Itau Unibanco Holding S.A.

hello good morning everyone my name is gustavo and it's a pleasure to have you with us for our second quarter of 2025 earnings video conference as always milton will soon walk you through our performance and afterwards we'll open the floor for a q a session where analysts and investors will be able to interact with us directly but before handing over to milton i'd like to share a few instructions to help you make the most of today's event For those accessing this video conference via our website, there are three audio options available on your screen, the entire content in Portuguese, the entire content in English, or the original audio. The first two options offer simultaneous translation. To select your preferred option, simply click on the flag icon in the upper left corner of your screen. Questions can also be submitted via WhatsApp to the number displayed on your screen. Today's presentation is also available for download on the Hot Site, and as always, on our Investor Relations website. With that, I'll now hand over to Milton, and I'll see you again shortly for the Q&A session. Milton, over to you.

Good morning, everyone. It's a pleasure to be here with you once again to discuss our second quarter 2025 results. Today, I will present an executive overview focused on our results and provide a brief update on our guidance. I will also share with you an update on the One Itaú initiative as I promised on our last quarter earnings video call. I will comment on our migration agenda and on the bank's digital acceleration process. Finally, I will share some key figures and wrap up with an invitation to all of you. Let's move on to the numbers. As you can see, we're presenting the same key indicators as always. Recurring managerial net income, recurring managerial return on equity, NII with clients, NIM, NPL over 90 days, and common equity tier one ratio. Starting with our results. This quarter, we delivered net income of R11.5 billion, representing a 3.4% increase over the first quarter and a 14.3% increase year-over-year. These are very strong results, stemming from a solid performance base established over recent years. As a result, our consolidated ROE reached 23.3%, expanding both quarter-over-quarter and year-over-year. In Brazil, ROE was 24.4%, a robust return also showing expansion over both comparative periods. As always, I would like to note that if we were operating with a capital ratio of 11.5%, which is roughly in line with market practice and our board's approved risk appetite, our consolidated ROE would be 24.7%, and in Brazil, the most comparable figure would be an ROE of 26.1%. This is detailed in the slide's footnote. How did we achieve this result? First, it was a very strong quarter for NII with clients, with a 3.1% increase over the previous quarter and 15.4% growth year over year. I will provide more details on NII shortly. NIM also expanded significantly, both sequentially and year over year, reaching 9.2 percent on a consolidated basis and 10 percent in brazil we have not reached double-digit name in brazil since before the covert pandemic in other words since 2019 underscoring a significant margin recovery for the bank's balance sheet over these years delinquency rates remained well behaved consolidated npl over 90 days stood at 1.9 percent and reached 2.0 percent in brazil this indicator is stable quarter over quarter and is down year over year indicating that despite some first quarter pressure and short-term delinquencies, we performed very well this second quarter in long-term overdue loans, a very positive development for the portfolio. The common equity tier ratio posted another solid increase, up 50 basis points quarter over quarter already adjusted for IOC provisions and some risk-weighted asset effects, but that were immaterial. Thus, we see a 50 basis points expansion in common equity quarter over quarter and flat year over year. This is excellent news for capital generation and it shows our ability to generate capital organically, another very positive sign. Moving on to the loan portfolio, I want to highlight that the individual loan book grew 8.0% year over year and 0.7% in the quarter, with a notable 1.6% quarterly increase in credit card loans. More important than total credit card loan book growth is the finance credit card portfolio growth, which I will address specifically. Regarding personal loans, it's crucial to break down this number because it includes products like unsecured credit lines and overdrafts, as well as debt renegotiation products. Breaking it down is key to understanding the quality of growth and how each credit line performed in the quarter. I will provide more detail on this shortly. Payroll loans underperformed this quarter due to multiple factors. The payroll loans for INSS beneficiaries dynamic was impacted by both the cap on interest rates and funding costs, as well as by a process change in originations. Private payroll loans are advancing gradually due to ongoing product process improvement. I'm positive that there will be questions on this in the Q&A session. In auto loans, risk management is key, and the portfolio continues to perform very well. Both credit card and auto loan portfolios are outperforming market benchmarks for the national financial system. Effective risk management discipline is essential here. The mortgage loan book grew 2.1% in the quarter and 17.2% year-over-year, further demonstrating our capacity to expand such an important credit line for our clients. The SME's loan portfolio grew 0.8% in the quarter. I will provide more details on the quarter growth and on the performance of what we classify as small companies in a little while. The large company's portfolio grew 1.4% in the quarter and 6.4% year-over-year. It is worth noting that the loan book in Brazil grew 1.0%, while in Latin America the portfolio declined 2.3%, a clear effect of the appreciation of the Brazilian real against other currencies. The total credit portfolio grew 0.4% in the quarter, and excluding the FX impact, it would have grown 1.3%. For large companies, the 1.4% quarterly growth would have been 2.3%, excluding the FX impact. This breakdown provides an insight into the impact of FX fluctuations. In previous quarters, we have noticed the impact of the Brazilian real depreciation. However, this quarter, the Brazilian real appreciated versus other currencies. Those are the main messages. Let me provide further details on the loan book performance. The finance credit card portfolio grew 5.4% in the quarter and 6.1% year over year. It's worth highlighting that 100% of annual growth came from the uniclass and personality segments. There are several reasons for this, some of which I will detail later, but primarily it's about new products and solutions in cards that have supported the expansion in the finance credit card lines. For personal loans, breaking down the figures is critical, as I've said. Unsecured credit portfolio, including installments and overdrafts, posted a 1.1% quarterly increase and 12.1% yearly growth, and 83% of this growth comes from uniclass and personality segments. Mid and high income clients with great credit quality. Debt composition in terms of an analogy would be the bad cholesterol, while unsecured credit would be the good cholesterol. Debt composition or the bad cholesterol posted a 3.8% reduction in the quarter and a 12.6% annual drop. Thus, tracking this breakdown is essential to understanding the personal loan portfolio dynamic. Moving on to SMEs, we see that small businesses grew 5.4% in the quarter. Government program volumes grew 21.7% in the quarter with very sound credit quality. Over recent months, we've become highly skilled in operating these programs, generating positive results and expanding net financial margin for the segment, a very positive outcome as well. Now let's talk about NII and NIEM. First, focusing on NII, then on annualized average margins. In client NII, we exclude the working capital effect, which was 4 billion Riyals last quarter and 3.8 billion Riyals this quarter. I would like to remind you that last quarter there was a significant additional dividend distributions, which reduced the shareholders' equity and explains the difference in working capital margin. What's most important is that all core margin lines contributed positively. The average volume contributed by 200 million reais. Product mix and segment mix added another 300 million reais. Spreads and liability margins are posting very strong results, with our investment franchise delivering extraordinary results. The calendar effect of one additional day also contributed positively, and Latin America and others added 100 million reais in the quarter. This resulted in core margin expanding 4.5% in the quarter, or 1.1 billion reais, a very positive performance. Moving on to NIMH, the first message is that NIMH continues to expand sequentially, reaching 9.2% this quarter, the highest in the historic series. As we always say, it's important to analyze risk-adjusted NIM since the hard figure may be misleading. On a risk-adjusted basis, NIM reached 6.3%, a significant expansion in the quarter. In Brazil, NIM hit double digits this quarter, a level we've not seen for many quarters. Risk-adjusted NIM was also the best in the series at 6.9%. showing that we've managed to expand margins while maintaining strong credit quality. In summary, net financial margin this quarter posted the strongest and most solid expansion to date. Moving on to market and I.I., let me take a moment to focus on this slide. We posted very strong results in the quarter, exceeding our expectations. It's always challenging to forecast trading results, which were outstanding this quarter and contributed to a very solid overall outcome. On the other hand, the cost for hedging the capital index, which is easier to forecast, is expected to increase in the coming quarters, as we mentioned last quarter. This is the impact of the interest rate gap. The 2025 guidance for NII with the market is a range between 1 and 3 billion reais. Thus, 2 billion reais is the midpoint of the guidance. In the first half of the year, NII with the market reached 1.8 billion reais. It is still hard to forecast market NII performance, especially in trading. but we've seen very positive results so far, and we're reaffirming our guidance as the range fits our best estimates. If there are any updates, we will discuss it again, and I will provide more details when addressing the guidance framework later on this presentation. The cost for hedging the capital index is expected to continue expanding over the coming quarters. Moving on to service fee income, I would like to highlight a few lines. Card issuance revenues are growing 4.5% year over year, with TPV performing well, directly impacting interchange revenue. In the asset management business, I want to emphasize the growth in revenues from 1.7 to 1.9 billion Riyals. We had a very strong and solid performance fee, significantly better than last year, leading to a 17.5% annual increase, a sound result. In advisory and brokerage services, revenues declined both quarter over quarter and year over year, mainly explained by DCM activities. Last year, in the same quarter, we experienced the best DCM quarter in the bank's history. Although we maintained significant market share and a strong position in the rankings, due to lower activity and fewer transactions, we naturally captured less revenue. Another noteworthy line is the insurance, pension, and capitalization businesses, which grew 8.8% in the quarter and 17.3% year over year. This shows that our operation has delivered very solid results, more than doubled earnings over recent years, and is keeping growth at a robust pace. I will provide further details on this shortly. In the asset management business, a positive highlight is the net inflow of 47.5 billion reais in the second quarter of 2025, a 30% increase compared to the second quarter of 2024, an outstanding result. Itaú Asset was the leading asset manager in terms of performance fees this quarter. We are growing not only through distribution capacity, but also through value creation, delivering sound performance to our clients and improving performance fees, a very robust outcome. Moving next to insurance, earned premiums are up 14.6% year over year, with significant expansion in the quarter. Recurring insurance income grew 7.7% in the quarter and 25.2% year over year. Our core insurance operation, Bank Assurance, continues to expand at a very favorable pace, with growth concentrated mainly in personal accident and credit insurance, underscoring the recurring and solid nature of these results. Moving on to credit quality, I will first address short-term delinquency, followed by long-term delinquency, Short-term delinquency indicators are very positive, showing delinquency is well controlled. Overall, NPL 15 to 90 days posted a slight 10 basis points decrease, and so did the indicator for the Brazilian operation. In Latin America, we had only isolated cases impacting the quarter, with very low volatility and no further concerns. Alongside, we have the indicator including corporate securities, in compliance with Resolution 4966, which we will continue to monitor closely. The chart contains extensive information, but