Banco BTG Pactual S.A. (BPAC11) Q4 FY2025 Earnings Call Transcript & Summary

Good morning and welcome to the Fourth Quarter of 2025 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 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 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, everyone. It's a pleasure having you here in our Q4 and full year '25 earnings call. Before I turn to the page of the highlights, which is Page 3 of the presentation, I'd just like to say that we are very satisfied to see the investments that we have made in the last decade, basically to allow us to enter new markets and new products to really start producing results. In the last decade, we have basically become a complete digital bank present in the various segments of both individuals and of companies. So now with the integration of Pan, we will be present in retail, and consumer finance, with BTG Pactual, we are in high income and wealth management, across banking, investments and credit. On serving corporates, we started in the large corporate segment, basically offering credit. We then started the SME. And by the end of this year, we will have SME, middle corporate and large corporate across banking and credit, and with the complete product set. So with that, we think that the opportunities to continue growing that we've seen in the recent years will continue in the years ahead as these investments mature and go along the J-curve, and we gain market share in the different initiatives, while at the same time, we gain operating leverage because basically for basically all of these initiatives, the cost base is here. As you know, we basically, expense most of our development expenses. So over time, we're quite confident that we will continue to see these investments continue to produce results and this is a multiyear trend. So going back to 2025, we finished the year with a return on equity of 26.9%, 380 bps above to 2024, making this the best year of our history and which I think is quite remarkable. We had record revenues across all of our different business lines. Our revenues grew 32%. Our bottom line grew more than that. We showed strong operating leverage and we finished the year with BRL 17 billion in net income. We had a record year in Investment Banking with BRL 2.5 billion with very good performance by DCM and M&A and where we kept our leadership across all segments. In Corporate Lending & Business Banking, which became our biggest revenue contributor. We expanded our portfolio to BRL 262 billion, 29.5% increase year-over-year, while at the same time, keeping quality and diversification. So diversified geographies, segments, disciplined capital allocation, disciplined credit underwriting so leaving us with a very, very strong balance sheet at the end of the year. In Sales & Trading, we also reached all-time high as we continue exploring new market segments, diversifying our client base and product offering, and we were able to efficiently deploy VaR a new product set and across markets. So we went back closer to the historical and target level of VaR still a bit below, but we had an efficient deployment of capital last year. Asset & Wealth Management continued their strong growth with revenues increasing 24% on Asset Management and 33% in Wealth Management. We had net new money of BRL 354 billion in the year, reflecting our continued gaining market share. I think this was especially present in Q4, where we had a very strong net new money, which was completely organic, no acquisitions in Q4. And finally, we continue to reduce our funding cost. We've spoken about this in the last few earnings calls. And this was evident in the issuance of a 5-year bond and 5.5% yield, which was marked the lowest spread versus sovereign BTG Pactual's history. And with that, we're quite confident to state in the previous call, we were very confident to say that our ROE was -- we expected above 24%. But given the underlying trends, where we see the business all the strategic steps that we see ahead of us, we are quite confident to say that we can deliver a sustainable return on equity above 25% in the next few years. With that, if we can change to Page 4, we talk a bit of financial highlights. So we finished the year with BRL 33 billion in revenues, 32% year-over-year growth, net income of BRL 16.7 billion, 35% year-over-year growth. Here you see the operational leverage coming in and 26.9% return on equity. We finished with total revenues of BRL 9.1 billion -- sorry, now going to Q4 on Page 5. We had revenues of BRL 9.1 billion, 35% year-over-year growth and net income of BRL 4.6 billion, 40% year-over-year growth and a return on equity in Q4 of 27.6%. Turning to Page 6, still on the Q4 results. We had net new money of BRL 108 billion, all organic. Our wealth under management assets grew 37% year-over-year, reaching BRL 1.23 trillion. And our Asset Management business grew 26% year-over-year reaching BRL 1.25 trillion, so roughly BRL 2.5 trillion in Assets Under Management between these two business lines. Turning to Page 7. We talk about our funding and capital. So we finished Q4 with an unsecured funding base of BRL 337 billion, 27% year-over-year growth, a Basel capital ratio of 15.5% and BRL 70 billion of net equity at the close of the year, and we grew our credit portfolio to BRL 262 billion, growing 18% year-over-year. If you go to Page 8, we talk -- we show the results of Q4 like we do every quarter. So once again, 27.6% return on equity, BRL 9.1 billion revenues BRL 4.6 billion net income, net income per unit for the quarter of BRL 1.19, cost-to-income ratio continued to decrease to 35.5%. We, in the quarter, also distributed the JCP of BRL 2.45 billion. During the quarter, we also concluded the Banco Pan transaction which increased the capital of BTG by BRL 2.2 billion, making us close the quarter with shareholders' equity of BRL 70 billion. On the next page, on Page 9. We talk about the full year results. So BRL 33 billion revenues, BRL 16.7 billion net income, net income per unit of BRL 4.32. Cost to income very similar to Q4, 35.4%. And as I mentioned previously, still a low bar given historical patterns, 27 bps for the average bar in the year, even though it increased quarter-over-quarter and once again, with equity growing 21.8% to BRL 70 billion. On Page 10, we see the breakdown of the revenues between the different business lines, we continue to see as the fastest-growing business lines in Wealth Management and Corporate Lending & Business Banking at a very diversified revenue stream, where we have basically between Investment Banking and Corporate Lending, 34% of our revenues. Sales & Trading or markets, 22%; and Investment Management, which is Wealth Management & Asset Management 24% of our revenues. And also the 18% of revenues in interest and other just reflects the very robust balance sheet with a high tangible equity to total equity, which reflects what we earn given the level of interest rates in Brazil. So with that, I'll pass the floor to Renato Cohn before we go to the Q&A session.

