5. 5
Market Overview – Capital Markets (ECM & DCM)
ECM Evolution – Volume & Number of Deals DCM Evolution – Volume & Number of Deals
Volume = BRL MM; N = Number of Deals Volume (BRL MM)
-5.5% -6.4% +34.2%
71,407
71 407 67,474
67 474 63,161
63 161
10,882 14,600
+335% 14%
38% 36% 30%
17%
49%
15,025 N=12
47,131 9,619 15% 20%
19%
34,882
2.962 N=3
N=64 67% 28%
60,474 N=11 36,287 N=19 44% 42%
27,280 2,213 36%
6.657 N=5 13%
7,602 N=4 10,844 N=5 2.213 N=1
2% 7% 5% 10% 8%
2007 2008 2009
2007 2008 2009 YTD Mar 09 YTD Mar 10 YTD Mar 09 YTD Mar 10
Promissory Notes
y FIDC Debentures CRI
IPOs Follow ons
Foreign Investors Participation – YTD Feb10 Number of Deals +9.2%
318
289 71
81 65
40 10
224
20 19
66 23
USA 131
Inst. Investors 36.8% 97 16
Foreign 69 13
36.5% Investors 3
33
54.8% EU 47
102 27 25
Individuals Other 15.7% 60
85
8.7% 2.3%
2007 2008 2009 YTD Mar 09 YTD Mar 10
Total Promissory Notes FIDC Debentures CRI
Source: ANBIMA
6. 6
Market Overview – Capital Markets (M&A)
M&A Evolution – Volume & Number of Deals*
Volume = BRL billion; N = Number of Deals
N=2
N=1 N=2
N=1
N=65 N=134
N=86
N=91
N=40
N 40
N=14 N=10 N=15
N=10 N=9
Announced Deals by Value
Capital Source (2009)
Volume Number of Deals
(*) – Source: ANBIMA. Megadeals include operations with volume greater than BRL 3.0 billion
Source: ANBIMA
12. 12
Santander Wholesale Banking Growth Strategy
General Strategy…
Focus on clients relationship
Empresas
(BRL 30- Increase share of wallet cross-selling and lead strategic transactions/loans with
wallet,
250MM) the existents key clients
~3,900 active
clients Expand market penetration with new clients and clients with unexplored potential
Cross-selling to individual clients
Companies
Explore value chain and sector opportunities with large companies
General Strategy…
C
Increase cross-selling and diversification
Corporate
(BRL 250MM Expand use of our wholesale and Investment Banking product platforms
and above)
~650 clients Increase share of wallet
Continuous active NPL management (recovery and prevention)
Cross-selling
Cross selling to individual clients
13. 13
GB&M Growth Strategy
Become the top relationship bank for the main players of sectors with high growth perspectives, like
1 Energy, Mining, Construction, Infrastructure and Agribusiness.
2 Take advantage of our global capabilities and support local clients who intends to become international.
3 The concept of one-stop shop and the first option for share of mind products.
p p p p p
Santander is well positioned in Investment Banking products and intends to take advantage of the good
4 perspectives for M&A, ECM and DCM markets.
5 Increase our client’s satisfaction, generating value to the Bank.
6 Leverage Retail opportunities through our origination capacity.
7 Increase net profit, ensuring full costs control and preserving a low risk profile.
14. Investor Relations
Juscelino Kubitschek Avenue 2,235 10th floor
São Paulo | SP | Brazil | 04543-011
Tel. (
T l (55 11) 3553-3300
3 3 3300
e-mail: ri@santander.com.br
17. 3
Main Topics
I. Macro Conditions
II. Market Potential
III. Loans Evolution
IV. Builders: Offer and Demand
V. Funding
VI. Final Remarks
18. Supportive Macro Backdrop 4
Interest rates are at historical low levels.
Resilient job market, supportive for the housing sector.
In our view, these are tailwinds for the Brazilian real estate sector.
