Banco ABC Brasil S.A. (ABCB4) Earnings Call Transcript & Summary

Good morning, everyone. We're just starting the 15th edition of APIMEC ABC Day, the event that's going to gather stakeholders. And we are going to focus on general investment topics. We're going to this issue is going to be the need of people and clients, opening opportunities and move our economy. I'm Vanessa Cochi, and I will be conducting this meeting throughout our morning. First of all, I would like to thank our audience and our partners that for more than 50 years are bringing training knowledge to investment professionals. Today, we're going to have an intense agenda focused on the bank's trajectory. Over the last few months of the bank, the evolution of new initiatives that had already gained ground important results in the current scenario. To start our meeting, we're going to listen to ABC Brasil CEO, Sergio Lulia and the Director of Corporate Relations and Events of APIMEC Mara Limonge. Next, we're going to listen to Lulia. And talking about ABC Brasil's strategy and CFO, Sergio Borejo will talk about the bank's performance in the last 18 months. We're going to hear presentations of 6 strategic areas of ABC Brasil middle segment: ABC Link, Energy Trading Company, insurance broker, investment bank, private paycheck backed loan and credit enterprise and supply chain finance. At the end, Sergio Lulia will get back for closing message and ABC Brasil look into the future. Our agenda also includes a few moments for Q&A. [Operator Instructions] Let's go and participate to open APIMEC Meeting ABC Day, I will invite ABC Brasil CEO, Sergio Lulia. Welcome.

Thank you, Vanessa. Good morning to everyone who's watching this online addition of APIMEC ABC Day, a meeting that will reveal our events, our recent trajectory and the vision we have for the future that is already happening. I feel very excited to lead this bank that it has 32 years old of operations in the country, 14 of which are publicly traded. ABC Brasil has a history that makes solidity tradition and a lot of evolution. It is a trajectory marked by changes. The learning from the 3 decades have allowed us to mature and improve our purposes and broaden our focus without ever losing sight of our values. In the last 18 months, we had our largest growth number of clients, an increase of up to 60%. It's an exceptional client portfolio companies with potential to acquire products and become business partners of ABC Brasil. We also grew in employees by almost 30% in such a delicate moment in the country. How to explain this growth only by analyzing the concepts and practice that have a combined -- have followed us throughout our history. We are a wholesale bank, which meets all the needs of companies and expertise and complete solutions are close to our clients. We invest in long-term relations. We advise the customers. And we don't just offer credit, we offer practicality, quality in service and in the products without bureaucracy, and we share knowledge. The client who seeks us wants the relationship of trust with their bank, and we deliver it. We create bonds with Brazilian entrepreneurs. And in the last 2 years, we have started to extend this value offer to smaller, the middle market companies with the same seriousness competence and that with which we treat larger companies. And we intend to go further helping their clients in their relationship with their stakeholders, their employees, customers and suppliers, broadening the range of solutions offered and at the same time reaching a new market share. We have specialized professional team that deeply knows the customers, the products and the market, young and thinking ahead, a team with energy, willingness to grow and build a future. But that's not all of it. We invest in state-of-the-art technology. We work with data that offers knowledge and points [indiscernible]. We use technology in favor. And in favor of our clients, modernizing the way we work, relate and solve problems. We have several initiatives and projects under development within the bank. We have chosen 6 of them to present to you here today at the APIMEC ABC Day, highlighting the differentials of each one in certain Brazilian companies. And we want to reinforce that in this modernization and evolution process. We have not lost our essence, our DNA of offering products with [indiscernible], entrepreneurship, commitment, governance and competence. We have a commitment to our history, integrating enthusiasm for the future, which inspires us to continue improving our strategy and our operational focus. And to help me in this opening, I will invite Mara Limonge to leave her message.

It's a pleasure to be here for another year with ABC Brasil. At APIMEC, we are in constant transformation to meet the new financial scenarios and to establish new partnerships with the sector. Our role is to always bring the best information on public-traded companies to our members and stakeholders. In times of free communications, seeking the best sources of information is always the most positive alternative. In today's meeting, we'll bring important solid content, which will contribute to better decision-making by stakeholders. And at APIMEC, we always support and lead the best practices initiatives such as those of Banco ABC Brasil. Thank you very much.

Thank you, Mara. Thank you for your presence in this meeting. The partnership with APIMEC is part of this network of relationships that ABC Brasil has maintained throughout its history. It is a relationship with an entity that contributes to the development of the financial sector by means of knowledge, updating and the training of professionals. And now I would like to move to a very important part of our meeting, ABC Brasil's strategy. To open this strategy section, I will start by answering one question. Who is ABC Brasil? We are a financial institution focused on the corporate market with a resilient business model, tested over time by the most diverse crisis. In our partnership company, we have great local economy. We have a strong foreign controller and the governance track record of the company that has been publicly traded since 2007. We're also in rapid evolution in the growth of the client base and the expansion of niches and an increase of the product portfolio. Finally, we are a profitable bank that uses part of its profitability to support new paths of growth. Leveraging technology should build previously and viable businesses. We have built a competitive bank offering not only products and services, but also a consultative approach, aiming at proximity and trust with our clients and partners. And it is this operation that we call our core banking and establish profitable and growing operation and nurtures a daily recurring relationship with more than 3,000 clients, one of our main assets. When we support our clients [indiscernible] treasury or capital markets operation, we're not just looking for a transaction, but for the building of a long-term relationship. And it is this trust built over the years that makes us dream and see even further. And where do we want to go? What is our ambition? The answer is straightforward. We want to be the partner of choice for large and mid-sized companies, offering quality financial and management products and services, building long-term relationships. But not only companies, we want to go beyond and serve their suppliers, employees and customers, their stakeholders as a whole. We want to provide customized solutions, whether by industry segment, company size or market niche. And for this, we need a broad product offering delivered through various channels. And to do so, leverage heavily on technology and data analysis, so we can attract talent in order to deliver a unique higher value-added products to our customers with sustainable business practices. And how can we build this ambition effectively? What is the strategy? Basically, it's based on 3 pillars: clients, products and channels. In clients, we're going to expand the number of clients. And as a consequence, the volume of transactions, taking to smaller clients the same quality of service that we have always delivered to larger ones. A clear demonstration of this thing is that -- is the expansion of the middle segment and a series of other initiatives that will be detailed throughout our presentation in products. The plan is to expand the portfolio, leveraging our relationship with more complete solutions for our clients, at the same time, increase the product offering that diverses our sources of revenue, dilutes the cost of customer acquisition and maintenance and reduces the dependence on specific lines of businesses. In channels, the strategy is to invest in digital and new partners to distribute products from ABC Brasil and also distributing third-party products through our commercial force -- task force, as it's the case of the insurance broker. And what's the final goal? We want to serve all links in the chain around our clients, suppliers, employees and their clients using for this and comparative advantages, such as access through a preferred channel of origination, which is the client itself, the information crucial for a more assertive offer of solutions as well as in the evaluation of credit condition of the final borrower and establishment of risk mitigation instruments as the use of receivable flows and other characterization structures. By making this, we leverage the relationship with our direct customer, contribute to with solutions for their stakeholders and expand the bank's customer universe. It's a daring action plan, but one that has the consistence to get to where we want to go. Winning new customers through our customers' ecosystems, always guided by technology, modernity and responsibility. Our strategy is open and transparent so that entrepreneurs can analyze and choose what is best and follow us. So that's the way I'm going to open our ABC Day, waving with our capacity to serve the market in a wider way and with the security that our brand offers. Thank you.

Thank you, Lulia, for your message. That reveals a bank that moves and seeks results encompassing new options for the entrepreneurs and their network of partners and employees. Now to talk about the bank's performance in the last quarters, I call the CFO of ABC Brasil, Sergio Borejo.

