Earnings Call: Q1 2021

May 11, 2021

Slides

Good afternoon, and welcome to the Q1 of 2021 Results Conference Call of Banco's CES Pac twelve. With us here today, we have Roberto Saluti, Silao Banco, Sylvain De Azulela. We would like to inform you that this event is being recorded and all participants will be in listen only mode during the bank's presentation. After Banco Bekateria Pactual's remarks, there will be a question and answer session for investors and analysts when further instructions will be given. Today, we have a simultaneous webcast that may be accessed through the website, www. Etgpactual.com/ir and the platform. There will be a replay facility for this call from May 11 through May 17. Before proceeding, let me mention that this call may contain forward looking statements relating to the prospect of the business estimates for operating and financial results and those related to the growth prospects of Banco Betege Pactual. These are merely projections and as such are based exclusively on the expectations of Banco Baterge Pactual's management concerning the future of the business. Such forward looking statements depend substantially on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in Banco Batavia Fagral's filed disclosure documents and are therefore subject to change without prior notice. Now I will turn the floor over to Mr. Robert Salute, who will begin the presentation. Mr. Salute, please go ahead. Thank you very much. Good morning to everyone or good afternoon. So we're very satisfied with the results from the Q1. Our business showed outstanding organic growth in our client franchises. We were able to produce very solid financial results and finished the quarter with a very solid balance sheet, which allows us to continue to implement the very aggressive growth strategy, which we've been implementing over the last few years. So turning to Page 3, we start with some of the highlights of the quarter. So this quarter was very strong in net new money. We had R76 $1,000,000,000 of net new money in the Q1, which gives us total net new money in the last 12 months of R182 $1,000,000,000 Our assets under management and under administration increased 67% year over year, reaching BRL450 1,000,000,000 at the end of the Q1 and our wealth under management. So basically, and our retail investment business grew 98% year over year reaching R317 $1,000,000,000 at the end of this first quarter. Turning to Page 4, we show the numbers that reflect very strong profitability across all segments. So our revenues increased 84% year over year reaching R2.8 billion dollars Our earnings before taxes also grew 84% year over year reaching BRL1.6 billion. And finally, our net income grew 52% year over year reaching BRL1.2 billion. Turning to Page 5, you see some of the key highlights of our balance sheet. So we finished the quarter with a credit portfolio of R80 $1,000,000,000 a growth of 69% year over year. Of these R80 $1,000,000,000 BRL10.4 billion in the SME segment. If you remember, on the Q4, we had a very strong growth in the SME business, which there is some seasonality towards year end. But even some of that, let's say, artificial high level, we were able to continue to produce growth in the Q1. Our unsecured funding base reached R121 $1,000,000,000 growing 98% year over year. Dentas will talk a bit about this further down the road, but this is 13% from our retail clients already in our unsecured funding base. And finally, we finished the quarter with a Basel ratio of 17.7% and a return on equity of 17%. In Page 6, we highlight some the M and A acquisitions that we've done, we continue with a selective agenda. Basically, with these complementing each of our business strategies. So we increased the product offering in our digital retail unit with the partnership with Mosaico and the acquisition of the aggregator Kingvo. We continue to diversify our investment product offering with the minority acquisition stake we did in Kawa, which is an asset manager focused on U. S. Markets, which is something that our client base has been demanding. Made some acquisitions like that of Fatur, which allows us to have operational leverage in our platform as it's basically a client acquisition deal. And finally, we increased our stake in our digital banking platform for Xceed D and E classes in Bancooper, where we acquired the voting shares that were owned by Caixa. Turning to Page 7, we go into a bit more detail of the financial highlights of the quarter. So we finished with total revenues of $2,800,000,000 and net income of $1,200,000,000 dollars return on equity of 16.8 percent and net income per unit of BRL1.28 Our cost income ratio, even as we expense all of the major IT development and marketing investments that we've been doing in our business, continued stable in the historical level, 43%, our comp ratio went 26%. And finally, our balance sheet finished the quarter with BRL278,000,000,000 assets and R30.4 billion dollars in shareholders' equity. Turning to Page 8, we see the revenue distribution of the different business units. This is something that we have been pursuing over the last years and quarters. And I think we finally reached what we wanted, which is a very even distribution across the different business lines. Some of them use capital, some don't. Some of them are more stable, some are more volatile. But we really think that this is the new format that we will have for the long run. With the long run, probably our client franchises will continue growing more strongly, but we are very, very happy and satisfied