Good morning, and welcome to the 1st quarter 2023 results conference call of Banco BTG Pactual. Here with us today we have Roberto Sallouti, Renato Cohn, Julia Koch. We would like to inform you that this event is being recorded. All participants will be in a listen-only mode during the bank's presentation. After Banco BTG Pactual's remarks, there will be a question and answer session for investors and analysts when further instructions will be given. Should any participant need assistance during this call, please press *0 to reach the operator. Today we have a simultaneous webcast that may be accessed through the website www.btgpactual.com/ir and the platform. There will be a replay facility for this call from today.
Before proceeding, let me mention that this call may contain forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to the growth prospects of Banco BTG Pactual. These are merely projections, as such, are based exclusively on the expectations of Banco BTG Pactual's management concerning the future of the business. Such forward-looking statements substantially depend on changes in market conditions, government re-regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in Banco BTG Pactual's filed disclosure documents and are therefore subject to change without prior notice. I'll turn the floor over to Mr. Roberto Sallouti, who will begin the presentation. Mr. Sallouti, please go ahead.
Thank you very much. Good afternoon or good morning to everybody. Thank you for joining our call. I'm gonna start with page 3 of the presentation, where we have some of the Q1 highlights. First, we started with another quarter of record revenues confirming the resilience and diversification of our business. We're very satisfied with the results. We continue to have strong net new money despite the more challenging macro environment. This has allowed us to continue with strong growth and assets under management, both in our wealth management and asset management units. Given the more challenging scenario, we decided to take a conservative approach to our balance sheet, just highlighting a fortress balance sheet, finishing with very robust capitalization levels and a Basel ratio of 15.5 for the quarter.
Finally, as most of you probably know, BTG Pactual controls Banco Pan. Part of Banco Pan's business model is that it recurrently, basically every quarter, sells part of the portfolio originated to the market. BTG, a few quarters ago, decided to start participating in these auctions as a way for us to continue to grow and diversify our credit portfolio. We actually succeeded in purchasing some of these portfolios both in Q4 last year and Q1 this year. When this happens, when Banco Pan sells these portfolios to the market, they have a capital gain. These capital gains were reported in Banco Pan's results as of last week in the Q1 results of Banco Pan.
When we consolidate Banco Pan into BTG Pactual, we have to accrue these capital gains that were recognized at Banco Pan in the life of the portfolio, so roughly an average duration of 30 months. The truth is, if Banco Pan had sold these credits and we had just picked up its result as it has traditionally done until Q4 of last year, where we started buying, the return on equity for BTG would have been 23% for the quarter. We reported 20.9%, and this difference will actually be accrued over the majority of the portfolio that we bought. Cohn will actually show these numbers. It sounds complex, it's actually simpler once you understand it, but Cohn will highlight this in his presentation. Turning to page 4, we talk a bit about the numbers.
We had BRL 4.8 billion of revenues in the quarter, net income of BRL 2.3 billion, and an ROE of 20.9%. Turning to page five, we had total net new money of BRL 43 billion for the quarter. Our wealth management unit grew 24% year-over-year, reaching BRL 568 billion. Our asset management unit grew 22% year-over-year, reaching BRL 717 billion. On page six, we talk a bit about our balance sheet. We continue to grow our unsecured funding 15% year-over-year, reaching BRL 178 billion. Equity of a bit above BRL 44 billion, with a Basel ratio of 15.5%. We continue to grow our credit portfolio year-over-year, 29%.
However, quarter-over-quarter, we basically had a stable balance sheet. This is the result of a more conservative approach and risk management, where we shifted from, let's say, more levered segments, sectors which to sectors which are more, how would I say, more resilient, better credit ratings, which we're offering very attractive spreads. This resulted in a decrease of our SME portfolio, but more or less stability in our total portfolio as we shifted to higher grade credits with very attractive spreads at this moment. We're very confident and excited with the credit business going forward because we basically, we think we did the correct shift in our portfolio, which started at the end of Q3 last year.
Actually we're right now, we're very well positioned to take advantage of current market conditions. On page seven is how we usually show the results. Once again, revenues of BRL 4.8 billion, net income of BRL 2.26, ROE of 20.9%, BRL 0.59 per unit. Our cost-to-income in the... a bit below our historical range at 39.3%. We finished with total assets of BRL 470 billion, equity of BRL 44.2 billion, and a 15.5% Basel ratio. On page eight, you can see the last 12 months versus the previous 12 months, and the business distribution among sectors, revenue distribution among sectors. Investment banking falling 19%, as more or less was expected and in line with our guidance.