Thank you, Vanessa. I start my presentation by talking about our recent history. The journey in the last few months has been marked by a lot of work dealing with change and expressive results that we face challenges, of course, just like every market. We were resilient. We acted with caution and a time to aiming to protect our balance sheet and dare to do it at the right moment with a responsible management plan and a business plan that was proven to be efficient. And so we continued in a process of profitability recovery with our model that envisions a medium- and long-term vision that will allow us to present a sustainable growth. I opened this panel diving into this recent trajectory. Over the last 18 months, the total client base grew by 60%. We added more than 1,100 clients in the portfolio, passing the first time the mark of 3,000 companies with active relationships. This result is aligned with one of the pillars of our strategy, which is the increase in the number of clients and consequently, transactions, which contributed to higher growth and diversification of revenue, spreading of risks and dilution of fixed costs. One of the flagships of this growth is the middle segment, which encompasses companies with an annual revenue between BRL 30 million and BRL 300 million and which is gradually gaining relevance in the mix and expanded portfolio, bringing through main benefits, diversification of risk exposure and more attractive spreads. We will talk more about this middle segment on a specific panel. Let's talk now about the financial margin management. We were able to show continuous growth in the last 8 quarters, reaching BRL 232 million in the second quarter of 2021. Currently, about 70% of this financial margin comes from this line. That is the relationship with customers, and that's the main source of revenue aligned with the strategy that we have outlined. We also have the market margin. Complementing the margin clients, we have the margin with the market, a result of assets and liability, administration and liquid management strategies. We also have changed the level from the second half of 2020, a reflection in the increase of the balance street with the optimization of liquid positions and occasional opportunities resulting from interest rates. This makes any interest variation to be neutral. And the capital is invested in liquidity following the movements of the base rate, the drop of interest reduces the remuneration of the capital, which is only 5% of the margin. In other words, this revenue line has never been so unrepresentative in the margin with a normalization of the monetary cycle. This line starts the process of gradual increase. As a reference, for every 100 basis points increase in the basic interest rate, we estimate a positive impact of around 40 basis points in the return on capital. Over the first quarter of 2020, the net interest margin was 30% compared with the margin of 3.5 in the second quarter of 2021. The strategy of diversifying customer segments and improving the product mix is gradually showing its effects, taking us to levels close to those of 2019. Our ambition is to continue this trend. Now talking about the quality of loan portfolio. We can observe that the allowance for the accounts PDD balance as a percentage is of 3.2%, slightly above historic levels at quite comfortable level. While above -- [ arrears ] about above 90 days corresponds to 1.2% of the loan portfolio, close to the historical change of 1%. In the sequence, this information can be seen in another way, the coverage ratio. Here, we have it, which is nothing more than the outstanding loans overdue over 90 days. This ratio reached a level of 261% by the end of the second quarter of 2021, aligned with the levels presented pre-pandemic. We see the current credit environment as stable with no major surprises and no new relevant cases that require extra attention. We have invested heavily in technology and digitalization of activities, not only in new initiatives, but also in our core business in order to reduce the cost per transaction and capture gains in operational efficiency. This can be confirmed both by the significant increase in the volume of transactions, payments, receipts and issuing of slips among others and in the states of the credit process such as the analysis of guarantees, balance and in limit definitions. In this way, we can already observe gains on upscale in our operation. Another important point to highlight is the effort that ABC Brasil has made to expand its human capital. We increased our team by 149 employees in the last 12 months, including especially reinforcement of the middle management, innovation, technology and data science teams. And even with a significant volume of hirings, we have managed to keep the efficiency ratio under control. It is natural that for any new business, costs come first with revenues following later. The expectations that with the continuity of scalability process of the new initiatives, we will be able to increase revenue growth even more significantly. Next, we show the comparison of the variations of net income in the second quarter of 2021 with the second quarter of 2020. It's clear the positive contributions of the margin with clients and market. The [ LCDI ] still contributes in a timid way. The drop in provisions expenses is also highlighted -- a highlight complemented by the better performance of service revenues. The trajectories are an increase in expense, a reflection of the new restructuring initiatives and higher tax payments, a result of the higher profitability. These factors resulted in the achievement of an annualized return of capital of 12.3% in the second quarter. Close to the profitability presented in the pre-pandemic orders. It's interesting to note that this recovery in net interest income adjusted for provisions have been happening consistently and gradually, contributing directly to the evolution of the return of the capital. Due to the several new initiatives under execution, this year, we decided to give a little more detail about then, either the initiatives that are still in their early stages or those that are already scaling. In the next panel, you will have the opportunity to get to know the professionals behind each initiative and a little more about the rationale and evolution in each front. Well, that's the end of my presentation about the performance of the last quarters, and I'm sure those results will encourage our team even more as you will see the following. Thank you very much.

Thank you very much for your message, Sergio Borejo, this overview about the last few months, ABC Brasil's performance that shows growth in total commitment to the market in all stakeholders. [Operator Instructions] Now it's time to get to know each one of the initiatives. And we have a trio of specialists opening this panel, the Commercial Vice President of ABC Brasil and Antonio Sanchez; the responsible for the metal segment, Fernando Vasquez; and the person responsible for the ABC Link project, Adriana Peres. Welcome.

Good morning, everyone. It's always great to gather our leaders to talk about a segment that opens such a wide range of opportunities. I'm referring to the middle segment, which cover medium-sized companies with high potential that were out of our relationship base until 2019. We know technology brings scalability and allows us to make moves that would not have been possible in the past. Since the beginning, our middle project has focused on a model with specialized teams, tools and optimized conveyors, which have allowed us to incorporate the important gains in productivity scale. This process is being complemented by a distribution model on our products and services through third-party channels, our ABC Link. This entire evolutionary process of distribution to channels both on our own and third party has been coordinated by a reformulated CRM area, which makes prospective selling and managing customers much more agile in assertive process. Today, in ABC Brasil, the middle segment, as Borejo himself has already mentioned here represents an important component in our results. Today, we have more than 1,400 clients in our portfolio, and this is just the beginning because there's still a lot of room for growth. But what is our growth strategy for this market. We have 4 pillars that we're going to focus on. First, the high growth potential, given our recent presence in the middle segment. We have an estimate market between 20,000 to 30,000 companies with revenues between BRL 30 million and BRL 300 million per year, which is the cut for our middle segment here. In the total universe, we understand that a number between 17,000 to 20,000 companies represent an attainable market that is within our geographic reach and with a credit profile compatible with the focus of ABC Brasil's operation. In the second quarter of 2021, we have reached around 1,400 clients in the segment, and approximately 1,000 are credit operation clients. In other words, the estimated addressable market in this something around 20x the size of our current middle market operation, showing great potential for growth. Also, a great way to accelerate this growth, expanding the addressable market, increasing our geographic presence and reducing the cost of customer acquisition, we brought the ABC Link model, which we'll see in more detail with Adriana later on. The second pillar I consider to be the differentiation in the service offer and in the relationship with clients besides the product line. Here, at ABC, our model is the proximity to the clients. We are recognized as a bank that is close to our clients and has a deep knowledge of them. This has been our trademark for more than 30 years, and we apply the same model for our operations in the middle market. We have a team of officers specialized in the middle market segment with a conservative approach so that the CFO is happy to talk to our officer. We give quick answers to this client even if they know. In addition to this model, we have continuously expanded our product portfolio going far beyond credit, which has allowed us to participate more and more actively in our customers' day-to-day activities. This has allowed us to participate more and more as well as in the -- participating in their most strategic transactions. Our third pillar has been continuous search for automation and digitalization of a series of processes, which has promoted speed, productivity and scalability both in prospecting and in expanding the customer base in the number of transactions. In this context, we have developed new prospecting tools, enriching our database in searching for more qualified leads in the front line. The increase of productivity is in various stage. Its customer relations and has encouraged us to continue the continued expansion of sales force. In this context, we have also made available new tools that facilitate the daily routine. The fourth pillar refers to agility with responsibility in granting credit. The focus is to gain agility in granting credit, giving flow to the growth in the volume of proposals, but at the same time, maintaining the essence in responsible credit analysis, which has also been a hallmark of Banco ABC. We are doing this by combining our proprietary credit engine based on behavioral analysis with the technical vision of our officers and the credit committee. This process is supplied with information collected from the moment of prospecting with enrichments from internal/external sources throughout the process in addition to the analysis of data participants of several relationship chains. Now I'm going to pass the floor to Fernando that will take a look into the performance of the last few months.

