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Transcript
Banco Santander (Brasil) S.A. Fixed Income Investor Presentation March, 2012 Important Information 2 This presentation may contain certain forward-looking statements and information relating to Banco Santander (Brasil) S.A. (“Santander Brazil") and its subsidiaries that reflect the current views and/or expectations of Santander Brazil and its management with respect to its performance, business and future events. Forward looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results ,performance or achievements, and may contain words like "believe", "anticipate", "expect", "estimate", "could", "envisage", "potential", "will likely result", or any other words or phrases of similar meaning. Such statements are subject to a number of risks, uncertainties and assumptions. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In no event shall Santander Brazil, or any of its subsidiaries, affiliates, shareholders, directors, officers, agents or employees be liable to any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this presentation or for any consequential, special or similar damages. In addition to factors identified elsewhere in this presentation, the following factors, among others, could cause actual results to differ materially from the forward-looking statements or historical performance: changes in the preferences and financial condition of our consumers, and competitive conditions in the markets we serve; changes in economic, political and business conditions in Brazil; governmental interventions resulting in changes in the Brazilian economy, taxes, tariffs or regulatory environment; our ability to compete successfully; changes in our business; our ability to successfully implement marketing strategies; our identification of business opportunities; our ability to develop and introduce new products and services; changes in the cost of products and our operating costs; our level of indebtedness and other financial obligations; our ability to attract new customers; inflation in Brazil, devaluation of the Real against the U.S. Dollar and interest rate fluctuations; present or future changes in laws and regulations; and our ability to maintain existing business relationships, and to create new relationships. 3 Index Brazilian Economy and Financial System Santander Brasil Santander Group Annexes 4 Macroeconomic Scenario GDP (Y-o-Y growth %) Interest Rate - Selic(%) End of period Inflation (IPCA %) Exchange Rate – (R$/US$) End of period Sources: Brazilian Central Bank, IBGE and Santander Research Estimates 5 Strong domestic fundamentals – High International Reserves International Reserves and External Debt US$ billion External debt Reserves 215 211 201 169 49 53 54 2002 2003 2004 2005 350 180 194 86 193 198 198 2006 2007 2008 2009 2010 2011 38% 43% 40% 37% 2008 2009 2010 2011 173 38 239 289 257 284 Net Public Sector Debt / GDP % 61% 2002 55% 2003 Sources: Brazilian Central Bank 51% 2004 48% 47% 45% 2005 2006 2007 6 Social dynamics show a favorable scenario for Brazil Favorable Demographic Dynamics1 Social Mobility Trends2 ∆abc= 19 ∆abc= 46 200 Millions of People Demographic Bonus 150 66 +55% 100 102 2009 D 14.00 12.00 12.3 11.5 10.00 9.9 9.3 8.00 4.00 2.00 2009 2008 2007 2006 2005 2004 2003 2002 2001 1999 1998 1997 1996 .00 1995 C 10.0 6.00 1993 16 2014 A/B Unemployment Rate and Real Income³ 7.0 7.1 7.3 6.5 6.6 6.8 6.3 6.2 6.0 5.4 5.5 5.6 5.7 5.0 5.1 5.3 1992 40 26 E 