Banco BTG Pactual S.A. (BPAC11) Earnings Call Transcript & Summary

Good morning, and welcome to the Second Quarter of 2024 Results Conference Call of Banco BTG Pactual. With us here today, we have Roberto Sallouti, Renato Cohn, Julia Rocha. We would like to inform that this event is being recorded [Operator Instructions] Today, we have a simultaneous webcast that may be accessed through the website, www.btgpactual.com/ir and the platform. There will be a replay facility for this call from today. Before proceeding, let me mention that this call may contain forward-looking statements relating to the prospects of the business, estimates for operating and financial results and those related to the growth prospects of Banco BTG Pactual. These are merely projections, and as such, are based exclusively on the expectations of Banco BTG Pactual's management concerning the future of the business. Such forward-looking statements depend substantially on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry. Among other factors and risks disclosed in Banco BTG Pactual's filed disclosures, documents and are therefore, subject to change without prior notice. Now I'll turn the floor to Mr. Roberto Sallouti, who will begin the presentation. Mr. Sallouti, please go ahead.

Thank you very much, and good morning to everyone. Thank you for joining the call. If you could please start turning to Page 3 where we have a few of the highlights for the quarter. Starting with the first point, it was another quarter of record results, and that was driven by both revenue growth and increased operational leverage. We have reached in the quarter 22.5% return on equity. But I think more important than that, we're very satisfied because we see this second quarter as a very challenging one, especially the macro scenario both globally and in Latin America. And even so, we were able to deliver solid results. But more than that, the underlying dynamics that we are experiencing in each of the different business units, makes us very confident that we will be able to continue to deliver ROE expansion over the next few quarters. Going to the second point, we had very robust results in investment banking, which were led mostly by a very strong DCM activity, debt capital markets activity. We had record results in corporate lending, which was driven both by a very strong portfolio growth but also by greater revenue diversification and healthy spreads. Here, we're benefiting from both diversification of business offering, of business segments, of geographical diversification. So we're very satisfied that we've been able to show strong growth but more than that, growth with very good quality and healthy spreads. Our total assets under management surpassed BRL 1.7 trillion at the closing of this quarter. We have BRL 56 billion of that new money and our AUM is growing 23% year-over-year. And finally, the fifth highlight of this quarter is that we continue to expand our funding base, which grew 30% year-over-year, and we continue with very strong capital and liquidity metrics in our balance sheet. Turning to Page 4. We talk a bit about the key numbers for the quarter. In the quarter, we had total revenues of BRL 6 billion, net income of BRL 2.9 billion, growing 15% year-over-year and a return on equity of 22.5% for the quarter. We have -- going to the next page, BRL 56 billion of net new money, and our wealth management business is showing 27% growth in AUM year-over-year. We finished the quarter at BRL 799 billion, so let's say, we can say BRL 800 billion. And our asset management business is growing 20% year-over-year, closing the quarter at BRL 920 billion. And finally, going to Page 6, our unsecured funding grew 30% to BRL 236 billion. Our credit portfolio showing strong and healthy growth of 27%, reaching BRL 195 billion, of which BRL 23 billion in the SME segment and as mentioned previously, a very robust capital base with a total Basel ratio of 16.2% for the end of the quarter and BRL 53 billion equity at the close of the quarter. Turning to Page 7. We show the traditional way that we've been showing for years now. So we had total revenues in the quarter of BRL 5.99 billion, net income of BRL 2.95 billion, BRL 0.77 net income per unit. We continue to improve our operational leverage and continue to maintain a cost income below our historical average having a cost-to-income of 37.3% for the quarter and a comp ratio of 20.8%. We finished the quarter with total assets of BRL 600 million, equity of BRL 53 billion as mentioned previously, Basel of 16.2%, and we had a very low VaR during the quarter of 21 bps. And during this quarter, we also announced the JCP distribution of BRL 1.55 billion. Turning to Page 8. We talk about the results for the first half of the year. For the first half of the year, we have total revenues of BRL 11.88 billion, net income growing 21% versus the 6 months of the previous year to BRL 5.84 billion. Our return on equity for the first half of the year was 22.8% and a net income per unit of BRL 1.53. Again, cost-to-income below historical base at 37.4% and compensation ratio of 21%. Turning to Page 9. We see the revenue breakdown by business units. And here, we continue to see the franchise businesses growing very strongly. And as we have been saying in the previous years and previous quarters, we continue to experience a stronger growth in our investment management businesses in our corporate and investment banking businesses than the growth compared to the global markets business. And this is generating a very healthy distribution among the different business units. I think the highlight here to mention is the very robust growth in investment banking, even in a still challenging market, especially for equity capital markets. Of course corporate learning and business banking still benefits here from the effect of Americanas events in the previous 12 months. But what really is -- really robust growth is what we're seeing in asset management and in wealth management and personal banking. 23% in asset management and 25% in wealth management. With that, I'll pass the floor to Renato Cohn before we go to the question and answer session.

