Good morning and welcome to the third quarter of 2026 results conference call of Banco BTG Pactual. With us here today, we have Roberto Sallouti, Renato Cohn, and Julia Rocha. We would like to inform you that this event is being recorded and 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. 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 and, as such, are based exclusively on the expectations of Banco BTG 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 BTG Pactual's filed disclosure documents, and are therefore subject to change without prior notice. Now, I'll turn the floor to Mr. Roberto Sallouti, who will begin the presentation. Mr. Sallouti, please go ahead.
Thank you very much. Good morning, everyone. Thank you for joining our third quarter earnings call. If you could please turn to page three of the presentation, we will start with the quarter highlights. First, talking about the results, we had a net income for the quarter of BRL 5.3 billion, a return on equity of 26.4% for the quarter. We believe that this once again demonstrates the resilience of our all-weather business model as we continue to be able to grow revenues even in a challenging environment. Going to the second point, the revenues in our corporate lending and business banking unit grew in line with the portfolio, reaching BRL 2.8 billion. Here, we're benefiting from a diversified origination, disciplined origination, and rigorous provisioning.
Here, we use the philosophy of always looking at the credits, no matter the period of delayed payment or what's happening, even if the credit is still functioning. We're every month updating the provisions to make sure that these provisions are compatible with our vision of the credit. Again, here, the incentives that we have being a partnership are completely aligned with this rigorous provisioning, and it's something that we have always used historically. Moving on to the third point, Sales & Trading, BRL 1.7 billion revenues, driven mainly by our client businesses, as we had a low VaR during the quarter, an average VaR of 23 basis points. Very disciplined risk management, as both the global scenario as well as the Brazilian scenario are quite challenging and very volatile in the last few months. Going on to the fourth point, Wealth Management and Personal Banking.
Record revenues of BRL 1.6 billion, in line with the expansion of the assets under management and wealth management, and with strong net new money of BRL 30.2 billion for the quarter. Consumer Finance & Banking continuing to grow, reaching BRL 1.6 billion in the quarter, again driven by portfolio expansion. Even though we are increasing the portfolio in clusters which have lower risk and consequently lower spreads for ROAs, we still have been able to keep growing the revenues in line with the expansion of the portfolio. If we continue with this conservative approach, at some point, we might see this not happening because we will be, increasing our portfolio in clusters with lower risk and consequently lower ROAs. We think that is exactly what we should do given the challenging scenario that we are expecting for the next few quarters.
Finally, at the end of the quarter, we completed in Q3, we are already showing the consolidated numbers of Uruguay. We completed the acquisition of HSBC Uruguay and obtained regulatory approval to operate as a bank in Peru. We actually had the official launch of the bank just this week. These are two very important milestones for the consolidation of our Latin American presence. Moving on to page four, we will talk a bit about the financial highlights. Once again, revenues of BRL 10.8 billion for the quarter, growing 14% year-over-year. Net income of BRL 5.3 billion for the quarter, growing 17% year-over-year, and 26.4% return on equity.
Moving to page five, we had BRL 58 billion of net new money in the quarter, and our assets in wealth management grew 22% year-over-year, reaching BRL 1.38 trillion, and our assets in asset management or assets under administration grew 23% year-over-year, reaching BRL 1.42 trillion. Moving to page six of the presentation, we see our unsecured funding reaching BRL 436 billion, growing 32% year-over-year, a very solid capital ratio of 16.3%. Our credit portfolio growing 25% year-over-year, reaching BRL 386 billion in total, of which BRL 302 billion in corporate and SME segment and BRL 84 billion in consumer finance. In page seven, we show the numbers of Q3 in the same historical fashion. Once again, revenues BRL 10.8 billion, return on equity 26.4%, net income per unit of BRL 1.38.
