BR Advisory Partners Participações - Q1 2024

Transcript

Vinicius Carmona (Director and Head of Investor Relations)

Good day, everyone. Thank you for waiting. Welcome to BR Advisory Partners' conference call to discuss first quarter 2024 earnings results. We inform that this video conference call is being recorded and can be accessed in the company's IR website, where you'll find the full package of our financial disclosure. During the presentation, all participants will be in listen-only mode. Later, we will have a question-and-answer session. To ask questions, click on the Q&A icon at the bottom of your screen and type in your question. If you prefer to use the microphone to ask questions, just let us know by message, and we will send you a request to enable your microphone.

We emphasize that the information contained in this presentation and forward-looking statements that might be made during the video conference call relating to BR Advisory Partners' business prospects, projections, and operating and financial targets are based on the beliefs and assumptions of the company's management, as well as on information currently available. Forward-looking statements are not a guarantee of performance. They invoke risks, uncertainties, and assumptions as they refer to future events and, therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operating factors may affect the company's future performance and lead to results that differ materially from those expressed in such forward-looking statements. Today, we have the following officers present: Ricardo Lacerda, CEO; Marcelo Costa, CFO; Danilo Catarucci, Managing Director and Head of Capital Markets; José Flávio, CEO of BR Advisory Partners Bank; and Vinícius Carmona, IRO.

Now I will turn the floor to Mr. Vinícius Carmona to start the presentation.

Good afternoon, everyone, and welcome to our conference call to discuss first quarter 2024 results. We are very happy with our performance this quarter. BR Advisory Partners once again posted record revenues and profits in Q1/2024, and this was the fourth consecutive quarter of net income growth and increased profitability. As we mentioned in the previous conference call, we felt an improvement in the business environment at the end of 2023, and we were quickly able to take advantage of this momentum, strengthening the company's revenue generation in its different business verticals. Let's start with the financial highlights. Total revenue was BRL 138 million, up 11% quarter-over-quarter and up 36% year-over-year. Client revenues totaled BRL 97 million, down 2% quarter-over-quarter, and growing 64% year-over-year.

I would also like to take this opportunity to announce the disclosure of client revenue by Managing Director, revenue by MD. This indicator is widely used by investors from foreign investment banks, and as a good practice, we are now communicating this to the market as well. Revenue per MD is a relevant metric to show the revenue-generating capacity of the company's top executives and can be used as a metric to measure the operating efficiency of BR Advisory Partners. In Q1, revenue per MD was BRL 9.7 million. Net income totaled BRL 49.5 million, up 15% quarter-on-quarter and up 49% year-on-year. ROAE reached 24%, the highest level of profitability reached after the total dilution of this indicator with the proceeds of the IPO in 2021.

Regarding operational highlights in investment banking, we announced three deals in Q1 totaling more than BRL 3.4 billion, the highlight going to M&A operations. In capital markets, our issuance volume reached BRL 2.1 billion in 16 issuances. In wealth management, we've reached BRL 2.7 billion in assets under advisory, wealth under advisory, growing 16% quarter-over-quarter. Moving on to the next slide, let's talk about the evolution of our partnership. You will remember that in Q3 last year, simultaneous to our follow-on, the partnership increased its stake in the company's total capital from 45% to 55% through the purchase of shares from the company's seed investors. This purchase was very important for maintaining our greatest competitive advantage, i.e., our people.

As you all know, we have a strong culture of retaining strategic people in the company by inviting them to the partnership, and all the wealth creation by these partners happens in the company itself, in BR Advisory Partners' equity. All partners are investors in the business and share the same risks, as well as the dividends related to business performance. Last quarter, we commented on our investment in people, strengthening the teams and seniorizing the company as a strategic pillar for the growth and sustainability of our activities. This year, right after the competency assessments and bonus payments, we officially expanded our partnership with 10 new partners joining from different areas, front and back office, and bringing very positive contributions to the company.

