Good morning everyone, my name Renato Jacob, and I represent market intelligence in Itaú Unibanco. Thank you very much for joining our video conference for the Fourth Quarter results in 2021. We're streaming this event from the headquarters of Itaú Unibanco and have three parts in this event. In the first part, we'll talk about the results for the year of 2021.

Hi, good morning, everyone. Good morning, Renato. Good morning, Milton. Congratulations on your results. They're very good. I have a question about digital transformation. We know that Itaú is going through this massive transformation, and we know there's a lot to be done. I wanted to hear from you whether you're already able to know whether this digital transformation is what accounts for these better margins. And performance that you have had than the peers. It's difficult to understand that from outside. It's difficult to know who is doing that type of job better. So do you know or can you tell whether this transformation is what is accounting for this better improvement or is that something that we're only going to find out in the next years?

Thank you, Rosman. Thank you for your question. And thank you all for joining this Q&A session. So how can I set the stage around digital transformation? First of all, it goes far beyond changing technological platforms, right? And this is the slowest processing. Guerra just talked about this now. We had 25% of our platforms modernized at the end of the year, which is crucial for this transformation. By the end of this year, we should have 50% of our platforms modernized. I think the pivotal point is how we prioritize this. We focus on what is more important to the clients. By the end of the year, 80% of what matters to the clients will have been modernized or updated. And when I say modernized or updated, I don't just mean coding something new. I mean, really having a platform that has a time-to-market that brings us to a whole new level with quality of products that is better. And there's another very important point that I've been talking about a lot. That is the cultural transformation, which is a major enabler that will really allow us to boost our digital transformation. We're sticklers for the idea that a digital bank is not a remote bank, but a bank that thinks faster, has cutting-edge technology that will understand the client's pain points, and that will react to the client's needs as fast as they expect us to. We want to have a simple decision-making process. We want to have good control. We also talk about preserving and conserving what is good in what we already have, but also making progress towards a new mindset with a lighter type of environment, less hierarchy. We have removed layers and administration. We want to give more autonomy to our staff to really have the chance of starting small and innovating, taking chances, making mistakes, and improving. We have more indicators. Some are more objective, and some are more qualitative. This is not a process that started last year. We have been talking about updating, upgrading, and modernizing our platform for a while. We did expedite the process in 2021, and this cultural transformation has been bolstering it. Over 60% of our sales are already through these digital channels, which indicates that that's part of the results. We have been investing in technology; we more than doubled our technology team. We have 14,000 staff in technology. This is a very expressive amount that's part of our guidance already and shows that we have been able to invest in technology, invest in purchases, in productivity, increasing scale, sustainable performance, and that's made the bank more efficient and more able to be competitive when it comes to pricing. All of the indicators that we have been monitoring are just according to plan or even better than that. From a data perspective, we have really revolutionized our data infrastructure. So when you think of the data cleansing, that is something that we solidified in 2021. In 2022, we're looking to improve further data management, which will allow us to make decisions faster and to really interpret our clients’ needs instead of just looking at a segment. We have a lot of homework to do. It is a lengthy and laborious process. But we're very excited and not only looking at the results that we have had, but also at what we have achieved so far.

Thank you, Milton.

Thank you for having my question. Congratulations on your results echoing what Rosman said. I'm not going to be asking much about operations. For guidance, I think we have a lot of information. The message was quite clear. But I wanted to try and understand a little bit more about your view concerning foreign strategies and foreign actions that you’re planning to take. There is a cost of opportunity that you have had in Chile. It was a lengthy transformation, but it’s been doing well. Recently, you've really been clear about tax issues in Brazil, and there was also a premium asset in Mexico, and that's a very interesting market. I'd like to understand your interest in continuing to expand or how you will be dealing with your branches in other countries?

