Renato Meloni

Renato Meloni questioned Credicorp's midterm ROE guidance of 19.5%, noting that current performance is already near this level despite expected loan growth and margin expansion. He asked when Credicorp expects to see a larger midterm ROE, suggesting potential upside, and inquired about the structural cost-to-income ratio five years down the line once disruptive investments normalize.

Answer

Alejandro Pérez-Reyes, CFO, explained that the midterm ROE guidance (19.5%) was conservative due to the electoral cycle in Latin America. He stated that Credicorp intends to revise this guidance after the electoral cycle, likely in the August call, and expects to present a target 'north of the 20% mark.' For the cost-to-income ratio, he reiterated the midterm target of 42% for the next two to three years, noting that a five-year projection is difficult due to potential future investments.

Renato Meloni questioned Credicorp's 2026 ROE guidance of 19.5% and its midterm ROE potential, asking when the company expects to see a larger increase, and inquired about the long-term cost-to-income ratio five years down the line, after disruptive investments normalize.

Answer

CFO Alejandro Pérez-Reyes clarified that the midterm ROE guidance (2-3 years) of 19.5% was conservative due to the electoral cycle. He expects to revise this guidance upwards, likely above 20%, after the upcoming elections in Peru and Colombia, with an update anticipated in the August call. For the long-term cost-to-income ratio, he reiterated the midterm target of 42% for the next 2-3 years, noting that further long-term projections are difficult due to potential new investments.

Renato Meloni followed up on loan growth, asking if the guidance for the current year was expected to be met and if it was FX adjusted or nominal. He also sought clarification on NIM expansion, reconciling higher yields from mix shift with lower cost of risk from lower-risk vintages.

Answer

CFO Alejandro Perez-Reyes confirmed the loan growth guidance is nominal but includes Bolivia's restatement, excluding Sol/Dollar FX impact, and is expected to be met. Chief Risk Officer Cesar Rios clarified that NIM expansion and lower cost of risk are due to two different portfolio dynamics: improving quality of traditional origination reducing cost of risk, while simultaneously originating new, higher-margin, higher-cost-of-risk segments that are gradually growing.

Renato Meloni from Autonomous Research asked for clarification on what diverged from initial expectations to cause the upward revision in loan growth guidance. He also asked for an expansion on the drivers for the higher long-term sustainable ROE target.

Answer

CFO Alejandro Perez-Reyes attributed the stronger loan growth outlook to a robust Peruvian economy and improved consumer situation, which is already translating into higher lending in retail and microfinance. For the higher sustainable ROE of 19.5%, he cited a better loan mix, improved risk-adjusted NIM, and growing fee income from initiatives like Yape. CEO Gianfranco Ferrari added a key factor is that the drag on ROE from digital investments, which was up to 150 basis points, is expected to be near zero this year and turn positive from 2026 onwards.

Renato Meloni asked for the primary drivers behind the subdued cost of risk this quarter, questioning if model revisions were the main factor and if this trend could lead to a full-year cost of risk below the official guidance.

Answer

An executive, likely Chief Risk Officer Cesar Rios, clarified that the lower cost of risk stems from multiple factors: a positive macroeconomic environment, specific one-time events, and the cumulative effect of enhanced origination policies and model adjustments since late 2023. He noted that while they expect to originate in higher-risk, higher-margin segments going forward, which will increase the cost of risk, the net effect on risk-adjusted NIM should be positive.

Renato Meloni of Autonomous Research asked what gives management conviction to restart loan origination and grow in the coming year while maintaining stable asset quality, particularly when shifting the mix towards consumer loans.

Answer

CEO Gianfranco Ferrari explained that confidence stems from a significantly improved macroeconomic environment and the fact that older, higher-risk loan vintages have been fully digested. CFO Alejandro Perez-Reyes added that while the loan mix is changing, the overall cost of risk will be managed through a different composition, with higher-yield loans being originated under tighter, more controlled risk parameters.

Renato Meloni from Autonomous Research questioned if 2026 is expected to be a year of accommodation or if the guidance is conservative due to upcoming elections. He also asked about expected revenue deliveries in 2027 to boost profitability, assuming an accommodation scenario for 2026.

Answer

CEO Marcelo de Araújo Noronha stated that 2026 is not a year of settling, but rather continued step-by-step improvement and investment for competitiveness, expecting higher and growing ROE. He acknowledged potential H2 volatility due to elections but expressed optimism based on GDP growth, balanced unemployment, and interest rate cuts. He identified credit, liability management, fee and commission income, the insurance group, and payments as key drivers for profitability, emphasizing cross-selling opportunities.

Renato Meloni asked if 2026 would be a year of accommodation or conservative guidance due to elections, and about the trajectory of ROE to more reasonable levels in 2027, as well as revenue drivers for increased profitability.

