Good afternoon everyone, and welcome to Agi's fourth quarter and full year 2025 earnings conference call. Today's conference call is being recorded. At this time, I would like to turn the call over to Felipe Gaspar Oliveira, Head of Investor Relations. Please go ahead.
Thank you, and good afternoon. With me today are Marciano Testa, our Founder, Chairman, and CEO, and Marcello Dubeux , Chief Financial Officer. Throughout this conference call, we will be presenting non-IFRS financial information. These are important financial measures for Agi, but are not financial measures as defined by IFRS and may not be comparable to similar measures from other companies.
Reconciliations of the non-IFRS to the IFRS financial information are available in the earnings press release. Unless noted otherwise, all figures are presented in Brazilian reais. I'd also like to remind everyone that today's discussion might include forward-looking statements, which are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties and could cause actual results to differ materially from our expectations. Please refer to the forward-looking statements disclosure in the earnings release. I will now hand over the call to Marciano.
Thanks, Felipe. Good afternoon, everyone. On behalf of the entire Agi team, it's my pleasure to welcome you to our first earnings call as a public company. During today's call, we will review our fourth quarter and the full year 2025 results. Our CFO, Marcello Dubeux , and our Head of Investor Relations, Felipe Gaspar, will walk you through the numbers and host a Q&A session.
First, I would like to take a few minutes to share some personal thought with you and provide my long-term perspective of the business, and also I want to build a strong relationship with the investor community based on transparency, execution, and trust. Let me share a few thoughts on Agibank, our mission, our unique model, and our vision for the future.
As many of you know by now, Agibank was built to serve the largest and fastest-growing segment of the Brazilian population, over 100 million Social Security beneficiaries and the payroll workers which has historically been underserved by the traditional banks. The digital-only banks have also struggled to serve them effectively because customers in this segment still value proximity and human interaction when needed. To address this opportunity, we designed a new approach that combine a fully digital bank with a nationwide retail network of Smart Hubs that are low cost and more effective than bank branches.
We call this our hybrid model, and it has given us a powerful structural advantage in the Brazilian payroll-linked financial ecosystem. We can acquire customers and serve them in a better way at lower cost, enabling us to build strong engagement and become the primary bank of our customers.
Our model allow us to scale efficiently and continue growing with the same asset-light benefits that define Agibank. This creates a powerful flywheel effect within our ecosystem. More engagement leads to more products per customer, better data, a stronger risk model, and improved economics across our platform.
To do this, we rely heavily on advanced technology, including a proprietary core bank system without legacy constraint that was designed to integrate with new technologies such as artificial intelligence to automate process across our organization and write new opportunities more effectively.
Data science to constantly collect and analyze proprietary information that we use to improve our customer experience, increase efficiency, and scale our operations. Software application that we use to engage with our customers in our Smart Hubs outside of the competitors' offices and our client mobile phones.
This is not new, but differentiating through technology has been a core principle of mine. We use our technology to help bridge the gap for customers who are not naturally tech-savvy. Millions, and perhaps billions of people outside the United States have learned over generation not to trust banks because of their poor service and high cost. Many of these people will need to sometimes a little help to feel more comfortable managing the small amount of money they have digitally.
That is exactly what we do. As all of you know, this is our first earnings call. It's very important to me and for you keep in mind the three principle that anchor our long-term management philosophy. First principle. We live for the customer. The core of our strategy is keeping customers deeply engaged in our hybrid platform.
We help them access their benefits and payroll in a better way, help them become more comfortable using digital tools, offer them small amount of the secured credit, and then use our technology and data to offer them a growing range of financial solution to help them across different areas of their lives. Our total addressable market continue to expand year after year in Brazil, driven by three factors, demographic, income, and educational.
Based on our unique hybrid business model, we can address favorable demographic trends. On top of that, the majority of the population in Brazil is still lower middle class, and they have barriers in accessing the resources such as education, which is unlikely to change radically over the next decade. To help them overcome these barriers, creating a long runway for Agibank's growth. Second principle, we continuously enhance our technology.
