Q4 2021 Banco Santander Brasil SA Earnings Call
[music].
Yes.
Good morning, and thank you for waiting.
Welcome to the conference call to discuss bone consumption Baptists Usda's results.
I think he had missed it says you're hill culture Chairman missed it on his central Domingo CFO and Mr. Gustavo <unk> head of Investor Relations.
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Now that the awards that you missed it says you're Hill. Please Mr Hill you May proceed.
Well very good morning.
Do you all thanks for joining us today's call. This is going to be mine.
My last goal.
CEO of <unk>.
Previous year 2021.
So basically materialize in six years.
Also a very interesting story, so without any further do let's go to slide four.
So this is slide shows is the slide with the headline business evolution and transformation.
A little bit.
But I think it's an important slide.
To show the evolution of the firm.
IPO I remember.
I joined as CEO back in 2016, there were a number of questions relative to something theyre on a variety of issues.
The last six years together with the team. This has nothing to do with me, but definitely the teams that still continues and the company we were able to redefine the scale.
There were a number of questions. We are still talking about the sale of HSBC, which at that time, we decided not to pursue and.
And we made a conscious decision that knowing that would be a lot harder we would go for organic growth and.
And we moved the company from a loan portfolio, which is only one data point of 142 billion as you can see.
Pretty much 500 reason and this hasnt happened.
Easy macro environment, we were able to do basically before the formidable speed of growth, yes, keeping the environmental control not just credit which is an important one for dean.
Entire environment of control E check.
This was only possible because we absolutely were obsessed among other things to move the company to different levels of efficiency I think we have probably if not yet, but most likely the leading company from a cost efficiency point of view in the industry. So with the cost income.
That I think it's a remarkably strong.
And this is just another reflection of the culture that the management team was able to implement over the last six years.
I think it is important to also note that a number of trends, which are today being spoken we initiated that.
The trajectory of Edr growth invest in the Agri industrial sector of Brazil, a number of years ago.
We have we have been in coal in the Lithia <unk> agenda for the last decade, I mean, this hasnt really happened for Santander in Brazil in the last couple of years. So this is something that I think it's going on for a number of a number of years and decades, and we have not shied away from innovating not only.
Wiring and we're going to talk about some of the subsidiaries, but also entering businesses, which traditionally something there wasn't necessarily a flat one being energy trading.
The other one being the commodity desk today, we have one of the most thriving commodity desk in the financial market pretty much not taking any directional risk, but assisting customers from our hedging strategy point of view. So this slide is.
Good picture of what has happened if we move to the next slide.
That's bringing more of a shareholder view.
If that is true what has happened to me shareholder and I think you have seen from the IPO with a desktop and a relatively robust Roe.
You would compare to the industry, we were still lagging behind back in 2009 to basically ending the Europe of the last 10 years as one of the leading firms in the financial industry from a profitability point of view.
It is said and done and it wasn't necessarily received six years six years ago that that was going to happen we have been incredibly committed to our shareholders.
As you can see the dividend yield we will we have just announced another another important dividend and we certainly bolstering this year a record dividend payment.
Again, and as you can see this has happened all the back.
Underlying profitability. So we have we continue to strengthen the balance sheet of the bank, we have up to now the <unk>.
Hi, as rating by Moody's when compared to any other financial institution in Brazil, and Thats very much underpinned by a net profit that moved from $4 7 billion Reais in 2009 to the number that we are printing today 16 three.
Billion Reais with an ROE of over 21%.
And if we continue on the next slide on earnings distribution to shareholders does life is an attempt to compare what has happened in terms of Santander Brasil and its management commitment towards shareholders over the last couple of years and as you can see 2010 was an atypical year.
Due to the cap that was imposed by the regulators on dividends to the entire industry.
So I think the slide speaks for itself it doesn't really require further explanation.
On the next slide is more addressing the underlying trends of the business. We have been incredibly focused on true client base growth by true I mean clients that are truly engaged inc. Transacting with the bank far beyond that database.
Or at a point in a database so we have.
Reached $53 4 million total customers.
As of end of December 'twenty, one and.
And when you see that all lead.
In the quarter, we have added almost 3 million new customers in the last quarter $2 seven to be exact.
And from this number of 52% five 2% are actually engaged with the bank in some sort of level product and or service.
