Itau Unibanco Q1 2026 Earnings Call - Record Efficiency and Resilient Credit Quality Defy Macro Headwinds

Gustavo, Moderator/Host, Itau Unibanco: Hello. Good morning, everyone. My name is Gustavo, and it is a pleasure to have you joining us for our First Quarter twenty twenty six Earnings Video Conference. As always, Milton will walk you through our performance, and afterwards, we will have our traditional Q and A session, in which analysts and investors will be able to interact directly with us. Before handing the floor over to Milton, I would like to share a few instructions to help you make the most of today’s event.

For those accessing the webcast through our website, there are three audio options available: the entire content in Portuguese, the entire content in English, or the original audio. The first two options offer simultaneous translation. To select your preferred option, simply click on the flag icon located in the upper left corner of your screen. Questions can also be submitted via WhatsApp. Today’s presentation is available for download on the hot site screen and, as always, on our Investor Relations website.

With that, I will now hand over to Milton, and we will reconvene later for the Q and A session. Milton, over to you.

Milton, Chief Financial Officer / Executive presenting earnings, Itau Unibanco: Good morning, everyone. Welcome to another earnings release. We will now discuss the results for the 2026. This is a very executive presentation with a strong focus on the numbers in order to leave ample time for our Q and A session at the end. The central point this quarter is that I will place somewhat greater emphasis on the credit quality of our portfolio.

This is a topic of interest given tighter macroeconomic conditions, interest rates and the economy as a whole, therefore I believe it is worth taking an additional deep dive into this topic. By doing so, I believe we will be able to share with you much of the management approach that is guiding us here at Itau Unibanco. I will start with our traditional overview covering key indicators such as results, profitability, loan portfolio, non interest expenses and delinquency. Beginning with results, we delivered a very strong managerial result of BRL12.3 billion in the first quarter, representing a 10% increase year over year. It is important to recall that exceptionally this quarter did not include the additional dividend distribution we typically make.

That distribution took place at the end of last year in the fourth quarter with BRL20 billion distributed in dividends. If we were to normalize for this effect, net income would have been BRL12.7 billion, which would be more comparable to the first quarters of previous years. This is the first adjustment I would like to highlight. Moving on to profitability, we recorded ROE of 24.8 on a consolidated basis and 26.4% in Brazil. Therefore, we saw an expansion in profitability.

Adjusted for 11.5% capital, which is the current industry average and the lower bound of our capital appetite, consolidated ROE reached 25.8 and ROE in Brazil reached 27.6%. These are very strong figures and for comparability purposes we believe these are the most appropriate metrics to consider. Looking at the loan portfolio: despite a seasonally weaker quarter driven by fourth quarter dynamics, we were able to grow the portfolio by 1.2%, I’ll provide more details shortly, and we achieved solid year over year growth of 9% excluding FX effects. Turning to non interest expenses we saw a 5% decline compared to the fourth quarter and growth of nearly 5% versus the 2025, this is fully aligned with the work we have been carrying out under our efficiency program and the targets that were set. Results are fully consistent with those objectives.

When we look at delinquency you may recall that the first quarter is always more pressured. It’s a quarter in which household commitments increase, expenses are higher, and in addition spending incurred in the fourth quarter is typically settled in the first quarter of the following year. Despite this, short term delinquency indicators remain very well behaved. NPL 15 to 90 increased by 10 basis points during the quarter and declined by 10 basis points compared to last year. I’ll provide further detail by portfolio shortly where this will become more evident.

Long term delinquency remains absolutely stable, which reinforces the resilience and quality of our portfolio. I’ll come back to this topic in more detail later. Turning again to the loan portfolio, we would like to highlight growth in Brazil of 7.8% year over year and 0.3% quarter over quarter, when excluding FX effects the portfolio as a whole grew 1.2% in the quarter. I would like to emphasize the quality and the dynamics through which we have been building this portfolio over time. First we refer to the cards target clients portfolio.

Target clients are those that under our portfolio management framework we consider resilient across longer credit cycles. More than 90% of new originations today come from these clients, and as this dynamic continues the existing portfolio is now approaching 80% target clients. This clearly reflects portfolio quality that is fully aligned with our strategy. From this perspective Uniclass and Personalite portfolios declined by only 0.5% in a quarter when the overall portfolio contracted by more than 2% and posted growth of 20% year over year. This reflects both the natural dynamics of this segment and our ability to cross sell under the one Itau client model, which we successfully migrated into a full bank experience, the results are clearly shown here.

Moving on to payroll loans, we continue to emphasize private payroll lending, which grew 19% in the quarter and 63% year over year. As I’ve always mentioned, when this product was launched the overall market was expected to grow and it has grown meaningfully, at that time we held approximately 30% market share in the former product and I stated that our share would likely decline but within a much larger market. Therefore we were able to grow, expand the market and be the market leader in private payroll loans after all these changes. We are growing with strong quality, targeting the right clients, with appropriate pricing, adequate profitability and a long term perspective. In micro small and medium sized enterprises, government backed programs once again stood out, growing 4% in the quarter and 52% year over year.

These programs also significantly support credit quality indicators. There is a mechanical effect on delinquency which I’ll explain shortly, but in cost of credit these dynamics are very positive for margins and profitability in this segment as well. Why am I showing average balances across portfolios? Because average balances are what truly matter for margin performance, not end of period balances. This breakdown is intended to help you understand how this picture connects to margin evolution on the next slide.

Average balances in the individual’s portfolio increased 2.2% compared to the fourth quarter, in SMEs growth was 4.6%, in corporate 1.6% and in Latin America 3.6%. This framework will help explain part of the margin dynamics, there’s a lot of information here so I’ll walk through it carefully. We begin with the 2025 where margin totaled R31.7 billion dollars The first adjustment we make is the exclusion of R4 billion dollars corresponding to the return of shareholders equity invested in the bank. In other words this represents bank equity invested at interest rates which we remove to arrive at what we call core margin. This brings margin to R27.7 billion the first major effect is average volume which you saw on the previous slide.

This is why the average balance breakdown was important as it shows how volume contributed approximately R400 million to margin growth this quarter. Next we have product mix, we grew in products that are more favorable to margins generating an additional R500 million dollars reflecting dynamics across multiple portfolios. Next spreads and liabilities margin were largely flat with a modest negative impact of R100 million dollars particularly relevant in the broader context. Calendar effects however were very significant with fewer business and calendar days affecting assets and liabilities differently, resulting in a meaningful reduction in margin. Therefore, calendar effects were one of the main headwinds to margin this quarter.

Finally, Latin America and other effects were largely flat, with no material impact. As a result, core margin would have reached R27.8 billion representing growth of 0.3% with the calendar effect being the main drag as core performance remains very positive. Next we calculated what working capital margin would have been had we not distributed dividends early in the fourth quarter of last year. This adjustment amounts to R4.2 billion dollars With this normalization, margin would have reached R32.1 billion dollars which is more comparable to the R31.7 billion dollars reported in fourth quarter twenty five. This would represent growth of 1.1% or R400 million considering all these effects.

However, due to the early dividend distribution, margin was negatively impacted. Shareholders benefited, so it was positive from a shareholder perspective. For the company however the effect was a R600 million dollars reduction in margin, bringing net interest margin with clients to $31,500,000,000 which is the figure I mentioned earlier. As a result margin declined by $200,000,000 compared to the fourth quarter. I believe this captures the key message.

We had two main effects on margin this quarter, the early dividend payment and the calendar effect. Core margin performance remains very strong, with portfolio growth, increasing average balances and a favorable mix. Now translating these figures into margin metrics, as we typically do, on a consolidated basis margin remains stable. When we look at risk adjusted margin, which is how we monitor performance for management purposes, we see a modest decline of 10 basis points at the consolidated level. Adjusting for the R600 million dividend impact working capital effect I mentioned earlier, consolidated risk adjusted margin would have been flat.

In Brazil this line shows a decline of 20 basis points, adjusting for the same dividend effect the decline would be 10 basis points, which is immaterial overall. Let us now move on to market margin. This was a quarter marked by significant volatility with many developments in both the local and global environments as you have been following. Therefore every month we reset the odometer for trading, positioning and risk, as well as for the structural component of market margin. The most important message is that in Brazil we delivered a solid performance this quarter despite all the challenges.

Latin America also performed well, Brazil in fact performed better than in the previous quarter. The capital index hedge cost remains a headwind as it has historically due to interest rate differentials. In the first quarter the negative impact totaled R700 million Even considering all these effects we delivered a positive market margin result of R800 million dollars demonstrating our consistency and ability to deliver results despite more challenging scenarios. Moving on to commissions, fees and result from insurance, the main highlight is that this quarter clearly reflects seasonality, the fourth quarter is typically much stronger for several of these lines, card issuance is a good example, therefore we observed declines in the first quarter, in current account for individuals we chose to disclose this line item to reinforce the clear directional trend, the bank is becoming increasingly less dependent on these fees, redesigning packages and offering more benefits to clients, Our objective is to increase lifetime value and client centricity, therefore the direction is very clear and you’ve been observing this over time. When we look at payments and collections this was indeed a quarter affected by several factors, there are multiple explanations here: seasonality effects, mix particularly on the collection side and repricing of funding within the receivables of the acquiring business.

