The first one is that as long as he holds at least 15% of the voting rights, he can indicate a Board member. The other safeguard which is building on that is that while he holds more than 25% of the voting rights, he decides who is the Chairman among the Board members. So I think in a nutshell, Andrea is still very committed to the company as a reference shareholder. And I think he played an important role in terms of changing the governance and setting the directions as we move ahead.
Eduardo Rosman: No, thanks a lot Pedro for the tough question. And thanks a lot, Mateus as well.
Mateus Scherer: Thank you, Rosman.
Pedro Zinner: Thank you.
Operator: Our next question from Mario Pierry with Bank of America. You can activate your microphone.
Mario Pierry: Hi guys, thanks for taking my question. Let me ask you two questions as well. The first one is you recently acquired a Financiera license that should help your funding costs going forward. Have you seen any benefits of that so far? Also, if we look at your deposit base, strong growth. Can you explain to us better what drove this growth? Is it because all of your clients now have a banking account with you, or what percentage of your clients already have a banking account? And maybe that’s why you’re seeing the benefits. And can you just remind us if you continue not to remunerate these deposits? And then the second question is related to your tax rate. We saw an effective tax rate of only 11%. Can you remind us what is the effective tax rate that you are forecasting on your guidance for the year?
So when you talk about net income, adjusted net income of more than BRl1.9 billion, are you assuming that tax rate should stay around the current levels, or should we see a more normalized tax rate, which I think had been running closer to 20%? Thank you.
Mateus Scherer: Hi, Mario, thank you for the questions. I will start with the tax rate piece and then hand it over to Lia to talk about banking. So in terms of the tax rates, I think the main driver for the lower tax rates in the quarter was that we were able to maximize the usage of tax benefits associated with research and development, the [Indiscernible]. And just to give some perspective here, even though our company as a whole has been profitable for many years, some of our entities where we had significant R&D expenses were not. So we have been working really hard to make sure that we improve profitability, not only at the consolidated level but also in those main legal entities. As a result of this effort, we were able to revert accounting losses at some of our subsidiaries in the fourth quarter and increase the usage of legal bank, which was really concentrated in the first quarter of ’23.
As we move ahead, the level of legal bank usage across the year will not materially change, but the benefits should be more spread out throughout the year. So when we look ahead in terms of tax rates, we continue to expect a tax rate between 20% to 25%, which is what we guided during the Investor Day, and that’s what is embedded in the guidance that we provided.
Lia Matos: Yeah. So Mario, just to give you some color on the — your questions regarding banking, right? So in terms of the strong results in deposits that we saw, these results were mainly a result — a consequence of two main factors. First is that we continue to put significant efforts around bundling payments and banking. So we talked a lot about this in the Investor Day, right? So payments, TPV becomes a relevant cash in to clients that use banking as a domicile. And that was an important driver in increase in deposits, but also our ability to continue to engage more and more clients with our banking solutions. Of course, the fourth quarter does have seasonality in deposits, so there is a seasonality effect there. But we continue to see the same very positive trends throughout the first quarter of ’24.
So with regards to your question about the Financera license, we talked — we gave a lot of color on this in the Investor Day, right? Roadmap that we have ahead of us in terms of banking this year. So investment products are a part of our roadmap and we gave some color on that. And there’s not much to say beyond what we already said. We are testing this product to our clients. Our focus is really that we develop a roadmap that can prioritize the main jobs to be done for our clients. So investment is a part of that roadmap. And we will be giving more color on this throughout 2024.
Mario Pierry: Thanks. Lia, just let me ask you then on the banking domicile what percentage of your clients today have a banking account?
Lia Matos: Today, Mario, between — around 50% of our clients have a banking domicile, of course, there has been a significant shift towards 2023 when we migrated all of our Ton clients to the full banking solution. But we continue to drive payments and banking bundles to new sales as well as upsell banking to current clients in the base.
Mario Pierry: Okay. And then just confirm that, you are not remunerating these deposits and you do not plan on remunerating rating them, correct?
Lia Matos: So you are correct in the sense that deposits currently we do not pass through any of the floats. But of course, as long as we decide to scale investment products that may change, but too early to give any more specifics about that.
Mario Pierry: Okay. Thank you very much.
Lia Matos: And just to be clear, our guidance that we gave in the Investor Day for the level of deposits of 2024 that considers that we do not pass through any of the interests to clients.
Operator: Our next question is from Tiago Binsfeld with Goldman Sachs. You can activate your microphone.
Tiago Binsfeld: Hi everyone. Thanks for taking my question. I have just one on expenses. When we look at your guidance growing below 7% in 2024, what do you think are the main challenges and opportunities here? And especially thinking that third-party services and personnel picked up this quarter. Are there any new trends to read from these two lines, but more broadly, we would appreciate any color you can give on expenses in 2024. Thank you.
Mateus Scherer: Hey, Tiago, thank you for the question, Mateus here. So I’ll first address the fourth quarter and then talk about 2024. In regards to the first quarter, administrative expenses are seasonally higher in this quarter and this is mostly a result of two drivers. The first one in general is variable compensation because we provision variable compensation according to the expected EBT of each quarter. Naturally, the fourth quarter has a higher result and drives more variable compensation. But also we have a concentration of more corporate events in the quarter and that drives a lot of the third party expenses. So I wouldn’t read too much into the trends for the quarter. I think that’s seasonally expected. Now when it comes to the guidance, we guided 1.125 million in 2024, this implies a growth slightly below 7% when we compare to the numbers we closed in 2023.
And here I think you had basically two drivers. On one end, we’ve been doing a lot of efforts to implement zero basic budgeting and shared services center throughout the company. And when we talk about these two processes, I think the main driver behind them is really unifying processes throughout the company that either because we grew too fast or either because we have the software segment not integrated yet, we may have duplicate processes for some corporate functions. On the other hand, we still need to invest more, especially in the financial services segments as we’re bringing more capability to the company and improving the processes as a whole. So I think the 7% figure in terms of growth is really the net effect of these two trends.
On one hand, seeking efficiency and implementing these initiatives. And on the other hand, continuing to invest in what we feel we need to deliver our plans.
Tiago Binsfeld: Thank you, Mateus. It’s very clear.
Operator: Our next question from Neha Agarwala with HSBC. You can activate your microphone.
Neha Agarwala: Hi, congratulations on the results, and thank you for taking my question. Just a quick one on volume growth for ’24, the guidance remain strong after the good year in 2023. How are you seeing the competition evolve given that most of your competitors are focusing on the SMB segment? You mentioned that you maintain your benchmark status in the SMB segment, but are you seeing a bit more competition from the competitors, both in terms of price aggressiveness as well as adding new sales force on the street? Is that putting pressure on the volumes? So any color on that would be very helpful. Thank you so much.
Lia Matos: Hi, Neha, Lia here. Thank you for your question. So I’m going to start talking a little bit about TPV trends in the guidance and then give some color on the competition. So I think regarding TPV, nothing really new in terms of the dynamics that we’re seeing. Abex released recently their outlook for market growth in 2024. And when you contrast that with our guidance for 2024 of BRL412 billion in MSMB TPV, this implies that we will continue to grow more or less twice the market rate of growth, which means essentially we will continue to gain share in the MSMB segment versus the overall market. So we remain committed to this guidance. In terms of competition, nothing really new regarding the competitive environment. Based on the fourth quarter results, we can see that we’re starting to experience benefits from reduction in interest rates with financial expenses as a percentage of revenue decreasing 4.3 percentage points.
