Santander disappoints within the quarter, with revenue under projections

Santander disappoints within the quarter, with revenue under projections

Profit fell 24% compared to the second quarter and PDD increased; analysts consider that the estimate was already a little weaker for the institution than Bradesco and Itaú

Santander Brasil’s performance in the third quarter was below market expectations, pulling the bank’s and competitors’ shares down this Wednesday. Santander units fell 5.6% to R$28.39. BB shares dropped 3.1%, Bradesco dropped 2.2% and Itaú Unibanco dropped 0.9%.

The bank’s third-quarter profit fell 24% compared to the second quarter and 28% year-on-year, to R$3.1 billion, taking ROE from 20.5% to 15.3%. The result came 18% below the Goldman Sachs forecast and 14% below the UBS-BB estimate. A consolidated projection made by Valor pointed to an average consensus of R$ 3.8 billion.

“We were already expecting a considerable contraction in earnings per share, but the numbers reported were even weaker”, highlighted a UBS-BB report. Operating profit, pre-tax, was 25% lower than Goldman had expected. Despite a slight drop in the shares of competitors such as Bradesco and Itaú today, analysts consider that the projections were already of slightly weaker numbers for Santander among private institutions.

In a conference call, the president of Santander Brasil, Mario Leão, acknowledged that analysts and investors had hoped that the administration would better navigate the murky waters of high interest rates. “We are in the most challenging phase of the credit cycle,” said Leão.

Customer margin, tariffs, trading, provisions and opex were the main areas of disappointment for UBS analysts. The over 90-day NPL index rose 10bps from the second quarter and 60bps year-on-year to 3%. “The delinquency rate had a small deterioration, but due to the high level of renegotiations”.

Loans increased by 3.4% in the quarter, up from the 2.5% that UBS had projected, but the volume was not reflected in the margin with clients due to the lower spreads, and there was also a decrease in the margin with the market.

The bank does not provide guidance to the market, but the expectation at UBS is a 6% drop in consolidated profit for the year, with downside risk. Goldman considers that the stock is trading at 6.5x the projected earnings for 2023, while the house model, which gives a target price of R$35, implies a multiple of 7.4x.

Source: Value Pipeline

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