Banco Santander Brasil SA
BOVESPA:SANB3
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Earnings Call Analysis
Q1-2024 Analysis
Banco Santander Brasil SA
The company experienced notable revenue and profit growth in the first quarter of 2024. Total revenues increased by 14% year-over-year, and net income rose by 41% to BRL 3 billion. This robust performance was largely driven by growth in net interest income (NII), fees, and efficient cost management. Profitability, in terms of return on equity (ROE), improved to 14.1%.
The company successfully reduced administrative and personnel expenses by 5% quarter-over-quarter. This reduction was attributed to seasonal variances and adjustments in variable compensation. This effective cost management, along with revenue recovery, led to an improvement of 3.3 percentage points in the efficiency ratio, bringing it below 40%.
The loan portfolio grew by 5%, with significant contributions from retail segments like auto loans and SMEs. The company also noted strong performance in agribusiness, achieving 39% growth year-over-year. Despite a stable allowance for loan losses and growth in the portfolio, the cost of credit fell by 70 basis points to 3.8%. Non-performing loan (NPL) formation also showed a slight decline.
The company is enhancing its customer experience through a multichannel approach, integrating physical stores, chat, and its app for continuous customer engagement. The recent launch of a renewed store model aims to deliver a seamless and differentiated customer service experience, especially for SMEs and mid-income clients.
The company is optimistic about consistent revenue growth throughout 2024, driven by portfolio diversification and disciplined strategy execution. They are also focusing on developing a more stable and sustainable results base by gradually increasing profitability. Improvements in credit quality and a more profitable portfolio are anticipated to continue benefiting the business.
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[Interpreted] Good morning, and thank you for joining us this morning to be with us during the results for the first quarter of 2024. This event is being broadcast live from our headquarters in Sao Paulo. And as always, it will be divided into 3 parts. First, our CEO, Mario Leao, will talk about the main highlights of the period and also the strategies by which we will continue to direct our growth in the coming quarters.Next, our CFO, Gustavo Alejo, will present a detailed analysis of our performance. And finally, we will have our Q&A session, during which you will be able to interact directly with our leadership.Before we begin, I would like to give you some instructions. We have 3 audio options on the screen, all the content in Portuguese, all the content in English or the original audio. The first 2 options will have simultaneous translation. To choose an option, just click on the button at the bottom center of your screen.To ask questions during the Q&A session, simply click on the hand icon at the bottom of your screen. Questions will be answered in the language in which they are asked. Today's presentation is now available for download in our IR website.And now I hand it over to Mario Leao to begin the presentation.
[Interpreted] Good morning, everyone. It's a great pleasure to be with you during the release presentation of the first quarter. We are here live. And as usual, I'll start with a brief summary that we will further elaborate. I will give you the first takeaways for the quarter and what we expect going forward.Looking to the left of the screen here, we highlight a few numbers that show the evolution of some of our results accounts and also how we are positioning the bank for 2024 and going forward. So this is about 2024, but also, we will refer to the next coming years.Our NII is growing 14%. We will then highlight that it grows both in terms of market NII and client NII. We have a positive market NII after quite some time. We also have fees and funding growing at 2 digits. And this is quite important because it reinstates what we've been mentioning to the market, which is the need to diversify our portfolio. We build our first initial growth cycle with great reliance on the market and credit, especially low income. So since 2022, we've been pursuing credit, but a more diversified loan portfolio.And also, we want to increase fees out of a very large base. And also, we would -- we wanted to put more emphasis in funding. So this quarter, we show you how diversified our portfolio is with important and significant numbers, okay? Also, we have [ AOL ] like going down. Our diversification of our portfolio is good. We are building new vintages since 2022 with a better credit quality. We've been testing and retesting our loan portfolio.And we have an expanded loan portfolio growing at almost 2 digits, and also new portfolios, portfolios that we chose that we wanted to grow them further above 2 digits. And with that, we arrived at a result of slightly above BRL 3 billion, and this is a level that we are pleased to announce because it's been a while since we reached that level, and I would say that the quality of this BRL 3 billion means that we are resuming growth. We are now changing or correcting the course of our operation, and this has been very successful. So this BRL 3 billion is a very sound number, very net with no one-offs in the results. And that makes us very pleased. And we are constantly working towards going further.ROE is slightly above our cost of equity measured by the marketing. In the third quarter, we saw the resumption of ROE. And in the first quarter, we already know that we are on the right track.On the right-hand side, I would like to show you some of the main takeaways that we refer to the quarter, but they are also messages for the year. And I would like to say that they are all quite important. First of all, we are in the midst of a transformation. In January, we launched it, and throughout the first quarter, we developed what we call a very encompassing transformation to our store model. We will elaborate further on that. But in summary, we revisited the way we operate in the stores, the way the stores are set up. And now in fact, our experience is much more connected and more multichannel with great differentiation.Together with the redesign of our stores, our service is quite unique for SMEs. We are operating in a more assertive way and more enforceable way around the stores. We redefined the way we cover our mid-income clients. We call them Van Gogh clients. They were covered by the stores. And now this would combine the entire flow of the store as a whole with SMEs. And now we are serving mid-income through regionalized platforms throughout Brazil. And with that, we have a better capacity to serve these mid-income clients, which can represent great profitability for the bank.And now we are also delivering something that I've been mentioning to the market for quite some time because we are now revisiting our massive retail business, and we launched that recently. This is more than a new offering for mass retail, but this represents a full repositioning of the Santander brand, the way we communicate, the way we relate to the client. And this is for mass retail, which is the bulk of our business. And so we are now in a much more assertive and simpler position.Now moving on to Slide 5. Here, I will start by talking about customer centricity. We are extremely focused and obsessed, I would say, in maintaining and gaining client principality. We want to be a bank that is more present in the lives of our clients. And to that end, we are working very hard in all fronts, channels, segments and products.Down below to the left of the screen, we see a positive evolution of NPS. Year-on-year, our NPS has been improving substantially in all channels, in all segments. And if we look at it by product, we also see significant improvements in credit cards, et cetera. That means that we are really grabbing this topic of customer experience with a lot of assertiveness.We are never satisfied. We want to improve continuously year-on-year, and it is no different this year. We have clients with vintages that are even better. So the argument that in previous vintages, we have the seasonality effect that we know it very well and we've been talking about it for quite some time, Gustavo and the IR team, our vintages are becoming increasingly better. The more recent vintages from 2023, it's already