this is due to the limited historical data available under the new regulation. I expect that within another quarter, we will be able to provide more comprehensive insights for monitoring. The direction remains consistent with the main change being in the information level, particularly in Brazil, where corporate securities are more relevant. The short-term delinquency ratio for individuals in Brazil dropped 10 basis points quarter over quarter, and there is no corporate securities effect in this portfolio. For SMEs, the credit quality remains healthy, and NPL was flat in the quarter at 1.4% considering the credit-only portfolio, and flat at 1.2% when adding corporate securities to the credit portfolio. So the trend is the same, but the absolute level changes. I would like to remind you of some information I shared last quarter. A significant portion of the growth in the SMEs portfolio came from government-sponsored products. Most of this portfolio is currently under a grace period, which benefits the denominator with the loan portfolio increase, while the numerator is not impacted by the amount of overdue payments, since under the grace period no installments are due yet, resulting in a temporary indicator benefit. We expect this to normalize over the coming quarters in both short- and long-term overdue loans, with no cause for concern. Therefore, a slight uptick is expected for the SMEs portfolio, which shows remarkable credit quality and no credit risk concerns. We have reaffirmed the cost of credit guidance. The main reason why we are highlighting the expectation of NPL growth is to be very transparent regarding our expectations going forward. Analyzing long-term credit quality, the news is equally positive with very well-controlled indicators. we did not experience significant rollovers from the first to the second quarter, which is typically seasonal. In Brazil, despite a slight increase in NPL creation, loan portfolio growth resulted in stable indicators, which is very positive. For SMEs, the earlier comment regarding gradual normalization over the coming quarters applies. As short-term overdue loans mature, they will eventually impact long-term delinquency ratio as grace periods expire. Another credit portfolio indicator that we are monitoring is the loan book by stage and coverage by stage for both stages two and three. In stage two, there are no material concerns. as movements largely reflect the mechanical rollover from short-term overdue loans in line with expectations and without any significant issues in either loan portfolio or coverage. Stage 2 is expected to slightly decline this quarter. This mechanical rollover impacted Stage 3 for individuals. There is a dual effect. The coverage ratio drops in Stage 3 for individuals, since loans recently entered into Stage 3 tend to be provisioned at a slightly lower rate compared to those exiting it via write-off, even though provision is made by expected lifetime loss. As there were more entries than exits in this stage, coverage mathematically drops. For large companies, the opposite trend was posted. Coverage increased because we sold a credit portfolio in Stage 3 at a lower-than-average provisioning ratio due to its strong collaterals. This sale removed the loan with lower provisions from the portfolio, improving overall coverage as the remaining loans have higher average provisions due to their credit risk profile. As a result, we have seen a significant reduction in restructured loan portfolios. We continue to provide ample transparency regarding renegotiated and restructured portfolios. This is a relevant figure to monitor, as it demonstrates our progress and ongoing evolution. There was a R$1.1 billion reduction in the quarter, driven by both restructured and renegotiated portfolios. Credit and securities renegotiated portfolio decreased from 40.1 billion reais to 38.8 billion reais, posting a healthy trend in both renegotiated and restructured categories. The combined effect of all these indicators is very well-behaved cost of credit, with only a slight nominal increase as the loan portfolio grows. We should analyze the cost of credit growth compared with the loan book growth. The annualized cost of credit over the loan portfolio remained flat at 2.7%, which is a very healthy portfolio with an indicator far below historical average. All in all, we are growing the loan portfolio with high-quality assets, resulting in a robust credit performance across all segments, a highly positive outcome. Regarding non-interest expenses, we posted an 8.7% increase in Brazil, when comparing the first half of 2025 to the first half of 2024, and a 9.2% increase on a yearly basis. Personnel and transactional expenses remain very well controlled lines. The bank continues to deliver solid and growing results, which impacts many of these lines, whether through higher transaction volumes or an increase in variable compensation. In terms of technology expenses, we continue to invest heavily in business, technology, products and solutions to meet client needs and make the bank increasingly efficient and modern. This has been the prevailing trend. And most importantly, all of this was delivered 100% within budget, meaning every initiative was fully aligned with our financial planning. This underscores our ability to forecast and manage the bank's cost structure with discipline and precision. When we look at the half-year comparisons, we observe another positive evolution in our efficiency ratio, which declined to 36.4% in Brazil in the first half of 2025, compared to 37.0% in the first half of 2024. On a consolidated basis, the ratio was 38.5% in the first half of 2024 and now stands at 38.4%. This represents another relevant improvement in our efficiency levels, demonstrating that the tech capex continues to translate into efficiency gains and solid and sustainable results. Moving on to capital, net income, already adjusted for the full provision of interest on equity, which alone would imply a payout ratio of approximately 32%, generated a capital increase of 60 basis points in the quarter, Risk-weighted assets had an immaterial impact during the period, so we expanded our CET1 ratio to 13.1%, with AT1 at 1.5%. Although our AT1 is structurally higher, Basel regulations cap our AT1 contribution at 1.5%. We just announced the call option on two perpetual foreign currency debt instruments, totaling approximately 1.5 billion U.S. dollars in two tranches of U.S. dollars, 750 million each, alongside our second quarter 25 earnings release yesterday. Due to this call option, our AT1 ratio should converge to approximately 1.3%, which remains fully aligned with our capital appetite. This was feasible because of our liability management. We issued approximately 5 billion reais in perpetual debt in the local market, which enabled us to exercise the call option on these instruments and repurchase them. Again, the notice to the market on this was released yesterday. Moving on to our 2025 guidance. we are reaffirming our expectation for credit portfolio growth, NII with the market, cost of credit, fee income growth, and non-interest expense growth. However, we are updating our expectations for NII with clients' growth since we are posting stronger growth than originally expected. Accordingly, the range previously set was between 7.5% and 11.5% and now has been updated to between 11% and 14%. The lower end of the new guidance is nearly equivalent to the top end of the previous range, This is a very positive development for NII with clients. On the other hand, given the higher earnings, the benefit from interest on capital is diluted, resulting in an increase in the bank's effective tax rate. In addition to that, we've been posting a higher share of earnings coming from banking operations versus non-financial entities. Together, these effects lead to a slight upward revision in our effective tax rate. from the previous range between 27% and 29%, to a new range between 28.5% and 30.5%. These are the two updates we are making to the 2025 guidance this quarter. Last quarter, many of you asked me about the performance of One Itaú and whether we had any data to share. As I've mentioned before, we are in the midst of a critical migration phase, and our focus remains on executing this transition carefully, ensuring a smooth and client-centric experience. We now have solid data to share, not only from the One Itaú initiative, but also from our broader digital acceleration agenda, including product delivery, solution development, and clients' problems resolution. Over 10 million clients have already migrated to the One Itaú platform, with an NPS of 80 points and a conversion rate of 99.3%, well above expectations. Notably, 54% of these clients already hold three or more products with the bank, reflecting our successful transition from a monoline offering to a full bank proposition. This shift has led to a 32% increase in engagement among this client base as they adopted the full bank offering. These are very encouraging results. We are enhancing the user experience in the Super App and improving results. Over the past 18 months, we have launched 19 key products and posted a 25% increase in Super App usage per client. This has significantly boosted frequency, activation and engagement across our digital channels. For example, our recently launched digital savings feature called Cofrinho or Piggy Bank reached a balance of 13 billion Riyals in less than 90 days with an NPS of 93 points. It's important to highlight that most of these funds came from a deeper client relationship. Our expense tracking tool launched less than 90 days ago already has 1.8 million active users and an NPS of 85 points. Interestingly, 57% of users were unaware of their largest spending categories, highlighting our ability to address client pain points and promote financial education. This drives engagement, strengthens relationships, and increases long-term client lifetime value. We now have 15% of our uniclass and personality client base using PixCredit, which is a very positive development. This functionality has contributed meaningfully to the growth in our finance credit portfolio. Over 13 billion reais in credit limits have been reallocated across cards, allowing clients to define their preferred limits and products. This flexibility has led to over 20% transactional growth in the past three months. Once again, this demonstrates how well-designed digital offerings can radically improve product adoption. Digital origination of loans, including personal loans and payroll loans, grew 31% compared to second quarter 2024. This emphasizes digital origination is improving significantly. Origination of daily financing, such as PIX credit, overdraft limit, paying bills and credit card installment plan, grew 72% versus second quarter 2024. These results reflect the impact of our investments in technology and modernization. These are very positive results, and we decided to share them with you. On the AI front, we've deployed over 500 internal use cases focused on efficiency and productivity. We've launched PIX via WhatsApp for our entire client base, powered by AI and transactional capabilities. Enabling self-service through intelligent automation. We are making significant progress in both investments and picks. Transactionality is key to scaling our models. If you're a client, try it. You will see the results yourself. Regarding investment advisory, we've launched a 24-7 AI-powered investment specialist pilot, already serving 10,000 clients. As results evolve, we will expand this solution to a broader base. This is a fully scalable advisory model. As I always say, having good AI technology is necessary, but not sufficient. What truly matters is combining technological know-how with deep expertise in investment products and solutions, which has always been a core strength of the bank. Our investment front has always been robust. Our understanding of client behavior, economic cycles, and solution design is what powers what we call Itaú intelligence. Technology alone, without domain expertise, does not deliver outstanding results. And I believe we've been able to do this in a differentiated way within the industry. To wrap up, I would like to invite you to Itaú Day, which will take place on September 2nd, from 9 a.m. to 12 p.m., Brazilian time. This is an event we host for clients, investors, employees and competitors, where we share more about our journey and strategy, and all members of the executive committee join the event. So there's our invitation, and I hope to see you soon. We close another quarter posting very solid results, strong across all lines, with high quality, and most importantly, with a long-term view across the balance sheet. We truly believe in long-term management. We must continue to follow our mantra, capital allocation, portfolio management, resilience, and consistency. That's what underpins the numbers you've seen so far. It's a highly entrepreneurial environment. where people are energized, results are growing, and we're building remarkable things. I am very excited about what we've been able to accomplish without ignoring the challenges ahead. Let's talk more about this. And now I will join Gustavo for our traditional Q&A session. Thank you for your trust and for being here. See you soon.