Today, we have 36 partners, and we are made up of a partnership led by highly senior people, 28% of whom are MDs, 39% directors, and 25% VPs. We also have 20% of the company's total headcount made up of partners and an average tenure of six years per partner. Considering that the company is only 14 years old, we have a partnership of six years, so that's a long time for our partners. We wish all our new members of the partnership the best of luck. Now, on slide four, we see the quarterly client revenues. Total revenue reached BRL 138 million, of which BRL 97 million, or 71%, was made up of revenue generated directly from clients.

We managed to maintain the same level of client revenue as last quarter when we felt a recovery in the capital market and better investment banking activity, and obviously with a much higher level than in the first quarter of 2023. On the capital revenues side, we saw an improvement in the yield of the private securities portfolio, which more than offset the reduction in funding income from equity remunerated at CDI. We also noted the revaluation of FIPs in the investments division, which had a positive impact on this revenue. In total, 29% of the quarter's revenue were made up of capital revenues. Now, on slide 5, let's review the performance of our business lines, starting with investment banking and capital markets.

In investment banking, specifically about M&A, we see a more benign environment with a greater likelihood of deal conversions compared to 2023, with a diversified pipeline that is developing, either due to improvements in the fundamentals and in the operational side of some companies or due to a slight perception of deleveraging. On the other hand, the still expensive access to resources and the difficulty companies have in raising funds via the stock market inhibit a more intense movement in M&A rounds, especially for companies that use this mechanism of M&A for inorganic growth. In other words, the level of activity is good, but it is not excellent. There has been market frustration more recently with the possible earlier and less intense monetary easing, which will still represent a heavy burden for the corporate sector, which will continue to have a high cost of debt.

On the capital markets side, the first quarter was marked by a very heated local debt market, whether for corporate finance, debt reprofiling and restructuring, or for deleveraging, the example being sale and lease back. Increased investor appetite for the primary credit market also certainly helped to drive new debt issuances. Turning to the figures, the division's revenue totaled BRL 78 million in the first quarter, up 3% over the previous quarter and 69% compared to the same period last year. We had the best quarter in the history of this division, accounting for the return of a greater contribution from M&A deals and the continuity of our presence in the local DCM. On slide 6, we show some information on the dynamics of IB in the quarter.

In the first 2 graphs, we show the distribution of deals announced in the last 12 months by type of advisory and economic sector. In IB, the deals announced were 50% M&A and 40% restructuring. In terms of sector distribution, we highlight retail, financial services, and energy. With regard to the transactions announced in the quarter, we would like to highlight our advice to Cemig on the sale of its stake in Aliança Energia to Vale, a BRL 2.7 billion deal. I would also like to highlight our advisory services for the primary follow-on of GPA in the beginning of the year and our advisory services to TravelX in connection with the purchase of the number one foreign exchange consultancy. On slide 7, we show the evolution of our issuances in the capital markets, which presented a volume of BRL 2.1 billion in the first quarter.

In 16 debt operations, an average of more than five transactions settled per month. We saw a considerable increase compared to previous quarters. Look at this. Despite the fact that the SELIC rate is looking more and more likely to remain in double digits in 2024, we continue to work with a rather solid pipeline and with good opportunities in real estate development and energy projects for the year 2024. Now, on slide eight, let's talk about our treasury, the results of treasury sales and structuring. The division posted revenues of BRL 17 million in the quarter, up 47.6% year-over-year and down 21% quarter-over-quarter.

In this quarter, we saw good dynamics, mainly due to the reheating of the capital markets, where we found good opportunities for structuring debt swaps with our clients, even though we felt greater price competition from the incumbent banks in the large corporate segment. In the FX and commodities markets, due to lower volatility, we saw lower demand than in the previous quarter, but this is expected to grow again in the coming quarters. Slide 9 shows the results of the asset management line, which includes revenues from the investments and wealth management divisions. Revenue totaled BRL 2.1 million in Q1, up by 54% year-over-year and 7% quarter-over-quarter. The division's revenue reflects management fees from FIPs and advisory fees from the wealth management business division, which, despite having started operations only in the last quarter of 2023, already has BRL 2.7 billion of wealth under advisory.