Thank you, Roberto, and good morning, everyone. So if we move to Page 12, we start with our Investment Banking, where we once again showed strong performance during the quarter with revenues reaching BRL 692 million, that's an increase of 7.7% when we compare to the previous quarter, and 36% when we compare it to the fourth quarter of '24. We saw strong revenues coming from DCM activity, which once again was the main contributor for this quarter, but we also had a good contribution coming from ECM as we executed some strategic transactions. For the full year, we achieved record revenues of BRL 2.5 billion, and that's a 20% increase when we compare to the full year of 2024 with record results coming from DCM and also M&A. So we see that we ended the year in quite a different scenario when we compare to the first quarter of '25 after very weak months of January and February with activity picking up throughout the year. And as mentioned, DCM delivered record results with more than 140 transactions completed both in the domestic and also in international markets where activity picked up more recently. M&A also achieved a record year with large transactions being executed while we continue to maintain a healthy pipeline for future quarters. And in 2025, we were ranked #1 in volume of transactions and #2 in number of transactions in Brazil and also #2 in volume of transactions in LATAM for M&A. And we were ranked second in number of transactions in Brazil and also second in volume of transactions in LATAM for ECM. And so once again, very strong numbers for Investment Banking for the quarter and especially for the full year with record revenues and a 20% increase when we compare to last year. If we turn now to Page 13, we see our Corporate Lending & Business Banking results. We see that we had record revenues for the quarter and for the full year, reflecting a strong portfolio expansion and resilient asset quality. Fourth quarter revenues came at BRL 2.239 billion, which is a 4.4% growth when we compare to the previous quarter and a 22% growth when we compare to the fourth quarter of '24. Total portfolio grew 6.2% during the quarter and 18.3% when we compare to last year, reaching a total of BRL 262 billion, by the end of the year. Our SME portfolio grew 11% during the quarter and 24% during the year, reaching a total amount of BRL 32 billion. For the full year of '25 revenues reached a total amount of BRL 8.4 billion. That's a strong growth, close to 30% as we continue to benefit from the reduction of our overall funding costs. Aligned with a strong quality portfolio and healthy origination coming now from different segments and also a more diversified geographies as we continue to expand internationally. And BTG Pactual Empresas our digital bank for SMEs was once again awarded as the World's Best Bank for SMEs by Global Finance, and that's for the fourth consecutive year. If we go now to Page 14, we looked at our Sales & Trading. And we see that we also achieved record revenues again for both the quarter and for the full year, as we continue to diversify and deepen our client base and our products and service offering while efficiently managing our risks across the different markets and products. Revenues for the first time passed the BRL 2 billion mark, growing 3.6% during the quarter and 30% when we compare to the fourth quarter of '24. And for the full year, revenues reached BRL 7.2 billion, that's a 20% increase when you compare to the full year of '24 as we continue to execute our strategy of enlarging our client base and widening our offer for products and services. And our average VaR closed the year at 27 basis points. That's a 6 basis point increase when we compare it to the very low levels of '24 and still somewhat below our historical levels and our market risk-weighted assets as a percentage of total risk-weighted assets remain stable at 25.7%. If we turn now to Page 15, we see our Asset Management business, where we also had record revenues for the quarter and for the full year, driven by robust growth of assets under management and administration and continued market share expansion. Revenues reached BRL 860 million during the quarter, which is a 15% increase when we compare to the previous quarter and a 30% increase when we compare to the fourth quarter of '24, reflecting higher management fees that increased in line with the growth of assets under management and administration and also performance fees achieved during the second half of '25. For the full year, revenues reached BRL 2.967 billion, basically BRL 3 billion, which represents a 24% increase when we compare to total revenues of '24. Net new money came at very strong levels with BRL 62 billion of purely organic inflows during the quarter and a total amount of BRL 140 billion of net new money throughout 2025, showing again our strong capabilities of net new money generation in this challenging macroeconomic scenario, with high interest rates and it shows our ability to