Inter & Co - Q4 2022
March 14, 2023
Transcript
Operator (participant)
Good morning, thank you for standing by. Welcome to the Inter & Co fourth quarter of 2022 earnings conference call. Today's speakers are João Vitor Menin, CEO, Alexandre Riccio, VP of Tech, Operations, and Finance, Helena Caldeira, CFO, and Santiago Stel, Strategy and IR Officer. Please be advised that today's conference is being recorded and a replay will be available at the company's IR website. At this time, all participants are in listen-only mode. After the prepared remarks, there will be a question-and-answer session. For this session, we ask you to write down your question via the Q&A icon on your screen. Your name will then be announced, and you will be able to ask your question live. At that point, a request to activate your microphone will appear on your screen.
If you do not want to open your microphone live, please write down "no microphone" at the end of your question. In this case, our operator will read your question. Please note that there is a translation button on your screen where you can choose the language you want to hear, English or Portuguese. Throughout this conference call, we will be presenting non-IFRS financial information. These are important financial measures for the company but are not financial measures as defined by IFRS. Reconciliations of the company's non-IFRS financial information to the IFRS financial information are available in Inter's earnings release and earnings presentation appendix. Today's discussion might include forward-looking statements, which are not guarantees of future performance. Please refer to the forward-looking statements disclosure in the company's earnings release and earnings presentation. Now I would like to give the floor to Mr. João Vitor Menin. Sir, the floor is yours.
João Vitor Menin (CEO)
Good morning, everyone. Thank you for joining our fourth quarter earnings call. On page four, I want to walk you through today's agenda. I will start with a brief overview of our 2022 performance and achievements. The team will walk you through our banking pillars, the credit engine, and our funding capabilities. Following that, we will discuss the transactional platform and then finish with a discussion on our financial performance. During 2022, we achieved several milestones that I believe will position us for the greater success in the future. On the growth front, we have been adding clients and gaining adoption of different products in our platform. As a result, we have seen meaningful market share gains, improving the quality of our revenue by achieving diversification at scale. From a profitability standpoint, we strengthen unit economics by improving monetization and engagement.
Our focus on operational efficiency is starting to be visible in our expanding margins. Finally, all of this is done over the foundation of a strong balance sheet. What I mean by strong is, on the asset side, we have built a highly collateralized loan book. On the liability side, we have a best-in-class funding base, 39% of which is comprised of free demand deposits from more than 10 million retail clients. On top of this, high levels of liquidity and excess capital. On page six, I'll walk you through some important highlights. On the revenue side, you can see a truly impressive growth trend, growing 4.5 times from 2020 to 2022, reaching nearly BRL 6 billion. On the operational front, we have also demonstrated improving cost efficiency with, number one, our cost to serve dropping 29% year-over-year to BRL 16.
Number two, our cost of funding dropping 350 basis points to 59% of the CDI. Three, our efficiency ratio dropping to 69% at 24 percentage points improvement. As a direct result of our balanced focus on growth and expense control, I'm pleased to note that we continued to deliver a steady and sequential improvement in bottom line profitability, which reached BRL 29 million in the fourth quarter of 2022. On page eight, I would like to provide a snapshot of the client journey, which represents the way we think about value generation going forward. We are already penetrated 11.8% of the bancarized population, and we continue increasing this penetration day by day. This is the starting point for the transactional products such as Pix and demand deposits, in which we already have meaningful market share.
The journey continues with the higher ARPAC products such as cards, payroll, and many more. We have been continuously gaining market share in these higher ARPAC products and intend to mimic the success levels obtained in the transactional products. As of today, 66% of our clients already have three or more products, meaning that this journey is advancing well and is resulting on better client principality, which now stands at 69%. In summary, this slide shows the sequence of a client at Inter from the moment they open an account to the full adoption of our platform. The outcome of that is a further improvement on the unit economics of our clients. I'll pass it to Alexandre, who will cover the credit engine section. Thank you.
