Inter & Co Inc

NASDAQ:INTR

Earnings Call Transcript 2022-Q4

[Operator]

Good morning, and thank you for standing by. Welcome to the Inter&Co Fourth Quarter of 2022 Earnings Conference Call. Today's speakers are Joao Vitor Menin, CEO; Alexandre Riccio, VP of Tech, Operations and Finance; Helena Caldeira, CFO; and Santiago Stel, Strategy and IR Officer. Please be advised that today's conference is being recorded, and a replay will be available at the company's IR website. [Operator Instructions]

Please note that there is a Translation button on your screen where you can choose the language you want to hear, English or Portuguese.

Throughout this conference call, we will be presenting non-IFRS financial information. These are important financial measures for the company, but are not financial measures as defined by IFRS. Reconciliations of the company's non-IFRS financial information to the IFRS financial information are available in Inter's earnings release and earnings presentation appendix.

Today's discussion might include forward-looking statements, which are not guarantees of future performance. Please refer to the forward-looking statements disclosure in the company's earnings release and earnings presentation.

Now I would like to give the floor to Mr. Joao Vitor Menin. Sir, the floor is yours.

[João Vitor Nazareth Teixeira de Souza, executive]

Good morning, everyone. Thank you for joining our fourth quarter earnings call. On Page 4, I want to walk you through today's agenda. I will start with a brief overview of our 2022 performance and achievements. The team will walk you through our banking pillars, the credit engine and our funding capabilities. Following that, we will discuss the transactional platform and then finish with a discussion on our financial performance.

During 2022, we achieved several milestones that I believe will position us for the greater success in the future.

On the growth front, we have been adding clients and gaining adoption of different products in our platform. As a result, we have seen meaningful market share gains improving the quality of our revenue by achieving diversification at scale.

From a profitability standpoint, we strengthened unit economics by improving monetization and engagement. Our focus on operational efficiency is starting to be visible in our expanding markets.

And finally, all of this is done over the foundation of a strong balance sheet. What I mean by strong is on the asset side, we have built a highly collateralized loan book. On the liability side, we have a best-in-class funding base, 39% of which is comprised of free demand deposits from more than 10 million retail clients. And on top of this, high levels of liquidity and excess capital.

On Page 6, I'll walk you through some important highlights. On the revenue side, you can see a truly impressive growth trend growing 4.5x from 2020 to 2022, reaching nearly BRL 6 billion.

On the operational front, we have also demonstrated improving cost efficiency with: number one, our cost to serve dropping 29% year-over-year to BRL 16; number two, our cost of funding dropped 350 basis points to 59% of the CDI; three, our efficiency ratio dropping to 69%, a 24 percentage points improvement. As a direct result of our balanced focus on growth and expense control, I'm pleased to note that we continue to deliver a steady and sequential improvement in bottom line profitability, which reached BRL 29 million in the fourth quarter of 2022.

On Page 7, I would like to provide a snapshot of the client journey, which represents the way we think about value generation going forward. We already penetrated 11.8% of the bancarized population, and we continue increasing this penetration day by day. This is the starting point for the transactional products such as PIX and demand deposits in which we already have meaningful market share. The journey then continues with the higher ARPAC products such as cards, payroll and many more. We have been continuously gaining market share in these higher ARPAC products and intend to mimic the success levels obtained in the transactional products.

As of today, 66% of our clients already have 3 or more products, meaning that this journey is advancing well and is resulting on better client principality, which now stands at 69%.

In summary, this slide shows the sequence of a client at Inter, from the moment they open an account to the full adoption of our platform. The outcome of that is a further improvement on the unit economics of our clients.

Now I'll pass it to Alexandre, who will cover the credit engine section. Thank you.

[Alexandre De Oliveira, executive]

Thank you, Joao, and good morning, everyone. Now moving to Page 9, let me walk you through the loan portfolio. As you can see, our portfolio reached BRL 24.5 billion at the end of 2022, reflecting a 40% increase from 2021 and 11% growth from the third quarter. The growth has been mostly focused on the lower-risk segments such as anticipation of credit card receivables, invoice factoring for SMBs, FGTS loans and Agribusiness. All these segments grew in the quarter at double-digit rates. In credit cards, we grew 7% quarter-over-quarter, reflecting a more conservative approach to unsecured credit underwriting that we have implemented since the beginning of 2022.

Regarding the longer-duration portfolio, which includes payroll and real estate loans, the focus has been on adopting a disciplined repricing initiative. This has resulted in slower growth though at much higher profitability levels.