Thank you, Jorge. It's great to see you again and thank you for your questions. Whenever we talk about international strategies, this is something that the bank decided a few years ago. We decided to expand internationally. We have Chile and Colombia, Itaú Unibanco, and we have various assets there. The banks we have in Argentina, Uruguay, and Paraguay have also been performing well. In Argentina, of course, there are macroeconomic challenges, but we have been operating well with our corporate wallet and treasury, especially where we have had good results despite the market challenges. Argentina has also been a trial environment for us. We have a new FinTech that we have developed completely independently from the bank. We're just getting started, but we can see that it's an auspicious start and we have good signs there. In Uruguay and Paraguay, we have more consolidated banks with a very good historical performance, and they have really been adding value to the organization. And I continue always to have a capital cost, but it’s still an operation that creates value. We have been managing cross-border risks really well and will reduce our exposure at the right moment. Itaú Unibanco is a marathon. It's not a short-term task. We were going through some points after the merger, some credit, and some platform operating technology issues that are quite complex. Our decision, once we took over the bank, was to really look at the market from a long-term perspective as we do in Brazil. Not favoring short-term gains, but favoring long-term value creation for shareholders. So in the fourth or fifth year of operations, we expect results to crop up. Last year, we made a few interesting adjustments to the balance. This year, we already had better performance in Chile as you mentioned. There is still a challenge from a tax perspective. There is some lack of symmetry today. We bring profits to Brazil, with taxes from Brazil levied upon it, which makes us a little less competitive internationally. There is a challenge concerning capital because we have a risk appetite well set in Brazil, and we have to set a level of capital here to support our operations. The capital cost in Brazil is about 14% at this point, and that is also a challenge. Looking at it as a whole, we have expanded our operations in Chile, as you've probably noticed. We increased capital, and that was positive for the bank because the capital impact was virtually zero. We used to have a 40% share, and now we have increased it to 56%. That was a good moment to increase capital. Furthermore, the bank now is going to acquire the Colombian operation's other slice of it. Colombia is still a challenge. We have a very devoted management team. We’ve been simplifying the cost structure, and we want to raise the Colombian operations to another level. Scale is a challenge in Colombia, as we have a 3.5% market share in retail, which makes it more difficult to gain profits there. But we're quite comfortable at this point to continue improving the assets that we have there. As for international expansions, it’s not a focus. We’ll continue consolidating assets that we already have, and we are reaping the benefits and results, as you have mentioned. I think it’s unlikely that we will make any changes in consolidation or enter new countries. We think Mexico is a great country and represents a great opportunity, but we also see several opportunities in Brazil and chances to improve operations we already have. We are not currently in a process of expansion like that. Of course, we will look at assets in the region, which is part of our job description, but I think we are unlikely to pursue that. We need to really focus and generate value for shareholders. Because of this lack of symmetry, any operation outside Brazil will allocate a substantial amount of capital and impact value generation for shareholders in the short term, but I think we have a full plate at the moment.

Shall we go into the next question? Gustavo Schroeder from for Banco do Brasil. Hello, Gustavo. We can hear you, Gustavo.

Good morning, Milton and Renato. Thank you for the presentation. Congratulations on your results. They are indeed very good. I just wanted to revisit a subject here, treasury and capital hedging. We understand there may be a need to neutralize the mismatch that may arise from FX operations. I think the assets and liabilities aspect is well hedged, but maybe the capital account isn't, if I'm not mistaken. How do we match that? Does this hedge you have for capital have an opportunity cost? You have a $2 billion expected impact onto treasury. But this doesn’t look like a meaningless cost of opportunity. What is the upside you see in capital that would justify having this $2 billion impact on treasury? If you could clarify, what the rationale is behind that is. And still about that, I don't believe this is going to be a one-off only in 2022; I believe you're going to keep this capital hedging structure, so we could expect $2 billion less in treasury for a couple of years, right?