Good morning.

We're back and directly from the studio for the Q&A session. Before we start, I'd like to remind you that this is a two-language session. We will answer the questions in the language that you asked the question. And if you need support for the translation, through our platform, we continue to give you the option to choose the original audio, English or Portuguese. And you can submit your questions via WhatsApp on the link that is on the screen. We have Milton here and Gabriel. He is here, the CFO. Welcome to both. and let's go to the first question that comes from daniel vas from safra bank daniel good morning everyone congratulations on the results excellent cash generation i think that the bank is very well positioned for the distribution of dividends for the shareholders and there is a capacity i saw the headlines but anyway i wanted to discuss another thing the network we see the interest over capital growing seven and a half percent We see the issuance number and the issuance of Itaú closer to five, Bradesco and Santander as well.

So, very close.

So we can see the inference of the market that you're gaining market share over the last few months. I wanted to understand that strategy. What is the direction? How can you be more competitive and how can you achieve a directed offering for a specific client so we can try and capture that strategy? And once again, congratulations on the result. thank you daniel it's a pleasure to have you here thank you for your initial words well ready network we have less uh we have we haven't talked about the results i saw in an isolated way because we i integrated ready network into the strategy of the bank it's uh it's a flow overview the tpv of the market of credit cards and tpv of the flow the market of credit cards is four percent of the tpv of the flow so for us it's much more important to see the full offer the vision of the client and this is the overview that we have here evidently we see the other indicators but the result of radar is distributed into the results as we publish we blocked the pay the paid and the receivables and we have the result of flex and mdr which is what you see here the rental but result of rav and the cost the financial cost of rev is in the margin for the client so the result is always difficult to try and understand how the take rate the result is with this overview The market share for us is not an objective. I always reinforce this issue. Market share is a consequence of everything that we do and everything that we believe in. Because once we focus on the correct client with the correct price and the holistic vision of the relationship as a whole, the consequence is the market share. So we don't do a management where we've seen a few cases where you get in with the result of the margin, contribution margin that is negative, but actually that's rental of the market share because the market share comes from big names, but it doesn't reflect into the result at the end of the day. And sometimes it's a detractor of this result. So we have, by consequence of everything that we've done, we are leaders, but we don't have to be the leaders. That's not an issue for us. The cost of the volume for market share should be concentrated on the big numbers, the big names, where the contributions are much lower. The margins are very tight, and sometimes we see contribution margins that are negative for the operation. So we continue with the strategy. Integration is a success. We are happy with the results. The way that the commercial teams articulate on the acquiring business, acquireance is nothing more than the additional receivables of the other ways that the client has to receive. So this is the way that we manage the business, and it brings a natural result, such as the flow creates value, and we continue to be very focused in our share of cash, penetration share of payments. That's how we see the relationship with the client. Now let's go to the second question. Renato Meloni Autonomous.

Good morning, Renato.

We do not hear you.

Hi, sorry.

