Q3 2022 Itau Unibanco Holding SA Earnings Call

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Got it.

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Good morning, everyone I'm heading out to Louisiana group head of Investor Relations and market intelligence at ETA when you bought it thank.

Thank you for participating in our video conference philosophy to talk about our earnings for the third quarter of 2022, and just what you're broadcasting directly from our office here on Friday at Lima Avenue in Sao Paulo said this event will be divided into two parts.

And the first part Mr. Milton Malawi video will explain our performance in earnings for the third quarter of 2022.

Next we will have the Q&A session, where analysts and investors will be able to interact with us directly.

Now I'd like to give some instructions for good participation in this meeting today.

But again for those of you who are accessing this via our website. There are three options of audio on the screen is the whole content in Portuguese and English the whole content in English or the original audio achieved within the first two options will have simultaneous translation, what's kind of the slope. So to choose your option. All you have to do is click on the flag on the top left of your screen.

Questions can also be forwarded via Whatsapp.

Basically carnival film just about Taylor to do so all you have to do is click on the button on the screen on the web site or send a message to the number of plus 551 190 91484308 offers doesn't presentation. We will make today is available for download on the hot side screen and also as usual on our Investor Relations website I now give the floor.

Over to Mr. Mallow did I Miss here.

To put it into some who will begin the presentation on the earnings and then I'll come back to you to moderate the Q&A sessions.

Milton will go ahead.

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Okay.

Yes.

Yeah.

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Yes.

Good morning, everyone. Thank you for participating in our conference on the earnings for the third quarter of 2022, I will go straight to the figures and then during the presentation all bringing some information that I consider relevant. So the first good news is that we posted a very robust recurring managerial result of $8 one.

<unk> in the quarter up five 2% from the previous quarter, and Nebraska and in Brazil, We posted a growth of four 8%, reaching seven 4 billion Reais consolidated ROE of 21% an increase of 0.2 percentage points and in Brazil, we've been able to maintain a very high and stable profitability level.

Of 21, 6%.

And then I've got a bit of a consolidated loan portfolio grew two 5%, reaching $1 one trillion rearranged and in Brazil. It reached 903 billion reais voltage up to 7% from the previous quarter.

The margin with clients also posted a very positive increase in the quarter growing six 4% from $23 4 billion Reais today's call I'll provide more details later on when we look at Brazil alone grew five 5%, reaching $20 6 billion Reais speak.

Speaking of delinquency there was a very small increase in the NPL ratio of 0.1 percentage point in the consolidated figure equal and when we look at Brazil alone grew 0.2 percentage point I'll provide more details later on the vintage on the capital ratio. We have good news, we were able to increase our capital base, which grew <unk> six percentage points.

Reaching 11, 7% of core equity in the quarter.

Above our risk appetite.

Alright.

There's no good financial performance without our clients. So I decided to include a slide here to show very briefly what is behind the figures we deliver theres a lot of work and dedication there are a lot of pools.

But the central message here is that we've been for some years now working with the net promoter score concept. So we have the measurements for all products channels Global NPS transaction NPS and competitiveness, we received more than 4 million pieces of feedback every year, everyone is read and interpret it and we incorporate them into our model to understand.

And from our client standpoint.

Where are the levers and opportunities are we have been receiving this high volume of feedbacks and the process already incorporates them into the interpretation of the information.

So we made a commitment back in 2018.

To grow 20 points by the end of 2022.

And our global N P. S. We consider all main segments of the bank on a straight line basis to understand how the client has been assessing us. The good news is that we've already grown 18 points in this period.

There are two more points to go and I'm confident we'll achieve our goal for 2022 by the end of the year.

Therefore, we have another seven points to grow by the end of next year, which I believe is very possible and the expectation is to reach 25 points of increase.

Therefore, we have another seven points to grow by the end of the year, which I believe is very possible.

Two more pieces of news here, 60% of our businesses are at record high levels. So this is excellent.

And we've been monitoring this every month.

And more than 25% of our businesses are above what we believe is the level of excellence.

That is above 75 NPS points.

So I'll, let him speak.

Speaking of the loan portfolio, we can see a growth of three 4% in the quarter for individuals and four 5% for SME.

In Brazil, we see a quarter over quarter growth of two 7% any year over year growth of 28%.

Obviously, we have an explanation for each of these line.

Personal loans grew six 8% in the quarter I'd like to say that part of the personal loan portfolio consists of consumer credit paid in installments and the overdraft accounts themselves should be about 90% of this growth took place in higher income segments, therefore, with lower default rates both in the personnel at the segment and in the Loonie class segment. Another highlight regarding the loan.

Portfolio is that we had a huge gap in payroll loans with public sector and I've been telling you. This for some time now.

We always had an important sharing the ians test pensioners in the private company sector.

So we set the goal of increasing our share in the public sector as well.

So the good news, we grew 8% in the quarter and 77% year on year.

Yeah.

Regarding SME is based on the profile of our portfolio and where we've been focusing over the years. We can see that there was an increase in origination which grew 15, 4% in the period folks at the top.

CBOE claims.

I put them into a popular I mean.

But 70% of this origination was in larger clients with higher revenue and therefore with lower default level.

The portfolio grew in a very healthy way and although we can already see a slowdown from the previous quarter. We've decided that I've already told you this to make adjustments throughout the cycle.

Sure.

Trying to understand what the opportunities are where there's room for growth and where necessarily we need to make origination adjustments monitoring.

Very good news for financial margin with clients in the quarter.

Core margin grew 1 billion reais in the working capital another 400 million Reais.

It grew $1 4 billion Reais sub six.

Another important message is that we've been increasing our average margin quarter on quarter Mercer in the consolidated grabbed period started at seven 4% in the third quarter of 2021 and reached eight 6% in the third quarter of 2022 and in Brazil. It went up from eight 5% to nine 4%. This.

Growth was not only seen in the annualized margin, but also in the annualized risk adjusted margin. So it's good news we've been managing to grow with quality I think that this is a very positive highlights.

Okay.

Next item I want to highlight is the margin with the market. There is currently a very challenging market as you've seen with the higher interest rates and more volatility and even though we've been able to consistently maintain the result over the quarter. So we remind you that this year, we established a capital ratio hedge and it cost around 500 million reais per quarter as we mentioned in the beginning of the year.

We released the 2022 guidance.

Sure.

The cost is very susceptible to an increase in the interest rate into the difference between the interest rate in Brazil and international interest rates.

Despite that we performed well this quarter in Brazil, with a margin with the market of 900 million Reais and we've been able to meet our expectation.

We should keep in mind that we no longer have the effects of the overhead strategy. This means that the 2022 numbers compared to last year's member that included the overhead to resolve the thing they've been so we've been able to keep a good margin.

I draw your attention now to the growth we had a number of lines under commissions and fees and results from insurance operations.

So we recorded a fair growth in the period.

Credit and debit cards increased by nearly 8%.

And the asset management business, we have a drop of 11, 8%, but it is crucial to draw your attention to our very important accounting criteria.

We recognized on a cash basis, the performance fee of the asset management business.

Typically this effect is felt in the second and fourth quarters. Therefore, it was accounted in the last quarter and it will happen again in the fourth quarter of the year. Therefore, comparing the third quarter with the second quarter is not ideal.

The fourth quarter, if we managed to perform well in our funds. We should also recognize the performance fee.

Uh huh.

Another highlight is that the insurance business continues to grow and it's also being faithful here, we have positive impacts on insurance operations and less positive impacts on pension plans.

Due to portfolio heads and deflation in the period.

Okay.

Well, what we call core insurance is growing 53% year on year.

What I'll do it.

I've been telling you over and over that there was a gap in our insurance business and that we would focus on.

The fact that we've been improving our performance I'm just delighted with this evolution.

Moving forward to financial advisory and brokerage services.

Despite a drop in this line we keep on trying hard this is a harder year for equities, but the bank has a very solid performance in both fixed income and <unk> Falcon minerals, there was a slight drop due to a little less activity in the quarter equities have not been so good but we've been leading on the fixed income ranking and as you can see we have.

Our fair share here up 27% in origination we saw 33% in distribution and 31% and ESG bond issuances setting them up in front of US, let's just say that the DCM performance is really strong.

