Earnings Call Transcript - ITUB Q2 2025

Operator, Operator

Hello. Good morning, everyone. My name is Gustavo and it's a pleasure to have you with us for our second quarter of 2025 earnings video conference. As always, Milton will soon walk you through our performance. And afterwards, we'll open the floor for a Q&A session where analysts and investors will be able to interact with us directly. But before handing over to Milton, I'd like to share a few instructions to help you make the most of today's event. For those accessing this video conference via our website, there are three audio options available on your screen, 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 in the upper left corner of your screen. Today's presentation is available for download on the website, and as always, on our Investor Relations website. With that, I'll now hand over to Milton, and I'll see you again shortly for the Q&A session. Milton, over to you.

Milton Maluhy Filho, CEO

Good morning, everyone. It's a pleasure to be here with you once again to discuss our second quarter 2025 results. Today, I will present an executive overview focused on our results and provide a brief update on our guidance. I will also share with you an update on the One Itau initiative, as I promised on our last quarter earnings video call. I will comment on our migration agenda and on the bank's digital acceleration process. Finally, I will share some key figures and wrap up with an invitation to all of you. Let's move on to the numbers. As you can see, we're presenting the same key indicators as always. Recurring managerial net income, recurring managerial return on equity, NII with clients, NIM, NPL over 90 days, and common equity Tier 1 ratio. Starting with our results. This quarter, we delivered net income of BRL 11.5 billion, representing a 3.4% increase over the first quarter and a 14.3% increase year-over-year. These are very strong results stemming from a solid performance base established over recent years. As a result, our consolidated ROE reached 23.3%, expanding both quarter-over-quarter and year-over-year. In Brazil, ROE was 24.4%, a robust return also showing expansion over both comparative periods. As always, I would like to note that if we were operating with a capital ratio of 11.5%, which is roughly in line with market practice and our Board's approved risk appetite, our consolidated ROE would be 24.7%, and in Brazil, the most comparable figure would be an ROE of 26.1%. This is detailed in the slide's footnote. How did we achieve this result? First, it was a very strong quarter for NII with clients with a 3.1% increase over the previous quarter and 15.4% growth year-over-year. NIM also expanded significantly, both sequentially and year-over-year, reaching 9.2% on a consolidated basis and 10% in Brazil. We had not reached double-digit NIM in Brazil since before the COVID pandemic, in other words, since 2019, underscoring a significant margin recovery for the bank's balance sheet over these years. Delinquency rates remained well-behaved. Consolidated NPL over 90 days stood at 1.9% and reached 2.0% in Brazil. This indicator is stable quarter-over-quarter and is down year-over-year indicating that despite some first quarter pressure in short-term delinquencies, we performed very well the second quarter in long-term overdue loans, a very positive development for the portfolio. The common equity tier ratio posted another solid increase, up 50 basis points quarter-over-quarter already adjusted for IOC provisions and some risk-weighted asset effects, but that were immaterial. Thus, we see a 50 basis points expansion in common equity quarter-over-quarter and flat year-over-year. This is excellent news for capital generation. Moving on to the loan portfolio. I want to highlight that the individual loan book grew 8.0% year-over-year and 0.7% in the quarter with a notable 1.6% quarterly increase in credit card loans. More important than total credit card loan book growth is the finance credit card portfolio growth, which I will address specifically. Regarding personal loans, it's crucial to break down this number, because it includes products like unsecured credit lines and overdrafts as well as debt renegotiation products. Breaking it down is key to understanding the quality of growth and how each credit line performed in the quarter. Payroll loans underperformed this quarter due to multiple factors. The payroll loans for INSS beneficiaries dynamic was impacted by both the cap on interest rates and funding as well as by a process change in originations. Private payroll loans are advancing gradually due to ongoing product process improvement. I'm positive that there will be questions on this in the Q&A session. In auto loans, risk management is key, and the portfolio continues to perform very well. Both credit card and auto loan portfolios are outperforming market benchmarks for the national financial system. The mortgage loan book grew 2.1% in the quarter and 17.2% year-over-year, further demonstrating our capacity to expand such an important credit line for our clients. We continue to be very focused in our share of cash, penetration share of payments. That's how we see the relationship with the client.

