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

Good morning, and welcome to the Third Quarter of 2024 Results Conference Call of Banco BTG Pactual. With us today here, we have Roberto Sallouti, Renato Cohn, and Julia Rocha. We would like to inform you 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 nearly 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 disclosure 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. Good morning to all of you, and thank you for joining our quarterly earnings call. I'd like to start with the highlights of the third quarter on Page 3 of the presentation. We had another record quarter with record revenues, improving operational leverage, a 23.5% return on equity for the quarter. Our Wealth Management unit posted record results and recorded net new money. We exceeded BRL 1 billion in revenues for the first time. And we had BRL 47 billion of net new money. Important to say that this net new money was all organic. We did not have any acquisitions this quarter. Our Asset Management unit also posted record revenues and a very strong net new money of BRL 30.6 billion. And we continue to be able to expand our return on assets in that business line as we are able to continue growing faster in the asset management business and the asset administration business. We continue to expand our portfolio -- our credit portfolio, supporting it with very solid capital ratios and a strong unsecured funding base. Here, I think we're benefiting from our entry into new products and segments, our low market share in Various of these product segments and geographies. So we're able to have strong growth while keeping a very good quality of the portfolio even -- and we're also benefiting here from our lower cost of funding, even though we're seeing market rates, especially in the public markets compress significantly, we've been able to more than offset with a decrease in our cost of funding. Going to the fifth point, our Sales and Trading business unit delivered very strong results, and this reflects the expansion of our client franchises and at an all-time low of VaR. So whatever VaR we allocated, it was very efficient allocation. But I think it's -- this is most -- it's most impactful because of the expansion of the client franchises. And finally, to support our growth, we had 2 significant issuances this quarter. We had BRL 2 billion issuance of an AT1 perpetual at CDI Plus 1.3%, which increased our Tier 1 capital by around 50 bps. And we issued a 5-year unsecured notes of $500 million at 5.78% at a very close to the all-time lows of financial companies to sovereigns. So I think these 2 reflect the perception of the brand, the perception, the fiduciary perception that investors have of us. And we're quite satisfied because we think this is a great -- something that helps us create a virtuous cycle in growing the different business units. Also important to note that together with the results, we announced despite a buyback of BRL 2 billion. So we expect to execute that depending on market conditions and volatility over the next few weeks and months. Turning on to Page 4. We talked a bit about the numbers of the highlights. So we had revenues of BRL 6.4 billion, 14% growth year-over-year. Adjusted net income of BRL 3.2 billion, a 17% growth year-over-year, reflecting the gain in operational leverage that we spoke previously. Once again, a return on equity of 23.5%. If you go to Page 5, we have the net new money of BRL 78 billion in the quarter, BRL 47.3 billion in Wealth Management, BRL 30.6 billion in Asset Management. Our assets in the Wealth Management unit growing 29% year-over-year, reaching BRL 857 billion and our assets in the Asset Management unit growing 20% year-over-year, reaching BRL 970 million. If you turn to Page 6, we see the growth in the unsecured funding, 33% year-over-year. Renato Cohn will have more details on this in the next section, reaching BRL 256 billion. Our credit portfolio, corporate, and SME portfolio grew 31% year-over-year, reaching BRL 210 billion, of which BRL 26 billion in the SME segment. As I stated previously here, we're benefiting from entry into new products, new segments, geographical diversification. So we're very satisfied with this growth. And finally, we finished the quarter with a Basel ratio of 16.4%, extremely well capitalized, and net equity of BRL 56 billion. If you go to the next page on Page 7, we show the traditional way that we've been showing results for the last, I don't know, probably 12 years. We had revenues of BRL 6.44 billion, net income of BRL 3.2 billion, and a net income per unit of BRL 0.84. Our cost-income ratio continues to decrease quarter-by-quarter, reaching 36.4% in this quarter. And we finalized the quarter with assets of BRL 611 billion, capital ratio of 16.4% and equity of BRL 56.3 billion, and an average VaR at an all-time low of 16 bps. If you turn to the next page, we talk about the results for the first 9 months of the year. We had revenues of BRL 18.3 billion, net income of BRL 9 billion, net income per unit of BRL 2.37, cost to income of 37.1% and a shareholder equity increase year-over-year of 17.8% in the period. So basically, the earnings of these 12 months minus the dividends. And we had for this period an average bar of 23 bps. If you turn to the next page, we show the breakdown by business units. Here, it's quite interesting. The first thing to call our attention is that corporate lending and business banking is the business unit with the highest last 12 months revenues, showing strong growth of 55%. Of course, this is impacted by the one-off we had of Americanas in the past. As of next quarter, this will trail off. I think everybody will have a better view of what's happening to the business. But investment banking growing 25%, a very strong growth in Asset and Wealth Management, 26% and 27% in revenues and Sales & Trading more or less stable, around 4%. And what we always have been signaling to our investors is that we expect that over time, we will have a very balanced business between Investment Management, Corporate and Investment Banking and Sales & Trading. And this is exactly what we're showing. And we think the recent trends of faster growth in Investment Management and in Corporate and Investment Banking will probably continue in the near future. With that, I'll pass to Renato Cohn, who will talk about the details of the different business units. Renato.

