Q4 2022 Itau Unibanco Holding SA Earnings Call
Speaker 1: Outro
Speaker 2: Thanks for watching!
Speaker 3: And M M M that art cage five times that.
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Speaker 6: The part P. really we SP have.
Speaker 7: which were broadcasting directly from our office here in Avonita Fadi Alema in Soundpul. This event will be divided into two parts and the first part Mr. Milton Malui-Feedio will explain our performance and earnings for the fourth quarter of 2022. Next we'll have a Q&A session where analysts and investors will be able to interact with us directly.
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Speaker 12: The presentation we will make today is available for download on the hot site screen and also as usual on our Investor Relations website. I now give the floor to Mr. Malui who will begin the presentation on the earnings and then I will come back with you to moderate the Q&A session.
Speaker 13: Milton, go ahead.
Speaker 14: Music
Speaker 15: Regard to him out to well. Thank you, and I turn with betweenen themes like Hey.
Speaker 16: Welcome to our fourth quarter of 2022 earnings presentation. I'll also talk about the 2023 guided.
Speaker 17: I'll go straight to the figures so that I can bring you some more information. Firstly, our earnings in the quarter totaled 7.7 billion Reals, a drop of 5.1% from the previous quarter, and 7 billion Reals in Brazil, which also dropped 5.7% from the previous quarter.
Speaker 18: A very important topic I'd like to raise at the very beginning so that it can be very clear to you is the subsequent event. The credit case that was announced after December .
Speaker 19: In our balance sheet for 2022, there was an increase in provision for loan losses to cover 100% of this exposure. Therefore, there won't be any negative impact in 2023, only positive impact from a possible credit recovery.
Speaker 20: I wanted to make this clear at the very beginning. I'll comment during the presentation on some adjustments to make it clear how our performance would have been without this credit event, but it's very important to highlight that the exposure in our balance sheet is 100% covered.
Speaker 21: If it weren't for this effect, our consolidated earnings would have been 8.4 billion rials and 7.7 billion rials in Brazil.
Speaker 22: Speaking of profitability, already considering the provision for loan losses to cover 100% of the credit exposure caused by the subsequent event, we posted a consolidated return on equity of 19.3%, a drop of 1.7 percentage points, and of 19.7% in Brazil. If it weren't for the subsequent event, our consolidated ROE for the fourth quarter would have been a loss of 1.7%.
Speaker 23: And if it weren't for the subsequent event, it would have been 8.5 billion riyals.
Speaker 24: Therefore, you may note a difference of 1.3 billion reals, which was recorded in our P&L, and the difference for the total exposure was recorded in our balance sheet. For the subsequent event, it was recorded as additional provision for loan losses. We always carry out regular reviews of the bank's additional provision for loan losses.
Speaker 25: and we used a portion of this balance to complement the provision for the subsequent event. Therefore, the provision for loan losses covers 100% of the exposure. Part of it has already been recorded in the P&L in the amount of 1.3 billion real. And part of it is recorded in the additional provision for loan losses. And if there is a deterioration of this case, naturally, it would consume the additional provision for loan losses.
Speaker 26: Speaking of the NPL for over 90 days, once again we are very consistent with what we've been telling you for many quarters now. We can see a slight increase of 0.1 percentage points in the consolidated figure and 0.2 percentage points in Brazil. We posted another positive result for the efficiency ratio, reached in 41.2% in the consolidated figure and 39.1
Speaker 27: grew 3.7% in the quarter and 20% in the year. The SME portfolio grew 2.4% in the quarter and 10% in the year. We reached 918 billion rials in the portfolio in Brazil and 1.1 trillion rials in the consolidated portfolio, an annual growth of 11% and of 14%.
Speaker 28: if adjusted by the foreign exchange variation.
Speaker 29: by the foreign exchange variation.
Speaker 30: In the next slides, I'll present the results compared to the 2022 guidance disclosed. For the loan portfolio, the growth expectation was between 15.5% and 17.5%. But the result was below the low range of the guidance.
Speaker 31: We've already been telling you that the bank has been very carefully making adjustments to the risk appetite in view of the current macro scenario. I'm very comfortable with having delivered a figure that is below the guidance because of this.
Speaker 32: Now, deep diving into the portfolios, the collateralized products share in the individual portfolio grew from 47.7% in 2019 to 52.8% in 2022, so that we have a more guaranteed mix. Finance credit card portfolio into overdraft.
Two lines that have a significant impact on the margin dropped in the quarter as the result of an active risk management.
On the other hand, this naturally had an impact on the margin of the product mix.
The margin with clients posted growth of 3.6% in a quarter up 800 million reals.
of which 600 million reals was the core increase.
and 200 million rials was related to the working capital impact allocated to the margin with clients.
As I previously mentioned, the product mix had a slight negative impact of 100 million reals.
On the other hand, the average volume, the spreads and the effects of the operations in Latin America had positive impacts, raising our margin to 21.5 billion reouts.
We reached a consolidated annualized average margin of 8.7% and a risk-adjusted annualized average margin of 5.6% excluding the subsequent event. If we include the subsequent event, it was 5.1%. In Brazil, we were able to maintain the annualized average margin at 9.4% and a risk-adjusted annualized average.
talk about the financial margin with the market. We should remember that 2022 was a very challenging year for this line, mainly due to the interest rate rises, volatility, and the fact that we no longer have the positive effects of the overhead strategy that we had until 2021.
But nevertheless, we managed to deliver a positive margin again, as margin with a market reached 700 million rials, slightly outperforming the last two quarters, already considering the capital hedge cost of roughly 500 million rials per quarter.
So we recorded another robust quarter as we performed well in both Latin America and Brazil.
We expected a major reduction in margin with the markets as our 2022 guidance for this line was between 1 billion Rials and 3 billion Rials.
The good news was that we reached the top of the guidance, although we can clearly see a negative impact compared to 2021 result for all the reasons I've mentioned, notably due to the overhead strategy and to the impact of the capital hedge implemented in 2022, which added approximately 2 billion reals in cost.
This year. Capital hedge was the major responsible for the drop of the margin with a market in 2022.
cartomic heads to.
Moving to commissions and fees and results for insurance operations, we performed well in credit cards, both in issuing and acquiring activities, and recorded a 4.2% increase. We also performed well in asset management, and we recognize our fund's performance fee in the second and fourth quarters.
That is accounted for on a cash basis as required by the central bank. We recorded the performance fee in the fourth quarter and this is why we posted increased earnings quarter on quarter. We also posted dramatic increases in insurance operations, both in quarter on quarter and year on year comparisons.
We expected growth between 7% and 9% in 2022 commissions and insurance results guidance, and we ended up with 7.8%, which means we were very close to the guidance midpoint.
Regarding asset management, our funding balance, whether through our own or third party products, through the open platform, was up 8.7% year on year. The most important thing is that we can provide better products for our clients because of our complete portfolio. Please bear in mind.
Focus on client-centricity. We have performed really well in our own products due to a greater demand for fixed income products, which are deemed safer and less volatile. For this reason, the open platform output ended up falling in the period.
Acquiring transaction volume recorded a significant increase of 17.9% from 2021, with revenues growing more than two times than the volume of transactions.
which means we've been performing really well due to the right mix of products and services, delivering real value and growth with NPS of acquiring activities improving dramatically.
I've been emphasizing the growth of the insurance business in the previous quarters, and the premiums earned were up 19.9% year on year.
Really noteworthy is that the core of the insurance operations result has grown nearly 50%. We believe this segment is due to keep on growing. Now let's move to credit quality.
