Q4 2023 Banco Santander (Brasil) SA Earnings Call

January 31, 2024

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Good morning, everyone. Thank you for being with us this morning to follow our results teleconference for the closing of 2023. This event is being broadcast live from our headquarters in So Paulo, and, as always, it will be divided into three parts. First, our CEO, Mario Leao, will talk about the main highlights of the period and the strategies by which we will continue to direct our growth in the next trimesters. Next, our CFO, Gustavo Alejo, will give a detailed analysis of our performance. And finally, we will have our Q&A session, during which you will be able to interact directly with our leadership. Before we start, I would like to give you some instructions.

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We have three audio options on the screen. All content in Portuguese, all content in English, or the original audio. For the first two options, we will have simultaneous translation. To choose your option, just click on the button at the bottom of your screen. To ask a question during the Q&A session, just click on the hand icon located at the bottom of your screen.

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The questions will be answered in the language they are asked. The presentation we will do now is already available for download on our website. Now I give the floor to Mario Leao to start the presentation. Hello, good morning, everyone.

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We are here live with you at 10 and 3. It's a pleasure to be here once again, closing my second year in the leadership of Santander. I will try, as we did in this new format in the last trimester, to present to you in a very direct and dynamic way the first slides of the presentation, then Gustavo will join me to talk about the numbers. We will try to do our part in a maximum of half an hour, so we can have quality time, so we can have a Q&A for 45, 50 minutes, according to your demand and interest. And we are here, obviously, to answer on time. On this first page, page 4... (inaudible) Some messages, four.

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First, we have another quarter of growth in margins as a whole. We will show a stronger growth in market margins, it's true. As the market was expecting, we are delivering this. We have growth in the client margin line. Remembering that client margin is the sum of margin on the asset side and on the passive side. With the reduction of the CDI, naturally, the passive margin has the challenge of the spread itself.

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We will try to compensate for this with volume, and on the credit margin side, we will show several portfolios growing in a relevant way this quarter. We will be very happy with this. So, the first message here is that we have, without a doubt, a recovery of revenues on the margin side. Expanding this to diversification of the portfolio, which is a theme that I have talked to you about a lot, we have a quarter that, seasonally, yes, is always stronger, but even with the seasonality, we have a very positive quarter in commissions. And we will go into details of how we seek to do this. We have a stronger growth of balance in this tree. We had already shown, in the third tree, a growth in some of the balance lines. We will show this more clearly now, on the fourth tree.

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What consolidates our strategy, both in diversifying the portfolio, diversifying the portfolio has to do with making passives, making commissions, and depending less on credit and markets, but it also has to do with diversifying within the credit line and doing more in client segments, where we had been growing less in the past growth cycle, and also growing in products, and in client bases, as we will show here. With this, we have a portfolio quality that makes us quite excited to keep growing, so we have already been showing this and talking about the curve turn that we have already made from the first to the second half of this year, and the fourth tree consolidates this. We are quite comfortable with the evolution of our credit costs.

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We will show here in detail that credit costs, the relevant indicators of credit costs, especially in the retail business, continue to evolve in the way we would like. We had specific cases, a specific case in the attack, Gustavo will comment more, we will not go into details name by name, as we never do, but we had a balance reinforcement, a provisioning reinforcement made in this tree, which is something specific, specific, and identifiable, and with that, the recurring credit cost continues to give very good indications. As we have said, we will continue to focus a lot on the base's profitability. We have a client base of almost 65 million clients that we have to seek to activate more and connect more.

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The agenda of principality, which is the term we are using here, our strategic motto of being the main bank of our clients, is increasingly rooted in the organization as a whole. So we will talk a lot about base profitability with you over the next trimesters, the next years. We will talk about the consolidation of strategic business. I will give you some data on that, as we have done since mid-2022. And we will talk about how innovation and technology affect all this. On the next page, in fact, on the next three pages, we chose three pages to talk about customer centrality.

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So there's a huge message behind that, which is that our strategy agenda, which is also our most tactical delivery of each TRI, is 100% correlated with our customer agenda. In the first, we make a big compendium of some data related to the client's centrality. I'm going to highlight some for you.

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On the bottom left of the slide, we have a big picture showing the evolution of our NPS. Just to remind you, Santander, in 2017, so almost 7 years ago, was the first of the big banks in Brazil to talk about NPS. We shared our measurement and started talking to the market about it. Of course, other competitors also started doing it.

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NPS is not ours, but we have been talking about it for at least 7 years. And I would say that this year we made a very important evolution. You can see here that we are growing the NPS in the PF in a material way. In the PJ, although the number is high, beyond what we want it to be, but it is our highest NPS in the PJ so far, with a super important evolution. And looking at each of the channels, we also evolved NPS in a material way.

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So the message here that I want to leave for the market is that we value NPS as a great indicator; obviously, it is not the only one. We will continue in an obsequious way, researching and talking to clients in a multichannel way, absolutely online, and reacting as soon as possible to these feedbacks. We have listened a lot to NPS, and we have evolved a lot with it on our main agenda. We have also improved our profitability for the new safras, so the clients... Obviously, we will look for much more than that from 2024, but this is to give the dimension that we are evolving; we are on the right track. And with the whole organization focused on being the main bank of our clients, I am sure that this will go faster from now on. Some of the main levers are the payment sheets. We have been talking a lot about this for a long time.

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We are a big bank of sheets. We are very proud of that. And we want to get more and more of what comes with the sheets, the relationships with PJ, this cross between PJ and PF that we do well. The high-income segment, which I will comment on a little more.

Investments, which I will also give a little more details of our incursion into this super relevant strategic agenda and the subject of loyalty cards. Now, going to the next one, giving this deep dive once again on Select.

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We believe that you are doing something different, something special. Here I give you some data, and after the Q&A, obviously, I can detail more, and our R&D team is ready to go into much more detail. But, in short, a year and a half ago, in August 2022, we decided to make a big repositioning in our high-income business, which is Select. Since then, we have grown the client base in a very material way. Along with the client base, the credit card, for you to have an idea, 27% of the PF portfolio is already represented by Select, which is very relevant data, and we grow 32% year-on-year. The client base grows more than 50% year-on-year. You will remember that we had a public ambition, which I have spoken to you about for a year and a half, to reach 1 million Select clients by the end of 2023. And we have actually reached 1.2 million clients. Obviously, we are now working to reach 2 million as the next level, in addition to the client base itself, to do it in a profitable way. So, here on the right, I show how the recipe, by client linked to Select, the Select clients are more highly linked than the average, and how this recipe has also grown over the years.

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And an additional fact that has to do with Select first, which is that we are launching a new initiative, still in pilot, in the fourth TRI, but I comment here because it will be a relevant step in our agenda for 2024. We expand the concept of the AAA, which I will talk about in a little while. The AAA is our investment advisory, which is already consolidated, which is already evolving well, which is already bothering. Finally, Santander places the flag definitively on investments.

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We launched the concept of the patrimonial AAA, which, in practice, is the version for insurance and consortium of our AAA for investments. So, the patrimonial AAA, which we will now expand this year, in practice, will do what we have, a relevant amount of sponsors linked at the first moment to select stores selling insurance and consortium for our high-income clients. Again, the pilot we did at the end of last year was super relevant, and it encouraged us to expand. So the goal is set, and we are going to have an important agenda here. We will talk more with you about that.

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Here on the issue of retail, but going to another extreme, we talked about high income; now we are taking a big step, some big steps this year, in what we call the segment of massified income. So, massified retail, which is the great basis of all our retail, of the competition, be it traditional banks, be it digital banks, we are on an agenda of challenging ourselves in a deep way, to seek much more link, much more principality again; we are evolving NPS, which is a way of measuring if we are doing it right. But doing more of the same, doing the same as we have done, with marginal evolutions, won't work here.

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In the last publications, in the last one in particular, I told you that this is a segment that today is generating a negative result for Santander. It's not an exclusivity of Santander; other banks are having challenges in this segment, but, without a doubt, we want to be profitable in each of the segments we cover. We don't want to have a bank where one segment finances the other.

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And the opportunity we have to make the massive segment profitable is huge, and it's clenched with both hands and nails, and we will work hard to deliver, in the coming months, evolutions in the supply, brutal simplifications in the supply, a much more digital and remote agenda. That is, the massive income bank that Santander will have more and more from now on is a duet between an even more impeccable digital experience and an ability to relate Yes, through the phone, but a phone that evolves to the chat, a chat that evolves to the DNAI. We are taking these steps very quickly, and this year will be the year of evolution and consolidation of the way we deal with massive income.

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This simplification agenda that I mentioned is no less; we already have a reduction, so far, of 31% of the products in the portfolio to less, and only in cards does this number exceed 50%. So, what are we doing in practice? We are cleaning up our supply, so that it is simpler, so that it is much more understandable by the customer, and so that, with this, we can engage the customer much better. Especially the massive income customer, who is a customer who needs less. He needs a good card, a good account, he needs good credit, and an impeccable digital experience.

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So, we are increasingly on the agenda of essentialism, as we say, of less is more, and looking for a simple, easy to understand, and impeccable offer. Following the investment agenda..., which is one of the big strategic blocks that I've been talking to you about for two years. We have a clear advantage, and we'll show you the numbers later, how we grow in volumetrics and how we grow in results. The retail sector, which is a great engine for the profitability of our passive agenda, not only in volume, but our retail sector had the best year in history.

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Operator: Good morning, everyone. Thank you for being with us this morning to follow our results conference for the closing of 2023. This event is being broadcast live from our headquarters in So Paulo, and, as always, it will be divided into three parts. First, our CEO, Mário Leo, will talk about the main highlights of the period and the strategies by which we will continue to direct our growth in the next three months. Next, our CFO, Gustavo Alerro, will give a detailed analysis of our performance. And finally, we will have our Q&A session, during which you will be able to interact directly with our leadership. Before we start, I would like to give you some instructions. We have three audio options on the screen. All content in Portuguese, all content in English, or the original audio. For the first two options, we will have simultaneous translation. To choose your option, just click on the button at the bottom of your screen. To ask a question during the Q&A session, just click on the hand icon located at the bottom of your screen.

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Of course, we want much more; we want to extract much more, especially from the P&F retail sector, but also from small and medium-sized companies. We have a record of acquisitions, which is one and a half times more than we did in 2022. And if we go back a little more, this number would be negative in previous years.

So clearly, the passive part was a theme that we didn't have as a strategic agenda, and we have started to have it in a forceful way. And obviously, we will look for multiples of what we achieved in 2023, but it shows that we are on the right track. One of the important arms of this, but not the only one, is our AAA, our great office of investment advisory, which is obviously in-house. It is a model that we developed, which is unique, and we believe it is a very successful model. It has an NPS of 85, which is the highest in the entire industry.

