Banco do Brasil (BBAS3.SA) has reported a record adjusted net income of R$35.6 billion for the fourth quarter of 2023, marking an 11% increase from the previous year. The bank's return on equity stood at 21.6%. The strong performance is attributed to substantial credit disbursement totaling over R$0.5 trillion across various sectors and a significant growth in its loan portfolio, which saw an increase of over 10% compared to 2022. Shares of Banco do Brasil have also seen an impressive surge, rising by 89% in just over a year.
Key Takeaways
- Adjusted net income reached R$35.6 billion, an 11% increase year-over-year.
- Return on equity was reported at 21.6%.
- Credit disbursement exceeded R$0.5 trillion, with a loan portfolio balance of R$1.1 trillion.
- Agribusiness and family farming loan portfolio grew by 15% to R$355 billion.
- Shares increased by 89% in just over a year.
- Plans to close Yellow (OTC:YELLQ)'s capital to enhance acquiring market operations.
- Focus on digital solutions and commitment to ESG issues with a sustainable loan portfolio of over R$443 billion.
Company Outlook
- Banco do Brasil expects to achieve a net income between R$37 billion and R$40 billion by 2024.
- The bank plans to increase its payout to 45% in 2024 and buy back 100% of Level 1 instruments.
- Growth targets for the sustainable loan portfolio are set at 5-9% for 2024.
- Total credit portfolio growth is anticipated to be between 8% and 12%, primarily driven by Agribusiness.
Bearish Highlights
- Administrative expenses totaled R$36.1 billion, with a growth rate of close to 7%.
- Expenses are expected to grow 6% to 10%, above inflation, due to ongoing investments.
- Provisions to protect the balance sheet from possible risks in 2024 are expected to remain within R$27 billion to R$30 billion.
Bullish Highlights
- The bank's CET1 stood at 12% and Tier 1 capital at 13.9%.
- Net interest income and fee income are expected to grow in line with the loan portfolio and range between 4% and 8% respectively.
- Banco do Brasil is the best positioned bank for customer complaints for the sixth consecutive semester and has received market awards for brand strength, sustainability, and diversity initiatives.
Misses
- There are no specific assumptions for provisions for 2024, although they may occur depending on negotiations.
Q&A Highlights
- The bank is confident that delinquency, especially in the agribusiness portfolio, will stabilize.
- A gradual increase in payout to 45% over the coming years is planned, with a conservative approach to maintain capital levels.
- The bank is focused on delivering robust guidelines for 2024 and exceeding market growth.
Banco do Brasil remains committed to its digital transformation strategy, emphasizing its role in supporting state and municipal projects, as well as its focus on agribusiness and family farming. The bank is also investing in technology and innovation, including cloud applications and personalization in customer service, and plans to hire 3,000 new IT and cybersecurity employees by the end of 2024. With a clear strategic direction and investment in both technology and sustainability, Banco do Brasil is poised to continue its growth trajectory in the coming years.
InvestingPro Insights
Banco do Brasil's impressive performance and optimistic outlook for the future are reflected in several key metrics and analyst perspectives. The bank's commitment to dividend payments is notable, with a history of raising dividends for 3 consecutive years and maintaining those payments for an impressive 28 consecutive years. This indicates a stable return to shareholders and a strong financial discipline within the bank's operations. Additionally, analysts have revised their earnings upwards for the upcoming period, suggesting confidence in the bank's ability to continue its growth trajectory.
InvestingPro Data metrics provide further insight into the bank's financial health. With a market capitalization of 33.17 billion USD and a low price-to-earnings (P/E) ratio of 4.88, the bank is trading at a valuation that may attract investors looking for earnings potential at a reasonable price. The P/E ratio has remained stable, with a slight adjustment to 4.86 over the last twelve months as of Q4 2023. Moreover, the bank's revenue growth over the last twelve months was 10.59%, indicating an ability to increase its earnings over time.
For readers interested in deeper analysis and additional InvestingPro Tips on Banco do Brasil, including insights on cash burn rate, gross profit margins, and price volatility, visit https://www.investing.com/pro/BDORY. There are currently 16 additional InvestingPro Tips available, which could provide valuable information for making informed investment decisions. To access these tips and more, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Banco Do Brasil SA (BDORY (OTC:BDORY)) Q4 2023:
Janaina Storti: Hello. Good morning, everyone. I am Janaina Storti, General Manager of Investor Relations of Banco do Brasil. Welcome to our video conference to announce the results of the Fourth Quarter of 2023. Our event will be in Portuguese with simultaneous translation into English, and you can choose between three audio options, original, Portuguese or English. Present with me today are our President, Tarciana Medeiros, the Vice President of Financial Management and Investor Relations, Geovanne Tobias, and the VP for Internal Controls and Risk Management, Felipe Prince. We will begin with a presentation of the results followed by a Q&A session. We would like to remind analysts that questions should be asked using the link provided. Now to begin, I would like to turn the floor to our President, Tarciana.