Answer

CEO Marcelo de Araújo Noronha clarified that 2026 is not a year of settling but a continuation of their step-by-step plan to increase competitiveness and ROE, expecting it to grow beyond 15.2%. He acknowledged macroeconomic volatility from elections but expressed optimism about their ability to compete, grow ROE, and deliver superior absolute results. He highlighted credit, liability management, fee and commission income, the insurance group, payments, consortium, and auto loans as key profitability drivers, emphasizing diversification and cross-selling opportunities through channel review and new digital platforms.

Renato Meloni asked about the progress in growing payroll-deductible loans for private companies following regulatory changes and inquired about the bank's capacity to expand its agribusiness loan portfolio.

Answer

CEO Marcelo Morojin explained that the bank was initially cautious with the new private payroll loan system due to high market-wide delinquency (16%), keeping its own NPLs at 5%. Now that the process is stabilizing, Bradesco expects to accelerate and gain market share. Regarding agribusiness, IRO Andre Garvalho confirmed there are good opportunities to grow the portfolio by carefully selecting the right customers, credit lines, and collateral.

Renato Meloni questioned how Bradesco is growing faster than the industry while remaining conservative, asking if they found an underserved niche or if they will need to enter riskier lines to sustain growth in competitive segments like payroll loans.

Answer

An executive clarified that the bank is not taking on higher risk. He explained that personal loan growth is focused on high-rated clients and includes low-risk, FGTS-guaranteed loans. He emphasized that the bank's vast distribution network and client base provide a significant advantage in INSS payroll loans and that the opportunity in fully collateralized SME loans (FGO/FGI) is substantial. Therefore, there is no need to move into riskier lines to achieve their growth targets.

Renato Meloni inquired about Bradesco's decision to reinforce its guidance despite lowering expectations for market NII, asking if this confidence stems from stronger client NII or lower provisions.

Answer

Executive Marcelo de Noronha explained that overall expectations have improved, leading to a higher implicit net income potential. He emphasized that provision costs and NII growth are linked, with a better loan mix driving safer growth. IRO Andre Carvalho added that the implicit net income is the primary reference and that stronger client NII, controlled expenses, or fee income can compensate for weaker market NII.

Renato Meloni from Autonomous Research questioned the reinforcement of Bradesco's annual guidance despite a lowered expectation for market NII. He sought to understand if this implies a stronger outlook for client NII or lower provisions, and what key factors have changed since the guidance was initially set.

Answer

Executive Marcelo de Noronha explained that overall expectations have improved, leading to a higher implicit net income potential within the guidance. He emphasized that NII growth and provision costs are managed together. IRO Andre Carvalho added that the implicit net income is the primary reference, and strength in areas like client NII or fee income can offset market NII weakness. He also highlighted strategic levers being pulled to accelerate revenue in the second half.

Renato Meloni from Autonomous inquired about Itaú Unibanco's long-term levers for value generation beyond efficiency, considering that some efficiency gains might be passed on to clients through pricing. He also requested clarification on the 2026 financial margin guidance, specifically the impact of anticipated dividends and interest rate sensitivity on the Net Interest Income (NII) line.

Answer

Milton Maluhy Filho, CEO of Itaú Unibanco, explained that value generation stems from growing the portfolio with quality, disciplined capital allocation, and consistent efficiency. He emphasized that while efficiency reduces costs, it also enables more competitive offerings and scale, leading to increased value through cross-selling and improved client relationships. Regarding NII, he clarified that a BRL 1.5 billion reduction in margin for 2026 is due to the delta dividend payment and anticipation, making the comparable client margin growth 8.1% against a 7.5% portfolio growth.

Renato Meloni from Autonomous asked about Itaú Unibanco's long-term levers for value generation, beyond efficiency, especially in a declining cost of capital environment where ROI might drop. He also sought clarification on the 2026 guidance, specifically the relationship between financial margin growth and portfolio growth, and the bank's sensitivity to interest rates.

Answer

Milton Maluhy Filho, CEO of Itaú Unibanco, identified key value generation levers as quality portfolio growth, disciplined capital allocation, and continuous efficiency improvements, emphasizing that a portion of efficiency gains must translate into competitive pricing. He highlighted the bank's technological modernization, including legacy system decommissioning and faster product delivery, as crucial for future scalability and value. Regarding the 2026 guidance, Maluhy Filho clarified that a BRL 1.5 billion reduction in margin due to anticipated dividend payments explains the apparent discrepancy between client margin growth (8.1% adjusted) and portfolio growth (7.5% midpoint), confirming organic growth at an adequate rhythm.

Renato Meloni from Autonomous asked about the growth drivers for the financed credit card portfolio, particularly the new products being deployed in the Personalité and Uniclass segments, and its contribution to NII.