Last but not least let's talk about asset management Forum, a speakers' welcoming thing.

In addition to the effect of the performance fee, which I've mentioned before it is essential to show that we keep on growing as you can see we have an open platform and have been working a lot on incentive models with complete independence, which allows us to grow more and open platforms than in our own products, but it all depends on the cycle, whether it's higher or lower <unk>.

Forest rate scenario, and our clients' investment profile and then what investment products. They are looking for we have a lot of flexibility when it comes to meeting our clients' needs.

Tonight.

Speaking of delinquency.

It started with the NPL 90 days overdue, because we have some important messages.

There was a slight rise in NPL 90 days overdue in Brazil as I told you in the beginning of the presentation, but I also told you that when we were to make any sale and an active portfolio, we would make it with transparency could you compare 3.25% to 329%. The difference is basically the effect we had from the active portfolio sell in the period.

It was a positive economic results.

And it also decreased the NPL ratio for muscle so again for the sake of transparency. We thought it was important to share this piece of information with you.

The total 90 days overdue NPL was impacted by only three basis points.

It werent for the sale of active portfolio, our NPL would have been $2 eight 5%. Once again the sale of active portfolio was made at a positive economic values, which is something good and healthy for the bank's balance sheet points. When we talk about NPL 90 days overdue in Brazil individuals NPL posted a slight rise by 30 basis points.

As the active portfolio sold was mostly made by individuals.

The impact would be an increase of seven basis points.

And here I'll pause for a moment to talk about something that will surely come up during the Q&A session because I'd like to address a critical point.

Remember that in the third quarter of last year I told you that there would be a gradual normalization of the NPL ratio. This was the bank's expectation for 2022.

As you can see the normalization, it's been happening in a very healthy way keep them, while still operating and lower levels than pre crisis.

We expect the NPL for individuals to get a little worse.

<unk> for one more quarter.

We expect the impact for next quarter to be of a similar scale to what we had this quarter.

This is our best expectation for the information we have today, but of course, there's a lot of uncertainty things may change.

We expect NPL normalization to levels similar to those we had pre COVID-19.

In the first quarter of 2023.

You've got them on May <unk>.

This is an important message.

We see a slight rise of 10 basis points in NPL for Smes Musica.

Moving to the short term delinquency individuals NPL ratio for 15 to 90 days overdue rose 10 basis points, whereas for Smes there was a drop of 10 basis points.

So we expect well behaved short term delinquency rates and 90 days overdue NPL to gradually normalize to levels similar to those we had pre COVID-19.

Is super consistent with what I've been telling you for the last four quarters.

Yes.

Yes.

NPL for the large corporate segment is it really comfortable level, 0.1%, although NPL is not exactly the best measure for monitoring delinquency in this segment.

Moving to credit quality and cost of credit the.

The ratio renegotiated portfolio to total portfolio was flat at three 2%, but there is an increase of $1 7 billion reais in the quarter of which only 900 million reais correspond to NPL 90 days overdue.

You look at <unk>. So we keep highly focused renegotiating what makes sense to renegotiate claims there's no purpose other than providing good service and some support to clients, who really need it.

However for those clients, who are regrettably foreign the red and probably follow our collection rules with all due care.

Another important piece of information is that the coverage for NPL 90 days overdue in this portfolio is over 220%. This is a very sound coverage, which is also very positive news.

The re profiled portfolio is the one that we segregated in the beginning of the pandemic under the Travis T. A program, which was the program implemented to help our clients who were not overdue at that time to make it through the crisis.

This re profiled portfolio started at $53 5 billion Reais and its now at 21 5 billion Reais.

So more than half of the portfolio has been amortized to this two year period.

Down 39% year on year.

10, 8% quarter on quarter.

So St.

Got it.

60% of this portfolio is collateralized and duration tends to increase once the remaining unsecured amount is paid and therefore, the amortization volume tends to drop but with more collateralized mix and good credit quality.

Cost of credit to portfolio ratio also posted a slight increase and we will see the nominal value is up due to the portfolio growth, but we are still running at levels lower than those of the pre pandemic period, So theres not much worth mentioning regarding this item.

Okay.

We reached the coverage ratio of 215% flat or.

A little drop compared to the previous quarter Quad.

With fairly adequate coverage in all segments.

We reached 188% coverage for individuals and we must keep in mind that the average coverage from 2015 to 2019 was 167%.

That is we've been operating at nearly 20 percentage points above the historical average.

You sound pretty massive.

Okay.

Going forward to OPEC I'd say this is a more challenging quarter due to the effects of the collective bargaining. The negotiated bonus was a major effect in the quarter. The 2021 salary adjustment of 10, 97%, which impacted until September 2022 was it based on inflation measured by <unk> plus 0.5% abroad.

Consumer price index, so called IPC, a was up seven 2% general market price index or I GPM rose eight 2% and we recorded a bonus effect of 80 million Reais in September 2022, So opex increased three 8% quarter over quarter and six 9% year over year, just remember that lag.

Year, there was no bonus since it was a different negotiation of collective bargaining negotiated every two years. This means that we managed to run opec's below inflation, even with the bonus impact in 2022 has been shrinking I'd like to show our opec's agenda as follows.

First we compare core expenses between 921 and 922, there was a 0.9% rise way below inflation as a reminder, the bank's inflation is much higher because of the salary adjustments towards Boston, we have in place our efficiency programs, which started some time ago with positive results.

Moreover, the bank keeps on growing doing more business and I would like to say that transaction costs may be a burden in OPEC, but this is a counterparty and increasing revenues.

Our investments grew by one 9 billion Reais.

There are investments in technology, and new business and in business expansion seeking higher efficiency productivity revenue generation and cost reduction. So these investments are focused on the long term.

And we excluded Latin America operation. The Bank has had a great performance with financial discipline and good cost management, it's true that we do not manage costs for the sake of cost we manage the efficiency ratio and we have the lowest ratio in the banking industry when calculated in the complete methodology our efficiency.

<unk> reached 38, 9% in Brazil, and 41, 1% in the consolidated last but not least the news regarding capital is great.

We managed to increase capital by 60 basis points in this quarter, so with that one going to 11, 1% from 11, 7% and 81 to one 6%.

You only have to keep in mind that the regulatory limit is one 5%.

The message here is that we still have a buffer of 10 basis points just in case, the Brazilian real appreciated and we have to optimize our capital ratio set one reached 13, 2% basically due to higher earnings, including the recognition of a provision for dividends.

An increase in loan portfolio. This way, we were able to finance our growth and also accumulate capital for shareholders, which is very good news too and tier I finish my presentation. These were the main messages we feel very positive about the results of this quarter of course, we are aware of the challenges we face at all times and highly aware that we'll face.

Major challenges in the future I'll be joining Renato now for the Q&A session. Once more thank you very much for your attendance and participation see you in a while take care.

[noise] well.

Can you talk about trigger key to note that it has just arrived so we can start with our Q&A session.

And it will be bilingual so we will answer the question.

The language of the question.

And if you won translation we have the option for English and Portuguese you can select it.

Please remember that you can submit your questions via Whatsapp and for that the number will be plus 50, 511 99 $148 308.

Well, we have the first question now.

Yes.

First question now.

From Flavio Yoshida from Bank of America.

Hello, Doug.

Hello, everyone.

But I've been these novel first of all I would like to congratulate you for the excellent work there.

Very good results of the bank.

And that's an area that is very challenging and I would like to understand on your opinion.

<unk> ability.

For the future at least for the next year 2023. This scenario is challenging the visibility is low.

Most of what you've done throughout this year will be let's just say you're planting. So you can harvest in the next year. So from that dynamic are we expecting a good results next year and I also wanted to understand the dynamic of the credit portfolio. What we've seen was an acceleration in the second quarter no. There it was a bit of it.

The acceleration year on year and the window to understand what can we expect I know that you.

There is still going to publish our guidance for next year, but what can you give us a feeling for the growth of the portfolio for next year.

Hello, Yes, hey, thank you for the question.

Well.

I think I'll conclude it very well.

Well the first question that I wanted to.

Provide any information that it does.