continue to gain market share in both our Asset Servicing and our Management businesses. Assets Under Management reached BRL 1.248 trillion, which represents an 8.3% growth during the quarter and a 26% growth when we compare to last year. And here, we are voted Best Bank for real estate funds in Brazil and in LATAM by Euromoney. Moving now to our Wealth Management & Personal Banking on Page 16. We also had record results again for the quarter and for the full year as we continue to achieve market share gains. Revenues reached BRL 1.370 billion during the quarter, which is slightly higher than third quarter levels, but we need to consider that in the fourth quarter, we had a smaller number of business days than in third quarter. And for the full year, revenues reached BRL 5 billion which represents a strong 33% increase when we compare it to the full year of 2024 as we continue to develop our business, attracting new clients launching new products and services and also expanding into new geographies. Net inflows also came at very strong levels at BRL 46 billion of organic net new money during the quarter. And for the full year, our total inflows reached BRL 214 billion, reflecting our continued market share growth and the successful consolidation of the strategic acquisitions that we did in the first half of '25. Wealth Under Management reached BRL 1.234 trillion, which is an 8.6% increase compared to the previous quarter and a 37% growth when we compare to last year. And overall, even with our higher wealth under management base, we see that our Wealth Under Management is growing steadily at a compounded growth rate of 30% for the last 5 years. And for the ninth consecutive year, we were recognized as LATAM's Best Private Bank by Global Finance and also Brazil's and Emerging Markets Best Private Bank. And finally, by the end of last year, we concluded the acquisition of M.Y. Safra So we now have a U.S.-based bank holding a full national license here. Going now to Page 17. We look at our participations. And here, we see that we recorded a profit of BRL 177 million for the quarter, Too Seguros contributed with BRL 58 million, and we see equity pickup in Banco Pan at BRL 44 million as we decided not to distribute JCP, the interest on equity, from Banco Pan to BTG Pactual after the completion of the acquisition of the remaining stake of Banco Pan so at the end, we reversed the JCP or the interest on equity that was provided and has been provided in the first 3 quarters. And we recorded BRL 75 million in accruals of the portfolios that were acquired in previous quarters. Now as we completed the acquisition of the remaining stake of Banco Pan, we decided to create a new business line called Consumer Finance & Banking. And this business line will include all the activities of Banco Pan and Too Seguros. And as you know, we used to record the profits of Banco Pan and Too Seguros through equity pickup and add them to the revenues of our other business lines, which is not ideal because we are adding profits to revenues. So now after the completion of the acquisition and the integration of Banco Pan into BTG Pactual, we will include revenues of Banco Pan, using the same methodology that we use in BTG existing business lines. And we will also include 51% of Too Seguros revenues as we own 51% of the company. And at the same time, we will include the full expenses of Banco Pan into BTG Pactual expenses, also using exactly the same methodology, salary, bonus, administrative expenses, et cetera, and 51% of Too Seguros expenses with the same criteria. So with that, the profit of BTG doesn't change as we already include the profits of Banco Pan and Too Seguros but we'll see a change in total revenues and total expenses. So let's have a look at the numbers, and we see them on Page 19. So we see there is no change in the existing business lines. And then we see that participation business line will cease to exist as all revenues and expenses will migrate to the Consumer Finance & Banking. So here, we see that we got a total of BRL 1.070 billion in profits during the full year of 2025, of which BRL 805 million came from Banco Pan, and BRL 265 million came from Too Seguros, so this will be deducted from our total revenues. And then we will include revenues of BRL 3.075 billion for Banco Pan and BRL 530 million for Too Seguros. So we will have a total of BRL 3.605 billion in revenues to the overall revenue number of BTG. Also within Banco Pan profits, we included BRL 190 million of interest and other that will now migrate to BTG interest and other lines. So with that, our total revenues for year 2025 moved from BRL 33.039 billion to BRL 35.765 billion now adjusted considering revenues from Banco Pan and Too Seguros. This will be important, so we can have the right comparison base for future quarters. And later on, we'll see the same slide related to expenses. Now on Page 20, we see the same slide that Roberto showed us at the beginning of the presentation, but now