Q1 2023 Inter & Co Inc Earnings Call
<unk> Alexandru riccio VP of tack operations, and finance, Atlanta, Caldera, CFO, and Santiago style strategy and IR officer.
Speaker Change: Please be advised that today's conference is being recorded and a replay will be available at the company's IR website.
Speaker Change: At this time all participants are in listen only mode. After the prepared remarks, there will be a question and answer session.
Speaker Change: For this session. We ask you to write your questions via the Q&A icon on your screen. Your name will then be announced and you will be able to ask your question live.
Speaker Change: At that point, a request to activate your microphone will appear on your screen.
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Speaker Change: Please note that there is an interpretation button on your screen, where you can choose the language you want to hear English or Portuguese.
Speaker Change: Throughout this conference call, we will be presenting non <unk> financial information. These are important financial measures for the company, but our non financial measures as defined by I F. R. S. Reconciliations of the company's non I FRS information Judy I F. R. As financial information are available and enters earnings release and <unk>.
Speaker Change: 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'll yield the floor to Mr. Santiago Stell, Sir the floor is yours.
Thank you operator afternoon, everyone. Thank you for attending our first quarter 'twenty two degree earnings call before.
Speaker Change: Got it yeah Timna, let me present, the phrase that summarizes the results and the moment, we are at either harvesting broker dealer results from solid foundations. This space that is the essence of who we are and where we stand right.
Speaker Change: <unk> will elaborate on this in his opening remarks.
Speaker Change: Jumping into paid for them.
Speaker Change: To use the agenda for this delay jovito will start the presentation sharing with you an overview of our vision and the main achievements of the quarter.
Jovito: And then they send it would cover the credit engine section.
Speaker Change: I will present funding capabilities together with a transaction platform.
Speaker Change: And finally, Linda will cover the financial performance section within Joe closely with his final remarks.
Speaker Change: And lastly, Mike to you.
Speaker Change: Thank you Sir.
Speaker Change: Good afternoon, everyone.
Mike: Before going to details of the quarter, Let me share my vision for inter on page six.
Speaker Change: I was reflecting on this given that we.
We just had the euro.
Of our IPO.
Speaker Change: Since then.
Speaker Change: We have been able to attract the top level management team there.
Speaker Change: This gave us the ability to build the best Super App in the Americas.
Speaker Change: The best Super App in the Americas allowed us to build our unique deposit franchise that quickly achieved critical mass in the Brazilian banking system.
Speaker Change: The result is a fortress balance sheet with massive capital and liquidity.
Speaker Change: All of this was made possible by our more than 26 minimum client.
Speaker Change: This was done through an amazing journey of innovation group.
Speaker Change: Great and strong foundations overreach with them today.
Speaker Change: But like everything in life, we are always evolving and need to adapt to the context in which we operate.
Speaker Change: On the next slide I want to share with you the way we're running the business for the next five years.
Speaker Change: Brian twice, we're adapting from a massive growth to our growth and engagement approach.
Speaker Change: On loans instead of being just market share driven we're moving we're more price incentives.
Speaker Change: On capital, we moved from the deployment phase.
The good news of this important pillar.
Speaker Change: Last but not least on efficiency.
Speaker Change: We had this concept as an outcome.
Speaker Change: And now it became one of the most important guidelines for our business.
Speaker Change: With that said.
Speaker Change: On page eight I will present to you a glimpse of the value that can be produced with this as strong harvesting approach.
Speaker Change: In the main deposits, we increased our market share additional 21 bps.
Speaker Change: And reached three 6% share.
Speaker Change: And probably around six among all Brazilian banks.
Speaker Change: On activation, we increased 50 bids and added the record number of new active clients in our history.
Speaker Change: 1 million new active clients in the quarter.
Speaker Change: On operational leverage our efficiency ratio reached an impressive 62% in this quarter.
Speaker Change: The disciplined repricing of our loan portfolio allowed us to increase earnings by 30 Bips on this quarter.
Speaker Change: We produce bottom line profitability with sets the base for the remaining of the year.
Speaker Change: And finally, we conclude the guar with 23% CET, one which according to our estimates as to is the land of the top five incumbent banks in Brazil.
Speaker Change: With that said I will now pass the Mic Board shunting, who will walk you through our credit engine.
Speaker Change: Okay.
Speaker Change: Thank you Hello, and good afternoon, everyone.
Speaker Change: I will start talking about the growth of our loan portfolio on page 10.