Tarciana Medeiros: Good morning. Good morning, everyone. Thank you so much for joining us this morning for another presentation of our results. I would like to apologize for this late beginning because our Press Conference was a bit delayed. I wasn't able to attend the last earnings release due to sick leave, but I am fine now and I would also like to emphasize it here, we are a team. I was very well represented by my colleagues, Marco Geovanne and Felipe Prince, at the last event, just as I am very well accompanied by them here today. But we are 125,000 employees of the BB conglomerate throughout Brazil in the world. Together, and mixed, we have completed a year of management, delivering excellent results and creating value for society. But before I get into the numbers, I would like to thank my colleagues for this excellent delivery. Today, we are very proud to announce the most impressive annual result in our history. Well, guys, Banco do Brasil posted a record adjusted net income of R$35.6 billion in 2023, a record this year, an increase of more than 11%, when compared to 2022. In the fourth quarter alone, net income stood at R$9.4 billion, an increase of 7.5%, when compared to the previous quarter. Our return on equity was 21.6%. A strong Banco do Brasil means support for a robust economy. Our performance enabled us to generate R$86 billion in added value to society. We are very proud of our ability to deliver consistent financial performance, turning challenges into opportunities even in a very competitive and constantly evolving business environment. All of this is achieved by having – advanced banking technology structures in the world and the best employees available in the market. It is very gratifying to be part of the story. Do you know what encourages us even more, having disbursed more than R$0.5 trillion in credit to the various segments of the Brazilian economy, in all corners of the country. This amount is very symbolic of what I had said at the beginning of our administration. Granting credit means believing in people. We reconcile our commercial objectives with our public activity supporting the most diverse sectors of the economy. Our loan portfolio posted a balance of R$1.1 trillion in 2023, growing over 10%, when compared to 2022. Remember what I said, when I'm sitting at this very chair that our profits would be the exact measure of the benefits we deliver to our clients and society. At the start of our administration, it was very clear to us that we would achieve results in line with Banco do Brasil size. Now these results can be considered as very high resolution indications of the success of our business guidelines. We have shown a sequence of consistent results, and this reinforces that we are disciplined in fulfilling our strategic plan. That's why I reinstate that those who follow us closely, they know what to expect from our performance. We are a team, and we play together. Our decisions are taken collegially, in statutory committees that include the participation of minority shareholder representatives. Our decisions are technical and always consider the best capital allocation of capital and value creation. We are the only Brazilian bank to participate in between Novo Mercado, a level of excellence among publicly traded companies. 2023 is a year of great achievements and I want to shed some light here on how we operate next to Brazilians. Last year, state and municipalities received R$20 billion in 400 operations throughout the country. This amount is higher than the R$17 billion, that were granted in the last four years. Most of it was backed by the federal government. We are talking about operations aimed at energy efficiency projects, renewable energy, road infrastructure, including urban mobility, as well as project finance in areas of Health and Education, for instance. Now I would like to talk a bit about our business with individuals. We were looking for a credit mix with increased participation in lines with better risk-adjusted returns. We operated in lines that favor the resilience of our portfolio, which totaled R$313 billion. The performance was influenced by payroll loans. In 2023, we will have been operating in this line for 20 years with the best. This is our journey in the market and immediate release of credit to the client. We are talking about a balance of R$126 billion, which corresponds to an increase of 10% in one year. Today, we have 11 million clients or civil servant retirees. As for companies, we posted growth of 9% in 12 months, reaching R$391 billion in the portfolio balance. In wholesale, we disbursed R$290 billion. In addition to credit, we also have funding through the capital markets, which have also been gaining traction. We are ranked in the top three in operations via debentures, equity and M&A. Another highlight was approximately 4 million jobs, that we were able to preserve through the 800,000 micro small and medium-sized companies that have BB loans. Although that brings meaning to our work and yet – and it's yet another sample of the scope of what we do on a daily basis, R$97 billion. We released 281,000 SMEs that benefited. More than 100,000 of them were run by women. We also took part in the Desenrola Brasil program, which has restored financial dignity to millions of Brazilians. Observing good market practices, the Banco do Brasil conglomerate has renegotiated R$26 billion, since the launch of the Desenrola Program, in a broader view for the bank's clients in addition to those benefiting from the program Now let's talk about the countryside. Earlier this week, I was at the Coopavel Rural Show in Parana, an event that kicks off the circuit of major agro fares for the year. BB is there offering support to the entire agribusiness production chain, going from family farmers to co-ops in agro industries. I used to be a farmers market person. The farmers market gave me an incredible knowledge of how to get along with people. And I learned a lot about selling interesting people. BB has all of that. It brings that trust to producers in the countryside. In 2023, our loan portfolio for agribusiness and family farming totaled R$355 billion, growing 15% in 12 months. In the first six months of the 2023, 2024 crop plan, BB disbursed R$120 billion, up 5.4% over the same period of the previous crop season. Looking at the year as a whole, we reached the highest disbursement of rural credit in history, R$195 billion, we released in more than 612,000 transactions. This represents an increase of 8.4% compared to 2023 of which R$22 billion were allocated to family farming, reaching a balance of R$61 billion, contract through physical and digital channels with a specialized advice from our employees. Our portfolio is resilient. Our financing is spread over more than 5,000 municipalities in all regions of the country and for the most diverse crops. We have mitigators that protect our operations, including against bad weather, our long tradition in the rural areas bring deep knowledge of agribusiness and family farming, and that makes a huge difference. The results we are presenting here today demonstrate our commitment to shareholders and society. Banco do Brasil's shares were worth R$31.44 at the beginning of 2023 and ended last year at our all-time high of [R$55.39]. And this week, the share price reached [R$59.60], which represents an increase of 89%, the highest in just over a year among the major Brazilian banks. From this perspective of creating value to our shareholders, and our clients, I would now like to announce another remarkable and decisive achievement by our management. This week, we took a historical step in our operations in the acquiring market. We decided to close the Yellow's capital in order to be more assertive or to delist – to be more assertive in the way we operate in this market. Our clients need even more competitive products and services. Therefore, we understand that this move adds to our strategy of seeking to be the main customer of our company clients. Having our clients' cash flow, we can better understand their behavior and improve our relationship models. We are confident that the public offering we are launching will be a success. The business model and the corporate structure that is being designed, allow us to present this improvement in the value proposition to this audience and to offer differentiated negotiating conditions to our clients. And speaking of generating value, in January, we launched the Educa+ Mulher bond in partnership with the National Treasury, and we are the first organization in the world to allow the purchase of a sovereign bond via WhatsApp. This is just one example of how we've been working with modern, simple and appropriate solutions, whether for investments, loans or means of payment. We are talking about Banco do Brasil, in which the use of data and analytical information is increasingly able to customize the relationship with our clients using artificial intelligence and analytics. There have been more than 1 billion interactions with clients using artificial intelligence and analytics. Payroll loans are another example of how we have been working digitally in the public sector for years. And now we are going to take this expertise from the public payroll loan models to the private sector and continue to advance in the INSS or pension funds, where we will be looking at our fair share, adding all the necessary improvements for a smooth and safe journey for both employers and employees. Our range of products and services is supported by cutting-edge digital solutions, combined with qualified human financial advice. This digital performance, which is the combination between physical and digital, is also one of our strengths. And the same thing goes for payroll loans. 