[Interpreted] Hello. Good morning, everyone. I am Renato Lulia and it is a pleasure to have you joining us at another Ita� Unibanco Quarter Earnings Conference. Milton will explain our performance and earnings for the First Quarter of 2025 in a new format from Ita� BBA's auditorium at Faria Lima headquarters in S�o Paulo. Then we will host a Q&A session, in which analysts and investors will be able to interact directly with us from the studio, which is right next door to the auditorium. I would like to give you some instructions to make the most of today's meeting. For those of you who are accessing this via our website, there are three options for audio on the screen. The entire content in Portuguese, the entire content in English or in the original audio, and we will have simultaneous translation in the first 2 alternatives. To choose your option, all you have to do is click the flag at the top left corner of your screen. [Operator Instructions]. Today's presentation is available for download on the hot side screen and also, as usual, on our Investor Relations website. That is it for now from me. Now I will hand over to Milton, and we will meet later next door in the studio for the Q&A session. Milton, over to you.

[Interpreted] Good morning. Welcome to yet another earnings presentation. Let's talk about the earnings for the First Quarter of 2025 with two key changes. First, we have changed the presentation format itself to make it easier for you to understand it and to deep dive. And I will also talk about some disclosure changes we have made, both in the credit portfolio chart and the service and insurance revenue breakdown. In addition, throughout the presentation, I will also highlight the impacts of implementing Resolution 4966 in the Brazilian GAAP accounting practice, and I think I will be sharing good news. Now I will get straight to the point, starting with the results highlights. This traditional chart shows the managerial recurring earnings, ROE, both in Brazil and on a consolidated basis, pretax earnings, NII with clients and efficiency and capital ratios. Moving forward, this quarter, we delivered a recurring managerial result of BRL 11.1 billion, a very sound result with a 2.2% growth compared to the last quarter and almost 14% year-over-year when we translate this result into profitability. In the first quarter of 2025 we delivered a return on equity of 22.5% on a consolidated basis and 23.7% in the operation in Brazil. Both indicators grew on a quarterly and annual basis. By adjusting ROE by risk appetite capital, which is 11.5% for the operation in Brazil, we get a 25.9% ROE. This indicator is more comparable with our peers, given that our capital ratio is still slightly above our risk appetite. On a consolidated basis, our ROE is 24.4%. So we continue to deliver very sound profitability, very high returns, and very positive earnings for the quarter. Even more importantly, we should look at the quality of our result, it's composition. I mean, the results from the inside out.…

[Interpreted] Thank you Milton. Well, I think that it was very nice the format of the presentation. And for those of you that have watched it, it's a very nice value of the new campaign. So as we continue with the Q&A, we have Milton and Gabriel, our CFO. Welcome Gabriel. And this session is bilingual so we answer the question in the language that is asked. If you -- should you need any translation, you can always choose the audio in English or Portuguese. [Operator Instructions] So we have a lot of questions, people have raised their hands. Without further ado, let's start. First question, we have on the screen, Daniel Vaz from Safra Bank. Good morning. Welcome to our earnings call.

[Interpreted] Congratulations on the results. I have two questions on my side. I wanted to ask about growth. I mean it's easy to say that a bank of your size should have more defense of market share and then you have discussions with investors. And we can hear the argument that it's difficult that you can compete in the massified segments against new events. But in another point, the bank does want to be attacker in some fronts. I mean, you referenced that. And given the great level of quality of assets and capital generation, should we expect a more bold position in 2025? And how can we expect the workings of Ita� and niches where you have less market share, looking up ahead?

[Interpreted] Thank you, Daniel. Thank you for the question. So it's two questions, I'm going to start first by credit. We cannot forget that we are in the highest interest rates of the last 19 years, 14.75%. It's not just an issue of offering, but demand that reduces as we see the different businesses. As we have had great opportunities, we've grown the portfolio in many of the segments, very diligently and we have personnel that is focused in our risk management and portfolio management. Of course, this is a dynamic process. But the public, the clients that we want to grow, we've managed to grow two digits, and we gained the market share. So the boldness comes from that. We have a lot of strength in growing in those publics that we understand are resilient in longer cycles. From the standpoint of opportunities, we are optimistic but cautious. Optimistic because, as I told you, we are maybe at the best moment for the balance sheet of the bank for any scenario that we should face, whether if it's a scenario for opportunities, we are ready to rapidly grow our adjustments. We are also prepared with a very resilient portfolio. This capital allocation portfolio with a long-term vision is very important regardless of the fact that we have indicators that are well behaved because these are decisions that we made today that will sustain the balance for the medium to long term. So we are very disciplined. The capital structure is key with the quality of balance sheet that is very strong, seizing the opportunities, and growing in the segments that we believe that we should continue to grow, growing 2 digits. But what you see in the aggregate is the effect of the growth and the derisking, which we…

[Interpreted] Thank you, Milton. Let's go to the second question with Thiago Batista from UBS.