Just to give you an idea besides numbers in itself digital transformation that I think we've done through all our channels. We moved from $15 6 million you don't see is here with $15 6 million customers. There were basically acquired through the digital channels to Andy.
$18 3 million in December 'twenty, one we have put quite a bit of attention that Santander Brasil and I think thats one of the uniqueness of the company has to be among other stresses on distribution strength, so strengthening the distribution platform, creating a true omni channel.
<unk> strategy, where the customer really decides to serve itself through the channel where it fits best its own style is something that I think we've been committed over the last couple of years and we are seeing the results both from a remote.
Broach that.
We internally call <unk> X channel or through directly through the digital channel shortening cycle, making sure that.
<unk> and there is enormous amount of rooms to to improve is as easy and comfortable as possible to any customer of different different extract all supplier.
So as you can see here, we see a very rapid growth on the on the customer side as already mentioned, but that has not happened without attention to quality, which the NPS is only one dimension and again a lot of work ahead of US I mean, there is no accolade that we have reached the peak of the mountains, but where we were to where.
We are there has been significant improvement on the next slide is just another attempt to show.
I think we are moving on the quality side, but I think there's still a lot of work to be done.
Due to the multi product and multi service nature of our platform of our of our signs quality. It's a permanent objective. So although yes, it's true that the NPS is now around the $60 range, we have within Samsung there verticals that have already exceeded seven.
<unk> sold the portfolio still shows a number of detractors from a quality point of view and this is where I'm sure. The new CEO module is going to pay attention and the big opportunity not the only one but one of the biggest opportunities that we see is definitely around enterprises to small and mid sized companies and <unk>.
That still need a level of customization and quality and Brexit is that from our perspective, nor Santander. Neither of the market is completely capable of doing it on the digital side slide nine where I'll show, where digital and available is this attempt to.
Show you here the Omnichannel attempt that we're implementing as we speak so we're less concerned about branches or remote coverage of digital those channels have to co exist in a way that from a customer perspective and experience is absolutely one and more and more this is going to be.
The reality customers still like to have the practicality of being able to see somewhat if there is a need for example in Europe . It's very there's a very interesting political debate going on for those who are not digitally literate if you will.
Banking has become a real challenge for a number of people who have just not being part of the generation of being digital. This problem is less important for Brazil, because it's younger younger population all the rest, but physical assets the combination of being able to be present, if there is a need it's not any material asset debt.
We will continue to leverage as part of this distribution platform strategy. So the customer acquisition through the digital channels and I think that's a remarkable number on this slide has increased 185% of course percentage is always a function of a whole low euro based loss, but what it shows is just the thrust.
That is behind the growth that we're experiencing over the last couple of years and a very important data point here is the fact that we've been incredibly transparent to actually even post <unk>.
What is our fully allocated cost on this channel cost of serving of 26, Reais a month customers coming through the digital channels. So any any so the attempt on making discuss similar to become more loyal more engaged transacting the bank more than justifies profitability.
In the years to come but that doesn't mean that we need to start from the 26 Reais amounts I mean, the attempt we continued sort of obsession of the company to remain ovens are from an efficiency point of view will continue its very important to note that part of the efficiency hasn't really just come from.
<unk> or we award one of the first companies in the financial industry with the exception of those who have started.
Over the last couple of years to bring the company of this size to the cloud we have over 70% of all our systems, Inc, and the club, which basically allowed to Santander Brasil to actually collapse or be less dependent on legacy systems and particularly in our case.
Remember, we have been historically, but a result of a number of acquisitions. So the cloud strategy has absolutely helped us to deliver the level of digital growth that I think you have seen to date on the next slide.
It was also another part of our strategy, which was.
Folks are paying too much attention to the number of branches as opposed to understand the demographics of the branches and one of the decisions that we made was to bring Santander to the interior of the country and we have expanded and will continue to expand to cities than most of us are not necessarily familiar but that's future.
Growth will continue to exist most of the cities have been served historically by public banks more recently by co ops and private banks in general with the exception of very few have never really taken a sort of a net nationwide view of Brazil, So and we have done it we believe it's a plural.
The slides, we believe Brazil, it's fundamentally not in the industrial economy and the European centers have an incredibly important but growth in the future of Brazil resides in its interior.
Last but not least here. It's just an attempt to show you that the physical branch or the physical channel the sports or the branches like more commonly known we have launched what we call nothing more than what we call back to go which is the capacity of one of our employees to be able to serve.