Speaker Change: So we were able to start the year running at a 20% annualized loan growth growing 5% quarter on quarter with the portfolio, reaching 24 billion reais.
Speaker Change: As you can see the growth have been mostly focused on the lower risk segments, such as the F. GTS loans, which grew 58% in just one quarter.
Speaker Change: In credit cards, we grew 6% still reflecting a more conservative stance to unsecured credit that we have in place since the beginning of last year.
Speaker Change: Regarding payroll and real estate loans, we continue evolving with the repricing initiatives, which is driving much higher profitability levels in these portfolios.
Speaker Change: Additionally, this quarter, our financials and glued being interest income breakdown by portfolio, which will allow investors should see the evolution.
Speaker Change: Of our loan yields byproduct.
Speaker Change: As you can see the rates are increasing across products as our portfolio is increasingly repriced.
Speaker Change: Please note that the implied rate in Smb's has an impact of lower outstanding balances in January and February.
Speaker Change: Finally, the OEM annualized yield of the portfolio increased from 23% to 22% this quarter.
Speaker Change: Unimpressive evolution.
Speaker Change: Now on page 11, we highlight our asset quality metrics, which performed well this quarter starting with the 15 to 90 day, Npls, which isolates the impact of loan growth, we were roughly flat during the quarter.
Speaker Change: On the 90 base best New metric, which does have an impact of our alone deceleration relative to a year ago. The ratio increased by 30 bps in line with the general market trend.
Speaker Change: The main driver of this NPL increase is delinquency in the old cohorts of credit cards should.
Speaker Change: We illustrate this point we included a graph that shows the NPL of cards by cohort as we can see there is a consistent improvement across cohorts, which is a result of both our choice to be more conservative.
Speaker Change: And our credit underwriting improvements.
Speaker Change: Finally, we reported one 5% NPL formation again in line with the market trends and our best performance.
Speaker Change: Yeah.
Speaker Change: To finish on page 12, we show that our cost of risk reached 6% in the quarter. The increase as mentioned in the prior page is mainly associated to older cohorts of credit cards to give better color of this effect. We included in this slide.
Speaker Change: The breakdown of the provision expense.
Speaker Change: Shown in Orange, how much was due to the originations of that same order versus how much was from portfolio built in prior quarters. These intends to show that the increase in provisioning is explained by the older cohorts.
Speaker Change: Once these delinquent credits from older cohorts past the 360 day Mark they are written off and the ratio of Npls and cost of risk should improve.
Speaker Change: And finally on coverage ratio with cap the ratio constant at 130% by provisioning in line with the NPL formation trend.
Speaker Change: Now I'll pass the word to Santiago.
Santiago Stell: Over the funding and transactional platform sections.
Santiago Stell: Thank you Alessandro.
Santiago Stell: On page 13, you can see the evolution of our funding base one of the key competitive advantages of our platform.
Speaker Change: <unk> grew 33% year over year, reaching 38 billion of hedges when.
When we compare these tier four loan balance described by early Sunday.
Speaker Change: You'll see that our loans deposit ratio remains very healthy significantly below 100%.
Speaker Change: Interesting to note that this quarter, we materially increased our market share in demand deposits growing to 358% and now ranked as the sixth largest Brazilian bank by these metrics.
Speaker Change: Another point to highlight again. These are the deposit base is highly fragmented with more than 12 million clients trusting us with our deposits.
Speaker Change: Moving to page 15, we are glad to say that on funding costs. We continue delivering strong performance with a cost of funding among the very best in the industry.
Speaker Change: We recorded a 65% funding cost as a percentage of CDI, even with seasonality of demand deposits being adverse in the quarter.
Speaker Change: As we continue gaining share of demand deposits and improve our duration. Further we believe we will be able to maintain the strong competitive advantage.
Speaker Change: Now let me walk you through the main topics of our transaction platform on page 17.
Speaker Change: As Joe mentioned, we reported our highest level of net new active players on record.
Joe: By adding 1 million this quarter.
Joe: This came combined with a low level of total new client and $1 6 million, which shows that our conversion ratio to active clients improved significantly to 59% from 38% a year ago.
Joe: You can see also on the left side graph.
Speaker Change: Our integration rate showed a strategy to the prior quarter and reversing the prior trend.
Speaker Change: This dynamic is the result of our effort to win new activation opportunities as the clients navigate in our Super App.
Speaker Change: To name. An example, we deployed our personal personalized version of our Super App.
Other material improvements in our Onboarding and UX UI processes.
