BANCO SANTANDER (BRASIL) SA 2026 Q3 Earnings Call

Good morning, everyone, and thank you for joining us today to follow us on our earnings release presentation for the third quarter of 2026. We are here live from our headquarters in São Paulo, and we will split this event into three parts. First, our CEO, Gilson Finkelsztain, will talk about the main highlights of the quarter. Next, our CFO, Carlos Muñiz, will give us a detailed analysis of our performance. Finally, we will proceed to the Q&A session. It's then that you see that you will have three audio options on your screen, Portuguese, English, or original audio. To choose your option, just click in the icon in the bottom of your screen. For questions, just click in the raise hand icon also in the bottom part of your screen. The presentation we are about to present is already available for download in our IR website.

Now, with no further ado, I'll turn the floor over to Gilson to begin the presentation.

Thank you, Camila. Good morning, everyone. I will keep this opening session brief, so we will have more time at the end for the Q&A. Well, this quarter marks the start of a new management cycle at Santander Brazil. We are starting from a very clear strategic foundation and building on the significant process we already made. There is continuity in our key pillars, but continuity does not mean inertia. Our responsibility is to preserve what works, make the necessary adjustments, and accelerate value creation. Well, I will then begin with a summary of the key KPIs for the quarter. We ended the quarter with recurring net income of R$2.9 billion and ROE of 11.9%.

These figures are, of course, still below the profitability levels we are aiming for, and at the same time, they need to be viewed in the light of the macroeconomic environment and the bank's rebalancing process. The macro environment remains challenging, and what I mean by that is that we have high interest rates, increased household debt, putting pressure on revenues and the cost of risk. The quarter also included some one-off cases in the wholesale segment. On the expense side, growth remains well below inflation, and this discipline enhances our ability to invest in the initiatives that underpin Santander's transformation. The bank has already moved toward a portfolio with higher quality clients and a more balanced relationship between risk, return, and capital utilization. This shift remains central to the bank's strategy. Customer primacy, transaction volume, and an improved balance sheet mix remain our pillars.

The next step is obviously to translate this foundation into a gradual and sustainable recovery of profitability with consistent execution. Now, moving to the next slide. The client is at the center of our strategy, and the priority is to deepen client centricity, supported by a platform of global scale and the capabilities of the Santander Group. We ended the third quarter of 2026 with 76.9 million clients, a 6% increase over 12 months. Growing the base matters, but our main goal is to enhance the quality of the relationship. More clients using Santander in their daily financial lives and choosing the bank as their primary financial institution. In this regard, Santander Rewards has been establishing itself as a key driver of engagement with a more relevant offering and a more intuitive experience. This platform has already reached around 700,000 clients and is having a positive impact on relationship metrics.

Spending stands out as the key highlight. Participants increased their spending by more than 10% vis-à-vis other clients with a similar pattern in investments. These indicators show that a more assertive value proposition drives greater engagement and deepens the relationship. The priority now is certainly to scale this proposition with a clear economic rationale for both the client and the bank. Our goal is not just to grow the base, but rather to make Santander more relevant in each client's financial life, strengthening its position as the primary bank in a long-term relationship. With these opening remarks, I will now turn the floor to Carlos Muñiz for a detailed presentation on the quarter's results, and at the end, the three of us will return for the Q&A session. Welcome, Carlos. Good morning, Gilson, and good morning, everyone.

We'll start with the performance of our loan portfolio.

As we have highlighted in recent quarters, the portfolio's performance reflects the choices we have made to improve its mix and strengthen the risk-return portfolio. We continue to prioritize quality, pricing discipline, customer loyalty, and transaction volume. As a result, we are seeing different growth rates across products and segments. In the year-over-year comparison, I would like to highlight the 10.3% growth in mortgage loans and 8.5% growth in SMEs. Consumer finance grew 9.1%, even after the portfolio sale during the period. In this business, a large portion of profitability is generated at time of origination and therefore is not affected by the subsequent sale of the portfolio. Consumer finance remains relevant, supported by a higher quality mix and a greater share of new hybrid and electric vehicles.