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NPS here measured by the market by thirds. And we had an acquisition per liquid assessor of 2.5 million in the TRI, which is an important evolution in relation to what we have had in the past TRIs. And this is very competitive data if we compare it with offices or similar companies. So we want more, of course, but we show that AAA, as a great vector of our passive agenda, is evolving quite well. Toro, which is our digital broker, whose effective control we bought 100% last year.

Operator: The questions will be answered in the language they are asked. The presentation we will do now is already available for download on our website. Now I give the floor to Mário Leo to start the presentation. Hello, good morning, everyone.

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We have had super strong growth throughout the year, in clients, in AOC, in results. So Toro is proving itself as a relevant agenda, and we will build more and more a duet between Toro, our Santander broker, and our entire investment agenda. We will still do a lot of integration here, with independent brands, different brands, but we will have a coordinated agenda. And our private equity, as I already had the chance to mention here for the market, we had a record year in the private equity, in volume, in acquisition, and in results. We still think it can grow a lot.

Mário Leão: We are here live with you at 10 and 3. It's a pleasure to be here once again, closing my second year in the leadership of Santander. I will try, as we did in this new format in the last trimester, to present to you in a very direct and dynamic way the first slides of the presentation, then Gustavo will join me to talk about the numbers. We will try to do our part in a maximum of half an hour, so we can have quality time, so we can have a Q&A of 45, 50 minutes, in short, according to your demand and interest. And we are here, obviously, to answer on time and what our R&D team is available to you later. On this first page, page 4... I would like to highlight some messages for you.

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We want to double our private equity at least in the coming years, and we believe we have all the conditions to do so. Moving quickly to the agenda of strategic business, we have been accounting for the market for a year and a half. Back in the third quarter of 2022, I decided to comment to the market on this issue of strategic business. We were still in the first year of this legacy portfolio management, in a way, of the old safras. So, on the one hand, there was a piece of the portfolio that we knew we had to manage, to hold, and some portfolios, such as cards, we knew that for a while, we even fell in love with.

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Mário Leão: Obviously, the profit is in the middle. I would like to focus a little less on the number and instead cover the details of the number and focus on consolidating our messages for S2023.

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Mário Leão: A few messages, four. First, we have another quarter of growth in margins as a whole. We will show a stronger growth in market margins. It is true. As the market was expecting, we are delivering this. We have a growth in the client margin line. Remembering that client margin is the sum of margin on the asset side and on the passive side. With the reduction of the CDI, naturally, the passive margin has the challenge of the spread itself.

Although we don't like to fall, obviously, we knew that some portfolios would have to be managed and taken care of for a year and a half or two. But, on the other hand, we chose some businesses already in the third quarter of 2022, which we have grown and will grow in some cases more or much more than the market. So, here is a quick account performance analysis of some of these businesses. I'll start with Consignado.

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Mário Leão: We will try to compensate for this with volume, and on the credit margin side, we will show several portfolios growing in a relevant way this quarter. We are very happy with this. So, the first message here is that we have, without a doubt, a recovery of revenues on the margin side. Expanding this to diversification of the portfolio, which is a theme that I have talked to you about a lot, we have a quarter that, seasonally, yes, is always stronger, but even with the seasonality, we have a very positive quarter in commissions. And we will go into details of how we seek to do this. We have a stronger growth of balance in this tree. We had already shown growth in some of the lines of the balance. We will show this more clearly now in the fourth tree.

We, in Consignado, on the left slide below, we grow again in the Tri, consistently. We are growing in all lines of Consignado. We are growing in the public, in INSS, and we are growing in the private, which is a great asset that Santander has. We are doing this with super-good credit cost control.

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We are earning quotas in Consignado, and I am super happy to see how we are consistently delivering here and will continue to do so. In the same line, we have in Agro a very relevant delivery. One of the public ambitions that I had set for the market was that we would reach 50 billion in agro products. Here, it is not only the customer's vision as a whole. Here are the agro products, and we not only reach 50 billion but almost 54 billion, that is, a growth of 42% if we look at December 22 to December 23, which is very relevant.

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Mário Leão: What consolidates our strategy, both in diversifying the portfolio, diversifying the portfolio has to do with doing passives, doing commissions, and depending less on credit and markets, but it also has to do with diversifying within the credit line and doing more in client segments where we had less growth in the past growth cycle and also growing in products and client bases, as we will show here. With this, we have a portfolio quality that makes us very excited to continue growing, so we have already been showing this and talking about the turn of the curve that we have already achieved from the first to the second half of this year, and the fourth tree consolidates this. We are quite comfortable with the evolution of our credit costs.

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And when we compare it with December 21, it is a growth of practically 100%. So, we doubled our portfolio of agro products in two years, which shows the relevance that we give to this business. Our finances, as you know, are the biggest in the country. It ends the year with 21% of GDP.

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We end up doing, on the fourth tree, almost 12 B of production, which is a historical volume. So this is a very strong indication. We will see a little of the impact of this in the results, as Gustavo will show, but this is a very strong indication of how we are thinking big from now on in the financial sector as well. In cards, which I already mentioned in the last tree of the evolution we had, in cards, we had another very positive evolution tree. If we look at the income, which is a good indication of the income of the quarter, year on year, we, in the fourth tree of 22, fell in relation to the previous year. In the third tree of 23, it already went up to 7.

Mário Leão: We will show here in detail that credit costs, the relevant indicators of credit costs, especially in the retail business, continue to evolve in the way we would like. We had specific cases, a specific case in the attack, Gustavo will comment more, we will not go into details name by name, as we never do, but we had a balance reinforcement, a provisioning reinforcement done in this tree, which is something specific, specific, and identifiable. With this, the recurring credit cost continues to give very good indications. As we have said, we will continue to focus a lot on the base's profitability. We have a client base of almost 65 million clients that we have to seek to activate more, to link more to the agenda of principality, which is the term we are using here. Our strategic motto of being the main bank of our clients is increasingly rooted in the organization as a whole.

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And in the fourth tree of 23, which we are now commenting on with the market, it grows 11, that is, we grow two digits in the income, given that the average spending increased in our client base and given that we are selling more cards than we did in the first half of the year. So the base 100 that we sold in the fourth year of 21, which was possibly our record sales of cards, we came back, and we reached a level of less than half of that not long ago, and we came back to practically two-thirds of that level, which is a level that we consider quite adequate. Again, we are not looking to make a sprint of card sales, of client acquisition, as we did in 21. This is not the module in which we close 23 and enter 24, but we are quite sure that we are selling cards to the base with which we are operating.

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Mário Leão: So we will talk a lot about the base's profitability with you over the next trimesters, over the next years. We will talk about the consolidation of strategic business. I will give you some data here, as we have done since mid-2022.

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Mário Leão: And we will talk about how innovation and technology affect all this. On the next page, in fact, on the next three pages, we chose three pages to talk about customer centrality. So there's a huge message behind it, which is that our strategy agenda, which is also our most tactical delivery of each TRI, is 100% correlated with our customer agenda. For the first one, we make a big compendium of some data associated with the client's centrality. I'm going to highlight some of them here for you.

This is the level we are at now, and the results will show up. And Sfera, as a complement to the issue of loyalty, of principality, as an agenda item, we will talk more about Sfera throughout the year, but here Sfera continues to advance quite a bit. In companies, we have a continuously positive agenda. You will see the data after the volumetrics, but here, speaking of the strategy, both in large companies and in small and medium-sized companies, we have had good growth in the portfolio. In large companies, especially in the expanded portfolio, we grow by double digits year on year.

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Mário Leão: On the slide on the left, we have a big picture showing the evolution of our NPS. Just to remind you, Santander, in 2017, almost 7 years ago, was the first of the big banks in Brazil to talk about NPS. We spread our message, started talking to the market about it. Of course, other competitors started doing it too.

We want to continue with a strong performance here over the years, but here there will always be a focus on profitability. We could grow much faster in large companies, but with the capital market, fortunately, strong again, especially in the second or third trimester, we will compete with the capital market and will choose the tickets that we really want to put on the balance sheet. And we continue with good performance in several of the rankings.

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Mário Leão: NPS is not ours, but we have been talking about it for at least 7 years. And I would say that this year we made a very important evolution. You can see here that we are growing our NPS in the PF in a material way. In the PJ, even if the number is a lot, beyond what we want it to be, but it is our highest NPS in PJ so far, with a super important evolution. And looking at each of the channels, we also evolved NPS in a material way.

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We are number one in Trade Finance, we are number one in Exchange, we were number one in DCM, in Depth Capital Markets International, and we are very happy. On the side of small and medium-sized companies, to the right of the slide, we continue with a clear growth agenda. You will see the data.

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We are going to make this portfolio more than 5% tri-contra-tri, after having grown more than 3% in the past tri-contra-tri, that is, that stable portfolio agenda in which we were still looking for and choosing the right moment to accelerate; we decided to grow stronger from the middle of the year, and the numbers show this clearly. Here we are going to try to double the business of small and medium-sized companies in a few years, and we are already taking clear steps in this direction. To close my part here, the agenda on technology and innovation obviously connects with all of this. We don't have technology on one side and business on the other.

Mário Leão: So the message here that I want to leave for the market is that we value NPS as a great indicator; obviously, it is not the only one. We will continue in an obsequious way, researching and talking to clients in a multichannel way, absolutely online, and reacting as soon as possible on top of this feedback. We have listened a lot to NPS, and we have evolved a lot with this as our main agenda. We have also improved our profitability for the new branches; the new safras have had increasingly better performance and profitability. We show here data only during the year 2023 of how it evolved from a base 100.

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I even say here that we are all businesses, so technology is a big business center. The areas of operations are big business centers. We have some data here on this page; I will just mention some, but we are already at 95% of our cloud operation.

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Mário Leão: The newer safras evolve much better than the older safras, that is, we have been happy in choosing the clients we want to work with. The way we want to work with the clients, we have been able to have an increasingly higher profitability. We advance in the TRI in the agenda of linking, and principality.

We have been converging to 100% here. In a little while, we will be ringing the bell on 100% of the cloud operation, which is super good data. This generates agility, generates the ability to react to customers, obviously generates efficiency, and cost reduction. So we are very happy to be on the agenda of such a strong cloud. We are increasingly investing, of course, like the whole market, in the question of D&AI. D&AI can be a great answer, as I have already mentioned a little while ago, to the chat and to the question of the remote channel, but it can also be a great answer to gain productivity in programming, in coding, in development.