First, we noted that the linkancy was at an acceptable rate, as measured by the ratio of 15 to 90 days overdue MPL. This is a very important piece of information. Last quarter, I mentioned that this rise in the Latin America ratio has been due to a specific corporate case that will be regularized and will not be transferred to MPL 90 day.
As you can see, this was rightly done. In Brazil and in total, we recorded a slight increase of 20 and 10 basis points respectively, as I commented back at the first slide.
Focusing on transparency, we recorded the impact of 100 million reals from the sale of the active portfolio of 0.02 percentage points at the NPL rate.
That represents a very small amount, but underlines the way how we value the transparency of any sales of our portfolio to the market. In Brazil, delinquency as measured by ratio of 15 to 90 days overdue NPL is extremely acceptable for individuals and was flat compared to the previous quarter. The NPL ratio for NPL is about 1.5 to 1.5 times the ratio of NPL to NPL to NPL to NPL
that I expected NPL to go up in the fourth quarter for the individual's portfolio, as we had noted in the third quarter, in line with the normalization process for this indicator.
We recorded 30 basis points increase in the third and 20 basis points increase in the fourth quarter.
you that this normalization should produce.
I'd also told you that this normalization process would go until the first quarter of 2023. This expectation is reaffirmed, which underlines our strength, risk management and ability.
to manage the cost of credit in more troubled times.
Challenges surely lie ahead, but I believe the bank has been successful so far in walking through such tough scenarios.
NPL for SMEs in Brazil recorded a slight increase of 10 basis points, and it poses no specific concern for us.
The cost of credit to portfolio ratio closed the quarter at 3.5%. If it were adjusted by the subsequent event concerning the specific credit, it would be 3%.
observant very close to previous periods and even below pre-pandemic results.
Cost of credit increased to 8.5 billion reals in the fourth quarter from 8 billion reals in the third quarter. And considering the subsequent event, it reached 9.8 billion reals. Lone coverage ratio in the wholesale segment reached 1,857 percent.
precisely due to the provision for loan losses done in the fourth quarter to cover 100% of the exposure on the specific corporate case that entered into judicial reorganization.
Thus that the event occurs to the extent of the recognized provision, the coverage ratio will surely suffer.
Cost of credit would have closed the year at 31 billion rials if we excluded that subsequent event, that is, at the top of the 2022 guidance.
at 31 billion rials if we excluded that subsequent event, that is, at the top of the 2022 guidance.
to wrap it up the amount we exceeded the 2022 guidance of 1.3 billion Real. In the same amount of cases.
is related to the specific case of this retail, that is, the subsequent event occurred in January 2023.
ingredient 1006.6 %
Moving now to AAPAC, the non-interest expenses were up 6.7% year on year and 4.5% in the quarter, the latter due to its seasonality.
We came close to the top of the Guidance Brazil and within the Consolidated Guidance.
The efficiency ratio reached 39.1% in Brazil and 41.2% in the consolidated figures.
Year on year, the investments we made in platforms and new business to improve the client experience with the main driver of non-interest expenses increased.
Our core cost was up 0.7% or 300 million rials.
The inflation in the period was almost certainly above 6% for banks, impacted by the effects of the collective bargaining from previous years at much higher levels.
We've been able to make huge investments to build the future of the bank, while growing slightly above IPCA Inflation Index.
but below inflation for banks.
Good news for the capital ratio. We made headway in the capital base for one more quarter by reaching 11.9%. If we disregarded the subsequent event, our capital ratio would be at 12%. Our tier one closed at 13.5%, that is 50 basis points above our risk appetite.
As a reminder, our risk appetite is 11.5% at CET1 and 1.5% at A-T1. So here we are again accumulating capital in the quarter. We've been successful in increasing learnings, generating enough capital to invest and grow our business in portfolios, and also evolving the bank's capital base.
So this is good news, and one more positive quarter. I've been talking about earnings all the time, but the pillars underlying our earnings, the ones I want to highlight here are
One, our culture is engaging our employees, whom we call YouTubers.
And, too, how digital transformation is happening and the impact on what is most important for us. The reason for our existence are clients, or in other words, our client-centricity agenda.
I'll start talking about culture. First we reached an employer net promoter score of 88 points.
And this is the bank's record high ENPS.
And I always say that engaged and happy employees deliver a higher client satisfaction.
We reached almost 19,000 people who are already working in a community or tribe model. There are 2030 squad in the bank's operation.
I'd like to share with you very carefully and humbly some awards and recognition we got in 2022. People ask me how we measure cultural transformation and employees' engagement. And I think that these recognition are the answer.
The best companies to work in Brazil, up to 10, we are the first bank to top the great place to work ranking with over 10,000 employees.
So, this is the first time a bank achieves this position of the best company in Brazil, according to the Great Place to Work ranking. We were ranked first in the bank's category of the Valor Award. This was the first time Valor magazine introduced the bank's category.
We were ranked first in the Valor Award career, the best in management. We also ranked first in the top companies of LinkedIn for the third consecutive year. We were elected the most innovative bank in Brazil by Valor Innovation. We were ranked first in the International Category of the Best Workplaces for Innovators Award.
and eight in the global ranking. So I always look at these recognitions and feel delighted. I think we've been making an important progress, but also in a humble way because things are still difficult and we need to keep on performing on a very sustainable basis, focusing on the coming quarters.
The second pillar that is very important to our journey is digital transformation.
The system modernization and focus on quick problem solving brings higher value creation to our clients and competitiveness in our business.
I told you that 2022 was a key milestone for the bank's digital transformation.
We managed to reach our goal of 50% of our platforms modernized with state-of-the-art technology and totally decomponentized.
As regards the competitiveness of our platforms, we reach the modernization of 70% of what we understand is relevant to the client journey.
So, rather than looking at the absolute figure of 50%, I prefer to look at this evolution because it's what impacts the UX user experience.
Speed is increased and our ability to bring in an agile methodology, renew digital platforms, a new culture and client's interest to production has allowed us to quickly increase our ability to deliver products, correct mistakes, and deliver new features to production. We increased this speed by 756%.
Also very important is reducing incidents, because incidents become issues for our clients. So, when we look back at the period beginning back in 2018, the numbers of incidents in our platforms fell over 70%, especially driven by all the work done and the journey we've undertaken.
Moving to client centricity, I'll share some figures we usually don't disclose, but I think it's a good moment for accountability, since we are wrapping up 2022 and beginning 2023.
Client centricity, as measured by net promoter score, is very important for our day-to-day activities.
The bank's global NPS has increased 20 percentage points since 2018.
We significantly cut back the gap we used to have compared to our peers that were operating with higher NPS levels. That was our goal and we are succeeding in delivering it.
We can see that most of our business is at record high levels, which evidences the engagement, the focus, the client centricity and the digitalization actually happening.
Almost 60% of our business reached what we call an excellent zone, with NPS over 70 point.
such as the Personale Test segment, top business and business, which are two retail corporate segments.
Ita-U, BBA, Uni-class, segment, private segment, credit card business, vehicle financing business. Rather than showcasing the evolution of this business and of the product's portfolio, it's better to set the goal of closing 2023 in the excellent zone, that is reaching an NPS over 70 points.
This is our goal for 2023 on a global scale.
on a global scale.
All our weighted business must reach an NPS of around 70 points by the end of the year.
This is the goal and we really believe we'll be able to get there based on everything we discussed today. Let's strive to go after it and reach all these ratios. This is the great evolution for the client agenda.
