Q1 2024 Inter & Co Inc Earnings Call
Pete you senior Vice President of retail banking and Santiago still senior Vice President of Finance had risks.
Speaker Change: Please be advised that today's conference is being recorded and a replay will be available at the company's IR website.
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Speaker Change: Throughout this conference call, we will be presenting non <unk> financial information. These are important financial measures for the company, but are not financial measures as defined by our F. R. S.
Speaker Change: Conciliations off the company's non <unk> financial information Judy I F. R. S financial information are available in interim co earnings release and earnings presentation Appendix.
Speaker Change: Today's discussion might include forward looking statements, which are not guarantees of future performance. Please refer to the forward looking statements disclosure in the company's earnings release and earnings presentation.
Speaker Change: Now I would like to yield the floor to Mr. Shuang theater minute, Sir the floor is yours.
Speaker Change: Thank you operator Hello, everyone.
Speaker Change: Thanks for joining us for our first skew earnings release.
Mr. Shuang: We generally do I will start with a quick overview of our strategy to deliberately to churn your incident that took over the rest of the presentation.
Mr. Shuang: I will then close with some final remarks and open it for Q&A session.
Mr. Shuang: Jumping to page five.
Mr. Shuang: We start with a quick update on this quarter performance and how this connects to our Northstar, which of the 630 30 plan.
Mr. Shuang: I'm glad to say that we reached almost 32 minimum clients this quarter.
Mr. Shuang: This increase in number of clients came together with the increase.
Mr. Shuang: Activation rates.
Mr. Shuang: We reached a 55% an improvement of 86 bps just this quarter.
Efficiency ratio, we continue making great progress quarter by quarter.
Mr. Shuang: It stands today at 47, 7%, which implies a strong improvement of three six percentage points again, just this quarter.
Mr. Shuang: And last but not least.
Mr. Shuang: Sure.
Mr. Shuang: Is approaching the two digits mark.
Mr. Shuang: Closing the first quarter.
At nine 7%.
Speaker Change: We think this number is even more remarkable considering the high level of excess capital we hope.
Speaker Change: As I mentioned in the last earnings call. We are proud to be a head of our North Star plan.
Speaker Change: It is strategically important for us to continue to be ahead of the plan, while continuing to grow and innovate.
Speaker Change: Now moving to page six here, we see either from a growth perspective, and how we are disrupting the Brazilian banking market.
Speaker Change: We can see this disruption from three angles.
Speaker Change: First on clients.
We have experienced strong expansion in our client base with a steady increase in the number of customers choosing to transact in our platform.
Speaker Change: Second home loans, our portfolio has been grown steady as more individuals and business finance their needs through our lending options.
Speaker Change: <unk>.
Speaker Change: On revenues, we have achieved robust growth driven by <unk>.
Ryan: Ryan monetization across these savings and credit products.
Ryan: These results shows how winter is delivering alpha by consistently over delivering growth across client balance sheet and income statement.
Ryan: Metrics.
Speaker Change: Moving to page seven.
Speaker Change: Here I will cover our main business achievements this quarter.
Speaker Change: There are two particular things I would like to highlight.
Speaker Change: First.
Speaker Change: Luke.
Luke: We are disrupting an outdated industry by integrating our existing verticals into a comprehensive rewards program.
Luke: This initiative aims to drive client engagements and expanding in our entire ecosystem.
Luke: Second we're scaling up our new private Wang.
Luke: These are mainly fixed findings and buy now pay later in our infrastructure.
Luke: Lastly, we are strategically building our global accounts.
Luke: We're doing this by leveraging the robust infrastructure, we have established in Brazil, and replicate replicate and it's to the U S.
Luke: These three group of business opportunities are is strategically important to continue reinforcing the power of our financial Super App.
Speaker Change: And to conclude on my side before handing over to <unk>.
Speaker Change: I would like to point the trooper yards that we have for the remaining of 2024.
Speaker Change: First on first on the growth side.
Speaker Change: We expect to continue growing clients loans deposits and top line revenue.
Speaker Change: Where do we will do that by continuing to innovate and delight our clients.
Speaker Change: Second on the business side.
Speaker Change: We remain focused on increasing client engagement and principality.
Speaker Change: We're doing that by offering the broadest digital solutions on the market.
Speaker Change: Lastly on the financial side.
Speaker Change: Our priority is to continue to improve operational leverage and expand our NIM.
Speaker Change: Streamlining our operations optimizing the efficiency and improving the portfolio mix, we aim to enhance profitability and financial growth.
Speaker Change: We believe that these factors will allow us to continue operating in a positive trajectory debt balance growth with profitability.
Speaker Change: Now <unk> will walk you through our business updates. Thank you very much.
Speaker Change: Thank you Jerome good afternoon, everyone and thanks for joining us today.
As will mentioned previously from day, one we have been disruptors in the banking industry, allowing us to gain market share in one of the largest banking markets in the world.
Speaker Change: Our focus on innovation has been instrumental to our success.
Speaker Change: The first quarter of this year was not different we once again welcome 1 million new active clients, bringing our total increments to $3 9 million in the last 12 months.
Speaker Change: This growth is on par with the previous 12 months period, However, with a 340 basis points higher activation rates.
Speaker Change: All of this while maintaining an extremely comfortable level of customer acquisition cost.
Speaker Change: This consistency in growth has put us in a very good position to compete in our industry.
Speaker Change: And each day, we see market share gains across the markets we participate.
Speaker Change: Moving to page 11, we can see that the day to day banking remains the backbone of our fight initial Superman.
