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Good morning, everyone. My name is Renato Lulia and I represent Market Intelligence in Itaú Unibanco. Thank you very much for joining our video conference for the fourth quarter results in 2021. We're streaming this event from the headquarters of Itaú Unibanco, and we have three parts to this event. In the first part we'll talk about the results for the year of 2021.
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You're ready for the third part? This is the Q&A now.
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Remember you can also text us your questions using WhatsApp. Just use the link that you have on your screen. You can use the website or you can use the telephone number to text us as well.
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This is a bilingual event, so we're going to answer the question in whatever language you ask, Portuguese or English. If you need translation, you can just select the language by choosing the flag: Portuguese or English. Eduardo Rosman, from BTG Pactual, is asking the first question.
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Hi, good morning, everyone. Good morning, Renato. Good morning, Milton. Congratulations on your results. They're very good. I have a question about digital transformation. We know that Itaú is going through this massive transformation and we know there's a lot to be done. I wanted to hear from you whether you're already able to know whether this digital transformation is what helps account for these better margins and performance that you have had than the peers. It's difficult to understand that from outside. It's difficult to know who is doing that type of job better. So do you know, or can you tell whether this transformation is what is accounting for this better improvement, or is that something that we're only going to find out in the next years?
Thank you, Rosman. Thank you for your question. Thank you all for joining this Q&A session.
How can I set the stage around digital transformation? First of all, it goes far beyond changing technological platforms, right? This is the slowest process. Guerra just talked about this now. We had 25% of our platforms modernized at the end of the year, which is crucial for this digital transformation. By the end of this year, we should have 50% of our platforms modernized.
I think the pivotal point is how we prioritize this. We focus on what is more important to the clients. By the end of the year, 80% of what matters to the clients will have been modernized or updated. When I say modernize or update, I don't just mean coding something anew. I mean, really having a platform that has a time to market that brings us to a whole new level with quality of products that is better. There's another very important point, and I've been talking about that very much, and that is the cultural transformation. That is a major enabler to me. That will really allow us to boost our digital transformation.
We're sticklers for the idea that a digital bank is not a remote bank, but a bank that thinks fast, that has cutting-edge technology that will understand the client's pain points and that will react to the client's needs as fast as they expect us to. We want to have a simple decision-making process. We want to have good control. We also talk about preserving and conserving what is good and what we already have, but also making progress towards a new mindset with a lighter type of environment, less hierarchy. We have removed layers and administration. We want to give more autonomy to our staff. We want to really have the chance of starting off small and innovating and taking chances, making mistakes, and improving. We have more indicators. Some are more objective and some are more qualitative. This is not a process that started last year.
We have been talking about updating and upgrading, modernizing our platform for a while. We did expedite the process in 2018, 2021, and this cultural transformation has been bolstering it. Over 60% of our sales are already through these digital channels, which does indicate that that's part of the results. We have been investing in technology. We more than doubled our technology team. We have 14,000 staff in technology. This is a very expressive amount. That's part of our guidance already. Investors that we have been able to invest in technology, invest in processes, in productivity, increasing scale, sustainable performance, and that's been making the bank more efficient and more able to be competitive when it comes to price. All of the indicators that we have been monitoring are just according to plan or even better than that.
From a data perspective, we have really revolutionized our data infrastructure. When you think of data cleansing, that is something that we really solidified in 2021, and in 2022, we're going to improve even further our data management, which will allow us to take decisions faster and to really interpret what a client's needs, instead of just looking at a segment. We have a lot of homework to do. It is a lengthy and laborious process, but we're very excited not only looking at the results that we have had, but also at what we have achieved so far.
Thank you, Milton. We already have quite a few questions, and the next one is Jorg Friedemann from Citibank. Thank you.
Thank you for having my question. Congratulations on your results, echoing what Rosman said.
I'm not gonna be asking much about operations or guidance. I think we have a lot of information. The message was quite clear, but I wanted to try and understand a little bit more about your view concerning foreign strategies and foreign actions or actions in other countries that you're planning to take. There is a cost of opportunity that you have had in Chile. It was a lengthy transformation, but it's been doing well. In the past months, recently, you've really been clear about tax issues in Brazil. There was also a premium asset in Mexico, and that's a very interesting market. So I'd like to understand from you what your interest is or if you're interested in continuing to expand or how we're going to be dealing with your branches in other countries.
Thank you, Jorg.
It's great to see you again, and thank you for your question. Whenever we talk about international strategies, this is something that the bank decided a few years ago. We decided to expand internationally. What we have, Chile and Colombia, Itaú Corpbanca, and we have put this asset there. The banks we have in Argentina, Uruguay and Paraguay have also been performing well. In Argentina, of course, there are macroeconomic challenges, but we have been operating well with our corporate wallet and treasury, especially where we have had good results despite the market challenges. Argentina has also been a bit of a trial environment for us. We have a new fintech that we have developed completely independently from the bank, and we're just getting started, but we can see that, it's an auspicious start, and we have good signs there.