Moving now to Page 10, we can see our underwriting performance. When you analyze the composition of originations, we see the second half of 2022 is a lot more focused on lower risk segments. These lower risk segments, though lowering margin, consumes significantly less capital and require less provisioning.

Now on Page 11, we highlight our asset quality metrics. When we look at the short-term metric of 15 to 90 days, we see a stable trend of NPLs, which is driven by the newer cohorts of originations, particularly on credit cards that are performing better than the older ones. In terms of the 90 days NPLs, it grew 30 bps in the quarter, mainly explained by the lower growth together with performance of our credit card portfolio, which is in line with the general market trend. Finally, when we look at NPL formation, we see consistency with a trend marginally higher, again explained by older cohorts of credit cards deteriorating further.

Finally, on Page 12, our cost of risk decreased to 14.8% in the quarter, and the coverage ratio reached 132%. This reflects a mix shift in our loan portfolio towards lower-risk credit products such as SMB, invoice factoring, FGTS and anticipation of credit card receivables, therefore, requiring lower provision expenses.

Helena will now cover the funding and transactional platform sections.

[Helena Caldeira, executive]

Thank you, Alexandre, and good morning all. On Page 14, we can see the evolution of our funding base. Our deposits grew 36% year-over-year or 5% quarter-over-quarter to reach BRL 29.8 billion. When we compare this figure to our loan balance described on Page 10, you can see that our loan-to-deposit ratio remains very healthy, significantly below 100%.

Additionally, I'd also highlight the double-digit growth on our low-cost demand deposit this quarter, increasing its share over total funding from 37% to 39%, one of the highest in the Brazilian banking system. Worth noting that this deposit base is highly fragmented, given the nature of our retail client base.

On Page 15, here, we show our deposits together with third-party fixed income investments and AUM from Inter asset on a per active client basis. Despite the high growth in active clients, we were able to grow the balance throughout the year towards BRL 3,500 per active client. This positive pattern make us proud when we consider the high inflation and interest rate environment prevailing in Brazil.

On our cost of funding, on Page 16, we see great results this quarter. The all-in cost decreased in the quarter to 8.1%, which represents 59.5% of CDI, a number that we consider best in class. This reduction can be explained by 2 factors: one, a better and lower cost funding mix; and two, the effect of paying off the holding debt in early October.

Now I will go over our transactional platform. On Page 18, we can see the strong client adoption of products in our different businesses. We have increased our clients by between 40% and 55% across verticals. Specifically, in the case of Inter Global, launched at the beginning of this year, we went from 0 to 1.1 million clients, surpassing our own expectations. Note that these are all high ROE products that consume no capital and drive strong client engagement.

Moving to Page 19. Here, we show how these products have helped us increase client engagement. First, on the chart on the left, you can see that approximately 2/3 of our active clients have more than 3 products, as mentioned by Joao. Second, on the right-hand side, you can see the evolution of who use Inter as their primary bank, which now amounts to 69% of active clients. Additionally, when we look on a cohort basis, you can see that both their starting point and the steepness improves, reaching levels close to 75% in most recent cohorts. This combination of transactional platform and banking have a very powerful effect on fee income.

As you can see on Page 20, our net fee income increased by a factor of 10x between 2019 and 2022. This demonstrates the success we have had in diversifying our revenue base, reaching a best-in-class fee income ratio of over 34%. We believe this is one of the highest levels seen across banks in Brazil and Lat Am.

Now I'll pass it over to Santiago, who will cover the financial section.

[Santiago Stel, executive]

Thank you, Helena, and good morning, everyone. Going now to the financial performance section, I'll jump into Page 22. Here, you can see the evolution of our total clients, where we added a record of 8.3 million net new clients in 2022. We often get questions on the cost of adding these new clients. So here you can see the evolution of our CAC, which has ranged from BRL 27 to BRL 32 and now stands at around BRL 30. When we look at the composition of this CAC, it is quite stable between marketing and operational costs. It is worth noting that the percentage of clients added organically continues to grow and now stands at over 80%.

In terms of volume transacted in debit and credit cards as well as PIX, we reached an impressive BRL 178 billion in the fourth quarter, as you can see on Page 23. This figure, which is equivalent to approximately USD 35 billion, makes us very proud and demonstrates our position strong in banking. When we look at transaction volume by cohort, you can see the continued improvements as cohort matures with the newest ones reaching higher levels at a much faster rate than the older ones.