Answer

President & CEO Milton Maluhy Filho confirmed the healthy evolution, attributing it to a set of factors including digital product adoption like PIX Credit, better personalization of offerings, and a favorable mix shift towards retail. He noted that while the financed credit card portfolio is a component, NII growth was also driven by average volume, liabilities, and structured wholesale operations.

Renato Meloni of Autonomous followed up on the client margin, asking about the potential sources of implicit compression later in the year (mix vs. funding costs) and where the biggest risks lie in the current credit cycle.

Answer

CEO Milton Maluhy Filho responded that he doesn't foresee significant pressure on spreads and highlighted that the risk-adjusted margin is the best since Q4 2019. Regarding the credit cycle, he described it as benign but requires caution. He identified short-term delinquency as the key indicator to watch, noting that Itaú's portfolio is performing very well and is resilient, with no major concerns at present.

Renato Meloni from Autonomous Research asked about the expected trajectory of the 2025 guidance and the opportunity and risks associated with the private payroll-deductible loan ('Consignado') market.

Answer

CEO Milton Maluhy Filho stated that while projecting linearity is difficult, most lines are stable except for market-sensitive items. He sees private payroll loans as a massive opportunity to grow the overall market, despite risks of over-indebtedness. He believes Itau's risk management provides a competitive edge and the goal is to expand the total market size.

Renato Meloni asked for the outlook on accelerating the individual loan portfolio, particularly in the context of the bank's recent derisking process and its comfort level with originating credit across all income segments.

Answer

CEO Milton Maluhy Filho stated that the derisking process is nearing its end, with an inflection point expected in Q3 2024. He noted that while growth continued in mid- to high-income segments, the overall portfolio was held back by the credit card book, which is now stabilizing. Maluhy Filho emphasized a disciplined approach, focusing on quality growth and risk-adjusted margins due to high consumer leverage, rather than pursuing aggressive expansion.

Renato Meloni asked about the competitive environment, inquiring if StoneCo might lower prices in a slowing economy and what its pricing strategy would be when interest rates eventually decline.

Answer

Strategy & Marketing Officer Lia Machado de Matos affirmed that the competitive environment remains rational and StoneCo's pricing strategy is based on its own return hurdles, not reactive moves. She projected that if interest rates fall, any industry-wide price adjustments for the existing client base would be a slow, multi-year process rather than an immediate change.

Renato Meloni asked about the deposit strategy, including whether the current mix of time deposits is optimal and if further benefits from lower funding costs are expected. He also inquired about competition for deposits and requested a breakdown of financial income growth drivers.

Answer

VP of Finance Mateus Schwening clarified that the cash sweep strategy is ongoing, with more deposits to be migrated in the coming months. The P&L impact was minimal in Q1 but will become material from Q2 onward, yielding a net benefit of 75-125 bps on migrated amounts. Executive Lia de Matos added that while the investment space is competitive, Stone's merchant clients prioritize saving for business purposes over chasing the highest yields.

Renato Meloni asked if there is a long-term target for deposits as a percentage of TPV. He also questioned the company's credit risk appetite for the year amid a potentially challenging macro environment and its view on the private payroll lending opportunity in Brazil.

Answer

Executive Lia de Matos stated that the long-term guidance implies deposits will continue to grow faster than TPV, serving as a key engagement metric. CEO Pedro Zinner and executive Mateus Schwening addressed credit, explaining that while they have proactively adjusted risk models, they still see room for portfolio growth due to low penetration. Regarding payroll loans, Lia de Matos described it as an early-stage opportunity that the company is monitoring closely as regulations evolve.

Renato Meloni asked what drove the strategic shift from a conviction in owning the software business to now considering a potential sale. He also asked for the expected recurring effective tax rate following the recent bond repurchase.

Answer

CEO Pedro Zinner clarified the core strategy of offering software remains, but the company now believes it can achieve its cross-selling goals through commercial partnerships without owning the asset, enabling an asset-light model. Executive Mateus Schwening stated the effective tax rate should now be at the lower end of the previously guided 20% to 25% range.

Renato Meloni asked about how PagSeguro is balancing deposit and credit growth, specifically questioning if there is a target for the loan-to-funding ratio. He also probed whether the current cost of deposits acts as a limitation on future credit growth.

Answer

Executive Ricardo da Silva stated there is no specific target for the loan-to-funding ratio. He asserted that funding is not a constraint for credit expansion, as the credit portfolio is still small relative to the BRL 40 billion total funding base, meaning they could grow lending without materially impacting funding costs. Executive Artur Schunck added that the company has worked to diversify its funding sources beyond deposits, providing flexibility.

Renato Meloni from Autonomous Research inquired about the company's strategy for balancing deposit and credit growth, asking if there's a target for the loan-to-funding ratio and whether deposit costs could limit credit expansion.