Uruguay and Paraguay, we have more consolidated banks with a very good historical performance, and they really have been adding value to the organization. In Argentina, you always have a capital cost, but still it's an operation that still will create value. We have been managing cross-border risk really well, and we reduced our exposure at the right moment. Itaú Corpbanca is a marathon, right? It's not a short-term task. We were going through some points after the merger, some credit, some platform operating technology issues that were quite complex. Our decision, once we took over the bank, was to really look at the market from a long-term perspective as we do in Brazil, not favoring short-term, but favoring long-term value creation for shareholders. In the fourth or fifth year of the operations, we expected results to crop up.
Last year, we made a few interesting or important adjustments to the balance. This year, we already had better performance in Chile, as you mentioned. It is still a challenge from a tax perspective. There is some lack of symmetry today. We bring profits to Brazil, and we have taxes from Brazil levied upon it, and that makes us a little less competitive, internationally speaking. There is a challenge concerning capital because we have our risk appetite well set in Brazil, and we have to set as a level of capital here so that it supports our operations. The capital cost in Brazil is about 14% now at this point, and that is also a challenge. There is a tax and a capital challenge. Looking at that as a whole, we have expanded our operations in Chile.
As you probably noticed, we increased capital, and that was positive for the bank because the capital impact was virtually zero. We used to have 40% share, and now we have 56%. That was great. That was a good moment to increase capital also because the bank is now going to acquire the Colombian operations, another slice of it. Colombia is still a challenge. We have a very devoted management team. We've been simplifying the cost structure, and we want to raise the Colombian operations to another level. Scale is a challenge in Colombia. It's a small operation, and we have 3.5% market share in retail. It's more difficult to gain profits there. We're quite comfortable at this point, and the idea is to continue to improve the assets that we have there.
As for international expansions, I don't see that as a focus. We continue to focus on consolidating assets that we already have, and we are reaping the benefits and results, as you have mentioned. I think it's unlikely that we will make any changes in consolidation or into new countries. We think Mexico is a great country and a great opportunity, but we also see a number of opportunities in Brazil and opportunities to improve operations we already have. We're not in a process like that. Of course, we'll look at assets in the region. Of course, it's part of job description, but I think we're unlikely to go that way. We have to really focus and generate value for shareholders.
Because of this lack of symmetry, any operation outside Brazil will allocate a number, or a substantial amount of capital and have an impact on value generation for shareholders in the short term. I think we have a full plate at the moment. Shall we go on to the third question?
Gustavo Schroden from BBI.
Hello, Gustavo. We can hear you, Gustavo.
Good morning, Milton and Renato. Thank you for the presentation. Congratulations on your results. They are indeed very good. I just wanted to go back to a subject here, treasury and capital hedging. We understand there may be a need to neutralize, the mismatch there may be from FX operations, and I think the assets and liabilities aspect is well hedged. Maybe the capital account isn't, if I'm not mistaken. How do we match that?
This hedge you have for capital has an opportunity cost. You have a BRL 2 billion impact expected on the treasury. This doesn't look like a meaningless sort of cost of opportunity. What is the upside you see in capital that would justify having this BRL 2 billion impact on treasury? If you could try and clarify what the rationale behind that is. Still about that, I don't believe this is going to be a one-off, right, only in 2022. I believe you're going to keep this capital hedging structure, so we could expect BRL 2 billion less in treasury for a couple of years, right?
Thank you, Gustavo. It's great to see you again.
Let me tell you a little bit about our hedging strategy and why we're going that way with hedging capital. All of the equity we had from banks in other countries were bringing back to Brazil with derivatives, using tools, using hedging. The capital that was there would always come back in BRLs, in Brazilian reals. There is a substantial lack of symmetry when it comes to taxes, and with that, we've been doing over-hedging, as you know well, and there was a high cost of opportunity. The first element is that in the first half of 2021, we started working with the first half of over-hedge and the second half of over-hedge in the second half of 2021. That is over now. We only have hedging now. We no longer have over-hedging.
That is the flip side of the coin, that if you have FX being devalued, you generate tax credit, and that's important for our capital indices. Another aspect that is negative is that as you had the equity of the bank hedged in reais, the RWA would vary alongside the currency. That would consume more or less capital depending on the currency. I'm not only talking about the Brazilian real, but also the Chilean peso and Argentinian peso and so on and so forth. These currencies will go through the real, the actual dollar. We always had a buffer in the past to be able to deal with adverse effects coming from RWA or from a tax credit. What was the decision that we then took?
It's difficult to manage a capital index for the bank because that's where you're going to generate value for the bank and that with a point of income control. You can have your risk appetite set by the board, and you may lose opportunities to grow the bank or have mergers and acquisitions and whatever it be. You may lose that flexibility because the capital index is volatile. We can't control it. We lost 40 points in the Tier 1 capital index. 140 points is BRL 14 billion in profit that we need to generate to recompose this capital. This is substantial figures. What is the decision that we then took? Ending over-hedge, cost of opportunity, and then good international practices. We'll look at other multinational banks, and they hedge capital index.