Brazilian Interest Rate (2003 2011E)
(2003- Brazil s
Brazil’s Job Market (2005-2011E)
30 12 11
Real Growth in Payroll (%)
Nominal Selic Real Selic 10
Unemployment Rate (%)
25 10
20
8
9
P
6
15 12
8
4
10 2
7
7
2
5 7
- 6
0 2005 2006 2007 2008 2009E 2010E 2011E
M-03
M-04
M-05
M-06
M-07
M-08
M-09
M-10
M-11
S-03
S-04
S-05
S-06
S-07
S-08
S-09
S-10
S-11
J-03
J-04
J-05
J-06
J-07
J-08
J-09
J-10
J-11
Real Growth in Payroll Unemployment Rate
Source: BACEN and Santander. Source: BACEN and Santander.
19. Favorable Macro Conditions 5
High Housing Deficit Brazil´s main Real Estate drivers
Monthly Houses Housing g
Wages Deficit
> 10 minimum Regulatory Framework
A/B
wages .
12%
0.1 million
C 5 – 10 minimum
18% 0.3 million
wages Reduction of interest rates
3 - 5 minimum
D 28% 0.7 million
wages
< 3 minimum
E
wages 42% 4.5 million Loans tenor extension
54 million 5.7 million
Source: IBGE 2006, CBCI e GV Consult.
Construction and consumer credit
availability (Earmarked resources)
Favorable Demographic Pyramid
80
70
Housing Deficit (5.7 million)
60
50
Income growth
40
30
20
Government support
10 ( “Minha Casa, Minha Vida” )
0
Source: IBGE and Santander.
20. 6
Brazilian Mortgage Market Potential
Mortgage as % of GDP (2008)
99%
81% 80%
63% 62%
16% 15% 11%
3%
Holanda Reino Unido Irlanda Portugal Espanha Polônia Chile México Brasil *
* Brazil includes FGTS e SBPE
Source: Associação Hipotecária Espanhola, ABECIP e BACEN (
ç p p , (2008 )
Credit Distribution: Santander Brazil vs. Santander Global
Brazil Global
6.4%
6 4%
Mortgages
32%
Others
93.6% 68%
Others Mortgages
Source: Financial Statements 2009 - Santander Brazil Source : Annual Report 2009 – Santander Group (Distribution of credit risk)
21. 7
Mortgage Loans Evolution
Over the past years the Brazilian residential mortgage market
O th t th B ili id ti l t k t
has shown strong growth.
R$ Billion
68
51
CAGR: +47%
40 Private and
50 Public Banks
34
25
30
16
10 18 Mainly public banks
9 operates FGTS
5 17 18
7 7 10
5
2005 2006 2007 2008 2009 2010E
(1) SBPE: Brazilian System of Savings and Loans (1)
FGTS: Guarantee Fund for length of Service
FGTS SBPE
Source: ABECIP – Brazilian Association of Real State Loan and Savings
22. 8
Mortgage Market Overview 2010
Mortgage Origination – 1Q10 Outstanding balance Jan/2010
Number of units Amount Santander Group leads the market
(thousands units) (R$ billion)
among private banks
75%
36% Total market: R$ 103.2 billion
6.2
45
3.5
Other Banks
33
Banco C 5.4%
6.9%
Banco A
1Q09 Mar/10
1Q10 1Q09 1Q10
Banco B
8.5%
Construction Loan Origination – 1Q10
8.9%
Number of units Amount
(thousands units) (R$ billion) 70.3 %
79%
67%
3.8
32
2.0
20
19 FGTS outstanding is about R$ 40 bn
Santander market share without FGTS is 15%
Mar/09
1Q09 Mar/10
1Q10 Mar/09
1Q09 Mar/10
1Q10
Source: ABECIP, BACEN and Santander
23. Sales vs. Inventories 9
Housing market seems pretty healthy in terms of inventory (less than 6 months of sales and
below 2007 levels in absolute terms).
Market rebound coupled with conservative launching have boosted sales speed (VSO).
