Banco Santander (Brasil) [BSBR] Conference call transcript for 2022 q1
2022-04-26 14:23:08
Fiscal: 2022 q1
Operator Good morning and thank you for waiting. Welcome to discuss Banco Santander Brasil SA's Result. Present here, Mr. Mario Leão, CEO; Mr. Angel Santodomingo, CFO; and Mr. Gustavo Sechin, Head of Investor Relations. All the participants will be on listened-only mode during the presentation. After which we will begin the question-and-answer session when further instructions will be provided. [Operator Instructions]The live webcast of this call is available at Banco Santander's Investor Relations website at www.santander.com.br/ri, where the presentation is also available for download. We would like to inform that the questions received via webcast will have answering priority. [Operator Instructions] Each participant is entitled to ask one question. Before proceeding, we wish to clarify that forward-looking statements may be made during the conference call relating to business outlook of Banco Santander Brasil operating and financial projections and targets based on the beliefs and assumptions of the executive board, as well on information currently available. Such forward-looking statements are not a guarantee of performance.They involve risks, uncertainties, and assumptions as they refer to future events and hence depend on circumstances that may or may not occur. Investors must be aware that general economic conditions, industry conditions, and other operational factors may affect the future performance of Banco Santander Brasil and may cause actual results to substantially different from those in the forward-looking statements.I will now pass the word to Mr. Gustavo Sechin to introduce all the participants. Please, Mr. Sechin, you may proceed.Gustavo Sechin Thank you, operator. Good day everyone. Welcome and thank you again for joining us for our 1Q conference call this morning to discuss our company's results. So here with me, I have our CEO, Mr. Mario Leão; our CFO, Angel Santodomingo; and our Investor Relations team. So now I'm going to first turn the call over to our CEO for his comments. Please, Mario, you may proceed.Mario Leão Thank you, Gustavo. Thank you all for joining our first quarter results earnings call. It's a pleasure to be here for the first time as CEO of Banco Santander Brasil. I'll kick off with a very brief overview of the context we're in. Then I'll go over some of the strategic priorities I have outlined for Santander Brasil in this next growth cycle, upon which we are already all working on as a group. So starting with the context, we already noticed in the second half of 2021, the beginning of deterioration in the credit portfolios resulting from the worsening macro conditions, mainly inflation and interest rates.Given that perception, we've taken several measures to adjust our risk appetite in several portfolios, mostly individuals and small SMEs that has already been evidence in our first – fourth quarter results last year when we grew our portfolio less than our peers, and is reinforced now with the portfolio relatively flat to that in December as Angel will present to you in more details. These measures allowed us to have solid performances in some of our core businesses, such as cards, where we grew fees close to 30% Q-on-Q to a record figure. We believe we have a very good combination of a growth oriented culture with a good capacity to react to signals such as those we're now experiencing. Therefore, our risk management culture is considered one of our key assets here at Santander. We still have around two thirds of our retail portfolio collateralized and we keep expanding our secure businesses with new products such as our home equity, already a market leader within private banks with 23.4% share and R$3.4 billion in assets.Our auto finance portfolio, one of our most relevant has improved its loan-to-value from 54% to 46%. We keep focus on growth and expect to resume a faster pace in the second half of this year. In terms of our strategic priorities, we have set an ambition to become the best financial services consumer company in Brazil, 100% customer driven and we're now positioning our teams and our energy towards this goal. In practice, we will focus on four interconnected pillar. The first one as it should be Customer Centricity.We will incorporate the customer advocacy mindset in everything we do, focusing on the client experience throughout the consumer cycle, pre-sale, sale and post-sale, designing strong and more integrated sales channels, improving our customers ability to self-serve and our own resolution capacity, developing dynamic and personalized pricing models based on more intelligent CRM data and segmentation. And shifting our orientation from the typical banking classic product to consumer pull, a critical cultural change that will mean less cards and mortgages and more customers and experience. We exist to increasingly help our customers improve their lives and fulfill their dreams. Positioning ourselves as our true customer advocates will transform in several ways how we operate and will allow us to maintain our growth, our results and our returns.Second pillar is culture and people. We could only aim at this goal with a truly horizontal culture, which we already have where empowerment, meritocracy and diversity represent key pillars. And all pieces of the engine think and act as business units, not following the traditional front office, middle office and back office definitions and having marketing is a critical component of our culture. We have been the first financial services platform to launch NPS on a full scale, all channels perspective. We started at 40 in 2017 and are now running at 57, aiming to achieve 60 plus before year end. We are shifting our compensation models towards variable payouts based on consumer experience and results where each of our 50,000 employees are sales persons and are trained to and evaluated by how they understand and serve our customers better than any