In Brazil, we have the cost of opportunity due to the interest rates. We had a BRL 2 billion estimate because of the increase in interest rates that we can see. The normalization of the interest rate, it could be a lower cost, but the flip side of the coin is very important because we have margin with the market in exchange for margin with the client. I think this is the pivotal point because if there is any devaluation in FX rate, and this is possible because it is an election year, then that is one point. The bank has the ability to generate capital and results that will allow the bank to grow and grow our wallets.
With that, we can work with a lower risk appetite than the current one, which will allow us then to leverage the bank and generate new businesses and to have other operations with associations, acquisitions and mergers, for example. The flip side of the coin will generate more value for shareholders. It will reduce the level of uncertainty, and it will allow the bank to operate with more leverage and also to generate more value as you can penetrate the current buffers. I think at the end of the day, this is quite positive, and we wanted to be very transparent around the cost of opportunity. About BRL 2 billion is what we said. It could be a little bit more or a little bit less, give or take.
From a value creation for the shareholder perspective, I think we have a right decision here. It is a hedging strategy, and these can change in the course of time, but we want to keep this level of capital hedged, especially due to uncertainties that might crop up.
Thank you, Milton. Thank you, Gustavo. We're gonna go to the next question. We have many coming up. We have Thiago Batista from UBS. Congratulations on your results. The Central Bank approved a project recently. There will be credit operations that will be carried out through Pix transfers. How will that affect credit, and what impact will that decision have on the market? Thank you, Thiago. It's great to see you.
Pix credit is still a concept, so we don't yet know the details of how that's going to be working. Our expectation is that by the end of the year, there should be more clarity on it. There is a time period that is important for more definitions. I think the crucial point here is that the Pix operations have come to stay. We have really embraced it from the start, so we don't swim against the current, really. We prioritize Pix on all of our channels. We have about 20% market share with payments and transfers, and we really penetrated our client base with that. Pix has become a key product for whatever client that wants to make transfers to an individual or corporation. We really want to embrace the opportunities however we can.
Our vision is lifetime value, creation of value in the long run, proximity with our customers and delighting them. If to some extent we have to give up on some fees to use the Pix, we'll do that, we've done it in the past. In the guidelines for 2022, everything that you see in income and revenue already includes Pix. Since we are quite careful in terms of payment as a whole, we also think that Pix will have an important role. We don't know exactly how that's gonna happen, but anything that's relevant for the market, relevant for customers, we want to be in the leading edge of that, and that is our purpose. I'm not able to give you many details, maybe in the next few quarters.
The fact that it was chosen in the sandbox, it shows that we're open to it and that we wanna challenge ourselves, and we wanna be disruptive whenever we need to. It's better for us to advance quickly than waiting for the market to do it. Once again, if it's good for the customer, it has to be good for the bank. That's the core of our thinking.
Thank you. Next question from New York, Mário Pierry from Bank of America.
Hi, Mário. Hi. Can you hear me? Yes. Thanks. Thanks for the opportunity and congratulations on the results. My question is about XP. You have to buy XP stocks at a price that seems to be attractive. I wanna understand your strategy and how you're, when you're going to make the purchase and what you're gonna do with these stocks.
Hi, Mário, and thanks for your question. Nice to see you again. Well, you're quite familiar with the process. This is a purchase and sale process that was negotiated back in 2017 when we made a transaction with XP. We were waiting for two things. First, the regulator's approval, and that was already approved by the Central Bank of Brazil. We still need some minor adjustments, some more formalities.
The main thing was to wait for the 2020 results. As you know, we negotiated the 12.5% purchase, and now after the capital increases, we're talking about 11.38% of XP, and we negotiated 19 x the profit of 2021. The results were published this week, based on which we are now calculating the amounts with them, the exact amounts on how to reach a price to formalize that in the next few months. We expect that in the upcoming 30 or 60 more days, we'll be able to finish the transaction. From a process perspective and approval perspective, we're all set. Naturally, given the size of the operation, it's a non-strategic, strategic operation. The bank made the decision not to control the spin-off and to deliver it to shareholders.
We first wanna complete the purchase just so that afterwards we can talk about the next steps. That is our focus, and then only we'll discuss the next steps.
Thank you, Milton. This question comes from Geoff Elliott from Autonomous. Just reminding people that you can choose whatever language you wanna listen to the Q&A session today. If you wanna listen in English, please click the American flag. If you wanna listen to Portuguese, the Brazilian flag. Or if you wanna listen to original audio, just click the button. Geoff, welcome.
Hello. Thanks very much for taking the question. Hope you can hear me okay.
We do. Yes.
The outlook for financial margin with clients points to a bit more growth than you're seeing in the loan portfolio. Can you talk about the moving pieces that go into that in terms of mix, spreads, competition, interest rates? What's driving that stronger growth in financial margin than you're expecting in the loan book? Thank you.