Moving forward to 2023, I'll start with the expectations for the macro scenario.
The main highlights are GDP is expected to grow by 0.9%, but I believe we have a positive bias. This forecast will likely be reviewed in the short term with an upward trend. Regarding the select rate, the best expectation today is a fall towards 12.5%, but the end of 2023. It naturally depends on decisions about the fiscal...
five and a half rials to one US dollar. So moving to 2023 guidance we expect the credit portfolio will increase between six and nine percent.
A more modest growth compared to what we've delivered in previous years.
This is fully associated with the challenging scenario we are experiencing. That's why we choose to be more cautious in granting credit, a strategy we've been applying in the last quarters. The financial margin with clients is expected to grow between 13.5 and 16.5%.
Margin with a market is expected to range between two and four billion reels. We believe we'll manage to deliver positive margins for another year, despite the challenging scenario. With the capital hedge cost already included in these figures, there is a significant impact of approximately two billion reels, depending on the interest rate differential. Cost of credit is expected to range between
rise over 2%.
We must remember that inflation measured by IPCA has been around 5.8%. And I always say that inflation for banks is usually higher due to the collective bargaining that brings in the inflation inertia from previous years. So we've set the goal of not letting the core costs rise over 2%. The whole difference between the two is that the
between 28 and a half to 31 and a half percent. That's all I wanted to share on 2022 earning and 2023 guidance. I'll be joining Henato for the Q&A session to address your questions. Thank you very much for joining us, and I'll see you in a while. Take care.
start with the Q&A session. And remember that this is going to be in two languages. English and Portuguese you can answer in the question that you want. But if you need simultaneous translation we have the options English to Portuguese and Portuguese to English. Now remember that you can ask the questions via WhatsApp and the number is 1194552.
Now, let's start. The first question is from Domingo Falavino from J.P. Morgan. He is right there.
Hello, Dom, welcome to the fourth quarter earnings results. Thank you very much for the opportunity. I have two questions, very quick two questions. In terms of provisions, the first...
is to understand a bit how that additional provision works, the additional one. Well, it seems that the balance is 17 billion, right? So I wanted to understand how much is already destined for the segment for credit cards or specific sectors of the economy, and how much of that is completely...
free, let's just say, with the use, looking at the subsequent fines of approximately $2 billion, $1.3 billion, the exposure we get to two. So I wanted to know how much leeway do you have, let's just say. And the second one, how do you reconcile the guidance for the growth, the total growth of appellate patentee loans that invested
And this is a provision that is anticipated.
with the expected loss. So how do you reconcile if it's an increase of risk or
Are you going to be more conservative in the guidance? These are the two points. Okay, thank you very much, Domingos. Thank you for the wonderful question. It's a pleasure to see you once again. Let me start with the complementary provisions. The complementary provisions, in fact, we've been looking at the balance for a long time. We do the periodic reviews, I would say monthly reviews on the volume of provisions that we have in the balance sheet.
Always looking for the at our board's father with expected losses and the bank as a practice of many years of being very careful very prudent with the level of provisioning that we carry out for the balance. So we have the reinforcement of provisions all throughout the previous quarters, specifically during COVID-19 you remember 2020.
And those provisions, they're allocated for specific cases where we have some concern that we understand that the level of provisioning has to be higher. Now, we always see the expected loss. We have the effect of the expected loss, which is within the complementary provision part, is the specific case. It can be a segment. It can be a company. It can be a company.
specific business or an adjustment that the bank deems necessary. So what do we do? Once a month at least we do a complete review of these provisions. And we take a look at case by case.
What are the expectations for the recovery in the future if it's improving, if it's not improving? So when we did the 100% provisioning in the specific case, which is the subsequent event, we looked at the balance sheet and we wanted to understand, well, is there any leeway in terms of some change in regards to the complementary provisions case?
We decided to do 100% provisioning. That was a decision. We look first if there is an adjustment that has to be done within the complimentary provisions. And in the end, we did 1.3 billion going through profits and losses in the configuring even more complimentary provisions. So in this particular case.
our exposure total is 2.8 billion for this specific case. So just to facilitate the math, it was 1.3 billion with a Q&L and then 1.5 consecutive because it's not just the risk of their credit for the operation. We also have an exposure of derivatives. There is a loan and then that complement the total exposure. So I'm giving you the results.
We don't do the specific results, but this is a specific case, but this is a very publicized case. So it's a lower exposure, 1.5 billion in a complimentary 1.3 billion allocated. So when we reviewed, we saw that there was an opportunity for a specific allocation, and in our financial results, if you look at several places.
we leave it explicit that it's for a specific case that is in the news. So if and when there is a deterioration of the case and we understand that this is given the case, given the unpredictability, then there will be naturally more expenses of PDD in the specific case and then an immediate use of the provision that is being allocated.
Here, here are two important elements that I would like to address. First, we look at the retail on the individuals, portfolio we see as civilization of the delays. And this is the best expectation so far. We are growing point two over 90 and over the last quarter, so it's stable.
for the first quarter. The portfolio is growing. It's about a growth of 9, close to 10% and in the individuals we didn't subdivide it by segment but our expectation is that the individuals and companies they're moving along in the same speed if we extrapolate the fourth quarter over the year in retail.
for next year given that we work with the expected losses so we're always anticipating the new cycle production this provision naturally will grow 13-14% with a portfolio that can grow close to 9-10. So this is not relevant when we look at these numbers so it's important that we look at a number that is very important when we normalize.
specifically the retail portfolio for two years and this is the term that I've been using. We realize that there is a gradual normalization in these retail and more challenges given the level of interest rates that we see in the economy that we have. The leverage of the companies has to be lower since we have a fixed interest rate.
And that made us be very careful in estimating the cost of credit that is much higher for 2023. Specifically in the wholesale that you know works with a lower, well the delay is not the, I don't like you follow the NPL 90 for the medium and large size companies, but there you can see that the delay is insignificant, irrelevant.
whether there is more relation with the cost of credit capture that we can observe all throughout 2023, given the scenario in the whole, given the perspective, given the size of the portfolio, to actually do more provisions and an expectation of doing more provisions for 2023.
Thank you very much. Now we have another person, Kya Goba Tista from UBS. Hello everyone.
Congratulations on the results. I think that it was very good. Now I have a question. I have a question, tier one question. The bank went back to 13.5, so there is an ROI of 20% and then you are working with the numbers online. With the growth of the portfolio, the bank can pay clearly.
more dividends pay out in my math 60 and still keep the tier one stable at 13.5 so it that's my that's my question and we're going back to that scenario that the bank is going to pay all the capital above 13.5 and a quick follow up on the main goes question what changed in the bank
in regards to the specific case of Americanas and the legal proceedings. How did the bank evolve with this case of Americanas? Hello. Thank you, Kago. Once again, it's a pleasure to see you. Once again, thank you for the question. Well, let me talk about the capital here.
We are going to systematically and consistently grow the level capital. If you remember that we started in 2020 with the provisions for COVID, and then we start to recover. We implemented the hedge of the capital index policy and the bank is consistently generating value and financing activities.
Having an increase of the capitalization of the bank measured by set one now my expectation Looking up ahead there was no scenario of the increase of percentage payout Payment we have 27 we maximize the JCB. That's right the payout is above the minimum
We still provision looking up ahead for the level of the payout that is much similar. Yes, we're growing the results of the bank and then we're increasing the dividends that JCPE shares. That's our work. Now, even though we recovered capital, which is a great news, we see challenges up ahead. These are typically two.