with this revenue breakdown. So Investment Banking, Corporate Lending, Sales and Trading and Investment Management, all of them are around 20% of revenues. This really puts us in a very comfortable position and it's something that we've been striving to reach, as I said previously, for quite a few years. Turning to Page 9. We always told you that there were 3 trends benefiting our business. So one was financial deepening, 2 was the digitalization and 3 was the ESG agenda. We incorporated the ESG values into our culture and this has been great. Of course, it helps us to participate in a better world. It makes us more attractive to key talents which share these values. It also goes in line with the demands of our clients and investors, but this is also very good for business. So a few highlights of the Q1. So we were the 1st bank in Latin America to neutralize Scope 1, 23 carbon emissions. We did this in 2019. In 2020, we did it again. But this time, we included the emissions of our independent financial advisor network in the calculation, which is something that we innovated. We launched our Impact Investing Fund, which is going very well and it's fundraising. Our credit portfolio, eligible credit portfolio and sustainable green and social financing framework reached R6.7 billion dollars We originated and distributed BRL2.7 billion of fixed income instruments linked to sustainable finance. We did our 1st sustainable linked credit transaction. And finally, we launched a new unit to basically develop the business of CBOs, which are local credits to compensate, which have to be bought due to regulations in Brazil by those companies which negotiate fossil fuels. We also in the quarter released our ESG research reports for our clients and also published our annual sustainability report. With that, I'll pass the floor to Dantos, who will talk about each of the business units, and then we can go to Q and A. Thank you, Jose. Thank you all for joining our call. We will start on Page 11. Before we discuss the performance of Investment Banking, just as a backdrop and to put things in context. As Roberto described, we will show results both in terms of growth and in terms of performance that are very good, outstanding throughout all our business areas. So growth and performance in the present quarter have been very well distributed amongst all our businesses, and this is what I expect we can see from the discussion on the next pages. So on Page 11, Investment Banking had our we had our 2nd best quarter in Investment Banking in the Q1 of 2021, only second to the Q4 of 2020. And as you can see on the graph in the middle, we have reached probably a new plateau fair to say, a new plateau of revenues and capacity to generate earnings in Investment Banking. We are taking advantage of the strong activity in capital markets in Brazil. About 95% of the revenues in the Q1 came from deals executed in Brazil, half of which about half of which ECM and the other half DCM deals. Despite a large number of M and A transactions in execution and many of them even closed during the Q1, we only have captured fees from 3 M and As in the Q1. So that's a business line inside Investment Banking, which we expect can contribute more with revenues throughout the year. We continue to be number 1 in the ranking in M and A and in ECM in Brazil and LATAM. And so that makes for a very good performance of Investment Banking in the Q1. Turning to Page 12. Here we see our corporate lending and SME business. Our lending portfolio continues to grow. We have expanded our lending portfolio 9% quarter on quarter and 69% year on year with solid quality and stable spreads. So as you see on the graph in the right part of the page, corporate lending portfolio went from R47.7 billion dollars to R80.4 billion dollars in the 12 month period. That's a 57% growth just in corporate lending. And if you look at the SME portfolio, it has grown in the same period 3.2 times. Our corporate lending portfolio also in the quarter was registered an expansion of the average standard. So while during the second and third quarter of 2020, we saw a compression on average standard because companies were taking credit from us looking at the shorter term horizon. Now they are back taking credit for thinking for the longer term horizon, which means that the risk appetite or the investor confidence or entrepreneurial confidence is growing in the country as we speak. For the SME portfolio, I think the highlight is not only the growth, the 3.2x expansion of the portfolio, but also the fact that we already have more than BRL 1,000,000,000 of credit card receivables inside the book. The book is still composed of only 2 products. One is the supplier financing, which we started first and now we start to have credit card receivables as a part of the SME lending portfolio, which we expect also as a category to grow. Looking at the revenues, we had a reduction of BRL 41 1,000,000 comparing Q4 with the Q1 of 2021. That reduction is only explained by the special situations revenue contribution. Even though we had a strong contribution from Special Situations in the Q1 of this year, in the Q4 of 20 20, special situations had probably its best quarter ever. That's why there is a reduction in total revenues even though if you look at the trend, we have been growing revenues, we have more than doubled revenues in 12 months comparing Q1 of 2020 with 1st quarter of 2021. That growth in accrual revenues, which is the majority of the revenues in corporate and SME lending, The accrual revenues are growing in line