Correct, but we're still working with the scenario of 2023, we have a lot of uncertainties.

A lot of points that we need to refine where in the final.

Twice for the issuance of the budget.

The first of all of the next year with the results of the fourth quarter, we're going to talk about at this point, but the message here is a sustainable growth that's the central core points and Thats why we have been working for over the last few quarters.

Airways the review of the guidance of 2022, well, we haven't really review that of course, our ranges for the alliance.

But we understand that within this geography weekend delivered the results of the bank and reaffirm therefore, the guidance Fortunately different nature.

The expectation therefore is that we will see a growth that is healthy.

There is a small.

There is a decrease.

The portfolio of <unk> the portfolio next year, here's the way that the interest rates still impact our business and the way that the bank does the hedge of the working capital.

So there is always an integral that we have to see observe there are challenges such as the investment bank, how the activities of our board and we have to keep an eye on this.

Challenges in the cost of credit.

We're still careful carefully and as a follow up of the risk of the bank and very cautious that's an area as buyers cautious and link it to your first question second question on accelerating.

There was a decrease in the third quarter and we are growing nonetheless, the portfolio is growing healthily.

Getting our penetration in the lower risk clients. We are deleveraging some clients that have higher risks, we've been able to have.

Capillarity.

Clients that we have our history, what we are.

Increasing the share of wallet and these groups that we have a relationship with and we are very careful with the external challenges, especially among our products every.

If we have to measure it showcases the credit cards.

The mono product in here.

The credit card for the shareholders.

The clients of the bank, we have the open Ocean segment, when we acquired the digital clients and also the clients or the only about various credit and typically you have a lower income than the average we've been ultra conservative.

<unk> reduced our concession in a material way over 90% reduction in the period ending refiners that have a value proposition with our partners, we've done adjustments and the concession of credit. Nonetheless. This is a club area of risk that is.

Much.

Well the open ocean that you use the physical.

Well, you'll do that.

Charging and this is the what we've been following up there was a decrease and I can see that for the next year. If we anticipate the guidance, we're going to see a portfolio that is very mature grow less than it's been growing in 2000 and furniture. We just have to say that this is a portfolio that has been.

Headed over the last quarter, it's been very very good reduction in our base effects, we're going to see a reduction in the portfolio as a whole and a central point here is to look at our business. When we look at the cost of credit.

Our universal robust.

We are very relevant in all of the segments and where we are working in the balance of the portfolio allows us to be able to navigate in a very consistent way throughout the very difficult area. There are some important compensations in the portfolio right now.

So an upscale effluent profile that allows us to have.

Temporary furlough of credits that are very adequate and we go back to what we've observed in the pre pandemic.

Thank you Emil.

We have now the next question from Thiago Batista from UBS.

The floor is yours.

Oh, Hello near term Renato.

Congratulations for the results very strong winter.

Well, that's a good portfolio.

My question is about margin for your customers and here I am focusing insensitive.

Operations, just spread if we look at the rate the spread.

The.

We are seeing a growth quarter on quarter, but still much lower than what it was pre COVID-19 and pre COVID-19 was.

No its 8% it was higher.

Now can we had mentioned that that market will converge because it was pre COVID-19 or not the change in mix was so large that mix of customers clients.

So it's so changed why do we come back to those levels and the other alternative is the margin post revision that is.

102 hundred.

<unk> low to the pre COVID-19. So its pipeline fixed it's closer to seven can we had mentioned that the margin is the stiffening or the preferreds I think we'll go back to the levels of the pre Covid that's the point.

Okay, Hi, Thiago.

Thank you very much for your question.

And.

For analyzing the results well first of all things are much more different than pre COVID-19.

Information that is key that we have to pay et cetera through the evolution of the margin. The first thing the hour guaranteed portfolio Hasbro the five percentage point increase the capillarity of five percentage points and of course that brings a mix to earn accounting less risky but with.

Less margin of course, and there is an effect at the beginning of Covid, which was a cat.

The regulatory caps that had an impact in the profitability of their profits.

So we had the risk lives our truck.

The portfolio was.

Was growing in that head.

And in fact, I know there is a mix between guaranteed and non guaranteed it changed.

Certain important information for example bank overdrafts.

Our wholesale portfolio, if we just go back three years.

<unk> grew 55% difficult back three years down in the past, it's a portfolio that has.

That is very horizontal so if you if you have more wholesale less well, we have more guarantee and less clean as thats. The second phenomena that has an impact kind of March and then the.

The third aspect and that is very relevant for the period that we have.

C C.

Seen that interest rate increase.

The <unk> 75, the speed has been very very high and there are some products that are impacted.

Hello.

Really increased the rate spread in the portfolio. There is more impact when you compare retail and wholesale. So you know you have is the overdraft has a cap the REIT real estate and <unk> forward, we havent dynamic spread both fixed.

So on one side, you're benefiting from the benefit of the savings are coming mainly on the other hand, you will have an impact and a credit.

You'll have the two effects that lead that spread in the credit and our liabilities and other front line.

Several other effects my vision is that we should not go back to what we had in March I would say no pre pandemic.

We are still seeing our margin stabilizing maybe a bit of an expansion, but stabilizing above the levels that we're seeing here.

This is our best estimation of thus far.

Thank you Milton.

Question on run Gustavo sure Robin.

Hello.

<unk> Neal.

Yes.

Good morning, Bernardo. Thank you for the opportunity congratulations on the results very strong.

Let's say I'm going to ask your questions. The first one is asset quality.

Could you try that ft.

Wording is appetite for a risk I am going to use that phrase.

For lack of a better one.

We see delinquency A&D endometriosis is growing there are some different dynamics between the players.

And in fact that it has been growing for everyone.

My question Milton is regarding about not trying to.

To predict the future if the NPL will stabilize over the next quarter or the first quarter of.

'twenty three but up.

Up until what ones do you believe that we can maintain let's just say that appetite for risk and those are riskier lines, how much of the extent of deterioration in the npls that we can continue.

Phil.

Going along with it for it and we see a deceleration in the growth specifically credit cards is growing but there is a deceleration also vehicles or cars right and I think well what is your limit really looking at deterioration and I'm not even thinking about if we stop at this quarter next next year, we're going to start you're going to stop.

It's very difficult to estimate, but I wanted to understand your risk appetite in those lines and the second question is quicker.

It's about dividend.

I think that the capital is replenishing itself there is.

Level of ROE 2021.

A dividend of 25% that tried to really is to exclude effects extraordinary effects. The trend is the capital to go back.

So do you think that the dividends that are going to go back to 40% next year.

First of all thank you, it's a pleasure to see you once again, thank you for the comments about our results.

Let me address delinquency and individuals' Nitro person special because they can put together.

To understand the complete ports.

Portfolio well.

Operational free that is just is very diverse we have.

The older and all of the segments that we have the only class personnel all of the products, we have our operations mono liners granted.

As I stated.

We have vehicles that we have the operation of credit cards, the two portfolios.

Feel.

Like I say the cycles that we're observing with increase of exploration Theres a portfolio of credit cards. The open ocean as we talk and architect integrate failure.

Appetite hasnt changed.

Because it depends on the conditions of what we see on the prospective scenario what we are observing.

And the reality the result of these crosslet USA. So we've had very irrelevant adjustment in concession, we reduce rigorously the concession in certain products credit cards open Ocean is one of them vehicles. We've done an annual comment that the portfolio of vehicles and the margin of the total.

Further reducing and that shows that we've been able to I just do the necessary adjustments in another important as Ed we are always.

Exposed X before it then we read through that.

So these are.

This is within our epic that youll have the vehicles, it's already fitted so.

The credit card portfolio. That's how we are doing a very active management of the portfolio very intense but the portfolio is very relevant as you know and it is subject to more volatility, but we've been able to.

Absorbed.

This period all of the account holders given the profile of our clients.

<unk> two.

Capital already in our relationship with two thirds are clients that are engaged so we have a credit performance at a very solid during that period.

Therefore, since the portfolio of account holder is very diverse individually.

Compensation some are more pressured somewhat less pressure if we can look at the future there will not be a review of the appetite in terms of expanding with more lines of risk unless we have.

Clients that we have records that we have a good relationship that we have.

