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

Good morning, everyone, I'm Ricardo de Moura, Director of Investor Relations and Proprietary M&A. Welcome to the results conference call of the Second Quarter of 2023 of Banco ABC Brasil. [Operator Instructions] Before we get started, I would like to share the following disclaimers. Any statements that may be made during this conference regarding the business prospects of Banco ABC Brasil projections, operating and financial goals, constitute the beliefs and assumptions of the company's management as well as information currently available to Banco ABC Brasil. Future considerations are not guarantee of performance and involve risks, uncertainties and assumptions because they refer to future events and therefore, depend on circumstances, which may or may not occur. Investors and analysts must understand that general conditions, industry conditions and other operating factors may affect the future results of Banco ABC Brasil and may lead to results that materially differ from those expressed in such future conditions. In compliance with the general data protection law, we also inform that this presentation is being recorded and broadcasted in our social networks, LinkedIn and YouTube. And that in proceeding, you are aware that personal data such as image and voice may be shared without any harmful or breach of law. All the content, including the presentation is available in our website for Investors Relationship. To follow our presentation, I suggested to download the content in the QR code on your screen. And at the end, we are going to have a Q&A session. And here with us today for the presentation of the results, Sergio Lulia, our CEO. Welcome, Sergio.

Thank you, Moura. Good morning, everyone. It's a great pleasure to be here in another quarter with all of you. So let's see our results. I will start with the highlights of the first quarter -- the second quarter, sorry. We had an increase of 185 clients going through the 4,500 corporate customers. This is something pretty important to our organization. That represents a growth of 14.8% and also 4.2% compared to the previous quarter. We also have the expenses that grew compared to the same period, around 12.4%. If we take into account only the average employee expenses, that would be 1.1%. Just keep in mind that we had an expense growth in 2022 compared to 2023 of almost 48%. That shows, as we've mentioned before that now we are more thorough in relation to expenses, allowing growth with better efficiency. In relation to portfolio quality, the delays above -- the overdues above 90% is 0.8% considering that retail from the first quarter. And we also have the agro project, the agro sector is a sector that we act a lot, the major segment of our portfolio, but we only dedicated so far to the major corporation. Now the agro project, the commercial cell specialized to the agribusiness segment. We have products, credit all that to develop products that are specific to the middle agro segment. Another important part is our second sustainability report that was published and just like other organizations, we have major advances in relation to the first report published a year ago. And for sure, we also have external assurance. Let's watch a video now with our highlights. [Presentation]