Thank you, Roberto, and good morning to everyone. So going now to our specific business lines. We start with our Investment Bank on Page 11, where we had solid revenue generation coming mostly from DCM and M&A activities. Revenues came at BRL 380 million, which is a 32% decrease when we compare to the previous quarter, bearing in mind that last quarter was our second-best quarter in DCM. As credit spreads continue to tighten, we saw a reduction in a number of transactions, although, during the fourth quarter, we are seeing some improvements in DCM activity. We also had solid contributions from M&A activities, and we remain optimistic that M&A transactions will continue to contribute to overall investment banking revenues as we continue to execute and develop our pipeline of transactions. And during the 9 months of 2024, our investment banking revenues increased 38% when we compared to the same period of last year, backed mostly by strong DCM and M&A activities. Looking now to our corporate lending and business banking on Page 12. We had another quarter of market share gains and record results. Revenues reached BRL 1, 712 million, which is a 12% increase during the quarter and a 30% increase when we compare to the third quarter of '23. Total credit portfolio grew 8% during the quarter and 31% when we compare to the third quarter of '23, reaching a total amount of BRL 210 billion, while our SME portfolios grew at a faster pace, increasing 9.5% during the quarter and 45% when we compare to the third quarter of '23 and reaching a total amount of BRL 25.6 billion. Our growth comes from a combination of market share gains in all segments and the expansion into different geographies and different sectors, while we maintain the same stable credit spreads and same quality in the portfolio. Moving now to our Sales and Trading business on Page 13. We can see that we had a strong performance driven mostly by client activity, as Roberto mentioned, and we also see that our VaR reached its lowest historical level. Revenues came at BRL 1. 672 billion. That's a 20% increase when we compare to the previous quarter as we continue to expand our client franchises. And as I said, the VaR reaching its all-time low, marking 16 basis points as we remain cautious in face of the challenging macroeconomic scenario and many uncertainties in both the domestic and international markets. And the market risk component of our risk-weighted assets remained stable at 23% of the total risk-weighted assets during the quarter. Looking now at our asset management on Page 14, we see that we had a strong growth of AUM and -- of assets under management and administration and record revenue generation. Revenues came at BRL 606 million, which is an 11% increase when we compare to the previous quarter and a 30% increase when we compare to the third quarter of '23. Revenues continue to grow in line with AUM and AUA expansion, which reached BRL 970 billion. That's a BRL 50 billion increase when we compare to the previous quarter or a 5.4% increase. And it also -- when we look at -- when we compare to the third quarter of '23, we see that AUM and AUA grew by BRL 162 billion, which is a 20% increase during the year. Net new money came at BRL 30.6 billion with most of the flows going to fixed-income strategies and also to our fund services business. And during the last 12 months, we managed to bring BRL 93 billion of net new money. Going now to our Wealth Management on Page 15. We see that we had outstanding results with record revenues and also record organic net new money. Revenues increased 8.5% during the quarter and reached BRL 1.007 billion. So for the first time, we passed the mark of BRL 1 billion per quarter. And when we compare to the third quarter of '23, we see that revenues increased by 27%. We also, as I mentioned, had record organic inflows. So without any acquisition, we managed to bring BRL 47.3 billion of net new money with our private bank printing its best quarterly contribution, while the