Banco BTG Pactual S.A. (BPAC11) Earnings Call Transcript

Good morning, and welcome to the Second Quarter of 2026 Results Conference Call of Banco BTG Pactual. With us here today, we have Roberto Sallouti, Renato Cohn and Julia Rocha. We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the bank's presentation. [Operator Instructions] There will be a replay facility for this call from today. Before proceeding, let me mention that this call may contain forward-looking statements relating to the prospects of the business, estimates for operating and financial results and those related to the growth prospects of Banco BTG factor. These are merely projections, and as such, are based exclusively on the expectations of Banco BTG Pactual's management concerning the future of the business. Such forward-looking statements depend substantially on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in Banco BTG Pactual's filed disclosure documents and are, therefore, subject to change without prior notice. Now I'll turn the floor to Mr. Roberto Sallouti, who will begin the presentation. Mr. Sallouti, please go ahead.

Thank you very much. Welcome, everybody. Thank you for joining our Q2 results call. If you could please turn to Page 3, where we can talk a bit about the highlights of this quarter. Once again, we were able to finished the quarter with record revenues and delivering record results, record net income, benefiting from the efficiency gains of the integrated business now with Banco Pan, resulting in a return on equity of BRL 26.7 million. And once again, I think this highlights our ability to capture opportunities that across different market cycles, macro cycles and different environments. Moving to the second bullet point. Corporate Lending and Business Banking had another record quarter, increasing 19% year-over-year in revenues, keeping healthy spreads and discipline [indiscernible] I think here, once again, we are reaping the benefits of our disciplined capital allocation strategy, which is not based on market share or share of wallet, but is based on making sure that the spreads in our view, are correctly priced for the unit of risk and also benefiting from our continuing -- continued increase in geographical diversification and segment diversification as we continue to penetrate the new segments that we have been building out over the last few years. Moving to the third bullet point. In Sales & Trading, we're able to deliver consistent performance despite a very challenging macro environment in the second quarter, different than what happened in the first 2 months of the year where we're able to offset slower software client activity with very efficient capital allocation in the balance sheet. Moving to page to the fourth point. Asset & Wealth Management continue to scale. We had BRL 59 billion in net new money in the quarter and pushing our combined AUM and wealth under management to BRL 2.7 trillion. And finally, the fifth bullet point, our Consumer Finance and Banking division grew 37% year-over-year. This was driven mainly driven by the results from Banco Pan but also we had contributions from our partnership with [ Miotto. ] And here in Banco Pan, we're benefiting from the integration of the back office and controls thus not only with efficiency gains, but what we believe is a 100% BTG Pactual culture now in our consumer finance business as we're also reaping the