Itaú Unibanco Holding (ITUB) Q1 2022 Earnings Call Transcript

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Itaú Unibanco Holding(NYSE: ITUB)
Q1 2022 Earnings Call
May 09, 2022, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Renato Jacob

Hello. Good morning, everyone. I'm Renato Lulia. I'm the investor relations director and market intelligence of Itau Unibanco.

Thank you for taking part on our video conference to talk about the earnings call, the earnings results of the first quarter of 2022. This event is being transmitted directly from our first Investment Center Itau Personnalite, so just launched at Faria Lima, the financial center of Sao Paulo. Here we offer a personalized experience for all of our clients that desire an onsite service to make these financial decisions. And also we have here rooms for meeting, for video conference in the studio for seeing and transmitting our results.

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And we're going to talk about the questions and answers from the studio. I'll give you more instructions to better use this session. For those of you that are accessing the website, you have three options of audio or the content in Portuguese or the content in English and the original audio. In the first two alternatives, we will have simultaneous translation.

To choose your option, just choose the flag at the left-hand corner, you can submit your questions via WhatsApp. You just have to submit to press the button on the screen. For those of you that are accessing via the website or submit a message on the number 1199-145-458, the presentation there will be presented here today is available for download at the website and also at our IR website, Investor Relations website. Now let's start the presentation of the results of the first quarter of 2022.

Milton, the floor is yours.

Milton Maluhy Filho -- President

Good morning, everyone. Welcome to our earnings call, earnings results of the first quarter of 2022. First of all, I'm going to give you some quality, quantity information, qualifying the results of the first quarter. And then we're going to do the Q&A traditional at the end of the presentation.

I wanted to start the presentation talking about our results, recurring results. If we compare it to the fourth quarter of 2021, we got a result of BRL 7.4 billion. And when we look exclusively at Brazil, we have a result of BRL 6.7 billion. So I would like to highlight that in a consolidated, we've been working with an ROE of 20.4%, which is a very robust one and looking at Brazil, exclusively the Brazilian operation, and ROE of 21%, a return on investment.

Now let's talk about our credit portfolio, the consolidated, we had a growth of 0.5% getting to BRL 1032 billion, and a credit portfolio in Brazil BRL 830 billion. Another information that is very relevant to highlight in this quarter is the efficiency indexes. When we look at the all -- while the consolidated 41.8% less, the smallest index in the series of the bank and looking at Brazil 39.6%, running below 40%, which is very strong. If you look at recent years of the records, we are operating at the lowest level that we have.

Now, let's talk a little bit about the M&A, well acquisition of clients, I apologize. This quarter of 2022, we acquired digitally 5.5 million clients. We have several products and channels and I'm talking about Itau channels, the ITI channels, credit cards, all of our businesses and products. This is a screen that I would like to highlight.

And we really talk about this. We talk about this during -- well, we've talked about this in the market and it really brought a lot of interest, the associate agenda. What do we want to show in the slide? We always had a DNA that is of association. We have partnerships, we have M&As, acquisitions.

We have business that are built together with several partners, commercial agreements and we've accelerated that agenda as well. This agenda was done with the objective, not only of doing M&A and partnerships. We have a focus of improving our ecosystem, improving the value proposition, and taking more value for our clients. And we have to identify what we have a strength and what are the strengths that are being developed in the market.

And that we can clearly associate or we can do an acquisition depending on the profile of the company or the FinTech or the start-up. Besides, we also have a corporate venture capital fund, and we are very active. And the objective of this fund is not just simply doing an investment to capture value with equity but we have to assure that we are going to invest in companies that are going to improve our ecosystem. And they're going to be integrated with the bank at some level of the business.

And we want to capture part of the value that will be generated with the relationship of the bank. Obviously, these are companies that are also going to have the relationships with other partners, commercial partners, and other companies. We are agnostic in that sense, just to give you a little bit of color, the Q4 partnerships here, we start with PayPal, the operation that we've done really focused on e-commerce with Reddit, Samsung, and Apple. We've done all of our products, the iPhone forever, Samsung, we've sold products.

And we finance our clients, building that client portfolio, Locaweb, we also have a great partnership. And we are helping clients being digital. Then the corporate venture capital, we have six invested. I'm not going to do a deep dive here, but just to give you an idea, Monkey, Paketa, others, we always have that logic of improving our main business and capturing value and equity and M&A and joint ventures we can mention a few cases.

A few are well known. We've talked about this in previous quarters, we have ZUP, Pravaler, Ideal and we also have recently marketplace of agribusiness, which is very important for our focus in agribusiness, our portfolio that is growing strongly. And we are doing the investors of Orbia, which is a marketplace dedicated to the sector. And TOTVS, we are partners of TOTVS.

It is a company that we start to be exclusive in providing financial services for everything that is integrated in the TOTVS ecosystem. Now let's talk about results. Let me give you a bit more information without talking about clients. It wouldn't make any sense.

Here is a very simple summarized slide just to show you how we are organizing ourselves so we can focus more on the clients. Let me start with the segmentation of the public and definition of engagement. Here, we have clusterization of the database of clients who are trying to define the behaviors of each client to try and capture in real-time. What is the best way of delivering value and reacting to these needs? This means not only doing the segmentation, but also defining the best talk using analytics and artificial intelligence, machine learning.

Since we have a lot of data in the bank, we can engage in having a best talk with our own clients, a conversation with our clients and investment in IT, science, data science. We also have done that with data scientists. We are improving our strengths and our teams. This resulted in this combination of pillars with a more robust delivery for our end client and customer.

We have a customer that is more engaged with the bank. I mean, if we compare it to the less engaged client, we can penetrate eight times more in an engaged client than what we penetrate in terms of credit offer business than a client that is not engaged. NPS 1.5 times higher in the engaged client, we can have 6.3 times more conversions for what we do in the omni-channel so that our clients have the best experience regardless of the channel that they get in. Our conversion level is very high, more than 13 times the volume of transactions, how many transactions that client does with the bank.

And also more important, more than 100% of what we call daily active users versus the monthly active users. We can have a frequency and a day-to-day relationship with those clients. This has been our focus, not only having clients, it is when moves us, what makes us grow, but more than having good clients is to be able to engage in our clients. This has been the central focus of our agenda.

Let's talk about the portfolio, credit portfolio, a few very relevant information, the natural person portfolio it's growing 4.4% and when we look at the portfolio of micro, medium size companies, we had a small drop. If you look at the big company's portfolio, we had a growth of 4.4%. Now looking at the year-on-year vision, this is a very robust growth, 32.9% in natural person and 21% in micro and small and medium size companies. In total, we had a growth -- slight growth of 0.5% in the quarter but an annual growth of 13.9%.

And in this growth of portfolio, we have the effect of the exchange rates since it was evaluation of the real in the first quarter, there is a 30 billion effect of our portfolio consolidated last portfolio so the effect of the exchange rate is very important regardless of our allocated operations hired in a Brazilian spreadsheet and also our Latin American portfolio that is done in different currencies. So there is a real effect against the currencies. Here, it's very relevant. If you look at December of 2019, our natural person portfolio with guarantees is 47.7% of the portfolio.

If you look at the recent numbers of March 2022, we close at 53.7%. So we have a migration that has had a great growth, a great migration, more guarantees, less spread, but a portfolio that is safer in terms of credit. And if you look at the portfolio of without guarantees, we leave 52.3 to 46.7, rebalancing our mix, a very important information to share. You remember that I really highlighted our flexible portfolio, at the moment when we started with the pandemic, we froze up the portfolio of our clients not only the natural person, but the wholesale companies, so we can help them go through this critical moment.

