Tito Labarta

Tito Labarta asked about the bank's funding and deposit base, noting a 12% fall in deposits this quarter, flattish time deposits, declining savings, and reliance on LCAs, LCIs, and financial bills. He inquired about the factors impacting deposit growth and the future evolution of funding costs. He also asked for any comments on Santander Spain's view on maintaining the publicly traded stub piece in Brazil and the potential for a buyout.

Answer

CEO Mario Leão stated that the bank is intentionally evolving its liabilities mix, prioritizing quality over volume. He highlighted a disciplined strategy over the past two years to shift from wholesale-dependent funding to retail-based, increasing transactional deposits from individuals and SMEs. He noted that financial letters were tactical issuances at tight spreads to reduce wholesale costs. CFO Gustavo Alejo added that the plan is to lower the overall cost of funding by changing the mix, focusing on quality, and leveraging good liquidity levels. He mentioned reducing the loan portfolio in the mass market while increasing transactional deposits. Regarding a potential buyout, CEO Mario Leão stated that the group already owns close to 90% and the focus is on delivering strong performance to justify that ownership, aligning with minority shareholders. He could not comment on group-level discussions.

Tito Labarta asked about the 12% fall in deposits this quarter, the flat time deposits over the last year, and declining savings deposits, with funding shifting to LCAs, LCIs, and financial bills. He sought to understand the impact on deposit growth, future evolution, and funding costs. His second question was about the possibility of Santander Spain buying out the remaining stake in Santander Brasil and the holding company's view on maintaining a publicly traded stub.

Answer

CEO Mario Leão explained that the bank is intentionally evolving its liabilities mix, prioritizing the quality of deposits over sheer volume, shifting from wholesale-dependent to retail-driven funding. He noted that retail deposits, especially transactional ones (DDA, ContaMax), are increasingly funding loan growth, leading to a positive evolution of overall liability costs. CFO Gustavo Alejo added that this strategic shift aims to lower the overall cost of funding and improve the balance sheet composition, contributing to stable and higher ROE. Regarding the buyout, Leão stated that the group already owns nearly 90% of Santander Brasil, and the focus is on increasing the value of this stake through improved performance and dividends. He acknowledged that the group might debate a buyout but emphasized that the Brazil team's role is to deliver the best possible Santander Brasil.

Asked about the bank's profitability, inquiring about a sustainable level of ROE and its key drivers. He also asked whether the sharp decline in ROE in recent years was purely cyclical or if structural competitive changes in the industry were also a major factor.

Answer

The executive stated the goal is to return to a high-teens ROE, driven by profitable growth and, crucially, by making the low-income segment profitable. He attributed the past ROE decline to a combination of factors: increased competition, the entire industry accelerating credit in 2021, and a structural change in the profitability model for the low-income market. The bank's current strategies are designed to counteract these competitive and regulatory shifts.

Tito Labarta of Goldman Sachs asked for a breakdown of the expected revenue acceleration in the second half of the year and questioned whether fixed income revenues are peaking or could continue to grow strongly.

Answer

CFO Victor Mansur attributed the expected 2H revenue growth to three factors: more business days, growth in new verticals and advisor headcount, and a potentially stronger DCM market. On fixed income, he noted that while high short-term rates are compressing take rates as clients prefer shorter duration, this trend could reverse as rates fall. He added that a strong primary offering pipeline in the second half could also boost fixed income performance by attracting clients to longer-duration products.

Tito Labarta from Goldman Sachs inquired if recent news concerning midsized banks had negatively impacted XP's client inflows. He also asked for the most critical driver for a potential recovery in the company's equity revenues.

Answer

CEO Thiago Maffra stated there was no impact on inflows or revenue from the midsized bank news, as the bank in question was not a significant contributor. CFO Victor Mansur identified the key drivers for an equity revenue recovery as a combination of higher market trading volumes, improved market performance, and a rebound in primary offerings for listed funds like REITs.

Tito Labarta asked about the drivers for potential upside to the 10%+ revenue growth guidance for 2025 to meet the 2026 targets. He also inquired about the flexibility of the projected 10% expense growth and the potential for further cost-cutting measures.

Answer

CEO Thiago Maffra described the 10%+ revenue guidance as conservative, noting it doesn't rely on a better macro environment. He detailed strong growth drivers across core investments, cross-selling, and the wholesale bank, stating they are on pace to meet the 2026 guidance. CFO Victor Mansur added that expense management is dynamic; they will manage costs to ensure efficiency ratio improvement, investing more if revenues outperform and tightening if they are at the lower end of guidance.