with the growth of the portfolio since spreads are stable and we didn't have significant variations on the levels of provisions, which are adequate for the portfolio at this point. Moving to Page 13. Our sales and trading business is also benefiting from strong volumes in capital markets. The business is producing strong revenues with lower use of capital. That's kind of a dichotomy explained by 2 factors that can be observed by 2 factors. The first observation point is the market risk component inside our capital requirements. It's only it's down to only 17% of our total capital requirements. In the past, it used to be much higher. So the capital requirements for the market risk of our balance sheet today is less than 20% of our total capital requirements. Also, you can measure our ability to run the business with lower use of capital by looking at the VAR, which is at a historically low level, not the lowest, but in average, a historically low level of 44 basis points of our average equity in the quarter. We are able to produce strong revenues with lower use of capital because of 2 trends. 1 is a more is that we have more diversification in site sales and trading revenues. We have now we have had this quarter strong contribution from the credit desk, from the rates, equities and energy desks. And inside all these businesses, we have more fee income. So brokerage fees have been growing inside sales and trading more than the total. Our participation in market in terms of market share of our brokerage volume in Brazil, Colombia, Chile, Peru, Mexico has been expanding for the last years and we continue to see that expansion going forward. So we're very glad with the level of revenues we have reached in the Q1 in sales and freight. On Page 14, we have the first of the 2 businesses that presented more outstanding growth, which is asset management. Our asset management AUM has grown 70% in the year in the last 12 months. The net new money of the Q1 of 2020 was R43 $1,000,000,000 and for the last 12 months, it reached R97 $1,000,000,000 Net new money has been growing quarter after quarter, as you can see on the graph on the right part of the page, from 9.3% in the Q1 of last year to 11.8%, 16.6%, 26% and now 42.9%. Percent, so a sequence of expansion of the net new money quarter after quarter. This is this comes as a result of 3 trends. First, investors are seeking alpha in response to a stable macro scenario in Latin America, especially Brazil and low interest rates, Regardless if they are at 2% or 4%, interest rates are low compared to historical trends in Brazil. 2nd is the growth in alternative assets and we are the largest player in alternative assets in Brazil, be it real estate or private acting infrastructure funds. And also the third one, which is the growth of our fund services franchise. Inside all these asset classes, it's interesting to note, our ROAs are stable. So by category, in the last years, we have been charging the same management fees. And also, it's important to note that the mix have been changing. Now the growth in fund services this year has been bigger than the growth in managed assets. If you look at the center part of the page, you'll see the revenues reaching BRL260 1,000,000, a reduction compared to the 4th quarter. But that's just because in the Q4, we registered, we capture performance fees on an accounting perspective. Funds provision performance fees on a daily basis, but we only record them from an accounting perspective on the end of the period of accrual of the performances, which happens for most funds in the Q4. Excluding performance fees, we had a growth in management fees and we had a growth of 24% in revenues comparing the Q1 of this year with the Q1 of last year. So a great performance of our asset management business in the Q1. Moving to the next page, here we see our Wealth Management and Consumer Banking business. And I would like to start explaining the performance making some comments about our current account. As you know, we have launched our current account services last year in the end of 2020. It was certainly one of the most important technology and service developments in our franchise over the recent years and that adds to the development of our investment digital investment platform, which in which we've been investing for the last recent years. The current account is now viewed by our clients as easy and great to use. So a very good acceptance of the service by the clients that already use. It's now a complete platform combined with credit card, debit card and all the kinds of services that one needs from a current account. So, thousands of clients that use our bank account already don't have any other bank account with any other competitor. And we are now launching a marketing campaign that we started yesterday to attract new clients and point new clients' attention to the ability to the possibility to use Betege Mahesh. We will continue to invest significant time, talent, resources in providing clients and our financial advisors with best in class services and products. And it's that one of the main reasons why we are capturing has doubled in assets under management in the last 12 months. The other reasons, of course, are associated with the macro backdrop, low interest rates, as I mentioned before, when we discussed asset management. And here, moreover, so due to the very accelerated pace of financial innovation that we are able to produce and provide our clients inside the Wealth Management and Consumer Banking business. So if you look at our net new money, in