Thank you, Geoff. Good to see you again. Thank you for your question. Just to give a quick view, we had a very strong year in terms of financial margin with clients, as you know. The last quarter was very strong. And as we've been growing the portfolio in a very healthy pace and building a very good portfolio, we believe that we have a strong year next year for financial margins with clients. The reason why is because this portfolio has been built in the last 2-4 months, so there is an inertia of the effects of this portfolio having a full year in 2022. This is one important component.
The other one is the interest rate in our working capital. As you know, it has impact not only in the working capital but also in the investments that we have from our clients. It has positive impact. Combining those effects, the portfolio that we have been building, plus the impact on investments, plus the investment of our working capital, that's the reason why we believe we can grow the financial margin 20%, round numbers in 2022. This is basically the reason. If you only take the accrual that we already have, this will take us 13% without any additional effort.
We still will be building the portfolio in 2022 in a different pace from what we did in 2021. We may go under in terms of portfolio growth, as you can see in the guidance, but with a very good mix as well. We see the retail portfolio growing. We see the wholesale portfolio growing in a good pace, but it will all depend on how the capital markets will evolve in 2022. On the retail side, we still see a lot of opportunity. On the other hand, we've been building the portfolio very in guaranteed products more than in clean products.
We saw in the last couple of months important recovery on the clean portfolio, which helps us as well with the margin with clients. This is basically how we believe we should achieve that in 2022.
Thanks, Milton. Now that we all warm up in English, let's take the next question from Tito Labarta from Goldman Sachs. Tito, welcome.
Hey, good morning. Milton and Renato, thank you for taking my question also. My question is a little bit of a follow-up, but I guess in terms of your loan growth, in terms of your expectations for growth this year, you know, particularly in Brazil, you know, growing into double digits, you know, to low teens. I know it's a little bit of a deceleration from 2021, but how prudent or how comfortable do you feel with that growth, just given the deteriorating macro, right, with GDP, you know, potential slight recession, you know, at best, maybe growing 1% or so. You know, you indicate that the provisions will be rising. You know, how comfortable are you growing at that pace?
Can you give a little bit more color in terms of kind of the segments, like what kind of growth that implies for corporate, for retail, and why you think you can grow, you know, so strongly with a weaker macro? Thank you.
Hi, Tito. Good to see you again. Thank you for your question. Basically, what we see is that there is still opportunity to grow the portfolio. It's important, we're talking about, we have -0.5%. But let's say that it's zero GDP for 2022. I think to compare with the portfolio growth, we have to look at the nominal GDP. When we take inflation in consideration, we are talking about 7%-8% nominal GDP for 2022, and a portfolio that should grow around 10%-12%. There is an important inflationary process in Brazil, and this is relevant for the credit and the portfolio growth. We are very comfortable with the pace.
Of course, we have a very relevant way and technology to decide about credit. We have a lot of information about the clients. We are taking the pulse all the time. If we feel more confident, we will deliver more. If we feel we have to slow down, we will do that. Basically, this is our best expectation talking now. We still believe there is opportunity. There is this portfolio that was already built in 2021. It has a natural inertia for 2022, but we are confident in a slow pace, of course, lower pace than what we did in 2021, that we should perceive a healthy portfolio growth.
On the other hand, I know your question has more to do with the pace of growing portfolio, but talking about the cost of credit, I think it's important to highlight that when we look for 2022, we do believe, as we have implied in our cost of credit, that this will grow. We are talking about nominal base, so it's important to talk about the index. Our cost of credit in relation to the portfolio, we believe that we should grow, but it's still behind what we perceived in the pre-crisis, in the pre-pandemic. We still believe we're gonna get to a very healthy relation in cost of credit and portfolio. This is important.
Second, we are diminishing the pace, so it has an impact in the index, and even though we believe we should have a healthy portfolio by the end of the year. In terms of coverage, the same. We believe we should keep a healthy level of coverage. Also, the delinquency ratio should increase, as we have been saying. You might remember that in the last quarter, I said that we would be seeing a growth in our delinquency ratio. It happened on the personal portfolios this quarter, but we still believe we will see a delinquency ratio going up, but it will be stabilized by the year-end. This is our best projection right now. We still feel very comfortable about the dynamic of risk return of those portfolios.
We've been engaging with the clients. We've been increasing the lifetime value of the clients. The year doesn't end for the bank in 2022, so we are talking about building a portfolio in the long term and enhancing the relationship and the lifetime value with the clients that we have, and the new ones, of course.
Thanks, Milton.
The next question will go back to Portuguese. It's Henrique Navarro from Santander. How are you? Good. Thank you. Thanks for the opportunity. Congratulations, the format of meeting is great. I'm sorry, we're going back to the subjects. Lots of people talking about credit, but I understand about the initial inertia, but okay. Itaú is probably one of the-
First banks to make negative GDP projections for 2022, -0.5%. In the 3Q, the message you sent out was a sort of a warning message that there was a challenging scenario, and still you delivered a number that was much higher than the expectations. The guidance for 2022 is really way above our expectations. When I look at the guidance that you published, it's not really aligned with this message of caution for 2022. If you look at the level of accruals, it's a very strong growth. Maybe we should interpret that, yes, it's risky, but we're able to monitor our risk and we will run greater risks for better returns. Maybe that's why the accrual is so high.