We froze that portfolio 53.5, it was a snapshot billions, and now it's BRL 27.1 billion, if you look at it, it reduced basically 50% in that period. It is a very strong amortization that portfolio is being amortized BRL 5 billion per quarter, and most important. If you look at the days to pay in this portfolio, we are not renegotiating. This is an amortization that is real, and we have not taken these clients to the renegotiated portfolio.

This is very important, specifically when you see that this portfolio 62% of real guarantees, because the products, the products of short-term, without guarantees, they've been amortized with more emphasis. So now we have a longer portfolio with products of guarantees, financing vehicles, real estate credit, and better risk portfolio, better profile of risk for this portfolio. And if we look at the provisions, volume of provisions, a delay here in this portfolio, we have 230% of coverage. These are very solid numbers.

NPL plus 90, obviously this is a very sensitive public but it has a healthy performance. This is very important. If you look at this number in the context of the bank, the renegotiated portfolio over the total portfolio, we are at the lowest levels, 3.3%. And most importantly, I just talked about the credit portfolio we've had of growth and we are losing BRL 30 billion given the effect of the exchange rate.

And if you look nominally, this number is also smaller. Not only the percentage is dropping but nominally, the renegotiated portfolio of the bank is smaller. So it shows how we -- and given emphasis to having a credit portfolio with quality, good performance. And we have not increased.

We have not sold our portfolio. We have not sold, and we can start to sell the portfolio if economically, that makes sense those to sell the clusters. But this is very useful information for you. Here, the margins so let's highlight the growth that we've had when we compare the first quarter of 2021 with the first quarter of 2022.

We had a growth of 23.9%, which is above the guidance. And this is a very solid, strong result remembering that this quarter has less business days. So compared to the previous quarter, there is always a seasonal effect. So less days, less business days that affects the results so we can deliver a margin in the quarter that is aligned with what is the margin of the previous quarter, which is a very strong growth in regards to the third quarter of last year.

So solidity, consistency in the results, very strong results in our margin. When I talk about the margin, annualize average margin, we have a growth from 7.72 NIM to 7.9 in NIM and then the Brazilian margin, we have 8.5% to 8.9%. Obviously, there is an increase in the annualized margin, these are very robust results, the margin with the market. We already gave you the guidance this year.

It would be a difficult year basically because of two reasons. First reason, the effect of the interest rate, the growth that we can see on the curve, this naturally affects several of our positions, even though the bank always has -- we don't have our liabilities open. We had the hedging active, whether if it's a banking portfolio or the trading portfolio, of course now, given having said that we have had a great result above what we expected in the quarter composed by BRL 1 billion in Brazil, BRL 500 million in Latin America that are aligned with the records, historical records, it's BRL 1 billion of results here are above our expectations. So we have had a great quarter of margins where the market is.

It's very different for -- with the previous quarters, we want to use the cost of hedging of the capital index. If you remember, last year we had ahead of the capital index, our bank given the size of our exposure in foreign currency, given the positions that we had in the different countries, we always had a lot of volatility and in the exchange rate, which is not healthy to balance a balance of our size with this level of volatility. So we made the decision of hiring this hedge is 100% done, and we are highlighting. We had a cost of hedging in this quarter of BRL 400 million.

If it wasn't that we would've had a margin that was higher. And besides that, we've also have important positions of available for sales, those positions that are in the [Inaudible] assets, we reverted it around BRL 560 million of less value in this quarter that are also launched in this number. The most important thing is that all those provisions of less value are in the recurrent results. And that's where they should be given that this is a result that is recurrent from treasury.

So these are all in the recurring results of the bank. If you talk about services and insurance, very important, our guidance to remember that when we already do it as a comparison based except in the first quarter our guidance, the results that we had with XP, remember that the spinoff was done at the end of May. We still had five months after the spinoff. This is very important information for us to look when we compare with the five months of previous year.

So our portfolio of services and insurance, we had a great growth. When we look at year on year 18.6%, a very important highlight for the checking account, the administrative, resources and in the investment bank, we've had a quarter that is slower with the market volatility. We've seen windows that are less relevant in general, specifically for equity markets. And this has decreased our investment banking.

Once again, aligned with what I've told you. When we expose in the guidance, we expected less activity in variable income in the investment bank. Now, what is important to highlight here is the result of the insurance. We are growing year-on-year 24%.

If you look at the longer series, this is the longest growth, the biggest growth that we've had very strong. And just on this quarter we had a growth of 10.4%. So if you look at insurance, you can see that in premiums earned an increase of 19%. If you remember that the insurance is wholesale, this is a business of wholesale.

You pile the sales and then those results are accumulating and you regenerate results through time. Very simple estimate of the premiums issued 20%, 25% have recognized as a result in the year itself. So we are building a very solid portfolio for the years to come. But we are already gathering the low-bearing fruits.

We have 3.8 percentage points, combined ratio, not only for the increase in revenue and premiums, but also because of drop in the liabilities four percentage points, another highlight in the claim. I apologize. And we have a growth of 29.8% when we look at the first quarter of 2021 with the first quarter of 2022. Now the issuing card, very strong and acquisitions, 22.7% as you can see here a growth.

And last but not least, the -- well, the acquiring 22.7% and the open products we have a complete bank. We have the best product for our clients, and we have the third parties. These are our own products and when we look at volatility, changes in the interest rates, where we have to do the best investment. Remember that all of our investing professionals are not paid by the products that they sell, regardless of the higher or lower spread the commercial force, the payout is the same.

This is very important to remove any type of conflict for the -- in the context of compensation. So we can deliver the best alternatives for our clients, for the cycle of the economy. So you can see that our portfolio of own products is growing, and we have a migration of the portfolio, and this is very healthy in the relationship with the clients. Quality of the credit, let's look at the NPL 15-90.

You can see an increase of this base point. If you go back to the fall of the third quarter last year, you will remember that I've told you for a long time, that we hope for normalization, gradual normalization of our delays. Now we've spent two years, 2021, 2020 with a low delay for several reasons, whether if it's lockdown, more increase in the savings and families less activities, economic activity, that's made our delays to be very -- at very low levels. And there is an effort for the company from the government to give the corona vouchers, the resources and that made the population gave an opportunity for them to adjust in a very relevant way during this period.

The delays start with a gradual curve, but they're still behaving well. We are growing the portfolio, a better mix, as I told you and this is reflected in the quality of our credit indicators. If you look at the NPL the delay above 90 days, we have the 2.6%, very low growth. If you look at Brazil is 2% very small growth in Latin America is horizontal.

So if you look at natural presence, there is the growth where we believe that there is a gradual movement, but once again, it is an adjustment for what we expected. There would be an actual correction of the historical records, even though levels that are below what we have in the pre-pandemic. And I've told you our best expectation is to stabilize in the pre-pandemic, because these are very reasonable to expect. When we look at the long delays, the natural presence we have a small growth, the micro, small and medium companies, and the big companies also the indicators are very stable.

A very important paying attention in the small and medium-sized companies, we have a small growth 0.4%, and let's remember, this is expected. Just go back to any historical records, always in the first quarter, whether if it's natural presence or the companies, this is a very difficult quarter because you have the concentration of a lot of expenses. And then the lack of pay tends to suffer more. So the seasonal delay is very aligned with what we expected and the most important thing is that it is completely expected.

And when I look at this delay, the default is -- the expectation is to have it stabilized close to their standard. Don't expect a lot of deviations when we look at this delay with small and medium-sized companies. And then in general, we expect to have a gradual correction and an expectation of growth in the delays. But once again, this is within what we expect for the standards of the pre-crisis of a very well-behaved portfolio.

