Banco BTG Pactual SA

BOVESPA:BPAC5

Earnings Call Transcript

[Operator]

Good afternoon, and welcome to the Third Quarter 2021 Results Conference Call of Banco BTG Pactual. With us here today, we have Roberto Sallouti, Joao Dantas and Jose Miguel Vilela. We would like to inform you that this event is being recorded. [Operator Instructions] Today, we have a simultaneous webcast that may be accessed through the website, www.btgpactual.com/ir in the platform.

Before proceeding, let me mention that this call may contain forward-looking statements relating to the prospects of the business, estimates for operating and financial results and those related to the growth prospects of Banco BTG Pactual. These are merely projections and, as such, are based exclusively on the expectations of Banco BTG Pactual's management, concerning the future of the business. Such forward-looking statements depend substantially on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in Banco BTG Pactual's filed disclosure documents and are, therefore, subject to change without prior notice.

Now I'll turn the floor to Mr. Roberto Sallouti, who will begin the presentation. Mr. Sallouti, Please go ahead.

[Roberto Sallouti, executive]

Thank you very much. Good morning, everyone. Thank you for joining our call. If we can start, please, on Page 3 of the presentation. We're very, very happy with the results of this quarter, across the board, be it net new money, be it level of revenues or be it level of income. So for the quarter, we had net new money of BRL 88 billion. If you exclude last quarter where we had a non-organic net new money from the acquisition of Necton, it's the highest ever. This takes our 9-month year-to-date net new money to BRL 261 billion. Our AuM, assets under management, our Asset Management business grew 65% year-over-year, reaching BRL 542 billion. And Wealth Management grew 81% year-over-year, reaching BRL 400 billion. This takes our total custody to BRL 942 billion or very close to reaching the emblematic BRL 1 trillion mark, which hopefully we expect to happen sometime this quarter.

Turning to Page 4. As I mentioned, we had another record quarter for revenues and net income. Revenues grew 55%, reaching BRL 3.8 billion. Net income grew 77%, reaching BRL 1.8 billion. This being the result of a 20.1% return on equity for the quarter. On Page 5, we show our funding base and credit portfolio. We continue to have very strong funding inflows. We've been able to keep a very solid capital metrics and a high-quality credit portfolio even as we grow. So our unsecured funding grew 45% year-over-year, reaching BRL 146 billion. We closed the quarter with a Basel ratio of 16.1%, and our credit -- our corporate and SME portfolio grew 43%, reaching BRL 98 billion, BRL 14 billion of which, an SME. Important to qualify here that we had very -- basically no growth in SME because of the issues that we're having with the central clearing of the credit card receivables. So basically, credit card receivables quarter-over-quarter decreased, and we slightly increased our supply chain financing portfolio. And also important to mention that Q3 had very strong seasonality, so we expect a more moderate growth of our portfolio in the fourth quarter.

Turning to Page 6. We have what we have been showing, centrally, we became a public company. So just recapitulating some key figures here. For the third quarter, we had revenues of BRL 3.8 billion, net income of BRL 1.8 billion, ROE of 20.1%. Our cost-to-income ratio has been on the lower margin of the band that we have. So historically, we've been between 41% and 45%. Cost-to-income ratio this quarter was around 42.6%. We closed the quarter with total assets of BRL 372 billion, and shareholders' equity of BRL 36.3 billion. And in the quarter, we had a share of VaR of 28 bps, so below our historical levels.

Turning to Page 7. We get return to the year-to-date results, where we had revenues of BRL 10.4 billion, net income of BRL 4.7 billion. So for the 9 months of the year, a return on equity of 20.6%. Cost-to-income also on the lower bound of the of the band that I mentioned, 42.1%. Turning to Page 8. You see the distribution of the different business signs and the revenues. And you see very strong growth from our client and less volatile businesses. So Investment Banking growing 80%, 81%; Corporate Lending, 51%; Investment Management, which is a combination of Asset and Wealth Management, 47%; and Sales & Trading, 46%. You see that Investment Banking, Corporate Lending and Investment Management are all around 20% of our revenues, and we expect this number to continue growing over time, especially in Corporate Lending and Investment Management over the next few quarters and years.

