We have regulatory asymmetries that are always being discussed, but we have some tax asymmetries as well. So if you look to us, we are paying 45 tax on the income, corporate tax and social contribution. The payment institutions are, are paying 34. So there is some tax assimilatories. And I’m pretty sure that this in the mid to long term needs to be solved. It doesn’t make any sense. All the time you lose a client here, you lose at the end of the day collection for the government as well, because you reduce the tax income. So there is a lot of asymmetries that will be solved in time being. But at this moment, we have to be focused in our agenda to deliver a much better experience to our clients, to be much more efficient. And of course, if you look to the numbers we deliver, there is restructuring cost being packed there.
So you have. That’s why we separate what is the core cost is being much less. So if we had inflation of 4% in this period, we are running at 2% in the core cost, but we still are investing in the enablers to have a much more digital bank. So on the other hand, we have to finance this investment period. So at a certain time, we’re going to be much more efficient. We’re going to be much more scale in terms of technology, much more product driven in terms of offering the best digital experience to our client. And this will help us to be much more efficient in the way we have a value proposition for our clients. So this is the way we look. We are in this space. We have a lot of work to do, but the job will be done. So, Alexsandro, I don’t know if you want to add something on that.
Alexsandro Lopes: I think it’s quite clear. I quite agree with the direction that you mentioned, but I wouldn’t focus so much, as you said, on 5% reduction in costs because, as Milton mentioned, maybe 5% reduction in cost normally means that I will not achieve a lower efficiency ratio. Because the easiest way to reduce cost costs is to reduce investments. And we are clearly not, not on the business. So we are fully committed to reducing the efficiency level, but not necessarily to have nominal cost reductions when, because we consider investments on this whole matter. So we fully agree in the direction. But I think that distinction between core costs and investments that Milton mentioned, I thought as is quite crucial show great. Thank you very much. This is the way to go. Jorge, it’s good to hear from you, but we’re going to pursue this agenda very strongly. Thank you.
Renato Lulia: [Interpreted] Now, going back to portuguese, the next question is from Gustavo Cerroder, BBI.
Gustavo Schroden: [Interpreted] Good morning, everyone. Renato, Milton, Broedo. Thank you for the time and congratulations on the results. I would like to speak dividends. Did you anticipate some. Well, you anticipate some questions, some words, Milton, but can you give us some color first? The items that you were analyzing, they’re waiting. Regulatory ifrs nine, you commented as well over the last calls about the tax reform. We’ve had the indication recently. In my reading, maybe it’s more easy going from the standpoint of adjustments, given the time, but maybe in my reading it would give more space for us to think in these extraordinary dividends that you’ve commented. But I wanted you to comment first. What are the items regulatory items that you have in mind?
Operational risk, IFRS nine. I think that an issue of the tax reform. But maybe can you qualify and can you give us some expectations on what would be the impact of these items that you have? Approximately. So you. Well, doing the math, what would be the dividend, extraordinary dividend in potential. Could you give us a number for the second semester? Thank you.
Milton Filho: [Interpreted] It’s a pleasure to see you, Gustavo. Thank you for the words. Well, let me give you an overview, in depth overview on this issue. Well, from the end to the beginning, our expectation is that we should get to the end of the year with everything that we have in projections, with the capacity of paying the extraordinary dividends. That’s our best expectation to announce an extraordinary dividend. And we’ve been discussing this on the second semester, the moment of doing it and the dimension. But for that we need a few premises. Now we are facing some relevant uncertainties, well estimated, but these are uncertainties nonetheless. I think that on the positive side, the capital generation capacity is very solid, very strong with the profitability level that we have.
We’ve been generating a capital that is organically generated, provisioning the dividends in a very robust way. This quarter wasn’t different, and it’s been this way through the quarters. Now, when we look up ahead in this quarter now, we’ve had the first event of the risk moderator for the credit, for the structured operations of the wholesale. That had a big increase impact. The 34 basis that we said 19 basis points approximately came from the fundraiser impact. The rest is just risk weighted assets, the increase. So we’ve managed not only to finance the organic growth of the bank, but also facing these adjustments and these fundraisers. Second aspect is that looking up ahead, what do we see in terms of uncertainties? We had an expectation of the reform, the tax reform of the income.
What is the tax reform point? You have a discussion. You had a discussion. If you have interest over on capital and how that compensates on the corporate tax, adequate. If you have a lower aliquot at the corporate level, you have to do, you know very well this process. You have to do an update, a re-evaluations over your tax credit. So we had an expectation that depending on the magnitude of the reevaluation, maybe it would cost us 60 basis for the bank. This is the number that we had with our projections. The fact is that the reform of the income, it’s probably the tax reform that’s not going to happen next year. This is the base scenario because we’re focused on government, Congress, in doing the norms and defining the IVA reform and all the impact in the segments.
