Q1 2024 Banco Santander (Brasil) SA Earnings Call
Unknown Executive: Good morning, everyone, and thank you for being with us this morning to follow our results teleconference for the first quarter of 2024. As always, this event is being broadcast live from our headquarters in So Paulo and 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. Then, our CFO, Gustavo Alejo, will do a detailed analysis of the performance. And finally, we will have our Q&A session, during which you will be able to interact directly with us. But before we start, I would like to give you some instructions.
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Unknown Executive: We have three audio options on the screen. All content in Portuguese, all content in English, or in 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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Mario Roberto Opice Leao: The questions will be answered in the language they are asked. The presentation we are going to do today is already available for download on our R.I. website. And now, I give the floor to Mario Leao to start the presentation. Hello, good morning, everyone.
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Mario Roberto Opice Leao: It's a pleasure to welcome you to our 1st TRI. It's 10.02 now; we're here live with you. And, as always, I'll start with a summary, which I'll develop with Gustavo in a little while, with the main messages of the trimester and the tone of what we want to tell you about the year. In the first block, on the left, we highlight, with some numbers, the evolution of several of the big results accounts and how we are positioning the bank for 2024 and from now on.
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Mario Roberto Opice Leao: So, it's about 2024, but obviously, it's about the next few years. We have a financial margin, year-on-year, that grows 14%. We will detail in a little while that it grows both from the client's point of view and from the market's point of view. We start to have a positive market margin after a long time, commissions, and acquisitions, also growing at two digits. This is super important because it reinforces what we've been talking about with the market for a few years, the need for us to diversify the portfolio and build, in our first big growth cycle, a Santander with a lot of market dependence and a lot of credit dependence, especially in the low-income sector.
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Mario Roberto Opice Leao: And we, since 2022, have been working to continue making credits, but a more and more diversified credit, and we show this with a lot of emphasis in this TRI, and also make a lot more commissions from a wide base and make acquisitions with an emphasis that we had never given. So we show, in this quarter, with a lot of consistency, this diversification of the portfolio with very potent numbers. We have a PDD that also drops two digits year-on-year; it also drops two digits year-on-year, as we will see in a little while, which shows that our strategy of diversifying the portfolio and of building new safras since 2022, with the credit quality that we have been measuring, testing, and retesting, is working exactly as we would like.
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Mario Roberto Opice Leao: There is an expanded portfolio that grows almost two digits. In several portfolios, which are new in portfolios, where we chose to grow more, we have an annual growth of more than two digits or even more. Obviously, we are working to get more, but with a very clear solidity. ROE is already at, or slightly above, our cost of equity, measured by the market average, in the first 3B. Obviously, we have the return of ROE being touched, and in the first 3B, this is already a step in the right direction.
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Mario Roberto Opice Leao: On the right, I highlight, and then I evolve a little more, some great messages, which are from the 3B, but they are more messages for the year, that I wanted to highlight here for you, which are all very important. First, we are in the middle of a transformation. We launched in January and, throughout the first trimester, we developed what we call a very complete transformation in our store model. I will have the chance to highlight a little more in the future, but, in short, we reformat the way we work with stores, the way we work inside stores, and we actually have a much more connected, much more multi-channel experience, using the store as a great element of differentiation and convenience, we started to have the middle-income customer service done through what we call platforms, regionalized platforms spread throughout Brazil, and with that, a much better ability to cover these middle-income customers, which are millions of customers with a huge potential for profitability at our base.
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Mario Roberto Opice Leao: We do, and now we deliver something that I've been talking about here with the market for several quarters, we relaunch, refound our massive income operation. This was literally two days ago, on a Sunday, and I will try to comment a little more with you about it, which is our Movement Starts Now, which is more than a new offer for massive income, it is a complete repositioning of the Santander brand, the way we position ourselves, the way we communicate, the way we talk to the client, and yes, for massive income, which is the great base of our clients and of the whole market, a much more precise positioning, much more assertive, much more simple.
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Mario Roberto Opice Leao: Moving on to slide 5, I will comment briefly, it couldn't be any different, starting with the client's centrality. We are still extremely focused and obsessed, I would say, with winning and maintaining the client's priority, that is, being the most present bank in the lives of our clients. This is our obsession; it's priority zero.
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Mario Roberto Opice Leao: And to that end, we are working hard on all fronts, channels, segments, products. We show, below, on the left, a very positive evolution in NPS. So, year on year, we have NPS improving in a material way in virtually all channels, in all segments. If we look at product by product, we also have important improvements in accounts, cards, and a number of others. So, it means that we embrace, with strength. I would say that we grasp the client's experience theme with a lot of emphasis and have invested a lot in it.
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Mario Roberto Opice Leao: So, obviously, here, we are never satisfied; we want to keep improving, but we have made a material improvement, year on year, and we are still, throughout this year, super focused on that. We have increasingly better customers with SAFRAs. So, that argument that we, in the old SAFRAs, had the profitability challenges that we know well, and that, for almost two years, I have been exposing here to you, along with Gustavo, with the R&D team, we have increasingly better SAFRAs, the profitability of the most recent SAFRAs, the 23 SAFRAs.
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Mario Roberto Opice Leao: So, here, on a 100 basis, we improve the profitability of this SAFRA by 56%, while the 22 SAFRAs also have an important improvement in profitability, and the older SAFRAs, the 21 SAFRAs, have a profitability that is even falling, due to the digestion of this portfolio, where we grow a lot between 2020 and 2021, and we know that, throughout the last few years, and a little bit still in We have a client-based base that grows year on year; of course, we will seek to grow more rapidly. The client-based clients are, without a doubt, the ones that bring more profitability to the client.
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Mario Roberto Opice Leao: So, every model, every strategy is focused, as I said, on the client's centrality, so that we can be the most active bank in the client's day-to-day, and, with that, have more links. Here I highlight some of the growth levers. I'll start with Select.
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Mario Roberto Opice Leao: We've been talking about Select for several quarters now, in a very consistent way. In fact, we've been talking in a very consistent way about almost all the major themes here, which is a sign that the strategy we defined back in 2022 and perfected in 2023 is the strategy we're following, and I hope to talk for many quarters with you about the same major themes for many years. High income is a big focus here at Santander.
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Mario Roberto Opice Leao: We have in Select a powerful lever for growth, for rentalization, for linking, for cross-sell. We had, not long ago, 600,000 clients in Select, and here we are very proud to show the number of 1,400,000. You'll remember that, a short time ago, I talked about the ambition to reach 1 million.
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Mario Roberto Opice Leao: We've reached it; at the end of last year, we had already exceeded 1 million, and we're growing even more for this first quarter. Obviously, we're on an aggressive count to reach 2 million clients in Select. We hope to achieve this in the short and medium terms, but we're growing consistently. We grow by bringing in investors. But we're also bringing in buyers, which is important. Select is not just about investors.
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Mario Roberto Opice Leao: We have almost a third of the APF's credit portfolio in Select clients, obviously with a lower credit cost and a portfolio that is not less than 68 billion of credit in Select. We, along with that, have the best liquid capitalization in history in Select. We'll look at the next page, in retail as a whole, I'd say in the bank as a whole.
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Mario Roberto Opice Leao: So, on the investment side, on the client-investor side of Select, we're doing a better and better job consolidating the strategy we made when redesigning Select almost two years ago, when creating our advisory channel, which we call D2A, and when doing all of this super-integrated with a complete offer for high-end clients. On the next page, which is page 7, I emphasize a little more on the topic of investments. As I said in the beginning, and I have been talking to you since 2022, we had a great gap in the bank's business portfolio.
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Mario Roberto Opice Leao: We recognized this and started to invest consistently in focusing the organization on the topic of passives, on the side of each balance sheet, and being able to consistently redesign the mix of bank captures in Brazil, which has always been more proportionally based on attacks and institutional clients than in retail, be it PJs, retail, be it PFs, mainly, of which 5 billion were from this advisory channel, which is our AAA. We are consolidating the AAA. We haven't even reached 2,000 advisors, which is our public ambition.
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Mario Roberto Opice Leao: But more than a temporary ambition, we think this is the right number to be able to cover, at the level of coverage, of load, of clients per advisor, the lowest load in the entire market, which means a unique ability to give advice to the investor client, which we believe we have here in Santander. We have, in this AAA channel, an average of 3.7 million per advisor in the quarter, which is a very powerful number, already a leap compared to last year, which means that we are consolidating this strategy.
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Mario Roberto Opice Leao: Without a doubt, we want to grow even more, but we are already at a level that makes us very happy. Toro is our digital broker, which we are increasingly seeing ways to integrate and be able to have a unique approach to the part of physical person brokerage, multi-channel, but based a lot on digital.
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Mario Roberto Opice Leao: Toro is also growing solidly in the TRI; it has a growth of more than 3 billion, it is reaching almost 20 billion in assets under custody, and it also has, as well as in the PFI retail, as a whole, a super high NPS. Our private has a growth of almost 2 billion in the TRI; we hope to accelerate this throughout the year. Once again, it is recognized as the best international private bank in Brazil and is consistently gaining shares.
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Mario Roberto Opice Leao: So, as a whole, the message of investments is the organization's key has also turned to passives. We are looking at both On and Off Balance in a much more solid, much more focused way. I am sure that this will be one of the great levers of differentiation in the richness of our results and of the business portfolio over the next years. Here I cover, in two pages, what we have called, since 2022, strategic business. This is to emphasize to the market where we chose to focus and why we chose to focus, and how we are delivering. So, I will highlight four big businesses.
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Mario Roberto Opice Leao: The first is the business of cards, which has been gaining more prominence here in the publications, while since the middle of last year, we have been selling cards in a more emphatic way. We are back to the growth of cards, literally with the same level of appetite, but with much more advanced technology in terms of the ability to personalize customers, ability to differentiate the non-customer that we want to bring here, the non-customer that we don't want, and a much better ability to activate the customers that we already have in the bar, which I will talk more about in a little while.
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Mario Roberto Opice Leao: So, in practice, we are growing cards, selling cards in a broader way than we did a year ago. This is bringing an increase in turnover, year on year, which is this first graph on the left. And in each quarter, we are increasing our total turnover.
Mario Roberto Opice Leao: We are actually increasing the average spending per customer and also increasing the customer base for the first time in a long time. I would say that for the first time since 2021, we have had an increase in the customer base in the quarter, year on year, which is these 3% that I show here in the second graph, and a turnover that grows even more. That is, we grow the customer base, the customer base grows again, and we have an average spending per customer growing a lot. On the right side, I talk about the consigned business. I've been talking about it every quarter with you.
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Mario Roberto Opice Leao: We have consistently, since 2022, worked a lot to earn the quota and earn it with quality, with both the right price and the right level of risk. We have better credit performance than the average of the system. And even so, we are earning quotas. And even so, we have a record level of production. The portfolio grows to 72 billion euros.
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Mario Roberto Opice Leao: And we have the highest level of production that we've ever had, which the graph here shows as well. So, in summary, Consignado is an extremely competitive product, as we know, which has practically all the incumbents, medium banks, and also digital ones coming in. We are very confident in the strategy, in our multichannelity in Consignado, in our diversification. We have a very strong and growing Consignado in the NSS, we have a very consolidated Consignado in governments, and we have a very strong Consignado on the private side.
