Santander Brasil kicked off the banking earnings season with a drop in profit and profitability, as the bank opted to "play it safe" in the face of a tougher outlook predicted for this year.
The bank announced on Wednesday, July 29, that its recurring net profit totaled R$ 3 billion in the second quarter, a decrease of 17.6% compared to the same period last year and 20.4% compared to the previous quarter.
The result disappointed investors' expectations. Bloomberg found that analysts had expected the bottom line to close the quarter at around R$ 3.5 billion.
Profitability also declined. Return on average equity (ROAE) reached 12.5%, 3.4 percentage points below that recorded in the first three months of the year and 3.8 percentage points lower than the same period in 2025.
The earnings report is dragging down Santander Brasil's units. Around 12:18 PM, the shares were down 6.76%, at R$ 25.80. Year-to-date, the assets have accumulated a 23.5% drop, bringing the market value to R$ 97.4 billion.
In the conference call with analysts, which did not include Gilson Finkelsztain, who recently took over as head of the bank, the CFO of Santander Brasil, Carlos Muñiz, said that the numbers reflect balance sheet management decisions, with a rebalancing of the product and customer portfolio, in search of a better risk-return ratio.
However, considering the current macroeconomic climate, the expectation is that results will only begin to show clearer signs of improvement from 2027 onwards.
“We are not concerned with market share at this moment. We are much more concerned with the macroeconomic environment and ensuring that all business generation and all credit origination are profitable and compatible with the level of risk we are willing to take,” said Muñiz. “I prefer to play it a little safer, even if it is costing us in the short term.”
One of the main effects of this "safe game" was seen in the provision for doubtful debts (PDD). The management result totaled R$ 7.6 billion, an increase of 20.6% compared to the previous quarter and 11.5% year-on-year. According to Santander, the situation weighed especially heavily on the mass-market segment. The bank also reported that the PDD was affected by specific cases in the wholesale segment, without going into details.
The delinquency rate for loans between 15 and 90 days ended the period at 3.3%, a slight decrease of 0.04 percentage points in the quarter and stability compared to the previous year. The bank attributed the performance to greater selectivity in loan origination and active portfolio management.
Another area affected by the more conservative stance was revenue. Total revenue reached R$ 20.7 billion, a 0.4% increase year-on-year and a 2.7% decrease compared to the first quarter of 2026. The net interest margin reached R$ 15.3 billion, a 3.0% decrease in the quarter and a 0.4% decrease over 12 months, while the expanded loan portfolio grew 5.8% year-on-year and 1.3% quarter-on-quarter, ending the period at R$ 714.7 billion.
Muñiz stated that the bank continues to reduce its exposure to traditionally more profitable products, such as revolving credit, and to segments considered riskier, such as the mass market with income below R$ 4,000, whose exposure has fallen by 30% in the last 12 months.
Conversely, the institution has focused its efforts on secured operations, including lines of credit supported by government programs and real estate-backed loans, as well as high-income clients and small and medium-sized enterprises (SMEs).
The result is that revenue is not expected to recover anytime soon. Growth is projected to be in the low single digits . "Right now, the goal isn't to maximize revenue growth, but to ensure we aren't taking excessive risks or making investments that could create problems later on," Muñiz stated.
Regarding the loan loss provisions (PDD), the CFO of Santander said that he is also not optimistic about an improvement in 2026, highlighting that it will still be necessary to incorporate new assumptions for the economy into the models.
“The scenario that will be incorporated now is more challenging than the one used in the previous update. Therefore, I don't expect positive effects from this revision. On the contrary, it is likely that there will be some additional impact, possibly concentrated in the fourth quarter,” he stated. “If I had to point to a timeframe for a more consistent improvement, I would say it is closer to the beginning of 2027.”
The second-quarter results take Santander further away from one of the goals set during Mario Leão 's tenure: to return the ROAE to the 20% level .
In the teleconference, analysts highlighted that Santander has been on the de-risking agenda for some time, reducing its exposure to mass-market credit and adopting a more cautious stance in granting funds, but that the results of this strategy are taking time to materialize.
In a report, analysts at Itaú BBA said they expect more concrete signs in the second half of the year. "Without a year-long projection as a reference, the next two results need to demonstrate that the decline is translating into risk-adjusted margins, rather than just a smaller spread," they stated.
According to Muñiz, the adopted strategy assumes smaller spreads, which does not help accelerate revenue growth in the short term, especially in the current macroeconomic scenario. However, the assessment is that this approach will pay off in the medium and long term, making the bank more robust to face volatile scenarios.
According to the executive, the return to profitability will depend on three levers: revenues less dependent on credit, more efficient operations, and normalization of portfolio quality. "The decisions we made during this period still need time to produce their full effects," stated the CFO.
According to him, Santander should start seeing "more reasonable levels" of profitability in 2027 as well.