We believe that delivering the best experience in the payroll ecosystem requires constant innovation. Customer behavior is evolving rapidly with new technology, and expectations continue to rise. At the same time, the regulatory environment evolves constantly, and we must always remain one step ahead.
As I mentioned, technology is a core enabler of our strategy, so we will always be looking to invest and innovate in this area. Part of the capital we raised in the IPO, we will be investing in even more technology to empower our customers and make us even more efficient than we already are, enabling us to provide you a strong combination of growth and profitability. The last principle, but not least, we have an entrepreneurial culture focused on long-term compound returns. We believe in building a business that compounds value over many years.
Whenever necessary, we will prioritize the long-term interests of the company and its shareholders over the short-term outcomes. Looking ahead, we believe that over the next five years, our market is going to continue to expand, enabling us to grow it. We plan to do this with discipline and evaluating new opportunities based on the potential to consistently create value for our shareholders.
Finally, we are and we remain a long-term focused company, and I am looking forward to sharing this journey with you, earning your trust, and improving the lives of our customers together. I am always open to any question or concerns through our journey together, above and beyond this first earnings call. With that, I will pass over to Marcello and Felipe, who will walk you through our performance in more details. Thank you again.
Thank you, Marciano, and good afternoon, everyone. This is Marcello, CFO of Agi. I'm pleased to report that we delivered a strong set of results for the fourth quarter and the full year 2025, which demonstrates the strength of our unique hybrid business model. In the fourth quarter and throughout 2025, we continued to execute against our core strategic priorities, growing our client base in Brazil with a focus on multi-product relationships, expanding our market leadership in the payroll credit segment through the new product releases and integrations, and maintaining our status among Brazil's most efficient and trusted financial institutions.
Today, I will walk through our fourth quarter and 2025 results and offer some insights. Before hopping into results, I'd like to make a quick comment on our relationship with the INSS, which is Brazil's Social Security Administration, responsible for the payroll of 42 million beneficiaries.
Agibank maintains a contractual relationship with the INSS to provide benefits, payments, and payroll credit underwriting. As part of an ongoing auditing process, the INSS and Agibank executed two operational agreements, one in November 2025 related to the benefits payments in Agi's accounts, and another in January 2026 related to origination of INSS payroll credit.
These agreements set standards for enhanced customer service and product delivered aligned with updated regulations. Although the discussions resulted in temporary suspensions that impacted credit origination for INSS clients in 4Q 2025, operations fully resumed by mid-January 2026. Commenting briefly on the addressable market and our strategic positioning, Agi has a nationwide hybrid model with over 1,100 Smart Hubs deployed with an opportunity to expand alongside our digital solutions.
When we look at the Brazilian landscape, we see a BRL 733 billion market in secure loans from INSS beneficiaries, private and public workers, representing approximately 100 million individuals we can serve with our specialized products. Adding complementary cross-selling products such as payroll, credit cards, personal loans, insurance, and fees, we see a total addressable market of BRL 2.1 trillion.
We would like to start off by showing how Agi delivers substantial yearly growth across some of the most important indicators, maintaining its position as a relevant player in this market and reiterating the high potential for the coming years. Taking a closer look at customer growth, as seen on slide nine, total active customers count increased 73% in 2025.
We exited the fourth quarter with 6.7 million active clients, which we define as those using at least one product at quarter end. Agi customers with primary banking relationships average over five products, rising above seven products among our most mature cohorts, underscoring the cross-selling opportunity within our model and validating our relationship centric strategy.
Turning to our credit portfolio on slide 10, total loan balances grew 44% in 2025 to BRL 34.9 billion. Our credit portfolio maintains a healthy mix, with secure loans representing 86% of total or BRL 29.9 billion and unsecured loans representing 14% or BRL 4.9 billion. We believe this mix brings a sustainable balance of profitability, credit quality, and a focus on long-term relationships with our clients.
In private payroll credit, an offering we launched in March 2025 centered around a more conservative approach, our portfolio reached BRL 0.9 billion. For public payroll credit, a growth lever in our credit portfolio that brings our business model to municipalities and regions where the footprint of the traditional banking systems continue to be less accessible, Agi finished 2025 with BRL 0.3 billion.