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Mario Roberto Opice Leao: Here, zooming in on the financial side, we have a business that is a market leader, as we know, that continues to work with a rate above 20%; we are at 21%, approximately. Here, it is not the rate by which we are doing well; we are also at record levels of production in the financial sector. We started the year with the same effort that we finished last year.
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Mario Roberto Opice Leao: In fact, since August last year, we have been working very hard on the recovery of the financial sector. Why did we reaccelerate in the financial sector? Because we saw, during 18 months, that all the adjustments that we had to make in the portfolio, we made, and we saw that it was time to resume, always with higher ratings, so we continue with a very high rigor, and I would say with a great restriction of the customer base with which we are operating more, we are managing to penetrate, and the portfolio is growing, with very positive production, given both our relationships with the stores, as well as with Agro has a year, not agro as a whole; some of the cultures have a more challenging year this year, on the soy and corn side, while some others are having a super positive year.
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Mario Roberto Opice Leao: Santander embraced agro 8 or 9 years ago. This embrace will continue this week, including the Agro Show Week. We will be there, with presents and photos.
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Mario Roberto Opice Leao: We continue to grow in agro. Possibly, we will have a less strong level of growth than we have had in the last two years, when we practically doubled the portfolio, but here you can see that we have grown a few more B's in the portfolio. And we continue, of course, monitoring each case super closely, but with a medium and long-term approach, as it has to be in the case of agro.
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Mario Roberto Opice Leao: Here we are quickly covering business, or businesses. We, on the left side, covering SMEs, still have the ambition to double this business. We believe that we can double this business in a few years, and we will look for that.
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Mario Roberto Opice Leao: Of course, growing together with the clients. We continue to grow in credit, and we continue to grow in transactionality. Here, giving a little more of a zoom on what we are doing with the service to small businesses, we take, in practice, the service of small businesses within the stores. In this new redesign of the stores, we put the specialists of small businesses spread out around the stores, covering what we call the micro-regions.
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Mario Roberto Opice Leao: We expand this team a lot, we put in many more hundreds of people and a whole management structure to be able to have the service of small businesses, in fact, much more pulverized. We brutally reduce the average coverage radius.
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Mario Roberto Opice Leao: We often increase the number of visits per day that each specialist can do. So, basically, what we want, in short, is to dominate the micro-region, dominate the surroundings of the stores, having the stores as a hubs, but no longer having the figure of the specialist there in the store, serving the flow that comes and continues to come into the stores. So, we start to have a much more in-house service for the client, much more where the PJ is, than doing what the PJ has to come to the bank for.
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Mario Roberto Opice Leao: This is quite powerful, quite innovative. We believe that we will have consistent gain from here. On the side of big companies, we still have very solid growth for the franchise. We are still a leader in several markets where we have been operating for years. We are number one or number two in several league tables here consistently.
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Mario Roberto Opice Leao: We have a franchise of investment banks that is consolidating more and more. It is true that the first quarter was not the most promising in the world for investment banks, in M&A, and especially in the variable income market, but in fixed income, where we have a very consolidated franchise. We also had a very good first quarter as a market, so we have a very positive dynamic in the fixed income market, while the variable income and M&A are still to be desired, but we hope that throughout the year, they will improve. But the franchise, as a whole, grows, it grows in revenues, and it grows in profitability. We have been very disciplined here at PJ Grande in not necessarily looking for quotas, obviously with a great focus on profitability.
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Mario Roberto Opice Leao: And with the fixed income capital market quite strong, we have competition from funds and market operations, and we often just let the operations pass and act more as a distributor than as a loader, as a balance. Here, on my last page, and then I'll pause, here, perhaps, is the most important theme of today's session because it is the summary, and I'll make it brief, of our refoundation, of our repositioning, and the relaunch of our Massive Income Strategy.
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Mario Roberto Opice Leao: Before I talk about the proposal and the repositioning itself... We call it Começa Agora. Why are we doing this now? What is the context for which we have decided to do this now?
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Mario Roberto Opice Leao: First of all, we're a digital-first operation. We're not digital-only, and that's good because we're a multi-channel operation. But we're digital-first. More than 90% of our clients use an app. We have a reduction of more than a third in the number of visits to stores.
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Mario Roberto Opice Leao: We have seen a reduction of more than 20% in the number of calls to our center, to our remote service. So, the client was educating themselves, we were educating the client, and, of course, the market was also educating the client to make our relationship mainly a digital one. Second, we have a very powerful remote conversational agent. We have First Call Resolution, that is, the ability to answer customers on the first call, which is reaching 97%.
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Mario Roberto Opice Leao: We have seen an increasing increase in the use of chat within the remote channel. So, the remote channel that we built it, and most of the payment banks built it, by phone, and we are increasingly migrating from phone to chat. And this chat, which is both the bot chat, the chat with non-generative artificial intelligence, and then the human chat, we are bringing the DNAI element, the Generative Artificial Intelligence, to support us, to bring productivity gains, to bring the ability to serve the customer.
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Mario Roberto Opice Leao: So, the digital context, on the one hand, and the remote conversational context, on the other, made us launch this redesign of the stores at the beginning of the year. I have already commented on the theme of small businesses, quickly commenting on the average income. What we do, as I said at the beginning, is that we also take the specialist, him or her, who served the average-income customers, and creates the concept of platforms, Van Gogh platforms, medium-income platforms, which are, basically, physical spaces that are inside the stores, in sections, or in other offices that we have spread throughout Brazil. We have almost 200 offices like this.
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Mario Roberto Opice Leao: So, we are serving, in a regionalized way, our medium-income customers, and with that, allowing these specialists, him, or her, to provide proactive service and also reactive, in a much more assertive way. So, here we hope to take a huge leap in our ability to bring medium-income customers to Santander. It is just beginning; I will update the market over time, but this is an important launch that we also did at the beginning of the year. Thus, the store is no longer the owner of a client portfolio.
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Mario Roberto Opice Leao: This is a leap that we take. The store had its own result, coming from the result of the real estate loan made two years ago, from the credit card sold a year ago, and so on. If we take that away, the store becomes a point of sale and a point of service.
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Mario Roberto Opice Leao: It is an element of... and will be measured by how well they did this sale, or the service, in case it was not a sale, the start of the project, the start of the activity, the start of the dream, the start of the investment, of the consumption, in short, the day is full of beginnings, and from now on, we start to position ourselves as the bank that, as your most present bank in the lives of customers, we are the bank So, this new value offer, this new repositioning of Massive Income and the Bank as a whole. It's a very powerful and important step that we're taking. It was literally a day and a half ago.
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Mario Roberto Opice Leao: I'll take the opportunity to break the protocol here and share with you the video that counts to be able to make it more tangible, better than me talking. It's the campaign's own video, a short video, and from now on, I'll pause for Gustavo to bring the numbers. Thank you. Not every beginning is easy, but at some point, everyone has to start. Free has arrived, the beginning of a new relationship between Santander and you. Lighter, more digital, simpler.
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Gustavo Schroden: Free account and credit card, for real and forever. 10 days free of charge with the PIX key. Unlimited withdrawals. Free, without asterisks. Start now. Santander. Thank you, Mario. Good morning, everyone.
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Gustavo Schroden: With this hook, let's start our presentation. Let's start with the results of the financial margin, which highlights our growth as a commentary. The NIAI showed growth of 14.5% compared to the previous year and 7% over the last quarter, showing positive performance both on the side of customers and in the market, which is very important.
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Gustavo Schroden: This quarter, we continue to see the same trends that we highlighted at the end of 2023, with the increase of our credit card in the retail sector and the administration of Selic benefiting from our FAN costs. In addition, the growth of spread levels with controlled credit quality, which I will detail a little later, demonstrates our assertive strategy of gradual resumption of business dynamics. On the other hand, the market is undergoing continuous evolution and is at a positive level, in line with the expectations that we have been commenting on in the previous trimesters.
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Gustavo Schroden: We are optimistic about the performance of the financial margin, which should reflect, in a positive way, the recovery of growth. Now, on the next slide, I will comment on the credit card, which had growth of 5% during the year. Good start, retail, in the physical sector, vehicle financing in the financial sector, and small and medium-sized companies.
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Gustavo Schroden: As for large companies... As Mario already mentioned, we observe a more competitive credit environment, and we will prioritize profitability. In addition, we registered an impressive growth of 23% in the private and guarantee securities portfolio in the last 12 months. And this resulted in the total growth of our entire portfolio, expanded in 8 months. Looking at the physical person, the consigned employee, and the credit card showed good performance, despite the seasonality of the previous quarter, which we always observe, especially in Cartagena. In relation to Consignado, we are advancing more quickly in relation to the market, and we are expanding our market share. The annual growth of 17% in the year and 6% in the quarter is quite robust.
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Gustavo Schroden: In vehicles, we observed a more benign scenario for the entire market, and we are following this recovery. We kept our prominence in the market share segment, which has already been mentioned. And it is important to comment that, once again, our solid agricultural evolution, with an expansion of 39% per year, is important for our strategy. On slide 15, I give some important points about our impassive performance. In the last 12 months, we had a growth of 10% compared to the previous year. After the deadline, letters and invoices mainly showed the greatest growth. And despite recent regulatory changes, we were able to move forward with the unauthorized letters in a satisfactory way.
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Gustavo Schroden: There may be other changes and challenges regarding the collection of these titles, but we have a very good strategy. In any case, we are advancing in the implementation of our growth strategy with the goal of achieving a greater mix in retail, as we have already commented on in our vision and strategy. And as a result, looking at the last three years, we observed an increase of two percentage points in the relationship between the physical person and the legal person. As I said, it's an evolution and a long-term race.
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Gustavo Schroden: In addition, the relationship between credit and deposits has shown better historical levels, approximately 94%. Now, I present the details regarding the commissions' performance. We recorded a slight trimestral contraction that comes from seasonal aspects, which you are familiar with.
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Gustavo Schroden: On the other hand, we had a very positive expansion throughout the year against ANU, with a growth of 13%. This comes from credit recovery and greater transactionality with our clients. And the expansion of credit has played an important role in this increase in revenues in line with the credit operations. We also had an increase in invoicing and sales of cards, as already mentioned, and with the spending higher. Looking at the figures... Even considering the seasonality of the quarter, the performance was quite robust.
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Gustavo Schroden: This result, driven by the commercialization of new products and the fall in cancellation, that is, the best performance of the insurance operation the year before. Next slide, please. I will present the details about our assets. The quality of our assets, in fact. Excluding the one-off effects we had in the previous quarter, we observed that GDP remained stable in the quarter, without signs of worsening.
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Gustavo Schroden: This stability, added to the expansion of the portfolio, resulted in a drop in the credit cost over 12 months of 70 basis points. We close the quarter with a 3.8% credit cost. It is noteworthy that a smaller volume of recovery is due to a more critical approach to recovery, as we have been indicating, and which is the most selective criteria to proceed with the renegotiation. And such a policy also impacts the renegotiation of the portfolio, which has a tendency to fall, where we reach 6% with an increase in coverage to 54.3%.