improving. We improved 56% of profitability of this vintage.The 2022 vintage also showed profitability improvement. And the oldest vintages profitability is coming down because of that portfolio itself. We grew a lot between '20 and '21, and we know that throughout the years and even in 2024, this carries over a cost. And gradually, this is being diluting in terms of what we are doing with our new vintages.We also have loyal customers that is growing year-on-year. Of course, we will try to grow more our loyal customers because they bring us more profitability. Therefore, the entire strategy is centered in the client because we want to be a more active bank and be an important part of our clients' life.Here, I just highlight some growth leverages, and I start with Select. We've been talking about Select for quite some time in a very consistent way. We've been talking in a very consistent way of many of the topics related to the bank, and that is part of the strategy that we defined in 2022 and perfected in 2023. This is the strategy we are pursuing. And I hope that in many years to come, I will still talk about that.High income is a great focus of Santander. Select is a great way to have more active and loyal customers. Not very long ago, we had 600,000 Select customers. And now that number jumped to 1 million clients. I said that we had the ambition of reaching 1 billion, but last quarter, we surpassed that 1 billion number. So now we are pursuing 2 million Select customers, and we hope to reach that number in the mid and short run.We are growing consistently. We're bringing investing clients. We are also bringing borrowing clients. We are not a partner of investing clients. We have a lot of our clients in the Select basket, and the portfolio is no less than BRL 68 billion. Together with that, we also have the best net funding in our history for Select if we look at the next slide in the entire retail or the entire bank as a whole.So on the side of the Select investing client, we are improving our work, consolidating our strategy when we redesigned Select 2 years ago and also to introducing our AAA channel. And everything is absolutely integrated with the offering we have for the client.Next page, Page 7, I emphasize investments. As I said, since -- as I've been saying since 2022, there was a gap in our business portfolio. We acknowledge that, and so we started to focus on the liability side of the balance sheet. And so with that, we could redesign our funding mix of the bank because in the past, it was mostly focused on institutional customers, wholesale rather than retail individuals, et cetera.And so this is another way to consolidate our strategy. Of course, this is not a sprint, but it's a marathon. We've been constantly focused on that strategy and the strategy will not -- we will not let go of that strategy. Our retail segment captures 80% more year-on-year for individuals in comparison to last year. So there was a significant leap in retail loan. We went from BRL 7.2 billion, of which BRL 5 billion came from this advisory channel, which is our AAA channel. We are consolidating the AAA.We haven't even reached the number of 2,000 advisers, but we believe that this is the right number if we want to have a very good level of coverage. This is the lowest number in the market, means -- which means that this is a very unique capacity that we have to advise our people in this AAA channel.In the quarter, we had inflows between BRL 3 million to BRL 7 million per adviser, and this is a big leap when compared to last year, means that we are consolidating our strategy. We want to grow that even further, but we are already at a very good level.Toro, our digital brokerage firm, I mean, we are looking at ways to integrate it better and to have a unique approach in terms of being multichannel at the same time, digital for individuals brokerage firm. It got funding of over BRL 3 billion, over [ 20 ] of AuC and retail is growing as a whole. And our private had funding of almost BRL 3 billion in the quarter. We hope to expedite that further.We've been seen as the best private banking throughout Brazil, and we are gaining market share. So as a whole, I mean, in terms of investment, things are now changing. We are looking on the on and off balance sheet side. And I'm sure that this will be one of the major differentiation leverages of our business, and this will help us grow even more.Here, I will talk about our strategic business. I would just like to highlight to the market, the areas where we chose to focus on and why and how we are delivering. We are focusing on 4 major businesses. First is credit cards, this is gaining momentum every time we have our earnings release. So now since last year, we started to sell cards in a different way and that boosted the sales of credit cards.We have the same level of appetite, but the technology is much more advanced in terms of the capacity to personalize clients, to personalize those that are nonclients or clients that we want to acquire, or those that we do not want to acquire. So we have a higher capacity to activate clients that we already have in our customer base. So we are growing our credit card base. We are selling more cars than what we did in the past, and this is bringing about increase in revenues. Turnover of credit cards is increasing. And every quarter, we increase total revenue. In fact, we are increasing average customer spending, and we are, at the same time, increasing our customer base.So I would say that it's the first time since 2021 that we see an increase in the customer base in a quarter [ near ] of 3%, what I show in the second chart. And our turnover is growing even more. We are growing our customer base and our spending per customer is growing consistently.Next, I will talk about payroll loans. This is something that I've been referring to consistently. So since 2022, we are working to gain traction with the right level of risk. Our credit performance has improved. It's better than the average of the system. We are posting record origination. The portfolio is growing to BRL 72 billion. And so this is a very robust number.So in summary, payroll loan, which is a very competitive product, as you all know, because you have incumbent banks, average-sized bank and digital banks are all part of this basket. So our multichannel approach for payroll loan is also something that helped us boost this line. Our payroll is quite consolidated with -- among governments, and our payroll loans is also very strong when it comes to the private sector.Now, the consumer finance. Our consumer finance is a market leader. We are operating above 20% and we have approximately 21%. We're not talking about a quota per se, but our origination levels are record levels. We started the year at the same pace that we started last year. Ever since last August, I mean, August of last year, we've been working very hard to expedite or to grow our Consumer Finance segment.Through the last 12 -- 18 months, we made all of the necessary adjustments to our portfolio, and now is the time to resume our operation. We are very rigorous. We remain very rigorous. Our customer base is quite sound, and we are, at the same time, growing our portfolio with positive conditions in terms of our operations with merchant stores and large OEMs. So everything is working as planned.In terms of agribusiness, growth is positive, not agribusiness as a whole, but some crops face more challenging years than others, like soybean and corn, whereas some other crops have more -- have a more positive year. For -- I mean, Santander entered into agribusiness 7 or 8 years ago. This week, we will have the agribusiness show, and we will be there. We will continue to grow in this agricultural segment, but we might not grow as much as we grew in the past 2 years. But we grew more in some aspects of agri, but we are constantly monitoring things on a case-by-case basis, but in the mid and long range, as it has to be in the case of agribusiness.Now talking about corporate business, on the left-hand side, in terms of our SME segment, we want to double the business. We believe that, that business can be doubled in the next few years, and that is what we will look for. We will grow together with our clients. We are growing in terms of loan -- of our loan portfolio.And zooming in, in terms of what you're doing for SMEs. In practical terms, we are removing the service to SMEs in our stores, but now we are replacing them by experts