the beginning of last year, in the first two quarters, we had $11,900,000,000 BRL 10,700,000,000 of net new money, so around BRL 10,000,000,000 of net new money in this quarter. On the second on the 3rd Q4 of last year, around R20 $1,000,000,000 of net new money and now more than R30 $1,000,000,000 and that is a constant trend, a trend which we believe will continue to present itself due to the reasons I mentioned before. Looking at revenues, we reached BRL295 million of revenues. It's a 74% growth compared to the Q1 of last year, very much in line with the growth in assets under management since every client that we bring is a client that invests in products that we already offer, paying the same fees of our large wealth management clients and therefore profitable clients producing revenues and contributing to the bottom line. Finally, moving to Page 16 before we talk about expenses. Here, a snapshot of our results in principal investments and participations, which we are putting together in a single page. As you know, principal investment revenues are composed essentially of the results from our investments in Eneva and in Prime Oil, which are performing well. Important to mention that Eneva is now a permanent investment for us in which we don't capture mark to market according to the price volatility, but we capture results from our share of the earnings of Aneta. And in participations, revenues are composed basically of the equity pickup from Banco Pan and from Toul Seguros. If we exclude some results from EFG, which now tends to be relevant in our business because we transferred the majority of our stake in ESG to our holding company, as you know. So if you exclude for that, the revenues in the participations earnings from Pampa and Tuzuguros have been growing consistently since the Q1 of 2020. So it makes us happy with that performance as well. Moving to Page 18. Here we have some comments about our expenses and the main efficiency ratios. As you all know, our cost efficiency is one of our strengths and is important to us that as we grow and as we invest and as we flow all the costs of these investments through P and L, we are able to maintain our cost income ratio in line with the historical levels. And once again, we did it this quarter. So as you see, the normalized cost income ratio for the Q1 was 43%, above Q4 of 2020, but pretty much in line with our historical average. If you look at the line salaries and benefits, you see that we have a 7% expansion on the total expenditure on salaries, 7% expansion due to hiring, 29% year on year if you compare with the Q1 of 2020. That's because we hired 331 people in the Q1 this year. And in the last 12 months, we hired 1057 new people to join us and to deliver services, investments in technology and new products that we have been discussing. On the other hand, on administrative and other costs, we have a reduction of 7% quarter on quarter and an expansion of just 5% year on year. That's because we're spending less on things like consulting fees because we're doing things much more in house than using third party service. And finally, on this page, I think it's important to highlight our income tax rate. Our effective income tax rate in the quarter was 26.3%. That's as a result of the use of JCP, the deductible dividends in Brazil and of the revenue mix of our business, and that's where we expect to be in terms of income tax for the remainder of the year. Moving now to Page 20, here a little bit of the analysis of our balance sheet. As you see, we are reaching in the end of the Q1, BRL280 1,000,000,000. That's a leverage of BRL 9.2 billion in terms of assets to equity. And if we were to consolidate the assets of Banco Pan, this page would show about the BRL320 billion of assets to equity, which represents 10.2 times leverage, which is still below our historical average. We always used to operate the bank with 11x to 12x assets to equity. So in terms of total assets and leverage of assets to equity, we are still in a comfortable level that allows us to continue to expand beyond the consolidation of Banco Pan, which we expect will happen soon after the regulatory approvals for that transaction. Also important to note that we have recorded record liquidity. We have R46.8 billion in cash and cash equivalents, a growth of 13% quarter on quarter, R5.5 billion dollars more in liquidity just from the end of last year to the end of the Q1. Evidently, that's above that's a cash cushion that sits above an efficiency standard since we are prepared to deploy some of that capital soon in the acquisitions that we mentioned. Also important to note, there's comfortable coverage ratio of about 2 times unsecured funding to our banking book assets. The unsecured funding base, as we'll see in the next page, has grown 13% quarter on quarter, while the on balance credit portfolio, just the part that consumes cash, has grown 8% in the same period. And our corporate lending portfolio is today the equivalent of 2.6 times our shareholders' equity. And with the acquisition of Banco Open, it would go to 3.6 times our shareholders' equity. So all in all, we can say that after the consolidation of Bancooper, we will maintain more than enough dry powder to continue to deploy capital and to grow. Moving now to Page 21 and approaching the end of the presentation. You see the unsecured funding base of Better Jetpackual. In the last 12 months, we have doubled our funding base, going from R61.1 billion dollars to R121.1 billion dollars of unsecured funding. We have benefited significantly from a volume