Lucro do Santander cai 28% e fica abaixo do consenso; ROE vai a 11,9%

The Lucro do Santander Brasil declined by 28% in the third quarter, falling below market consensus. Net profit dropped to R$ 2.9 billion, 7% under consensus expectations. The return on equity (ROE) decreased to 11.9%, down from 12.5% in the previous quarter and 17.5% a year earlier. Operational profit frustration was even greater, with EBT falling 38% year-on-year and 15% below estimates from Citi and BTG.

The earnings were higher than operational due to tax credits that made the effective tax rate negative, boosting net profit, a trend that had already occurred in the prior half-year. This result reflects Santander's strategy of changing its credit mix and transitioning to lower-risk assets with smaller spreads. The CEO, Gilson Finkelsztain, said the move has a cost, but is a long-term winning strategy.

He noted that while continuity does not mean inertia, the bank is below the profitability level it should have and needs to walk towards regaining a healthy ROE "gradually and sustainably." The challenge lies in doing this amidst high interest rates, pressured companies, and highly indebted individuals. The portfolio size of Santander continues to grow slower than the banking average, expanding by 0.9% in the quarter and 4.7% year-on-year, reaching R$ 721 billion.

Margins for customers fell by 1% quarter-on-quarter and 4% over the same period last year. The Provision for Deterioration of Debts (PDD) dropped by 2.5% in the quarter but increased by 14% year-on-year, reaching R$ 7.5 billion, a high level reflecting problems in retail, agro, low income, and also middle class, especially on unsecured lines like credit cards, according to CFO Carlos Muñiz.

The trend now is relative stability, Muñiz said. "I cannot say if there will be a new delinquency case, but overall, delinquency starts to come better," he affirmed. Delinquency above 90 days rose to 3.4% in September, up from 3.3% in June and 2.8% in September 2025. The biggest increase was in the retail segment, where the rate reached 5.5%, up from 5.1% in the previous quarter and 4.2% a year earlier.

Retail delinquency below 15 days fell from 3.3% to 3.2% in the quarter, down from 3.1% in September 2025. For Citi analysts, this is a positive signal that could indicate a gradual reduction of credit pressure, favored by a more conservative portfolio composition. Another positive point was the cost reduction, with general expenses totaling R$ 6.4 billion, a drop of 3% in the quarter and 0.6% year-on-year.

Personnel costs fell around 4% in both comparisons, despite the impact of the salary increase stipulated in the collective agreement. The employee base was reduced by 1.5 thousand more in the quarter and almost 6 thousand over the last 12 months. As a result, efficiency improved by 0.4 percentage points over the previous quarter, reaching 38.8%, but still 1.3 percentage points below a year ago due to revenue weakening, according to BTG.

Despite the setback, analysts do not expect significant impacts on the share price. The stock fell by 4% on the day, almost in line with Bradesco's (-5%) and Itaú's (-3%) decline, in a still very volatile post-election market. The Santander share price is tied to the outcome of the OPA announced in July for the bank to acquire the remaining 10% it doesn't own of the Brazilian operation.

"Until last week, we heard from several investors who did not intend to participate in the offering" due to the domestic scenario possibly improving significantly, and Santander Brasil being traded at a discount to Bradesco, its main listed competitor according to BTG. "The revaluation of assets after the elections quickly changed this assessment," said Rosman.

On the week ending October 27, Santander's shares fell about 7%, while Bradesco's dropped by 24%, making the Spanish bank expensive. With the stock prices from yesterday, Santander Brasil trades around 1 times its latest book value, compared to about 0.9 times for Bradesco. "In our assessment, this increases the probability of current shareholders opting to participate in the exchange offer," BTG concluded.