If you go to Page 9, we mentioned some of the ESG and impact investing accomplishments for the quarter. To start, it's worth mentioning the 2 prizes that we got, basically the recognition for what we've been doing. So for global finance, we've got the Outstanding Sustainable Financing in Emerging Markets awards, and from Environmental Finance, the Impact Initiative of the Year for the Latin American and Caribbean region. Our green portfolio reached BRL 6.1 billion at the end of the quarter. And in the quarter, we distributed for our clients over $1 billion in sustainable finance instruments, bringing our, let's say, since 2016, that number to over $7 billion. We also joined the Taskforce for Nature-related Financial Disclosure and the CFO, Taskforce for SDGs. We think this is state-of-the-art reporting regarding SG. We also launched a new product, ESG recommended portfolio for our clients. And finally, in Q3, we announced a collaboration with the Nature Conservancy, the world's largest NGO focused on preservation for -- and they will be our impact advisers for our Forest Management business in the U.S. And actually, in the fourth quarter, we announced a partnership with Conservation International, where they will be our impact advisers for the reforestation funds that we're launching in Latin America. So I think this tests the quality of the work we're doing and how we're perceived by very important stakeholders in the environmental world. And we think we're very excited that these partnerships will allow us to increase the impact of this Asset Management business that we have.

With that, I pass the floor to Dantas, who will speak about the performance of each of the business units.

[João Leite, executive]

Thank you, Roberto. Thank you all for joining our call. This has been a very important and strong quarter, and there's many interesting highlights and ideas to share with you. So starting right away on Page 5. Here, we have -- sorry, Page 11. Here, we have Investment Banking. The Investment Banking business reached BRL 727 million of income, 81% above the same quarter 1 year ago. And if you look at the right part of the graph, you see that the accumulated revenues in the 9 months of 2021 have reached close to BRL 1.9 billion, which is already 43% above 2020 full year, which was, in turn, 40% above 2019 full year.

So it's fair to say that our Investment Banking business has made a very strong progress in the last 3 years. We have not only maintained our leadership position in the industry, especially in ECM and M&A, but also we have captured an even higher share of the total people in LatAm. M&A and DCM revenues are growing more than ECM. That's a trend for the last couple of years and is also a trend that we expect for next year, and we became leaders in both international and local DCM for Brazilian clients. We are amongst the top banks in Brazil for local DCM. And in the third quarter, we ranked the #1 international DCM bank for Brazilian companies. So that is what explains this new plateau of revenues for the business, not only, as I said, we're growing our participation in the total fee pool, but also we did a significant catch up on the DCM rankings, which is exactly where the fee pool is growing. So all in all, a very good quarter for Investment Banking.

Turning to Page 12. And starting from the right part of the page, you see that our corporate and SME lending portfolio reached BRL 97.6 billion, of which BRL 14.3 billion is from SME lending. That's a 13% growth compared to the second quarter of 2021, so 13% in the quarter and 43% growth year-on-year. Our revenues reached BRL 642 million, 51% above the same quarter 1 year ago, slightly below the second quarter for reasons I'll explain. Our portfolio is expanding quarter-on-quarter, continuously for the last 5 years. And that portfolio is -- continues to be composed of exposure to the best companies in Latin America. Even our SME lending is fully collateralized by credit for suppliers of top-quality large corporates. And as Roberto mentioned, today, that's the main and almost only exposure we have inside SME lendings, the supply chain financing. Revenues are growing very fast, 51% revenue growth year-on-year is even more than the 43% growth of the portfolio year-on-year, and that is for 2 reasons.

#1, as we grow the portfolio and we maintain the quality or even expand, I would say, the quality of the disbursements, 2e also maintain the spread levels. And the second contribution, which has been very important for the revenues, is special situations that also has been expanding over the years. Special situation revenues in the third quarter were smaller than in the second quarter, just slightly smaller. And that is what explains this small reduction in total revenues for the quarter. We don't expect the portfolio to continue to expand at the same pace in 2022, even though it will continue to grow, and we will continue to privilege as we grow the very high-quality of the assets. We are very satisfied with the current level of provisions, and they're satisfied with the results of Corporate and SME lending.

Just to finalize, I think it's an important recognition to mention we were awarded the Best SME Bank in Brazil by Global Finance. Considering that we just launched our current account for SMEs, which is entirely digital, and that we are operating still with a single product, which is the supply chain financing, we believe that this award is not only very important, but also indicates our potential as we deploy more products and service to that segment of clients.