[Interpreted] Well, it's another result that is constant, and we've grown in -- you have grown in a quarter. My question is about the private consignado. So two topics on this. But you had the list of the six biggest players, and we have two states, three or four niche and the six would be 80% of the private market share. And we don't see any of the incumbent, the traditional amongst the players. So how do you position this product? Why you and the other big players, how do you position yourself in this business? What do you imagine that would be -- there would be a cannibalization maybe the exchange for the more expensive income for the other one, so they can pile up the debt. So I wanted to understand how do you see this small market, I understand, but how do you see it?

[Interpreted] Well, thank you. Thank you for this initial consideration. Well, talking about 2 minutes on this consignado payroll loan. So our product unlocks a value. There was always an operational limitation on how to do the agreements with the companies on a large scale. We have the solutions via CTPS that is unified via the eSocial, and that's a change that is relevant and it makes the market to have a relevant growth. Let me give you a few numbers that can help you in your analysis. First information, this is a market of BRL 40 billion, I'm not talking about the EUR 10 billion that were disimbursed over the last weeks. No. Out of the BRL 40 billion, Ita� Unibanco has BRL 12 billion. So about 30% of that market we have it today because we have a strong penetration in the segment and big agreements. So we have used that strategy of the private payroll loan for a long time. So this consignado, if you've seen with the incumbent banks, it has been since the inception, Banco do Brasil Caixa. But we've been in the private since the inception of the concession because we -- and we've learned -- this is very important. We've learned all throughout these weeks. And why do we think it's important that we do this counterpoint? The private payroll loan is completely different from any other consignado that exists. We leave from an anticipation of the withdrawal at the birthday, which has less risk and then you drop down in the chain on the risk. And then you have INSS and then you have public companies. It depends whether if you're working with the municipality or a company and the private payroll loan is no different. You have a company and the…

[Interpreted] Thank you, Milton. Complete result -- complete answer to this recurring questions. Third question now also with us. Eduardo Rosman from BTG Pactual. Rosman?

[Interpreted] Congratulations on the numbers, strong quality. You have digital transformation that has been paying out. My question is what is now? What about now? I think that the threshold is getting ever higher. They are very relevant in a sector that is well-penetrated in an economy that does not grow a lot, unfortunately. So how do you generate value? Where is it going to come from? One Ita� closing all banks, it's going to come from abroad. Help us to -- with your 2 cents on that?

[Interpreted] Well, thank you, Rosman. Always great to see you. Congratulations on the report. And this has to do all the reports as they are published. We read all of them. Thank you for the feedback. I would like to say the following, Rosman. You mentioned many of the points. When we look ahead, we still see a lot of opportunities. This opportunity, we have a breakdown in several segments that we work with. Since the bank in the end of the day, is a big holding of capital allocation with a portfolio that is very diverse with businesses that are non-correlated, some correlated, we can have a portfolio that is very well-balanced and we can find opportunities in all fronts. So when we talk about the business unit PF, you mentioned One Ita�, the natural persons, we are very excited. In the next quarter, I'm going to show you some early indicators of what we've managed to do through One Ita�, is very exciting to see the results -- the initial results. First, the migration of the 15 million clients that we can -- that we migrated until the end of the year, we've migrated already 8 million. So until the end of the year, we should finish the total migration, 99.1% migration, that's the rate precise. So 0 attrition and the NPS of those are migrated above 85%. So you changed, you migrated, no attrition. And the customer experience is 85%, that's very encouraging. And then you get into a stage of offering a full bank for the client that had a monoliner experience, and that full bank experience has had great value in the penetration of products, accounts payable, opening new relations. And now we start to advance in the breadth of the portfolio of the bank,…

[Interpreted] Thank you, Milton. For the next question, we're going to switch to English as we always do because that comes from Tito Labarta from Goldman Sachs. Tito great to see you. Thanks so much for joining the call today.