of additional deposits during 2020 that happened in a classical flight to quality movement that benefited us, but we have not only maintained those additional deposits that we gathered during the especially the second and third quarter of last year, we also have been able to continue to expand our market share in local funding in BRL. We also expanded our market share in local funding in Chilean pesos. And we also issued in January this year our new benchmark green bond in January that contributes to the increase in securities issue. So all in all, a very good performance in terms of our unsecured funding base evolution. Demand deposits inside our funding base have reached R5.7 billion dollars growing more than 4 times as compared to the Q1 last year, so in 12 months, 4 times more demand deposits, which is a reflection of our expansion into retail. The share of our retail funding in the total funding site and term instruments continue to expand reaching 12% of the total Honey base. And finally, our liquidity coverage ratio has reached 2 38%, which is above our industry peers in the segment 1 of banking supervision in Brazil. Finally, on Page 22, we have our BIS capital ratio. We have reached 17.7 percent total capitalization ratio at the end of the first quarter, and that's about 250 basis points above the average of segment 1 private banks in Brazil. That's more than sufficient capital to consolidate Banco Pem and to continue to operate above the segment 1 average of capital ratio in Brazil. It's important to explain that as we consolidate Banco Open, there are capital consequences for our business since we'll take on 100% of the risks of Banco Pan and we'll take on the minority shareholder equity into our equity and that will impact our capital ratios. But with 17.7% total capitalization, as I said, about 2 50 basis points above the average of the industry, we are comfortable to do that consolidation and still have dry powder to continue to expand the balance sheet organically. So these were our comments. Again, I thank you all for joining our conference call, and we're happy to take any questions from you. Thank you very much. The floor is now open for questions for investors and analysts. George Curry from Morgan Stanley would like to make your question. Hi, good afternoon everyone and congrats on the good numbers for the quarter. I have two questions on growth, basically one on the corporate lending book or your overall lending book, no longer only corporate, but your lending book. With the current leverage at 2.6 times of our equity or if you look at the broader book at 3.1, how much room is there to increase that leverage ratio going forward? We've seen your book growing at multiple times your equity, but with 20% return on equity, 50% payout, that would imply a big deceleration at the current leverage levels. And so how comfortable are you with increasing that leverage ratio? What do you think is a reasonable target? And isn't the increase in the SME lending and on Banco Panc lending would argue for lower leverage relative to history? So that's my first question. And the second one is on the Wealth Management business, which is growing at a phenomenal pace, probably driven by BDGMIs. We don't know because there's no disclosure. But in order for us to understand how sustainable these growth rates are, it would be useful to know what portion of your AUC or what portion of your inflows is coming from that business, so we can understand market share and can do a much better job at figuring out what the sustainable level of growth for that business is because I really doubt that a lot of people are putting 90% sustainable for the next half a year, 2 years and maybe it is. And so if that's not a possibility in terms of disclosure, what do you think is your best estimate then of how your wealth management business will grow over the next 2 years? Thank you. Thank you, Jorge. So starting first on the credit portfolio. We have a self imposed limit of 3 times equity, but we've had this for, I don't know, the last decade. And we are much more diversified in funding and much more comfortable that at the right time we should discuss whether we should increase this to 4 times and then depending on how our funding continues to diversify this year. And I would say that right now, I would say that we're probably inclined to change this 3 times to 4 times as we continue to grow the credit portfolio. But we want to make sure that we continue to grow it in a diversified way. So today we have large corp, we have SME, we have so this gives you different tenors, different asset classes. We think it's the right way to grow and have a diversified credit portfolio, which allows us to be big enough to be with all the key clients and key segments, but small enough that we're not a beta to the economy that we can have some alpha as has been our historical behavior in our credit portfolio. So we want to keep these both things true as we go forward. Talking about Wealth Management, I agree with you, probably 90% growth for the next 2 to 3 years is not reasonable, especially because the base also becomes much higher. But I would say before this acceleration, we were going at around the 45% growth, which I think is quite reasonable for the next few years. And this growth is coming across the board. I mean, we're growing in all segments, even high net worth individuals. We've been increasing market share. We've been getting more share of wallet, we've been increasing in our independent financial network, the B2B business, the B2C business, the