Operator, Operator

We have Milton here and Gabriel. He is here, the CFO. Welcome to you both. And let's go to the first question that comes from Daniel Vaz from Safra Bank.

Daniel Vaz, Analyst

Congratulations on the results. Excellent cash generation. I believe the bank is well positioned for dividend distribution to shareholders. I noticed the headlines indicating capacity in this area. However, I want to discuss the Rede network. We observe a 7.5% growth in our capital interest. The issuance numbers show Itau close to 5%, with Bradesco and Santander similarly positioned. This indicates that you are gaining market share over the last few months. I would like to understand that strategy better. What is the direction you're taking? How can you become more competitive, and how can you achieve a targeted offering for specific clients to effectively capture that strategy? Once again, congratulations on the results.

Milton Maluhy Filho, CEO

Thank you, Daniel. It's great to have you here, and I appreciate your opening remarks. Regarding Rede network, we haven't discussed the results in isolation because it's integrated into the bank's overall strategy. The total payment volume of the credit card market is just 4% of the flow's total payment volume. Our focus is on the complete offering and understanding the client's perspective, which shapes our overview. We monitor other indicators, but Rede's results are reflected within our published outcomes. We've accounted for the paid and receivables, and the outcomes from Flex and MDR, which you're seeing here, including the rental aspect, while the results of RAV and RAV's financial costs contribute to the client margin. Understanding the take rate with this broader perspective is challenging. Market share is not our primary goal; it's a byproduct of our approach. When we concentrate on the right clients, appropriate pricing, and a comprehensive view of our relationships, market share naturally follows. We don’t manage our strategies based solely on market share data, as some might pursue negative contribution margins for the sake of gaining it, which doesn't always translate into favorable results. Our market share does stem from significant players, but sometimes this doesn't show in the overall results. As a result of our efforts, we've become leaders, but that's not our primary focus. Managing volume costs for market share has led us to concentrate on larger accounts, where contributions are lower and margins are tighter. We are pleased with our integration success and the results we've achieved, particularly from our commercial teams in the acquiring business. Acquiring is essentially about enhancing the receivables that clients have for receiving payments. This approach yields natural results, as the flow generates value. Our attention remains on increasing our share of cash and payment penetration, as that's how we view our client relationships.

Operator, Operator

Now let's go to the second question, Renato Meloni, Autonomous. Good morning, Renato. We do not hear you.

Renato Meloni, Analyst

Congratulations on the results once again. Well, I wanted to talk about the portfolio of finance credit, which is growing. It's very interesting. It's growing beyond the total portfolio of credit cards and you're focusing more on the Personnalite and Uniclass base and you're improving the profitability of our portfolio without increasing your credit risk. So I wanted to understand which are the initiatives of these new products that you're developing and deploying in this segment. And thereafter, if I want to understand if that's a relevant contribution for your clients in this quarter? And does this continue throughout the year?

Milton Maluhy Filho, CEO

Thank you, Renato. We appreciate your presence here. This quarter, we've observed a positive growth trend, particularly regarding our margins with clients. Several factors contribute to this, including the margin from credit cards, though it’s not the only component. We aim to expand our personal credit card portfolio, especially as the rotation in credit shows promising performance. Seasonality plays a role, as we’ve seen shifts in expenses from one quarter to the next, leading to an increased tendency for financing options. Additionally, we have discussed the evolution of client journeys. By targeting segments like Uniclass, specifically in the Personnalite product, we can enhance the digital experience for clients, which is crucial when they are considering short-term purchases. They can access discounts when paying via PIX, making it imperative for them to finance purchases under competitive conditions, tailored to their profiles rather than just segments. We have also seen an increase in PIX credit within credit cards, which aligns well with the client journey. This collection of initiatives adds to our client margins. When analyzing client contributions, there is a noticeable impact in terms of product distribution mix and average volumes, which directly affects our overall performance. The growth in the Retail sector, particularly in the middle segment as published in the MPME, contributes positively to our margins with clients. I believe we’ve reached a commendable level of maturity this quarter.

