Good day, everyone, and thank you for waiting. Welcome to BR Partners' Video Conference Call to discuss Q2 '23 Earnings Results. We inform you that this video conference call is being recorded and can be accessed in the company's IR website, where you'll find the full package of our financial disclosure. During the presentation, all participants will be in listen-only mode. We will begin a Q&A session. To ask questions, click on the Q&A icon at the bottom of your screen, and type your question. If you prefer to use the microphone to ask questions, just let us know by message, and we will send you a request to enable your microphone. We emphasize that the questions should be asked all at once.
We emphasize that information contained in this presentation and forward-looking statements that might be made during this video conference call relating to BR Partners' business prospects, projections, and operating and financial targets, are based on the beliefs and assumptions of the company's management, as well as on information currently available. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties, and assumptions as they relate to future events, and depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operating factors may affect the company's future performance and lead to results that differ materially from those expressed in such forward-looking statements. Today, we have the following officers present: Ricardo Lacerda, CEO; Marcelo Costa, CFO; Danilo Catarucci, Managing Director and Head of Capital Markets; and Vinicius Carmona, IRO. Now, I will turn the floor to Mr.
Vinicius Carmona, who will start the presentation. Mr. Carmona, you may begin.
Good day, everyone, thank you for participating in our earnings video conference call to discuss first half 2023 results. The first half of 2023 took place in a volatile environment for the financial markets, with very different dynamics in the first and second quarters. In Q1, we faced an extremely difficult market, given the great turbulence in the corporate environment and the rapid deterioration of the balance sheet of some important companies, which paralyzed the debt capital market and curbed the activity of the financial market as a whole, with an increased perception of risk by investors. In Q2, especially from May onwards, the market turned around quite sharply, regaining some optimism with more encouraging macroeconomic indicators.
Combining inflation under control, which created the ideal environment for the start of a new interest rate reduction cycle. In addition, more encouraging projections of GDP growth in 2023 and the progress of the tax reform gave additional impetus to the market's recovery. That is, we experienced, in a single half year, a relevant change of investors' mood and market behavior. For BR Partners, this first half was an extremely important period to show our adaptability and versatility, even though our DNA is composed of business verticals of a more cyclical nature. Our adaptability to quickly read market guidelines and to be able to use the balance sheet in our favor in times of stress, and to maintain origination in the local debt market in the first quarter.
Our adaptability to quickly respond to the improved market mood with a debt structuring pipeline and treasury activity more heated, to respond also to the resumption of investment banking activities, mainly unlocking M&A dialogues from the second quarter onwards. Our versatility in finding the opportunities according to market conditions. For example, we focused our energy on advising on corporate restructurings, helping our clients in sensitive moments in the first quarter. Now, we still have a strong pipeline of restructurings, but coupled with full operational leverage to continue the M&A activity. Our versatility in calibrating lower balance sheet utilization with the resumption of the primary market for debt distribution in Q2. We were able to show a semester of resilience in the business, creating value to our shareholders with high profitability.
To start the presentation, total revenue in Q2 '23 was BRL 103 million, up 1.6% quarter-on-quarter, and down 6% year-on-year. Total revenue for the first half of the year amounted to BRL 205 million, down a slight 5.4% year-on-year, even with a significant decline in the level of economic activity in the first quarter of the year, as I mentioned earlier. Still looking at the company's revenues, we analyze the revenue from clients. This revenue line item totaled BRL 74 million in Q2 '23, up 24% in the quarter-on-quarter comparison. Net income totaled BRL 39 million, up 16.8% and down 3.5% quarter-on-quarter and year-on-year, respectively. In the six-month period, net income totaled BRL 72 million, a decrease of 10.4% compared to the six months of 2022....
As for profitability, quarterly ROAE reached 19%, and the half-yearly stood at 18%. Net margin was 37.5% and 35% in Q2 and in the first 6 months of the year, respectively. Regarding operating highlights, in investment banking, we announced that 13 deals from the beginning of the year to date, 7 of which are restructuring deals, an increasingly strategic and complementary pillar to the company's business. In the capital markets, despite the major challenges mentioned earlier, we were able to find good opportunities, and issued 17 debt operations totaling BRL 1.7 billion in the half year. Now, on slide three, we would like to highlight the increase of BR Partners' stake in the company's total capital.