Moving to Page 14. Here, we have a little bit of the Sales & Trading, which had a strong performance with larger contribution from 3 businesses and also a contribution from the sale of CredPago, which I will explain in more details. So starting from the right on the page, we have the VaR and market risk metrics. You see that we have about 11% of our regulatory capital deployed to support market risk component of capital requirements, which is a historically very low level. And also, we are running the bank with about 0.28% of average equity in terms of VaR, which is in the very low bound of that range of our usage. There was a clear trajectory of lower use of balance sheet with growing contribution of fees inflow to the revenue mix of Sales & Trading.

The strong revenues in the quarter, which are our highest since our IPO, benefit in part from the sale of CredPago, which is our residential lease insurance platform, which we sold to Loft, which is a residential real estate platform in Brazil. As we announced to market, the sale represents a BRL 1.4 billion revenues that were generated in the transaction, of which BRL 520 million are included in the Sales & Trading revenues in the current quarter. So from the BRL 1.3 billion of revenues, we have about BRL 500 million coming from revenues, coming from the sale of CredPago and BRL 800 million from the other Sales & Trading businesses. And we expect the remainder, the balance of the BRL 1.4 billion of these revenues to materialize during 2022 and 2023. So all in all, a very strong quarter for Sales & Trading with this highlight of very low utilization of balance sheet resources to produce the revenues, so more contribution from fees and from flow trading, less usage of balance sheet in the quarter. And that is a trend that we expect to maintain going forward.

Moving on to Page 14. Here, we have our Asset Management business and starting from the right part of the page, you see this is our fourth consecutive quarter of record-breaking net new money and growing management fee income in consequence of debt. Our total assets under management have reached BRL 542 billion, which is 8% above last quarter and 65% above the same quarter, 1 year ago. We had BRL 50 billion net new money in the quarter. We had BRL 136 billion net new money in the 9 months of 2021, and that means approximately BRL 15 billion of net new money per month, only in our Asset Management business. Revenues are growing 8% quarter-on-quarter. They are now composed mainly of management fees, which are growing 31% year-over-year. If you just take the component of management fees inside the revenues of Asset Management, the growth is 31% year-on-year. Which is, of course, a more stable revenue component for Asset Management. And important to note, management fees have been stable in the last quarters and years inside each asset class. So there is a change in the mix of assets.

We are growing, as you know, more in nondiscretionary management mandates than on funds managed by our portfolio managers. And in turn, there is a change in mix. But inside each asset class, we have been able to charge our clients the same ROAEs because we already charge very competitive management fees in the industry. The strong AuM growth already comments for higher management fees going forward. That's a mathematical consequence of the higher average AuM that converges to the peak AuM. So as we continue to grow or even stabilize at this higher plateau, we are able to produce more management fees going forward.

I would highlight, last but not least, point here on the page, which Roberto already touched upon, which is the launch of a new product in Asset Management, which is a reforestation fund. It's a $1 billion capital raising to finance projects in Brazil, Uruguay and Chile, in collaboration with Conservation International. What we're doing here, our Timberland Asset Management business acquires degraded land and dedicates half of it for trees that are permanent forest. So local species that are planted and capped permanently. And the other half of the land is dedicated to commercial timber, so eucalyptus. It wouldn't be viable in terms of returns before. But now by adding the carbon certificates that you are able to issue with that kind of business, and which are going to be attested in this collaboration with Conservation International, then the business becomes viable. So it's not only a good financial result for our clients and investors, but also a very significant impact to reforestation and for the nature.

Moving to Page 15. Here is our Wealth Management and Consumer Banking results. I'd love to highlight here. As you see, starting from the right of the page, our Wealth under Management reached BRL 400 billion, growing 81% year-on-year. Our net new money in the quarter was BRL 37.7 billion, only slightly below second quarter, if we consider that in the second quarter, we had the consolidation of Necton. So the -- not including the consolidation of Necton, net new money in the second quarter would have been BRL 42 billion comparing to the BRL 37 billion -- BRL 37.7 billion in the third quarter.

