Banco Santander (Brasil) S.A. — FY2021 Form 20-F
Business context and reporting period. This audited annual report covers the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter report. Financial statements are consolidated and prepared under IFRS as issued by the IASB, in Brazilian reais (R$). PricewaterhouseCoopers issued an unqualified audit opinion and concluded internal control over financial reporting was effective.
Key financial and operating metrics
Amounts below are in R$ billions unless otherwise noted.
| Metric | FY2021 / year-end | Prior comparable period |
|---|---|---|
| Total income | 63.93 | 48.24 in 2020; +32.5% |
| Net interest income | 51.32 | 44.44 in 2020; +15.5% |
| Net fee and commission income | 15.27 | 16.23 in 2020; -5.9% |
| Impairment losses on financial assets, net | 17.11 expense | 17.45 expense in 2020 |
| Operating income before tax | 24.75 | 9.66 in 2020 |
| Consolidated net income | 15.56 | 13.45 in 2020; +15.7% |
| Net yield / yield spread | 5.9% / 4.8% | 6.0% / 5.2% in 2020 |
| Return on average equity | 14.8%; adjusted 20.2% | 13.3%; adjusted 18.4% in 2020 |
| Efficiency ratio | 27.1%; adjusted 28.2% | 35.5%; adjusted 27.8% in 2020 |
| Basel capital adequacy ratio | 14.9% | 15.3% in 2020 |
Balance sheet and funding. Total assets were R$931.21 billion, total liabilities R$825.23 billion and total equity R$105.97 billion at year-end. Gross customer loans were R$493.35 billion, up 18.1%; customer deposits were R$468.96 billion, up 5.2%. Total funding was R$688.65 billion, including R$79.04 billion of marketable debt securities and R$19.64 billion of capital-eligible debt instruments. The bank issued R$5.5 billion of subordinated financial bills in 2021. A conventional net-debt measure is not provided.
Liquidity and cash flow. The reported liquidity coverage ratio was 148.5%, and the net stable funding ratio exceeded 111.7%, both above the 100% regulatory minimum. Cash and cash equivalents were R$32.67 billion at year-end, versus R$28.45 billion in 2020. Cash flows were R$6.81 billion from operating activities, negative R$1.93 billion from investing activities and negative R$0.66 billion from financing activities, producing a R$4.22 billion net increase in cash. Bank cash flows are affected by changes in financial assets and liabilities and may not be comparable to those of non-financial companies.
Material changes and unusual items
- Getnet spin-off: Completed October 26, 2021; Getnet ceased to be consolidated from March 31, 2021. The transaction reduced Santander Brasil’s share capital by R$2.0 billion, from R$57 billion to R$55 billion. It also affected fee income and makes year-over-year comparisons less like-for-like.
- Foreign-investment hedge effects: The filing attributes much of the 32.5% increase in total income and the sharp rise in pretax income to lower foreign-exchange losses on hedges of investments abroad compared with 2020. Excluding this hedge effect, total income grew 3.4% and adjusted pretax income was R$27.26 billion, up 17.3%. The 2020 comparison included R$13.58 billion of hedge effects; 2021 included R$2.51 billion.
- Credit provisions and asset quality: The bank established a R$3.2 billion COVID-related expected-credit-loss overlay in 2020 and used part of it in 2021. Impaired assets rose 16.2% to R$26.92 billion, while impaired assets as a percentage of gross loans remained 5.5%; the filing says portfolio growth contributed to the stable ratio. Coverage was 110.4% of impaired assets. Consumer and installment-loan impaired balances increased, warranting attention.
- Dividends: Gross dividends and interest on equity declared for 2021 totaled R$9.65 billion, compared with R$3.84 billion in 2020 and R$10.80 billion in 2019. A temporary pandemic-era distribution restriction applied in 2020 but not in 2021. The board approved a further R$3.0 billion distribution in February 2022, payable March 4, 2022.
- Accounting and tax: Management revised the presentation of electric-energy sales contracts so principal amounts are no longer included; comparative 2020 and 2019 figures were adjusted, with no change to equity or income. The 2021 bank social contribution tax rate also increased temporarily, contributing to the R$9.19 billion income-tax expense, versus a R$3.79 billion tax benefit in 2020.
Outlook, commentary and principal risks
Management withdrew financial guidance in 2020 amid COVID-19 uncertainty and the filing provides no numerical earnings guidance. It describes an improving 2021 operating environment, customer and loan growth, and continued digital investment, but warns that higher interest rates, inflation, political uncertainty and the 2022 Brazilian election could weigh on growth, credit quality and funding costs. Brazil’s SELIC rate ended 2021 at 9.25% and rose to 10.75% by the report date. The bank estimated that a 100-basis-point rate increase would reduce annual net interest income by R$553 million.
- Brazilian sovereign exposure was R$171.4 billion, approximately 18.4% of total assets and 76.1% of the securities portfolio.
- Funding is materially short term: 87% of customer deposits were payable on demand or had remaining maturities of one year or less, while 55% of assets had maturities of one year or more.
- Other key risks include loan defaults and collateral values, inflation and currency volatility, regulatory and tax changes, cybersecurity and data protection, competition, and the effects of COVID-19 or new variants.
- Probable judicial and administrative proceedings and related obligations were disclosed at approximately R$11.18 billion and were provisioned; possible-loss proceedings were approximately R$32.15 billion. Outcomes may exceed recorded provisions. PwC identified expected-credit-loss measurement and provisions for judicial and administrative proceedings as critical audit matters.
- The Getnet partnership involves continuing commercial arrangements, including receivables prepayment and referrals; either party may terminate it at will on one year’s notice.
Important facts for investors to verify
- Reconcile reported income and efficiency trends to the effects of foreign-investment hedges, taxes and the Getnet deconsolidation; distinguish IFRS measures from management’s non-GAAP adjustments.
- Review loan growth against rising impaired-loan balances, the use of the 2020 credit overlay, coverage levels and performance of individual and corporate borrowers.
- Assess liquidity and funding maturity mismatch, deposit concentration and the resilience of LCR and NSFR under stress and higher rates.
- Examine the status and potential range of tax, labor and civil proceedings, including the AFABESP/Banespa matters, and compare exposures with provisions.
- Confirm the cash payment and regulatory capacity for declared dividends, and monitor the terms and continuation of the Getnet partnership.