1. IBGE and Santander Research 2. Ministry of Finance; * estimated 3. IBGE 113 39 49 2003 Sources: +11% 47 50 0 Educational Bonus (years of study)³ 31 23 13 6.4 5.1 6.2 8.1 8.1 7.4 6.7 4.9 3.1 3.1 2004 7.9 2005 2006 2007 2008 Unemployment Rate (%) 2009 2010 Payroll (YoY%) 2011 Sound Financial System – Banks are well prepared for Basel III 7 As of Sep/11 Solid, Profitable Well-capitalized financial system BIS Ratio: 15,5% Coverage index: 108% High Profitability ROE: 17% Sizeable market: The four largest listed Brazilian banks are ranked within the 40 largest banks of the world in market capitalization Conservative regulation and strict prudential rules: 11% minimum BIS ratio required Highly regulated and sizeable financial system High Reserve requirements Banks are well prepared for Basel III Source: Brazilian Central Bank In December, the Brazilian Central Bank opened public consultations on adherence to Basel III rules. Consultations will remain open through May. Current capital requirement in Brazil is higher than the international standard. 8 Plain Vanilla Balance Sheet 4 Major listed banks in Brazil¹ – Dec/11 (US$ Bi) 1,284 Loans + Corporate Bonds² Reserve Requirements Bonds Deposits in guarantee Deferred Tax Assets Intangible Assets 1% Others 1,284 Deposits 49% 15% 21% 51% No hidden risks 4% Letras Financeiras 15% Issuance 8% 4% Credit Lines & Onlending Provisions 2% 4% 10% Capital 8% 7% Others Assets Assets Liabilities Liabilities 1. Itaú, Santander, Bradesco and Banco do Brasil 2. Debentures, Commercial Papers and CRI Originated to hold model No credit derivatives Significant domestic pool of liquidity Low reliance on external funding Buffer Quality Significant domestic pool of liquidity... ...with a challenge 9 Only ~10% of the total funding in Brazil comes from external sources. Outward mobility of domestic pool of fund is relatively limited Low interconnectivity: Interbank deposit market is quite small Banks liquidity deployed basically in government bonds and in the government bond repo market Sizable asset management industry controlled basically by the big retail banks: USD 1,031 billion (the 4 largest banks concentrate 63%) Deposits of USD 754 billion (the 4 largest banks concentrate 69%) Creation of new instruments that allow for a better liquidity risk management. 10 Financial System Evolution Total Loans Total Deposits US$ billion (Constant FX rate) US$ billion (Constant FX rate) 16.9% 1,781 974 995 1,026 13.3% 875 910 964 1,019 1,055 20.6% Dec.10 Mar.11 Jun.11 Sep.11 Dec.11 Funding from Clients Tenor Individuals Total Corporate Source: Brazilian Central Bank / CETIP Funding from Clients – Deposits , Letras Financeiras and Others • Deposits – Demand deposits, Savings Accounts and Time deposits • Others – Debentures repurchase agreement, Real Estate Credit Notes (LCI) and Agribusiness Credit Notes (LCA) • Letras Financeiras – Bonds issued by Financial Institution on the domestic market Individuals Dec-11 Jun-11 Dec-10 Jun-10 Dec-09 Jun-09 Dec-08 Jun-08 Dec-07 Jun-07 Dec-06 Dec-11 Aug-11 Apr-11 Dec-10 Apr-10 Aug-10 Dec-09 Aug-09 Apr-09 Dec-08 Apr-08 Aug-08 Dec-07 Aug-07 Apr-07 Dec-06 Apr-06 Aug-06 150 Jun-06 250 3.9% Dec-05 350 5.5% Dec-04 403 Jun-04 450 7.3% Dec-03 497 Jun-03 600 550 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Dec-02 Data in days Dec-05 AUM Delinquency Ratios 650 Corporate 2,082 956 %12M Total %12M Public Banks 2,015 906 Jun-05 %12M Private Banks 1,937 1,866 Dec11 vs. Dec10 Total 11 Index Brazilian