Q2 2024 Banco Santander (Brasil) SA Earnings Call
I mean, we have to show our NPS numbers, either going up or down so our NPS continue to grow and P. S. As a whole transactional we grow any P. S individuals and companies that we have posted high levels that but that's not enough we want to increase and.
Even more.
Speaker Change: Converging towards individuals as well, but these are historical levels and quite positive. They also.
Speaker Change: Reflecting average I know when we look at additional channel remote channel and obviously they are constantly integrated with the chat experience. So we'll look at our physical stores. This is even more surprising because we posted an important evolution in the physical channels, which coincides with the new service model that we also launched a fee.
Speaker Change: Two months ago in our effort to redesign our retail platform the stores no longer own the clients, but they become a major element of our multichannel offering as an element of convenient until now the stores serve all clients of the bank in a very open way all of the models are earmarked.
Speaker Change: To that end so the story is more dedicated to traffic.
Speaker Change: N P S grows substantially Moreover.
Speaker Change: Profitability per vintage.
Speaker Change: It also grows we've been showing these numbers in the past quarters. The 2021 vintage compared to 22 and 'twenty three had a substantial evolution, which shows that we are going in the right direction. When you want to grow more but we are on the right right track already.
Speaker Change: Here, we talk about three.
With the strategic numbers. So we capture the strategy that was literally launch one day before.
Speaker Change: The release I, even showed you. The video we are referring to a strategy that involves a complete redesign of the way we deal with massive with mass income we talk about.
Speaker Change: Our new digital experience redesigned simpler.
Speaker Change: Much more supported by a human and digital experience through the App. We also talk about it continuous conversation and I, usually say here that we don't want our clients to repeat the story over and over so the client had a conversation with us or the conversation has to flow I don't want our clients to to tell the story more.
Speaker Change: Then once and we do that through data capture and our CRM experience. We don't want the clients to tell the story over and over again, because we have to be able to know the story, even before they tell us and again, we wanted to be the most pleasant bank in customers' lives and not only you know through our own wheel, but we want them to feel that.
Speaker Change: For themselves and N. P. S. Evolution is just showing that what has happened to free in the past three months. We are very pleased with the evolution. The first kpis are quite positive we are reactivating more.
Speaker Change: Account holders.
Speaker Change: Part of the strategy that I talked to you before during the relief in it and other presence.
Speaker Change: Presentations.
Speaker Change: From our total base of over 60 million clients half of it almost the entire bank. We have inactive customers. So we have a great opportunity to do reactivate clients that where we.
Speaker Change: We're not active a few months or a year ago.
Speaker Change: We also streamed.
Speaker Change: We are also capable all converted converting you know single product clients like our auto loans or mortgage loans or savings accounts. So we have the opportunity now to bring these clients.
Speaker Change: Two to bring them in.
Speaker Change: A more encompassing offering and we're doing that would've very selective group. So free not only means that we are changing our cost of race could not only means that we are lowing lowering the bar in that credit in the ocean credit, we are bringing new clients with quality.
Speaker Change: Proportionately, even better than before and we are activating the clients that we want to have as well.
Speaker Change: Now here, we're zooming in into the select product I've been talking about select for the past year. When we launched select select as our high income segment. It celebrated its 10th anniversary last year or two years ago, and I started talking about select with you we had 600000 clients right.
Speaker Change: And at the end of last year have we hit the target of 1 million that was a public commitment that I made with you.
Speaker Change: And I was saying Okay. Now we are counting backward towards you know our target up to mail. It. So nine months later I would say I'm pleased to say that we already have one 5 million clients and we are not only focusing on the number of clients, but we are growing with an M. P. S that hits the Mark of 70. This is the highest in our.
Our history and this.
Speaker Change: Is through public survey N P. S between the first and second banks in terms of high income in Brazil, and this makes us very pleased and we do that by growing our credit profiles of the loan portfolio and we also do that through investments.
Speaker Change: The Principality is increasing among high income clients and things weird never totally satisfied a few weeks later, we launched a new positioning that we call the.
Speaker Change: Our positioning repositioning of the branding and this is also migrating to high income clients with Comestible say, starting with you. So we want to be very close.
Speaker Change: And being close weenie human of course at the digital also has a very good relationship with our clients, but we want our clients to be supported by people available 24 by seven these are experts in investments in our AAA and so on and so forth. So we are revisiting this offering.
Speaker Change: To highlight what we do best in terms of our offering of credit cards, you know credit our current accounts.
Speaker Change: Personalized offering in our dedicated stores, which are spread all over Brazil also in terms of our remote and digital offering.
Speaker Change: And here as I've been doing since September of 2022 here, we choose some of our strategic businesses and we will detail their performance. So starting on the left hand side with our credit card business. If you recall for almost two years.
Speaker Change: Our.
Speaker Change: Operation was decreasing and this was not pleased to see but it was something that we did consciously. This was part of the B the change in our portfolio, we need that not only we had to step on the brakes, but we had to earmark a portfolio because we were growing significantly in 'twenty and 2021 'twenty two 'twenty three there was a draw.
Speaker Change: <unk> and <unk>.
Speaker Change: The customer base that was necessary, but in in the last quarter. We started to grow again, we double our speed of growth. This current quarters. So we are very pleased with the evolution of our credit card business. We are growing in terms of.
Speaker Change: Client quality, we are growing in terms of credit turnover and you see the growth in credit turnover in our fees line you will see through <unk> presentation that we are very well positioned particularly in credit cards, and we are selling a level of credit cards that is two thirds of what we we sold in the peak of our speed of sales back in 2020.
Speaker Change: But certainly now we are selling you know having better knowledge of our clients. We have a good management of who comes in and who will merit an increase in in their limits. So there was a great evolution in terms of data management and risk management as well. Therefore, we are very pleased with the current led.
Speaker Change: Ah things and certainly.
Speaker Change: I would say that it's been a year since we started growing the credit card business and this is relevant for this year and Moreover, for the coming years and quarters and at the same time NPS has been very good. So we choose to grow this business again, but grow with quality and customers being very very happy on that.
Speaker Change: Right hand side, we talk about payroll loans. This is a business that I've I've been referring to for quite some time payroll Lowe's, we're growing ever in every single portfolio.
Speaker Change: Individuals government and I N S. As you know with all of them given challenges with where it rightfully mutations. This is one of the most competitive and dynamic products. We have maybe the most in our entire portfolio, but once again, we're growing with satisfied clients and we are going growing providing a better.
Speaker Change: Credit quality, so payroll loan remains a very key part of our offering. This is the type of credit where we want to grow with our clients and with that we would generate not only principality, but we will be able to deliver better.
Speaker Change: Quality of credit now here.
Speaker Change: In this slide we highlight our consumer finance business.
Speaker Change: Telling our employees that the consumer finance is even older.
Speaker Change: Older than Banco do Brazil, because the consumer finance transaction is over 60 years old so it's been around in Brazil, even longer than the bank itself, but even then.
Speaker Change: It is one of the arms.
Speaker Change: That brings more transformation, we are making.
Speaker Change: Great.
Speaker Change: <unk> here.
Speaker Change: Between 2015, 2016, we took a major step but now in 'twenty four we're giving another big leap because not only we want to be ahead of the game certainly this is.
We are not sitting comfortably in.
The couch, but we are working toward ball, we are the consumer finance company that is leader in the country. Our market photo is 21% and more you know.
Speaker Change: Even more than their quota were originating almost 90% of all of the entire auto loans are used vehicles in Brazil, where we choose to do part of it but we are able we are capable of looking at the market and that's why we have a law.
Speaker Change: A lot of data technologically speaking, we also evolved in terms of hiring experienced in terms of hiring a auto loan or we only need the C. P. F N. The member play to the vehicle just forklifts till the experience to the dealership is amazing so on average the.
