Morning, everyone. I am Janaína Storti, Head of Investor Relations for Banco do Brasil. Thank you very much for joining us for another live streaming on the results of the bank. As always, our event will be in Portuguese with simultaneous translation into English. You have three audio options to choose from: Portuguese, English, or the original audio.
To comment on the numbers for the third quarter, joining me today are our CEO, Tarciana Medeiros, our CFO, Geovanne Tobias, our CRO, Felipe Prince, and Agribusiness and Family Farming VP, Gilson Bittencourt. Now, to start our event, I will turn the floor to our CEO, Tarciana.
Good morning, everyone. Thank you for joining us for another earnings release presentation. Our net income was BRL 1.3 billion. Year to date, BRL 18.3 billion, and this result is much lower than we expect for a bank with the strength of Banco do Brasil. We know that, and you know it too.
That is why I want to take this opportunity to discuss three points with you: the severity of the impacts of the agricultural loan portfolio situation on our results, the effects of the measures we have adopted at the bank that we continue to build, and the cost of risk reached BRL 21.2 billion in the quarter. For the first nine months, they totaled BRL 58.6 billion, a 33.2% increase year over year. I will go into more details on this item shortly. There is another side of these results that also needs to be highlighted.
The bank continues to create business value to its customers. NII grew 7.4% for the year and reached nearly BRL 81 billion, with a more diversified mix and sound liability management. Service, our fee income rose 4.8%, driven by contributions from our affiliated companies, such as asset management, consortium, and insurance.
This diversification is an important competitive advantage, mainly when the banking business is under pressure and expenses remain under control without us having neglected to invest in technology and our people. As a result, our cost-to-income ratio remains at an appropriate level. In other words, the bank's commercial and financial performance remains sound. At the same time, we are navigating the most severe cycle of agricultural credit costs in our history.
To give you a sense of what that means, in a simulation we conducted, assuming a normalized average risk for ag business portfolio, the ROE for 2025 would have been around 19% rather than 11.4%. In the first nine months of 2026, it would rise from 6.2% to about 16%. This slide, we have included also some climate events, some geopolitical issues, and discussions regarding support measures for the agricultural sector, so that you will have full visibility into this cycle.
From the very beginning, we have been openly talking to you about the severity of the situation and about every measure adopted to address this cycle. Today, I want to share with you our most recent assessment based on three questions. Did we take too long to identify the challenge we are facing? Are we doing everything that can be done? Where is the problem? In other words, were we able to identify the threats in the environment and act quickly to respond to them?
If we did that and the results are not visible yet, where is the problem? As early as the first quarter of 2025, when we noticed an unprecedented deviation from our expectations for non-performing loans in the agribusiness sector, we chose to suspend our guidance. When we redo it in the second quarter of 2025, we presented to you a very comprehensive analysis of what we were seeing at that time. As the leading bank in the Brazilian agribusiness sector, we were the first to identify this trend as atypical.
We mapped out the causes and made strategical and tactical changes to our operation. Today, this issue is present throughout the entire financial system. We are not talking about the sector as a whole. Delinquency is mostly concentrated among mid and large-sized customers in soybean, corn, and livestock sectors, primarily in the Midwest of the country. Last year, I mentioned to you that this delinquency is a recent phenomenon involving clients who had always paid on time.
Now, 85% of these clients became delinquent starting in 2024. Our response was decisive. We adopted a resilience matrix for new loans. We reviewed the entire collateral framework. We added fiduciary sale provisions and completely overhauled our collection of recovery process, creating a dedicated unit focused on structuring solutions, increasing recoverability, and enforcing collaterals.
We also took strong action on renegotiation programs, offering appropriate terms to customers who turn to the bank, acting proactively and in a way to facilitate solutions. The numbers backed up our actions. Today, our portfolio already includes BRL 61 billion in fiduciary sales, with approximately 80% of all funds disbursed during the Plano Safra, which we launched in July of this year, were backed by this guarantee. Under Provisional Measure 1314, BRL 36.6 billion in loans were originated between October 2025 and February of 2026.
The most recent and significant action involved renegotiations under Provisional Measure 1376. A total of BRL 13.4 billion was renegotiated. Of this total, 85% involved contracts with compliant customers, those with extended or renegotiated debts who were facing cash flow pressures. For them, this involved their ability to pay, whereas for us, this resulted in reduced risk and greater predictability regarding future reductions in expected loans. Under the provisional measure, we began offering controlled funding to delinquent borrowers.
We knew that this was the path to restoring this group's financial capacity and creating room for credit in the new harvest season. All customers with eligible transactions were contacted, and the offer was made. Even so, only 15% of the renegotiations were with delinquent customers, which was lower than we had estimated.
This demonstrated an important point that I would like to discuss with you, which leads me to the third questions after two important renegotiation opportunities with subsidized funds in terms of up to 10 years made available through Provisional Measures 1314 and 1376, and with record harvests expected for 2025 and 2026. Some mid-to-large-sized growers chose neither to pay nor to renegotiate, or even refused to provide collateral.
The wait-and-see attitude in the face of news about potential miracle solutions, which we have been monitoring since the beginning of the year, has been intensified over the past three months as a result of the solution of delinquent debt is proceeding much more slowly than we anticipated, and the recovery has not come as quickly as we had hoped. We did not anticipate the persistence and deliberate nature of moral hazard. This behavior comes at a cost.
While it weighs on our bottom line, it also penalizes growers who pay on time and limits credit not only for the sector, but for Brazilian society as a whole. This is reflected in the collection rate for agribusiness operations, which is the indicator that measures the receipt of installments due on this portfolio since the beginning of the year. We expected to return to levels close to 95% last quarter, and we talked to you about our expectation of reaching 90% between August and December.
Despite all of our collection and negotiating efforts, we did not get there. In September and October, the on-time payment rate hovered around 70%, lower than in August. One piece of data that shows that we are on the right track for loans granted after July of 2025, with a resilience matrix and fiduciary assignment, the average on-time payment rate is above 90%. Therefore, we will treat differently situations that are different. For those who need it, there are solutions.
We offer products and negotiation options, including those outlined in the Rural Credit Manual. We have already renegotiated more than BRL 3.8 billion as part of our complementary strategy, in addition to the measures under Provisional Measure 1376. For those who refuse to negotiate or fail to pay, the response is collection using everything at our disposal. We have stepped up legal proceedings and the repossession of collateralized assets.