For the 9-month period of the year, our net new money was BRL 124 billion or BRL 14 billion per month. On top of the BRL 15 billion per month that we attracted as net new money in our Asset Management business. So both businesses growing significantly in a very strong pace. Revenues are growing 75% year-on-year, and that's consistent with the growth in our Wealth under Management.

I'd say we could not be more satisfied with the results of this very hard and competent work that is being put out by all our teams, be it the front office or back office teams. It's fair to say that Brazilian individuals continue to look for the best place where to put their investments and to invest their assets, and we are the main beneficiaries of that continuous flow that we see. So regardless of more allocation to fixed income or more allocation to equities, times of uncertainty underlying even further, the need for you to side with the best adviser for you to invest your investable assets with, one that understands your suitability and your risk appetite, and that provides the best returns given your risk appetite. And that's what we do, this is what maximizes long-term value. The lifetime value of the customer relationship is maximized with that approach, even though in the short term, you can waive, in part, the potential to generate floating revenues, more brokerage fees. But in the long term, you maximize your relationship with your customer, the perception of value-added is more clear, and that's the path that we want to pursue always.

Also important to highlight our Consumer Banking developments, the consumer banking platform. Our digital current account was awarded with 2 very significant awards in the quarter. The most -- we were awarded the Most Customer-Centric Bank by Global Economics and Best Customer Service Locally, in Brazil. So I'd like to say that we are the best-in-class and most innovative digital consumer bank, which sides with our best-in-class and most innovative digital investment platform, providing our clients a full range and 1-stop shop approach for banking and investments digitally.

Moving to Page 16. Now we have Principal Investments and Participations, the last of our businesses and the smallest, since we have been by design, reducing our allocations in principal investments. We reached BRL 136 million of Principal Investment revenues, basically coming from a very strong net income share of profit from Eneva, and also a share of profit from Prime Oil. It's smaller than the BRL 242 million of the second quarter of 2021, even though there's strong contribution from these 2 investments, but we didn't make strong revenues from global markets in the quarter. Looking at Participations earnings, we have stable net income flows from Banco Pan from Too Seguros, which is offset, in part, as demonstrated in the bar by goodwill amortization from our last acquisition of the voting shares from of Banco Pan from Caixa. So on that opportunity, we did acquire with a premium over the book value of Banco Pan. And because of that premium and given Brazilian accounting standards, we need to amortize over time, the goodwill from that investment, which reduces the BRL 146 million of equity pickup revenues to BRL 91 million, net of the amortization costs.

Also important to remember, both our investments in Eneva, which is about BRL 3.7 billion and in Banco Pan, are booked at very -- are booked very below the mark-to-market, even if you consider the current market prices as we carry both under the equity method of accounting, more close to the book value and very below in a conservative way from the market side.

Moving to Section 2. Here, we have the expenses and main performance ratios. Our cost/income ratio is, in this quarter, in line with the historical average. Our average, as Roberto mentioned, ranges from 41% to 45% cost/income ratio. Probably going forward, we will see cost/income ratio going slightly up to the upper bound of that range, but not -- we don't see reason to rely on that. The cost base has expanded 9% quarter-on-quarter in salaries and benefits and 27% quarter-on-quarter on administrative and other costs. This is basically a growth that is in line with the headcount increase. Also in administrative and other costs because there, we have the cost of IT vendors. But it's fair to say that we continue to make significant additional investments. We are constantly upgrading, launching more products and new services. And the number of people we have is compatible with the big advances that we see in our Wealth Management and Consumer Banking platform, mainly that one, but there are technological advances out all our businesses, be it credit, be it Sales & Trading or Corporate Lending or any client franchise. And we are doing these additional investments without impacting the growth of our profit margin. As you saw, we are growing revenues 55%, but we're growing profits 75% year-on-year. So costs have increased nominally, but they don't put pressure in the increase of the margin, the bottom line contribution.

Also important to highlight, the effective income tax rate in the quarter of 21.1%, which we consider very efficient. This is due to the mix of revenues and to the use of JCP, and we expect that JCP will prevail, will be maintained in Brazil for the next year. And also, we don't expect corporate income tax to go down since we don't expect at this point that the tax reform should be approved this year.