First, there is a new ponderators for the credit risk and in our first reading they can be positive for the capital. But there is one that is a public consultation which is the operational capital. There is a measure in the way that we allocated for now but there is a review being done and this measure might impact the...
that we are going to inspect, follow up in different geographies, a delay to 2025. So the bank is doing a provision for the capital looking up ahead. We are not going to fall in the scenario that we're going to pay for a larger dividend, knowing the perspective of we can have a use because of this event.
It's not materially going to place us below the appetite. We are continuing to work so that doesn't happen. We continue to replenish, but there might be yes and impact. There might be an impact. And we are going to follow up over the next quarters. There's no change in the policy available. Therefore, we continue to follow the policy of dividends that was published. And the capital, our trend is to continue to grow.
And we need on the regulators from the central bank that we do not know all the details on how it's going to be Post the public consultation But so the corporate a subsequent event that's the specific case about that of course. Yes every credit event give us learning
whether it comes from a fraud or if it comes from a worsening of a scenario where we eventually did not predict or did not imagine that would happen. So I would say that that's part. It's an expensive learning without a shadow of a doubt, but we always have a learning, however expensive it is. So we want to do a complete review of the processes. We are going to go over the storyline, understand what we could have...
for all happening in the company with all the characteristics that you know of the company. But we were reducing our exposure and we reduced one billion reais in that area just so you know the magnitude of the efforts given the operations that were due. We didn't produce new operations for several...
for several reasons. So this is learning. So in our opinion of everything that we've seen, this is a nice related case. It's a fraud. We reviewed or portfolio we reviewed several companies that are using the risk not only in the bank and in the market. We didn't identify any any of them.
Any bad thing. This is an isolated thing, is isolated case, and we are learning, and this is everything that we are doing. Whenever we encourage an event such as this, okay, great. Thank you very much. And third, now Gustavo is here. Hi, Gustavo. Welcome to the call.
Hello, Miotem. Thank you for the opportunity. Congratulations on the results, specifically given the whole scenario. I wanted to change the subject. I wanted to talk about the guidance, the PN. Well, at least our understanding is that if we understand the run waiting at the end of the year, there is maybe a little bit lower than the bank was presenting throughout the year, and that there is a guidance of staff.
and investment banking, so I wouldn't understand. How do we see this end of the year? That is more challenging in this line at the growth rate weaker, and you are bringing an expectation much higher than the run weight at the end of the year. So it would be the insurance compensating for all that. If you can go over the composure.
Whenever we get into a new year, and I like to say that we got into 2023 better than we finished 2022, and better than what we started in 2022. Having said that, looking up ahead, there is always a degree of challenge in any guidance many times. You have an objective, you have the best estimation, not everything has an absolute well-designed of it.
and a fine action plan and this is part of our dynamic with me challenges.
This is how we like to deal with performance. This is how we like to deal with the indicators of looking up ahead and the future. Now, along those lines, it's no different. We have a challenge. That's it. Now, Kevin said that. We believe that in with the information that we have, nowadays, it is possible to capture that growth all throughout 2020-23.
if nothing else is altered. We can see that in different ways. Not only PDB credit cards, there is also the Inter-Exchange and when we talk about the credit cards, we have to look at the fees which is very important for the reduction annual fees. Also the programs for stimulation
for generating loyalty with our clients under the Inter-Exchange Rate. So these effects are contained here. The acquiring as you've seen...
If you look at the end of the year, when you have the buyers, the DPP there is a growth. Here is a...
better mix, we're searching for a focus in the repricing because of the penetration of financial products, interest rates, a management that is much closer to the bank and that integration has worked much more. And the buyer, acquirer, we don't like to look at them as a P&L of a business, but we like to look at them in a global context for the relation of the bank.
and a client asset every year we have a challenge because regardless of where the market goes
An important part of the result is coming from performance Cs. And we have to be capable. We have a very competent team. We have to be capable. We have the multi tables besides the traditional tables of assets for exchange. We have the performance C challenge and we've managed to deliver this all throughout the year. So we have a challenge for 2023.
obviously with the risk of the market, with the treasury, it depends on the position. How do we manage the assets and the risks all throughout the year, but there is always an expectation for the generation of alpha. Now, whether it's a challenge, more uncertainty, well, the performance will always bring volatility, but wherever I think that there is a challenge is in the economic.
see a growth. So part of the result comes from the individuals when we have a portfolio that is much more robust to service our clients better. On the other hand, the investment bank, transitional, the activities of M&As have to continue. Equity capital markets, it will depend on the window of the market, how the global and local uncertainty scenario interest rates.
So there might be a good opportunity and we imagine that even though we have important challenges, we will have an activity that will continue with a lot of dynamics all throughout the year. And insurance, I always say, we see an evolution of the operation. There is retail that is not a good solve for lyHunger.org and there is links to Simon.ly online back at there.
insurance and we pile them up. So as we penetrate more, we grow, you pile the seasons for the subsequent years and we expect an evolution at the bottom line at 2023. So insurance should bring good contributions in 2023. So we expect...
that this is fine. We have the execution risk, of course, whenever we have investment bank, I always see more risks.
But we're going to work hard so we can follow up on the guidance that was placed. If there is any change all throughout the quarters, any change in the scenario, or if there is any difficulty then we're going to update the guidance. If it's necessary by once again, we believe that it's factual and we're going to continue running after the...
the numbers. So the next, well we have Daniel Fas, credit sweets.
Thank you. Good morning, Renato. Good morning, Milton. Thank you for the results.
So I wanted to talk about the how the guidance of the growth of the portfolio, how it's made, do we have retail growing more? Well, wholesale growing below if you are comfortable with individuals makes that is 40, 40, and then it grew with a collateralized credit. So if you can tell us.
More about the growth of portfolio in the breakdown, the second question that is quicker, is there any changes in the spread that you practice in the wholesale given the subsequent, do you think that you're going to do anything for the supply chains involved? That would be my question.
about the growth of portfolio and the breakdown and the second question that is quicker, is there any changes in the spread that you practice in the wholesale, given the subsequent, do you think that you're going to do anything for the supply chains involved? That would be my question. Hello, Daniel, thank you for the question.
How about the growth of the portfolio, Sonny Ops? We open up in the consolidated information for you, but it's important to separate three main messages. Well, the portfolio is going to grow less than the 2021-22, so there is a de-exceleration of the growth. Even though I think that that balance between insure the non-insured might be...
There might be a growth in not a, not a, sure, more than 23 than what we observed in vehicles and real estate which has a great growth. So we're going to continue with a level of and, sure, above 50, but there might be an adjustment in the mix.
which is a positive factor for the financial margins as well. So possibly portfolios with more risk in the adequate populations with the adequate risk profile we have a portfolio that is very affluent and we've managed to gain share in the best risks which is a good sign but with a mix that is more favorable for more. So we have a de-acceleration in the vehicle
because of the interest rates, our expectations are going to be a de-exceleration. Deceleration all throughout the year. So this is how we see the retail. Well, small and medium companies SMEs are growing, but you know, two digits low. This is something that we can foresee and big.
and a C.C.C.2, recycle the portfolio is very relevant. And we are the leaders of the capital markets, with the market share. We are the leaders with 30%. So we're going to continue to recycle the portfolio, opening the space. And we're going to continue to operate and generating a profile in a client.
