Santander Brasil (SANB11) Q3 2026 earnings review
Santander Brasil cuts staff costs, but profit falls 28%
Santander Brasil, the Brazilian arm of the Spanish banking group, is earning less on loans while its bad debt costs stay high. Recurring net profit fell 28% from a year ago to R$2.9 billion, pulling return on equity down to 11.9%. In his first quarter as chief executive, Gilson Finkelsztain kept shifting the loan book toward wealthier people and large companies, which cut the annualized loan spread by nearly a full percentage point.
| Total revenue | R$20.4B -1.9% from a year ago |
|---|---|
| Net profit, excluding one-offs | R$2.9B -28.0% from a year ago |
| Return on equity, excluding one-offs | 11.9% -5.6 percentage points from a year ago |
| 2027 market interest income outlook | Unchanged smaller loss than 2026 |
⚖️ Verdict: 🔴 Bearish
The story got worse because lending to safer clients is squeezing revenue before it lowers loan losses. Bad debt charges still rose 14% from a year ago on R$500 million of wholesale corporate cases, farming stress and middle-income credit card delays, while core capital slipped to 10.9%. One bright spot: cutting 12% of staff and 13% of branches kept operating expenses slightly below last year's level despite union wage raises.
The question now is whether shifting toward safer borrowers will lower bad debt costs before narrower loan spreads hurt profit even more. Either new loan cohorts keep bad debt charges falling in coming quarters, or high Brazilian interest rates trigger more corporate and small-business defaults. Fourth-quarter loan loss provisions and lending spreads will show which side is winning.
🐂 Bull Case
Staff and Branch Cuts Keep Costs Down
Santander Brasil is shrinking its physical network and workforce to protect profit while revenue falls. Finance chief Carlos Muñiz said the bank is simplifying its operations and "reduced our product lineup by more than 100 items" this year.
General expenses—staff pay, administrative bills and depreciation—dropped 0.6% from a year ago to R$6.38 billion. The bank stated that "Efficiencies from footprint and workforce optimization more than offset higher technology investments" and a 4.6% union wage raise.
- Employees: 45,782, down 11.5% (5,965 people) from a year ago by our math
- Stores and points of sale: 1,554, down 13.1% (235 locations) from a year ago by our math
- Personnel expenses: R$2.88 billion, down 4.2% from a year ago
- Data processing costs: R$962 million, up 16.6% from a year ago
Cutting branches and staff lets the lender fund software upgrades without raising total spending, but shrinking revenue still pushed its efficiency ratio—expenses as a share of revenue—up 1.3 percentage points from a year ago to 38.8%.
What to watch: fourth-quarter personnel expenses after a full three months of the 4.6% union wage increase. Another quarterly drop would show that staff cuts can still outrun wage inflation.
Wealthier Clients Lift Card and Fund Fees
The Brazilian lender wants customers to use it as their main bank so it can earn service fees that do not tie up capital. Chief executive Gilson Finkelsztain highlighted Santander Rewards, a loyalty programme that gives points and benefits to cardholders.
Santander Rewards reached about 700,000 clients, mostly high-income customers, and lifted their card spending by 10.5 percentage points compared with non-members. Card fees rose 8.1% from a year ago to R$1.70 billion, while asset management fees—from investment funds and consórcios, which are pooled savings groups for buying cars or homes—climbed 23.7% to R$599 million.
Growth in cards and funds shows high-income clients are doing more business with the group. However, total fees still fell 2.4% from a year ago to R$5.42 billion because securities brokerage and placement fees dropped 46.5% on slower capital markets and current account fees fell 11.3% on fee waivers.
What to watch: total fee revenue in the fourth quarter as Santander Rewards expands beyond its initial 700,000 high-income users. A return to yearly growth in total fees would prove that card and fund gains can outweigh fee waivers.
🐻 Bear Case
Safer Loans Squeeze Lending Margins
Santander Brasil is shifting its loan book away from lower-income borrowers toward wealthy individuals and large companies. "The strategy was very well designed so that we can put more effort and more capital in lower risk segments. I think that this is costing us a little, but in the long run, it will be a winning strategy," chief executive Gilson Finkelsztain said.
That shift is cutting into lending revenue right now because wealthier clients pay nearly half the interest spread of mass-market borrowers, according to Finkelsztain. Client net interest income—interest earned on loans and deposits—fell 4.2% from a year ago to R$15.85 billion as the annualized loan spread dropped 0.94 percentage points to 9.70%. Selling R$5.0 billion of consumer finance loans into a credit rights investment fund (FIDC) also removed interest income.
Total revenue fell 1.9% from a year ago to R$20.38 billion because loan volume growth of 4.7% (or 5.4% excluding the consumer finance loan sale) was too slow to offset the narrower spread. Until lower-risk borrowers bring in enough extra volume, top-line revenue will stay under pressure.
What to watch: the annualized product loan spread in the fourth quarter, after one-off hits from the consumer finance loan sale and agent fee deferrals pass. A further drop of 0.3 percentage points or more would show the mix shift is still shrinking lending income.
Bad Debt Charges Rise Despite Safer Mix
Management's pitch for accepting lower loan spreads is that safer borrowers will cause fewer loan losses. Instead, bad debt charges took a much bigger bite out of revenue this quarter, driving operating margin before tax down 7.4 percentage points from a year ago to 12.8% by our math.