other consumer company.The third pillar is our integrated sales channels. We will build the best sales platform in Brazil, focusing on an integrated sale and post-sale offering to reach our customers who will be served 24x7 at any form they want with simplified offering and processes. We truly believe in the benefits of economic channel approach, where our digital channel, where our customers inquisitively choose to be served, represents a key pillar, but not an independent one of our offerings.We will keep advancing and transforming our traditional customer support team into a powerful and cost-efficient remote sales channel. We will expand considerably our recently reorganized external channel, achieving several new regions of Brazil in efficient forms. And we will keep reinforcing our physical channel, a key pillar of our integrated sales strategy and an edge comparing to digital only players. Our cross sale and credit recovery capacities, for example, are considerably stronger at the stores.We are already designing our vision of store of the future. A concrete step is our bank to go initiative where we are capturing the ATM flow into our stores with a TABit based offering, bringing more speed to our store customers and mobility to our salespeople. We'll continuously look at the best cases within the consumer space and serving our customers where they are and how they want to be served.The fourth and final pillar is innovation and capital. We will seek this transformation into a top consumer company with a continuous focus on organic innovation. The last example was our TransferNowPayLater, so called DividePIX in Portuguese offering, which where customers for the first time can pay installments their instant payments transfer DividePIX and 90% of the volume so far has been on new, personal loans customers.Our UseCasa home equity product was only launched in 2020 and is already a market leader, as I mentioned before.We've just launched our digital channel for supply chain financing, SX Integra, which will reinforce our position as a market leader in receivables backed financing. And we keep innovating on older products, such as mortgages. We have substantially reduced our delivery time on personal mortgages to our market best 19 business days. And we continue to add innovation to traditional businesses. All that capital deployment has been centered around delivering strong shareholders returns and payouts, coming from a low-teens ROE six years ago to a consistent 20 plus ROE on the last few years, one of the best globally.With these four cornerstone strategies, we plan to differentiate our sales from our peers, not only banks, but consumer companies in general. Our evolution keeps based on stability, senior leadership and management model with focus and an obsession with speed. Our recent succession represents our well, our culture frictionless and improving our metabolism, meritocracy and ambition even further. We feel proud to have one of the highest levels of career opportunities in Brazil and the creation of our first technology company represents that well.We keep very focused on the SME space with multi-channel services, offering personalized solutions where necessary. We keep expanding our agro business footprint as a whole and reinforcing our wholesale platform with strong businesses, such as our energy and commodities desks.Overall, we'll keep representing a continuous transformation and growth story. And now our leadership couldn't be more excited with the years ahead, including myself. Thank you very much. I'll pass it on to Angel now.Angel Santodomingo Thank you, Mario. Good morning, everybody. And welcome to these results, first Q results presentation.Well, first thing to share with you is a kind of a summary of what are presenting today. As you may see, we continue to deliver sustainable and profitable growth compared to the past and during the last years. As commented in fourth Q a combination, and as Mario has mentioned, a combination of higher inflation increase in interest rates and the level of a family indebtedness has provoked acceleration that we provoked our portfolio growth.Revenue continued to grow consistently, as you will see in the next slides, partially of setting the impact of rising inflation related expenses on efficiency, reaching 36% in that ratio.Net income continued to be above or at R$ 4 billion with a return on equity that maintains healthy levels at around 21% or 20.7%. So, all those numbers and results are being translated into a consistent shareholder remuneration. The board approved R$1.7 billion of dividend, which means an analyze dividend yield of almost 6%.Next slide. All this is achieved through client expansion, but more important monetizing that flow as you can see in this slide. Our total customer base increased by R$5.8 million in 12 people in 12 months. But again, our focus is not only on the number of customers, but on how to turn those customers base into a more loyal and profitable one.Loyal customers, and when I mean loyal customers, I am saying those with more than six products so we are being quite assert in that measure grew more than two times, 2.2 times faster than customer acquisition, which means 27% year-on-year. This means that we are not only enlarging the client base, but is specifically making it profitable.Revenues derived from our loyal customers rose by 12%, acquisition through the digital channels as you may see also is again showing a strong growth. So all-in-all, strong growth in clients are a strong growth in revenues monetizing and making it profitable. So in next slide, as you may see, we keep enhancing the user experience in boosting engagement as shown by the numbers. Examples of these are 70%, for example, of all new accounts are activated within four months and 25% of new customers become loyal within six months. Loyal customers make up 27% of our active customer base that as you would imagine are almost six times, 5.6 times more profitable than the non-loyal ones. Next