BMGB4

Banco BMG S.A. is a financial institution with almost a century of operations in the Brazilian banking system and shares traded on B3 under the ticker BMGB4. Its origins date back to 1930, with the founding of Banco de Crédito Predial S.A. by the Pentagna Guimarães family, later renamed Banco de Minas Gerais S.A., operating as a commercial bank serving individuals and companies. Over the following decades, the group underwent significant corporate reorganizations, including the creation of Argento S.A. Crédito, Financiamento e Investimento in 1964, which evolved into Bmg Financeira and later into a multiple-service bank, eventually adopting the name Banco BMG S.A. in 1989. Mergers and acquisitions in the 1990s and 2000s – such as the merger of Bmg Banco Comercial and the purchase of financing and leasing operations – consolidated the bank as a financial group with a diversified offering of credit products. From the late 1990s, BMG began to focus its strategy on payroll-deductible loans (crédito consignado), which redefined its business model and its role in the mass retail credit segment.

Throughout the 2000s and 2010s, Banco BMG expanded its presence in payroll-deductible products and structured new funding and securitization sources. In 2001, it created Bmg Bank (Cayman) Limited, a wholly owned subsidiary in the Cayman Islands, and in 2002 it launched FIDC programs to finance its credit portfolio. In 2005, it launched the payroll-deductible credit card, combining an international card with payroll deduction and lower rates than those of conventional credit cards, serving mainly retirees, INSS pensioners and public servants. The bank also pursued strategic partnerships, such as the Banco Itaú BMG Consignado joint venture, focused exclusively on payroll loans, which it exited in 2016 to strengthen its own credit origination. In 2019, it completed its IPO, joining B3’s Level 1 of corporate governance, with proceeds mainly aimed at reinforcing regulatory capital and expanding its business.

Banco BMG’s business model is organized into three major operating verticals: Retail, Wholesale and Insurance. Retail is the main source of revenue and profit, focusing on payroll-deductible loans and retail products for individuals, especially the payroll-eligible segment of retirees, pensioners and public servants in classes C and D, generally over 50 years old. In this vertical, the bank offers payroll-deductible credit cards, benefit-linked payroll-deductible cards, traditional payroll-deductible loans, personal loans with direct debit, credit cards linked to the digital bank and early withdrawal of the FGTS birthday withdrawal, as well as current accounts, transactional services and investments. In Wholesale, it serves medium and large companies, offering financing, structured financial services, derivatives for balance sheet hedging, investment banking in partnership with AF Controle, and structured receivables anticipation transactions for correspondents, franchisees and soccer clubs. In Insurance, through Bmg Seguradora and Bmg Corretora, it sells mass-market insurance products primarily tied to credit operations, such as credit life insurance, life insurance and personal accident insurance, often combined with assistance and additional services.

One of Banco BMG’s key pillars is the prominence of the payroll-deductible credit card and the benefit-linked payroll-deductible card, which make up the main component of its credit portfolio. In December 2024, the combined portfolio of these cards totaled R$ 12.5 billion, representing around 47.5% of the bank’s total credit portfolio. Most of this portfolio is made up of INSS clients, who accounted for more than 80% of the card volume, reflecting BMG’s specialization in the retirees and pensioners segment. The payroll-deductible credit model is based on automatic deduction of the minimum invoice amount directly from the payroll or social security benefit, within the payroll-deductible margins defined by specific laws and regulations. The limit structure takes into account each individual’s payroll-deductible margin, applying a “Limit Factor” that multiplies this margin to determine the total credit limit, while maintaining maximum amortization terms in line with each agreement. This design contributes to relatively lower delinquency and to predictable cash flows from the portfolio.

Banco BMG’s client base is broad and diversified, with no material revenue concentration in a single client, and reached approximately 10.7 million clients as of December 31, 2024, according to the Central Bank’s methodology. A significant portion of these clients hold both credit and insurance products, reflecting the cross-selling strategy, which achieved an average of 2.04 revenue-generating products per client in 2024. In addition to the Brazilian retail individual segment, BMG has exposure to payroll-deductible credit in the United States through participation agreements between Bmg Cayman and Bmg Money, a company owned by the bank’s shareholders, although this portfolio was classified as non-strategic at the end of 2024. The bank distributes its products through a combination of channels, with no individual customer accounting for more than 10% of net revenue, which ensures meaningful diversification of its borrower base.

In terms of geographic presence and distribution channels, Banco BMG has a physical network made up of its own branches, banking correspondents and specialized franchises, in addition to a digital platform. As of December 31, 2024, it had 24 bank branches in 21 states and in the Federal District, as well as an extensive network of banking correspondents built over roughly two decades. A standout is “help! Loja de Crédito”, a franchise network of financial services focused mainly on INSS beneficiaries and public employees, which reached 825 stores across the country by the end of 2024. In parallel, the bank operates a digital bank, with 6.3 million digital accounts at the end of 2024, integrating physical and digital relationships in a strategy that combines client acquisition through in-person channels and deeper engagement via digital channels.

Banco BMG’s operations are heavily regulated by financial and insurance authorities in Brazil. As a multiple-service financial institution, it depends on authorization and supervision from the Central Bank of Brazil, which sets capital requirements, credit limits, reserve requirements and other prudential rules. Its activities in securities and asset management are conducted through subsidiaries authorized by the Brazilian Securities and Exchange Commission (CVM), acting as a securities distributor and portfolio manager in the asset management category. In insurance, Bmg Seguradora and Bmg Corretora are supervised by the Superintendence of Private Insurance (Susep), in line with guidelines set by the National Council of Private Insurance (CNSP). The bank is also subject to specific regulations and limits imposed by the National Social Security Institute (INSS) and public-sector HR systems, particularly with respect to payroll-deductible margins and conditions for granting payroll-deductible loans and cards linked to social security benefits and public sector salaries.

From a technological and operational standpoint, Banco BMG invests in an architecture based on microservices and APIs, using multiple data centers and cloud environments to support scalable growth of its operations. The institution adopts agile development methodologies and organizes its digital teams into squads focused on specific customer journeys, integrating technology, products, marketing and customer service. Artificial intelligence is being incorporated into areas such as credit, collections, operations, customer service and compliance, focusing on efficiency and process automation, as well as improving the customer experience. The combination of proprietary technological infrastructure, a highly capillarized physical network and a focus on payroll-deductible segments defines Banco BMG’s competitive positioning among banks listed on B3, with operations concentrated in retail credit and adjacent financial services.