Tito Labarta asked about the growth outlook for the fixed income retail revenue line and the Issuer Services division, particularly regarding DCM activity. He also sought confirmation that the reported BIS ratio was fully loaded.

Answer

CEO Thiago Maffra expressed optimism for both fixed income and Issuer Services revenues, citing a robust DCM pipeline and strong client demand. He noted that the company's restructured bank enhances competitiveness in originating and warehousing deals. He also confirmed the BIS ratio is fully loaded.

Tito Labarta of Goldman Sachs asked how Nubank thinks about balancing its rapid deposit growth with loan growth, and if they would consider slowing deposit intake. He also followed up on the optimal gross profit breakdown between credit, fees, and float.

Answer

CFO Guilherme Lago explained that they are comfortable with the current loan-to-deposit ratio and view a strong deposit franchise as a strategic necessity for becoming customers' primary bank, especially in Brazil. For the follow-up, he stated that credit is expected to be the main driver of ARPAC growth, aiming to close the gap between Nubank's current $12 ARPAC and the incumbent banks' $45 ARPAC, as credit represents the largest portion of the retail banking profit pool.

Tito Labarta of Goldman Sachs asked about the long-term growth opportunity in secured lending, including FGTS, public payroll, and the newly launched private payroll loans. He also followed up by asking why management does not expect the new private payroll product to have a material short-term negative impact on the existing unsecured loan portfolio.

Answer

CFO Guilherme Marques do Lago highlighted the massive profit pool available in Brazil's secured lending market. He noted strong traction in public payroll loans and market share gains in FGTS, and expressed significant optimism for the digitally-native private payroll product. Lago explained that any potential cannibalization of unsecured loans would be far outweighed by the overall growth of the credit portfolio, as the new product will allow Nu to grant more and better credit to a wider customer base.

Tito Labarta inquired about the growth outlook for the secured lending portfolio, particularly FGTS and payroll loans, and asked how the lower-yield nature of these products impacts overall company profitability and ROE.

Answer

CFO Guilherme Marques do Lago detailed a strong growth outlook for secured lending, driven by achieving 'product parity' in public payroll loans, signing new collateral agreements, and capturing over 30% market share in new FGTS originations. Regarding profitability, Lago explained that while the ROE of secured loans is lower than unsecured products, it is not dilutive to the company's overall ROE. This is because the growth is funded by deploying excess liquidity from the balance sheet (e.g., treasury bonds), not by replacing higher-return assets, thus optimizing the balance sheet and boosting overall profitability.

Tito Labarta from Goldman Sachs inquired about the key drivers for the upgraded financial guidance, the sustainability of the 50%+ TPV growth rate, and whether this growth was broad-based or concentrated among a few key merchants.

Answer

CEO Pedro Arnt explained that the stronger outlook is due to broad-based momentum, including a rebound in Brazil and Mexico and strong performance across other emerging markets. He attributed this to an accelerated push by global merchants to localize payments. Arnt clarified that while the growth is led by larger global players, it is driven by the top 20 merchants, indicating healthy diversification beyond just one or two clients.

Tito Labarta asked for details on the sustainability of growth and take rates in Argentina, particularly concerning advancement volumes, and for more color on the partial volume loss with a large merchant in Mexico.

Answer

CEO Pedro Arnt explained that growth in Argentina is sustainable due to renewed merchant interest and that the higher take rate is a structural part of a white-label product involving receivable financing. Regarding Mexico, he stated the volume shift was due to concentration with a few large merchants, not churn, and that the company needs to improve execution to reignite growth.

Tito Labarta asked about StoneCo's confidence in its 2027 guidance given the current TPV growth slowdown, and inquired about the expected timing and use of proceeds from the Linx divestiture.

Answer

Strategy & Marketing Officer Lia Machado de Matos acknowledged that softer market growth creates risk for the 2027 TPV target but expressed confidence in overall guidance due to strong monetization in banking and credit. CFO & IRO Mateus Scherer Schwening stated the Linx deal timing depends on regulatory approval and that proceeds will be returned to shareholders if no immediate value-accretive opportunities are identified.