including the Consumer Finance & Banking business line. So here, we can see that the Consumer Finance & Banking line now represents 10% of overall BTG Pactual revenues, which better represents the real diversification of our sources of revenues. And if we turn to Page 21, we see the evolution of the Consumer Finance & Banking business line. So we see some revenue increases for Banco Pan that were partially offset by an increase in provisions, especially as we grow our portfolio of auto loan. Too Seguros had a weaker quarter after a strong third quarter in revenues. Credit portfolio grew 4.9% during the quarter with auto loans growing 7.1% and payroll loans growing 5.2%, while personal loans and credit card loans decreased as we sold some nonperforming portfolios. And overall, the credit portfolio grew 22% during 2025. As you can see, 95% of Banco Pan portfolio is collateralized. And during the fourth quarter, we had record origination in auto loans, supported by the growth in lower risk segments and our leading position in motorcycle loans. We go now to Page 23, we see our Expenses and Main Ratios. So here, we see that we continue to see strong gains in operating leverage, highlighting our scalability of our business model. Bonus increased 8% during the quarter, in line with revenues. Salaries and benefits were stable. Administrative expenses increased 7% as usually during the last quarter. There are always some pickup in fees and invoices that arrive by the end of the year. Goodwill amortization increased 3% and tax expenses increased 18% as a consequence of higher revenues, also a higher component of services revenues and also the geography of reps. Overall, during the year, we see the expenses increased 26%, which is a slower pace than our revenues increased. So with revenues increasing at a faster pace than cost. We saw the reduction of cost income moving from 37% to 35%. That's a 200 basis points reduction of cost income during the year of 2025. And our effective tax rate remained stable at 20.2%. On Page 24, if we look, we can see the effects of including Banco Pan and 51% of Too Seguros expenses into the overall BTG expenses. So we see the impact on all our expense lines with a total increase in expenses of BRL 2.029 billion coming from Banco Pan and BRL 120 million coming from Too seguros plus an additional BRL 431 million in income tax expenses coming from Banco Pan, and BRL 146 million coming from Too Seguros. So as you can see, net income does not change, right, as we are now just separating profits into revenues and expenses, but there is a BRL 50 million increase in adjusted net income. Once there was a BRL 90 million goodwill inside or the profits of Banco Pan. So once we migrate this goodwill, we need to adjust it for the effect of taxes on goodwill. So we see the BRL 50 million increase in the adjusted net. We go on to Page 26, we see that our balance sheet closed the year with BRL 806 billion in total assets, which represents now 9.7x our equity. We continue with robust liquidity levels with BRL 88 billion in cash and cash equivalents. And on the LCR rate ratio of 176.8%. Our unsecured funding base continues to grow in line with the expansion of our on-balance sheet credit portfolio with a comfortable coverage ratio of 168% for BTG stand-alone. And then when we include the credit portfolio of Banco Pan, we see our coverage ratio at 138%. And our Corporate and SME portfolio represents now 3.9x our equity and when we include now the credit book of Banco Pan, we see that our total credit portfolio represents now 4.7x our equity, which is still way below our peers. If we go to Page 27, we see our unsecured funding base. And here, we see that the overall funding base during the quarter grew by almost BRL 30 billion. So a very strong growth during the quarter and BRL 71 billion throughout the year, which represents a 37% increase. And as we mentioned before, we managed to increase our overall funding and at the same time, expanding its average duration and also reducing its overall cost. And considering Banco Pan total funding, our overall funding reached BRL 357 billion, with 30% of our funding coming from retail sources and close to 7% coming from demand deposits. And in January, we successfully issued a 5-year senior unsecured note with a total amount of BRL 750 million and a yield of 5.5% which was our cheaper spread over the Brazilian sovereign. We managed to issue this note at 30 basis points above the Brazilian sovereign rate. And looking now at Page 28, we see that out Basel ratio remained stable at 15.5% and also our Tier 1 capital also remained stable at 12.4% after we issued BRL 1.6 billion of perpetual notes during the fourth quarter of '25 and our VaR increased during the quarter to 38 basis points, bringing it closer to our recent historical levels coming up from the very low levels of last year and also the beginning of this year. So I think with that, we conclude the presentation and we can open for questions.