Speaker Change: Total PPV increased 42% year in and year over year basis. This reflects the strong growth and adoption of our platform.
Speaker Change: This quarter volumes from credit cards her best debit for the very first time.
Speaker Change: This shift contributed to a stable interchange revenue, even when compared to the seasonally strong fourth quarter.
Speaker Change: When looking at a cohort basis, we observe an encouraging trend.
Speaker Change: <unk> cohorts choice steady increasing spending.
Speaker Change: Reflecting their growing engagement they grow they're growing engagement with our offerings.
Speaker Change: Simultaneously older cohorts continue to demonstrate robust growth as they mature.
Speaker Change: Moving to page 12, I'll talk about inter shop insurers and the investments all of which had great performance this quarter.
Speaker Change: Starting with inter shop, we were able to resume GMB growth, while increasing net take rate.
Speaker Change: We delivered a 1 billion <unk> in the quarter typically marked by seasonal contraction.
Speaker Change: One insurers.
Speaker Change: We also had another great quarter, reaching more than 404000 sales and $1 9 million active clients.
Speaker Change: These operating numbers supported a record breaking 52 million reais in net revenue for insurance.
On investments, our cutting edge product offering resulted in an impressive 61% year over year growth.
And on May you see reaching 95 billion reais.
Speaker Change: On the global front, we're successfully replicating one of our most important competitive advantages, but now in the U S. Our strong deposit franchise.
Speaker Change: Our assets under custody and deposits in U S dollars have reached an impressive milestone of $460 million, reflecting a remarkable 223% year over year growth.
Speaker Change: We achieved almost 3 million clients in the vertical that is strategically important given its typical customer profile.
Speaker Change: I would also like to emphasize that this quarter, we introduced a new investment option for our clients time deposits.
Speaker Change: Despite being a recent addition to our lineup we're thrilled to see the rapid adoption and growing interest in the product.
Speaker Change: Jumping into our seventh vertical loyalty, we achieved $6 6 million active clients.
Bringing a net increase of $1 2 million.
Speaker Change: <unk> as we call. It is an evolution of our cash back program and has and had one more quarter of success. A few highlights are we have rolled out more than 40 missions to enhance client spending engagement and activation is missions influenced the behavior influence.
Speaker Change: The behavior of nearly 1 million clients.
Speaker Change: Second we have observed that loop clients have a spending lift of 66% as compared to a non loop clients.
Speaker Change: Third we are consolidated co sell consolidating all sources of cash back into points and customer feedback has been extremely positive and left from a financial perspective, we are observing a variety of benefits that go from profits made win.
Speaker Change: Selling points.
Speaker Change: To interest earned on float to making spreads when points are burnt.
Speaker Change: We're excited with all possibilities loop will keep bringing us, especially after the launch of our new experience a week ago.
Speaker Change: Finally.
Speaker Change: Before giving the floor to <unk> I want to talk about the expansion of our new credit lines.
Speaker Change: First we're observing consistent growth in peaks financing.
Speaker Change: Second our buy now pay later offering is fine tuned and gaining traction supporting <unk> expansion in either shop.
Speaker Change: These two products.
Speaker Change: Along with Bill pay financing cash financing and overdrafts are growing and showing great potential the.
Speaker Change: Delinquency readings are within our expectations or.
Speaker Change: We're continuously fine tuning user experience and flexibly lies in credit policy to make the offering more broad.
Speaker Change: There is a lot of room to grow within our base.
Speaker Change: The portfolio reached $170 million in the quarter and is evolving at an encouraging pace now.
Speaker Change: Now I'll pass the word to <unk> to present, our financial performance.
Speaker Change: Thank you Shannon and Hello, everyone. Thank you for attending our call.
Speaker Change: Starting on page 17, we can see a strong performance on our credit book.
Speaker Change: After growing our loan several quarters at 5%, we're now at 4%, which is in line with first quarter seasonal trends, reflecting marginally lower credit demand as a result of holidays and carnival.
Speaker Change: On a yearly basis, our portfolio grew 28%, surpassing 32 billion Harris.
Speaker Change: Important to notice that will continue growing our loan multiple times more than the market. Therefore gained significant market share across products and diluting our cost base.
Speaker Change: Moving to interest rates on the top of the page, we can see increase of 1.0% in the all in lowest rate in this quarter.
Speaker Change: This is the consequence of one continued growth in the high margin portfolios to the repricing of the legacy payroll and real estate portfolios and three the higher than average inflation in the quarter. We go deeper into a full impact of rates on the main page.
Speaker Change: Sure.
Speaker Change: Going deeper on growth by loan type, we remain committed on deploying capital on the most profitable manner possible and therefore, increasing the high the yields on our loan portfolio.
Speaker Change: Our best Great books, Ebitdas and home equity had a highest growth levels in scale in our loan mix.
Speaker Change: <unk> this quarter alone we reached the highest underwriting volume on record, reaching approximately $500 million in new loans.
Speaker Change: Average monthly rate of one 8%.
Speaker Change: On credit cards, we continue with our approach of prioritizing credit limits to existing and strong performing clients, enabling us to increase by nearly 40% of this portfolio, while improving asset quality trends.
Speaker Change: Finally on real estate and payroll loans, we balanced growth we were pricing to ensure that profitability continues to improve in these portfolios.
Speaker Change: Now moving on to page 19 on asset quality M.
Speaker Change: <unk> increased by 20 basis 20 basis points, which is normal in first gorgeous as result of less liquidity in the consumers as opposed to the prior quarters.