Tito Labarta followed up on the EPS guidance, asking if executing the remaining share buyback program would create upside to the forecast. He also sought clarity on the potential sale of the software business, asking if a deal is still possible or effectively off the table.

Answer

Executive Mateus Schwening confirmed the EPS guidance does not factor in future buybacks, so any repurchases under the remaining BRL 900 million authorization would represent potential upside. On the software assets, CEO Pedro Zinner stated that no offers met their intrinsic value assessment and the focus is now on maximizing the asset's value on a standalone basis. He did not definitively close the door on a future sale but emphasized the current strategy is execution-focused.

Tito Labarta asked for the outlook on asset quality and provisioning levels for the remainder of the year, considering the macroeconomic environment and the company's growth in higher-risk segments like private payroll loans.

Answer

CFO Santiago Horacio Stel explained that the company's strategy is to optimize the risk-adjusted NIM, not just minimize cost of risk. He highlighted that the 90-day NPL is at its lowest level since 2022. Mr. Stel reaffirmed the cost of risk guidance of 5.0% to 5.25%, stating this range already accounts for the current portfolio mix and that he remains comfortable with the overall asset quality outlook.

Tito Labarta inquired about the outlook for expense growth and efficiency improvements in 2025 to reach the long-term 30% target. He also asked about the company's capital management, including the Core Tier 1 ratio in Brazil and the use of excess capital at the holding company.

Answer

Executive Alexandre De Oliveira affirmed the commitment to the 30% efficiency ratio target through disciplined cost initiatives. Executive Santiago Stel noted that Q4 expense growth was driven by higher volumes and variable pay but that costs are under control. Executive João Vitor Nazareth Teixeira de Souza addressed capital, stating the holdco structure optimizes allocation and that the strategy is to increase leverage in the Brazil operation by deploying capital into high-return loans while paying a modest dividend.

Tito Labarta from Goldman Sachs asked about the bank's sustainable long-term profitability (ROE), considering its excess capital, potential for efficiency gains, and the changing competitive landscape, especially in the high-income segment.

Answer

CFO & Member of Executive Committee Gabriel Amado de Moura stated that while the bank doesn't guide long-term ROE, he sees no reason why the current high levels of profitability are not sustainable, given the information available today. He acknowledged that competition is tough but expressed confidence in Itaú's capabilities, teams, and investments to maintain its strong position and continue delivering value above its cost of equity.

Tito Labarta from Goldman Sachs inquired about capital management, asking about the appropriate level of capital and the potential for further capital returns in 2025, given the high ROE and CET1 ratio.

Answer

CEO Milton Maluhy Filho clarified that 'additional dividends' are becoming a new normal, not an extraordinary event. He stated the bank targets a 12% CET1 ratio, maintaining a buffer for uncertainty. While business growth is the priority, any excess capital generated will be distributed annually to shareholders through dividends and/or buybacks.

Tito Labarta inquired about the strong loan growth in the corporate sector, including large corporates and SMEs, and how the bank views its ability to sustain this pace given the broader macroeconomic concerns in Brazil.

Answer

CEO Milton Maluhy Filho explained that the growth is healthy, supported by a well-capitalized balance sheet and an active DCM market that allows for a revolving credit strategy. He noted the portfolio is highly diversified with low concentration risk. While the rapid growth pace in large corporates might moderate, he expressed comfort with the portfolio's quality and the ongoing opportunities in both large companies and SMEs, where delinquency is decreasing.

Tito Labarta of Goldman Sachs asked about the potential for loan growth to accelerate in 2026 post-elections and the sustainability of high single-digit fee growth, considering the possibility of new interchange fee regulations.

Answer

Andrés Sansone, Chief Economist, and Patricia Pérez, CFO, addressed the questions. Sansone noted that while the expanding customer base supports fee growth, potential new interchange fee regulations by year-end could impact 2026. Pérez added that while consumer and SME loan demand is healthy, significant acceleration in overall loan growth depends on the reactivation of investment from large corporates, which is tied to the political landscape.

Tito Labarta from Goldman Sachs asked about the outlook for loan growth acceleration in 2026 following the elections and the sustainability of fee income growth, considering potential new regulations.

Answer

Andrés Sansone, Chief Economist, addressed fees, noting that while customer base expansion is a positive driver, a potential interchange fee cap at year-end could impact 2026. Patricia Pérez, CFO, added that consumer and SME loan demand is healthy, but large corporate loan growth is uncertain and depends on the post-election political landscape.

