Banco Do Brasil Sa S/Adr

Welcome to Banco do Brasil's public meeting and earnings release conference. As usual, our event will be in Portuguese with simultaneous translation into English. To choose the language, click the button on the right corner of the homepage to select the language of your choice. Here with us, we have our CFO, Giovanni Tobias, the Vice President of Internal Controls and Risk Management, Felipe Princip, and the Director of Strategy and Organization, Tiago Borsatti. We would like to remind analysts that they will only be able to ask questions through the webcast link. I'll turn the floor over to Giovanni to begin our presentation. Thank you, Janaína. Good morning, everyone. It's a pleasure to welcome you to our third quarter 2023 earnings live stream. I don't know if everyone knows, but Darciana, our CEO, is not here, unfortunately, because she underwent a surgical procedure earlier this week, and she's following the recovery period recommended by the doctors. She's doing well, and she'll be back in a few days. Meanwhile, Felipe Prince, our chief risk officer, is acting as interim president of BB. Our conference call will be a little bit different from our usual calls because now we are also registering our public meeting with analysts and investors. We also have the participation here with us of Ms. Lucy Souza, the president of APIMAC, a longtime partner in our public meetings. This is the 30th public meeting held by Banco do Brasil with the market and investors. So, for 30 years, every year, we hold this meeting. So we are here to talk more about our robust delivery of results, reflecting the dedication and professionalism of Banco do Brasil's employees. From day one, this administration has sought to execute a proposal to build sustainable results. In this sense, when we look at the first nine months of 2023, it is clear how much our commitment to consistent results and growing results is already present in the figures we're going to discuss. We are on track to deliver the highest annual net income in Banco do Brasil's history. At the same time, we are acting as inducers of sustainable practices and we continue to lead the movement of digital transformation and technology innovation in the financial industry, always with the aim of delivering a personalized Banco do Brasil experience to each one of our customers. Finally, I would also like to just mention that in September of this year, we concluded the periodic cycle to review our corporate strategy for the period from 2024 to 2028. Through this, we reinforce our purpose of being close and relevant in people's lives at all times, and our commitment to generating value for all our stakeholders. To talk a little bit more about this topic, we also invited our director of strategy and organization, Tiago Borsari. But before I turn the floor over to him, I'd like to call on a video where Tarsi left a message to you. She'll talk a little bit about our values that have been improved in the review set of our corporate strategy. So let's watch. looking towards the future and thinking what bank we want to be. How do we want to act and position in the market? What's our essence? To contribute to the development of our country, to be close and relevant in people's lives at all times, and delivering sustainable results to our shareholders are big challenges. And big challenges require transformation. So in this transformation journey, what guides us are our values. They are what determine our behaviors. They define our identity and make us unique, the bank of Brazil. And this is built with proximity. We are present, proactive and empathetic to delight people. We want to be next close to our relationship stakeholders, supporting their choices and helping them realize their dreams. Our complete portfolio and the search to offer people the best experience are a reflection of our potential to innovate. We innovate to simplify solutions and make people's lives easier. We combine our tradition of more than 200 years with results that go through generations. True scope and constant innovation in all fronts, and that's how we generate value to our clients and society. growing and sustainable results, the outstanding position in the market and the soundness of our company are acquired with efficiency. We use the resources available to create value to our relationship publics and investment in digital solutions to build a safer, more efficient company that is accessible to all. Banco do Brasil's activity is marked by integrity. We worked based on respect, trust, ethics and transparency. We are committed to do what's right always. We take care of the quality of our relationships and are aware of our responsibility towards people. We contribute to the development of our country because we are committed to society. We consider collective interests when making our decisions. we remain a reference in sustainable practices and businesses, working very strongly in the social transformation of our country. The greatest Banco do Brasil in the galaxy is made of diversity. We promote diversity, equity, and inclusion to build sustainable relationships and results. We believe in a fair and equal world. Our efforts are based in the creation of plural, representative, and engaged teams. Our strength resides in the people working together to have one Banco do Brasil for each employee and each customer. That's our way of being BB. you So this is our way of being in Banco do Brasil, right, Tiago? Tiago, I'd like to invite you now to talk a little bit about this process to develop our strategy for 2024 to 2028. Great, good morning, everyone. First, it's a pleasure to be here with you today, such an important day disclosing or releasing our earnings. And as Giovanni said in Tarsiana's video, we're also at a special moment because we have just reviewed our corporate strategy. what we called CBB is what we lay out as a trajectory for the next five years. We've been doing this in a robust participating process. And every year we take the step to look at the trajectory because the market changes. We need to do specific adjustments, but it is a robust strategy that guarantees the sustainability of our company to be able to achieve increasingly sustainable results. So I'd like to share with you today two images that really represent this process. Banco do Brasil, as I said, has been following an increasingly integrated process with the participation of more people. And we had this exercise now with 7,000 people participating, colleagues in the frontline at branches, partners, specialists, debate panels to build what we're going to show you of our ambition and where we want to be in the coming years, starting in 2024. In the process, we consider different pillars, the traditional pillars that we put together collaboratively, our strong SWOT matrix, where we look at our weaknesses and strengths and opportunities, where we can get in the future, where we can drive or leverage more. considering the movement that the financial market is going through. We also prioritize mega trends when we look at the future and see what's already impacting our business, what we need to leverage, and each perspective that I'll talk in a minute. Another important point is looking at the macroeconomic scenario with our macroeconomy department. We look at what is challenging us in the market. then we do this fully considering the added value to shareholders, what we need to have as an ambition in our company. Also looking at the performance of our peers, the new entrants in the transforming market. Also considering the markets where Banco do Brasil acts at each customer segment, how we're going to work, and considering the impact of that on society and public policies and each of our stakeholders. So as I said, it's a robust process that we go through with research and market trends. We also hold lives using technology to be able to reach all of our employees in Brazil and around the world to be able to actively hear what we need to adjust in our strategy to generate better results. We have discussions and technical analysis of specific topics with experts and that are reviewed by market experts. And finally, the approval of our CBB, BB's corporate strategy, and a very robust process. We go through the board and the executive directors. We have a hands-on meeting to design the strategy. We go through all of the advisory committees in the board and the board itself approves it considering the view of the different shareholders so that we can put this forward from one year to the next and then on day on the first or second of january each unit of banco do brasil each branch each colleague knows the challenge that will unfold from the strategy for the coming year And then on the next slide, I wanted to show you because we have one slide showing or summarizing our corporate strategy from 24 to 28. So it includes our long term components. That's our purpose of being close and relevant in people's lives at all times. And we follow this very strongly in our purpose. We have our values. very well explained in Tarciana's videos with our colleagues from the branches expressing and explaining our six values and how to beat Banco do Brasil in everything we do. We have a very careful eye to each one of these values. And here in blue is what we revisited, which guides our decision-making and our actions. So when I said that we unfold this for each unit, for each employee, These objectives and drivers are what we look at. We break it down into five perspectives. That's our BSC, how we break it down. And each perspective feeds back into the other. And I'd like to point each one. And first, it's customers. Our goal is to provide the best customer experience at all times. And we have four drivers. The first is what we call engagement, so that our customers have Banco do Brasil as their main bank. Our channel, our operation, our products should be relevant in their lives in every financial and non-financial thing. The second point is integrated solutions. We know that each type of product, financial or non-financial products, we need to be part of the customer journey. So we will invest heavily in our platform