Itaú Unibanco Q4 2024 Earnings Report

Itaú Unibanco EPS Results

• Actual EPS: $0.17
• Consensus EPS: $0.18
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Itaú Unibanco Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $8.10 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Itaú Unibanco Announcement Details

• Quarter: Q4 2024
• Date: 2/6/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 8:00AM ET

Itaú Unibanco (NYSE:ITUB) offers a range of financial products and services to individuals and corporate customers in Brazil and internationally. The company operates through three segments: Retail Banking, Wholesale Banking, and Activities with the Market + Corporation. It offers current account; loans; credit and debit cards; investment and commercial banking services; real estate lending services; financing and investment services; economic, financial and brokerage advisory; and leasing and foreign exchange services. The company also provides property and casualty insurance products covering loss, damage, or liabilities for assets or persons, as well as life insurance products covering death and personal accident. It serves retail customers, account and non-account holders, individuals and legal entities, high income clients, microenterprises, and small companies, as well as middle-market companies and high net worth clients. The company was formerly known as Itaú Unibanco Banco Múltiplo S.A. and changed its name to Itaú Unibanco Holding S.A. in April 2009. The company was incorporated in 1924 and is headquartered in São Paulo, Brazil. Itaú Unibanco Holding S.A. operates as a subsidiary of IUPAR - Itaú Unibanco Participações S.A.

Itaú Unibanco Q4 2024 Earnings Call Transcript

Key Takeaways

• 2024 Financial Performance: Managerial recurring net income rose 2% sequentially to BRL 10.9 billion in Q4 and 18.2% year-over-year to BRL 41.4 billion, delivering a consolidated ROE of 22.1% (23.4% in Brazil).
• Loan Portfolio & Credit Quality: Total loans grew 15.5% YoY to BRL 133.6 billion while long-term NPLs fell 0.5 p.p. to 2.4% and cost of credit reached its lowest level in the series.
• Shareholder Returns: The bank announced BRL 18 billion in additional distributions (BRL 15 billion dividends/IOC and BRL 3 billion buybacks) plus a 10% bonus share issue, lifting total 2024 payouts to BRL 28.7 billion (~70% payout ratio).
• Digital Transformation & Client Experience: It migrated 5.3 million clients to its new Super App with post-migration NPS above 80, deployed over 1 300 AI models, and cut high-impact incidents by 99% through technology upgrades.
• 2025 Guidance: Expecting loan growth of 4.5–8.5%, client NII up 7.5–11.5%, cost of credit BRL 34.5–38.5 billion, operating expenses up 5.5–8.5%, and an effective tax rate of 27–29%, based on GDP of 2.2%, Selic 15.75%, inflation 5.8%, and exchange rate of BRL 5.90.

Presentation

[Operator]

Hello. Good morning, everyone. I'm delighted to welcome you to another quarterly earnings conference. As always, this event will be divided into two parts. First, Milton will go through the performance for the quarter and the year, and he'll also disclose our expectations for 2025.

[Operator]

Then we'll have the Q and A section, during which investors and analysts will be able to interact with us directly. But before I hand over the floor to Milton, I'd like to provide some guidance to help you make the most of today's presentation. For those viewing this through our website, there are three audio options on the screen. You can choose to listen to the entire content in Portuguese, the entire content in English or just the original audio. For the first two options, we will have simultaneous translation.

[Operator]

To choose your preferred option, just click on the flag at the top of your screen. You can also send questions via WhatsApp. To do this, just click on the button on your screen or simply send a message directly to the number 5511939591877. Today's presentation will be available for download on the website screen and as always on our investor relations website. That's it from me for now.

[Operator]

Now I will hand over the floor to Milton, who will begin the earnings presentation, and then I will come back to you at the end to moderate the Q and A session. Milton, the floor is all yours.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Good morning. Welcome to another earnings presentation. Let's talk about our quarterly earnings, yearly earnings, dividends, and guidance. This will be quite a dense conference call covering a lot of information. I'll try to be very objective to convey the main messages, and then we'll have our Q and A, in which we can talk more broadly about the different topics of interest to all analysts who might ask us questions.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

I'll start by summarizing what 02/2024 meant for us in a slightly more qualitative way by leaving aside most of the figures for the time being. And so let me put touch on several pillars of our operation. First, in terms of both culture and ESG, this year, we were recognized for our work both by institutional investor who ranked us first in all categories and in the Valor one thousand yearbook as a value company. It's the first time in history that a bank has received the Value Company of the Year award. In addition to winning as a financial institution, we also won as a value company an incredible mark of recognition by the entire Valor team.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

We are very honored by this as well as by all the other awards that we list here. As regards our ESG agenda, we made important progress in 2024. We made the commitment to go from BRL400 billion to reach up to BRL1 trillion in loan transactions and financing transactions in the capital market by granting loans to businesses and industries with positive impacts on the economy. Our role is to be the transition bank, and we continue to believe that we can be this bank, while never losing focus on our pillars of sustainable finance diversity and climate transition, which are very important to us. In the last quarter, I talked a lot about what all our modernization, investment in technology and the migration to the cloud means.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

This is a summary as I've already given you some data. We achieved an important reduction of 99% in higher impact incidents. We have more than 470 data scientists and more than 390 initiatives using generative artificial intelligence within the bank. And we also have in place more than 1,300 artificial intelligence models currently in use, tested, and growing within the organization. I made a commitment to you that our goal was to migrate 15,000,000 clients as part of what we call Wan Itau, a very important project for us.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

For the end of the year, we had a goal that changed over time. We managed to close 2024 with 5,300,000 clients migrated and should complete the migration of the remaining clients throughout 2025. We managed to do this without compromising quality with a post migration NPS of more than 80 points and a lot of account activation and PIX key registrations. This shows that we have started to move from focusing on the experience of our clients' journeys towards a phase of hyper personalization and transactionality over time. So I believe the bank has a lot of opportunities.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And this is one of the most promising projects we have at the moment. And we have managed to do all this while delivering quality solutions. We reached an employee Net Promoter Score of 83 points. This is the level of energy, engagement and internal strength that allows us to work, receive so much recognition and above all, evolve within the client centricity agenda, which is one of the key pillars of the entire management of our organization. Our global NPS increased by four points with 75 business areas reaching their all time highs and 69% of our business segments and products posting an NPS above 70 points.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Considering global NPS, we overcame all the challenges and met all the goals we had set for ourselves. And now we will set new challenges. It is very important when we look at the relative NPS to see how much we managed to narrow the gap in a very significant way for those items where we still had some kind of opportunity, whether regarding the app or whatever. And today, we are able to compete in several segments with those segments' leaders and narrow the gaps even further from an experience standpoint. While on the other hand, in several other business segments, we are opening up major gaps.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

This is the bank's continuous agenda. Now let's talk about earnings. Managerial recurring results for the quarter totaled BRL10.9 billion, reminding that in the last quarter, it totaled BRL10.7 billion. And we had that non recurring impact, an important reversal of BRL500 million before taxes. Therefore, we managed to more than offset that effect and still grew our earnings by 2% for the quarter.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

For the year, we closed at BRL 41,400,000,000.0, very strong growth of 18.2% in light of the earnings and profitability levels at which the bank has been operating. This result leads us to a consolidated ROE of twenty two point one percent and twenty three point four percent in Brazil. And if we simulate adjusting by the minimum capital ratio approved by the board of directors, we would be running at 24.426.2% in Brazil. This shows how we have been able to perform in a very relevant way. We remind you that our capital ratio approved by the Board of Directors considers a minimum capital of 11.5%, and we cannot operate below this level.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

So it is very important to adjust with regard to the average capital ratio of the industry. The loan portfolio grew with great quality and recorded major growth in this quarter. I'll give more details in a moment. We've already reached BRL13359 billion, and we grew 15.5% over December 2023. This is very sound growth, although a good chunk of our growth is explained by FX rate effects, which I'll soon give you more details about.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

All this growth has been achieved with increasingly better credit quality. We managed to improve our delinquency levels yet another quarter by reducing long term NPL by 0.2 percentage point compared to last quarter and 0.5 percentage point compared to December 2023. We have also seen very positive growth in the financial margin with clients, which has grown 3.7% in the quarter and 8.3% year over year, reaching BRL108 billion in 2024, very sound growth. Commission fees and results from insurance totaled BRL14.3 billion, important growth of 3.9% compared to the last quarter and 7.7% year over year. So I believe that the big picture shows a very sound quarter, very strong in terms of earnings, profitability, credit quality and growth.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

In addition, the figures year over year are also very strong with growth of almost 20% in bottom line earnings. Going into more detail for credit portfolio, the individual loan segment grew 6.9% year over year. We remind you that this year, we made an important adjustment to the portfolio. As I have mentioned in the past, we had been derisking the individual loans portfolio since the beginning of twenty twenty four, and this process has now been completed. We grew 3.7% in the quarter, pushed by the growth in credit card loans.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Naturally, this quarter has the highest card revenue seasonally. In addition, we also posted growth in vehicle and mortgage loans, which are products that tend to have a slightly different credit performance from unsecured products in general. The SME portfolio grew 8.1% in the quarter. However, it's worth highlighting that this quarter, our origination of governmental programs as FGI and Pronnape grew almost 300% compared to the last quarter as we originated more than BRL12 billion. When we make this adjustment to the SME portfolio, we see that of this quarterly growth delta, approximately BRL10 billion consists of these governmental programs that generate a pretty adequate NEEM for to our portfolio, especially by looking at the cycle and the challenges that lie ahead.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

