Prepared remarks
Hello. Good morning, everyone. My name is Gustavo, and it is a pleasure to have you joining us for our first quarter 2026 earnings video conference. As always, Milton will walk you through our performance, and afterwards we will have our traditional Q&A session, in which analysts and investors will be able to interact directly with us. Before handing the floor over to Milton, I would like to share a few instructions to help you make the most of today's event. For those accessing the webcast through our website, there are three audio options available: the entire content in Portuguese, the entire content in English, or the original audio. The first two options offer simultaneous translation. To select your preferred option, simply click on the flag icon located in the upper left corner of your screen. Questions can also be submitted via WhatsApp. Today's presentation is available for download on the hot site screen and, as always, on our investor relations website. With that, I will now hand over to Milton, and we will reconvene later for the Q&A session. Milton, over to you.
Good morning, everyone. Welcome to another earnings release. We will now discuss the results for the first quarter of 2026. This is a very executive presentation with a strong focus on the numbers in order to leave ample time for our Q&A session at the end. The central point this quarter is that I will place somewhat greater emphasis on the credit quality of our portfolio. This is a topic of interest given tighter macroeconomic conditions, interest rates, and the economy as a whole. Therefore, I believe it is worth taking an additional deep dive into this topic. By doing so, I believe we will be able to share with you much of the management approach that is guiding us here at Itaú Unibanco. I will start with our traditional overview covering key indicators such as results, profitability, loan portfolio, non-interest expenses, and delinquency. Beginning with results, we delivered a very strong managerial result of BRL 12.3 billion in the first quarter, representing a 10% increase year-over-year. It is important to recall that exceptionally, this quarter did not include the additional dividend distribution we typically make. That distribution took place at the end of last year in the fourth quarter, with BRL 20 billion distributed in dividends. If we were to normalize for this effect, net income would have been BRL 12.7 billion, which would be more comparable to the first quarters of previous years. This is the first adjustment I would like to highlight. Moving on to profitability, we recorded ROE of 24.8% on a consolidated basis and 26.4% in Brazil. We saw an expansion in profitability adjusted for 11.5% capital, which is the current industry average and the lower bound of our capital appetite. Consolidated ROE reached 25.8% and ROE in Brazil reached 27.6%. These are very strong figures. For comparability purposes, we believe these are the most appropriate metrics to consider. Looking at the loan portfolio, despite a seasonally weaker quarter driven by fourth quarter dynamics, we were able to grow the portfolio by 1.2%. I'll provide more details shortly. We achieved solid year-over-year growth of 9%, excluding FX effects. Turning to non-interest expenses, we saw a 5% decline compared to the fourth quarter and growth of nearly 5% versus the first quarter of 2025. This is fully aligned with the work we have been carrying out under our efficiency program and the targets that were set. Results are fully consistent with those objectives. When we look at delinquency, you may recall that the first quarter is always more pressured. It's a quarter in which household commitments increase, expenses are higher, and in addition, spending incurred in the fourth quarter is typically settled in the first quarter of the following year. Despite this, short-term delinquency indicators remain very well behaved. NPL 15 to 90 increased by 10 basis points during the quarter and declined by 10 basis points compared to last year. I'll provide further detail by portfolio shortly where this will become more evident. Long-term delinquency remains absolutely stable, which reinforces the resilience and quality of our portfolio. I'll come back to this topic in more detail later. Turning again to the loan portfolio, we would like to highlight growth in Brazil of 7.8% year-over-year and 0.3% quarter-over-quarter. When excluding FX effects, the portfolio as a whole grew 1.2% in the quarter. I would like to emphasize the quality and the dynamics through which we have been building this portfolio over time. First, we refer to the card's target clients portfolio. Target clients are those that, under our portfolio management framework, we consider resilient across longer credit cycles. More than 90% of new originations today come from these clients. As this dynamic continues, the existing portfolio is now approaching 80% target clients. This clearly reflects portfolio quality that is fully aligned with our strategy. From this perspective, Uniclass and Personnalité portfolios declined by only 0.5% in a quarter when the overall portfolio contracted by more than 2% and posted growth of 20% year-over-year. This reflects both the natural dynamics of this segment and our ability to cross-sell under the One Itaú client model, which we successfully migrated into a full bank experience. The results are clearly shown here. Moving on to payroll loans, we continue to emphasize private payroll lending, which grew 19% in the quarter and 63% year-over-year. As I've always mentioned, when this product was launched, the overall market was expected to grow, and it has grown meaningfully. At that time, we held approximately 30% market share in the former product, and I stated that our share would likely decline, but within a much larger market. We were able to grow, expand the market, and be the market leader in private payroll loans after all these changes. We are growing with strong quality, targeting the right clients with appropriate pricing, adequate profitability, and a long-term perspective. In micro, small, and medium-sized enterprises, government-backed programs once again stood out, growing 4% in the quarter and 52% year-over-year. These programs also significantly support credit quality indicators. There is a mechanical effect on delinquency, which I'll explain shortly. In cost of credit, these dynamics are very positive for margins and profitability in this segment as well. Why am I showing average balances across portfolios? Average balances are what truly matter for margin performance, not end-of-period balances. This breakdown is intended to help you understand how this picture connects to margin evolution on the next slide. Average balances in the individual's portfolio increased 2.2% compared to the fourth quarter. In SMEs, growth was 4.6%; in corporate, 1.6%; and in Latin America, 3.6%. This framework will help explain part of the margin dynamics. There's a lot of information here, so I'll walk through it carefully. We begin with the fourth quarter of 2025, where margin totaled BRL 31.7 billion. The first adjustment we make is the exclusion of BRL 4 billion, corresponding to the return of shareholders' equity invested in the bank. In other words, this represents bank equity invested at interest rates, which we remove to arrive at what we call core margin. This brings margin to BRL 27.7 billion. The first major effect is average volume, which you saw on the previous slide. This is why the average balance breakdown was important, as it shows how volume contributed approximately BRL 400 million to margin growth this quarter. Next, we have product mix. We grew in products that are more favorable to margins, generating an additional BRL 500 million, reflecting dynamics across multiple portfolios. Next, spreads and liabilities margin were largely flat, with a modest negative impact of BRL 100 million, not particularly relevant in the broader context. Calendar effects, however, were very significant, with fewer business and calendar days affecting assets and liabilities