moving towards the third item. That's the omni channel platform. So very robust investments for us to be able to personalize or customize the customer journey so that we can customize the offer to the clients so that they can begin or conclude their journey either in the physical or the digital environment. And we'll follow. the client's behavior, making our service channels stronger, as well as new customer generation. We have a robust customer base and it is being engaged, but we need to expand this basis. We have new generations coming in, new product portfolios, so that we can have a customer base that is bigger working with Banco do Brasil. And the financial perspective, the first highlight is our objective of creating value and generating sustainable results. That's the ground, the basis for our earnings. And we have some drivers, the first one being the diversification of results. That's a constant challenge where we look at our portfolio, look at the challenging markets, and we do need to diversify the source of earnings. Risk mitigation is always very strong in Banco do Brasil's activities, the portfolio mix and how to protect our portfolio for sustainable growth. Operational efficiency. We do know that a bank that is undergoing transformation and the trends that I mentioned, using data, analytics, AI that I'll talk about in a minute, we have the opportunity to do better and faster, delivering more value to the customer. Profitability. Again, new business models, working in ecosystems, financial products, non-financial products, new sources of income is a very strong model. action for Banco do Brasil and working in value chains. Banco do Brasil is present around the whole country and the world. We work at the wholesale banking business, agribusiness, retail banking, and how these markets complement in the value chain for our clients. The next point of perspective that I'd like to highlight that was very strong in our corporate strategy is ESG, with the objective of being a protagonist in sustainability and in the promotion of business and ESG practices. I highlight practices because we have the ability to deliver very fast a lot of ESG practices with some drivers, the first being sustainable credits. I think we've already mentioned this as a long-term ambition to have a healthy, sustainable portfolio for the country and the world. Decarbonization also is closely related to the previous driver, looking at greenhouse gas emissions in all of our financed portfolio. And the third, diversity, equity, and inclusion, where we have our human resources policies, but we have suppliers, shareholders, clients. We want to be the inclusive brand in the world and in Brazil to be able to generate the inclusion movement that is so needed in society. The fourth perspective, digital transformation and processes, very strong investments in changing the way we work to accelerate delivery, to have agile delivery in the first waves of technology integrated businesses and deliver autonomy and value to the client. And we have some drivers here that include analytical intelligence. So with this Huge amount of data and digital transformation increasing. We have the ability to know our customers better and use data to the benefit of our clients so that we can have these offers and deliveries. Digital maturity. So we're going to continue looking at each one of our products in the app. For example, Bakuto Brasil's app today is a reference in the market. And we put it more and more as a reference by looking at the entire customer journey, that it can be digital, but it's also integrated to whatever channel they choose. It can be physical at a branch or ATM or through our app. Efficiency in processes. We have the implementation of automation, the robotization of our processes, the speed and improvement of the processes and journeys to deliver value to customers. And the final point is the agile operating model. As I mentioned, we started with the first lines of agile operation and we'll learn a lot with them to be able to turn the key and have Banco do Brasil working more and more integrated so that we break down silos and work to the benefit of the client. The final perspective is people and culture. We have the objective of having people engaged with BB's values and promoting collaboration, respect, and inclusion. That's why it's so important to always stress our long-term component with our values, the way of being Banco do Brasil, where we have the drivers of leadership. We have incredible leaders that deliver these values to all of our customers and will continue to invest in training and action. engagement. So having an engaged staff makes the difference. We look at the customer, we look at the employee experience, bringing the third driver here that we do need to have our employees promoting the brand. And we're proud to say that the pride of belonging to Banco do Brasil's brand is a strong factor of our culture and will make this even stronger. And finally, psychological safety. If we want to have a favorable environment for discussion, autonomy, innovation, we will invest. more and more in order to have inclusive discussion environments where people can speak up freely, build things together in collaboration as we did our corporate strategy. So this is a summary of what we have as the drivers for Banco do Brasil for us to continue on track to deliver sustainable results from here on 24, 25, 26 and 200 years into the future. So it's a pleasure to be here with you. I turn back to Giovanni to talk a little bit about the numbers and how we make this happen with discipline and strategy to deliver the numbers. Thank you, Tiago. As you can see, this is the roadmap. And from this roadmap, we set forth all of our targets. We define our budget. We disseminate this to all of our networks with the purpose of delivering sustainable growing results. We'll have the opportunity to talk a little bit about how we're seeing 2024. Officially, we're going to release the guidance for next year, and I already would like to invite you all to participate in February, right after the earnings release. We will hold our Banco do Brasil Day, where we'll have all of our board of directors, our executives discussing these drivers and what we'll actually be doing to deliver results in 2024 and the coming years. So, let's now get into the results before we open to questions. Here on slide five, we bring our adjusted net income and profitability. In the nine months of 23, Banco do Brasil posted 26.1 billion BRLs of adjusted net income, which is equivalent to an ROE of 21% and a growth of 14% compared to the same period in 22. In the quarter, income was 8.8 billion BRLs, an increase that is practically stable when compared to the previous quarter. with a growth of 4.5% compared to the same period of last year, equivalent to an ROE of 21.3%. The income in the third quarter was impacted by reinforcement in the provisions that we made for a specific case. even though to the delay on the judicial recovery, if it was not for that, our income would have been of around 9 billion BRLs in line with the bottom line of the average estimates of the market. Now on slide six, talking about our loan portfolio, we have grown our loan portfolio consistently. In the expanded view, we had an increase of 2% in the quarter. and 10% in 12 months, exceeding 1 trillion BRLs And one third of this portfolio corresponds to what we refer to as sustainable businesses. I'd like to highlight here in the performance of this portfolio, the individual's portfolio, the evolution of 7.9% in 12 months, with a highlight to payroll deductible loans that increased 8.9%, helping increase the levels of the portfolio. Payroll deductible loans are more than 120 billion BRLs, that's 40% of this portfolio. In the company's portfolio, the highlight was without a doubt the SME segment, which grew 14.2% in the year. The agribusiness portfolio grew almost 19% in one year, mainly driven by the lines of costing and investment, as well as by family agriculture. All of them grew in line with what we presented. 45% of the agribusiness portfolio is what we consider sustainable agriculture. It is part of our strategic drivers to increase even further in sustainable business in the ESG perspective. The government portfolio grew 9%. in the quarter comparison. And I'd like to note here that these operations are mostly guaranteed by the National Treasury. But I'd like to highlight disbursement. We've already contracted almost 16 billion BRLs with the segments that will be disbursed during the coming year. The modest performance of the corporate portfolios reflected liquidations and, in particular, the strategy of having a higher turnover of this portfolio favoring profitability in the generation of the benchers and so on. We ended up favoring the distribution to our private portfolios rather than retaining those papers in our balance sheet. Next, let's move to the next slide, slide number seven, where we'll talk a little bit about credit risk. The A-triple-L expanded view totaled 7.5 billion BRLs in the third quarter of 23 and 20.5 billion in the nine months of this year. This quarter's flow was impacted by the worsening of that same specific case of a company in the large corporate segment, which filed for judicial reorganization, but that so far has not been able to disclose or release their balance sheet. So we decided to increase provisions in over 500 million BRLs due to this delay. in this judicial reorganization solution. It's important to note that unlike other banks, I mean, other banks have already gone ahead and done 100% of the provisions for these specific operations in the results of last year's. Banco do Brasil reinforced only 50% of the provisions for last year's results, and there's 50% remaining for this year. The operations of these companies were already classified as risk G. In the previous quarter, we had 20% provision, so it was at 70% provisioned. We were confident that we would see an acceleration in the recovery or the reorganization process, but since that was not the case, we decided this quarter to reassign it to risk H, covering 100% of this operation with provisions.