high-income retail segment continued to bring strong inflows as we continue to gain market share in both segments. In the last 12 months, we added BRL 145 billion of net new money with wealth under management reaching BRL 857 billion. That's a 7% increase when we compare to the previous quarter and a 29% increase when we compare to the third quarter of '23. And we were voted Best Private Bank in LatAm and Best Private Bank for succession planning also in LatAm by the banker. Looking now at our participations business line, we had the contribution of BRL 68 million in profits from Too Seguros. We also recorded BRL 13 million contributions from EFG as the results became more consistent. Then we had the usual 3 components of Banco Pan contribution with BRL 161 million of equity pickup from our participation in Banco Pan. Then we had an additional BRL 85 million contribution of accruals from the portfolios we acquired in previous quarters. And we had the BRL 109 million elimination from the portfolios that we acquired during the third quarter of '24. So overall, we had total contributions of BRL 217 million in profits from our participation business lines. Moving now to Page 18. We see our expenses and main ratios. And there, you can see that we continue to improve our efficiency metrics as our revenue growth continues to outpace our costs. Total operating expenses increased by 5.5% during the quarter, and most of the growth came as a consequence of higher bonus provisions as obviously the higher revenues result, while salaries and benefits and administrative costs grew by 2% and 5%, respectively. Cost/income ratio, as Roberto mentioned, decreased to 36.4% as we continued to benefit from operational leverage and our effective tax rate was 20.2% during this quarter. Moving to Page 20. We see that our total assets reached BRL 611 billion. That's 9.4x our equity. Our cash and cash equivalents increased by 17% during this quarter, reaching BRL 88 billion, and our LCR increased to 197%. Our coverage ratio remains at a comfortable level, 163% as our unsecured funding continues to grow more than our on-balance credit portfolio. And our corporate lending business portfolio represents 3.7x our equity, which is a similar metric from -- when we compare to the previous quarter. Going to Page 21, we see that our unsecured funding base continues to grow. It grew more than BRL 20 billion in the last quarter, reaching BRL 256 billion. That's an 8% increase when we compare to the previous quarter and 33% when we compare to last year. The share component of our retail funding slightly increased to 29%. And Roberto mentioned also, we managed to conclude 3 important transactions at very favorable terms. So the issuance of BRL 8.5 billion in CDCAs with terms of up to 10 years and a credit spread of approximately 60 basis points. We also issued BRL $2 billion in AT1 perpetual notes at approximately 130 basis point spread. And the third one was concluded on October 22, so will impact numbers on the fourth quarter of '24 was the issuance of $500 million of 5-year senior unsecured notes at less than 40 bps spreads over the Brazilian sovereign equivalent. So we continue to significantly improve our unsecured funding base, reducing our cost of funding. And at the same time, we are extending our -- the average duration of our unsecured funds. Finally, moving to Page 22, we look at our Basel ratios. So we see that our Basel ratio increased to 16.4%, mainly impacted by the issuance of the BRL 2 billion Tier 1 notes, which contributed with approximately 50 basis points. Here, we see that our Tier 1 capital reached 12.9%. And as I mentioned, our VaR reached a historical low level in line with our dynamic risk approach and obviously, the uncertainty in this challenging macroeconomic scenario. So with that, I think we conclude with this very strong results with record results in wealth management, in asset management, and in corporate lending, both in terms of revenues and in terms of growth.