88% of our payroll loan disbursements in 2023, were made omnichannel or digitally, in an integrated vision between origination, advised by our network and the convenience of our digital channels. I will tell you about some very nice highlight that exemplifies how much we are protagonists on the digital front in the financial sector, BB, Open Finance and Minhas Finanças solution already allows clients to see their investments in other banks and operate on the BB app. Another example here is the optimization of our systems and cloud application, that allows us to scale our personalization at all points of content in an increasingly integrated vision of customer service in any channel. Now looking towards the future, which is already present at Banco do Brasil, I would like to point out that we were the first bank to carry out tests in 2023 with Real Digital – DREX, which will be the next gateway to a tokenized economy. We continue to invest in technology. There will be 3,000 new IT and cybersecurity employees, by the end of 2024. Security, efficiency and innovation go hand-in-hand at BB, and this is reflected in the recognition by our clients. In January, the Central Bank released its quarterly ranking of bank customer complaints. For the sixth consecutive semester, we've been the best positioned bank among traditional and digital banks. We have the client at the core of our operations, strengthening the Banco do Brasil brand more and more. In addition to this, recognition from our clients, we also received several market awards last year. I would like to highlight that we were considered the strongest brand in the country and one of the three most valuable Brazilian brands in the world. Banco do Brasil was also voted the most sustainable bank in the planet for the fifth time. In 2023, we reinforce our consistent actions on ESG issues with the creation of a strategic unit to drive environmental, social and governance agenda across the bank. We have public commitments and concrete targets on each of these fronts, acting on a voluntary and leading role in corporate sustainability. Over the last year, representatives of the bank have actively participated in various fundraising meetings with an intense business agenda. I would like to highlight just a few. In July, we were in Asia and in the Middle East. In September, we went to New York during the week of the UN General Assembly, we also went to the UN Global Compact meetings in Chile and Geneva. We were in Morocco, during the IMF agendas, and we went to Dubai for COP28. Banco do Brasil has played a transformative role by offering conscious loans. Our sustainable loan portfolio reached a balance of more than R$443 billion. This amount was granted in credit lines with positive economic, social environmental impacts. We also have several relevant deliveries in regards to diversity, which is by far, one of our strategic pillars. It was this year that we launched our people, equity and diversity program and executive committee, the bank's main advisory monitoring body on the subject. We are working on this in a very serious and structured way. We are doing our share. And the market recognizes our performance. We have a prominent position in B3's iDiversa index by acting as a benchmark in diversity. I mean, not only we do our part, but we encourage this in other companies, our suppliers and our clients. Most recently, the bank renewed their BB 2030 commitments for a more sustainable world, which includes objectives in 12 commitments divided into forefronts. Sustainable loan, responsible investment, ESG and climate management and positive impacts on the value chain. We have also become ambassadors of three important UN Global Compact movements. They lead 2030, living and dignified wage and race is a priority. We strongly believe that public commitments and concrete targets have the power to transform realities. And that is why in an unprecedented way and direct way, Banco do Brasil is bringing ESG to our guidance. We are the first bank in the Brazilian market to do so. From 2024 onwards, we will start monitoring estimates for the growth of our sustainable portfolio. We believe that the guidance will bring more transparency to the bank's performance in projects that will contribute to sustainable development and the transition towards a low carbon economy. We expect to grow our sustainable loan portfolio by between 5% and 9% by 2024. We should also recall that one of our sustainability goals is to reach R$500 billion, by 2030. Our CFO, Geovanne will go into more detail about our guidance in a moment. But I just wanted to say that our commitments are bold, but in line with the size of BB's business. We are stating the continuity of our management committee, which is to support the country's development, while being judicious in granting credit. [Foreign Language] 2023 prove that we can do all this. And lastly, I would like to highlight our projection for net income between R$37 billion and R$40 billion by 2024, maintaining the principles I announced when I took office and which have marked the management of the company's executive committee. We build a future every day without losing the essence of what makes us Banco do Brasil. We are made [indiscernible]. Thank you very much. I will turn the floor to our CFO, Geovanne Tobias.
Geovanne Tobias: R$6 billion is the first way to close 2023. This was the year in which for the first time in its history of women leading our 125,000 colleagues. These figures show our ability to create value for our shareholders, clients, employees, and the whole of society. This record net income reflects the 27% growth in our net interest income NII over the year as a result of the 23% increase in loan operations income and the 40% growth in our treasury business. In this item, we also see the reflection of the results of Banco Patagonia. We were also disciplined in our cost management, which grew by 7.5% over the year. I would also like to highlight the expansion of the businesses of our related companies, which brought more than R$7 billion in profits to Banco do Brasil by equity income up 30% year-on-year. Even in a challenging and competitive environment, we managed to expand fee income by more than 4% and delivered a return on equity of 21.6% the best among Brazilian banks. Now moving to Slide 11, please. We'll speak a little about the NII. In the breakdown of net interest income, we can see the fact I mentioned earlier. We ended the year around 140 bps above the top end of the guidance. Looking at the NII managerial breakdown, please note that market NII, where we consolidate the entire margin effect of Banco Patagonia rose significantly in Q4 2023. This movement is explained by the effect of the Maxi depreciation of the Argentine peso, which took place in December 2023, against the dollar. On part of Banco Patagonia securities portfolio, which is hedged against exchange rate variations. It's important to remember here that this was a one-off event in December 2023, that for 2024, the devaluation should reduce Banco Patagonia's contribution to BB's NII, which is already included in our guidance, which we will detail later. I would like to point out that if we exclude Banco Patagonia's contribution to the NII, we would have posted a robust growth of 23%, considering only BB's operating performance. On Slide 12, we see our expanded loan book. Our credit performance continued to show strength and consistency, as our CEO, Tarciana mentioned. With all the ranges of the proposed guidance being met by 2023. In individuals, we saw growth of 8.1%. Highlight going to payroll loans. In legal entities at the SMEs portfolios plus large corporates, closed the year growing 8.5% driven by a strong performance in working capital and private securities line items. The agribusiness portfolio continued to grow the most growing 14.7%, in line with the expectation of a move that we call soft lending, that we had already been guiding the market towards and after a sequence of two consecutive years of growth in excess of 20%. Our Government portfolio grew by 11.9% in the full-year, especially the lines linked to investment programs, as Tarci mentioned. I remind you that almost all of this portfolio is secured by the National Treasury and does not compromise