So now on slide eight, I would like to draw your attention to the quality of our loan portfolio. NPL plus 90 days reached 2.81% below the industry's average, which was 3.5%. And the coverage ratio ended at 199%. As a reminder, Total portfolio NPL was affected by the operations balance and the corporate segment that I just mentioned that we had that delay of 90 days. If it were not by that, NPL plus 90 would have been 2.63%. Now to the top right part of the slide, individual portfolio NPL dropped again. clearly showing an improvement in the quality of the loan portfolio for individuals reaching 5%. The top of the NPL in this portfolio happened in December of 2022. Corporate portfolio indicator reached 3.04% here, considering the aforementioned situation, which is affecting the NPL for this portfolio. And not considering that effect, it would have been at 2.49%. And the agro portfolio closed NPF 0.7%, the lowest for all NPL portfolios in Banco do Brasil. And the new NPL went up to 8.32 billion reals here, also affected by that specific case, which added 800 million reals in this case, and also reflecting the volume of write-offs. for operation losses a year overdue. Nevertheless, provisions in the quarter were enough to cover for that increment in the NPL and reached 110.15%. On slide nine, we'll see the breakdown of our NII both for the new managerial view, including clients and markets NII. And if we go into the details, we have here the different lines in the accounting view with details for loan operations, funding expenses, and treasury lines. NII reached 67.7 billion rounds in the nine months of 23, a significant increase of 30.4%. Also here we have an impact margin from Patagonia, approximately... If it were not by the Patagonia effect, we would have posted expansion of 27%, which is a very robust growth. If we look at Brazil's operation itself, but Patagonia represents around 7% of our NII. And now, looking at the quarter, we reached 23.7 billion rials, an expansion of 3.5%. Annual growth of 17% in client NII was driven by the credit portfolio increase, as I mentioned, also because of a higher spread in all portfolios and higher liability margins stemming from greater funding. with our clients. I would like to give a special focus here on the loan operations income increase thanks to a higher loan portfolio and also the SELIC average rate effect in the period. Margin NII growth or market NII growth can be explained by the average SELEC rate increase effect on the securities portfolio and also by higher Patagonia Bank NII. Treasury results reflected SELEC's behavior and securities portfolio average balance increase and spread with clients ended The quarter at 9% and NIM global spread was stable in 4.9% in the spite of a slow movement of reduction of our interest rates. On slide number 10, fees and expenses. In the nine months of 2023, fees income was up 5% thanks to insurance pension plans and premium bonds lines and also consortiums. The first ones increased 8.3% and consortiums were up 29.6%. In the same period, administrative expenses increased 8% falling into the corporate projections estimate. reflecting inflation and also adjustments in the category. Specifically talking about category adjustments, personal expenses were up 7.3% in line with pay rises, while other administrative expenses posted 9.4 growth which reflects mainly investments in BB digital transformation. As Tiago mentioned, we are changing our process so that we can become more and more an agile company, innovating our tech capacity and also increasing our data processing capacity. Therefore, in this quarter, we reached an efficiency rate of 28%, our all-time best And of course that all these sound and consistent results ended up improving our capital position. We maintained a sound CET1 thanks to strong sustainable results generation. Our CET1 reached 12.49%. And here we have organic capital increased by retained profits. of around 53 BPS. That's how much we increased our capital base, thanks to profits. In July, we announced the payment of one billion RELs of the hybrid instrument, which reduced capital in 11 BPS. RWA also increased and accounted for a drop of 54 BPS. in our main capital index explained basically by the loan portfolio increase. And finally, I would like to highlight the fact of resolution 229, which added 60 BPS to our CET1. Before we open to our Q&A, I would like to comment on our guidance. In general, we expect to see convergence with the intervals that we have disclosed. We continue seeing positive trends for the long portfolio growth, especially driven by the agribusiness segment. For individual segments, payroll loans still deserve a highlight. For the corporate segment, we posted relevant growth in SMEs higher than our guidance. And considering wholesale performance and all the movements I mentioned before, we expect growth, total growth for the year will be pointing towards the lower end of our guidance. NII Dynamics stands positive, and we should close between the average and the top of our guidance. especially because of a higher flows of a triple well for individuals in non payroll loans and considering deterioration in companies and therefore the portfolio growth. We believe that provisions expenses should point towards the top of the guidance when we look at the results for the year as a whole. Fee income post performance in line with the guidance, which was adjusted in the second quarter results, basically because a disruption that is happening and the payments, means of payment market, which also reflects in the growth of our fee income. And administrative expenses, of course, we also believe that they will be in line with our guidance. Thus, we are very well positioned, and that's what we believe, to deliver record results this year with a profitability rate that is consistent with our business generation capacity. We already have 26.1 billion rials, of profits in nine months, and our guidance points an interval between 33 and 37 billion RELs. We believe that we will be able to deliver close to the average of this range and maybe towards the top of our guidance if we look at the results of the fourth quarter of 2023. So now I end my presentation with the figures, and I would like to turn the floor to the Q&A session. Thank you. Janaína, the floor is yours. Thank you, Giovanni. So before we start our Q&A session, I would like to welcome Lucie Souza. She is APMEC's president. For 29 years, Banco do Brasil holds public meetings, and APMEC is an important partner of the bank. So good morning, Lucie. Welcome. Lucy, we cannot hear you. Are you muted? I'm sorry, Lucy, we cannot hear you. It is a pleasure to be here with you, Tiago Filippi, Marco Giovanni. Yeah, this is a long-term partnership, right? We have been together for almost 30 years. These are 29 years of meetings that allow you to have the MRL seal. I would like to add, that this partnership is the second longest one for AppyMac. You are part of our own history. We started back in 1970, and now we are Epimac Brazil. We had a large restructuring process. We followed the market changes. We are very happy to be here, and I would like to greet all investment analysts, and they are the origin of our association. Thank you very much, Lucy. It is a pleasure to be back here at Banco do Brasil as a CFO and to be able to hear with you for another public meeting. Thank you very much. Yes, and I would like to stress the invitation. We will have our BB Day 2024 on February Please save the date so that you can get to know a little bit more about our process. So now we are going to start our Q&A session. Questions can be asked in English or in Portuguese. I would like to ask participants to ask only one question at a time so that we can interact. Our next question and first question actually comes from Danielle Vass from SAFRA. Good morning, Danielle.