differently, resulting in a meaningful reduction in margin. Therefore, calendar effects were one of the main headwinds to margin this quarter. Finally, Latin America and other effects were largely flat with no material impact. As a result, core margin would have reached BRL 27.8 billion, representing growth of 0.3%, with the calendar effect being the main drag as core performance remains very positive. Next, we calculated what working capital margin would have been had we not distributed dividends early in the fourth quarter of last year. This adjustment amounts to BRL 4.2 billion. With this normalization, margin would have reached BRL 32.1 billion, which is more comparable to the BRL 31.7 billion reported in fourth quarter 2025. This would represent growth of 1.1% or BRL 400 million considering all these effects. However, due to the early dividend distribution, margin was negatively impacted. Shareholders benefited, so it was positive from a shareholder perspective. For the company, however, the effect was a BRL 600 million reduction in margin, bringing net interest margin with clients to BRL 31.5 billion, which is the figure I mentioned earlier. As a result, margin declined by BRL 200 million compared to the fourth quarter. I believe this captures the key message. We had two main effects on margin this quarter, the early dividend payment and the calendar effect. Core margin performance remains very strong with portfolio growth, increasing average balances, and a favorable mix. Now translating these figures into margin metrics, as we typically do, on a consolidated basis, margin remains stable. When we look at risk-adjusted margin, which is how we monitor performance for management purposes, we see a modest decline of 10 basis points at the consolidated level. Adjusting for the BRL 600 million dividend impact working capital effect I mentioned earlier, consolidated risk-adjusted margin would have been flat. In Brazil, this line shows a decline of 20 basis points. Adjusting for the same dividend effect, the decline would be 10 basis points, which is immaterial overall. Let us now move on to market margin. This was a quarter marked by significant volatility, with many developments in both the local and global environments as you have been following. Every month we reset the odometer for trading, positioning, and risk, as well as for the structural component of market margin. The most important message is that in Brazil, we delivered a solid performance this quarter despite all the challenges. Latin America also performed well. Brazil, in fact, performed better than in the previous quarter. The capital index hedge cost remains a headwind as it has historically due to interest rate differentials. In the first quarter, the negative impact totaled BRL 700 million. Even considering all these effects, we delivered a positive market margin result of BRL 800 million, demonstrating our consistency and ability to deliver results despite more challenging scenarios. Moving on to commissions, fees, and result from insurance, the main highlight is that this quarter clearly reflects seasonality. The fourth quarter is typically much stronger for several of these lines. Card issuance is a good example. We observed declines in the first quarter. In current account for individuals, we chose to disclose this line item to reinforce the clear directional trend. The bank is becoming increasingly less dependent on these fees, redesigning packages and offering more benefits to clients. Our objective is to increase lifetime value and client centricity. Therefore, the direction is very clear, and you've been observing this over time. When we look at payments and collections, this was indeed a quarter affected by several factors. There are multiple explanations here: seasonality effects, mix, particularly on the collection side, and repricing of funding within the receivables of the acquiring business. It is worth remembering that we've captured all these impacts within this line. Therefore, this reflects the complete payments and collections corporate flow. The most important thing here is the client perspective. We are not managing the business through isolated lines, but rather with a strong focus on being the primary bank for our clients on long-term relationships and on customer lifetime value. As a result, some degree of volatility is in fact expected. A positive highlight was brokerage, which delivered a quarter somewhat stronger than the fourth quarter. In asset management, this was a quarter without performance fees. As a reminder, under our approach, performance fees are typically recognized in the second and fourth quarters of the year. Therefore, we moved from a fourth quarter with performance fees to a first quarter without this revenue, which explains this effect on asset management results. Finally, the main highlight is insurance, where we had already delivered a very strong previous quarter and were able to sustain this performance with 17% growth year-over-year. As a result, services and insurance revenues increased 5.3% year-over-year. It's worth noting that a significant portion of these revenue lines is highly correlated with the level of economic activity. Therefore, performance will depend very much on the dynamics ahead, on how economic activity evolves, on capital markets conditions, and on the investment banking environment overall. The same comment applies to the other lines as well. I will now begin to go deeper into credit quality, starting with some information that I believe is highly relevant. Here, we show NPL performance. In short-term delinquency at the consolidated level, we observed an increase of 10 basis points, as I mentioned earlier, with Latin America remaining essentially flat. While in Brazil, there was an increase of 20 basis points. When we break down Brazil, the dynamics become much clearer. First, in individuals, we observe the seasonal first quarter effect. When we compare it with the historical series, excluding the first quarter short-term NPL from 2023 to 2024, this represents the lowest increase we have seen. While we are rounding this figure to 30 basis points on the slide, the actual increase was 23 basis points, meaning a smaller increase compared to other first quarters that share the same seasonal effect. Therefore, this is a first quarter that came fully in line with expectations and with very well-behaved short-term delinquency. In SMEs, we see an increase that was already expected. I have been discussing this with you for quite some time, and I'll reinforce it again when we talk about over 90-day delinquency. This is a portfolio that experienced strong growth in guaranteed credit, especially government-backed loans. A relevant portion of this portfolio previously carried grace periods, which are now gradually ending. Today, less than 5% of the portfolio remains under a grace period. As a result, we'll mechanically start to observe delinquency from this client base, but always covered by government guarantees. Therefore, despite the observed increase, which was fully expected, delinquency levels remain significantly below those seen in prior years, with expected losses and profitability fully in line with our expectations. Moving to long-term delinquency, both at the consolidated level and in Brazil and Latin America, indicators remain well-behaved. In Brazil, individual portfolios were stable during the quarter. In SMEs, we saw an increase of 10 basis points, and we expect that the indicator could still rise by an additional 10 basis points-20 basis points. Running close to 2.1% would be a reasonable level, which is still below where we were just a few quarters ago when this indicator was closer to 2.4%, already reflecting portfolio adjustments under Resolution 4966, which includes securities. I would like to remind you that these indicators already include securities consistent with the Resolution 4966 framework. No adjustments are being made here. Our expectation is for a mild and expected increase, which is mechanical in nature and does not raise any concern regarding cost