At last, which will be re baptized, is the internal project. We have a name. We are going to announce the new name of Atlas project. It is at a soft lounge project. Friends and family. We have a lot of projects, friends and family, but this is a family that’s been growing. The feedbacks have been very positive thus far. We’ve learned a lot. We’ve evolved with the platform, we’ve applied technology, everything that is available in terms of technology, and we’ve grown with our clients and learn with them. Our overview is that for the second quarter we will get the long hanging fruits and then we can more share the concrete data with you. We are very happy with the advances and we continue to believe in the success of Atlas, an offering that is completely different, full digital focusing, really in the pains and needs of the clients of what they really need to work with their business.
And we are going to work with clients and publics that are different. But companies that I see that have a value proposition and a solution that services their needs. We’re very happy with the evolution, I would say second quarter. I’m going to give you more details. I hope to give you more details. In Italy, we’re going to discuss the evolution of Atlas and our expectations. But our business companies is growing very well, very healthy and with a profitability much higher than the profitability of the bank. So it’s a high performance segment, very well managed all throughout the years.
Renato Lulia: And now the next question we have Bernardo Guttmann from XP. Floor is yours.
Bernardo Guttmann: Thank you, Milton. Thank you, Myles Sander, for the space to ask the question. And congratulations for the result. I have a question about profitability per segment. Well, it seems that retail is going on a recovery trajectory that is very important. Left an ROI of 17% for in the first quarter, two of last year to 23%. Now, What can we think about the elements that brought in this recovery. How can you project these returns on investment? Looking up ahead, the bank seems to be adjusting very well to the cost of serve service. And it’s a very assertive movement of the risk offering that the portfolio that Milton explored very well. And on the opposite side, when we look at wholesale, the ROI is still very high, 28%. When we look at the competition per operation, given the reduction in the venturies and spread and capital markets, the scenario seems a bit more challenging. How can we think about this dynamic of the wholesale as well? Thank you
Milton Filho: [Interpreted] Bernardo, thank you for the initial words. Great to see you. Thank you for taking part in our call. Well, I remember a few quarters ago, what’s question about retail? I said that I wasn’t happy with the profitability of the retail, not even the management, not even the CEO. At that moment in the past, we were doing a strong work of renewal of the value proposition, review of the business model, so we can get a profitability level that is more sustainable. We didn’t want to go back to what we saw in the past. There’s regulatory changes down the line. It’s a segment that grew more credit than the income of services, revenue, service. What brings the profitability? Let’s just say to a lower threshold, because the credit in general, it brings a profitability level that it’s closer to the cost of capital.
But without foregoing the exploration and going, getting closer to the clients and in relationship here, the retail, there is the individuals and the companies. I mean the companies are growing. This is the business that is improving year-on-year. But where we had a big turnaround and it’s still not done completely, but we’ve done a great part, is in the individuals, a natural person. So I said that I wasn’t happy with that business. But now our bottom was 16.5 that we delivered in the results of profitability of the individuals. And we got to ’23 now there’s still space for increasing this profitability. And there isn’t a silver bullet. There is a series of initiatives. We changed the business model. We did all the review of uni-class, we did the review of personality.
But we also did a review that in depth of our mono-liners. We had in fact the de-risking important reversing to do in this portfolio, specifically credit cards, vehicles, even, you know, with the loans that we had to do. And we’ve done very well. We did sanitization very well of the credit and the portfolio for this segment. So we can, you know, work with better profitability levels. So there is value proposition business model here, generation of top line, reduction of cost of credit and with an operation that is more efficient. So this evolution is the one that we’ve observed and we are very positive in regards to this evolution. We tend to continue to advance in profitability. As I told you, we are not going to, we’re not going back to the threshold, but we didn’t get to the peak of profitability.
And I think that we can wait for this. In this business we are very satisfied with the evolution and we continue to have the. The retail working with a profitability that is close to the profitability of the bank. It was diluted for the Roy some short time ago, but now it’s aligned with the ROI of the bank. That is very positive, creating value in a consistent way and sustainable way. Wholesale. We had a small expansion in this quarter on the profitability. So we managed to operate with a strong profitability. And this is the business. Of course, credit is important, it has a very strong weight, but it goes beyond the credit and the balance sheet. Standalone our capacity to work with the clients in the several businesses and several needs in the way that we say with Itau Bba, it’s from the d day until the most important day, the day to day to the D-day of our clients.
So we leave from a cash management that we have a share of cash that is very relevant of our basis of clients. Going through the cross sale with several products, with investments and derivatives. There is a penetration of other credits that is supporting the clients, but with enormous capacity of working both in a fixed income and variable income. With the M&A market, we have a strong participation there. But remember that when we talk about profitability of the wholesale, I’m not talking about Itau Bba, I’m talking about [indiscernible]. All of our agenda of asset management, you know, the net individuals, all the business of investment that we have in the bank, the brokerage, the custody management, we are working with a profitability level that is very high, with an efficiency, you know, there are services, there is less leverage, inefficiency is a bit higher.
