UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, |
OR
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period fromto. |
OR
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report |
Commission file number: 001-34476
BANCO SANTANDER (Brasil)(BRASIL) S.A.
(Exact name of Registrant as specified in its charter)
Federative RepublicSANTANDER (BRAZIL) BANK, INC.
(Translation of Brazil(Jurisdiction of incorporation)Registrant’s name into English)
Avenida Presidente Juscelino Kubitschek, 2,041 and 2,235 – Bloco AVila OlímpiaSão Paulo, SP 04543-011
Federative Republic of Brazil
(Jurisdiction of incorporation or organization)
Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A
Condomínio WTORRE JK, Vila Nova Conceição
São Paulo, São Paulo 04543-011
Federative Republic of Brazil
(Address of principal executive offices)
James H. Bathon,Mercedes Pacheco, Managing Director -– Senior Legal and ComplianceCounsel
Banco Santander, S.A.
New York Branch
45 E. 53rd Street
New York, New York New York 10022(212) (212) 350-3604
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbols | Name of each exchange on which registered |
Units, each composed of 1 common share, no par value, and 1 preferred share, no par value | SANB11 | New York Stock Exchange* |
Common Shares, no par value | SANB3 | New York Stock Exchange* |
Preferred Shares, no par value | SANB4 | New York Stock Exchange* |
American Depositary Shares, each representing one unit (or a right to receive one unit) which is composed of 1 common share, no par value, and 1 preferred share, no par value, of Banco Santander (Brasil) S.A. | BSBR | New York Stock Exchange |
* | Not for trading purposes, but only in connection with the listing of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission. |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Title of each Class |
7.375% Tier 1 Subordinated Perpetual Notes |
6.000% Tier 2 Subordinated Notes due 2024 |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Title of Class | Number of Shares Outstanding | |||
Common shares | ||||
Preferred shares |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x☒No¨☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ¨☐Nox☒
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yesx☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes¨☒ No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and large accelerated filer”“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer☒ Accelerated Filer ☐ Non-accelerated Filer ☐ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ U.S. GAAP
☒ International Financial Reporting Standards as issued by the International Accounting Standards Board
☐ Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
¨☐ Item 17 ¨☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨☐ No x☒
1325
Presentation of Financial and Other Information
General
In this annual report, the terms “Santander Brasil,” the “Bank,” “we,” “us,” “our,” “our company” and “our organization” meanrefer to Banco Santander (Brasil) S.A. and its consolidated subsidiaries, unless otherwise indicated. References to “Banco Real” mean Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. and their respective consolidated subsidiaries, unless otherwise indicated. References to “Banespa” mean Banco do Estado de São Paulo S.A. – Banespa, one of our predecessor entities. The term “Santander Spain” means Banco Santander S.A. References to “Santander Group” mean the worldwide operations of the Santander Spain conglomerate, as indirectly controlled by Santander Spain and its consolidated subsidiaries, including Santander Brasil.
All references herein to the “real,” “reais” or “R$” are to the Brazilianreal, the official currency of Brazil. All references to “U.S. dollars,” “dollars” or “U.S.$” are to United States (or “U.S.”) dollars. All references to “euro,” “euros” or “€” are to the common legal currency of the member states participating in the European Economic and Monetary Union. References to “CI$” are to Cayman Islands dollars. References to “£” are to United Kingdom pounds sterling. See “Item 3. Key Information—A. Selected Financial Data—Exchange Rates” for information regarding exchange rates for the Brazilian currency.
Solely for the convenience of the reader, we have translated certain amounts included in “Item 3. Key Information—A. Selected Financial Data” and elsewhere in this annual report fromreais into U.S. dollars using the exchange rate as reported by the Brazilian Central Bank (Banco Central do Brasil), or the “Brazilian Central Bank,” as of December 31, 2016,2021, which was R$3.25915.5805 to U.S.$1.00, or on the indicated dates (subject, on any applicable date, to rounding adjustments). We make no representation that thereal or U.S. dollar amounts actually represent or could have been or could be converted into U.S. dollars at the rates indicated, at any particular exchange rate or at all.
Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
Consolidated Financial Statements
We maintain our books and records inreais, our functional currency and the presentation currency for our consolidated financial statements.
This annual report contains our consolidated financial statements as of December 31, 2016, 2015 and 2014, and for the years ended December 31, 2016, 20152021, 2020 and 2014.2019. Such consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”),IFRS, as issued by the International Accounting Standards Board (“IASB”)IASB and interpretations issued by the IFRS Interpretation Committee (“IFRIC”).Committee. Our consolidated financial statements as of December 31, 2016 and for the yearyears ended December 31, 20162021, 2020 and 2019 have been audited by PricewaterhouseCoopers Auditores Independentes or “PwC.” Our consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015 and 2014 have been audited by Deloitte Touche Tohmatsu Auditores Independentes, or “Deloitte.” PwC and Deloitte areLtda., an independent registered public accounting firms,firm, whose reports arereport and unqualified opinion is included herein.
IFRS differs in certain significant respects from generally accepted accounting principlesaspects in the United States (“comparison with U.S. GAAP”).GAAP. IFRS also differs in certain significant respects fromaspects in comparison with the Brazilian GAAP (as defined below).GAAP. Appendix I to our audited consolidated financial statements for the years ended December 31, 2016, 20152021, 2020 and 2014,2019, included herein, contains information relating to certain differences between IFRS and Brazilian GAAP.
Under Brazilian law, we areAs required by the Brazilian Central Bank toand Brazilian law, we must prepare consolidated financial statements according toin accordance with IFRS. However, we will also continue to prepare statutory financial statements in accordance with accounting practicesthe Brazilian GAAP, as established by the Law 6,404, dated December 15, 1976 (“by: (i) Brazilian Corporate Law”) and standards established byLaw; (ii) the National Monetary Council ((CMN - Conselho Monetário Nacional), or “CMN,”; (iii) the Brazilian Central Bank and document template providedincluding the regulatory reports set forth in the AccountingStandard Chart of Accounts for NationalBrazilian Financial System Institutions (Plano Contábil das Instituições do Sistema Financeiro Nacional), and(iv) the Brazilian Securities and Exchange Commission ((CVM - Comissão de Valores Mobiliários), or “CVM,” to the extent that such practices do not conflict with the
rules of the Brazilian Central Bank,Bank; (v) the Accounting Pronouncements Committee (C(CPC - Comitê de Pronunciamentos Contábeis), to the extent that such practices are approved by the Brazilian Central Bank,Bank; (vi) the National Council of Private Insurance (Conselho Nacional de Seguros Privados),; and (vii) the Superintendence of Private Insurance ((SUSEP -Superintendência de Seguros Privados), or “SUSEP.” We refer to such Brazilian accounting practices as “Brazilian GAAP.”which is responsible for the supervision and control of the insurance, open private pension funds and capitalization markets in Brazil. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Auditing Requirements.”Requirements” for additional information.
iii |
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Market Share and Other Information
We obtained the market and competitive position data, including market forecasts, used throughout this annual report from internal surveys, market research, publicly available information and industry publications. ThisThese data isare updated to the latest available information as of the date of this annual report. We have made these statements on the basis of information from third-party sources that we believe are reliable, such as the Brazilian association of savings and mortgage financing entities (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança) or “ABECIP”; the Brazilian association of credit card companies (Associação Brasileira de Empresas de Cartões de Crédito e Serviços) or “ABECS”; the Brazilian association of leasing companies (Associação Brasileira de Empresas de Leasing); the national associationNational Association of financialFinancial and capital markets entitiesCapital Markets Entities (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais) or “ANBIMA”; the Brazilian Central Bank; the Brazilian social and economic development bankDevelopment Bank (Banco Nacional de Desenvolvimento Econômico e Social) or “BNDES”; the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística) or the “IBGE”; the Brazilian bank federationBank Federation (Federação Brasileira de Bancos), or “FEBRABAN”; the national federationNational Federation of private retirementPrivate Retirement and life insuranceLife Insurance (Federação Nacional de Previdência Privada e Vida); the Getúlio Vargas Foundation (Fundação Getúlio Vargas) or “FGV”; the Brazilian Central Bank systemInformation System (Sistema de Informações do Banco Central); the SUSEP; and the CVM, among others.
Certain Definitions
Unless otherwise indicated or the context otherwise requires, all references to:
“ADRs” mean American Depositary Receipts representing ADSs.
“ADSs” mean American Depositary Shares.
“ANBIMA” means the National Association of Financial and Capital Markets Entities (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais).
“B3” means the B3 S.A. – Brasil, Bolsa, Balcão, or the São Paulo Stock Exchange.
“BNDES” means the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social).
“Brazil” means the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil.
“Brazilian Capital Markets Law” means Brazilian Law No. 6,385/76, as amended.
“Brazilian Central Bank” means the Central Bank of Brazil (Banco Central do Brasil).
“Brazilian Corporate Law” means Brazilian Law No. 6,404/76, as amended.
“Brazilian GAAP” means the generally accepted accounting principles in Brazil.
iv |
Table“CDI Rate” is the overnight interbank deposit rate (Certificado de Depósito Interbancário), which is the average daily interbank deposit rate in Brazil (at the end of Contentseach month and annually) for the given year.
“CMN” means the National Monetary Council (Conselho Monetário Nacional).
“COPOM” means the Brazilian Monetary Policy Committee (Cômite de Política Monetária).
“CPC” means the Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis).
“CVM” means the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários).
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“FEBRABAN” means the Brazilian Bank Federation (Federação Brasileira de Bancos).
“FGV” means the Getúlio Vargas Foundation (Fundação Getúlio Vargas).
“Getnet” means Getnet Adquirência e Serviços para Meios de Pagamento S.A. Getnet was one of our subsidiaries until the completion of the Spin-Off. For additional information on the Spin-Off of Getnet, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
“IASB” means the International Accounting Standards Board.
“IBGC” means the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança
Corporativa).
“IBGE” means the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística).
“IFRS” means International Financial Reporting Standards as issued by the IASB.
“IPCA” means the Brazilian consumer prices index (Índice de Preços ao Consumidor – Amplo), as calculated by FGV.
“IGP-M” means the Brazilian general index of market prices (Índice Geral de Preços – Mercado), as calculated by the IBGE.
“LGPD” means Law No. 13,709/2018, or the Brazilian General Data Protection Act (Lei Geral de Proteção de Dados).
“Nasdaq” means the Nasdaq Global Select Market.
“NYSE” means the New York Stock Exchange.
“Santander Spain” mean Banco Santander, S.A. and its consolidated subsidiaries.
“Santander Group” mean the worldwide operations of the Santander Spain conglomerate, as indirectly controlled by Santander Spain and its consolidated subsidiaries, including Getnet and Santander Brasil.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“SELIC” means the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.
“SMEs” means small and medium-sized enterprises.
“Spin-Off” means the distribution of all of the units, common shares and preferred shares of Getnet to holders of Santander Brasil units, common shares and preferred shares, including holders of Santander Brasil units represented by Santander Brasil ADSs, on a pro rata basis (excluding treasury shares), completed on October 26, 2021. For additional information on the Spin-Off of Getnet, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
v |
“SUSEP” means the Superintendence of Private Insurance (Superintendência de Seguros Privados).
“TJLP” means the Long-Term Interest Rate (Taxa de Juros de Longo Prazo), the interest rate applied by the BNDES for long-term financing (at the end of the period).
“U.S. GAAP” means the generally accepted accounting principles in the United States.
“United States” or “U.S.” means the United States of America.
vi |
Forward-Looking Statements
This annual report contains estimates and forward-looking statements subject to risks and uncertainties, principally in “Item 3. Key Information—D. Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and “Item 4. Information on the Company—B. Business Overview.Overview” and “Item 5. Operating and Financial Review and Prospects.” Some of the matters discussed concerning our business operations and financial performance include estimates and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Our estimates and forward-looking statements are based mainly on our current expectations and estimates or projections of future events and trends, which affect or may affect our businesses and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to certain risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking statements may be influenced by the following factors, among others:
the 2019 coronavirus, or “COVID-19,” pandemic and other actual or potential epidemics, pandemics, outbreaks, or other public health crises, which could have an adverse impact on our business (see “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19”); |
● | the impact of the COVID-19 pandemic on general economic and business conditions in Brazil, Latin America and globally and any restrictive measures imposed by governmental authorities in response to the outbreak; |
● | our ability to implement, in a timely and efficient manner, any measure necessary to respond to, or reduce the impacts of the COVID-19 pandemic (including any variants of the virus) on our business, operations, cash flow, prospects, liquidity and financial condition; general economic, political, social and business conditions in Brazil, including the impact of the current international economic environment and the macroeconomic conditions in |
exposure to various types of inflation and interest rate risks, and the Brazilian |
exposure to the sovereign debt of Brazil; |
the effect of interest rate fluctuations on our obligations under employee pension funds; |
exchange rate volatility; |
infrastructure and labor force deficiencies in Brazil; |
economic developments and perception of risk in other |
increasing competition and consolidation in the Brazilian financial services industry; |
extensive regulation by the Brazilian government and the Brazilian Central Bank, among others; |
changes in reserve requirements; |
changes in taxes or other fiscal assessments; |
potential losses associated with |
vii |
a decrease in the rate of growth of our loan portfolio; |
potential prepayment of our loan and investment portfolio; |
potential increase in our cost of funding, in particular with relation to short-term deposits; |
a default on, or a ratings downgrade of, the sovereign debt of Brazil or |
restrictions on the distribution of dividends to holders of our shares and ADRs representing ADS; |
● | the effectiveness of our credit risk management policies; |
our ability to adequately manage market and operational risks; |
potential deterioration in the value of the collateral securing our loan portfolio; |
failure to adequately protect ourselves against risks relating to cybersecurity; |
● | our dependence on the proper functioning of information technology systems; |
our ability to protect personal data; |
our ability to protect ourselves against cybersecurity risks; |
● | our ability to protect our reputation; |
our ability to detect and prevent money laundering and other illegal |
our ability to manage the growth of our operations; |
our ability to successfully and effectively integrate acquisitions or to evaluate risks arising from asset acquisitions; and |
other risk factors as set forth under “Item 3. Key Information—D. Risk Factors” in this annual report. |
The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast,” and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements are intended to be accurate only as of the date they were made, and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements. You should therefore not make any investment decision based on these estimates and forward-looking statements.
The forward-looking statements contained in this report speak only as of the date of this report. We do not undertake to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1A. Directors and Senior Management
Not applicable.
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1B. Advisers
Not applicable.
1C. Auditors
Not applicable.
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
2B. Method and Expected Timetable
Not applicable.
FinancialThe following tables set forth the selected financial information forof Santander Brasil at and for the years ended December 31, 2016, 2015, 2014, 20132021, 2020 and 2012 has been2019 derived from our audited consolidated financial statements prepared in accordance with IFRS as issued by the IASB. See “Item 18. Financial Statements.” This financial information should be read in conjunction with“Item 5. Operating and Financial Review and Prospects,” as well as our audited consolidated financial statements and the related notes thereto included within this annual report.
In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, “Item 5. Operatingtherefore, only the adjustments to fair value and Financial Reviewinterest determined in these transactions are recorded in equity accounts. The financial information as of and Prospects”for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See and note 8 to our audited consolidated financial statements included elsewhere in this annual report.
8 |
Income Statement Data
For the year ended December 31, | ||||||||||||||||||||||||
2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(in millions of U.S.$)(1) | (in millions of R$) | |||||||||||||||||||||||
Interest and similar income | 23,671 | 77,146 | 69,870 | 58,924 | 51,217 | 52,644 | ||||||||||||||||||
Interest expense and similar charges | (14,286 | ) | (46,560 | ) | (38,533 | ) | (31,695 | ) | (22,738 | ) | (21,057 | ) | ||||||||||||
Net interest income | 9,385 | 30,586 | 31,337 | 27,229 | 28,479 | 31,587 | ||||||||||||||||||
Income from equity instruments | 79 | 259 | 143 | 222 | 81 | 94 | ||||||||||||||||||
Income from companies accounted for by the equity method | 15 | 48 | 116 | 91 | 91 | 73 | ||||||||||||||||||
Fee and commission income | 4,157 | 13,548 | 11,797 | 11,368 | 10,742 | 9,611 | ||||||||||||||||||
Fee and commission expense | (789 | ) | (2,571 | ) | (2,314 | ) | (2,602 | ) | (2,641 | ) | (2,001 | ) | ||||||||||||
Gains (losses) on financial assets and liabilities (net) | 925 | 3,016 | (20,002 | ) | 2,748 | (1,146 | ) | (548 | ) | |||||||||||||||
Exchange differences (net) | 1,404 | 4,575 | 10,084 | (3,636 | ) | 551 | 378 | |||||||||||||||||
Other operating income (expenses) | (192 | ) | (625 | ) | (347 | ) | (470 | ) | (445 | ) | (623 | ) | ||||||||||||
Total income | 14,985 | 48,837 | 30,814 | 34,950 | 35,712 | 38,571 | ||||||||||||||||||
Administrative expenses | (4,578 | ) | (14,920 | ) | (14,515 | ) | (13,942 | ) | (13,850 | ) | (13,773 | ) | ||||||||||||
Depreciation and amortization | (455 | ) | (1,483 | ) | (1,490 | ) | (1,362 | ) | (1,252 | ) | (1,201 | ) | ||||||||||||
Provisions (net)(2) | (836 | ) | (2,725 | ) | (4,001 | ) | (2,036 | ) | (2,692 | ) | (2,057 | ) |
For the year ended December 31, | ||||||||||||||||||||||||
2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(in millions of U.S.$)(1) | (in millions of R$) | |||||||||||||||||||||||
Impairment losses on financial assets (net)(3) | (4,081 | ) | (13,301 | ) | (13,634 | ) | (11,272 | ) | (14,118 | ) | (16,476 | ) | ||||||||||||
Impairment losses on other assets (net) | (35 | ) | (114 | ) | (1,221 | ) | 4 | (345 | ) | (38 | ) | |||||||||||||
Gains (losses) on disposal of assets not classified as non-current assets held for sale | 1 | 4 | 781 | 87 | 460 | 501 | ||||||||||||||||||
Gains (losses) on non-current assets held for sale not classified as discontinued operations | 27 | 87 | 50 | 15 | 103 | (52 | ) | |||||||||||||||||
Operating profit before tax | 5,027 | 16,384 | (3,216 | ) | 6,443 | 4,018 | 5,475 | |||||||||||||||||
Income taxes | (2,737 | ) | (8,919 | ) | 13,050 | (736 | ) | (233 | ) | (37 | ) | |||||||||||||
Net Profit from Continuing Operations | 2,290 | 7,465 | 9,834 | 5,708 | 3,785 | 5,438 | ||||||||||||||||||
Discontinued Operations(4) | — | — | — | — | 2,063 | 55 | ||||||||||||||||||
Consolidated Profit for the Year | 2,290 | 7,465 | 9,834 | 5,708 | 5,848 | 5,493 |
For the Year Ended December 31, | ||||||||||||||||||||||||
2021 | 2021 | 2020 | 2019 | 2018 | 2017 | |||||||||||||||||||
(in millions of U.S.$)(1) | (in millions of R$) | |||||||||||||||||||||||
Interest and similar income | 13,975 | 77,987 | 62,775 | 72,841 | 70,478 | 71,418 | ||||||||||||||||||
Interest expense and similar charges | (4,779 | ) | (26,669 | ) | (18,332 | ) | (28,520 | ) | (28,557 | ) | (36,472 | ) | ||||||||||||
Net interest income | 9,196 | 51,318 | 44,443 | 44,321 | 41,921 | 34,946 | ||||||||||||||||||
Income from equity instruments | 16 | 90 | 34 | 19 | 33 | 83 | ||||||||||||||||||
Income from companies accounted for by the equity method | 26 | 144 | 112 | 149 | 66 | 72 | ||||||||||||||||||
Fee and commission income | 3,653 | 20,388 | 20,607 | 20,392 | 17,728 | 15,816 | ||||||||||||||||||
Fee and commission expense | (917 | ) | (5,115 | ) | (4,378 | ) | (4,679 | ) | (3,596 | ) | (3,094 | ) | ||||||||||||
Gains (losses) on financial assets and liabilities (net) | 40 | 222 | 12,998 | 2,463 | (2,783 | ) | 969 | |||||||||||||||||
Exchange differences (net) | (359 | ) | (2,002 | ) | (24,701 | ) | (2,789 | ) | (2,806 | ) | 605 | |||||||||||||
Other operating income (expenses) | (201 | ) | (1,119 | ) | (873 | ) | (1,108 | ) | (1,056 | ) | (672 | ) | ||||||||||||
Total income | 11,455 | 63,926 | 48,242 | 58,769 | 49,507 | 48,725 | ||||||||||||||||||
Administrative expenses | (3,103 | ) | (17,316 | ) | (17,115 | ) | (16,942 | ) | (16,792 | ) | (16,121 | ) | ||||||||||||
Depreciation and amortization | (436 | ) | (2,434 | ) | (2,579 | ) | (2,392 | ) | (1,740 | ) | (1,662 | ) | ||||||||||||
Provisions (net)(2) | (391 | ) | (2,179 | ) | (1,657 | ) | (3,682 | ) | (2,000 | ) | (3,309 | ) | ||||||||||||
Impairment losses on financial assets (net)(3) | (3,067 | ) | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | ||||||||||||
Impairment losses on other assets (net) | (30 | ) | (166 | ) | (85 | ) | (131 | ) | (508 | ) | (457 | ) | ||||||||||||
Gains (losses) on disposal of assets not classified as non-current assets held for sale | (3 | ) | (15 | ) | 231 | 11 | (25 | ) | (64 | ) | ||||||||||||||
Gains (losses) on non-current assets held for sale not classified as discontinued operations | 9 | 48 | 77 | 10 | 182 | (260 | ) | |||||||||||||||||
Operating income before tax | 4,435 | 24,750 | 9,664 | 22,273 | 15,910 | 14,514 | ||||||||||||||||||
Income taxes | (1,647 | ) | (9,191 | ) | 3,787 | (5,642 | ) | (3,110 | ) | (5,376 | ) | |||||||||||||
Consolidated net income for the Year | 2,788 | 15,559 | 13,451 | 16,631 | 12,800 | 9,138 |
(1) | Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, |
(2) | Mainly provisions for tax risks and legal obligations, and judicial and administrative proceedings of labor and civil lawsuits. For further discussion, see notes |
(3) |
9 |
Earnings and Dividend per Share Information
For the year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Basic and Diluted Earnings per 1,000 shares | ||||||||||||||||||||
From continuing and discontinued operations(1) | ||||||||||||||||||||
Basic Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | 929.93 | 1,236.96 | 709.69 | 719.89 | 689.29 | |||||||||||||||
Preferred Shares | 1,022.92 | 1,360.66 | 780.66 | 791.87 | 758.22 | |||||||||||||||
Diluted Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | 929.03 | 1,235.79 | 709.40 | 719.60 | 688.87 | |||||||||||||||
Preferred Shares | 1,021.93 | 1,359.36 | 780.34 | 791.56 | 757.75 | |||||||||||||||
Basic Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | 285.34 | |||||||||||||||||||
Preferred Shares | 313.87 | |||||||||||||||||||
Diluted Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | 285.06 | |||||||||||||||||||
Preferred Shares | 313.57 | |||||||||||||||||||
From continuing operations | ||||||||||||||||||||
Basic Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | 929.93 | 1,236.96 | 709.69 | 460.35 | 628.34 | |||||||||||||||
Preferred Shares | 1,022.92 | 1,360.66 | 780.66 | 506.38 | 750.57 | |||||||||||||||
Diluted Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | 929.03 | 1,235.79 | 709.40 | 460.16 | 681.92 | |||||||||||||||
Preferred Shares | 1,021.93 | 1,359.36 | 780.34 | 506.18 | 750.11 | |||||||||||||||
Basic Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | 285.34 | |||||||||||||||||||
Preferred Shares | 313.87 |
For the year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Diluted Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | 285.06 | |||||||||||||||||||
Preferred Shares | 313.57 | |||||||||||||||||||
From discontinued operations | ||||||||||||||||||||
Basic Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | — | — | — | 259.54 | 6.95 | |||||||||||||||
Preferred Shares | — | — | — | 285.49 | 7.65 | |||||||||||||||
Diluted Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | — | — | — | 259.43 | 6.95 | |||||||||||||||
Preferred Shares | — | — | — | 285.38 | 7.64 | |||||||||||||||
Basic Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | — | — | — | |||||||||||||||||
Preferred Shares | — | — | — | |||||||||||||||||
Diluted Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | — | — | — | |||||||||||||||||
Preferred Shares | — | — | — | |||||||||||||||||
Dividends and interest on capital per 1,000 shares (undiluted) | ||||||||||||||||||||
Common Shares (reais) | 666.21 | 784.90 | 193.26 | 305.15 | 335.73 | |||||||||||||||
Preferred Shares (reais) | 732.83 | 863.39 | 212.59 | 332.36 | 369.30 | |||||||||||||||
Common Shares (U.S. dollars)(2) | 204.42 | 201.01 | 72.76 | 128.98 | 164.29 | |||||||||||||||
Preferred Shares (U.S. dollars)(2) | 224.86 | 221.11 | 80.03 | 141.88 | 180.72 | |||||||||||||||
Weighted average share outstanding (in thousands) – basic | ||||||||||||||||||||
Common Shares | 3,828,555 | 3,839,159 | 3,851,278 | 3,858,717 | 3,860,354 | |||||||||||||||
Preferred Shares | 3,689,696 | 3,700,299 | 3,710,746 | 3,719,858 | 3,721,493 | |||||||||||||||
Weighted average shares outstanding (in thousands) – diluted(3) | ||||||||||||||||||||
Common Shares | 3,832,211 | 3,842,744 | 3,852,823 | 3,860,239 | 3,862,679 | |||||||||||||||
Preferred Shares | 3,693,352 | 3,703,884 | 3,712,291 | 3,721,380 | 3,723,817 |
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
Basic and Diluted Earnings per 1,000 shares | ||||||||||||||||||||
From continuing and discontinued operations(1) | ||||||||||||||||||||
Basic Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | 1,981.65 | 1,713.45 | 2,094.83 | 1,604.34 | 1,133.43 | |||||||||||||||
Preferred Shares | 2,179.82 | 1,884.80 | 2,304.32 | 1,764.78 | 1,246.77 | |||||||||||||||
Diluted Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | 1,981.65 | 1,713.45 | 2,094.83 | 1,604.34 | 1,132.44 | |||||||||||||||
Preferred Shares | 2,179.82 | 1,884.80 | 2,304.32 | 1,764.78 | 1,245.69 | |||||||||||||||
Basic Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | 355.10 | 329.72 | 519.72 | 414.05 | 342.63 | |||||||||||||||
Preferred Shares | 390.61 | 362.69 | 571.69 | 455.45 | 376.90 | |||||||||||||||
Diluted Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | 355.10 | 329.72 | 519.72 | 414.05 | 342.33 | |||||||||||||||
Preferred Shares | 390.61 | 362.69 | 571.69 | 455.45 | 376.57 | |||||||||||||||
From continuing operations | ||||||||||||||||||||
Basic Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | 1,981.65 | 1,713.45 | 2,094.83 | 1,604.34 | 1,133.43 | |||||||||||||||
Preferred Shares | 2,179.82 | 1,884.80 | 2,304.32 | 1,764.78 | 1,246.77 | |||||||||||||||
Diluted Earnings per shares (reais) | ||||||||||||||||||||
Common Shares | 1,981.65 | 1,713.45 | 2,094.83 | 1,604.34 | 1,132.44 | |||||||||||||||
Preferred Shares | 2,179.82 | 1,884.80 | 2,304.32 | 1,764.78 | 1,245.69 | |||||||||||||||
Basic Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | 355.10 | 329.72 | 519.72 | 414.05 | 342.63 | |||||||||||||||
Preferred Shares | 390.61 | 362.69 | 571.69 | 455.45 | 376.90 | |||||||||||||||
Diluted Earnings per shares (U.S. dollars) (2) | ||||||||||||||||||||
Common Shares | 355.10 | 329.72 | 519.72 | 414.05 | 342.33 | |||||||||||||||
Preferred Shares | 390.61 | 362.69 | 571.69 | 455.45 | 376.57 | |||||||||||||||
Dividends and interest on capital per 1,000 shares (undiluted) | ||||||||||||||||||||
Common Shares (reais) | 1,231.79 | 1,693.28 | 1,378.87 | 841.68 | 801.63 | |||||||||||||||
Preferred Shares (reais) | 1,354.97 | 1,631.71 | 1,516.76 | 925.85 | 881.80 | |||||||||||||||
Common Shares (U.S. dollars)(2) | 220.73 | 325.84 | 342.09 | 217.22 | 242.33 | |||||||||||||||
Preferred Shares (U.S. dollars)(2) | 242.80 | 313.99 | 376.30 | 238.94 | 266.57 | |||||||||||||||
Weighted average share outstanding (in thousands) – basic | ||||||||||||||||||||
Common Shares | 3,802,851 | 3,800,140 | 3,802,303 | 3,807,386 | 3,822,057 | |||||||||||||||
Preferred Shares | 3,664,423 | 3,664,666 | 3,663,444 | 3,668,527 | 3,683,145 | |||||||||||||||
Weighted average shares outstanding (in thousands) – diluted(3) | ||||||||||||||||||||
Common Shares | 3,802,851 | 3,800,140 | 3,802,303 | 3,807,386 | 3,825,313 | |||||||||||||||
Preferred Shares | 3,664,423 | 3,664,666 | 3,663,444 | 3,668,527 | 3,686,401 |
(1) | Per share amounts reflect the effects of the bonus share issue and reverse share split |
(2) | Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, |
10 |
Balance Sheet Data
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2016 | 2016 | 2015 | 2014 | 2013 | 2012 | 2021 | 2021 | 2020 | 2019 | 2018 | 2017 | |||||||||||||||||||||||||||||||||||||
(in millions of U.S.$)(1) | (in millions of R$) | (in millions of U.S.$)(1) | (in millions of R$) | |||||||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 33,937 | 110,605 | 89,143 | 55,904 | 51,714 | 55,535 | 2,985 | 16,657 | 20,149 | 20,127 | 19,464 | 20,642 | ||||||||||||||||||||||||||||||||||||
Financial assets held for trading | 26,042 | 84,874 | 50,537 | 56,014 | 30,219 | 31,638 | - | - | - | - | - | 86,271 | ||||||||||||||||||||||||||||||||||||
Financial Assets Measured At Fair Value Through Profit Or Loss | 3,379 | 18,859 | 60,900 | 32,342 | 43,712 | - | ||||||||||||||||||||||||||||||||||||||||||
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading | 12,646 | 70,571 | 95,843 | 55,396 | 68,852 | - | ||||||||||||||||||||||||||||||||||||||||||
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss | 156 | 870 | 500 | 171 | 917 | - | ||||||||||||||||||||||||||||||||||||||||||
Other financial assets at fair value through profit or loss | 525 | 1,711 | 2,080 | 997 | 1,298 | 1,228 | - | - | - | - | - | 1,692 | ||||||||||||||||||||||||||||||||||||
Available-for-sale financial assets | 17,740 | 57,815 | 68,265 | 75,164 | 46,287 | 44,149 | - | - | - | - | - | 85,823 | ||||||||||||||||||||||||||||||||||||
Financial Assets Measured At Fair Value Through Other Comprehensive Income | 18,142 | 101,242 | 109,740 | 96,120 | 85,437 | - | ||||||||||||||||||||||||||||||||||||||||||
Held to maturity investments | 3,083 | 10,048 | 10,098 | — | — | — | - | - | - | - | - | 10,214 | ||||||||||||||||||||||||||||||||||||
Loans and receivables | 90,838 | 296,049 | 306,269 | 264,608 | 258,778 | 226,957 | ||||||||||||||||||||||||||||||||||||||||||
Loans and receivables(2) | - | - | - | - | - | 368,729 | ||||||||||||||||||||||||||||||||||||||||||
Financial Assets Measured At Amortized Cost (2) | 113,474 | 633,241 | 554,925 | 474,681 | 429,731 | - | ||||||||||||||||||||||||||||||||||||||||||
Hedging derivatives | 68 | 223 | 1,312 | 213 | 323 | 156 | 61 | 342 | 743 | 340 | 344 | 193 | ||||||||||||||||||||||||||||||||||||
Non-current assets held for sale | 411 | 1,338 | 1,237 | 930 | 275 | 166 | 146 | 816 | 1,093 | 1,325 | 1,380 | 1,155 | ||||||||||||||||||||||||||||||||||||
Investments in associates and joint ventures | 304 | 990 | 1,061 | 1,023 | 1,064 | 472 | 221 | 1,233 | 1,095 | 1,071 | 1,053 | 867 | ||||||||||||||||||||||||||||||||||||
Tax assets | 8,822 | 28,753 | 34,770 | 23,020 | 22,060 | 21,497 | 7,483 | 41,757 | 41,064 | 33,599 | 31,566 | 28,826 | ||||||||||||||||||||||||||||||||||||
Other assets | 1,566 | 5,104 | 3,802 | 5,067 | 5,085 | 5,601 | 1,084 | 6,049 | 7,222 | 5,061 | 4,800 | 4,578 | ||||||||||||||||||||||||||||||||||||
Property, plant and equipment | 1,574 | 8,784 | 9,537 | 9,782 | 6,589 | 6,510 | ||||||||||||||||||||||||||||||||||||||||||
Intangible assets | 5,517 | 30,787 | 30,766 | 30,596 | 30,019 | 30,202 | ||||||||||||||||||||||||||||||||||||||||||
Total assets | 166,868 | 931,208 | 933,578 | 760,613 | 723,865 | 645,703 | ||||||||||||||||||||||||||||||||||||||||||
Average total assets* | 168,834 | 942,177 | 854,615 | 735,507 | 685,531 | 637,511 | ||||||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
Financial liabilities held for trading (4) | 6,622 | 36,953 | 75,020 | - | - | 49,323 | ||||||||||||||||||||||||||||||||||||||||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading | - | - | - | 44,440 | 50,939 | - | ||||||||||||||||||||||||||||||||||||||||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss | 1,337 | 7,460 | 7,038 | 5,319 | 1,946 | - | ||||||||||||||||||||||||||||||||||||||||||
Financial liabilities at amortized cost | 134,413 | 750,094 | 707,289 | 575,230 | 547,295 | 478,881 | ||||||||||||||||||||||||||||||||||||||||||
Deposits from the Brazilian Central Bank and deposits from credit institutions | 21,684 | 121,006 | 131,657 | 99,271 | 99,023 | 79,375 | ||||||||||||||||||||||||||||||||||||||||||
Customer deposits | 84,036 | 468,961 | 445,814 | 336,515 | 304,198 | 276,042 | ||||||||||||||||||||||||||||||||||||||||||
Marketable debt securities | 14,163 | 79,037 | 56,876 | 73,702 | 74,626 | 70,247 | ||||||||||||||||||||||||||||||||||||||||||
Subordinated debts | - | - | - | - | 9,886 | 519 | ||||||||||||||||||||||||||||||||||||||||||
Debt Instruments Eligible to Compose Capital | 3,520 | 19,641 | 13,120 | 10,176 | 9,780 | 8,437 | ||||||||||||||||||||||||||||||||||||||||||
Other financial liabilities | 11,011 | 61,449 | 59,823 | 55,566 | 49,783 | 44,261 | ||||||||||||||||||||||||||||||||||||||||||
Hedging derivatives | 80 | 447 | 145 | 201 | 224 | 163 | ||||||||||||||||||||||||||||||||||||||||||
Provisions(3) | 2,079 | 11,604 | 13,815 | 16,332 | 14,696 | 13,987 | ||||||||||||||||||||||||||||||||||||||||||
Tax liabilities | 1,465 | 8,175 | 10,130 | 10,960 | 8,075 | 8,248 | ||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 1,882 | 10,501 | 14,051 | 10,921 | 9,095 | 8,014 | ||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 147,878 | 825,234 | 827,488 | 663,404 | 632,270 | 558,615 | ||||||||||||||||||||||||||||||||||||||||||
Stockholders’ equity | 19,541 | 109,047 | 106,205 | 96,736 | 91,882 | 87,425 | ||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income | (610 | ) | (3,406 | ) | (428 | ) | (86 | ) | (879 | ) | (774 | ) | ||||||||||||||||||||||||||||||||||||
Non-controlling interests | 60 | 334 | 313 | 559 | 593 | 437 | ||||||||||||||||||||||||||||||||||||||||||
Total Stockholders’ Equity | 18,990 | 105,974 | 106,090 | 97,209 | 91,595 | 87,088 | ||||||||||||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | 166,868 | 931,208 | 933,578 | 760,613 | 723,865 | 645,703 | ||||||||||||||||||||||||||||||||||||||||||
Average interest-bearing liabilities* | 116,074 | 647,752 | 573,429 | 491,187 | 463,388 | 416,816 | ||||||||||||||||||||||||||||||||||||||||||
Average total stockholders’ equity* | 18,828 | 105,070 | 101,531 | 95,836 | 89,263 | 87,868 |
* The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.
(1) Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, 2021, for reais into U.S. dollars of R$5.5805 to U.S.$1.00.
(2) In the fiscal year ended December 31, 2018, as a result of the implementation of IFRS 9, the balances related loans and receivables, assets held for trading, held to maturity, available for sale and compulsory deposits on time deposits were reclassified to new accounts prescribed by IFRS 9.
(3) Mainly provisions for tax risks and legal obligations, and judicial and administrative proceedings of labor and civil lawsuits.
(4) In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.
11 |
Table of ContentsSelected Consolidated Ratios (*)
As of December 31, | ||||||||||||||||||||||||
2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(in millions of U.S.$)(1) | (in millions of R$) | |||||||||||||||||||||||
Tangible assets | 2,039 | 6,646 | 7,006 | 7,071 | 6,886 | 5,938 | ||||||||||||||||||
Intangible assets | 9,278 | 30,237 | 29,814 | 30,221 | 29,064 | 29,271 | ||||||||||||||||||
Total assets | 194,653 | 634,393 | 605,395 | 520,231 | 453,053 | 422,608 | ||||||||||||||||||
Average total assets* | 185,832 | 605,646 | 571,918 | 478,560 | 435,286 | 408,143 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Financial liabilities held for trading | 15,839 | 51,620 | 42,388 | 19,570 | 13,554 | 5,352 | ||||||||||||||||||
Financial liabilities at amortized cost | 144,696 | 471,579 | 457,282 | 392,186 | 329,701 | 306,976 | ||||||||||||||||||
Deposits from the Brazilian Central Bank and deposits from credit institutions | 24,128 | 78,634 | 69,451 | 63,674 | 34,032 | 35,074 | ||||||||||||||||||
Customer deposits | 75,924 | 247,445 | 243,043 | 220,644 | 200,156 | 188,595 | ||||||||||||||||||
Marketable debt securities | 30,635 | 99,843 | 94,658 | 70,355 | 65,301 | 54,012 | ||||||||||||||||||
Subordinated debts | 143 | 466 | 8,097 | 7,294 | 8,906 | 11,919 | ||||||||||||||||||
Debt Instruments Eligible to Compose Capital | 2,550 | 8,312 | 9,959 | 6,773 | — | — | ||||||||||||||||||
Other financial liabilities | 11,316 | 36,879 | 32,073 | 23,446 | 21,306 | 17,376 | ||||||||||||||||||
Hedging derivatives | 95 | 311 | 2,377 | 894 | 629 | 282 | ||||||||||||||||||
Provisions(2) | 3,613 | 11,776 | 11,410 | 11,127 | 10,892 | 12,775 | ||||||||||||||||||
Tax liabilities | 1,870 | 6,095 | 5,253 | 12,423 | 11,693 | 13,784 | ||||||||||||||||||
Other liabilities | 2,516 | 8,199 | 6,850 | 5,346 | 4,928 | 4,303 | ||||||||||||||||||
Total liabilities | 168,630 | 549,581 | 525,559 | 441,548 | 371,397 | 343,472 | ||||||||||||||||||
Stockholders’ equity | 26,214 | 85,435 | 83,532 | 80,105 | 83,340 | 79,921 | ||||||||||||||||||
Other Comprehensive Income | (414 | ) | (1,348 | ) | (4,132 | ) | (1,802 | ) | (1,973 | ) | (1,022 | ) | ||||||||||||
Non-controlling interests | 223 | 726 | 435 | 380 | 289 | 237 | ||||||||||||||||||
Total Stockholders’ Equity | 26,023 | 84,812 | 79,835 | 78,683 | 81,655 | 79,136 | ||||||||||||||||||
Total liabilities and stockholders’ equity | 194,653 | 634,393 | 605,395 | 520,231 | 453,053 | 422,608 | ||||||||||||||||||
Average interest-bearing liabilities* | 125,209 | 408,067 | 400,008 | 318,639 | 287,382 | 265,328 | ||||||||||||||||||
Average total stockholders’ equity* | 25,860 | 84,283 | 81,475 | 78,818 | 80,916 | 77,886 |
As of and for the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(%) | ||||||||||||||||||||
Profitability and performance | ||||||||||||||||||||
Return on average total assets | 1.7 | 1.6 | 2.3 | 1.9 | 1.4 | |||||||||||||||
Asset quality | ||||||||||||||||||||
Impaired assets as a percentage of loans and advances to customers (gross)(1) | 5.5 | 5.5 | 6.7 | 7.0 | 6.7 | |||||||||||||||
Impaired assets as a percentage of total assets(1) | 2.9 | 2.5 | 3.1 | 3.1 | 3.0 | |||||||||||||||
Impairment losses to customers as a percentage of impaired assets(1) (4) | 105.9 | 103.8 | 87.8 | 90.3 | 80.5 | |||||||||||||||
Impairment losses to customers as a percentage of loans and advances to customers (gross) (5) | 5.8 | 5.8 | 5.9 | 6.3 | 5.4 | |||||||||||||||
Derecognized assets as a percentage of loans and advances to customers (gross) | 3.0 | 3.7 | 4.3 | 3.5 | 4.7 | |||||||||||||||
Impaired assets as a percentage of stockholders’ equity(1) | 25.5 | 21.8 | 24.3 | 24.5 | 22.0 | |||||||||||||||
Capital adequacy | ||||||||||||||||||||
Basel capital adequacy ratio(2) | 14.9 | 15.3 | 15.0 | 15.1 | 15.8 | |||||||||||||||
Efficiency | ||||||||||||||||||||
Efficiency ratio(3) | 27.1 | 35.5 | 28.8 | 33.9 | 33.1 |
* | The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: |
Selected Consolidated Ratios(*)
At and for the Year Ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
in (%) | ||||||||||||||||||||
Profitability and performance | ||||||||||||||||||||
Return on average total assets | 1.2 | 1.7 | 1.2 | 1.3 | 1.3 | |||||||||||||||
Asset quality | ||||||||||||||||||||
Impaired assets as a percentage of loans and advances to customers (gross)(1) | 7.0 | 7.0 | 5.6 | 6.2 | 7.6 | |||||||||||||||
Impaired assets as a percentage of total assets(1) | 3.0 | 3.1 | 2.7 | 3.1 | 3.8 | |||||||||||||||
Impairment losses to customer as a percentage of impaired assets(1) (4) | 87.0 | 81.9 | 95.8 | 96.1 | 87.0 | |||||||||||||||
Impairment losses to customers as a percentage of loans and advances to customers (gross) (5) | 6.1 | 5.7 | 5.4 | 6.0 | 6.6 |
At and for the Year Ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
in (%) | ||||||||||||||||||||
Derecognized assets as a percentage of loans and advances to customers (gross) | 4.3 | 4.4 | 4.9 | 6.5 | 7.2 | |||||||||||||||
Impaired assets as a percentage of stockholders’ equity(1) | 22.3 | 23.3 | 17.8 | 17.2 | 20.3 | |||||||||||||||
Capital adequacy | ||||||||||||||||||||
Basel capital adequacy ratio(2) | 16.3 | 15.7 | 17.5 | 19.2 | 20.8 | |||||||||||||||
Efficiency | ||||||||||||||||||||
Efficiency ratio(3) | 30.6 | 47.1 | 39.9 | 38.8 | 35.7 |
(1) | Impaired assets include all loans and advances past due by more than 90 days and other doubtful credits. For further information, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information— |
(2) | Basel capital adequacy ratio |
(3) | Efficiency ratio is determined by |
(4) | In |
(5) | In |
See also “Item 4. Information on the Company—B. Business Overview—Selected Consolidated non-GAAP Ratios(*)Statistical Information—Selected Credit Ratios.”
At and for the Year Ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
in (%) | ||||||||||||||||||||
Profitability and performance | ||||||||||||||||||||
Net yield(1) | 6.2 | 6.6 | 6.9 | 8.1 | 9.6 | |||||||||||||||
Return on average stockholders’ equity(2) | 8.9 | 12.1 | 7.3 | 7.3 | 7.1 | |||||||||||||||
Adjusted return on average stockholders’ equity(2) | 13.3 | 18.5 | 11.3 | 10.9 | 10.8 | |||||||||||||||
Average stockholders’ equity as a percentage of average total assets(2)(*) | 13.9 | 14.2 | 16.4 | 18.5 | 19.1 | |||||||||||||||
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(2)(*) | 9.7 | 9.8 | 11.3 | 13.1 | 13.3 | |||||||||||||||
Asset quality | ||||||||||||||||||||
Impaired assets as a percentage of credit risk exposure (3) | 6.3 | 6.0 | 4.8 | 5.4 | 6.7 | |||||||||||||||
Impaired assets as a percentage of stockholders’ equity excluding goodwill(2)(3) | 33.5 | 36.1 | 27.5 | 25.9 | 30.9 | |||||||||||||||
Liquidity | ||||||||||||||||||||
Loans and advances to customers, net as a percentage of total funding(4) | 58.0 | 59.3 | 63.9 | 69.0 | 67.9 | |||||||||||||||
Efficiency | ||||||||||||||||||||
Adjusted efficiency ratio(5) | 34.9 | 34.8 | 38.1 | 36.4 | 34.4 |
12 |
Selected Consolidated Ratios, Including Non-GAAP Ratios (*)
As of and for the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(%) | ||||||||||||||||||||
Profitability and performance | ||||||||||||||||||||
Net yield(1) | 5.9 | 6.0 | 6.8 | 6.9 | 6.4 | |||||||||||||||
Return on average stockholders’ equity(2) | 14.8 | 13.3 | 17.4 | 14.3 | 10.4 | |||||||||||||||
Adjusted return on average stockholders’ equity(2) | 20.2 | 18.4 | 24.7 | 21.0 | 15.4 | |||||||||||||||
Average stockholders’ equity as a percentage of average total assets(2)(*) | 11.2 | 11.9 | 13.0 | 13.0 | 13.8 | |||||||||||||||
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(2)(*) | 8.4 | 8.8 | 9.6 | 9.3 | 9.8 | |||||||||||||||
Asset quality | ||||||||||||||||||||
Impaired assets as a percentage of credit risk exposure (3) | 4.9 | 5.0 | 6.0 | 6.2 | 5.8 | |||||||||||||||
Impaired assets as a percentage of stockholders’ equity excluding goodwill(2)(3) | 34.5 | 29.8 | 34.4 | 35.5 | 32.6 | |||||||||||||||
Liquidity | ||||||||||||||||||||
Loans and advances to customers, net as a percentage of total funding(4) | 70.2 | 76.3 | 62.9 | 60.6 | 62.7 | |||||||||||||||
Efficiency | ||||||||||||||||||||
Adjusted efficiency ratio(5) | 28.2 | 27.8 | 28.2 | 30.3 | 32.5 |
(*) The average annual balance sheet data has been calculated based upon the average of Contentsthe monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.
(1) “Net yield” is defined as net interest income (including dividends on equity securities) divided by average interest earning assets.
(2) “Adjusted return on average stockholders’ equity,” “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” and “Impaired assets as a percentage of stockholders’ equity excluding goodwill” are non-GAAP financial measures which adjust “Return on average stockholders’ equity,” “Average stockholders’ equity as a percentage of average total assets” and “Impaired assets as a percentage of stockholders’ equity,” to exclude the goodwill arising from the acquisition of Banco Real in 2008, Getnet and Super Pagamentos e Administração de Meios Eletrônicos Ltda., or “Super,” both in 2014, Banco Olé Bonsucesso Consignado S.A. (formerly known as Banco Bonsucesso Consignado S.A.) 60% in 2015 and the remaining 40% in 2020, and BW Guirapá I S.A. in 2016. Our calculation of these non-GAAP financial measures may differ from the calculation of similarly titled measures used by other companies. We believe that these non-GAAP financial measures supplement the GAAP information provided to investors regarding the substantial impact of the R$27 billion goodwill arising from the acquisition of Banco Real during the year ended December 31, 2008, the R$1.1 billion goodwill arising from the acquisition of Getnet and Super both during 2014, the acquisition of an interest in Banco Olé Bonsucesso Consignado S.A. in 2015 (although Getnet and Super are no longer subsidiaries of Santander Brasil, the goodwill arising from their respective acquisitions continues to have an effect on our consolidated financial statements). Accordingly, we believe that the non-GAAP financial measures presented are useful to investors. The limitation associated with the exclusion of goodwill from stockholders’ equity is that it has the effect of excluding a portion of the total investment in our assets. We compensate for this limitation by also considering stockholders’ equity including goodwill.(3) Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets), guarantees and documentary credits. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. The reconciliation of the measure to the most comparable IFRS measure is disclosed in the table of non-GAAP financial measures presented immediately after these notes.
(4) Total funding is the sum of financial liabilities at amortized cost, excluding other financial liabilities. For a breakdown of the components of total funding, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”
(5) Adjusted efficiency ratio excludes the effect of the hedge for investments held abroad. This exclusion affects the income tax, gains (losses) on financial assets and liabilities and exchange rate differences line items but does not affect the “Net income from continuing operations” line item because the adjustment to gains (losses) on financial assets and liabilities and exchange rate difference is offset by the adjustment to income tax. Our management believes that the adjusted efficiency ratio provides a more consistent framework for evaluating and conducting business, as a result of excluding from our revenues the effect of the volatility caused by possible gains and losses on our hedging strategies for tax purposes. The adjusted efficiency ratio excluding the hedge of investments held abroad is a non-GAAP measure. For further information, see the table below and “—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Effects of the hedge for investments held abroad | 2,512 | 13,583 | 1,264 | 5,867 | (810 | ) | ||||||||||||||
Efficiency ratio | 27.1 | % | 35.5 | % | 28.8 | % | 33.9 | % | 33.1 | % | ||||||||||
Adjusted efficiency ratio | 28.2 | % | 27.8 | % | 28.2 | % | 30.3 | % | 32.5 | % |
See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Selected Credit Ratios.”
13 |
For the year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Effects of the hedge for investments held abroad | (6,140 | ) | 10,919 | 1,668 | 2,367 | 1,437 | ||||||||||||||
Efficiency ratio | 30.6 | % | 47.1 | % | 39.9 | % | 38.8 | % | 35.7 | % | ||||||||||
Adjusted efficiency ratio | 34.9 | % | 34.8 | % | 38.1 | % | 36.4 | % | 34.4 | % |
Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures
Reconciliation of Non-GAAP Ratios to Their Most Directly Comparable IFRS Financial Measures
The information in the table below presents the calculation of specified non-GAAP financial measures from each of theirto the most directly comparable IFRS financial measures. Our calculation of these non-GAAP financial measures may differ from the calculation of similarly titled measures used by other companies. We believe that these non-GAAP financial measures supplement the GAAP information provided to investors regarding the substantial impact of the R$1.1 billion goodwill arising from the acquisition of GetNetGetnet and Super both during 2014, the acquisition of Banco Olé Bonsucesso Consignado S.A. in 2015 and the significance of other factors affecting stockholders’ equity and the related ratios. See “Item 4. Information on the Company—4A.A. History and Development of the Company—Important Events.” The limitation associated with the exclusion of goodwill from stockholders’ equity is that it has the effect of excluding a portion of the total investment in our assets. We compensate for this limitation by also considering stockholders’ equity including goodwill, as set forth in the above tables. Accordingly, while we believe that the non-GAAP financial measures presented are useful to investors and support their analysis, the non-GAAP financial measures have important limitations as analytical tools, and investors should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP measures including under IFRS.