Speaker Change: Dealers will want to work with sometime there because our experience is quite technological we use facial biometrics and all of the experience that we need because the world is becoming even more complex when it comes to security, where we also have super personalized offerings. We all all we need is the.
Speaker Change: And the number of players within the card. So we anticipate ourselves in terms of risk and the price of the operation and we use a lot of events like Olympics again, we have.
Speaker Change: Embark technology favoring customer experience and this allows us to deliver quickly and correctly. Both in terms of pricing volume in appetite, we have partnerships with six out of 10 largest Oems partnerships that involve you know our stake we have a stake in some companies in.
Speaker Change: We all saw the operating partnerships and in practical terms. They work the same way and we are leveraging sales together the sales of new and sometimes used vehicles together with the Oems we have a historical partnership with web Motors, you might recall that last year, we sold our.
Speaker Change: <unk> two car sales in practical terms nothing changed in terms of the operation we remain totally integrated web motors is one of the largest auto portals in the world and so our partnership remains very solid and strong. In addition, we have a green consumer finance operation and we are constantly embracing.
Speaker Change: Initiatives related to electric vehicles, flax vehicles partnership with BYD and other players. Therefore, we're growing it with quality, bringing ESG to our agenda on the side of the consumer finance trends our platform speaking about.
Got it.
Speaker Change: So angry agribusiness hour in AR and accordingly, if we look you know on a monthly basis and quarter on quarter, we had a a.
Speaker Change: A record origination quarter, our portfolio grows almost 20% in two years and our origination also grows if you look at the volumes that sports is over 60%, we do that with a very high NPS score and the quality the quality of credit is even outstanding outperforming.
Speaker Change: The industry, our NPL is coming down zero.
Speaker Change: Zero percentage points, so M P S and and credit quality and volume growing significantly here, we zoom out in our SME last quarter I referred to the launching of a new service model for Smes in practical terms to recap so what do we do we do.
Speaker Change: Remove from the stores and the specialists.
Speaker Change: For SME. So the manager is no longer sitting in the store.
Speaker Change: Just serving a flow that not necessarily hum came from Smes, but we reconnect these experts and we put them down the road show that can cover a closer micro region in the past.
Speaker Change: Yeah.
Speaker Change: We would cover hundreds of kilometers, sometimes 50 or 60 kilometers of area that it was almost impossible to cover but now they're range covered is much closer so the exports out of the stores they spend their days carrying their ipads and visiting clients all day long.
Speaker Change: Therefore, we increased the number of calls so in a few months, we just increase the number of visits NPS increases because proximity multiplies N. P. S. And we've had we also have a better risk management because these clients on average are a bit more nervous so being close to them is crucial we can cover more clients we are.
Speaker Change: Much closer.
Speaker Change: And we increased the number of specialists by 25%. We do believe in this model. We are investing in people. So this is a topic that involves people. So we are increasing their head count by 25%. We will have more experts all over all over the country, increasing our performance and on the right hand side we.
Speaker Change: Have other figures again based on technology, we do not have a slide on technology alone because technology is part of everything we do technology as part of you know.
Speaker Change: Select transformation technology is also part of free as part of our investment platform and certainly its part of our.
Speaker Change: The transformation of our offering and the delivery of our experience for SME and corporate as a whole here, we talk about automation digitalization, we talk about guarantees you know, we say that almost.
Speaker Change: We have almost 100% of the Digitalized customers, 94%, we talk about lead time lead time is decreasing substantially in some of the products that we highlight here and the NPS continues to grow I do not like 41 of N. P S. But it's much better than the 20 some debt.
Speaker Change: We had in the past, but that means that we are moving in the right direction with you know more profitable vintages and more engaged and loyal customers.
Speaker Change: Yeah, we talk about investments investments. So that's one of the main pillars of our strategy I've been talking about that since the first time, we met I said that we had to diversify towards an investment platform I mean.
Speaker Change: The bank never focus on investment as being the main pillar, but we want to change the funding mix of the bank I mean from being more concentrated in wholesale to be more concentrated on the retail side I will show you more of the data further out and we are very pleased with our results. So starting with that lower part we have.
Speaker Change: Important.
Speaker Change: Progress in retail retail has never captured as much of course, we want to do a lot more funding we would move towards that direction. So a five time growth and investment in the past year that is very good we're more consolidated and that will give us continuous grow I mean, the base is growing more and more and I hope to be bringing good news.
Speaker Change: In the future as well this is executable and we will not be distracted in terms of retailer. The zoo of retail is AAA triple ways. Our advisory services at first we wanted to reach 12.
Speaker Change: 1200 advisors, but now the target has gone to 2000, but we know that with 2000 advisers, we will be able to provide unique service through triple light is is unique because we offer a.
Speaker Change: Good basically has a technological base, which is comparable to any other good experience available in the market and proximity is very unique and I see I say that we we no arrogance at all our AAA service level is outstanding our design is very good and with Orange.
Speaker Change: It capture our funding of clients, we can even X L. This gives us a greater possibility to serve clients. We can talk more about it. We we will bring net inflow and we will keep an eye on our client because all of the targets are very much aligned with the client.
Speaker Change: You all of the standards related to correct sales in compliance helps us to grow the business significantly we are very pleased because this quarter. We reached over 6 billion of course.
Speaker Change: Our is increasing we reach we reached $6 5 billion and the member per adviser is 4 million users in the quarter and this number is well compares quite well with the market numbers and for all investor clients and individuals all individuals starting June they will have.
Speaker Change: New digital experience.
Gustavo: Renewed its almost like a new portal with profitability experience usability experience and different many menus and usability everything at a different level and we were pleased with that evolution and with that I will call Gustavo to talk about the results and then I'll come back to talk about the closing remarks for the quarter.
Gustavo: Thank you.
Gustavo: Thank you Mario.
Gustavo: Good morning, everyone, let's talk about our results NII continues to expand.
Speaker Change: On your revenue 11%.
Speaker Change: This reflects the evolution of our strategy on both client and market in my mind.
Speaker Change: Claimed NII benefited from an increased volume, which offset the effect of the selic interest rate funding.
Speaker Change: One quarter.
Speaker Change: And in the quarter is fully explained by the various regions.
Speaker Change: Great and then.
Speaker Change: Especially the non revolving card portfolio would work with.
Market NII on the other hand, a L. M operations progressed as planned and continue to strongly positive trend for the year as we have been mentioning.
Speaker Change: The reduction in the quarter.
Market NII with lots of Lubrizol and Treasury operations.
Speaker Change: Two the fact of market volatility observed in this quarter, we seek long term sustainable expansion with active risk management price discipline, and technical rigor when making resource allocation decisions on.
Speaker Change: On the next slide.
As mentioned, we show that our loan portfolio grew by 8% year on year with a positive evolution in all segments and individuals portfolio grew by 1% with a balance between higher and lower risk products with a highlight going to the cards portfolio, which grew 4% in.
Speaker Change: The quarter and payroll wounds, which grew 2% actually in cards as Mario mentioned, we are increasing activation and gradually expanding our client base.
So payroll loans, we continue to increase origination more and more through our own channels with a 21% increase in share in two years, which gives us greater profitability with regard to auto loans. The market continues to be buoyant and we are keeping up with this trend.
Speaker Change: We grew 4.5.
Speaker Change: In the quarter and as seen before.
Speaker Change: With our well adjust their portfolios.
Speaker Change: And he is with us.
Speaker Change: Increase in the portfolio a segment that we are prepared to grow at a good pace as we saw before.
Speaker Change: Based on our team and on technology. The large corporate portfolio has benefited from the exchange rate in the quarter and here, we continue to maintain our profitability discipline.