At the bottom of the slide, we see the results of the capital revenues, which stood at BRL 40 million, increasing 62% quarter-over-quarter and decreasing 4% year-over-year. The strong performance of the result in Q1 is explained basically by the expansion of the private securities portfolio and the revaluation of FIPs in the investments division. This movement always takes place in the first quarter of each year. Now, on slide 10, we'll go through our performance indicators. We show the evolution of income profits, which totaled BRL 49.5 million in Q1, up 49% over first quarter 2023 and up 15% quarter-over-quarter. Net margin remained at a very healthy level of 36%, in line with prior quarters. In the top right-hand chart, our efficiency ratio reached 40.7%, showing healthy operating leverage and representing a substantial improvement over last quarter.

Due to strong revenue growth, lower personnel expenses, these personnel expenses were higher in Q4 2023 on account of the investment we made in people and the provisioning for bonuses, and also due to lower administrative expenses this quarter. In turn, our compensation ratios stood at 27.7% in keeping with the company's track record. In the lower chart on the left, we present the evolution of ROE, which reached 24% in the quarter, showing a continuous evolution of increasing profitability since the first quarter of last year. This quarter's ROE also shows that we have been able to take advantage of windows of opportunity in the market and quickly translate them into results. Finally, in the last chart, we present the metric client revenue per managing director. Revenue per MD amounted to BRL 9.7 million in the quarter.

The reduction compared to Q4 2023 is explained by the number of MDs, which increased from 8 to 10 in this quarter. This increase is a reflection of the company's growth and its investment in strategic people for our development, as we have been saying last quarter. As I commented a minute ago, this is an operating efficiency metric widely used in foreign investment banks, and we decided to adopt it to improve our information disclosure. On slide 11, on capital and funding, we show the growth of our private securities and bridge loans portfolio, which stood at BRL 2.5 billion at the end of March 2024, growing strongly by 46% year-on-year and 19% compared to December last year.

This growth is explained by the greater activity of the capital markets division in line with our strategy of using capital intelligently and more actively in the debt issuances we structure and co-invest in with our investors. Still in the first chart, we present the bank's leverage, which reached 3.5 times at the end of March, a moderate increase over Q4 2023, but which still leaves room for the continuation of our asset growth strategy, respecting always our strict credit quality criteria. With regard to the Basel ratio, we ended the quarter with a ratio of 17.8%. We are very comfortable and have room to continue allocating capital strategically and helping to grow our derivatives activities and private securities portfolio over the coming quarters following the execution of our business plan.

On slide 12, we show the evolution of the company's shareholders' equity, which stood at BRL 826 million in the end of the quarter. Shareholders' equity of BR Partners Bank totaled BRL 728 million. On the bottom of the slide, we present the evolution of our funding. We reached funding of approximately BRL 3 billion in the end of March 2024. This growth in funding is a reflection of the increase in our private securities portfolio in the period. The average term of funding stood at 334 days, close to one year, a healthy level given the nature of our assets. With this, I would like to reinforce that we continue to maintain very comfortable levels of liquidity. Lastly, on slide 13, we announced that the board of directors has approved the payment of interim dividends referring to the results of the first quarter of 2024.

We'll be paying BRL 0.30 per unit, totaling BRL 31.5 million, representing a payout of 63.7%. The dividend yield will be 7.61% based on the average share price in that period. Lastly, I would like to emphasize that we are rather pleased with the results we have achieved and that we have a very prepared team with partners aligned to pursue the company's growth in the long term. Thank you very much for your attention so far, and now we're ready to answer your questions and clear your doubts. Thank you very much. We will now begin the Q&A session. In order to ask a question, click on the Q&A icon at the bottom of your screen. Write your question to get in line. When announced, a prompt will appear on your screen to enable your microphone. Then you must open your mic to ask questions.