Congratulations on the results once again. Thank you for the opportunity to ask a question. Well, I wanted to talk about the portfolio of finance credit, which is growing. It's very interesting. It's growing beyond the total portfolio of credit cards, and you're focusing more on the personality and unit class base, and you're improving the profitability of your portfolio without increasing your credit risk. So, I wanted to understand. Which are the initiatives of these new products that you are developing and deploying in this segment? And thereafter, I want to understand if that's a relevant contribution for your clients in this quarter, and does this continue throughout the year? Thank you. Thank you, Renato. Thank you for the opportunity to have you here. We've seen a healthy evolution in this quarter, specifically with the margin with the client. We've seen an important contribution. It's a set of factors, the margin of the credit card, the finance credit card is a component, but it's not a single one. So that's why we want to open the personal credit card portfolio to see that the rotation credit is doing well. there is a seasonality because when you see the expenses over the last quarters and the rollouts from the first to the second one, there is a propensity to the higher financing. This is an aspect. Second aspect is everything that we've discussed on the evolution of the journey of our clients. So when we can penetrate these segments, such as Uniclass, specifically in Personnalité and this product, it shows how can we, in the context of the journey and the transaction of the client, give lives to digital products that are very important. The client is facing a purchase. Sometimes it is a short-term transaction. They can get a discount because they're going to pay in PIX, and it's important for them to finance that purchase in competitive conditions, and we have their rates according to the profile of the client, the segment. It's more of the profile than the segment in a way that we can personalize the offerings for the client. So this is what we've seen. Yes, there is an expansion of the PIX credit within a credit card. we understand that this is the best chassis in the context of the journey of the client and so this is a set of initiatives it contributes for the margin of the clients but when you see that breakdown for the clients there is average volume contributing there's liabilities contributing when we see exclusively the possibly the part of mix of products distribution certainly there is an impact there is an impact as well in the rotation and there is an impact positive impact for the mix which is the uh growth in uh the in regards to the middle, which we publish in the MPME. These are the three that contribute for an important margin with the client, and I think that we have a maturity level that is good in this quarter, and probably we're not going to see the same growth level for the next quarter, given that we've got to a maturity level that is very important this quarter, specifically with the margin with the client. It's expanding your question. We've seen an evolution, but there is a series of positive factors. the rotation of credit, the growth of the finance credit card, the growth of government, which has an expansion in the net margin. We had another business day, which is another impact we had in anticipation. of results of operations of wholesale that are structured and we would imagine that they would materialize in the second quarter and they anticipated so there is a set of positive factors up ahead this acceleration that we are observing in the quarter it doesn't come with the same intensity but regardless the guidance was seen again and we can fulfill at the end of the year a stronger result than originally planned thank you Thank you. Let's go to the third question, Mario Pieri, Bank of America. Good morning, everyone. Congratulations once again on the result. Milton, what really impresses me is you're delivering the results, generating a lot of capital, but the management is still not satisfied i mean you're always trying to improve what called my attention was the extraordinary expenses that you had in this quarter 600 million raised approximately in the restructuring so could you explore more um what are the measures what are you thinking i imagine that this is more for the reduction of the physical distribution of the bank but would you be able to anticipate to us a target a goal of efficiency thank you Well, Mario, thank you. Thank you for the initial words. I think that this point that you bring to the beginning is our culture, is a lot of the DNA of the organization, and this intensity of wanting to do better every day. We are never satisfied. We celebrate good results, but the celebration is short-term. The challenges are big. And we are looking to the future to try and overcome our expectations.

This is... Talking about this specific provision and efficiency, in fact, when we look at the amount of investments that the bank has been making over the years, this obviously leads us to an increasingly scalable platform, an increasingly digital platform, We have to extract and operate in pockets of credit that with a lower efficiency index, you can absorb more risk than what we can absorb in the status quo.

so i believe that we've done a provision for the structuring of the in the past it's non-recurring recurrent it's important to make this point drive this point through if we see in 2019 we're talking about 2025 if you do a provision with this characteristic these provisions are done when we look at a scenario up ahead and we see that we are in a period of adjusting of the harvest of the investments that were that were done in the past it's non-recurrent it's extraordinary certainly but we will continue to evolve in our digital agenda and a bit of the information that i brought to you the evolution of wanita which is a relevant embryo so we can advance more and more with the super app the results are incredible all the evolution of the digital acceleration allows us to be more uh ambitious in the plan and this is what we are discussing we're looking at efficiency we you see that we are getting to an efficiency level that is very competitive we can see some volatility in the efficiency level and the quarters up ahead because it's resulting naturally from revenue and cost but directionally we have to have a an index of efficiency in businesses that we need to be more competitive there are businesses that we are a global benchmark for efficiency specifically in the wholesale operations and in retail we see an operation we see an opportunity to evolve in the efficiency level well everybody has their homework to do it's not a challenge of one segment or the other we have different proportions we have evolved in this agenda gabriel he has been the leader of this effort in the organization it's not enough for just the finance it's an effort of the whole organization it's not just a project of one area is the work of everyone and every now we are in the phase of execution that is very strong we've been for many many years in the period of investment and now we are in a relevant phase of discussion and we've expected that we are going to advance in these restructurings over the next quarters and the next years. We don't give you a guidance of footprint because the footprint is a consequence of what our clients are demanding. It's natural that the flows are dropping and well we continue to adjust the footprint there is a reduction in the adjustment and we will adjust as necessary so we can understand the sustainability of these models the value proposition and the model of service for the client this is what we focused and certainly we will work and we'll continue to work on this provision is an implementation that is the clearest example of that to continue moving forward with our plans and the implementation of this project thank you for the question mario now we will continue with yuri fernandez jp morgan the floor is yours good morning everyone congratulations thank you gustavo another result that is very good on the capital I'm going to ask on physical, which is another variable of efficiency. Well, the only line of the bank that is weaker, the digital, but I understand the logic. I think that we have the revenue of the checking account. It has been dropped. It's dropping. So how much? How much stabilization should we see in the checking account? This is a line that is weaker. You have some nice data on the, well, the consortium is doing well, the insurance is doing well. So I wanted to understand the improvement of efficiency in their plan. the stabilization in the line of FIS, sorry, and in retail and wholesale, on the opposite of what I thought, I thought it would be weaker, there is more wholesale than retail. So if you can comment the trajectory of this line, it would be great. Thank you. Thank you, Yuri. Thank you for the words and taking part of our call. I believe that here we need to break down the answer into a few chapters. The first one. transactionality we see in the retail that transactionality is still very strong i've discussed of the good cholesterol the bad cholesterol we see transactionality occurring in the issuance and the acquiring in the engagement of our products in the digital channel so we're increasing the volume in a consistent and important way there are two lines that i would say that they directly they fall through all time and that's why we be we change the way that we publish so we when we have terrace the checking account and we're talking about terrorism packages we are resignifying the packages it doesn't tend to zero because as you create value in the packages we can do that there is a charge for a package it's a different way to service a client but directionally we highlight that first relevant of this line in the quarter and secondly i think that it will continue to drop little by little when we look up ahead and we will re-signify the packages, but the deltas, the millions of reais for all the completion of the revenue of insurance, it's not that relevant. The percentages are higher because we're talking about smaller numbers. So what is the variation in this revenue? The percentages are higher. So when we look at credit card, it's always important to remember that here you have revenue of exchange, and you have the revenue of the invoice and we see that this is less relevant and we see the strategy we have to be careful because every time that you have the growth of terrorists that is relevant you are seeing this line and you have an adverse result in your base because the good clients that have access to good offerings will migrate if you have a good transactionality with the bank and a good relationship you end up bringing the client that are willing to pay for something that is not necessarily a capacity to increase the cross sale and engagement for the bank so this is we have to be careful when we look at the long term so uh yearly uh rates are dropping and we are uh we are working royalty program is so relevant because we see the credit card we need to see it in the context of the relationship then when we look at payments and repayment and receivables then you have the uh the companies you have the revenues you have ready you have payments you have the revenue of pix within the companies universe there is another logic of relationship has to do more with the flow and we've seen positive results so when we look at the wholesale there are two separations the economic uh the economic uh consultancy the result is weighted because we had a second quarter that is weaker because we had a second quarter that is historical in the past with the debt, so we need to be very strong with that, so there is less volumes in the market, and this quarter we've seen there is one operation that is more relevant, that has the characteristics that are our own, and the general volume is dropping 20%, so that affects naturally this line. On the other hand, if you discuss the administration of resources, consortia is doing very well, important growth year on year. And the second aspect are the profiles that we're doing very well. So we have a better profile in the market in the second quarter and the added value. And our best expectation is that in the fourth quarter we can deliver good profiles. But once again, it depends on the market and all the expenses that this brings. So when we look to insurance and the Social Security, we have great results, solid ones. important volumes that are growing the volume, and we need to see the performance fee, which is very solid with the added value. And insurance, insurance is growing very relevant. Year on year, 7%, 7.7, and we see in the quarter on quarter, so we see an expansion but it has to do with the activity as we see a smaller activity the data of the share of this business naturally we can feel more of what happened in this quarter the rest we think that we are performing very well in the lines it's important to look at the performance of the line but also thinking about the lifetime value of the client vision So, it's not just growing in the line. If you had a way of showing that we are growing in the rates of the checking account and natural persons or the yearly rates of credit cards, we would not be satisfied. So, we wouldn't be understanding the change in the market and the added value to improve the value proposition of the client and increase the engagement and the completeness of the relationship.

