AGI (NYSE:AGBK) Q1 2026 Earnings Call

0:00 Good afternoon, everyone, and welcome to AGI's First Quarter twenty twenty six Earnings Conference Call. Today's conference call is being recorded. At this time, I would like to turn the call over to Felipe Gaspar Oliveira, Head of Investor Relations. Please go ahead. Thank you and good afternoon. With me today are Marciano Testa, our Founder, Chairman and CEO and Marcelo Dube, Chief Financial Officer. Throughout this conference call, we will be presenting non IFRS financial information. These are important financial measures for AGI but are not financial measures as defined by IFRS and may not be comparable to similar measures from other companies. Reconciliations of the non IFRS to the IFRS financial information are available in the earnings press release.

0:51 Unless noted otherwise, all figures are presented in Brazilian reals. I would also like to remind everyone that today's discussion might include forward looking statements. We do not guarantee future performance and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties and could cause actual results to differ materially from our expectations. Please refer to the forward looking statements disclosure in the earnings release. I will now hand over the call to Marciano. Good afternoon, everyone, and thank you for joining us today. During today's call, I will walk you through our strategic progress.

1:38 Following my remarks, our CFO, Marcel Rondwe and our Head of Investor Relations, Philippe Gaspar, will take you through the financial in more details and then host the Q and A session. We had a solid start to 2026, and we are pleased to share our first quarter results with you. So, before going into details, I would like to remind you of the three principles I mentioned in our last earnings call, which is guidance our executions. First, we lead before the customers with a clear focus on driven engagement on our hybrid platform and increasing the usage of multiple products.

2:26 We showed a strong progress in the first quarter with total active clients growing more than 50% year over year to over 7,000,000. At the same time, product penetration continued to evolve with customers who have a primary relationship with us using on average more than six products risen to above seven products among our most maturity cohorts. Underscoring the cross selling opportunity within our model and validating our high touch relationship strategy. Over time, we aspire to become the primary financial institution for all our customers, delivering a growing range of financial solution to support them across different areas, reinforcing the consistent execution of our long term strategy.

3:29 Second principle, enhance our platform. Before going into the numbers, let me start with the important structural evolution of our company. This quarter marks a key step in how we are building AGI Bank for scale. We have evolved into a business units driving organization where each vertical wants the full customer journey from origination to servicing. At the same time, have a centralized risk management, data, and artificial intelligence across the platform. This is not just a real organization, is an extra upgrade in our business architecture. It allow us to combine agility at the business level with consistency and control of the platform levels.

4:22 As a result, we are improving decision making speed, reducing cost to serve, and reinforcing our ability to scale efficiently. This model is a key enabler of our profitability and one of the reasons we believe AGI is the structure differentiates and continues to its trending position in the market. Finally, the three principles, entrepreneurial culture focus on long term returns. This quarter clearly demonstrates the resilience of our business model. After the temporary disruption in the payroll credit ecosystem, we saw a consistent recovery through the quarter. By March, our credits origination had already reached 106 of pre suspension levels.

5:15 Also in March, we observed a clear inflection point in our fee business, with a strong recovery following the adjustments implemented earlier in the year. These were very important signs that show that demand remains strong, that our distribution model is responsive, and that our operational execution was efficiency even under stress. In a simple terms, the disruption was only temporary, but our recovery is structural. This is reinforcing our conviction that our long term thesis remain fully intact. Summarizing the first quarter of twenty twenty six, we demonstrate a resilient business model capable of navigating short term volatility.

6:09 We also delivered important improvements supported by scalable platform and our new organizational structure and technology foundation. We continue to operate in the largest and underserved market where structural demand remains strong, especially in the payroll lending. We are resilient, we have scalability, and a structural advantage in this market. Finally, we always operate at the intersection of technology, data, and now artificial intelligence and human interaction. Serving a population that is not natural tech savvy, this position remains a competitive advantage for a long term.

6:55 With that, I will now turn it over to Marcelo and Felipe, who will walk you through the financial performance in more details and host you in a Q and A section. Thank you, Marciano, and good afternoon, everyone. I'm pleased to report that we had a solid start to 2026, which demonstrates the strength of our unique hybrid business model. In the first quarter, we continue to execute against our core strategic priorities, growing our client base in Brazil with a focus on multi product relationships, expanding our market leadership in the payroll credit segment through new product releases and integrations, and maintaining our status among Brazil's most efficient and trusted financial institutions.

