Banco Santander (BME:SAN) Brasil SA reported a promising Q3 performance, despite challenges in the credit market. The bank's net profit rose by 18.2% quarter-over-quarter to R$2.7 billion, marking a positive trend amidst loan defaults and credit availability issues. However, its return on equity (ROE) of 13.1% still lags behind competitors.
The bank's Q3 2023 credit portfolio displayed modest growth at R$502.8 billion, with notable gains in the individual segment and small to medium-sized companies. The consumer financing segment contracted due to the sale of Banco PSA stake, leading to a decrease in the credit portfolio for large companies in line with capital market recovery and the bank's selectivity strategy.
Interest income fell by 1.2% quarter-over-quarter but rose by 6.5% year-over-year. The margin with clients declined due to a more selective approach, while the margin with the market remained stable with a year-over-year improvement of 1.8%. Delinquency over 90 days decreased by 0.3 percentage points quarter-over-quarter, indicating an improvement across various segments.
Net provision expenses reached R$5.6 billion, demonstrating a robust financial position with a coverage ratio of 229.5%. CFO Gustavo Viviani hinted at potential changes to payout policies, projecting an 80% payout this year. However, consensus estimates forecast a 26% decline in EPS in 2023 to a net profit of approximately $1.99 billion, suggesting a dividend yield of 4%.
Despite improvements, CEO Mario Leão conceded that profitability is weaker than historical performance and competitors but targets an ROE range of 15-20%. With improved credit quality, consistent growth may resume in 2024.
Banco Santander Brasil's financial success can be attributed to consistent profitability from interest income growth in retail and corporate sectors and fee-based income from diverse financial products. The bank maintains a low level of non-performing loans in its diversified portfolio, achieved through stringent credit risk management. Its prudent approach to capital management ensures above-norm capital adequacy, providing a buffer against losses and supporting strategic expansion objectives. Liquidity, backed by a mix of customer deposits and wholesale funding, guarantees sufficient assets for short-term obligations. The bank's growth strategy leverages its brand strength, customer base, and digital transformation initiatives, driving revenue growth and ensuring better customer experience.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.