Santander Brasil posts weakest profit since 2023; shares tumble as provisions rise

By Gabriel Araujo and Michael Susin

SAO ‌PAULO, July 29 (Reuters) - ​Banco Santander ​Brasil on Wednesday reported its weakest quarterly profit and profitability since late 2023, missing market expectations as tighter lending spreads and higher provisions for bad loans weighed ‌on earnings.

Shares in the Brazilian unit of Spain's Banco Santander, which has Latin ⁠America's largest economy as a key market, fell as much as 7% after the results, on track for their biggest ‌daily loss since April 2020.

Santander Brasil ‌posted net profit of 3.01 billion reais ($586.9 million) for the April-June period, down 17.6% from a year earlier and below the 3.9 billion reais expected by analysts polled by LSEG.

RESULTS SET ​STAGE FOR PEERS NEXT WEEK

The result was the lender's lowest quarterly profit since the fourth quarter of 2023. Return on average equity (ROAE), a key profitability measure, also reached its lowest ⁠since that period, slipping to 12.5% from 16.4% a year earlier.

"While a soft print (result) was expected, we have a negative first take," ​JPMorgan analysts said.

Santander Brasil is typically the first major private-sector lender in the country to report quarterly earnings, setting the stage for peers including Itau Unibanco ​and Bradesco, which are scheduled to report next week.

Itau ‌BBA analysts, however, said the read-across for peers was limited. "Santander has been on a softer revenue path for years with idiosyncratic non-performing loan issues, and ⁠we expect a stronger Bradesco next week," they wrote.

CFO WANTS A 'MORE BORING BANK'

Santander Brasil's net interest income, a measure of earnings on loans minus funding costs, slipped 0.4% year-on-year to 15.34 billion reais, with tighter spreads reflecting ⁠lower exposure to the mass-income segment.

Loan-loss provisions rose 6.5% to 8.26 billion reais, with Santander citing one-off effects from ​additional provisions for wholesale cases and the review of write-off criteria, with impacts concentrated in "specific portfolios."

Chief Financial Officer Carlos Gonzalez-Blanch said the update to provisioning models incorporating a deterioration in Brazil's macroeconomic outlook amid high interest rates ‌could also have an impact in the fourth quarter.

He said Santander would seek to improve its profitability through greater generation of non-credit-related revenue, cost ‌reductions and a normalization of loan-loss provisions.

"I want a more boring, more predictable bank. One that doesn't deliver ⁠positive surprises, but doesn't deliver negative ones ‌either," said Gonzalez-Blanch, who was ​appointed late last year amid a broader leadership shakeup.

($1 = 5.1290 reais)

(Reporting by Gabriel Araujo in Sao Paulo and Michael Susin in Barcelona; Editing by Tomasz Janowski and ‌David Holmes)

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