Earnings call: Itau Unibanco reports growth and solid Q1 2024 performance

Published 2024-05-08, 07:20 a/m

ITUB

In the first quarter of 2024, Itau Unibanco (ITUB) experienced a positive financial performance, reporting earnings of R$9.8 billion, a 3.9% increase from the previous quarter. The bank's recurring return on equity (RoE) was 21.9%, showing a 70 basis points improvement. A de-risking strategy contributed to stable delinquency indicators and a reduction in the cost of credit to R$8.8 billion.

The credit card and advisory services sectors saw significant year-over-year (YoY) growth, and the bank maintained a strong position in investment banking. Itau Unibanco also highlighted its digital transformation efforts, commitment to risk management, and its ability to navigate regulatory changes. The bank expressed confidence in its ability to pay extraordinary dividends by the end of the year, subject to certain conditions.

Key Takeaways

Itau Unibanco's earnings rose to R$9.8 billion in Q1 2024, up 3.9% from the last quarter.
The bank's recurring RoE reached 21.9%, with the cost of credit decreasing to R$8.8 billion.
Credit card portfolio and advisory services grew significantly YoY.
Itau Unibanco is confident in its growth strategy and digital transformation initiatives.
Management discussed the potential for extraordinary dividend payouts by year-end.

Company Outlook

Itau Unibanco reaffirmed its 2024 guidance, anticipating a credit portfolio growth of 6.5% to 9.5%.
The bank aims to complete its de-risking process by Q3 2024.
Itau Unibanco plans to host Itau Day on June 19th to discuss strategy and future plans.

Bearish Highlights

Capital market activities dropped due to a fraud event in Q1 2023.
Regulatory and tax asymmetries present, with potential long-term resolutions.
Uncertainties such as tax reform and regulatory changes could affect future dividend payments.

Bullish Highlights

Strong market share in investment banking with a leading position in debt capital markets and M&A.
Positive momentum in client net interest margin and strong performance in insurance and commission fees sectors.
The bank's efficiency ratio reached record levels, indicating effective cost management.

Misses

Individual loan portfolios decreased by 0.6% over the quarter.
Non-interest expenses saw a 6.4% increase YoY, though the bank maintained strict cost discipline.

Q&A Highlights

Itau Unibanco emphasized its risk management capabilities and long-term vision.
The bank sees growth opportunities across all client segments and aims to deliver a fully integrated app experience.
Despite competition from digital players, Itau Unibanco remains confident in managing expenses and delivering on guidance.

Additional Insights

The bank is focused on providing a safe and efficient digital experience for clients.
Itau Unibanco is exiting the Argentine market but sees growth in other Latin American countries.
Management is satisfied with the bank's funding growth, driven by engagement with clients and capturing deposits from high and medium-income individuals.

Itau Unibanco's first quarter of 2024 demonstrates the bank's resilience and strategic positioning in the face of economic challenges and market dynamics. With a robust growth strategy and a commitment to digital innovation, Itau Unibanco continues to strengthen its market presence while maintaining a focus on risk management and profitability.

InvestingPro Insights

In light of Itau Unibanco's first-quarter performance in 2024, InvestingPro data provides additional context to the bank's financial health and market valuation. The bank's adjusted market capitalization stands at a robust $59.36 billion, reflecting its significant presence in the financial sector. An attractive Price/Earnings (P/E) ratio of 8.23 for the last twelve months as of Q1 2024, compared to the current P/E ratio of 9.22, suggests that the bank's earnings have been growing faster than the market expected, a positive signal for investors looking for value.

InvestingPro Tips indicate that Itau Unibanco's PEG ratio, which measures a stock's valuation taking into account expected earnings growth, is currently at 0.53 for the last twelve months as of Q1 2024. This figure is below the benchmark of 1, often used to identify undervalued stocks with growth potential. Additionally, the bank's dividend growth of 39.68% for the same period highlights its ability to increase shareholder value.

InvestingPro users can access PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing them with further insights and an additional 15 InvestingPro Tips that can help in making informed investment decisions.

InvestingPro Data Metrics:

Market Cap (Adjusted): $59.36B

P/E Ratio (Adjusted) LTM Q1 2024: 8.23

Dividend Growth LTM Q1 2024: 39.68%

Full transcript - Itau Unibanco Holding (ITUB) Q1 2024:

Renato Lulia: [Interpreted] Hello. Good morning, everyone, and thank you for joining this Video Conference to talk about our Earnings for the First Quarter of 2024. We're broadcasting directly from our office in Avenida Faria Lima in Sao Paulo. As usual, today's event will be divided into two parts. First, Milton will take you through our performance and earnings for the first quarter of 2024. And then we will have a Q&A session during which investors and analysts can ask us questions and get into the details with us. Before we get started, I'd like to give you a few pointers to help you make the most of today's meeting. For those of you who access this via our website, there are three audio options on screen, the entire content in Portuguese, the entire content in English, or just the original audio. For the first two options, you'll have simultaneous translation. To choose your preferred option, just click on the flag on the top of your screen. Questions can be submitted via WhatsApp. Just click on the button on the screen on the website or simply send a message to +55-11-939-591877. The presentation we will be making today is available for download on the website screen and as usual, on our investor relations website. I'll hand over the floor to Milton, who will begin the earnings presentation, and then I'll be back to moderate the Q&A session. Milton, the floor is yours.