We also have part of this growth explained by FX rate effects, especially with regard to the middle market portfolio, which contains a more material foreign currency component. The large corporate segment is no different. We posted significant growth of 6.8% quarter over quarter and 21% year over year, and this growth is also explained by FX rate effects. In the unsecured products portfolio, we grew 11% this quarter pushed by credit transactions in the Personality and Uniclass segments, which are mid- and higher income segments that usually tend to perform better during more challenging cycles. Growth year over year was 17.5%.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Mortgage loan origination totaled BRL10.8 billion and the segment's loan to value was 60%. So this is a collateralized higher quality portfolio. I've already highlighted above the impact of government programs, and we also have the FX rate effects. Disregarding this, our growth in the SME segment would be 4.9% in the quarter. In large corporates, we are talking about growth of 4.3%.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And in Latin America, growth was 3.3%. This shows the impact of FX rate effects both in the quarter and year over year. That said, I can now move to render account of the 2024 guidance. Our guidance range from 9.5% to 12.5% and we are delivering growth of 15.5%. And if it weren't for the FX rate effects, our growth would be 10.2% within the targeted range because the FX rate effects were very strong.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

In other words, the devaluation of the real against several currencies ended up generating this effect on the portfolio as a whole, and that is why we were above our guidance upper range. At the financial margin with clients, we isolated the impact of working capital, which which is these 3,100,000,000.0 reais, which had a slightly positive effect while the bank's equity kept growing. When we look at the core margin in product mix by having an individual loans portfolio of better guaranteed products, With credit cards this quarter tending to grow more in the non interest portfolio and then moving on to the interest portfolio and with the strong growth in government programs, this ends up resulting in a slight negative effect, but with a small impact. We posted growth in average volume with very significant volumes in the quarter and in spreads and liabilities margin. The biggest effect is on the liabilities margin and not on spreads, which also helps to explain a good portion of the growth in Niam.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

In Latin America and others, we see some effects from structured operations allocated to the wholesale business and that were a little weaker this quarter due to different seasonality impacts on this line as a result of our portfolio's dynamics. As regards the risk adjusted annualized margin, which is the margin that we track, As I always say, we cannot just look at the annualized margin and forget that we have a credit cost to offset.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

When we look at the series, we see

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

a gradual evolution over the quarters. And last quarter, we had a one off impact as a result of the mentioned quarters. In Brazil, we have similar movement from 6.2% to 6.2 to 6.2%. In Brazil, we have similar movement from 6.2% to 6.1%. By adjusting for the effect of BRL500 million from the reversal of provision for loan losses, last quarter, the ratio would be 6.3%, and this quarter, we also closed at 6.3%.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Compared to the guidance, we closed 2024 at 8.3% of growth, and the given range already adjusted for Argentina was from 5.5% to 8.5%. Therefore, we grew close to the top of the guidance upper range, which is good news for the financial margin with clients. In the financial margin with the market, we had a good quarter in terms of earnings generated in Brazil. The market NII reached BRL1 billion after removing the hedging effect from the capital ratio. And the earnings from Latin America were in line with the earnings posted in previous quarters.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

In annual terms, in 2023, we posted earnings of BRL3.3 billion. And in 2024, this totaled BRL4.4 billion. So we recorded important growth year over year. Compared to our guidance, the range was between BRL3 billion and BRL5 billion, and we closed at BRL4.4 billion, therefore, closer to the guidance upper range and with another strong year of market NII performance. Focusing now on commissions, fees and result from insurance operations, I'd like to highlight some effects.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

In credit cards, at the issuer level, growth was 5.7% in the quarter. And at the asset management level, growth was 6.8%. While year on year, growth was 12%, therefore quite material. In addition, in advisory services, revenue remains at BRL1.1 billion, while it grew 38% year over year. These are very strong results, especially in the capital market, which I will highlight in a moment since this is well reflected in all rankings.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And when we look at the result of insurance operations, pension plan and premium bonds, growth was 14 year over year, which shows that all our insurance earnings continue to grow consistently. With regards to the year's highlights, this year, Itau Asset was the asset manager that raised the most funds and generated the most performance fees in a challenging year as we managed to have the best performance in the market. I never say much about our individual's broker, but this is a journey that started four years ago, and we are focusing on it a great deal. As a result, we managed to increase the earnings of the individual's broker sixfold, which is now much more in alignment with its value proposition, investments, products and UX. These are major results.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And even though we did not break down the absolute amounts, they are already a quite material portion our P and L. And as I mentioned earlier, we were once again in first place in fixed income, mergers and acquisitions and equities when it comes to investment banking. As you can see, our market share is quite significant, above our credit fair share with a 26.5% market share in fixed income, 30% in mergers and acquisitions and 14% in equities, a very sound performance from our investment bank. ECM had a weaker year, but on the other hand, 2024 was an extraordinary year for fixed income. Compared to our guidance, we grew 7.7% over guidance ranging from 5.5% to 8.5%, also above the midpoint, which also shows the quality of our guidance.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

In terms of credit quality, from any standpoint, we only have good news. Looking at NPL fifteen to ninety days, we are consistently reducing the indicators both in Brazil and in Latin America, and in total short term NPLs. And our performance is measured by loan indicators, which is not a denominator effect, was already very sound. In this case, we suffered a double impact, both from the numerator and the denominator. Total NPL over ninety days decreased from 2.6% to 2.4, while in Brazil, NPL over ninety days decreased from 2.9% to 2.6%.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

So very sound performance. We can also view this very sound performance in the breakdown of NPL fifteen to ninety days. The short term NPL ratio for individuals decreased from 3% to 2.8% and the ratio for SMEs decreased from 1.5% to 1.4%. Both long term NPLs of individuals and SMEs improved by 20 basis points and 50 basis points respectively, which is a major development. Of these 50 basis points, 20 basis points are explained by the growth of the credit portfolio, while the other 30 basis points are explained by the actual improvement in loan performance.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

In terms of credit quality and cost of credit, last quarter, we separated this view. We posted BRL8.7 billion in cost of credit in the third quarter, which disregards the extraordinary reversal effect that we had. Officially, the amount was BRL8.2 billion in the third quarter, and the adjusted cost of credit ratio would have been 2.8% in the last quarter and went to 2.6 in the fourth quarter. These are the most comparable values. As a result, in this quarter, we posted cost of credit of BRL8.6 billion, which is the best indicator in the series when compared to previous quarters.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

The cost of credit year over year decreased from BRL36.9 billion in 2023 to BRL34.5 billion in 2024. We have posted strong portfolio growth and a nominal drop in the cost of credit for 2024. The figures for the renegotiated portfolio show a major fact. This is falling nominally and falling percentage wise, while it is the lowest ratio in the series. Before the pandemic, we operated at the ratio of 3.9%, and we closed the year at 2.5%.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And we also have a very sound coverage ratio. The decrease in NPL indicators makes our coverage ratio slightly higher, which again shows a very well collateralized portfolio and with very well provisioned and sound indicators. By comparing the 2024 guidance projections with the actual figures posted, we reached 34,500,000,000.0 reais, while our guidance range from 33,500,000,000.0 to 36,500,000,000.0 reais. In other words, slightly below the midpoint. This evidence is a very strong year from a credit risk management standpoint.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

With regards to non interest expenses, we posted growth of 6.8% year over year. When we look at our efficiency ratio, we ended 2024 with an efficiency ratio of 37.7% in Brazil and a consolidated efficiency ratio of 39.5%. This shows that we are also managing to grow the core cost with discipline and below inflation, which was the benchmark that we gave you in the past. As a result, we grew 4.4% in core costs compared to an IPCA of 4.8%. And all this without giving up, making important investments in business and technology, while focusing on and ensuring earnings generation and always investing in the franchise and our business.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Compared to our guidance, which range from 5% to 8%, we closed the year at 8% in the upper range and within the range that was released to you. On the capital side, this quarter, we were able to finance major growth. Given what we generated in terms of earnings already adjusted by the dividends that we had provisioned, We were able to fully finance the portfolio growth, which was important in the quarter, and we were also able to finance the adjustments that were made to equity caused by volatility, rates and securities. As a result, we closed the quarter with the same level of capital as the previous quarter at 13.7%. Here you are seeing 1.3%, but I would like to remind you that the maximum percentage we can use from this additional Tier one is 1.5%, and we closed the year with 1.3%.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

However, with the Tier one capital level of 15% at which we're operating, we believe that it is not necessary to operate at 1.5% as we have the capacity to operate at slightly below this percentage by always relying on our financial management while keeping an eye on our capital ratio and looking for the best opportunities to manage our additional Tier one. For this reason, in this quarter, it dropped slightly. As regards the extraordinary dividends, which are actually additional dividends, last year, we made an additional distribution of dividends to shareholders. And this year, we are making another announcement of additional distribution of dividends. This is how we do things here at the bank.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Every year, we assess our ability to generate capital throughout the year. We make expected growth, business performance, consumption, and regulatory impacts projections. And based on these projections, we distribute payouts to shareholders above a certain level. And these announcements have been made somewhat regularly since we did this last year, and we are doing it again this year. And this entire assessment will be done again at the end of twenty twenty five.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

The news we are announcing regarding dividends is very good. We will make an additional distribution of BRL18 billion, which will be done in two different ways. BRL15 billion will be distributed as both dividends and interest on capital, and we will distribute BRL3 billion related to share buybacks that will be made throughout the year. And these shares, once bought back, will be canceled. This was the best way and the best combination we found to distribute dividends to shareholders this year.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

We had already disclosed, declared and paid BRL5.7 billion, and we also have BRL5 billion already declared that will be paid in the future. When we add up all these effects, we have a total distribution of BRL28.7 billion with BRL15 billion in dividends and interest on capital and BRL3 billion in buybacks regarding shares that will be bought back and later canceled throughout the year. This means a distribution of around 70% of our profit, including this new distribution that I've just mentioned. Last year, we made an additional distribution of BRL11 billion, which represented a payout of approximately 60%. We have increased our distributions, not only as a percentage, but also nominally as a result of higher earnings.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