Economy and Financial System Santander Brasil - Strategy - Business - Results - Liquidity and Funding Santander Group Annexes 12 Universal bank focused on retail Revenues* by Segment – 4Q11 +19.3 million of Customers¹ Commercial Commercial Bank Bank Commercial Network Global Banking and Markets Asset Manag. and Insurance *Considers managerial Customer Base 2,355 branches (+154 branches in 12 months and +61 in the quarter) 1,420 PABs (mini branches) 18,419 ATMs 54.6 thousand employees data Sound Credit Rating² Standard & Poor’s Moody’s Fitch 1. 2. BBB (stable) Baa2 (under review) BBB+ (stable) Total current account: active and inactive account during a 30-day period, according to the Brazilian Central Bank Foreign Currency Rating Strategy 13 Maior volume de Maior volume de Wenegócios are focused onnegócios our goals Quality in customer services + 100/120 branches per year during 2011-2013 To be the 1º in customer satisfaction until 2013 Commercial punch in key segments and products SMEs Credit Card, Mortgage, Santander Acquiring and Auto Finance Prudent Risk Management Intensify customer relationships To be the bank of choice of our customers by 2013 Improve our value proposition for each customer segment Cross - Sell Identify and take advantages of cross-sell opportunities (products and segments of Retail and GB&M) Brand Attractiveness To increase Brand Attractiveness 14 Index Brazilian Economy and Financial System Santander Brasil - Strategy - Business - Results - Liquidity and Funding Santander Group Annexes 15 Managerial Loan Portfolio¹ US$ billion 21.3% Dec.11 Dec.10 Y-o-Y Variation Individuals 33,806 27,178 24.4% 5.4% Consumer Finance 16,238 14,377 12.9% 6.1% SMEs 25,557 20,353 25.6% 8.5% Corporate 27,920 23,686 17.9% 1.4% 103,521 85,595 20.9% 5.1% 7,825 6,192 26.4% 0.9% 111,346 91,787 21.3% 4.8% US$ million Total IFRS Other Transactions² Expanded Credit portfolio² 1. Loans for the year 2010 have been reclassified for comparison purposes with the current period, due to re-segmentation of customers occurred in 1Q11 2. Includes others Credit Risk Transactions with customers (Debenture, FIDC, CRI, Floating Rate Notes and Promissory Notes) and portfolios acquired from other banks. Total amount of R$ 2.9 billion in Dec/11 and R$ 4.2 billion in Dec/10 Q-o-Q Variation 16 Santander Loan Portfolio Credit CreditPortfolio PortfolioConcentration¹ Concentration¹– –Risk Risk(%) (%) Total Loan Portfolio Dec/11 Dec/11 Total Credit Total: US$ 104,0 billion 100 largest Corporate 27% 26.3% 50 largest Individuals 32% 20.3% 20 largest Consumer finance 16% SMEs 25% 13.3% 10 largest 9.7% Largest debtor 3.8% Loan Portfolio Breakdown by Segment – Dec/11 Consumer Finance³ Corporate + SMEs Total US$ 53.5 billion Leasing / Auto Loans 3.0% Working capital / Others 62.1% Total US$16.2 billion Construction Loans 6.3% Large Vehicles 5% Consumer Credit 7% Personal Loans/Others 35.1% Trade Finance 17.7% On-lending 9.0% Individuals Total US$ 35.3 billion Mortgages 15.8% Vehicles & Motorcycles 88% Agricultural Loans 1.9% 1. Includes: Credit Portfolio and Credit Guarantees, Securities and Derivatives Financial Instruments 2. Includes acquired portfolio 3. Vehicles (Cars, Motorcycles), Large vehicles and Others: Clubcard, CVC. Agricultural Loans 3.9% Leasing/Auto Loans¹ 3.6% Credit Card 22.3% Payroll Loans² 19.3% 17 Quality of Loan Portfolio - BR GAAP NPLs Over 90¹ (%) NPLs Over 60² (%) Coverage Ratio Over 90³ 1. Nonperforming loans over 90 days / total loans BR GAAP 