We recommend that you ask your questions all at once. Our first question comes from Ricardo Botbigo, sell-side BTG Pactual. Ricardo, we will enable your mic so you can proceed. Go ahead, sir. Good afternoon, everyone. I have two questions. First, could you comment what you see in terms of deal flow for M&A DCM in the first months of Q2? Because we saw this opening of the curve in April, so we thought there might be an impact, particularly on DCM. How would this compare with what we saw in Q1? And my second question, I understand that your business requires a constant building of a pipeline, but assuming that the business environment continues at this level, would it make sense to think of a profit close to BRL 200 million this year? It would be basically annualizing the results of Q1.

And there's also the effect of a positive reassessment of the FIPs in Q1, but at the same time, in Q4, you also have the concentration of the benefit of the IOC. So I'd like to understand if this current level is feasible in your view. Thank you very much. Thank you, Ricardo, for the questions. Regarding the pipeline and the business environment, I would say that the deal flow for M&A and DCM remains very robust in these first weeks of Q2. Now, obviously, there was a deterioration, a big deterioration in the expectations we had at the turn of the year. Unlike the 2022-2023 turn, from 2023 to 2024, we had an improvement in all segments and also a very positive expectation for 2024, including the return of the IPOs and a DCM flow. That was the expectation. It didn't happen.

This was basically given the interest rates in the United States and some concerns about the fiscal and monetary policies in Brazil. So we are living, so to speak, a volatile environment, which is something that we experienced along 2023. In 2023, we had a very poor beginning with Q2, Q3, still very volatile then, a significant improvement in Q4. We started 2024 with a positive outlook. I think the outlook remains positive, but not with the same level of expectation we had at the beginning of the year. As for DCM, Danilo can speak more about this, but we see the same thing. The rates did not affect us. Our portfolio is mostly hedged, and the demand for incentivized products ended up increasing with this change in the regulation. And of course, we're a company of incentivized products. This is our DNA since the beginning.

The products on which we focus actually ended up having a greater demand given the regulatory changes. So what we have seen is actually the opposite. We see a compression of the fees of our portfolio. And as for the results, we don't provide a guidance of future results. I always remind investors that despite our results in prior quarters showing a certain stability, we are a company that faces seasonalities, cyclicality, and perhaps a certain concentration in some major deals. So it is very hard for us to estimate. So we don't want to give an indication to the market of something that might not materialize. What I can tell you, though, is that what we saw in Q4 last year and Q1 2024 is a range of results that is possible.

I think we are more in the upper part of the range in terms of quarterly results than on the average or the lower end of the range. Something between BRL 40 million and BRL 50 million per quarter is something that we are aiming to get in the coming quarters, given the current environment. I'd like to recall that the environment is still positive. We have a robust pipeline both for mergers, acquisitions, and DCM, with a satisfactory renewal of the pipeline. But obviously, we are facing a scenario of uncertainties that can end up impacting the ratio of deals completed. It's clear. Thank you very much. Next question from Brian Flores, Citi. Brian, your audio will enable. You may proceed. Hello. Thank you for the opportunity. Actually, I have two questions. The first is about leverage. You showed in the presentation that the leverage is increasing.

I would just like to understand what is the comfortable level? I think it increased from 3x to 3.5x of the ratio. What is the level, Marcelo and the whole team? How do you see this leverage? And if you want, you can ask my second question afterwards. Brian, our leverage is at 3.5x. And we have been saying in prior calls that we use our balance sheet much more as a tactical portfolio, where we put part of the operations we are distributing and we co-invest in with our investors, and always with a mindset of finding a secondary market for these securities. So we don't have any metric of how much we'll grow or whether these 3.5x will grow. We don't think that it will grow much more than that. But we have a Basel Ratio, which is quite comfortable, 18%.