Thank you, Sanchez. It's good to talk to you about a new model for ABC Brasil. The middle segment expansion will start in the second quarter of 2019 in the Greater São Paulo region, focusing on clients between BRL 100 million and BRL 250 million in annual revenues. We gradually expanded our geographical presence of annual revenue per client, which currently includes companies from BRL 30 million to BRL 30 million. It start has a new wave, and it was only possible with the success of the previous wave. We currently have about 60 officers working in the segment. The investment allowed ABC Brasil to build a franchise in the segment that will be shown below. The expanded portfolio of middle segment has already reached more than BRL 2.4 billion with almost 1,400 customers of around 1,000 of credit through a continuous evolution even considering the effects of COVID-19. The average ticket per client shows a high pulverization index, which together with the higher spreads in the aggregation of cross-sells among the great attractions of the segment. The average term showed an increase in the second half of 2020, resulting from loans within the [ CDI ], which have longer terms. The expectation is that they will gradually return to terms closer to 1 year. And as a result, the middle segment currently corresponds to 6.9% of our expanded credit portfolio, an increase in the last 12 months of more than 170% in the balance of the expanded portfolio and an increase of more than 400 basis points of rate of participation in the total expanded portfolio considering all customers. As mentioned, the middle segment corresponds to approximately 6.9% of the expanded credit portfolio. However, it already contributes with more than 18% of the margin of clients. This is due to the higher spreads and cross-sells of the middle segment when compared to the spreads of other customer segments. As we have seen in our recent wave, officers mature their clients' portfolio. We expect increased profitability from the segment's portfolios, encouraging for future waves. And finally, there is a gradual expansion of the middle market relevance in the total portfolio. This multiplier effect should be reflected more significantly in the total client margin and all of this while preserving the quality of the credit originated. And just as important as growth in the quality of the credit portfolio, in the sense, we decided to constitute an additional anti-cyclical provision for the middle segments in addition to the specific provisions to raise the coverage index portfolio and even operating with substantially lower levels today. Today, the middle segment has a ratio of outstanding balance to the portfolio around 3.5% and coverage index of more than 400%. Now I'm going to pass the floor to Adriana, who's going to talk about ABC Link and our bench initiatives for sales channels.

We go on with the expansion of ABC Link, an initiative based on the distribution of our financial products through our partners that will work as a correspondent, banking correspondent. And this channel will add to our geographical expansion, and we're going to grow faster and with lower services cost us. And what are the differentials for our partners? Possibility of distributing a complete portfolio from credit cash, products, foreign exchange, investment banking for customers in the middle and corporate segments, a new team of channel development specialists or partner managers. We're going to be here to assist all of our customers in business diagnostics and tips for their office advancements, supporting the management and fulfillment of our end customers' needs, guaranteeing the evolution of the partners team through training certification, support material and a lot of communication. You can be sure our managers are here to support success of our partners. Currently, we have 26 partners in operation and more than 50 interested in joining us. As you can see, we are constantly evolving and also working with a tool called [ Workbank ], aiming at improving the operability of our -- and the relation between our customers and our company. We want to reinforce that ABC Link will contribute to our expansion, addressing the estimated market -- the interested market better. And I want to close saying that we are all aiming and excited to keep evolving. Now Sanchez, the word is yours.

Thanks, Adriana, everyone. That's it for you, everyone. ABC Brasil's project spend our operations and serve this new group of clients in a personalized way. Opening this new business channel, we have a segment that has enormous potential as we could see in Fernando and Adriana's presentation. Even with the recent operation, we see initiative-bearing fruit, and these results move us to bet a lot on our performance in the middle segment. And in this channel, ABC Link will help us. And we're going to close our part, reinforcing. We are aware that there is still a lot of work ahead of us, but we're extremely optimistic about this promising future full of opportunities. Thank you all.

This was another initiative that broadens the focus of all ABC Brasil serving entrepreneurs in the middle segment with a diverse portfolio and quality services with a lot of close proximity. Now we're going to hear the energy trading panel. We have a great team, the Vice President of Treasury and Energy Trading, Antonio Nicolini; and the Head of Energy Trading, Carlos Monaco and Ronaldo Torres. Now the floor is yours.

Thank you, Vanessa. As everyone knows, energy rules our lives. We need energy for everything, either inside our homes or in our daily lives, to use our machines and workstations. Energy is everywhere and occupies a prominent place within companies as an item of primary need. So why not entering the -- into this market? That's what ABC Brasil decided to do. And for this, we planned. And now we are seeing practice what this experience is like. We started to operate in the sector through ABC Brasil energy trade and the challenges we faced. Well, let's take a look. We evolved a lot in a very positive in the short period of time, and the direction of the free energy market has left us optimistic about the potential of this new activity. After designing a business plan early last year and submitting it to the Central Bank, we obtained the license to act as a new energy trading agent in mid-April 2020, effectively starting the operations of the trading company in June. We hired an experienced team, which worked to get a trading company up and running with all the safety and diligence required. We also did all the alignment of the business areas with the support areas, which was extremely important for us to start this new activity in an organized way. Because this is such a relevant -- it is a new market for us and it's still a little explored by the financial sector, the second half of 2020 was a period used by us to understand our customer needs, organize our internal structures and train the sales force. And still, in the second semester, we became a member of Abraceel, this is Brazilian Association of Energy Traders (sic) [ Brazilian Energy Traders Association ], and developed new types of operations, among them the prepayment of energy. It's important to highlight that in spite of the short time of activity of the trading company and some delay due to the pandemic, we closed the year of 2020 with an operation that was already in surplus. Already in 2021 and continuing the process of expanding our product portfolio, we carried out our first flow of operations, which are nothing more than the purchase of surplus energy from generators and the subsequent sale to other agents invest. Finally, and for the sake of time, it's important to highlight that we are in a growing dynamic, exploring new counterparts and products. We understand that the free energy contracting environment will be a protagonist in a matter of time since freedom of choice, price negotiation term and cost savings bring many advantages to customers. And how ABC, the trader, is positioning itself in this market? The fact that the trader belongs to solid financial group as we are with an excellent reputation and such a history of success, this brings several advantages. And among them, the relationship with more than 3,000 corporate clients leverage sales force specialized in specific client segments. The niche. Credit ratings equivalent or above the Brazilian [indiscernible] positioning us as a robust counterpart for long-term energy contracts known as PPAs. And finally, an increase in our capacity to offer financial products linked to energy contract. On the other hand, ABC Brasil also benefits from having an energy trading branch, where the bank can be a direct party in energy purchase and sale contracts become -- also becoming a potential buyer of energy and capital market operations, allowing the creation of derivatives to hedge or to generate exposure to the sector, creating alternatives for credit risk management. And lastly, and very important, in my opinion, it expands our product portfolio, allowing us for greater diversification revenue generation. And now to further detail of our portfolio, I turn -- I give the floor to Ronaldo.

Thank you, Nicolini. I will start by talking about the development of our products. This is such a space that we are conquering little by little in the market. Talking about the product portfolio. We were before large families, and the corporate clients are our main focus. The first family corresponds to structured credit operations through energy trading contract. Next, we have the flow operations that we have mentioned in the previous slide. In addition, we have the capacity to perform on an occasional basis in proprietary operations, either through directional trading transactions of buying and selling power from generators and power market -- marketers or traders who entered through the acquisition of PPAs, making funding to greenfield enterprise viable. Ambition includes continuing to expand the portfolio and serve our corporate clients. Now let's talk about the meanings of our consumers in the energy market. On the generator side, there are the demand for sources and finance -- of financing to develop new projects, expand their existing plans and modernize older assets. In general, this financing is tied to long-term power purchase agreements held by large utilities and consumers who are considered good counterparts and who can handle large volumes of contracted power. At the same time, consumers look for marketers that serve their cash flow needs without increasing debt levels and partners that has access to energy markets from different sources and regions and can customize them to their specific needs. How can we add value to our customers? Energy generators, ABC Trader performs the purchase of energy ballast. We've advanced payment either for investments or for short-term needs, the purchase of existing contracts with different terms and also there is a possibility of long-term contracting model both for the purchase and sale of energy. This allows the customers to finance renewable generation projects, optimizing cash flow and shareholder returns. This model is generally focused on greenfield project developers, but is also applicable to assets that are already in operation. And to the energy consumers, we enabled the reduction of the average price of contracted energy, resulting in a hedge of prices in the medium and long-term and bringing greater cost predictability. We also offer mechanisms to source working capital with lengthening the energy payment profile according to each customers' demand as well as bringing cash relief in the first years of operation. And from here on out, what is the expectation, Carlos?