The cost income ratio that grew slightly in Q3, given our inorganic initiatives, and as we continue to have some businesses which benefit in the J-curve, when you see at the nine months, which we will talk about on the next page, we see a decrease in cost income, but quarter-over-quarter, it did grow a bit. So we finished the quarter with 37.8% cost income, and we finished with total assets of BRL 945 billion and equity of BRL 81.7 billion for the quarter. Moving to page eight, we talk about the performance for the first nine months of the year, and here for the nine months of 2026, we had revenues of BRL 31.15 billion, net income of BRL 15.3 billion, return on equity of 26.9%, and net income per unit of BRL 3.96.
As I mentioned previously, cost income decreasing from 38.7% in the nine months of 2025 to 37.7% in the nine months of 2026. What we really like is in the nine months versus nine months, that we've been able to grow revenues 20%, net income by 26%, and our shareholders' equity growing 24.5% even after the payment of JCP. We continue to see operational efficiency in the platform. We continue to see growth in revenues, and most of all, we continue to see a very robust balance sheet where our equity increases basically with the accumulated earnings minus what we pay, distribute as JCP. Moving on to page nine, we see the breakdown by business unit of nine months versus nine months. Instead of going one by one, I'd like to highlight what we think is a very healthy distribution among the different business dynamics.
Not exactly the business units, but with the dynamics. Here we're going to start with, for example, investment banking and Sales & Trading. Investment banking up for nine months, Sales & Trading growing 6%, but let's say our businesses related to markets are 23% of overall revenues. Corporate and lending and business banking, solid 23% growth, and also representing 24% of our revenues. Moving on to what we could say is investment management, which is the consolidation of asset management and wealth management, growing consolidated 20%, so strong growth, and representing 23% of our total revenues.
Consumer banking, 14% of our total revenues, with very strong growth of 60%, and reflecting the robustness of the balance sheet, the very large percentage of tangible book value that we have, we can see Interest & Others growing 27%, even in a scenario where interest rates decreased in the nine months versus nine months, and this representing 17% of our revenues. With that, I'll pass on to our CFO, Renato Cohn, who will talk about the performance of each of the business units.
Thank you, Roberto, and good morning, everyone. Going now to page 11, we look at our investment banking business line, where we see that we had consistent revenues in a softer capital markets environment. Revenues came at BRL 412 million. That's a similar amount of what we achieved during the second quarter of 2026, as investors awaited the conclusion of a Brazilian electoral period. ECM remained the main contributor for third quarter revenues, despite a lower absolute number with wider credit spreads throughout the market during the quarter, and as we are still seeing some redemptions from fixed income funds. M&A provided also a solid contribution, was the best contribution since second quarter of 2025, and followed also by lower contribution from ECM. During the quarter, we were ranked number one in number of transactions and also second in volume of transactions. We turn now to page 12.
We see our corporate lending and business banking. We see that revenues continue to expand in line with portfolio growth, and that came supported by discipline and diversified originations with rigorous provision. Revenues reached a record of BRL 2,766 million. That is a 10.7% increase during the quarter and a 28.4% increase when compared to the third quarter of 2025, as we recorded this quarter an above-average contribution from our special situations portfolio. Credit portfolio grew by 4.7% during the quarter and 22.3% when we compare to last year, reaching a total amount of BRL 302 billion. Our SME portfolio reached BRL 33.5 billion during the quarter, coming back to levels where we were in previous quarters after a reduction during the second quarter of 2026.
Consolidation of HSBC Uruguay credit book improved the diversification of our total portfolio, raising our exposure to credit outside of Brazil to 25% now. During the quarter, we were recognized by Global Finance as the world's best SME bank for the fifth consecutive year, and as best bank for SMEs in Latin America and in Brazil for the sixth consecutive year. If we turn now to page 13, we look at our Sales & Trading business line, where we saw solid revenues in a challenging macroeconomic environment, driven by our client-oriented business and disciplined risk management approach. We recorded revenues of BRL 1,736 million. That is a 6.6% decrease from the previous quarter, mainly as a result of a slowdown in client activity ahead of the electoral period. Average VaR came at 23 basis points.