I think we can open up for Q&A.

[Operator Instructions] The first question comes from Thiago Batista from UBS VP.

Congrats for the results. I have 2 questions. The first one, I want to double check and confirm with you guys about the impact of Americanas. I think the impact -- the Americanas had no impact in the bottom line, but only to double check. And the second one, if you have any initial thoughts on the potential impact of the implementation of the Resolution 4966, especially regarding the impact of -- on the capital of BTG. So how much and if the implementation of the 4966 will really impact the capital of BTG Pactual...

Thiago, thank you for the question. So first one related to the Americanas event. There was no impact or no significant impact related to that transaction. We had provided for, as we mentioned along all the time that we had adequate provisions for the effect. The plan was executed by the creditors. So the transaction was settled and there's no significant impact in terms of results. And to the second one, the resolution 9666, as mentioned in Banco Pan results, I think Cadu mentioned that we're still finalizing all the evaluations, but we expect that Banco Pan will have an impact of around approximately BRL 1 billion there. And that obviously will impact BTG as well. And also important to mention that at BTG, there will be no impact, the impact of implementation of Resolution 4966, at BTG stand-alone is 0.

The next question comes from Eric Ito with Bradesco BBI.

Congrats on the results. I have 2 questions here as well. The first one is regarding your sales and trading performance, very strong. If you look at the historical low VaR at 0.16%. So I just want to understand if there's any nonrecurring impact here in the quarter. I don't know, maybe impact from the share trading. And I want to understand as well how much the power plants sold to Eneva contributed to the results. We want to estimate how could be the impact for 2025 as the plants were sold to Eneva. And my second question is a follow-up on maybe on Americanas here. If we look at the balance sheet for provision expenses, there was a reversion in the quarter apparently. You guys used to run at around BRL 800 million to BRL 1 billion provisions per quarter in the first half. And in the third quarter now, I think it was around BRL 50 million provisions in the quarter. So I just want to get a bit color on what were the main trends here. And as you mentioned, there were no impact in the P&L, but just confirming.

Thank you, Eric. So related to the sales and trading question, there's nothing -- no one-offs there. It's -- all the results are recurring results. And related to the second part of this same question, you asked about the Eneva transaction. The Eneva transaction was settled in October. So the impact of this specific transactions will be recorded during the fourth quarter. Obviously, there is -- the normal impact of the thermal power plants that we -- but it's the same that we have been or similar of what we have been recording in the previous quarter. Related to the second question, I'm not sure I followed regarding the reversion of provisions.

Yes. If you look at the balance sheet -- sorry, you want to go ahead, Sallouti?

No, go ahead.

Okay. Yes. So my question is, if we look at the balance sheet for provisions, I think in the notes 10C, we look -- apparently, there was a lower provisions booked in the quarter. I think the first half, it was around BRL 800 million to BRL 1 billion provisions per quarter in the first half, so first quarter and second quarter. And then this quarter, I think you guys provisioned around $50 million. I just want to understand if there's -- apparently, there was a reversional provision, why don't you confirm if it is related to Americanas?

So I think that the main impact here is the reversion of the provisions related to Americanas. So that's the main difference why we will continue to provide during the first quarter. And now during the third quarter, we reversed that -- sorry, during the third quarter, we reversed that provision. That's completely different.

The next question comes from Tito Labarta with Goldman Sachs.

A couple of questions, if I can. I guess, first, following up on the sales and trading. I mean the strong results there. I know the first half was a bit weaker. But how do you think about the sustainability of the Sales and Trading results going forward? Do you think that this is maybe a new level to consider? And I know it's volatile from one quarter to the next, but just to think about that can evolve going forward. And then second question on the investment banking. Conversely, they are weaker results. I know it's coming off, a tough comp. But how do you think about investment banking results going forward, will DCM sort of continue to drive that? Any color on like M&A and maybe ECM kicks in some point next year. But how do you think about investment banking going forward?

Thank you, Tito. So in Sales & Trading, once again, even though it has become a much more stable line given the growth of the client franchises, it is also a line that still has some market risk. And once again, you can have low VaR or higher VaR, but it's important if you -- the positions that you express in the VaR are profitable or not profitable. So there is always a correlation in the VaR, but there's also a correlation if you have the right market view to some extent. So I still think that the best way to see the sales and trading is probably in, let's say, a moving average of probably the last 4 quarters and continue to see. But we're quite comfortable that every quarter, we grow the size of our client franchise business and what is predictable and recurrent. But having said that, we continue to expect it to grow. But of course, we depend on market activity. And as you know, especially in Brazil, we're facing very challenging markets. And even though we've been able to gain market share when you have a market that's not growing, it's also quite challenging. But we're still comfortable that we will continue to see growth, as I showed in my -- the first part of the presentation, were relatively stable in the last 12 months compared to the previous 12 months. But we expect that as we continue to grow the franchise business that at some point, we will take the necessary macro measures, which hopefully will improve markets a bit. And as we express market positions with effective our allocation, we can see this back to growth. On Investment Banking, you are right. What we are seeing drive that line of business recently is DCM and M&A, and we're very confident with the pipeline we see both for the fourth quarter and for 2025.

Okay. Maybe just a quick follow-up. On the sales and trading, is it right to think as Asset and Wealth Management business continued to grow, very strong performance there that helps support the Sales and Trading business as well, right? So there's some positive benefits from that, and that's driving sort of that continued growth over time. And just follow up just a little bit on the investment banking because it did seem this quarter was a bit weaker than kind of we were expecting. I mean, do you think the trends -- is this a new level to think about? Or anything specific this quarter that maybe can reverse next quarter to get back to sort of the levels we haven't seen earlier in the year?

