Santander starts the banking season well and SANB11 advances 2.7% with rising profits

Santander Brasil (SANB11) opened the banking results season for the first quarter of 2024 (1Q24) with numbers that surpassed market consensus projections and show the company’s continued recovery. As a result, the financial institution’s units closed with gains of 2.74%, at R$ 28.90, in the session this Tuesday (30), on a day of risk aversion in the market with caution before the Fomc decision .

Santander Brasil had a 41.2% increase in recurring net profit in the first quarter compared to a year earlier, to R$3.02 billion, the Spanish bank reported this Tuesday morning (30). The result exceeded the average expectation of R$ 2.89 billion obtained from sector analysts, according to data from LSEG, and also from Itaú BBA analysts, who also highlighted the strong recovery in relation to the approximately R$ 2 billion reported in the last quarter.

JPMorgan also highlighted that profit was around 6% above what the consensus projected, even though it was 3% below its projections.

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Bradesco BBI also highlighted the important recovery in profitability: “in our opinion, Santander Brasil registered positive general trends in 1Q24, mainly reflecting a quarterly recovery in profitability compared to a weak 4Q23. Notably, defaults by individuals and large companies remained stable in the quarter, while treasury results showed an important recovery in the quarter. Service rates were slightly weaker than expected, reflecting the seasonality of 1Q, and operating expenses remained under control.”

For Itaú BBA, the profit above projection came mainly from a better financial margin and lower expenses with credit provision. The total loan portfolio was also stronger, increasing 2% quarter-on-quarter, with strength in consumer finance (+4% quarter-on-quarter) offsetting a 2% quarter-on-quarter decline in corporate loans. While BBA highlighted the loan portfolio, BBI still saw timid credit growth.

The company reclassified several sources of revenue, making historical comparisons more valid, points out Itaú BBA. Compared to the last quarter, total net interest margin (NII) increased by 7% in the quarter, with the share of customers increasing by 4% in the quarter and the market’s NII entering positive territory.

“In short, a good set of results that should be well received by the markets”, projected the BBA, highlighting that Santander is already recovering revenues, while “the moment of absorption” of the worst credit harvests is almost over. For BBA analysts, overall, the season should be generally positive for Brazilian banks, but they still maintain a recommendation equivalent to neutral for assets. BBI, in turn, continues with a recommendation equivalent to sale (underperformor performance below the market average) for the assets, while JPMorgan, like the BBA, has a neutral recommendation for SANB11.

Levante Corp also points out that it considered Santander Brasil’s result, in qualitative terms, slightly positive, indicating a level of evolution in the bank’s credit harvests, in addition to continued expansion in lines focused on High Income and Private customers. As for managerial net profit, the numbers were good, and reflected an expansion in the NIM (managerial financial margin) added to a level of discipline in costs and expenses.

On the other hand, it notes that the bank’s coverage ratio – which represents the proportion that the provision for credit risk is capable of covering defaulted loans – fell from 222% to 209%, being a point of attention, since, although default levels have shown a certain level of stability, there is still a risk of deterioration in the system, which is also a risk for Santander.