Highlights for the second quarter of 2023. Profitability, net profit of BRL 201.9 million in the second quarter, a growth of 6.2% in relation to the first quarter and 0.1% in relation to the same quarter last year. Our return on the current portfolio expansion of 63 basis points in relation to the previous quarter. Quality of portfolio, operations with delays above 90 days. Growth of the customer base. We continue to grow our base with corporate clients, addition of 185 new clients in the quarter and 592 in total, equivalent to an annual expansion of 14.8%. We continue our presentation. Let's talk a little bit about the expanded credit portfolio. In the year, our expanded credit portfolio grew 8.4% compared to the same period in the previous year. On the corporate segment, we have a growth here -- and 0.3%. In the quarter, specifically, there was a small drop around 0.7% and the segment that had a better -- the best behavior was corporate with a growth of 0.9%. This light drop is due to a set of factors. We had, as you know, in the first quarter, a couple of wins against in the corporate market as a whole, starting with those overdue loans of that retail and also policies, high interest rate, companies were trying to reduce their loans of working capital, the market was a little bit slow. And the numbers we have here, they reflect the sector numbers as it was mentioned by Federal Bank and the Central Bank. Our expectation is that this will grow in the second quarter. We have that in relation to the interest curve, the uptake of investment banks. So we expect that this dynamic in the corporate market as a whole and also to Banco ABC Brazil specifically, will reflect a more positive sense. In relation to products, we had a good performance of corporate securities and [ 8.9% ] compared to the -- quarter comparison. We had [ CD Apps ], agriculture numbers that are from rural product certificate. And they have a great acceptance by the market and Banco ABC Brazil. So this is something that performed really well. Well, moving forward here, we have these sectors that are amazing and due to be a bank that has a niche and our market share is 1.5% of corporate credit. This sectorial is by design, better than by default. So we have sectors that are pretty defensive like agro business, energy, trade, financial and transportation and logistics representing the largest part of our portfolio. It is a diverse portfolio, no concentration points and in sectors that we believe are against the cycles. Now let's talk about the margin. The margin with clients, presented BRL 327 million. It's a small drop in relation to BRL 345 million but is still the line that represents most of our financial margin. So here, it represents 60% of the entire interest margin. So despite the drop here, we had 15 subsequent quarters under expansion. And if we get 15 quarters below, our margin was around BRL 140 million. So we went from BRL 140 million in an ascending trajectory, reaching BRL 330 million, BRL 340 million, more than 140% in the period, and it's not one quarter that will take us to have a change in our trajectory. That's the one we have been showing throughout the years. Our spread with customers, the annualized at one reached 4.2%, and if we deconsider the risk cost 3.3%, a small improvement in relation to the previous quarter due to the fact that provisions are now without the impact of that specific case from -- that we mentioned before. In relation to the entire evolution, the financial margin reached this BRL 1.094 billion compared to BRL 924 million, growing 18%. If we get the quarter, a small drop affected by the line of the margin with clients. Margin with market, there is an increase in margin of the shareholders' equity remunerated at CDI. There was also an increase here, pretty stable compared also for the NIM, and it's pretty to stability. Let's talk about the quality of our credit portfolio. Loans overdue more than 90 days reached 1.2% of our portfolio. If we deconsider that specific case, it would be 0.8%, a portfolio quality that is pretty constant and stable. This is important because after a period with high interest that just like we had with macroeconomic uncertainties we have here the resiliency of our portfolio, how we can operate in this segment. Now talking about the segment, specifically, the corporate segment with overdue of 0.4%, great behavior below our historical margin, C&IB impact of this specific case and in the middle, 3% per year, quite stable. Now let's talk about the expanded provision expenses, we had BRL 70 million in the period, and that comes from a reduction in relation to BRL 98 million from the previous quarter and BRL 115 million of the fourth quarter of 2022. This represents 0.6% of the expanded portfolio. And that is totally aligned with our history. If we get the cycles, usually, the provision is around 0.5%, 0.7% of this portfolio. So in comparison, there was a drop in relation to the previous year, 28.9%. There wasn't -- there is no impact of that retail client and 46.2% in relation to the previous year when it was way below what we had in history. The PDD balance represents 3.4%, the loan loss reserve is 1.4% in corporate, 5.1% in the middle and 11% in the C&IB. In relation to the coverage rate we have, the entire coverage, the total and also the coverage ratio is considering the impact of the retail clients, it's around 270%, 280% at proper level. In relation to the service revenues, it reached BRL 79.4 million, stable in relation to BRL 79.7 million from previous quarter. Here, there is a slight recovery of the investment bank segment despite the fact that it's inferior to what we considered the regular -- the normal time of the market. So we expect this recover to continue. We have many signs of this -- the pipe is huge the pipeline are amazing, and we have expectations for conclusion this semester. In relation to tariffs and brokerage, we have a great numbers. And when we compare annually, we see that we have BRL 44 million this year compared to 31.1% -- 31.8% (sic) [ BRL 31.8 million ] in the first quarter, and we expect this to continue. This graph here, I believe it's pretty useful so we can understand the dynamic. It's a semester versus semester. And