Thank you, Roberto. So moving now to our business lines on Page 11. In Investment Bank, we showed once again very strong results during this quarter. This time, mostly impacted by strong DCM activity. Revenues came at BRL 558 million, which is a decrease when we compare to the first quarter of '24, bear in mind that in the previous quarter, we had very strong revenues. We also had very strong revenues and our best quarter ever in M&A. So as I mentioned, most revenues came this time from DCM transactions with more than 40 transactions concluded during the quarter as market conditions for DCM continue to improve with both institutional and private individuals being very active throughout the quarter. M&A and ECM continue to contribute to the overall investment banking revenues. And specifically, in M&A, we continue to execute our existing pipeline of transactions while we bring new ones for execution in the next few quarters. And in ECM, we executed an IPO of Auna, Latin American company created in Peru that listed the shares in the U.S. markets and also we coordinated some follow-ons both here in Brazil and other transactions in Latin America. And we maintain our leading position in the industry rankings being #1 in M&A by number of transactions in Brazil and in LatAm. We also ranked #1 in ECM in Brazil by number of transactions and in volume of transactions in LatAm. Moving now to Page 12. In Corporate Lending and Business Banking, we had record performance with strong portfolio growth, healthy spreads and revenue diversification. Revenues grew 6.8% during the quarter, reaching BRL 1.534 billion, which represents a 20% growth when we compare to the second quarter of '23. Credit portfolio grew 7.3% during the quarter and 27% when we compare to last year, reaching BRL 195 billion as we continue to expand our portfolio, not just in Brazil but also in Latin America with our banks in Chile and Colombia and now also with our bank in Luxembourg. Important to note that we managed to grow our portfolio while we maintain the same healthy spreads and the same quality of the portfolio. SME portfolios continue to develop growing 6% during the quarter with additional diversification of revenues coming from our expanded offering of products and services. And an update on the Americanas credit case, with the conclusion of the process of restructuring their debt according to the judicial plan, we have received the majority of our remaining exposure in cash with a smaller part received in debentures and equity. And with that, we expect to have a marginal gain as the level of provisions we had in our balance sheet were in line with the judicial plan agreed and approved between the company and its creditors. And finally, we have voted for the third year in a row by Global Finance, the world's Best Bank for SMEs. And we are also voted by Euromoney Best Bank for SMEs in Brazil and in Latin America. Going now to Sales & Trading. We had resilient revenues driven mostly by client activity and with VaR at historical low levels. Revenues came in at BRL 1.388 billion during the quarter, which is a similar level when we compare to the last 2 quarters, as we face more challenging market conditions with lots of uncertainty in both domestic and international markets and a low VaR allocation. Average VaR during the quarter was 21 basis points, which is the second lowest VaR in our history. And in July, we announced the acquisition of Sertrading a company that provides solutions in foreign trade, mostly imports. And with this transaction, which still needs the customary regulatory approvals we will add additional services to our clients and also integrate a range of financial products and solutions to such trading clients. And for the fourth consecutive year, our teams were voted best Research team, best Sales, best Trading team and best Corporate Access in Latin America by Institutional Investor. Additionally, we were voted best Local Broker and best Trading house in Brazil. So just to highlight, our research team was ranked #1 in 18 out of the 25 categories of institutional investors. Going now to our asset management. We had strong inflows and consistently growing management fees aligned with the AUM growth revenues came in at BRL 548 million, which is a 4.6% increase -- I'm sorry, a 4.6% decrease during the quarter. Management fees continue to grow in line with the portfolio expansion. But overall, revenue