The transit that goes throughout each and every day through our Atms. So this concept 59% of the store. So you can actually go to a customer in ATM and serve that customer besides the need for cash neutral so that customer can actually do transactions without necessarily having to go into the brain.
<unk> now be an update on adapt and eventually spend 20 or more minutes. When you don't have that time, we have to date approximately 15 million one five customers circulating per month through our physical infrastructure. So we believe there is quite a bit of opera.
Unity for us to optimize sales engagement and dialogue with our customers.
And that is very much shown by the next slide Slide 12, which you see the commercial activity of the company in terms of cards, we had a record year in terms of invoicing, So reaching 306 billion Reais, that's a 26% increase year on year.
And again in a year of a pandemic. So one can explain that some of that was absolutely linked to the fact that people have to use cards more often than before but this is a record number and it's a record number because it also shows that we have seen a significant growth in terms of acquisitions of new customers.
So our ambition.
Is to be able to get cellphone that Brazil to a market share of 20%, it's not guidance, but it's an internal ambition that drives us into that direction as we headed for gap, which was able to end the year with 16% market share coming from single digit market share in the years past.
The rest I think one of the things I would like to note is the insurance piece on the upper side of the table. We have launched some thunder also today one of the highest growth insured decks in the marketplace and that will continue to grow very fast uncle can give you is that becomes an interesting becomes a question.
One of your more data around the growth of Santander.
2021, we have issued 6 million cards do with variety.
Of customers of different segments under the brand <unk> X as we have launched.
Years ago.
Next one is the whole piece around.
The cultural transformation something there was not even part of the great place to work. We ended 2021 as one of the best companies to work for in the country. It's one data point, but it is a data point that shows that a lot of attention has been put in place not only just to culture.
The dynamic in the fabric of the organization. So we are I think the numbers speak for themselves I will not make comments, but very few companies can.
Say do they have the level of ambition that we have for December 'twenty five in terms of true leadership positions of different different extract of our society. So again the slide speaks for itself with that I pass the word to our CFO , who will get into now more.
Specific specific city around the numbers. Thank you.
Thank you Sir good morning to you all.
I will now go into the.
Delude ourselves into.
The presentation.
Which we can detail a little bit more in our Q&A session.
So in.
The first is light.
Can see the full P&L account for the full year you may see we delivered record net profit of $16 3 billion Reais, which is a 7% increase.
We closed call SKU for SKU 'twenty, one with a net profit of three.
$3 9 billion rupees.
Representing a 10% decrease relative to the total SKU and the stable when compared to the same period last year.
Quarterly decrease can be explained by you we can market result in expenses.
Pressure from completion.
Which we highly spleen further on in the next few slides.
Let me highlight the following figures here in this slide on the revenue front NII rose by almost 9% in the year, even higher customer NII important detail here on the customer in EMEA fees increased by 14, almost 14% over the year.
Again, the customer base growth and higher activity boosted different items, such as comps or revenue.
And on the expense side provisions grew 10% in 2021, which is consistent with our continued growth and mix.
<unk> expenses increased due to the collective bargaining agreement.
Back in September inflation, and foreign currency fluctuations, but remains clearly below inflation in the year.
Efficiency ratio.
So these came in 35% improving by 90 basis points in 12 months again, probably the best in the country and return on equity remained at the 20% delivered in the fourth Q on.
Reached above.
Above 21, 51, 2% for the full year <unk>.
The next slide illustrates the evolution of our NII highlighted by as I said customer NII, which advance almost 3% to 6% in the quarter and almost 10% in the year in 2021 with product.
Benefiting from positive volume dynamics and mix.
Despite a strong pressure in funding costs as spreads increased by 10 basis points.
10, three to $10 four.
Reflecting a better mix and good price management.
Market volatility during the year contributed to positive results from Margaret NII also in these SKU.
So weaker market activity to return to a more normalized levels from an extraordinary first Q.
Q.
Advancing to the next slide we can see that our loan portfolio grew almost 3% in the corner and above 12% year on year to 462 billion reais largely driven by retail.
<unk> continued to outperform with mortgage and credit card explaining part of the growth.
It is important to note that almost 70, 67% of the individuals loan portfolio is collateralized.
<unk> remained virtually stable in the quarter.
Growing 1% nine but performed well in the year expanding 2% thanks to recovering demand.
