Hello, good morning, everyone, and thank you for joining this videoconference to talk about our earnings for the second quarter of 2024. As usual, we are broadcasting directly from our office in Avenida Faria Lima, in São Paulo. Today's event will be divided into two parts. First, Milton will take you through our performance and earnings for the second quarter of 2024 and then we will have a Q&A session, during which investors and analysts can ask us questions and get into the details with us. Before we get started, I'd like to give you a few pointers to help you make the most of today's meeting. For those of you who access this via our website, there are three audio options on screen: the entire content in Portuguese, the entire content in English, or just the original audio. For the first two options, we will have simultaneous translation. To choose your preferred option, just click on the flag on the top of your screen. Questions can be submitted via WhatsApp. Just click on the button on the screen on the website or simply send a message to +55 (11)-93-959-1877. The presentation we will be making today is available for download on the website screen and, as usual, on our Investor Relations website. I will now hand over the floor to Milton, who will begin the earnings presentation, and then I'll be back to moderate the Q&A session. Milton, the floor is yours!

Good morning, everyone. Welcome to our meeting to talk about the 2024 second quarter earnings. In this presentation, we have primarily tried to provide executive information, in order to make more time for a conversation during the Q&A session. Let me go straight into the figures to share our results. We reached the double-digit mark in quarterly managerial recurring results of 10.1 billion reais in the second quarter and posted growth of 3.1% over the first quarter of 2024. Now, moving on to the bank's profitability, our consolidated return on equity was 22.4%, a quarter-on-quarter growth of 50 basis points and, in Brazil, our ROE was 23.6%, a quarter-on-quarter growth of 100 basis points. I'd like to draw your attention to the fact that we are running with the Common Equity Tier I ratio of 13.1%. If we were to adjust the bank's profitability by the risk appetite level set by our board, which today is not permitted to operate with capital below 11.5%, we would have posted a consolidated ROE of 24%, taking into account all adjustments, and ROE of 25.7% in the operation in Brazil. So, the profitability adjusted by Common Equity Tier 1 of 11.5% is 25.7% in Brazil, which is the profitability for the quarter. We have good news regarding the loan portfolio, with sound growth that I will comment on later. We've been finding opportunities to grow with quality and a long-term vision by looking at longer-term cycles. We reached the 1.3 trillion reais mark during this quarter. Delinquency ratios are within acceptable thresholds, and I think that the delinquency indicators level that two we've been working on is just as important as the steed fall that we're posting. Delinquency indicators are lower than pre-pandemic levels and I'll talk about that later. Commission, fees and…

Thank you Milton for your presentation. It was very quick we just have [indiscernible] three hours of initiatives and contents about our business focused on result, and we have 13 questions waiting for you here on today's call. Well, let's start the second part of our meeting today, which is a Q&A session. Now I remind you that we have two languages. Milton will answer the questions in languages that are asked, either English or Portuguese. If you need support for translation, you can choose the entirety of the content in Portuguese or English. Besides, you can submit your questions via WhatsApp. The number (11)-93-959-1877. Let's start Milton with the first question. We have a long list of analysts. We have Renato Meloni from Autonomous. Thank you, Renato for taking part in our call.

Good morning, everyone. Thank you for the questions. Actually, I wanted to understand what is the perspective for acceleration of the portfolio of natural persons of, for this quarter. But if you can give us some context, regarding the de-risking that you just mentioned, but also with the comfort that you have to accelerating the origination and all the segments of income? Thank you.

Thank you for the question. Okay. To give you a bit more context, let me just find a camera right there. Alright. So to give you a bit of context, de-risking, it's at the end of the process, as I mentioned on the previous quarter. The 0.35 year-on-year on that drop on the second quarter, I would like to just say that we're very close to that end, the end of this. Well, we are at the inflection point until the third quarter. We should be close to that. So in the end, we have to clarify something very important. We didn't stop growing. We continue to grow in the portfolio of medium high income, several quarters in a row. But when you look at a few portfolios in the aggregate, for example, credit cards, you have a nurture of the portfolios that continue to drop nominally. So you have a strength a gravitational strength that pulls you down when you have your origination and a portfolio growing in other segments. We're going to lose that negative effect, and we're going to see the positive effect. We should observe the year-on-year growth on the portfolios in regards -- growing in regards to what we observed in this quarter. This is the central message. We had the opportunity of growing in several businesses, several products, and several segments of income. So you have to be very careful when we say high income, low income. Well, actually, we've seen opportunities in all segments in growing in a correct channel with the correct client, and we have less resilient clients in all segments. But whether if it's low, medium, high income, we have to interpret well the data. That's the important thing, understanding the model, the depth of the relationship, and engage the more and more these clients. So we're looking at the future, and we can see in a positive way the capacity of growth, especially after the good de-risking in a portfolio, but always having understanding that the level of leverage is still high, the commitment of the income of the population is still high. So you have to grow with care. Growing a portfolio and accelerating, bringing more margin and then returning that, it's not what we do. We do a very disciplined net financial margin. So it's the margin of the products minus the cost of credit, the expenses, and we've defended our net margin. And we are going to continue to expand on the adjusted line for the risk in within this discipline. So we see it in a very positive way. We can naturally continue to with the appetite for growth, quality, and the long cycles and removing the volatility of the portfolio. So we can continue to deliver the consistent growing results. That's the main message.