Let's talk about the credit cost, some information. We can see that the cost of credit in the quarter is BRL 7 billion, so much bigger portfolio, so the nominal cost has been to grow, of course, and this is the cost of -- the relation of cost of credit over the portfolio, if you see 2.7% still running A&D standards that are pre-pandemic. So the costs of portfolio very comfortable remember that we cannot just look isolatedly the cost of credit without having -- taking a look at the top line and the results of the margins. So we are looking as the liquid margin.

So our capacity of generating results with quality, with sustainability in a consistent way. The coverage index is very solid. So if you look at the end, we have 232%, wholesale 210%, so a small drop, but if you look at the average coverage in the period of 2015 to 2019, the average, we ran at 167% of coverage. So I want to say that 210% is still maybe comfortable when we look at previous period.

So we are still having our balance sheet very well protected with a good coverage over the delays to default. Now recurring expenses of interest rates here is our discipline consistency day to day. We've talked about this and the numbers speak for themselves. So when we look at the inflation period, whether if it is the correction of our payroll, which is done the IPCA and the IGPM rates, all these indexes for inflation number still impact very strongly our non-recurring expenses on interest rates.

Our expenses recurring that do not incur from interest rates. We are growing above the inflation 3.8%, and there is still a drop in the delta of 2.7%. So if you look at the expenses that are not stemming from interest rates, we on a consolidated growth 2.9%, when we look at a year-on-year 4.2% of drop in the quarter. Very important message, all of this effort for contention of costs and reductions, we can see the core cost that core of running the bank to operation of processing the volume, the volume metrics, everything that we do, the payroll, it came zero for the period.

So we absorbed all of the inflation and still controlled any increase in expenses without, at any time to stop investing in the future. So what I talk about the bank of the future is what we are going to invest, what we're going to do in the expansion of new businesses, investment in technology. So looking at here, we have investments that are very solid and we're still growing the bank, investing in the franchise, commercial and expansion, new businesses, businesses that already exist. This has been our focus, always looking up ahead with a long-term vision, reducing the cost so we can deliver a result for the quarter.

And our efficiency level, I would like to show you that we can see a longer series. We are running at the lowest standards of the serious 41.8% and 39.6% in Brazil. Our efficiency, we are considering all the expenses. We make no exception, all the expenses are here.

And once again for comparability we have to take that into consideration. The results that we had with the dividends in the first quarter, this was enough to finance the robust growth of the portfolios. So this is what we have to do to the results and we consume that 0.5% with the growth of RWA of the bank. Also, we had two important events.

Over the year, we had disclosed that before. We had the acquisition of a part that was still lacking of the bank in Colombia with the Itau Chile. So there was this acquisition, this was higher back in 2014, it's not new, but it was finalized now. And also you've probably seen that we have this voluntary dismissal program with a little bit of a different condition than what we had in the past.

At the time, we had the launch of provisions in the non-recurring results, same thing that we did now, but the most important thing is this program now, this launch now, it doesn't really integrate any kind of expenses in the first quarter of 2022. It is prospective for what we expect to have in terms of expenses with the extraordinary expenses, we do not expect to have this as a recurring element, and that's why we are doing the provisions like this. So we have 12.5%, this is AT1. So it's close to 1.5%, but we're able to use everything that we have issued in Brazil and abroad.

In our capital the AT1 is 11.1%. Now, in terms of guidance, I think it's important to be consistent coherent, I think that's very important in this game. We're not going to change anything in our guidance. And actually, for a while, we know that the last guidance was posted just three months ago in the first quarter.

And if we look at everything that we want to do in 2022, we're still looking at the same expectations, basically. So credit, also the financial margin with the clients, I mentioned that we had 3.5% in consolidated, and it's really close to the maximum of the guidance. So we're still comfortable with the guidance that was disclosed -- that was published. Well, I would like to wrap up and I think we should now listen to you.

If you have any questions, any comments, thank you all so much. I am going back to the studio to see Renato now so that we can continue this.

Renato Jacob

Send us your questions, your comments, if you want, you can send them on WhatsApp or using the button on the platform. Well, all this material is going to be available as I said before, and our IR page. I have Milton over here. Hello, Milton.

Let me turn it over to you now so that we can start with the debate with the discussion in our earning call. So we have the first question already from Flavio Yoshida, from Bank of America Merrill Lynch.

Milton Maluhy Filho -- President

Flavio, Hello. Good morning.

Renato Jacob

I think he's still connecting. There it is.

Milton Maluhy Filho -- President

Hello, Flavio. Good morning. Can you hear us?

Renato Jacob

Not sure. Flavio, can you hear us? Maybe you're on mute, Flavio. I'm not sure.

Milton Maluhy Filho -- President

I'm not sure Flavio can hear me. OK. I think we can try maybe the second question and then we'll go back to Flavio.

Renato Jacob

I'll try again. So I have a question from Tiago Batista. Tiago, Can you hear us? There is probably a connectivity issue. Let's double-check.

Well, Milton, in the meantime, we're having an connectivity issue or audio issue, I'm just waiting for the technical team to solve that. But in the meantime, it's interesting to see all those results that you mentioned. So I wanted to know what are the main highlights, if you want to repeat some of the highlights in terms of the consistency of our results this quarter.

Milton Maluhy Filho -- President

Well, as you were saying, this is live. So yes, I think that we're probably having a connectivity issue maybe via Zoom or something. So as I was saying a while ago this was a very consistent quarter. I think results were well aligned with what we were expecting.

Again, the main term here is consistency and there might be a few questions. And we expect to hear from all of you, but still it's something that makes us very satisfied, very happy in terms of this quarter and in terms of the future as well. We really trust the guidance for the entire year. So that's why we didn't have any changes in that.

Renato Jacob

OK. I think Flavio is with us now. Hello, Flavio. I'm not sure if you're on mute Flavio, we cannot hear you.

Can you hear me now?

Flavio Yoshida -- Bank of America Merrill Lynch -- Analyst

I was on mute before.

Renato Jacob

There it is. OK, Flavio. We can hear you now.

Flavio Yoshida -- Bank of America Merrill Lynch -- Analyst

Great. How are you today?

Milton Maluhy Filho -- President

Great, Flavio. Nice to hear from you.

Flavio Yoshida -- Bank of America Merrill Lynch -- Analyst

Well, it's great to have this opportunity to ask you a question. Well, you are talking about the guidance before. And what we have seen here in terms of the figures of the first quarter is that they're not higher than the guidance. So what I wanted to ask you about was the margins.

When you look at the growth, you can see that it is usually for credit cards that have had very good growth. And when it comes to companies to corporative also that's a bit stronger than before. So I wanted to know -- I wanted to ask you why haven't you changed the guidance, especially when it comes to the margins. I mean, for the rest of the year, why haven't you changed the guidance? Do you think the margins are going to suffer more pressure as time goes by throughout the year, etc.?

Milton Maluhy Filho -- President

Thank you very much for the question, Flavio. We're truly sorry for the inconvenience with the connectivity issue. But I think this is working now. Now in terms of the margin, what I can reinforce is that we understand there was a very solid -- we had a very solid quarter.

It was above the guidance. But since it is annual, when we're looking at the forecast, when we're looking at the future projections, we believe that this is going to be aligned with the guidance year on year. And we have seen some advancement in some lines. There are many reasons for that.

There is also seasonality. There is also invoicing. There is also resuming activities. That's why also we have seen an impact on cards.

And in the fourth quarter, there is this seasonality with people also getting Christmas bonuses, for instance, or different amortization. And that's why the balance for certain product or special credit, for instance, there will be a reduction in that. Also in personal credit lines, there is renegotiation. We were discussing a while ago that this is something that has or brings a reduction.