Alexandre Riccio (VP of Tech, Operations, and Finance)
Thank you, João, good morning, everyone. Now moving to page nine, let me walk you through the loan portfolio. As you can see, our portfolio reached BRL 24.5 billion at the end of 2022, reflecting a 40% increase from 2021 and 11% growth from the third quarter. The growth has been mostly focused on the lower risk segments, such as anticipation of credit card receivables, invoice factoring for SMBs, FGTS loans, and agribusiness. All these segments grew in the quarter at double-digit rates. In credit cards, we grew 7% quarter-over-quarter, reflecting a more conservative approach to unsecured credit underwriting that we have implemented since the beginning of 2022. Regarding the longer duration portfolio, which includes payroll and real estate loans, the focus has been on adopting a disciplined repricing initiative.
This has resulted in slower growth, though at much higher profitability levels. Moving now to page 10, we can see our underwriting performance. When you analyze the composition of the originations, we see the second half of 2022 is a lot more focused on lower risk segments. These lower risk segments, though lower in margin, consume significantly less capital and require less provisioning. Now on page 11, we highlight our asset quality metrics. When we look at the short-term metric of 15-90 days, we see a stable trend of NPLs, which is driven by the newer cohorts of originations, particularly on credit cards that are performing better than the older ones.
In terms of the 90 days NPLs, it grew 30 bps in the quarter, mainly explained by the lower growth together with performance of our credit card portfolio, which is in line with the general market trend. Finally, when we look at NPL formation, we see consistency with a trend marginally higher, again explained by older cohorts of credit cards deteriorating further. Finally, on page 12, our cost of risk decreased to 14.8% in the quarter, and the coverage ratio reached 132%. This reflects a mix shift in our loan portfolio towards lower risk credit products such as SMB, invoice factoring, FGTS, and anticipation of credit card receivables, therefore requiring lower provision expenses. Helena will now cover the funding and transactional platform sections.
Helena Caldeira (CFO)
Thank you, Alexandre. Good morning, all. On page 14, we can see the evolution of our funding base. Our deposits grew 36% year-over-year or 5% quarter-over-quarter to reach BRL 29.8 billion. When we compare this figure to our loan balance described on page 10, you can see that our loan to deposit ratio remains very healthy, significantly below 100%. I'll also highlight the double-digit growth on our low cost demand deposit this quarter, increasing its share over total funding from 37%-39%, one of the highest in the Brazilian banking system. Worth noting that this deposit base is highly fragmented given the nature of our retail client base. On page 15, here we show our deposits together with third-party fixed income investments and AUM from Inter Asset on a per active client basis.
Despite the high growth in active clients, we were able to grow the balance throughout the year towards R$3.5 thousand per active client. This positive pattern make us proud when we consider the high inflation and interest rates environment prevailing in Brazil. On our cost of funding on page 16, we see great results this quarter. The all-in cost decreased in the quarter to 8.1%, which represents 59.5% of CDI, a number that we consider best in class. This reduction can be explained by two factors. One, a better and lower cost funding mix. Two, the effect of paying off the holding debt in early October. Now I will go over our transactional platform. On page 18, we can see the strong client adoption of products in our different businesses.
We have increased our clients by between 40% and 55% across verticals. Specifically, in the case of Inter Global, launched at the beginning of this year, we went from zero to 1.1 million clients, surpassing our own expectations. Note that these are all high ROE products that consume no capital and drive strong client engagement. Moving to page 19, here we show how these products have helped us increase client engagement. First, on the chart on the left, you can see that approximately two-thirds of our active clients have more than three products, as mentioned by João. Second, on the right-hand side, you can see the evolution of who use Inter as their primary bank, which now amounts to 69% of active clients.
When we look on a cohort basis, you can see that both the starting point and the steepness improves, reaching levels close to 75% in most recent cohorts. This combination of transactional platform and banking have a very powerful effect on fee income. As you can see on page 20, our net fee income increased by a factor of 10 times between 2019 and 2022. This demonstrates the success we have had in diversifying our revenue base, reaching a best-in-class fee income ratio of over 34%. We believe this is one of the highest levels seen across banks in Brazil and Latam. I'll pass it over to Santiago, who will go over the financial section.