Speaker Change: Moving on to the next slide we present, our funding performance.
Speaker Change: Our liabilities plan continues at a good pace aimed at improving the mix of clients segments and funding instruments, when we reported growth of 3% in the quarter and 10% over the previous year.
Speaker Change: I would like to highlight the four 5% increase in the quarter and demand deposits as well as the good growth in time deposits savings.
Speaker Change: Letters of credit.
Speaker Change: Our strategy of increasing retail exposure in our mix continues to make progress and as a result, we have seen an increase of two percentage points into share of individuals over the last two years as we have mentioned this is a structural and gradual change and we were pleased with the evolution.
Lucian: Lucian about strategy to close the slide the loan to deposit ratio.
Speaker Change: Yes.
Lucian: At an all time high reaching 93%.
Speaker Change: I will now comment on the performance of our fees and commissions. We reached all time highs this quarter as a result, but revenue diversification strategy, our quarterly growth was 6% and our tangible growth was almost 18% I'd like to highlight the 7.2% growth in cards and.
Speaker Change: The quarter and 13% growth in the year showing this resumption.
Speaker Change: Insurance current account and assets.
Speaker Change: Showed increases of more than 4% in the quarter and significant new growth.
Speaker Change: Another relevant point is that the securities brokerage and placement line item continues to grow driven by debt issuances, which grew 12 in the quarter and the like.
Speaker Change: Item others.
Speaker Change: Biggest quarterly increase came from the savings bonds.
Speaker Change: Regarding the quality of our assets, we continue to have a controlled.
Speaker Change: Allowance for loan losses, with a slight drop in the quarter, which together with the increase in the portfolio resulted in a cost of credit of three 7% accumulating a reduction of 80 basis points in 12 months MPL formation showed a positive performance, reflecting the better quality of our origination.
Speaker Change: Ending at one 2%.
Speaker Change: Lastly, due to the better quality of the vintages, the renegotiated portfolio. It was already more than 5 billion barrel smaller than in Q2 'twenty.
Speaker Change: Yeah.
Speaker Change: We posted a reduction of 150 basis points in relation to the total portfolio last year now moving to the next slide here, we provide details on the performance of our delinquency indicators.
Our loan granting remains well balanced and the portfolio onto the adjusted.
Speaker Change: Short term indicators improved in all segments.
Speaker Change: Yeah.
Speaker Change: And the long term indicators, we saw stability overall, we saw an improvement in individuals and the opposite behavior and companies increase enough for me, it's concentrated specifically in what we call <unk>.
Speaker Change: <unk>, which includes companies with an annual turnover of up to 3 million bureaus.
Speaker Change: This behavior is partly explained by the renegotiated portfolio as mentioned in the previous quarter. However, it is important to note here that the short term indicators have been adjusted which suggests a more positive trend.
Speaker Change: And the next slide we have details on our expenses.
Speaker Change: Continue to make progress.
Speaker Change: And our request for efficiency focusing on cost control.
Speaker Change: During the quarter total expenses remained stable.
Speaker Change: Okay.
Speaker Change: The increase in administrative expenses is due to a higher volume of data processing.
Speaker Change: Two of the proof of our business and this was offset by a reduction in personnel expenses can be year on year comparison the growth in expenses most of the move out of revenues, helping to ease of operating leverage.
Speaker Change: As a result of our effective management, we saw sequential improvement in our efficiency ratio, which fell by four percentage points year on year.
Speaker Change: To conclude the earnings result section represent our income statement.
Speaker Change: When you we saw 12% increase in total revenues.
Speaker Change: Driven by NII.
Speaker Change: And by a good performance in fees and commissions.
Speaker Change: Provisions dropped and importantly in the annual comparison, and we maintained our strict control over expenses, resulting in a profit of three 3 billion euros. This represents an increase of 44% in 12 months.
Speaker Change: We ended the quarter with growth and profitability with auto we of 15, 5% and common equity tier one of 11, 2%.
Speaker Change: Finally, I would like to highlight there.
Speaker Change: We are focused on a gradual resumption of our room phones, which have evolved and keeping with our expectations.
Speaker Change: Oh, we're going on with long term sustainability with solidity and consistent results.
Speaker Change: That concludes my part and then turn the floor back to Murray for his closing remarks.
Thank you Gustavo so just to close very quickly. So we can start the Q&A and I'm sure you'll have more questions.
Speaker Change: I must have five take home message is connecting with everything I talked about everything we've been talking about you don't have a lot of new elements into strategy, which was good. It shows we are consistent in what we decide.
Speaker Change: In 2022 2023 were focused on.
Speaker Change: And finally, the bank we want to have in the next five years and beyond and this is summarized in these five pillars, we want to be.
Speaker Change: Most present bank and our customers live.
Speaker Change: This is the main modal cascades down and all the rest we're gonna have primacy using tensely technology, you'll hear more and more we're talking about technology as the main enabler. So we can have principality, we wanted to have the right customer experience and the interconnection among the channels.
Speaker Change: <unk> offering.
Speaker Change: Eastern.
Speaker Change: It's a powerful tool.
Speaker Change: Or.
Speaker Change: For mass income offerings will bring more activation more conversion margin.
Speaker Change: The right margin and the right assets and not the short term margin.
Speaker Change: And we will be counting and less on the comp one collateralized products.
Speaker Change: And on cards in the offering given the cards represent a lot and principality and usability.
Speaker Change: In clients day to day relationship with the bank.
Speaker Change: Consequently advance our strategic business and we'll continue consistently look for nonlinear growth because all my Kid is not linear but consistent solid growth with quality.
Speaker Change: This translates.
Speaker Change: Into a mid to long term view of profitability one two steps at a time in the right direction.
Speaker Change: So that we can grow with speed, where we believe we can crew with speed to deliver solid results as Gustavo mentioned with this I am fighting with the Q&A session.
Speaker Change: Got it.
Speaker Change: Thank you Mario Thank you Gustavo will now start the Q&A session from now on.
Speaker Change: All analysts will have the opportunity to ask questions and clarify any pending point. If you want to ask a question just click on the Hana I can that appears in the lower part of his screen. Your questions will be answered in the language. They are spoken we are every analyst to only.
Speaker Change: Ask one question to give everyone the opportunity to participate we already have a series of questions. The first question comes from Brian <unk> from Citibank.
Speaker Change: Brian.
Brian: Good morning, Kai Mueller and team. Thank you for this opportunity and congrats on your results. My question is on SME, you talked about changes to your model and it is very clear to me what you've been doing I was just trying to understand a bit better why did we see delinquency increasing in the in the quarter.
Speaker Change: And so.
Speaker Change: If you could elaborate a bit more on that issue that will be useful and also if you talk about the the performance of the sector. The dynamics that will be very good. Thank you.
Brian: Brian well I'll start and then I'll turn it took us that well first of all we referred to the strategy and how this connects to the risk management that we've been doing for over a year and finally I'll refer to the numbers themselves.
Speaker Change: We've been talking about is our strategy and that means that we went to double our businesses of Smes and the like Sirius I cannot give you the exact date, but certainly it cannot be in 10 years, but you know a few years, we went to double our business because we believe there is room for that and we would do that not linearly because this is not a mathematical equation.
Speaker Change: But we wanted to double the size of the business just as a reminder, in December of 2023, we had already doubled the numbers piece of <unk> 'twenty 'twenty. One so we double that number once and we want to double it again, but certainly we will do that the correct way and this applies to every segment of Smes, but certainly there there are different clusters, there are small small companies and small.
Speaker Change: Size and we call them in the bank companies 123 in the and the very small company segment, you know company, one we needed to renew our service and I already talked.
Speaker Change: <unk> talked about that during my presentation and I am pleased to know that you recognize that we believe that we have something you know much.