of credit. In large corporates, the indicator remains stable. These are data points that we do not typically disclose, but I believe it's worth taking the time to discuss them. As I mentioned earlier, target clients currently represent close to 80% of our outstanding portfolio, and in the origination, they tend to be close to 100%. What I want to show you is how client indebtedness has evolved, excluding mortgage lending. This is because mortgage dynamics are somewhat different. That said, the footnote includes the calculation, including mortgages as well. In many cases, clients replace a more expensive rent with a mortgage installment. Mortgage lending is collateralized with solid loan-to-value ratios and down payments, so we believe the dynamics are different for this product. Excluding mortgages, the indebtedness of our target clients, starting from a base of 100 in December 2019, reached 105 in January 2026. When we look at the broader market data, including our own clients, this index reached 123 in January 2026. This highlights a very significant difference relative to the client base we have been working with, reflecting responsible credit, a credit cycle perspective, portfolio management, and resilience. This is the client base on which we have built our reference portfolio. The market, in a broad sense, considering all other client segments, experienced a much stronger increase in indebtedness over the same period. When we analyze our total client base, and here you can clearly see how relevant target clients are for us, the index moves from 100-106. In other words, the difference is not material, and when compared to the market, by definition, the index is the same. This demonstrates the predominance and relevance of target clients in our client base and in the way we operate. This is the first information to show good client quality from an indebtedness perspective. Now, let's move on to the breakdown of delinquency. This is information we have never shared before. I felt it was important to present comparative series across selected products. Today, over 90-day delinquency in our personal loan portfolio stands at 5.1%. This reflects delinquency among our clients in this product. In the market, delinquency in personal loans stands at 9.3%. More important than the snapshot is the trend. From December 2019 through today, we reduced this delinquency indicator by 21% among our clients, whereas the market increased by 18% over the same period. We observe not only a meaningful difference in delinquency level, but also a clearly opposite trend. In credit cards, the logic is the same. We report 5.1% over 90-day NPLs, which is roughly half of what we observe in the market. Over the period, we reduced delinquency by 8% following the de-risking process in the portfolio that we've discussed extensively, while the market increased delinquency in this segment by 56%. Once again, both the level and the trend are significantly different when we analyze the full picture. In auto loans, our over 90-day delinquency stands at 3.5% compared to 6.2% in the market. While our indicator increased by 17%, market delinquency increased by 82% over the same period. Finally, in private payroll lending, a portfolio where we've been growing meaningfully, we do not have a comparable long historical series due to changes in the product's dynamics. Even so, we can show that our delinquency level has been running at 4.2% with pricing that is coherent, competitive, and responsible for clients. By comparison, market delinquency in private payroll lending stands at 7.1%. This once again highlights the discipline of our risk management across the bank's balance sheet and how we operate across our individual portfolios. Moving on to SMEs, we see information pointing in the same direction. The first metric is the share of guaranteed lending across portfolios. From December 2019 to March 2025, our guaranteed portfolio increased from 36%-55%. Looking at the same period only for micro and small enterprises, guaranteed lending increased from 37%-70%. On one hand, we look at SMEs as a whole, including middle-market companies. On the other, we isolate micro and small enterprises. In this latter group, we see guaranteed lending growing from 37%-70% in a client segment that is typically more volatile with higher failure rates. We have materially changed the profile of this portfolio by operating with significantly more collateral. In large corporates, we also have an important message following the same logic of portfolio management, long-term perspective, capital allocation, and risk management. First, the portfolio nearly doubled between December 2019 and March 2026. We effectively doubled the portfolio size. What about client quality? First, we reduced concentration. The bank's 10 largest clients represented 20% of the portfolio in December 2019, and after doubling the portfolio, they represented 15% as of March 2026. We achieved growth in a much more granular way, avoiding concentration risk. Most importantly, we not only grew, but we grew with high quality. According to our internal investment grade assessment framework, where we monitor, measure, manage, and qualify corporate ratings, we achieved a substantial improvement in mix and quality, reaching nearly 80% of the portfolio in investment-grade credits. Across both individuals and corporate banking, including micro, small, medium, and large companies, what we see is clear evidence of our management discipline. This reflects our view of an infinite game in which we must continuously build a sustainable and consistent portfolio that generates value, serves our clients well, and does so with much lower volatility than we observe in the market. Agribusiness is also a very important portfolio for us. There has been a great deal of discussion about the more challenging environment for the sector with pressure from commodity prices, foreign exchange, fertilizer costs, farmers operating with tighter margins, higher leverage, and higher interest rates. How have we built our agribusiness portfolio? Out of the total agribusiness portfolio, 31% is allocated to farmers. When we analyze this portfolio, nearly 80% of it is backed by strong collateral structures and robust legal instruments, which provide a high level of security in terms of credit quality and recovery potential. Our market share in agribusiness is estimated. There is no official market share data for agro lending. Based on the proxies we use, we estimate our market share at approximately 20%. We then applied the same market share estimation to all Chapter 11 cases observed in the market in order to assess our participation in those cases. Despite holding an estimated 20% market share in agribusiness, we account for only about 4% of the total volume under Chapter 11. We highlight this 4% comprises products with strong collateral, and we can negotiate guarantees with clients much more effectively. As a result, our recovery rates and loss given default tend to be significantly lower, given the way these portfolios have been structured. This once again reinforces the reliability and security of our portfolio. Regarding the portfolio by stage, when we look to total coverage ratios and loan portfolios for stages two and three, we observe only small variations with no significant impact. In corporate, we do see somewhat greater volatility in coverage for stage two and stage three portfolios, and the primary reason for this is mechanical. Every time we remove a client from stage three, typically through write-off, and the restructured portfolio is a good example, which I will show shortly, or when a client with a very high level of provisions exits the balance sheet through write-off, that client usually carries higher coverage. Meanwhile, new clients entering these stages typically do so with lower coverage ratios. This explains why we see some volatility in coverage indicators for stage two and stage three portfolios, which is entirely related to portfolio dynamics. I would also like to remind you that we operate under an expected loss model. If