Given liquidity conditions of compounding seems at the beginning of the pandemic.
Lending remained stable in the quarter and grew by two 5% in the year.
On the funding side. Our funding also had a positive performance financial bills increase quarter Retargeting diversified funding base and continue to have been around the longest living in Houston relative to total funding.
At the end of the quarter capital stood at comfortable levels, our core equity tier one reached 11, 6%.
Decreasing.
Basis points due to higher earnings distribution as soon as you mentioned to shareholders in the PD.
Our bis ratio was almost 15% given recent capital operations.
Next slide moving onto piece, we had another strong performance reported by customer base growth and a stronger loyalty the best performance in the quarter and the year were clearly costs and insurance the lottery following our traditional seasonality in fourth Q.
Kind of an account fees decreased by only 4%, 3.9%. During 2021 these lower growth compared with previous use is basically explained by the peaks. This rapid payment system here in Brazil implementation.
Looking at expenses in the fourth Q.
The full impact of the collective bargaining agreement as I mentioned before and also important you mentioned higher commercial activity, which puts pressure on body with costs in the year. We saw expenses rise by 4%, which continues to be well below inflation, we have conducted and will continue to come back.
Review of efficiency, given our commitment to productivity.
As I mentioned in the beginning of my presentation, our efficiency ratio improved year on year to <unk> 35 35, 3%.
These literally maybe possibly one as I said that we remain as it has.
It's been for a long she is now the best in the industry.
On the next slide we can see how our asset quality has evolved.
It remained well controlled level in the quarter with inadequate coverage ratio, reflecting our solid risk management.
Short term delinquency remains healthy while 90 day NPL increased by 30 basis points to two 7% both still under control and below pre pandemic levels. As you may see in fourth Q1 9.
You can also see that our loan loss provisions remained reasonable within reasonable levels consistent with our cost of fees for the full year of two 7%.
Performance is a direct result of our diligent lending practices.
As you probably have seen in our numbers, we released $1 2 billion of our generic provision due to risk modeling updates.
Recovery continues to post a good performance.
The great part that you can see in the columns, reaching eight.
$800 million in the quarter.
Driven by both the continuation of good management as well as the sale of retail loan portfolio.
In the year.
The full year recoveries grew almost 23% representing the message I've mentioned, you previous Qantas and a strong focus on that although the activity.
So finalizing the main takeaways six main avs consistency sustainable growth and profitable given our long term focus and return on equity in the industry.
Second a robust and comprehensive financial platform.
While keeping an all time high level of new customer acquisition. So as you mentioned.
The stronger loyalty and try sexuality will support our growth going forward.
The macro environment will likely present, some challenges we acknowledge that.
So to be able to manage successfully in past cycles.
For example, in 2015 or 2016.
The availability and integration of tunnels.
Look if you read their business opportunities.
Last but not least our corporate cool too deeply committed to growth results.
Right.
So that's about the last part of the presentation I think we opened the Florida now for Q&A. Thank you.
Thank you we will now start the Q&A session.
And then a list I will now turn the word to Mr. Gustavo. Thank you please Mr <unk>.
You May proceed making the questions via webcast.
Good morning, everyone. So, let's just start our Q&A session.
A question on here.
The first group of questions comes from Chuckle about she is the phone UBS.
So.
Can you comment your expectation of asset quality dynamics for 2022, do you see NPL ratio of Santander Brasil during this credit cycle higher than the pre COVID-19 levels.
Other question enough.
<unk> relates to the profitability as the bank entered 2021.
Our Roe of 21% or 20% in the fourth Q.
It is feasible to maintain the ROE at <unk> levels going forward. So.
Sure.
Can I <unk> I will take the first part I think Thiago it's surgery.
One of the things that I have experienced over the last couple of couple of years and rightfully so as a CEO is.
The whole discussion around cost of credit in Npls in Brazil, I remember back in 2016, as we were growing the suspicious level that we would definitely have significant increases.
Cost of credit Fortunately did not have any wasn't by luck.
We have over the last couple of years.
<unk> created a portfolio that is incredibly well collateralized that's 1.2nd point. When you think for example on the vehicle market the Alpha market, where we have expanded our consumer finance business has over the last couple of years tripling size and yet keeping the cost of credit in inkjet.
Now one of the facts for example that perhaps the sell side does not necessarily.