slide.We have spoken and shared with you the omnichannel or the four channels study so that the client may choose how to transact, how to make a relation with the bank. Speaking of the four channels, the physical channel I have said with you in the past that we have close to 15 million people going through our branches, through our shops every single month, 50%, half of that are non-customers. But we also have what Mario said, bank to go. Bank to go, which is already almost 90% of our branches, we have invented how we are address customer needs and flow on our physical channel, increasing manager mobility at our branches and innovating the way we bring our products and services to customers. This is a service that we have where the ATMs are before you enter actually on the branch. And we activate and make more speedy way of serving to the clients.On the digital channel, more than 92% of our customer transactions are already accruing through that channel and 17% of our digitally acquired customers were previously unbanked and chose Santander to establish their first banking relationship. This is another example of how ESG travels in a recurrent way across businesses and areas in the bank. The remote channel is a critical part of our integrated offer to our clients. Sales increasing more than threefold in just one year reflects why I'm saying and also quite important to see that almost half of the transactions occurred outside commercial hours, outside from 9:00 to 4:00 PM and finally, our external channel, which recently launched a new platform, allows us to enlarge our offering to a larger number of Brazilian areas. But channel availability and integration enable us to boost that commercial activity that you have seen in the previous slides.As you may see, cards continue to grow at a rapid pace with over 95% of cards being used to current account holders, this is important for our quality – for our quality of risk discussion that we will have later on. Toro, our digital investment brokerage platform added over 90,000 new clients in the first quarter, clearly outpacing the market. Our sustainable business reached 5.2 billion of production in the quarter with our micro credit portfolio experiencing a strong growth of 47%, almost 50%. While our market share of CBOs reached 56%. So again, as you may see these ESG example, something that has coexisted in the bank for at least 20 years now.Moving to the digital front or side of business, the streamlining of processes has boosted our productivity, resulting in a faster time to market for new products and services. Some examples are 76% of our process has running in the cloud, 74% of all personal loans are granted through the digital channel – were granted through the digital channel in the first quarter. And lead time for different products has clearly dropped, fast improving NPS, as you will see in the next slide. And finally continuing with a long series of efficiency improvement, cost to serve digital customers declined by 25% year-on-year to those R$24.6 per month. As I said, continuing a long series of drop in cost of service.In Slide 13, we have been repeating these through different quarters, but our focus is and will continue to be attending properly. So making the customer the center of our attention and focus and its satisfaction. A satisfied customer, a promoter generates 7 times more revenues than the average in our case. We have been publishing our NPS score for some time, now it reached 57 points as you may see, which is a measure based on more than 11 million messages being sent to our customers as well as dialed conversations from our commercial units and management. Those 11 million messages mean approximately in between 30,000 to 40,000 messages per day in all our channels. So we are measuring it on a daily basis throughout the different channels.Next slide it means insist about our diverse and supportive culture. We continue to make progress on the human in leadership roles and in the proportion of black employees in our workforce. Ambition in this regard continues to be to reach 40% by 2025. And we have training model based on internal multipliers that has help strengthening our corporate culture and that I have served with you in several quantities. And finally, we have recently launched a new corporate guidance named teams, as you may see in the bottom part of the slide.Slide 15 before going to the numbers, I mentioned a little bit about ESG in some of the slides and we try here to make a summary as it is an integral part of us of our strategy as I mentioned for the last two decades. We are carbon neutral for example since 2010 and an ambition of achieving net zero carbon emissions by 2050.We invested more than R$280 million on sustainable crops in the Amazon region. And I would like to emphasis also our objective of relying solely on renewal energy by 2025. Currently this source of energy accounts for almost 60%, 59% of the energy used in our operations. You may see in this slide, different commitments we have communicated throughout this year across with recognitions that we have received lately.So moving to results on the Slide 17, we detail the P&L we presented to you this morning. On net profit – our net profit total that I said – as I said, R$ billion, up 3.2% in the quarter and flat year-on-year. The quarterly increase can be attributed to a better performance in NII as a result of a better mix and funding results that help to offset a higher cost associated with the transition to more normalized asset quality in a stronger commercial activity.Let me highlight some of our the annual figures on the revenue front. NII rose by 3.8% in the year based on higher customer NII. Fees increased almost 6% over the year here our customer base growth and higher activity boosted revenues from a wide variety of items including costs. And on the expense side, provisions grew by 46% in a quarter in line with what I mentioned in the last two quarters results.General expenses increased due to the collective