In June, in a very opportunistic way, the partnership acquired the equivalent of 1.29% of the total capital of the company by purchasing the stake of one of the families that invested in the company. Just to recall, at the beginning of its history, back in 2010, BR Partners raised BRL 100 million from 10 investing families, which in turn, held part of the company's capital. Today, these families hold an ownership equivalent to 29% of the total capital, and this ownership position is within a closed fund called FIP Brep Invest, a fund with lock-up period until 2030. The partnership itself controls the company through a HoldCo, as can be seen in the organizational chart.
With the purchase, the partnership clearly reinforces its commitment and confidence in the company's business model, and the partnership increased its stake to 46.8% of the company's total capital, with 72% of common shares. In slide four, we show the evolution of quarterly revenues generated directly in the client business, which considers IB revenue, capital markets structuring and distribution fees, treasury revenues, and management fees of our FIPS. In the gray band, we show the revenues from the capital invested in CDI and private debt securities that we carry on our balance sheet. In the 2nd quarter of 2023, revenues from clients amounted to BRL 74 million, up 24% over the previous quarter. This performance results from 13% growth in investment banking revenues, 38% growth in capital markets revenues, and 41% of treasury sales and structuring revenues.
Revenue from clients showed a strong recovery this quarter and accounted for 71% of total revenues. After an extremely difficult first quarter, we are once again experiencing a significant improvement in market conditions, which has provided greater potential for activity across all our business fronts. It is important to mention that capital revenues in the gray band decreased from 42 million BRL to 30 million BRL in the quarter, mainly due to the positive impact of the revaluation of the private funds, the FIPS, which we manage and invest in. Let's present the performance of each business unit, starting on slide five with IB, investment banking.
After three consecutive quarters of reduction in IB revenues due to the unfavorable environment for these activities, as we have already discussed in the previous presentations, IB revenues grew once again, reaching 35 million BRL, growing 13% in the quarter. year to date, we announced 13 deals, seven of which were restructuring deals. We have been commenting since the beginning of the year that IB has a solid pipeline in different advisory angles. Until April and early May, market conditions were not favorable for the progress of most M&A projects and strategic moves with our clients, including with a higher mortality of some operations.
As of June, with the market improving, we have already felt a greater convergence between the interests of the different parties involved in some negotiations that were already underway, a greater attractiveness of potential investors and buyers for sell-side mandates, as well as the resumption of expansion and acquisition projects in buy-side mandates. Of course, the success of these operations continues to depend on several micro and macroeconomic factors, but the fact is that we have a more promising market, still far from the bull market of 2021, but considerably better than the end of 2022 and beginning of 2023.
The new cycle of interest rate reduction has begun to enable access to growth capital, mainly via equity, with the resumption of the capitalization of companies via follow-ons, but with a good outlook also on the debt side, where interest rates are still very high, and it should take some time to reach lower levels that would make large investments feasible. We'll speak a little about this in the capital markets explanation. Lastly, despite the reheating of M&A activities, we still continue to have a very robust pipeline in advising special situations and restructuring. After all, although the cycle of declining interest rates has started, the cost of debt remains very high, with a wide range of companies still with high levels of leverage and structural problems in the execution of their strategies.
In addition, our franchise has also been gaining a lot of strength in this segment, as we're independent, without any share in the equity or debt of these companies, and working 100% to serve the interest of our clients and their own stakeholders. We have managed to position ourselves in iconic deals, such as the ones with Light, Marisa, and CVC. The restructuring business has been crucial to complement IB activities and to maintain our resilience in the area. In the chart to the right, we show the breakdown of deals by sector and type of advisory. We continue to have a well-diversified sector activity, as can be seen. Regarding the type of advisory, we highlight the increased share of special situations and restructuring operations, which accounted for 45% of the total number of deals of the last 12 months. Now, let's speak about capital markets.
The Capital Markets division showed strong recovery in volumes issued, and also in the deal flow itself in the second quarter when compared to Q1. It was a very atypical half year, with the first quarter marked by the well-known shakes in the corporate credit of some large companies, aggravated by the high cost of debt and restricted credit supply, with more limited access to funding by companies and higher spreads. Still, we managed to find good opportunities and show revenue resilience at the beginning of the year. Throughout the second quarter, macroeconomic conditions were essential to seek some normalization of Capital Markets activities, mainly inflation control, which gave way and made room to the beginning of the new interest rate, the new interest rate reduction cycle, but also better GDP forecasts and the progress of the tax reform itself.
