BANCO SANTANDER, SA
Otras Comunicaciones #27536 - 31/10/2008 17:18
Presentación relativa a Santander Brasil
PDF Adjunto:
GRUPO
SANTANDER BRASIL
Integration for
leadership
São Paulo, October 31, 2008
Brazilian Financial System
Disclaimer
Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements within the meaning of the US
Private Securities Litigation Reform Act of 1995. These forward-looking statements are found in various places throughout this
presentation and include, without limitation, statements concerning our future business development and economic
performance. While these forward-looking statements represent our judgment and future expectations concerning the development of
our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ
materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and
regulatory trends; (2) movements in local and international securities markets, currency exchange rates, and interest rates; (3)
competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers,
obligors and counterparties. The risk factors and other key factors that we have indicated in our past and future filings and reports,
including those with the Securities and Exchange Commission of the United States of America (the “SEC”), could adversely affect our
business and financial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those
in the forward-looking statements.
The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available
information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring
securities must do so only on the basis of such person's own judgment as to the merits or the suitability of the securities for its purpose
and only on such information as is contained in such public information having taken all such professional or other advice as it
considers necessary or appropriate in the circumstances and not in reliance on the information contained in the presentation.
In making this presentation available, Santander gives no advice and makes no recommendation to buy, sell or otherwise deal in
shares in Santander or in any other securities or investments whatsoever.
No offering of Securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, as
amended, or an exemption there from.
Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the
purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act 2000.
Note: Statements as to historical performance, historical share price or financial accretion are not intended to mean that future
performance, historical share price or future earnings (including earnings per share) for any period will necessarily match or exceed
those of any prior year. Nothing in this presentation should be construed as a profit forecast.
Index
Characteristics and Evolution of Financial System
Funding and Liquidity
Financial System: Solid, with low leverage and good asset
quality...
Solid, profitable and good asset quality... ...with low leverage
Dec/02 Jun/08
Low level of external dependence: 8% of foreign
issues
ROE 18% 22%
Good asset quality and low delinquency
BIS¹ 16.7% 16.4%
BIS ratio higher than required by the Central
Coverage Ratio¹ 100% 122% Bank, of 11%
Delinquency² 8.5% 5.1% Low leverage: 10.9 assets / stockholder equity
TIER I / TIER II 0% 16% Low Tier I/ Tier II ratio, indicating opportunities in
raising capital using subordinated debt
Assets / stockholder
10.4 10.9 No toxic products
equity
Concentration –
Reserve Requirements Loans / Deposits (%)
10 largest Banks
R$ billons Deposits Loans
300bp
CAGR: 45% 224 89% 92%
91%
107 78%
62% 75%
Dec.02 Oct.08³ Dec.02 Jun.08 Dec.02 Jun.08
1. Considers only the 20 largest banks. 2. E-H/ Total Loans as of September 2008 3. Santander estimates
Source: Brazilian Central Bank
...supported by solid economic fundamentals
International Reserves Securities / Total debt Public Debt / GDP
USD billion USD
206 22% 51% -10pp
CAGR: 41%
132% 21pp
38
1%
Dec.02 Sep.08 Dec.02 Sep.08 Dec.02 Aug.08
Inflation
More than US$ 200 billion of international reserves
12.5% -6pp
Elimination of domestic public FX debt
6.3%
Reduction of external public debt
Public debt declining
Inflation within de Central Bank’s target band
Dec.02 Sep.08
Source: Brazilian Central Bank
Balance Sheet: R$ 2,574 Billions of assets
Jun / 2008
Assets Liabilities
Gross Loans
28%
35% Deposits+
42% 47% Debentures
Reserve 10%
Requirements
10%
14% Open Market
15%
Securities + 44%
Cash 38%
Equivalents
35%
31% Other
liabilities
Other Assets 18% 17%
9% 9% Equity
2003 2008 2003 2008
Source: Brazilian Central Bank
Savings with significant contribution from mutual funds.