Speaker Change: On the other hand, we did see continuous improvement in the credit card NPL by cohort together with the NPL and safety formation.
Speaker Change: This performance is a result of continuous enhancements in the underwriting models.
Speaker Change: Better risk management and collection strategies.
Speaker Change: On page 20, we can see a stable performance in the cost of risk metric, we've remained flat at five 2%.
Speaker Change: Our coverage ratio also remained stable at 131%, which means we continue provisioning in line with the NPL formation trend.
Speaker Change: Regarding loan mix, which could impact. These two ratios we have two opposing forces that offset each other on the one hand, we're originating more <unk> home equity loans, which should lead to lower ratios and on the other hand, we are saving Greek gods and fixed financing and therefore, the overall numbers remains.
Speaker Change: An imbalance.
Speaker Change: We continue focus on improving our underwriting models together with the collection practices.
Speaker Change: Which are the ultimate drivers of our asset quality trends.
Speaker Change: Moving to page 21, we once again see our strong funding Fridays, which reached $43 8 billion of highs and as a result of $15 7 million clients trusting us with their deposits.
Speaker Change: As I mentioned many times before we have a very attractive funding mix with transaction deposits, representing 32% of our total funding.
Speaker Change: We believe that this funding mix is one of the best mixes of course Brazilian banks.
Speaker Change: In terms of growth our funding base grew 1% this quarter, which was a good performance for our first quarter in the year for instance in the first quarter of 2023, we experienced a 1% decrease.
Moving on to page 22.
Speaker Change: Our cost of funding remains a key competitive advantage and we can see this consistently over a long period of time and through the cycle of rates, increasing things stable and then begin to increase.
Speaker Change: This quarter, our cost of funding was 61, 9% of CDI once again, our own 60% of the market that we aspire to operate in as rates to decrease further we should continue to benefit from this dynamic given the structure of our balance sheet that makes intra beat liability sensitive.
Speaker Change: Moving on to page 23, once again, we had a great quarter in terms of revenue reaching record breaking numbers.
Speaker Change: Two three and $1 4 billion in gross and net revenue respectively. This quarter.
Speaker Change: <unk> is a growth of 37% on a year over year basis, and 7% on a quarter on quarter basis. The main driver of growth was NII.
Speaker Change: Each experienced strong performance to focus on improving asset allocation into profit our loan segments fees decreased marginally this quarter as a result of our strong performance is typically has at the end of the year on a year on year basis growth in net fees was very strong, resulting in a 38% growth.
Speaker Change: Moving on to unit economics metrics on page 20 for sure we're going to see that our outback remains stable as we continue adding 1 million active clients each quarter isolation dimension. These.
Speaker Change: These result in a stable ARPA over approximately 30 <unk> per month.
Speaker Change: On the cost side, we continued to improve significantly our cost to serve metrics, which reached a record low level of 11 eight Ks.
Our margin per active clients reached a record of $18 five reais, which is 23% higher than a year ago.
Speaker Change: Moving on to page 25, we present here the evolution in terms of our net interest margins.
Despite being a quarter when the percentage of demand deposit with deposit mix is typically lower than other quarters all of our nims kind of strong performance.
Speaker Change: Starting on the top of the page, both our NIM 1.0, and 2.0 with and without the non interest across of credit cards known as Avista Importunities increased 20 basis points this quarter.
Speaker Change: When we look at the risk adjusted NIM, which is the <unk> cost of risk performance was even stronger we can records in both the 1.0 and 2.0 Meg.
Speaker Change: Yeah.
Speaker Change: This strong performance is the consequence of the following factors playing out consistently for the past several quarters.
Speaker Change: One improvement in the repricing of legacy real estate in payroll loans.
Speaker Change: Two <unk>.
Speaker Change: <unk> in the loan mix towards the most profitable products and three the lowering of the cost of funding.
Speaker Change: This move now on page 26, where we show our improvements on the operational leverage trends.
Speaker Change: On the left chart, we can see that we're able to further increase the gap between the growth of net revenue and expenses.
Speaker Change: These expenses remained flat while net revenues grew 7% this quarter.
Speaker Change: With this dynamic we continue to expand the gap between the two curves on the left graph.
Speaker Change: Our goal in terms of operational leverage.
Speaker Change: As a result, our efficiency ratio improved 370 basis points to 47, 7% as Rolla mentioned at the beginning.
Speaker Change: We celebrate this milestone of penetrating the 50% Mark and the highlight that this is one of the three key ratios we target for our 630 30 Northstar.
Speaker Change: Way ahead of our goal at this point in time.
Speaker Change: And to close on my side here, we show our performance in terms of profitability.
Speaker Change: We delivered a record row.
Speaker Change: Of nine 7% by appointing our best ever net income of 195 million <unk>.
Speaker Change: On a pre tax basis, we reached $274 million.
This continued growth and profitability on a quarter by quarter basis strengthens our confidence on being in the right path to deliver a healthy combination of growth and profitability while building a franchise for the long run.
Speaker Change: Now I'll pass it to draw for his closing remarks. Thank you.
Speaker Change: Thank you <unk>.
Speaker Change: As we saw in this presentation, we are disrupting the market by staying true to our mindset top builders and innovators.
Speaker Change: We truly believe that we're creating a unique and special and built to last.
Speaker Change: Financial platform.
Speaker Change: In the first three months of this year, our robust financial and operational performance showcased that the model is matured and has shown the true merits of its design.
Speaker Change: These achievements also highlight the resilience and effectiveness of our business as profitability is effectively combined with disruptive growth.
Speaker Change: Finally, the performance of the first quarter of the year.