Our corporate lending business growing 9%, but this again, was mainly affected by the one-off provisions we had to take at Q4 of last year. Sales and trading growing 7%. Very robust performance of our investment management platforms. Asset management growing 36% year-over-year, wealth management 47%. This gives a very good, let's say, equilibrium between corporate and investment banking, markets and investment management. We expect our investment management franchise to continue to grow stronger than the other business lines over the next quarters and years. On page 9, we highlight our ESG achievements for the quarter. We're very proud to receive a commitment from the White House via the DFC of a $50 million investment in BTG Pactual's Reforestation Fund.
We launched our Venture Capital II fund in Chile focused on financing SMEs, received the 27001 ISO certification focused on transaction security and customer data protection. We also are publishing our social responsibility and annual reports, you have the QR codes here on the presentation for those of you that are interested in taking a look. With that, I pass to Cohn, who will talk about each of our business units, then we can go to Q&A.
Thank you, Roberto. Moving to our specific business lines, we start as usual with our investment bank on page 11, where we record the revenues of BRL 260 million during the quarter, which is a reduction when we compare to previous quarter, and also when you compare to the first quarter of 2022. As we all noticed, since Lojas Americanas' large fraud case, we saw a significant decrease in the level of activity, specifically for DCM transactions, which obviously impacted our revenues. More recently, we started to see some new issuers coming to the market, and we expect better market activity in the second quarter.
For M&A, we had a very different scenario as we recorded our best quarter in terms of revenues, with a higher number of transactions being concluded during the first quarter. We still have a solid pipeline of transactions to be executed in the next few quarters. Similar to previous quarters and throughout 2022, we continue to see little market activity for ECM transactions with only one follow-on and some structured transactions and also some block trades. Despite the low level of activity for ECM and DCM, we maintained our leading position in volume of transactions for both businesses, as well as in volume and number of transactions for M&A, both in Brazil and in Latam.
Moving to our corporate lending business, on page 12, we recorded revenues of BRL 1.192 billion, which is a 46% increase when we compare to the first quarter of 2022. Total lending portfolio slightly decreased during the quarter as a result of our dynamic risk allocation process where we managed to reduce exposure to some sectors while we also increased exposure to others. In that sense, our SME portfolio decreased by about BRL 8 billion as some companies from sectors that we decided to reduce were more heavy users of our supply chain financing product, which comprises the large majority of our SME portfolio. On the other hand, we managed to expand our large corporate portfolio, lending to more premium counterparties and at higher spreads.
Also, we continue our program to acquire additional payroll loans, portfolios from Banco Pan. Also, the increase of our large corporate portfolio, aligned with the additional acquisition of payroll loan, portfolios from Banco Pan, allow us to almost compensate the reduction in our SME portfolio. In summary, our portfolio ended the quarter with similar size with better quality, higher spreads, and adequate levels of provision supporting our continuous expansion in recurring revenues. Going to our sales and trading business. We had, not on page 13, we had another quarter with record revenues driven by our continued diversification of products and services, aligned with the expansion of our client franchises, and also supported by our efficient VaR allocation process.
Revenues reach BRL 1.485 billion, which is a 31% increase when we compare to the previous quarter. We also managed to keep our risks under control, with VaR slightly increasing from 27 basis points to 29 basis points, while the market risk component of our risk-weighted assets was reduced to 15%. Despite the more challenging market conditions, we continue to expand our market presence as we increase our product offering, and also as we increase our client base. Going to our asset management. On page 14, we had another quarter of record revenues registering BRL 443 million, which is a 3% increase when we compare to the previous quarter, and a 41% increase when you compare to the first quarter of 2022.
Important to say that these revenues came on the back of strong management and administration fees, and also some dividends from partner assets that we invest in. Without the accrual of performance fees, which are usually recorded during the second and during the fourth quarter. We brought BRL 12.5 billion of additional assets, which is a softer amount when we compare to previous quarters. That came as a consequence of stronger redemptions in several asset classes of the asset management industry. We continue to attract new clients to our managed funds and new independent asset management companies to our fund administration business. The stronger redemptions from our existing client base offset the part of the new money that we brought in during this quarter.
Assets under management and administration ended the quarter at BRL 717 billion, which is a 1.5 percentage points above previous quarter, and 22% above the first quarter of 2022. Going now to our wealth management business on page 15. We had another quarter of record revenues, and actually this is the 17th consecutive quarter of increasing revenues. We registered BRL 694 million in revenues, which is a 1% growth when we compare to previous quarter, and 22% growth when we compare to the first quarter of 2022.