7:49 Taking a closer look at customer growth as seen on Slide nine, total active customer count increased 53% in the first quarter compared to the prior year period and 5% quarter over quarter. And we exited the fourth quarter with 7,100,000 active customers, which we define as those using at least one product at quarter end. That growth demonstrates the resilience of our thesis, as earlier explained by Marciano. Turning to our credit portfolio on Slide 10, total loan balances grew 30% year over year in first Q twenty six to BRL35.5 billion.

8:37 Our credit portfolio maintains a healthy mix with secured loans representing 87% of total or BRL30.7 billion, and unsecured loans representing 13% or BRL4.8 billion. We believe this mix brings a sustainable balance of profitability, credit quality, and focus on long term relationships with our clients. In private payroll credits, an offering that completed one year in the first quarter following its March 2025 launch, our portfolio reached BRL1 billion. It is worth mentioning that our appetite for production of this product remains strong after making enhancements to its credit model.

9:27 For public payroll credit, a growth lever in our credit portfolio that brings our business model to municipalities and regions where the footprint of the traditional banking system continues to be less accessible, AGI finished the first quarter stable at BRL0.3 billion. Unsecured lending restricted to account holders who maintain primary relationships and direct deposits arrangements with AGI, which mitigates default exposure while improving margins expanding 4.8% year over year to BRL4.7 billion in this quarter. Quarter over quarter, we see a slight decrease sequentially following the suspensions.

10:14 However, we saw in this first quarter an increase in the number of clients with principalities surpassing the number of 1,400,000 clients. Within an SS payroll credits, we continue to successfully execute against our strategy of being the disruptor of this segment in Brazil, as you can see on Slide 11. Based on our strong positioning with the NSS and leveraging our competitive advantages in this segment, our market share in Q1 was 9%, an increase of two ten bps year over year. It is worth mentioning that we were able to maintain our market share levels, even though the recent periods of regulatory volatility.

11:06 With regards to credit quality on Slide 12, non performing loans exceeding ninety days declined slightly in the first quarter to 3.6%, reflecting normalization in defaulting cohorts. At the quarter end, NPLs for the overall portfolio remaining comfortably below the average for consumer credit in Brazil, which continues to trend up. The coverage ratio measured by provisions over NPLs over ninety days was 165% at the end of March, a level we consider comfortable to operate going forward. Turning now to our revenue on Slide 13.

11:56 In the first quarter, we delivered a total revenue of BRL3 billion, an increase of 24% year over year, and 1% quarter over quarter, even considering the disruptions in the period. On Slide 14, we see net interest income growth of 9% year over year and 4% quarter over quarter to 1,300,000,000. The slight decline in NIM on an LTM basis is primarily due to asset mix with a lower contribution from personal loans in the credit portfolio and a higher allocation to other interest bearing assets, which typically carry lower yields compared to loans.

12:43 On Slide 15, we see net interest margin on an annualized and LTM basis. As you can see in the first chart, the annualized NIM was 12% and after provisions was 7.3%, expanding 50 bps on a quarterly basis, suggesting that the portfolio is in a normalization path after the impacts of the suspensions. Moving to efficiency on Slide 16, which highlights the operating leverage embedded in our unique and highly scalable business model. Our operating efficiency ratio, which we calculate as NII plus fee revenues divided by operating and personnel expenses, improved to 43.2% in the first quarter, down two fifty basis points quarter over quarter, excluding non recurring events of the 4Q twenty five.

13:47 Continue down the income statement and to Slide 17, recurring net income in the first quarter reached BRL186.5 million, an increase of 14.7% over the previous quarter, adjusted for non recurring effects, primarily related to legal outcomes from civil contingencies, indicating that AGI's profitability improved quarter over quarter. Speaking briefly to our funding approach on Slide 18, as a regular debt issuer, AGI maintains established relationship within Brazil's credit markets, diversifying funding sources to support portfolio expansion. As a result, total deposits reached BRL39.3 billion, an increase of 37% from the first quarter twenty twenty five.

14:43 Institutional counterparties represented 55% of total funding, while retail sources came to a share of 45%. Moving to equity on Slide 19, it increased 42% in March 26 compared to December 25, especially impacted by the IPO proceeds. AGI's consistently above average ROE track record enables self sustaining capital generation. Return on equity over the last twelve months was 26.1%, impacted by the proceeds of the IPO now being accounted for in the net equity.