14 |
Reconciliation of Non-GAAP Ratios to Their Most Directly Comparable IFRS Financial Measures
As of and for the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$, except as otherwise indicated) | ||||||||||||||||||||
Return on average stockholders’ equity: | ||||||||||||||||||||
Consolidated net income for the year | 15,559 | 13,451 | 16,631 | 12,800 | 9,138 | |||||||||||||||
Average stockholders’ equity (*) | 105,070 | 101,531 | 95,836 | 89,263 | 87,868 | |||||||||||||||
Return on average stockholders’ equity (*) | 14.8 | % | 13.2 | % | 17.4 | % | 14.3 | % | 10.4 | % | ||||||||||
Adjusted return on average stockholders’ equity(*): | ||||||||||||||||||||
Consolidated net income for the year | 15,559 | 13,451 | 16,631 | 12,800 | 9,138 | |||||||||||||||
Average stockholders’ equity(*) | 105,070 | 101,531 | 95,836 | 89,263 | 87,868 | |||||||||||||||
Average goodwill(*) | 27,967 | 28,513 | 28,213 | 28,176 | 28,360 | |||||||||||||||
Average stockholders’ equity excluding goodwill(*) | 77,103 | 73,018 | 67,623 | 61,087 | 59,508 | |||||||||||||||
Adjusted return on average stockholders’ equity(*)(3) | 20.2 | % | 18.4 | % | 24.6 | % | 21.0 | % | 15.4 | % | ||||||||||
Average stockholders’ equity as a percentage of average total assets(*): | ||||||||||||||||||||
Average stockholders’ equity(*) | 105,070 | 101,531 | 95,836 | 89,263 | 87,868 | |||||||||||||||
Average total assets(*) | 942,177 | 854,615 | 735,507 | 685,531 | 637,511 | |||||||||||||||
Average stockholders’ equity as a percentage of average total assets(*) | 11.2 | % | 11.9 | % | 13.0 | % | 13.0 | % | 13.8 | % | ||||||||||
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*): | ||||||||||||||||||||
Average stockholders’ equity(*) | 105,070 | 101,531 | 95,836 | 89,263 | 87,868 | |||||||||||||||
Average goodwill(*) | 27,967 | 28,513 | 28,213 | 28,176 | 28,360 | |||||||||||||||
Average stockholders’ equity excluding goodwill(*) | 77,103 | 73,018 | 67,623 | 61,087 | 59,508 | |||||||||||||||
Average total assets(*) | 942,177 | 854,615 | 735,507 | 685,531 | 637,511 | |||||||||||||||
Average goodwill(*) | 27,967 | 28,513 | 28,213 | 28,176 | 28,360 | |||||||||||||||
Average total assets excluding goodwill(*) | 914,210 | 826,102 | 707,294 | 657,355 | 609,151 | |||||||||||||||
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*) | 8.4 | % | 8.8 | % | 9.6 | % | 9.3 | % | 9.8 | % | ||||||||||
Impaired assets as a percentage of stockholders’ equity: | ||||||||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | |||||||||||||||
Stockholders’ equity | 105,974 | 106,090 | 97,209 | 91,595 | 87,088 | |||||||||||||||
Impaired assets as a percentage of stockholders’ equity | 25.4 | % | 21.8 | % | 24.1 | % | 24.5 | % | 22.0 | % | ||||||||||
Impaired assets as a percentage of stockholders’ equity excluding goodwill: | ||||||||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | |||||||||||||||
Stockholders’ equity | 105,974 | 106,090 | 97,209 | 91,595 | 87,089 | |||||||||||||||
Goodwill | 27,915 | 28,360 | 28,375 | 28,378 | 28,364 | |||||||||||||||
Stockholders’ equity excluding goodwill | 78,059 | 77,730 | 68,834 | 63,217 | 58,724 | |||||||||||||||
Impaired assets as a percentage of stockholders’ equity excluding goodwill | 34.5 | % | 29.8 | % | 34.0 | % | 35.5 | % | 32.6 | % | ||||||||||
Impaired assets as a percentage of loans and receivables: | ||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | |||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | |||||||||||||||
Impaired assets as a percentage of loans and receivables | 5.5 | % | 5.5 | % | 6.7 | % | 7.0 | % | 6.7 | % | ||||||||||
Impaired assets as a percentage of credit risk exposure: | ||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | |||||||||||||||
Guarantees | 47,518 | 48,282 | 44,313 | 42,260 | 42,645 | |||||||||||||||
Credit risk exposure | 540,873 | 466,115 | 391,569 | 364,182 | 330,474 | |||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | |||||||||||||||
Impaired assets as a percentage of credit risk exposure | 5.0 | % | 5.0 | % | 6.0 | % | 6.2 | % | 5.8 | % | ||||||||||
Loans and advances to customers, net as a percentage of total funding: | ||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | |||||||||||||||
Impairment losses(1) | 28,511 | 24,054 | 20,557 | 20,242 | 15,409 | |||||||||||||||
Total Funding(2) | 688,645 | 647,465 | 519,664 | 497,512 | 434,620 | |||||||||||||||
Loans and advances to customers, net as a percentage of total funding(2) | 75.8 | % | 60.8 | % | 62.9 | % | 60.6 | % | 62.7 | % |
At and for the year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$, except as otherwise indicated) | ||||||||||||||||||||
Return on average stockholders’ equity: | ||||||||||||||||||||
Consolidated profit for the year | 7,465 | 9,834 | 5,708 | 5,848 | 5,493 | |||||||||||||||
Average stockholders’ equity (*) | 84,283 | 81,475 | 78,818 | 80,916 | 77,886 | |||||||||||||||
Return on average stockholders’ equity (*) | 8.9 | % | 12.1 | % | 7.3 | % | 7.3 | % | 7.1 | % | ||||||||||
Adjusted return on average stockholders’ equity(*): | ||||||||||||||||||||
Consolidated profit for the year | 7,465 | 9,834 | 5,708 | 5,848 | 5,493 | |||||||||||||||
Average stockholders’ equity(*) | 84,283 | 81,475 | 78,818 | 80,916 | 77,886 | |||||||||||||||
Average goodwill(*) | 28,343 | 28,376 | 27,747 | 27,218 | 27,218 | |||||||||||||||
Average stockholders’ equity excluding goodwill(*) | 55,940 | 53,130 | 51,071 | 53,698 | 50,668 | |||||||||||||||
Adjusted return on average stockholders’ equity(*) | 13.3 | % | 18.5 | % | 11.3 | % | 10.9 | % | 10.8 | % | ||||||||||
Average stockholders’ equity as a percentage of average total assets(*): | ||||||||||||||||||||
Average stockholders’ equity(*) | 84,283 | 81,475 | 78,818 | 80,916 | 77,886 | |||||||||||||||
Average total assets(*) | 605,646 | 571,860 | 478,560 | 435,283 | 408,143 | |||||||||||||||
Average stockholders’ equity as a percentage of average total assets(*) | 13.9 | % | 14.2 | % | 16.5 | % | 18.5 | % | 19.1 | % | ||||||||||
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*): | ||||||||||||||||||||
Average stockholders’ equity(*) | 84,283 | 81,475 | 78,818 | 80,916 | 77,886 | |||||||||||||||
Average goodwill(*) | 28,343 | 28,376 | 27,747 | 27,218 | 27,218 | |||||||||||||||
Average stockholders’ equity excluding goodwill(*) | 55,940 | 53,130 | 51,071 | 53,698 | 50,668 | |||||||||||||||
Average total assets(*) | 605,646 | 571,860 | 478,560 | 435,283 | 408,143 | |||||||||||||||
Average goodwill(*) | 28,343 | 28,376 | 27,747 | 27,218 | 27,218 | |||||||||||||||
Average total assets excluding goodwill(*) | 577,303 | 543,515 | 450,813 | 408,065 | 380,925 | |||||||||||||||
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*) | 9.7 | % | 9.8 | % | 11.3 | % | 13.1 | % | 13.3 | % | ||||||||||
Impaired assets as a percentage of stockholders’ equity: | ||||||||||||||||||||
Impaired assets | 18,887 | 18,599 | 14,011 | 14,022 | 16,057 | |||||||||||||||
Stockholders’ equity | 84,813 | 79,835 | 78,683 | 81,655 | 79,136 | |||||||||||||||
Impaired assets as a percentage of stockholders’ equity | 22.3 | % | 23.3 | % | 17.8 | % | 17.2 | % | 20.3 | % | ||||||||||
Impaired assets as a percentage of stockholders’ equity excluding goodwill: | ||||||||||||||||||||
Impaired assets | 18,887 | 18,599 | 14,011 | 14,022 | 16,057 | |||||||||||||||
Stockholders’ equity | 84,813 | 79,835 | 78,683 | 81,655 | 79,136 | |||||||||||||||
Goodwill | 28,355 | 28,333 | 28,271 | 27,218 | 27,218 | |||||||||||||||
Stockholders’ equity excluding goodwill | 56,458 | 51,502 | 50,412 | 54,437 | 51,918 | |||||||||||||||
Impaired assets as a percentage of stockholders’ equity excluding goodwill | 33.5 | % | 36.1 | % | 27.8 | % | 25.9 | % | 30.9 | % | ||||||||||
Impaired assets as a percentage of loans and receivables: | ||||||||||||||||||||
Loans and advances to customers, gross | 268,438 | 267,266 | 249,110 | 226,206 | 210,740 | |||||||||||||||
Impaired assets | 18,887 | 18,599 | 14,011 | 14,022 | 16,057 | |||||||||||||||
Impaired assets as a percentage of loans and receivables | 7.0 | % | 7.0 | % | 5.6 | % | 6.2 | % | 7.6 | % |
At and for the year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$, except as otherwise indicated) | ||||||||||||||||||||
Impaired assets as a percentage of credit risk exposure: | ||||||||||||||||||||
Loans and advances to customers, gross | 268,438 | 267,266 | 249,110 | 226,206 | 210,740 | |||||||||||||||
Guarantees | 33,265 | 43,611 | 39,334 | 31,150 | 28,571 | |||||||||||||||
Credit risk exposure | 301,703 | 310,877 | 288,445 | 257,357 | 239,312 | |||||||||||||||
Impaired assets | 18,887 | 18,599 | 14,011 | 14,022 | 16,057 | |||||||||||||||
Impaired assets as a percentage of credit risk exposure | 6.3 | % | 6.0 | % | 4.9 | % | 5.4 | % | 6.7 | % | ||||||||||
Loans and advances to customers, net as a percentage of total funding: | ||||||||||||||||||||
Loans and advances to customers, gross | 268,438 | 267,266 | 249,110 | 226,206 | 210,740 | |||||||||||||||
Impairment losses(1) | 16,435 | 15,233 | 13.421 | 13,472 | 13,966 | |||||||||||||||
Total Funding(2) | 434,700 | 425,209 | 368,741 | 308,395 | 289,600 | |||||||||||||||
Loans and advances to customers, net as a percentage of total funding(2) | 58.0 | % | 59.3 | % | 63.9 | % | 69.0 | % | 67.9 | % |
(*) | The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months. |
(1) Provision for impairment losses of loans and advances to customers
(2) Total funding is the sum of financial liabilities at amortized cost, excluding the other financial liabilities.
(1) | Provision for impairment losses of loans and advances to customers. |
(2) | Total funding is the sum of financial liabilities at amortized cost, excluding other financial liabilities. |
The table below presents the reconciliation of our adjusted efficiency ratio to the most directly comparable GAAPIFRS financial measures for each of the periods presented.
As of and for the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$, except as otherwise indicated) | ||||||||||||||||||||
Efficiency ratio | ||||||||||||||||||||
Administrative expenses | 17,316 | 17,115 | 16,942 | 16,792 | 16,121 | |||||||||||||||
Total income | 63,926 | 48,242 | 58,769 | 49,507 | 48,725 | |||||||||||||||
of which: | ||||||||||||||||||||
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | (1,781 | ) | (11,703 | ) | (326 | ) | (5,589 | ) | 1,574 | |||||||||||
Efficiency ratio | 27.1 | % | 35.5 | % | 28.8 | % | 33.9 | % | 33.1 | % | ||||||||||
Total Income | 63,926 | 48,242 | 58,769 | 49,507 | 48,725 | |||||||||||||||
Effects of the hedge for investments held abroad | 2,512 | 13,583 | 1,264 | 5,867 | (810 | ) | ||||||||||||||
Total income excluding effects of the hedge for investments held abroad | 66,438 | 61,825 | 60,033 | 55,374 | 47,915 | |||||||||||||||
Administrative expenses | 17,316 | 17,115 | 16,942 | 16,792 | 16,121 | |||||||||||||||
Efficiency ratio adjusted for effects of the hedge for investments held abroad | 26.1 | % | 27.7 | % | 28.2 | % | 30.3 | % | 33.6 | % |
At and for the year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$, except as otherwise indicated) | ||||||||||||||||||||
Efficiency ratio | ||||||||||||||||||||
Administrative expenses | 14,920 | 14,515 | 13,942 | 13,850 | 13,773 | |||||||||||||||
Total income | 48,837 | 30,814 | 34,950 | 35,712 | 38,570 | |||||||||||||||
of which: | ||||||||||||||||||||
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | 7,591 | (9,918 | ) | (888 | ) | (595 | ) | (170 | ) | |||||||||||
Efficiency ratio | 30.6 | % | 47.1 | % | 39.9 | % | 38.8 | % | 35.7 | % | ||||||||||
Total Income | 48,837 | 30,814 | 34,950 | 35,712 | 38,570 | |||||||||||||||
Effects of the hedge for investments held abroad | (6,140 | ) | 10,919 | 1,668 | 2,367 | 1,437 | ||||||||||||||
Total income excluding effects of the hedge for investments held abroad | 42,697 | 41,733 | 36,735 | 38,079 | 40,007 | |||||||||||||||
Administrative expenses | 14,920 | 14,515 | 13,942 | 13,850 | 13,773 | |||||||||||||||
Efficiency ratio adjusted for effects of the hedge for investments held abroad | 34.9 | % | 34.8 | % | 38.1 | % | 36.4 | % | 34.4 | % |
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Reconciliation of Non-GAAP Measures to Their Most Directly Comparable IFRS Financial Measures
The information in the table below presents the calculation of specified non-GAAP financial measures from each of their most directly comparable IFRS financial measures. Our calculation of these non-GAAP financial measures may differ from the calculation of similarly titled measures used by other companies. We believe that these non-GAAP financial measures supplement the GAAP information provided to investors regarding effects of the hedge for investments held abroad. The limitation associated with the exclusion of effects of the hedge for investments held abroad is that it has the effect of excluding a portion of gains/losses on financial assets and liabilities (net) plus exchange differences (net) line item which is offset by excluding a portion in the income tax line item. Accordingly, while we believe that the non-GAAP financial measures presented are useful to investors and support their analysis, the non-GAAP financial measures have important limitations as analytical tools, and investors should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP measures including under IFRS.
As of and for the year ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$, except as otherwise indicated) | ||||||||||||||||||||
Gains/losses on financial assets and liabilities (net) plus exchange differences (net) | (1,781 | ) | (11,703 | ) | (326 | ) | (5,589 | ) | 1,574 | |||||||||||
Effects on hedge for investment held abroad | 2,512 | 13,583 | 1,264 | 5,867 | 810 | |||||||||||||||
Adjusted Gains/losses on financial assets and liabilities (net) plus exchange differences (net) | (4,293 | ) | (25,286 | ) | (1,590 | ) | (11,456 | ) | 2,384 | |||||||||||
Total Income | 63,926 | 48,242 | 58,769 | 49,507 | 48,725 | |||||||||||||||
Effects on hedge for investment held abroad | 2,512 | 13,583 | 1,264 | 5,867 | (810 | ) | ||||||||||||||
Adjusted Total Income | 66,438 | 61,825 | 60,033 | 55,374 | 47,915 | |||||||||||||||
Operating income before tax | 24,750 | 9,664 | 22,273 | 15,910 | 14,514 | |||||||||||||||
Effects on hedge for investment held abroad | 2,512 | 13,583 | 1,264 | 5,867 | (810 | ) | ||||||||||||||
Adjusted Operating income before tax | 27,262 | 23,247 | 23,537 | 21,777 | 13,704 | |||||||||||||||
Income Tax | (9,191 | ) | 3,787 | (5,642 | ) | (3,110 | ) | (5,376 | ) | |||||||||||
Effects on hedge for investment held abroad | 2,512 | (13,583 | ) | (1,264 | ) | (5,867 | ) | 810 | ||||||||||||
Adjusted Income tax | (6,679 | ) | (9,796 | ) | (6,906 | ) | (8,977 | ) | (4,566 | ) | ||||||||||
Operating income before tax – Commercial Banking | 19,491 | 4,666 | 18,375 | 12,397 | 11,220 | |||||||||||||||
Effects on hedge for investment held abroad | 2,512 | 13,583 | 1,264 | 5,867 | 810 | |||||||||||||||
Adjusted Operating Income before tax – Commercial Banking | 22,003 | 18,249 | 19,639 | 18,264 | 12,030 |
Exchange Rates
The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer ofreais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.
Since 1999, the Brazilian Central Bank has allowed thereal/U.S. dollar exchange rate to float freely, which resulted in increasing exchange rate volatility. Until early 2003, thereal declined against the U.S. dollar. Between 2004 and 2008, thereal strengthened against the U.S. dollar, except in the most severe periods of the global economic crisis. Given the recent turmoil in international markets and the current Brazilian macroeconomic outlook, thereal depreciated against the U.S. dollar from mid-2011 to early 2016. Beginning in early 2016 through the end of 2016, thereal appreciated against the U.S. dollar, primarily as a result of Brazil’s changing political conditions. In 2017 to the date of this annual report, thereal has continued to appreciate against the U.S. dollar due to optimism about economic recovery in Brazil and the improved political climate. In the past,However, the Brazilian Central Bank has intervened occasionally to control high volatility in the foreignmoderate exchange rates.rate volatility. We cannot predict whether the
Brazilian Central Bank or the Brazilian government will continue to permit thereal to float freely or will intervene in the exchange rate market through the return of a currency band system or otherwise. In the future, thereal may fluctuate substantially against the U.S. dollar.
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Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are compelling reasons to foresee a serious imbalance,imbalance; temporary restrictions may be imposed on remittances of foreign capital abroad. Any such restrictions on remittances of foreign capital abroad may limit our ability to make distributions to holders of our ADRs.American Depositary Receipts, or “ADRs.” We cannot assure you that such measures will not be taken by the Brazilian government in the future. Exchange rate fluctuations will affect the U.S. dollar equivalent of the price of our shares inreais on the BM&FBOVESPAB3, as well as the U.S. dollar equivalent of any distributions we make with respect to our shares, which will be made exclusively inreais. Exchange rate fluctuations may also adversely affect our financial condition. For further information on these risks, see “—“Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic Conditions in Brazil and Globally—Exchange rate volatility may have a material adverse effect on the Brazilian economy and on our business.us.”
The following tables set forth the selling rate, expressed inreais per U.S. dollar (R$/U.S.$), for the periods indicated:
Period-end | Average(1) | Low | High | |||||||||||||
(per U.S. dollar) | ||||||||||||||||
Year: | ||||||||||||||||
2012 | 2.04 | 1.96 | 1.70 | 2.11 | ||||||||||||
2013 | 2.34 | 2.16 | 1.95 | 2.45 | ||||||||||||
2014 | 2.66 | 2.36 | 2.19 | 2.74 | ||||||||||||
2015 | 3.90 | 3.34 | 2.57 | 4.19 | ||||||||||||
2016 | 3.26 | 3.48 | 3.12 | 4.16 | ||||||||||||
Month Ended: | ||||||||||||||||
September 2016 | 3.25 | 3.26 | 3.19 | 3.33 | ||||||||||||
October 2016 | 3.18 | 3.19 | 3.12 | 3.24 | ||||||||||||
November 2016 | 3.40 | 3.34 | 3.20 | 3.44 | ||||||||||||
December 2016 | 3.26 | 3.35 | 3.26 | 3.47 | ||||||||||||
January 2017 | 3.13 | 3.20 | 3.13 | 3.27 | ||||||||||||
February 2017 | 3.10 | 3.11 | 3.05 | 3.15 | ||||||||||||
March 2017 (through March 24) | 3.13 | 3.13 | 3.08 | 3.17 |
Period-end | Average(1) | Low | High | |||||||||||||||
(per U.S. dollar) | ||||||||||||||||||
Year: | ||||||||||||||||||
2017 | 3.31 | 3.19 | 3.05 | 3.38 | ||||||||||||||
2018 | 3.87 | 3.68 | 3.14 | 4.19 | ||||||||||||||
2019 | 4.03 | 4.11 | 4.02 | 4.22 | ||||||||||||||
2020 | 5.20 | 5.16 | 4.02 | 5.94 | ||||||||||||||
2021 | 5.58 | 5.40 | 4.92 | 5.87 | ||||||||||||||
Month Ended: | ||||||||||||||||||
September 2021 | 5.44 | 5.28 | 5.16 | 5.44 | ||||||||||||||
October 2021 | 5.64 | 5.54 | 5.39 | 5.71 | ||||||||||||||
November 2021 | 5.62 | 5.56 | 5.41 | 5.67 | ||||||||||||||
December 2021 | 5.58 | 5.65 | 5.56 | 5.74 | ||||||||||||||
January 2022 | 5.36 | 5.53 | 5.36 | 5.70 | ||||||||||||||
February 2022 (through February 22, 2022) | 5.06 | 5.22 | 5.06 | 5.33 |
Source: Brazilian Central Bank.
(1) | Represents the average of the exchange rates at the close of each business day during the period. |
Our parent company, Santander Spain, reports its financial condition and operating results of operations in euros. As of December 31, 2016,2021, the exchange rate foreuro toreal was R$3.4384 6.3210 per €1.00.
3B. Capitalization and Indebtedness
Not applicable.
3C. Reasons for the Offer and Use of Proceeds
Not applicable.
This section is intended to be a summary of more detailed discussions contained elsewhere in this annual report. You should carefully read and consider the following risks, along with the other information included in this annual report on Form 20-F. The risks described below are not the only ones we face. Additional risks that we do not presently consider material, or of which we are not currently aware, may also affect us. Our business, financial condition and results of operations or financial condition could be materially and adversely affectedimpacted if any of thethese risks described below occur. Asmaterialize and, as a result, the market price of our unitsUnits and of our ADRs could be affected.
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Summary of Risk Factors
Summary of Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally
● | The COVID-19 pandemic has had, and is expected to continue to have, a negative impact on global, regional and Brazilian economies, and we would be materially adversely affected by a protracted economic downturn. |
● | The Brazilian government has exercised significant influence over the Brazilian economy. The Brazilian government’s macroeconomic management strategies, as well as Brazilian political and economic conditions, could adversely affect us and the trading price of our securities. |
● | Inflation, government efforts to control inflation, and changes in interest rates may hinder the growth of the Brazilian economy and could have an adverse effect on us. |
● | Exposure to Brazilian federal government debt could have a material adverse effect on us. |
● | Fluctuations in interest rates and other factors may affect our obligations under legacy employee pension funds. |
● | Exchange rate volatility may have a material adverse effect on the Brazilian economy and on us. |
● | Infrastructure, labor force deficiency and other factors in Brazil may impact economic growth and have a material adverse effect on us. |
● | Disruption or volatility in global financial and credit markets could adversely affect the financial and economic environment in Brazil, which could have a material adverse effect on us. |
Summary of Risks Relating to the Brazilian Financial Services Industry and Our Business
● | The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations. |
● | The strong competitive environment in the Brazilian financial services market may adversely affect us, including our business prospects. |
● | We may not be able to detect or prevent money laundering and other criminal activities fully or on a timely basis, which could expose us to additional liability and could have a material adverse effect on us. |
● | We are subject to increasing scrutiny and regulation from data protection laws. Failure to protect personal information could adversely affect us. |
● | We are exposed to risk of loss from legal and regulatory proceedings. |
● | Disclosure controls and procedures over financial reporting may not prevent or detect all errors or acts of fraud. |
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● | Changes in taxes and other fiscal assessments may adversely affect us. Furthermore, we are subject to review by tax authorities, and an incorrect interpretation by us of tax laws and regulations may have a material adverse effect on us. |
● | Our loan and investment portfolios are subject to risk of prepayment, which could have a material adverse effect on us. |
● | The credit quality of our loan portfolio may deteriorate and our loan loss reserves could be insufficient to cover our loan losses, which could have a material adverse effect on us. |
● | Liquidity and funding risks are inherent in our business, and since our principal sources of funds are short-term deposits, a sudden shortage of funds could cause an increase in costs of funding and an adverse effect on our revenues and our liquidity levels. |
● | The value of the collateral securing our loans may not be sufficient, and we may be unable to realize the full value of the collateral securing our loan portfolio. We may face significant challenges in possessing and realizing value from collateral with respect to loans in default. |
● | We may not effectively manage risks associated with the replacement or reform of benchmark indices. |
● | Failure to successfully implement and continue to improve our risk management policies, procedures and methods, including our credit risk management system, could materially and adversely affect us, and we may be exposed to unidentified or unanticipated risks. |
● | Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks. |
● | We are subject to counterparty risk in our business. |
● | Our financial results are constantly exposed to market risk. We are subject to fluctuations in interest rates and other market risks, which may materially and adversely affect us. |
● | We engage in transactions with related parties that others may not consider to be on an arm’s- length basis. |
● | Our business is highly dependent on the proper functioning of information technology systems. |
Summary of Risks Relating to Our Controlling Shareholder, Our Units and American Depositary Receipts (“ADRs”) could decline, and you could lose all or part of your investment.(ADRs)
● | Our ultimate controlling shareholder has a great deal of influence over our business and its interests could conflict with ours. |
● | Our status as a controlled company and a foreign private issuer exempts us from certain of the corporate governance standards of the NYSE, limiting the protections afforded to investors. Furthermore, our corporate disclosure may differ from disclosure regularly published by issuers of securities in other countries, including the U.S. |
● | The liquidity and market prices of the units and the ADRs may be adversely affected by the cancellation of units or substantial sale of units and shares in the market, or by the relative volatility and limited liquidity of the Brazilian securities markets. |
● | The relative volatility and limited liquidity of the Brazilian securities markets may negatively affect the liquidity and market prices of the units and the ADRs. |
● | Holders of our units and our ADRs may not receive any dividends or interest on stockholders’ equity, may be unable to exercise preemptive rights with respect to our units underlying the ADRs, and may find it difficult to exercise voting rights at our shareholders’ meetings. |
● | Investors may find it difficult to enforce civil liabilities against us, our directors or officers. In addition, judgments of Brazilian courts with respect to our units or ADRs will be payable only in reais. |
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● | Holders of ADRs could be subject to Brazilian income tax on capital gains from sales of ADRs. Furthermore, if you exchange your ADRs for their underlying Units, you risk losing Brazilian tax advantages and the ability to remit foreign currency abroad. |
Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally
The COVID-19 pandemic has had, and is expected to continue to have, a negative impact on global, regional and Brazilian economies, and we would be materially adversely affected by a protracted economic downturn.
The COVID-19 pandemic added a new source of uncertainty to global economic activity and it has had, and is expected to continue to have, a negative impact on global, regional and national economies and to disrupt supply chains and reduce international trade and business activity. New variants of the virus have emerged against which existing vaccines and acquired immunity may not be effective. Restrictions will likely remain in place, suppressing activity, if the contagion does not subside. The materialization of these risks has affected global growth and may decrease investors’ interest in assets from Brazil, which has adversely affected the market price of our securities, possibly making it more difficult for us to access capital markets and, as a result, to finance our operations in the future.
The current COVID-19 pandemic and its potential impact on the global economy may affect our ability to meet our financial targets. A continued downturn in local, regional or global economic conditions may adversely affect our business, results of operations and financial condition.
The Brazilian government has exercised significant influence over the Brazilian economy. The Brazilian government’s macroeconomic management strategies, as well as Brazilian political and economic conditions, could adversely affect us and the trading price of our securities.
The Brazilian government has frequently intervened in the Brazilian economy and has on occasion made significant changes in policy and regulations. In the past, the Brazilian government has adopted measures, including, among others, changes in regulations, price controls, capital controls, changes in the exchange rate regime, and limitations on imports, which have affected Brazilian asset prices. Recently, the Brazilian government has adopted measures, including changes in tax policies, and constraints that have affected Brazilian asset prices and the trading price of our securities.
We and the trading price of our securities may be adversely affected by changes in policy, laws or regulations at the federal, state and municipal levels involving or affecting factors such as:
interest rates; |
currency volatility; |
inflation; |
reserve requirements; |
capital requirements; |
liquidity of capital and lending markets; |
non-performing loans; |
tax policies; |
the regulatory framework governing our industry; |
exchange rate controls and restrictions on remittances abroad; and |
other political, social and economic developments in or affecting Brazil. |
Uncertainty over whether the Brazilian government will implement changes in policy or regulation, createsas well as uncertainties related to the 2022 Brazilian presidential election, create instability in the Brazilian economy, increasing the volatility of the Brazilian securities markets, which may have an adverse effect on us and our securities. Recent economic and political instability has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian securities markets, which also may adversely affect us and our securities. The overall trend of the Brazilian political and economic arenas may also affect the business of the Brazilian financial industry.
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We are not able to fully estimate the impact of global and Brazilian political and macroeconomic developments and economic regulatory policy changes on our business and lending activity, nor are we able to predict how current or future measures implemented by regulatory policy-makerspolicymakers may impact our business. In addition, due to the current political instability, there exists substantial uncertainty regarding future economic policies and we cannot predict what policies will be adopted by the Brazilian government and whether these policies will negatively affect the economy or our business or financial performance. Any changes in regulatory capital requirements for lending, reserve requirements, or product and service regulations, among others, or continued political uncertainty may materially adversely affect our business.
Political instability in Brazil may adversely affect Brazil’s economy and investment levels, and have a material adverse effect on us.
Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affecteconomy by impacting the confidence of investors and the general public, and havewhich has historically resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies.
The recent economic instability in Brazil has contributedThere are uncertainties regarding the ability of the current government to a decline in market confidence in the Brazilian economyimplement policies and reforms, as well as to a deteriorating political environment. Weak macroeconomic conditions in Brazil are expected to continue in 2017. In addition, various ongoing investigations into allegations of money laundering and corruption being conducted by the Office of the Brazilian Federal Prosecutor, including the largest such investigation known as “Lava Jato,” have negatively impactedexternal perception regarding the Brazilian economy and political environment.
In August 2016, the Brazil’s senate approved the removalenvironment, all of Brazil’s then-President from office, after completion of the legal and administrative process for impeachment, for infringing budgetary laws. The former Vice-President, who assumed the interim presidency of Brazil since the former President’s suspension in May, was sworn in by the senate to serve out the remainder of the presidential term until 2018. In addition, there is an ongoing proceeding before the Brazilian Higher Electoral Court (Tribunal Superior Eleitoral) against the electoral alliance between the former President and the current one (former Vice-President) in connection with the 2014 elections, which may affect the office of the current President. We cannot predict which policies the current President may adopt or change during his mandate or the effect that any such policies mightcould have a negative impact on our business and the price of our securities. In addition, a tax reform proposed in 2021 that has not been voted on, suggests the revocation of the income tax exemption on the payment of dividends, which, if enacted, would increase the tax expenses associated with any dividend or distribution by Brazilian economy.companies, could impact our capacity to receive future cash dividends or distributions net of taxes from our subsidiaries. Any such new policies or changes to current policies may have a material adverse effect on us.
ForFurthermore, Brazil’s federal budget has been in deficit since 2014. Similarly, the last few years, political demonstrations in Brazil havegovernments of Brazil’s constituent states are also affectedfacing fiscal concerns due to their high debt burdens (particularly following the development ofCOVID-19 pandemic and the need for the Brazilian economygovernment to fund extensive economic relief programs), declining revenues and investors’ perceptioninflexible expenditures.
Uncertainty about Brazil. For example, street protests, which startedthe Brazilian government’s implementation of changes in mid-2013 and continued through 2016, demonstrated the public’s dissatisfaction with the worsening Brazilian economic condition (including an increase in inflation and fuel pricespolicies or regulations that affect such implementation, as well as rising unemployment),uncertainty arising from the perception of widespread corruption, as well as the potential for severe water and electricity rationing following a decrease in rainfall and water reservoir levels throughout Brazil in early 2016. Additionally, the “Lava Jato” corruption investigations involving certain oil and gas, energy, construction and infrastructure companies, as well as public agents and politicians, have raised investors’ risk aversion with regard to Brazil.
Furthermore, the Brazilian economy has experienced a sharp downturn in recent years due, in part, to the economic and monetary policies of the Brazilian government and the global drop in commodities prices. Uncertainty over whether the acting Brazilian government will implement changes in policy or regulation in the future2022 Presidential election, may contribute to economic uncertaintyinstability in Brazil and to heightenedincrease the volatility in theof securities issued abroad by Brazilian companies.
Continuing political instability in Brazil could also materially adversely affect us.
companies, including our securities.
Ongoing investigations relating to corruption and diversion of public funds that are being conducted by the Brazilian federal police as well as other Brazilian and non-Brazilian regulators and law enforcement officials may adversely affect the growth of the Brazilian economy and could have a material adverse effect on us.
Certain Brazilian companies active in the oil and gas, energy, construction, and infrastructure sectors are facinghave faced investigations by the CVM, the U.S. Securities and Exchange Commission, (the “SEC”),or the “SEC,” the U.S. Department of Justice, the Brazilian Federal Police and the Brazilian Federal Prosecutor’s Office, the Comptroller General of Brazil, and other relevant governmental authorities, in connection with corruption allegations (the so called “Lava Jato” investigations). The Brazilian federal police isFederal Police are also investigating allegations of improper payments made by Brazilian companies to officials of the Board of Tax Appeals (Conselho Administrativo de Recursos FiscaiFiscaiss)), or CARF,“CARF,” a tax appeals tribunal (the so-called “Operação Zelotes”)Zelotes). It is alleged that the purpose of such improper payments was to induce those officials to reduce or waive certain tax-related penalties imposed by the Brazilian federal revenue authority,Federal Revenue Authority, which were under appeal in the CARF.
Such investigations involve and/or involved several companies and individuals, including representatives of various companies, politicians and third parties. Certain of these individuals are being investigated by the Brazilian Federal Police and others were formally charged and are facing criminal proceedings and/or have already been convicted by the Brazilian Federal Courts.
Depending on the duration and outcome of such investigations, the companies involved may face a reduction in their revenues, downgrades from rating agencies or funding restrictions, among other negative effects. Given the significance of the companies cited in these investigations in the Brazilian economy, the investigations and their fallout have had an adverse effect on Brazil’s economic growth prospects in the near short to medium term.
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Furthermore, the negative effects on such companies and others may also impact the level of investments in infrastructure in Brazil, which may lead to lower economic growth or contraction in the near to medium term (accordingterm. According to data from the IBGE, the Brazilian economy’s gross domestic product, (“GDP”)or “GDP,” contracted by 3.8%3.3% in 20152016, then increased by 1.3% in 2017, 1.8% in 2018 and 3.6%1.2% in 2016)2019. In 2020, Brazilian GDP contracted by 3.9% as a result of the adverse macroeconomic effects of COVID-19 pandemic. In 2021, Brazilian GDP is estimated to have increased by 4.6%. In addition, although we have creditreduced our exposure to certain of the companies involved in the “Lava Jato”Lava Jato and other governmental, regulatory and private investigations.government investigations, we cannot assure that new investigations will not be launched or that additional persons will not become subject to investigation. To the extent that the repayment ability of these companies is hampered by any fines and/or other sanctions that may be imposed upon them or reputational or commercial damage as a result of the “Lava Jato”Lava Jato investigations, we may also be materially adversely affected.
As a result of the allegations under the “Lava Jato”Lava Jato investigations and the economic downturn, Brazil was downgraded to non-investment grade status by SStandard & Poor's, or “S&P,” in September 2015, by Fitch Ratings, or “Fitch,” in December 2015, by Moody’s Investor Service, or “Moody’s,” in February 2016, and downgraded again by Fitch in May 2016. In addition, Brazil was further downgraded by S&P to BB- with a stable outlook in January 2018 as a result of the failure of the prior Brazilian government to approve certain reforms, Brazil’s sovereign rating is currently rated by the three major risk- rating agencies as follows: BB- by S&P (stable outlook) and Fitch (negative outlook) and Ba2 by Moody’s (stable outlook). Further downgrading of Brazil’s credit rating could reduce the trading price of units and ADRs. Various major Brazilian companies were also downgraded. Such downgrades have further worsened the conditions of the Brazilian economy and the condition of Brazilian companies, especially those relying on foreign investments over 2016 and 2017. More recently,investments. In addition, the “Lava Jato”Lava Jato investigations have also reached members of the executive and legislative branches of the Brazilian government, which has caused considerable political instability, and, as a result, persistently poor economic conditions in Brazil could have a material adverse effect on us. It is difficult to predict the effects of such political instability.instability, which may include further deteriorations in Brazil’s economic conditions.
GovernmentInflation, government efforts to control inflation, and changes in interest rates may hinder the growth of the Brazilian economy and could have an adverse effect on us.
Brazil has experienced extremely high rates of inflation in the past and has therefore implemented monetary policies that have resulted in one of the highest interest rates in the world. Since the establishment of thePlano Real (a set of measures designed to stabilize the Brazilian economy) in 1994 and until 2015, Brazil’s annual consumer price inflation levels were below 10%. However, in 2015, consumer price inflation increased above 10%, to 10.7%, while in 2016 consumer price inflation reached 6.3%. The Brazilian government’s measures to fight inflation, principally through the Brazilian Central Bank, have had and may in the future have significant effects on the Brazilian economy and our business.business, and can continue to do so. Tight monetary policies with high interest rates and high compulsory reserve requirements may restrict Brazil’s growth and the availability of credit, reduce our loan volumes, and increase our loan loss provisions. Conversely, less strict government and Brazilian Central Bank policies and interest rate decreases may trigger increases in inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect our spreads.
InThe SELIC rate had been on a downward trend since mid-2016. The SELIC rate reached a high as 14.25% as of October, 2016, before decreasing to 13.75% p.a. by the end of 2016. The SELIC rate fell further to 7.00% p.a. by the end of 2017, and to 6.50% p.a. in March 2010, due2018. The SELIC rate remained at this level until June 2019, when it resumed its downward trend, ending 2019 at 4.50% p.a. As a result of the negative economic impact of the COVID-19 pandemic, the SELIC rate continued to fall during 2020, and reached a favorable macroeconomic environment, inflation stabilityhistorical low of 2.00% p.a. by the end of the year and followingremained at that level until mid-March 2021, when it reached 2.75%. As a monetary easing cycle initiated byresult of inflationary pressures that have arisen in Brazil and globally in late 2021 and early 2022, the Brazilian Central Bank started tightening monetary policy: the SELIC rate (the acronym for “Special Settlementthen reached 6.25% p.a. in late September 2021, 7.75% p.a. in late October 2021, 9.25% p.a. in December 2021, and Custody System”reached 10.75% p.a. in Portuguese –February 2022. As of the benchmark interest rate payable to holdersdate of certain Brazilian government securities, based on the Brazilian Central Bank’s overnight rate) reached a then historical low of 8.65% since the implementation of thePlano Real. In October 2012,this annual report, the SELIC rate reached an annual rate of 7.14%, its lowest level ever, as a result of a monetary easing policy to mitigate the spillover effects of the then ongoing international financial crisis (particularly in Europe). In 2013, the Brazilian Central Bank began a monetary tightening cycle due to rising inflation, the depreciation of thereal, and a perceived recovery of certain economic activity. The SELIC rate was increased by 275 basis points, reaching 9.90% in November 2013, the last monetary policy committee meeting of the year. The upward trend continued and in December 2014, the SELIC rate reached 11.65%. In March 2015, the SELIC rate was increased to 12.65%, due to continuing inflation pressures and was further increased to 13.15% in April 2015, to 13.65% in June, and to 14.15% in July 2015. In December 2016, the SELIC rate was lowered to 13.65%, and in January 2017 the SELIC rate was further lowered to 12.90%, and to 12.25% in February 2017, where it currently remains.
is 10.75% p.a..
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are significantly affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2016,2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$385553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, generallysuch as the consumer price index (Índice de Preços ao Consumidor – Amplo), or “IPCA,”IPCA, and the general index of market prices (Índice Geral de Preços-Mercado), or “IGP-M.”IGP-M. For example, considering the amounts in 2016,2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$7890 million and R$6783 million, respectively.
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DespiteInflation, as measured by the Brazilian Central Bank’s repeated increasesIPCA, reached 4.52% in 2020, compared to 4.31% in 2019, mainly as a result of temporary supply shocks affecting the prices of foodstuff items. These inflationary pressures have persisted in 2021 and have also been compounded by additional ones, including climate events that hit electricity generation and led to an increase in energy prices, disruption in supply chains and the depreciation of the SELIC rate duringreal, among others. As a result, inflation as measured by the period from 2013 to 2016, inflation has continued to increase until recently, reaching 6.3%IPCA reached 10.06% in 2021, significantly above the target of 3.75% set for the twelve-month period ending December 31, 2016, and decreasing to 4.8% for the twelve-month period ending February 28, 2017.
period.
Inflation, government measures to curb inflation, and speculation related to possible measures regarding inflation may significantly contribute to uncertainty regarding the Brazilian economy and weaken investors’ confidence in Brazil. Future Brazilian governmental actions, including interest rate decreases, intervention in the foreign exchange market, and actions to adjust or fix the value of thereal,, may trigger increases in inflation and adversely affect the performance of the Brazilian economy as a whole. Any of the aforementioned developmentsthese actions may adversely affect our asset quality. Furthermore, Brazil’s high rate of inflation, compounded by high and increasing interest rates, declining consumer spending and increasing unemployment, may have a material adverse impact on the Brazilian economy as a whole, as well as on us.
Exposure to Brazilian federal government debt could have a material adverse effect on us.
We invest in Brazilian federal government sovereign bonds. As of December 31, 2016,2021, approximately 19.4%18.4% of our total assets, and 85.5%76.1% of our securities portfolio, was comprisedconsisted of debt securities issued by the Brazilian federal government. Any failure by the Brazilian governmentGovernment to make timely payments under the terms of these securities, or a significant decrease in their market value, will have a material adverse effect on us.
Fluctuations in interest rates and other factors may affect our obligations under legacy employee pension funds.
We sponsor certain defined benefit pension plans and a health carehealthcare plan that benefit certain of ourfor former and current employees, most of which were inherited from Banespa (though we discontinued the use of defined benefit pension plans for our employees in 2005).
In order to determine the funded status of each legacy defined benefit pension plan and, consequently, the carried reserves necessary to pay future beneficiaries, we use certain actuarial techniques and assumptions, which are inherently uncertain and involve the exercise of significant judgment, including with respect to interest rates, which are a key assumption in determining our current obligations under the legacy pension plans as interest rates are usedplans. For further information, see note 21 to calculate the present value of such obligations.our audited consolidated financial statements included elsewhere in this annual report.
Changes in the present value of our obligations under our legacy defined benefit pension plans could causerequire us to have to increase contributions, to reduce or satisfy the deficits, which would divert resources from use in other areas of our business. Any such increase may be due to factors over which we have no or limited control. Increases in our pension liabilities and obligations could have a material adverse effect on our business, financial condition and results of operations.
DecreasesIncreases in interest rates can increasedecrease the present value of obligations under our legacy defined benefit pension plans such as occurred duringand lifetime medical assistance plan. Therefore, in 2021, there were two factors that contributed to the year of 2012, when the SELIC rate decreased to a historic low of 7.14% p.a., and may materially and adversely affect the funded statusreduction of our legacy defined benefit plansprovisions when compared to 2020: first, increases in interest rates, and require ussecondly, the greater-than-average profitability of investments indexed to makethe IGP-M.
As of December 31, 2021, our provisions for pensions and similar obligations totaled R$2.7 billion (out of total provisions for legal and administrative proceedings, commitments, pensions and other matters of R$11.6 billion). For additional contributionsinformation, see note 21 to these plans to meet our pension funding obligations.audited consolidated financial statements included in this annual report.
Exchange rate volatility may have a material adverse effect on the Brazilian economy and on us.
The Brazilian currency has during past decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. In 2011, dueThe Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system.
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Although long-term depreciation of the real is generally linked to the ongoing international financial crisis (particularlyrate of inflation in Europe)Brazil, depreciation of the real occurring over shorter periods of time has resulted in significant variations in the exchange rate reached R$1.88 peramong the real, the U.S.$1.00 dollar and other currencies. As a result of fluctuations in commodity prices, international developments and periods of progress and setbacks on the domestic front—such as of December 31, 2011. From 2012 to 2014,during thereal continued to depreciate due to a decrease presidential impeachment process in commodities prices and a recovery2016, or the approval of the U.S. economy, reaching R$2.04 per U.S.$1.00 on December 31, 2012,national pension system reform in 2019—the real has weakened over the last few years. After having ended 2013 with an exchange rate of R$2.34 per U.S.$1.00, on December 31, 2013 andthe real/U.S. dollar exchange rate was R$2.65 per U.S.$1.00 on December 31, 2014.
However, during 2015, due2014, depreciating further to the poor economic conditions in Brazil, including as a result of political instability, thereal devalued at a much higher rate than in previous years. On September 24, 2015, thereal fell to the lowest level since the introduction of the currency, at R$4.1953.91 per U.S. $1.00. Overall in 2015, thereal depreciated 47%, reaching R$3.905 per U.S. $1.00$1.00 on December 31, 2015. In 2016,Despite the instability caused by a change in the country’s presidency, the real faced continuing fluctuations, primarily as a result of Brazil’s political instability, but had appreciated 17.0% year-over-year against the U.S. dollar as of December 31, 2016 to R$3.26 per U.S. $1.00. On March 24,$1.00. In 2017, the real remained relatively stable against the U.S. dollar, with an exchange rate of R$3.31 per U.S.$1.00 as of December 31, 2017, but continued to depreciate in the following years, reaching R$3.87 per U.S.$1.00 as of December 31, 2018, and R$4.03 per U.S.$1.00 as of December 31, 2019. In 2020, in response to the turbulence and uncertainty caused by the COVID-19 pandemic, the real depreciated significantly against the U.S.$ dollar, but finished the year at R$5.20 per U.S.$1.00. In 2021, the fallout of the COVID-19 pandemic continued to weigh on the performance and prospects of the Brazilian economy. The adverse economic effects of the COVID-19 pandemic have led to pressure on the Brazilian government to increase its support for the economy, which has led it to increase its already high indebtedness. Along with an ongoing perception that the Brazilian government could continue such support and further increase its indebtedness, this has led to a depreciation of the real. As of December 31, 2021, the exchange rate was R$3.135.58 per U.S.$1.00. There can be no assurance that therealwill not substantially depreciate or appreciate further against the U.S. dollar.
In the year ended December 31, 2016,2021, a variation of 1.0% in the exchange rate of reais to U.S. dollars would have resulted in a variation of income on our net foreign exchange position denominated in U.S. dollars of R$0.61.17 million.
DepreciationPast episodes of depreciation of thereal relative to the U.S. dollar has created additional inflationary pressures in Brazil, which have led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets and prompted the adoption of recessionary policies by the Brazilian government. Depreciation of therealmay also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of therealcould make our foreign currency-linkedforeign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of therealrelative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency accounts,balance of payments, as well as dampenhinder export-driven growth. Depending on the circumstances, either a depreciation or appreciation of therealcould materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Infrastructure, and workforce deficiency and other factors in Brazil may impact economic growth and have a material adverse effect on us.
Our performance depends on the overall health and growth of the Brazilian economy. Brazilian GDPgross domestic product, or “GDP,” growth has fluctuated over the past few years, with growth of 2.7% in 2013 but decreasing to 0.1% in 2014, a contraction of 3.8%3.3% in 20152016 followed by a three-year streak of growth in 2017 (1.3%), 2018 (1.8%) and 2019 (1.2%). In 2020, the Brazilian GDP contracted by 3.9% as a contractionresult of 3.6%the effects of the COVID-19 pandemic, and despite the significant economic support measures put in 2016.Growthplace by the Brazilian government (although it is believed that these measures averted an even stronger contraction).We estimate that Brazilian GDP increased by 4.6% in 2021 due to the extension of income supports programs and the relaxation of certain mobility restrictions that allowed some businesses to resume their activities (e.g., after having contracted by 3.9% in 2020, we estimate that the services sector increased by 4.8% in 2021). Growth has been limited by inadequate infrastructure, including potential energy shortages and deficient transportation, logistics and telecommunication sectors, the lack of a qualified labor force, and the lack of private and public investments, resulting in these areas, which limit productivitypotential energy shortages and efficiency.deficient transportation, declining logistics and telecommunication sectors, and a lack of a qualified labor force. In addition, the growth and performance of the Brazilian economy may be impacted by other factors such as nationwide strikes, natural disasters or other disruptive events. Additionally, travel restrictions or potential impacts on personnel due to the COVID-19 pandemic may disrupt our business and adversely affect the financial condition of our customers. Any of these factors could lead to labor market volatility and generally impact income, purchasing power and consumption levels, which could limit growth, increase delinquency rates and ultimately have a material adverse effect on us.
Developments and the perception of risk in other countries may adversely affect the Brazilian economy and market price of Brazilian issuers’ securities.
The market value of securities of Brazilian issuers is affected by economic and market conditions in other countries, including the United States, European countries (including Spain, where Santander Spain, our controlling shareholder, is based), and in other Latin American and emerging market countries. Although economic conditions in Europe and in the United States may differ significantly from economic conditions in Brazil;Brazil, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. In particular, investor perceptions of the risks associated with our securities may be affected by perception of risk conditions in Spain. Additionally, crises in other emerging market countries may diminish investor interest in securities of Brazilian issuers, including our securities. This could adversely affect the market price of our securities, restrict our access to capital markets and compromise our ability to finance our operations in the future on favorable terms, or at all.
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In the years of 2014, 20152021, 2020 and 2016,2019, there was an increase in volatility in all Brazilian markets due to, among other factors, uncertainties about how monetary policy adjustments in the United States would affect the international financial markets and the increasing risk aversion to emerging market countries,countries. In 2021 and 2020, the uncertainties regardingfallout of the COVID-19 pandemic has also affected the performance of Brazilian macroeconomic and political conditions.markets. These uncertainties adversely affected us and the market value of our securities.
In addition, we continue to be exposed to disruptions and volatility in the global financial markets because of their effects on the financial and economic environment, particularly in Brazil, such as a slowdown in the economy, an increase in the unemployment rate, a decrease in the purchasing power of consumers and the lack of credit availability. We lend primarily to Brazilian borrowers, and these effects could materially and adversely affect our customers and increase our non-performing loans, resulting in increased risk associated with our lending activity and requiring us to make corresponding revisions to our risk management and loan loss reserve models.
A global economic downturn could have a material adverse effect on us.
The global macroeconomic environment is facing challenges, including the economic setbacks derived from the COVID-19 pandemic. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States.
Pandemics, epidemics or outbreaks of infectious diseases can have an adverse effect on the global market and economy, as well as on our operations. Historically, some epidemics and regional or global outbreaks, such as Zika virus, Ebola virus, H5N5 virus (popularly known as avian influenza), foot-and-mouth disease, H1N1 virus (influenza A, popularly known as swine flu), middle east respiratory syndrome (MERS) and severe acute respiratory syndrome (SARS) have affected certain sectors of the economy in the countries where these diseases have spread.
On March 11, 2020, World Health Organization, or “WHO,” declared that the COVID-19 epidemic rose to the level of a pandemic. This declaration triggered severe measures by government officials around the world with the aim of controlling the spread of COVID-19, including restrictions on the flow of people, with limitations on travel, use of public transport, quarantines and lockdowns, prolonged closure of commercial establishments, interruptions in the supply chain and reduction of consumption in general. These measures, combined with the uncertainties caused by the COVID-19 pandemic, had an adverse impact on the economy and the global capital market, including Brazil, including causing eight circuit breakers in B3 negotiations throughout March 2020. The price of most of the assets traded on B3 was adversely affected due to the COVID-19. Impacts similar to these may reoccur, causing the prices of securities traded on the B3 to fluctuate.
In addition, any material changes in the economy and the global capital market, including Brazil, may decrease the interest of investors in Brazilian assets, including our ADRs, which may adversely affect the market price of our securities, in addition to making it difficult for us to access the capital markets and finance our operations, including on acceptable terms.
There have also been concerns over conflicts, unrest and terrorist threats in the Middle East, Europe and Africa, which have resulted in volatility in oil and other markets. The United States and China have recently been involved in controversy over trade barriers in China that threatened a trade war between the countries and have implemented or proposed to implement tariffs on certain imported products. Sustained tension between the United States and China over trade policies could significantly undermine the stability of the global economy. In 2022, the military conflict between the Russian Federation and Ukraine is contributing to further increases in the prices of energy, oil and other commodities and to volatility in financial markets globally, as well as a new landscape in relation to international sanctions. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term.
In addition, on January 31, 2020, the UK ceased to be a member of the EU, on withdrawal terms that established a transition period until December 31, 2020. During the transition period, the UK continued to be treated as an EU member state and applicable EU legislation continued to be in force. A trade deal was agreed between the UK and the EU prior to the end of the transition period and the new regulations came into force on January 1, 2021. Uncertainty remains around the terms of the UK’s relationship with the European Union and the lack of a fully comprehensive trade agreement may negatively impact the economic growth of both regions. Similarly, an adverse effect on the UK and the European Union may have an adverse effect on the wider global economy or market conditions and investor confidence. This could, in turn, have a material adverse effect on our operations, financial condition and prospects and/or the market value of our securities.
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Moreover, the risk of returning to a fragile and volatile environment and to heightened political tensions in Europe exists if, among others, the policies implemented to provide relief to the economies most affected by the COVID-19 pandemic do not succeed, the reforms aimed at improving productivity and competition fail, the banking union and other measures of European integration do not take hold or anti-European groups become more widespread. A deterioration of the economic and financial environment in Europe could have a material adverse impact on the global economy, affecting our operating results, financial position and prospects. In addition, growing protectionism and trade tensions, such as the tensions between the United States and China in recent years, could have a negative impact on the global economy, which would also impact our operating results, financial condition and prospects.
Any slowdown or instability in the global economy could impact income, purchasing power and consumption levels in Brazil, among other things, which could limit growth, increase delinquency rates and ultimately have a material adverse effect on us while also creating a more volatile economy, limiting potential access to capital and liquidity. In addition, any global economic slowdown or uncertainty may result in volatile conditions in the global financial markets, which could have a material adverse effect on us, including on our ability to access capital and liquidity on financial terms acceptable to us, if at all. Any such adverse effect on capital markets funding availability or costs or in deposit rates could have a material adverse effect on our interest margins and liquidity.
Disruption or volatility in the global financial and credit markets could further increase negative effects onadversely affect the financial and economic environment in Brazil, which could have a material adverse effect on us.
Volatility and uncertainty in global financial and credit markets have generally led to a decrease in liquidity and an increase in the cost of funding for Brazilian and international issuers and borrowers. Such conditions may adversely affect our ability to access capital and liquidity on financial terms acceptable to us, if at all.
Part of our funding originates from repurchase agreements which are generally short-term and volatile in terms of volume, as they are directly impacted by market liquidity. As these transactions are typically guaranteed by Brazilian government securities, the value and/or perception of value of the securities may significantly impact the availability of funds, as the cost of funding will increase if the quality of the Brazilian government securities used as collateral is adversely affected as a result of conditions in financial and credit markets, making this source of funding inefficient for us.
If the size and/or liquidity of the Brazilian government bond and/or repurchase agreement markets decrease, or if there is increased collateral credit risk and we are unable to access capital and liquidity on financial terms acceptable to us or at all, our financial condition and the results of our operations may be adversely affected.
Risks Relating to the Brazilian Financial Services Industry and ourOur Business
The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.
Health and safety restrictions adopted in 2020 and 2021 to contain the impact of the COVID-19 pandemic, including imposing mass quarantines, shelter-in-place orders, medical screenings, travel restrictions and limiting public gatherings, resulted and many continue to result in a severe decrease of global economic activity and decreases in production and demand, which led to sharp declines in the GDP of those countries that were most affected by the pandemic, including Brazil. Some of these measures remained in force as of the date of this annual report. Other consequences included increased unemployment levels, sharp decreases and high volatility in the stock markets, disruption of global supply chains, exchange rate volatility, steady customer draws on lines of credit, decline in real estate prices, and uncertainty in relation to the future impact in regional and global economies in the medium and long term. These measures have also negatively impacted, and could continue to negatively impact, businesses, market participants, our counterparties and customers, and the global economy for a prolonged period of time.
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Many governments and regulatory authorities, including central banks, have acted, and may further act, to provide relief from the economic and market disruptions resulting from the COVID-19 pandemic, including providing fiscal and monetary stimuli to support the global economy, lowering federal funds rates and interest rates, and granting partial or total deferral (grace period) of principal and/or interest payments due on loans. Furthermore, it is unclear how the macroeconomic business environment or societal norms may be impacted after the pandemic. The post-COVID-19 environment may undergo unexpected developments or changes in the financial markets, fiscal, tax and regulatory environments as well as customer and corporate client behavior which could have an adverse impact on our business.
It is difficult to predict how effective these and other measures taken to mitigate the economic effects of the pandemic will be. For more information on the measures taken by the Brazilian Central Bank to combat the COVID-19 pandemic, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19.”
In 2021, high vaccination rates in many countries and a progressive relaxation of health and safety restrictions, together with the fiscal and monetary policy measures implemented, contributed to an increase in employment levels and recovery of the global economy generally, with some variations across sectors and geographies. However, the pandemic remains dynamic and the emergence of variants resistant to existing vaccines remains uncertain. In addition, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time, including labor shortages and disruptions of global supply chains, that are contributing to rising inflationary pressures.
If new COVID-19 waves or variants of the virus force countries to re-adopt measures that restrict economic activity, the macroeconomic environment could deteriorate and adversely impact our business and results of operations, which could include, but is not limited to (i) a continued decreased demand for our products and services; (ii) protracted periods of lower interest rates and resulting pressure on our margins; (iii) further material impairment of our loans and other assets including goodwill; (iv) decline in value of collateral; (v) constraints on our liquidity due to market conditions, exchange rates and customer withdrawal of deposits and continued draws on lines of credit; and (vi) downgrades to our credit ratings. See also “Our cost of funding is affected by our credit ratings, and any risks may have an adverse effect on both variables. Any downgrade in (i) the rating of Brazil’s, (ii) our controlling shareholders, or (iii) our credit rating would likely increase our cost of funding, requiring us to post additional collateral under some of our derivative and other contracts and adversely affect our interest margins and results of operations.”
Moreover, our operations could still be impacted by risks from remote working arrangements or bans on non-essential activities. For example, some of our branches in Brazil have been closed and others have been functioning with reduced hours for a significant period of time. During 2020, we had more than half of our total workforce working remotely, which has increased cybersecurity risks given greater use of computer networks outside the corporate environment.
During 2021, there was a progressive move to return to the office while still maintaining flexibility to work remotely, particularly during the peaks of the COVID-19 waves. If we become unable to successfully operate our business from remote locations including, for example, due to failures of our technology infrastructure, increased cybersecurity risks, or governmental restrictions that affect our operations, this could result in business disruptions that could have a material and adverse effect on our business.
We may also be adversely affected by measures taken by the Brazilian and other governments to mitigate the effects of the COVID-19 pandemic. For example, in 2020, a temporary suspension on dividends and other distributions was enacted in Brazil through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million in 2020 compared to R$10,800 million in 2019. This restriction was not applied in 2021, but we cannot assure you that the Brazilian Central Bank or other government agencies will not apply similar measures to us in the future, whether in an effort to mitigate the effects of the COVID-19 pandemic or otherwise.
The COVID-19 pandemic may persist for some time, which could affect the global economy and/or adversely affect our business, financial condition, liquidity or results of operations, and may also increase the likelihood and/or magnitude of other risks described in this “Item 3. Key Information—D. Risk Factors.” The extent to which the consequences of the COVID-19 pandemic affect our business, financial condition, liquidity and results of operations will depend on future developments that remain uncertain, including the rate of distribution and ad ministration of vaccines globally, the severity and duration of any resurgence of COVID-19 variants, future actions taken by governments, central banks and other third parties in response to the pandemic, and the effects on our customers, counterparties, employees and third-party service providers.
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For more information about specific measures that we have adopted and the impact on our business operations, see “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”
Our growth, asset quality and profitability, among others, may be adversely affected by a slowdown in Brazil, as well as volatile macroeconomic and political conditions.
A slowdown or recession in Brazil and other major world economies, such as the severe recession caused by COVID-19 that started in 2020, could lead major financial institutions, including some of the world’s largest global commercial banks, investment banks, mortgage lenders, mortgage guarantors and insurance companies to experience significant difficulties, including runs on deposits, the need for government aid or assistance or the need to reduce or cease providing funding to borrowers (including to other financial institutions). The year 2021 was marked by an accelerated recovery in the level of activity in the main global economies, as a result of the expansionary monetary and fiscal policy, including reductions in interest rates. As a result, inflation rates have increased considerably in Brazil and around, due to the strong increase in aggregate demand and bottlenecks in supply and production chains due to unavailability of inputs.
In Brazil, this process of generalized increase in prices was intensified by the depreciation of the Brazilian real against the U.S. dollar and other leading currencies, leading the Brazilian Central Bank to start raising interest rates. This increase in interest rates may have an adverse effect on economic growth in 2022 and 2023. It is also widely expected that Brazil will experience greater economic volatility in 2022 as a result of the Presidential elections which are scheduled to take place in the second half of the year.
Volatile conditions in financial markets could also have a material adverse effect on us, including on our ability to access capital and liquidity on financial terms acceptable to us, if at all. If capital markets financing ceases to become available, or becomes excessively expensive, we may be forced to raise the rates we pay on deposits to attract more customers and become unable to maintain certain liability maturities. Any such increase in capital markets funding availability or costs or in deposit rates could have a material adverse effect on our interest margins and liquidity.
In particular, we face, among others, the following risks related to the economic downturn and volatile conditions:
● | reduced demand for our products and services; |
● | strong political polarization of the political scenario in Brazil, aggravated by the socioeconomic impacts of the pandemic; |
● | intensification of government action in banking regulation (BC#, CSLL, IOF and Tax Reform), technological disruptions (PIX and Open Finance) and the entry of new players including large technology companies, fintech and marketplaces) have made and may continue to make our industry more competitive and potentially less profitable; |
● | increased inflationary pressure, continued high unemployment and continued reductions in growth prospects could make the economic environment more unpredictable and adversely affect our results of operations; |
● | increased regulation of our industry and compliance with such regulation will continue to increase our costs and may affect the pricing for our products and services, increase our regulatory risks and limit our ability to pursue business opportunities; and |
● | inability of our borrowers to comply with their existing obligations on a timely basis, whether in part or at all. Continued macroeconomic uncertainty may adversely affect customers’ income across both our retail and corporate business, and may adversely affect the recoverability of our loans, resulting in increased loan losses. |
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Any of the developments mentioned above may have a material adverse effect on our business, financial condition and results of operations, including without limitation as a result of a higher cost of capital and limitations on the availability of funding given the market’s requirement for a higher risk premium due to market conditions, expectations for the sector and availability of liquidity in the Brazilian and global economy.