It is worth remembering that we’ve captured all these impacts within this line, therefore this reflects the complete payments and collections corporate flow. The most important thing here is the client perspective. We are not managing the business through isolated lines, but rather with a strong focus on being the primary bank for our clients, on long term relationships and on customer lifetime value. As a result some degree of volatility is in fact expected. A positive highlight was brokerage, which delivered a quarter somewhat stronger than the fourth quarter.

In asset management, this was a quarter without performance fees. As a reminder, under our approach, performance fees are typically recognized in the second and fourth quarters of the year. Therefore we moved from a fourth quarter with performance fees to a first quarter without this revenue, which explains this effect on asset management results. Finally the main highlight is insurance where we had already delivered a very strong previous quarter and were able to sustain this performance with 17% growth year over year. As a result services and insurance revenues increased 5.3% year over year, It’s evident that a significant portion of these revenue lines is highly correlated with the level of economic activity therefore performance will depend very much on the dynamics ahead, on how economic activity evolves, on capital markets conditions and on the investment banking environment overall.

The same comment applies to the other lines as well. I will now begin to go deeper into credit quality, starting with some information that I believe is highly relevant. Here we show NPL performance In short term delinquency at the consolidated level we observed an increase of 10 basis points as I mentioned earlier, with Latin America remaining essentially flat, while in Brazil there was an increase of 20 basis points. When we break down Brazil the dynamics become much clearer, first in individuals we observe the seasonal first quarter effect, when we compare it with the historical series excluding the first quarter short term NPL from 2023 to 2024, this represents the lowest increase we have seen. While we are rounding this figure to 30 basis points on the slide, the actual increase was 23 basis points, meaning a smaller increase compared to other first quarters that share the same seasonal effect, Therefore this is a first quarter that came fully in line with expectations and with very well behaved short term delinquency.

In SMEs we see an increase that was already expected. I have been discussing this with you for quite some time and I’ll reinforce it again when we talk about over ninety day delinquency. This is a portfolio that experienced strong growth in guaranteed credit, especially government backed loans. A relevant portion of this portfolio previously carried grace periods, which are now gradually ending. Today less than 5% of the portfolio remains under a grace period.

As a result we’ll mechanically start to observe delinquency from this client base but always covered by government guarantees. Therefore despite the observed increase, which was fully expected, delinquency levels remain significantly below those seen in prior years, with expected losses and profitability fully in line with our expectations. Moving to long term delinquency both at the consolidated level and in Brazil and Latin America indicators remain well behaved. In Brazil individual portfolios were stable during the quarter, in SMEs we saw an increase of 10 basis points and we expect that the indicator could still rise by an additional 10 to 20 basis points, running close to 2.1% would be a reasonable level, which is still below where we were just a few quarters ago, when this indicator was closer to 2.4% already reflecting portfolio adjustments under Resolution 4966, which includes securities. I would like to remind you that these indicators already include securities consistent with the Resolution 4,966 framework, no adjustments are being made here.

Therefore our expectation is for a mild and expected increase which is mechanical in nature and does not raise any concern regarding cost of credit. In large corporates the indicator remains stable. These are data points that we do not typically disclose, but I believe it’s worth taking the time to discuss them. As I mentioned earlier, target clients currently represent close to 80% of our outstanding portfolio and in the origination they tend to be close to 100%. What I want to show you is how client indebtedness has evolved, excluding mortgage lending.

This is because mortgage dynamics are somewhat different, that said the footnote includes the calculation including mortgages as well. In many cases clients replace a more expensive rent with a mortgage instalment. Mortgage lending is collateralized with solid loan to value ratios and down payments, so we believe the dynamics are different for this product. Excluding mortgages the indebtedness of our target clients starting from a base of 100 in December 2019 reached 105 in January 2026. When we look at the broader market data including our own clients this index reached 123 in January 2026.

This highlights a very significant difference relative to the client base we have been working with, reflecting responsible credit, a credit cycle perspective, portfolio management and resilience. This is the client base on which we have built our reference portfolio. The market in a broad sense considering all other client segments experienced a much stronger increase in indebtedness over the same period. When we analyse our total client base, and here you can clearly see how relevant target clients are for us, the index moves from 100 to 106. In other words the difference is not material, and when compared to the market by definition the index is the same.

This demonstrates the predominance and relevance of target clients in our client base and in the way we operate. This is the first information to show good client quality from an indebtedness perspective. Now let’s move on to the breakdown of delinquency and this is information we have never shared before. I felt it was important to present comparative series across selected products. Today over ninety day delinquency in our personal loan portfolio stands at 5.1%.

This reflects delinquency among our clients in this product. In the market delinquency in personal loans stands at 9.3%. More important than the snapshot is the trend. From December 2019 through today, we reduced this delinquency indicator by 21% among our clients, whereas the market increased by 18% over the same period. We observed not only a meaningful difference in delinquency level, but also a clearly opposite trend.

In credit cards, the logic is the same. We report 5.1 over ninety day NPLs, which is roughly half of what we observe in the market. Over the period, we reduced delinquency by 8% following the de risking process in the portfolio that we’ve discussed extensively, while the market increased delinquency in this segment by 56%. Once again both the level and the trend are significantly different when we analyze the full picture. In auto loans our over ninety day delinquency stands at 3.5% compared to 6.2% in the market, while our indicator increased by 17%.

Market delinquency increased by 82% over the same period. Finally in private payroll lending, a portfolio where we’ve been growing meaningfully, we do not have a comparable long historical series due to changes in the products dynamics, even so we can show that our delinquency level has been running at 4.2 with pricing that is coherent, competitive and responsible for clients. By comparison market delinquency in private payroll lending stands at 7.1%. This once again highlights the discipline of our risk management across the bank’s balance sheet and how we operate across our individual portfolios. Moving on to SMEs, we see information pointing in the same direction, the first metric is the share of guaranteed lending across portfolios.

From December 2019 to March 2025 our guaranteed portfolio increased from 36% to 55%. Looking at the same period only for micro and small enterprises, guaranteed lending increased from 37% to 70%. On one hand we look at SMEs as a whole, including middle market companies, on the other we isolate micro and small enterprises. In this latter group we see guaranteed lending growing from 37% to 70% in a client segment that is typically more volatile with higher failure rates. We have materially changed the profile of this portfolio by operating with significantly more collateral.

In large corporates we also have an important message, following the same logic of portfolio management: long term perspective, capital allocation and risk management. First, the portfolio nearly doubled between December 2019 and March 2026. We effectively doubled the portfolio size, but what about client quality? First we reduced concentration. The bank’s 10 largest clients represented 20% of the portfolio in December 2019, and after doubling the portfolio they represented 15% as of March 2026.

We achieved growth in a much more granular way, avoiding concentration risk. Most importantly, we not only grew, but we grew with high quality. According to our internal investment grade assessment framework, where we monitor, measure, manage and qualify corporate ratings, we achieved a substantial improvement in mix and quality, reaching nearly 80% of the portfolio in investment grade credits. Across both individuals and corporate banking, including micro, small, medium and large companies, what we see is clear evidence of our management discipline. This reflects our view of an infinite game in which we must continuously build a sustainable and consistent portfolio that generates value, serves our clients well and does so with much lower volatility than we observe in the market.

Agribusiness is also a very important portfolio for us, there has been a great deal of discussion about the more challenging environment for the sector with pressure from commodity prices, foreign exchange, fertilizer costs, farmers operating with tighter margins, higher leverage and higher interest rates, so how have we built our agribusiness portfolio? Out of the total agribusiness portfolio 31% is allocated to farmers. When we analyze this portfolio nearly 80% of it is backed by strong collateral structures and robust legal instruments which provide a high level of security in terms of credit quality and recovery potential. Our market share in agribusiness is estimated. There is no official market share data for agro lending but based on the proxies we use we estimate our market share at approximately 20%.

We then applied the same market share estimation to all Chapter 11 cases observed in the market in order to assess our participation in those cases. Despite holding an estimated 20% market share in agribusiness, we account for only about 4% of the total volume under Chapter 11. We highlight this 4% comprises products with strong collateral, and we can negotiate guarantees with clients much more effectively. As a result our recovery rates and loss given default tend to be significantly lower given the way these portfolios have been structured. This once again reinforces the reliability and security of our portfolio.

Regarding the portfolio by stage, when we look at total coverage ratios and loan portfolios for stages two and three, we observe only small variations with no significant impact. In corporate, we do see somewhat greater volatility in coverage for stage two and stage three portfolios and the primary reason for this is mechanical. Every time we remove a client from stage three typically through write off and the restructured portfolio is a good example which I will show shortly or when a client with a very high level of provisions exits the balance sheet through write off that client usually carries higher coverage. Meanwhile new clients entering these stages typically do so with lower coverage ratios. This explains why we see some volatility coverage indicators for stage two and stage three portfolios which is entirely related to portfolio dynamics.

I would also like to remind you that we operate under an expected loss model, if we identify any sign of deterioration we proactively build provisions, we do not manage our balance sheet through provisioning decisions. At the core our models are robust, accurate and reliable, whenever there is an event or a forward looking change in expectations or outlook we typically recognise provisions accordingly, which reinforces overall portfolio quality. As for the delinquency indicators that I showed you earlier, they also reinforce a message I have been making for quite some time, there has been no change in our write off criteria, Although resolution 4,966 allows for some flexibility in extending write off timeframes, doing so actually worsens delinquency indicators as it keeps clients classified as over ninety days delinquent for longer than appropriate. Another consequence particularly when you consider the incurred loss framework for provisioning is that you end up with lower provisions initially. This creates a temporary benefit in credit cost but results in worse delinquency indicators, we did not change our criteria.