Capillarity of credits.

We've been able to do it.

Increase the share of wallet in those clients increase the value proposition improving that relationship.

So as to grow with quality.

The central message well the harvest their crops are.

<unk> are fitted at the adjustments have been done in a relevant way and what we look at companies we have to break through the breakdown into.

World, We have wholesales at retail we have the middle market above $50 million.

Have the ultra large the biggest corporations or Brazil.

So when we look at the.

Wholesale.

Performance is extraordinary.

<unk> really grown with control costs, we had the capillarity with our clients we have a very solid value proposition and the cost of credit is change well we have the middle here.

Companies, but this is for the hotel because we operate with a profile of.

The retail where we have decent mall.

Companies, but our mix is a bit more upscale from the.

Invoicing and they have a better quality for the retail when we go to metal.

It is not the trend of stories out there we've been growing with a lot of quality with our cost of credit that is a very well behaved in a fight in our margin net margin that is very healthy as we see it.

The remainder is managing the bank we are not.

Just looking at the topline we.

Re feed our models.

We bring in new observation of the new elements that we are always looking at profitability always looking at that our mantra for the creation of value the return on allocated assets.

Main driver for that decision, making process, even though we have appetite policies for credit that are very well in March and we are always pricing.

Well.

We are making the operations run as effectively as we can at the best way possible not only being able to look at the past, but also estimation doing an estimation of the future performance of our bank said, that's how we manage we've done relevant.

Relevant.

<unk> and we are growing with quality and expanding as possible our financial margin with clients.

As the portfolio grows.

But it will help dividend sorry question number two before we give the floor to Rafael.

Above David the question is very objective our policy for dividends that table that was published.

When we said there is on the one hand that matrix. The APR the assets that are under rated by risk on the other hand the.

Profitability, our appetite for risk for the second one has reduced to 11 and the happy hour program, we had a reduced at the board and we are talking about 13 percentage points.

On capital one so this is our appetite for the table of dividends, we're still absorbing that <unk> and <unk>.

The second point.

Why don't we go to an excess of capital we're always observing perspective.

Looking to the best our REO capacity that you'll be able to grow and invest in not only growing the portfolio. We're doing new investments are quite efficient.

Corporate entities that are coming up so.

So in the past we used to.

Operating with a payout with a quarter with a payout that was very high because there were some excess capital in the bank that was very high and we didn't see the perspective of the use of that capital. That's why we created the policy for the profit sharing payout was very high now we don't see that increasing were still working at 25% for two reasons, we are doing in catching up.

The capital if you look at the last three years, we've really replenish the main capital.

The bank we are about the evidence we have challenges of the future are positive and challenges. Nonetheless in the same way that we ever change and by the way a decade at risk of credit.

Benefits are.

Operational risks.

There are some public but there are some transactions that we are working with irregularly irregular about considering a couple of other intangibles that go against the capital and then we are still investing in the bank.

Looking at the reasonable horizon at least the next 12 months, we do not see any sense and increasing the payout what we are doing yes, and we've been able to do with predictability or consistency is a great day.

The profit in and pay out the information is that we are working with 25 any changes looking at the future for any scenario. If we do not understand that the bank has a capacity.

You'll have an adequate profitability.

The capital of the shareholders that we are going to increase the distributions that certainly.

Let's see.

Milton we're going to go Rafael yes.

Sorry for the fall it starts now with short term funding.

I think that it was going to have Josh answer you how about your dividend policy of dividend. So well good morning, everyone. Congratulations on the radar third two questions here I think that Nielsen has commented on that.

The previous event, even on the over offering maybe there is an over offering of credit credit cards in the open ocean.

You've commented really on that issuance.

Could you give us a read out on what you understand that happened in the market specifically in that segment that there was an excess of offering.

Second question.

Still well not trying to get guidance, but just to understand youre dynamic of delinquency.

Nielsen already mentioned.

If everything else is constant maybe delinquency will be stabilized in the first quarter well what are your expenses with provision that you mentioned that the expenses with provision.

To go to the fourth quarter would it be reasonable that it is a percentage as a percentage of the portfolio will be maintained.

In the same levels from the fourth quarter. So there is a stability in the provision for the percentage of the portfolio would trend we'd have a trend in the evolution and the same rhythm, let's just say.

Or there would be any variations, obviously does hi, Rafael Thank you for the question.

Thank you for your initial comment now, let's talk about the operation and the credit cards now we always talk about the benefits and the benefits of competition more players more digital players more competition.

Certainly that brings benefit the client has benefited the experience changes and make the bank having to reinvent ourselves every day. So we can deliver a better value proposition and experience of our clients now.

I'll add a series of effects that I am talking about regulatory effects and I'm talking about.

The the whole scenario issues well, we have the lower interest rates are negative in some places the phenomena of the abundant capital.

Newer companies that are growing.

Greatest driver it was growth it was growth.

Always heard about the growth debate.

Those were the drivers and now we're having a lot of these players that started their operations based on credit cards that was their main product where it may be the only product at a time so at the time that the investors that to grow.

Pat.

Increase your base of clients and reducing our acquisition costs. Many of them had journeys that were incredible for their clients, but they are growing with a lot of effort.

What I expect is that our growth was given in an unbalanced way unbalanced.

Say about their product they don't have any fees there are three ways.

Digital experience that is very good.

Doug generates.

And then balance economic an imbalance between the client and the organization. So first point today is very easy and it was very easy any client would acquire a product.

Card, so whether it would be through the digital channels and the fact that they didn't have to pay an annuity.

So I think it has seven credit card Fisher.

One day and that was very easy second element since there is no cost.

Got a credit card in your pocket and you leave it there until you need it.

Third that we observe in the open ocean.

The behavior of the client is a client customers that generate the sudden death.

It has a mono product with your relationship only use us with their credit card until they have the difficultly of pay for the fed and what they do they get it in the drawer and then they go to the next so the main engagement is key in that relationship should be the main in nature.

The core issue.

Third element is that when you created.

It's something that our us artificial in the tariff for the interchange of the prepaid several businesses had a revenue that was artificial that was asymmetric it was artificial and that made us the.

Profits and liabilities of the business model now we have more interest rates, but the main vaccine for that exercise of interest rates and it's coming up all throughout the world. The investors they have less appetite. So the correction for the market value of these many of these companies happens now and the value of these companies drops and your investors are expecting profitability for them.

To get profitability, you have to get levers of monetization.

Have a risk in the credit appetite adequate when you operate in a very low income public domain, whether it's credit they don't have pocket these clients.

Don't have the buckets, you'll have other relationships with us so it's very difficult in those scenarios such as the one that we are starting to increase and inflation interest rates and all of the effect that we've been seeing it's very difficult for declines should be ego.

Their bargaining price has been corroded, they don't have purchasing power they have difficulty sometimes.

Sometimes paying their obligations. So yes, there was an overall three there was eight capital asymmetry that was relevant in the bank.

Consider the capital level to operate with those public aid why it's much higher than the centex.

Yes.

I believe in proportionality I think that we need to classify by size and the Central Bank has done that recently, but it's all but it's still not implemented.

There is still a phase in of that change.

Right of the interchange of the exchange.

Many of the clients well the business model was based on just our name.

Mainly on that tariff that was more than double than the regulatory cap of central bank offline by the central bank by the MD error of debit.

Okay.

How we generated that effect that it was very rare.

Irrelevant, that's very important effect.

So part of what we are seeing okay.

Whereas the over offering the client is a levered they have less financial education, maybe less capacity.

The decision, making process a bunch of when they can go with our independence, Andy and toughness of the of the families has increased when we stratify. The space. We can see that the growth of low income was two product credit card.

Credit and personal credit it becomes a lever for you to remove the client from the credit card and given deadline. So they can pay so it's a renegotiation that is for us. So you can remove the claims from one product and then getting them to the personal credit portfolio.

The portfolio that grew on the market, but part of the delinquency.

Up there with the time in the future because you'd have to look at that dynamic as a whole, but I think that there was a very very large there was too much excess here.

We're actually happen and it takes time it takes time to Digest and then it takes time to do the adjustment that is harvested in such a way they will affect the growth of the portfolio on time and about the cost of credit. If you look up ahead, we still think that there was a small expansion, Indiana indicator.