Nice, Ronaldo. We all know that the future is only built with learning, and we have evolved a lot with this trading initiative. But what can we expect in the next 12 to 18 months? We are focusing increasing the number of customers and counterparties. This is a constant and gradual process, but that benefits from an important effort from ABC Brasil's commercial force. We will also continue the process of expanding our portfolio in order to extend an increasingly customized offer to our customers. With this, we aim to grow the volume of traded energy and consequently, the revenues. We understand that we still have a young operation with a lot of work ahead of us, but at the same time, it presents a series of growth opportunities and synergies with the ABC Brasil operation. So we're going to close our presentation excited about what's to come. We believe in the growth of this area, the expansion of business and in the success of ABC Brasil Bank at another front. Thank you all very much.

Wonderful. Really, the energy trading is a front of extreme importance for the companies and for the day-to-day of all of us. This ABC Brasil trading company comes with huge focus and determination to gain space and make it happen. Thank you so much for your presentation. So first, to take a breath, we think what we have heard, I'm going to open the Q&A session.

But at first, I want to say that we are following all the recommended standard measures, including testing 100% of the people present with us today. I invite our CEO, Sergio Lulia; the CFO, Sergio Borejo; Commercial Vice President, Antonio Sanchez; VP of Treasury, Trading and Financial Institution, Antonio Nicolini; the responsible for the ABC Link project, Adriana Peres; and one of the responsible persons from the energy trading business, Ronaldo Torres. Thank you all for being here. We have many questions for you. Let's go to the first one. How is the growth performance of the energy trading? Can you talk about it? Sergio, I will ask you to help us and you can guide who is the best person to answer that to us.

Thank you, Vanessa. It's a pleasure being here with you today to answer these questions. I'm going to call Antonio Nicolini to answer that about the possibility of growth of our trader.

Good morning, everyone. Thank you so much for your question. This performance indicator of the trader is data that we have been following closely to our existence from 2020 on, and the growth rate has been great for this activity. When we do comparative data from 2020 to 2021, we can surely say we could grow in over 100% with transactions with customers, over 50% with counterparties. And this is super important not just for risk management, but because we can perform buying and selling of energy with several different counterparties, and we have grew by 8x the volume of negotiated energy. Considering the force of the commercial that we have that is experienced, mature with a free energy market that's not well dived by the financial sector, and considering that we are relevant and our product portfolio has expanded with our clients' needs, I can surely say this can go for years to come because the energy market is still not too much representative.

Are you going to add to that?

We can talk about the new business lines, expansion plans. We need to explore that with the middle portfolio. This is growing, expanding the number of customers. And we understand there are many synergies to capture as the energy trader. This is a focus of segment that we'll be directing efforts for the next few months.

This is great. Our next question is, during 2020 -- sorry, 2010 to 2016, ABC Brasil had a written capital from 14% to 16%. Between 2018 and 2019, that dropped to 13%. And in 20%, that was over -- that was about 8% due to COVID-19. What should be the level of return of capital starting from 2022?

Thank you, Vanessa. I'm going to answer that question. And afterwards, I'm going to tell Borejo to help me. This is an interesting question, but it talks about different realities of different periods When we analyze 2017 to 2018, we know we had a high interest rate in Brazil on the capitalized banks that helped with -- to have bigger revenue. But that doesn't mean the productivity and the efficiency wasn't increasing in that period. But when you go to 2017, 2018, 2019, we have a drop of profitability, especially with the Selic rates, although we had productivity gains at the bank. Not just with the increase of productivity, but as because everything has been exposed here, we can know that the ROI would be bigger that what it was before. We do not release guidances, but we believe that our initiatives, some will be bigger, some will be smaller, just as in any business, but the joint of that could represent an increase of 2% to 3% of points at medium term. Do you want to add anything?

Sure. To add to what you said, we also have the CDI increase. We have presented a profitability on the second quarter of about 12.5%. As we have said in the presentation, this should represent about 40 basis points on ROI increase because of the return of interbank certificate deposits. So the normalization of interest rates and the projection that you have mentioned, with the increment of the new initiatives, this should bring the profitability of the bank to the level -- close to the levels of 2016.

Next question. The middle segment corresponds to 6.9% of the expanded portfolio. What are you projecting for growth inside the credit portfolio?

I will also talk about it, and then I'll pass the floor to Sanchez to help me. It's important to say that we are growing in all segments. The growth of the middle market is relative because it's growing at a higher rate, but that doesn't mean that large corporate -- and corporate, just to refresh your memory. In corporate, we're talking about BRL 300 million to BRL 4 billion, and large corporate is over BRL 4 billion per year. Those are relevant segments to the bank and we see growth opportunities, and we are investing at this segment. But middle, as a new activity and with a smaller penetration, it presents a broader projection of growth. Last year, it represented 0%, now around 7%. I think medium term, we can reach a participation, a market share of 15%, having the 2 initiatives, our task force initiative and also third-party initiative with ABC Link. Would you like to add, Sanchez?

I don't have too much to add as you have said a lot, but it's what you said. We have the other segments that the speed of growth will set the pace of the middle. And yes, we are focusing in a lot of growth on those segments as well. Corporate, we are very ambitious for next year. But of course, this growth will be more significative on the middle segment. This gaining of relevant participation will be kept for the next few years in a speed of 2% of the portfolio per year. Showing that we can keep that growth and using the tools Sergio has mentioned, not only our own task force but third-party to ABC Link bringing high potential, complementing our own task force. So we are projecting for middle term about 15%.

I would like to thank our audience, the prestige of having you with us this morning. Please keep sending your questions. Our event was created especially for you, so you can interact with our executives here. Our next question is regarding the contribution of ABC Link with the middle segment. This one is for Adriana to comment.

Nowadays, ABC Link has a margin contribution in the middle segment, but our plans for medium term, we would expect it to contribute to 15% to 20% of the middle segment. This is extremely relevant, And we can be surprised by this participation, all these movements of the market, the organization, the partner officers distributing financial product. So we are expecting at least 20% of the segment.

That's great. Thank you, Adriana. And considering an increase of interest rates, bigger representative of the middle segment and also generating revenue for new initiatives, what is the level of financial margin that we could expect for 2022? Borejo, that one is yours.

We don't give guidance for financial margin. But what we can say is this is a line that has increased quarter-by-quarter. And the biggest component of it is the client revenue. Given that representative of the middle segment and the increase of this representativity, that line will increase consistently in the next quarters. We are very optimistic about this. How much it will reach. It's hard to say. It depends on speed, but it tends to keep growing.

How will scenario of bigger interest rates and low GDP will impact ABC Brasil perspectives?

This one I will answer myself. First, an environment of higher inflation is not beneficial for anyone, but it's a world inflation rate environment. We can see that's not restrict to just Brazil. And that has to do not by demand, but with offer because we see the disruption of supply chains and energy shocks. Our advantage is that we have an independent central bank, and that has reacted quicker than other banks around the world. This brings credibility to our financial policies. And the expectatives of inflation for next year are under control. We are projecting growth that's very unequal after the pandemic. The press has talked a lot about that. But the segments that the bank has more representativity, which are the infrastructure, energy, agribusiness as a whole in the grain, sugar, the real estate segment, those are not only more resilient, but they are highlighted in Brazilian growth. When we see intra-infrastructure, when we talk about it, we see many projects that were concentrated on energy only. You can see a lot of things happening in oil and gas. Energy, the demand for projects is huge, highways, ports. So in a scenario of more inflation, we understand those segments are still good with great projects. In agribusiness as well, everybody knows Brazil is very competitive. In agribusiness, commodities are rated at higher prices than have been historically, we have increase of productivity. And this is a segment that ABC Brasil has been supporting for 30 years and will continue to support. So independently of the issues of getting the economy back on track, and we are talking about this worldwide, not just Brasil, but we -- I think we are prepared to show robust growth next year.

And how the middle profitability can be compared to other segments, [ CIB ] and corporate. Borejo, please, can you answer that?

Well, today, the spread we have in the CIT segment, it's around 200 bps [ at the year, less than a year ]; and the corporate, around 350 basis points to 400. And the [ middle ] varies around 800. It's almost 4x the CIB segment and 2x the corporate. These are cyclic segments. And we have to pay attention and make the segments. But also we have to protect credit as they are cycle. There is this other side of things, and we must pay attention to that. The bank has a 32-year history of trying to predict the economic cycles and keeping balance in such a way when these cycles are not that favorable, we are protected.

And with the growth we have today, how do you see the capacity of the bank of gaining scalability, either by improving the internal processes and customer service?