Observing is that the embedded equity to date in used vehicles. So if I would take a fair market value of Santander car finance portfolio and I would do a mark to market in terms of the embedded equity just because the price of used cars have double you have a loan to value that has improved.
Credibly.
But your question is related to any too. So I have said in the past that there were a number of factors that would make me pause to think that.
The cost of credit for this system in Brazil will increase one has been definitely the pandemic and unemployment.
One of the things we've seen is that the government sponsored programs that actually alleviated a big big part thankfully.
Thankfully so indebtedness level of a number of Brazilians. So a lot of finance has gone into people rightly so paying down debt, but now we have been we have had new factors coming in one is inflation.
Interest rate third open finance, which will create a level of competitiveness, perhaps in terms of willingness of new players to grant credit that we haven't necessarily seen over the last couple of years. So we have taken cautionary measures in the third quarter of two <unk>.
'twenty, one so that we could navigate 'twenty two.
With absolutely.
Acceptable levels worldwide 'twenty to 'twenty, two most likely coming back to levels of 19 again its not guidance. Its just I think we're going to see structurally the cost of credit of 2020 and 21, what was very much helped by Gov.
<unk> sponsored programs as I mentioned those were significant amounts of money injected in the account. So we should be seeing levels closer to 2018, and 19 briefing that nothing that we are concerned, but we are certainly attentive.
And paying attention to growth, where you have to be more sensitive as on cards absolutely under control.
And our control phenomenally good quality growth vehicles obsolete under control and I had mentioned the fact of the quality of the portfolio. So nothing today that would put me at and then easy position.
Yes.
Yes, I would.
I mean I mentioned in my speech that Continental is part of that was mentioned.
Speaking of around 70% and 67% of it.
The retail individuals' portfolio has gone out in our lives and that collateralize those guarantees.
As mentioned an improvement in price.
Seven.
Okay.
So that's one path putting numbers to what you just said.
I mean, certainly Brazil has been with a cost of risk between three three to 3536.
2014, 15, 16, so I think so.
Structural kind of way of looking at these and probably.
Coming back to you was mentioning is that the two 7% that you have seen is cost of risk is a leveling which is clearly possibly affected by the liquidity that we have been having.
And the performance and the programs in that.
Mentioned so.
I would say that yes, we do expect.
The degradation of quality in a gradual manner not something to really.
Fingers I saw some exposure.
Something that will be intense.
Miami was.
The return on equity so you want to address that or.
I'll leave it up to the CFO , because it's 22 and I will not be behind the wheel.
Okay.
The return on equity as we have been.
Mentioning to you in the past I mean, we have been.
Striving to the Levered return on equity and the levers that Youll see that 2021, 22% and that is where the bank has been moving in the last.
Some years now.
Obviously, you have seen also the payout of the remuneration and.
How we have been dealing with the capital in the last quarter. So if we put all that in the same kind of discussion.
We would be waiting I mean, I would be expecting.
Growth of risk weighted assets in the region of high single digit low double.
Which means that to maintain that to have that roll in to maintain those levels of capital of around 11, 11, 5% of core equity tier one we would be does it in a payout of around 50%. So all of that works in the same formula.
Which means trying to deliver.
Similar profitability during the year.
The same time that we maintain a nice remuneration to our shareholders.
So our next question comes from Gustav <unk> from Bradesco BBB.
The increase in <unk>, which line is we're responsible for debt cards out et cetera.
And also did the bank sell low end portfolio in the quarter of EPS, what was the amount and what was the net impact in the quarter.
Our goal here okay.
I think.
We do sales from time to time, so nothing that I wouldn't necessarily characterize so we did sell in the fourth quarter, but I think if I remember correctly. We also sold back in the second quarter. So nothing nothing just part of what I would call business as usual on the asset quality I think I already addressed in the previous discussion from <unk>.
Yes, so we I think the credit card portfolio was the one that could have broad surprises.
Incredibly comfortable with our credit card portfolio because of the measures we have taken cautionary measures. We've taken right from the beginning of 2021, so nothing else I could add here.
Okay.
On the on the critical side, just hurting 90, because remember that we have mentioned this in the past 90% of our cars being sold.
Current customers that we know about them.
Carr to whatever rollout.
One or two so.
That's.
Second the risk control that you just mentioned and can be seen in that in that number.