Milton Filho: [Interpreted] Hello everyone, good morning or good afternoon to those who are in a different time zone. Thank you for joining us and welcome to our earnings call for the first quarter of 2024. I'll begin with a high level presentation outlining the bank's earnings and providing more detail for certain items. At the end, I'll also be making a special invitation for our Itau Day, which is just around the corner. So let's get straight into the figures. Our earnings for the first quarter of 2024 totaled R$9.8 billion, representing growth of 3.9% compared to the previous quarter. Our consolidated recurring return on equity was 21.9%, meaning 70 basis points of growth quarter-over-quarter. It reached 22.7% in Brazil, growing 50 basis points quarter-over-quarter. This RoE takes into account 13% of common equity Tier 1, which exceeds our capital appetite. This means that we would be posting even higher profitability, if we calculated it with our capital target. The cost of credit dropped nominally in the third consecutive quarter, reaching R$8.8 billion, a 3.9% decrease quarter-over-quarter. Our delinquency indicators remained stable with consolidated NPL over 90 days dropping 10 basis points quarter-over-quarter and the 90 day NPL for individuals falling 20 basis points in the same period. I'll bring you more details about the cost of credit a bit later. OpEx fell by 6.2% in the quarter to R$14.4 billion in the first quarter of 2024, meaning another record quarter for the consolidated efficiency ratio, which reached 38.3%, a decrease of 200 basis points in the quarter for the consolidated figures and 36.8% in Brazil, a decrease of 130 basis points during the same period. This is a very sound set of results, with a good overall portfolio quality, strong profitability and above all, high predictability. The individual loans portfolio grew by 2.6% year-on-year but decreased by 0.6% in the first quarter due to the normal seasonality of the credit card portfolio. We posted significant growth of personal loans portfolio and 11.3% for the year, while the payroll loan portfolio was flat, growing 0.1% in the quarter. In vehicle loans we grew 1.7% during the quarter and 5.4% during the year. We also saw flat growth in the mortgage portfolio in the quarter and 3.1% growth in the year.I'll go into more detail about the individual's loan portfolio later in the presentation. We saw a 1.9% growth in the SME's portfolio in the quarter and 10.2% growth year-over-year. The large corporates portfolio grew by 9.3% during the year, posting sound growth of 3.6% in the quarter. This was a strong and very active quarter for the capital markets as we have a significant market share. We've ranked very high in the capital market rankings. Our credit portfolio, excluding FX variations, grew by 5.6% year-over-year and taking into account FX variations, the portfolio grew by 2.8% in the same period. I'll share further details in the next slide. I'd now like to draw your attention to the growth of the loans to individuals. I'm sure this is a topic of general interest that we'll talk about in depth in our Q&A. If we look at the December 2022 to March 2024 series, our portfolio grew by roughly 4%. Adjusting the loan book to reflect the de-risking of the portfolio, which we've carried out proactively, the portfolio has grown by 7%. This de-risking strategy involved reducing credit to some segments that did not prove resilient. This 7% growth is slightly below the market growth for the period. It's worth noting that the credit card portfolio accounts for a significant share of our total portfolio. Thus, any appetite adjustment efforts have a major impact due to the credit card portfolio share in terms of the overall portfolio mix. We'd like to provide some additional clarification about this de-risking strategy, which we proactively implemented for clients who are less resilient to credit cycles. We believe that at this point we have roughly reached the valley of the curve for this portfolios downsizing. Since December 2022, we have reduced this portfolio by 83%, so there is little left to do to achieve a full reduction which is expected to happen by the end of the third quarter 2024. This de-risking strategy may have an additional negative impact of only 0.5% on our portfolio and this is already taken into consideration in the 2024 loan portfolio guidance that we've disclosed. Looking back, we see that the de-risking actions helped us reduce our delinquency ratio, measured based on the 90 days NPL by 103 basis points. Given the prudential adjustments that were made to the banks balance sheet to enable us to face this credit cycle, we were able to avoid delinquencies accounting for between 172 hundred basis points of NPL depending on the period analyzed. We were also able to make savings of R$3 billion per year in provisions for loan losses. I'd also like to point out that while growing, the portfolio indiscriminately generates earnings via NII and operating revenue in the short term, in the long run, these earnings could be entirely canceled out through the cost of credit. We track our NIM and profitability very closely. These are two very important metrics in terms of our management and that have proven effective during the current period. This de-risking strategy has had a positive impact on 300 basis points on the profitability of the individual's business, measured based on the risk adjusted return on capital. These results for profitability and earnings clearly indicate that our decision to reduce our exposure to clients who are less resilient to the credit cycle was the right one. Now, looking to the future growth of the credit portfolio, there remains very little left to do to complete this de-risking process and as such, we will start to experience a positive inertial effect from the growth of portfolios made up of clients who are more resilient to the credit cycle, which have never stopped growing. This includes all individuals, in all segments, all channels and for all products. So we're going to start to see growth within the range indicated in the 2024 guidance. Now, as regards the client NIM, we have great news. First, I'd like to explain the adjustment made to exclude the results of our operation in Argentina from our earnings for the first quarter of 2023. Given that the operation in Argentina was sold and was excluded from the balance sheet for the last five months of 2023, the first quarter still included the operations figures. If we compare the margin for the first quarter of 2024 with the margin for the first quarter of 2023, excluding the results for Argentina, you will see that we posted steep growth of 9.4%, equivalent to an additional margin of R$ 2.2 billion. This is very positive news in terms of the client's NIM momentum with top-line growth and the lower cost of credit indicating good credit quality and disciplined capital allocation. The drop in core clients NII was 1.7% quarter-over-quarter if you take a look at the Banks historic series, youll notice that this trend often occurs in the first quarter. On the other hand, we saw a minor effect of the change in product mix where the average volume is positive, and we also saw wider spreads and higher margins on liabilities. In terms of negative effects, we would note that around half of the drop can be explained by the lower number of calendar days in the quarter and the other half by the results for Latin America and from structured wholesale operations. Aside from these effects, we're managing to deliver high quality clients NII, especially if we look at our performance relative to comparable quarters. NIM remained virtually flat with a slight decrease due to the effects I mentioned earlier. And when we analyzed the risk adjusted NIM, which is the most important metric, it was flat compared to the previous quarter, reaching 5.8% on a consolidated basis, and saw a slight drop of ten basis points in the operations in Brazil, which is where the structured wholesale operations effect I've mentioned is accounted for. Thus, our clients NIM is extremely promising and we still believe we'll be able to maintain a good development pace for the coming quarters. Our numbers for market NII in the quarter are sound without any major highlights. We've been able to take and exit positions when this makes sense quarter on quarter and we always make such moves based on predictability, risk management and proper positioning, our market NII has remained very consistent. As a result, we posted yet another sound quarter in Brazil, reaching R$1.1 billion in Latin America. We also had a good quarter, posting an increase of R$100 million quarter-over-quarter and a flat cost of hedging capital Ratio capital index hedging has had a diminishing impact on earnings due to our management strategy and due to the decrease in the interest rate differential. Core market NII was R$1.3 billion but the total market NII was slightly lower due to the allocation of the cost of capital index hedging as shown in this chart. We've presented the figures in this way for full transparency in terms of commission fees and results from insurance operations. We posted growth in the credit card portfolio of 4.6% year-over-year. It's worth noting that the first quarter of the year tends to be weaker in both the issuance and acquiring businesses due to seasonality factors and the way we allocate these results for recording purposes in current accounts. We noted a more stable result for the quarter with a 5.8% drop year-over-year, but this is not a significant proportion of the bottom-line. We had a very strong quarter for advisory services and brokerage, which grew 7.1% quarter-over-quarter and 70.6% year-over-year. The first quarter of 2023 was affected by the poor performance of the capital market as a whole due to the fraud event that occurred during that quarter, which ended up cooling down capital market activities in Brazil in 2024. We managed to grow investment banking results and to maintain our leading position in a good number of the investment banking rankings. We are number one for debt capital markets with a market share of 32%. In M&A, we are in second place with a 39% market share as this is a market concentrated on a few players. In capital markets, with a market share of 13%. Another item worth drawing attention to is the results of insurance, pension plans and premium bond products in which we continued to post growth every year. We've managed to expand the results in this line. Structurally, we continued to grow 10% so we practically more than doubled the results of our insurance operations over a relatively short period. Commission fees and insurance thus grew by 6.7% during the year compared to the result excluding Argentina. Disregarding Argentina adjustment, in the first quarter of 2023, growth was 5.8% for the period. In terms of the cost of credit, we had a very stable quarter. As you may recall, in the first quarter of the year. It's common to see higher levels of delinquency as a reflection of the expenses at the end of the last year and the beginning of the next. Historically, weve seen some seasonality in the first quarter where shorter delinquencies in particular are more common. If you analyze the numbers from a consolidated perspective on Itau Unibanku as a whole, the increase was only ten basis points. I'd also remind you that this series saw some aberrations in the post pandemic period and thus some normalization can be seen in subsequent quarters. Analyzing a longer period, it can be seen that we are at the lowest delinquency levels. Remember that there is also some negative inertia because the loan portfolio did not grow significantly due to all the adjustments we've made to the portfolio and yet we have still delivered very healthy indicators. In Brazil we saw an increase of ten basis points over longer timeframes. We've previously seen increases of between 30 and 40 basis points. So this slight increase in the first quarter of 2024, when the credit portfolio has already been normalizing for a reasonable period of time, is good news. The same analysis holds true for SME's when we analyze our historical series of npls, it's possible to see that last year the indicators were stable in line with what we've already been saying in 2022 and now we've seen a decrease for the second consecutive quarter in NPL, 90 for individuals and NPL for SME's of 2.6% and not increasing during the period. This shows once again our ability to manage these portfolios through adverse scenarios and how well we've been able to control the risk management process and delinquency levels as a result. This is the third consecutive quarter posting a nominal decline in the cost of credit and in the cost of credit as a percentage of the overall credit portfolio, which reached 3%. The renegotiation of the portfolio has also pulled the portfolio down. It's worth remembering that the individual loans portfolio includes the renegotiated portfolio and since our strategy has been to ensure disciplined risk management, the portfolio was renegotiated to the right level and not excessively. We can therefore see that this portfolio has also been dropping nominally year-over-year. The ratio of the renegotiated portfolio to the total credit portfolio was 3.2% following a nominal decrease. There were no surprises in terms of the coverage ratios, with a small increase overall, but some variations by line of business, reflecting everything we've been doing to protect our balance sheet with good credit quality. Going forward, we expect healthy indicators with good coverage by provisions and a healthy level of 90 days. NPL non-interest expenses, excluding the effects of the deconsolidation of Argentina, increased by 6.4% year-over-year. There was a 6.2% drop compared to the last quarter of 2023 as non-interest expenses for the first quarter of 2024 totaled R$14.4 billion. It's worth noting the improvement in our efficiency ratio which reached 36.8% in Brazil and 38.3% in the consolidated in this first quarter of the year. This meant that we had yet another record quarter in terms of our efficiency ratio, both for Brazil and on a consolidated basis. In the 2024 guidance, we reported that we expected to grow our core costs at less than inflation. The twelve month headline inflation rate was 3.9%, while our core costs grew by 2%, which is half of the inflation rate for the period. This result was delivered without stopping investing in the growth of our business and in our technology platform. Therefore, the growth in our total non-interest expenses is due to investments in our business. It's also important to demonstrate that we have maintained strict cost discipline. For banks, inflationary pressures go beyond just interest rates. We are parties to collective agreements that put a lot of pressure on costs, but we have made major investments in the business and in the future of the bank, and we don't abdicate our responsibility for actively managing our costs every day. We also have very positive news regarding capital. We announced the payment of extraordinary dividends and that reduced our capital base during the last quarter. Since then, we've generated both more earnings and more capital. This quarter we reported capital consumption by risk weighted assets and due to regulatory changes that increased the risk weighting on some operations. Therefore, we had some non-recurring impacts that caused the set one ratio to reach 13%. It's worth noting that our dividend policy establishes a set one level close to 12%. So how will this excess capital affect the dividend policy in the coming periods? We're still grappling with some uncertainties, whether related to regulatory changes or future implementations of regulatory updates, including the new operational risk regulation and credit weightings that have been impacting the RWA, the impacts of the IFRS-9, and how it will affect tax credits and consequently capital. For this reason, we're always careful to maintain a capital buffer to anticipate future events in order to ensure proper capital management and avoid any issues. Any excess capital beyond that will be distributed, and the closer we get to the end of the year, the greater our visibility on this. Our goal is not to retain capital beyond what is required to run the bank and grow our operations. Considering a horizon of twelve to 24 months, which gives us considerable security regarding our current and future capital generation in the coming quarters, we do not release the guidance on a quarterly basis and this is already known to the market. The idea of bringing the guidance framework is to share with you our view of the year of 2024 and the bank. The first relevant piece of information is that the 2024 guidance estimates a growth of the credit portfolio between 6.5% and 9.5%. The year-over-year growth of the credit portfolio was 2.8% but adjusting for FX that impacts the Latin American credit portfolio growth is 5.6%, which is still below the 2024 guidance. As we are currently in the valley of the de-risking portfolio adjustment curve, we remain very comfortable with the 2024 credit portfolio growth guidance that was released at the beginning of the year. We believe that we'll recover to a position in the range of the loan portfolio growth throughout the year and are reaffirming our 2024 loan portfolio growth guidance. Our clients NII grew by 7.4% year-on-year, but when we exclude Argentina from 2023 results, we grew by 9.4% in the period. This growth of 9.4% is above the guidance range. However, this is not an indication of where well be at the end of the year. We are simply sharing with you as evidence that we have been able to grow close to the ceiling set out in our 2024 guidance. As such, we remain comfortable with our clients NII guidance. The market NII is a simplification because we take the result of the first quarter and multiply it by four, since this is only nominal guidance, we know that the unpredictability level of the margin is high, but we also know that we must work hard throughout the year and deliver results within the established guidance. The cost of credit follows the same rationale with the first quarter of 2024 amount being multiplied by four. The guidance supports this credit cost momentum commission and fees excluding Argentina grew by 6.7% during the year, which is also within the guidance. We disclosed the guidance figures both including and excluding Argentina from 2023 results to better understand the performance in the period. Non-interest expenses increased by 4.3% during the year, while inflation was 3.9% for the period. If we exclude the figures for Argentina, growth is 6.4% for the year, also within the range of the guidance. The tax rate is also within the guidance range. We believe that the predictability is as important as good guidance for the market to calculate earnings expectations. So it's important to share how we are managing the bank. Let me say once again that we are reaffirming our 2024 guidance and we are very comfortable with the numbers we are achieving. Going forward, we believe we'll deliver the expected earnings and that the guidance range accommodates potential changes. We're very confident that the growth of the credit portfolio will be within the guidance range by the end of the year. This is the general message. We will not track the guidance during every quarterly presentation, but we think it's important to share our views at this time. Finally, I'd like to take the opportunity to extend an invitation. This has been a very high level executive presentation only with some updates on our credit portfolio, NII capital costs and guidance details. But on June 19, from 9 a.m to 11:30 a.m, Sao Paulo time, we will host Itau Day. The event will have the same format as previous years, with the participation of the executive committee, Pedro and Roberto at the beginning, and also myself. Although I promise not to take up much of your time and to give the executive committee the opportunity to explain our strategy and what's behind the headline numbers. Of course, the numbers are important, but behind them there is a lot going as appropriate. We will organize with great care and dedication. And it will also be the time for you to understand how we've conducted our business and the vision we have for the future. This concludes my presentation. I'd like to thank. I'll now join Renato to start our traditional Q&A session.