benefits from the change in strategy and leadership that we did within the consumer finance business in the last one, say 18 to 24 months. Moving to Page 4. We talk a bit about the highlight what the numbers. So we had total revenues reaching BRL 10.4 billion. This is a 16% growth year-over-year and net income reaching BRL 5.1 billion 3% growth year-over-year, once again showing our efficiency gains and operating leverage in the platform. We finished the quarter with a return on equity of 26.7% and turning to Page 5. Once again, as mentioned previously, we had BRL 59 billion in net new money, roughly half Asset Management, half wealth management. Our assets and wealth management grew 24% to BRL 1.314 billion and our assets and asset management grew 25% to BRL 1.361 billion. Moving to Page 6. Our unsecured funding grew 32% year-over-year, reaching BRL 405 billion, a very conservative capital ratio of 16% and net equity reaching BRL 80 billion at the end of the quarter. And finally, our credit portfolio grew 24% year-over-year, reaching BRL 367 million, BRL 288 million in the corporate and SME segment and BRL 78 billion in the consumer finance sector. In Page 7, we show the numbers in a traditional matter that we've always done for the last, I don't know, over a decade. So total revenues reached BRL 10.4 billion, adjusted net income of BRL 5.14. Net income per unit of BRL 1.33. cost-to-income ratio moving down to 37.1% from 38.5% at the end of last year, showing the improvement in operating leverage. Total assets reached BRL 925 billion for equity of BRL 80 billion and had an average VaR for the quarter of 22 bps. On Page 8, we show the results for the first half of the year, where we had an increase in the net income year-over-year of 31%. So net income for the first 6 months of the year was BRL 20.3 billion, net income of roughly BRL 10 billion return on equity 26.6% and net income per unit of BRL 2.58. Once again, a similar cost-to-income ratio of 37.6% and a slightly higher of our of 27 bps on for the first half of the year. On Page 9, we now show -- last quarter, we showed Q1 versus Q1. Now we show first half versus first half the revenue breakdown of the different business units. And here, we're basically in investment banking, we see the tougher markets. So in the first half of the year, 10% reduction from the first half of last year. Corporate lending and business banking as a very healthy growth of 20% year-over-year. The same for sales and trading, 16% growth despite a tougher quarter this quarter. Asset Management growing 16% and Wealth Management, a very strong 30% and Consumer Finance and Banking an extremely healthy 58%. And also interest and other continuing to grow 35% which is a reflection of the very solid balance sheet that we have and a very high interest rate environment that we're currently living. And when you see the breakdown for business units, we continue to see increased diversification and a very healthy distribution across what we can call Corporate and Investment banking with roughly 29%. Sales & Trading were market-related, 18%; Investment Management, 23% and consumer finance 13%. Probably over the next few years, we'll probably continue to see a growth in investment management as a percentage of total businesses and a growth in consumer finance as a percentage of the total business. With that, I'll pass the floor to Cohn, and then we can go to Q&A.