we identify any sign of deterioration, we proactively build provisions. We do not manage our balance sheet through provisioning decisions. At the core, our models are robust, accurate, and reliable. Whenever there is an event or a forward-looking change in expectations or outlook, we typically recognize provisions accordingly, which reinforces overall portfolio quality. As for the delinquency indicators that I showed you earlier, they also reinforce a message I have been making for quite some time. There has been no change in our write-off criteria. Although Resolution 4966 allows for some flexibility in extending write-off time frames, doing so actually worsens delinquency indicators as it keeps clients classified as over 90 days delinquent for longer than appropriate. Another consequence, particularly when you consider the incurred loss framework for provisioning, is that you end up with lower provisions initially. This creates a temporary benefit in credit cost, but results in worse delinquency indicators. We did not change our criteria despite the additional flexibility granted by the regulator. Our view is that recovery expectations have not changed. Therefore, we continue to apply write-off timelines based on our best estimate of recoverability, which is the same approach we used prior to the regulatory change coming into effect. Turning to credit cost, which ultimately consolidates all these dynamics, we do observe a nominal increase as previously noted. However, the credit portfolio is expanding and therefore nominal credit costs are expected to increase. What truly matters is the annualized credit cost ratio over the portfolio, which has remained remarkably stable over the past several quarters. This stability reinforces all the points I have been making throughout the previous slides. When looking at the restructured portfolio, as you can observe from what I mentioned earlier, whenever a large client moves to write-off, that client typically carries a very high provisioning balance, which also affects these indicators. This effect is usually visible between the third and fourth quarters. Still, this portfolio continues to decline. Overall, restructured and renegotiated portfolios also declined further and are moving in the right direction. Most importantly, the ratio of renegotiated loans to total loans remains very well behaved. We do not expect significant nominal reductions to happen very quickly. This process unfolds over the cycle, but levels remain fully acceptable and appropriate for the bank's portfolio. Now turning to expenses, I would like to highlight the main points. It is important to remember that the first quarter is always affected by seasonality. Even so, when we look at expenses in Brazil, we recorded a 5.6% reduction compared to the fourth quarter of last year. On a year-over-year basis, expenses increased by 5.2%. We maintain our commitment to reaching our efficiency targets. If you want a reference, we continue to aim for the midpoint of our guidance, which implies annual expense growth of 3.5%. This is supported by a series of structural initiatives with a long-term perspective. This clearly reinforces what we have seen in previous quarters, a year-over-year downward trend driven by significant and structural changes across the bank. This is the key message here. Our efficiency ratio reached 34.9% in Brazil, once again setting a record at our lowest level for this metric. If we adjust for the early dividend payment effect I mentioned at the beginning of the presentation, this figure would have been 34.4% in Brazil, representing a very significant improvement. Regardless of the adjustment, the reported figure is 34.9%, and for the first time, we have broken the barrier below 35%. The same trend is observed at the consolidated level. This is the efficiency ratio of a universal bank like Itaú Unibanco operating across all segments and regions. We are the most international bank in Brazil. This clearly demonstrates our discipline in cost management and revenue generation, building business models that deliver adequate profitability and are sustainable over the long term. Turning now to capital, we ended the fourth quarter with a CET1 ratio of 12.3% and AT1 capital of 1.5%. During the first quarter, we delivered strong results, generating 0.8% in capital. Capital consumption related to dividends, interest on capital, and share buybacks amounted to 0.4%, while risk-weighted assets consumed 0.5%. We can therefore see that our core capital generation is sufficient to fund both capital uses and the growth of risk-weighted assets. We also show the impact of the 4-year phase-in, currently in its 2nd year, related to operational risk and certain credit risk exposures, resulting in capital consumption of 0.3%. I would also like to remind you that there is a phase-in, also in its 2nd year, related to compliance with Resolution 4966. In Itaú's case, there was zero capital impact from this transition. We did not incur any capital cost from migrating to Resolution 4966 because we already operated with provisions for securities and expected loss provisions across all portfolios. The regulatory change had no accounting impact on the bank's capital. Finally, even after the significant dividend distribution in the fourth quarter, our objective was to start the first quarter with a CT1 ratio of 12%, which is the level we use as our reference for dividend distribution. This is above the board-defined capital appetite floor of 11.5%, and 12% is the level we consider appropriate for dividends. We also reached 1.4% in AT1. We ended the quarter with a very solid capital base despite all the impacts, allowing us to continue growing and paying a meaningful level of dividends with high profitability. To conclude, I would like to promote our reports. We have made available our 2025 integrated annual report and our ESG report. This is an invitation for you to access these materials. They contain a significant amount of high-quality information that can address many questions directly. The level of detail is much greater than what we can share during earnings calls and Q&A sessions. I encourage you to review these reports. With that, I conclude the presentation of our first quarter 2026 results. As I mentioned at the beginning, this was a solid quarter with very strong profitability. Naturally, the environment requires attention. We must remain highly disciplined in managing our credit portfolio, monitoring conditions on a daily basis. Most importantly, we have been able to continue expanding the bank, investing and advancing our digital and cultural transformation while maintaining a strong client-centric approach and delivering very solid and robust numbers, all in a manner sustainable. Consistency, lower volatility, and execution discipline, especially capital allocation discipline, continue to be core to the bank's decision-making process. This is why we have been consistently able to deliver strong results. I would like to thank you all once again for your trust and for your time. I will now join Gustavo and Gabriel for our traditional Q&A session. Thank you very much once again, and above all, for your support. See you shortly.
Hi, welcome. We are right back at the studio for the Q&A session. Before we start, we would like to remind you that this is a two-language session, so we will answer the questions in the language that they are asked. If you need any support with the translation, our platform has the options in English and Portuguese or original audio. You can submit your questions via WhatsApp. The first question is Thiago Batista from UBS. Floor is yours.
Questions and answers
Good morning, Milton, Gabriel, Gustavo. Congratulations on the predictability of your results. Very constant, very predictable. Question is about, well, the focus of Itaú Unibanco, the main banks, is the one that is less exposed with the client, with products. I wanted to hear your initial impressions on the program, Desenrola. Also Rede. Of course, there is the capture of payouts. What are the next steps at Rede as well?