With that, our common equity Tier one ratio goes from 13.7%, as we saw earlier, to 12.3%, adjusted on a pro form a basis for this distribution as if the share buyback had been done on the first day and the shares had been canceled also on the first day of the period so that you can get a sense of the results of these events. As a consequence, our adjusted ROE on a pro form a basis in the consolidated figures would be 23.525% in Brazil due to these events and these adjustments made in the fourth quarter of twenty twenty four. In addition, we are announcing a bonus shares of 10%. This way, we trigger a capitalization. That is an increase in the bank's capital stock by BRL33.3 billion, which will be transferred from the reserves to capital stock.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Simply put, for every 10 shares held by each investor, they will earn an additional share of the same class at the attributed cost of 34 reais per share. As for the BRL0.015 dividend that we pay monthly per share, with this bonus, each shareholder will have an increase of 10% in the amount received monthly. These are the three pieces of news we are announcing: distribution, buyback, and bonus shares. These were all the points regarding the release of the 2024 results. Now let's talk about 2025 and our outlook and guidance.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Regarding the GDP, we expect lower growth this year due to the monetary tightening cycle reaching 2.2% growth by the end of twenty twenty five. We expect a year end silica 15.75% in 2025, which is our best outlook. We expect inflation of 5.8% resulting in greater inflationary pressure, which naturally justifies this effect on monetary policy. We estimate an unemployment rate going from 6.5% to 6.8 and an exchange rate in the range of BRL5.90, which despite the volatility is necessary to assess the sensitivity of our guidance. Accordingly, the guidance I submit to you now takes into account these macroeconomic indicators for sensitivity analysis purposes.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

We might make some adjustments or updates to our guidance if needed as a result of any changes over time. We remind you that this guidance has already been adjusted by the criterion of resolution four nine six six. As regards to the loan portfolio, we expect growth ranging from 4.5% to 8.5. And this is what we are currently foreseeing considering all the challenges expected for 2025. In terms of the financial margin with clients, we expect growth substantially higher than portfolio growth ranging from 7.5% to 11.5%.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

As for the financial margin with the market, we expect something between BRL1 billion and BRL3 billion due to volatility and the monetary cycle. We estimate a cost of credit nominally ranging from BRL34.5 billion to BRL38.5 billion. An important point that I would like to mention is that resolution 4,966 has virtually no impact on these lines. But if we were to follow the previous criterion, commissions fees and results from insurance operations would grow from 4.9% to 7.9%. That is an increase of one percentage point.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

But as we have to defer some revenues due to Resolution four nine six six, this is the actual impact of one percentage point on growth. In terms of non interest expenses, we expect growth ranging from 5.5% to 8.5%. As for the effective tax rate, we expect it to range from 27% to 29%. These are our best prospects. This has surely given rise to many questions.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And next, I will join Renato to reply to all of them in our traditional Q and A session. I would like to take this opportunity to tell you that we are very happy with the quality of our earnings and our performance throughout 2024. All business lines have been performing at their best, and we see a bank that is perfectly integrated from a culture management and workplace environment standpoint, in addition to being very open to innovation and change. And as you have seen on the first slide, all the investment we have been making for years in technology, business model development and client experience is bringing major recognition, both in terms of client satisfaction and the satisfaction of our employees. All in all, this is a set of results, which in our view are very solid and consistent.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

I would like to thank you once again for your time, support and feedback. I will now join Renato so we can start the Q and A session. Thank you very much and see you in a moment.

[Moderator]

Okay, let's go. First question, we have Daniel Das from Safra Bank. Daniel, good morning. Welcome once again. Good morning, everyone.

[Moderator]

Good morning, Renato. Good morning, Milton. Congratulations on the results. It's incredible to see a 25% ROI being distributed here by the bank when adjusted here in Brazil. I I wanted to talk about your guidance on expenses.

[Moderator]

You've delivered improvements on the efficiency, the guidance. It's implicit that in the midpoint, it worsens 28 basis points because of stability. If you can give us some more detail on what is you growing above revenue, does that come from more investments in technology or a core cost that is pressured by higher inflation? Since you gave the projection for 5.8%, specific expenses, the efficiency programs getting to a more advanced stage, if you can give us some more color on those expenses, that would be very productive. Thank you, Daniel.

[Moderator]

It's a pleasure to see you once again. Talking about expenses, very relevant messages. If we look at the year on year evolution of this result that we just delivered, you're going to see that there are three big effects. One, the profit sharing has improved. It explains 30% of the delta.

[Moderator]

I believe that this is a very important number to keep in mind because the result of the bank grows not only in the value creation, but also in the bottom line. And that affects naturally all the pools of the bank. That affects that's the first effect. Second effect, we had a year that we improved the labor provisions that generates a year on year effect. Sent your message.

[Moderator]

This is an exercise that you can look. You can see what we have for labor against the costs incurred during the year. This is a model that has labor expenses that anticipates what's up to come and with a very relevant coverage. We have three years of coverage at least of these provisions and it shows discipline discipline and management. Thirdly and most importantly, all investments that we do all throughout the years.

[Moderator]

We've done Delta investments since 2021, very strong. And when you see the growth of investments, part of what we could activate, we've expensed on the result of the year itself. Part is activated and the activated part will depreciate, will lose value throughout time because of all the intangibles that we have in the balance sheet of the bank. The most important thing to see is that we're growing the level of investments and we've stabilized for some years. We're still in the curve of depreciation.

[Moderator]

We're going to get to a plateau over the next two years. Delta depreciation tends to decrease year on year over the next two to three years until stabilization and everything is more constant. The investment is constant. So we've managed to deliver the level of profitability and result in growing the top line above expenses due to this level of investment that we've done. But this is the same level of investment that we've done that will allow us to take leaps of efficiencies in the future.

[Moderator]

So we have a platform that is completely digital. We have all applications of the bank, ultra modern platforms of tech, migration to cloud. Once you go through this maturation of the investment cycle, you get to a capture value cycle because either you're going to turn off mainframes, you're going to deactivate a lot of expenses that you have today, so you have the cost of operation lower and also you have a value proposition and a model of business that is more digital, which allows you to take relevant leaps in the efficiency of the bank. We are in this cycle, therefore, of investment that is not complete. We've gone over the midpoint.

[Moderator]

And what's up ahead, we are gonna get into a cycle of capture of value that is very important. This is a project with an efficiency level. Looking up ahead, it's natural. That part goes to price and competition. That's why we are more efficient.

[Moderator]

And part of it is so you can absorb more risk, especially in the retail operations. We're still investing nonetheless. We have inflation, banking inflation, which is higher than the current inflation and transactionality issues and volumes that are important. So our volume growing, therefore, we see that our unit cost is decreasing, which makes a big increase in the transactional, the volume grows. Therefore, we have a leverage operational leverage that is much higher, but with the space to grow and evolve.

[Moderator]

I am still very hopeful for the expectations of what we can do up ahead. Thank you. Second question, we have Bernardo Gutman from XP. Welcome. Good morning, Bernardo Milton.

[Moderator]

Thank you for the opportunity to ask a question and congratulations on the results. I have a question about the guidance of growth for NII clients, taking into consideration the reduction of the risk on the portfolio and the perspective of an expansion that is lower on the portfolio. When you think about growth from now on, taking into consideration some current market dynamics such as the no banks well positioned in the mass segment, high income, more competitions, So which segments can bring the best opportunities for the bank to increase its spreads? Where are the opportunities and where can we still see pressure of the competition?

[Moderator]

Bernardo. Right.

[Moderator]

Bernardo. Thank you very much for your initial words. Great to see you here. Well, let me do a general statement first about the guidance and the numbers. First, when we do the scenarios and we do the budgeting of the bank, it always has the it's not matched between the moment of the budget and the moment that we publish it.

[Moderator]

We try to do the adjustments that are more relevant corrections, but this temporal, this adjustment exists by design. Secondly, guidance, we have thresholds. They are not midpoints. So these are the best thresholds. We are conscientious of the guidance that we are publishing and the thresholds are there to capture some deviations of what we imagine with the available information.

[Moderator]

Third aspect, very important. The bank never has been so well prepared to face any scenario in the future as of now. Whether if it's a positive scenario or a challenging scenario, it doesn't matter. I am saying that because of the indicators of the cost of credit, also because of the indicators of bad debt. We or delinquency, we are talking about the position of the business as a whole, the capacity of growth, modernization of platforms, improvement of the journeys, evolution of NPS and the credit indicators with a robust balance with adequate provisions for the cycle and then capital index debt is post adjustment of the dividends, additional dividends that we're probably going to talk shortly.

[Moderator]

When we look at the whole bank, the bank is well positioned for the challenges up ahead. We've done that investment in modernization of the platforms, not only the platforms that are conventional, but also we've modernized the credit and coverage. And these are relevant projects and we've concluded these projects. So our speed of reaction for any scenario that is up in the future has never been so fast. These are not decisions that you do with thirty, sixty days lag.

[Moderator]

You do this every day. So we have tempestiveness in the management of the control of the bank, monitoring of the businesses of the scenario and we do it daily. And this is where we're going to do the fine tuning, the adjustments. So we can evolve as the scenario is showing favorability. We show we see the macro and micro indicators.

[Moderator]

We look at the customer profile that we want to grow portfolio management. It's very important through the cycle, I'm answering your question, so we implemented that management of the portfolio in wholesale after the crisis in 2015, '20 '16. We've done we've seen that the crops are growing and we've done this project over the last few years in retail as well. So we have the thermometer and the speed of reaction is instantaneous. Remember in the first quarter of last year, when I gave you the first result, the first question is, you're going to be below the guidance with this projection?