When you look at the FEBRABAN survey that was talking about 6.5% in credit growth for 2022, it seems to be a great misalignment between what some players are seeing for 2022 in terms of risk. Itaú, I thought that Itaú was being more conservative, but the guidance, which is very good by the way, mostly says that we're able to manage our risks and returns. I know that you've talked extensively about that, but maybe you can shed a bit more light on, well, is Itaú seeing something different in the market? Is this scenario really dangerous? Are you really being cautious? Maybe you could dive a bit deeper into why you're considering this growth and the risk that you're taking, and its impacts on the risk and the accrual.
Thank you. Thanks, Henrique. Nice to see you again. I think your question is important in clarifying some aspects. First, I think that everything depends on the comparisons that you make and some aspects that are extremely relevant. The first one is that 2021 and 2022 are two very difficult years in terms of comparability when you talk about a regular fiscal year. In 2021, we had a fiscal stimulus and several other stimuli, and the pandemic came in 2020, and people stopped consuming. Less consumption, more stimulus, the stimulus checks, incentives for companies, and low interest rates, the capacity, people's capacity to repay increased a lot. If I told you that we imagined that that would happen, that's not true, that we would see in 2021 such an important drop in the delinquency rates.
In 2020, we did a reasonable volume of anticipated accruals or complementary accruals, which have been untouched so far. We were expecting a more adverse scenario that did not happen in 2020. In 2021, it's kind of a continuity of that scenario. Since in 2020, there was less credit hired, and we also saw that the delinquency rates were much lower. If we look at 2021 and 2022, that's not a good metric. That's why we always go back to 2019 to get a better perspective. The second aspect is that we see a gradual normalization of delinquency. The last quarter, if you look at our numbers, you'll see that the portfolios are well behaved, even though we see delinquency in 50-90 and over 90 in natural persons.
I made this comment and I'll make it again. We did not sell a portfolio. This does not say that we're not gonna do it, but the fact is we haven't been using that lever, which does have its effects, but its biggest effects are in the delinquency rates. Our delinquency rates are quite pure, and that is important. There's another aspect, which was that we had a flexibilized portfolio that was relevant in 2020 in our Travessia program. The way we dealt with our customers by offering them installments that would be possible for them to pay was really good. The delinquency rates are really good in that portfolio. We reduced the delinquency rates by 42%. We had over BRL 45.4 billion in flexibilized portfolio, and we're talking about BRL 31 billion with very healthy numbers.
The clean portfolio, most of it has been paid. What remains in the end are the guaranteed portfolios that have good LGD, a good recovery. If you look at the next year, we grew the credit portfolio of the bank by more than 40% in the last three years, and that's natural. We work with an expected loss model, and that anticipates the provisions in this cycle, and the accrual comes with time. There's a mismatch in the timeline. The expected loss is less, but the margins increase. That's the phenomenon that we're seeing in 2022. I was, yes, being cautious, and we're still being cautious. This is our best expectation for the guidance.
As you know, we're always gonna focus on the best results for the bank and not simply turn a blind eye on our expectations. If we need to make expectation adjustments, we'll do that during the year. That's not our intention. In 2021, for instance, we reduced the credit cost and we adjusted the credit lines. If there are adjustments, we will make them. We expect to deliver an ROI of around 20%. As a reminder, and this is central to our guidance, there is no expectation of material consumption of complementary accruals, which is relevant. You're seeing a growth of around BRL 5 billion-BRL 6 billion without using any complementary accrual. I think the balance is quite good and we have complementary accruals.
If we have a harder and more difficult credit cycle or greater uncertainties, we'll always have leeway to deal with that. I think the risk and return of the portfolios are also q uite healthy.
It's just natural. I think your question is legitimate, but there is the flip side to the coin. The interest rates are increasing, which also results in increased margins for customers, and that's why you see these results. If you look at the portfolio growing in Brazil between 11%-13% for a nominal GDP of 8 or 9, that doesn't seem so relevant. These are products and portfolios that we have mastery over and customers that we know well. Again, the future is uncertain, so we will be cautious if necessary during 2022.
Thank you, Milton. For the next question, we'll share with Jason Mollin. If you wanna be Portuguese and English, Mike, maybe Jason. You can choose your question.
Good morning. I like the meeting's new format, but I'll ask my question in English.
What Milton, you just mentioned, the view that Itaú can generate around 20% ROE on a sustainable basis. In this context, I kinda wanted to refer to the slide I like that you guys publish every quarter on the business model. I guess it's on slide 19 this time. Itaú shows the value creation of BRL 9.3 billion in 2021, and almost 100% or 99% of that in the year was generated in the Insurance and Service segment. That segment had a return on regulatory capital of 32.5% for the year. There was a small value disruption, I guess I would call it, from the credit portfolio.
