Banco BMG S.A. ($BMGB4)

Good morning, everyone. It is a pleasure to have you with our Banco BMG's results conference call regarding Q1 of 2026. I am Danilo Herculano, and I'm joined by Felix Cardamone, Flavio Neto, and João Consiglio, who will present the main highlights and results for the period. After the presentation, we will go to our Q&A session, during which analysts and investors will be able to interact with us. Before we begin, I would like to share a few quick announcements. This conference call is being recorded and will be available in our IR website. During the presentation, all participants will be in listen-only mode. Questions may be submitted at any time through the Q&A icon along with your name and company and will be answered at the end of the session. The presentation material in both Portuguese and English are already available for download on our website in the Results Center. I will now turn the call over to Felix to begin the presentation.

Thank you, Danilo. Good morning to everyone that are participating in this earnings results for Q1 of 2026. I would like to go to Page 3, please. I would like to initiate, strengthening our strategy, which is always focused on our clients' needs to leverage ourselves on the proven expertise that we have regarding our products for the C and D classes, also based on the tradition and the brand of the bank with 96 years of history. How we want to service these clients that should be through a combination of physical and digital channels. And this means that we would like to service our clients wherever they are; this with our 950 stores and with all our digital channel structure that I will elaborate on subsequently. And based on an addressable market, which is broad, be it for retiree customers C and D classes, the CLT customers that are focused on the private payroll. And this is all based on a team that has showed a great capacity of strong execution. We always strengthened that we strongly invest on our team, on our training, on the improvement of our culture, and today, BMG Bank came second place in LinkedIn Top Companies 2026 amongst medium-sized companies with up to 5,000 employees. Last year, we ranked second and third place in GPTW. And this shows that we will only show good results, and we will only be able to service our clients if we have an engaged, prepared, and encouraged team so that our clients are more and more satisfied with us. And of course, we can never waver on a technological platform that is scalable, flexible, stable, and that provides agility in order to service our clients. Now on our next slide, I would like to highlight the transparency with our clients, which is critical for us, this in all our channels and processes so that we can always guarantee that we understand our clients -- what they're buying, how they're buying, from term, rates, deadline of our products. This is something that we're constantly focusing on. We're always reviewing processes and journeys because we want our clients to engage more with us. We have over 9 million clients. And I would like to highlight important points: 91% satisfaction in service. Now we at the 31st position in the Central Bank complaints ranking, improvement of 2 positions in the quarter. We were 29th, now we are 31st, and we're focused on service transparency, the satisfaction, the seal RA1000 seal, and everything demonstrates that our clients are more engaged. They will remain longer with us, and we will have sustainable results, not only in the short, but also the mid and long run. To take care of this relationship is one of our biggest assets. Now our next slide, that would be Page 5. I do understand that there are data that show that a lot of investments in people, journey review, technological platform in AI agents in order to help us to analyze our processes, we are reaping the results now. And I believe that one of the examples is what is connected to self-hiring, self-contracting, or origination through self-contracting through WhatsApp credit, shopping and the digital bank experience, they self-contract. And this volume is BRL 1.3 billion of origination. Almost 50% of origination comes through this channel. Our client can get service wherever they want, how they want, in a very transparent fashion. And this is why engagement is better. And of course, we still have a lot to do in this journey. We do understand that we are reaping these fruits, but the competitive [ differential ] together with the strengths of the brand of our bank and the confidence that it conveys, well, with this, we have better results. Now going to our next slide. The result of everything that we have done, something that I showed very quickly in the past slides. This is combined with an ROAE of 15.3% during Q1 of 2026, our ROAE, of course, overcoming our average during the last quarter of 2025, the ROAE was higher -- was around 19%, but we always clarified that this was not the ROAE cruise speed. Now we ended -- we are at 15.3% with a net result of BRL 147 million. I'm absolutely sure that this demonstrates our execution capacity with a strategy that has shown to be a winner and that is correct in our long-term view. Therefore, we're going to evolve during each quarter, although this is a challenging market right now. And at last, a point that I would like to share with you on Slide 7, please is [Foreign Language] Trained understanding financial education. This is good for the bank because these are potential customers. And now I give the floor to João to continue with our presentation.