Speaker Change: And we're fully focused on adding high quality client base, we continue to optimize our attack which decreased to below 30 <unk> this quarter.
Speaker Change: All these together shows the profitability profile of our debt investment increased meaningfully as a result of better use of data with strong understanding of our customers' behavior and customer preferences.
Speaker Change: On page 18 in terms of volume transacted in David and credit cards, as well as Biggs will reach 181 billion hands, which demonstrates our strong position in banking.
Speaker Change: Looking at the intersection volume by cohort, we can see newest cohorts, reaching higher levels at a faster pace than the older ones.
Speaker Change: Out of better quality claims acquisition and improvement of activation and engagement campaigns.
Speaker Change: Moving to page 19.
Speaker Change: Our clients transacting more than 180 billion per quarter in the daily banking activities, we see a higher propensity to adopt our brother transactional platform.
Speaker Change: On inter shop, we reached two 5 million clients during effecting during the quarter.
Speaker Change: Our momentum in our e-commerce allowed us to continue growing our net take rate, which now stands at six 5%.
Speaker Change: Highest level ever.
But in their insurance a similar pattern is seen as we improved our upselling and cross selling initiatives and reached one 3 million insured clients.
Speaker Change: And finally on into invest we also had strong adoption, reaching $3 3 million clients and a record level of AUC of 68 billion hacks.
Speaker Change: As mentioned in the past all these products are higher Roe.
Speaker Change: Even though they consume no capital.
Speaker Change: On page 20, you can see our newest initiative into global which has been performing at a much higher base than we anticipated.
Speaker Change: Talking about the number of clients. We are nearly at $1 5 million, having just started a year ago. These are clients with an account routing number in the U S in real banking clients.
Speaker Change: Compare this to other <unk> in the U S. We rank 12 in this category.
Speaker Change: These clients dressed and transact in our global platform and have consequently, we have more than 140 million U S dollars in deposits plus investments.
Speaker Change: And to conclude here the rest of this is our increasingly replicating our Brazil offering into the U S with minimal investments and leveraging our existing platform and learning curve.
Speaker Change: Now I'll pass the mic to Alaina will cover the financial performance section.
Speaker Change: Yeah.
Alaina: Thank you Santiago and Hello, everyone.
Alaina: With our financial performance on page 22, I'd like to highlight our revenue grafts.
Alaina: We recorded one 8 billion of gross revenues in the quarter, which is a run rate level.
Seven Q <unk>.
Santiago Stell: Percentage wise it means a 40% growth year on year or 23% growth on a net of funding.
Santiago Stell: Yes.
Speaker Change: This dynamic has been led mainly by the ongoing repricing of our portfolio as mentioned Diane violation.
Speaker Change: On page 23, we can see that the our bank on a cohort basis continues to increase overtime with newer cohorts outperforming that cohort.
Speaker Change: This reflects our improvement in engagement and cross sell initiatives leading to higher monetization.
Speaker Change: Jumping to page 24, when discussing the evolution of our inkjet margins and see the effect of our repricing strategy moving forward.
Speaker Change: Starting on the left side.
Speaker Change #100: Our NIM one zero.
Speaker Change #101: It considers all portfolio, including receivables that does not accrue interest also known as <unk> in Brazil.
Speaker Change #101: On a quarter on quarter basis, our NIM, one zero improved plenty big.
Speaker Change #102: On the left side, we show our NIM jump on hero, which considers only the interest in the portfolio.
Speaker Change #103: And this metric we saw a very big increase compared to the prior quarter.
Speaker Change #103: 70%.
Speaker Change #103: 70 bps increase compared to a year ago.
Speaker Change #104: It is worth noting that the growth in funding was skewed towards most expensive deposits. This quarter, so delivering Disney and increase in such a context is a testament of the strong ongoing repricing exercise that we are thoroughly executing.
Speaker Change #105: Flipping to page 25 on the expense side. We report what we believe is a very is trial progress.
Speaker Change #106: Alright expenses decreased 13% compared to the prior quarter showing a nominal decrease in most significant lines in particular personal expenses decreased by 17%. Despite having the impact of the annual increase in the fourth quarter known as getting.
Speaker Change #105: Jim.
Speaker Change #107: In Portugal.
Speaker Change #107: The other lines remained under control, reflecting the strong focus on expense management to deliver that.
Speaker Change #107: Matt.
Speaker Change #108: So our customers in a cost efficient manner.
Matt: Going to page 10, we think the improvement can be seen in our operational leverage.
Matt: Evolution of our ratio of active clients per employee is in a positive trend.