[Operator Instructions] The first question comes from Daniel Vaz with Safra.

First of all, congrats on the results, very powerful franchise that you've created so far. So -- and happy about the soft guidance of or hard guidance for the 25-plus percent ROE for the next years. So I want to direct my questions to Banco Pan, right? We know that it's not exactly a new asset for you. And now that the bank is fully integrated, I would like to understand whether you have any specific ROE targets for the near future given it currently operates below BTG. And I'd like to hear a bit also about the bank strategy. We know vehicle financing is very important. And now you have private payroll loans also as well and accelerating. And when we look at the third quarter release, originations were accelerating at the time. So when you look at 2026, is it still a year that supports further acceleration and especially in a rate cut cycle. So that's my question.

Thank you Daniel. So, first of all, we have concluded the acquisition, but we have not concluded the integration. What is very important for us on the integration side is when we are able to operate Banco Pan's business on BTG Pactual's core banking system. And we expect that will happen at the end of this year and that we will see the effects of this in '27. We expect to, over time, bring Banco Pan to return on equity or the Consumer Finance business to return on equity in line with BTG's. As you correctly stated, it has been detrimental to our total return on equity. And we're basically focusing on 3 different aspects to achieve that. The first one is client experience. And once we have made throughout 2025, significant investments in process controls and stabilization of the legacy platform, which has already improved the client experience. But we think that once you are able to leverage of everything we built at BTG, you will see a significant improvement at the end of '27. Second thing that we have been investing a lot is the new credit underwriting models where we have seen improvements. And with that, you'll see the acceleration, both in vehicles and on the private payroll segments. And we do expect these improvements to continue to produce results both on the delinquency side and on the production side. And finally, we also expect to gain operational leverage with this integration. So we are actually very -- how would I say, very bullish with the possibilities here, but it's all about execution, right? So we're very focused, very disciplined, following very closely all these different metrics. And we think that gradually over the next 2 to 3 years, we will be able to see significant improvement in the results of this business line.

And if I may follow up, we have been hearing about AI and mainly in cost optimization, but some peers in the consumer finance group have been implementing it to the credit cycle, the credit engine. So how is that -- how are you envisioning this trend or this type of assets do you want to acquire? Do you see any potential M&A for BTG or even Banco Pan, you want to develop this in-house? How is this strategy rolling out in BTG and Banco Pan?

On the AI side, we're basically using our internal resources. So we don't expect any acquisitions on this side, but we're quite satisfied with the results that we're seeing both in customer service, client experience and credit underwriting in the consumer finance side, which is exactly what is giving us confidence to continue expanding.