Each of these factors could also affect the credit quality of our counterparties, due to the slowdown in the Brazilian economy as a whole, reduction in purchasing power and operating margins. The process we use to estimate losses inherent in our credit exposure requires complex judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans. The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the sufficiency of our loan loss allowances.
The value and liquidity of the portfolio of investment securities that we hold may be adversely affected.
The recoverability of our loan portfolios and our ability to increase the amount of loans outstanding and our results of operations and financial condition in general, are dependent to a significant extent on the level of economic activity in Brazil. See “—The credit quality of our loan portfolio may deteriorate and our loan loss reserves could be insufficient to cover our loan losses, which could have a material adverse effect on us.”
In addition, we are exposed to sovereign debt in Brazil. Our net exposure to Brazilian sovereign debt as of December 31, 2021 was R$171.4 billion (or 18.4% of our total assets as of that date) and consistent principally of National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C e NTN-F). Recessionary conditions in Brazil would likely have a significant adverse impact on our loan portfolio and sovereign debt holdings and, as a result, on our financial condition, cash flows and results of operations.
Our revenues are also subject to risk of deterioration from unfavorable political and diplomatic developments, social instability, international conflicts, and changes in governmental policies, including expropriation, nationalization, international ownership legislation, interest-rate caps, tax and monetary policies.
The economy of Brazil has experienced significant volatility in recent decades. This volatility resulted in fluctuations in the levels of deposits and in the relative economic strength of various segments of the Brazilian economy to which we lend. In addition, Brazil is affected by commodities price fluctuations, which in turn may affect financial market conditions through exchange rate fluctuations, interest rate volatility and deposits volatility. Furthermore, the Brazilian government has implemented fiscal and monetary policies and initiatives to mitigate the effects of the COVID-19 pandemic on the economy, individual businesses and households. These fiscal and monetary policy measures have accelerated the economic recovery in 2021 but have significantly increased public debt. Among the risks that could lead to an economic slowdown and financial markets falls are (i) the rise in energy prices that can cause inflation; (ii) the breakdown of global supply chains; (iii) excess liquidity and low interest rates, which has already led to an increase in inflation; and (iv) further tightening of monetary and public deficit policies. Negative and fluctuating economic conditions, such as slowing or negative growth and a changing interest rate environment, could impact our profitability by causing lending margins to decrease and credit quality to decline and leading to decreased demand for higher margin products and services.
The strong competitive environment in the Brazilian financial services market may adversely affect us, including our business prospects.
The Brazilian financial markets, including the banking, insurance and asset management sectors, are highly competitive.competitive, with this competition increasing in recent years. We face significant competition in all of our main areas of operation from other Brazilian and international banks, as well as state-owned institutions. In recent years, the competition has increased in the banking and insurance sectors.
institutions, including through portability of loans.
Non-traditional providers of banking services, such as Internet basedinternet-based e-commerce providers, mobile telephone companies and internet search engines, as well as payment services for block-chain technologies, may offer and/or increase their offerings of financial products and services directly to customers. These non-traditional providers of banking services currently have an advantage over traditional providers because they are not subject to banking regulation. Several of these competitors may have long operating histories, large customer bases, strong brand recognition and significant financial, marketing and other resources. They may adopt more aggressive pricingprices and rates and devote more resources to technology, infrastructure and marketing. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision”
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New competitors have entered and may continue to enter the market or existing competitors may adjust their services with unique product or service offerings or approaches to providing banking services. If we are unable to successfully compete with current and new competitors, or if we are unable to anticipate and adapt our offerings to changing banking industry trends, including technological changes, our business may be adversely affected. In addition, our failure to effectively anticipate or adapt to emerging technologies or changes in customer behavior, including among younger customers, could delay or prevent our access to new digital-based markets, which would in turn have an adverse effect on us.
The rise inour competitive position and business. Furthermore, the usewidespread adoption of new technologies, including distributed ledger, artificial intelligence and/or biometrics, to provide services such as cryptocurrencies and payments, could require substantial expenditures to modify or adapt our existing products and services as we continue to grow our internet and mobile banking platforms by financial servicescapabilities. Our customers may choose to conduct business or offer products in recent yearsareas that may be considered speculative or risky. Such new technologies and mobile banking platforms could negatively impact the value of our investments in traditional bank premises, equipment and personnel for our branch network. The persistence or acceleration of this shift in the demand for financial services towardstoward internet and mobile banking may requirenecessitate changes to our retail distribution strategy. Our failure to implement changes to our distribution strategy swiftly and effectively implement such changes could have an adverse effect on our competitive position.
In particular, we face the challenge to compete in an ecosystem where the relationship with the consumer is based on access to digital data and interactions. This access is increasingly dominated by digital platforms who are already eroding our results in very relevant markets such as payments. In addition, neobanks (i.e., banks that are fully digital) have begun operating in Brazil and have drawn significant numbers of customers. This privileged access to data can be used as a leverage to compete with us in other adjacent markets and may reduce our operations and margins in core businesses such as lending or wealth management. The alliances that our competitors are starting to build with major technology companies can make it more difficult for us to successfully compete with them and could adversely affect us.
Increasing competition could also require that we increase our rates offered on deposits or lower the rates we charge on loans, which could also have a material adverse effect on us, including our profitability. It may also negatively affect our business results and prospects by, among other things, limitingprofitability, as well as limit our ability to increase our customer base and expand our operations, andfurther increasing competition for investment opportunities.
In addition, if our customer service levels wereare perceived by the market to be materially below those of our competitor financial institutions, we could lose existing and potential business. If we are not successful in retaining and strengthening customer relationships, we may lose market share, incur losses on some or all of our activities, or fail to attract new deposits or retain existing deposits, which could have a material adverse effect on us.
Our ability to maintain our competitive position depends, in part, on the success of new products and services that we offer to our customers, as well as our ability to offer products and services that meet the customers’ needs throughout their entire life cycle, and we may not be able to manage emerging risks as we expand our range of products and services, which could have a material adverse effect on us.
The success of our operations and our profitability depends, in part, on the success of new products and services we offer our customers and our ability to offer products and services that meet the customers’ needs during their entire life cycle. However, our customers’ needs and/or desires may change over time, and such changes may render our products and services obsolete, outdated or unattractive and we may not be able to develop new products that meet our customers’ changing needs and/or desires. Our success is also dependent on our ability to anticipate and leverage new and existing technologies that may have an impact on products and services in the banking industry. Technological changes may further intensify and complicate the competitive landscape and influence client behavior. If we cannot respond in a timely fashion to the changing needs and/or desires of our customers, we may lose them, which could in turn materially and adversely affect us. In addition, the cost of developing products is likely to affect our results of operations.
As we expand the range of our products and services, some of which may be at an early stage of development, in certain regional markets where we operate, we will be exposed to new and potentially increasingly complex risks, such as conduct risk arising from relationships with customers, and development expenses. Our employees and risk management systems, as well as our experience and that of our partners may not be sufficient to enable us to properly manage such risks. Any or all of these factors, individually or collectively, could have a material adverse effect on us.
While we have successfully increased our customer service levels in recent years, should these levels ever be perceived by the market to be materially below those of our competitor financial institutions, we could lose existing and potential business. If we are not successful in retaining and strengthening customer relationships, we may lose market share, incur losses on some or all of our activities or fail to attract new deposits or retain existing deposits, which could have a material adverse effect on our operating results, financial condition and prospects.
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We are subject to substantialextensive regulation and regulatory and governmental oversight, which could adversely affect us.
our business, operations and financial condition.
The Brazilian financial markets are subject to extensive and continuous regulatory control by the Brazilian government, principally by the Brazilian Central Bank, the CVM and the CMN, which, in each case, materially affects our business. We have no control over the issuance of new regulations that may affect our operations, including in respect of:
minimum capital requirements; |
reserve and compulsory deposit requirements; |
limits on investments in fixed assets; |
lending limits and other credit restrictions, including compulsory allocations; |
limits and other restrictions on interest rates and fees; |
limits on the amount of interest banks can charge or the period for capitalizing interest; and |
accounting and statistical requirements. |
The regulationregulations governing Brazilian financial institutions isare continuously evolving, and the Brazilian Central Bank has reacted actively and extensively to developments in our industry.
Changes in regulations in Brazil and international markets may expose us to increased compliance costs and limitations onlimit our ability to pursue certain business opportunities and provide certain products and services. Brazilian regulators are constantly updating prudential standards in accordance with the recommendations of the Basel Committee on Banking Supervision, in particular with respect to capital and liquidity, which could impose additional significant regulatory burdens on us. For example, future liquidity standards could require us to maintain a greater proportion of our assets in highly-liquidhighly liquid but lower-yielding financial instruments, which would negatively affect our net interest margin. There can be no assurance that future changes in regulations or in their interpretation or application will not have a material adverse effect on us.
As some of the banking laws and regulations have been recently issued or become effective, the manner in which those laws and related regulations are applied to the operations of financial institutions is still evolving. Moreover, to the extent that these recently adopted regulations are implemented inconsistently in Brazil, we may face higher compliance costs. The measures of the Brazilian Central Bank and the amendment of existing laws and regulations, or the adoption of new laws or regulations, could adversely affect our ability to provide loans, make investments or render certain financial services. No assurance can be given generally that laws or regulations will be adopted, enforced or interpreted in a manner that will not have a material adverse effect on our business and results of operations. Furthermore, regulatory authorities have substantial discretion in how to regulate banks, and this discretion, and the regulatory mechanisms available to the regulators, have been increasing during recent years. RegulationRegulations may be imposed on an ad hoc basis by governments and regulators in response to a crisis, and these may especially affect financial institutions such as usthose that may be deemed to be systemically important. In addition, the volume, granularity, frequency and scale of regulatory and other reporting requirements necessitaterequire a clear data strategy to enable consistent data aggregation, reporting and management. Inadequate management information systems or processes, including those relating to risk data aggregation and risk reporting, could lead to a failure to meet regulatory reporting requirements or other internal or external information demands, and we may face supervisory measures as a result.
We may also be subject to potential impacts relating to regulatory changes affecting our controlling shareholder, Santander Spain, due to continued significant financial regulatory reform in jurisdictions outside of Brazil that directly or indirectly affect Santander Spain’s businesses, including Spain, the European Union, the United States and other jurisdictions. In Spain and in other countries in which Santander Spain’s subsidiaries operate (including Brazil), there is continuing political, competitive and regulatory scrutiny of the banking industry. Political involvement in the regulatory process, in the behavior and governance of the banking sector and in the major financial institutions in which the local governments have a direct financial interest, and in their products and services and the prices and other terms applied to them, is likely to continue. Changes to current legislation and their implementation through regulation (including additional capital, leverage, funding, liquidity and tax requirements), policies (including fiscal and monetary policies established by central banks and financial regulators, and changes to global trade policies), and other legal and regulatory actions may impose additional regulatory burdens on Santander Group, including Santander Brasil, in these jurisdictions. In the European Union, these reforms could include changes relating to capital requirements, liquidity and funding, or other measures, implemented as a result of the unification of the European banking system under a European Banking Union. In the United States, these reforms couldmany changes have occurred as a result from current, pending, and future legislation, including the continued implementation of or changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). See and its implementing regulations, most of which are now in place. In May 2018, the United States government enacted the Economic Growth, Regulatory Relief, and Consumer Protection Act, or “EGRRCPA,” the first major piece of legislation rebalancing the financial regulatory landscape since the passage of the Dodd-Frank Act. The U.S. financial regulatory agencies have begun to propose regulations implementing EGRRCPA, but the ultimate impact of these reforms on our operations is currently uncertain. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—U.S. Banking Regulation.” We cannot predict the final outcome of any financial regulatory reformreforms in the European Banking Union, the United States or elsewhereother jurisdictions, and we cannot yet determine their effects on Santander Spain and, consequently, their effects on us, but regulatory changes may result in additional costs for us.
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We are subject to potential intervention by any of Contentsour regulators or supervisors.
Our business and operations are subject to increasingly significant rules and regulations set by the Brazilian Central Bank, the CVM and the CMN, which are required to conduct banking and financial services business. These apply to business operations, affect financial returns, and include reserve and reporting requirements and conduct-of-business regulations.
In their supervisory roles, the Brazilian Central Bank and the CMN seek to maintain the safety and soundness of financial institutions with the aim of strengthening the protection of customers and the financial system. Their continuing supervision of financial institutions is conducted through a variety of regulatory tools, including the collection of information by way of prudential returns, reports obtained from skilled persons, visits to firms and regular meetings with management to discuss issues such as performance, risk management and strategy. As a result, we face increased supervisory scrutiny (resulting in increasing internal compliance costs and supervision fees), and in the event of a breach of our regulatory obligations we are likely to face more stringent regulatory fines.
We are subject to regulation on a consolidated basis and may be subject to liquidation or intervention on a consolidated basis.
We operate in a number of credit and financial services related sectors through entities under our control. For certain purposes related to regulation and supervision, the Brazilian Central Bank treats us and our subsidiaries and affiliates as a single financial institution. While our consolidated capital base provides financial strength and flexibility to our subsidiaries and affiliates, their individual activities could indirectly put our capital base at risk. Any investigation or intervention by the Brazilian Central Bank, particularly in the activities carried out by any of our subsidiaries and affiliates, could have a material adverse impact on our other subsidiaries and affiliates and, ultimately, on us. If we or any of our financial subsidiaries become insolvent, the Brazilian Central Bank may carry out an intervention or liquidation process on a consolidated basis rather than conduct such procedures for each individual entity. In the event of an intervention or a liquidation process on a consolidated basis, our creditors would have claims to our assets and the assets of our consolidated financial subsidiaries. In this case, claims of creditors of the same nature held against us and our consolidated financial subsidiaries would rank equally in respect of payment. If the Brazilian Central Bank carries out a liquidation or intervention process with respect to us or any of our financial subsidiaries on an individual basis, our creditors would not have a direct claim on the assets of such financial subsidiaries, and the creditors of such financial subsidiaries would have priority in relation to our creditors in connection with such financial subsidiaries’ assets. The Brazilian Central Bank also has the authority to carry out other corporate reorganizations or transfers of control under an intervention or liquidation process.
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Increases in reserve, compulsory deposit and minimum capital requirements may have a material adverse effect on us.
The Brazilian Central Bank has periodically changed the level of reserves and compulsory deposits that financial institutions in Brazil are required to maintain, with the Brazilian Central Bank, as well as determined compulsory allocation requirements to finance government programs. The Brazilian Central Bankprograms, with these changes continuing to be a potential area of risk as they may increase the reserve and compulsory deposit or allocation requirements in the future or impose new requirements. Increases in reserve and compulsory deposit or allocation requirements, which as a result could reduce our liquidity to fund our loan portfolio and other investments and, as a result, may have a material adverse effect on us.
Compulsory deposits and allocations generally do not yield the same return as other investments and deposits because a portion of compulsory deposits and allocations:
do not bear interest; and |
must be used to finance government programs, including a federal housing program and rural sector subsidies. |
In 2013, 2014, 2015, 2016, and early 2017recent years, the CMN and Brazilian Central Bank published several rules to implement Basel III in Brazil. This new set of regulations covers the revised definition of capital, capital requirements, capital buffers, credit valuation adjustments, exposures to central counterparties, leverage and liquidity coverage ratios, and treatment of systemically important financial institutions. No assurance can be given that the Basel III rules will be adopted, enforced or interpreted in a manner that will not have an adverse effect on us. Furthermore, in January 2017, the CMN issued a new rule by means of which the Brazilian Central Bank established the terms for segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for proportional application of the prudential regulation, considering the size, international activity and risk profile of members of each segment. By February 2017, the Brazilian Central Bank published the initial categorization of financial institutions in the different segments according to the terms set forth in the new resolution.
For more information on the rules implementing Basel III, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Capital Adequacy and Leverage—Basel”Leverage - Basel—Basel III” and “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding—Capital Management.”
We may not be able to detect or prevent money laundering and other criminal activities fully or on a timely basis, which could expose us to additional liability and could have a material adverse effect on us.
We are required to comply with applicable anti-money laundering, (“AML”),or “AML,” anti-terrorism, anti-corruption,anti-bribery and corruption, sanctions and other laws and regulations applicable to us. These laws and regulations require us, among other things, to conduct full customer due diligence (including sanctions and politically-exposedpolitically exposed person screening) and keep our customer, account and transaction information up to date. We have implemented effective financial crime policies and procedures in place detailing what is required from those responsible. We are also required to conduct AML training for our employees and to report suspicious transactions and activity to appropriate law enforcement following full investigation by the Special Incidents area.
Financial crime has becomecontinues to be the subject of enhanced regulatory scrutiny and supervision by regulators globally. AML, anti-bribery, anti-corruption and sanctions laws and regulations are increasingly complex and detaileddetailed. Key standard-setting and have becomeregulatory bodies continue to provide guidelines to strengthen the subjectinteraction and cooperation between prudential and Anti-Money Laundering/Combating the Financing of enhanced regulatory supervision, requiring improvedTerrorism (AML/CFT supervisors). Compliance with these laws and regulations requires automated systems, sophisticated monitoring and skilled compliance personnel.
We have developedmaintain updated policies and procedures aimed at detecting and preventing the use of our banking network for money laundering and other financial crime related activities. However, emerging technologies, such as cryptocurrencies and innovative payment methods, could limit our ability to track the movement of funds and therefore, present a risk to our Company. Our ability to comply with the legal requirements depends on our ability to improve detection and reporting capabilities and reduce variation in control processes and oversight accountability. These require implementation and embedding within our business effective controls and monitoring, which in turn requires on-goingongoing changes to systems and operational activities. Financial crime is continually evolving and, as noted, is subject to increasingly stringent regulatory oversight and focus. This requires proactive and adaptable responses from us so that we are able to deter threats and criminality effectively. Even known threats can never be fully eliminated, and there will be instances where we may be used by other parties to engage in money laundering and other illegal or improper activities. In
addition, we rely heavily on our employees to assist us by spotting such activities and reporting them, and our employees have varying degrees of experience in recognizing criminal tactics and understanding the level of sophistication of criminal organizations. Where we outsource any of our customer due diligence, customer screening or anti-financial crime operations, we remain responsible and accountable for full compliance and any breaches. If we are unable to apply the necessary scrutiny and oversight of third parties to whom we outsource certain tasks and processes, there remains a risk of regulatory breach.
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Additionally, in 2015 and in early 2016, pursuant to a new resolution issued by the United Nations Security Council, as well as a recently enacted lawlaws and regulations issued by the Brazilian Central Bank forrequiring the implementation of the aforementioned resolution in Brazil, additional compliance requirements were imposed on us and on other financial institutions operating in Brazil, which relate to the local enforcement of sanctions imposed by the United Nations Security Council resulting from certain resolutions. We believe we already have the control and compliance procedures in place to satisfy such additional compliance requirements. However, we continue to evaluate their impact on our control and compliance procedures and whether adjustments will need to be made to our control and compliance procedures as a result.
If we are unable to comply fully comply with applicable laws, regulations and expectations, our regulators and relevant law enforcement agencies have the ability and authority to impose significant fines and other penalties on us, including requiring a complete review of our business systems, day-to-day supervision by external consultants and ultimately the revocation of licenses.
The reputational damage to our business and global brand would be severe if we were found to have breached AML, anti-bribery, anti-corruption or sanctions requirements. Our reputation could also suffer if we are unable to protect our customers’ data orand bank products and services from being accessed or used for illegal or improper purposes.
Furthermore, the Brazilian Public Federal Prosecutor’s Office (Ministério Público Federal), or “MPF,” has charged one of our officers in connection with the alleged bribery of a Brazilian tax auditor to secure favorable decisions in tax cases, resulting in a claimed benefit of R$83 million (approximately U.S.$15 million) for us. On October 23, 2018, the officer was formally indicted and asked to present his defense. On November 5, 2018 the officer in question presented his defense. The proceedings are currently ongoing. We are not a party to these proceedings. We have voluntarily provided information to the Brazilian authorities and have relinquished the benefit of certain tax credits to which the allegations relate in order to show good faith.
In addition, while we review our relevant counterparties’ internal policies and procedures with respect to such matters, to a large degree we rely upon ourexpect relevant counterparties to maintain and properly apply their own appropriate compliance measures, procedures and internal policies. Such measures procedures and internal policies may not be completely effective in preventing third parties from using our (and our relevant counterparties’) services as a conduit for illicit purposes (including illegal cash operations) without our (or our relevant counterparties’) knowledge. If we are associated with, or even accused of having breachedbeing associated with, breaches of AML, anti-terrorism, or sanctions requirements, our reputation could suffer and/or we could become subject to fines, sanctions and/or legal enforcement (including being added to “black“watch lists” that would prohibit certain parties from engaging in transactions with us), any one of which could have a material adverse effect on our operating results, financial condition and prospects.
We are subject to increasing scrutiny and regulation from data protection laws, including penalties in the event of noncompliance with the terms and conditions of certain new European and Brazilian regulations.
We receive, maintain, transmit, store and otherwise process proprietary, sensitive and confidential data, including public and non-public personal information of our customers, employees, counterparties and other third parties, including, but not limited to, personally identifiable information and personal financial information. The collection, sharing, use, retention, disclosure, protection, transfer and other processing of this information is governed by stringent federal, state, local and foreign laws, rules and regulations, and the regulatory framework for data privacy and cybersecurity is in considerable flux and evolving rapidly. As data privacy and cybersecurity risks for banking organizations and the broader financial system have significantly increased in recent years, data privacy and cybersecurity issues have become the subject of increasing legislative and regulatory focus.
On May 25, 2018, the Regulation (EU) 2016/279 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (the “General Data Protection Regulation” or “GDPR”) became directly applicable in all member states of the European Union.
In addition to the GDPR, we face new regulations from Brazilian authorities. The LGPD was approved in the Federal Official Gazette on August 14, 2018 and, as amended by the Law No. 13,853/2019, took effect in September 2020, with the exception of its Articles 52, 53 and 54, which address administrative penalties, which entered into force on August 1, 2021. Law No. 13,853/2019 also set up the National Data Protection Authority for purposes of monitoring, implementing and supervising compliance with the LGPD in Brazil. The LGPD also brings about deep changes in the conditions for personal data processing, with a set of rules to be observed in activities such as collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons.
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Although a number of basic existing principles have remained the same, the LGPD has introduced extensive new obligations on data controllers and rights for data subjects. The LGPD applies to individuals, as well as private and public entities, regardless of the country where they are headquartered or where data is hosted, as long as (i) data processing takes place in Brazil; (ii) the data processing activity is intended to offer or supply goods or services or to process data of individuals located in Brazil; or (iii) the data subjects are located in Brazil at the time their personal data is collected. The application of the LGPD will apply irrespective of industry or business when dealing with personal data and is not restricted to data processing activities performed through digital media and/or on the internet.
The GDPR has also introduced new fines and penalties for a breach of requirements, including fines for systematic breaches of up to the higher of 4% of annual worldwide turnover or €20 million, and fines of up to 2% of annual worldwide turnover or €10 million (whichever is highest) for other specific infringements. The LGPD similarly sets out several penalties, which include warnings, blocking and erasure of data, public disclosure of the offense, and fines of up to 2% of the economic group’s turnover in Brazil in the preceding year, capped at R$50 million per offense.
The implementation of the GDPR and of the LGPD has required substantial amendments to our procedures and policies. The changes have impacted, and could further adversely impact, our business by increasing our operational and compliance costs. Further, there is a risk that the measures may not be implemented correctly or that there may be partial noncompliance with the new procedures. If there are breaches of the GDPR and or the LGPD obligations, as the case may be, we could face significant administrative and monetary sanctions, as well as reputational damage, which could have a material adverse effect on our operations, financial condition and prospects. Furthermore, following any such breach, we may be ordered to change our business practices, policies or systems in a manner that adversely impacts our operating results.
For more information on the rules implementing LGPD, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Data Protection Requirements.”
We are exposed to risk of loss from legal and regulatory proceedings.
We face risk of loss from legal and regulatory proceedings, including tax proceedings that could subject us to monetary judgments, regulatory proceedings, fines and penalties. The current regulatory and tax enforcement environment in Brazil reflects an increased supervisory focus on enforcement, combined with uncertainty about the evolution of the regulatory regime, and may lead to material operational and compliance costs.
We are from time to time subject to certainregulatory investigations and civil and tax claims and party to certain legal proceedings incidental to the normal course of our business, including in connection with conflicts of interest, lending activities, relationships with our employees, economic plans, and other commercial or tax matters. In view of the inherent difficulty of predicting the outcome of legal matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories, involve a large number of parties or are in the early stages of investigation or discovery, we cannot state with confidencecertainty what the eventual outcome of these pending matters will be or what the eventual loss, fines or penalties related to each pending matter may be. The amount of our reserves in respect ofto these matters, which is calculated based on the probability of loss of each claim, is substantially less than the total amount of the claims asserted against us, and, in light of the uncertainties involved in such claims and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves currently accrued by us. As a result, the outcome of a particularhighly uncertain matter may bebecome material to our operating resultsresults. As of December 31, 2021, we had provisions for taxes, other legal contingencies and other provisions of R$8,876 million.
See more information in note 22 to our audited consolidated financial statements included in this annual report and in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”
We may face operational difficulties under the Brazilian instant payment scheme.
On November 16, 2020, the Brazilian Central Bank instituted its instant payment scheme, or “PIX,” as well as the Instant Payment System (Sistema de Pagamentos Instantâneos), or “SPI,” which enables participants to settle electronic transfers of funds in real time and is available for 24 hours a particular period.day, seven days a week, and every day in the year.
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As a direct participant of Contentsthe PIX, we may face operational issues, as well as difficulties in adapting to the requirements established by the PIX payment scheme regulations and by the other applicable rules, mainly related to the minimum level of service to be provided on a recurring basis to customers, as well as recent new security and fraud prevention requirements set forth by the Brazilian Central Bank. The Brazilian Central Bank has also enacted a new rule to be implemented by July 2022 setting a limited amount of R$ 1,000.00 for PIX transactions carried out between 8 p.m. (or, at the user’s discretion, between 10 p.m.) and 6 a.m. As a result, we may be the target of administrative sanctions and/or judicial claims, either by the Brazilian Central Bank itself or as a result of complaints brought by our customers. Furthermore, as a consequence of potential administrative sanctions or judicial claims, we may face difficulties in retaining customers in relation to Santander SX, our solution for our customers to access PIX, which may have a material adverse effect on our financial results, as well as our reputation.
In addition, the Brazilian Central Bank may issue new and stricter rules applicable to PIX participants, including new operational capacity requirements. The imposition by the Brazilian Central Bank of new requirements may adversely affect our operations.
For more information related to the PIX and the SPI, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Brazilian Payment and Settlement System.”
Disclosure controls and procedures over financial reporting may not prevent or detect all errors or acts of fraud.
Disclosure controls and procedures, including internal controls over financial reporting, are designed to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the U.S. Securities Exchange Act of 1934, as amended, or the “Exchange Act,” is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms.
These disclosure controls and procedures have inherent limitations, which include the possibility that judgments in decision-making can be faulty and result in errors or mistakes. Additionally, controls can be circumvented by any unauthorized override of the controls. Consequently, our business is exposed to risk from potential noncompliance with policies, employee misconduct, or negligence and fraud, which could result in regulatory sanctions, civil claims, and serious reputational or financial harm. In recent years, a number of multinational financial institutions have suffered material losses due to the actions of “rogue traders” or other employees. It is not always possible to deter employee misconduct, and the precautions we take to prevent and detect this activity may not always be effective. Accordingly, because of the inherent limitations in the control system, misstatements due to error or fraud may occur and not be detected.
We are subject to review by taxingtax authorities, and an incorrect interpretation by us of tax laws and regulations may have a material adverse effect on us.
The preparation of our tax returns requires the use of estimates and interpretations of complex tax laws and regulations and is subject to review by taxingtax authorities. We are subject to the income tax laws of Brazil. These tax laws are complex and subject to different interpretations by the taxpayer and relevant governmental taxingtax authorities, leading to disputes, which are sometimes subject to prolonged evaluation periods until a final resolution is reached. In establishing a provision for income tax expense and filing returns, we must make judgments and interpretations about the application of these inherently complex tax laws. If the judgment, estimates and assumptions we use in preparing our tax returns are subsequently found to be incorrect, there could be a material adverse effect on us. In some jurisdictions, theThe interpretations of the taxingBrazilian tax authorities are unpredictable and frequently involve litigation, which introduces further uncertainty and risk as to tax expense.
Changes in taxes and other fiscal assessments may adversely affect us.
The Brazilian government regularly enacts reforms to the tax and other assessment regimes to which we and our customers are subject. Such reforms include changes in the rate of applicable taxestax rates and, occasionally, enactment of temporary levies, the proceeds of which are earmarked for designated governmental purposes. The effects of these changes and any other changes that result from enactment of additional tax reforms cannot be quantified and there can be no assurance that any such reforms would not have an adverse effect upon our business. Furthermore, such changes may produce uncertainty in the financial system, increasing the cost of borrowing and contributing to the increase in our non-performing credit portfolio.
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Changes in tax policy, including the creation of new taxes, may occur with relative frequency and such changes could have an adverse effect on our financial position or operating results. For example, in 2011, the Brazilian government established the Tax on Financial Transactions (the “IOF Tax”). It applied, which used to be charged at a rate of 1.0% per day onover the notional value of increased foreign exchange exposure, but has currently been reduced to zero with respect to foreign exchange. The IOF Tax rates applicable to local loans toof individuals and legal entities have been frequently adjusted (both increases and decreases) in recent years. The currently applicable IOF Tax rates applicable to local loans are approximately 1.5% for legal entities and 3.0% for individuals, but could change in the future. We cannot estimate the impact that a change in tax laws or tax policy could have on our operations. For example, the IOF Tax is a tool used by the Brazilian government to regulate economic activity, which does not directly impact our results of operations, though changes in the IOF Tax can impact our business volumes generally.
Also, the Brazilian Congress may discuss broad tax reforms in Brazil to improve the efficiency of allocation of the economic resources, as proposed by the executive branch of the Brazilian federal government. Major tax reforms in Brazil have been discussed over the last few years. We cannot predict if tax reforms will be implemented in the future. The effects of these changes, if enacted, and any other changes that could result from the enactment of additional tax reforms, cannot be quantified.
Our loan and investment portfolios are subject to risk of prepayment, which could have a material adverse effect on us.
Our fixed ratefixed-rate loan and investment portfolios are subject to prepayment risk, which results from the ability of a borrower or issuer to pay a debt obligation prior to maturity. Generally, in a low interest rate environment, prepayment activity increases, which reduces the weighted average livesterms of our earning assets and could have a material adverse effect on us. We would also be required to amortize net premiums or commissions into income over a shorter period of time, thereby reducing the corresponding asset yield and net interest income. Prepayment risk also has a significant adverse impact on credit card and collateralized mortgage loans, since prepayments could shorten the weighted average life of these assets, which may result in a mismatch in our funding obligations and reinvestment at lower yields. Prepayment risk is inherent to our commercial activity, and an increase in prepayments could have a material adverse effect on us.
The credit quality of our loan portfolio may deteriorate and our loan lossesloss reserves could be insufficient to cover our actual loan losses, which could have a material adverse effect on us.
Risks arising from changes in credit quality and the recoverability of loans and amounts due from counterparties are inherent into a wide range of our business.businesses. Non-performing or low credit quality loans have in the pastcan negatively impactedimpact our results of operations and could do so in the future. In particular,as the amount of our reported non-performing loans may increase in the future as a result of growth in our total loan portfolio, including as a result of loan portfolios that we may acquire in the future whose(the credit quality turnsof which may turn out to be worse than we anticipated,had anticipated), or other factors, including factors beyond our control, such as adverse changes in the credit quality of our borrowers and counterparties or a general deterioration in economic conditions in Brazil and globally.globally, including as a result of the COVID-19 pandemic. In 2021, as a response to the macroeconomic shock of the COVID-19 pandemic, we used a part of the provision overlay on expected credit losses created in 2020. If we wereare unable to control the level of our non-performing or poor credit quality loans, this could have a material adverse effect on us.
Our provisions for impairment losses are based on our current assessment, of andas well as expectations, concerning various factors affecting the quality of our loan portfolio. These factors include, among other things, our borrowers’ financial condition, repayment abilities and repayment intentions, the realizable value of any collateral, the prospects for support from any guarantor, government macroeconomic policies, interest rates, and the legal and regulatory environment. Because
Since, many of these factors are beyond our control and there is no preciseinfallible method for predicting loan and credit losses, we cannot assure you that our current or future provisions for impairment losses will be sufficient to cover actual losses. If our assessment of and expectations concerning the abovementioned factors differ from actual developments, if the quality of our total loan portfolio deteriorates, for any reason, or if the future actual losses exceed our estimates of incurred losses, we may be required to increase our provisions for impairment losses, which may adversely affect us. If we were unable to control or reduce the level of our non-performing or poor credit quality loans, this could have a material adverse effect on us.
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On December 31, 2021, our credit risk (which includes gross loans and advances to customers, guarantees and documentary credits) amounted to R$540,873 million (compared to R$466,104 million as of December 31, 2020).
The rate of growth of our loan portfolio has decreased from its historical average and economicEconomic uncertainty may lead to a contraction in our loan portfolio.
The rate of growth of our loan portfolio has decreased from its historical average and there can be no assurance that it will return to its previous levels. The recent slow growth rate of the Brazilian economy experienced in 2012 20142021, 2020, 2019 and recession in 2015 and 2016,2018, as well as a slowdown in the growth of customer demand, an increase in market competition, changes in governmental regulation, and ana recent increase of the SELIC rate, as well as a recession in 2016 have adversely affected the rate of growth of our loan portfolio which increased by a small amount in 2016 and our risk index and, consequently, increased our required allowances for impairment losses.recent years. Ongoing economic uncertainty could adversely affect the liquidity, businesses and financial condition of our customers, as well as lead to a general decline in consumer spending, a rise in unemployment and an increase in household indebtedness. All thisthese factors could lead to a decrease in demand for borrowings in general, which could have a material adverse effect on our business.
Liquidity and funding risks are inherent in our business, and since our principal sources of funds are short-term deposits, a sudden shortage of funds could cause an increase in costs of funding and an adverse effect on our revenues and our liquidity levels.
Liquidity risk is the risk that we either do not have available sufficient financial resources available to meet our obligations as they fall due, or that we can only secure them onlysuch financial resources at excessive cost. This risk is inherent in any retail and commercialwholesale banking business and can be heightened by a number of enterprise-specific factors, including over-relianceoverreliance on a particular source of funding, changes in credit ratings or market-wide phenomena such as market dislocation. Continued constraintsdislocation, including as a result of the COVID-19 pandemic, Constraints in the supply of liquidity, including in inter-bankinterbank lending, has affected and maycan materially and adversely affect the cost of funding of our business, and extreme liquidity constraints may affect our current operations, our growth potential and our ability to fulfill regulatory liquidity requirements, as well as limit growth possibilities.requirements.
Increases inOur cost of obtaining funds is directly related to prevailing market interest rates and into our credit spreads, can significantly increaseand increases in these factors raise the cost of our funding. Changes in our credit spreadsCredit spread variations are market-driven and may be influenced by market perceptions of our creditworthiness. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile.
Disruption and volatility in the global financial markets could have a material adverse effect on our ability to access capital and liquidity on financial terms acceptable to us. If wholesale markets financing ceases to become available, or becomes excessively expensive, we may be forced to raise the rates we pay on deposits, with a view to attracting more customers, and/or to sell assets, potentially at depressed prices. The persistence or worsening of
these adverse market conditions or an increase in base interest rates could have a material adverse effect on our ability to access liquidity and cost of funding.
We rely, and will continue to rely primarily on commercialretail deposits as our main source of funding. As of December 31, 2016, 77.0%2021, 87% of our customer deposits had remaining maturities of one year or less, or were payable on demand, while 48.7%55% of our assets have longerhad maturities of one year or more, resulting in a mismatch between the maturities of liabilities and the maturities of assets.assets, The ongoing availability of this type of funding is sensitive to a variety of factors outsidebeyond our control, such asincluding: general economic conditions, and the confidence of commercialretail depositors in the economy and in the financial services industry, and the availability and extent of deposit guarantees, as well as competition for deposits between banks or with other products, such as mutual funds, for deposits.products. Any of these factors could significantly increase the amount of commercialretail deposit withdrawals in a short period of time, thereby reducing our ability to access commercialretail deposit funding on economically appropriate and reasonable terms, or at all, in the future. If these circumstances were to arise, this could have a material adverse effect on our operating results, financial condition and prospects.
Central banks around the world have taken extraordinary measures to increase liquidity in the financial markets as a response to the financial crisis and the COVID-19 crisis. As a result of inflationary pressures in late 2021 and early 2022 central banks have begun to reduce or discontinue these measures. If current credit facilities wereare rapidly removed or significantly reduced, this could have a material adverse effect on our ability to access liquidity and on our funding costs.
Additionally, our activities could be adversely impacted by liquidity tensions arising from generalized drawdowns of committed credit lines to our customers.
Our ability to manage our funding base may also be affected by changes to the regulation on compulsory reserve requirements in Brazil. For more information on the rules on compulsory reserve requirements, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”
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We cannot assure you that in the event of a sudden or unexpected shortage of funds in the banking system, we will be able to maintain levels of funding without incurring high funding costs, a reduction in the term of funding instruments or the liquidation of certain assets. If this were to happen, we could be materially adversely affected.
Finally, the implementation of internationally accepted liquidity ratios might require changes in business practices that affect our profitability. The liquidity coverage ratio, or “LCR,” is a liquidity standard that measures if banks have sufficient high-quality liquid assets to cover expected net cash outflows over a 30-day liquidity stress period. For the observations in this disclosure (exercised with daily balances for October, November and December 2021), Santander Brasil had an LCR of 148.5%, above the 100% minimum requirement. The Net Stable Funding Ratio, or “NSFR,” provides a sustainable maturity structure of assets and liabilities so that banks maintain a stable funding profile in relation to their activities. The NSFR, which must remain at a minimum of 100% beginning from October 1, 2018 according to CMN rules, stands at over 111.7% for us as of December 31, 2021.
Our cost of funding is affected by our credit ratings, and any risks may have an adverse effect on our credit ratings and our cost of funds.both variables. Any downgrade in (i) the rating of Brazil’s, (ii) our controlling shareholder’s,shareholders, or (iii) our credit rating would likely increase our cost of funding, requiring us to post additional collateral under some of our derivative and other contracts and adversely affect our interest margins and results of operations.
Credit ratings affect the cost and other terms upon which we are able to obtain funding. Rating agencies regularly evaluate us, and their ratings of our long-term debt are based on a number of factors, including our financial strength, conditions that generally affect the financial services industry and the economic environment in which we operate. In addition, due to the methodology of the main rating agencies, our credit rating is affected by the rating of Brazilian sovereign debt and the rating of our controlling shareholders. If Brazil’s sovereign debt or the debt of our controlling shareholder iswere downgraded, our credit rating would also likely be downgraded similarly.
to a similar degree.
Any downgrade in Brazil’s sovereign credit ratings, those of our controlling shareholder, or in our ratings, would likely increase our borrowing costs. For example, a ratingsrating downgrade could adversely affect our ability to sell or market certaintrade some of our products, such as subordinated securities, engage in certain longer-term and derivatives transactions, and retain our customers, particularly customers who need a minimum rating threshold in order to invest. This, in turn,In addition, under the terms of certain derivative contracts and other financial commitments, we may be required to maintain a minimum credit rating or risk termination of such contracts or require the posting of collateral. Any of these results of a ratings downgrade could reduce our liquidity and have an adverse effect on us, including our operating results and financial condition.
While certain potential impacts of these downgrades are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain, as they depend upon numerous dynamic, complex and inter-relatedinterrelated factors and assumptions, including market conditions at the time of any downgrade, whether anythe downgrade of our long-term credit rating precipitatesindirectly downgrades to our short-term credit rating, and assumptions about the potential behaviors of various customers, investors and counterparties. Actual outflows could be higher or lower than any hypothetical examples, depending upon certain factors, including whichincluding: the credit rating agency downgrades our credit rating,issuing the downgrade, any management or restructuring actions that could be taken to reduce cash outflows, and the potential liquidity impact from loss of unsecured funding (such as from money market funds) or loss of secured funding capacity. Although unsecured and secured funding stresses are included in our stress testingstress-testing scenarios and a portion of our total liquid assets is held against these risks, a credit rating downgrade could still have a material adverse effect on us.
In 2013, Spain’s sovereign credit rating outlook was revised to stable from negative by the three major risk rating agencies (S&P on November 29, Fitch on November 1 and Moody’s on December 4). Subsequently, Moody’s upgraded Spain’s sovereign rating to Baa2 from Baa3 with a positive outlook on February 21, 2014. Fitch Ratings upgraded Spain’s sovereign rating to BBB+ from BBB with a stable outlook on April 25, 2014. S&P upgraded Spain’s sovereign rating to BBB+ from BBB with a stable outlook on October 2, 2015. In February 2016, Moody’s revised Spain’s sovereign outlook to stable from positive. Santander Spain’s long-term debt is currently rated investment grade by the major rating agencies: A2 stable outlook by Moody’s, A with a negative outlook by Standard & Poor’s Ratings Services, or “S&P,” and A- with a negative outlook by Fitch Ratings Ltd., or “Fitch.” In April 2018, following the upgrade of the Spanish sovereign debt rating, S&P and Moody’s upgraded their ratings of Santander Spain from A- to A and from A3 to A2, respectively, and in July 2018, Fitch confirmed its rating and outlook. In 2019, the agencies such credit ratingsmaintained their 2018 analysis, considering, in some cases, a positive rating depending Santander Spain’s performance in 2019. However, due to the crisis caused by the COVID-19 pandemic and the macroeconomic deterioration in 2020, S&P and Fitch revised the outlook to negative, while Moody’s maintained its rating and outlook. In 2021, Fitch revised the outlook to stable and S&P revised its outlook to negative, considering the strength of Santander Spain’s geographic diversification and the fact that it has the potential to withstand an additional deterioration of its assets’ quality in some geographies and business segments. Santander Spain’s long-term debt in foreign currency is currently being: A3rated A+ with a negative outlook by S&P, and A2 with a stable outlook by Moody’s and A-Moody’s.
Our long-term debt in foreign currency is currently rated BB- with a stable outlook by Fitch Ratings. In February 2017, S&P upgraded Santander Spain’sand Ba1 with a stable outlook to positive. Santander Spain is rated at least one notch above Spain’s sovereign rating by each of S&P, Fitch and Moody’s.
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S&P lowered Brazil’s credit rating in September 2015 from BBB- to BB+ (a non-investment gradenon-investment-grade rating), and then again in mid-February 2016 from BB+ to BB with a negative outlook, mainly due to the continuing weak economic conditions of Brazil, political instability, the ongoing “Lava Jato” investigations, and uncertainty as to whether the Brazilian government will enact reforms in the 2016 federal budget to improve the country’sBrazil’s fiscal accounts and economic situation. In January 2018, Brazil was further downgraded by S&P to BB- with a stable outlook as a result of the failure of the prior Brazilian government to approve certain reforms. Fitch Ratings also lowered Brazil’s credit rating in December 2015 from BBB to BB+ (a non-investment grade rating), and then again in May 2016 from BB+ to BB, citing Brazil’s worsening economic outlook and growing political crisis as reasons for downgrading the country.Brazil. In February 2018, Fitch further downgraded Brazil to BB-. Moody’s lowered Brazil’s credit rating from Baa2 to Baa3 (which was still an(the lowest investment grade rating) in August 2015, and then to Ba2 (a non-investment gradenon-investment-grade rating) with a negative outlook in February 2016.. Brazil’s sovereign rating is currently rated by the three major risk rating agencies as follows: BB with a negative outlookBB- (stable) by S&P BBand Fitch, and Ba2 (stable) by Fitch Ratings. In March 2017, Moody’s upgraded Brazil’s credit rating from Ba2 negative to Ba2 stable outlook.Moody’s. Any further downgrade in Brazil’s sovereign rating would likely increase our funding costs and adversely affect us, including our asset quality.
As a result of the lowering of Brazil’s sovereign credit rating, our long-term foreign currency credit rating was lowered during the course of 2015 and in early 2016: on2016. On August 12, 2015, Moody’s lowered our credit rating from Baa2 to Baa3, lowering it again on February 24,25, 2016 to Ba2Ba3, and onin March and May 2017, it affirmed the rating of Ba1. On September 10, 2015, S&P lowered our credit rating from BBB- to BB+ (a non-investment gradenon-investment-grade rating), lowering it again on February 17, 2016 to BB. Our foreign long-term bank deposits are currently ratedBB and maintaining the rating at BB in August 2017 while changing the outlook to negative. In January 2018, we were downgraded by S&P to BB- with a stable outlook from BB with a negative outlookoutlook. We are currently rated as follows: BB- by S&P and Ba2Ba1 by Moody’s, both with a stable outlook by Moody’s.outlook. Any further downgrade in our long-term debt in foreign currency would likely increase our funding costs and adversely affect our interest margins and results of operations.
We cannot assure you that the rating agencies will maintain their current ratings or outlooks, or with regard to those rating agencies that have a negative outlook with respect to us or our controlling shareholder, there can be no assurances that such agencies will revise such outlooks upward. In general, the future evolution of our ratings will be linked, to a large extent, to the macroeconomic outlook and to the impact of the COVID-19 pandemic (including, for example, additional waves, new lockdowns, etc.) on our asset quality, profitability and capital, as well as on the rating of Santander Spain. Our failure to maintain favorable ratings and outlooks would likely increase our cost of funding and adversely affect our interest margins and results of operations.
The effectiveness of our credit risk management is affected by the quality and scope of information available in Brazil.
In assessing customers’ credit worthiness,creditworthiness, we rely largely on the credit information available from our own internal databases, certain publicly available customer credit information, information relating to credit contracted, which is provided by the Brazilian Central Bank and other sources. Due to limitations in the availability of information and the developing information infrastructure in Brazil, our assessment of credit risk associated with a particular customer may not be based on complete, accurate or reliable information. In addition, we cannot assure you that our credit scoring systems collect complete or accurate information reflecting the actual behavior of customers or that their credit risk can be assessed correctly. Without complete, accurate and reliable information, we have to rely on other publicly available resources and our internal resources, which may not be effective. As a result, our ability to effectively manage our credit risk and subsequently our allowances for impairment losses may be materially adversely affected.
Our hedging strategy may not be able to prevent losses.
We use a range of strategies and instruments, including entering into derivative and other transactions, to hedge our exposure to market, credit and operational risks. Nevertheless, we may not be able to hedge all risks to which we are exposed, whether partially or in full. Furthermore, the hedging strategies and instruments on which we rely may not achieve their intended purpose. Any failure in our hedging strategy or in the hedging instruments on which we rely could result in losses to us and have a material adverse effect on our business, financial condition and results of operations.
Inadequate pricing methodologies for insurance, pension plan and premium bond products may adversely affect us.
We establish prices and make calculations in relation to our insurance and pension products based on actuarial or statistical estimates. The pricing of our insurance and pension plan products is based on models that include a number of assumptions and projections that may prove to be incorrect, since these assumptions and projections involve the exercise of judgment with respect to the levels and timing of receipt or payment of premiums, contributions, provisions, benefits, claims, expenses, interest, investment results, retirement, mortality, morbidity, and persistence. We could suffer losses due to events that are contrary to our expectations as a result of, among others, incorrect biometric and economic assumptions or the use of incorrect actuarial bases in the calculation of contributions and provisions.
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Although the pricing of our insurance and pension plan products and the adequacy of the associated reserves are reassessed on a yearly basis, we cannot accurately determine whether our assets supporting our policy liabilities, together with future premiums and contributions, will be sufficient for the payment of benefits, claims and expenses. Accordingly, the occurrence of significant deviations from our pricing assumptions could have an adverse effect on the profitability of our insurance and pension products. In addition, if we conclude that our reserves and future premiums are insufficient to cover future policy benefits and claims, we will be required to increase our reserves and record these effects in our financial statements, which may have a material adverse effect on us.
Social and environmental risks may have a material adverse effect on us.
As part of the risk analysis we undertake with respect to our customers, we take into account environmental factors (such as soil and water contamination, vegetation suppression, or lack of environmental authorizations) as well as social factors (such as the existence of working conditions akin to slavery). We are also exposed to the risk that our assessment that a product or service we provide is socially or environmentally responsible will be challenged by customers, regulators or third parties. Any failure by us to identify and accurately assess these factors and the potential risks to us before entering into proposed transactions with our
clients customers may result in damage to our image and reputation, as well as have a material adverse effect on our business, results of operations and financial condition.
Furthermore, the Brazilian Central Bank has recently issued new regulations and standards applicable to us relating to the management and governance of social, environmental and climate risks by financial institutions. These rules relate both to risks resulting from our products, services and activities, and to risks arising out of the activities of our counterparties, controlled entities, suppliers and outsourced service providers. The majority of these regulations will enter into effect in July 2022. Any failure by us to adequately identify and assess these risks may subject us to future sanctions by the Brazilian Central Bank, as well as have a material adverse impact on our business and financial condition. For more information on the new regulatory requirements issued by the Brazilian Central Bank relating to environmental, social and governance requirements applicable to Brazilian financial institutions, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Environmental, Social and Governance (ESG) requirements applicable to financial institutions.”
The value of the collateral securing our loans may not be sufficient, and we may be unable to realize the full value of the collateral securing our loan portfolio.
The value of the collateral securing our loan portfolio may fluctuate or decline due to factors beyond our control, including among others,as a result of a prolonged COVID-19 pandemic or a weaker than expected economic recovery after the COVID-19 pandemic and macroeconomic factors globally and in Brazil, as well as force majeure events.events, such as natural disasters (including as a result of climate change). We may also not have sufficiently recent information on the value of collateral, which may result in an inaccurate assessment for impairment losses of our loans secured by such collateral. If any of the above were to occur, we may need to make additional provisions to cover actual impairment losses of our loans, which may materially and adversely affect our results of operations and financial condition.
We may face significant challenges in possessing and realizing value from collateral with respect to loans in default.
If we are unable to recover sums owed to us under secured loans in default through extrajudicial measures such as restructurings, our last recourse with respect to such loans may be to enforce the collateral secured in our favor by the applicable borrower. Depending on the type of collateral granted, we either have to enforce such collateral through the courts or through extrajudicial measures. However, even where the enforcement mechanism is duly established by the law, Brazilian law allows borrowers to challenge the enforcement in the courts, even if such challenge is unfounded, which can delay the realization of value from the collateral. In addition, our secured claims under Brazilian law will in certain cases rank below those of preferred creditors such as employees and tax authorities. As a result, we may not be able to realize value from the collateral, or may only be able to do so to a limited extent or after a significant amount of time, thereby potentially adversely affecting our financial condition and results of operations.
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We are subject to market, operational and other related risks associated with our derivative transactions and our investment positions that could have a material adverse effect on us.
We enter into derivative transactions for trading purposes, as well as for hedging purposes. We are subject to market, credit and operational risks associated with these transactions, including basis risk (the risk of loss associated with variations in the spread between the asset yield and the funding and/or hedge cost) and credit or default risk (the risk of insolvency or other inability of the counterparty to a particular transaction to perform its obligations thereunder, including providing sufficient collateral). We also hold securities in our own portfolio as part of our investment and hedging strategies.
Financial instruments, including derivative instruments and securities represented 23.1%88.6% of our total assets as of December 31, 2016. 2021. As of December 31, 2021, the notional value of derivatives in our books amounted to R$2,427,444 million (with a market value of R$21,125 million of debit balance and R$24,619 million of credit balance).
Any realized or unrealized future gains or losses from these investments or hedging strategies could have a significant impact on our income. These gains and losses, which we account for when we sell or mark-to-marketmark to market investments in financial instruments, can vary considerably from one period to another. If, for example, we enter into derivatives transactions to protect ourselves against decreases in the value of thereal or in interest rates and thereal instead increases in value or interest rates increase, we may incur financial losses. We cannot forecast the amount of gains or losses in any future period, and the variations experienced from one period to another do not necessarily provide a meaningful forward-looking reference point. Gains or losses in our investment portfolio may create volatility in net revenue levels, and we may not earn a return on our consolidated investment portfolio, or on a part of the portfolio in the future. Any losses on our securities and derivative financial instruments could materially and adversely affect our operating income and financial condition. In addition, any decrease in the value of these securities and derivatives portfolios may result in a decrease in our capital ratios, which could impair our ability to engage in lending activity at the levels we currently anticipate.
The execution and performance of these transactions depend on our ability to maintain adequate control and administration systems. Our ability to adequately monitor, analyze and report derivative transactions continues to depend, largely, on our information technology systems. These factors further increase the risks associated with these transactions and could have a material adverse effect on us.
We may not effectively manage risks associated with the replacement or reform of benchmark indices.
Interest rate, equity, foreign exchange rate and other types of indices, which are deemed to be “benchmarks,” including those in widespread and long-standing use, have been the subject of ongoing international, national and other regulatory scrutiny and initiatives and proposals for reform. Some of these reforms are already effective while others are still to be implemented or are under consideration. These reforms have caused and may in the future cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences, which cannot be fully anticipated.
Any of the benchmark reforms which have been proposed or implemented, or the general increased regulatory scrutiny of benchmarks, could also increase the costs and risks of administering or otherwise participating in the setting of benchmarks and complying with regulations or requirements relating to benchmarks. Such factors may have the effect of discouraging market participants from continuing to administer or contribute to certain benchmarks, trigger changes in the rules or methodologies used in certain benchmarks or lead to the disappearance of certain benchmarks.
Any of these developments, and any future initiatives to regulate, reform or change the administration of benchmarks, could result in adverse consequences to the return on, value of and market for loans, mortgages, securities, derivatives and other financial instruments whose returns are linked to any such benchmark, including those issued, funded or held by us.
Various regulators, industry bodies and other market participants in the U.S. and other countries have worked to develop, introduce and encourage the use of alternative rates to replace certain benchmarks. A transition away from the widespread use of interest rate benchmarks to alternative rates has begun and will continue over the course of the next few years. While central bank-sponsored committees in various jurisdictions have recommended alternative rates for various important interest rate benchmarks, if a particular benchmark were to be discontinued and an alternative rate had not been successfully introduced to replace that benchmark, this could result in widespread dislocation in the financial markets, engender volatility in the pricing of securities, derivatives and other instruments, and suppress capital markets activities, all of which could have adverse effects on our results of operations. In addition, the transition of a particular benchmark to a replacement rate could affect hedge accounting relationships between financial instruments linked to that benchmark and any related derivatives, which could adversely affect our results.
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On 5 March 2021, the U.K. Financial Conduct Authority, or the “FCA,” which regulates the London interbank offered rate (LIBOR), published an announcement to confirm the dates immediately after which all LIBOR settings will either cease to be provided by any administrator or no longer be representative: December 31, 2021 for all EUR, GBP, JPY and CHF LIBOR tenors and 1-week and 2-month USD LIBOR tenors, and June 30, 2023 for the remaining USD LIBOR tenors (overnight, 1-, 3-, 6- and 12-month). Therefore, since January 1, 2022, most LIBOR settings have ceased to be available. While publication of the 1-, 3- and 6-month GBP and JPY tenors will continue at least until the end of 2022 on the basis of a “synthetic” methodology, these rates are solely available for use in legacy transactions. In addition, while certain USD LIBOR tenors are expected to continue to be published until June 30, 2023, U.S. regulators and the FCA have published guidance instructing banks to cease entering into new contracts referencing USD LIBOR no later than December 31, 2021, with limited exceptions.
In October 2020, the International Swaps and Derivatives Association, or “ISDA,” launched the 2020 IBOR Fallbacks Protocol, which amends the ISDA’s interest rate definitions used among protocol adherents, to incorporate new fallbacks for legacy non-cleared derivatives linked to LIBOR and certain other interest rate benchmarks. The protocol became effective as of January 25, 2021. We have adhered to this new protocol. Similarly, ISDA’s IBOR Fallbacks Supplement also amended ISDA’s standard definitions to incorporate these new fallbacks in new derivatives entered into on or after that same effective date. Following December 31, 2021, derivatives referencing non-USD LIBOR that were amended through adherence to the 2020 IBOR Fallbacks Protocol or that incorporate the IBOR Fallbacks Supplement are or will be valued using the adjusted version of the applicable risk-free reference rate selected as an alternative to the applicable IBOR by the appropriate national committee.
With respect to USD LIBOR-linked contracts that are governed by New York law, New York State has enacted legislation that will replace references to LIBOR in certain contracts with a benchmark based on the Secured Overnight Financing Rate (SOFR), including any spread adjustment, recommended by the Federal Reserve Board, the Federal Reserve Bank of New York or the Alternative Reference Rates Committee (the ARRC) convened by the Federal Reserve Board and the Federal Reserve Bank of New York. The Federal Reserve Bank of New York currently publishes the SOFR based on overnight U.S. Treasury repurchase agreement transactions, which has been recommended as the alternative to USD LIBOR by the ARRC.