Matt: And has even accelerated further this year.
Matt: We went from a ratio of two 6000 active clients per employee a year ago to $3 5000 active clients per employee in the first quarter.
Speaker Change #110: As a result, we have lowered the cost to staff, which now stands at 13 eight.
Speaker Change #111: Finally, I'd like to highlight the impressive improvement in our efficiency ratio.
This is a result of our pricing strategy and cost control initiatives.
Speaker Change #112: We reached 62% in this metric and improvement of nine percentage points.
Speaker Change #113: This is a strong sign of our commitment towards our five year business plan presented in the last Investor Day, and also as highlighted by you.
Speaker Change #114: Moving to page 27, we recorded a 23% CET one ratio in the quarter.
Speaker Change #115: With the lowest level of capital consumption.
Speaker Change #116: Since our IPO.
Speaker Change #117: Additionally, if we consider the impact that we expect from the Neil That's N rose.
Speaker Change #117: Taking effect in July of this year.
Speaker Change #118: Our CET one ratio on a pro forma basis would increase by an additional 150 bps.
Speaker Change #119: Finally, if they put in context, our capital, which is fully comprised of top quality core equity without any hybrid capital instrument, we see that it is.
Speaker Change #119: Twice as high as the medium of the five incumbent banks in Brazil.
Speaker Change #120: On page 28, I will walk you through our profitability profile.
Speaker Change #121: Net income continued trending positively reaching $24 million.
Speaker Change #122: On a pretax basis, we ended the quarter with 6 million has moved up.
Speaker Change #123: Our our wheat trading underwriting alright efficient funding at scale and our obsession on operational excellence.
Speaker Change #124: Are the foundations to this improvement which is just getting started.
Speaker Change #125: Our bad no word back to you on for his closing remarks.
Speaker Change #126: Thank you Atlanta.
Speaker Change #127: Closing on page 30, I would like I would just conclude by saying that as we mentioned previously we are harvesting the results of our solid foundations.
Speaker Change #128: Across metrics I see very encouraging improvements in market share client activation operational leverage.
Speaker Change #129: <unk> and bottom line.
Speaker Change #130: The best yet to come.
Speaker Change #131: And last but not least <unk>.
Speaker Change #132: Like to thank our amazing team that is motivated engaged and excited to continue with us on this journey.
And thanks to all for our earnings call operator, we can open it up for questions. Thank you very much.
Speaker Change #132: Yeah.
Speaker Change #133: We will now begin the question and answers.
Speaker Change #134: Chin lives.
Speaker Change #135: At this point a request to activate your microphone will appear on your screen.
Speaker Change #136: If you prefer not to open your microphone live please right no microphone at the end of your question and our operator will read your question out loud.
Speaker Change #136: Our first question comes from Mr. Thiago Batista from UBS.
Speaker Change #136: Sarah we're now opening the audio so you can ask your questions live.
Operator: Please go ahead.
Speaker Change #138: Hi, guys.
Speaker Change #139: Without them I have two questions. The first one on the <unk> loans.
Speaker Change #140: Your loan book or the achievements, both we're going to be done in this segment or 4% of the of the banks' loans.
Speaker Change #141: In just a couple of quarters. So can you share with us the strategy of inter.
Speaker Change #142: In terms of distribution and pricing to achieve this level of our loan portfolio with these exits yes.
Speaker Change #143: And the second one about the draws a buck a.
Speaker Change #144: Those are our Parker has been relatively stable less quarters around 245 to 47 <unk> per month.
Speaker Change #145: Do you believe that the inter has achieved already did the cap of these are part or we can see an.
Speaker Change #146: And expansion going forward.
Speaker Change #147: Childhood drone video of speaking thank you for the question I'm going to cover the.
Speaker Change #148: This section related to they have to pass and then start to recover the remaining of the question. The remaining the other part of the grocery store.
Speaker Change #149: And so after death, just to highlight that I really love this product so.
Speaker Change #150: It has a very good ROI for our business.
Speaker Change #151: It also have a very good debt service for our clients.
Speaker Change #151:
Speaker Change #152: But why were we able to achieve that impressive number just a group of cars I would say that first of all we have a very good fit among our clients for this product. So we have many young clients a year people that will have a job they do have that.
Speaker Change #153: Our outstanding balance at <unk>. So this is the first reason why we're able to attract and underwrite a lot of that but also we spent some time.
Speaker Change #154: To have the best design, the best UX UI for our clients two through our App engage high.
