Santander Brasil(BSBR) - 2025 Q1 - Quarterly Report

Report on Review of Consolidated Condensed Interim Financial Statements Auditor's Conclusion The auditor's review found no material misstatements in the interim financial statements prepared under IAS 34 - The auditor's review, substantially less in scope than a full audit, did not identify any material misstatements in the interim financial statements[9] - The financial statements are prepared in accordance with IAS 34 - Interim Financial Reporting, as issued by the IASB[10] Consolidated Condensed Interim Financial Statements Consolidated Condensed Balance Sheet Total assets grew to R$1,252.5 billion and stockholders' equity increased to R$121.9 billion as of Q1 2025 Key Balance Sheet Figures (in thousands of BRL) | Account | 03/31/2025 | 12/31/2024 | | :--- | :--- | :--- | | Total Assets | 1,252,506,194 | 1,238,796,810 | | Loans and advances to customers (net) | 539,301,309 | 566,089,914 | | Total Financial Assets | 1,107,868,999 | 1,091,405,210 | | Total Liabilities | 1,130,559,753 | 1,118,969,678 | | Customer deposits | 608,159,302 | 605,068,163 | | Total Stockholders' Equity | 121,946,441 | 119,827,132 | Consolidated Condensed Statements of Income Net profit for Q1 2025 rose slightly to R$3.15 billion, driven by higher net interest income Q1 Income Statement Highlights (in thousands of BRL) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | 14,825,731 | 13,386,928 | | Total Income | 19,171,053 | 18,178,911 | | Impairment losses on financial assets (net) | (7,264,611) | (6,799,369) | | Operating Income Before Tax | 4,619,867 | 4,416,906 | | Net Profit for the Period | 3,151,583 | 3,060,928 | | Profit attributable to the Parent | 3,108,800 | 3,052,046 | Consolidated Condensed Statements of Comprehensive Income Total comprehensive income for Q1 2025 increased significantly to R$4.23 billion, boosted by OCI gains Comprehensive Income Summary (in thousands of BRL) | Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Profit for the Period | 3,151,583 | 3,060,928 | | OCI that will be reclassified to P&L | (68,248) | (421,457) | | OCI that won't be reclassified to P&L | 1,151,153 | (261,611) | | Total Comprehensive Income | 4,234,488 | 2,377,860 | Consolidated Condensed Statements of Changes in Stockholders' Equity Stockholders' equity grew to R$121.95 billion, driven by net profit and OCI adjustments - The closing balance of Total Stockholders' Equity was R$121,946,441 thousand as of March 31, 2025[19] - Key changes during Q1 2025 include net profit of R$3,108,800 thousand, payment of dividends and interest on capital of R$1,500,000 thousand, and a positive adjustment of R$1,170,858 thousand from employee benefit plans[19] Consolidated Condensed Statement of Cash Flows Operating activities generated R$33.4 billion in cash, leading to a net cash increase of R$34.88 billion Net Cash Flow Summary (in thousands of BRL) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Flows from Operating Activities | 33,407,718 | (21,503,627) | | Net Cash Flows from Investing Activities | (51,546) | 32,665 | | Net Cash Flows from Financing Activities | 1,519,867 | (909,486) | | Net Increase in Cash and Cash Equivalents | 34,878,435 | (22,381,920) | | Cash and Cash Equivalents at End of Period | 102,079,340 | 67,035,840 | Notes to the Financial Statements Note 1: Operating Context and Basis of Presentation The bank's financial statements follow IAS 34 and reflect a new hold-to-maturity strategy for some securities - The bank operates as a multiple bank in Brazil, offering a wide range of financial services through its subsidiaries, including commercial, investment, credit, financing, and insurance[21] - The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB[23] - In Q1 2025, the bank changed its strategy for part of its ALCO portfolio of government securities to a long-term investment profile, reclassifying them to be measured at Amortized Cost to reduce equity volatility[45][46] Note 2: Basis of Consolidation The statements consolidate all controlled entities and reflect recent mergers, acquisitions, and a new joint venture - On February 24, 2025, the bank signed an agreement to sell its entire stake in Summer Empreendimentos Ltda, pending regulatory approvals[52] - The bank established a Joint Venture with the