Thank you, Gustavo. It's good to see you again. Let me explain our hedging strategy and our approach to hedging capital. We brought back equity from banks and other countries to Brazil using derivatives for hedging. However, this capital is always returned in Brazilian Reals. There is a significant asymmetry regarding taxes. As you know, we've been over-hedging, which has led to a high opportunity cost. We began over-hedging in the first half of 2021 and continued in the second half of that year, but that practice is now finished. We are currently only using standard hedging. One consequence of currency devaluation is that it creates tax credits which are beneficial for our capital ratios. On the downside, when the bank's equity is hedged in reals, the risk-weighted assets will fluctuate with the currency, affecting capital requirements differently depending on the currency. I’m referring not just to the Brazilian Real but also to the Chilean Peso, Argentine Peso, and others. These currencies will be influenced by the dollar. Previously, we maintained a buffer to manage the negative impacts from RWA or tax credits, leading to our current decision. Managing a capital index for the bank is challenging since that’s where value is generated, and we lack control over it. If the board sets a risk appetite, it might limit growth opportunities like mergers and acquisitions due to the volatility of the capital index. We experienced a 40-point drop in the Tier 1 capital index, translating to $14 billion in profit needed to restore this capital, which are significant amounts. Our decision was to stop over-hedging, consider opportunity costs, and adhere to good international practices. We monitor other multinational banks and their hedged capital indices, and in Brazil, we face opportunity costs from rising interest rates. We estimated a $2 billion impact from increasing interest rates, but normalizing rates might reduce costs. However, the market context is essential because if there’s any depreciation in FX rates, especially in an election year, the bank can generate capital and results conducive to growth and new business ventures, which would lower the risk appetite from our current situation. This strategy enables the bank to work with greater leverage and create more value by utilizing current buffers. This is encouraging, and we want to be transparent about the opportunity cost. The $2 billion figure is our estimate; it could vary slightly. This decision supports value creation for shareholders. It is a hedging structure that may evolve over time, but we aim to maintain this level of capital hedge, especially given potential uncertainties ahead.

Thank you, Milton. Thank you, Gustavo. We're going to go to the next question. We have many coming up. We have Thiago Batista from UBS.

Congratulations on your results. The Central Bank approved a project recently; there will be credit operations that will be carried out through PIX transfers. How will that affect credit, and what impact will that decision have on the market?

Thank you, Thiago. It's great to see you. Fixed credit is still a concept. So we don’t yet know the details of how that's going to work. Our expectation is that by the end of the year, there should be more clarity on it. There is a time period that is important for more definitions. But I think the crucial point here is that fixed operations have come to stay. We have really embraced it from the start, so we don’t swim against the current. We prioritize PIX on all of our channels. We have about 20% market share with payments and transfers. We’ve penetrated our client base with that. PIX has become a key product for any client that wants to make transfers to an individual or corporation. We really want to embrace the opportunities however we can. Our vision is lifetime value, creating value. In the long run, proximity with our customers and delighting them. If we have to give up some fees to use PIX, we will do that. We've done so in the past. In the guidelines for 2022, anything you see in income and revenue already includes PIX. Since we are quite careful in terms of payment as a whole, we believe PIX will have an important role. We don't know exactly how that's going to happen. But anything relevant for the market and for customers, we want to be at the cutting edge and add that to our purpose. I'm not able to provide you with many details, but in the next few quarters, expect to know more. The fact that it was chosen in the sandbox shows that we're open to it and that we want to challenge ourselves and be disruptive whenever necessary. It's better for us to advance quickly rather than waiting for the market to do it. If it's good for the customer, it has to be good for the bank. That's the core of our thinking.

Hi, can you hear me?

Yes.

Thanks. Thanks for the opportunity, and congratulations on the results. My question is about XV. You have to buy XV stocks at a price that seems to be attractive. I want to understand your strategy and how you're going to make the purchase and what you're going to do with these stocks.