[Moderator]

I said, no, we're very comfortable to get here and we overcome the guidance. We did the adjustment in the quarter and a great deal of the effect is exchange rate related, but the portfolios grow grew a lot. This is an opportunity to and we're well, we have a decision today about the increase of growth. We're going to do it if that's the case and the guidance is the best information that we have available. If we have to do any adjustments for the guidance, we are always going to do it looking up ahead.

[Moderator]

We are not saying that this is set in stone. We have to fulfill the guidance. No. About the Delta portfolio and margin, it's well, we have a portfolio at the end. It has a mix that is very distributed amongst the businesses.

[Moderator]

And in a year that the portfolios grew a lot 15%. So it's natural that when you have a base effect, your expectation for growth at a cycle of uncertainty, monetary uncertainty, inflation and interest rates, you have the trend of not being more conservative, but you allocate the capital in the most efficient way, taking into consideration the scenario. The scenario is that is. We cannot ignore what's up ahead, positive or negative. So we discuss the indicators as if the scenario is not relevant, but it's very relevant for the decision making.

[Moderator]

Second aspect is that the average portfolio, which is what generates margin, will grow strongly than the other portfolio. It depends on the capital markets. It depends on exchange rate. It depends on our capacity to grow in the business where the opportunities may arise. Interest rates also play a part.

[Moderator]

The terminal interest rate 15%, this is a macro projection based on the best information available. The change in that threshold that is lower than what we've observed can give you maybe an even lower rate depending on how the inflation will behave that might or might not have an effect whether at the growth of the margin because there is a lot of products that are capped by regulatory rates or whether by our capacity of growth. This is a central message. We see spaces of growing in all the businesses, but always with that strategy of having the resilient target clients through the cycle. And in the middle to high income, which is a part of your question as well, this is where we managed to grow the most.

[Moderator]

So we get share, we are still growing because this is a segment that was always available. It's not new. The mid high income, it's not new segment. Competition was always there for this segment. Of course, when you see a performance that is much more stable of the bank through the cycles, you see the strength of our balance sheet, whether if it's the mid to high income on the retail or our wholesale Itau BBA asset management treasury, which together let us work with a profitability level that is much higher than the average of the industry, not adjusted by the capital index of the average of the industry.

[Moderator]

We have a higher index. So we have an opportunity of continuing to grow in the mid to high income. And the last point, in Meruito, our platform, our super app that we migrated 5,300,000 to give you an updated number. What we're discussing here, we migrated 6,000,000 clients. We've increased right at the beginning of the year, and we're going to conclude the $15,000,000 All the capacity of growing in this public, which is not a low income public, it's very heterogeneous.

[Moderator]

We have clients all throughout the spectrum. Then we have nothing implicit in the numbers that you can see here because our main challenge was migrating and taking care of the transition. Once we've done the transition and immigration the best way possible, NPS above 80, then you have the opportunity of cross sale. You know, the products that we can service and offer within a journey in the context of these clients. None of this is containing growth of margin, growth of portfolio.

[Moderator]

What we want to do is first test and see the potential results before we do any estimation. We are still on track. We doubled the speed and what was expected and this is a great opportunity for growing in all segments, low, mid, high income. This is the watershed moment for the retail operation of the bank. Sorry for the long response, but, you know, this is important to pinpoint some some points on the guidance.

[Moderator]

Thank you. Thank you for the complete response and a lot of things about guidance.

[Renato Lulia, Group Head of Investor Relations & Market Intelligence at Itaú Unibanco]

Now switch it back to English. We have Chitel Abad for Goldman Sachs with us. Hello, Chitel. Good to see you. Thanks for joining the call.

[Tito Labarta, Vice President at Goldman Sachs]

Hi. Good morning, Renato. Hi, Milton. Thank you for the call. Good to see you as well.

[Tito Labarta, Vice President at Goldman Sachs]

My question is on capital. Right. Core Tier one is still at 13.7. I mean, you need to pay additional dividends. You have the buybacks, the stock bonus.

[Tito Labarta, Vice President at Goldman Sachs]

I think all, were received by the market and to somewhat expect that I would say. I mean, just given the high level of capital that you have, your ROEs running above 20%, the loan growth guidance, you know, mid single digits roughly, it seems you will still be generating capital. So just kind of want to think, what is the appropriate level of capital that you would like to be at? Is there room to return more capital? Just to think about what kind of payout we could see in 2025?

[Tito Labarta, Vice President at Goldman Sachs]

Thank you.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Cuchito, good to see you again. Thank you for joining us in this call. That's a great question because we are seeing here a few times additional dividend, not extraordinary dividend. And this is meaningful. There is a reason why we are using this word.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Basically because after the recover that we made in the capital index of the bank since the pandemic, we reached a very good level of capital generation, growth and dividend distribution and buybacks. So our view is that everything constant. So if we are able to deliver the profitability that we believe we can do that of course risk weighted assets depend on the capability to grow and this will be always the main goal, grow the business, grow the bank And if we are not able to grow more for businesses reasons, we will be distributing the excess capital. In this year, 2025, in the first quarter, we are paying two relevant increments that we have in the capital index. One, it's operational risk that we have a hit in the first quarter and the second one, risk on credit for wholesale portfolio and some specific corporations.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Both of them are being funded by this excess that we're going to have of 12.3 percent. Of course, by the moment we are paying the dividend, we will be having capital generation as well. So 12 is what we look today as the target of running the bank in terms of capital index. It's 50 basis above what we have as a minimum dividend decided by the Board of Directors of the bank. So we try to operate with a buffer of 50 basis points for many reasons for uncertainty.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And let's agree that we have more uncertainty today than we had last year. This is the first topic, the capability to grow. So if we decide if there is an opportunity we're going to grow, this will be our priority and other businesses that we decide to do organic or inorganic, This is part of the business. So by the year end, everything set that is paribus if we get by the year end, we'll be having the same discussions that we're having now. We're going to be calculating the excess and we're going to be distributing to our shareholders in either way paying dividends and or buyback of the shares and this will be what we believe the new normal.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

So it's an additional, it's not extraordinary and this is the way we're going to be approaching the market every single fiscal year. If there is any change on that, of course, you will know, but I think we have a very solid history to grow capital, to finance the business and to distribute increasing our dividend yield for the investors. So this is what we're going to be pursuing looking forward.

[Tito Labarta, Vice President at Goldman Sachs]

Great. Thanks, Milton.

[Moderator]

Can I do a quick follow-up? So the next question is from Thiago Bautista, UBS. Thank you.

[Moderator]

Can you hear me? Congratulations on the results. The bank seems to navigate very well this cycle. I I have a question and maybe a follow-up on the question of Tito. But again, regarding the guidance, sorry to focus on this point.

[Moderator]

I think you answered two of these questions already. There is a lot of questions about the two guidance of margin, margin with a client and margin with a market. In the margin with client, the main point is why is it so much higher than the portfolio index and the margin index, Why is it below of what we were running and what would be the indicator for '24? Those are the two doubts of the guidance. And then the follow-up to confirm, doing the midpoint work for '25, can you imagine that the payout is 70?

[Moderator]

Rounding up, is it down this line that we should expect? Of course, you know, you have the 12.3 that was left out, but is it this magnitude of payout that we should expect thinking about the midpoint of the guidance? Well, Great to see you, Thiago. Thank you for being with us. Congratulations on the new job.

[Moderator]

Okay. Let me go back. The growth you managed to talk about two relevant points. The margin projection has a double effect. First, the mix, where what are the products that we're going to grow in which way, first effect.

[Moderator]

Remember that the financial margin with the clients, we have all the effects of the running capital, the way that we working capital, the way that we have the effect of the working capital with a margin with the client. When we see the average of the portfolios and the mix that we're growing,

[Moderator]

especially

[Moderator]

there is the liabilities that are that also grow importantly, we can see the margin where the clients growing above what we see the portfolio, because we remember that with the clients, when we get it, we don't see just credit. Of course, credit is important, but there is other effects on the balance that remain with the client. When we see all these effects, our capacity to grow with the liabilities, the profitability, all the effect of the working capital and the portfolio and the average balance of the portfolio gives us a lot of surety in the growth of the margin. That's why it's above the portfolio effect. And remember that the portfolio is at the end.

[Moderator]

First answer. So thereafter, the margin with the market, relevant point, I think that this is going to be a recurring question because of what I've heard from the sell side, the buy side and the reports. I want to give you an important statement. The truth is, this is the most difficult line to project. When we sit down, see VAR, the past results, the capacity to generate value, well, margin with the market is the one that you don't have a result that is inertial in the great deal of this margin.

[Moderator]

The other part depends on the liability management, how you work with your hedges, that we have a clear vision, which is the result to realize of the banking book. What we don't have effectively is a capacity to project the result of the trading. Truthfully, we have strong results and we expect to have very strong results in the trading for as much volatility as we might have with uncertainty increase under the banking book with an increase in the interest rates, you have a challenge that is natural for the generation in the accounting results all throughout the year. Besides that, within the margin of the market, there is a double effect. There is an effect that we consider, which is the hedge of the capital index.

[Moderator]

So let's remember, now when we made the decision of doing the hedge of the index, it has an opportunity cost that is with a margin of the market and with a differential of interest rate between Brazil and The United States, the interest rates going up here and abroad maintenance and other countries already have operations. In a mix, we see a delta differential of interest rates that is higher, which implicates in a cost of hedge that is much higher.

[Moderator]

But I

[Moderator]

wanted to give you a data that is very important and relevant. We did a back test that went back since this decision because remember that a part of our assets are in a foreign exchange, a part in reais, a part in foreign currency. That foreign currency, you have a cost of the index hedge and the final results of the currencies are in the patrimony, the asset. So we did a backtest to see how is the cost of hedge plus the movement of the patrimony throughout the years and we see that the effect was zero. So we managed to do the hedge of the capital index and economically, we deducted the cost of opportunity of the hedge of the index and we are zero zero.