Welcome once again. Thank you for asking your question. Let me start by Desenrola, the program. Desenrola is building. The Febraban, the banks, and the ministry worked with the debate since the first date to understand what are the conditions that we would be comfortable to find the best product, the best deadline, the best discount, everything within a reasonability that would make sense for the client, for the system, for the market. Of course, it's a program that is very concentrated in five minimum salaries. That's the range, up until two years with a discount that is predefined and with a guarantee of FGO for the limited 50% stop loss, so to speak. In our case, we are working actively. Since yesterday, we are operating in the new program. It's evident that, as you just mentioned, proportionately, the portion of the market that is eligible for this program with regard to our portfolio is less relevant proportionately speaking. Without a shadow of a doubt, we're going to work in the best way possible. We're going to try to get the best offerings for the eligible clients. In terms of materiality in the results, I wouldn't say that it's material given the size of the credit line and the recovery line of the bank. We're going to try and service the clients well in this transitional process, given the level of indebtedness, the interest rate, the delays. We think that working alongside the sector is good to service these clients well. This is the first thing. About Rede, it's important to make sure that you understand that the integration that we've done in the past was well done. The results are there. You can see them. We fitted in the offering. We do not talk about Rede separately; we talk about receivables and payments. The integrated offering, we service the clients and their needs regardless of the product. The pricing is on the client vision, not the product. In the past, several companies were single-product and pricing. That doesn't make sense for Itaú Unibanco for a long time. It's another product, another offering to service well the needs of our clients. In the market share, in fact, we've had the results of the quarter. It's an effect of the mix that is important. We had a higher volume of wholesale than retail. What moves the market share is the big accounts. Retail has more profitability in the business, but the one that moves the market share is the big accounts. When you have big contracts, that moves the needle naturally. The most important news is that we are leaders in the sector for a long time. We are leaders in the market of the wholesale and also the retail markets. That's the main message. Market share is not our objective. It's a consequence of our actions. If it's well resolved, if it's well fitted in the journey, and we're servicing the clients well with a competitive value proposition, the share is a consequence. In the big accounts, we avoid that discussion of renting the market share because you can get it with aggressive pricing below the exchange fee and the flag, and you receive that market share; it's costly to carry it over. We've seen that. In this quarter, specifically in the line of flows of payouts and receivables that we have in the revenues and services line, we had an effect, two main ones. The first was the mix that I just commented. Second, the structure of hedge that we use, because we do the hedge of the anticipations that are done because most of them are automatic, so we will work the transfer and the liabilities through time, and that generates volatility. It's not a 100% perfect hedge. It's impossible. Any change in the interest rate structure is the main impact in this line. The part of the result of Rede is still in the margin with the clients. I would say that 97% to 98% of the result is in the service line. In the next quarter, we are going to do the adjustment that is missing, which is bringing part of the result that is positive in this quarter so that all the result of Rede is in the lines of services and insurance, which would attenuate the numbers that you're seeing. Our strategy is best, offering vision of the client, price of the client, and vision of the payments and receivables. Among acquiring, it plays an important role.
Let's go to the second question with Bernardo Guttmann from XP. The floor is yours.
Good morning, Gustavo, Milton, Gabriel. Thank you for the opportunity. Congratulations on the results. I wanted to understand the trajectory of the ROE of the bank. Itaú delivered 25% of ROE recurrent, very high threshold, even in a seasonably weaker quarter. When you see that profitability, the natural question is: how many levers do you still have to maintain or even expand this ROE through the year? In your opinion, the sustainability will come from margin of the client efficiency, mix of credit, revenues of services, capital. Is there any point that you think that the market is still not capturing well the capacity of Itaú in keeping that ROE structurally above the system? Thank you.
Thank you, Bernardo. Thank you for the question. Thank you for your initial words. Great to see you again. Well, the issue of the ROE, as we always mention, and I'm going to answer your question, but I'm going to do it with a disclaimer. We avoid giving guidance of ROE because there are many variables at the end of the day that affect accounting. We like to talk about value creation, and that depends on the cost of equity, the cost of capital. In our opinion, the cost of capital is 14.5%. That's the best information that we have in our models, and we look at instruments, perpetual instruments in the market. We have proprietary modeling. The spread between profitability and cost of equity, in fact, is where we are focusing. All the incentives of the bank are placed in value creation, so that's a relevant metric for management. That brings discipline, long-term vision, and always focus on the creation of value. In the guidance that we gave at the beginning of the year, there is a profitability above 20%, and we are delivering this ROE recurrently. If you ask me, do I foresee any problems in regards to profitability, if we work with the operations that we have right now? No, we're still going to deliver a profitability that is important throughout the next quarters. Of course, there's going to be some volatility because there are a number of variables that compose the ROE of the bank. It's not just Brazil. Latin America, there are all the lines. Speaking of the guidance, the best answer that I can give you is that we are comfortable with the guidance that is there. We reaffirm the guidance. I think that the challenge is looking at the future, and we've seen with the service line, with the insurance, they're very much connected with the activity. That's where we're going to see the biggest challenge at the end of the year because it depends on the activity. That's where we're going to see the biggest challenge at the end of the year because it depends on the dynamics of capital markets, TPV and credit cards. It depends on our capacity to continue to grow with insurance. There is a dynamic of activities that will be important going forward, especially if some of those volumes are 30%-40% weaker. The margin with the client, you saw the effects that I highlighted. The working days and non-working days, the working capital — so core margin grows. There is guidance on portfolio growth that we are comfortable with. Cost of credit, which is also an important lever for profitability, we reaffirm the guidance. Looking at everything else that we just published, we are still comfortable that we're going to try and deliver the results that are implicit in the guidance. Of course, the challenges are significant, as you've seen, but we are still very disciplined and focused to deliver the results. I think long-term profitability depends on the variability of the cost of equity. If structurally the interest rate drops in Brazil, assuming that geopolitical tensions subside and inflation falls, the Central Bank can do a relevant monetary adjustment that will open more activity, and that improves the cost of equity. It's not just the interest rate here in Brazil. It's the interest rate, the environment, institutional environment that influences the cost of equity. If we can operate in that environment, it's expected that part of that spread between the cost of equity and the ROE will go to the client, so we can be more competitive and the efficiency agenda is vital, so we can have more conditions to compete and more pricing power, and maintain a part of that efficiency that goes to the client. That's not a conclusive answer, but an overall answer. We are very comfortable with the profitability. We will deliver profitability above 20% without giving any guidance on ROE.