Our exposure to LIBOR-linked contracts as of December 31, 2021 was limited and related only to USD LIBOR. In 2021, we adopted the SOFR (Secured Overnight Finance Rate) as a replacement for USD LIBOR for new agreements and since January 1, 2022 we are no longer entering into new USD LIBOR transactions. We are communicating with our customers to amend existing agreements to include appropriate fallback clauses for when USD LIBOR ceases to be published.
These and other reforms have caused and may in the future cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences, which cannot be fully anticipated, which introduce a number of risks for us. These risks include (i) legal risks arising from potential changes required to documentation for new and existing transactions; (ii) risk management, financial and accounting risks arising from market risk models and from valuation, hedging, discontinuation and recognition of financial instruments linked to benchmark rates; (iii) business risk of a decrease in revenues of products linked to indices that will be replaced; (iv) pricing risks arising from how changes to benchmark indices could impact pricing mechanisms on some instruments; (v) operational risks arising from the potential requirement to adapt IT systems, trade reporting infrastructure and operational processes; (vi) conduct risks arising from the potential impact of communication with customers and engagement during the transition period and inquiries, reviews or other actions from regulators regarding our preparation, readiness and transition plans and (vii) litigation risks and risks relating to other disputes and actions with clients, counterparties, investors and other parties regarding our existing products and services, which could adversely impact our profitability. The replacement benchmarks and their transition path have been defined, but, with respect to some benchmarks, the mechanisms for implementation are under development. Accordingly, it is not currently possible to determine whether, or to what extent, any such changes would affect us. However, the implementation of alternative benchmark rates may have a material adverse effect on our business, results of operations, financial condition and prospects. We may also be adversely affected if the change restricts our ability to provide products and services or if it necessitates the development of additional information technology systems.
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Failure to successfully implement and continue to improve our risk management policies, procedures and methods, including our credit risk management system,systems, could materially and adversely affect us, and we may be exposed to unidentified or unanticipated risks.
TheRisk management of risk is an integral part of our activities. We seek to monitor and manage our risk exposure through a variety of separate but complementary financial, credit, market, operational, compliance and legal reporting systems.systems, among others. We employ a broad and diversified set of risk monitoring and risk mitigation techniques, which may not be fully effective in mitigating our risk exposure in all economic market environments or against all types of risk, including risks that we may fail to identify or anticipate.
We use certain qualitative tools and metrics for managing market risk, including our use of value at risk, or “VaR,” and statistical modeling tools, which are based upon our use of observed historical market behavior. We apply statistical and other tools to these observations to arrive at quantifications of our risk exposures. These qualitative tools and metrics may fail to predict future risk exposures. These risk exposures could, for example, arise from factors we did not anticipate or correctly evaluate in our statistical models. This would limit our ability to manage our risks. OurThus, our losses thus could be significantly greaterhigher than the historical measures indicate. In addition, our quantified modeling doesstatistical models may not take all risks into account. Our more qualitative approach to managing those risks could prove insufficient, exposing us to material unanticipated losses. We could face adverse consequences as a result of decisions, which may lead management to, actions by management, based on models that are poorly developed, implemented or used, or as a result of the modeled outcome, being misunderstoodmisunderstand or the use ofmisuse such information for purposes for which it was not designed. In addition, if existing or potential customers or counterparties believe our
risk management is inadequate, they could take their business elsewhere or seek to limit their transactions with us. ThisAny of these factors could have a material adverse effect on our reputation, as well as our revenues and profits. We also face risks from operational losses that may occur due to inadequate processes, people and systems failures or even from external events like natural disasters, terrorism, robbery and vandalism. Despite the operational risk management process supported by the Board and the internal audit tests, the internal controls and procedures effectiveness may not be fully adequate or sufficient to avoid all the known and unknown operational risks. We have suffered losses from operational risk in the past, including losses related to the migration of customer accounts in connection with acquisitions, phishing scams perpetuated by third parties, and information system platform upgrades. There can be no assurance that we will not suffer material losses from operational risk in the future, including losses related to security breaches.
As a commercialretail bank, one of the main types of risks inherent in our business is credit risk. For example, an important feature of our credit risk management system is to employ an internal credit rating system to assess the particular risk profile of a customer.individual customers and SMEs. As this process involves detailed analyses of the customer, taking into account both quantitative and qualitative factors, it is subject to human or IT systems errors. In exercising their judgment on current or future credit risk behavior of our customers, our employees may not always be able to assign an accurate credit rating, which may result in oura higher exposure to higher credit risks than indicated by our risk rating system.
Some of the models and other analytical and judgment-based estimations we use in managing risks are subject to review by, and require the approval of, our regulators. If models do not comply with all their expectations, our regulators may require us to make changes to such models, may approve them with additional capital requirements, or we may be precluded from using them. Any of these potential situations could limit our ability to expand our businesses or have a material impact on our financial results.
Failure to effectively implement, consistently followmonitor or continuously refine our credit risk management system may result in an increase in the level of non-performing loans and a higher risk exposure for us, which could have a material adverse effect on us.
Failure to adequately protect ourselves against risks relating to cyber-securitycybersecurity could materially and adversely affect us.
We are also subject to increasing scrutiny and regulation governing cybersecurity risks.
We face various cyber-securitycybersecurity risks, including but not limited to: penetration of our information technology systems and platforms by ill-intentioned third parties, infiltration of malware (such as computer viruses) into our systems, contamination (whether intentional or accidental) of our networks and systems by third parties with whom we exchange data, unauthorized access to confidential customer and/or proprietary data by persons inside or outside of our organization, ransomware affecting our services and cyber-attacksend-user technology, social engineering and phishing attacks, and cyberattacks causing systems degradation or service unavailability that may result in business losses.
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We may not be able to successfully protect our information technology systems and platforms against such threats. We have seen in recent years computer systems of companies and organizations being increasingly targeted, and the techniques used to obtain unauthorized, improper or illegal access to information technology systems have become increasingly complex and sophisticated. Furthermore, such techniques change frequently and are often not recognized or detected until after they have been launched and can originate from a wide variety of sources, including not only by cyber criminals, but also by activists and rogue states. We have been and continue to be subject to a range of cyber-attacks,cyberattacks, such as denial of service, malware and phishing. Cyber-attacksCyberattacks could give rise to the loss of significant amounts of customer data and other sensitive information, as well as significant levels of liquid assets (including cash). In addition, cyber-attackscyberattacks could give rise to the disablement ofdisrupt our information technologyelectronic systems used to service our customers. As attempted attacks continue
If we fall victim to evolvesuccessful cyberattacks or experience cybersecurity, operational or security incidents in scope and sophistication,the future, we may incur significantsubstantial costs inand suffer other negative consequences, such as remediation costs (liabilities for stolen assets or information, or repairs of system damage, among others), increased cybersecurity protection costs, lost revenues arising from the unauthorized use of proprietary information or the failure to retain or attract customers following an attack, as already mentioned, litigation and legal risks, increased insurance premiums, reputational damage affecting our attempt to modify or enhance our protective measures against such attacks, or to investigate or remediate any vulnerability or resulting breach, or in communicating cyber-attackscustomers’ and investors’ confidence, as well as damages to our customers.competitiveness, stock price and long-term shareholder value.
We are also subject to increasing scrutiny and regulation governing cybersecurity risks. Such regulation is fragmented and constantly evolving, and includes CMN Resolution No. 4,893/2021. See “Item 4. Information on the Company��B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulations on Cybersecurity.” We could be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that we are required to alter our systems or require changes to our business practices or policies. A failure to implement all or some of these new global and local regulations, that in some cases have severe sanctions regimes, could also have a material adverse effect on us. If we fail to effectively manage our cyber securitycybersecurity risk, e.g.,for example, by failing to update our systems and processes in response to new threats, this could harm our reputation and adversely affect our operating results, financial condition and prospects through the payment of customer compensation or other damages, litigation expenses, regulatory penalties and fines and/or through the loss of assets. Furthermore, upon a failure to comply with applicable law and regulation, we may be ordered to change our business practices, policies or systems in a manner that adversely impacts our operating results.
In addition, we may also be subject to cyber-attackscyberattacks against critical infrastructures of Brazil. Our information technology systems are dependent on such critical infrastructure, and any cyber-attackcyberattack against such critical infrastructure could negatively affect our ability to service our customers. As we do not operate such critical infrastructure, we have limited ability to protect our information technology systems from the adverse effects of such a cyber-attack.cyberattack. See “Item 4. Information on the Company—B. Business Overview—TechnologyOverview.”
It is important to highlight that even when a failure of or interruption in our systems or facilities is resolved in a timely manner or an attempted cyber incident or other security breach is successfully avoided or thwarted, normally substantial resources are expended in doing so, and Infrastructure.”we may be required to take actions that could adversely affect customer satisfaction or behavior, as well as represent a threat to our reputation.
For additional information, see also “—We are subject to increasing scrutiny and regulation from data protection laws, including penalties in the event of noncompliance with the terms and conditions of certain new European and Brazilian regulations” and “—Failure to protect personal information could adversely affect us.”
We are subject to counterparty risk in our business.
We are exposed to counterparty risk in addition to credit risks associated with lending activities. Counterparty risk may arise from, for example, investing in securities of third parties, entering into derivative contracts under which counterparties have obligations to make payments to us, or executing securities, futures, currency or
commodity trades from proprietary trading activities that fail to settle at the required time due to non-delivery by the counterparty or systems failure by clearing agents, clearing houses or other financial intermediaries.
We routinely transact with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual funds, hedge funds and other institutional clients.customers. Defaults by, and even rumors or questions about the solvency of, certain financial institutions and the financial services industry generally have led to market-wide liquidity problems and could lead to losses or defaults by other institutions. Many of the routine transactions we enter into expose us to significant credit risk in the event of default by one of our significant counterparties.
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If these risks give rise to losses, this could materially and adversely affect us. We have a diversified loan portfolio, with no specific concentration exceeding 10% of total loans. Furthermore, currently, 2%1.2% of our loan portfolio is allocated to our largest debtor and 10%7.4% to our next 10 largest debtors. However, we cannot assure this will continue to be the case. If counterparty risks give rise to losses, this could materially and adversely affect our results of operations and financial condition.
Our financial results are constantly exposed to market risk. We are subject to fluctuations in interest rates and other market risks, which may materially and adversely affect us and our profitability.
The COVID-19 pandemic has caused and may continue to cause significant market volatility which may materially and adversely affect us and our trading and banking book.
Market risk refers to the probability of variations in our interest income/(charges) or in the market value of our assets and liabilities due to volatility of interest rate, inflation, exchange rate, commodity price or equity price. Changes in interest rates affect the following areas, among others, of our business:
● | interest income / (charges); |
● | the volume of loans originated; |
● | credit spreads; |
● | the market value of our securities holdings; |
● | the value of our loans and deposits; and |
● | the value of our derivatives transactions. |
Interest rates are sensitive to many factors beyond our control, including increased regulation of the financial sector, monetary policies and domestic and international economic and political conditions. Variations in interest rates could affect the interest earned on our assets and the interest paid on our borrowings, thereby affecting our interest income/(charges), which comprises the majority of our revenue, reducing our growth rate and potentially resulting in losses. In addition, costs we incur as we implement strategies to reduce interest rate exposure could increase in the future (which, in turn, will impact our results).
Due to the historically low interest rate environment in Brazil in recent years, the rates on many of our interest-bearing deposit products have been priced at or near zero or negative, limiting our ability to further reduce rates and thus negatively impacting our margins.
Interest rates have been increasing in Brazil since March 2021. Increases in interest rates may reduce the volume of loans we originate. We have generally observed an inversely proportional relationship between interest rates and credit demand. We believe this is due to the fact that higher interest rates increase transaction costs and therefore discourage consumption. However, the demand for certain products and services, such as overdrafts and revolving checks, is not significantly affected by increases in interest rates. As a result of these factors, we estimate that the recent increases in interest rates could result both in decreased demand for credit products but also in changes to the overall composition of our portfolio.
Sustained high interest rates may dampen economic growth. Higher interest rates have historically discouraged customers from borrowing and have resulted in increased delinquencies in outstanding loans and deterioration in the quality of assets.
Increases in interest rates may reduce the value of our financial assets and may reduce gains or require us to record losses on sales of our loans or securities. In particular, certain assets are constantly marked-to-market and are therefore affected by changes in prevailing interest rates. This process may result in significant reductions in book values and to impairment losses.
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We are also exposed to foreign exchange rate risk as a result of mismatches between assets and liabilities denominated in different currencies. Fluctuations in the exchange rate between currencies may negatively affect our earnings and value of our assets and securities.
We are also exposed to equity price risk in our investments in equity securities in the banking book and in the trading portfolio. The performance of financial markets may cause changes in the value of our investment and trading portfolios. The volatility of world equity markets due to the continued economic uncertainty and sovereign debt crisis has had a particularly strong impact on the financial sector. Continued volatility may affect the value of our investments in equity securities and, depending on their fair value and future recovery expectations, could become a permanent impairment which would be subject to write-offs against our results.
Market conditions have resulted and could result in material changes to the estimated fair values of our financial assets. Negative fair value adjustments could have a material adverse effect on our operating results, financial condition and prospects.
In the past, financial markets have been subject to significant stress resulting in steep falls in perceived or actual financial asset values, particularly due to volatility in global financial markets and the resulting widening of credit spreads, including as a result of the COVID-19 pandemic. We have material exposures to securities, loans and other investments that are recorded at fair value and are therefore exposed to potential negative fair value adjustments. Asset valuations in future periods, reflecting then-prevailing market conditions, may result in negative changes in the fair values of our financial assets and these may also translate into increased impairments. In addition, the value ultimately realized by us on disposal may be lower than the current fair value. Any of these factors could require us to record negative fair value adjustments, which may have a material adverse effect on our operating results, financial condition or prospects.
In addition, to the extent that fair values are determined using financial valuation models, such values may be inaccurate or subject to change, as the data used by such models may not be available or may become unavailable due to changes in market conditions, particularly for illiquid assets, and particularly in times of economic instability. In such circumstances, our valuation methodologies require us to make assumptions, judgements and estimates in order to establish fair value, and reliable assumptions are difficult to make and are inherently uncertain and valuation models are complex, making them inherently imperfect predictors of actual results. Any consequential impairments or write-downs could have a material adverse effect on our operating results, financial condition and prospects.
We face risks related to market concentration.
Concentration risk is the risk associated with potential high financial losses triggered by significant exposure to particular component of risk, whether it be related to a particular counterparty, industry or geographic concentration. Examples of such risks include significant exposure to a single counterparty, to counterparties operating in the same economic sector or geographical region, or to financial instruments that depend on the same index or currency.
We believe that an excessive concentration with respect to a particular risk factor could generate a relevant financial loss for us, especially if the risk is one described in this annual report. We recognize the importance of this risk and the potential impacts that may affect our portfolio and results of operations.
The financial problems faced by our customers could adversely affect us.
MarketPotential market turmoil and economic recession could materially and adversely affect the liquidity, credit ratings, businesses and/or financial conditions of our borrowers, which could in turn increase our non-performingnonperforming loan ratios, impair our loan and other financial assets, and result in decreased demand for borrowings in general. We have credit exposure to borrowers whichthat have entered or may shortly enter into bankruptcy or similar proceedings. We may experience material losses from this exposure.
In addition, our customers may further significantly decrease their risk tolerance to non-deposit investments such as stocks, bonds and mutual funds, which would adversely affect our fee and commission income. We may also be adversely affected by the negative effects of the heightened regulatory environment on our customers due to the high costs associated with regulatory compliance and proceedings. Any of the conditions described above could have a material adverse effect on us.
We engage in transactions with related parties that others may not consider to be on an arm’s lengtharm’s-length basis.
We and our affiliates have entered into a number of services agreements pursuant to which we render and/or receive services, such as administrative, accounting, finance, treasury, legal services and others from (or provide such services to) related parties. We are likely to continue to engage in transactions with such related parties (including our controlling shareholder) that others may not consider to be on an arm’s lengtharm’s-length basis. Future conflicts of interests may arise between us and any of our affiliates, or among our affiliates, may arise, which conflicts may not be resolved in our favor. See “Item 7. Major Shareholders and Related Party Transactions.”
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Changes in accounting standards could impact reported earnings.
The entities that set accounting standardsstandard setters and other regulatory bodies periodically change the financial accounting and reporting standards that govern the preparation of our consolidated financial statements. These changes can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. For further information about developments in financial accounting and reporting standards see note 1 to our audited consolidated financial statements included elsewhere in this annual report.
Our financial statements are based in part on assumptions and estimates that impact the results of our operations.
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts that differ from those estimates. Estimates, judgments and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. The accounting policies deemed critical to our results and financial position, based upon materiality and significant judgments and estimates, include impairment of financial assets measured at amortized cost, goodwill impairment, valuation of financial instruments, impairment of financial assets measured at fair value through other comprehensive income, deferred tax assets provision, and pension obligation for liabilities.
If the judgment, estimates and assumptions we use in preparing our consolidated financial statements are subsequently found to be incorrect, there could be a material effect on our results of operations and a corresponding effect on our funding requirements and capital ratios.
Our business is highly dependent on the proper functioning of our information technology systems.
Our business is highly dependent on the ability of our information technology systems to accurately process a large number of transactions across numerous and diverse markets and products in a timely manner, and on our ability to rely on our digital technologies, computer and email services, software, and networks, as well as on the secure processing, storage and transmission of confidential data and other information in our computer systems and networks. The proper functioning of our financial control, risk management, accounting, customer service and other data processing systems is critical to our business and our ability to compete effectively.
We do not operate all of our redundant systems on a real-time basis and cannot assure you that our business activities would not be materially disrupted if there were a partial or complete failure of any of these primary information technology systems or communication networks. Such failures could be caused by, among other things,
major natural catastrophes, software bugs, computer virus attacks, or conversion errors due to system upgrading. In addition, anyupgrading, security breachbreaches caused by unauthorized access to information or systems, or intentional malfunctions or loss or corruption of data, software, hardware or other computer equipmentequipment. Any such failures could have a material adverse effect ondisrupt our business and impair our ability to provide our services and products effectively to our customers, which could adversely affect our reputation as well as our business, results of operations and financial condition.
Our ability to remain competitive and achieve further growth will depend in part on our ability to upgrade our information technology systems and increase our capacity on a timely and cost effectivecost-effective basis. We must continually make significant investments and improvements in our information technology infrastructure in order to remain competitive. We cannot assure you that in the future we will be able to maintain the level of capital expenditures necessary to support the improvement or upgrading of our information technology infrastructure. Any substantial failure to improve or upgrade our information technology infrastructure and management systems effectivelyin an effective, timely and cost-effective manner, including in response to new or onmodified cybersecurity and data privacy laws, rules and regulations could have a timely basis could materially and adversely affectmaterial adverse effect on us.
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Failure to protect personal information could adversely affect us.
We managereceive, maintain and holdstore confidential personal information of our customers and counterparties, including, but not limited to, personally identifiable information and personal financial information in the ordinary course of our banking operations. The sharing, use, disclosure and protection of this information are governed by various Brazilian and foreign laws.
Although we have procedures and controls in place to safeguard personal and other confidential or sensitive information in our possession, unauthorized disclosuresaccess or security breachesdisclosures could subject us to legal actions and administrative sanctions, as well as damages and reputational harm that could materially and adversely affect our operating results, financial condition and prospects. Further,Furthermore, our business is exposed to risk from employees’ potential non-compliance with policies, employee misconduct, or negligence andor fraud, which could result in regulatory sanctions and serious reputational orand financial harm. It is not always possible to deter or prevent employee misconduct, and the precautions we take to detect and prevent this activity may not always be effective. We also face the risk that the design of our controls and procedures prove to be inadequate or are circumvented such that the data we hold is incomplete, not recoverable or not securely stored. In addition, we may be required to report events related to information security issues, (including any cyber security issues), events where customer information may be compromised, unauthorized access to our systems and other security breaches, to the relevant regulatory authorities. Any material disruption or slowdown of our systems could cause information, including data related to customer requests, to be lost or to be delivered to our clientscustomers with delays or errors, which could reduce demand for our services and products and could materially and adversely affect us. If we cannot maintain effective and secure electronic data and information, management and processing systems or if we fail to maintain complete physical and electronic records, this could result in disruptions to our operations, claims from customers, regulators, employees and other parties, violations of applicable privacy and other laws, regulatory sanctions and serious reputational and financial harm to us. Moreover, as a result of the COVID-19 pandemic, we have increased the number of employees working remotely, which may increase the vulnerability of our systems and impact our ability to conduct business.
Furthermore, data breaches and other security incidents with respect to our or our third-party vendors’ systems could adversely affect our business or reputation, and create significant legal, regulatory or financial exposure. Although we work with our clients, vendors, service providers, counterparties and other third parties to develop secure data and information processing, collection, authentication, management, usage, storage and transmission capabilities and to ensure the eventual destruction of sensitive and confidential information, including personal information, to prevent against information security risk, we routinely manage personal, confidential and proprietary information by electronic means, and we, our third-party vendors or other third parties with which we do business may be the target of attempted cyberattacks or subject to other information security incidents or breaches. This is especially applicable in the current environment, which is still being affected by the COVID-19 pandemic, and the shift to work-from-home policies for a significant portion of our workforce, as they access our secure networks remotely (see “—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations”). If we cannot maintain effective and secure electronic data and information (including personal information), management and processing systems or if we fail to maintain complete physical and electronic records, this could result in disruptions to our operations, litigation or claims from customers, regulators, employees and other third parties, violations of applicable privacy and other laws, rules or regulations, regulatory sanctions and serious reputational and financial harm to us.
For additional information, see also “—We are subject to increasing scrutiny and regulation from data protection laws, including penalties in the event of noncompliance with the terms and conditions of certain new European and Brazilian regulations” and “—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”
Damage to our reputation could cause harm to us.
Maintaining a positive reputation is critical to protect our attractingbrand, attract and maintainingretain customers, investors and employees.employees and conduct business transactions with counterparties. Damage to our reputation cancould therefore cause significant harm to our business and prospects. Harm to our reputation cancould arise from numerous sources, including, among others, employee misconduct, including the possibility of fraud perpetrated by our employees, litigation or regulatory outcomes,enforcement, failure to deliver minimum standards of service and quality, dealings with sectors that are not well perceived by the public, ratings downgrades, significant fluctuations in our share price, dealing with customers in sanctions lists, rating downgrades, significant variations in the price of our ADRs throughout the year, compliance failures, unethical behavior, and the activities of customers, service providers and counterparties.other counterparties, including activities that negatively affect the environment. Further, negative publicity regarding us whether or not true, may result in harm to us.our prospects.
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Actions by the financial services industry generally or by certain members of, or individuals in, the industry can also affect our reputation. For example, the role played by financial services firms in the financial crisis and the seeming shift toward increasing regulatory supervision and enforcement has caused public perception of us and others in the financial services industry to decline.
We could suffer significant reputational harm if we fail to identify and manage potential conflicts of interest properly. The failure, or perceived failure, to adequately address conflicts of interest could affect the willingness of clientscustomers to deal with us or give rise to litigation or enforcement actions against us. Therefore, there can be no assurance that conflicts of interest will not arise in the future that could cause material harm to us.
Any failureWe may be the subject of misinformation and misrepresentations deliberately propagated to establishharm our reputation or preserve a favorable reputation among our customersfor other deceitful purposes, or by profiteering short sellers seeking to gain an illegal market advantage by spreading false information about us. There can be no assurance that we will effectively neutralize and in the market in generalcontain false information that may be propagated regarding us, which could have a materialan adverse effect on us.
our operating results, financial condition and prospects.
We plan to continue to expand our operations and we may not be able to manage such growth effectively, which could have an adverse impact on us, including our profitability.
We may also not be successful in any reorganizations, dispositions or spin-offs we undertake.
We allocate management and planning resources to develop strategic plans for organic growth and to identify possible acquisitions and disposals and areas for restructuring our businesses. From time to time, we evaluate acquisition and partnership opportunities that we believecan offer additional value to our shareholders and are consistent with our business strategy. However, we may not be able to identify suitable acquisition or partnership candidates, and our ability to benefit from any such acquisitions and partnerships will depend in part on our successful integration of those businesses. Any such integration entails significant risks such as unforeseen difficulties in integrating operations and systems and unexpected liabilities or contingencies relating to the acquired businesses, including legal claims. We cannot provide assurance that we will, in all cases, be able to manage our
growth effectively or deliver our strategic growth objectives. Challenges that may result from our strategic growth decisions include our ability to:
manage efficiently the operations and employees of expanding businesses; |
maintain or grow our existing customer base; |
assess the value, strengths and weaknesses of investment or acquisition candidates, including local regulation that can reduce or eliminate expected synergies; |
finance and integrate strategic investments or acquisitions; |
align our current information technology systems adequately with those of an enlarged group; |
apply our risk management policy effectively to an enlarged group; and |
manage a growing number of entities without |
Any failure to manage growth effectively could have a material adverse effect on our operating results, financial condition and prospects.
In addition, any acquisition or venture could result in the loss of key employees and inconsistencies in standards, controls, procedures and policies.
Moreover, the success of the acquisition or venture will at least in part be subject to a number of political, economic and other factors that are beyond our control. Any of these factors, individually or collectively, could have a material adverse effect on us.
Similarly, we cannot ensure that we will be able to successfully divest or spin off businesses or other assets that we have identified for this purpose, or that any completed divestment or spin-off will achieve the expected strategic benefits, operational efficiencies or opportunities, or that the divestment or spin-off will ultimately maximize shareholder value.
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We may not realize the anticipated benefits from the Spin-Off, and the Spin-Off could harm our business.
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, in October 2021. We cannot assure you that the Spin-Off will achieve the expected strategic benefits, operational efficiencies or opportunities we envisaged, or that it will ultimately maximize shareholder value.
Furthermore, on April 15, 2021, we entered into the Getnet Partnership Agreement with Getnet, which provides a framework for our relationship with Getnet following the Spin-Off. Pursuant to the Partnership Agreement, both parties have the right to terminate the Partnership Agreement at will, upon one-year prior written notice to the other party. In case of fault by the other party, as described by the Partnership Agreement, such as due to insolvency, bankruptcy, loss of material license, among others, the non-defaulting party is free to terminate the Partnership Agreement by means of a simple notification sent to the other party. We may suffer a material adverse effect if the Getnet Partnership Agreement is terminated or not renewed, or if we are unable to enter into a favorable agreement with a new partner in the event of termination of the Getnet Partnership Agreement.
Goodwill impairments may be required in relation to acquired businesses.
We have made business acquisitions in the past and may make further acquisitions in the future. It is possible that the goodwill which has been attributed, or may be attributed, to these businesses may have to be written down if our valuation assumptions are required to be reassessed as a result of any deterioration in their underlying profitability, asset quality and other relevant matters. Impairment testing in respect of goodwill is performed annually, or more frequently if there are impairment indicators present, and comprises a comparison of the carrying amount of the cash-generating unit with its recoverable amount. Goodwill impairment does not, however, affect our regulatory capital. There can be no assurances that we will not have to write down the value attributed to goodwill in the future, which would adversely affect our results and net assets.
We rely on recruiting, retaining and developing appropriate senior management and skilled personnel.
Our continued success depends in part on the continued service of key members of our senior executive team and other key employees. The ability to continue to attract, train, motivate and retain highly qualified and talented professionals is a key element of our strategy. The successful implementation of our strategy and culture depends on the availability of skilled and appropriate management, both at our head office and in each of our business units. If we or one of our business units or other functions fails to staff its operations appropriately, or loses one or more of its key senior executives or other key employees and fails to replace them in a satisfactory and timely manner, our business, financial condition and results of operations, including control and operational risks, may be adversely affected.
Our ability to attract and retain qualified employees is affected by perceptions of our culture and management, our profile in the markets in which we operate and the professional opportunities we offer.
In addition, the financial industry has experienced and may continue to experience more stringent regulation of employee compensation, which could have an adverse effect on our ability to hire or retain the most qualified employees. If we fail or are unable to attract and appropriately train, motivate and retain qualified professionals, our business may also be adversely affected.
We rely on third parties and affiliates for important products and services.
Third-party vendors and certain affiliated companies provide key components of our business infrastructure such as loan and deposit servicing systems, back office and business process support, information technology production and support, internet connections, and network access (including cloud-based services). Relying on these third parties and affiliated companies can be a source of operational and regulatory risk to us, including with respect to security breaches affecting such parties. We are also subject to risk with respect to security breaches affecting the vendors and other parties that interact with these service providers. As our interconnectivity with these third parties and affiliated companies increases, we face the risk of operational failure with respect to their systems. We may be required to take steps to protect the integrity of our operational systems, thereby increasing our operational costs. In addition, certain problems caused by these third parties or affiliated companies could affect our ability to deliver products and services to customers. While we have diversified providers for the main services and keep strict and close monitoring on them, in some instances, replacing these third-party vendors could also entail delays and expense. Further, the operational and regulatory risk we face as a result of these arrange ments may be increased to the extent that we restructure such arrangements. Restructurings could involve significant expense to us and entail significant delivery and execution risk, which could have a material adverse effect on our business, operations and financial condition.
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Past performance of our loan portfolio may not be indicative of future performance; changes in the profile of our business may adversely affect our loan portfolio. In addition, the value of any collateral securing our loans may not be sufficient, and we may be unable to realize the full value of the collateral securing our loan portfolio.
Our historical loan loss experience may not be indicative of our future loan losses. While the quality of our loan portfolio is associated with the default risk in the sectors in which we operate, changes in our business profile may occur due, among other factors, to our organic growth, merger and acquisition activity, changes in local economic and political conditions, a slowdown in customer demand, an increase in market competition, changes in regulation and in the tax regimes applicable to the sectors in which we operate and, to a lesser extent, other related changes in countries in which we operate and in the international economic environment. In addition, the market value of any collateral related to our loan portfolio may fluctuate, from the time we evaluate it at the beginning of the trade to the time such collateral can be executed upon, due to the factors related to changes in economic, political or sectorial factors beyond our control, and we may be unable to realize the full value of the collateral securing our loan portfolio.
We rely on models for many of our decisions. Their inaccurate or incorrect use could have a material adverse effect on us.
We use models for approval (scoring/rating), capital calculation, behavior, provisions, market risk, operational risk, compliance and liquidity. A model is a system, approach or quantitative method that applies statistical, economic, financial or mathematical theories, techniques or hypotheses to transform input data into quantitative estimates. It involves simplified representations of real world relationships between characteristics, values and observed assumptions that allows us to focus on specific aspects.
Model risk is the negative consequence of decisions based on inaccurate, improper or incorrect use of models. Sources of model risk include (i) incorrect or incomplete data in the model itself or the modelling method used in systems; and (ii) incorrect use or implementation of the model.
Model risk can cause financial loss, erroneous commercial and strategic decision-making or damage to our transactions any of which could have a material adverse effect on our operating results, financial condition and prospects. In addition, our models and the underlying methodologies are subject to scrutiny from our supervisors, who could identify potential weaknesses or deficiencies that may result in enforcement actions, including sanctions, fines and/or the imposition of stricter capital requirements, as well as mandates and recommendations with respect to the methodologies underlying our models, which could also lead us to more onerous or inefficient capital consumptions.
Unprecedented movement in economic and market drivers related to the COVID-19 pandemic required monitoring and adjustment of financial models (including credit loss models, capital models, traded risk models and models used in the asset/liability management process) to comply with the guidance and recommendations of standard setters, regulators and supervisors, particularly for credit loss models. It also resulted in the use of mitigants for model limitations, such as adjustments to model outputs to reflect consideration of management judgment. The performance and usage of models was and may continue to be impacted by the consequences of the COVID-19 pandemic. In addition, data obtained during the COVID-19 pandemic may not be representative and may distort the calibration of the models in the future, which could have a material adverse effect on us.
In addition, the fair value of our financial assets, determined using financial valuation models, may be inaccurate or subject to change and, as a consequence, we may have to register impairments or write-downs that could have a material adverse effect on our operating results, financial condition and prospects. See “—Market conditions have resulted and could result in material changes to the estimated fair values of our financial assets. Negative fair value adjustments could have a material adverse effect on our operating results, financial condition and prospects.
Climate change can create transition risks, physical risks and other risks that could adversely affect us.
There is an increasing concern over the risks of climate change and related environmental sustainability matters. Climate change may imply three primary drivers of financial risk that could adversely affect us:
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● | Transition risks associated with the move to a low-carbon economy, both at idiosyncratic and systemic levels, such as through policy, regulatory and technological changes, which could increase our expenses and impact our strategies. |
● | Physical risks related to discrete events, such as flooding and wildfires, and extreme weather impacts and longer term shifts in climate patters, such as extreme heat, sea level rise and more frequent and prolonged drought, which could result in financial losses that could impair asset values and the creditworthiness of our customers. Such events could disrupt our operations or those of our customers or third parties on which we rely and do business with, including through direct damage to assets and indirect impacts from supply chain disruption and market volatility. |
● | Liability risks derived from parties who may suffer losses from the effects of climate change and may seek compensation from state entities, regulators, investors and lenders, among others. |
These primary drivers could materialize, among others, in the following financial risks:
● | Credit risks: Physical climate change could lead to increased credit exposure and companies with business models not aligned with the transition to a low-carbon economy may face a higher risk of reduced corporate earnings and business disruption due to new regulations or market shifts. |
● | Market risks: Market changes in the most carbon-intensive sectors could affect energy and commodity prices, corporate bonds, equities and certain derivatives contracts. Increasing frequency of severe weather events could affect macroeconomic conditions, weakening fundamental factors such as economic growth, employment and inflation. |
● | Operational risks: Severe weather events could directly impact business continuity and operations both of customers and ours. |
● | Reputational risk: our reputation and client relationships may be damaged as a result of our practices and decisions related to climate change, social and environmental matters, or to the practices or involvement of our clients, in certain industries or projects associated with causing or exacerbating climate change. |
As a financial institution, we are already subject to certain regulatory environmental, social and governance, or “ESG,” requirements as detailed under “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Environmental, Social and Governance (ESG) requirements applicable to financial institutions.” These requirements may increase going forward as a result of the increasing importance of ESG matters. This and other changes in regulations in Brazil and international markets may expose us to increased compliance costs, limit our ability to pursue certain business opportunities and provide certain products and services, each of which could adversely affect our business, financial condition and results of operations.
As climate risk is interconnected with all key risk types, we have developed and continue to enhance processes to embed climate risk considerations into our risk management strategies established for risks; however, because the timing and severity of climate change may not be predictable, our risk management strategies may not be effective in mitigating climate risk exposure.
Any of the conditions described above could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to Our Controlling Shareholder, Our Units and American Depositary Receipts (ADRs)
Our ultimate controlling shareholder has a great deal of influence over our business, and its interests could conflict with ours.
Santander Spain, our ultimate controlling shareholder, currently owns, directly and indirectly, approximately 88.8%89.53 % of our total capital (not including the shares held by Banco Madesant - Sociedade Unipessoal).capital. Due to its share ownership, our controlling shareholder has the power to control us and our subsidiaries, including the power to:
elect a majority of our directors that appoint our executive officers, set our management policies and exercise overall control over our |
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influence the appointment of our principal officers; |
declare the payment of any dividends; |
agree to sell or otherwise transfer its controlling stake in our |
determine the outcome of substantially all actions requiring shareholder approval, including amendments of our |
In December 2012, primarily in response to the requirements of the European Banking Authority, Santander Spain adopted a corporate governance framework (Marco de Gobierno Interno del Grupo SantandeSantanderr)) to organize and standardize the corporate governance practices of certain companies of the Santander Group (including us). We adopted this corporate governance framework in May 2013, subject to the precedence of applicable Brazilian laws, regulations and limitations, such as banking secrecy laws, as well as ourlimitations. Our corporate governance practices, including our policies for related party transactions and for disclosure of material acts and facts. See “Item 16G. Corporate Governance.”
On July 27,model was further amended in 2015 as a result of theto reflect certain new requirements ofimposed on our parent company, Santander Spain, by the European Central Bank, the Bank of Spain and the regulators in different jurisdictions, our parent, Santander Spain established a new corporate governance model for its subsidiaries, with the purpose of setting forth a clear and transparent conceptual framework to govern their relationship. Our Board of Directors approved the new corporate governance model on January 26, 2016.
jurisdictions. See “Item 16G. Corporate Governance.”
We operate as a stand-alone subsidiary within the Santander Group. Our controlling shareholder has no liability for our banking operations, except for the amount of its holdings of our capital stock and for other specific limited circumstances under Brazilian law. The interests of Santander Spain may differ from the interests of our other shareholders, and the concentration of control in Santander Spain will limit other stockholders’ ability to influence corporate matters. As a result, we may take actions that our other shareholders do not view as beneficial.
Our status as a controlled company and a foreign private issuer exempts us from certain of the corporate governance standards of the New York Stock Exchange, (“NYSE”),or “NYSE,” limiting the protections afforded to investors.
We are a “controlled company” and a “foreign private issuer” within the meaning of the NYSE corporate governance standards. Under the NYSE rules, a controlled company is exempt from certain NYSE corporate governance requirements. In addition, a foreign private issuer may elect to comply with the practice of its home country and not to comply with certain NYSE corporate governance requirements, including the requirements that (i) a majority of the board of directors consists of independent directors, (ii) a nominating and corporate governance committee be established that is composed entirely of independent directors and has a written charter addressing the committee’s purpose and responsibilities, (iii) a compensation committee be established that is composed entirely of independent directors and has a written charter addressing the committee’s purpose and responsibilities, and (iv) an annual performance evaluation of the nominating and corporate governance and compensation committees be undertaken. Although we have similar practices, they do not entirely conform to the NYSE requirements,requirements; therefore, we currently use these exemptions and intend to continue using them. Accordingly, you will not have the same protections affordedprovided to shareholders of companies that are subject to all NYSE corporate governance requirements.
The liquidity and market prices of the units and the ADRs may be adversely affected by the cancelationcancellation of units or substantial sale of units and shares in the market.
market, or by the relative volatility and limited liquidity of the Brazilian securities markets.
Holders of units may present these units or some of these units for cancellation in Brazil in exchange for the common shares and preferred shares underlying these units. If unit holders present a significant number of units for cancellation in exchange for the underlying common shares and preferred shares, the liquidity and price of the units and ADRs may be materially and adversely affected.
Also, sales of a substantial number of our units, or our common shares or preferred shares in the future, or the anticipation of such sales, could negatively affect the market prices of our units and ADRs. If, in the future, substantial sales of units, or common shares or preferred shares are made by existing or future holders, the market prices of the ADRs may decrease significantly. As a result, holders of ADRs may not be able to sell their ADRs at or above the price they paid for them.
The relative volatility and limited liquidity of the Brazilian securities markets may negatively affect the liquidity and market prices of the units and the ADRs.
The BM&FBOVESPAB3 is significantly less liquid than the NYSE or other major exchanges in the world. As of December 31, 2016,2021, the aggregate market capitalization of the BM&FBOVESPAB3 was equivalent to approximately R$2.24 4.5 trillion (U.S.$7110.8 billion), and the top ten stocks in terms of trading volume accounted for approximately 42.71%43% of all shares traded on BM&FBOVESPAB3 in the year ended December 31, 2016.2021. In contrast, as of December 31, 2016,2021, the aggregate market capitalization of the NYSE was approximately U.S.$ 1927.7 trillion. Although any of the outstanding shares of a listed company may trade on the BM&FBOVESPA,B3, in most cases fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, government entities or a principal shareholder.
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The uncertainties caused by the outbreak of COVID-19 had an adverse impact on the global economy and global capital markets, including in Brazil, during the course of 2020 and, to a lesser extent, 2021 and early 2022. As a result of this volatility, the B3’s circuit breaker mechanism was triggered eight times during March 2020. The prices of most of the securities traded on the NYSE and the B3, including the price of our securities, was adversely affected by the COVID-19 pandemic. Impacts similar to those described above may reoccur, which may result in volatility in the prices of our securities traded on the NYSE and on the B3. We cannot assure you that the price of our securities will not fall below the lowest levels at which our securities traded during the ongoing pandemic.
The relative volatility and limited liquidity of the Brazilian securities markets may substantially limit your ability to sell the units or ADRs at the time and price you desire and, as a result, could negatively impact the market price of these securities.
If securities analysts do not publish research or reports about our business or if they downgrade our ADRs or shares orsecurities issued by other companies in our sector, the price and trading volume of our ADRs and/or our shares price and trading volume could decline.
The trading market for our ADRs and our shares has been affected in part by the research and reports that industry and financial analysts publish about us or our business. We do not control these analysts. Furthermore, if one or more of the analysts who cover us downgrade our ADRs, our shares or our industry, change their views regarding the shares of any of our competitors, or other companies in our sector, or publish inaccurate or unfavorable research about our business, the market price of our ADRs and/or shares could decline. If one or more of these analysts ceases coverage of usstops providing reports or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our ADR and/or share price or trading volume to decline.
The economic value of your investment may be diluted.
We may, from time to time, need additional funds, and we may issue additional units or shares. Any additional funds obtained by such a capital increase may dilute your interest in our company.
Company or decrease the market price of our shares, units or ADRs.
Discontinuation of the current corporate governance practices may negatively affect the price of our ADRs and units.
After completion of the voluntary exchange offers by Santander Spain in Brazil and in the United States (respectively, the “Brazilian Exchange Offer” and the “U.S. Exchange Offer”) for the acquisition of up to the totalityall of our shares that were not held by the Santander Group at that time, we are no longer subject to the obligations of the special listing segment of BM&FBOVESPAB3 known as Corporate Governance Level 2 (the “Level 2 Segment”). Currently, we voluntarily comply with certain of the corporate governance requirements for companies listed on the Level 2 Segment.
Discontinuation, in whole or in part, of our existing corporate governance practices or minimum protections may adversely affect your rights as a security holder and may result in a decrease of the price of our shares, units and ADRs.
Holders of our units and our ADRs may not receive any dividends or interest on stockholders’ equity.
According to our By-Laws, we must generally pay our shareholders at least 25.0% of our annual net income as dividends or interest on stockholders’ equity, as calculated and adjusted under Brazilian Corporate Law, (“adjustedor “adjusted net income”),income,” which may differ significantly from our net income as determined under IFRS. This adjusted net income may be used to increase capital usedor to absorb losses, or otherwise retained as allowed under Brazilian Corporate Law, and may not be available to be paid as dividends or interest on stockholders’ equity. Additionally, Brazilian Corporate Law allows a publicly traded company, like ours, to suspend the mandatory distribution of dividends and interest on stockholders’ equity in any particular year if our board of directors informs our shareholders that such distributions would be inadvisable in view of our financial condition or cash
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availability. We paid R$1.510.9 billion, R$6.23.8 billion and R$5.310.8 billion (R$0.41,2.94, R$1.651.03 and R$1.402.90 per unit, respectively) as dividends and interest on stockholders’ equity (considering gross value) in 2014, 20152021, 2020 and 2016,2019, respectively, in accordance with our dividend policy, but there can be no assurance that dividends and interest on stockholders’ equity will be paid in the future. We are also subject to Brazilian banking regulations that may limit the payment of dividends or interest on stockholders’ equity. SeeThese regulations have recently included a temporary restriction on dividend distributions and other payments as a result of measures taken by the Brazilian Central Bank to combat the COVID-19 pandemic’s effect on the Brazilian financial sector (see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19—Temporary Suspension of Dividend Distributions and Other Payments” and “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—History of Payment of Dividends and Interest Attributable to Stockholders’Shareholders’ Equity.”
Although this restriction has not been reinstated in 2021, we cannot assure you that it will not be reinstated in the future.
Holders of ADRs may find it difficult to exercise voting rights at our stockholders’shareholders’ meetings.
Holders of ADRs will not be our direct shareholders and will be unable to enforce directly the rights of shareholders under our By-Laws and Brazilian Corporate Law. Holders of ADRs may exercise voting rights with respect to the units represented by ADRs only in accordance with the deposit agreement governing the ADRs. Holders of ADRs will face practical limitations in exercising their voting rights because of the additional steps involved in our communications with ADR holders. For example, we are required to publish a notice of our stockholders’ meetings in specified newspapers in Brazil. Holders of our units will be able to exercise their voting rights by attending a stockholders’ meeting in person or voting by proxy. By contrast, holders of ADRs will receive notice of a stockholders’ meeting by mail from the ADRs depositary following our notice to the depositary requesting the depositorydepositary to do so. To exercise their voting rights, holders of ADRs must instruct the ADR depositary on a timely basis on how they wish to vote. This voting process necessarily will take longer for holders of
ADRs than for holders of our units or shares. If the ADR depositary fails to receive timely voting instructions for all or part of the ADRs, the depositary will assume that the holders of those ADRs are instructing it to give a discretionary proxy to a person designated by us to vote their ADRs, except in limited circumstances.
Holders of ADRs also may not receive the voting materials in time to instruct the depositary to vote the units underlying their ADRs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of ADRs or for the manner of carrying out those voting instructions. Accordingly, holders of ADRs may not be able to exercise voting rights, and they will have little, if any, recourse if the units underlying their ADRs are not voted as requested.
Holders of ADRs could be subject to Brazilian income tax on capital gains from sales of ADRs.
Law No. 10,833 of December 29, 2003 provides that the disposal of assets located in Brazil by a non-residentnonresident to either a Brazilian resident or a non-residentnonresident is subject to taxation in Brazil, regardless of whether the disposal occurs outside or within Brazil. This provision results in the imposition of income tax on the gains arising from a disposal of our units by a non-residentnonresident of Brazil to another non-residentnonresident of Brazil. It is unclear whether ADRs representing our units, which are issued by the ADR depositary outside Brazil, will be deemed to be “property located in Brazil” for purposes of this law. We believe ADRs do not qualify as property located in Brazil and, thus, should not be subject to Brazilian income tax. Nevertheless, there is no judicial guidance as to the application of Law no. 10,833 of December 29, 2003 and, accordingly, we are unable to predict whether Brazilian courts may decide that it applies to dispositions of our ADRs between non-residentsnonresidents of Brazil. However, in the event that the disposition of assets is interpreted to include a disposition of our ADRs, this tax law would accordingly impose withholding taxes on the disposition of our ADRs by a non-residentnonresident of Brazil to another non-residentnonresident of Brazil. See “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations.”
Any gain or loss recognized by a U.S. taxpayer will generally be treated as U.S. source gain or loss. A U.S. taxpayer would not be able to credit any Brazilian tax imposed on the disposition of our units or ADRs against such person’s U.S. federal income tax liability, unless such credit can be applied (subject to applicable limitations) against tax due on other income of such person from foreign sources.
See “Item 10. Additional Information—E. Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders.
Our corporate disclosure may differ from disclosure regularly published by issuers of securities in other countries, including the United States.
Issuers of securities in Brazil are required to make public disclosures that are different from, and that may be reported under presentations that are not consistent with, disclosures required in other countries, including the United States. In particular, for regulatory purposes, we currently prepare and will continue to prepare and make available to our shareholders statutory financial statements in accordance with IFRS as issued by the IASB and Brazilian GAAP, both of which differ from U.S. GAAP in a number of respects. In addition, as a foreign private issuer, we are not subject to the same disclosure requirements in the United States as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short-swing profit rules under Section 16 of the Exchange Act. Accordingly, the information about us available to you will not be the same as the information available to shareholders of a U.S. company and may be reported in a manner with which you are not familiar.
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Investors may find it difficult to enforce civil liabilities against us or our directors and officers.
The majority of our directors and officers reside outside of the United States. In addition, all or a substantial portion of our assets and theirthe assets of our directors and officers are located outside of the United States. Although we have appointed an agent for service of process in any action against us in the United States with respect to our ADRs, none of our directors or officers has consented to service of process in the United States or to the jurisdiction of any United StatesU.S. court. As a result, it may not be difficultpossible for investorsholders of our shares, units and/or ADRs to effect service of process against these other persons within the United States or other jurisdictions outside Brazil or to enforce against these other persons judgments obtained in the United States or other jurisdictions outside Brazil. Holders of our ADRs may face greater difficulties in protecting their interests due to actions by us or our directors or executive officers than would shareholders of a U.S. corporation, because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if the judgment meets the following conditions: (i) it must comply with the formalities necessary for enforcement under the laws of the jurisdiction in which it was rendered; (ii) it must have been issued by a competent jurisdiction/court after proper service of process on the parties, which service must comply with Brazilian law if made in Brazil, or after sufficient evidence of the parties’ absence (revelia) has been given, as required by applicable law; (iii) it must be final, binding and therefore not subject to appeal (res judicata) in the jurisdiction in which it was issued; (iv) it must be apostilled by a competent authority of the country from which the document emanates according to the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalization for Foreign Public Documents or, if such persons.
country is not signatory of the Hague Convention, it must be duly authenticated by a competent Brazilian consulate in the country where the foreign judgment is issued; (v) it must be accompanied by a translation thereof into Portuguese made by a certified translator in Brazil, unless an exemption is provided by an international treaty to which Brazil is a signatory; (vi) it must not be contrary to Brazilian national sovereignty, good morals or public policy or violate the dignity of the human person (as set forth in Brazilian law); (vii) it must not relate to a matter which is also subject to a similar proceeding in Brazil involving the same parties, based on the same grounds and with the same object, which has already been judged by a Brazilian court (res judicata); and (viii) it must not violate the exclusive jurisdiction of Brazilian courts pursuant to the provision of Article 23 of the Brazilian Code of Civil procedure (Law No. 13,105/2015). Judgments which meet these criteria are not subject to an analysis of the merits or a retrial by Brazilian courts.
Judgments of Brazilian courts with respect to our units or ADRs will be payable only in reais.
Our By-Laws provide that we, our shareholders, our directors and officers and the members of our fiscal council shall submit to arbitration any and all disputes or controversies that may arise amongstamong ourselves relating to, or originating from, the application, validity, effectiveness, interpretation, violations and effects of violations of the provisions of Brazilian Corporate Law, our By-Laws, the rules and regulations of the CMN, the Brazilian Central
Bank and the CVM, as well as other rules and regulations applicable to the Brazilian capital markets and the rules and regulations of the Arbitration Regulation of the Market Arbitration Chamber. However, in specific situations, including whenever precautionary motions are needed for protection of rights, the dispute or controversy may have to be brought to a Brazilian court. If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the units or ADRs, we will not be required to discharge our obligations in a currency other thanreais. Under Brazilian exchange control limitations and according to Brazilian laws, an obligation in Brazil to pay amounts denominated in a currency other thanreais may be satisfied in Brazilian currency only at the exchange rate, as determined by the Brazilian Central Bank or competent court, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailingthen-prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the units or ADRs.
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Holders of ADRs may be unable to exercise preemptive rights with respect to our units underlying the ADRs.
Holders of ADRs will be unable to exercise the preemptive rights relating to our units underlying ADRs unless a registration statement under the Securities Act is effective with respect to the shares for which those rights are exercisable or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares relating to these preemptive rights or to take any other action to make preemptive rights available to holders of units or ADRs. We may decide, at our discretion, not to file any such registration statement. If we do not file a registration statement or if we and the ADR depositary decide not to make preemptive rights available to holders of units or ADRs, those holders may receive only the net proceeds from the sale of their preemptive rights by the depositary, or if they are not sold, their preemptive rights will be allowed to lapse.
As a holder of ADRs, you will have different shareholders’ rights than do shareholders of companies incorporated in the United States and certain other jurisdictions.
Our corporate affairs are governed by our By-Laws and by Brazilian Corporate Law, which may differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States or in certain other jurisdictions outside Brazil.
Under Brazilian Corporate Law, holders of the ADRs are not our direct shareholders and will have to exercise their voting rights through the depositary. Therefore, holders of ADRs may have fewer and less well-defined rights to protect their interests relative to actions taken by our board of directors or the holders of our common shares under Brazilian law than under the laws of other jurisdictions outside Brazil.
Although Brazilian Corporate Law imposes restrictions on insider trading and price manipulation, the form of these regulations and the manner of their enforcement may differ from that in the U.S. securities markets or markets in certain other jurisdictions. In addition, in Brazil, self-dealing and the preservation of shareholder interests may be regulated differently, which could potentially disadvantage you as a holder of the preferred shares underlying ADRs.
If you exchange your ADRs for their underlying Units, you risk losing Brazilian tax advantages and the ability to remit foreign currency abroad.
Brazilian law requires that parties obtain registration with the Brazilian Central Bank in order to remit foreign currencies, including U.S. dollars, abroad. The Brazilian custodian for the Units must obtain the necessary registration with the Brazilian Central Bank for payment of dividends or other cash distributions relating to the Units or after disposal of the Units. If you exchange your ADRs for the underlying Units, however, you may only rely on the custodian’s certificate for five business days from the date of exchange. Thereafter, you must obtain your own registration in accordance with the rules of the Brazilian Central Bank and the CVM, in order to obtain and remit U.S. dollars abroad after the disposal of the Units or the receipt of distributions relating to the Units. If you do not obtain a certificate of registration, you may not be able to remit U.S. dollars or other currencies abroad and may be subject to less favorable tax treatment on gains with respect to the Units. For more information, see “Item 10. Additional Information—D. Exchange Controls.”
If you attempt to obtain your own registration, you may incur expenses or suffer delays in the application process, which could delay your receipt of dividends or distributions relating to the Units or the return of your capital in a timely manner. The custodian’s registration and any certificate of foreign capital registration you may obtain may be affected by future legislative changes. Additional restrictions applicable to you, to the disposal of the underlying Units or to the repatriation of the proceeds from disposal may be imposed in the future.
Holders of the ADRs may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could be less favorable or less desirable to the plaintiff(s) in any such action.
The deposit agreement provides that, to the extent permitted by law, holders of the ADRs waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADRs or the deposit agreement. The deposit agreement, including the waiver of the right to jury trial, governs the rights of the initial holders of the ADRs as well as the rights of subsequent holders that acquire holders of the ADRs in the secondary market.
If you or any other holders or beneficial owners of the holders of the ADRs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADRs, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. Any plaintiff(s) in such an action may believe that a non-jury trial would be less favorable to the plaintiff(s) or otherwise less desirable.
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ITEM 4. INFORMATION ON THE COMPANY
4A. History and Development of the Company |
General
We are a publicly held companycorporation (sociedade anônima) of indefinite term, incorporated under Brazilian law on August 9, 1985. Documentation of our incorporation is duly registered with the Commercial Registry of the State of São Paulo (Junta Comercial do Estado de São Paulo or “JUCESP”), under NIRE (Registry Number) 35300332067. Our corporate name is Banco Santander (Brasil) S.A. and our commercial name is Banco Santander. Our headquarters are located in Brazil, in the city of São Paulo, state of São Paulo, at Avenida Presidente Juscelino Kubitschek, 2,041 and 2,235, Bloco2041, Suite 281, Block A, Condomínio WTORRE JK - Vila Olímpia, 04543-011.Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil. Our telephone number is 55-11-3553-3300. Documentation+55-11-3553-3300 and our website is https://www.santander.com.br/ri. In addition, the SEC maintains a website at www.sec.gov that contains information filed by us electronically. The information contained on our website, any website mentioned in this annual report or any website directly or indirectly linked to these websites, is not part of, our incorporationand is duly registered with the Commercial Registry of the State of São Paulo (Junta Comercial do Estado de São Paulo or JUCESP), under NIRE (Registry Number) 35300332067.
not incorporated by reference in, this annual report and you should not rely on such information.
Our agent for service is James H. Bathon,Mercedes Pacheco, Managing Director -– Senior Legal and Compliance,Counsel, Banco Santander, S.A., New York Branch, 45 E. 53rd Street New York, New York 10022.
History
History
Thethe Santander Group, a financial institution founded in Spain in 1857, and that has expanded globally through a numbernumerous acquisitions. Under the Santander Group’s business model each major unit is autonomous and self-sufficient in terms of acquisitionscapital and liquidity. However, our relationship with the integrationSantander Group allows us to:
● | access the Santander Group’s global operation network, using the operational synergies with the Santander Group to enhance our ability to provide global products and services to our customers, while reducing technology development costs; |
● | provide our customers with the benefits of a strong presence in certain international markets, predominantly in Latin America and Western Europe; |
● | assimilate best practices with respect to products, services, internal controls and risk management, that were implemented by the Santander Group internationally; and develop our employees’ skills by means of local and international training and development initiatives, including international experiences at the Santander Group’s offices worldwide. |
Our history in the acquired businessesBrazilian banking industry goes back to achieve synergies.the 1970s and is as summarized in the following figure:
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Santander Brasil Timeline
In 1957, the Santander Group first entered the Brazilian market for the first time through an operating agreement with Banco Intercontinental do Brasil S.A. In 1970, the Santander Group opened a representative office in Brazil, followed by its first branch in 1982.
Since the 1990s, the Santander Group has sought to establishestablished its presence in Latin America, particularly in Brazil. The Santander Group pursued this strategy throughBrazil, by capitalizing on organic growth as well as acquisitions. In 1997, the Santander Group acquired Banco Geral do Comércio S.A., which subsequently changed its name to Banco Santander Brasil S.A. Inand pursuing an acquisition strategy, including the following year, the Santander Group acquired Banco Noroeste S.A. In 1999, Banco Noroeste was merged into Banco Santander Brasil. In January 2000, the Santander Group acquired Banco Meridional S.A. (including its subsidiary Banco Bozano, Simonsen S.A.).most notable acquisitions:
● | In November 2000, the Santander Group acquired Banespa, a bank owned by the State of São Paulo that resulted in the Santander Group becoming one of Brazil’s largest financial groups. |
● | On July 24, 2008, Santander Spain took an indirect share control of Banco Real, which was then absorbed into the Santander Group in order to further consolidate its investments in Brazil. Santander Brasil’s acquisition of Banco Real’s share capital was approved through a share exchange transaction on August 29, 2008, which resulted in Banco Real becoming a wholly-owned subsidiary of Santander Brasil. Subsequently, it was merged into Santander Brasil on April 30, 2009. |
Since October 7, 2009, our units, and became one of Brazil’s largest financial groups. In 2006, Santander Brasil consolidated its investments into one entity, Banco Santander Banespa S.A., which was later renamed Banco Santander (Brasil) S.A. In 2007, the Santander Group implemented a brand unification program to consolidate our operations in Brazil at such timecommon and preferred shares have been listed and traded on B3 under the Santander brand.