Answer

Executive Ricardo da Silva stated there is no specific target for the loan-to-funding ratio and asserted that funding is not a constraint on credit growth. He explained that given the company's large BRL 40 billion funding base, the marginal cost of funding incremental loan growth is minimal and easily supported by lending spreads. Executive Artur Schunck added that the company's diversified funding sources provide further flexibility.

Asked about the company's strategy for balancing credit growth and funding, specifically whether there is a target for the loan-to-funding ratio and if the current cost of deposits acts as a constraint on credit growth.

Answer

There is no specific target for the loan-to-funding ratio. Funding is not considered a constraint on credit portfolio growth, as the company has access to ample and diversified funding sources beyond deposits. The marginal cost of additional funding is manageable and would not prevent them from growing the loan book if they choose to.

Renato Meloni of Autonomous Research asked about the potential opportunity in private payroll lending and requested information on the percentage of clients that have already been repriced.

Answer

Executive Ricardo da Silva stated that PagBank views private payroll lending as a significant opportunity once regulations are finalized, citing its collateralized nature and the potential for a superior digital experience to be a key differentiator. Regarding repricing, he confirmed that the majority of clients have been repriced over the last 12 to 18 months, with the exception of those on standard, publicly listed website rates.

Renato Meloni of Autonomous Research asked about the dynamics of reducing deposit costs despite a sequential dip in checking account balances, and sought confirmation that the company could offset higher interest rates to meet its guidance.

Answer

Executive Ricardo da Silva explained the drop in checking account balances was a timing anomaly due to the quarter-end date, noting that daily average deposits are growing. He also expressed confidence in the company's ability to offset higher interest rate impacts and deliver on its 2024 guidance, potentially exceeding the top of the range for TPV and net income.

Renato Meloni of Autonomous Research asked about the initiatives to reduce deposit costs in light of a sequential decline in checking account balances and sought confirmation that the company could still meet guidance despite higher interest rates.

Answer

Executive Ricardo da Silva explained the drop in checking balances was a timing anomaly due to the quarter's end date and that average daily balances are growing. He also reaffirmed confidence in meeting or exceeding 2024 guidance, stating the company will offset the impact of higher interest rates.

Asked about the recent decline in gross profit as a percentage of TPV and whether further compression is expected. Also requested more detail on plans to reduce the cost of funding for deposits and if there's a specific cost target.

Answer

The decline in gross profit per TPV was attributed to the mix shift towards the LMEC segment and the growth of lower-margin products like PIX. The company emphasized managing the entire P&L to meet its overall guidance. For funding costs, there is no specific target versus CDI; the strategy is to diversify funding sources and balance paying higher yields to attract clients for cross-selling with overall cost reduction efforts.

Renato Meloni revisited the revenue drivers, questioning the assumption of lower DCM volumes and asking how much market share gain was embedded in the forecast. He also asked for the rationale behind their conviction to gain share and whether to expect lower fixed income take rates.

Answer

CEO Thiago Maffra stated the >10% growth guidance is a floor and that XP can gain market share even in a shrinking DCM market due to its strength in retail-focused products and growth in new corporate lines. He advised against projecting a lower fixed income take rate. CFO Victor Mansur added that the company's recently completed corporate restructuring provides a lower cost of capital, enhancing their competitiveness and ability to gain share in 2025.

Renato Meloni requested a breakdown of the fixed income take rate expansion between client activity and balance sheet securities, and asked how the take rate might behave amid compressing spreads and a changing rate cycle.

Answer

CFO Victor Mansur declined to provide a detailed breakdown but confirmed that selling previously warehoused securities was a significant driver. He stated that despite some spread inflection, strong DCM pipelines and client demand should support a similar take rate, as they don't foresee major structural market changes.

Requested more detail on the NII guidance, asking to distinguish the contribution from Patagonia's results versus other factors. He also inquired about the exchange rate assumption for Patagonia and the potential impact of further currency depreciation.

Answer

The NII guidance review is supported by better spreads in the Agro portfolio, tactical treasury strategies, and growth in payroll loans. Patagonia's contribution has already exceeded the full-year forecast, aided by the removal of a funding rate cap in Argentina. The current guidance does not assume a major currency depreciation, and even excluding Patagonia, NII growth would be strong.

Asked about the repricing of the loan portfolio, which had been significant recently. He wanted to understand the bank's mindset on this, particularly for payroll loans, and whether there was an opportunity to continue increasing yields into the next year.

Answer

The executive explained that the payroll loan portfolio has a duration of about 18 months, so a huge impact from repricing isn't expected in 2024. However, they see an opportunity to improve the overall portfolio yield by successfully growing their share in the private payroll loan segment, which commands more attractive rates than public sector payroll loans. They are also bringing back older, lower-spread operations at better profitability.