Santiago Stel (Strategy and IR Officer)
Thank you, Helena. Good morning, everyone. Going now to the financial performance section, I'll jump into page 22. Here you can see the evolution of our total clients, where we added a record of 8.3 million net new clients in 2022. We often get questions on the cost of adding these new clients. Here you can see the evolution of our CAC, which has ranged from BRL 27-BRL 32 and now stands at around BRL 30. When we look at the composition of this CAC, it is quite stable between marketing and operational costs. It is worth noting that the percentage of clients added organically continues to grow and now stands at over 80%.
In terms of volume transacted in debit and credit cards, as well as Pix, we reached an impressive BRL 178 billion in the fourth quarter, as you can see on page 23. This figure, which is equivalent to approximately $35 billion, makes us very proud and demonstrates our position strong in banking. When we look at transaction volume by cohort, you can see the continued improvements as cohorts matures, with the newest ones reaching higher levels at a much faster rate than the older ones. Going to ARPAC on page 24, you can see here an increase versus the prior quarter, both gross and net of cost of funding. On a cohort basis, ARPAC continues to increase over time, with newer cohorts outperforming the older ones.
These are a reflection of our ability to increase engagement and cross-selling of clients over time, resulting in higher monetization. Jumping now to page 25, we have added some new perspectives on the evolution of our interest margins. I'll start explaining this slide with the bar charts. On the lower left, you can see the NIM as we have traditionally reported it. The numerator includes the entire loan portfolio, including approximately BRL 5.4 billion of credit card receivables that do not earn interest and come from our card transactors. This NIM has recovered from the third quarter impact of deflation and is back at 7%. On the lower right, we present the NIM calculated by only including the interest-earning portfolio or IEP, making the numerator and denominator more comparable to each other and provides a more accurate picture on our loan margin profile.
This takes our NIM in the fourth quarter to 8% using this more precise methodology. On the top of the page, we present the marginal NIM or NIM using the origination rates of each quarter. We believe this metric is indicative of where our NIM could converge to if we maintain the current origination rates and cost of funding. On page 26, you can see 90% revenue growth in 2022. On net revenue terms, the growth is still remarkable at 59% year-over-year, despite the rapid rise in interest rates during the year. On a quarterly basis, you can see net revenue growing at 18% faster than the 11% growth in gross terms, which is a result of the repricing initiatives that are ongoing. Moving to page 27, here we see the improvements in our operational leverage.
Starting from the left, you can see the evolution of our ratio of active clients per employee. We went from a ratio of 2,300 active clients per each employee at Inter a year ago to 3,100 active clients per employee in the 4Q. We see a continued improvement in this ratio going into the 1Q 2023. As a result, we have lowered the cost to serve, which now stands at 16.1 AIs on an adjusted basis. It is worth noting that our cost to serve calculation is very simple. We take SG&A from the income statement, deduct the CAC expenses, divide that number by the active clients. Finally, our efficiency ratio continues to improve, reaching 69% on an adjusted basis.
As mentioned during the investor day, this is one of the three core ratios we use to track the performance of the company in our business plan. Finally, I'd like to walk you through our profitability improvements on page 28. Net income has steadily increased across quarters due to the many of the factors we just covered. For example, one, our conservative underwriting, two, our repricing initiatives, three, our efficient funding base, four, our growing base of fee income, and six, our cost controls. We think this is the basis for what lies ahead and are excited to be starting the year with this momentum, both on the operational and the financial side. I'll pass it back to João Vitor for his final remarks.
João Vitor Menin (CEO)
Thank you, Sancho. Let me close with some final remarks on the financial priorities for this year that already started. Operational leverage is a core priority, as discussed already. With the products and features already deployed, we now expect to keep gaining market share and economies of scale. NIM expansion as a result of our repricing is another core priority. Lots of progress already done, with more to come along the year. The quality of our loans, based on a highly fragmented and collateralized portfolio, will continue enabling us to have highly resilient performance. Finally, all of this over a strong balance sheet that has best-in-class liquidity and Tier 1 capital ratio to continue supporting franchise growth. With that said, I would like to reinforce my commitment to our profitability and a self-sustained business plan. Thank you for listening. Now we can open for questions.