Hi Mario. Thanks for your question. Nice to see you again. You're familiar with the process. This is a purchase and sale process that was negotiated back in 2017 when we made a transaction with XP. We've been waiting for two things. First, the regulator's approval, and that has already been given by the Central Bank of Brazil. We still need some minor adjustments, some more formalities. The main thing was to wait for the 2020 results. We negotiated a 12.5% purchase. Now, after the capital increases, we are talking about an 11.38% stake in XP. We negotiated 19 times the profit of '21. Their results were published this week, based on which we are now calculating the amounts with them, the exact amounts and how to reach a price to formalize that in the next few months. We expect that within 30 or 60 days, we'll be able to complete the transaction. From a process perspective and approval perspective, we're all set. Given the size of the operation, it's a non-strategic operation, and the bank made the decision not to control the spin-off and deliver it to shareholders. We first want to complete the purchase just to be able to discuss the next steps thereafter.

Thanks so much for taking the question. Hope you can hear me okay. The outlook for financial margin with client points to a bit more growth than you're seeing in the loan portfolio. Can you talk about the moving pieces that go into that in terms of mix, spreads, competition, interest rates? What's driving that stronger growth in financial margins you're expecting in the loan book? Thank you.

Thank you, Geoff. Good to see you again. Thank you for your question. Just to give you a quick view, we had a very strong year in terms of financial margin with clients. The last quarter was very strong. As we’ve been growing the portfolio at a very healthy pace and yielding a very good portfolio, we believe that we have a strong year ahead for financial margin with clients. The reason why is that this portfolio has been built over the last four months. So, there is inertia of the effects of this portfolio having a full year in 2022. This is an important component. Another is the interest rate in our working capital, which has a positive impact on investments that we have from our clients. Combining those effects, the portfolio that we've been building, plus the impact of investments, and our working capital increased is why we believe we can grow the financial margin 20% round numbers in 2022. If you just take the accrual that we already have, it will yield us 13% without any additional effort. We will still build the portfolio in 2022 at a different pace from 2021, so we may underperform in terms of portfolio growth, as you can see in the guidance. We feel good about the mix as well. We see both the retail and wholesale portfolios growing at a good pace. But it all depends on how the capital markets will evolve in 2022. On the retail side, we still see a lot of opportunities. We’ve been building the portfolio with guaranteed products, and we've experienced a significant recovery on the clean portfolio in the past couple of months, which helps us as well with the margin with clients. This is basically how we believe we should achieve that in 2022.

Thanks, Milton. Now that we all warmed up in English, let's take the next question from Tito Labarta from Goldman Sachs. Tito, welcome.

Hi. Good morning, Milton and Renato, thank you for taking my question as well. My question is a bit of a follow-up, particularly in Brazil with expectations for growth this year, particularly in Brazil, growing into double-digits to low teens. I know it's a little bit of a deceleration from 2021, but how prudent or comfortable do you feel with that growth just given the deteriorating macro, with GDP, potential slight recession, possibly growing 1% or so? You indicate that the provisions will be rising. So how comfortable are you growing at that pace? Can you give a little bit more color in terms of the segments, like what kind of growth that implies for corporate, retail, and why you think you can grow so strongly with a weaker macro? Thank you.

