(New throughout, adds GetNet talks, comments, updates share
By Guillermo Parra-Bernal
SAO PAULO, March 19 Banco Santander Brasil SA
expects to conclude the buyout of card payment
processor GetNet Tecnologia SA in the second quarter, a senior
executive said on Wednesday, a move that should boost the
footprint of Brazil's largest foreign lender in a fast-growing
The São Paulo-based lender and Ernesto Corrêa da Silva,
GetNet's controlling shareholder, are finalizing details of the
deal, with the most important aspects already agreed upon, said
Conrado Engel, Santander Brasil's executive president for retail
banking. He declined to elaborate on the value and other terms
of the deal.
Both parties began discussions in July over the purchase of
Corrêa's stake in GetNet, a financial institution known as a
merchant acquirer in Brazil, which processes credit or debit
card payments for merchants and also deals with receivables and
payments from card-issuing banks.
GetNet controls about 6 percent of Brazil's $300 billion
card payment processing industry. Larger rivals Banco do Brasil
SA, Itaú Unibanco Holding SA and Banco
Bradesco SA control a combined 90 percent of the
market directly or indirectly through their merchant acquiring
"Certainly that deal will be concluded during the second
quarter, I have no doubt about it," Engel said on the sidelines
of a Santander Brasil event with shareholders. "All this is
happening - the timetable, the talks - as expected."
Santander Brasil recently divested fee income-earnings
business lines such as insurance and asset management, and the
decision to integrate GetNet into its platform marks a step back
from this strategy. It also underscores the bank's goal to win
market share in merchant acquiring, which has grown at
compounded average growth rates close to 20 percent in the past
Analysts have said that Santander Brasil is likely to pay a
fat premium to buy out Corrêa, since GetNet's contribution to
the lender's earnings is larger than the stake Santander Brasil
owns in the unit. GetNet is also a key tool in Santander
Brasil's intention to grow in retail banking, which has
struggled in the wake of aggressive competition from state-run
banks and a jump in defaults in recent years.
Units of Santander Brasil rose 2.1 percent to 11.67 reais on
Wednesday. The units, a blend of Santander Brasil's common and
preferred shares, are down 11.2 percent in the past 12 months.
This year, the outlook for the bank's retail segment
business looks more promising than in 2013 because lending
spreads are unlikely to narrow significantly and delinquencies
will remain stable at the very least, Chief Financial Officer
Carlos Galán said at the event.
Santander Brasil's plan to increase debt and reduce excess
capital will eventually help the lender deliver higher levels of
profitability, Galán added. The program, which was announced in
October and allowed the bank to distribute 6 billion reais ($2.6
billion) in dividends by taking on an exact amount of debt, will
gradually yield the expected results, he noted.
Capital regulatory ratios at Santander Brasil remain above
the average of Brazil's banking system, allowing the bank to
expand organically or through other means, including mergers and
acquisitions, Galán added. The bank still has about 9 billion
reais to book from goodwill amortizations stemming from prior
acquisitions, Galán said.
"This capital optimization plan that we concluded in January
... will help us tackle our bank's biggest Achilles' heel,
profitability readings," Galán told investors.
Santander Brasil's return on equity, a gauge of how well the
bank spends shareholders' equity, is the lowest among Brazil's
four largest listed banks. Analyst Carlos Macedo of Goldman
Sachs Group Inc said one reason is that Santander Brasil did not
reinvest proceeds from the divestment of the insurance and asset
management units in activities that produced a higher return.
The strategy of integrating non-bank businesses such as
GetNet into the mix is more attractive from a return and risk
perspective, Goldman's Macedo said in a recent client note.
($1 = 2.33 Brazilian reais)
(Reporting by Guillermo Parra-Bernal; Editing by Jeffrey Benkoe
and David Gregorio)