Operator (participant)
We will now begin the question-and-answer session. Once again, for this Q&A session, we ask you to write down your question via the Q&A icon at the bottom of your screen. Your name will then be announced, and you will be able to ask your question live. At this point, a request to activate your microphone will appear on your screen. If you prefer not to open your microphone live, please write down, "No microphone," at the end of your question, and our operator will read your question out loud. Our first question comes from Thiago Batista from UBS. We are now opening the audio so you can ask your question live. Mr. Thiago Batista, you have the floor. Please go ahead.
Thiago Batista (Research Analyst)
Hello, can you hear me?
Operator (participant)
Loud and clear, sir.
Thiago Batista (Research Analyst)
Yes. Hi, guys. Good morning. I have two questions. The first one about the improvement in the profitability of the bank. If not wrong, one of the key drivers of this improvement is the repricing of the bank's loan portfolio. We saw yesterday, the government reducing the cap for the payroll loans. Is this reduction so important at a point that this should affect your profitability strategy or no? Is it still possible to expand the profitability even with this cap? The second one, very briefly, I believe Inter has no exposure to Silicon Valley Bank, but can you confirm it if there's any exposure or not for the bank?
Santiago Stel (Strategy and IR Officer)
Good morning, Thiago. Thank you for your question. I'll start with the second one. We have no exposure for Silicon Valley Bank. That's an easy one to answer. Going back to the first one with our expansion linked to NIMs. That would be expansion has to do with a combination of several factors, with the repricing being one of them. Providing a bit more of detail in the repricing, short-duration portfolios already repriced. This is SMBs, repayment of card receivables and credit cards. On the longer-duration portfolio, which accounts to nearly 50% of the total mix, we have around a quarter in payroll loans. For those, we have already repriced around 15%. We're repricing another 10% per quarter. The rates at which we are originating today are on average 1.7%.
In real estate, which is another quarter of the portfolio, we have 15% already repriced, and we're repricing 5% more per quarter. We think that by the end of the year, approximately two-thirds of the payroll portfolio will be repriced.
Alexandre Riccio (VP of Tech, Operations, and Finance)
One third of the real estate portfolio will reprice, making a total repriced portfolio of 75%. Particularly on the payroll side, linking to the INSS comment, we see originations at 1.7%, producing an ROE at Inter of 25%. We don't operate with distributors as you know, so we have the possibility of finding that rate without sacrificing ROE. The impact on us is quite limited on the cap front.
Pedro Leduc (Research Analyst)
Very clear, Santiago. Thanks.
Operator (participant)
Our next question comes from Mr. Fabio Yoshida from Bank of America. Mr. Yoshida, we are opening the audio now so you can ask your question live. Please go ahead, sir.
Fábio Yoshida (Research Analyst)
Hi. Hi, good morning. Thanks for the opportunity to ask questions. I have two questions as well. The first one is on asset quality. We saw that asset quality in this quarter deteriorated 40 basis points to 4.4%. In the last earnings call, if I'm not wrong, you mentioned that we should expect some stability in this indicator. At the same time, NPL formation increased to 1.1%. I would like to have your view on what happened here, which products affected the most this indicator, and what should we expect going forward. Also my other question is on funding costs. You showed an improvement on your funding costs. I was wondering what drove this improvement.
When you show a marginal NIM higher, what drove the most this NIM? Was it the lower pricing or the lower funding cost? Thanks.
Alexandre Riccio (VP of Tech, Operations, and Finance)
Thank you. I'll start answering. This is Alexandre Riccio. Overall, thinking about the delinquency and the evolution of the NPLs, the total NPL has been impacted by mainly the credit card portfolio, particularly on the older cohorts that were underwritten between September of 2021 and the beginning of 2022. Especially given that, from the beginning of last year, 2022, we decreased the approval rates to around 10%, so, significantly lower than a year before. Having said that, what we observed in increase on NPLs came from these older cohorts. When we look at the other portfolios at Inter, we are observing consistent performance. For instance, Crédito Imobiliário stayed at the same level that we observed in September in the third quarter results.
It's worth noting also that the strong deceleration that we had in the loan growth from 2021 to 2022, that we didn't grow as much in the denominator. To try to explain the effects on the what's happening now, we shared also the 15-90 days NPLs, where we see a more stable trend on the NPLs. Thinking about the future, as we've mentioned before, we expect the maximum NPL to be held on the first quarter of this year and then to start like a tipping point and we should see things stabilizing. The evolution, like if we think about negative evolution, we should see it mainly also on credit cards. What we've been observing on the other portfolios up to now is again, stability.