On November 1, 2007, RFS Holdings B.V., a consortium comprising Santander Spain,symbols: “SANB11,” “SANB3” and “SANB4,” respectively. Our ADRs have been registered with the SEC under the Securities Act and are listed and traded on the NYSE under the symbol “BSBR.” For further information, see “Item 9. The Royal Bank of Scotland Group PLC, Fortis SA/NVOffer and Fortis N.V. (“Fortis”), acquired 96.95% of the shares of ABN AMRO Holding N.V. (and together with ABN AMRO Bank N.V. “ABN AMRO”), the controlling shareholder of Banco Real. In the first quarter of 2008, FortisListing—A. Offering and Santander Spain reached an agreement whereby Santander Spain acquired the right to the Brazilian asset management activities of ABN AMRO, which Fortis had acquired as part of the consortium’s purchase of ABN AMRO. On July 24, 2008, Santander Spain took indirect share control of Banco Real, which it then absorbed into the Santander Group to consolidate its investments in Brazil. On August 29, 2008, the acquisition by Santander Brasil of Banco Real’s share capital was approved through a share exchange transaction (incorporação de ações), and Banco Real became a wholly-owned subsidiary of Santander Brasil. On April 30, 2009, Banco Real was merged into Santander Brasil and Banco Real ceased to exist as a separate legal entity.Listing Details.”
Important Events
We have set forth below important recent events in the development of our business. For further information, please see to note 3 to our audited consolidated financial statements included elsewhere in this annual report.
Plans to Optimize Our Capital Structure
On September 26, 2013, we announced that, in order to optimize our capital structure, our board of directors submitted a proposal to optimize the composition of our regulatory capital to our shareholders for their approval (“PR Optimization Plan”). The aim was to establish a more efficient capital structure, consistent with recent capital rules and aligned with our business strategy and asset growth plan. The PR Optimization Plan was composed of the following items: (i) an equity distribution to the shareholders of Santander Brasil in the total amount of R$6 billion, with no reduction in the number of shares; (ii) the issuance abroad of capital instruments to compose Tier I and Tier II of our regulatory capital; and (iii) a bonus share program and an adjustment in the composition of the Units, followed by a reverse share split, with the purpose of eliminating trading in cents of reais.
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On November 5, 2018, our board of directors approved the issuance, through our Cayman Islands branch, of debt instruments to form part of our Tier 1 and Tier 2 regulatory capital in the aggregate amount of U.S.$2.5 billion, pursuant to an offering made to non-U.S. Persons under Regulation S of the U.S. Securities Act of 1993, as amended, or the “Notes Offering.” In addition, our board of directors also approved the redemption of debt instruments issued to form part of our Tier 1 and Tier 2 regulatory capital, as set out in the board’s resolution of January 14, 2014. The proceeds from the Notes Offering were used to fund this redemption. On December 18, 2018, the Brazilian Central Bank authorized the transactions contemplated in the Notes Offering and the redemption, which were completed on January 29, 2019.
Sale of Santander Securities Services Brasil DTVM S.A. (current corporate name of CRV Distribuidora de Títulos e Valores Mobiliários S.A.)
, or “SSS DTVM.”
On June 19, 2014, we executed preliminary documents containing the main terms and conditions relating toof the sale of our qualified custody business operations, and of all of the shares issued by Santander Securities Services Brasil DTVM S.A. (current corporate name of CRV Distribuidora de Títulos e Valores Mobiliários S.A.) (“SSS DTVM”), onesale of our subsidiaries that was engaged in the rendering ofsubsidiary SSS DTVM, which renders third-party fund administration services.
The transaction was part of a broader alliance between Santander Spain, certain investment funds controlled by Warburg Pincus, a leading global private equity firm, and the Singaporean sovereign fund Temasek. As part of this alliance, Santander Spain will become the owner of 50% of the shares inservices, to a holding company thatowned by Santander Spain and a group of private equity funds managed by Warburg Pincus. Following the sale, we will integratecontinue to act as the Santander Group’s custody units located in Spain, Brazil and Mexico. Warburg Pincus and Temasek will hold the remaining 50%administrator of the shares issued by such holding company.
funds, as per CVM Instruction No. 306, dated as of May 5, 1999, as amended.
The closing of the transaction was completedoccurred on August 31, 2015, oncewhen all regulatory approvals applicableof our shares in Brazil had been obtained.SSS DTVM were formally transferred to Santander Securities Services Brasil Participações S.A. (“Santander Securities Brasil”), which is indirectly controlled by Santander Spain, became the owner of shares representing 100% of the total share capital of SSS DTVM, and SSS DTVM acquired theour qualified custody business from Santander Brasil. The purchase price forbusiness. We received R$859 million at the shares was R$859 million. Theclosing of the transaction which generated capital gains of approximately R$450751 million after taxes.
Investment Agreement Between Santander Brasil and Banco Bonsucesso S.A.
On July 30, 2014, we, through our controlled company Aymoré Crédito, Financiamento e Investimento S.A. (“Aymoré CFI”) entered into an investment agreement with Banco Bonsucesso S.A. (“Banco Bonsucesso”) whereby we and Banco Bonsucesso agreed to form a joint venturebefore taxes recorded in the payroll credit card loan and payroll loan segments,
currently known as Banco Olé Bonsucesso Consignado S.A., or “Banco Olé Bonsucesso Consignado,” and formerly known as Banco Bonsucesso Consignado S.A.
On February 10, 2015, with the approval of the Brazilian Central Bank, the transaction was completed and Santander Brasil, through Aymoré CFI, became the controlling shareholder of Banco Olé Bonsucesso Consignado, holding 60% of the share capital of the entity. Banco Bonsucesso owns the remaining portion of Banco Olé Bonsucesso Consignado’s share capital (i.e., a 40% interest).
The transaction involved the transfer to Banco Olé Bonsucesso Consignado of the payroll loan business and payroll credit card loans of Banco Bonsucesso, and our investment, through Aymoré CFI, of R$460 million in Banco Olé Bonsucesso Consignado.
Banco Olé Bonsucesso Consignado became the exclusive vehicle of Banco Bonsucesso and its subsidiaries for the offer of payroll loans in Brazil. We will also continue to originate payroll loan transactions through our own independent channels.
Investment in Super Pagamentos e Administração de Meios Eletrônicos Ltda.
On October 3, 2014, we, through Aymoré CFI, signed an investment agreement with Super Pagamentos e Administração de Meios Eletrônicos Ltda. (“Super”), whereby Aymoré CFI agreed to subscribe and pay for shares issued by Super representing 50% of Super’s total and voting capital. Super is a Brazilian digital service provider that offers online payment accounts, prepaid cards and access to simplified financial services. The transaction reinforced our presence in the electronic payment market.
The transaction was concluded on December 12, 2014, following the completion of certain conditions precedent set forth in the investment agreement, including the prior approval of the Brazilian Central Bank (obtained on December 2, 2014). Aymoré CFI subscribed for and acquired 20 million new common shares issued by Super for a value of R$31,128 million. We, through Aymoré CFI, control Super.
On January 4, 2016, Aymoré CFI informed the sellers of its decision to exercise the call option for the shares representing the remaining 50% of Super’s total voting capital owned by the sellers, for a value of approximately R$113 million. The transaction was completed on March 10, 2016, following receipt of approval from the Brazilian Central Bank. In May 2016 Super received approval from the Brazilian Central Bank to operate as a payment institution.
Buyback Program
On November 3, 2016, our board of directors approved, in continuation of the buyback program that expired on the same date, the buyback program of units and ADRs issued by us, directly or through our branch in the Cayman Islands, to be held in treasury or subsequently sold. The buyback program will cover the acquisition of up to 38,402,972 units or ADRs, representing 38,402,972 common shares and 38,402,972 preferred shares, corresponding to approximately 1.02% of our share capital. The term of the buyback program is up to 12 months counted from November 4, 2016.
Financial Co-Operation and Joint Venture with Banque PSA Finance
On July 24, 2015, and in furtherance of the partnership in Europe between Banque PSA Finance (“Banque PSA”) and Santander Consumer Finance for the joint operation of the vehicle financing business related to PSA Peugeot Citroën (“PSA”) brands (which include Peugeot, Citroën and DS), we entered into binding agreements for a joint venture in Brazil with Banque PSA to offer financial and insurance products to consumers and distributors of PSA brands in Brazil.
After the fulfilment of the applicable conditions precedent, which included obtaining the appropriate regulatory authorizations, the joint venture began its operations on August 1, 2016.
The principal entity around which the partnership is formed in Brazil is Banco PSA Finance Brasil S.A., 50% of which is held by our wholly-owned subsidiary, Aymoré CFI, and 50% of which is owned by Banque PSA. The transaction also contemplates the acquisition by Santander Brasil of 100% of PSA Finance Arrendamento
Mercantil S.A. and of 50% of PSA Corretora de Seguros e Serviços Ltda., an entity of the PSA group dedicated to the distribution of insurance products in Brazil.
The joint venture adds the network of PSA Group’s distributors in Brazil to the distribution channels of Santander Brasil for the offering of financial and insurance products, especially in the vehicle-financing sector.
“Other non-financial gains/losses” line.
Establishment of the Credit Intelligence Bureau
On January 20, 2016, we entered into a non-binding memorandum of understanding with Banco Bradesco S.A., Banco do Brasil S.A., Caixa Econômica Federal and Itaú Unibanco S.A., for the creation of a credit intelligence bureau (“CIB”Credit Intelligence Bureau (Gestora de Inteligência de Crédito S.A., or “CIB”). The CIB will bewas structured as a corporation and each of Santander Brasil, Banco Bradesco S.A., Banco do Brasil S.A., Caixa Econômica Federal and Itaú Unibanco S.A. will havehas a 20% ownership stakeequity interest in the corporation.
The purpose of the CIB will beis to develop a database that, in conformitycompliance with the applicable laws,law, will collect, reconcile and handleprocess the credit information of registered individuals and legal entities that register with the CIB andwho expressly authorize the inclusion of their credit information on the CIB’ssuch database. We believe this initiative will lead to an increased degree of efficiency and improvement ofimprovements in our credit management activities, and will also facilitate the disbursement of long and medium-term lines of credit to participants in the Brazilian Financial System and to other corporate entities.
The incorporation At the extraordinary shareholders’ meeting held on October 5, 2017, a capital increase in an amount of R$285,205 thousand was approved as a result of which CIB’s capital stock increased from R$65,823 thousand to R$351,028 thousand. On April 14, 2017, the CIB is subject to the satisfaction of certain conditions precedent customary for similar transactions, including the execution of definitive agreements.documents were executed by CIB’s shareholders. The necessary regulatory authorizations, including those issued by the Brazilian Central Bank and the Brazilian Anti-Trust Authority (Conselho Administrativo de Defesa Econômica), or “CADE,”by CADE, have already been granted. The CIB became fully operational in 2019.
Joint Venture with Hyundai Motor Brasil Montadora de Automóveis Ltda. andFormation of Banco Hyundai Capital Services, Inc.
Brasil S.A.
On April 28, 2016, our wholly-owned subsidiary Aymoré Crédito, Financiamento e Investimento S.A., or “Aymoré CFI,” entered into a joint venture with Hyundai Motor Brasil Montadora de Automóveis Ltda.(“Hyundai Motor Brasil”) and Hyundai Capital Services, Inc. (“Hyundai Capital”), or “Hyundai Capital,” for the incorporationpurposes of incorporating (i) Banco Hyundai Capital Brasil S.A. and (ii) an insurance brokerage company, in ordercompany. These entities were incorporated to provide, respectively, auto financefinancing and insurance brokerage services and products to consumers andthrough the Hyundai dealerships in Brazil.
Aymoré CFI will ownowns a 50% equity stakeinterest in the joint venture entities while Hyundai Capital and Hyundai Motor Brasil will have equity stakes of 25% each in the joint venture entities.
In order to implement the joint venture, the incorporation of Banco Hyundai Capital Brasil S.A. and of the insurance brokerage company are subject to certain regulatory approvals, including, in the case of Banco Hyundai Capital Brasil S.A., obtainingand Hyundai Capital owns the remaining 50% equity interest.
On February 21, 2019, the Brazilian Central Bank’sBank granted Banco Hyundai Capital Brasil S.A. the authorization to operate as a banking entity. Banco Hyundai Capital Brasil S.A. began operating in the first half of 2019.
On April 30, 2019, the Brazilian Central Bank authorized the formation of the insurance brokerage company. The insurance brokerage company was incorporated on July 2, 2019 and began operating in November 2019.
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Accession to Certain Tax Payment Plans
In additionAugust 2017, we joined the PERT. The program allows for certain tax debts to working towards obtaining the necessary regulatory approvals, Aymoré CFI, Hyundai Motor Brasil and Hyundai Capitalbe repaid in installments. In connection with our participation in this program, we are currently working on the development of the administrative and operational structures for the joint venture.
Partnership with American Airlines Inc.
On December 9, 2016, Santander Brasil and American Airlines Inc. entered into a ten-year commercial participation agreement for the marketing and issuance of co-branded credit cards, with the purpose of offering AAdvantage® miles to their respective clientsrepaying in installments certain amounts due as a result of lawsuits and administrative proceedings relating to corporate income tax and social security contributions for the periods from 1999 to 2005 in a total amount of R$492 million in January 2018 (taking into account the reduction arising from our participation in the program). A payment of R$191.9 million was due in August 2017 and a further payment of R$299.7 million was due by January 2018, both of which we have made within the prescribed time limits. As a result of our participation, we recorded expenses in an amount of R$364 million (after tax) in the third quarter of 2017.
In October 2017, we joined the Incentive Payment Programs and Installments (Programas de Parcelamento Incentivado) created by the cities Rio de Janeiro and São Paulo. The program allows for certain tax debts to be repaid in installments. In connection with our participation in these programs, we are repaying in installments certain amounts due as a result of lawsuits and administrative proceedings relating to ISS for the periods from 2005 to 2016 in a total amount of R$293 million as of December 31, 2017. As we had made provisions for these losses, we registered income of R$435 million as a result of the reversal of certain provisions, net of tax effects, in an amount of R$96 million.
Joint Venture with HDI Seguros
On December 20, 2017, we entered into binding agreements with HDI Seguros for the formation of a partnership involving the creation of a new insurance company called Santander Auto S.A., or “Santander Auto.” Sancap Investimentos e Participações S.A., a company controlled by Santander Brasil, will hold 50% of the issued share capital of Santander Auto with the remaining 50% being held by HDI Seguros, Santander Auto will focus on offering motor insurance policies through a fully digital platform. The transaction closed on October 9, 2018 when the documentation to form Santander Auto S.A. was executed and we and HDI Seguros undertook a joint capital contribution of R$15 million into Santander Auto. On January 11, 2019, Santander Auto was granted regulatory authorization to begin operations by SUSEP and effectively started its operations in the second half of 2019.
Sale of equity interest in BW Guirapá I S.A.
On December 22, 2017, Santander Investimentos, Corretora de Seguros, Cia. de Ferro Ligas da Bahia – Ferbasa S.A. and Brazil Wind S.A. entered into an agreement for the sale of 100% of the shares issued by BW Guirapá I S.A. held by Santander Corretora de Seguros and Brazil Wind to Cia. de Ferro Ligas da Bahia – Ferbasa S.A. The transaction also encompassed the seven wind farms organized as special purpose companies held by BW I. The base consideration paid was R$450 million, and an additional amount of up to R$35 million may still be paid if certain contractual targets are met. The transaction closed on April 2, 2018.
Acquisition of Isban Brasil S.A. and Produban Serviços de Informática S.A. Companies
On February 19 and 28, 2018, respectively, we purchased all shares issued by Isban Brasil from Ingenería de Software Bancário, S.L., and all shares issued by Produban Serviços de Informática S.A. from Produban Servicios Informáticos Generales, S.L., for R$61,078 thousand and R$42,731 thousand, respectively. While all parties to these transactions are ultimately controlled by Santander Spain, the transactions were conducted on an arm’s length basis. On February 28, 2018, Isban Brasil was merged into Produban Serviços de Informática S.A. and on the same date, Produban Serviços de Informática S.A. changed its corporate name to Santander Brasil Tecnologia S.A.
Creation of PI Distribuidora de Títulos e Valores Mobiliários S.A.
On May 3, 2018, our indirectly controlled subsidiary Santander Finance Arrendamento Mercantil S.A. was converted into a securities brokerage company and had its corporate name changed to SI Distribuidora de Títulos e Valores Mobiliários S.A. The conversion was approved by the Brazilian Central Bank on November 21, 2018. On December 17, 2018, SI Distribuidora de Títulos e Valores Mobiliários S.A. changed its name to PI Distribuidora de Títulos e Valores Mobiliários S.A., or “PI DTVM.” The corporate name change was approved by the Brazilian Central Bank on January 22, 2019. PI DTVM began its operations in March 2019. PI DTVM is a securities brokerage company, with an open digital platform, whose focus is to broaden the portfolio of financial products we are able to offer to our customers.
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Formation of BEN Beneficios
On June 11, 2018, we incorporated BEN Beneficios, Benefícios e Serviços S.A., or “Ben,” an entity fully held by Santander Brasil, whose purpose is to create, supply and administer various types of vouchers and tickets used to provide employee benefits (such as meals, transportation and cultural events) in the form of printed electronic and magnetic cards, BEN Beneficios began operating in the second quarter of 2019.
Formation of Esfera Fidelidade S.A.
Esfera Fidelidade was incorporated on August 14, 2018 as our wholly-owned subsidiary. Esfera Fidelidade was formed to develop and manage customer loyalty programs. The company started its operations in November 2018.
Investment in Loop Gestão de Pátios S.A.
In 2018, Webmotors, a company in which we own an indirect 70% equity interest, entered into an agreement with Allpark Empreendimentos, Participações e Serviços S.A. and Celta L.A. Participações S.A. to acquire a 51% stake in Loop through a capital increase and issuance of new shares by Loop which were fully subscribed and paid-in by Webmotors. Loop conducts physical and virtual car auctions. This acquisition has enabled Webmotors to expand its service portfolio and strengthen its competitive position. The transaction was completed on September 25, 2018 for the amount of R$23.9 million.
Acquisition of residual equity stake in Getnet
On December 19, 2018, the minority shareholders of Getnet exercised their daily purchases.right to sell all of their shares to Santander Brasil, or the “Put Option,” pursuant to the Share Purchase and Sale Agreement and Other Covenants executed between the parties on April 4, 2014, or “SPA.” On the exercise date of the Put Option, we entered into a binding amendment to the SPA, to acquire all of the Getnet shares owned by minority shareholders, corresponding to 11.5% of the entity’s equity interest, in the amount of R$1.4 billion. The transaction was approved by the Brazilian Central Bank on February 18, 2019 and closed on February 25, 2019. We subsequently spun-off Getnet to our shareholders as a result of which Getnet is no longer a subsidiary of Santander Brasil, see “—A. History and Development of the Company—The Getnet Spin-Off.”
Put option of the remaining equity interest in Banco Olé Consignado S.A. against Aymoré Crédito, Financiamento e Investimento S.A.
On March 14, 2019, the minority shareholder of Banco Olé Consignado S.A., or “Banco Olé” formalized its interest in exercising the put option right provided in the Investment Agreement executed with Aymoré CFI on July 30, 2014, to sell its 40% equity interest in Banco Olé to Aymoré CFI, a controlled entity of Santander Brasil. On January 31, 2020, Santander Brasil and the shareholders of Bosan Participações S.A. (a holding company whose single asset is the shares representing 40% of the corporate capital of Banco Olé) entered into the definitive agreements and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon the transfer of Bosan’s shares to Santander Brasil and payment of the total price of R$1,608.8 million to the sellers. As a result, Santander Brasil became, both directly and indirectly, the holder of all shares issued by Banco Olé.
Acquisition of Summer Empreendimentos Ltda.
On May 14, 2019, we and our wholly-owned subsidiary Santander Holding Imobiliária S.A., or “SHI,” entered into a binding document with the shareholders of Summer Empreendimentos Ltda., or “Summer,” for the acquisition of Summer’s issued share capital. The acquisition was approved by the Brazilian Central Bank on September 16, 2019 and concluded on September 20, 2019. We now hold, directly and indirectly through SHI, 100% of Summer’s share capital. Initially, Summer was not consolidated in our financial statements because it was treated as a temporary investment (non-current assets for sale). However, the investment is no longer considered temporary, and therefore Summer is included in our consolidated financial statements.
Sale of equity stake in CIBRASEC – Companhia Brasileira de Securitização
On July 24, 2019, we completed the sale of our entire equity interest in CIBRASEC – Companhia Brasileira de Securitização, or “Cibrasec,” to ISEC Securitizadora S.A., or “ISEC.” Our interest amounted to 4,000 common shares and 50 Class A preferred shares, representing, in the aggregate, approximately 9.72% of Cibrasec’s total capital stock. The transaction was effected pursuant to the Shares Purchase and Other Covenants Agreement executed on the same date among Santander Brasil, the other shareholders of Cibrasec, ISEC and Cibrasec, who acted as an intervening party. We received consideration of R$9.8 million for our interest in Cibrasec. As a result, we are no longer a shareholder of Cibrasec.
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Acquisition of equity stake in Ipanema Empreendimentos e Participações S.A., currently named Return Capital Serviços de Recuperação de Créditos S.A. (“Return Credit Management”), and Gestora de Investimentos Ipanema S.A., currently named Return Gestão de Recursos S.A. (“Return Asset” and, together with Return Credit Management, the “Return Entities”)
On October 16, 2017, Santander Brasil, through its wholly-owned subsidiary Atual Companhia Securitizadora de Créditos Financeiros, or “Atual,” acquired a direct equity interest in Return Credit Management, and an indirect equity interest in Return Asset corresponding to 70% of Return Entities’ share capital.
On October 16, 2019, Atual informed the remaining shareholders of the Return Entities of its decision to exercise its call option for shares representing the remaining 30% of the Return Entities’ total voting capital owned for a value of approximately R$17 million. The transaction was completed on November 1, 2019. As a result of this transaction, Atual currently owns 100% of the Return Entities’ issued and outstanding share capital. The Return Entities are active in the credit recovery intelligence sector, providing services such as credit portfolio evaluation and pricing, collection, management and recovery of non-performing loans.
Incorporation of the spun-off portion of Integry Tecnologia e Serviços A.H.U Ltda.
On October 31, 2019, we approved a spin-off of Integry Tecnologia e Serviços AHU Ltda, or “Integry,” a then wholly-owned subsidiary of Getnet (which was itself a subsidiary of Santander Brasil until the completion of the Getnet Spin-Off). Subsequently on December 20, 2019, Getnet and Santander Merchant Platform Solutions, S.L., or “SMPS Global,” a company based in Spain and controlled by Santander Spain, entered into a share purchase agreement as a result of which SMPS Global now holds 100% of Integry’s share capital. On December 23, 2019, Integry changed its name to Santander Merchant Platform Solutions Brasil Ltda.
Sale of equity stake in Super Pagamentos e Administração de Meios Eletrônicos S.A.
On February 28, 2020, we sold our entire equity interest in Super Pagamentos e Administração de Meios Eletrônicos S.A., or “Superdigital,” to Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain, for the amount of R$270 million as consideration. As a result of such transaction, we are no longer a shareholder of Superdigital.
Disclosure of Projections
On July 29, 2020, we informed the market that we will no longer disclose guidance, as previously announced in the material fact dated October 8, 2019. This decision comes in response to the ongoing uncertainty with respect to the impact of the COVID-19 pandemic on our business, financial condition, assets, liquidity, cash flows and results of operations, as well as on the macroeconomic environment in Brazil and globally.
Acquisition of direct equity interest in Toque Fale Serviços de Telemarketing LTDA
On March 24, 2020, we acquired all of the outstanding share of Toque Fale Serviços de Telemarketing Ltda., or “Toque Fale,” held by our then subsidiaries Getnet and Auttar HUT Processamento de Dados LTDA for an amount of R$1.1 million, corresponding to the equity value of the quotas on February 29, 2020. As a result, we became the direct holders of 100% of Toque Fale’s share capital.
Purchase of Equity Interest in Gira – Gestão Integrada de Recebíveis do Agronegócio S.A.
On August 11, 2020, Santander Brasil executed a share purchase and sale agreement and other covenants with the shareholders of Gestão Integrada de Agronegócio S.A., or “Gira” to acquire 80% of Gira’s share capital. Gira is a technology company that operates in the management of agribusiness receivables and whose platform has the potential to make agricultural credit transactions more secure. This increased layer of security is achieved through the use of applications, such as geolocation of productive areas, capture and analysis of agronomic data and permanent monitoring of production performance for sites involved in credit transactions. Gira’s solutions also include the review and digital registration of collateral provided under commercial contracts and continuous observation of crop development as a way of monitoring risks. The applicable regulatory approvals were received on December 18, 2020 and the closing of the transaction took place on January 8, 2021. As a result, Santander Brasil now holds an 80% equity interest in Gira.
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Merger of Banco Olé Consignado S.A. into Banco Santander (Brasil) S.A.
Following the acquisition of the remaining equity interest over Banco Olé Consignado S.A., through the holding company Bosan Participações S.A., together referred to as “Olé Companies,” the shareholders of Santander Brasil and the Olé Companies approved the merger of Olé Companies into Santander Brasil, as provided by the general meetings held on August 31, 2020. As a result, the Olé Companies ceased to exist and were succeeded by Santander Brasil. The incorporation of the Olé Companies has been approved by the Brazilian Central Bank and is in the process of being registered with the applicable commercial registries (juntas comerciais).
Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.
On September 29, 2020, Santander Brasil’s subsidiary, PI DTVM, entered into an investment and other covenant agreement with the shareholders of Toro Controle e Participações S.A., or “Toro Controle,” to invest in Toro Controle. Toro Controle is the holding company of Toro Corretora de Títulos e Valores Mobiliários Ltda, or “Toro Corretora,” and Toro Investimentos S.A., or “Toro Investimentos,” which jointly run an investment platform focused on the retail market, founded in Belo Horizonte in 2010. We refer to Toro Controle, Toro Corretora and Toro Investimentos as “Toro.” As a result of the transaction, and the subsequent merger of Toro Controle into Toro Corretora, PI DTVM holds 60% of Toro Corretora’s share capital.
In addition, PI DTVM and Toro Corretora combined their market experiences to develop a complete platform of fixed and variable income products. This platform is based on shared expertise, technology and operate in the growing Brazilian investment market. The completion of the transaction occurred in April, 2021, following the execution of certain customary agreements between the parties, the fulfillment of customary conditions precedent and the receipt of certain regulatory approvals, including the approval of the Brazilian Central Bank.
Capital reduction of Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A.
On October 8, 2020, the shareholders of Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A., which we refer to jointly as the “Norchem Companies,” approved a capital reduction in the two Norchem Companies, in the amounts of R$14.7 million and R$19.9 million, respectively. As a result, we ceased to be shareholders of the Norchem Companies.
Dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A.
On November 12, 2020, we approved the dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A., a Spanish entity wholly-owned by us, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. The capital invested abroad was repatriated to Brazil in November 2020. The deed of dissolution and liquidation of the entity was registered with the Mercantile Registry of Madrid and effective on December 15, 2020. These activities are now carried out by our Luxembourg branch.
Acquisition of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém EIRELI
On December 8, 2020, we entered into a quota purchase agreement with the owners of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém Eireli (jointly “Paytec”) for the acquisition of the entirety of Paytec’s issued share capital. Paytec is a logistics operator with Brazil-wide coverage which focuses on the payments market. The transaction closed on March 12, 2021.
Buyback Program
On February 2, 2021, our board of directors approved, in continuity with the buyback program that expired on November 4, 2020, a new buyback program of our units and ADRs. Our units and ADRs will be acquired either directly or through our branch in the Cayman Islands, to be held in treasury or subsequently sold. The buyback program covers the acquisition of up to 36,956,402 units or ADRs, representing a combination of 36,956,402 common and 36,956,402 preferred shares, corresponding to approximately 1% of our share capital. The term of the buyback program is up to 18 months beginning on February 3, 2021 and expiring on August 2, 2022.
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Corporate reorganization Santander Leasing S.A. Arrendamento Mercantil and Banco Bandepe S.A.
On May 11, 2021, Santander Brasil and Banco Bandepe SA, or “Bandepe,” entered into an Agreement for the Purchase and Sale of Shares through which Santander Brasil acquired the entire equity interest held by Bandepe in Santander Leasing S.A. Arrendamento Mercantil, or “Santander Leasing,” which amounted to 21.42% of Santander Leasing’s share capital. As a result, Santander Brasil became the sole shareholder of Santander Leasing. On May 27, 2021, an incorporation of all the shares of Bandepe by Santander Leasing was approved, in order to convert Bandepe into a wholly-owned subsidiary of Santander Leasing. As a result, the capital stock of Santander Leasing increased by approximately R$5.4 billion.
Acquisition of Equity Interest in Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.
On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos SA, or “Toro Investimentos” entered into an investment agreement and other covenants with the partners of Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda., or, collectively, “Monetus,” by means of which Toro Investimentos will hold, upon the closing of the transaction, 100% of the capital stock of Monetus. Monetus, originally from Belo Horizonte in the state of Minas Gerais, carries out its activities through an automated investment application. Taking into account a customer’s needs and risk profile, this application automatically creates, executes and tracks a diversified and personalized investment strategy to provide optimal service to customers. The transaction is subject to the execution of the definitive agreements and the occurrence of certain conditions usual to this type of transaction, including the applicable regulatory approvals.
Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.
On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos S.A. executed an investment agreement and other covenants with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda (jointly “Mobills”), by which, once the transaction is concluded, Toro Investimentos will hold 100% of the capital stock of Mobills. Domiciled in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning. After the conditions precedent established in the investment agreement were fulfilled, the transaction closed on January 4, 2022.
Acquisition of Equity Interest in Solutions 4 Fleet Consultoria Empresarial Ltda.
On July 13, 2021, Aymoré Crédito, Financiamento e Investimento S.A., or “Aymoré,” and the partners of Solution 4 Fleet Consultoria Empresarial Ltda., or “Solution4Fleet,” executed a certain Investment Agreement and Share Purchase and Sale Agreement, by means of which Aymoré will hold, upon the closing of the transaction, 80% of the capital stock of Solution4Fleet, or “Solution4Fleet Transaction.” Solution4Fleet specializes in structuring vehicle rental and subscription businesses – long-term rental for individuals. The transaction closed on October 8, 2021 after the applicable conditions precedent were fulfilled.
Acquisition of equity interest in Car10 Tecnologia e Informação S.A. and Pag10 Fomento Mercantil Eireli.
On July 13, 2021, Webmotors S.A., or “Webmotors,” the shareholders of Car10 Tecnologia e Informação S.A., or “Car10 Tecnologia,” and Pag10 Fomento Mercantil Eireli, or “Pag10,” and, together with Car10 Tecnologia, “Car10,” entered into certain agreements for the acquisition by Webmotors of 66.7% of the capital stock of Car10 Tecnologia, which is the sole holder of Pag10. Car10 acts as a marketplace that brings together more than 7,000 service providers such as workshops and autocenters, auto body and paint, and cleaning and sanitizing, as well as emergency assistance and towing. The transaction closed on September 20, 2021.
Acquisition of equity interest in Liderança Serviços Especializados em Cobranças Ltda. and Fozcobra Agência de Cobranças Ltda.
On August 4, 2021, Atual Serviços de Avaliação de Créditos e Meios Digitais S.A., or “Atual,” a wholly-owned subsidiary of Santander Brasil and the shareholders of Liderança Serviços Especializados em Cobranças Ltda., or “Liderança,” entered into a certain Agreement for the Assignment of Quotas and Other Covenants, for the acquisition by Atual of 100% of the capital stock of Liderança. Liderança operates in the industry of overdue credit recovery, providing extrajudicial collection services to financial institutions and other industries, and has a subsidiary: Fozcobra Agência de Cobranças Ltda. The transaction closed on October 1, 2021. Subsequently, Fozcobra Agência de Cobranças Ltda. was merged into Liderança on October 4, 2021.
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Acquisition of Equity Interest in Apê11 Tecnologia e Negócios Imobiliários Ltda.
On September 2, 2021, Santander Holding Imobiliária S.A., or “SHI,” a wholly-owned subsidiary of Santander Brasil, entered into a Share Purchase and Sale Agreement and Investment Agreement with the shareholders of Apê11 Tecnologia e Negócios Imobiliários Ltda., or “Apê11,” for the acquisition of 90% of the capital stock of Apê11. Apê11 acts as a collaborative marketplace, pioneering the digitization of the purchase journey of houses and apartments. After the conditions precedent established in the agreement were fulfilled, the closing of the transaction occurred on December 16, 2021.
Issuance of Notes
In November and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our Tier 2 regulatory capital, in the total amount of R$5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.
Acquisition of Equity Interest in CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A.
On January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A., or “Santander Corretora,” together with other investors (including Banco BTG Pactual S.A. and CBOE III, LLC) entered into an investment agreement with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A., or “CSD BR,” and its shareholders for the acquisition of a minority equity interest in CSD BR. CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Brazilian Central Bank, the CVM and the SUSEP. Subject to closing, Santander Corretora’s interest in CSD BR will be 20%. The closing of the transaction is subject to the conclusion of definitive agreements and the implementation of certain customary conditions precedent, including the receipt of applicable regulatory approvals.
The Getnet Spin-Off
On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which was undertaken by our then-subsidiary Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. As a result of the Spin-Off, each holder of our common shares, preferred shares and Santander Brasil units, including the custodian for the Santander Brasil ADS facility, received Getnet common shares, preferred shares and Getnet units, at the rate of 0.25 common share, preferred share or Getnet Unit, as the case may be, for each one common share, preferred share or Santander Brasil Unit issued by us held at close of trading on the B3 on the relevant record date. Additionally, each holder of Santander Brasil ADSs representing Santander Brasil units received Getnet ADSs, each representing two Getnet units, at a rate of 0.125 Getnet ADS for each Santander Brasil ADS held at the close of trading on the NYSE on the relevant ADS record date. The Getnet common shares, preferred shares and Getnet units are traded on B3, and Getnet ADSs are traded on Nasdaq under the symbol “GET.” The Spin-Off was completed on October 26, 2021.
As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. On April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “ Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.”
The charts below set forth a summary of our simplified corporate structure before and after the Spin-Off and after the reorganization of the PagoNxt group, of which Getnet forms part:
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Corporate Structure Prior to the Spin-Off
Corporate Structure After the Spin-Off
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Corporate Structure After the Reorganization of the PagoNxt Group
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. Based on the information available as of the date of this annual report, we present below a summary of the main effects of the COVID-19 pandemic on our business and results of operations:
● | As the COVID-19 pandemic escalated in Brazil starting March 2020, we adjusted our operations to be able to continue providing our products and services to our customers while ensuring the health and safety of our employees. We have prioritized the safety and health of our employees and customers by adhering to prevention and care measures recommended by the Brazilian health and labor ministries, while striving to minimize the impact on our business. From the beginning, we implemented remote working arrangements to safeguard employees most at risk from COVID-19. We have also provided telemedicine services in addition to standard medical support to support the care of our employees and their families. Furthermore, we have instituted a protocol for mapping, protecting, and monitoring all contaminated individuals and those in contact with them, as well as a remote working strategy that evolved in lockstep with the pandemic. We supported our employees throughout the COVID-19 pandemic by offering them and their dependent remote medical care through an agreement with a leading Brazilian hospital. We also provided advance payment of thirteenth salary installments in April 2020 (these are normally paid in April and November of each year). |
● | From March 2020 to October 2021, our branches operated with reduced service hours; from 9:00 a.m. to 2:00 p.m. from March 2020 to July 2020 and then from 9:00 a.m. to 3:00 p.m. until October 2021. From November 2021 through to the date of this annual report, we have been expanding our service hours in our branches from 9:00 a.m. to 4:00 p.m. We adopted a staggered entry system in branches with heavy customer traffic in order to reduce the total number of customers in the branch at any given time. We also reserved the period from 9:00 a.m. to 10:00 a.m. for customers who would are more vulnerable to COVID-19. To provide continuous service and meet the increased demand of our call centers, we temporarily relocated retail employees to our call centers to help deal with the increased demand for remote banking services. In line with our commitment to clear customer communication, we launched the “Overcome Together” and “Santander Supports You” websites, which gathered resources and initiatives related to our business. |
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● | We have offered individual, microentrepreneur and SME customers the possibility of deferring their loan payments for up to 60 days. In May 2020, we allowed an extension for an additional 30 days, as a result of which our deferred loan portfolio reached a total of R$49.8 billion as of June 30, 2020, R$40.6 million as of December 31, 2020 and R$25.9 million as of December 31, 2021. At the same time, we continuously monitored our loan quality indicators, which remained at acceptable levels throughout the COVID-19 pandemic and through the date of this annual report. We also participated in government programs created in 2020 that granted special credit lines for businesses, particularly in retail, to minimize the negative effects of the pandemic including CMN Resolution No. 4,846, which was published on August 24, 2020 and regulated lending under the Emergency Employment Support Program, initially established by Provisional Measure No. 944/2020. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” As a result, our total portfolio balance of government-sponsored loans reached R$10.3 billion as of December 31, 2021. |
● | The onset of COVID-19 had a negative impact on our net fee and commission income, especially in the first half of 2020, due to a lower volume of customer transactions, which adversely affected the total amounts we were able to charge in credit and debit card fees. As a result, we experienced reductions in the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2019 to the six months ended June 30, 2020, as compared to the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2018 to the six months ended June 30, 2019. These reductions were due to the abovementioned lower transaction volumes, a higher share of global wholesale banking in the loan portfolio, alongside a shift in the product mix, with a decreased share of higher risk products, such as credit cards and overdrafts. In 2021, in particular in the second half of the year, there was a recovery in economic activity. As a result, in the year ended December 31, 2021, our net interest income increased by 15.5% compared to the year ended December 31, 2020 (although our net fee and commission income decreased by 5.9% in the same period), our sales through physical distribution channels increased (by 46% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and so did our sales through digital channels (which increased by 45% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and we added 784,000 new customers in December 2021 (which is 78% more than in December 2020). For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Interest Income” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Fee and Commission Income.” |
● | In 2020, we constituted an additional provision in the amount of R$3,200 million. This provision was calculated based on the analysis of the potential macroeconomic effects and took into account not only quantitative and qualitative indicators, but also the adequate and accurate identification of risks and a collective assessment of exposures. In 2021 as a response to the macroeconomic shock of the COVID-19 pandemic, we used a part of the provision overlay on expected credit losses created in 2020, as further explained under “Item 5. Operating and Financial Review and Prospects—A. Operating Results— Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).” However, we also experienced an improvement in our loan portfolio, in particular with respect to individuals as loans to individuals increased by 17% in the year ended December 31, 2021 compared to the year ended December 31, 2020. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019— Results of Operations—Impairment Losses on Financial Assets (Net).” |
● | In 2020, the National Monetary Council, or “CMN,” and the Brazilian Central Bank introduced measures to minimize the impact of COVID-19 on the financial system. With respect to liquidity, these changes included: (i) a reduction in the time deposit reserve requirement from 31% to 17%; and (ii) an increase in the additional limit on the reserve requirement treated as High Quality Liquidity Assets from 15% to 30%, ensuring greater liquidity in a stress scenario. In addition, a temporary suspension on dividends and other distributions was enacted through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This suspension on the payment of dividends was not renewed in 2021. The CMN also published Resolution No. 4,783, which temporarily reduced the capital conservation buffer (where all rates relate |
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to the total amount of risk-weighted assets) required from financial institutions from 2.5% to 1.25% as of the second quarter of 2020, leading our Basel ratio to reach 15.3% as of December 31, 2020. In 2021, the time deposit reserve requirement increased from 17% to 20% as of November 2021, and the capital conservation buffer required from financial institutions rose from 1.25% to 1.625% as of April, 2021, with this percentage increasing gradually until April 2022, when it will reach 2.5%. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” and “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”
● | We experienced an increase in digital business. Specifically, we recorded an increase of 45% in the number of new contracts originated through digital channels in the year ended December 31, 2021 compared to the year ended December 31, 2020. |
See also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”
Capital Expenditures and Divestitures
Our main capital expenditures include investments in our Information Technology (“IT”) platform in Brazil.information technology platform. Our ITinformation technology platform focuses on our customers and supports our business model. In 2016, 20152021, 2020 and 2014,2019, total investments in ITinformation technology were R$8951,905 million, R$8581,432 million, and R$1,0291,858 million, respectively.
In 20162021, 2020 and 2015,2019, we continually improved in our technology platformplatforms by means of investment in our digital applications, especially through the implementation of new solutions in the areas of artificial intelligence (machine learning, AIOPs), micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. The application of these new technologies improved our interaction with our customers enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness, investments to better address client needs. We also continued to invest in systemsour physical distribution network (branches, PABs and PAEs), including: biometric identification for corporate customers, digital purchase and payment of exchange, among other initiatives. For more details about our technology and infrastructure, renewal. During these years, our main projects were: RDA (Risk Data Aggregation), CRM (Customer
Relationship Management), Big Data transformation, Cyber Security, Channel Transformation (Mobile, Internet, Bank Branch), new Santander consumer purchasing model, Digital Back Office, agile, DevOps and intern cloud implementation.
Technology management by specialized companies withinsee the Santander Group enables us to achieve a global scale and other benefits similar to outsourcing, without the loss-of-control that is often seen when outsourcing core activities. For further discussion regarding our technology infrastructure seeitem “—B. Business Overview—Technology and Infrastructure.”
Our ongoing capital expenditures consist primarily of investments in information technology. We expect to fund our ongoing capital expenditures principally from our cash flow from operations.
Our major divestituredivestitures in the past three fiscal years and until the date of this annual report waswere the sale, in August 2015,Spin-Off of our qualified custody business throughGetnet and the sale of all the shares of SSS DTVM to Santander Securities Brasil (in this respect, pleaseSuper Pagamentos.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting the Comparability of Our Financial Condition and Results of Operations—SaleOperations.”
4B. Business Overview
Our Strategy
Our strategy is centered on endeavoring to generate profitable, recurring, and sustainable growth. We believe the expansion of our customer base over the Investment Fund Managementyears is due to our ability to capture new customers and Managed Portfolio Operations”).increase their loyalty. We have achieved this by offering a comprehensive portfolio of products and services, with a particular emphasis on quality and a constant drive to improve customer satisfaction. We serve our customers through multi-channel solutions which we believe enable us to provide a tailored and human service which is responsive to the needs of our customers. We rely on our four integrated service channels to do offer our services to our customers: digital, remote, physical and external channels.
We recorded net income of R$15,559 million, R$13,451 millionand R$16,631 million in the years ended December 31, 2021, 2020 and 2019, an increase of 15.7% in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the years ended December 31, 2021, 2020 and 2019 we achieved capital adequacy ratios of 14.9%, 15.3% and 15.0% respectively. In the years ended December 31, 2021, 2020 and 2019, we have achieved efficiency ratios of 27.1%, 35.5% and 28.8%, and adjusted efficiency ratios of 28.2%, 27.7% and 28.2%, respectively. In addition, we achieved an adjusted return on average stockholders’ equity of 20.2%, 18.4% and 24.6% in 2021, 2020 and 2019, respectively. Adjusted return on average stockholders’ equity is a non-GAAP financial measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” We believe these metrics demonstrate our track record of consistent performance and the results of our constant efforts to improve our productivity.
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In recent years, we have undergone significant transformations, thereby enabling us to identify and capitalize on business opportunities. We have expanded our platform to diversify our offering of products and services:
● | In 2017, we took steps to improve service quality and we placed customer satisfaction to the core of our strategy. We believe we were industry pioneers in implementing and publicly disclosing our net promoter score, or NPS, as a measure of customer satisfaction. |
● | In 2018, alongside our culture of service, we advanced our pursuit of efficiency by bringing an industrial cost approach into our banking business, covering three critical fronts: organization, technology, and culture. We believe this strategy has already yielded positive results and that it will enable us to further optimize our productivity while also improving customer experience on our platforms. |
● | In 2019, we expanded our ecosystem by introducing new, innovative products into the market. We launched Sim, emDia, Santander Auto, Auto Compara and Ben Visa Vale while repositioning ourselves in the card market, as well as refocusing our efforts on customer and account holder loyalty. |
● | In 2020, we focused our efforts on assisting customers in facing the challenges posed by the COVID-19 pandemic by providing products and services adapted to the new reality brought in by the pandemic. We did so by improving and expanding our digital channels in order to deliver to our customers robust self-service banking at a time when in-person service delivery was not possible. We also reaffirmed our commitment to efficiency and rapid response to emerging market trends by launching SX Santander to offer customers exclusive benefits, differentiating ourselves from the Brazilian Central Bank’s PIX instant payment solution. |
● | Finally, in 2021 we redoubled our efforts to improve customer experience and satisfaction across all channels. Our strategy is to convert new customers into loyal customers (we define loyal customers as those who purchase six or more products), thus, generating profitability for the bank and satisfaction in using the bank for our customers. We seized on the opportunities we saw in the market and managed to reach 53.4 million customers as of December 31, 2021, including adding more than 784,000 new customers in December 2021. We achieved this while also maintaining high levels of customer loyalty, reaching eight million loyal customers as of December 31, 2021 (an increase of 32% compared to December 31, 2020). The combined effect of the growth in our customer base and our levels of customer loyalty enabled us to increase our customer base by 11% as of December 31, 2021 compared to December 31, 2020. We also further improved our digital operations by expanding our offerings through this channel, which has grown significantly, as evidenced by an increase of 45% in financial products and services purchased through this channel in the year ended December 31, 2021 compared to the year ended December 31, 2020. In addition, we continued to focus on streamlining processes, digitalizing our operations, and reducing paper consumption to enable us to operate faster and more efficiently. As a result, we have achieved: (i) faster service, as the lead time to open a business current account decreased by 78% in the year ended December 31, 2021 compared to the year ended December 31, 2020 and (ii) improved efficiency, with 87.0% of credit card bills issued in digital or email format in the year ended December 31, 2021, an increase of 13 p.p. compared to the year ended December 31, 2020. |
● | We strive to continuously improve our customer experience through the addition of new services, the expansion of our offering, and the enhancement and deeper integration of our channels. |
We have consolidated and improved our four service channels through which customers can select the product or solution that best meets their needs. Our digital channel averaged 442 million total visits per month in 2021, adding 554,000 new accounts in December 2021. Similarly, the physical channel, which consists of our branch network that is expanding into Brazil’s rural areas, recorded a monthly average of more than 15 million visits by customers and potential customers, serving as a crucial pillar for business origination. In the remote channel, with the implementation of SX Negócios, a new service model, we have redefined our model to move away from a call center and toward a business channel. We have built a platform to capture new business, processing over 25 million support requests per month in the year ended December 31, 2021, 4.6 million of which are handled by humans. The external channel is comprised of bank correspondents, which are entities allowed to provide specific services to customers, including customer services, on behalf of another financial institutions, and our business verticals, such as payroll-deductible loans, Prospera and Olé Consignado.
Our Competitive Strengths
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We believe that our digital platform enables us not only to offer our customers a comprehensive set of services but also to benefit from the business generation potential which arises from the ease with which customers are able to purchase our products and services through our digital sales channels. Sales of our products and services through our digital channels increased by 45% in the year ended December 31, 2021, compared to the year ended December 31, 2020, including an increase in the number of premium bonds (capitalização) contracts of 360% and 23% in premiums written in open insurance contracts (considering life insurance, personal accident insurance, home insurance, and other types of insurance) in each case in the year ended December 31, 2021 compared to the year ended December 31, 2020. GENT&, our artificial intelligence channel, recorded over 18.5 million interactions in December 2021 and is currently capable of answering more than 26,000 questions.
We believe that our main competitive strengths are: (i) beingbusiness has the potential to grow by means of innovation and technology, in conjunction with user experience enhancements and steady evolution in the quality of our services. Our products, services, and businesses form part of the Santander Group; (ii) maintaining sophisticateddaily lives of all our customers, whether businesses or individuals, and include, among others, payment solutions (i.e., payment platforms), investment and advisory services, vehicle and consumer goods financing, mortgage loans, payroll-deductible and agribusiness loans, as well as the products and services offered through our wholesale unit. We also endeavor to maintain sound risk management, practices;which entails continuously improving our credit granting models to maintain our credit risk indicators at acceptable levels.
In order to strengthen our platform, we have launched new businesses that continue to evolve and support our customer loyalty strategy, such as (i) Ben, which grew its customer base to 565,000 cards as of December 31, 2021 along with 2,675 human resources customers and 365,432 partner establishments as of the same date; (ii) Sim, which surpassed the five million customer mark and reached a loan portfolio of R$1.6 billion as of December 31, 2021; (iii) maintainingemDia, which increased recovered credit volume by 12% in the year ended December 31, 2021 compared to the year ended December 31, 2020, and (iv) Santander Auto, where the percentage of new consumer finance contract purchasers who also acquired insurance reached 20% in 2021, resulting in over R$210 million in written premiums in 2021. In 2020, we also announced the acquisition of securities brokerage firm Toro Corretora to complement our investment platform and broaden our product offering. Finally, in 2021, we launched Auto Compara, a strong capital base; (iv) maintainingfully online auto insurance comparison and offering platform that is now also available to non-customers. Auto Compara had an average of 350,000 website visits in the year ended December 31, 2021 and we increased by 26% in premiums written during the year. Additionally, we reinforced our position in the automotive and real estate industries by completing acquisitions of businesses and solutions to expand our business and build a modern technology platform;more comprehensive platform.
As a result of our efforts to constantly improve our business, we were recognized the Best Bank in Brazil in 2021 by The Banker Magazine.
Our People
Our people are a key pillar of our strategy, supported by a culture that values employees, promotes diversity, encourages efficiency, and (v) focusingfosters innovation, while also preparing us for a new cycle and enabling us to continue anticipating market trends. Our performance is the embodiment of our culture, with our people serving as the catalyst for the transformation. Thus, we have built a diverse and engaged team. We value meritocracy, diversity, and inclusion, as evidenced by the fact that, as of December 31, 2021, 31% of our leadership positions were held by women, 27% of our employees were black employees, and 5% were held by people with disabilities. We also place a premium on sustainable growthproactive knowledge acquisition: in 2021, over 3,200 courses were held on the Santander Academy platform, with 78% of them being taught by employees. Close leadership and open communication are ingrained in our DNA. Our actions are backed by a strong presenceculture that is increasingly centered on our people – 94% of whom are proud to work for Santander, according to the Great Place to Work, or “GPTW,” survey from 2021. As a result of our efforts, we have been named one of the top 10 best companies to work for in attractive demographicBrazil by GPTW 2021, appearing in the following categories: Ethnic-Racial, Women, LGBTQI+, Early Childhood, 50+, and geographic areas. We are active in large investments in infrastructure, while supporting the growth of small and medium enterprises (“SMEs”) and the future of Brazilian citizens through our university funding programs.
Synergies from Our AffiliationHealthy Management. Additionally, we were honored with the Santander Groupfollowing awards: (i) Ethnic-Racial by Exame magazine’s Diversity Guide, (ii) Diversity and Inclusion by Euromoney’s Awards for Excellence, and (iii) Bloomberg’s Gender Equality Index. Finally, we were also included on the GPTW B3 index.
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Social and Environmental Initiatives
Similarly, and consistent with our strategy of responsible growth, we recognize our role as a financial institution in Brazil’s development. Hence, for twenty years, we have sought to foster sustainable businesses. We highlight our Amigo de Valor program, one of the main social programs in Brazil today, started in 2002. In 2021, we continued to advance initiatives that reflect how sustainability and social issues are embedded in every layer of our organization:
● | In the social realm, we lead initiatives that have impacted more than one million people over the last three years. For the past 19 years, we have worked to protect, promote, and defend the rights of children and adolescents in vulnerable situations through the Amigo de Valor program, benefiting thousands of people and raising R$20 million in 2021 through employee and customer contributions. Since 2002, we have been promoting financial inclusion by means of Prospera Santander Microfinance (Prospera Santander Microfinanças), which had 708,000 active customers and a R$1.9 billion portfolio as of December 31, 2021, with the goal of helping microentrepreneurs thrive and thereby develop the communities in which they operate, while also providing business management guidance. Likewise, for more than two decades, we have consistently invested in education, as we believe that it is the foundation for societal transformation. Finally, we have awarded higher education scholarships since 2005, including 33,000 scholarships in 2021 alone. |
● | With respect to our environmental initiatives, we offer a comprehensive suite of financing solutions for the development of sustainable businesses, both for individuals and businesses, which we accelerated in 2021, generating R$ 51.6 billion in sustainable businesses in the year ended December 31, 2021. We pioneered green financing, with over R$ 1.3 billion loans linked to environmental, social and governance, or “ESG,” goals and green loans in our portfolio as of December 31,2021, in addition to being among the leaders in CBIOs (decarbonization credit). We are also active solar energy loans, financing photovoltaic panels for individuals, companies, and agribusinesses, disbursing R$ 2.3 billion in the year ended December 31, 2021. In 2021, we also launched a financing facility exclusively for bicycles. |
We believeimplement routine socioenvironmental risk assessment, for which we rely on a Socioenvironmental Questionnaire, or “QSA,” by means of which we collect information on customers that beinghave environmental practices, including data on carbon emissions, management of offsets and extreme weather events. The QSA is applied to the Wholesale and Business 3 segments, as well as to Retail customers. This analysis is part of the Santander Group offers usannual credit review for 14 sectors in which we operate, all of which are potentially affected by climate change according to the Task Force on Climate-related Financial Disclosures, or “TCFD.”
Since 2016, we have taken climate change issues into consideration in the credit rating of Wholesale customers, and, since 2020, we have used a significant competitive advantage overwater stress calculator in our competitors. While, undersocioenvironmental assessments. This tool considers our customers’ economic activity, watershed location and measures taken to save water. It has been developed considering customer vulnerability to climate change in general, even as a result of changes in legislation or consumer preferences.
Regarding decarbonization targets, in 2021 we announced our intention to achieve net zero carbon emissions by 2050 to support the goals of the Paris Agreement on climate change using 100% renewable energy sources by 2025 and eradicating single-use plastic from all our operations. We have been carbon neutral since 2010, fully offsetting our emission sources.
In July 2021, we established a forum with the goal of preventing greenwashing by seeking to ensure that operations which we describe as green, social, or sustainable comply with Santander Group’s taxonomy and market standards. The forum, which is composed of senior executives from the Sustainability, Risk, Social and Environmental Risk, Business, Compliance, and Legal departments, also assesses reputational risks associated with our operations. Out of a total of 40 proposals to label a particular service of product as being “green” which were reviewed by the forum in 2021, 31 have been approved.
In addition, we have developed products that contribute to lowering the impact on climate change, such as:
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● | Low Carbon CDB, we launched the Low Carbon CDB, a sustainable, low risk investment aimed at companies that want to have more sustainable investments in their portfolio capable of reducing their greenhouse gas emissions. The resources of the investments in CDB will be used to finance sustainable projects of companies that promote actions to reduce greenhouse gas emissions. |
● | Carbonômetro (Carbon meter), a tool that calculates the daily greenhouse gas emissions of our operations. |
● | Carbon Calculator, which encourages employees of Santander Brasil and affiliates to calculate their carbon footprint. |
● | "The Future of the Carbon Market in Brazil” live video. We produced a live video to discuss the future of the carbon market in Brazil and the challenges and opportunities for the business sector. |
In July 2020, we announced a plan to promote sustainable development in the Amazon, in collaboration with two other largest private-sector banks in Brazil. Part of this plan, named “Plano Amazônia,” aims to eliminate deforestation in the supply chain for cattle farms for beef processors in the Amazon, aiming to finance the cultivation of local crops, such as açaí, Brazilian nuts and cocoa, and to identify opportunities for the development of bioeconomy chains. In 2021, we also launched the new commercial network Rede Norte Amazônica, in order to expand our operations in the region, and we have established the North Amazon Network, a business model, each unit comprised of four Brazilian states (Amazonas, Acre, Rondônia, and Roraima), with the objective of fostering business in the region and a particular focus on sustainability. Since its creation, we have made over R$ 270 million in credit lines available to cooperatives and agribusinesses, as well as to producers of Amazonian products who adopt sustainable practices.
In 2021, we inaugurated Brazil’s first sustainable train station in partnership with the State Government of São Paulo, maximizing on-site natural resource efficiency by means of solar energy panels and a water reuse system. Furthermore, in collaboration with the International Finance Corporation, a World Bank Group institution, and the State Government of São Paulo, we supported the Pinheiros River clean-up program.
We also use ESG as one of the criteria for evaluating our executives, evidencing how deeply embedded the subject is requiredin our culture.
In recognition of our efforts, we have received several ESG accolades in 2021, including Exame magazine’s Best ESG Bank, the Eco Brazil Award, Época Negócios 360°’s Most Sustainable Company, in addition to be self-sufficient in termsbeing named to Fortune magazine’s Change the World list.