15:29 Lastly, as you can see on Slide 20, our capital adequacy ratio consolidated at the holding level, stood at 19.3% in the first quarter, with a Tier one capital ratio of 18.1%, reflecting proceeds from the IPO as well. Looking forward, we remain confident in AGI's long term investment thesis, its execution capacity and its positioning to be a winner in this segment, addressing the financial needs of millions of Brazilians. On behalf of AGI, I would like to thank you all for your interest and support. And now, we would like to open the call for the Q and A session.

16:15 Thank you very much. Operator? Thank you. We will now begin the question and answer session. The first question comes from with Goldman Sachs. Hi, good evening. Marciano, Marcelo, Felipe, thanks for the call. I'm taking my question. Congrats again on the IPO. I guess my question, two questions, if I can. First, just on the regulatory environment, right, we continue to see a lot of noise there, right last week, there was also the TCU suspending INSS, payroll loans.

17:01 We spoke last week a little bit, but just any update on that? What is the potential risk of that actually happening? And then also, saw that the Centrulla 2.0, which came out yesterday, making some changes there, particularly for the credit card payroll, and which could potentially impact you reducing the percentage that you can borrow up against although extending the duration. So how do you think about those impacts and any other regulatory impacts to consider? And then just operationally, thanks for the chart on the monthly origination. Increase that you're seeing, does that also include the unsecured? Because I think that was the headwind this quarter. Are you seeing unsecured lending also picking up? Thank you.

17:54 Hi, Tito. How are you? Thank you for the question. So first of all, let's be clear that that is not specific to AGI TCU federal court decision. We don't have a concern about the TCU decision. We consider this matter related to ongoing the on the government and the regulatory bodies and is under future review across the government institutions. So it becomes public today that the government appealed and suggests maintaining the payroll credit working and keeping suspended credit cards to the enough period to review the implementations that is they suggest to NSS.

18:46 In our review, a relevant portion of the points has already been identified and is being addressed by NSS, DataPrev and also the financial system. For now, our operation remains fully operating as usual and if they decide to spend the credit card for a while, we don't have material impacts in the origination. Also, it's a small part of our credit portfolio. No structural impact to the business. We do not anticipate changes to the product's fundamentals, demand's dynamic margin, our risk profile as the focus of the discussion in our training, controls and the process.

19:40 For AGI's AGI's perspective, we have already put the majority of the measuring priming in the tissue really in place. Therefore, we should not have the material impact on operations and at this point we do not see a material impact on margin of risk, although we continue to monitor potential developments closely. The second part, the second question is regarding DESMROLA. Yesterday the federal government of Brazil initiated a new phase of the DESMROLA program and amended at reducing the debt service ratio household indebtedness throughout the set measuring across the different credit products and segments of the financial system, designed especially for the low income segment, where historically Brazil has the high DSR over their income.

20:42 In our case, we can capture opportunities across the customer's life cycle. Around 25% of the unsecured portfolio is eligible for having benefits of the program. It's roughly BRL1.2 billion. Specifically in the NSS side, we see a very positive measure to shrink the compromise of the income from 45% to 40% and keep it reducing 2% every year up to 30%. Regarding these changes, we are also following the details and as they are implemented and believe we are well positioned to adapt quickly and leverage our technology and capabilities that integrate disruption in our disruption model.

21:36 Basically, is positive over time because improved customer financial health, support better credit performance and portfolio quality and reduce long term risk. The end of this exclusive card linked margin could allow us to the bank to grow more through the payroll loans where we are specialized. As for unsecured personal loans, we could expect lower NPLs. The credit demand could also potentially increase as a result of our decreasing NSS payroll offering. So also to finally, the cross sell and penetration fee products could theoretically increase given in the high disposable income in the salary.

22:30 So thank you. I pass to Marcelo to complement. Hi, Tito. Well, just to complement and to also answer your final part of the question regarding the unsecured loans. So just to complement on this, this is Hola. So the conclusion is for us that is it contributes to a healthier portfolio of credit, and therefore, allowing us to one optimize the payroll credit in one side, and have more disposable income of the client to eventually to have more cross sell and more other credit products as well. So then going back to going back to the unsecured loans, you asked about the growth, right? So for the unsecured loans, we see a normalization of the origination, in March.