As a result, the primary debt market resurfaced, albeit largely in the form of shorter operations to meet working capital needs, and to a large extent, absorbed by the balance sheets of large banks. However, we have seen a gradual improvement in the investors' appetite, returning to the primary market. On the issuers' side, the signaling of monetary easing is extremely positive, but we need to remember that there is a transition period of at least one year, so that the cost of debt effectively stops burdening companies, and so that companies can also rebalance their leverage and improve cash generation by reducing financial expenses. From this point on, the capital market can play a leading role in enabling and fostering expansion and CapEx moves of companies, especially in infrastructure.
For now, it is important to emphasize that industry volumes have improved, but are still made up of debt to compose working capital and renew, so to speak, the stock of operations that are maturing. Debt for CapEx exists, but it is still concentrated on specific sectors, such as Agribusiness or in some specific clients, which are under-leveraged and with a lot of growth. As regards to the performance of the division, revenue amounted to BRL 30 million, up 25% over the previous quarter. In the six months, revenue grew 4% compared to the same period last year. Volume reached BRL 1.4 billion in Q2, distributed in 11 operations, showing a clear recovery compared to the first quarter. In the half year, the volume totaled BRL 1.7 billion, distributed in seven issuances, with a well-diversified mix between MBS, bridge loans, debentures, and real estate funds.
This volume meant a 55% reduction compared to the first six months of 2022, mainly by virtue of a large syndicated debenture that we participated in last year, and also due to a difficult first quarter. In the breakdown of issuances by sector, we continue to be present in important sectors of the economy, with a stronger presence in real estate, taking into account our expertise in structuring MBS and rates with different clients in this sector. Lastly, we are ready to capture opportunities that may start to arise with the new interest rate reduction cycle, and we continue to execute a strong structuring pipeline. I now hand over to our CFO, Marcelo Costa, who will continue the presentation. Hello, good day, everyone, and it is a pleasure to be here again with you. In the next slide, we will show the results of Treasury, Sales and Structuring.
This division reported revenues of BRL 17 million in Q2, up 41% quarter-on-quarter. This growth stemmed from a better mix of treasury operations, with a greater representation of flow activities. That is, treasury products that are more recurrent, such as foreign exchange derivatives, and our broader performance in commodity derivatives. We structured a dedicated task to operate in this segment, mainly in agribusiness. This mix is important, since having more components of revenue coming from flow, we reduce our reliance on derivatives tied to primary capital market issuances, which helps reduce revenue volatility. It is important to note that these issuances came back more towards the end of Q2. Therefore, we will be able to capture good opportunities with the beginning of the interest rate reduction, which should give more momentum to this segment in our treasury.
In the chart below, we show the evolution of the mix of flow and non-flow operations, reinforcing what I just said about having a more balanced mix and with a more important recurring component. Last year, only 21% of revenues were flow operations. Now, the indicator has reached 47%. The growth of the client base by 193% since the IPO, as well as the diversification of the product portfolio, mainly with greater performance of commodity and foreign exchange derivatives, are the main factors that explain the increase in the flow component. As a result, if we can keep the flow business more and more representative, we can increasingly reduce the volatility of treasury results and raise the level of revenues on an annual basis. In any case, we are pleased with Q2 results. These results showed a strong revenue generation in this division.
On slide eight, we can observe the performance of the investment division. Revenues totaled BRL 2.6 million in the first half, an increase of 5.4% compared to the same period of last year. Revenue of this division reflects the management fees of the FIPS. Capital revenues totaled BRL 53 million year to date, with significant growth in the annual analysis. This growth was due to the expansion of the company's shareholders' equity and the higher value of the revaluation of assets. On a quarterly basis, the decrease results from the fact that only in the first quarter of each year is the revaluation of assets accounted for. In Q1 '23, this line represented 21% of the total capital revenue.
On slide nine, our performance indicators represent the evolution of net income, which reached BRL 71.8 million, down 10% compared to the first half of 2022, by virtue of the impact of the difficult business environment. Quarterly net income was BRL 38.7 million, up 17% quarter-on-quarter, given the rebound of the business environment and the resumption of the credit market. Net margin reached 35%, a level we, which we consider healthy. We can see in the blue line of the upper-right graph that our efficiency ratio reached 44%. It is a healthy ratio, the increase over the same period of 2022 is due to higher administrative expenses, which were fundamental to accompany the growth and development of the company's infrastructure of processes, systems, and technology, which today has great capacity for operating leverage.