scattered around the stores and covering the micro regions. And we are growing that team. We are putting hundreds of people in addition to what we have because we want SMEs to be better served.We are also decreasing the average coverage ratio. We are improving the number of visits per day, and we want to dominate and to master the micro regions. The stores will be like a hub, but we will no longer have an expert in the store just to serve people that walk into the stores. But we will rather go where the companies are rather than having them come to us. This is a very innovative mode of action, and I think we will have substantial gains.In terms of large corporate, we are still increasing our franchise. It's increasing very soundly. We are #1 or #2. And we have several consistent lead tables. We have an investment banking franchising that is becoming more and more consolidated. Of course, we are not yet leaders in this equity market, but in terms of fixed income, we are performing quite well. Our first quarter performed quite well. Our fixed income side, it's moving quite well, whereas equity and M&A is still progressing, still advancing. But we are growing in terms of revenue, and we've been very disciplined in terms of large corporate, not necessarily we are looking for quotas, obviously, with a major focus in profitability.And since the fixed market -- the fixed capital market is very robust, we simply sometimes leave other operations to go by, and we operate more as a distributor rather than somebody -- a company that is carrying out the balance sheet.This is my last slide, and then I'll pause. This is probably the most important topic of today's session because this is a summary, and I'll try to be brief. This is a summary of our repositioning, the relaunching of our mass retail strategy. But before I go into the proposal and the positioning itself that we call Comeca Agora or starting now. Why are we doing this now? What is the backdrop? And what led us to make this decision now? I mean, equally important is how.The first major thing is that we are a digital-first operation. We're not digital only, well, and that's good because we are a multichannel operation. Well, more than 90% of our clients use our app. We have a growth of over 1/3 of the number of people that go to the stores. There was a 20% reduction in the number of calls to our customer service line. We've been educating our clients and the market also educated clients. Therefore, our relationship is mostly digital.Secondly, we have a remote conversational, which is quite robust. We have the capacity to serve clients and that number of calls answered is 97%. People are increasing the use of the chatbot. Most incumbent banks build that over the phone, and we did that as well. So we are migrating telephone chats over to the chatbot. This is non-generative interaction, and then we have chat 1. We are also adding Gen AI to support us and to increase productivity and also to increase our capacity to serve the client.So we have the digital on the one side and the remote conversational on the other side. And so at the beginning of the year, we launched the redesign of our stores. I already talked about the issue of SMEs and mid-income. What do we do at the beginning? I mean we removed the expert that used to serve mid-income clients, and we introduced midrange platforms and the Van Gogh platforms. In fact, these are physical spaces in our stores that are either in the store or in some other separate offices.Therefore, we are able to serve customers in a very regionalized way, and more personalized. And these experts can be more proactive and reactive as well, but they operate in a more assertive way. And this increased our capacity to also acquire mid-range or mid-income clients, and this is an important launch that we did at the beginning of the year. Therefore, the store is no longer the owner of a client portfolio, and this is the leap we gave because the store had its own results coming from results of real estate mortgage from years ago or credit cards that were sold a year ago, et cetera, et cetera.So now the store is the Santander store or the Santander branch that has finally become a point of sale and a point of service. It's a convenience element. It's part of our value proposition, a multichannel value proposition. And as part of our service to all clients of the bank, clients that are served through free, they can go to the store, they can have assisted sales through added value or even a private client that can use the stores for anything they need. And the experts will be measured by the sale of the day, and they will measure by how well they sold and how well they served the client. Therefore, our incentive models are up to date, and they contemplate sales and service to clients. And therefore, now we are more earmarked to the needs of the store, and this is when we give that definite leap.And with all of that, finally, we give our definite leap towards mass retail, and this is the relaunching of our value proposition, but the scope is much broader, which is the scope of our rebranding, our brand repositioning, our repositioning in terms of market communication and of our signature. So what can we do for you today, which is our slogan is now changed to Comeca Agora, it starts now. It's very powerful because it starts with our restarting in terms of mass retail.We start with all of our clients. This is the beginning of the project, of the activity, the beginning of the dream, the beginning of the investment, of consumption. It's a day full of beginnings. And from this point forward, we are positioned as a bank that is more present in the lives of our clients. We want to be present in every new beginning of our client.So this new value proposition and this new position of the bank for mass retail and the bank as a whole is a very, very significant step of the bank. And I would like to break the protocol and then share with you a video that tells you a bit more of the campaign. It's a very short video. And from here on, I'll stop and Gustavo can bring the numbers.[Presentation]
[Interpreted] Thank you, Mario. Good morning, everyone. So after the video, let's start this presentation with the results of net interest income, NII, which highlights our resumption of growth. NII grew by 14.5% compared to the previous year and by 7.3% over the last quarter, showing a positive performance on both client and market NII, which is very important.In Q1 '24, we continued to see the same trends that we highlighted at the end of 2023, such as increase in our retail credit portfolio and the decrease in the Selic rate, benefiting our cost of funding. In addition, the growth in spread levels with controlled credit quality, which I will detail a little later, demonstrates our assertive strategy of gradually resuming our business dynamics.Market NII, on the other hand, is showing a continuous evolution, and it's at a positive level, in line with the expectations we've been talking about with the market in previous quarters. We are optimistic about NII performance, which should positively reflect the resumption of growth.On the following slide, Slide 14, I'm going to comment on our loan portfolio, which grew by 5%, highlights our retail in the individuals segment and auto loans and SMEs. In the corporate segment, as Mario mentioned, we saw a more competitive credit environment, and we will prioritize profitability. In addition, we recorded significant growth of 23% in our private securities and guarantees portfolio over the last 12 months, which resulted in a total growth of 8.1% in the expanded portfolio.As for individuals, payroll loans and credit cards performed well despite the seasonality of the previous quarter that we always see, particularly in cards. With regards to payroll loans, we've advanced more quickly than the market, expanding our market share. Year-over-year growth was 17% and quarter-on-quarter 6%, very robust.In auto loans, we saw more benign scenario throughout the market, and we are following this recovery, maintaining our leading position in this segment with the market share that was mentioned. And it's important to comment once again on our solid performance in agribusiness with 39% growth year-on-year. And this is important for our strategy.On Slide 15, we have some important points about our performance in terms of liabilities. Over the course of 12 months, we've seen a 10% growth compared to the previous year, which comes mainly from