So, it's because of the currency. This is an overview of the credit portfolio and this is how we are observing in 2023. In this specific case, the review of the spread is very important.
reviewing this spread it will always happen whenever we understand it as an order the perspective change the risk and area change that the implicit risk of the company's worsened so the pricing is something dynamic that we do every single day there was no reprising because of the specific case in the media I say once again this is a specific fraud case
something that we do not see there ever soft it's maybe the biggest fraud of all times so this is a nice related case of everything that we observe we don't see any contagion in our personal we looked at that all the chain we always have to be careful with no materiality
This is a company that continues to work. They have challenges. We hope that the company will leave this process in the best way possible. There are people dedicated to that, but there is no repricing of the portfolio due to this event. We continue to price in the same way. We are always taking care.
of the scenario, but nothing that comes from the specific case. This is very important that we come from Maria Pierre, from Bank of America, I'm Maria. Good morning, everyone. Thank you for the opportunity. Congratulations on the result. Well, then I wanted to focus more in the retail. So the weight of America with the wholesale.
And we have the companies that are so contracting the financial advisors to restructure their debt. So clearly, there is a worsening of the scenario in general. So I want you to understand from you if there is any specific thing that will wor you the most.
So I think that your ROE is close to 30% of the money to understand what is the capacity of the bank in profitability having a high profitability and the sector. Looking at the records, I mean the profitability might be lower. So when you understand better.
how are the dynamics and how you see specifically case by case. Thank you, Mario. It's a pleasure to see you once again. Thank you for the compliments. Now, in fact, specifically talking about the cost of credit and the evolution for the year and the sector, the segment of wholesale. For the bank.
It's very broad. And the MDNA, the Asian, and the way that we talk about this, it's very important that we understand there are several businesses here. Not only the business of it, the OVBA, BBA, which are the big corporations that tell middle, there is the whole business of asset management, which is in there. The operation of LATAM is also there in there.
So it's a business that is very complete from the standpoint. So it's an overview that is the previous one with the wholesale, the retail vision. Well, no. In there, there are several businesses, some more resilient, some more depending upon credit, some are outside of Brazil, which is the operation of LATAM, which had a great evolution in 2022.
with perspectives and challenges for 2023, of course. Now looking at the environment, of course, in a scenario that you're looking at prospectively, GDP that is relatively low, much below the potential for growth. We're talking about GDP of 1% growth. We are talking about 0.9 in the premise. I was talking about the bias of highs.
Might be higher, but it's not going to be substantially better So we are reviewing the scenario and we are going to publish the next phase for first point second point interest rate come on Interest rate 30 13.75 plus the spread that is charged It has an important pressure on any company whether if it's a small company or large
expected we've seen but November December was were weaker months so maybe there is going to be compensation now with the interest rates 13.75 there is a natural deceleration of the company but globally the scenario improved from what we had two months ago we see global dropping
the dropping less than what we expected. And this is the whole framework. In our opinion, yes. This is a scenario that is more challenging for the company, specifically from thresholds that were very low. If you looked at the cost of credit, close to zero in some cases, because there was still a portfolio in the past. There were reversals that happened.
you know companies perform third or in several cases or what we expected so etc. So we're going to see an effect of normalization also that is going to happen in the wholesale. You mentioned a few cases, restructuring. Come on, these are not new to be very frank, these were open. Once again, they fraud the specific case.
It's not something that the traditional models would capture. The cases that we've heard, they're not new. They were already on the radar, they were monitored and followed up. So there is a re-RJ happening. So you generate 45.
Days in the come back, the chapter 11 because of the legal protection, the strategy and the whole thing. The, and following up with the process indicates is absolutely duly provisioned. We didn't have any concerns specifically regarding for those that follow up, of close social answer. It's a challenge scenario, yes.
I believe that there will be a normalization, yes. The interest rate currently pressures the bad debt in the segment of the companies, and then we have to follow up these liabilities up close. So there's no specific sector. What worries us is the leverage companies with high leverage with the cost of debt.
and they don't have an adequate capital structure. But remember, then there are many ways they can work with that. There is a capital market today that is always an opportunity for opening a window and then you can work on the capital that companies, the shareholders themselves, they can inject the capital whenever there is difficulty so there is ex-semino situations that you can go over the problem. But yes, we're expecting a worse scenario than...
we have to look at percentage the cost of credit year on year if it removes the effect for the specific case of December we have the retail for now from the nominal the big volumes and of course the margin levels are it's very different well it's from retail and before with full sold
Thank you very much. Next question from Renata Maloney.
How are you doing Renato Maldoni? How are you doing?
How you doing? Welcome.
Thank you all for your time. Thank you for the opportunity. Thank you, congratulations on the results.
But you, you made to less, you turn bit about growth.
When we look at the central bank data, specifically for individuals,
It measures that you and other banks took make sense.
But greater reduction than we would normally see seasonally speaking.
So I'd like to understand this deceleration and how this can affect guidance risk this year. Thank you Renato.
And thank you for taking part in our call. Yes, we've seen this portfolio decelerating for the last few quarters actually. We made adjustments in the third quarter of 2021. And so we're talking about 13, 14 months of consistent consecutive readjustment.
vehicles, we took, we proactively decided to reduce our exposure.
For individuals, I think it's important that we understand where the income is lower in the portfolio list.
So this is a 10% percentage point in the mix.
So this is 10% points, not 10%.
So this is a 6-point NPL Givertine.
We're looking at 150-160 NPL above what we are disclosing.
So this has been proactive and something we've been doing each month. Yes, fourth quarter there was a deseration.
There is seasonality. Non-fined credit card is growing.
Otherwise it's falling and in personal loans individual loans two areas were affected.
general loans.
General loans, average balance, skill is...
Fine. Overdraft and 13th salary.
are affecting the more expensive line, we cover the more expensive line. Since there's piling up with retail, and we see this over the quarters, when we start to look at the future, we don't see much growth. So the system across the board has done this, we, to some degree, other.
And where we see greater preoccupation, greater risk, we've been, we've made the adjustments that are necessary in the portfolios.
This includes credit cards, vehicles, and the like. So we've been very prudent. I think we need to be cautious. That's what the outlook calls for us. I think few people look at this with such caution, as much caution as we are. So that's what we're doing. Looking at a decrease in growth and managing the portfolios as best as possible.
again, watching how these portfolios are performing over time and make adjustments to the right to the left. Again, that's part of what we do and that's what we do on a day-to-day basis.
Thank you very much. Next Eduardo Rothman from BTG Pactual.
Hello Eduardo.
Thank you, and I'll thank you, Milton. Welcome. Good morning. I'm wondering if you guys are following you guys for 15 years. I remember how you started compared to your competition way back then and how you are now.
A lot of your peers say this performance gap is cyclical Cautioner, exposure, etc. We think it's more structural.
say this performance gap is cyclical. Customer exposure etc. We think it's more structural.
Since day one as CEO , you've been focusing on digital transformation. You've been pushing it. And you can see that this has really affected performance.
No, no, no, no. Potentially. Do you think they're still...
Do you think there's still a chance for growth here?
Can we believe this different difference?
Better performance for Itau is structurally better, is based on digital technology, because it's even better now than it was 10, 15 years ago. Thank you so much for the kind words, and it's great to see you again.
Okay, disclaimer, my disclaimer. Okay, I'm going to start with that.
Okay, our numbers, our indicators, our bank, etc.
Okay, our numbers, our indicators, our bank, etc. These have been important.
Second disclaimer, I'm not really going to go into performance, relative performance, these are the others.
You have the number, as you know what's happening, you know how to assess this the exact better than I do. And I respect our competition, I highly respect our competition, regardless of where we are at different moments in time.
