Banco do Estado do Rio Grande do Sul S.A. (BRSR6) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to Banrisul's video conference to discuss the results for the first quarter of 2025. This video conference is being recorded. [Operator Instructions]. Today's event will be divided into three parts. First, our CEO and President, Mr. Fernando Lemos will talk about the main highlights of this quarter. Next, our CFO, Mr. Gonzaga will discuss in greater detail the main figures and performance for the quarter and we'll finish this event with our traditional Q&A session with our market analysts. Now let's start our event. Mr. Lemos, the floor is yours.

Thank you, Nathan. Good afternoon, everyone. It's a pleasure to be here with you holding this video conference. Last year in May, we were -- we had our headquarters completely flooded, I think you remember the tragedy, the flood that took place here in Rio Grande do Sul. It was a lot of pain in here in Rio Grande do Sul. But thanks to the resilience and the support of Brazil and even from abroad Rio Grande do Sul is back -- is strong, again, investing strongly. Today, we can say our situation is much better. And we have to celebrate the return of Rio Grande do Sul to its normality and productive capacity. And so we are here back in our headquarters, in our head office 100% fully working. Back then in last May, we were 100% of the time online, no client, no customer suffered for a lack of service. All of our branches were virtualized. So we kept our provision -- service provision, which proved our technical capability. And in our highlights, we are presenting an income of BRL 241.5 million in the first quarter, an improvement of almost 30% year-on-year. And a reduction of 15% if compared to the last quarter because it's the first quarter and it's a traditional occurrence. So we can say we are truly happy with our figures, our financial margin had an increase, reaching BRL 1.514 billion, our net interest income, our cost of risk is 1.4%. Administrative expenses are within our limits. We have full control over the bank's operation. Our assets reached BRL 151.3 billion. For the first time in the history of our bank, our loan portfolio also had a growth of over 18% in the last year in the previous 12 months. Last year, we said we were going to direct our loan portfolio more to companies, and this is what is going on. The flood has brought some problems. But anyway, we are advancing more and more so that the bank's mix is better -- adequate and better adapted. And our funding is in the order of BRL 98.5 billion. These are the figures of our institutions. We are focused on the bank's performance. Right now, we are 4966, this new law that direct the workings of the bank and our CFO, Mr. Gonzaga will later talk to you about that -- about this new regulation. And once again, I want to tell you that we are happy to see our state advancing strong again, thanks to the collaboration of our people and the collaboration of the whole of Brazil. We will always be grateful for the people of Brazil and the people of Rio Grande do Sul, who knew how to face the terrible tragedy. We are rebuilding Rio Grande do Sul, this state preserving nature in a proper way, always keeping in mind that we need to bridge our work today with the future with our tomorrow under a different basis, so we can respect nature, learn with what happened and may take Rio Grande do Sul ahead. Brazil is almost reaching 100 years of its foundation, and we are getting ready for the next 100 years. Thank you very much. Mr. Gonzaga, the floor is yours.