So from a standpoint of credit quality and margins, we recover margins. We started the year off very, very strongly. We know that the projection that we had for the beginning of the year has of course some expectations and many aspects. And when we were preparing for the guidance, there were a few things that did change.

I would say the inflation rate, the interest rate, some macro things. But you see, the last quarter of last year, we had a lot of acceleration in the margin, 13.8% quarter on quarter. So we have been accelerating. I mean, we were accelerating last year, so that makes the result of the margins.

Now it makes them converge toward the guidance. So that's what we see. We're still very positive, very comfortable with the guidance. And we don't see a reason to change that in any of the lines.

Renato Jacob

Thank you. Thank you, Milton. Thank you, Flavio, for the question. And we have another question here from Tiago, but I do see Tito on screen.

So, Tito, let me turn it over to you.

Tito Labarta -- Goldman Sachs -- Analyst

Yes. I can hear you. Can you hear me?

Renato Jacob

Yes. Brilliantly. Thank you.

Tito Labarta -- Goldman Sachs -- Analyst

OK. Great. Thanks for the call and taking my question. My question, sorry, I just hear the translation right after I speak.

So my question, just in terms of your growth in NII and provisions, right? I mean, you had good growth in the client NII as you mentioned, but provisions are also growing quite a bit and there's concerns about asset quality deterioration in the current market environment. So just how do you think about that growth? Are you concerned about asset quality deterioration? I mean, you have the growth in insecure lending. Do you see potential risk from that at some point later in the year? How do you think those two lines should kind of involve hand in hand.

Milton Maluhy Filho -- President

OK. Tito. Thank you very much for your question. Let me go through some message here from the cost of credit and the perspective looking forward.

First of all, we are very positive about the guidance. So we still believe we're going to deliver the figures with the guidance we -- well, told the market at the beginning of this year. Second, we saw a deterioration situation by the second semester of last year when we found out that we were seeing some difficult in some specific vintages. So we are very fast here and other models predict a lot.

So we made the decision to reduce the origination of some credit throughout that period. And this of course will have positive impact this year because we made very fast decision. But anyhow, I've been saying to you and to the market, that when you look 2020 and 2021, were two unusual years. That means that we saw the delinquency ratios and also the cost of credit per portfolio in a very, very low level, the lowest level ever when you look to a long series.

So it doesn't seem reasonable to have those solo indicators. So our review and what we've been saying to the market that we expect a gradual normalization of the delinquent throughout the period. We still believe by the year end, we're going to be below or very similar to what we're seeing before the pandemic. So this is basically our review.

We saw some growth here in some clean portfolio in the first quarter, but in a very comfortable way because 80% of that or even more 88% in some portfolios with known clients that we have a relationship and long-term relationship and where they were consuming more and using more some credit facilities to overdraft is a good example. When we go back to the fourth quarter, we have to remember there's some seasonable effect that the clients they have, their 13 payroll, paycheck, and they pay credit lines. And also we are comparing on a nominal basis with the previous quarter with a much higher portfolio. So when I look to the NII -- the NIM of the bank and the NII of the bank, we are very positive, more than 20% growth.

And of course, we have a little bit higher cost of credit, but in the bottom line, very positive for the balance sheet. So we're still comfortable, but we expect, as I've been saying, telling you things the third quarter of last year that the delinquency ratios will increase throughout the three quarters that we believe. But it's still normalizing or getting more stable, very near or close to what we were seeing before the pandemic starts. So we're still very comfortable about the figures, but again, expecting slightly deterioration throughout the quarters that we still have ahead.

Renato Jacob

Thank you so much, Milton. Now we have a question from Tiago Batista.

Unknown speaker

Hello and good morning.

Milton Maluhy Filho -- President

Good morning.

Unknown speaker

You can hear me OK?

Milton Maluhy Filho -- President

Yes.

Unknown speaker

So I have a question about the bank capital. We were -- you were talking about 12.5% around BRL 100 million below the target that you had and without really considering the consumption that you're going to have, I mean, From XP. So when you think about capital, is that something that bothers you and also, is there a plan to reconsider all that? I mean, Milton, you mentioned that you're creating, I think, 50% per semester, But it's still 100% below that level. So how long do you think it might take to reconstitute all that? And are we going to see a reduction in that goal for the next few months, given the new approach of hedge? So how do you think this is going to work?

Milton Maluhy Filho -- President

Thank you. Thank you, Tiago. Thank you for the question. There are many things that I could share here with you.

First of all, in fact, with the end of overhead, that started with a 100% percent adjustment this year, that's the rule of the central bank. And with the end of the changes in fiscal aspects, we are expecting more volatility in the exchange rate. We didn't have the same effect in the last quarter, actually. And we usually say that this is not the structural position of the bank.

I mean, it is a hedge really per se, so that we can calculate the volatility so that we can manage our assets in a perspective manner. So the first thing is in our committee, in our council, we're working with 12% CET I, and we are comfortable to work with 1.5% CET I. So from a risk appetite standpoint, there is not going to be an impact on the dividend of the bank. We are still distributing the QCD, the 13.5% as we are used to.

So that's the first movement, and we understand it in terms of operations, the banking still work with that because the buffers that we had in the past, as you said, they were connected with those events, of course, it depends on the circumstances. And we work with more buffers, especially for dividends, because we want to invest and expand the franchise. I am not looking to pay more dividends. I am actually looking at having the right profitability from the bank's capital.

The second thing is, we expect that the assets that were funded by risk as we change the margins and the margins, and we have an adverse effect that might pressure the portfolios. So the capital generation and the quarter is going to be more than enough to absorb any growth. And we had two specific events that I just mentioned, the PDV, for instance, it's going to bring benefits and recover capital as time goes by, because I'm going to do the provisions. And as I have more expenses, I'm going to bring more benefits, better results and reconstitute capital and also the acquisition of Itau Corpbanca in Columbia that's something that happened in the past.

And we simply finalized that. We have the investment in the participation of the acquisition that we had on April 29, the BRL 8 billion, the 11.36% participation in XP. Let's remember that by the rule -- capital rule, any investment above 10% in institutions, financial institutions make us deduct fully the value of the investment. So if you look at the isolatedly the investment of BRL 8 billion, we lose around BRL 0.8 million in capital with this acquisition.

On the other hand, if we sell just 1.37%. So going back to the 10%, which is the limit, then we already come back with the capital -- total capital of this acquisition. Of course not 100% because the part that remains below 10% is pondered with the -- pondering factor, which is 100%. So in practice, what happens is then since it comes, we can recover a great part of this capital and that can be done as we think that it is an opportune moment and exclusively here, this lot is not a relevant lot and we can do it with private sales, trading and this size is less relevant here.

And we are very comfortable and this depends exclusively on our actions. So this is something that will be done. And when we look at this perceptively, we've done a very active management of our portfolio. So the fixed income market is very good example, everything that we've originated the longer term credits, we tried to get it in the market to have a bigger rotation for the clients of big companies, big tickets, big customers that have capital markets that are well developed.

And of course, we have made decisions that optimize the level of capital that we manage. So we are comfortable and our expectation is to replenish this capital all throughout time and always working with an appetite that are for the management of the bank. We are comfortable and we think that we're going to work well and we'll have less origination all throughout year.

Renato Jacob

Well, thank you, Milton. Thank you, Tiago. And we have another question now from [Inaudible] No. We inverted [Inaudible] in the screen.

We are adjusting the question we can go with [Inaudible] as well.

Gustavo, I thought that you were kind of different Gustavo.