Good morning, Jana. Good morning, everyone. Giovanni, Felipe, thank you for the opportunity to ask the question. I think looking at it, there's a graph of Safra in your implementation that is very interesting. And then we have an important trajectory change in the 2023 curve. I think you have it indicating, making an important inflate there. I think it's very much in line with what is expected after a de-risking of the system as a whole and you. I think we see the NPLs falling in terms of physical people. So looking at the new NPLs and the need for provision for next year, how do you see the trajectory of our needs for provision for next year?

We're hearing Giovanni saying that the guidance already reflects on the high numbers this year, and we start to already outline next year. And it seems that there's a good opportunity for you to reduce that both in terms of the portfolio and volume as a whole year on year. So how are you outlining this for next year? I'd like to hear from you about what we see in terms of the quality of portfolio. Thank you. Excellent, Danielle. Good morning. Thank you. I think you had a good conclusion. We make it a point to release those harvest charts to show the care and the assertiveness as we promised and delivered the adjustment of the individual's portfolio to what we believed it should be, noting that it's a portfolio with a risk-adjusted return that's very positive. So with that, the perspectives of profitability remain strong, both for the closing of 2023. And of course, we've also been taken into account for 2024. We already have our budget approved and we're now finalizing the adjustments should be able to put it out and work on it in 2024. In the portfolio overall, we expect growth slightly above what the market has been disclosing either through the central bank or FEBRABAN itself. Giovanni even mentioned in a press conference that which should be in the high single digits or low double digits for 2024 in terms of portfolio increase. And obviously portfolio growth also carries a provision that we call the good cholesterol. So that makes the levels of provisioned expenses expenses with provisions converge to stability in 2024.

Thank you. So now our next question, and I will switch to English.

Tito Labarta from Goldman Sachs. Tito, can you hear us?

Yes, thanks, Janaina. Good morning, Giovanni, Felipe. Thanks for the call to get my question. My question, following up a little bit on loan growth outlook, I think particularly on retail loans, right, we saw a nice improvement there in assets equality. Credit card NPL has actually improved quite a bit. Yet within consumer, you're not really growing credit cards and personal loans. And I know those have been the two segments that have been under the most pressure in terms of asset quality. But now that we seem to be turning the corner on that, how do you think about the growth of the consumer loan book and particularly credit cards and consumer finance loans? Going into next year, do you think with the asset quality cycle improving, you can accelerate growth? And also, how do you see the competitive environment? There's been increased competition there from digital banks. So how do you see your position in those segments going forward?

Thank you. Well, thank you, Tito. I'm going to switch to Portuguese, okay?

So what we see in terms of growth for... loan book for individuals. The main focus is going to be payroll deductible loan. And when we say that we should be grown growing in the low double digits is more or less what we envisioned because the main growth will be coming from agribusiness once it reflects a SAFRA plan. So it is expected to have in the agribusiness high double digits rates while for individuals, low double digits rates focusing in the payroll loans. And even in this year, the payroll loans have increased almost 9%. And our strategy for next year is to grow in a segment that we do not have a strong action now, which is the private payroll loan. We expect to grow there. And credit card loans... These are not a share that is relevant to us. Just to give an idea, we are talking about a balance of 56, 54 billion rounds of a portfolio of 304 billion rounds. And it is clearly stable. I would say this is a stable growth. What happens is that in this market, we still see a discussion in terms of cap. and the interest rates for the rotation and the interest rates. Also discussion in the non-interest bearing installments. So this reflects not only the competition of the new players and one of the reasons that increased the NPL in this market is because the new players are not in the same regulatory demand levels as banks, and they ended up significantly growing their credit card portfolio without having a good and clear analysis of the risk of their clients. So that ended up causing more debtness for Brazilians and more NPLs for their clients. And so this is a discussion that is being held by the central bank, by the Congress. So all of that encourages us to be very careful and focus in growing our loans in the lines that will really allow us to have a long-term relationship with our clients that will allow us to guarantee sustainable results. We do not know what will come ahead as they're regulating in terms of the cap for the rotation interest rates and the new rules. So looking at our budget, We are focusing in the other lines where we are leaders. We have 20% of the payroll loans market. We can continue growing in the INSS payroll loans. We have a shy share there, even less than 10%. And we have basically no presence at all in the private payroll loans. we are going to use our large corporate segments trying to bring that vision of value chain that Thiago mentioned in our strategy so that we can drive growth in these portfolios. For credit card specifically, we are being very careful because depending on what comes from the regulating agency, that really could hinder the market, okay?

Great. Thanks, Giovanni. Up on that, just on the payroll lending segment, that's also a segment that maybe is going to face increased competition going forward from digital players. And I know you have leading market share there, good position, but any concerns on the competitive environment there and how that will evolve and potentially impact your growth next year?

Definitely, being leaders, we must be very careful on protecting our... Sorry, switching to Portuguese.

Without a doubt, we must be careful in protecting our customer base since we are the leaders for payroll loans for the public sector in Brazil. we have that law that built the free choice of bank and the credit portability law or the loan portability law when we understand that there are banks especially digital banks that were not quite as cautious when offering credit card loan credit for their customer base and they want to migrate to this segment because it is more sustainable and less risky but since there is competition in the market, we are being able to defend our customer base. We always have the opportunity before approving the credit portability, we have the ability to be able to work in the customization of price, offering competitive solutions or conditions for those customers that may wish to migrate to other banks. So we've been able to increase this portfolio and protected from attacks from other players who also want to act in the segment.