you can see that we have a stability in guarantees. It's a segment that we have been working a lot additional and important to the bank, and pretty stable. In the investment bank segment, as I've mentioned, that's why we had a retraction. In the market as a whole, we have seen other banks pretty important. And this has been something really amazing. And we expect these to come back in the second semester, maybe not to recover from the first asset to improve in relation to tariffs and insurances we expect the expansion to continue. Let's talk about the efficiency ratio. The efficiency ratio reached 40.1% compared to 38.8% in the previous quarter, a slight increase. The efficiency rate is a division of expenditures over revenue. And here, in expenses, we were good, as I mentioned, 2.6% of growth in relation to the previous quarter and 12.4% in relation to the previous year. If we compare the first quarter of 2023, and the first quarter of 2023 (sic) [ 2022 ], it's 20% if we get the entire year, 22% versus 23%, above 40%. So here, we have a great convergence of the expenditure increase to what was our expectations that we have lower growth on that. And the efficiency ratio increase due to this relative adjustment of the expenditures. So this is an expectation for us in the second semester. And we have kept our guidance and the efficiency that is to reach at the end of the year, an efficiency ratio of 38 -- 36% to 38% compared to 40% we have now. And funding, let's talk about funding. Funding that continues to be a great strength of the bank. We have ratings that are similar to the sorting ratings, one above due to the controller, and we have a funding that is pretty diverse 27.5% coming from institutional investors, 15% from deposits made by the companies that are our customers, 16% from individuals, and then we have BNDES and then we have Level 1 and Level 2 with those. And also, we have the shareholder equity, we have trade finance at 10% in multilateral agencies. It's important to highlight, and I highlight that every time we do have cash spread. All vertex, we have this funding higher than what we expected, and that has brought a lot of covenants to manage the bank. In relation to the yearly funding, it reached BRL 45.9 billion, 7% above what was the previous year. Talking a little bit about the capital now. Our basal ratio reached 15% and 12.9% is level 1 capital and 12.1% Level 2. So it's pretty stable, a small increase in relation to 14.8% that we presented last March. From the equity, it's around BRL 6.6 billion and also the shareholders' equity BRL 5.4 million. This basal ratio is what we consider to the bank, and we expect that to improve a little bit better due to two factors: The first one is the recapitalization of the [ SAP ], we just did it. It will impact our equity as soon as we have all the approvals and the second Resolution 229 of the Central Bank that we considered all the equity. Those two factors: The recapitalization and the Resolution 229 will add 0.7% to the bank in the basal ratio. Well, let's talk about the results here in the annual comparison. The net income of the second quarter compared to the second quarter of 2022 was almost flat. We see that in relation to revenue generation, there is an increase in the three major compounds despite the fact that we would like that to improve a little bit better mainly with the margin with clients, BRL 22.9 with clients, market, BRL 13 and the shareholder equity remunerated at CDI, BRL 31.7. Then we had some problems related to overdue mainly to that specific case, but a year that had low numbers, service revenue that impact of investment bank and also an increase in expenses. That's according to what we planned. We believe that there will always be an increase with expenses but the proportion is pretty close to what we expect to the bank. Our ROI is recurrent. It's 15.1% in this quarter, compare to 14.4% in the previous. And if you consider the consolidated semester 14.8% in relation to 16.1%. I would like to spend a couple of seconds here to mention one thing. Well, just like I explained throughout my presentation, I believe that in this semester, we had a set of factors that despite not being acute brought a week of the entire market where we work at. So there was this overdue amount that was somehow -- something that scared the market and everybody got retracted that reflect in our capital market that was retained. We had a higher interest ratio, sometimes adding some value on the balance sheet of smaller companies, making banks just like us that respect the credit cycle to be more careful when granting credit to this market and major companies where we expected the repricing to occur during to this risk. This didn't happen, and in moments like that, we prefer to spare our capital in order to expand when we had more favorable commissions. But those things are related to the moment and they are under transformation now. And even with all these points that took part in the first semester, the ROAC is around 15% despite being what we would like to present that what we expect to present it shows a certain resilience of our business model. And finally, let's talk a little bit about our guidance. The growth of expanded credit portfolio that was from 12% to 16%, we are changing to 4% to 8%. And keep in mind, as growth up to June was almost zero, when we talk about growing 4% to 8% in the second semester. This corresponds to an annual growth of 4% to 8% as the pace. Same thing for middle, we had a guidance of 35% to 45% per year due to all the credit policies that are a little bit more restrictive. The growth was flat, so we are proposing to ourselves to grow for 5% to 15% in the second semester that would mean a rhythm of growth from 10% to 30%. In relation to expenses, and once again, I show how our business model adapt to changes in the scenario, we had a guidance of 15% to 20%. And we are downgrading that to 10% to 15%. And our efficiency level, 35% to 38% and we finished the first -- the second quarter in 40% of this indicator. So in our best estimation that we are going to have an improvement of this indicator in the first semester. That's what I had to share with you. And now I hand back the floor to Ricardo.