time deposits and real estate LCI and agribusiness LCA credit notes. Despite the recent regulatory changes, we managed to grow these exempt securities in a satisfactory way in the last quarter.There might be other changes and challenges regarding the funding of these securities at the retail level, but we have a strategy. In any case, we are making progress in implementing our growth strategy, aiming to achieve a mix with greater retail exposure, as already mentioned in our strategic vision. As a result, looking at the last 3 years, we have seen an increase of 2 percentage points in the individuals to end company's ratio. And this is a long stretch race. In addition, the loan-to-deposit ratio continues to post its best historical levels at approximately 94%.I will now detail the performance of our fees. We saw a slight contraction in the quarter due to seasonal factors, as you know. On the other hand, we saw a very positive expansion throughout the year, year-on-year, growing 12.8% due to the resumption of credit and the greater transactionality of our clients. The expansion of credit has played an important role, increasing revenues and loan operations. We also had an increase in cards turnover and sales, as mentioned, with higher spending by clients.Moving to insurance. Even considering the quarterly seasonality, our performance in the segment remained robust. This result is driven by the sales of new products and the drop in the number of cancellations. In other words, better performance in the insurance operation year-over-year.On the next slide, we present detail on the quality of our assets. The quality of our assets. Excluding the atypical one-off effects we had in the previous quarter, we observed that the allowance for loan losses, [ AOLL ], remained stable in the quarter with no signs of worsening. This stability, coupled with the expansion of the portfolio resulted in a fall in the cost of credit of 70 bps in 12 months ending Q1 '24 at 3.8%.And it is worth noting that the lower volume of recoveries of written-off loans comes from a more careful approach to our collection services as we have already been signaling a more selective criteria for proceeding with renegotiation. Such policy also has an impact on the volume of renegotiated portfolio, which continues to post a downward trend in relation to the total portfolio reaching 6% and increasing its coverage to 54.3%.Lastly, NPL formation fell slightly, still affected by defaults on the renegotiated portfolios. This effect will continue as we make progress in purging these portfolios plus the impact of some seasonality, but the impact is under control.Now let's move on to the next slide and focus on the performance of our delinquency indicators. As mentioned by Mario, after a period of 2 years dedicated to adjustments, we have a well-balanced loan origination and properly adjusted portfolios. With regard to the short-term indicator, although there was no change in the overall indicator, we saw, as you can see, an improvement in the individuals segment. This improvement was offset by the last positive performance of corporate and SMEs. These are one-off effects and do not cause us any concern.The long-term indicator, well, it has a marginal variation of 30 basis points in small and midsized enterprises by virtue of the renegotiated portfolio and seasonality. I have already mentioned in the previous quarter that there might be some variation.On the next slide, we'll talk about expenses. We saw a 5% drop in administrative and personnel expenses quarter-on-quarter. This decline is mainly due to the seasonality of administrative expenses, which typically occur in the last quarter of the year. And personnel expenses were influenced by the adjustment in the variable compensation with a 4.6% impact on salary adjustment in 2023, the impact of the collective bargaining agreement.However, what matters is that the optimization of our footprint has been fundamental to supporting our control of expenses, and we'll continue our quest to expand our business while reducing the cost to serve. This is very important for the way we manage our expenses. And this has been very satisfactory so far. As a result of our effective management, as I have just mentioned, combined with the recovery in revenues that we saw in the quarter, we saw an improvement of 3.3 percentage points in our efficiency ratio in the quarter, which is now below 40%, which is very positive.Now let's move to our earnings results. We'll present our income statement. Year-on-year, we saw 14% increase in total revenues driven by NII and fees. We kept AWL and expenses under control, which led us to post a net income of BRL 3 billion, up 41% in 12 months. Profitability improved to 14.1% ROE, and we ended the first quarter of '24 with a solid balance sheet, as shown by our CET Tier 1.Lastly, the results obtained are in line with our expectations, and we are committed to developing a more stable and sustainable results base, focusing on continuously and gradually increasing our profitability.Thank you very much. I'll turn the floor to Mario for his final remarks.
[Interpreted] Thank you, Gustavo. Excellent. So here to end, and so that we have time for a detailed Q&A, I have 5 main messages, take-home messages. These are messages related to the quarter, but that I would like to stress with you investors, analysts and the whole market for the whole year and for our future positioning.So our first big message, we believe in a consistent revenue growth due to a portfolio diversification, new more calibrated vintages, given a super clear strategy we defined in the past and which we are following with a lot of discipline, with no surprises, without one-offs. And we have a positive outlook of revenue growth throughout 2024. We expect this will continue for market and clients, and our whole strategy revolves around that.Our cost of credit continues to improve, and we will -- we think that this will continue to improve throughout 2024. We are looking for a more profitable portfolio. All of the measures I mentioned were implemented with a lot of rigor since 2022. We've had credit origination for new clients and for the current ones following the same policy, the same approach we've been following since 2022.We continue to work to grow the business that we choose to grow. It doesn't mean we'll grow equally for all of them and for all client bases, but we choose some businesses for which we want to bring the clients closer to us, the famous bank principality. And we think that this will be consistent and continue to grow over the next quarters.We had a leap in our physical and multichannel operation, launching a new positioning for the stores and effectively integrating the stores to our multichannel approach, what we call continuous conversational. The store is linked to the chat, which is linked to the app, so with a continuous customer experience. In our view, this will bring a leap in the clients' relationship with us.And the Comeca Agora, starting now, when we are launching mass retail and how we position the bank as a whole in relation to the market, how we communicate, our tone of voice, our color, our campaigns and how we make it all more tangible in a more powerful, simple digital experience, which we believe will bring a lot more clients, which are inactive now and will become active in new clients who will want to be a Santander client in the free proposal or other value propositions.With that, I end. Thank you very much, and we are going to start the Q&A. Thank you very much.
[Interpreted] Thank you, Mario. Thank you, Gustavo. Now we initiate our Q&A session from now on. Everybody will have the opportunity to clarify any issue or point. If you have questions, just click on that hand icon in your screen. We will answer the questions in the language as they are asked. I would like analysts to ask just one question. But at the end, you can ask for further clarification.Our first question comes from Daniel Vaz from Safra Bank.
[Interpreted] First of all, I would like to learn more about your net funding dynamics. The AAA channel was quite strong this quarter. I mean the net inflow per adviser, I think increased by BRL 5 billion in terms of net inflows through that channel. That was quite strong. And in the private segment, you were slightly below the other cores.As the market is a bit more pessimistic, how do you see differences in terms of these fundings, I mean comparing these 2 channels, AAA and private?