capital. Lastly, our expanded loan portfolio surpassed R$1.1 trillion, showing growth of 10.3%, compared to 2022. On Slide 13, let's talk about the expanded ALL. In 2022, we normalized the surplus provision built up during the COVID pandemic, bringing our coverage to what was appropriate for the size of our business. It is important to note this variation because it largely explains the growth that we observed in the volume of provision expenses. In Q4 2023, we protected our balance sheet by reenforcing ALL expenses, especially for the company's segment, even though the guidance was succeeded. As for credit quality on Slide 14, a we will cover 90 NPL. Our 90 NPL remains below the financial system ending the year at 2.92%, an increase of 11 bps in the quarter. Net of the effect of one specific case, which has been broadly talked about, 90 NPL would have ended the year at 2.75%. And the dynamics of delinquency by segment. On the right side of the slide, shows a sequential improvement in the quality of individuals over the quarters. Offset by a normalization movement in delinquency in the agribusiness and company's portfolio. The fall in delinquency in the individual segment is the reflection of the best – the better vintages in non-payroll loan lines, especially credit cards. Payroll loans are the ones with the lowest delinquency. In agribusiness, we see a marginal rise in defaults, which reflects the slower growth rate of the portfolio, which is really natural after two years of strong expansion. It is worth remembering that the current level is still below the portfolio's historical average under 1%. The company's portfolio shows a gradual normalization effect back to pre-pandemic levels even when we consider the effect of that specific case. It's important to remember that we provisioned in legal entities portfolio, maintaining the protection of our balance sheet along 2023. The volume that we provisioned for was 113.81% of the NPL formation, which contributed to maintaining BB's coverage ratio close to 100% and above the market average. As for fee income, we delivered on our commitment to fee income in the revised guidance, expanding 4.6% in the full-year. We highlight the growth in insurance, pension plans and premium bonds, which grew more than 6%, consortia with robust 40% growth credit operations and guarantees growing close to 9%. On Slide 16, we speak about administrative expenses. We ended the year with a 7.5% increase in our expenses, close to the low end of the guidance. The graph on the right, shows the variation in these increased expenses. I would like to point out that the recurring expenses remained under control, grown below inflation around 3%. And we increased investments in technology and innovation in keeping with our digital transformation strategy, which posted growth close to 7%, totaling administrative expenses of R$36.1 billion in the full-year. Now moving towards the end of our presentation. I'd like to highlight on Slide 17, the strength of our common equity Tier 1. We ended the year with a CET1 of 12%. Actually, with the CET1, yes, CET1 1% of 12% and 13.9% in Tier 1 capital. The bottom graph shows the main movements during the year. It is clear here that BB has a strong capacity for organic capital generation, which feeds the risk-weighted assets consumption needed to grow our portfolio. I also highlight the return of R$1 billion from hybrid instruments of capital and debt in July. This allowed us to end the year with CET1 level, that was quite high. In the last quarter, we also had the effect of the Patagonia exchange rate variation. The effect of accounting for the actuarial results of employee benefit plans and other effects on prudential adjustments that occurred throughout the year to justify the behavior of our common equity tier. The strength of our capital, coupled with our business growth outlook guided by our capital plan and our risk appetite policy allowed us to make important decisions that we announced together with the results. Responding to the request of many investors, we are proposing to increase the payout in 2024 to 45%. And we also decided to buy back 100% of Level 1 instruments, BANBRA 9%, exercising the call for June of this year. And we decided not to have the call of BANBRA 6% in 2025 in April. And we have decided for the non-call of BANBRA 6.25%, as an economic and financial decision. Given the systemic events that took place over the last year and greater altered the dynamics of the AT1 market. Lastly on Slide 18, I'd like to present our guidance for 2024, highlighting the new sustainability indicator, already announced by our CEO, Tarciana. For growth in the ESG portfolio of between 5% and 9%. This is a challenge we set for ourselves. You have to remember that this is across cutting indicator for individuals, companies and agribusiness lines. Now total credit portfolio is expected to grow between 8% and 12%, a little higher than what we expect for the system. Mainly influenced by Agribusiness, which should follow the soft lending movement after two consecutive years of growth above 20%, which I have already mentioned and which results today in a portfolio of more than R$350 billion, ending in the end of 2023. The companies and individuals segments should grow more in keeping with the market and with a focus on the quality of credit granting. We expected net interest income to grow in line with the loan portfolio. This represents a natural slowdown compared to 2023, given a lower Selic environment, as well as the return of Banco Patagonia’s contribution to lower levels. The extended ALL range in the case that we will seek to keep the cost of risk under control in 2024, ranging between R$27 billion to R$30 billion in provisions for this portfolio. Fee income also pose a big challenge this year, given the competitiveness in this sector. It is expected to range between 4% and 8%. And administrative expenses, as previously informed, will reflect investments we made in the digital transformation of Banco do Brasil. All-in-all, we expect to deliver to you, investors and shareholders and adjusted net income between R$37 billion to R$40 billion, which reinforces our commitment to generating consistent results and earnings aiming for high single-digit profit growth. I’ll end the presentation of our earnings now, and we can start the Q&A session. Janaina, over to you.
A - Janaina Storti: Thank you. So now we start our Q&A session. Questions can be asked both in English and Portuguese. Let's just try to stick to one question per analyst. I already have 11 people online, I mean waiting in line, so we have to have enough time to get everybody's questions. Our first question comes from Daniel Vaz from Safra. Good morning, Daniel.
Daniel Vaz: Good morning, Janaina. Good morning, everyone. President Tarciana, Geovanne, Felipe, congratulations on your very strong results. Looking at the NII guidance, the net interest income, there was a strong 9% growth in the middle of the range. If you look at the portfolio, you are like 6 basis points lower. If you also consider that the Patagonia NII started from a 50% lower base, so you will be growing in line or even above your portfolio for 2024. Can you please help us understand how – what is that number made of? I mean your spread maybe should shrink and the average Selic rate in the period will be also lower. So how come your credit margin grows or whether there was a relevant impact. This would help us to understand the very strong NII guidance?
Geovanne Tobias: Thank you, Daniel. It's also important to remember that our liability structure is different when compared to other banks. We are highly exposed to post fixed liabilities. We were able to improve the margins of liabilities in the timeline. I mean as you said, with a more adjusted Patagonia Bank, the security has continued to grow in volumes, in lines that can ensure good profitability and lower risk being supported by a funding cost that is also better for us at Banco do Brasil. Therefore, we believe that considering our budget and everything that we are supposed to deliver in terms of growth, we will work with NII along the lines that we mentioned before. And the anticipated average Selic that we used in our calculation should be about 10% in 2024.
Janaina Storti: Thank you. Our next question is from Bernardo Guttmann from XP (NASDAQ:XP). Bernardo, over to you.
Bernardo Guttmann: Good morning. Thank you for taking my question. My question is about the loan portfolio guidance and the growth. I mean, your guidance seems to be quite fair, looking at the bank's performance in 2023. But I think it's a bit aggressive, if we look at the guidance by Fibra and the numbers I saw from other incumbent banks for the same year. I would just like to understand which are the portfolios that you trust the most? And what will be the major risks in terms of growth et cetera? And looking at the portfolio, I'm just trying to zoom into that individual portfolio, how could we see the mix between secured and unsecured loans?