Unsecured lending restricted to account holders who maintain primary relationship and directed deposit arrangements with Agi, which significantly mitigates default exposure while improving margins, expanded 18.3% during 2025 to BRL 4.8 billion. Within INSS payroll credits, we continue to successfully execute against our strategy of being the disruptor of this segment in Brazil, as we can see on slide 11.
Based on our strong positioning with the INSS, we further increased our market share of payroll credit reaching 8.9%, a gain of 250 basis points compared to 2024. With regards to credit quality on slide 12, non-performing loans exceeding 90 days reached 3.7% by year-end 2025, impacted primarily by two factors.
First, a larger share of private payroll credit, which has structurally higher delinquency ratio compared to INSS loans. Second, no recurring effects from the INSS suspensions beginning in August and ending in January 2026. Nevertheless, NPLs by end of 2025 of the overall portfolio remained comfortably below the average for consumer credit in Brazil. The coverage ratio measured by provisions over NPLs above 90 days was 189.4% by end of 2025. Turning now to our revenue on slide 13.
In the fourth quarter, we delivered total revenue of BRL 2.96 billion, an increase of 6% quarter-over-quarter. For the full year, the total revenue was BRL 10.7 billion, growing 46.8% year-over-year. On slide 14, we see Net Interest Income growing 19% in the year to BRL 4.7 billion. Net Interest Margin was 12.5% for the year, resulting from a loan portfolio more weighted towards secured loans.
Moving to efficiency on slide 15, which highlights the operating leverage embedded in our unique business model. As discussed, our proprietary physical digital channel network drives a highly efficient scalable operation. Our operating efficiency ratio, which we calculate as NII plus fee revenue divided by operating and personnel expenses, improved to 40.6%.
An approximately 590 basis points improvement year-over-year as revenue growth continues to outpace expenses. Continuing down the income statement and to slide 16. Net income in the fourth Q 2025 reached BRL 215 million, supporting the BRL 1.05 billion figure for the full year, an increase of 31.8 year-over-year with Return on Equity of 35.8%, maintaining Agi as one of Brazil's most profitable financial services companies.
Speaking briefly to our funding approach on slide 17. As a regular debt issuer, Agi maintains established relationships with Brazil's credit markets, diversifying funding sources to support portfolio expansion. As a result, total deposits reached BRL 37.8 billion, an increase of 50% from 2024. Institutional counterparties represented 51% of total funding, while retail sources came to a share of 49%.
We follow conservative principles, aligning secured credit portfolio durations indexation with corresponding funding sources, safeguarding spreads against market and interest rate fluctuations. Lastly, as you can see on slide 18, our Capital Adequacy Ratio stood at 15.5 exiting 2025, with a Tier 1 capital ratio of 14.2%.
Agi's consistently above average ROE track record enables self-sustaining capital generation. As a reminder, IPO proceeds will appear in our Q1 2026 financial statements. If reflected in 2025's capital structure, we estimate a Capital Adequacy Ratio of circa 19%. Looking forward, we remain confident in our capacity to address the financial needs of millions of Brazilians. On behalf of Agi, I would like to thank you all for your interest and support. Now we would like to open the call for the Q&A session. Thank you very much. Operator?
Thank you. We will now begin the Q&A section for investors and analysts. If you have a question, please click on raise hand for audio questions or write it down in the Q&A section for written questions. Please remember that your company's name should be visible for your question to be taken. Our first question comes from Tito Labarta with Goldman Sachs. Your microphone is open.
Hi. Good evening, Marciano, Marcello, and Felipe. Thank you for the call and taking my questions, and congrats on the IPO. Just to follow up, you know, thanks for the color on the relationship with the INSS. You know, just one question we get from investors. Just to get comfortable that there won't be any other suspensions or delays in your ability to underwrite credit and also to sell insurance. I mean, how comfortable are you that, you know, this is definitely behind you, that there won't be any other risks related to that? I mean, do you feel like, you know, for the rest of this year and going forward, that's behind you completely?