Speaker Change #155: Tired of product and get the funds released immediately in our checking account. So we took a while to get into the markets, but with UBS in a very good way. So as we mentioned the results aren't rates and we expect to keep gaining momentum on that product going forward.
Speaker Change #155: Sandy will cover the other part of the question.
Sandy: Thank you, Joe and Daryl on Outback, and we do think that it still has significant room to grow further what happened in this quarter is that we recorded a record growth in number of active clients, which grew 8% relative to December levels as Joel mentioned before.
Sandy: This is a consequence of the targeted marketing approach, where we're trying to increase the monetization on the investment in the hopper that we get specific on the timing there.
Speaker Change #157: Let's turn active these combined with a quarter that had lower revenue.
Speaker Change #158: Growth due to seasonality on the fee side.
Speaker Change #159: Led to the C. R Bard trend keeping it relatively stable and I would highlight that the growth in the active client piece is probably the number one and highlight that we see in the quarter and the combination of these with the with a flat revenue gains. They are below we think we are seeing in the second quarter. This normalizing.
Speaker Change #161: And the trend upwards coming back.
Speaker Change #159: Okay.
Speaker Change #160: Very clear thank you.
Speaker Change #160: Hello.
Speaker Change #160: The next question comes from Mr. Yuri Fernandes from Jpmorgan.
Yuri Fernandes: Mr. Fernandez, we're now opening the audio so you can ask your question live. Please go ahead Sir.
Hi, everybody and good afternoon.
Speaker Change #163: A question regarding the cost of risk. If you can provide an outlook for the year I think cost of risk was 6% this quarter, so where should we be like whereas the beacon asset quality and if I may I guess congrats on the on the improved disclosure Oh, we saw like some improvements on your excel on your release.
So congrats on that but if I may I would like to know more information about the renegotiated loans in portfolio sales. So if you can provide us some color how you're I don't see renegotiate that decided the company or if you did or did not.
Speaker Change #164: Sell any portfolio this quarter that would be great. Thank you very much.
Speaker Change #165: Iot Thank you for a question.
Speaker Change #166: I'll start talking about the cost of risk portion and what we see going forward and to start our talk about what's been building our cost of risk. So.
Speaker Change #167: The main impact on the on the NPL formation has been due to the credit card portfolio and with the main pressure coming from the 20th 21 cohort. So you've probably seen that you'll make these visible we added two pieces of information in our disclosure.
Speaker Change #168: One was the MTL off guard by cohort, where we see a sequential improvement on the newer cohorts and choose the breakdown of the cost of risk from provisions that come from the new versus the old cohorts.
Speaker Change #169: The conclusion, there is that most of what we're seeing going through going through the P&L now is coming from older cohorts and it's not about first payment before it's really about just a macro deterioration what we saw in macro in a macro perspective.
Speaker Change #170: Is that and what we see actually is a high correlation between the selic rate and monetary tightening with overall delinquency off the unsecured credit given the pressure that these high rates both in the capacity of our families to serve their debt.
Speaker Change #171: Although we do not provide guidance in general terms, our forecast for Q2 'twenty three is still showing some continuation of the current trend in npls and cost of risk.
Speaker Change #172: We believe that this trend will be in line with the general market.
Speaker Change #173: And from the second half of 2023 young we're expecting better figures for several factors. So first stop and improvement of our of underwriting and collections model. The aging of the board of older cohorts.
Speaker Change #174: And also better mix in the new originations skewed towards existing clients over new ones. So as we know the behavior the model stands to behave better.
Speaker Change #175: Moving to the second part of the of the question, both renegotiation and asset sales or as business as usual with did not have any sale portfolio during the quarter.
Speaker Change #176: Thanks hearing no debt, that's great to listen to just a follow up in the first part of her you'll show the offshore answer.
Speaker Change #177: You mentioned 2021 cohorts right.
Speaker Change #178: And credit cards are very kind of FERC terms. So just checking like these are like old clients right. The originated those guys should be good but for any and all like maybe a risk appetite towards higher back in 2021, you added some clients.
Speaker Change #179: That maybe they were good for part of the of the history, but now they are showing some weakness right like that's the mindset like we should continue to sourcing from those old clients because what my question is.
Speaker Change #180: Credit card is a very short term product right. So your portfolios for the clean should be clean very quickly.
Speaker Change #181: That's the case, but if yours Nate like for some clients that are somewhat riskier, we make much interested this is worsening <unk> trained the does it make sense.
It does make sense, but there are a few things here that I'd like to highlight first.
