Banco Santander Brasil NYSE: BSBR reported first-quarter 2026 results marked by lower net income versus the prior quarter and marginally lower net income year-over-year, while management emphasized continued improvement in pre-tax profitability and balance sheet discipline.
Chief Executive Officer Mario Leão said earnings before tax rose 5.4% quarter-on-quarter, which he described as evidence that “the organic operation of the bank is growing in the direction that we intend it to.” He added that the bank is paying more taxes compared with the prior quarter, a dynamic he said investors had been focused on, as Santander Brasil works to concentrate profitability within the bank itself and “absorb” deferred tax assets (DTAs) over time.
Pre-tax growth, ROE, and expense discipline
Leão noted net interest income (NII) increased 3.1% quarter-on-quarter, though he said the composition skewed toward market NII rather than client NII, with client NII down 4%. He attributed part of the quarter’s market NII performance to asset-liability management actions, including what he described as a “marginal hedge of provision” initiated in September 2024 that dynamically hedges 50%–60% and targets an average hedge of 75% over nine months, aimed at reducing volatility from short-term rates.
Return on equity (ROE) was 16%, which Leão characterized as “not an structural number, it’s an accounting number,” citing balance sheet math effects. He reiterated a longer-term goal of reaching 20% ROE, saying it remains part of management’s target for the coming year.
On costs, Leão said the bank delivered “practically zero growth in expenses” in the quarter and reported a 0.7% quarter-on-quarter reduction when separating general expenses from depreciation and amortization. He also cited continued headcount reduction alongside technology investment. Efficiency improved by 110 basis points in the quarter, which he tied to controlled costs and operating leverage.
Customer strategy and the launch of Santander Rewards
Management again highlighted customer centricity as a foundation of strategy. Leão said the bank’s customer base grew 6% year-over-year and emphasized the importance of increasing “principality” and engagement among active customers.
Leão also pointed to the launch of “Santander Rewards” as a major initiative. He described it as a shift from a credit card-centric rewards model to one that considers the “customer relationship as a whole,” rewarding broader engagement with the bank through points, benefits, and a “gamification” approach. He said the campaign would begin that Saturday and called it “one of the most important deliveries” during his tenure.
Portfolio mix: de-risking low income and emphasis on secured lending
Leão said Santander Brasil continues to pursue growth “with quality,” focusing on risk-adjusted profitability at origination and ongoing backtesting of cohorts. He described a planned reduction in low-income exposure, noting the individual portfolio declined partly due to the ongoing runoff. Leão said the de-risking process is expected to continue through 2026 and into part of 2027 given portfolio duration.
He highlighted pockets of growth, including credit cards and real estate credit, and said home equity is an area where Santander holds leadership. Leão said home equity origination has been increasing relative to prior periods, with monthly origination approaching what he described as “close to EUR 400 million,” nearly double past levels.
In small and mid-sized companies (SMEs), Leão acknowledged the bank was more cautious in the quarter given the macroeconomic backdrop, particularly among very small companies where he said the “credit challenge is even higher.” Still, he reiterated that SMEs and high-income individuals are two areas where the bank aims to grow at “2+ digits” during the year and gain share, while maintaining margin discipline.
In large corporate, Leão pointed to foreign exchange impacts on a trade portfolio denominated in dollars and euros, describing the quarter’s effect as an FX translation issue rather than a change in appetite.
Fees: seasonal pressure, strength in select lines
Fees fell 5.5% quarter-on-quarter, which Leão said partly reflected normal seasonality from the fourth quarter into the first. He said cards experienced seasonal pressure sequentially, but year-on-year growth was “practically” double digits, which he attributed to portfolio quality and profitability in revolving and installment products.
Leão said insurance fees were broadly stable sequentially despite typical first-quarter seasonality and showed “clear 2-digit growth” year-on-year, with strength in open insurance not tied to credit. He also said current account services declined but less than the market, as the industry faces pressure from “free accounts with no commissions.”
Other fee-related highlights he cited included:
- Nearly 20% growth in credit card turnover.
- Strong performance in securities brokerage and capital markets, which he described as one of the strongest quarters.
- Growth in consórcio, supported by fixed bid and reduced installments, though he said he expects faster sequential growth.
- Asset management up 20.9% year-over-year, which he said underscores potential to further expand the franchise.
Asset quality: stable NPLs, write-off policy changes, and areas of attention
Leão said cost of risk declined by “some basis points” in the quarter and that non-performing loans were “practically flat,” adding that the bank is not concerned with the overall NPL trajectory at current levels. He attributed higher provisions largely to lower recoveries and fewer portfolio sales. He also flagged continued pressure in segments including agribusiness, low income, SMEs, and very small enterprises.
Discussing early-stage delinquencies, Leão said 15–90 day NPLs declined in companies, partly linked to government programs that do not necessarily translate into losses. In individuals, he cited a slight increase related to consumer finance and mortgages, but said the rollover into 90+ day NPLs is contained and that the bank expects a reversal in the second quarter.
He also described a “technical review” initiated in the fourth quarter that changed write-off timing by product. For cards, he said Santander is bringing forward write-offs based on analysis of prior cohorts, while in auto loans and some other products, recoveries can extend longer and the bank is adjusting write-off treatment accordingly. Leão said these changes may push reported 90+ day NPL higher than last year’s average, but he did not frame it as a deterioration in underlying credit quality.
In response to questions on SMEs, Leão said 25%–30% of the SME portfolio is tied to government lines, where “most of the delays occur,” and he acknowledged macro sensitivity in the segment. He said it is possible delinquency could rise depending on economic conditions, while noting the government may also support programs such as Pronampe and FGI.
On consumer finance and auto loans, Leão said Santander’s broad origination visibility allows it to be highly selective. He said the bank has shifted away from used cars and motorcycles toward new vehicles and electric vehicles (EVs), citing better credit performance and higher-income borrowers. Leão said Santander funds “out of every two e-vehicles, one,” and in some brands the bank’s share is close to 70%.
Leão said Santander does not expect the cost of risk to deteriorate materially this year, while cautioning that macro conditions remain uncertain. He said the bank expects a “flat order of magnitude” with some basis-point variation and argued de-risking and improved origination should support lower cost of risk in 2027 and 2028.
Leão closed by pointing to capital strength, reporting a 15.2% Basel ratio and 11.2% CET1 ratio, and said the bank plans to maintain its distribution policy, adding that distributions should rise as profits grow.
During the Q&A, Leão also said the call was his last earnings presentation. CFO Carlos Muñiz, introduced as the new CFO, joined Leão during the Q&A session, though Leão said he would address the questions.
About Banco Santander Brasil NYSE: BSBR
Banco Santander Brasil SA is the Brazilian unit of Spain-based Grupo Santander and one of the country's major commercial banks. Headquartered in São Paulo, the bank serves a broad client base across Brazil through an integrated network of branches, ATMs and digital channels. Its shares are represented abroad via American Depositary Shares listed on the New York Stock Exchange under the ticker BSBR.
The bank offers a full range of financial products and services for retail, small and medium-sized enterprises, and corporate clients.
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