bargaining agreement and inflation. But besides that, that we were able to have a good performance QoQ with a drop of almost 2% or 1.5%. The efficiency ratio came in at 36%, which improved in the quarter, but obviously with the pressure of higher expenses that I mentioned. And finally return on equity, we have maintained a 20.7% as I also mentioned in the beginning.So going by through different parts of the P&L, next slide displays the evolution of our NII with a strong protection on the client side. Customer NII is growing at 13% QoQ, which is a clear reflection of all what has been said about client growth, loyalty, activity, et cetera. Past in first Q product NII advanced by almost 9% QoQ and 25% year-on-year benefiting from favorable volume dynamics in a better mix.In addition to obviously a stronger funding results, consequently spreads increased by around 130 basis points on the commercial side. On the other hand and as I have been sharing with you for some time now, market NII is reflecting our negative sensitivity to movements in the yield curve with an offsetting role from our treasury side or desk.I mentioned in the last quarter that we were already taking limiting decisions on production since September approx, September last year, September 2021, reflecting the adverse economic cycle we were seeing. Thus, and as a consequence of this, our loan portfolio fell by 1.6% QoQ down to R$455 billion. Without the currency effect that minus 1.6% will have been barely flat around 0.6%, minus 0.6%.Individuals continue to perform in the year with mortgage, payroll, personal loans and credit card explaining part of the growth. It is important to underline that 67% of the individuals loan book is secured, is collateralized.SME remained virtually stable in the quarter, but perform well in the year, expanding by 12%, thanks to the recovery and demand. Given the Forex impact migration to capital markets in a few amortizations, but lending track down the growth of the total loan portfolio.Our funding also had a positive performance year-on-year and remained the stable in the quarter. In this regard, we believe that the rise of interest rates will lead to higher a month for traditional banking products. And at the end of the quarter, as you may see on the right side of the slide, our core capital is stood at comfortable level, reaching a core equity Tier 1 ratio of 11.7% and of this ratio of almost 15%.Moving on to fees, despite in the first Q traditional seasonality, we continue to grow on a normal basis supported by the expansion of our active customer base and stronger loyalty. Current accounts and capital markets were the top performance in the quarter, while cars remained the best performing on a year-on-year basis.Looking at expenses, we again show our strong commitment to control this part of the P&L through a decrease of 1.5% in the quarter. Let me remember that last September, we had the salary agreement increase of almost 11%. So we have start to control costs on a Q on Q basis.And even with that, in the year, also we have an increase of 10% plus. They are growing below inflation. We continue to be focused on efficiency, as you will see in the next quarter. As a consequence of all this and as I mentioned at this start of my presentation, our efficiency ratio ended the quarter of 36% are healthy level, despite pressure from inflation and stronger commercial activity. And at this level, we may well remain, again, the best in the industry.On the next slide, we can see how our asset quality has evolved. Quality had a deterioration aligned with what was expected and with what we have been announcing to you in the previous quarters. No surprise here I’m afraid. We continue to see the trend marginal and not exploding, but a trend. Important to say that we share with you the situation, the 4Q results, and that we took measures to start in last September that are having the effect on P&L as expected.Our cost of risk grew to 3.5% in the quarter. This performance is directly tied from migration to more normalized levels in the evolution of risk [indiscernible] products in our mix last year. We are currently running in different ratios at almost or around pre-pandemic levels.We have also released approx R$0.8 billion following of our overlay, following what it was built for. Credit recovery once again to form well in the quarter, reaching R$740 million, thanks to both continued solid management and the sale of written down portfolios.Now let me revert to you Mario, for the closing remarks. Thank you.Mario Leão Thank you. So just wrapping up, in terms of strategy, we aim to be the best financial services consumer company in Brazil with four key pillars as I mentioned before. We will be centered around the customer with customer advocacy mindset and everything we do, we will focus more and more on customer experience throughout the cycle, not only the sale, but post sale. We will have integrated sales channel on an omni-channel approach, whereby each channel represents a pillar in itself, not in independent, but in an integrated mindset.We have 50,000 people within our culture, which think themselves and behave themselves more and more salespeople. We are shifting compensation towards allowing these people to be remunerated by the way they serve, the way they listen and the way they act, in terms of innovation and capital as I mentioned before, we keep focusing on organic innovation, we have very good examples live as we speak some things we launched a few years ago, already market leaders.And all that, with the capital orientation throughout we deliver some of the industry best payout and written on equity to our investors. We have delivered consistently over the past few years, we’re delivering again in the first quarter. The ROE of 20.7% represents that. We keep adding clients. So we have a customer – part of our customers intricity relies on how we bring customers, how we make them more loyal, how we make them interact with us more and more. We’re doing that.We