23:31 But the overall size of the portfolio is still reduced 2% compared to fourth quarter. That was mainly due to the short term duration of the nature of this portfolio, and the interruptions that we had throughout the period. But that growth is already covered in the month of March. We see a very healthy levels already of production of the unsecured. Okay, great. That's helpful, Marcelo and Marciano. Thank you. The next question comes from Gustavo Schroden. Hi, good evening, Marciano or Marcelo.

24:24 Thanks for the call. I have two questions as well. So the first one, I'd like to explore with you on this front, regulatory front, but regarding the insurance brokerage insurance, we saw a relevant decrease in the quarter, especially if you compare it to last year. Showed the recent trends and a monthly trend. We can see an improvement, but this is still running below, I mean, last year. So what is the what is the, let's say, actions that the bank has a thought to, let's say, control these and be back to to have a higher brokerage insurance revenues.

25:23 So I think it is it is important to us to understand how the bank is managing this this evolution. And second, about the net interest margin. We understand that there was, let's say, mix impact in the quarter. So that can explain this reduction. But if you analyze, let's say, one year period, net interest margin is declining even with, let's say, when you had a relevant origination of unsecured loans. So it would be great if you share with us what is the trend for net interest margin in the coming quarter? Should we continue to see net interest margin declining?

26:20 Or do you think that it is close to normalization? Thank you. Thank you, good to be talking to you. So, first of all, regarding insurance, as we saw here in the presentation month of March already, saw a very steep recovery in the product. And the measures that we took throughout the quarter includes reshaping the user experience of the product, so that we have full compliance with the all potential norms of this product going forward that required us to take this product for a few days, weeks out of the market. So that impacted the production of the product. But as we saw in March, it recovered its base.

27:20 And the second part going forward, we foresee this product to continue gradually recovery to get back its normal pace of last year. We have a very efficient bank insurance business, and we are very confident that this product will deliver over time. And it is normal that it will pick up together with the growth of the whole base of clients, and the whole base of credit portfolio that is becoming growing in a faster pace as of now, including month of April as well. And we'll see that in the second quarter probably as well. Also, it is worth mentioning that this measure is announced by changing the payroll credit from ninety six to one hundred and eight months, that also might have an impact on the production of insurance as well. So, it's also an upside in the case in the short to medium term that you can take into consideration.

28:32 So, now talking about NIMs, so NIMs are composed by only taking out of analysis, the fee business only, the credit business composed by the unsecured and the secured loans. What we see is that in the more shorter term, when we talk about fourth quarter and first quarter of this year, we see more of a proportion of unsecured revenues, unsecured part of the portfolio contributing to the revenues, which we know that have much lower yields to contribute to the NIMs, is that in one hand, as we saw the portfolio of the unsecured shrink a little bit 2%.

29:19 Over time, it is expected that to normalize and to pick up and to go back to a point where it contributed, let's say, twelve months ago. But also, when you mentioned that over the last four quarters, we see the NIM going down. That's also do we have to put into consideration the right? We saw on average, when you compare from first Q twenty twenty five to this quarter is 200 bps on average higher, right? So, that's a clear impact in the NIMs. Although we do have very conservative approach to ALM, So we, as we always say, we lock all the durations and indexations of every new vintage of production of credit, but that's every new vintage comes with a new cost of funding, right? If selling is going up, eventually, the margins will suffer in the short term.

30:28 Yes. No, okay. Just a follow-up on that interest margin, just to make clear. So do you think that these, let's say, 12%, it is, let's say, close to a normalized level? So do you think that we should, let's say, estimate net interest margin around this level? Yes. I mean, we are not providing guidance overall in terms of the indicators, right, but we what we can see is that select it will depend, but we see the macro scenario changing from the beginning of the year to now.

31:18 We expected lower Selic rates at this point in the year, at least 75 to 100 bps lower. Now I have to follow what will happen with the Selic over time this year, but it will have a connection to margins. Also, it will take probably one, two quarters for the unsecured portfolio to recover and to occupy more space in the overall revenues of the company. So that's the two combined will impacted into the normalization of the NIMs. So we might see if you have the NIMs going in the same level for one or two quarters to then go back, depending on what happens with the Selic.

32:05 Felipe will complement me just a second. No. So Marcelo, just to complement, I think it's important to mention that in the first quarter, where we see the net interest margin annualized after provisions, we already had a peak compared to the fourth quarter. So it's important to say that it's a sign that is stabilization in terms of margins. And just to add a third point related to the historical figures, one more thing that we have to consider is that the mix between loans and treasury into the interest bearing assets also go down went down in the past from around 90% to 82%. So it's another headwind that we had in the past. And as Marcelo mentioned, we are now in this mixed stable ahead.