Moving to Page 20 on Section 3. This is the balance sheet analysis. As you see, we have reached BRL 372.2 billion of assets growing from the BRL 335.2 billion of assets of the previous quarter. We're running the bank with about 10.3x assets to equity, going up from about 9.6x assets to equity in the last quarter, which is still a conservative measure for us to run our balance sheet. It's 11% increase quarter-on-quarter, but mostly composed of more leverage in financial instruments and the financing of those financial instruments. So no structural increase here. We are running the bank with record liquidity. We have BRL 50 billion in cash, which is almost 1.4x our net equity, which is a very strong measure in terms of the cash that we maintain compared to Brazilian peers or international peers, and this is our record liquidity.

And in result, our LCR, which is the short-term measure of liquidity under stress, is at 214%, which is one of the highest among the large banks in Brazil. The on-balance sheet credit increased in the quarter, BRL 12.6 billion, less than the total increase of our Corporate Lending portfolio because some of the instruments are off-balance sheet like standby letters of credit, and the BRL 12.6 billion growth on the banking book, we compare with the BRL 18.1 billion growth on the funding base. I'll explain about the funding base in the next page, but very healthy indication. We're growing our unsecured funding base in the quarter, about 40% more than the own balance sheet use of assets. Our coverage ratio is at 184%, which is also very comfortable. And our Corporate Lending portfolio has reached about 2.7x our net equity, which is also a measure that allows us to continue to expand credit. As I said, less than the current pace for the upcoming quarters, we don't expect the same pace, but we expect to continue to grow.

On Page 21, we have the evolution of our unsecured funding base. You see that we reached BRL 145 billion of unsecured funding compared to BRL 100 billion a year ago, so a 45% growth of our funding base. Inside the funding base, I would highlight, first of all, that the growth comes in all types of instruments, all types of tenors in all counterpart and client segments. So it's a very healthy distribution and a very healthy growth that is a consistent trend across the last quarters and for the recent years. Demand deposits inside this BRL 145 billion represent BRL 8.4 billion already or almost 6% of the total funding base, which is quite relevant for a bank like us and indicate that we are really growing inside the upper income retail.

Our share of retail funding, not only demand deposits but also term deposits, continue to expand. For Banco BTG Pactual alone, our retail funding is already 15% of the total funding base. And if we include Banco Pan, then it's 25% of the total funding base. And also, I'd like to highlight here that we have obtained a new green facility in the amount of $300 million provided by DFC, which is a permanent multilateral organism, International Development Finance Corporation to deploy across Latin America in SME activities. And being able to pass the underwriting standards of DFC is something that we believe recognizes the quality of our credit underwriting policies and management.

And finally, on Page 22, we have our BIS ratio and VaR. Our capital decreased from 17.3% to 16.1% being composed predominantly of tangible equity. Our quarter equity Tier 1 is at 14.2%. We are deploying capital, but still maintain ourselves significantly above the average of the S1 banks in Brazil, which are the domestically systemically important banks. We also take into consideration, I think it's important to highlight, that post-closing during October, we have raised $900 million of local Tier 2 deposits -- bonds. And with that, our adjusted BIS capital ratio would have closed the quarter at 16.5%, so 4, almost 5 -- 50 basis points above the current levels. It was a successful raising in the local market. It continues to be open. We can reach a little bit more than $1 billion on that. And our average daily trading VaR, as we said before, pretty much in line with the second quarter, which means we are producing more revenues in Sales & Trading with less use of balance sheet.

That is the end of our presentation. I'd like once again to thank everyone who's participated -- who's participating, and we open now the floor for questions. Thank you very much.

[Operator]

[Operator Instructions] Our first question comes from Pedro Leduc from Itaú.

[Pedro Leduc, analyst]

Two questions, please, here. First, on the Sales & Trading division, where you recognized the gain from the CredPago sale. You mentioned earlier about BRL 500 million before in the Portuguese call, I would like to take the opportunity to try to estimate what it had on your bottom line. And I assume something closer to BRL 200 million, trying to take out SG&A, bonus, other OpEx, income tax. Any color there? And how we should input it in the next quarter? And remind us how you move to last, and the stake there and how this will be booked, et cetera. So just clarification on that.

