Itau Unibanco Holding SA

BOVESPA:ITUB4

Earnings Call Transcript 2022-Q1

[Renato Lulia, executive]

[Interpreted] Good morning, everyone. I am Renato Lulia. I am the Investor Relations Director and Market Intelligence of Itaú Unibanco. Thank you for taking part on our video conference to talk about the earnings call, the earnings results of the first quarter of 2022. This event is being transmitted directly from our first investment center in Itaú Personnalité. Just launched at Faria Lima, the financial center of São Paulo here, we offer a personalized experience for all of our clients that desire an on-site -- and on-site service to make this financial decisions. And also, we have here rooms for meeting for a video conference in the studio for seen and transmitting our results, and we're going to talk about the questions and answers from the studio. I will give you more instructions to better use this session.

[Operator Instructions] The presentation there will be presented here today is available for download at the website and also at our IR website, Investor Relations website.

Now let's start the presentation of the results of the first quarter of 2020. Milton, the floor is yours.

[Milton Maluhy Filho, executive]

[Interpreted] Good morning, everyone. Welcome to our earnings call, earnings results of the first quarter of 2022. First of all, I'm going to give you some quality, quantity information qualifying the results of the first quarter, and then we're going to do the Q&A traditional at the end of the presentation. I wanted to start the presentation talking about our results, recurring results. If we compare it to the fourth quarter of '21, we got a result of BRL 7.4 billion, and when we look exclusively at Brazil, we have a result of BRL 6.7 billion. So I would like to highlight that in a consolidated, we've been working with an ROE of 20.4%, which is a very robust one. And looking at Brazil exclusively the Brazilian operation and ROE of 21%. A return on investment.

Now let's talk about our credit portfolio, the consolidated. We had a growth of 0.5% getting to BRL 1,032 billion and the credit portfolio in Brazil, BRL 830 billion. Another information that is very relevant to highlight in this quarter is the efficiency indexes. When we look at the all -- well, the consolidated 41.8%, less the smallest in index [ indexes ] of the bank and looking at Brazil, 39.6%, running below 40%, which is very strong. If you look at recent years, the records, we are operating at the lowest level that we had.

Now let's talk a little bit about the M&A, well, acquisition of clients, I apologize. In this quarter of 2022, we acquired digitally 5.5 million clients -- we have several products and channels. And I'm talking about Itau channels, the ITI channels, credit cards, all of our businesses and products. This is a screen that I would like to highlight, and we really talk about this. We talk about this during well, we've talked about this in the market, and it really brought a lot of interest. The associate agenda.

What do we want to show in this slide? We always had a DNA that is of association. We have partnerships. We have M&A, acquisitions. We have business that are built together with several partners, commercial agreements, and we've accelerated that agenda as well. This agenda was done with the objective not only of doing M&A and partnerships. Now we have a focus on improving our ecosystem and improving the value proposition and taking more value for our clients. And we have to identify what we have a strength. And what are the strengths that are being developed in the market and that we can clearly associate or we can do an acquisition, depending on the profile of the company or the fintech or the start-up.

Besides, we also have a corporate venture capital fund and we are very active. And the objective of this fund is not just simply doing an investment to capture value with equity. But we have to ensure that we are going to venture in companies that are going to improve our ecosystem and they're going to be integrated with the bank at some level of the business, and we want to capture part of the value that will be generated with the relationship with a bank. Obviously, these are companies that are also going to have the relationships with other partners, commercial partners and other companies. We are agnostic in that sense.

Just to give you a little bit of color. The Q4 partnerships here, we start with PayPal, the operation that we've done really focused on e-commerce with ready, Samsung and Apple. We've done all of our products, the iPhone forever, Samsung, we sold products and we financed our clients, building that client portfolio. Local web, we also have a grow partnership, and we are helping clients being digital. Then the corporate venture capital, we have 6 invested.

I'm not going to do a deep dive here. But just to give you an idea, Monkey, Paketá, others, we always have that logical improving our main business and capturing value in equity. And M&A and joint ventures, we can mention a few cases. A few are well known. We've talked about this in previous quarters. We have Zup, Pravaler, Ideal. And we also have recently marketplace of every business, which is very important for our focus in every business, a portfolio that is growing strongly. And we are doing the investors of Orbia, which is a marketplace dedicated to the sector. And TOTVS we are partners of TOTVS. It is a company that we start to be exclusive in providing financial services for everything that is integrated in the TOTVS ecosystem.

Now let's talk about the results. Let me give you a bit more information without talking about clients what makes any sense. Here is a very simple summarized slide, just to show you how we are organizing ourselves so we can focus more on the clients. Let me start with the segmentation of the [ public definition ] of engagement here. We have clusterization of the database of clients. We are trying to define the behaviors of each client to try and capture in real time.

What is the best way of delivering value and reacting to these needs? This means not only doing the segmentation, but also defining the best talk using analytics, artificial intelligence, machine learning. And since we have a lot of data in the bank, we can engage and having a best talk with our own clients, a conversation with our clients.

And investment in IT, science, data science, we also done that with data scientists. We are improving our strength and our teams, this resulted in this combination of pillars with a more robust delivery for our client and customer.

We have a customer that is more engaged with the bank. I mean, if we compare it to the less engaged client, we can penetrate 8x more in an engaged client than what we penetrate in terms of credit offer business than a client that is not engaged. NPS, 1.5x higher in the engaged client. We can have 6.3x more conversions for what we do in the omnichannel, so that our clients have the best experience regardless of the channel that they get in, our conversion level is very high, more than 13x the volume of transactions, how many transactions that client does with the bank.

And also more important, more than 100% of what we call daily active users versus the monthly active users. We can have a frequency and a day-to-day relationship with those clients. This has been our focus, not only having clients. It is one moves us, what makes us grow. But more than having good clients is to be able to engage in our clients. This has been the central focus of our agenda.

Let's talk about the portfolio, credit portfolio, a few very relevant information. The natural person portfolio is growing 4.4%. And when we look at the portfolio of micro medium-sized companies, we had a small drop. If you look at the big company's portfolio, we had a growth of 4.4%. Now looking at the year-on-year vision, -- this is a very robust growth. 32.9% in natural person, 21% in small- and medium-sized companies, in total, we had a growth, slight growth of 0.5% in the quarter, but an annual growth of 13.9%. And in this growth of portfolio, we had the effect of the exchange rate since there was a valuation of the real in the first quarter. There is a BRL 30 billion effect of our portfolio consolidated, portfolio. So the effect of the exchange rate is very important regardless of our allocated operations hired in the Brazilian spreadsheet and also our Latin American portfolio that is done in different currencies. So there is a real effect against the currencies.

Here, it's very relevant. If you look at December of '19, our natural portfolio with guarantees is 47.7% of the portfolio. If you look at the recent numbers of March 22, we closed at 53.7%. So we have a migration that has had a great growth, great migration, more guarantees, less spread, but a portfolio that is safer in terms of credit. And if you look at the portfolio of without guarantees, we leave 52.3% to 46.7%, rebalancing our mix. A very important information to share. You remember that I really highlighted our flexible portfolio, at the moment, when we started with the pandemic, we froze the portfolio of our clients, not only the natural person, but the wholesale companies, so we can help them go through this critical moment. We froze that portfolio of 53.5%. It was a snapshot billions, and now it's BRL 27.1 billion. If you look at it, it reduced basically 50% in that period. It is a very strong amortization. That portfolio is being amortized BRL 5 billion per quarter.