Renato Lulia: Thank you very much. Milton, thank you for the presentation. So let's start the second part of our meeting, which is a Q&A session. This is a bilingual session, so we're going to answer your question. If you need any, either English or Portuguese, or you can submit as well your questions via WhatsApp. The number is 11-939-59-1877. Milton, we have a list of questions to address for both of you. But before I would like to give message for everyone here.

Milton Filho: Thank you very much. Renato. Well, guys, once again, thank you for your participation. I'd like to break the protocol of our call and that the bank is going through. But we wanted to also seize the moment to bring our solidarity of the state of Rio. A difficult moment of crisis attract on the press. A lot of initiatives that we've done to help the population of Rio Grande do Sul. But the government warfare that it is, the city, the capitals, the cities and the population. The moment of solidarity and we have to work citizens as a company and Itau well, we want to do the best that we can. We subdivided with our actions with the collaborators. We have 170 branches in the agency, 52 are closed and impacted. 16 of you know, our collaborators and associated companies is in good conditions. Family members are impacted. So this is a moment of the strength of the -- Because in the end, we have to be together in a moment of difficulties and also joy, so that our employees can also to the community and our clients. So we have a series of actions that we are. We've been very proactive in the offering of insurance for our clients. We know that there is a policy that protects them. We've proactively called our -- We are at the granularity, at the individuals to see what are the processes that we need to help them in this great moment of pain. We did initially a donation to Union Brazil, an NGO. But the big [Technical difficulty] It's not only resources, but mainly the war plan at this very difficult moment. So yesterday, the invitation of Azul. John, the CEO of Azul, talked to me in the morning. We closed at that moment, our partnership, so we can capture our friends, colleagues, citizens of submitting planes to the region where we can land, taking to the first responders as well to help them. We have an internal resource allocation in the bank. So donate, there is the pairing of donations. This is a problem that hopefully will be ending soon. Even though it's long term, there is a rebuilding work. But, you know, I have to start by expressing my deep set, the most solidarity to the population that we can. We're going to take two steps ahead to do whatever we can, Renato message very important. So let, First of all, I think that we have a toolwork of risk management that is very much developed all throughout many years. This is a core system in our culture. Risk management is very strong at capital allocation, our institution. So when we do projections of the guidance and projects, we can, with a predictability degree that is very accurate, project our numbers. And we can see that we are developing all throughout the years, both in finance and also risk. And this tool box allows us to do great decisions with a prospective vision and not the short term vision. Of course, we have teams that are high quality. I cannot delegate this to the models, because the models were built by high quality teams, people that are dedicated to understand the journey of the client. And we've recently been planting in a very structured way, with the. With the retail, the management of the portfolio. We have to prioritize and make decisions, and you have to make choices. So, as important as it is growing, you have to choose your battles from the capital allocation standpoint, with a long term view. We saw that there is an over offering of credit over the years. We cut it in the materials that are presented. But there is a series of December, from 22 to March of 24. If you see that series, we didn't grow R$17 billion, realizing the portfolio. Maybe this is a good number. So you can keep in mind, why? Because these are clients with a compromise of their income very high, their indebtedness, they're now resilient on the long term and we have to remember that number. So we have, yes, periods of high volatility. So I cannot look at a short cycle and make decision looking at the next three or six months or aiming for the results of the next quarter. If the VPL of the client is negative and not in the credit overview, we look at the overview client, not the credit overview. So in an institution such as ours that we want to bring and build a strong franchise of great engagement of the clients, having a management of the client and looking at that client on a longer cycle is fundamental. So we can take the make the decisions. So we realize a certain increase of delinquency with everything that we lived after the pandemic, the increase of the inflation, increase of the interest rates, and we knew at that time to make the adjustments that are necessary for the portfolio. I believe that looking from now looking to the numbers that I've just commented, we made decisions that are very accurate. Why? Because management through equity and growing portfolio and growing revenue is not difficult on the short term. The revenue will come. I mean, for growing the portfolio, just have to open the credit filters. You're going to grow the portfolio, but thereafter, the problem is that you're going to spend many years paying for that bill. And that's not how we want to manage the bank. We want a branch, not just looking at it. Naturally there is an issue of value proposition where we've done adjustments that are very relevant. It wasn't a credit card portfolio. There was an over offering of the portfolio of the product on the market. The client had 1.4 credit cards per CPF number. Now we see four credit cards per CPF. We have an over offering over product without annual fees that you can hire digitally and no client. When they hire a credit card, they ask the interest rate of the installments and the payments. They just think that this is a payment method.[Technical difficulty] [Audio Gap]