Operator, Operator

Thank you. Let's go to the third question, Mario Pierry, Bank of America.

Mario Pierry, Analyst

Good morning, everyone. Congratulations once again on the result. Milton, what really impresses me is you're delivering the results, generating a lot of capital but the management is still not satisfied. I mean, you're always trying to improve. What caught my attention was the extraordinary expenses that you had in this quarter, BRL 600 million, approximately in the restructuring. So could you explore more what are the measures? What are you thinking? I imagine that this is more for the reduction of the physical distribution of the bank, but would you be able to anticipate to us a target, goal of efficiency?

Milton Maluhy Filho, CEO

Thank you, Mario, for your initial comments. The point you raised about our culture is central to our organization's DNA. We have an intense desire to improve daily and are never fully satisfied. While we celebrate our successes, those celebrations are brief. The challenges we face are significant, and we're focused on the future with the goal of exceeding our expectations. We need to identify and operate in areas of credit where we can take on more risk than our current state allows. In the past, we made a provision for restructuring that is non-recurring, which is important to emphasize. Looking ahead to 2019 and beyond, such provisions arise when we anticipate changes in the investment outcomes from prior years. Although these provisions are significant and extraordinary, we will keep progressing in our digital initiatives, including the development of One Itau, which is crucial for advancing our Super App. The results of our digital acceleration are impressive and enable us to be more ambitious in our plans. We're aiming for a higher efficiency level, and while we may experience some fluctuations in efficiency due to revenue and costs in the coming quarters, we need to maintain a competitive efficiency index across our businesses. There are areas where we set a global benchmark for efficiency, especially in Wholesale operations, while we see opportunities for improvement in Retail. This endeavor is a collective effort, not just limited to one segment. Gabriel has been leading this initiative across the organization, and it's not solely a financial responsibility; it involves everyone. We are now in a strong execution phase after years of investment, and we anticipate advancing these restructuring efforts over the next few quarters and years.

Operator, Operator

Now we will continue with Yuri Fernandes, JPMorgan.

Yuri Rocha Fernandes, Analyst

Good morning, everyone. Congratulations and thank you, Gustavo. The capital results are very good. I want to ask about physical efficiency. The only line that is weaker is digital, which I understand logically. The revenue from checking accounts has been declining. How much stabilization should we expect in checking accounts? This line seems to be a concern. However, the consortium is performing well, and the insurance is also doing well. I wanted to understand the efficiency improvements in your plan, the stabilization in fee lines, and in retail and wholesale sectors. Contrary to my expectations, wholesale is performing better than retail. If you could comment on the trajectory of this line, that would be great.

Milton Maluhy Filho, CEO

Thank you, Yuri. Thank you for the words and taking part of our call. I believe that here, we need to break down the answer into a few chapters. The first one, transactionality. We see in Retail, the transactionality is still very strong. I've discussed the good cholesterol, the bad cholesterol. We see transactionality occurring in the issuance in the acquiring, in the engagement of our products in the digital channel. So we are increasing the volume in consistent and an important way. There are two lines that I would say that they directly, they fall through our time, and that's why we changed the way that we published. So when we have tariffs, the checking account. And we are talking about tariffs and packages. We are re-signifying the packages. It doesn't tend to zero, because as you create value in the package as we can do that, there is charge for a package. It's a different way to service a client. But directionally, we highlight that first relevance of this line in the quarter. And secondly, I think that it will continue to drop little by little when we look up ahead, and we will re-signify the packages, but the deltas, the millions of reals for all the completion of the revenue of insurance is not irrelevant. The percentages are higher because we're talking about smaller numbers.

Operator, Operator

Now we have Henrique Navarro, Santander Brasil.

Henrique Navarro, Analyst

Congratulations on the results. My question is about the corporate portfolio. We've encountered some challenges this quarter, including the IOF and the dollar. Despite that, there has been significant growth in this portfolio. So my question is about the nature of this growth. Is it driven by capital markets? Where is it originating? Are there more aggressive policies at play? What can we anticipate for the upcoming quarters?