[Interpreted] Thank you, Daniel, for your question, and thank you for joining us this morning. As a whole, when we look at our individual business as a whole, that includes private. The quarter was very good in our view. We were very pleased with the results. But every quarter that we come to you and then we comment on the results, we see the consolidation of a strategy that is like a huge marathon. This is a topic that we've been referring to for many years.I started since talking about that in 2022 because we had to make -- to change the game. So every quarter when we meet, I am pleased to say that we are indeed growing. We have a very good offering. We -- our coverage proposal is quite sound. And of course, we have a range of products that finds no parallel in the market.We had a better performance in the retail. AAA is a major arm for us to get funding in the retail side, but we have Select and AAA, both are doing quite an impressive work. And in addition to high income, Daniel, because we keep gaining more relevance in this redesign of the mid-income bracket that I mentioned, we have a great opportunity to serve these clients better because there are millions.And of course, with the offering of free, we hope to bring more clients on board or more clients back to us. And the investments, they are not long-term investments, but day-to-day investments, I think, will come our way much more frequently. Private was less impacting or when compared to what happened in previous quarters, but nothing that cause us to be concerned.Maybe the notes -- the financial notes is not especially a private product, but it affects all products because in the past, people used to buy incentivated notes. But because of other things that came to play probably that had a drop and this probably put on hold the demand from our private clients.Last year, as I said, it was a record year for us. We continue to grow in this first quarter, therefore, for me, is not the summary of what we expect the rest of the year to be as any other investment line with individuals is like this. So every year, every quarter, I want to place Santander where it belongs.In terms of these letras financeiras or financial notes, we saw that there was a pickup. There is a rebound in the quarter. It was a bit stagnated before, but now we hear people say that they are gaining momentum or gaining relevance. If you look at the month of March, do you think that this funding through financial notes are picking up?Well, I'm not going to talk about April. I'll talk about April soon enough. But we saw a [ value ] that the market experienced the same thing, maybe 2 weeks or maybe a month, there was a drop in volume. But then later on, all of the issuers found their place under the sun. So there -- they used to be -- there was a period of a gap or a value or volumes decrease in this affected private more than individuals retail.So I believe that both in terms of those financial notes and the commercial activity because you do not rely on a single product, we will see a more impressive growth going forward. But it was a positive funding, which was good, and we will try to get more and more, and this will certainly consolidate our wealth management portfolio as well. Thank you.
[Interpreted] Now I'll call Mario Pierry from Bank of America. Hello, Mario, welcome.
[Interpreted] Congrats on your results. I would like to focus on market NII. We saw positive results after 7 quarters of losses. I mean, if I look at the delta year-on-year, it's almost BRL 1.5 billion in results. I would just like to understand your views about how this line will evolve, particularly if the Selic rate drops in a more gradual way when compared to what was expected earlier on. I just want to understand the trend. How do you see this line and whether this change in the Selic landscape would have a negative or positive impact?
[Interpreted] Well, I can start, and then I'll turn it over to Gustavo. Thank you, Mario, for joining us. I mean throughout these negative quarters, you mentioned 7 of them, we've been constantly talking to you whenever we meet that it was very clear to us what the itinerary of that line would be. I said at the beginning of our session today that historically, we had a great reliance on that market NII. And I think you are familiar with that from '21 to '22, you can see the size, the magnitude of that lower level, almost BRL 10 billion.Therefore, we started to reprice the portfolio throughout the years. Part of that improvement comes from the [ repricing ] of the pre-fixed portfolio of our consumer finance segment. And the other part of it comes from the reduction in the Selic rate, which reduces our funding need of that portfolio. So the fact that we entered into a positive number, I think that came as a surprise to you. It's just a result of something that we had previously indicated before, and we just hope that this line continues to perform well throughout the year.Selic affects in part the pre-curve. The fact that the pre-curve was up, that leads us to understand that the curve of our pre segment will be more expensive. So we have to higher the prices to our end customers, and we're trying to keep the same level of profitability. Therefore, if the environment is such, and we won't be able to make adjustments in that pre portfolio and have to let go of spreads and that maybe this will lead to changes in our profitability.And on the other hand, how much it will cost to carry that over with a Selic that moves lower, that means that the results will also take longer to recover. Therefore, there might be some effect, yes. But given the fact that we are not anticipating any change in course, we don't expect Selic rates to go up again as part of the market believed that, that would happen. Now we are more positive because interest rates should go down. So we don't think that interest rates will go up again next year. Therefore, we are not concerned and the trend of this curve will be reversed. But I'll now hand it over to Gustavo.
[Interpreted] Mario, it's good to talk to you. Well, it's precisely it. I mean the course has not been altered. We are moving with more or less speed in terms of Selic cuts. So maybe the script will be the same, but maybe the distribution of where the script would go might change. But in fact, things didn't change. So even with the fact that Selic is not dropping as fast as we expected, we also have the benefit of the pre-curve which has a positive inclination.It still came to the positive side. And since that is positive, things are well underway. Again, we are not changing the script. The direction is very clear to us. The direction is very clear. Maybe we just have to review that direction in the coming quarters, right?
[Interpreted] Next question from Eduardo Rosman with BTG. Hello, Rosman.
[Interpreted] Congratulations on the results. My question is about principality. I think that all banks are talking about principality. That's the name of the game. And we also saw during the presentation the importance of payrolls for loyal customers. So I'd like to know about your strategy. How do you see the strength in the scenario of evolving open finance, which is one of the objectives of the Brazilian Central Bank?And some banks are very excited that this could unlock the private payroll loan. So what is the Santander positioning regarding payrolls? And how do you want to attack rather than just defending the bank in a scenario when payrolls may lose some value in the future?
[Interpreted] Excellent question, Rosman. We continue to believe a lot in the importance of payrolls for Santander. Santander is one of the big payrolls bank, and we are very happy with that positioning. We don't want to give it up. It doesn't mean that we would have to pay somebody to have their payroll. We are very disciplined about the value of the payrolls and how profitable they can be. But it continues to be a pillar, and we don't think that this is going to change in the next few years.It is true that potentially detractor elements or challenging elements, a strategy of paying for payroll, gaining principality through payroll. These detractors or challenging factors are growing, but we see open finance as a very positive agenda. It's also an opportunity for us. It's not necessarily aiming to remove value from incumbent banks and Santander. In my view, it will improve the value of Santander as long as we have the right approach.If we have an attitude of attacking rather than being in the defense, of course, if you're in the offense, you have to be in the defense, but we have to be a net winner, not a net loser. How do we do that with our offering? Payroll is a vehicle through which I have access to a client base. Payroll in and of itself ensures very little, just a checking account, possibly a salary checking account. But I don't want the mechanic element of payrolls, Rosman. I want the element that will allow me to have principality.So payroll is a vehicle. How can I gain principality, which is what is really a game changer, which will bring profitability in the bottom line. It is by having the right offering, and it means a number of things. We can detail that. But in a nutshell, it means knowing how to target well, segmenting well, understanding the blocks. And it's not just talking about middle income as one thing.Middle income can be 6 to 8 different clusters. High income also has different clusters. Almost 30% of our high income is a credit borrower, and there's nothing wrong about that. It's a very profitable portfolio. I want to grow my high end, and there's a high-end investor, and there's the high end that doesn't touch the assets. They chose to use the credit card that we have with American Airlines and others.So in low income, we have even more clusters. So the ability to segment and sub-targeting is very important. With sub-targeting, we will approach the person and not just the cluster. That is what I call hyper-personalization. A lot of people have been talking about that. But I would say that we are advancing a lot in redesigning our CRM model, in redesigning our systems, models and credit policies, we can detail that, if you want.So stability of sub-segmenting and personalization, so that we can understand which offering, at what time, through which channel I should offer to the client. And that's a game changer. The payroll is a big vehicle to give me access to millions of clients, whether if I do sub-segmentation well and hyper-personalization, if I can offer the client exactly what they need in the right context with the right language, with a multichannel conversation that is very precise with this client, that's how we can win this game.And that's why we are relaunching massive retail. And that's why we relaunched the high income in the past. So all of the pieces are connected. And this is the strategy I've been telling you and other analysts for quite a few years now. We are having those pieces to run in the right sequence, sometimes in parallel, all converging so that we can achieve principality. Having payroll is one of the big vehicles and not just the only one. I hope I have answered.
