Q2 2026 Banco BTG Pactual SA Earnings Call

August 11, 2026

Operator: Good morning, and welcome to the Q2 2026 results conference call of Banco BTG Pactual. With us here today we have Roberto Sallouti, Renato Cohn, and Julia Rocha. We would like to inform you that this event is being recorded, and all participants will be in a listen-only mode during the bank's presentation. After Banco BTG Pactual's remarks, there will be a question and answer session for investors and analysts when further instructions will be given. Should any participant need assistance during this call, please press star one to reach the operator. Today, we have a simultaneous webcast that may be accessed through the website www.btgpactual.com/ir and the platform. There will be replay facility for this call from today.

Speaker #1: Good morning, and welcome to the second quarter of 2026 Results Conference call of Banco BTG Pactual. With us here today, we have Roberto Sallouti, Renato Cohn, and Julia Rocha.

Speaker #1: We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the bank's presentation.

Speaker #1: After Banco BTG Pactual's remarks, there will be a question-and-answer session for investors and analysts when further instructions will be given. Should any participant need assistance during this call, please press start 1 to reach the operator.

Speaker #1: Today, we have a simultaneous webcast that may be accessed through the website www.btgpactual.com/ir and the platform. There will be replay facility for this call from today.

Speaker #1: Before proceeding, let me mention that this call may contain forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to the growth prospects of Banco BTG Pactual.

Operator: Before proceeding, let me mention that this call may contain forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to the growth prospects of Banco BTG Pactual. These are merely projections and as such, are based exclusively on the expectation of Banco BTG Pactual's management concerning the future of the business. Such forward-looking statements depend substantially on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in Banco BTG Pactual's filed disclosure documents and are therefore subject to change without prior notice. Now, I will turn the floor to Mr. Roberto Sallouti, who will begin the presentation. Mr. Sallouti, please go ahead.

Speaker #1: These are merely projections and, as such, are based exclusively on the expectations of Banco BTG Pactual's management concerning the future of the business. Such forward-looking statements depend substantially on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy, and the industry, among other factors and risks disclosed in Banco BTG Pactual's filed disclosure documents, and are therefore subject to change without prior notice.

Speaker #1: Now, I'll turn it forward to Mr. Roberto Sallouti, who will begin the presentation. Mr. Sallouti, please go ahead.

Speaker #2: Thank you very much. Welcome, everybody. Thank you for joining our Q2 results call. If you could please turn to page 3, where we talk a bit about the highlights of this quarter.

Roberto Sallouti: Thank you very much. Welcome, everybody. Thank you for joining our Q2 results call. If you could please turn to page 3, where we talk a bit about the highlights of this quarter. Once again, we were able to finish the quarter with record revenues and delivering record results, record net income, benefiting from the efficiency gains of the integrated business now with Banco PAN, resulting in a return on equity of 26.7%. Once again, I think this highlights our ability to capture opportunities across different market cycles, macro cycles, and different environments. Moving to the second bullet point, corporate lending and business banking had another record quarter, increasing 19% year over year in revenues, keeping healthy spreads and disciplined on asset origination.

Speaker #2: Once again, we were able to finish the quarter with record revenues and delivering record results with a record net income benefiting from the efficiency gains of the integrated business now with Banco Pan.

Speaker #2: Resulting in a return on equity of 26.7%. And once again, I think this highlights our ability to capture opportunities across different market macro cycles and different environments.

Speaker #2: Moving to the second bullet point, corporate lending and business banking had another record quarter. Increasing 19% year-over-year in revenues. Keeping healthy spreads and disciplined on asset origination.

Speaker #2: I think here, once again, we are reaping the benefits of our disciplined capital allocation strategy, which is not based on market share or share of wallet, but is based on making sure that the spreads in our view are correctly priced for the unit of risk, and also benefiting from our continuing to continued increase in geographical diversification and segment diversification, as we continue to penetrate the been building out over the last few years.

Roberto Sallouti: I think here, once again, we are reaping the benefits of our disciplined capital allocation strategy, which is not based on market share or share of wallet, but is based on making sure that the spreads, in our view, are correctly priced for the unit of risk, and also benefiting from our continued increase in geographical diversification and segments diversification as we continue to penetrate the new segments that we have been building out over the last few years. Moving to the third bullet point, in sales and trading, we were able to deliver consistent performance despite a very challenging macro environment in the Q2, different than what happened in the first two months of the year, where we were able to offset softer client activity with very efficient capital allocation in the balance sheet. Moving to the fourth point, asset and wealth management continue to scale.

Speaker #2: Moving to the third bullet point, in sales and trading, we were able to develop the deliver consistent performance despite a very challenging macro environment in the second quarter.

Speaker #2: Different than what happened in the first two months of the year. Where we were able to offset slower software client activity with very efficient capital allocation in the balance sheet.

Speaker #2: Moving to page to the fourth point, asset and wealth management continue to scale; we had 59 billion in net new money in the quarter.

Roberto Sallouti: We had R$59 billion in net new money in the quarter, pushing our combined AUM and wealth under management to R$2.7 trillion. Finally, the fifth bullet point, our consumer finance and banking division grew 37% year over year. This was mainly driven by the results from Banco PAN, but also we had contributions from our partnership with Meu Tudo. Here in Banco PAN, we are benefiting from the integration of the back office and controls, thus not only with efficiency gains, but what we believe is a 100% BTG Pactual culture now in our consumer finance business, as we are also reaping the benefits from the change in strategy and leadership that we did within the consumer finance business in the last, if I am not mistaken, 18 to 24 months. Moving to page 4, we talk a bit about the highlight about the numbers.

Speaker #2: And pushing our combined AUM and wealth under management to 2.7 trillion AIs. And finally, the fifth bullet point, our consumer finance and banking division grew 37% year over year.

Speaker #2: This was driven mainly driven by the results from Banco Pan, but also we had contributions from our partnership with Meu Tudo. And here in Banco Pan, we're benefiting from the integration of the back office and controls; thus, not only with efficiency gains, but what we believe is a 100% BTG Pactual culture now in our consumer finance business, as we're also reaping the benefits from the change in strategy and leadership that we did within the consumer finance business in the last, if I'm not mistaken, 18 to 24 months.

Speaker #2: Moving to page 4, we talk a bit about the highlights regarding the numbers. So, we had total revenues reaching R$10.4 billion. This is a 16% growth year over year.

Roberto Sallouti: We had total revenues reaching R$10.4 billion. This is a 16% growth year over year, and net income reaching R$5.1 billion, 23% growth year over year, once again, showing our efficiency gains and operating leverage in the platform. We finished the quarter with a return on equity of 26.7%. Turning to page 5, once again, as mentioned previously, we had R$59 billion in net new money, roughly half asset management, half wealth management. Our assets and wealth management grew 24% to R$1.314 billion, and our assets and asset management grew 25% to R$1.361 billion. Moving to page 6, our unsecured funding grew 32% year over year, reaching R$405 billion. Very conservative capital ratio of 16%, and net equity reaching R$80 billion at the end of the quarter.

Speaker #2: And net income reaching 5.1 billion AIs, 23% growth year over year. Once again, showing our efficiency gains and operating leverage in the platform. We finished the quarter with a return on equity of 26.7%, and turning to page 5, once again, as mentioned previously, we had 59 billion AIs in net new money, roughly half asset management, half wealth management.

Speaker #2: Our assets and wealth management grew 24% to 1.314 billion AIs. And our assets and asset management grew 25% to 1.361 billion AIs. Moving to page 6, our unsecured funding grew 32% year over year, reaching 405 billion AIs.

Speaker #2: Very conservative capital ratio of 16%, and net equity reaching 80 billion reais at the end of the quarter. And finally, our credit portfolio grew 24% year over year, reaching 367 billion reais.

Roberto Sallouti: Finally, our credit portfolio grew 24% year over year, reaching R$367 billion, R$288 billion in the corporate and SME segment, and R$78 billion in the consumer finance sector. In page 7, we show the numbers in a traditional manner that we have always done for the last, I do not know, over a decade. Total revenues reached R$10.4 billion, adjusted net income of R$5.14, net income per unit of R$1.33. Cost income ratio moving down to 37.1% from 38.5% at the end of last year, showing the improvement in operating leverage. Total assets reached R$925 billion, for equity of R$80 billion, and had an average VaR for the quarter of 22 bps. On page 8, we show the results for the H1 of the year, where we had an increase in the net income year over year of 31%.

Speaker #2: 200 of it and 88 in the corporate and SME segment, and 78 billion in the consumer finance segment. In page 7, we show the numbers in a traditional manner.

Speaker #2: That we've always done for the last, I don't know, over a decade. So total revenues reached 10.4 billion AIs. Adjusted net income of 5.14.

Speaker #2: Net income per unit of 1.33. Cost-income ratio moving down to 37.1%, from 38.5% at the end of last year, showing the improvement in operating leverage.

Speaker #2: Total assets reached R$925 billion, and equity was R$80 billion. We had an average bar for the quarter of 22 bps. On page 8, we show the results for the first half of the year, where we had an increase in net income year over year of 31%.

Speaker #2: So net income for the first six months of the year was 20.3 billion AIs. Net income of roughly 10 billion AIs. Return on equity 26.6.

Roberto Sallouti: Net income for the first 6 months of the year was R$20.3 billion, net income of roughly R$10 billion, return on equity of 26.6%, and net income per unit of R$2.58. Once again, a similar cost income ratio, 37.6%, and a slightly higher VaR of 27 bps for the H1 of the year. On page 9, last quarter, we showed Q1 versus Q1. Now we show H1 versus H1, the revenue breakdown of the different business units. Here we are basically, in investment banking, we see the tougher markets. In the H1 of the year, 10% reduction from the H1 of last year. Corporate lending and business banking, a very healthy growth of 20% year over year. The same for sales and trading, 16% growth despite a tougher quarter this quarter.

Speaker #2: And net income per unit of 2 AIs and 58 cents. Once again, similar cost income ratio, 37.6. And a slightly higher bar of 27 beats for the first half of the year.

Speaker #2: On page 9, we now show last quarter, we showed Q1 versus Q1. Now we show first half versus first half. The revenue breakdown was a different business units.

Speaker #2: And here, we're basically in investment banking. We see the tougher market. So in the first half of the year, 10% reduction from the first half of last year.

Speaker #2: Corporate lending and business banking, a very healthy growth of 20% year over year. The same for sales and trading, 16% growth despite a tougher quarter, this quarter.