And most important, if you look at the days to pay in this portfolio, we are not renegotiating. We -- this is an amortization that is real, and we have not taken these clients to the renegotiated portfolio. This is very important. Specifically, when you see that this portfolio 62% of real guarantees, because the products. The products of short term without guarantees, they've been amortized with more emphasis. So now we have a longer portfolio with products of guarantees, financing vehicles, real estate credit and better risk portfolio, better profile of risk for this portfolio.

And if we look at the provision, so volume of provisions delay here in this portfolio, we have 230% of coverage. These are very solid numbers NPL plus 90. Obviously, this is a very sensitive public, but it has a healthy performance. This is very important. If you look at this number in the context of the bank, the renegotiated portfolio over the total portfolio, we are at the lowest level, 3.3%.

And most importantly, I just talked about the credit portfolio we've had of growth, and we are losing BRL 30 billion giving the effect of the exchange rate. And if you look nominally, this number is also smaller. Not only in the percentage is dropping but nominally the renegotiated portfolio of the bank is smaller. So it shows how we give an emphasis to having a credit portfolio with quality good performance, and we have not increased. We have not sold our portfolio. We have not sold and we can start to sell the portfolio if economically, that makes sense, those to sell the clusters, but this is very useful information for you.

Here, the margin, let's highlight the growth that we've had when we compare the first quarter of 2020 with the first 2021 with the first quarter of '22. We had a growth of 23.9%, which is above the guidance, and this is a very solid, strong result. Remembering that this quarter has less business days. So comparing to the previous quarter, there is always a seasonal effect, so less sales, less business interest affected the results. So we can deliver a margin in the quarter that is aligned with what is the margin of the previous quarter, which is a very strong growth in regards to the third quarter of last year.

So solidity consistency in the results, very strong results in our margin. When I talk about the margin, annualized average margin, we have a growth from 7.7% to NIM to 7.9% in NIM. And in the Brazilian margin, we have 8.5% to 8.9%. Obviously, there is an increase in the annualized margin. These are very robust results [ margin ] with the market.

We already gave you the guidance this year. It would be a difficult year basically because of 2 reasons. First reason, the effect of the interest rate, the growth that we are can see in the curve, this naturally affects several of our positions. Even though the bank always has we don't have our liabilities open. We had the hedging active, whether if it's a banking portfolio or the trading portfolio, of course.

Now given -- having said that, we have had a great result above what we expected in the quarter, composed by BRL 1 billion in Brazil, BRL 500 million in America that are aligned with the record, historical records. This BRL 1 billion of results here are above our expectations. So we have had a great quarter of margins where the market is very different with the previous quarters. We want to use the cost of hedging of the capital index.

If you remember, last year, we had ahead of the capital index our bank, given the size of our exposure in foreign currency, given the positions that we had in the different countries, we always had a lot of volatility in the exchange rate, which is not healthy to balance a balance of our sites with our -- this level of volatility. So we made a decision of hiring this hedge is 100% done, and we are highlighting. We had a cost of hedging in this quarter of BRL 400 million. If it wasn't that, we would have had a net margin that was higher. And besides that, we also have important positions of available-for-sale dose positions that are in the [indiscernible]. We reverted it around BRL 560 million of less value in this quarter that are also launched in this number.

The most important thing is that all those provisions of less value are in the recurrent results, and that's where they should be given that this is a result that is recurring from treasury. So these are all in the recurring results of the bank.

If we talk about services and insurance, very important. Our guidance, remember that when we already do it as a comparison base, except in the first quarter, our guidance, the results that we had with XP, remember that the spin-off was done at the end of May. We still had 5 months after the spin-off. This is very important information for us to look when we compare with the 5 months of previous year. So our portfolio of services and insurance, we had a great growth when we look at year-on-year, 18.6%, a very important highlight for the checking account, the administrative resources. And in the investment bank, we had a quarter that is slower with the market volatility.

We've seen windows that are less relevant in general, specifically for equity markets, and this has decreased our investment banking. Once again, align with what I've told you when we expose in the guidance, we expected less activity in variable income and the investment bank. Now what is important to highlight here is the result of the insurance. We are growing year-on-year, 24%. If you look at the longer series, this is the longest growth, the biggest growth that we've had, very strong. And just in this quarter, we had a growth of 10.4%.

So if you look at insurance, you can see that in premiums earned, an increase of 19%. If you remember that the insurance is wholesale. This is a business of wholesale. You pile the sales and then those results are similar in and you generated results through time. Very simple estimate of the premiums issued, 20%, 25% are recognized as a result in the year itself. So we are building a very solid portfolio for the years to come. But we are already gathering the low berry fruits. We have 3.8 percentage points combined ratio, not only for the increase in revenue and premiums, but also because of drop in the liabilities, 4 percentage points.

Another highlight in the claims, I apologize. And we have a growth of 29.8% when we look at the first quarter of 2021 with the first quarter of '22. Now the issuing card very strong and acquire -- and acquisitions, 22.7%. As you can see here, our growth. And last but not least, the -- above the acquiring firing from [ 22.7% ]. And the open products, we have a complete bank. We have the best product for our clients. And we have the third parties. These are our own products. And when we look at volatility, changes in the interest rates, but we have to -- we have to do the best investment. Remember that all of our investing professionals are not paid by the products that they sell, regardless of the higher and lower spread. The commercial force, the payout is the same.

This is very important to remove any type of conflict for the -- in the conflicts of compensation, so we can deliver the best alternatives for our clients, for the cycle of the economy. So you can see that our portfolio of own products is growing, and we have a migration of the portfolio, and this is very healthy in the relationship with the client.

Quality of the credit, let's look at the NPL [ 15 19 ], you can see an increase of this base point. If you go back to the call of the third quarter last year, you will remember that I told you for a long time that we hope for normalization, gradual normalization of our delays. Now we've spent 2 years '21, 2020 with a low delay for several reasons, whether if it's locked down, more increase in the savings and family/activities, economic activity that's made our delays to be very at very low levels.

And there is an effort for the company -- from the government to give the corona vouchers, the resources and that made the population gave an opportunity for them to adjust in a very relevant way during the period. The delay start with a gradual curve, but they're still behaving well. We are growing the portfolio a better mix, as I told you, and this is reflected in the quality of our quality of our credit indicators. If you look at the NPL that delay above 90 days, the -- we have the 2.6%, very low growth. If you look at Brazil, it's 2 very small growth in Latin America is horizontal.

So if you look at natural persons, there is the growth where we believe that there is a gradual movement. But once again, it is an adjustment for what we expected there would be an actual correction of the historical record. Even though levels that are below what we had in the prepandemic and I told you our best expectation is to stabilize in the prepandemic because these are very reasonable to expect.

When we look at the long delays, the natural person, we have a small growth, the micro, small and medium companies and the big companies, are also the indicators are very stable. A very important pay attention and the small and -- small and medium-sized companies, we have a small growth, 0.4%. And let's remember, this is expected. Just go back to any historical records. Always in the first quarter, whether if it's natural persons or the companies, this is a very difficult quarter because you have the concentration of a lot of expenses and then the lack of pay tends to suffer more. So the seasonal delay is very in line with what we expected.

