1. 24/10/13
Santander's Brazil Unit Set to Boost Lending Again - WSJ.com
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MARKETS
Santander Brazil Unit Set to Increase Lending
Bank Plans to Emphasize Less Risky Lending to Keep Bad Loans Under
Control, CEO Says
By R OGER IO JEL MAYER a n d MATTH EW C OWL EY
Oct. 24, 2013 3:43 p.m. ET
SÃO PAULO—The Brazilian unit of Spanish bank Banco Santander SA plans to start picking up
the pace of lending once again as the Brazilian economy shows signs of life.
Santander wants to emphasize less risky loans, such as those to large corporations, while
keeping bad loans under control, the first meaningful change of strategy at Banco Santander
Brasil SA since Chief Executive Jesus Zabalza took over the Brazilian bank's operations in June.
Related
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Growth
"My task in Brazil is first, to grow, then to grow
profitably," Mr. Zabalza told reporters on Thursday.
It is a move full of trade-offs, but one that is
designed to boost profits. Loans with less risk mean the Brazilian bank is accepting a lower profit
on each loan, but will try to make up for that with a larger volume of loans.
Santander Brasil suffered more than most of its private-sector peers with the recent sharp
increase in nonperforming loans, as rivals such as Banco Bradesco SA and Itau Unibanco
Holding SA took a much more conservative approach as the economy slowed.
"Santander is reaping the pros and cons from a strategy of risk reduction that was late compared
to its peers," said Andre Riva, a senior analyst in São Paulo who covers Brazilian banks for
Grupo Bursatil Mexicano SA de CV.
On Thursday afternoon, the bank's shares were down 1.63% at 15.07 reais ($6.8), in line with the
local index, the Ibovespa, which was down 1.33%.
Santander Brasil is the largest single overseas contributor to profits of the Spanish parent
company, which has been buffeted in recent years by the financial crisis in Spain and Europe.
Santander owns 75% of the Brazilian unit's shares.
The bank, the third-largest private-sector bank in Brazil in terms of assets, on Thursday said its
net profit declined 6.8% to BRL1.41 billion ($648 million) in the third quarter, the first full quarter
under Mr. Zabalza's management. The bank's credit portfolio grew 7.1% in the third quarter to
BRL222 billion; Santander expects 11% growth for 2013 as a whole, and a little bit more than that
next year.
Santander Brasil's default rate has declined, but remains high compared with its peers. The
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2. 24/10/13
Santander's Brazil Unit Set to Boost Lending Again - WSJ.com
default rate on loans that are more than 90 days overdue was at 4.5%, down from 5.1% a year
ago. Bradesco's default rate stood at 3.6% at the end of the third quarter.
Bradesco and Santander are the only Brazilian banks to have published third-quarter results so
far. On Monday, Bradesco, the second-largest private-sector bank, reported a 7.1% rise in profit,
largely due to lower provisions for bad loans. Itau Unibanco and state-run Banco do Brasil SA are
scheduled to report in coming weeks.
Santander's shift to lend more reflects a broader move in the Brazilian market, as bad loans
appear to have peaked in the first half of this year, Mr. Zabalza said.
As Brazil's economy slowed over the last three years, private-sector banks pulled back on
making new loans while nonpayment rose. Public-sector banks, meanwhile, expanded their
lending as part of a government-led strategy to gain market share and counteract some of the
slower economic growth.
Economists expect the Brazilian economy to grow faster this year than last, although growth still
comes in bursts. After a surge in the second quarter, growth in the third quarter is expected to be
close to zero. For the full year, economists expect around 2.5% growth, up from 0.9% last year.
"For next year, we're not expecting an enormous growth in credit for the country," he said.
Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com and Matthew Cowley at
matthew.cowley@wsj.com
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