Okay. So our next question comes from Flavio <unk> from Bank of America.
That additional provision decreased $1 1 billion in the quarter, an NPL trade. It up is there any change in the credit concession our risk policies should we expect a lower loan book growth provisions growing at a faster pace than the loan book.
So with you.
Yes, as I mentioned, we did use that.
Generally provision that responds to modeling basically.
<unk>.
We already addressed.
And the provision discussion, so I'm not going to repeat it.
But the fact is that we did both in <unk> and M. B R gap.
As we do as bow as we always do the modeling of the need of over of generic provision of Yodlee.
And that led us to.
Total amount.
<unk> of around 182 billion and that's why we did that.
In terms of growth of portfolio and credit portfolio, what I would expect this our country grow any nominal terms GDP somewhere at around <unk>, 7% with an inflation of five seats and some GDP real in terms of ceded one.
That means that.
Credit portfolios could grow in the high single as I mentioned before it is weighted assets, so high single digit or even low double so.
This is not what it is.
Kind of pro forma for these year.
And I already mentioned cost of risk should a compounding of that.
Thank you I Hope our next question comes from Carlo on BTG Pactual as we saw in the third quarter. The other operating expense line of wind it up on the fourth quarter due to higher credit cards and customer acquisition expense these investments should reflecting in higher Custer.
Base and does a boost in the main revenue lines.
Correct, how do we.
Back to these investments to continue on the falling quarter.
Yes, I won't go there.
Thank you.
Marty.
As the new CEO I think that's an important.
Very much committed to growth and very much committed to profitable growth and I think we've seen in his own way I mean, he is going to certainly be refining improving doing things that at that time were not ready to one is certainly continue to grow profitably the credit card business.
We do expect the revenue line in terms of growth to be steel imports in north star for the new CEO . So the answer would be yes.
And that has to happen in an environment, where costs will continue to be under control remember I mean, we were able to post.
Significant.
I would say.
Measure in terms of cost despite.
While we have seen in terms of employee increases on the back of the Union agreement of almost 11% which already hit.
The numbers third fourth quarter last year and expenses have been pretty much under control in the neighborhood of 5%, 4% to 5%. So I think that commitment towards efficiency will still be there, but that will not be at the expense of good variable costs that are basically fueling good growth slowed and then.
I would like to also that we haven't really.
Ask the question, but I think it's worth noting for example under commissions.
The significant increase that we have seen on capital markets and the position that the bank has been able to achieve an investment banking. So we have done.
Very large number of either Ipos of fall along this worth 28 last year.
And Santander has really moved up in the quality of transactions like the one of Soma inherent and which was very much led by the current CEO moderately oil and.
And all the transactions that we are still very much pursuing so the whole capital market investment banking has also had a phenomenal performance last year not necessarily seen.
Because we're not necessarily disclosing and in terms of some of subsidiaries I'd like to mention return, which is our asset securitization.
The company. We have also made last year and important acquisition, which was a company called <unk>, which has continued to focus on collection. One of the things that has that explains something their good performance in terms of risk management is not just the model is not just the people.
It is also what I would call state of the art collection strategy and last year, we strengthened that with the acquisition of delayed us a co branding.
Thank you.
And to add to that on the specific line of expenses that you mentioned.
Remember that we do have some seasonality normally the fourth skus more intense you do have somebody will cost like the ones you say the cogs or the.
On the banking correspondence you do have some impact also from the.
Currency from the currency exchange rate.
<unk> tends to be on.
Align which is more intense in the fourth Q, which explains also part of the.
Of the profit evolution okay.
Yes, Thats true there is another question to start with maybe a help you hear from Mario <unk> from Bank of America, which is good job in the last five years. So thank you Mike for that recognize but the strong appreciation of the stock that's true not enough yet but that is true but the question is what are the main challenges for the bank over the next five years.
I mean, one of the very important questions is the whole succession process.
There has created a succession that was noiseless.
That was basically done with up with one of the best candidates.
We have I have absolutely look and as a group as part of the governance together with the board local board and group's board external candidates and Im.
Completely convinced the model was the best choice.
He has been I hired him.
It did not necessarily have a broader experience in retail over portfolio of this size phenomenal quality banker.
That's been a number of years and Citibank Morgan Stanley and Goldman Sachs Youre going to have a chance to meet him in the first quarter, but more importantly over the last couple of years. He basically took I gave him the most challenging jobs, which was the turnaround of the SME business not only did that but he also show levels of leadership and desire to leave.