Okay, let's go to the third question, Marcelo Mizrahi, BBI.
Hello, everyone. Thank you for the opportunity. Thank you for getting my name right. Question about delinquency. The macro data that we've seen, delinquency has been intensifying, and that slide that you just mentioned is great, we can see the difference of how the bank is performing in regard to the market. The bank doesn't run alone. I wanted to understand, looking at the perspectives of the year and the portfolio, you said that you're at ease with the guidance. The dynamic of the beginning of the year, the first quarter, in regards to the dynamic of the guidance, the quality of credit of the market itself, is it better, is it worse than what Itaú expected when you assembled the guidance? From the standpoint of macro, of delinquency, the issue worries enough so you can be more cautious and have more difficulty getting to the guidance of the growth of credit. How do you see specifically delinquency of natural persons in the beginning of the year? As well, we see that the numbers of the bank are doing well, but the growth of the portfolio in the next quarters. Thank you.
Thank you, Marcelo, for the questions. Objectively speaking, the conditions from the start of the year to now are worse than at the beginning of the year. Specifically, since the beginning of February we have seen new shocks: the war in the Middle East, volatility in oil prices, increased uncertainty regarding inflation and energy costs, transportation, fertilizers in the agricultural chain, and a deceleration of global growth, which impacts Brazil. Those factors were not present when we assembled the guidance earlier in the year. On the other hand, our discipline in provisioning is timely. For the cases we've provisioned over time, these are cases we have planned for, and we make provisions depending on new information and developments. Our portfolio by definition was built with a more resilient client base to the cycles that we're seeing now. Nevertheless, interest rate pressure affects all segments. We are not isolated from the world. We have a BRL 1.5 trillion credit portfolio, BRL 1.3 trillion in Brazil, and any worsening can impact our portfolios. Having said that, the portfolio was built in such a way that is resilient and well managed across allocation by segment, client types, and sectors. With the best information we have now, we reaffirm the guidance. Short-term delinquency indicators are well behaved. The first quarter is always a relevant indicator for the individuals portfolio, and this quarter's increase was smaller than many prior years' first-quarter increases. Our expectation is that long-term delinquency in the individuals portfolio remains stable during the year. For SMEs, we expect some mechanical normalization — perhaps modest increases of 10 or 20 basis points — but still at levels below those seen just a few quarters ago. For corporates, the indicator remains stable. Our primary focus is to remain timely with provisions, to manage migrations rigorously, and to keep a robust balance sheet so we can face future waves. The scenario is worse now than at the beginning of the year, but our radars are on, and we are operating actively to manage the risk.
Next question, Gustavo Schroden, Citibank. Gustavo?
Good morning, Milton and Gabriel. Thank you for the opportunity. Congratulations once again on the solid results and the predictability. Wanted to explore the growth of the credit portfolio in two specific products, Milton. The private payroll loan and SMEs that you're growing. In our reading, there are two things, two points that we would like to think. In the payroll loan, private, there is the creation of caps. Last week, we had a specific point about the cost effectiveness. See the issue of appetite in the private payroll loan and in the small, medium, micro companies. The issue of the support to the government programs has, we know that that has helped in the delinquency in that sector. Even so, as you highlighted, we expect a worsening 10, 20 basis points in the portfolio. Do you foresee sustainability in the government programs another 1, 2 years? That would be my two questions about the two points on the credit portfolio.
Thank you, Gustavo. Great to see you again. Let me start by payroll loan. When the product was launched, we said the market would expand. Initially, Itaú had about 30% market share in private payroll; the market was BRL 40 billion then. We expected the market to grow and our share to decline proportionately, but within a much larger market. In fact, that happened. Today we are leaders in private payroll with a portfolio around BRL 20 billion. We grew from BRL 12 billion at launch to approximately BRL 20 billion today. Our strategy since inception included launching early with modernized platforms and technology, which gave us an advantage. On delinquency, our over 90-day delinquency is substantially below the market. We focus on clients who have bank relationships with us — we know them and we can manage risk differently. Average rates we practice are among the lowest in the market; we have competitive pricing for those target clients. We do not view caps as a helpful long-term tool; caps can be artificial and remove products from the market. For our portfolio, the impact of the caps as currently proposed is irrelevant; we are comfortable with current conditions and the way we are growing. Regarding SMEs and government programs, programs such as PRONAF and FGI have been effective. We are leaders in utilization and availability of those programs. The government has provided additional capacity where needed — for example, an extra BRL 2 billion injected into FGI that can support roughly BRL 25 billion of lending capacity — and we expect these programs to remain relevant at least for the current year and likely into the next year as well. They support credit quality via guarantees, and while you may see some mechanical increases in delinquency statistics as grace periods end, the guarantees mean the expected loss and cost of credit are not materially affected.
Well, next question. Renato Meloni, Autonomous Research, the floor is yours.
Good morning. Congratulations on the resilience of the results. The scenario is difficult. I wanted to focus on the individuals portfolio. In additional information, I'm looking at the graph that you're showing of leverage of individuals. What is your expectation within the cycle in terms of increased reduction maintenance of this indicator, which is important? I am thinking, given the focus that you are doing with the selected public, at one point do you get to a limitation of growth of these portfolios? If you can also expand on your comment about the SMEs thinking about the cycle. Another one, two years, these programs can sustain a similar level of growth, but when that extends or extinguishes, do you think that the cycle of credit can be at a moment that is more prolific and even leveraging? Can you expand more on the universe of small companies that you are lending money? Thank you.