Thank you, Roberto, and good morning, everyone. So starting with our specific business lines on Page 11. We see our investment bank where we had a resilient performance despite the challenging DCM environment with ECM and M&A delivering positive contributions across Brazil and Latin America. Here, we recorded revenues of BRL 421 million during the quarter. That's a decrease when we compare to the previous quarter, mostly, again, as a consequence of softer DCM activity throughout the quarter. So as you know, by the end of the first quarter of '26 we saw a widening of credit spreads in the secondary market, which caused some redemptions in some credit-related fixed income funds and consequently, a little appetite for new placements in DCM markets by the middle of the second quarter, we saw credit spreads stabilizing and in some cases, started to tighten. So we see redemptions normalizing. And by the end of second quarter, we started to see an improvement of issuances pointing to a stronger pipeline for the third quarter of '26. Both ECM and M&A remained as active contributors in similar amounts as previous quarters with transactions executed both in Brazil and in Latin America. And during the quarter, we acted as the sole Latin America underwriter in SpaceX Landmark IPO which was the largest equity offering in history, reinforcing BTG standing as the leading Latin America partner for global transactions. Moving now to Corporate Lending and Business Banking on Page 12. We see that we had record results with 19% revenue growth, maintaining healthy spreads and disciplined asset origination. Revenues reached BRL 2.5 billion, which is a 7.2% increase when we compare to the previous quarter, and again, 19% when we compare to the second quarter of '25 as we continue to expand our portfolio in different segments, different geographies. We continue to expand our international portfolio, maintaining healthy spreads, showing once again the strength of our business and also improved funding structure. Total corporate portfolio grew 2.6% during the quarter and 21% when we compare to the second quarter of reaching a total of BRL 288.5 billion. Large corporate and corporate book grew 5.5% and while SME portfolio contracted, reflecting a more disciplined risk-adjusted capital allocation across all corporate lending segments. And for the third year in a row, we were recognized by Euromoney as the best bank for SMEs in Brazil, reflecting the quality and strength of our digital banking platform for entrepreneurs and businesses. If we go now to Page 13, we see our Sales & Trading business line, where we showed once again resilient performance despite the challenging macroeconomic environment with a more efficient risk allocation offsetting softer client activity. Revenues reached BRL 1.58 billion, mostly stable when we compare to the previous quarter. And that came again as a consequence of slower client activity, reflecting still high uncertainties and volatility related to the geopolitical and macroeconomic scenario. As we mentioned, despite the lower client activity, we managed to keep similar revenues as previous quarter with an improved risk allocation, which can be seen by the significant reduction in the average fare from the previous quarter when it was 32 basis points. And we see here that the average fare during the second quarter was 22 basis points, so a significant reduction here. Overall, this was our best first half with revenues reaching BRL 3.7 billion. That's a 16% increase when we compared to the first half as we continue the process of expanding our client base and widening the range of products and services that we offer to this -- to our client base. And during the quarter, we were voted once again best research sales, trading and corporate access in Latin America and best research and trading house in Brazil for institutional investors. Moving now to Page 14. We look at our asset management business line, where we can see that we had also resilient net inflows with consistently growing management fee revenues. Revenues reached BRL 794 million, which is a 1.3% increase during the quarter and a 27% increase when we compare to the second quarter of '25 as management fees continue to management fees revenues continue to grow alongside the expansion of assets under management and administration. Assets under management reach and administration reached BRL 1,361 billion, which represents a 3.5% increase during the quarter and a 25% growth when we compare it to the second quarter of '25. We recorded positive net new money of BRL 29.4 billion during the quarter. That's a good number, especially considering the challenging environment that the asset management industry is experiencing in recent quarters with the fund industry experiencing net redemptions during this quarter. And we recorded positive inflows in both our asset servicing and in our managed fund businesses as we continue to gain market share. We go now to our wealth management and personal banking business line on Page 15. We see that our total wealth under management passed the BRL 1.33 trillion mark with strong net inflows during the quarter. We recorded revenues of BRL 1.447 billion, which is a 4.5% decrease when we compare to the previous quarter, which was marked by a very strong levels of client activity. When we compare to the second quarter of '25, we see a 17% increase in revenues with revenues growing alongside portfolio expansion. And as mentioned, wealth under management past the BRL 1.3 billion mark, reaching BRL 1,314 billion, which represents a 3% increase