Rebound was lead by smaller segment (
(more affordable).
ff )
Inventories in SP below Sep/08 Level
25.000 16
14
Months of Sal (3-MMA)
20.000
12
Stock of Units
15.000 10
le
o
8
10.000 6
4
5.000
5 000
2
- -
O-06
O-07
O-08
O-09
F-07
F-08
F-09
F-10
M-06
M-07
M-07
M-08
M-08
M-09
M-09
A-06
A-06
S-06
A-07
A-07
S-07
A-08
A-08
S-08
A-09
A-09
S-09
J-06
J-06
J-07
J-07
J-07
J-08
J-08
J-08
J-09
J-09
J-09
J-10
N-06
D-06
N-07
D-07
N-08
D-08
N-09
D-09
Inventory (LHS) Sales (LHS) Months of Sale (RHS)
Source: Secovi and elaborated by Santander
24. Government’s Housing Package: “Minha Casa,Minha Vida” 10
Government program created to reduce the housing deficit and support the sector.
p g g pp
Construction of 1.0 million homes for families with monthly income of up to 10 minimum
wages.
Package totaling R$34 0 billion
R$34.0 billion.
In 2010 Minha Casa, Minha Vida (MCMV) is running at a rate of 600,000 units per year.
800
723.5
723 5
700
595.7
600
500
nd
408.7
408.7
thousan
400 352.0
300 231.7
200 170.0
104.6
100
5.6
0
2Q09 3Q09 4Q09 1Q10
Contracts Submitted (accum.) Contracts Signed (accum.) Annualized Rate
Source: CEF and elaborated by Santander
25. Sales Regaining “pre-Lehman” levels 11
Sales from Listed Co’s (R$MM) Close to Sep/08
10.000
10 000 R$ MM
9.000 8,286
7,577 7,563
8.000
6,392 6,186 6,620
7.000 5,916 2,602
6.000 3,332 3,131
1,750
5.000 1,616 2,110
4,142
4 142 3,912
3 912
3,088
Sales in the mid-high income
mid high
4.000
3.000
1,300
1,691
segment are still some 20-30%
5,684
2.000
4,642 4,300 4,076 3,532
4,245 4,432 bellow pre-crisis levels.
2,842
1.000 2,221
- Affordable segment is offsetting
4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
the d li
th decline.
Mid-High Total Brokerage Co's
Source: Listed Constructions and Properties Agency’s Reports ‐ Elaborated by Santander Listed companies are selling at
an annualized rate of 200,000
Sales Speed VSO from Listed Co’s coming back to 30% s
Co s 30%’s units/year.
30% 30%
28% 27% Sales speed (VSO) is coming
26%
24%
23% back to 30%’s.
15% 15%
4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
Source: Listed Constructions and Properties Agency’s Reports ‐ Elaborated by Santander
26. 12
Brazilian Saving Accounts and Mortgage system
Uses Sources
S
52%
Individual mortgages
g g
65% Properties up to
R$ 500,000
Individual Saving Accounts
mortgages Construction loans 100% (R$ billion)
and Average loan per unit up to
construction R$ 500,000 Saving
loans Accounts 19 % 256.6
13% Deposits
Properties over R$ 500,000
Cost of
TR+ 6.17% aa
30%
Compulsory Monthly average 215.8
Deposits or
last 12 months
average
(
(the lower
5% amount)
Free Usage
jan‐09 jan‐10
Source: BACEN
27. 13
Funding Analysis (SBPE) (1)
Mortgage R$ Billion
Scenario Jan’10
Jan 10 outstanding 2013
Sources Uses
R$ 169 bn
With 40% of annual
R$ 169 bn
growth in mortgage
and 10% in saving
LCIs, LHs (2) 20 accounts, the funding
86 will finish in 4 years.
Remaining (3)
230
Earmarked Committed 20
resources 149 Loans
Mortgage 63
outstanding
Mortgage Savings Mortgage Month /
Scenario
Outstanding Oustandings Outstanding (R$ Bi) Year
1 60% 20% 262 Jan-13
2 40% 10% 230 Nov-13
3 40% 17% 331 Dec-14
4 20% 0% 167 May-15
y
(1) SBPE (Brazilian System of Savings and Loans) Not included FGTS.
(2) Real estate credit bills (LCI’s) and Mortgages Notes (LH).