It's just the regular seasonality of deals. So yes, it was a bit weaker, but we don't think this is the new level. Once again, we think using probably an average of the last 4 quarters is probably a good metric. And hopefully, market improves a bit. On Sales & Trading, it's important to mention that it's not only the growth of the Asset and Wealth Management business. It is also the growth of the product offering. I'm going to give an example of the Sales & Trading acquisitions. With the Sales & Trading acquisitions, we are now tailoring to new set of corporates that were not important clients of ours. We're doing more FX transactions. We're doing more hedging transactions. So actually, Sales & Trading, it's not only important to our growth, but probably the market growth of asset management is very relevant for that. So it's a combination -- for example, and you're right, when we grow wealth management and we have more, let's say, market making of private bonds, it also affects. So it's a combination of everything, but not only asset and wealth management.

The next question comes from Daniel Vaz with Safra.

Congrats on the results. Two questions on my side. The first is regarding your strong net new money in the wealth management business, right? So you had the CDCA issuance and distribution of clients maybe there is a help from that. But could you comment beyond that on whether the BRL 20 billion in derivatives that we see in your wealth under management, was this a primary driver of this net new money increase? This is the first one. And beyond Banco Pan, you said that the 4966 resolution, there's no impact to BTG. But can you comment a bit further on that? Is it because you have already been using a similar provisioning method? Or is it because you do not expect the new regulation to impact corporate loans or letter -- credit letters and securities?

Regarding the net new money, I think you mentioned CDCA, but it's a small part, right? We brought BRL 47 billion of net new money. And if you look at what we've been doing in the last -- I think it's now 11 quarters that we bring around BRL 30 billion net new money, consistently bringing around BRL 30 billion net new money. Quarter-over-quarter, sometimes it's a little bit higher than that, BRL 32 billion, BRL 34 billion. Sometimes a little bit lower than that. So around BRL 30 billion. I think we've been very, very consistent and the first quarter this year, there was a bigger number, BRL 43 billion around, but that was with the acquisition of Orama. So I don't think we can relate that specific to one or another. I think we've been quite consistent in bringing the net new money for a long period of time. And that's the effort of our two -- our main segments and our team working on obviously bringing net new money on a daily basis on every day, right? Related to Resolution 4966, we already use the type of methodology, right, that IFRS and Resolution 4966 establishes in terms of providing for the transactions with the expectations of what we need to provide during the term of that. And obviously, as our book is mostly focused on large corporates, when we use this, there won't be any impact. The major impacts are related to the loans more related to consumer, right, be it mostly to the unsecured consumer loans, right? So that's the main reason of no impact on the implementation of Resolution 4966.

And if I may follow up on the reversion of provision related to Americanas. Can you explain how did it flow through your managerial P&L? I'm asking because we would expect the corporate lending to have an extraordinary revenue, but it actually did not. So you had like the effect neutral on your P&L, but where did it flow? It was like on corporate lending, you had another negative result to compensate that? Or is another revenue segmentation?

Yes. There's no impact in the P&L, right? We did the reversal for the provisions that we had, considering that we had the provisions of an amount similar of what we received net. So 0 impact on P&L.

The next question comes from Gustavo Schroden with Citi.

I have only one. As the energy business has gained more relevance for the bank, I'd like to discuss with you how this business impacts the bank's capital allocation, basel ratio, minority interest and if the bank's management is considering moving the energy business to the holding or partnership level and maintaining the Banco BTG Pactual still focusing on its core business, which is might be Asset Wealth Management, corporate lending. Look, I'm not saying that energy business is not good. I'm just trying to understand if it makes sense to maintain this at the bank level instead of at the holding or partnership level considering the size and nature of the energy business.

Thank you, Gustavo. So first of all, you have the sales and trading part of the energy business, which we think is very linked to the bank and very important. And even after we started the business, we saw that many of our competitors also started their sales and trading energy units. So we're very satisfied there, and we think it will continue to grow. The market will continue to develop. You now have the growth of the Mercado Livre. So we're very happy with that business. I think your question refers more on the Eneva legacy position and a similar thesis, which were the thermal power plants. So what we did in this transaction is that you -- we had a capital increase at Eneva that was not followed by the bank. You had the thermal plants, which were, let's say, illiquid assets, which now have gain liquidity because they're a liquid stock. And with that, we have -- as we always said, we have a very clear asset from the time that we had the principal investments line in Eneva. What we always tell investors is that it makes no sense for us to be buying Eneva at the holding company and selling it at the bank. It would be a very tough situation to explain and there could be understood as a conflict of interest. So we think it's a good asset. It's, let's say, liquid asset, a listed company. And over time, we expect the bank to slowly diminish that position. It is not increasing the position. So we had the legacy Eneva asset. We had the thermal power plants, which now have gained liquidity because they're a liquid stock. And over time, we expect to execute that in the market. We think it would be -- we have to be very careful to do any transactions between the holding and the bank because that could always generate questions that we want to make sure that we don't lead to any, let's say, anything that could make our investors uncomfortable.