Tarciana Medeiros: Collateralized loans. I would say, Bernardo, that in the loan portfolio, especially through individuals, we still have a lot of room to grow and still in lines with very low risk in terms of payroll loans, INSS. We haven't yet reached our fair share of the market. We grew a lot in 2023, as you could see from previous events with you, but 2024 is a year where we still have additional room to grow. This is a loan portfolio with very low risk. In terms of auto operations for 2024, we now have a partnership with Votorantim Bank. It's part of our portfolio. So the market is anticipating growth between 8% to 12% for this segment in 2024, meaning that we still have some additional share to gain because – I mean, this is a profitable portfolio, but we still have room to grow. We still have the home equity market to pursue, and that is over R$1 trillion. And our share of this market is quite marginal. Therefore, we see great possibilities to grow on the individual line and in lines of very low risk that bring about good results and good volume. And I would even say to you that we are pursuing the private payroll operation in 2023. We expanded our strategy. On the public payroll lines, we have a lot of expertise, more than 20 years of expertise. But now we are also translating that to our private payroll line, and we grew 28% in terms of our private payroll segment, for 2024. We see good growth outlook for payroll for the private sector. Now for SMEs, we still see great possibilities to grow in micro and small sized companies of lower risks. We have 800,000 micro and small size companies in a portfolio of almost 2 million clients. So we still have a lot of room to grow in terms of the wholesale business, we see the possibility to grow the portfolio in very low-risk segments. Therefore, I would say that whenever we talk about growing our loan portfolio, we are very comfortable with the guidance that we posted to the market. And that growth between 11% and 15%, we already talked about the largest Crop Plan in the history for R$440 billion have been already granted in terms of loans. And in this first half of 2024, we will execute the remaining of the Crop Plan, and we are very confident with the next crop season 2024, 2025.
Unidentified Analyst: Thank you for the opportunity. I'd like to know more about NPL formation for companies and agribusiness. In your opinion, what explains the increase? And how should we think about NPL formation looking forward? Thank you.
Felipe Prince: Brian, thank you for the question. So let's break this down. I'm going to talk about legal entities, companies. There is an NPL formation coming from wholesale. We have been mentioning to you that there was one specific case in 2023. And that all of this – that this effect will be reflected along the 90-day NPL of 2023. This was completed in Q4. There are some other cases that we identified. And they ended up impacting the NPL formation in Q4 for large corporates. And in addition, we have a part of this coming from small and midsized enterprises. What is the difference in SMEs, practically one-third of the portfolio is anchored in Pronampe operations. In other words, I carry the delinquency in my balance sheet. On day-180, I am allowed to have that guarantee honored. So we should see a stabilization of this NPL creation of companies in Q1 of 2024. And with that, we will run this portfolio, as Tarci mentioned, this year, focusing on lines that would give us an adequate return to risk. If I might add, one of the ambitions of this movement with Cielo. One of our ambitions is to strongly foster our prepayment of receivables, which is still a little lower if compared to the market. So our idea here is to manage the company's portfolio with a lot of focus. And we are confident that just like we did for the individuals portfolio, we are confident that delinquency will stabilize. Agri business, in the agribusiness portfolio, it is very much related to climate events in some specific regions. And in some regions were large growers have tried to increase their commodities inventories. So to get a better selling price when the market overheats again, we are acting, resorting to insurance linked to too much rain-fall and climate change. And we have also put in pressure regarding the inventories. So in agri business, we see a process of normalization. Delinquency was very much different than the historical delinquency ratio, but it is now settling at levels that we've always had along our relationship with the agribusiness segment.
Janaina Storti: Yes. Have we answered your question, Brian? Yes. I just wanted to thank you. All right, thank you. I will now invite the next question from Mario Pierry with Bank of America (NYSE:BAC).
Mario Pierry: Good morning everyone. Congrats on the results. I'd like to ask a follow-up question on the NII. Perhaps you could give us a breakdown of the expected growth of client NII and market NII. And my question also has to do with operating expenses. Your guidance is to grow expenses 6% to 10%. We are talking about the middle ground 8%. This should be more than doubling the inflation rate. So I'd like to understand what kind of projects do you have? Are you considering any specific investment? Because when we look at expenses in 2023, it also grew 8%, above inflation. So I would like to understand what the bank is planning regarding investments, whether expenses are expected to remain high in the coming years.
Geovanne Tobias: Hello, Mario. Regarding the guidance for NII, we don't provide a breakdown, okay? We give you a general NII guidance. As for the expenses, we have been talking a lot about the investments, we're having to make, considering the Agio project, so the agile projects, we are talking about technology, expanding our technology park. It is impressive the amount of processing involved here. Banco do Brasil was the one that processed the most PIKS, 30% of all PIKS transactions. It is an impressive volume so not only to ensure the reliability and stability of the system, we need to invest. And investments in technology are constant. We always need to be updating technology. There's always new technology. We are also replacing the whole system to monitor our branches. We are automating that in data centers, and that is why our expense guidance runs above inflation. In this quarter, we try to break down recurring expenses day-to-day expenses. Of course, we're going to have the labor bargaining agreement. It will depend on what Febraban negotiates with the unions, but we believe that this is going to be more in line with the inflation rate. But anything beyond that is investments in processing technology, park, et cetera, et cetera.
Mario Pierry: Geovanne a follow-up question. How do you expect this to impact your cost-to-income ratio?
Geovanne Tobias: We are working to maintain cost-to-income ratio at 27%, 28%. We don't expect any significant impact because we will also be growing our revenues.
Janaina Storti: Thank you. Our next question is from Renato Meloni from Autonomous.
Renato Meloni: Good morning. Thank you for taking my question. And Tarciana, welcome back. My question relates to client NII that was a bit under pressure in this last quarter. At the beginning, you mentioned something related to business days. But what else contributed to that decrease in NII? Now going towards 2024, what about your NIM vis-a-vis the level of interest? And what do you see going forward in the portfolio?
Geovanne Tobias: Well, certainly, in the fourth quarter, that was basically due to working days. We had a little bit also related to funding. But nothing out of the ordinary or nothing that was not predicted. And you also – when you talked about 2024, you were talking about NIM or NII? NIM. Yes. I mean, if provisioning remains stable, we believe that it will also be in keeping with the growth of NII, given the fact that our ALL expenses are within budget.
Janaina Storti: And Renato, it's also important to remember that our loan portfolio has been growing significantly throughout the past year. And this has a very positive carryover. And we also have growth coming this year. So the loan portfolio, we will also pay an important contribution to our client NII.
Renato Meloni: Perfect. Thank you.
Janaina Storti: Our next question is from Tito Labarta from Goldman Sachs (NYSE:GS). Tito, you may begin.