Milton Maluhy Filho, CEO

Thank you, Henrique. Great to see you again. Here, the effect of the exchange rate that you commented is very relevant. The portfolio has a lot of sensitivity to the foreign currency. The growth here of Wholesale has a boom of operations that we put in the portfolio without changing the appetite. This is very important for the long-term vision for the strong portfolio management on the long term. And we have inside Itaú BBA several segments of clients and companies. We've grown the portfolio by per quality in all of them, removing the foreign exchange effect, of course. Here, we have agribusiness, which has a performance that is very highlighted. We've seen the middle, which has an effect of foreign exchange. But when we see as foreign exchange growth, even though the companies grow, the SMEs grow, there is no silver bullet. All the segments, we have penetration that is good and with the right price. We have a discipline of price that is very strong, prices in the sense of capital allocation for the return of capital. So we see the excesses in the market, they occur, but we rather lose share than lose money and lose profitability. So we've been very disciplined. We don't see difficulties. We continue to grow this portfolio at the right price with the adequate profitability level and with the completeness of the relationship that we have with the clients. So the growth is very diversified, no big concentrations and no changes in the appetite. This is the most important thing.

Operator, Operator

Next question Eduardo Rosman, BTG.

Eduardo Rosman, Analyst

Good morning, everyone. I have two interrelated questions. First, regarding the credit business, we've observed that it has generated value during this period, with ROI surpassing the cost of capital. Historically, you've indicated that ROI should align more closely with the cost of capital, with excess returns coming from other areas. As the Retail business evolves in the high-income segment, we anticipate an increase in this ROI. What are the current developments in this area? Additionally, with the potential efficiency improvements you mentioned, could we expect a greater risk appetite and more growth opportunities at Itau? Also, is it possible that we could lower the payout in the future to allow for greater reinvestment and enhanced growth with higher ROIs?

Milton Maluhy Filho, CEO

Thank you, Rosman. It's great to see you again. This quarter was positive for credit due to the margin expansion, which performed well. The cost of credit has been stable in the Retail sector, showing a nominal decrease. This is an important point. There have been some concerns about the quarter's formation, but it's essential to remember that we operate based on expected loss in the bank. The primary impact on provisions is from short-term delays seen last quarter. For long-term delays, the necessary provisions have already been accounted for. That's why the coverage level isn't affected by the delays. We had a provisioning formation of 120%, and in Retail, it's even lower at 98%. The expected loss and short-term delays are why I'm mentioning the potential for short-term delay delinquency, as they influence the expected loss on our balance sheet. Any variations from that involve operating incurred losses and unexpected losses. I wanted to clarify this point. Despite this, we see the formation consistent with the portfolio we are monitoring, amidst the expected volatility and seasonal effects from the first to the second quarter, as short-term delays transition to long-term ones and normalize afterward. I wanted to address this aspect in response to your question.

Operator, Operator

Next question with Thiago Batista, UBS.

Thiago Bovolenta Batista, Analyst

I'm going to do a follow-up on the question of Rosman and Mario on efficiency. Are you comfortable that today, your app, not One Itau, but the Retail app is state-of-the-art to the point that the branches are secondary to the relationship with the client. So it's a question about asset quality. And you're very comfortable with the evolution of the quality of the portfolio in the second quarter and potentially until next year. Do you think that, that's a specific factor that is just yours that you could focus on better clients? Or for the market as a whole, would you think that this is the same for the portfolios or the asset quality is not a niche thinking about the second semester?

Milton Maluhy Filho, CEO

Thank you, Thiago. Great to see you again. I'm going to start with the second one, and I'm going to answer both. But here about the cost of credit, that has to do with the clear strategy of the bank of doing a portfolio management with a long-term vision in the Wholesale and Retail. So we see very little hiccups and volatility in the numbers. And when you see the management for the long-term cycle, you can have a better control for the quality of credit. You define the publics, you can cluster the base, you can define the frontiers of the appetite for clusters. And in that sense, you're going to navigate in a less volatile way and in a more consistent way. The worst thing that can happen with the credit relationship is the stop and go that you offer and then you have to stop abruptly, the predictability of the client and the bank and the results. I'm going to give you two indicators of the market, and I'm not doing any sort of qualification of what we are seeing. But I believe that the performance has two indicators that I follow of delays, which is the system publishing. The credit card and vehicles. We've seen in the last quarter, the long-term delays on the credit card growing 100 points in this quarter. So there can always be a discussion that the change of criteria of write-off, ours grew 20%. So when we compare with the performance of the market, we haven't seen any change of criteria in the write-off. We've seen a performance of the industry that is different from what we observed. And ballpark 20% when you exclude Itaú from December, you see that the impact is more relevant than that.