Not anticipating any guidance look we still believe that they are going to stabilize.

The levels that was lower than our pre pandemic when we look at the fourth quarter of 19.

And then whether we're running $3 two.

The credit index, we believe that it will be the relationship should be going slowly towards.

These thresholds, but once again there is a lot of uncertainties.

There is a lot of things that were not defined.

And we're going to follow up I know at the beginning of the year, we're going to have more surety to give a guidance that is more robust in line for airlines of the bank.

Bob.

Approximately very good let's go to the next question, we have a long list of questions today.

One are running at Omolon.

He is on screen.

Hello, everyone.

Hello, Congratulations on your results.

Jim can you expand a little bit more on the adjustments as Arizona with the credit concession for example, how much was it did you do undercut on the cutoff on the limits.

How much of the drop in approvals.

Also with.

With these reductions.

Are you going to continue to next year or are you at the correct level for this scenario nowadays.

Bernardo.

I think that here.

And if that were necessary or was already done of course, there is always a space on the margin and this is a dynamic agenda. If we are in a commerce scenario. Then we can do adjustments. We can look at the history. How the model is performing and there is always a perspective.

Remember, we've been working with our models not only look at the expectation of the bat right of that client with time, but also what is the macro perspective. So there is some macro variable.

And the cutoff well <unk> was a very relevant.

But not only per channel we did.

Really adjustments that are relevant in lower income. These R&D incomes that are impacted the people that are impacted more in this process. So that was a decision that was made for menu for a long time, we've been managing a sharing there was a reduction of 10 percentage points in the period our share with its public just to give you the relevance.

The adjustment that we've done and we grew in the publics that have risk level that is better.

Even the incomes that are suffering less of the cycle.

So there is the.

Guaranteed products. So we have the guaranteed products and we've increased them five percentage points.

Our capillarity of these products in the portfolio as a whole.

Sure.

The things that we are analyzing them based on the information that is available at the adjustments that were done if we look at the future. There can always be an adjustment additional adjustment, but the big.

We are cheering already happened if you look at the vehicles the cuts in production very relevant and credit card, we cut 90% of what it 90% of open Xchange, 30%. It gives you a dimension of the size of yes, definitely whatever the volume 90% of adjustment.

How much were seeing these harvests and with more volatility.

They are not connected to our appetite.

The Central point is that we are quick and dynamic Julien we interpret the data we have the aviation we are active.

Surgically in our models about four days.

For next question please.

Charles English because the next question will come from a just a laboratory for Goldman Sachs pages to you. Thanks for thanks for joining.

I'll answer that.

Yes.

Well I would just love your thoughts.

Can I speak Portuguese you want me to ask anyway.

Hi.

Great. Thanks for the call and taking my question My question, a little bit on the capital.

But more specifically given the macro and political environments right. You mentioned I think core tier one of 11, 5% right around there.

This quarter, just given the scenario that we're going into do you feel that you would need to hold maybe more capital right I mean, the asset quality deteriorating some uncertainty on the fiscal situation in Brazil, I don't know.

Alright.

On your potential movements from the government I mean, just trying to think.

You said public sector banks potentially renegotiating some debt so.

Any color you can provide on what you're hearing from government potential programs and would that make you more cautious to want to hold more capital.

Okay.

Thank you very much so I'll answer in English to respect.

The language of your question.

No, but it got.

So.

The topic is.

Just going back when we define our risk appetite and the levels of tier one that we were expecting for the bank. We were seeing about 13 and a half and this is what we used for the dividend policy of the bank.

At that time, if you remember the largest or the biggest impact that we could have in our capital base was related to the effects.

Cultivation held evaluation and why was that.

That was because we have.

Huge portfolio not only in Brazil in other currencies, but also the banks that we have abroad, especially in Latina America. So you'll have to take this in consideration.

From that time, when we look today there was a second huge impact that was due to the FX devaluation. It was the overhead just prodigy off the bank debt whenever we had a real depreciation you will generate tax credit and this food.

Huge impact in our capital base. So there is no more over hedged.

So there is no revenues, but there is no risk for capital and cycle I think successfully we implemented by December of last year, when we announced that we were implementing to hedge.

Capital, We index that means that there is a cost is 400 $500 million per quarter, but when we look at full year.

There is no volatility due to the effects. So even though we had some appreciation at beginning of the year. We are seeing some devaluation in our effectiveness of the hedge has been perfect. So that is very good news that means that the buffers that we had for this type of volatility now we can replace with father uncertainties that we might have.

Having the future so we're very comfortable.

And we do a stress test.

Balance sheet, all the time and we have these discussions and we see that we have a very comfortable capital base and that our appetite is pretty well defined we fell 11 and a half offset one.

CPU, one and also one and a half of additional tier one so we're confident with that I think we have a comfortable buffer we don't have the FX risk anymore.

We should be increasing our capital there were some positives and negatives as I will say just a few minutes ago, we have for credit basal changes maybe have some positive impact in our capital we have the operational.

Risks that will impact the bank, but this won't be in 2023 should be in 2024.

We have some approvals are still pending.

Fasting or buying some company so at the end of the day, we still comfortable.

We feel that we have the capability to keep growing capital base still with a good buffer.

Far away from the regulatory requirement.

Can lead us to uncertainties and changes in macro policies, we think it's too early to say.

What's going to happen.

So we see the market very volatile yesterday was a good example of that but it's still in the mood of expecting new flows to understand what are the risks that we are seeing.

Forward, but we have a very comfortable capital base and we are very fine with that.

Thank you. The next question comes from Jay sole mortgages I never short in which language you're going to ask your question, but I'll leave that up to you.

Melting in absolute dollars I'll ask my one question is for question and I'll do it in English since you have all everything set up to do that.

Well first I would like to repeat the congratulations on the solid results at all only Bronco is living up to the very high standards in a challenging environment My opinion.

Most of my questions on operational performance have been addressed so let me ask this in the management commentary you report you started with the statement that it won't ivanka digital and cultural.

Transformation agenda continues to evolve.

You have provided strong.

Digital metrics and customer satisfaction through MTS, but if you can provide a recap and update on how the cultural transformation is evolving.

There have been challenges and how have you been facing them.

I think it really differentiates.

Alright, great.

Great good to see you Jay so thank you for the compliment so pleasure to have you here with us.

So I think.

Someone the other day was asking me how many of my time I spend with the cultural transformation Nim's for 120%.

And why is that because cultural transformation is something that.

Pop, though and we have to do that every single day every single decision every single promotion every single discussion every single moment you need to walk the talk venue culture. So the thinking is that last year, we worked very deep in defining the pure retail.

Off this new culture and.

We had discussions internally with many people from the bank and I would say that 90% of <unk>.

Our employees more than 4000 people seeing their survey said that they would expect relevant digital.

Relevant cultural transformation okay.

And this was just to let you know that we still have a very fertile ground to invest.

So then we started to discussing this active committee with the board of directors, saying what are the.

Possible possible movements that we can do and we were both at the end of the B. We really think that we have a lot of good things of our culture that never change.

Ethical thing client profitability.

Profitability performance sustainable performers are things that won't change.

In the coming years, but we still have to modify relevant thinks an overcoat for so we do that.

We've been working a lot of workshops in China workshops, we've been discussing we followed the managers since this active committed just to let you know always part before workshops weakness active committee, where we had very very deep discussions about the new culture, because we have to keep in mind that the change begins in ourselves before.

We're seeing that people should do this way or that way we have to be sure that we are doing the right way and this is the discussions we've been having this active committed to guarantee that we are the role model.

The partner Softbank or the Ro model the directors of the bank after the role model, but they have to be trained we have to be trained that we have to be very open mind to understand that things are changing and we have to do things a different way. So this is basically the way we've been working we've been having many many workshops, we have teams dedicated to the <unk>.

Cultural transformation and I think if you ask me how can I measure culture, it's not only by the workshops or the reaction or the capability of doing things. We had major trenching. The bank. So there is no tie to anymore I always say that it's not a you relevant information, it's a very relevant we only have directors.