Operator: [Audio Gap]

Unidentified Analyst: Client and AI given some of that de-risking of the portfolio. But when you think about growth from here and some of the competitive dynamics that are happening, you have some people competing on the lower income segment, but others talking about growing more with higher income clients. So I mean, how comfortable are you in your ability to maybe accelerate loan growth from here, to be able to deliver on the guidance for the full year? Just, and just digging in a little bit on the loan growth in particular, right. I mean, credit cards are, we, we did see a pickup in personal loans. Just to understand a little bit that the dynamics there. If you go through the loan growth by the individual client segments, like where you see the opportunities and where there still may be some competitive pressures. Thanks.

Milton Filho: Okay, Chitu, thank you much, very much for your question. I start saying that we see a lot of opportunities looking forward. So we are very positive about the size of the opportunity that we have in terms of growing the portfolio. Of course, we had to deal with this de-risking process for the past, I would say two years. And we are very happy we've been through that, delivering a very good level of profitability. But we are, yes, working in all segments and we see opportunities throughout all the publics that we have inside the bank, from Italy to the individuals on the wholesale side, we've been able to deliver two digits growth. But you have to remember and take in mind in consideration that the debt capital market markets very strong, especially in this first quarter. So you have to add at the end of the day, we are serving our client not only with the balance sheet, but also with the debt capital market. With for the client is a financing solutions and very important. And we open room to support the clients that don't have access to the debt capital market. When we look to the SME's, we've been able to post a very decent growth many years in a row. So if you go back, we've been growing for many years now and we've been growing two digits this year as well. And we still see opportunity to keep growing. This portfolio where we made the most relevant adjustment was on the individual side. I just mentioned a few reasons why, but we see that we are at the end of the tunnel. So we won't see that pressure coming from this de-risking from the next two quarters. We just have just a little bit more negative pressure. But in the other hand, we've been growing two digits in the target clients that we define. So mid-income, high income, we are growing two digits in all those segments. And we believe that with this platform, this app fully integrated with a full bank experience, we will be able to grow not only in the mid and high income clients, but also in the low income clients. You have to define very clear what type of public you can access, with what type of product, in which channel and what is your expectation in expected loss you can have with this client. So you can define the lifetime value, the VPN of this relation, but taking in consideration of course the risk models that, that we run inside the bank. So we do believe we have more than a winning class outside the bank, more than a one personality outside the bank. And we do have in the low income, a lot of opportunity, having the correct value proposition. And this is our main goal for this year, to find out the value proposition with the app completely integrated, and we will be able to grow the relationship with low income, mid and high income clients with this strategy. And also we have, of course, all the retail operation running very well, growing the business, the client base of all those segments is growing almost two digits a year. So, just to give you an idea that we've been able to grow personality, unique class, not only growing the size and the number of clients, but also growing the shut off wallet of those clients. So we still have a lot of room to increase the relationship with clients that are already very good clients of the bank. So we don't see any limitation, of course, in terms of growing. We do see of course, that we have to keep in mind the scenario and how we will manage the scenario, depending on the variables that we see looking forward. So we have to look to the unemployment rate, we have to look to the GDP, we have to look to the geographic, to the demographic of our clients, we have to understand the level of leverage the clients have. So despite of all these tools that we use for risk management, we are very confident that we can grow the portfolio. You will see us growing in the coming quarters and we are very confident with the guidance that we made. So there is no need to change. If you look Brazil, only Brazil, we are growing 6.6% year-on-year. Then you have LATAM, which is having a major impact, a negative 12%. And why is that? Because the portfolio without this effects variation the valuation, we would be having a 2.6 portfolio year-on-year. This is what we see nowadays, 2.62.8, depending on the way you cut it. So at the end of the day, my most relevant information here, yes, we'll be able to deliver the guidance and you have to look to us with two other optics. One of that is that if you take out Argentina of our numbers, we are growing at 9.4 top-line. So the financial margins with client is growing 9.4%, which is very, very relevant. But then you look to our cost of credit is diminishing on a nominal basis. So our financial margin net is very positive. So we are growing the portfolio, growing the financial margin with client and reducing the cost of credit on a nominal basis. So, and also we've been able to deliver a very good efficiency ratio. So this is the way we've been managing the balance sheet and we believe that we can keep delivering the level of profitability that we've been delivering, looking to our longer period. So we are very confident and very positive about the opportunity, of course, always having a huge discipline in capital allocation, huge discipline in risk assessment. So this is our mantra, and we'll keep that very strongly.

Unidentified Analyst: Great, thanks.

Operator: The next question is you from New York, coming from Jorge Kuri for Morgan Stanley (NYSE:MS). Hey, Jorge, good to see you. Thanks so much for joining the call.

Jorge Kuri: Hi, everyone. Thanks for taking my question and congrats on the numbers. I wanted to maybe shift to expenses where you've done a really good job, certainly well ahead of what your incumbent peers have done. As you think about the banking system moving more and more to the digital front, and some of your better digital competitors now moving into bigger products like payroll loans, for example, how can you compete effectively with players that have cost income ratios, efficiency ratios of 20%, 25%, and are using that to translate into much lower prices for consumers? And I'm asking this in the context of your guidance for expenses. Growing expenses with inflation is just not going to get you there because your revenues are going to grow a little bit above inflation. They're not going to grow five times inflation. Your NII, for example, is growing two times inflation. And so the efficiency seems to be lagging where I think financial institutions are going to have to be in order to compete with the pure digital players. So when can you do that? When can you start to provide us guidance of expenses are going to be down 5% next year, down 10% next year, and within the next x number of years, we should be at sub 30% efficiency ratio. Or maybe I'm wrong and you disagree and you don't think that you need to run the bank at 20% plus 20%, 30% efficiency ratio to be competitive. So just wanted to get your overall take on this. Thank you.

Milton Filho: Start talking about that and give you a few messages. Thank you. Good to see you, Jorge, again. And thank you for the compliments. Let me start saying that, of course, efficiency, for us, it's key. And that's why we've been delivering quarter on quarter a reduction in our efficiency ratio. We've been delivering this quarter the best ratio that we had so far, far. And we keep very positive about all the actions we are taking inside the bank. Our business model is a little different. We are not a full digital bank, and we have to understand that is in this index. We are looking the whole bank. Okay, so this is a full bank index. We come from wholesale global markets, Latin you have Brazil, you have everything. So you have the two index right there, the consolidated index, and also you have the Brazilian ratio. My message to you is, first of all, we've been investing a lot in the digital transformation. That was the first best decision we had to make to be able to deliver a digital experience to our clients with a completely different user experience, completely different efficiency ratio. At this point, we believe that the app, the way we're going to be integrating that will be a huge achievement in terms of providing a much cheaper cost to our clients, to be able to deliver a much better price at the end of the day and to be more competitive and have a more operational scale coming from technology. So this is something that we're going to be very, very, very focused. The second thing, you have to look to our model, physical model, but the same way you don't have the same level of costs, but you don't have, when you look to the digital banks, the same level of revenues. When we look, the capability that we have to have a full bank relationship with those clients and creating engagement not only for the day by day products, which always the case, but also to more sophisticated product. You really need this remote application approach to access your clients, to offer, to be consulted to your clients. We are not, I would say, happy because we believe that we still have a lot of work to do in that front. So I'm not saying that we got there and we are happy that we don't have anything else to do. Yes, we have to keep pushing that and we have to find a way to serve our clients the way he wants, but with a much lower efficiency ratio. Of course, we do have asymmetries in this discussion. So we talk a lot about asymmetries. We have regulatory asymmetries that are always being discussed, but we have some tax asymmetries as well. So if you look to us, we are paying 45 tax on the income, corporate tax and social contribution. The payment institutions are, are paying 34. So there is some tax assimilatories. And I'm pretty sure that this in the mid to long term needs to be solved. It doesn't make any sense. All the time you lose a client here, you lose at the end of the day collection for the government as well, because you reduce the tax income. So there is a lot of asymmetries that will be solved in time being. But at this moment, we have to be focused in our agenda to deliver a much better experience to our clients, to be much more efficient. And of course, if you look to the numbers we deliver, there is restructuring cost being packed there. So you have. That's why we separate what is the core cost is being much less. So if we had inflation of 4% in this period, we are running at 2% in the core cost, but we still are investing in the enablers to have a much more digital bank. So on the other hand, we have to finance this investment period. So at a certain time, we're going to be much more efficient. We're going to be much more scale in terms of technology, much more product driven in terms of offering the best digital experience to our client. And this will help us to be much more efficient in the way we have a value proposition for our clients. So this is the way we look. We are in this space. We have a lot of work to do, but the job will be done. So, Alexsandro, I don't know if you want to add something on that.

