Banco Santander (Brasil) S.A. (SANB11) Earnings Call Transcript
October 28, 2026
Earnings Call Speaker Segments
Good morning, everyone, and thank you for joining us today. to follow us on our earnings release presentation for the third quarter of 2026. We are here live from our headquarters in Sao Paulo, and we will split this event into 3 parts. First, our CEO Gilson Finkelsztain will talk about the main highlights of the quarter. Next, our CFO, Carlos Munis, will give us a detailed analysis of our performance. And finally, we will proceed to the Q&A session. [Operator Instructions] The presentation we are about to present is already available for download in our IR website. And now with no further ado, I'll turn the floor over to Gilson to begin the presentation.
Thank you, Camila. Good morning, everyone. I will keep this opening session brief, so we will have more time at the end for the Q&A. This quarter marks the start of a new management cycle at Santander Brazil. We are starting from a very clear strategic foundation and building on the significant process we already made. There is continuity in our key billers. But continuity does not mean inertia. Our responsibilities to preserve what works, make the necessary adjustments and accelerate value creation. Well, I will then begin with a summary of the key KPIs for the quarter. We ended the quarter with recurring net income of BRL 2.9 billion and ROE of 11.9%. These figures are of course, still below the profitability levels we are aiming for. And at the same time, they need to be viewed in the light of the macroeconomic environment and the bank's rebalancing process. The macro environment remains challenging. And what I mean by that is that we have high interest rates, increased household debt, putting pressure on revenues and the cost of risk. The quarter also included some one-off cases in the Wholesale segment. On the expense side, growth remains way -- well below inflation, and this discipline enhances our ability to invest in the initiatives that underpin Santander's transformation. The bank has already moved toward a portfolio with higher quality clients and a more balanced relationship between risk, return and capital utilization. This shift remains central to the bank's strategy. Customer primacy, transaction volume and an improved balance sheet mix remain our pillars. The next step is obviously to translate this foundation into a gradual and sustainable recovery of profitability with consistent execution. Now moving to the next slide. The client is at the center of our strategy and the priority is to deepen client centricity supported by a platform at global scale and the capabilities of the Santander Group. We ended the third quarter of '26 with 76.9 million clients, a 6% increase over 12 months, growing the base matters, but our main goal is to enhance the quality of the relationship. More clients using Santander in our daily financial lives and choosing the bank as their primary financial institution. In this regard, Santander Rewards has been establishing itself as a key driver of engagement with a more relevant offering and a more intuitive experience. This platform has already reached around 700,000 clients and is having a positive impact on relationship metrics. Spending stands out as the key highlight. Participants increased their spending by more than 10% vis-a-vis other clients with a similar pattern in investments. These indicators show that a more assertive value proposition drives greater engagement and deepens the relationship. The priority now is certainly to scale this proposition with a clear economic rationale for both the client and the bank. Our goal is not just to grow the base, but rather to make Santander more relevant in each client's financial life. strengthening its position as the primary bank in a long-term relationship. So with these opening remarks, I will now turn the floor to Carlos mines for a detailed presentation on the quarter's results. And at the end, the 3 of us will return for the Q&A session. Welcome, Carlos.