Speaker Change: Two of the 630 30 plan set us on a good pace and therefore, we.
Speaker Change: We are full steam ahead for the coming quarters and years.
Speaker Change: I would like to thanks to our amazing team of employees for their hard work.
Speaker Change: And to our shareholders.
Speaker Change: Supporting us.
Speaker Change: Since the beginning.
Before moving to the Q&A section.
Speaker Change: Like to extend an invitation to all of you to attend our Tech day on May 13th <unk> Eastern time.
Speaker Change: These will be live in New York Office, where <unk> are people, who also have remotely.
Speaker Change: During this event, we will deep dive into enters key competitive advantage, which is our technology platform.
Speaker Change: You can find all the details for the event on our Investor Relations website.
Speaker Change: Thank you for our attention and for joining us for this earnings presentation.
Speaker Change: <unk>, we can now open it for questions. Thank you.
Speaker Change: We will now begin the question and answer session.
Once again for this Q&A session. We ask you to write down your question via the Q&A icon at the bottom of your screen. Your name will then be announced and you will be able to ask your question live at this point a request to activate your microphone will appear on your screen. If you prefer not to open your microphone live please write down no.
Speaker Change: Microphone at the end of your question and our operator will read your question aloud.
Speaker Change: Our first question comes from Mr. Tito Levada from Goldman Sachs.
Speaker Change: Mr. Levada, we're now opening the audio so you can ask your question live. Please go ahead Sir.
Speaker Change: Hi, good afternoon, and thank you for the call and taking my question I have two questions if I can.
One.
Speaker Change: Just some good loan growth asset quality held up despite some seasonality.
Speaker Change: Just thinking from here I mean, how much of the pickup in Npls do you think was related to seasonality.
Speaker Change: And in terms of continuing to grow the loan book and you are closer to this 30% level how comfortable are you in being able to continue.
Speaker Change: Turning to do that and then my second question really just a clarify a little bit the decline in the capital ratio in the quarter I see here.
Speaker Change: Thank you paid a dividend from the bank.
Speaker Change: To the holding.
But it looks like the reference equity fell even more than what the dividend was let's take dividends of $125 million, if I heard it correctly, but just if you can clarify a little bit that decline in the reference equity in the quarter and how much of it was related just to the dividend payment. Thank you.
Speaker Change: Hi, Thank you for the question of some Delta here, so on asset quality and we think it was mainly due to seasonality and we are operating at them delinquency levels. Both in terms of NPL formation and cost of risk that we think that we will be operating throughout the year, we have some upside to potentially.
Speaker Change: <unk> be operating below this level, but it will be around the ZIP code and keep in mind that we are increasing underwriting on certain unsecured lines that win.
Speaker Change: And with Embraer on the on those ratios on the other hand, we are growing EBITDA and home equity which tend to compensate.
Speaker Change: Compensate we are solving for risk adjusted NIM. We have said this in prior calls thats when we get the most out would you say, what we get to with a homeowner in terms of paying the reasonable as an interest expense and cost of risk.
Speaker Change: And then in terms of capital when we had lost.
Speaker Change: Several factors playing on the one hand, we had.
Speaker Change: A OCI or the mark to market of the securities portfolio, which is positive and some core does narratives and others. In this quarter was negatively by $50 million. It goes directly to equity and impacts the delivery capital.
Speaker Change: <unk> referenced capitalized related calls it we had the dividends from the bank into the holding level, which will I wouldn't diving a bit deeper now for approximately 160, <unk> and we also had at <unk>.
Speaker Change: Capital contribution from the bank to the broker dealer in Brazil.
Speaker Change: $440 million that will be reversed when it was a central that recognize the consolidated capital of that so that's $1 41.
Speaker Change: Temporary and we also see the LCA also is temporary because it has these oscillations of back and forth.
Speaker Change: And those three together explains the change in the in their referenced capital, but the most important thing on capital that I would like to highlight is that we are solving for.
Speaker Change: <unk> financial performance and in that sense, we created an organizational structure, our corporate structure, which now has the interim call holding with the follow on that we did at the beginning of the year together with the profits that we're increasingly creating we do expect to have a heavier percentage of our excess capital.
Speaker Change: <unk> holding 11, Dcs more efficient for the performance of the company. We will keep that cushion are operating with a comfortable level of <unk> one of the of Brazil bank level, but the excess capital will be increasingly more based in the holding company.
Speaker Change: Okay, No that's very clear, thanks, and Kevin just a follow up on the first question. So the 30 ish percent loan growth you feel pretty comfortable that youll continue to be able to grow grow at that pace.
Speaker Change: Yes, we think it's going to be in the 30, Sam obviously, the second half of the year is the most active one so that we will be filing the out the final outcome. We saw that in the in the last year. When we had acceleration towards the end of first quarter wasn't.
<unk>, 4% was higher than prior first quarters, but we would see as vehicles back.
Speaker Change: Perfect great. Thanks Daryl.
Speaker Change: Thank you.
Speaker Change: The next question comes from Mr. Thiago Batista from UBS. Mr. Battista we are now opening the audience. So you can ask your question live.
Speaker Change: Please go ahead Sir.
Hello or hear me.
Speaker Change: <unk> Okay perfect.
Speaker Change: First of all congrats Joe on the centers in Chicago for the results of our strong numbers.
Speaker Change: I have two questions. So the first one.
Speaker Change: About the pig financing how are.
Speaker Change: How much turn from us can be exciting supporting winter do you believe that this can really change the profitability or change the business of the bank or how big this can be.