We don't have direct or executive director Executive Vice President, where all directors.

This gives us a lot of flexibility when we have to move people because we give them on Monday, we gave them an objective we gave him our goal and that's all in there was a compensation discussion there was nothing in house.

We increased our partnership program, we used to have two levels. The holding partner and also we have the associate we don't have those names anymore. We have partners and all of them are partners we have.

450 positions.

Nursing tighter bank coming from 195, so more than twice the size, we had a year ago.

We don't have one layer. This active layer that we used to have we don't have anymore. So there is much more autonomy and much more accountability much more speed.

<unk> is something that we take a lot in consideration, but never forgetting what brought us here the ethical the risk capability of managing the <unk>.

Bank.

The performance and sustainable performance in the long term.

And the client.

It's something that we're always upgrading so this is the agenda that we hope to grid.

And also the way we are working the method.

It's relevant for the new culture. So if you have the digital transformation, where we are very advance if you have the way of working change it in a more agility way.

And if you have the right culture.

Where are the results the NPS. So at the end of the B the client should be more satisfied so the way I measure cultural transformation, you've seen the NPS being employee net promoter score just to give you. One number we reached 83 point and the NPS, we want in Brazil, The first company with a great play.

To work not only on our financial system, but also looking at companies all over so number one in great place to work. This is a very good feedback that we receive from our team, but the most relevant one at the end of the day. If you have had people you should have helped clients. If you are working in the right direction and the NPS of the bank.

NPS.

<unk> has been achieving.

Maximal when we look for historical range. So we are very positive that we are in the right way right pace moving forward, but still challenges you don't change.

You don't sheets in Wolf.

Two or three months, we have to do that as time come by we are moving forward and also we are bringing new hotels to their bank. All the time. So we have to work can be very open mind that we don't know everything.

We have to take the competition very seriously, but we have to look too. So the market understand what they are doing what you can do better and you need to bring good people to the bank. So this is.

The process that we are going.

The words, we are very happy with the solution so far but in the other hand I would tell you that we are 15 or 20% of the Jordan. So we still have a lot of work to do in that front.

Regarding mutual Jayson.

The other thing Jason and now the next question we have.

<unk> from BTG Pactual.

Hello pleasure to talk to you guys. So let me also I have a very quick question for you.

When do you think they should do it seems that a lot of investors are surprised with the difference of the results of E Mail.

For there are private.

Pardon me.

The other ones Santander, Bradesco, well youre talking about the cultural transformation.

Since you took on since CEO well count.

If we have to look at the difference in performance tier peers. How much do you think can be explained by more cyclical issues defense on the cycle of the client that the bank operates.

Hi.

Our office.

The more the companies and individuals.

More money, how much can that explain the transformation maybe.

No push back on maybe that would be the structural thing.

I'm not trying to get a number but I want you to give us a guidance how much can we see and if that I think that youre seeing and will continue and that will mean.

GAAP into return.

Or is that way in comparison.

<unk> Hello, Rosman. Thank you for the question.

So why do I statement before too before I answer first I have enormous respect for our.

Our competition enormous.

Thanks.

So as I've always said it though it is what it is because of it this way it exists because something that exists because banca there, but that's the only exists.

All of our competition has an enormous value they've done incredible things all throughout the years and these are long term guarantees we cannot just look at one quarter. One year, we have to look at the long term. That's the first statement second statement that I want to give.

Give you maybe I should talk more about the bank itself I don't want to do comparison relative comparisons I believe that you'll have data information and capabilities to get to your own conclusions I wanted to talk about why I believe that we are having a performance that is sustainable predictable and quality.

Based there is no single answer I cannot attribute all of that is exclusively to one element or the other so it's a series of factors.

Sure.

There are factors.

The long term.

The external factors and internal factors I'm going to try and talk about the strength of the <unk>.

Bank.

First of all the fact that we are in the Universal Bank strong.

That plays a role in the quality of our results.

What do I mean by that.

If you look at all the businesses.

Investing that we have a competition we have.

Ed highlighted performance, we had really wholesale participation that is relevant in Latin America, we have done that great catch up.

That is a great one.

We look at wholesale.

And I apologize before it was retail.

So we have credit we have in the agribusiness and the cash services products the distribution and sales.

We've had performances that are funding the investment bank. If you just look at the ranking and you follow up that closely we can fight for the leadership and all of the rate case, whether if it's fixed income variable income M&A.

These are not decisions that were taken just now we've been working with these franchises for many many years since it out.

Session in 2013, and we've really focused.

Our wholesale we see an evolution that is consistent that is constant with our operation.

Back in 2005, we did an investment in the investment bank.

We're getting the fruits of that investment.

Other than that it has to do with the human capital that yesterday with the culture has to do with the vision of the client, but we are.

We're getting the fruits of his long.

Long term structural decision, making process. The bank is an evolution 98 years of a story in the bank has always evolved and it has been able to be reinvented itself in times of need and shorter cycles as well. So there is a structural issue here at hand, the second point.

When I look at the profitability, we see that our well our.

Wholesale bank, we have to really mention that I'm talking about the Latin America operation Treasury has a very important role in that when I talk about Treasury go global markets I'm not talking exclusively of the trading table that also it is important of course.

He has been navigating very well.

The face of adverse scenarios. So if look at the interest rates.

Delivering results that is healthy.

The end of March whether if it's the dynamic banking hedge positions theyre choosing the time of that edge you can be more directionally, one position or the other trading is doing very well banking is very well regardless of the challenges of the increase in interest rates. The ROI of those positions are more as more.

Pricing, we hadn't levers last year that we don't have this year for example, the overheads.

When you look at that at our asset base, we've had a fantastic performance.

Performance fees that were very strong and I just mentioned the accounting effect of the second quarter for the fourth quarter, we talked about the quality and the capacity to manage that we've had our private it's a market leader and we are still growing with quality NPS at the record high.

<unk> had happier customers more satisfied customers and this is a virtuous cycle that we can increase profitability of the bank as a whole so highway.

I would say that there isn't just one answer.

Cultural transformation is evident that it helps digital transformation is.

Necessary condition, it's not sufficient.

It's not enough just to do the digital transformation. If you don't have the right cultural fit and understand the client in the correct way. If you don't have the agility and the capacity to react to the needs might be.

Look at the wholesale world and we look at all of the business, we had historical Max and retail at all.

Also an operation that is very complete.

So we look at all of the businesses.

Really retail bank is doing very well with.

With the quality of the team that has to do with the quality of the decision making process.

The transformation that the bank has done anticipating to movement when youre talking about the digitalization as well that we've done so really retail that is being very well individuals' doing well at retail the insurance business that for US was a theme.

Now we are still focusing the insurance business is growing in a very relevant the way our expectation is to double this business in a very hot and a reasonable horizon of time level from what we have started last year and we are.

Going at the adequate rhythm for the mono liners are growing growing with policy adjustments recent et cetera have been done where we're talking about vehicle or other portfolios.

Okay.

Retail is growing our real estate is growing and credit card business. It is important for the business.

And this is a volatile.

Portfolio, we cannot crucified the portfolio because we're seeing the acute cycles in the past and that happens.

If I have to give you an answer it's a set of factors and I believe that the fact that we are universal robust bank with competitiveness and leadership that we've achieved.

Ed brings a great responsibility in that.

Vision of the client that is very strong and has allowed us to navigate very well that challenging scenarios.

So we're going to switch back.

We have.

For mortgage delivered us hi, Jorge.

Thanks for thanks for joining Richard here.

Thank you hi, everyone.

Congrats also on the great results.

My question is on operating efficiency I think you said little about it.

And I think you've got a loss on it.

I think a big part of what has driven our results to be resilient.

So you've gone from.

Three 7% expenses to assets five years ago to two 7% today and I'm looking at expenses to assets just to clean out the volatility of the net interest margin with the volatility in rates.

If you want to think about it in a cost income ratio at 40.

How much more can you do.

When you think about the next three years the next five years.

Could we see another four percentage points of model expenses to assets over the next five years and you run the bank with one 7% costal assets can you run the bank with 30% cost to income ratio.

What is needed to get you there.