keep the loan portfolio under control. Our risk oriented culture allowed us to have a very positive part as I mentioned in some of our key portfolios, such as credit cards and a few others. And we keep having responsible growth throughout Brazil as a whole throughout the society and with a clear focus ESG. Overall, Santander Brasil keep being a strong and continuous growth story shifting more and more to a customer centricity, customer advocacy mindset.And with that, we are now open for Q&A. And thank you very much again for joining this call.Question-and-Answer Session Operator Thank you. We will now start the Q&A session for investors and analysts. I will now pass the word to Mr. Gustavo Sechin. Please, Mr. Sechin, you may proceed making the questions sent via a webcast.Gustavo Sechin So we’re going to start the Q&A. Our first couple of questions is regarding our asset quality that comes [indiscernible] Goldman Sachs. So they are requesting us our view for NPLs in 2022. And also if we continue to see the return in 2018 levels, or if we see a more challenging outlook, given the early increase in the 1Q 2022. And also they request us to comment on the increase in provisions in the quarter.Mario Leão Okay. Thank you. Let me elaborate on quality as I have tried to do a little bid through my presentation. Let me remember what we discussed in last quarter results and what I have been discussing with you throughout this quarter in the different meetings we have had. We started to take limiting production measures last September 2021, which meant that as you show in the performance of the portfolio – of the loan portfolio in 4Q performance we are already growing at the lower speed.And in this quarter, we do have growing pieces, as you may have seen on the retail side and part of the SMEs, et cetera. But the portfolio barely remained flat. Why we did that and that is something like six or eight months or nine months ago is because we have started to see the different variables a little bit more tensioned.So what is happening right now? We are in the moment in which we have already taken those measures. We think that the measures we have taken are enough, those measures are started to have some impact on the P&L but still [Technical Difficulty] since last year. And we may not seeing any concerns in those mid corps upwards portfolios.The second comment is on the small SMEs, as I mentioned before, and individuals, even on those portfolios where we took measurements in terms of risk reduction since September, October, last year in some of those portfolios, we are already taking new measurements to resume expanding the portfolios again, using CRM data, using personalized pricing and risk validation.So we are improving our models as we speak so that we can already resume some of those portfolios growing back to levels as we saw last year. So given our growth orientation, we will keep the risk mindset, the risk mentality first line of defense, as you say, but we’re already looking at true CRM data and personalized segmentation. We’re already looking at expanding the portfolios again.Gustavo Sechin Thank you, Angel. Thank you, Mario. So our next question comes from [indiscernible] in UBS and [indiscernible] from Credit Suisse and are related to the Credit. Thank you, Jago, thank you, Marcel. So they are requested you to comment on how much loan growth should expand in 2022, if we see the need to reduce in our risk appetite or tighten credit standards.Angel Santodomingo Okay. Thank you, Jago, and Marcel. We have accounted this year that will probably grow in GDP number terms of around – depends on how we ended the year in terms of inflation, but around 8%, 9%. So seeing volumes growing at the low double digit or close to double digit, I don’t think it should be a surprise. So we continue to see that kind of capacity in terms of growth. We see the retail side growing during the next quarters, probably the SME side as Mario said. On the large corporate and corporate segments there you have competition from capital markets, competition and in terms of investments how the policy of investments is done and how the geopolitical general situation is going to evolve. So, you have other values on top of the discussion around volumes and quality, et cetera. Do we see more tightening? Not at this stage, as was mentioned, we are reopening in some cases in the small parts of the business. We are considering the growth capacity of our commercial kind of framework. So, we don't see added decisions for the time. I think we took it at the right moment. That is some time ago. And that has personally as was in the past, remember that in 2019, we did the same thing with credit cards and it worked pretty well.Gustavo Sechin Thank you, Mario. I think that we have some connection issues in the first question. So, I will make the question again, and Mario relates to the asset quality, the question was [indiscernible] thank you guys. So the question is relate to our NPS [ph] in 2022 overview. And if we continue to see it return to 2000 entity levels, or if we see a more challenging how to look given the early delinquency increasing in the first Q, and also they request us to comment on the increase in the provision in the quarter.Angel Santodomingo Okay. I'm sorry about that. I'll try to repeat my answering before. Thank you, Gustava. What I was saying was that we took, and I shared this with you if you remember in the 4Q results and in different meetings that we have had throughout this quarter we already took the measures. We thought we had to take starting September, 2021. Okay. Those measures on production. We are taking, if you remember on the data on the 4Q Santander Brasil, we had a lower growth in terms of the loan portfolio. And the one that we have presented today means that fairly the portfolio is flat in terms of amount in terms of growth.As I said in my, in the previous question, we think that the message we have taken are enough that they were taken at the right moment, that is