I will switch to English because I know the next question comes from Tito Labarta from Goldman Sachs. I was preempting your interest here, Tito. Thanks for joining us for the call.

My little bit of Portuguese. But thanks for the call and taking my question. Actually, follow-up on loan growth, but more on the corporate side. We saw very good loan growth both on the large corporates. I know part of that was, FX, but even without the FX origination grew up quite a bit. SME loans also growing at a healthy pace. Just to understand, how do you think about, sort of the health of corporates, the health of the economy overall and in terms of your ability to continue to lend at this pace? And then how could that, maybe even like trickle down into the economy, right? Because you have a lot of fiscal concerns about Brazil. But, I mean, that you're growing corporate loans this strong, right? There seems to be some demand there. So just help us think about that in the context of the Brazil macro as well? Thank you.

Yes, sure. Thank you, Tito. Thank you for coming. Thank you for your question. I would say that the growth that we had in this portfolio, especially on the big companies has been very, very healthy. And we've been able to find opportunities. We have a very well capitalized bank, which bring us opportunities to grow the portfolio whenever we find there is an opportunity. The DCM market in Brazil, as you know, is very active. We've been seeing the AUM growing strongly quarter-on-quarter. And we've been seeing opportunities to deliver more credit to our clients and also to take the advantage to being leading in the decision market and selling this portfolio throughout the market. So this is kind of a revolving process where we grow the portfolio, we sell to the market and we, of course, open the balance sheet to finance clients that don't have access to the DCM market. So in general speaking, although we have all those macro discussions on interest rate, inflation, the effects, We've been working since 2015 and '16. We changed completely the way we managed our portfolio. We have a very, very portfolio approach, risk approach for the portfolio. And if you take just to give an example, if you take the 10 largest clients or the 10 biggest clients in terms of credit within the bank, we have less than 3.5% of our capital allocated to those clients. So we reduced strongly the allocation, the concentration of those portfolios and we have a very healthy balance when you look all the segments where we are inserted in. And if you look off the clients, we're always hearing this client or that client that may or might be having an issue with credit. We've been having good surprises. We never know…

Thanks. Now going back to Portuguese, Portuguese, and, we have Rosman from BTG Pactual.

Good morning, everyone. I wanted to steer away from the quarter, and I wanted to get an update from One Itaú. I wanted Milton, how relevant is One Itaú for the strategy on the medium term for the bank? Do you expect, well, are you going to be disappointed if you don't have success as you want, or this is just an option for your case study?

Okay. Thank you, Rosman. Thank you for the question. I'm going to start with the second one because, the entirety of the team is watching us. We will we will be disappointed if we, in fact, cannot advance in a relevant way in what we call the One Itaú platform. We started this process. It was a very strong work at the infrastructure with a platform, with the unification of management. An unlock for the client holistically for the whole of the relations. And there is a complexity and there is a great opportunity as well as well as complexity. What do we do? We started with a process that I'd say that is, family and friends. It's a pilot that was very carefully implemented. We have a volume of clients that have been working with this, pilot, and all the indicators are very healthy thus far. Just so you know, out of all the clients that we stimulated, the migration of the apps of cards for the super app, 98% migration. 98% is much higher than the expectations and much more than any migration because we've done this in a very light way, in a very soft way. And the client is understanding that there is value being offered. We are very satisfied with the advances, and we will anticipate all the migration. We had predicted about 15 million clients that we're going to migrate for this platform. We are working at a very healthy pace. We don't like to give numbers, but we are probably going to migrate in 2 million, 2.5 million clients still this year. Maybe we're going to do double that this year depending on the rhythm, because there is a lot of quality in what we've done. It's a commitment. It's an -- it's…

Thank you, Rosman. Now with us, next question, [indiscernible] BBI. Thank you for your question.