Advisor, which is our brokerage business, NEX on which we acquired. Now we have the whole banking offering on top of that. So it's a bit of all of the above. You don't have you have a very spread out growth throughout all these different segments. And I think the good thing is that we continue to see acceleration in all of these with the exception of Wealth Management with the ultrahigh business, where we're not seeing acceleration, but we're seeing very strong inflows. But on the all the other business units, we continue to see acceleration. All right. Thank you, Roberto. That was very clear. Thanks and congrats again. Thanks, Jorge. Nicolas Rivers from Bank of America would like to make a question. Thanks. I only have one question. It's about capital. Joao, you mentioned at the end of your remarks that you expect to remain above the levels of capital of your private sector peers even after the consolidation of Banco Bank. Wanted to ask you if you have an estimate of where your CET1 will be after the consolidation of Banco Bank. If I just increase your risk weighted assets by 100% of the risk weighted assets of Banco Pan, I get to about 13.2% CET1 ratio. But I believe there should also be an impact probably on your equity, right? You are buying, I believe, at around 2.5 times book value. There should be some goodwill created on that. And also, I wanted to check if, I guess now you're going to be fully consolidated Banco Bank. Up until now, I believe you were doing like the equity PIF cap, but I wanted to check also on the change of methodology for the accounting of Banco Bank. And finally, if you have a target level of CET1 below which you wouldn't want to go? Thanks. Yes. So thank you, Nicolas, for the question. We do we have a target of being always above the average capitalization of our peers, which are the private banks in segment 1 in Brazil. So this would mean for us about 14% CET1 and about 16% 13% to 14% CET1 and about 16 percent of total capitalization. You are right in all your steps that you considered as impacts from the consolidation except for 1, which is the fact that we already own the majority of the capital of Banco Open. So we already have today, it's a capital underpinning. We deduct our investment in Banco Open from our capital. So it only comes at the margin. Even though we will consolidate 100% of the risks, we, so to speak, already consolidate more than 50% of them under the capital underpinning regime. So the impact of the full consolidation will come at the margin. In the end of that exercise, since I told you, we are operating at 17.7% at the end of the first quarter, we are about 250 to 300 basis points above the average capitalization of our peers, the private banks in segment 1. We will continue to operate above them. And in the long run, you can think of BTG Pactual always at the margin better capitalized than our peers. They are larger than us. They are as important to the financial system because they are in the segment 1 of banking supervision, but we have always maintained the bank with excess liquidity and excess capital to make sure that we run the business in a way that we can always grow and take advantage of growth opportunities as we see them. Our business tends to grow more than our peers in the segment 1. That's why we will always maintain excess capital to make sure we take advantage of those opportunities, which is exactly what's happening now. Thanks very much, Joao. So just to clarify, so then you expect your CET1 not to be below 14% after consolidating Banco Bank? Not below 13%, but between 13 14 should be something like that. Okay. Thanks very much, Joe. Thank you. Ketur Labarta from Goldman Sachs would like to make a question. Hi, good afternoon. Thank you for the call and taking my question. Maybe a follow-up on the Wealth Management and also, I guess, the Asset Management. You're showing like the net new money, very strong quarter there, like $76,000,000,000 combined between both segments. It has been accelerating. But just to think about how that compares to last year, it was $46,000,000,000 in the 4th quarter, but had been accelerating per quarter. Is this new level of $76,000,000,000 do you think that's a sustainable level? Was anything extraordinary there? Does it normalize somewhere in between? Just to try to get some context, right, just given the strong acceleration and how you see the inflows continue for the rest of the year and maybe beyond? That would be helpful. Thank you. Hi, Tito. Clearly, we accelerated from last year. So if this is not the new level, I would say it's pretty close to this. So let's use Wealth Management. Maybe is it reasonable to think of RMB10 1,000,000,000 per month seems reasonable. Of course, it's all it's very hard to predict exactly. But we are very bullish that we this new level that we've achieved is sustainable. Maybe yes, we had a great Q1, but remembering that was all extra or organic growth. We will have some inorganic transactions in the Q2, more specifically, Nekton. But we do think that something around this area is the new normal level. Yes. Thanks, Roberto. That's helpful. Maybe a follow-up then. You made a big investment in IFAs last year. I don't know how much color you can give, like how much did that contribute? And is that an area where you continue or will continue to invest in and try to grow from? Yes. We will continue to invest. We have been continuing. The ex post of the scenarios we imagined when we made the investments are all confirming themselves or slightly better. So that give us very strong