growth was offset as during the first quarter, we recorded dividends from the independent asset management companies that we invest in. When we compare with the second quarter of '23, revenues grew by 27%. Net new money came in at strong BRL 28 billion despite the more challenging scenario. And most of the flows are going to fixed income related products as a consequence of market expectations of higher interest rate scenario for a longer period of time. And assets under management and administration reached BRL 920 billion, which is a 4.5% growth when we compare to the previous quarter and a 20% growth when we compare to last year. Moving now to Page 15, in Wealth Management. We had another quarter of strong revenue generation with wealth under management grow. We had record revenues of BRL 928 million, which is a 5.6% growth during the quarter and 27.6% growth when we compare to last year. Wealth under management reached BRL 799 billion, growing also at 5.6% during the quarter and also 27% when we compare to last year. And net new money came in at BRL 27.8 billion, summing up a total of BRL 130 billion of net new money during the last 12 months. And in June, we also announced the acquisition of M.Y. Safra, which is a bank in the United States, and that will help us improve our products and services offering as well as the experience for our clients and their financial needs in international markets. And here, we were also voted Best Private Bank in Brazil, Chile and Colombia by World Finance. Looking now to our participation results on Page 16, we see the different components in the right side of the slide, with Too Seguros contributing with BRL 57 million in profits. EFG added BRL 30 million in profits as they continue to improve their results. And then we have the 3 different components of Banco Pan contribution to our results. First, we recorded BRL 145 million in profit in equity pickup from our stake in Banco Pan and on top of that, we had a contribution of BRL 99 million in accrual for the portfolios that we acquired from Banco Pan in the last few quarters and we had BRL 106 million in elimination from the portfolio we acquired during the second quarter of '24. So overall, our participations contributed with BRL 224 million in profits. Moving now to our expenses and main ratios. On Page 18, we see consistent operational leverage gains through effective cost management. Total operating expenses slightly increased 1.9% during the quarter. Salaries and benefits increased 1.7% during the quarter, while administrative and other expenses remained flat during this quarter. Goodwill amortization increased 8.9% with the impact of the Orama acquisition that now impacted for the first time the full quarter. And our effective tax rate remained stable at 19.9%, mostly impacted by the JCP distribution or the interest on equity. Now to Page 20, we see our balance sheet. And here, we see that total assets grew by 5.8% during the quarter, representing now 10.3x our equity. We continue to maintain strong liquidity levels with BRI 75 million of cash and cash equivalents and with an LCR of 191%. And our coverage ratio remains at a comfortable level of 168% with our unsecured funding growing in line with our balance sheet credit portfolio. And now our corporate lending business portfolio now represents 3.7x our net equity. Going to Page 21. We look at our unsecured funding base, and we see a strong growth of BRL 11 billion, reaching a total unsecured funding base of BRL 236 billion, with retail funding remaining stable at 28% of total funding and growing in line with the total funding base. And in April, we successfully issued a 5-year unsecured note of $500 million in international markets. Going now to Page 22, we see our Basel ratio slightly decrease to 16.2% as we distributed interest on equity of 100 -- sorry, BRL 1.550 billion. Core equity Tier 1 decreased 10 basis points to 12.3%, while Tier 2 capital remained stable at 3.9%. And finally, looking at our VaR, as mentioned before, we see a strong reduction to 21 basis points, our second lowest level ever as we reduce our exposure due to some recent market activities. So to conclude once again in a challenging market environment with lots of volatility in both domestic and international markets, we managed to produce very strong results with record revenues and also record profits. And with that, I think Roberto we can open for questions.