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

Congrats on the results, really strong numbers across the board here. So I have a first question here on operating leverage. So if you're looking into the next few years, do you think that increasing operating leverage is still going to be a source of ROE expansion for you? And where do you think that your cost-to-income ratio can stabilize over the longer term? And then if you allow me for a second one here, you're highlighting the decrease in cost of funding. I wonder if you think that this translates into higher net yields, higher spreads on your lending business? And if you could comment a bit on the expansion of SMEs and if that's also -- that mix shift, it's also going to translate into higher yields in the future.

Thank you, Renato. So on the operating leverage side, with the integration of Pan, we now go back to 38% adjusted cost income, 38.5% to be more specifically. So our goal in the next few years is to bring that to the 35%, 36% level as we continue to grow the business and integrate the core banking platforms and leverage out of all the investments we did on the apps and the front office systems in dealing with clients. So yes, we do expect that this gives us a new avenue to gain efficiency. And on the cost of funding, I think we mentioned this in the previous quarters. The truth is our cost of funding reduced, but spreads also compressed across the board, and we saw that in the different segments. So the truth is our cost of funding has allowed us to expand a bit, but mainly to mainly be able to defend the business in this cycle as credit spreads tightened. And yes, you are right, as the corporate, middle and SME segments have higher spreads. So as they grow in the portfolio and as we grow the cash management and business banking, we do expect that to eventually reflect in the credit spreads. But this is -- given the size of that relative to the whole credit portfolio, this will be showing up in the numbers very gradually over the next few quarters and years.

The next question comes from Tito Labarta with Goldman Sachs.

I echo the congratulations on the strong and impressive results and thanks also for the 25% ROE guidance. But just a double click a little bit further on that and particularly on Slide 10, which you showed in the presentation, I mean, pretty impressive growth across pretty much every single business line growing close to 20%, if not higher. Now comps obviously get tougher, but interest rates coming down this year, which tends to be good for most of your business lines. So at least from a qualitative perspective, I mean, how much is just the tougher comps make it harder to continue to grow at this pace in the different business segments? And how much of a tailwind should interest rates be? So just to try to think about how this growth that you've been delivering for the last few years, I'd say, how that can continue, particularly as rate start to come down, just given the strong growth that you've been showing.

Thanks, Tito. Well, clearly, the guidance already reflects that we do think the growth will slow down a bit, right? We had 32% growth and top line, 35% and bottom line. If we would be able to continue at this pace, we would be seeing an ROE significant ROE expansion, which is not what we are seeing here. This is not to say that we are not very, let's say, we are not seeing growth avenues in the business. Of course, we're seeing them in line or above our capital accumulation rate, which gives us confidence that we can continue showing these type of results. As you said, there's always a -- we have to see at what is the pace of interest rate cuts because as you know, we have our capital, which is basically cash. So interest rates have to fall, but we have to be able to compensate with the growth of the businesses. which probably will happen. It just does not happen month-on-month but it happens with a delay to the decrease in interest rates. So with that, I would say that we're quite confident in continued strong growth where we have been gaining market share, asset management, wealth management, corporate lending and business banking. We are also very confident that we can show strong growth in consumer finance because we're coming from a business that is being turned around. Investment Banking, we will depend much more on the scenario given the very strong market share that we already have. And Sales & Trading will also be more dependent on us continue a bit on the level of activity and a bit of us continue to find new avenues of growth. So -- but that's why we're quite confident in giving this guidance and that you will probably see significant growth numbers of business lines in order of change similar to what we have seen in the recent past. With that we would probably say we do expect Consumer Finance to grow strongly over the next few years.

Maybe just one follow-up, if I may. Just ROE very strong. But on the capital ratio, particularly the core Tier 1, it was down a little bit and it didn't really increase for the year. Just to think about the capital consumption, just given the strong ROE that you do have and the growth that you have, how should we think about that core Tier 1 ratio from here?

Hi Tito, we've been showing a number that were quite stable. There was a 20 basis points reduction of core equity Tier 1 this quarter, right? It's a quarter where we pay the interest on equity. But overall, if you look at the longer term, right, with this level of profitability and return on equity and our dividend policy of distributing 25% or interest on equity the number is somewhat close. We are retaining around 20% and adding around 20%, growing our capital by 20%, right? So we are quite comfortable that by adding this capital to our core equity base. We can sustain the same level of growth in our business line, right, especially considering that investment bank doesn't use capital. Wealth management doesn't use capital. Asset management doesn't use capital. So basically, Corporate Lending and Sales & Trading in a lesser way, they are the business lines that consume capital. So by adding 20% of additional capital every year, I think we are in a comfortable position.