Our Business
We provide our complete portfolio of capitalproducts and liquidity,services to our relationship allows us to:
30 million active customers as of December 31, 2021 through the following business segments:
Sophisticated Risk Management Practices
High quality risk management is one ofWe outline below the Santander Group hallmarks and, consequently, onebusiness divisions for each of our priorities. Throughout its 150 years, the Santander Group has combined prudence in risk management with the use of advanced techniques, always aiming to generate recurrent and balanced earnings and to create shareholder value. Our risk management model is a key factor for achieving our strategic objectives.
Our risk management principles are: (i) independence and risk assessment; (ii) business support to maintain risk quality; (iii) decision-making based on committee involvement; and (iv) use of modern tools and systems to analyze risk effectively. Our risk management policy seeks to maintain a medium-low and predictable profile for all our risk.
To manage our risk, we have incorporated the Santander Group’s global program of risk management into various levels of our organization. The entire Bank is responsible for risk management, from our branch employees to our risk management committee members. Our risk management and control is structured along three independent but coordinated levels, each with its own responsibilities: (i) risk management at the level of the origination of our financial products and activities (e.g.,through credit checks on potential borrowers); (ii) control and management of our risk management function; and (iii) internal audits.
Strong Capital Base
As of December 31, 2016, our Basel capital adequacy ratio was 16.3%. We endeavor to maintain an efficient capital structure enabling us to safeguard our solvency even in stress scenarios, consistent with recent Basel III capital rules, and our business strategy and asset growth plan.
For further information, please see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting the Comparability of Our Results of Operations—Plans to Optimize our Capital Structure.” For further information on our capital adequacy requirements, please see “—Regulation and Supervision—Capital Adequacy and Leverage—Basel.”
Modern Technology Platform
We operate a modern and global technology platform that is interconnected with the Santander Group platform. This allows us to assist our customers on a global scale and to provide them core banking services quickly and efficiently.
Over the last three years, we have made significant improvements in our technology platform, focusing on the modernization, improvement in offers and simplification of products, services and processes. As example, in 2014, we inaugurated our new IT Center, which we believe is the largest in Latin America.
In 2015, in order to improve customer experience and increase employee engagement, we put on the market the “É Comigo Santander,” a mobile application for exclusive use by employees, which enables them to report online issues that impact the banking experience of our customers and to improve services provided to our customers. We also implemented a new account opening process (Welcome Kit), which makes available to our customers on the same day on which they open a current account with us, their account debit and credit cards and the PIN for each card.
During the course of 2016, as part of our digital strategy expansion, our number of digital clients (clients that have used at least one online mobile or internet banking service) increased by 45.1% reaching 6.4 million as of December 31, 2016 compared to 2015. To date, we have more than 300,000 clients to whom we provide banking services exclusively via our digital branch platform. In addition, we have also made significant progress in the biometric registration of our clients, which enables us to provide secure and practical banking services to our customers. As of December 31, 2016, more than 6.3 million of our customers had their biometric data registered with us.
In 2016, we also introduced the “ContaSuper,” a pre-paid card model, which is totally digital and user friendly. The “ContaSuper” system allows users to manage their daily financial activities (including transferring funds, doing online shopping, charging the card with credit on 10 different currencies, and other uses) entirely online in a user friendly interface. In cards, in order to increase security and usability in our online interactions with our clients, we also introduced the “Santander Way” mobile application, which is an online credit/debit card tool. The application allows clients to track credit/debit card transactions safely in real time. It also has other functionalities, like control over the cards’ credit limit and a “virtual” credit card, optimized for online transactions, among other functions. In addition, we also redesigned the business model for our consumer finance unit with the introduction of “+negócios” in July 2016. “+negócios” is an innovative digital commercial platform designed to be simple and intuitive and which enables users to simulate loan payments based on certain pre-defined parameters (e.g.,income, current liabilities and, amount of the loan, among others), that can increase loan effectiveness, credit approval and proposal formalization in addition to providing portfolio management reports.
Strong presence in attractive demographic and geographic areas
We focus continuously on sustainable growth. We believe that we are well positioned to benefit from the growth of our customer base and the relatively low penetration of financial products and services in Brazil. We have a strong presence in attractive demographic and geographic areas and we have strengthened our competitive position in all Brazilian regions.
In addition, to maintaining a significant branch network, we endeavor to adapt our products and services to the evolving needs of our customers. In 2014, we acquired GetNet, which has given us the ability to offer integrated e-banking services for SME customers, which services include a current account, cash management services and POS machines. Furthermore, we also entered into a joint venture with Banco Bonsucesso to improve our position in the payroll credit market. See “—A. History and Development of the Company—Important Events.”
In 2015, we repositioned our Santander Van Gogh segment, aimed at our upper middle income customers, and introduced a range of new products, services, customer service and financial advice tailored to this segment. In the second half of 2015, we relaunched our enterprise segment called “Santander Negócios & Empresas,” a proprietary financial and non-financial solution aimed at creating a new relationship model that facilitates entrepreneurship and the growth of SMEs.
In 2016, we undertook various actions to increase and diversify our revenuesoperating segments, as well as the loyalty of our customers. For example, our consumer finance business settled a joint venture agreement with Banque PSA Finance for car financing and financial services. We also introduced our consortium business product line. This product line consists of a purchasing pool through which a group of people pay monthly installments on a certain item (e.g.,a car) so that every month the group can afford to buy one of the items, which is then awarded by draw to one of the group members. There is a fee charged by the pool administrator (i.e., us) but no interest. This product line leverages our customer loyalty and provides a commission revenue with reduced risk and capital cost. We have also created a new agribusiness unit, which includes the opening of specialized branches, the creation of a team with expertise in that sector and the offering of certain unit-specific products. This effort was already recognized by the market with the “Lide Agronegócio 2016” award.
We work constantly to improve our customers’ experience. We have recently implemented a new sales management tool called “Modelo Certo,” which has resulted in business productivity and customer satisfaction. For example, there was an overall improvement in customer satisfaction for individuals in a customer satisfaction survey by IBOPE Inteligência, a Brazilian market research firm, in the second half of 2016. In this survey, Santander Select, our high income segment, jumped from fourth place in 2015 to second place, Santander Van Gogh, our medium income segment, maintained its second place, and our segment focused on lower income customers achieved first place.
In 2016, we also saw results of initiatives we had launched in previous years. GetNet, our acquiring business, has shown consistent results with a 30% increase in revenues in 2016 and an increase of 2.0 p.p. in market share, reaching 10.6% in December 2016, according to ABECS. Moreover, as a result of the repositioning of “Santander Negócios & Empresas” our SMEs segment received an award for best bank for SMEs in the world, as well as for and in Latin America, from Euromoney in 2016.
Our branch network, service channels, and technology platform have enough capacity for substantial growth in our customer base and financial transactions. We are ranked third among the privately-owned banks in Brazil in terms of assets, with a market share of 8.1% as of September 2016, according to information provided by the Brazilian Central Bank. Among these banks, we believe that we have a strategic position in the majority of our key product lines, as evidenced by our market share in the following products and regions.
Source: Brazilian Central Bank.
Our Strategy
We are a universal bank with focus on retail banking. We believe that the only way to grow, recurrently and sustainably, is to provide our services with excellence and to consistently strive to increase our clients’ level of satisfaction by being a Simple, Personal and Fair Bank. As a result, our strategy is focused on the following objectives:
We prioritize selective growth, a long lasting relationship with our shareholders and an alignment with the country’s economic and social development agenda.
Our Business
Overview
We operate along two segments: Commercial Banking and Global Wholesale Banking.
The following chart sets forth our operating segments and their main focus.
The following table presents the breakdown of our net interest income and profitoperating income before tax by operating segment:
For the year ended December 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net interest income | Profit before tax | |||||||||||||||||||||||
(in millions of R$) | ||||||||||||||||||||||||
Commercial Banking | 27,366 | 27,041 | 25,042 | 12,652 | (5,565 | ) | 4,231 | |||||||||||||||||
Global Wholesale Banking | 3,211 | 4,297 | 2,186 | 3,732 | 2,349 | 2,212 | ||||||||||||||||||
Total | 30,586 | 31,337 | 27,229 | 16,384 | (3,216 | ) | 6,443 |
Commercial Banking | Global Wholesale Banking |
●Retail Banking | ●Santander Corporate & Investment Banking (“SCIB”) |
●Individuals | |
●SMEs | |
●Consumer Finance | |
●Corporate | |
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For the Year Ended December 31, | ||||||||||||||||||||||||
Net interest income | Operating income before tax | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||||||||
(R$ millions) | ||||||||||||||||||||||||
Commercial Banking(1) | 46,236 | 41,457 | 42,044 | 19,491 | 4,666 | 18,375 | ||||||||||||||||||
Global Wholesale Banking | 5,082 | 2,985 | 2,277 | 5,260 | 4,998 | 3,898 | ||||||||||||||||||
Total | 51,318 | 44,443 | 44,321 | 24,750 | 9,664 | 22,273 |
In our Commercial Banking business segment, we focus on long-term relationships with our individual and corporate customers (other than global enterprise customers that are serviced by our Global Wholesale Banking segment), seeking to support all of their financial needs through our credit, banking services, financial products, acquiring services, asset management and insurance products. We also offer special financing and credit opportunities for corporate customers pursuing social and environmental improvement programs. Our business model and segmentation allow us to provide a tailored approach to each client in order to address their specific needs.
Through our Global Wholesale Banking segment we offer financial services and sophisticated and structured solutions to our customers, in parallel with our proprietary trading activities. Our wholesale banking business focuses on servicing local and multinational conglomerates, which we refer to as GCB customers. Our wholesale business provides our customers with a wide range of domestic and international services that are specifically tailored to the needs of each client. Our customers benefit from the global services provided by the Santander Group’s integrated wholesale banking network and local market expertise. Our proprietary trading desk is under strict risk control oversight and has consistently shown positive results, even under volatile scenarios.
Our business is strongly committed to sustainability. Our sustainable strategy is based on three pillars: (i) social and financial inclusion, (ii) education, and (iii) social and environmental business and management. In 2016 we were selected by the BM&FBOVESPA for the seventh consecutive year to form part of its ISE - Corporate Sustainability Index. The ISE – Corporate Sustainability Index highlights companies with a recognized commitment to social responsibility and business sustainability, in addition to acting as a promoter of best practices in the business community.
As of December 31, 2016 our loans and advances to customers grew 0.4% and reached R$268,438 million compared to R$267,266 million as of December 31, 2015.
(1) | Operating income before tax reported under commercial banking includes the effects of the hedge for investments held abroad (offset in the same amount in the “Income Tax” line). The effect of the hedge for investments held abroad in 2021, 2020 and 2019 amounted to loss of R$2,512 million, R$13,583 million and loss of R$1,264 million, respectively. |
The following table shows a managerial breakdown of our loans and advances to customers by client categorycustomer type at the dates indicated:
For the year ended December 31, | Change, as of December 31, 2016 vs. December 31, 2015 | |||||||||||||||||||
2016 | 2015 | 2014 | R$ million | % | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Individuals | 91,195 | 84,578 | 77,809 | 6,617 | 7.8 | % | ||||||||||||||
Consumer finance | 26,608 | 25,850 | 27,686 | 758 | 2.9 | % | ||||||||||||||
Small and Medium Enterprises(1) | 42,440 | 43,524 | 42,191 | (1,084 | ) | (2.5 | )% | |||||||||||||
Large Corporations(2) | 108,195 | 113,315 | 101,425 | (5,120 | ) | (4.5 | )% | |||||||||||||
Total | 268,438 | 267,266 | 249,111 | 1,171 | 0.4 | % |
As of December 31, | Change between 2020 and 2021 | Change between 2019 and 2020 | ||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||
(R$ millions) | ||||||||||||||||||||
Individuals | 203,678 | 174,042 | 156,177 | 17.0 | % | 11.4 | % | |||||||||||||
Consumer Finance | 55,441 | 51,637 | 48,421 | 7.4 | % | 6.6 | % | |||||||||||||
SMEs | 59,602 | 54,525 | 53,119 | 9.3 | % | 2.6 | % | |||||||||||||
Corporate(1) | 174,634 | 137,618 | 89,539 | 26.9 | % | 53.7 | % | |||||||||||||
Total Credit Portfolio | 493,355 | 417,822 | 347,257 | 18.1 | % | 20.3 | % |
(1) |
Commercial Banking
Our Commercial Banking business includes products and services for retail customers, enterprises and corporations (other than global corporate clients, who are served by our Global Wholesale Banking segment), our consumer finance business and our asset management and insurance services.
We serve clients throughout Brazil, primarily through our branch network, which as of December 31, 2016 consisted of 2,254 branches, 1,167 mini branches (postos de atendimento bancário or “PABs” located at our corporate customers’ premises) and 13,806 ATMs.
Retail Banking
Individuals
Our currentWe have structured the individual customer classification model isservice segment as follows:
Private Banking – |
Santander Select |
Santander Van Gogh |
Santander |
We offerFurthermore, we also support our retail lending products toSelect and Van Gogh customers through our extensive branch networkSantander Direct channel, Santander Direct is suited to customers who want more flexible service hours, from 8:00 a.m., to 10:00 p.m. and on-sitewho prefer using a remote method, such as telephone, e-mail or chat, as well as access to digital channels. This service units. See “—Distribution Network.” Thecomplements our offering and broadens our capillarity by catering to regions where we do not have a physical presence.
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We launched the following table sets forth our individual customer loan portfolio at the dates indicated, as per our management records:
For the year ended December 31, | Change, as of December 31, 2016 vs. December 31, 2015 | |||||||||||||||||||
2016 | 2015 | 2014 | R$ million | % | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Leasing/Auto Loans(1) | 1,869 | 2,470 | 3,219 | (601 | ) | (24.3 | ) | |||||||||||||
Credit cards | 20,524 | 19,013 | 18,218 | 1,511 | 7.9 | |||||||||||||||
Payroll loans(2) | 18,918 | 14,836 | 11,178 | 4,082 | 27.5 | |||||||||||||||
Mortgages | 27,313 | 26,134 | 21,581 | 1,179 | 4.5 | |||||||||||||||
Agricultural Loans | 3,416 | 3,438 | 3,371 | (22 | ) | (0.6 | ) | |||||||||||||
Personal loans/Other | 19,155 | 18,687 | 20,242 | 468 | 2.5 | |||||||||||||||
Total | 91,195 | 84,578 | 77,809 | 6,617 | 7.8 |
products or functionalities for retail customers in 2021:
Payroll Loans
A payroll loan is a typical retail product with a differentiated method of payment. Monthly installments are deducted directly from customers’ payroll by their employer and then credited to Santander Brasil, significantly reducing our credit risk. Our customers are typically employees from the public sector, private sector and retirees benefitting from a state pension. We had a 6.5% market share in payroll loans with a loan portfolio of R$18.9 billion in this category as of December 31, 2016, compared to a market share of 5.4% and a loan portfolio of R$14.8 billion as of December 31, 2015, according to the Brazilian Central Bank (including payroll loans from the agreement between Santander Brasil and Banco Bonsucesso).
Credit Cards
We operate in the credit card market issuing Visa and MasterCard cards to our customers (including both account and non-account holders). Our revenues from credit cards include administration fees, interest on unpaid balances, annuity fees and withdrawal fees.
The total credit card portfolio grew 8.7% in 2016 compared to 2015, reaching R$21.1 billion. In 2016, our average base of active credit card customers increased 4.7% compared to 2015, reaching 6.4 million of active credit cards. Our credit card revenues increased by 9.4% in 2016 and as of December 31, 2016 our market share was 11.1%.
Holders of credit cards issued by Santander Brasil have access to the Esfera rewards program, which offers exclusive deals and discounts, as well as to Bonus Esfera, which enables customers to exchange their Esfera reward points for certain products, services and travel benefits.
In 2016, we were among the first banks to launch digital platforms such as the Samsung Pay online payment platform and our own Santander Way mobile application, which is an online credit card tool allowing customers, among other things, to track their credit card use online.
We have also launched two new innovative credit cards in the market:
In 2016, we entered into an agreement with American Airlines for exclusive co-branded cards issuance in Brazil. In addition, we also have partnerships for co-branded credit cards with Vivo, Shell, Dufry and Ferrari, which enable us to offer exclusive benefits to our customers.
In January 2017, the CMN enacted a new resolution establishing that credit card bills and the debt balance of other forward paying products may be used as revolving credit only until the following bill. Thereafter, financial institutions must offer customers another type of financing on more favorable conditions than those typically found in the credit card market.See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Credit Cards.”
Super
Super is a financial technology company which was acquired by Santander Brasil in March 2016 with the aim of enabling Santander Brasil to offer a convenient payment platform for managing the financial affairs of customers across all income segments and occupations.
As a result of an integrated action, a commercial effort between Super and Santander Brasil’s segments such as SMEs and branches’ network, we increased the number of active users of this digital payment platform from approximately 76,000 active users in December 2015 to approximately 223,000 in December 2016, which led to an increase in fees collected by Super of approximately 350% from 2015 to 2016.
We took important steps towards further integrating Super within our business during the course of 2016. Such steps included integration with Santander Brasil’s existing digital channel and introducing our ContaSuper product to high-income customers as a useful tool to manage domestic and travel expenses.
Mortgages
We offer long-term loans to our customers for the purchase of real estate, secured by deeds of trust, which we consider a strategic product due to its lower risk and ability to increase customer loyalty. Mortgages accounted for an important share of our credit portfolio in 2016. In addition to financing for individuals, we also offer credit lines
to corporate customers in the real estate construction industry, as a rule, for the financing of up to 80% of the project cost.
As of December 2016, we had a 6.03% market share in Brazil in terms of amounts outstanding under mortgage products, according to the Brazilian Central Bank. As of December 2016, our individual sector mortgage loans portfolio was R$27.3 billion, a 4.5% increase compared to December 2015, and our total mortgage loans portfolio reached R$36.6 billion.
On average, the loan-to-value ratio of our housing loans is 59.8%. We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not make any loans for more than 80% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment or other types of revenue, which allows us to evaluate their credit risk profile and (iii) monthly payments may not exceed 35% of borrowers’ monthly gross income.
Insurance Brokerage Services
In 2011, Santander Spain entered into a long-term alliance with Zurich Financial Services Group (“Zurich”) in relation to Latin America. Pursuant to the terms of this alliance, Zurich, through certain of its subsidiaries, acquired a majority interest in the insurance operations of the Santander Group in Argentina, Brazil, Chile, Mexico and Uruguay. Furthermore, as part of the alliance, it was agreed that Santander Brasil would exclusively distribute these insurance products over the following 25 years through its branch network. As a result of these arrangements, we receive payments from Zurich equivalent to those received before the transaction for the distribution of insurance products.
This transaction enabled us to combine Zurich’s insurance know-how with our distribution capacity in Brazil, allowing us to offer a broad variety of insurances, which aims to meet the particular needs of our different retail segments.
In 2015, we launched Santander AutoCompara (www.autocompara.com.br), a tool which allows customers to compare car insurances prices for insurance coverage across several insurance companies.
Capitalization Products
Targeted toward medium and large customers, as well as SMEs, capitalization products are savings account products that generally require customers to deposit a fixed amount with us to be returned at the end of an agreed upon term, with accrued interest. In addition, the customer is automatically entered into periodic drawings for the opportunity to win significant cash prizes. Thus, capitalization products are similar to certificates of deposits, except that, along with purchasing a product that receives a return on principal, the customer has a chance of receiving cash prizes during the term of the product based on random drawings.
Our capitalization products transactions are carried out through our subsidiary Santander Capitalização S.A. and are focused on bank assurance products.
Small and Medium Enterprises (SMEs)
Our currentWe serve SMEs classification model is as follows:
Business 3: companiesunder the “Santander Negócios e Empresas” brand, with annual revenue over R$20 million and up to R$200 million. Our focus is to strengthen relationships with our customers in this segment by offering a complete and sophisticated range of products and services, with dedicated and qualified managers,the following customer service centers, a dedicated and exclusive call center unit, and the support of product experts and local risk analysts;
segmentation model:
In 2016, we undertook initiatives aimed at improving our offering to each class of SME, namely:
● | Negócios Direct - for companies with annual |
In addition, we have also repositioned the “Santander Negócios & Empresas” customer segment, improving our financial offer and launching a non-financial offer, called “Programa Avançar.” The program provides companies with concrete deliverables, such as videos, events and workshops in order to develop partner and employee skills, build teams to support talent hiring, and helps connect our customers to international trade through the Santander Trade portal.
The table below sets forth our SME loan portfolio at the dates indicated, as per our management records:
For the year ended December 31, | Change, December 31, 2016 vs. December 31, 2015 | |||||||||||||||||||
2016 | 2015 | 2014 | R$ million | % | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Agricultural lending | 322 | 243 | 283 | 79 | 32.5 | |||||||||||||||
Working capital loans | 12,695 | 14,736 | 16,966 | (2,041 | ) | (13.9 | ) | |||||||||||||
Buyer financing | 21 | 27 | 27 | (6 | ) | (22.2 | ) | |||||||||||||
Vendor financing | 10 | 9 | 8 | 1 | 11.1 | |||||||||||||||
Discounted receivables | 1,491 | 1,228 | 1,037 | 263 | 21.4 | |||||||||||||||
Comex | 1,259 | 1,954 | 1,658 | (695 | ) | (35.6 | ) | |||||||||||||
Overdraft facility | 2,837 | 3,072 | 3,113 | (235 | ) | (7.6 | ) | |||||||||||||
Refinancing | 4,365 | 3,691 | 3,393 | 674 | 18.3 | |||||||||||||||
Resolution 2,770 | 35 | 78 | 109 | (43 | ) | (55.1 | ) | |||||||||||||
Account overdraft loans | 1,734 | 1,983 | 2,042 | (249 | ) | (12.6 | ) | |||||||||||||
CDC/leasing(1) | 1,506 | 1,521 | 1,733 | (15 | ) | (1.0 | ) | |||||||||||||
Other(2) | 16,165 | 14,982 | 11,822 | 1,183 | 8 | |||||||||||||||
Total(3) | 42,440 | 43,524 | 42,191 | (1,084 | ) | (2.5 | ) |
Agribusiness
In 2015, we undertook a review of our activities in the agribusiness sector, both at the retail and wholesale markets. During 2016, we worked to improve our value proposition for the sector offering new client interface and speeding up credit approvals and back office. This work enabled us to identify synergies and generate opportunities in the agribusiness sector, launch product offerings, enlarge our specialized commercial team, create a new client segmentation, and use new risk management tools. These developments have led to improved results for Santander Brasil in the agribusiness sector, with our market share in the sector increasing by 2.6 p.p.
In early 2017, we created a new agribusiness customer unit, which includes the opening of specialized branches, the creation of a team with expertise in that sector and the offering of certain segment-specific products.
Merchant Acquiring Market
The acquisition of GetNet, which was completed in 2014, has given us more flexibility to invest in, and influence the, business strategy within the Brazilian electronic payments sector, creating opportunities for us to gain scale in this segment and to make use of the product portfolio and services of GetNet.
In particular, GetNet enables us to provide a fully integrated offering to SME customers, including card payment solutions. One of them is “Conta Integrada,” a bundle combining a current account with an integrated card payment solution. As a result of Conta Integrada and other measures, GetNet’s transactional volume has increased 30% during 2016.
In 2016 we also integrated additional payment methods into our card payment solutions offering (including American Express, Elo, Hiper, Hipercard, Alelo and Ticket), launched “Santander Mais Gestão,” an offer that merges card payment solutions with a financial conciliator focused on medium and large companies, and launched “Vermelhinha,” a solution that targets self-employed professionals and small companies.
Corporate
Our corporate customer segment is comprised of large companies that have annual gross revenues greater than R$200 million (other than global corporate clients). We focus on fostering a close relationship with our corporate customers by providing them with customer-tailored services. To that end, we offer a wide range of specialized products and services that are compatible with the products and services we offer to our GCB customers. In 2016, our team comprised approximately 115 bankers and more than 96 product specialists across Brazil and dedicated exclusively to our corporate sector.
Consumer Finance
Aymoré CFIWe provide consumer credit to finance motor vehicles, goods and services directly or through intermediate agencies, Santander Financiamentos is our main service channel, forbut we also operate under multiple brands.
The following table sets forth certain key financial and operating data regarding our consumer finance with expertise in providing consumer credit directly to borrowers or through intermediate agencies. We have a total portfolio of R$26.6 billion, in an operation based on four pillars: (i) vehicle financing, where we arebusiness for the market leader with 20.8% market share (including our joint ventures with RCI Banque S.A., or “RCI,” and with PSA); (ii) captive banks, through joint ventures with RCI (Renault and Nissan) and PSA (Peugeot and Citroën), white label partnerships with Hyundai, Subaru Volvo and Chery; (iii) Webmotors S.A. (“Webmotors”) (an online car trading portal active in the Brazilian market); and (iv) consumer credit through intermediate customers (i.e., stores), or industrial or partner brands, including businesses in the furniture, tourism, nautical, health, technology, accessibility equipment, renewable energy and cleaner processes sectors, among others.periods indicated:
As of December 31, | Change between 2020 and 2021 | Change between 2019 and 2020 | |||
2021 | 2020 | 2019 | |||
Individual consumer finance loan portfolio market share (1) (%) | 24.4% | 25.1% | 25.0% | (1.1) p.p. | 0.1 p.p. |
(1) | Source: Brazilian Central Bank. |
In July 2016 we also introduced “+negócios.” +negócios is an innovative digital commercial platform designedCorporate
Our corporate banking segment aims to be simple and intuitive and which allows for faster loans simulations, credit approval and proposal formalization in addition to providing portfolio management reports.
In December 2016, the portfoliomain distribution channel of Aymoré CFI consisted of over 12,700 business partners and a sales team composed of approximately 1,270 employees (operators and businesses managers).
Asset Management
Santander Asset Management, a holding company jointly owned by the Santander Group (with a 50% interest)to Brazilian and Warburg Pincus and General Atlantic (with a combined 50% interest), currently owns the Santander Group’s former asset management business. Santander Asset Management is present in Brazil, Germany, Argentina, Chile, Mexico, Puerto Rico, Portugal, the United Kingdom, Poland, USA and Spain) with U.S.$194.1 billion in assets under management as of December 31, 2016.
Following the partial divestiture of our asset management business and the creation of Santander Asset Management, we continueforeign and/or multinational corporate clients. The product offering ranges from simple cash accounts to act as administrator, meaning we continue to represent Santander Asset Management in certain respects, carry out certain client-facing activities on behalf of Santander Asset Management, and engage in sales and distribution activities in relation to Santander Asset Management products. We do not, however, manage the funds invested by clients with Santander Asset Management or make investment decisions with respect to such funds. Such fund management activities are carried out independently by Santander Asset Management. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting the
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Comparability ofthan R$200 million located across Brazil by physical and digital channels. Our Results of Operations—Sale of the Investment Fund Managementcorporate banking segment has been constantly evolving as a segment relying on a disciplined analytical toolkit, consistent communication and Managed Portfolio Operations.”
As of December 31, 2016, Santander Asset Management’s Brazil division had R$222.3 billion of assets under management, according to ANBIMA. During the course of 2016, Santander Asset Management’s Brazil division remained the fifth largest Brazilian asset management firm with a 25.8% increase in assets under management and an increase in market share of 0.59p.p. to 6.30%, according to ANBIMA. In 2016, Santander Asset Management’s Brazil division has reinforced its product offering with the launch of a new family of multimarket funds aimed at customers in our Private Banking and Santander Select segments.
During the course of 2016, Santander Asset Management’s Brazil division was also recognized in the main local rankings, receiving “Top Asset Manager – Fixed Income” ranking from ValorInvest/S&P in July 2016 as well as being elected as Best Asset Manager – Money Market funds by Guia Exame in December 2016. More recently, we have been recognized for the third consecutive year as the Best Bank to Invest, an award that takes into account the performance of the funds managed by Santander Asset Management’s Brazil division (GVcef and Fractal Consult – January, 2017).
In 2016, the Santander Group reached an agreement with Warburg Pincus and General Atlantic pursuant to which the Santander Group will acquire their 50% share in Santander Asset Management. This transaction on completion will bring Santander Asset Management back to the 100% ownership of Santander Group.
workforce upskilling.
Global Wholesale Banking
Santander Corporate & Investment Banking (SCIB)
GCB
GCBSCIB is the global business unit that covers those clients that,serves customers, who, due to their size and complexity, require tailored services or high value addedhigh-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customers in the GCB segment benefit from the global structure of services provided by the Santander Group with its worldwide integrated wholesale banking network and global services solutions, combined with its local market expertise and provision of integrated services.
In 2016, GCB focused on its customer relationship model and on building partnerships with other sectors of Santander Brasil. To do so, it sought to improve the sales of products in the GCB portfolio to other segments within Santander Brasil such as corporate, private banking, retail clients and SME customers. In addition, GCB maintained its sustainable growth objective, diversifying and distributing our results across Tier II and III clients, increasing active asset portfolio management, and increasing its operational capacity through investments in process redesigns and enhancements in technological platforms.
We offer a range of services from core products to highly complex customized solutions in the following key areas:
The GCB team is dedicated to client coverage comprisingcomprises a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.
Our customers in the SCIB segment benefit from Santander Group’s global structure of services, which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and provision of integrated services.
Our Portfolio of Products and Services
Payments
Credit and Debit Cards
We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
In order to reach a greater number of customers and remain competitive, we launched the SX card in November 2020, as part of the SX strategy detailed below. This product benefits highly engaged and transactional customers, facilitating the exemption from annual card fees. In addition, we also took the opportunity with the SX card to launch a more modern and ambitious card design for our customers.
To improve customer experience for the high-income segment, where we are aiming to increase market share and brand awareness, we launched the Gold, Platinum and Centurion products with American Express which include NFC technology, the accumulation of Esfera points that do not expire and still allow access to Membership Rewards, an exclusive American Express program.
In line with Santander Brasil’s global purpose of becoming NetZero by 2050, we launched cards made from recycled material in July 2021. The new cards made of recycled material were issued to customers who already had an SX or Elite card, close to expiry. We expect to make the official launch for the first quarter of 2022, with the issuance of 100% of SX and Elite cards with recycled material. Currently, we are the only bank in Brazil that issues cards made from recycled material.
In the SMEs segment, believing in the great potential of microentrepreneurs, or “MEI,” who represent more than half of the companies in Brazil, we developed an exclusive card for this segment. The MEI card grants customers discounts on purchases made with partners, chosen according to the microentrepreneurs field of activity, as a result of which cardholders have access to exclusive offers for the purchase of input for their companies. In addition, there is the possibility of an annual fee waiver by binding the card by using the card on a monthly basis or by registering with the PIX system.
In line with the objective of becoming an open financial services platform, in November 2021 we launched a partnership with Samsung, a solution that offers digital account opening, card sales and SIM loans on the first screen of Samsung pay. The objective is to provide a simple and fluid journey within the app that is already used on a daily basis to pay for on-the-go purchases.
We also improved our digital journey to provide better customer self-service, which we believe is a key component for higher customer engagement. A recent novelty is “Clique e Retire,” a new physical card delivery system that provides a quick, autonomous solution for customers by allowing them to opt to collect their cards from self-service machines.
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The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.
As of and For the Year Ended December 31, | Change between 2020 and 2021 | Change between 2019 and 2020 | ||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||
Credit card portfolio market share (1) | 12.4 | % | 13.4 | % | 12.9 | % | (1.0 p.p.) | 0.5 p.p. | ||||||||||||
Credit card portfolio (R$ billion) (2) | 48 | 37.8 | 36.1 | 27.0 | (100.0 | %) | ||||||||||||||
Total card turnover (R$ billion) (2) | 306.0 | 242.0 | 236.4 | 26.4 | 2.4 | % | ||||||||||||||
Credit card turnover (R$ billion) (2) | 203 | 158.7 | 161.0 | 27.9 | (1.4 | %) | ||||||||||||||
Total card transactions (in millions) (2) | 3,555.3 | 2,570.8 | 2,725.4 | 38.3 | (5.7 | %) | ||||||||||||||
Credit card transactions (in millions) (2) | 1,859.1 | 1,300.0 | 1,450.9 | 43.0 | (10.4 | %) | ||||||||||||||
Participation of credit card in the household consumption (only debit)– Market overview (2)(%) | 24.1 | % | 17.4 | % | 13.8 | % | 6.7 p.p. | 3.6 p.p. | ||||||||||||
Participation of credit card in the household consumption (only credit) – Market overview (2)(%) | 42.1 | % | 25.2 | % | 24.0 | % | 16.9 p.p. | 1.2 p.p. | ||||||||||||
Participation of credit card in the household consumption (total, debit and credit) – Market overview (2)(%) | 69.3 | % | 43.5 | % | 38.2 | % | 25.8 p.p. | 5.3 p.p. |
(1) | Source: Brazilian Central Bank, as of September 31, 2021. Data for the year ended December 31, 2021 was not available as of the date of this annual report. |
(2) | Source ABECS – “Monitor bandeiras,” The data relating for the year ended December 2021 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS. |
Santander Way
Santander Way is an app available to our cardholders that allows them to manage their Santander Brasil cards at any time and place. This complete payment platform also works as a digital wallet, enabling customers to conduct instant contactless payments. The app is frequently updated with new features. Some of the most notable features launched in 2021 included: (i) extra loan and installment offers, (ii) virtual cards that allow purchases before the physical card arrives, (iii) functions for safer online purchases without a physical card, (iv) possibility for the customer to update his or her income to obtain a higher credit limit, and (v) chargeback from unrecognized purchases. In 2021, we have nine million active customers using Santander Way.
Merchant Acquiring Market | Getnet
Getnet is a technology company that offers payment solutions to a range of merchants, from large businesses to the small entrepreneurs, both physically and digitally. Getnet was our subsidiary until the completion of the Spin-Off on October 26, 2021. For more information on the Spin-Off of Getnet, see “—A. History and Development of the Company—The Getnet Spin-Off.”
The following table sets forth certain historical key financial and operating data regarding Getnet’s business for the periods indicated.
As of and For the Year Ended December 31, | Change between 2020 and 2021 | Change between 2019 and 2020 | ||||||||||||||||||
2021 (1) | 2020 | 2019 | ||||||||||||||||||
(R$ millions, except as otherwise indicated) | ||||||||||||||||||||
Market share of total turnover (2) | 15.3 | % | 14.9 | % | 11.3 | % | 0.4 p.p. | 3.6 p.p. | ||||||||||||
Debit turnover (3) | 105.8 | 105.8 | 80.9 | 0 | % | 30.8 | % | |||||||||||||
Credit turnover (3) | 182.7 | 167.9 | 126.6 | 8.8 | % | 32.6 | % | |||||||||||||
(1) | We completed the Spin-Off of Getnet on October 26, 2021 and, as a result, Getnet is no longer a subsidiary of Santander Brasil. We stopped consolidating Getnet within our results of operations on March 31, 2021. For additional information on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report. |
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(2) | Source: Data for 2021 relates to the nine-month period ended September 30, 2021 and is based on ABECS Monitor Bandeiras - Acquirers. Data for the year ended December 31, 2021 was not available as of the date of this annual report. For comparison purposes, the difference between September 30, 2021 and September 30, 2020 would be an increase of 1.7 percentage points. |
(3) | Considers data until September, 2021. |
We completed the Spin-Off of Getnet in October 2021, and Getnet is no longer our subsidiary. However, on April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.
Following the Spin-Off, Getnet is operating as the Brazilian leg and regional acquirer of the Santander Group’s PagoNxt merchant solutions. PagoNxt is a strategic initiative that seeks to promote sustainable and profitable growth by integrating various payment solutions for businesses and consumers using the latest technology. PagoNxt is an autonomous company within the Santander Group. Through its three lines of business, namely merchant solutions for businesses, trade solutions for international trade and consumer solutions for consumers, it provides solutions not only to banking clients of the Santander Group but also to third-party customers, financial institutions and fintechs.
Esfera
Esfera is our loyalty program, which can be accessed through its own website and mobile app. Our loyalty platforms enable our credit card holders to exchange their reward points for many products, services and travel benefits, including exclusive deals and discounts with a broader selection of partners such as some of Brazil’s largest retailers and a cinema chain, among others. Esfera also operates a marketplace offering cashback to is clients on purchases of products that aggregate more than sixty partners as of the date of this annual report.
Ben
Ben is an employee benefits company that provides greater flexibility, purchasing power and quality of life to its users by creating, supplying and managing types of employee benefit vouchers (e.g. meals, such as Vale Alimentação and Vale Refeição, as well as transportation) in the form of magnetic cards. These benefits are offered through an integrated digital platform.
Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.
Ben is currently working on development of new products, such as fuel cards and other benefit options to expand its portfolio.
Ben added Ben Único to its portfolio. This product allows customers to have two kinds of benefits in a single card, reducing the cost with card emission and logistics, contributing with ESG metrics,
According with new products developing planning, Ben submitted a request to the Brazilian Central Bank to issue a license to operate as a payment institution (instituição de pagamento) and it was granted in December 2021.
The following table sets forth certain key financial and operating data regarding Ben´s business for the periods indicated.
As of and For the Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in R$ millions, except as otherwise indicated) | ||||||||||||
Card Purchases | 1,484 | 946 | 560 | |||||||||
Number of Cards (in thousands) | 565 | 217 | 98 | |||||||||
Number of Transactions (in thousands) | 20,477 | 12,192 | 9,534 | |||||||||
Merchant accredited (in thousands) | 365 | 338 | 253 |
For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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Payroll Loans
Payroll loans support both account and non-account holders in the execution of projects and financial organization. Under these loans, monthly installments are deducted directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, significantly reducing our credit risk. We offer these payroll loans to our customers through our mobile banking platform and our branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts. Furthermore, these loans are also offered to non-account holders through Olé Consignado. For further information on relevant events, relating to Olé Consignado’s corporate events, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.
As of December 31, | Change between 2020 and 2021 | Change between 2019 and 2020 | ||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||
Market share in origination (1) | 16.96 | % | 18.90 | % | 13.2 | % | (1.94) | p.p | 9.09 p.p | |||||||||||
Payroll loan portfolio (R$ billion) | 53.3 | 48.1 | 43.0 | 10.85 | % | 11.9 | % |
(1) | Source: Brazilian Central Bank, as of December 31, 2021, 2020 and 2019, as applicable |
SIM
SIM is a digital lending platform for individuals through which customers can apply, and be approved, for a loan completely online. After two years of operation, SIM has already achieved a positive net profit, a loan portfolio of R$1.6 billion as of December 31, 2021 and a market share of 0.7%, in the year ended December 31, 2021, as well as a total of 6.5 million registered users as of December 31, 2021. SIM also has a high level of customer satisfaction, with an NPS of 80 points in the year ended December 31, 2021.
emDia
emDia is an online debt renegotiation platform. It provides customers with a simple platform to access debt renegotiation services on a 24/7 basis, As of December 31, 2021, emDia had 6.5 million customers and had contributed to the recovery of R$78 million in credit volume in 2021.
Mortgages
We offer long-term financing to our customers for real estate purchases, secured by deeds of trust. We consider mortgages to be a strategic product due to their lower risk (since the acquired property serves as collateral) and their ability to increase our customer loyalty (especially since we offer customers more attractive rates if they choose to bank with us). In this market, our customers, and those of our competitors, are primarily individuals.
We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 90% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of the borrower’s monthly gross income,
To facilitate the process for our customers, we provide a real estate digital platform where customers can obtain mortgages completely online. We were the first bank in Brazil to offer customers the opportunity to secure a mortgage without being physically present, except for the signing of the agreement and returning it duly registered. We have a partnership with the largest real estate platform in Brazil in order to improve our sales network and strengthen our digital presence.
The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated:
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As of December 31, | Change between 2020 and 2021 | Change between 2019 and 2020 | ||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||
(in R$ billions, except percentages) | ||||||||||||||||||||
Mortgage loan portfolio | 54.8 | 45.8 | 39.7 | 19.7 | % | 15.4 | % | |||||||||||||
Individual sector mortgage loans | 53.0 | 44.0 | 37.2 | 20.5 | % | 18.3 | % | |||||||||||||
Loan to value(1) – Production (% quarterly average) | 65.5 | % | 64.9 | % | 62.9 | % | 0.06 p.p. | 2.0 p.p. | ||||||||||||
Loan to value – Portfolio (%) | 52.5 | % | 52.2 | % | 49.4 | % | 0.30 p.p. | 2.75 p.p. |
(1) | Ratio between loans and the value of the collateral, excluding home equity. |
Home Equity
In our portfolio of loan products, we also offer a “home equity” financing product called “UseCasa” in which clients can receive a loan if they provide real estate as collateral. This product enables clients to access financing to pursue their personal objectives. “UseCasa” has increased its market share to 23.5% in 2021, maintaining our position as the leading private sector bank for these types of loans in Brazil. Our portfolio was R$3.2 billion in 2021, an increase of 27% in the year ended December 31, 2021 compared to the year ended December 31, 2020. Efficiency has also improved as approximately 50% of loans are now approved in less than 10 days. We do not offer home equity loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 60% of the value of the property, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of borrowers’ monthly gross income.
To facilitate the process, customers can obtain home equity loans completely online through our real estate digital platform. When using this option, customers only need to be physically present when signing the contract and when returning it once it is duly registered.
Tailored Products and Services
As mentioned above, we offer a complete set of services and products worldwide. In this way, we have a portfolio that ranges from basic to tailor-made and highly complex solutions in the following areas:
● | Global Transaction Banking – Responsible for the sale and management of local transactional banking products, which include local loans, commercial financing such as on-lending of funds from development banks, structuring of local loans and cash management solutions). |
● | Global Transactional Services – Responsible for the sale of global transactional products, financing for export and import, guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks. |
● | Global Debt Financing – Responsible for the provision of financing and financial advice on infrastructure projects, origination, and distribution of fixed income instruments in capital markets both locally and internationally, financing for acquisitions and syndicated loans in local and foreign currency. |
● | Investment Banking – Advice on mergers and acquisitions and equity transactions in the capital markets. |
● | Equities – It operates brokerage services for individual, corporate and institutional investors in stocks, listed derivatives and research. |
● | Treasury Customers – Responsible for structuring and offering foreign exchange products, derivatives and investments to clients in our various segments, including institutional investors, corporate clients and individuals. |
● | Market Making – Responsible for the pricing of operations (foreign exchange and derivatives) for customers originating from the sales efforts of our corporate, institutional, corporate, private banking and retail. This area is also responsible for managing our proprietary books. |
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● | Energy Trader – Performs transaction with qualified customers and end consumers, and also acts as a hedge and market making provider in the energy markets. |
We are one of the leading banks in capital markets and financial advisory services in the Brazilian and international markets as evidenced by the league tablesawards we have received, of which the most significant are listed in the table below.
Company | Acknowledgments | |
Dealogic | Full Year 2021 #8 Latin America & Caribbean ECM Revenue #9 Latin America ECM Volume by Bookrunner #10 Brazil M&A Revenue by Advisor #6 Brazil M&A Volume by Advisor #4 Latin America & Caribbean DCM Volume by Bookrunner #8 Latin America and Caribbean Loans Volume by Bookrunner #8 Latin America and Caribbean IB Revenue by Bookrunner #5 Brazil Investment Banking by Bank¹ #1 Latin American & Caribbean Project Finance Loans Volume by MLA² #1 Americas Project Finance Volume by Finance Adviser to Consortium² #1 Americas Project Finance Volume by Finance Adviser² #4 Americas Renewable Energy Project Finance Volume by MLA² ¹ For the third quarter of 2021 ² For the first half of 2021 | |
Global Finance | Best New Measures to Support Trade Finance Customers during Pandemic 2021 | |
Best Supply Chain Finance Bank Global 2021 Best Post-Shipment Financing Solution 2021 Best Provider of Short-Term Investments Money 2021 Market Funds in Latin America 2020 Best Trade Finance Bank in LatAm 2020 World’s Best Payment Hub Solution 2020 Best Trade Finance Provider for LatAm 2020 | ||
Institutional Investors | #1 The Latin America Strategy Team #4 The Latin America Sales Team # Sales Trading Institutional Team #5 Research Team | First Quarter of 2020 |
TMI Awards | Best Trade & Supply Chain Finance Bank in South America 2020 | |
Euromoney | The Best Bank for SMEs Award in LatAm. | October 2020 |
FX Markets | Best Bank for emerging LatAm currencies 2020 Best Bank for LatAm 2020 Best Bank for USD/BRL 2020 | |
Global Trade Review | Best Trade Finance Bank in LatAm 2020 Best Deal Award Route 2020 Best Supply Chain Bank 2020 | First Quarter of 2020 |
Bond Radar | #1 DCM Distributed in the International Market Brasil Bonds & Corporate Bonds | Full Year 2020 |
Trade Finance an IJ Global | Best Supply Chain Finance Bank 2020 Best Receivables Financier 2020 | |
PFI Awards | Global Adviser of the year | First Quarter of 2020 |
Anbima | #2 DCM Distributed in the Local Markets #4 DCM Originated in Local Markets– Fixed Income Consolidation Project Finance Financing advisory #1 Announced value | First Quarter of 2021 Full Year 2020 |
Risk Net | Risk Solutions House of the Year 2020 Deals: Cosan (EDQ) / Syngenta (Special Sits) |
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Latin Finance | Corporate High-Grade Bond of the Year: Suzano FY2020 Equity Follow-On of The Year: Via Varejo Infrastructure Bank of the Year – Brazil Syndicated Loan of the Year: LD Celulose Domestic M&A Deal of the Year: Grupo Notre Dame Intermédica purchases Clinipam Corporate High-Yield Bond of the Year: Braskem Bank of the Year: Southern Cone | |
Bacen | #1 Total FX | September 2021 |
The Banker | Best Transaction Bank for Latam | 2021 |
Customer Solutions
Agribusiness
Agribusiness remains one of our key areas of expansion, and we believe that expanding our agribusiness network will help broaden our reach into the Brazilian countryside to strategic areas in which we are not yet present. We provide a full range of products and services focused on the agribusiness sector. Our approach towards rural producers differs from the one taken with our other customers in that we offer a specialized relationship to our rural producers. We believe that a network of physical stores and digital solutions will result in a more agile and efficient communication with these customers.
The following table sets forth certain key financial and operating data regarding our agribusiness for the industry according to Bloomberg and Thomson Reuters.periods indicated.
As of and For the Year Ended December 31, | Change between 2020 and 2021 | Change between 2019 and 2020 | ||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||
Number of agribusiness-focused stores | 42 | 40 | 34 | 5 | % | 6 | % | |||||||||||||
Agribusiness loan portfolio (R$ billion) | 13.9 | 13.7 | 10.9 | 1.5 | % | 26.2 | % |
Our mergersMicrofinance
We believe that Prospera Santander Microfinance is a leading microcredit-oriented operation among privately owned banks in Brazil, based on market share and acquisitions team ranked first in Bloombergportfolio value. This product aims to support formal and Thomson Reuters league tables for Brazil in terms of volume of announced transactions in 2016,informal microentrepreneurs by generating business and income with a 100% digitalized service process, in addition to products intended to improve business management skills, we have customers who hire us for services previously not available to them, because they do otherwise have access to financial services, such as property finance, consortium and investment services.
As of and For the Year Ended December 31, | Change between 2020 and 2021 | Change between 2019 and 2020 | ||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||
Number of Prospera stores | 119 | 99 | 100 | 20.02 | (1.0 | %) | ||||||||||||||
Microfinance loan portfolio (R$ billion) | 1.9 | 1.3 | 1.2 | 49.2 | % | 8.3 | % |
Webmotors
Webmotors is the first and largest Brazilian technology company focused on providing automotive purchase and sale solutions for dealers, original equipment manufacturers and private sellers, holding the largest online automotive listing in Brazil.
Webmotors received an average of more than 30 million visits per month in 2021. Through Cockpit, a pioneering and disruptive platform for utilities, which brings together solutions for the entire network described above, we offer the following solutions: business management/ performance, buyer profile (CRM), data intelligence, predictive pricing models and market data (AutoGuru).
Webmotors endeavors to be a platform that accompanies private and corporate users throughout the life of their vehicle, from purchase, to use and sale. In order to do so, Webmotors reformulated the business of its subsidiary Loop, which was a traditional auctioning business, into an omnichannel dealer which is able to increase the sale value of demobilized fleets in its digital and physical stores. Webmotors also launched “Agenda Fácil,” a product focused on scheduling services through WhatsApp.
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Santander Auto
In 2019, we launched Santander Auto, a fully digital car insurance solution which relies on the use of big data analytics for pricing.
The Brazilian insurance market is characterized by: (i) low insurance penetration in proportion to its GDP; (ii) low technological evolution, dominated by companies with low innovation rates, still focused on financial results (due to a history of high interest rates); and (iii) retail brokers as the main distribution channel. As a result, the subscription process still requires that the customer complete a question form (approximately 40 questions). As a result, only approximately 20% of Brazilian vehicles are insured.
Actuarial techniques and behavioral models enable Santander Auto to make an insurance proposal, without making additional information requests from the customer, based on information already available to us.
During 2019, its first year of operation, almost 110 thousand policies were sold, which represents a penetration rate of 16% (i.e., total insurance contracts sold as a percentage of 16 transactions. the contracts relating for loans by Santander Financiamentos). These results are based on a pricing system based on information bureaus which provides have a more accurate price, which makes it possible to make an offer at the time the vehicle is purchased, and which enables customers to include insurance in their purchase with a single click.
During 2020, we focused on consolidating our insurance offer, by ensuring that all customers have at least one insurance offer, while also covering the most diverse types of risk. We intend to expand the business through the optimization of our ecosystem and penetration in our customer base.
In Latin America, under2021, Santander Auto expanded its product offering to cover 95% of all vehicles financed by Santander Financiamentos, reaching a penetration rate of 20% in the same criteria, we also ranked firstyear ended December 31, 2021 (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos), and registering an increase of 80% in 2016,the number of policies sold in the year ended December 31, 2021 compared to fifththe year ended December 31, 2020. In the fourth quarter of 2021, Santander Auto started to offer car insurance to customers who are not financing their vehicle with Santander Financiamentos in 2015.order to expand its distribution channel further.
Our Brazilian equity capital markets division participated as bookrunner in numerous offerings in recent years. In 2016, we ranked third in equity issuances according to Bloomberg, with a total of five executed transactions.
Solution4fleet and Car10
In 2016,2021, we also played an important roleacquired Solution4fleet, a company specialized in the internationalleasing vehicles to third parties. Solution4fleet offers services such as assistance, fleet management, inspection, vehicle maintenance and domestic debt capital markets for Brazilian issuers. In the international debt capital markets, we acted as coordinator in 14 out of 16 transactions involving Brazilian corporate issuers, thereby achieving a leadership position in this market with U.S.$20.25 billion raised for clients during the year. In the domestic market, we participated in 28 transactions, which raised a total of R$10 billion in funding for companies. Among the long-term fixed income issues, we achieved a 9% market share in 2016 and ranked fourth in the relevant ANBIMA rankings.
Our project finance team has advised and structured the most important projects in recent years in several sectors of the economy. The Santander Group is one of the main players in project finance around the world. For the seventh time in the last eight years Santander Brasilfine management. It is the leaderonly company in the Brazilian market as evidenced by ANBIMA’s financial advisors ranking in 2015. In Latin America, we are the leading bank in project finance, accordingthat has a complete ecosystem for fleet management and leasing operations.
We also acquired Car10, a company which provides a marketplace to Dealogic rankings for 2016.simplify auto repair shops and services with over 7,000 registered garages across Brazil.
+ Negócios and +Vezes | Santander Financiamentos
In 2016, our2017, we launched “+Negócios,” which we believe to be an innovative digital trading platform. This simple and intuitive platform enables faster execution of loan simulations, receipt of credit approval and proposal formalization for vehicles, in addition to providing portfolio management reports. In the same year, we also introduced “+Vezes,” a digital trading platform allowing retailers to offer installment payment options for the sale of goods and services.
In 2021, approximately 15 million separate Brazilian project finance team acted as financial advisor and/or lender in relationindividual taxpayer identification numbers were used to 38 wind energy projects with a total output exceeding 1,000 megawatts. Our Brazilian project finance team also acted as advisor and lendersimulate vehicle leasing through the “+Negocios” platform, which makes it one of the second largestmost widely used platform in Brazil’s vehicle leasing market.
+Vezes has a strong focus on digital channels. With the use of +Vezes website, two editions of “Decora +” and “Energia +” have been launched, both focused on the development of digital showcases to bring main resellers closer to the end customers, mostly on the furniture and photovoltaic complex under constructionsegments. Additionally, Crédito Pessoal +Vezes has also been launched, which is a complementary offer of credit for end customers in Brazil,their checking account, without a specifically required purpose. We have also advanced multiplying +Vezes presence and service throughout the national territory for the implementation of the CONSULTANT + Model, strengthening the relationship with intermediary customers.
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Moreover, “+Fidelidade” is a loyalty program with the objective of offering incentives to agents based on their relationship with Santander Brasil and Webmotors. Accordingly, we have sought to improve the customer’s post-sales experience by implementing several features on +Fidelidade’s online portal.
Cash Management
We offer cash management solutions to corporate customers and SMEs online through our Internet banking and mobile banking services.
Our revenues from cash management include fees charged for offering the following products: (i) collections, in which we assist customers in carrying out commercial transactions using printed or online payment slips; (ii) payments, consisting of simple and automatic management of our customers’ accounts payable activities through individual transactions or via electronic file transfer; (iii) instant Payments, in which our customer pays and receives funds online with an immediate credit or debit to the account (this can be added to our collection, payments or acquiring products); (iv) payroll, which is intended to facilitate the management of salary and benefits payments to our customers’ employees via an online tool;(v) collection of values, which consists of seven projectsthe payment of cash values and checks at the customer’s points of sale; and (vi) custody, by which we perform the custody, control and deposit of predated checks up to the date of clearing.
In addition, we also provide other revenue-generating products which are structured and tailored to the customer’s operation.
Customer Funding
Our main sources of liquidity are customer funding through deposits and other bank funding instruments. These deposits, combined with equity and other instruments, enable us to meet most of our liquidity and legal reserve requirements.
For further information, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”
Investments
Our investment process for retail customers seeks to provide qualified guidance and help them achieve their financial objectives based on five major pillars:
● | Client investment profile – We assess our customer’s situation to understand their level of financial knowledge, investment horizons, liquidity needs and the levels of risk they are willing to assume, among other factors. This analysis is reviewed periodically, according to the customer’s needs and local regulations; |
● | Investment strategy – Our investment philosophy aims to provide long-term returns through a structured asset allocation process and mitigate market risks by diversifying among different asset classes; |
● | Model Portfolio – We define strategic portfolios for each customer profile and build our “Model Portfolio” on a monthly basis according to market conditions and trends. This tactical view arises from the Asset Allocation Committee, which consists of our advisory team and economists from our economics department, our Santander Asset Management division, our Private Banking unit and our brokerage house (Santander Corretora); |
● | Execution and implementation – To assure a successful execution of investment strategy, we provide a complete array of financial products, ranging from banking instruments, bonds, stocks, structured notes, investment funds with an open architecture and selected investment providers, real estate funds and exchange traded funds, among other capital markets instruments. Our partnership with Zurich Santander completes this offering with a wide range of private pension plans. Furthermore, our recent acquisition of Toro Corretora has further enhanced our PI DTVM investment platform by expanding our product offering. For more information regarding this acquisition, see “—A. History and Development of the Company—Important Events—Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.;” and |
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● | Follow-up – Our advisory team performs a thorough and frequent review of our clients’ profile, objectives and results alongside each client in order to maintain the client’s investment within the parameters established and the guidance provided by the model portfolio. |
In order to identify possible deviations from the investment profile’s recommended positions, we also rely on automated monitoring systems. These controls alert customers of any transactions that compromise the suitability of their portfolio and are in line with our commitment to protect our customers’ interests.
Furthermore, each customer has direct access to their positions through a total outputprivate access on the internet and mobile app, where they can view the evolution of 210 megawatts and, finally, we advised on and financed four hydroelectric projects with a total output of approximately 794 megawatts.their investment strategies.
Programa Avançar
We also actedhave a non-financial solution, known as lead financial advisor to the principal winner of the largest auction held by the Brazilian National Electric Energy Agency (Agência Nacional de Energia Elétrica), or “ANEEL.“Programa Avançar,” As partwhich is aimed at entrepreneurial customers. By means of this auction, ANEEL offered concessions regarding approximately 13,300 kilometerssolution, SMEs can access content and solutions related to management and innovation, internationalization, team building, and other topics relevant to businesses via a web platform. We see this program as a key component of transmission lines for an estimated capital expenditure of R$25 billion. In April 2016, our client won the bid for the largest offered lot, a transmission line with an extension of 1,100 km in Northern Brazil for a capital expenditure of R$1.9 billion. In October 2016, other important clients of GCB team won three offered lots, totaling R$2.4 billion in investments and 1,065 km of transmission lines, including the largest lot of the auction. These transactions demonstrate Santander Brasil’s outstanding position in project finance advisory services.offering to Brazilian entrepreneurs.
In 2016, we have also offered, through our structured lending division, and our asset and capital structuring division, several structured financing solutions, allowing our clients to execute their strategic investment plans.