Thank you, Felix. Thank you to everyone. Before we talk about our products, first and foremost, on Page 9. Basically, I would like to strengthen our commitment in terms of relationship and how we cherish transparency and how responsible we are when it comes to service our clients through all the channels, we've made a great effort. So for what the client wants from the bank or what is offered for them, we want to be absolutely sure that they get what they want. Today, we have a confirmation video call with 100% of the retirees of the INSS that use the bank. This gives more quality, safety, more compliance with our standards for all our partners, collaborators, because we want to be absolutely sure that the client understands the conditions that were offered and what they are hiring. In addition to this, we launched a new sales platform where we guarantee a better experience, more productivity, and a better credit offering according to the clients' need. And this new sales platform is supported by AI with a better offering for the client according to their capacity and the priority because we always want to offer first a more convenient and cheaper credit lines for our customers. And the result is that our origination mix has become more balanced and more profitable. During this quarter, I would like to highlight the private payroll loan that appears as a very important business for us in the bank and the net revenue per client that has been growing 13% year-on-year, and now it's BRL 56 per month. On Page 10, we can talk about the -- of course, the payroll products. This public about 50 years of age, and we work with C, D, and E classes. We are strongly focused on the quality of the relationship and what we offer to our customers. The excellence in formalization allows us to work with a number of partners when we need to assign credits. And this is important for the bank because this demonstrates the quality of our offering and all our origination from the bank. In the INSS bank, despite all the challenges that we're facing -- that we faced during the quarter, origination is growing. I get benefited a bit by seasonality and the new operational system, which provides more productivity and facility. Now in the payroll credit cards, that is a product where we can offer a way that a client can pay, and compared to other cards from the market, everything that they pay in installments will be done by or through the lowest interest rate in the market. Origination represents 70% of our purchase operations when the client buys at the drugstore, at the supermarket, or wherever they need. And if the client wishes, they can pay in installments. So the use of a card to pay is more intense and provides a major benefit for these clients that do not have limits with other cards. Now on Page 11. In the retail market, personal credit, this is sub-dimensioned. It is lower than what it could be. It has been growing consistently with responsibility and with origination with good quality throughout the quarters. And our strategy that was adopted during the INSS auctions brings -- attracts clients and places the bank in the very advantageous position because our minimum pitch allowed us to service these clients with the lowest cost. Now in the private payroll loan that has been gaining relevance, origination is majorly digital. And we use our physical presence for needs to increase the proximity. Now this is a market where we've embarked very cautiously. At the end of last year, we saw the operational processes that were working in accordance. And now we feel secure with this origination. The broadening of the physical channels allows us to come closer to our customer, and the cross-sell potential is important because these are new clients, and these are a lot of clients that are using the bank. And on Page 12. Now speaking about insurance, the integrated action of the insurance company and brokerage house allows us to offer products according to the needs of our clients, and they have access to protection, assistance. And here, we can increase the recurrence and the relationship with our customers. Here, we have BMG Med that broadened the access to telemedicine at accessible prices for those that don't have access to immediate and urgent medicine as it is needed. Now on Slide 13. Here, this is our wholesale market. And this is the corporate market. And it is disciplined in capital allocation, focused on value. In the corporate segment, we're advancing consistently. We are diversifying our credit portfolio and the origin of the revenues. We are very selective, we are very disciplined where the operations with the best return are used together with the capital markets, debt, derivatives, equities. And with this, we have better return with our customers' relationship. And this is according to the minimum returns that are expected by the bank. During the last 2 quarters, our volume was slightly lower of noncredit revenue. This is a natural oscillation of the corporate market, which depends on the performance of different operations from the capital markets and M&A. And during this quarter, we participated in 7 offerings in the capital market and 1 M&A. So with this, I hand it over to Flavio, who will talk about assets and liabilities.