So if we grow to BRL 3.5 billion-BRL 4 billion, we have room in terms of capital. But our mission is to use up our balance sheet in a tactical way so we can foster the primary market. Perfect. Thank you very much. My second question is a follow-up on Vinícius's comment. You mentioned that the debt market had a lot of price competition in Q1. So I just would like to understand Q1 and Q2. How is Q2 beginning in your view? Do you see a more rational pricing, or is the competition still fierce? Brian, I would say that it really depends on the segment and on the products that you're working with. The plain vanilla in high-grade operations, I would say that the competition is very, very strong, and the spreads have been shrinking, as Ricardo mentioned, mainly because of a change in the beginning of February.

But the more structured segments where operations are more illiquid, in these segments, we can have a better pricing. There's still a lot of asymmetry in the capital markets and fixed income, where we have more obvious operations practically with no premium. And I'm not talking just about the world of non-incentivized operations, but also for the incentivized operations as well. While in less obvious operations, either because it's not liquid or due to an asymmetry or credit risk, these operations today can have a great distortion in terms of pricing. The market where we operate is in between these two worlds. We have seen a price competition, but today, there is a big demand for the product, so I think it's adequate.

I'd like to remind you that in the world of sales to individuals, the opening of the curve, as was mentioned in the first question, ends up helping to close the spread a bit because individuals, well, of course, the spread is important, but they look a lot at the coupon, particularly in prices of the securities. So this has helped compress the spreads, as mentioned before. Okay. Thank you. Just one follow-up from the standpoint of our treasury. Brian, we also saw in our treasury, well, we serve demands of inflation swaps for our issuers, their primary issuers. And we also saw, particularly in the second half of Q1, greater competition, either because the issuers were large corporates or because there was a certain shortage of operations, given the change in the legislation for MBS and ABS.

So we had some operations where we saw that the market was pricing with a spread, which, in our opinion, was not worth the risk-return ratio, capital allocation, and so on and so forth. So we decided to sit those out. And that led us to not have a better result in treasury and sales. Excellent. Thank you very much. Next question from Mateus Guimarães, sell-side XP. Mateus, we'll enable your mic so that you can begin. Mateus, go ahead. Good afternoon, everyone. Thank you for taking my question, and congratulations on the results. I have two questions. The first is relating to the wealth management segment. How do you see the evolution of that? You're at a level of BRL 2.7 billion. It seems irrelevant level. I just want to get a sense if this is in line with your expectations or if this is running even better.

My second question is about Basel. In Q1, we saw some banks adopting phase two of Basel III, impacting their Basel ratio. So in your time horizon of one year or the coming years, do you have any regulatory adaptation that can impact your Basel ratio, or this is basically portfolio growth impacting Basel? I just want to get a sense of how to include that in our modeling. Good afternoon, Mateus. Regarding wealth, we got to BRL 2.7 billion, which is what we are accounting in terms of revenue. The wealth management revenue has products that you account for monthly. Some clients pay every six months depending on the product. So it is a little ahead of the plan, but I think that this is less relevant.

More relevant is to build a portfolio of clients, important names, with a very global set of products covering both the international part and the domestic part. Just like in IB, there are many deals that we close and only book the revenue for when it is approved by CADE, Antitrust Agency, and the Central Bank of Brazil. Same goes for wealth management. We sign a contract of asset management, but there is a process involved, and there is a lagging. So we believe that in the next quarter, we will post even better numbers than the one presented in Q1. Regarding Basel, a straightforward answer is what will impact a Basel ratio is the size of our portfolio, particularly the portfolio of credit and derivatives. Basel III does not impact. Super clear. Thank you very much, and congratulations for the results. Well, thank you.

To continue, next question by Pedro Leduc, sell-side Itaú BBA. Mr. Leduc, go ahead. Thank you. Congratulations on the results. I have two questions. First, about ECM. We estimate, in terms of value produced and evolution of the portfolio, a retention level of about 20%. Of course, we don't know the fee for the portfolio, but it seems that you originated a lot, so I would like to understand. It seems that the market is doing better, or is this a level that we could expect for the rest of the year in terms of origination converting to the portfolio? That's one. Second, in the area of treasury sales and structuring, you posted resilient revenue. So perhaps you could elaborate on what led to those results and what to expect in the coming quarters. Thank you very much.