The next question comes from Mario Pierry with Bank of America.

Good morning, everybody. Congrats again on the results. I wanted to focus a little bit on the net new money on the asset management business. BRL 61 billion in the quarter. It's quite impressive, right? Like if we look back, the net new money historically grows about BRL 30 billion. So I wanted to understand from your perspective, what led to this growth, i.e., is this like significant market share gains? Or do you think the industry saw inflows because people are expecting rates to come down. If you can give us any color on which products these inflows were directed to? And if there was any seasonality throughout the quarter, like especially if you saw a pickup more in the -- in November and December, and if you can give us any update on what have you seen so far at the beginning of the year?

Thanks, Mario. So trying to give you some color here. The big -- the industry is still not back to growth. It's still very focused on fixed income. Having said that, our net new money was, if I'm not mistaken, 2/3 are fund administration business. And of the other 1/3 was half fixed income and credit and the other half are alternative asset management offering, which has been having a quite strong performance. So it's quite mixed. We continue to develop new products. We are still to see interest rates falling, which would probably change the dynamic of the industry as a whole, but we're still not seeing that. I would say that definitely this is probably a gain in market share more than something linked to the market. If there's any seasonality, I would say, you can say that maybe not a seasonality, but maybe a bulky net new money from gaining fund administration clients, but nothing really a short ordinary year.

The next question comes from Marcelo Mizrahi with Bradesco.

Hello, guys. Congratulations about the results, very good. Again, you guys delivered fantastic results, 3 fantastic quarters. And in the last years, a huge recovery and all different franchise in the company. Looking forward, you guys are saying that it's possible to deliver an ROE higher than 25%. Looking to now and the consensus numbers, me and the other analysts, we have numbers a little bit better than this 25%. So question is regarding which line or which line do you guys believe that it's -- what is the challenge here? So the most difficult line to achieve or the line that you guys have more concerns regarding the next year with this environment that we have now?

Thank you, Marcelo. Let me see the best way to answer your question. We probably understand where you're seeing the different growth numbers in the business lines. I would probably say that -- if I looked at your numbers, I would probably agree with them. But as you know, we always like to be conservative with our guidance numbers because we always want to leave some space for market volatility, market changes or even some frustration in one of our strategies. So I would not say that there's a specific business sign that we probably don't have the same outlook that you have, but it's probably a reflection of our traditionally conservative guidance to give us some space for these, let's say, events that I previously mentioned.

Okay. Very good. Can I just do a follow-up here. So in last quarter, I asked you, Sallouti, about the Sales & Trading results. and you were talking to look to 4 quarters' average. And now the average is higher. So can you help me to try to look to that forward? I know that it's better to have something like 30% discount on this average. But -- so the book value is higher, so it makes sense to see to use the average of the last 4 quarters?

Yes. I think the average of the last 4 quarters is a good guidance. And naturally, you have to take into consideration that we're constantly developing new product offerings, penetrating new market segments increasing our geographies and that recently, market activity has been positive. But yes, just for the sake of simplicity, I will keep my guidance over the last few years that the last 4 quarters are good indicator of where the business is tracking.

The next question comes from Yuri Fernandes with JPMorgan.

Also congratulations on this historical 27% ROE for the full year, very solid 2025. I would like to ask about Corporate Lending. This line has been growing around 20% for a while, and it was another quarter of closer to 20% with SMEs doing a little bit better. But I guess, 2026 may be a little bit more challenging, right? We have been seeing some corporate credit issues here and there. I guess on SMEs, there is always the government guarantee lines that can help on that. So if you can provide some color, like are you comfortable in keeping this, I don't know, 20% year-over-year growth for Corporate Lending? And also on spreads, right, despite the tightening, I think your implied long yield, let's say, like revenues divided by average loans, right, it has been expanding for you. Do you see this continue because of mix. So if you can give a little bit of color on this. I know there is a lot of moving pieces, operations outside of Brazil. So whatever you can debate about the growth outlook and the margin outlook for this line and even maybe the asset quality outlook for Corporate Lending?