We have already issued more than 20,000 out-of-court renegotiations, and this effort is having an effect. 24% of all farmers who received an out-of-court notice contacted us to resolve their situation. Today, we have more than 400 properties eligible for the consolidation program, of which 236 are already in the process of out-of-court repossession, with 33% having resolved their situation after the out-of-court collection process began. These figures underscore the importance of collateral in the current agricultural cycle.
We have always said that negotiating debts before entering into court reorganization is the best path for farmers facing financial difficulties. In court renegotiation entails high costs, hinders access to new credit, and increases third-party interference in business management. In addition, there are more than 40 bankruptcy petitions currently pending in court, showing that in-court reorganization does not guarantee business continuity. These efforts we gain an ally.
The bank will begin the process of selling its non-performing loan portfolio to market participants. Previously, we handled these on a mass scale only through our subsidiary, Ativos S.A.. We expect this initiative to gain traction very quickly. There are already more than 40 companies interested in these transactions. Banco do Brasil is not defined solely by a cycle of delinquency. We are, and we continue to be, the bank for Brazilian agriculture for those who maintain a relationship of trust with us.
This is our commitment. Of our more than 540,000 farmers who are agricultural loan borrowers, 88% of them have been with us for over 10 years, and 90% are paying their obligations on time. We have already disbursed more than BRL 24 billion for this new crop season. Credit remains available to those who come to negotiate with us. We have learned a great deal from this cycle. We are much more selective. We have specialized our relationship with farmers.
We refined our business model in the ag sector, and we are now developing new ways to finance the sector, diversifying our funding and reducing our reliance on our own capital. AI has expanded our data cross-referencing capabilities, giving us greater insight into each customer's ability to pay. This is a picture of the present, but a bank with over two centuries of history cannot be defined by a single cycle.
Cost of risk deserves our full attention, but it does not reflect the bank's ability to deliver, not the progress of our long-term agenda, which we remain committed to. That is why I want to highlight what we have strengthened and what keeps the business engine running and even running better. I will start with credit. We have evolved our portfolio mix. We began to scrutinize risk-adjusted returns more closely, and we become even more disciplined in capital allocation.
We maintain our leadership in public sector payroll loans. Over the past two years, private sector payroll loans have grown as we had planned. We have made progress in loan lines that generate primacy, repayment, such as auto finance, as well as lines backed by risk mitigators, guaranteed funds, and collateral. We have also expanded loans origination using guaranteed funds for micro, small, and mid-sized enterprises, which now accounts for 41% of our portfolio. In other words, we are redirecting growth toward lower-risk lines of business.
In our business operations and customer relationship, we have gained the ability to compete through specialization in specific segments. Today, we have 215 branches dedicated exclusively to business and more than 3,700 employees serving this clientele. In the ag sector, we conducted approximately 35,000 visits and consultations with farmers.
Our digital channel reached 36.4 million active customers, and the 360-degree CRM identifies more than one billion business opportunities per day, enabling us to deliver the right offer to each customer at the right time. At the same time, we have made progress in our strategy for engaging high-value customers. Card revenue has grown significantly since the launch of Altus Liv. The number of customers holding this card increased by 61% this quarter, with approximately 30% rise in average spending after account opening.
Now, a new level begins with the BB Visa Infinite Private. We also transformed the way the bank operates, investing BRL 26.2 billion in technology since January 2023. Over two sessions, AcademIA BB has already brought together 60,000 colleagues learning to apply AI in their day-to-day work. With AI and analytics, we have generated nearly 1.5 million hours of efficiency. This means that more and more people are interacting with us and generating business.
This is the digital strategy in practice, a physical presence and digital capabilities working together to enhance the customer experience. The new BB app launched in August already has a 95% positive rating. This same technology is powering our risk models. We are incorporating the lessons learned during this period to anticipate scenarios and detect changes in customer behavior earlier.
We will have more assertive and dynamic models that take into account each customer's history, the specific characteristics of each region, the collective risk signals, paying that the risk in everything that could affect the payment capacity of growers. This transformation also extends to the bank's leadership. Today, we are a much more diverse bank. Since 2023, the proportion of women in leadership positions has risen from 25.8%- 30%.
The proportion of Black, mixed-race, and Indigenous people have risen from 26.4%- 31.6%. These advances did not happen by chance. They were management decisions, and I firmly believe that a more diverse leadership team makes better decisions and produces better results. In sustainable businesses, our sustainable credit portfolio exceeds BRL 431 billion, highlighting our prominent position as one of the country's leading financiers of activities with a positive social-environmental impact.
Additionally, we have raised BRL 55.8 billion in funding linked to ESG initiatives, which support our strategy for better resource allocation. All this brings us to the most important point of our discussion. Today, our focus is on restoring Banco do Brasil's profitability. Our management has a commitment to put the bank's sustainability first, even when this requires difficult decisions in the short term. As you can see from the data we published, our CET1 ratio ended the quarter slightly below 11%.
Although well above the regulatory minimum, it is below the level we consider to be adequate. The challenges in the ag sector, with uncertainties regarding payment behavior among some growers, continue to put pressure on our results and consequently on our capital projections. It was with this commitment to sustainability that we decided to reduce the 2026 payout to the mandatory minimum of 25% in 2027. The payout will remain at 25%, with distribution contingent on the capital projections verified at the end of every fiscal year.
These measures complement others we have already adopted, such as adjusting our credit appetite and reducing IHCD. There are others under review in our capital plan with a medium and long-term horizon, including regulatory, corporate, and business initiatives. We have no doubt that this is the most responsible decision at this time, to preserve capital so that the bank can continue to execute its strategy and once again generate returns commensurate with its potential.
We are a bank with BRL 2.5 trillion in assets, a nationwide presence, nearly 90 million clients, and adequate liquidity. This measure is prudent and temporary. We prefer to navigate this cycle with a margin of safety, because preserving capital today means protecting the value of the bank and those who invest in it over the long term. Over the past two years, we have often asked ourselves what it meant to face one of the greatest challenges in the bank's recent history, precisely during our tenure.
Today, looking at the situation, I think, thank God it's happening on our watch. It's happening during the tenure of people who know the bank from the inside, who don't shy away from difficult decisions, who make decisions with the bigger picture in mind, who never stop investing in people in the bank or standing by the Brazilian people. We know that the recovery of our financial results will not be immediate, and we continue working diligently to ensure that the bank remains strong, relevant, and prepared for the next cycles.