Good morning, Gilson, and good morning, everyone. We'll start with the performance of our loan portfolio. as we have highlighted in recent quarters, the portfolio's performance reflects the choices we have made to improve its mix and strengthen the risk-return portfolio. We continue to prioritize quality, pricing discipline, customer loyalty and transaction volume. As a result, we are seeing different growth rates across products and segments. In the year-over-year comparison, I would like to highlight the 10.3% growth in mortgage loans and 8.5% growth in SMEs. Consumer finance grew 9.1% even after the portfolio sale during the period. In this business, a large portion of profitability is generated at time of origination, and therefore, is not affected by the subsequent sale of the portfolio. Consumer finance remains relevant, sorted by a higher quality mix and a greater share of new hybrid and electric vehicles. Over the past 12 months, we increased the share of hybrid in electric vehicles in the total number of finance vehicles from 5% to 20%. In the large Corporate segment, we maintained positive growth concentrated in the expanded portfolio. Overall, this trend reflects our active portfolio management and also ongoing focus on risk-adjusted returns. On the funding side, we continue to increase retail share of our funding, this strategy, strengthens customer loyalty and transactionality. Transactional deposits grew 10% over the past 12 months. This progress reinforces our gains in consumer primacy and improves our funding mix. Next, client NII declined during the quarter. primarily due to 4 different factors. Firstly, lower funding income resulting from a lower evolute. Secondly, a greater impact from deferral of banking correspondent expenses. Thirdly, the sale of the bank's consumer finance portfolio, which reduced revenue for the period. And finally, selective approach to loan origination, as we discussed on the previous slide. In together, these effects more than offset the greater number of days in the quarter and a slight increase in volume. NII also reflects the shift in portfolio mix towards companies with a better risk return profile and high net worth clients. Because these segments have structured lower spreads, the increased share puts downward pressure on this metric in the short term. But this is consistent with the portfolio rebalancing we are carrying out. As for market NII, we saw a slight decline in financial management results resulting calendar effect and lower revenue from inflation index securities, partially offset by improved performance in market making. In fees, we saw a more positive trend during the period despite the effects of stricter credit selectivity and the decline in capital margins. in brokerage and securities placement, as we expected, there was a sequential decline due to the slower pace of capital market activity during the quarter. Nevertheless, we maintained strong performance in parts and insurance, both quarter-over-quarter and year-over-year. in lending-related activities, performance continues to be shaped by selected origination by the increased share of new vehicles in consumer finance. In cards, we continue to grow within our existing client base, driven by an increase in transaction volume, especially among higher income clients. Turning to the quality of our assets and provisions as in the previous period. The quarter was impacted by specific cases in the Wholesale segment, which totaled approximately BRL 500 million. Excluding the one-off effects in these 2 quarters, we observed stability in recurring expenses. We also continue to see pressure in the Agribusiness segment and among the low income individuals, and more recently, middle income individual clients, particularly in unsecured loans. This environment has required a higher level of provision. Part of this trend also stems from the more restrictive stance we have adopted for renegotiations. We have been requiring additional collateral or upfront cash deposits to formalize agreements. This discipline we put pressure on asset quality indicators, but it improves the quality of renegotiated loans. Speaking about delinquency, we observed a favorable trend in the short term for the second consecutive term, long-term NPL indicator posted an increase for individual borrowers. When adjusted for the impact of the Agricultural segment, however, it would have remained stable. On corporate loans, we saw an improvement in the SME, continue to monitor these portfolios closely, carefully and with discipline. On the next slide, we present the evolution of expenses. During the quarter, even with the partial impact of the new 4.6% collected organic agreement, personnel expenses continued to perform favorably. Likewise, administrative expenses remained under control. Overall, expenses grew well below inflation, reflecting our discipline in cost management and contributing to an improvement in the efficiency ratio, which ended the period at 38.8%. We continue to make progress on spending discipline and our simplification agenda. In 2026, we reduced our product lineup by more than 100 items, expanded the digitization of our portfolio and increased sales through digital channels, thereby enhancing the operations efficiency. To conclude the present income. We ended the quarter with recurring net income of close to BRL 2.9 billion and ROE of 11.9%. The macreconomic environment and the portfolio rebalancing, we are undertaking continue to have short-term impacts. This quarter, this was reflected in lower profitability against the backdrop of higher household debt. Revenues grew at a slower pace. The cost of risk remained under pressure, partially due to onetime effects. Even so, our disciplined approach to capital allocation leaves us better prepared towards the periods of volatility and to sustain a more solid growth and profitability trajectory over the medium and long term. We continue to make progress in client primacy, portfolio mix, funding, efficiency and technology. We're building an increasingly balanced and resilient franchise. Well, thank you very much. And now we will move to the question-and-answer session with Gilson and Camila.
[Operator Instructions] We finally ask that each analyst ask only 1 question so that everyone can participate. Next question comes from Carlos Gomez from HSBC.
