April 27, 2016 / 11:02 AM / 2 years ago

UPDATE 2-Santander Brasil shares up on profit beat, lower provisions

(Recasts to add comments from executives, details, share performance throughout)

By Guillermo Parra-Bernal

SAO PAULO, April 27 (Reuters) - Shares in Banco Santander Brasil SA rose on Wednesday after the nation’s largest foreign-owned lender posted a first-quarter profit that beat expectations due in part to lower loan-loss provisions and increased loan renegotiations.

The shares, which are a blend of Santander Brasil’s voting and non-voting stock, had their biggest intraday jump in five weeks, adding as much as 4.2 percent to 18.12 reais. The rise extended Santander Brasil’s gain this year to 14 percent.

Recurring net income totaled 1.660 billion reais ($471 million) last quarter, up 3.3 percent on a quarterly basis, São Paulo-based Santander Brasil said in a statement. The result topped the average consensus estimate of 1.100 billion reais compiled by Thomson Reuters.

Efforts by Chief Executive Officer Sérgio Rial to cut fundraising costs propped up interest income, offsetting the impact of slower loan disbursements in the quarter. Stringent expense controls and steps to renegotiate credits that could potentially sour in coming months helped shield results.

Chief Financial Officer Ángel Santodomingo told investors in a conference call that the strategy kept a lid on delinquencies.

Banks in Brazil are facing a deluge of requests from companies to renegotiate at least 100 billion reais in loans, posing additional headwinds for an industry already struggling with the deepest Brazilian recession in decades.

“Overall, we believe the key message was that credit quality didn’t crack,” said Domingos Falavina, a banking analyst with JPMorgan Securities.


Santander Brasil is the local subsidiary of Spain’s Banco Santander SA, which reported a decline in first-quarter profit earlier on Wednesday.

Santander Brasil’s loan renegotiations rose 1.8 percent last quarter, helping mitigate the impact of rising defaults and allowing it to cut provisions on bad credit by more than 12 percent last quarter.

Loan-loss provisions totaled 2.424 billion reais at the end of March, the lowest level in three quarters and well below the average estimate of 2.999 billion reais in a Reuters poll of seven analysts. Loans in arrears for 90 days or more, a benchmark for delinquencies, rose slightly to 3.3 percent of credit, below the poll’s 3.5 percent estimate.

Recurring return on equity, a gauge of profitability, rose to 12.6 percent last quarter, compared with 12.4 percent in December. The consensus estimate for ROE was 8 percent.

Santander Brasil’s loan book at the end of March was 248.27 billion reais, down almost 5 percent from the end of December 2015.

$1 = 3.5256 Brazilian reais Reporting by Guillermo Parra-Bernal; Additional reporting by Erick Noin and Aluísio Alves in São Paulo; Editing by Paul Simao

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