Finance chief Carlos Muñiz noted that "in the third quarter, the quarter was impacted by specific cases in the wholesale segment, which totaled approximately BRL 500 million". Even excluding those wholesale cases, loan loss charges rose 6.7% from a year ago by our math. The bank also restricted loan renegotiations, "requiring a down payment in 100% of recovery agreements".
- Result from loan losses (bad debt expense net of recoveries): R$7.46 billion, up 14.4% from a year ago and up 5.2 percentage points of revenue by our math
- Individuals loans over 90 days past due: 5.5%, up 1.3 percentage points from a year ago
- Individuals loans over 90 days past due, excluding agribusiness rural bonds (CPR): 4.9% by our math, still up 0.7 percentage points from a year ago
The numbers cut against the de-risking story because corporate defaults, farm stress and middle-income credit card delays are keeping loan losses high while spreads are already down. That combination pushed recurring net profit down 28.0% from a year ago to R$2.89 billion.
What to watch: fourth-quarter net loan loss charges and whether new wholesale corporate cases appear. A reading above R$7.0 billion would mean bad debt costs are not falling to match the lower loan spreads.
Core Capital Ratio Drops Below Eleven Percent
Finkelsztain plans to grow by allocating more capital to large corporate clients and high-net-worth individuals. To keep capital free for new lending, the bank sold R$5.0 billion of consumer finance loans without recourse during the quarter.
Even with that loan sale, the Common Equity Tier 1 (CET1) ratio—the bank's core capital buffer—fell 0.3 percentage points from last quarter and 0.8 percentage points from a year ago to 10.9%. Risk-weighted assets grew 9.1% from a year ago to R$791.2 billion, driven by a 41.0% jump in market risk requirements and a 27.5% rise in operational risk.
Because risk-weighted assets are growing twice as fast as the 4.7% loan book while the bank still pays R$2.0 billion per quarter in interest on equity (a tax-deductible dividend), core capital is shrinking. A thinner capital buffer limits how fast Santander Brasil can expand corporate lending.
What to watch: the Common Equity Tier 1 ratio at year-end after the R$1.5 billion fourth-quarter interest on equity payout approved in October. A further drop toward 10.5% would force more loan sales or slower corporate lending.
👓 Other Themes
High Interest Rates Slow Brazilian Economy
Brazil's central bank cut its benchmark Selic interest rate to 13.75% in the third quarter, but borrowing costs remain high for households and farmers. "In our scenario, we expect the Selic rate to end 2026 at 13.50% and 2027 at 12.50%," Santander Brasil wrote in its report. It also expects Brazilian economic growth to slow from 1.8% in 2026 to 1.3% in 2027, keeping pressure on small businesses and agribusiness borrowers.
💲 Other KPIs
The expanded loan portfolio—which includes loans, private securities and guarantees—grew 4.7% from a year ago and 0.9% from last quarter, slowing from 5.8% yearly growth in the second quarter. Excluding the R$5.0 billion consumer finance loan sale, the portfolio grew 5.4% from a year ago. Large corporate loans rose 7.8%, while loans to individuals shrank 0.9%.
Customer deposits and credit notes rose 6.3% from a year ago and 1.9% from last quarter, adding R$12.8 billion in three months by our math. Individuals now provide 51% of total customer funding, up 3 percentage points from a year ago, which lowers the bank's funding cost and leavesloans at 91.6% of customer funding.
Market net interest income—results from treasury hedging and managing interest rate gaps on the balance sheet—posted a loss of R$895 million. That loss was 24.7% larger than last quarter's R$718 million loss on lower inflation-linked bond income, but 33.6% smaller than the R$1.35 billion loss a year ago because older fixed-rate hedges are maturing.
🔮 Guidance
Unchanged. The bank still expects its market treasury line to post a loss in 2027, but a much smaller one than the R$2.38 billion loss recorded in the first nine months of 2026. Chief executive Gilson Finkelsztain said the fixed-rate securities portfolio is hedged against interest rate moves, so maturing bonds will reduce the loss next year even if Brazilian interest rates rise.
❓ Key Questions
How much more will wholesale corporate defaults cost in Q4?
Specific wholesale corporate cases added about R$500 million to loan loss provisions in both the second and third quarters. Management declined to say whether more corporate restructurings are in the pipeline for the fourth quarter.
Where will the bank stop cutting branches and staff?
Santander Brasil reduced its workforce by 5,965 employees (11.5%) and closed 235 stores and points of sale (13.1%) over the past year. On the call, an analyst asked if the physical reduction is complete, and management did not answer.
What is the target range for the CET1 capital ratio?
The Common Equity Tier 1 ratio fell 0.8 percentage points over the past year to 10.9% as risk-weighted assets grew 9.1%. Management discussed selling loan portfolios to rotate assets, but did not state the minimum core capital level it wants to hold.
What was the over-90-day delinquency rate without write-off timing changes?
The bank shortened write-offs for unsecured loans to nine months and lengthened them for auto loans to 21 months. Management noted this distorts the over-90-day delinquency ratio through 2027, but did not give the clean figure.