Well, actually, we are obsessed about it. When we look at the market today and the impact of technology and digital that it's such -- something important, hot topic. So when we analyze the retail and compare it to wholesale, it's different. In retail, we focus a lot on the relationship -- direct relationship with customers, either by offering pleasant user experience without the need of human interface. But on the -- in the corporate world that we work, of course, there is investment in this relationship with customers, but it's different. It's how you can leverage your internal processes but keeping the human touch in our relationship with customers because companies, they want to meet their needs. And in our case, as we offer a consultancy, this human relationship is still important, but the scalability will come from other sites. For instance, in the credit analysis that we invest a lot, in middle market when a client is assessed. For the first time, the bank has already 70%, around 70% to have the credit analysis and understand the preapproved credit without even visiting the client. The onboarding, that is the opening of a bank account, it used to take up to 90 days and now it's very quick because from our first contact, we have all the information of the customers for different sources, and the clients just have to check the data. Also, the hiring is through electronic process, avoiding the signature and papers. This makes our sales force to be much more productive, offering better service for clients with less friction and also being able to scale our productivity along the next years.

Now we have a question, 3 questions in 1. What are the risks that the trading energy company faces in the case of the scarcity of energy, also how the company is mitigating such risk and how can we protect customers from this risk? Well, Nicolini and Ronaldo, can you help me?

Yes. Let's go. Scarcity, that is our customer -- we are positioned in the water energy, and there is the credit risk also because some companies are open to this fluctuation of risks. But those risks are very punctual, and we don't take into account the exposure to the credit -- to this risk. And in relation to the credit exposure, we analyzed everything, and we got to the conclusion that our portfolio doesn't have any risk at the fluctuation of prices. Again, we have an advisory, and we have a price area. We have methodologists, and we always advise our customers on their decision-making so we can guide them through the best paths.

I will add to -- something -- I will add something to what Ronaldo said. Energy -- electrical energy is something very important for different companies. And this price fluctuation translates into a volatility of the cost matrix of companies, which is something that no one wants. And one of the products we are offering is a balance of the price of energy a long time. So the bank uses its balance and its financial capacity to absorb this fluctuation in prices and not -- for predictability for customers so they can be protected from any fluctuations.

Any other addition to that? No. Next question. ABC Bank has in mind to keep its policy of quarterly payments.

This is a decision that we take every year since 2000, the IPO of the bank. Every year, the bank distributed dividends and on the limit of JCP, that is the owned capital interest rate. We propose this to our Board every year and this quarterly policy as it was last year. And next year, we will propose as we do every year. I cannot -- well, I cannot see any reason for changing this at this point. But this has a lot to do with the need of capital, the moment, the growth, the perspective of growth. And then in the -- at the beginning of 2022, we're going to take a look at these perspectives, and we're going to propose to our Board if we're going to keep this policy of paying quarterly dividend out or not.

That's great. Thank you very much for your participation on the Q&A session. Of course, we are going to highlight our invitation for you to take part on this because we're going to have another moment for this interaction. Lulia and Borejo will come back for our next round of Q&A. Now let's get back to our panels. And the next topic is about something that helps entrepreneurs to manage unforeseen events and crisis. And I'll call someone who's an expert, the CEO of ABC Brasil, the insurance broker, Luiz Assumpção.

That's it, Vanessa. Insurance broker wants to help companies with a service that is highly complementary to ABC Brasil's portfolio. And the best thing is we are serving clients who already has a relationship with the bank, taking this additional service to them. And I will start with a question, why did ABC Brasil decided to enter this segment? Most of the broker's clients are part of the more than 3,000 active clients of ABC Brasil, either in credit or in other products. Insurance brokerage operation is a service revenue with no claims or credit risk. Thus, there is no capital allocation or solvency risks. The initial investment is marginal, and implementation is relatively fast. Finally, the product is widely accepted in the market, being already contracted by our customer base on a recurrent basis. In summary, clear synergies with existing operation, attractive returns and low execution risk. We started offering the portfolio focusing on financial lines, where we see clear competitive advantages. The guarantee insurance is an insurance line directly linked to 2 corporate credit analysis, complementary to the current offer of guarantees provided by ABC. The credit insurance, it's a life insurance for reference shareholders and other corporate clients, a line that is very adherent to the middle segment, and that adds to the quality of the credit operation. Additionally, we also offered a capital global line, a group life insurance. ABC Brasil brokers -- insurance broker business plan includes a gradual expansion to other insurance lines over the next few months such as transportation, engineering, fleet, E&O, D&O, cyber and civil liability. We are also taking into account to offer insurance to agribusiness segment, which is our largest segment of exposure in the expanded portfolio. As mentioned, we believe that there is a great synergy to be explored through the relationship of more than 3,000 active clients of ABC Brasil for insurance as well. In this sense, each client segment is characterized by specific needs for corporate and CIB, for example. There is a great demand for financial lines for property insurance and agribusiness. In the case of the middle segment, the life product has create variance. The plan is to create a broad offer of options directed to specific demands in line with the experience that ABC Brasil has been providing segmented services to its customer base. And in this sense, the training of the sales force is fundamental. Over the last few months, we have been training our commercial team to identify business opportunities for our insurance brokerage. We listed some examples of the indicators that indicate a potential demand for our products. For example, companies with high volume of judicial deposits can be potential clients for guarantee insurance. Similarly, clients with high levels of receivables may be interested in credit, insurance and so on. The strategy is to fine-tune the coordination of our officers and credit areas for the generation of qualified leads in order to arrive first at the opportunities and make our sales more assertive. Finally, it is worth remembering that the area in its few months of operation has already reached its breakeven point. We are even getting -- generating more premiums than our initial planning, which should accelerate the introduction of new insurance lines. And to wrap up this presentation, we reinforce that the broker -- insurance broker ABC Brasil is the result of an identified demand from our clients, and we are sure we can offer a product of high quality and security. Thank you all for your attention.

Thank you very much, Luiz, for bringing these strategies, the action plan of the insurance brokers that is an area that is constantly growing for ABC Brasil. And keep sending your questions for our next Q&A session. Now we are going to follow with investment banking, another area that is gaining more and more space and guaranteeing new business for the market and for the bank. And I'm going to call the Vice President of Investment Banking, Jose Laloni; DCM responsible, Gustavo Bellon; and the responsible for M&A and ECM, César Mindof.

Thank you, Vanessa. It is great to share with you some of our advances and expectations when we talk about investment banking. We are at the center of the strategy along with other areas of the bank, and we keep evolving, conquering more and more space. If we could back in time in the short term and analyze what happened in the market this year and how ABC Brasil behaved, we see a year of growth. The market grew and ABC Brasil as well. The spectacular numbers of the capital market recovery and the volume of issuances and transactions and the growth of investors was surprising and encouraging, and this is what you're going to learn, how the scenario unfolded and what lies ahead. To open the panel with the scenario of investment market, I give the floor to César.

Thank you, Laloni. To open this presentation, I would like to go back a little in our trajectory. Investment bank in ABC Brasil started gaining more relevance and focus about 7, 8 years ago, and we are very fortunate in developing this franchise. Today, we can say that we have a very consolidated M&A franchise. We have a very senior team offering close attention to our clients. I usually call it as a boutique but with the benefits of having a bank as ABC Brasil to support it. We have more than 50 successfully completed transaction in the last years, including sales side and buy side mandates. And we have been recurrently referred in the top 10 in the ranking in number of transactions, developing a broad relationship with strategic national and international players, private equity funds and family businesses, providing financial advisory services with a focus on long-term relationships as what -- something that we really look forward here. In 2020, we started a new initiative, our ECM platform. We were seeking to capture the synergy that we have with commercial banking but with 2 main goals: the first one to contribute to the large offerings of our large clients but also to position ourselves as a player -- a protagonist actually in the market of smaller offerings, which is the front we strongly believe in, and that has everything mature in Brazil as in the most developed markets like the American or European. In a short period of time, we have also concurred a very nice position. And we have already successfully concluded 4 offerings, 3 IPOs, 1 follow-on, and we have a pipeline that is very robust. We have more than 10 transactions to be brought in over the next few quarters. And how can we really contribute? What are our differentials? First thing, we have a highly senior and experienced team with people that we brought from the market and that are contributing a lot to the offers we are bringing to the market. The second thing that I think that we have, a more balanced relationship between issuers and investors. The third point that I think that is very important is the partnership that we have with Eleven Financial. They lay our research firm on our offerings, and this is very interesting because we bring unbiased and independent opinion recognized by the market, both institutional and retailing. Also, we have focused distribution on local market, building deeper relationship with the main case -- institutional cases and also the retailing platforms. We are very excited because we have a pipeline that we believe is very robust, both in M&A and MCM. And we believe we're going to gain more and more space in this market that is very competitive but full of opportunities. To continue with this panorama, I'll call Gustavo Bellon. He will bring more analysis on the DCM and project finance information. Thank you. Gustavo?