I want to thank our employees who dedicate themselves every day in every corner of the country. I thank you, investors and analysts, for your trust and for the frank dialogue. The choices we make today address the challenges of the present. The capabilities we have built throughout this journey extend way beyond this cycle.
They strengthen Banco do Brasil's financial soundness, competitiveness, and ability of the bank to generate value in the long term. Thank you very much. Janaína will move to our Q&A session.
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Renato, [Non-English content]
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First, could you please quantify the drag of capital because of these measures? And secondly, imagining that we have about 80 basis points of usage of CET1
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And the CET1 below 10%, what is the trajectory of recovery that you see? And what is the level of minimum capital that you would expect to operate temporarily until we get some recovery? Thank you.
Thank you for the question. Just to give you an idea, I read many of your reports, and I looked at your concerns, and they're very legitimate. But I'd like you to know that this whole situation that we're explaining to you in a very transparent and candid way is something that we have been monitoring, and we adopted some measures to cope with the situation. I want you to know that we already have a plan set out or have more than 15 actions to be implemented involving regulatory topics, as Tarci mentioned, some other ownership aspects.
For 2027, we decided not to have any distribution or payout of dividends because we want to reinforce our capital. You should expect a capital reinforcement that will happen naturally, organically, with the evolution of our results throughout 2027. In addition, we are going to have some reinforcement coming from the law that will allow us to turn our DTAs into presumed results. All of that will reinforce the capital. And we are also adjusting our risk appetite. The target is CET1 of 10.5% for 2027.
And as you said it yourself, from the beginning of the year, there will be a worsening, a usage of CET1, approximately 40 basis points because of the regulatory aspects. And we expect to have an accommodation of this moral risk, of this agribusiness delinquency improvement. With the renegotiations and as we receive payment, we will stop this trajectory of lost results, and we are going to have better risk-adjusted returns, particularly in payroll deductible loans.
The review of this will allow us to allocate capital in more profitable lines of business so that we can offset reduction of margin from other portfolios. It is really important that you keep in mind that this volume reduction will be lower in the agribusiness portfolio, which is exactly what is bringing us more pain points. But it is the one that brings us the lowest margin, the lowest risk-adjusted return.
We expect the growth in other higher return portfolios will help us to, say, sail through 2027 and to end the year with a CET1 of about 10.5%, in addition to some other measures that we will adopt in this first year.
Let me add something important to this. I would like to underscore that we are working very strongly in the qualification of our portfolios. Geovanne mentioned the agribusiness portfolio, and it is important to make this clear. Banco do Brasil remains the agri bank. We will continue to lend to our clients who are longstanding partners of ours. Some families have been with us for several generations. There is an issue, and I think that we can explain what we are calling a moral hazard.
But the fact is, 90% of agribusiness clients are paying. They are paying their obligations on time, the renegotiation installments, or they are paying on time, paying their loans on time. Another point that I believe is important and that we clarify is that, yes, we are going to look more and more for collaterals for our loan books. We are working with more selectivity of clients. This means that some portfolios, like the agribusiness portfolio, will be growing less. There is no to expect a shrinkage of that portfolio.
Now, Geovanne, it does not mean that we are going to get less revenue. We are going to have more risk-adjusted returns. Just so you will not have any doubts, we have our risk appetite statement already approved, the board of directors, following what Geovanne mentioned. In a longer timeframe, we do not expect to see CET1 below 10%. It is 10.5%. We would like to be delivering 11%, but we are not working with a CET1 level lower than 10%. I just want to make this clear.
Thank you, Renato. Next question from Daniel Vaz with Safra.
Good morning, Janaína, President Tarci, and Geovanne, Prince, everyone. Thank you for an opportunity to ask a question. I would like to talk about the new provisional measure, the new discussion about the existing provisional measure, the 1376. Provisional Measure 1376. Could you speak about how much volume has been dispersed under this provisional measure? I know it is very recent, and perhaps in the last two days, you started discussing expanding Vaca, the program, until 2021, and the new growers being included in this calculation.
So, I would like to get a sense from you. How much have you dispersed already, and how much are you thinking to disperse, given these discussions that are going on at Congress? We know that this needs to be discussed at some levels before it is approved, but I would like to get a sense from you. What would be the impact, the beneficial impact for your provisions for 2027? Thank you.
Thank you, Daniel. Provisional Measure 1376 had its validity expiring yesterday. Congress approved a new text, but they maintained the duration, range, and limits for the two programs. We will only be able to work with that MP, the provisional measure, if it is actually approved. From today onward, there will be no more loans because it expired yesterday. If it is approved by the President, we do not know how the process will be, if there will be vetoes or not.
The President of the Republic has 15 days to analyze and return with a verdict. If approved, then we will start contracting new loans. It will really depend on what will be approved in the project, and then the sum of money that the government will make available according to approvals by Congress. Any impact coming from this text, if approved, will be felt next year. It should not impact Q4. Until yesterday, we renegotiated BRL 13.4 billion at Banco do Brasil, quite a substantial volume.
Initially, we signaled that we could operate with up to BRL 30 billion, of which 50% for delinquent growers. Of these, delinquent installments of about 15% of the total growth, about BRL 1.5 billion would be the balance of delinquent farmers. This difference, it is the low contact from delinquent farmers, is what led to a lower demand.
We have to remember that many farmers, they chose not to renegotiate, although they were eligible, because they were expecting some kind of solution provided or approved by Congress with much better conditions regarding interest rates, terms, and conditions. Congress reaffirmed the measure or the terms in the provisional measure. In the pre-election period, many farmers simply did not look for a solution and had many cases of growers who contacted the bank yesterday or the day before yesterday after approval by Congress.
For many of these cases, we did not have time to complete the renegotiation. If the provisional measure is approved, banks on the new wording will analyze the eligible growers. It is important to highlight that even in the conditions that were in force under MP 1376, even under those conditions, delinquent growers who were eligible, they chose not to come to us. That was the moral hazard. In other words, they had the right terms, they had the right maturity, they had the right interest rate, but a set of farmers who said, "I do not want to do it.
Because something better is coming up." We know that there are no such things as miracles, and the government always works based on their budget. I do not know whether I answered your question.
Daniel, it is important to stress that this is just a small part of the farmers, but they have representative volume. They are more in the Midwest, actually, of Brazil. We have most of the farmers paying their operations on time, paying their loans on time.