The company to a whole new phase again, he has been part of the executive Committee over the last six years, so no big changes conceptually, but still a big generational change its 47 years old and 61. So he will see the world differently. He will certainly bring us all.
Flavor to a number of aspects, but I'm absolutely convinced that.
Not only succession was done in a very nice way I mean, you didnt have anybody leaving the company abruptly the entire management team remained because everyone believes in the story and everyone see something there as one of the most challenging from opportunities.
That forms in the country I mean, if you look at the number of subsidiaries that we have opened from start.
Launched we launched the company a benefit vein, which last year already had half a million active cards and increasing over 330000 merchants being at credit to be able to use bank are all done from scratch. So there is a culture of being able to be built.
<unk>.
I think succession is a good point to mark.
Thank you. So our next question comes from Tito <unk> from Goldman Sachs.
<unk> ratio is now below 12, what level do you feel comfortable operational operating in and what does that imply for dividends.
Okay.
I mentioned a little bit before.
Before the levels of core equity and bis ratio linked the risk weighted assets growth.
What we feel going forward, what is our core equity of around <unk>.
I always say between 11 to 11, 5% we are going to be in that range the full year.
We will probably be also well above the 14% in the bis ratio between 14, five and 15% as you probably remember we detail and issuance of tier two subordinated debt in November .
And with those ratios to maintain the ratios given what I mentioned before the return on equity and given the reasonably versus growth probably payout will be in the region of 50%, but the main the main objective will be to maintain those levels of capital that they said okay.
Thank you, Ohio. So our next question also comes from Tito <unk> from Goldman do you expect that for further pressure on trading results from rising rates.
Well. This is this is a good question.
There is a little bit.
My speech, but probably as Wolf mentioned you know so the first thing is as you just saw in the fourth Q the Ni Hao.
Decline because the NII from Marcus decline cut or the cloud for them and us strongly in <unk> and so compute putting numbers to these I think the Q last year was like $2 five $2 6 billion and we have.
This was a slowdown as he said in first Q <unk>, we went down back to a normalized or average number which is in the region of $1 $71 eight $1 5 billion, which explains fully the decrease of NII because NIH frontlines had another strong performance.
Going forward and given the movements that we have seen in interest rates.
In the deal.
We told you and always strongly.
Stupid.
During this year and then with negative slope.
Hello, Yes.
I would expect that the NII from Markus <unk> weaker result during this year, we do have.
As strong as you know Treasury Department, which is over performing and that should continue into 2022, but the alco side, but you're always question in this part of the.
All the questions for the Q&A.
We'll obviously perform.
We could wait compared to $20 to us So I would expect in NII from markets weaken in 'twenty, two compared to 21, yes.
So our next questions come from Pedro Leduc from without maybe renegotiations Santander has launched a national wide <unk> here the program productivity.
Calling retail clients to renegotiate their credits can you can you discuss more just program is there a rule of thumb for how much your provision for retail corporate rate negotiations.
Yeah, I'll take that one thanks.
Thanks for the question. Thanks for your work I've been following your workflow outstanding quality, so well done overall not necessarily something there.
Marty and I and the rest of the team as we have as we were pretty much attentive that I think you raised around what's going to happen what's already happening 21 in terms of credit quality, we wanted to start the year ready.
And we were very fortunate in doing a couple of things not only the campaign, but also.
The marketing content behind it which was the notion of you have the launch of Big brother, Brazil, which is still very popular in our country.
And we were created to bringing former winners of the same reality show, which despite the price because they had one.
All of them had financial problems.
And we want we wanted to make a point that the fact that you earn money it doesn't make that youll get read our financial problems you need more than that so we came with the program. This program has yielded in terms of new renegotiations over 700 million Reais, we normally run I'm not going to give you the exact.
Number, but somewhere between 182 8 billion a month in terms of negotiations. So seven hundreds is a very significant number four for one specific campaigns. So it proved to be the right thing to do and again, we are not yet.
Completely we just don't know how the 400 <unk> the new government subsidized.
Systems program is going to influence.
Debt repayments. So that's two in a no no. If we look at the last two years has been very positive and favorable but we don't know how the consumers are going to behave, especially on the back of the inflation that is eroding.