I guess just second question, more I guess on the competitive environment. I mean, I think you have a unique position with the hybrid model. As interest rates come down, I mean, do you see a risk of increasing competition either from incumbents or fintechs trying to go after this market? Any color you can give on that would also be helpful. Thank you.
Great. Hi, Tito. Thanks for the question. Good to be talking to you. First of all, in terms of the relationship with INSS, we have a contractual relationship with INSS for years. We believe that we passed through an audit process and we signed two agreements with the authority, and that validates our processes going forward, as long as we are in compliance with the process and with the adjustments that we made, which we are. Based on that, we have no reason to believe that there's a possibility of a different type of suspension or friction with the authority. All of our operations are back to normal, fully normalized. The user experience is also fully operational in terms of the relationship with the INSS.
We really believe this is a turned page in our relationship with them. That's the first part of your question. The second part, we believe the competition in terms of relation to the interest rates. You have to remember that our business positioning it is focused on the experience of the client. We serve an underserved big portion of the population in Brazil that is less related with the cycles of the economy, but on how they are being left behind, both by the incumbent banks and the digital-only banks. We believe we still won't see any important variation in terms of that due to the interest rates. I think also Marciano can comment on that. Marciano, I'll hand over to you.
Okay, Marcello, thank you. Thank you for the question, Tito. Yeah, we see as a very competitive market between the players and a very high structured demand from the population side. Payroll credit is the biggest credit portfolio for individuals in Brazil. The reason for this, the payroll credit is the most affordable and cheapest credit for individuals in our country. We are very well positioned to capture the opportunities in the payroll credits ecosystem. Basically, we see three structural factors to support our thesis for the long term. First, demographic trends, education and average income in Brazil. Our country's population is aging rapidly. We are very well positioned with our hybrid model to allow us to offer advisors to this segment.
It is not simple for this segment to navigate in the digital world for their self, especially to the complex transaction as a portability of financial products or in the Open Finance platform. Agibank has been built to solve a very specific problem. The question is how to use technology to improve the lives of the largest population that is not natural tech-savvy. Because of that, we have always operate at the interaction of the technology, data, and the human interactions. Somebody can say that the new older people are more digital, right? Here we see this, the second factor is that is education. Unfortunately, we don't see signs that we will have a revolution of the education system in Brazil, and the people still have less access to the better education.
The third is average income in Brazil, more than 65% of the population have an income less than $400 monthly. Also, we don't see radical changes in this structural situation in Brazil over the decade. Based on that, we see several barriers to replicate our model. In the incumbent side, they don't have the specific setup to address this special segment. While the other digital banks have the best structure of the cost, but it's not the best model in terms of channels and customer journey to address most of this part of the population, right? Finally, we have decided to invest heavily to be an AI-driven company in the next 12-24 months. We can continue to deliver the best hybrid experience to the customers and improve our efficiency rates and scale. To continue to be relevant, we'll be the bigger player in the payroll credit ecosystem in Brazil. Thank you.
Great. Thank you, Marciano and Marcello, and congrats again.
Thank you, Tito.
Our next question comes from Jorge Kuri with Morgan Stanley. Your microphone is open. Mr. Kuri, your microphone is open. You can talk.
Can you hear me? Sorry, apologies. Can you hear me?
Okay, we can hear you now.
Is this good? Can you hear me?
Yes, Jorge, we can hear you. How are you? Hello.
I can't hear you, Jorge.
Our next question comes from Eduardo Rosman with BTG.
Hi. Hi, everyone. Congrats on the numbers. Congrats on the IPO. I have two questions here. The first one, just trying to understand, you know, the dynamics at the start of the year, right? 'Cause we've been tracking, you know, INSS payroll lending and it has been weak for everyone, right? Because of all the changes going through, right? The Social Security entity, right? Given the relevance of the segment to your business, how should this impact your results? Should we expect a softer start to the year with results improving at the second half? It would be great to understand a little bit what's going on. My second question would be regarding the private payroll lending, right?
As far as I understand, you were one of the first movers in the product, right? With the goal of gaining experience and understanding how it works. However, at the margin, it seems that your appetite for the product has come down, right? Just wanted to confirm if that's the case, what happened, you know, or if you can, you know, come back with more growth or more appetite in the future, depending on the changes that the product is going through. Thanks a lot.