Thank you, Yuri. Now, we'll go to Bernardo Gutmann from XP. Good morning, Bernardo.

so congratulations gabriel gustavo milton congratulations on the results now my question is the roi per segment the profitability of the wholesale went over the retail for many many years so how can you think about and decompose these reversal in terms of segments that contributed the most for this operation more of a spread efficiency or even the improvement in the risk profile and how does the bank see the profitability of this differential of roi specifically considering the competitive environment and credit environment that is more selective in the second quarter thank you bernardo thank you for your kind words I think that in the third quarter of 2022, when we got to 16.4% of profitability in the retail, I said that we were not happy with that profitability. We were coming from a credit cycle that was tighter, was more difficult, but we would do a catch-up all throughout the next quarters. So here, there is a lot of work. There is a lot of effort. There is no silver bullet. Naturally, credit and the risking that we've done in the portfolio throughout the period, all the portfolio management focusing more and more resilient clients in longer cycles, all the digital journey of the bank, the delivery of value that we've shown, the evolution of the digital acceleration of PID, everything that we achieved. So when we look at retail, we look at an expansion of the net financial margins. Specifically, we have finance credit card that is evolving. We have the rotation of credit involving the funding in the next quarter. We see more pressure with the capped products. The cost of credit, it normally drops. at retail we you can see that we expanded the financial margin with the client dropping the cost of credit in a nominal way so the net financial margin is expanding this is the main driver our vision is that we think that yes there is a sustainability at this level of profitability there is some volatility is natural that it occurs we've had a quarter that we have the alignment of the start so to speak but within a profitability threshold that is very comfortable. The retail of the companies is evolving, and a great catch-up that was done was in the natural persons, that we in fact change the threshold of the, we create a value for the organization, the more volatile products we don't do, the management product oriented, but with profitabilities that are very high, creating very a lot of value so here is a set of values that that went to the same point and this is the result the we have an important driver for the profitability on the long term we are very focused on this and in the whole so we don't do the breakdown but i'm going to mention it because i think it's relevant when we think about brazil and latin we see that in brazil we are changing with the profitability center in this uh it's the sum of wms and itaubba when we highlight latam in this version we have an roi of 15.8 close to 16. so it creates a lot of value in that sense so it's very interesting to see that even though the uh retail has done the suspension the wholesale has delivered solid results about 30 percent in brazil and all the businesses that we're working so the advantage of having a portfolio that is diverse relevant and that we can naturally navigate through all on wholesale and retail performing with great profitabilities is the great advantage of having a new universal bank that is deep in all the businesses and has a market leadership in a great deal of the businesses that we work with thank you bernardo now we have enrique navarro santander brazil good morning congratulations on the results my question is about the portfolio corporate and we've seen uh some headwinds uh the iof in this quarter the dollar and even though you got some important growth in this portfolio so my question is where what is the dna of this growth is it capital markets where does it come from is it more aggressive policies what can we expect for the next quarters Thank you, Enrique. Great to see you again. Here, the effect of the exchange rate that you commented is very relevant. The portfolio has a lot of sensitivity to the foreign currency. The growth here also has a boom of operations that we put in the portfolio without changing the appetite. This is very important for the long-term vision for the strong portfolio management on the long term. And we have inside of Itaú Bebiá several segments of clients and companies. We've grown the portfolio there per quality and all of them, removing the foreign exchange effect. Of course, here we have agribusiness, which has a performance that is very highlighted. We've seen the middle, which has an effect of foreign exchange, but when we see S, foreign exchange grows. even though the companies grow, the SMEs grow, there is no silver bullet. All the segments we have penetration that is good and with the right price. We have a discipline of price that is very strong, prices in the sense of capital allocation. For the return of capital, allocated capital. So we see the accesses in the market, they occur, but we'd rather lose share than lose money and lose profitability. So we've been very disciplined. We don't see difficulties. We continue to grow this portfolio, the right price with the adequate profitability level and with the completeness of the relationship that we have with the clients. So the growth is very diversified, no big concentrations and no changes in the appetite. This is the most important thing. And that's why we decided to be more aggressive and taking more risk. No, it's the opposite. We're more cautious when we look at the challenges up ahead. the interest rates and the activities we continue to be very careful as needed thank you next question

Good morning, everyone.