Speaker Change: And the second question about our interest our hedge strategy. So we have seen interest rates increasing a lot in the last couple of months in Brazil. So how our internet is doing it's a hedge strategy.
Travel luggage. We're speaking thank you for the question I'm going to cover the fixed financing part of the question Vincent to core to hedge.
Speaker Change: So we are very excited with the fixed with the big findings.
Speaker Change: Got it.
Speaker Change: We have been saying for a while that we see the 2.0 consumer finance in Brazil, starting to play out.
Speaker Change: What do you mean by that.
Speaker Change: We see with the pigs finance different from the achieved allowed on the credit cards as a more active.
Speaker Change: Product more interesting product for us to deploy our capital we can manage matter. The interest we can manage better the moment, where we do the underwriting we have less intermediaries under process such as the card companies the acquired companies and so on.
Speaker Change: We started about one year, so even last with big financing and so far the delinquency is better than the credit cards and the economics are better than the credit cards, and we're still improving and we're still rolling off that that offering for our clients as we always like to say when it comes to credit from Horizons, we will.
Speaker Change: Like to move forward, but with caution, but we see as a big addressable market for optics finance. So very excited to work with what you have seen so far.
Speaker Change: <unk>.
Speaker Change: Again, just to run through.
Speaker Change: To remind the market.
Speaker Change: 80% of penetration on <unk>, So we will be able to place them.
Speaker Change: Very good role on that on.
Speaker Change: On that product going forward.
Speaker Change: Hi, Darryl Wilson Dale here on the on the hedging side, what we started to do at the beginning of last year was to hedge the originations not desktop the origination of the loans that had more than one year.
Speaker Change: Operations. This was payroll <unk> es will make would be and and creation of mortgages and we have been doing that since.
Speaker Change: Now that interest rates went up a lot we with boss will resume once we see our rates going down somewhere.
Speaker Change: It is smoothly am increasing the low end of the of the ratio of the hedge ratio in the in a long duration portfolio, we expect to lease or we seek to lease to have less volatility in the results. We think these are strategy, we're doing but we don't want to rush in over hedging too fast when we still see.
Speaker Change: Some potential for rates to go slower, but overall, that's the strategy so far.
Speaker Change: That is zero and for travel.
Speaker Change: Our next question comes from Mr. Pedro, let Duke from <unk> BBA, Mr. Li Duke we are now opening the audience. So you can ask your question live. Please go ahead Sir.
Speaker Change: Thank you guys have congrats on the border.
Speaker Change: I'd like to take a branch a little bit on loan book.
Speaker Change: Knowing very well in the Nordics, our credit Covenant and special now so first of all bad.
Speaker Change: What led you to have more comfort on this why.
Speaker Change: What are you doing differently.
Speaker Change: And our clients are garlasco user profile on these cards and then on the overall loan book pace, 30% unit growth. If that's the level, we should see also for domain.
Speaker Change: Thank you.
Speaker Change: Hi, Luke.
Speaker Change: <unk> speaking thank you for the question. So as you know credit card is an important product for our transactional banking vertical and the key driver of Principality.
Speaker Change: So growth there is aligned with our short and long term objectives.
Speaker Change: With that.
Speaker Change: When we think about specifically in the first quarter, we had a few factors contributing to growth.
<unk> was loop so our loyalty program is gaining a lot of traction.
Speaker Change: We have deployed several missions and these have been the drivers of awful lot more use on our cards.
Speaker Change: Bulk of it in with a lot of focus are a good contribution from higher income clients also Matthews.
Speaker Change: The upper scale products this is being done.
Speaker Change: Second part is a nerdy contribution in the port in the total portfolio coming from <unk>.
<unk> financing and also bill pay and cash financing.
Speaker Change: It's growing so it starts to contribute for the growth of the portfolio.
Speaker Change: And also last but not least the continuity of our usual growth and that includes new clients from on boarding that we continue underwriting credit limits and we're having good engagement.
Speaker Change: New clients for the credit card product coming from the behavior models. We're also very active on underwriting those limits and a big focus on gains of share of wallet on existing customers. So clients that are already using credit cards, we've been doing all the typical increases off.
Limits and again with Luke it's easier to sell these engagement. So we'll keep working on this direct Indian direction throughout the year and.
Speaker Change: And that's our best that's good to hear for the Indians are moving toward the growth it's going to be in that ballpark that Santiago just mentioned, so we're going to be in the thirties.
Speaker Change: And with the credit profile evolving in parallel with good growth on the App GTS, so products with low delinquency balancing with products that might have a little bit more delinquency.
Speaker Change: And so we see growth in Npls at good levels as we saw in the first quarter.
Speaker Change: Thank you and congrats again.
Speaker Change: Our next question comes from MS <unk> from HSBC.
So Gabriela we're now opening the audio so you can ask your question live. Please go ahead ma'am.
Gabriela: Hi, Thank you for taking my question just a quick follow up on the previous question regarding the anti calculate lines that eni expanding into.
Speaker Change: You've seen a lot of players are all saying big financing now even the incumbent banks.
Speaker Change: Pleasingly improving debt offering in fixed financing how do you think <unk> can differentiate.
Speaker Change: Either in decline differentiation, given that you have 8% market share of fixed transactions.
You could continue to grow aggressively and big financing. This 170 million number that you've shown this quarter leg.
Speaker Change: This would be by the end of this year, roughly where do you see these new lines going into at least by the end of this year.
Speaker Change: That they have for us to gain us anticipate what kind of growth we should imagine. Thank you so much.