Speaker Change #182: When the vessel.
Speaker Change #183: In the past, we've talked about FTB, which is first name in before.
Speaker Change #183: And.
What that tells US is that what's the quality of their recent underwriting so we improving that metric by 50% or more last year on this first payment default and what that tells US is a prediction that we're going to see bear npls as we move forward and we've seen that in the call.
Speaker Change #184: As shown in the cohorts that we showed in the in the presentation. What we're seeing the 'twenty 'twenty. One cohort is really about another dynamic we typically will see the maturity of our credit card cohort in 36 months. These means that mark.
Speaker Change #185: Every client that's going to become delinquent is gonna be full in the first payment or second payment authored payments.
Speaker Change #186: Given the deterioration in the credit scenario you may see this happening further down the road and that's what we're seeing.
Speaker Change #187: Did they see is that the more the time goes by the better their remaining clients of the cohort and things should come to like a more stable.
Speaker Change #188: Performance in the long term.
Speaker Change #189: Let me note that basket here that you know that was super clear. Thank you very much.
Speaker Change #189: Yeah.
Speaker Change #190: The next question comes from Mr. Tito Roberta from Goldman Sachs.
Speaker Change #191: Mr Law Barrator, we're now opening the audio so you can ask your question live. Please go ahead Sir.
Speaker Change #192: Hi, good afternoon, thanks for the call and taking my question I have a question on road was answered but I have.
Speaker Change #193: Another question on expenses right you know good job there, particularly on the cost to serve is there room to improve this further from here or do you think this is a new recurring level.
Speaker Change #193: Just to think about how that should evolve and then just.
Speaker Change #194: A second question in terms of your profitability and your capital right I mean, we saw capital not falling less.
Speaker Change #194: Then in prior quarters, but still coming down a bit I mean.
Speaker Change #195: When do you think you'll be able to start generating capital or in other words.
Speaker Change #196: Are you still confident you'll get I know you have the long term ROE target of 30%, but do you think you'll be able to generate capital by the end of the year or in other words have a level of profitability that will allow you to generate capital or when do you think you start to see that inflection where you can generate your own capital.
Speaker Change #197: So chip romp Naito speaking here regarding expenses.
Speaker Change #198: By the end of the day drives down our cost to serve.
Speaker Change #199: On the personal front, which you asked.
Speaker Change #200: We are improving a lot.
Speaker Change #201: And two angles actually the first ones, we downsized the conference. So we started the year with 4.1 thousand employees.
Naito: <unk>, we are slightly below three 7000.
Speaker Change #203: This evolution happened through tactical adjustments and through not replacing people that decide to leave.
Speaker Change #204: We are working to keep our expense level. This line flat throughout the year.
Speaker Change #204: Second.
Speaker Change #205: And as important as this one we want to have the proper management structure. We are working with the advice of BCG on this strong and expect to have it in place in this new structure will also help drive our personal expenses down so I'm very excited with what we have achieved so far but we believe that more to come.
Speaker Change #206: In the coming quarters, Okay, and now start to look over the rest of the question. Thank you.
Speaker Change #207: And then on the cabinet side Pizza, we're excited over the trend, we're seeing and we see still a very strong bathroom, two eggs and relative to a large incumbent banks.
Speaker Change #208: 100% of top quality C D. One in terms of organic capital creation as we see the arrow.
Speaker Change #209: Building up and we see that we start creating our own organic capital to fund road further as we mentioned in January in our Investor Day, We expect to have a fully funded business plan from a capital perspective, and that's where we'd be in SAP combined with allo UAE consumption of the loan growth we see.
Speaker Change #210: When much am each other and as we continue even in these organic capital to where we're comfortable in these in these brands and the sequential improvement on net income is the one that will help us and fund this business plan.
Speaker Change #211: Okay. Thanks, Angelica in Santiago, maybe just one follow up there.
Speaker Change #212: I mean, just in terms of.
Speaker Change #213: When you can begin to see that inflection point I mean do you think you reach it at all this year I think you had mentioned the capital around 20% by year end is that still where you're thinking. So is it maybe you start to get organic capital sometime next year is that a fair assumption.
Speaker Change #214: So we don't give guidance on profitability, which is aimed at.
Speaker Change #215: Question I think here, so and what I can say is that we expect to continue cutting a sequential improvement of net income and in terms of loan growth, which is the other big variable that plays out and.