[Moderator]

I I would like to say that this is an insurance that didn't cost anything at the end of the cycle, which shows that our capacity for economic management has worked very well. From protecting volatilities in the index gives you more surety to give to growth or having more dividends because your sensitivity to exchange rate decreased because of the effect of the hedge of the index and the overhead that has a volatility of the index because of the credit taxes that were generated. This is the response. If you ask me, our capacity with the execution with the margin with the market could be better, but it depends on the scenario. And this is a constant discussion that we have here.

[Moderator]

So we understood that in this line, having more prudence to project because of the uncertainties would be more reasonable. But again, as any year, I don't expect that we can, regardless of the cost, we can work firmly here to have a performance that the threshold can absorb. And if eventually, over the next first quarter first or second quarter, we can understand we can perform better due to the uncertainties and all this interest rate effect that has naturally appeared in the banking box. We're going to review the guidance if necessary. So to say that the guidance is not static.

[Moderator]

With time, we do adjustments if need so. But the degree of uncertainty is very high in this line. And the payout, it's an answer that I don't know if it's going to help you, but we don't want to guide the market with an expectation of payout because when you create us expectation, any change, you frustrate the expectation and we know how the market reacts to expectation is equal to reality. The happiness is expectation less than reality. So in practice, not having a model of what seeing first how much we're gonna generate of results, how much are we gonna grow of RWA, risk of credit, risk of market, operational risk.

[Moderator]

And having as a reference 12 of capital, it's something that we will observe throughout the year. And the idea is financing what we have in regulatory changes. Remember that these changes are in phase in. They go to 2028, operational risk, credit risk. So these are changes that come all throughout the years and all of this is taken into consideration.

[Moderator]

I believe that we will continue to distribute dividends that are relevant more constantly. Any changes in the scenario for any reason, we're going to change what we don't want to compromise ourselves with the payout. And the sensitivity to exchange rate that in the past we had because of the foreign exchange assets or because of the overhead are hedged. So we can even work more leveraged all throughout the time. If you think that this is a moment, given the uncertainties, this is something that we're not discussing but can be discussed if the bank decides to work with a leverage degree that is higher, which might mean significantly higher payouts all throughout time.

[Moderator]

But this is a decision that will be taken if it makes sense. Thank you, Milton. Thank you, Thiago. Let's continue with the questions, Mario Pierahi from Bank of America. Welcome.

[Moderator]

Good morning, everyone. Congratulations on the result. Very predictable as usual. We thought that the guidance was very aligned with the projection. We really appreciate this visibility of the results.

[Moderator]

Milton, I wanted to focus on your growth of guidance. When we see you're expecting a nominal GDP of growing 8% and the growth of the portfolio in the middle is 6.5%. So I wanted to understand better, Can you tell us more on the growth of line per product and the growth of Brazil against the Latin American portfolio, which usually you have this effect, your total credit reflects your operations outside of Brazil. So is this growth valid just for Brazil or is it really the total and Brazil should be growing higher and Latin America is bringing it down. And also implementing, when I see the guidance of the cost of credit, it doesn't seem so negative.

[Moderator]

I think that the low guidance you're seeing saying that the cost of credit well, it seems that there is a big concern for the appetite of credit. At the same time, you don't see a worsening of the cost of credit. So I just wanted to understand your train of thought, Bayard. Well, thank you for the kind words. Great to see you as well.

[Moderator]

First, growth in Brazil tends to be higher than Latin America. But for those of you to do an exercise, I think that in Brazil, we're going to grow in the midpoint. Seven, there is 50 points between the consolidated and the Brazilian portfolio distributed on the several businesses and with some businesses that depend on the market dynamics, exchange rate variation, which has an effect, but especially the capital market. So this year, we grew a lot in big companies because the capital markets were very active and we found good opportunities for the operations and we have a basic effect. Remember that the dynamics of Itau BBA has an effect on the portfolio and we have the opportunities to generate the portfolio.

[Moderator]

It's not a buy and hold. It's only when the operation makes sense at the right price, but with the vision of generating a portfolio and optimizing the relationship with the clients and the, optimizing the capital of the bank. It depends on this scenario. The market of capitals can be in volume. Capital Markets local can be 30%, forty % lower than the year of 24%, which brings a few challenges naturally because you have more origination and distribution.

[Moderator]

On the other hand, you can have opportunities of getting more portfolio, more credits. In the natural persons portfolio, well, we are well distributed in the several lines of business, and we see the products more and more than we see the client. So I think that is in this era of hyper personalization, customer centric service, the product is necessarily not the chief bandwagon, but it's how we service the client in that risk profile, in that case, in that segment. So we believe that a natural person can grow, can continue to grow. And then in the micro and mid, we can have a growth of two digits maybe in the companies and the right product and the right, well, the performance of credit is very good.

[Moderator]

Let me separate your final question about prudence with the credit indicators and the guidance of the cost of credit. First, the bank was has it said that it said that the best position to face the scenario, whatever the scenario is. The scenario of opportunities, more challenges, more delinquency, more pressured scenarios, looking firstly at the quality of our portfolio, the profitability and the capital allocation, and most importantly, the distribution of the portfolio with the clients that are target, that are resilient to longer cycles. We are ready for some volatility should it come to fruition and we are ready to grow should the opportunity appear. So we don't have anything that anything that causes problems with the capital or delinquencies, we are at a unique moment for the future.

[Moderator]

So we have a reflection of our portfolio that we've grown over the last years. It's true. If you see the cost of credit adjusted by the effect of Americanas that we had the reversal in the third quarter of last fiscal year, the real year '24, what happens is that when we remove this effect, the year on year portfolio is growing 4% at the cost of credit. This is gonna grow seven, seven and a half in the consolidated in the midpoint, and we want to use that threshold. If we want to use if we want to grow more, we're going to grow.

[Moderator]

And if we need to review the guidance in the regime, we're going to do it as well. Therefore, the central message is that we are very comfortable with this level of cost of credit. We don't expect any crisis in the market regardless of the higher interest rate for longer time get us under pressure. We think that the portfolio is very well defended. And what we have of the growth of the cost of credit, we also have the perspective of expected loss.

[Moderator]

Since we grew well the portfolio and we continue to grow, we we call the provisions up ahead. So the proof of that is the April. We did the equivalence of our model for April, which is expected loss in IFRS and the tropicalized vision, and we have a zero effect. Zero effect in the cost of credit, zero effect in the PL with the expected loss. So our capacity of provisioning up ahead is very precise and it gives you a lot of surety of what's up ahead.

[Moderator]

Again, we are comfortable with the cost of credit. We believe that the indicators got to the historic lows. It's difficult to imagine an improvement. Media indicator is not improving regardless of the growth of the fourth quarter. It has that impact in the growth of the portfolio, but a great deal is the NPLs that are dropping.

[Moderator]

And the formation, specifically of the retail is dropping as well. So we are comfortable with the guidance of the cost of credit. We will work strongly to have a lower cost of credit, but not losing the opportunities. I told you the mistake of mistake one, which is given the credit. Mistake two is not making business because of the excess of being conservative.

[Moderator]

But we do the management of the bank looking at the future. I grow because the market wants me to grow and then I expect why the indicate then I spent two years expecting, explaining the indicators that are bad. No. Here, we create value and on the long term. We don't work on the short term.

[Moderator]

We are comfortable with what is being discussed and if the opportunity should come to fruition, we will seize it.

[Moderator]

Next one. J. P. Morgan.

[Moderator]

J. P. Morgan. Welcome. Thank you, Lulia.

[Moderator]

Thank you. Milton, congratulations on the great result. I think that the expectations for you are high, but it's part of your success. I'm gonna ask about the wholesale bank. Just the leak rate is higher.

[Moderator]

So what is your expectation? And the are you getting into the DCM market opening spreads? The how would it impact origination? Anything on asset to quality that concerns? Thinking about the source of the wholesale, if you can explore on this part, I would expect I would thank you for giving us more details.

[Moderator]

Great to see you, Yuri. I think that the expectation is the expectation itself. And what we expect to do is to deliver or overcome the expectation whenever possible and having a good being aware good awareness of the scenario up ahead. This is how we've done the management of the bank. And talking about the wholesale bank, a few messages.

[Moderator]

The portfolio of the bank is well positioned. We managed to grow the portfolio in an important way. We have an effective exchange rate. I'm talking exclusively about Itau BBA, but still the portfolio grew relevantly. Ratings that are very good, rates and spreads that are very adequate, very important to this point because growing portfolio with a low spread destroying the value is easy to do.

[Moderator]

You don't need any technology. And what we try to do is actually look at the cross sale client ad hoc return on allocated capital. This is the discipline of capital allocation is a differential of our bank today, competitive differential. And it makes a difference as we allocate and grow the relationships. What I believe that makes a lot of difference with Itau BBA is the positioning of the franchise that goes beyond the credit portfolio that is well robust and strong with low concentration, well positioned, looking at longer cycles with the right price, with good profitability on the allocated capital and also our whole capacity for cross sale.

[Moderator]

That makes a big difference. Whether if it's cross sell of the day to day operations, derivatives, exchange rate or the cross sell of payments, flux, cash management, the investments, which is not just cross sell. We have aggregated value, we have alpha when we have a relationship of trustworthiness with the client and we service them with all the needs as Flavia Niuta will be there. They say from day to day to day, that makes a lot of difference in a holistic management of the portfolio. So we believe that this is a year for strong results.

[Moderator]

Capital markets, this was the biggest year of the history of the bank for the market. And in terms of volume and results, we are doing very well in this revenue pool, revenue pools and rankings. The bank, once again, is well positioned in this market with quality, profitability, with strategy, adequate structures, quality and execution. But the volume is lower for 2025. We expect 30% to 40% less this year with the interest rate.