Alexsandro Lopes: I think it's quite clear. I quite agree with the direction that you mentioned, but I wouldn't focus so much, as you said, on 5% reduction in costs because, as Milton mentioned, maybe 5% reduction in cost normally means that I will not achieve a lower efficiency ratio. Because the easiest way to reduce cost costs is to reduce investments. And we are clearly not, not on the business. So we are fully committed to reducing the efficiency level, but not necessarily to have nominal cost reductions when, because we consider investments on this whole matter. So we fully agree in the direction. But I think that distinction between core costs and investments that Milton mentioned, I thought as is quite crucial show great. Thank you very much. This is the way to go. Jorge, it's good to hear from you, but we're going to pursue this agenda very strongly. Thank you.

Renato Lulia: [Interpreted] Now, going back to portuguese, the next question is from Gustavo Cerroder, BBI.

Gustavo Schroden: [Interpreted] Good morning, everyone. Renato, Milton, Broedo. Thank you for the time and congratulations on the results. I would like to speak dividends. Did you anticipate some. Well, you anticipate some questions, some words, Milton, but can you give us some color first? The items that you were analyzing, they're waiting. Regulatory ifrs nine, you commented as well over the last calls about the tax reform. We've had the indication recently. In my reading, maybe it's more easy going from the standpoint of adjustments, given the time, but maybe in my reading it would give more space for us to think in these extraordinary dividends that you've commented. But I wanted you to comment first. What are the items regulatory items that you have in mind? Operational risk, IFRS nine. I think that an issue of the tax reform. But maybe can you qualify and can you give us some expectations on what would be the impact of these items that you have? Approximately. So you. Well, doing the math, what would be the dividend, extraordinary dividend in potential. Could you give us a number for the second semester? Thank you.

Milton Filho: [Interpreted] It's a pleasure to see you, Gustavo. Thank you for the words. Well, let me give you an overview, in depth overview on this issue. Well, from the end to the beginning, our expectation is that we should get to the end of the year with everything that we have in projections, with the capacity of paying the extraordinary dividends. That's our best expectation to announce an extraordinary dividend. And we've been discussing this on the second semester, the moment of doing it and the dimension. But for that we need a few premises. Now we are facing some relevant uncertainties, well estimated, but these are uncertainties nonetheless. I think that on the positive side, the capital generation capacity is very solid, very strong with the profitability level that we have. We've been generating a capital that is organically generated, provisioning the dividends in a very robust way. This quarter wasn't different, and it's been this way through the quarters. Now, when we look up ahead in this quarter now, we've had the first event of the risk moderator for the credit, for the structured operations of the wholesale. That had a big increase impact. The 34 basis that we said 19 basis points approximately came from the fundraiser impact. The rest is just risk weighted assets, the increase. So we've managed not only to finance the organic growth of the bank, but also facing these adjustments and these fundraisers. Second aspect is that looking up ahead, what do we see in terms of uncertainties? We had an expectation of the reform, the tax reform of the income. What is the tax reform point? You have a discussion. You had a discussion. If you have interest over on capital and how that compensates on the corporate tax, adequate. If you have a lower aliquot at the corporate level, you have to do, you know very well this process. You have to do an update, a re-evaluations over your tax credit. So we had an expectation that depending on the magnitude of the reevaluation, maybe it would cost us 60 basis for the bank. This is the number that we had with our projections. The fact is that the reform of the income, it's probably the tax reform that's not going to happen next year. This is the base scenario because we're focused on government, Congress, in doing the norms and defining the IVA reform and all the impact in the segments. That in and on itself is a very complex reform to do. We don't foresee this discussion for this year, now for the next year. What are the impacts that we see? We did. We see a discussion of the fundamental review of the trade book. This is basilea three. This is coming for the market as a whole. Correct. I think that it's in the right direction. I think that it's ever more clear that the most risk for the results in the institution is in the banking book. And we've seen this happening in several banks and in the United States as well. This is a regulation that is necessary. We are very comfortable with what we've seen thus far. We've done a risk management and adequate management, very adequate of these books. So I don't foresee big impacts. We have a discussion of solo basis, which is to work at the capital, at the individual level and not consolidate it. And then you define economic groups in a conglomerate, higher potential. Therefore, this is a debate that is ongoing and we need to define what is the type of impact. There is an impact of basilea risk, operational risk. So looking up ahead, our estimate is 100 basis .4 eta when you bancor it's four years. Phase n starts next year. So 25 basis per year. Four years. So we are very comfortable that with our projections we can absorb these 25 bases at the beginning of next year without any difficulties. There is a discussion of IFRS 9 or the norm, the law that was created. And I think that, you know, this is something that you should measure the impacts in the several institutions, because as you necessarily have to deduct all of your loss of credit in the, in this FY and then for stock, you have three years to do the deductibility. The risk of a process such as this is that some institution is going to lock in liability of tax and then you have a double effect. First you lose upon the rater of the PDD and then it becomes CTPF, the tax of the loss of tax reform. And then you reduce the the base of the capital. There is a transition that is being broadly discussed in central bank government, but we do not know exactly what is going to be the outcome of this debate. So I think that we have to by policy be very cautious, facing the uncertainties, because events take place. There are several regulatory changes. So these are the main ones, the main changes that I see. But our capacity to generate capital has been very strongly, which means that we continue to be comfortable and we are capable of financing these impacts and finishing the year with a set one with the level of. So we can make a decision for the extraordinary dividend that has been paid. And I rather do some extraordinary dividends all throughout the year than rather do one off just once and just do this with the tight capital. And we have a buffer in our risk appetite for the board. We're always going to discuss the convenience here. If it's 1211 and a half and what is the size of capital that we've seen up ahead, given our projections. The most important is if we can continue to allocate. To allocate the capital for growing the bank organically and organically for we can bring a great return for the shareholders. This is our central objective. But we don't want to retain the capital above a certain level. So therefore distributions are going to be done in that sense. I hope that I gave you a general overview of the issue. Thank you.

Renato Lulia: Thank you for the answer, Milton. The next question. We have Mario Pierry from Bank of America (NYSE:BAC). Hi, Mario. Welcome to the call.

Mario Pierry: [Interpreted] Good morning, everyone. Congratulations on the result. Thank you for the opportunity to ask the question, Milton. I wanted to explore more on the issues, the opportunities on the SME's. We've discussed a lot of natural persons, but I wanted to. I wanted to see how you see the opportunities, the growth. You talked about the other projects. What is the process of implementation of the timing of the Aqua project and how is this project helping you differentiate your. Your service to the companies in a digital way? Thank you.