It's a marathon. And it's an ongoing marathon. There's no end. It's not something that ends next quarter. It's ongoing, ongoing. We're going to run, we're running, we're running. We'll never reach the finish line. Now going back to performance.
Our digital transformation has been very critical for the bank. No doubt about it.
The speed of change that we have implemented and the features has been phenomenal. How quickly we've changed our system, how fast we've simplified things, how we've made them interoperable, the cost of serving our customers and the quality of the new solutions.
All of this together has been incredible and translate to a wonderful NPS. It's not just digital transformation, it's cultural transformation, this customer focus, obsessed with the customer.
All of this has resulted in customer satisfaction. So it's a number of factors that have led to these positive numbers and these positive results.
And yield an NPS, go hand in hand. You can't have a high sustainability, you can't have a product that's not sustainable, and then get an NPS. We work with sustainable products, sustainable solutions that maximize yield and maximize satisfaction of our customers so they walk hand in hand to them. So I have no doubt that digital transformation that has been absolutely critical go in the...
evolution of the bank and how we work and how we work with our customers. There are lots of communities in the bank. If you don't have the digitalized platforms and all the components in place, you're not going to get the speed you need, so you're going to have people.
You have Agile people, but they don't have the Agile tools. You're not going to be able to deliver on your promises. And fortunately, we have that. So the NPS reflects that we have that. We have, over 20,000 people in our community.
over 2,000 squads. That just shows how relevant the agile system is in our company.
So why has our performance led to these wonderful results?
So why has our performance led to these wonderful results? Very positive.
very high. It's because we're a full bank. I insist on this from the beginning. Full bank is not just being present in the different sectors and areas. That's not what it means. It means managing these and understanding where you're operating. And because of our dedication and because of our investment and our focus over many years, we've been relevant in a number of businesses.
been able to perform in a number of areas. We were talking about wholesale. Ito, BBA, very important in these results. It's not just commercial, it's investment bank, it's products, it's cross sell. If you look at our positions relative.
our relative positions in all of these businesses. We are high up in all of the rankings. The returns are fantastic. 2022, you saw these great returns. So if you add this all up, all of this helps our performance. When we look at retail.
a traditional retail bank where we work closer with customers, we've had excellent performance.
We're close to the customers. We work with them. We've been able to increase in customer engagement with the bank. Each engagement.
engagement points, percentage point represents a billion reals. Obviously, there are challenges in cyclical moments. You know, we've got vehicle issues, it's area in a vehicle sector. But if you understand the risk...
And you can anticipate these cycles. And if you have a portfolio that balances out these difficult moments...
It means that your yields are going to be quite high. Your earnings are going to be quite high. We have credit cards in Brazil when we look at our market share and we look at our portfolio. Yes, we're facing a more challenging moment, but we have a number of other businesses that are maximizing their revenue pool. And their leadership is unquestioned.
So this healthy portfolio has helped us in terms of yield and revenue across the board. Challenges are always going to face them. We have difficulty with retail, obviously. There may be decreases in terms of yield and in terms of earnings.
because of the cost of credit, but because we can manage a number of different businesses, implicit in our guidance, we're able to confront the challenges and deliver excellent numbers. Yes, we've got competition all across the board, we've got transformation, changes happening, and we continue understanding that, pursuing it. So I don't see...
But because we can manage a number of different businesses, and that's implicit in our guidance, we're able to confront the challenges and deliver excellent numbers. Yes, we've got competition all across the board, we've got transformation, changes happening, and we continue understanding that, pursuing it. So I don't see anything today.
that will make me change my outlaw in terms of yield. Obviously things may change over time. Obviously the macro is important, zip codes are important.
is important on our result. And this obviously affects us directly. So again, it's going to depend on general macro outlook so that we can continue to...
deliver on these numbers. And when we look at global market, and this is also quite important, not just customer wise, but
Generally, we look at the market risk to serve our customers. We don't look at it as simple returns on associated risk separately. We've been able to manage risk.
excellent job managing risk in a very challenging situation.
And you can see that the results to returns are excellent. Hedging costs are great.
Two million in margin just last year. If it weren't for that policy, we'd even have higher returns on the top line. Next question, we're going to switch to English. As we have with us, Tito Labarto from Goldman Sachs. I think you understand Portuguese, but you don't tell us, Tito. But in any event, welcome, good to see you again.
negative, questioning central bank independence, high interest rates, re-negotiation programs, using public sector banks to support growth. I don't know if he's had any conversations with them at all, but just...
How do you think this environment could potentially impact the bank and the way you run the bank? You know, particularly if some of the public sector banks start to lend below market rate Just any color your thoughts on the current, you know, macro and political environment and how that could impact the bank Sure, I'd you to go to see you again. Thank you for for joining us today
Let me first of all say that yes, we've been having conversations with the government, with Fernando Adade and his team, not only with him last week in February , we had four ministers there telling us a little bit more about their plans, Simone, Esther, Fernando Adade and also Alois Umercadenti, the CEO of D&DS.
So, our view is that all the discussions we had so far are very positive. Okay, so I think the direction and the concepts are very clear. They've been very open to listen to us and understand our views on the scenario, the noises that we've been hearing recently. In a democracy, the way we've been very polarized, I would say.
message to the market that the deficit is very important for the government and they will pursue to reduce the deficit for 2023 and so. We have a huge discussions about the goals and the inflation target. I think it's an unnecessary noise so my view is that they have to define as soon as possible the new inflation target.
and work on that because otherwise there is an impact on the prospective inflation. The expectations are going up only because of the noise and this has of course an impact in the interest rate curve. And the most relevant information from my view and I think the whole market is expecting is the new fiscal framework that we should...
understand a little bit more by the end of April this is what Minister Adagio has been telling the market. So I would say yes there is noise, yes we've been hearing the discussions but we have to understand that we are in a democracy part of the process to have some noise. The most relevant thing is that whenever we have new decisions coming from the government and new efforts coming from the financial team.
We will have more information to forecast looking forward. But there is a lot of uncertainty and this uncertainty, yes, it changes the way we manage the bank. So we are being more conservative, yes, we have a prudential approach, yes, we don't have all the information, so it's difficult to forecast.
As much noise you have, as less confident, we believe we have to be in running our businesses. So there is a guidance, there is this input that we consider on the macroeconomic scenario, the GDP, we may have something around 1.3, 1.4 for 2023.
This is something that may have a positive impact, but again there is a lot of challenging and a lot of noise. And this of course makes price not only in the financial market, in the system, but in our decisions. So we expect that this noise starts to reduce at some point, especially if we take out...
the most relevant decisions that should be taken to take this noise of the yield curve. So this is our best expectations up to now and we have to wait and see what will be the the message and decisions that will arise in the coming months.
with the current scenario.
from scintodder are known churra?
from Saint-Henryar, Arnon Chirazi. Welcome Arnon Chirazi.
Good morning. I hope you're doing well. First, I wanted to thank you for the 2022
The result is excellent.
I wanted to know thanks investments specifically.
We're quite satisfied with how our business has been developing specifically investments. We did our homework, we made the right decisions, we made the right investments. So when we look at maturity, this is three months, six months, depending on the investment, depending on where we're located, where we're investing.
We've got B2C over 2000 employees focusing on this with great new platform, great tools. If we look at the platform and all the different products, our products are excellent. It's a very open platform with tons of fun, including third party funds. We also have product solutions that are very specific that are...
specific to different customers. This allows us to understand and work through the cycle.