[Interpreted] Now Thiago Batista with UBS. Thiago?
[Interpreted] I would like to focus on Select. It is impressive the growth you showed in that segment, 1.4 million clients. And Mario, you mentioned you aim to achieve 2 million clients. That will be a little above the market leader. This portfolio, as it should, accounts for almost 30% of loans and less than 5% of the active clients are Select. So it's an amazing performance.So my question is, first, what was the most relevant change you saw in this segment to explain this improvement? And the second point is the average ticket of this portfolio of this segment is about BRL 50,000 per client. Not all of them do enjoy that loan offering. But my point is, in what segment do you see the superior growth in Select? What product is leading to the strong portfolio growth?
[Interpreted] Excellent, Thiago. Thank you. Well, Select, just like I answered to Rosman. We have to be able to do segmentation and targeting. I think that the first big cluster of clients that we embraced in 2022, I spoke about this in Q3. We relaunched in August, September of '22, a little over 1.5 years ago. So we relaunched Select as a whole. At the time, we had 9 years of Select in Brazil. Last year, we celebrated 10 years.For the first time, we ran a campaign. It was not about the campaign alone, but in the campaign we democratized Select. So we're no longer accepting Select clients just by income or investments they have. We opened Select to whoever wanted to pay a monthly fee that we charge before they can get a fee exemption. And in that democratization, we opened the doors to Select for clients who wanted a super differentiated service.What is this? Again, this was the first segment where we started to offer multichannel in a very precise and comprehensive way. So here, we always have the stores, the Select stores individually or store in stores. And those are nice environments. They were very cool, but those spaces are a lot more integrated with a 24/7 personal service. A Select client, if they want to call -- some people still want to call. They are transferred directly to an agent, a human agent. Of course, we also have a chat with an impeccable chatbot, but the human agent is also there. So Select client can talk with the team, a multichannel with a human always available to them.And in addition, we bring an element which we definitely did not have, which is a financial advice to investor Select clients. So when we bring financial advisory over the more advanced investment portal, in 2021, beginning of 2022, we still lacked the digital experience for the investor client, but we are making a leap, in a matter of weeks, we'll launch what we call the investment portal, which will be a lot more advanced. So we bring a much more complete digital experience for investor clients.We offer them human AAA service. So we have the biggest capacity to cover in the market. And together for investor clients, we offer a multichannel, human service 24/7 with stores that are being well used. Several clients love to go to the stores. Many don't like to go to physical stores, but they are equally well served. So we have a differentiation there.We will also look at our clients in other segments. If we see that they are Select clients due to their history or because they were originally Van Gogh or could even be in our low income that we call special, we're bringing them to Select. So we are reanalyzing them. But this year, for the first time, we have a material organic growth of clients. So this number is growing because it has an important number of organic clients who decided to be Select because it came from payroll. And again, to Rosman's answer, we are working better with the payrolls.So we are inviting executives of companies to choose Santander as their principal bank. And in terms of product, there is no specific product. Of course, we are growing a lot in real estate loans and mortgage loans. We've had a relatively better performance than the market in mortgage loans. We grew a little, but we grew several banks had a retraction.And in the first months of the year, we had a powerful real estate loan performance. We also have payroll loan, which is also valid for high income. We have several products in which we are differentiating. There is no silver bullet. There's never a silver bullet, but we are expecting this portfolio to continue to grow as a reflection of that.
[Interpreted] Our next question is from Eduardo Nishio from Genial. I think we had a connection problem. So we will jump to Yuri Fernandes from JPMorgan. Yuri, good morning.
[Interpreted] Congrats -- congratulations, Mario and Gustavo. Mario Pierry already talked a little bit about the market. But I would like to discuss the client NII. We saw a very good performance in spreads. There were some reclassifications as you mentioned. So our history is not so long if we look before 2023. How can we then look at that line? My feeling is that, that margin would continue to improve. But how much further that margin could extend?Should we go back to 2022? I know that the base is different, but product NII should be higher or maybe not, maybe closer to what we saw in early '23. Can you help me put some color to that? I think it has to do with many of the things that you talked about before like funding. I think this would help me get a better understanding about your spread improvement.