Good afternoon, everyone. As our President said in this last quarter, we had 141 -- I mean, BRL 241.5 million with a growth of 28.8% if compared to the first quarter of '24. In the past quarter of '24, I always led to a readjustment. There was a recovery in loans. And so the performance was better in the fourth quarter of '24. But point by point, our earnings, our results are within our expectations, confirming our idea. Our net interest income is like the gross spread today based on the form of calculation according to 4966 regulation. So the -- if you compare the fourth quarter of '24 -- to the first quarter of '25, we have 8.6% increase, a slight increase in the past quarter of 0.2%. Our return on investment is BRL 1.6 billion, if measured against the first quarter of '24. And the asset performance of the last quarter of '24 was very good. There was a slight drop, a slight reduction in the first quarter of '25. But the expectation is very positive. Next, our loan portfolio has a good performance so far. And based on the recovery of the economy of Rio Grande do Sul, our main market, with 18.6% year-on-year in the past 12 months. In the first quarter -- in this quarter, there was a 2% increase and for individuals, 12.5% in the past 12 months in the commercial portfolio, obviously. And in the quarter, 2% highlighting the portfolios of personal loan, overdraft in credit cards portfolios. We've been working on low or granular retail market. Portfolios, which have a better margin, and this is what we've been working or focusing on small retail -- daily retail in our individual commercial portfolio. For a company, it's no different. We've been working on retail strongly. We have the Conta Única. This product has a good margin for small and medium-sized companies. And also for companies with higher turnover with higher sales for Rio Grande do Sul, but mostly small, medium-sized companies, they rely a lot on this Conta Única product. The quarter-on-quarter reference is 23.4%. And the other products led to a 9.2% growth and 2.7% in the quarter for companies. We've been working very well with this portfolio. The market in Rio Grande do Sul is very strong for -- the foreign exchange is very good CC and CE in this market. We like this market because it gives us a very good margin in services. So in the past 12 months, we have 86.2% growth, and we have evolved. This is a portfolio we've been exploring I mean, Banrisul clients would work with foreign exchange. And now we are focusing more on this segment. Unlike in the past, we are focusing to -- on this segment. This is a segment of strong capitalized companies that they have foreign exchange service and also funding and commercial loan services. So other services too. In terms of our asset quality, it's within our expected range. We are working with our statistic models based on 4966 regulation. But this equation hasn't changed much. Our default ratio from 90 to 360 days, 2.2% for individuals and 2.1% for companies and portfolio by stage, 94% of the portfolio are in Stage 2 of the company. Cover ratio by stage, Stage 1, 1.7%; Stage 2, 20.8%; and Stage 3, 64.1%, totaling 5%. If you look at PDD and cost of risk or net provision expenses and cost of risk, we closed the quarter with 1.4% working on both ends, equalizing these figures. These figures were systematized and streamlined, so that we could work with comparable figures differently from the model we had followed up until March '24. Now we are using the same database and equalizing our figures using the same level of information. In terms of administrative expenses, we've been working very strongly on this side, consolidating branches. We have two branches. If you have two close branches, we put them in the same point, so we don't need so many points open. And today with basically individuals use their cell phones, we don't need as many branches. So we've been streamlining the number of open physical branches and likewise, we've been reallocating costs related to rent. So to work in -- very strongly to reduce the administrative expense, we incorporated PRR and PPR. And even with these two other results, we had the collective agreement in maintenance and conservation of assets totally 4.1% in growth if compared to the first quarter of '24, a little below NPC. In the first quarter of '25 was BRL 1.159.4 billion. And the first quarter of '24 was BRL 1.114.2 billion. However, we've been working to decrease these expenses and to control these expenses. Although we have made investments in IT and many other investments. Even with these investments, we are keeping our expenses under control, cutting expenses whenever possible. In terms of service fees, in the past, there was a growth of 2.2% in the first quarter of '25 with compared to the first quarter of '24, there was an evolution in this area in the past quarter. The past -- the last or the fourth quarter of the year, Vero holds it and helped us in this front with our acquired company led by cards, accounts, which have a fee that we charge from our clients. We also have insurance consortium, the foreign exchange product helping us in this area with a growth of 2.7% quarter-over-quarter in revenues coming from account fees and the banking system, specifically with the contribution given by digital banks. The system has been cutting a lot of revenue in these areas. So we need to adapt to this new market to compete with this banking services market. It's a struggle to keep these revenues under these limits. We need to find other sources of revenues like currency -- foreign exchange and other services. And in Vero's, it helps us very much on this front. In terms of funding at 82.2% (sic) [ 82.4%], cost of funding, 80% with a small increase in the cost of -- in the global cost of funding all portfolios and 86.7% in the deposits. And if you take the index, we have evolved the total of this portfolio. And if we add 14% due to this savings accounts, we have 13.6% and 12.7% in savings. This is our natural hedge we've been looking for. With the increase in the tax interest rate, we have prefixed portfolio, especially in payroll loans with a lower margin and the portfolios with the evolution of selling interest rate need to be careful to maintain the margin. And the portfolio we've been working the prefixed service with a lower cost of hedge, we've been working strongly in this portfolio to maintain the balance of the bank between liabilities and assets. The total of the portfolio of funding and deposits LCA, LCI, and other bank notes and saving deposits has an evolution of 14.1% at the level of Selic if you measure Selic in the period, for the past 12 months. So it covers everything time deposits, traditional administrate deposits, demand deposits, savings, bank notes. This is a very friendly cost for funding. We've been working to maintain our margin, a safe margin of profitability in the first quarter as we have reported. And assets under management showed an evolution of 16% in the past 12 months, if you compare March '24 with March '25. This is a comparison mark year-on-year in the volume of the portfolio. And if you look at the slide, you have on March '25, 19,770.6 million and March '24, 17,030.2 million. We have a very good relationship with the municipal government and we have evolved in the services we provide to them, and we hold a very good market share with these clients. Most of our portfolio, 2/3 is related to assets under management. In terms of our capital, we had a small decrease, 15.8% in the past quarter. That is the Level 1 -- Tier 1 capital change. There was a small drop, and we reached 12.8%, but it's a manageable figure. Soon enough, it will be back to normality. We've been working under the new model based on 4966 regulation, there are debt account in overdraft checks and not using this. If the client doesn't use the services, if you tell them we are going to lower their limit, we are not working with this operating margin and -- but as from the second quarter on, when the client has -- is under default, we can decrease their limit, their overdraft limit and this will make a difference on the order of 1% or 0.5% so it will be back to this number. This is a pretty manageable figure. We are not in a hurry to make this balance. So this would be our base figures regarding performance related to the first quarter of '25. We are available for your questions to discuss these figures in more detail.