Thank you, César. Continuing with our panel, I would like to start with 2 important messages about our fixed income performance model. The first one is that our DCM focus is to originate, to distribute. We understand that aggregates more value to our clients besides providing a higher return on our capital, complementing this strategy with project advisory and independent research. The second message is that we work with focus on the relationship and not the transaction, seeking a balanced relationship between issuing and investing clients, bringing a high level of recurrence and ensuring the sustainability of our business. This model has allowed us to grow consistently over the years, particularly in 2021, as Laloni has mentioned. The first 9 months of the year, we have already distributed over 30 offer, totaled more than BRL 3.5 billion, which is a record volume for the DCM area and which represented about 80% of all the volume originated in the same period. This is a high percentage by market standards and aligned with our strategic objectives. In the end of 2019, we implemented the project finance area with 2 main objectives that have been widely met, first, to provide advisory services from the initial phase of projects, allowing us to strengthen our relationship with the client and also capture more revenue for the bank with financing projects, both banking and capital market. The second one was to strengthen our role in infrastructure debentures with an integrated operation with DCM. We also have a research area that provides credit intelligence to our investors, both banking and capital market and also through monitoring reports, conferences and webinars. This slide demonstrates a high degree of diversification in fixed income. Regarding clients and products, we are very active in all fixed income products, have a strong presence in infrastructure debentures. We work with a wide variety of sectors and clients, coordinating both benchmarks to the largest groups in the country such as BRL 1.5 billion issuance by Copel distribution and also smaller or inaugural offers by emerging companies. We are expanding our portfolio beyond traditional DCM products, coordinating and distributing fund share, including actively managed funds such as CPA and FIC Infra. We have access to all channels in the domestic market, always focusing on the close relationship with investors. We would like to highlight our relationship with independent asset managers and investor class in which we have that and believe in growing since the beginning that we have understanding that it brings many benefits when participating in offer, contributing to greater dispersion and liquidity in the secondary market. And through our recently created partnership with Inter, we are strengthening our penetration in the retail channel, which has been increasingly relevant in fixed income offerings. I would like to start with 2 important messages and saying that ABC Brasil has a strong knowledge, and also, we have the culture of retail and the variety of investment products of Inter. This has assured a better assurance, bigger participation in retail and a great variety such as infrastructure. This partnership has concrete results. We have 8 operations in 2021 and over 30 proposals sent. And also, the flow of new opportunities is robust and ongoing. We have been evaluating about 10 transactions per week. We are highly enthusiastic with this partnership, with the aligning of the 2 institutions and the discussions that we have such as the potential of new business. I would like to thank everyone. And continuing our panel, sending the floor to Laloni.

Thank you, Gustavo. Thank you, César. That's how we thought and how we see the investment bank. We are transforming business and profitability, so all sides are winning. Thank you so much for your attention.

This is our investment bank panel, another success front of ABC Brasil, which is gaining market share and making a difference in the market. Let's now go to payroll loan and supply chain finance. Now I invite the VP of Digital business, IT and Products and Operation, Marco Mastroeni; the Head of Digital Business PF, Gustavo Machado; and the Head of New Business, Rodrigo Cordeiro.

Thank you, Vanessa. Throughout its trajectory, ABC Brasil has been shown not only resilient to market conditions but also with the proven capacity to evolve, relying on its competitive advantages in the corporate segment. Today, we are proud of our relationships with our clients, and we have created a relationship that has lasted for years. As mentioned by Lulia at the beginning of our presentation, and following our nature of continuing to evolve, we are expanding our services to help our clients with their stakeholder relationships. And how do we do this? We have broadened our focus and are now offering financial services to the entire value chain of the company, from their suppliers to their own clients and their employees, who is helping us enable this technology, giving us access to the customers, the information about the companies and the relationships and creating risk mitigation tools. We are accompanying and contributing to the digital transformation of these companies and the entire ecosystem. We rely on technology to enable new solutions, facilitate transactions and simplifying our daily routine, allowing greater dedication to our relationship with our clients. Gustavo and Rodrigo, our partners in this journey will explain how this has been done in practice. Gustavo will focus on solutions for individuals and Rodrigo for companies.

That's it, Marco. Our team has launched the payroll loans with differential human resources and corporate client employees. But what, in fact, we offer with the solution and what we want, we launched our payroll operation focused in the private sector. Our ambition is to be the HR choice with the employees. This business is born digitally from the project development that had, within 6 months, cloud solutions, digital hiring, 24/7 distribution, which combines digital and physical, the so-called phygital. We want to help our clients, HR, by developing their employee base, taking continuous education with personal and professional development to the company's team. On the personal side, we want to provide financial education and on the professional side with extension courses focused on fundamental teams in these times of transformation. We also want to reduce the operational burden of HR using intensive technology to make payroll loans in automatic way in supporting ABC business partners and structure. And also, we're always looking for new solutions and partnerships. For the employee, we want to deliver credit in a contextualized way. It's not just credit for credit's sake but rather solutions and information so that they can evaluate the alternatives and choose the best mix of products for their financial health. We also offer educational content about personal financial management to the employees of our partner companies. With regards to the professional development, we have just now done a partnership with the largest online education institutions and offer extension courses with content such as digital transformation, data analysis, diversity and sustainability, health and balance, agile methods and other fundamental topics at these times of transformation of the work dynamics in companies. We believe this is a huge market to be explored in Brazil. Almost BRL 0.5 trillion in payroll loans, only 6% in private payback loan, which is our focus of activity. As a base of comparison, the payroll of the private CLT segment is almost twice the one of the public sector. It gives the idea of advancing this business. If we compare to the public sector, the ratio between the balance taken and this annual payroll is still very low, around 2%. But why does this make sense? For our clients' employees, the interest rates are lower than the rates of other products they use. The default rate has its own characteristics, but it's manageable levels. The potential returns are very attractive, which leads to a very good equation for our corporate clients to employees, clients and ABC Brasil. We have a winning position here considering the 3,000 groups that we serve that have more than 6 million employees, our potential clients for these products. This puts us in a privileged position to operate in this market. The success of this operation is based on 5 pillars: combining the traditional and new digital; bank [ stresses ] broad access to a source of capital; tested and calibrated credit models, both for private and corporate clients; access to our corporate clients to sign agreements; own digital sales expertise with strategic partners; and technology, as Marco has emphasized, that allows us to make this business feasible with low costs for the customer acquisition. Private payroll loan for ABC Brasil is already a reality. This is a project that has been done in an agile approach. We have structured in December 2020. We went through a test in May for a period of family and firms until the beginning of August, and then we went to market. Throughout this 50 days of the first commercial cycle, we have preselected customers, and the acceptance was aligned with our expectation. We have talked to over 700 customers about the product and offer, and over 60% want to continue with us. We have already more than 40 of these agreements in process of formalization, giving access to a potential base of more than 40,000 borrowers. Our strong positioning as a bank -- corporate bank gives us access to important base of potential agreements and credit clients, more than 6 million employees. The technology that we embrace is a great ally that allows us to bring differentiated solutions to private and corporate clients. This motivates us to keep moving forward. We put that into practice, and it's now available in the market. And now I'm going to -- we're not going to stop here. Now to talk about solution for legal entities, it's up to you, Rodrigo.