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

Congrats on the results. So I wanted to go back to the corporate lending side. So your net yields actually increased during the quarter, right? So I'm trying to understand if this is a sustainable level and what we are seeing, what your expectation here in the future, especially considering the rate cycle in Brazil, so potentially some compression there in spreads. And then I have a second question just on the wealth management business. ROAs there expanded for the first time after a few quarters. At the same time that you're adding a lot of new assets. So if you could offer some clarity there, if this is a trend, maybe there was a product mix and also some expectations here going forward?

Thank you, Renato. So on credit, yes, we think that around this level of spread is sustainable in the foreseeable future. And this is a consequence of our -- the strong reduction we had in our cost of funding and our penetration into new segments and products, which have higher spreads. So traditionally, let's say, 5, 6, 7 years ago, we were only in the high-grade large corporate. Now we have high-grade large corporate, we have corporate, we have middle, we have SME. We're buying consumer credit portfolios. So the combination of all this together with the reduction in funding cost allows us to have these credit spreads, which we believe are sustainable. On the asset management return on assets, it's exactly what you said. It is a product mix. This year, we're seeing stronger growth in the asset management business, fixed income funds, credit funds, semiliquid funds, and lower growth in the asset administration business, which have lower ROAs. So it's exactly the difference in the product mix, which explains this increase in the return on assets.

The next question comes from Antonio Ruette with Bank of America.

Two questions on my side. So first on net new money, if you could provide a little bit of color on net new money during this quarter? So what you perceived in terms of gross inflows and also outflows would be great. And also my second question is related to [ Pan. ] How do you see the perspectives for the acquisitions of portfolio going forward? If you should acquire more or less portfolio over the next quarters? That's pretty much it.

Thank you, Antonio. So on the net new money, I think the most relevant gross out -- inflows, outflows would be in asset management. I would say here, especially in the asset administration business, we see a lot of outflows from some managers and inflows from others as we gain new mandates. So there, it is very significant, and this is much less significant in the wealth management business. I would say there's nothing there that's worth commenting. On your question about the portfolio acquisitions, we expect probably that in 2025, they should diminish. They have been diminishing. 2024 was lower than '23, and we expect '25 to be lower than '24.

Okay. If I may follow up on this one. How would you see the strategy of closing the capital of Banco Pan? How would as a closed company here add to your franchise? And how do you see this current -- the possibility at the current level of prices?

There's nothing going on. There's nothing happening in that case right now. Of course, it's always an option. We see that there would probably be some operational leverage gains in doing that. But it's something that has to happen at the right time and at the right prices. We will have gains. We'll probably have some gain gains in costs, especially the ones related to keeping 2 listed companies. And you will probably have some simplification. But again, this is something that's not being considered. Right now, it can happen, but I think it depends on the market prices and the desire, especially of the minority shareholders of changing their interest in Banco Par to BTG.

The next question comes from Jorge Kuri with Morgan Stanley.

congrats on the numbers. I wanted to ask you about your preliminary view for 2025. Last time we heard from you was second quarter conference call, I think the rate scenario was very different back then versus what the consensus expects for next year. And maybe you can share what you expect for next year in terms of the main macro Variables. And then what does that mean for your business? This year, the first 9 months of the year, rates are roughly -- average Selic rates are down like 200 or 300 basis points versus last year. You were able to grow revenues 15%. Your net income is up 30% -- sorry, 20% for the first 9 months of the year. So it's been a pretty good year for you guys. And as we move forward over the next 12 months, I'm guessing if consensus is right, we're going to see rates go up, maybe not to the average of 2023, but not far from that. So how are you thinking about your business next year in terms of different building blocks? And what does that mean for revenues, net income growth relative to the very strong numbers that you've been able to achieve year-to-date?