Now going to ARPAC on Page 24. You can see here an increase versus the prior quarter, both gross and net of cost of funding. On a cohort basis, ARPAC continues to increase over time with newer cohorts outperforming the older ones. These are a reflection of our ability to increase engagement and cross-selling of clients over time, resulting in higher monetization.

Jumping now to Page 25. We have added some new perspectives on the evolution of our interest margins. I'll start explaining this slide with the bar charts. On the lower left, you can see the NIM as we have traditionally reported it. The numerator includes the entire loan portfolio, including approximately BRL 5.4 billion of credit card receivables that do not earn interest and come from our card transactors. This NIM has recovered from the third quarter impact of deflation and is back at 7%.

On the lower right, we present the NIM calculated by only including the interest-earning portfolio, or IEP, making the numerator and denominator more comparable to each other and provides a more accurate picture on our loan margin profile. This takes our NIM in the fourth quarter to 8% using this more precise methodology.

Finally, on the top of the page, we present the marginal NIM or NIM using the origination rates of each quarter. We believe this metric is indicative of where our NIM could converge to if we maintain the current origination rates and cost of funding.

Now on Page 26, you can see 90% revenue growth in 2022. On net revenue terms, the growth is still remarkable at 59% year-over-year despite a rapid rise in interest rates during the year. On a quarterly basis, you can see net revenue growing at 18% faster than the 11% growth in gross terms, which is a result of the repricing initiatives that are ongoing.

Moving to Page 27. Here, we see the improvements in our operational leverage. Starting from the left, you can see the evolution of our ratio of active clients per employee. We went from a ratio of 2,300 active clients per each employee at Inter a year ago to 3,100 active clients per employee in the fourth quarter. We see a continued improvement in this ratio going into the first quarter of 2023. As a result, we have lowered the cost to serve, which now stands at BRL 16.1 on an adjusted basis.

It is worth noting that our cost to serve calculation is very simple. We take SG&A from the income statement, deduct the GAAP expenses and divide that number by the active clients. And finally, our efficiency ratio continues to improve, reaching 69% on an adjusted basis. As mentioned during the Investor Day, this is one of the 3 core ratios we used to track the performance of the company in our business plan.

Finally, I'd like to walk you through our profitability improvements on Page 28. Net income has steadily increased across quarters due to the many of the factors we just covered. For example, one, our conservative underwriting; two, our repricing initiatives; three, our efficient funding base; four, our growing base of fee income; and fifth, our cost controls. We think this is the basis for what lies ahead and are excited to be starting the year with this momentum both on the operational and the financial side.

Now I'll pass it back to Joao Vitor for his final remarks.

[João Vitor Nazareth Teixeira de Souza, executive]

Thank you, Santiago. Let me close with some final remarks on the financial priorities for this year that already started. Operational leverage is a core priority as discussed already. With the products and features already deployed, we now expect to keep gaining market share and economies of scale. NIM expansion as a result of our repricing is another core priority. Lots of progress already done, with more to come along the year.

The quality of our loans based on a highly fragmented and collateralized portfolio will continue enabling us to have a highly resilient performance. And finally, all of this over a strong balance sheet that has best-in-class liquidity and Tier 1 capital ratio to continue supporting franchise growth.

With that said, I would like to reinforce my commitment toward profitability and a self-sustained business plan. Thank you for listening. Now we can open for questions.

[Operator]

[Operator Instructions] Our first question comes from Thiago Batista from UBS.

[Thiago Bovolenta Batista, analyst]

I have 2 questions. The first one about the improvement in the profitability of the bank. If I'm not wrong, one of the key drivers of this improvement is the repricing of the bank's loan portfolio. And we saw yesterday, the government reducing the cap for the payroll loans. Is this reduction so important at a point that this should affect your profitability strategy or no? Is it still possible to expand the profitability even with this cap?

And the second one, very briefly, I believe Inter has no exposure to Silicon Valley Bank, but can you confirm it if there's any exposure or not for the bank?

[Santiago Stel, executive]

Thank you for your question. I'll start with the second one. We have no exposure of Silicon Valley Bank. So that's an easy one to answer. And going back to the first one with our expansion linked to NIMs. So that would be the expansion that has to do with a combination of several factors with repricing being one of them.

Providing a bit more of detail in the repricing, short-duration portfolios are already repriced. This is SMBs, prepayment of card receivables and credit cards. And then on the longer duration portfolio, which accounts to nearly 50% of the total mix, we have around a quarter in payroll loans. And for those we have already repriced, around 15%, we are repricing another 10% per quarter. The rates at which we are originating today are on average 1.7%.