And the most important thing is that it is completely expected. And when I look at this, the latest on [indiscernible], the fault it's, the expectation is to have it stabilized close to the standard down. I don't expect a lot of deviations when we look at this delay with small- and medium-sized companies. And then in general, we expect to have a gradual corrections and an expectation of growth in the delays once again. This is within what we expect or the standards of the precrisis of a very well-behaved portfolio.

Let's talk about the credit cost, some information. We can see the cost of credit in the quarter is BRL 7 billion. So a much bigger portfolio, so the nominal cost is going to grow, of course. And this is the cost of the release of cost of credit over the portfolio, if you see 2.7%, still running P&D standards that are prepandemic. So the cost of portfolio very comfortable. Remember that we cannot just look isolatedly the cost of credit without having taking a look at the top line and the results of the merchants. So we are looking at the liquid margin. So in our capacity of generating results with quality, with sustainability in consist way.

The coverage index is very solid. So if you look at the end, we have 232%, wholesale, 210%. So as a small drop, but if you look at the average coverage in the period of '15 to 2019, the average, we ran at 167% of coverage. So when I say the 210% is still very comfortable. When we look at previous periods. So we are still having our balance sheet very well protected with a good coverage over the delays to the default.

Nonrecurring expenses of interest rates here is our disciplined consistent day-to-day. We've talked about this. And the numbers speak for themselves. So when we look at the inflation period, whether if it's the correction of our payroll, which is done IPCA and the IGPM rates, all these indexes for inflation number. So in fact, very strongly our nonrecurring expenses on interest rates. Our expenses recurring that do not incur from interest rates. We are growing above the inflation, 3.8% and there is still a drop in the delta of 2.7%. So if you look at the expenses that are not stemming from interest rates, we had a consolidated growth of 2.9% when we look at year-on-year, 4.2% drop in the quarter.

Very important message. All of this effort for contention of cost and reductions, we can see the poor cost that core of running the bank to operational processing the volume, the volume metrics, everything that we do the [indiscernible] it's been 0 for the period. So we absorbed all of the inflation and still controlled any increase in expenses without at any time to stop investing in the future.

So what do you talk about the bank of the future is, what we're going to invest? What we're going to do in the expansion of new businesses, investment in technology. So looking at here, we have investments that are very solid, and we're still growing the bank. Investing in the franchise, commercial expansion, new businesses, businesses that already exist. This has been our focus, always looking up ahead with a long-term vision, reducing the costs so we can deliver a result for the quarter. And our efficiency level, I would like to show you that we can see a longer series. We are running at the lowest standards of the series, 41.8% and 39.6% in Brazil. Our efficiency, we are considering all the expenses. We are making no exception. All the expenses are here. And once again, for comparability, we have to take that into consideration.

Maintaining the results that we had with the dividend in the first quarter. This was enough to finance the robust growth of the portfolios. So this is what we have to the results, and we consume that 0.5 with the growth of RWA of the bank. Also, we had 2 important events over the year. We had disclosed that before. We had the acquisition of a part that was still lacking of the bank in Colombia with the Itaú Chile. So there was this acquisition. This was higher back in 2014. It's not new, but it was finalized now. And also, you've probably seen that we have this voluntary this business program with a little bit of a different condition than what we had in the past.

At the time we had the launch of provisions in the nonrecurring results, same thing that we did now, but the most important thing is this program now, this launch now, it doesn't really integrate any kind of expenses in the first quarter of 2022. It is prospective for what we expect to have in terms of expenses with the extraordinary expenses. We do not expect to have this as a recurring element, and that's why we are doing the provisions like this. So we have 12.5%. This is the Tier 1.So it's close to 1.5%, but we are able to use everything that we have issued in Brazil and abroad. And our capital, Tier 1 is 11.1%.

Now in terms of guidance, I think it's important to be consistent, coherent, I think that's very important in this game. We're not going to change anything in our guidance. And actually, we, for a while, we know that the last guidance was posted just 3 months ago in the first quarter. And if we look at everything that we want to do in 2022, we're still looking at the same expectations basically.

So credit, also the financial margin with clients. I mentioned that we had 23.5% in consolidated, and it's really close to the maximum of the guidance. So we're still comfortable with the guidance that was disclosed. That was flattish.

Well, I would like to wrap up, and I think we should now listen to you if you have any questions, any comments. Thank you all so much. I am going back to the studio to see Renato now so that we can continue this debate.

[Renato Lulia, executive]

[Operator Instructions] [Interpreted] I have Milton over here, hello Milton. Let me turn it over to you now, so that we can start with the debate with the discussion in our earnings call.

So we have the first question already from Flavio Yoshida from Bank of America, Merrill Lynch. Flavio?

Can you hear us? I'm not sure Flavio can hear us. Maybe you're on mute, Flavio, I'm not sure. I'm not sure Flavio can hear me.

Okay. I think we can try maybe the second question, and then we'll go back to Flavio. We'll try again. So I have a question from Thiago Batista. Thiago, can you hear us? There's probably a connectivity issue. [Technical Difficulty]

But in the meantime, it's interesting to see all those results that you mentioned. So I wanted to know what are the main highlights if you want to repeat some of the highlights in terms of the consistency of our results this quarter.

[Milton Maluhy Filho, executive]

[Interpreted] Well, as you are were saying this is live. So yes I think that we are probably having a connectivity issue maybe via Zoom or something. So as I was saying a while ago, this was a very consistent quarter. I think results were well aligned with what we were expecting. Again, the main term here is consistency and there might be a few questions, and we expect to hear from all of you, but still, it's something that makes us very satisfied, very happy in terms of this quarter and in terms of the future as well. We really trust the guidance for the entire year. So that's why we didn't have any changes in that.

[Renato Lulia, executive]

[Interpreted] So that's why we didn't have any changes in that. I think Flavio is with us now. Hello, Flavio. I'm not sure if you're on mute, Flavio, we cannot hear you. Can you hear me now?

[Flavio Yoshida, analyst]

[Interpreted] I was on mute before.

[Renato Lulia, executive]

[Interpreted] There it is. Okay. Flavio, we can hear you now.

[Flavio Yoshida, analyst]

[Interpreted] Well, you were talking about the guidance before. And what we have seen here in terms of the figures of the first quarter is that they're not higher than the guidance. So what I wanted to ask you about was the margins. When you look at the growth, you can see that it is usually for credit cards that have had very good growth. And when it comes to companies to corporative, also that a bit stronger than before.

So I wanted to know to ask you why haven't you changed the guidance, especially when it comes to the margins I mean for the rest of the year, why haven't you changed the guidance? Do you think the margins are going to suffer more pressure as time goes by, throughout the year, et cetera?

[Milton Maluhy Filho, executive]

[Interpreted] Thank you very much for the question, Flavio. We're truly sorry for the inconvenience with the connectivity issue, but I think this is working now -- in terms of the margin, what I can reinforce is that we understand there was a very solid -- we had a very solid quarter, it was above the guidance. But since it is annual, when we're looking at the forecast, when we're looking at the future projections, we believe that this is going to be aligned with the guidance year-on-year. And we have seen some advancements in some lines. There are many reasons for that. There's also seasonality. There is also invoicing. There is also resuming activities -- that's why also we have seen an impact on cards. And in the fourth quarter, there is this seasonality with people also getting Christmas bonuses for instance, or different amortizations. And that's why the balance for certain products or special credit, for instance, there will be a reduction in that.

