Banco Pan S.A. (BPAN4) Earnings Call Transcript

Good morning, everyone. Welcome to Banco Pan's teleconference for discussing our results related to the third quarter of 2025. This conference call is being broadcast in Portuguese with simultaneous translation into English. To select your preferred language, click on interpretation on the applications menu. This conference's audio and slides are being broadcast simultaneously on the Internet on our company's IR website, www.bancopan.com.br/ir and via Zoom. This event will also be available for download after its conclusion. We would like to inform everyone that this event is being recorded. [Operator Instructions] Before proceeding, we shall inform you that statements that may be made during this conference call related to Banco Pan's forward-looking perspectives, projections, financial and operational goals are based on the beliefs and assumptions of the bank's management and on information currently available to the company. Future-looking statements are no guarantee of future performance. It involves risks, uncertainties because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that general economic conditions, industry and other operating factors could also affect the bank's future results and could cause the results to differ materially from those expressed in such forward-looking statements. With us here today, we have Mr. André Luiz Calabro, Banco Pan's Director, President; and Mr. Inácio Caminha, Head of Investor Relations. We will now give the floor to Mr. André Luiz Calabro, who will begin today's presentation. Please Mr. Calabro, you may proceed.

Good morning. Thank you, everyone, for being here with us today in our earnings release. And before talking about our performance in the quarter, I would like to mention this relevant factor we have disclosed recently. We were told by our controlling shareholder about the incorporation of shares. And all the needed analysis are ongoing now. They are being done by our independent advisers. They are ongoing, and we are waiting for information. Any additional information relevant will be promptly informed to the market according to the transparency that guide our actions. And now let's talk about the highlights of the quarter. I would like to highlight some important points that we had. The first one is the expansion on the credit origination new and about the products in all the segments. We grew a lot in the private loan. We resumed the leadership in motorcycles, growth in used vehicles. Also, we are working now for having a rebound in the INSS in the next quarters and also a gradual rebound on the cars and private loans where we have been careful because of the macro scenario in the country. Regarding operational leverage, okay, we disclosed in the last quarter, we had this exceptional portfolio as a strategy. Also, we had an improvement in the expenses. So besides increasing the portfolio, we have had an improvement in the expense personnel expenses, admin expenses, we have had good results with a decrease in the indicators. Regarding revenues, well, we have growing margin and growing fee revenue. Regarding delinquency, there was a decrease in motorcycles and light vehicles. We have had better controlled delinquency. And of course, private loans and cars, we are being more careful because of the scenario in the country, the macro scenario. So we have been working with more controlled production and delinquency, it's kind of nervous, if I say so. Regarding efficiency, we are working with the B2C channel originations there. So we have had several AI models that we are using data models combined. It's intensive work this strategy. Regarding self-service, we have had good results, very positive indicators results, our client experience and the bot usage has been increased so that we can offer a better service to our clients. And the last highlight, really important regarding the quality and the focus on our clients, it's important to highlight that for the second quarter in a row, the bank has presented good positions in the rank. Last half, we were in 6th in the Bacen Ranking so have improved. This shows our commitment to our clients in the Reclame Aqui. We had 8.18. So this shows our commitment to our clients as well. And of course, we have been working in our new app. It is a long-term project. We are going to disclose more novelties in the next half, or I think these are the first points and Inácio is now going to continue with the presentation.

Thank you. So now continuing to Page 3. We have showed details about how the results of the bank have kept around BRL 200 million. So we have reduced the credit assignment. And in the second quarter, there was no credit assignment. The portfolio grew strongly. So reaching BRL 61.5 billion, leveraging the results and ROE evolving to 12%. In Page 4, we have the big numbers, the big figures, clients, we closed with BRL 32.5 million in this quarter. The portfolio BRL 61.5 billion, representing a growth of 6%, very important growth in the quarter. Net income growth of 9%, amounting to BRL 209 million and ROE 12.1%. Regarding the engagement on Page 6, we were rather kind of flat this quarter, total and active clients, 59% of our base 2.3 products in the cross-sell index, PIX keys 9.5% and transaction volume amounting to 32.3% in the quarter. Regarding origination on Page 7, we have here a rebound driven by vehicles. We had a record origination of BRL 5.2 billion and also the new product, private payroll loan in which we are working hard. We had very good results in this quarter. Public payroll loan less INSS is still with volumes, but we imagine that in the future, we are going to escalate it again in FGTS and [indiscernible] landed stable in this third quarter. So we originated BRL 8.4 billion, BRL 1 billion more than on the previous quarter. Credit portfolio, BRL 61.5 billion, an important growth of 6% in the quarter. Vehicles is the main portfolio with BRL 36.5 billion, almost 60% of the portfolio, public payroll plus FGTS, decrease in the margin due to smaller origination and private payroll has more relevant growth totaling BRL 2.8 million in a portfolio for which we see a very promising future. Regarding credit cards plans, volumes more growth because of credit characteristics and the behavior of the product. And regarding delinquency on Page 9, portfolio mix changes gradually, especially with the reduction of the payroll loan and FGTS. So we have more risk in operations, but we offset this with more spread. When we look at the indicators in arrears, we see that there was vehicles here contributing here vehicles increase in the -- of over 90%, but we perceive this in the total movement of the portfolio because that the clean portfolio is kind of more difficult, okay? So due to this on Page 10, we see that new cards issued continue with a limited offer with 144 new credit cards and TPV also decreasing to BRL 3.6 billion with a BRL 63 million revenue. Insurance on Page 11. The performance was strong here see the relationship it has with the vehicles, but also with the private payroll loan. So we can work on several types of policies to our clients amounting to BRL 268 million in prices issued and BRL 124 million in revenues in the quarter. Now the financial highlights on Page 13, we see that our interest margins totaled in the quarter, 17% with that I mean we did it and in the arrears on the portfolio assignments. Credit cost had 9% in the quarter. It's a level very close to the first quarter of '25. And in the second quarter, there was this decrease because we did this arrears portfolio assignment in the second quarter. So we analyze the margin, financial margin 14.8%. If we hadn't done these assignments in the last quarter, the cost of credit would be quite almost flat. So we see how comfortable we are here with the risk management at the bank. And of course, NIM after credit cost closed at BRL 7.4, BRL 1.1 billion on the quarter. On Page 14, we have the lines regarding the results, well expenses. We see that the efficiency agenda is working on the personnel expenses, for instance, we reduced to BRL 201 million in the third quarter expenses as a whole decreased gradually and expenses with conclusion fees also decreased. So we have this ongoing work bringing more leverage to the bank. Regarding the revenues, we see an important leap in the level, we had BRL 420 million around, and now we have reached BRL 464 million this quarter and profitability, BRL 209 million, 12.1%, so to close this first part of our call, we have equity and capital, 12.7%. And with that I close the first part and open for the Q&A session.

[Operator Instructions] So begin with a question from Brian Flores from Citi.

Well, I have only one. Well, it's clear that you are broad origination, congratulations for this initiative. But also we see that the risk cost is growing notably, of course, because of the way we are operating. But I would like to understand if the margin adjusted according to the risk would continue on this level? Is there a space for improving? And please, could you explain about the levers of this potential improvement?