Thank you, João. Good morning to everyone. We are going on Slide 15. Here, we present the change in mix of our assets throughout the last quarters. Here, you can see that we grew mainly on the private payroll loan, but also payroll loan and payroll credit cards also as per personal credit. On the other side, we dropped in other portfolios where we have been reducing throughout the time with lower profit than the other portfolios. With this mix, we have been able to positively influence our margin. Now another highlight regarding the growth of our portfolio: after spending the entire 2025, reducing the portfolio of this mix during, now we're presenting a growth in our portfolio. Now on Slide 16. Here, you can see our provision expenses, net of recovery, with a slight high. This slight high is due to the growth of our private payroll loan portfolio since 466 Resolution (sic) [ Resolution 4,966 ] from the Central Bank, we provisioned the expected loan in the origination of the operation. And every time we grow in our portfolio with a slighter risk, the level of provisioning expenses will increase. Despite when we see with the NPL over 90, we can see that our level is very stable, and we have navigated between 3.5% and 4%. Now we're at 3.7%, which is stable, as is our NPL Stage 3, which remains stable at 6%, demonstrating the quality of our credit portfolio. Now when we go to Slide 17, here you can also see our funding base. We always like to match assets and liabilities, not only in rates, currencies, but also from the duration point of view. We can see that our liability has an extended profile with very little short-term liquidity. If we see our short-term liquidity LCR 284% or the NSFR at 123%, these are levels which reassure us and guarantee good liquidity. When we see funding, our portfolio is over BRL 33 billion and 37% is in institutional funding. And this has also allowed us to be strongly present in institutional investors. I'm talking about our frequent issuance. In the past year, there were 15 -- here, we had 15 issuance between security letters. Another indicator, which we analyze is the FGC, and this is a trigger for fundings that are backed by [ LCD ], and it has been 48%. So if you grow up to 60%, there is no type of penalty or additional cost. We consider that this is a very suitable level. Now Slide 18. Here, we present our capital indicators Level 1, 9.8%, our Basel ratio with 12.9%. We would like to remind you that recently, we capitalized the bank with over BRL 200 million that were capitalized in order to strengthen the bank's capital. Here, when we compare this to the last year, we start 2026 with a more robust balance. And during each January, we have the phasing of [ 466 ] (sic) [ 4,966 ], and there is an important impact on our capital. But this year, we started with a stronger capital position and there are leverages to generate capital, be it the recapitalization of ISE, credit assignments, consumption of tax credits, and the internal capital generation because we have more positive results. So with this, now I hand it over to Danilo so he can present our financial results.

Thank you, Flavio. Can we go to Slide 20? Now speaking about the margin, the expansion after credit costs grew in the quarter as well throughout the year, and we totaled during Q1, BRL 853 million. This shows that the growth comes from a more profitable mix of portfolio despite the initial effects of the private payroll loan. I would like to highlight -- let's go to Slide 21. I would like to strengthen that, although with the growth of the operation, the bank has maintained its rigorous management in cost, the cost of serving grows marginally, driven by the drop in our customer base, and the total expenses are slightly lower than the last quarter, but they're very stable when we see the last quarters. Now with the growth of the margin and stable expenses, we improve our efficiency. As you can see in the past slide, the operation provisions are impacted because the INSS challenging situation. We would like to highlight that our success in these actions are 75% for all our base and 98% success rate in the video call lawsuit. Today, for 100% of the formalizations, we have the confirmation via video. Now on Slide 22. I would like to highlight that the shares of BMG were valued above the small caps in the financial index, but this doesn't reflect the momentum of the bank. We have our ROAE that is growing close to the average and dividend yield above the other banks, but our price-to-book value is still lagging behind. I would like to hand it over to Felix so he can finalize this presentation.

Danilo, thank you very much. João and Flavio as well. Let's go to our next page. As a final message, first, I would like to highlight our strong investments on customer satisfaction. Our investment -- our constant investment on client satisfaction through transparency, new journeys, our focus on engagement, training, and the encouragement for our team, which is of utmost importance for everything that we have been doing. We also -- if our ROAE develops sustainably, also our financial margin and also after the PDD drop, we had Basel incidence which is sound. This shows you that we're on the right path. We still have room for improvement. This is a challenging market. The BMG Bank has a team that is supported by the Board and the controlling shareholders has shown the great ability to execute and to adapt itself to the different variables that we face, be it when new businesses and new products emerge, like the private payroll loan, which was a very assertive strategy. And this accounts for a very significant volume of our origination and it is ever growing in our portfolio and helping us in our results. So I do understand that everything, our investments, we are reaping the fruits. The results of this quarter show how sound our strategy is, how our team is strong, how our bank is strong, and we will continue throughout this pathway searching for better results. I thank all of you for participating in our earnings results. I thank all our employees, our franchisees. Everybody has worked incredibly, investing in the expansion of our stores and how careful they are with our clients. So let's go on. We have the entire year of 2026 to work.

So thank you, Felix. Now we will initiate our Q&A session, reminding you that you can pose your question through the Q&A icon with your name and company. Pedro Leduc from Itaú. There are 2 Pedro, I'm going to separate them. The private payroll loan was strong with BRL 570 million in origination. What about its profit? It already contributes to the profit, or bringing more PDD due to the origination? Flavio, can you help us with this first question?

Of course. Thank you, Leduc, for the question. You went straight to the point. What happens? Due to Resolution 4,966, the provision comes before and the results the interest rates of the portfolio, you collect them at the end. Although we are highly satisfied and reassured with this portfolio, the contribution for the results until this quarter is still negative. Obviously, when you see the older periods, around 6 and 9 months, you can see a positive contribution, but still -- since we start seeing better results, the contribution is more important, but during this first moment, it is negative. We do expect an evolution in the result based on the growth and the maturity of the private payroll loan.