2. Nonperforming loans over 60 days / total loans BR GAAP 3. Allowance for Loan Losses / (nonperforming loans for over 90 days + performing loans with high delinquency risk) 18 Deposits and Assets Under Management (AUM) US$ billion 8.2% Dec.11 Dec.10 Y-o-Y Variation Demand 7,229 8,600 -15.9% -1.0% Savings 12,418 16,155 -23.1% -23.1% Time 44,750 36,740 21.8% 11.1% Others¹ 21,211 20,200 5.0% -2.6% Letras Financeiras² 10,622 3,539 200.1% 10.2% Funding from customers 96,230 85,234 12.9% 1.2% AUM 60,253 59,355 1.5% -1.9% 156,483 144,589 8.2% 0.0% US$ million Total Funding 1. 2. Debentures repurchase agreement, Real Estate Credit Notes (LCI) and Agribusiness Credit Notes (LCA) Bonds issued by Financial Institution on the domestic market Q-o-Q Variation 19 Index Brazilian Economy and Financial System Santander Brasil - Strategy - Business - Results - Liquidity and Funding Santander Group Annexes 20 Income Statement US$ million 2011 2010 Y-o-Y 4Q11/3Q11 Net Interest Income¹ 14,875 13,138 13.2% 10.2% Net Fee² 3,912 3,643 7.4% 1.0% 629 720 -12.6% -87.4% Total Income 19,416 17,502 10.9% 3.0% General expenses³ (6,596) (5,987) 10.2% 8.9% Impairment losses on Financial Assets (net) (5,002) (4,682) 6.8% -14.2% Net Provisions/Others4 (2,191) (1,649) 32.9% 15.8% 5,628 5,184 8.6% 9.2% (1,493) (1,248) 19.6% 34.8% 4,134 3,935 5.1% -0.2% Other Operating Income Net profit before tax Income tax Net profit 1. Excludes amortization of goodwill. Includes the Cayman tax reclassification, interest on emissions and recoveries of written-off credits 2. Considers Income from Services Rendered and Income from Banking Fees 3. Considers Personnel Expenses, Other Administrative Expenses, and Profit Sharing 4. Considers Other Operating Income (expenses) and Non operating(expenses) income 21 Performance Ratios Efficiency Ratio¹ (%) -0.2 p.p. ROAA³(%) -0.2 p.p. Recurrence² (%) -1.5 p.p. ROAE (adjusted)4 (%) -0.7 p.p. 1. General Expenses excluding amortization / Total Revenue excluding Cayman hedge and considers Leasing’s accounting standardization proceeding occurred during the system integration of Banco Real and Banco Santander 2. Net Fee/General Expenses excluding amortization 3. Net Profit / Average Assets 4. Excludes goodwill on acquired companies (Banco Real and Real Seguros Vida e Previdência) as international rules in Tier I 22 BIS and Leverage Ratios Leverage Ratio (%) BIS Ratio (%) – Dec/2011 Santander¹ 22.5 Santander ² 24.8 8.8 17.5 19.9 C1 12.3 16.0 C2 12.3 15.0 C3 10.9 Tier 1 12.0 13.0 14.4 Tier 2 Source: Brazilian Central Bank 1. In accordance with the Brazilian Central Bank 2. Excludes goodwill C1, C2 and C3 are the main competitors of Santander Brasil 16.1 Total Assets / Tier 1 23 Index Brazilian Economy and Financial System Santander Brasil - Strategy - Business - Results - Liquidity and Funding Santander Group Annexes 24 3 Pillars Model Strong local presence / economies of scale (“vertical strategy”) Subsidiary model with financial autonomy Grupo Santander UK US Portugal Mexico Brazil Chile … Operational Integration Decentralized Model: Financial and capital independent subsidiaries’25 based model According to Financial Stability Board (FSB) and BIS III. The aim is to limit the contagion risk between units of the group and establish a plan (LIVING WILL) to face severe crisis scenarios in terms of liquidity and capital. 