Thanks, Gustavo. That's right. We are ready to conquer new markets and explore complementary business. And as explained by Lulia, we are working on solutions to meet the needs of our customers' value chain. This posture mean going beyond traditional banking relationship, reaching the edge of technological disruption, contributing to the modernization and resignification of financial profits and transforming the value offer delivered to our customers. This type of proposal allows us to serve companies in different sizes as long as it is an intrinsic part of the strategy of our customers. To make this goal feasible, ABC Brasil is developing a digital ecosystem of complete solution for companies and their stakeholders, involving banking and businesses, management products, focusing on meeting the main needs found in the daily lives of our customers. More than connecting to our clients, businesses and management systems through banking as a service, it is necessary to understand the B2B dynamic relationship in each case and make the experience of using the applications more complete, efficient and integrated. In this new challenge, ABC Brasil has already taken the first step and launched the market-first digital credit product for companies, the Credit 2 enterprise. Credit 2 enterprise is a solution for granting credit encapsulated in more than 20 micro-services for consumption by our clients on their digital platform, making it possible to take ABC Bank's credit to any ecosystem. Each service of this product is available through API and customized to meet the needs of our customers and their partners, being able to adapt the credit contracting journey to the experience of each connected digital platform. The product went live in early September with the credit and modality for marketplace sellers, giving the strong growth of the e-commerce market and the consequent high demand for working capital. The feedback obtained so far both from the commercial partner and the sellers has exceeded our expectations, which accelerated the development of new features and the releases of new software versions. The solution that is in this product was fully developed by ABC Brasil throughout 2021 and has the following differentials: adherence with 0 friction. The shopkeeper has access to credit in an automatic where with no need to fill out or send documents to make his registration and credit analysis. It's 100% digital. The product was built in APIs, using cloud and computing to enable scalability, high availability and easy connectivity. It has no back-office solution. Solution has been deployed in an end-to-end digital conveyor with human support whenever requested by customers. Credit 2 enterprise is a different way to give credit to companies of any size. Based on retailers' sales are -- preapproved credit limits, the loans are formalized electronically by means of a digital signature and directly on the marketplace platform. Assessment of the customers' financial health is also carried out based on the customers' behavior on the marketplace using data analysis algorithms. And this product has the guarantee of card receivables connected to all registrations, mitigating the current interoperability of challenges encountered in the market. And finally, how does this product work? The solution is an embedded finance, allowing it to be offered directly in the customers' digital ecosystem. It is an online credit. Contracting takes place within 5 minutes with disbursement on the same day. As a reference in other similar products in the market, this flow happens in up to 4 days. Ours is on the same day. All the terms and conditions are available online, so we can make personalized simulations, offer credit as we want, and person can do it in self-service. In addition, the payment flow is fortnightly and linked to the merchant's cash flow in the marketplace and can be adjusted as needed. Finally, we bring good news for the meeting. As in November, the product accounts can be released off credit by any day with disbursement via instant transfer. This product boosts the portfolio existing in the legal entity and is the first step in serving this rich ecosystem. Thank you, guys.

That's it. We want to create products that meet the needs of our customers, and also, our current customers are interested. We're going to keep on moving forward and bringing more convenience to the client and those around them. Thank you very much for your attention. Vanessa, it's up to you now. Thank you.

Thank you very much, Marco, Rodrigo, Gustavo, for showing us this portfolio that is gaining strength and more space in the everyday market. Good business to all. We're going to follow with our Q&A session. But it's important to highlight that once again, this meeting was only possible because we are following all the measures recommended by the health bodies, including the testing of 100% of the people who are here today. We have, again, our CEO of ABC Brasil, Lulia; the CFO of ABC Brasil, Sergio Borejo; the CEO of the brokerage, Luiz Assumpção; the Vice President of Investment Bank, Jose Laloni; the VP of Digital Businesses, IT Products and Operations, Marco Mastroeni; and the Head of Investor Relations, Ricardo de Moura.

Thank you for coming. And Sergio, could you please help me to direct the questions to our executives? Is there any expectation of ABC Brasil having exclusivity agreement with partners, either an insurance company or brokerage?

At this point, we are focused on broadening the offering of insurance products for our customers. We are testing and understanding what is our DNA on selling insurance. Of course, this can be an option in the future, but we need to understand better our scenario so we can see what's going to be best for the institution.

I think that's it at first. Of course, lots of partners want to collaborate with us. And we often receive questions about our strategy. But as Luiz just mentioned, at first, we started very promising with insurance brokerage, and we are surprised every month. I guess the results, we are not disclosing the numbers yet, but we're going to focus on meeting the demands of our customers at first.

When it comes to credit to enterprise for the financing of sellers in marketplace, is this a product that is already in operation? Which are the marketplaces that ABC is offering the products currently? And if it's available to all the shoppers right now.

Yes. The product is already on operation. It started in August. In September, it advanced, and October is doing already very well. And Marco is going to add.

As Sergio mentioned, it is in pilot operation, actually, with some partners that we have been developing this product with, is Lojas Americanas, a large department store in Brazil. We started with a small number of clients because it's a digital product. We are seeing very good feedback on the usability of this. It's basically no line credit that is already available. We are with this small number of customers for now, but we want to open to others, not only for our partners but all the marketplace. We see a potential market that is very promising, and we want to help our customers in their partnership with their clients.

Lots of fintechs were successful on offering services and comprising lots of clients, but now they're facing difficulties in funding and expertise in credit. How ABC can play a role in this dynamic? And the second question, if we can think of ABC using its balance and credit expertise in channels of origination of fintechs -- sourcing of fintechs.

Well, as a matter of fact, as we are trying to show you, we see that this is a market that allows us to offer third-party products in our own channels but also our products in third-party channels. As we just mentioned, the partnership with Lojas Americanas shows this offering of credit completely aligned in the website of Lojas Americanas. This can be extended to other channels in case they have to do with our strategy. And our strategy is to meet the demands of our corporate customers and stakeholders -- and their stakeholders. Not only credit offering, but cash management, currency exchange, all the offerings that we can have for our customers and their stakeholders, including with fintechs, are going to be comprised.

Once again, I want to thank you very much for your feedback, your participation, all of you who are watching us. And you still have time to send your questions to our executives present here. Another question, how is the pipeline of fixed income for the quarter 3 -- the third quarter better?

Since last year, we have been recovering the pipeline, and I believe this whole year is a growth year. So we hope that this last quarter is going to follow the same growth, the same flow, including products like real estate certificates and agricultural certificates. We really look forward this last quarter being very promising as well. I want to talk about a little of the ECM market, the pipeline of IPOs. Since the last half of 2020, we started making feasible more operations. We have now more than 10 operations in ECM pipeline. Of course, the stock market is more cyclic and more volatile. And we believe that his last quarter will enable good operations of ECM.

Now when it comes to payroll credit -- private payroll loan, it's not a new product. Quite the opposite, it exists for such a long time. But what are the competitive advantages of ABC Brasil in the offering of this product in comparison to the big banks and fintechs.

Marco, would you like to talk about it?

It's true. Private payroll loan, it's not new. However, from the point of the private market, we have great potential to explore, including Gustavo mentioned that only 2% of the private payroll is -- already has loan -- private payroll loan. So in most cases, they have regular loans. We have lots of rooms to work with this product, our differentials. Well, we have a very interesting position now because we're a new player. And for that reason, we can offer more customized product comparison to what we see in the competitors. And also, it's not only a private payroll loan. We are positioning as -- to help HRs of companies in a very critical issue that has to do with debt of their employees, which impacts all the performance and productivity of such force. So we want these employees to restructure themselves. And not only we offer the loan, but we offer a platform for finance education and training. This is one of our main goals. And there are lots of others that we're going to develop so HR can offer solutions and benefits for their employees. Another thing has to do with the solution that HR is going to work with. What we have been working hardly is to offer solutions that impact the minimal as possible in their operations so they can have more fluidity, and so their employees can hire this credit in a very easy way. It's a digital loan once again, and we can have the disbursement the same day, offering a lot of agility in the process. When compared to the large banks that has these products within companies, I think one of the main differentials has to do with the characteristic of using and offering this with the goal of helping the HR department. The solution is being deployed right now. The potential growth we have is huge. We are talking now about more than 700 companies, and they have around 6 million employees to which we can offer not only solutions for loan but others that we are building for this.

So having the HR completely connected to the bank that wants exclusively to help their employees in such an issue that is very clear and happening a lot in the scenario of the pandemic, this is one of the main differentials that has to do with helping their clients.

And this private payroll is just one topic. There are several others that can add to this offering, aiming at the same thing, helping HR to offer perks to their employees. That's how we look at this initiative.

Would you like to add to that, Sergio?