[Interpreted] So I'll start, and then I'll hand it over to Gustavo. That's a very good question. And when we talk about reclassification, the first time I met with analysts, at least those in Brazil, they said, well, you have to look at the big picture. So we look at the first reclassification. These are correct reclassifications. We didn't do that to improve line X, Y or Z. I mean we just wanted to make the first move just to serve your demand when we expect to do another reclassification early next year. And whatever we can help you to think about the bank even before to help you conduct your analysis, we can really think about it.But to be more precise and to answer your question, in fact, our portfolio in '24 and from now on is quite different than the portfolio we had back in 2022. You mentioned '22. In '22, we still had a major carryover effect of the portfolio that we designed in the major growth cycle that ended in 2021. And so at the end of the year, we reviewed everything and the rest you already know.So we started the redesign of the portfolio, but we still have the effect of the carryover from previous years, prior to 2022. That's why our first line in the NII margin, you start seeing things resuming at the end of last year. And now we see that, that line is growing more significantly.Okay. Funding net -- funding NII, that changes because of Selic. Selic is going down more gradually. So that line is diluted with time. We already know, as you are quite familiar with it, that we are working to compensate that funding with volume and the mix. I mean, liabilities mix having that load that remains in the account as we all have some instruments that allow us to improve margins. And obviously, we do not want just to use the floating money. We want to use all of our investment line and select. So we compensate with volume and mix.Therefore, we hope to have a positive effect, even though Selic is pushing that line downwards. We will start focusing even more in funding, and we will continue to focus on our expanded portfolio as well. And in fact, Yuri, we will look for the same kind of mix we are building now here. Therefore, I think you should have a similar average spread when compared to what we had in the past.I mean the lower income rating would be rating 5, 6 or 7 used to be more prevailing than it is today. Well, we don't have the same mix anymore. We don't want to have the same mix. We are working very little with 8 rating clients. Every bank has its own scale, but I think you have an idea of where we are cutting. We have to have a clean exposure with 9 and 10 and even collateralize with the consumer finance and payroll. So our average rating will go up a few points from 2021 to 2022.Therefore, in the first line, we couldn't expect the first line of gross spreads, but the [ ALL ] net spread should improve with time. And this is what we are showing. This doesn't necessarily happen in the first quarter because first you build up your portfolio, you are building up the portfolio. We are doing less agreements. We are looking for better results and maybe in due time, we won't be able to recover everything and Gustavo mentioned that. So not everything will happen in the first quarter, but that first line of credit cost that will be gradually and increasingly healthier.And also considering the fact that our legacy portfolio will continue to flow, this will improve our overall scenario. Therefore, we are positive in terms of how the slide is behaving throughout the year. We can compensate volume and price. On the asset side, we continue to grow with the same kind of mix of products and the same customer portfolio that we've had so far. It is precisely it.Well, you cannot compare the previous portfolio with the current portfolio. With the current portfolio, we continue posting the same ratings, the same product composition per customer cluster with the same profile per micro portfolio, I would call it. We are making strides with some kind of collateral. We had more volume with CP3 and therefore, we changed the entire composition of our portfolio. We know that CDI is coming down. We do a recomposition with the liability. But what we are seeking to do or to see is that the net spread could be higher, and this is pretty much the dynamics that we anticipate going forward.
[Interpreted] Well, now we have Eduardo Nishio from Genial.
[Interpreted] Congrats on your results. I would just like to revisit the retail segment and in your mass retail strategy. Congratulations for the launches. Well, retail has changed significantly in this cycle. And you came -- we came up with a new strategy, a redesign strategy. I would like you to elaborate a bit more on the type of profitability that you anticipate. What happened during the cycle and whether you could also tell you -- tell us more about this new cycle, whether it's an open sea or low income?
[Interpreted] Thank you, Eduardo. Well, that's a good opportunity for us to talk more about mass retail. So -- but I'll try to be brief. The key topic here -- topics, I would say, here. Well, we recognize that clients evolved. Their demand change, the type of relationship they want to have with the bank changed, the type of principality they are willing to give us. People sometimes, on average, have about 4 to 5 accounts or 4 to 5 credit cards. So the way the client defines principality is something that changed over the years. Therefore, the capacity of every year, digital bank -- I mean, we are all digital today.The fact that banks are struggling to get principality on the part of clients is something that changed. And this is very clear, we recognize that and so does the market. We also recognize that the way that we and the entire market approach loans to that mass audience had to evolve between 2021 and '22. We granted credit probably more than clients were capable of absorbing and all the banks probably do the same, which means that we tested the hard way and we learned the hard way. We learned the elasticity of that low-income bracket.So the lessons learned is that now we have a much better idea of the elasticity of the income capacity of this audience, which is much lower. Elasticity is much lower. We have a better understanding of the size of the pocket or how big is the wallet of this low income and how big is the exposure we can have, and what kind of exposure it pays off to have with these clients, whether I have transactionality or not with this client, because even if you ran small credit, they may use my loan to pay off loans from other banks.And so the bottom line is that our maturity level is much better now because we have a better understanding of the contacts and the low elasticity coming from the low income. And we understand the need for that client to be on board and choosing us as their main bank. Because with that, we can have -- we stand a better chance in terms of how to use the limited income to pay for the loans and services, et cetera.I think that this is well acknowledged by the entire market. So I'm not saying anything new. But how do we approach that differently? Well, we start with a very, very simple offer, much simpler than what we had in the past. It's very free. It's a free offer. So it's free without the different stars after the free word. So all the historical offerings from incumbent banks and digital banks, they were quite provocative. They always came with a conditional offering, but we have an account and a credit card that is free for life. It is indeed.How can we monetize on top of that? Well, not only this is a free for line offering, but you have unlimited withdrawals. I mean, this audience uses cash. They will still use cash for quite some time. So unlimited cash withdrawal is a good proposition, and we also give the possibility of interest free for 10 days. If we use your [indiscernible], we will give you 10 days of free interest rates. So therefore, through these 2 elements, we will bring a very simple experience with a human conversational aspect, which is quite important.Therefore, we believe that this new offering of Comeca Agora. Comeca Agora is the name of this entire positioning. It's free positioning. So we are catching up in terms of what we didn't have before. It's a positive differential as well based on what we already have. And this is a very simple formula to dialogue with our client. We want to reactivate clients that were with us. We have about 30 million inactive clients if we consider our total base of 60 million clients. So half of those clients are inactive. What we want now is to activate those inactive clients.And of course, there is also the element of capturing in the open sea, but it's not anything near to what we did back in 2021. It's a smaller open sea with more information, more intelligence. We are using data, trying to understand what this client is all about. So we are looking at open sea clients, even though we are not looking at a huge open sea, but we will look at the clients that are already in our customer base, but they were not active. And maybe the principality was going elsewhere. We want to acquire new clients, but we want to make a distinction between those that we want and those that we do not want.
[Interpreted] Next question by Brian Flores with Citibank.
[Interpreted] Well, building on Yuri and Mario's question about cost of credit. How should we think about this as a percentage of the portfolio? And how does this connect with a strategy to renegotiate the written-off loans that are running at much lower levels now?
[Interpreted] Gustavo?
[Interpreted] Well, let me start with the second half, what we mentioned that we changed the renegotiation strategy. We're being a lot more assertive in renegotiating those written-off loans asking for formats with more payments. So this changes the way in which we renegotiate. And this, as I mentioned, means a smaller renegotiated portfolio. And we see perhaps some volatility in some portfolios, which I mentioned in the prior quarter. So the renegotiation dynamic continues being a lot more selective and the renegotiated portfolio will be reducing over time given the fact that we'll have the legacy portfolios being digested or purged as Mario mentioned. So that's the first part.Cost of credit at the pace we are growing and with the credit discipline and the change in the risk profile, the trend is positive, then we will reduce the cost of credit. It will depend on where we grow and how we grow, but we've seen already a very good improvement in the last 12 months. This can improve even further in the future, but it really depends on how much we will advance in the portfolios given that we have a lot of trust in the credit performance. Because all of the new vintages we are producing are performing exactly as expected, no surprises in the new vintages. Also, given the fact that we haven't been changing the credit profile over the last few quarters.