Thank you, Jorge. So I think the scenario you described is basically priced into the market right now. If you look at the forward curve, they are anticipating the increase in interest rates and those expectations are already affecting markets and market volumes. So to be very sincere with you, we think we're going to have a pretty similar scenario that we had starting in Q2, where the -- let's say, where the market started trending towards the current expectation that we're seeing right now. So in Q2, this happened. In Q3, we are more or less floating around these expectations, FX in a range and interest rates increasing. As you remember, we also like the combination of our businesses because if interest rates increase, we benefit in interest on capital, even though we probably have a tougher time in some of our franchises. But as I as I think I mentioned previously, we think that even in the scenario that you described in 2025, we think that we can continue to see some ROE expansion in the next year. And on the other hand, if for some reason or if we're able to do the fiscal adjustment that we need to do in Brazil and markets reprice a better scenario, I think that would greatly benefit our business. But in the current scenario you described, we think we're able to continue to benefit from the operational leverage from the increasing market share and all the new initiatives that we have, in some extent from the higher interest rates on interest on capital and with that, continue to have a slight expansion of our return on equity.

The next question comes from Rafael Nobre with XP.

Congrats on the results. Just a quick one here on my side. Lately, we are seeing an increase in SMEs bankruptcies. And I'm just wondering if this changes anything on your expectations for SME lending growth moving forward? And if you could touch bolt-on credit portfolio growth and credit quality moving forward, this would be really helpful.

Thanks, Rafael. As you know, the current SME exposure we have are in the very low-risk lines. So basically, supply chain finance, credit card receivables, and a little bit more on the say, agriculture, but a small part, which is guaranteed by land. We don't have significant clean SME exposure yet because we still feel we don't have enough confidence in the modeling or in the transaction history of clients with us yet to increase that. We think that will come over time. But on the other hand, so we're not benefiting from that, let's say, segment and that product at this moment. But at the same time, we're not facing the challenges that you described with the increase in delinquencies that's happened recently. So here, we continue to benefit from the high-quality portfolio we have in SME. And I think this actually reflects in the portfolio as a whole. We continue to operate in an alpha-based approach. We're always analyzing what's happening to the different sectors, different companies. And with that, we have -- we were able to navigate the different cycles and the different situations quite comfortably. So we're quite convinced that we have a high-quality portfolio, but we are also making sure that we're doing the modeling already taking into consideration the challenging macro environment that the market is currently pricing it.

The next question comes from Pedro Leduc.

Congrats on the quarter. First one on the growth of corporate and SME lending. The book grew by about BRL 15 billion Q-on-Q you could help us understand a little bit the components behind the delta, how much was credit card? How much was the payroll and corporate? And in that regard, if you -- we're hearing from several market participants that spreads in corporate are very tight, almost nonaccretive to be growing in and you guys seem to be finding still very good opportunities. Maybe you can explain a little bit how you're playing with that? Is it mix? Is it duration? Is it new clients? That will be really the first question, try to understand what drove the growth and how you're seeing the opportunities in terms of yield? And then the second question is a follow-up on RWA. Cohn, you mentioned that market RWA grew in tandem with the overall RWA, but it did grow by about BRL 10 billion, and there's like a new line called DRC, which wasn't there before, maybe has to do with their trading. Just trying to reconcile that, but that's a second question.

Thank you, Leduc. So on corporate lending, I agree with your comment that especially the high-grade market, which competes with the public market is very tight. So the growth that we've been seeing in high-grade corporate has been quite limit. But as I mentioned previously, we're benefiting from our penetration into new segments, corporate, middle SME acquisition, benefiting from our presence in other Latin American companies and benefiting from the lower cost of funding that we've been able to achieve. So I completely agree with your view of the market with that given what's happening in the credit funds, we think that public markets and high-grade credit is quite tight, and we're not seeing any strong growth there for us but we're benefiting from the different geographies, segments and products that we entered over the last few years. And the RWA, I'll leave to Cohn to answer.

Leduc, so the RWA is a change in the regulation where this part of RWA is to be embedded in the credit RWA, and now it pass to the market risk RWA. So that's just the change already existed, but it was in the credit RWA and now it's in the market risk RWA. And just to clarify because you mentioned sales & trading, the settlement of the transaction was on October 1. So there is no impact on sales & trading during the third quarter.

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, sir.

Once again, thank you very much for participating in our quarterly call. We look forward to being with you again at the beginning of next year as we talk about the full-year results. Hoping all of you have a great week, and thank you once again for your partnership and trust. Thank you.

Thank you. This does conclude today's presentation. You may now disconnect your line at this time, and have a nice day.