Despite the additional flexibility granted by the regulator, our view is that recovery expectations have not changed. Therefore we continue to apply write off timelines based on our best estimate of recoverability, which is the same approach we used prior to the regulatory change coming into effect. Turning to credit cost which ultimately consolidates all these dynamics, we do observe a nominal increase as previously noted, however credit portfolio is expanding and therefore nominal credit costs are expected to increase. What truly matters is the annualized credit cost ratio over the portfolio which has remained remarkably stable over the past several quarters. This stability reinforces all the points I have been making throughout the previous slides.

When looking at the restructured portfolio, as you can observe from what I mentioned earlier, whenever a large client moves to write off that client typically carries a very high provisioning balance, which also affects these indicators. This effect is usually visible between the third and fourth quarters. Still this portfolio continues to decline, overall restructured and renegotiated portfolios also declined further and are moving in the right direction. Most importantly, the ratio of renegotiated loans to total loans remains very well behaved, we do not expect significant nominal reductions to happen very quickly, this process unfolds over the cycle but levels remain fully acceptable and appropriate for the bank’s portfolio. Now turning to expenses, would like to highlight the main points.

It’s important to remember that the first quarter is always affected by seasonality, even so when we look at expenses in Brazil we recorded a 5.6% reduction compared to the fourth quarter of last year. On a year over year basis expenses increased by 5.2%. We maintain our commitment to reaching our efficiency targets, and if you want a reference we continue to aim for the midpoint of our guidance which implies annual expense growth of 3.5%. This is supported by a series of structural initiatives with a long term perspective. This clearly reinforces what we have seen in previous quarters: a year over year downward trend, driven by significant and structural changes across the bank.

This is the key message here, our efficiency ratio reached 34.9% in Brazil, once again setting a record at our lowest level for this metric. If we adjust for the early dividend payment effect I mentioned at the beginning of the presentation, this figure would have been 34.4% in Brazil, representing a very significant improvement. Regardless of the adjustment the reported figure is 34.9% and for the first time we have broken the barrier below 35%. The same trend is observed at the consolidated level. This is the efficiency ratio of a universal bank like Itau Unibanco operating across all segments and regions.

We are the most international bank in Brazil. This clearly demonstrates our discipline in cost management and revenue generation, building business models that deliver adequate profitability and are sustainable over the long term. Turning now to capital, we ended the fourth quarter with a CET1 ratio of 12.3% and AT1 capital of 1.5%, during the first quarter we delivered strong results generating 0.8% in capital. Capital consumption related to dividends, interest on capital and share buybacks amounted to 0.4% while risk weighted assets consumed 0.5%. We can therefore see that our core capital generation is sufficient to fund both capital uses and the growth of risk weighted assets.

We also show the impact of the four year phase in currently in its second year related to operational risk and certain credit risk exposures resulting in capital consumption of 0.3%. I would also like to remind you that there is a phase in also in its second year related to compliance with Resolution 4,966. In Itau’s case there was zero capital impact from this transition, we did not incur any capital cost from migrating to Resolution 4,966 because we already operated with provisions for securities and expected loss provisions across all portfolios, therefore the regulatory change had no accounting impact on the bank’s capital. Finally, even after the significant dividend distribution in the fourth quarter, our objective was to start the first quarter with a CET1 ratio of 12%, which is the level we use as our reference for dividend distribution. This is above the board defined capital appetite floor of 11.512% is the level we consider appropriate for dividends.

We also reached 1.4% in AT1. As a result, we ended the quarter with a very solid capital base despite all the impacts, allowing us to continue growing and paying a meaningful level of dividends with high profitability. To conclude I would like to promote our reports, we have made available our 2025 Integrated Annual Report and our ESG Report. This is an invitation for you to access these materials, they contain a significant amount of high quality information that can address many questions directly. The level of detail is much greater than what we can share during earnings calls and Q and A sessions, so I encourage you to review these reports.

With that I conclude the presentation of our first quarter twenty twenty six results. As I mentioned at the beginning this was a solid quarter with very strong profitability. Naturally the environment requires attention and we must remain highly disciplined in managing our credit portfolio, monitoring conditions on a daily basis. Most importantly we have been able to continue expanding the bank, investing and advancing our digital and cultural transformation, while maintaining a strong client centric approach and delivering very solid and robust numbers, all in a sustainable manner. Consistency, lower volatility and execution discipline, especially capital allocation discipline continue to be core to the bank’s decision making process.

This is why we have been consistently able to deliver strong results. I would like to thank you all once again for your trust and for your time. I will now join Gustavo and Gabriel for our traditional Q and A session. Thank you very much once again and above all for your support. See you shortly.

Gabriel, Executive / Q&A Participant, Itau Unibanco: Welcome. We are right back at the studio for the q and a session. Before we start, we would like to remind you that this is a two language session. So we will answer the questions in the language that are asked. If you need any support with the translation, our platform has the options in English and Portuguese or original audio.

You can submit your questions via WhatsApp. So the first question in Thiago Batista from UBS. Congratulations on the predictability of your results. Very constant, very predictable. Question is about, well, the focus of Itau Nibanco, the main banks, is the one that is less exposed with the client, with products.

But I wanted to hear your initial impressions on the program, this umbrella. And also Rede, of course, there is the capture of payouts. Now what are the next steps at Rede as well? Well, welcome once again. Thank you for asking your question.

Let me start by Desimrola, the program. Desimrola is a building. So the Fibroban and Banks and the ministry worked with the debate since the first date to understand what are the conditions that we would be comfortable to find the best product, the best deadline, the best discount, everything within a reasonability that would make sense for the client, for the system, for the market. Of course, it’s a program that is very concentrated in five minuteimum salaries. That’s a range up until two years with a discount that is predefined and with a guarantee of FGO for the limited 50% stop loss, so to speak.

So in our case, we are working actively. Since yesterday, we’ve been working. We are operating in the new program, but it’s evident that you just mentioned, well, proportionately, the public of the market that is eligible for this program in regards to our portfolio is less relevant in the portfolio of the bank, proportionally speaking. So without a shadow of a doubt, we’re going to work in the best way possible. We’re going to try to get the best offerings for the eligible clients.

But in terms of materiality in the results, I wouldn’t say that it’s material given the size of the credit line and the recovery line of the bank, but we’re going to try and service the clients well in this transitional process given the level of indebtedness, the interest rate, the delays. We think that working alongside with the sector is good to service these clients well. This is the first well, about Rede, it’s important to make sure that you understand that the integration that we’ve done in the past was well was was succeeded, was well done. The results are there. You can see.

We fitted in the offering. We do not talk about radio. We talk about receivables and payments. The integrated offering, we service the clients and their needs regardless of the product. The pricing is on the Vision client, not the product.

In the past, several companies were listed in the sector, everybody would, work with a mono product and pricing. That doesn’t make sense for Itau and Ebanco for a long time. So it’s another product, another offering to service well the needs of our clients. In the market share, in fact, we’ve had the results of this quarter. It’s an effect of the mix that is important.

We had a higher volume of wholesale than retail. And what guides the market share is a big accounts. The retail has more profitability in the business, but the one that directs the market share, two thirds is the big accounts. So when you have big, contracts that moves the needle naturally. The most important news that we are leaders in the sector for a long time.

We are leaders in the market of the wholesale and also the retail markets. So that’s the main message. Now market share, that’s not our objective. It’s a consequence of our actions. If it’s well resolved, if it’s well fitted in the journey, we are servicing the clients well with a competitive, value proposition, the share is a consequence.

In the big accounts, we avoid that discussion of renting the market share because you can get it with aggressive pricing and below the exchange feed and the flag and you receive that market share, it’s costly to carry it over. And we’ve seen that. In this quarter, specifically in the line of flows of payouts and receivables that we have in the revenues and services line, we had an effect, two main. The first was the mix that I just commented. Second, the structure of hedge that we use because we do the hedge of the anticipations that are done because most of them are automatic.

So we would, we will work the transfer and the liabilities through time, and that generates volatility. It’s not a per a 100% perfect hedge. It’s impossible. So any change in the interest rate structure is the main impact in this line. And the part of the result of Rede is still in the margin with the clients.

So I would say that 97% of the 98% of the result is in the service line. In the next quarter, we are going to do the adjustment that is missing, which is bringing part of the result that is positive in this quarter so we can so that all the result of really is in the lines of services and insurance, which would attenuate the numbers that you’re seeing. But our strategy is best, offering vision of the client, price at the client and vision of the payments and receivables amongst acquirers, it plays an important role. Well, let’s go to the second question with Bernardo Gutmann from XP. The floor is yours.

Good morning, Gustavo Milton, Gabriel. Thank you for the opportunity. Congratulations on the results. So I wanted to understand the trajectory of the ROE of the bank. Itau delivered 25% of ROE recurrent, very high threshold, even seasonably in weaker quarter.

When you see that profitability, the natural question is how much do you how many levers do you still have to maintain or even expand this ROE through the year? In your opinion, the sustainability will come from margin of decline efficiency, mix of credit, revenues of services, capital. Is there any point that you think that the market is still not capturing well capacity of Itau in keeping that ROI structurally above the system? Thank Thank you, Bernardo. Thank you for the question.

Thank you for your initial words. Great to see you again. Well, the issue of the ROE, as we always mention, and I’m going to answer your question, but I’m going to do it with a disclaimer. We avoid giving guidance of ROE because there is a lot of variables at the end of the day that affect accountability accounting, sorry. We like to talk about value creation, and that depends on the cost of equity, the cost of capital.