But we can deliver relevant returns when we compare to other players. The magnitude of our asset, the investment business, the relevance of our business, the private banking with 30% of market share is contained in this profitability. And we’ve managed to gain markets month after month, day after day. We’re very satisfied with the evolution of this business. And now we have a bank that is outside of Brazil. All of our operation LATAM also in this quarter had an ROI that is close to 14.9, close to 15. It was 14.9 to be precise, to showing that our LATAM operation also has managed to grow and increase the profitability. So it’s true that we’ve seen a higher pressure in the market. The capital markets is very active in this first quarter to positive side is that we are the best, the main player and we have the big, the origination market share for the fixed income, the primary one for.
So this is relationship with the companies that’s cross sale, being closer to the client, delivering to the client the best solution and the best structure for financing at that time. We’ve worked with relevant projects as well and I would say we are satisfied. The issue of more pressure and price. Gaussian let’s just say we have a mantra in the bank and we use it very well. When we see any rationality and it exists, we have two paths. Either we lose market or we destroy value. Our decision is to lose market in situations such as these. But we also understand that these are unsustainable in the long term. So when we see an anomaly in the pricing, in the capital allocation vision and the return vision in certain segments, we take a step back in the sense that saying this is not sustainable, this is a poor capital allocation, is diluted for the ROI.
And when we look at our models of capital allocation, we always look with our cost of funding that is lower our model for capital allocation, with our efficiencies, tax efficiencies, and still these are operations. When we realize that these operations at destroy value and are much below the return on the cost of capital, then we decide to stay away and try to find more sophisticated and intelligent solutions for our client. But we don’t get into that dispute. That’s why I’m not worried about profitability. I think that the biggest driver for profitability on the medium long term, and it has been a lever that is very positive for us, is the cost of credit. In this segment. We’ve been running much below to what was the pre pandemic. And we for some years had a cost of credit that is very, that is behaving well.
There will be a normalization, and this normalization has been slow. And the most important thing is that in relevant cases of credit that we’ve seen in the market, we usually, with the disciplined management of risk and concentration and allocation of capital, we’ve managed to do very well. I’m going to hit wood three times, but you know, we’re going to be. We fended very well through these moments. The segment of medium and small companies. We start to realize there is a pressure here and there, but absolutely something within what was expected normalization, very slight one, and we haven’t seen big events that we somehow are exposed. So I believe that, you know, wholesale, we see a good capacity to deliver value and good results up ahead.
Competition is part of the game, and we are here on the long term and not just the next border.
Renato Lulia: Next. Thiago Batista, UBS.
Thiago Batista: [Interpreted] Hello, Thiago. Hello, Renardo. Milton Brodo. I have a question about how transformational can it be, the Juanita Wu thing? And is this transformation, what is the focus, its efficiency? Having a better credit control is having access to a client that you didn’t have before. What can transform the bank in one? Itau.
Milton Filho: [Interpreted] Okay, thank you, Thiago. Also very nice to see you. Thank you for the words. I have a question for a question that wasn’t asked before answering. That event that we launched in the non recurring, in the balance sheet of the selling of the participation of a company is the selling of Pismo, which is a company that we had 5.4% in participation, and that company was sold to visa. We had a stake in the company. It generated a result for the bank of R$180 million in this, in the last line. But to keep our consistency in the recurring non recurrent, regardless of it being a positive result, we have that discipline of being positive or negative, we launch in the recurrent when it’s non recurrent. This is a classical case of a positive that we launched in the non recurrent, in the balance sheet of the bank and not the result that I would say recurrent.
Otherwise we mess the information and you lose the capacity to understand what is operation and what is events. So just to give you that information for you and the market of that transaction that we are talking, that we’re talking about. What I wanted to discuss with you about the super app platform. I think that is transformational, at least with this. We believe that this is the way that we’re going to run the project. I believe that first there is a maximum mobilization of the entirety of the organization, the most prioritary, most important project of wholesale, of retail. Sorry. That is, I mean, everybody is involved. CEO, superintendent, coordinates, analysts. Everybody is involved and dedicated. This is a project that has to be done together.
The coordination level is deep, but we are very happy with everything that we’ve done thus far. Our best expectation is that this is an evolution of the platform of which we had a cap quality, the best technology with indicators and KPI of clients that are very solid with digital experience. That is incredible. And we can use a great deal of these components to lever a platform that before dependent on several products and systems. So we couldn’t break the monoliths and create the solutions into that product and into the in between the businesses. Because really the platform, tech platform wouldn’t allow for. So here there is a confluence of two events. The digital transformation of the bank and the evolution and investments of everything that we’ve done with the which platform.
Joining these two initiatives, we can get you the solution, which is a super app, the Turbo app, which is a full-bank offering for the clients. Well, I don’t want to do any type of projection because as any project there is a risk for the execution. I mean there are many challenges looking up ahead, but my expectation is that this will be transformational, transformational for the experience of the client. It’s not just this. We have an accelerated program for digital transformation in the retail, improving the value offering, the offering of credit being improved in the context of journey. So there are several fronts, all the safety, because safety is the experience of the client. We are certain that offering a safe offer for the client is generating value at the end.