Hi, Tito. Good to see you again. Thank you for your question. What we see is that there is still opportunity to grow the portfolio. It's important — we're talking about we have -0.5%, but let’s say that it’s 0 GDP for 2022. I think to compare with the portfolio growth, we have to look at the nominal GDP; when we consider inflation, we are talking about 7% to 8% nominal GDP for 2022 and a portfolio that should grow around 10% to 12%. There is an important inflationary process in Brazil, and this is relevant for credit and portfolio growth. We are very comfortable with the pace. Of course, we have a significant amount of tech knowledge to decide about credit. We have ample information about our clients and take the polls all the time. If we feel more comfortable, we will deliver more. If we feel we need to slow down, we will do that. This is our best expectation now. We still believe there is an opportunity. There is this portfolio built in 2021, which has natural inertia in 2022, but we are confident in a slow pace, of course, slower than what we did in 2021, but we perceive healthy portfolio growth. I know your question was more about the portfolio growth pace. Regarding the cost of credit, I think it is important to highlight that in 2022, we believe, as we have indicated in our cost of credit, that this will grow. We are talking about nominal base, so it is important to talk about the index and our cost of credit relative to the portfolio. We believe we should grow, but it will still lag behind what we perceived in the pre-crisis, pre-pandemic. We still believe we’ll arrive at a very healthy relationship in terms of cost of credit and portfolio. This is important. Second, we are diminishing the pace, so it has an impact on the index, but even though we believe we should have a healthy portfolio by the end of the year. In terms of coverage, we believe we should maintain a healthy level of coverage. The delinquency ratio should increase as we have been saying. You might remember that I mentioned in the last quarter that we would see a rise in our delinquency ratio. This happened in the personal portfolios this quarter. We still believe we'll see a delinquency ratio coming up, but it will stabilize by the year-end. This is our best projection right now. We feel very comfortable regarding the dynamic risk return of those portfolios. We’ve been engaging with our clients, enhancing their lifetime value. The year doesn't end for the bank in 2022; we are focusing on building our portfolio long-term and enhancing relationships with our current clients and new ones.

Thanks, Milton. And now we go back to Portuguese. It's Henrique Navarro from Santander. How are you?

Thank you for the opportunity and congratulations. The format of the meeting is excellent. I apologize for revisiting this topic. Many are discussing credit, but I understand the initial hesitation. Itaú was likely one of the first banks to project a negative GDP for 2022, forecasting a decrease of 0.5%. In the third quarter, the message communicated was one of caution regarding a challenging scenario. Nonetheless, you reported a number that exceeded expectations, and your guidance for 2022 is significantly higher than what we anticipated. Looking at the guidance you provided, it doesn't align with this cautious outlook for 2022. The accrual levels indicate strong growth, suggesting that we might interpret this as a sign that, while risks exist, you're capable of managing them and willing to take greater risks for better returns. This could explain the high accrual. The survey indicated a 6.5% credit growth for 2022, highlighting a significant disconnect between what some players foresee regarding risk. I previously thought that you were taking a more conservative stance, but the guidance, which is very promising, indicates a strong ability to manage both risks and returns. I know you have discussed this in detail, but could you clarify your views on growth and the risks involved, particularly concerning impacts on risk and accrual? Thank you.

Thanks, Henrique, it's great to see you again. Your question is crucial for clarifying certain points. Firstly, the comparisons you make matter significantly. Both 2021 and 2022 present challenges when discussing the regular fiscal year. In 2021, we experienced fiscal stimulus and various other incentives, while in 2020, consumption dropped due to the pandemic. Reduced consumption led to more stimulus, allowing for lower interest rates and boosting people's ability to repay. However, if I claimed we anticipated this, it wouldn’t be accurate given the delinquency rates in 2021. In 2020, we had reasonably sized anticipated and complementary accruals that have remained unchanged. We were expecting a more difficult scenario that didn't occur, and 2021 continued that trend. In 2020, we faced lower credit capacity and consequently lower delinquency rates. Comparing 2021 and 2022 isn't ideal, which is why we refer back to 2019 for clearer insights. Additionally, we are noticing a gradual normalization of delinquency since the last quarter. Our portfolio performance remains strong, despite some recognized delinquency in specific segments with individuals. I want to emphasize again that we did not sell any portfolio, although that doesn't mean we won't in the future. We haven't used that strategy, which can influence delinquency rates. The delinquency rates we report are fairly accurate, which is important. Furthermore, we sustained a flexible portfolio that was effective in 2020 as part of our program, which allowed us to work with clients on manageable installments. This helped us reduce delinquency rates by 42%. We’ve been discussing a portfolio of over R$54 billion, translating to around $31 billion with healthy indicators. Our clean portfolio mainly includes obligations that are being honored. In 2022, we expanded the bank's credit portfolio by more than 40% over the past three years. We utilize an expected loss model that accounts for provision cycles over time, which creates a timing mismatch. While expected losses are lower, margins seem to be improving. This is the state we observe in 2022. I was being conservative, and we remain cautious. Our guidance reflects our best estimates. We are committed to delivering optimal results for the bank and will adjust expectations if necessary. Two years ago, we recalibrated our credit costs and adjusted our lines accordingly. If changes are needed, we will make those adjustments as required, aspiring for around a 20% return on investment. Importantly, we do not anticipate significant utilization of complementary accruals, which is a noteworthy point. We're seeing growth of about $5 billion to $6 billion without relying on any complementary accruals. I believe our position is quite advantageous. If there is a heightened credit cycle or more uncertainties, we will have the flexibility to manage that. Our risk and return metrics are strong. Your question is valid, but there are two sides to this situation; rising interest rates lead to higher margins for customers, which accounts for these results. Notably, the growth in our portfolio in Brazil, at 11%, 12%, or 13%, appears modest against a nominal GDP of 8 or 9%. We have a solid understanding of our products and portfolios and know our clients well, yet the future remains unpredictable, so we will take a cautious approach in 2022.