Okay. Hi, Rosman. Good to be talking to you. Thanks for the question. Marcello here. First of all, on the credit origination in the INSS product, first of all, in the market itself, there were some frictions in the beginning of the year. We see normalization of the flows of production since mid-February, and that is also combined with our situation as well because as you know, we got the temporary suspension from December to mid-January, and we were able to be back in full operation after that. We see now, since end of the last month, the pace of origination in our case, now talking about Agi, as pre-suspension levels.
We are, you know, very comfortable with the production and origination of credit that we see every day, especially in the INSS payroll loans. That's one thing. We believe implicitly that we are originating market share at the margin the way we were before the suspensions, which means above average, above the market share that we have, which is 8.9%.
We believe that we are already reaching the numbers of metrics in terms of the market share origination at the margin. Right. That's one thing for the INSS production. Then the private payroll, yeah, you are correct. You have the full reading on the situation regarding the beginning of the operations last year.
We demonstrated our operational and technological readiness to be the first to offer this product in the market. We took a more cautious approach throughout the year, and we see this product as operated by two types of competitors. One is the incumbents who have the behavior, the relationship, who know the companies that these potential clients work for. The other types are the challengers who have to develop their own model to work with this product. Within this segment, we believe we have state-of-the-art capabilities to develop credit modeling, as we demonstrated already in the way we run our credit business throughout the last few years. We now are comfortable with the models that we developed to operate the private payroll, and we already seen in this month of March the product starting to ramp up in our production technology here at Agi. We are now taking a very more realistic approach to grow in this product.
Perfect. Thanks a lot.
Thank you. Awesome.
Yes. We have the question from Jorge Kuri. He has audio issues, and then he asked it to ask for him here. The question is, he would like to ask why NPL ratio went up from third Q to fourth Q, and why Net Interest Margin came down from the third Q to the fourth Q. Can you please give us color on what is driving this? This is the question.
Okay. Thank you, Felipe. Thanks, Jorge, for the question. Regarding the NPLs, we believe, first of all, that we have structurally low and low risk and comfortable levels of NPLs in our portfolio. Have to remember that a big portion of our portfolio is in the Social Security payroll loans, which have under 2% NPLs. We've been increasing the private payroll, and we have also the unsecured loans who have both of them most close to the teens' NPLs. What we saw in the fourth quarter, we saw a mix influence on the private payrolls, the vintages or the first vintages of the private payroll is starting to mature and to influence the average of the NPLs on one hand.
On the other hand, also as a factor of denominator, we did have the slowdown in the production because of the suspension which halted the pace of origination, the pace of growth in the total credit portfolio, which, in turn, took us to a higher ratio in terms of the NPLs. We are very comfortable to say that is not a different trend in terms of growing NPLs. This is the number that we should run in the equilibrium, in the stability going forward in terms of NPLs, given that we will continue to grow private payrolls, and they have a higher number in terms of this ratio.
Regarding the NIMs, on the other hand, there's a few factors impacting the NIMs since the beginning of last year, which is one, mixed more towards the secured lending compared to unsecured, which has tighter spreads, as we know, is one factor. The other factor is that on the unsecured loans by themselves, we have been also working with slightly lower rates for the customer because remember our strategy is focusing in the long-term relationship with this client. We want to maintain them with us in our portfolio. It's important to say that this is the kind of NIMs that we think is healthy for the business, that is structural, sustainable going forward.
We have one other factor that impacted the year, and it might be reverted this next year, which is the interest rates. Although we have a very conservative approach to ALM to match the ratios indexation, when we see abrupt impacts in the interest rates, of course, they will impact in the cost of funding, which happened during the year of 2025. We know that the Selic went up almost 300 basis points in the second half of the year, so that impacted also the NIM. On the flip side, we can expect a potential reduction on the Selic, which we can capture also in this next quarters as well. Maybe Felipe can add a few observations on that as well. Felipe?