Great. My question is on the financial margin with the clients. I think very good performance, particularly in a seasonally tough quarter and also given the high base you already have there. Just looking at the year-over-year rates running a bit above the guidance. I mean, you sounded a bit constructive, Milton a bit before on the potential growth outlook. So could there be potential upside? Or just help us think about the continued growth of the financial margin with clients and also maybe beginning to think about, well, maybe we saw the last rate hike earlier this week and maybe the market is beginning to price in potentially lower rates later in the year. So just help us how do you think about that financial margin with the clients given sort of the current environment and potentially the rest of the year?

Thank you, Tito, good to see you, too. Always a pleasure to have you here with us. Let me start saying that we are very positive with the financial margin with clients, of course. When we do our budget, we take in consideration the level of interest rate, we had planned or budget those hikes that we've seen so far. Let's see what happens in the next meeting. But at the end of the day, all of them somehow are incorporated in our guidance that we released in the beginning of the year. So we are positive. I still believe that the guidance is the best information that we have today. But if I had to choose a geography, I would say that we would be much more close to the top of the guidance with the financial margin with the clients that in the average or the midpoint of the average -- of the guidance. So my view is that the range still absorbs our best expectation, but we are positive that we can deliver a near to the top of the range. This is our best estimative expectation, I would say, today. A lot of opportunities. As you saw, the average balance of our portfolio has been very positive in this quarter. We had those seasonal effects of last calendar days, business days and also current days. But in general, all the operations performing very, very well. Of course, the interest rate has an impact as well, being on the spread of the investments and the deposits that we have in the bank, but also on the working capital of the bank that has been increasing quarter-over-quarter. So overall, positive, and I believe we can deliver the top of the range by the year-end.

[Interpreted] Thanks, Milton. Now going back to Portuguese. We have Marcelo Mizrahi. Good luck, you're in BBI. Welcome to the call.

[Interpreted] Well, it's an honor to be here after so many -- 20 years as an investor, analyzing the bank on the other side. So my question, a lot of them were answered, but when we think that One Ita� -- the market opportunities that One Ita� can bring, we think about the segments where Ita� can have an increase of market share. So credit card is a big market share. We have an opportunity for growth. But maybe the question for -- I would be thinking about the platform of investment. How do you think the platform of investment in a sense that if One Ita� with the type of client that One Ita� will bring, will be opening an opportunity for growing in the retail, what would be possible to develop so that Ita� can bring a client for the platform of investments that already exists, already was a discussion of what was the lessons learned during the development of �on. So how do you think about this business segment once that the bank is not a shareholder of XP. And I think that there is an issue that can be identified that is very different.

[Interpreted] Well, thank you, Marcelo. Congratulations, on of the challenges. Thank you for the questions. Well, first of all, One Ita� is very important to say since we have it being born from the origin of credit cards in each which are the two big publics that are being migrated. We don't think that is necessarily in the credit card, there's always going to be an opportunity because it's always the same client operating with us and sometimes they come through a specific product, and we have the capacity of broadening the offering of credit cards for this line. Number two, when you segment this space of 50 million clients, you can see that there is clients from all the segments. We have a low income Ita� ag�ncias, we have the average income on the class, and we have the affluent of the Personnalit�. Of course, evident one or the other clients from private. But I would say that this is concentrated in PF in the natural person segment. So the opportunity not only goes through the evolution of the credit relationship of that client, but products and solutions. So you can evolve in the transactions, accounts payable, you can bring a flow to the bank all the features that we launched for the clients to seize our resources, anticipation of the fix credit, you start to lever within the platform itself and investments and the model of attention of Uniclass. Personnalit�. It is also something that we can offer for these clients, all the programs and advantages for the clients. So we see an opportunity for cross-sell, now solving the pains of the clients and increasing operations with this client and investment is one of them. And here a link with �on. We are very satisfied with the evolution…

[Interpreted] Now the next question. Mario Pierry from Bank of America.

[Interpreted] Congratulations on the results, very predictable. We see an improvement quarter-on-quarter, and the market appreciates that. So Milton, a question for you, more about expenses. You've shown that the bank has done a great job, and we have the lower threshold, but when we look you closed almost 0% of your branches all throughout the year. And your number of employees, excluding technology, dropped just 2%. So today, where we see the number of employees per branch is 32 a year later it was 29. So I wanted need to understand, how do you see that metric evolving and if there is still space for building branches because every call we hear, investment in technology, why that? I wanted to understand from you, how do you see the function of the physical branches from now on? We have a survey we see that the people still have a value of going to the branch. So what would be the ideal number of branches and number of employees per branches.