[João Leite, executive]

Sure. Pedro, and I appreciate the opportunity to clarify. It's not just a straightforward transaction, but I think I can provide the clarifications that you asked. So as you'll recall, we have disclosed it to markets that the sale of CredPago results in a revenue of about BRL 1.4 billion for us. As you know, just to give you some context, we are generally very conservative in our approach to our balance sheet. The sale of CredPago has 2 components. Besides an upfront cash payment that we already received, there is a long-term receivable component that is not linked with, or subject to any performance metrics, and there's a smaller proportion of an equity stake in launch. We are -- what we're doing, we're applying a conservative view to both of these components. So we recognized in this quarter, BRL 520 million of the total revenues. And for the remainder -- remaining components, we are applying a conservative approach, which implies a haircut in the receivable and on the equity. As time passes, the uncertainties that we used to estimate the haircut will vanish. We believe they will vanish. Time flowing, these should vanish. And this is why the full results shall flow through P&L during 2022 and 2023. On your point of what is the bottom line impact, I won't give you a precise number, but I'll tell you how we do the math. BRL 520 million is the top line, of which we extract our bonus provision, which, as you know, is 25% of revenues minus costs, we extract transactional costs, and we deduct the top line corporate income tax in Brazil, which for the bank who is the seller, is 45%. So we can get to a rough estimate of what is the bottom line, which is probably a little bit below what you estimated. The same impact will apply to the upcoming revenue recognition from CredPago since everything maintains the same, if corporate income tax rate doesn't change in Brazil, we won't change our bonus accrual process, and the costs will be recognized as well in accordance with the recognition of revenue. So this is how it's included in the results in this quarter. As I said, BRL 500 million on top line and the bottom line is about what I told you and close to what you estimate.

[Pedro Leduc, analyst]

Okay. No, that's super useful. Very good. I have another question on the Wealth Management division, if I may. And here, it includes, of course, your digital bank and retail investments, Wealth under Management growth quarter-over-quarter, and strong net new money. But revenue yield, when we do simple math of revenues over this average, was flatter, which is fine. But I would like to understand a little more, the forces behind these drivers for the Wealth Management division qualitatively, or if you can go review a bit of channel mix between IFAs and direct, net new money, product mix, maybe a bit on the client harvest differences, how you're seeing it on the take rates?

[Roberto Sallouti, executive]

So first of all, I think it's important to qualify 1 thing. The way we report here is we report net return on assets after we give the rebates to the IFAs or to the asset manager or to whatever channel it gets a rebate. So at the end of the day, the ROAE of the traditional high net worth Wealth Management business, and let's say, the IFA network business will not be very different. You will have a larger ROAE from, let's say, the direct retail and when consumer bank grows. So over time, you will probably see a gradual increase, but I think it's very important that expectations are adjusted, given how we have chosen to report this, which has been the net -- the ROAE, net of rebates. So in that sense, if you grow in the IFA network or if you grow in the Wealth Management business, there's not going to be a huge difference in ROAE. That's a bit different when we start having more significant revenue from consumer banking. And when you grow in the direct-to-clients in the investment world. But as you would expect, you have the different channels. So we had a higher beginning point of the traditional Wealth Management. We have seen a lot of growth from retail, stronger growth from IFAs on that retail, let's say, a smaller number from the direct-to-consumer and still very -- just the beginning of consumer banking. So it is probably right to expect that you will have a small increase in ROAE over time, but given how we have chosen to report this, you will not see a huge increase. And depending on the different channels -- the behavior of the different channels, clearly, we are seeing a very strong growth from the new initiatives. From the markets that we had no market share 4 or 5 years ago that we entered, we are seeing much stronger growth there from the traditional Wealth Management where we've been present all of our life.

[Operator]

The next question comes from Jorge from Morgan Stanley.

[Jorge Kuri, analyst]

Congrats on the numbers. I have one question on your expenses. I know you kind of like, alluded to an efficiency ratio going forward, but I wanted to be more specific, trying to understand just the moving parts on the expenses. Your headcount is up 55% over the last 12 months as you've been developing the new digital business and the new Wealth Management business. What do you think should be the growth in your employee base over the next 2 years? And then the admin expenses are also up quite a lot as a result of this. What -- how do you see that playing out over the next 2 years? And at what point do you think you should go back to a normalized growth rate of expenses given these businesses that you're building?