Tony: Tony I was wrong. It we're speaking here. Thank you for the question.
Tony: As I told you before them.
Speaker Change: It's a mantra athlete of that we'd like to move forward, but with caution mostly on unsecured credit portfolio, but the good news is we're putting this new products up and running the clients are adopting very fast.
Speaker Change: Lastly, the way that people.
Speaker Change: By this product with us, it's a 100% digital through our App and a very seamless way. This help us to grow fast and also to mentioned by having the best cost of funding in the market, who can have a very good profitability on that we have been.
Speaker Change: Tracking the delinquency of the product big financing buy now pay later four hour into shop, the Bull bullish.
Speaker Change: A payment option and they withdraw option with <unk>.
Speaker Change: So far as I mentioned before in the previous question the numbers are better than the credit card and therefore, the economics are much better without the intermediaries that had also mentioned on the previous question. So our appetite for this.
Speaker Change: The consumer finance 2.0 is big I believe that agile SAP have enough big market share on the market at good cost of funding in a very seamless way to hire the products. We believe that we will.
Speaker Change: Again with <unk>, a big market share of the market going forward.
Speaker Change: And Mr. Zhao. Thank you if I can just follow up on the cost side I mean, we continue to see very good cost control and that has definitely had been lifting up the ugly.
Speaker Change: What kind of level do you have for this year in terms of cost control a significant deal kind of cost performance Ah can we see a big moves this year I think the biggest move happened last year, but what kind of expectation give me half of this year in terms of cost growth and cost control measures. Thank you. So my hand, congratulations once again.
Speaker Change: Thanks, Nihon <unk> speaking so on cost control.
Speaker Change: One one reality is we keep surprising ourselves we expected it to grow marginally it's not that we expected to grow aligned with the <unk>.
Speaker Change: With revenues, we want to gain efficiency right. So we need operating leverage.
Speaker Change: And we need this to happen, but with technology with gains from implementation of new technologies and all the projects that we've been doing to keep costs under control we've been surprising our sales, Florida after quarter as we look forward, we still see.
A little bit of what we said in the last quarter call, which was having the costs growing at about half the pace.
Speaker Change: That we see revenue growth. So that's kind of how we are aiming and how we are running the company.
Speaker Change: And here's where I'm speaking just to complement on the Xiaomi. It's important to mention that is not by accident that our expenses are growing whaler happened around us we need to think depth by design.
Speaker Change: The structure without the big idea legacy systems without the brands, 100% cloud base we.
Speaker Change: We have very developed.
Speaker Change: And database. So we are working with that with now the technology technology that to have on our kitchen under the Hood.
Speaker Change: And to improve.
Speaker Change: The number of clients that to conserve per active employee the number of products that we can offer and our super App. So all of this combined have been helping us to achieve this operational leverage.
Speaker Change: And we believe that we're just scratching the surface. So we see how we have been able to reduce from almost 90% cost to income to 47% cost to income just maybe three or four quarters, it's really a very good achievement.
Speaker Change: I believe that this metric is going to be maybe the one that youre going to get the first 633 PM very excited with them.
Speaker Change: Cost control with the operational leverage that we're putting in the balance sheet.
Speaker Change: Super Thank you so much.
Speaker Change: The next question comes from Mr. Flavio Yoshida from Bank of America. Mr. Yoshida, We are now opening the audio so you can ask your questions live.
Speaker Change: Please go ahead Sir.
Speaker Change: Hi, guys.
Speaker Change: Congrats on the strong Brent so I have two questions here on my side. The first one is on engagement and Principality. So in fact, we see many banks talking about seeking clients Principality.
Speaker Change: And I was wondering how what do you think it's key to get the clients prosperity.
Speaker Change: You bet.
Speaker Change: Credit limit is very important.
Speaker Change: But I'm not 100% sure about it.
Speaker Change: So if you could elaborate on this on how to increase engagement levels it will be great and.
Speaker Change: And then my second question is on the coverage ratio so.
Speaker Change: You were seeking growth on our unsecured credit lines right, including credit cards.
Speaker Change: Were running with very stable coverage ratio around 130%.
Speaker Change: But when we see other banks are there Lisa banks historical data.
Speaker Change: We see an average around 200% so.
Comfortable are you guys with this level do you think it'll be a necessary to drive just coverage level up.
Speaker Change: C dream that their loan mix is getting a riskier.
Speaker Change: Thank you.
Shannon: How you see that this is any Shannon. Thank you for the question. So I'll start with the engagement and Principality Park and then we'll talk about that.
Speaker Change: The portfolio and risk box and what we see if first strategically how do we position ourselves to gain Principality Youll have high engagement. It's about several things so not only credit cards, but a lot about the product. So we've been differentiating ourselves since the.
Speaker Change: Early days back like IPO in 2018, and invested a lot in bringing many different products to two hour to hour Super App. So a lot of transactional banking features so we have today the best peaks at the market base by base by the Central Bank rating system.
Speaker Change: And Thats an important one.
Speaker Change: But then we have a lot of different verticals, including insurance.
Very complete and flat investment platform.
Speaker Change: I'll either shop, adding a lot of value to your customers more recently, our global account offering that drives tremendous engagement.
Speaker Change: A lot of upper scale clients, so having the super App offering with all of the products within the same app at a seamless user experience is for US the biggest driver of Principality people don't need to leave intercept to take care of their entire financial life.
Speaker Change: And we will keep moving there and you'll get more prosperity and when we get more to the statics to the tactical action items. Then we will do is we do a lot of things to make sure that we bring everything that I talked before as soon as possible to enter so for example, when we think.