Thank you, Milton.

For the next question, we have Jason Mollin. It’s going to be in English. Jason, you can choose your language.

I like the new formats for the meeting. However, I'll pose my question in English. Milton, you mentioned that Itaú can achieve around 20% ROE on a sustainable basis. In this context, I'd like to refer to the slide you release every quarter about the business model. I believe it's on Slide 19 this time. It indicates a value creation of 9.3 billion in 2021, with nearly 100% or 99% of that coming from the insurance and services segment. This segment had a return on regulatory capital of 32.5% for the year, although there was slight value destruction from the credit portfolio. How should investors view this sustainable ROE of 20% in light of the returns from different business segments? Thank you.

Thank you, Jason. Good to see you. I’ll answer in English, even though I know your Portuguese may be better than my English. What I’d like to share about the business model is that the data you observe reflects the annual basis figures. It is true that when you look at the credit perspective, we didn't generate capital or value creation considering the hikes in capital cost of the bank. All value generation in 2021 came from services, basically, as you noted. However, from the last quarter, we observed a positive trend in credit, generating value. You're looking at a full-year set. We believe that in 2022, we will generate value from credit also. We are talking about a 14 capital cost which can be a bit higher or lower. When looking at that, we are delivering good growth numbers. However, there are costs related to the portfolio growth that may limit shareholder creation. When we consider the findings of services, credit serves as a crucial lever for reciprocity with our clients, enhancing their relationship. So credit represents a significant and pertinent lever for us. We believe we can generate value on credit in 2022 for several reasons. As I previously stated, last quarter was positive. We are likely to benefit from rising interest rates in a way that helps our returns. But understanding return on capital is crucial when assessing the total revenues from clients in conjunction.

Thanks, Milton. Next question. Marcelo Telles from Credit Suisse. How are you, Marcelo?

Hello, Renato.

Hello, Marcelo.

Thank you for the presentation. Thank you for this format, as well. Most of my questions were already answered, but I like to take advantage here to ask about your strategy as an investment platform. You acquired Ideal as you mentioned and want to leverage technology and use the platform to plug the IFAs. So I would like to hear from you what that means exactly, is it transformational for Itaú and how do you see possibilities of distributing your investment platform products? Do you want to create an XP within Itaú? How should we think about your investment products and strategies related? Thank you.