Unknown speaker

Good morning, everyone. Milton, everyone, congratulations for the results. My question is very simple.

Renato Jacob

We lost the audio. No. I think we can hear it. Can you repeat the question?

Unknown speaker

Sure. Well, the question is treasury and guidance. The result Milton already specified it is what we expected. And if we think about the guidance that you passed, BRL 1 billion to BRL 3 billion, we had BRL 1 billion now, but we have the guidance.

So that means that the next quarters will be very weak and you'll have this very -- very well match. Do you think that there is a possibility for the second quarter or review of the guidance? I just wanted to understand that because it was surprising. BRL 1 billion was not what we had in mind.

Milton Maluhy Filho -- President

Thank you, Gustavo, for the questions. Well, it's exactly what you mentioned. We've had a better quarter than what we expected. We know that we're going through a very volatile moment, not only Mexico, but internationally.

This is what has happened. The war with in the Ukraine, this is a very important movement, China with a zero-tolerance lockdown and emphasis and above what the market expected behind a curve, the adjustment in the interest rates. So we expect more volatility. Our structure portfolio of the trading we are doing well performance wise, even though there is the adversities inherent to the market.

So we are still delivering a lot of results and the banking structurally we've had different effects when we look at the different levels of interest rates, Brazil and the United States mainly. So our best expectation is that we're going to have two quarters that are a little bit more difficult up ahead, and we should frame this result within the guidance. So the cost of hedge is there highlighted BRL 400 million in the quarter and we should have, well, it really depends on the interest rate differential. And our expectation is that it is something close to the BRL 2 billion that we just mentioned at the beginning that this is what we should have of the cost of the head, the index hedge.

Well, in the market, the perspective is not the best. We've seen the market as a whole. This has to do with the structural positions that we have. And remember that this year we have the end of the overhead.

Last year, we still had a very important result from that BRL 800 million. So a long response to say that the expectation is to be within the guidance, we shouldn't review it unless an opportunity or additional volatility might come up that might benefit us. But we will maintain the guidance nonetheless.

Renato Jacob

Thank you, Milton. Now I think that everybody thinks knows who's next. So here is Rodman. Thank you very much.

Unknown speaker

Good morning, everyone. Can you hear me? Great. I wanted to ask about the other blocks of the results you have several opens, and for example, we can see that the ROE or return investment on the ROE of the bank is, we have a big ROE and we have -- and we wanted to get your trend here.

Milton Maluhy Filho -- President

Well, thank you. Thank you, Rodman, for the return on equity question. Now we've seen a growth in a portfolio that is a bit higher than what we see in services and insurance. So we have more dependence on credit and we had more dependency, less dependency moments where we have a cycle of four years, the fifth year of growing the portfolio.

And naturally, this brings more dependency on credit results. Credit for us cannot be looked at in an isolated way. Everything that we do in credit, whether it's wholesale it is trying to service our clients as best as possible cross sale. Everything that we generate is we can see that wholesale has great results.

And the delinquency is really low. If you look at corporate investment banking, all the large corporate in the middle market, these are we have portfolios that have low delay cost that is low solidity. The companies are less -- are more leveraged, more prepared for the challenges up ahead. So wholesale, we've had great results, incredible results and pulled by the investment bank and in the concept, not only variable income, but also fixed income, we've had important growth we had in the first quarter of this year.

We had record results in fixed income, even though in the fourth quarter, we're going to have a deacceleration natural from the elections and so on to forth, but we should have three quarters that are very solid for the fixed income not so strong for variable income, but it's very stable. And in general, the wholesale is doing well. The cost of credit is a very important lever. And the retail, and it generates a lot of credit.

And retail actually, we have delinquency, the high inflation in April. We should have 12% of inflation interest rates that are climbing at a breakneck speed. So regardless of the magnitude of the interest rates, what impacts is the speed of the interest rate. Remember that we went to low 2% and now we're running 12.75% and we still have 100 points for the climb of the interest rates and this impacts a few specific spreads.

Some portfolios more than others are sensitive. The marginal procurement we try to pass it on to a few other portfolios with the increase of interest rates, some have limits, regulatory limits, such as Consignado or the loans here, the Chilean Peso here in Brazil, other portfolios that we suffer in funding, the savings account is a great asset. Most of the deposits on the savings account is spontaneous. We don't have any objective our -- we have to sell the savings for the clients, but still a safe product in the view of several clients with several benefits.

So there's still a big volume when the interest rate goes up and we change the rule, and this brings a cost that is additional for the savings account. And there is a credit effect, which is the cost of funding for the anticipations that we do at the bank as a whole, specifically in the acquiring, remember that for the acquiring is 100% ours. So all the effect of the funding, all the costs of funding are with the margin are within the NII of the bank and all the MDR it's within the revenues of services. So remember that when we change the commercial regime, for example, D+1, the cost of funding of that the margin is with the client sold the MDR is within the revenue of services.

All the anticipation is there. So all in all, we see this increase of pressure because of the interest rate. Increase, we can penetrate in products of great -- greater profitability, but with a marginal profitability that is lower than what we observed. So the expectation is that this should be the tone at the top, and we can see the increase of delinquency all throughout these next quarters.

And so this should cause some issues in profitability. We are going to get a return on capital very similar to what we see in credit. I don't see a lot of changes mainly considering that at the bank, the cost of -- the capital cost is increasing. We are running at 14% at capital cost, and this is the way that we enter and calculate our capital costs even more conservative than what we see at the average of the industry, 12.5%, 13%, we rather run at a conservative level than we are adjusting the margins with the new portfolios, trying to get a profitability level that is, well, given our hurdle of economic capital allocated and the value that is extracted at the portfolios.

So this is a long response to how we work this, but the results are still very strong. And the creation of value is based on the revenues of bank book, insurance, everything that is not called credit and the trading portfolio that also generated value, but it's separated.

Renato Jacob

Great. Thank you, Milton. Now following the order, we have Eric Friedman from Citi.

Eric Friedman -- Citi -- Analyst

Hello, everyone. Thank you for accepting my call. Good morning. Good morning, everyone.

My question is what has Milton talked the growth of clients. So we can see clearly what is happening. We have a platform that is centered on the client. This is a trend in the sports of several banks.

I know it's difficult to execute specifically, given the legal issues. In this call, I think that Milton highlighted the deliveries of the insurance, we can see the client centers. What are the other business units, Milton that have opportunities for improvement within the bank? I think that we can improve different potentials here in the bank. But I wanted to, well, the brokerage, can improve and I wanted to do a follow-up and if possible.

Can you comment on how do you see the flexibility -- regulatory flexibility for the M&A of these opportunities? It's clear that we have a limited addition, but I don't know if there is going to be the interest rates and the difficulty with some start-ups. Can that lead you some consolidation in the universe? Do you think?

Milton Maluhy Filho -- President

Thank you, Eric. Thank you for the question. Here I've talked a lot that the mantra is cultural, digital transformation, efficiency. But all of that only makes sense if we have -- if we focus on the client.

We've changed in a very relevant way, the way that we face even the incentives related to clients. This has changed all throughout the bank. So all of our collaborators with that exception have objectives goals with clients, including accounting, people, risks everybody have to have an unlock that is dedicated to the client. Of course, to deliver that we have the modernization, as you said, the legacy system.

We've done 25% of the migration of the legacy, all the move -- all the systems, 8,000 services, we already migrated 25%. And when I say migrate, it's not simply stop the processing of that software or that system that's in our data center and take it to the cloud. Going to the cloud infers in modernization, new architecture and avant-garde technology. We are up and running in this process.

