Banco Santander (Brasil) S.A. — FY2023 Form 20-F
Period and basis: Annual report for the fiscal year ended December 31, 2023, with comparisons to 2022 and 2021. This is not a standalone Q4 filing; the supplied filing text does not provide a clear set of Q4-only results. Consolidated statements are prepared under IFRS as issued by the IASB, in Brazilian reais (R$); U.S. dollar translations are for convenience.
Business context and financial performance
Santander Brasil is a large Brazilian retail and wholesale bank and a controlled subsidiary of Banco Santander, S.A. It reported 32.9 million active customers and operated through Commercial Banking and Global Wholesale Banking segments.
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Total income | R$65.9bn | R$66.5bn | -0.9% |
| Net interest income | R$46.9bn | R$47.5bn | -1.3% |
| Net fee and commission income | R$15.6bn | R$14.9bn | +5.1% |
| Operating income before tax | R$11.9bn | R$19.6bn | -39.1% |
| Consolidated net income | R$9.5bn | R$14.3bn | -33.8% |
| Total assets, at year-end | R$1,115.7bn | R$985.5bn | +13.2% |
| Gross customer loans, at year-end | R$551.5bn | R$524.7bn | +5.1% |
| Customer deposits, at year-end | R$583.2bn | R$490.0bn | +19.0% |
Costs and credit losses weighed on earnings: administrative expenses rose 7.3% to R$19.6bn; net impairment losses on financial assets rose 12.8% to R$28.0bn; and net provisions rose to R$4.4bn from R$1.2bn, mainly due to labor contingencies. The efficiency ratio increased to 29.7% from 27.4%. Return on average assets was 0.9% (1.5%); return on average equity was 8.5% (13.3%). Net interest margin fell to 4.9% from 5.4%.
Credit quality indicators were mixed. Impaired assets were R$39.9bn, or 7.2% of gross loans, versus R$39.2bn and 7.5% in 2022. Impaired assets were 5.5% of total credit risk exposure, down from 5.9%. However, net charge-offs rose to 5.0% of average loans from 3.7%, and the coverage ratio declined to 88.1% from 89.8%. Management cited tighter underwriting since January 2022 as supporting newer loan vintages, while a specific large wholesale borrower remained a source of credit provisions.
Cash flow, capital, debt and liquidity
- Cash flow: Operating activities provided R$36.6bn in 2023, investing activities used R$2.6bn, and financing activities provided R$5.8bn. Cash and cash equivalents increased R$39.9bn to R$89.4bn. These are bank cash-flow statement figures, not a measure of freely distributable cash.
- Funding and liabilities: Total funding was R$851.7bn, up from R$741.6bn. Customer deposits were R$583.2bn; deposits from credit institutions were R$118.5bn; and marketable debt securities were R$130.4bn. Total liabilities were R$1,000.8bn and total equity R$114.9bn.
- Liquidity: LCR was 154% (above the 100% regulatory minimum) and NSFR was 113% at year-end. The filing notes a maturity mismatch: 74% of customer deposits had maturities of one year or less or were payable on demand, while 44% of assets had maturities of one year or more.
- Capital: The Basel capital adequacy ratio was 14.5%, up from 13.9%; the filing reports a regulatory minimum capital ratio of 11.5%. In 2023 the bank repurchased US$1.25bn of 2018 Tier 2 notes and issued R$6.0bn of subordinated financial bills. Tier 1 and Tier 2 debt instruments totaled R$19.6bn at year-end.
- Shareholder distributions: Dividends and interest on shareholders’ equity totaled R$6.2bn gross in 2023, compared with R$8.1bn in 2022. The reported dividend payout ratio was 65.3%.
Material changes versus prior periods
- Net income fell 33.8% in 2023 after declining 7.8% in 2022. The 2023 decline reflected higher provisions, increased credit impairment charges, slightly lower net interest income, and higher operating expenses.
- Net interest income and margin continued to decline as the bank shifted toward lower-risk, collateralized lending and faced pressure on credit spreads. Fee income improved, especially in cards, asset management and capital markets.
- Gross loans grew 5.1%; credit risk exposure, including guarantees and private securities, rose 8.3% to R$719.9bn. Customer deposits increased 19.0%, with growth in time deposits.
- The loan loss allowance was broadly stable at R$35.2bn, but write-offs increased and net charge-offs rose. Impaired commercial and industrial assets increased 15.1%, primarily due to the large wholesale borrower; impaired individual installment loans declined 7.3%.
- Other nonfinancial gains rose to R$1.0bn, primarily from the sale of a 40% stake in Webmotors. The sale left Santander Brasil with a 30% holding; the filing reports the company as jointly controlled with Carsales.
Outlook, management commentary and risks
Management expected Brazil’s GDP growth in 2024 to be lower than 2023’s estimated 2.9%, citing tight monetary policy, inflation, a weaker expected contribution from agriculture, and global uncertainty. This is macroeconomic commentary, not quantified company earnings guidance. The filing gives no specific numerical revenue, profit, margin or credit-cost forecast.
Management’s strategy emphasizes profitable and sustainable growth, customer loyalty, selective lending, digital services and operational efficiency. It reported 97% of 2023 transactions were digital and continued significant technology investment; information technology investment was R$2.3bn. Management also reported a 5.8% increase in loyal customers and 42% growth in its agribusiness portfolio.
- Macro and market exposure: Brazil’s fiscal and political outlook, inflation, interest rates, exchange rates, sovereign debt, and global conflicts may affect credit demand, asset quality, funding costs and securities valuations. Brazilian federal government securities represented approximately 13.3% of total assets at year-end.
- Credit and funding risks: Credit losses, collateral values and recoveries remain sensitive to the economy. The bank relies substantially on deposits, and short-term funding could become more expensive or less available.
- Legal and regulatory contingencies: Provisions for judicial and administrative proceedings, commitments and other matters were R$8.9bn; separately, the filing reports R$37.5bn of possible-loss proceedings. These are estimates and outcomes could exceed recorded provisions. A notable labor matter concerns claims by former Banespa employees; the ultimate amount is not specified clearly.
- Other risks: Competition from digital platforms and fintechs, changing banking regulation and taxes, cybersecurity and data protection, operational resilience, climate and social risks, related-party dealings, and the influence of the controlling shareholder.
- Unusual items and reporting: Getnet was spun off in 2021 and is no longer consolidated. The financial statements received an unqualified audit opinion; management and the auditor reported effective internal control over financial reporting as of December 31, 2023. No significant changes were reported after the audited financial statements’ date.
Most important facts for investors to verify
- Review the full audited IFRS statements and notes, particularly expected credit-loss assumptions, write-offs, and the large wholesale borrower’s status and exposure.
- Reconcile the R$4.4bn provision expense and R$28.0bn credit impairment charge with the detailed labor, tax and credit disclosures; distinguish recognized provisions from possible-loss claims.
- Assess deposit maturity concentration, the R$39.9bn cash increase, liquidity ratios, and the bank’s ability to maintain funding and margins as rates change.
- Confirm the basis and sustainability of the R$6.2bn distribution, the 65.3% payout measure, capital buffers, and the effect of the new buyback program.
- Check subsequent developments in litigation, Brazil’s tax reforms, banking rules, and the Toro acquisition completed January 3, 2024; the filing states certain 2024 transactions and outlook items were subject to approvals or uncertainty.