Regulated loans account for 1/3 of the total loan portfolio
SAVINGS 2003 - R$ 910 Billions LOANS 2003 - R$ 418 Billions
Dec/03 Regulated Loans¹ Dec/03
Demand
7% Individuals
Savings
Time 16% Corporate
37% 39%
Mutual Funds
59%
17%
Participation 24% Participation
Public: 49% Public: 34%
Private: 51% Private: 66%
SAVINGS 2008 - R$ 2,128 Billions LOANS 2008 - R$ 1,149 Billions
Jun/08 Regulated Loans¹ Jun/08
Demand
Savings 5% Individuals
Time 12% Corporate 28%
Mutual Funds 39%
57%
25%
Participation Participation
33%
Public: 43% Public: 33%
Private: 57% Private: 67%
1) Includes: BNDES, Mortgage and Rural
Source: Brazilian Central Bank
Loan growth driven mainly by corporate lending...
Total Loans (R$ Bn) Unrestricted Individual Loans (R$ Bn)
1,149
993
857 384
757 34.0% 338
626 684 296
202 225 252 29.7%
30.1%
20.3%
Mar.06 Sep.06 Mar.07 Sep.07 Mar.08 Sep.08 Mar.06 Sep.06 Mar.07 Sep.07 Mar.08 Sep.08
Unrestricted Corporate Loans (R$ Bn) Regulated Loans (R$ Bn)
442
368 44.3% 323
280 307
241 255 288
219 238 26.6%
205 218
17.3% 11.8%
Mar.06 Sep.06 Mar.07 Sep.07 Mar.08 Sep.08 Mar.06 Sep.06 Mar.07 Sep.07 Mar.08 Sep.08
Volume Y-o-Y Variation %
Source: Brazilian Central Bank
...with extension of loan terms, higher spreads and stable
delinquency
The increase in the Selic overnight rate is ...and in spreads
already reflected in customer rates...
39.6%
38.6%
52.1% 53.1%
27.2%
26.4%
39.8% 40.4%
14.7%
28.3% 13.6%
26.2%
Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08
Extension of loan terms... ...and stable delinquency¹
Days
480 9.4%
8.3%
368 378 6.5%
5.2% 5.1%
296 303
3.5%
235
Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08
Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08
Corporate Individuals Total
Source: Brazilian Central Bank 1) E-H/ total loans
Savings are rising by 19%, driven by time deposits
R$ Billions
Savings (Deposits + Mutual Funds) Deposits Mutual Funds
Demand: 7.8%
Savings: 18.2%
Time: 69.4%
2,128 909
1,953
1,785
1,601 705
1,248 1,219
1,470 642 534 1,143
1,369 588
529 554 1,012
349 916
19.2% 315 41.6% 840
21.8% 297
282 293
26.3%
18.6%
6.6%
356 375
291 327
247 261
Mar.06 Sep.06 Mar.07 Sep.07 Mar.08 Sep.08 Mar.06 Sep.06 Mar.07 Sep.07 Mar.08 Sep.08 Mar. 06 Sep. 06 Mar. 07 Sep. 07 Mar.08 Sep.08
Time Demand + Savings
Volume Y-o-Y Variation %
Source: Brazilian Central Bank
Index
Characteristics and Evolution of Financial System
Funding and Liquidity
Funding Dynamics – Financial System 12
Government Bank Deposits+ debentures Society
R$ 1,588 bn R$ 836 bn
Reserve
Requirements
in cash
R$ 191 bn Individuals
R$ 244 bn R$ 1,219 bn and
Public Securities Assets Corporate
Banks Managers Clients
R$ 248* bn
Capital +
onlendings + R$ 508 bn
R$ 975 bn R$ 2,229 bn
Others lines
R$ 975 bn Loans
R$ 1,223 bn R$ 1,149 bn
Data as of Sep/2008. Source: Brazilian Central Bank and Published Balance Sheet
* Liquid of assets and liabilities
High reserve requirements are being gradually lowered
Before CB After CB
BRL Million* BRL Million* Remuneration
Measures Measures
Demand Deposits
Reserve Requirement 45% 42% -
Additional 8% 69,844 5% 60,157 Interest Rate (Selic)
Obligatory Rural Credit 25% 30% SELIC
Savings
Reserve Requirement 20% 20% TR + Interest of 6,17% p.a.