The capacity of people to buy more critical stuff like food energy bills and so forth.
Yeah.
The Q&A session via telephone is open now.
One question their purchase of debt only.
Please wait while we can't predict for every request.
Yeah.
Our first question comes from Marcelo Telles with credit Suisse.
Hi, good morning, and Hello, everyone.
Satish.
To start here.
Just.
Thank you for all the work you've done at sometime there in.
Leading this incredible trust.
Formation, which I'm pretty sure will be part of Okay got it.
Hard to transform our bank.
And I know it was.
A lot of hard work and I Wonder I wish you all the best.
Our new role.
So congratulations again.
Hi, My question is regarding the competitive environment of course, all this year, there's always like some ongoing concern right about potential players potentially.
Bringing down credit spreads.
And the latest data that we're looking we're not seeing that so if you could comment a little bit how youre seeing.
No competition.
The impact on credit spreads.
Going forward, especially now coming from the digital banks.
How do you see.
And there.
B B.
At the digital banks.
Okay.
Nice to hear you I thought you were not youre not on the call. So it's really nice.
And I think I appreciate the words, but I would also like to give back the warrants to you because you are probably one of the very few who truly believed that what happened could have happened. So thanks for delivering.
<unk>.
I would say Marcello a couple of things I think on the wholesale side on the corporate investment banking side.
I think youre going to see quite a bit of pressure on spreads.
Because by definition, there's going to there's not going to be a lot of demand for credit I don't see it.
I don't see significant investments happening in the private sector as of today.
Sure.
Particularly the large companies in Brazil, who have done a phenomenal job in improving their balance sheet.
Alex sheets over the last couple of years, So I don't see companies borrowing net.
Necessarily so corporate investment banking side pressure on spreads on the retail side consumer side, not necessarily I don't see it I think credit is going to remain.
Scarfs.
The banks have done a phenomenal job during the pandemic, but delinquency levels increase there is going to be naturally in the system.
A higher level of attention and care. So I don't see the pressure on spreads on the consumer side necessarily but I can see.
All companies in general, particularly gruesome that strengthen their balance sheet I don't see credit demand from large corporates.
In the coming quarters, that's how we see now digital banks.
I think that's a broader discussion I can't speak about them, but I think Mike.
Reflection is we are getting into a world.
That is indeed, the fed increases rates by more than six times, where people are already even discussing that seven times can still be possible.
I think there will be important implications to the rest of the world as we all know and it's not very clear all of the different correlations to the financial system in particular to the value of liquidity I think the value of liquidity will fundamentally change those are little bit older. Like me have seen that in the past and also.
Being a little bit older than me remember the U S and not in any way, suggesting that but with rates in double digits back in the seventies. So inflation seems to have arrived.
And Thats just part of the knock on effect of treatments of quantitative easing over the last two decades. Since 2008. So this is going on for a number of years and.
Some of the consequences are going to come and we're going to have to move with them for the coming years.
Thank you. Thank you.
Thank you everybody for for the interest in our call. We have a couple of more questions, but to do at the time.
We would like to give you.
The awards of <unk>.
<unk>.
Thank you first of all let me correct just to be accurate and mining supported seats are not 47, so I still want to keep them as a friend. So it's 46 years old and I think I don't know if <unk> has joined us, but I think he probably join US now in the room and knocking Sao Paulo today I'm in London.
So I would like to ask each and every one of you to give Marty the level of challenge.
Rust doubt.
Confident total lack of confidence that you have given to me over the last couple of years.
And I'll be as close as Marty wants me to be as a chairman I am incentive there I will ensure that everything that I have learned.
The pudding for him to bear and for him to make his own decision as the CEO . So Marty maybe you want to say few words and I am sure youre going to meet them in the first quarter.
Thank you very much Sir I just wanted to say it will be it will be a pleasure to get to know each one of you we're going to have.
Discussions with investors discussions bilateral discussions group discussions surgery.
Given me the opportunity to lead this great company and we will definitely continue the transformation has begun.
Six years ago, we have a great team, which goes well beyond myself.
It should be with surge was well and I'll be very happy to lead the executive Committee are 50000 lanes of the call.
Towards a new cycle of continuous growth and continuous transformation is about when it would be a pleasure to get to know each of you. Thank you very much.
Banco Santander <unk> conference call has kind of a trend that we thank you for your participation and have a nice day.
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