Tito Labarta: Hi. Good morning everybody. Thank you for taking my question. My question on your provision just to understand because you were above the guidance, for the year at R$30 billion versus the R$27 billion, which is top end of the range. And I know these are related to the corporate segment. Do you think you're now fully provisioned there, in the Corporate segment? Could there be any other additional provisions that you may need to do just to think about the guidance for 2024? How comfortable are you with that, that your business should now come down from this level? And following up on the NPLs in the Corporate segment, right? I mean you are running well above reporting levels above 3%, even excluding the one-off your 2.8%. Should that begin to come down? Or just any ongoing risk there that we should have in mind?
Felipe Prince: Thank you, Tito. Okay, Tito. First of all, I think we have to make very clear that a great part of this of this NPL origination comes from the portfolio that is growing since the portfolio is growing, I have to make natural provisions to make up for the risk that I'm taking. What we did in this fourth quarter is that our modeling indicated some possibilities of increased risk, concentrated in a handful of companies. That's why we decided to bring about more protection to our balance sheet. We want just to be protected from possible risks that could emerge in 2024. I just want to make clear that we are not expecting anything. Well, we know that the wholesale segment is subject to one-off events. But, if you look at our best projections, we contemplate this risk in our projections between R$27 billion and R$30 billion, which is the figure that we are giving to you in our guidance. So just to be very specific, our portfolio is very robust. We understand that risk-adjusted returns are quite relevant. I think the numbers can speak for themselves. And therefore, I must say that we are very comfortable with our level provisions estimated for 2024 or that it's in the budget for 2024. From the new businesses that will come in and also, this relates to the risk assessment we have in our existing portfolio. And at the moment, we do not expect any additional setbacks or hiccups in addition to what has been already predicted.
Tito Labarta: Okay. Any color like which sector is corporate provisions were related to?
Felipe Prince: [Foreign Language] Well, I cannot give you that information. I just want to make clear that we are not talking about one specific case. There are a few companies from the wholesale industry and some lines coming from the micro and small sized companies. [Foreign Language]
Pedro Leduc: Thank you for the decision on the payout. Congratulations. [Foreign Language] Started with a number of almost R$10 billion. Now looking at the NPL curve of about two quarters. When you made some decisions, I would like to know whether we should expect a higher number in the short-term? Or whether we should expect something lower in the second half of the year? Are you comfortable with everything that was done in retail? What are you expecting and the same goes for companies and are you expecting some kind of benefit in your NII or in your provision for loan losses? You had some write-offs, but then you had some recovery. So I'd like to hear a bit about the whole picture, please.
Felipe Prince: Well, Pedro, I think that we have to tell you a slightly longer story. So, during the COVID pandemic, we had a very uncertain scenario. So we reinforced our provisions, which we call prudential provisions. And we disclosed that to you because we wanted to mitigate the unknown risks related to COVID. We were very confident in dealing with these cases during the COVID pandemic. And regarding the quality of our portfolio. And everything was proven effective when in 2022, we run the operation without these effects. So in 2022, we naturally released these preemptive provisions, related to these risks, which were not materialized linked to the COVID pandemic. And that's why the chord is a little more "contaminated " because the risk of credit would be slightly higher because we just needed to provision for that. And then from 2022 to 2023, you know about that specific case. That did not impact only us. It impacted the whole market. But loyal to our methodology into the way in which we deal with what supervised reorganization cases. We recognize the potential loss, as we had effective elements to measure the size of that loss. That cycle ended in Q3 for that specific case. And in Q4, what did we see? We saw the possibility of protecting our balance sheet because we had some wholesale clients that were underperforming according to our expectations. Now looking to the future, we still have a little bit of the continuation of the long tail of the individual delinquency. This pressure is naturally expected to reduce along 2024. Now we are committed to delivering adequate performance in companies. So we have a slightly ascending curve in company slightly descending curve in individuals, which leads us to think that this range between 27% and 30% will be a normalized range for our loans for loan losses. We are talking about a portfolio that has doubled in size since 2019. The average risk shows that the same did not happen with our provision expenses. So take home messages. Our portfolio is healthy. We know how to manage it. We'll enjoy the opportunities, and there are many, as Tarci mentioned, not only with our current portfolio, but also due to some perfecting in the credit market that is happening. And that is being led by the federal government. It is important to recognize that. So we are confident that we're going to deliver growth. And this growth brings with it a natural allowance for loan losses in the new loan originations, and we'll manage the portfolios we already have in-house, and we'll do it thoroughly as we have been doing to date. This is my message.
Pedro Leduc: Very clear. I just want to confirm there is no kind of assumptions for that case. That specific is in 2023 already provision for helping the ALL for 2024.
Felipe Prince: No, that's not happening. It might happen. But as you have been following this is a difficult process with ups and downs. So we're exercising our right as a creditor. We are doing it strongly. We are participating actively in the negotiations. And if we are successful, and we have signaled that we would vote in favor of the plan that was suggested. And if all happens, the benefits will be reaped. We have to remember that the exposure of Banco do Brasil is smaller.
Janaina Storti: Unfortunately, the commit was made up. So well excellent. Thank you and congratulations again. Our next question from Yuri Fernandes with JPMorgan (NYSE:JPM).
Yuri Fernandes: Thank you. I'd like to congratulate on the increased payout. Very nice. I have a question about FGO. In other revenues and other expenses, we see like R$1.7 billion of reversal. I'd like to understand how the FGO works because you contribute for a period of time. So that was an expense for many years, and this is recognized at once. I'd like to understand how FGO works. And also in other revenues and other expenses, the line item is normalized when we add everything. It doesn't seem to be a very major difference. So most likely, this FGO gain was used to offset some expense, maybe perhaps you could elaborate on that? How could you – what made you revert R$1.7 billion on FGO? Please tell us the story and where that money went to? Whether you used it to reinforce some kind of provision. I just want to understand the moving parts.
Geovanne Tobias: Well, the money is there. It is in our balance sheet. Well, so let me comment on this. To facilitate your analysis, in managerial terms, we decided to post FGO revenue. If you look at the balance sheet that was published, it is part of the intermediation of the margin results because we didn't want to contaminate anything. And so that you could evaluate our NII based on business growth. I know that many analysts are going then this should be extraordinary. We don't see it that way. We see it as part of the business. We had quotas of FGO. Prince can give us more detail. And Yuri you said it well. We did have expenses that we used to correct historical issues in evolving patient plans of the economists employees that we acquired back then and [indiscernible]. So in a way, we try to offset or the redemption of these quotas with these other expenses related to negotiations that the bank has been doing for quite a while now. So during this management we decided to solve these issues once and for all. Prince, perhaps you could tell us a story of FGO.