Additional 10% 70,926 10% 65,660 SELIC
Obligatory Mortgage 65% 65% TR + 12% p.a.
Time Deposits
Reserve Requirement 15% 15% Linked to bonds
Additional 8%
110,694 5%
77,847 Interest Rate (Selic)
Debentures
Reserve Requirement 15% 20,551 15% 20,551 Linked to Bonds
Total 272,015 224,215
Freeing up of Central Bank reserve requirements, largely interest bearing, with virtually zero effect on
banks’ results
With a direct impact of approximately R$ 56 billion in terms of additional system liquidly
More than R$ 54 billion of central bank reserve requirements have been removed: R$ 19 billion to
stimulate external credit lines and R$ 35 billion for the purchase of loan portfolio from smaller financial
institutions
Source: Brazilian Central Bank * Santander estimates
Liquidity
Structural Situation Effects of the Crisis
Liquidity for small and medium-sized
Credit underpenetrated
banks. Credit sale, reserve requirements
High reserve requirements
Increased selectivity and shorter loan terms
Core deposits are liquid, but stable.
bbb Match assets/liabilities
No secondary market for time
Higher volatility. Companies with exposure
deposits.
to derivatives Disclosure limited impact
Interbank market almost inexistent
Scarcity of external lines of credit
Small securitization market Central Bank auction and BNDES
Reinforcing on-balance savings and in the
retail segment back to basics
Conclusions
Strong fundamentals
Economy
Banking System
System with good pace
No toxic products
Not leveraged
Steps in the right direction
Annexes
Market Depth
Average Term of Debt Securities Open Contracts Added – BMF (Maturing in Jan)
Months 1,800,000
1,600,000
58%
41
1,400,000
1,200,000
26
1,000,000
800,000
600,000
400,000
200,000
2000 Jun.08 0
2009 2010 2011 2012 2013 2014 2015 2016 2017
Open Contracts Average
DI
added (MM) (MM)
Jan/02 250 80
Jan/04 309 105
Jan/06 1,607 316
Jan/08 1,625 1,055
Jan/10 (E) 2,140 1,057
CAGR 171% 191%
Source: Bloomberg.
The recent market turbulence has affected the share prices
of small and medium-sized national banks...
...Small and medium-sized banks have lost an average of >60%/80% of their market value in the last 12 months
•
Share Performances of Small and Medium-Sized Banks
Base 100
160
140
120
100
80
60
40
20
0
Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sept-08 Oct-08
Indusval Daycoval Sofisa Panamericano BIC Banco
Pine Paraná Banco Cruzeiro do Sul ABC Brasil Nossa Caixa
Medium-sized banks appear to be experiencing more liquidity problems (increases in prices and terms)
The origination of portfolio funds is in decline or has ground to a complete halt
The Central Bank: stimulating the system by lowering reserve requirements, purchasing bank porfolios with a net worth of <
R$7.0 billion
Source: Bloomberg (Oct. 7,.2008)
Financial System: Central Bank Regulations
30
23,5
18,9
20 16,9
13,1
10 8,0 8,0
5,2 6,2 - 5,5 6,0 6,0 6,0
3,6
- - -
0
Posterg. Aumento no caixa Other efects
24/set 24/set 8/out 8/out 13/out 13/out 14/out 14/out 27/out 3/out 5/out 6/out 13/out 13/out 16/out 27/out
The increase The amount Permissible The rate on The The The directed The Reduction in The The Provisional Banks may A bank that The range of Financial
in the that can be deduction additional exemption exemption lending to compulsory reserve compulsory cancellation Measure use up to takes part in credit (loan) institutions
compulsory deducted from compulsory limit on the limit on the rural credit lending requirements lending of co- creates a 70% of the auctions of portfolios that can deduct the
lending from the compulsory lending compulsory compulsory related to requirement on demand requirement obligation new compulsory external lines can be value of five
requirement additional lending (demand / lending on lending demand/sight rate on deposits on term (joint rediscount lending of credit will purchased to years of FGC