[Interpreted] Thank you, Mario. Always great to see you in our calls as well. I think that the question is very good, Mario. And let me give you a few data that can help you in your train of thought. Well, first of all, we don't have an objective before we don't think about we're going to close so many branches. Of course, we do the forecasts, we do the analysis, and it's a very complex algorithm. It's not simple. We want to close, we want to close. We look at a lot of variables, the geography clients, penetration of the branch in the region, the result of that branch, the capacity of doing the scalability of that agency or now the distance between the branches, can we service that client in a central branch and have a business branches more satellite. So this is an analysis that we've done daily by our team. And this is an important point. Well, there is a point that there's a great deal of these branches, we are migrating to digital branches. It's a completely different model of servicing. The cost of service is much lower and with the scalability and the capacity of adjusting the account loads in a very important way. Second aspect, when we close the agencies that we close, we always look at the distance, how many kilometers we are from the next agency, will that generate attrition with the clients that will service us or not. So in the end, depending with the distance, we have a reduction when we close an agency because a great deal of the managers of relationship given that the account loads are finite, we can transfer the commercial teams that service these clients. We decreased the work of those teams, maintaining quality,…

[Interpreted] Thank you, Mario. And now Renato Meloni from Autonomous. Welcome to the call.

[Interpreted] Good morning, everyone. Thank you for the opportunity, congratulations on the consistency of the results. First of all, let's go back to your answer on the financial margin of clients. If we -- well, you're running well above the guidance now. So the issue of the deceleration of growth has been clear. But if we take that margin with the end of guidance okay, you're still running above what you already mentioned. So I wanted to understand, within that implicit compression, where do you see the biggest risk and among the segments that we are decelerating, how will that influence the mix? Or will that come from the increase of the cost of funding? And secondly, can you mention the evolution of the sector of credit? Where is the biggest risk? And how is the bank positioning itself for that?

[Interpreted] Thank you, Renato. Thank you -- and what I wanted to tell you is that when we look at the margin, well, first of all, portfolio, this is a central point. We've seen the portfolios perform within what we expected, average income coming up. We have a volatility in -- because of the exchange, but the exchange, Gabriel is always there monitoring the effect. So this is an outlook that we have a constant on look, so we have to look at the average numbers that I just presented to you. Second aspect that I wanted to mention to you. The interest rate itself. It's a pass through for margin that is slower. And why is it slower? Because we do hedging of those positions. So with the interest rate, it's a low cycle and the interest rate drops very a lot. We take longer to proceed this drop because the portfolio works in a very ruled way. So that increase in the interest rate, there is a pass-through, we predicted it. So we can observe in the working capital, that effect of the CDI generalized, you can see an annualized margin that is relatively stable with small oscillations. The adjusted margin to the risk is relevant to the capital because at the end of the day, we published and you've seen that our margin adjusted to the risk is the best one of this year since the fourth quarter of 2019. So when we look at the projections of the margin adjusted for the risk in the payroll loan, it can have in consolidated -- sorry, these are small effects with a very solid effect. This is the important thing. The risks, I think that we understand that the portfolio will continue to perform as we expected. We…

[Interpreted] Next question. Matheus Guimaraes from XP. Welcome to our earnings call. Matheus Guimarães: [Interpreted] Congratulations on the results. I want to ask a question about the cost of funding. I think that the financial margin is still very strong, and we see a few competitors with strategies of cost of funding. I wanted to understand if you foresee that there is a space for some improvement in that indicator or if eventually some changes that the competitors are doing, and they're going to be opening opportunities for you, that would be more aggressive in that point. That would be the first. And if you allow me, follow-up on the question early on about the private payroll loan, and it's clear the subordination issue, whether if it's credit loan with our guarantees or the payroll loan that already existed. So my question is about the subordination in the credit card because with the launching of the private payroll loan with the app, cart�o virtual, the client could take a debt in the bank, maybe they didn't even have a relationship the day before. So can it affect the appetite in the segment of the credit card?

[Interpreted] Well, thank you, Matheus. Great to see you. Thank you for the question. Now starting about the cost of funding, depends on how you see the cost of funding and a strong statement. In the end, of course, we have a cost of funding that is optimized in the bank because of all the business lines that we operate, these are products of treasury, et cetera. So our cost of funding all the flow of clients that we have in the bank, the cash management. Well, the -- we are centered in the relationship with our natural persons clients and so the cost of funding is optimized. So if you see the deposits in the portfolio of natural persons, we have the best relationship in the market. So it shows that we are a solid franchise for our investment in a solid alternative for our clients. But the most important thing to see is that there is a client on the other side. So here is where we do the segment of franchise. We want and we will continue to be a strong franchise of investment for our clients. So our objective is not to optimize the cost of funding. So the cost of having a client that will not engage on the other hand, with the bank and you'll lose the vision of lifetime value. When we launched Cofrinhos, the piggy bank, where the client has the alternative of taking the money and do a savings account or doing a value reserve and then we pay 100% of the CDI. It shows that our vision is -- of client is not the optimization of the cost of funding, this is a part of the story. So I see this as an opportunity, because naturally reducing in a relevant…

[Interpreted] Next question also with us Guilherme Grespan from JPMorgan.