When there is a declaration on the part that they do not want the solution that they are eligible for, that impacts our provision. The provision for the quarterly provisions. It is important to remember that not just after they are delinquent is it necessary to build a provision. The moment that we have payments that is not on time, the model has already detected. They detect an aggravated risk, and then provisions start being built. That is why it is very important we remember that the bank remains an agribusiness bank.
We will continue to have available solutions, available options for renegotiation in a way that it will fit the farmer's pocket. We have a specialized network that remains available to serve them. We will continue to be proactive. We will go back to talk to the farmers who initially did not show interest in paying, but we will offer them a new proposal solution. We at Banco do Brasil, we never give up. Right, Daniel?
Absolutely.
Thank you. Let me continue now with Henrique Navarro with Santander. Hello, Navarro.
Hello. Good morning. Thank you for the opportunity. Renegotiations under government programs, they are exempt of that stage deterioration. In other words, they renegotiate, and in principle, the loan would remain at the same stage. These renegotiations, they normally have a period after which the client has to start paying. My question is, there's a moment after a year when farmers have to start to pay, and that's the moment when Banco do Brasil will have a real perception of the farmer's real ability to pay.
It is possible that they will not be able to pay, and that's when the loans would have to move from Stage 1 to Stage 3, for example. That would mean a higher recognition of provisions by Banco do Brasil. My question to you is, all right, when you renegotiate, considering all of the programs that have happened since the beginning of 2026, are you recognizing a worse stage, or are you maintaining loans in their original stage?
Those dates when potentially you will have to have a big buildup of provisions given a change in the stages, what would be the possible, the worst-case scenario? If there's a deterioration of the stages, what is the sum we're talking about here?
I just want to have a sense of this. I think all questions are related to capital. I believe that your monetary evolution and how you're going to replenish capital by retaining profits, but my concern is whether we have a slowdown in 2027, if you'll have to build more provisions, then we are going to have an undesirable usage and consumption of capital.
Thank you. Mr. Navarro. First, ability to pay was assessed at the moment that they renegotiate, both under MP 1314 and MP, pardon me, 1376, which are the two major milestones of renegotiation for 2026. Before renegotiating, we analyzed the client's ability to pay at the moment that they were renegotiating. If the client was delinquent but showed that they had an ability to pay, so that we could renegotiate the loan with them, then most of these operations were classified as Stage 1.
Again, repeating and stressing that the farmer's ability to pay was assured. Now, of course, the market is dynamic. Part of these clients had their ability to pay replenished, and with this, they will be paying their operations, their loan operations on time. They will remain as stage 1. But other of these assets will deteriorate, and they will have provisions made. How are we managing this?
We are closely monitoring and following up on these loan operations so that once we identify a deterioration in the farmer's ability to pay, very quickly, as Gilson himself mentioned, we can protect our portfolio with a volume of provisions. With this almost BRL 13 billion provisions for the agribusiness segment in this quarter, this is proven, and this is included in our capital forecast.
So, when we communicate to you, to the market, that we are reducing the 2026 payout to 25%, and that we will be analyzing the payout for 2027 at the end of the exercise, we are showing prudence, considering that this scenario remains very challenging and difficult. On the other hand, we have an expectation because we are going to be working more on collection, and we will be working on improving origination so that we can deal with these impacts.
But we want to make it very clear to you that when we identify deteriorations and when we approve our statement of risk appetite and tolerance, and that reduction in CET1 to 10.5% by year-end 2027, all of this takes into account this agribusiness scenario, because as you put it yourself, it continues to be deteriorated.
I'd like to add to that, Navarro. First, ability to pay. This is key to us. We were even criticized because in some cases, farmers came to us to renegotiate, but when we analyzed their ability to pay, we realized they would not be able to pay because they have a high lease price, and the size of the debt would not match the revenue expectation for the next cycle. Second point, there were many cases of operations under Provisional Measure 1314 at a free rate, and now they came back to the Provisional Measure 1376 with a controlled rate.
So, we have looked at their ability to pay under Provisional Measure 1314. We are reassessing that now. With that, we can maintain that farmer paying. Thirdly, in the cases of the farmers who were delinquent, where the risk was higher, normally asked them for a lump sum payment or a trust deed. When they couldn't offer trust deed or could not pay a lump sum, a down payment, we maintained them as aggravated risk.
In those cases where the farmers could give us a collateral, where they showed a true interest in regularizing their loans, that allowed us to redo the case. So, it's not a simple process. We brought everyone to Stage 1, so we reversed the provisions. No. Only in those cases that showed a legitimate interest in paying on time, that's when we redo to Stage 1. In other cases, we maintained the provisions.
I'd like to add something regarding when you mentioned about the pace of building provisions. Please remember that we have one or two years of grace period, but we are charging interest rates during the grace period. So, we can sense the risk of the farmers during that timeframe. So, provisions that we might have to build, and we will build them, it will be done over time and will not have a hurdle concentrated cruelly when the maturities of the principal start kicking in.
Another point about the percentage of the portfolio in Stage 1. We have a percentage in the agribusiness which is higher than in the total loan book. I'm talking about an average of 3.4, and for the total portfolio, 1.6. Of losses, yes. For Stage 2, we said 40%. This loan book has a higher level of provisions, although it remains in Stages 1 or 2.
Henrique, part of the renegotiation under Provisional Measure 1314 that happened in the beginning of the year are having their interest rates maturing this year. Like I said, there will not be a concentration in time. We are already seeing a return of a significant part of the farmers who renegotiated under 1314 and who are paying on time.
Our next question is from Tito Labarta with Goldman Sachs.
Hi,Janaína . Good morning, everyone. Thank you for the call and taking my questions, and thanks for the visibility on what you're seeing and with the latest guidance. My question, following up a little bit on capital, right? Thanks for the You expect a 10.5% next year, and I appreciate what you're doing in terms of trying to control your capital, reducing the dividend payouts, et cetera. That does seem to imply some type of recovery for next year. You had a pre-tax loss.
The guidance for Q4 looks still very challenging, so it doesn't look, at least in the short term, you're generating capital, right? The payment that you show, I think it's in slide 11, right? The on-time payments continue to decline, right? At what point do you think you start to see that maybe begin to inflect, right? Because, I mean, loans are not growing, provisions may remain elevated for some time. Just trying to understand kind of what type of recovery you're assuming to be able to get to that 10.5% CET1 by year end, right?
Because if the recovery takes longer, right, the capital could be worse than that, just given what we're seeing today. Just to understand what type of recovery you're kind of expecting to be able to maintain capital around 10.5% by the end of next year. Thank you.