[Moderator]

We don't imagine that the windows for the capital markets on equity shares, we imagine that this is going to be a timid market with eventual opportunities or follow ons, some pinpoint cases and M and As. We're always going to have the most more active or less active depending on perspectives. The fact that we have a portfolio that is very complete allows us to do to have this balance within the bank itself and especially within Itau BBA. Even though you might not have a very pungent ear in some business lines, the other lines tend to perform very well. So the overall, we expect a solid bank, solid year for EBITDA, high profitability doing the adjustments for our capital allocations, which is necessary to phase in of operational risk impacts the profitability of the business.

[Moderator]

That phase in of the credit risk will always have the rebalancing effect all throughout the year. It's set to the spotty bose with the results that are with a high expectation. We are not forcing any crisis in the credit. We are not. Naturally, we know that, you know, we have events in wholesale.

[Moderator]

It's a relevant portfolio under management and it's very well diversified, distributed, and the quality of it is very strong. We've never had a quality of the mix so strong as we had today, but we are working naturally with the lower indicators of 0.6, zero point five, zero point four kills. I mean, it is what it is. It might get worse, yes, but, you know, we have the complete capacity for absorption. Last point to close this question is to tell you that we have a provisioning level in the cases that bring more attention to them.

[Moderator]

The these this is a strong provisioning. I would say that is almost completely provision any cases that have any cause for concern. We don't see any need to accelerate the provisions. On the contrary, if we can execute the transition of credits, we might even have reversals. And that has to be taken into consideration.

[Moderator]

The coverage index is not a good metric for this portfolio, but the level of provisioning over the portfolio very adequate and we see name by name statistically, we look at segments, We stress that we are very comfortable with the quality of our portfolio. Perfect. Thank you. Thank you, Yuri, as well. Next question, we have here.

[Moderator]

Hello, Nishio. Welcome. Oh, okay. Now we can hear you. Good morning.

[Moderator]

Good morning. A few questions. First, the ROI, it's difficult to see how can you improve it. Maybe you had a tremendous result. We're looking at the verticals, different business views that you report.

[Moderator]

The credit vertical, given the improvement, it still runs below the cost of capital of the bank. How do you see the evolution of this vertical throughout time? Chile, which still runs below the cost of capital, you had an improvement, but still below the peers of Latin America that you can run with an ROI. That is interesting. And my second question is in regards to the credit cycle, delinquency and the quality of portfolio that you've managed to improve even below the pre pandemic.

[Moderator]

I wanted to know if you can somehow what do you see for this indicator? And can we keep that threshold structurally very low if you see a worsening in 2025 in the cycle, if you can tell us about the new crops, what's up ahead? Thank you. Thank you, Nishio. Thank you for the question.

[Moderator]

From the standpoint of profitability, I believe that we have naturally, homework to do every single day. And capital allocation is without a doubt a mantra here. We discussed this thoroughly. The it's a competitive differential of the bank. I believe this is true because the way that we do the capital management allocation, we make the decisions that are prospective.

[Moderator]

We do not do operations just looking at the short term and giving incentives down the line, this is a relevant differential that has showed itself strong from the standpoint of strategy and decision. When I look at the business, you have the well, the cost of capital has done a catch up that is important, and you don't reprice the portfolio in the same speed that the cost of equity grows. So this is an important message. So as you see an increase in the cost of capital, the ROI of the credit operations tends to not follow-up in the first moment, and then you reprice the portfolio as time goes by. There is some temporal mismatch.

[Moderator]

So the other side of this, this credit portfolio allows us to have the level of revenue in the bank. So our capacity of cross sell and not look at the ad hoc of credit stand alone. Of course, it's important to look at the ad hoc of credit stand alone, but not ignoring the capacity of cross sell that you have with the client and looking at the relationship. At the end of the day at the end of the day, you have to look at the return of the capital, not of the relationship and not just a capital. Even do we do both and with a lot of discipline.

[Moderator]

This is the differential in the way that we work with the bank. When I look at Chile, I believe that we are more conservative in the allocation of the business model that than what we could be. There are two reasons for this. First, there is a tax issue. So when you look at the profitability of our bank locally, for the size of the operation and for the level of cross sell that you generate, I believe that we are managing to operate the bank with a competitive profitability.

[Moderator]

But what happens when you see the business model, there are three factors that affect the profitability for the allocation of calculation that we do in the bank. The first is the tax issue itself. The TBU based taxing based universally, when you have the taxation of a country, you have to complement the taxes in Brazil, That's different. With Sandy O. C.

[Moderator]

D. E, the government is conscientious of this. There is a discussion of pillar two of tax and there is discussion of TBU, universal tax two happening, so we can standardize this in all dimensions. Of course, that depends on the approval of Congress. There's still a long ways ahead, but I have a high expectation that this tax issue can be resolved in a reasonable time frame, I expect short.

[Moderator]

This is a discussion that we've done for many years. Not just of Itau Unibanco, it's of all the multinationals that have operations outside of Brazil, and it's a differential competitive differential on opposite. You lose competitiveness as you do not dispute the markets with the same, guns. The government is aware of that. We had talks at the higher level of the government.

[Moderator]

We have high expectations that this is a problem that will be solved and what unlocks, the value for this operation, in the future. Second aspect is the capital allocation. If we look at the operation of Chile, if you look at the minimum regulatory, there is no ad hoc in the way that the regulator looks at our minimum regulatory. In Chile, we have an adequate buffer for the operation, but 4% consolidation issues. We operate with a minimum of 11.5% with capital.

[Moderator]

If Chile is running at 10%, I do an add on at the shareholder vision of an additional 1.5 based on the and it's based on this capital that I measure profitability. If I just consider that we have an an appetite to work with 10 of capital with Chile, which she which seems very adequate and the other banks work. And if the other point is if you compare the other big banks, comparable banks and you see the add on that the regulator places, our differential between the minimum regulatory and the capital that we operate is higher than some banks that are higher than us. So I believe that we have an adequate buffer for capital. If I remove from the math this effect, the profitability increases because, the shareholder that purchases E2 for doesn't give me a COI different because I have geographic diversification.

[Moderator]

We should in our vision, but in practice, we're more conservative and we take into consideration that we don't consider this. Taking these two effects, the return climbs importantly for the bank. And I think that and these generate value for the shareholder. It's accretive for the profitability of the bank, and it could be accretive if we just consider these two effects. First, possibly in this phase of discussion and eventually, we have an expectation that will be expected.

[Moderator]

And another thing is how we allocate the capital in the Chilean operation and we publish within the business model. There is a last factor which is the cost of the hedge of the index. The cost of the hedge of the index has a cost of opportunity in the Chilean operation and we allocate a part of the cost in the business model. So I would like to say that the operation, if you want to be as precise as possible, gives a better profitability than the business model, but in the way that we do the adjustment with the of the math as a whole. Opportunity there is an opportunity in retail, we believe that there with One Italy and everything that we're doing, we have the capacity to evolve the profitability of these operations all the time.

[Moderator]

You had complimented with other questions. Renato, can you help me? Am I missing out something? The NPL NPL 90 in the 15 well, in the short, we haven't seen any any well, all the crops are performing very well. We haven't seen any mismatch in the crops.

[Moderator]

We have more pressure indeed in the short delays. If we look at the numbers, for example, NPL 90, small and medium companies. We improved 50 points the last quarter. And this is 20 is explained by the growth of the portfolio and 30 basis points of improvement of the NPL itself. So it's important.

[Moderator]

I would declare that we are very comfortable with the quality of the crops. We are not foreseeing any problem. We can see that the management of the portfolio, the management through the cycle has worked and this is what will allow us to have the opportunities that we're not going to have to explain unless we have a radical change, an increase in the delays, regardless of the rupture, which might give you a space for growing in quality over the next few years. So we are very comfortable with all the results, whether if it's a short, a delay, tempestuous, over 39, three, everything that we measure with satisfactory thresholds. Thank you.

[Moderator]

Next question, Renato Miloni from Autonomous. Hello. Welcome. Thank you for the opportunity and congratulations on the results. Guidance.

[Moderator]

First, the guidance. And how do you see the trajectory of the materialization of the guidance? So you're growing with the year and that reverses on the second quarter or do you have a linear expectation? If you can talk about the main risk that you see for this year. And secondly, I wanted to mention the, Conseganado private.

[Moderator]

How do you see the product? Do you think that this is an opportunity, you know, in the segment? And do you see a risk of cannibalization of other products? Because we have the consumer that is leverage and probably without being able to take more credit, personal credit, and other products. Thank you.

[Moderator]

Thank you, Renato, for the question. Always great to have you with us. Let's talk about the linearity of the guidance. It's very difficult given the size of our operation to add attribute every line, the geography at the start. It depends on the result of the first quarter.

[Moderator]

You start to understand a bit better how we behave. So remember last year, the portfolio in the first quarter, we are below the the the threshold of the of the guidance. It has a different behavior in the different lines. It has some continuity and others that are easier to project. But generally, I don't see a greater volatility.

[Moderator]

The portfolio has that. It doesn't bring a lot of volatility unless we have a specific, businesses or some structured wholesale operations performance fees, which in the fourth quarter, we can capture these effects. The rest has some linearity from the accounting standpoint. Margin with the market has volatility, a quarter that is better or worse, but in general, we can expect some linearity and we see the base effect regarding the previous year. If we are getting a a stronger quarter or less, that might generate some effects.

[Moderator]

That's the first aspect. Second point about the consign and private credit, this is a great opportunity because this can be a program of credit that is very strong, very positive. We've had a meeting with president Lula and the ministers to discuss the potential and the importance. And what I've told you at the meeting, I'm gonna give you back. The salary, here, mass is a hundred and 70,000,000,000 reais.