3 Pillars model: 1) “Self funded” 2) Financial autonomy 3) Focus on Brazilian assets Low level of funding from the parent company - USD 580 MM in dec/11, corresponding to 0.3% of total assets. No exposure to peripheral Europe sovereign risk. 13,5% of total funding in foreign currency. 26 Liquidity Firewall The Brazilian Law It is forbidden to lend money to Parent Company (Lei 4.595/64; Lei 7.492/86; MNI 02-01-16). In Brazil it's a white-collar crime. Dividend Policy Supervision Limited Regulation: max. 95% of Profits (BR GAAP). Santander: approx. 90% (BR GAAP) and 50% (IFRS). The Central Bank of Brazil has a close and rigorous supervision. Corporate Governance Level 2 There is a Policy for Transactions with Related Parties Bylaws are designed to protect shareholders. Decentralized Model Independent subsidiaries in terms of capital and liquidity. Financing Strategy: we manage our balance sheet in a very prudent and conservative way Santander’s basic liquidity management principles Decentralized, but coordinated action Diversification: market, maturity, currency, instrument Limited short term funding Limited intra-group funding (principle of autonomy in the context of the «Living Wills») 27 28 Financing Strategy: good liquidity position Reduced Short Term Funding Short Term Funding1 / Total Funding2 Funding Offshore Maturity³ Volume Outstanding: USD 5.5 Billion Liquidity Ratios at comfortable levels Dec/2011 Loans / Deposits: 107% Loans / (Deposits + M/L Term Funding) : 87% 1.Funding up to 3 months 2. Institutional Funding 3.Includes Senior Unsecured Bond, Syndicated Loan, DPR and EuroCD Financing Strategy Santander Brasil Capital Markets funding is carried out through a diversified approach by markets, tenor and instruments Short Term EuroCD: US$1 billion Programme (Reg. S Notes only) Medium and Long Term Eurobond market: Senior transactions in all major currencies through a US$ 10 billion EMTN Programme (Reg S and 144-A). Structured and Private Placements are also issued under the Programme. Diversified Payment Rights (future flows securitization) – MT103 and MT202 through established programme. Rated A2 Moody’s/A S&P/ A+ Fitch. 29 30 Index Brazilian Economy and Financial System Santander Brasil Santander Group Annexes 31 Santander Group Main financial figures 2011 Sound credit ratings Million Euros Total assets 1,251,525 Net customer loans 750,100 Shareholders’ equity1 80,629 Total managed funds2 1,382,980 Attributable profit 5,351 Long term Standard & Poor’s Moody’s Aa3 Fitch A DBRS AA Attributable Profit by geographical area USA 6% Continental Europe 31% Other LatAm 23% Brazil 28% 1. 2. In 2011, estimated data of May 2012 scrip dividend Includes Total Assets, Mutual and Pension Funds and Managed Portfolios A+ United Kingdom 12% Santander Group – High diversification by geographies (1) Over operating areas attributable profit (2) Expected GDP growth age for 2012-2013 Source: International Monetary Fund, World Economic Outlook Database, January 2012 32 Santander Group – Balance Sheet Strengthening: Capital ratio 10.02%¹ 1. Core capital under Basel II criteria (*) Including Valores Santander (compulsorily convertible bonds) 33 Santander Group – Balance Sheet Strengthening: Liquidity Note: Liquidity balance sheet in terms of management (trading derivatives, interbank balances and fixed assets are netted) (*) Including retail commercial paper (**) Including FHLB lines in the US to Sovereign 34 Santander Group Main elements of our business model… 1.1 Diversification is key: good balance between emerging and mature economies…with dominant local positions in large and attractive