In real estate, which is another quarter of the portfolio, we have 15% of the reprice and we're repricing 5% more per quarter. We think that by the end of the year, approximately 2/3 of the payroll portfolio will be repriced and 1/3 of the real estate portfolio will be repriced, making a total repriced portfolio of 75%. Particularly on the payroll side, linking to the INSS comment, we see originations at 1.7% producing an ROE at Inter of 25%. We don't operate with distributors, as you know. And so we have the possibility of having that rate without sacrificing ROE. So the limit -- the impact on us is quite limited on the cap front.

[Operator]

Our next question comes from Mr. Flavio Yoshida from Bank of America.

[Flavio Yoshida, analyst]

So I have 2 questions as well. The first one is on asset quality. So we saw that asset quality in this quarter deteriorated 40 basis points to 4.4%. And in the last earnings call, if I'm not wrong, you mentioned that we should expect some stability in this indicator. At the same time, NPL formation increased to 1.1%. So I would like to have your view on what happened here, which products affected the most this indicator? And what should we expect going forward?

And also, my other question is on funding costs. So you showed an improvement on your funding cost. I was wondering what drove this improvement? And also when you show a marginal NIM higher, what drove the most this NIM? Was it the loan repricing or the lower funding costs?

[Alexandre De Oliveira, executive]

So thank you, and I'll start answering. This is Alexandre. So overall, thinking about delinquency and the evolution of the NPLs, the total NPL has been impacted by mainly the credit card portfolio, particularly on the older cohorts that were underwritten between September of '21 and the beginning of 2022, especially given that from the beginning of last year 2022, we decreased the approval rates to around 10%, so a significantly lower than a year before. Having said that, what we observed an increase on NPLs came from these older cohorts.

When we look at the other portfolios at Inter, we are observing consistent performance. For instance, [indiscernible] stayed at the same level that we observed in September in the third quarter results. It's worth noting also that the strong deceleration that we had in the loan growth from 2021 to 2022 that we didn't grow as much in the denominator.

So to try to explain the effects on the -- what's happening now. We shared also the 15 to 90 days NPLs where we see a more stable trend on the NPLs. Thinking about the future. As we've mentioned before, we expect the maximum NPL should be held on the first quarter of this year and then to start like a tipping point, and we should see things stabilizing. The evolution -- if we think about negative evolution, we should see it mainly also on credit cards. What we've been observing on the other portfolios up to now is again stability. So I think this is it for the nonperforming loans part of the question, and I'll now pass the word to Helena.

[Helena Caldeira, executive]

Hi, Flavio. So regarding the cost of funding, there are some factors that played out in 4Q that got our cost of funding to 59% of the CDI. One was some seasonality. There is more liquidity at the end of the year with the 13th salary. And we also paid off the holding debt in October, which was expensive compared to our traditional funding cost that was CDI plus 1.95% a year.

When we look at the effect of that in our margins, that is not so significant compared to the funding cost that we traditionally have around the 60% of CDI. With the expectation of having a similar share of demand deposits that we had in 2022, we expect cost of funding to remain around this low 60% of CDI throughout the whole year.

[Operator]

The next question comes from Mr. Pedro Leduc from Itau BBA.

[Pedro Leduc, analyst]

First, on loan book growth. SME housing continues strong, leading the portfolio of this year. And on loan SME, this is almost entirely supply chain financing that you do. And here, of course, you had no exposure to Lojas Americanas, so congrats. But we wonder how business changed here post the event in the first quarter, volumes, demand, spreads and if you've taken additional measures of precaution to avoid the same thing.

And how profitable is this SME supply chain financing for you nowadays? Is it above portfolio profitability, in line and our cost of risk is very low, but definitely I want to hear your thoughts on what changed in this product line in the first quarter post the LAME event.

[João Vitor Nazareth Teixeira de Souza, executive]

So good morning, Leduc. Joao Vitor speaking here. It's a very good question, by the way. We do have the supply chain finance running very well at Inter. We always had a tripod approach. So collateralization, diversification and monetization. So we are always assessing the right spreads for the risk that we take, always trying to have as much more what we call portals. So many, many supply chain contracts and players instead of concentrate that on big ones and also working with the 100% collateralization for this SME approach.

Having said that, what we saw is that we were able to improve, not significantly, but we were able to improve the margins on that product, which, by the way, connects very well with the funding capabilities that we have. We need to remind that this product is a very short-term duration. So it match our very strong demand deposits funding franchise.