That is below historical levels and just 1 basis point above the second quarter, as we maintain a selective approach to risk amid a heightened market uncertainty. The share component of our risk-weighted assets related to market risk decreased to 23%. Despite all the geopolitical and macroeconomic uncertainties ahead of the electoral period, Sales & Trading revenues during the nine months of 2026 reached a record of BRL 5,471 million. That is 5.9% higher than in the same period of nine months of 2025, as we continue to expand our client business franchise and also to enlarge our product and offering services. We move now to page 14. We see that in our asset management, our assets under management and administration passed the BRL 1.4 trillion during the quarter, as we continue to scale the platform organically in a challenging industry environment. Revenues came at BRL 808 million.
That is 2% higher than the previous quarter and an increase of 8.1% when we compare to the third quarter of 2025, despite smaller contributions from our minority stakes in independent asset managers. Net new money came at BRL 27.9 billion, with most of the inflows being directed to our managed funds, and more specifically to our fixed income strategies. As I mentioned, assets under management and administration passed the BRL 1.4 trillion mark, reaching BRL 1,420 billion. That is an increase of 4.3% during the quarter and a 23% increase when compared to the third quarter of 2025. Now, if we go to page 15, we look at our Wealth Management and Personal Banking business line, where we had record revenues growing in line with the expansion of our wealth under management and also supported by strong net new money generation. Revenues reached BRL 1,571 million.
That's an increase of 8.5% during the quarter, and they came mainly driven by the combination of a 5% increase in wealth under management and also a higher ROA, partly reflecting a higher number of business days during this third quarter. Net new money came at BRL 30.2 billion, and that reflects market share gains across all segments and a larger share of wallet with our existing clients, and bringing our wealth under management also to BRL 1.4 trillion during the quarter. That's 22% higher than the third quarter of 2025 numbers. During the quarter, we were recognized as best private bank for family offices, best private bank for succession planning, and best private bank for ultra-high-net-worth clients in Latin America by Private Wealth Magazine. Also, we were recognized for the third time as Wealth Management Bank of the Year in LATAM by LatinFinance.
If we turn now to our Consumer Finance & Banking business line, we see that revenues continue to grow, driven by portfolio expansion, with improving credit quality reflecting discipline underwriting. Credit portfolio grew 7.5% during the quarter and 37% during the year, reaching a total of BRL 84 billion, with more than 95% of our portfolios comprised as collateralized loans. Credit revenues reached BRL 1,449 million, which is a 3.9% increase when compared to the previous quarter, with higher quality origination, especially in the vehicles segment. Although the portfolio continues to expand as we expected, third quarter revenues came in at similar levels when we compare to the combination of the six months of the first quarter and second quarter, as we mentioned in the previous call during the second quarter.
Too Seguros revenues contributed with BRL 151 million, which is a similar amount when we compare to the numbers of the second quarter of 2026. In October, Pan and Too Seguros ended their exclusivity agreement for Pan's insurance distribution. So now, we should expect a runoff of the existing portfolio and revenues from Pan's 50% stake in Too Seguros, while in the future, we'll see revenues for new insurance origination will be recorded 100% at BTG Consumer Finance business line. We go now to our expenses and main ratios. We see that we had a 100 basis points efficiency gain during the first nine months of 2026 when we compare to the same period of 2025. Total operating expenses increased by 5.5% during the quarter, primarily reflecting the consolidation of HSBC Uruguay operation and its acquisition costs.
Salaries and benefits increased 2% during the quarter, while administrative and others increased 10%, as mentioned, mostly again impacted by the Uruguay acquisition. The effective tax rate remained flat at 19.1%. Turning to our balance sheet at page 20, we see that total assets increased by 2.1%, reaching a total amount of BRL 945 billion. That's 9.6 x our equity, while our Tier 1 equity, which is the combination of our core equity and perpetual notes, increased by 5.8%, reaching a total amount of BRL 98.3 billion. Cash and cash equivalents grew 17% during the quarter, reaching a total amount of BRL 121 billion. Our coverage ratio increased slightly to 144%, supported by the strong expansion of our unsecured funding base during the quarter. Our total credit exposure now represents 4.7x our equity.