How should we, as investors, think about this sustainable ROE of 20% given this view on returns in the business segments? Thank you.
Thank you. Hi, Jason. Good to see you. I'll answer in English, even though I know your Portuguese may be better than my English. What I would tell here about this business model, the way we provide you the information, it's very important to highlight that you are seeing the year base. It's true when you look from a credit perspective, we didn't have any capital or value creation when you consider the hikes we had in the cost of capital of the bank. All the value creation that we had came from service, came from other revenues, basically, as you were saying. When you look from the last quarter, we saw a positive trend on the credit, so generating value. You're looking at full year set.
We believe that for 2022, we may be able to achieve a value creation on credit as well. We are talking about 14% cost of credit, can be a little bit higher, a little bit lower. When we look at that, we are delivering a very good pace and growth. This cost and even if we generate a little bit of value creation for the shareholders, has a very important impact on what we see on the Service side. We cannot look for credit standalone and forget that this is what brings reciprocity from our clients with the penetration of the relationship. Credit, it's a very good lever and relevant lever for that.
We believe that we may have any value on credit for 2022 for the reasons I just mentioned. The last quarter was positive. We may see this growing interest rates that will help somehow the returns that we have on that. It's very important lever for the other lines, especially for services in general, the reciprocity, cash management effects, derivatives, and all the other products, investment banking, asset management that we do with our clients in all segments. We are pretty much comfortable with that.
Thanks, Milton.
Next question. Marcelo Telles from Credit Suisse.
How are you, Marcelo?
Hello, Renato. Hello, Marcelo. Thank you for the presentation. Thank you for this format as well. Most of my questions were already answered, but I already like to take the advantage here to ask about your strategy as an investment platform. You acquired Ideal, as you mentioned, right? And you want to leverage on technology, and you want to use the platform to plug the IFAs. I would like to hear from you what that means exactly. Is it transformational for Itaú and how you see the possibilities of distributing your investment platform products? Do you want to create an XP within Itaú? How can we think about your investment products and strategies, really? Thank you.
Thank you, Marcelo. It's great to see you again, and thank you for your question. Acquiring Ideal has a very important role in our strategy to complement our environment at the bank, and we have very important information to share with you. In private banking, we had an increase of 2%.
Point percentage points in the market share. We grew more than the market and we got two market share points. We have 30% market share. We have the absolute lead in this segment, and we got market share in investments as well. There are always points coming in and out, but net we got market share 70 basis points approximately. We believe that our strategy is growing, be it in the private or general public general audience. We plan to open 90 offices, but not autonomous, but our own offices with our registered staff. We expanded into 20 cities. We are present in 20 cities, and we should grow and penetrate other 20 cities in the course of this year.
By the end of this year, we should have substantial number of offices and branches, 20-30, and over 2,000 IFAs focusing on investment. We have over 400,000 clients already using this new model, using the digital platform, getting support from us. Itaú Personnalité, it was the franchise for high income. The manager had that exclusive role to manage the relationship and so on. Now we have specialized the group further, which is the IFAs mentioned, and they will work hand in hand with the managers giving support and advising our clients. This model has really been working well. We have migrated the portfolios, and clients have really enjoyed this new model. We're very satisfied and very happy with the strategy and how it's been orchestrated. You heard from Constantini just now. Himself and André have been coordinating this really well.
Itaú has a few major objectives. First, it operates in some markets we don't, high-frequency trading and institutional market operations mainly. This is an edge that we get from them. They have cutting-edge technology platform better than ours, that's another point. A second point concerning Itaú is the human capital. Nelson and the whole team, they are top-notch professionals with a wealth of experience. They bring in flexibility so that we can penetrate other markets to strengthen our value offer and also to allow us to develop our strategy if we understand we should go from our own offices to external autonomous offices as well. We are still a bit unclear around how this model is going to develop. It's moving more and more towards B2C.
Hiring their own teams, and there could be some conflict between the own teams and autonomous teams, and also making a decision around how to deal with this. With this platform, we can plug in more easily our own staff or autonomous teams and clients. This is a model we're still discussing. Soon we should have more clarity on this matter.
Thank you, Milton. Thank you, Telles. Domingos Falavina from JP Morgan. Welcome.
Hello, everyone. Good morning. My question has to do with the PDD. This initial assumption that you have of no additional items. That will consume some of your provisions. The NII was very positive, and there's room for this high coverage.
Maybe that has to do with high debt levels, and then the bank is choosing to cover this higher coverage till the end of 2022. What I'm trying to get at here is we see you allowing more this quarter. Is this a new level of coverage that we will probably see Itaú working at? Or is it a temporary movement, and there will be more room for net profit in 2023?
Thank you for your question, Domingos. Great to see you. This is a good point you've raised, and I'll try and break it down. In 2021, we expected to consume the complementary point. We already budgeted the year like that. What surprised us positively is how our portfolios behaved. I'm not only talking about flexibilized portfolios, but also non-flexibilized portfolios, those who didn't need the Travessia program.
