UPDATE 1-Santander Brasil to outpace peers this year, CEO says

Thu Jan 30, 2014 10:25am EST

By Aluísio Alves

SAO PAULO Jan 30 (Reuters) - Banco Santander Brasil SA aims to increase lending at a faster rate than its private-sector peers this year as credit markets return to normal, margins recover and loan defaults decline, Chief Executive Officer Jesús Zabalza said on Thursday.

Zabalza said at an event in São Paulo after release of the bank's fourth-quarter results that the lending gap between Brazil's state-run and private-sector banks will shrink this year, as the former put the brakes on lending and the latter seek more loans.

Last year, state banks increased lending almost five times as fast as private sector banks did. Santander Brasil, the Brazilian unit of Spain's Banco Santander SA, is the largest foreign lender in Brazil and the third-biggest private-sector lender.

The bank, which beat profit estimates in the fourth quarter after ramping up auto, credit card and corporate real estate lending, aims to "expand credit faster than the average of our rivals in the private sector," Zabalza said, adding he sees strong potential for growth in agribusiness loans.

The bank's recurring net income, which excludes one-off items, was 1.41 billion reais ($577 million) in the quarter, up 0.1 percent from the previous three months, but down 12.3 percent on an annual basis, according to a securities filing. A Thomson Reuters poll of eight analysts had predicted recurring profit of 1.329 billion reais.

Santander Brasil undertook a more aggressive loan strategy in the quarter, and implemented strict expense controls, while reducing loan loss provisions sharply.

That contrasted with a more conservative stance at Banco Bradesco SA, Brazil's No. 2 private-sector bank, which also released quarterly results on Thursday and issued cautious guidance for credit growth this year.

Santander Brasil's loan book rose 2.4 percent in the quarter, reaching 227.48 billion reais at the end of December. Credit growth was 7.3 percent last year.

The bank cut loan-loss provisions by 9.2 percent on a quarter-on-quarter basis as 90-day loan defaults fell to 3.7 percent of outstanding loans from 4.5 percent in the previous three months.

Provisions could fall further this year, alongside the bank's default ratio, which has room to decline slightly, Zabalza said.

Sales, administrative and expenses rose 4.2 percent in the quarter and 5.2 percent in the year, below the nation's inflation rate for 2013.

Return on equity fell slightly in the quarter on a sequential basis. ROE ended December at 10.5 percent, compared with 10.6 percent in the third quarter and 12.8 percent in the fourth quarter of 2012.

According to Zabalza, Santander Brasil's ROE will trend toward that of the banking system - currently at around 16 percent - this year.

Still, net interest income, or revenue from lending-related transactions, dropped 4.1 percent to 7.21 billion reais, chiefly because of a 0.1 percentage point compression in lending spreads. Spreads are the different between the rate at which banks lend money and the one at which they remunerate their deposits and other sources of funding.

Parent company Banco Santander SA also released results on Thursday. The Madrid-based lender nearly doubled annual profit in 2013 due to diminishing charges against bad real estate loans, and signaled earnings would keep growing thanks to a turnaround in Spain and Brazil

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