Speaker #2: Asset management growing 16%. Wealth management, a very strong 30%. And consumer finance and banking, an extremely healthy 58%. And also interest and other continue to grow 35%, which is a reflection of the very solid balance sheets that we have and the very high interest rate environment that we're currently living.

Roberto Sallouti: Asset management growing 16%, wealth management a very strong 30%, and consumer finance and banking an extremely healthy 58%. Interest and other continuing to grow 35%, which is a reflection of the very solid balance sheets that we have and the very high interest rate environment that we are currently living. When you see the breakdown per business unit, we continue to see increased diversification and a very healthy distribution across what we can call corporate and investment banking with roughly 29%, sales and trading or markets related 18%, investment management 23%, and consumer finance 13%. Probably over the next few years, we will probably continue to see a growth in investment management as a percentage of total businesses and a growth in consumer finance as a percentage of the total businesses. With that, I will pass the floor to Cohn, and then we can go to Q&A.

Speaker #2: And when you see the breakdown per business unit, we continue to see increased diversification and a very healthy distribution across what we can call corporate and investment banking, with roughly 29% sales and trading or markets related, 18% investment management, 23%, and consumer finance, 13%.

Speaker #2: Probably over the next few years, we'll probably continue to see a growth in investment management as a percentage of total businesses and a growth in consumer finance as a percentage of the total businesses.

Speaker #2: With that, I'll pass the floor to Colm, and then we can go to Q&A.

Speaker #1: Thank you. Roberto, and good morning, everyone. So I'll start with our specific business lines on page 11. We see our investment bank, where we had resilient performance despite the challenging ECM environment with ECM and M&A delivering positive contributions across Brazil and Latin America.

Renato Cohn: Thank you, Roberto, and good morning, everyone. Starting with our specific business lines on page 11, we see our investment bank where we had resilient performance despite the challenging ECM environment with ECM and M&A delivering positive contributions across Brazil and Latin America. Here we recorded revenues of R$421 million during the quarter. That is a decrease when we compare to the previous quarter, mostly, again, as a consequence of softer DCM activity throughout the quarter. As you know, by the end of Q1 2026, we saw a widening of credit spreads in the secondary market, which caused some redemptions in some credit-related fixed income funds and consequently, little appetite for new placements in DCM markets. By the middle of Q2, we saw credit spreads stabilizing and, in some cases, started to tighten.

Speaker #1: Here we recorded revenues of 421 million AIs during the quarter, that's a decrease when we compare to the previous quarter, mostly again as a consequence of softer DCM activity throughout the quarter.

Speaker #1: So as you know, by the end of the first quarter of '26, we saw a widening of credit spreads in the secondary market, which caused some redemptions in some credit related fixed income funds and consequently little appetite for new placements in DCM markets.

Speaker #1: By the middle of the second quarter, we saw credit spreads stabilizing and, in some cases, starting to tighten. So we see redemptions normalizing. By the end of the second quarter, we started to see an improvement in issuances, pointing to a stronger pipeline for the third quarter of '26.

Renato Cohn: We see redemptions normalizing and by the end of Q2, we started to see an improvement of issuances pointing to a stronger pipeline for Q3 2026. Both ECM and M&A remained as active contributors in similar amounts as previous quarters, with transactions executed both in Brazil and in Latin America. During the quarter, we acted as the sole Latin America underwriter in SpaceX landmark IPO, which was the largest equity offering in history, reinforcing BTG's standing as the leading Latin America partner for global transactions. Moving now to corporate lending and business banking on page 12, we see that we had record results with 19% revenue growth, maintaining healthy spreads and disciplined asset origination. Revenues reached R$2.5 billion, which is a 7.2% increase when we compare to the previous quarter, and again, 19% when we compare to Q2 2025.

Speaker #1: Both ECM and M&A remained as active contributors in similar amounts as previous quarters, with transactions executed both in Brazil and in Latin America. And during the quarter, we acted as the sole Latin America underwriter in SpaceX landmark IPO, which was the largest equity offering in history reinforcing BTG's standing as the leading Latin America partner for global transactions.

Speaker #1: Moving now to Corporate Lending and Business Banking on page 12, we see that we had record results with 19% revenue growth, maintaining healthy spreads and disciplined asset origination.

Speaker #1: Revenues reached 2.5 billion AIs, which is a 7.2% increase when we compare to the previous quarter. And again, 19% when we compare to the second quarter of '25.

Speaker #1: As we continue to expand our portfolio, in different segments, different geographies, we continue to expand our international portfolio. Maintaining healthy spreads, showing once again the strength of our business.

Renato Cohn: As we continue to expand our portfolio, in different segments, different geographies, we continue to expand our international portfolio, maintaining healthy spreads, showing once again the strength of our business and also improved funding structure. Total corporate portfolio grew 2.6% during the quarter, and 21% when we compare to Q2 2025, reaching a total of R$288.5 billion. Large corporate and corporate both grew 5.5%, while SME portfolio contracted, reflecting a more disciplined, risk-adjusted capital allocation across all corporate lending segments. For the third year in a row, we were recognized by Euromoney as the best bank for SMEs in Brazil, reflecting the quality and strength of our digital banking platform for entrepreneurs and businesses.

Speaker #1: And also improved funding structure. Total corporate portfolio grew 2.6% during the quarter and 21% when we compare to the second quarter of '25. Reaching a total of 288.5 billion AIs.

Speaker #1: Large corporate and corporate book grew 5.5%, while the SME portfolio contracted, reflecting a more disciplined, risk-adjusted capital allocation across all corporate lending segments. And for the third year in a row, we were recognized by Euromoney as the best bank for SMEs in Brazil.

Speaker #1: Reflecting the quality and strength of our digital banking platform for entrepreneurs and businesses. If we go now to page 13, we see our sales and trading business line, where we showed once again resilient performance despite the challenging macroeconomic environment with a more efficient risk allocation of setting softer client activity.

Renato Cohn: If we go now to page 13, we see our sales and trading business line, where we showed once again resilient performance despite the challenging macroeconomic environment with a more efficient risk allocation offsetting softer client activity. Revenues reached R$1.858 billion, mostly stable when we compare to the previous quarter. That came again as a consequence of slower client activity, reflecting still high uncertainties and volatility related to the geopolitical and macroeconomic scenario. As we mentioned, despite the lower client activity, we managed to keep similar revenues as previous quarter with an improved risk allocation, which can be seen by the significant reduction in the average VaR from the previous quarter when it was 32 basis points. We see here that the average VaR during the Q2 was 22 basis points. So a significant reduction here.

Speaker #1: Revenues reached 1 billion 858 million AIs, so mostly stable when we compare to the previous quarter. And that came again as a consequence of slower client activity, reflecting still high uncertainties and volatility related to the geopolitical and macroeconomic scenario.

Speaker #1: As we mentioned, despite the lower client activity, we managed to keep similar revenues as previous quarter, with an improved risk allocation, which can be seen by the significant reduction in the average bar from the previous quarter when it was 32 basis points.

Speaker #1: And we see here that the average bar during the second quarter was 22 basis points. So a significant reduction here. Overall, this was our best first half with revenues reaching 3.7 billion AIs.

Renato Cohn: Overall, this was our best H1 with revenues reaching R$3.7 billion. That's a 16% increase when we compare to the H1 of 2025 as we continue the process of expanding our client base and widening the range of products and services that we offer to our client base. During the quarter, we were voted once again, best research, sales, trading, and corporate access in Latin America and best research and trading house in Brazil for institutional investors. Moving now to page 14, we look at our asset management business line, where we can see that we had also resilient net inflows with consistently growing management fee revenues.

Speaker #1: That's a 16% increase when we compare to the first half of '25. As we continue the process of expanding our client base, and widening the range of products and services that we offer to this to our client base.

Speaker #1: And during the quarter, we were voted once again best research, sales, trading, and corporate taxes in Latin America, and best research and trading housing in Brazil for institutional investors.

Speaker #1: Moving now to page 14, we look at our asset management business line, where we can see that we had also resilient net inflows with consistently growing management fee revenues.

Speaker #1: Revenues reached 794 million AIs, which is a 1.3% increase during the quarter and a 27% increase when we compare to the second quarter of '25.

Renato Cohn: Revenues reached R$794 million, which is a 1.3% increase during the quarter and a 27% increase when we compare to the Q2 of 2025 as management fees revenues continue to grow alongside the expansion of assets under management and administration. Assets under management and administration reached R$1.361 trillion, which represents a 3.5% increase during the quarter and a 25% growth when we compare to the Q2 of 2025. We recorded positive net new money of R$29.4 billion during the quarter. That's a good number, especially considering the challenging environment that the asset management industry is experiencing in recent quarters with the fund industry experiencing net redemptions during this quarter. We recorded positive inflows in both our asset servicing and in our managed fund businesses as we continue to gain market share. We go now to our wealth management and personal banking business line on page 15.

Speaker #1: As management fees continue to management fees revenues continue to grow alongside the expansion of assets and the management and administration. Assets under management reached and administration reached 1 trillion 361 billion AIs, which represents a 3.5% increase during the quarter.

Speaker #1: And a 25% growth when we compare to the second quarter of '25. We recorded positive net new money of 29.4 billion AIs during the quarter.

Speaker #1: That's a good number, especially considering the challenging environment that the asset management industry is experiencing in recent quarters, with the fund industry experiencing net redemptions during this quarter.

Speaker #1: And we recorded positive inflows in both our asset servicing and in our managed fund businesses, as we continue to gain market share. We go now to our wealth management and personal banking business line on page 15.

Speaker #1: We see that our total wealth under management passed the 1.3 trillion AIs mark, with strong net inflows during the quarter. We recorded revenues of 1 billion 447 million AIs, which is a 4.5% decrease when we compare to the previous quarter, which was marked by a very strong levels of client activity.

Renato Cohn: We see that our total wealth under management passed the R$1.3 trillion mark, with strong net inflows during the quarter. We recorded revenues of R$1.447 billion, which is a 4.5% decrease when we compare to the previous quarter, which was marked by very strong levels of client activity. When we compare to the Q2 of 2025, we see a 17% increase in revenues, with revenues growing alongside portfolio expansion. As mentioned, wealth under management passed the R$1.3 trillion mark, reaching R$1.314 billion, which represents a 3% increase during the quarter and 24% increase when we compare to the Q2 of last year. New money came at R$29.1 billion during the quarter, showing, once again, very consistent net inflows generation and the strength of our distribution network.