Okay. Jorge Thank you very much for for your comments as we say, we like to under promise over deliver so I think can efficiency, we've been doing that for a while now.

My view is that.

S. They named C or the definition seats on efficiency ratio. So we look for cost, but we look to revenues as well. So it depends a lot on this scenario we are in a very favorite moment, though if you'll see we are in the lowest.

Level when we look this year.

Finding the lower level off.

<unk> ratio.

So there was a lot of operational.

The leverage that we can do as you can see when you look and compare to our assets. We can grow the bank and we can keep the costs under control. The other point that I would like to highlight is that we are not.

<unk>.

We are investing a lot in the future of the bank so.

For cost, it's very easy if you want to take a cost only cost approach that you make wrong decisions and youll decided not to invest in our franchise.

To grow the businesses not to sell product and you can do that you have a much better cost.

Our ratio by by next quarter, but you won't have a strong franchise in the long term. So our decisions here are long term based even if we have to invest we're going to do it because this is the way we keep growing the bank.

Spending the business that we do that we have.

So my view is that still have room.

So keep doing the efficiency agenda, we're always discussing that cost you have to do every single day.

As part of our strategy strategic.

I was saying, though and we are focused on that we're very focused on that.

My view is that still have room to.

The increase we are doing investments as you'll know, but the most relevant thing is that the level of efficiency ratio that we have nowadays I think its international benchmark for global banks like ourselves. So we are very very.

Are we happy.

But not satisfied so I think we did good up to now, but we still have room to do more and it will depend on many decisions that will be taken in the coming quarters. It depends on the scenario and depends on the capability and the revenues that we are able to generate more pressure or less pressure. So that's a lot of things to do I cannot give you one number saying that.

We can go one point more or a full 100 basis point, but I can tell you that still room to do more and I think the core cost that we say that we grew 0.9% in the quarter.

Is the sense that we are doing good and we are doing much below inflation. Okay. We will keep investing keep investing in the bank and we will keep delivering.

LOE costs on the core costs. This is demand for this bedroom.

Thank you. Thank you very much for Hartford, which was for you.

You don't put two gives you a little more broad.

Question on when we go back to Portuguese and when you have month arrows from bumping into.

The <unk>.

Congratulations on the results.

It is regarding credit cards.

You have demonstrated an increase.

The overdraft fees, I mean, and I don't want you to understand.

What is the level that is healthy for this rate is there any action plan for reducing the delinquency.

Hi.

Thank you for being with us once again.

In fact during the pandemic period.

We cannot just looking at Snapchat, we have to look at the picture.

The whole picture.

The lockdown less expensive less people purchasing stuff and we have.

More payment and less expensive than a credit card.

And so our portfolio dropped in a credit card.

Fundamentally and remember that $176 billion of portfolio. We have 102 billion is the.

Without the interest rate.

26 billion is the interest rate portfolio. So yes, we saw a reduction during the period, but now it makes it where people were spending less.

And of course with more than England fee.

Some portfolios.

Let me see.

Higher and the open ocean before the.

The client goes delinquent they go through the interest rate. They go for paying the installment billing by installments on exiting the agreement. So part of the delinquency goes through that previous that yes, we've done a series of actions.

And the margin there is a portfolio that is better.

The bank has the capacity to be very yes.

Be very active in the.

Management of the limits of our clients whether they are they have the benefits of the capital.

Clients also that are given signs for a difficulty is part of the.

Active management of the bank to communicating with the ability to do that.

Necessary adjustments there are several initiatives adjustment and the crops I mean in the concession.

Structural limits adjustment and to try and understand.

When these portfolio so when I'm talking about the protections India individuals.

Zero.

It increased the biggest center.

The credit card business. So when I say that we are expecting a stabilization with information nowadays.

And that portfolio will be has a tendency to stabilize and we're working strongly for the Sip is continuing with AMD individuals' universe natural person universe.

Thank you Marcos.

Next question, we have Rick Navarro from Santander.

Hello, Thank you for your presence episodes.

Congratulations on the results My question is regarding the coverage index.

We imagined.

You have 215, something like that I imagine 2023, the risk of the portfolio should be lower.

Rich.

Corporate portfolio. So if you think about your records that is something closer to 200%.

Imagine that also we can so there the way that your position.

The provision criteria you do it.

But before and then you can reverse that provision down the line and then you mentioned 2023, the regulatory risk.

Hey, Andrew.

Taxes are very evident on the even the increase in Texas, where the bank is more interested in.

Income so considering these profit. These hypotheticals can we've worked with $200 reduction into coverage index for the year 2003, and those assumptions that Ive mentioned some of them do not make sense I mean, if data makes sense can you comment.

Yes, and Rick and thank you for this opportunity. Thank you for the compliments.

I think it's reasonable to think about a certain stabilization I'll throw up 200% ballpark.

I mean, we don't have a goal we don't have an objective.

They're not manage the bank's total coverage level.

We're operating with unexpected loss, we are always anticipating demand due to the modest recovery as index as a consequence of the decision making process, but this is a great indicator. So I think that yes. The bank should remain with the coverage index that is reasonable all throughout this period when I look at.

I look at retail, yes, we are.

A few months.

Coverage, but it's still above the thresholds.

15% to 19, we're still operating 20% at baseline.

Above what we are operating in a period of 2019, which is great deal. So we are keeping a portfolio that is well covered and there is an element in that portfolio that has to be taken and it took us the duration with a lot of care, which is really the wholesale portfolio. This is an events portfolio what.

What do I mean by events the coverage index and doesn't necessarily it's not an excellent metric for the wholesale portfolio like the coverage of provisions over the total portfolio. There are different outlooks that we can take so any event of anything that is already provisioned by expected loss that we already had expected library that is anticipated.

It takes on the coverage and so that's why we need to separate we have to look at also isolated leidy theres going to be volatility in retail so before you'll have a delinquency before that you have restructuring we have delinquency just because of a stress situation that is much stronger and then the client will take the provision.

With him so reason.

It reasonable to expect that we have good coverage levels. There are some challenges up for the future. So I would say to the bankers, while protect that we've been able to navigate with.

Buffer and a relationship with coverage against provisions regulatory.

Our regulatory provisions will give you if you look at that will give you a good idea on the protection of the balance sheet and this is reflected on how we mark those coverages for segment and does it reflect that Andy and the coverage and access I think I'm not going to give you a number because we do not project that it that way, but I think it's reasonable to expect a certain stabilization above.

And the total coverage.

Retail, that's probably going to be some units.

As I commented we've observed meaningful.

An increase in the Npls and remember, even though we provision above the NPL formation youre still fighting against an indicator of two hundreds. So anytime that you ended March and you do that you take your indicator too.

Lower level of lower threshold.

Okay.

Thank you Emil said three more questions is down the line.

And now we have modest hotel is from credit Suisse.

Okay.

Zero muted.

I was waiting for that moment, so I can follow up.

You can talk Marcello.

Yes.

So I'm gonna be Nevada.

Can you hear me now.

Sorry, I had an issue here with my microphone my headset.

First of all congratulations Milton on the great results.

Good luck with our clearly it against.

I'll add a different threshold a different level in regards to the other banks.

This is really impressive.

And now I wanted to most of my questions were of course answered, but I wanted to ask you more about it.

And given the fact that you are.

Super important and the credit.

Credit card market. So how do you see the growth of <unk> takes the transfer.

Do you think that <unk> cannot substitute do you see it as a threat to the credit card business.

<unk> business, we see an increase in the use of Pete Pixar Pis here in Brazil, and the <unk> and the transfers and.

Milton what is your opinion on that type of transaction. The Pis transaction then.

What is it doing to be able to capture art.

This value chain thinking marcella. Thank you for the question. Thank you for the comments.

Well.

Okay.

First of all I would like to say the following.

We're all in on pace.

As soon as we got the discussion up yes, we said its difficult for these specific brings a great experienced 27, we already did in charge the tariff the tariff or the internal transfer inside of the bank.

The client to transfer from one account to another they always had the freedom and it wasn't cost the way it was.

<unk> thousand 700 for the account holder of it when they did a transfer for another account holder of it I'll remember that.

Universal life that so our first decision making process.

In front of any product.