Mário Leão: We grow 2% in TRI, 6% in the year. We will look for much more than that from 2024, but this is to give the dimension that we are evolving, we are on the right track, and with the whole organization focused on being the main bank of our clients, I am sure that this will go faster from now on. Some of the main levers, payment sheets, we have been talking a lot about this for a long time. We are a big bank of sheets, we are very proud of it, and we want to get more and more of what comes with the sheets, the relationships with PJ, this cross between PJ and PF that we do well. The high-income segment, which I will comment on a little more.

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We are also on this very strong front and moving fast here. We have been following Banco Central in innovations. We made the first transaction with privacy on the Real Digital network, DREX.

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Mário Leão: Investments, which I will also give a little more details of our incursion into this super relevant strategic agenda and the subject of loyalty cards. Now, going to the next one, giving this deep dive once again on Select.

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So we are obviously embracing Banco Central here on the innovation agenda. We have invested a lot in the API of Santander, in Banking as a Service. We have partnerships with large ERPs and are seeking to expand this agenda to be able to have Santander more and more within the client, not necessarily having to go to the bank, even if digitally, we want to be inside, embedded in the client's experience. We are maturing our business domain agenda. We have 27 business domains that we created from 22 to 23 and now from 23 to 24.

Mário Leão: I have met several analysts over the years, and I always ask myself, but what are you doing differently? Everyone is talking about high income; everyone has their own answer, their own brand. Ours is Select. You know it well.

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Mário Leão: We believe we are doing something different, something special. Here I give you some data, and after the Q&A, obviously, I can go into more detail. Our R&D team is ready to go into much more detail. But, in short, a year and a half ago, in August 2022, we decided to make a big repositioning in our high-income business, which is Select. Since then, we have grown the client base in a very material way. Along with the client base, the credit card. For you to have an idea, 27% of the PF portfolio is already represented by Select, which is very relevant data.

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We merge this even more with the agenda of products, as we call it here. So the business domains, that is, these large communities that lead from end to end in each business, are super consolidated, and all the management, all the remuneration, and the incentives are aligned. We continue with a large efficiency agenda. We have more than doubled the number of transactions and fallen by half the unit cost. So this agenda is still super strong for Santander, as it should be. With this, I will pass the word to Gustavo about the results, and I will be back soon for the Q&A. See you soon!

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Mário Leão: And we grow 32% year-on-year. The client base grows more than 50% year-on-year. You will remember that we had a public ambition, which I have spoken to you about for a year and a half, to reach 1 million Select clients by the end of 2023. And we have actually reached 1.2 million clients.

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Thank you, Mario. Good morning, everyone. Let's start with the results for the financial margin. We see a growth of almost 5% year-on-year with a good evolution in the market margin. We achieved a good performance in volume, as well as in funding results, both benefiting the margin with clients in 2023. Already in the quarter, we saw continuity of some positive trends presented in the third trimester, which led to an increase of 4.8% in the financial margin in the trimester comparison.

Mário Leão: And, obviously, we are now working to reach 2 million as the next level. This is the head, the big thought we have here, in addition to the client base itself, to do it in a profitable way. So, here on the right, I show how the recipe, by client linked to Select, the Select clients are more highly linked than the average, how this recipe has also grown over the years.

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Mário Leão: And an additional fact that has to do with Select first, which is that we are launching a new initiative, still in pilot, in the fourth TRI, but I comment here because it will be a relevant step in our agenda for 2024. We are expanding the concept of the AAA, which I will talk about in a little while. The AAA is our investment advisory, which is already consolidated, is already evolving well, and is already bothering. Finally, Santander places the flag definitively on investments.

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One of them is the gradual growth of credit in the retail sector, which will be further detailed by me. The other trend is the drop in the SELIC rates, which benefits our funding course, as already commented by Mario. Marge Comercado presents a progressive evolution about which I have been commenting throughout the last presentations, and in line with the expected. The evolution of ESPRES throughout the year reflects our strategy of greater selectivity, which started in 2022 and that is in accordance with the risk profile of our productions.

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Mário Leão: We launched the concept of the AAA patrimonial, which, in practice, is the version for insurance and consortium of our AAA for investments. So, the AAA patrimonial, which we will now expand this year, in practice, will do what we have, a relevant number of sponsors, linked at first to select stores, selling insurance and consortium for our high-income clients. Again, the pilot we did at the end of last year was super relevant, and it encouraged us to expand. So the goal is set, we will have an important agenda here, and we will talk more with you about it. Here on the issue of retail, but going to another extreme, we talked about high income; now we are taking a big step, some big steps this year, in what we call the segment of massified income.

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Finally, on the margins, I highlight the positive evolution of the financial margin year on year. In this fourth quarter, as you can see here..., we have a growth of 12.3%. Now, I'm going to comment on some data on the evolution of our credit card. We increased our expanded portfolio, with a growth of 9%, as mentioned. We grew in all business lines, with significant expansion in physical retail, vehicles, and SMEs. During the quarter, we had a strong performance in cards for physical people, and this result... was supported by seasonality and by the gradual improvement in the sales of cartridges. The recovery and improvement, and with more quality, more assertiveness in the levels, and with satisfactory levels in production. This performance is accompanied by the continuity of consistent results in consigned loans, real estate financing, and in the rural segment.

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Mário Leão: So, massified retail, which is the great basis of all our retail, of the competition, be it the traditional banks, be it the digital banks, we are on an agenda of challenging ourselves in a deep way to seek much more link, much more principality again. We are evolving NPS, which is a way of measuring if we are doing it right. But to do more of the same, to do the same as we have done with marginal evolutions, it won't work here.

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Mário Leão: In the last publications, in the last one in particular, I told you that this is a segment that today is generating a negative result for Santander. It's not an exclusivity of Santander; other banks are having challenges in this segment, but without a doubt, we want to be profitable in each of the segments we cover. We don't want to have a bank where one segment finances the other.

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By the way, Mario has already commented, but I will reinforce it, it is worth noting the growth in agribusiness, with an increase of 10% in the quarter and an expansion of 42% in the year. In vehicle financing, we achieved a growth of 5.5% in the quarterly comparison, marking the best performance of the year. This progress has more than compensated for the impact of the PSA's portfolio sale in the previous quarter and reflects the strength of our strategic partnerships and the positive market moment that we are seeing. As for SMEs, we continue to boost the growth of our portfolio after a relatively stable first quarter, with adjustments, which is fully aligned with our strategy, already declared, of increasing the participation of this business in the total portfolio. The increase of 5.2% in the semester is something I want... Distaca, next slide, please. [inaudible] As we have been saying throughout the year and highlighting, we have achieved a solid performance in captures, demonstrating our commitment to the strategy of expansion and the search for a more balanced mix between attack and defense. Nossas captaçes.

Mário Leão: And the opportunity we have to make this massive segment profitable is huge, and it's clenched with both hands and nails. And we will work hard to deliver, already in the next months, evolutions in the supply, brutal simplifications in the supply, a much more digital and remote agenda. That is, the massive income bank that Santander will have more and more from now on is a duet between an even more impeccable digital experience and an ability to relate to the human being via the remote channel, via our remote operation, more and more. Yes, through the phone, but a phone that evolves to the chat, a chat that evolves to D&AI.

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Mário Leão: We are taking these steps very quickly, and this year will be the year of evolution and consolidation of the way we deal with massive income. The simplification agenda that I mentioned is no less important. We already have a reduction, so far, of 31% of the portfolio products to less, and only in cards does this number exceed 50%. So, what are we doing in practice? We are cleaning up our supply so that it becomes simpler, so that it is much more understandable to the customer, and so that, with this, we can engage the customer much better. Especially the massive income customer, who is a customer who needs less. He needs a good card, a good account, he needs good credit, and an impeccable digital experience.

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As I said, they grew 15% in the year and 2.6% in the trimester. [inaudible] Our rate for credits and deposits is at 92%, at the highest levels of our society. Here, on this next slide, we present the performance of our commissions, which each quarter reflects in a very clear and consistent way the evolution of the business, with positive performance practically in all lines, and in the quarter, with 7% growth, coming from a 6.5% growth in the previous quarter. Even with the positive seasonal returns that occur in cards and insurance, businesses in general have shown very positive dynamics, which reinforces our strategy in commissions for greater transactionality with Let's move on for the evolution of the quality of our activities.

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Mário Leão: So, we are increasingly on the agenda of essentialism, as we say, of less is more, and looking for a simple, easy to understand, and impeccable supply. Following the investment agenda..., which is one of the big strategic blocs I've been talking to you about for two years. We have a clear advantage, and we'll show you the numbers later, how we grow in volumetrics and how we grow in results. The retail sector, which is a great engine for the profitability of our passive agenda, not only in volume, but our retail sector had the best year in history.

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Mário Leão: Of course, we want much more; we want to extract much more, mainly from the P&F retail sector but also from small and medium-sized companies. We have a record of acquisitions, which is one and a half times more than we did in 2022. And if we go back a little more, this number would be negative in previous years.

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Mário Leão: So clearly, the passive part was a theme that we didn't have as a strategic agenda, and we have it in a forceful way. And obviously, we will look for multiples of what we achieved in 2023, but it shows that we are on the right track. One of the important arms of this, but not the only one, is our AAA, our great office of investment advisory, which is obviously in-house. It is a model that we developed, which is unique, and we believe it is a very successful model. It has an NPS of 85, which is the highest in the entire industry.

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In this quarter, we have the effect relative to the increase in supplies in specific cases and reinforcement of supplies for cases of the attacked. If we disregard these effects and the smaller volume of recovery after two quarters with record performance..., we have a stable GDP compared to the previous quarter, with no sign of deterioration. We maintained a credit cost reduction trajectory that closed at 4% per year.

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Mário Leão: NPS here measured by the market, by thirds. And we had a liquid asset acquisition of 2.5 million in the TRI, which is an important evolution in relation to what we have had in the past TRIs, and it is very competitive data if we compare it with offices or similar companies. So we want more, of course, but we show that AAA, as a great vector of our passive agenda, is evolving quite well. Toro is our digital broker, whose effective control we bought 100% last year.

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And we also continue to observe a decline in the renegotiated portfolio. In relation to the total portfolio, it reached 6.3%, as you can see. This 120-basis point reduction reflects the best quality of the most recent crops, especially in the retail sector.

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Mário Leão: We also have had super strong growth over the year in clients, in AOC, and in results. So Toro is proving itself a relevant agenda, and we are increasingly going to build a duet between Toro, our broker, Santander, and our entire investment agenda. We will still do a lot of integration here with independent brands, different brands, but we will have a coordinated agenda. And our private, as I already had the chance to mention here for the market, we had a record year in the private, in volume, in acquisition, and in results. We still think it can grow a lot.