Milton Filho: [Interpreted] Thank you, Mario. Thank you for the report and for your kind words. Now, this segment is super strategic for us, very relevant for us for many years. This is a segment that the bank has focused a lot. We've had a lot of earnings in the segment. And we managed in a relevant way to deliver values for the clients of the segment and creating value based on our value proposition and based on the business model that is developed in the retail. We've grown two digits in the segment for many years. If you see the indicators, the credit indicators absolutely controlled, behaving well without perspective concerns. Of course, there are more difficult cycles, better cycles for the credit. But the fact is that we can grow with a lot of engagement, with a lot of increase of relationship with the clients and growing the base and increasing the penetration of these in these clients. And important with the credit and the risk well managed in our hands. We went through this process very well in the long term and we are growing with a lot of quality. So this is a value proposition that fitted very well with us, with a lot of training, human capital that is differentiated and always with an overview of the client, not product, with an overview of the relationship with the client and long term view. So we can always have and not just look at one quarter, but looking at the long term view. We integrated the network and Reddit and we were very well successful. Red Card Ready is not a business that we observe standalone. It starts to be a part of the value proposition of the segment. And once again, always the overview of the product, but with the client and we are very happy with the integration and with all the benefits that that has brought with the operation. At last, which will be re baptized, is the internal project. We have a name. We are going to announce the new name of Atlas (NYSE:ATCO) project. It is at a soft lounge project. Friends and family. We have a lot of projects, friends and family, but this is a family that's been growing. The feedbacks have been very positive thus far. We've learned a lot. We've evolved with the platform, we've applied technology, everything that is available in terms of technology, and we've grown with our clients and learn with them. Our overview is that for the second quarter we will get the long hanging fruits and then we can more share the concrete data with you. We are very happy with the advances and we continue to believe in the success of Atlas, an offering that is completely different, full digital focusing, really in the pains and needs of the clients of what they really need to work with their business. And we are going to work with clients and publics that are different. But companies that I see that have a value proposition and a solution that services their needs. We're very happy with the evolution, I would say second quarter. I'm going to give you more details. I hope to give you more details. In Italy, we're going to discuss the evolution of Atlas and our expectations. But our business companies is growing very well, very healthy and with a profitability much higher than the profitability of the bank. So it's a high performance segment, very well managed all throughout the years.

Renato Lulia: And now the next question we have Bernardo Guttmann from XP (NASDAQ:XP). Floor is yours.

Bernardo Guttmann: Thank you, Milton. Thank you, Myles Sander, for the space to ask the question. And congratulations for the result. I have a question about profitability per segment. Well, it seems that retail is going on a recovery trajectory that is very important. Left an ROI of 17% for in the first quarter, two of last year to 23%. Now, What can we think about the elements that brought in this recovery. How can you project these returns on investment? Looking up ahead, the bank seems to be adjusting very well to the cost of serve service. And it's a very assertive movement of the risk offering that the portfolio that Milton explored very well. And on the opposite side, when we look at wholesale, the ROI is still very high, 28%. When we look at the competition per operation, given the reduction in the venturies and spread and capital markets, the scenario seems a bit more challenging. How can we think about this dynamic of the wholesale as well? Thank you

Milton Filho: [Interpreted] Bernardo, thank you for the initial words. Great to see you. Thank you for taking part in our call. Well, I remember a few quarters ago, what's question about retail? I said that I wasn't happy with the profitability of the retail, not even the management, not even the CEO. At that moment in the past, we were doing a strong work of renewal of the value proposition, review of the business model, so we can get a profitability level that is more sustainable. We didn't want to go back to what we saw in the past. There's regulatory changes down the line. It's a segment that grew more credit than the income of services, revenue, service. What brings the profitability? Let's just say to a lower threshold, because the credit in general, it brings a profitability level that it's closer to the cost of capital. But without foregoing the exploration and going, getting closer to the clients and in relationship here, the retail, there is the individuals and the companies. I mean the companies are growing. This is the business that is improving year-on-year. But where we had a big turnaround and it's still not done completely, but we've done a great part, is in the individuals, a natural person. So I said that I wasn't happy with that business. But now our bottom was 16.5 that we delivered in the results of profitability of the individuals. And we got to '23 now there's still space for increasing this profitability. And there isn't a silver bullet. There is a series of initiatives. We changed the business model. We did all the review of uni-class, we did the review of personality. But we also did a review that in depth of our mono-liners. We had in fact the de-risking important reversing to do in this portfolio, specifically credit cards, vehicles, even, you know, with the loans that we had to do. And we've done very well. We did sanitization very well of the credit and the portfolio for this segment. So we can, you know, work with better profitability levels. So there is value proposition business model here, generation of top line, reduction of cost of credit and with an operation that is more efficient. So this evolution is the one that we've observed and we are very positive in regards to this evolution. We tend to continue to advance in profitability. As I told you, we are not going to, we're not going back to the threshold, but we didn't get to the peak of profitability. And I think that we can wait for this. In this business we are very satisfied with the evolution and we continue to have the. The retail working with a profitability that is close to the profitability of the bank. It was diluted for the Roy some short time ago, but now it's aligned with the ROI of the bank. That is very positive, creating value in a consistent way and sustainable way. Wholesale. We had a small expansion in this quarter on the profitability. So we managed to operate with a strong profitability. And this is the business. Of course, credit is important, it has a very strong weight, but it goes beyond the credit and the balance sheet. Standalone our capacity to work with the clients in the several businesses and several needs in the way that we say with Itau Bba, it's from the d day until the most important day, the day to day to the D-day of our clients. So we leave from a cash management that we have a share of cash that is very relevant of our basis of clients. Going through the cross sale with several products, with investments and derivatives. There is a penetration of other credits that is supporting the clients, but with enormous capacity of working both in a fixed income and variable income. With the M&A market, we have a strong participation there. But remember that when we talk about profitability of the wholesale, I'm not talking about Itau Bba, I'm talking about [indiscernible]. All of our agenda of asset management, you know, the net individuals, all the business of investment that we have in the bank, the brokerage, the custody management, we are working with a profitability level that is very high, with an efficiency, you know, there are services, there is less leverage, inefficiency is a bit higher. But we can deliver relevant returns when we compare to other players. The magnitude of our asset, the investment business, the relevance of our business, the private banking with 30% of market share is contained in this profitability. And we've managed to gain markets month after month, day after day. We're very satisfied with the evolution of this business. And now we have a bank that is outside of Brazil. All of our operation LATAM also in this quarter had an ROI that is close to 14.9, close to 15. It was 14.9 to be precise, to showing that our LATAM operation also has managed to grow and increase the profitability. So it's true that we've seen a higher pressure in the market. The capital markets is very active in this first quarter to positive side is that we are the best, the main player and we have the big, the origination market share for the fixed income, the primary one for. So this is relationship with the companies that's cross sale, being closer to the client, delivering to the client the best solution and the best structure for financing at that time. We've worked with relevant projects as well and I would say we are satisfied. The issue of more pressure and price. Gaussian let's just say we have a mantra in the bank and we use it very well. When we see any rationality and it exists, we have two paths. Either we lose market or we destroy value. Our decision is to lose market in situations such as these. But we also understand that these are unsustainable in the long term. So when we see an anomaly in the pricing, in the capital allocation vision and the return vision in certain segments, we take a step back in the sense that saying this is not sustainable, this is a poor capital allocation, is diluted for the ROI. And when we look at our models of capital allocation, we always look with our cost of funding that is lower our model for capital allocation, with our efficiencies, tax efficiencies, and still these are operations. When we realize that these operations at destroy value and are much below the return on the cost of capital, then we decide to stay away and try to find more sophisticated and intelligent solutions for our client. But we don't get into that dispute. That's why I'm not worried about profitability. I think that the biggest driver for profitability on the medium long term, and it has been a lever that is very positive for us, is the cost of credit. In this segment. We've been running much below to what was the pre pandemic. And we for some years had a cost of credit that is very, that is behaving well. There will be a normalization, and this normalization has been slow. And the most important thing is that in relevant cases of credit that we've seen in the market, we usually, with the disciplined management of risk and concentration and allocation of capital, we've managed to do very well. I'm going to hit wood three times, but you know, we're going to be. We fended very well through these moments. The segment of medium and small companies. We start to realize there is a pressure here and there, but absolutely something within what was expected normalization, very slight one, and we haven't seen big events that we somehow are exposed. So I believe that, you know, wholesale, we see a good capacity to deliver value and good results up ahead. Competition is part of the game, and we are here on the long term and not just the next border.

Renato Lulia: Next. Thiago Batista, UBS.

Thiago Batista: [Interpreted] Hello, Thiago. Hello, Renardo. Milton Brodo. I have a question about how transformational can it be, the Juanita Wu thing? And is this transformation, what is the focus, its efficiency? Having a better credit control is having access to a client that you didn't have before. What can transform the bank in one? Itau.