Speaker Change: Much better now and certainly very soon we will have a business of small smaller companies that will grow in a very sound and consistent way, but how does that connect to risk management. The fact that I have.
Speaker Change: Some thousands of experts spread all over Brazil, and knocking the doors of our clients' soda so to speak it means that our marginal risk management is much better and there's also allows us to manage our inventories much better how do we.
Speaker Change: How are we managing smell of companies and individuals in the last 12 to 13 months since the second quarter of last year, we changed our renegotiation policies than what we've been referring to that.
Speaker Change: We are not so open anymore to read renegotiate debt with no cash components, we are being more restrictive in a way that we allow the renegotiation to rollout a portfolio of 5 billion reflect a more sensitive agreement policy, which is very good for the health of the Pea.
Speaker Change: Portfolio and it's also good because our derisking is more accelerated in terms of the portfolio and some rates are affected because we are not rolling over anymore, but you know I can.
Speaker Change: Turn that question over to Gustavo, but this stems from a more asset so to speak management of our legacy portfolio. I mean, there's legacy portfolio is more predominant among individuals but more more so with very small companies. That's why raising the bar in this portfolio allows us to.
Speaker Change: <unk> touch and.
Gustavo: And some ratios or indexes, but this has to do with a new generation of very small companies and more to do with that inventory.
Gustavo: Hi, Brian and then you can all you will also notice that.
Gustavo: NPL 15 to 90 of this segment.
Gustavo: Okay.
Speaker Change: As under control is performing well.
Gustavo: So in terms of.
Gustavo: Legacy portfolios and as Martin was saying with our noon renegotiation strategy I mean things are very clear and NPL 15, 90, and the new vintages performance is very good.
So it's a one off thing and it stems from what Mario said before.
Speaker Change: And <unk>.
Speaker Change: NPL 15 to 90 is performing well in summary, it has.
Speaker Change: Has more to do with our portfolio derisking rather than margin our origination so I would say.
Speaker Change: Margin origination tends to be a better quality not only because of the policies, but with everything else. We did especially after 2022 and the new model will help us because the new model will increase proximity something we didn't have as much with our with our clients I mean look at the number of calls.
Speaker Change: Cause that we have now and I assure you we want to increase that number of visits not only increase the number of its but visits with quality I want my experts almost like camping in the house of the client this will not only increase our volume but results I Hope I answered. Your question. Yes, you did thank you.
Speaker Change: Okay. Our next analyst is Danielle Vas from Safra Bank good morning, Daniel.
Daniel Vaz: Good morning, Camilla Good morning, Mario Gustavo and congrats on your results.
Daniel Vaz: I would like to take a second look at the spreads.
I will put my question into to your portfolio makes sense.
Daniel Vaz: No.
Daniel Vaz: Absolutely.
Speaker Change: I see you're accelerating mass income.
Speaker Change: And also high income has become your priority.
Speaker Change: What would be the behavior of your spread first looking at client makes and secondly, looking at the rates from your peers I mean tight tight rates in terms of.
Speaker Change: Payroll alone what would be the the progress of your spreads going forward. Thank you.
Speaker Change: Okay.
Speaker Change: Well thank you.
Speaker Change: Well certainly when we look at the spread we look at the gross profitability of the portfolio, but.
Speaker Change: We are taking a deeper look.
Speaker Change: According to the profitability of the portfolio I'm generating I'm I'm, not saying that we're not interested.
Speaker Change: On the spreads.
Speaker Change: It is important.
Speaker Change: But I do not want to demonize.
Speaker Change: The.
Speaker Change: The portfolio.
Speaker Change: Their credit portfolio I mean, the spread comes from several dozens of percentage points, it could be 40% or 42% annual but I do not want to rely on that spread because the net spread a provisions is not a good spread so of course, there will be a certain amount.
Speaker Change: Personal loans that is very much connected to the payment journey. So personal loan that is disconnected from principality from the credit card journey from their journey of transaction earlier fixed because it's becoming just one single thing we call. It you know a payment journey.
Speaker Change: Since consumption or consumer journey, so in terms of portfolio.
Speaker Change: Midterm view.
View it would have less risk in terms of makes them. So credit card would be the major glean element of my portfolio, because it's crucial to have a Friday car doesn't glean element. It doesn't mean that I'm gonna open to everybody at of Alibaba 100000 rats per client I will accept having lower limits when compared to my hip.
Speaker Change: Storage levels and I can only do that if my unit cost.
Speaker Change: I'll quickly because this is an important evolution and we will talk more about that.
Speaker Change: Further on it but the credit card has to has to be the clean element of their offering because this translates the science connection with a bank on a day to day basis, but this has to be based on collateralized instruments.
Speaker Change: And we want to have all of the other.
Speaker Change: Things coming from that I mean, our home equity they will call Uzi Casa we are already leaders in home equity in Brazil about 25% of all I don't think that's enough I think that the portfolio is not so relevant but I think we can do a lot more in terms of structure finance that.
Speaker Change: <unk> point would be the credit card. So we will migrate to less risk and if the price to get there is if the nominal spread I'm not going to struggle because the net margin will have much better quality and this will certainly be translated into the bank's profitability. Our design is you know profit.
Speaker Change: Ability et cetera, so I will grow with profitability. So therefore, I would look for an equation that involves a net spread on the liability side I mean, the NII yield comes on the right on the left side of the balance sheet. So we are getting a cheaper funding for the bank maybe in one quarter.
Speaker Change: I may give a leap, but in some years, we will see some gradual improvement I mean individuals versus corporate so retail funding for the entire industry is cheaper when compared to the wholesale funding many percentage points of C. D. C. D is cheaper and as we gradually improve quarter on core.
Speaker Change: Order.
Speaker Change: We will see an increasing margin on the funding side.
Speaker Change: Even I mean C D b that has a lower spread but we.
Speaker Change: We'll have.
Speaker Change: Cheaper funding off the money that remains in the account.
Speaker Change: So the mix is much better one point that I would like to stress is that we.
Speaker Change: We make a decision aiming at the performance of the portfolio, it's not spread alone, but how their performance.
Speaker Change: You know evolves in terms of profitability. So the decisions we make.
Speaker Change: <unk> client and the combined product.
Speaker Change: It looks at the evolution, we envision for the portfolio aiming at profitability.
Oh, if I can if I can do a follow up question.
Speaker Change: You said that the pivotal element is still the credit card, we see a digital a competitor of yours doing picks finance has an embedded product in the credit card. How do you see that product and whether this is also part of that mass income product of yours.
Okay Great question.
Speaker Change: Well, thank you for raising that issue.
Speaker Change: I say that we our view is based on the journey rather than the product alone.
Speaker Change: I'm, not raising a or b, but that view that the client no longer wants to have a private relationship with the bank. This is something that is here to stay I mean, there is no going back a client they want to have a journey relationship and they made.
Germany that individuals' wants to have I mean, corporate it would be to say the main journey that clients want to have with US is transaction ality and with transaction Ality. There is no distinction between overdraft account or credit card account. It has we have to operate and integrate it limit and so no matter how they consume.
Speaker Change: <unk>.
Speaker Change: And consumption defined as you know supermarket purchase says you know payment slips and and picks transactions at the end everything boils down to transaction LD and everything has to be integrated we have a very clear design of payment journey and we are working towards having the best.
Speaker Change: Germany and the market in just a few months and we'll be able to deliver that so certainly the short term view is to have a unique journey. So with together with the fixed journey, which is a very simple and very seamless journey in the market. The entire payment journey will be integrated with our credit with a card.
Thank you again.
Speaker Change: We will now switch to English with Jorge Kuri Morgan Stanley go ahead of him Hello, Hardhack with morning.
Jorge Kuri: Hi, everyone. Good morning.