Over the past 12 months, we increased the share of hybrid and electric vehicles in the total number of financed vehicles from 5% to 20%. In the large corporate segment, we maintain positive growth concentrated in the expanded portfolio. Overall, this trend reflects our active portfolio management and also ongoing focus on risk-adjusted returns. On the funding side, we continue to increase retail share of our funding. This strategy strengthens customer loyalty and transactionality. Transactional deposits grew 10% over the past 12 months. This progress reinforces our gains in consumer primacy and improves our funding mix. Next, the client NII declined during the quarter, primarily due to four different factors. Firstly, lower funding income resulting from a lower average CDI. Secondly, a greater impact from deferral of banking correspondent expenses. Thirdly, the sale of the bank's consumer finance portfolio, which reduced revenue for the period.

And finally, selective approach to loan origination, as we discussed on the previous slide. Taken together, these effects more than offset the greater number of days in the quarter and the slight increase in volume. NII also reflects the shift in portfolio mix toward companies with a better risk-return profile and high net worth clients. Because these segments have structurally lower spreads, the increased share puts downward pressure on this metric in the short term, but this is consistent with the portfolio rebalancing we are carrying out. As for market NII, we saw a slight decline in financial management results resulting calendar effect and lower revenue from inflation index securities, partially offset by improved performance in market making. In fees, we saw a more positive trend during the period, despite the effects of stricter credit selectivity and the decline in capital markets.

In brokerage and securities placement, as we expected, there was a sequential decline due to the slower pace of capital market activity during the quarter. Nevertheless, we maintained strong performance in cards and insurance, both quarter-over-quarter and year-over-year. In lending-related activities, performance continues to be shaped by selective origination and by the increased share of new vehicles in consumer finance. In cards, we continue to grow within our existing client base, driven by an increase in transaction volume, especially among higher income clients. Turning to the quality of our assets and provisions, as in the previous period, the quarter was impacted by specific cases in the wholesale segment, which totaled approximately BRL 500 million. Excluding the one-off effects in these two quarters, we observed stability in recurring expenses.

We also continue to see pressure in the agribusiness segment and among low-income individuals and, more recently, middle-income individual clients, particularly in unsecured loans. This environment has required a higher level of provisioning. Part of this trend also stems from the more restrictive stance we have adopted for renegotiations. We have been requiring additional collateral or upfront cash deposits to formalize agreements. This discipline may put pressure on asset quality indicators, but it improves the quality of renegotiated loans. Speaking about delinquency, we observed a favorable trend in the short term for the second consecutive quarter. Long-term NPL indicator boasted an increase for individual borrowers. When adjusted for the impact of the agricultural segment, however, it would have remained stable. For corporate loans, we saw an improvement in the SME segment. We continue to monitor these portfolios closely, carefully, and with discipline.

On the next slide, we present the evolution of expenses. During the quarter, even with the partial impact of the new 4.6% collective bargaining agreement, personnel expenses continued to perform favorably. Likewise, administrative expenses remained under control. Overall, expenses grew well below inflation, reflecting our discipline in cost management and contributing to an improvement in the efficiency ratio, which ended the period at 38.8%. We continue to make progress on spending discipline and our simplification agenda. In 2026, we reduced our product lineup by more than 100 items, expanded the digitization of our portfolio, and increased sales through digital channels, thereby enhancing the operations efficiency. To conclude, I present our income statement. We ended the quarter with recurring net income of close to BRL 2.9 billion and ROE of 11.9%. The macroeconomic environment and the portfolio rebalancing we are undertaking continue to have short-term impacts.

This quarter, this was reflected in lower profitability against the backdrop of higher household debt. Revenues grew at a slower pace while the cost of risk remained under pressure, partially due to one-time effects. Even so, our disciplined approach to capital allocation leaves us better prepared to weather periods of volatility.