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On the other hand, the NPL Formation showed a small increase due to the greater inadequacy in the renegotiated portfolio. Something that was already expected, and as we move forward, the process of deleting the folder. On the next slide, we present a more detailed view of our Nadiem Play indicators. We recorded a sequential drop in short-term indicators, both in physical people and in legal people, as shown here.

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Mário Leão: We want to double our private equity at least in the coming years, and we believe we have all the conditions to do it. Moving quickly to the agenda of strategic business, we have been accounting for the market for a year and a half. Back in the third quarter of 2022, I decided to comment to the market on this issue of strategic business. We were still in the first year of this legacy portfolio management, in a way, of the old safras. So, on the one hand, there was a piece of the portfolio that we knew we had to manage, to hold, and some portfolios, such as cards, we knew that for a while, we even fell in love with.

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I highlight the reduction of 110 basis points in the 15 to 90 of the physical person. In the long-term indicator, the Over 90, there was a small variation of 8 basis points, due to the renegotiated portfolio, as I have already mentioned. By the way, the 90-day anniversary of the S&M segment..., and the one on the left also reflects this impact. In summary, we continue with quality indicators under control, with the possibility of some volatility throughout the year due to the renegotiation portfolio. Moving on to slide 19...

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Mário Leão: Although we don't like to fall, obviously, we knew that some portfolios would have to be managed and taken care of for a year and a half or two. But, on the other hand, we chose some businesses already in the third TRI of 2022 that we had already grown and would grow, in some cases, more or much more than the market. So, here is a quick account performance analysis of some of these businesses. I will start with Consignado.

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Mário Leão: In Consignado, on the left slide below, we grow again in TRI consistently. We are growing in all lines of Consignado. We are growing in public, in INSS, and we are growing in private, which is a great asset that Santander has. We are doing this with very good credit cost control.

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I present here the evolution of our general expenses. They rose 19% in the quarter and 8% in the year. The expenses were affected by the collective agreement, which affected the fourth quarter as a whole, and, in addition, in the year, we also had the burden of the collective agreement of last year, of 8% of the 22% deficit. Administrative expenses recorded an increase in the quarter, driven largely by seasonality. The main factors of this growth were strategic investments in marketing campaigns to take advantage of the end of the year period and data processing, and this was due to the increase in avelonmetry plus business. The seasonal effect also affected our efficiency index, resulting in a deterioration of 80 low points.

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Mário Leão: We are earning a lot in Consignado, and I am very happy to see how we are consistently delivering here and will continue to do so. In the same line, we have a very relevant delivery in agribusiness. One of the public ambitions that I had for the market was that we would reach 50 billion in agribusiness products. Here, it is not only the customer's vision as a whole. Here are the agribusiness products, and we not only reach 50 billion but almost 54 billion, which is a growth of 42% if we look from December 22 to December 23, which is very relevant.

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Mário Leão: And when we compare it with December 21, it is a growth of practically 100%. So, we doubled our agribusiness products portfolio in two years, which shows the relevance that we give to this business. Our finances, as you know, are the biggest in the country. It ends the year with 21% of GDP.

Continuing our opening already implemented in the previous trimester, we present the evolution of our expenses, segregating expenses for products and business expansion, with recurring expenses. We can see here that our annual growth was concentrated mainly in expenses focused on business growth, which we consider fundamental to support our strategy to deliver the best experience to our clients. And to finish, the results session. Presentamos aqui nusa DRS.

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Mário Leão: We want more than that. You know that I have the ambition to reach 25%. We will reach it. I still wait for this year, but it ends up with a production record.

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Mário Leão: We end up doing almost 12 B of production in the fourth tree, which is a historical volume. So this is a very strong indication. We will see a little of the impact of this in the results, as Gustavo will show, but this is a very strong indication of how we are thinking big from now on in the financial sector as well. In cards, which I already mentioned in the last tree of the evolution we had, in cards, we had another very positive evolution tree. If we look at the income, which is a good indication of the income of the quarter, year on year, we, in the fourth tree of 22, fell compared to the previous year. In the third tree of 23, it already rose 7.

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As a result of the dynamics discussed throughout this presentation, we recorded a liquid profit of US$ 2.2 billion. In relation to the 4th trimester of 2022, total revenues grew by 11%, and gross profit grew by 30%. The managerial profitability, excluding the specific case, reached 12.3%.

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Mário Leão: And in the fourth tree of 23, which we are now discussing with the market, it grows 11. That is, we grow two digits in the income, given that the average spending increased in our client base and given that we are selling more cards than we did in the first half of the year. So the base 100 that we sold in the fourth year of 21, which was possibly our record sales of cards, we came back, we reached a level of less than half of that not long ago, and we came back to practically two-thirds of that level, which is a level that we consider quite adequate. Again, we are not looking to make a sprint of card sales, of client acquisition, as we did in 21. This is not the module in which we close 23 and enter 24, but we are quite sure that we are selling cards to the base with which we are operating.

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Our main capital... It reached 11.5%, a level that we consider adequate to move forward with our long-term growth strategy. And we're done. 2023 with a more positive trend despite the fluctuations in specific supplies and seasonal expenses typical of the last quarter. The credit performance was favorable and was accompanied by an increase in receipt generation. Our expectations... are that this trend will intensify throughout 2024, with, I'll stop here, and I give the floor to Mario for the final considerations. Thank you, Gustavo. I'll take one more minute to close, and we can dedicate quality time to QNA.

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Mário Leão: At this level that we are now, and the results will show up. And Sfera, as a complement to the issue of loyalty, of principality, as an agenda item, we will talk more about Sfera throughout the year, but here Sfera continues to advance quite a bit. In companies, we have a continuously positive agenda. You will see the data after the volume.

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Great messages here on this conclusion page, page 22, for those who are following the slides. On the context side, four big messages. The recipes are expanding, and we have a very positive perspective on 24.

Mário Leão: But here, talking about the strategy, both in large companies and in small and medium-sized companies, we have had good growth in the portfolio. In large companies, especially in the expanded portfolio, we grow two digits year after year. We want to continue with strong performance here over the years. But here, there will always be a focus on profitability.

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Both on the side of customers and on the side of markets. So we are optimistic and excited about the recipe line. Portfólio de Negócios segue semente diversificado, segundo a grande mensagem, a gente vai continuar bastante focados no tema de passivos, bastante focados em expandir o negocio de comisses, que sempre foi um negocio relevante para Santander, a gente quer E, de novo, diversificaço também tem a ver com crédito, which is the third point.

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Mário Leão: We could grow much faster in large companies. But with the capital market, fortunately, strong again, especially in the second or third trimester, we will compete with the capital market and will choose the tickets that we really want to put on the balance sheet. And we continue with good performance in several of the rankings. We are number one in Trade Finance. We are number one in Exchange. We were number one in DCM, in Depth Capital Markets International. We are very happy.

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Mário Leão: On the side of small and medium-sized companies, on the right side of the slide, we continue with a clear growth agenda. You will see the data. We are going to make this portfolio more than 5% tri-contra-tri, after having grown more than 3% in the past tri-contra-tri, that is, that stable portfolio agenda in which we were still looking for and choosing the right time to accelerate, we decided to grow stronger from the middle of the year, and the numbers show this clearly. Here we are going to try to double the business of small and medium-sized companies in a few years, and To close my part here, the agenda of technology and innovation obviously connects with all of this. We don't have technology on one side and business on the other.

We will continue to seek to grow the portfolio; we will seek to gain market share in various products, in various segments, and do it intelligently so that we can grow the portfolio, obviously with profitability. And the fourth big message in context is our obsessive search for the clients' principalities. This is Santander's strategic agenda for 2024 and for the next several years. Everything we do will have to be associated with the client's agenda, as it already is, and we will strengthen it more and more. The big levers that we see for this, I mentioned here just to reinforce them.

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Mário Leão: I even say here that we are all businesses, so technology is a big business center. The areas of operations are big business centers. We have some data here on this page; I will just mention some, but we are already at 95% of our cloud operation.

The first one, we are actually doing a great repositioning of our retail. Both in the massive segment, about which we will give more details to the market throughout the year. We have several deliveries for the first, for the second trimester mainly.

We will end the year on a very different footing from where we started, and we are very excited about it. All of our characterized businesses, which are the high-income segments, the select, the business segments, the mid-income segments now as well, and some of the small businesses, we are specializing more and more, and we are making the service for these segments even more regionalized, even closer to the client, even more multi-channel. We have, in the return of cards, which is another important step in the fourth TRI, an obvious focus on the principality We are doing it in an intelligent way; we are doing it in a precise, technical way, with more and more profound personalization in the understanding of each client, of each class. We have a financial business that is, as I mentioned, since the middle of the year, growing again. In the third trimester, it had already shown strength; it had the sale of the PSA, of course, but the liquid of it had already had a good third trimester, and it had a very strong fourth trimester.

Mário Leão: We have been converging to 100% here. In a little while, we will be ringing the bell on 100% of the cloud operation, which is super-good data. This generates agility, generates the ability to react to customers, and this obviously generates efficiency and cost reduction.

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Mário Leão: So we are very happy to be on the agenda of such a strong cloud. We are increasingly investing, of course, like the whole market, in the question of D&AI. D&AI can be a great answer, as I have just mentioned, to the chat and to the question of the remote channel, but it can also be a great answer to gain productivity in programming, in coding, in development.

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Mário Leão: We are also on this very strong front and moving fast here. We have been following Banco Central in innovations. We made the first transaction with privacy on the Real Digital network, DREX.

We are very excited about what the financial sector will bring to us from 2024 onwards. Remembering that we also have a financial operation outside of cars, consumer goods, which is also going through an important turn. We expect a lot from here.

Mário Leão: So we are obviously embracing Banco Central here on the innovation agenda. We have invested a lot in the API of Santander, in Banking as a Service. We have partnerships with large ERPs and are seeking to expand this agenda to be able to have Santander more and more within the client, not necessarily having to go to the bank, even if digitally, we want to be inside, embedded in the client's experience. We are maturing our business domain agenda. We have 27 business domains that we created from 22 to 23 and now from 23 to 24.

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And the business segment, as I said, has grown again in retail since the middle of the year. We are doing this in a very calculated way, very balanced, and we are very excited about what comes next. And on the side of large companies, it will be a much more profitable theme, but we have a super broad franchise already established for decades, and we are sure it will grow a lot here too. So, as a whole, we end the year here now, the official closing of 2023, and are now 100% focused on 2024. We end the year quite excited about the business dynamics, which we have been showing in a consolidated and solidified way from now on. With that, I pause here for us to do the Q&A. Thank you again.

Mário Leão: We merge this even more with the agenda of products, as we call it here. So the business domains, that is, these large communities that lead from end to end in each business, are super consolidated, and all the management, all the remuneration, and the incentives are aligned. We continue with a large efficiency agenda. We have more than doubled the number of transactions and fallen by half the unit cost. So this agenda is still super strong for Santander, as it should be. With this, I will pass the word to Gustavo about the results, and I will be back soon for the Q&A. See you soon!