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Gustavo Schroden: Finally, the NPO Formation had a small drop, still affected by the negligence of the renegotiated portfolios, and this effect remains as we move forward in the purging of these portfolios. And there's a little bit of seasonality in the quarter, but it's pretty controlled.
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Gustavo Schroden: Now, let's move on to the next slide and focus on the evolution of our Nadim Plan indicators. As Mario has pointed out, after a two-year period dedicated to adjustments, we have a well-balanced concession and properly squared portfolios. In relation to the short-term indicator, although there was no change in the overall indicator, we registered, as you can see, an improvement in the physical assessment.
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Gustavo Schroden: This advance also had a counterbalance in legal people with punctual effects, and they also don't bring any kind of concern to us, OK? On this long-term indicator, we saw a specific marginal variation of 30 base points in small and medium-sized companies, but it is in virtue of the renegotiation portfolio that I had already commented on in the previous quarter that there could be a little variation, OK? In the next slide, we will talk about expenses. We observed a drop of 5% of personal expenses compared to the trimester. This fall was mainly due to the seasonality of administrative expenses, some of which occurred at the end of the trimester.
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Gustavo Schroden: And personal expenses were influenced, as you know, by the landslide that had an impact of 4.6% in 2020. But what is important is that the optimization of our footprint has been fundamental to support the control of our expenses, and we will continue to look for the expansion of our business with the reduction of the cost of service. So it is very important how we handle the whole issue of expenses, which is going on in a very satisfactory way.
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Gustavo Schroden: As a consequence of the effective management, which I just commented on, and coupled with the increase in recipes that we saw in the quarter, we have an improvement in the efficiency index of 3.0. 3.3 percentage points, and we are below 40%, which is very positive. Now let's go to the results of the quarter to present our DRE. During the year, we observed a 14% growth in total revenues driven by NIA and commissions.
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Gustavo Schroden: We kept PDD and expenditures under control, which led us to this profit of R$ 3 billion, which represents a growth of 41% in 12 months. The profitability improved, reaching 14.1% of ROE. And we finished the first quarter of 2024 with a solid balance, as evidenced by our CTO. And finally, the results obtained.
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Gustavo Schroden: They are aligned with our expectations. We are committed to developing a base of more stable and sustainable results, focusing on the gradual recovery of our profitability. Thank you. I'll pass it to Mario for the final considerations.
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Mario Roberto Opice Leao: [inaudible] To wrap up, so we can have time to do a detailed Q&A at the level you want here, five main messages. To wrap up, again, they are messages from the TRI, but they are messages that I wanted to share with you, investors, analysts, the market as a whole, for the year and for our positioning from now on. So, the first big message.
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Mario Roberto Opice Leao: We believe that we have, in the long run, consistent growth in revenues, derivatives of diversification of the portfolio, derivatives of new calibrated safras, derivatives of a super clear strategy that we defined back there, that we are following in a very disciplined way, without surprises, without one-offs, without horseback riding. So, we have a positive view of this growth in revenues, and we hope to continue in the same positive way, both in customers and in markets. And, obviously, the whole strategy is focused on that. Our credit costs are still improving.
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Mario Roberto Opice Leao: And we believe that this will continue throughout the year. We are continually looking for a healthier portfolio. As I said, all the growth that we have made in the strategic businesses that I listed has been done with the same rigor that we have used in recent years. So, since 2022, we have had an approach with concession to new customers and especially to current customers. And it is this same policy, this same approach that we have been following since then.
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Mario Roberto Opice Leao: We keep working hard to grow in the businesses we choose to grow in, which doesn't mean that we grow the same in everything, and certainly we don't grow the same in all client bases. But we choose some businesses for which we want to bring the client closer, we want to bring the famous principality, and this business has grown consistently, and we believe that it will continue to grow over the next three months and years.
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Mario Roberto Opice Leao: We've made a big leap in our physical operation, I would say, in our multi-channel operation, in our channel operation, launching the new positioning of the stores and, in fact, integrating, definitively, the stores to our multi-channel model, which we call continuous conversational. So we start to have the store linked to the chat, linked to the app, and all this bringing a continuous conversational experience to the customer, which, in our vision, will make a huge leap in the relationship, And, obviously, the call for now, the start now, that we make this big launch of massive income, and more than massive income, of how we position ourselves in the bank as a whole in relation to the market, of how we sign, of how we communicate, of the tone of voice, of the color, of the campaigns, and, obviously, the tangibility of all this in a much more powerful offer, much simpler, much more digital, and that we believe that, over the next few years, will bring many more clients that today are inactive, that will become active, and not clients that will want to become Santander clients, be Santander in the Free proposal, be Santander in other value proposals throughout the segment. With this I pause, thank you all, and now we have the Q&A time, Camila, please.
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Camila Stolf Toledo: Now it's time for the Q&A session. From now on, everyone will have the opportunity to ask their questions. If you want to ask a question, just click on the hand icon at the bottom of your screen.
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Camila Stolf Toledo: We will answer these questions in the language they are asked. I ask that each analyst ask only one question and ask for clarification at the end, so that everyone can participate. Our first question comes from Daniel Vaz, from Banco Safra. Hello, Daniel. Good morning. Good morning Camila, good morning everyone, Mário. Gustavo, how are you? I would like to comment first on the dynamics of liquid capture.
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Daniel Vaz: We saw that in the AAA channel, the dynamics of capture per assessor were very strong this quarter, and you had an increase there of, if I'm not mistaken, 5B of liquid capture in this channel. So I think it's pretty strong there in the quarter. And then in the private, which is a little below the last couple of quarters.
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Gustavo Schroden: Since we are living in a market that is a little more pessimistic, how did you see these different captures, if you could comment on the nuances? [inaudible] Daniel, good morning. Thank you for the question and thank you for participating. Looking at our business as a physical person as a whole, which includes the private sector, we were actually quite happy with the quarter. As I said earlier, we are here each quarter to share with you and comment along the way. We are seeing the consolidation of a strategy that is an ultramarathon, a theme for many years.
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Gustavo Schroden: Back in 1922, I used to say this, but it's a theme for at least five years, for us to focus every day so that we are at a very different level from what we were back then.
Gustavo Schroden: I think we are taking this step. So, with each quarter, I will share with you the progression. I do it with a lot of pleasure to see that we are, in fact, growing.
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Gustavo Schroden: We have a combative offer, in a good way. We have a super close coverage proposal, personalization of contact, and of offer, and obviously, a range of products that today doesn't let anyone down. So, as a whole, the P&F was super good. It was even better in retail, it's true.
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Gustavo Schroden: The AAA is a big arm that we use to capture in retail, but we have the Select, which we call non-characterized in the AAA, which is also doing a super good job, and we have the theme of captures beyond high income, Daniel, which obviously gains more and more relevance. So, in this redesign of the average income that I mentioned, we will have a golden chance to be able to work much better with the coverage of these clients, which, as I said, are millions, and the investment agenda will certainly benefit.
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Gustavo Schroden: And with the offer from Free, honestly, we will bring much more of this client here or back here, and that investment, which is not a long-term investment, but that day-to-day investment, should also come here more and more. So, we are very positive. The Private was less impactful or less forceful than it had been a few times last year, but nothing to worry about.
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Gustavo Schroden: The Private, in my view, suffered, Daniel, maybe a little more with the theme of the letters, which is not an exclusive product from Private, but obviously, Private, not only ours, but Private in general, consumed a lot of the letters, and with the theme of the lack and the ties themselves, obviously, there is a drop, and this may have held a little the demand of Private clients, but nothing to worry about, we have a commercial agenda on another level in Private, last year, as I said, the market even set a record for us, so we kept growing, and this first trip, for me, is not the summary of what we expect it to be on average for the year, so I'm very positive. As a whole, the investment agenda in Private is quite consolidated here, and now it is, each trip, each year, we put Santander on the level I want to put it.
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Gustavo Schroden: Thank you. It's just a little follow-up, I think this part of the lyrics is very interesting that we heard internally that this had a re-acceleration in the trimester. I think in February this theme was very stopped.
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Gustavo Schroden: And then in March, we heard again from the big market catchers that these lyrics came back to have a little more of a leap. If you look at your experience in March, it opened up until now. Did this come back, in fact, this capture via lyrics?
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Gustavo Schroden: Well, I'm not going to talk about April, I'll talk about it in a little while, but we actually saw a valley that the whole market saw, so for a few weeks, maybe a month, the volume actually decreased a lot. I think after that, all the broadcasters, Daniel, reaccommodated themselves, and we were one of them, and, in fact, the volume has since recovered. So there was a period of valley, a hole, in a way, in which the volumes dropped a lot. This proportionally affected the private sector more than the P&F retail, which ends up investing in instruments in a more diversified way.
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Gustavo Schroden: And I believe that, both in terms of letters and in terms of commercial activity itself, which obviously cannot depend only on one type of product, we will have a greater expansion from the second trim. So, again, nothing to worry about. It was a positive pickup, which is good, and we will continue to look for more and more, and also consolidate our business in the ultra-high income or higher heritage, such as private. I will now call Mario Pierri from Bank of America. Hello, Mario.
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Mario Pierry: Welcome. Good morning, everyone. Congratulations on the result. I would like to focus more on the margin with the market. We saw a positive result after seven quarters of losses, and the Delta, looking at it year-on-year, is almost a 2.5% result. I'd like to understand how you see the evolution of this line, especially if we have a scenario where the fall of SELIC is a little more gradual than what was being estimated at the beginning of the year. Do you think that it gives me...
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Mario Pierry: I mean, I'd like to understand the trend, how you see this line, and if this change in the SELIC scenario would have any impact, positive or negative. Thank you.
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Mario Roberto Opice Leao: I'll pass the ball to Gustavo. Thank you, Mario. Thank you for participating. During these negative trimesters, you mentioned seven, we also talked to you during this time, in the dissemination meetings and subsequent meetings, that we had a very clear agenda for this line of Magicos Mercados. I said at the beginning that we historically had a very large dependence on the Magicos Mercados line, and you have been following the bank for a long time, you know that from 2021 to 2022.
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Mario Roberto Opice Leao: Do you remember the size of the step down that we had, only in this line, 10 billion? So, obviously, with this agenda, we have been re-pricing the portfolio over the years. So, part of the improvement comes from the re-pricing of the pre-fixed portfolio itself, of our retail operation, of the financial one, and, obviously, part of that comes from the reduction of the SELIC itself, which reduces the cost of our funding from the point of view of the funding of this pre-fixed portfolio that we carry.
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Mario Roberto Opice Leao: So, the entry this year in the positive number is also in line, and I think it is not a big surprise for you; it is the realization of something that we had, in a way, suggested or indicated, and we hope that this line will continue to behave well throughout the year. The SELIC affects, in part, and part of the pre-curve itself.