In 2016, we performed strongly in transactions involving the BNDES, as demonstrated by the fact that BNDES disbursed R$3.86 billion to our wholesale clients (clients with revenues above R$90 million per year). Further, we achieved a 17.6% market share, compared to 14.2% in 2015. We also performed strongly in Multilateral and Export Credit Agencies transactions in Brazil, arranging transactions totaling R$5.03 billion for our clients in 2016. Further, we achieved a 25% market share in Latin America and first place in the Dealogic Global Trade Finance Review ranking for 2016. In addition, we retained our position as first bank in the IFC’s ranking for total committed portfolio volume in the B-Loan category in 2016.
In 2016, our equities department integrated the equity, derivatives and futures’ teams of our brokerage house, and Research. The objective behind this integration was to offer the best advisory and expand the range of investment services fora digital account solution where individual corporate and institutional clients. With 19 analysts and a coverage universe of more than 155 companies in Latin America, 329 events and conferences were offered to clients.
In addition to order execution services, Santander Corretora has developed its own portfolio ofentrepreneurs can purchase banking products and services increasing its number of proprietary Recommended Portfolios toin a total of ten (each suited to different investment profiles). Improvements have also been made in user experience,100% digital experience.
Similarly, we offer “Santander Copiloto,” an enterprise resource planning tool designed for our SME customers. This tool is integrated with the Santander Digital channels, and provides solutions such as the implementation of a system enabling us to investment suggestions directly to the customers’ mobiles.e-commerce, sales point software and tax compliance.
Service Channels
We also offer our financial services and products to our customers through our treasury sales team, foreign exchange products, OTC derivativesmultichannel distribution network composed of: (i) physical channels, such as branches, mini-branches and investments to all of our clients, including institutional investors, corporate clientsATMs; (ii) call centers; and individuals. We have an effective coverage, based on teams, which are specialized in each of these segments,(iii) digital channels, such as well as structuringInternet banking and products teams that work to create and maintain a portfolio that allows us to offer our customers the most innovative solutions available in the market.mobile banking.
In 2016, our treasury sales team maintained its first-rank position in foreign exchange products according to the Brazilian Central Bank, with a 14.3% market share. In 2016, we also won the “Best Performance House, Brazil” category in the structured transactions certificates (Certificados de Operações Estruturadas), or “COE,” and guaranteed capital fund by Structured Retail Products) and we also maintained our third-rank position in COEs, according to CETIP.
Proprietary Trading
Our proprietary trading division is responsible for the management of our proprietary books and the establishment of a relevant presence as a leading liquidity provider across local and foreign markets.
Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers through a variety of channels, including branches and mini-branches (or PABs), ATMs, call centers, the internet and mobile banking.customers. The following table presents our principalphysical distribution network as of December 31, 2016:the dates indicated.
As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Branches | 1,987 | 2,153 | 2,328 | |||||||||
Mini-branches | 1,384 | 1,411 | 1,512 | |||||||||
Own ATMs | 12,561 | 12,949 | 13,296 | |||||||||
Shared ATMs | 24,255 | 23,798 | 23,780 |
Branch Network
Our branch network offers allour entire portfolio of our products and services to our customers. As of December 31 of 2016, we hadcustomers through a network of 2,254 full service branches throughout Brazil, 85.71% of which were concentrated in the Southeastpersonal and South regions.
customized approach. The table below shows the geographic distribution of our branch network throughout Brazil, as of December 31, 2016:
Branches | PABs | ATMs | ||||||||||
Central West | 100 | 65 | 553 | |||||||||
Northeast | 183 | 118 | 1,230 | |||||||||
North | 39 | 40 | 290 | |||||||||
Southeast | 1,627 | 815 | 10,124 | |||||||||
South | 305 | 129 | 1,609 | |||||||||
Total | 2,254 | 1,167 | 13,806 |
The following map shows the geographic distribution of our branch network, each region’s share of 2014 GDPand our market share as of December 31, 2016, according to the Brazilian Central Bank. Market share is calculated by dividing the number of our branches in the region by the number of branches for all principal banks in such region:dates indicated.
Source: GDP - IBGE 2014 / Market Share – Brazilian Central Bank December 2016
As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Northeast | 9.74 | % | 9 | % | 9 | % | ||||||
North and Midwest | 8.42 | % | 7 | % | 7 | % | ||||||
Southeast | 67.31 | % | 70 | % | 70 | % | ||||||
South | 14.53 | % | 14 | % | 14 | % |
PABs
(Mini-branches)
We offer daily banking services to our SME andSMEs, as well as corporate customers and their employees through our PABs -(“Postos de Atendimento Bancário”), which are exclusive sales points located on their sites,at our customers’ buildings, as well as in hospitals and universities. Our PABs are generally exclusive sale points at customers’ sites. We believe that theThe presence of PABs in our customers’ offices strengthens our relationship and builds loyalty with those customers, who benefit from the convenience of conducting their banking transactions at their workplace.
Client Service Channels
We also distribute our products and services through ATMs, the internet, mobile banking and call centers. This contributes significantly to our product sales revenue, strengthening the relationship with the customer and the customer’s satisfaction.
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ATMs
We operate an extensive network of 13,80612,561 ATMs, including those located in our branches and PABs.mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 19,86824,255 ATM units. Through this network, our customers are able tocan access their accounts and conduct banking transactions, as well as purchase most of the products and services available in our portfolio. In 2016, the implementation
Remote Channel
Our remote channel consists of digital biometrics technology incall centers, online messaging services and contact emails available to all our ATMs was accelerated, achieving 100% coverage of our ATMs and 6.3 million clients registered their biometric information tocustomers. These allow account access and provision of services through biometric access procedures. This allows our customers to execute ATM transactions faster and safer, without the need for presenting cards or passwords.
Call Centers
Our call centers provide our customers with the opportunity to make inquiries execute payment transactions and apply forsolve issues, engage new products and services such as personal loans. and generally interact with us to fulfil their banking requirements. We received over 25 million contacts per month through our remote channel in the year ended December 31, 2021.
In, we began a process to reshape the way in which we interact with customers through our remote channel. In 2021, this transformation allowed us to achieve more than 740,000 sales in December 31, 2021.
Digital Channels
Our call centers are also an important distribution channel that offersdigital channels include Internet banking, mobile banking and other digital solutions aimed at facilitating our clients additionalcustomers’ access to the products and services. services that we offer.
The last few years have been marked by a significant digital transformation for us. We believe that in 2021 we have strengthened our focus on customers with a digital mindset while also leveraging digital tools to enhance our efficiency and scalability. In this context, we highlight the following:
● | We have created an online store to receive and serve our customers on an ongoing basis. In the year ended December 31, 2021 we recorded an average of approximately 442 million total visits per month and we increased the number of digital buyers in comparison with the year ended December 31, 2020. |
● | We added 557,000 new accounts in December 2021, an increase of 190% when compared to December 2020. We believe this growth is due to our streamlined account opening process, which improved our customers’ experience, and to an increase in our approval rates as a result of improvements in our fraud detection and offline processes. |
● | We have performed an average of approximately 3.2 million sales per month in the year ended December 31, 2021, an increase of 45% when compared to the year ended December 31, 2020. This increase has been primarily driven by an increase in credit cards sales, representing an average of 297,000 sales per month in the year ended December 31, 2021, an increase of 99% when compared to the year ended December 31, 2020. We have consolidated our position as a leading credit and digital recovery platform in Brazil, with more than 2.4 million contracts per quarter in the year ended December 31, 2021 (considering only individuals) an increase of 69% when compared to the year ended December 31, 2020, and with a share of sales amounting to 64% in loans in the year ended December 31, 2021. |
● | We have also taken steps to improve our digital customer service, in the form of Gent&, our virtual assistant. Gent& is an artificial intelligence launched in 2020. This solution offers a more personalized digital service that provides greater autonomy for our customers. |
The following table presents summarizedprovides certain key operating statisticsinformation with regards to our digital channels as of our call centers for the periodsdates indicated.
For the Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in millions) | ||||||||||||
Number of digital customers (1) | 18.8 | 15.6 | 13.4 | |||||||||
Number of digital channel transactions (2) | 7,482 | 5,262 | 4,311 |
As of December 31, | Change, December 31, 2016 vs. December 31, 2015 | |||||||||||||||||||
2016 | 2015 | 2014 | Change | % | ||||||||||||||||
Number of individual customers (in thousands) | 1,733 | 2,076 | 2,155 | (343 | ) | (17.0 | )% | |||||||||||||
PAS(1) | 3,472 | 3,428 | 3,278 | 44 | 1.3 | % | ||||||||||||||
Headcount | 5,248 | 5,344 | 5,194 | (96 | ) | (1.8 | )% | |||||||||||||
Percentage of using customers per month | 20.1 | % | 22.8 | % | 23.5 | % | (2.7) p.p. | — |
(1) |
(2) | Refers to transactions carried out through internet banking, mobile banking and other digital platforms. The data refers to the year ended December 31. |
Internet Banking
Internet banking enables customers to conduct banking transactions at their convenience, such as obtaining account information, financial transfers, contracting products and making payments. The following table presents operating statistics for our internet banking segment for the periods indicated.
As of December 31, | Change, December 31, 2016 vs. December 31, 2015 | |||||||||||||||||||
2016 | 2015 | 2014 | Change | % | ||||||||||||||||
Number of individual customers (in thousands) | 3,229 | 3,444 | 3,098 | (215 | ) | (6.2 | )% | |||||||||||||
Percentage of using customers | 37.5 | % | 37.9 | % | 36.8 | % | (0.4) p.p. | — |
Mobile Banking
In 2014, we launched a new application for individual customers, which gives clients access to consolidated information relating to all of their accounts, products and services via a single access platform. The application is a significant improvement in the user experience as it offers a simplified and intuitive function with mobile devices. In 2015, we made further improvements to the user experience by further simplifying intuitive functionality and making available to our customers fingerprint access to their consolidated information through certain smartphones.
We continued to improve the application in 2016 by updating it with the inclusion of new services and products. We have also integrated the application with our customer relationship management system, enabling us to offer targeted products to customers and to undertake customized advertising campaigns.
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The following table presents operating statistics forprovides an overview of the weight of each key distribution channel in our mobile banking segment for the periods indicated.overall distribution system.
For the Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(%) | ||||||||||||
Internet banking | 27.7 | 37.8 | 39.7 | |||||||||
ATMs | 3.6 | 5.9 | 8.9 | |||||||||
Mobile (1) | 62.3 | 46.9 | 39.0 | |||||||||
Branch | 1.1 | 2.2 | 4.1 | |||||||||
IVR (2) | 4.6 | 6.4 | 7.4 | |||||||||
Call Center | 0.7 | 0.9 | 0.9 |
As of December 31, | Change, December 31, 2016 vs. December 31, 2015 | |||||||||||||||||||
2016 | 2015 | 2014 | Change | % | ||||||||||||||||
Number of individual customers (in thousands) | 3,618 | 2,027 | 1,166 | 1,591 | 78.0 | % | ||||||||||||||
Percentage of using customers | 42.0 | % | 34.4 | % | 14.0 | % | 7.6 p.p. | — |
(1) | Refers to total transactions (account holder and unique product-holder). |
(2) | Interactive voice response is an automated telephone system in which a computer interacts with callers (who can use their voice or the telephone keypad to communicate with the computer), gathers information and transfers caller to the appropriate representative. |
Customer Funding
Since we are primarily a commercial bank, customer deposits are our main source of funding. These deposits, combined with capital and other instruments, enable us to cover our liquidity needs and legal reserve requirements. As of December 31, 2016, customer deposits amounted to R$247.4 billion, representing 56.9% of total funding, which amounted to R$434.7 billion.
For further discussion of our funding, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”
Technology and Infrastructure
OneIn 2021, we have performed significant investments in our technology systems. We put customers at the center of our key goals isstrategy. We are continuously seeking improvements in customer experience and satisfaction by launching new services, as well as combining self-service features with human and personalized services and channels.
Therefore, we have strengthened our technological culture and our business systems capacity, which supports an intense flow of more than 53 million customers as of December 31, 2021 and an average of 442 million total visits per month to become a trueour digital bank, capablechannels in the year ended December 31, 2021, along with an efficient and secure processing of providing customersan average of more than 367 million transactions per day in the year ended December 31, 2021. We believe that this continuous improvement of our customer services, combined with the offer of new solutions and employees withthe expansion of the range of our channels contributed to the growth of our customer base by 11% in the year ended December 31, 2021 compared to the year ended December 31, 2020.
We have increased our operational efficiency and scalability, expanding the use of computing to over 75% of operations, and improving the time-to-market of products and services, via internetby using Agile and mobile bankingDevOps methodologies in a manner which is easy to handle. To achieve this goal,the execution of 85% of our projects. Furthermore, we have releasedreduced the number of relevant incidents (which we define as high priority incidents, i.e., those that could result in the unavailability of a new application called “Santander Way” developed forwide range of critical services) in the credit card and payments market which, among other functionalities, is aimed at improving our customer interface and allows our customers to manage their expenditure, limits, and unlock their credit cards to be able to use them abroad.
In order to serve our customers effectively, to improve our profitability and grow our business, we continuously invest in new technology and renewal of equipment and infrastructure. We believe that proper management of technology is key to the efficient managementlast three years by more than 90% on average, ensuring greater availability of our business. Our technology platform focuses onproducts and services to our customers and supports our business model. We operate a modern global technology platform that is interconnected with the platform of the Santander Group, which allows us to serve our customers on a global scale, under a platform that is uniquely customer-centered. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Information Technology Platform.”
customers. We have put in place extensive security measures to mitigate the risk of cyber-security threats affecting our technology platforms and our business. We have taken into consideration the best practices set forth in the ISO-27002 security standard to assist us in formulating such security measures. The security measures, which we currently have in place include, but are not limited to access and privilege management, separation of test and production environments, network security analysis, incident management, baseline configuration of hardware and software, activity log correlation, malware prevention and remediation, and security analysis of third-party operations. We employ a range of security processes and solutions to enact such security measures, including regular compliance checks and maintaining continuous monitoring of network activity by our Security Operations Center. We also perform periodic reviews of cyber-security threats and related controls, including periodic penetration tests performed by independent third parties. In addition, we are constantly investing in technology and security solutions, as well as conducting user training and awareness efforts. Furthermore, we cooperate and exchange information and experience relating to cyber-security with local and international security communities, such as local telecommunications companies andlisted below other financial institutions, and in our capacity as a member of the Financial Services – Information Sharing and Analysis Center community.
In 2014, we opened and concluded the migration of our operation to the new data center located in Campinas. During the course of 2015, we began the first cycle of disaster recovery plan, or “DRP,” tests of the data center. These tests consist of activating the alternative infrastructure, simulating a real disaster situation in the main Data Center, and evaluating the system’s availability to support critical business functions. In 2016, the fourth DRP test was successfullyinitiatives carried out.on throughout 2021:
In 2016, we introduced our new human resources interactive portal which includes new tools such as working hours management, team information and personalized alerts. In addition, we have introduced “Santander Pessoas,” an application which enables employees to clock in and out by geolocation, and review their pay slips and working hours. We also launched Academia Santander which is both a physical space and an online platform intended to spread knowledge among our employees regarding strategic subjects such as innovation, digital culture and business unit management, among others.
● | Investments: We have launched the Algo+ service (stands for “algorithm”), which simplifies the investment process to our customers, allowing them to invest in stocks from the bank’s recommended portfolios without having to sign-in to the home broker. This initiative ensures diversification and time saving in investments, also protecting investors from cognitive biases and human failures. |
● | Open Banking: We have started to provide the “Open Finance” service to our customers, which allows them to authorize the sharing of their financial data to other financial institutions. This enables us to understand customers’ profiles better, so we can offer personalized products, services, and other benefits, such as increases in credit card limits and competitive banking fees. Customers can also concentrate the management of their finances in a single place, and they will soon be able to manage all their accounts from other banking institutions (e.g., balance and statement checking, making payments and investments) by means of our digital channels. We have also implemented resources and mechanisms to ensure data privacy and security to conform to government regulations. |
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● | Security: Aiming to provide our customers with a streamlined digital experience, we have offered authentication via facial recognition, eliminating the need to authorize mobile devices at an ATM in order to use all the features of our digital channels. The new security system recognizes the customer with the use of artificial intelligence, including legitimacy checks through advanced Machine and Deep Learning models developed internally, ensuring proof of life and facial verification. Customers only need to register face biometrics when opening an account and afterwards in their mobile application, which grants our customers with a more digital and secure experience. |
● | Individual Bank Account (Mobile): We have added new resources and features in order to provide a better experience for our customers. Regarding customer service, we provide the DialMyApp service. When the customers access our call center, they are guided to online services (App, Website and Virtual Assistant) through a graphic menu displayed on his cell phone concurrently with the phone call they have placed, which improves engagement and reduces customer service costs. With respect to foreign exchange, we have included a new feature for uploading documents through the OnePay service, optimizing the time of carrying out exchange transactions, in addition to improvements in exchange rates checking for the main currencies. With respect to investments, we have offered our customers a new feature to monitor and analyze the evolution of their investment portfolio for a given period of time by means of the Investment Profitability Chart (GRENT). |
● | Corporate Bank Account (Mobile): In order to ensure greater support to our corporate customers, we offer new assistance service channels, such as our AI virtual assistant, as well as direct contact with one of our managers in our corporate mobile App. This service also includes a feature that enables our customers to contract our business management system (Santander CoPilot), by means of which they can control their business sales and inventory. Moreover, the Open Banking feature gives customers an opportunity to share their company data, which ensures a better understanding of their business profiles. |
● | Credit Cards: In the context of the COVID-19 pandemic, we have expanded the digitalization of our card transactional services, enabling customers to self-serve through digital channels for acquisition and post-sales purposes, such as invoice checking via WhatsApp. Another disruptive initiative is the generation of the online card before the physical card, allowing customers to make their purchases in e-commerce and also by cell phone approximation before they receive their physical card by mail. |
● | Customer Service: Combining entrepreneurship, technology and focus on customer experience, we developed a Voice Analytics solution to scale our capabilities of listening to our customers by means of the use of machine learning, Graphics Processing Units (GPU) and cloud computing, which accelerates our deliveries and adds value to our shareholders. Currently, we have already studied and addressed the needs of our customers going through credit recovery processes and with reduced investments. |
● | Software Development Agility: We have transformed our software deployment process through the adoption of a new solution focused on the integration of software development lifecycle tools, providing greater autonomy to the development teams, in addition to ensuring production environment stability through automatic deploy and rollback processes without manual interventions (Zero Touch). As a result, our development teams are able to better meet customer needs, delivering new features with more assertiveness, speed and quality. In just nine months after the process was implemented, twice as many software deploys were made compared to the entire year of 2020. |
● | Cloud: In order to improve the availability and resilience of our main applications, we expanded the use of our computing capacity with two public cloud services providers, extended our on-premises datacenter network using these cloud providers, and created a full mesh connectivity model. Using this model, we have updated software applications to use cloud capabilities adopting an abstraction strategy for the providers’ Cloud products (for example: accessing products through open and common protocols), ensuring code standardization and reduction of lock-in (dependency on a single cloud provider technology implementation), in addition to the implementation of normal/peak/special day auto-scaling strategies and the creation of automated capacity to balance applications in multi-cloud service. |
Communications and Marketing
Santander Brasil’s strategy is focused on closeWe use and transparent customer relations, which requires that communication and marketing play a vital rolemonitor several tools in order to communicate effectively with our business. Toolscustomers. These include not only traditional media, such as television and printed media, but also the internet, mobile advertising and social networks.
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We regularly provided information through all available media, seeking to make a real and positive difference in the lives of our clients. Such information includes guidance on what open finance is, i.e., an ecosystem that allows financial institution customers to share their information to other banks which enables banks to develop more tailored products. We publicized updated solutions, like Gent& and Algo+, an algorithm that helps investors to follow our monthly portfolio recommendations. Internally, we released more than 200 videos aimed at instructing our teams on how to best-serve our customers, and guidelines to prevent COVID-19 in the workplace. Externally, we ran 297 video advertisements on TV and social networks. Our communications campaign generated significant feedback, with 100,000 articles published in newspapers and magazines, and 120 stories featured in Brazilian national media outlets as well. On social media, we averaged 10 posts per day, with 2.6 million impressions. We have also joined new media formats on networks sponsorships,such as Telegram, WhatsApp and games. Additionally, we conducted more than 120 live broadcasts and events where our senior management, as well as experts and institutional publications represent our activities, productsgovernment officials were invited to address several topics, including the current economic scenario, social investment, sustainability, diversity, women’s leadership, entrepreneurship, and services,culture and entertainment, The Fourth Edition of Global Citizen, organized in collaboration with newspaper Valor Econômico and featuring Al Gore, the 2007 Nobel Peace Prize winner, received more than 935,338 views. Also, the 22nd Annual Santander Conference showed discussions on politics, sustainable businesses, health and technology, with the participation of major chief executive officers, public authorities and our strategy for the promotionleadership. The conference was broadcasted on YouTube, garnering a total of our way of doing business.7.1 million views.
Sustainability
In 2016, we conducted a comprehensive reviewBrazil, sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through the Board of our communications processes, standardsDirectors, the Executive Committee and practices, both internalthe Sustainability Executive Superintendents. The Sustainability Committee is responsible for providing clarification and external, as partrecommendations to the Board of the “What can we do for you today?,” an initiative which is designed to help Santander Brasil to achieve the following goals: (i) show customers that we understand their needs and are always in search of the best solutions for them; (ii) promote an organizational culture focused on customer service; and (iii) reinforce our ongoing commitment and effort to stay contemporary.
Sponsorships and Culture
Our sponsorship initiatives are focused on two areas: (i) entrepreneurship, and (ii) democratization of the access to outdoor culture and physical activities.
In entrepreneurship, we sponsor “Endeavor,” a non-profit organization focused onDirectors regarding the development of entrepreneurship. During 2016, we also sponsored “Taste of São Paulo,” the first edition of an international gastronomic festival in Brazil, with the aim of generating business for entrepreneurs in this segment.
Regarding access to culture, we sponsor the “Museu do Amanhã,” an interactive science museum in Rio de Janeiro with a focus on education. The museum has received over one million visitors during its first year of operation. It also accounts for the revitalization of an old neighborhood in the city. We have also sponsored the art gallery of Claudia Andaujar, at the Instituto Inhotim in the state of Minas Gerais, since 2015. In 2016 we also began sponsoring the largest greenhouse at the Jardim Botânico of Inhotim. We also inaugurated the Teatro Santander, a cultural space for musicals with large casts, concerts, shows, and plays in the first quarter of 2016. In its first nine months of operation, the theater received more than 150,000 viewers.
In terms of outdoor physical activities, we sponsor the “Academias ao Ar Livre,” or outdoor gyms in both São Paulo and Rio de Janeiro. These outdoor gyms feature bodybuilding equipment as well as physical education professors to direct activities. In addition, the “Estações de Ginástica” also make available gym equipment in urban areas, such as São Paulo, Rio de Janeiro, and Goiânia. Still in 2016 we sponsored the “Caminhada da Paz,” in São Paulo, with a route that includes installations promoting peace.
We also sponsor two sports initiatives that are connected with the Santander Group: a major South American soccer tournament (Copa Libertadores da América) for which we are the official bank, and Scuderia Ferrari Formula One team, which we have sponsored since 2010.
In 2016, our “Santander Cultural” initiative celebrated its 15th anniversary. Housed in a historical building in Porto Alegre, in the state of Rio Grande do Sul, it operates in visual arts, cinema, and music, in addition to initiatives in the areas of education and knowledge. Throughout this period, Santander Cultural promoted 70 art exhibitions, 700 music shows, 3,100 films, and art workshops, as well as supporting a library housing document archives that preserve 15 thousand banking items. The “Santander Cultural” initiative has already attracted over 5 million visitors. Lastly, the Santander Brasil collection acts to preserve, promote and disseminate both the visual arts and institutional heritage of Santander Brasil.
Communication and Events
We relate to all of our stakeholders via a number of platforms. For example, we utilize social networks to establish dialog on issues of common interest as a means of increasing the engagement and involvement of the followers of our brand. Using this model, Santander Brasil amassed around 2.7 million fans on Facebook, 173,000 followers on Twitter and 38,000 followers on Instagram in 2016. The Annual Report, drawn up in accordance with Global Reporting Initiative (GRI) standards, is another important communication tool for our different stakeholders. We also issue quarterly reports to the market, including releases to shareholders, while using communications channels and tools available to us – intranet, our institutional website, the shareholder portal, public relations experts and events – to interact with our audiences.
Sustainability
sustainability-related guidelines.
Our sustainability strategy is based on three pillars: (i) strategic and efficient use of environmental resources, (ii) developing potential and (iii) resilient and inclusive economy. Our vision, based on these three pillars, which are alignedis to contribute to a better society, while maintaining management excellence and responsibility, in accordance with our businessethical values and using our technology to serve people and businesses.
Resilient and Inclusive Economy
Our broad commercial activity allows us to advise and support of our customers and projects. We believe we can play a role as facilitator and contribute to the generation of jobs and income, and the improvement of logistics and infrastructure for Brazil’s development priorities: (i) socialdevelopment.
Through this pillar, for example, we offer access to banking services, products and non-financial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the “Prospera Santander Microfinanças,” “Programa Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include the topic of financial management in the client's relationship with the Bank, using tools such as Santander On.
In 2021, we helped 341,000 people through financial inclusion products and financial inclusion; (ii) education; and (iii) social and environmental businesses and management.education guidance.
Social and Financial Inclusion
Education
Social and Environmental Businesses
We offer products, services and programs which promote the developmentDevelopment of our customers’ businesses in more sustainable ways, namely:
Commitment to Addressing Climate Change
Potentials
Our commitment to climate changethe development of potential begins with our employees. We have ranked as one of the best companies to work for in the GPTW survey since 2016, ranking top ten in 2021. Guided by our corporate culture and internal policies, we offer opportunities that promote development and professional growth, in order to build a culture of delivering results, respect, innovation, inclusion and diversity.
We work to create a culture of respect, inclusion and equity, where everyone can develop their talents with their unique attributes. Diversity is one of the five principles of our Code of Ethical Conduct. Our priorities are gender and racial equity, inclusion of LGBTI+ and people with disabilities, as well as diversity of experience and generational diversity. Since 2018, we have set inclusion targets for black employees in the bank and female employees in leadership, which in 2021, were 27.3% and 31.4%, respectively. Additionally, in 2021, we received two diversity awards from GPTW: one for our ethnic-racial practices and another, for the fourth time, as one of the best companies for women to work.
Through the Santander Universities Program, we offer initiatives is basedfocused on three pillars:granting national and international scholarships, programs for entrepreneurial development, as well as internship and employment programs.
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As of December 31, 2021, about 33,000 scholarships and entrepreneurships were granted with a total investment of approximately R$33 million.
We maintained our actions to support society and continued with our private social investment strategy with our programs to support children, teenagers, the elderly and entrepreneurs.
● | Campanha Brasil sem Fome: we are responsible for |
Our initiatives, including Amigo de Valor, Parceiro do Idoso, Blood Donation Campaign and Volunteer Program, had an impact on 542,545 people in 2021.
Efficient and Strategic Use of Natural Resources
We are implementing changes to our business that contribute to a responsible and more efficient use of our national environmental resources, including with respect to a reduction in carbon emissions. In this sense, in addition to the responsible environmental management of our operations, we finance and advise companies in the fields of infrastructure and renewable energy, while also providing support for sustainable agribusiness.
In the year ended December 31, 2021, we have destined R$ 51.6 billion to foster sustainable businesses, 96% more than in the year ended December 31, 2020. We believe these operations are in line with market benchmarks and include the issuance of green bonds, advisory services to sanitation businesses and financing for renewable energy (such as CDC Solar). For instance, we have transformed the Vila Olímpia station, at the city of São Paulo, into the first sustainable station in Brazil, increasing its efficiency in the use of natural resources on site. As a consequence of our investments, 70% of the energy now used by the station derives from solar panels and it has implemented a system to recycle its water usage.
One year after the launch of Plano Amazônia, a commitment signed by Santander Brasil, Bradesco and Itaú in connection with measures to enhance and scale up solutions that promote the sustainable regional development, we highlight the following initiatives from Santander Brasil:
We held the Bioeconomy in the Spotlight conference that has promoted a debate related to bioeconomy, preservation and sustainable development of the Amazon region, with market specialists and the CEOs of Santander, Bradesco and Itaú. |
● | We have |
Since 2002, we have adopted social and environmental parameters in the credit risk analysis for projects and companies. Our analyses seek to identify issues such as contaminated land, deforestation, labor practices in conditions analogous to slavery and child labor, among other matters that would prevent us from doing business with such projects and companies.
We have been carbon neutral since 2010, by completely offsetting our Scope 1 and 2 emissions. Since 2013, we follow a methodology for selecting projects from which to purchase Verified Emission Reductions, or “VERs,” in order to ensure the social and environmental benefits for the Amazon region. In recent years, we bought VERs from reforestation and renewable energy ventures.
In addition, we have made a commitment to supply 100% of our operations with renewable energy by 2025, establishing specific metrics for electricity, water, paper and internal renewable energy consumption. In the year ended December 31, 2021, 53% of our energy consumption came from renewable sources.
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giving a more sustainable destination for our waste.
Socio-Environmental Responsibility Policy
In December 2014, our executive committee and board of directors approved our Social and EnvironmentalOur Socio-Environmental Responsibility Policy, (“PRSA”). The PRSA followsor “PRSA,” meets the guidelinesrequirements of CMN Resolution No. 4.327/4,327/14 of the National Monetary Council and Normative Instruction SARB No.Regulation 14 of FEBRABAN. We implemented the PRSA in February 2015. The PRSA establishes principles andThese regulations define guidelines and consolidatesconsolidate specific policies and procedures for our social and environmentalsocio-environmental practices in business and in the relationshiprelationships with stakeholders, includingcertain parties. These practices include socio-environmental opportunities and impacts, and risk management impactssuch as suitability in granting and opportunities. In 2016, PRSA’s governance was consolidated throughusing credits, management of suppliers and socio-environmental risk analysis. We also have a PRSA Senior Group, which consists of our vice-presidents of Risks, Legal Issues, Corporate, Human Resources, Finance and Communication, Marketing, Institutional Relationships and Sustainability, and officers of Agribusiness and Compliance. This Group is involved in decision-making related to the implementation of a panel of indicators, which is monitored by a multi-departmental group within Santander Brasil.
SustainabilityPRSA and operates in the Management of Suppliers
Since 2007, our relationshipconnection with our suppliers has been supported by the guidelines of the Global Compact, an initiative of the United Nations to promote best practices in human rights, labor relations, environment and anti-corruption. We have incorporated these guidelines in our supplier contracting process.Executive Committee.
During the approval process, potential suppliers are evaluated on technical, administrative, legal and social and environmental aspects. For all suppliers which are considered critical, we have an Index of Supplier Qualification (IQF). In the formalization of the supply of a service or purchase of goods, we use contracts that have clauses of social and environmental responsibility aligned with the Global Compact guidelines.
In 2016, we also implemented the Corporate Milestone of Agreements with Third Parties and Suppliers Control, which establishes guidelines governing our relationship with our suppliers with a view to mitigating the risks (in terms, for example, of compliance, sustainability and reputation, among others) involved in these relationships.
Recognitions
Our sustainability strategy and practices have been recognized by the inclusion of Santander Brasil, for the seventh consecutive year, in the portfolio of theÍndice de Sustentabilidade Empresarial - “ISE” (Business Sustainability Index), of BM&FBOVESPA. The ISE highlights companies with recognized commitment to social responsibility and business sustainability, in addition to acting as a promoter of best practices in the business community.
Other recognition in 2016 included:
Insurance Coverage
We maintain insurance policies that we renew annually in order to protect our assets. All of our branches, affiliates and administrative buildings are insured against loss caused by fire, lightning, explosions and other all risks policy coverage. Such coverage establishes reimbursement for the asset replacement value.
We also maintain an insurance policy against third-party damage to our properties.
Additionally, we maintain a directors and officers, or “D&O” insurance policy for our management against third-party complaints regarding management acts. There are insurance policies against crimes, employee dishonesty and damages arising out of public offerings.
We also maintain an insurance policy against hacker attacks and cyber-crimes.
Dependence on Patents, Licenses, Contracts and Processes
In Brazil, ownership of trademarks can be acquired only through a validly approved registration with the National Institute of Intellectual Property (Instituto Nacional de Propriedade Industrial, or “INPI”), the agency responsible for registering trademarks, patents and designs in Brazil. After registration, the owner has exclusive rights of use of the trademark throughout Brazil for a ten-year period that can be successively renewed for equal periods.
As of the date of this annual report, we own 632 trademarks in Brazil, 440 of which are owned by Santander Brasil, with the remaining 192 owned by other companies of the Group.
The major trademarks we use, including, among others, the “Santander” and “Banco Santander” brands, are owned by the Santander Group. One of the Santander Group’s affiliates granted us a license to use such brands. All material trademarks for our business are registered or have been submitted to INPI by us or by the Santander Group.
We also own the principal domain names used in our business, which include:
Our Intellectual Property department monitors social media pages for any unauthorized use of our trademarks. Also, our internet domain names are registered and monitored by the Santander Group in accordance with its policies, and the registration and creation by us of internet domain names are subject to the prior approval of our Intellectual Property department.
Competition
In the last few decades, the Brazilian financial system has experienced significant structural changes, following the evolution on the country’s economic environment and developing a solid framework, for both legal and financial supervision.
The consolidation of the Brazilian financial sector in the recent past, with the merger of large banks and the privatization of state-owned banks, led to increased competition in the Brazilian market for banking and financial services. According toOn September 2021, the Brazilian Central Bank in December 2015 there were 133 universal banks, 21 commercial bankspublished the new CMN Resolution No. 4.945, which provides for the Social, Environmental and 13 investment banks, along with several brokers, leasing companiesClimate Responsibility Policy (PRSAC) and other financial institutions operating in Brazil. Between 2011the actions aimed at its effectiveness. As of July 1, 2022, the PRSA will be revoked and 2016, the Brazilian economy grew less than in prior years while delinquency rates, inflationPRSAC will come into effect.
Competition and currency depreciation increased. Consequently, financial institutions operating in Brazil intensified their efforts to hedge their exposure to credit risk by increasing their provisions for credit losses, moving their credit portfolio from products with larger spreads (and therefore, increased credit risk) to products with lower risks (and therefore, lower spreads) and shifting to a more conservative product mix.
Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal.Federal, Together, these financial institutions accounted for 76.6%71.7% of the credit and 70.4%73.9% of the deposits available in the country inBrazil as of September 2016,30, 2021, according to the Brazilian Central Bank and the financial statements of the aforementioned banks.
Industry Transformation
Recently, the Brazilian banking industry has tried to adapt itself to the economic environment of the post-global crisis world, in a transformation process that has brought important changes to the country’s banking model.
One of these changes is the shift to a more conservative product mix. Due to the increase in default rates and the regulatory changes that increased banks’ capital requirements, the leading banks, have started to move their credit portfolio from products with larger spreads (and therefore, increased credit risk) to products with lower risks (and therefore, lower spreads). The leading banks have also attempted to change the composition of their revenue, reducing revenue derived from financial margins (which are subject to default risks) and increasing revenue derived from fees (which are not subject to default risks).
As a result of the abovementioned changes, there was a significant increase of interest of the banks in efficiency improvement, aiming to offset, at least partially, losses resulting from the change in product mix and the decrease in credit spreads.
Public Sector
Despite the privatizations and consolidations in the banking industry, the Brazilian government still controls commercial banks at both the state and federal levels. In addition to their significant role as credit providers (with a 56.5% market share) and deposit takers (with a 53.2% market share), the state-owned banks also act as regional development agencies, with a strong position in markets such as housing and rural credit.
The three main financial institutions controlled by the federal government are:
Private Sector
We consider two privately-owned financial institutions to be our main competitors: Bradesco and Itaú Unibanco. Both have established brands and distribution capacity throughout the country, competing in every category of banking activity. Furthermore, we also face competition from local and regional banks that operate with commercial banking products in specific niches. In the GCB segment, our competitors are global financial institutions focused on investment bank services, which fill this role as a result of their experience in complex and structured operations, as well as their distribution network throughout Europe, North America and Asia.
Market Share
The following table shows the market sharetotal loans and deposits of the fourfive leading financial institutions in Brazil at the dates indicated:
Santander Brasil | Bradesco | Itaú Unibanco(*) | Banco do Brasil | |||||||||||||
(In percentage) | ||||||||||||||||
Total Assets(1) | 8.1 | % | 15.6 | % | 17.2 | % | 17.8 | % | ||||||||
Total Lending(2) | 8.3 | % | 12.6 | % | 11.7 | % | 21.0 | % | ||||||||
Total Deposits(2) | 7.6 | % | 12.4 | % | 12.1 | % | 16.1 | % | ||||||||
Demand Deposits(2) | 5.6 | % | 11.8 | % | 14.2 | % | 24.5 | % | ||||||||
Savings Accounts(2) | 5.4 | % | 14.6 | % | 14.9 | % | 22.8 | % | ||||||||
Time Deposits(2) | 9.7 | % | 11.0 | % | 9.5 | % | 8.8 | % |
Santander Brasil | Bradesco | Itaú Unibanco(*) | Banco do Brasil | |||||||||||||
(In percentage) | ||||||||||||||||
Mutual Funds(3) | 7.7 | % | 22.7 | % | 21.7 | % | 22.4 | % | ||||||||
Retail(3) | 9.1 | % | 13.0 | % | 18.1 | % | 37.4 | % |
Santander Brasil | Bradesco | Itaú Unibanco | Banco do Brasil | Caixa Econômica Federal | Financial System | |||||||||||||||||||
September 2021 (R$ billion) | ||||||||||||||||||||||||
Total loans (1) | 450.3 | 581.3 | 567.4 | 745.3 | 842.0 | 4,442.0 | ||||||||||||||||||
Total deposits (1) | 389.8 | 559.8 | 792.6 | 475.2 | 472.5 | 3,641.7 | ||||||||||||||||||
(1) |
According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP |
Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. All of our branches, affiliates and administrative buildings are insured against losses caused by fire, lightning, explosions and other risks. Such coverage establishes reimbursement for the asset replacement value.
Credit Market in Brazil
There has been a steady increase in credit penetration in Brazil since 2003, but it is still at a level below that of other developed and emerging markets. However, after a decade during which credit penetration more than doubled compared to GDP, the pace of growth slowed down between 2014 and 2016. The following charts show total credit as a percentage of GDP:
Total Credit as a percentage of GDP
Sources: The graph on left is based on data from the Brazilian Central Bank. The graph on the right is based on data from the Bank for International Settlements on “Credit to non-financial sector” and takes into account lending from all sectors to the private non-financial sector as of September 30, 2016.
The Brazilian credit market is based on two types of loans:
● | policies against financial losses due to |
● | directors’ and |
By the end of December 2016, 50.1% of the R$3,105 billion of total credit outstanding in Brazil was market-based credit, of which 50.1% was loans to individuals and 49.9% was corporate loans:
2016 | 2015 | 2014 | ||||||||||
(in billions of reais) | ||||||||||||
Total Credit Outstanding | 3,105 | 3,219 | 3,017 | |||||||||
Earmarked Credit | 1,549 | 1,582 | 1,441 | |||||||||
Market-Based Credit | 1,556 | 1,637 | 1,577 | |||||||||
Corporate | 747 | 832 | 793 | |||||||||
Individuals | 809 | 805 | 783 |
Source: Brazilian Central Bank.
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TableDependence on Patents, Licenses, Contracts and Processes
The major trademarks we use, including, among others, the “Santander” trademark, are owned by Santander Investment Bank. Santander Brasil has a license to use this trademark. All trademarks of Contents
Retail Credit
According toour business are registered or applied through the Brazilian Central Bank,Patent and Trademark Office (Instituto Nacional de Propriedade Industrial, or “INPI”), the total outstanding market-based creditagency responsible for individuals increased at an average annual compounded rate (“CAGR”) of 5.3% between December 2011registering trademarks, patents and December 2016, reaching R$808.8 billion or 26.1% of alldesigns in Brazil. After registration, the loans in Brazil.
The following table shows the evolutionowner has exclusive rights to use of the main retail credit products offered to individuals:trademark in Brazil for a 10-year period that can be successively renewed for equal periods.
2016 | 2015 | 2014 | Change between December 31, 2016 vs. December 31, 2015 | |||||||||||||
(in billions of R$, except percentages) | ||||||||||||||||
Overdraft Accounts | 23.3 | 24.6 | 24.5 | (5.5 | )% | |||||||||||
Payroll Loans | 287.6 | 273.9 | 252.2 | 5.5 | % | |||||||||||
Personal Credit | 101.7 | 105.6 | 101.0 | (5.4 | )% | |||||||||||
Credit Card | 184.9 | 172.7 | 160.8 | 6.6 | % | |||||||||||
Autos | 144.8 | 162.7 | 187.2 | (11.1 | )% | |||||||||||
Mortgage Financing (only individuals) | 534.3 | 499.6 | 431.6 | 7.0 | % | |||||||||||
Rural Credit (only individuals) | 162.5 | 153.7 | 145.6 | 5.7 | % | |||||||||||
Others | 121.3 | 118.7 | 109.2 | 3.1 | % | |||||||||||
Total | 1,560.5 | 1,512.3 | 1,412.1 | 3.2 | % |
Source: Brazilian Central Bank.
Even with the economic recession in the 2015-2016 biennium, the housing and real estate financing market continued to grow. According to the Brazilian Central Bank, the ratio of mortgage loans to GDP increased from 4.3% in December 2011 to 8.4% in December 2016. Housing and real estate financing represents approximately 34.2%As of the retail credit marketdate of this annual report, we own a total of 568 trademarks in Brazil, according towith Santander Brasil owning over 117 of these trademarks, while the Brazilian Central Bank. As of December 31, 2016, our market share was 5.1%.
Historically, the costs of market-based loans in Brazil have always been high, due to the lack of competition and high default rates. A safer and more attractive market-based loan for individuals is the payroll loan. As its paymentsremaining are deducted directly from the borrower’s paycheck, it is considerably less risky and, therefore, has lower interest rates than unsecured consumer credit, and presented a CAGR of 12.5% between December 2011 and December 2016. As of December 31, 2016, payroll loans represented approximately 18.4%owned by other companies of the retail credit market in Brazil. As of December 31, 2016, we had 6.5% of the market share in payroll loans, according to the Brazilian Central Bank.Santander Group.
The auto financing market has very competitive interest rates and the market’s ability to access a low-cost source of funding is an important advantage. Thus, this market has been dominated by the large retail banks, which gradually assumed the business from the automakers’ lending arms. As this product is secured by the asset being financed, it tends to have lower default rates than other market-based products. As a result of deteriorating economic conditions in Brazil, the auto financing portfolio decreased by 11.1% in 2016. As of December 31, 2016, we ranked first in the auto finance market, with a market share of 20.8%, according to the Brazilian Central Bank.
The credit card market has relatively high default rates and, as a result, higher interest rates than other market-based products. This market is dominated by the large retail banks, operating their own labels associated with international labels (such as Visa and MasterCard). In November 2013, the Brazilian Central Bank began to regulate electronic payment services. It is expected that this supervision will help decrease the risk of electronic transactions and reduce related costs. As of December 31, 2016, we had 11.2% of the market share in credit cards, according to the Brazilian Central Bank.
Corporate Credit
According to the Brazilian Central Bank data, the amount of loans granted to companies has increased at a CAGR of 6.8% between December 2011 and December 2016, reaching R$1.5 trillion, or 49.7% of the country’s total lending. The main corporate products are the BNDES loans, which represent 17.8% of the country’s total lending, and working capital loans, that represent 10.4%.
Asset Management
According to ANBIMA, the asset management industry in Brazil increased at a CAGR of 11.2% between December 2011 and December 2016, reaching R$3.3 trillion of total assets. Retail funds represent 16.2% of this total, or R$530.0 billion. The largest players of the market are the large financial conglomerates and their main clients are institutional investors, including pension funds, insurance companies and private banking clients. As of December 31, 2016 we had a 7.7% market share with regard to assets under administration, according to ANBIMA.
REGULATION AND SUPERVISION
The basic institutional framework of the Brazilian financial system was established by Law 4,595, of December 31, 1964,4,595/64, as amended from time to time, (theor the “Banking Reform Law”).Law.” The Banking Reform Law created the CMN, responsible for establishing the general guidelines of the monetary, foreign currency and credit policies, as well as regulating the institutions of the financial system.
Principal Regulatory Agencies
CMN
The CMN oversees the Brazilian monetary, credit, budgetary, fiscal and public debt policies. The board of the CMN is formed bycomposed of the president of the Brazilian Central Bank, the Minister of Planning and the Minister of Finance, and is chaired bywho also chairs the Minister of Finance.Board, Pursuant to the Banking Reform Law, the CMN is the highest regulatory entity within the Brazilian financial system, and is authorized to regulate the credit operations of Brazilian financial institutions, to regulate the Brazilian currency, to supervise Brazil’s gold reserves of gold and foreign exchange, to determine Brazilian savings and investment policies and to regulate the Brazilian capital markets with the purpose of promoting the economic and social development of Brazil. In this regard, the CMN also oversees the activities of the Brazilian Central Bank and the CVM.
Brazilian Central Bank
The Brazilian Central Bank is an autonomous authority responsible for the implementation of the CMN policies related to foreign currency and credit, the regulation of Brazilian financial institutions, including asparticularly in regards to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out by financial institutions as well asand their financial information and monitoring and regulation of foreign investments in Brazil.information. The Brazilian Central Bank has committees to addressaddresses specific issues noteworthy among which isthrough the Monetary Policy Committee (“Copom”)(COPOM), which has the purpose ofa committee responsible for adopting measures to fulfill themeet inflation targets defined by the CMN and establishing monetary policy guidelines. The activity of the Copom in the control ofIn order to meet inflation targets, includes the definition ofCOPOM must set the target for the SELIC Raterate (the average rate for daily financing, backed by federal instruments, as assessed under the Special SettlementSELIC) and Custody System) and publication ofpublish reports on the Brazilian economic and financial environment and projections for the inflation rate.
CVM
The CVM is responsible for the implementation of theCMN policies established by the CMN related to securities, with the purpose of regulating, developing, controlling and inspecting the securities market and its participants (companies with securities traded in the market, investment funds, investors, financial agents, such as custodians of instruments and securities, asset managers, independent auditors, consultants, andas well as instruments and securities analysts).
Self-Regulating Entities
The Brazilian financial and capital markets are also subject to the regulation of self-regulating entities that are divided by field of activity. TheThese self-regulating entities include, among others, the National Association of Investment Banks – ANBIMA, the Brazilian Association of Credit Card and Services Companies – ABECS, the Brazilian Banks Federation – FEBRABAN, the Brazilian Association of Publicly-Held Companies – ABRASCA and the BM&FBOVESPA.
B3.
Principal Limitations and Obligations of Financial Institutions
In line with leading international standards of regulation, Brazilian financial institutions are subject to a series of limitations and obligations. In general, such limitations and obligations concern the offering of credit, the concentration of risk, investments, operating procedures, loans and other transactions in foreign currency, and the
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administration of third-party funds and micro-credit.microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:
No financial institution may operate in Brazil without the prior approval of the Brazilian Central |
A Brazilian financial institution may not hold direct or indirect equity interests in any company located in Brazil or abroad registered as permanent assets without prior approval of the Brazilian Central Bank. |
Brazilian financial institutions must submit for prior approval by the Brazilian Central Bank the corporate documents that govern their organization and operation, |
Brazilian financial institutions must fulfill minimum capital and compulsory deposit requirements and must |
A Brazilian financial institution may not own real estate, except for properties it occupies and subject to certain limitations imposed by the CMN. If a financial institution receives real estate, for example, in satisfaction of a debt, such property must be sold within one year, unless otherwise authorized by the Brazilian Central |
Brazilian financial institutions must comply with the principles of selectivity, guarantee, liquidity and risk |
A Brazilian financial institution belonging to the S1 segment, as is the case of Santander Brasil, cannot lend more than 25% of its Tier 1 Regulatory Capital ( |
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The total amount of |
Brazilian financial institutions must comply with anti-money laundering, combating the financing of terrorism and anti-corruption |
Brazilian financial institutions must implement policies and internal procedures to control their systems of financial, operating and management of information, as well as their conformity to all applicable |
Brazilian financial institutions must implement a policy for remuneration of board members and executive officers that is compatible with their risk management |
The |
Additionally, as part of the Santander Group and due to the global nature of our organization we are subject to related international rules.
Capital Adequacy and Leverage – Basel
Current Requirements
The Brazilian Central Bank supervises the Brazilian banking system in accordance with the Basel Committee on Banking Supervision, (“Basel Committee”)or “Basel Committee,” guidelines and other applicable regulations, including the Basel II Accord (“Basel II”), which was recently implemented in Brazil, and the Basel III Accord (“Basel III”), which supplements and amends Basel II and is in the process of being implemented.regulations. For this purpose, banks provide the Brazilian Central Bank with theany information necessary forwhich it to performdeems useful in performing its supervisory functions, which includeincludes supervising the changes in the solvency and the capital adequacy of banks.
The main principle that guides the directives set forth in the Basel II and Basel IIICommittee is that a bank’s own resources must cover its principal risks, including credit risk, market risk and operational risk.
Brazilian financial institutions are subject to capital measurement and standards based on a risk weighted risk-assetasset ratio. The parameters of this methodology resemble the international framework for minimum capital measurements adopted by Basel II, except for certain differences (for instance, Basel II requires banks to have a capital to risk-weighted assets ratio of at least 8.0%, while current Brazilian rules require minimum capital of 11.0% of risk weighted assets). Brazilian financial institutions’ regulatory capital is composed of two tiers. Tier I capital is represented by stockholders’ equity plus certain reserves, earned income and hybrid debt and capital instruments authorized by the Brazilian Central Bank. Tier II capital is represented by revaluation reserves, contingency reserves, special profit reserves related to mandatory dividends not yet distributed, preferred cumulative stock, certain subordinated debt and hybrid instruments and non-realized earnings related to available-for-sale securities market value adjustments.
III.
Basel III
On December 16, 2010, the Basel Committee issued theits Basel III framework, which supplementswas revised and amends Basel II.republished on June 1, 2011. The Basel III includes higherframework increases minimum capital requirements, andcreates new conservation and counter cyclicalcountercyclical buffers, capital requirements, revisedchanges risk-based capital measures, and the introduction ofintroduces a new leverage ratiolimit and new liquidity standards in comparison to the former framework. The rules were phased in gradually and were fully implemented by January 1, 2019. Regulatory Capital is composed by Core Capital and two liquidity standards. As with other Basel directives, the Basel III framework will not be self-effectuating and will be
implemented gradually by each country through legislation or regulation to be imposed upon that country’s home banks. Basel III is currently being implemented in Brazil and its implementation is expected to conclude on January 1, 2022, according to the agreed international timeframe.
Regulatory capital will continue to be composed of two tiers.
additional tiers:
Tier I capital will have to reach a minimum indexratio of 6.0% (according to the schedule established by the Brazilian Central Bank), divided into two portions: (i) PrincipalCore Capital consisting mainly of corporate capital and profit reserves (shares, units of ownership, reserves and earned income) of at least 4.5%, and (ii) Supplementary CapitalAdditional Tier I consisting mainly of perpetual hybrid securities and capital instruments authorized by the Brazilian Central Bank (but excluding amounts relating to funding instruments issued by other local or foreign financial institutions) and any of our own shares purchased by us and the integration of which into the SupplementaryAdditional Tier I Capital is permitted. To improve the quality of the capital of financial institutions, Basel III restricts the acceptance of financial instruments that fail to demonstrate effective capability of absorbing losses and requires the reduction of assets that in certain situations could jeopardize the financial institution’s capital value due to the instruments’ low liquidity, dependence on future profits for realization or difficulty of value measurement.
There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid instruments and subordinated debt approved by the Brazilian Central Bank as additional capital requirements, or Tier II, are expected to be maintained if they also comply with requirements introduced by Basel III, including the mandatory conversion clauses into equity or write-off upon the occurrence of triggering events provided for in the regulations. The instruments that do not comply with Basel III rules have been gradually reduced since January 1, 2013 and shall continue to be so reduced until they do not consist of any portion of our regulatory capital as from January 1, 2022.
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In accordance with the Basel III standards, the Brazilian Central Bank created the Premium PrincipalAdditional Core Capital buffer (Adicional de Capital Principal), which correspondsis composed by the sum of three buffers:
● | Core Capital Conservation buffer (Adicional de Capital Principal de Conservação), which was introduced to ensure that banks have an additional layer of usable capital that can be drawn down when losses are incurred. Whenever the buffer falls below 2.5%, automatic constraints on capital distribution (for example, dividends, share buybacks and discretionary bonus payments) will be imposed so that the buffer can be replenished. Countercyclical capital buffer (Adicional Contracíclico de Capital Principal), which aims to protect the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risks. The countercyclical capital buffer is fixed by the Financial Stability Committee (Comitê de Estabilidade Financeira) based on discussions about the pace of credit expansion, and currently is set zero (Brazilian Central Bank Communication No. 36,830/21). Should the requirement increase, the new percentage takes effect twelve months after the announcement, |
● | Core Capital Systemic buffer (Adicional de Importância Sistêmica de Capital Principal), which is applicable to the S1 bank segment (banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity). |
On March 16, 2020, due to additional capitals (buffers) that create additional capital reserves to be used in periods of stress. In accordance with CMN regulation,the challenging macroeconomic environment resulting from the COVID-19 pandemic, the Brazilian Central Bank is entitled to establishissued Resolution No. 4,783 which establishes the percentage to be applied to the risk-weighted assets value for the purpose of calculating the Premium Principalcapital conservation buffer. This percentage increases gradually until April 2022, when it reaches 2.5%.
This level will phase-in towards the 2019 level by 2022, as shown in the image below. This buffer change decreased the minimum Core Capital within certain minimum and maximum limits previously set forth by the CMN, the final minimum and maximum limits being 2.5% and 5%requirements, reaching 6.75% to 10.5%, respectively, of the weighted risk-asset ratio.
On December 29, 2014, the Brazilian Central Bank established that the amount of the Premium Principal Capital shall start at 0.625% of the weighted risk-asset ratio as of January 1, 2016, and shall increase to 1.25% on January 1, 2017, 1.875% on January 1, 2018 and 2.5% on January 1, 2019.December 31, 2021.
In 2015, the CMN and the Brazilian Central Bank enacted a set of rules which determine that the Premium Principal Capital will be equivalent to the sum of the Capital Conservation Buffer (Adicional de Conservação de Capital Principal), the Countercyclical Buffer (Adicional Contracíclico de Capital Principal), and the Systemic Relevance Premium Principal Capital (Adicional de Importância Sistêmica de Capital Principal). The regulation establishes the minimum requirements and methods to calculate each of them separately. The Conservation Buffer and the Countercyclical Buffer will compose the Premium Principal Capital of all financial institutions and institutions authorized to operate by the Brazilian Central Bank (except for those expressly waived from complying with regulatory capital requirements). The Systemic Relevance Premium Principal Capital will only apply to multiple banks, commercial banks, investment banks and saving banks (caixas econômicas).
The Basel III minimum capital index will increase from the current 11% to a maximum of 13%. The total index will be calculated as the sum of two parts: the Regulatory Capital and the Premium Principal Capital.
The Basel III rules also provide for the implementation of a leverage ratio calculated by the division ofdividing the Tier I capital by athe bank’s total exposure. In early 2015, the Brazilian Central Bank issued a new regulation governing the calculation and reporting of the leverage ratio of Brazilian financial institutions in line with the Basel III rules, which became effective in October 2015. Financial institutions classified as segment 1 (S1), as is the case for Santander Brasil, or segment 2 (S2), for purposes of the application of prudential rules, are required to maintain a minimum RA of 3% as from January 1, 2018.
Additionally, in order to enable the implementation of the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No. 12,838, enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.
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In 2015, the CMN and the Brazilian Central Bank also issued a set of rules for the implementation in Brazil of the liquidity coverage ratio or “LCR,” a short-term liquidity index. The purpose of the LCR is to demonstrate that financial institutions have sufficient liquid assets to make it through a stress scenario lasting one month. According to the recently enactedthese rules, the largest Brazilian banks have beenwere required to maintain an LCR of at least 60% since October 2015. This ratio will increaseincreased 10% annually until it reachesreached 100% in 2019. The Brazilian Central Bank also released, in 2015, the local methodology for calculating the LCR so as to align the existing rules with the
guidelines of the document “Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools” issued by the Bank for International Settlements onin January 2013.
Further, in accordance with the international “phase-in” schedule for implementation of Basel III, the Brazilian Central Bank will also establish a long-term liquidity index to further control banks’ cash positions and its implementation is recommended as from 2018. In addition, in January 2017, the Brazilian Central Bank enacted a new rule amending the calculation method and procedures for disclosure of LCR information. The new regulation establishes a new possible stress scenario and, for purposes of LCR retail, includes spot and forward deposits.
As mentioned above, the LCR is a short-term liquidity ratio for a 30-day stress scenario. It represents the resultratio of the division of the high qualityhigh-quality liquidity assets byto net outflows. High Quality Liquidity Assets are composed mainly byof Brazilian federal government bonds and reserve requirementsrequirement returns. Net Outflows are mainly composed byof losses ofon deposits, offset in part by Inflows, which are mainly credits. In the months ending on October 31, November 30 and December 31, 2016, Santander Brasil had a surplus (difference between net assets and net cash outflows) of R$32.1 billion, which resulted in an LCR of 174%, above the regulatory requirement of 70%.