Speaker Change: Thanks for taking the time to answer questions on excellent presentation I wanted to ask about market.
Speaker Change: You did $258 million this quarter, which was down sequentially what extent this number going forward.
Speaker Change: So all the market volatility.
Speaker Change: As a result of the absolute level of rates.
Speaker Change: There's evidence there isn't a big shift in the way the market thinks about grades going forward.
Speaker Change: Did the consensus is right.
Speaker Change: Throughout this year.
Speaker Change: How much of a recovery and we see that number.
Speaker Change: So $58 million that you did this quarter. Thank you.
Jorge Kuri: Thanks Jorge.
Speaker Change: So although we don't provide formal guidance is in terms of how we how we think about the numbers because number has two components like with several national and NOL. The first number is our alco portfolio.
Speaker Change: L a and.
Speaker Change: And in that portfolio, we have.
Speaker Change: Have been repricing, our funding of our retail business for two years already that's the piece of the portfolio, which with the higher rates very rapidly.
Speaker Change: In Brazil between late 'twenty furniture.
Speaker Change: 2023 that piece of the portfolio. So for the you know while we explained it every quarter that's repricing off the road.
Speaker Change: Payroll funding of the portfolio the margin of the front book as we call it that's where pricing.
Speaker Change: Has been undertaken basically and we are going to keep progressing on their results. So we don't have any cost.
Speaker Change: Cost to be paid on debt repricing the repricing is fully implemented.
Speaker Change: It took us 18 months give or take which is normally the speed.
So that's the piece, which will save mentioned that we should keep progressing through.
Speaker Change: Through the next few quarters, and obviously as we as we enter into a 2025 years of dynamic the dynamics change with the selic rate more than 50, probably throughout late this year and you know more.
Speaker Change: Most next year, who knows.
Speaker Change: But that impact mostly the funding of our back book, which.
Speaker Change: Which is how we basically invest our capital so the funding of our capital is going to be made at a higher rate than than we felt before so that margin is lower than what we expected, but the overall the juncture off how we price our front book, how we fund our back book, we feel positive.
Speaker Change: We really are in the next few quarters. So.
Speaker Change: It's not a guidance, but but the outlook should be to be constructive as how we see that piece, which is a big fish progressing over the next few quarters.
Speaker Change: The second element is our market, making as we call it which is the way we handle and square the risks arising from our market for sure.
Speaker Change: Sales and trading business.
Speaker Change: And that's where recaptured the volatility we saw in the second quarter. It was a tremendous volatility.
Speaker Change: Globally, but in Brazil, particularly with nominal rates going more than 100 basis points, a nominal rates going maybe 50 basis points up effects et cetera.
Speaker Change: And that obviously caught us partially we still made money in that business, but less so than in the first quarter, where we had actually a seller a production.
Jorge Kuri: It's harder to predict a business, which is a on the squaring off of businesses from clients and that depends more on market volatility and how we capture that we feel that business positive. It has been a strong component before a P&L delivery Jorge.
Jorge Kuri: But it's hard to predict the direction, it's obviously not linear.
Jorge Kuri: But we feel positive as to the way we run our vars the way we have our franchise established we are the number one franchise for effects in Brazil number one in rates. So we do have a lot of flows to capture and that should allow us to trade that squared those positions as well. So we feel that positively, but it's again, it's a business which is harder to predict.
Jorge Kuri: The alcohol business is easier quote unquote to predict and we feel that a constructive you like I said I'll say overall, we feel good about our markets NII through the next few quarters, but again, there's an element, which is market dependent which earth and no one else can precisely predict but we feel positive about the overall line.
Niccolo: Thank you Niccolo.
Niccolo: Hello.
That was all probably got up to for todays call might appear at the bank of America, Portuguese lose somebody appear he with bank of America.
Speaker Change: Good morning, congratulations on the results.
Speaker Change: Many positive trends here.
Speaker Change: Operational trends, but I'd like to focus more on fees and commissions.
Speaker Change: So fees and commissions at the last four years not growing and in this quarter, we saw a significant increase.
Speaker Change: Particularly in current accounts checking.
Speaker Change: Checking accounts.
Speaker Change #100: And I would like to understand how you see the dynamic of this line item going forward, particularly with the growth will come from volume or price.
Speaker Change #101: Do you see competition holding back prices.
Speaker Change #102: Is there any room to increase prices or have we achieved a price level.
Speaker Change #103: That hasn't that has decreased enough and there's no more room to decrease.
Speaker Change #103: Thank you Mario starting to Gustavo will implement okay. So we are happy with the performance of our fees and commissions. It is true we had modest growth in fees and commissions for quite a while again, we built a successful business in the 2015 2021 cycle based on CRU.
Speaker Change #104: Gross so weird.
Speaker Change #104: Through other line items too but.
Speaker Change #104: But the loan book grew and it's clear to us that we will have to support our loan book with a more a smarter and more diversified credit.
Speaker Change #104: Okay.
Speaker Change #105: I don't want to suggest that we're going to grow 6% quarter on quarter. In every quarter of course, we are progressing and we want to continue to grow whenever we reach in all quarters, but the fact that we grew most significantly in this quarter as a result of a number of things and number of seeds, we've been planting for a while there was no great one off.
Speaker Change #105: Off element, that's the customer markets must be the only one and we have a franchise to capture that it was a good progress as Gustavo mentioned, that's what the transactional part of which to me is the most recurring element to the Muslim replicable element when we look at the lifetime value of the account.
Speaker Change #106: You mentioned cards I know you asked about checking accounts for cuts to me here, a very important element because they.
Speaker Change #107: And have a progressive games named clients news as I mentioned, we grew 6% in your own youth. So it's not a huge number but growing 6%. So was I am spending per client higher turnover by client boats and very powerful.
Speaker Change #107: Element, we didn't speak about which would go.
Speaker Change #107: Also relevant we talk about expense management.
Managing our expenses correctly, but it was an important management to reduce costs of those operating expenses expenses directly linked to sales.
Speaker Change #108: We sometimes recognizes reduction factors for margins and fees and commissions for managing that now I'm talking about checking accounts. So that's an important question you asked.
Speaker Change #108: Checking accounts in a market, where supposedly there should be no fees coming from checking accounts.
Speaker Change #109: How come we are growing in a business that clearly should be zero.
Speaker Change #109: I don't believe they will continue to grow in the line of fees and commissions for the next five to 10 years and it is very positive, but we are doing so by chance. We're doing this for two reasons, we're bringing in new clients, when you're bringing new clients into packages.
Speaker Change #109: Yeah.
Speaker Change #109: Clients.
Speaker Change #109: Except to pay fees and commissions and there was also some repricing also for legal elements. So we have new clients on board and us.
Speaker Change #110: The visuals and companies and companies we can bring this clients in components of combos.
Speaker Change #110: And have been adjusted by inflation. So when you adjust for inflation plus small clients that accept.
Speaker Change #110: Paying some fees and of course that pumps up the fees and commissions. So the growth you saw is positive we're happy about it mainly.
Speaker Change #110: And companies in an entity tools and my favorite your long term vision and we should see this line item together with other transactional Lady lines our cards.
Speaker Change #110: Cash and payments as a whole and it might not acquiring which is a key product prepayment. So spoke a lot about our focus on China.
Speaker Change #111: Uh huh.
For individuals and companies, it's all about transaction entity cash collection prepayment get match in our case, a more integrated and all lifted this will involve two or more powerful kombu do that we will price.
More and more focus on our client and will play where the lines in a way Mario there will allow us to to Windows, a hole and of course volume is important the checking accounts is important but I'll focus less in gaining and the claim but in gaming as a whole in fees and commissions of profitability per coin, but this is a positive movement in the.
Speaker Change #111: Okay.
