Santander’s positivity is an outlier in Brazil

A Santander office gleaming in the São Paulo sunshine

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As the first of Brazil’s big banks to report first-quarter earnings, there was more focus than usual on Santander Brasil at the end of April as people searched for clues about the likely financial impact of the coronavirus.

The bank’s commentary on the results was always going to be more important than the results themselves as the coronavirus only began to impact Brazil’s economy in the last couple of weeks of the quarter.

While it reported a return on equity of 22.3% and an 11% increase in net profits, it was the lack of forward-looking action that perplexed analysts.

Facing an economy in crisis, the third-largest privately held bank in the country increased provisions at a lower rate than the increase in the total loan portfolio (19% and 20% respectively).

In fact, in his opening presentation to the earnings conference call, Angel Santodomingo, Santander Brasil’s chief financial officer, made two points in relation to the coronavirus that were positive: it was driving digital growth (greater efficiencies for the bank) and it had led to a “clear flight to quality movement, thus benefiting on balance funding instruments”.