Thank you. Thank you. Our next question is from Gustavo Schroding from Bradesco. Good morning, everyone. Thank you for this opportunity. Good morning, Giovanni, Jana and Felipe. Actually, I would like to discuss a triple L and I don't know if I well understood it. You talked, you said that in the NPL creation, you have 800 million roles for a specific case. I would like to know if it is really 800 million, because if we, exclude these 800 million from the creation we still have 7.5 in creation for 100 provision for the creation we have plus 7.5 billion for the fourth quarter and then it was going to go over 27 billion which is the guidance for the a triple l so i would like to understand if that rationale is right if you have anything over 27 or if you're considering a lower a triple one considering the creation. And even if you exclude that specific case, the NPL for corporate is a little bit higher. And I would think that is because of SMEs. And this is a segment where we were growing a lot, and that was a highlight of the portfolio growth. So how do you see the quality of the portfolio for SMEs if the NPL that is going up now in this quarter that is higher is because of older operations. Can you give us more information, please? Well, here we are talking about delinquency and also we are talking about provisions. But Gustavo, yes, if you do the math, you are going to get to those numbers. that is the conclusion that you would get. So in order to be in the guidance, we now should focus in this last quarter, especially in the recovery. So the more we are able to recover the better will be the removal of this massive factor that you mentioned. Of course, the corporate segment, corporate portfolio factor, it's going through a normalization process, but we had specific cases. There is a larger, big specific case that everyone is waiting for since the beginning of the year, but we did have other specific cases and that the media also discussed. And we are being very cautious. to reinforce our provisions. But I would like to turn the floor to our entering CEO here. So yes, while the creation is affected in the last two quarters because of the balance of operations for specific large corporate and the retail segment. So this creation both for the second quarter and in the third quarter would be 800 million lower in each one of those bars. Obviously, considering that this is fully provisioned, it will allow us to have a perspective of continuing to have the coverage and reinforcing our balance sheet, to face future NPLs, but that's not because we are going to bring in new provisions, but as Giovanni mentioned, this is an effort recovery so that we can maintain this new NPL stable and the coverage ratio also stable, but always aiming at protecting our balance sheet and that we have enough coverage for this new NPL. And obviously, hoping that the other specific cases that rose, that we have them already solved and that we do not have anything else for the fourth quarter. Now, talking about SMEs, First, I think that you need to consider that there is a normalization of this NPL when compared to the pandemic's period, when obviously we did have some debt extension and rollover process so that we could give more breath to those entrepreneurs. But you have to take into consideration at the same time that 30% of this growth come from lines that are mitigators that are related to government obligations, mainly PRONAP and also FGI. And we expect to have a normalization of NPL for corporate segment, but it is natural that it will follow some stability from now up to the end of the year because part of this NPL balance will be paid based on this government guarantees that do provide us support in 30, 35% of our portfolio. Thank you.

Our next question, Eduardo Rosman, BTG. Hello, good morning. Congratulations on an excellent year. My question is about 2024. You gave some indication about next year, and I'd like to get into more details there. Because when we look at the consensus for 2024, even according to Bloomberg, we see that the projections have a somewhat flat profit, very close to the results of 2023. So I think there's some fear, so to speak, from the markets with a very strong slowdown of the NII and the increase of provisions. You've already made some interesting comments on how you expect the portfolio to grow high single digits, low double digits, that's probably more than the market. And this year you're also growing more than the market. So you're replacing securities with loans. You kind of already talked about provision for next year. So I'd like to know, your view of the NII post-PDD, if it's too compressed or if you can maintain a good performance, and trying to think if you can still consider an increase in the bottom line for 2024. Thank you. Rosamund, thank you for your question. I won't give you any data in advance for what we have in the earnings conference call for the fourth quarter. But as Prince said, we already have the budget for next year approved, and we're already starting to work and involve our entire network. And the next step now, is to do what we call atomization for us to be able to reach the objectives that were approved by the Board of Administration in terms of profitability, growth, expenses, and so on, and efficiency. So now we're going to move to the tactical plan, so to speak. But what I can tell you ahead of time is that our view is extremely positive for 2024. We do believe that we are entering a more benign scenario with a reduction of interest rates in the economy. Of course, we're always attentive to external issues, the war, inflationary pressures coming from oil commodities, or maybe even an interest rate level in the United States. How long it's going to remain at this level and how much it could affect the freedom of our regulator to work with a more, how can I say, or a smoother monetary policy or not. So what's going to be the room for greater reductions of our interest rates and everything ends up having an impact in our margins. But we do believe that considering the configuration of our assets and liabilities, and we've been talking about this to you, each reduction of 1% in the basic interest rates equals approximately 89, 90 millions. You can round it up to 100 if you want to make the math easier, 100 million BRLs and margin. But we've been, you saw the spreads, even with the resolutions that already happened with the SELIC rate, we've been able to, through growth and an improvement in the fundraising funding, we've been able to maintain our spread at a stable level. So we don't have a perspective for 2024 of seeing a reduction And bottom line, earnings, I know a lot of analysts are saying that there's going to be there, but we're working based on high single digits of growth in terms of earnings for Banco do Brasil in 2024. We believe that we have the capacity to get there. And when you say, oh, but you'll be growing more than the market, it's because an important part of our balance sheet of our loan portfolio, a third of it is agribusiness. We're the main financer for the agribusiness market. And this market, as I mentioned, will continue to grow. And we also have individuals We have some natural protection of our spread because the spread levels are low. Elasticity, if you consider reduction of interest rates, tends to be a lot smaller. So we already have guaranteed the spread for that portfolio that's much better. We don't expect to suffer any huge impacts, maybe if there's a a cap for the rotating credit facility interest rates. It's a small part. As I said, it's 50-some billion of the 300-and-some billion BRLs. But all of that is taken into consideration. Of course, we'll have the opportunity to discuss that with you at our BB Day, so I don't want to get ahead of myself, otherwise you won't even attend, and we want to get a full house. But for the company's portfolio, Without a doubt, we are very attentive and mindful that there's an expression people like that there's a game of cards. Companies are going through this normalization that Prince mentioned, the post-pandemic. And there have been many adjustments in terms of government policies, allowing the re-agreements or the extension of maturities. But we believe that with a more benign environment, companies do tend to make more investments. seek more working capital. The capital market that was closed in the first half of the year and we already see it starting to recover. So we're already seeing the issues of criss-cross the ventures. We're participating and we're participating with you, the SBB and the companies who want to participate. We have an organic structure in Banco do Brasil. That's the organic BI. In the specific case of the third quarter, it's a portfolio that did not grow because we chose to distribute that. We did not retain those instruments, those papers in our portfolio. We distributed to our private clients. Looking at 24, we believe the companies will have the market available for at their disposal and they're not necessarily going to grow in specific loan lives but the view of the the expanded view of the loan credit where we include securities tend to grow but i'd also work with a growth of high single digits for the company's portfolio for 2024. as for provisions we will always have to be mindful But we hope we won't have any hiccups or surprises in specific cases. Of course, specific cases ended up harming our results. We would be delivering much better results if it weren't for those specific cases. But as the scenario becomes more benign, companies can also cruise without any further damage.