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Gustavo Schroden: The pre-curve is raised, which makes the starting point of the pricing of our pre-fixed portfolio, the financial one, and the retail one, more expensive. So, in practice, we have to raise the price for the end customer if we want to maintain the same level of profitability, and we are trying to maintain the same level of profitability. So, if we have an environment in which we can't adjust the tip of the pre-fixed portfolio and have to give up some of the buildings, of course, the effect of a higher pre-curve can affect the profitability of the portfolio, but we haven't seen that yet.
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Gustavo Schroden: And on the side of how much it costs to carry our pre-fixed portfolio, a SELIC that falls more slowly makes us improve the result of this piece, which is the piece that finances our pre-fixed portfolio, which we carry, as all major banks do. So, yes, there can be some effect, but since we don't expect a change in direction, we really don't expect SELIC to go up again, as part of the market has started to believe.
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Gustavo Schroden: We continue to be constructive in relation to how interest rates fall and that interest rates will go down a bit this year, and we don't believe that next year they will go up again. We are not necessarily worried that we will have a reversal of the trend of this curve, but I leave it to Gustavo to add. Mario, it's good to talk to you. No, that's exactly what it is. The script hasn't been changed, so we have the same script. More or less, the speed in Selic's cut can make the same script, but the distribution of the script in the semesters is a little different.
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Gustavo Schroden: But, in fact, the script hasn't changed for this reason. So, even with Selic not falling at the expected speed, we also have the benefit of the pre-curve, which has a positive inclination, and, as we create the portfolio in the positive inclination of the pre-production, this is well matched. So, again, there is no change in the script. The script is clear to us. Maybe there will be a distribution of this script in the quarters.
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Gustavo Schroden: Great. Very clear. Thank you very much. The next question comes from Eduardo Rosman, from Banco BTG. Hello, Rosman.
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Eduardo Rosman: Good morning. Hi, good morning. Congratulations on the results.
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Eduardo Rosman: I have a question here about principality. I think all banks have talked a lot about principality, which is the name of the game. And we also saw during the presentation the importance of the payment sheets for clients linked to Santander. So I would like a little more detail about the strategy here. How do you see this strength in a scenario of evolution of Open Finance, which is one of the objectives of Banco Central, but also with this potential new social platform?
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Eduardo Rosman: Some banks are very excited that it can help to unlock the private contract. So I would like to understand how you see the positioning of Santander here in terms of payment, and how to go to the attack and not just be defending in a scenario where the sheets may potentially lose some value in the future.
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Mario Roberto Opice Leao: Thank you. Thank you. That was a great question.
Mario Roberto Opice Leao: It is true that the potentially detractors or challengers elements of a strategy to pay for the leaflet, to gain new clients, to gain principality through the leaflet, these detractors elements are growing over time, but in fact, we see Open Finance as a super positive agenda because it is also an opportunity for us. It is not necessarily made to take value from incumbent banks or Santander. In our view, and in my view, it is made to give value to Santander.
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Avi: Like ours with regard to non watch market.
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Avi: They can put off for DFAST, and Chillers and cheap like albeit afforded in castle, principally not and when to violence Hoyas.
Mario Roberto Opice Leao: As long as we know how to approach it right and see it positively, as you said, if we have an attitude of attack and not of defense, this is the attitude that I guarantee that we are also defending. Every attacker has to defend, but we have a mentality of a net winner and not a net loser here.
Avi: Whatever you end up with identical Socotra Dallas Matt's question Hossein on variety of additional acreage you think is funneled albums, Brussels ever dodgy, he'll say remains a potential putting so much data authority. So just actually avoid it's nigel myself LNG backup of Florida.
Mario Roberto Opice Leao: So how do we do this? We do this with an offer. So the leaflet is a vehicle through which I have access to a client base. But the leaflet alone guarantees very little. It guarantees an account opening and, eventually, a salary account, because that's how it works. But I don't want the mechanical element of the leaflet, Osmar.
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Avi: CIT off although there's one single bank sort of something that most of US don't I'm, Arizona state Buffalo or something that <unk> said I think is a positive a mainstay follow. Thank you wanted to jump back in August the phase I assets surgical patterns because Mr. <unk>.
Mario Roberto Opice Leao: I want the element that allows me to actually work in the principality. So how do I actually earn through the vehicle that the leaflet allows me to do? How do I gain the principality, which is what actually changes the game and obviously brings profitability, the ROI, the bottom line that you want to follow, that we manage? With an offer. And the offer is a series of things. The summarized version of this, we can detail it later; the summarized version is that I know how to segment really well, and I know how to understand the blocks. And here we are not just talking about average income as one thing. Average income is probably 6, 8, 10 different classes.
Avi: The main thing Dana on Apple to Apple and Amazon stock momentarily, the Argentinean net winner, noting that lose rocky.
Avi: How much phases.
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Avi: First of all we already started interpreters onto Hawaii bottom line, you will say snack adequate package as yet.
Mario Roberto Opice Leao: High-income also has different classes; there is the high-income taker, I mentioned here that almost 30% of our credit portfolio, several JPFs, is a taker, and there is nothing wrong. There is a super high loss absorption, we have a hyper-profitable portfolio there, and I want to grow more in high-income credit. And there is also, of course, the high-income investor, and there is that high-income investor So, even in high-income areas, there are several classes, and in low-income areas, even more.
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Mario Roberto Opice Leao: So, the ability to segment or sub-segment is super important, and from this sub-segmentation, going more and more into the person, and not only into the cluster, which is what I call hyper-personalization, which, yes, a lot of people have talked about it, but I would say that we are advancing a lot in completely redesigning our CRM model, completely redesigning our systems of models and credit policies. We can In practice, with the ability to sub-segment and personalize, we can understand what offer, at what moment, and on what channel, in what context, I have to offer to that client. I think that's what changes the game.
Avi: No category correctly as you think of American Airlines that you are testing meso, if I had anything vital sclerosis, and a bunch of Haynesville migraine talk about largest Sigma Tau sub segment is preparing potential parties as a sub segment of film in the calories might not be solely the notional cluster Jaco Schoeman EBIT personalities are some kissing dominion's earnings followed the juice.
Avi: Strategically stuff and sell Boston Sheen, Okay. This ample transformational small little sorry, Amy hit Disney a competitor mentioned also Sistema Jimbo there is a police because you could add to his part of the post Panamaxes, Nebraska Cacapa subjects from Sigma inside your persona Rosa <unk> factor in chemo meaningful inky can now compare so think of it as it particularly in truck.
Mario Roberto Opice Leao: So, Folha is a big channel from which I have a large client base, and there are many millions of Folha clients that we have here, but if I do well in sub-segmentation and hyper-personalization, and I offer exactly what that client needs, in the context that he needs, with the language, and with the access, and what I call multi-channel conversation, that this client needs, then we have a chance to win the game, and that's what we're working on, and that's why the re-launching of massive income offers, for example, that's why back there we re-launched high income, that's why now I platformize my mid-income, so all the pieces in the background are connected, and it's the strategy that I've been commenting with you and other analysts for a few years, and that we're putting the pieces to run in the sequence that we get, some in parallel, and all this converging for us to actually have the real chance of having the lead, having Folha as one of the big vehicles, but not the only one. I hope I was able to answer well here. No, excellent. Thank you very much. Now we go to Thiago Batista from UBS.
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Avi: But it shouldn't own because you increased the most and that's on the Sigma into Michigan.
Thiago Bovolenta Batista: Hello, Thiago. I would like to focus a little on Select. Impressive knowledge that you are showing in this segment, 1.4 million customers. You have already commented, Mario, that you have already reached 2 million customers; this will be a little above what the market leader is. This portfolio, as has been shown here, represents almost 30% of the loans and less than 5% of Anderson Select's clients. This performance is amazing.
Avi: Secondly, it <unk> matter if somebody asked you should always musically so they say we book a few months we needed the macondo.
Avi: I forgot data much more strategically the ability to put scientists impression was mainly distinguished scientists clean touches of industrial select don't.
Avi: I spent towards this up at four months.
Keith: So with that Keith.
Avi: Premier to hopefully do some measly verge because if you Miss piggy means basically costs I mean the order.
Thiago Bovolenta Batista: My question here, first, is what was the most relevant change you saw in this segment to explain this improvement? And a second point here, the average ticket for this portfolio, for this segment, is more or less R$ 50,000 of credit per client. Obviously, all clients use a loan.
Avi: Yeah.
Avi: We will report a key which you can imagine it's about data.
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Avi: I went to new highs and you could actually put to clean sheet diminishing towards.
Avi: When schools aren't well known brands.
Avi: Okay Cool Siggi means close at that that interest rates don't superiority data the selection due to liberty's could submit that data to enforce.
Thiago Bovolenta Batista: But the point here is, what segment are you having such a higher growth within Select? What product is leading to such a strong growth in the portfolio? Select, in this line that I just answered to Rosman, of us being able to do segmentation, I would say that the first big cluster of clients that we hugged strongly, and it was still in 2022, I commented on this the first time, in the disclosure of the third TRI, we relaunch in August, September of 2022, so a little over a year and a half ago, we relaunch Select as a whole.
Avi: Okay.
Avi: Although I've traveled regardless because a faster path.
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Mario Roberto Opice Leao: We did, at that time, nine years of Select in Brazil; last year, we completed ten, and we, for the first time, did a campaign. Of course, it's not just about the campaign itself, but in the campaign, we democratize Select. What do I mean by that? We no longer accept the Select client for income or for investment.
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Mario Roberto Opice Leao: We open Select, deep down, for anyone who wants to pay the monthly fee that we charge before the client is able to get in. And in this democratization, Thiago, we, deep down, open the doors of Select for the client who wants to have a super differentiated service. What super differentiated service is this? We also launched this back there.
Speaker Change: Katherine you anticipated any Saturday is the mainland swap price corporate amira siggi mainstream faster parcel <unk>.
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Mario Roberto Opice Leao: It was the first segment where we, in fact, started to practice, in a very complete and precise way, the multichannel approach, which now we also want to do for this base, which is many times larger than the massive income base. So there we always had the stores, the Select stores, either individual or store-in-store, stores within stores, super cool spaces that had nothing wrong, but we left those spaces even more integrated with a personal 24x7 service.
Speaker Change: What about Corona excuse me, John I bet, you Hobbema Vinci <unk> responses in the mining to get out of school more things remains of Inchcape research. This wall don't claims selection Iniga Kelly.
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Mario Roberto Opice Leao: So the Select client calls, if it wants to call, and some still want to call, it goes straight to a cell that goes straight through the URA, that is, it goes straight to a human attendant who speaks. Obviously, we also have an impeccable chatbot, but the human chatbot is also there. So the Select client realizes that it has a continuous, multichannel conversational capacity. It always has a human at its disposal, him, or her.
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Mario Roberto Opice Leao: And besides that, we bring an element that we definitely didn't have, Thiago, which is the element for the Select client investor, which is the element of financial advice. So when we bring financial advice, which is not only the human part of AAA, but it is also a much more advanced investment portal. Until the beginning of 2021, we still owed, in a way, in terms of the digital experience of the client investor.