[João Leite, executive]

That's an important question and gives us the opportunity to explain a few of the drivers here. So as I highlighted and you underlined, the main component of the expansion on the costs is headcount. We don't expect to continue to grow headcount in the same pace. We actually took advantage of a good timing to add people. We were able to add people without even adding square meters to the office. We're adding square meters as we speak. People are returning to the office. Now we have more people than office space. But as soon as we finish the renovation of the space, the additional space we got, we'll be able to bring them back. Also, we were able to attract people in other cities in Brazil. So they work effectively remotely as a home-office type of approach. And especially in technology, it worked very well. And it allowed us to develop our digital investment platform and our consumer banking platform faster even than we expected. We don't expect the same growth going forward. We are actually expecting to normalize the growth, and so the pressure on the cost base will reduce with that. I guess, we will still go -- see the cost/income ratio go up slightly to the upper bound of our average cost/income ratio, which ranges from 41% to 45% in the recent past. And then what we will start to see is the kick-in of additional revenues from consumer banking. As Roberto highlighted, we're not still producing significant revenues. It's kind of a tasting period for our digital bank account. We're growing a lot, the number of users, the number of credit cards issued, et cetera. So these 2 trends beyond 2022 will be very interesting to see. Very probably, beyond '22 at a certain point in time, Wealth Management and Consumer Banking will be the largest revenue and -- in all our business areas. We're still not there, but we're going in that direction very fast. And costs will stabilize because we're building a digital bank. We're building a bank with a self-service approach with a lot of digital functionalities, which take away the biggest part of the heavy burden of the day-to-day relationship and allow us to focus on the real value-adding service and the cost of the service will be pursued by the client as value-added on the relationship. So this is how we see and we're quite comfortable that these levels of costs that I indicate to you are the levels that we will probably pursue in 2022.

[Operator]

The next question comes from Gustavo from Bradesco.

[Gustavo Schroden, analyst]

I'd like just to get your view regarding your corporate lending, especially on SMEs, where we saw almost a flat quarter-on-quarter. The loan portfolio for SME is at BRL 14.3 billion versus BRL 14 billion last quarter. And you mentioned that it is related to some issues, some delays on the chamber of receivables. So could you give us any color here about the other credit lines for SMEs that you also offer? How these other credit for other SMEs are behaving? And what we should expect going forward in terms of credit lending and also the breakdown between large and SME?

[Roberto Sallouti, executive]

Thank you, Gustavo. So on the SME side, we basically have 2 products right now, supply chain financing and discount of credit card receivables. Supply chain financing continued to grow quarter-over-quarter, albeit at a much slower pace because it would just come from, I don't know, BRL 2 billion a year ago to over BRL 13 billion, BRL 14 billion -- close to BRL 14 billion this quarter. At the same time, our portfolio of the discount of credit card receivables decreased, and decreased because given the situation that we have in the clearing, we're not comfortable in increasing at this point. We have a road map to roll out new products over 2022, but this will be very gradual and cautious because we are now entering cleaner or riskier lines of credit. And here, the growth that you should expect from us is a slower one because we want to make sure that we are taking the right steps with the right credit controls. It's 1 thing to discount supply chain financing or discount credit card receivables, where we see the credit risk to be very controlled and basically either of the acquirer or of the large corp. So there, we are -- we were happy to have a very strong growth. You should expect us to be more cautious here. But we still expect that once the problems with the central for credit cards is solved, we do expect to see a strong growth coming from there. But then it depends not on us, but on this issue of the market. At the same time, on the large corp, I think the seasonality of the third quarter was very strong. We expect some marginal growth, but at a much slower pace also in the fourth quarter just because, for some reason, everything got pulled up to Q3 this year.

[Gustavo Schroden, analyst]

No. That's very clear. I have another question, if I may, now it's related to your Asset and Wealth Management evolution, and more related to net new money. It is still pretty strong, especially in Asset Management this quarter, but also wealth, which we exclude the last quarter positive impact from Necton, but it is still a strong number. So my question is, how should we expect the net new money evolving in the coming quarters, especially in this more challenging macro environment. Higher interest rates, higher inflation, a weaker GDP. So I know that -- I mean, we should expect a migration from equities to fixed income. I think it's natural. But I mean, overall, do you think that the pace of growth should continue at the same pace we've seen? Or do you expect some contraction in net new money evolution -- not contraction, but a deceleration in net new money due to this weaker macro conditions expected?