[Moderator]

If you look at the credit, private, unsigned, and private, personal credit, the penetration of two the two added gives a relation of 1.1 to one. So we have 10% more in credit for this population than we have the salary mass. And 30% of these operations are done at the private, payday loans consigned. We have CDC, Creditiario, whatever you want to call it. When we go to public companies and INSS security, we have the salary which is half at Social Security, but you have a leverage of six to six and a half times in terms of products and the penetration of consigned credit significantly higher at these points of social security, INSS, and public companies when compared to private.

[Moderator]

There is a lot of reasons for that. Different risks, private consign, it comes from the payroll of the companies and, the agreements that you have to sign amongst the companies, you have an operational development. What we are studying is that this is done through CTPS. So we can, through the side of the channel, have access not only of the data of the workers, but an operational flow that is born, developed as everything that is gathered as social security is done through this solution. Much easier to make operational.

[Moderator]

We have challenges as an industry, but it's simpler to make operational once the companies have it in motion. I'd rather have a smaller share of a market that is five, four times higher than having the share that we have of a small market. So just to give you a numbers, the private consigned credit is 40,000,000,000. We are 30% of this market. We are the leaders in this market, 12,000,000,000 in portfolio.

[Moderator]

I'd rather have three times more portfolio even though I lose some share in the market that has everything to increase and that I can service our clients better. What are the concerns? First, over indebtedness over indebtedness. Because when you launch that program, there is a lot of people, 70% of those that are, have taken credits. They take, credits in other products.

[Moderator]

If they take another credit, another loan, there is a risk of super leveraging, over leveraging that we don't think it's healthy. And the government is aware that they have to find mechanisms to work with this moment right at the inception, should it be launched. And it's important that all the channels of all the institutions to offer this product for our clients. So we don't have the monopoly or the marketplace because this from this standpoint of journey and the capacity of penetration, the capacity of time of response is very bad for the long taker. So this is a conversation without the CTPS having its role.

[Moderator]

And we have the the tool of CTPS where they can naturally compare. It will be more competitive, certainly, but there will be a differential on our side. It's our capacity of risk management of the companies because in the end, obviously, it's important the average salary, the time working, the turnover of the sector, but it is as important as the capacity of evaluating the risk of these companies. We have a gigantic operation, Itau BBA, or the credit for the companies and the performance of credit, as you've seen, has a differential in regards to what we have observed in the market. So the risk of the company is important for the decision making process.

[Moderator]

The sector that they are, the turnover, how cyclical it is, perpetuity of the business, all of that has to be taken into consideration. We are very comfortable that if this market comes, we continue to be leader. We are going to work to increase the pizza size for everyone even though we don't have the 30% that is much higher than our fair share. We believe that the pizza, the pie has to be bigger and this has to do with more competitive credits that reduce delinquency and you can service a population with salary that is higher, which is great for the country, great for the market itself. Thank you.

[Moderator]

Thank you.

[Renato Lulia, Group Head of Investor Relations & Market Intelligence at Itaú Unibanco]

I'm going to go back to English now as we have Jorge Echevarria from MortgageSilly with us. Jorge, thanks for joining the call. Thanks for your question.

[Jorge Echevarria Gonzalez, Analyst at Morgan Stanley]

Hi, Milton. Hi, Renato. Good morning. How are you? Thank you for taking the time.

[Jorge Echevarria Gonzalez, Analyst at Morgan Stanley]

So I wanna ask you quickly about the acquiring business. We've seen TPV growth decelerate, across credit cards and debit cards. You know, credit card TPV grew 6% this quarter compared to 18% last year. Debit card was flat compared to 7% growth last year. Now, your market share has been relatively stable around 22.

[Jorge Echevarria Gonzalez, Analyst at Morgan Stanley]

So, a couple of questions. One, I want to get a sense on the market share dynamics for 4Q, if your market share was relatively flat or there's market share gains in this quarter. And two, I wanna get a sense on the outlook for the acquiring business in 2025, both in terms of TPV growth expectations and in terms of competition. Because, you know, as you are, you know, growing and launching, or you already launched, but growing on the Atlas initiative in SMEs, you know, there is an expectation that you could potentially not be that aggressive in in prices, meaning, you know, with higher Saliq, some of the other acquirers are expected to increase prices, particularly of the prepayment of credit card operations. But, you know, there's an expectation that Itau has more room to maneuver on price and maybe be more competitive throughout 2025.

[Jorge Echevarria Gonzalez, Analyst at Morgan Stanley]

Thank you.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Thank you. Thank you, Jorge. Thank you for coming. Good to see you. Well, I have a broad overview about this discussion and I'll try to be very pragmatic here to deliver the most relevant messages.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

The first one is that for many years, when all the acquiring companies were listed, there was this massive discussion about the acquiring market, how relevant the market share, the profitability, if you're gaining share, if you're losing share, what is your TPV growth, what is the MDR credit, debit, so on and so forth. I think this dynamic has changed it for few years now. So just to give you a few numbers here. If we look to the cash management payments, receivables and payments that we have for our clients, the TPV of the credit card in the whole system, it's only 4% of the whole cash management business. So it's relevant.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Yes, it's relevant. It's important of course, but it's only 4% and we look the broader market. We don't look only the credit card market and the acquiring business. This is one topic. The second one, the way we release the data in our balance sheet, it's not very precise for you to make the calculation about the take rate and the profitability.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And this is for two main reasons, the MTR and the flex anticipation we do that it's embedded in the MTR. It is in the service and fee business. When we go to the margin with client, we have the anticipations that we do when we buy receivables and the cost of funding of the MDR that we anticipate. So for two reasons that I just explained, you cannot see the whole business altogether when you look to that. The third information, and I think this is very relevant, even though we are the leader in this market for a few quarters now, we don't look to market share as other companies or other participants do.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

For us, market share in this business doesn't mean profitability, doesn't mean the right price. So we focus on the target market and where you have to rent market share just to show a better figure, we are out of this discussion. So whenever you price on a negative price, marginal price you are negative and we are seeing this happening. We don't fight for those deals because it doesn't make sense because you don't pay me more or less in my multiple because I have more or less market share. The most relevant thing is the profitability of the business.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

As the business fully integrated in Itau Unibanco, it's not a stand alone business as used to be in the past. Having said that, if you look the stand alone business, we had a 40% grow year on year on profitability. But there is a lot of other side benefits on the integration with our business, enterprise business, SMEs business, it will be a business that's much more relevant than that. So we look the client as I will say not more as a product, but as a client and we don't need to look at each product and price to perfection otherwise you're not pricing the relationship and not giving delivering to your client the best product, the best offer that the client needs. So I think in somehow we are discussing for the next quarters to change the way we release the figures of the acquiring company because we think it's somehow misleading when you look to that.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And for us to be the number one in the market or be the number two of the market share, this is not what we pursue. What we pursue is the profitability of the relations, the sustainability of the business and where we need to have fair share because the profitability is there is there where we have a relevance difference among our competitors. So on the big companies where the market share really moves the needle, it's two thirds of the TPV. Therefore, you have a very small take rate. And we are seeing a fierce competition because of market share.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Be my guest. So if some companies wants to gain market share to show that they are the leader or not or they are gaining share. Be my guest, we look profitability. This is not where we are and we are looking the business fully integrated. And this is the major change that we have when we compare, to other periods of time.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

In the past, we used to do this way, but things have changed in Italy Banco for a few years now. And we are very happy with the integration and with the results that we are getting so far. So a lot to think a lot of things to be done.

[Renato Lulia, Group Head of Investor Relations & Market Intelligence at Itaú Unibanco]

Thanks, Jorge.

[Moderator]

Next question is from Brian Flores from Citi. Thank you. Thank you, Milton. The growth of the portfolio and the theme that we didn't discuss, how does Juanitao will get in if this is the case in this equation? Thank you.

[Moderator]

Thank you, Brian. Great to see you. I believe that we have to look at the mix. And we have a growth. I look at the revenue of services more associated to GDP than activity more than the portfolio.

[Moderator]

And we have to see that the breakdown of the revenue of services is distributed amongst the lines of businesses. Doing a a a summary in the aggregate is difficult in the issuance. We had done a rederisking very strong all throughout the years, focusing on the relevant clients through the cycle. And the credit card is a relationship and transactionality product that is very important for for relationship. And focusing that we are growing the product 17% is the growth year on year than what we did with Personalit and Uniclass.

[Moderator]

Good rhythm of growth that is an exchange, but the de risking of the portfolio where we left has a negative impact because you have less portfolio in these clients. But VPL of this decision is very positive because the in in there's well, we have the delinquency and the exchange rate, and this is an important cycle for delinquency with the high interest rates, more inflation. We have the commitment of income higher, and we have a challenging scenario for credit. How will it materialize? Time will tell.

[Moderator]

When we look at the other two lines that are very relevant, the other three lines, we talk about asset management. We see the opportunity of growing, whether if it's because of volume of capture. We have a global capture that is very strong, A higher volume of capture either by performance fee, which is similar. And it's very difficult, but we have more volume in the money and the asset than what we had in the end of the year. So it shows that our capacity of performing and charging performance fee is higher and we are optimistic that we can have great results.

[Moderator]

The consign consortium is growing. Of course, there is a smaller margin. And the investment bank and, we expect a decrease year on year because the year of '24 was an extraordinary strong year on DCM. It was the biggest record in terms of volume and profit pool of the year of the history. We don't expect, especially with the interest rates in this threshold, that we're gonna have a year that will repeat with the same intensity.

[Moderator]

We expect volumes with 2024, and this has an increase in the revenue. If the market has a window, we're going to seize our positioning and relevance in this market. The last line, which is insurance, is where we consistently have grown throughout the years. We've changed the threshold. We've doubled the results over the last four years, and we are still seeing an opportunity of growth.