confidence to continue with the strategy that we have been successfully implementing. Okay. Very clear. Thanks a lot. Thank you. Jaguba Chista from UBS would like to make a question. Hi, guys. Thanks for the opportunity. I have just one question about acquisitions. The bank did several M and As in the last couple of months. Is there any segment that you still see opportunities for acquisitions? So there is any that they lack or weakness that you see on Medici that an acquisition should fit? So let me see how I answer this without giving away what I should mock. So there are basically 3 segments that we are investing. So the Retail Investment segment, the Retail Banking segment in Paa and we also have our SME Business platform. So I would probably say that we have a few discussions in the pipeline, mostly focused on the Investment and SME segment as we speak. Okay, okay, perfect. Thanks. Thank you. Pedro Labrique from Itau BBA would like to make a question. Good afternoon, everybody. Congrats on results. Thank you for taking these questions as well. 2, if I may. First, on demand deposits, you swiftly commented there that it surged not from almost $3,000,000,000 last quarter to $6,000,000,000 now, doubling in the quarter, something we're not seeing in the system. We can't avoid to think that this is a fruit of BTG plus additional accounts taking hold. This is becoming slowly a meaningful or could become a meaningful and cheaper funding source for you. Can you elaborate a little bit about this, especially if it's right that it's coming mostly from the retail accounts and from BTIG Plus or any other color there? Thank you. Pedro, thank you very much for your question. Yes, it's coming from essentially from our expansion in retail. It comes from flows of some of our institutional clients as well that sometimes leave their balances on their accounts in between transactions. And it comes also there's an impact in the quarter from money market deposits, those that don't earn interest that we add to that pool. So it's not only the retail base in reais that has been growing, but it is predominantly the retail base in hand that has been growing. Yes, it's fair to say, it shows that we are growing into retail for sure. These deposits use it to exist in our business, but they used to be very volatile because they were concentrated sometimes on institutional clients and sometimes on corporate clients. Now they are much more concentrated from the flow of retail clients, which makes for a more stable cushion. And with interest rates rising, yes, it's a source of revenues. We much prefer the low interest rate environment. It's an environment that allows us to capture net new money and grow assets from 3rd party from clients in a more accelerated way. But with interest rates at 4% or 6%, that doesn't change and we add a little bit of floating revenues to the business mix that is not bad in the end of the day. Remember that when we IPOed, we used to deliver higher than 20% returns with CDI much above 10% in Brazil. Today, we deliver close to 20% returns with CDI at 2%. So CDI does have an impact in our nominal returns, if you will. Very good. And then still on this capital or funding topic, you will start to consolidate Banco Pan soon. Essentially, your basal ratios will merge. You've given us guidance there on CET1, etcetera. But you will compete, BTG and PAM will compete over CATO because essentially, you'll be 1 at the end of the day. And PON is growing significantly, mass retail and demand for clean credit there. You need to cope with that and keep those NPS high, keep those clients happy. So we this is a good competition, right? Both of you guys are growing very fast. And so we're wondering if on a high level, how you're thinking about this, if it's really we should think about it as 1 or capital decisions will be taken at 1 entity or the other in case, for example, capital round comes, just high level thoughts there? Thank you. Pedro, no, of course, you're right. You have to look at it as a consolidated thing, even though we don't we only own 70, let's say, 72 percent of PPA, but we will do the capital allocation as one. And but we're quite comfortable. We think that this will be a healthy competition and we have significant earnings power every year that we retain most of the capital. So it's not going to be a lack of capital to deploy. We will be accumulating capital that we will deploy. And actually, we're quite satisfied that we have good opportunities competing for this capital. What would worry us if it was the opposite. And remember, Banco Pan today on a stand alone basis operates with 15% capitalization ratio and has been generating itself enough earnings power to continue to grow its business and increase its capitalization. So in the end of the day, that dilemma of capital allocation doesn't really present itself since we have earnings power at the level of BTG Pactual and at the level of Banco Pan, which makes us confident that we can grow both businesses as the market presents opportunities to do so. Understood. Thank you. Thank you. Thank you. That brings us to the end of the question and answer section. I will now turn the floor to Mr. Roberto Solis for his closing remarks. So once again, thank you all for participating in our Q1 call. Thank you once again for your trust and partnership, and we look forward to talking to all of you again at the end of the Q2. Have a great day and a great week. Thank you. Thank you. This concludes today's presentation. You may disconnect your lines at this time and have a nice day.