(3) FCVS (Compensation Fund Wage Variation) , default and multipliers.
28. Securitization in Brazil: CRI market 14
Total I
T l Issuance : R$ 13.8 b
13 8 bn
CRI Issuance
CRI1(R$ billions)(R$ billion)
Issuance Share (%)
ALTERE
6 5%
CIBRASEC
OTHERS 32%
9%
5 WALTER TORRE
5%
4
3
BRC
2 6%
1
RIO BRAVO
17% BRAZILIAN
0 SECURITIES
1999
1
2000
2
2001
2
2002
2
2003
2
2004
2
2005
2
2006
2
2007
2
2008
2
2009
2
26%
1. CRI: Mortgage Backed Securities
Source: CIBRASEC – Brazilian Securitization Company
29. 15
Pension Funds Investment Profile in Brazil
55% of the pension f d’ i
f h i fund’s investments are i fi d i
in fixed income products.
d
Investment distribution Biggest Pension Funds
Investment
Total: R$ 447 bn # Pension Funds (Billion R$)
1 Previ 137.75
Mortgage
Mortgage 2 Petros 40.55
0.5%
0,5%
, Others
9% 3 Funcef
F f 32.98
32 98
4 Fundação Cesp 15.21
Stocks 5 Valia 10.37
20%
Investment 6 ItauBanco 9.49
Funds
7 Sistel 9.46
9 46
(Fixed Income)
40% 8 Centrus 9.09
9 Banesprev 8.67
10 Forluz 6.92
Investment
Investment
Funds
(Equities) Public Bonds
16% 15% 2% of fixed income investment shifted to
CRIs would represent around R$ 5.0 bn.
Source: CIBRASEC – Brazilian Securitization Company
30. 16
Final Remarks
Mortgage growth will reduce the funding availability to the Real Estate
financing.
Other funding alternatives will be required(Debentures,Notes,IPO’s)
Construction cycle shortening will be important to reduce companies’ short
term funding liabilities, and to deliver affordable segment houses(lack of
savings)
Mortgage will be available earlier in the process to speed up the cash
process,
management ,new product development (PIP)
Inflation Hedge will be provided to avoid industry mismatch.
34. 3
Agenda
Overview of Brazilian Cards Industry
Santander Cards Issuer
Santander Cards Acquirer
35. Overview of Brazilian Cards Industry 4
Cards industry continues to show substantial growth rates, even considering the competitive
scenario consolidation and recent regulation changes
Total industry debit + credit cards and spend
600
500
400
18.8% a.a.
300
200
23.7% a.a.
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
# cards (MM) Total Spend (R$ bn)
Source: ABECS. Prepared by Ferrés Consultoria.
36. Overview of Brazilian Cards Industry 5
Cards transactions have been strongly replacing checks transactions last 10 years
In billions transactions (cards include debit + credit)
7
6
5
21% a.a.
4
3
‐8.1% a.a.
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Cards Checks
Source: ABECS and BCB. Prepared by Ferrés Consultoria.
37. Overview of Brazilian Cards Industry 6
Lower income population’s tool as formal payment means and bank services inclusion
For classes D/E the ratio of card holder is higher than check account holders
Economic classes Total AB C DE
Card holders (% of pop.)
Cards 67% 81% 64% 36%
Credit Cards 45% 61% 38% 20%
Debit Cards 53% 70% 49% 19%
Check accounts holders (% of pop )
pop.) 67% 82% 64% 33%
Source: Researches Abecs. Survey on 11 metropolitan areas.