Yes. Thank you, Marcello. Just to complement one thing, it's important to say that in terms of interest-bearing assets mix, we also have a growth in assets yield to Selic versus lending operations. When we see financial assets and treasury allocation, it has a bigger share over the interest-bearing assets when compared to the end of 2024, it helps in this kind of explanation about the Net Interest Margin about the fourth quarter.
Thank you. Our next question comes from Gustavo Schroden with Citi. Your microphone is open.
Hi, guys. First of all, congratulations on the IPO. I have two questions here. The first one is regarding the commissions and fees revenues, which declined in the quarter. I would like to understand what is behind this decrease, if it is related to the suspension of INSS originations in the fourth quarter late last year, if it is behind this decrease. My second question is regarding the selling, general, and administrative expenses, which also we saw a relevant decrease of almost 31% quarter-on-quarter. If you could explain us what is behind this decrease in the selling, general, and administrative expenses. Thank you.
Okay. Thanks, Schroden. Good to be talking to you. So on the one hand, on the fees, we see the fees as very sustainable business for us. As you know, we have the full distribution. We work as a broker selling customized insurance to a public that really looks for products that can complement their wallet of solutions. This is one thing. In the fourth quarter, we have some impact on the overall slowdown of the production and the cross-sell that impacted the selling of insurance. This is one thing.
When we look at the adjustments that we made, derived from the agreements that we executed with the authority of the Social Security in Brazil, we see nowadays already, since the middle of the quarter, the user experience in acquiring insurance totally normalized, and the product flowing very well. We're very comfortable to affirm and to state that this is a product that will continue to be very important revenue stream of the business, very important contributor of our returns, going forward. That's one thing for the insurance. Regarding the G&A and the expenses, yes, we see a reduction in the fourth quarter.
On one hand, we see portion of that is related to the cost to serve that we pay, related to a variable part of the expenses as we have the disruptions of the suspensions that impacted the quarter, both the payments of the payrolls and part of the fourth quarter that impacted part of the variable cost to serve that we have to pay for the salaries for each of the individuals that we are paying. The other part, we see non-recurring event on the model of lawsuits that we have. Because we started using AI, we are, as Marciano said, heavily investing in AI in the company.
We have initiative in tackling lawsuits with AI agents that reads all the the proceeds and prepares the defenses, and that increases a lot the number of the percentage of victories that we have in these massive lawsuits that we have. That allowed us to make an adjustment in the model that we use to provision lawsuits in the company. We were able to adjust this model in the fourth quarter, and that produced also an additional impact in the G&A. Those are the main factors that we can mention here.
Thank you, Marcello. Very clear. Thank you.
Thank you, Schroden.
Our next question comes from Pedro Leduc with Itaú BBA. Your microphone is open.
Hi, guys. Good evening. Thank you so much for taking the question. Just to make sure I understood the explanation behind SG&A, there was a reversal in legal contingencies in the fourth quarter because you've read through all the stuff and you've found that you had maybe too much provision, so there was an actual reversal and the run rate going forward is gonna be kind of the one we saw here. Is that right?
Hi, Leduc. Good to be talking to you. Yes, that's right. That's the reading. It's a reversion based on the much better model that we established through all the investing in AI for the lawsuits.
All right, great. Then just on NIMs, you mentioned that the fourth quarter is sort of the level we should see as well. There's gonna be a mix effect now that should maybe play in your favor or the Selic should play in your favor. When you talked about NIMs being this level, was it a mix constant or funding cost constant? Just wanna make sure I got that one too.
Yeah. The mix will maintain and is skewed a little bit always more to the secured level than the unsecured. Remember, we only offer unsecured credit for those clients who receive their salary with us. We'll keep growing in the number of beneficiaries, of clients that we are able to be the primary relationship and to pay the payroll and to offer the unsecured. As we grow, and have the mix more skewed to the secured lending in terms of credit portfolio, we have a tighter spread, but we don't see the product as a product by itself. We see a client view and how can we look at cross-sell in for this client so we can add other products.
As we say, in the newest cohort boarding, 75% of our clients have five or more products with us. In terms of the NIM, that's right, more a result of mix, and then we can capture a short-term impact on the reduction of the Selic rates going forward. Yes, that's kind of the explanation for the NIMs going forward.