I wanted to ask about something you haven't commented, which is the reduction in your physical footprint in your number of employees. We calculate this about 12% year-on-year. Is that process complete? Or do you expect to continue with it in the current economic environment? .
Carlos, I think that we have done the most in terms of the physical footprint here. If you look in the last 3 years, we have reduced the number of branches by over 800 branches. This quarter, it was 35 if we put in conjunction here, both the branches and the point of sales that we have in specific clients, the reduction in terms of the number of the employees is part of the automation and part of the group strategy of using more AI as well, so if you look into this year in the quarter, the reduction was 1,500 employees in the year as a whole, it was 4,000 people right now. So we are looking very closely in terms of our physical presence. We believe that it's part of the strategy to serve the client here. So we are not going to become a purely digital bank. We believe that there is value specifically here for high-income clients. We have been increasing the number of branches but we are constantly evaluating that. And if you look in the last 4 years, the number of visits to the branches has reduced by over 60%. It came from 16 million visits per month to less than 5 million right now. So we need to adapt to the needs of our clients as well.
Question from Daniel Vaz with Safra.
Welcome, Jose, and I wish you a lot of success in your new role. I'd like to ask about your mandate and the legacy you intend to leave Santander. As you said, there are some opportunities continuity is not necessarily inertia. And the group wants to get a sustainable ROE above 20%. So there are opportunities in the P&L and capital in this quarter. We see Santander with a portfolio assignment of 5 billion of big showing that there is room to touch capital and also the recovery the P&L. So what can you do more in terms of capital to increase efficiency in the way do you see the greatest opportunity to recover the P&L in retail or in house?
I think that the recovery of the franchise, like I said, is a common point, a common target that the bank has been pursuing for a while. The strategy was very well designed. so that we can put more effort and more capital in lower-risk segment. And I think that this is costing us a little bit, but in the long run, it will be a winning strategy. detriment of the short term where we have a reduction in spread in more transaction activity, more proximity with the client will come in the future. and recovering market share is among our goals in these segments that we call both segments that we will dedicate more capital to. We are talking about high net worth individuals and in corporate to large corporates and what we call CIB and this means allocating more capital to these segments. I think that there are innovations that we included, as you said, this does not mean not allocating capital to other. It means using our market share and the positioning of the bank in some businesses so that we can increase our market share, but with an asset rotation in elegance. I think that this is what is going to be dictating our action in the coming quarters. We want to have market share. Yes. across the segments that the bank serves, but we want to make asset rotation more dynamic in some areas where we operate. So to answer your question moderately. we focus on individuals or legal entities. I think they're both but with more adjusted approach. In the corporate side, large corporates more structured with a direct capital allocation; in smaller legal entities, capital allocation with more transaction -- transactional approach looking at our customer centrality and the several services we provide with credit supporting the relationship and an individual's portfolio, more secret loans and balance sheet.
The next question is from Anand Shirazi with Citibank.
My question relates to provisioning. This quarter, we saw an increase coming from the wholesale side in provisioning. In the fourth quarter, do you think we should expect the same thing. And given the recent changes to your risk model, I just want to know whether you should expect some additional pressure in this sense going into the fourth quarter.
As I said, the main indicator is that once we remove the extraordinary effects from the second and third quarters, the provision volume remains stable. And then we see this stability given this very challenging macro environment. I mean I cannot tell you whether we will have any additional names, especially in the wholesale universe that could impact our numbers in the fourth quarter. But we talked about the NPL indicators and now we see that the behavior is much better than we had in the past in these portfolios.
Next question is from Ricardo Buspigo with BTG.
Well, first of all, Gilson, welcome. I have a question addressed to you. Since you arrived at the bank what are the main challenges that you identified? And what surprised you the most about the Santander franchise and what problems seem to be more difficult to solve when compared to what you originally thought.