32:56 All right, guys. Thank you very much. Thank you, The next question comes from Ricardo Boccepigo with BTG. Hi, everyone. Thank you for the opportunity of making questions. I have two here on my side. So first, we saw a sharp reduction on personnel expenses this quarter, and it will be interesting to see if there are any one off impacts helping here and if we can assume that OpEx is already at normalized levels going forward. And also going back a bit on the discussion on the recovery, we noted that loan origination already has started to recover. You also mentioned that March has already reached the suspension level in terms of total loans and even unsecured loans.

33:44 So can you walk us through whether it makes sense to expect a resumption to positive year over year bottom line growth already in Q2? I imagine the main variable still missing here will be fees to recover, but I wanted to hear your overall thoughts on that. Thank you. Nice to talk to you. So in terms of the OpEx, we see that if you take like LTM basis is in a normalized period. In terms of the specific personnel expenses, it is a seasonal impact. So every year, we will compare projections of variable compensation to the performance of the business.

34:34 So, coincidentally, it's similar to first Q twenty twenty five, what we had this year. And if you sum, you know, the full last four quarters is in line with the last four quarters. So, we see that in a normalized level already the OpEx. So, can you repeat the second part of the question was too sorry. So given that you already have been seeing improvement in terms of loan origination, secure also have been recovering already in March, if you could make sense to expect a resumption to positive year over year bottom line growth already in Q2? And if the main question mark here would be the recovery on fees?

35:25 We are not providing guidance on specifically net income or any indicator compared quarter over quarter. But what we've been saying is that the operational are clearly back in pace. And that is inevitable that at some point in the short to medium term, it will impact directly in the financials. So, we should expect that to be back in pace in a later period, especially in the second, second half of the year. Thank you. The next question comes from with.

36:14 Thanks, guys. Good evening. Question on provision expenses for bad credit around $500,000,000 this quarter. When I look at the breakdown in your financial statements, catches my attention that there are over 800,000,000 in write offs this quarter and 300,000,000 in reversals of provisions that you had previously that netted out to the 500. But 500 then will compare it to an NPL formation of north of 800. So your coverage declined a lot. Help us understand a little bit what concentrated so many write offs this first quarter? I mean, in one quarter you did basically all the write offs that didn't make tired of last year. And then you reversed some provisions you have. Just trying to understand the moving pieces here and how we should think about cost of risk in the coming quarters then. Thank you.

37:07 Thank you. Thank you, Leduc, for the question. I think it's a good opportunity to clarify all these movements that we had in terms of provisions. So in terms of this increase that you can see in the write off, this is driven by a change in the timing that we made that. So before it was three sixty days and now it's two seventy days in line with best market prices. And this is naturally offset by provision reversals because of accounting. So this is why we could keep the cost of risk and the NPLs stable at the levels in terms of quarter over quarter comparisons.

37:54 And also, these changes in our view, it improves the alignment between the portfolio dynamics and the accounting accuracy that we have in the balance sheet. So this is our view in terms of this write off movements. But in terms of expenses over the portfolio, we can see in terms of cost of risk, we are kind of stable compared to the last quarter. And so you're writing off faster now in personal loans, I imagine, not in payroll. So we should also work with a slightly higher cost of risk. Just help us think about that in the next quarters, please. No. Actually, it's for the total portfolio, it's not even for specific products.

38:40 And just to clarify, the NPLs of the payroll loans is much more related to mortality. So this is a kind of normalization of the portfolio that we have by changing this criteria of three sixty to two seventy. That's great, Felipe. You. And look, if I may, on the second question, just follow-up on that personnel expense line. You mentioned briefly, I know there's a schedule of variable compensation. But even when I look relative to last quarter, I mean, your results grew, right? Portfolio grew and compensation fell. When I look at relative to last year, I understand why it dropped. I mean, didn't even drop that much. Was there any specific reversal in bonus or something this quarter in particular?

39:27 No, This is a different periods. So one is in one quarter, you'll see normal compensation for this one is you compare to the full year performance of the company and KPIs. So we have specifically 2025, we not necessarily beat all the estimates internal for budgeting variable compensation. So, there's no correlation between fourth quarter this one. And assuming you perform the next quarter, this line goes up accordingly, right? Probably. Yes, let's hope so. Thank you. The next question comes from Marcelo Misrai with Bradesco BBI.