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Gustavo Alerro: Thank you, Mário. Good morning, everyone. Let's start with the results for the financial margin. We have seen a growth of almost 5% year-on-year, with a good evolution in the market share of clients. We achieved a good performance in terms of volume, as well as in terms of funding results, both benefiting the margin with clients in 2023. In the second half of the year, we saw a continuation of some positive trends presented in the third TRI, which led to an increase of 4.8% in the financial margin in the quarterly comparison.

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Thank you, Mario and Gustavo. We will now start the Q&A session. From now on, all analysts will have the opportunity to ask their questions. If you want to ask a question, just click on the hand icon that appears at the bottom of your screen.

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We will answer these questions in the language in which they are asked. We ask that each analyst ask only one question so that everyone can participate. Our first question comes from Thiago Batista from UBS. Good morning, Thiago. Good morning, Camila.

Gustavo Alerro: One of them is the gradual growth of credit in retail, which will be further detailed by me. The other trend is the fall of the SELIC rates, which has benefited our funding course, as already commented by Mário. The market presents a progressive evolution about which I have been commenting throughout the last presentations and, in line with expectations. The evolution of Espresso throughout the year reflects our strategy of highest selectivity, which started in 2022 and that is in accordance with the risk profile of our production.

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Good morning, Mario. Good morning, Gustavo. Good morning, everyone. My question is related to credit ordering. We saw that, in this fourth quarter, the bank was able to originate very strongly in vehicles. Santa Errada had the best quarter ever in terms of vehicle origination.

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Gustavo Alerro: Finally, on the margins, I highlight the positive evolution of the financial margin year on year. In this fourth quarter, as you can see here..., we have a growth of 12.3%. Now, I'm going to comment on some data on the evolution of our credit card. We increased our expanded portfolio, with a growth of 9%, as mentioned. We grew in all business lines, with significant expansion in physical retail, vehicles, and SMEs. During the quarter, we had a strong performance in cards for physical people, and this result... was supported by seasonality and by the gradual improvement in the sales of cartridges. The recovery and improvement, and with more quality, more assertiveness in the levels, and with satisfactory levels in production. This performance is accompanied by the continuity of consistent results in consigned loans, real estate financing, and in the rural segment.

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We have talked to you, in a very consistent and linear way, in the sense that we have been choosing, over the years, which portfolios we would accept, to stay in plans or even fall, cards without a doubt are in this category, CP, pure CP, was also in this category, that is, the more clean, direct credit, mainly focused, in our history, even more, to medium and low income, we knew that in these two years these portfolios would stay from plans to drop, and the work, obviously, in compensating this with other business. Some of these portfolios, the CP, we have advanced a lot in CPFGTS, in Investidor, more and more, the CP itself, pure, and we are taking back the cards, Thiago, with a focus in all segments of income, your question is great, we are, without a doubt, obviously, looking at high income, along with the entire Select's agenda, but in average and low income, we have, in the payment sheets, a great lever of knowledge of the clients, which we already had, it's true, we didn't just make the payment sheets now, we've been doing it over the last few years, but we've managed, in these two years, especially in the last one, a very clear evolution in our ability to understand, to talk, to make this client linked, and with that, to have the comfort of selling cards and selling CP, the most clean products, let's say, to the base, more of average and low income, but mainly those clients that we already had in the base, that we already knew, and the payment sheet is a good example for that.

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Gustavo Alerro: By the way, Mario has already commented, but I will reinforce, it is worth noting the growth in agribusiness, with an increase of 10% in the quarter and an expansion of 42% in the year. In vehicle financing, we achieved a growth of 5.5% in the quarterly comparison, marking the best performance of the year. This progress has more than compensated for the impact of the PSA's portfolio sale in the previous quarter and reflects the strength of our strategic partnerships and the positive market moment that we are seeing. As for SMEs, we continue to boost the growth of our portfolio after a relatively stable first quarter, with adjustments, which is fully aligned with our strategy, already declared, to increase the participation of this business in the total portfolio.

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We've been growing other products since 2022 and, more recently, since 2023, and we intend to continue doing so. So, what we have today, I would sum it up as follows. We have the same comfort that we already had in growing in some of the portfolios that we've been growing since 2022 and 2023. Consignado, Agro, big companies. We never stopped growing there.

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Gustavo Alerro: The increase of 5.2% In the second half, it's something that I want... Giztaka, in the following slides, share the details about our captures. As we have been saying throughout the year and highlighting, we have achieved a solid performance in captures, demonstrating our commitment to the strategy of expansion and the search for a more balanced mix between attack and defense. Our captions www.barrista.com.br have grown 15% per year and 2.6% per trimester, with highlights for post-apraisal and speech letters. Our rate of credits and deposits is at 92%, at the highest levels of our society.

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As I said, it's more of a profitability issue. But we, since the middle of the year, have also started to have the comfort of growing in other portfolios that we, until then, had chosen to stop. And finance, as you mentioned, and small companies, small and medium-sized, were two large portfolios that we had decided to stop.

We could have been more ambitious or more aggressive in 2022 and mid-2023, but we preferred to work this time in taking care of the portfolio we had, taking care of the parameters of the origination premises, so that, from July, August, we can do it again with more strength. So, we enter 2024 with this mindset of keeping those that we had been growing, consolidating those that we started to grow from the third to the fourth trimester, and the more clean products, such as cards and CP, based on clients that we are operating, taking care of what we are having, obviously, of doing with the right clients, and, as I said, not looking for the sprint that we gave in 2021, but looking, with more ambition, to grow in these lines as well. So, we enter 2024, I would say, with a very good diversification between different products and different segments. I hope I have answered your question, Tiago. Perfect. Thank you. We now have a question from Thiago Binsfeld, from Goldman Sachs. Hello, Thiago.

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Gustavo Alerro: Here, on this next slide, we present the performance of our commissions, which each quarter reflects in a very clear and consistent way the evolution of business, with positive performance practically in all lines, and in the second quarter, with 7% growth, coming from a 6.5% growth in the previous quarter. Even with the positive seasonal effects that occur in cards and insurance, business in general showed very positive dynamics, which reinforces our strategy in commissions for greater transactionality with our clients. Let's move on now, for the evolution of the quality of our activities. In this quarter, we have the effect relative to the increase in supplies in specific cases and reinforcements of supplies for cases of the attacked. If we disregard these effects and the smaller volume of recovery after two quarters with record performance, we have a stable GDP compared to the previous trimester without any sign of deterioration. We maintained a credit cost reduction trajectory that closed at 4% per year.

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[inaudible] Sorry, my question goes to the supply line. You stressed throughout the presentation that you didn't see a deterioration in the quarter, but... When we look at it in the longer term, there are already two years of very high provisions, so I want to understand how you are looking at 2024. Do you believe that it is still a year of transition for the cost of credit, or do you already see a clearer perspective of normalization? And also, if you have any comments about the corporate segment... There was a specific case in this trimester, and there are other specific cases that concern 2024. Thank you. Thank you, Thiago.

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Gustavo Alerro: And we also continue to observe a decline in the renegotiated portfolio. In relation to the total portfolio, it reached 6.3%, as you can see. This reduction of 120 base points in a year reflects the best quality of the most recent saplings, especially in the retail sector.

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I'll start and I'll definitely pass it on to Gustavo, but let's talk about the macro here. We have two dimensions. Your question has two pieces. There's the credit cost, and there's the absolute value of the provisions.

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We talked about it in the presentation, and I'd like to emphasize that we've been getting better at the credit cost, in terms of percentage. We've been getting better in terms of credit costs, and we're still waiting for this data to improve over the next 24 hours. So, the factor itself, the credit costs, which have been improving over the last few quarters, including this last quarter, when we get rid of the specific punctuality effect, which I'll leave for Gustavo to comment on, we've been getting better in terms of credit costs, and we're still waiting for that. The PDD itself, although we're not going to give you any guidance here, the PDD itself has the effect, of course, So, when we speed up the portfolio again, as we're speeding up more forcefully in the third and fourth quarters, we expect to be able to do this over the next 24 hours, which is the recent question that I just answered. We naturally, with more portfolio, will have a PDD level that goes along with it.

Gustavo Alerro: On the other hand, the NPL Formation has shown a small increase due to the greater inadequacy in the renegotiated portfolio. Something that was already expected, and as we move forward, the process of deleting the folder. On the next slide, we present a more detailed view of our Nadiem Play indicators. We recorded a sequential drop in short-term indicators, both in physical people and in legal people, as they are here.

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Gustavo Alerro: I highlight the reduction of 110 basis points in the 15 to 90 of the physical person. In the long-term indicator, the Over 90, there was a small variation of 8 basis points, due to the renegotiated portfolio, as I have already mentioned. By the way, the 90-day anniversary of the S&M segment, which is on the left, also reflects this impact. In summary, we continue with quality indicators under control, with the possibility of some volatility throughout the year due to the renegotiation portfolio. Moving on to slide 19...

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We're going to wait for the credit cost of this marginal portfolio to be lower than the average, and with that, we'll keep looking for a credit cost that keeps going down. So, the PDD has a behavior that talks to the credit cost but also to the portfolio growth, and the credit cost should keep going down. Gustavo, if you want to add something. No, that's exactly it.

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Gustavo Alerro: I present here the evolution of our general expenses. They rose 19% in the quarter and 8% in the year. The expenses were affected by the collective agreement, which affected the fourth quarter as a whole, and in addition, in the year, we also had the burden of the collective agreement of last year, of 8% of the dividend of 22%. Administrative expenses recorded an increase in the quarter driven largely by seasonality.

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So, there's a tendency for credit costs to go down. You asked about cases in the corporate world. Looking ahead, we understand that there won't be material cases, so we see name by name, we make the provisions and the discussions name by name, we adjust the positions. So, looking ahead to 2024, I don't see any movement, or any material event, in the corporate world, or in our portfolio. I now pass to Brian Flores from Citibank. Welcome, Brian.

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Gustavo Alerro: The main factors of this growth were strategic investments in marketing campaigns to take advantage of the end of the year period and data processing, and this was due to the increase in aviolumetry plus business. The seasonal effect also affected our efficiency index, resulting in a deterioration of 80 low points, continuing our opening already implemented in the previous trimester. We present the evolution of our expenses, segregating expenses for products and business expansion and Pedro Recurrentes. We can see here that our annual growth was concentrated mainly in expenses focused on business growth, which we consider fundamental to support our strategy to deliver the best experience to our clients. And, to finish, the results session. We present here our DRE.