during the quarter and 24% increase when we compare to the second quarter of last year. And net new money came at BRL 29.1 billion during the quarter, showing once again very consistent net inflows generation and the strength of our distribution network. And for the third consecutive year, we are voted Best Private Bank in Brazil and in Latin America by Euromoney. And this year, a best private bank for family office services across Latin America. If we look now at our consumer finance and banking business line. On page 16, we saw strong performance driven by portfolio expansion, improved spreads and the inclusion of revenue contribution from our partnership with [indiscernible] so credit portfolio reached BRL 78 million. That's a 6% increase during the quarter and a 35% increase when compared to the second quarter of with most of the quarterly growth coming from the expansion of our private payroll loan portfolios. Auto loan portfolios increased 3% and during the quarter and 24% when we compare to the second quarter of '25, while payroll loans portfolio grew 11% during the quarter and 61% when compared to the second quarter of last year. as we continue to privilege collateralized loans and those type of loans that have some sort of guarantees and more recently, the private payroll loans instruments. Following the closing of our partnership with [indiscernible] in April, we began recognizing our proportional share of 48% revenue costs and the portfolio exposure in our consumer business lines. Total revenues reached BRL 1.546 billion, with consumer credit revenues reaching BRL 1.395 billion which is a 46% increase when we compare to the previous quarter. And this strong growth came from different factors, right? So most importantly, the majority of the growth came for improvement with Banco Pan business. So here, we saw -- we had better auto loans contribution from a larger portfolio and lower provisioning after a one-off adjustment that we did in the first quarter of '26. Also, we had higher private payroll loans revenues in line with the portfolio expansion. And the third is the inclusion of the proportion of revenues of [indiscernible] Also important to note is that we are recording 6 months of [indiscernible] to do revenues. But obviously, after the partnership with [indiscernible] the portfolio expanded throughout this first half. So the run rate by the end of the first half is much higher than the average run rate throughout this 6 months or we expect these revenues to continue to improve. To Seguros revenues reached BRL 152 million, reflecting a normalized run rate after the first quarter one-off regulatory impact. If we go now to Page 18, we look at our expenses and made ratios, and we see that our cost income ratio continues to improve on the back of positive operating leverage. Total operating expenses increased 1.2% during the quarter, driven by disciplined cost management and favorable revenue mix and when we compare the second quarter of last year, we see the debt total expenses increased by 13%. Salaries and benefits increased by 3% during the quarter, mainly impacted by the inclusion of our proportional stake in [indiscernible] costs. Administrative and others increased by 8.9%, again, mostly impacted by inclusion of [indiscernible] Good minor amortization remained flat despite the impact of [indiscernible] as we continue to amortize the recent acquisition. Tax charges decreased as a consequence of revenues geography and as mentioned, adjusted cost-income ratio decreased 1% during the quarter, reaching 37%, and our effective income tax rate remained stable at 19.5%. Look at our balance sheet on Page 20. We see the total assets remain somewhat stable as a proportion of our equity with total assets representing 10x our equity. We continue to maintain strong liquidity levels with more than BRL 100 billion of cash and cash equivalents, resulting in a stable LCR ratio of 160%. Our unsecured funding increased strongly during the quarter with a 7.2% growth while our on balance sheet portfolio grew 2.6% resulting in an expansion of our coverage ratio, which reached 142%. And our total credit portfolio represents now 4.6x our equity, that's a reduction from the previous quarter when it was 4.8x. So you see that despite the strong portfolio growth in both corporate lending and in consumer finance, the high profitability and especially the strong capital generation continues to support the expansion of all our business lines. Looking at our unsecured funding base on Page 21. As mentioned in the previous slide, our total funding grew 7% during the quarter and 32% when we compare to the second quarter of last year. So basically, we grew our total funding by BRL 100 billion during the last 12 months. Demand deposits also grew in line with total funding. So we kept our ratio of approximately 7% of demand deposits as a share of total funding. And during the second quarter, we managed to secure a BRL 210 million syndicated loan for BTG Pactual Europe, our bank in Luxembourg with banks participating across Europe and Asia, reinforcing our international presence and supporting the expansion of our European platform. Finally, when we look at our basal ratio and bar, we see that base ratio increased slightly to 16% with our core equity Tier 1 increasing 20 basis points to 11.6% and showing a balanced approach to capital generation and capital usage. And as mentioned before, VAR reduced to 22 basis points as geopolitical and macroeconomic uncertainties increased during the quarter. I think with that, we can go for questions.