In our opinion, the cost of capital is 14 and a half. That’s the best information that we have in our models, and we look instruments perpetual instruments in the market. We have the model modeling that is prepared proprietary. So the spread between profitability and cost of equity, in fact, is where we are focusing. And all the incentives of the bank are placed in value creation.

So that’s a relevant metric for management. That brings discipline, long term vision, and always focus in the creation of value. In the guidance that we gave at the beginning of the year, there is a profitability above 20%, and we are delivering this ROE recurrently. So if you ask me, do I foresee any problems in regards to profitability? If we work with the operations that we have right now, no.

We’re still going to deliver a profitability that is important all throughout the next quarters. Of course, there’s going to be some volatility because there is an x amount of variables that compose the ROE of the bank. It’s not just Brazil, Latin America. There is all the lines. But speaking of the guidance, the best answer that I can give you, we are comfortable with the guidance that is there.

We reaffirm the guidance. But I think that the challenge is looking at the future, and we’ve seen with the service line, with the insurance, they’re very much connected with the activity. That’s where we’re gonna see the biggest challenge at the end of the year because it depends on the activities of capital markets. It depends of TPV and credit cards. It depends on our capacity to continue to grow with insurance.

And we it seems that we’re gonna be growing the bottom line all years, throughout the years. We doubled the insurance results. There is a dynamic of activities that is going to be important in the future, the capital markets. We see volumes amongst 3040% weaker. A lot of people saw that in the past.

So the dynamic in this line is that we’re going to have to observe closer in the next quarters. In the margin with the client, you saw the effects that I highlighted. So the working days and non working days, we have the working capital, so the margin core grows, grows importantly. There is a guidance of portfolio, but that we are still comfortable with what was published. Cost of credit, which is also an important lever for the profitability, we reaffirm the guidance.

So looking at everything else that we just published, we are still comfortable that we’re going to try and deliver the results that are implicit in the guidance. Of course, the challenges are big, as you’ve seen, all the points that I’ve just mentioned, but we are still very disciplined and focused to deliver the results. And I think the profitability long term depends on this variability of the cost of equity. If structurally the interest rate will drop in Brazil, assuming that the war ends, that the exchange rate is in the threshold that is current, that inflation succeeds and the central bank can do can do a relevant monetary adjustment that will open more activity, will improve the COE. And it’s not just the interest rate here in Brazil.

It’s the interest rate, the environment, institutional environment that makes the price and the cost of equity and legal security. If we can work well with that, it’s expected that part of that spread between the COI and ROE will go to the client. So we can be more competitive and the efficiency agenda is vital, so we can have more conditions to compete and more pricing power and maintain a part of that efficiency that goes to the clients. That’s not a conclusive answer, but a but an answer is that is general, and we are very comfortable with profitability. We will deliver the profitability above 20% without giving any guidance with the ROE.

Okay. Let’s go to the third question, Marcelo Mizaraki, BBI. Hello, everyone. Thank you for the opportunity. Thank you for getting my name right.

Question about delinquency. So the macro data that we’ve seen, the delinquency has been intensifying. And that slide that you just mentioned is great. So we can see the difference of how the bank is performing in regards to the market. But the market the bank doesn’t run alone.

So I wanted to understand, looking at the perspectives of the year and the portfolio, you said that you’re at ease with the guidance. But the dynamic of the beginning of the year, the first quarter in regards to the dynamic of the guidance, The quality of credit of the market itself, is it better? Is it worse than what Itau expected when you assemble the guidance? So the point from the standpoint of macro of delinquency, The issue worries enough so you can have more so you can be more cautious and have more difficulty getting to the guidance of the growth of credit. How do you see specifically delinquency of the natural persons in the beginning of the year?

And as well, we see that the numbers of the bank are doing well, but the growth of the portfolio in the next quarters. Thank you. So thank you, Marcelo, for the questions. Well, objectively speaking, the conditions from the past to now are worse than the beginning of the year. And objectively speaking, before we talk about the portfolio itself, macroeconomics are worse, specifically because of the geopolitical events.

January, February were months that were very much aligned with the guidance and right at the February. And from then on, there is a war in The Middle East, volatility in the price of oil, more uncertainties in regards to inflation, in regards to the price of energy, transportation, all the issue of fertilizers in agricultural manufacturing chain, deceleration of global growth, which impacts Brazil naturally. There is a series of new factors that didn’t exist at the beginning of the year when we did the guidance. And the other side of the same coin is the discipline of doing the provisions tempestatively. So out of the cases that we’ve provisioned throughout time, these are cases that we know.

And we’ve planned to have done advances and provisions depending, of course, on situations and new information, new situations throughout the year, number one. Number two, our portfolio, by definition, was built with a more resilient public to the cycles that we’re seeing right now. Evidently, the interest rates with restricted interest rates, they generate effects in all segments. And as you said, we’re not isolated from the world. We have a credit portfolio of $1,500,000,000,000.1300000000000 dollars in Brazil.

So it’s evident that any worsening can have an impact in our portfolios. Having said that, the portfolio was built in such a way that is so resilient, so well managed from the standpoint of allocation segments, public sectors, volatility, clients, that we understand that even so, with this information, the best information that we have now, the guidance is reaffirmed. Our indications of delays are well behaved. The first quarter, which is a relevant indicator for the natural persons or individuals portfolio is important. Well, you talked about the opening of the short term.

It gives you a good visibility on how we are doing and the performance. So we expect that with the expected loss is fundamental, and the expected loss is impacted by the short delays, delinquencies. In the first quarter, we had a better second quarter of the of the series. It wasn’t better from ’23 to ’24. 23 basis points in what we say, a pressured quarter because of the commitments of the family at the beginning of the year.

So our expectation is that the long delay, specifically in the individuals, is stable throughout the year. We do not see materiality in ten months, nothing too relevant in small SMEs. Our portfolio is performing very well. The data given the characteristics that I just described, we expect that it can be two ten, 190, something reasonable to imagine where we’re not seeing a worsening, that is not the mechanical effect of the government programs and the big companies are events. So here is more difficult for you to foresee.

We try to foresee as best as we can because we look at the balance sheets. We discuss with the companies. The management of provisions is super tempestuous, but events take place. Rarely, the client leaves from Stage one to three. Rarely, it occurs, but it occurs.

And we’ve seen in this quarter, it happened. So the most important thing is to be tempestuous in doing the adequate provisions and migrations and having a solid balance so we can face the waves up ahead. So besides the DRE, which is looking at the results, the patrimony accounts provisions, and the balance is very well robust to face the challenges for the future. But this scenario from then to now is worse than at the beginning of the year. We are here with all the radars turned on and operating in the best way possible.

Now next question, Gustavo Sherrodin, Citibank. Gustavo? Congratulations once again on the solid results and the predictability. Why don’t you explore the growth of the credit portfolio in two specific products, Milton, the private consignado and payroll loan and SMEs that you’re growing? So in our reading, there are two things, two points that we would like to think.

In the payroll loan, there is the creation of caps. Last week, we had a specific point about the cost effectiveness. And so I see the issue of appetite in the private payroll loan and in the small, medium micro companies, the issue of the support to the government programs. We know that, that has helped in the delinquency in that sector. And even so, as you highlighted, we expect a worsening ten, twenty bps in the portfolio.

Do you foresee sustainability in the government programs another one, two years? That would be my two questions about the two points on the credit portfolio. Thank you, Gustavo. Great to see you again. Let me start by the order of your questions, the payroll loans.

First point that we’d like to highlight, in way back when the product was launched, I had talked to investors, I talked in the call itself, I talked to investors of how the bank sees the evolution of the, payroll loan, a CLT. First, it was a leader, 30% of the market. It was a market of 40,000,000,000 reais. So we understood that there would be an expansion of that market. It would be natural that we will lose share through the cycles, but we would still be more relevant in the payroll loan private, not from the standpoint of share, but volume of the portfolio.

In fact, that happened. So when I look, if you look at the records, we are the leaders of the payroll loan private with a large advantage in regards to the competition. And we assumed the market share today, which is above 20%, with a portfolio of approximately BRL 20,000,000,000, a portfolio of BRL 12,000,000,000 when the program was launched. So we had a growth of BRL 8,000,000,000 approximately of portfolio with important productions throughout the period. But these strategies, since the inception, was important for us to get here.

First, be able to launch with the launch. So the cost of modernized platforms technology, we had an advantage comparative of starting right at the beginning. It wasn’t necessarily in this way for the system as a whole. Of course, that generates a comparative advantage, but that is not the main advantage. Historically, we always evaluate it very well.

We’ve had large learnings in the past and the company’s portfolio as a whole, we had, difficult cycles in the retail and wholesale. And this logic and risk matrix, which is the risk of the companies with the risk of the private fit. This combination is very important to define what is the equity play, where we want to work and where our strategy is going be built. And it’s in this strategy that we designed the portfolio from then on. Two important commentaries.

Well, delinquency, I just talked about over 90%. It’s substantially below what we observed in the market. Two, we have a strategy that is very focused on the clients that have bank account in the bank. We know them. We are the main one, and we can manage the risk management in a different way.

Growth was given there. If you see the average rates practiced, you can see that in the list of the banks, ours is the second to last. Second, cheapest rate that is offered to the bank to the clients. And two issues. First, focusing on the client, which is what we are defending.