Thank you, Marcelo, it's great to see you again and thank you for your question. Acquiring EDL plays a significant role in our strategy to complement our environments at the bank. We have very important information to share with you. In Private Banking, we had an increase of 2% in market share by acquiring a larger portion of the market. We grew more importantly in the market, gaining two market share points. We now hold a 30% market share in this segment, and we have the absolute lead here. Additionally, we are gaining market share in investments as well. There are always fluctuations, but overall, we gained around 70 basis points in net terms. We believe our strategy will expand significantly in terms of reaching the private and general public. We intend to open 90 offices, not as autonomous, but our own offices with our registered staff. We expanded into 20 cities already, planning to penetrate into another 20 cities in the course of the year. By the end of this year, we should have a substantial number of offices and branches, as well as over 2,000 IFAs focusing on investments. We have over 400,000 clients using this new model, utilizing the digital platform we manage. Previously, Itaú was exclusively for high-income clients, but now we have specialized groups to support and advise our clients. The success of this new model pleases us; we're very satisfied with how the strategy is structured. You heard from Constantini just now, and Andre has also been instrumental in this. Itaú has a few major objectives. First, we are upgrading in some markets with high-frequency trading and traditional market operations primarily. This is an edge we gain from them. They possess a cutting-edge technology platform better than ours. Additionally, we consider human capital very valuable. Nielsen and the entire team comprise top-tier professionals with a wealth of experience that brings flexibility to penetrate other markets and strengthen our value offerings. We aim to strengthen our strategy, and while we are exploring how this model will emerge, we’re shifting more towards B2C, hiring our own teams. There could be some conflict among our teams and autonomous teams. We are making decisions around how to move forward. With this platform, we can more easily plug in our staff with both Autonomous teams and clients. This is a model we are still discussing, and we’ll share more clarity on this matter soon.

Hello, everyone. Good morning. My question has to do with the PDD. This initial assumption that you have, no additional items that will consume some of your provisions. The NII was very positive and there's room for this high coverage. Maybe that has to do with high levels, and then the bank just covers this higher coverage until the end of 2022. I am trying to get at here is we see you allowing more this quarter. Is this a new level of coverage that we will probably see Itaú working at, or is it a temporary movement with more room for net profit in 2023?

Thank you for your question, Domingos. It's great to see you. You've raised a valid point, so I'll try to explain it. In 2021, we expected to use the complementary points as we had already budgeted for that. What pleasantly surprised us was the performance of our portfolios. This included not just flexible portfolios but also those that were not flexible, engaging customers who did not require the program. We reviewed our guidance on credit costs during the year and felt very confident about it. Therefore, we revised our guidance downwards and recognized that it wasn't the right time to use complementary provisions. When we look at recent years and analyze the retail portfolio, we see that we are operating at higher levels, which reassures us. We also feel confident about 2021 because the risk-return rate did not necessitate tapping into complementary allowance provisions. As we monitor expected losses, we will advance provisions; non-performing loans will come into play. We expect that over time, this should normalize, and non-performing loans will materialize gradually. In our retail portfolio management, we do not base our strategy on non-performing loan formation. Our focus is on expected losses. An increase in non-performing loan formation will naturally happen, and we provision for incoming non-performing assets to address these needs. Coverage consumption happens quickly, and as I mentioned in the presentation, it's a good indicator for predicting future coverage levels. Our expectation is that if the current scenario continues, non-performing loans should stabilize by the end of the year, and we are very comfortable with this. In 2022, we do not anticipate reducing coverage levels and expect to operate similarly to last quarter. If the situation normalizes, we may tap into some of these provisions, but that’s not our primary scenario at the moment.

Thank you, Milton. The last question from the analysts now comes from Roberto Garcia. Hi, Roberto. It’s nice to meet you. Thanks for attending our earnings call.

Thank you for the call. It's great to see you too. I wanted to ask about the guidance, which is quite impressive, especially considering the challenging macro conditions. Could you share your insights on how the macro environment might affect results? Is there anything specific that concerns you? Additionally, do you believe any part of the guidance might be overly cautious, and is there anything in particular that excites you?