Thank you, Tito, for the question. It will be a combination of different measures. There is a part of recovery coming from the results, the profit. It is going to be smaller, definitely. You should not expect bringing back our profitability to the levels we had before this delinquency increase in the agri book. Fourth quarter and first quarter 2027 will also be challenging.
Fourth quarter 2026 and first quarter 2027 due to the past due loans that will become Stage 3. On the other hand, as I mentioned earlier, we have around 15 measures that will be taken in order to boost our capital cushion. One of them will be transferring those deferred tax credits into, in English would be presumed credits. That is the
Yeah
the name we use? Presumed credit. This could add potentially 120 basis points extra capital for our CET1 during 2027. We have probably two companies that belong to our conglomerate that are already in line for IPOing, and this will definitely also bring some reinforcement in our capital base. There is another specific measure regarding some tax shields that we used to have, and we are considering bringing or decreasing these tax shields in our affiliated companies in order to boost more taxable income in Banco do Brasil.
As I mentioned, there are a number of measures that are already in our plan, and that is why we are confident that by the end of 2027, despite this smaller profitability, but it is still, we are going to have profitability. With a recovery in our results, reduction in the delinquency in the agri book, and growth in those higher risk-adjusted return loans, especially payroll loans, we will be able to not only deliver profitability, but also protecting our capital.
Thank you, Janaína.
Our next question comes from Ricardo Buchpiguel with BTG. Ricardo, go ahead.
Good morning, and thank you for taking my questions. I would like to get a better understanding about NPL dynamic for cards and private payroll loans. I mean, in this worsening period, how much of that will be carried over to the next quarter? I mean, you talk about your expectation for improvements, but when do you think this will start to show up in the numbers? In private payroll loans, can you please tell me something about the most recent cohorts? Thank you very much.
Thank you, Ricardo. As for cards, I think we can look at what happened with the NPL for SMEs. There was a hiccup because we detected an increase in delinquency. We noticed that from one of the initiatives that we deployed at the end of last year, when we allow people to automatically pay their statements in installments, we saw what was happening and we had to ascertain our provisions in the early quarters of 2026 because the system was not recognizing that new model.
Then we adjusted the delinquency ratios at the moment that we detected that operating failure. With that, there was a spike, especially in the new NPL of cards in view of all of these adjustments. Now, we are at a level of below two digits. So we already zeroed that limit of 400,000 clients, and we reduced the limit of others of, 1.2 million clients. So we would do something very similar to what we did with the SMEs portfolio.
So we would do the de-risking of that portfolio, focusing on high-income clients, because there was an increase in spending of clients that migrated to the Altus Liv segment. With that, we will migrate gradually, and that will bring delinquency to more healthier levels. But once again, these are lines that have good risk-adjusted returns, especially among high-income customers. So indeed, we had to reduce allocating less capital to increase that improvement in delinquency.
The second question about private payroll role, there's a very specific issue about that issue that has to do with the way collection is done. From the very beginning, we reached the vice leadership in this market. What happens is that this entire operation occurs through the CTPS system or the working booklet, and Dataprev does all of the analytics.
For those employees and clients, they move from one job to another, and the posting of all of these operations that were in the hands of Dataprev, what happened is that our unemployment level was very low, and many clients that when they worked for employer A, they migrated to employer B, but that payroll loan was not carried over. Therefore, the new employer didn't feel that they were obliged to collect that money. So now, this is being adjusted. So once this is working in full, things will get better.
So we stepped on the brakes, and then we started to focus on that issue because clients that migrated from job A to job B to different company, that payroll loan had to be adjusted. But very soon, the system will be working very well, and then we will be able to migrate the payroll loan once they change jobs.
Now, giving a view of the future, it is also important to say that we adjusted our risk model, particularly for private payroll loans, because it was important that we could predict that turnover movement, and this will be important for that portfolio going forward. We are now adjusting the collection model also because it is important that we link these operations to the new job migrations of these people.
We already did some manual adjustments with Dataprev, and this is a combined effort that will allow us to reconnect with the payroll loan and the new employer. We are focusing now on high-income clients with our credit cards, which are the best ones in the market. Therefore, we are focusing on being more selective now because we do not want to see a decline in the portfolio that would allow us to reduce delinquency.
So the mantra is to originate better, to originate higher balances with clients with more resilient income, and so gradually, we will be able to reduce the risk of the portfolio. But I would like also to say that half of our delinquency in private payroll loans come from workers that move to another job. So as this relationship between the old and the new employer can occur much quicker than in the past, and with that, we will be able to reduce delinquency in that portfolio alone. Thank you, Ricardo.
Next question from Marcelo Mizrahi with Bradesco BBI. Mizrahi, go ahead.
Hi, everyone. My question has to do with the expanded loan book. We have seen that it stabilized in the past quarters, but I think that there was a concern. It was in the forbearance loan portfolio. This was a concern given the agribusiness segment condition, improving conditions, and keeping farmers in good paying conditions. But as these offerings were late, they were not successful, and we saw increased write-off in the agri portfolio, in the forbearance loan portfolio.
And it draws our attention given its size, about BRL 65-70 bi. So the forbearance loan portfolio, Marcelo, it is Stage 1. It makes sense that we should look at the forbearance loan portfolio migrating to the next stage, since this could have an impact of the S Delta or the review of the guidance for the next quarter. So forbearance loan portfolio, would it migrate to Stage 2 so that we could have a higher expected loss than we currently have? Thank you.
Oh, Marcelo. Not all of the forbearance loan portfolio is Stage 1. Depending on the conditions under which it was extended, it could be Stage 2 or 3. And even when they are on Stage 1, it does not mean they do not have provisions. Secondly, it is important to stress here, and I talked about this before, part of what we did under 1376 would be farmers who had extended their or renegotiated their loans under 1314. And even those farmers who had these operations renegotiated, they chose not to work under 1376.
Many of them had controlled rates. They renegotiated with rates that go from 4% under Pronaf to 12%. They chose to remain under Provisional Measure 1376, and they have good interest rate conditions versus their ability to pay. Simply get a forbearance loan and build a higher provision without having clear reasons for that, I mean, that would be unnecessary pressure on capital. I insist, if there is a delay in a forbearance loan portfolio during the period to pay interest or to pay the principal, then it is all provisioned for.
It goes into the normal dynamic of provisioning. Effectively, we have about BRL 68 billion in forbearance loan portfolio, but say that a good part of it is paying on time. That is why our agribusiness has this possibility of balancing the flow of payments when we have tighter cash or given reduction of revenue or some kind of crop frustration.