Yes, I would. I wanted to tell you that it's very interesting, this question of the differentials. And Marco mentioned some of the differentials we have. But I think all the products -- in every product, actually, execution is fundamental. We are, for more than 30 years, competing with the large banks. And when it comes to the differentials we have, we have them since day 1, and it has to do with execution. We are in a world that it's going to be very hard to find different ideas. We have lots of companies, and that's good. There is a lot of competitiveness in the markets. There are fintechs that are offering innovative products, but they don't have funding or credit and know-how. Or in some other cases, we have large banks that are not so focused on this product. And as a whole, like they offer revolving or other issues. But as what Marco just mentioned, execution is key, focusing on customers and being quick enough to adapt products to new realities. And this is something we have lots of know-how, and we're going to be able to offer the same thing.

Okay. Making the difference in customer service. Yes?

Yes. That's it.

What are the mitigation mechanisms for credit risk that ABC has on Credit 2 enterprise product? Would you like to talk about it, Marco?

Yes. Well, the sellers that are based on the marketplace, they have sale flow. And this flow is part of our framework of credit analysis, not only analyzing their behavior and the understanding that we have of this salary -- this customer but also their relationship with the marketplace. For that reason, we have a model that is more accurate, and the flow of payments has to do with the receiving. So in the case of what we are developing with Lojas Americanas, it's a fortnight flow, but it can be daily or weekly according to the agenda the seller has of payments and receivables of the marketplace. Of course, we are also connected to the cashiers automatically to see if this agenda is available or not. So then we can register this collectible with the cashiers.

Another question from the audience. Isn't there a risk of the insurance product cannibalizing the premiums offered by the bank?

Well, when it comes to this insurance -- security insurance, what we understand is that we have already the surety bonds. And in practice, what we notice is that we are working in a market that we were not a player before. And we have a very interesting competitive advantage. And because we have deeply knowledge of the credit of the companies and when they receive the insurance brokerage, when they receive, they see this operations as quality operations, offering better prices in comparison to other partners. This differential brings this competitive advantage. And in practice, this was a market we weren't playing in before.

Well, could you talk a little more about fee income? And what do you expect on that?

Well, if we talk about fee income in a broader way, that has to do with the fees of investment banks that Laloni mentioned; also services, especially cash management; the banking bails; and also with the insurance that Luiz just mentioned. We have great expectations because from one side, we have our branch of investment that is very robust. We're growing every year. We are an important player in fixed income and in the variable income. Although we're just starting, we have a big pipeline of transactions, and we believe very strongly on the success of this operation. We have -- we see a trend of growing in this, and we believe this will go on. In cash management, especially because we are adding more customers from middle market, customers have very good experience. The feedback we get from them in our cash product is very interesting. And the increase of the transaction volume, that's going to reflect a long time an increase of fees. When it comes to the banking bails, this has to do -- because no -- guarantee is better. We have no specific view. But this is a new product that just started, and it's doing well. Probably next year, we're going to have a highlight line of this product showing all the guarantees and the fees that we are generating from there.

And how do you see the impact of macro in the [ AB ] business? What do you expect?

Can you repeat the question?

How do you see macro impact in [ AB ] business? And what do you expect for 2022?

When it comes to fixed income, as I told you, and Sergio just added to that, we don't expect a lot of change in the growth of the flow -- or changes in the flow. We have the new sanitation mark and new bids on energy and also highways and in procurement. And in this case, it has to do with, sometimes months later, the capital of income -- of fixed income. When it comes to fixed income, I see it very optimistically and also for next year as well. And again, in this market, we are positioned as a player that is capable of growing in any kind of situation. We are growing in this as investment bank as an alternative to others, and we believe this will go on next years. When it comes to variable income, then we are a bit more exposed to twists and turn and domestic exposures and risks, but we believe that we're going to grow. We have a clear strategy. We are following these companies since day 1. So it's clear now for us that we're going to -- as soon as they are going to become publicly traded, we're going to be present with them. And as it's been shown by the numbers, we are being able to penetrate on these segments. Another point that I would like to talk about is the project finance. We started this 2 years ago. And this is an area that helps clients since the origin of their projects, and we are offering advisory for them. This is already being fruitful. And we want to be with them, helping customers at the right moment. As soon as they start thinking about their projects and start to serving capital, we want to include and build an IPO of this project. Everything is connected, variable and fixed income.

Last question. Rodrigo Cordeiro, talking about solutions for business management. And please correct me if I'm wrong, I'm not -- embedded finance RPA, I don't know if it's English, and also management softwares, are you thinking about working on this?

Yes, for sure. This is the main goal. In such a way, we can generate offerings of our products for alternatives for our -- for the business and removing all the paperwork related to finance products. So management softwares that we are able to connect are going to be considered. So the operation of companies can be reduced, and they can really focus on decision-making. Everything possible we are doing is like this. Solutions are being built in such a way that we can connect them, develop them and build them around the needs of our customers.

That's everything. We're getting to the closure of our Q&A session. I want to thank you very much for coming. All the executives that are here, thank you very much for bringing such very relevant content for our audience. I really hope you could have your questions answered, and you could enjoy all the areas we saw in the trajectory of ABC Brasil of more than 3 decades. We are now going to listen to the closure message of Lulia.

Dear friends, investors and shareholders, what a morning, isn't it? So much information about our projects over the last few months. The various initiatives are a part of ABC Brasil's business strategy to become an institution that shares knowledge, works of data and provides financial advisory services and offers a broad and diversified portfolio of products. Our directors and their teams have clearly reported the focus and preliminary results of each initiative at this time, which is important in our trajectory. As you have seen, we have here the recently new initiatives under development to be -- to more consolidated areas with expressive results. Today, we are an energy trader, an investment bank, an insurance broker. We serve the middle-market segment and offer products for companies and their employees. We have broadened our horizons to further improve the presence in the market and within Brazilian companies. Our ambition is that the new combined initiatives may raise, over time, the bank's structural ROE. In the last 18 months, we have increased the number of employees by 30%, doubled the number of officers, tripled the IT team, hired a team specialized in data, invested heavily in training for the development of digital competencies. We have also invested in a cultural transformation program with the objective of preparing ABC Brasil for this moment that we are living today. And during the pandemic, we have created a support structure for employees and their families through a program called Humanities. We are expanding our ESG agenda, strengthening internal governance and increasing the transparency of our practices and initiatives. Today, we ensured good social environmental, risk management, and we are focused on expanding our impact appetite. The goals include supporting our clients in the transition to more sustainable business practices, providing innovative financial solutions and sustainability, identifying and capturing sustainable business and opportunity, balancing short-term pragmatism with long-term ambition. We know that this is a continuous process of evolution, and it is included as a priority theme by ABC Brasil's leadership. And what is our aspiration? We want to be a partner of choice for medium and large companies, for their employees, customers and suppliers based on a tailored relationship that includes multiple product offerings and an integrated service model. We want to further expand our customer network, diversify our product offering, create a financial institution with more technology, more flexible, scalable and open to innovation, attracting talent and promoting its development. This is the future we want for ourselves, our professionals, our shareholders and investors. This is the future we want for everyone who can follow us on this challenging journey because these challenges never stop, and it's up to us to accelerate, grow against scale, generate profitability for shareholders and benefits for society. Thank you all for participating in this APIMEC ABC Day.

Thank you, Lulia. Thank you for the message, for the motivational and optimistic message for all of us. I would like to again invite Mara Limonge from APIMEC for her final message.

Dear APIMEC ABC Day participants, what an excellent moment reaching content for the financial area and all of its professionals. The last speech by Lulia opens perspectives in relation to technology development and innovation. And all of this just confirms how much we want to follow along with ABC Brasil along on this journey into the future. And now I want -- it is my pleasure to invite the CEO, Sergio Lulia, to once again receive the APIMEC certification seal. It is with great honor that I present this APIMEC certification seal of attendance, which celebrates APIMEC partnership with ABC Brasil.

Thank you, Mara. It's very gratifying to see this work of the entire ABC Brasil team being recognized. We have been receiving this certificate for 15 years, and it's part of our history. APIMEC always reminds us of our role in the market, our presence as a company that has a corporate governance, transparency in business and in the disclosure of information. We are very happy to move forward with this partnership that grows stronger every year. Thank you very much.

What a great tribute from APIMEC to ABC Brasil. Congratulations to the professionals who make it happen with their ideas and projects. I'm now closing this event. It was such a pleasure to participate here with you. Thank you very much, and see you all next year.