We will now switch to English with Tito Labarta from Goldman Sachs. Good morning, Tito.
Actually, a bit of a follow-up to Brian's question on the cost of risk, but more on the asset quality side. We saw the NPLs were still sort of flattish in the quarter. I know there may be some seasonality in 1Q, but the SME NPLs did go up a little bit. Just how are you thinking about asset quality from here? I mean, it seems that we're past the worst of it, particularly if your provisioning levels are coming down. But any risk to that? How do you think asset quality can evolve from here?
Let me just -- Tito, thank you for participating. So just kicking off, and I'll hand it over to Gustavo. So the broad message, [ taking ] the opportunity for question is we are very comfortable with the portfolio we are building. The portfolio we're building for the last 2 years, I'd say, and obviously, with the benefit of having now 2-year-old vintages, 1-year-old vintages, 6 months old vintages. With all that, we can back test, and we are continuously doing that, and we're doing that every time more and more precisely and taking the small adjustment decisions much faster than we did before.So all that points to the direction that we are managing with better tools, with much more modern policies and models, and the vintages are behaving well on average. So yes, there's seasonality. There's -- the elements that you see in the presentation, they relate much more to the digestion of the older vintages, which we are embracing differently for a year already in terms of the [Foreign Language] the renegotiations than we did before.So Gustavo can comment better. But the direction I wanted to share with you is that, yes, we're very comfortable with the way the portfolio is behaving, the direction we're taking and how the new vintages since 2022, by the way, they are behaving. So with that, Gustavo, please?
Yes, it's exactly that, Tito. There is no changes. I've mentioned last quarter that potentially we will see some volatility in the overs, but it's totally related to the old vintages and the old portfolio. So it's everything under control. So in terms of future and credit quality is everything really under control.
[Interpreted] We're back to Portuguese with Gustavo Schroden from Bradesco BBI.
[Interpreted] Congratulations on the strong results. I think that there is one part of the equation missing. You discussed NII, you talked about segmentation, product mix, but I'd like to speak about portfolio growth because it is an important component for NII growth that grew 5% year-over-year.I'd like to understand, is there room for acceleration? Should we expect the portfolio accelerating in the next quarters? Can we get between 8% and 10%? Do you think that this is a fair number in terms of portfolio growth? And I'd like you to speak a little about the mix, not in terms of segmentation, but we saw strong growth concentrated on payroll loans, auto loans. Is this the real trend?And if I may, I think that portfolio growth can take us to another point, which is profitability. There was a good improvement in ROE 10%, 11% to 14%. Do you think that by year-end, we could get to an ROE close to a more recent past before the whole deterioration that we saw in the system in asset quality that made everyone grow or hold back on portfolio growth? So can we go back to dreaming with an ROE closer to 18%, 20%? Of course, I do understand the limitations. I don't expect the guidance, but I just want to know if this is the path in the future.
[Interpreted] Thank you, Gustavo. It's great to have you here in the call. Let me start talking about the portfolio, and then we'll speak about profitability. Like I said, and Gustavo also underscored, we are growing exactly in the portfolios we meant to grow. Our goal is not to grow equally 10%, 8% or 12% for all portfolios. That would not be a smart way of managing the bank, and it's not what you expect from us. So we choose the businesses where we want to consolidate our leading position or gain share, but with quality.We don't want to gain market share with no profitability. And you're not seeing us grow in that way indiscriminately. So we cherry pick some businesses. So we say in the call, we decided to grow in this area or that area. For 1.5 years, we spoke about cards because this was decelerating. And since Q3, we've been talking more about it, and now we'll continue to speak more about cards because that's when we start consolidating our strategy to go back to growing cards.When we think about the size of growth, we are not going to give you a guidance, Gustavo, as you know, but we expect to grow as much as the average market expected by Febraban. And given that in some businesses, we know that we'll be able to grow more, and we'll probably deliver more growth to the market. So we would love to grow as much as the market or above.But again, that's not going to be linear. It's not going to be in all businesses and all segments. But we have several segments, particularly in retail, individuals, companies and consumer finance. And those we have reasonable safety that those are the businesses with the highest profitability. If we do a good job, and I believe we are doing a good job, and we have everything to grow as much as or more than the market.In Large Corps, I'm not going to say the same thing because like I said before, and Gustavo reinforced, as in everything else, we want to be disciplined about profitability. So where I can have marginal ROEs in that operation, which are positive with economic property above our cost of equity. On average, if the cost of risk is good, we'll look at the operation, the possibility of cross-selling. In wholesale, there's a lot of cross-selling in services and so on and so forth. So we'll always have a customer focus. But sometimes, even with the customer focus, it won't make sense and we'll be a distributor and will not be carrying the loans.So here, we're not in a sprint race of growing 8%, 10% or 5%. We even posted a slight decrease, but it's not a concern to us because the business is making a lot more money now than it was making money in the past quarter. So we have a good profitability in our wholesale operation of large corps. We might grow a little less of the market, but [ ex anti ], I'm not saying it's going to happen, but if it does happen, it will be with super fine capital discipline and will offset with growth and capital discipline in other operations as we showed in Q1.In a nutshell, in terms of profitability, if I'm disciplined in wholesale, if I'm only going to go to ROE accretive operations and in my retail operations, individuals, companies and consumer finance have a lot of profitability. As long as we know how to select the right clients and the right product, we'll expect the ROE recovery, which was good, will continue over time.This is not a guidance, but we are seeking to consolidate low-teens and middle-teens, high-teens. And eventually, we'll get to high-teens or 20s. We are not expecting that in the short term, but we are redesigning the operation, executing a well-disciplined strategy to dream with that.In a nutshell, the quality of the portfolio, which is delivering the ROE -- that will deliver ROE in Q2, Q3 is totally different. It's a lot more diversified and, therefore, more sustainable. We are less focused on the speed in which I will grow the ROE. But the solidity with which I deliver ROE so that we can always pursue different leaps.
[Interpreted] Congratulations on the results.
[Interpreted] I would like to thank you all very much for joining us this morning. And after this video conference, myself and the entire IR team of Santander will be available to clarify any further questions. Thank you very much. Have a very good day, and see you soon.[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]