Speaker #1: When we compare to the second quarter of '25, we see a 17% increase in revenues, with revenues growing alongside portfolio expansion. And as mentioned, wealth under management passed the 1.3 trillion AIs mark, reaching 1 trillion 314 billion, which represents a 3% increase during the quarter and 24% increase when we compare to the second quarter of last year.

Speaker #1: And net new money came at 29.1 billion AIs during the quarter, showing once again very consistent net inflows generation. And the strength of our distribution network.

Speaker #1: And for the third consecutive year, we were voted best private bank in Brazil, and in Latin America by Euromoney. And this year, best private bank for family office services across Latin America.

Renato Cohn: For the third consecutive year, we were voted best private bank in Brazil and in Latin America by Euromoney, and this year, best private bank for family office services across Latin America. If we look now at our consumer finance and banking business line, on page 16, we saw strong performance driven by portfolio expansion, improved spreads, and the inclusion of revenue contribution from our partnership with Meu Tudo. Credit portfolio reached R$78 billion. That is a 6% increase during the quarter and a 35% increase when compared to Q2 2025, with most of the quarterly growth coming from the expansion of our private payroll loan portfolios.

Speaker #1: If we look now at our consumer finance and banking business line, we on page 16, we saw strong performance driven by portfolio expansion, improved spreads, and the inclusion of revenue contribution from our partnership with Miltudi.

Speaker #1: So credit portfolio reached 78 billion AIs. That's a 6% increase during the quarter and a 35% increase when compared to the second quarter of '25.

Speaker #1: Most of the quarterly growth came from the expansion of our private payroll loan portfolios. Auto loan portfolios increased 3% during the quarter, and 24% when compared to the second quarter of '25.

Renato Cohn: Auto loan portfolios increased 3% during the quarter, and 24% when we compare to Q2 2025, while payroll loans portfolio grew 11% during the quarter and 61% when compared to Q2 last year, as we continue to privilege collateralized loans and those type of loans that have some sort of guarantees, and more recently, the private payroll loans instruments. Following the closing of our partnership with Meu Tudo in April, we began recognizing our proportional share of 48% revenues, costs, and the portfolio exposure in our consumer business lines. Total revenues reached R$1.546 billion, with consumer credit revenues reaching R$1.395 billion, which is a 46% increase when compared to the previous quarter. This strong growth came from different factors. Most importantly, and the majority of the growth came for improvements with Banco PAN business.

Speaker #1: While payroll loans portfolio grew 11% during the quarter and 61% when compared to the second quarter of last year, as we continue to privilege collateralized loans and those type of loans that have guarantees and more recently the private payroll loans instruments.

Speaker #1: Following the closing of our partnership with Miltudi in April, we began recognizing our proportional share of 48% revenues, costs, and the portfolio exposure in our consumer business lines.

Speaker #1: Total revenues reached 1 billion 546 million AIs, with consumer credit revenues reaching 1 billion 395 billion AIs, which is a 46% increase when we compare to the previous quarter.

Speaker #1: And this strong growth came from different factors, right? Most importantly, the majority of the growth came from improvements with Banco Pan's business.

Speaker #1: So here we saw we had better auto loans contribution from a larger portfolio, and lower provisioning after a one-off adjustment that we did in the first quarter of '26.

Renato Cohn: Here we saw we had better auto loans contribution from a larger portfolio and lower provisioning after a one-off adjustment that we did in Q1 2026. Also, we had higher private payroll loans revenues in line with the portfolio expansion. The third is the inclusion of the proportional revenues of Meu Tudo. Also important to note is that we are recording six months of Meu Tudo revenues, but obviously, after the partnership with Meu Tudo, the portfolio expanded throughout this H1, so the run rate by the end of the H1 is much higher than the average run rate throughout these six months. Expect these revenues to continue to improve. TuSeguros revenues reached R$152 million, reflecting a normalized run rate after the Q1 one-off regulatory impact. We go now to page 18.

Speaker #1: Also, we had higher private payroll loans revenues in line with the portfolio expansion. And the third is the inclusion of the proportional revenues of Miltudi.

Speaker #1: Also important to know is that we are recording six months of Miltudi revenues, but obviously we after the partnership with Miltudi, the portfolio expanded throughout this first half.

Speaker #1: So the run rate by the end of the first half is much higher than the average run rate throughout this six months. So expect this revenues to continue to improve.

Speaker #1: Two seguros revenues reached 152 million AIs, reflecting a normalized run rate after the first quarter one-off regulatory impact. We go now to page 18.

Speaker #1: We look at our expenses and main ratios. And we see that our cost income ratio continues to improve on the back of positive operating leverage.

Renato Cohn: We look at our expenses and main ratios, and we see that our cost-income ratio continues to improve on the back of positive operating leverage. Total operating expenses increased 1.2% during the quarter, driven by disciplined cost management and favorable revenue mix. When we compare Q2 last year, we see that total expenses increased by 13%. Salaries and benefits increased by 3% during the quarter, mainly impacted by the inclusion of our proportional stake in Meu Tudo costs. Administrative and others increased by 8.9%, again, mostly impacted by inclusion of Meu Tudo. Goodwill amortization remained flat despite the impact of Meu Tudo as we continue to amortize the recent acquisition. Tax charges decreased as a consequence of revenues geography. As mentioned, adjusted cost-income ratio decreased 1% during the quarter, reaching 37%. Our effective income tax rate remains stable at 19.5%.

Speaker #1: Total operating expenses increased 1.2% during the quarter, driven by disciplined cost management and a favorable revenue mix. When we compare to the second quarter of last year, we see that total expenses increased by 13%.

Speaker #1: Salaries and benefits increased by 3% during the quarter, mainly impacted by the inclusion of our proportional stake in Miltudi costs. Administrative and others increased by 8.9%, again mostly impacted by inclusion of Miltudi.

Speaker #1: Goodwill amortization remained flat despite the impact of Miltudi, as we continue to amortize the recent acquisition. Tax charges decreased as a consequence of revenues geography.

Speaker #1: And as mentioned, adjusted cost income ratio decreased 1% during the quarter, reaching 37%. And our effective income tax rate remained stable at 19.5%. We look at our balance sheet on page 20.

Renato Cohn: We look at our balance sheet on page 20. We see that total assets remain somewhat stable as a proportion of our equity, with total assets representing 10 times our equity. We continue to maintain strong liquidity levels with more than 100 billion BRL of cash and cash equivalents, resulting in a stable LCR ratio of 160%. Our unsecured funding increased strongly during the quarter with a 7.2% growth, while our on-balance sheet portfolio grew 2.6%, resulting in an expansion of our coverage ratio, which reached 142%. Our total credit portfolio represents now 4.6 times our equity. That is a reduction from the previous quarter when it was 4.8 times. You see that despite the strong portfolio growth in both corporate lending and in consumer finance, the high profitability, and especially the strong capital generation, continues to support the expansion of all our business lines.

Speaker #1: We see that total assets remain somewhat stable as a proportion of our equity, with total assets representing 10 times our equity. We continue to maintain strong liquidity levels, with more than R$100 billion of cash and cash equivalents, resulting in a stable LCR ratio of 160%.

Speaker #1: Our unsecured funding increased strongly during the quarter with a 7.2% growth, while our unbalance sheet portfolio grew 2.6%, resulting in an expansion of our coverage ratio, which reached 142%.

Speaker #1: And our total credit portfolio now represents 4.6 times our equity. That's a reduction from the previous quarter, when it was 4.8 times. So you see that despite the strong portfolio growth in both corporate lending and in consumer finance, the high profitability and especially the strong capital generation continue to support the expansion of all our business lines.

Speaker #1: Looking at our unsecured funding base on page 21, as mentioned in the previous slide, our total funding grew 7% during the quarter and 32% when we compare to the second quarter of last year.

Renato Cohn: Looking at our unsecured funding base on page 21. As mentioned in the previous slide, our total funding grew 7% during the quarter and 32% when we compare to the Q2 of last year. Basically, we grew our total funding by 100 billion BRL during the last 12 months. Demand deposits also grew in line with total funding, so we kept our ratio of approximately 7% of demand deposits as a share of total funding. During the Q2, we managed to secure a 210 million EUR syndicated loan for BTG Pactual Europe, our bank in Luxembourg, with banks participating across Europe and Asia, reinforcing our international presence and supporting the expansion of our European platform.

Speaker #1: So basically, we grew our total funding by 100 billion reais during the last 12 months. Demand deposits also grew in line with total funding.

Speaker #1: So we kept our ratio of approximately 7% of demand deposits as a share of total funding. And during the second quarter, we managed to secure a €210 million syndicated loan for BTG Pactual Europe, our bank in Luxembourg, with banks participating across Europe and Asia, reinforcing our international presence.

Speaker #1: And supporting the expansion of our European platform. Finally, when we look at our baseline ratio and bar, we see that the baseline ratio increased slightly to 16%, with our core equity tier one increasing 20 basis points to 11.6%, showing a balanced approach to capital generation and capital usage.

Renato Cohn: Finally, when we look at our Basel ratio and VaR, we see that Basel ratio increased slightly to 16%, with our core equity Tier 1 increasing 20 basis points to 11.6%, showing a balanced approach to capital generation and capital usage. As mentioned before, VaR reduced to 22 basis points as geopolitical and macroeconomic uncertainties increased during the quarter. I think with that, we can go for questions.

Speaker #1: And as mentioned before, BAR reduced to 22 basis points, as geopolitical and macroeconomic uncertainties increased during the quarter. I think with that, we can go to questions.

Speaker #2: Thank you. The floor is now open for questions for from investors and analysts. If you have a question, please press star one on your touch tone phone at this time.

Operator: Thank you. The floor is now open for questions from investors and analysts. If you have a question, please press star one on your touch-tone phone at this time. If at any point your question is answered, you can remove yourself from the queue by pressing the hashtag key. Questions will be taken in the order that they are received. We would like you to please pick up your handset when you ask your question in order to ensure optimum sound quality. Please hold while we poll for questions. The first question comes from Yuri Fernandes with JPMorgan. Please go ahead.

Speaker #2: If at any point your question is answered, you can remove yourself from the queue by pressing the hashtag key. Questions will be taken in the order that they are received.

Speaker #2: We would like to please pick up your handset when you ask your question in order to ensure optimum sound quality. Please hold while we pull for questions.

Speaker #2: The first question comes from Yuri Fernandez with J.P. Morgan. Please go ahead.