countries 2.2 We are increasingly playing the international connectivity and the business derived from it 3.3 Our banking model has two strong pillars non-negotiable: low risk profile…and cost austerity 4.4 Subsidiary based model-financial de-centralisation with strong operational centralisation 5 ...AND A STRONG BALANCE SHEET MANAGEMENT 35 36 Index Brazilian Economy and Financial System Santander Brasil Santander Group Annexes 37 Balance Sheet - Total Assets – IFRS US$ million Assets Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 CASH AND BALANCES WITH THE BRAZILIAN CENTRAL BANK 30,280 30,623 33,404 34,810 35,152 FINANCIAL ASSETS HELD FOR TRADING 13,232 12,550 16,740 15,877 15,940 9,563 9,652 9,810 350 355 156 113 77 50 33 0 0 0 0 0 119 112 114 122 123 9,288 9,427 9,619 179 200 AVAILABLE-FOR-SALE FINANCIAL ASSETS 25,166 27,813 29,683 23,583 23,781 LOANS AND RECEIVABLES 92,817 95,297 97,365 103,493 108,091 - Loans and amounts due from credit institutions 12,080 12,749 11,555 10,819 10,497 - Loans and advances to customers 85,595 87,748 91,363 98,479 103,521 - Allowances for credit losses -4,900 -5,241 -5,595 -5,848 -5,960 - Debt instruments 43 42 42 43 33 HEDGING DERIVATIVES 62 68 56 42 43 NON-CURRENT ASSETS HELD FOR SALE 36 35 25 13,261 70 198 210 215 223 225 2,409 2,439 2,441 2,505 2,670 17,039 17,032 17,102 16,587 16,759 15,093 15,093 15,093 14,510 14,510 1,946 1,939 2,009 2,076 2,249 TAX ASSETS 7,912 7,646 8,238 9,055 8,663 OTHER ASSETS 1,020 1,341 1,826 1,444 1,432 OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS - Loans and amounts due from credit institutions - Loans and advances to customers - Debt instruments - Equity instruments INVESTMENTS IN ASSOCIATES TANGIBLE ASSETS INTANGIBLE ASSETS - Goodwill - Other intangible assets Total Assets 199,735 204,706 216,905 221,230 213,181 38 Balance Sheet - Total Liabilities – IFRS US$ million Liabilities FINANCIAL LIABILITIES HELD FOR TRADING FINANCIAL LIABILITIES AT AMORTISED COST Dec-10 Mar-11 2,551 2,611 Jun-11 2,845 Sep-11 Dec-11 3,538 2,691 135,058 139,146 149,435 150,964 155,374 - Deposits from Central Bank and deposits from credit institutions 22,599 19,722 24,363 22,583 27,469 - Customer deposits¹ 89,535 92,986 94,256 95,233 93,013 - Marketable debt securities 10,708 14,344 17,374 20,318 20,573 - Subordinated liabilities 5,168 5,317 5,478 5,653 5,815 - Other financial liabilities 7,047 6,777 7,964 7,178 8,504 0 0 1 13 19 0 10,472 0 10,758 0 10,938 11,914 0 0 0 PROVISIONS² 5,009 4,803 4,996 4,857 5,073 TAX LIABILITIES 5,614 5,646 6,467 6,431 6,331 OTHER LIABILITIES 1,922 1,911 2,091 2,467 2,095 HEDGING DERIVATIVES LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE LIABILITIES FOR INSURANCE CONTRACTS Total Liabilities Total Equity³ Total Liabilities and Equity 1. Includes repo 2. Includes provisions for pensions and contingent liabilities 3. Includes minority interest and adjustment to market value 160,624 164,875 176,773 180,185 171,582 39,111 39,832 40,132 41,045 41,599 199,735 204,706 216,905 221,230 213,182 39 Quarterly Managerial¹ Income Statement US$ million Income Statements 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 - Interest and Similar Income 4,946 5,245 5,653 5,965 6,292 6,761 7,078 7,450 - Interest Expense and Similar (1,773) (2,043) (2,354) (2,500) (2,752) (3,158) (3,400) (3,396) Interest Income 3,173 3,202 3,298 3,465 3,539 3,604 3,678 4,054 Income from Equity Instruments 2 7 1 17 3 24 5 19 Income from Companies Accounted for by the