Thank you, Lulia, for bringing the overview in the second quarter. I would like to thank you all who are following the broadcast. In a minute, we are going to start our Q&A session. [Break]

[Operator Instructions] Here, by my side, besides Sergio, we also have our CFO, Sergio Borejo. Welcome Borejo.

Thank you. Good morning. Good morning, Sergio. Good morning, everyone who's here. It's a pleasure to be here for another quarter, and I'm available for questions. Thank you.

Great, Borejo. Now let's see our first question from Flavio Yoshida from Bank of America.

My question here is related to the next year, and not getting the guidance with you, but this review you did in the guidance somehow was meaningful in relation to what is related to the portfolio growth for this year. And we see this carryover of the portfolio and the interest accrual. So this may pressure a little bit the revenue in the next year. So how can I think about that? Do you see that with the drop of Selic, this may increase and it would compensate this weak portfolio for this year? Thank you.

Well, this matter of the growth, we always enjoy putting that into perspective, a bank like ours that has a small market share, you managed to grow even in scenarios that are more adverse just like the first quarter. If we wanted to grow, we would have grown. But the matter is we enjoyed growing with the correct risk return ratio. In relation to first quarter, there was an opportunity that didn't have the relationship of risk and return ratio, because you had an increase in the risk perception, at least in our understanding and on the other hand, there was a compression of the spread or even stability, and the spreads didn't follow the risk presented. Well, anyways, what do we see now? We see, first of all, in relation to the risk, the impression we have that is to be confirmed is that we are at the end of a cycle, not only because of the Selic that started to be reduced, but also the macroeconomic uncertainties that are being addressed by all the reforms the interest rate is improved. The currency also had an improvement. The capital market is coming back. And that brings this appearance that things are a little bit more relaxed and that may reflect the improvement for the financial economic status of companies. The uptake of projects that sometimes are not feasible due to interest rates. We have this in the second quarter. The second semester in fact of this year, this may be faster or slower, but we entered 2024 with this acceleration rhythm for our portfolio.

Now our next question from Brian Flores from Citibank.

I would like to ask you a little bit about the margin. You've mentioned, Sergio. You've talked about the problem with repricing. So how should we think about the second half of the year on what could we expect in this margin with the market conditions that you just presented?

Thank you, Brian. It's a pleasure to talk to you. I will start and then Borejo Ricardo, you may add on that. Well, the margin is related to two major things, one is the credit spread in relation to the perceived risk. A little bit about what I just commented on the previous question from Yoshida. But that reflects to understand if the spreads presented is a price stake at -- well, we have a price stake and not a price maker. So we access the prices of the market and check if that is in agreement with our risk margins. And what we see is that prices are somehow constant, but the risk perception is improving. This may bring opportunities for growth. The second part that is also important is the product mix. Throughout the years, we have been increasing the participation of products that are less intensive in capital to the portfolio. Here it is, if we get four years ago, the products we considered less intensive in capital, they represented more or less 20% of the margin from clients. Now we are close to 40% only with margin with clients. We are not talking about the margin with clients, neither shareholders' equity numerated relative to CDI. And that has presented in the second quarter performance that was a little bit worse and we expect that to resume. And there is a risk perception on one side, on the other side of uptake of those products, well, that brings a great expectation for the second semester. Was it answered, Brian?