Looking now at page 21, our unsecured funding base, we see that total funding grew by 7.6% during the quarter. That is a BRL 30.8 billion increase, driven mostly by time deposits and securities issued both in the domestic and international markets. Retail funding remained as 29% of total funding, as our retail funding continued to grow alongside the expansion of our wholesale funding. Demand deposits increased by BRL 5.8 billion during the quarter and now represent 7.4% of our total funding base. During the quarter, we successfully issued BRL 1 , 850 million in perpetual notes at 110 basis points spread. Also, we issued BRL 350 million of Tier 2 notes, further strengthening our capital base.
Looking now at page 22, we see that Common Equity Tier 1 remained stable at 11.6% during the quarter, while our Tier 1 capital increased by 30 basis points with the issuance of the perpetual notes that I just mentioned, reaching 12.9% of Tier 1 capital, while our total ratio also increased by 30 basis points, reaching 16.3% when we compare to the second quarter. Our VaR, as I already mentioned, remained at low historical levels, just 1 basis point above last quarter at 23 basis points, as we took a more conservative approach ahead of the electoral period. With that, I think we can move to questions.
Thank you. The floor is now open for questions from investors and analysts. If you have a question, please click raise hand at this time. If at any point your question is answered, you can remove yourself from the queue by clicking lower hand. Questions will be taken in the order that they are received. Please hold while we poll for questions. The first question comes from Daniel Vaz with Safra. Please go ahead.
Hi, Sallouti. Hi, Cohn, Julia. Congrats with the results. I have two questions. The first one on your macro assumptions for next year. Are you already working with GDP growth close to zero, maybe a stable Selic rate? In this scenario, can you hold the ROE spread flattish or even increase? The second one, you like to mention that BTG is an all-weather bank, right? I remember in the beginning of the year, we were studying the consumer finance business, and we did a report on that. But looking into 2027, I'm missing another line that can show up as large in terms of magnitude and as quickly. But I do see how fast you are expanding the franchise across LATAM, right? How much of your revenues could come outside Brazil?
Maybe if you can give us a little bit of magnitude of today and maybe in your medium and long-term target. Thank you.
Thank you, Daniel. I'll address your question about macro assumptions, and I'll let Cohn address your question about the growth and guidance on revenues. Yes, the base case is different than what we are underwriting credits for. The base case we're working with is growth from flat to 0.5%, inflation above the ceiling of the inflation target, stable interest rates, so a challenging environment. These are the basic assumptions we're working with. But when we are doing credit underwriting, we are actually doing so for a more challenging scenario, where we expect a stronger deceleration, increase in unemployment, interest rates maybe even slightly higher than today. So, we're using a more conservative scenario than what I mentioned as the base case scenario in the macro assumptions. Guidance, we will keep what we've been always saying.
We think that we can continue delivering above 25% ROE in the different scenarios. Higher interest rates, we benefit in Interest & Others. Naturally, it presents a more challenging environment for credits, a more challenging environment for the different franchises, but we think one compensates the other. But we continue to see growth in our client franchises, let's say the fee businesses, which are more predictable, like wealth management and our investment management business, continuing to grow at similar levels, especially as we increase geographical diversification. So we're confident that we can keep this guidance for the future. I'll let Cohn address your second point.
No, thank you, Daniel. I think regarding the sustainability of our ROE, I think we have to consider that we still think that we can continue to grow at significant pace or similar pace of what we've been growing in recent past. All the client franchise business lines, wealth management, asset management, if you look at how much they've been growing, how much new money we've been generating, and also how the portfolio grows alongside the levels of interest rate that we are seeing, you'll see that we can keep, and we expect to keep, similar growth. So we'll have wealth management, asset management, and corporate lending growing at more or less the same pace that we believe. Sales and trading should grow alongside the growth of the client business franchise, or at least a proxy to that.
Investment bank is a little bit more dependent on client activity. Overall, we expect to be able to grow our revenue lines at similar pace of what we've seen. Again, Roberto mentioned about the credit origination. We are with a much more robust infrastructure to grow also our credit exposure outside of Brazil, and we expect costs to grow at a lower pace than our revenue. So with that, we continue to believe that our profit can grow also at similar pace of what we've been seeing. With that, you have a sustainable return on equity above the guidance that we provided, the 25%.
