now proceed to the questions and answer section.
Operator
Thank you. [Operator Instructions] Our first question comes from Mario Pierry, Bank of America.
Mario Pierry
Hi, everybody. Congratulations on the results and thank you for taking my question.
Leandro, I wanted to focus on the guidance. And here, I was looking at your macro assumptions for the year and how they have changed, right, from 3 months ago.
Basically, you are expecting a higher, higher inflation and higher GDP growth than before. So what caught my attention is that you really expect inflation to be much higher than before.
You’re expecting the IGPM to go up to 12% versus 7% before. And I wanted to understand how does this tie in of a lower operating expense guidance?
Because right when we look at your personnel expenses, they are about 40% of your expenses, so you just increased salaries by about 11% last year. I would imagine the negotiations this year are going to be tough again, and we should be thinking about double-digit growth again.
So again, help me understand a little bit better why you’re expecting higher inflation but lower expenses? And same thing with the provision charges, as you mentioned, right, you’re seeing a shift in your loan mix towards this year loans, and that’s helping your net interest margin.
However, you continue to say that NPLs are only expected to go up another 10 to 20 basis points and then remain stable throughout the year. So it seems to me like your expectations for NPLs have not changed, but you are expecting much higher provisions than before.
So just trying to understand here like the thinking behind the new assumptions?
Leandro Miranda
Mario, thank you very much for the questions. You are right.
We do see a much higher inflation and much higher interest rates, especially in the pace of initial expected. And besides that, we also see the IGPM and IPCA curve, and we can see that from now on, IPCA seems to perform better than IGPM, what benefits our insurance business directly, right?
So basically, what happened regarding to our previous expectations is that everything happens much, much faster. Inflation in Brazil occurred much faster than initially expected.
The Central Bank decided to be very hawkish. And according to the signals that we have, this might still go on.
And this helps in all the lines that we have revised in the guidance. Regarding to expenses, we are extremely conservative on our costs and expenses.
We have been reducing it on a monthly basis despite of inflation. And although we shall have a sort of labor agreements by September, October, we understand that closing branches, transforming branches, into units of services or PAs and that will help us to grow on cost.
Besides that, we have a natural reduction in our staff. Although we are increasing personnel in IT and all kinds of digitalization efforts, we can see that we have been reducing our labor force on a continuous base.
And besides that, when you compare the expenses that we had last year with this one, you shall see that there is a line that we name others. And in this line of others, there are several provisions in significant amounts that we shall not have this year.
That’s a key element to understand how we shall decrease the expenses. Just to give you a flavor, we believe that we shall be from the bottom to the center in the guidance for expenses.
So we are even more confident that we shall keep it on a very good control. Regarding to provision in our guidance is, first of all, it’s all regarding – it’s all related to expected losses.
Our models of expected losses, given the scenario we are living in, of course, we are living in a volatile world. The scenarios can change dramatically as we have seen a war that no one was expecting, and so the oil price is going even higher.
That’s one of the points that also affecting inflation together with the prices in food. And so I think it can happen.
But according to the situation that we see now, we see that we have already provisioned in the past much more than the other banks. Therefore, what we have to make provisions for just the adjustments in our mix is the $2 billion range that we have – that have put extra to that.
So it’s pretty much aligned with the NPL apparent to our calculation. It represents around 96% of the NPL.
And it’s a result of the mix. And more important to us is not the level of provisions – it’s the – it’s how is the result in our spread.
So when we speak on our gross spreads minus the provisions that we have to have, according to our models, we do see an increase and a growth of net spreads. So it makes us comfortable that the level that we are working on is accretive.
Mario Pierry
Okay. But what I was trying to get here is the incremental that we had since 3 months ago, right?
So on operating expenses, it seems to me the incremental news that we had is higher inflation. The other line I think you already expected that to be coming down because your original guidance was already for expenses to grow below inflation.
So that’s the only thing that I still don’t get it. Like the incremental news is higher inflation, but at the same time, you’re reducing your expense.
Like is there something else like structurally that you think – that you weren’t seeing 3 months ago that you’re seeing now to make you more comfortable with your new range?
Leandro Miranda
Yes. A couple of other things, Mario.
First of all, we have speed up the closures and transformations of our branches. So we see now more room than initially by the beginning of the year regarding to savings towards these measures and our branch network.
And the second thing is that we have been able to sign much better agreements with our suppliers, extending tenors, and it’s bringing a significant reduction in our expenses.
Mario Pierry
Okay. And then on the same question with regards to the provisions, like you said, [indiscernible] provision based on expected losses, and now you expect losses to be higher, which is expected, makes sense to me.
