Banco BTG Pactual S A : 4Q22 Earning Release

Earnings Release

Fourth Quarter 2022

February 13, 2023

Net New Money

Total AuC

(R$)	(R$)
254bn	1.3tn
2022	4Q 22
68bn 4Q 22	28% y-o-y growth
Adjusted Net Income	Total Revenues
(R$)	(R$)
8.3bn	17.2bn
2022	2022
28% y-o-y growth	24% y-o-y growth
Credit and SME	Unsecured Funding
Portfolio (R$)	(R$)
144bn	176bn
35% y-o-y growth	14% y-o-y growth
SME: 23bn
Basel Ratio	ROAE Adj
15.1%	20.8%
4Q 22	2022

Earnings Release

Fourth Quarter 2022

Highlights

Banco BTG Pactual S.A. reported total revenues of R$3,626.4 million and adjusted net income of R$1,767.4 million for the quarter ended December 2022. Adjusting for non-recurring provisions, total revenues were R$4,826.4 million while adjusted net income was R$2,347.4 million for 4Q 2022.

For the full year of 2022, total revenues were R$17,247.1 million, and adjusted net income was R$8,306.5 million. Adjusting for non-recurring provisions, net income ended the year at R$8,886.5 million, while total revenues were R$18,447.1 million.

BTG Pactual's adjusted net income per unit and annualized adjusted return on average shareholders' equity ("Annualized Adj. ROAE") were R$0.46 and 16.7%, respectively, for the quarter, and R$2.17 and 20.8%, respectively, for the year ended on such date. Adjusting for non-recurring provisions, Annualized Adj. ROAE was 22.0% in the quarter and 22.1% in the year.

As of December 31, 2022, total assets of BTG Pactual were R$450.6 billion, a 2.4% increase compared to September 30, 2022. Our BIS capital ratio was 15.1%.

Banco BTG Pactual Financial Summary and Key Performance Indicators

	Highlights and KPIs		Quarter		Year to Date
	(unaudited)
	(in R$ million, unless otherwise stated)	4Q 2021	3Q 2022	4Q 2022	2021	2022
	Total adjusted revenues	3,489	4,756	3,626	13,901	17,247
	Accounting net income	1,744	2,188	1,644	6,342	7,842
	Adjusted net income (1)	1,782	2,302	1,767	6,493	8,306
	Adjusted net income per unit (R$)	0.46	0.60	0.46	1.69	2.17
	Annualized ROAE	19.4%	22.0%	16.7%	20.3%	20.8%
	Adjusted cost to income ratio	36.5%	38.1%	45.8%	39.2%	40.1%
	Adjusted shareholder's equity	37,380	42,262	42,372
	Total Number of Shares (# in '000)	11,506,120	11,492,477	11,476,120
	Number of Units (# in '000)	3,835,373	3,830,826	3,825,373
	Book Value per unit (R$)	9.7	11.0	11.1
	BIS Capital Ratio	15.7%	15.2%	15.1%
	Total assets (in R$ Billion)	346.1	439.9	450.6
	Total of WuM and AuM	980.5	1,174.1	1,253.8

Note: Number of shares ex-treasury

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Earnings Release

Fourth Quarter 2022

BTG Pactual Performance

BTG Pactual is glad to report another year of record revenues and net income, as we benefited from operational leverage and all-weather business mix. Despite the challenging macroeconomic cycle, we reported strong accumulated net inflows of R$254 billion in 2022, of which R$68.0 billion was recorded in 4Q 2022, leading to a total AuM/WuM of R$1.3 trillion. Our funding base has largely expanded throughout the year, with the share of our retail funding achieving 26.3% of total funding base and 30.5% considering Banco Pan's funding base, while we kept a solid and well-capitalized balance sheet.

Reinforcing our transparency and commitment to clients, shareholders, and to all our partners, we would like to describe non-recurring provisions in our Corporate and SME Lending and Sales & Trading business areas which impacted our quarterly and yearly results. In light of a highly publicized and specific event, we decided to provision (i) R$1,123.0 million in Corporate and SME Lending related to our credit exposure, and (ii) R$77.0 million in Sales & Trading related to our exposure in other financial instruments. This subsequent event also impacted bonus expenses, which were lowered by R$153.1 million, and income tax and social contribution expenses, which declined by R$466.9 million this quarter. Furthermore, on aggregate, the non-recurring provisions negatively impacted BTG Pactual's net income by R$580.0 million. More details are available in the following sections.