I think this is it for the, for the non-performing loans part of the question, and I'll now pass the word to Helena.
Helena Caldeira (CFO)
Hi, Fábio. Regarding the cost of funding, there are some factors that played out in 4-Q that got our cost of funding to 59% of the CDI. One was some seasonality. There is more liquidity in the end of the year with the 13th salary. We also paid off the holding debt in October, which was expensive compared to our traditional funding costs. That was CDI plus 1.95% a year. When we look the effect of that in our margins, that is not so significant compared to the funding costs that we traditionally have around the 60% of CDI. With the expectation of having a similar share of demand deposits that we had in 2022, we expect cost of funding to remain around this low 60% of CDI throughout the whole year.
Fábio Yoshida (Research Analyst)
Okay, thanks a lot.
Operator (participant)
The next question comes from Mr. Pedro Leduc from Itaú BBA. Mr. Pedro Leduc, we are now opening the audio so you can ask your question live. Please go ahead, sir.
Pedro Leduc (Research Analyst)
Thank you guys so much. 1st on loan book growth. SME housing continues strong and leading the portfolio up this year. I know in SME, this is almost entirely supply chain financing that you do. Here, of course, you had no exposure to Lojas Americanas. Congrats. We wonder how business changed here post the event in the 1st quarter. You know, volumes, demand, spreads, and if you're taking additional measures of precaution to avoid the same thing. How profitable is this SME supply chain financing for you nowadays? Is it above portfolio profitability, in line? I know cost of risk is very low, but I definitely want to hear your thoughts on what changed in this product line in the first quarter post the Lumi event. Thank you.
João Vitor Menin (CEO)
Good morning, Pedro Leduc. It's João Vitor speaking here. It's a very good question, by the way. We do have the supply chain finance running very well at Inter. We always had a tripod approach, so collateralization, diversification, and monetization. We are always assessing the right spreads for the risks that you take. Always trying to have as much more what you call portals. Many, many supply chains, contracts and payers instead of concentrate that on big ones. and also working with the 100% collateralization for this SME approach. Having said that, what we saw is that we were able to improve, not significantly, but we were able to improve the margins on that product, which by the way, connects very well with the funding capabilities that we have.
We need to remind that this product is very short-term duration, so it matches our very strong demand deposits funding franchise. Having said that, we believe that we can keep growing this portfolio in a secured way, and improving the ROE for our banking portfolio going forward. Again, we took some small change on the product. Trying to diversify even further and lowering some tickets that we had before Lumi, but we're very comfortable and very excited with this business going forward.
Pedro Leduc (Research Analyst)
Great. You are seeing slightly more spread opportunities there, John Victor, indeed?
João Vitor Menin (CEO)
Yes, Pedro Leduc. We do see that. We see that many of the corporate companies that are using this product, today, we see some of a credit crunch. Not much a crunch, but we see some restriction. Therefore, we have been able already to reprice and to improve that. Just to remind, because it's so short-term duration, the repricing of this portfolio is very, very fast. It's happening already. Okay.
Pedro Leduc (Research Analyst)
Super. Thank you guys so much.
Operator (participant)
The next question comes from Mr. Yuri Fernandes from JPMorgan. Mr. Fernandes, we are now opening the audio so you can ask your question live. Please go ahead.
Yuri Fernandes (VP of Equity Research)
Good morning. Hi, John. Thank you. I have one regarding personal expenses here. If you can explain what drove, you know, higher expenses this quarter. Checking your presentation, we see about BRL 40 million in M&A-related expenses that I think you recognize, also with share-based compensations in this line. My question is, what drove this? Is this a kind of non-recurring? Should we see, you know, personal expenses behave a little bit better? For me, it was a bit hard to conciliate your speech of cost control, seeing, you know, like personal expenses growing a lot. On the other side of the question, not regarding M&A, what is the main driver for performance inside the company? Is it growth? Like, how scorecards work inside the company?
It was a better year for many KPIs, but still a tough year for profitability. I really don't know, you know, how to think about personal expenses going forward. You know, like if this should be more, you know, headcount kind of inflation growth or, you know, we should expect this kind of volatility on personal expenses. Thank you.
