Banco Santander (Brasil) S.A. Q4 FY2022 earnings call

• Anticipation of economic cycles: Demonstrated ability to anticipate market trends, which has been key to past performance.
• Credit quality: New loan vintages perform better than old ones in terms of NPL and over 30 M3 ratios, showing the effectiveness of selective lending.
• Client loyalty: Loyal customer base grew 5% in 2022, revenues from loyal customers rose 41% in 12 months; target 1 million high-income clients by 2023.
• Channel integration: Santander Brasil customers have 24/7 access to channels, with 13 million monthly store visits (half non-clients) and 51 new agribusiness stores opened in 2022.
• Efficiency: Reduced transaction unit costs by 40% in 4 years, cost to serve fully digital clients down 31% in 12 months, 90% of businesses on cloud.
• Growth initiatives: Investments expanding with AAA model and Toro platform; credit cards at record turnover; insurance targeting R$15 billion by 2023; payroll loans and Consórcio growing strongly; Company segment and Agribusiness with ambitious growth targets; Auto segment aiming for 18% credit portfolio growth.

In the Individual segment and Consumer Finance, results are under pressure due to older vintages and client selectiveness. The Wholesale division was impacted by a large company event. On the positive side, the Investment segment saw expansion in the AAA model for advisory services and growth in the Toro digital open platform. Credit cards had record turnover. Insurance premiums rose 28% with a target of R$15 billion by 2023. Payroll loans saw digitalization leading to record origination, and Consórcio had 42% growth in 2022. The Company segment (Empresas) had revenues up 32%, with SMEs achieving 43,000 new clients per month. Agribusiness increased its portfolio to almost R$38 billion and aims for R$50 billion by year-end, with 51 new stores opened in 2022. The Auto segment is the market leader with a 22% market share in vehicle financing for individuals and targets an 18% increase in its credit portfolio.

• Consumer Finance: Projected to resume growth in the second half of 2023 as Selic rate declines and consumer spending recovers.
• Growth targets: 13% increase in company portfolio, 33% growth in agribusiness portfolio, 18% growth in consumer finance credit portfolio.
• Capital impact: Central Bank Resolution 229 postponed to July 2023, expected to add 70 basis points to core equity Tier 1 ratio.

• Exposure risk: Exposure to specific companies (e.g., Americanas) and its impact on provisions.
• Credit cycle pressure: Results under pressure due to older loan vintages, client selectiveness, and economic cycle deterioration.
• Interest rate sensitivity: Market NII negatively affected by interest rate changes.

Q: Jorge Kuri asked about exposure to Americanas, provisions, etc.

A: Mario Leao stated they won't comment on specific names but mentioned a provisioning step and monitoring the event.

Q: Thiago Batista asked about supplier finance and payroll loans.

A: Mario discussed supplier financing expansion and digital channel, Angel mentioned diversified exposure; Mario talked about payroll loans' digitalization and cross-selling.

Q: Eduardo Rosman asked about capital base and dividend policy.

A: Angel Santodomingo discussed core equity Tier 1 ratio, payout policy, and impact of Central Bank resolution.

Q: Rafael Frade asked about asset quality.

A: Angel Santodomingo talked about through-the-cycle management, better new vintages, and stable renegotiation portfolio.

Q: Pedro Leduc asked about client NIMs.

A: Mario and Angel discussed selective lending, renegotiation portfolio impact, and collateralized exposure.

Q: Flavio Yoshida asked about loan growth and credit risk.

A: Angel Santodomingo mentioned time needed for new vintages to impact results and stable 90+ days NPL ratios.

Q: Yuri Fernandes asked about loan growth targets.

A: Mario discussed growth targets in various segments and risk/reward basis, Angel talked about NII and volume growth.