With regards to retention, this question is kind of hard to answer because the market is very dynamic. As you said, the distribution scenario is better. We obviously have helped more and more clients in the secondary market, so we retain a piece to help and foster liquidity. That's very important. Also, with the partners that we use and considering the maturity of the securities so that we can have the clients with the return levels expected because there are intermediary amortizations. It is important that we have the securities so that they will continue to buy along the lifespan of that security. So the retention is a lot more opportunistic than a target itself.

Depending on the type of deal, we'll increase that ticket either because I have to be fast and have a quick deal and then handle distribution, or if we realize that the market is going through a bad moment, and if we know that that is temporary, we can make a decision to retain more or even depending on the demand from investors. There were deals with practically no retention and deals where we had a longer retention because somebody wanted to buy it later. So although we were on the average and in our target 10%-20%, this was a coincidence of the opportunities rather than anything else. For the future, the second quarter is similar to the first. I think it should remain similar.

For the mid to long term, that's hard to say because it will depend on arbitration factors and even on opportunities of origination and distribution we might have. We have discipline to always bring in investors to co-invest. I'd like to remind you that our goal is to retain 20%-25% of deals limited to BRL 100 million maximum. We have complied with that. Just like Danilo mentioned, the demand for incentivized products increased. It was heated in the market because of market conditions and the regulation. That improved the distribution of these products. When we see that the spread is closing and that it's out of our risk-return ratio, we sell. If we see the opposite happening, we have another security. There will be better and worse moments. This is our day-to-day work.

It really depends on the needs also of our partners and clients. Sometimes our clients took on long amortization, so we end up helping them. It's very opportunistic, really. And Leduc, on the size of treasury, as Vinícius mentioned, we had very little volatility, particularly in currency. The dollar rate ranged from 40.9 to 5 BRLs per dollar the whole quarter, so we captured less from currencies and commodities, and we captured more in the part of operations pegged to debt. We continue to grow our portfolio. In this quarter, we see a lot of volatility, and this is having a reflection on our revenues and the fact that we have real interest rates slightly higher. For the swap market, that's actually important because it will give more incentives for clients to swap their operations to CDI.

As I mentioned, we saw greater price competition in the end of the quarter, but we believe that this is momentary. So given the growth of clients, which is a constant thing for us, and given our Basel capacity, which is quite good, and given the volatility and the capital market rather functional, we expect to have future quarters similar or even better than what we had in Q1. And Marcelo, let me add. One point that we talked about in the previous call is that today, half of the treasury revenues, revenue coming from flow, that helps a lot stabilizing revenue. And since the flow and the number of clients and the flow are growing, we expect revenue to be less volatile. So the numbers you're seeing, they're flat because we're doing a lot of work to bring in recurring revenues to the treasury. Excellent.

Thank you very much, and I wish you a lot of success. Next question from Marcelo Gonçalves, Buyside analyst, Versa. It's a written question. Could you give us more color on the result of remuneration on capital, which was 60% higher in the quarter compared to the previous quarter? That's a question by Marcelo. Well, thank you for the question, Marcelo. We had a revenue of BRL 40 million, capital revenue in this quarter. We had some positive impacts. The first being, occasionally in Q1, we do the reassessment of the FIPs that we manage. It's FIP Outlet and FIP PetCamp in the pet shop industry. We had a reassessment of these assets based on performance and on the results that we've had in these investees. And we had a reassessment of BRL 11 million in the quarter, and that is posted in the capital revenue.