Well, Ricardo. I mean I'm returning to Santander after being absent for 15 years, and I was surprised because this is a more global and more multinational bank, and it has more clarity in terms of what we call 1 single Santander and to succeed in the banking universe we have to have a bank with a cost to income ratio lower with more digital services and maybe a lower credit leverage, especially when it comes to individuals in Brazil, for the reasons that we already know. . And I think this is what I found. Also, I found a senior team, a team that is very knowledgeable and has several initiatives that will allow us to deliver to our strategy. And this came as a positive point to me. So there hasn't been any drastic change in the directions. But all we have to do is to continue pursuing this capital allocation strategy where we should have a higher market share. So this still remains our mantra. The goal is certainly to have a very competitive global bank and Brazil is part of this global landscape. And now we will be after increasing the footprint of our franchise in Brazil.
Next question from Matheus Guimaraes with XP.
My question has to do with market NII. This was another quarter with NII under pressure and I think that in the last days, we saw a significant change in the interest level looking forward. Can you comment on what should we expect more than Q4, but looking at 2027. Can anything be changed in terms of the bank's policy? Anything you're revisiting? If you could give us more color on that, that would be very, very helpful.
I think that we spoke about this in Q2. Our expectation is that things will improve in 2027. We have observed that what it was a little more challenging because of the calendar effect and because of our inflation indexed securities, but our outlook for next year is more positive, but still with a negative result in the every business portfolio, but better than what we had in 2026. And let me add to that Matheus since the end of 2024, we have been saying that we are reducing our sensitivity to interest rates. So if we look at a portfolio, which is pretty fixed and deposits, deposits which are close to fixed in Brazil. What we are doing is hedging it so that we are reducing our exposure. Sometime in the past, we will criticize because people claim that interest rates could decline faster, and we wouldn't have that benefit. But as Carlos mentioned, we are not going to have as significant an impact. Even if we have increasing interest rate, we have prefixed securities hedged securities that we carry in our portfolio. And that's why we're still having a negative result next year, but this result is in the variations. It's hedged. It's going to be negative, but it will be significantly less than the loss that we posted in the first 9 months. And that will impact the results for the full 2026.
We have a question from Eduardo Nishio with Genial Investment.
Gilson, good to see you again now in a new role. I'd like to explore asset quality and the quality of your assets, which has been deteriorating. We're seeing that net of specific provision would have remained stable. I'd like to understand this movie. How do you stay present? And what is deteriorating in your NPL for individuals, delinquency was a little more marked this quarter. So what are you seeing and now in this environment of perhaps a higher silicate do you continue to expect a worsening in legal entities in companies. Do you expect the continuation of court reorganizations? What supervised reorgs?
I think we continue to see deterioration mainly in the agribusiness and in low-income cards. More recently, some deterioration in middle-income cards. In my mind, these are main concerns for high net worth clients and large corporate behavior is reasonably good. The consumer finance, this reflects the choice to make, focusing on -- that's a deterioration in used cars and low-income segments and better results in electric vehicles and hybrids. We had to make some adjustments for motorcycles in the consumer finance. But after these effects, I think that the behavior of the latest cohorts is much better. So like I said before, loan losses remain stable, the LLP. And what we see is that if interest remain higher for longer, most likely the choice remain of getting away from riskier segments will benefit the bank in the future. Will give us an opportunity to go back to the market with better positions. Nishio, let me add and we look at provision, the cost of risk, which is the point that Carlos highlighted, we still see some effects from prior movements. But when we look at newer cohort of vintages, we can see 15 to 9 NPL, much more under control even compared to the rest of the financial system using Brazilian Central Bank data. We have improvements in SMEs, individuals and in over 90-day NPL, there was some increase, a big increase in individuals, as you mentioned, but this is -- same-store business segment. If we exclude CPR, a part of agribusiness linked to individuals, this would be below 5%, a relevant impact of almost 60 basis points in the quarter. So in fact, this is a one-off situation. We have to live with that. We have to -- Well, when we look at it, the choices that Carlos mentioned of being more selective, focusing on more resilient customers and reducing the appetite for some clients already shows the cohort is more in line with what we want to build in regards to portfolio quality. And just to add, Nishio, we do have a concern that higher interest rates could also have, as a consequence, put more pressure on small and midsized companies and on the agribusiness side as well. So this is what reinstates that visibility that somehow we should have lower interest rates to bring about your relief to the financial aspect. As Camila and Carlos said, we've -- we are conducting adjustments to our portfolio, and this is translated into lower losses, certainly with lower spread but lower losses at the margin, as Carlos said, in some vintages that we are adding to our portfolio, but there is a concern in regards to higher interest rates, especially for SMEs and agribusiness in the coming quarters. Thank you very much.