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Thank you, everyone, and thank you for the opportunity to ask questions. One is about efficiency. So, how should we think about the cost-to-income ratio for this year? Would it be closer to 23%? Closer to 22%?

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I'm going to start with the macro here, and then I'll pass it to Gustavo. So, Brian, thank you for the question and for letting us talk a little bit about recipes and expenses. Two vectors here. Without a doubt, we want to expand. I started my conclusions for you by talking about recipes, so we are, as it could not be different, super focused on expanding, but expanding the recipe line correctly. We want to grow our recipes, which is the strength of the franchise. It's measured on the top line, in the recipe line.

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Gustavo Alerro: As a result of the dynamics discussed throughout this presentation, we recorded a liquid profit of US$ 2.2 billion. In relation to the 4th trimester of 2022, total revenues grew by 11%, and the liquid profit grew by 30%. The managerial profitability, excluding the specific case, reached 12.3%.

We want to grow our recipes in a consistent way. It will never be linear, as it is not. The world is not linear. But we want to grow the recipe line in a consistent way. When I say consistent, I mean sustainable. I don't want to have solutions for the growth of recipes, because in six, nine months, I will regret it.

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Gustavo Alerro: Our main capital... It reached 11.5%, a level that we consider adequate to move forward with our long-term growth strategy. And we're done. 2023 with a more positive trend despite the fluctuations in specific supplies and seasonal expenses typical of the last quarter. The credit performance was favorable and was accompanied by an increase in receipt generation. Our expectations are that this trend intensifies throughout 2024, with... I'll stop here, and I give the floor to Mário for the final considerations.

We can always make mistakes, of course, but we are being careful to grow in the correct way each of the segments and each of the product portfolios that we decide to grow. So, part of the answer, without a doubt, is the expansion of revenues. The expansion and the side of expenses. Of course, we will naturally have some growth in expenses. Again, without giving guidance, but it is natural because the business will demand that we have more volume; the business will demand that we expand. We are hiring people, as we speak, in some of the subsegments that we are specializing more. I mentioned to you the mid-income, I mentioned to you the segments of small companies that we are specializing even more, and characterizing even more.

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This demands us because they are clients, PF or PJ, who want to be covered by people. And this is one of the details that we have; we can be multi-channel and multi-task for real. So, some lines of expenses we will grow. What we have to be able to do, Brian, just to close and pass to Gustavo, is how do we finance this? So, when I spoke in the last TRI about the huge turn that we have to make in the mass segment, that we have to reduce the basis of expenses, some material thing between 30%, 40%, 50%, from this will come the funding for me to make the investment where I need to make it, so that I have a potential increase in expenses, yes, but that is disproportionately less than the expense of revenues, and the jaw opens, and we can have an efficiency Gustavo, do you want to add anything?

Mário Leão: Thank you, Gustavo. I'll take one more minute to close, and we can dedicate quality time to QNA. Great messages here on this conclusion page, page 22, for those who are following the slides. On the context side, four big messages. The recipes are expanding, and we have a very positive perspective on 24.

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Mário Leão: Both on the side of customers and on the side of markets. So we are optimistic and excited about the recipe line. The business portfolio continues to be diversified, according to the big message.

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Exactly, and just to add, we are living in, in 2024, we are living through a process of de-inflation, so this also benefits our account. So, we have the most efficient use of the resources or expenses that we have, with the benefit also of inflation, which will be different from the previous periods, and this gradual and solid evolution of revenues. So, we see a positive evolution in efficiency levels. But this is basically what Mario said, a very important evolution of our top line to gain speed and traction in this recovery of efficiency. [inaudible] The next participant is Matheus Rafaelli from Ita BBA. Good morning, Matheus, welcome.

Mário Leão: We will continue to be very focused on the subject of passives, very focused on expanding the business of commissions, which has always been an important business for Santander. We want to grow even more. And again, diversification also has to do with credit, which is the third point. We will continue to seek to grow the portfolio; we will seek to gain market share in various products, in various segments, and do it in a smart way, so that we can grow the portfolio, obviously with profitability. And the fourth big message of context is our obsessive search for the clients' principalities.

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Mário Leão: This is Santander's strategic agenda for 2024 and for the next several years. Everything we do will have to be associated with the client's agenda, as it already is, and we will strengthen it more and more. The big levers that we see for this, I mentioned here just to reinforce them.

I would like to explore with you the prospects for NIM Client throughout 2024. I understand that the spread of capture is going down, but at the same time, we see Santander here with a little more appetite for clean lines and vehicles. We expect good growth as well. The Renegade portfolio there should operate at a drop in the year. So, could you comment a little bit here about what you are seeing for NIM Client 2024? Should we expect a cooler NIM or a drop? It makes sense to think about an expansion here, given the factors that I mentioned earlier. Thank you.

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Mário Leão: The first is that we are actually doing a great repositioning of our retail. Both in the mass segment, which we will give more details to the market throughout the year. We have several deliveries for the first, and for the second, mainly. We will end the year on a very different footing than we started.

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Mário Leão: And we are very excited about it. All of our characterized businesses, which are the high-income segments, the select, the business segments, the mid-income segments now too, and some of the small businesses, we are specializing more and more and are making the service for these segments even more regionalized, even closer to the customer, even more multi-channel. We have, in the return of cards, which is another important step in the fourth TRI, an obvious focus on the principality and the ability to serve customers. So we are very excited about this return of cards again.

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Directionally, as I said, nothing is linear, and you shouldn't expect anything linear from us or anyone else, right? But directionally, we want to grow. I talked about revenue in Brian's last question. Obviously, revenue has some sub-blocks, but the NIM block, without a doubt, is a fundamental block, and it measures, in good part, the strength of the franchise, along with commissions, perhaps.

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Mário Leão: We are doing it in an intelligent way; we are doing it in a precise, technical way, with more and more profound personalization in the understanding of each customer, of each class. We have a business in finance that, as I mentioned, has been growing again since the middle of the year. In the third trimester, it had already shown strength; it had the sale of the PSA, of course, but the liquid of that had already had a good third trimester, and it had a very strong fourth trimester.

And NIM clients measure more than NIM markets, obviously, the strength of the franchise. So, we are very focused on this line and on the sub-blocks that make up NIM clients. You said it well.

I also mentioned in my opening that we already have, in the fourth TRI, a challenge related to the third TRI in the NIM line of passives. Naturally, with SELIC falling, the better we make volume, the better we make the spread, as the spread is measured in percentage of CDI. If we want to look at it like this, SELIC falling, obviously, has a detractor. However, it is positive for the economy as a whole. We like SELIC to fall, obviously, but for the NIM line of passives, this brings a challenge, which will be a challenge throughout this year.

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Mário Leão: We are very excited about what finance will bring to us from 2024 onwards. Remembering that we also have a finance operation outside of cars, for consumer goods, which is also going through an important turn. We expect a lot from here.

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Mário Leão: And the business segment, as I said, is growing again in retail since the middle of the year. We are doing this in a very calculated way, very balanced, and we are very excited about what comes next. And on the side of big companies, it will be a much more profitable theme, but we have a super broad franchise already established for decades, and we are sure it will grow a lot here too. So, as a whole, we end the year here now, the official closing of 2023, and are now 100% focused on 2024.

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Mário Leão: We end the year quite excited with the business dynamics. Thank you, specific items that Gustavo mentioned here on the PDD side, on the attack side there are no concerns on the retail side, which is very important that we spent these two years working to be able to have the comfort of sharing with you now that we are very excited about the performance of the portfolio, of the new batches, as we have called it on the expense side, we have seasonal punctuality but the strength of the franchise is at a point that makes us very excited to enter 24 now with both feet with a lot of spirit and to have the history of growth of the top lines that we have been showing in a consolidated and solidified way from now on. With this, I pause here for us to do the Q&A. Thank you again.

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We will seek to be efficient in price, of course, as we try to be in everything. And part of that we will compensate for with NIM, credit, which you mentioned well. We are more constructive in several lines. I mentioned it just now.

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We want to have growth that will not be the same in all portfolios. I would like all portfolios to grow throughout this year, and we no longer have any material portfolio that is flat or falling. And we, taking care of the spread, on the side of the asset, are increasing volumes in an important way. In some cases, we will look for two digits.

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In other cases, we will have more growth in the industry line. But, anyway, we will look for a relevant growth in all credit portfolios, which, taking care of the spread, will mean the compound effect that we will have a good evolution in the NIM line, in terms of credit clients, which I hope is more than enough to compensate for what we will have as a challenge because of Selic, not because of strategy, on the contrary, in the NIM part of acquisitions. Gustavo, do you want to comment? You commented well. I mean, there are different growth speeds for different portfolios. So, you commented.

Operator: Thank you, Mario and Gustavo. We will now start the Q&A session. From now on, all analysts will have the opportunity to ask their questions. If you want to ask a question, just click on the hand icon that appears at the bottom of your screen.

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Operator: We will answer these questions in the language in which they are asked. We ask that each analyst ask only one question so that everyone can participate. Our first question comes from Thiago Batista from UBS. Good morning, Thiago. Good morning, Camila.

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There is CP, there is the designated, Autos, and SMEs. So, the speed... Well, first we need to have demand for some portfolios, and the growth speed between portfolios will dictate a little what the NIM would be. Obviously, with a lot of price discipline, more volumetrics in passives, and the tendency is that we can effectively balance the margin with the challenges that are already set. But if we want to be in the portfolios at the speed we want, in the volumetrics, we can equate this variable well.

Operator: Good morning, Mário. Good morning, Gustavo. Good morning, everyone. My question is about credit ordering. We saw that, in this fourth quarter, the bank was able to originate very strongly in vehicles. Santo Errado had the best quarter ever in vehicle origination.

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Mário Leão: We saw that, in cards, the MTC Carto was also back, a good expansion of the portfolio. My question is, if the bank is comfortable returning to several segments, or are you still seeing a focus on high-income, medium-high income? How do you see this return to Santander's portfolio? Thank you, Thiago. It's a pleasure to start here with you. I'm going to start, and Gustavo, if you want to add something,

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So, in summary, we will obviously have a positive evolution in NIM markets, which is the implicit question here, and obviously it will arise. We continue to wait, of course, like all of you, for the evolution in NIM markets, and it will happen; it is also, in a way, a given, and we expect to have an evolution also in NIM clients, with the liquid effect on one side, that we will have an anchor for SELIC in acquisitions, that we will seek part of the compensation in the acquisition business itself, and the rest, the compensation, with a positive liquid, I hope I have answered your question correctly. Thank you, Mateus. Super clear, guys. Thank you.