Speaker Change #121: Very clear thank you.
Speaker Change #114: Now, we turn to materials came out of earnings from XP.
Speaker Change #112: My fails you may start you may begin.
Speaker Change #115: Hello, Good morning, Mario and Gustavo. Thank you for taking my question and congrats on your results.
Speaker Change #111: Okay.
Speaker Change #113: You should be there for the referring to ross' question.
Speaker Change #117: I would like to hear more about personal loans and you also said.
Speaker Change #119: That the spread or margin the margin after provisions is not healthy I mean, it's less.
Speaker Change #118: Healthy then it seems even though spreads are higher.
Speaker Change #125: What makes it worth it.
Speaker Change #122: Does that have to do with the cost.
Speaker Change #116: Cost of serve.
Speaker Change #124: How do you compare that with other fintech same competitors investing in this line as well I think that's it.
Speaker Change #126: It's more focused on personal loans.
Speaker Change #116: When I talked about everything from personal loans I mean person alone involves four major port book, because we have.
Speaker Change #116: The clean personal loan and I I answer that part when I answered <unk> question, our ambition to grow it.
Speaker Change #120: Is moderate given the fact that.
Speaker Change #123: Their vocation of this product in my view should be the one that boosts principality and loyalty.
Speaker Change #123: <unk>.
Speaker Change #123: Okay.
Speaker Change #123: The personal loan product that we have not necessarily ads principality or delivers results of course, I'm, referring to the average I'm not saying that any personal loan there's no. It makes no sense, but it's a product that.
Speaker Change #123: Usually we have a lower share I mean, we are not worried about that so in all my leadership you know meetings with my team doesn't have to do with how I double my personal loan share and talking about you know collateralized personal loan or on the investments that we've talked a lot about.
Speaker Change #123: The payroll loan portfolio, which is huge but.
Speaker Change #123: I don't not wants to have different ratios in these two particular loans and there is a fourth person although in that I really want to reduce which is the renegotiation.
Okay.
Speaker Change #123: Portfolio and that's when we combine all portfolio, especially from credit cards, Overdrafting accounts and more structure funding and then we bundle everything to renegotiate you know.
Speaker Change #123: Some debts that even have a haircut and and this person alone is coming down and part of the margin.
Speaker Change #123: Part of that margin equation has to do with the drop of this person alone reorganization that means that the.
Speaker Change #127: The members are healthier now I cannot speak about how other competitors see that product, but in our view person alone is something that is accelerated to the entire payment journey and a clean personal loan is seen by us with a certain degree of limitation.
Speaker Change #123: <unk>.
Speaker Change #123: Clean person alone is just part of our portfolio that clean personal loan.
Speaker Change #123: As part of our portfolio with a balanced portfolio.
Speaker Change #123: And with that balanced portfolio is something that he would just limits. So personal loan is just part of that and this is very important.
Speaker Change #123: It's not a standalone product, but it's a product that is part of our portfolio.
Speaker Change #123: And long and at mid and long term profitability and sustainable growth. So we are not so much concerned with the evolution of that clean, but it that's part of our risk portfolio and how we we weigh that portfolio. So that we arrive at the best possible performance answer at least serving the.
Speaker Change #123: Client.
Speaker Change #128: That's very clear thank you very much.
Speaker Change #128: No.
Speaker Change #128: We go to Thiago Batista from UBS good morning Thiago.
Speaker Change #128: Yeah.
Thiago Bovolenta Batista: Good morning can you hear me, yes, okay.
Thiago Bovolenta Batista: Good morning, Camillo module and Gustavo My question is about margins.
Speaker Change #130: We talked a little bit about margins when we look at the third effect the third quarter I mean, the first quarter. The margins were positive I mean, the only thing that disappointed me a bit was the growth of NII.
Speaker Change #131: In the Spanish call they indicated that the margin in Brazil will grow and before it was in the high tens.
Speaker Change #132: I would just like to understand what will be your dynamic going forward.
Speaker Change #133: I know that Brazil uses GAAP there is gap in I F. R. As we will see gross margins in the quarter. So what kind of dynamic in terms of NII should be expected, whether we would see them gaining momentum in the next quarter or not.
Chad: Okay, Great question Chad.
Speaker Change #135: Without giving any guidance of course.
Speaker Change #136: If you if you if we look at the funding margin this quarter as Gustavo said, but I would like to reinstate that point of course, we would rather have a client NII that grows more of course.
And our and NII as a whole that grows we are working on that and we will deliver it but starting with the funding client NII.
Gustavo: Structure factor of the quarter was basically the proportional fall all average CDI, comparing first and second quarter, we compensate part of that with volumes I would say that the mix also had a positive evolution. Therefore, our evolution and I would like to call. It I mean the average.
Gustavo: Spread measured as you know city, our average spread is evolving in the correct direction and Theres compensates for the drop in CDI per Se I mean C. D. I. It doesn't change from now till the end of the year, which is the base case of the entire market and ourself and and we are also included in that we would not.
Gustavo: Have a a J tractor factor CDA CDI. So we will continue to work hard to grow volume to grow makes bringing more clients and more time deposits with.
Speaker Change #137: You know a a mix.
Speaker Change #137: More earmark towards.
Speaker Change #137: Retail and so we will see a difference in the funding client NII in terms.
Speaker Change #137: Regular client NII. It has to do with with C. P. R goes down and we do know no longer have that NII element I mean that I would rather not have so we will continue to see that positive evolution of the reorganized portfolio and this is good and we will try to mitigate that.
Speaker Change #137: By increasing the portfolio that that aims at gross spread but as I said before we want to do that in a way that you know after provisions we can grow in the correct way.
Speaker Change #137: NII cause client NII, we should have a positive evolution in the next quarters. So this coupled with.
Speaker Change #137: Funding.
Speaker Change #137: We will grow client NII, it won't be linear or because it shouldn't be but we will grow sequentially with a bias of the mid and long term rather than the next quarter, we want to deliver good quarters, certainly, but we want to deliver a very sound ecosystem bank with a very diversified portfolio and this has to do with a girl.
Boeing client NII.
Speaker Change #137: Thank you perfect.
Speaker Change #137:
Pedro Leduc: Next question from Pedro Leduc from any thought would be by.
Speaker Change #137: Yes.
Speaker Change #137: Hello, Good morning, and thank you for the question Mario team Congratulations on the results speaking about revenue lines I'd like to ask about the.
Speaker Change #139: Our cost of risk could be a low level was slightly below despite a higher loan book without good NPL formation SME is not so much.
Speaker Change #140: Any double our level is stable at six almost six a buoy on the cost of risk is.
Speaker Change #139: Thanks.
Speaker Change #141: So I wouldn't like it.
To ask you about what do you think about the next six months.
Speaker Change #142: In terms of N P. L. A W. Woeful acceleration of the portfolio and he's been a point of attention.
Speaker Change #142: And.
Speaker Change #143: That's the second part of my question.
Speaker Change #144: The JV most conservatives in reinforcement for AWS.
Pedro Leduc: Something that you wanted to do was it just a good place to all located I just wanted to get a sense of the coverage I had all set for the second part I. Thank you for asking about Pedro.
Speaker Change #145: I'll start with the second part and then I'll turn the floor to Gustavo.
Gustavo: So starting.
Gustavo: And it's a good good thing you asked about the factually. The fact that we have this gain of $1 9 billion in our V. P. Our operation. It's circumstantial of course, it's part of a vision a bedroom.
Gustavo: When do we want to extract value that is kind of hidden in the pricing of the stock.
Gustavo: Okay.
Speaker Change #146: I know because its non core because these are small elements in the franchise and in the results.
And when we have web motors operational last year, we wanted to lock volume and web murders, one way or another that flowed into the results. We were in the most acute phase of purging the portfolio. No. We are in a more mature phase of management the old portfolio and just de risking.