[Operator Instructions] The first question comes from Yuri Fernandes with JPMorgan.

I have a first one on sales and trading. And I know usually your answer is hard to forecast, and let's kind of use the last 4 quarters. But going into a little bit of more detail, the VaR was pretty low this quarter, right? And usually, you say that this line is becoming more and more clients dependent, and we see other lines doing well. So again, guys, if you can help us understand like the level of sales and trading, which we just continue to use this average or if you expect the second half to be better than the first half? That would be my first question. And then on the M&A, I think you have been doing -- you mentioned some of the deals in the presentation. So Pershing Square, the M.Y. Safra the U.S., the Sertrading, what else? What could we expect for your M&A strategy? Could you see this strong pipeline to remain in place in the second half. So a little bit of more color on M&A would also be helpful.

So on your first question on sales and trading, yes. As I said, we don't usually say this, but yes, we do expect the second half of the year better than the first half of the year. We were expecting, of course, growth across all our business lines. We did not see that in sales and trading. We think that was, how I say, something due to the conditions of specific of these 2 orders, but we -- given the dynamics that we're seeing, we're quite confident that we will see a better second half than the first half. On your second question on inorganic growth, if you look at the ones you mentioned, Sertrading or the bank in the U.S. These are all complementary product lines that we are able to offer to our client base. So you should continue to expect that whenever there are interesting opportunities, first, to add product lines to better serve our clients, these will be done. And this is a different rationale that, for example, the Auna acquisition, we're basically just bringing leverage to the current product offering we have, where we're able to basically bring more clients to the current platform that we are operating. So you should not expect any transformative acquisition, but we will continue to be on the lookout for these, let's say, specific acquisitions that either bring us an additional product offering to our client base or bring additional clients to our current platform.

Super clear. If I may just a follow-up on Sales & Trading, you used to have the principal investments in a separate line, right? Just checking, when you say the second half to be better, it's maybe the principal investments doing better? Or is the core -- I don't know the old, the good old sales and trading doing better. Again, I know it's not that mature anymore, but just to -- kind of [indiscernible].

It's just the combined sales and trading line as we are showing it now or rather my analysis was regarding the way we are showing now. So that's why we expect a stronger second half than the first.

The next question comes from Olavo Arthuzo with UBS. Please go ahead.

I have 2 questions. My first one is about the investment banking because we saw a drop in revenues this quarter and then looking at fees it shrunk after a spike in the last quarter. So could you give us any color on this line, but mostly focusing on the fees, the bank accrual, just for us to understand if there is any kind of deferred accrual here? And what would be the mechanics behind it, it helps us a lot and then I'll go to my second question.

There is no deferred accrual. If there is something -- the only thing that have been announced and not booked yet are M&A transactions, which they're announced, but the fees are only paid when the transactions are closed. So sometimes you have CADE your regulatory approval, and that takes a while. But as we mentioned previously, Q1 was very strong because we had M&A fees and Q2 was a bit lower but still strong where we had very strong debt capital market fees.

My second question, I'll shift to the asset management business of the bank because you mentioned the decrease in the quarter had some relationship with a higher comparison base in the last quarter with the contribution from that stake. The bank has independent asset there. So just like to elaborate a little bit more on the magnitude of this impact on the asset business, I mean, the level of relevance of that contribution from the independent assets. Any color here would also help us. Thank you again.

So first, I'm going to use your question to comment that we're actually quite satisfied with the performance, especially the net new money of our business, given what is happening to the industry and a very challenging environment. And I think here, we're benefiting from the complete product offering for the fact that we have, let's say, conservative fixed income to active fixed income, to credit products, to hedge funds, to equity funds, to infra real estate. And I think we're benefiting from this complete product offering. Especially given the very tough moment that the industry is in -- we're very proud and satisfied with the performance of this business. What we can say about the revenues here is that we have seen a constant increase in the management fee component of asset management revenues. And here, you have some performance fees, I think, on the first in the second and fourth quarter. And in the first quarter, you have some dividends from the independent asset managers, where you have a bit of volatility that is linked either to the performance of the funds or the performance of these independent asset managers. But what's important to note here is the underlying trend of constant growth in the management fee component, but most of all, a very healthy performance in a very difficult market environment.