Milton Filho: [Interpreted] Okay, thank you, Thiago. Also very nice to see you. Thank you for the words. I have a question for a question that wasn't asked before answering. That event that we launched in the non recurring, in the balance sheet of the selling of the participation of a company is the selling of Pismo, which is a company that we had 5.4% in participation, and that company was sold to visa. We had a stake in the company. It generated a result for the bank of R$180 million in this, in the last line. But to keep our consistency in the recurring non recurrent, regardless of it being a positive result, we have that discipline of being positive or negative, we launch in the recurrent when it's non recurrent. This is a classical case of a positive that we launched in the non recurrent, in the balance sheet of the bank and not the result that I would say recurrent. Otherwise we mess the information and you lose the capacity to understand what is operation and what is events. So just to give you that information for you and the market of that transaction that we are talking, that we're talking about. What I wanted to discuss with you about the super app platform. I think that is transformational, at least with this. We believe that this is the way that we're going to run the project. I believe that first there is a maximum mobilization of the entirety of the organization, the most prioritary, most important project of wholesale, of retail. Sorry. That is, I mean, everybody is involved. CEO, superintendent, coordinates, analysts. Everybody is involved and dedicated. This is a project that has to be done together. The coordination level is deep, but we are very happy with everything that we've done thus far. Our best expectation is that this is an evolution of the platform of which we had a cap quality, the best technology with indicators and KPI of clients that are very solid with digital experience. That is incredible. And we can use a great deal of these components to lever a platform that before dependent on several products and systems. So we couldn't break the monoliths and create the solutions into that product and into the in between the businesses. Because really the platform, tech platform wouldn't allow for. So here there is a confluence of two events. The digital transformation of the bank and the evolution and investments of everything that we've done with the which platform. Joining these two initiatives, we can get you the solution, which is a super app, the Turbo app, which is a full-bank offering for the clients. Well, I don't want to do any type of projection because as any project there is a risk for the execution. I mean there are many challenges looking up ahead, but my expectation is that this will be transformational, transformational for the experience of the client. It's not just this. We have an accelerated program for digital transformation in the retail, improving the value offering, the offering of credit being improved in the context of journey. So there are several fronts, all the safety, because safety is the experience of the client. We are certain that offering a safe offer for the client is generating value at the end. So we are working with a lot of focus in this. Our overview is that if we are making this work and we are very trusting that it will work, we will unlock in fact a very big value in individuals, in natural persons. And that means working with a generation that is strong of business, with clients that we have relationship, but it's a very limited relationship. And we can do that at a cost of service that is better with Ux and a value proposition that is better. And we're going to have to learn to generate, cross sell. And we've made an effort all throughout the years to learn how to do businesses with platforms that are uniquely only digital. And we can service, therefore a public that is below the threshold of the waterline when you place in the cost of service in the equation. So we're going to be more efficient, more digital first in this business, and the expectation is very high. So we are working in the bank and this can be transformational for the retail and it can be a relevant growth lever for the future. And you talk about the cost of credit, a great deal of these clients, we have a relationship, we know the behavior, we have appetite for credit. And it's not clients of low income. When we talk about, oh, it's a platform which had an approach that was focused on the lower income in the younger product. This is a solution that goes through all the segments. Yes, it goes on the low income and it can be a value proposition for us to service exclusively the clients in that way. But it goes on all segments. And the big advantage of this solution is that you can customize for the need of each client. So you don't have the one size fits all. You're going to have a customization depending on the need. And we will be able to attack the medium and high income with the known behavior, with clients that we know. And I can deliver the concessions that are very important. And this share. So I believe that there is a lot of talk. It's not our style. What we prefer is over delivery, under promise. I'm not over promising, but we are very confident with the future. And I will give you more details. Last time it goes by.

Renato Lulia: Next question. Brian Flores, Citibank. Thank you for your presence.

Brian Flores: [Interpreted] Hi brother Milton Bernardo. I wanted to talk about Latin America. On the one side, we are seeing a contribution with a size that is less, but on the other hand, the profitability is improving. So I wanted to ask you, what are the trends that should talk amongst themselves from now on and what is the level of profitability that you are foreseeing for this operation in LATAM? Thank you.

Milton Filho: [Interpreted] Thank you for the questions. And your accent shows the importance of looking outside of Brazil, not just talking about Brazil. Right. This is a very important agenda for us, the agenda of regional Latin, Latin America on the long term. And we've managed to perform in a very strong level in all the countries that we are present in. What happened is that on the Yuri on year, there is a negative impact, which is the exit from Argentina, which impacts the numbers. This shows a smaller result in regards to the result. The result of Brazil is growing. Importantly, and I would say that Latin America now represents ballpark, about 7% of the result of the conglomerate, but with 20% of the assets. Why? Because these are countries where the ROI is, the results are lower, the profitability is lower. So you have a larger portfolio, but a representativeness in the last line, smaller. What can I tell you? Well, first of all, Argentina, it's misleading. When we just look at the line of the top line in the DRE, of the balance sheet of the bank, because it was positive in the generation of results. It reduced my cost of hedge for the capital index. So it brought a series of effects with the margin of the market and it had a positive result. The problem of Argentina is that we had the CTA famous. That was in the patrimony that all throughout the time it accumulates. The difference between the interest rates between Brazil and Argentina had a negative number and it reduced the patrimony of the bank. So Argentina had a positive effect in profitability, and a better result when you looked at the ROI, because it decreased the PL by the wrong reason. So when we looked at the shareholder, Argentina was a detractor of value of the bank. So our vision of selling the operation, I think that the timing was very adequate. We saw other foreign banks leaving the operation. Thereafter, I think that the decision was correct in a consolidation for the local banks. What we kept in Argentina is an operation servicing the corporate clients for a very senior group of the bank. And even the CEO, Juan, that has been the leader of the operation, Argentina, he is leading all of that front. And we keep the relationship with the big economic groups in the region, bulking the offshore vehicle operation. The other countries, Uruguay and Paraguay, we've seen important growth with profitability, that is, very solid growth of the business in several countries. Now, these are businesses that, even though we have a great profitability and they grow in the whole, they're less relevant, given the dimension, continental dimension, geographic dimension of these countries, populational size, etcetera. And in Chile, we had last year, we had very good years, and this is a year that we go back to operating to what Gabriel and myself, many years, we said there was the profitability of expectation of profitability for Chile on the wrong term, which was an rot of 16%. So that's where Chile has been running on the local level. When we took the adjustments here, taking into consideration the tax issue and the capital issue, and the hedge of the NSF capital, the profitability goes to a lower threshold. But even so, Latin America is accretive in very close to the cost of capital, which generates value in the bottom line result. But it's a bit dilutive in the ROI, given our ROI. So we think that these countries are going to grow, the countries are reacting economically, there are opportunities. And Colombia has been a big challenge, whether it fits by macro factors, micro factors. Our bank there is small sized, so you cannot work with a subscale bank. On the retail, we have an allocated team trying to do the best doing, structure adjustment, working strongly in efficiency, so we can have, within what is possible, the best possible operation, given the contour, local operation. So we're very positive in regards to the region we've delivered the result, it's a very strong position. Nonetheless, it will not represent more than seven, 8% of the results of the bank. And if we continue to expand in that speed, it will be that ballpark that we should observe. But this is a very solid result and quality result.

Renato Lulia: Thank you. Next question. Renardo Meloni, Autonomous. Hi, Renato. Welcome.

Renato Meloni: [Interpreted] Thank you for the questions. Congratulations on the consistency of the results. Let's go back to the issue of growth in the individuals natural person's portfolio. I mean, you see the inflection point at the growth of the portfolio with the industry, even with the quality of credit, and that is better. [Technical glitch]

Nicolas Riva: I wanted to. At this point, you're more likely than not to call the question yet on the 29th, and then third on the senior bonds. Other than potentially refinancing the 25s in the, in the offshore market, I would assume that at this point, you don't have any, any relevant needs to issue senior bonds in dollars. But just to check your thinking regarding 81s, Tier 2 and senior bonds in dollars. Thanks. Perfect.