You remember that when we provided the guidance, we said that we think that we can have the 25% in a sustainable way, which means that we expect this remains for the future, despite the more challenging economic environment that we are seeing today.
Also, just to complement Cohn's point, the challenging investment bank environment might mean that we have better opportunities in large corporates and credit. So the combination of a robust balance sheet with different lines of business allows us to navigate exactly in the scenario that you mentioned.
Thank you for the answers.
The next question comes from Renato Meloni with Autonomous Research. Please go ahead.
Hi, everyone. Thanks here for the space to ask questions. First on corporate lending and SMEs, we saw this large re-acceleration in SME lending at the same time that the cycle is a bit more challenging, as you've been saying. Can you expand your comments a bit on maybe the segments that you're targeting with SMEs, level of collaterals that you have? Then as we march into 2027, and also picking up on your recent comment that you might see some more opportunities for corporate lending, where do you expect growth to land next year for these portfolios? Then if you allow me for a second question here, you ended 3Q with VaR still at very low risks, very low levels. Did that increase at the beginning of 4Q or remained at the same level? Thank you.
Thank you, Renato. This decrease and then increase in SME was basically when, in the previous quarter, we opened space for corporate lending, and then when, let's say, conditions normalized, we used that limit back in the SME. It was just a small readjustment of the portfolio, basically between the two quarters. For the growth, we continue to see solid growth, very solid growth on the banking business as we continue to open accounts, launch new products, and seeing that we're gaining in, let's say, market share and being the primary bank of various SMEs.
As we continue the rollout of our cash management products, which, as I said in the previous calls, we're quite excited about, and we expect to continue growing mainly in the more securitized credit lines, even though we have been slightly growing, very cautiously, some of the, let's say, the lines which are using the government guarantees. These are lines which we have been growing in the last few quarters. We expect to continue growing, but most of the growth and most of the portfolio will be still in the lines which have guarantees. But we're very confident, especially with the continued growth of our banking, be it in the SME segment or be it in the corporate and large corporate segment, as we roll out cash management.
We just rolled out BTG Pay, so we continue launching products which make us very bullish in the growth in the banking products. On the VaR, we basically say it was a walk around the block in the beginning of Q4. We increased VaR, we then decreased VaR, and we basically went around the block and got nowhere. So, yes, there was some, but we're back to basically where we were at the end of last quarter.
That's clear. Thank you.
The next question comes from Thiago Batista with UBS. Please go ahead.
Hi, guys. Hi, guys. Can you hear me?
Yes, go ahead.
Okay. Hi, everyone. My question is about the lending business. When I look corporate plus consumer lending, this already represents 40% of your top line, which is an impressive number and impressive growth over the last couple of years. Looking forward, do you see room for further expansion of the lending business, especially considering the maximum amount that you have for coming years?
We think that over the next few years, and of course, you always have some cyclicality depending on the volatility of the markets, which we all know very well, we think that the percentage of, let's say, our fee-based businesses compared to the percentage of our businesses which are more capital-dependent will remain more or less stable. Naturally, if you look this quarter over quarter in short periods of time, you will have some fluctuation. But if we look in the next four to five years and how we expect the business to develop, we don't think that this will change much. Of course, you will see growth in Corporate Lending, you will see growth in Consumer Banking. You have to remember that part of this business is banking, it's not credit.
We expect banking to continue to grow in both of these units from the levels that they are now. Investment banking, of course, is challenging, as we mentioned, because it depends on the scenario. But in a normalized scenario, we expect the current combination, and I will even add Interest & Others to, let's say, another line that uses, let's say, our balance sheet, that this combination will remain relatively stable. If you look not quarter-over-quarter, but if you look a longer period of time and you get, let's say, the moving average, we do expect it to remain more or less stable.
Very clear. Thanks.
The next question comes from Tito Labarta with Goldman Sachs. Please go ahead.