Good morning, Milton, Renato. Thank you for the opportunity. Congratulations on the record income of $10 billion in a quarter. I wanted to explore the results of treasury. I think it really called it stands out. We've seen the volatility, but there is, R$900 million, R$1 billion rise, R$1.4 billion. So I wanted to understand if you can share with us, Milton, the composition of that data. I wanted to understand if there is a gross up of fiscal benefit of a bond that you might have, how much do you get from trading, just so we can understand this better. And is this going to be a trend in the next quarters R$900 million, R$1 billion considering the information available? This is a very volatile line.

Well, thank you, Gustavo. It's important to well, thank you for the question and congratulations. Let me start by the more objective answer. There is no way, There is no artifact. There is no grass up. There is no realization of plus value trying to take the result to the margin. No. None. What we have in that result in this quarter is that it was a stronger quarter, atypical, certainly. If we look at the record, we were running with R$1 billion and some, and results in Brazil in this quarter was a stronger quarter. I think there are many risk factors in play. We had the higher effect with trading, more with banking. The trading had a relevant impact. It was a stronger quarter. But once again, as you said, there are two predictions that we have to do. First, if we naturally can deliver this quarter up ahead, it's going to be a new outlier. That's not the expectation. We are trying to find the opportunities nonetheless, but that's not really our expectation looking at the quarters up ahead. I think it's more reasonable to think about our margin with the market going to the thresholds of R$1.1 billion. Remember that the cost of the hedge of the index has gone to lower thresholds. We published with a decimal, but if you open it, it's going to reduce given the interest rate differential. We've seen -- that we've seen this has been positive for the cost of hedge. So the expectation is going back to normalcy with all the difficulty of trying to protect the line for the market, but this was a quarter that was outlier. And if you look at the DFs, you're not going to see the effects of gross up, or plus values being added that are not recurring to our balance. It's more of a risk management and opportunities that came up because of different risk factors in the different tables. It was a quarter that was exceptional, and there was a no increase in the limit or the risk appetite. But it was within the framework of the risk of the bank for the market. There was no change in the appetite in the sense of limits that are available. There might have had more consumption of the limits, but within the framework that is exactly the same as the previous quarter. So these are quarters that I would say that are comparable.

Very clear. Thank you. Thank you, Gustavo. Next question. Now on the call, Daniel Vas [ph] from Safran. Welcome.

Good morning, Renato, Milton. Thank you. And congratulations on the results. I wanted to explore the acquirance. You grew 10% year-on-year. The quarter, it seems to be a maintenance of market share. You're thinking about the growth of the industries. So if and when do you expect to grow above the industry? Are you aligned with the strategy of the apps? And second, I can ask later.

Great. Thank you for the question because I wanted to clarify something and actually give you a feedback on it, some changes. The line of acquirance in the service, in the line of service and insurance, but you can only see a part of the result of the business of acquirance through that line. Because there is another part of the result that stays in the margin, financial margin with the clients. So remember that there is the invoice of rent, MDR, anticipation. There is the flex. There is the cost of funding of that advance, and those lines are distributed. So if you try to simplify and get your take rate, looking at that line isolatedly, you're not going to get to the result of the acquiring. I don't see the benefit in publishing it this way because it's a partial information that doesn't give you the completeness of the whole thing. So we're discussing internally how we're going to publish the acquirance business. Maybe we should get the issuance and the acquirance in the same line to avoid any assumption or any inadequate conclusion. Second point about market share, it's very important in your question in regards to the fact that we don't have an objective, a goal of market share. Market share is a consequence of work, consequence of getting close to the client, a consequence of a value proposition, of an offering, of a business that is done with a client. Regardless of the fact that we're growing along with the market and we have a market share of leadership, we don't guide ourselves through market share. That's not what moves our decision making process in the bank. What we've tried to do is the integration that was done completely, very well done with incredible quality,…

Can I ask the second question?

Yes.

Well, you hired 700 employees of technology. It's a number that really, really stands out. Is there any specific direction that you can give us? I know that you're doing a lot of projects simultaneously, but can you give us some color on that?