The next question comes from Daniel Vaz with Safra.

Congrats on the results. I guess, there were no large deviations from our expectation. So trying to explore a more broad subject here. You currently don't disclose original breakdown, right, of revenues. So it will be very valuable to hear what's the current share of revenue coming from LATAM. So which countries do you see as the most promising -- what like an idea of share maybe of revenue you want to achieve in the medium term versus Brazil? So if also any major acquisition looking for to do to penetrate in any of specific market?

Thank you, Daniel. Qualitatively, all of our LATAM say, geographies are actually having record years having very, very strong performance. So we're very satisfied with the growth. The truth is Brazil in the last few years has grown very strongly. So that, to some extent, has decreased the LATAM participation for that, let's say, the historical 15%. But I think that over time, as LATAM has been performing strongly, we think that going back to this roughly 15% coming from LATAM is something that we expect will happen naturally as these businesses continue to perform. It's important to note that these geographies have been performing very strongly even in very challenging macro environments, right, in the countries -- all of the countries for different reasons. So that makes us even more confident on the quality of the franchise and the quality of the business that we have in each of these different countries. So we're very satisfied. We had seen this percentage decrease over the last few years, but now we're seeing it slowly grow back, and we believe it will grow back very soon to this historical 15%.

The next question comes from Renato Meloni as an Autonomous Research.

I wanted to follow up on the sales and trading revenue line. We're seeing some risk on movement in Brazil in the past couple of weeks at the same time that you reported your lowest VaR or second lowest VaR historically. So going back to your comment that you expect a better second half, do you see more opportunities here to deploy more risk or this improvement will come from more trading from clients? And if you allow me for a second question on the corporate lending side, you're still performing ahead of the expectation that you had at the beginning of the year when it comes to loan growth. So I'm curious here, if you see the lending book growth and in the year above 20%? Or we can see some deceleration here.

On sales and trading, I would actually say probably both. When you have a risk on scenario, clients become more active so that helps the franchise business. And you also feel more comfortable probably allocating a bit more hard, so I would say both. But both of these, we expect to benefit the sales and trading line. And other corporate lending, yes, we do think that, again, we don't want to give this as a guidance. But I think it's very reasonable that we will finish the year with bigger than 20% growth in corporate lending.

The next question comes from Brian Flores with Citi.

I wanted to do 2 questions. First is a follow-up on the strategic side. You mentioned you are very confident on sequential ROE expansion, could you elaborate a bit on this? Is there any particular line or segment that gives you a bit more enthused going forward? I think that's the first question. And then on my second question, have you had any updates regarding the negotiations with Banco Pan? Anything on that front would be really appreciated.

Of course, we are confident because the investment management franchise has been very strong, corporate lending has been very strong. But when you talk -- where have we -- where do we have space probably to perform above what has been the growth of these units that we talked it is probably sales and trading. As I mentioned previously, we have stable revenues in a very challenging environment, and we think that the dynamics we're seeing give us comfortable to see some growth in sales and trading. And at the same time, you are also seeing a ramp-up in Banco Pan, because Banco Pan has been holding more of its portfolio and they're less willing to sell. That means that we probably BTG will buy less. So we expect less of this netting effect that we have to do. And at the same time, they will continue to grow, let's say, results that it has been showing and we also got the accrual. So -- we're confident in this ROE expansion, both because of the very strong performance of all business lines in general and specifically because we think Sales & Trading will go back to growth and the ramp-up will continue. And on your second question, no, there have been no developments in Banco Pan, nothing to disclose here.

The next question comes from Gustavo Schroden with Bradesco BBI.