If this is the best product, I can service the client in the best way possible, and I can have the lowest price, why am I not not offering this product beforehand? That’s the first decision that we’ve had. Second, if I can work with the level of guarantees that is a combination of the individuals and and companies, have to operate with competitive rates because delinquency is gonna be lower and the value creation and return is gonna be very adequate. Lastly, we have to understand the full offering of the client. I don’t see this product in an isolated way.

I look at this product and I look at all the offering of credit that that client has, all the products, so we can do a pricing and a risk management with the vision of the client. I do not ignore. Lastly, there is always a risk because if I don’t do this with my good clients or the clients that we justify that we need to grow, all of the target ones, somebody does it, I’m gonna be subordinate.

Gabriel, Executive / Q&A Participant, Itau Unibanco: And

Gabriel, Executive / Q&A Participant, Itau Unibanco: so we look at the total risk exposure, but we look at subordination that is very important. So the issue of the cap, which is your question, the impact is irrelevant. Regardless, while being very transparent, we do not think that is adequate caps, trapped caps in credit operations. We know that, that produces something artificially removed products of the market. And this is a product that is more adequate for competitive prices.

Having said that, for the mechanic of the cap that is established in our portfolio, so with the data that we operate with the lowest rates of the market, our average rates are below the average rates practiced by the market. There’s going to be some convergence, and it’s going to be the calculation of one standard deviation. I think that, that calibration is going be fundamental because of risk. We rather calibrate lower getting the cap as we work with the other products that, you know, remove the other product publics from the market, the INSS. And this is the more competitive credit.

So I have that issue in regards to cap for our portfolio in the way that we are growing. We are very comfortable with the current conditions. That’s one of the questions on the payroll loan. The second question was SMEs. We talk about the government programs.

The programs were very well successful. Pronamp, FGI, Procreje. And we worked once again focusing on the client. If I need to service the client well, I need to get them to access, give them access to more competitive products with the best with the best prices so they can have capacity to prosper in the longer cycle. We are leaders, the availability of those government, programs, the clients and all the programs.

This year, last year, there was a return of the FGI because we proposed at the time for BNDES, for the government, a higher utilization of the first laws that were established, and we can do a leverage that is even bigger. The government is aware that we have opportunity, and we have a preponderant role in the cessation of Mercademy and others understood this dynamic, and they proposed the relevant volumes for the FTI. We applied resources. The thermal sensation is lower. But however, recently, talks with the Ministry of Economy, they understood the difficulty of this program.

They had an additional investment in BRL 2,000,000,000 within FGI that brings to the market another BRL 25,000,000,000 of lines. And this is the first of many that can happen throughout the year because of the programs, government programs, the most efficient were pronounced NFTI. With the information nowadays, we don’t see any stoppage, abrupt one. We are going to keep sustainability. But at some point, you’re going to have to do a translation of the portfolio, and it depends on the appetite of this government or the plans that are up ahead.

So we are gonna have to follow closely, and it’s it’s difficult to see for the future. But at least for the current year and the next one, this these programs are gonna be relevant with the service where the clients and delinquency. And the mechanic delay that you commented, it has that effect of the ten, twenty bps. It doesn’t generate that effect with the expected loss because the guarantees are very strong. So it doesn’t affect the cost of credit.

Well, next question. Renato Meloni, Autonomous. The floor is yours. Congratulations on the resilience of the result. The scenario is difficult.

I wanted to focus on the individuals portfolio. The additional information, I’m looking at the graph that you’re seeing of leverage of individuals. What is your expectation within the cycle in terms of increased reduction maintenance of this indicator, which is important? And I am thinking, given the focus that you are doing with the selected public, at one point do you get to a limitation of growth of these portfolios? And if you can also expand on your comment about the SMEs thinking about the cycle, another one, two years, these programs can sustain a similar level of growth.

But when that extends or extinguishes, do you think that the cycle of credit can be at a moment that is more prolific and even leveraging? Can you expand more on the universe of small companies that you are lending money? Thank you, Renato. Good to see you. Thank you for your question.

First, in the credit portfolios of the individuals, we still see the capacity of growth. We’ve grown two digits. We’ve managed to get into the clients that we wanted, that we had the opportunity of growth, always getting into this logic of target clients’ long term view. We are very comfortable with the strength, the capacity of growing in this resilient public, number one. Number two, I think that the migration that we’ve done of Wenetau brought opportunities that are gigantic, 15,000,000 clients.

And there, we didn’t have a full bank relationship with the clients. And we’ve seen a great deal of this growth that we’ve observed unit class and mainly personalities come from this public that didn’t have had one product with us. And now over 60% of the base has three products with the bank, which shows that we are starting to operate with the clients that are monoline. They didn’t have a full bank experience, and now they have a full bank experience. And that is a lot of volume of clients and opportunities for us to continue to grow with.

And we are growing well in the market. As part of our strategy, we are growing in the segments that we are giving focus. We’ve grown with our products. And now let’s talk about the vision of the payroll loan. The mix of funding, if you look how much do we have in the savings and the real estate, the structure of funding growing with the prices, imagining that the full market practice is the same one, the marginal cost of capture gives more volume of the savings and less allocation in the map.

It brings competitiveness in the price. So in the same price, our return is higher by definition, and that strengthens, obviously, the franchise and the relationship with the client. We will naturally continue to operate with the products that we operate it. Clean, The payroll loan is an important lever, the real estate as well. Some products that we’ve been cautious in vehicles, for example, we’ve seen volatility.

We are servicing the clients, and this is a more volatility segment. And the credit cards, regardless of the derisking that we’ve done, we’ve grown in a relevant way with a per target public transitionality that is very relevant. So I see opportunities to be able to grow. I don’t see any limitation. There is an additional fact that I’d like to state.

And the individuals, we see nominal reductions in the cost with an inflationary pressure that is enormous. So just with the tying with the cost, it’s an extraordinary result with all the pressure that we have with negotiations, the banking inflation, which is higher than the IPCA rate, even though with that, we’ve worked very strongly. And why am I saying that? Because Itau Digital, which is where we work with the client, where the digital service is preponderant, it starts to work with an efficiency level that is ever more competitive. And that generates options to work with publics that I couldn’t serve as well because my efficiency level didn’t allow me to assume additional losses.

So as we evolve in this agenda, I can work with publics that I be that I didn’t work before with the same appetite and competitiveness. So opportunity to grow in the private persons is enormous. We still see opportunities, and I am very happy with all the investments, refreshments and the strategic vision on individuals. We are working along with the plan, but this is a year that is important for the execution. I am very optimistic about our capacity to deliver and long term view.

And SMEs, which is the second point of your second question, it’s very difficult to foresee where these programs end. The program is definitive, so we don’t have that discussion of the commitment of resources. FGO depends on the appetite and the conditions of the market. Because if in more than two years, we have a situation where the small and medium are going to need support with the government programs, it doesn’t matter. I know that they’re going to understand the effectiveness of this program, the cost of allocation of the public resources.

It’s very difficult to say where and if these programs are going to decelerate. With the information that we have now, they’re going to continue to exist in a relevant way because they’ve been very effective, specifically for the SMEs. Well, in the segment of middle, outside of that, we grow with the last dependency on these programs. The participation in the portfolio is a fraction of SMEs. And SMEs, we know that these programs are key for the growth with quality, competitive pricing, adequate deadlines for the needs of these clients and with a risk portfolio that is well defended.

Well, now the next question, Daniel Vas, Safra. Thank you, Milton, Gustavo, Gabriel. Thank you. Congratulations on the resilience of the bank. Thank you for sharing new data on the credit.

It’s important to see a bit of your how you’re working with the capital quality of credit. So I wanted to explore two themes that we usually do not mention, which are vehicles and the payroll loan, INSS and vehicle loans. Vehicles, the hiring of the bank, they dropped 13% year on year. In the market, if you look at the level of Basel, the disbursement grew 25%. It’s very big in terms of financial activity.

So I wanted you to understand to make me understand better the vehicle loans. Is there any opportunity of attack? How do you want to position from now on? Or if the product has some gaps that you don’t like guidance, well, if you can explore in the call. Second, in the payroll loan, yes, INSS, we had important changes with this EnrolaR one point zero.

Well, with the new margin of the payroll loan, at least 35.5%, which is 45% with credit cards now to 30 in five years when you’re going to have the phase in of this new regulation. But the credit card losing importance, it does that opens more space to play with more or less with this product in this new regulation. Thank you, Daniel. Thank you for the question. It’s great to see you.

Vehicles, as I commented very quickly in the last question, this is a segment that we work a lot. The bank was a leader in the past and with relevant volumes. In the past, we’ve had the portfolio of BRL 60,000,000,000 with nominal values. And if you mentioned the values today, over BRL 100,000,000,000 if we’ve just did the correction of the revenue in the past. Well, this is a segment that is very volatile.

So when you see the commitment compromise of the income of the families, we’ve seen restrictive interest rates. The financing of vehicles naturally becomes more risky. Second, recovery of the guarantees. There is a new legal framework, but there are still stages to be fulfilled. The legal proceedings.

So it’s not operating in full power under the best conditions thus far. So I always say that the vehicle is a real guarantee with wheels. So you need to find the vehicle, and the recovery rate is not so high. So the market secondary, it changed the dynamic of the prices. And in the past, what was the strength?