Thank you so much, Marcello. See you next time.
Thank you, Leduc.
Our next question comes from Marcelo Mizrahi with Bradesco BBI. Your microphone is open.
Hello, guys. Thank you. Thanks for the opportunity. My question is regarding the growth of the portfolio. If this beginning of the year is changing the idea or the budget to growth, the pensioners portfolio of the payroll looking to this year. If you guys can give us a little bit, I cannot say that it's a guidance, but it's a perspective in terms of growth looking forward. Also in the private payroll as we saw a reduction of the growth of this portfolio. Thank you.
Hi, Mizrahi. Nice talking to you. In terms of the growth, one thing, we are able to say, as you know, we don't provide formal guidance, but as we already are comfortable to say that the pace of origination in overall credit portfolio is back to the pre-suspension levels. We are comfortable to say that, irrespective of what growth we will show in the first Q, we are very confident with the consensus estimates that we have in the street in terms of reaching the total portfolio that is seen in the consensus. That's one thing that we can say in terms of the growth of the portfolio. We are comfortable with that. It also applies for the private payroll.
As I said, private payroll is a product we see that as a huge opportunity in terms of diversification of activities within Agi. We have a vertical working here to develop this product and to develop the credit model specialized for this product so that we don't see growth by itself. We want to have growth in a sustainable way that brings, on one hand, profitability to, you know, to the stakeholders, to the shareholders, and also security so that we don't lose the pace in terms of the NPL. We will also be building the growth going forward for the private payroll as well in terms of what we have in consensus for the estimates that we've been in conversations with you.
Can I do a follow-up here?
Sure.
Regarding the private payroll, in terms of the perspective of interest rates to this product, are you guys seeing a worse environment in terms of competition or something that can change the idea of the growth of the mindset of how much you can grow from on this product? Thank you.
Yeah. We see this product, as I said, as two types of competition. One from the incumbents who have the relationship with this client, who know the behavior, and that can model in a different way and scale fast this product, and then the challengers, right? That have to build their models by themselves. We, as we know, have the experience with payroll products. We know the way the Consignado INSS developed 20 years ago and how we know that it will take time that this product to stabilize. Also we already comfortable with the credit model that we developed. We think that there is no winner takes all in this product.
There will be a lot of demand for this product, and we'll be able to tap a big chunk, a big portion of this demand, of this market going forward. Also, we have a lot of experience in doing portability because the way we work already with the other secured lending products that we have, and we'll be able also to benefit from that and to also bring more stabilized portfolios within the payroll loan by doing also portability. That's kind of the way. I'll also pass to Felipe to complement a little bit here.
Yes, Marcello, I think it's important to mention that we saw the same evolution 20 years ago with the development of the rails of the products. Just as INSS, we have strong capabilities built on this experience to keep growing in this portfolio as well. Just to mention, I think it's important that there is no cannibalization in our case. It's a complete upside for us. We started in a more conservative way, as Marcello mentioned, but now we are ready to accelerate going forward. Thank you.
Okay. Thank you.
Our next question comes from Renato Meloni, Autonomous. Your microphone is open.
Hi, everyone. Good to see you all here. Congrats on the results on the IPO. Just a quick follow-up on the SG&A. Can you give us an order of magnitude of how much was the provision reversal and how much was reduction in the variable expenses there? My question here is a bit on rates and NIM, right? You earlier were mentioning that you have lower rates, you're focusing on the long-term perspective here with the client. Assuming that we'll have lower rates in Brazil eventually and the government will probably try to reduce the cap rates in the regulated products, what's gonna be the strategy there? Do you think you're gonna be able to maintain similar rates for some time and gain some spreads there, or you're gonna pass that through to clients and remain below the cap? Thank you.
Hi Renato. Marcello here. Good to be talking to you. Again, I have to reiterate that we see our approach to this market as looking at the client as a whole, not the payroll INSS as a product by itself, right? We'll keep continuing, and we see ourselves as positioned to continue to grow and gain market share in this market, independent of the cycles of the economy, be it in high rates or low rates. Continue to work with this client to generate cross-sell, to generate long-term relationship. What we see usually, the correlation with the lag. The rates will probably start to go down.
