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Santander Brasil's CEO says extra provision enough to face COVID-19 crisis

Credit: REUTERS/SERGIO MORAES

Banco Santander Brasil SA is unlikely to need extra provisioning this year, after it set aside 3.2 billion reais ($621 million) for potential coronavirus-related loan losses, Chief Executive Sergio Rial said on Wednesday.

By Carolina Mandl

SAO PAULO, July 29 (Reuters) - Banco Santander Brasil SA <SANB11.SA> is unlikely to need extra provisioning this year, after it set aside 3.2 billion reais ($621 million) for potential coronavirus-related loan losses, Chief Executive Sergio Rial said on Wednesday.

His statement to reporters helped boost the bank's shares almost 4% in morning trading.

The bank's SANB11.SA quarterly earnings sank 41.2% from a year earlier, to 2.1 billion reais, mainly due to extraordinary provisions.

Total loan-loss provisions more than doubled from the same period a year ago, to 6.5 billion reais. Contrary to its rivals, Santander Brasil had not yet cushioned for an expected rise in loan defaults.

Santander Brasil gave grace periods to 13% of its loan book, worth 49.8 billion reais, and renegotiations rose 4 billion reais from the previous quarter. Rial said it is unclear how defaults will perform, given current uncertainties.

Still, he said Brazil's record low interest rates and the government's emergency aid payments to informal workers should contain asset quality deterioration.

"I would not dare make predictions right now," Rial said when asked about his outlook for defaults. With clients having a 90-day grace period to help them weather the coronavirus crisis, loan delinquency still does not entirely reflect potential losses.

In the second quarter, the 90-day default ratio fell to 2.4% from 3% in the first quarter.

BTG Pactual's analysts said in a note to clients that a "proper reading on asset quality remains quite hard."

The bank's return on equity, a gauge of profitability, was 12%, down more than 10 percentage points from the previous quarter due to the rise in provisions.

After years of accelerated growth in consumer lending, the bank is now more focused on corporate loans and collateralized consumer lending, Rial said.

Its loan book grew 1.2% in the quarter, while credit card, overdraft and personal loans portfolios shrank.

($1 = 5.1533 reais)

(Reporting by Carolina Mandl; additional reporting by Paula Laier; Editing by Louise Heavens and Dan Grebler)

((carolina.mandl@thomsonreuters.com; +55 11 5644 7703; +55 11 97116-3806;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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