[Moderator]

Part of the growth comes with the expansion of credit. It's natural that it happens, but it's not just in the open platform. We have an important growth for the other products. This is a dynamic that is evolving in a very positive way. And we see relevant opportunities in markets that we've explored very little, and we see the opportunities of continuing to explore and growing in a relevant way.

[Moderator]

So we still have to grow the insurance operation of the bank and these are the main lines to show that they're positive and some that grow less, but it depends on the previous year and depends on the market. So in this context, it doesn't capture a linearity of the business. Juanitao, you asked, as I told you in the beginning, we don't have an expectation. It's not implicit in the guidance what we can do with Juanitao. We've migrated over 5,300,000 clients.

[Moderator]

At this moment, we have 6,000,000 and we will complete this year the migration of the 15,000,000. The number one, two, three priority is quality of the migration. Just so you know. Over 99% of the clients that were invited to migrate migrated. 99% shows the quality that this is a journey that is seamless, simple without friction, has to be a wow journey so that the client can do this migration without any pains.

[Moderator]

Now we go to a new era. We know the clients. We have more deployed the new features and the super app, not only for the migrated clients, but for the entirety of the basis. We've evolved importantly with the digital advancement of the features. We can see the amount of products with the Neo Super App.

[Moderator]

We have a new rhythm of delivery of products, services, and context and quality for our clients. So one it all and its potential, it's not implicit just in the numbers, but with everything that we've observed and what we have in opportunities tends to be one of the biggest factors of growth. When we look at retail, we have opportunities not only in low income but also mid to high income. We are very excited up ahead. So far so good.

[Moderator]

Once we have more concrete numbers, I can share with you. But for now, we are down the right path and above our expectation. But we have a lot of homework and a lot of work to do, and I don't wanna overpromise. I rather overdelivery. Thank you.

[Renato Lulia, Group Head of Investor Relations & Market Intelligence at Itaú Unibanco]

Exercising our ability to switch back in portions in English, we have with us Carlos Gomez from HSBC. Carlos, good to see you again. Thanks for joining the call.

[Carlos Gomez-Lopez, Analyst at HSBC]

Thank you for the call. Congratulations on the results. And as always, thank you for your generosity with your time and spending answering all the questions from all the analysts. I was looking at where you started the year and where your guidance was initially. And you were expecting this year 2024 to Brazil to grow 1.8%.

[Carlos Gomez-Lopez, Analyst at HSBC]

It ended up growing twice as high, 3.6%. You also expected a little bit less inflation. Where do you think that is reflected in the results? And is there a risk that at some point we have a year which is down versus what you were expecting? And my second question is about the tax rate.

[Carlos Gomez-Lopez, Analyst at HSBC]

I see that you are guiding for a higher one this year. Last year, you were at the end of the at the higher end of the range. Any case that we should be aware of or any reason why the rate is higher now? Thank you.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Thank you, Carlos, for your question. So the GDP, as I was mentioning in the beginning, looking for the perspectives of 2025, This is the best number available. We see that the agribusiness should grow around 5% this year, should be relevant not only for the business, but for all the impacts to generate in the places where the agro is very strong, which is very strong throughout Brazil in many regions. So I would say that the GDP, it's an information that we use. But at the end of the day, we are so connected with the clients, with the activity in all the lines of business that we have, in all the business that we discuss that if the activity is getting better, we are getting better.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

If there is more opportunity, we don't lose time because we had expectation of the GDP to grow only three one point eight it end up growing 3.6 for instance. Because the GDP growth has many distributions throughout the country, regions, places, industries. We are connected with all those businesses. So we feel the flow online and the GDP is a consequence. So of course, at the end of the day, you can forecast what you can expect when you look to GDP.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

But if the behavior throughout the year is different, we can capture that online due to the penetration and the close relationship that we have with the whole country and the whole companies and whole clients, so on and so forth. So I just used the GDP to forecast. But if there is any change, if the economy is doing better or worse, of course, we are projecting, but we can feel that online. This is a pass through to our businesses. So this is the first answer.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And the second one about the tax rate, I think at the end, you have to take two things in consideration. We are paying a relevant dividend. This, of course, have an impact in the IOC of the bank as more capital have more IOC. But the second one, the IOC benefit is limited as well. As higher is your profit, as higher is the profit of the organization, as less I would say you have the IOC impact in the effective rate.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

And of course, we don't have only a bank that pays the tax of $45,000,000 We have other companies around the conglomerate that we pay different taxes. So depends on the mix of the businesses that we are generating, profitability depends on the IOC, depends on the level of capital, depends

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

on

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

the level of profit. So many things that can impact. And we are going through now changes on the DTA for next year. So you have many other things that impact the effective rate of the bank. So it's difficult to give you one, only one answer that explain that, but it's the combination of those factors that I just mentioned that impact at the end of the day the effective tax rate of the bank.

[Carlos Gomez-Lopez, Analyst at HSBC]

But you don't expect any

[Renato Lulia, Group Head of Investor Relations & Market Intelligence at Itaú Unibanco]

Tax, Milton. And we're going to the last question now. We're going to say in English because it's coming from Nicolas Rivera from Bank of America. Hello, Nicolas. Thanks for our question.

[Renato Lulia, Group Head of Investor Relations & Market Intelligence at Itaú Unibanco]

We don't hear Nicolas. Not sure you're in mute. We cannot hear you. I'm sorry. Nope.

[Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco]

Try again. I think we heard some noise from your mic. You're not listening now. Try again, Nicholas. Maybe we can Nicolas,

[Moderator]

we can Can I ask a question while Nicolas is connecting? Okay. Let me get a question here from WhatsApp. We try Nicholas, otherwise we can call him back and get his question. So So a lot of questions on guidance costs.

[Moderator]

A lot of questions on migration for the Super App. Gonna get one from here. So when they ask about the Super App, the when do we expect to get to the potential total potential of this migration? You said that nothing is incorporated in the guidance of '25, that the main one is quality. When do we expect the maturation of this initiative?

[Moderator]

I am under the impression, Renato, that over the next six months, we're going to have a sensitivity that is higher of our real capacity of getting a relationship with a client, of giving credit cross sell. Remember that this is a client that we know. It's not a new client, so it has a they have a behavior. It's a client that has a relationship with us, and they end up having access to a series of features. So we have all the opportunities, but we need to test, pilot, get you know.

[Moderator]

It's very difficult that in the middle of the year, I'm gonna have all the answers. I'm we're gonna have more information, but we're gonna be more safe. But imagine the potential of a basis that is less explored, 50,000,000 clients that has different behaviors spread in a different segments. We have to evolve the experience. So this is ongoing.

[Moderator]

It's difficult to see to say that over the next six months, we're gonna be able to project where we're gonna get. We're gonna be able to show the evolution and what we see in terms of potential when you can scalene this for other clients. So this is not a project that has a beginning, middle, and end. It's a new way of relationship with the clients, and we always do data relationship through the mono liner, and this changed, and this is gonna open new opportunities, new learnings, new corrections, new adjustments. It's a bit on how we expect to work with this platform.

[Moderator]

Nothing is implicit in the results as we have more surety and tranquility we can incorporate as they become more relevant in the numbers. Milton, do you inform me that we couldn't connect with, Nicholas? Well, we are gonna answer all the questions that we've got through WhatsApp, and we didn't have the time. Well, what I can tell to Nicholas before we conclude is that in some cases, we, exercise the call and in other, we look at the economic aspects of the debts. Different different tranches, tier one, tier two.

[Moderator]

There is local tier one and offshore. So, Nicholas, if it helps, for each case, we're gonna position ourselves. In some cases, we exercise the call of ELF in CIRMs, some we did. It depends on the scenario. As we have more information, we can publish it.

[Moderator]

And maybe it helped. I imagine that your question could have been along those lines. To conclude, I would like to thank you. In the end, I want to show you that we are very aware of the guidance that we are very much prepared to face whatever the challenge is. Speed is the name of the game.

[Moderator]

Capacity of reaction is the name of the game. So our businesses are evolving. All the businesses are evolving and growing. And the more important thing is that we see a lot of opportunities to continue to evolve and grow. It's not that we got to the gap, and then we we we have a lot of space for evolve to evolve.

[Moderator]

All the discussions and and meetings, we have opportunities all throughout. I respect the competition. I respect the other banks to what they've done, but we also have to run faster and continue to deliver results. So we're very satisfied with the results obtained in '24 over the last years. Very excited with the perspectives, and we will pilot the scenario, down to the with, well, we've managed to pilot very well in adverse scenarios.

[Moderator]

If the scenario is more difficult, we're gonna be strengthened on the other side. If the scenario is of opportunity, we're gonna be, strengthened as well. So I have a positive cautious tone from the standpoint that we have to look up ahead and we have to take into consideration the information. We have to look at the perpetuity of what we do and not just look at the next quarter so we can continue to have solid results with good profitability, good payouts, good capacity for investment, and growing the franchise. Very excited.

[Moderator]

Thank you very much for the feedback. And we will see each other in three months to see how the first quarter was working, and then we will have more sensitivity of whatever adjustments that might be necessary if they are necessary. Once again, thank you very much. Thank you, Renato, for your work of management along with Gustavo and the IR team. Well, I am well, there is still a lot to do, and I'm excited.

[Moderator]

Thank you, and see you next time.

Participants

Analysts

• Milton Maluhy Filho, CEO & Member of Executive Board at Itaú Unibanco
• Moderator
• Renato Lulia, Group Head of Investor Relations & Market Intelligence at Itaú Unibanco
• Tito Labarta, Vice President at Goldman Sachs
• Jorge Echevarria Gonzalez, Analyst at Morgan Stanley
• Carlos Gomez-Lopez, Analyst at HSBC