Thank you for your presentation our Chairman and our CFO, Gonzaga. Now we advance to the next part of our event with our Q&A session. [Operator Instructions]. Let's start in the first question to with Ricardo Buchpiguel from BTG Pactual.

Good afternoon. Thank you for this possibility. I have two questions. First, well, we've noted there was an increase of -- in the default ratio for the 90 days in this quarter. Could you talk about this increase in the default ratio, is there any segment that is more challenging regarding quality of credit? And my second question is that the provision of civil up to BRL 121 million. They fell quarter-by-quarter because -- why do they have this drop? Could we look BRL 120 million, BRL 130 million as a recurring figure for next quarter or if it's due to another impact?

Well, starting with your last question regarding the levels of provisioning or civil lawsuits and labor suits, in the past quarter, in January, always, we realigned these figures related to labor lawsuits and provisioning. There was a decrease, but numbers are not so expressive, but the idea is that it will get back to normal. We will wait for new numbers, there's always a difference. There is always a change, but we hope or we expect this to be a straight line. I would say this quarter is a little atypical in the sense. In labor costs in the past quarter of '24, there was a higher provisioning due to a collective lawsuit. And in this first quarter, we didn't have to do with that so we are back to normal regarding labor suits. In civil suits, we need to revisit the base every semester, we do that according to our legal policies. And as we revisited this basis, there was this change between possible and probable that suits that will affect these numbers. And the past quarter, there were some labor lawsuits and that were dealt with last year. So now we do not have to deal with them. Now regarding the 90-day default rate, regarding the regular portfolio, loan portfolio we are in the beginning of this new modeling system. The models have been tested and retested, however, still need to perform or to make some adjustments. The economy is not so inviting, there is a high interest rate. And all of this always leads to some level of cost risk. And we work on the conservative side. So we wanted to change more and give more volume, credit volume and better provisioning based on conservative perspective. But default rate has been heavy in the market, and we are no different. But our real estate portfolio is collateralized. The payroll loan is also very good. And the retail companies portfolio is very strong, too. There's always some claims but these numbers are under control and well calibrated in terms of provisioning.

That's perfect. Just a follow-up regarding the best comment. Could you talk about this increase in the default rate? Was it pushed by credit given to individuals to companies or payroll loan?