Tito Labarta of Goldman Sachs inquired about the key drivers that would enable Banco Santander Chile to bridge the gap from its 2024 ROE guidance of 15-17% to its long-term target of 17-19%.

Answer

Emiliano Muratore, CFO, explained that the two primary drivers for achieving the long-term ROE target are a normalization in the cost of risk from current cyclical highs and continued Net Interest Margin (NIM) expansion. This NIM improvement will be supported by the full repayment of the FCIC facility and the normalization of monetary policy conditions.

Tito Labarta from Goldman Sachs sought clarification on the increased fundraising guidance, asking if it was purely organic and separate from the recent REIT acquisition, and questioned the timing of its impact on Fee Related Earnings (FRE) for the remainder of the year.

Answer

CEO Alexandre Saigh confirmed the 5-10% increase to the fundraising target is entirely organic and in addition to the ~$600 million REIT acquisition. He attributed the strong fundraising to heightened interest from Asian, Middle Eastern, and European investors in Patria's infrastructure, credit, and GPMS products, driven by a search for alternatives to U.S. markets. Saigh explained that the FRE impact would be more weighted towards Q4 and into 2026, as the newly raised capital needs to be deployed before it becomes fee-earning, but expressed high confidence in meeting the full-year FRE guidance.

Tito Labarta asked about the fundraising outlook, questioning if there was potential upside to the $6 billion annual target given the strong Q1 results. He also asked for clarity on the path to achieving the full-year fee-related earnings (FRE) guidance, noting the Q1 run-rate appeared low.

Answer

CEO Alexandre Saigh confirmed Patria is maintaining its $6 billion fundraising target for the year, cautioning against extrapolating the record Q1 performance. To address the FRE guidance, Saigh provided a mathematical bridge, explaining that the Q1 run-rate of $42.6 million, when annualized and combined with expected incentive fees and management fees from the new capital raised, positions the company to achieve the midpoint of its $200-$225 million guidance.

Tito Labarta of Goldman Sachs asked about Bradesco's capital management strategy, questioning if the bank intends to increase its Core Tier 1 (CET1) ratio from the current 11.1% as profitability improves.

Answer

IRO Andre Garvalho stated that the bank considers the current 11.1% CET1 level to be very adequate and expects it to remain stable through the end of the year. He explained that profit generation will organically fund IOC payments and portfolio growth without restricting capital. The bank's plan includes absorbing its stock of DTAs over time without negatively impacting the capital base.

Asked about the bank's capital strategy, specifically whether there are plans to increase the Core Tier 1 ratio from its current 11.1% and what a sustainable level would be.

Answer

The bank considers the current Core Tier 1 level of 11.1% to be adequate and expects it to remain stable through year-end. This level provides a sufficient buffer for growth opportunities. Profit generation is expected to organically fund dividends and portfolio growth while maintaining this ratio. There is no plan to increase it at this time.

Tito Labarta asked about the financial contribution from the recently acquired John Deere Bank, specifically if it had any impact on Q1 earnings and what the expectations are for the full year.

Answer

An executive clarified that the contribution from John Deere to the Q1 net income was 'immaterial' and close to zero. The acquisition is viewed as a long-term strategic move to strengthen Bradesco's position in the resilient agribusiness sector. The current focus is on operational integration and strategy rather than immediate financial contribution.

Tito Labarta questioned the sustainability of the strong fee income growth and asked for clarification on the significant increase in 'other' operating expenses while core expenses remained controlled.

Answer

Executive Marcelo de Noronha asserted that the growth in fee income is sustainable and recurring, with the exception of the naturally volatile capital markets line. CFO Cassiano Scarpelli explained that the jump in 'other expenses' was primarily due to a difficult comparison baseline from the prior year, which included one-off gains and reversals. He noted that excluding certain consolidated companies, expense growth was within guidance.

Tito Labarta of Goldman Sachs questioned the sustainability of the quarter's healthy fee income growth, particularly from loans, asset management, and capital markets. He also asked for clarification on the significant increase in the 'other' operating expenses line item.

Answer

Executive Marcelo de Noronha asserted that the growth in fee income is sustainable and recurring, with the exception of capital markets which is naturally more volatile. CFO/CTO Cassiano Scarpelli explained that the jump in 'other' expenses was due to a difficult year-over-year comparison, as the prior year's baseline included specific reversals and gains. He stressed that core expense control remains a focus.