Gustavo: And.
Gustavo: Why did we provision for that why did we reinforced our balance sheet, because we could do it we wouldn't have done it if it weren't for the open to Oh that joint venture. So to answer your question within the things that we needed to do.
Speaker Change #147: Oh, we were not worried about the coverage of the portfolio you mentioned the evolution of the indices and that proves that as proof of that where we felt that we had a clean result to the liver.
Speaker Change #147: A clean result in terms of being recurrent diversified in the right direction with strong quarter, even no growth. So we didn't need to Florida. As a result, we have decided to be prudent and reinforce.
Speaker Change #147: With a need to do what we can afford to do it.
Speaker Change #147: So simply put that's it and that's like Gustavo to comment on the performance.
Speaker Change #147: Yeah.
I think drew and it's exactly what you're saying to all of our emphasis.
Speaker Change #149: Ratios 15 to 990 M D O N P O lesion at a good level.
Speaker Change #148: The vintages are performing well.
Speaker Change #150: We are accruing the portfolios, where we want them to grow we didn't change our risk appetite or we are growing at a good pace in the portfolios that have been growing in some quarters. So the AWS trend.
Speaker Change #150: Also Dave at this point, we have no surprises.
Dave: News already in the 90, plus 15 to 90 day NPL as Joe mentioned S&P.
Dave: That's that's.
Dave: Well balanced adjusted looking forward, we will continue to grow the portfolio with this kind of credit quality that we have.
Speaker Change #152: There was a change we talked about and this is already reflecting in our allowance for loan.
Speaker Change #152: Loan losses.
Speaker Change #152: That's all established so theres no.
Speaker Change #153: Nothing new because their full stablish paints already seamless AWS was very correct in adjusted in auto sensors will grow.
Speaker Change #154: Portfolio performance.
Speaker Change #155: Doing well, where theres some noise, we can trust, we didn't see anything different in the quarter.
Speaker Change #155: So that's the trend but again.
Speaker Change #156: E. W. O volume will be the result of the volume of the portfolio that we are growing and how.
Speaker Change #157: It is.
Speaker Change #157: It up into every block of business.
Speaker Change #157: All of that.
Speaker Change #157: So let me stress that.
Speaker Change #158: We see all ratios swarming, well and we are comfortable.
Speaker Change #158: <unk> grew in the SME portfolio grew in the quarter, because its almost better off within grocery.
Speaker Change #158: So that's the trend and a W O a double L.
Speaker Change #158: And the cost of risk would have felt positively and there's something here to highlight some kind of touched on it but let me answer that during the presentation I kind of mentioned, what we're doing with technology. So please allow me to digress, we look more to the point.
Speaker Change #158: Then we would have the ability to react.
Speaker Change #159: So we're just up depending on the audience is that I want to work with not Memphis appetite, but a margin on cruises in terms of loan granting but also to reduce credit so when I look at the border.
Speaker Change #159: Mood to loan granting in every product in every segment. We are looking at that every day every week what changed from the last in the last three years and they end up 2021 to 'twenty two when we stepped on the brakes.
Speaker Change #160: Well it took months to implement something now it took a couple of weeks to implement a change.
Speaker Change #161: I tell them garage, but two weeks in spite of Chile as an advantage on MLS do you know that our ability to move with this.
Speaker Change #162: I think this cruise in terms of policy decision and marble decision.
Speaker Change #162: And trial, whether it's already that evolved a lot in the last few years. So we can test the border more dynamically.
Speaker Change #163: If we make mistakes and it's part of the business to make mistakes, we can adjust quickly.
Speaker Change #163: And when we realize that there is an audience, we shouldnt be giving rooms do we can quickly make a change it costs very little to us. So this evolution has everything to do with technology and how we deal with our policies and credit models. That's an asset that we have now that we didn't have to three years ago and that helps us in the policy of Rick.
Speaker Change #163: Covering in our ability to do fine tuning.
Speaker Change #163: Our debt management.
Speaker Change #166: Thank you very much thank.
bedroom: Thank you bedroom.
Speaker Change #165: Got it.
In terms of where you're going to.
Speaker Change #165: The floor now to Yuri Fernandes with JP Morgan.
Yuri Fernandes: My question is similar to little crude and.
Yuri Fernandes: But its cycle in Brazil.
Speaker Change #168: I think the difference moment you stepped on the brakes before.
Speaker Change #168: And that the systems level, there's some NPL discussions some worsening in Smes, but I think that Gustavo message is clear.
Speaker Change #169: You and appeal as well behaved.
Speaker Change #170: To understand this.
Speaker Change #171: System Hoodies.
Speaker Change #171: Not just in terms of NPL, but in terms of growth as well, there's a lot of discussion with the federal funds.
Speaker Change #172: Research reviewing grew.
Speaker Change #173: Ruth Liberal pinpoint with somewhat higher interest rates, so I'd like to understand how do you see the cycle at the two level.
Speaker Change #174: Hum something distressed that cycle, because like I said, you were in a slightly different position than the average peers.
Speaker Change #175: Just the pump the brakes earlier, okay. Thank you for the question I'll start and then I'll give the floor to Gustavo.
When we speak about strategic business I always choose a few to comment on in the call semi related to credit, but we have other strategic business directly from credit fees and commissions liabilities. So on and so forth. So I spoke about when we are evolving where we are gaining share but do you mean, it's a good thing.
Speaker Change #176: Sure of course, we prefer to earn share than lose share we have.
Speaker Change #176: Gaining share in current in consumer finance and payroll loans well we do.
Speaker Change #177: Don't wake up.
Speaker Change #177: In the morning, thinking I have to gain one to three points this quarter.
Speaker Change #178: That's my dad, moving to grow with profitability with the right mix in a sustainable fashion.
Speaker Change #179: So we don't define it.
Speaker Change #180: Our evaluation model for the management there, we should accrue one two points more than favorable no. If everybody is talking about something close to 10, but I don't want to give any guidance, but we want to grow in line with the market.
Speaker Change #180: But I want to say, Oh, I'm happy to grow up as much as the market of course, not but in line with the market and the products that we choose to grow and I call. These strategic businesses, we're going to grow more than the market, but no because gaining share will define our success because you know strategic.
Speaker Change #180: <unk> approach of mix and how we want to grow the bank with the signed me the bank for the next five years, but deliver it every quarter, but I'm designing the bank for 2028.
Speaker Change #180: So this bank has to have a different.
Speaker Change #180: Mix different credit mix having.
Speaker Change #180: More clean personal loans this product moved lose relevance over time, it's not the most relevant in margin it will lose.
Speaker Change #180: It doesn't mean I'm doing a bad job and payroll loans, so I'm gonna collateralized at home equity home equity can dove.
Speaker Change #180: Rove twofold, if a portfolio of less than 6 billion of their own. So this portfolio can grow to $10 billion very quickly or maybe 50 billion well switches.
Speaker Change #181: Well, we have an end mortgages, so lenses mix approach, we intend to grow more than the market and products.
Rich: Rich we will be reasonably keeps.
Rich: Keeping hubs, one percentage point more or less the.
Speaker Change #183: The state owned banks I'm speaking about that the whole industry I'm not going to give any names, but some state owned banks with an appetite to go which is marginally higher.
Speaker Change #183: Higher natural these are cycles I think state owned banks don't do a super important work.
Speaker Change #184: In some industries and sectors, which are huge searches housing every business is an interesting one and housing recompete less but to integrate business. We compete in and we want to continue to grow but in the group business. This year will grow less ambition than in prior years, but remember that we principally doubled nine.
Speaker Change #184: The 8% to portfolio growth between December 'twenty, one for 'twenty three.
