ITUB - Banco Santander (Brasil): Q4 Earnings Still Struggling To Turn Bullish

2024-02-02 22:23:04 ET

Summary

• Banco Santander Brasil's Q4 results were not favorable, witnessing a 19% decline in net income compared to the previous quarter.
• The bank's return on equity (ROE) remained low at 10.3%, below its historical performance and competitors.
• Despite some positive aspects such as improvement in interest income and stability in non-performing loans, the bank's profitability worsened in Q4.
• Despite holding a premium valuation, I maintain a neutral stance on Santander Brasil, awaiting clearer signals of stabilization in provisions and improvement in ROE.

In previous articles outlining my investment thesis on Banco Santander (Brasil) ( BSBR ), I have primarily focused on the performance of the Brazilian bank's shares, which have been affected by concerns over loan defaults and credit availability. These concerns have significantly impacted the broader Brazilian banking sector, negatively affecting the efficiency and profitability of Santander Brasil in recent quarters, where the bank has maintained a notably low Return on Equity ("ROE") compared to its critical domestic peers.

During the preceding quarter, Q3, Banco Santander Brasil displayed promising improvement in critical areas, such as asset quality, credit origination, and a gradual profitability enhancement. This positive trajectory was reflected in the performance of Santander Brasil shares, which witnessed a notable increase of about 17% from Q3 to Q4....

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