Thank you, Roberto, it's nice to see you. To answer your first question, we remain optimistic about the potential for portfolio growth. We must consider GDP in nominal terms. There is a timing mismatch in how provisions are made versus how the portfolio generates margins. The challenges we may face in 2022 are closely related to the portfolio growth we've experienced over the last two to three years. This marks the fifth consecutive year where we expect positive developments from portfolios that meet those needs. We do foresee an increase in credit costs. As I mentioned earlier, this is our best estimate at this point. Throughout the year, we'll make decisions based on the delinquency rates of families, assessing whether we need to slow down or expand. This is our approach, as it has been in the past. However, there is a natural inertia with the portfolio. Observing recent months, we have seen growth, which will certainly affect 2022. Additionally, due to the 2020 crisis, we significantly reduced our credit offerings to clients, resulting in nearly a 50% loss in market share. Regaining our fair share among these clients will have a substantial impact. The guidance seems fair to me and provides a comprehensive outlook. I see the figures indicating considerable growth in pre-tax earnings. I don't view it as purely positive or negative; rather, I see it as the best projection we have, and we will adjust as needed in the coming months.

Thank you, Milton. We still have some minutes, and we've been getting lots of questions on WhatsApp. Several of them have been answered already. But I'd like to ask you at least two or three questions in the last 10 minutes. As a reminder, if your question has not been answered, the RI team will contact you directly to answer your questions, okay? Milton, there is a question about ESG and our initiatives in that regard for 2022, along with issuing green bonds and internal initiatives around ESG. Could you share your thoughts, please?

Certainly. The ESG agenda is a fundamental part of our strategy, not just a passing trend. Since joining the Dow Jones Sustainability Index, we have made consistent efforts in this area, witnessing significant progress in recent years. I want to highlight some key initiatives. For example, our "Everyone United for Health" campaign was pivotal, with over $1.2 billion donated by the bank. A dedicated council worked diligently on this initiative from early morning hours, and it was a crucial undertaking that we all took pride in. We have recently announced plans to increase our credit volume and operations by 2025, focusing on high-impact sectors like renewable and clean energy. Specifically, we aim to allocate $400 million towards these efforts, representing $170 billion, or 43% of our target commitment, which we hope to achieve by 2025. These investments are expected to create a significant impact nationwide. Additionally, our council prioritizing initiatives in the Amazon comprises experts tackling complex issues with challenging timelines, yet it remains a vital aspect of our agenda. We are also actively promoting our mobility agenda, investing in bicycles and electric vehicles, with positive results from pilot tests. Our diversity agenda is extensive and includes commitments to empower women, elevate marginalized voices, and enhance representation for individuals with disabilities. This is a comprehensive and impactful agenda, and our achievements thus far are promising. In corporate governance, we've received commendation this year for the quality of our financial reporting and adherence to best practices. We are addressing all prioritized areas on our agenda, as I believe ESG should be integrated across all departments of the bank, not treated as a separate effort.

Thank you. I think we could spend two more hours discussing this. There's an unending list of questions. But I've been informed that our time's up. If your question has been answered, we'll get back to you. I'd like to give you the floor back for your final words and goodbyes.

First, Renato, thank you very much for leading this event. The change at the end of the day designed to create a more interactive format. I want to thank the site team and am thrilled about the creation of this dynamic environment. I'd like to hear more from the executive committee. This naturally means commitments with our results, allowing us to demand action from them. Joking aside, I wanted to tell you that our energy levels are extremely high. Everybody is fully committed to this transformation. I continue to insist that we can only succeed if we work together, as we believe it is essential to success. We have significant cultural and digital transformation ahead of us. The word I want to leave this teleconference with is customer focus. That's our obsession. We're aware of our homework but remain resolute in pursuit. We have the means to engage with over 60 million customers, and each one of them is significant. This ethos must be at the core of our initiatives. Thank you once again, and we look forward to seeing you next time for an even more interactive experience like this one.