Despite the more challenging macroeconomic scenarios with the uncertainties both in the domestic and in international markets, and also the high level of interest rates, we managed to bring BRL 30.7 billion of new money, which is a similar amount of inflows that we have been seeing throughout 2022. Very strong new money numbers despite the more difficult environment. Our total wealth under management ended the quarter at BRL 568 billion, which is a 4% increase when we compare to the fourth quarter of 2022, and a 24% increase when you compare to the first quarter of 2022.
Finally, we'd like to highlight that we receive awards from Euromoney for Best Private Bank in Brazil, Latin America's Best for Digital, Latin America's Best for High Net Worth Individuals, and Best International Private Bank in Colombia. That came as a recognition of excellence in our products and services offered throughout Latin America. Now going to participations and principal investments. We start with principal investments on page 16, where we see revenues came at BRL 54 million, which is a stable number when we compare to previous quarter as a result of equity pickup from our investments, which were partially offsetted by higher cost of funds. In participations, we are recording a BRL 70 million loss during the quarter, as can be seen in the top left chart on the page.
Here it is important to explain, and we are showing here in detail on the top right side chart, the effects of our decision to acquire the payroll loan portfolio of Banco Pan. As we explained during the last quarter, and Roberto just explained, right, when we the Banco Pan business model includes the recurring sales of credits of credit portfolios that it originates. Now, when Banco Pan sell these credits to the market, it recognize the capital gain. During the quarter which the sales happened and this capital gain is immediately recorded at BTG Part 12 level at the proportion of the stake that BTG has in Banco Pan.
Since BTG consolidates Banco Pan, when these credits are sold to BTG, this capital gain will be recognized during the portfolio duration, which is approximately two and a half years. Going to the specific numbers and looking to the right side chart, we see that Banco Pan announced profit of BRL 172 million, which considering BTG stake, would translate into BRL 127 million profit in the first quarter of 2023, which is right in the middle of the chart. We have BRL 30 million of revenues that are related to the accrual of the portfolio acquired during the fourth quarter of 2022.
We have the capital gains related to the sale of the portfolio from Banco Pan to BTG, which represents BRL 301 million, which we need to deduct during this quarter as they will be recognized in future quarters. When we sum up the BRL 127 million related to Banco Pan profit, plus the BRL 30 million of accrual from the portfolio acquired during the fourth quarter of 2022, you deduct the BRL 301 million related to Banco Pan capital gain, and then we add to Seguros' profit that came at BRL 50 million and EFG profit that came at BRL 24 million, we get to the negative BRL 70 million that we are showing.
Had Banco Pan sold its portfolio to a third party, we would then record the BRL 301 million of capital gains that we deducted in the previous calculations. We would have revenues of BRL 231 million, which obviously would make our ROE much higher, as Roberto Sallouti mentioned at the beginning of our presentation. That, I think it makes the explanation very clear, right? Finally, I think it's important to mention also that to better reflect the total revenues in our participation lines, we are moving the goodwill amortization related to Banco Pan to the goodwill amortization line in total expenses. Moving to our total expenses on page 18.
We see that total expenses increased by 12.8% during the quarter, which came mostly as a result of higher bonus provisions and salaries. Bonus increased aligned with our compensation model. As a consequence of significant revenue increase, when we compare to the fourth quarter of 2022, and salaries increased as per the normal process of annual salary adjustments by inflation and also promotions. Important to say that as we indicated in our guidance, we do not expect headcount to increase in the back office areas, so we should not see significant increases in the salaries and benefits line in future quarters.
Administrative and other expenses remain stable when we compare to the fourth quarter of 2022, and our effective tax rate came at 20.4%, impacted mostly by the provisions of interest on capital and a favorable revenue mix. Now going to our balance sheet. Our total assets-- on page 20, sorry. Our total assets increased to BRL 470 billion, which is a 4% increase when we compare to previous quarter. There we maintain the stable ratio of 10x our total equity. Our cash and cash equivalents increased to BRL 61 billion, which show solid levels of liquidity resulting in an LCR of 174%. We maintain the comfortable coverage ratio at 170% as our funding base grew more than our credit portfolio.