That in and on itself is a very complex reform to do. We don’t foresee this discussion for this year, now for the next year. What are the impacts that we see? We did. We see a discussion of the fundamental review of the trade book. This is basilea three. This is coming for the market as a whole. Correct. I think that it’s in the right direction. I think that it’s ever more clear that the most risk for the results in the institution is in the banking book. And we’ve seen this happening in several banks and in the United States as well. This is a regulation that is necessary. We are very comfortable with what we’ve seen thus far. We’ve done a risk management and adequate management, very adequate of these books. So I don’t foresee big impacts.
We have a discussion of solo basis, which is to work at the capital, at the individual level and not consolidate it. And then you define economic groups in a conglomerate, higher potential. Therefore, this is a debate that is ongoing and we need to define what is the type of impact. There is an impact of basilea risk, operational risk. So looking up ahead, our estimate is 100 basis .4 eta when you bancor it’s four years. Phase n starts next year. So 25 basis per year. Four years. So we are very comfortable that with our projections we can absorb these 25 bases at the beginning of next year without any difficulties. There is a discussion of IFRS 9 or the norm, the law that was created. And I think that, you know, this is something that you should measure the impacts in the several institutions, because as you necessarily have to deduct all of your loss of credit in the, in this FY and then for stock, you have three years to do the deductibility.
The risk of a process such as this is that some institution is going to lock in liability of tax and then you have a double effect. First you lose upon the rater of the PDD and then it becomes CTPF, the tax of the loss of tax reform. And then you reduce the the base of the capital. There is a transition that is being broadly discussed in central bank government, but we do not know exactly what is going to be the outcome of this debate. So I think that we have to by policy be very cautious, facing the uncertainties, because events take place. There are several regulatory changes. So these are the main ones, the main changes that I see. But our capacity to generate capital has been very strongly, which means that we continue to be comfortable and we are capable of financing these impacts and finishing the year with a set one with the level of.
So we can make a decision for the extraordinary dividend that has been paid. And I rather do some extraordinary dividends all throughout the year than rather do one off just once and just do this with the tight capital. And we have a buffer in our risk appetite for the board. We’re always going to discuss the convenience here. If it’s 1211 and a half and what is the size of capital that we’ve seen up ahead, given our projections. The most important is if we can continue to allocate. To allocate the capital for growing the bank organically and organically for we can bring a great return for the shareholders. This is our central objective. But we don’t want to retain the capital above a certain level. So therefore distributions are going to be done in that sense.
I hope that I gave you a general overview of the issue. Thank you.
Renato Lulia: Thank you for the answer, Milton. The next question. We have Mario Pierry from Bank of America. Hi, Mario. Welcome to the call.
Mario Pierry: [Interpreted] Good morning, everyone. Congratulations on the result. Thank you for the opportunity to ask the question, Milton. I wanted to explore more on the issues, the opportunities on the SME’s. We’ve discussed a lot of natural persons, but I wanted to. I wanted to see how you see the opportunities, the growth. You talked about the other projects. What is the process of implementation of the timing of the Aqua project and how is this project helping you differentiate your. Your service to the companies in a digital way? Thank you.
Milton Filho: [Interpreted] Thank you, Mario. Thank you for the report and for your kind words. Now, this segment is super strategic for us, very relevant for us for many years. This is a segment that the bank has focused a lot. We’ve had a lot of earnings in the segment. And we managed in a relevant way to deliver values for the clients of the segment and creating value based on our value proposition and based on the business model that is developed in the retail. We’ve grown two digits in the segment for many years. If you see the indicators, the credit indicators absolutely controlled, behaving well without perspective concerns. Of course, there are more difficult cycles, better cycles for the credit. But the fact is that we can grow with a lot of engagement, with a lot of increase of relationship with the clients and growing the base and increasing the penetration of these in these clients.
And important with the credit and the risk well managed in our hands. We went through this process very well in the long term and we are growing with a lot of quality. So this is a value proposition that fitted very well with us, with a lot of training, human capital that is differentiated and always with an overview of the client, not product, with an overview of the relationship with the client and long term view. So we can always have and not just look at one quarter, but looking at the long term view. We integrated the network and Reddit and we were very well successful. Red Card Ready is not a business that we observe standalone. It starts to be a part of the value proposition of the segment. And once again, always the overview of the product, but with the client and we are very happy with the integration and with all the benefits that that has brought with the operation.