The company is ready to grow revenues with the current structure when the markets in which we operate heat up again. The gray line shows an increase in the compensation ratio, which stood at 26%, due to our headcount and greater provisioning of bonuses. As for profitability, presented in the final part of the slide, we are pleased to be able to maintain an ROE well above the cost of capital, which reached 18% in the half year and 19% in the second quarter, in a moment of downturn in our economic cycle and in a totally adverse market environment, showing the resilience of the company.
In slide 10, we show the growth of our private securities portfolio and bridge loans, which totaled BRL 1.9 billion at the end of June 2023, up 9.6% compared to March, and 71% up compared to June 2022. This increase is explained by the activity of the capital markets division, in line with our strategy of using capital intelligently and more actively in the debt issuances that we structure and co-invest in with our investors. It is worth noting that 100% of this portfolio is made up of debt securities that we originate, structure, and distribute from companies which have a full due diligence performed by our credit and risk areas. We point out that 98% of our portfolio is rated between AA and B.
Has no non-performing loans according to the criteria of Resolution 2682 of the Brazilian Central Bank, BACEN. In the first chart, we present the bank's leverage, which reached 2.7 times in the end of June, a considerable increase over recent quarters, but one which still leaves plenty of room for the continuity of our asset growth strategy, respecting our strict credit quality criteria. As regards to the Basel ratio, we ended the quarter with a healthy ratio of 18.6%. We are comfortable and have room to continue allocating capital in a strategic way, and supporting the growth of the derivatives activities in the private securities portfolio for the year 2023. We point out that 100% of the company's Basel ratio is Tier one.
In slide 11, we present the evolution of the company's shareholders' equity, which totaled BRL 807 million in June 2023, while the shareholders' equity of the bank vehicle was BRL 707 million. We highlight that all dividend payments have been made with cash generated in the vehicles outside the bank, and that the bank's results have been recapitalized. This can be seen by the 6.7% year-on-year growth. On the bottom of the slide, we present the evolution of the company's funding. We reached funding of approximately BRL 1.9 billion at the end of June 2023, an increase of nearly 70% compared to June 2022. I would like to point out that we continue to maintain very comfortable levels of liquidity that are in line with the bank's leverage. Average term of funding with third parties was 189 calendar days.
Before ending this presentation, I would like to announce that the board of directors has met and approved the payment of interim dividends, referring to the results of the second quarter in the amount of BRL 0.24 per unit. I reinforce that we are happy with the results we have achieved and reported, even with all the challenges already mentioned here. I affirm that we have a very prepared and motivated team, with a partnership that is aligned and confident in the long-term growth capacity of the company. We close our presentation and invite our investors to ask their questions so that we can debate. Thank you very much.
We will now begin the question-and-answer session. To ask questions, click on the Q&A icon at the bottom of your screen and type your question to get in line.
When you're announced, a prompt to enable your microphone will appear on the screen, and you must open your microphone to ask your questions. We recommend that all your questions are asked at once. We will begin. The first question from Ricardo, sell-side analyst of BTG. Ricardo Buchpiguel, we will enable your mic. Go ahead.
Good afternoon. I have two questions. The first, I would like to understand what we can expect from IB and capital markets revenues for Q3. We had a good improvement in June, which was the end of Q2. I would like to understand if it would make sense to think of in June as the most recurring month, at least for the coming quarters. Also, I'd like to get an update from you to see the development of the wealth management business. What can we expect regarding this in the coming quarters?
What can we expect in terms of revenues and costs? Thank you. Thank you, Ricardo, and thank you all for joining us. What we saw is that in the middle of the second quarter, we saw substantial improvement in the business environment as a whole, and this was reflected in Q2 results, with an increase in revenue from clients in all areas, and an environment which was very much more positive for all of our activities. As for revenue expectations, we normally do not provide guidance for revenue or earnings by quarter, given that our results and our revenues can be impacted by individual deals that can take longer to close. They are subject to regulatory questions, it's kind of hard to predict. Today, we are living in a much more favorable environment, with a business pipeline that is very robust.
and the quarterly revenues and results will depend on a number of factors, including this business pipeline, what is already underway in our portfolio, and it also depends on the success fees and these other aspects, bureaucratic and regulatory aspects, that I mentioned. When we consider all of that, our expectation is that the results of Q2, in terms of revenue and earnings, reflect the more favorable environment we are working in now. It reflects more than Q1, because Q1 was a point of inflection. We had a very favorable moment, and then an inflection point, a deterioration in the end of 2022. It was aggravated in Q4 2022 and Q1 2023. Now we are very excited with the expectations and the outlook for the end of the year and for the coming quarters.