Yuri Fernandes: Hi, everybody. Congrats for another good quarter here, like delivering ROEs. But I think the main questions we have here is regarding the consumer finance unit, the sustainability. I think Renato Cohn already mentioned a little bit of the moving pieces. I want to get a little bit of more color here. I think you mentioned, Renato, that the main driver was auto loans. If you can provide a little bit of more color, what was this on Banco PAN? Just on Meu Tudo, I think I heard you mentioning that you consolidated 6 months in the quarter. I want to ask if this is going to be the recognition, or now it is a quarterly basis, so in Q3, we should see this more normalized in Q4. I got you mentioned that the run rates would be healthy, right?

Speaker #3: Hi everybody. Congrats on another good quarter, delivering strong ROEs. But I think the main question we have here is regarding the consumer finance unit and its sustainability. I think Renato already mentioned a little bit about the moving pieces.

Speaker #3: So I want to get a little bit more color here. I think you mentioned, Renato, that the main driver was auto loans.

Speaker #3: If you could provide a little bit more color on what was this regarding Banco Pan. And just on Miltudi, I think I heard you mention that you consolidated six months in the quarter.

Speaker #3: So I want to ask if this is going to be the recognition, or now it's on a quarterly basis. So, in the third quarter, we should see this more normalized, and the fourth quarter as well.

Speaker #3: And I got you mentioned that the run rate should be healthy, right? Because you said, like, Miltudi was stronger by the end of the quarter than at the beginning of the quarter.

Yuri Fernandes: Because you said Meu Tudo was stronger by the end of the quarter than at the beginning of the quarter. I just would like to understand if the recognition here is going to be every 6 months, or this is going to be on a quarterly basis now. Then I have a second question regarding the SMEs. We note your SME portfolio down almost 20% quarter over quarter. I know this is an important pillar for growth for you, but I also understand there is a higher risk credit outlook in Brazil. If you can provide some comments on what is the strategy for SME, I would appreciate it. Thank you.

Speaker #3: But I just would like to understand if the recognition here is going to be every six months, or if this is going to be on a quarterly basis now.

Speaker #3: And then I have a second question regarding the SMEs. We note your SME portfolio is down almost 20% quarter over quarter. I know this is an important pillar for growth for you, but I also understand there is a higher-risk credit outlook in Brazil.

Speaker #3: So if you could provide some comments on what the strategy is for SME, I would appreciate it. Thank you.

Speaker #1: So thank you, Yuri, for the question. So for the first question, regarding the improvement of consumer finance business lines and revenues, the majority of the improvement comes from Banco Pan in general, right?

Renato Cohn: So thank you, Yuri, for the question. For the first question regarding the improvement of consumer finance business lines and revenues. The majority of the improvement comes from Banco PAN in general, right? Part of it comes from auto loans, where we had a larger portfolio and lower impact from provisioning. You remember that in Q1, we did a revision of the 4,966 rules on the expected loss. There was an impact, a one-off impact there in Q1, which was not present during Q2. So that made an increase or an improvement in auto loans. But also the private payroll loans also contributed significantly with the growth of the business, right? They continue to increase portfolio originations within the private payroll loan segment, right? The majority part of the improvement comes from Banco PAN, and then we added Meu Tudo.

Speaker #1: So part of it comes from auto loans, where we had a larger portfolio and lower impact from provisioning. You remember that in the first quarter we did a revision of the 4,966 rules on the expected loss.

Speaker #1: So there was an impact, a one-off impact there in the first quarter, which was not present during the second quarter. So that made an increase, or an improvement, in auto loans.

Speaker #1: But also the private payroll loans also contributed significantly with the growth of the business, right? They continue to increase portfolio originations within the private payroll loan segment, right?

Speaker #1: So, the majority of the improvement comes from Banco Pan. And then we added Miltudi. As I mentioned, and you correctly pointed out, we added six months of revenues from Miltudi, and from now on, we'll add quarterly numbers.

Renato Cohn: As I mentioned, and you correctly pointed that we added 6 months of revenues of Meu Tudo, and from now on, we will add quarterly numbers. What I said is that because of the ramp-up of the portfolio of Meu Tudo after establishing the partnership with BTG, is that the run rate by the end of the quarter is much higher. So we do not expect an impact of this difference between recording a quarter revenues in Q3 with the first part, because the partnership was beginning at the beginning of the year, and now it is in a more significant run rate. Right?

Speaker #1: What I said is that because of the ramp up of the portfolio of Miltudi after establishing the partnership with BTG, is that the run rate by the end of the quarter is much higher.

Speaker #1: So we don't expect an impact from this difference between recording a quarter's revenues in the third quarter with just half the first part, because the partnership began at the beginning of the year and now it's at a more significant run rate, right?

Speaker #3: Yeah, and if I could just complement Con's answer. I think we saw a significant quarter-over-quarter improvement, which was a result of both the synergies and basically reaping the benefits of the change in strategy and integration of Banco Pan.

Roberto Sallouti: Yeah. If I could just complement Cohn's answer, I think we saw a significant quarter-over-quarter improvement, which was a result of both the synergies, we are basically reaping the benefits and change in strategy and integration of Banco PAN, and also of our partnership with Meu Tudo. We expect to continue to grow from this level, but at a slower pace than what is quarter-over-quarter growth. We are very encouraged by what we see on both different franchises. Of course, we are as worried as everybody is worried with the level of indebtedness of individuals. So we are underwriting to very conservative standards, and in our view, the scenario will get worse before it gets better. That's why we are concentrated on lines which have collateral, are lower risks, and we are all ready.

Speaker #3: And also of now of our partnership with Miltudi. And we expect to continue to grow from this level but at a slower pace than what this quarter over quarter growth.

Speaker #3: But we are very encouraged by what we see on both different franchises, and of course, we are as worried as everybody is with the level of indebtedness of individuals.

Speaker #3: So we are underwriting to very conservative standards and in our view the scenario will get worse before it gets better. That's why we are concentrated on lines which have collateral are lower risks and we are already actually we have been underwriting expecting the deterioration already for I would say for quite a while this deterioration has taken longer than what we expected to have than have happened which has been very good but we already encompassing this and already reducing exposures to let's say the segments of higher risk or products with higher risk.

Roberto Sallouti: Actually, we have been underwriting, expecting deterioration already for, I would say, for quite a while. This deterioration has taken longer than what we expected to have happened, which has been very good. But we are already encompassing this and already reducing exposures to, let's say, the segments of higher risk or products with higher risk. As I mentioned previously, we are always underwriting credits, be it in corporate, be it in consumer finance, in spread for unit of risk. Of course, the unit of risk encompasses the scenario which we expect.

Speaker #3: So as I mentioned previously we're always underwriting credit be it in corporate be it in consumer finance and spread for unit of risk. And of course the unit of risk encompasses the scenario which we expect.

Speaker #3: And in the SME portfolio, it was a small adjustment because, since we're consistently re-evaluating the spread per unit of risk, there were some lines where we thought the competition was a bit too intense, which we reduced at this moment. And we can go back to increasing if we expect the spreads to adjust, although unfortunately we don't see the risk improving in the short term.

Roberto Sallouti: In the SME portfolio, it was a small adjustment because since we are consistently reevaluating the spread per unit of risk, there were some lines which we thought the competition was a bit too intense, which we reduced at this moment, and we can go back to increasing if we expect the spreads to adjust, or that we don't see, unfortunately, in the short term, the risk improving. It's more related to the spreads than to the risk in this case.

Speaker #3: It's more related to the spreads than to the risk in this case.

Yuri Fernandes: No, super clear. Thank you, Sallouti. Thank you, Cohn.

Speaker #2: No, super clear. Thank you, Sallouti. Thank you, Con.

Speaker #1: Thank you.

Roberto Sallouti: Thank you.

Julia Rocha: Thank you.

Renato Cohn: Thank you.

Speaker #3: Thank you.

Speaker #4: The next question comes from Daniel Vass with Safra. Please go ahead.

Operator: The next question comes from Daniel Vaz with Safra. Please go ahead.

Speaker #3: Hi everyone. Hello, Sallouti. Hello, Cohn. Congrats on the results. Maybe two questions on my side. First, on DCM, how does the pipeline look for the second half of the year, if you have any visibility on that?

Daniel Vaz: Hi, everyone. Hello, Sallouti. Hello, Cohn. Congrats on the results. Maybe two questions on my side. First on DCM, how does the pipeline look for the H2 of the year, if you have any visibility on that? Maybe some comments also on the recent league tables with some other banks being more aggressive to win mandates. The second question is regarding a more recent debate that some economists have been bringing to the table of recession in 2027, a possible recession in 2027. I would like to hear your opinion on how BTG is seeing this scenario. If the environment does deteriorate, in fact, how would you expect to be more opportunistic again on capital allocation, maybe including equity stakes in companies that you can be on very cheap valuations. Love to hear your comments on that. Thank you.

Speaker #3: And maybe some comments also on the recent league tables, with some other banks being more aggressive to win mandates. And the second question is regarding a more recent debate that some economists have been bringing to the table—of a possible recession in 2027.

Speaker #3: I would like to hear your opinion, and how BTG is seeing this scenario. And if the environment does deteriorate, in fact, how would you expect to be more opportunistic again on capital allocation, maybe including equity stakes in companies that can be at very cheap valuations?

Speaker #3: Love to hear your comments on that. Thank you.

Speaker #1: Thank you, Daniel. So our perspectives on DCM is an improvement from Q2, maybe not to the level of Q1, but we are seeing marginally a bit of a better market.

Roberto Sallouti: Thank you, Daniel. Our perspectives on DCM is an improvement from Q2, maybe not to the level of Q1, but we are seeing marginally a bit of a better market. You are correct. We are seeing a competition for league tables where we think sometimes the underwritings or the firm underwritings are not, in our view, justifying the spread per unit of risk. We are fine giving up market share if we do not think that the risk-adjusted price is correct. As I mentioned previously, that is our philosophy, which also works for DCM. It is what it is. We have seen these cycles throughout the last decades since I have been here. Every once in a while, the market gets a bit irrational as people fight for league tables, but eventually economics prevails, especially, as you mentioned, in a tougher macroeconomic environment, which I think is becoming a consensus.

Speaker #1: You are correct. We are seeing a competition for league tables, where we think sometimes the underwritings or the firm underwritings are not, in our view, justifying the spread per unit of risk.

Speaker #1: So we're fine giving up market share if we don't think that the price adjusted the risk adjusted price is correct. So as I mentioned previously, that's our philosophy, which also works for DCM.

Speaker #1: So it is what it is. We have seen these cycles throughout the last decades since I've been here. Every once in a while, the market gets a bit irrational as people fight for league tables.