Thank you, Renato. Great to see you. First, in the individuals credit portfolios, we still see capacity for growth. We've achieved double-digit growth and have been able to reach the clients we targeted. The One Itaú migration created a great opportunity: many clients that did not have full bank relationships with us are now engaged, and cross-sell is progressing. More than 60% of that base now has three products with the bank, showing we are reaching clients who were previously monoline. That gives us a large universe from which to grow. Regarding funding mix and product mix, payroll and real estate are important levers. Some products, such as vehicle financing, are more volatile and we've been cautious. Credit cards, despite de-risking, have grown meaningfully in our target public. I do not see a limitation in growth for the individual portfolio; the opportunity set is still large. For SMEs, it's difficult to precisely foresee the future of government programs, but for now they are effective and likely to remain relevant for this year and next. They provide competitive pricing and appropriate duration for SMEs, improving access and supporting credit quality. The SME portfolio dependence on these programs is a fraction of overall portfolio, and we are comfortable operating with the current dynamics.
Next question, Daniel Vaz, Safra.
Thank you, Milton, Gustavo, Gabriel. Thank you. Congratulations on the resilience of the bank, and thank you for sharing new data on the credit. It's important to see a bit of how you're working with the capital, quality of credit. I wanted to explore two themes that we usually do not mention, which are vehicles and the payroll loan, INSS, and vehicle loans. Vehicles: the hiring of the bank dropped 13% year-over-year. In the market, if you look at the level of BNDES, the disbursement grew 25%. It's very big in terms of financial activity. I wanted you to make me understand better the vehicle loans. Is there any opportunity of attack? How do you want to position from now on? If the product has some gaps that you don't like, guidance, you know, if you can explore in the call. Second, in the payroll loan, INSS, we had important changes with this Desenrola 1.0. With the new margin of the payroll loan, at least 35.5, which is 45 with credit cards now to 30 in five years when you're going to have the phase-in of this new regulation. The credit card losing importance, and it does open more space to play with this product in this new regulation. Thanks.
Thank you, Daniel. Vehicles is a segment we have participated in significantly in the past, with sizable portfolios historically. This is a volatile business. When household income commitments become tighter and interest rates are restrictive, vehicle financing becomes riskier. Recovery of guarantees has its challenges; while vehicles are real collateral, recovery rates are not that high and legal processes have yet to fully improve. Market spreads have tightened and competition has increased, especially in used vehicles. From a risk-return and capital allocation perspective, we find the business less attractive relative to other opportunities. That is why we have been reducing exposure: we prefer to lose share rather than lose money. We will still serve our clients who have good risk profiles and want vehicle financing, but we will remain disciplined in underwriting and capital allocation. Regarding INSS payroll loan changes: they were designed to reduce household commitment and are a transition over years. We received details only recently, so it's early to quantify the full impact on our portfolio. We do not focus on payroll loan credit cards; our positioning is disciplined and we will not enter suboptimal return strategies. Caps can eliminate product availability for some clients; a reduction in caps over time could bring more clients back into the market depending on how regulation evolves. We will continue to monitor and adapt our approach according to regulation and market dynamics.
Next question, we have Mario Pierry from BofA. The floor is yours.
Good morning. Great. Thank you. Congratulations on the result. We understand that this scenario in Brazil, not just Brazil, is one of uncertainty. It's interesting to say that the bank can see the thresholds that are stable. The question is regarding the efficiency level. You showed in Brazil there is an efficiency level of 35%, and you've seen I think that you reduced the number of branches by 15% in the last year. Headcount just dropped 5%. I'm thinking here, in terms of still being able to see improvements in the efficiency level, should the bank reduce more people or employees? Do you see that, or is there still space to improve efficiency with operational improvements, reviews of contracts, etc.? In your perspective, what is the threshold that you can bring this efficiency level to, and to have improvements, should you focus more on reduction of personnel?
Thank you, Mario. Great to see you again. I always include the caveat that efficiency must be viewed by segment. Wholesale and Latin America wholesale operate at a different efficiency benchmark — we are first quartile globally in that area and still see opportunities. In retail, efficiency is a key driver. The reduction in branches and the digital transformation are important: 98% of transactions are digital, and branch visits have fallen 70% since pre-pandemic. This requires an adjustment of the footprint but not simply a mechanical reduction of branches or headcount. You must redesign the model to serve clients where they prefer: digital, remote, or high-touch for wealth clients. We have seen nominal cost reductions in individual banking in this quarter and still see room to improve. Initiatives such as Itaú Digital, platform modernization, and reviewing the value proposition and business models are the real levers. The objective is to reduce unit cost while maintaining high NPS and eNPS. This is a long-run transformation combining technology, process change, and people. We are optimistic about further efficiency gains and are executing a plan to capture them with quality and client-centricity.
Ninth question. Eduardo Rosman from BTG Pactual.
Good morning. I wanted to ask about artificial intelligence. It's very difficult from us on the outside to see how tangible, who the winners or losers will be. In thesis, those that are doing a good digital transformation, such as you, should have an advantage in the implementation of AI. I wanted to ask Milton: what would you recommend for us, the analysts? What should we ask or observe for the executives and the numbers of the banks throughout time to have a good reading of who is moving ahead?
Great to see you, Rosman. First, we will be launching the first acquiring machine—the new orange terminal—powered by AI, with an integrated AI system in the device that assists merchants and tenants through conversational features. Early tests show high NPS and adoption. That is an example of how AI can change client experience in payments. More generally, what matters is results: increased efficiency, higher top-line potential, improved productivity, faster decision-making, and better customer experience. We have been building an intelligence foundation in the bank: guardrails, governance, democratized data access, and prioritization of high-impact projects. It's not a race for the number of models in production; it's about connecting models to business outcomes. Examples include credit modeling, fraud detection, CRM personalization, and operational productivity. Over time, AI will bring structural improvements, but the metric to watch is the translation into business KPIs: cost per client, conversion, NPS, time to decision, loss rates, and productivity gains. We are doing many pilots and deployments, but we focus on projects that scale across the bank. Rede is a clear example of a digital and AI-enabled improvement in the payments experience. Ultimately, the market should look for tangible improvements in efficiency, client engagement, and risk management that can be traced to AI implementations.
Now we switch to English as we have Tito Labarta from Goldman Sachs with us. Tito, the floor is yours.