Now we have a question from Yuri Fernandes with JPMorgan. .
Well, first of all, good luck and good morning, Carlos. And your Portuguese is much better. Yes, we understand you loud and clear. My question is about NII -- client NII and well, market NII. But a client NII with drew my attention was that drop of 30 bps. I mean it was more significant in the third quarter. And I think Carlos mentioned the risk and Camila also mentioned that. But I would like to hear from you your view about trends maybe that derisking could continue and whether it would make sense for us to expect further NIM drops. So I would just like to hear from you what is this trend concerning client NIM. .
So Carlos, would you like to start? Okay.
If you look at the quarter, there was a drop of 33 bps in this spread. And this is due to Fed impact in the consumer finance. There was also the impact of a lower CDI and high interest rates, which also accounts for another 3 bps, there is that impact related to banking agents, about BRL 30 million. So this is not so much as a trend, but one-off effects from the quarter, depending on the behavior of interest rates, this funding margin may go up at time. Now the derisking side of the portfolio would still put some pressure because in our last release, we said that when we are more focused on high-income clients when compared to low income, the spread on average is much lower. It's almost half. I mean select customers when compared to mass clients is almost half. And considering our most recent adjustments, what we reduced the most were the revolving lines. And the same thing goes if we look at SMEs, B1 mentioned by Carlos, which are smaller companies up to 7 million to 8 million of revenue is a little bit of the spread of the B2. Of course, that we are also looking at the significant move in terms of interest rates and lower competitiveness in some segments. This may allow us to take advantage of the opportunities. But the portfolio is derisking is something that we will continue to deal with. And I would even say that we do more secured loans rather than unsecured loans. and because they put pressure on the spreads. But you have to remember that we had a portfolio. We had a portfolio or we have a portfolio that had very high spreads. And the new ones, the spreads are better than it was before. We see good growth opportunities, but the market as a whole is under pressure. I mean, payroll loans. Now there is a limit in terms of interest rates. So payroll loans for individuals is something that now we are exploiting, but we are very careful because we don't want to make any mistakes. but we would rather be more cautious. And then we have control placement because we don't want to put that bill in the future. So I'm very optimistic in terms of NII growth in 2027. I don't want to share any numbers, but we still have something to do in terms of the changes going forward.
I mean, Carlos still mentioned that when we mentioned the portfolio. But mortgage loans is an important way to increase customer loyalty, and it's an important growth driver. I mean, the spreads are lower, but all in all, we see a good chance to increase loyalty and engagement and to increase primacy. So we are looking at profitability as a whole. In the short and mid-range, there may be some more pressure on spreads. But on the mid and long range I think the equation will be much more in line in terms of the behavior of cost of risk and the quality of the portfolio which would be much more resilient rather than attacking the higher spread lines, which the consequence could be tougher.
Now we are moving to our last question from Marcelo Mishi with Bradesco BBI. .
Gilson, good luck in your new challenge, I wish you a lot of success. This will be an interesting journey, and I think you have everything to create a lot of value for Santander. So a lot of success in Carlos, your Portuguese is getting much better. All right. So my questions are about 2 topics, actually. First, it was a consolidated view of important growth coming from small medium-sized enterprises. Santander always talked about this. Last year, SMEs portfolio grew more than 20%, and you were talking about as doubling the size of the portfolio in 5 years. . But we saw SMEs growing way below 10% in the market. And when we discussed this portfolio shift, I cannot imagine why next year would be very different. So I have 2 questions. us. First, looking at portfolio adjustments. and we start thinking in 2027. At credit growth well at it hard to be greater than in 2026 for the consolidated portfolio. And for SMEs, what is your flight plan. The SME segment require adjustments. perhaps linked modeling incentives and so on and so forth, so that you can renew or go back to posting relevant growth? Or do you have a more cautious appetite that should be driving this? If you get the recent dynamics of SMEs, most likely 2027, is not going to be a year with expected growth above 10%. So 2 points, the portfolio next year and the specific dynamics of the SME segment.