So I'll move on with our Q&A. Next question is from Renato Meloni from Autonomous. Good morning. It's nice to see you again. My question is about the repricing of portfolio, which was large up to last quarter. I would like to understand your mindset about that, especially if we focus in the payroll loans, if you see more stabilization there, or if for next year you see an opportunity to increase that. Thank you. I'm sorry, Melanie, to increase what? I could not hear the end of your question. to continue increasing the yields and the portfolio and to go into another repricing cycle? Well, this is a good question because I'm sure that as you start having lower interest rates, the client always has a possibility to exchange That is, they are able to have a new loan with a lower rate. The duration of that portfolio usually is of 18 months. So I would say that for 2024, we do not have an expectation to have a huge impact in that specific portfolio. But I would like to remind you that as we are successful in our strategy, and increasing the private payroll loans, I think then we will be able to make a better difference in terms of the yield for that portfolio of payroll loans as a whole, because then we are going to have rates in the private payroll loan that are more attractive than in the public payroll loans. The public payroll loans, of course, has less risks because we have stability in the jobs, but the private payroll loan is riskier because the employee might be terminated, lose his or her job. Therefore, we do increase the risk of default in that line. So we are considering all that. We are pricing it in the right way, but I believe that we can maintain the spread for a longer time. And if I can add to that, Renato, we also have been able in the payroll loans to, bring back operations of lower spreads of past seasons with better profitability. So if we compare the season of contracting of our portfolios, we had 33% of 2023 for the whole portfolio and 23% for 2022. So we also have a possibility to have a turnover in this portfolio with the mix that Giovanni mentioned with the INSS, with the private payroll loan, which also helps us to balance out that spread average. Perfect, thank you.

Bom.

Our next question now, Mario Pierre from BOFA. Mario, please go ahead. Good morning, everyone. Congratulations on the results. I'd like to focus a little bit in operating expenses. You talked a lot about investments and IT, digital transformation, and we're seeing that expenses are now growing at a double-digit level. For a long time, in recent years, we saw the banks' expenses growing below the inflation. So first, I'd like to understand, within... expenses. We see marketing expenses going up this quarter. I'd like to understand a little bit more of the reason why. And we see the administrative expenses are also growing almost 15%. Personnel expenses only 5%. But I'd like to understand whether in the future there will be a need to increase the number of employees at the bank. Hello, Mario. Good to see you. Thank you for your question. So how are we addressing expenses? Expenses are like our nails, right? We always have to cut them and trim them. But we're seeking to separate what is that day-to-day expense that is required to run the structure of the bank from those expenses that are more transformative, as Thiago said, which is our technology innovation strategy of becoming an agile company. All of that falls into administrative expenses, but we could say that part of it is the good cholesterol type. So despite the growth on expenses, we've been able to increase our cost to income ratio. We've been able to increase revenues at a level higher than the bank's expenses. When we compare our bank to its peers, we see that our investments in technology are shyer than theirs. But of course, as you increase your investment in technology, the consequence will be an increase of expenses because of the depreciation of those investments made in technology. But looking specifically at the results of this quarter. Marketing expenses, I'd like to remind you, especially when you run that comparison, part of it was built up. There's a bill that here in Brazil, there's a law that in years of election, after a certain point of the year, you are no longer allowed to make any investments in marketing. So that is building up. But specifically in this last quarter, we had one-off, very specific marketing actions that required a higher level of expenses. But that was all planned for. That was all part of the guidance. All we did was phase it out and delay the development of these programs. campaigns. We ran a specific campaign for the Desenrola program, the Desenrola at the bank that we call Desenrola BB. That's already, what, 15 billion? Yes, 15 billion BRLs of renegotiated loans inside Banco do Brasil. We had a specific ESG action. We launched three commitments that we made with the Global Compact from the UN. We have launched the campaign for Amazon in New York, and we are the ambassadors for the racial equality action. And Elas Liderum, which is for women in leadership, as well as a... dignified salary, and that all explains why the marketing expenses were more impacted this quarter. But looking at 2024, Mario, I would say that we believe, I mean, we'll continue to make these investments in technology. We expect to increase the current expenses to run the bank in line with inflation, slightly above, even because we are hiring, we are, I believe, We had 2,500 people hired this year. We ran a public competition and next year we'll have around 2,000, 2,500 new people. But there's also naturally a departure of people who retire. So the net effect of that is something we'll see later. I wouldn't be able to give you a precise number right now, but we do expect to have an increase in total expenses, probably in line with what we're seeing this year. But the important indicator is that our target is to maintain our cost to income ratio at this level of 28%. Mario, as for the number of employees, due to this movement or the natural turnover that Giovanni mentioned, this quarter, We're coming in with a number that's below our historical series, but the expectation is that we will bring this increase in the number of employees as part of the technology investments we're making. Within this public competition that we open now, half the employees, half of the positions were specific for technology professionals. The bank has also been investing in training programs for our employees to foster the development of digital skills. So we're talking about upskilling, reskilling, the review of the work model, as Tiago mentioned. We've been directing our efforts to agile. We're expanding investments in technology. And all of that is part of a trend that we see, as Giovanni said, that will remain for 2024.

Thank you. Our next question is from Eduardo Nishio from Genial. Nishio, we cannot hear you. Can you hear me now? Hello, good morning. Good morning, Giovanni, Felipe, and Janaina, and Tiago. I would like to go back to a prior question about NII, but also with provisions. We were running at a stronger level for margins, almost a double of the loan speed. For 2024, we will be able to increase NII. and higher than a loan. And if you can break down that, according to this new vision for markets and clients, how do you see the market NII that is hitting an all-time high since your historical series and your clients NII? How do you see the behavior of those numbers from now on? And since you talked about Patagonia, I would like to know more about your position in Argentina. We saw a bank selling their position and opening their operations. And what we see here is that the capital contribution for them was negative. So I would like to know from you, for Patagonia, do you have the same negative impact in the capital after the adjustments for inflation and exchange rate? Well, starting by your second question, Our position in Argentina is totally different from our competitor that decided to leave. We have a sound bank there with assets and liability structure that is very conservative and that has allowed major growth because we do not have delinquency, basically treasury there, which has been benefited by the interest rates in that country. This is Patagonia Bank is a brand that has trust. It has an org of almost 300 points or branches. And we have colleagues from Bank to Brazil that are part of the executive board of that bank. So we always try to maintain an alignment in all our policies, whether for risk appetite or trust. with practices that we also put in place here. The only lagging area is in technology. There we really need to move forward in technology. Well, having said that, what we saw here and also because of regulatory matter. In Brazil, monetary adjustment was abandoned a long time ago, so we cannot post in our balance sheet that. And there, they have a hyperinflationary economy. But yes, we are benefiting in our NII. thanks to the results in treasury and also exchange rate effects. We do not intend to sell differently from our peer that decided to leave. I don't know what is their strategy anyway. So in the spite of all the volatility that we see, and this is not something that is happening today, the volatility in Argentina. We do hope that this can be addressed and that they move forward in an economic stability, in a better predictability. They are a main commercial partner. They are the third largest commercial or trade partner from Brazil and Brazil being one of the main financing agents in the Brazilian trade wants to be a resource of trade with Argentina. Therefore, it is important for us to be there, to have a footprint there that's favorable for us. And so in terms of what that represents in our balance sheet, we do have a breakdown of that. It is disclosed. you will see it is the CTA. It's there in our balance sheet. And there is an accounting rule, you know, if we were to sell, how the treatment should be. So we follow the rules. I am not sure if our peer has followed the rule posting the sale of that asset, but for us, we do not intend to sell. So we have it all marked in our P&L and you can check that you will find the value. Just adding to your answer, Giovanni, is we do show the variation of FX. You can see that in the explaining notes. But I would like to highlight that the information we provide is very transparent. So everything related to Patagonia Bank is there. So this is not a bank that is compromising value. Even with the negative mark in our P&L, what we lose in terms of results with this bank, it does bring a positive net. for us. So just telling you about this difference and everything can be found and it is disclosed in materials. Yes, you can see the ROE for Patagonia in the third quarter was 23.9%, a basal index of 26.7 coverage ratio 217 and NPL of 0.5. So this is a robust and a good asset. so we do not consider the possibility of selling it. Now, the other part of the question about the margin. Well, Nishiu, in terms of estimates, think about the NII growing in line with the portfolio, with the assets. Of course, we have an opportunity to do that as the spreads, and you have an opportunity to have a better spread, for instance, in the funding. So we eventually can have that, our funding is all post. And as you have a reduction in the interest rates, you can adjust immediately the cost of funding. Of course, there was a specific strategy for LCA's funding, and this did help us in our liquidity. All these numbers are all there in our SG&A, but that allows us to have gains and spreads on the funding, and that can also help us and increase a little bit more than the portfolio. But yes, to in order to pose the strong growth in the nine months comparison of 30%, there was another strategy that I already mentioned that is a specific for funding with our clients before we were privileging basically the access of liquidity of these clients and funds that could be automatically withdrawn and we chose to sign CDBs with these clients. That did help us a lot and this is a practice that other peers were doing it. We were not because we were privileging another area of our asset and so we switched the strategy in terms of funding. So just as we grow our NII with our loan portfolio, we also are able to grow with our clients in terms of funding.