Our expectation is to get to the end of the year with 50% of the legacy platform modernized. But we are prioritizing in the context of the client. We start from the pains of the client. We understand what it's relevant and the modernization stems from that.

So at the end of the year, 50% of the business services, these are 80% or 80-20 of what is really important for the client. 80% of what is important will be modernized and running on the cloud. This is a transformational change. And I would say that this is a new moment for the bank.

So 100% of the squads, the tribes, whatever you want to call it, operating in modern platforms, which changes we measure the quality of the delivery at the legacy for what we have in the new platforms, modern platforms. The speed you're taking to production, time market, the testing, making a mistake and correcting, understanding the pains and working in the context of the client is enormous. And the amount of time that you dedicate -- that you have to dedicate to develop a series of codes -- lines of code, this increased a lot. So we have more efficiency.

With the intelligent use, not only for the processing capacity, but in our vision investment is advancing very well. You talked about the point of the brokerage. Not only we acquired EDAL, which we're still working for the regulatory approval, we should take a big leap in terms of quality and platform. We've done very important investments in our legacy brokerage.

So we will have delivery not only at the institutional level big accounts, but also for the wholesale world. So we see evolution of the home broker. We can see the negotiation of the secondary is working very well. The R LPs, the mini contracts, all of that were features products that we didn't have before.

So now we have an advance. We are change the logic of investing in technology, in business, understanding the needs and the needs of clients. So I see a lot of opportunities in wholesale, the world of cards, the NPS is very solid in investments. We're doing a great catch up delivering value, delivering the quality of experience.

And we see insurance the growth is vigorous. Our expectation is that the growth will be continuous. And once again, not only we have to do the management that is centralized without understanding the pain of the clients, and we have to evolve it. So in my opinion, we finished 2022 with relevant advances in the NPS of the bank, in several of the business.

So I don't have one business that has more difficulty. All of them are advancing. And for here next year, we will launch the platform that is much more modernized. So these are very relevant expectations of all the investments that we're doing.

And just so you know, of the 14,000 people that we have in technology, 80% of them are dedicated exclusively to the modernization of the bank. And end-to-end delivery, only 20% are dedicated to the random bank. So this shows the size of the appetite for the investment that we've done. And we believe that with everything that we're seeing, we can compete on equal footing with many of these new companies.

And at the same time, we see the added value of the companies that are in the market. And now the second point, we will go to an associated agenda, which is CDC partnerships, commercial partnerships, or the agendas of fusions and acquisitions and everything that we've done here. There wasn't any counterpoint of the regulator or the CADE. I don't expect to see any downfalls.

We are always paying attention. We didn't stop to do any transactions worried about regulatory issues. We know that in 2017, it's very complex, very specific case, which is the negotiation with the future controller of XP, it wasn't approved by the Central Bank. But we still have the expectations that naturally the market will be more competitive.

And it's important to look at the market share and market cap, everything that happened from 2017 to now on. Several companies earned the market because of the value of the market, not only from last year, but this shows a competitive market that won't be observed. So we imagine that the processes for eventual deals approvals should be more -- bringing more trend quality than what we observed a few years back.

Eric Friedman -- Citi -- Analyst

Thank you very much, Milton. It is difficult sometimes to communicate all that to the market. When we're here on this side of the camera, we know more about that.

Renato Jacob

We have Henrique Navarro from Santander now. Hello, Henrique.

Henrique Navarro -- Banco Santander -- Analyst

Hello. Good morning. Thank you for taking my question. I wanted to ask about delinquency or failure to pay, which is a real concern nowadays, when it comes to results, we see that the 90-day delinquency -- wanted to know, actually if that has been a concern, I think it is aligned with what many others have reported already.

But real, real concern, I think is the 15 delinquency. We've seen some rate of 90, but the real concern I think has to do with the 15 because it might lead to a bigger problem. And especially the 15-day delinquency, it is -- I mean, it is normalized at Itau, it is under control. It is aligned with a portfolio and its risk.

So my question has to do with the following that a symmetry that we've seen with the 15-day delinquency for Itau and the rest of the market. Why does that happen? I mean, I wanted to know more, does it have to do with the profile of the portfolio or is it something that we really shouldn't worry about because it is very volatile. I mean, very seasonal, maybe. So I wanted to hear from you, I wanted to understand what you think about the 15-day delinquency rate?

Milton Maluhy Filho -- President

Hi, Henrique. Nice to see you again. Thank you for the question. I think you even asked something about related to that in the previous call.

So it's something that you're truly concerned about. I can tell. Well, we've seen that it's normalizing little by little. The thing is the short delays, especially in the first quarter, there is a seasonality for that.

If you look at the history of the records of the bank, yes, that's -- there's usually a deviation in that. So we've seen something similar to previous period of time. I don't see a huge change in the short delays. If I look at Brazil per se, I see that it is a usual behavior.

When it comes to portfolios, there might still be an increase in delinquency rate for the next few quarters, but still close to normal. And especially for the over 90, I think it's still going to increase in Brazil and going to be stable, similar to what we had before the pandemic. I think it is a good behavior. I think there are two levers.

I would say that I would like to highlight. There is no -- not even one real of a sold portfolio. I mean, we're not selling active portfolios. We know that selling active portfolios would have a positive impact on the indicator, and we haven't done that.

So whenever you compare, it is important to see what the conditions are. It's important to understand what kind of effect or selling active portfolios would be. So we really reintegrate the sales of portfolios whenever we want to compare to have also a good reference to compare. That's the first topic here.

The second thing is the renegotiated portfolio. We've been very careful. I mean, ever since we ended the Itau CR program, we wanted to renegotiate looking into the future. I mean, nowadays we're looking at 3.3% but the renegotiated portfolio, it had a nominal reduction, the one with BRL 53 billion.

Now it is -- we're looking at BRL 27 billion. So we had a change, basically half the portfolio. So it's still good coverage. Of course, the duration is going to be longer because we have some credit for houses or cars, but the bottom line is we're not renegotiating the active portfolio or increasing the renegotiation of the portfolios at the bank.

We're not changing anything in terms of these portfolios. What we're looking at here is a screenshot of what's happening to the delinquency indicators. So again, it is a challenging moment, more inflation, more interest. The GDP is not growing that much.

The perspective might not be super positive for the future. So we have been very careful. We have been very proactive in reducing and adjusting concessions ever since last year, the second semester last year, I think we're going to continue to do that this year. We're trying to adjust and we're working in a timely manner to make sure that it's going to be OK.

But again, we believe that it's going to gradually go back to a stable level. There might be a deterioration until the end of the year and that's what we believe will happen.

Renato Jacob

Geoff Elliott from Autonomous, hey, Geoff, thanks for attending the call. Can you hear as well?

Geoff Elliott -- Autonomous Research -- Analyst

I can hear you. Hope you can hear me as well.

Renato Jacob

Yes. Hi.

Geoff Elliott -- Autonomous Research -- Analyst

So another question on this topic of credit and specifically interest rates so rates are now quite significantly higher than they were a year ago, and I know you don't have a lot of floating rate loans on the consumer side, but how is the increase in credit, increase in interest rates speeding through into credit quality? And are there any kind of threshold levels of -- where you'd start to think that your customers really start to get squeezed?

Milton Maluhy Filho -- President

Yes. Thank you, Geoff. Thank you. Thank you for your question.

I think we have to separate what we call the wholesale clients from the retail clients. On the wholesale clients, indeed, they have their credits raised on CDI plus in general. OK. So when you have an interest rate hike or increase as we are seeing locally they have an impact.