38. Overview of Brazilian Cards Industry 7
The relative lower participation as a mean of payment shows a relevant up side opportunity for
Brazilian Cards Industry
Higher utilization of cards in private consumption (1)
15.8% 17.1% 19.1% 21.4%
12.4% 14.0%
2003 2004 2005 2006 2007 2008
...but below developed countries (2)
2X
(1) Source : ABECS and IBGE
(2) Source: ABECS, Bank of International Settlements, United Nations, IBGE
39. Overview of Brazilian Cards Industry 8
Card penetration, average ticket and transactions per card are still low in Brazil
Number of cards (MM)
~ 15 MM credit cards / year
628
565
514
453
201 217 233 249 225
173 196 153
104 147 124 136
2007 2008 2009 2010 (e)
Credit Debit Private Label Total
Spend (R$ Bn) Average Ticket (R$ per transaction)
CAGR: 21.1% CAGR: 3.7%
535
444
375 98 100 104
302 93
309 75
256 68 71 73
215 53 52 55 51
174 158 48 53 51 52
107 129
83 53 60 68
45
2007 2008 2009 2010 (e) 2007 2008 2009 2010 (e)
Credit Debit Private Label Total Credit Debit Private Label Total
Source: ABECS (Associação Brasileira das Empresas de Cartões de Crédito e Serviços)
40. 9
Agenda
Overview of Brazilian Cards Industry
Santander C d Issuer
S t d Cards I
Santander Cards Acquirer
q
41. Santander Cards Issuer – Role in the Value Chain 10
Sets rules for
issuers and
acquirers
Card Brands
Issues credit and
debit cards Captures and
processes transactions
Issuers Acquirers
Use credit and debit
cards
Clients Merchants
42. 11
Santander Cards Issuer – our approach
To be the world’s best integrated cards monoliner within a retail bank…
Monoliner Retail Bank
Product focus Access to customers’
base
p
Specialized
capabilities Traditional channels:
branches / agents
Direct channels:
Telemarketing /
Mailings Brand
Global specialized Economies of scale
systems
… contributing to improving our local banks’ performance
43. Santander Cards Issuer – our model 12
Is based on managing all levers along the product lifecycle …
ACQUISITION PORTFOLIO MANAGEMENT
Acquisition
Activation Spending Outstandings Retention
Depth of customer relationship
Product innovation
and…
Unlimited Platinum
r
Reward Free
Cancellation
Mini Card Light VALUE
h
Flex
Time
Launch strategies Specialized risk management
Multichannel Profitability
management
… supported by an end-to-end view of RISKS and TECHNOLOGY
44. Santander Cards Issuer – our model 13
The Business expansion will be held in two dimensions: Customer Base and Profitability
per Account
Increase the
profitability by using Card Accounts
the card’s platforms as
Δ Profitability per Account
a distribution channel
for other banking
products and services 1Q10
Net income
e
7%
Personal Loan 1Q09
Savings
S i Insurance
1Q09 1Q10
10%
Payment Services
Continuous product
innovation as a growth
lever
(1) Source: Internal data
45. Santander Cards – market position 14
In Brazil, where our model is already well established, our market share has improved
significantly
Market Share
end of 1Q10
Other Banks
BANK “A”
A increases to
23.40 25.30 9.9%
Rev
BANK “D” 7.10
volving Ba
15.10
15 10
9.4 BANK “C”
19.70
BANK “B” 3.6 9.4
alance %
2.3
3.5
%
2005 Organic Growth Banco Real Current Dec/2009
Santander Acquisition
Note 1: Competitor data as of December, 09, source Competitor Quarter Reports, BCB and internal analysis.