Perfect, thank you. Next question, Yuri Fernandes, JP Morgan. Thank you, everyone. I have a quick doubt here. about the income for 2024. I think it's a very positive overview from Giovanni, the income or the high single digits. There's no guidance yet, but in the moving parts, it seems that next year will be good for you. But my question is, do these estimates consider only Banco do Brasil in Brazil or the group as a whole? Like thinking about Michio's question about Patagonia, if this more positive view may bring disappointments, for example, with Argentina, that's the first question. And a follow-up in the client NII, when we look at, it grew very well, and it was not Patagonia. Patagonia grew in line, I believe. It didn't gain any relevance in market NII with you. But I'd like to understand what it was that brought that. My impression is that it was liquidity, as Giovanni mentioned, but just to make sure. about the quarter-over-quarter in terms of market NII. Yes, without a doubt, in market NII, there have been opportunities to spread and securities, and there was also liquidity. But when we talk about earnings, basically, we're looking at Brazil. But we've already said in relation to Patagonia, of course, there's no way to know exactly what's going to happen. It's too early. It's still going to be issued, and we'll see how it's going to happen after the elections and how they will run their economy in Argentina. But we believe, looking at that estimate, I'm looking basically at Brazil operation, we already consider in terms of the budget a smaller share of Patagonia. We would not maintain Patagonia at that level. that it takes today in terms of NII, it's around 7%, right, Shana? Yes, 7% today. Yeah, so we can work considering that Patagonia will be less relevant in 2024. Very clear, thank you, Giovanni. I think the main point here is that BB grows, the banks NII continues to grow even with a potential scenario, Patagonia contributing less, okay?

So the next question is from Pedro de Luque, Itaú. Thank you. Thank you all. Congratulations on the results. A quick question about the additional provision for Lojas Americanas in this third quarter and the balance sheet. If there is a resolution and a solution to this problem, what is the degree of recovery? It looks like they will disclose results on Monday. So can you comment on that? And if it happens, can we expect a reversal in this process? And second question, more technical. I believe when you said that the numbers are going to point towards the middle of the guidance and if they're going to go down in the fourth quarter. I did not understand the last question. It's about the provisions guidance. Your audio is not very good, right? Well, it does make sense to adjust the guidance now. So we will be working to deliver towards the high end of the guidance. Could it go over? We are going to go over. We are going to work so that it stays within the guidance. Because if it goes over, we'll have to explain why. Now, for your first part of the question, if we should have waited or not, because they're going to publish their balance sheet, then what's going to happen? Well, when we have a better understanding of the process, yes. Considering your audio was not very good, if we forget anything, please comment at the end. So as we said in the beginning, we would have provisions related to that specific case according to our models. making it clear that the bank would be a protagonist in the renegotiation process. I think we have moved forward very well in the process. You know that in the beginning we had $7 billion, but we were able to increase that to $10 and then to $12. But with this possible amount of 12 with no restrictions was offered, we had already ended our closed our balance sheet in the quarter. And this happened in the midst of October. And In addition to the calculation of expected losses that we run, this started being laid over 90 days, half of the balance in June and the other half in September. And obviously that we use our customized model. But on the other hand, we also follow the regulation of 2682. So these two facts in line with the delay and the balance sheet disclosure and also the conclusion of the in court reorganization process to be submitted to the creditors assembly ended up causing us to fully provision the 1.7 billion that we have available for that specific client. So what do we expect from now on? The audited balance sheet disclosure, we will compare that to our own models to understand the assertiveness level of the expected losses that we had estimated, then this in-court reorganization process has to be approved by the general creditors meeting, which should happen still in 2023, but because of judicial vacation, probably this is not going to happen. But we expect to conclude this process in the first quarter of 2024, carrying over this $12 billion amount, which will bring an amortization in the bank's debt and those that are fully provisioned. will have part of that revenue posted in the first or second quarter of 2024. But these are steps not yet taken. On the 13th, we'll be looking at the balance sheet. And the idea now is to bring forward this provisioned balance and to see if we are going to be able to have an amortization of part of that. And we will then analyze the provision according to the ability of payment of the new company that should arise.

So next question.

To welcome Nicolas Riva from Bank of America. Please, Nicolas.

Thanks, Janaina, and thanks, Giovanni, for the resourceful questions. I'm going to ask a couple of questions about the 81 capital. So I see in the notes to the financial statement that you raised 2 billion reais of 81 capital in the, well, I guess if you can give more details about that transaction, the raising of 2 billion reais, I would assume that it was in the domestic market, probably a private placement, but if you can Tell us a bit more details about that. And then second, you did a partial buyback of the 9% purpose in the international market. You bought back about $750 million. There's still $1.3 billion outstanding on that. I wanted to ask if the plan, I mean, to the extent you can discuss this a bit, if the plan would be to fully call the remaining portion in June next year, and if the idea would be to replace at least some of that capital with more domestic 81 issuances.

Thanks. Thank you, Nicolas. In a certain extent, you already know the answer. Switching back to Portuguese.