To your question on wealth management, we have been discussing this for quite a while with you. We've been very transparent in saying that we did negotiate some acquisitions that ended up not evolving, because we thought that they were not the adequate model and the adequate value for what we expect in terms of value creation for BR Partners. We did identify a good, large team, a very experienced team, not only in the wealth management business itself, but people who have an entrepreneurial profile with a history of creating companies, growing companies, selling companies. Something which is a very good fit with us, and we do have some of these people in our team, particularly working in structuring the platform in the back office piece.
By September 10, we are going to have the core of this team all in-house at BR Partners, then we will be announcing the names of the whole team in the beginning of September. We're still respecting non-compete and garden leave, lift of some of these people, and that's what's delaying the announcement a bit, but by the beginning of September, everything will be made public. Super clear. Thank you very much. Thank you. Next question by Pedro Leduc, sell-side analyst, Itaú BBA. This was a text question: The capital markets had a high relevance, high in the volume of issuances in the second quarter. Unlike market trends, it seems that a good part that was originated was distributed. Can you tell us the evolution of the quarter and how you see Q3?
Lastly, what is the idea for this portfolio originated and retained in first and second quarter? Should we carry it or distribute it? These are Pedro Leduc's questions. Thank you for the questions, Pedro. Here's what I can tell you. Q2 has to be broken down into two phases. Until, I should say, the end of May, and then June onward. Operations as of June, as Ricardo mentioned in the previous question, we started seeing improvement in the market. Although the market is still quite challenging for distribution, and so on and so forth, but these were one time of operations, and as you said it yourself in your question, we were able to be efficient in the distribution. Of course, these challenging credit and capital market scenarios do open opportunities. We were able to match the supplement of these operations without the need for balance sheet utilization.
Obviously, as you said, in the bridge operations or operations that we used in the first half of the year, so to speak, a part of this, you will start perceiving that we are already starting to distribute these. A part of those should happen in Q4. We continue to use the balance sheet for origination and for, for some bridge operations, and already thinking about the pipeline of the last quarter in Q1 2024. Yes, we should make some moves to distribute some of these securities because they were tactical in a given moment. I think you have all followed what is happening in the market, particularly in terms of inflation, and NTN-Bs are closing in. We are being able to exit these operations for which we had liquidity in the first half.
Well, let me add something, and congratulations on the birth of your child today. In the private securities portfolio, we see that the main growth came from bridge because of what Danilo has just explained, the fact that we had a more challenging environment for distribution in the first half. It is important to highlight that these bridge operations are a bridge for us to do a takeout. We don't provide credit for itself for the sake of that. The bridge loans that we brought in-house are instruments in which we see an opportunity for takeout for a capital markets debt. We always have to have in our assets that these are market deals. As the primary market normalizes, we see an opportunity of having a takeout of these debts along the year.... Okay, next question from Matheus Raffaelli, sell-side analyst, Itaú.
Mateus, we will enable your mic so you can proceed. Please go on. Good afternoon. Thank you for taking my question. I'd like to speak about the Basel ratio. The bank was quite agile on the balance sheet. In the first half, we saw a strong growth of almost 30% in the securities portfolio and bridge loans. Although you're still in a comfortable level, 18%-19%, I would like to understand, how are you piloting the capital of the bank, thinking about retention versus distribution? I know you kind of touched on that in the previous answer, but I'd like to understand this theme in the scope of capital, and will you be releasing any capital with the changes, given Resolution 229 of the Brazilian Central Bank? Thank you for the question.
Well, we have been consuming, in recent quarters, 1%-2% of our Basel on a quarterly basis. We know it is a lot easier when we have a Basel ratio of 30 to get down to 20. You consume faster than when you are at 20, and you want to get down to 11. Here, we have a metric that we are very comfortable with, of having a Basel ratio of up to 15%, and there are the points that you raised yourself. We did a study. This change that happens in July of a reclassification of assets to match Basel ratio. In our study, with this resolution alone, we're going to have an efficiency of around 1.5% of the Basel ratio, so those 18.7 would go back to 20. We, we find peace in that.