Having said that, we believe that we can keep growing this portfolio in a secured way and improving the ROE for our banking portfolio going forward. So again, we took some small changes on the product. So trying to diversify even further and lowering some tickets that we had before our planning, but we're very comfortable and very excited with this business going forward.

[Pedro Leduc, analyst]

Great. You are seeing slightly more spread opportunities there, Joao Vitor, indeed?

[João Vitor Nazareth Teixeira de Souza, executive]

Yes, Leduc, we do see that. We see that many of the corporate comps that are using this product, today, we see some of credit crunch, not much crunch, but we see some restriction. And therefore, we have been able already to reprice and to improve that. And just to remind, because it's so short-term duration, the repricing of this portfolio is very, very fast. So it's happening already, okay?

[Operator]

The next question comes from Mr. Yuri Fernandes from JPMorgan.

[Yuri Fernandes, analyst]

I have one regarding personnel expenses here. If you can explain what drove higher expenses this quarter. Checking our presentation, we see about BRL 40 million in M&A-related expenses that I think you recognize also with share-based compensations in this line. So my question is what drove this? Is this kind of a nonrecurring? Should we see personnel expenses behave a little bit better? Because for me, it was a bit hard to conciliate your speech of cost control seeing like personnel expenses growing a lot.

And on the other side of the question, not regarding M&A, what is the main driver for performance inside the company? Is it growth? Like how does credit cards work inside the company? Because it was a better year for many KPIs, but still a tough year for profitability. So I really don't know how to think about personnel expenses going forward. Like if this should be more headcount kind of inflation growth or we should expect this kind of volatility on personnel expenses?

[João Vitor Nazareth Teixeira de Souza, executive]

Okay, Yuri, thank you for the question. I'm going to cover the second one and Helena is going to cover the first one about the personnel expense. So we do have a focus on both, as we mentioned on the first page of our slide on growth and profitability. Of course, that when we have some impact from NPS, as we saw last year, it postponed our profitability a little more than we wish. Though we see the trends playing in such as improving on the NIM expansion and, therefore, we should be able to combine growth and profitability. So this is the way we think -- the way I think at Banco Inter, the way we manage the business. And again, the incentives that we have here are for both, profitability and growth. And we do think that we can keep growing without sacrificing the profitability, mostly on the Commercial part of the business.

So all the fee income, we can keep growing without putting Tier 1 at risk, putting the limits at risk. So that's the way you see about growth. And now Helena will cover the personnel expenses on 4Q.

[Helena Caldeira, executive]

So, Yuri, to talk a little bit about the personnel expenses. I will go back to a brief view of the impacts of the USEND acquisition overall. So we have 2 components in that acquisition: one, that was an upfront payment; and a second one that was a deferred payment in shares. This deferred payment is to key executives that sold -- that were selling shareholders at the time of transactions, and it has to be accounted as compensation according to IFRS rule. We'll have an impact on the compensation expenses in 2022, 2023 and 2024.

And just for a reference, the full impact in the full year of 2022 was of BRL 63 million. For '23, it's expected to be BRL 33 million. And finally, for '24, BRL 19 million totaling this deferred payment of BRL 115 million.

In 4Q, we finished the PPA, that is the purchase price allocation, for the USEND acquisition. Once it's finished, we -- there are allocations required in the balance sheet that also affects the P&L, so the income statement.

These allocations were -- in the balance sheet, there was inclusion of software and licenses to depreciate and adjustment to goodwill. And on the income statement, there is a revision of the share-based compensation expenses and the allocation of depreciation in the first year. As a result, in the fourth quarter, we had the share-based compensation, which is, in essence, an M&A payment that accounted to BRL 43 million and a depreciation of software and licenses that accounted to, sorry, BRL 12 million, that combined had a nonoperating impact on our P&L of BRL 55 million.

So just to conclude, I really want to differentiate the M&A expenses from the personnel expenses. For that, I'd like to call the attention to Page 33 in the appendix of our presentation where there, we showed the expenses broken down by this concept in each quarter. There, you can see that personnel expenses grew 14% quarter-on-quarter, mostly as a result of the annual union agreed salary increase known as dissídio in Portuguese.

Our head count closed the year roughly flat at 4,100 employees, which -- well, despite the USEND acquisition that brought in 150 employees early in the year. Additionally, right now at the moment of this call, we have currently 3,800 employees, continuing the approach that we've been talking about to deliver operational leverage on this line.