Felipe Prince: Okay. Let me add that when you offset you can choose the pocket you allocate it to. It could have been contributing to the ALL. Let's talk about FGO. FGO is what we call the original FGO. It was the first fund to force the credit to SMEs. Its balance sheet is totally separated from FGO Pronampe and FGO, Desenrola. And this fund, although managed by Banco do Brasil had a participation of all financial institutions that rent loans to SMEs and have been granting loans to SMEs from 2011 onwards. So what happened? In 2016, this fund reached the limit of first loss. In these credit operations. In other words, it did not have enough assets to provide all the guarantees to which it was linked. So in practice, everyone stopped granting new loan operations at the time. But there was a mechanism through which according to the recoverability of the asset, we could enjoy a benefit in terms of appreciation of the quotas in the future. Initially, this created expenses to Banco do Brasil because, as you know, the recovery oftentimes does not happen quickly in the short-term. So those operations were provisioned for over time. But in practice, since we have a credit recovery operation as a whole, we recovered double the competition. And from this double 50% in flow via cash. So this happened, these recoveries happened in the FGO because of our recovery performance we had a higher value to be redeemed because we contributed to rebuild the assets of the fund. This was actually used by the federal government, as an additional contribution to FGO Pronampe, which allowed FGO Pronampe to continue to help SMEs along the Q4 2023. So like I said, from 2016 onward, we recognized expenses. Coming from the operations and the relationship with the fund we never recorded that as nonrecurring. Our collection performance was lower in a general meeting with the quote holders or financial institutions and the federal government decided to end the fund. And each player got its respective share. Ours is recorded in our balance sheet. The federal government put the resources that they called in FGO Pronampe, every bank posted this in their own balance sheet. And that we have quite a lot of peace of mind regarding that. And as Geovanne said, this gives us an opportunity to address issues that we have been systematically addressing and showing numbers consistent numbers and consistent earnings of our businesses.
Yuri Fernandes: Thank you. It's a very complex theme, but your explanation was very clear. Is there any legal risk and legal costs that should be expected to be lower in 2024? Would this be in your guidance?
Felipe Prince: Yuri, the plan that Geovanne mentioned for Casa economists has no linkage with a legal risk, no origin in a legal risk. In terms of legal risk in our guidance, we expect R$1.5 billion, R$1.7 billion per quarter.
Yuri Fernandes: All right, wonderful super clear. This gives us a cleaner understanding of the balance sheet. It shows that he used this money for other things. So I think that this is a good explanation. Thank you very much for the answer.
Felipe Prince: But it's all in the balance sheet. I'd like to stress that.
Janaina Storti: The next question is from Gustavo Schroden from Bradesco.
Gustavo Schroden: Good morning. And thank you for taking my question. I would like to change gears a bit and talk about the results of the bank thinking about core business, Brazil and Patagonia. You already told us I mean I don't know whether the correct word would be nonrecurring. There was a very one-off case in Argentina. But if you look at a 25% of the net income of the quarter, came from Patagonia. We did some calculation, we run the math. And if we – if we break it down, we see that the results of the Brazil unit, which is our core business will give us an ROE of 15%, excluding Patagonia. You already said that this should get normalized, at least having a lower NII in 2024. And that would probably contemplate some normalization in the Patagonia's earnings results. But I think you indicated that 2023 was an unusual year for Patagonia. Well, what I want to understand is that when you we look at some Brazil core business KPIs, I think you still have some challenges. We already talked about companies delinquency, client spread and client NII is down as well. But looking at your guidance for 2024, how much you still have in terms of Patagonia? And if we were to think about Patagonia's contribution to your overall results, looking back at 2023, 17% of your net income came from Patagonia. Last year, we thought it would be 9%, meaning the Patagonia gain momentum and gain more relevant. I mean this balance sheet, looking at your core business, Brazil and Patagonia. Let me just measure your core business, I mean that strength that the bank has with so many branches, et cetera, you could help me with that, that would be mostly appreciated.
Geovanne Tobias: Good morning, and thank you for your question and for joining us. Patagonia is our business. We are the largest funder of foreign businesses. And certainly, this brought volatility. Well, it could have brought volatility on the bad side. But on the contrary, we came on the good side. Our bank there has more than 200 branches. Of course, that our expectation within the budget, is that once the exchange rate has been corrected, is just expected to have a Patagonia that will be more similar to 2022. This is an assumption. We use that when we drew the budget for 2024 and to set the guidance. Is there a possibility or the risk that maybe, you would be continuing to see hyperinflation in Argentina, despite all the measures, Yes. There is, but we are not working with that. We believe that all the measures are – being putting into place just to place indicators of the country in a more normal level. But we think that this will increase more because the country might recover my return to normality economically speaking, and probably will have higher credibility. But it's important that you look at Banco do Brasil, but not only at the light of a commercial bank. We are talking about Banco do Brasil, as a conglomerate. We are referring to 125,000 colleagues and employees of the bank. So if you look at accounting figures, I mean, if you want to make managerial adjustments, in my consolidated figures, I mean, R$33.8 billion. Banco Mochpo brought about R$14.9 billion. My subsidiary companies R$12.4 billion. Therefore, we can show you that our results are being achieved not only through loans. I mean, loans are crucial because we want to keep principality. Our sector is being disrupted in several areas, there is increased competition. Regulation has been changed to reduce entry barriers, and we just have to react to all of these changes. And when we talk about customer centricity and the value chain, we are looking at our client since onboarding and all the way to catering to their needs. We're not only looking at margins, but we are looking at generating results. Be it at the Elo business, and that's why Cielo's decision fits into that purpose. Patagonia also being a very important part of our foreign trade with Brazilian companies. If you look at ROE of Patagonia, that's basically treasury, and I'm talking about ROE of a huge percentage. It brings some hybrid things, but we are bringing all this breakdown to you because this will help you run your simulations. Okay, for 2024, we are working with Patagonia in line with what we had in 2022 rather than 2023 because that was a very unusual year. But it's a recurring thing as part of the business. We have this assumption, but this is a budgetary assumption. We have the bank's management in Argentina. I mean, we have our own colleagues that move to Argentina. And we want to maximize results. Also, we want the country to allow us to grow our loan portfolio, and therefore, we have to prepare to deliver I think R$3 billion in Gustavo. These are balance sheet figures. I'm not making any managerial adjustment. So let's look at the contribution from the country, R$27.4 billion, R$15 million coming from Banco Mochpo and R$12 million coming from subsidiaries. Now you look at abroad. Let's look at our results abroad. So we have branches abroad, Grand Cayman, New York, London, Patagonia, BB Americas. I had R$6.4 billion coming from those. And the subsidiaries where Patagonia is located, is R$4.571 million, Patagonia alone increased by more than R$2 billion. So I think contribution should supersede 2 billion.