Also in personal credit product lines, there is renegotiation. We were discussing a while ago that this is something that has or brings a reduction. So from a standpoint of credit quality and margins, we recover margins. We started the year off very, very strongly. We know that the projection that we had for the beginning of the year has, of course, some expectations in many aspects. And when we were preparing for the guidance, there were a few things that did change I would say the inflation rate, the interest rate, some macro things, but you see the last quarter of last year, we had a lot of acceleration in the margin, 13.8% quarter-on-quarter.

So we have been accelerating. I mean we were accelerating last year. So that makes the result of the margins now it makes them converge towards the guidance. So that's what we see. We're still very positive, very comfortable with the guidance. And we don't see a reason to change that in any of the lines.

[Renato Lulia, executive]

[Interpreted] Thank you. Thank you, Milton. Thank you, Flavio for the question. And we have another question here from Thiago. But I do see Tito on screen. So Tito, let me turn it over to you.

[Unknown Analyst]

[Interpreted] So my question, just in terms of your growth in NII and provisions, right? I mean you had good growth in the client NII, as you mentioned. But provisions are also growing quite a bit, and there's concerns about asset quality deterioration in the current market environment.

So just how do you think about that growth? Are you concerned about asset quality deterioration. I mean you have the growth in unsecured lending. Do you see potential risk from that at some point later in the year? How do you think those 2 lines you kind of involve hand-in-hand?

[Milton Maluhy Filho, executive]

[Interpreted] Tito, thank you very much for your question. Let me go through some messages here from the cost of credit and the perspective looking forward. First of all, we are very positive about the guidance. So we still believe we're going to deliver the figures with the guidance we told the market at the beginning of this year.

Second, we saw a deterioration situation by the second semester of last year when we found out that we were seeing some difficult semi-specific vintages. So we are very fast here and other models predict a lot. So we made the decision to reduce the origination of some credit throughout that period. And this, of course, will have a positive impact this year because we made a very fast decision. But anyhow, I've been saying to you and to the market that when you look 2020 and 2021 were 2 unusual years. That means that we saw the delinquency ratios and also the cost of credit per portfolio in a very, very low level, the lowest level ever when you look to a long series. So it doesn't seem reasonable to have those so low indicators.

So our view on what we've been saying to the market that we expect a gradual normalization of the delinquencies throughout the period. We still believe, by the year-end, we're going to be below or very similar to what we were seeing before the pandemic. So this is basically our view. We saw some growth here in some clean portfolio in the first quarter, but a very comfortable way because 80% of that or even more 88% in some portfolios with known clients that we have a relationship and long-term relationship and where they were consuming more and using more some credit facilities, the overdraft is a good example.

When we go back to the fourth quarter, we have to remember that on seasonable effect that the clients they have, there are 13 payroll, paycheck and they pay credit lines. And also, we are comparing in -- on a nominal basis with previous quarter with a much higher portfolio. So when I look to the -- the NIM of the bank and the NII of the bank, we are very positive, more than 20% growth. And of course, with a little bit higher cost of credit, but in the bottom line, very positive for the balance sheet.

So we're still comfortable, but we expect, as I've been saying, telling you since the third quarter of last year that the delinquency ratios will increase throughout the 3 quarters that we believe, but it's still normalization or getting more stable, very near or close to what we were seeing before the pandemic start. So we're still very comfortable about the figures, but again, expecting slightly deterioration throughout the quarters that we still have ahead.

[Renato Lulia, executive]

[Interpreted] Now we have a question from Thiago Batista.

[Thiago Bovolenta Batista, analyst]

[Interpreted] So I have a question about the bank Capital. We were -- you were talking about 12.5%, around 100 below the target that you had and without really considering the consumption that you're going to have. I mean from XP, so when you think about capital, is that something that bothers you? And also is there a plan to -- did all that. I mean, Milton, you mentioned that you're creating, I think, 50 first semester, but it's still 100 below that level.

So how long do you think it might take to reconstitute all that? And are we going to see a position in that goal for the next few months given the new approach hedge. So how do you think this is going to work.

[Milton Maluhy Filho, executive]

[Interpreted] Thiago. Thank you for the question. There are many things that I could share here with you. First of all, in fact, with the end of overhead, that started with 100% adjustment this year. That's the rule of the Central Bank. And with the end of the changes in fiscal aspects, we are expecting more volatility in the exchange rate. We didn't have the same effect in the last quarter, actually. And we usually say that this is not the structural position of the bank. I mean, it is a hedge really per se, so that we can calculate the volatility so that we can manage our assets in a prospective manner.

So the first thing is in our committee, in our counsel, we're working with 12 CET1, and we are comfortable to work with 1.5 CET1. So from a risk appetite standpoint, there is not going to be an impact on the dividends of the bank. We are still distributing the QCD the 13.5% as we are used to. So that's the first movement. And we understand in terms of operations, the bank can still work with that because the buffers that we had in the past, as you said, that they were connected with those events. Of course, it depends on the -- depends under circumstances. And we work with more buffers, especially for dividends because we want to invest and expand the franchise. I'm not looking to pay more dividends. I am actually looking at having the right profitability from the bank capital.

The second thing is we expect that the assets that were converted by risk as we change the margins and the margins and we have an adverse effect that might pressure the portfolios. So the capital generation in the quarter is going to be more than enough to absorb any growth. And we had 2 specific events that I just mentioned. The [ PDB ], for instance, it's going to bring benefits and recover capital as time goes by because I'm going to do the provisions. And as I have more expenses, I'm going to bring more benefits, better results and reconstitute capital and also the acquisition of Itaú Corpbanca in Colombia, that's something that happened in the past, and we simply finalize that.

We have the investment in the participation of the acquisition that we had on April 29, the BRL 8 billion, the 11.36% participation in XP. Let's remember that by the rule, capital rule, any investment above 10% in institutions, financial institutions, make us deduct the -- fully the value of the investment. So if you look at the isolatedly the investment of BRL 8 billion, we lose around [ .8 ] in capital with this acquisition.

On the other hand, if we sell just 1.37%, so going back to the 10%, which is the limit, then we already come back with the capital -- total capital of this acquisition, of course, not 100% because the part that remains below 10 is pondered with the pondering factor, which is 100%. So in practice, what happens is then since it comes -- we can recover a great part of this capital, and that can be done as we think that it is an opportune moment. And exclusively, here, this lot is not a relevant lot, and we can do it with private sales, trading and this size is less relevant here. And we are very comfortable, and this depends exclusively on our actions.

So this is something that will be done. And when we look at this prospectively, we've done a very active management of our portfolio. So the fixed income market is a very good example. Everything that we've originated the longer-term credits we try to get it in the market to have a bigger rotation for the clients of big companies, big tickets, big customers that have capital markets that are well developed. And of course, we have made decisions that optimize the level of capital that we manage.

So we are comfortable. And our expectation is to replenish this capital through all time and always working with an appetite that are for the management of the bank. We are comfortable, and we think that we are going to work well and we will have less origination throughout the year.

[Renato Lulia, executive]

[Interpreted] Well, thank you, Milton. Thank you, Thiago. And we have another question now from Schroden with Bradesco. We are adjusting the question. We can go with Rosman as well. And Gustavo, I thought that you were kind of different, Gustavo.

[Gustavo Schroden, analyst]

[Interpreted] Congratulations for the results. My question is very simple.

[Renato Lulia, executive]

[Interpreted] We lost the audio. Now I think that we can hear it. Can you repeat the question?

