What Banco Santander Brasil (BSBR) Said on Its Q3 Earnings Call

Key Points

• Santander Brasil reported BRL 2.9 billion in recurring net income and 11.9% ROE in Q3 2026, while management said profitability remains below its target amid high interest rates and elevated household debt.
• The bank is shifting toward lower-risk customers and secured lending, supporting loan growth in mortgages, consumer finance and SMEs but weighing on near-term spreads and net interest income.
• Credit costs included about BRL 500 million in wholesale-specific cases, with ongoing stress in agribusiness and lower- and middle-income consumers; meanwhile, disciplined expenses improved the efficiency ratio to 38.8%.

Banco Santander Brasil NYSE: BSBR reported recurring net income of BRL 2.9 billion for the third quarter of 2026, with return on equity of 11.9%, as the lender continued to rebalance its loan book toward lower-risk customers and more secured lending products.

Chief Executive Officer Gilson Finkelsztain, who described the quarter as the start of a new management cycle, said the bank intends to preserve its existing strategy while making adjustments aimed at accelerating value creation. He said profitability remains below the bank’s objectives, while high interest rates and elevated household debt are pressuring revenue and credit costs.

“Continuity does not mean inertia,” Finkelsztain said. “Our responsibility is to preserve what works, make the necessary adjustments, and accelerate value creation.”

Portfolio shift weighs on spreads

Management said Santander Brazil has been directing capital toward clients and segments with stronger risk-adjusted returns, including high-net-worth individuals, large corporations and corporate and investment banking activities. The strategy has reduced exposure to riskier lending categories, but it has also created near-term pressure on margins because those segments generally carry lower spreads.

Chief Financial Officer Carlos Muñiz said the bank’s client net interest income declined during the quarter due to lower funding income from a lower average CDI rate, higher deferred banking-correspondent expenses, the sale of a consumer-finance portfolio and selective loan origination. These factors more than offset the additional calendar days in the quarter and a modest increase in volumes, he said.

Finkelsztain said the bank expects its continued shift toward more secured loans and higher-income customers to keep some pressure on spreads in the near term. However, he said the newer vintages of the portfolio have better spreads than previous originations and that management sees opportunities for net interest income growth in 2027.

The bank has also reduced its sensitivity to interest-rate movements by hedging its exposure, Finkelsztain said. Management expects the negative result associated with certain securities and interest-rate effects to be smaller in 2027 than in the first nine months of 2026, although it still expects a negative result next year.

Loan growth led by mortgages, consumer finance and SMEs

Santander Brazil reported differing growth rates across its lending businesses as it prioritized pricing discipline and loan quality. Mortgage loans grew 10.3% from a year earlier, while lending to small and medium-sized enterprises rose 8.5%. Consumer finance increased 9.1% despite the portfolio sale during the period.

Muñiz said consumer-finance profitability is largely generated at origination and therefore was not affected by the subsequent portfolio sale. The business has also shifted toward newer vehicles, including hybrid and electric models. Over the past 12 months, the share of hybrid and electric vehicles in the number of financed vehicles rose to 20% from 5%, according to the CFO.

In the SME segment, management said growth will depend on demand, pricing and risk conditions. Muñiz said the bank sees pressure on net interest margins in the segment and remains cautious on portions of the SME portfolio without government-backed collateral. About 25% of the SME portfolio has support from Pronampe and FGO programs, he said.

Management said the bank’s strategy for smaller business customers will emphasize transactional and service-linked credit rather than unsecured lending. The bank expects cash-management, receivables and acquiring services to support the expansion of credit relationships where appropriate.

Credit costs affected by wholesale cases and consumer stress

Provisions during the third quarter included approximately BRL 500 million of specific cases in the wholesale segment, Muñiz said. Excluding extraordinary effects in the second and third quarters, recurring provisioning expenses remained stable, according to management.

The bank continues to see credit pressure in agribusiness, low-income consumers and, more recently, middle-income customers using unsecured loans. Muñiz said high-net-worth clients and large corporate borrowers have performed reasonably well, while more recent consumer-finance cohorts have shown improved behavior after adjustments to underwriting models.

Short-term delinquency improved for a second consecutive quarter, management said. Long-term nonperforming loans increased among individual borrowers, though the bank said the measure would have been stable when adjusted for agribusiness-related effects. Santander said the agribusiness component linked to individual borrowers had an impact of nearly 60 basis points on the quarter’s delinquency indicator.

Finkelsztain said higher interest rates could continue to create pressure for SMEs and agribusiness borrowers in coming quarters. The bank has also tightened its standards for renegotiated loans, requiring additional collateral or upfront cash deposits in some cases. Management said this approach may pressure asset-quality metrics in the short term but should improve the quality of restructurings and future recoveries.

Cost discipline and customer engagement initiatives

Expenses grew below inflation despite the partial impact of a 4.6% collective bargaining agreement, management said. The efficiency ratio improved to 38.8% as personnel and administrative expenses remained controlled.

During 2026, Santander Brazil reduced its product lineup by more than 100 items, expanded digitization of its portfolio and increased sales through digital channels, Muñiz said.

Finkelsztain said the bank ended the quarter with 76.9 million clients, up 6% from a year earlier. The company’s Santander Rewards platform had reached roughly 700,000 clients, and participating customers increased spending by more than 10% compared with other clients with similar patterns, he said. Management said the platform is intended to increase customer engagement and reinforce Santander’s position as clients’ primary financial institution.

“The priority now is certainly to scale this proposition with a clear economic rationale for both the client and the bank,” Finkelsztain said.

About Banco Santander Brasil (NYSE:BSBR)

Banco Santander (Brasil) SA is a Brazilian financial institution and a subsidiary of Spain-based Banco Santander. It provides banking and financial services to individuals, small and midsize businesses, corporate clients and institutional customers throughout Brazil.

The company's offerings include checking and savings accounts, consumer and commercial loans, credit and debit cards, mortgages, payroll lending, insurance, investment products, foreign-exchange services, cash management and payment solutions.

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