Milton Filho: Nicolas, good to see you again. It's always good to have some fixed income questions just to go through the three of them. For the first one, the answer is yes, we have the same approach for the 81. I know it's callable six months, and we're going to take the same approach that we did in the past. One, we look a few metrics before making the decision with the informations we have today. The reset or to call this bond and to access the market would be much more expensive than simply don't exercise. So we have an economic approach for the 81, for the 82, for the tier two. We don't have the 82, but the tier two we see by the year end, we didn't make the decision yet either. Or not. We're going to call that. But as you said, it's important to know that we have this five year term, that we go year by year losing the benefit of capital. So we do a lot of calculation here to make sure that we are optimizing in the best way our capital base, considering the price that you lose 20% per year in terms of capital benefit on the senior bond. Yes, you are right. We don't have any need to do or to tap the market with a senior bond. Of course, we are always going to do that if we find out it's a good opportunity to access funding, but we have a lot of funding as well in the local market. Despite all of that, we always want to maintain some yield curve reserve market in the offshore market. So whenever we have the opportunity, we try to keep some bonds outstanding. But the main decision that we make all the time is look to the bonds and see if the price, the yield and what are the alternatives. We have a very strong level three, basel three indicator of liquidity. Our LCR, it's very, very strong at this moment. Far it's very strong at this moment. So we don't have any liability issue, any big discussion will be much more price oriented than a liquidity need to put this way. So thank you again for the question. Thanks.

Renato Lulia: [Interpreted] Nicolas Brigado Muto now let's go to the last question of the call. Last but not least, Yuri Fernandez JPMorgan (NYSE:JPM).

Yuri Fernandez: Thank you for the question. Thank you everyone. Congratulations on the consistency. I wanted to ask about deposits. It's very difficult to compare the dynamic we end up calling these different numbers. So, you know, one thing might mean something for me and something for the other banks, but it's very good, even adjusting for the exchange rate. Chile it's very good quarter and you have great initiatives. I mean, high income. So I wanted to get from the conglomerate, where is the growth in funding coming from? Is it more corporate? I mean, there is a great DCM quarter, is it more high income? I wanted to understand in your franchise what is helping in this performance versus the peers. And congratulations. Thank you.

Milton Filho: [Interpreted] Yuri, it's great to see you. Well, the issue of deposits is. There are several explanations. The deposit in this quarter, we see a variation that is slightly positive. Year-on-year we lose the basis. But it's important to qualify this deposit. The local deposit riyals we've grown and we've increased the penetration engagement with our clients. Where we've seen higher volatility was relevant tickets of deposits in foreign currency because of the increase in the interest rates in the US. So these are clients that typically kept the deposit without remuneration or with a remuneration of the day to day. And they started to do their cash management realizing that the interest rate naturally increased and that the cost of opportunity changed. So here we felt a volatility of great tickets, big corporate clients with concentrated volumes that ended up doing the deposit. So it migrates from the one lump sum and it goes to the long term and there is demigration, another phenomena that we realized. The deposits specifically for treasury products, which is the risk off that we observed in the market over the last few times. You remember the event of the, of the retailer that impacted the credit industry and the funds. And we saw the movement for, given the interest rate for the titles that are exempted, for letters and so on. So the idea the advantage of being a full bank and working with all the products is that at the moment, such as this wealth migration, we end up absorbing a great deal of these resources when they migrate from one strategy to the other. This is the client overview that we have had evermore. So you have a consultant of investment that is looking at the client and is looking as it is taking care of the relationship. And it doesn't matter if the product being offered a CDB or a fund. It's important that the client is being serviced, given the context of the market and the profitability expectation of that portfolio. So there is a migration, yes, for treasury products. That has an impact. We have worked with a high discipline of prices, because we have a cash and we have a liquidity level that is very high. I wouldn't say that these are big tickets of the. You have to look at the prices that we've practiced. We are practicing the prices that are fair, given the liquidity moment of the bank. But where we manage to grow and penetrate more is in the capture of wholesale of retail. Sorry that, you know, they have the big private bank, the big fortunes, natural persons. Until the high income, medium income, which is where we have more relevant pockets for investment. So we've grown relevantly in the last quarter of last year. It was a very strong growth of capture. And we continue to see this dynamic. So this shows first, is the correct product, correct price, experience, naturally, of investment and the value proposition. With a consultancy of investment and managers are working strongly in this capture. So I believe that this coordination has worked very well. And we have over 100% of our portfolio of retail finance. With deposits of retail itself. Which shows that we've managed to naturally have a ratio and the deposit and assets very strongly. And this brings longevity, brings engagement. It has a long term relationship. And we are very happy with the advancement. And still lots to do. Nobody is comfortable here with what was done thus far.

Renato Lulia: Beauty. Last question and then we can close our session of Q&A. And also we close Milton and Broedel. Thank you for the persuasion our video conference of the results of the first quarter of '24. Before giving the floor to Milton, I would like to reinforce once again the invitation to Etao day on June 19. You can enroll and you can submit the questions for it all day. Enrollment is open. You can take part in this day. As Milton said, we're going to bring more details of what is behind the bank. With that, Milton, I will give the floor to you so you can close our call.

Milton Filho: [Interpreted] Thank you. Well, once again, I would like to finish thanking, once again, all of you, thank you for the participation. Reinforce the invitation that Renardo did. Thank you for Renato Broredo and another quarter. We're very happy with the results. We are growing a 20% year-on-year bottom line growing 15%. Profitability, very solid. But more than that is that behind these numbers, there is an enormous volume of business, of relationships being developed and improved, and 100,000 youtubers that are in love for what they do. And they make us deliver this value for you, for our shareholders, for our clients, for our community. This is our long term overview. We are celebrating the 100 year anniversary, but we're thinking about the next 100 years. I would like to thank you for the support. The feedback is always well seen. The past performance is not a guarantee of the future performance. We are going to do the by the tournament in the bank to deliver the best bank possible, to deliver the best bank for the society and the community. I leave you with my respect and my words of solidarity to the entirety of Rio Grande do Sul. And thank you to all the collaborators for everything that we built together all through all these years. With that, I close. We will see you soon. The New York conference next year, next week, we will certainly meet several of you personally.

Renato Lulia: So we will see you in the next conference or in next week conference. Thank you very much.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

View all comments (0)0

Latest comments

S&P/TSX

25,624.96

+34.63

+0.14%

S&P/TSX 60

1,537.05

-0.04

0.00%

US 30

44,719.30

-62.7

-0.14%

US 500

6,049.20

+2.1

+0.03%

S&P 500 VIX

13.36

+0.02

+0.15%

DAX

20,035.14

+101.52

+0.51%

Dollar Index

106.329

-0.094

-0.09%

Name	Last	Chg. %	Vol.
Bank of Nova Scotia	76.96	-3.55%	5.08M
Toronto Dominion Bank	79.13	+0.20%	2.33M
Canadian Imperial Bank	89.12	-1.03%	1.77M
Canadian National Railway	153.53	-1.66%	1.61M
Bank of Montreal	133.78	+0.17%	1.37M
Shopify Inc	157.21	-0.92%	1.27M
RBC	175.42	-0.22%	1.22M

Name	Last	Chg. %	Vol.
PeakBirch Logic	0.030	+500.00%	1.32K
New Leaf Ventures	0.05	+400.00%	666.82K
Vencanna Ventures	0.0300	+200.00%	627.00K
Irwin Naturals	0.30	+150.00%	3.24K
Green Scientific Labs Holdings	0.06	+120.00%	15.00K
Hempsana Holdings	0.01	+100.00%	1.00K
Copper Lake Resources	0.0100	+100.00%	210.00K

Name	Last	Chg. %	Vol.
FintechWerx International Software	0.05	-95.45%	1.60K
Metamaterial	0.25	-92.86%	0.00
Talent Infinity Resource	0.50	-75.00%	100.00
Biocure Tech	0.0100	-66.67%	3.00K
Letho Resources	0.0300	-60.00%	7.84K
Castlecap Capital	0.025	-58.33%	5.00K
1CM Inc	0.250	-58.33%	500.00

Trending Stocks

Name	Last	Chg. %	Vol.
Hut 8	35.000	-3.85%	1.02M
Toronto Dominion Bank	79.13	+0.20%	2.33M
Air Canada	24.88	+0.95%	2.98M
Bank of Nova Scotia	76.96	-3.55%	5.08M
BCE Inc	38.47	+1.18%	2.69M

Install Our AppScan QR code to install app

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Popular Searches

Please try another search