The market was practicing high prices. We see a convergence in the prices, and the spreads are very tight. So at the end of the day, our logic for the value creation and capital allocation and risk management, we think that this is a business that is less promising, so to speak, from what we see in other businesses and that we see opportunities. Having said that, we wanna service the clients very well. Our client that has a good risk that wants to do the vehicle finance.

We want we need to be present. We need to service the client with a one stop shop. I need to offer the client all the products that the bank has. Financing is one of them of vehicles. But getting the first or second place with a reseller, with a competitive market, assembly lines getting into the used banks, increasing the deadlines with the used vehicles, very strong competition.

We rather lose share than lose money. So that’s our strategy. In the end, to be very disciplined in the risk allocation, even though that produces the effects that you commented, reduction of share risk. And this is something that we’re very comfortable because we think that the risk return relationship is not adequate, so we’d rather reduce the portfolio. That’s the first point.

Second point about the INSS, payroll loan. That decision was made with this, Enrola. It’s in the best interest of the families to try and get the level of commitment, compromise of the income through time. It’s a transition. These are new information forty eight hours ago that we received this information, but we need to understand the impact in our portfolio.

It’s it’s early to say because this is a transition that is long. You do it at the beginning, the reduction of the 45 to 40. You bring the five plus five, the 10 to the credit card to the limit, but then you have the reduction of two percentage points in the year, getting to thirty and five years. So that’s the endgame that you mentioned. Let’s try and understand how that can be.

And this is an opportunity because we do not operate with the payroll loan credit card. So the INSS is important for us. We practically just produce at Reddit. We do not produce with the others because of the caps, the commissions, the balance financial balance is the return on capital was below than what it should be. We see players aggressive with the conditions.

It’s more focusing in generation of revenue than return of capital, and we are very disciplined in regards to that. And the caps have removed public from the market. So with the reduction structurally of the interest rates, it depends on the evolution of the reduction of the caps. We can maybe or not, depending on the decision on the cap, to bring new publics for the market. And there is a review of the blockage of benefits, the review of processes.

We are working strongly with the clients to facilitate this process. And we managed to lead, in terms of production, the INSS market through the network of the bank. Next question. We have Mario Pierry from BofA. The floor is yours.

Great. Thank you. Congratulations on the result. We understand that this scenario in Brazil, not just Brazil, but is of uncertainty. And it’s interesting to say that the bank can see the thresholds that are stable.

So the question is regarding the efficiency level. You showed in Brazil, there is an efficiency level of 35%, and you’ve seen I’ve seen that you reduced the number of branches in 15% in the last year, but the headcount just dropped 5%. So I’m thinking here in terms of still being able to see improvements in the efficiency level, the bank should do a more should reduce more people and more employees. Do you see that? Or is there still a space to improve efficiency with operational improvements, reviews of contracts, etcetera?

And so getting your perspective, what is the threshold that you can bring this efficiency level? And to have improvements, should you have more focus in the reduction of personnel. Thank you, Mario. Great to see you again. Thank you for the initial words.

I always do the disclaimer that this efficiency level is really in a consolidated. So we need to look at the breakdown between wholesale and retail, wholesale with LATAM working with an efficiency level lower. So I would say, in the world of wholesale, to simplify, we run benchmark, global benchmark. We are first quartile, first tenth inefficiency level without opportunity. We are very disciplined to understand the well, highlighted by artificial intelligence, how can we advance more.

So this is a constant agenda. And the retail is a game changer, the efficiency level. So every plan, I always say that even though the cost of the bank grows and let’s get the middle point of the guidance this year. Even though we grow 13 and a half, if we look in the inside, the thermal sensation between the several business is very different. So in the in the individuals where it’s important that we reduce the efficiency level, and we got to 40%.

That was an important reduction quarter on quarter, 40% of the efficiency level. When I look at individuals, I can observe that that’s where we need. Well, I’m talking about, you know, retail as a whole, 40, and then there is companies and and individuals. And individuals is where we need more competitiveness. So we see costs in this quarter.

There is nominal reductions of costs in individuals, and this is very important news. And we still believe, and there is important space to do the assessments, And this goes through a revision of value proposition, business model, Itau, digital, more focused. Adjustment of footprint, 98 of our transactions are digital, 97%. The flow of visitation to the branch has reduced from the pre pandemic to now 70%. That’s the reduction of the monthly visits to the branches.

So it’s where the client is going that we are analyzing. It’s not simply making a decision of reduction of branches. How do we adjust our it is how adjusting our model to best service our clients and having a more digital service specifically with these publics where the efficiency level makes all the difference in the service, is fundamental so we can open the options here. So this review of the model is being done as we speak. It’s natural that it happens.

And this is highlighted by all the technologies and so on. So we should see an efficiency level of the retail dropping through time. We expect, obviously, the revenues are different than what there is a cap with the interest rate with the and this is where we’re going. And Gabriel has been the leader of this process with all the executive committee, with all the areas dedicated so we can take that efficiency level to the place that it should be. Of course, the rest is a consequence of this strategy.

What is the model? If it’s full digital, if there is a remote service, how do we service the high income, middle income? Every segment is going to have its position. In the last quarter, I brought you a slide that shows the segment that we are referenced in efficiency segments where we need to gain operational scalability. We are very excited with the advances, and this is where we’re to go.

With quality, with a digital structure that is ever more powerful, high NPS, the eNPS of the workers in higher thresholds. So absorbing the turnover with good quality and the communication is fundamental, we can go through this bridge. And I’m very optimistic that we’re going to get there very strongly on the other side. Well, next question, Yuri Fernandes, JPMorgan. Congratulations on the execution of the strategy.

Let’s go back to the point of ROE. The question is ROE against growth. We know that there is a growth. There is a choice to keep an ROE that is high. There is a rewards.

We’ve seen that in your lines. The bank has kept that ROE. We talked about the good capital allocation rationality. We so I wanted to ask you about the balance because when we see the most negative point on the quarter, well, the most negative point is the FIIs clients. And the FIIs, they seem transitory.

Checking account, it should be normalized or even the fee of issuing the credit cards, very pressured because of rewards. So if you can comment, Milton, on how we should think about the bank in terms of ROE against the growth because to me, ’26 is a year of transition. Different pressures of fees with an ROE that is very high, but at one point, the it it all the the cost of service can accelerate the growth. So I don’t know if the ROE is gonna decrease eventually, and the bank is gonna get gain market share or gain market share in other products outside of the opportunities that we’re discussing. So generic question, structural, I wanted to hear from you to balance this high profitability against growth.

Thank you, Yuri. Great to see you. Thank you for the question. So our logic here is to grow. That is the dynamic of the bank.

My objective is now having a smaller bank with more profitability. The combination of both on the long term is what we seek every day. Think that $1,500,000,000,000 in credit card portfolio of 1,300,000,000,000 in Brazil, we have testing and the capacity of testing and understanding how we’re going to pilot our growth. And where are the opportunities in lay? Even in the cluster that we close of risk, we still have a percentage open to test.

And be careful that we are not making type two mystic, which is not approving a good credit because we think that from the standpoint of risk, it wouldn’t be worth it. So we have testing happening as we speak in all the places of the bank. Number two, profitability certainly is very relevant for us. And we haven’t seen opportunities of growth that are not being used, are not growing to increase the ROE. Cost of capital is there.

You can see it. And we operate restriction of profitability is not that. What restricts the growth is risk. So that’s the main factor, specifically for credit. To grow a portfolio is very quick when you open the credit.

Then you spend two, three years explaining the delays, paying the provisions and having to decelerate in a product public that you want to decelerate and consuming the capital in an adequate way. That discipline is key, is a strong balance with discipline. It’s a balance that wants to grow, but wants to grow within the opportunities that we understand that are sustainable in long cycles. We do not see any restriction to growth. So when we talk about the line of services of business and insurance, I commented, this is a line that what we’ve seen in activities, specifically the capital markets, there are challenges.

Consumption will have its challenges. The TPV of credit cards in the quarter has a seasonability because the fourth quarter is very strong. It pushes for the exchange. The first quarter, there’s an adjustment of seasonality. The indebted families are paying the Black Friday and Christmas.

And you have a natural trend of less usage in the first quarter than the fourth quarter. This is important in the credit card. On the other hand, the rewards, we still have the yearly payments. We are reducing them. Today, the rewards program costs more than what we had the results.

And this is by design. We’re this is a decision that we made many years. We’re still going to go this. We’re going to reduce clearly what we call the risky revenues that generate an attrition with the client and reduce the lifetime value. Because if I defend these tariffs, on the short term, this transition is soft, but in the long term, I’m going to lose a client.

So it doesn’t make sense. We don’t want to lose a client. We want to increase the time of relationship and being the main ones with the client. We open the credit card, the the the checking account with the individuals to show the direction. I’m not discussing with the regulator the resignification of $3.03 9 tariffs.

This is not the discussion. The debate is to find new ways of taking packages for our clients that generate value, that are perceived as value and not cost, doesn’t generate attrition. So the packages that are being developed for all clients have this logic of taking. We buy in the wholesale, we deliver solutions, streaming, restaurants, a series of other benefits. And the advantage programs that we’ve been working for a long time, you end up rewarding the relationship with the client and the engagement on the long term.

So we’re very comfortable with this growth and the rewards program that we have in all the segments, they have a good penetration with relevant results, very well managed, so we can have an adequate balance. But those revenues of yearly tariffs and tariff on the checking account individuals paying for the PIX in the companies. This is our tariffs that we are doing the transition for a long time time. It’s a negative force, but it brings an x amount of benefits on the long term, mainly the reciprocity and the relationship with the clients. So that’s the service line.