It was an impact in the revenue but of course SaaS our agenda. Our culture is on the client it's the best product the best product.

That is focus on our clients. So that was the first efficient too.

Really focused on from then on we have been working diligently and we've been working with the evolution of <unk> receivables that payments how is that doing what type of payment method is a dislocated we are keeping a great market share and volume transactional.

We have the two ends in the receivable and the payment the orders of magnitude of 20% of market share. So I think that these are very relevant numbers given our size. So we're still looking at the packages of the accounts of the.

Thinking about the suitability of the claims that they have a package.

Service is at a certain level of offers but theyre not using it they are not.

They are not using about a hired where do we do adjustments. So we are getting <unk>. So that the client is getting the greater the long term vision that is centered around our clients.

Our right price I know that the Central Bank has a role central bank has a roadmap toward that the IX and potential product.

<unk> is the one that grew more the beach would be still going at a different speed scale time for evolution.

It can be captured and there is a alicia we ourselves at the sandbox.

The Central Bank, we have tens of new.

New initiatives, the PPI ex credit, but somehow it.

I'd say two to four point model, if well done this can be a complement for.

The payment method to here in Brazil, So our opinion.

Difficult to say here today, what will be the <unk> in its evolution and down the line, but the fact is any evolution any past trailed the bank <unk> Bank, we'll have access to very very relevant.

We never had from <unk> or any other bank any type of retaliation in regards to <unk>.

No we've always one API extra work safety and if that's an NPI. It's only work and it is affected it is because of the engagement with all the banks in the system because the level of investment and the platform is in.

The settlement and the checking and savings accounts and so that interoperability only works because of that so we are very satisfied with ESI says <unk> tons.

Certainly disrupt other business model other.

So payments were going to be at the vanguard of that if it is good for the client and it's good for the bank its good for those long term.

Perfect. Thank you Milton.

Yes.

We have done because we have with us Nicolas Riva.

From Bank of America, Hi, Nicholas <unk>.

Patricia you Renata and thanks, so much for another minute on for the chance to ask questions.

So I wanted to ask on your 81 capital under Burps. So a few weeks ago, you said youre not going to be called in the $601 18. In December you said he was basically based on.

On the economics, and I guess on the difference between the coupon reset which should be right now about 8% on the refinancing cost baidu.

But you can call every six months.

And you said you were going to continue monitoring monitoring market. So my question is.

If there is a certain premium in terms of coupon reset of our suite.

Refinancing cost that you would be willing to pay in order to exercise that call option worried for example, 50 basis points to 100 basis points or any color on that and then the second.

We have seen some Brazilian banks access the domestic market in recent years.

Banco Brasil in the third quarter raised $2 3 billion, you've seen the private placement in 91 domestic market. So my question would be how much do you think you could raise in the domestic market.

With 81 to refinance some of the global Burps and then finally on capital just going back to the question that the total I wanted to ask about capital I, just want to make sure I understood correctly.

Your internal targets remain 17, 5% tier 112% CET one.

We're gonna be making decisions on dividends based on those targets. Thank you. Okay. Nicolas good to see you again, thank you for your questions.

Let me start talking about the <unk> as you said, we said to the market on a formal basis.

That we wouldn't be exercising the call the difference of the repricing and the recap looking to the prices that we should that pull market.

Very relevant it's more than 200 basis point, so it didn't make any economic sense to exercise that call that was the decision we made.

And I think we were very transparent to you not only communicating before the exercise date, but also much before that I will say this and coal for instance, so we were saying to investors.

This would be.

The definition that we shoot.

Move.

The second thing is that there was no price that we define X before saying that at this level of premiums will be exercising the six month's call, but I would say that 50 basis points, we will discuss.

But its not automatic that we will say that the service 50 basis point, but whatever premium batteries. We won't be exercising is are we will be exercised we would evaluate.

The alternatives that we have not only offshore but also local.

And just to go back to your second comment we raised capital one locally as well the same way Banco do Brasil, we did the same but there was no deep there is not it's not a very deep market and where you can change or you can refinance.

<unk> saw 50, once we have issued offshore wind the local market. So we can do up to a certain level.

It's very competitive it was very competitive in terms of price even swap into U S dollars, but we don't have the same size.

We have two hour.

Folio issued abroad. So the thing is we need to understand the size you need to understand the price.

But I would say that 50 basis points, we will discuss.

What are the benefits of exercising but.

Above that it's very difficult that we will be exercising.

For the reasonable future that we can see from now it doesn't seem to occasionally but in the short term we should be exercising the calls we still have some calls to be exercised by March of next year.

Same way around to pursue the same strategy.

And on the capital the second comment or question that you made.

Let me be very clear on that our risk appetite.

Finally, the board of directors of the bank is that for CET. One we should have 11 and a half that's why we are 20 basis points above and.

And we will be 13% in the level. One this is the risk appetite that.

We have defined four dividend purpose, we are still absorbing the same policy that we approved.

Released to the market, so 13 and a half.

Below that we shouldn't be discussing any extra payout.

Even though the risk appetite of the bank is 11, and a half into one and a half 13% of level one.

Thanks, very much for that I mean, so if I can ask a follow up so your comment about the 50 basis points basically what youre, saying is that right now with current rate.

Thank you wouldn't be able to issue up or below eight 5%.

Then you would end.

Youll Global Barbara.

At least in the global market and then of course the question would be yes.

Yeah.

We're going to be looking to the price for the yield that we have at that time. If there is a 50% 50 basis points more expensive we will have the discussions but again there is the decision will be on an economic basis I'm not saying that there was 50 basically we exercise the call I'm much more see if I have to make the decision should be.

Wouldn't exercise the call.

Because we discuss on an economic basis, but below that or above that we won't be even discussing so just to give you a good idea off you have to compare the level of price the repricing of the tier one that we have and compare that to a new issue premium.

And understand what are the premiums that we have embedded so this is the 50 basis range that I'm mentioning here.

Thanks, very much regarding when you've got so much emotional.

I also think that we're getting towards the end and therefore, the last question I'm going to ask you because it's via Whatsapp.

Rafael I thought of it as where you couldnt comment connect I'm going to read what we perceived a deceleration in deep in the business of issuance of the credit cards.

The <unk> presentation.

The whole industry has seen a raise in delinquency and credit cards and do you plan to have a more harsh metrics or decelerate credit in these segments.

Reviews.

Anything.

Well first of all thank you for the question. It's a shame that you couldn't join us today.

I think that we go back to the previous question I think that we've done relevant adjustments the market as a whole is suffering the readjustment happen across the board. This is not specific on.

In Bangkok, but of course one.

What is necessary.

It has been done and we've taken the necessary measures not only in the reveals that limit, but also India definitely the confession and this is what we still have opportunities. So it's important to mention that every time that you face a situation such as this we need to separate where do we want to do the de risking of the portfolio, where do we have the opportunity to.

Should we continue to grow and invest in the franchise and the credit card product is very transactional.

The day to day of the client.

The bank. So you mentioned a long lasting.

Relationship with other product doesn't make any sense. So there are opportunities that we are still taking but wherever necessary adjustments will be done.

So we've seen a deceleration in the market. The feeling is trying to make is is that they are all doing.

Relevant adjustment in our concession thank you Milton and with that we have.

Well finish the Q&A session.

And also we will finish our results for the third quarter earnings.

In 'twenty two Milton if we can do the closing of our earnings.

Thank you Renato for conducting this I would like to thank you all for Europe , it's sufficient and presence here in our event for us, it's a great pleasure to be able to share with the level of maximum transparency our agenda.

We've shared information quality quantitative it.

Always a pleasure to receive your questions here or presentations are also welcomed and I would like to say that we are facing scenarios that are challenging.

I have to say you are in the market.

And the challenges up ahead, the bank will continue to operate with a cautious way the care that it necessary, making the necessary adjustments because our objective is to create long term value of predictability and sustainability. This is our agenda and this is why we prepare ourselves and we work every day once again. Thank you very much for your press.

Thank you for the comments and just say on our side, we are very humble.

I respect for we are down to work not only with our competition, but also the market as a whole and we will continue to play our role working hard.

Had a lot of passion for what we do thank you very much and we will see each other soon thank you.