That will give me the funding to invest where I need to invest. So, I’ll have a potential increase in expenses, but it must be a lot smaller than the increase in revenues so that we’ll have the crocodile mouth. Gustavo, if you want to add?
Gustavo Alejo: That’s exactly it. In 2024, we are seeing a deflation process. This will benefit us. We’ll have a more efficient use of the expenses that we have, the spending we have, benefited by inflation, which is different than in the previous quarters. And this gradual and solid increase in revenues. So, we see a positive evolution in terms of the level of efficiency, but it’s basically what Mario said. It is very important to increase, expand our top line to gain speed and traction in resuming efficiency.
Unidentified Analyst: Okay, perfect. Thank you.
Mateus Raffaelli: Next question from Mateus Raffaelli, Itaú BBA.
Mario Leão: Mateus, good morning. Welcome.
Mateus Raffaelli: Good morning. Thank you for the opportunity to ask a question. I’d like to explore the expectations for client NII. I know that the funding spread pulls this down, but we see Santander with more appetite for clean lines, vehicles. We expect growth, renegotiated portfolio as well. So, perhaps you could elaborate on what you’re expecting for client NII for 2024. Do you expect a flat NII or dropping or expansion, given the factors that I mentioned before? Thank you very much.
Mario Leão: Thank you, Mateus. I’ll start. Well, directionally, like I said, nothing is linear. You should not expect anything linear from us or anybody else. But we want to grow the revenue. I spoke about this in the previous question. Of course, the revenue has some sub blocks, but the NII is a fundamental block. It measures the strength of the franchise together with fees. In client NII, it’s even more precise. It measures the strength of the franchise. So we are very focused on that line and in the sub lines that make up client NII. You mentioned and I also mentioned that in Q3 compared to Q4, we have a challenge because the Selic interest rate is dropping. As much as we increase the volume and spread as a percentage of CDI, if the Selic rate falls, it’s a detractor.
It’s positive for the economy as a whole. We want to have a reduced interest rate, but for the liabilities line item, it will be a challenge. It will be a challenge for this year. You can do the math you want, but anything between 20% give or take of a lower Selic rate in 2024 compared to 2023 is a challenge that we will have and the whole industry will have in terms of liabilities. What we can do is to expand even more our investments and liabilities agenda. I have spoken about how this is strategic for Santander. So Mateus will offset with volume. I have some hedge in volume. We’ll try to be pricing efficient as we try to be efficient in everything and we’ll offset that with credit NII because you mentioned we are more constructive in several line items.
I mentioned we want to have growth. It will not be equal in all portfolios, but I would like to have all portfolios growing over 2024 so that we wouldn’t have any portfolio dropping or flat. And if we take care of spread on the side of assets and growing volume, sometimes we’ll look for two-digit growth. Sometimes we’ll grow just like the industry, but we’ll pursue relevant growth in all credit portfolios. If we take care of the spread, we’ll have a compound effect and we’ll have a good evolution in the client NII, credit NII that I think will be more than enough to offset the challenges we’ll have given the Selic interest rate, not because of the strategy, on the contrary, because of the interest rate.
Gustavo Alejo: And you mentioned well, Mario, there are different speeds of growth for the portfolios. So, we have payroll deductible loans, SMEs, mortgages, auto. So, the speed of growth among the portfolios will dictate the NII. Of course, we have to be very disciplined about pricing and volume. And the trend is that we’ll be able to effectively balance the NII with the given challenges. But if we grow the portfolios in the speed, we believe we can, and if we increase volume, we’ll be able to cope with this variable. So, in a nutshell, of course, we’re going to have a positive evolution in market NII, which is the implicit question here. We continue to expect it just like you all do, an evolution in market NII. It will happen, it is a given.
And we expect it to also evolve client NII with a net effect on one hand, because we are going to have an anchor in funding given Selic, we’ll try to offset in the funding business, and we’ll have a net positive in client NII on the side of assets. And I hope I have answered.
Mateus Raffaelli: It was super clear. Thank you very much.
Camila Toledo: Now, the next question comes from Daniel Vaz from Banco Safra. Hello, Daniel.
Daniel Vaz: Hi, Camila, Mario. Good morning. Thank you for taking my question. I would like to hear your view about something that has been very recurrent, which is payroll loans. There is a pressure on rates and also an additional potential of a major digital player that wants to add share in 2024. First question, how do you advocate in favor of the product? Are you increasing origination? And second question is, how do you see a potential increase in portability if the bank is expecting that? And how do you intend to defend yourself, maintaining cost of client, etc?
Mario Leão: Thank you, Daniel. That’s a recurring question about payroll deductible loans. And this is a very relevant question because this is part of the industry’s portfolio. And for us, this is quite relevant. If you look at our expanded loan portfolio, our payroll portfolio is about 10% of our expanded loan portfolio. And that means this is a very relevant portfolio and we are happy with it. How do we see the pricing and the competitive dynamics playing out? First of all, you mentioned the price ceiling pressure. It’s very specific. It’s not lower, but it’s very specific related to INSS. And as Santander, and I can certainly also speak on behalf of the entire industry, we don’t think that this is a pro-consumer agenda.
I mean, the decisions that were made in this past year in terms of limiting that rate lead to origination volumes. And this is a fact, I’m not speculating the origination volume in practice is coming down a few million every month, maybe two billion, even more every month. So if you multiply that by 12 months, it’s R$25 million to R$30 billion. And the INSS loan, which is the cheapest loan available in the market, I mean, it competes with mortgage, mortgage loan. It’s certainly the cheapest kind of loan given to retirees, and many of the potential borrowers have to resort to more expensive loans. So this is an agenda that does not favor consumers, and we are trying to tell the authorities about that. So I hope this year our advocacy is more successful.
I mean, I just take this opportunity to say, I mean, we look at it and we are very sad because we know that consumers are being hurt. Having said that, we are trying to rebalance our pricing equation because we do not want to let go of INSS. As I said, we grew a lot in this past year, year and a half, we gained momentum, and we grew the most with INSS. And I can assure you that that was very profitable. So we are trying to rebalance the equation of fees. I mean, as with the rest of the industry, there is a great relevance coming from the external channel, the banking correspondence. We continue to have them, but we reduced the relevance of the external channel vis-à-vis the internal channel. So in practical terms, we are investing more to use INSS in our special stores.
We are making advances in terms of our reading of INSS audiences. We are turning some of our major stores into stores that focus on INSS loans. We are — I mean, anyhow, the whole agenda is not very favorable. And this affects the entire industry. So, I mean, if you look at the historical format, therefore, we are trying to do it more, more things internally, trying to keep our relationship with customers at different levels of profitability. In terms of competition from other digital banks, this is something like with any other player that is a new entrant, we are looking at those very carefully. But the relevance of these banks are not yet affecting us. I mean, we respect them, we think that their move is legit, but we will try to monitor that very attentively.