Thank you, Yuri. So no, we're confident to continue growing at more or less similar percentages of around this 20%. As you said, we are entering into segments where we have minimal market share, corporate, middle SME. It is still a market where A big part of the credit is dominated by 5 of the other S-1 banks. So we continue to see space for us to gain market share, especially when you compare the size of our portfolio some of these, let's say, incumbents or competitors. At the same time, as you mentioned, there is the geographical expansion. So yes, we think that we can continue to grow in a way that we can keep the discipline in credit underwriting, avoid to the greater expense possible, the credit events and operate this credit book still on an alpha basis and not on a beta basis. And for this, the geographic and the segment expansion is crucial because if not, at one point you become beta. But we are quite confident that we will be able to do this, especially as we continue to grow the cash management business banking offering together with that.

If I may, just a follow-up and back to Tito's point on capital. Your loan is growing around 20%. And for sure, you also have some kind of market RWA risk, right, that sometimes grow with your activity. Should we think like about your core capital remaining stable around those levels, like 11.3%, 11.5%? Is this a good guess on the capitalization ratio for you. And again, I know it's well above the minimum. But just for us to work like with a capitalization target for you?

No, I would say that you can definitely think that our core equity Tier 1 ratio between 11% and 12% is the target, yes. We don't want to be below 11% and probably above 12% is probably too conservative to maximize the return. So we will probably go above 12%, if we are concerned with the environment. But if not, for us, probably operating between 11% and 12% is the target.

That brings us to the end of the question-and-answer session. I will now return the floor to Mr. Roberto Sallouti for his closing remarks.

So thank you very much once again. I'd just like to make some final comments before we finish the call, because there has been a lot of chatter recently about investment platforms and the distribution of deposits of S3 to S5 banks guaranteed by the FTC. In our view, the FTC has a dual objective in its creation. One is to protect all of the investors and two, is to foster competition by guaranteeing funding to those S3 to S5 institutions who don't have significant limits with institutional investors. And we think, clearly, in the recent events of Banco Master it clearly shows that there sits an opportunity to improve the regulation and the supervision. But we believe that we have to be very careful as a society and as the financial sector, not to go back to the situation where we were before investment platforms were available where basically clients would go to their banks and they could buy basically a deposit at 80% of CDI or an investment fund with a 4% management fee. The investment platforms have helped democratize and offer good investment opportunities to all of the investments, investors and also have allowed competition to foster on the different credit segments. Because this was abused, we have to be careful to not try to create rules. We're basically investment platforms, either we choose not to distribute S3 to S5 deposits or the cost to these players would be so high that would become unviable for them to do their relevant businesses. And on the Master case, we also think that it's very important here that the most important thing was to protect the investors within the FTC limits. And if you look at our case, we basically had 10% of the deposit base of Banco Master distributed. Not everything was distributed to us as Banco Master, some came from the acquisitions that the bank di and the truth is when we started noticing in the beginning of '24, that maybe the treatment of the balance sheet was not adequate. We then reduced the distribution and stopping fully the distribution in October of '24. So of course, when you noticed that maybe the activities don't justify the balance sheet, we should behave. But other than that, we have to count on good regulation by FTC. And here, probably the regulation should advance to limit the percentage of deposits per platform to limit the percentage of deposits, which are retail distributed. And here, we don't have to invent the wheel. You can just see what is done in Europe and the U.S., and we can use that as a model. And at the same time, I think that the supervisory environment, the supervision of S3 to S5 banks has to be reinforced, especially after balance sheet reaches a certain size. This will probably prevent situations like the ones we are facing to happen. We have to remember that the issue was with the assets, not with the liabilities. So this is just a comment because I think that sometimes we get emotional with these discussions, but it's very important that we try to preserve what is good about this framework that was created over 2 decades here in Brazil. With that, thank you very much once again for joining our earnings call. It's a pleasure to have you here and look forward to discussing with you at the end of the first quarter of this year. Thank you very much. Have a great week.

Thank you, sir. This concludes today's presentation. You may disconnect your line at this moment.