Okay, thank you. Good morning, Sallouti, Cohn and Julia. Thanks for the call. Thanks for my question. Also, I guess a follow-up on the lending, right? Because you mentioned your underwriting standards, you're using a more challenging scenario than what you're forecasting, but you also said corporate lending can probably maintain similar growth levels. So, does that mean that on the consumer portfolio in particular, we should see slower growth, right? Because that's been growing at a pretty strong pace. I mean, part of that's private payroll, which has had some operational issues, and maybe those get resolved, so maybe you can still continue to grow there.
But yeah, just I guess specifically on the consumer finance, like, should we expect a significant slowdown there because of the macro, or are there like some other moving pieces, maybe operational issues in private payroll get resolved and that gives you room to grow faster? Just to think about that portfolio, given the macro. Thank you.
Just given the increased level, you will see a natural leveling off, but you will continue to see an increase. But you have to remember, Tito, that we're showing you consolidated, basically two lines of credit which have guarantees and one line of credit with no guarantees. And you can see that the growth is concentrated in the lines that have guarantees. But that's only part of the story. I'm just going to use vehicles because I think it's a better way to show the shift that we already have done. Because as I mentioned in the previous quarters, we are actually underwriting, and we expected the macro environment and the slowdown to be tougher than it is.
Basically, the fiscal spending that we had in the first nine months of 2026 has pushed off what the deceleration which we expected at the macro level and the consequences it will have on the credit portfolio. But I'm going to give you one example. We, at Pan, historically, before the consolidation, Pan basically occupies two niches which were higher risk, which was motorcycles and vehicles, let's say older vehicles. With the consolidation with [inaudible] , the reduction in the cost of funding, the improvement in the brand perception, and the change in strategy, we reduced the market share that we had in motorcycles. We reduced the market share which we had in older vehicles, especially not underwriting to clusters of higher risk, and we increased the market share, for example, in newer vehicles.
In newer vehicles, the Pan market share, if I'm not mistaken, went from around something of 4%-5% to 11% or 12% in newer vehicles. These are clusters which, as I mentioned previously, have lower spreads and lower risk. So, we have been doing this strategic shift exactly to address the scenario that we were seeing, but also benefit from our capacity to operate in different segments and products, which was more limited previously. The fact that we have diversification of segment, product, and geography allows us to navigate in these more challenging scenarios which we've been discussing.
So yes, a lot of big numbers, growth will slow down, but you will not see a significant slowdown exactly because we have been growing, been able to grow in clusters that we consider better risk, and we have basically been reducing exposure to clusters which we consider with higher risk.
Great. No, that's very helpful and good color. Thank you, Sallouti. Maybe just one follow-up, I guess, on the private payroll. Some of the operational issues that we've seen there have caused some credit deterioration just across the system. But how do you think about that? Do you think that improves, and could that allow you to grow more even, just like, so yeah, just specifically on private payroll?
No, we think, yes, the operational issues are public and they exist, but something that we always knew about. It's part of the new, let's say, the launch of the new product. And we understood that when we were a first mover that this would happen, and we always addressed it. We think that the market matures a bit because things stabilize, so we do expect, of course, slower growth. We decided to continue with the conservative underwriting standards that we've been using because of this more challenging environment. So, we think that this lower growth will come much more from a, let's say, consolidation of the market and where the market has reached, than from us necessarily changing the credit standards, because we will continue with what we've done since the beginning, which is a very conservative approach.
Okay. That's very clear. Thank you for the call.
The next question comes from Mario Pierry with Bank of America. Please go ahead.
Hey, guys. Good morning. Congratulations on the results. Let me ask two questions as well. On corporate lending revenues, you talked about higher contribution from special situations. Can you quantify that or talk about the sustainability of these results in coming quarters? Then second question is related to when you talked about the VaR changing in October, right ahead of elections. I would imagine that that's going to bring some volatility to your results in the fourth quarter. Also, do you want to give us any guidance of the potential size? Thank you.