Our goal is not to grow the portfolio as a loan, a lending bank. The portfolio, as Danilo mentioned, has the goal to generate liquidity in the secondary market for our investors. We do have these characteristics. In some moments, we utilize the balance sheet in a more tactical way. Part of the consumption that you saw in Q2 was a little higher because of bridge loan operations that we did. We are doing good, and we are quite comfortable, and we see that we have a capital base, which is very adequate for the second half of 2023 and for 2024. Perfect. Thank you very much. Next question by Marcelo Goncalves, buy-side analyst. It's a written question: "Capital revenue line item came below expected, considering the level of the interest rate.
Was there any adjustment in this line item in Q2 '23? For the coming quarters, what is the expected quarterly result for this line item?" These are Marcelo Goncalves' questions. Marcelo, thank you for your question. There are some factors. First, if we'll look at a quarterly evolution, I think that this is what caught your attention. In Q1, capital revenue increased from BRL 33 million... actually decreased from BRL 33 into BRL 20 in this quarter. In capital revenue or capital remuneration, we consider revaluation of the private funds that we manage, the FIPs. The revaluation of these funds always happens in the first quarter of any year, so I think it is important that we explain this. Basically, the revaluation of the FIPs, well, this is done in an ultra-conservative way.
We analyze debt amortization of the companies of these funds, taking into account also revenue growth and equity growth. We do a revaluation, and this takes into account the increase of the operating result of these units. There was this impact, an impact of almost BRL 9 million in Q1. The second pillar is an adjustment of the average equity. We had a dividend payment in the last week of March, referring to Q1. When we get the average shareholders' equity of Q1, it was above the shareholders' equity of the second quarter. If you look at the capital revenue, we had BRL 24 million in Q1, down to BRL 20 million in Q2, basically because we had a lower average equity in Q2, and there was a slight calendar effect as well impacting the revenue.
It is important to highlight that capital revenues is basically revenues that the bank has because of the cost of funding that the bank charges from the business units, particularly from Treasury and capital markets. The revenue reflects a capital utilization by our business units or business divisions. I think that when you look at the coming quarters, it is natural that this line item will feel some impact according to the reduction of the interest rates, because we are just starting a monetary easing cycle. It will all depend on the speed, the velocity, the pace of this declining interest rates. Obviously, on one hand, when you have a new interest rate reduction cycle, we expect to offset that, more than offset that, with a greater revenue from fees and boosting our investment banking, Treasury, and capital markets activities. Thank you.
Next question from Rafael Frade, Sell-Side Analyst, Citi. It's a written question: Could you comment on the operating leverage for second half 2023? Is it reasonable to assume that expenses should remain relatively stable, even with the increase in activities and deals? All right, Rafael, thank you for the question. Well, we have to break this question down into two parts. In the activities where the company already operates, IB, and capital markets, and treasury of companies, we do have a very large operating leverage with the team that we have, the capital that we have, so that we can more than double our level of revenue without having to add a relevant cost increase. So along this last cycle of downturn in our activities in the end of 2021 onward, we did not have to cut our head count a lot.
We just had the natural recycling of talents that we need to implement based on our annual evaluations and our human resources management. We continued with a team that was basically the same, a headcount the same as we had before. With this potential revenue recovery outlook, we can go a lot farther with the same team that we have and with a significant operating leverage. We have the wealth management division. That's a new area for us, in which we are investing, and in which we are going to invest aggressively in the next two years. Today, we are a company with about 150 people. From now until the end of next year, we are thinking about adding another 25, 30, 35 people for our wealth management division, which is, of course, a substantial headcount increase.
This is for a new activity that we believe will generate a lot of revenue in the future, a division that will have a lot of synergies with our other businesses. When you look at the evolution of our personnel costs in the coming quarters, personnel costs will increase. The cost of our people will increase. The metric that we use, compensation ratio compared to net revenue, this will increase, but it is because we will be investing in a new division, a new business division, rather than the need to add cost to perform our current activities. Because there, we see a great operating leverage for this more positive cycle that is just starting. Thank you. Next question from Brian Flores, Sell-Side Analyst, Citi. Could you elaborate on your perception of the corporate credit environment, particularly regarding delinquency and demand? Thank you.
Question by Brian Flores. Okay, I'll speak a little about the general environment, how I see it, considering our client base and the segments in which we operate, then I think it is important for Danilo to complement the answer. I think that in the turn of the year, we had a credit environment, which was very critical, particularly after the Americanas crisis and some other problems. Retail being hit very strongly, and some companies in the energy sector, companies that were very much indebted, and had to look for a debt renegotiation, and that's when we saw a peak interest rate. Although most of the companies are still showing in Q1 reasonable growth at the top line, still, they suffered a lot in their bottom line. Some of them had to resort to more formal processes of debt restructuring.