So the good thing of that is that as when we see the whole portfolio of the wholesale, we are working with much lower leverage companies than we used to see in the past. So even when you have a huge devaluation of the facts or things like that, we don't see the same impact that we used to see in the past so this is one side. So the corporate clients in general, and the middle market corp clients as well, they do have this impacting their costs of financial debt whenever you have an interest rate hiking process. So this is from one hand.

On the retail, it's more on the margin. So you don't have clients in general that have their liability being correct by the interest rate, putting the marginal new production. Yes, you do. Because then we have this path through of the interest rate to the new credit and the new origination.

So my view is that when you look for real estate, we have an important reduction in demand, in production as well. So we do both. First of all, we see lower clients asking for less mortgage than they used to be. But on the other hand, we do adjustments in our credit policies because we are afraid that clients, you may have some adverse selection at this levels of interest rate, the same for auto loans and for products, when you have to price with the new interest rate.

So lower demand but also we work very active to adjust our policies to guarantee that we won't have any diverse selection, but I would say that the most impact stays on the corporate clients in general, they feel more pressure, but as we see a much lower level of leverage of those companies, the marginal impact is of course, much reduced when compared to the past, but it's still something that we have to keep an eye on.

Geoff Elliott -- Autonomous Research -- Analyst

Thanks Milton.

Renato Jacob

We have a question now from J.P. Morgan.

Milton Maluhy Filho -- President

Hello, Domingo.

Unknown speaker

Good morning. We're trying to get -- we're having an audio issue here, but let me ask you my question. So, Milton, I have two quick questions. The first one for card, we see that the balance in the portfolio grew 40, and FII 16.

It seems like you have a little bit more control over the limits of the portfolio. The rest would be because of the use and all that. So my question is how do you see the revolving changing? So, I mean, we see the change in number of reis, so I would say that it is actually 10%, 15% of the results of the bank, and it's something that has changed in terms of profitability. So the question is how much do you think that might represent in terms of the total profit of the bank.

Milton Maluhy Filho -- President

Excellent, Domingo. I hope you've been able to solve the audio issues. We were able to hear your questions. So I think it's back to normal and hopefully, you're going to have access to all this later, if you are not able to hear my answer right now.

So, on the credit -- for the credit perspective, in terms of credit cards, when we look at the first quarter last year, and we see that change in 40% -- that increase in 40%, we have to actually see the entire video. I would say, not just the screenshot you see with the lockdown effect with people at home, trying to save more money and spend less money. There was a great impact. So that changes the value of everything that was consumed.

That also changes. There also has an impact on credit cards. Right now, we are looking at figures that are growing and it's in line with the market. But despite that, we're not going to -- we're not having a great market share, we're trying to defend market share actually right now, it is something that has grown a lot in the market, but we have a great portfolio, 30% of the portfolio in the -- or 30% of market share in cards.

So it is a very relevant thing, but it is really different perspectives. So you have the individuals with an account, you have the financial institutions, you have everyone in that chain. We have changed a few things. We have reduced the number of new clients, because we understand it is more of an adverse moment right now.

And it's something that we have to be very careful about because it has a higher volatility. Whenever there is an adverse moment in terms of economics, we have to be careful. Again, we see that there was a change in the savings of these people, especially lower class. And that's why we have to be careful when we compare with the first quarter last year, we've been trying to look at seasonality as well and compare with the right references and adjust accordingly.

But again, yes, it is a portfolio that has more volatility. There is this migration into a finance portfolio, but it is usually lower than what we had in the past. That financed one. So the one without interest has grown a lot lately, and the financed portfolio has reduced a lot over the past few years, we are looking at a certain transition back into what we had before the pandemic.

So it's really resuming in a way, it is all very relative. And in this adverse moment, we are trying to pilot this portfolio in that way. And it's also valid for special credit lines, for instance, or payment and with installments and all that. But yes, it's a similar challenge.

We're looking at a weaker quarter last year, the first quarter or last year and much stronger this year. And naturally, we're going to stop having that kind of comparison probably next year. We're going to have more of a normalized scenario.

Unknown speaker

Excellent.

Renato Jacob

We now have a question from Marcelo Telles from Credit Suisse. Hello, Marcelo.

Milton Maluhy Filho -- President

Good to have you here, Marcelo.

Marcelo Telles -- Credit Suisse -- Analyst

Thank you, Milton, and thank you, Renato. I think actually most of my questions have been answered already, but I wanted to ask about the funding. Especially when it comes to FIIs or the real estate funds in this case, there was a change of around 40%, an increase of 40% quarter on quarter. And we've been, I think -- you've been very competitive in that scenario, but we have to consider the independent platforms.

And my question here is what is the strategy in terms of funding for the bank? Do you think it's necessary to rethink the rates -- the interest rates and how that's going to affect your strategy and also do you think there's going to be an impact and the cost of funding or your margins in a negative manner in the future?

Milton Maluhy Filho -- President

Thank you, Marcelo. Thanks for the question. Let me give you a little bit of a context here. We've been talking about an open platform for a while.

We've been talking about avoiding conflict with our consultants, with our investment consultants. We've been investing on this commercial sector to be able to offer this service, as we mentioned a while ago. And this has brought great results. We have gained a lot of share in retail, also in private banking.

So that shows that we're very strong in terms of the offer, the commercial team, that we have a lot of dedication really in that regard. And we've seen the results. There are some also some other metrics that have shown interesting results. First of all, we have an idea of de-liquidity.

When we see the relative scenario, of course, everyone is consuming all that. We came from a moment where there was a lot of savings and now we have more assets and people consuming all those savings. So the liquidity indicators have changed, but we're still working with the most competitive indicators, the most conservative ones. So LCR for instance, is higher right now.

And the second aspect here is that the commercial team, the investment consultants, they're not compensated by the product or the spread generated by that product per se. They're simply -- their compensation is for AUM or AUC. So there is an important change, an important difference here against other places. So whenever we see that there is a hiking here in the interest rate, we're able to migrate many clients that are having a lower yield in their product.

We migrate them to a higher profitability, even though we do miss results. I mean, we may -- or we might be losing an administration or management fee there or something like that, but still we are migrating them to a higher profitability and you see that our own products are growing. Our platform of our own products are growing so there is a great search. People are trying to find that kind of option.

And the thing here is how can we deal in a better way with conflicts? That's what we're trying to do. In this moment, we're not selling anything that has a high spread or doesn't make sense, or is going to just maximize the short-term results. But from a client standpoint is not a good thing. If you look two years back, if you look at what we were offering in the past and that portfolio, and if you compare that to what we have right now in the market with those clients, you will see that we are very consistent, very transparent, very coherent.

That's the agenda. And in the long term, I think that brings loyalty. That brings the great delivery of results. So the answer for you is we are trying to bring to clients what generates value there is this migration in the portfolio, in the macro scenario, we have a different interest rate and it doesn't make sense to make people or to leave people with a fixed income product with a certain risk that is integrated or a fee that is integrated to that.

So we adjust that to the right risk and then we have the best conversation with clients. And that's why it's good to be a full bank. I mean, we can offer our own products or third-party products. We don't see any conflicts whenever we change the transfer price at the bank.

The first discussion is it doesn't matter if we're going to have a transfer, we're going to have the best conversation with our clients. Another indicator that I find very important is the deposits for individuals. We have the highest results in that regard in the market. We finance all that portfolio 100% with deposits of individuals.

When we see the portfolios of individuals, we have the best indicators in the market. So the thing is we have more investments. We're gaining market share. We're bringing the right thing to them and we're maintaining good levels above regulatory levels.