Equity Method 5 7 6 5 10 8 7 4 Net Fee 865 912 947 920 950 995 979 989 - Fee and Commission Income 981 1,028 1,082 1,084 1,114 1,155 1,190 1,216 - Fee and Commission Expense (117) (117) (135) (164) (164) (160) (211) Gains/Losses on Financial Assets and Liabilities and Exchange Rate Diferences 324 155 251 124 147 224 286 96 Other Operating Income (Expenses) (24) (32) (56) (74) (15) (78) (25) (84) Total Income 4,345 4,251 4,448 4,458 4,633 4,776 4,930 5,077 General Expenses (227) (1,415) (1,479) (1,519) (1,574) (1,577) (1,582) (1,645) (1,791) - Administrative Expenses (693) (723) (732) (679) (716) (739) (768) (831) - Personnel espenses (722) (755) (787) (895) (861) (843) (877) (961) Depreciation and Amortization (152) (156) (165) (186) (180) (190) (191) (218) Provisions (net)² (335) (155) (359) (203) (336) (333) (344) (393) Impairment Losses on Financial Assets (net) (1,347) (1,256) (1,049) (1,042) (1,102) (1,229) (1,446) (1,245) - Allowance for Loan Losses³ (1,344) (1,276) (1,045) (1,017) (1,098) (1,227) (1,441) (1,237) - Impairment Losses on Other Assets (net) (2) 20 (4) (26) (5) (3) (5) (9) Net Gains on Disposal of Assets 62 26 19 (32) 15 (12) 8 3 Net Profit before taxes Income Taxes Net Profit 1,158 (218) 940 1,231 (289) 941 1,374 (343) 1.032 1,421 (398) 1.022 1,452 (348) 1.104 1,430 (320) 1.110 1. Includes the Cayman tax reclassification, the unification of the accounting classification of leasing transactions and non-recurring events. 2. Includes provisions for civil, labor and others litigations. 3. Includes recovery of credits written off as losses 1,312 (351) 961 1,433 (474) 959 40 Managerial Loan Portfolio - BR GAAP¹ R$ billion 20.9% R$ million Dec.11 Dec.10 Y-o-Y Variation Individuals 65,568 55,146 18.9% 4.1% Consumer Finance 35,629 29,814 19.5% 8.7% SMEs 47,940 38,306 25.1% 8.5% Corporate 47,925 42,111 13.8% -1.1% 197,062 165,377 19.2% 4.6% 11,784 7,414 58.9% 3.7% 208,846 172,792 20.9% 4.5% Total BR GAAP Other Credit Risk Transactions ² Expanded Credit portfolio² BR GAAP 1. a) The credit portfolio in BR GAAP is higher than in IFRS because it includes loan portfolio acquired from other banks and consolidates the credit portfolio of our consumer finance joint ventures (Santander Financiamentos) b) Loans for the year 2010 have been reclassified for comparison purposes with the current period, due to re-segmentation of customers occurred in 1Q11 2. Includes other Credit Risk Transactions with customers (Debenture, FIDC, CRI, Floating Rate Notes and Promissory Notes) and anticipated acquiring receivables Q-o-Q Variation 41 Asset Quality Ratios - IFRS Delinquency ratio¹ (%) Coverage ratio² (%) 1. (Nonperforming loans over 90 days + performing loans with high delinquency risk) / managerial loan portfolio 2. Allowance for Loan Losses / (nonperforming loans over 90 days + performing loans with high delinquency risk) 42 Total Revenues US$ Million 13.9% 2011 2010 Y-o-Y Variation Net Interest Income¹ 14,875 13,138 13.2% 10.2% Net Fees 3,912 3,643 7.4% 1.0% Subtotal 18,787 16,782 12.0% 8.3% Others² 629 720 -12.6% -87.4% 19,416 17,502 10.9% 3.0% US$ Million Total Revenues 1. 2. Considers Leasing’s accounting standardization proceeding occurred during the system integration of Banco Real and Banco Santander. Results from Financial Operations excluding the fiscal effect of Cayman hedge + Other Operational Revenues (expenses) + Others Q-o-Q Variation 43 General Expenses and Amortization US$ Million 14.1% US$ Million 2011 2010 Y-o-Y Variation Other General Expenses 3,054 2,828 8.0% 8.1% Personnel Expenses 3,542 3,159 12.1% 9.5% General Expenses 6,596 5,987 10.2% 8.9% 779 659 18.2% 13.6% 7,375 6,646 11.0% 9.4% Depreciation and Amortization Total Q-o-Q Variation Dividend policy according to the Parent Company Dividend policy Limited Regulation: max. 95% of Profits (BR GAAP). Santander: approx. 