Pluxee Group, contributing R$2.044 billion and now holding a 20% stake in the JV vehicle, Pluxee Benefícios Brasil S.A[58][60][61] - In early 2024, the bank acquired the remaining stakes to gain 100% indirect control of Toro Corretora de Títulos e Valores Mobiliários S.A. and Toro Investimentos S.A[67] Note 3: Financial Assets Total financial assets reached R$1,107.9 billion, with the majority measured at amortized cost Financial Assets by Category (in thousands of BRL, as of 03/31/2025) | Category | Amount | | :--- | :--- | | Measured At Fair Value Through Profit Or Loss | 250,374,171 | | Measured At Fair Value Through Other Comprehensive Income | 94,747,569 | | Measured At Amortized Cost | 762,747,259 | | Total | 1,107,868,999 | - The provision for losses on financial assets measured at amortized cost increased from R$35.67 billion at the start of the period to R$35.68 billion at the end of Q1 2025[72] - The balance of non-recoverable financial assets due to credit risk stood at R$42.85 billion at the end of Q1 2025, up from R$42.24 billion at the start of the year[75][76] Note 5: Interests in Associates and Joint Ventures Investments in associates and joint ventures totaled R$3.58 billion, contributing R$86.6 million to income Investment in Associates and JVs (in thousands of BRL) | Category | Investment Value (03/31/2025) | Equity in Earnings (Q1 2025) | | :--- | :--- | :--- | | Joint Control | 642,985 | 9,671 | | Significant Influence | 2,937,811 | 76,944 | | Total | 3,580,796 | 86,615 | - No impairment losses were recognized on investments in associates and joint ventures as of March 31, 2025[87] Note 7: Intangible Assets - Goodwill Goodwill stood at R$27.86 billion, primarily from the ABN Amro acquisition, with no impairment identified - The total goodwill on the balance sheet is R$27,858,556 thousand as of March 31, 2025[96][97] - The largest component of goodwill, R$27,217,566 thousand, is from the acquisition of Banco ABN Amro Real S.A[96] - Goodwill recoverability is tested annually using a value-in-use cash flow model with a 5-year projection period, a 4.5% perpetual growth rate, and a 13.6% discount rate; no impairment was indicated in Q1 2025[94][97][99] Note 9: Financial Liabilities Total financial liabilities were R$1,094.3 billion, led by R$608.2 billion in customer deposits Financial Liabilities Composition (in thousands of BRL, as of 03/31/2025) | Category | Amount | | :--- | :--- | | Customer deposits | 608,159,302 | | Deposits from Brazilian Central Bank and credit institutions | 167,832,517 | | Marketable debt securities | 143,949,584 | | Debt Instruments Eligible to Compose Capital | 23,448,586 | | Trading derivatives & Short positions | 75,838,081 | | Total Financial Liabilities (excluding hedge derivatives) | 1,094,266,922 | - The bank has R$23.4 billion in debt instruments eligible for capital, consisting of Tier I and Tier II Financial Bills with maturities extending to 2033 and perpetual instruments[113][114] Note 10: Provisions and Contingent Liabilities Provisions for probable losses totaled R$11.62 billion, with significant contingent liabilities disclosed Provisions for Probable Loss (in thousands of BRL, as of 03/31/2025) | Type | Amount | | :--- | :--- | | Civil | 3,501,069 | | Labor | 3,146,765 | | Tax and Social Security | 2,878,772 | | Total Judicial/Admin Proceedings | 9,526,606 | - The bank has contingent liabilities with a possible risk of loss totaling R$36.03 billion for tax matters and R$3.27 billion for civil matters, which are not provisioned[136][146] - Major contingent tax liabilities (possible loss) include disputes over PIS/COFINS calculation basis (R$2.25B), INSS on Profit Sharing (R$9.83B), and unapproved tax compensations (R$6.69B)[136][137][139] Note 11: Stockholders' Equity The bank's capital stock is R$65 billion, with an active share buyback program and R$1.5 billion distributed - Shareholders are guaranteed a minimum dividend of 25% of the annual Net Profit, with preferred shares receiving a 10% higher dividend than common shares[151] - In Q1 2025, the Board of Directors approved the distribution of R$1.5 billion in Interest on Equity, paid in February 2025[155] - A new share buyback program is active until August 2025, authorizing the repurchase of up to 36.2 million Units; as of March 31, 2025, the