Yes, Daniel, great question. Great question. I think that first of all, we have to look at the mix. If you look at the amount of technology, employees and the amount of employees in the bank that doubled in the mix. So simplifying very well, very much is we're running at 17%, 18%. That shows that the bank, is changing the way that they're delivering products and services for the clients, the way that we are using the platforms, the importance and the relevance of technology having within the organization, not as a support area, but as a business area. So the way that we organize ourselves, the method of working, and how much we've done and we've delivered at the end with all the services and technology that we've been doing for many, many years have given us important results. We got to the point that we need to be careful because it's not by getting more people that you're going to deliver, more results. If you need to take into consideration the interconnection of the platforms, doesn't matter. Sometimes, like you just get a 100 more employees. You have still monolines that are not changed for a component structure. So without the modernization of the platform, we realize that there is an opportunity of accelerating the value delivery very strongly in the natural. We've seen that there is the acceleration of digital projects that changed the experience of the client in the NPS, in the loyalty. So [indiscernible] has been accelerating, and we understood that we need to open different fronts now. We did the study, and we concluded that we can add more people, more team in technology to accelerate a few processes and a few projects or changes and features, changes in journeys of the client quickly. And this is what we call the throughput at the end. And we decided to, yes, increase more people, more staff. It's not a 100% for a natural person, but 90% or so. And that increase is focusing in our clients and our persons so we can accelerate several of the projects for the value delivery for our clients. The value is there and the results are there to see. Very encouraging. If you start to test our solutions now and you will see this in six months, you're going to see changes in products and context and product solution experience, value delivery for the client, ever more complete than what we have now. More quality within a design language that is very within our own standards and happening very quickly.

Next question from [indiscernible] from XP.

Good morning, Renato, Milton. Thank you for this space. Just a question. And congratulations on the results. I wanted to understand the growth of levers in the bank, but also the payroll loan. It's very important for the retail. You reduce that payroll, because of the cap of the INSS. So it's very interesting to understand the strategy of this segment, the appetite of this bank to grow the portfolio, and we've seen ever more aggressiveness, with the digital competitors, more aggressive rates that they're practicing. So it would be interesting if you can, comment on how you would retain these clients because of the competitiveness of the market.

Thank you for the question. Thank you for the congratulations. Now, payroll loans, they have several angles that we can explore. First, our portfolio is very much, very well distributed. We have the biggest INSS portfolio. We have a very important position with the business. There's a private portfolio that we have a market share that is very relevant, but a very small market, regardless of the share being big, is a smaller portfolio. And a portfolio that is similar, which is the public that we've been growing, it was a relevant gap that we had, and we've been growing over the last few years. I think that the payroll of that is key where we've been growing in this segment. It's not just Menas [ph]. We've done this with several others. The INSS has a change of strategy for the bank. I think that the cap of the INSS brought for everyone, first an offering reduction for the market. It's not specific of Itau Unibanco. And we've seen that at the end, we've reduced the impact. We've impacted the consumption of this line, which is cheaper for the retirees because of the cap. If you look at the market, historically was always regulated by price. Competition always existed, and competition happens at the bank, but also through the correspondent, the distribution channels. So it was a very competitive market from start. The cap forced a dynamic in the market that you left outside. The retirees that lost access to the credit because given the interest rates, a few specific publics, especially the older folk that have a specific demand, they lose the offer of credit. That impacted the system. And since we are very relevant in the market, we had an impact. The second comment that I do, we…

Thank you, Milton.

Thank you, Bernardo.

Next question. Brian Flores from Citibank.

Good morning. Good morning, Leonardo and Milton. Thank you for the opportunity. Question about the revenues and services. That line, while there is the specific line that I know that DCM was very strong as Milton has said, but also I know that you've done a few structural changes facing the client specifically. So thinking up ahead, how should we think close to the R$2.5 billion that you delivered in a quarter or a line that is normalized, on a downward path?

