Competitive Advantages and Strategy

We have more than 45 years of experience in the personal loan market, being one of the first financial institutions to explore the payroll-deductible loan market, which started in 1996. The experience gained over decades in the public sector payroll-deductible loan industry provides us with significant knowledge regarding the profile of our users and the main opportunities and challenges of the market.

Our business model, based on the diversification of distribution channels, consisting of the digital solution, own stores and exclusive correspondents, allows us to be more efficient and agile in granting credit, reflecting a high origination potential, with a low default rate, characteristic of this product.

We have a direct relationship with the customer, being able to increase our knowledge about their needs and identify new business opportunities: greater retention, increased share in the customer’s wallet (share of wallet) and potentially cross-selling of new products.

Traditionally, the payroll-deductible loan market for medium-sized banks based its growth on third-party channels, in particular through the hiring of commissioned intermediaries, creating a distant relationship between these banks and borrowers. Our differentiated way of acting through our own channels allows us, with a direct relationship with the end customer, to increase their loyalty.

Our frequent contact with the consumer allows us to understand the challenges of the process of granting payroll-deductible loan. With this knowledge, we began to develop solutions in order to improve the user journey, from simulations to the formalization and release of the credit. In this context, we believe we were the first medium-sized financial institution in Brazil to create an end-to-end digital platform, so that our customers can enjoy a friendlier experience in obtaining payroll-deductible loan.

For the development of this end-to-end digital platform, our team has invested strongly in the development of its own and innovative digital solutions, respecting the necessary regulatory framework, always with the aim of offering a fast, secure online payroll-deductible loan contracting that provide a positive experience for our customers.

Our digital transformation is not only focused on online origination capabilities, but also on data collection and processing, in compliance with current regulations, with the aim of better understanding our customers’ behavior and offering a better experience. Among the technologies used by our data analysis team, we have tools for optimizing the pricing of payroll-deductible loan applications, behavioral analysis to maximize customer retention (minimize churn or customer evasion) and profitability and monetization of the current customer base by through the increase in the share of wallet.

In 2019, we conduct a complete organizational restructuring, with the aim of adapting to the new phase based on digital transformation. We identified opportunities to gain efficiency and productivity, moving away from the traditional vertical and hierarchical model to a horizontal value chain model, focused on maximizing results for different units (origination, profitability, retention, technology and funding, among others).

We have implemented several initiatives that promote greater visibility and focus on our business opportunities. Also, our new structure promotes flexibility and agility for decision-making, in view of the transformational environment and high growth of user adherence on the digital platform.

Our priority distribution platform has three pillars, which have distinct and complementary dynamics:

• End-to-end digital;
• Own stores; and
• Exclusive correspondents.

Our physical presence is well established in the south and southeast regions of Brazil, due to our approximately 25 years of experience in the public sector payroll-deductible loan market. Our digital platform, on the other hand, breaks down regional barriers, enabling a much broader reach, creating conditions for the Company to originate payroll-deductible loan for retirees and pensioners throughout Brazil.

The end-to-end digital distribution channel has expanded our capacity to operate, providing scalability and improving the experience of borrowers. Moreover, the digital transformation positively impacted the physical distribution channels through improvements in support processes, reducing costs and providing greater focus on activities with high added value, such as origination and customer support.

Our distribution, driven by priority channels, allows us to be constantly connected with the end customer, improving the customer experience. Which can be seen through low customer turnover, reduced commission expenses and potential synergy with eventual new products.

Our business model values sustainable growth, in which the increase in the payroll-deductible loans portfolio does not negatively impact the Company’s profitability, maintaining consistent levels of return on average equity.

The end-to-end digital distribution channel makes it possible to increase the scale of the Company’s origination platform, reducing the cost of acquiring new customers and maintaining margins at attractive and profitable levels.

Our investees, Junto Seguros S.A. and Junto Resseguros S.A., represent an opportunity for diversification for us, operating in the surety bond and reinsurance market for large, medium and small corporate customers.

We understand that our surety bond business allows exposure to corporate credit risk in a more attractive way than through direct bank credit, considering that:

1. the surety bond market has shown strong expansion, with growth in premiums collected in recent years greater than the increase in the corporate credit portfolio;
2. the regulatory framework allows, with consistency and security, a more efficient capital structure and a more attractive return on equity; and
3. the possibility of controlling exposure to risks through the reinsurance business, which makes it possible to originate high-value policies, with retention of premiums and adequate profit sharing, while distributing the risk among solid national and international reinsurers.

Paraná Banco has focused its efforts on the constant development of payroll-deductible loan for the public sector and on expanding its product portfolio. To this end, the launch of the PB FGTS at the end of 2021 is aimed at anticipating the customer’s FGTS birthday cash withdrawal, reaching a different audience, employees of private companies. In April 2022, Paraná Banco entered into an agreement with Wiz Soluções to create Paraná Seguros, aiming to offer insurance products exclusively to the PB distribution network. In September 2022, we launched the Cartão Benefício INSS, allowing INSS retirees and pensioners to use an additional 5% available margin to make withdrawals and purchases in cash or in installments. The last two launches reiterate our goal of seeking to serve and build customer loyalty through products related to payroll and increase cross-sell, always focusing on growth and profitability.

The Bank has been pursuing to act as an open investment platform, for which it has a range of products, with attractive rates and easy account opening. It has specialized and qualified professionals to assess the economic scenario and investment options, outlining strategies for the most varied investor profiles together with an agile structure and technology.

The experience and procedures in granting surety bond policies allow Paraná Banco, through Junto Seguros, to maintain its leadership in this market, in addition to making it possible to reach another profile of the Bank’s different customers. With the implementation of a point-credit analysis system, a high number of policy proposals are automatically analyzed and monitored. There is a classification of 12 levels of risk that determines the frequency of new analyzes and the division by sectors, regions and sizes. The average analysis time, which used to be one week, is currently one day and the strategy is to continue investing in credit analysis to further speed up this process.