Yes. If you could have a follow-up on -- so in the middle part, you see this risk improving also, right? Or is it related to the guidance that you mentioned a little bit more conservative? And this is a segment that is a little bit more difficult.

Well, we see a slight improvement. And then we have to be careful. We have to perform cherry-picking. There are smaller companies that suffered throughout the year, the year and a half and the situation, the credit situation was a little bit more risky. And we see October, November last year, they closed their taps of credit, and now they're starting to open, but that's not something that is just going around 180 degrees. You go slowly, you test, and there is a perception that worsening cycle is over, and then we are starting to improve.

Now our next question from Ricardo Buchpiguel from BTG Pactual.

I have two things to ask you. First, could you give us an idea of the magnitude of FGI program, how that improved the portfolio throughout the years? Was there any recent change in those programs that could justify lower risk -- lower numbers mainly in the risk segment and other things. If you could comment on the sensitivity of results in relation to the drops of Selic. And also thinking about Selic will go around 9%, but also other effects like the change of portfolio mix in products throughout the change throughout time and efficiency. Can the customer think for -- about the ride for the next months for ABC?

Well, Yes, the government, let's start with that. FGI was important to our growth. 60% of our portfolio but now there was no major change. This nongrowth, as Sergio mentioned, is related to our risk perception and return of the portfolio than any governmental issue. As Sergio mentioned, we have this matter. We were perceiving that the risk was increased and the spreads were stable. So we could have more assets, yes, but we have a small participation in the market. We have opportunities to grow. But the major expectation is related to risk return ratio that for us was not something that would justify the growth. And what about the second, the sensitivity of CDI interest rate? Yes, a lot of questions. Well, CDI, the math is pretty clear. Every 100 [ bites ] 0.3% of ROAE, the return on average equity. But it's only important when you take into account a line. On the other hand, the CDI, this high CDI will increase the cost of the debt and the asset generation, as we mentioned, is worth as long as the spread compensate everything. So that is this growth issue that for sure, due to the drop of Selic will happen. It's just a matter of time. And then the portfolio increases the activities, increase the service revenue increase and the capital market is more active. So we have different lines that are -- that will compensate the CDI. We have no questions about that. Hence, the last two years, we had 17%, 17.5% of the return on average equity. CDI was below 13.4%, that's what we had in the last quarter.

Just to add on what Borejo mentioned. The sensitivity of the interest rate result, you have one line that is the compensation of CDI and math is doing easily there. It's the explicit side of the improvement or worsening of results due to CDI variation. But we have a set of other things that are hidden. For instance, how many projects were not accomplished because the interest rate was way too high or because the average cost of the debt didn't compensate the project. How many clients had their credit denied because we thought this interest rate would break the client? How many credit lines were shortened? And we say, look, in this situation, I will operate in the short because if I elongate the uncertainties is bigger. So our bank, and we have a bank that has been here for 33 years, and we expect that to double. We are prepared to operate throughout cycles, higher interest, lower interest also loans overdue in longer periods, less periods -- lower periods. So you have to respect and understand the cycle. In our case, from the sustainable return on average equity, we prefer to have a lower Selic, it's 52% because that was also a situation. It will be around something between the interest rate that will compensate to the investors and allow projects to be developed and allow credit to be granted and allowed the overdue loans be under control, and that's it. Have we answered Ricardo?

Yes.

Now next question Carlos Gomez-Lopez from HSBC.

So two specific questions. One is could you give us the impact on capital of relation 229. And the other impact can you isolate the impact of 229? And second, in your expenses -- with your tax expenses have increased 32% year-on-year. What is that related to?

I will also mention your questions in Portuguese. The first question is related to 229. Resolution 229, what would be the individual impact in the capital base, the result of this Resolution 229.