So, yes, we are looking at what to do. We have two call windows next year, one of the perpetual from six and the other for the perpetual of nine. The perpetual of nine We decided to, considering the soundness of our capital base and the liquidity of the bank, we offered an opportunity via tender. We were willing to buy up to $1 billion. But unfortunately, we had an addition of $700 and some million. So a significant part of our bondholders are comfortable with the Banco do Brasil risk, and they are willing to hold on to those papers. If we're going to call or reset, will depend on the conditions of next year. We've been able to considerably reduce that value. We believe that the perpetual bond of six financially makes sense to maybe reset it. But what we are going to decide, and there's no decision made so far, is without a doubt looking at the financial issues and the opportunities that present themselves to Banco do Brasil next year. If there is a market for the issue of new bonds internationally, I think it But if there is opportunity, we'll look at it. But in the meantime, we're making the most of the domestic market. Today we have it, and it's part of our MD&A. We have approximately 4 billion BRLs, close to $1 billion of financial letters that would be equivalent to the 81 that we already raised in the domestic market. The depth of the domestic market is not as profound as the international market, but the price levels that we're seeing today, if we were to test the market for the issue of a new 81, it's a lot more expensive than what we have, even more expensive than what we can raise domestically. So what I could tell you, Nicolas, is that we offer a window out for those who wanted to go out now for the perpetual bond of 9%. We had the adherence of about 70% of what we wanted to acquire. And for next year, it will depend on the economic conditions, and then we'll evaluate it in the economic viewpoint and what it is that we'll do.

Great, thank you, Giovanni.

Hello everyone, good morning, good afternoon, thank you for having the opportunity to talk to you. My question is about the change in the operational RWA, if you see any, what would be the impact and if there is any update in relation to regulation, in short, what you have seen so far. Thank you.

It's good to talk to you, Arnon. Thank you, Arnaldo, for the question, very well put, because yesterday we had, when I say we, the system, a meeting with the Central Bank, it brought an answer that is still not formal,

where we had a non-formal response about the public hearing of 94 which talked about the base 032 implementation and the regulating agencies said that probably they We'll have a phased implementation in Brazil, which would happen in four years. We then have an impact probably in 25, 6, 7, and 8. And the prior call, we have signaled that the impact for Banco do Brasil would be between 100 and 150 BPS. But what is new now is that this impact that should fully happen in 2025 will now, should that information be formalized, and this came from the regulating agencies, then it will be happening over four years. And then how much will be assigned in these four years, this sharing will depend on the institution here in Banco do Brasil considering Our expenses related to operating risks, the phasing should be around one third starting in 23, 26, sorry. So we are expecting a lower impact in 2025 and 33% in 26, 27, 28 of this 100 and 150 BPS that we mentioned. This is... fresh news that we are sharing now. That meeting happened last afternoon with our colleagues from the central bank. Perfect. Thank you very much for your answer.

Moving towards the end of our conference call and for the last question, I'll call Brian from Citi. Please go ahead. Good morning. Thank you for the patience and the opportunity for us to ask questions. I just wanted to confirm part of the data and comments that you made and some answers to my colleagues. In particular, I'd like to ask, you talked about stability and provisions. The stability that you're talking about, is it in the nominal side? That's how we should think about it. And also, I know it's not official that you're working on the budget, but just to confirm that growth in line with the portfolio or the assets as well in the bank's bottom line for next year. Thank you. As for the provision for 24, is that what you mean, Brian? Yes, I heard a comment about stability for next year. No, actually provision is going to grow. It's a proportional stability, proportional to the growth of the portfolio, not a nominal stability as we always say. The generation of new business brings with it that good cholesterol and that's the provision that we expect for 2024. I think we can align it maintaining the portfolio's average risk. And the other question about his doubt was about the growth for 24 as well as also aligned to the increase in portfolio. Is that right, Brian? Is that your question? Did we answer? Yes, that was it. But on the income part, my specific question, Well, for the income, we will update it. We're working on it, but we believe that earnings have the means to grow. the high single digit level. That's our estimate for 2024. But we are still going to confirm all of that officially when we release the 2023 year's results and announce the guidance. But considering our feeling and based on the expectation of business growth, expense control, maintaining efficiency and the provision on control, we have the possibility to deliver growth in the bottom line. Great, thank you. I was going to close the call here, but there's a final question, okay?

So Carlos Gomez-Lopez from HSBC. Hello, Carlos. Thank you very much. I would like once again to go back to capital talking about dividends to the 12.5% and you talked about more visibility on the weight operating risk. Also the perspective of profits increment for next year. So you can pay more than 40%, right? Hello, Carlos. It's nice to see you. Thank you very much for your question. Well, I just got to know that my CRO said the operating risk is going to be phased out. Yes, in the last call, I did mention that we did have a number of regulatory matters to happen and that we had to be very careful and discussing a possible payout or not. Now we have a payout of 40%. We know that one of our peers is at 30, paying less than us. So I'm going to wait for them to increase theirs so that I can consider increasing ours. But they have announced it already. Oh, so I'll wait for him to pay it. Let's wait for him to pay it, and then I'll announce ours. So we do have to be careful, Carlos. We can run simulations, but all the budget that we will be discussing, is working with a payout of 40. There is something that nobody asked about. I don't know why, but that's something that is making us very cautious, which is the tax reform and what we'll see after that. And one of them, one of the issues here is the interest on equity. And this is going to affect the bank's profits. So considering that signaling of the operating RWA, we have to be careful because we do not want to hinder the capital base of the bank that is at 11. Today I have 50 BPS At every quarter and my result, I add that. But I also take 50 BPS because the assets are growing. So I am financing the expansion of my loans, my assets with a profit generation. As I reduce that amount and pay out more, well, today I am able to deliver results that are much higher than my KE, and so I consider the volume of funds that are being reinvested here are also being reinvested to your benefit, but I am not going to say it's impossible. Nevertheless, we are going to take this matter very carefully into account. Thank you, Carlos. So we end now our Q&A session. I would like to thank you all very much for your participation. And now for the final remarks, I would like to turn the floor to Giovanni. Once again, I would like to thank you for this opportunity to be here with you with the open heart. We from Banco do Brasil understand all the concerns from our investors because we are a company that has half of its capital and the private investors hands and also the other half as public capital. And the best way to show you our commitment in generating sustainable results is to bring to you at every quarter, better numbers, growing numbers, and that are robust, thanks to our strategies. Right when I started, I was asked, what we would do to improve the stock prices for Banco do Brasil, because we know that we are at four times, and some of our peers are being negotiated at eight times of their price earnings. And the best way to have the market perceive, see, and reprice Banco do Brasil's stock is to deliver sound and consistent results. And when we talk about the year of 2023, we will be able to talk about the fourth quarter. I'm sure we are going to be delivering good results, but mainly we'll be talking about what's going to be done in 2024. So I would like to invite you to be part of this debate, bring in your questions, also improvement suggestions if you have any, because the more transparent we are, safer you will feel, not only to understand the business, to understand Banco do Brasil, but also to know what we can bring and deliver to you. Thank you very much for being with us today. Thank you all.