That's really more focused on your own products. You want something that's more focused on lower risk? We've got that too. So we're able to address these risks.
We've been able to balance them out based on what our customers want. So our offer, supply and demand has been quite positive. I'd like to stress our business model today is to encourage our investors is excellent, excellent. We'll keep building up to this Polo Instincts video toward your end.
Our performance, our portfolio returns are fantastic. Regardless of the products and how it is for the company, the most important thing is that it best meets our customers needs and this is what we're really focused on. And we've seen excellent results because of that. And I really want to stress that.
There has been a reduction of volume loss over the last period, and that's excellent. Our portfolio is much better structured. As simple as that, I have been able to work
NPS is much higher, our consultants are focused, again, interest rates also help.
And we've been able to gain market share in investments overall. So...
If you look at individuals, this is one of the best ratios we've seen. Individuals with these investments were quite, are we completely satisfied? No. Have we reached our main objective? No. We have challenges ahead of us. We'd like to improve better. And I'd actually like to talk about some of the products that really, we really advanced a lot. We've been in progress in 2022, but we need to make a lot of progress.
products has been excellent so there's lots of investment in this but there's still lots to be done so we're happy where we are but we'll be more happy when we get to where we want to get to but we're very happy with what we've gotten to so far.
Now the next one is from Rafael Fraadi from Citibank. Welcome.
Hello everyone, thank you very much. Thank you for this time and congratulations on the results. I wanted to talk about the financial margin.
We've seen stability and then there's a discussion of the city of the Voluzon. Discussions on how that evolution would be. Can you comment a bit more on the mix of the retail and then we have spread a bit lower for 23, but we see that in the wholesale.
at least the largest level in the historical records. And so I want to show them their sample sale. We have the product spread at the beginning, Milton said that there is...
not a relevant change in spread. So, you know, what explains this margin of retail? Thank you, Rafael. It's a pleasure to see you once again. Thank you.
Well, once again we see an expansion for 23 that is very subtle.
So we continue to believe that there might be an expansion. But there's going to be an march in and we've been running with a profitability level that is very good. I'm looking at the consolidated. But we can expect that there's going to be an increase in the line after all the time the guidance is explicit on the growth of the march in. There is a series of effects here, the first effect. Okay.
is that we should have the fourth border that has a typical effect way, the payment for the 13th salary, the non-finance portfolios that have been growing. The loans have been reduced so that affects the mix of the line.
On the other hand, more volumes, we've managed to get some products with regulatory caps, so there is the increase in the funding, structural funding. We have the realistic credit, there is a dynamic of the price of the asset and the liability, the savings, the treasury against the credit.
So we also have the competition and we see pressure in the spread in a few products, specifically those that have a regulatory cap. Now, on the other hand, since we are a full bank and we have a penetration for the relationship with the clients that it's very relevant, we have all the cross-ail that also affects.
the margin, whether it's several products or transactionality of treasury or catch management projects, products and deposits and the volume of capture for the raw debate that generates a lot of returns. In part, it's also the interest rate that are higher. We also benefit and I would say on the short term.
specifically with better results. Not only in our deposit structure saving, but also the working capital that is also benefited. The impact is not immediate. We do the hedging, whether it's out deposits and capital and several vertices, looking up ahead, but we also see in 2023 given the interest rate.
Levels a potential positive effect that comes from the deposits in our working capital now in the In the wholesale because we are a full bank and once again we can capture several treasury products, and we can have penetration of Cash management that is relevant
We have the outstanding balances and the deposits that affect importantly. But the wholesale is not just a double-bebet. It's at it with the performance fee and the growth and results has also affected that when we look at the wholesale as a whole, and there is the operations for a lot of them that has had a better profitability for.
I'd like to say that structurally we'd rather work with the interest rates that are lower so that the bank can expand the business, increase the risk appetite so that the companies can in fact have a quality of credit and capacity for growth that is much more healthy than in a scenario of risk of interest rates that are much higher for a long period of time.
So when the interest rates go back to the lower Yeah, then we're going to lose some revenues on the short term but on the other hand we're going to recover the capacity for growth and growing much stronger and Part of the math is the cost of credit...
from HSBC. Hey Carlos, good to see you. Hi, good morning and thank you for taking my question. I would like to go back to the capital. First, could you quantify the impact of increased operational risk-related assets in a capital capital?
whenever it is applied, as you mentioned earlier, it could be January of 2024, it could be later. Second, has your risk appetite changed? I mean, you mentioned a lot of caution and certainty. Do you want to operate with a different level of capital? What would be your current capital level at which you are aspiring for your CET1? And finally, related to that, do you...
Would that affect your investment in XP and is that something that you want to keep or you might sell at some point also to reduce your risk? Thank you. Yeah, Carlos. Good to see you. Thank you for joining us today. So first of all, talking about capital, as I was saying at the very beginning, we still believe we have room to increase our capital base.
Just to get your second question, then I go back. Yes, we decided to run the bank with a set one common equity of 11.5, which is a little bit below the 12% that we had in the past. Why is that? First of all, because in the past the most relevant negative impact that we could have in capital
had to do with the FX rate, okay, for two reasons. First of all, the overhead strategy that would generate a lot of tax credit and with all the impact in capital. And second, due to the operations we have not only Latte, but dollar linked or other currencies linked portfolio.
this brings a lot of volatility in our capital index. So having said that, when we took out the overhead due to change in the regulatory environment and also implementing the hedge for the capital index, we took out all this volatility. So that's why we reduced our appetite so we don't need to run.
the bank with 12% of common equity, but 11.5%. That was the most relevant explanation for the decision. But more than that, we are very concerned about our ratings. So we don't go much below that. We could, because we want to keep a very good standard of ratings and doing some local or international, more than that, benchmarks to understand.
base is point production. Talking on the operational side is very early to say, we're not releasing a specific figure, but my view is that we may have something that could be around a hundred basis points depending on how it is implemented. So this is reasonable to expect. So as we see an increase in our capital for 2023, more profitability.
planning the capital base of the banking, taking these in consideration. This number is very, very 20,000 feet information, I would say, but just to give you a sense that even with that and with the capital plan that we have, we won't be below the level of risk appetite of the bank. So we still be in a very well position in terms of capital base. So to clarify,
Great, thank you Milton. And let's keep it in English then, because the next question comes from Gilberto Garcia from Barclays. Hello Gilberto, good to see you. Hola, I'm Gilberto, I'm Renato, I'm one of the students at Luarlos. I had a quick follow-up on the complementary allowances. We saw that they did increase quarter over quarter, but in a much lower magnitude than the...
exposure to the subsequent event. So is it fair to say that if it hadn't been, that if that hadn't happened, you could have released something like 1.2 billion reais from these complimentary allowances and then a quick question on your guidance towards pensions. You have a,
a fairly wide range. Is it okay to understand that if, let's say, its conditions are challenging throughout the year, you could delay or hold off on some investments? Thank you.
Okay, thank you for coming, Roberto, thank you for your question. So talking about the provisions, yes, to be very precise here, if we didn't have this specific event, we could be in a position to consume part of those complementary provisions, those allowances that you just mentioned. So the answer is yes. That's really where we're going to start, we're going to cascade some of the regulations
But looking to the portfolio, looking name by name, we understood that the best thing to do was to provision 100% of the specific case the way we did at the end. So being very sharp here, yes we could. And talking about 2023, we saw that the best thing to do was to provision 100% of the specific case the way we did at the end.