It has already started to go down in Brazil, and there will be a correlation of the caps, but there is also a lag in that. Within this period of time, there will be an arbitrage to capture temporarily benefit rates. The way we have our own distribution system to operate this client, we don't suffer. We have a bigger buffer, we understand, because we also don't have third parties to distribute this product. When rates go down or go up, there's also a part of the fees or more cost that in general the market pays that we don't do. We can kind of maneuver better the strategy of maintaining the relationship with this client. With that, I'll pass to Felipe to complement also this question.
Yes, Marcello, just to mention that this is an efficiency game. As we don't rely on third parties, for example, to originate credit, we are able to be more efficient, not only in acquisition of the customers, but also in terms of cost to serve. These unit economics provide us this leverage to keep growing and keep growing this in this segment as well.
Just the first question on the follow-up on SG&A, if you can break that apart, the two effects that you mentioned earlier?
Yep. Meloni, it was a little bit cut off the part that you asked about the G&A. Can you repeat that, please?
Oh, yeah, of course. I apologize. So you mentioned the one-off effect from legal and then lower variable costs. Can you split that up for us and give us an order of magnitude of which effect was what?
Yeah. It was the part of the variable was like in terms of the reduction. I would say 20% of the reduction came from the variable costs, and 80% came from the reduction in the SG&A expenses.
That's perfect. Thanks again, guys, and congratulations.
Our next question comes from Jamie Friedman with SIG. Your microphone is open.
Hi, good evening. It's Jamie at Susquehanna, SIG. I wanted to ask, the company's had significant improvement in the efficiency ratios. I was just wondering how durable you see those. If I could, as my follow-up, in terms of some of the investment considerations for 2026 and beyond, how do you see the technology investments required to, you know, address both some of the new services and the expansion of the company overall? So the first is on efficiency, the second's on technology. Thank you.
Hey, hi. Good to be talking to you. In terms of the efficiency ratio, we see our model as scalable to capture gains of operational leverage throughout the last years based on the strategic position that we have and based in heavy investments in technology. We see that in the future, we can still capture more operational leverage. We've been heavily investing in AI. We see we want to see ourselves as an AI-driven company within a period of the next 24 months by immersing all of our C-level in the AI initiatives. We have already initiatives that are measurable in the company. I think with, for that, I can invite Marciano to speak a little bit of the projects that we have in place here. Marciano, please.
Thank you, Marcello. Great question. I would say that it can be AI can be a disruptor, but also a powerful opportunity to the companies, depends on how quickly a company is able to adapt and integrate into its core business, right? For many companies globally, the real challenger is not understanding AI, but it's actually integrate deeply into systems, process and culture. In our case, we see AI as a natural extension of our strategy. Agibank has been built to solve a very specific problem. We use technology to improve the lives of the largest population that is not naturally tech-savvy. It puts us in a very strong position today.
We see AI as a significant opportunity to become a truly AI-driven bank over the next 12-24 months, enhancing key areas such as credit underwriting, customer service, fraud prevention, collections, marketing, and the overall operational efficiency as you asked. Another important point here that we not carry the same legacy constraints as many traditional banks. We operate on a proprietary core bank system designed to be flexible and fully integrate with the modern technology stacks. This allow us to connect seamlessly with the latest foundational AI models and external solutions without the limitation of the legacy architecture, right? We are excited to the results that we can see.
Just to give you a quick color about the impact, we have 40% in cost avoidance related to our call centers and over the next 12 months. Also, our AI agents are 80% more efficient when you compare it to the human contact. While also maintaining higher service levels and accommodate our fast pace of growing the customer base.
Basically we see also in the fraud detection a 90% reduction in the review time of the fraud alerts. Also, as Marcello mentioned, the legal workflow today we use our AI agent to avoid costs per process for legal processes for litigations, and we have a very material result of that. We have many layers of the bank that we already use, and we see a very massive opportunity to continue to improve our efficiency ratio based on the AI impact.