Speaker Change #184: With 53 billion at the end of last year now we are growing.
Speaker Change #184: Rowing through accruals, rather than growing the portfolio because this is a more challenging year for our grid business.
Speaker Change #184: Rather than that it's really the cycles, we're not scared.
Now going to be growing 20, 30% as we did before and it's all good and I agree with what you might lose a little share it would be a correct decision about managing the portfolio. So I hope I I kind of gave you a macro view this type of do you want to add.
Speaker Change #185: No that's exactly it of course, we look at the market, but we have our own portfolio mix.
Speaker Change #184: Italy.
Speaker Change #184: It has been a dynamic portfolio mix, we measure performance of all of the portfolios thinking.
Speaker Change #184: Thinking about the protest and thinking about the clients. So very dynamic we have a target of profitability.
Speaker Change #184: It's made up might be different in my growth as much as the market with a different composition. So it's all about actively managing the portfolio and measuring.
Speaker Change #184: Almost daily of everything.
Speaker Change #184: Oh very dynamic and we are now focused on growing more or less we're focused on doing the right thing right.
Speaker Change #184: That will give us the best result.
Speaker Change #184: Well, our micro environment and business environment, and always decomposing from individuals and companies. This is all of them.
Speaker Change #186: So D C D I C D eyes.
Speaker Change #184: Dropping.
Speaker Change #187: It doesn't help particularly for companies.
Speaker Change #188: We feel off because I think I have 10, five it's still high we don't pay any of that.
Speaker Change #188: As long as the C D I close in terms of market funding.
Speaker Change #188: <unk>.
Speaker Change #188: Legal entities and benefit from interest rates to no decline and for individuals.
Speaker Change #188: The individual risk appetite for individuals will not go back to the level of 'twenty 2021 because we had an over supply of credit.
Speaker Change #188: There was this perception that.
Speaker Change #188: Covid.
Speaker Change #188: Did not have any factor on disposable income as an industry, we got that wrong.
Speaker Change #188: And maybe just as we had new competitors offering credit to clients, but almost 30 folks I spoke about this in Petrosky question revolved as an industry in terms of not only an oversupply, particularly to low income clients I don't think that for individuals that will be an.
Speaker Change #189: Celebrated resumption of some hobbies indicate I think everyone is going to be more prudent with fronting.
Speaker Change #189: Prudent and still we are growing but with a smaller audience and with products with a different mix as we said before.
Speaker Change #190: Thank you very much.
Speaker Change #189: Okay.
Speaker Change #189: Let's move to our last question from Eduardo Nishu from Danielle Hello Eduardo.
We have no sound.
Eduardo Rosman: Nishu wasn't.
Speaker Change #192: Nishu, we cannot hear you.
Speaker Change #193: I got no not yet.
Speaker Change #194: Ours, because <unk> figure I'll kick connect power in the shale plays on supply I think we weren't able to connect with new issue and certainly we can do it.
Speaker Change #194: Follow up with him.
Speaker Change #194: Let's see I think now his back I am sorry.
Speaker Change #194: So good morning, everyone. Good morning, Mario Gustavo income you lost my question relates to this last one.
Speaker Change #195: It's more related to your journey.
Speaker Change #196: To improve.
Mario Roberto Opice Leao: No sustainability diversification and profitability I think Mario since 2022 you had or are we at the at the end of 2022 was very.
Speaker Change #198: Very low and then you started resuming profitability there was another quarter with a drop but in fact this profitability is improving.
Speaker Change #199: And it has been improving more quickly this year in the last quarters, but my question is where do you find yourselves in this journey.
Speaker Change #200: I know that this is an endless journey, but in terms of the objectives that you have lined up.
Mario Roberto Opice Leao: Your administration, Mario where do you think you are right now in that journey and where do you think you still have some catching up to do what segments.
Speaker Change #200: Right.
You believe that profitability could be improved in mass income or credit cards and weather.
Speaker Change #201: You could also tell us about incumbent banks that are operating at higher R. O R O a.
Speaker Change #202: And when do you intend to catch up with these banks.
Mario Roberto Opice Leao: Let's see.
Speaker Change #203: I will answer without giving any guidance. Okay that was a that's a very good question.
Speaker Change #203: Whenever we talk about profitability certainly this is a key element.
Speaker Change #203: Of our strategy I mean, the strategy is not just profitability because profitability is just the result of our strategy and I've been repeating that because we have to have a better balanced credit portfolio more recurring more fees, you know funding and all of that combined.
Speaker Change #203: To to deliver a good client strategy and we haven't seen that happening so strongly in at least in the last nine years, where I've been with the bank.
Speaker Change #203: And some quarters ago, when you and your peers would ask me you would say that we were in the low teens I mean, we were generating economic loss I mean profitability was below cost of capital and that was not sustainable but it was part of the cycle, we have to go through that.
Speaker Change #203: Well, we were not proud of it but we had to go through it because we are now doing there right.
Speaker Change #203: Homework.
We have to look at the cost of capital we were doing that even before some of you started asking us about that but in the first quarter, we were able to show.
Speaker Change #203: Some economic problems progress, but still.
Speaker Change #203: You know not what we wanted to have 1.4 percentage points of.
Speaker Change #204: Again every quarter, but its not live linear because that's not part of our business, but the bank is.
al: As al said with the right leverage levers and we are just measuring the acceleration pace in every segment.
We want growth in both that we are not going to let go of profitability in favor of growth.
Speaker Change #206: Because even though we wanted to deliver good quarter is all the time, we are not going to let go of one in favor of the other how we reach that level up mid teens, we want to consolidate that level and from now on what will be the next level mid to high teens. So in the next quarters, we will.
Speaker Change #206: Here, our operation to that and I'm not going to say that it will be in the next quarter will be quarters and not years, because if he takes.
Speaker Change #206: Here is for us to reach you know high teens.
Speaker Change #206: It wouldn't be advisable, so we will.
Speaker Change #206: Aim at mid to high teens in the next few quarters until we reach something rounding up to 20%. This is a very clear objective I'm not going to tell you, whether it's going to happen in X number of years, obviously, he's not going to comment in just a few quarters, but it could happen and we will work to that end.
Speaker Change #207: In a timeline of short.
Speaker Change #207: Short to mid term, but more importantly, Eduardo is how we're going to get there.
Speaker Change #208: If I'm, saying, okay, I'm going to do 20, that's cool, but certainly I think this is what you want to hear myself included but we have to do that with a different portfolio construction when compared to what we did back in <unk> 2021 in that in some quarters well.
Speaker Change #208: It's not bad debt reached 21, plus but that 21, plus that cost cost of US you know low teams of our OE. This is not good.
Speaker Change #208: Where I want to be so to speak will be different but it will be very consistent in our mix that I guarantee you will be very different I mean of course challenges will be on the way.
Speaker Change #208: Our business is very dynamic dynamic and complex with exceptional competitors, both incumbent and digital competitors and end consumers are looking at us.
Speaker Change #208: Forcing us to innovate all the time, so there are challenges coming from all different many different directions.
Speaker Change #208: You know that.
Speaker Change #209: Got it.
Speaker Change #209: This also includes human and intellectual challenges and that's very nice we discussed with the Santander group all the time, because Brazil is almost like an indicating.
Speaker Change #209: P I for all the world, but we are aiming at a mid to high teens level and then.
Speaker Change #209: To be in the Twenty's and throughout time, we will evolve and we will certainly talk to you about how we're getting there. Thank you.
Paul: Thank you Paul.
Very well then tow now I would like to thank all of you for joining US. This morning. So after this video conference myself and the entire IR team a sense on that Brazil will be available to shortly ask answer any pending questions. Thank you very much I wish you a very good day.
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Paul: Okay.
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Paul: Okay.