Our corporate and SME portfolios now represents 3.2 times our total equity, which is a slight reduction compared to previous quarter when it was 3.4 times, as we took a more conservative approach when our equity grew while our credit portfolio remained almost stable. Now going to our unsecured funding base, we see that our total unsecured funding base reached BRL 178 billion, which is a 15% increase when we compare to previous year. Our demand deposits remain stable at BRL 13 billion, which represents 7% of our total funding base. Here now, on the top of the chart, we can see the evolution of the share of our retail funding base, which continues to expand, reaching now 31% of our total unsecured funding base.
Finally, we move to page 22, where we show our Basel ratio.
That reach 15.5%, again, as we took a more conservative approach, giving market uncertainties with our Common Equity Tier 1 reaching a comfortable level of 13%. RVAR, as mentioned before, slightly increased 2 basis points, reaching 29 basis points, still way below our historical levels. With that, we conclude our presentation, highlighting again, another strong quarter with record revenues despite the challenging scenario, which confirms the resilience and diversification of our business model, a very strong annual money generation, especially in wealth management and our fortress balance sheet and capital ratios. I guess we can move to questions.
Thank you. The floor is now open for questions from investors and analysts. If you have a question, please press star one on your touchtone phone at this time. If at any point your question is answered, you can remove yourself from the queue by pressing star then two. Questions will be taken in the order they are received. We would ask you to please pick up your handset when you ask your question in order to ensure optimum sound quality. Please hold while we pull for questions. Our first question comes from Tito Labarta with Goldman Sachs. Please go ahead.
Hi, good afternoon, Roberto and Renato. Thank you for the call. Taking my question. I guess a couple questions. First on the sales and trading, you know, continue to see, you know, very strong results there, you know, despite, you know, VAR remaining at fairly low levels. Is this new level a new normal? How should we think about this going forward? I mean, you mentioned you continue to benefit from client flows, you know, as you continue to grow, I guess, the asset and wealth management. Is there room for this to continue to grow? Just to understand how to think about sales and trading from here, given the very strong results. Second question, just on investment banking.
Just any update you can give us, particularly, I guess, on DCM activity, which we know has been weak. You know, do you see that beginning to improve? Any color on the outlook for the rest of the year? Thank you.
Thanks, Tito. On sales and trading, we continue giving the guidance. We think that the moving average of the four previous quarters is a good estimation of the trend line. We continue to benefit of new markets, new clients, further penetration among existing clients, gaining of market share. We think that's still a valid guidance with some volatility around that, just given the nature of the business. In investment banking, yes, we are a bit more optimistic with capital markets. Both debt and capital markets have been very slow. As you see, I mean, we think that the interest rate curve is a great indicator of where the market is growing. We're at the lowest point of the curve since the elections of the current government.
We're seeming to address, as a country, the macro issues affecting especially Brazil. We're addressing the fiscal doubts. We're addressing the central bank nominations that just came out right before our call. I think hopefully soon we will have clarity that inflation target, if it changes or will not change. Our expectation is that does not change, even though it can be some, let's say, a few changes to the policy from calendar year to relevant horizon, just like the rest of the world. With that, getting out of the scenario, we do think that interest rates will eventually reduce. Not only that, but the anticipation of these reductions can already help pick up activity. At the same time, the markets will have time to digest the credit events that triggered this credit, let's say, stagnation of DCM markets.
Yes, we are seeing people interested. We have a good pipeline, but the conditions need to be there. We think that we are building the macro conditions that our guidance of last quarter is still valid for this year as hopefully, these two markets pick up.
Okay. That's very clear. Thanks, Roberto. If I could ask just one more specific question on the asset management business, right? 'Cause revenues were up despite, you know, the negative seasonality. Inflows were relatively weak. Just to understand, you know, what drove the pickup in revenues in the quarter, given some of the negative dynamics that impacted it? Will that, you know, will you give any of that back next quarter, or does that, you know, should continue to grow with AUM?
No, we think that this will continue to grow. I mean, you have to remember, you always, quarter-over-quarter, you are always looking at the end of the quarter, so you always have the average, which is an increase. You always have... We've been having a gradual ROA expansion as we have been able to increase the percentage of funds that we manage and not only do the administration for, from. Yes, we think, to think that we will continue to grow, we don't think it's a one-off that will come down.
Okay, perfect. Thanks, Roberto.
Thank you.
Thank you. That brings us to the end of the question and answer session. I will now return the floor to Mr. Roberto Sallouti for any closing remarks.
Thank you all for joining the call. It's a pleasure being with you, and we hope to see you next quarter. Have a great week. Thank you. Bye-bye.
Thank you. This concludes today's presentation. You may disconnect your line at this time, and have a nice day.