January 26, 2017 / 11:12 AM / 3 years ago

Santander Brasil sees room for less Brazil bank regulation

SAO PAULO (Reuters) - The Brazilian central bank’s recent easing of reserve requirements for commercial lenders could lead to a more business-friendly oversight of the industry and more credit issuance, Banco Santander Brasil SA’s (SANB11.SA) top executive said on Thursday.

A woman walks past a Banco Santander branch in downtown Rio de Janeiro August 19, 2014. REUTERS/Pilar Olivares/File Photo

In addition, recent actions to modify card payment rules that analysts have said could hamper banks’ revenue may help improve relationships between lenders and clients, said Chief Executive Officer Sérgio Rial.

Steps to cut spending and allow consumers to tap their severances are part of an agenda “that will eventually give the system an incentive to be more present in the lives of people,” via services or credit, Rial told reporters at an event to discuss Santander Brasil’s fourth-quarter results.

Indications that central bank policymakers could slash the overnight lending rate to single-digit percentage rates mean that the government, which controls more than half outstanding loans in Brazil, wants more private-sector involvement in the market, he said.

His remarks underscore improved sentiment since President Michel Temer vowed to curb the government’s presence in Latin America’s largest economy. Temer rose to power following the impeachment of Dilma Rousseff, who instructed state banks to boost credit at artificially low rates at the start of the decade.

“I believe people allocate their resources better than anyone else,” he said.

Rial’s efforts to offer more services to clients, keep expenses under check and focus on profitable segments helped propel Santander Brasil to a record fourth-quarter profit.

Recurring net income, which excludes special items, came in at 1.989 billion reais ($628 million), beating a consensus estimate of 1.613 billion reais, on a jump in fee income and declining loan-loss provisions.

Financial services revenue, or fee income, jumped 12 percent from the previous quarter and helped offset a 5 percent decline in interest income. Expenses grew slightly below inflation, while provisions dropped 6 percent on a quarterly basis due to stricter credit-risk controls.

Return on equity hit 13.9 percent in the fourth quarter, the highest in almost four years, according to Thomson Reuters data.

Santander Brasil’s units (SANB11.SA), a blend of common and preferred stock, jumped 2.3 percent to 31.83 reais, outperforming a 1.9 percent gain in an index tracking financial shares listed in the São Paulo Stock Exchange .IFNC.

Spanish parent company Banco Santander SA (SAN.MC) had reported robust fourth-quarter results on Wednesday. It derived about 21 percent of its profit last year from Santander Brasil’s net income.

Santander Brasil has a goal for return on equity at 15.6 percent by December 2018. Other targets remained unchanged, including a December 2018 goal of bringing default ratios in line with those of peers.

Editing by Lisa Von Ahn and Alan Crosby

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