Hi, Mario. As you know, special situations within special situations is extremely diversified, but just given the nature of the business, every once in a while, you have these, let's say, resolutions or think one-offs, which you have a higher, a better result, but then you go back to what was the baseline, and that's exactly what we expect. So, we do think that we could It's not a change in level. This was a, let's say, a small one-off, but we go back to the historical pattern. On your second question, no, I don't expect any significant volatility in Q4. As I mentioned previously, we joke here that there was a walk around the block, right? We increased VaR, we benefited, we kept more or less similar risk, we went back to the level, so we're back to where we were.
So we don't expect any significant volatility from this, let's say, increase and then decrease in the VaR.
Thank you.
The next question comes from Marcelo Mizrahi with Bradesco BBI. Please go ahead.
Hello. Hello, Sallouti. Thank you for the opportunity. My question is regarding the levels of provisions. If we look to the levels of provisions, and we looking just to the part, to the wholesale banking, which is out of the consumer banking, the coverage ratio of this part has been reducing for a while, and especially in this quarter, the trend were more strong. My question is regarding the levels of provisions going forward. How do you guys believe that you are, first? Second, why we saw this reduction of the coverage ratio? The provisions to coverage to the NPL formation were lower than the last part. If you can clarify a little bit what happened in the last quarter. Thanks.
I will give a qualitative view, and then I'll let Cohn answer the specific, let's say, accounting implications quarter-over-quarter, where he is more in the detail than I am. Let's first talk about the philosophy. As I mentioned previously, we are always preemptive and very aggressive in provisioning, and that implies that sometimes you see credits advancing in different stages, but the provisioning had already been done. This is basically because our philosophy, which is reinforced by our partnership model, where we're having a conservative book value, is very important for us. Also, taking a step back from the quarter-over-quarter changes in the accounting numbers, if you look at the coverage levels that we have compared to any of our peers, they are higher in a portfolio which has less higher-risk products.
That already shows that we have a more conservative provisioning compared to our peers. I just wanted to make this clarification about the, let's say, the philosophy or qualitative, and I will let Cohn address the specific changes quarter over quarter.
Marcelo, I think it is a little bit of what Roberto mentioned, right? First, we have high levels of provisioning and the shape of the portfolio. When you consider the amount of provisions that you need to do for corporates with all the guarantees that they have, and as they migrate, sometimes you have a much higher level of provision of credits that were in stage two, and then when they migrate to stage three, there is no major change there. Sometimes it's related to a type of increase in the portfolios or the share of components of what is in the consumer finance business line, what is the credit business line. As Roberto mentioned, when you compare our portfolio, both the corporate portfolio and the consumer finance portfolio, which is 95% types of loans that are collateralized, we have very high levels of provisions.
Depending on where this migrates, you can see small shifts of coverage in the portfolio. But I think we are still at very high levels, and we do not expect this to change in the near future.
Okay. With the environment that we are right now, makes sense to see an important reduction of the pace of growth, or in this scenario, to have the ROE above 25%, the base case is to maintain some maintenance of these levels of growth that we were seeing in the last years?
Oh, I think, as we mentioned, we expect to maintain the pace of growth. Obviously, we are very attentive to the more restrictive scenario, but also, I think we have geographic diversification that can also support the pace of growth that we've been showing. Again, the types of loans that we do with the proper guarantees, I think we still have a lot of room to continue to grow, so.
Yeah, just complementing what Cohn was saying, I think if the scenario is the one that we seem to be more or less on the same page, it's going to be less competition for capital markets. You have to remember that we are penetrating into products and segments where we basically had zero market share in corporates, large corporates, and corporate middle market, and also benefiting from new geographies. So, this combination of lower competition from capital markets and the fact that we're penetrating new product segments and geographies where we have zero or very small market share, and if you look at the size of our portfolio compared to the size of the portfolio of our peers, this will give us confidence that we can grow with quality at similar levels.
Great. Thank you, guys.
The next question comes from Pedro Leduc with Itaú BBA. Please go ahead.