40:22 Hi, guys. I have another question regarding the other liabilities or the partnership program liabilities. It was so we can see a reduction on the balance sheet. So it's another question here. If there is any specific impact on the expenses side because of that because of this adjustment on the balance sheet of liabilities? Thank you. This is regarding changing the nature of the company, but becoming a public company before when AGI was a private company, the partnership program was had different rules. So the management would receive eventually sell their shares to the company at some point if they would leave the company. So we had a liability provision to buy back the shares of management that would leave the company. And as of now, there's no this option is not available because it's a public company.

41:31 Everything will be settled at market. So the conversation with the auditors is to write that down from the liabilities, but it went up in the balance sheet. So within the net equity, we have the offset of this measure. Okay. So no cash impacts and no impacts on income statement? Zero. And just to do a follow-up here as the last question regarding the cost of risk. So in terms of coverage ratio, so it makes sense to believe that the coverage ratio will be maintained at the same levels that are now looking forward? Thank you. Thank you, Ms.

42:29 Ari. So good follow-up. Yes, we see these levels of that we achieved in first quarter as healthy levels ahead. Okay, thank you. The next question comes from Renato Meloni with Autonomous Research. Everyone, good evening. I wanted to follow-up on your comments about this and follow-up if you can walk us through a bit of the impacts here, right? Because I'm thinking if you if you are to maintain the same exposure that you have with clients, right, but you have to reduce the loan margin on on payroll compensating that with unsecured lending.

43:17 I think this can be very beneficial in the medium term for you guys if you're thinking in terms of the difference in yields here. Of course, there's also a difference in NPLs, but your risk adjusted margin should start going up. Right? Is that the right way to look at this? And what do you think is the pace here? Do you have to immediately reduce the limits for lower margin? Or this is done through the renewals is another question I had on this. Thank you. Hi, Renato. Marcelo here. Just to start this answer and I will ask Marcelo to complement. In the short term, we see a very positive inflow in terms of increase in the income from the salary of the benefits because the shrink of the compromise, it's decreased from 45% to 40% now and goes to 30 in the future.

44:23 This is a positive impact in our case because we are a payer provider of the benefits and we can see the inflow rising in our checking accounts. It's very healthy for our unsecured portfolio and also we are more confident to rise to deploy more credit in the unsecured side. Thanks. I know there's an addition to that. Can you complete your question again, please? Yes. So I'm thinking of the impact here, right? I think Marcelo addressed that. So there's a short term positive impact here since you are extending other types of loans with higher margins to these clients.

45:19 So that's the short term impact longer term. Is that a positive that's going to be sustained? Yeah, so you asked about NPLs as well, right? So in the more medium, long term, we believe this is sustainable for exactly where our long term positioning, strategy positioning is based off, having long term relationships with the clients, right? We see, as we always say, the payroll loans as tool or as a relationship product with this client as we maintain to long term. The payrolls are very important in our strategy.

46:06 And with that, having the principality of this client, and having a client that has a more disposable income, more a healthier credit quality for us is clearly a plus, right, because we will be able to have a long term relationship with this client, and therefore, monetize this relationship over time. And although you mentioned NPLs, although eventually the NPLs might, because of mix, go a little bit up, we look at the appetite for the products as with the loss absorption concept. So, as long as we can provide a credit product to a client where we see 1.5 to two times the NII that product produces over the cost of credit that it has for us is product that will have appetite to continue growing. But, you know, the long term relationship in the healthier portfolio is the basis for better quality for us, and a positive impact.

47:19 That's perfect. Thank you. The next question comes from with HSBC. Hi, team. Thank you for taking my question. First, I wanted to talk about the private payroll origination. We saw fourth quarter was a bit slow in terms of the growth in private payroll loan book. But in the first quarter, we saw a little bit of pickup. It grew 10% quarter on quarter. However, at the beginning, the origination was much more faster. So how do you see this product right now? I remember you mentioned in the last call that you were taking a step back, looking at the older vintages and making changes in the prior period product. So what is your view on this product right now? And should we expect more significant acceleration in the coming quarters? And my second question is on asset quality.