João Vitor Menin (CEO)
Okay, Yuri. Thank you for the question. I'm gonna cover the second one, and Helena is gonna cover the first one about the personal expense. We do have a focus on both, as we mentioned on the first page of our slide, on growth and profitability. Of course, that's when we have some impact from NPS, as we saw last year, it postponed our profitability a little more than we wish. Though we see the trends playing in, such as improving on the NIM expansion, we should be able to combine growth and profitability. This is the way we think, the way I think at Banco Inter, the way we manage the business. Again, the incentives that we have here are for both profitability and growth.
We do think that we can keep growing without sacrificing the profitability, mostly on the commercial part of the business. All the fee income, we can keep growing without putting Tier 1 at risk, putting the liquids at risk. That's the way you see about growth. Now Helena will cover the personal expenses on 4Q. Thank you.
Helena Caldeira (CFO)
Yuri Fernandes, to talk a little bit about the personal expenses, I will go back to a brief view of the impacts of the Usend acquisition overall. We had two components in that acquisition. One that was an upfront payment, and a second one that was a deferred payment in shares. This deferred payment is to a key executives that sold that were selling shareholders at the time of transactions, and it has to be accounted as compensation according to IFRS rule. We will have an impact on the compensation expenses in 2022, 2023, and 2024. Just for a reference, the full impact in the full year of 2022 was of BRL 63 million. For 2023, it's expected to be BRL 33 million.
Finally, for 2024, 19 million, totaling this deferred payment of BRL 115 million. In 4Q, we finished the PPA, that is the purchase price allocation for the Usend acquisition. Once it's finished, there are allocations required in the balance sheet that also affect the PNL, so the income statement. These allocations were: in the balance sheet, there was inclusion of software and licenses to depreciate and adjustment to goodwill. On the income statement, there is a revision of the share-based compensation expenses and allocation of depreciation in the first year. As a result, in 4Q, we had the share-based compensation, which is in essence an M&A payment that accounted to BRL 43 million, and a depreciation of software and licenses that accounted to BRL 12 million.
That combined had a non-operating impact on our PNL of BRL 55 million. Just to conclude, I really want to differentiate the M&A expenses from the personal expenses. For that, I'd like to call the attention to page 33 in the appendix of our presentation. We show the expenses broken down by this concept in each quarter. There you can see that personal expenses grew 14% quarter-on-quarter, mostly as a result of the annual union agreed salary increase, known as dissídio in Portuguese. Our headcount closed the year roughly flat at 4,100 employees, which, well, despite the Usend acquisition that brought in 150 employees early in the year.
Additionally, right now, at the moment of this call, we have currently 3,800 employees, continue the approach that we've been talking about to deliver operational leverage on this line.
Yuri Fernandes (VP of Equity Research)
That's super clear, Helena. Basically the M&A, the only portion that was not clear for me was regarding the 2023 and 2024 impact. Is this something linear? Like, we should see this like on a, you know, more... I think if the 4Q 2022, most of those impacts, they were concentrated, right? Like in the 4Q. For 2023, 2024, should we see, you know, like a more gradual impact during the year? Or should be, you know, seasonal impact in the 4Q 2023 and 4Q 2024? How that will work? Also the D&A, the depreciation and amortization, I understood that the pressure was also driven by this. Is that line supposed to come back to more normalized level?
is this new, I don't know, BRL 50 million the new level for D&A expenses?
Helena Caldeira (CFO)
Yeah.
Yuri Fernandes (VP of Equity Research)
You increase your base of assets, right?
Helena Caldeira (CFO)
Yeah.
Yuri Fernandes (VP of Equity Research)
you keep-
Helena Caldeira (CFO)
Of course.
Yuri Fernandes (VP of Equity Research)
amortizing, at a higher pace now.
Helena Caldeira (CFO)
So that's correct. The impact in 2022 was higher in fourth Q because that was with the conclusion of the PPA. Okay? That's how we made the allocations. Now for 2023 and 2024, we will see a more linear effect throughout the whole year without any seasonality in 4Q for neither of these lines, neither D&A or the personal expenses.