I think that there was, a relief in, in that scenario, both due to concessions by creditors, friendly negotiations. Now we are getting into a scenario with an expected reduction of the Selic rate. In time, this should relieve that problem in the balance sheets of the companies. We have to remember that this is not yet a wonderful world. We are seeing, in some metrics, some economic deceleration, a slowdown. We saw in Q2 results, some weaker numbers in the top line. Since companies are still carrying relatively high debt costs-... This is a difficult scenario. This is why we see in the balance sheets of the large banks an increase, almost generalized increase of delinquency. Delinquency of both individuals and companies.
I would say that the beginning of the monetary easing process will bring a great relief for that, and it brings an outlook that will make renegotiations a lot easier, will facilitate the forecasting by companies. I believe that from now on, we'll start seeing an improvement. It's not like the perfect world scenario, no. It is a critical situation for many sectors and many companies, and this is a process that will be digested with time. I think it's important that Danilo talks a little bit about liquidity in the area of capital markets. Okay, I think that Ricardo has set the stage regarding the macroeconomic conditions and what happened with credit. I would only mention one thing to complement what he said. In addition to declining interest rates, what helps us is the reopening of the capital markets.
We saw some companies already having their follow-ons in, in the equity part, and even extending their debt, or taking on new debt in the capital market, and some banks are already granting loans again. Of course, that improves the whole system, but of course, the reduction in interest rates is very important. As for demand for loans by companies, I think that this is a good question. I think that this is not very equal. Some sectors had investments contracted, and they need, therefore, to make investments in infrastructure or in some specific areas. Some of these sectors had many operations last year, including or, or considering a takeout this year, so several bridge loans would take out, and others that ended up postponing their investment decisions, given the credit scenario. Now, of course, they'll have to make things happen.
Other sectors were less affected by the domestic crisis. In agribusiness, for example, we see investments were high due to some factors, either the price of commodities or other needs. In some retail segments, where we saw a downturn, but again, they continued with a good top line, as Ricardo mentioned. As Ricardo mentioned, the scenario is challenging. There are some credit segments that suffered more than others, and I think that high interest rates in the market drove companies to have good financial discipline in the market, either for individuals or legal companies, or legal entities. This ended up correcting some distortions that existed and that were created in a bull market, when there was a lot of liquidity, and obviously, the spreads between high grade and high yield were not reflecting the reality of the credit risk.
I think that now, little by little, the high yield should start reducing the spreads, and we should again have a demand for loans, just like the reduction of the Selic rate and long interest rates will help make some new investments feasible and unlock a little bit of what we saw in the first half. Thank you. To continue, next question by Alexandre Assaf, an investor. It's a written question: What is BR Partners' expectation regarding possible impact on the results coming from the tax reform? Well, you see, we haven't mapped any significant impact on our activities from what we've seen regarding the tax reform. BR Partners does not use interest on capital in a relevant way so as to impact our result. Our interest on capital in recent years has been very marginal.
In other divisions, we don't see either a negative or positive impact of the Tax Reform as it is. Now, obviously, the Reform is being detailed. It's possible that new proposals will surface that might have an impact, but for now, nothing relevant. Thank you. The Q&A session is ended. Now, we would like to turn the floor to the management for their final statements. Well, once again, I would like to thank all of you in our video conference call. We have been interacting a lot with investors in several roadshows, both in Brazil and abroad, showing the outlook for our business. As we have underscored, we work in some cyclical segments. We had a difficult moment of the cycle starting in 2022, and now we see a certain recovery.
We are very excited for this new moment that is starting now, and we are very happy with the performance of the company. The performance we had in this most difficult moment of the cycle in recent quarters. We were able to maintain our revenues, maintain our profitability, and to have a, a return on equity close to 20%. Like I said before, without the need to cut down the headcount or to take measures that would impact our operating leverage for the coming cycles. Again, I can only thank you for your participation. Again, I reinforce that our investor relations department is available to all our investor base, and we're very excited for the rest of the year. Thank you very much. The Q2 '23 earnings video conference call of BR Partners is now closed.
The Investor Relations Department is at your disposal to answer any further questions or doubts. Thank you very much, and have a great end of day.