Just something important that we clarify. When we talk about the Resolution 4966, we look at the stage of the operation, but Resolution 4966 brings us the need to analyze the risk mix, considering client risk and operation risk. I can have a renegotiation where the farmer is paying on time, but it is Stage 2 because we observed a deterioration in the farmer's ability to pay other businesses.
We have to remember this is not a cold analysis or a simple math looking at renegotiated portfolio, thinking it is Stage 1, 2, or 3, because in the loan book, depending on the risk of every farmer, that operation will be at a different stage. We also have to keep in mind that one of the innovations brought along by Resolution 4966 was exactly the need for us to see the client in an integral way, not just considering their loans with BB or not just considering one renegotiated loan, but also observing their ability to pay in the present and in the future.
This requires from us a lot more diligence in monitoring, a lot more proximity, and it requires investment in technology. Marcelo, just to give you a number, our expected loss level on the forbearance loan portfolio is 22%. Okay, just to give you a number. A very high level above the delinquency rate of this portfolio. Of course, this aggravates as the operation continues to be not paying. If they are Stage 2, but they have a higher level of loss, we will migrate it to Stage 3. All right?
All right, thank you.
Next question from Gustavo Schroden with Citi.
Hello, Schroden.
Good morning, Janaína . Good morning, everyone. Thank you for taking my question. If I may, I would like to go back to capital and perhaps be a little more specific. I think that Geovanne, at the very beginning, he was talking about capital in the first question. He said they talked about many measures, and he said that there are some ownership positions.
Then it comes to mind, BB Seguridade. I think that Banco do Brasil has a relevant stake at BB Seguridade, and perhaps would there be room to sell a part of that stake and still remain the controlling shareholder? Another point that comes to mind is related to the contract. There is an interesting economics on the table considering the way that the contract was designed in the past.
And you also use the Banco do Brasil desk that has a gigantic volume. My question is, how are you considering BB Seguridade in this equation and in these measures that you are considering to improve capital in 2027? To be more direct, don't you think it is about time to rethink this contract and these economics?
And whether the bank is considering selling part of the bank's stake of BB Seguridade. I'll make it clear, I know this is a simple discussion. I don't want you, Geovanne, to be mad at me, and it's not a resolved discussion, but I guess that given the situation of the bank, it would be interesting for you to clarify for all of us investors and analysts. Thank you.
Very well. We have all options on the table, all options possible, but the same, BB Seguridade, given its profitability and the importance of the company to us, and given our need to continue to create future results, we have not gotten to that level of discussing the sale of BB Seguridade. This is not in our radar. The second point regarding renewal in the contract, this will be done on a timely basis. We have, I believe, another five years? Yes. We have at least another five years to review the contract.
At the right time, then we'll start having these discussions. But rest assured of one thing, any future discussions regarding BB Seguridade, either renewal of contract or changing the stakes, all and every change will come to benefit BB, to its shareholders, and to maximize the potential of BB's desk in that business. Just want to make this clear, BB Seguridade is not for sale, and renegotiation of the contract will happen at the expected time within our projections. Geo?
Thank you, Tarci. I read your report, and you made a comment on that. Yes, selling the surplus of control of BB Seguridade would bring us what, BRL 15 billion to reinforce our capital? Is it significant? Yes. Would it help? Yes. But in the shorter term, we have much more important structural issues to solve than simply deliver to you a capital ratio this year and next year. What is the reflection of that in the sustainability of BB over time? How much will I be giving up of revenue, of earnings in the future if we bring this to present value?
Actually, it would be easier to do that. It would be easier for us to make such a decision, but I am here to defend the legitimate interests of the company and its shareholders and for the company. It's really important not only to have, but to increase our stake. I wish we had more capital to increase my stake of BB Seguridade. It's really important we make this clear. It's actually good that you asked this question, Gustavo, because considering the whole plan that we designed, we are going through turbulence, a turbulent moment now.
There's more delinquency in the agribusiness segment. We are going to have a soft landing of Banco do Brasil. Given this situation, we will not be making any decision that would be super beneficial in the short term, but that would hinder the sustainability of the earnings of Banco do Brasil in the future. We don't want that. We have many alternatives so that we can help sustain this capital in a very controlled fashion. We have a macroeconomic environment that is not requiring that we quickly expand our assets.
We have the macroeconomic context playing in our favor at this point. We believe that we will be able to deliver stronger results, yes, of course, but at the same time, sorting out these issues. I have more than 80 companies in my conglomerate. I know you put pressure on us. We have to sell assets. We have assets. I told you, we have two companies that are in queue for an IPO. As soon as the IPO window opens up, we will do it, and this will bring an impact. Renegotiation will take place at the right time, as Tarci said.
Even this kind of negotiation does not have an immediate impact because I have to defer it over the lifetime of the new contract. This will be accrued over time. Again, I cannot take short-term measures or short-term decisions just to give you a CET1 that looks robust, but in the mid to long term, it will hurt us. This is a pitfall. We do not want that. Everything that we are doing is to improve structurally, not just the earnings of the bank, but also to control delinquency and make our capital more robust.
Thank you, Gustavo. Our next question. It is from Yuri Fernandes with JPMorgan.
Thank you, Janaína. Good morning, Tarci, Geovanne, Prince. First of all, I would like to congratulate you on the dividend payout part. That was the right decision. I think it's not always easy, but I think that was an assertive move. I would like to go back to that Law 12838. I think you will change temporal tax credit into presumed tax credit. That means whether the bank will receive either cash or federal securities. How does that work?
Because at 120 basis points mentioned by Geovanne, that means BRL 16.6 million in cash. I would like to understand, of course, the government has the means to do it, but how does that work within the government spectrum? And whether you have any capital impairment, because from my recent reading, you can change that tax credit, but it's not in a ratio of one-to-one. How does that work?
Tax credit turning into cash at a discount, and whether this will not generate an equity impairment. You improve capital because you receive cash, and that is better than leaving, having a bad tax credit. This will have an impact on your loan book, and this may have an impact. Trying to summarize these three questions.
Law 12838, is there capital impairment in terms of equity? What is the average discount of the tax credit so that it can become a presumed tax credit? And whether the government will have cash, that BRL 16.6 billion will have an impact.