It is also important to highlight that we have taken swift and necessary measures to protect the interests of our clients and shareholders, and this isolated event does not reflect the overall state of our business. We remain confident that our focus on delivering high-quality financial services to our clients will enable us to overcome this one-off event and continue to deliver long-term value to investors.

That said, this quarter we registered solid results despite the non-recurring provisions, especially across our client franchises. Excluding the one-off event, we achieved the fourth consecutive quarter of record revenues and adjusted net income: (i) Investment Banking reported revenues of R$484.7 million, 7.6% lower than 3Q 2022 as a result of lower activity in ECM and M&A segments, but with record contribution from DCM; (ii) Corporate and SME Lending posted revenues of R$105.1 million, or R$1,228.1 million adjusting for the one-off event; (iii) Sales & Trading delivered solid results of R$1,133.7 million, or R$1,210.7 million excluding the impact of the aforementioned event; (iv) Asset Management registered a 5.3% quarterly revenue growth to R$429.2 million, while AuM/AuA increased 6.3% to R$707.3 billion, and NNM added up R$33.0 billion; (v) Wealth Management & Consumer Banking reported record revenues for the sixteenth consecutive quarter totaling R$686.1 million, while WuM reached R$546.5 billion and quarterly net inflows were R$35.0 billion, another strong feat. Finally, Principal Investments and Participations had revenues of R$53.0 million and R$6.9 million, respectively.

Full-year figures illustrate record performance across the board even with the negative impact of non- recurring provisions. We finished 2022 with a 20.8% ROAE (22.1% when excluding the one-off event), while total revenues were R$17,247.1 million, 24.1% above an excellent 2021, and adjusted net income was R$8,306.5 million, 27.9% higher than last year. Asset and Wealth Management displayed impressive

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Earnings Release

Fourth Quarter 2022

revenue growth throughout the year, the former and latter up 31.1% and 66.0% on an annual comparison, respectively. Accumulated net inflows registered R$254 billion in 2022, leading to a R$1.3 trillion of total AuM/WuM. Benefitting from our fast-growing client base, Sales & Trading had record contribution from client activities and ended the year with 23.8% revenue growth. Corporate and SME Lending posted annual revenue growth of 5.4%; and, adjusting for the non-recurring provisions, revenues would have grown 48.7%. Despite the more challenging macroeconomic scenario, our Investment Banking franchise posted R$1,845.7 million in revenues, down 20.1% compared to 2021, which was the best year of our history. Principal Investments and Participations also posted lower contributions for the year of R$359.7 million and R$327.9 million, respectively.

Operating expenses were R$1,881.6 million in 4Q 2022 and R$7,755.7 million for the full year (a 35.6% expansion compared to 2021). The increase was mostly due to (i) higher salaries and benefits expenses, as we increased our headcount by 35.1% during the year, (ii) larger administrative and other expenses, mostly related to the expansion of our digital retail platforms and (iii) higher goodwill amortization expenses, resulting from inorganic growth initiatives. Bonus expenses were stable compared to 2021, considering the R$153.1 million adjustment related to the one-off event previously mentioned, and excluding this impact, bonus expenses would have grown 6.5%, in line with the increase in operational revenues. Nevertheless, even with the non-recurring impacts, our adjusted cost-to-income ratio finished the year at 40.1%, below historical average.

Accounting net income was R$1,644.3 million in 4Q 2022, and R$7,841.8 million for the full year 2022. Year-over-year, accounting net income grew by 23.6%, from R$6,342.0 million in 2021, an impressive mark given the relevant macroeconomic headwinds as well as one-off losses in our loan exposures.

As we move forward, we are confident that our experienced team, our focused on the excellence standards and continuous innovation of client services, and our strong track record of performance will enable us to navigate any challenges that may arise, and we will continue to deliver results that meet shareholders' expectations.

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