Insurance, on the other hand, the penetration has grown over the last year. This year is not different. So whether if it’s life insurance or others, integrated offerings for our clients, increasing the penetration, we’ve seen a lot of opportunities in other publics that are not explored. So insurance is growth above 10%, 15%. Easy looking at the future, still want to grow the result in the bottom line.

And services depend on activity. The capital markets 34% weaker. Of course, they’re going to affect this line. On the other hand, the advantage of being a full bank is that you have another complete portfolio that helps you manage these types of situation. You’re not doing well in one line, but you have a better one with the margin, with the client, but you have a cost of credit that is very adequate, Or you can get levers of cost where you can work with better efficiency.

So this is where we’re working with. But there are pressures, and we need to deal with it. Well, nice question. Eduardo Rosman from BTG Pactual. Good morning.

I wanted to ask about artificial intelligence. Very difficult from us from the outside to be to see how tangible who’s going to be the winners or losers. But in thesis, those that are doing a good digital transformation, such as you, should have a big advantage in the implementation of AI. So I wanted to ask Milton. Milton, what would you recommend for us, the analysts, what should we ask or observe for the executives and the numbers of the banks throughout time to have a good reading of who is moving ahead.

Great to see you, Rosman. Thank you for the questions. I read your report. Thank you for the points that were done. First, we didn’t agree on this, but I’m going to use this question for marketing and the official launch.

We, in the next weeks, in the next days, we’re going to launch the first acquirers machine, the orange one powered by AI, with an AI integrated system in the machine, a conversation with the tenant. The first one powered by AI with NPS above 90, adoption above 90. So this can be a game changer in this world of payments. They are the inception is integrated AI, and it evolves for the conversational, for a series of other points. And I tested it myself.

I have a great appreciation of RedeDay because I was the CEO of RedeCard in the past. I talked to the machine. I tested it. Saw it. It’s impressive how you simplify the experience of the salesman, the tenant, the restaurant, and it facilitates the transaction.

It’s quicker. So I’m very excited about the launch. Briefly, you’re going to have news. We’re going to do the press release. So thank you for the question.

Let me tell you what I think. What you need to get in the end of the day is get the results. On our side, instead of being the race for the biggest number of models under production, this is not translated into concrete relevant structural results. I think that the organization of the bank has been given in terms of these are the levels of the organization, started with the Executive Committee. So the bank needed the clearest definition of what are the players, the enablers, what are the levels of clients, how do we do this cross.

It doesn’t matter that one area advances quickly, if the other corporate areas do not work with the same speed. So we proposed ourselves to do Itau, the foundation of the intelligence of Itau in the bank. We assembled the guardrail, internal guardrail, so we can guarantee that we can take the model in the model, in the vision of the client without having hallucinations at the end with these models of AI, how the management to guarantee the adoption and knowledge of the bank was done. So more and more the employees have access to information. And we define clearly what are the big projects and what are the most structuring and relevant for the bank.

It’s impressive how the applications have brought results. From the standpoint of the customer experience, they asked me about the MPS. I’m going to help with the answer. EMS has a fundamental role in the digital strategy of the companies. It was born out of a limited scope, so we can do testing and evolve the solution.

It’s a relevant pillar of the companies where we’re going to leverage in a digital way. The great part of the basis, powered by AI, specialists in investment. We are launching where we are going to have access. I know that you don’t have a checking account in Itau. Imagine that you have it at BTG.

I recommend that you open an account in Itau and that you test it, and then you’re gonna have your DNA fully analyzed and you have a conversational analysis with the bank. This is game changer for the bank. You’re not a transactional, and you have a consulted hyper personalized bank in all the areas going through finance, IR, analysis, legal, HR, all the areas powered by AI and several processes. So what you need to discuss with the banks and understand first the result. This has to be translated into bigger efficiency, more capacity for the generation of top line, more productivity naturally of the teams because you have the you bring solutions to the teams and it’s with, not or.

So it’s a combination of the human with being able to provide more consultiveness with more quality, And it’s going to make a difference. And in the credit models, we’ve done a partnership that is relevant. And we have an investment with a company that has created models for LDM, which are the large data models, not the large language models. And here, we worked in relevant fronts. Modeling of credit fraud is one of them, CRM is the other.

So all of that will bring more productivity, more accuracy, more competitiveness, more efficiency. So that will be translated with numbers at the end of the day. If I tell you everything that we are doing and the results are moving along, these are structuring or there are improvements that are less relevant. So in the medium to long term, the changes can be transformative. And we need to be able to communicate this to the market so you can make it tangible in what we are doing.

And I mentioned a series of initiatives, the PIX with WhatsApp, but there are game changers that are relevant being done at the bank. And I am certain that we will be able to show this with time. But Reddy is a clear case of what we can do with artificial intelligence, changing the experience of payment with our clients.

Gustavo, Moderator/Host, Itau Unibanco: Now we switch to English as we have Tito Abarta from Goldman Sachs with us. Tito, the floor is yours.

Tito Abarta, Analyst, Goldman Sachs: Great. Thanks, Gustavo. Hi, Milton, Gabriel. Thank you for the long call and taking my question here. Following up a little bit on Yudi’s question on growth, but looking at your guidance here, and I know you had some seasonality in the quarter and the payment of the dividend impacting particularly financial margin with clients and fees.

But how do you your guidance 5% to 9% growth for the year, you’re at the low end or a little bit below that on the fees. Insurance, I know, was a bit more resilient. But how should we think about the rest of the year and your ability to deliver, say, maybe a bit above the low end of the guidance, particularly with some of the increased concerns on credit quality and appreciate the charge that you gave. Certainly, you’re in a much better position than the system. But just given those concerns, how do you think about your ability to perhaps accelerate growth through the year and maybe have these revenue trends be a little bit above that, the lower end of that guidance?

Thank you.

Gabriel, Executive / Q&A Participant, Itau Unibanco: Hi, Tito. Good to see you. Thank you for joining us in the call. It’s always a pleasure to have you here. So let me give you a little bit more details on the guidance.

I think it’s still the first quarter, but of course, we do have our forward look to make estimations in how should we end up the year. So we’re still comfortable with the overall guidance. I think in portfolio growth, we are comfortable even though we still have challenges ahead. So let’s see how it works out in the coming quarters. Financial margin with clients, we think we’ve been delivering.

It’s possible for us to get to where we want due to the level of our portfolio growth, spreads on the liability side as well, investments. We’ve been performing very well. Recent figures coming from the market, we’ve been gaining market share. So all in all, I think in financial margins, the event that we had only in the first quarter and we had some calendar effect as well, I don’t think we should have any issue. Cost of credit, it’s always I always knock on wood three times here just to be sure that we will be able to deliver.

But with the informations we have today, we are comfortable with the guidance in cost of credit. The only one that I see more on the lower end, it’s on the service and our results with insurance. This one I mentioned now a few times. I think this is more challenged for the year, okay? On the insurance side, very positive.

On the fees in general, the markets and the activity has not been as what we expected, especially in the DCM side, which is very relevant for us due to the level of market share we have. So we’re still dominant in the market. We still have a relevant market share, but it’s not related to our performance, but more related to the market performance. So this is an overall impact. And also, it’s important to highlight, we have the performance fees on the asset management in a year with much more volatility as we have been seeing.

This is more challenge as it’s challenge for the financial market with in the treasury side, but we’ve been able to deliver, although despite of the volatility we have in the asset management, per fee is relevant. Second quarter and fourth quarter, it will depend in our market performance. It will depend on the volatility. It will depend on geopolitics. It will depend in interest rates, so all the markets where we take position.

So I think those are the lines where we have to keep an eye on. TPV has to do with consumption, with the capability of the families to consume. And this will be relevant for the issuer, this will be relevant for the acquiring company. So it will depend on activity at the end of the day. So if you ask me if I still confident with the guidance, the answer is yes.

If we believe that we can achieve the level of profitability that we expected at the very beginning, yes. If we can achieve the bottom line that we are looking and of course, the geography may change in lines, but we’re still working hard to deliver the profit as we expected. But the lines in terms of geography, I think the profit, the results coming from Services and Insurance, they will be much more to the lower end than the other ones. So this is the one that I think it’s in risk. I’m not changing the guidance.

If I have new informations in the coming quarters, and we believe it’s the time to make an assessment on adjustment in the guidance, as we always do, we’ll be transparent and upfront if there’s any change needed. But we’re still comfortable with what we have here.

Gabriel, Executive / Q&A Participant, Itau Unibanco: Let’s go back to Portuguese in Ricanavaro, Santander. The floor is yours. Navarro, your microphone is not okay. Okay. Hi, everyone.

Sorry. So thank you for your time and for the opportunity. My question is about delinquency. The market has been very worried about the cycles. And actually, two questions.

The first one, from what I can understand, correct me if I’m wrong, from what I understand, you are seeing the peak of delinquency coming maybe in the second and third quarter, we’re going to see the peak of delinquency at Itau. And this number shouldn’t be a number that is frightening. So maybe deterioration of another twenty, thirty basis points in delinquency. So that’s the first question. If really we are close to the peak and that peak might come in the second, third quarter, and it’s not a number that will frighten you.

Second question, thank you for the information that you just gave on Slide eight, was very useful for us. It’s clear that Itau has an advantage in comparison to the sector. So my question is, where does this come from? The explanation can be the products. But even if we get the segmentation of products, it’s still in the math of it all that you’re doing a good service in the management of risk.