I'll start with your last question. It's actually a question I have to ask the government if they have cash or not. Law 12838 was never used by BB because we have never had all conditions that would trigger the half transformation. The ultimate goal is undoubtedly to avoid over 2027 the generation of DTAs, because you are following the volume of provisions that I am reducing in my fiscal base. This is going to generate a negative fiscal base, and then I will be eligible.
This is a law that exists. Other banks have used it. This allows me, at the turn, close to 11, 12 basis points, I'll change the weight. DTA at 10% will become presumed credit and weight zero. That's why I say that when we do that, as of January, we have to end 2026. We have to have achieved the conditions allowed by the law. I think you Googled Law 12838. That's why I understand your anxiety. You have to do capital. You have to tell BB Seguridade.
There are other measures we can adopt that involve regulatory positions, administrative positions, administrative decisions, regulatory decisions, commercial decisions, that will allow us to manage this in a soft manner. The bank has more than BRL 2 trillion worth of assets, more than 90 million clients all over Brazil. I know that it's probably a narrative out there saying, "What happened to Banco do Brasil? Banco do Brasil is suffering." Banco do Brasil is a solid company, more than 200 years old.
This is clearly an opportunity that we have, made possible by a law. We'll take these DTAs and turn them into presumed credit. Payment of this will be made by the National Treasury of Brazil at their own time. We will have the DTAs, the presumed credit, recognizing my asset with weight zero, and this is positive.
All right, Yuri?
Yes? Oh, sorry, I could not unmute the mic. Just one last question, Geovanne. Is it one-to-one, or is that a discount when you convert it to presumed?
There is a calculation, a calculation that would take into account that there is a limit. I cannot just take everything and migrate everything. Our IR team will give you more around this. Actually, this is kind of new, and as I realize, everyone was very excited about this. This will help us improve capital in 2027, but we will give you more detail on this. It is a one-to-one ratio, okay? There is a calculation.
If I have zero or negative fiscal base, the following year when it becomes positive, I miss the opportunity to continue to transform this into presumed credit. What happened the first time, my fiscal base will be negative this year, and then in January 2027, I will recognize it. Most likely, the asset, of course, we have to end Q4, but I am talking about BRL 12 billion-BRL 14 billion of DTAs that I can transform into presumed credit.
All right, wonderful. Thank you.
Thank you. Next question from Carlos Gomez-Lopez, Lopez with HSBC. Go ahead, Carlos.
Hello, good to see you. Thank you very much for taking my questions. Like everybody else, very concerned about capital. In terms of the measures that you can take, as you said, to improve the long-term profitability of the bank, and not just the ratio, but the actual capital, the actual profitability. One long-term issue that you have is the medical and pension liabilities, PREVI and CASSI. Does your list of measures, your 15, include any new plans to reduce your current and future liabilities in those areas?
Second, I know this is very small compared to the other issues, I noticed that you stopped doing provisions for economic plans this quarter. Is that a deferral or you have stopped doing them altogether? Thank you.
Hi, Carlos. Thank you for the question. Regarding our pension plan and health plan, we have already increased, sorry, adjusted the discount rate, and because of that, we have increased the liability of these plans, and this consumed our capital. I think it was-
Last quarter
last quarter, it was 70 basis points, something like that.
I think a bit less. I will take the number.
Something around that, okay?
Yeah.
We had already to adjust, complying with a requirement from the regulator, so this caused a decrease in our BIS ratio last quarter. For 2027, it will depend. We are under negotiations with our employees. Perhaps in our healthcare plan, we might see some smaller adjustments, but it will depend on general meeting approval between Banco do Brasil's employees, but it is nothing material that would require some concern, okay? With regard to economic plan, we are finally seeing some light at the end of the tunnel.
It seems that the Supreme Court is almost ruling finally all the discussions regarding economic plans, so that is why we are adjusting our expectations in terms of what kind of provisions we should account looking forward.
By the end of this year, that is our expectation, we will have a final ruling from the Supreme Court with regard to the economic plans, and that is why you see a smaller accounting expenses accounted in that particular area, okay?
Okay, Carlos? Did we cover everything? Okay. Thank you. Thank you. [Non-English content]
Guttmann, with XP.
Bernardo?
Bernardo?
[Non-English content] Hello. Good morning. Thank you for giving me an opportunity to ask a question. I would like to go back to the agribusiness topic. You mentioned that on-time payment of recent operations is above 90%, while when consolidated, it was close to 70%. Do we have an idea of how much of the portfolio is concentrated on these clients that continue to have difficulties in paying? Looking at 2027, does improvement rely on recovery of these operations, or do you expect any substantial benefit from the changing profile of the new loans granted?
Well, Bernardo, I think you are looking at a certain table, and in this table, month after month, we are increasing the maturity of the portfolio granted after the change of the new methodology. In October, 45% the loans were under the new methodology. In November, it is 53%. In December, 57% of everything we are expecting to receive in December is under the new methodology. For next year, this number will grow.
There is always a residual number because these are long-term investments, and they will take perhaps another 10 years to be totally settled. Month after month, we are gaining room for this portfolio with more trust deeds, with more in-depth analysis in the loan granting process.
This tends to improve significantly over time. Of course, those old operations will continue to have an impact. If we consider renegotiated operations in the old portfolio, even if they are contracted now, they will result in some kind of deterioration over time, as we highlighted here. Looking at 2027, Bernardo, the contagion effect, as Geovanne mentioned, that happens at the client level.
If I have a contaminated operation, it is only natural that the operations for that client as a whole, even if we do not migrate to the next stage, although in most cases this will happen, these operations already carry a similar provision to those operations in arrears. This is part of our forecast, and this is the scenario that we used to approve our risk tolerance and appetite statement, and to review our goal for capital. Thank you, Bernardo.
Moving on to the next question. Question from Mario Pierry with BofA.
Good day. Thank you very much. We are over one hour and a half in the call, but I would like to focus on something. You spoke a lot about the moral hazard in agribusiness impacting default and delinquency. I would like to understand from you, do you see this moral hazard also impacting individuals' portfolio, and particularly SMEs' portfolio? If the government is announcing a new Desenrola program, is this also going to impact default in other loan books?
Thank you. Mario, the moral hazard is seen in agribusiness, particularly when we offer a possibility to renegotiate with good conditions, terms, and subsidized rates, and people do not really take the opportunity. We see a moral hazard when we have farmers who have an ability to pay, and they choose not to. When we look at these farmers and we see them continuing to operate, continuing to invest, but choosing not to pay us. It is important to make one thing very clear here, Mario.