Thank you, Brian. Look, this is difficult. This is a line that depends on the market conditions. Demand, capital markets depends on naturally of the appetite of our clients to finance themselves and invest, the micro conditions, several variables that impact the performance of this line. We continue to believe and we think that we should continue to work with the market share. Well, I don't see it as an obsession for the share. But from the standpoint of the capacities that have been installed in our bank and the capacity for the distribution of the reading of the bank, that the bank takes. We have a participation of the market, above the fair share in other business. Well, historically, we've always had a leadership position in DCM, and we believe that there is a lot of opportunities for business. And when the capital markets, they're open, we observed this this quarter. This is a line that generates a lot of business because the clients use the windows. There is a close of rates in CDI Plus, so the market is very attractive if you want to self-finance in competitive rates. And the market has been absorbing the papers and with CDIs with higher volumes and rates closing. So it's very healthy dynamic. How sustainable it's going to be? Only time will tell. But I can say that this was, it was a record quarter, I would say, for DCM. But we are waiting for a certain normalization over the next few quarters. I don't know if we're going to see quarters that are so, good for results and dynamics as we've seen for this quarter, but the dynamic is very healthy. It's difficult to project the result of this slide. Equity markets, we don't see in the short term, any chance. There is always going to be a deal or a follow-up. We are looking at pinpoint operations, M&A, some activity, and the investment banking, it's a DCM market per se. I'm waiting for a normalization. I don't think that it's going to continue with the rhythm of the second quarter, but given our fair share, if the market continues to be heated up, we will continue to seize those opportunities.

Thank you, Brian. Now the next question, Thiago Batista, UBS.

Good morning, everyone. Congratulations on the result. Now, Milton, you commented at the beginning of the call about the utilization of capital, and that would take the ROI of the bank about 24% consolidated and then 25% in Brazil. If I'm not wrong, that should be the highest level since 2015 or something close to that. And I remember some years ago that we've discussed if the ROI of Itau was going to go, middle teens given the competition of newcomers. So that's not happening. But my question to you, that level of ROI, ROI, 24, 25, is it sustainable in the medium term? And do you have a plan for increasing the frequency of the capital allocation? Today, if I'm not wrong, you are optimizing the capital once a year, at the end of the year and then you'll pay the dividend. Would that be more recurrent? Maybe twice a year, something like that. So we can see, in fact, that ROI migrating to 24.

Well, thank you, Thiago. I think that in the end, since we do not do guidance of ROI, we are not projecting the ROI on the long-term, we are projecting the value creation. As a relationship with the cost of capital, direct relationship, We've been delivering this level of profitability because of a series of reasons. We have a benign cycle of credit operation of the wholesale with a threshold that is very high. When we looked in the past, the operation of retail had a higher ROI than the wholesale, but we never worked and operated with this level of profitability in the wholesale as we've operated in these years. Maybe that's the twist of what changed, what you mentioned from the previous years and what we have observed now. We in fact can raise the profitability of the wholesale in the broad sense of the word. It's not just Itau where they are with medium and large companies. It's not just investment banking. It's the whole gross sale and also, our asset that has a relevant role in the value creation of the wholesale and the Latin American operation that has been evolving all throughout the many years. So what wasn't in the equation at that time is that we could take the operation of wholesale for the profitability level that we've observed, and that has been sustainable nonetheless. It wasn't just a jump that came that went down. We can see quarter-on-quarter, we've defended the profitability of wholesale in all the businesses, including this last quarter. There was an additional increment in the profitability of wholesale. Optimization of capital. There is risk management. There is an increase in penetration. There is creation of new businesses. There is an increase in penetration in products and services that generate…

We have Mario Pierri from BofA. Nice to have you.

Hi, everyone. Congratulations on the results. Another quarter. Very predictable. Good trends. And we need to focus still on the capital. With the implementation of IFRS 9 next year, what is going to be the impact? Did you manage to calculate the impact on capital? And another question that I have is about Americanas. It seems that the negotiations have improved. Do you have a potential for the revision of those provisions that you had for Americanas, the company?

Thank you, Mario. Thank you for the question. Okay. To give you some context, in the end with the change of IFRS 9, it has an accounting change. The way that we publish our results, [indiscernible] our IFRS more adapted to what is Basel layer III, but also there is a tax issue. In the sense that you cannot you can no longer choose how much you're going to waste, a tax, the expense of bad debt. You have to pay that PDD, that bad debt throughout the year. There is an optimization of tax and capital, and the main impact is the stock that the norm has to say that you have to award do the amortization in three years at the time that it's it starts to work. So, let me start from the end. Even if we had to do the amortization, in three years, there would be no material impact for Itau Bank. That's the first message. The bank has the capacity and result and stock that is adequate to absorb those provisions and that those expenses in three years from 2025 onwards if the norm prevails. Of course, when that happens, that generates another impact. It generates for the impacts for the optimization of capital, less impacts in the index because you stop to optimize the capital LPDD that that optimize a 100, and then you have to withhold other, tax credits that have a foundation that is higher. You have the consumption of the CPF. You the capacity to absorb is less. So there are impacts. It's not zero impact, but they are immaterial for Itau Bank, Itau Bank. But it's not necessarily the same thing for the industry. What is for us? What do we believe? We believe that there is a debate…

Thank you, Milton and Mario. Next question Nishio from [indiscernible].