Another point is that we are growing our private securities portfolio. As we showed in the yield of this portfolio, increased, improved substantially over the previous quarter. So that also brought us a gain in capital revenues, which more than offset the reduction in SELIC because we use our equity with a cost of funding at CDI to foster our treasury and capital market verticals. So declining SELIC impacts negatively this revenue, but the yield of the private securities portfolio more than offset this reduction. So these are the two factors that explain your comment. All right. Before proceeding, I would like to remind you that if you want to ask questions, you should click on the Q&A icon at the bottom of the screen and write your question to get in line.

When announced, a prompt to turn on your microphone will appear on the screen, and then you should enable your mic to ask questions. To continue, we received a question from an investor. Regarding the new client revenue indicator per MD, do you have any ideal revenue level? What interpretations can we draw from this metric? Well, thank you for the question. This indicator, let me put things into context and why we decided to communicate this indicator. We compare a lot our company with other peer investment bank players in the United States. And since we are a business of people, we're executives with a direct impact on revenue generation. We thought it would be interesting to disclose this metric to our investors. And it is also a measure of the efficiency of the company with our resources, and our resources are our people.

So in terms of what is the level, it really depends on the moment, on the economy. But our revenue per managing director ranges from 7 million BRL in worst market moments to booming moments when we were able to post revenue of 15 million BRL per MD. We are now at 10 million BRL, a high level. For your reference, our foreign peers have an average revenue per MD of $2 million. So we're kind of head-to-head with the main players of the investment banking market globally. Our idea is to follow the evolution of this index. And when we increase the number of MDs at the company, there's an expectation that we'll grow our revenues as well because at the end of the day, these MDs bring in recurring business to create value for the firm. We got another question from one investor.

The question is, what is the company's risk exposure in relation to events in the state of Rio Grande do Sul? Well, thank you for the question. I would say that in our private securities and bridge loans portfolio, we have zero exposure to the state of Rio Grande do Sul. In our derivatives portfolio, we have a few clients that have a low percentage of revenue linked to activities in that state. So we are led to say that we should not have any effect on our allowance for doubtful loans, and we have a lot of peace of mind. We understand that the situation may get worse, but we have very, very little exposure to this specific event in Rio Grande do Sul. Let me add.

On the side of credit, what we did was a reassessment of all our clients that have an exposure in Rio Grande do Sul. The conclusion was what Marcelo has just said. As we showed you, our portfolio is basically composed of clients with ratings A and B. These are very high-grade clients. We speak daily with those clients that we believe might have some risk, but this is something that we'll need to follow for a long time because the catastrophe in the south of Brazil has been terrible. We can never have peace of mind regarding credit, even when things are going quite well, but we are monitoring, and we don't think that our portfolio will be negatively impacted by the events in Rio Grande do Sul. Thank you.

As a reminder, if you want to ask questions, click on the Q&A icon on the bottom of your screen. Write your question to get in line. As there are no more questions, the question-and-answer session is closed. We would like to turn the floor over to the company management for their closing remarks. Well, thank you very much to all of you for joining us in another earnings call. I'd like to highlight that we are now in the best moment of our company. Both Q4 2023 and Q1 2024 showed very robust results across all divisions in a moment that reflects market conditions, but also the work we've done with our different teams. And this is giving the right results in investment banking, capital markets, treasury, and investments.

I would like to highlight the work that was done by José Flávio in putting together our wealth management division. It is with a lot of pride that we see this. At certain moments, we were frustrated when we tried to have some acquisitions. We negotiated, and things didn't go forward. At the end of the day, it is important to highlight that at this moment, we have a volume of clients in that division, which is equivalent to and surpasses a number of the options we considered for acquisition. We were able to build this without increasing the expenses of the company too much, increasing our ROAE, and with no dilution for our shareholders. So we are extremely optimistic with this business vertical. It is an extremely important business vertical to make up our business portfolio.

I think that we are going to see some very positive results in the future. That's just something I wanted to underscore. Of course, we don't have a crystal ball. We are in a very volatile market. We have to acknowledge that there are a number of external and domestic uncertainties. In terms of the moment for the company and our action in different segments, we are very pleased. Thank you very much, and I'll see you next time.