Well, basically, we have two positive impacts here, Carlos, one from 229 around 35 bps, and the other is the recapitalization of our own interest around 35 bps, adding 70 bps that as Sergio mentioned. And the second was -- tax expenses. This is simple. It's -- tax expenses vary, but when you get six months or something similar, it is 4.65% over the margin that's piece and [ COFINS ]. And in relation to the service revenue is around 9.65%, 5% of ISS and 4.65% of [ piece COFINS ]. So if you do the math on the long term, maybe one small difference in one quarter or another one. This quarter, it was way longer than our history. But when you get longer series, it won't go away from that. Okay, Carlos?

About the expectations of JCP . We have followed by the press -- well, not even discussions -- it's about sources saying what the government should did and that. This comes back to the media. But there is a perception from the economic team in the context that the sector has been doing that, the tax are pretty high, and they are intermediate. So this increase will automatically imply in an increase of the final costs to the takers because we affect that in relation to the economy. Our perception is that the economic team understands that and in the discussion that we have is if there is any increase in the interest on the capital distributed. It would be for -- so we have no concrete news, just ideas and news, and then we have to treat that. Did we answer your questions, Carlos?

Yes. Thank you.

Now our next question, Yuri Fernandes from JPMorgan.

I have a question about portfolio quality. We see all the letters, and we see a worsening of letter B, BRL 250 million. So I would like to ask you, if you could mention, we have many cases, so should we be worried about that? The pathway that we should have more provisions. So it's just an adjustment of the portfolio. So how is that? That's my first question. What happened in letter B. And then also talking about portfolio quality. Do we have a specific adjustment similar to what you mention if we get the large corp that wants this specific case, it's around BRL 70 million, BRL 65 million, BRL 70 million. So removing the letter B, does it make sense to have this cost of risk of [ 1.2% ]? I know you don't have a guidance, but should that be the cost of risk that you have?

Yuri, thank you for your questions. I can answer and please add if you have anything. The letter D issue, a part of our activity, we have corporate customers improving. In this quarter, we had some corporate clients that we did some changes. Considering that, provisions are adjusted, it's not that client thne say, "Oh, it has deteriorated" and so on. These provisions are adequate. We had a couple of cases, three cases, in fact, that impacted letter D in this quarter. In relation to the provision and NPL, we have a proper level. When you see BRL 70 million despite the fact that we respect our segment and its particularities, and surprises may arise, we don't have anything identified so far. No surprises, I believe, if you think about the provision that is somehow [ 0.65%, 0.5%, 0.7% ] in the expanded credit portfolio for the next quarters, it seems to be a proper level.

Now our next question, Pedro Leduc from Itau.

Here's my question about a different subject, the efficiency rate ratio. The expenditures capped despite the review of the guidance for the portfolio that will imply in a lower revenue. I would like to understand that what was the front of economy that you found, commercial ones or projects? And how this will impact 2024? Is there anything that will be postponed or more services, helping this ratio? So just shed a light on that, how you capped efficiency ratio despite a smaller revenue? Thank you.

Here, we have a good question, and there is a set of factors that we have to take into account. First of all, when you look to the initial guidance, from 2022 to end 2023, we can see this stabilization of the growth curve because most investments, the structuring investments, that's how we call it, were performed. It doesn't mean that other investments won't be made. So investment is a constant, it's here to stay. We are always going to invest. Otherwise, you lose the pace, but the intensity may be reached its peak in 2022 and now it can be reduced. First point. Between the guidance of this year, 15% to 20% to the guidance that is 10% to 15%. The major change, and I believe that's an important aspect in our business model is we have less participation in the case of these recoveries that are variable. These recoveries represent a meaningful part of the total recovery, and it adjusts quickly according to the performance of the bank, product, the segment and so on. So when you realize there is a relative weakness of the revenue there, you can translate that into cost adjustment because then we have lower personnel costs. There was no impact in relation to investments and restructuring projects and not even development of new investment fronts that are only maintained. Another specific point that we have also results that are surprisingly positive. Throughout the last year, when we released all the results in our calls, a reorganization of the company, and we built some areas and one of them was what we call operations and technology. And they are developing -- manufacturing project of the entire back office. So you get not only operations, but when you get technology, you get on board, guarantee control and all the this. Then, we have new processes. They are more scalable or automation, and that is being reflected in lower operational costs. So we've been there, and we expect for the second semester that it will intensify in a sustainable way the bank will have better sustainability in middle and back office. You can imagine our histories of a bank, a wholesale major companies in which back office follows that and the back office is pretty customized with customers' needs. And then when you go to the middle segment, this is something that is happening. You have to have more manufacturing process with a cost that is lower per unit and errors per million also lower all that with KPIs and those are the impacts we see now.