Speaker #1: But eventually economics prevails. Especially as you mentioned, in a tougher macroeconomic environment, which I think is becoming a consensus. I think it's consensus that the level of indebtedness of families is too high.

Roberto Sallouti: I think it is consensus that the level of indebtedness of families is too high, the level of indebtedness of the government is too high, the level of interest rates are too high, and at some point, this will end up impacting the economy. As I mentioned, we are underwriting to this scenario. We think there is a very probable scenario. If it does not happen, great. But our job here is always to, especially when underwriting the balance sheet, is to underwrite to the worst scenario expected. If there are going to be opportunities or not, let us say time will tell, but we will continue with the approach we have always had, which is to always pay attention to different market opportunities presented by the different scenarios.

Speaker #1: The level of indebtedness of the government is too high. The level of interest rates are too high. And at some point the this will end up impacting the economy.

Speaker #1: And as I mentioned, we are underwriting to this scenario. We think there's a very probable scenario. If it doesn't happen, great. But our job here is always to especially when underwriting the balance sheet is to underwrite to the worst scenario expected.

Speaker #1: Whether there are going to be opportunities or not, time will tell. But we will continue with the approach we have always had, which is to always pay attention to different market opportunities presented by different scenarios.

Speaker #3: Thank you, Sallouti.

Daniel Vaz: Thank you, Sallouti.

Speaker #4: The next question comes from Mario Pieri with Bank of America. Please go ahead.

Operator: The next question comes from Mario Pierry with Bank of America. Please go ahead.

Mario Pierry: Hey, guys. Good morning. Congratulations on the results. Thank you for taking my question. Let me ask two questions as well. First one is on capital. Roberto Sallouti, you showed your common equity Tier 1 ratio 11.6%, but it is down from 12% one year ago, despite this 27% ROE. Clearly you are growing into businesses that are more capital intensive. Can you talk a little bit about how you see capital evolving and what you think is a minimum common equity Tier 1 ratio that you would like to have? The second question is going back to the corporate loan book and this change in loan mix that we saw, right? This decline in SME loans. We did not see an impact on your overall spreads. The number that you showed, the credit spread for the portfolio was 3.5% versus 3.4% in the first quarter.

Speaker #5: Hey guys, good morning. Congratulations on the results, and thank you for taking my question. Let me ask two questions as well. The first one is on capital.

Speaker #5: Sallouti, you showed right your common equity tier one ratio 11.6%. But it is down from 12% one year ago. Despite right this 27% ROE, so clearly you're growing into businesses that they're more capital intensive.

Speaker #5: Can you talk a little bit about how you see capital evolving, and what do you think is a minimum common equity Tier 1 ratio that you like to have?

Speaker #5: And then the second question is going back to the corporate loan book and this change in loan mix that we saw, right? Like the decline in SME loans.

Speaker #5: We didn't see an impact on your overall spreads. The number that you showed, right, the credit spread for the portfolio was 3.5% versus 3.4 in the first quarter.

Speaker #5: So I'm just wondering, should we see this change in mix having a negative impact on your spreads and does it could mean lower slower revenue growth going forward?

Mario Pierry: I am just wondering, should we see this changing mix having a negative impact on your spreads and thus it could mean slower revenue growth going forward? Thank you.

Speaker #5: Thank you.

Speaker #1: Hi Mario. Thank you for the question. So first, in terms of capital ratios a pretty balanced way if you see. It has been somewhat stable with 10 basis points increase or decrease quarter over quarter.

Renato Cohn: Hi, Mario. Thank you for the question. First, in terms of capital ratios and capital usage, I think we are in a pretty balanced way. If you see, it has been somewhat stable with 10 bps increase or decrease quarter over quarter, as we add a lot of capital every quarter by the high level of profitability. As you know, our dividend policy is to pay interest on capital for 25% of the profit. That means we retain approximately 75% of the profits. With the existing 26.7% return on equity, that means that we are adding about 20% or a little bit more than that in capital every year, right? That supports the pace of growth for our business lines that do consume capital. Several of our business lines do not consume capital.

Speaker #1: As we add a lot of capital every quarter by the high level of profitability. So as you know, our dividend policy is to pay interest on capital for 25% of the profit.

Speaker #1: So that means we retain approximately 75% of the profits, right, with the existing 26.7% return on equity. That means that we are adding about 20% or a little bit more than that in capital every year, right?

Speaker #1: So, that supports the pace of growth for our business lines that do consume capital. Several of our business lines do not consume capital.

Speaker #1: So, the lines that consume capital mostly are exactly the corporate lending book and the consumer finance book. So I think we are in a kind of sweet spot in terms of capital generation and capital usage, right?

Renato Cohn: The lines that consume capital mostly are exactly the corporate lending book and the consumer finance book. I think we are in a kind of a sweet spot in terms of capital generation and capital usage, right? Regarding the average credit spreads related to the reduction of the SME portfolios, you might remember that most of our, or almost all of our SME portfolios are types of collateralized portfolios. So with an average spread that is similar to the large corporate spread of the book. There should not be a major difference there. As Roberto mentioned, what we did is some sort of portfolio adjustments where we reduce credit spreads for those that we thought that the level of spreads did not justify the risk we are taking despite being collateralized.

Speaker #1: Regarding the average credit spreads, right, related to the reduction of the SME portfolios, you might remember that most of our, or almost all of our, SME portfolios are types of collateralized portfolios.

Speaker #1: So, with an average spread that is similar to the large corporate spread of the book, there shouldn't be a major difference there. And as Roberto mentioned, what we did is some sort of portfolio adjustments, right, where we reduced credit spreads for those where we thought that the level of spreads did not justify the risk we were taking, despite being collateralized, right?

Renato Cohn: We shifted an increase more in the corporate and large corporate book, where we saw opportunities with higher spreads. We shouldn't expect a change in credit spreads.

Speaker #1: And we shifted any increase more in the corporate and large corporate book where we saw opportunities with higher spreads. So there was and we shouldn't expect a change in credit spreads.

Renato Cohn: We shifted an increase more in the corporate and large corporate book, where we saw opportunities with higher spreads. We shouldn't expect a change in credit spreads.

Mario Pierry: That's very clear. Can I ask just like a third question here? It's more of a follow-up as well to what you said about the efficiency ratio improving. You are realizing some synergies from PAN, but also I think this improvement has to do with the revenue mix changing, right? You having more of a composition of this consumer finance and corporate. Is that a fair assessment that your efficiency ratio is better in these two segments than the other segments?

Speaker #5: That's very clear. Can I ask just like a third question here? It's more of a follow-up as well to what you said about the efficiency ratio improving.

Speaker #5: You are realizing some synergies from PAN, but also I think this improvement has to do with the revenue mix changing, right? You having more of a composition of this consumer finance and corporate.

Speaker #5: Is that a fair assessment that your efficiency ratio is better in these two segments than the other segments?

Speaker #1: Yes. Naturally, the businesses that use capital have a better ratio than the businesses that do not use capital. But I think it's a combination of various things, right?

Roberto Sallouti: Yes. Naturally, the businesses that use capital have a better ratio than the businesses that do not use capital. But I think it's a combination of various things. We're living a technological revolution with AI. We had the integration of PAN. We are growing, as you mentioned, consumer finance and corporate lending, but we're growing wealth management faster. It's also the fact that we have the J-curve of the various new market products and segments that we have been penetrating. So I've mentioned in the past, let's say, the high income retail investment platform, the personal banking platform. This will be happening now in consumer banking. This will be happening in cash management. This will be happening in payments. This will be happening in acquiring. This will be happening in our wealth management offering of Europe and the US. So the truth is a combination of various things.

Speaker #1: We're living a technological revolution with AI. We had the integration of PAN. We are growing, as you mentioned, in consumer finance and corporate lending, but we're growing wealth management faster.

Speaker #1: It's also the fact that we have the J-curve of the various new market products and segments that we have been penetrating. So, as I've mentioned in the past—for example, the high-income retail investment platform and the personal banking platform.

Speaker #1: This will be happening now in consumer banking. This will be happening in cash management. This will be happening in payments. This will be happening in acquiring.

Speaker #1: This will be happening in our Wealth Management offering in Europe and the US. So the truth is a combination of various things. But I would say, if you ask me personally and sincerely, we've never mapped out what is what. I think the most important effect is the J curve that we have, from the significant investments that we delivered over the last few years as we launched new products and penetrated new segments.

Roberto Sallouti: But I would say if you ask me personally, and sincerely, we've never mapped out what is what I think the most important effect is the J-curve that we have of the significant investments that we dealt with over the last few years as we launch new products and penetrate new segments.

Speaker #5: Very clear. Thank you.

Mario Pierry: Very clear. Thank you.

Operator: The next question comes from Renato Meloni with Autonomous Research. Please go ahead.

Speaker #2: The next question comes from Renato Meloni with Autonomous Research. Please go ahead.

Speaker #6: Hi, good morning everyone. Congratulations on the numbers, and thanks for taking my question here. So first, if you could just expand a bit on your comments about the credit cycle.

Renato Meloni: Hi, good morning, everyone. Congrats on the numbers, and thanks for taking my question here. First, if you could just expand a bit on your comments about the credit cycle. Do you expect loan growth to decelerate throughout the year, particularly in corporate lending, or you still think that you can maintain the same level, maybe via your international expansion? If you allow me for a second question here, I want a bit more clarity on the impact of Meu Tudo in the numbers this quarter. Can you give us an order of magnitude if you are considering the revenues recognized and the expenses, what was the contribution to the pre-tax income? Then if you can talk more about Meu Tudo, I am assuming that given this high level of growth, the bottom line contribution is still dilutive to ROE.

Speaker #6: Do you expect loan growth to decelerate throughout the year, particularly in corporate lending, or do you still think that you can maintain the same level, maybe via your international expansion?

Speaker #6: And if you allow me for a second question here, I want a bit more clarity on the impact of Miltudo in the numbers this quarter.

Speaker #6: Can you give us an order of magnitude if you consider the revenues recognized and the expenses? What was the contribution to the pre-tax income?

Speaker #6: And then if you can talk more about Miltudo. I'm assuming that, given this high level of growth, the bottom line contribution is still diluted to ROE.

Speaker #6: So, can you give us a sense of where ROE will stabilize there, and at what pace we should expect this to become a contributor?

Renato Meloni: Can you give us a sense of where ROE will stabilize there, and at what pace we should expect this to become a contributor? Thank you.

Speaker #6: Thank you.