Two questions that I believe that are interrelated. First, about the credit business. We've seen that they generated value through this period. ROI is above the cost of capital. And if I'm not wrong, historically, you've always indicated that the ROI had to be closer to the cost of capital and the access of return should be coming from the other lines. wholesale of retail is changing in the high high income so we would expand it we would expect that this number would go up and now what's that what happened and along with this question if with a future in the future with the improvement of efficiencies that you are indicating that are possible your risk appetite will increase would we see more opportunities of growth and you know even in the future we can reduce the payout so we can reinvest more and grow better with higher rois well thank you rosman it's a pleasure to see you again it's a nice well in fact it was a good quarter for credit because of the reason that i just commented the expansion of the margin it was very good the cost of credit very well behaved in the in the retail we've seen the cost of credit that is nominally dropping so this is a very relevant point we've seen a few doubts about the formation on the quarter, it's important to remember that we work with the expected loss in the bank. So, the main effect for the provisions is the short-term delay for the last quarter. When it goes to the long-term delays, the provisions have been already done. So, that's why the coverage level is not on the delay, And we had a provisioning on the formation, 120%. And it's even below 100 in the retail. It's 98. So the expected loss and the short-term delays, that's why I say opening for the short-term delay, because it's what's directing the expected loss of the balance sheet. Anything differently from that, you're operating in incurred losses and unexpected losses. So I just wanted to... and even though we see the formation align with the portfolio that we observed and within the volatility that is expected and seeing the seasonality in this quarter, first quarter, from the first to the second, the rollout of the short-term to the long-term delay, then it normalizes later. So I wanted to clarify with your question this aspect. This quarter was very solid in net financial margin. The credit is performing very well. In fact, the cost of capital, if you see, it's closer to 15. So since we're looking at an average ROI and cost of capital, it creates value. If we operated with 15 and the average in the whole quarter, we would be slightly below in the cost of capital. So here, you're always running against the cost of capital. So it depends on the interest rate cycle in Brazil, it depends on the COI, cost of equity of the bank on the long term, and that's what's going to determine. With all the agenda of efficiencies, and we still believe that working close to the cost of capital is the ideal, so we can achieve naturally penetrated with the relationship with our clients and of course it varies from segment to segment but it has to do with what we produced of credit over the last year that has been very good quality positive for the value creation so the positive trend for the creation of credit as well about the efficiency level that you discussed Certainly, when we adjust the efficiency level index, it's going to open for space for credit operations that do not have the necessary profitability so we can, in fact, get into different public sector that we don't get in because of that reason, because of the limitation of the efficiency level. So, this is the direction that we're headed. Our objective is not a big payout. Our objective is to reinvest the capital of the bank in adequate profitability and distribute via access that we shouldn't use. So, with all the migration of One Itawe and all the advances that we're doing in the natural persons specifically, and all the expectation of the expectation of the efficiency level, this will allow us to get into pockets that we explore very little and clients that we subservice or we cannot service at all in an integrated way. So this is a great opportunity for growth. Juanita is bringing that. We are advancing in the efficiency level, certainly, and we're going to have space to grow in these portfolios. Next question with Tiago Batista, UBS. good morning good morning gustavo good morning milton gabriel i'm going to do a follow-up on the question of rosman and mario on efficiency are you comfortable that today your app not one at all but the uh retail uh app is state-of-the-art to the point that the that the branches are secondary to the relationship with the client So it's a question about asset quality. And, you know, you're very comfortable with the evolution of the quality of the portfolio in the second quarter and potentially until next year. Do you think that that's a specific factor that is just yours that you could focus in more, in better clients? Or for the market as a whole, would you think that this is the same for the portfolios or the asset quality? It's not a niche thinking about the second semester. uh thank you chavo great to see you again i'm going to start by the second one and i'm going to answer both but hear about the cost of credit That has to do with the clear strategy of the bank of doing a portfolio management with a long-term vision in the wholesale and retail. So we see very little hiccups and volatility in the numbers. And when you see the management for the long-term cycle, you can have a better control for the quality of credit. You define the publics, you can clusterize the base, you can define the frontiers of the appetite for clusters. And in that sense, you're going to navigate in a less volatile way and in a more consistent way the worst thing that can happen with the credit relationship is the stop and go that you offer and then you have to stop abruptly the predictability of the of the client and the bank and the results i'm going to give you two indicators of the market and i'm not doing any sort of qualification But I believe that the performance has two indicators that I follow of delays, which is the system publishing, the credit card and vehicles. We've seen in the last quarter the long-term delays on the credit card growing 100 points in this quarter. So there can always be a discussion that the change of criteria of write-off hours grew 20. So when we compare with the performance of the market, we haven't seen any change of criteria in the write-off. We've seen a performance of the industry that is different from what we observed. And, you know, ballpark 20%, when you exclude it all from the sample, you see that the impact is more relevant than that. For vehicles, it's no different. We see that, well, vehicles can be a change of write-offs, policies of write-off. No, the short-term delay of vehicles is coming stronger than what we observed. Short-term delay doesn't have any relationship with the policies of write-off. so we continue to be very consistent we have gained shares with the clients that we publish the targets for the organization we've penetrated in an important way and we've grown two digits in this public this is a management strategy i believe that every bank has their own strategies their own policies their own criteria ours is this and it has been very consistent, specifically when you allocate capital in an incorrect way with the transaction, then you see profitability with the capital allocation, so this has been an important driver. The first point I wanted to highlight, I think that all the investments that we've done with the Super App, the digital journeys with the completeness, taking off transactionality, we don't want to make the client go to the branch they go if they want to go so all the digital uh transformation was necessary. If they want to stay in the super app or if they want to go to the branch and talk to the manager of an on-site or remote agent or a consultant of real estate or insurance, it's a decision of the client. We cannot oblige the client to use one channel or the other because of a lack of offering. So we try to offer all. We are very satisfied with the evolution of the Super App and we are looking at the NPS Absolute that is, it's drastically, we reduced the digital that had a higher NPS, so we are in the same arena, competitive arena for the cost of quality and with opportunities to continue to evolve. And to launch new products, we launched 19 new products And we've shown the results of some. And this is a new normal of the bank. It's not a project. It's not that we delivered a product. And it's engagement. It's activation. It's better penetration in the relationships. And this is a new normal of the bank. We're going to have a new bank, digital bank for the client. we have 70 million clients and within this public we have different profiles we have those that prefer the physical branch there are the specific publics for specific public demand remote service so this is the advantage we can service a client in all of the contexts and i am certain that the super app that we've done is going to be a facilitator for the evolution of the efficiency level of the retail segment Well, now we have Gustavo Schroeder from Citibank. Floor is yours. Hi, Gustavo. Thank you. Thank you, Gabriel. Congratulations on the solid results. We've discussed the strategy of the bank and about the private consignado, so the payroll loans, the private payroll loans. I wanted you to evaluate how you see the evolution of the product and how Itaú wants to position in the Consignado Privado private payroll loans. Well, thank you for the words and the participation in our call. Well, I believe that this is a product in evolutions. and we've seen this is a great idea it makes a lot of sense we see the portfolio as a whole of the product that is growing in the market and we're trying well we're growing in a 40 billion reais but it's limited to specific uh associations we always had 30 percent of that market so it's a market that we have a relevant participation but it's a small market it's a market that is growing so we see an evolution of portfolios all throughout the last months at the beginning there was more activity than because of operational issues risk aspects we've seen a deceleration when we talk about platform and organization the capacity technological capacity I believe that we are the first banks, along with Banco do Brasil, specifically mentioning another one, to get into this product of the big banks in this product, because of a sensitive reason. It's the capacity to adapt to the changes that were done. That's why we're here. We are right from the inception, and the advantage of taking part since the beginning is that we learn from this evolution of platform, not only the operational challenges, but we could define very well the strategy. Our strategy is very robust. We focused on the clear matrix of Publix that we want to service, in which way, We're going to grow, and we've grown with quality. There's weeks that we had 30% of the share of production. I think that in the accumulated, if I had to give you a number, it would be 11%, 12% of market share of production. And once again, focusing when we look at the target products, Publix is higher market share. There is a lot of non-people that don't have a bank account. And so the portfolio is growing. We've grown with adequate prices. If you look at the curve of prices in the market, we have the most competitive prices. There's talks about the quality of the clients that we penetrated with the product. And we're migrating from the old to the new product. and we're getting to production levels that are very good with a new product. So there is a ramp up that is demonstrated in the period, and today we are very well positioned, and we're very well structured, and we're very satisfied. We've seen two problems. Credit, which we've seen a level of delinquency that is higher, the full portfolio as a whole not in our case so it's tight and the way that we structure ourselves is true we have the breakdowns we have two installments payment and we saw two we we saw breakdowns on the on the payments from the first to the second one where we found a mechanism to advance even in these relationships given the profile of the client that we're working so we are excited with the evolution i believe and there is still a long ways ahead with the clients, with the companies, I have to adapt, Data Previs, CTPS, everybody is doing their homework. Nonetheless, I see a positive result. It doesn't really move the needle in a relevant way, but directionally, we are down the right path. Thank you, Milton. Now, the next question with Marcelo Mizhari. Thank you.

We don't hear you, Marcelo. Hi, everyone.

Thank you for the opportunity. My question, I wanted to go back to growth.

And I understand the message. Really, when we look at the line to line, We've seen several lines with weaker growth than what we've seen in the previous quarter in the natural persons and the credit card or the vehicle portfolio, and even the rhythm of the growth of SMEs is a bit slower. So about the guidance. When we look at the guidance, I think that the only line of the guidance that seems more at risk is the growth of portfolio. So I wanted you to tell us, you've reviewed the guidance, so it's stable in growth, and I imagine that having the level of trust that you have in regards to the middle point of the average, so we can understand what we can expect in the next quarters, and what is the portfolio that should help in this composition of the guidance. and now to continue with this question is the issue of the dividends it really gives you the impression that the payout the percentage can be higher in this year than last year i don't know if it's early to say this but i wanted you to share that thank you thank you for the question it's a pleasure to see you again i think you're right when you look at the realized and the projected And in fact, when we do a review of the guidance, we do a review line per line. So we revisited all lines, because if there is an information that is better available, then we want to correct whenever necessary. But in fact, when you look, apparently the biggest challenge is in the portfolio. you're right in this vision and even so we reaffirm the guidance so the best information that we have today has the effect of the foreign exchange uh that is important the real is is gaining value in regards to the other currencies and their plays against so it's a guidance of consolidated of the portfolio So the currency can explain a piece of the behavior. It's difficult to project the foreign exchange rate for the second semester if it's going to impact the growth of portfolio or not, but we continue to believe that all the segments in the way that we planned for this year and we've done the guidance will be able to deliver what is predicted in the guidance. We don't give point guidance. I'm not going to tell you if it's the middle point. We give you a range, and we still believe that the range is the best information, our best expectation for the growth of portfolio. Anything different from that, naturally, adjustments will be done. But we continue to be trusting that we can deliver the guidance with the information that we have. Now, it depends on scenario. It depends on cycle. It depends on demand. So we've seen a demand that is weaker with higher interest rates. So there are several factors that affect. And also it's well distributed. There is no specific segment. We continue to believe that we continue to grow in the natural persons. healthily in the companies in big companies as well in all the segments so with lesser degree with varying degrees but there isn't a specific segment that will perform better than the other so i believe that today we are within our expectations initial expectations this is the first point second point on the payouts uh so we don't give you a guidance of payouts so your question you asked if it's earlier yeah it is earlier but directionally what i wanted to tell you is the following we've grown capital with a lot of quality we've expanded the set one and one and a half percent 0.6 adjusted by the provision of the interest over capital so we are with a rhythm of cash capital generation that is very solid so the second semester is to the future we are going to expect to see how we're going to deliver the results for the next semester with the micro and macro scenarios and delivering solid results we have to sit down and see the projection what we expect of the growth of portfolio the opportunities of uh of investments naturally we're going to see our appetite we've seen uh 12 of set one plus for the distribution of in of interest and uh we have regulatory impacts the operational risk and credit rates that we paid the first installment we did the four times four payments without interest rates So in the first quarter of the next year, there's some impact with those projections we can collaborate well. The objective is not to retain the access. It's no longer extraordinary payments, so it's additional payments of dividends. So it's a recurrent as we generate a good base of capital. And this is the best expectation. And we're certainly going to have an additional payment with the same mechanism, with the same modeling that we've used for the payment of this year. from the standpoint of logic of distribution. And next year, with more information, we can detail to you. But we are positive in regards to that.