Yuri Fernandes (VP of Equity Research)
No, that's super clear. Thank you very much.
Operator (participant)
Our next question comes from Ms. Neha Agarwala from HSBC. Ms. Agarwala, we are now opening the audio so you can ask your question live. Please go ahead.
Neha Agarwala (SVP)
Hi. Thank you so much for taking my question. I wanted to ask about growth. What kind of growth should we expect, loan growth, should we expect for this year, as you mentioned, that you continue to gain market share? What are the plans that you have in mind to bring about cost efficiency that, since that's one of the most important goals for the bank for 2023. On loan growth and cost efficiency, what are the plans and what should we expect for 2023? My second question is on capital. During 2022, you consumed almost 20 percentage points in terms of Tier 1 capital, which is now at 24%. What do you think is a comfortable level at which the bank would like to operate?
How do you see the Tier 1 supporting the loan growth expectations that you might have for this year? Thank you so much.
Santiago Stel (Strategy and IR Officer)
Good morning, Neha. Thank you for the questions. I'll start with loan growth. On that front, we grew 40% on the calendar year of 2022. We expect 2023 to be marginally below that number. Will ultimately depend on the macro picture and these corporate events that are happening, which we're obviously monitoring on a day by day. Our base plan is to be growing in the 30s. This is what we call disruptive growth in a sense, which is multiple times the growth of the market, which allows us to gain market share and deliver the real operational leverage. As Helena mentioned, a big component of our expanding ROE plan is to keep cost on the personal side flat. We have 2,800 employees. We think that number has started to improve further.
as Titou was asking at the beginning, the other point of the ROE expansion has to do with the, with the NIM and the repricing of the portfolio, which is also ongoing. I'll let Alexandre cover the capital question now.
Alexandre Riccio (VP of Tech, Operations, and Finance)
Hi, Neha. On the capital, there are a few things that happened here last year worth mentioning. Second one is we have two one-offs. We have the Usend acquisition and the capital reduction. One of them happened in the first quarter, second of them happened towards the end of the year in early in the fourth quarter. And that responds to most of the reduction that we saw on the CET1. We are consuming capital more efficiently. We closed the fourth quarter of 2022 at a CET1 of around 24%. Considering our estimated profit as well as some additional capital opportunities to be incorporated during 2024, we expect to finish the fourth quarter of 2023 at around 20%. Thank you.
Neha Agarwala (SVP)
João, could you please elaborate on the capital opportunities that you mentioned for this year? What do you mean by that?
Alexandre Riccio (VP of Tech, Operations, and Finance)
Yeah. Neha, there are a few different things that we're working on. One of them is the methodology on the operational risk RWA. We're working on changing the methodology. We should get around, well, a little bit above 1% on that. We're working on optimizations on, for instance, the credit card that could get us another 1%. Things like that and other fine-tunings that brings minor improvements, but can also be important as we move along. Thank you.
Neha Agarwala (SVP)
Thank you so much.
Operator (participant)
The next question comes from Mr. Yuri Fernandes from JPMorgan. Mr. Fernandes, we're now opening the audio so you can ask your question live. Please go ahead, sir.
Yuri Fernandes (VP of Equity Research)
Thank you again. Just to follow up on profitability, you mentioned, like João mentioned during his closing remarks during the presentation, a commitment to profitability. Santiago mentioned like the loan repricing. Any commitment with like short-term profitability, like what would be the target for 2020 on ROE net income? Like anything we should expect from the company this year? Thank you.
Santiago Stel (Strategy and IR Officer)
Thank you, Yuri. As you know, we do not provide guidance, but as we mentioned on Investor Day, we continue to think that's the case. The consensus of the 15 research analysts that cover our shares, our stock is on the mid-single digit ROE. We continue having that as our base plan for 2023. We do think that the second half will have better numbers than the first half. We expect a sequential improvement on our profitability on a quarter by quarter.
Yuri Fernandes (VP of Equity Research)
Okay. Thank you, Santiago.
Santiago Stel (Strategy and IR Officer)
Thank you.
Operator (participant)
This concludes our question and answer session. The conference is now concluded. Inter IR area is at your disposal to answer any additional questions. Thank you for attending today's presentation. Have a nice day.