48:20 There was a big pickup in the fourth quarter. And 1Q, it was a slight decline in the NPL ratio despite it typically being seasonally worse. So things have been improving on the last four d front. So should we expect this these levels to continue in the coming quarter? I mean, we don't need numbers, but this is directionally. Should the trend continue to improve, or should we expect NPL ratio to increase as you increase the share of unsecured loan book in the overall portfolio? Thank you so much. Hi, Elena. Good to talk to you. Marcelo here. So in terms of the private payroll, as we said in throughout the explanations of the fourth quarter earnings presentations, we throughout the end of last year, we took a more cautious approach with this product.

49:17 We wanted to observe after making some adjustments in the credit modeling. We wanted to go smaller and see the behavior of those vintages. And we got much more comfortable with that, and we decided to accelerate a bit more cautiously accelerate a bit more in this product, starting in the middle of this quarter, especially beginning of March. So, March and April, we can say we already produce an average north of BRL200 million a month in the product, and that is the level that we plan conditions maintaining the way they are. That's the level we at least want to maintain growing in the product. That's why we already saw uptick in the portfolio of private payroll in this quarter. So then regarding to NPLs, I'll pass to Felipe to complement.

50:21 Yes. Thank you, Marcelo. Hi, Neha, good to talk to you. In terms of asset quality, as we discussed before, we see those levels of NPLs stable ahead due to the mix that we achieved. And one more thing that make us feel comfortable about that is the short term KPIs related to the healthy of the portfolio. As for example, the NPLs between fifteen to ninety days and also the first payment of portfolio that's been improving over time. So this is our view on that. I think you can go to the next question.

51:14 The next question came via Q and A from Rainey Kumar with Oppenheimer. Good evening. Can you provide your outlook for net interest income, loan and net income growth in 2026? Is there any financial guidance you can provide based on most recent trends? We are not providing formal guidance at this point. The next question comes from Jamie Friedman with Susquehanna International Group. Hi, Good evening, and thank you for taking my question. I just had a kind of higher level question. In terms of the regulatory changes at the INSS, is this business as usual and we should be accustomed to it? If you look back over the ten plus years that you've offered this product, how frequent are there regulatory changes?

52:23 I know you say in Portuguese it's something like not even the past is certain. But is there any certainty that this is not going to chronically impact the company's business model? Hi, Marcelo here. We don't see some chronic impact in our business model. This product, the last twenty years in Brazil is fairly stable. Obviously, always when you see the government change, they change a little rules about the products and sometimes the margin to decline from the income rise, sometimes down, is normally of the product and we are very able to adapt our ratios, our model to continue originating very fast and maintain the pace of the origination. So we are very confident with this risk and also when you see the changes that the ANS has promoted yesterday, we are actually very, very excited because when you see the

53:54 future, the reduction of the compromise of income from 45 to 40 and then keeping reducing 2% year over year up to 30%, it's very healthy for the customer, maintaining the long term healthy and portfolio very safe. So basically we see that as normally changes of the products in the Brazil market. Thank you. Okay. Thanks, Marcela. And then as a follow-up, you know, I realize you're not guiding to this, but how should we anticipate the evolution of secured versus unsecured longer term? Like, where do you see those ratios over time and what assumptions may be in there?

54:50 Hi, Jamie. Marcelo here. So, going forward, as we usually mention, our main product is, are the unsecured we are, we consider ourselves as well positioned in this secured lending ecosystem in Brazil to keep growing, to surpass 100,000,000,000 reais credit portfolio by the end of the decade. So, that's a medium term guidance that we can also always provide, and we really believe we are in the path to reach. And today, have 87% of our credit portfolio with unsecured lending.

55:35 That path is will continue to be a pillar of our credit portfolio and probably slightly go a little bit up over time to reach up to 90%. And the unsecured might reach up to 10% over time of the credit portfolio. So that's kind of the long term trend. So no big variations, big changes here in the mix. Okay, perfect. Thank you very much. The next question comes from with Santander. Yes. I I think I think I can complement.

56:46 And I think has any audio issues, but he sent me in parallel the question about the market share in origination comparing to the market share in the portfolio on the INSS And what we can say as we provide the monthly evolution is that when we see the March we see the March origination, we already surpassed the market share that we had in the portfolio. So yes, we are seeing the market share evolution and back into growing surpassing the levels that we had in the portfolio for now. So thank you for the question, Naval. And with that, I pass it forward to operator to end the call. Thank you. Thank you all. This concludes today's conference call. You may now disconnect.