Banco Santander (Brasil) S.A. — FY2020 Form 20-F
Reporting period: Year ended December 31, 2020; this is an annual report, not a standalone Q4 filing. Financial statements are consolidated and prepared under IFRS as issued by the IASB, with an unqualified audit opinion. Unless otherwise noted, amounts below are in Brazilian reais (R$).
Business context and financial performance
Santander Brasil is a Brazil-focused bank serving retail, SME, corporate and wholesale clients. It reported 27.9 million active customers at year-end. The Brazilian economy contracted an estimated 4.1% in 2020 amid COVID-19; the SELIC rate ended the year at 2.0%, and the real weakened 28.9% against the U.S. dollar to R$5.20 per dollar.
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Total income | R$48.24bn | R$58.77bn | Down 17.9% |
| Net interest income | R$44.44bn | R$44.32bn | Up 0.3% |
| Net fee and commission income | R$16.23bn | R$15.71bn | Up 3.3% |
| Operating profit before tax | R$9.66bn | R$22.27bn | Down 56.6% |
| Consolidated profit | R$13.45bn | R$16.63bn | Down 19.1% |
| Net cash from operating activities | R$42.32bn | R$24.87bn | Cash increased R$7.00bn |
Reported results were heavily affected by foreign-exchange movements and the hedge of investments abroad. The exchange differences line was a R$24.70bn expense, while gains on financial assets and liabilities were R$13.00bn, producing a net loss of R$11.70bn on those lines. Excluding the hedge effect, management reported total income of R$61.83bn, up 3.0%, and operating profit before tax of R$23.25bn, down 1.2%. These are non-GAAP measures. Income taxes were a R$3.79bn benefit in 2020, versus R$5.64bn of expense in 2019, reflecting hedge-related tax effects and deferred tax credits.
Balance sheet, credit, liquidity and capital
| Metric at December 31 | 2020 | 2019 |
|---|---|---|
| Total assets | R$936.20bn | R$762.24bn |
| Gross loans and advances to customers | R$417.82bn | R$347.26bn |
| Customer deposits | R$445.81bn | R$336.51bn |
| Total funding | R$647.47bn | R$519.66bn |
| Total liabilities | R$830.11bn | R$665.03bn |
| Total shareholders’ equity | R$106.09bn | R$97.21bn |
| Basel capital adequacy ratio | 15.3% | 15.0% |
Loan growth was 20.3%, led by corporate lending, which rose 53.7%; individual lending rose 11.4%. Impaired assets were R$23.18bn, or 5.5% of gross loans and 5.0% of credit risk exposure, compared with 6.7% and 6.0%, respectively, in 2019. The allowance for impairment losses was R$25.64bn; coverage was 110.6% of impaired assets, versus 96.6% in 2019. Net impairment losses on financial assets increased 30.5% to R$17.45bn, including a R$3.20bn additional COVID-related provision.
Liquidity disclosures report an LCR of 170.7% and an NSFR above 118.6%, both above the 100% regulatory minimum. Funding is predominantly deposit-based, but 82.0% of customer deposits had maturities of one year or less or were payable on demand, while 48.9% of assets matured in one year or more. Brazilian federal government securities represented approximately 20.5% of total assets and 83.4% of the securities portfolio. No conventional net-debt measure is presented for the bank.
Profitability and efficiency weakened: return on average assets was 1.6% versus 2.3%; return on average equity was reported as 13.2% in selected ratios; net yield was 6.0%; and the reported efficiency ratio rose to 35.5% from 28.8%. The adjusted efficiency ratio, excluding the foreign-investment hedge effect, improved to 27.7% from 28.2%.
Material changes, outlook and risks
- COVID-19 disrupted activity and reduced first-half transaction volumes and fee income. The bank deferred customer loan payments, participated in government-backed credit programs, and reported R$14bn of government-sponsored loans at year-end. Digital contract originations increased 151% from January–February to December 2020.
- Management cited credit portfolio growth and the additional pandemic provision as key drivers of higher impairment expense and lower profit. It said credit quality indicators remained at acceptable levels, while warning that outcomes depend on the duration and severity of the downturn.
- The bank withdrew its guidance on July 29, 2020, citing uncertainty around COVID-19 and its effects on results, liquidity and the Brazilian and global economy. The filing provides no replacement financial guidance.
- Dividend and interest-on-equity distributions were constrained by pandemic-era regulation. The filing reports R$3.84bn distributed in 2020 versus R$10.80bn in 2019; management’s stated general policy is to recommend distribution of 50% of adjusted annual net income, subject to financial, regulatory and other conditions.
- Material business developments included acquiring the remaining 40% of Banco Olé for R$1.61bn and merging it into Santander Brasil, selling Superdigital for R$270m, and closing the liquidation of Santander Brasil EFC in Spain. A proposed Getnet spin-off was announced after year-end and remained subject to shareholder approval. The Gira acquisition closed in January 2021; the Toro investment was subject to regulatory approval.
- Risks include Brazil’s economic, political, interest-rate and currency volatility; COVID-19 and borrower credit deterioration; deposit funding and maturity mismatch; exposure to Brazilian sovereign debt; competition and regulatory change; legal and tax contingencies; cybersecurity, data protection and technology dependence; and the controlling shareholder’s influence. The real’s depreciation materially increased reported volatility.
- At year-end, probable tax, labor and civil proceedings and legal obligations were reported at approximately R$11.72bn and possible-loss proceedings at approximately R$29.35bn. These outcomes are uncertain and could exceed recorded provisions. A criminal proceeding involving an officer over alleged tax-auditor bribery was ongoing; the bank stated it was not a party and had relinquished related tax credits.
Important facts for investors to verify
- Reconcile reported results with management’s hedge-adjusted, non-GAAP figures; assess the sensitivity of earnings and capital to further real depreciation.
- Review the R$3.20bn COVID-19 provision, subsequent performance of deferred and renegotiated loans, and possible credit losses as relief measures expire.
- Confirm liquidity and funding resilience, including deposit concentration and maturities, LCR/NSFR calculations, and the bank’s substantial holdings of Brazilian government securities.
- Track legal and tax matters, particularly the R$29.35bn possible-loss exposure, and whether recorded provisions remain adequate.
- Confirm the timing and terms of dividend distributions under applicable regulatory limits. Check the filing’s figures: one narrative passage describes 2020 distributions as R$3.3bn, while the financial tables report R$3.837bn.
- Resolve apparent presentation inconsistencies: return on equity is shown as 13.2% or 13.3%, and net yield as 6.0% or 5.9% in different sections. The COVID-19 deferral balance is also stated once as “R$40.6 million” but elsewhere as R$40.6bn; verify the intended amount against the audited notes.