I have a couple of questions. The first one is regarding the Eneva's transaction. Well, correct, if I am wrong, but I believe that there will be some capital gains from this transaction. And if it is correct, can you share with us if that will be recognized in the second half of this year? And if you can share with us more details, especially about the amount that we should expect? And if that will be booked in the sales and trading revenue line? And my second question is on the corporate lending. Just a follow-up here. Just I can see that the SMEs is growing in line with the total loan book, which means that it represents 12% of our total book is the same participation compared to the last quarter. I am trying to understand here what is the target for SMEs? Should we expect that this is the level that you believe it is appropriate, so something around 10% to 12% or SMEs should gain more relevance in the coming quarters.

Thank you, Gustavo. So on Eneva. We -- of course, the impacts on the results will depend on how long it takes for the transaction to close. And -- sure you have both the recurrent income that comes more or less every quarter, plus the results that will be linked to the transaction, which the time is uncertainty, but assuming that everything closes by year-end, yes, it will probably impact both quarters. We don't disclose exactly the amount. We're not even to be sincere. We also have to understand all the accounting treatment that this will do. But what we are seeing right now is that, yes, there will be some results in the next -- assuming it closes by year-end in the 2 quarters, but even though that we still booked Eneva in our balance sheet significantly below market value, and this will be impacting the sales and trading line as you asked. On corporate lending, we do not have a specific target for SME, neither market share, neither as a percentage of our total portfolio. Because we operate the SME portfolio the same way we operate our corporate lending business, which is on an allocation of capital or risk return analysis. So if we think there are good opportunities to grow, we expect to continue growing. If we think that the market is too competitive, the spreads too tight or the underwriting standards too loose, we might even shrink the portfolio. So we do not have a specific target, but we're always looking at this, especially on the portfolio side from a good, let's say, underwriting and risk allocation. But what we do expect to see growing more and more in the corporate lending and business banking side is the business banking revenues. And this is -- we're seeing this growth quarter after quarter and this is what's making us very confident from the business. So we expect an increased importance from business banking but not -- it's very hard to give you a guidance on the percentage of the portfolio, which will be SME because this will be much more dependent on market conditions.

Very clear. If I may, just a follow-up on the first question. You were very clear, but these potential impacts of Eneva they are included in your ROE budget for the year or that will be like a nonrecurring item.

Even without if we did not have Eneva transaction, let's say, events we would still expect an ROE expansion. So of course, they will impact. But even if they didn't, we would still expect the ROE expansion to happen.

The next question comes from Tiago Binsfeld with Goldman Sachs.

Just one from our side. Looking at the liability side of the business, you have close to BRL 150 billion in deposits, you mentioned a 28% exposure to retail funding base. So where do you see most white space to improve? Is it gaining share of wallet in retail clients? We're trying to understand here if there are any levers you could pull to either increase the funding base or to reduce your average funding cost?

Tiago, actually, it's across the board. But specifically, in the next few quarters, we do expect retail probably as a percentage to grow. As you guys have probably seen, we have a very successful capital markets transaction targeted towards retail, which was the CDCA issuance. We continue to see very strong net new money, both in the high-income retail and wealth management platforms. We continue to see very successful expansion of both the personal banking and the business banking activities. At the same time, we continue to see BTG getting bigger credit limits in institutionals and in corporates and accessing new larger limits in pockets where we did not have big exposures such as multinationals in the past. So I would say that we continue to expect funding growth, funding base growth across the board as well as we continue to expect a percentage of retail to grow in the next few quarters.

Is there any target you can think of if you're today at 20%?

No, we don't really have a target, but we do think that over the next few quarters, it should be above 30% for retail.

The next question comes from Pedro Leduc with Itaú BBA.

On Wealth Management, we had strong net new money, stable take rates and ROAEs, which is great and almost counter intuitive given the rough markets. So if you can elaborate, give us a little more color on how you're able to sustain this stable take rates. That's the first main question. And then second, on the credit side, corporate credit, we here have been writing that your coverage had been lagging a little bit. And now you are getting money back from Lojas Americanas in 3Q or 4Q, if you can help us understand that? And I believe it brings your coverage back to where it was before. Just want to get some color on that, that will be great.