90% (BR GAAP) and 50% (IFRS). 44 • Dividend policy: 50% of IFRS results, which has been practice of the Parent Company for a long time • On the basis of the amortization of the goodwill, which is only in BR GAAP, the 50% IFRS dividend distribution policy represents a higher percentage in BR GAAP, with levels close to the regulatory cap (95%) 45 Level 2 of Corporate Governance Board of Directors with 3 independent members, Audit and Remuneration Committees being totally separated from the group. In order to protect the minority shareholders, additional procedures have been established. Highlight – Related Parties: Any transactions to be entered into with the Controlling Shareholders, which contemplate a disbursement by the Bank in an amount equal to or higher than 1% or R$ 660 million (in one or a series of transactions during a certain period) of Santander Brasil capital, must be submitted to the Audit Committee and approved by the Board of Executive Officers. Corporate Governance Segments Segmentos de Governança Corporativa Classification Corporate Governance Level 2 There is a Policy for Transactions with Related Parties Bylaws are designed to protect shareholders. Corporate Governance Banks New Market Banco do Brasil Level 2 Level 1 Santander Bradesco and Itaú Requirements Share Allows only ON 25% free float Allows ON / PN 25% free float Allows ON / PN 25% free float Source: Bovespa Stock Exchange and Financial Institutions Tag Along 100 % ON Shares Board of Directors 5 Members (20% independent) Term of Office: 2 years 100 % ON /PN Shares 5 Members (20% independent) Term of Office: 2 years 80 % ON Shares 3 Members 46 Household Debt Ratio and Delinquency 45% 42.5% 40% 19.0% 17.0% 35% 15.0% 30% 13.0% 11.0% 25% 21.9% 9.0% 20% 7.3% 15% 7.0% 5.0% Household Debt Ratio* Source: The Brazilian Central Bank * New methodology released on September/11 Household Debt Service Ratio* Nov-11 Sep-11 Jul-11 May-11 Mar-11 Jan-11 Nov-10 Sep-10 Jul-10 May-10 Mar-10 Jan-10 Nov-09 Sep-09 Jul-09 May-09 Mar-09 Jan-09 Nov-08 Sep-08 Jul-08 May-08 Mar-08 Jan-08 Nov-07 Sep-07 Jul-07 May-07 Mar-07 Jan-07 3.0% Nov-06 10% Deliquency Ratio Individuals (RHS) Source: The Brazilian Central Bank Corporate Individuals Total Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 Dec-09 Sep-09 Jun-09 Mar-09 Dec-08 Sep-08 Jun-08 Mar-08 Dec-07 Sep-07 Jun-07 Mar-07 Dec-06 Sep-06 Jun-06 Mar-06 Dec-05 Spreads – Corporate x Individuals 47 (p.p.) 60% 50% 40% 33.7% 30% 26.9% 20% 17.9% 10% 0% Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 46% 47% 48% 48% 50% 51% 52% 52% 54% 54% 57% 57% 59% 59% 60% 61% 61% 61% 60% 60% 60% 60% 62% 63% 64% 65% 66% 67% 67% 67% 67% 69% 67% 68% 68% 68% 68% 68% 68% 68% 68% 68% 68% 68% 54% 53% 52% 52% 50% 49% 48% 48% 46% 46% 43% 43% 41% 41% 40% 39% 39% 39% 40% 40% 40% 40% 38% 37% 36% 35% 34% 33% 33% 33% 33% 31% 33% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% Loans to Individuals – Secured* x Unsecured Loans Secured Lending* Source: The Brazilian Central Bank Unsecured Lending *Payroll Loan + Mortgage + Auto Loans divided by total loans to individuals. Interest Rate Reference Credit Operations. 48