There was a lot of headlines in the system saying that the banks are charging 450% per year in interest rate, and I was always saying to the press and to all the stakeholders that this is a futile rate, it doesn’t exist at the end of the day for two main reasons. First of all, no one can stay in the revolving credit for more than 30 days, this is the first reason. The second reason, because you have a price amortization profile in the credit card that shows you that at the end of the day, no one’s paid much more than 100% on the acquisition value of the credit card, so on principle, to say on capital to make it easier. So we were saying that the rates are much, much lower than the rates that were being released. The central banks, they released the interest rate on a monthly basis of 12, 13, 14, whatever is the rate, and they do on a compounding rate, 12 months and say that it’s 450% per year.
It’s not true. The rate on the mathematical way, it’s correct. There’s no doubt about it. But it doesn’t happen because no one stays at this level of interest rate throughout 12 months. So our view, and we said that many times to everyone, and I kept repeating that, is that the impact would be very marginal on the interest rate whenever you had this law approved. And why is that? Because at the end of the day, no one was paying much more than 100%. We were seeing 160, 120, 170, depending on the portfolio. So you have to do, yes, adjustments on the terms and also on the interest rate, but you will be with minor impact inside the limitation. We’re going to fulfill the law, so this is our obligation to follow what is approved, and this is the way we are working in 2024.
But in our view, this is an open discussion because unless someone tries to understand really what are the real impacts for interest rates in credit cards and when to do a long-term agenda, not a short-term agenda, but a long-term agenda, I think this will be an open dialogue that we have to keep. And so our view is that the executive, the central bank, and all the stakeholders will listen to everyone else in the industry as they should. They will do another analysis trying to understand causes and effects, and will try to create new discussions about that. So we are always open to that. We have proposals, everyone else has, so it’s part of the business to have those discussions in a democracy very open to the dialogue, and this is what we’ve been doing so far.
So we don’t see a cap again, a new cap coming. I don’t think it’s necessary to what we are seeing, but if we want to solve that on a structural basis, looking at the long-term, we have to do things in a different way. Those were not the decisions made so far, but that doesn’t mean that they are not open and willing to do that discussion in the mid to long term. So we are very open to do so as the leader in this market, and what’s going on right now, it’s exactly what we’ve been telling the market. So I think the good thing of that, that we needed to prove somehow that this is what was going to happen. So before that was just analysis. So I think the real life will show and confirm our thoughts, and this will help to reopen this discussion again.
We are very positive that this can happen, and we are very open to that.
Renato Lulia: Back to Portuguese, because now we have Arden Shirazi from Santander.
Unidentified Analyst: Good morning. Milton, Broedel, Renato. Thank you for the opportunity. My question is regarding the vehicle portfolio. We saw that there was an increase quarterly, year-on-year, talking to the investors and clients, we see that that market in general is more excited with that credit line. I wanted to hear from you. What is your mindset in terms of quality growth? What kind of markets are you working with? Thank you and congratulations on the results.
Milton Filho: Thank you, Arden, thank you for the kind words. Vehicles business is something that we for many, many years had a participation that is very relevant and with all of this movement that has happened all throughout the market, we’ve learned a lot. We made new mistakes and we learned with the mistakes of the past. That’s an evolution. We have a portfolio that is an adequate size. We’ve been working ever more focusing and servicing well our clients, regardless of the channel that they do the vehicle acquisition and the procurement of the financing, we expect a growth in that portfolio for ‘24, not very robust. I would say that is adequate to what we’ve seen. This is a portfolio that we are in the fourth quarter consecutive that we are reducing our delays above 90 days.
There was a loss there and then there was a reframing in the market and we’re reducing it relevantly that delays delinquency in this portfolio. This is a scalable business naturally to dilute the cost in this activity and we’ve been working strongly to digitize the journey so that regardless of the scale, we can operate more competitively. So within the defined appetite of risk, we can define the higher volumes depending on the cost of service that we’re working. And I think that this portfolio we’re going to see the needle movement throughout the years. We’re looking in detail the portfolios that make sense. We are present in the market. We do not see and we think that this is a euphoria business because the big growth comes from euphoria, the big losses as well.
So this is a very volatile portfolio that is not very resilient. There is a positive aspect I would like to recognize with the assurance that you can recover the vehicle through the de-trans or extra judicially recovered the vehicle. This is important, this is a victory for all, and this will improve naturally. But we always talk about that vehicle is an insurance with wheels, so when you recover, the asset is always difficult. We know that in Brazil, recovery of asset in assurance is a big challenge, will always be, and is very strong, and it’s a big challenge. So we see the evolution in the assurance, and that can help us to have a recovery, an LGD better in this portfolio, and that allows us to do the expansion and the profiles of risk, then that’s what’s limiting.
I don’t see a big explanation for our growth. I don’t think that the growth is going to be modest. R$ 33 billion, I don’t think that it’s going to be very relevant, it’s going to be in that order of magnitude, maybe a bit above.
Renato Lulia: We’re going to switch back to English again, because the next question comes from Nicolas Riva from Bank of America.
Nicolas Riva: Hi, Renato, thanks guys, thanks Milton, and Alexsandro for the chance to ask questions. I have two questions, the first one on dividend, first, just to confirm, I’m looking at this right, R$ 11 billion that you announced as extraordinary dividend payments, that should come out of equity in the first quarter. So at the end of March, I should take out about 90 basis points of capital from your ratios just to confirm. And then in general, on your dividend policy, I remember that in the past you used to target a common equity tier fund of roughly 12% and 1.5% 81 bucket, and you said that you would pay in dividends, the excess capital on top of that, 12%, 81. Is that still the way you look at your dividend policy and your target for your capital structure?
And then second question on the perps, so far you haven’t been calling the perps the old is 6.18 and the old 6.5 which we said to higher coupons in 10. But if I look at market prices, you’re basically trading at the call price at par, and you can call them every six months. It seems that the market is assuming that they are going to call them in the short term. Now, you’re paying a coupon below 8%. And last week, we saw a Chilean bank, PCI, with better ratings because of the sovereign in Chile than you, issue an 81 on callable five at 8.25, so quite above the below 8% coupon you are paying on your perps. Is it realistic to assume that you’re going to call the perps in the next call date, or at least if you can discuss a bit how you’re thinking about the call option on the perps?
Thanks.