Well, individuals in the non-payroll there is default rate, it's under control, but there is. And the companies, it's for the low-ticket retail area. This area has suffered with a certain level of control.

Now let's go to Olavo Duarte from UBS.

Good afternoon, and thank you this presentation. I have two questions. First of all, I would like to ask -- I would like to ask you about payroll loans. We saw the incumbent showing their earnings results and medium-sized banks talking about that. So it's worthwhile listening to your opinion about this product. And I could divide this question to be more objective into two areas. First, I would like to understand what is the position Banrisul has considering this product and what is the strategy the bank has adopted or he's adopting right now? And the second part could you talk to us about the basis you have of credits and loans, how many of them have CLT or have a fixed employment relationship. And could you talk to us about where are you aiming at regarding each line of the guidance from this quarter on.

All I would just let me -- you are talking up -- let me ask you talking about the payroll, the private payroll or as a whole?

No private payroll.

Well, regarding private payroll credit or private payroll loan, we started this in our branches and also in our bank app and in the next few days, we'll start operating this from the digital portfolio. This is a small operation, we are in the beginning of it. We -- it's pretty residual in terms of the total value or our payroll service. But we have expectations regarding this payroll loan service considering the strategy -- business strategy for this product. And our expectation is a positive one, considering this product from the second semester of this year on. This product needs -- we need to be careful with this product. We need to check the company we are going to work with for this payroll loan because there will be risks if it's distributed with no criteria and simply providing this payroll loan. You need to be very careful before attributing these loans. What is your second question?

Well Gonzaga, just a follow-up on this question. If could you talk about how many of them are employees -- private employees or CLT in Brazil.

Well, our payroll loan portfolio out of the BRL 19.6 billion, I think that's the figure, right, BRL 19.6 billion. BRL 50 million -- BRL 30 million private payroll loan before this model. And it's a pretty healthy small portfolio with an excellent margin, but we have an operated in payroll loan with companies in a generalized fashion. We do have payroll loan with companies, but with very few of them, it's a very healthy portfolio. But usually, we work with municipal government and in the state of Rio Grande do Sul and INSS it's the same for any banks in Rio Grande do Sul with little -- the Brazilian Social Security Institute. In the level -- the regular level of default rate and for municipal government, it's a profitable portfolio with the flood. There was a [ reduction of stop ] over this receivables after 4 to 6 months clients restarted their payments.

The other non-payroll loans for individuals, it's more -- usually, it's for civil servants, they have access to these payroll loans to finance their vehicles. Eventually, we have a product called Credito Minuto.. Sometimes our clients take this loan, and they pay this loan by the end of the month. It's a very good margin. And talking about the other part of your question, what was that?

Yes, I just wanted to confirm this with you. It's okay. And the second question is about the guidance. It's a very broad guidance, right? Could you give us -- could you provide us with [indiscernible] for this semester for this next few quarters?

Well, our margin is 7% to 12%, it's 8.6%. So it's within our expectation for the guidance. I hope that now I work with the spread the is based on the growth spread, we are strongly working with retail. And naturally, the margin will have to be high, right? Our portfolio is concentrated on retail, which has a higher margin for companies and individuals accounts. In non-payroll loans, they must have a margin because they have a high risk associated but it's a growth margin. And on the other side, that is PDD. In the net revenue, it's not going to be all connected to the margin. In our credit or loan portfolio, we have a moderate appetite related to that due to the macroeconomic scenario due to the high interest rate, we are providing credit. We are providing loans, but we are being selective. We are not working without care, we are working very carefully. And we have 1.2 as the figure, and we hope to get to 2.2 for our collection for the default rate over 90 days. And we have -- we will work very hard on collecting and to reduce this default rate and also reduce administrative expenses because there may be claims and due to interest rates and due to the economy scenario, we need to control expenses so we can have a very -- we can have good numbers at the bottom line.

Now moving on with our Q&A session. Let's talk to Antonio Ruette from BofA. Can you hear us Antonio?