So my question is, where does these numbers come from? The digital and the question of Rosman, is it AI, data lake, the way that you’re managing that data lake? Is it really digital or AI? With an advancement in the AI becoming a commodity, do you foresee a risk of a competitor getting to you in this excellency? Or do you have more to gain with the evolution of AI because there are still a lot of things to be done in terms of improvement and image of that risk adjustment?

Thank you, Enrique. Great to see you. Well, about delinquency, I’m going to try with all the caveats that things can change. We are in a very dynamic market. I would say that my expectation for the delinquency rates for the next quarters are stability, are very stable.

I’m not even anticipating the peak. I am saying that we are structurally in thresholds of delay over 90 that I am confident and 10 basis points up or down, stability. So delay over 90 with the private persons with the information that I have today in regards to stability. Of course, if changes come, if the challenge if the market is more challenging, but we’re going to warn you. But we are going to have stability with the private with individuals.

It’s fiber plus 10 is very stable, given the thresholds, very much lower than the what the bank worked below in the past. And the generation of top line has changed. So we cannot imagine that you’re going to work with the same level of cost of credit that you operated in the past where you could extract more value. There were caps. There were other products.

So there weren’t those. So here, you have more dependency on the credit than you had in the past. So you need to deal with delays with lower thresholds to have the profitability level that is adequate. And we see the line adjusted to risk. Combination of both, we grow the financial margin of net financial margin of PDD.

We cannot deliver the top line and deliver with the cost of credit and then the return adjusted to the risk that is not adequate. This is the discipline. Where I still think that there’s going to be an increase in mechanical normalization, which is key, SMEs. The effect on the whole is not material for the bank. But in the line of SME, there can be another 10 to 20 bps.

So I wouldn’t even say that it’s material. But to be precise, the best expectation is that it should run around two ten in the next two quarters, remembering that in the same mechanical criteria we run, we ran at two forty not so long ago in the same logic. And when we published a delay over 90, we’re not even bringing the vision below. SMEs, where you still have titles specifically in the middle, here it’s a delay that you’re going to have in this portfolio. So why SMEs is going to work?

Because a great deal of the government programs are not with the deadlines. And the client has payment, they cannot they they may choose not to pay. But since there is a delay for the call of guarantees, is ninety days for 180, for the other, there is a time delay. There is a delay. The provision not necessarily happens because you have a good guarantee, and then you regularize the delay with an honor delay.

So there is an accounting time mismatch that can produce this effect. And you might have a provision, but it resolves in a short cycle.

Milton, Chief Financial Officer / Executive presenting earnings, Itau Unibanco: With the

Gabriel, Executive / Q&A Participant, Itau Unibanco: guarantees with the with the government, you can get this client with the adequate rating, and it avoids you making provisions. So very important because you have guarantees of treasury, FTO, whatever the guarantee is. So I would say that looking up ahead, there is a stability in the delay indicators. Now going back to the second question, how. The how doesn’t have a we don’t have a silver bullet.

There is a series of elements. First, the strategy that is well defined, a portfolio management that is well structured, discussed. Very important to give credit is not giving credit. The best thing that you can do for the client is not giving the credit because they don’t have the conditions, they don’t have the financial education necessary. There is an expansion in the credit in the market with the fintechs that was very relevant.

A client had 1.4 credit cards. Now they have six because there is no annual fees. They get online and they can get credit cards, as many as they get. When they have problems, they stop transactioning and they avoid to stop paying the bank where they have the salary. So being the main bank makes a difference.

We have a relevance that is strong in the segments of middle to high income. We have clients that are target. So the definition of a target client not necessarily goes through income. It’s not just income that discriminates. We also operate 10,000,000 target clients.

And Itau De Jatto, which is the basis of the pyramid, the mastified segment, we can see the profile of the client, what are the conditions of the client. We have target clients in all segments. We have non target in all segments. Income is not the sole factor for risk discrimination. A lot of modeling, a lot of testing, a lot of humility because credit makes you humble.

Every day you have feedbacks, creation of value, capital allocation, fundamental, so you can see if the decisions that you’re making at the margin are creating value. It’s not just it’s the vision to see the corrections that are necessary. A lot of artificial intelligence that is applied, but still, it’s a lot of hype in that aspect. There is concrete benefits, but it’s not so structuring as a whole. And we think that it’s going to be more in the future.

So there’s relevant modules for production with changes, high changes, with the performance of the models changing, but still under testing and some under production. Expectation is that there’s going to be a relevant advance, but there is no silver bullet. Franchising is important. Being the main one is very important for delinquency as well. And building a resilient portfolio, having the discipline to allocate the right clients for the right segment and having the discipline of not doing so.

This is the important. So that relationship of risk return well balanced on the long term brings value, removes the volatility for the balance sheet and increases the value creation and brings consistency on the long term. So this is what we believe, and we continue. We made mistakes in the past. We’ve learned with those.

We commit new mistakes. We learn again. There is a lot of learning. And for that to work, all the modernization that we’ve done on the platform and data architecture was key. So we could have a data mesh architecture, centralized data modernization of platform.

That was a game changer because today, this is the data is democratic in a bag. It’s tempestuous. Everybody can use it quickly, and you can react with the modernization of online platforms and doing the adjustments for management. And the human capital to conclude, I have to recognize having the right people, competent teams motivated, engaged with quality of management attitude and with a long term view that is with the adequate incentives. So it goes through incentives.

If you make a mistake with the incentives, you see that in the industry, this is where you lose the result in the long term. So having aligned incentives with the shareholders is fundamental.

Gustavo, Moderator/Host, Itau Unibanco: And now for the final question of the day, we have Carlos Gomeslopis from HSBC. Carlos, please go ahead. Carlos, we cannot hear you. You’re on mute.

Carlos Gomeslopis, Analyst, HSBC: I was. Sorry for that.

Gustavo, Moderator/Host, Itau Unibanco: Okay. Brilliant.

Carlos Gomeslopis, Analyst, HSBC: So again, thank you very much for the generosity with your time. Two minor questions. The first one is about your tax rate, which is a little bit lower than the guidance that you have given us for the year. Typically, it is higher in the first quarter. So I wonder if there was any particular reason or if you think that you may actually outperform in terms of your effective tax rate.

And the second one is about the agricultural portfolio. You mentioned you have about a 20% market share. Have any of the support programs from the government, are they adequate to your portfolio? Is that something that you are using? And do you have a view about how that market is starting to evolve?

Thank you.

Gabriel, Executive / Q&A Participant, Itau Unibanco: So Carlos, good to see you. Thank you for your question. So coming from the second one, no, there is those programs coming from the government, are not specific for the agriculture. Of course, if there is any similarity with the clients that are eligible for the program, you might have a coincidence, but they are not designed to the agriculture. So this is the answer.

But I think this is something that should be in government awareness that if there is something that could be developed for the agriculture market and business, this would be relevant for the market as a whole. But there is no discussions on that. On the effective tax, I will ask Gabriel to go there. But we are still comfortable with the guidance and you will see there is specific effects in the first quarter, but you will see the effective tax rate converging throughout the year. So Gabriel, if you want to give more details.

Gabriel, Executive / Q&A Participant, Itau Unibanco: Hi, Carlos. As mentioned as Muto mentioned, we are very comfortable with the guidance that we have. If you think about the bank in terms of tax rate, effective tax rate, I think there are two main components to that. As you know, the first one and the major impact that we have is interest on capital. And if you remember, the interest on capital that we have on this trimester is larger than we had last year on the first quarter and also larger than we had on the ’25.

And the second major impact that we have is the distribution of the results within the bank. So the geography among the different companies that we have financial, non financials. There are seasonalities around those two specific factors. If you take a look at what happened in the first quarter exactly they lead to a lower effective tax rate, but they tend to normalize during the year and go according to the guidance that we have so far.

Gabriel, Executive / Q&A Participant, Itau Unibanco: Well, with that, we will close the earnings call. Thank you, Milton. Thank you, Gabriel. Thank you, everyone, that took part. We’re going to close our Q and A session and our video conference of 26.

I’ll give the floor to you, Milton, for the closing arguments. Thank you, Gustavo. Thank you, Gabriel. It’s always an honor to have you here in this meeting, in this results meeting. Well, it’s a long term for debate.

It’s always enriching debate, enriching questions, always important to work with transparency and proximity to the investors. Challenges are there. Everybody has their feet on the ground, as I say. Good results. They do not generate a future accommodation.

This is what we discussed. It’s an infinite game. We’re never satisfied. We’re always raising the bar every quarter. And we try to do the best for the client.

Gabriel, Executive / Q&A Participant, Itau Unibanco: And resources

Gabriel, Executive / Q&A Participant, Itau Unibanco: agenda, the result will see this evolution on the long term. And we are happy with the results. Evidently, these are the challenges. I think that the macro, there is an election year. And today, the news is peace.

They change a lot. And the important thing is discipline, looking outside. We have good competent people, competition that is competent, and our work history evolves every day. Thank you for your time. Thank you for your feedback.

Next week, we have the conference in New York. We’re going to be there with the biggest audience of a conference for the participation of CEOs in the history. Another year that we’re going to focus all the events of our conference. And we’re going to have the group of sports. They’re going to be New York in one year.

Keynote speakers are spectacular. And then the conference itself, I’m gonna be myself there. I should see a great deal of the local investors and analysts. We’re gonna be there to respond to questions. See you next time.