Gustavo Schroden: Perfect. That was really helpful because he helped me to understand it better. This time, contribution was upwards. I mean, it's important that we focus on what the business is so that we can eliminate the effect of volatility for the good or for the bad, right?
Geovanne Tobias: So the idea is just to build up a reasoning. Gustavo, we just put together a matrix group to analyze what will be the worst-case scenario because nobody knew exactly what was happening because [indiscernible] was such. But I think that we took into account volatility, et cetera. But we are talking about results, but we also have the issue of the equity. We have to look at all the variables because with that, we can check our balance sheet that is very robust. It can support all the volatilities and also whatever it's necessary. Even that R$45 million dividend payout was something that we took into account as well.
Gustavo Schroden: That’s perfect. Thank you very much.
Janaina Storti: Our next question comes from Nicolas Riva with Bank of America.
Nicolas Riva: Geovanne, I'm going to go back to your initial remarks that you made before the Q&A session, you talked about the decision that you announced yesterday on the perps. That you will not be exercising the call option on the 6.25% in April, but that you will be calling the 9s in June. I think the decision in my view, was largely expected by the packet. I don't think it is a surprise. My question would be, I'm sure when you make the decision, you were kind of comparing the coupon resets on the perps with the cost of issuing a new perp in the global market in dollars. And the coupon reset on the 6.25% is going to be close to 8.5%. So clearly, you consider that a bit too low versus the cost of issuing a new perp, the coupon reset on the 9s would have been 10.5%. So you kind of consider that too high. So just the way I'm thinking about this is if I would have assumed, let's say, a coupon, a cost of 9.5% on a new AT1. The amount of savings of interest expense savings that you have would have been 1% on a bit less than $2 billion. So roughly less than $20 million pretax or after tax $10 million? And as you said, your guidance for net profit for the year is R$37 billion to R$40 billion, so $7 billion to $8 billion. So my point is it seems to me that the coupon savings really that you have with this decision, not to call the 6.25% is very small, it's about 0.1% of your annual net profits. So perhaps if you can give us some color in terms of, number one, how much do you think you would have paid for a new AT1 issue this market in dollars? And then number two, how do you think about this coupon savings versus potentially any reputational risk associated with not calling one of these instruments? Thanks.
Geovanne Tobias: Thank you very much. We did take into consideration the coupon, but not only that, but also the need of capital that I might have in the future. You should not forget that the Central Bank will definitely impose more capital requirements on operational risk. And the market is not there. So I have this option to reset. And every six months, I can reassess again and if I believe it is interesting for us to call the 6.25%. We're going to do that. For the time, we have enough opportunities here to raise AT1 in the domestic market that costs much less than the actual 6.25% or even 8%. So it doesn't make any sense economically speaking, to go on with the call of the 6%, okay? And with regard to your last question, you mentioned about [Foreign Language]
Janaina Storti: What was your last question again?
Geovanne Tobias: Reputational risk. I'm not concerned about that.
Nicolas Riva: Okay. And Geovanne, maybe just one quick follow-up. Then I guess, I assume from what you just said, your preference right now, if you need to raise AT1 capital, it would be in the local market rather than...
Geovanne Tobias: Yes, we're planning for this year, $1 billion in the domestic, okay? It's growing. And it's much cheaper than abroad. Unfortunately, the AT1 market because investment banks, they tell me, you can issue AT1s, but you have to adjust because now you have to have that option of converting the debt into shares. I'm not allowed to do that because I am a government-controlled bank. I have to have the authorization of the government to issue an instrument, a debt, a bond that can be converted in shares. And this means privatizing Banco do Brasil through an international bond. So it doesn't make – I'm not allowed to do that. So AT1 for us nowadays is not an option, okay?
Nicolas Riva: Okay. Thanks, Geovanne. Thank you.
Janaina Storti: Now move to the last question with Arnon Shirazi with Santander (BME:SAN).
Arnon Shirazi: Hello. Good afternoon. Good to speak with you, Tarciana, Geovanne, the whole team. It’s always good to be here in your earnings call. My question is a brief one. Regarding the payout, it was very nice to hear that it will be a 5 percentage point increase in the payout, now 45%. My question is, should we expect to be out in the coming years also to gradually increase? You would be studying the process now given the capital generation that the bank is having, is this a possible movement of gradually increasing the payout? Do you work with this as your base case scenario?
Geovanne Tobias: Can you hear as well? Your image was kind of frozen. But it's all okay. Thank you for the question, Arnon. We are working now. On a multi-annual budget, this is a challenge we set to our controllership department. And at the moment, we believe that 45% is a good level, extending to 2027. We think that this is a comfortable level for us to maintain a level of capital, in accordance with what was approved in our risk policy. Also, considering the adjustments that will be made by the regulator requiring more capital for operating risk. There's also the resolution of IFRS 9. So it's all considered. So to us 45%, we even considered 50% and then 45%. And then keep it at 40%. But we believe that being conservative, 45% for the mid-term. We believe that 45% is perfectly fine, predictable, and we will focus to deliver this to you. This is what's in the guidance. You see sometimes, you speak as if guidance is just something we put it in the spreadsheet and it happens. It's not like that. We have sweat and blood to make it happen. So as you can say how much our employees and our network work hard to deliver all of these earnings and results to you.
Janaina Storti: Tarciana, I'll turn the floor to you for your final remarks.
Tarciana Medeiros: To all of the analysts that are joining us today, earlier on, I talked about this during the press conference, and I would like to repeat it for you. What should you expect for 2024 for Banco do Brasil? We will bring robust guidelines for 2024 and what should we expect in terms of the guidance? We are working in a very strategic way to be able to deliver all the numbers that we are stating in our guidance today. It's important that we are able to deliver a portfolio growth that is above the market, and we believe that we will meet our goal. There are several indicators that lead us to believe that we will be able to deliver to our promise. But in the last line, the net profit between R$37 billion and R$40 billion for 2024. As you said before, we have 125 employees, that are constantly multiplying their efforts year-after-year, and they will already post an adjusted payout of 45%. And the expectations are quite robust for 2024. We know what we are doing. We know what do we expect from Banco do Brasil for 2024. This is for 2024 to 2027. This is a pure annual guidance. We want to give you more predictability, and we wanted to be confident in our guidance. Thank you once again for joining us today. And we will meet again for our next earnings release call for the first quarter of 2024. Thank you so much, and have a great weekend and enjoy Carnival (NYSE:CCL). Have fun. Thank you.
Janaina Storti: So we'll see you next time. Thank you.
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