Everything is fine. Thank you. Thank you for your time. Thanks for allowing us to make questions. I have two questions. First of all, I read in your slides that the funding -- prefixed funding has gained more relevance in the past year. And as Mr. Gonzaga said, can help us to maintain the difference between liabilities and assets, especially when there is the scenario of changes in interest rates. Is this a trend that will continue? I mean, these margins of prefixed services getting more relevance to decrease this mismatch between liabilities and assets?

Yes, that's our policy. We have a product -- the basic product in the market for retail banks, all of our competitors do, we have automatic CDB product with a residual value that is in the clients' account, like BRL 100 or BRL 15. They returned this into a remunerated account. This is automatic, it's an automatic service for the savings account. Obviously, it's previously agreed upon with the client, and this helps clients to manage their account and it can be used throughout the month. It's a prefixed product. And we also have those operations, the LCA operations. Real estate letters of credits, CDBs, and we have competitive rates considering the markets and other banks that work with this modality. In letters of credit some of them are rural credits. We work with prefixed interest rate for rural loans. We have these products that can be matched. So as time goes by, we want to have a residual difference between assets and liabilities based on these indexes. This number -- this mismatch was higher in '21, '22 when there was a change in the interest rate during the pandemic. However, this number has been reduced and the trend -- well, this is our trend. We like to have spread and not risk in the fees. Well, the Selic interest rate is 15%. It's going -- if it goes down to 10%, you can work more loosely. But in general, we like to operate based on the interest rate. And the difference are the mismatch is very small. It doesn't change our results.

Now the second question with the accounting change, you started reporting for the three stages regarding the portfolio breakdown, I would like to pick your brains regarding provisioning? Moving on, what are you going to look for? Because before you have those coverage targets for 90 days default rate, but what is the policy from now on? Are you going to have a target coverage for Stage III or a coverage for each stage or total coverage on 90 days? Could you give us some ideas on provisioning, that would be great?

Well, we've been adopting a policy that is a conservative one. A conservative policy. The idea is -- well, we presented the covered percentage, we've been announcing them per stage. And we look at the quality of our loan portfolio. And because we have a policy of not being aggressive in the granting of this portfolio, we want to keep with good businesses, good spread, giving priority to short term, giving priority to collateralize operations with receivables, payroll loans with a conservative policy. We will keep on growing. However, we'll be basing our work on short-term operations and safe operations. And point number one, the priority here is an aggressive collection policy. To maintain client -- to maintain our negotiation with the clients to negotiate the debt with clients, so the idea is to go and collect and keep a surveillance on debt with our clients.

Just a follow-up. When you look at the coverage of each stage, would just say because we are learning to base our coverage on stages? I believe from now on, we look at these numbers from a different perspective. When you look at the coverage of each stage, that's an adequate a proper value, that's a conservative number according to you, right?

Yes. I just say that Stage III pulls a higher provision, which is necessary due to the 352 resolution by the Central Bank that places a portfolio from 1 to 5. And in portfolio 5, we have a minimum step of 50% within the classification or ranking of clients that have become problematic clients. They start with 50% right on. And even if the model works with something a little lower, we are obliged to work with this minimum provision based on the Central Bank resolution. And as these problematic customers are on this portfolio #5, there is this provision of 50% and above. In this specific point, the 64% represent the necessary provision for Stage 3 and as time goes by, as operations will be written off by the end of the period of time it takes to get to 100% of provisioning that is 18 months or portfolio #5. That will be something near 50% and 100% as time goes by, according to this Stage 3 classification. Stage 1 and Stage 2 are the pure model applied to the portfolio under this stages. Stage 2 is 32 -- Stage 1 is the portfolio that is working, good performance and Stage 2 has some days. From July -- I mean, in July '26 it will be changed. But in this transition phase, we will look for a growing line, a steady line. But as we lower our written off these credits, these loans, they are with a default rate of 120 days in April or May next year. Every month, there will be new newcomers and that will be paid off. In this scenario, we'll learn. We have new models to work with in a new stage, new phase. We need to change our mindset to welcome new this new stage, this new phase. Statistically will be different. And when we equalize everything that we need to do will be just like 2682 regulation. Yes, after this transition period is over.