six, eight, nine months ago. And now we are in the moment in which those measures – remember, okay, for duration of one year, on the loan portfolio, excluding the mortgages. So, we are in the moment in which the decisions obviously are limiting the growth of the loan portfolio. And we are still have the cost of risk impacts of the production that was taken before that.So, we are in that moment on which still provisions reflecting that previous reality and the loan portfolio growing at a lower space. What we do we see looking forward, looking into the next quarter or months, we have already reopened part of the production. So in parts of the portfolio production, we'll recover because we already, as I said, took those decisions some time ago and at the same time we think that the cost of recent provisions, et cetera, should reflect all those measures going into second semester of the year.Gustavo Sechin And Mario you can also have some comments.Mario Leão I just wanted to emphasize what just mentioned. So using, like I mentioned before, using CRM data, using personalized segmentation, both for coverage, and also with modeling, we are already taking steps to reopen some of the risk restrictions. We enacted for the past six months. So, we are already re-expanding some of the key portfolios in our retail decision from our mid corp supports in terms of the corporate segment. We did not foresee any issues last year. We keep not foresee. So we are going to grow based on profitability. So the opportunities arising, we will be there. We have loads of credit lines available, and obviously funding capacity to keep expanding our mid corps and large corps businesses. It has been tough given the competitiveness of local capital markets. And obviously companies are funding less given lower levels of investments. But those portfolios remain very healthy and we will keep expanding those as opportunities arise.Gustavo Sechin Thank you, Mario. Thank you, Angel. So the next questions come from [indiscernible] to NII. So what should we expect in terms of NII with clients, and NII with markets in the coming quarters? Can we assume that the first Q 2022 is a proxy for the coming quarters?Angel Santodomingo Okay. in terms of NII, I try to underline how – what are the main metrics that are below what we descended today. As you said, as you saw NII from clients has performed strongly. And this is based on several things it's based on volume linked to obviously to mix is also linked to a spreads and is also linked to products within the business. So the three variables work pretty well along with NII from the liability side that with the interest rate levels obviously is also helping and supporting that number. So that is the basic explanation. Again, we are in terms of – remember in terms of transaction, in terms of clients, in terms of linked clients, I gave you all the numbers throughout the presentation. We are growing much more in linked clients than in total clients. And also we are growing a lot in total clients. So we are not only growing clients, but monetizing and strongly linking them and transforming those clients into loyal clients.Loyal clients, meaning more than six products, which is high appealing. So NII from clients strong should continue in the direction through. NII from, I explained at least in the last two quarters that NII from market will start to perform lower, given our negative NIM sensibility to movements. Last year we had the strongest movement in, I think it is like 20 years. We had 800 basis points of movement. As you know, the sensitivity that we have because we have done, we save R$450 million for 800 basis movement. If it is a parallel movement, given that it was not, you have different impacts there, but that means that the results from the Arco portfolio will and will be much lower.Normally during the first year, year and a half, depending on the curve and on the movements of the deal curve. So that is basically what is happening. You have an upsetting position from our treasury activity that has had a good quarter, but going forward, what I would say is that I would – what I said to you in the last quarter, clearly reflecting that negative sensitivity the movement in interest rates, which is what is happening. So nothing abnormal in terms of performance, exception, that the comparison always is a little bit strange because you see strong movements.Gustavo Sechin Thank you. Our next question comes from [indiscernible]. And I relate to our other revenues and other expense and also not operating the results. So we could see a better performance in the others lines and operated income. Can you explain what is included in these line and which line had a positive impact on that? And also, can we please explain this CIT dis-consolidation does so plan to dives from this asset?Mario Leão Thank you, Gustavo and Judy. Well, in that line, I have always explained to you have different kind of inputs and impacts, positive and negative. It's always, I understand perfectly your situation in terms of it is difficult to estimate it because it has certain volatility has been in the past and will probably be in the future. So what is inside? I always said to you have different label and similar provisions. You have optimizations in terms of interest rates. You have a little bit of impact on the foreign exchange rate.Importantly, you have transactionality costs there. So the larger, the transactionality improves or goals the more impact you will have. So you have recurrent and non-recurrent details there that make that volatility clear through all the quarters. We already had also the CIT operation, this is an accounting movement in terms of moving from cost to investment in terms of how you account for it. And that was also included there, but again, difficult to say with for next quarter, the evolution of that platform.Gustavo Sechin So our next question comes from Flavio Arzilla from Bank of America. This trust on cards, growth is focused on checking account