Speaker #1: So, on the credit cycle—there are many factors in play here. We talked about a weaker DCI market, and I think I mentioned this in our last call.

Roberto Sallouti: On the credit cycle, there are many factors in play here. We talked about a weaker DCM market, and I think I mentioned this in our last call. Last year, we did not increase our large corporate portfolio in Brazil because the competition from debt capital markets was too intense. This year, with slower debt capital markets, there is more opportunity for the corporate lending book. We continue to benefit from our penetration in the corporate and middle market segments, where we basically had zero presence a few years ago. We continue to benefit from our geographical diversification, and we are already underwriting to conservative macroeconomic environment.

Speaker #1: Last year, we did not increase our large corporate portfolio in Brazil because the competition from the capital markets was too intense. This year, with slower debt capital markets, there's more opportunity for the corporate lending book.

Speaker #1: We continue to benefit from our penetration in the corporate and middle-market segments, where we basically had zero presence a few years ago. We also continue to benefit from our geographical diversification.

Speaker #1: And we are already underwriting to a conservative macroeconomic environment. So with that, and where we see the market right now, we do expect that, yes, we can continue to grow, let's say, between 15% and 20% growth for the year and for the portfolio.

Roberto Sallouti: With that and where we see right now the market, we do expect that, yes, we can continue to grow, let's say, between 15% and 20% growth for the year in the portfolio with a healthy portfolio, given all these different things that I mentioned. On Meu Tudo, Renato Cohn can compliment me, but we are not ready to discuss any details at this moment. We have just basically started this partnership. They have been growing strongly. As you know, this is a business of scale, so we do expect profitability to increase as the portfolio grows. As you also, whenever you grow the portfolio, you always have to make initial provisions, which brings the profitability a bit more over time, which is why we are comfortable to say that we had, let's say, this good improvement this quarter in consumer finance.

Speaker #1: With a healthy portfolio, given all these different things that I mentioned. On Miltudo, Cohn can complement me, but we're not ready to discuss any details at this moment.

Speaker #1: We have just basically started this partnership. They have been growing strongly. As you know, this is a business of scale, so we do expect profitability to increase as the portfolio grows.

Speaker #1: And as you know, whenever you grow the portfolio, you always have to make initial provisions, which is what brings the profitability a bit more in over time. This is why we're comfortable to say that we had this, let's say, good improvement this quarter in consumer finance, but we do expect to continue to improve and grow from these levels at a slower pace. All these factors that we mentioned—the improvement in the partnership, the continued growth of the credit portfolio—even in this environment that we are seeing, we expect to continue to grow from these levels.

Roberto Sallouti: But we do expect to continue to improve and grow from these levels at a slower pace. But all these factors that we mentioned, the improvement in PERA, the partnership with Meu Tudo, the continuing credit portfolio. Even in this, what we are seeing in the environment, we expect to continue to grow from these levels.

Speaker #6: Okay, that's great guidance. Thank you.

Renato Meloni: Yes. Great guides. Thank you.

Speaker #2: The next question comes from Tiago Batista with UBS. Please go ahead.

Operator: The next question comes from Thiago Batista with UBS. Please go ahead.

Thiago Batista: I have a follow-up question on the stage 3 of the consumer lending. The level achieved almost 14%, and Roberto Sallouti mentioned that you guys are expecting some deterioration ahead. My perception talking with investors is that this 14% was a little bit much higher than expected and probably much higher than most of the peers that we look on as a comparison. Nubank, for instance, they have half of this level of stage 3. I know that the mix is different. My question here is, can you provide any number to us, for instance, the level of the NPL ratio of this portfolio to trying to see if this 14% has been a kind of conservative approach of BTG or if the quality of this loan is not really good.

Speaker #5: I have a follow-up question on the stage three of the consumer lending. The level achieved almost 14 percent and Sallouti mentioned that you guys are expecting similar duration ahead.

Speaker #5: My perception talking with investors is that this 14 percent was a little bit much higher than expected and probably much higher than most of the peers that we look only as a comparison new bank, for instance, they have half of this level 53.

Speaker #5: I know that the mix is different. So my question here is, can you provide any numbers to us—for instance, the level of the liquidity situation of this portfolio—to try to see if this 14 percent has been a kind of conservative approach from BTG, or if the quality of this loan is not really good?

Speaker #5: I'm trying to help investors understand if this 14 is okay, or if this is a point that should worry investors.

Thiago Batista: I am trying to help investors understand if this 14% is okay or is this a point that should worry the investors.

Speaker #1: So I'm going to start commenting on the last point. I don't think it should worry you. I think it's a very tough job for you to compare the different product types and the different moving pieces.

Roberto Sallouti: I am going to start commenting the last point. I do not think it should worry you. I think it is a very tough job for you to compare the different product types and the different moving pieces, the speed of write-off, if you sell NPLs, if you do not sell NPLs. There are many factors. For example, this quarter, we usually sell the NPLs of PAN. This quarter, we thought it was the right economic decision not to sell. This led to an increase in what you can call stage 3. But sincerely, we thought it was the right economic decision. There are many moving pieces, and naturally, we understand your worry. We are discussing ways we can do to make you comfortable. We are very comfortable with the level of provisions. We are very comfortable with the results.

Speaker #1: The speed of write-off, if you sell NPLs, if you don't sell NPLs—so, there are many factors. For example, this quarter, we usually sell the NPLs of...

Speaker #1: This quarter, we thought it was the right economic decision not to sell. This led to an increase in what you can call stage three.

Speaker #1: But sincerely, we thought it was the right economic decision. So, there are many moving pieces, and we understand—naturally, we understand your worry. We are discussing ways we can make you comfortable.

Speaker #1: We are very comfortable with the level of provisions. We are very comfortable with the results. But I agree with you that, especially when you look at the accounting—the GAAP financials—this is very hard to read and very hard to compare.

Roberto Sallouti: But I agree with you that especially when you look at the accounting, the GAAP financials, this is very hard to read and very hard to compare. But going to the end of your question, no, we are not worried, and we think we have very healthy provisions.

Speaker #1: So, to address the end of your question, no, we're not worried, and we think we have very healthy provisions.

Thiago Batista: Okay, thanks.

Speaker #5: Excellent.

Operator: The next question comes from Pedro Leduc with Itaú BBA. Please go ahead.

Speaker #2: The next question comes from Pedro Leduc with Itaú BPA. Please go ahead.

Speaker #6: All right, guys. Thank you very much for the call and taking questions. Just one quick follow-up on consumer finance. So we call last quarter, Sallouti gave an interview saying PAN, you know, historically 12 percent ROE.

Pedro Leduc: All right, guys. Thank you very much for the call and taking question. Just one quick follow-up on consumer finance. I recall last quarter, Sallouti gave an interview saying PAN, historically 12% ROE, and it should converge to the consolidated group level by 2028. And I am wondering where we are in that process. Seems like this quarter there is a material, and I am calling it PAN, but let us simplify it on consumer finance. What kind of ROE levels are you running there today already? And then the second question would be on corporate lending. Revenues up 7%, loan book up 2.5%, even though SMEs fell, so the implied yield looks like to have gone up. If you can help us put it together, what drove it? Maybe it was funding, maybe it was special sits, maybe lower cost of risk in corporate.

Speaker #6: And he should converge to the consolidated group level by '28. And I'm wondering where we are in that process. It seems like this quarter there's a material—I'm calling it PAN, but let's simplify it on consumer finance.

Speaker #6: What kind of ROE levels are you running there today already? And then the second question would be on corporate lending. Revenue is up seven.

Speaker #6: Loan book up two and a half. Even though SMEs fell, so the implied yield looks like to have gone up. If you can help us put it together, what drove it?

Speaker #6: Maybe it was funding, maybe it was special sits, maybe lower cost of risk in corporate. Just for us to understand a little bit, what drove this slightly higher revenue the way you reported versus loan book in corporates?

Pedro Leduc: Just for us to understand a little bit what drove this slightly higher revenues the way you reported versus loan book in corporate. Thank you.

Speaker #6: Thank you.

Speaker #1: Thanks, Leduc. On I think we are quite on track. We might be able to anticipate that goal by a few quarters given how we are seeing things.

Roberto Sallouti: Thanks, Pedro Leduc. On PAN, I think we are quite on track. We might be able to anticipate that goal by a few quarters given how we are seeing things. Right now, we are still a bit below 20, but improving. We continue with the same expectation. We might be able to be there maybe one or two quarters before than we had expected, given that we have been able to implement changes at a faster pace than we had imagined. Now let Renato Cohn answer the corporate lending.

Speaker #1: Right now, we are still a bit below 20, but improving. So, pretty much, we continue with the same expectation. We might be able to be there maybe one or two quarters earlier than we had expected.

Speaker #1: Given that we have been able to implement changes at a faster pace than we had imagined. And now let's answer the corporate lending.

Speaker #7: I think you are asking about the corporate lending credit spread, right? This was a little bit higher than the previous quarter. I think many factors contributed.

Renato Cohn: I think you ask about the corporate lending credit spreads, right? It was a little bit higher than previous quarter. Many factors contributed. Cost of fund is one of them, as you mentioned, and also a little bit more revenues coming from special sits, which also, despite the recurrence that we see in special situations contribution, there is some volatility there, right? A little bit of higher contribution also from special sits. But it's a combination of factors. So larger portfolio, lower or improved cost of funding, and also a little bit more of contribution from special situations.

Speaker #7: So, cost of fund is one of them, as you mentioned, and also a little bit more revenues coming from special seats, which also—despite the recurrence that we've seen—special situations contribution, there is some volatility there, right?

Speaker #7: So a little bit of higher contribution also from special seats, but it's a combination of factors. So larger portfolio lower or improved cost of funding and also a little bit more of contribution from special situations.

Speaker #6: Thank you. Very useful both. Thank you.

Pedro Leduc: Thank you. Very useful, both. Thank you.

Speaker #1: Thank you.

Roberto Sallouti: Thank you.

Speaker #2: The next question comes from Brian Suarez with City. Please go ahead.

Operator: The next question comes from Brian Flores with Citi. Please go ahead.

Brian Flores: Hi, team. Thank you for the opportunity to ask questions. Just two quick ones here. I think, Sallouti, Cohn, you mentioned back in February that the origination pace of Meu Tudo was around BRL 2.5 billion per month. Just wanted to check if we could assume this as a reasonable run rate given today's environment. Also just wanted to check with you the importance of maybe the ex-Brazil portfolio. As you mentioned, the current environment in Brazil is very challenging. But maybe the last time we had the opportunity to meet, you mentioned that growing the corporate portfolio outside Brazil was certainly a good opportunity and could help to maintain your very healthy pace in terms of growth. Just wanted to check with you if this is still the case, and how is the opportunity set ex-Brazil looking like for loans. Thank you.