[Interpreted] Thank you for the presentation. So great quality of the results. I think that they asked a big debate of the case. I wanted to clarify 2 dots that are more specific on this quarter that we are in now in the results. First of all, it's working capital, you mentioned on your presentation, but we noticed a strong performance of that line in this quarter. It's longer duration, it's not a spot and then you have the vertices of the investment when you see the yield of that line, it was very representative. We had gradual increases and the implicit yield went from 8.7% to 11.2%. So since this is a line of working capital and others, I just wanted to understand if it's working capital or there is another others that are influencing? And if it's sustainable, more it's important that level of yield that we've seen from this quarter ahead. And the second question, just to the taxes were higher in this quarter, should we expect the taxes conversion for the credit? And if you can explain, what led to the increase of the taxes in this quarter?

[Interpreted] Thank you, Guilherme. Thank you for the questions. Working capital of the bank and others, as you've seen, what are the others? Just to give you some more visibility. Well, investments that we have in companies that we do not necessarily consolidate and we do by having the patrimonial consolidation. Well, the investment is within the working capital. So if we have an activation -- purchasing of a payroll, and we have to do the activation of that payroll that's in the working capital. So there are some effects that are there that can have some seasonalities. So the part of the effect is the result itself of the rate in the capital that comes in the quarter and a part are effects that are relative to the previous quarter. So these are deltas of effects that are happening or of the variation of [HAP] or intangibles of payrolls than we had in the previous quarters that were higher or we didn't have negative effects in this quarter. So it's a bit of a combination of both that lead you to bring this effect in the working capital. So I think that now, Gabriel, this -- well, our expectation is more normalized, of course, this volatility can happen by the effects that I mentioned, but these are adjustments that are done in between quarters that show a bit of a discontinuity and this is the level of working capital and the rhythm seems adequate, right?

Yes, I think that the yield that you mentioned is the yield that makes sense. With other disclaimers that Milton mentioned on the volatility that we had quarter-on-quarter, whether if it's a basic effect, things that happened in the previous quarter or by the yield of the portfolio of what we are investing, looking up ahead.

And about the rate of taxes, very simple explanation. In fact, we have two effects that will explain this al�quota. Well, first, because the bank is conglomerate with several vehicles, we have financial and non-financial vehicles. And we have three types of al�quotas in conglomerate. We have companies that pay 34, corporate al�quota. There are companies that pay 40 and there are companies that pay 45. Depending on where the result was generated, you change the mix. In this quarter, we had more generation of results in companies with higher al�quota so naturally you have the al�quota is growing effectively. The second aspect is more layer you generate less is the benefit of the interest rate on the -- on our own capital. So the higher the profitability of the bank, the JCP is lower because it's limited to PL and TGLP. You have a benefit that is defined for a higher net income. So the benefit of the interest of our capital is divided at the higher your result is. So the result is higher diluted the interest of our capital JCP. And the second one is the mix of the businesses that we have where the businesses with a higher al�quota had bigger results. So we pulled up the higher al�quota. The expectation is to try to converge to the guidance and maybe more close to the roof of the guidance and below. Whether it would be different? No, I think that's it.

When we look at the bank, I mean there is the effect portfolio that Milton mentioned, 120 companies that we have in the conglomerate different profitability, different income, different sizes. Depending on the seasonality of all this, you generate fluctuations in that tax rate, and that should converge with the guidance that we've seen in the beginning of the year. That information is the guidance, any difference in the next quarters, we will do the adjustments. But it's good cholesterol in the end of the day, good cholesterol and diluting the effect of JCP interest of our capital. Thank you.

[Interpreted] And now also Gustavo Schroden from Citibank.

[Interpreted] Congratulations on the strong results. Swiss watch, high quality. Question is about the mass. We see the ROI per segment is that you see the retail 25%, wholesale 25%, 30%, that order of magnitude. But in the previous quarters, you shared with us that the massified still had a challenge of profitability. The bank has been doing investments we've seen the efficiency level improving, of course, there is the cost. But I wanted to know how do you see the profitability of the massified? Is it improving to the point that you're getting to a stage that you can be higher in the massified? Have you got to a level of profitability or there is still some space just so we can understand when the bank or what is the stage that the bank is diversified? And does the bank believe that we can get to a profitability rate level that is higher in this segment?