[Yuri Fernandes, analyst]

That's super clear, Helena. So basically, the M&A, it was -- the only portion that was not clear for me was regarding the 2023 and '24 impact. Is this something linear? Like so we should see this like on a more -- because I think in the 4Q '22, most of those impacts that were concentrated, right, like in the 4Q. So for '23, '24, should we see like a more gradual impact during the year? Or should be seasonal impact in the 4Q '23 and 4Q '24, how that will work?

And also the D&A, the depreciation and amortization, I understood that the pressure was also driven by this. Is that line supposed to come back to a more normalized level? Or is this new, I don't know, BRL 50 million the new level for G&A expenses? These increases your base of assets, right? So you keep amortizing at a higher pace now?

[Helena Caldeira, executive]

Yes. So that's correct. So the impact in '22 was higher in 4Q because that was with the conclusion of the PPA, okay? So that's how we made the allocations. So now for '23 and '24, we will see a more linear effect throughout the whole year without any seasonality in 4Q for neither of these lines, either D&A the personnel expenses.

[Operator]

Our next question comes from Ms. Neha Agarwala from HSBC.

[Neha Agarwala, analyst]

I wanted to ask about growth. What kind of growth should we expect -- loan growth should we expect for this year? As you mentioned that you continue to gain market share. And what are the plans that you have in mind to bring about cost efficiency that since that's one of the most important goals for the bank for 2023? So on loan growth and cost efficiency, what are the plans? And what should we expect for '23?

My second question is on capital. So during 2022, you consumed almost 20 percentage points in terms of Tier 1 capital, which is now at 24%. What do you think is a comfortable level at which the bank would like to operate? And how do you see the Tier 1 supporting the loan growth expectations that you might have for this year?

[Santiago Stel, executive]

Thank you for the questions. As on loan growth, so on that front, we grew 40% in the calendar year of 2022. We expect 2023 to be marginally below that number. It will ultimately depend on the macro picture and these corporate events that are happening. We are, obviously, monitoring on a day-by-day, but our base plan is to be growing in the 30s. This is what we call disruptive growth in a sense, which is multiple times the growth of the market, which allows us to gain market share and deliver operational leverage.

So as Helena mentioned, a big component of our expanding ROE plan is to keep cost on the personnel side flat, where at 32,000 employees, we think that number has absolutely improved further. And as Thiago Batista was asking at the beginning, the other point of the ROE expansion has to do with the NIM and repricing of the portfolio, which is also ongoing.

I'll let Alexandre cover the capital question here.

[Alexandre De Oliveira, executive]

Hi, Neha. On the capital, there are a few things that happened here last year worth mentioning. So first one is we had 2 one-offs. We had the USEND acquisition and the capital reduction, one of them happened in the first quarter, second of them happened towards the end of the year early in the fourth quarter and that responds to most of the reduction that we saw on the CET1.

Now we are consuming capital more efficiently. So we closed the fourth quarter of '22 at a CET1 of around 24%. And considering our estimated profit as well as some additional capital opportunities to be incorporated during 2024, we expect to finish the fourth quarter of '23 at around 20%. Thank you.

[Neha Agarwala, analyst]

Joao, could you please elaborate on the capital opportunities that you mentioned for this year? What do you mean by that?

[Alexandre De Oliveira, executive]

Yes. So Neha, there are a few different things that we're working on. One of them is the methodology on the operational risk, RWA. So we're working on changing the methodology. We should get around, well, a little bit above 1% on that. We're working on optimizations on, for instance, the credit card that could get us another 1%. So things like that and other fine-tunings that brings other improvements, but it can also be important as we move along. Thank you.

[Operator]

The next question comes from Mr. Yuri Fernandes from JPMorgan.

[Yuri Fernandes, analyst]

Just a follow-up on profitability. You mentioned -- like Joao mentioned during his closing remarks during the presentation, a commitment to profitability, Santiago mentioned like the loan repricing. So any commitment with like short-term profitability? Like what would be the target for 2023 on ROE, net income? Like anything we should expect from the company this year?

[Santiago Stel, executive]

Thank you, Yuri. so as you know, we do not provide guidance. But as we mentioned in the Investor Day, I will continue to think that's the case. The consensus of the 15 research analysts that cover our shares, our stock is on the mid-single-digit ROE. We continue having that as our base plan for 2023. We do think that the second half will have better numbers than the first half, although we expect a sequential improvement on our profitability quarter-by-quarter.

[Operator]

This concludes our question-and-answer session. The conference has now concluded. Inter IR area is at your disposal to answer any additional questions. Thank you for attending today's presentation. Have a nice day.