[Roberto Sallouti, executive]

So what we saw that -- what we see is that in periods of very large volatility, you do have a slowdown in the new money, but it's probably more marginal than people expect. Just as people become more conservative and want to see and understand what's going on in the markets because before they make any movements. But once things stabilize, we tend to see flows resuming to similar levels that they were in the past, maybe a bit higher, maybe a bit lower, but to similar levels. But as you said, with a very different proposition. 6, 9 months ago, we were seeing very strong inflows into more illiquid products into products linked to equities or to hedge funds. Now we're seeing a very, very strong inflow into fixed income products, either CDs from the bank or especially tax-exempt products, especially of not only the bank but also the ventures. So you do see a shift in the composition. There is -- the change can be a little marginal up, marginally down, but we continue to see strong inflows even with the volatility of the last, I don't know, 2 months.

[Operator]

The next question comes from Tito Labarta from Goldman Sachs.

[Daer Labarta, analyst]

I guess a couple of follow-ups. Similar to Gustavo, just on the outlook with tougher macro environment, rising rates, but more on, I guess, Investment Banking and Sales & Trading, excluding what you expect for CredPago, if you can give maybe some color on how you think that can evolve next year also going into a political presidential election next year? Any color you can provide there would be helpful. And then also 1 follow-up on the SME, particularly on the credit card receivables. Is it because -- you slowed down the lending because you were planning to use those credit card receivables as collateral and you're comfortable doing that? And do you have any expectations for when those issues can get resolved?

[Roberto Sallouti, executive]

So starting with your second point on the credit card receivables, yes, that's exactly it. There's a lot of confusion on being able to spot and secure the credit card receivables, which will guarantee your credit. So with that, we're not comfortable in expanding that business until we are sure that we're getting the right guarantees for our credit. And on the second question on the businesses which are supposedly more cyclical, like Sales & Trading and Investment Banking. We do think that clearly, 2022, given just the market volatility that is expected, and this can change at any moment, but let's say, let's assume that the scenario we have today continues for all of 2022, we probably see that these markets will probably be stable at the levels that they are now, but with a different composition. So within Investment Banking, you will probably have lower equity capital markets fees but higher debt capital market fees. And also within that capital markets, you also have a series of products, such as tax-exempt products versus the non tax-exempt products. And each of these different actual products have -- are more or less cyclical. And even sometimes these products are even benefited from higher interest rates, especially the tax-exempt ones. And also given, let's say, less rich valuations in public markets, we expect M&A transactions to pick up given that we see strategic players finding valuations more attractive. And I would say the same thing for Sales & Trading. Maybe you have a flattish equity brokerage fees year-over-year, but you see a growth in demand for hedges or in trading of corporate bonds, which helps you either grow slightly or maintain similar levels. But probably, given what we're seeing right now and I'm supposing that we're going to have a scenario close to what we're seeing in Q3, Q4 for the rest of the year. I would probably say that these markets will probably not grow significantly. So you would have probably marginal up, marginal down but around the levels that we have.

[Daer Labarta, analyst]

Great. And just 1 follow-up on the credit card receivables. Any color or expectation for when you think those issues could get resolved?

[João Leite, executive]

Should be soon because most of the hard work, the heavy lifting is done by the market participants. And so should be soon. It's a matter, we believe, of details. Then once it's effectively launched and functioning in a way that we make sure we can really hold or block or secure the receivables against what lending we want to do, then we're going to start gradually to deploy capital and understand the details as we always do. But it should be soon. I think this is going to benefit the SME -- the SMEs in Brazil. It's another source of competitive funding to be provided, and it's another way that we can understand the business of the SMEs, so to have a comprehensive view and understand the total exposure we want to take. So that's the view, and so should be soon.

[Operator]

That brings us to the end of the question-and-answer session. I would now turn the floor to Mr. Roberto Sallouti for his closing remarks.

[Roberto Sallouti, executive]

Thank you all for joining the call. Thank you for your continued support and partnership, and we look forward to being with you again sometime in early February. For us to talk about the full year results of '21. Have a great day, and a great week. Thank you very much.

[Operator]

Thank you. This does conclude today's presentation. You may disconnect your lines at this time, and have a nice day.