Excellent answer. Thank you. Three major factors: The variable one, the commercial one and also the structural one. Two of them, you are carrying to 2024, right?

Yes, the cyclical -- I hope not, but others, I believe so. Yes, this is structural, it's structural and the name of our bank business is to have this positive leverage from the infrastructure point of view, it's happening in relation to revenue, and we postponed it for a semester because well, looking ahead from what we discussed, this reason for being optimistic.

Now, our next question, Lucas Martins from Prada.

Well, you've mentioned an initiative in agro business. And I would like you to understand how you are going to address the sector? Do you intend to serve smaller clients and exposing more the bank or that goes aligned in adding other financial products like ranch, insurance and so on. So how is that related?

Well, Lucas, this announcement is something that we have been packing internally, and it comes from different factors. First, I don't need to spend a lot of time explaining the importance of agro business in the Brazilian economy. It's a pretty competitive scenario segment including internationally, it has a larger participation in the GDP. It's totally dedicated to credit, good for financial institutions. And it's a segment in which the chain -- well, it's a little bit stressed from the credit point of view because credit granting is not only by banks, but also input suppliers, major trade, corporative and so on, everyone who takes part of the segment, in fact. Our presence is in this segment, we have 28% range, sugar and alcohol comparatives and livestock and so on. But in grain manufacturers, we are only major farmers -- major companies. It's not a rigid rule, strict rule, but those who have more than 20,000, 25,000 hectares of grain planted. It is an important and interesting reach, there are the middle-sized producers. We are going to start with those with 10,000 to 15,000 hectares. They are major producers, we are not talking about a small one, but they are consider middle in the business. And they have some particularities. They are individuals. Most of the time, there are no legal entities, we have some tax benefits for individuals. They have relationships with the entire chain of input, trade, fertilizers. We are the bankers of this chain. We are developing products here for these entities, helping them to sell and fund their sales to middle-sized producers, but we need to develop technology to understand them to monitor the crops to have proper guarantees. And that's what we have been doing and we intend to do. It's a huge number of clients. When we talk about middle market, we have this portfolio of BRL 4 million with 2,000 something plus the clients, there's no agro. So if you want to be a middle corporate bank in Brazil when you're not acting in agro, that was a link that was missing in the chain, and we intend to reach that. And cross-out of products, that is amazing. You've mentioned insurance. We have insurance, we have crop funding, hedge of all types. We have intermediation of the relationship with the trades, also their relationship with input suppliers, seed suppliers. So it's a very inclusive proposal, but one step at a time through all time, this will have a good result.

So now we finish our session of Q&A, we would like to thank so much you all for your participation. And we are reaching the end of our broadcasting for the conference call for results in the second quarter. Now I will hand the floor to -- final words. Borejo, please.

I would like to thank for your participation. We are available in case you have any questions, anything that was not asked, come talk to us, and I hope to see you soon in our next opportunity. Thank you very much.

That's it on my side, I would like to thank you for your presence, for your time and say that it's always a pleasure to be here telling you what we have been talking about and as Borejo and Ricardo mentioned, we are totally available in case you have any other questions. And I hope to see you soon. Thank you very much.

Thank you, Lulia, thank you, Borejo for your presentation, and we thank you for your participation. And the presentation is available at our IR website. The video will be available on our YouTube site, and if you want to listen to the audio, it's going to be available on Spotify at the ABC channel. So hope to see you soon. We thank you for the audience and the presence. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]