Speaker Change: Fix.
Speaker Change: An important part of the process is to get one of the clients main fixed Keith as they're called in Brazil, we've been doing a lot of that.
Speaker Change: On getting clients to engage with credit card limits you need to have a loyalty program that has to be complete we're doing a lot of mission to make sure we bring those clients and as we go.
Speaker Change #100: We were being able to engage clients with more value added products, such as <unk> financing I'll pass the word to as well we've got a feeling for it with a little bit with some I know youll Sheila just to add on top of <unk> comments I would say that two things are very very important to have.
Speaker Change #101: The best product on the streets by having the best product you have client Principality.
Speaker Change #102: And I would say, it's the combination of innovation and technology. So as we talked before our technology is the best in class and we have this quarter a threat right. We are very innovative home. So when you combine these two things we are always the first mover on the new trends that you see on the digital banking.
Speaker Change #102: Environment digital banking market with that in place the clients are embracing more and more and more data.
Speaker Change #102: They're our first option.
Santee: Digital banking leadership and now Santee will cover about the coverage ratio for our portfolio.
Santee: Hi, yes, so on the coverage ratio, we have two different realities on the one hand, we have the unsecured part which is around 30% that has leverage ratios, which are higher than 130, and then the secured part which has a lower the blended is what the market sees which is the 130, but inside of that.
Santee: Different realities, we have is a big level also.
Santee: Fragmentation or diversification on in New York clients within the portfolio. So we will see is how the portfolio mix evolves through time, so far the changes happening into significant at 30% now stands at 32 by secured powerful wasn't something that made SaaS substantially changing them and the coverage ratio.
Santee: But if we do happen to have them.
Santee: The growth of our bigger share on the unsecured part we would assess them.
Santee: Accordingly, but we do not see our portfolio in the future having mix significantly skewed towards unsecured we do imagine am unsecure growing beyond the 30%, but nothing.
Speaker Change #104: Essentially you have on that.
Speaker Change #105: Alright, great. Thank you.
Speaker Change #106: They don't like to like.
Speaker Change #106: The next question comes from Mr. Yuri Fernandes.
Speaker Change #107: J P Morgan.
Speaker Change #108: Mr. Fernandez, we're now opening the audio so you can ask your question live. Please go ahead Sir.
Yuri Fernandes: Thank you guys and congrats on the quarter I have a question regarding the payroll loans.
Provides the breakdown of personnel.
Speaker Change #110: Excluding <unk>.
Speaker Change #110: For me the <unk> basically payroll.
Speaker Change #111: It has not been growing so I would like to understand what has been your view on the broad or is there any challenge on originating these bar digitally like whatever you can comment on your expectations for this.
Speaker Change #112: This the more traditional payroll, let's put this way and also if you can comment is a follow up on this question on potential changes to the broad. So today, we see lower rates like great gifts from the government, but we also see the government going for some kind of marketplaces for payroll kind of potentially making easy.
There are digital guys like yourself to maybe offer.
Some of those products. So whatever you can comment on those initiatives as we believe they will have been if you have any timing I think it can also help so basically what is happening because we are not growing and can you accelerate growth.
Speaker Change #113: See our changes for this project. Thank you.
Speaker Change #114: Hi, Eric This is <unk> speaking. Thank you for your question so starting with the traditional payroll loans now cover a few different topics that we're seeing and how we're approaching the products. So first is like portfolio management or.
Speaker Change #114: Our focus is on having a healthy and profitable portfolio.
Speaker Change #114: Having said that we're happy that even on a stable portfolio in size. So we remained in the 5 billion ballpark. We grew our implied rates by 80 bps in one quarter. So this was very positive positive and there is a lot of room to keep this trend given our discipline in pricing and the rates of the overall ports.
Speaker Change #114: <unk> that our policy is considerably lower than.
Speaker Change #114: The current levels.
Speaker Change #114: Second in terms of origination channels.
Speaker Change #114: As we have communicated before we have been evolving from an origination that used to be mostly omnichannel, which is like digital.
Speaker Change #114: With human support to a hybrid of omni channel. So that the same one as before and a digital only origination we see early results already happening of the digital loan origination.
Speaker Change #114: With a lot of iron SaaS through Whatsapp going on already and we're confident that we should resume.
Speaker Change #114: Portfolio growth throughout 2024. So this I believe are the main points as we think about the traditional payroll. So we'll keep the discipline to grow the on this portfolio.
Speaker Change #114: When you think about everything that we've heard in the market. So we've heard noise on the F. GTS product. We believe this product is here to stay it's the lowest cost.
Speaker Change #114: Loan or loans that that's a normal worker can get in Brazil. So this is.
He is a product that we do 100% leased study we're confident it's here to stay and.
Speaker Change #114: On the other.
Speaker Change #114: The other issues that we've heard through the last few months private payroll can be a gigantic opportunity.
Speaker Change #114: Though it might take longer to see it implemented.
Speaker Change #114: And last we've heard a lot about <unk> SaaS digital I NSS and that one is probably one that we're going to see in the short term. So this is going to be like a portal from that a player who manages the.
Speaker Change #114: They are SaaS payroll loans, and we're going to be able to put our offering there along with other competitors and given our differentiated cost of funding we should be able to use that as a great opportunity to grow and attract clients as we can as we can comfortably underwrite.
Speaker Change #114: At the at the lower lower the lower end of the market prices with very good Roe.
Speaker Change #115: Lip Bu is wrong.
Speaker Change #116: Sorry, just one <unk> sorry, you had to just one thing just.
