Banco Santander (Brasil) SA Q2 FY2021 earnings call

• Succession: Succession has been planned over the last two years. Sergio Rial will hand over to Mário by January 1, 2022, with a clear transition process until the end of 2021. Sergio remains committed to Santander Brasil and the group. - Business system integration: Serves over 50 million clients, with channels receiving over 500 million visits monthly. The auto platform has over 35 million monthly interactions. - Client growth: Pace of customer acquisition increased by 50% year-on-year. Total client base grew 8% in one year, and most linked clients grew 26% at a pace more than 3x faster than the total client base. - Technology initiatives: Boosted capacity, speed, and productivity. By the end of the year, 72% of operations will run in the cloud. - ESG initiatives: Executed nearly R$28 billion in green business. Expanded presence in microcredits through Prospera. Set targets to reduce carbon emissions, etc. - Financial performance: Reported highest quarterly net profit in history, with ROE at 21.6%, the second best in history. Efficiency ratio at 33.8%, the lowest ever.

The loan portfolio grew by almost 15% year-on-year, reaching R$440 billion at the end of the quarter. The individual segment outperformed, with mortgage and payroll loans boosting growth. Consumer finance grew by 1.7% quarter-on-quarter and nearly 10% year-on-year. SME’s grew by 6.5% due to demand recovery. Corporate lending also performed well. Fees saw bright spots with credit cards growing roughly 40% year-on-year, insurance up by almost 28.7% year-on-year, and asset management increasing on the back of consortium and funds rising by more than 50% year-on-year. Revenue contribution: The full linked group of most linked clients is 14.1 million, standing for 80% of total revenue.

• 2021 will be the best year in Santander Brasil's history, and 2022 will lay the basis for a phenomenal solid year. - Expect NII on the client side to continue in a positive direction. - The country's GDP growth close to 5%-6% in the second half is expected to impact NII positively.

• Forward-looking statements involve risks, uncertainties, and assumptions as they refer to future events and depend on circumstances that may or may not occur. - General economic conditions, industry conditions, and other operational factors may affect future performance and cause actual results to differ substantially from forward-looking statements.

Q: Although the NII with clients expanded in the quarter, the net inter-margin with clients decreased quarter-over-quarter, despite the stronger growth in lines with better interest rate. What could explain such a decrease despite the better mix? Do you believe that the NII with clients should improve in the upcoming quarters? Any color on how could the loan mix NII growth in the coming would be very useful.

A: Angel Santodomingo said NII in absolute terms is growing due to volume in clients and portfolio growth. NIM is affected by mix and funding costs. The trend is at least flattish if not improving, and NII will clearly be in positive territory looking forward Q: Pedro Leduc from Itaú BBA asked about the new technology initiative, if it will only provide service to the bank or other components like Getnet.

A: Angel Santodomingo said the new technological company will compete with technological providers, first provide services to the bank and may sell data services to the market in the future Q: Flavio Yoshida from Bank of America asked if fee income growth pace will continue in coming quarters and if insurance and cards will continue benefiting.

A: Angel Santodomingo said fees are strong due to better client service leading to more clients, more usage, and higher transactionality. Insurance and cards are expected to continue benefiting as client growth and transactionality continue Q: Thiago from UBS asked about cost of risk being below pre-COVID level and if it should be super lower in coming years.

A: Angel Santodomingo said Santander Brasil has good risk capacities, cost of risk depends on macro view. If country stabilizes, cost of risk is not expected to increase marginally Q: Jorg Friedemann from Citibank asked about Getnet TPV up 11% Q-over-Q despite change in active merchant and revenues only up a small amount Q-on-Q, and margin trends.

A: Angel Santodomingo said Getnet has good trends with turnover, anticipation, client base, and e-commerce growing strongly. Getnet's numbers will be available in more detail once listed Q: Jorge Kuri with Morgan Stanley asked about NII growth for next 12 months and if there will be strong acceleration.

A: Angel Santodomingo said NII on client side is expected to be positive, but non-client side has its own trends. NII as a total is expected to be in positive territory but not double-digit Q: Marcelo Telles with Credit Suisse asked about lending appetite, if it's due to increasing risk appetite or more demand for credit.

A: Angel Santodomingo said lending appetite growth is due to client growth, and there will be more growth on retail, SME side and smaller growth on corporate side as competition and spread factors come into play Q: Thiago Batista with UBS asked about capital position and if bank can operate with higher leverage.

A: Angel Santodomingo said the bank can run at lower capital levels, dividend payments have been made with 6.4 billion in dividends in the first six months, and the bank can operate at lower capital ratios Q: Domingos Falavina with J.P. Morgan asked about NII breakdown and Getnet EBITDA vs earnings.

A: Angel Santodomingo said real estate mortgages, payrolls, and personal loans are main forces in NII. Getnet's EBITDA and earnings differences are due to mix and specific operational factors