Understand that a part of the agribusiness sector is dealing with a liquidity crisis. It is not a crisis in the whole agribusiness. Why do we say this? Because we continue to expand arable land, and we continue to have an activity that requires inputs. We have to consider that between 2020 and 2023, when commodity prices were very high, given the COVID pandemic and the start of the Ukrainian war, farmers capitalized during that period. They still delayed paying their debts, but they were capitalizing, mobilized capital.
That is why we say agribusiness is not facing a crisis, but there is a delinquency crisis, there is a liquidity crisis. Liquidity crisis is due to forbearance of loans, a high delinquency rate, funds that were mobilized, and then they required more funds from the financial system or from the trading companies and other players in the market that fund agribusiness. When the growers face a difficulty, we give them an opportunity to renegotiate, and they choose not to renegotiate, that is when we see moral risk.
Our expectation is that as time goes by, growers are paying, they are having access to new loans. For those who were waiting for better renegotiations, under the provisional measure, we were operating under Provisional Measure 1376 for three months, and some farmers contacted the bank just yesterday because they were still waiting for something better to come. Again, that is moral risk.
That is an expectation that they will get a better deal. Our expectation is that the moral risk will start reducing, and as it reduces, we will go back to the historical payment level of the bank. Those who choose not to contact the bank and find a solution, again, we insist, the MP is not in effect anymore, but we have other options for them. If they do not come to us, we will have to advance with court measures to prove to our shareholders that we are taking measures to recover the loans.
Mario, it is also important that we say that we used to offer this situation for SMEs that have been pressured and have found difficulties because of high interest rates, and the interest rates have been high for a long period of time. I mean, renegotiations have been attempted, and in some cases, they have been executed, and there are delays that have been perpetuated for a long time. This is impacting individuals as well, because we are seeing a record level of delinquency among households.
I mean, and the monthly income of families is very much related to the payment of their debt, and they have been delinquent for quite a long time. There is a clear distinction between what happens in agribusiness, which are payments on time or short delays, and the production in the farms are moving along, and they have a lot of options to pay. The Desenrola program is earmarked to long delinquency payments or individuals or small companies that have been affected by the macro scenario.
Renegotiations have been attempted, but their payment capacity has not been recovered. That is why the Desenrola program come as a cushion to that issue, and they are not related to the agribusiness environment, as we said before.
Proof of that is the corporate portfolio. When we look at quarter-over-quarter, I mean, NPL is high, but it has shown a reduction if you look at the yearly number. It is around 9.5% now. I think the only aspect where we see some contamination is in the individuals' portfolio in terms of some products that farmers have that lead to delinquency. When we talk about credit card lines, there is some carryover when I look at high-income clients or big farmers.
That sometimes are not paying or did not approach us to renegotiate. When we look at the corporate portfolio, we see some normalization in NPL. Mario, it's also important to note that in the SME portfolio, 41% of this portfolio already has some settlement fund. Now speaking about agribusiness, we're not talking about any agricultural portfolio. We're talking about the Brazilian agribusiness. When you look at soybean, sugar, orange juice, and beef, we are the largest producers and the larger exporters in the world.
So when Gilson shows some optimism, saying that after the spirit of uncertainties and once farmers come to the bank to renegotiate their debt, we will envision a more optimistic scenario when it comes to receivables. I mean, the world population will continue to grow. This is a certainty. Brazilian products will remain necessary, and Brazil is one of the pillars of the food staple in the world. I mean, it's important to remember that we fund the Brazilian agricultural sector.
These farmers are with Banco do Brasil. They will remain with the bank, so we will never cease to find solutions to Brazilian growers. When we speak about these numbers in a very cold fashion, it seems like this is very distant from the reality of the Brazilian agribusiness, which grows year over year and posts high yield rates. Since we have visibility, and once the agribusiness sector has lower delinquency, this is important to us because this comes with enhanced profitability.
So in the future, I expect to see increasing results, more organic production of results, better capital level, et cetera. Everything is tied to the agricultural sector, and this virtuous cycle is important in terms of getting the situation back on track again.
Thank you, Mario. Now we move to our last question, and I have here Pedro Leduc with Itaú.
Good morning, everyone, and thank you for being so transparent and clear. I just have a follow-up question about a detail of that 10.5 CET1, which contemplates 120 basis points of 12838. I don't know whether this contemplates the dividend payment for 2027. A more general question is about the portfolio. We talked a little bit about, I mean, we talked a lot about agro. Maybe it will be more difficult next year, but I want to know whether you see opportunities to grow even though you maximize capital or CET in corporate in 2027.
Well, Pedro, it's always a pleasure to have you with us. That target of 10 and a half does not contemplate payout. As we said, the payout will be assessed at the end of 2027, and depending on the metrics, we will then decide on its distribution or not.
The fact is that between 10 and 11, the trend is that this payout should be looked at in a more conservative way. As for the portfolios, this target of 10.5 assumes very strong selectivity when it comes to credit origination, and also, we will earmark our business strength to the areas where Banco do Brasil is stronger. So when we look at our portfolio and we look at the best opportunities in terms of risk-adjusted returns, we are naturally focusing on public payroll loans.
In addition to public payroll loans, we also look at the non-payroll lines, but secured, meaning loans secured with pension funds, credit cards for high income. These are the main lines where we channel our business strength and capital optimization towards very profitable lines and more secure. That is followed by SMEs. We look at government lines and receivables, and on the wholesale side, we focus on the turnover of the portfolio. Our fee business is becoming more and more accurate.
We continue to provide assistance to our clients, but at the same time, we are reducing the use of capital. The art here is how not to reduce revenues at the same ratio. I generate fee, I reduce the portfolio, I serve my clients, and at the same time, I alleviate capital consumption. This is the mantra for 2027. Certainly, this implies in a portfolio volume that could be even lower than what we are delivering in 2026.
But the magic of this equation is to do that in a safe manner, having a very assertive risk-adjusted return, and the result is returning profitability, and the priority is to incorporate that in the capital. I mean, they are two different things, and in our budget, we will try to stretch that profitability. If profitability is higher than the prudence required on the capital side in 2028, when we close the balance sheet for 2027, we will decide to probably have a payout.
Well, thank you, Leduc. Thank you all. We spent an hour and 40 minutes with this earnings release presentation. With that, I conclude our Q&A by thanking all of you for joining us today, and we wish you all an excellent day. Our entire team remains available to clarify any further questions. Thank you, and we see you later.