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Mario Roberto Opice Leao: We have a big leap. We are about to, we are in the countdown. In weeks, we are going to launch the new version of what we call the investment portal, already much more advanced. So we bring a much more complete digital experience for the client investor. We bring human touch to the AAA, which I have already mentioned here, which has the lowest cost on the market and therefore the best ability to cover.
Speaker Change: So he's staying with it maintenance as you finish that some cases being taught by lab I think the main thing Fay to cloud <unk> seven loss claims you told us what Siggi, Maine. So can you just get into VIX something select you put will be finished.
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Mario Roberto Opice Leao: But along with that, this is for the client investor; we bring a multichannel, human, 24x7 offer, with stores that are there, which are super well used, and several customers love them in the stores, and several do not love them in the stores, and are well treated as well. So with that, we have an element of differentiation that we have been working on. We have also done, of course, we observe our customers from all other segments; those that we see are select customers, and by historical definition, because they were originally Van Gogh, or some were even in our low income segment, which we call special, we also bring these clients to select. So we have an element of re-characterization, yes, but it is legitimate, natural, and correct.
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Mario Roberto Opice Leao: But in this year and a half, Thiago, to close, we have, for the first time, a very material organic growth of customers. So this number that you see growing, it has an important component of growth of organic customers who decided to be select customers, whether they came from Folha, which is, again, the answer I gave here to Osmo. We have been working better and better on Folhas and sub-segmented, more senior executives of the companies, and having them choose Santander as the main bank, and not the bank they already had, be it the traditional ones or the new ones that focus on high income. In terms of products, there is no specific product, which you also asked.
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Mario Roberto Opice Leao: We have grown a lot, of course, in real estate. We talk little about real estate, unfairly, because we have had a relative real estate performance much better than the market. We won the quota last year; we were one of the only ones that grew. It grew a little, but it grew, and several withdrew. And in the production of these first three months of the year, we had a very powerful real estate performance.
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Mario Roberto Opice Leao: So, between the real estate and the consigned, of course, which is also valid for high income, we have managed to differentiate several different products. There is no silver bullet, there never has been, but we have made solid growth, and that portfolio, which we expect to grow, is a reflection of that. Thank you very much, Mario. The next question now comes from Eduardo Nishio, from Genial. Hello Nishio, good morning. I think there's a connection problem.
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Eduardo Nishio: We'll go to Yuri Fernandes from JP Morgan. Sorry, Yuri. Good morning. Good morning, Camila. Congratulations, Mario, and Gustavo, for the quarter. Mario and Pierry have already discussed a little bit about the market. I would like to go a little bit to the product margin and the client margin. We saw a good improvement in the spread here. There were some declassifications, as you have already pointed out, so our history ends up not being so long for us to look at before 2023.
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Yuri Fernandes: So I would like your help here to understand how to think a little bit about this line. I think, from what you are saying, the impression I get is that this margin should continue to improve. I wanted to confirm that.
Mario Roberto Opice Leao: Yes.
Yuri Fernandes: But how far should this margin improve? Should we go back to the beginning of 2022? I know it's not the same base, but the product margin used to be higher. Or not?
Yuri Fernandes: Okay.
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Yuri Fernandes: It must be something closer to what we saw at the beginning of 2023. If you could help us think about this margin, which has to do with me, which has to do with a lot of things you have commented about funding, I think it would help us not to be so loose in improving your spread. Thank you. I'll start and pass the ball to Gustavo.
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Mario Roberto Opice Leao: Yuri, a very good question. And we, touching on the point you made about reclassifications, here we are meeting a demand. The first time I met with the analysts, at least here in Brazil, they said, ah, you have to look at Oruodo. We looked at Oruodo, so we did our first reclassification. They are correct classifications.
Speaker Change: Roger.
Mario Roberto Opice Leao: So look I can't talk much about that what it means to desktop or the <unk> I think just <unk>. So called proposals. They saw me let me start up by the end of our company size ink up the high school balloon economics.
Mário Leão: Because they perceive with <unk> of course with the floor, if you kind of quanta.
Mario Roberto Opice Leao: We didn't do it to get better or worse. We wanted to put things in the most accurate places, not that they were imprecise before, but we wanted to. So, the first move to reduce Oruodo is to meet demand from you. We hope to do another important one at the turn of next year. And if we can help, obviously, you, the analysts who study our numbers in depth, to think about the bank even before, we can do that with pleasure.
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Camila Toledo: So I can track what your office into being equal MISO, signing the cloud Apache Apache achieve a passbook cadet to captain MPR, Yes, Scott another large annuity well.
Mario Roberto Opice Leao: MC finished arcos <unk> Don.
Mario Roberto Opice Leao: But answering precisely here, Yuri, we actually have a portfolio today, in 2024, and I would say from now on, quite different from the portfolio that entered in 2022. So, you mentioned 2022; in 2022, we had a fairly large carryover effect of the portfolio that we designed in this great growth cycle that ended in 2021. And then, at the turn of the year, which coincided with the bank's assumption, it was a coincidence; we made an important stop. You already know it well, and I don't need to repeat it.
Mario Roberto Opice Leao: Subsidiary spin around Eva just sporadic magic policy to conquer initiated last rise in K Cup data G cleaning a cartilage might've busha Hain that your ratings not discourage my base waiting seem to say sachi Airbus <unk> hundred <unk>.
Speaker Change: No no I think you're right.
Mario Roberto Opice Leao: Tell me the <unk> MX engine on Caddo Mills mix I, just have trouble all claims rating way to moving to complaints Navidad Sustainment also I cannot quantify Scott myself, but the amount you made some geology and stuck with them that I E.
Camila Toledo: He's got a sports some clean oil commodity days amazement collateral reside in equity market in Sierra <unk> kept at the main considerations by volatile right imagine law saga Winstone <unk> using <unk>.
Mario Roberto Opice Leao: In Washington on the media spend are not Permira linear amazing you would expect Bruce My Love our maintenance Division when you win strategy, Peter Millar nickel paying professional consist almost trend and so it's not one person ceramic from missile three premier a second frac up there that's a budget in the portfolio.
Mario Roberto Opice Leao: So, in 2022, we start a redesign of the portfolio, but still with a carryover effect in the first line, and quite clear. And that's why the first line, our margin line, for six or seven consecutive quarters, constantly falls and starts to rise again to the third quarter of last year. And then there's a fourth quarter flat, and now, in fact, it starts to grow with a little more strength. How would I answer your question? Block A, the liquid margin of acquisitions. This one tends to fall, in fact, because of Selic. So, Selic will fall a little slower, so the detractor element of this line dilutes the time a little more.
Mario Roberto Opice Leao: Just a first in man of our quarters are installed and sando has allowed the mice with <unk> no one called Siggi comprised equally bad ie with some liquidity reserve booking particle reminds at St. Paul mentioned them I told us not to mention the missile Puma Adidas. So you must be mirror Lena Nico vehicles, you could I ask a couple of things myself.
Mario Roberto Opice Leao: You don't have you ever mentioned that that just don't Dr. Tara Prasad with a catheter, let god the meaningful English, Ohio spoke scale demand <unk> necessarily educate agitophasia machine. He could you took almost arbitron history of equity almost Don I can stop was achieved in his room, you're quite sudden E&C comparator core earning capacity.
Mario Roberto Opice Leao: But we already know this, as you all know, so we are working to compensate for this in acquisitions with volume and mix. Mix is passive, with having more of that float resource that is in the account. We have, as all banks have, the instruments of profitability to be able to have a good margin there. Obviously, we don't just want to count on floating money, so we have to bring the investor client here, then all the investment agenda, select and beyond. So, we are going to compensate for Selic's fall with volume and mix. So, we expect to have a positive performance here, even though Selic's strength is throwing this line out there.
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Mario Roberto Opice Leao: Knowing this challenge that we have in the margin of acquisitions, we will continue to do well, and with even more strength, of course, the active part, the credit, and extended portfolio part. And here, we are actually going to look for the same type of mix that we are building here. So, you should expect an average spread level similar to the one we had back there, where the clean portfolio, the low-income portfolio, the ratings, on our scale of 1 to 10, rating 5, 6, 7, were much more present than they are today.
Mario Roberto Opice Leao: Can you just can you stop roku <unk> minority superb.
Speaker Change: So could you name it.
Mario Roberto Opice Leao: Okay.
Mario Roberto Opice Leao: So what are you guys might have.
Speaker Change: Okay Gotcha.
Mario Roberto Opice Leao: I got a senior <unk> sure there's are now <unk>.
Mario Roberto Opice Leao: Camilla <unk> towards ones here.
Mario Roberto Opice Leao: But I'm just proceeds.
Mario Roberto Opice Leao: Can you split on <unk>, what is your name spaces coming just that there's so much Chicago.
Mario Roberto Opice Leao: But at least the last seven years.
Mario Roberto Opice Leao: But even with the worst angina in its initial initiatives.
Mario Roberto Opice Leao: <unk> got the Asia.
Mario Roberto Opice Leao: No, because we don't have the same mix, we don't want to have the same mix, we are working with a little on rating 8 clients and a lot on rating 9 and 10 clients. Each bank has its own scale, but you can see a dimension of where we are cutting. So, we want to have a clean exposure with 9 and 10, and even collateralized, as in the financial sector, as in the consignado, we also want to have higher ratings. So, our average rating goes up a few points, certainly, from 21 to 22.
Mario Roberto Opice Leao: In Norway.
Mario Roberto Opice Leao: Let's just for a simple <unk> somebody in a hint tablet versus shadow.
Mario Roberto Opice Leao: <unk>.
Mario Roberto Opice Leao: As far as your book in mice, the municipal public while semi to bear to.
Mario Roberto Opice Leao: Berkshire hand.
Mario Roberto Opice Leao: England.
Mario Roberto Opice Leao: Let's say somebody so much <unk>.
Mario Roberto Opice Leao: Harshman dossier together now.
Mario Roberto Opice Leao: Bonkers for any follow on for <unk>, how much of ourselves and tell them what intercept as a key.
Mario Roberto Opice Leao: Yeah.
Mario Roberto Opice Leao: Stemming traffic yourself.
Mario Roberto Opice Leao: I think she hecla and ethical clinical overview.
Mario Roberto Opice Leao: If you look at demand neutropenia lost some could look at it.
Gustavo Schroden: So, we shouldn't expect, in the first line, the same level of gross spread, but obviously, we should expect the level of liquid PDD spread to improve over time because I think that's what we are showing. So, this doesn't necessarily happen in the same tree, where first you build the portfolio, you digest the portfolio, we make fewer agreements, we launch the results more, the cases that we see that we won't be able to recover in time, and Gustavo covered this a little bit, he can cover more.
Mario Roberto Opice Leao: No chip, which is principally the educated call Sada now clean choices thing elements single contest I imagine achieved quite a quad cartoons achieved capital gains.
Gustavo Schroden: Mccormack launch definite principally dodgem woodall weaknesses learners are put onto a capacity that is your collarbone cool because it's all in conventional barcodes soldiers digitize energy G.
Gustavo Schroden: How about the ARPA going up.
Gustavo Schroden: Snow product in spite of that as a cleaner wash it out at the <unk>.
Gustavo Schroden: Subsequent collateral equally have somewhere close to me as your interest in <unk> as a key.