[Gustavo Schroden, analyst]

The question is treasury and guidance. The result that Milton already specified it is what we expected. And if we think about the guidance that you passed BRL 1 billion to BRL 3 billion, we had BRL 1 billion now, but we have the guidance. That means that the next quarters will be very weak and you have this very well mapped. Do you think that there is a possibility for the second quarter, a review of the guidance. I just wanted to understand that because it was surprising BRL 1 billion was now what we had in mind.

[Milton Maluhy Filho, executive]

[Interpreted] Thank you, Gustavo, for the questions. Well, it's exactly what you mentioned. We had a better quarter than what we expected. We know that we're going through a very volatile moment, not only in Mexico, but internationally, this is what has happened the war in the Ukraine. This is a very important movement China with a zero tolerance lockdown and emphasis and well above what the market expected behind the curve, the adjustment in the interest rates. So we expect more volatility.

Our structured portfolio of the trading, we're doing well, performance-wise, even though there is the adversities in here into the market, so we are still delivering a lot of results. And the banking, structurally, we've had different effects. When we look at the different levels of interest rates, Brazil and in the United States mainly. So our best expectation is that we're going to have 2 quarters that are a little bit more difficult up ahead and we should frame this result within the guidance.

So the cost of hedge is there lied to BRL 400 million in the quarter. And we should have -- well, it really depends on the interest rate differential, then our expectation is that it is something close to the BRL 2 billion that we just mentioned in the beginning. This is what we should have of the cost of the hedge -- the index hedge. Well, in the market, the perspective is not the best we've seen in the market as a whole. This has to do with the structural positions that we have. And remember that this year, we have the end of the overhead. Last year, we still had a very important result from that, BRL 800 million.

So a long response to say that the expectation is to be within the guidance. We shouldn't review it unless an opportunity or additional volatility might come up that might benefit us. But we will maintain a guidance nonetheless.

[Renato Lulia, executive]

[Interpreted] Thank you, Milton. Now I think that everybody sayings. Now who's next. Here is [ Rosman ]

[Unknown Analyst]

[Interpreted] I wanted to ask about the other blocks of the results. You have several openings. And for example, we can see that the [ ROE ] or return on investment. On the ROE of the bank is -- we have a big [ ROI ] and we have -- and we wanted to get your trend here.

[Milton Maluhy Filho, executive]

[Interpreted] Thank you, Rosman, for the return on equity question. Now we've seen a growth in the portfolio that is a bit higher than what we see in services and insurance. So we have more dependence on credit and we had more dependency less dependency moments, but we have a cycle of 4 years, the fifth year of growing the portfolio. And naturally, this brings more dependency on credit results. Credit for us cannot be looked at in an isolated way, everything that we do in credit, whether it's wholesale, it is trying to service our clients as best as possible cross-sell, everything that we generate is we can see the wholesale has a great results, and the delinquency is really low. If you look at corporate investment banking, all the large corporate in the middle market, these are -- we have portfolios that have low delay cost that is low.

Solidity, the companies are less -- are more leveraged, more prepared for the challenges up ahead. So wholesale, we've had great results, incredible results and pulled by the investment bank and in a concept, not only variable income but also fixed income. We've had important growth that we had in the first quarter of this year. We had record results in fixed income. Even though in the fourth quarter, we're going to have a deacceleration natural from the elections and so on and so forth. But we should have 3 quarters that are very solid for the fixed income not so strong for variable income, but it's very stable.

In general, the wholesale is doing well. The cost of credit is a very important lever in the retail, and it generates a lot of credit. And retail, actually, we have the delinquency, the high inflation in April, we should have 12% of inflation, interest rates that are climbing at a breakneck speed.

So regardless of the magnitude of the interest rate impact is the speed of the interest rate. Remember that we went to low or through 2% and now we're running [ 12 75 ] and we still have 100 points for decline of the interest rate, and this impacts a few specific spreads. Some portfolios more than others are sensitive. The marginal procurement, we try to pass it on to a few other portfolios with the increase of interest rates, some have limits regulatory limits such as Consignado or the loans here, check specifically in Brazil. Other portfolios that we suffer in funding, the savings account is a great asset. Most of the deposits on the savings account is spontaneous. We don't have any objective -- our -- we have to sell the savings for the clients, but still a safe product in the view of several clients with several benefits.

So there's still a big volume. When the interest rate goes up, then we changed the rule, and this brings a cost that is additional for the savings account. And there is a credit effect, which is the cost of funding for the anticipations that we do at the bank as a whole, specifically in the acquiring.

Remember that for the acquiring is 100% ours. So all the effect of the funding or the cost of funding are with the margin or within the NII of the bank and all the MDR, it's within the revenues of services. So remember that when we changed the commercial regime, for example, D+1, the cost of funding of that, the margin is with declines so the MDR is within the revenue of services. All the anticipation is there.

So all in all, we see this increase of pressure because of the interest rate increase, we can penetrate in products of greater profitability, but with a marginal profitability that is lower than what we observed. So the expectation is that this should be the tone at the top. And we can see the increase of delinquency throughout these next quarters. And so this should cause some issues in profitability.

We are going to get a return on capital very similar to what we see in credit, I don't see a lot of changes, mainly considering that at the bank, the cost of the capital cost is increasing. We are running at 14% of capital costs, and this is the way that we infer and calculate our capital costs, even more conservative than what we see at the average of the industry, 12.5%, 13%, we rather run at a conservative level, and we are adjusting the margins with the new portfolios, trying to get a profitability level that is -- well, given our hurdle of economic capital allocated and the value that is expected at the portfolios.

So this is a long response to how we work this, but the results are still very strong, and the creation of value is based on the revenues of bank book insurance, everything that is not called credit. And the trading portfolio that also generated value, but it's separated.

[Renato Lulia, executive]

[Interpreted] Thank you, Milton. Now following the order, we have your treatment from Citi.

[Jorg Friedemann, analyst]

[Interpreted] My question is what was Milton talked, the growth of clients. So we can see clearly what is happening. We have a platform that is centered around the client. This is a trend in the disposal of several banks. I know it's difficult to execute, specifically given the legal issues. In this call, I think that Milton highlighted the deliveries of the insurance -- we can see the client centers.

What are the other business units, Milton, that have opportunities for improvement within the bank? I think that the -- we can improve different potentials here in the bank, but I wanted to -- well, the brokerage can improve, and I wanted to do a follow-up and if possible, can you comment on how do you see the flexibility -- regulatory flexibility for the M&A of these opportunities? It's clear that we have a limited addition, but I don't know if there is going to be the interest rates and the difficulty with some start-ups can that lead to some consolidation in the universe, what you think?

[Milton Maluhy Filho, executive]

[Interpreted] Well, thank you, Jorg. Thank you for the question. Here, I've talked a lot that the mantra is cultural, digital transformation efficiency. But all of that only makes sense if we have -- if we focus on the client, we've changed in a very relevant way, the way that we face even the incentives related to clients. This has changed all throughout the bank. So all of our collaborators, without exception have objectives, goals and with clients. I'm including accounting people, risk, everybody has to have an unlock that is dedicated to the client. Of course, to deliver that, we have the modernization, as you said, the legacy system. We've done 25% of the migration of the legacy, all the systems, 8,000 services, we already migrated 25%.