[Operator Instructions] The first question comes from Yuri Fernandes with JPMorgan.

Congrats for another good quarter here, like delivering ROEs. But I think the main questions we have here is regarding the consumer finance unit, the sustainability, and I think on Cohn, Renato already mentioned a little bit of the moving pieces. So I want to get a little bit of more color here. So I think you mentioned, Renato that the main driver was auto loans. . If you can provide a little bit of more color what was this on Banco Pan and just on [indiscernible] I think I heard you mentioning that you consolidated 6 months in the quarter -- so I want to ask if this is going to be the recognition or now it's a quarterly base. So in the third quarter, we should see this more normalize in the fourth quarter. And I got you mentioned that the run rate should be healthy, right? Because you said like [indiscernible] was stronger by the end of the quarter than at the beginning of the quarter. But I just would like to understand if the recognition here is going to be every 6 months or this is going to be on a quarterly basis now. And then I have a second question regarding the SMEs. We note your SME portfolio down almost 20% quarter-over-quarter I know this is an important pillar for growth for you, but I also understand there is a higher risk credit outlook in Brazil. So if you can provide some comments on what is the strategy for SME. I would appreciate.

So thank you, Judy, for the question. So for the first question regarding the improvement of consumer finance business lines and revenues. The majority of the improvement comes from Banco Pan in general, right? So part of it comes from auto loans where we had a larger portfolio and lower impact from provisioning. You remember that in the first quarter, we did a revision of the 4,966 rules on the expected loss. So there was an impact -- a one-off impact there in the first quarter, which was not present during the second quarter. So that made an increase or an improvement in auto loans. But Also, the private payroll loans also contributed significantly with the growth of the business, right? We continue to increase portfolio originations within the private payroll loan segment. Right? So the majority part of the improvement comes from Banco Pan and then we added [indiscernible] and as I mentioned and you correctly pointed that we added 6 months of revenues of [indiscernible] And from now on, we will add quarterly numbers. What I said is that because of the ramp-up of the portfolio of [indiscernible] after establishing the partnership with BTG is that the run rate by the end of the quarter is much higher. So we don't expect an impact of this difference between a recording a quarter revenues in the third quarter with the half the first part because the partnership was beginning at the beginning of the year, and now it's in a more significant run rate, right?

If I could just complement Cohn's answer. I think we saw a significant quarter-over-quarter improvement, which was a result of both the synergies and the we're basically reaping the benefits and change in strategy and integration of Banco Pan and also now of our partnership with [indiscernible] and we expect to continue to grow from this level, but at a slower pace than what is quarter-over-quarter growth. . But we are very encouraged by what we see on both different franchises. And of course, we are as worried as everybody is worried with the level of indebtedness of individuals. So we are underwriting to very conservative standards. And in our view, the scenario will get worse before it gets better. That's why we are concentrated online, which have collateral or lower risks. And we are already. Actually, we have been underwriting, expecting deterioration already for, I would say, for quite a while. This deterioration has taken longer than what we expected to have -- that have happened, which has been very good. But we are already encompassing this and already reducing exposures to , let's say, the segments of higher risk or products with higher risk. So as I mentioned previously, we are always underwriting credit, be it in corporate, be it in consumer finance and spread per unit of risk. And of course, the unit of risk encompasses the scenario, which we expect. And in the SME portfolio, it was a small adjustment because since we're consistently reevaluating the spread per unit of risk. There were some lines which we thought were a bit the competition was a bit too intense. -- which we reduced at this moment, and we can go back to increasing if we expect the spreads to adjust or we don't see, unfortunately, in the short term, the risk improving. It's more related to the spreads than to the risk in this case.

The next question comes from Daniel Vaz with Safra.

Congrats on the results. maybe 2 questions on my side. First on DCM, how does the pipeline look for the second half of the year if you have any visibility on that? And maybe some comments also on the recent league tables with some other banks being more aggressive to win mandates. And the second question is regarding a more recent debate that some economists have been bringing to the table of a recession in 2027, a possible recession in 2027. I would like to hear your opinion on how BTG is seeing this scenario and if the environment does deteriorate effect, how would you expect to be more opportunistic again on capital allocation, maybe including equity stakes in companies that you can be on very cheap valuations. I'd love to hear your comments on that.

Thank you, Daniel. So our perspective on DCM is an improvement from Q2, maybe not to the level of Q1, but we are seeing marginally a bit of a better market. You are correct. . We are seeing a competition for league tables, where we think sometimes the underwriting or the firm underwritings are not in our view justifying the spread per unit of risk. So we're fine, giving up market share if we don't think that the price adjusted -- the risk-adjusted price is correct. So as I mentioned previously, that's our philosophy, which also works for DCM. So it's just -- it is what it is. We have seen these cycles throughout the last decades since I've been here. Every once in a while, the market gets a bit irrational as people fight for league tables, but eventually, economics prevails, especially, as you mentioned, and a tougher macroeconomic environment, which I think is becoming a consensus. I think it's consensus that the level of indebtedness of families is too high. The level of indebtedness of the government is so high the level of interest rates and too high and at some point, this will end up impacting the economy. And as I mentioned, we are underwriting to this scenario. We think that's a very probable scenario. If it doesn't happen, great. But our job here is always to -- especially when underwriting the balance sheet is to underwrite to the worst scenario expected. If there are going to be opportunities or not, let's say, time will tell, but we will continue with the approach we have always had, which is to always pay attention to different market opportunities presented by the different scenarios.

The next question comes from Mario Pierry with Bank of America.