[Interpreted] Great to see you. Congratulations Gustavo. Thank you for the initial words. Remember, the third quarter of '22, when I was discussing that we've reached 16.4% of profitability in the retail, and we were not happy. This is a process cycle of credit that is tougher, but we had a relevant work for this portfolio. And today, I'm happy to look that some quarters later, we are running at 25% of profitability in the retail, but whether if it's a natural persons or company. So we need to break down this vision. The two businesses are running above cost of capital. So we don't have the sensation and there is a composition. Profitability in companies is even higher than the clients, natural persons, but we still with the monoliners, which is where we had a cycle of credit that was tougher with the credit card and vehicles, we did a strategy for revision that is relevant in the way that we work and the appetite of risk and that process was very salutary for the portfolio. There was a derisking combined with a better management penetration and increase of engagement of the target clients that would make the -- bring more profitability for this threshold. So when we look back to the profitabilities that we had many years ago, several circumstances. First, the regulatory caps did not exist at that time, it didn't have the cap of the credit card, it didn't have the cap of many things. So the regulatory changes generated impact. And this is a market that is more penetrated in credit than it was at that time. So you have a cost of credit that is more preponderant and the profitability of credit that pulls the profitability of everything lower, but massified. I think that…

[Interpreted] Next question from Morgan Stanley, Jorge Kuri. Jorge, Good to see you. Thank you so much for joining us today.

Congrats on the results. Let me go back to rates. And this is a bit of a longer time frame question beyond your guidance for the year. Evidently, rates are at a 10-year high roughly. And so I wanted to ask you, what do you think the windfall that you had benefited from rate in your record ROE today is? And look, if we go back to when rates were below 10%, the ROE of the bank was around 18%, 19%. Today, it's at 22%, 23% and there are so many moving parts. So I'm not -- in no way suggesting that there's a regression analysis for rates and ROE. But I guess that's the question I'm asking you, which is how do we quantify how much of the very high level of profitability that you have today is due to this very excessive level of rates. And then as we hopefully normalize rates in Brazil to hopefully stop 10% or around 10% within the next 2 to 3 years, what does that do to your ROE? And what are the things that you can still do over the next 2 to 3 years to make sure that, that level of ROE that we're seeing today doesn't dilute over time? Or maybe it will, and it's fine as well. So yes, that's what I'm trying to get to.

Okay. Thank you, Jorge. Thank you for your question, your words. Low time, no see you in our call. So thank you for joining us today. And I would say that we have a slide I think for you, Jorge. And sometimes we bring this slide in our presentations here, where we try to show how sensitive is the margin of the bank and the profitability due to interest rate in Brazil. I think it's not a simple question because, as you said, there are many moving parts when you look to that impact. What I can tell you is that in the short-term, the benefits are working capital and also deposits. Those are the two more relevant impacts that we have. But at the end of the day, we hedge those effects. So it doesn't come in the same speed as we see the hike or the reduction on the interest rate. So it's less sensitive due to the level of hedge we do to maintain more stability in our figures, this is one point. The second one, I think when the interest rate starts to go down, we see more activity, more activities, more portfolio growth. More portfolio growth is more business with our clients, more engagement, more penetration of product, services, derivatives, cash management, effects, all the products that we serve our clients. And so we have some compensations in the portfolio in different lines due to different reasons. We have impact in the financial margin with the market. We have impact in the financial margin with the client. We have more portfolio growth, less delinquents, especially on the individual side. So it's difficult to give you one number. So the good thing to see is in the long-term, when we see all the volatility of the…

No, I think as Milton told you, Jorge, there is a portfolio effect on the bank, right? So with the different cycles of interest rates, when you take a look at the short-term, you're going to have more of the liability income from us, from capital and everything. But the flip side to that is asset growth, right? And we see that in other countries that we operate, right? So the experience in Chile, for example, with much lower interest rates, you see the penetration of credit to the GDP, much higher than we have in Brazil. So yes, of course, some of the lines of business that we have on lower interest rates will be a little bit lower than we have nowadays. But on the flip side, if you take a look at the fees, transactions, investments, and asset growth will be much different. So I think that the portfolio effect at the end of the day is positive for us.