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Mário Leão: We have talked to you, in a fairly consistent and linear way, in the sense that we have been choosing, over the years, which portfolios we were going to accept, to stay in plans or even fall, cards without a doubt are in this category, CP, the pure CP, was also in this category, that is, the more clean, direct credit, mainly focused, in our history even more, for medium and low income, we knew that in these two years these portfolios would stay from plans to drop, and the work, obviously, in compensating this with other business. Some of these portfolios, the CP, we have advanced a lot in the CPFGTS, in the investor more and more, the pure CP itself, and we are taking back the cards, Thiago, with a focus on all segments of income, your question is great, we are, without a doubt, obviously, looking at high income, along with the entire Select's agenda, but in the mid and low income, we have, in the payment sheets, a great lever of knowledge of the clients, which we already had, it's true, we didn't start making sheets just now, we were already making sheets over the last few years, but we have achieved, in these two years, especially in the last one, a very clear evolution in our ability to understand, to talk, to make this client linked, and with that, to have the comfort of selling cards and selling CP, the more clean products, let's say, to the base, more of mid and low income, but mainly those clients that we already had in the base, that we already knew, and the payment sheet is a good example for that.

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Now, we go to the analyst, Daniel Vaz, from Banco Safra. Hello, Daniel. Camila, Mario, how are you?

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Daniel Vaz: Good morning, thank you for the opportunity to ask questions. I would like to get an overview of the bank, in fact, on a subject that is very recurrent, which is consignment. So, there is pressure on the rates, both the maximum by CNPS, which is a little more active, and also the additional potential of a large digital player that wants to add Share in 24. So, the first question is how to defend the profitability of this product, if there is room to improve the mix of origination, and reduce the fee, if this is being discussed. And the second question is how do you see a potential increase in order and portability if the bank expects this, and how do you defend yourself in this regard? Is there a rate comparison? Is there a client cluster that you intend to maintain? Obrigado.

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Mario Roberto Opice Leao: Great question, Daniel. It's a recurring question from Consignado, and it's good. It's relevant because it's a portfolio, for the industry as a whole, and for us in particular, it's very relevant. If you take into account our expanded portfolio, we have a Consignado portfolio that represents exactly 10% of our expanded portfolio. That is, it's a relevant portfolio for Santander, and we want it to be. We're happy with it, and we want it to be more and more. How do we see the pricing dynamic and the competitive dynamic as a whole? First, the price ceiling pressure is specific, not smaller, but specific to INSS. We, as Santander, and I can say here, in the name of the industry as a whole, we don't find an agenda... pro-consumerist, pro-consumer, agenda from the ceiling.

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Mário Leão: Other products, we've been growing since 1922 and, more recently, since 1923, and we intend to continue doing so. So, what we have today, I would sum it up as follows. We have the same comfort that we already had in growing in some of the portfolios that we've been growing since 1922 and 1923. Consignado, Agro, big companies. We never stopped growing there.

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Mário Leão: As I said, it's more of a profitability issue. But we, since the middle of the year, have also started to have the comfort of growing in other portfolios that we, until then, had chosen to stop. And finance, as you mentioned, and small and medium-sized companies were two big portfolios that we had decided to stop.

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Mário Leão: We could have been more ambitious or more aggressive in 1922 and mid-1923, but we preferred to work this time on taking care of the portfolio that we had, taking care of the parameters of the origination premises, so that, from July to August, we could do it again with more strength. So, we enter 1924 with this idea of keeping those that we had been growing, consolidating those that we started to grow from the 3rd to the 4th trimester and the more clean products, like cartons and CP, in the client base that we are operating, taking care of what we are having, obviously, of doing with the right clients, and, as I said, not looking for the sprint that we gave in 1921 but looking, with more ambition So, we enter 1924, I would say, with a very good diversification between different products and different segments. I hope I have answered your question, Tiago. Perfect. Thank you. We now have a question from Tiago Binsfeld of Goldman Sachs. Hello Tiago.

Mario Roberto Opice Leao: In fact, the decisions made in the last year to limit the rate end up making the origination volume, this is a fact, it's not a speculation, the origination volume, in practice, has dropped a few billion a month, the Fibroblast has been given something like 2 billion or more a month, if we multiply that by 12 months, we're talking about 25 to 30 billion, of consigned credit, INSS, which is the cheapest possible credit available in the market, it competes with SFI's real estate, but anyway, it's a super cheap credit, no doubt the cheapest available to that public of retirees, and many of these potential buyers are being leased and going to much more expensive financing that they wouldn't need to be taking.

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Mario Roberto Opice Leao: So, in fact, it's an anti-consumer agenda; we have passed this to the different government forums; this is an issue of executive power. We hope that this year we'll be more successful, but honestly, Daniel, so far, we haven't been very successful. There is an echo in some government blocks; there is one in all of them, but here, I take this opportunity to say, we look at this and feel sad, in fact, because the consumer is being harmed. Having said that, we have sought to rebalance our pricing equation so as not to give up INSS. As I said, we've grown a lot in the last year and a half, we've earned a quota, and where we've grown the most, Daniel, was precisely in INSS. And we've done this, I can guarantee you, in a very profitable way. So, what have we done?

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Gustavo Alerro: Thank you very much. Welcome. Sorry, my question goes to the supply line. You have emphasized throughout the presentation that you did not see a deterioration in the quarter, but... When we look at it from a longer perspective, there are already two years of very high provision, so I want to understand how you are looking at 2024. Do you believe that it is still a year of transition for the cost of credit, or do you already see a clearer perspective of normalization? And also, if you have any comments about the corporate segment... There was a specific case in this trimester, and there are other specific cases that concern 2024. Thank you. Thank you, Thiago.

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Mario Roberto Opice Leao: We've rebalanced the pricing equation, yes, we still have, as every industry has, an important relevance coming from what we call the external channel, from the corresponding cords. We still have, but we've reduced proportionally our relevance from the external channel in relation to the internal channel, so we have, in practice, invested more in being able to make INSS, mainly through our stores, our specialized stores. We have evolved a So, we have grown the quota in INSS with preserved profitability, but, obviously, the agenda is not good, the whole industry, the way it has developed in the last 20 years, the corbus, etc., is a little out of control, in the usual format, in the historical format, and we are trying to do more and more internally and trying to maintain the relation with the corbus at levels of different profitability.

Mário Leão: I'll start and I'll definitely pass it on to Gustavo, but let's talk about the macro here. We have two dimensions. Your question has two pieces. There's the credit cost, and there's the absolute value of the provisions.

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Mário Leão: We talked about it in the presentation, and I'd like to emphasize that we've been getting better at the credit cost, in terms of the percentage. We've been getting better in terms of credit costs, and we're still waiting for this data to improve over the next 24 hours. So the factor itself, the credit cost, which has been improving over the last three quarters, even in this last quarter, when we get rid of the specific punctuality effect, which I'll leave to Gustavo to comment on, we've been getting better in terms of credit costs, and we're still waiting for that. The PDD itself, although we're not going to give you any guidance here, the PDD itself has the effect, of course, of the credit cost itself; it has the effect that the portfolio is growing.

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Mário Leão: So when we speed up the portfolio again, as we're speeding up more forcefully in the third and fourth quarters, we expect to be able to do this over the next 24 hours, which is the recent question that I just answered. We naturally, with more portfolio, will have a PDD level that goes along. We're going to wait for the credit cost of this marginal portfolio to be lower than the average, and with that, we'll keep looking for a credit cost that keeps going down. So the PDD has a behavior that talks to the credit cost but also to portfolio growth, and the credit cost should keep going down. Gustavo, if you want to add something, No, that's exactly what it is.

Mario Roberto Opice Leao: The competition that comes from digital players, and maybe one with more emphasis, is something that we, like any other player who is entering or is reinforcing its emphasis on a product, are looking at and observing with clear attention. It has not reached a materiality that makes our management different from what it was in the recent past. We respect, we think it is legitimate, and we will continue to observe closely, but our agenda has to be very focused on making our Consignado client and non-Consignado client look at Santander as a big bank on this agenda, and we already are, and we want to be even more, with an impeccable digital experience, with stores specialized by INSS, for a multi-channel service capacity, and as the widest offer, which is not I can have all this in a single bank account. We are this bank, and we want to make it more and more simple, more and more effective, as I commented earlier. I don't know, Gustavo, if you want to complement me.

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Gustavo Alerro: So there's a tendency for credit costs to go down. You asked about cases in the corporate world. Looking ahead, we understand that there won't be material cases, so we see name by name, we make the provisions and the discussions name by name, and we adjust the positions. So looking ahead to 2024, I don't see any movement, or any material event in the corporate world in our portfolio. I now pass to Brian Flores from Citibank. Welcome, Brian.

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Operator: Thank you, everyone, and thank you for the opportunity to ask questions. One is about efficiency. So, how should we think about the cost-to-income ratio for this year? Would it be closer to 23, closer to 22?

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Gustavo Alejo Viviani: Unknown Speaker, in general, for the consignado portfolio and with more speed in the portfolios where there is more dependence on third parties. So this is an evolving agenda. It's going at the right speed.

Mário Leão: And, in your view, which line should contribute more in this subjective meeting? Thank you. I'll start with Marco, and then I'll pass to Gustavo.

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Mario Roberto Opice Leao: And, of course, there are the market challenges that you mentioned, but we are prepared to defend our portfolios with these movements, probably, from each district. Just to finish, a long answer here, but it's an important point. We have the INSS in the consignate, we have the private sector, and we have the consignment of the public sector. And we have strengths in the other two as well, they are price and competition dynamics, differences between the three big blocks, and we are very happy to be evolving in all of them, Mr. Daniel. So, in practice, we don't want to depend on just one, and, as much as the INSS is super relevant, we don't want to depend on it, as we don't want to depend on governments. So, we have a very broad consignate agenda, and, again, we are very happy with how it is evolving, and we will continue to have this line as one of our main focus lines for 2024. Obrigado. The next question comes from Bank of America.

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Mário Leão: So, Brian, thank you for the question and for letting us talk a little bit about recipes and expenses. Two vectors here. Without a doubt, we want to expand. I started my conclusions for you talking about recipes. So we are, as it couldn't be different, super focused on expanding, but expanding the recipe line in the right way. We want to grow the recipes, which is the strength of the franchise. It is measured on the top line, in the recipe line.

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Mário Leão: We want to grow the recipes consistently. It will never be linear, as it is not. The world is not linear. But we want to grow the recipe line in a consistent way. When I say consistent, I mean sustainable. I don't want to have solutions for the growth of recipes because in six months, nine months, I will regret it.