Congratulations on the results. Let me ask 2 questions as well. First one is on capital. Sallouti, you showed your common equity Tier 1 ratio of 11.6%. But it is down from 12% 1 year ago despite right, this 27% ROE. So clearly, you're growing into businesses that they are more capital intensive. . Can you talk a little bit about how do you see capital evolving? And what do you think is a minimum common equity Tier 1 ratio that you'd like to have? And then the second question is going back to the corporate loan book and this change in loan mix that we saw, right, like the decline in SME loans, we didn't see an impact on your overall spreads the number that you showed by the credit spread for the portfolio was 3.5% versus 3.4% in the first quarter. So I'm just wondering, should we see this change in mix, having a negative impact on your spreads and does it could mean slower revenue growth going forward?

Mario, thank you for the question. So first, in terms of capital ratios and capital usage, I think we are in a pretty balanced way if you see, it has been somewhat stable with basis points increase or decrease quarter-over-quarter as we add a lot of capital every quarter by the high level of profitability. So as you know, our dividend policy is to pay interest on capital or 25% of the profit. So that means we retain approximately 75% of the profits, right, with the existing 26.7% return on equity, that means that we are adding about 20% or a little bit more than that in capital every year. Right? And that supports the pace of growth for our business lines that do consume capital. Several of our business lines do not consume capital. So the lines that consume capital mostly are exactly the corporate lending book and the consumer finance book. So I think we are in a kind of a sweet spot in terms of capital generation and capital usage, right? Regarding the average credit spreads, right, related to the reduction of the SME portfolios, you might remember that most of our -- or almost all of our SME portfolios are types of collateralized portfolio. So with an average spread that is similar to the large corporate spread of the book. So there shouldn't be a major difference there. And as Roberto mentioned, what we did is some sort of portfolio adjustments, right, but reduce credit spreads for those that we thought that the level of spreads did not justify the risk we are taking despite being collateralized. Right? And we shifted an increase more in the corporate and large corporate book where we saw opportunities with higher spreads. So there was -- and we shouldn't expect a change in credit spreads.

That's very clear. I guess just like a third question here. It's more of a follow-up as well to what you said about the efficiency ratio improving you are realizing some synergies from Pan. But also, I think this improvement has to do with the revenue mix changing, right? You're having more of a compensation of this consumer finance and corporate. Is that a fair assessment that your efficiency ratio is better in these 2 segments than the other segments?

Yes. naturally the businesses that use capital have a better ratio than the businesses that do not use capital. But I think it's a combination of various things, right? We're living a technological revolution with AI. We had the integration of PA. We are growing, as you mentioned, consumer finance and corporate lending, but we're growing wealth management faster. It's also the fact that we have the J-curve of the various new market products and segments that we have been penetrating. So I've mentioned in the past, let's say, the high-income retail investment platform, the personal banking platform. This will be happening now in consumer banking. This will be happening in cash management. This will be happening in payments as we'll be happy in acquiring. This will be happening in our wealth management offering of Europe and the U.S. So the truth is a combination of various things -- but I would say, if you ask me personally and sincerely we've never mapped out what is what. I think the most important effect is the J-curve that we have of the significant investments that we delivered over the last few years as we launch new products and penetrate new segments.

The next question comes from Renato Meloni with Autonomous Research.

Congrats on the numbers. So first, if you could just expand a bit on your comments about the credit cycle. Do you expect loan growth to decelerate throughout the year, particularly in corporate lending? Or you still think that you can maintain the same level maybe via your international expansion? And if you allow me for a second question here, I want a bit more clarity on the impact of mild winter numbers this quarter. Can you give us an order of magnitude if you're considering the revenues recognized and the expenses what was the contribution to the pretax income. And then if you can talk more about [indiscernible] I'm assuming that given this high level of growth, it bottom line contribution is still dilutive to ROE. So can you give us a sense of where are we, we will stabilize there? And at what pace we should expect this to become a contributor .

