Banco Santander (Brasil) S.A. - ADR

Solid profitability but pressured by higher “cost of risk” (bad news) - Recurring net income: BRL 3bn; ROAE 12.5%. - Management attributes the decline in profitability to a more challenging macro environment, mainly higher provisions / cost of risk (plus some one-off items). - LLP drivers: (i) specific wholesale banking cases, and (ii) inventory adjustment from new write-off methodology; combined ~BRL 700m as a “one-off” component, but recurring pressure persists in low-income individuals and SMEs/agribusiness smaller companies.

Revenue weak / NII flat: mix + funding headwinds (why results lag) - Client NII virtually flat YoY, despite expectations that mix and funding would help. - Key reasons cited for NII spread pressure: - Deferred expenses on banking correspondents (quarter-on-quarter impact). - Lower funding result due to lower average CDI (Brazil rate benchmark effect). - Loan origination selectivity + portfolio mix shift toward higher-income / more secured lending (lower structural spread vs low-income segments). - Management also says impacts are fading: spread headwind estimated ~10 bps in the quarter and ~20 bps in the year, expected to improve as expenses normalize.

Derisking / portfolio rebalancing is the core strategy (good long-term, bad short-term) - Customers: 76.2m clients (+6% YoY); engagement initiatives include Santander Rewards (enrollment ~15% of eligible base) and +30% PIX registered keys. - Loan growth remains selective and risk-adjusted: - Cards +13% YoY - Consumer finance +15% YoY - SME retail banking +11.5% YoY - Mortgage highlight: home equity +40% YoY - Explicit negative risk shift: - Reduced exposure to higher-risk profiles, especially income < BRL 4,000; segment portfolio down ~30% YoY. - Management emphasizes the trade-off: lower revenue in the short run to build a “more balanced, resilient and predictable” franchise.