So on wealth management, yes, we are quite confident with both the continuous growth in net new money and also, I would say, stable to -- as over time, even expanding the return on assets. You have to remember that we are penetrating as we have been having very strong net new money, sometimes it takes a while for you to generate revenues under new money because many times they already come invested or they're not very active. So as you mature these assets, they start generating revenues. And at the same time, we continue to expand our product offering and I think the most obvious case is personal banking. The more we're able to penetrate our client base and have them bank with us that is additional source of revenue that we did not have. So we're very optimistic. We think the product is very good. The NPS is very good, the client feedback is very good. So we're confident that if we trend along and we continue to deliver good service, good products, good technology platform, we'll continue to see both growth and stability to even maybe a slight increase in the return on assets. On the corporate lending portfolio, given that our portfolio is mostly a corporate portfolio, we're always doing an analysis on name by name. It's not statistical. So as we always mentioned, we're very comfortable with the provision levels and we always look this on a very, let's say, deep case-by-case basis. I have to confess to you that I don't even know the big numbers, which I think is what you're probably you're referring to because we're always looking at this from a case by case. So as I said, we were very comfortable, and we continue to be very comfortable with our provisioning level.

I agree. And it seems like you're getting some money back, right, from the Lojas Americanas recovery in 2Q. Just wondering if how we should think about it flowing through your results or balance sheet?

Pedro. As we mentioned, I think we were with the right size of provision on our remaining exposure. Most of -- the largest part of our remaining exposure we already received in cash. We received some part in debentures and a smaller part in equities. Obviously, there are still some moving parts there, but we expect to have marginal gains there related to this exposure. So -- we shouldn't expect any major change there.

Yes, because whatever remaining exposure, we'll continue with significant provisions, yes.

The next question comes from Antonio [indiscernible] with Bank of America.

Congrats on the results and also thank you for your time. I have 2 questions. So first, on SMEs, a follow-up here. Could you please explore a little bit the competition in the segment. How do you perceive evolution of spreads and also appetite from peers here? You mentioned that -- you mentioned cross-selling with banking clients. Are you also growing on non-BTG clients? Would you pursue this? And after this, I can make my second questions.

On the competition side, I'm going to speak more broadly than just specifically on the credit side on SMEs. We think that we had a huge competition on the consumer banking side, with many new entrants and it was very disruptive. And I think we are in the early stages there in SME. And I think here, we have the benefit of being the disruptor. We are the new comer. We have a -- we are building a very robust product offering both on the banking and the credit side, a very good client experience. And we've been seeing significant growth in clients and client activity quarter-over-quarter, which will now makes us very competent that this will continue for quite a few years. And I think here, the competition is much more from the incumbent banks, renewing their offering and improving their offering and from newcomers, which was the case in the consumer banking side. So we see some segments where we think spreads are very tight. For example, the discount of credit card receivables. And we see other segments which have larger spreads, which we're being very cautious, for example, the green credit side because we have to make sure that we have the correct information in credit lending to expand this. So we're no hurry here to expand it, but we're very confident with the increased client activity that we're getting in the segment.

Okay. So my second question here goes on Consumer Banking. Is there any metric that you could share with us to help us to measure the evolution here. I know that you already mentioned that no update on the discussion with Pan, but would you say that Pan could help you to speed up your growth on consumer banking, that's it.

Well, we separate very clearly, right? BTG Pactual serves the high income and wealth management segments, and we report that in wealth management and Personal Banking and Pan is our vehicle for consumer banking. Pan has been growing, and we expect it to continue to grow, has also been revamping its banking offering, which gives us quite confident for the future. So yes, we're definitely very optimistic in both the high income and Wealth Management segments with the BTG Pactual brand. But also in the Consumer Banking segment with Banco Pan.

Thank you all very much. That brings us to the end of the question-and-answer session. I will now turn the floor to Mr. Roberto Sallouti for his closing remarks. Please go ahead.

So thank you, everybody, for joining us on this Q2 call. We hope you guys have a great rest of the week, and we look forward to meeting with you again at the end of the Q3. Thank you very much. Have a great week.

Thank you. This concludes today's presentation. You may now disconnect your lines at this moment, and have a nice day.