Good morning, Milton and Renato. Congratulations on the consistent results for the quarter. I want to go to go back to the app. It is very interesting that you are taking the risk again and the implementation of the two apps. The first part would be an update of Atlas that wasn't mentioned yet. How do you see the ramp up of that product? It's a product that, the other incumbent banks, they still don't have that. And how do you think it's going to impact the industry with this new product? And if you can share with us the level of cross sell, the pilot plan of one, the cross sell is the main objective for this product. How was it in the pilot plan, the cross selling of this product? And do you expect, reversion of 98% when you do abroad rollout of that product? Second question is in regards to your sensitivity to the margins. The analysis is very interesting. The margin -- besides the margin, you also do the hedge of the capital. And I wanted to understand on the dynamics of those two hedges that you do that protect from the volatilities subsidy. And how should we think about that in the medium to long-term? According to the numbers that you presented, I believe that we can conclude that regardless of an interest rates that is lower, we could expect a margin, annualized margin at least, that is adjusted for a higher risk. So is that correct? How do you think about that dynamic of margin and CDI? Thank you.

Thank you, Nishio, for the question. Let me start by Itaú One. Our focus -- central focus in the pilots and the discussion that was in the experience of the migration. So we do not have, let's just say, we're not running after a cross sale without completing, without having the complete migration to the platform. It has to be a soft welcome. Welcome. I migrate and the client has to feel welcome. It has to improve the features of quality, the experience. They have to feel welcome. The way that we can communicate with the client changes, and this has been the central focus of our pilots. That to us is priority one, two, three to ensure that the migration is done with quality, with care, and that the client doesn't feel that, oh, I migrated from the platform, and I am receiving a push of products and of offers and solutions. Because in the end, that's not pro client. That's an old and wrong way of trying to preclude businesses with our clients. The way that we work is to work within the context of the journey of the client. First, we migrate, then we create the context. The client starts to have an app with many solutions and features. They have access to more frequency to the different solutions, and we get into the context. Did they hire, did they register a PIX key? They if they have the journey of the PIX, they have access to the credit of the payment with the PIX. Well, that's going to be this -- that's coming up in the future. So the pilots that we've done, the cross sell, they are encouraging, but there's still, baby steps. There is not enough to show that this is a relevant pilot…

Thank you, Milton.

Now continuing. Thank you, Yuri for waiting. Welcome to the call.

Thank you Milton. Congratulations on your results. It's no surprise that they are good. I wanted to ask about wholesale. I wanted to explore the margin. We see that the portfolio is growing year-on-year. Of course, there is exchange rate. Of course, there is LATAM. Here, we're thinking about those points, but the NII grew 0, the portfolio grew 11, the ROE capped at 28, invoice didn't grow. So the bigger portfolio, higher leverage. Thinking about assets on P&L, so what are the drivers that are behind this? So it might be LATAM or fees that we're not making so much money in NII, but we're monetizing the clients through FIS. So just those economic issues on wholesale.

Thank you. Good question. Good to clarify. It's important to understand how we work those results, and we provide the results in the business model. The wholesale has LATAM in their asset. So let's leave it on the side, for a bit and look at Itau BBA per se, those activities and businesses of credit. What happens here? We are working with 12 of capital, which is what we use. Minimum of the dividend also allocated in the business. And they made a -- we made a decision of allocating in this quarter the capital of 11.5 and leaving the excess of capital of 11.5 and how much we have in this case, 13.1 in the corporation of the bank. So when you look at the business model, we publish wholesale, we publish retail and we publish a corporation plus margin for the market. So what happens when you do that? First, automatic impact. I am allocating less capital in the business because I left from 12 and I went to 11.5, first. So secondly, believe in the business the Selic rate. Even though I do the hedge of the working capital of the bank in several vertices, in the business model, we have the daily Selic in the business. So any reduction in the Selic and the time has immediate sensitivity in the business and not in the corporation because corporation is working with longer vertices. Since I allocated less capital in the business and I went from 12 to 11.5, the allocated capital of the business being lower provides you less interest because it has less capital and Selic dropped. And that's directly in the margin, in the NII. So when you look at the NII, it has an important component for the effect of the working capital,…

Thank you, Yuri. Next question, Arnon, Santander.