Operator, Operator

Now we have Gustavo Schroden from Citibank.

Gustavo Schroden, Analyst

Congratulations on the solid results. We've discussed the strategy of the bank and about the private consignado. So with the payroll loans, or private payroll loans. I wanted you to evaluate how you see the evolution of the product and how Itau wants to position in the consignado privado private payroll loans?

Milton Maluhy Filho, CEO

Thank you for your kind words and for participating in our call. I believe this product is evolving. It’s a great idea that makes a lot of sense. We see the overall portfolio of this product growing in the market, and we are expanding within the market of BRL 40 billion, although it's limited to specific associations. We consistently held a 30% share of that market, which is significant, though small. Despite being a small market, it is on an upward trend. We have observed continued portfolio evolution over the past few months. Initially, there was a higher level of activity, but due to operational issues and risk factors, we've noticed a deceleration in industrial registration. Regarding our platform and organizational capability, I believe we are among the first banks, alongside Banco do Brasil, to engage with this product from the start. This involvement is crucial because it allows us to adapt to the changes that have occurred. Our participation from the beginning has provided valuable insights into the evolution of the platform—not just regarding operational challenges, but also in defining our strategy. Our strategy is strong, focusing on a clear framework of target audiences we aim to serve and the manner in which we intend to grow, ensuring quality growth.

Operator, Operator

Now the next question with Marcelo Mizrahi. We don't hear you Marcelo.

Marcelo Mizrahi, Analyst

My question is about growth. I understand the overall message, but when we analyze the details, we've noticed some areas showing weaker growth compared to the previous quarter, particularly in natural persons, credit card vehicle portfolios, and the growth rate for SMEs, which appears to be slowing down. Regarding the guidance, it seems that the growth of the portfolio is the only aspect at greater risk. I would like to know if you've reviewed the guidance and if it's stable regarding growth. I assume you have a strong level of confidence about the average midpoint, so can you provide insights on what to expect in the upcoming quarters? Additionally, which portfolios will contribute to this guidance? On a related note, concerning dividends, it seems that the payout percentage might be higher this year than last. I'm not sure if this is too early to discuss, but I would appreciate your thoughts on it.

Milton Maluhy Filho, CEO

Thank you, Marcelo. It's great to see you again. You're correct in your assessment of the realized and projected figures. In our review of the guidance, we go through each line carefully. We revisit all lines because if there is better available information, we want to make necessary corrections. It appears that the most significant challenge lies within the portfolio, as you've pointed out. Nevertheless, we stand by our guidance. Current information indicates that foreign exchange is affecting the situation, with the real gaining value against other currencies, which works against us. The guidance reflects a consolidated view of the portfolio, and currency fluctuations can account for part of the behavior we see. It's challenging to predict the foreign exchange rate for the second half of the year and its potential impact on portfolio growth, but we remain confident that all segments will perform as planned, allowing us to deliver what we've forecasted in the guidance. We do not provide point guidance or specify if it's the midpoint; instead, we offer a range, which we believe best represents our expectations for portfolio growth.

Operator, Operator

Now we're going to switch to English as we have Tito Labarta from Goldman Sachs with us.

Tito Labarta, Analyst

Congratulations on the strong results. I guess my question is in terms of your maybe longer term or sustainable profitability, right? I mean, ROE is very strong. You have excess capital, which you can return; you have room to improve efficiency. So I mean, if we continue to extrapolate what you've been doing, ROE could continue to go up, I don't know, '24 or '25 and cycle can change, interest rates will move. But just to think, how do you think about the sustainable profitability? And I say that in the context of thinking about the competitive environment, right? I mean, you've derisked on the lower income side. We have some very strong competitors there. A lot of competitors are trying to get more into high income where I think you have a bit of a competitive advantage. Given this sort of changing competitive landscape, you continue to produce strong results. What do you think is a right level of sustainable ROE at least from a high level, just given all these moving parts that you have?