So on the credit cycle, there are many factors in play here. We talked about a weaker DCM market. And I think I mentioned this in our last call. Last year, we did not increase our large corporate portfolio in Brazil because the competition from that capital market was intent. This year, with slower debt capital markets, there is more opportunity for the corporate lending book. We continue to benefit from our penetration in the corporate and middle market segments where we basically had 0 presence a few years ago. We continue to benefit from our geographical diversification, and we are already underwriting to conservative macroeconomic environment. So with that, and where we see right now the market, we do expect that yes, we can continue to grow, let's say, to the -- between 15% and 20% growth for the year in the portfolio with a healthy portfolio given all these different things that I mentioned. On [indiscernible] can complement me, but we're not ready to discuss any details at this moment. We have just basically started this partnership they have been growing strongly. As you know, this is a business of scale. So we do expect profitability to increase as the portfolio grows. And as you also whenever you grow the portfolio, you always have to make initial provisions, which is -- which brings the profitability a bit more over time, which is why we're comfortable to say that we have this let's say, this good improvement this quarter in consumer finance, but we do expect to continue to improve and grow from these levels at a slower pace. But all these factors that we mentioned, the improvement in the partnership on the contingent portfolio. Even in this -- what we are seeing in the environment, we expect to continue to grow from these levels.

The next question comes from Thiago Batista with UBS.

I have a follow-up question on Stage 3 of the consumer lending. The level achieved almost 14%. And so we mention that you guys are expecting maturation ahead. [indiscernible] talking competitor. This 14% was a little bit much higher than expected and probably much higher than most of the peers that we look only as compared to new bank, for instance, they have half of this level of stage 3, I know that the mix is different. So my question here is, can you provide any number to us, for instance, the level of delinquency ratio of this portfolio to trying to see if this 14% has been a kind of conservative approach of BTG or if the quality of this loan is not really good. understand to help at understand if this 14 is okay? Or is this a point that should worry investors?

So I'm going to start commenting the last point, I don't think it should worry you. I think it's a very tough job for you to compare the different product types and the different moving pieces the speed of write-off, if you sell NPLs, if you don't sell NPLs. So there are many factors. For example, this quarter, we usually sell the NPLs of Pan. This quarter, we thought it was the right economic decision not to sell. This led to an increase in what you can call Stage 3. But since early, we thought it was the right economic decision. So there are many moving pieces, and we understand naturally, we understand your worry. We are discussing ways to -- we can do to make you comfortable. We are very comfortable with the level of provisions. We are very comfortable with the results. But I agree with you that especially when you look at the accounting the GAAP financials. This is very hard to read and very hard to compare. So we -- but -- going to the end of your question, no, we're not worried, and we think we have very healthy provisions.

The next question comes from Pedro Leduc with Itau. Please go ahead.

Just 1 quick follow-up on Consumer Finance. I recall last quarter, so what you gave an interview Span historically 12% ROE, and you should converge to the consolidated group level by '28 and I'm wondering where we are in that process? It seems like this quarter, there was a material and I'm calling it pun, but not simplified on consumer finance. What kind of ROE levels are you running there today already? And then the second question would be on corporate lending. Revenues up 7%, loan book up 2.5%, even though SMEs fell, so the implied yield looks like to have gone up. If you can help us put it together, what drove it? Maybe it was funding, maybe it was special sits maybe a lower cost of risk in corporate just for us to understand a little bit what drove this slightly higher revenues the way you reported versus loan book in for print. Thank you.

One, I think we are quite on track. We might be able to anticipate that goal by a few quarters given how we are seeing things. Right now, we are still a bit below 20, but improving. So pretty much we continue with the same expectation, we might be able to be there maybe 1 or 2 quarters before than we had expected. . Given that we have been able to implement changes at a faster pace than we had imagined. And I'll let Cohn answer the corporate lending.

I think you asked about the corporate lending credit spread, right? This was a little bit higher than previous quarter. I think many factors contributed. So cost of fund is one of them, as you mentioned, and also a little bit more revenues coming from special seats, which also despite the recurrence that we see in special situations contribution with there are -- there is some volatility there, right? So a little bit of higher contribution also from special seats. But it's a combination of factors, a larger portfolio, lower or improved cost of funding and also a little bit more of contribution from special situations.