bank held 13.8 million Units in treasury[164][165][167] Note 15: Operating Segments The Commercial Bank and Global Wholesale Bank are the two main segments, with the former driving revenues - The bank identifies two primary operating segments: Commercial Bank (individuals and non-global corporate clients) and Global Wholesale Bank (Investment Banking, Markets, Treasury)[185][189] Segment Performance (Q1 2025, in thousands of BRL) | Segment | Total Revenues | Operating Result Before Tax | | :--- | :--- | :--- | | Commercial Bank | 16,459,901 | 2,480,470 | | Global Wholesale Bank | 2,711,152 | 2,139,397 | Segment Assets and Liabilities (as of 03/31/2025, in thousands of BRL) | Segment | Total Assets | Loans and advances to customers | Customer deposits | | :--- | :--- | :--- | :--- | | Commercial Bank | 1,160,674,800 | 460,157,530 | 450,754,132 | | Global Wholesale Bank | 91,831,394 | 79,143,779 | 157,405,170 | Note 17: Fair Value of Financial Instruments Financial instruments are classified by a three-level fair value hierarchy, with most assets in Levels 1 and 2 - The bank uses a three-level hierarchy to classify fair value measurements: Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[204][205][206] Financial Assets at Fair Value by Hierarchy Level (in thousands of BRL, as of 03/31/2025) | Level | Financial Assets at FVTPL | Financial Assets at FVOCI | Total | | :--- | :--- | :--- | :--- | | Level 1 | 84,856,220 | 91,388,466 | 176,244,686 | | Level 2 | 163,361,021 | - | 163,361,021 | | Level 3 | 2,156,930 | 3,359,103 | 5,516,033 | - For financial assets measured at amortized cost, the fair value of 'Loans and advances to customers' was estimated at R$530.3 billion, compared to its carrying value of R$536.2 billion[220] Note 18: Other Disclosures The bank maintains a Basel III Reference Equity Index of 14.35%, well above the minimum requirement Basel Capital Ratios | Ratio | 03/31/2025 | 12/31/2024 | Minimum Requirement | | :--- | :--- | :--- | :--- | | Basel Index Level I | 12.13% | 12.09% | 9.50% | | Basel Core Capital Index | 11.05% | 10.96% | 8.00% | | Basel Reference Equity Index | 14.35% | 14.28% | 11.50% | Sensitivity Analysis - Potential Loss from 25% Adverse Shock (Scenario 2, in thousands of BRL) | Portfolio | Potential Loss | | :--- | :--- | | Trading Portfolio | (656,279) | | Banking Portfolio | (4,888,560) | - The bank uses derivative financial instruments (swaps, futures) for fair value and cash flow hedging to protect against fluctuations in interest rates and exchange rates[235][236][240] Note 19: Subsequent Events Subsequent events include a R$1.5 billion interest on equity distribution and the sale of an equity stake - On April 10, 2025, the Board approved a R$1.5 billion distribution of Interest on Equity, payable from May 8, 2025, to shareholders of record on April 17, 2025[269] - The bank completed the sale of its entire stake in Galgo Sistema de Informações S.A. on May 7, 2025[270] Management Report Economic Situation Q1 2025 saw US-China trade tariffs and a Selic rate hike to 14.25% in Brazil to combat inflation - International factors include the US FED pausing interest rate cuts and the Trump administration imposing a 20% tariff increase on China[273][274] - Domestically, Brazil's Central Bank (Copom) raised the basic interest rate (Selic) to 14.25% in response to high inflation, with expectations of it reaching 15.25% by June 2025[276] Consolidated Performance Recurring net profit grew 27.8% YoY to R$3.9 billion, achieving a 17.4% ROAE in Q1 2025 Q1 2025 Managerial Performance Highlights | Metric | Value | YoY Change | | :--- | :--- | :--- | | Recurring Managerial Net Profit | R$ 3.9 billion | +27.8% | | ROAE | 17.4% | +3.3 b.p. | | Net Interest Income | R$ 15.9 billion | +7.7% | | Expanded Loan Portfolio | R$ 682.3 billion | +4.3% | | Efficiency Ratio | 37.2% | -2.5 b.p. | Sustainability The bank advanced its sustainability goals, facilitating R$9.7 billion in sustainable business in Q1 2025 - Facilitated R$9.7 billion in sustainable businesses and holds a R$40.2 billion portfolio in green bonds and clean energy financing[300] - Prospera Santander Microfinanças reached a R$3.3 billion portfolio, serving 1.14 million customers[301] - The Board of Directors is composed of 50% female members and 50% independent members[303]