Milton Maluhy Filho, CEO

Tito, thank you for your initial words. Good to see you here. Thank you for coming. My view is that even though we don't guide ROE for the long term, we never did and we keep thinking that this is the best way to give you a right assets about the way we are seeing the future. We believe that there are a lot of elements, as you said. So the macro is relevant. The level of activities is relevant. At the end of the day, the cost of equity is relevant, because if there is a change in the long term in the cost of equity, we might see the ROE somehow behaving in a different way, but always looking to the capital gains, value creation that we have as our mantra here in the bank, the way we manage the organization. So I believe looking for this year, I think it's not so tough to say what I'm going to say, but the 20-plus is reasonable to expect. This somehow is implied in the guidance that we just adjusted. But we think we still have capabilities and delivers to keep delivering good profitability for the bank. It's of course, it depends on competition and competition is tough. It's always tough in all the segments. We know we have a lot of very good banks working every day, trying to grow in the segments when somehow we've been leading. But we believe that we have, the capabilities we have, the teams we have, the structure and all the investments we've been making throughout the years to compete very strong and to keep delivering a good position in all those segments where we are.

Operator, Operator

We are going to keep the discussion in English as we have Nicolas Riva from Bank of America with us. Nicolas, good to see you. Please go ahead.

Nicolas Alejandro Riva, Analyst

Milton, I have a question regarding the AT1s. You mentioned in your initial remarks that you will be calling both of your dollar AT1s. My question is whether there will be an issuance of dollar AT1s to replace the 55 basis points of capital. If that's not the case, please let me know. Additionally, in your announcement, you stated that calling both AT1s will impact total capital by 65 basis points, but I noticed a distinction between the impact on Tier 1 and Tier 2 capital. Could you clarify why there is an impact on Tier 2 if both AT1s are being called? My understanding is that the AT1s account for 100% of AT1 capital both before and after the call date.

Milton Maluhy Filho, CEO

Yes. No, it's completely right, Nicolas. There is no impact in Tier 2. So to be very clear, what we did is a liability management as we are seeing a good opportunity to issue in Brazil. So we did almost BRL 10 billion in issuances in this first semester. I would say more recently, BRL 5 billion in local AT1s, very good market, deep market in very good conditions. So as the level of the capital of the bank is 13.1%. We don't think we need to be full power in AT1, 1.5%. So we are very comfortable to go behind it. So after all those calls, the $700 million and the $750 million bond, AT1, we should go below 1.5%. Our best estimate is to be 1.3%, and we are very comfortable with that. So in the short term, with the market conditions we've been seeing, we don't anticipate going to the international market to do new issuances for AT1. Of course, if there is an opportunity in Brazil at a good level of price, we may issue more, always looking to the restriction we have, that is 1.5%.

Operator, Operator

Now we go back to Portuguese with Eduardo Nishio from Genial.

Eduardo Nishio, Analyst

Congratulations on the results. I have two questions. First, regarding your mention of potential new areas for credit, particularly among low-income individuals. Given the improvement in natural persons, do you expect significant indices improvement throughout the year with the One Itau rollout and reduced footprint? Are you reconsidering the strategy for the mass market, and what are your expectations for cost reductions? What do you believe is needed in this segment to move forward? My second question concerns delinquency. We have noticed a deterioration in the industry over the past six months, which has been consistent, yet your numbers appear to be strong.

Milton Maluhy Filho, CEO

Well, thank you, Nishio. Pleasure to see you. Thank you for the initial words. Now let me start by the second one. We don't see any reason with the information thereby available to have discontinuity on the credit looking up ahead. We're very comfortable with delinquency level. I talked about SME. The expectation is that this normalization can be 10, 20 basis points in the indicator of delays looking ahead, but with an expectation. It's a mechanical issue of not having the delinquency and the portfolio growing and produces a better indicator like you say artificially when it normalizes, it goes back to the parameters that we expected before. But Brazil is cyclical. We need to look at the cycle, the activity. So with the information that we have today, we kept the guidance of the cost of credit. We understand that this is the best information.