But if you’re thinking that expected losses are going higher, why not forecast higher NPLs? And here, I’m trying to say, aren’t you being too optimistic by seeing saying NPLs are only going to go up another 20 basis points and then they stay flat because like you said, your models are telling you that expected losses should be [indiscernible]?
Leandro Miranda
Mario, excellent question. Basically, our portfolio is not only comprised by individuals.
It’s also comprised by SMEs and especially large corporates. We have seen a reduction in the NPL of large corporates.
If you take a look at our whole portfolio and its breakdown, you’re going to see that a significant part, the vast majority is of large corporate names. Therefore, we are able to make gains regarding to the lower delinquency ratios in the large corporate and compensate the mix in individuals and SMEs.
We do expect this level to grow in the second quarter as we have discussed it, but we see it stable in our models for the second half of the year.
Mario Pierry
Okay. And sorry, last question is also related to guidance, is on the NII with clients, right?
You’ve pretty much now doubled the growth expectations for NII client. I understood from your comments that you are improving the loan mix is better than what you thought and your ability to reprice is also better.
So it means, I think, less competition in the system. But at the same time, also, you’re forecasting the Selic rate to be – to be higher by 150 basis points than what you expected at the beginning of the year.
Can you help me understand the impact of the higher sales on your new guidance for client NII? So what I’m trying to get is how much of this higher growth is related to the higher Selic and how much of the higher growth is related to better spreads and better mix.
Leandro Miranda
Well, very good question, Mario. First of all, when you consider the deposits that we get from clients, a higher Selic bring us a higher income from that.
The second thing is that in order to compensate the reduction that we naturally shall see in line of business, that we have lower spreads such as mortgage financing. So this shall be – shall represent a reduction in terms of growth as we could see in the previous years.
So we are focused on more credit cards and similar lines of credit, what give us higher spreads. We have a very good selection backed by our models, our experience, our artificial intelligence and analytics.
So, so far, we have perceived a lower problem that the average industry is getting from that. And remember that we are the leaders in payroll financing and we use the price significant payrolls from companies.
So this brings us more individual clients but with a better collateral than the rest of the industry. That’s the reason why we are able to keep the NPL levels low.
We, as the rest of the market, we expect the Selic to remain – to grow a little bit and then remain stable by the second – by the end of the second semester, the second half. So according to our models, we are comforted with the clients’ margin.
Just to give you a flavor, nowadays, we are running at 19.6%. So it’s very likely that we shall be, by ‘21 or ‘22, in our guidance.
If this is something that carries on to the next year, so this is really positive because by the end of the day, we are renewing our portfolio. So you shall see a much healthier and with higher margin portfolios for next year.
Mario Pierry
It just surprises me, right, that 3 months ago, you thought that your client NII was going to grow on average, 10%. Now you are talking closer to 20%.
It just surprises me that so much has changed in 3 months.
Carlos Firetti
Yes. Mario, as is implicit in our comments, we were also conservative in our guidance when we provided it.
Mario Pierry
Okay, guys. Thank you.
Carlos Firetti
Thanks so much. Thanks for your questions.
Operator
Our next question comes from Thiago Batista, UBS.
Thiago Batista
Hi, guys. I have only two very small questions.
The first one about the guidance of fees, you guys raised the growth ratio between 4% and 8%. Can you comment which type of products should lead this higher growth is [indiscernible] or can you elaborate a little bit more what are the main products helping this growth?
And the second one is a question about accounting. You booked during this quarter some – or a little way.
In the intangible assets, it’s possible to see that Bradesco catalyzed a higher amount of software expenses. If not wrong, BRL1.4 billion this quarter and last year, the full year was BRL1.7 billion.
So is there any explanation for this hike in this these expenses that was catalyzed. This is related to or there is any other explanation to this spike in this line?
Carlos Firetti
Starting with the second one, the capitalization this intangible, basically, it’s related to 2 years service contracts for which we paid in advance. So basically, this accounting procedure is pretty standard.
We pay now, we’re going to take the service over the next 2 years and we recognize the expenses over these 2 years. It’s mostly software-related service contracts.
Leandro Miranda
Yes. Let me get the first question here regarding to our guidance on fees, right?
Basically, we see the benefit of credit cards that you have already mentioned here. It’s spiking.
And we understand that we have even a deeper room to go. Basically, we have been growing the base of credit cards among our clients, existing clients.
So therefore, it’s a profile that you know very well. We also see growth in checking accounts.
We have added more than 2.5 million new checking accounts. And when you take into consideration the high interest rates that we are leaving, we also see room in our Asset Management to grow since has an excellent grade of fixed income funds.
The investment bank shall suffer on the IPO and M&A side, but it has a very good fixed income practice. So those, I would be, I would say, that are the lines to benefit the most.
Thiago Batista
Very clear. Thanks Leandro and Firetti.