Speaker #8: Hi, team. Thank you for the opportunity to ask questions. Just two quick ones here. I think Sallouti Kohn, you mentioned back in February, right, that the origination pace of Meotudu was around two and a half billion per month.

Speaker #8: I just wanted to check if we could assume this as a reasonable run rate, given today's environment. And then, I also wanted to check with you on the importance of maybe the ex-Brazil portfolio. As you mentioned, the current environment in Brazil is very challenging, but maybe the last time we had the opportunity to meet, you mentioned that growing the corporate portfolio outside Brazil was certainly a good opportunity and could help you maintain your very healthy pace in terms of growth.

Speaker #8: I just wanted to check with you if this is still the case and how is the opportunity set ex-Brazil looking like for loans. Thank you.

Speaker #8: Can I ask you just to repeat the first question because it broke up for us and we couldn't really get it? It's... Sure, Sallouti.

Roberto Sallouti: Can I ask you just to repeat the first question because it broke up for us, and we couldn't really get it?

Brian Flores: Sure, Sallouti. It is about the 2.5 billion origination pace for Meu Tudo. If you think this is a reasonable run rate to assume in this environment, current conditions.

Speaker #8: It's about the $2.5 billion origination pace for Meotudu. Do you think this is a reasonable run rate to assume in this environment, given current conditions?

Speaker #8: So, Brian, for Meotudu, I think that the origination is lower than that, especially after the portfolio gained more—it's more robust, right? So now it's a larger-sized portfolio.

Renato Cohn: So Brian Flores, for Meu Tudo, I think that the origination is lower than that, especially after the portfolio gain. It is more robust, right? So now it is a larger size portfolio. So we are growing, but not at this pace. But remember that we are growing not just in Meu Tudo, we are growing at Meu Tudo and PAN, right? Both together in some months grew at this pace or maybe at a quarterly rate than that we did some origination at that pace. Regarding the international exposure of the portfolio ex-Brazil, we continue to improve or to grow. As we mentioned last year that we passed the 20% mark. Obviously, there are some variations through time, but we are getting closer to the 25%. This will happen through time as we continue the expansion in international locations. We did the acquisition of the bank in Luxembourg three years ago.

Speaker #8: So we are growing, but not at this pace, but remember that we are growing not just in Meotudu. We are growing at Meotudu. And PAN, right?

Speaker #8: Both together in some months, or grew at this pace, or maybe at the quarterly rate, and then we did some origination at that pace.

Speaker #8: So and regarding the international exposure of the portfolio ex-Brazil, we continue to improve, right? So or to grow. As we mentioned, last year that we passed the 20 percent mark, I think we're getting obviously there's some variations through time, but we are getting closer to the 25 percent.

Speaker #8: This will happen through time as we continue the expansion in international locations. We did the acquisition of the bank in Luxembourg three years ago.

Renato Cohn: The bank now it is much more developed and growing. We concluded the acquisition of the bank in the US at the end of last year. So this is developing, and we just concluded in July, the acquisition of the bank in Uruguay. So we are expanding, we are improving the infrastructure for that, and we expect this process to continue to improve.

Speaker #8: Now it's much more developed and growing. We concluded the acquisition of the bank in the US at the end of last year. So this is developing, and we just concluded, in July, the acquisition of the bank in Uruguay.

Speaker #8: So we are expanding. We are improving the infrastructure for that and we expect this process to continue to improve. Well, super clear. Thank you.

Brian Flores: Super clear. Thank you.

Speaker #2: The next question. Comes from Henrique Navarro with Santander. Please go ahead.

Operator: Next question comes from Henrique Navarro with Santander. Please go ahead.

Speaker #8: Hi, morning, guys. Congratulations on the results. Two questions. First one: There was a positive impact from the incorporation of the revenues from Meotudu. My question is, I understand higher revenues, but also higher expenses with provisions, et cetera.

Henrique Navarro: Hi. Morning, guys. Congratulations for the results. Two questions. First one, there was a positive impact from the incorporation from the revenues from Meu Tudo. My question is, I understand higher revenues, but also higher expenses with provisions and cetera. My question is, what is the net impact of that incorporation? I understand you did not treat it as a non-recurring, but just for me to understand, what would be, I would say, the net income if we adjusted for this net impact from the incorporation of Meu Tudo? That's my first question. The second one is, from evaluation model, if I look forward, do I need to change the structure from now on considering, I would say, more revenues coming from products that consume capital. How should I look forward in terms of the participation of loans as a contributor for the total revenues of the bank?

Speaker #8: My question is: what is the net impact of that incorporation? I understand you did not treat it as a non-recurring, but just for me to understand, what would be the net income if we adjusted for this net impact from the incorporation of Meotudu?

Speaker #8: That's my first question. The second one is: for my evaluation model, if I look forward, do I need to change the structure from now on, considering, I would say, more revenues coming from products that consume capital?

Speaker #8: How should I look forward in terms of the participation of loans as a contributor to the total revenues of the bank? That's it. Thank you.

Henrique Navarro: That's it. Thank you.

Speaker #1: Hi Navarro. So first, the truth is we have the revenues there. We have the cost income of our consumer finance consolidated into everything. It's very important that you always look at the thing as a whole, right?

Roberto Sallouti: Hi, Navarro. First, the truth is, we have the revenues there, we have the cost income of our consumer finance consolidated to everything. It's very important that you always look at the thing as a whole, right? You can expect, probably, looking how to model this, you can expect some growth of consumer finance from the levels of this quarter, and we expect these to come from both of our franchises, both that we own 100% and the partnership we have with Meu Tudo. If you should expect more capital, no. You should expect that we continue to allocate the capital that we accumulate through retained earnings, just as we have been doing in the past years.

Speaker #1: And so you can expect, probably looking at how to model this, you can expect some growth of consumer finance from the levels of this quarter.

Speaker #1: And we expect these to come from both of our franchises: PAN, which we own 100 percent, and the partnership we have with Meotudu.

Speaker #1: If you should expect more capital, no, you should expect that we continue to allocate the capital that we accumulate through retained earnings. Just as we have been doing in the past years.

Speaker #1: So, with that, we probably expect that the equilibrium of businesses that use capital and those that don't use capital will remain slightly stable, given that you expect growth to come from across business lines.

Roberto Sallouti: So with that, we probably expect that the equilibrium of businesses that use capital and don't use capital will remain slightly stable given the. Let's expect growth to come from across business lines. I mentioned here, consumer finance will probably grow faster in the next six quarters, but wealth management will grow much stronger than corporate lending. So when you put all of these things into consideration, I think it's fair to say that you can expect a similar mix of capital business, businesses that use capital and business that don't use capital, as we've had in the last few years.

Speaker #1: I mentioned here that consumer finance will probably go faster in the next six quarters, but wealth management will grow much stronger than corporate lending.

Speaker #1: So, when you put all of these things into consideration, I think it's fair to say that you can expect a similar mix of capital businesses that use capital and businesses that don't use capital, as we've had in the last few years.

Henrique Navarro: Okay. Thank you. Yes. I was wondering, for example, looking forward, if BTG is going to be a bank that just like other banks, will start publishing in the main page, ratios like NPL, provisions, stage 1, stage 2, stage 3 loans. I mean, those kinds of ratios that are normally more concerned to banks that do lending in a more aggressive way. That's it.

Speaker #8: Okay, thank you. Yes, I was wondering, for example, looking forward, is BTG going to be a bank that, just like other banks, will start publishing on the main page ratios like NPL, provisions, Stage 1, Stage 2, and Stage 3 loans?

Speaker #8: I mean, those kinds of ratios are normally more relevant to banks that do lending in a more aggressive way—that's it. Hi, Navarro.

Renato Cohn: Hi, Navarro. I think as Roberto mentioned at the beginning of the presentation, that we would expect credit to become a more important part of the revenue mix of BTG as a whole, but not as dominant as what we see in the large incumbent banks, right? So, I think we will migrate to a more equilibrium in terms of revenues generation coming from credit segments. But they will not be as dominant as they are in the large incumbent banks. I think that's the difference, right?

Speaker #8: I think, as Roberto mentioned at the beginning of the presentation, we would expect credit to become a more important part of the revenue mix of BTG as a whole.

Speaker #8: But not as dominant as what we see in the large incumbent banks, right? So, I think we will migrate to more of an equilibrium in terms of revenue generation coming from credit segments, but they will not be as dominant as they are in the large incumbent banks.

Speaker #8: I think that's the difference, right?

Speaker #1: Yeah. The truth is, the consumer finance credit just gave us further exposure. We could continue growing just in corporate lending, but we decided to also diversify geographically.

Roberto Sallouti: Yeah. The truth is, the consumer finance credit just gave us a further exposure. We could continue growing just in corporate lending, but we decided to also diversify geographically. We decided to diversify in segments, and it's exactly the same thing with consumer finance. It's not really changing the mix of the businesses that use capital and don't use capital, which remain relatively stable, as can be seen by the growth in the different business lines, as can be seen by the capital ratio. But for us, it's very important to have this diversification so that we can continue with our alpha management of credit exposure. We don't want to be beta to the market. We think that, as can be seen by what's happening in the market, the results are. There's a lot of alpha being generated in credit. But this does not mean that this will become commanding.

Speaker #1: We decided to diversify in segments. And it's exactly the same thing with consumer finance. It's not really changing the mix of the businesses that use capital and don't use capital, which remain relatively stable.

Speaker #1: It can be seen by the growth in the different business lines, as can be seen by the capital ratio. But for us, it's very important to have this diversification so that we can continue with our alpha management of credit exposure.

Speaker #1: We don't want to be beta to the market. We think that, as can be seen by what's happening in the markets, the result is that there's a lot of alpha being generated in credit.

Speaker #1: But this does not mean that this will become commanding. As you can see, wealth management is growing 30%, and investment management's contribution is over roughly 25% of total revenues.

Roberto Sallouti: As you can see, wealth management is growing 30%, our investment management contribution is roughly 25% of total revenues. We don't expect a change in mix. But for us, having this diversification is crucial for us to have an alpha strategy in credits.

Speaker #1: So, we don't expect a change in mix, but for us, having this diversification is crucial for us to have an alpha strategy in credits.

Speaker #8: Okay. Thank you.