So that's the point. And investments are bringing more value to us. We are growing, we're investing, we're happy, we have been capturing, but there's still a long way ahead of us. And that's why we're going to continue to work with the same intensity.

You may see the evolution of that and the results that will come.

Renato Jacob

We have another question and then we have space for the WhatsApp so the next one is from Goldman Sachs.

Unknown speaker

Hello, Renato. Hello, everyone. So just a follow up on the participation of XP and let's understand what happens from here till the end of the year. If this is just below 10%, can you sell more relevant? Or if I understand correctly today, you don't have capital gains, how much that causes a hindrance in terms of selling a higher percentage of your participation?

Milton Maluhy Filho -- President

And this is a very simple response. The acquisition that was done of BRL 8 billion was higher since 2017. We simply fulfilled what we committed to the multiples of XP changed in terms of price and profit. Any scenario, the values of the market will change a lot at the moment that we did the spinoff.

And in May of last year, our vision is two times. Time number one is how much we do the investment should recover the capital. So it is a very small lot of shares that we have to sell to maximize the return on investment. And it is maximizing the recovery for the capital index.

And the second one, it is a TBM. And let's just mention that we do an adjustment of the position and we start to carry 9.99 to simplify of shares of XP. And with time, we will decide economically, what is the best time of exit as it is a position of equity. And as we have another investment and this will be an economic decision and we will leave the investment, if it's on the medium term, long-term.

So you'll look at market conditions perspectives. So we don't have any rush to do this sale. And we are discussing every receiver questions if it's going to be a spinoff or not, it doesn't seem like it will be a spinoff, even though we didn't make the decision. I think at the moment that we did the spinoff of the other participation, there was a very different logic.

The value market, enormous not capture in our multiples. We are in at the regular prices of the market. I don't see the spinoff in this logic. We are going to take a look at the conditions and we can always reevaluate, but at this moment, we will make the most, the best economic decisions.

There is no rush to do the disinvestment and with an exception, it's no rush is trying to find the ultimate time of this 1.37. And it has to be 137 for us to maximize the recovery of the capital index of what we in fact will have from now on, this is a central point here.

Renato Jacob

Thank you, Milton. Can we do another two? There is a lot of questions via WhatsApp. So I'm trying to gather all of them.

Unknown speaker

For the themes that appear you mentioned the capital funds, well dividends, for natural persons this is even more relevant. So how do you see the payment of dividends in 2022?

Milton Maluhy Filho -- President

Well, here is a response. I see an increase, the value of the dividend for the growing, because the results are growing. We have two answers how many real per share we're going to distribute at the end of the day, since we are distributing sharing 25% of profits in the period with more profits, more dividends. So this is what we expect.

The payout, which is a question, what about the payout? It is 25%. Do you want to increase it to 30, 40? It was much higher in the past. Well, really it depends on our table spreadsheet that we inform to you, which is the matrix on one side is profitably. And the other one is the risk, the growth of the risk weighted assets, how much we have a growth of demand of capital in the bank.

So if I have low profitability and low capital with a lot of capital in the bank, the distribution is higher. As I have demand to use more capital than we will see the size of profitability to find the optimal point by the projections that we have. We will continue with a payout of 25% for a long time, but really increasing the result of the bank and paying more dividends per share. And this is what we expect.

There is no type of change in the policy of dividends. We still continue with the same table that was discussed, and we are doing the investments, the reinvesting in the franchise, the growth of the bank, and making the capital of the -- the capital be profitable. We are running at 21% in ROE, 24% at the consolidated. Our goal and my mantra as a CEO is the creation for the value for the shareholders.

So anytime that we are creating value for the -- at the high levels the capital cost will continue to invest in the operation. If I understand that I have a capital that will not be used in the period, and then we can rediscuss the payout or the percentage of the payout, but for now, there is no discussion.

Renato Jacob

Perfect. Thank you, Milton. Anything due to the time, let's finish with another question. We've had several questions about the inflation with an interest rate.

How does it impact the cost of the bank? And you mentioned -- we have the consolidated efficiency in Brazil. So how can we -- what are the levers that we have to reach this ambitious goal of having a result of core of the stable cost of the bank not only all throughout the years.

Milton Maluhy Filho -- President

Great. Now in an inflation environment is not very simple. We have to say that a relevant part of our cost is the payroll of the bank. And that we can see the increase in last year was almost 11%, and this is a subcontracted part, the subcontracted cost.

And we have until September when we have a new discussion, and then there will be increase in a quarter, we are going through an inflationary peak that is very strong. This is not news for everyone. And this inflation is materialized through APCA, IGBM and a very strong inflationary pressure. Since we cannot control the inflation, we have to do our homework.

And our homework is not simply costing the cost on -- with brute force, reducing, freezing, we have to do structural changes in the way that we work. And this is our agenda. The efficiency program has over 4,000 initiatives. So there is no silver bullet here.

Efficiency is something that is piloted through everyone at the level of detail and granularity that is huge. And everything adds. It's an economy of BRL 100 or BRL 100 million. Everything adds, there is no expenses that we have to pay attention to all the expenses.

There is a lot of that has to do with the culture, the example, the discipline of management, and a lot of capturing a lot of these values of investment on technology so that the bank becomes more efficient, more digital. We've done adjustments that in the first quarter, the amount of the physical parts of the bank, we, we will have digitalization. We have the relationship with the clients, with the more sophisticated products decreasing the number of branches. So we are not going to cost across on the short term, just to give better indicators.

And we are investing in the operation. That's why it's very important to look at the efficiency index and not just a line of costs in an isolated way. So adjusting costs is having revenue so what you have of 39.4%, 39.6%, which is what we published. It shows that there is a combination of a lot of revenue, expenses that are controlled.

We can have a cost core of zero incorporating all the inflation, but this is a work of everyone. This is not a silver bullet. This is the day-to-day work and the results are being gathered more pressure toward the future. We have challenges.

We have the guidance that has an expectation of growth of costs year on year that is much below the -- much lower than the inflation. And we will deepen this agenda with intensity.

Renato Jacob

Thank you, Milton. And with that, we will come to the end of the session of the Q&A, but before I bid you farewell, I would like to invite you to navigate with our manager that we published last year. And this is on our website that besides promoting more transparency in our operations, the report expands the vision of the context and the transformations and the cost of the market and all that stems from this new economic sector. You can see in this documented strategy, the business strategy, the description of what we have, how we are generating value through careful management of our portfolio in our capitals.

And you can see everything in our IR website. I wanted to share something new in terms of service of investor relations. You can access our team via WhatsApp. You can see our phone number, which is 1127-943-547.

In this channel, you can get information that you need and also clarify any doubts. This is another initiative for me. I would choose service our stakeholders anywhere. With that, thank you very much, Milton.

Thank you for your time. Thank you for being here with us this quarter, and we will see you in the next quarter. Thank you very much. Everyone, thank you for your participation for the questions.

I apologize once again, for the technical issues at the beginning of our transmission, but the important is to make mistakes, learning with mistakes. And this has been our cultural transformation in-house, and as part of a process. Thank you very much for your participation. And as I told you the result in the agenda is of consistency, and this is what we are seeking in the next quarters.

Thank you very much for your time. We'll see you shortly.

Duration: 99 minutes

Call participants:

Renato Jacob

Milton Maluhy Filho -- President

Flavio Yoshida -- Bank of America Merrill Lynch -- Analyst

Tito Labarta -- Goldman Sachs -- Analyst

Unknown speaker

Eric Friedman -- Citi -- Analyst

Henrique Navarro -- Banco Santander -- Analyst

Geoff Elliott -- Autonomous Research -- Analyst

Marcelo Telles -- Credit Suisse -- Analyst

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