We reviewed the guidance, the credit costs in the course of the year. We felt very comfortable about that. We reviewed the guidance down, and we understood that was not the right moment to consume complementary provisions. When we compare that to previous years, and we look at the retail portfolio, we're still operating on higher levels, which makes us very comfortable. We're also very comfortable looking at 2021, the risk return rate, not tapping into the complementary allowances provisions. What happens is that as we work with expected losses, we will bring forward provisions and the NPL will come in. We had the NPL formation, 30% of that provisioned, and we expect that to convert in the course of time.
Our expectation is that in the course of time, this should normalize, it should go down, and the NPL should come with time. I'm looking at the retail portfolio. We don't manage the bank through NPL formation. We use expected loss. When you look at retail, and you know that as well as I do, we bring forward a lot of the provisions, and the delinquency from major clients come in the course of time. The coverage consumption happens fast, it, which is what we saw one quarter ago, which I mentioned in the presentation. Just a good indicator for us to have an idea of the coverage. Looking forward, if the scenario plays out as is, and if it goes down, we'll make use of the complementary provisions.
It will depend on what the scenario is, our level of comfort, but the provisions were made for that. In 2022, as I said, we're not expecting to reduce the coverage levels. We'll probably operate in the same line as we did in the past quarter. As the scenario normalizes, we're likely to consume some of these provisions. It is possible that that may happen in 2023, maybe in 2022, but that's not our base scenario right now.
Thank you, Milton. The last question from the analyst now.
It comes from Gilberto Garcia.
Hi, Gilberto. Gilberto, good to meet you. Thanks for attending our earnings call.
Hola, buenos días. Thank you for the call. It's nice to be here as well. My question was on the guidance. Very impressive, particularly so I guess given the tough macro conditions. I was wondering if you could give us some color on how you feel the macro could impact results. Is there anything in particular that would be that you find concerning? So as not to sour the mood, is there anything that you feel you are being too conservative in terms of the guidance? Anything that you are particularly excited about? Thank you.
Well, thank you, Gilberto. Good to see you. [Non-English content ]. Going to your first question. We still, as I was saying a little before, we're still constructive about the opportunity to grow the portfolio. We have to look at the GDP, of course, in a nominal basis, and this is very relevant. Of course, there is a mismatch in terms of timing on how the provisions are made and how the portfolio generates margin. I think the provisions we will be seeing in 2022 has to do with the last 2-3 years in which we've been growing the portfolio. This is the fifth consecutive year that we are growing the portfolio in a very good risk-return pace. This is our view.
We expect the cost of credit to grow, as I was explaining a little ago, for the reasons I said. As I said in the very beginning, this is the best estimate that we can do right now. We'll be understanding how the year will evolve in terms of macro conditions, the delinquency, leverage, of the families, and we'll be deciding throughout the year if we have to slow down or not, if there is opportunity to grow. This is how we're gonna be doing, as we've been doing in the past. There's a natural inertia, with the portfolio. As you know, in the retail, you'll be building the portfolio. When you look at the last months, and we had a growth, so this, has a natural impact for 2022.
Coming from, it's important to say, in 2020, due to the crisis, we reduced in a very relevant manner the pace of providing credit to our clients. We lost, on the retail side, almost 50% of our market share in production. Some of the credits that we've been deploying in the market in the past years is to recover our fair share in those clients that we have a very close relationship, and we were not very present in the market at that time. This has an impact as well. Looking to the guidance, what is the positive? I believe the guidance, it's very fair in terms of. I don't see positive or negatives. I think it's the best projection that we see.
I think the numbers has implied an important growth in terms of bottom line earnings before tax. I would say there is no positives or negatives. This is our best projection. Let's see in the coming months how we should be adjusting, if necessary, any of those lines.
Milton, I said that was the last question, but it isn't. We have Rafael from Banco do Brasil. Hi, Rafael. Welcome.
Hi, everyone. Good morning. Thank you for having me and my question. Congratulations on this format and your results. I wanted to hear a little bit about your payout. What do you expect regarding payout, what could support growth? In the short term, what are you gonna be doing with all of this profit you've made?
Thank you for your comment and question, Rafael. Well, payout, right? There are always two possible answers to what to do with payout. The profit percentage you're going to be distributing and the profit per share, right, and earnings per share. We're looking at earnings per share at this point. With the improvement we had in 2021, we're gonna have improvements in dividends, naturally. We haven't changed our dividend policy. Regardless of the review of capital indices, we continue to look at the policies we have, and our commitment is to distribute and pay out the 3.5 figure or point that we had with capital. We're still below that. We show the capital indices, so there is some recovery that needs to be achieved. There is growth for the bank.
While we think there's an opportunity to grow the bank with quality and creating value to the shareholders, then I can't tell you that I have a different payout target. I have a target to increase the nominal value per share, right? We still have a 25% payout for cash. Looking forward, depending on the capital levels that the bank will achieve, this number could go up. We're not committing ourselves to that for now, also because we believe there is a lot of opportunity to grow the bank and create value for shareholders. If we think that we have a lot of capital and results, and we can apply that to the right profitability level, then we review the dividends policy. For now, we're still very committed to the bank and to the growth of the franchise. Thank you, Milton.