Gustavo Schroden: So, temporarily, it's not all exactly in the same tree, but the direction of a first line of liquid credit costs, becoming more and more healthy, and obviously the digestion of the past portfolio, also flowing, this gradually creates a jawbone in this line of credit, let's call it that, that we believe we have already shown in this tree and will continue to show. So, we are positive, in summary, about how this line will behave during the year. In that case, if you go down on one side, we compensate for volume and price, and on the asset side, we will continue to grow, but with the same type of mix of products and with the same type of customer portfolio that we have sought. Gustavo, I don't know if you want to add anything. Yuri, that's exactly what it is.
Gustavo Schroden: Former command nausea pursue a meeting in a couple of thoughts about the animals.
Speaker Change: The pricing will be komatsu.
Speaker Change: <unk> <unk> in June we're methodical move toward a considerable collage to placebo Michelle indicated Lucas clean southern Copper's as you just sort of it <unk> cost you could actually presumed <unk>.
Speaker Change: I Love some builders books.
Speaker Change: The Mercado significant cash interest this store.
Gustavo Schroden: Our Buda airplane build a former ore I love to digest the Haynesville. The bus shined a film that is happening is that the homeownership actually the person over Furfur Oman also move to my Senior places you only lost a couple of strategy Jehane ADESA disapproval Havent mentioned being man is it logical to <unk>, you help us kind of the appropriate visual up and down.
Gustavo Schroden: So, there is no comparison between the previous portfolio and the current portfolio. In the current portfolio, we will continue with the same dynamics, so we will continue with the same ratings, we will continue with the same composition of products per client cluster, so we will continue with the same profile per microportfolio, as I said. We are advancing a lot in CP with some kind of guarantee; we had higher volumetricity with CP Clean, so we effectively change the entire composition of our portfolio. If the CDI falls, we make a composition in the passive, but also make a composition in the asset to balance it.
Speaker Change: Quintin remained to be minority being my funeral cotton balls.
Gustavo Schroden: Marcia Hain importance catamarans for someone who's project different correctly H E. Keith for some while a panoptic organic Lynch keep opinion willing to sustain your authorization or a dodge this clean fuel milk in magenta set the main will it means.
Speaker Change: That they cannot Patrick Lynch <unk> propaganda.
Gustavo Schroden: <unk> Omar.
Gustavo Schroden: Yes.
Gustavo Schroden: Formulary.
Gustavo Schroden: The rest of maintenance <unk>, who just don't work here.
Gustavo Schroden: Mail article test Internet Miller.
Gustavo Schroden: Okay last geologic turbocharging the thing ethane they may not and as I started the screens are keeping to Chicago kind of astronomical Norsk, We news clinical Mobi C power energy that Celgene was critical in principle for the 35 promotions may not michaela lose that kind of hit the limit that propaganda.
Gustavo Schroden: What we are looking for is that the liquid spread is getting bigger and bigger, and this opens up over time. This is a little of the dynamics we have. Perfect, thank you Gustavo, thank you Mario. Good luck with the results and congratulations again.
Speaker Change: It actually is profitable services I think don't contest.
Gustavo Schroden: Thank you. Now we are with Eduardo Nishio from Genial. Hello Nishio, good morning. Hello Camila, good morning, everyone.
Eduardo Nishio: Chapter from installed Mercado was unique when you're asking something more immigrants for myself hopefully sake.
Eduardo Nishio: Good morning Mario, and Gustavo. Congratulations on your results. I would like to talk a little more about retail, specifically your strategy, Massificado. Congratulations on the launch. Retail has changed a lot in this cycle, and you came up with a new strategy. I would like you to talk a little more about the profitability you expect, what happened in this cycle, talk a little more about the target audience, if it is the open sea, if it is low income, your vision for Massificado and retail. Thank you. Great, Eduardo. Thank you, Unknown.
Eduardo Nishio: We have always performance befitting, a boarder coupon capacity to kill more from Luke Wooten with my seems okay for Falcon shattered Monsanto capsule with I mean, she got with amazing product <unk> on a freestanding eds, which is super important lack of interest yesterday. This presents those little faster historic I mentioned was <unk> <unk>.
Speaker Change: I mean she.
Speaker Change: Proof ocado.
Speaker Change: Our pro forma package yokado sequenced for each symptom concerns until I think Jackie keeps Furthermore fell 35% components in terms of shop talk from a quantum custom care free for life and try to go out with pricing yeah about launching travels client that we've lost some use of cloud a pathway into clinch opportunity more fab calendar, if we for lifetime secondary Demitasse Kal.
Eduardo Nishio: It's a good hook for us to talk a little more about massivism, so I'll try to be brief here. These are the key themes. We recognize that the client has evolved. He has evolved in the type of demand, in the type of relationship he wants to have, in the type of principality he is willing to give.
Eduardo Nishio: <unk> will be quite a thing mortgages year put important data.
Eduardo Nishio: I had a bunch of the orange because it started even without the realm of possible.
Mario Roberto Opice Leao: Today, the client has at least five active accounts on average and has almost four active accounts for each client. So, the way the client defines principality has changed a lot over the years, and, therefore, the ability of each digital bank, or bank, it doesn't matter; we are all digital, to work to earn, if not all the client's principality, a good part of it, also has to change a lot. So, this is super clear; we recognize the market as well.
Mario Roberto Opice Leao: Yes, just the maintenance or the maintenance of digesting jewel osco something that thing so, but what I think will add almost shop at Dick's, Washington, clinical Botox, Xiaomi, Pixar, Turkey, who said a lot of setback hit your radar.
Mario Roberto Opice Leao: As you'll see here just cover them and turn them into finished ourselves and our retail some undersell. It means oh gee equally as ourselves what are you setting yourself. So you shouldn't take almost finished the super seem to the Dol who covers us on Oman being figured out equalize largest co mail remains confidential commercially might said the only truck is just a kind of a fast to commence high water.
Mario Roberto Opice Leao: We also recognize that the way we, and possibly the whole market, approach credit for this massive audience had to evolve. Between 2020 and 2021, the market as a whole granted credit, possibly beyond what these clients were able to absorb. Hence, the credit costs for the following years are much higher in all the banks in the market, which means that we tested, in a hard way, and learned in a hard way, the elasticity of low-income income, Eduardo.
Mario Roberto Opice Leao: Whirlpool ceramic docomo toward an hour faster to free Eduardo <unk> Zinn, who get choppy handle some tension on Ciena you won't you're feeling helpless excuse me, how some arcos <unk> impact what pace you want a super seem to include Apple claims you don't want to go back preferred ancient pass a residual water ethically and to keep our team is adding assume just sort of my day.
Eduardo: It's interesting Michael mental strength, I mean, the only plains and achievable and I know, sometimes its hotel to sustain a focus can be noisy and also about the achievers approximately anything Don my platform titled loss Clinton, accusing don't don't want them because it boosts our key can achieve all screens can achieve.
Mario Roberto Opice Leao: So, what we bring from learning as a starting point for this new offer is a much finer and more precise notion of how elastic the income capacity of this audience is, which, obviously, is much less elastic than the average and high-income, and PJ itself. So, with a much better and much finer understanding of how much fits in the pocket of this low-income, and, therefore, what size of exposure we can have with each client, and what exposure is worth having with that client, which depends a lot on whether I have the transactionality of this client or not, because it's no use being the element that brings even small credit to that client, it will use my credit to pay another bank, and then I end up with an adverse selection.
Mario Roberto Opice Leao: But that's a topic mark with a collateral <unk> put them at a bathroom is knowhow o'meara bath to catching facing losing tune we pursue more partner cab Amato bass pro Premier brokers Wilmington, Mcmahon with quite a few card might be for myself with device intelligence <unk> their cancer claims when you finish out the only thing.
Mario Roberto Opice Leao: As you move to myself, all the amazing sequential might a bathroom capacity purpose, Amit you assume and also kind of a sub minus ballpark accuracy clearance because latona Boston you could tell me not to even look at on a barge that she was my little pony leaves or fab.
Mario Roberto Opice Leao: So, in the end, I would say that our maturity as a management here is to better understand the context, to better understand the little elasticity that the low-income has, and to better understand the need of this client to be here at home, transacting with us, and choosing us as the principal, or in the direction of choosing us as the principal, so that we can, in fact, have a better chance in the use of that limited income to pay the So, that's the context.
Mario Roberto Opice Leao: We signed a parcel of CRISPR related products, such as copyright claims catch if I was an acute issue for <unk>.
Mario Roberto Opice Leao: Most commodities have some super good engine disconnect you guys can hear okay.
Mario Roberto Opice Leao: Does it fit in with what are you guys.
Speaker Change: Got it.
Mario Roberto Opice Leao: Perhaps not that <unk> seen the Brian Florida is the Citibank T a lot Brian.
Mario Roberto Opice Leao: All our Camilla E.
Mario Roberto Opice Leao: Regardless the opportunity that just slipped it won't as you probably don't do well then showed up but do you really do module could it evolve.
Mario Roberto Opice Leao: It goes to the carriage took them because of it almost as a Nissan corporate center liquor data Eaton being connected commerce strategy G. Pinnacle's, just so people can start with on the Nevis.
Mario Roberto Opice Leao: It's the context that, certainly, the whole market recognizes today, so there's no great confidential information here. How do we approach this in a different way? We approach it with a starting point that is a much, much simpler offer than any offer we've ever had. An offer that is absolutely free, as we talk about in the video that you saw, free without asterisks. This is super important; it's not that we had asterisks before, but all offers, historically, incumbents and digital ones, correctly provoked, and, in a way, even criticized incumbents for this, So, we here wanted to make an offer, in fact, without conditions.
Mario Roberto Opice Leao: You may notice that go with them.
Mario Roberto Opice Leao: Yeah.
Mario Roberto Opice Leao: So.
Mario Roberto Opice Leao: Right.
Mario Roberto Opice Leao: Global commercial policy wound up power steering towards Senior's issue, it's jobs or commit ordinary condition will do.
Mario Roberto Opice Leao: And it was just so Nathan when she.
Mario Roberto Opice Leao: I assume to minimize our search you want to handle so so yeah. So let me turn to for marketers.
Mario Roberto Opice Leao: I spoke a me too, but I want to get your answer for me to put a few.
Mario Roberto Opice Leao: The north community further intervals. So soon we see bleaker. Congrats you can meet the Newmar immunotherapy Domingo Charlotte E E.
Mario Roberto Opice Leao: So, we act with an account and a card which is free for life, which is, in fact, free forever. And, well, where are we going to get the profitability from this? Of course, taking the client from an offer that, in addition to being free for life, brings unlimited withdrawals, which is something for those who withdraw money. This public still has the use of money for a while, and it is still relevant, so we believe that a limited withdrawal is a nice proposal.
Speaker Change: He is an issue.
Mario Roberto Opice Leao: Theres a room a global issue that you want to push forward with Scotia Geochemical Mesothelin.
Mario Roberto Opice Leao: As you know because you're going to go so soon will continue.
Mario Roberto Opice Leao: To my silly achieve E did anniversary.