And when I say migrate, it's not simply stop the processing of that software or that system ex in our data center and take it to the cloud. Going to the cloud in first, in modernization, new architecture and [ Up and Guard ] technology. We are up and running in this process. Our expectation is to get to the end of the year with 50% of the legacy platform modernized. But we are prioritizing in the context of the client. We start from the pains of the clients. We understand what is relevant and the modernization stems from that. So at the end of the year, 50% of the business services, these are 80% or 80-20 of what is really important for the client, 80% of what is important will be modernized and running on the cloud.

This is a transformational change. And I would say that this is a new moment for the bank. So 100% of the spreads, the tribes, whatever you want to call it, operating in modern platforms, which changes we measure the quality of the delivery at the legacy for where we have in the new platforms, modern platforms. The speed to take to ship production time to market, the testing, making a mistake and correcting understanding the pains, and working in the context of the client is enormous. And the amount of time that you dedicate that you have to dedicate to develop a series of codes -- lines of code, this increased a lot. So we have more efficiency with the intelligent use, not only for the processing capacity, but in our vision, investment is advancing very well.

You talked about the point of the brokerage. Not only we acquired [ EDL ], which we're still working for the regulatory approval, we should take a big leap in terms of quality and platform. We've done very important investments in our legacy brokerage. So we will have delivery not only at the institutional level, big accounts, but also for the wholesale world. So we see an evolution of the home broker. We can see the negotiation of the secondary is working very well. We -- there are LPs, the many contracts, all of that were features products that we didn't have before. So now we have in advance. We are changing the logic of investing in technology, in business, understanding the needs and the needs of clients.

So I see a lot of opportunities in wholesale. The world of cards, the NPS is very solid and investments were doing a great catch-up, delivering value, delivering the quality of experience, and we see insurance the growth is vigorous our expectation is that the growth will be continuous. And once again, not only we have to do the management that is centralized without understanding the pain of the clients, and we have to evolve it.

So in my opinion, we finished 2022 with relevant advances in the NPS of the bank in several of the business. So I don't have one business that has more difficulty. All of them are fencing. And for here next year, we will launch the platform that is much more modernized.

So these are very relevant expectations of all the investments that we're doing. And just so you know, of the 14,000 people that we have in technology, 80% of them are dedicated exclusively to the modernization of the bank and end-to-end delivery. Only 20% are dedicated to the [indiscernible] bank. So this shows the size of the appetite for the investment that we've done. And we believe that with everything that we're seeing, we can compete on equal footing with many of these new companies. And at the same time, we see the added value of the companies that are in the market.

And now the second point, we will go to an associated agenda, which is CVC partnerships, commercial partnerships or the agendas of fusions and acquisitions and everything that we've done here, there wasn't any counterpoint of the regulator or the CADE. I don't expect to see any downfalls. We are always paying attention. We didn't stop to do any transactions. We're worried about regulatory issues. We know that in 2017, it's very complex, very specific case, which is the negotiation with the future controller of XP. It was an approval by the Central Bank. But we still have the expectations that naturally, the market will be more competitive and it's important to look at the market share and market cap, everything that happened in 2017 from now 2017 to now on.

Several companies are in the market because of the value of the market, not only from a year, but this shows a competitive market that one we observed. So we imagine that the processes for eventual deals, approvals should be more -- bringing more churn quality than what we observed a few years back.

[Renato Lulia, executive]

[Interpreted] Thank you very much, Milton. It is difficult sometimes to communicate all that to the market. When we're here on this side of this camera, we know more about that. Well, we have Henrique Navarro from Santander now. Hello, Henrique.

[Henrique Navarro, analyst]

I wanted to ask about delinquency or failure to pay, which is a real concern nowadays. When it comes to results, we see that the 90-day delinquency actually -- well actually I want to know actually if that has been a concern, I think it is aligned with what many others have reported already, but the real, real concern, I think, is the 15 delinquency. We've seen some rate of 90%, but the real concern, I think, has to do with the 15 because it might lead to a bigger problem. And especially the 15-day delinquency it is -- I mean, it is normalized at Itaú, it is under control. It is aligned with a portfolio and its risk.

So my question has to do with the following. That asymmetry that we've seen within 15-day delinquency from for Itaú and the rest of the market, why does that happen? I mean I wanted to know more. Is it -- does it have to do with the profile of the portfolio? Or is it something that we really shouldn't worry about because it is very volatile. I mean, very seasonal maybe. So I wanted to hear from you, I wanted to understand what you think about the 15-day delinquency rate.

[Milton Maluhy Filho, executive]

[Interpreted] Henrique. Thank you for your question. I think you even asked something about related to that in the previous call. So it's something that you're truly concerned about I can tell, well, we've seen that it's normalizing little by little. The thing is the short delays, especially in the first quarter, there is a seasonality for that. If you look at the history of the records of the bank, yes, that's -- there's usually a deviation in that.

So we've seen something similar to previous periods of time. I don't see a huge change in the short delays. If I look at Brazil per se, I see that is a usual behavior when it comes to portfolios, there might still be an increase in delinquency rates for the next few quarters, but still close to normal. And especially for the over 90, I think it's still going to increase in Brazil and going to be stable, similar to what we had before the pandemic. I think it is a good behavior. I think there are 2 levers, I would say, that I would like to highlight. There is no -- not even BRL 1 of sold portfolio. I mean we're not selling active portfolios. We know that selling active portfolios would have a positive impact on the indicator, and we haven't done that. So whenever you compare, it is important to see what the conditions are. It's important to understand what kind of effects for selling active portfolios would be. So we really reintegrate the sales of portfolios whenever we want to compare to have also a good reference to compare. That's the first topic here.

The second thing is the renegotiated portfolio. We've been very careful. I mean, versus we ended the Travessia program, we wanted to renegotiate looking into the future. I mean, nowadays, we're looking at 3.3%, but the renegotiated portfolio had a nominal reduction the one with BRL 53 billion. Now it is -- we're looking at BRL 27 billion. So we had a change. It's basically half the portfolio. So it's still a good coverage. Of course, the duration is going to be longer because we have some credit for houses or cars. But the bottom line is we're not renegotiating the active portfolio or increasing the renegotiation of the portfolios at the bank. We're not changing anything in terms of the these portfolios, what we're looking at here is a screenshot of what's happening to the delinquency indicators.

So again, it is a challenging moment, more inflation, more interest. The GDP is not growing that much. The perspective might not be super positive for the future. So we have been very careful. We have been very proactive in reducing and adjusting concessions ever since. Last year, the second semester last year, I think we're going to continue to do that this year. We're trying to adjust and we're working in a timely manner to make sure that it's going to be okay. But again, we believe that it's going to gradually go back to a stable level. There might be a deterioration until the end of the year, and that's what we believe will happen.

[Renato Lulia, executive]

[Interpreted] Next we have Geoffrey Elliott from Autonomous.

[Geoffrey Elliott, analyst]

[Interpreted] So another question on this topic of credit and specifically interest rates. So rates are now quite significantly higher than they were a year ago. And I know you don't have a lot of floating rate loans on the consumer side. But how is the increasing credit -- increase in interest rates feeding through into credit quality? And are there any kind of threshold levels of [indiscernible], where you'd start to think that your customers really start to get squeezed.

[Milton Maluhy Filho, executive]

[Interpreted] Geoff. Thank you for your question. I think we have to separate what we call the wholesale clients from the retail clients. On the wholesale clients, indeed, they have their credits raised on CDI plus in general, okay? So when you have an interest rate hike or increase as we are seeing locally, they have an impact. So the good thing of that is that when we see the whole portfolio of the wholesale, we are working with much lower leverage companies than we used to see in the past. So even when you have a huge devaluation of the effects or things like that, we don't see the same impact that we used to see in the past. So this is one side.