Now moving on, we listen to Mr. Eduardo Nishio from Genial.

Thank you for this opportunity. I have two questions as well. First, regarding the loan growth, there were some areas that grew very much in this quarter. And in spite of the slightly more challenging scenario, you are growing in individual loan, overdraft service grew by 18% quarter-by-quarter. I would like to understand a little bit more how you're growing in this higher risk products. And if you could talk a little bit more about the Conta Única a product for companies that had an exceptional evolution in this past quarter. Comparatively, the past quarter was a little not so good, but it grew 23% if we consider a more normalized basis of comparison. So could you talk a little bit more about Conta Única and advantages compared to competitors? And my second question has more to do with payroll loans and the crisis of INSS, the Brazilian security -- social security funds. And according to the news, the system are stopped. They have stopped, could you talk a little bit more about the funding of this product related to the INSS, the social security or are you also stopped? And could you talk about the products that will be impacted by this and payroll credit, payroll cards, are they all stopped, are they all interrupted?

Thank you for your question. Well, we've been growing in individuals portfolio, looking for new customers in the market and even clients that were already in our customer base that started taking loans from us. Now we are working with a digital account through our app. We are reaching to 200,000 accounts, new clients, new accounts all over the country, but mainly centered in Rio Grande do Sul because the bank fully has its operation mainly here Rio Grande do Sul also in the state of Santa Catarina. Regarding Conta Única product is our -- is one of our main products and in companies, it has a receivables collateral from credit cards, receivables, debit card receivables, bonds, picks. Any -- in all financial flow, they serve as a guarantee for this Conta Única. It has a big advantage for client. They have a limit -- on overdraft limit and they take this limit as they need. They pay banking fees every month and this has a very clear advantage as these operations are based on IOF tax. They can -- clients can manage the effective cost of the operation managing this in their own companies. Regarding the payroll loan for INSS, we are not operating. We cannot work with the margin working with Dataprev. And we do not work with benefit card or a payroll card related to INSS. Our product there is personnel payroll loan. And we've been waiting for this period. It must be closed or interrupted for 60 days. And the clients, they can work the minute credit line, so they can use this. They have a credit limit, the so-called minute credit. They can rely on this form of credit according to their capability in the amount, the payroll they have with us.

Just a follow-up. You mentioned new clients. Are they clean clients? Or is there any type of guarantee or collateral in individual loan?

They are individual clients in the digital side. We are making available credit card in current account as well as funding services, insurance tag. We have been making these services available to all of the clients who open a digital account. They can have this services. They can have tags. They can pay tolls vehicles too, there is a series of services. Regarding personal loans, they are pulverized services like the example of Credit Minuto, they are clean. Operations based on the payroll they maintain within the bank. They receive the payment through the bank with us.

Moving on, we are about to wrap up our Q&A session. Let's listen to Mateus Raffaelli from Itaú BBA. Mateus, you can hear us? No, we cannot -- we cannot hear Mateus for now. I think our team is going to check. Mateus, if you can check your connection or your audio and now we are moving on, let me call Yuri Fernandes from JPMorgan.

Hello, thank you for this opportunity. I just want to ask you about expenses strategies for the medium and long term of your -- Banrisul has an important coverage in the state and has done some optimization of some of its channels in the past. And my question is about the efficiency left and it's a little higher if compared to other peers, it's around 65% more or less. And expenses has grown keeping up with inflation, which is good. But what is the mission of Banrisul regarding expenses. I'm asking you this because a larger bank is talking about being more aggressive in terms of expenses because they lost some fees. There were some caps. There were some changes in the rules of interchange the profitability of retail change 5 years -- from 5 years or has been changed in the past 5 years. So what is your strategy concerning the cutting of expenses or the management of expenses?