on leasing compulsory requirement sight and demand/sight requirement deposits was demand/sight (currently deposits was guarantors) rate based on requirement be offset against contributions
transactions lending increased term , term on term increased deposits was 42%) for lowered by portfolios is loan on term exonerated CDB reserve from their CB
from 15% to requirement from R$ 300 deposits) was deposits and deposits from 25% to reduced from banks that up to 40% for allowed. portfolios in deposits to from having requirements reserve
20% has was million to R$ reduced from savings was charged at 30%. 45% to 42% pay their banks both reais purchase to put up the now includes requirements
been increased 700 million. 8% to 5%. increased normal rate monthly FGC acquiring and dollars. loan normal securities/bo on demand /
postponed from R$ 100 from R$ 300 of 15% was contributions small banks’ portfolios reserve nds issued by sight deposits
until Jan/09. million to R$ million to R$ increased in advance. portfolios (up (previously requirements non-financial if they pay
300 million. 1 billion. from R$ 700 to R$ 2.5 40%). applicable to individuals them in
million to R$ billion of funding and advance. This
2 billion, if PER). raised from corporate decision has
this rate was leasing entities. the potential to
maintained. operations. free up R$ 6
billion.
8 Bi 53,5 Bi 54,4 Bi
The Central Bank Announced New Regulations at the end of
2007
Elimination of TLA - Dec/2007
Information about total cost of loans – Mar/2008
Regulations Offer of service packages in accordance with CB regulation – Apr/2008
of Fees/Tariffs Elimination of TAC¹ – Apr/2008
Impact: reduction in increase in fees at the main banks of 20% in the
last two years to approximately 5% in 2008
Effective since May 2008, the contribution rate rose from 8% to 15% for Financial
Increase in Institutions.
CSLL² Tax rate increase of 34% to 40%
Reserve requirements for leasing companies, implemented in Jan/08, gradually increasing to
Inclusion of a rate capped at 25%. First implemented in May/08 with 5% and ending in Mar/09 with 25%.
Leasing The government recently postponed the institution's calendar of rates, largely due to the crisis in
terms of international liquidity.
New rules will become effective from December 1, 2008, establishing
Call Center 24h service, free calls, solutions to requests within a maximum of 5 working days.
² TAC: Tariff charged for Taking out a Loan 2. CSLL: Social Contribution on Corporate Net Income
Peers – Total Assets
Structure of our balance sheet is very similar to our main competitors. Approximately
37% of the balance in loans. Highly dependent on public securities earmarked for
reserve requirements and other regulatory requirements (89% at Santander).
Other (Credits Taxes + Guarantor Deposits)
Fixed Assets
Other Amounts and Goods (Client Acquisition +
BNDU
FX Portfolio
Available-for-Sale financial assets
Repo + CDI
Market Debt Securities
Reserve Requirements
Loans + Lesing (gross)
Source: Published Balance Sheets (4050)
Peers – Total Liabilities
A market highly regulated for Core Deposits. Focus on Savings in the form of Term
Deposits. There is no secondary market for CDBs, and liabilities are extremely liquid
on a daily basis. Banks cannot make local issues.
Core Deposits
Term Deposits + Assigned Debentures
Fund raising on the Open Market + Deposits.+ Interfiance
Available-for-Sale financial assets
External Loans
FX Portfolio
Dívida Subordinada
Provisions for Insurance, Social Welfare and
Capitalization.
Fiscal and Pension (Social Welfare) Obligations
Net Equity
Others (Onlending + Interfinance Agreements)
Source: Published Balance Sheets (4050)
Competition by Product
Santander + Real: High Concentration of Term Deposits.
Itaú and Bradesco have a larger share of Core Deposits
R$ MM
Fuente: CNMV