We do believe that we have to keep an eye on the cost of credit, we have to keep an eye on the guidance range that we have. Understand how these allowances and complementaries will pursue and how we should approach them.
and talking about investments, if I understood right your questions. You mean investments in general speaking of the Bancorp? We have of course, we discuss investment every single day. Okay, and we decide if we should or not expand some business or some credit.
some business line or new business model. So when we look to our expenditure and the cost of the bank for 2023, what we believe is that we have room to improve our efficiency ratio and we're going to keep doing that. And also on the other side, we want to keep investing for the franchise, for the future of the bank.
So we don't like at all to run the next quarter making decisions of avoiding investing in things that we really believe. But the cost of equity is different today, the scenario is different, so we are always more cautious when making a decision investment, an investment decision due to the scenario, due to the cost of capital, but we take those in consideration.
But another relevant thing that I would like to highlight here in terms of costs running the bank, we want that the core costs of the bank, and I said that before in the guidance, won't be above 2% year on year. With inflation that is not the inflation of the year, but you have of course the impact of the inflation of the year before, and also the banking industry inflation is higher than the IPCA.
So we do believe that we can keep 2% on the core side. It's a very relevant adjustment that we do to open space and rule for more investments in the bank.
Thanks, Mute. Now we're going to the last question from our analysts. And last but not least, obviously, the question comes from Ricardo de Fomiscocha Bank. Hello, Juan. Thanks for joining us. And thanks for making a question. Hi, Bonjilla. Thank you very much, Renato. I'm very happy for the opportunity to ask questions.
My question is about the acquireance business. In 2022, the conditions in acquireance, they grew above the transactional value. So what is the expectation for 2023?
for the growth of the transactional value and can we see the revenues or the conditions in acquirements growing above the seasonal value for 2023? Thank you. Hi Juan, thank you for the question. Portuguese, very fluent. I'm going to answer in Portuguese therefore.
Look, the acquirence business is more and more a product within the organization. We close the capital of Redecar and...
And we've been investing more and more to include this acquirer, buyer in the bank. And we can do it much more, well faster. And we need to look at this with a grain of salt. I'm going to do a few brief comments. Yes, we've been growing revenue larger than TPV for several reasons. First, the repricing capacity that we've had. So separating those clients that need to be reprised.
Those clients have a relationship of a choir, not just a customer, but more product. We're seeking that penetration of the financial product has been very important and that has brought very relevant results. That's why we have a substantial growth. We've been operating more and more with the adequate mixes. So we've tried to serve our clients, but always try to grow in the...
The year, if you look isolated, the P&L of a Redicar, and this is not a great reading, but remember that our business model, every capital of the business we isolate and leave it in corporation. When we look at the results of several other companies in the market, all the working capital is benefited with an interest rate that is higher. Remember the cost of funding too.
Given that it's zero because it's capital B to do the anticipation operations with the effective lower rate We priceified we price at the margins So we look at the opportunity cost for funding to do the pricing of the anticipation that the other at the end So this is from the managerial model is cleaner for from these effects and we isolate the working capital and indeed
Corporation is not located at the business per se. So I look at this way the great business. We've had a great evolution, NPS that has been advancing all the advances in the relationship with the clients and the proximity with the bank. I am very optimistic for 2023, 2023. I think that there is a double effect. Not only the indicators performance indicators should improve, but also the isolated results of the business should be better.
because we've done the hedge of the liabilities, many companies. They didn't work with that, so they didn't do the other way to hedge. So we implemented the hedge policy that has worked very well, and that has brought stability for the results. So I can expect a better result for the buyer, the acquired results for 2023. It's another level of results that we operate.
There were some segments where we invested in the past and then we made the decision of leaving. So basically credit card bomb which was a specific individual segment that at that moment.
The operation wasn't structured in the way that it should. You have a lot of basis of clients in a mount, but you don't have a result in profitability. So VPL of those harvests are negative. So the cleanup happened at the base over the last two years and where we are focusing, we are growing the base and where we decided to leave because there are not profitable segments. We have...
more amount of clients and little profitability, maybe none. So that's why you see the base of clients that are reduced, but this is healthy, the direction is good. So we're very satisfied with the evolution and then we have a great 2020-24 acquireer. So thank you, Milton. Now finishing the questions we received, the WhatsApp questions.
I know that we have a short term, but I wanted to ask you at least one, so we can finish. So the questions were from several themes. We've covered cost and BL portfolio, but there is one. One that I chose to finish our talk, which is about what we call Beyond Bank. So the question is from Ithalodias and he asks.
We have the portfolio that has evolved in the bank with products beyond the financial market. Thinking about the increase of that portfolio, what are the other businesses that the bank foresee as potential for the next years?
That's an excellent question. Thank you so much, Ithalo, for this question. Beyond thinking is part of our strategy, actually.
And we've seen, we've got to talk to our customers to find out where there are new opportunities, and that's what we've been doing.
is a great example. We're very happy with the progress thus far. It's been growing substantially. All of our iPhone forever, Samsung forever, Apple, and all these products, all these partnerships have been wonderful. We've seen excellent results. The results have been great for the bank and we've been able to offer exclusive products to our customers.
solutions to our customers. And we found other profit pools. And these are not the traditional profit pools of the financial system of the banking system. So this has actually resulted in not just cross sell, but better conversations with our customers, better audience, better interaction with our audience and public. So we've got more interaction with our apps, with our super apps. It's been great. So it has been developing wonderfully. We've been losing a lot of progress.
When we see cash management for wholesale, we've seen a lot of progress as well. This is also considered part of Beyond Banking. There are a number of initiatives. And our role is to be open to this, to be looking out to see where there are opportunities, where there are correlated opportunities, where there are ecosystems that we can tap into. With totals, we saw a great...
We are waiting for one last authorization. We've been able to distribute some of our solutions in other channels, Avenue for example. We brought this in.
These are ways to reach other markets that we weren't operating in. Specifically for affluent customers, those who have resources and funds and international resources are offers before we're limited to personality pay. So we really need to make this access more broad. So we've been able to fill out these ecosystems with new offers, new products.
And we've looked to beyond banking because we understand there's great synergy for the customer and this generates value to the customer I don't have to leave my app. There's associated loans. There's credit. There's the the payment and installments products. There's funding. There's
And so obviously this creates loyalty not just with the bank, but with the products that are behind these offers. So we're really looking.
closely at these new business opportunities. Thanks, we look forward to hearing about this in the upcoming earnings calls. Okay, so we're just going to end our question and answer period here. Before we close, I'd just like to remind you that all of the material from this earnings call and the recording, the results and all of this will be available on the website.
Binks website, so please take a look when you get a chance. Thank you so much for your work today for presentations today and thank you for presenting. It's wonderful to be here. I'm sure we'll have many opportunities to see each other or meet up over the next quarter. I look forward to telling you how our first quarter is. The challenges are great, but we're up for it. I'd like to end by saying we're quite satisfied, as I mentioned, beginning. We're quite satisfied. Thank you.
We started 2023 much better than 2022 and certainly better often we ended the year last year. Although it was a very long and difficult year this month as well. We are very dedicated, very focused, we're very excited, very willing. But we're also conservative. We know what we need, we're aware of the challenges that they face us, that we face, we're aware of what we need to do. And we are working hard.
to deliver on what we promised to deliver and to give you sustainable Performance over the years. We know the challenges are great. We talked about some of them today And I hope to give you some updates over the over the course of the year over the course of the quarter
See you soon, and hope you're all doing well. Thank you very much. Until we meet again.