UPDATE 2-Santander Brasil beats profit estimates as lower provisions bet pays off

(Adds CEO comments, rise in share price)

SAO PAULO, Feb 3 (Reuters) - Banco Santander Brasil SA on Wednesday beat fourth-quarter profit estimates as provisions for bad loans decreased and fee income grew, driving the company’s shares up about 2%.

Santander Brasil’s recurring net income rose 6.2% to 3.958 billion reais ($737 million), topping the Refinitiv consensus analyst forecast of 3.716 billion reais.

Loan-loss provisions, net of recoveries, shrank 3.4% to 2.883 billion reais, while the 90-day loan default rate remained at a record low level of 2.1%.

Santander Brasil set aside less than its peers for potential losses last year to help weather the economic crisis stemming from the coronavirus pandemic, a bet which several analysts said appeared to be paying off.

“Yes, Santander booked fewer extra provisions than Itau and Bradesco. But with each passing quarter, it is increasingly the consensus that once again they are the outperformers,” analysts at BTG Pactual said in a note to clients.

Santander Brasil Chief Executive Officer Sergio Rial said in a conference call with journalists he is unsure whether the company’s loan delinquency ratio will rise this year even after the expiration of forbearance plans and a government cash aid program, as demand for new loans has also rebounded.

“The bank’s credit recovery strategy also explains our good performance in loans, despite the coronavirus crisis,” he said. Santander Brasil had 40.6 billion reais in loans with repayment deadlines that were extended under forbearance programs in December, down 9.2 billion reais from the second quarter, when those programs were launched.

Rial added that the bank had not had to use 3.2 billion reais in reserves set aside last year for potential loan losses.

Santander Brasil posted a return on equity of 20.9%, mostly thanks to the lower provisioning. That was down 0.3 percentage points from the previous quarter but higher than larger rival Itau Unibanco Holding SA’s.

It also pressed forward with a cost-cutting program that caused its workforce to fall more than 6% to 44,599 employees in 2020.

Shares of Santander Brasil were up about 1.9% at 41.78 reais in mid-morning trading.


Despite a challenging environment for banking products from insurance to credit cards, Santander Brasil’s fee income grew by 6.9%.

The gains were partially driven by its payments unit GetNet, as processed volumes surged 53% from a year earlier, reaching a market share of 15%.

The bank is planning to spin off GetNet and list it by September. Rial said the listing is aimed at making the payments unit more independent from Santander Brasil, potentially allowing it to pursue expansion in Latin America.

$1 = 5.3680 reais Additional reporting by Paula Laier; Editing by Edmund Blair, Jason Neely and Paul Simao