Mario Roberto Opice Leao: So it was either just from <unk> into the synergy this go more whom article mentor.
Mario Roberto Opice Leao: And we also bring the element of 10 days without interest, which Santander has super strong, linked to a strong PIX key. So, the client who puts the strong PIX key here, on the cell phone or CPF, we will give them 10 days without interest, which, obviously, is a huge differentiation element.
Mario Roberto Opice Leao: A supplemental approach because it crashed and residual scheduled start could exchange quite disciplined.
Mario Roberto Opice Leao: And you could have two single dose with few useful lithium <unk> <unk>.
Mario Roberto Opice Leao: So, adding these elements, or equalization, or differentiation, we will deliver a super simple and digital experience, with a well-integrated human conversational, and with the stores as a convenient element, as I said earlier. So, we believe that the new offer of Começa Agora, Começa Agora is the positioning as a whole, and the new offer of Free, Eduardo, will bring, deep down, a chat app in relation to what we didn't have and a positive differential in relation to what we already had, and we package it in a super simple and direct way for the client.
Chris: Chris This is Chris.
Mario Roberto Opice Leao: Our view moving so much since you bought <unk>.
Mario Roberto Opice Leao: Which moves those images is positive.
Mario Roberto Opice Leao: ZIP AG <unk> <unk>.
Mario Roberto Opice Leao: And as Scott theaters.
Mario Roberto Opice Leao: Doug EOG cheap.
Mario Roberto Opice Leao: Boston is confusing a performance you could add.
Mario Roberto Opice Leao: We'll get both of those losses.
Mario Roberto Opice Leao: Novo software the tools as novo surplus Gucci store, because you stop losing two peripheral Mendoza from each conversion spared from senior almost footprint when we lost one with Novo Sars.
Mario Roberto Opice Leao: Maybe a little faster decision and we start.
Speaker Change: But if you could add two or three messages.
Mario Roberto Opice Leao: So, we believe that, from now on, we will bring back this client who was here but was inactive. To give you an idea, we have more or less 30 million inactive clients, our total base is 60 and a few million, and our asset base is just over 30. So, in practice, half of our clients are inactive, so there is a lot of what we are looking for here, which is to activate the inactive clients, to answer this part of your question.
Speaker Change: Okay very good.
Speaker Change: Okay got it.
Mario Roberto Opice Leao: We will now switch to English wished he'd tell abad from Goldman Sachs.
Speaker Change: Good morning Tito.
Speaker Change: Hi, Good morning, <unk> morning, everyone and thank you for the call and taking my question actually a bit of a follow up to Brian's question on across the rest of them one on the asset quality side, we saw the mpls.
Mario Roberto Opice Leao: We're still sort of flattish in the quarter I know there maybe some seasonality in one queue SME Npls did go up a little bit.
Mario Roberto Opice Leao: And there is something, of course, about open sea capture, but it is not the open sea that we did in 2021, and possibly a good part of the market; it is the open sea, first, proportionally much smaller, much more qualified, with much more information, much more intelligence in the use of data, to understand who this differentiated client is. So, today we are much safer to look at even this open sea client, which weighs less than in the past.
Speaker Change: Just how are you thinking about asset quality from here I mean, it seems that we're past the worst of it particularly if your provisioning levels are coming down, but any risk to that I do think asset quality can evolve from here. Thank you.
Speaker Change: Let me just hi, Tito. Thank you. Thank you for participating so just kicking off and I'll hand, it over to Gustavo So the broad message.
Mario Roberto Opice Leao: But a good part here will be clients who are already in the database and who are inactive, or who are in the active database but are not so happy with the offer and are gradually leaving and giving priority to others. We want to recover these clients, reactivate the inactive ones, and, yes, make client acquisitions, but with a super-big differentiation between what we want and what we don't want. Perfect, thank you very much.
Mario Roberto Opice Leao: Taking the opportunity to for question is we're very comfortable with the portfolio. We are building the portfolio we're building.
Mario Roberto Opice Leao: For the last two years, I will say and obviously with the benefit of having now two year old vintages, one year old vintages are six months old vintages with all that we can back test and we are continuously doing that and we're doing that every time more and more more precisely and taking the small.
Brian Flores: Thank you. The next question comes from Brian Flores from Citibank. Hello, Brian.
Mario Roberto Opice Leao: Just when decisions much faster than we did before so all of that points to the direction that we are managing with better tools with much more modern.
Brian Flores: Hello Camila, and thank you very much for the opportunity to ask questions. Taking advantage of Yuri and Mario's question, which was about credit costs, how should we think about them as a percentage of the portfolio? And also, how does that connect with the renegotiation strategy, which seems to be running at lower levels now? Thank you very much.
Brian Flores: Policies in models and the vintages are behaving well on average so yes, there is seasonality there.
Brian Flores: The elements that you that you've seen the presentation. They relates much more to the digestion of the older vintages, which were embracing differently for a year already.
Brian Flores: In terms of the Accretable the renegotiations than we did before so with subsequent common better but the direction I wanted to share with you is that yes, we're very comfortable with the with the way the portfolio is behaving the direction, we're taking and how the new vintages since 2022 by the way their behavior, so without cassava. Please.
Gustavo Schroden: I will start with the second part. We have already commented that we have changed the renegotiation strategy. The renegotiation dynamic remains much more selective, and the renegotiation portfolio, over time, will be reduced precisely because of the fact that we have the old portfolios being digested, as Mario mentioned.
Gustavo Schroden: Luckily that.
Gustavo Schroden: There is no no changes.
Gustavo Schroden: Credit costs, at the rate that we are growing, and with the credit discipline that we have, and no change in the risk profile, it has a positive tendency to reduce credit costs. It will depend a little on how we grow and where we grow, but we have already seen a very important evolution in the last 12 months, and we may have future evolutions, but it also depends on how much we advance in the portfolios, given that we have a lot of confidence in the credit performance, and all the new portfolios that we are producing are performing exactly as we expect, so there is no surprise in relation to the new portfolios, also in relation Perfeito, obrigado.
Gustavo Schroden: As mentioned last quarter that potentially we will see some.
Gustavo Schroden: Some volatility in the overs, but does is solely related to the old vintages than the old portfolio.
Speaker Change: Everything under control.
Gustavo Schroden: No.
Gustavo Schroden:
Gustavo Schroden: In terms of the future and credit quality.
Gustavo Schroden: Everything.
Gustavo Schroden: Really under control.
Speaker Change: Okay, great. Thanks, Mario Gustavo.
Speaker Change: Thank you.
Speaker Change: Oh God I prefer today call with Tom Shaw things of Bradesco <unk>.
Speaker Change: Yes sure thing.
Gustavo Schroden: With regard to our <unk> module was solved by debentures as dogs and went through with Florence, Missouri. Okay.
Gustavo Schroden: Follow up on Kansas stuff, we're talking about parts of the puzzle the solids control essentially NII, followed AG segment that some producers to meet somebody's got a fall bookings you could have some edge to it and ask you <unk>.
Daer Labarta: We will now switch to English with Tito Labarta from Goldman Sachs. Good morning, Tito. Hi. Good morning, Camila.
Daer Labarta: Good morning, everyone. Thank you for the call and taking my question. Actually, a bit of a follow-up to Brian's question on the cost of risk, but more on the asset quality side. We saw, you know, the MPLs were still sort of flattish in the quarter.
Daer Labarta: <unk> combination potential with NII.
Daer Labarta: I did a key crystal seem to say its around controlling them getting it in the past Brazil. It is there is it as Chris mentioned that tail affiliate earn a yellow dysprosium remastered is I wish I could I appreciate the early profitable entry way today. St says she can only with it has a lot of range, taking time as Chris mentioned car theater. He sent me a follow up on <unk>.
Daer Labarta: I know there's maybe some seasonality in 1Q, but the SME MPLs did go up a little bit. So just how are you thinking about asset quality from here? I mean, it seems that we're past the worst of it, particularly if your provisioning levels are coming down. But at any risk to that, how do you think asset quality can evolve from here? Let me just, hi, thank you, thank you for participating. So I'm just starting off, and now I'll hand it over to Gustavo.
Gustavo Schroden: There are no known as they can beat us on them I think she is in Geo glycerin, Unfortunately Hussein driving <unk> equal.
Gustavo Schroden: I think Asia.
Mario Roberto Opice Leao: So the broad message, taking the opportunity for a question is, we're very comfortable with the portfolio we're building, the portfolio we've been building for the last two years, I'll say, and obviously, with the benefit of having now two-year-old vintages, one-year-old vintages, six-month-old vintages. With all that we can back test. And we continuously do that every time more and more, more precisely, and we take the small adjustment decisions much faster than we did before. So all that points to the direction that we're managing with better tools with much more modern policies and models, and the vintages are behaving well, on average. So, yes, there's seasonality, there's...
Gustavo Schroden: Some of the asthma.
Gustavo Schroden: The simple deci, you have taken English English composition, and you guys did a bulge allophone column as well.
Mario Roberto Opice Leao: Once again I believe that you know what level of Sun.
Mario Roberto Opice Leao: And then just you know Hawaii Sunny days or was it broker tours.
Mario Roberto Opice Leao: Josh a key adapt.
Mario Roberto Opice Leao: Plus you got phenol dwindle Kona, Hawaii my sprawl smooth.
Mario Roberto Opice Leao: <unk>.
Mario Roberto Opice Leao: Uh huh.
Mario Roberto Opice Leao: Yes.
Speaker Change: So it doesn't stay on adjusted quality Crystal demand to see what you guys did in hygiene places would be we bumped that idea if you can give us.
Gustavo Schroden: The elements that you see in the presentation relate much more to the digestion of the older vintages, which we've been embracing differently for a year already in terms of the acuerdos, the renegotiations than we did before. So Gustavo can comment better, but the direction I wanted to share with you is that, yes, we're very comfortable with the way the portfolio is behaving, the direction we're taking, and how the new vintages since 2022, by the way, are behaving. So with that, Gustavo, please. Exactly that. There are no changes.
Mario Roberto Opice Leao: Let me see that residual definitely IPO, Kelly, Hawaii, <unk>, approximately <unk> <unk> each of the major intangibles when it does sometimes in the oil guidance you'll care to myself.
Gustavo Schroden: Sue can you please break out.
Gustavo Schroden: Breakout looks tough and automotive is a key.
Gustavo Schroden: Welcome I saw it will damage competitive positioning antibody that Ah Vinci commercially with subway foresaw the poise stucco, saying, who is that administers portfolio centric reckless here.
Gustavo Schroden: Additional thing go Milwaukee's Ivanka say Wow, that's Saint toy for doors, you woke up little Moodle.
Gustavo Schroden: I mentioned last quarter that potentially we'll see some volatility in the overs, but it's totally related to the old vintages and the old portfolio. So it's everything under control. So, uh, uh, in terms of the future and credit quality, is everything really under control? Okay, great.
Gustavo Schroden: Pharmacology work in OXXO spend I mean those are interesting.