So the corporate clients in general or and the middle market clients as well, they do have this impact in their cost of financial debt whenever you have an interest rate hiking process. So this is from one hand.

On the retail, it's more on the margin. So you don't have clients in general that have their liability being correct by the interest rate but in the margin of new production, yes, you do because then we have to -- we have this pass-through of the interest rate to the new credit and the new origination. So my view is that when you look for real estate, we have an important reduction in demand and in production as well. So we do both. First of all, we see lower clients asking for less mortgage than they used to be. But on the other hand, we do adjustments in our credit policies because we are operated that clients you may have some adverse selection at these levels of interest rate. The same for auto loans and for products when you have to price with the new interest rate.

So lower demand, but also we work very active to adjust our policies to guarantee that we won't have any adverse selection. But I would say that the most impact stays on the corporate clients in general. -- they feel more pressure. But as we see a much lower level of leverage of those companies, the marginal impact is, of course, much reduced when compared to the past, but it's still something that we have to keep an eye on.

[Renato Lulia, executive]

[Interpreted] We have a question now from JPMorgan. Hello, Domingos.

[Domingos Falavina, analyst]

We're trying to get -- we're having an audio issue here, but let me ask you my question. So Milton, I have two quick questions. First one for cards. We see that the balance in the portfolio grew 40 million and [ FII 16 ], it seems like you have a little bit more control over the limits of the portfolio. The rest would be because of the use and all that.

So my question is, how do you see the revolving changing? So I mean we see the change in number of our items, I would say that it is actually 10%, 15% of the results of the bank, and it's something that has changed in terms of profitability. So the question is, how much do you think that might represent in terms of the total profit of the bank.

[Milton Maluhy Filho, executive]

[Interpreted] Domingos. I hope you've been able to solve the audio issues. We were able to hear your question. So I think it's back to normal. And hopefully, you're going to have access to all this later if you are not able to enter right now. So on the credit -- for the credit perspective, in terms of credit cards, when we look at the first quarter last year, and we see that change in 40%, that increase in 40%, we have to actually see the entire video, I would say, not just the screen shot. You see with the lockdown effect, with people at home trying to save more money and spend less money. There was a great impact.

So that changes the value of everything that was consumed that also changes. There also has an impact on credit cards. Right now, we are looking at figures that are growing, and it's in line with the market. But despite that, we're not going to -- we're not having a great market share. We're trying to defend market share actually right now. It is something that has grown a lot in the market, but we have a great portfolio, 30% of the portfolio in the -- or 30% of market share in cards. So it is a very relevant thing, but it is really different perspectives. So you have the individuals with an account, you have the financial institutions, you have everyone in that chain.

We have changed a few things. We have reduced the number of new clients because we understand it is more of an adverse moment right now, and it's something that we have to be very careful about because it has a higher volatility. Whenever there is an adverse moment in terms of economics, we have to be careful. Again, we see that there was a change in the savings of these people, especially lower class and that's why we have to be careful when we compare with the first quarter last year. We've been trying to look at seasonality as well and compare with the right references and adjust accordingly. But again, yes, it is a portfolio that has more volatility.

There is this migration into a financed portfolio, but it is usually lower than what we had in the past, that financed one. So the one without interest has grown a lot lately, and the finance portfolio has reduced a lot over the past few years. We are looking at a certain transition back into what we had before the pandemic.

So it's really resuming in a way. It is very relative. And in this adverse moment we are trying to pilot this portfolio in that way. And it's also valid for special credit lines, for instance, or payments and with installments and all that. But yes, it's a similar challenge. We're looking at a weaker quarter last year, the first quarter of last year and much stronger this year. And naturally, we're going to stop having that kind of comparison. Probably next year, we're going to have more of a normalized scenario.

[Renato Lulia, executive]

[Interpreted] We now have a question from Marcelo Telles from Credit Suisse.

[Marcelo Telles, analyst]

[Interpreted] I think actually most of my questions have been answered already, but I wanted to ask about the funding. You know that especially when it comes to FIIs or the real estate funds in this case, there was a change of around 40%, an increase of 40% quarter-on-quarter. And we've been -- I think you've been very competitive in that scenario, but we have to consider the independent platforms. And my question here is, what is the strategy in terms of funding for the bank, do you think it's necessary to rethink the rate, the interest rates and how that's going to affect your strategy? And also do you think there's going to be an impact and the cost of funding or your margins in a negative manner in the future.

[Milton Maluhy Filho, executive]

[Interpreted] Thank you, Marcelo. Thanks for the question. Let me give you a little bit of context here. We've been talking about an open platform for a while. We've been talking about avoiding conflicts with our consultants, with our investment consultants, we've been investing on this commercial sector to be able to offer this service. As we mentioned a while ago, and this has brought great results. We have gained a lot of share in retail, also in private banking. So that shows that we're very strong in terms of the offer, the commercial team that we have, a lot of dedication really in that regard, and we've seen the results. There are some also some other metrics that have shown interesting results.

First of all, we have an idea of the liquidity. When we see the relative scenario, of course, everyone is consuming all that. We came from a moment where there was a lot of savings and now we have more assets and people consuming all those savings. So the liquidity indicators have changed, but we're still working with the most competitive indicators, the most conservative ones. So LCR, for instance, is higher right now.

And the second aspect here is that the commercial team, the investment consultants, they're not compensated by the product or the spread generated by that product per se. They're simply -- their compensation is for AUM or AUC. So there is an important change, an important difference here against other places. So whenever we see that there is hiking here in the interest rate, we're able to migrate many clients that are having a lower yield in their products, we migrate them to a higher profitability. Even though we do miss results, I mean, we may -- we might be losing an administration or management fee there or something like that. But still, we are migrating them to a higher profitability.

And you see that our own products are growing. Our platform of our own products are growing. So there is great search. People are trying to find that kind of option. And the thing here is how can we deal in a better way with conflict? That's what we're trying to do. In this moment, we're not selling anything that has a high spread or it doesn't make sense or it's going to just maximize the short-term results. But from a client standpoint is not a good thing.

If you look 2 years back, if you look at what we were offering in the past in that portfolio. And if you compare that to what we have right now in the market with those clients, you will see that we are very consistent, very transparent, very coherent. That's the agenda. And in the long term, I think that brings loyalty, that brings the great delivery of results. So the answer for you is we are trying to bring to clients what generates value. There is this migration in the portfolio.

In the macro scenario, we have a different interest rate and it doesn't make sense to make people or to lead people with fixed income product with a certain risk that is integrated or a fee that is integrated to that. So we adjust that to the right risk and then we have the best conversation with clients. And that's why it's going to be a full bank.

I mean we can offer our own products or third-party products. So we don't see any conflict whenever we change the trends and prices at the bank, the first discussion is, it doesn't matter if we're going to have a transfer. We're going to have the best conversation with our clients. Another indicator that I find very important is the deposits individuals. We have the highest results in that regard in the market. We finance all that portfolio 100% with deposits of individuals. When we see the portfolios of individuals, we have the best indicators in the market. So the thing is we have more investments. We're gaining market share. We're bringing the right thing to them, and we're maintaining good levels above regulatory levels. So that's the point.

And investments are bringing more value to us. We are growing. We're investing. We're happy with what we have been capturing. But there's still a long way ahead of us. And that's why we're going to continue to work with the same intensity. You may see the evolution of that and the results will come.

