Business context and reporting period
Banco Santander (Brasil) S.A. is a Brazil-focused bank serving retail, small and medium-sized businesses, and large corporate customers. This Form 20-F reports audited consolidated results for the fiscal year ended December 31, 2022, with comparisons to 2021 and 2020; it does not provide standalone 2022 fourth-quarter results. Statements are prepared under IFRS as issued by the IASB and presented in Brazilian reais (R$).
Key financial metrics
Unless otherwise noted, amounts are R$ billions. U.S. dollar figures in the filing are convenience translations.
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total income | 66.5 | 63.9 | +4.0% |
| Net interest income | 47.5 | 51.3 | -7.4% |
| Net fee and commission income | 14.9 | 15.3 | -2.6% |
| Impairment losses on financial assets | (24.8) | (17.1) | Expense increased 45.1% |
| Administrative expenses | (18.2) | (17.3) | Expense increased 5.3% |
| Operating income before tax | 19.6 | 24.8 | -20.9% |
| Consolidated net income | 14.3 | 15.6 | -7.8% |
| Total assets at year-end | 985.5 | 931.2 | +5.8% |
| Gross loans and advances to customers | 524.7 | 493.4 | +6.3% |
| Customer deposits | 490.0 | 469.0 | +4.5% |
| Basel capital adequacy ratio | 13.9% | 14.9% | -1.0 percentage point |
- Profitability and margins: Return on average assets was 1.5% (1.7% in 2021); return on average equity was 11.1% (14.8%). Adjusted ROE, a non-GAAP measure that excludes goodwill, was 14.2% (20.2%). Net yield was 5.3% versus 6.1%; yield spread was 2.7% versus 5.1%. The reported efficiency ratio was 27.4% versus 27.1%.
- Credit quality: Impaired assets were R$39.2 billion, or 7.5% of gross loans, up from R$26.9 billion and 5.5%. Impairment allowances were R$35.2 billion; the coverage ratio was 89.8%, down from 110.4%. Net charge-offs were 3.7% of average loans versus 2.7%.
- Cash flow: Net cash from operating activities was R$6.8 billion, investing cash flow was negative R$2.7 billion, and financing cash flow was positive R$12.8 billion. Cash and cash equivalents at year-end were R$49.6 billion versus R$32.7 billion. These cash-flow figures should be interpreted in the context of a bank’s deposit and lending activity.
- Funding and liquidity: Total funding was R$732.7 billion, including R$490.0 billion in customer deposits, R$107.1 billion in marketable debt securities, and R$19.5 billion in instruments eligible for regulatory capital. The filing reports an LCR of 137.5% and NSFR of 108.3% at year-end, both above the stated 100% minimum. It also notes that 87% of customer deposits were payable on demand or had maturities of one year or less, while 52% of assets had maturities of one year or more.
- Dividends: R$8.1 billion of dividends and interest on equity was distributed in 2022, compared with R$9.6 billion in 2021. The stated current policy recommends distributing 50% of annual adjusted net income, subject to financial, regulatory and other considerations.
Material changes versus the prior comparable period
- Higher Brazilian interest rates increased funding costs and pressured net interest income and margins, despite growth in average earning assets and the loan portfolio.
- Credit impairment expense rose R$7.7 billion. Management cited deterioration in Brazil’s macroeconomic conditions, increased defaults among individual borrowers, and a large wholesale customer entering judicial recovery. Impaired assets increased 45.7% year over year; the coverage ratio fell.
- Loan growth was 6.3%; individual loans increased 19.5%, while corporate loans declined 8.7%. The filing attributes the increase in credit costs to selective credit policies and changing economic conditions.
- Fee income declined, notably from cards and current-account services. Management cited more selective credit approvals, customer use of PIX, fee-exemption campaigns, and the Getnet spin-off.
- Getnet was spun off in 2021; Santander Brasil stopped consolidating it from March 31, 2021. This affects comparison of fee and commission results between years.
- The reported tax expense declined to R$5.2 billion from R$9.2 billion. IFRS reconciliation disclosures include a R$980 million benefit from reversal of a provision relating to PIS litigation; tax and hedge accounting effects also affect comparability.
Outlook, commentary, risks and unusual items
- Outlook: The filing gives no quantified financial guidance. Santander Brasil said in 2020 it would stop disclosing guidance because of uncertainty. Management described the 2023 outlook as subject to inflation, high interest rates, global slowdown, and Brazilian political and fiscal uncertainty.
- Macroeconomic sensitivity: Brazil’s SELIC rate was 13.75% at year-end 2022. The Bank estimates a 100-basis-point rate increase would reduce net interest income by R$945 million over the following year. Inflation and currency movements may also affect expenses, funding costs, borrowers, and asset quality.
- Credit and sovereign exposure: Brazilian federal government debt represented approximately 14.5% of total assets and 70.3% of the securities portfolio. A large wholesale borrower’s judicial recovery was an unusual credit event; a subsequent-events note says the related provision was increased after year-end but does not state the amount.
- Funding and other risks: Key disclosed risks include short-term deposit reliance and maturity mismatch, competition and digital disruption, PIX and open finance, regulatory and tax changes, litigation, cybersecurity and data protection, and climate and other ESG risks.
- Contingencies: Probable tax, labor and civil proceedings and legal obligations were reported at approximately R$13.8 billion and provisioned; possible-loss proceedings were approximately R$35.9 billion. The filing says ultimate outcomes may exceed existing provisions.
- Subsequent events and assurance: A R$1.7 billion interest-on-equity distribution was approved in January 2023. The CFO/Investor Relations Officer was due to leave in March 2023, with a successor identified. The auditor gave an unqualified IFRS opinion and concluded internal control over financial reporting was effective; expected credit losses and legal provisions were identified as critical audit matters.
Most important facts for investors to verify
- Review the full-year audited statements and notes for the impairment charge, the large borrower’s judicial recovery, the subsequent provision increase, and subsequent loan performance.
- Reconcile reported credit-risk exposure: the filing gives R$568.3 billion in one discussion and R$582.0 billion in another. Confirm the definitions and included guarantees or commitments.
- Assess the sustainability of margins and earnings if high rates persist, including deposit repricing, credit costs, and the R$945 million sensitivity estimate.
- Verify liquidity under stress, particularly deposit maturities, funding concentration, and the reported LCR and NSFR.
- Assess the nature and potential outcomes of possible-loss litigation, including tax matters, and whether provisions remain adequate.
- Separate recurring operating performance from hedge-related effects, tax adjustments, the Getnet deconsolidation, and other non-GAAP measures.