Welcome. Good morning, Milton. Good morning, Renato. Congratulations on the results. Revenue of R$10 billion. Good number. The question is the portfolio of credits, the share of the interest rate has dropped. That is working with the derisking that you mentioned when maybe at this moment you're going to go back to the appetite of the appetite for risk for the lower income, and how should that work with the [indiscernible]?

Well, thank you. Thank you, Arnon. Sorry. Okay. So you went to the point. The effect of derisking has a lot of benefits, benefits for margin, delinquency, but it has that perverse effect because it decreases given the profile of the clients, the propension of finance on the credit card, whether if it's the interest rate on the credit card or the interest rates on the credit card, which is a parcel. So we have the profile of the interest rates that is different from the market. If you look, we got to 14% of the finance, payer portfolio with the interest rates. And I always talk about the interest. Of the R$130 billion of credit cards that we have, 86% of that of that portfolio doesn't pay interest rates, but we have risk of credit. And we only receive the exchange that is in the service line. So that's the anomaly that exists. Only 14% of that portfolio pays interest rates in the credit card. So what is our vision? First, we have to be very careful because we're always looking at the client, their needs, and we're trying to offer the best product in the best rate possible. So the credit card product, it's not a product for financing consumption. It's a product for payment that is very, it's a way of payment that is very efficient. And on the other hand, as the client needs to finance themselves, through the product, it's not the best product for financing. The client has to look at the other alternatives. The interest rate on credit card, Rotativo is not used, should not be used for financing. It corrects the delay, for the client for not paying the credit card and directs the client to home equity, whatever the credit line that the client has access. Another credit line, therefore. Our vision is that as the portfolio is stabilizing, we might see an increase in the profession and an increase in time, but it's a portfolio with the risk profile that is different from what we have in the past. The biggest impact in the P&L of the credit card is the delinquency, the delay. But this is a client that is not paying and that you charge high rates. So from the standpoint of financial health of the result and the quality of the result, it's not a good quality. So in the end, yes, we've been working with a prevention level that is lower, depends on the cycle. Depends on the evolution of the product that we've been working to offer conditions that are more competitive and solutions of finance within the credit card chassis. This is an evolution, and all throughout time, there might be an evolution with that. But it's a profile that dictates the rhythm. And because it's a portfolio of high, medium income rate, it has lower prevention.

Thank you, Milton. Nicolas Riva from Bank of America. Hello, Nicolas. Welcome back to the call.

Hi, Renato. Thanks and thanks, Milton as well. Nice to see you guys. So Milton, I have a few questions on your bonds, on your Tier 2s and your 81s given that the call option approaches on the 2019 in November and also on the 4 and 58s on the 81s in February. So far you haven't been calling the 81s, but you can call in each coupon payment date. And also looking at prices, it's interesting, because it seems that the market is kind of assuming that you're are not going to call the 4.58s in February, it's trading well below the coal price bar. But the 2.81s that you didn't call in the past are trading just above the call price and you can still call them every six months in each coupon payment date. And then on the Tier 2s, I think in the past you have highlighted that even though you cannot say beforehand what you plan to do regarding the call option, The Tier 2 start losing capital treatment if not call which I think gives an incentive really to call the 2019 in November and looking at market prices they are trading at the call price, so it seems that the market is assuming you are going to call the 2019 November. So any thoughts you can give us regarding the call options on the Tier 2s and the 81s would be welcome. Thanks, Milton.