Here, another question from Leduc. How do you see the recent announcement of the consigned margin and the change of margins in the credit cards, by and large? Felix, can you help us?

Leduc, thank you for the question. What is important to highlight is, be it a payroll credit card or direct debit loan, these are the lowest interest rates in the -- and this product, there was an origination of BRL 9 billion per month. Today, this origination is around BRL 3 billion per month. Now the low-income client had less access to this line that is the cheapest line. Currently, we are assessing. We operate with all these products. Therefore, that in the short term, our portfolio is preserved. And there is a dynamic of maturities where we will focus on -- there is no impact in the short run. And as we work with a number of products, as I mentioned, there will naturally be a replacement of one product by the other. We must respect, obviously, these decisions. But I would like to also highlight that financial institutions have to work with certain predictability. This was a decision that was adopted, the entire financial market became aware of it during this week on Monday. And what we strengthened here is that this will impact the journey of the clients, the commercial dynamic. Day-by-day, this also affects the products, and we must adapt ourselves very quickly to this new reality and continue our trajectory and to seek efficiency and revenue. Yes, the predictability is important. This doesn't affect our sales, and yes, we have to provide sustainable results to our bank.

Thank you, Felix. Our next question from Pedro Ávila, VAROS. Good morning. This would be the consigned assignments. You assigned BRL 940 million in assigned loans with BRL 42 million in results, 8.5% of the assigned value above 5.3% practice in 2025. Now default went up from 2.5% to 3.5%. Can we say that you assigned more sounder products from your portfolio and the NPL is the effect of this composition? This strategy, will it continue in the upcoming quarters? Flavio, can you help us with this?

Yes. Thank you, Pedro, for your question. Yes, your rationale is right. When we sell portfolios, generally, these are portfolios that are up to date. This wasn't different in the past. So when you see the indicator of the NPL, this indicator deteriorates slightly when you withdrew this portfolio from the balance. What is valid to highlight there, there was no difference in terms of the quality of the portfolio. The spread varies throughout the time. Sometimes this is connected to the interest rate; sometimes there are ups and downs because the spreads open and close throughout the time. This is related to the sales time. We have to highlight that in the INSS consignment, there is an effect regarding the part of the portfolio regarding clients. We work with these clients because perception of the increase of risk on the population. And now we've seen during the past months, a number of cuts in benefits. The governments are not paying benefits. And in addition to the effect that I mentioned, the [ LOAS ] cutting contributed to the deterioration of the NPL indicator.

Thank you for your answer. Our next question from [ Luiz Antonio ], a manager. Why are you expanding the help! stores if digital is growing with self-contracting? What is the strategy behind this? Can you help us with this, João?

The help! stores are basically our network. They integrate our offering ecosystem of products and how we service our clients. The digital world has been developing itself, but many times, we feel that we need an in-person service for certain types of clients. And this happens and we leverage this, we harness this because this is a bank that can service their clients digitally and physically in places where clients don't have access to other types of services. Now in addition to this, I would also like to highlight that the bank operates with franchisees in their help! stores. The help! stores are not only expanding because of the incentive that the bank provides to these stores, but also because of the perspective and the partnerships with our franchisees, and we want to see stores in places where there weren't stores in the past. And I believe things will continue this way, and this will drive the growth.

Thank you, João. Our next question from Rafael Reis from Banco do Brasil. Good morning friends from BMG. I believe that the credit cost is influenced by the accelerated growth of the private payroll loan that operates with a negative margin. According to Flavio's comment, due to the origination in this line, is there a term where these results will provide positive results, and will we reverse provisions or there will be an increase in our financial margin?

Well, thank you for your question, Rafael. The provision impact takes place during the month where you originate the portfolio. Theoretically, during the quarter where we present, there is a great increase. The next 3 where you isolate, this is negative. Here, you have higher interest than any additional variation of the NPL. Now obviously, we have accumulating groups. If it is -- here, we had an origination of BRL 570 million. The return comes quicker. If the production continues escalating, this takes longer. But if we see per period during the second quarter, it will be positive. What we should see, let's remember that this product is a product with a recent history. So the level of provisioning carries over uncertainty. So we do see institutions operating in the same market, but working with different provisioning levels with this product. What we are certain about, there will be an increase of the yield of our portfolio in the interest revenue, you start the quarter with a more robust portfolio, and provision expenses, depends on the level of origination. When you have an origination that is aligned, it should be stable while the interest rate revenue will be where we will see greater gains.

Thank you, Flavio. So with this, we bring to an end our Q&A session. We would like to thank you once again for the earnings results call. Our Investor Relations team is at your disposal, and have a very good day. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]