Well, in terms of expenses, expenses are part of the organizational structure. You need to invest. You need to spend money to make things work. If you open a new branch, depending on the size of the branch, depending on the cost of rent and the cost of employees and the whole structure you need BRL 200,000, BRL 300,000. You need to use this money. But from the macro scenario or the macro standpoint, we will work to correct the expenses related to the rent of some of the branches in payrolls, they are not so elastic, but we do have some strategies. The bank has been relying on to try and decrease that. We have some voluntary dismissal programs and other strategies that can help us retain our control expenses. And everything we can do, like in terms of reduction, rent reduction over time that's what we do. Payroll expenses, they have to do with collective bargain agreement and other expenses, there's nothing much we can do regarding these expenses. But sometimes when you have like several branches in cities like Porto Alegre, Cascais and Santa Maria, we've been streamlining the number of branches. If they are too close to each other, we try to close down one of them and keep just one working strongly in the digital side to gain scale in the businesses and products we offer.

That's pretty clear.

Just let me tell you that that we have recently signed a deal with a 24-hour bank. We are changing our ATM basis. Right now, our ATMs will reach 2,000 ATM machines and an ATM can do most of what an employee can do in a branch, in a physical branch. It's important to remain with our employees at the branches, but we've been working to reduce the number of ATMs in the branches. And our ATMs are open and fully working. Our ATMs today, they are open to any clients, even clients who are not Banrisul clients, 180 associated -- we have 180 associated companies that can work with our ATM. So it's an open bank open to customers and clients who are not Banrisul clients too. So this generates revenue. It's a source of revenue. We get some banking fees coming from these ATMs. And throughout these years, we plan to reach 1,000 machines. And next year, we will finish this operations of changing or overhauling the number of ATMs outside the network in petrol stations, gas stations in supermarkets. In other areas, we are changing the -- replacing these ATMs and this change has provided a very good service coming from clients who have, for example, an account in a -- with a digital bank they will use our ATM and pay a fee, and this fee comes to us. Of course, we'll pay for the implementation and the rolling out of these ATMs but they will provide us with some fee. The fee related to usage throughout the state of Rio Grande do Sul, and this will lead to cost reduction as time goes by.

That's super clear. That's the strategy of monetizing a part of the revenue always helps. You can maintain expense, but we also have a new source of revenue, it makes sense. Just a final question on capital. I'm sorry if you already talked about that. But it caused attention the change in Tier 1 RWR, your Tier 1 well, 100 bps. It's -- I don't know if it's 4966 regulation. And if [indiscernible ] has something to do with that?

As I mentioned before, we have a massive credit or loans that is available for clients. That accounts from companies overdraft individuals for individuals, for companies, credit cards and these available lines and [indiscernible] as well. All of this sources of loans are available. For example, they have -- a client may have 10,000 in the limits. They can use 5,000 and they have -- still have 5,000 available. According to the 4966 regulation, we can reduce this limit for the client. If I observe the client poses risks, I can change the limit. The limit was 10,000 and I can lower it to 7,000, for instance. This regulation is not fully operational yet. But we will complete this operation and let our clients know. If I can do this with the client, I can change the requirements for capital stock for this basis of clients or decline basis. And within this index of BRL 15.8 million will be back to BRL 16.8 million, I mean 1 point. So we still need a couple of days additional days to implement this model.

Just to add something to his answer. We used to have -- there was a different methodology before, and we'll be back to the use of the same capital requirement methodology. But we still need to adequate this methodology in the next few days.

That's clear. Now based on this 4966 regulation, there was a change in strategy and other banks are optimizing limits and then they decreased the headwinds that you had in this quarter?

Yes, this is a -- this -- based on our operating evidence, we can change the evidence and reduce this capital for this available loan or available credits for our clients. This is just out of curiosity because you are well above the minimum, just to understand the moving impacts. .

Well, with this, we wrap up our Q&A session, I would like to thank our President and our Director here. I would like to thank the participants, the analysts with us, our RI department is available after this call. If you have further questions, we know there were many changes related to the 4966 regulation. We have we can answer your questions or any questions you have regarding that. Thank you very much. See you next quarter, and take care.