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Mário Leão: We can always make mistakes, of course, but we are being careful to grow in the correct way each of the segments and each of the product portfolios that we decide to grow. So part of the answer, without a doubt, is the expansion of revenues. The expansion and the side of expenses, of course, we will naturally have some growth in expenses. Again, without giving guidance, but it is natural, because the business will demand that we have more volume; the business will demand that we expand. We are hiring people, as we speak, in some of the subsegments that we are specializing more. I mentioned to you the mid-income, I mentioned to you the segments of small companies that we are specializing even more, and characterizing even more. This demands us because they are clients, PF or PJ, who want to be covered by people.

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Mário Leão: And this is one of the details that we have; we can be multi-channel and multi-task for real. So some lines of expenses we will grow. What we have to be able to do, Brian, just to close and pass to Gustavo, is how do we finance this? So when I spoke in the last TRI about the huge turn that we have to make in the mass segment, that we have to reduce the basis of expenses, some material thing between 30%, 40%, 50%, from this will come the funding for me to make the investment where I need to make it, so that I have a potential increase in expenses, yes, but that is disproportionately less than the expense of revenues, and the jaw opens, and we can have an efficiency account Gustavo, do you want to add anything?

Gustavo Alerro: Yes, exactly that. And just to add, in 2024, we are living through the process of de-inflation, so this also benefits our account. So we have the most efficient use of the resources or expenses that we have, with the benefit also of inflation, which will be different from the previous periods, and this gradual and solid evolution of revenues. Thus, we see a positive evolution in efficiency. But this is basically what Mario said, a very important evolution of our top line to gain speed and traction in this recovery of efficiency. Perfect. Thank you. The next participant is Mateus Rafael from Ita BBA. Good morning, Mateus.

Operator: Welcome. Good morning everyone, thank you for the question. I would like to explore with you the prospects for NIM Client throughout 2024. I understand that the capture spread is going down, but at the same time, we see Santander here with a little more appetite for clean lines and vehicles. We expect good growth as well. The Renegade portfolio there should operate at a drop in the year. So, could you comment a little bit here about what you are seeing for NIM Client 2024? Should we expect a cooler NIM or a drop? It makes sense to think about an expansion here, given the factors that I mentioned earlier. Thank you.

Mário Leão: Thank you, Matheus. I'll start here. Directionally, as I said, nothing is linear.

Mário Leão: You shouldn't expect anything linear from us or anyone else, but directionally, we want to grow. I talked about revenue in Brian's last question. Obviously, revenue has some sub-blocks, but the NIM block is undoubtedly a fundamental block, and it measures a good part of the strength of the franchise, along with commissions, perhaps.

Mário Leão: And NIM clients measure more than NIM markets, obviously, the strength of the franchise. So, we are very focused on this line and on the sub-blocks that make up NIM clients. You said it well.

Mário Leão: I also mentioned in my opening that we already have, in the fourth TRI, a challenge related to the third TRI, in the NIM line of passives. Naturally, with SELIC falling, the better we make volume, the better we make the spread, as the spread is measured in percentage of CDI. If we want to look at it like this, SELIC falling, obviously, has a detractor. But it's positive for the economy as a whole. We like SELIC to fall, obviously, but for the NIM line of passives, this brings a challenge, which will be a challenge throughout this year.

Mário Leão: We can do the math we want, but anything between 20%, plus or minus, of SELIC average less than 24% versus 23% is a challenge that we and the whole industry will have in the NIM line of passives. And what we will do to compensate here is... I would like to further expand our agenda of passives.

Mário Leão: I mentioned to you, and I have spoken every quarter, how strategic it is for Santander to evolve here, Matheus. So, in practice, we will compensate with volume. So, I will bring some head in volumetry.

Mário Leão: We will seek to be efficient in price, of course, as we try to be in everything. And part of that we will compensate for with NIM, credit, which you mentioned well. We are more constructive on several lines. I mentioned this just now. We want to have growth that will not be the same in all portfolios. But I would like all portfolios to grow throughout this year, and we no longer have any material portfolio that is flat or that falls. And we, taking care of the spread, on the side of the asset, are growing volumes in an important way. In some cases, we will look for two digits.

Mário Leão: In other cases, we will have more growth in the industry line. But, anyway, we will look for a relevant growth in all credit portfolios, which, taking care of the spread, will mean the compound effect that we will have a good evolution in the NIM line, in terms of credit clients, which I hope will be more than enough to compensate for what we will have as a challenge because of Selic, not because of strategy, on the contrary, in the NIM part of acquisitions. Gustavo, do you want to comment? You commented well.

Gustavo Alerro: I mean, there are the growth speeds of the portfolios. As you commented, there is CP, there is the designated, and the high SMEs. So the speed, well, first we need to have demand for some portfolios, and the growth speed between portfolios will dictate a little what the NIM would be. Obviously, with a lot of price discipline, more volume in passives, and the tendency to effectively balance the margin with the challenges that are already set. But if we want to be portfolios, at the speed that we create, at the volume, we can equate this variable well. So, in summary, we will obviously have a positive evolution in NIM markets, which is the implicit question here, and it will obviously arise.

Gustavo Alerro: We continue to wait, of course, like all of you, for the evolution of the NIM markets, and it will happen. It is also, in a way, a given, and we expect to have an evolution also in NIM clients, with the liquid effect on one side, that we will have an anchor by SELIC in acquisitions, that we will seek part of the compensation in the acquisition business itself, and the rest, the compensation, with a positive liquid, we will seek in NIM clients on the acquisition side. I hope I have answered your question, Matheus. Thank you. Super, of course.

Operator: Thank you. Now, let's go to the analyst, Daniel Vaz, from Banco Safra. Hello, Daniel. Camila, Mário, how are you?

Mário Leão: Good morning, thank you for the opportunity to ask questions. I would like to get a view from the bank, actually, on a subject that is very recurrent, which is consignment. So, there is pressure on the rates, both the maximum by CNPS, which is a little more active, and also the additional potential of a large digital player that wants to add Share in 24. So, the first question is how to defend the profitability of this product, if there is room to improve the mix of origination, and reduce the fee, if this is being discussed. And the second is how you see a potential increase in order and portability if the bank expects this, and how to defend yourself in this regard. Is there a rate comparison? Is there a client cluster that you intend to maintain? Obrigado.

Mário Leão: Great question, Daniel. It's a recurring question from Consignado, and it's good. And it's relevant because it's a portfolio for the industry as a whole and, for us in particular, very relevant. If you take into account our expanded portfolio, we have a Consignado portfolio that represents exactly 10% of our expanded portfolio. That is, it's a relevant portfolio for Santander and we want it to be. We're happy with it, and we want it to be more and more. How do we see the pricing dynamic and the competitive dynamic as a whole? First, the price ceiling pressure is specific to INSS.

Mário Leão: We, as Santander, and I can say this on behalf of the industry as a whole, we don't find an agenda... a pro-consumerist, a pro-consumer agenda from the ceiling. In fact, the decisions made in the last year to limit the rate end up making the origination volume, this is a fact, it's not speculation; the origination volume, in practice, has dropped a few billion The Fibroblast has given itself something like 2 billion or more cells a month.

Mário Leão: If we multiply that by 12 months, we're talking about 25 to 30 billion in consigned credit and NSS, which is the cheapest possible credit available in the market, it competes with SFI's real estate, but anyway, it's a super cheap credit, no doubt, the cheapest available to that public of retirees, and many of these potential buyers are being leased and going to much more expensive financing that they wouldn't need to be So, in fact, it's an anti-consumer agenda; we have passed this to the different government forums, which is a theme of the executive power. We hope that this year we will be more successful, but honestly, Daniel, so far, we haven't been very successful. There is an echo in some government blocks; there is one in all of them, but here, I take this opportunity to say, we look at this and feel sad, in fact, because the consumer is being harmed.

Mário Leão: Having said that, we have sought to rebalance our pricing equation so as not to give up on NSS. As I said, we have grown a lot in the last year and a half, we have earned a quota, and where we have grown the most, Daniel, was precisely in NSS. And we did this, I can guarantee you, in a very profitable way. So, what have we done? We have rebalanced the pricing equation, yes, we still have, as every industry has, an important relevance coming from what we call the external channel, from the corresponding cordons. But we still have, and we have reduced proportionally our relevance from the external channel in relation to the internal channel.

Mário Leão: So, we have, in practice, invested more in being able to make the NSS, mainly through our stores, our specialized stores. So, we have evolved a lot in the ability to read which are the micro-regions where we have the largest eligible public for the NSS and transform our stores into big Santander stores, pro-NSS, for this public, and we have done this with a lot of success. So, we have grown the quota in the NSS with preserved profitability, but, obviously, the agenda is not good, or the whole industry, the way it has developed in the last 20 years with Corbus, etc., is a little out of control in the usual format, in the historical format, and we are looking to do more and more internally and trying to maintain the relationship with Corbus at different levels of profitability. The competition that comes from digital players, and It has not reached a materiality that makes our management different from what it was in the recent past.

Mário Leão: We respect it, we think it is legitimate, and we will continue to observe closely. But our agenda has to be very focused on making our consignor client and non-consignor client look at Santander as a big bank in this agenda, and we already are, and we want to be even more, with an impeccable digital experience, with stores specialized by INSS, with a multi-channel service capacity, and with a broader offer that is not only consignor, in which the client looks at Santander and says, I can serve myself here as a whole, and I do not need to have several relationships to complement me, the investment relationship, the card relationship, the real estate relationship, etc. I can have all this in a single bank.

Mário Leão: We are this bank, and we want to make this bank more and more simple, more and more effective, as I commented earlier. I don't know, Gustavo, if you want to complement me and me.

Gustavo Alerro: We'll see you next time. I'm listening to someone. Daniel, that's exactly it. We've been evolving, so the relative participation of third parties or corbans in our total production drops year after year. So we have a reduction agenda, reduction because we use our internal channels more. We are leveraging a lot of digital, a very powerful tool, and also using our own channel. So this movement we are making, in general, for the consigned portfolio and with more speed in the portfolios where there is more dependence on third parties. So this is an evolving agenda, it's going at the right speed, and, of course, there are the market challenges that you mentioned, but we are prepared to defend our portfolios with these movements, probably, in each district. Just to finish, it's a long answer, but it's an important point. We have the INSS, and we have the private sector, and we have the public sector consignment. And we have Fortaleza and the other two as well. They have different pricing and competition dynamics between the three big blocks.

Mário Leão: And we are very happy to be evolving in all of them, Mr. Daniel. So, in practice, we don't want to depend on just one. As much as the INSS is super relevant, we don't want to depend on it, as we don't want to depend on governments.

So, we have a very broad consignate agenda. And, again, we are very happy with how we are evolving and we will continue to have in this line one of our main focus lines for 2024. Obrigado. Thank you. The next question comes from Bank of America.

Q4 2023 Banco Santander (Brasil) SA Earnings Call

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