Great. Thanks, Gustavo, Milton, Gabriel. Thank you for the long call and taking my question here. Following up a little bit on Yuri's question on growth, looking at your guidance here, and I know you had some seasonality in the quarter and the payment of the dividend impacting particularly financial margin with clients, and fees. How do you — your guidance is 5%-9% growth for the year. You're at the low end or a little bit below that on the fees. Insurance I know was a bit more resilient. How, how should we think about the rest of the year and your ability to deliver, say, maybe a bit above the low end of the guidance, particularly with some of the increased concerns on credit quality? Appreciate the charts you gave. Certainly, you're in a much better position than the system. Just given those concerns, how do you think about your ability to perhaps accelerate growth through the year and maybe have these revenue trends be a little bit above that, the lower end of that guidance? Thank you.
Hi, Tito. Good to see you. Thank you for joining. Let me give a bit more detail on guidance. We're still comfortable with our overall guidance. For portfolio growth, we remain confident even with challenges ahead. Financial margin with clients is supported by portfolio growth and spreads; despite the dividend timing and calendar effects in Q1, we do not expect major issues in margin. Cost of credit: with the information we have today, we are comfortable with the guidance, though we always remain vigilant. The area where I see more risk is services and insurance — these lines depend heavily on economic activity and capital markets. Insurance performed well in Q1, but services fees were affected by seasonality and market activity, particularly DCM and asset management performance fees. Performance fees are volatile and typically recognized in Q2 and Q4; in a more volatile or weaker market year, that can reduce fees. TPV and card volumes depend on consumer activity. All in all, we are confident in the guidance. If we see new information, we will be transparent and update the market as appropriate. For now, we remain comfortable with our targets.
Let's go back to Portuguese and Henrique Navarro, Santander. The floor is yours.
Hi, everyone. Sorry. Thank you for your time and for the opportunity. My question is about delinquency. The market has been very worried about the cycles. Two questions. First, from what I can understand, correct me if I'm wrong: you are seeing the peak of delinquency coming maybe in the second and third quarter; we're going to see the peak of delinquency at Itaú. This number shouldn't be a number that is frightening. Maybe deterioration of another 20, 30 basis points in delinquency. That's the first question. If really we are close to the peak and that peak might come in the second, third quarter, and it's not a number that will frighten you. Second question, thank you for the information that you just gave on slide eight, it was very useful. It's clear that Itaú has an advantage in comparison to the sector. My question is, where does this come from? The explanation can be the products, but even if we get the segmentation and products, it's still in the math that you're doing a good job in managing risk. My question is, where does these numbers come from? Is it digital and AI, data lake, the way that you're managing that data? Is it really digital or AI with an advancement in AI becoming a commodity? Do you foresee a risk of a competitor catching up with your excellence? Do you have more to gain with the evolution of AI because there's still a lot of things to be done in terms of improvement and image of that risk adjustment?
Thank you, Henrique. Regarding delinquency, with caveats given the dynamic market, my expectation is stability in the immediate quarters rather than a sharp peak. For over-90-day delinquency in individuals, I expect continued stability with small movements of maybe plus or minus a few basis points, given current information. For SMEs, we may see some mechanical normalization — another 10 to 20 basis points — but still at levels below recent peaks. Overall, we do not foresee levels that would be alarming based on current data. On why we outperform the market: there is no single silver bullet. It is a combination of factors. First, a clearly articulated portfolio and risk strategy: target client definition, disciplined underwriting, and portfolio management. Second, the advantage of being the main bank for many clients — having salary, deposits, and multiple products helps reduce delinquency. Third, investments in data architecture, platform modernization, and operational foundations have made data more accessible and actionable across the organization, enabling faster and better decisions. Fourth, continuous testing, modeling, and humility in risk management: we learn from feedback and adjust quickly. AI and digital tools are important enablers, but they are not the whole story yet; they are incremental and will likely become more structural over time. Finally, people and incentives aligned to long-term value creation and proper capital allocation are essential. Competitors can catch up in pieces, but the combination of these elements creates a durable advantage.
Now for the final question of the day, we have Carlos Gomez-Lopez from HSBC. Carlos, please go ahead. (Carlos had an audio issue, then continued.)
Thank you very much for the generosity with your time. Two minor questions. The first one is about your tax rate, which is a little bit lower than the guidance that you have given us for the year. Typically, it is higher in the first quarter, so I wonder if there was any particular reason or if you think that you may actually outperform in terms of your effective tax rate. The second one is about the agricultural portfolio. You mentioned you have about a 20% market share. Have any of the support programs from the government been adequate to your portfolio? Is that something that you are using, and do you have a view about how that market is starting to evolve? Thank you.
Carlos, good to see you. Regarding agricultural support programs, they are not specific to agribusiness. If any program overlaps with agricultural clients, there may be some coincidence, but the programs we discussed earlier are not specifically designed for agriculture. It would be relevant if the government considered targeted instruments for agribusiness, but at present there are no special programs specifically for agriculture beyond the general programs. On tax rate matters, I'll ask Gabriel to add color, but we are comfortable with our guidance and expect the effective tax rate to converge through the year. There are some seasonal effects in Q1 that led to a lower effective tax rate, but we expect normalization.
Hi, Carlos. As Milton mentioned, we are very comfortable with the guidance that we have. If you think about the bank in terms of effective tax rate, there are two main drivers. The first and major factor is interest on capital, which was larger this quarter compared to last year and also to Q4 2025. The second factor is the distribution of results across the different legal entities and geographies within our structure, which has seasonality. Those two components explain the lower effective tax rate in Q1. We expect these effects to normalize during the year and for the effective tax rate to converge to the guidance.
Well, with that, we will close the earnings call. Thank you, Milton. Thank you, Gabriel. Thank you to everyone who took part. We're going to close our Q&A session and our video conference for Q1 2026. I'll give the floor to you, Milton, for the closing remarks.
Thank you, Gustavo. Thank you, Gabriel. It's always an honor to have you here in this meeting, in this results meeting. It's a long-term game and always an enriching debate with important questions. We operate with discipline and with our feet on the ground. Good results do not lead to complacency. This is an infinite game: we're never satisfied and we keep raising the bar every quarter, always trying to do the best for the client. We will continue to allocate resources and push the agenda. The macro environment presents challenges — an election year and geopolitical developments can change things — and discipline is key. We have competent people and good competition, and our work is to evolve each day. Thank you for your time and feedback. Next week, we have the conference in New York; we will be there to meet local investors and analysts. See you next time.