Gustavo Schroden: As in Squali with <unk> Lynch cure all considered the Almighty theyre, all going out share market share from quite a Dodge <unk> sure Santa Beatriz <unk> Cos Lucas, we could absolutely the cost saves those away from us. So it's not something that he is going to set us apart.
Gustavo Schroden: Thanks, Mario and Gustavo. Thank you. Let's go back to Portuguese now, with Gustavo Schroden from Bradesco BBI.
Gustavo Schroden: No it's quite almost make losses at the Palomar is I can enter the worst comparable sided issue as well.
Gustavo Schroden: Good morning, Schroden. Good morning, Cami. Thank you. Good morning, Mario, and Gustavo.
Speaker Change: The casino cut points.
Gustavo Schroden: Hello Poker during 'twenty major catalysts, but getting staffing models GDS dusted it off so yes, <unk> come into the mice are in opportunities are mainly our interaction with a follow up for Mike.
Gustavo Schroden: Congratulations on the results, really strong. I'd like to talk a little bit because I think we're missing a part of the equation. People have discussed the NII a lot; we talked about segmentation, product, and mix, but I'd like to talk a little bit about portfolio growth. I think it's an important component for the NII. The portfolio grew 5% year on year. I'd like to understand if there is room to accelerate this?
Gustavo Schroden: Finish core mass up they are considered it also on a strategical packaging customers is key.
Gustavo Schroden: Cause I think pacer.
Gustavo Schroden: I'm, Andrew because remains cloudy.
Gustavo Schroden: Nevada guidance Cassava from Society, I think medical center.
Gustavo Schroden: According to a magical mercado I spell out the pillar favorable.
Gustavo Schroden: I think we should see this portfolio growth accelerate over the next three quarters. Do you think we can get close to 8% to 10%? Do you think it's a reasonable number for us to have here in terms of portfolio growth? And also, talk a little bit about the mix, right?
Gustavo Schroden: Fair enough electrical the Dod kidney almost like Los Angeles, Savi, if a particular semis if I.
Gustavo Schroden: Provost mentioned <unk> Smiths medical is now almost all of the equal strategically.
Gustavo Schroden: Wow or Sema Bucco Mercado <unk>.
Gustavo Schroden: <unk> <unk> with some of our Selene, Oh, Vice important like Ross University segments Rising star.
Gustavo Schroden: Not in the segmentation, but anyway, we saw strong growth focused on designating the vehicle. The trend is the same. And if I can get a hook here, I think portfolio growth can leverage another point, which is profitability. I'm a big fan of Roy, from 10, 11 to 14.
Gustavo Schroden: In Colorado CCA in two vital Sigma inks transformational moodle provide asbestos raw state National Theater.
Gustavo Schroden: It'll quality once it would have to hustle average of kinases Greens and I will ask sounds like lots of our mutual neupogen <unk> Zhao for centuries, that'd be safety because it's how much can you talk a little bit.
Gustavo Schroden: Do you think we can get to the end of the year with Roy closer to his recent past? Before all this deterioration that happened in the asset quality system, which made everyone hold their portfolio growth, the influence rate went up, and the impact would go up. I'd like to know if we can go back to dreaming of that Roy, closer to 18, 20.
Gustavo Schroden: As you've seen through the platinum Chris remains a key.
Gustavo Schroden: David is a while all my audio QQ speed to market.
Gustavo Schroden: <unk> presence in which Columbia Mcquade applecare.
Gustavo Schroden: Ada puzzle to solve for so actually travel Scott.
Gustavo Schroden: When we put another large amongst opinion, obviously integrity that Intel eligible to get the highest margin is.
Gustavo Schroden: Macro cross selling apples achieved was a kitchenette and looked like one arm across similar than obstacles effect as you can imagine.
Gustavo Schroden: Obviously, I understand the limitations; it's not guidance I want, but I just want to know if that's the way. Thank you. I'll start with the portfolio topic, and then I'll come to profitability. As I said, and Gustavo reinforced it later, we are growing exactly in the portfolios we want to grow. We don't have a goal here of growing the same, 10%, 100%, 8%, 12%, the same for everyone. It wouldn't be a smart way to manage the bank, and it's not what you expect from us either.
Gustavo Schroden: Congrats for mortgage life of it.
Gustavo Schroden: I would hope that our some of our lack of pathologic cross sell with similar kind of persona over 100 per car the quality move cost home service as mondavi. It all but the same for a lot of them are pharma. Some clinch myself. The club's commitment of some claims from Barclays I think Jose as you describe your Rockland Felipe just simply do not turn to Katanga door locks garage door key additional bandwidth spurring CIO things Christy.
Gustavo Schroden: <unk> today is a single attacking one of his talking biologic, yeah, absolutely foundational group of Conagra and shipper they handle.
Mario Roberto Opice Leao: We choose the businesses in which we want to consolidate leadership or gain share, but we never want to gain share without profitability and at the cost of the credit cost of 6, 12, 18 months. You don't see us growing that way. So, we choose some businesses and detail more here in the promotional disclosure. We decided to grow here.
Mario Roberto Opice Leao: Meaning are located because they have a call.
Mario Roberto Opice Leao: We look at them as facade and run off of having published stock market.
Mario Roberto Opice Leao: Our central more and I'll hop off on that because it didn't exist.
Mario Roberto Opice Leao: The occupancy can you just give us a mendoza <unk> NAND devices <unk> services.
Mario Roberto Opice Leao: A couple of our Super <unk> E. <unk> I couldn't be size of concurrency means that maintenance capital now sort of wrestling as conventional Sunoco military Don.
Mario Roberto Opice Leao: Cards are growing. We spoke little during a year and a half of cards because we were in a deceleration module, and we, since the third trimester, have commented more, still a little shyly. Now we're going to start talking a little more because we're starting to have the consolidation of our strategy of growing again in cards. So, I would say that when we think about the size of the growth, of course, we're not going to go all out, as you know, but we expect to grow as much as the average market is expected by Febraban. We expect, in fact, to be able to...
Mario Roberto Opice Leao: But xena introducing him to many large won't BELBUCA was principally northern Africa is software as a percentage because songs you somehow accretive without the commercial personnel. As you thought is that if you don't see it I don't personally school bus Sunshine terribly large cloud data center cyber citizen Austin SaaS for the SaaS I think it's better for us.
Mario Roberto Opice Leao: We will settle the Hawaii from both Brazil. Unfortunately, we got all major along the thing you can stop Oscar NUCYNTA guidance and subsequent considering down mid teens, the voice considering down mid to high teens.
Mario Roberto Opice Leao: Given that in some businesses we know we will be able to grow more and will..., which are businesses, obviously, with a higher level of profitability, if we do it well, and I really believe that we are doing it well, we have everything to have growth here that should be equal to or greater than the market growth. In large companies, I will not tell you the same thing, because, as I said, then Gustavo reinforced, we will look for, as in everything, actually, a huge discipline of profitability.
Mario Roberto Opice Leao: I wasn't sure I thought about a broad multi year war Mehta from very high teens or twenties yoga admission almost terminal in Panama.
Mario Roberto Opice Leao: We'll go to PRASM is that he started this handle cross selling is external my strategies have been slipping out a couple of elements.
Mario Roberto Opice Leao: Geographically the Nike a quite a diverse portfolio contains that are going to see Hawaii, because I can tell you how hard the possibility that this inch.
Mario Roberto Opice Leao: But since you fit into <unk> diverse CCAR, they put them at the same time doing stuff.
Mario Roberto Opice Leao: So, where I managed to have marginal ROIs in that positive operation, and that generated economic profit above our ROIs, we, on average, if the credit risk is good, we will do it. We will look at the operation, and we will look at the cross-sell capacity on top of that operation. The attack operation, of course, has a lot of cross-sell in services, mandates, and such.
Mario Roberto Opice Leao: Stuff Ocado men will have hurdles Dodge quality Super high on voice response, you've seen consolidates can interact with your <unk> propagate Apache daily Pascal possible sort of simple yet.
Mario Roberto Opice Leao: So pay collateral regardless.
Mario Roberto Opice Leao: Jose.
Mario Roberto Opice Leao: Regardless of the stuff.
Mario Roberto Opice Leao: <unk> got at this you thought this pretty tight in Kronos connect suddenly they paid US a video calls today, so I always thought that keeping hello. Thanks convinced shadow. It is this something that some of that's supposed to sell but it's clearly a circle capitals of the human I think.
Mario Roberto Opice Leao: So, we will always look at the customer's vision in a way, but there will be cases where even in the customer's vision it will not make sense to do it, and we will become, as I said, a distributor and not so much a credit loader. So, here we are not in a sprint of, ah, I have to grow 8, 10, or 5, up to here in the year. We have a slight drop, but it absolutely does not worry us, because the business itself is making more money than it did in the last quarter and last year.
Mario Roberto Opice Leao: Mkay bodyguard that they watch and with <unk> capital.
Mario Roberto Opice Leao: Capital.
Mario Roberto Opice Leao: [noise].
Mario Roberto Opice Leao: So, we have pretty good profitability in our attack operation on large companies. Here, it may be that we grow less than the market, but it is already ex-ante. I'm not saying it will be, but if it happens, it will be because of super-fine capital discipline, and we will compensate for this with growth, also with capital discipline, in the other operations, as we showed in the first three. So translating all this into profitability.
Mario Roberto Opice Leao: Okay.
Mario Roberto Opice Leao: Okay.
Mario Roberto Opice Leao: [noise].
Mario Roberto Opice Leao: Well, since I will be disciplined in the attack and only do the operations that are ROE-acquitted, and since my retail operations, PF, PJ, and finance, are operations with very high profitability, of course, as long as we know how to select the right clients, and the right products, we hope that the recovery that you mentioned of ROE, which was a good recovery, will continue gradually over time. What are we looking for without guidance?
Mario Roberto Opice Leao: Okay.
Mario Roberto Opice Leao: [noise].
Mario Roberto Opice Leao: We are looking to consolidate a mid-teens, then consolidate a mid-to-high-teens, and then we will work hard to come back at some point to a very high-teens or 20s. Obviously, we are not at this level in the short term, but we are redesigning the operation, executing a very disciplined strategy, to be able to meet this. What I would like to finish is that the quality of the portfolio that is delivering this ROE, and that will deliver the ROE of the next tree, is a very different quality, much more diversified and, therefore, sustainable.
Mario Roberto Opice Leao: So we are less focused on the speed with which I go up the ROE 1, 2, 3 points, and yes, with the solidity that I deliver this higher ROE, to be able, from there, to seek the next leap, and so on.
Mario Roberto Opice Leao: Okay.
Mario Roberto Opice Leao: Okay.
Mario Roberto Opice Leao: Okay.
Gustavo Schroden: Perfect, super clear, thank you and congratulations once again. Obrigado, Gustavo. I would like to thank you all for being with us this morning. After this videoconference, I and the entire team of relations with Santander investors are available to clarify any remaining questions. Thank you very much, have a great day and see you next time.
Mario Roberto Opice Leao: Yeah.
Mario Roberto Opice Leao: Okay.
Gustavo Schroden: Okay.
Gustavo Schroden: Okay.
Gustavo Schroden: Yeah.
Gustavo Schroden: [noise].