Now we're going to switch to English as we have Tito Labarta from Goldman Sachs with us. Tito, the floor is yours.

Great. Thanks, Gustavo. Hi, Milton. Gabriel, thank you for the call and taking my questions. And congratulations on the strong results. I guess my question is in terms of your maybe longer-term or sustainable profitability, right? I mean, ROE is very strong. You have excess capital, which you can return. You have room to improve efficiency. So, I mean, if we continue to extrapolate what you've been doing, ROE could – continue to go up, I don't know, 24, 25, and cycle can change, interest rates will move. But just to think, how do you think about the sustainable profitability? And I say that in the context of thinking about the competitive environment, right? I mean, you've de-risked on the lower income side. We have some very strong competitors there. A lot of the competitors are trying to get more into high income where I think you have a bit of a competitive advantage. Given this sort of changing competitive landscape, You continue to produce strong results. What do you think is a right level of sustainable ROV, you know, at least from a high level, just given all these moving parts that you have? Thank you.

Hi, Tito. Thank you for your initial words. Good to see you here. Thank you for coming. My view is that even though we don't guide ROE for the long term, we never did and we keep thinking that this is the best way to give you a right access about the way we are seeing the future. We believe that there are a lot of elements, as you said, so the macro is relevant, the level of activities is relevant, At the end of the day, the cost of equity is relevant because if there is a change in the long term in the cost of equity, we might see the ROE somehow behaving in a different way, but always looking to the capital gains, value creations that we have as our mantra here in the bank, the way we manage the organization. So I believe looking for this year, I think it's not so tough to say what I'm going to say, but the 20 plus is reasonable to expect. This somehow is implied in the guidance that we just adjusted. But we think we still have the capabilities and the levers to keep delivering good profitability for the bank. It's, of course, it depends on competition, and competition is It's tough. It's always tough in all the segments. We know we have a lot of very good banks working every day trying to grow in the segments when somehow we've been leading. But we believe that we have the capabilities we have the teams we have, the structure and all the investments we've been making throughout the years to compete very strong and to keep delivering a good position in all those segments where we are. So I don't see reasons why today with the information we have to see the profitability going under the levels that we've been delivering. I'm not guiding return on equity. Please don't take me wrong. I'm just saying that this level of profitability so far is sustainable. Let's see the coming quarters, what are the challenges we have for Brazil, for the macro, for the micro, for competition, for interest rate, for activity, all of them. have a relevant impact in the level of profitability. But I don't foresee up to now a reason why we cannot keep delivering good level of profitability.

Yeah. No, thank you. That's very fair.

We are going to keep the discussion in English as we have Nicolas Riva from Bank of America with us. Nicolas, good to see you. Please go ahead.

Okay, thanks Gustavo, good to see you as well, and also Milton and Gabriel. So Milton, I have a question on the 81s, and I think that you alluded to this a bit in your initial remarks. You announced that you're going to be calling both of your dollar 81s. My question is, I assume there's not going to be a $1.81 issuance at this point to replace the 55 basis points of capital, but please let me know if that's not correct. And then the second question, on the announcement you mentioned So you said the impact on total capital is 65 basis points from calling both of these 81s, but you distinguish between an impact on Tier 1, on 81, and on Tier 2 capital, and I wanted to ask what's the reason for the impact on Tier 2 if you're calling both 81s, and my understanding is that the 81s count 100% as 81 capital before and after the call date.

Yeah, no, it's completely right, Nicolas. There is no impact in Tier 2. So, to be very clear, what we did is a liability management, as we are seeing a good opportunity to issue in Brazil. So, we did almost 10 billion reais in issuances in this first semester. I would say more recently 5 billion reais in local AT1s. Very good market, deep market in a very good conditions. So, as the level of the capital of the bank is 13.1, We don't think we need to be full power in 81, 1.5. So we are very comfortable to go behind it. So after all those calls, the $700 million and the $750 million bonds, 81s, we should go below 1.5. Our best estimate is to be 1.3 and we are very comfortable with that. So, in the short term, with the market conditions we've been seeing, we don't anticipate going to the international market to do new issuances for AT1. Of course, if there is opportunity in Brazil at a good level of price, we may issue more, always looking to the restriction we have that is 1.5. Even though we fulfilled today with 81, we have almost 1.9, 1.8. in 81s, but we can only use the 1.5. That's why we release the figures the way I just made the presentation. So this is the way for the other ones that are maturing in Tier 2 that we have options and call options by the year end. It's still too early to anticipate what we're going to do, and we are going to take in consideration that the level of capital utilizations in the Tier 2, it's a relevant information to make the decision, either or not we have to call those bonds. Of course, when you are decreasing the level of capital utilizations in the Tier 2. So there is no impact in Tier 2, 100% 81, Tier 1, Level 1 capital, and this is what we've been calling and announcing today, yesterday, with the results figures.

Thank you very much. Now we go back to Portuguese with Inuardo Nishio from Genial. Nishio, the floor is yours. Congratulations. Thank you for the opportunity. Milton Gabriel Gustavo. Congratulations on the results. I have two questions. First, in regards to your mention of new pockets of credits, probably in the low income, And with the improvement of the natural persons, you see the indices improving a lot throughout the year. The improvement of Juanita Wu, Rollout. Reduction of footprint, are you revisiting the strategy of the massified? And what are we expecting? What is the reduction of cost? What is missing in this segment for you to move forward? And the second question is in regards to delinquency. We see in the industry of worsening, it's been a while, six months, half a year, that has been consistent in the industry and you have numbers that are very good. You expected a normalization throughout the year, but the natural persons is still very low. So I wanted you to know what is the main cause of this improvement vis-à-vis what you had before. Do you think that you improved? And can you stay a lot of time with this discrepancy in regards to the industry? Can you keep if the new harvests are still good enough for you to keep such a higher gap in regards to the industry? Well, thank you, Nishio. Pleasure to see you. Thank you for the initial words. Now, let me start by the second one. We don't see any reason with the information thereby available to have discontinuity on the credit looking up ahead. We're very comfortable with delinquency level. I talked about SME. The expectation is that this normalization can be 10, 20 basis points in the indicator of delays looking ahead, but within expectation. It's a mechanical issue of not having the delinquency and the portfolio growing. It produces a better indicator. When it normalizes, it goes back to the parameters that we expected before. But Brazil is cyclical. We need to look at the cycle, the activity. So, with the information that we have today, we kept the guidance of the cost of credit. We understand that this is the best information. We had an expansion in the net margin, and we've grown with quality. we don't see a reason that we shouldn't grow with quality all the harvests no deviation of what we have as a target audience so that portfolio long-term vision is determinant so we can continue to perform of course volatility can always come that happened in brazil we've seen it many many times I believe that our portfolio is much more resilient than what we had in the previous period. Given the diversification, the portfolio management, all the way that we've managed the portfolio in the wholesale and retail, it's a more resilient portfolio, less volatile than what we observed. we have a great penetration in credit cards that we are market leaders with a position of highlight in regards to the second uh place and even though we have products that are more volatile we've grown with quality and the target audiences in an important way and here we will not forego of a very aware conscientious balanced management to have short-term results, just to have short-term results, because then you pay for this cost of credit for two, three years. We want to have the decisions that are positive, and this is the way that we manage the balance of the bank, and we are comfortable. retail, wholesale, this is for everything. There is an interest in agribusiness, some doubts on the performance of agribusiness. Well, the segment, just to give you a zoom, I see that this is a segment that in the last few years has suffered. the price of commodities, tighter margins, climate issues that are never seen before in some regions, the cost of capture with the Selic rate going up. This is a sector that from previous years had extraordinary years, very strong years, and over the last few years, difficult years. But we've seen and we've heard in the market more volatility in our portfolio. Our portfolio from the management standpoint is very balanced. We are in all the agriculture, all relevant, very well selected agricultural distribution. with big clients of agribusiness, the rural producers that invoice higher volumes with higher invoicing very well define agricultural monocultures that we should be present and we are resilient and we've managed to perform our indicator show in a very healthy way regardless of the challenges and we have an agribusiness portfolio that is about 130 billion reais so when we look at the percentage of the rjs that we have in the market our market share is 5 with 130 billion reais in portfolio so we've managed to perform with a portfolio management that is very active and very careful with good penetration of guarantees in the segment in adequate cultures. So, I wanted to clarify this out about every business. So, the portfolio is very resilient and always subjected to changes in the scenario. That's it. About your first question, about the new pockets. Well, we're going step by step. Our objective is not just to open the credit. There is an evolution to capture in the efficiency level. The 1,800 is an embryo of this public that we can observe, and we can work with more emphasis, but this is a very qualified public of 1,800. We have uniclass, personality clients. It's not just low income in the old concept. These are incomes that you have this public included. We did a de-risk in the portfolio. position in more vulnerable uh publics it reduced the volatility as you have more comfort with the right efficiency level and we are evolving our credit levels artificial intelligence machine learning everything that is modeling of high level we have volume to simply When we have the opportunity, we can evolve. And in a consistent and careful way, we don't want to rush. We want to do this long-term vision very well.