Thank you. First, one clarification. The consolidation of HSBC Uruguay, where did it impact your income statement here this quarter, be it on credit that you consolidated or revenues were falling, or if it is spread out, and if you want to mention it? Second, on Sales & Trading, not specific to this quarter, but when I look at the past four, five quarters here, it has been kind of stable, and it used to grow with the ecosystem, the more assets or wealth or portfolio that you had. We look at the ADTV at the exchange, it went up. But this line has been kind of flattish. Can you talk to us a little bit what is behind this, if it is just a comp matter or you guys reducing VaR?
I remember you used to talk about two-thirds client, one-third prop, if that is still the case, roughly speaking. Of course, I am trying not to look into the year ahead here. Thank you.
So, hi, Leduc. Uruguay is basically spread around. We allocated all the revenues to the different business units. So, basically, you see it across the six different business units, to be very specific. Sales & Trading, it is still more or less the same historical ratio. As you know well, the market has been suffering. Also, compared to that, we have had low VaR, and a few quarters ago, I think I mentioned not necessarily the fact that you have VaR, it means it is efficient. A few quarters ago, we had an efficient VaR. Now it is more or less okay, stable. So, yes, I would say that Sales & Trading presents a challenging environment, but between market share gain, new initiatives, new geographies, hopefully in the next year, we will be able to show some growth from the current levels.
But yes, it is a very challenging line, as you mentioned, and given the market conditions.
Okay. Great. On the corporate lending side, I am assuming some credit of Uruguay flew in here in this quarter. It appeared on the corporate lending.
Yes, across the board, in both corporate lending, consumer finance, Sales & Trading, asset management, wealth management, across all the lines.
All right. I will follow up then later for details. Thank you.
Okay.
The next question comes from Henrique Navarro with Santander. Please go ahead.
Hi. Good morning, everyone. It is a follow-up on the question from Mario on the VaR. We had a huge volatility on the markets after the second round of the elections, notably on the equities. I wonder if there is any losses that we should be aware of on Sales & Trading for the 4Q, or we can consider Sales & Trading for the 4Q as business as usual? Thank you.
For the avoidance of doubt, business as usual.
Great. Thank you.
The next question comes from Gustavo Schroden with Citi. Please go ahead.
Hi. Good morning, everybody. Thanks for taking my question. I had a couple of questions as well. The first one is regarding your wealth management business, because it's been a very good business. It's kind of a Swiss clock in terms of a net new money, right? So, around BRL 30 billion per quarter. I'd like to get your view, how sustainable is this level of BRL 30 billion net new money per quarter? And also, if you could elaborate more, what kind of clients are you bringing? I mean, is it ultra-high net worth, private, I mean, affluent? So, that would be great to understand the mix that you have in this net new money in our wealth management business. And my second question is regarding the private payroll.
I know that you already answered some questions about it, but what kind of, let's say, employees are you lending? It is for employees from companies that you have relationship, or you are going to open sea? So these are my two questions. Thank you.
Thank you, Gustavo. So, this BRL 30 billion seems to be, let's say, a run rate that we've been able to keep at the current scenario. Of course, there will always be some variation. Some quarters will be stronger, some quarters will be weaker. As we launch new products, hopefully we can maybe increase this. That's always our goal. The composition reflects basically, I would probably say high income is probably slightly bigger than what we consider wealth management high and ultra-high. But again, this varies quarter over quarter. But if you get something that's normalized over the year, that's probably the scenario, because we have a lower market share in high income, a higher market share in high and ultra-high. So we're able to gain more net new money from where we have lower market share.
On payroll, most of what we're doing is originating directly with the client, and a small percentage in the mercado, the auction. So, it's mainly clients for which we have relationships, most of them in plan, and that we've been able to have the B2C origination.
Okay, cool. Thank you, and congrats on the results.
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 his closing remarks. Please go ahead, sir.
Thank you very much. Thank you all for participating in our Q3 call. Looking forward to be together with you in the next call, which we will talk about full year results for 2026. Thank you very much.
Thank you. This concludes today's presentation. You may now disconnect your line at this moment. Have a nice day.