Thank you, Carlos. Nicolas Riva, it's always good to see you. Thank you for your question. Let me go through. So on the 81, we keep doing the same thing we've done in the past decision. So we are looking also all the economics around what would be the new price of new issue if we do and what will be the reset premium. So we believe that today, we would pay at least 100 basis point more if we exercise the call and try to tap the market with a new 81. So at least, okay? So that means that whenever on an economic way we don't feel comfortable to exercise the call due to the impact on the new issue, we won't exercise the call, the same logic that we adopted all the other calls. So we know that we have every six months the decision to be made and we're going to follow through. And if we believe there is any change in the market or any situation that allows us to do in a different way, we'll be more than glad to exercise the call if it's the case. But looking with the information we have today on the 81, we don't believe it's the case now due to the repricing and the reset that we have to do in those transactions. Now going on the Tier 2, we have some calls to be exercised in November. And we haven't made the decision yet. So it's very important to tell you that we're always analyzing what would be a new issue if we can issue locally or abroad. Where are and what is the size of the opportunity? What will be the new issue premium? What would be the new price if we have to tap the market? But it's very important to make it clear. We haven't made the decision on the Tier 2 yet. We are discussing that. There's a lot of discussions going on at this moment. Whenever we have this decision made, of course the market will be the first one to know. And you are right, you have and you lose the capability to use that for capital on the remaining tenure of those bonds. So at the end of the day, we're going to take this in consideration in the decision to be made. So again, we haven't made the decision. We are having at this moment this discussion. Whenever we have this very clear inside the bank, we're going to release and let all of you know what will be our decision on the Tier 2.

Thanks very much, Milton.

Thanks, Nicolas. And for our last question, we remain in English, because we have with us here Carlos Gomez from HSBC. Hello, Carlos. Good to see you.

Hello, thank you very much. Thank you for two things, one for your generosity with your time, this is a very long call and second for showing us the cost including Argentina, not only on the revenues but also the cost so that we can see the true picture. A very simple question. You mentioned earlier the uncertainties, regard to uncertainty that you have. You are always negotiating with the government different aspects of your activity. What is the focus now? Last year, we were talking on credit cards. What is the main thing that the banks today are discussing? Is it this, DTA treatment? Is it still the card? Or is it IOC? What is in your mind right now?

Yes, thank you. Good to see you, Carlos. Thank you for your words and to know that for me, it's always a pleasure to have the most quality time with you here to go through all the details about the bank. So thank you for your comments. So I would say that the DTA that we were having the discussion right now is the discussions that we had more, I would say, the past or previous months. It's always discussions on CSLL if it's going to increase or not. I think it's very clear and made it very clear recently that the idea is not to hike the social contribution of the banks because you have to take in consideration that we have the highest amount or highest rate when compared to other countries and other banks around the world. So this is important to highlight. The DTA has been part of the discussions. Credit card is always going to be an ongoing discussion, always going to be an ongoing discussion. So I don't think we solved the problem that structurally we have. But this is, I would say an ongoing discussion. So this topic will come back. We'll be a little bit quiet. We'll have more discussions. But the main topic, I would say, it's the DTA right now. There is no discussions on IOC. There is no discussions on the new reform, on capital and gains. There is no discussions coming from that side. And there is the regular discussions that we have about general topics, the economy, the market, interest rate that we talk about, the fiscal side. So I would say regular discussions but nothing that needs to be highlighted here. So very regular discussions and the common course of business, I would say.

Thanks, Milton. Thanks Carlos. And now we finish the Q&A session. We answer to all the analysts that connected today with the call, all the questions. Any questions that might come up through WhatsApp are going to go directly to the Investor Relations team are going to be answered there. I give you the floor, therefore to close our earnings call. Thank you, Renato. Thank you for working with us. Thank you everyone that took part. Always a pleasure to be here with you. We try to do a presentation that is very executive, so we have time to talk and discuss the issues, get into the details with the most transparency as possible. You're never going to leave this call without answer. We're always going to take care of the quality and the transparency of the information. I wanted to see this moment to thank you. To thank, something that is very serious. We are very honored with the recognition that we've had from II. And we were recognized by you, and the sell side and the buy side, and all the categories of AI. And we were very honored. Third year in a row that we are -- second year in a row that we are recognized in all categories. This doesn't make us rest in our laurels. No. Responsibility continues, it increases. We want to do more to, to deliver more and to be ever closer to you with a maximum transparency, delivering the data, information quality on the books, quality on our calls, and publications quality on the Itau Day, which is so important. And we try to open there as most as we can. We always try to give strategy telling you more. But since we have that relationship with the investors in the market, if we are in doubt, we make them as, we have trust on the long-term. Thank you for your recognition and everyone that is watching. Our commitment to the bank is top with the organization, with the country, and we're going to diligently work to deliver solid results, consistent results, and especially quality results. Always thinking on the long-term. Never sacrifice in the short term to deliver results, whether if it's by the growth in revenue, the reduction on expenses. We're always investing in a franchise and working with a 100 year anniversary for the next 100 years. Thank you for your patience and time and dedication to the call and the questions. Have a nice day. We will see each other in the one-on-one meetings and see you on the next call.