And you have also the cost of the hedge of the capital index as well, Jorge -- sorry this has an impact as well. And this is why we believe that the financial margin with the market for the next quarter might have more impact because as high is in the interest rate and it's bigger is the difference between the interest rate that we have here compared to the countries where we operate, higher the cost to have the capital index. So this is one of the reasons why we are seeing, we expect to have a guidance more aligned to our expectation than to have four consecutive quarters in line with this quarter that we had. This is the reason why because the cost of hedge, we paid BRL 500 million this quarter. We expect this to grow in the coming quarters. And also, you will see some effect on the banking book, even though we do a very dynamic hedge on the book, we might see some impact with the expected results coming from the banking book to be lower in the coming quarters. So this is also the flip side of working with a high interest rate in Brazil.

The only minor comment I was going to make is that they're Brazil-specific topics as well. So we have products that have caps, right? So payroll loans and [indiscernible] for overdrafts. And then every time that the cost of funding goes up because Selic goes up, your spread is compressed. So whenever Selic goes down, you might see also the spread [indiscernible].

I agree 100%. We said on the retail operations, as I was saying, you have caps on a credit card, you have kept on Consignado, the payroll loans, you have caps on overdraft. So it puts pressure as well on the profitability of the retail whenever the rates are high. So as I said, many effects, we have to take all of them in consideration, but that's why I always say and we try to show, as I said Jorge, we are less sensitive to interest rate than it seems like.

So if we bring it all together...

[Interpreted] Thank you, Jorge. And we are warm up in English. So let's keep that language because now we have Carlos Gomez with us from HSBC. Carlos, great to see you. Thanks so much for joining.

Congratulations everybody else for the results. And thank you for the reference to taxes as good cholesterol, we will use that. That's very good. My questions. First, you have made a [indiscernible] for showing us the new classification of loans by stages and new provisioning. I think that gives a new insight about how the profitabilities for each type of lending. Do you think that we will see a change in the market going forward when the data points when everybody start to look at things this way? Do you expect perhaps some products to become more -- to become bigger, some products to become smaller in the future? And completely and related to that, we haven't heard about any possible changes in taxation on IOC or of your subsidiaries abroad. Do you think anything like that is in the works for the coming months?

No. Thank you, Carlos. Thank you for coming. Thank you for the initial words. It's a good cholesterol whenever you have the same corporate tax, right? When it goes up for legal decisions or regulatory decisions, this is not necessarily it's the good cholesterol because at the end of the day, we know that if you have a hike in interest rate, in tax rates, what happens is that the cost of credit in Brazil increases. And of course, the payers the ones that are depending on lending and needs to finance their needs have to pay more whenever it happens. So it's always important to remember this is how we see whenever we have a hike on the corporate tax rate. So my view is that these stages the way we are showing now reflects the way we manage the bank. So we don't expect any change because now we have the local or the BR GAAP IFRS local. So we don't expect to change the way we operate inside the bank because of that. This will give us, in our view, we'll be more transparent, more comparable. It will be easier to show, reflect better what we do inside the organization. So I don't expect any change in the way we operate the products and the businesses especially, because as I said in the very beginning, we haven't changed any method, any criteria compared to the BR GAAP when linked to the write-offs, for instance. So as we keep exactly the same way, it shouldn't change the way we manage the organization. Your second question on IOC. No, we don't see any discussions coming from there. I know there is a discussion now in the Congress. There is a proposal coming from the government that have to be analyzed by the Congress that is increase the corporate rate withholding tax with -- for dividends, they take out some exempted products above specific income that the people have. So that's what we could see in terms of change. But this is a discussion that it's still very open. Let's see how the Congress will react to that. We don't have any discussion related to increasing tax. We don't have any discussion regards to the IOC, and I think this is what we have now. Of course, things can change. And if you change, we're going to give you more color on that, but still waiting to see how the Congress will deal with this tax exemption for people that has up to BRL 5,000 in monthly income. So let's see what happens. Let's keep very -- follow very close.

If I can follow up your assessment...

[Interpreted] Next question is from Henrique Navarro, Santander. Great to see you.

[Interpreted] Congratulations on that result. I think that the performance is solid. And my question is, well, talking to some of the participants in the market, not that there is a concern, but there is care with delinquency in the second quarter. The increase in Selic, you can have the lagging. So there is carefulness when we discuss the second quarter. Since we have several segments, I wanted to hear from the horse's mouth. Is there something that we should really monitor for the second quarter for delinquency? How do you see this evolution? And anything that you can share would be great.