Henrique Navarro: Okay. Thank you.

Speaker #2: The next question comes from Marcelo Mizrahi with Bradesco BBI. Please go ahead.

Operator: The next question comes from Marcelo Mizrahi with Bradesco BBI. Please go ahead.

Speaker #9: Hello, everyone. Thank you for the opportunity. My question is regarding leverage, operational leverage. So, assuming the fact that you guys are saying that the consumer banking revenues will grow next quarter—the revenues will grow, the portfolio will grow in the different plays, but it will grow—can we assume that the levels of the efficiency ratio, I mean, comparing expenses and revenues, are the levels that we will see in the next quarter?

Marcelo Mizrahi: Hello, everyone. Thank you for the opportunity. My question is regarding the leverage, your operational leverage. Assuming the fact that you guys are saying that the consumer banking revenues will grow next quarter, the revenues will grow, the portfolio will grow at a different pace, but it will grow. Can we assume that the levels of efficiency ratio, comparing expenses and revenues, are the levels that we will see in the next quarter? Can I expect something around those levels, which is better than the levels that last quarter or even the end of the last year looking forward? Thank you.

Speaker #9: So, can I expect something around those levels, which is better than the levels from last quarter or even the end of last year, looking forward?

Speaker #9: Thank you.

Renato Cohn: Hi, Marcelo. No, I think there is a lot of embedded operating leverage into the overall business. We see that the revenues are twice as high as the costs. When we grow revenues at a faster pace than cost, the operating leverage, which is already embedded, as I said, will make the cost income ratio to dilute over time. We expect this to continue to happen as we benefit from different sources of revenues. But overall, you see growth and strong growth in wealth management. You see growth in asset management, you see growth in the credit books, both consumer finance and in the corporate lending. Overall, the combination of revenue growing at a faster pace than what we see in costs, as Roberto said, we continue to benefit from the improvement of the J-curve from all the investments that we did in the past.

Speaker #8: Hi, Marcelo. No, I think there is a lot of embedded operating leverage into the overall business, right? So we see that the revenues are twice as high as the cost, right, or so when we grow revenues at a faster pace than cost, the operating leverage, which is already embedded, as I said, will make the cost income ratio to dilute over time.

Speaker #8: So we expect this to continue to happen as we benefit from different sources of revenue. But overall, you see growth, and strong growth, in wealth management.

Speaker #8: You see growth in asset management. You see growth in the credit books, both in consumer finance and in corporate lending. So overall, the combination of revenue growing at a faster pace than what we see in cost, as Roberto said, we continue to benefit from the improvement of the J-curve from all the investments that we did in the past.

Speaker #8: It doesn't mean that we are not investing. We are still investing, but as a magnitude of the revenues, it's much smaller than what we did in the past.

Renato Cohn: It doesn't mean that we are not investing. We are still investing, but as a magnitude of the revenues, it's much smaller than what we did in the past. We are collecting now the benefits of advancing into the J-curve.

Speaker #8: So, we are now collecting the benefits of advancing into the J-curve.

Speaker #9: Okay. Thank you.

Marcelo Mizrahi: Okay. Thank you.

Speaker #2: The next question comes from Jorge Curie with Morgan Stanley. Please go ahead.

Operator: The next question comes from Jorge Kuri with Morgan Stanley. Please go ahead.

Speaker #10: Hi, everyone. Good morning. Thanks for the opportunity to ask questions, and congrats on another great quarter. Sallouti, I wanted to follow up on something you mentioned.

Jorge Kuri: Hi, everyone. Good morning. Thanks for the opportunity to ask questions and congrats on another great quarter. Sallouti, I wanted to follow up on something you mentioned. You talked about a complicated backdrop for credit risk given excessive consumer leverage, excessive government leverage, and overall weak macro. At the same time, you mentioned that you had been expecting a correction for a while, but it hasn't really happened. I guess two questions. The first one is, why do you think it hasn't happened? What have been the factors that have been keeping things in check? Second, to what extent those factors may extend longer than you think, and maybe the backdrop for risk is not as negative as your position for. Thank you.

Speaker #10: You talked about a complicated backdrop for credit risk given excessive consumer leverage, excessive government leverage, and overall weak macro and at the same time, you mentioned that you had been expecting a correction for a while that hasn't really happened.

Speaker #10: And so I guess two questions. The first one is, what do you think it hasn't happened? What have been the factors that have been keeping things in check?

Speaker #10: And second, to what extent might those factors persist longer than you think? And maybe the backdrop for risk is not as negative as your position suggests.

Speaker #10: Thank you.

Speaker #1: Thanks, Jorge. In our view, this has not happened, because government expenditures have been growing more than what we expected. Especially this year, they were growing at a slower pace toward the end of this year and the beginning of last year.

Roberto Sallouti: Thanks, Jorge. In our view, this has not happened because the government expenditures have been growing more than what we expected, especially this year. They were growing at a slower pace towards the end of this year and beginning of last year. This accelerated with the electoral cycle to very strong levels, which we don't believe are sustainable towards next year. That's why we think it's inevitable that at some point in time, this slowdown will happen, and especially given the level of indebtedness of family, it can be a macro, a more complicated cycle. Nothing disastrous, but we just have to realize that we're living a very benign environment, very low unemployment, strong income levels. We're also living something interesting, and you can see that we are focusing on collateralized credits because we think there is also a lot of micro things happening in the consumer credit market.

Speaker #1: This accelerated with the electoral cycle to a very strong levels, which we don't believe are sustainable in towards next year. That's why we think it's inevitable that at some point in time, this slowdown will happen and especially given the level of indebtedness of family, it can be a macro, a more complicated cycle.

Speaker #1: Nothing disastrous, but we just have to realize that we're living in a very benign environment. Very low unemployment, strong income levels, but we're also living something interesting.

Speaker #1: And you can see that we are focusing on collateralized credits because we think there's also a lot of micro things happening in the consumer credit market.

Speaker #1: For example, we think these private payroll loan creations are something that drastically change how you underwrite clean credit. And for us, it's still not clear how to underwrite this.

Renato Cohn: For example, we think this private payroll loan creation is something that changes drastically how you underwrite clean credit. For us, it's still not clear how to underwrite this. As you can see, we're not growing clean credit and consumer finance because we don't feel confident to what the future will be like, because we think the future is very different than the past. Because the past, you did not have these private payroll loans, for example. Even in private payroll, it's not a product that you underwrite generically. There's a lot of modeling that goes into the corporate risk, the employment risk, the re-employment risk, now the guarantees. So there's a lot of complexity here that also affects the scenario of credit underwriting, which is not only the macro. Just going back to your first point is, what we think has pushed this

Speaker #1: As you can see, we're not growing clean credit in consumer finance because we don't feel confident to what the future will be like because we think the future is very different than the past.

Speaker #1: Because in the past, you did not have these private payroll loans, for example. And even in private payroll, it's not a product that you underwrite generically.

Speaker #1: There's a lot of modeling that goes into the corporate risk, the employment risk, the re-employment risk, and now the guarantees, so there's a lot of complexity here.

Speaker #1: That also affects the scenario of credit underwriting, which is not only the macro. But just going back to your first point, if anything, what we think has pushed this further, or delayed what we saw as an expected deterioration, has been the increase in fiscal spending.

Jorge Kuri: Further or delayed what we saw as unexpected deterioration has been the increase in fiscal spending. Great. Thank you very much, Aldemir. Congrats again. Thank you.

Speaker #10: Great. Thank you very much, Saluti. Congrats again.

Jorge Kuri: Great. Thank you very much, Aldemir. Congrats again.

Speaker #1: Thank you.

Jorge Kuri: Thank you.

Speaker #2: The next question comes from Marcelo Mizrahi. Please go ahead.

Operator: The next question comes from Marcelo Mizrahi. Please go ahead.

Speaker #9: Thank you. Another one. Regarding provisions on private payroll, so we are seeing a lot of discussions regarding the right levels of provisions and unexpected provisions.

Marcelo Mizrahi: Thank you. Another one regarding provisions on private payroll. We are seeing a lot of discussions regarding the right levels of provisions or unexpected provisions on these products. Can you share with us the levels of delinquency of BTG on this portfolio and also the levels of provisions that you guys are doing right now? Thank you.

Speaker #9: On this product, can you share with us the levels of delinquency of BTG on this portfolio, and also the levels of provisions that you guys are doing right now?

Speaker #9: Thank you.

Speaker #10: Hi, Marcelo. No, I think we are adequately provided using central bank 4966 rules. With the initial provision of expected loans, right, that we do at the origination process and then following the process with the table when if this product become deliquenty.

Renato Cohn: Hi, Marcelo. No, I think we are adequately provided using CMN Resolution 4,966 rules with the initial provision of expected loans that we do at the origination process, and then following the process with the table when, if these products become delinquent. But I think we are adequately provided there.

Speaker #10: But I think we are adequately provided there.

Speaker #9: In terms of delinquency on this product, the portfolio is controlled or is becoming a more risky portfolio or become better?

Marcelo Mizrahi: In terms of delinquency on this product, Cohn, the portfolio is controlled or is becoming a more risky portfolio or become better?

Speaker #1: Well, actually, the performance of the portfolio has been better than we expected. Especially on the re-employment which was something that we have not modeled initially.

Renato Cohn: Actually, the performance of the portfolio has been better than we expected, especially on the re-employment, which was something that we have not modeled initially. It has been happening, and faster than we expected. If anything, the performance of the portfolio has been better than what we had expected initially.

Speaker #1: It has been happening, and faster than we expected. So if anything, the performance of the portfolio has been better than what we had expected initially.

Speaker #9: Thank you, guys.

Marcelo Mizrahi: Thank you, guys.

Speaker #10: Thank you.

Renato Cohn: Thank you. Thank you.

Speaker #1: Thank you.

Speaker #2: Thank you all very much. That brings us to the end of the question-and-answer session. I will now return the floor to Mr. Roberto Sallouti for his closing remarks.

Operator: Thank you all very much. That brings us to the end of the question and answer session. I will now return the floor to Mr. Roberto Sallouti for his closing remarks.

Speaker #1: Well, thank you very much for joining us for our quarterly call. We hope to see you all at the end of the third quarter.

Roberto Sallouti: Well, thank you very much for joining us for our quarterly call. We hope to see you all at the end of Q3. Thank you very much. Have a great week.

Speaker #1: Thank you very much. Have a great week.

Operator: Thank you. This concludes today's presentation. You may now disconnect your line at this time. Have a nice day.

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