BMEB3

Banco Mercantil do Brasil S.A., currently branded as Banco Mercantil, is a retail financial institution founded in 1940, with operations beginning in 1943 in the city of Curvelo, in the state of Minas Gerais. Originally called Banco Mercantil de Minas Gerais S.A., it was acquired in 1953 by businessmen Oswaldo and Vicente de Araújo, at which time its headquarters were moved to Belo Horizonte. From the mid-1950s onward, the bank began an intense cycle of acquisitions, incorporating institutions such as Banco Industrial Minas Gerais S.A., Banco Santa Cruz S.A., Banco Metrópole do Rio de Janeiro S.A. and, in 1972, Banco Industrial de Campina Grande S.A., which marked its national expansion, with a presence in several Brazilian states. In 1974, upon acquiring Banco Mercantil do Brasil S.A., it adopted its current name and consolidated its regional relevance, especially in Minas Gerais. Over the following decades, it built a track record of tradition and significant presence in the financial system, supported by a branch network and service to both corporate and retail clients.

From the 2000s onward, Banco Mercantil strengthened its presence mainly in Minas Gerais and the countryside of São Paulo, initially focusing on small and medium-sized enterprises. This positioning began to change from 2009, when the institution started to direct its strategy toward mass-market credit and the retail public, especially INSS retirees and pensioners. Participation in the first INSS auction in 2009, when it won five lots in Minas Gerais and São Paulo, was a watershed moment: the bank became one of the main institutions paying social security benefits in these regions and began to structure specific products for this segment. In subsequent auctions, in 2014, 2019 and 2024, it maintained an active presence, being the only medium-sized private bank to participate in all of them, which gives it access to the beneficiary base throughout Brazil and reinforces its position as one of the largest INSS benefit payers in the country.

Today, Banco Mercantil is a retail bank with a clear focus on the population over 50 years old, the so-called 50+ Public. The institution combines its own physical network, with 294 service points, with a rapidly expanding digital strategy. The bank operates on an omnichannel basis, integrating branches, its own app, service via WhatsApp and the MeuMercantil platform, focused on relationships with banking correspondents. As of December 31, 2024, its customer base reached around 9 million clients, 51% of whom had contracted credit products. The loan portfolio totaled R$ 17.1 billion, composed mainly of payroll-deductible loans, personal loans and FGTS withdrawal advances, with a small share of corporate operations. Banco Mercantil is a publicly traded company, with BMEB3 and BMEB4 shares listed on B3. In 2020, it migrated to the Level 1 listing segment, reflecting the voluntary adoption of more advanced corporate governance practices.

Banco Mercantil’s business model is strongly anchored in the payroll-deductible loan segment aimed at INSS retirees and pensioners, as well as public-sector employees. As of December 31, 2024, payroll-deductible credit accounted for 63% of the total loan portfolio, with 98% of this balance concentrated in operations with INSS beneficiaries. The bank also offers advance loans on FGTS birthday withdrawals, personal loans (including those collateralized by FGTS), payroll-deductible credit cards, overdraft facilities, traditional credit cards and working capital for companies. The rebalancing strategy initiated in 2014 deliberately reduced exposure to corporate credit, so that the corporate portfolio represented only 4% of the total portfolio in 2024. Funding is well diversified, based on customer deposits, resulting in a cost of funds close to the CDI, which supports the profitability of the operation.

In addition to traditional financial intermediation, Banco Mercantil organizes its activities into four operating segments: Financial, Insurance, Marketplace and Other. The Financial segment, which groups credit operations in their various forms, is by far the main revenue generator, accounting for more than 95% of net revenue in recent years. In insurance, through specialized subsidiaries and in partnership with an insurer, it distributes products such as protected card insurance, home protection, credit life insurance and coverage focused on the customer’s financial protection, with an emphasis on the 50+ public. In the Marketplace segment, led by the subsidiary Mercantil do Brasil Marketplace e Empreendimentos Imobiliários S.A., it offers products and services such as healthcare discounts, dental plans, partnerships with local merchants and e-commerce partnerships through the M+ portal. The Other segment groups real estate, securitization and technology activities, including companies dedicated to the creation, development and licensing of software.

Banco Mercantil’s commercial strategy combines physical presence with strong process digitalization. The Mercantil app, launched in 2014, has become a priority channel for transactions and credit origination, complemented by intensive use of WhatsApp and the MeuMercantil platform for relationships with correspondents. In 2024, approximately 70% of the credit contracts originated by the bank were already carried out through digital channels. In 2019, the institution took another step in digitalization by launching the virtual assistant “Mel”, based on artificial intelligence, which performs millions of monthly interactions and supports the provision of information on products such as loans, credit cards and benefits. In parallel, the bank has been expanding its “Bem Aqui” stores, an insurance brokerage and banking correspondent with a lean structure, focused on prospecting clients in various regions of the country.

From a regulatory standpoint, Banco Mercantil is supervised by the Central Bank of Brazil (BACEN) and the National Monetary Council (CMN), within the framework of the Brazilian Financial System. The institution obtained its operating license from BACEN in 1940 and later, in 1989, authorization to operate as a multiple bank, maintaining since then what it describes as an adequate relationship with the monetary authority, with no records of events that threatened operational continuity. Activities in payroll-deductible credit, payment of INSS benefits and other financial products are subject to specific rules from the CMN, BACEN, INSS and related legislation, which define limits on payroll-deductible margins, terms, maximum rates and authorization and agreement requirements. These rules directly shape the supply of credit to retirees, pensioners and public servants, as well as the bank’s role as a benefits payer.

In terms of governance and ESG practices, Banco Mercantil emphasizes the adoption of what it considers a high standard of corporate governance and, since 2009, has also adhered to the Banking Self-Regulation System, which establishes principles of ethics and respect for consumers. The institution reports socio-environmental responsibility projects and, in 2021, published a sustainability report following the GRI methodology. In the same year, it created Domo Digital Tecnologia S.A., an innovation hub dedicated to boosting the bank’s digital operations, and structured initiatives such as the MB+ benefits club for clients. The company also reports awards and certifications related to organizational climate, service quality and quality management (including ISO 9001 certification for its Quality Management System). For investors analyzing BMEB3 and BMEB4 shares on B3, these elements highlight a medium-sized retail bank with strong specialization in the 50+ public, high dependence on payroll-deductible credit and a growing emphasis on digital channels, operating in a highly regulated environment and with governance practices in evolution.