[Interpreted] Thank you for the initial comments. You know that I don't look at the price of the share during the call. So you updated me. I only see it after the call is done because we're looking at the long-term and we are less sensitive to the spot price, but it's always a great feedback. So thank you for the initial words. About delinquency. So let's separate the discussion. For our portfolio, we have a stability in the delays or it's a big concern, and I was discussing small companies there should be normalization throughout the second quarter. So I think that this is the best expectation. I don't see something a lot different. But I look at some market indicators, credit cards, vehicles, national financial system. We've seen movements that are bigger in the portfolio in the market than what we've seen in ours. So an example, credit card. We have been for 7, 8 quarters with relevant reductions. And we have 25% -- we're almost 30% depending on the division with Carrefour that we have in the portfolio. So in the end ex Ita�, we've seen a performance in some products that is much worse than what we've seen in our own portfolio, this is for vehicles as well. So it's important to see that our vision is constructive regardless of a very challenging scenario. So to believe that the interest rates are going to be dropping there is not going to be an impact in delinquency, it's not reasonable. But the portfolio of the bank is very resilient. So that's why we don't see a lot of changes in delinquency, everything being constant. So there is a lot of dynamic of portfolio, but this is a portfolio that is very challenging. So the indicators of the…

[Interpreted] The last question, last but not least, Eduardo Nishio from Genial. Welcome.

[Interpreted] Congratulations on the results, Milton Gabriel, and Renato. Quick question about the hedge of your capital index, which you've been group managers of capital of the cycle. The hedge has been a competitive advantage in this interest cycle. And my question is what the other banks -- we're not going to be able to replicate if you have a competitive advantage in this segment with the hedge, is there a difficulty to do this or not? And your vision, the hedge of the capital index versus the NII, what is the advantage and disadvantage because there's a cost.

[Interpreted] Thank you for the initial words. Well, first of all, there are a few answers, a few idiosyncrasies for Ita� Unibanco. First, the relevance of the operations outside of Brazil. When we compare it to other players, we are the bank the other Brazilian players that have a bigger exposure of activities outside of Brazil. Now when we got the portfolio of Chile and Colombia, it's very relevant in our assets. So we have a portfolio in foreign -- well, dollar, Chilean peso, but we have the banks in Uruguay and Paraguay. And we -- you have to take care of the portfolio that is sensitive to euro and dollars, and these are Brazilian clients that are taking resources and other currencies. In the past, we were very sensitive to the exchange because of the overhead. Remember that we had a positive result with the strategy, but depending on the level of the -- you would have to manage the liabilities of the strategies of how you did the hedge, but it generated dangerous tax effect. So when we don't have the overhead, our sensitivity to the stock exchange -- to the exchange rate, it drops in the capital because whether if it's CTTF or CTTT, it consumed the capital index in a different way. Afterwards, the big effect that we had is the variation of the portfolio. The hedge is dynamic, we're always looking at the cost of opportunity. So we have clearly a policy that has been approved, giving visibility to the regulator on how we do this, but we are always looking to try and optimize this hedge. So it's dynamic up until certain point because these are long-term strategies, and we try to bring a stability of the capital index in the end because that…

[Interpreted] Thank you, Milton. Thank you, Nishio. That was the last question. With that, we finish our Q&A session. And just to remind you that the questions -- we had a lot of questions via WhatsApp by the investors, the IR team will answer. Thank you, Gabriel. Thank you, Milton. I'm going to give you the floor so you can close the call.

[Interpreted] Thank you, Renato. Thank you, Gabriel. We will be together with all the publications, all the calls up ahead. So thank you to -- by the support, the feedbacks and the recognition and the positive and constructive feedbacks that we received we're very satisfied with the evolution of what we managed to deliver in values, and these are values for the clients, the collaborators, the investors, and value to the society in the end of the day. Thank you for taking part. Active part, the questions are always good, so we can understand what you're looking at, what are your concerns to see if there is a blind spot for some additional hallmark on our culture, we don't know everything and we're very excited. I think that we're very excited structurally with the evolution of the bank and all the transformation that we've experienced with the amount of solutions that we've gotten with more strength and excited with the perspective, the macro challenges for everyone, the micro, it depends on how you do your homework and delivering more value for our stakeholders. So we are very humble. Everybody with two feet on the ground, working hard, knowing that the past performance is not going to guarantee of future performance. So we need to continue to be consistent because this is an infinite work, infinite game. I hope to be here in the next quarter. See you next time. And for those of us that are in the conference in New York, it will be the best conference of all the series, over 130 CEOs confirmed, incredible lineup. It will be a great opportunity for you, investors that are here to take part and have high-quality discussions. We will see you in New York. See you next time. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]