Speaker Change #216: In capital, we're running where we studied running and 20% loan growth are you able to that 5% of our quarter annualize will monitor macro conditions to see visa. It goes up a bit we would like you to read and I retired in 'twenty, but it will be around that ZIP code. So expansion ordinary income to help with this.
Speaker Change #217: There are no other.
Speaker Change #218: <unk> growth we see.
Speaker Change #218: Capital level to sustain above 20% throughout the end of the year.
Speaker Change #219: Okay, that's clear thanks until.
Speaker Change #219: Yes.
Speaker Change #220: Our next question comes from Mr. Flavio Yoshida from Bank of America. Mr. Yoshida, We're now opening the audience. So you can ask your question live. Please go ahead Sir.
Speaker Change #221: Hi, Good afternoon, everyone. So my question is on NII trends going forwards. So this quarter, we saw the loan portfolio growth decelerating.
Speaker Change #221: But at.
Speaker Change #222: At the same time, they'll all spreads our lives such as real estate and payroll loans were.
Speaker Change #222: More resilient.
Speaker Change #223: And this suggests a weaker NII going forward, but on the other hand, you guys showed a strong repricing efforts, which is actually driving NII up right. So my question is what should we expect going forward, taking all these into consideration.
Speaker Change #222: Thanks.
Speaker Change #222: Thanks, Larry for the question so on on NIM, we're truly excited with the dynamic that we're seeing.
Speaker Change #224: You'll notice we bring to the highest NIM in several quarters and we declined the size of a portfolio of lower yielding part which.
Speaker Change #225: Is supply chain finance and the prepayment card receivables, we had in real estate. The mix is much richer in the new originations and shifting towards clinical Deanne <unk> inflation adjusted loans on <unk>.
Speaker Change #226: Payroll, we are originated diligently at rates that in at 175% monthly or more.
Speaker Change #226: On Smbs, we increased the rates.
Speaker Change #227: 100 to 200 basis points on the new originations and as you saw <unk> D. S and we had a monthly rate of $2 15 per cent per month is gaining critical mass in them in the wearable point is all of these together.
Speaker Change #228: <unk> is playing a positively.
Speaker Change #229: We have been recording anemic sponsors of the new 30 ribs, we don't give guidance of what's going on with.
Speaker Change #230: <unk> coming in the next quarters, but and.
Speaker Change #231: We think the passage is available indications or the trend going forward.
Okay. Thanks.
Speaker Change #232: Our next question comes from MS. Nihon Agarwalla from HSBC ma'am.
Speaker Change #233: We're now opening the audio so you can ask your questions live. Please go ahead.
Speaker Change #234: Hi, Thank you for taking my question.
Speaker Change #235: Well I think my question was already asked but.
Speaker Change #236: And I have a classification on the loan growth and the coastal since that is for the year for La Lucha. We expect a you mentioned about 20% loan growth for the year is that the level that we should expect for the full year.
Speaker Change #237: Or could.
Speaker Change #238: Could it be a retiree.
Speaker Change #239: Also the what would be the focus segments for this year in terms of loan growth and my second question is on Costa says College improvement can we expect.
Speaker Change #239: During the year in terms of cost of risk.
And would it be I understand from your comments it would be more in the second half of this year versus in.
Speaker Change #239: In the first half thank you so much.
Speaker Change #240: Hi, Thank you for a question digitally shelter speaking so I'll start from the second piece.
We as you mentioned, yes, we expect to see more stability during the year and given expectations that we have from the macro scenario and also due to improved underwriting collections and the aging of the older cohorts, we might see improvements in.
Speaker Change #240: In the cost of risk front in the second half of the year.
Santiago Stell: Moving to the first part of the question, which is great, which regards to the growth of their own portfolio S. Santiago said, we ran the first quarter at about 5% growth. That's 20% annualized you also said that.
Santiago Stell: It's a little bit below what we what we expected, but it's a good position to be in in the deaths macro that we signed the first quarter. So we had we saw very busy movements happening with American Vandal other corporate events happening that's made the market turns.
Speaker Change #241: As we observe these attention are fading away we may see.
Speaker Change #242: More aggressive growth towards the volumes that we discussed during our Investor day earlier, this year towards that 40% level or something like that thank you.
Can I ask one more question in terms of your costs are you are you are showing a good performance in terms of improving efficiency, reducing your cost of.
Speaker Change #243: Guastella income what other levers do you have a I mean now that he had a low hanging fruits.
Speaker Change #243: That can help you further drive down the cost to income ratio and what is the plan.
Speaker Change #244: For the cost isn't going to be by the end of this year. Thank you so much.