We still have some minutes, and we've been getting lots of questions on WhatsApp. Several of them have been answered already, but I'd like to ask you at least maybe two or three questions in the last 10 minutes. Just as a reminder, if your question has not been answered, the RI team will contact you directly to answer your questions. Okay? Milton, there is a question about ESG and our initiatives in that regard for 2022, what we're planning in terms of issuing green bonds and internal initiatives around ESG. Could you share your thoughts, please?
Sure. To your point, the ESG agenda for us, it's not a fad. Ever since we joined the Dow Jones Sustainability Index, we've been constantly working on that agenda.
There's been a huge evolution over the course of the last few years, and I always like to emphasize a few things that are quite significant. Todos pela Saúde, or Everyone United for Health, was very relevant. We allocated over BRL 1.2 billion. It was a donation by the bank and we had a council that worked tirelessly starting every day at 7 A.M. It was a pro bono initiative, so it was really important for the bank, and we were really proud of it, all of us collaborators.
Well, I think that in terms of what's relevant, we made a recent announcement, and we increased our credit volume and operations that we intend to structure by 2025 to tackle high impact sectors, segments like renewable energies, clean energy, and lots of other segments that bring about a series of benefits to the ESG agenda. To give you an idea of the magnitude, we decided to allocate BRL 400 billion, whether in credit or green bonds. We reached BRL 170 billion or 43%, and we have the commitment to reach that by 2025. It's numbers that will have a huge impact on the country. The Amazon Advisory Council, I always mention it with Bradesco and Santander. We sit together, and it's a group of council members that are extremely knowledgeable about this extremely high complexity subject with slow results.
It's really hard. It's challenging. There's a lot that needs review, reviewing, but that's an important part of our agenda. The mobility agenda is something that we've been investing a lot in, not only the bikes, but also cars, electric cars and the fact that you can use these cars, that's a great investment that we're making, and we believe that it's gonna be very successful. The first results of the test pilots are really positive. That's a very prominent agenda. The diversity agenda is also very important, and we're gonna be talking about it soon. Our commitments, that's something that we're working on. I believe that, you know, we need to have goals in terms of where we wanna reach. It's not. The most important thing is not really the goal, but rather the path that we're treading, the direction we're headed.
Women are getting more and more voice in discussions, succession committees, actively participating. This is an agenda that we have to pursue. I'm talking about women, Blacks and browns, sexual orientation, people with disabilities. It's a quite diverse agenda, and we have areas dedicated to that, and our progress has been great. There's also corporate governance. We talk about sustainability. In sustainability, the Net Zero commitment that we have made by 2050, and this has a huge impact in terms of how we're gonna support our customers in that project. We do not want to be law enforcement agents. We want to have commitment. It's a joint process. There are important plans. By 2030, we're gonna reduce it by half and reduce it to zero by 2050.
When we signed that project, the first question I got asked was, "Well, 2050 is a bit far away, right? This is a problem for your successor." The thing that I always say is that when you sign a long-term commitment, your responsibility is even greater. It's not just because it's far away into the future that you're not gonna plan for it. We created an ESG board that's dedicated to all the subjects, and we have the departments dedicated to that, and we're working on the net zero plan that we just signed, and that will be very important. In terms of corporate governance, we got very important awards this year. You work in the finance industry, awards, recognizing the quality of our financial statements, the, commitments and everything else.
We're protecting our best practices, and we've been getting extremely relevant awards. We've been dealing with all of the agendas. This is at the top of our list. I cannot believe in a bank that talks about ESG and has a separate area for that. I believe that it has to be present across all departments of a bank.
Thank you. I think we could spend two more hours talking about this. We have an endless list of questions, but I've been told that our time's up. If your question has not been answered, we're gonna get back to you. I'd like to give you the floor back for your final words and your goodbyes.
Well, first, Renato, thank you very much for leading this event.
The change at the end of the day was meant to present a different format for you. I wanna thank our site team, and I'm really happy about the creation of this more interactive environment. I'd also wanted to hear a bit more from the executive committee and this of course means commitments with our results. It's positive that we all got to hear from them, and now we can demand action from them. Anyway, jokes aside, I wanna tell you that our energy levels are extremely high, at maximum levels. Everybody is extremely engaged with this transformation. The word that I've been repeating is, let's do it together because we really believe that it is something that needs to be done jointly. Only by doing so we'll be able to create value.
Cultural and digital transformation, I talked about everything, but the word that I wanna finish this teleconference with is customer. That's what we're obsessed with. We have some homework to do, but we'll pursue this very hard, and I believe that we can really execute that and delight more than please our customers. We're not talking about a small base of customers. We're talking about 60 million customers, and each one of them matters, and that has to be at the center of our initiative. Thank you again and see you next time. I believe that it will be a bit more interactive like this one was. Thank you.