holders. How different, anything else from non-checking account holders from those who have checking account at Santander? Should this trend changing the short, medium term? Is the bank lowering cards limit for riskier clients?Angel Santodomingo Well, as we presented cards continue to be an important part of the business in several days. What we have done with credit cards as I said, is that 95%, the vast majority of the cards that we are selling today and those are cards being sold to current account clients. That means that we know the risk profile and we know the evolution we have to have with them.We commented in the past, I mean, for example, was this credit cards or digital credit cards they tend to perform worse that is profile if already clients that are Santander clients we know their profiles. This has also been quite active through different channels. For example, on the remote side, we presented the numbers. We one year ago, we were selling almost 300,000 products per month. Now we are selling 800,000 products per month. And those products are large part of that includes the credit card. So the strategy continues to be well positioned. In that sense, we are applying efficiency to the product also in terms of the [indiscernible] products and we will continue that line. Mario, could you want to make some comments?Mario Leão Yes, just to add what I just mentioned. So cards is one of our “mono liners” historically it's 85 points NPS product. It's one of our key pillars for sure. But we want to integrate all our “mono liners” to a total integrated offering again, customer centered with a customer advocacy mindset. So with that in mind, we have shifted our strategy over the past few years towards cards holders, which are account holders as well, which means clients, customers, which are fully customers of Santander Brasil and through which we can explore our offering on our integrated channels.That strategy is not only with cards, we're doing the same with our consumer finance company, our auto loans, which is the largest in Brazil, our consumer finance company for goods and services as well. And with that integration of our entire ecosystem, we believe we have a very strong growth line to develop here. We are already doing that with card, as I mentioned, we will do so exploring all synergic opportunities we have within our ecosystem. We will talk more about this in the coming quarters. And we believe card is a very good example of how we should operate as an integrated offering to our clients or customers, and not necessarily independent mono liner approach.Gustavo Sechin Thank you, Mario. Thank you. So our next questions comes from [indiscernible] Garcia from Barclays, and I relate to Texas. So can we also comment on the relative low tax rating the quarter and what we should we expect going forward?Angel Santodomingo This has to do, I mean as always, it has to be to do we think that is on capital. I remember to you that we have the dividend that we have announced part of those dividends are interest on capital, which have a good tax treatment. We will continue to optimize that throughout the year. We always give you a guidance of around 30%, 33% approx on the tax rate that we should have throughout the year with up and downs depending on net interest on capital.Gustavo Sechin So our next question comes from Mario Pierry from Bank of America. And so the question is we noted that your branch network declined by 10% quarter-on-quarter, but your headcount remained in relative stable. Can we discuss the outlook for further branch closures and if they should be elderly followed by reduction in the headcount?Mario Leão I'll take this one. And I'll be very brief. As I mentioned a few times already, we have been, and we keep being a growth story. And that growth story is represented by a very strong sales channel, which will keep improving and a reliance on our physical channel, which we truly believe is one of our key advantages, not legacy in the bad sense. We believe it is one of our differentiations, and we will keep expanding our physical footprint throughout Brazil, both in terms of new cities and regions. And also in terms of new neighborhoods in cities, which are expanding. We will do so with the mindset of looking at the portfolio we have, and potentially merging stores and looking at whether we can relocate stores so that we serve better our clients, we're closer to them, we're closer to the flow and that is – that will be a continuous exercise.This number disfigure Q-on-Q and year-year-over is the reduction per se is on a reduction of stores, mostly not 90 plus percent of that number presents the consolidation of branch codes, which were now joining into Q1 call. Formally speaking is a reduction of branch codes, but it's much less architecture of physical stores than, than as I said branch codes. So it's more a formality and something we're doing to basically clean up the number of branch codes we have, which is a form of figure we have with the Central Bank. But again it is the – the mindset is that of an expansion through our top channels including the physical one and we will keep talking about our expansion in the physical channel towards the quarters. Thank you.Gustavo Sechin So our next question from Thiago Batista from UBS.Can you confirm to us if the portfolio sold in the quarter impacted the NPL ratio and how much results is it has generated?Mario Leão We do all these kind of portfolio sales when we do them. They are fully written off. So we only sell fully written of portfolios [indiscernible] clear. And its business as usual, we do every single year. We have them in some quarter, in these quarter we did have sell our portfolio being sold around 100 million if I remember well, but again this is something that is an ongoing process, we fully written off our portfolios.Gustavo Sechin Thank you. Our next question come comes from Carlos Gomez from HSBC.Could you give us an update on your views on two areas, out landing and investment