Speaker Change #245: EMEA was wrong victory speaking.
Speaker Change #246: Yes, we do have also another.
Speaker Change #247: Initiatives on that front.
EMEA: And you are right I would call them low hanging fruit. So we have some big contracts that were trying to ring, they renegotiate, which will help us drive our cost to serve now mainly Mastercard AWS salesforce call centers into one so we're working hard on that front and also on personnel.
EMEA: We still have more room to improve as I mentioned before.
Speaker Change #249: And all of that combined with our improving on the on the <unk>.
Speaker Change #249: On the on the Nims.
Speaker Change #249: And reprice and should help us on profitability, so I'm I'm convinced that to Kim <unk>.
Speaker Change #249: Reduce the cost of serve even further.
Speaker Change #250: We do have a.
Speaker Change #251: Our objective of having.
Speaker Change #252: More active clients per employee so we're really looking forward to this metric.
Speaker Change #252:
Speaker Change #252: Having said that I believe that we.
Speaker Change #253: We will improve a lot on that metric, but we don't give a guidance for that okay. So thank you for your question.
Speaker Change #254: Thank you so much very helpful.
Speaker Change #255: The next question comes from Mr. Eduardo Rosemont from BTG.
Speaker Change #256: Mr Rose that we're now opening the audio so you can ask your question live. Please go ahead Sir.
Speaker Change #257: Hi, Hi, everyone. Congrats on the quarter, we like to see the improvement in efficiency and also the performance coming from capital I have a quick follow up on on Tito's question right are.
Speaker Change #258: Given the repricing effort tried the better cost control and the fact that our interest rates probably have peaked.
Speaker Change #259: Do you think or do you think it's fair to say that from now on we should expect no growing results on our profit before taxes basis.
Speaker Change #260: I understand that visibility on recent results, which was still a little below but do you think it's fair to say that top the.
Speaker Change #261: The visibility on what to expect for the coming quarters improved I'm, just trying to understand here, the five year view and and and and I think we all agree here that are profitable.
Speaker Change #262: Profitability will improve but I think investors have been kind of a I have been having a hard time to forecast. The next 12 months. So.
Speaker Change #263: If we have if we are able to to understand if the trends are are now, let's say on a clear way or if the trends are off improvement in results I think it would be if it would be great. If we could can share that with us. Thanks.
Speaker Change #264: Poizner zombie through here.
Speaker Change #265: Yes, Youre right.
Speaker Change #266: As I mentioned on the beginning of the presentation I would say that's the previous five year of inter we're building our foundation with a lot of cost upfront greening. The theme building the platform broaden out the features.
Poizner: We're doing our ipos follow ons and everything.
Speaker Change #268: And from now on.
Speaker Change #269: Highlighted we're taking a more cautious approach on pricing on using the capital in a good way.
Speaker Change #270: Growing in a I would say in a better manner looking for engagement.
Speaker Change #271: Trying to optimize the fixed costs for that for the for the business G&A personal and everything so the point I'm trying to make here is that we're really focused on this new I would say.
Speaker Change #272: Not the new environment, but the new momentum for the company we call. This the next five years or so.
Speaker Change #272: With that said.
Speaker Change #273: I'm sure that will keep improving our profitability.
Speaker Change #274: A more cautious approach on our equity.
Speaker Change #274: Having a better pricing better cost control when you combine all of bids hordesman pretty much will keep improving quarter over quarter, our ROE our profitability, we're very focused very committed to that to that metric.
Speaker Change #275: We have the team and when I say that demand talking about almost everyone here at <unk>.
Speaker Change #275: Looking for depth and when you have everyone pursue the same angle.
Speaker Change #276: Your chance to get there is way higher so I'm very excited I'm very.
Speaker Change #277: Very convinced that we'll get there so improving our require of the bar and get to a very good number on that metric soon thank you.
Alejandra: Thanks Alejandra.
Speaker Change #279: This concludes our question and answer session.
Mr. Joe: Now I turn the floor back over to Mr. Joe Why don't Victor men Ed for his closing remarks.
Operator: Thank you operator, I'd like to thank you everyone for participating or are in scope.
Joe: Again I'd like to thank all the team here have been turned its working hard every day to keep improving.
The business.
Mr. Joe: Hope to see you soon in another three months. Thank you very much bye bye.
Speaker Change #281: The conference has now concluded.
Speaker Change #282: Our IR area is at your disposal to answer any additional questions. Thank you for attending today's presentation have a nice day.