Operator
Our next question comes from Tito Labarta, Goldman Sachs.
Tito Labarta
Hi, good afternoon. Thanks for taking my questions.
A couple of questions also. First, on your asset quality, just can you give some color on the increase in individual NPLs and how much of that was driven by just underlying deterioration?
And how much of it was just simply the mix because you grew so much faster in unsecured credit, like credit cards and personal loans? And then my second question is kind of on the back of that, right?
I mean, you’re growing unsecured credit at a very strong pace, right, credit cards, in particular, 8% quarter-over-quarter, 45% year-over-year? How sustainable is this growth or maybe – or how quickly should this decelerate, particularly as you kind of expect losses are increasing?
So, just help us think about that growth in the context of the current macro environment and what – how we should think about it going forward?
Carlos Firetti
Thank you, Tito. Regarding asset quality, I’d say the increase in NPLs comes mostly from mix, especially the very strong growth in credit card revolving loans.
That is actually not growing more than it is as a percentage of the transactions in the past. But since we had this big increase in the – actually the revolving goes together.
I would say credit cards for the bulk of the the growth in the quarter, followed by other risk credit lines where we had also higher growth that changed the mix. Regarding credit cards, the growth is a result of our strong performance, adding new clients, and we are growing mostly with clients coming from Bradesco’s client base.
It’s not that we are going to the open market to get new clients. Our clients, we know we are – we have been able to offer new products at good conditions, and we have been able to bring new clients and also activate new cards.
This answers for a part of it. The other part responsible for this strong growth is the normalization of the economy.
The travel and leisure expenses are growing quite strongly with the reopening, people starting to travel again. On top of that, you have inflation on these lines.
Air tickets, as you know, have went up a lot and other travel in leisure-related expenses. And I would say inflation as a whole is responsible for some of this growth on top of our own growth due to the addition of new clients, and as I said, the reopening of the economy.
I would say this is kind of – the main point that explained this is strong growth. But just highlighting that we believe we are doing also a really good job adding new clients to our base.
Tito Labarta
That’s helpful. If I can ask a couple of follow-ups on that actually, so that you expect NPLs to increase only like 20 bps next quarter and then kind of flat.
Is that an indication also that the shift in mix is going to slow down so the growth will be more even ? Is that how we should read into that?
And then second, just on these clients, the new clients, how much of that coming from like digital channels like NEXT? Is that providing a big benefit yet or just to understand these new clients that you’re giving credit card loans to?
Carlos Firetti
In the credit card business, I would say, virtually all the revenues or volume come from Banco Bradesco at this point. Really, NEXT is doing a good job in terms of growth and the base of clients.
But in credit cards, specifically, they are growing but the bulk of the volume comes from Banco Bradesco itself. Renato, would you like to...
Renato Ejnisman
I mean we’re growing in both in number of clients and a number of clients that have credit card. We’re growing our portfolio of credit.
We grew, in terms of total clients, 153% year-on-year, and we grew, in the loan portfolio, 250%. But remember that in our case, I mean, because we actually changed a number of things in the collection process and also even on the communication process for clients that have credit cards before they receive their statements.
I mean, we didn’t use to send notices. So I mean, we changed the entire communication methodology with the clients.
We actually had a decrease in delinquencies. Obviously, we’re monitoring and seeing how much of this new scenario impacts our clients.
But in our case, I mean, considering that I would expect that, that’s what you’re trying to get at. I mean, we’re definitely a smaller loan portfolio compared to Bradesco.
It’s increasing at a pretty good rate faster than the rate of increase of clients. But again, I mean, this behavior that we’re seeing kind of on a macro level, I mean, it’s been somehow mixed with an improvement in our own processes.
Tito Labarta
Alright. And just on the growth, like how that should evolve from here, do you expect a slowdown or – and is the NPL guidance a reflection of that, that you will be growing less in these unsecured segments?
Carlos Firetti
Yes. I think considering that a lot of the normalization in the economy, the reopening and the big jobs and volumes from, let’s say, lower activities affected by the pandemic to a more normal scenario, has already played out in the second half of 2021.
As we go through ‘22, probably we will see a slowdown in this growth rate despite the fact it will still remain at a very strong level.
Tito Labarta
Alright. Thank you.
Operator
[Operator Instructions] Since there are no further questions, I would like to invite the speakers for the closing remarks.
Leandro Miranda
Well, once again, just to thank you all for making the time to be discussing with us. If for any reason, we don’t have the time to discuss any additional topic or you want to get more information on any specific data, our Investor Relations team is going to be more than happy to address any issues you may have.
Thank you very much and have a great weekend.
Operator
That does conclude Bradesco’s conference call for today. Thank you very much for your participation.
Have a good day.