Operator, Operator

Now we're going to proceed back to English as we have Carlos Gomez-Lopez from HSBC. Carlos. Good to see you. Please go ahead.

Carlos Gomez-Lopez, Analyst

So two brief questions on two areas we haven't touched. One on the corporate spreads, you mentioned how the market has been quite receptive to your AT1. And in general, the Brazilian market seems to be operating with very low levels of corporate spreads today. Do you think they make economic sense? Do you expect them to increase in the future? And second, could you comment on one area of the portfolio that we don't talk too much about, which is the mortgage portfolio? I think it is the one that is growing the most right now in your individual segment, 17%. How are you doing it with these high interest rates?

Milton Maluhy Filho, CEO

Yes. Thank you, Carlos. Thank you very much. So yes, you're right. So the spreads in the DCM market, especially for the big corporates in general, the market is very tight and the companies that have been accessing market have been able to do at a very competitive level of prices. The same way for us when we go to the market and access for AT1s, as you were saying and mentioning. So this is for everyone. Let's see because we still have a lot of demand with this level of interest rate, a lot of flows going to the credit industry. And that's the reason why we are seeing this level of prices. Let's see, looking forward, if the credit scenario keeps delivering the way we've been seeing, if there is no volatility, we believe that this is possible that we will keep looking for this level of prices, but will depend a lot in volatility and in the credit market.

Operator, Operator

Now for the last question, we have Natalia Corfield from JPMorgan.

Natalia Corfield, Analyst

I'm going to mention my question as you do with capital. And a lot of it, well, you answered to Nicolas, which was that there is no impact in the Tier 2. I was confused. Another point, because you mentioned that you cannot have over 150 basis points in AT1. I always understood that Itau thought that it was a level optimal to have, but that you could have more than 150 basis points. Banco do Brasil already had it. So I just wanted to clarify with you. Is there any change in the regulation in Brazil that now you cannot issue more than 150 basis points of AT1?

Milton Maluhy Filho, CEO

There are no restrictions on the volume we can issue; we can have as much as we want. However, the Central Bank allows us to use Basilea with a maximum of 1.5% of the capital index and AT1. We have undergone a liability management process for various reasons. For instance, we issued BRL 10 billion in perpetual bonds during the first half of the year, and the calls come afterward, leading to a temporary excess of AT1 during that period. Legally, we can use more than 1.5%, but this access comes at a higher cost. The cost is inherent to AT1, despite not being used for AT1 purposes. This situation creates a temporal mismatch between the issuance and the exercise of the call. We slightly exceeded our limits, but it’s not problematic. Presently, the bank's capital level is at 13.1% with our capacity for capital generation at the core, meaning we do not need to consistently maintain the 1.5% requirement.

Operator, Operator

Thank you, Milton, Gabriel and all of you. Thank you all of you that taken part with our Q&A session, our video conference. And I'd like to give you the floor, Milton, to close the call.

Milton Maluhy Filho, CEO

Well, thank you very much for your participation, for the questions. And I think that the point that remains is culture, the strength of the organization in the sense that we are all dedicated looking at the scenario and paying attention to the changes and be satisfied, thinking that we can always do something better every day. This has made the bank evolve throughout the years. Once again, thank you very much. We're very happy and satisfied with the results, but that's the past, water under the bridge. We've discussed the results, and we need to work for the next quarters, believing in the value of the franchise on the long term, and this is what we believe every day, focusing on sustainable growth and evolving with client satisfaction centrality, solving the pains of the clients every day, and we are in a unique moment, not only of the balance and results, but strategic positioning to face the challenges up ahead. And we can evolve in our digital journey, artificial intelligence and everything that has to do with technology that is available. Always paying attention to our clients and naturally our investors. Thank you very much for your trust. Thank you for the messages and the questions. And the challenges are up ahead, and we still have a lot of work to do.