Now we're going to switch back to English as we have Carlos Gomez-Lopez from HSBC. Carlos, good to see you. Please, go ahead.

Good to see you and thank you for making the time to take all the questions. Really appreciate it. So two brief questions on two areas we haven't touched. One on the corporate spreads. You mentioned how the market has been quite receptive to your 81 and in general the Brazilian market seems to be operating with very low levels of corporate spreads today. Do you think they make economic sense? Do you expect them to increase in the future? And second, could you comment on one area of the portfolio that we don't talk too much about, which is the mortgage portfolio? I think it is the one that is growing the most right now in your individual segment, 17%. How are you doing it with these high interest rates? Thank you.

Thank you, Carlos. Thank you very much. So, yeah, you're right. So the spreads in the DCM market, especially for the big corporates in general, the market's very tight. And the companies that have been accessing market have been able to do at a very competitive level of prices. The same way for us when we go to the market and access for AT1s, as you were saying and mentioning. So this is for everyone. Let's see, because we still have a lot of demand with this level of interest rate, a lot of flows going to the credit industry, and that's the reason why we are seeing this level of prices. Let's see, looking forward, if the credit scenario keeps delivering the way we've been seeing. If there is no volatility, we believe that this is possible, that we will keep looking for this level of prices. But we'll depend a lot on volatility and in the credit market. If there is any volatility, we might see some changes in prices, but this is not what we are forcing right now. and the market has been very active, even though the volumes have been lower than what we saw last year, the level of prices are still very, very competitive. Companies that have a long-term liability program or infrastructure investments are taking the advantage to go long and issue with this level of prices. So this is what we've been seeing. And the second one on the mortgage side, Although, I think all the industry is oversubscribed, I would say, in the levels of what we call the saving accounts. We look to the capabilities to make price combining what we have in terms of saving accounts. We are, in the private industry, we are number one bank in terms of volume, so we still have less need, even though we do have needs, to access the market with other instruments, the letter of credits and things like that. We've been accessing market with all the instruments, LCI and others, to make that good composition to the funding. We've been very disciplined in price, which is important, but at the end of the day, we still see a lot of demand from clients for the good segments, the segments where we believe there are more resilient, more affluent clients. So that's where we've been able to do good growth. In terms of market share, we've been able to do 45, 46% of market share on the private banks. And we know that this product is very important for the relationship with our clients, long-term relationship. And we have the edge of having bigger saving accounts, amounts which make us more competitive in general to access those clients. So it's a good growth, very solid and consistent, and we still believe there will be opportunities to grow, especially on the retail. In the wholesale, where we still have capability to produce transactions, we've been very cautious here, taking care of the clients that we have, but avoiding credits that may be more riskier. We see the market underwriting some risks that we don't believe are sustainable in the long term. So we've been very disciplined with the real estate, especially on the mortgage side.

Now, for the last question, we have Natalia Cornfield from JP Morgan. Great to see you. Thank you, Gustavo. Great to see you again. Great to see you all. Well, I'm going to mention my question has to do with capital. And a lot of it, well, you answered to Nicolas, which was that there's no impact in the Tier 2. I was confused. Another point, because you mentioned that you cannot have over 150 basis points in AT1s, I always understood that Itaú thought that it was a level optimal. to have, but that you could have more than 150 basis points. Banco do Brasil already had it. So I just wanted to clarify with you, is there any change in the regulation in Brazil that now you cannot issue more than 150 basis points of 18-1? Hi, Natalia. Thank you for your presence. There's no restriction. we can have the volume that we want and issue the volume that we want but central bank only allows that we use basilea with one maximum one and a half of capital index and 81. we have by different reasons we have a liability management that has been done imagine that we issued 10 billion reais in the first semester of perpetual alas the calls come after so there is a temporal lack of uh you have an excess of 81 during that time and you can use uh more than one and a half by legislation so that access that you have as a higher cost is a cost of 81 but that you do not use it for 81 purposes so there is the temporal mismatch of the issuance and the exercise of the call that's what happened We invaded, we advanced a little bit, nothing wrong. But what we've seen as a capital level that the bank is running 13.1 with the capacity of capital generation at the core, there is no need that we run at 1.5, 100% all the time. So we are very comfortable because it doesn't affect the appetite of risk of the bank and much less the policy of dividends. Having more or less 81 is not... a limitation for the distribution of dividends we always do the planning on the core equity so the logic is to do we saw the opportunity of exercising a call it's an economic decision based on price and we are comfortable on running less than one and a half so first we don't have the appetite to be running we're going to run it one and a half if we understand that there is an opportunity for capturing at the local market that would justify us anticipating a capture, if that's not the case, then we are very comfortable running with 1.3 or less than 1.3, if we understand that there is an opportunity, given the level of capital that we have of core equity, and we can have, through the cycle, the utilization of the key 1.5, which is what's happening now. It's not limitation, no change in appetite. It's more circumstantial issues that we're very comfortable with. in fact if there is any doubt in regards to tier two there is no relationship the discussions of the call of the tier two the decisions will be made in the future with more information taking into consideration what i just discussed to nicholas the utilization of capital that will be an important variable to attribute the economic value of that issuance this is what we are saying and this is clearer Thank you. Thank you, Milton, Gabriel, and all of you, to all of you that have taken part with our Q&A session, our video conference. And I'd like to give you the floor, Milton, to close the call. Well, thank you very much for your participation, for the questions. And I think that the point that remains is culture. the strength of the organization in the sense that we are all dedicated, looking at the scenario and paying attention to the changes and dissatisfied, thinking that we can always do something better every day. This has made the bank evolve all throughout the years. Once again, thank you very much. We're very happy and satisfied with the results, but that's the past, water under the bridge. we've discussed the results and we need to work for the next quarters believing in the value of the franchise on the long term and this is what we believe every day focusing on a sustainable growth and evolving with the client satisfaction centrality solving the pains of the clients every day and we are in a unique moment not only of the balance and results but strategic positioning to face the challenges up ahead and we can evolve in our digital journey artificial intelligence and everything that should do with technology that is available always paying attention to our clients and, naturally, our investors. Thank you very much for your trust. Thank you for the messages and the questions. And the challenges are up ahead and we still have a lot of work to do. Thank you very much.