You received complements. So you start.
I'll start and then Camila will complement. It's what we have mentioned before. We have a very clear itinerary of where we want to grow in terms of client profile and risk profile. We have a good demand in terms of price return and risk. So we're most likely going to grow. What we see in the SMEs world, we see NIM under pressure and B2 portfolio is under control. The government programs are helping FTI, FGO, we have about [ 85% ] of the portfolio with Pronampe and FGO support in lari. And the rest requires more caution. High interest rates don't make -- don't help us have more confidence. But we have to work close to our clients. We like these clients, they accord to Santander and we see an opportunity there. It's 1 of the segments in which we want to grow.
And if I can add what perhaps will incur credit in B1, B2 segment will be transactional credit, the more services we provide, the transactions, cash, receivables, acquiring the more comfort we will have to expand this portfolio. The driver of relationship in B1, B2 will definitely not be clean predict. It will be transaction-linked credit and services linked credit. And as we are successful in this strategy, we intend to expand this portfolio. But of course, this will depend on the environment. The environment remains very uncertain, and it will depend on the interest rates.
And since I am the last person to ask may I ask another question, Camila. We have discussed in our Central Bank report, the divergence between 90-day NPL and 15 to 90 day NPL. Santander, the last quarter, made an adjustment in write-offs. in some of the portfolios bank. But because of the difference in the indicators, I don't think that all adjustments have been made. We see 15 to 90 day NPL indicators are seeing good results improvement. And then it was 90 day in a wise, particularly in individual spoke about a grid business and some individual loans. So I'd like to understand do you have any sensitivity, if it went for the write-offs what would have been the behavior of the 90-day NPL and what about the write-offs of portfolios that are not for 360 days. Are we talking about 2, 3 years.
I will start, and Carlos and Gilson can add. What we had was a slight increase in the over 90 indicator for SMEs because we had a more relevant run-off in Q2 and what we are doing, in general, the portfolio has started adopting for 9, 66, 360 days a uniform for the whole portfolio with the exception of mortgage, which had a longer term for 155 days. And during 2026, we have been refining this. discussing with the regulators and the auditors, what our real expectation was of recoveries, so that we could have accuracy, emoterativeness considering the profile of our portfolio. So for secured loan portfolios, we extended the term. An example is consumer finance 18, increasing to 21 months, depending on the good, which is funded or announced. And in those portfolios where we see delay is reducing a lot of chance of recovery, we wrote off, these are clean lines for both individuals and legal entities. and we are writing it off 8, 9 months. This had an effect in the first half, the first quarter and did the second quarter. So -- personal loans, revolving credit have been written off 9 months. The total term increased marginally, but that's not so representative. Throughout the year, you're right. When you look at over 90 NPLs, sometimes it's benefiting. Sometimes it has been negatively impacted because some lines that you were writing off faster, taking longer to write off. And this tends -- throughout 2027. And that's why we are focusing on talking about short-term NPL because they don't have this effect. These indicators are not looked by changes in the write-off because it's just the loans that are past due.
Camila, there's the impact of the negotiations. Our teams are being more demanding than we were in the past, the conditions to accept -- in the conditions that we required to renegotiate. And we think that this will improve recoveries in our operation. If not, we intend to remain strict. And the bank is making an effort to grow our portfolio, but we are growing way below some of our peers, but we want to maintain a delinquency levels low when the portfolio is not growing as fast as the others. I think that this is proof of our discipline in terms of credit assignment.
Thank you, and I would like to thank all of you for joining us this morning. Immediately after this video conference I and the entire Santander Brazil Investor Relations team will be available to answer any further questions you may have. Thank you very much and have a great day, and I'll see you next time. I'll see you in the next call. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
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