Santander´s current Market Share as of December, 09
Note 2: Include non interest bearing due to unpaid balances
46. Santander Cards Issuer – continuous growth 15
The Credit market continues to show substantial growth rates, even considering the competitive
scenario consolidation and recent regulation changes
Cards
C d (MM) CAGR (06~09)
(06 09) Market Santander
124 136
+21% (04~09) 104
82 +18%
Key Observations
68
53
8 10 ~80% of the Cards Market is
5 7
+22% concentrated at the top 4
04 05 06 07 08 2009 Banks (Banco do Brasil, Itaú,
Total Spend (R$ Bi) Bradesco and Santander)
256
215 There is an important
+22% (04~09)
174 +22% opportunity for cards revolving
142
115
95 growth
14 19 26 33
+33%
33% Relevant regulation changes
R l t l ti h
are being implemented,
04 05 06 07 08 2009
Revolving Balance (R$ Bi) representing significant
25.7 opportunities for issuers and
+27% (04~09) 22.1
22 1 new acquiring business
+24%
17.2
13.4 players
11.3
8.2
1.2 1.7 2.1 2.4 +26%
04 05 06 07 08 2009
Note 1: Source Banco Central do Brasil, including +360 days balance
Note 2: Source ABECs – Brazilian Cards Association
47. Santander Cards Issuer – 1Q10 performance 16
The business growth is leveraged by Cards Accounts expansion…
Cards Accounts (MM) Cards (MM) Key Notes
+14% +16%
Cards Accounts
+20% +13% has presented
sustainable growth,
7.542 7.890
7 890 9.745 10.042
10 042 year over year
6.916 8.674
Cards Accounts
growth rate has
continuously
increased quarter
1Q09 4Q09 1Q10 1Q09 4Q09 1Q10 over last quarter,
reflecting our
strategy
YoY growth
Quarter annualized growth
49. 18
Agenda
Overview of Brazilian Cards Industry
Santander Cards Issuer
Santander Cards Acquirer
50. Santander as Issuer and Acquirer 19
Sets rules for
issuers and
acquirers
Card Brand
Issues credit and Captures and processes
debit cards transactions
Issuers Acquirers
Uses credit and
debit cards
Clients Merchant
51. Santander’s Experience in Other Countries 20
Sovereign
Puerto Rico
UK
Mexico
Totta
Colombia
Spain
S i
Argentina Portugal
Santander
Santander + Acquiring Partners
52. New Model: Santander (Acquiring + Financial Services) 21
Innovative value offer
Products and Services + Acquiring +
rs
Acquirer
Other POS Capturing Services
ACQUIRER FINANCIAL
SERVICES SERVICES
Banks
FINANCIAL SERVICES + ACQUIRING - packaged in a suitable value
offer to corporate clients
53. Partnership Santander & GetNet 22
Creation of a Partnership leveraged by GetNet’s
p g y
technological expertise and POS network
Brand
MASTERCARD Investment in
Capturing Network and
g
License Processing Platform
Partnership
Integrated value offer
– Acquiring and Banking
Other POS Capturing
Business Services
Ser ices
Commercial Model –
Distribution/Pricing
165 POS (Capturing
Communication and Terminals - 2009)
“Time To Market”
Media
54. GetNet Tecnologia 23
Entrance in the Acquirer industry through a technological
partner - GetNet Tecnologia
GETNET TECNOLOGIA
Campo Bom – RS
Technological Platform for capturing,
CORREA DA SILVA GROUP
authorizing and the processing of
Domestic Capital transactions
N&SP – Network and Service Provider
165 thousand POS
Customized solutions for capturing, authorization and processing of
transactions and information Services at Capturing Terminals:
Main Clients: Goodcard, Banco BNG, Serasa, Microsoft, Base Card, Wal- - Mobile Recharge
Mart, Brasil Telecom, Claro, Tim, Vivo, Telefonica, Oi, Embratel, CTBC, - “Vale Transporte” (transportation ticket)
Amazonia Celular, Banco Matone, etc. Recharge
- “PAT Alimentação e Refeição” (meal ticket)
PAT Refeição
Over 800 employees - “Cartão Convênio” / Private Label / Cobrand
Annual turnover of R$ 2,29 Bn (2009)
55. Santander Conta Integrada: Innovative value propose 24
Santander (Acquiring + Financial Services) & Getnet = Capillarity
Synergy and corporate client base + technological knowledge
SECUNDARY BENEFITS:
A “Win-win” Relationship: the bank recognizes the
financial volume of the client in transactions made with
MASTERCARD brand credit card: Competitive rates for prepayment of
receivables
Reduction of up to 100% of checking
account fee for financial transaction volume over R$ 3 Prepayment of receivables through
thousand/month in each POS POS (pioneer in the market)
5 days without interest rate charge
by using overdraft Call center support to merchants
24hours / 7 days
Guarateed Account or Working Capital
limits based on financial transaction volume multiples
negotiated in the POS Mobile Recharge
Corporate current account with integrated bank domicile
SERASA / RECHEQUE* consultancy
POS connection using both dial-up and/or broadband.
Regional cards capture
* Credit Bureau