Tito Labarta followed up on guidance, asking if potential upside would come primarily from a lower cost of risk, and questioned what it would take for loan growth to accelerate, as it remains muted despite strong economic conditions.

Answer

Chief Financial Officer Alejandro Perez-Reyes explained that loan recovery typically lags after a downcycle and that high liquidity has led to significant client prepayments. However, he noted that loan sales have been very strong in recent months. An executive, likely CEO Gianfranco Ferrari, added that the company prioritized ensuring risk processes were robust before accelerating loan growth.

Tito Labarta of Goldman Sachs questioned why the efficiency ratio guidance for 2025 is stable to slightly weaker despite Yape's profitability. He also asked for the expected sustainable ROE for the insurance business.

Answer

CFO Alejandro Perez-Reyes explained that significant ongoing investments in innovation and core business capabilities are keeping the efficiency ratio at similar levels. CEO Gianfranco Ferrari added that while Yape is profitable, its cost-to-income ratio is much higher than the group's average, which negatively impacts the consolidated efficiency metric as Yape grows. For the insurance business, Ferrari guided for a sustainable ROE in the low 20s, noting that the exceptional results of the past two years were not sustainable.

Tito Labarta questioned the full-year ROE guidance of around 17%, given the strong year-to-date performance, and inquired about the net interest margin's sensitivity to falling interest rates.

Answer

Chief Financial Officer Alejandro Perez-Reyes confirmed that Q4 seasonality would temper results but expects the full-year ROE to land on the upper side of the ~17% guidance. He quantified NIM sensitivity as a ~15 basis point impact in the first year from a 100 bps rate cut, but expressed confidence in offsetting this through funding advantages and pricing discipline.

Tito Labarta asked whether the increased investor interest in Latin America is translating into actual capital deployment and which segments are most attractive. He also questioned why the FRE margin was below guidance and how it is expected to evolve.

Answer

CEO Alessandro Morgado Horta confirmed that interest is real and translating into commitments, with equities, infrastructure, and credit being the most sought-after asset classes by global investors. Bruno Zaremba, President of Finance and Operations, addressed the FRE margin, attributing the Q1 dip to an unusually quiet quarter for corporate advisory revenue. He reaffirmed the full-year guidance for a margin in the low 30s, expecting a stronger second half as the advisory pipeline materializes.

Tito Labarta sought to distinguish between one-time and recurring advisory fees, particularly within the IP&S segment. He also asked if the management fee rate for IP&S is at a sustainable level, considering Compass was only included for two months.

Answer

CEO Alessandro Morgado Horta and President of Finance and Operations Bruno Sacchi Zaremba clarified that advisory revenues from IP&S are a recurring part of the business, though lumpy, as they depend on the timing of closed-end fund placements. They distinguished these from truly non-recurring M&A-related expenses. Horta also confirmed that the current fee rate for IP&S, once annualized, should represent a stable recurring level.

Followed up on TPV, asking if take rate pressure is purely from the mix shift to larger merchants and about competitive dynamics. Also inquired about the source of the strong deposit growth, specifically the contribution from large merchants versus SMBs.

Answer

The company clarified that take rate pressure is indeed from the mix shift to LMEC, a trend expected to continue, but noted their definition of 'large merchant' is relatively small (over BRL 1M/month). This growth is driven by their own initiatives, not competitor actions. The strong deposit growth is primarily driven by SMBs and consumers, as very large merchants typically have established banking relationships elsewhere.

Questioned the reasons behind the sharp quarterly decline in financial expenses, especially for time deposits, and whether this trend is sustainable as interest rates in Brazil decrease.

Answer

The decline in funding expenses is expected to continue as interest rates fall, since approximately 80% of the bank's funding is at floating rates. A key driver was a regulatory change that extended the lockup period for certain investments (LCA/LCI), prompting the bank to strategically move clients to time deposits and other funds, which helped reduce overall funding costs.

Inquired about the growth outlook for retail loans, particularly credit cards and consumer finance, given the recent improvement in asset quality. Also asked about the competitive landscape, especially from digital banks.

Answer

The bank's growth focus for individuals is on payroll deductible loans, aiming for low double-digit growth. They are cautious with credit cards due to regulatory uncertainty and competition. For payroll loans, despite increased competition from digital players, they are confident in their ability to defend their leading market share through customized pricing and competitive offers.