[Renato Lulia, executive]

[Interpreted] We have another question, and then we have space for the WhatsApp. So the next one is from Goldman Sachs. [indiscernible]?

[Unknown Analyst]

[Interpreted] So just on a follow-up on the participation of XP, and let's understand what happens from here until the end of the year. If this is just below 10%. Can you sell more relevant? Or if I understand correctly today, you don't have capital gains, how much that causes a hindrance in terms of selling a higher percentage of your participation?

[Milton Maluhy Filho, executive]

[Interpreted] And this is a very simple response. The acquisition that was done of BRL 8 billion was higher since 2017. We simply fulfilled what we committed to the multiples of XP changed in terms of price and profit any scenario the values of the market will change a lot at the moment that we did the spin-off in May of last year, our vision is 2x. Time #1 is how much we do of the investment to recover the capital. So it is a very small lot of shares that we have to sell to maximize the return on investment and it is maximizing the recovery for the capital index.

And the second one, it is TDM. And less years to mention that we do an adjustment of the position, and we start to carry [ 9.99 ] to simplify our shares of XP. And with time, we will decide economically what is the best time of exit as it is a position of equity. And as we have another investment. And this will be an economic decision, and we will leave the investment. If it's now, if it's on the medium term, long term.

So you look at market conditions perspective. So we don't have any rush to do this sale. And we are discussing every -- receive questions if it's going to be a spin-off or not. It doesn't seem like it will be a spin-off even though we didn't make the decision. I think at the moment that we did the spin-off of the other participation, there was a very different logic, the value market network enormous, not capture in our multiples. And we are in the regular prices of the market.

I don't see the spin-off in this logic, we are going to take a look at the conditions and we can always reevaluate. But at this moment, we will make the most -- the best economic decisions. There is no rush to do the disinvestment. And with an exception is now rush is trying to find the ultimate time of this 1.37 and it has to be 1.37 for us to maximize the recovery of the capital index of what we, in fact, will have from now on. This is the central point here.

[Renato Lulia, executive]

[Interpreted] Thank you, Milton. Can we do another two. There is a lot of questions here at WhatsApp, I'm trying to gather all of them for the themes that appear, you mentioned capital funds as well dividend. For natural persons, this is even more relevant. So how do you see the payment of dividends in 2022?

[Milton Maluhy Filho, executive]

[Interpreted] Well, here is a response. I see an increase, the value of the dividend for the growing because the results are growing. We have 2 answers. How many real per share we're going to distribute at the end of the day. Since we are distributing sharing 25% of profits in the period, with more profits, more dividends. So this is what we expect.

[Renato Lulia, executive]

[Interpreted] The payout, which is a question -- what about the payout? And is 25%, do you want to increase it to 30%, 40%, it was much higher in the past.

[Milton Maluhy Filho, executive]

[Interpreted] Well, really it depends on our table, spreadsheet that we informed to you, which is the matrix on one side is profitability, and the other one is the risk -- the growth of the risk-weighted assets, how much we have growth of demand of capital in the bank. So if I have low profitability and low capital with a lot of capital in the bank, the distribution is higher. As I have demand to use more capital, then we will see the size of profitability to find the optimal point. But the projections that we have, we will continue with a payout of 25% for a long time, but really increasing the result of the bank and paying more dividends per share. And this is what we expect. There is no type of change in the policy of dividends.

We still continue with the same table that was discussed, and what we are doing in the investments. We're investing in the franchise, the growth of the bank and making the capital -- of the capital be profitable, we are running at 21% and ROE 24% and be consolidated. Our goal and my mantra as a CEO is the creation for the value for the shareholders. So any time that we are creating value for the -- at a high level, the capital part will continue to invest in operation. If I understand that I have capital that will not be used in a period, and then we can rediscuss the payout or the percentage of the payout. But for now, there is no discussion.

[Renato Lulia, executive]

[Interpreted] Perfect. Thank you, Milton. Anything due to the time. Let's finish with another question. We've had several questions about the inflation with an interest rate. How does it impact the cost of the bank? And you mentioned the -- we have the consolidated efficiency in Brazil. So how can we -- what are the levers that we have to reach this ambitious goal of having a result of core -- of the stable cost of the bank nominally all throughout the years?

[Milton Maluhy Filho, executive]

[Interpreted] Great. Now in an inflation environment is now very simple. We have to say that a relevant part of our cost is the payer role of the bank and that we can see the increase in last year was almost 11%, and this is a subcontracted part subcontracted costs. And we have until September when we have a new discussion and then there will be increase in the quarter.

We are going through an inflationary peak that is very strong. This is not news for everyone, and this inflation has materialized through IPCA, IGPM in excess and a very strong inflationary pressure. Since we cannot control the inflation, we have to do our homework. And our homework is not simply causing the cost with brute force. No, we have to do structural changes in the way that we work. And this is our agenda. The efficiency program has over 4,000 initiatives. So there is no silver bullet here.

Efficiency is something that is piloted through everyone the level of detail and granularity that is a huge and everything as it's an economy of BRL 100 -- BRL 100 million. Everything adds. There is no expenses that we -- we have to pay attention to all the expenses. There is a lot of time to do with the culture, the example, the discipline of management and in a lot of capturing a lot of these values of investment on technology so that the bank becomes more efficient, more digital. We've done adjustments that are in the first quarter, the amount of the physical parts of the bank, we will have digitalization.

We have the relationship with the clients, with the more sophisticated products, decreasing the number of branches. So we are not going to cost the cost on the short term just to give better indicators. And we are investing in the operation. That's why it's very important to look at the efficiency index and not just a line of cost is in an isolated way.

So adjusting cost is having revenue. So where you have 39.4%, 39.6%, which is what we published, it shows that there is a combination of a lot of revenue expenses that are controlled. We can have a cost quarter of 0 incorporating all the inflation, but this is a work of everyone. This is not a silver bullet. This is the day-to-day work and the results are being gathered. More pressure towards the future, we have challenges.

We have the guidance that has an expectation of growth of costs year-on-year that is much below the much lower than the inflation and we will deepen this agenda with intensity.

[Renato Lulia, executive]

[Interpreted] Thank you, Milton. Well, and with that, we will come to the end of the session of the Q&A. But before I bid you farewell, I would like to invite you to navigate with our monitor that we published last year, and this is on our website. So besides promoting more transparency in our operations, the reported expense division of the context and the transformation and the cost of the market. And all that stems from this new economic sector. You can see in this document the strategy, the business strategy, the description of what we have, how we are generating value through a careful management of our portfolio and our capital. And you can see everything in our IR website.

I wanted to share something new in terms of service of Investor Relations. You can access our team via WhatsApp. You can see our phone number, which is 811-2794-3547. In this channel, you can get information that you need and also clarify any doubts. This is another initiative from Itaú to service our stakeholders anywhere.

With that, thank you very much Milton, thank you for your time. Thank you for being here with us this quarter, and we will see you in next quarter. Thank you very much, everyone. Thank you for your participation for your questions. I apologize once again for the quite technical issues at the beginning of our transmission. But the important is to make mistakes, learning with mistakes and this has been our cultural transformation in-house and is part of a process.

Thank you very much for your participation. And as I told you, the result and the agenda is of consistency, and this is what we are seeking in the next quarters. Thank you very much for your time. We'll see you shortly.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]