Speaker Change #117: Just to complement on the China comment.
Speaker Change #118: Important to mention that with the capped at 168, we see the average of the market with their portfolios at 175 ballpark, we have as <unk> mentioned in the best or portfolio at $1 25, because it was underwritten I'd say two years ago. So we have huge room to improve the winner.
Speaker Change #118: <unk> of our current portfolio, but not only depth to get market share from the market and just to highlight having the best cost of funding.
Speaker Change #118: Also on this new product.
Speaker Change #118: And as shown in wealth management. It seems to me like Deja Blue I remember one six started in Brazil, and we had our the cost with the cheapest study the inter banking fees that was rationale or margins and when people start growing it was very good for us so imagine all of the employees in Brazil.
Speaker Change #119: I'll do the the payroll loan through a portal as challenging mention connected through our hour through API and our Super App. This would be amazing and we can see approx of depth with Neff GTS.
Speaker Change #119: They update their started where we're able to do depth and a very very seamless way in our app and our underwriting is growing and growing and growing March will require so we're very excited that if it come to happen with this new type of payroll loans is going to be very very good for our balance sheet.
Speaker Change #120: Thank you joelle and thank will assume it is super clear and congrats guys.
Speaker Change #121: The next question comes from Mr. Andrew guarantee from Morgan Stanley Mr. Guarantee we're opening the audio now so you can ask your questions live. Please go ahead Sir.
Speaker Change #122: Thank you for the opportunity to ask a question I just wanted to briefly ask about how we should think about the income from derivatives portion of your securities income, which ultimately gets included in NII.
Speaker Change #122: There was a pretty significant swing in this line quarter over quarter can you just kind of provide some more details as to what happened and do you expect this to continue to be a tailwind for NII for the rest of the year. Thank you.
Speaker Change #122: Hi, Andrew Sandell taken these one so what we do is we break down the result of that derivatives, which are interest rates of the longer duration portfolio that I mentioned earlier in a question, we'll break that down by product and we add that to calculate the implied rates.
Speaker Change #122: The portfolio level, we disclosed that in the release with skills that he makes a file on the IR website called the historical series and with as you can see how the interest rates of real estate loans personal loans et cetera performance through time, So I guess the way that we think about is how will the interest rates on.
Speaker Change #123: Considering the hedges will evolve through time and as Alessandro said there at.
Speaker Change #123: The payroll, which remain part of personal loans now we are we're still with our portfolio.
Speaker Change #124: <unk> is running at around one 5% per month, and we originated $1 six so those rates to continue to go up and the same thing on real estate, which is a bit more complicated because we havent inflation adjusted loans that but they're also increasing their performance quarter on quarter, but will answer the question.
Speaker Change #125: Question them, we do breakdown that buy at the product level as part of the hedge that is directly the interest income as well and pilot go through derivative line.
Speaker Change #125: But to see a lot together, we've been working and we show it in the in the breakdown to calculate the all in rates of the portfolio.
Speaker Change #126: Got it thank you.
Speaker Change #127: Thank you.
Speaker Change #128: The next question comes from Mr. Ricardo booked Spiegel from BTG, Mr. Both speak.
Speaker Change #127: No.
Speaker Change #129: We are now opening the audio so you can ask your question live. Please go ahead Sir.
Good afternoon, and thank you for the opportunity to make questions I have two here on my side.
Speaker Change #130: First can you please share some light on when do you expect to have the NPL formation declining.
Speaker Change #131: And if you could provide an update for this metric so foreign could show and have April and a little bit of May a number I'll, let you basically get an idea on why do you could see cost of risk declining more as a reduction in the care is very important for that and for my second question, we saw that firsthand.
Speaker Change #131: The decrease by around 14% quarter over quarter, the truth or not.
Speaker Change #132: Not mistaking lower bonus provisioning. So I went to their stand and what was the rationale for that and does it make sense to consider at this level as a recurring base going forward. Thank you.
Speaker Change #133: They've got about Sandy out here, so on NPL formation, we need to have two consecutive quarters of NPL formation decreasing.
Speaker Change #134: These onewest margin probably is bought by visa lower number in the fourth quarter. Despite.
Speaker Change #134: The pressure that we have the bigger in the first quarter, we don't see these numbers changing too much and as I mentioned before in another question, we think that the asset by the metrics, we will stay at around these levels potentially a bit better but not meaningfully different from what we have now because of worries about five 2%.
Speaker Change #134: We see it operating also at our own the Laramie, maybe even closer to five and a half throughout the year and by ultimate sleep the second half.
Speaker Change #134: It drives more of a final outcome as there is more growth there and we also have to see the level of penetration and success that will have on their secure lines, let biggs Cray that might know bellaire, which are ramping up.
Speaker Change #134: In terms of the personal expenses when you have the same situation at the beginning of last year, we do have higher expenses.
Speaker Change #134: All of EM.
Speaker Change #134: Bonuses.
Speaker Change #134: A few of which are provisions throughout the year as our decided debatable entirely.
In the fourth quarter last year was a very good year. So we wanted to recognize the personnel and the talent and the huge effort that the team throughout the entire booked in a in a in a year that was.
Speaker Change #134: Very strong.
Speaker Change #134: Strong depth of effort together results done.
Speaker Change #135: This year, we stayed at this level the number will go up throughout the quarters and lowered tend to preparation at the net income rose quarter over quarter.
Got it thank you.
Speaker Change #136: This conference call is now concluded enters IR area is at your disposal to answer any additional questions.
Speaker Change #137: Thank you for attending today's presentation have a good day.