platform? Do you expect to maintain your market sharing out loans or is becoming more competent? And what are your aspirations in the investment areas? Will you compete with [indiscernible] or BTG?Angel Santodomingo Okay. Let me try to address both areas and probably Mario will also want to join us afterwards. On the auto, the auto sector is as you know is clearly going through difficult moments in terms of volumes. So the total number of cars is dropping by around 15%, 20%, 22%, which means that the activity as itself in the sector is low. What has been our position along with the measures I already said before started in last September et cetera, what we are doing is we are building – we have built impact. It's already bad. We have built capacity to address different publics and clients that we were not addressing before with the same capabilities and the same capacity of growth. And this is as I speak today. So this is happening in April and we will continue in that direction. We continue to build a full ecosystem. We are leaders in the country and we want to keep on business. We don't want to go in and out of that sector and we want to structurally maintain the activity in the lending and that means not only our financial unit that means del Monte's, that means the different acquisitions we have done Amherst, SHUSA, all that we have announced go in the direction of [indiscernible] and strong.On the investment side, this is one of our core strategies. I mean, we are going into that field for some time and we will continue to grow into that field for some time. We are building a new platform, et cetera, et cetera but we think that when we speak of lien clients, it also means lien clients through the liability part of the balance sheet and again that is something key and totally important for us.Mario Leão Just adding specifically to the investments platform like Angel mentioned, this is one of our key strategies for not only this year but the next few years. We are closing a very important step now in terms of technology offering. We are delivering as we speak a much stronger investment platform for our clients and sales people within Santander that talk to clients about investments. And that's all the year we'll provide a big leap forward in terms of our technology offering and experience for our clients.In terms of sales efforts, we already have the advisors, we have a 250 plus advisors team already talking on a much more personalized base to our select and Vangaurd plus clients, which are welfare’s in terms of assets. We will expand that platform within sent them there, not through external offices. We will expand through sent them there four fivefold across the next two years. So that will be a big investment we're going to make, in terms of providing more personalized content and approach which has to be on a personalized basis as well, that together with the technology platform that I mentioned before, we provide a very big step forward towards our investment platform and we will be even stronger than we are today, expanding the product offering as well, but mostly focus on the distribution channel and technology platform. So yes, we are very focused on that and we'll keep expanding here. Thank you.Operator The Q&A session via telephone is open now. [Operator Instructions] Our first question comes from Pedro Leduc with Itaú BBA.Pedro Leduc Thank you guys for the question. Good morning, everybody. A bit on NII. Could you help us understand a little more, what drove the treasury results? So close to zero and just to help us see how it will carry on to the next quarters and still on NII on the product portion. We wonder how far you think you are in terms of re pricing the credits, the new credit that's to the cost of funding and cost of credit reality. That's upon us within you're already halfway or more in the final rounds of repricing the new lines. Thank you.Mario Leão Thank you. Well, I tried to explain on my previous answer, basically narrative sensitivity to movement in the GQ, which is I had impact on that part of the P&L positively impacted by our resource in person. That's basically, the summary of what I try to explain to you. And the summary of the number that show in terms of the market. And this is a trend, as I mentioned in the last two quarter, at least I don’t know more than that, but for sure, the last two quarter, this is a trend that will continue throughout 2022. Again, given our duration of on the asset side and given the GQ movement and the – GQ shape that we have today this should last one year, one year and half, depending how it moves from now on, remember that we hedge the commercial units in terms of cost of fund.Okay. So this is how it is reflected in our business model. The second part of the question was sorry?Pedro Leduc Pricing.Mario Leão Pricing sorry. Yes, we have already on the stress side, you have two impacts the funding side or liability side, and the client price, how it is evolved, what has happened is that during 2021 as the cost of funding was going up, that spread was pressured. Okay. We finalized that transfer throughout fourth queue and first queue. So I would say that now on the movements on the GQ will probably be more positive on that side, but are we done with the price evolution? It will depend on how things move in terms of the GQ, in terms of transferring what has happened up to now the answer is still yes, but that was already as such during the last at least two months.Operator Thank you. The Q&A session is over. I will now pass the word to Mr. Gustavo Sechin for your final considerations.Gustavo Sechin So I would like to thank you very much for joining us today. We know that we have a couple of more questions, but during the given the hour, we'll try to answer you lately. And also again, we are fully available here for any further questions, and thank you. Have a nice day. Bye.Operator Banco Santander Brasil’s conference call has come to an end. We thank you for your participation and have a nice day.