The following table presents an estimate of the implementation schedule of the main changes related to capital adequacy and leverage expected as a result of Basel III, as established by the Brazilian Central Bank:
Parameters | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | As from 2019 | |||||||||||||||||||||
Common equity | 4.5 | % | 4.5 | % | 4.5 | % | 4.5 | % | 4.5 | % | 4.5 | % | 4.5 | % | ||||||||||||||
Tier I | 5.5 | % | 5.5 | % | 6.0 | % | 6.0 | % | 6.0 | % | 6.0 | % | 6.0 | % | ||||||||||||||
Regulatory capital | 11.0 | % | 11.0 | % | 11.0 | % | 9.9 | % | 9.3 | % | 8.6 | % | 8.0 | % | ||||||||||||||
Capital conservation buffer | — | — | — | 0.6 | % | 1.3 | % | 1.9 | % | 2.5 | % | |||||||||||||||||
Countercyclical buffer | — | up to 0.6 | % | up to 1.3 | % | up to 1.9 | % | up to 2.5 | % | up to 2.5 | % | up to 2.5 | % |
In addition, in order to enableNovember 2017, the implementation ofCMN established a minimum limit for the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No 12,838 enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.
Systemically Important Financial Institutions
The assessment of the global systemic importance of financial institutions (“IAISG”) comprises the index of systemic importance (“ISG”Net Stable Funding Ratio (Índice de Liquidez de Longo Prazo, or “NSFR”) and the aggregateLeverage Ratio (Razão de Alavancagem, or “RA”) with which Brazilian financial institutions are required to comply. The NSFR corresponds to the ratio between the Available Stable Funds (Recursos Estáveis Disponíveis, or “ASF”) and the Required Stable Funds (Recursos Estáveis Requeridos, or “RSF”) of ancillary indexes established by regulations issued by the Brazilian Central Bank, which take into account, among other things, amounts relating to certain current and long-term liabilities, deposits, financial transactions and revenues.institution. The Brazilian Central Bank adoptedfinancial institutions classified as “segment 1” for purposes of the same components set out by the Basel Committee to calculate the ISG, including (i) size; (ii) interconnectedness; (iii) lackapplication of readily available substitute or financial institution infrastructure for the services provided; (iv) global or cross-jurisdictional activity; and (v) complexity, with each of these components receiving an equal weight in the assessment.
This assessment should be carried out by banks with total exposure in excess of R$500 billion, individually or at the consolidated enterprise level (conglomerado prudencial),prudential rules, as the case may be. Our controlling shareholder Santander Spain is considered a global systemically important financial institution in accordance with the Basel Committee rules. In Brazil, we are, consideredmust maintain, as from October 1, 2018, a systemically importantminimum NSFR of 1.00. Regarding the leverage ratio, the financial institution pursuantinstitutions classified as “segment 1,” as we are, or “segment 2” for purposes of the application of prudential rules are required to regulations issued by the Brazilian Central Bank.maintain a minimum RA of 3% as from January 1, 2018.
Other Applicable Laws and Regulations
Consolidated Enterprise Level (conglomerado prudencial)
Since January 2014, financialFinancial institutions must submit to the Brazilian Central Bank, monthly and semi-annually,semiannually, consolidated financial statements based on the “consolidated enterprise level” (conglomerado prudencial)(conglomerado prudencial) of which the financial institution is a member, which servemember. Such information serves as the basis for calculation of the required regulatory capitalRegulatory Capital of the Brazilian institutions. The “consolidated enterprise level” (conglomerado prudencial) includes data relative to the financial institutions and other institutions authorized to operate by the Brazilian Central Bank, consortium administrators, of consortia, payment institutions and credit factoring companies, including real estate credit, or of
credit rights, such as mercantile foment companies, securitization companies and specific purpose companies, located in Brazil or abroad, as well as other legal entities headquartered in Brazil that have equity participation in the mentioned entities as their exclusive business purpose.
On January 29, 2020, the CMN published Resolution No. 4,818, which requires financial institutions categorized as S1, S2 and S3 to publish IFRS financial statements. The requirement is already in force for publicly held financial institutions and financial institutions which are leaders of a prudential conglomerate and came into effect for all remaining financial institutions on January 1, 2022.
New accounting criteria applicable to financial instruments, hedging and leasing agreements
On November 25, 2021 and December 16, 2021, the CMN issued Resolution No. 4,966/2021 and Resolution No. 4,975/2021. These rules establish, respectively, new accounting principles and criteria applicable to financial instruments, as well as to hedging and financial leasing transactions contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank.
The rules intend to align the accounting criteria applicable to financial instruments and leasing agreements contracted by financial institutions and other entities supervised by the Brazilian Central Bank with best international practices, including the “IFRS 9 – Financial Instruments” and “IFRS 16 – Leases” standards issued by the IASB.
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CMN Resolution No. 4,966/2021 and Resolution No. 4,975/2021 will enter into effect on January 1, 2025, ensuring a transition period for the institutions subject to the changes.
Segmentation for the Proportional Application of Prudential Regulation
In January 2017, the CMN enacted a resolution establishing segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for the purposes of proportional application of the prudential regulation. The segmentation is based on the size, international activity and risk profile of members of each segment. Pursuant to the resolution, the segments are as follows:
● | Segment 1 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base equivalent or superior to 10% of Brazil’s GDP; or (b) which perform relevant international activities, irrespective of the size of the institution; |
● | Segment 2 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base lower than 10% of Brazil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brazil’s GDP; |
● | Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brazil’s GDP; |
● | Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and |
● | Segment 5 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP, that apply a simplified optional method for verifying the regulatory capital’s minimum requirements, except for multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks. |
We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.
Regulation of Risk and Capital Management Structure
The rules enacted by the CMN and the Brazilian Central Bank provide that risk management must be conducted through an integrated effort by the relevant entity (i.e., not only must risks be analyzed on an individual basis, but must also control and mitigate the adverse effects caused by the interaction between different risks). The rules set out different structures for risk and capital management, which are applicable for different risk profiles. This means that a financial institution of limited systemic importance can have a simplified structure of management, while institutions of larger complexity have to follow stricter protocols.
Compulsory Reserve Requirements
Currently, the Brazilian Central Bank imposes a series of compulsory reserves requirements. Financial institutions must deposit these reserves with the Brazilian Central Bank. The Brazilian Central Bank uses these reserve requirements as a mechanism to control the liquidity of the Brazilian financial system for both monetary policy and risk mitigation purposes. Reserves imposed on time deposits, demand deposits and saving accounts represent almost the entirety of the amount that must be deposited at the Brazilian Central Bank.
● | Time Deposits (CDBs), The Brazilian Central Bank imposes a reserve requirement of 20% in relation to time deposits. Financial institutions must deposit an amount equivalent to the surplus of (i) R$3.6 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2.4 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1.2 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with a Regulatory Capital greater than R$15 billion. |
Time Deposits (CDBs). TheAdditionally, as from the issuing of Brazilian Central Bank imposes a reserve requirement of 25.0% in relation to time deposits. Financial institutions mustResolution No. 145 on September 24, 2021, collateral deposit an amount equivalent tofor the surplus of (i) R$3 billionnew funding mechanism for financial institutions with consolidated Tier 1 capital under R$2 billion; (ii) R$2 billion for financial institutions with consolidated Tier 1 capital between R$2 billion and R$5 billion; (iii) R$1 billion for financial institutions with consolidated Tier 1 capital between R$5 billion and R$15 billion; and (iv) zero for financial institutions with Regulatory Capital higher than R$15 billion. As from the end of April 2017, the reserve requirement on time deposits will be increased to 36.0% and the surplus will be calculated based on the following metrics: (i) R$3 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with consolidated Tier 1 capital higher than R$15 billion.
(called Linhas Financeiras de Liquidez
Demand Deposits. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 45% in relation to demand deposits.
Savings Deposits. The Brazilian Central Bank imposes a reserve requirement of 24.5% in relation to general savings deposits and 15.5% in relation to rural savings deposits. For financial institutions with consolidated Tier 1 capital under R$5 billion on December 31, 2014 such as us the result of the application of the reserve requirement rate must be discounted by R$100 million as from the calculation period of January 2 to January 6 of 2017 until the calculation period from January 2 to December 29 of 2017. In addition, a minimum of 65.0% of the total amount of deposits in savings accounts must) can be used to finance the housing sector.
Additional Deposit Requirements. The Brazilian Central Bank also stipulates an additionaldeduct up to three percentage points of this type of reserve requirement on deposits raised by full service banks, investment banks, commercial banks, development banks, finance, credit and investment companies, real estate credit companies and savings and loan associations, as amended in early January, 2017. These institutions are required to deposit on a weekly basis the sum of the following amounts: (i) 0% of the mathematical average of funds from time deposits and other specific amounts, subject to the reserve requirement; and (ii) 5.5% of the mathematical average of funds from savings accounts subject to the reserve requirement. These amounts must be discounted by: (i) R$3 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with Regulatory Capital higher than R$15 billion. At the close of each day, the balance of such account should be equivalent to 100% of the additional reserve requirement.requirements.
● | Demand Deposits. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits. |
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● | Savings Deposits. The Brazilian Central Bank imposes a reserve requirement of 20% in relation to general savings deposits and to rural savings deposits. |
Asset Composition Requirements
Permanent assets (defined as property and equipment other than commercial leasing operations, unconsolidated investments and deferred charges) of Brazilian financial institutions may not exceed 50% of their adjusted net equity, calculated in accordance with the criteria established by the Brazilian Central Bank.
Brazilian financial institutions, as a general rule, may not have more than 25.0%25% of their Tier 1 Regulatory Capital allocated to credit and leasing transactions and guarantees extended to the same customer or group of customers acting jointly or representing the same economic interest. In addition, Brazilian financial institutions must comply with an exposure limit of 25.0%25% of their Regulatory Capital in connection with underwriting for or investments in securities of the same entity, its affiliates, or controlled or controlling companies. Repurchase transactions executed in Brazil are subject to operational capital limits based on the financial institution’s Regulatory Capital, as adjusted in accordance
with Brazilian Central Bank regulations. A financial institution may carry out repurchase transactions in an amount of up to 30 times its Regulatory Capital. Within that limit, repurchase transactions involving private securities may not exceed five times the Regulatory Capital. Limits on repurchase transactions involving securities backed by Brazilian governmental authorities vary in accordance with the type of security involved in the transaction and the perceived risk of the issuer as determined by the Brazilian Central Bank.
The regulation issued by the Brazilian Central Bank with respect to the classification and valuation of securities and derivative financial instruments—instruments - including government securities—securities - owned by financial institutions, based on the investment strategy of the financial institution, determined that securities and derivatives are to be classified into three categories: (i) trading; (ii) available for sale; and (iii) held to maturity.
In September 2016, the CMN enacted a new rule, which amends the regulation on repurchase transactions involving fixed-income securities. The recent changes to the regulation amend the list of the types of securities that may be subject to repurchase transactions by expressly including obligations issued by the International Finance Corporation and certain securities issued by leasing companies (Letras de Arrendamento Mercantil). It also removes the possibility of the Brazilian Central Bank adding to the list any securities not expressly listed in the regulation.
“Trading” and “available for sale” securities are to be marked-to-market with effects in income and stockholders’ equity, respectively. Securities classified as “held to maturity” are recorded at amortized cost.cost, Derivatives are marked-to-market and recorded as assets and liabilities in the balance sheet. Changes in the market value of derivatives are generally recognized in income with certain modifications, if these are designated as hedges and qualify for hedge accounting under the regulations issued by the Brazilian Central Bank. Securities and derivatives in the “held to maturity” portfolio may be hedged for accounting purposes but their increase or decrease in value as derived from the marked-to-market accounting method should not be taken into account.
On June 31, 2018, the CMN enacted a rule providing that financial institutions categorized as “Segment 1” as per the Brazilian Central Bank’s classification system established in 2017 (which is our case) (1) may not have more than 25.0% of their Regulatory Capital allocated to a single legal or natural person, and (2) that the total exposure of such financial institutions to one individual customer may not exceed 600% of their Regulatory Capital allocated to focused exposure, that is 10% of their Regulatory Capital – Tier 1. The rule also subjects financial institutions categorized as segment 2, segment 3 or segment 4 to less restrictive rules.
Centralized Registration and Deposit of Financial Assets and Securities
Law No. 13,476/17 consolidates the provisions on creation of liens over financial assets and securities, CMN Resolution No. 4,593/2017, as amended, regulates the registration and deposit of financial instruments and securities by financial institutions as well as the provision of custody services by such institutions.
Resolution 4,734/19 sets out the guidelines applicable to the establishment of liens and encumbrances on credit and debit payment instruments due to credit operations with financial institutions and regulates credit operations guaranteed by receivables from payment arrangements. The amount of receivables perfected into guarantees for a certain credit transaction will be reduced, whenever applicable, so that they are limited to the outstanding balance of the transaction or to the maximum limit extended, in the case of an extension of a non-dischargeable credit facility by a financial institution on an absolute and unilateral basis.
Circular 3,952/19, deals in particular with the procedures for the registration of receivables, and requires a convention between market infrastructures to guarantee the uniqueness of the receivables as financial assets that can be registered, interoperability, exchange of information between registration systems and participants in the structure. Circular 3,952/19 came into effect on June 7, 2021.
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Brazilian Payment and Settlement System
The rules for the settlement of payments in Brazil are based on the guidelines adopted by the Bank of International Settlements, or “BIS,” and the current Brazilian Payment and Settlement System (Sistema Brasileiro(Sistema de Pagamentos e CompensaçãoBrasileiro or the “SPB”). The Brazilian Central Bank and CVM (in relation to transactions with securities) have the power to regulate and supervise this system.system, SPB is composed of systems for the clearing of checks, clearing and settlement of debit and credit electronic orders, transfer of funds and other financial assets, clearing and settlement of transactions involving securities, clearing and settlement of transactions carried out in commodities and futures, and others, collectively designated as Financial Market Infrastructures, as well as the payment arrangements and payment institutions.
Within the scope of SPB, the Brazilian Central Bank operates the Reserves Transfer System, (“STR”)or “STR,” and the SELIC. STR is a system of transfer of funds with real-time gross settlement, which means that transfers are made at the processing time, one by one, and are subject to the existence of outstanding balance in the account. STR is composed of financial institutions, clearing and settlement houses and the National Treasury Office. SELIC is the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.
Instant Payment System
The interbankBrazilian Central Bank also implemented an instant payment ecosystem in November 2020. The settlement of the system is centralized at the Brazilian Central Bank. In addition to increasing the speed at which payments or transfers are made and received, available 24 hours a day, seven days a week in all days of fundsthe year, the ecosystem has the potential to increase market competitiveness and efficiency; lower costs; and enhance customer experience.
On June 12, 2020, the Brazilian Central Bank issued Circular 4,027/20, which established the Brazilian Instant Payment System (Sistema de Pagamentos Instantâneos, or “SPI”). Circular 4,027/20 also approved the regulation with which the direct and indirect participants in the SPI must comply, and provided that the SPI started operating on November 3, 2020 with certain features and becoming available gradually until it was fully operational on November 16, 2020. Brazilian Central Bank Normative Ruling No. 47/20 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 129/21, in turn, establishes the procedures for the adherence to the instant payment arrangement (PIX).
According to the by-laws of the SPI, the participation in the SPI is mandatory for the participants of the PIX arrangement, and optional for (i) the clearing houses and other providers of clearing services, and (ii) the National Treasury Department.
There are two types of participation in the SPI: (i) direct, in which the participant holds an instant payment account and is directly connected to the SPI; and (ii) indirect, in which the participant institution does not only settled by STR but alsohold an instant payment account and its participation occurs via a direct participant to the SPI, responsible for registering the indirect participant in the SPI and to act as its clearing agent in the SPI for instant payments, Circular 4,027/20 came into effect on July 1, 2020.
On August 12, 2020, the Brazilian Central Bank issued Central Bank Resolution No. 1, or “Central Bank Resolution 1/2020,” establishing the PIX System payment arrangement and approving the regulation governing it, or (the “PIX Regulation”).
Pursuant to Central Bank Resolution 1/2020, participation in the PIX System is mandatory for financial institutions and payment institutions authorized to operate by the Funds TransferBrazilian Central Bank that have more than 500,000 active customer accounts, considering cash deposit accounts, savings deposit accounts and prepaid payment accounts. Participation in the PIX System (Sitraf),is optional for financial institutions and payment institutions that do not meet this threshold, as well as for the Deferred SettlementNational Treasury Secretariat.
The PIX Regulation applies to all PIX System participants. According to the PIX Regulation, there are three types of participation: (i) transactional account provider, which is a financial institution or a payment institution that offers deposit accounts or payment accounts to end users; (ii) government entity, which is the National Treasury Secretariat, with the exclusive purpose of making collections and payments related to its activities; and (iii) special clearing houses, that are the financial institutions and payment institutions that (a) within the scope of the PIX System, have the exclusive purpose of providing settlement services to other participants, (b) meet the requirements to act as settlement participant in the Brazilian Central Bank’s SPI, and (c) do not meet the criteria of mandatory participation in the PIX System.
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Brazilian Central Bank Resolution 1/2020 came into effect on September 1, 2020. PIX System transactions started operating on a restricted basis through to November 3, 2020 and was fully as of November 16, 2020.
Furthermore, on September 2, 2021, the Brazilian Central Bank issued Resolutions No. 135 and 136, which regulate the offering of the PIX Withdrawal and PIX Change services by regulated institutions that participate in the Brazilian Instant Payments System. Both rules came into effect on November 1, 2021. The new services were established by the Brazilian Central Bank on August 24, 2021, in a meeting of its Collegiate Board, which approved changes to the PIX Regulations.
PIX Withdrawal will allow all the clients of any participating institution to make a withdrawal in kind at one of the points that offer the service. Merchants, shared ATM networks and PIX participants, through their own ATMs, may offer the service. In order to withdraw funds in kind through PIX, the client simply executes a PIX transaction to the withdrawal agent, in a similar dynamic to a normal PIX transaction, by reading a QR Code or through the service provider's API.
With the PIX Change, the dynamic is almost identical. The difference is that the withdrawal of cash can be carried out during a purchase transaction with a merchant that offers PIX as a mean of payment. In this case, the PIX transaction is executed for Interbank Credit Orders (Siloc)the total amount (purchase + cash withdrawal). The customer's invoice will show the amount corresponding to the cash withdrawal and the Centralizer Clearancepurchase amount.
The offer of the two new products on PIX’s evolving agenda to users is optional, and the final decision to implement PIX Withdrawal and PIX Change is up to the merchants that accept PIX, the companies that own ATM networks, and the financial institutions that have their own ATMs.
Further, on September 23, 2021, the Brazilian Central Bank issued Resolution No. 142, introducing security measures to be adopted by institutions under its regulation and supervision to prevent frauds in the provision of payment services.
Resolution No. 142 establishes that financial and payment institutions must limit the provision of payment services for Checks (Compe)the period from 8 p.m. to 6 a.m. to a maximum of R$1,000 per deposit or prepaid payment account, as applicable. This limit may be increased at the client's request, which must be submitted formally through the relevant electronic service channels, but the institution must establish a minimum period of 24 hours for the change to take effect. Resolution No. 142 required payment service providers to implement the new transaction limit by October 4, 2021.
Pursuant to Resolution No. 142, financial and payment institutions must also implement, by November 16, 2021: (i) procedures aimed at evaluating the customer prior to offering the anticipation of the settlement of payment receivables on the same date of the execution of a payment transaction within the scope of payment schemes in which the institutions participate; and (ii) daily registration of the occurrence of fraud or attempted fraud in the rendering of payment services, including the corrective measures adopted by the institution. Based on these records, the institutions must prepare a monthly report consolidating the occurrences and the preventive and corrective measures adopted. This report must be forwarded to the institution audit and risk committees (if instituted), internal audit unit, Executive Board and Board of Directors (if instituted).
Furthermore, on September 28, 2021, the Brazilian Central Bank issued Resolution No. 147, which established security mechanisms specific to PIX transactions. The rule also details, within the scope of PIX, the measures established by Resolution No. 142, which applies to all electronic payment methods (including other types of electronic transfers available in Brazil, such as Transferência Eletrônica Disponível – TED or Documento de Ordem de Crédito – DOC). The security measures came into effect on November 16, 2021, with the exception of the new transaction limits, which came into effect on October 4, 2021.
Open Banking Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open banking. Open banking consists of the sharing of data and payment initiation services and forwarding credit transaction proposals, by financial institutions and other authorized entities (with customers permission) and the integration of information systems.
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Among other topics, the resolution sets forth the mandatory and voluntary participating institutions, the data and services covered, the requirements for sharing, the responsibilities for sharing, the implementation schedule and the form of agreement to be entered into by the participating institutions.
According to the resolution, financial institutions and prudential conglomerates belonging to the S1 and S2 segments, as is our case, are required to participate in open banking.
Open banking has a four-stage implementation plan, as follows:
● | Stage 1 (completed on February 1, 2021): public access to participating institutions’ data on their access channels and product/service channels related to checking, savings, prepaid payment accounts and to lending transactions. |
● | Stage 2 (completed on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions. |
● | Stage 3 (completed October 29, 2021): start of PIX transactions by payment transaction initiators, as well as the gradual entry of other payment arrangements. |
● | Stage 4 (starting on December 15, 2021): sharing of customer transactional data related to additional products, pursuant to the following deadlines: (i) insurance, open-end private pension and capitalization products: until March 4, 2022; (ii) merchant acquiring services: until March 11, 2022; (iii) foreign exchange transactions: until March 18, 2022; and (iv) time deposit accounts and other investment products: until March 25, 2022. |
On October 29, 2020, the Brazilian Central Bank issued Central Bank Resolution 32/2020, which sets forth the technical and operational requirements to be observed by institutions which participate in the Brazilian Open Banking System.
The new rule lays out, among others, rules relating to (i) the scope of the data and services to be shared by participating institutions within Open Banking, detailed in a specific manual; (ii) the standards for the development of application programming interfaces (APIs) by participating institutions, detailed in a specific manual, which deals with their design, data transmission protocols, data exchange formats, control accesses, version control systems and specification parameters; among other things; (iii) criteria for registration and cancellation of registration in Open Banking; (iv) services to be rendered by the Open Banking Governance Structure, which also is detailed in a specific manual, including the maintenance of a repository of participating institutions and a website containing updated information about Open Banking and its implementation; and (v) minimal security standards and certifications.
Additionally, on September 9, 2021, the Brazilian Central Bank published Resolution No. 138, which disclosed the minimum scope of data to be available for sharing on Stage 4 of Open Banking, to be further detailed by the Open Banking Governance Body. The fourth stage of the ecosystem, which covers data on foreign exchange, investment, insurance, and open-end private pension transactions, as well as merchant acquiring services, began on December 15, 2021, when the participating institutions must make the information about the mentioned products and services available to other financial institutions.
Regarding investment transactions, the main financial and capital market products offered in Brazil were included in the scope of Stage 4, such as: (i) Banking Time Deposit Certificates (Certificados de Depósito Bancário or CDBs); (ii) Banking Time Deposit Receipts (Recibos de Depósito Bancário or RDBs); (iii) Real Estate Credit Bills (Letras de Crédito Imobiliário or LCIs); (iv) Agribusiness Credit Bills (Letras de Crédito do Agronegócio or LCAs); (v) investment fund quotas; (vi) direct treasury government bonds (títulos do tesouro direto); (vii) stock; (viii) quotas of exchange-traded investment funds (ETFs); (ix) debentures; (x) Certificates of Real Estate Receivables (Certificados de Recebíveis Imobiliários or CRIs); and (xi) Certificates of Agribusiness Receivables (Certificados de Recebíveis do Agronegócio or CRAs).
With regard to foreign exchange transactions, effective total value of transactions (VET) and commercial exchange rates will need to be made available. The data referring to merchant acquiring services will cover applied service fees and rates.
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Finally, the data referring to insurance products and pension plans will follow the scope defined by the CNSP and the SUSEP in CNSP Resolution No. 415/2021 and SUSEP Circular No. 635/2021, respectively, which establish a specific timeline for the implementation of Open Insurance, an exclusive governance body responsible for Open Insurance, as well as specific implementation manuals.
Stage 4 of Open Banking introduced information sharing beyond traditional banking products and services, marking the beginning of the migration from Open Banking to Open Finance in Brazil.
Regulatory Sandbox
On November 28, 2019, the Brazilian Central Bank published Public Consultation No. 72/2019, which ended on January 31, 2020, regarding the Controlled Testing Environment for Financial Innovations or “Sandbox” which is intended to enable institutions test innovative financial and payment projects for a specified period.
After receiving comments on such Public Consultation, the CMN and the Brazilian Central Bank issued, on November 26, 2020, CMN Resolution 4,865/20 and BCB Resolution 29/20, to regulate the Sandbox. These rules set forth the applicable conditions for the implementation of the Sandbox, among which are also partthe specific rules for the first cycle of SPB.tests, such as duration and number of participants, required documentation, criteria for the classification of institutions and the schedule for registration, selection and authorization processes of such entities. In November 2021, the Brazilian Central Bank selected developers’ projects for the first cycle, which will last for one year and may be extended for another year.
Treatment of Overdue Debts
The Brazilian Central Bank requires financial institutions to classify credit transactions in accordance with their level of credit risk and to make provisions according to the level attributed to each transaction. Such credit classifications shall be determined in accordance with criteria set forth from time to time by the Brazilian Central Bank, relating to the conditions of the debtor and the guarantor and the transaction terms. Where there are several credit transactions involving the same customer, economic group or group of companies, the credit risk must be determined by analyzing the particular credit transaction of such customer or group that represents the greatest credit risk to the financial institution.
Credit transactions of up to R$50,000 may be classified either by the financial institution’s own evaluation method or according to the number of days such transaction is past due, whichever is the more stringent. Credit
classifications are required to be reviewed (i) monthly, in the event of a delay in the payment of any installment of principal or interest, in accordance with the maximum risk classifications; (ii) every six months, in the case of transactions involving the same customer, economic group or group of companies, the amount of which exceeds 5% of the adjusted net worth of the financial institution in question; and (iii) once every 12 months, in all circumstances, except in the case of credit transactions with a customer whose total liability is lower than R$50,000, the classification of which may be reviewed as provided above. Such R$50,000 limit may be amended by the Brazilian Central Bank from time to time.
The provisions set forth above are not applicable to our IFRS consolidated financial statements, which are based on the criteria described under “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment Losses on Financial Assets.”
Credit Performance Information – Positive Registration
Regulation of the Transfer of Customer Data by Financial Institutions to Database Managers
Brazilian law regulates the formation and consultation of databases containingwith information regarding performance, individuals or legal entities, for the formation of credit performance informationhistory, Resolution No. 4,737 determines that the history of individualsthe following operations should be provided: (i) credit operations; (ii) leasing operations; (iii) self-financing operations executed upon consortium groups; and (iv) other operations with characteristics of credit granting; and defines the criteria for the registration of database managers, such as the identification of the natural and legal entities. Dissemination of information from these databases is subject to the express request or authorizationpersons that are part of the institution’s corresponding clients.
In September 2016, the CMN enacted a new rule in order to include in the roll of databases allowed to receive credit performance information those managed by acontrol group of entities that jointly have net equity equal or higher than R$70 million (excluding any amounts relating to the interest holding among such entities).
database manager.
Collection of Bank Fees
The collection of bank fees and commissions is extensively regulated by the rules that seek standardization of the collection of bank fees and of the costs of credit transactions for individuals. According to these rules, bankBank services to individuals are divided into the following four groups: (i) essential services; (ii) priority services; (iii) special services; and (iv) specific or differentiated services.
Banks are not able to collect fees in exchange for supplying essential services to individuals with regard to checking accounts, such as (i) supplying a debit card; (ii) supplying 10 checks per month to accountholdersaccount holders who meet the requirements to use checks, as per the applicable rules; (iii) supplying a second debit card (except in cases of loss, theft, damage and other reasons not caused by the bank); (iv) up to four withdrawals per month, which can be made at a branch of the bank, using checks or in ATM terminals; (v) supplying up to two statements describing the transactions during the month, to be obtained through ATM terminals; (vi) inquiries over the internet; (vii) up to two transfers of funds between accounts held by the same bank, per month, at a branch, through ATM terminals or over the internet; (viii) clearing checks; and (ix) supplying a consolidated statement describing, on a month-by-month basis, the fees charged over the preceding year with regard to checking accounts and savings accounts.
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Certain services rendered to individuals with regard to savings accounts also fall under the category of essential services and therefore are exempt from the payment of fees. CMN prohibits banks from charging fees for supplying essential services in connection with deposit and savings accounts where clientscustomers agree to access and use their accounts by electronic means only. In the case of these exclusively electronic deposit and savings accounts, banks areonly (being authorized to charge fees for supplying essential services only when the clientcustomer voluntarily elects to obtain personal service at the banks’ branches or clientcustomer service locations.
locations),
Priority services are those rendered to individuals with regard to checking accounts, transfers of funds, credit transactions, leasing, standard credit cards, over-the-counter exchange transactions for the purchase or sale of foreign currency in respect of international travel, and records, and are subject to the collection of fees by the financial institutions only if the service and its nomenclature are listed in its regulations. Commercial banks must also offer to their individual clientscustomers a “standardized package” of priority services, whose content is defined, as well as the clients’customers’ option to acquire individual services instead of adhering to the package.
The collection of fees in exchange for the supply of special services (including, among others, services relating to rural credit, currency exchange market and on-lendingon lending of funds from the real estate financial system) is governed by the specific provisions found in the laws and regulations relating to such services. The regulation authorizes financial institutions to charge fees for the performance of specific services, provided either that the account holder or user is informed of the conditions for use and payment or that the fee and charging method are defined in the contract. Some of the specific services, among others, are (i) approval of signatures; (ii) management of investment
funds; (iii) rental of safe deposit boxes; (iv) courier services; (v) custody and brokerage services, (vi) endorsement of clients debts (aval, or guarantee); and (vii) foreign currency exchange.
It is worth pointing out: (i) the prohibition against charging fees in cases of adhesion contractscontract amendments, except in the cases of asset replacement in leasing transactions, early liquidation or amortization, cancelationcancellation or termination; (ii) the prohibition against including services related to credit cards and other services not subject to fees in service packages that include priority, special and/or differentiated services; (iii) the requirement that subscription to service packages must be through a separate contract; (iv) the requirement that information given to the customer with respect to a service package must include the value of each service included in the package, the number of times that each service may be utilized per month, and the total price of the package; (v) the requirement that a customer’s annual banking statement must separately identify default interest, penalties and other costs charged on loans and leasing transactions; (vi) the requirement that registration fees cannot be cumulatively charged; and (vii) the requirement that overdraft fees can be charged, at most, once over the course of 30 days.
In addition, CMN regulations establish that all debits related to the collection of fees must be charged to a bank account only if there are sufficient funds to cover such debits in such account and thus forbid overdrafts caused by the collection of banking fees. Furthermore, a minimum of 30 days’ notice must precede any increase or creation of fees (except if related to credit card services, when a minimum of 45 days’ notice is required), while fees related to priority services and the “standardized package” can be increased only after 180 days from the date of the last increase (except if related to credit card services, when a minimum of 365 days’ notice is required) whereas reductions can take place at any time.
Late Payment Fees
In 2017, the CMN enacted a new rule onThe default payment fees charged by financial institutions, consumer credit companies (financeiras), and leasing companies whichare expressly limits the late payment fees charged by such entitieslimited to compensatory interest per day on the amount that is overdue, interest on arrears and fines on arrears. The new regulation will become effective in September 2017, and will be applicable only to transactions taking place after it becomes effective.
Credit Cards
The banking regulations also have specific rules relative to the charging of credit card fees, the publication of information in the card invoices and the obligation to provide a package of basic services upon offering credit cards to clients. Credit card holders must pay monthly at least 15% of outstanding credit card balances. This minimum payment does not apply to credit cards with payment by means of direct payroll deductions.customers.
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In January 2017, the CMN issued a new rule on revolving credit for financing of credit card bills which determines certain conditions and limitations to this type of financing. The regulation determines that revolvingRevolving credit for financings of credit card bills may only be extended to clientscustomers until the due date of the following credit card bill. After this term, financial institutions must offer customers another type of financingproduct with conditions more favorable than the ones typically found in the credit card market. Furthermore, the new regulation prohibits banksBanks are prohibited from offering this type of credit to clientscustomers who have already contracted one revolving credit for financing of credit card bills which waswere not repaid in a timely manner. The new regulation will become effective in April 2017.
Payment Agents and Payment Arrangements
In 2013, a legal and regulatory framework for the payment industry was established in Brazil, pursuant to which the CMN and the Brazilian Central Bank now have powers to regulate payment mechanisms, players and transactions.
The regulation issued by the Brazilian Central Bank, which became effective in May 2014, determines, among other aspects: (i) consumer protection, and anti-money laundering compliance and risk prevention systems that should be observed by payment agents and payment arrangers; (ii) the procedures for incorporation, organization, authorization and operation of payment agents, as well as transfer of shareholding control, subject to the Brazilian Central Bank’s prior approval; (iii) capital requirements; (iv) definition of arrangements excluded from the SPB; and (v) rules related to payment accounts, which are divided into prepaid and post-paidpostpaid accounts and require the allocation of the totality of their balance to a special account at the Brazilian Central Bank or investment in government bonds.
Portability of Credit Transactions
In 2013, the Brazilian Central Bank regulated the possibility of financialFinancial institutions’ customers transferringcan transfer their credit transactions from one institution to another. The regulation, which became effective in May 2014, establishedSuch transfers must comply with the specific rules for such transfers,established by the Brazilian Central Bank, including, among others, the requirement that the amount and term of the transaction in the receiving financial institution must not be higher than the amount due and term of the original transaction.
Digitalization of Documents and Record Keeping
In March 2016, CMN enacted a new rule establishing a new regulation on digitalization of documents of operations and transactions carried out by financialFinancial institutions and other institutions authorized to operate by the Brazilian Central Bank. The new regulation authorizes those institutions toBank may keep onin their records digital documents instead of physical documents, provided that certain requirements to ensure the documentsdocuments’ authenticity and validity are met such as recording if the physical document that originated the digital version was an original or a copy, the parameters to validate the document and select the technology used to ensure the security of the electronic documents, as well as the parameters to select the documents that will continue being kept as hard documents on the institution’s files.
met.
Anti-Money Laundering Regulations
Under the Brazilian Anti-Money Laundering Law, it is a crime to conceal or dissimulate the nature, origin, location, availability, transaction or ownership of assets, rights or amounts resulting, directly or indirectly, from any criminal offense, as well as their use in economic or financial activity and the participationto participate in a group, association or office while being aware that its principal or secondary activities are directed towardstoward the practice of such acts.
The Brazilian Anti-Money Laundering Law also created the Financial Activities Control Council (Conselho de Controle de Atividades FinanceirasFinanceira(the Council of Control of Financial Activities,s or “COAF”), which operates under the jurisdiction of the Ministry of Finance. The purpose of the COAF is to investigate, examine, identify and impose administrative sanctions in respect of any suspicious occurrences of illicit activities related to money laundering in Brazil.
The COAF is composed of individuals with recognized competence in this area, appointed by the Minister of Finance, all of whom are nominated by each of the following entities: (i) the Brazilian Central Bank; (ii) the CVM; (iii) the SUSEP; (iv) the NationalBrazilian Treasury Attorney-General’s Office; (v) the Brazilian Federal Revenue; (vi) the Federal Intelligence Agency; (vii) the Ministry of Foreign Affairs; (viii) the Ministry of Justice; (ix) the Federal Police Department; (x) the Ministry of Social Security; and (xi) the General Comptroller’s Office, one of whom will be the president, which shall be appointed by the President of Brazil on the basis of recommendations by the Minister of Finance.
Brazilian anti-money laundering legislation and applicable regulation issued by the CMN and the Brazilian Central Bank established that financial institutions must, among others:
Brazilian financial institutions must inform COAF in the manner established by the Brazilian Central Bank, by the day following the date on which any of the following transactions, proposed or carried out, were verified:
These communications must be made without providing knowledge thereof to the parties involved.
The records referred to above must be kept for five to ten years, depending on the nature of the information, from the end of the relationship with the customer.
Failure to comply with any of the obligations indicated above can subject the financial institution and its officers and directors to penalties that range from fines (not above 200% of the transaction amount or the real profit obtained or that would be obtained by carrying out the transaction or the amount of R$20 million) to the declaration of its officers and directors as ineligible to exercise any position at a financial institution and/or the cancellation of the financial institution’s operating license.
Government officials and auditors from the Brazilian Federal Revenue Service may also inspect an institution’s documents, books and financial registry in certain circumstances.
Financial institutions must also maintain specific records of (i) the transactions in cash (deposit, withdrawal, withdrawal by means of a prepaid card or request of provision for withdrawal) so as to enable the identification of a deposit in cash, withdrawal in cash, withdrawal in cash by means of a prepaid card, or request of provision for withdrawal, of (a) an amount equal to or greater than R$100,000100,000.00 or (b) that presents evidence of concealment or dissimulation of the nature, of the origin, of the location, of the disposal, of the movement or of the ownership of assets, rights and valuables, as well as issuancevaluables; and (ii) the issuances of cashier’s checks, TED (Electronic Available Transfer)funds electronic transfers (TED) or of any other instrument of transfer of funds upon payment in cash, for an amount equal to or greater than R$100,000.100,000.00.
Financial institutions must maintain records of all operations, products and services contracted, including withdrawals, deposits, contributions, payments, receipts and transfers of funds. Additionally, the institutions must also keep specific records of (i) transactions in cash with an individual value greater than R$2,000.00; (ii) deposit or cash transactions of an individual value equal to or greater than R$50,000.00; and (iii) withdrawal transactions, including those carried out by check or money order, with an individual value equal to or greater than R$50,000.00.
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The regulations also impose an obligation on financial institutions to request that both customers and non-customers are providing a withdrawal request at least three working days in advance for withdrawals (including those carried out by check or money order) in an amount equal to or greater than R$50,000.00.
On January 23, 2020, the Brazilian Central Bank published Circular No. 3,978, which improves the regulation applicable to financial institutions, by expanding the adoption of a risk-based approach and came into effect on July 1, 2020. Regulated institutions must carry out specific internal risk assessments in order to identify and measure the risk of using their products and services in the practice of money laundering and terrorist funding.
In connection with the aforementioned change, the Know-Your-Client procedures were also improved and include the identification, qualification and classification of the customer, compatible with the risk profile, the nature of the relationship with the AML policy and the institution’s internal risk assessment, which must be permanently reassessed, according to the evolution of the business relationship and the risk profile of the client. The procedures must also include the verification of the client’s (including their representatives’, family members’ or close collaborators) condition as a Politically Exposed Individual, as well as consider them in the monitoring, selection and analysis of operations and situations with indications of suspected money laundering or terrorist funding.
On July 27, 2021, the Brazilian Central Bank published Resolution No. 119, which came into effect on September 1, 2021 and introduced certain changes to Circular No. 3,978/2020, which establishes the regulations and procedures related to anti-money laundering and combating the financing of terrorism applicable to entities subject to the Brazilian Central Bank´s regulation and supervision.
Among other changes brought by the new rule, financial institutions (and other entities regulated by the Brazilian Central Bank) are now required to obtain information about their customers’ place of residence, in the case of a natural person, or the location of the head office or branch, in the case of a legal entity, as part of their mandatory Know-Your-Client (KYC) procedure. The CVM also issued CVM Resolution No. 50 in August 31, 2021, which establishes the framework for the prevention of money laundering and the financing of terrorism in the Brazilian securities market. CVM Resolution No. 50 is in line with the practices currently implemented in the principal global securities markets, including with regard to the recommendations of the Financial Action Group against Money Laundering and the Financing of Terrorism (GAFI/FATF), as well as with the duties arising from Brazilian anti-money laundering laws.
Brazilian Anti-Corruption Law
Law No. 12,84612,846/13 of August 1, 2013, Brazil’s new anti-corruption law (“Brazilianor the “Brazilian Anti-Corruption Law”) entered into force on January 29, 2014. This law aims at fulfilling international commitments assumed by Brazil as a result of the ratification of various anti-corruption treaties, as well as meeting the population’s demands for the creation of more effective mechanisms to fight corruption at the public administration level. The Brazilian Anti-Corruption Law establishes that legal entities will have strict liability regardless of fault or willful misconduct for acts against the public administration carried out in their interest or for their benefit. Although known as the Anti-Corruption Law, thisThe Law encompasses not only performance of acts of corruption but also performance of other injurious acts contrary to the Brazilian or foreign public administration.
Corporations that violate the Brazilian Anti-Corruption Law’s provisions will be subject to heavy penalties, some of which may be imposed through administrative proceedings and others solely through judicial channels. The Brazilian Anti-Corruption Law also creates a leniency program under which self-disclosure of violations and cooperation by corporations might result in the reduction of fines and other sanctions.
Politically Exposed Individuals
Financial institutions and other institutions authorized by the Brazilian Central Bank to operate must take certain actions and have certain controls in order to establish business relationships with and to follow up on the financial transactions of customers who are deemed to be politically exposed individuals.individuals (public agents and their immediate family members, spouses, life partners and stepchildren who occupy or have occupied a relevant public office or position over the past five years in Brazil or other countries, territories and foreign jurisdictions). The internal procedures developed and implemented for this purpose by financial institutions must be structured in such a way as to enable the identification of politically exposed individuals, as well as the origin of the funds involved in the transactions of such customers. One option is to verify the compatibility between the customer’s transactions and the net worth stated in such customer’s file.
Politically exposed individuals are public agents and their immediate family members, spouses, life partners and stepchildren who occupy or have occupied a relevant public office or position over the past five years in Brazil or other countries, territories and foreign jurisdictions.
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Bank Secrecy
Brazilian financial and payment institutions shall also maintain the secrecy of their banking operations and services provided to their customers. The only circumstances in which information about customers, services or transactions of Brazilian financial and payment institutions may be disclosed to third parties are the following:
the disclosure of information with the express consent of the interested parties; |
the exchange of information between financial institutions for record purposes; |
the supplying to credit reference agencies of information based on data from the records of issuers of bank checks drawn on accounts without sufficient funds and defaulting debtors; and |
the occurrence or suspicion that criminal or administrative illegal acts have been performed, in which case the financial institutions and the credit card companies may provide the pertinent authorities with information relating to such criminal acts when necessary for the investigation of such acts. |
Complementary Law 105/01 also allows the Brazilian Central Bank or the CVM to exchange information with foreign governmental authorities, provided that a specific treaty has previously been executed.
The government of the Federal Republicgovernments of Brazil and the government of the United States of America executed an agreement on March 20, 2007, by means of which these governments established rules for the exchange of information relating to tax, (“2007 Agreement”).or the “2007 Agreement.” Under the 2007 Agreement, the Brazilian tax authority would be able to send information it receives by virtue of Section 5 of the Bank Secrecy Law to the U.S. tax authority.
Data Protection Requirements
The LGPD (Lei Geral de Proteção de Dados) was published in the Federal Official Gazette on August 15, 2018 and was amended by Law 13,853/19. The LGPD came into effect in September 2020, except for administrative sanctions, which came into effect on August 1, 2021, pursuant to Law No. 14,010/20, which delayed the applicability of certain provisions of the LGPD.
Before the LGPD, Brazil lacked regulations specific to data privacy and a data protection authority. Despite this, privacy has been generally protected through the Brazilian Federal Constitution, the Civil Code (Law No. 10,406/2002), the Consumer Protection Code (Law No. 8,078/1990) and the Civil Rights Framework for the Internet (Law No. 12,965/2014 and the Decree 8,771/2016).
The LGPD brings about profound changes in the rules and regulations applicable to the processing of personal data, with a set of rules to be complied with in activities such as the collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons.
The LGPD has a wide range of applications and extends to individuals as well as private and public entities, regardless of the country where they are headquartered or where data are hosted, as long as (i) the data processing takes place in Brazil; (ii) the data processing activity is intended to offer or supply goods or services to, or to process data of individuals located in Brazil; or (iii) the subjects of the data are located in Brazil at the time their personal data are collected. The LGPD will apply irrespective of the industry or business when dealing with personal data and is not restricted to data processing activities performed through digital media and/or on the internet.
The LGPD sets out several rules related to data processing such as principles, requirements and duties imposed to data controllers and data processors; rights of data subjects; requirements in connection with cross-border transfers of data; the obligation to appoint a data protection officer; data security and data breach notification; corporate governance practices; and the regime for civil liabilities and penalties in case of a breach of the provisions of the LGPD. Penalties include warnings, blocking and erasure of data, public disclosure of the offense and fines of up to 2% of the economic group’s turnover in Brazil in the preceding year, capped at R$50 million per offense.
Moreover, Law 13,853/2019 created the Brazilian National Data Protection Authority, or “ANPD,” which will have powers and responsibilities analogous to the European data protection authorities, exercising a triple role of (i) investigation, comprising the power to issue norms and procedures, deliberate on the interpretation of the LGPD and request information of controllers and processors; (ii) enforcement, in cases of noncompliance with the law, through an administrative process; and (iii) education, with the responsibility to disseminate information about and foster knowledge of the LGPD and security measures, fostering standards for services and products that facilitate control of data, and elaborating studies on national and international practices for the protection of personal data and privacy, among others.
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The ANPD has been assured technical independence, although it is subordinated to the Presidency of the Republic. It will be composed of five commissioners, to be appointed by the President of Brazil, and advised by a National Council for the Protection of Personal Data and Privacy, composed of 23 unpaid members.
Regulations on Cybersecurity
Financial institutions must follow certain cyber risk management and cloud outsourcing requirements which apply to the design and adaptation of internal controls, namely CMN Resolution No. 4,893/2021, which requires financial institutions to institute a Cybersecurity Policy, as well as regulates the outsourcing of relevant data processing and storage and cloud computing services and CVM Ruling No. 35/2021, which sets forth the standards and procedures to be observed in security transactions carried out in regulated securities markets requiring the implementation of cybersecurity controls and data protection. Policies and action plans to prevent and respond to cybersecurity incidents were fully compliant and in place by December 2021. Data location and processing may occur inside or outside Brazil, but access to data stored abroad must be granted at all times to the Brazilian Central Bank for inspection purposes. The contracting of relevant processing services must be communicated to the Brazilian Central Bank within 10 days from the execution of the agreement. See “Item 3. Key Information—D. Risk Factors— Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”
Auditing Requirements
The legislation and regulations issued by the CMN, CVM and BM&FBOVESPAB3 determine that the periodic financial statements of financial institutions must be audited by independent auditors (individuals or legal entities) that are registered with the CVM and who meet the minimum requirements set forth by the Brazilian Central Bank, and that the financial statements must be presented together with an independent auditor’s report. Our financial statements are audited in accordance with International Standards on Auditing with regard to Brazilian GAAP and also onwith the standards of the Public Company Accounting Oversight Board with regard to IFRS as issued by the IASB, as required by the SEC.
As result of the auditing work, the independent auditor must prepare the following reports: (i) audit report, issuing an opinion regarding the accounting statements and the respective explanatory notes, including regarding the compliance with financial regulations issued by the CMN and the Brazilian Central Bank; (ii) internal control system quality and adequacy evaluation report, including regarding electronic data processing and risk management systems, evidencing any identified deficiencies; (iii) legal and regulatory provisions non-compliance report, regarding those which have, or may have, material impacts on the financial statements or on the audited financial institution’s operations; (iv) limited assurance report, analyzing Santander Brasil’s Annual and Sustainability Report pursuant to the guidelines and requirements of the Global Reporting Initiative (“GRI”); and (v) any other reports required by the Brazilian Central Bank, CVM and BM&FBOVESPA. The reports issued by independent auditors must be available for consultation upon request by the overseeing authorities.
Independent auditors and the fiscal council when established, individually or jointly, must formally notify the Brazilian Central Bank of the existence or evidence of error or fraud, within three business days of the identification of the respective occurrence, including:
The executive office of the financial institution must inform the independent auditor and the fiscal council, when established, if any of the above situations occur.
CMN Regulation also requires financial institutions and certain other entities holding regulatory capital equal to or greater than R$1 billion to create a corporate body designated as the “audit committee.”
To obtain more information concerning the audit committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”
For purposes of the financial statements prepared according to Brazilian GAAP, as from January 2017 all financial institutions and other institutions authorized to operate by the Brazilian Central Bank are required to create provisions for all losses related to financial guarantees issued by them.
Socio-Environmental Responsibility Policy
On April 25, 2014, As a result of the auditing work, the independent auditor must prepare the following reports: (i) an audit report, issuing an opinion regarding the accounting statements and the respective explanatory notes, including regarding the compliance with financial regulations issued by the CMN enactedand the Brazilian Central Bank; (ii) an internal control system quality and adequacy evaluation report, including regarding electronic data processing and risk management systems, evidencing any identified deficiencies; (iii) a new regulation establishinglegal and regulatory provisions noncompliance report, regarding those which have, or may have, material impacts on the financial statements or on the audited financial institution’s operations; (iv) a limited assurance report, analyzing our Annual and Sustainability Report pursuant to the guidelines and requirements of the Global Reporting Initiative, or “GRI”; and (v) any other reports required by the Brazilian Central Bank, CVM and B3. The reports issued by independent auditors must be available for consultation upon request by the implementationoverseeing authorities.
Independent auditors and the audit committee, individually or jointly, must formally notify the Brazilian Central Bank of socio-environmental responsibility policies at Brazilianthe existence or evidence of error or fraud, within three business days of the identification of the respective occurrence, including:
● | noncompliance with legal rules and regulations that place the continuity of the audited entity at risk; |
● | frauds of any amount perpetrated by the management of the institution; |
● | material frauds perpetrated by the institution’s employees or third parties; and |
● | errors that result in major incorrectness in the financial statements of the audited entity. |
The executive office of the financial institution must inform the independent auditor and the audit committee, if any of the above situations occur.
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CMN regulation also requires financial institutions (each,and certain other entities holding Regulatory Capital equal to or greater than R$1 billion to create a “Responsibility Policy”). The Responsibility Policycorporate body designated as the “audit committee.” To obtain more information concerning the audit committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”
Internal Auditing of Financial Institutions
Financial institutions are required to establish and maintain internal audit activities compatible with their operational specifications, so that such internal bodies are able to perform an independent, autonomous and impartial audit of the quality and effectiveness of the institution’s internal systems. Such unit shall be directly controlled by the institution’s board of directors. Internal and external independent auditors are also liable for failures of the financial institution’s internal control mechanisms.
Environmental, Social and Governance (ESG) requirements applicable to financial institutions
Financial institutions are currently required by CMN Resolution No. 4,327/14 to have a responsibility policy, which must guide the social and environmental actions of Brazilian financial institutions in conducting their businesses, their relationship with their clientscustomers and other users of their products and services. The Responsibility Policyresponsibility policy must also guide the financial institution’s relationship with its personnel and with any others affected by the financial institution’s activities. In addition, the Responsibility Policyresponsibility policy must provide for the management of social and environmental risks (which, according to the Brazilian Central Bank, represent one of the several categories of risk to which financial institutions are exposed). Financial institutions were required to have a Responsibility Policy,
Following Public Consultations Nos. 82, 85 and an action plan to guide its implementation, in place by February 28, 2015, for financial institutions required to implement the Internal Process for the Assessment of Capital Adequacy (Processo Interno de Avaliação da Adequação de Capital, or “Icaap”) or up to July 31, 2015 for the remaining financial institutions.
We, as a financial institution required to implement the Icaap, have already developed our new Socio-Environmental Responsibility Policy in accordance with the guidelines established86, initiated by the CMN for Brazilian Central Bank in 2021 under the “Sustainability” pillar of the “Agenda BC#” (which consists of a list of goals to improve the Brazilian National Financial System), a new set of rules was published on September 15, 2021. These new rules aim to improve the disclosure of information, management and governance of social, environmental and climate risks by financial institutions, as mentioned above.well as to bring changes to the rural credit regulations in effect.
Resolution No. 140 establishes new conditions for the access to rural credit considering social, environmental and climatic aspects. Among them, it stands out the credit restriction for a producer who is not registered, or whose registration is canceled, in the Rural Environmental Registry (Cadastro Ambiental Rural – CAR). The new resolution also sets forth that rural credit shall not be granted to (i) an enterprise fully or partially inserted in a conservation unit, indigenous land already approved, an area of embargo in force resulting from the economic use of illegally deforested areas in the Amazon; nor (ii) an individual or legal entity registered in the official register of employers who have kept workers in conditions analogous to slavery.
CMN issued Resolution No. 4,943, which amended CMN Resolution No. 4,557/17 with the purpose of highlighting and distinguishing social, environmental and climate risks, as necessary for the identification, measurement, evaluation, monitoring, reporting, control and mitigation in connection with the risk management structure of financial institutions. The new rule provides for specific definitions to such risks, using new and modern concepts, such as the inclusion of the two main components of climate risks – physical and of transition – already recognized by international ESG standards. The amended rule also deals with the identification and monitoring of social, environmental and climate risks incurred by financial institutions, resulting not only from their products, services and activities, but also from the activities performed by their counterparties, controlled entities, suppliers and outsourced service providers.
Similar provisions were also included in the simplified structure of continuous risk management pertaining to the Simplified Reference Capital (Patrimônio de Referência Simplificado – PRS5) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
The CMN issued Resolution No. 4,945, replacing CMN Resolution No. 4,327 of April 25, 2014 on the Social and Environmental Responsibility Policy (Política de Responsabilidade Socioambiental or PRSA). The new rule provides for the inclusion of a climate aspect to the PRSA, which will be henceforth named Social, Environmental and Climatic Responsibility Policy (Política de Responsabilidade Social, Ambiental e Climática – PRSAC). Such new policy to be implemented by financial institutions shall take into account the impacts, strategic goals and business opportunities for the financial institutions in connection with social, environmental and climate aspects. There was also a reduction in the period for reviewing the PRSA, from five to three years.
The Brazilian Central Bank issued Resolution No. 139, regulating the preparation of a Report on Social, Environmental and Climate Risks and Opportunities (Relatório de Riscos e Oportunidades Sociais, Ambientais e
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Climáticas, or the “GRSAC Report”) by financial institutions classified in segments S1 (such as Banco Santander), S2, S3 and S4. Following the propositions of the Public Consultation, this new rule seeks to contemplate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) at the national regulatory level. The GRSAC Report must be published annually with the base date of December 31, within a maximum period of 90 days from December 31, and must be made available on the financial institutions' websites for a period of five years.
Finally, on October 6, 2021, the Brazilian Central Bank published Resolution No. 151, which regulates the remittance information regarding social, environmental, and climate risks addressed in CMN Resolution No. 4,557 and CMN Resolution No. 4,945 to the Brazilian Central Bank by authorized institutions. The rule applies to institutions classified in segments S1 (such as Santander Brasil), S2, S3, or S4; and the information that must be sent to the Brazilian Central Bank is related to the assessment of social, environmental and climate risks related to their exposures in credit and securities transactions, as well as those of the respective debtors under these transactions. The information to be remitted includes identification, economic sector, risk aggravating and mitigating factors, appraisal of social, environmental and climactic risks, among others.
In order to allow financial institutions to adapt their practices and policies to this new set of rules, CMN Resolution No. 4,943/21 and article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) will enter into effect on July 1, 2022, while CMN Resolution No. 4,944/21, the other provisions of CMN Resolution No. 4,945/21 and Central Bank Resolution No. 139/21 will enter into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 will enter into effect on July 1, 2022 and Central Bank Resolution No. 140, which specifically provides for rural credit, came into effect on October 1, 2021.
Policy for Succession of Financial Institutions Managers
In November 2016, CMN enacted a new rule providing that Brazilian financial institutions and other institutions authorized to operate by the Brazilian Central Bank shall implement and maintain internal policies for succession of managers, applicable to higher levels of the institution’s management. According to such resolution, theThe internal policy shall encompass the procedures related to recruitment, promotion, appointment and retention of managers in accordance with the institution’s rules for identification, evaluation, training and selection of the candidates to management offices.
Corporate Governance of Financial Institutions
Financial institutions must (i) remit to the Brazilian Central Bank information on the financial institution’s management, controlling group and relevant shareholders, including the obligation to communicate to the regulator any information that may affect the reputation of any such persons; (ii) make available a communication channel allowing employees, contributors, customers, users, associates, or services providers to report anonymously situations indicating illegalities of any nature related to the institution; and (iii) have an internal body responsible for receiving the information and complying with the reporting obligations.
Compliance Policy
Financial institutions must implement and maintain a compliance policy compatible with the nature, size, complexity, structure, risk profile and business model of the institution, which is intended to ensure an effective compliance risk management by the institution and may be established at the consolidated enterprise level (conglomerado prudencial). The compliance policy must establish the scope and purpose of the compliance function in the institution, set forth the organizational structure of the compliance function, specify which personnel is allocated to the compliance function, and establish a segregation of roles among personnel in order to avoid conflicts of interest.
The compliance policy must be approved by the Boardboard of Directors (and indirectors and the absenceregulation also assigns to the board the responsibility to ensure the following: adequate management of a Boardthe compliance policy throughout the institution, its effectiveness and continued application, its communication to all employees and services providers, as well as the dissemination of Directors, by the Executive Office), thatintegrity and ethical standards as part of the institution’s culture. The board of directors is also responsible for supervisingensuring the application of measures in case of noncompliance, and controllingfor providing the procedures for planning, operationalization, maintenance and review of the policy (which will occur at least every five years). CMN granted a term of 180 daysnecessary means for the institutionsactivities related to implement this policy.
the compliance functions to be adequately conducted.
Consumer Protection
Relationships between consumers and financial institutions are governed by Law 8,078, dated September 11, 1990, (“Brazilianor the “Brazilian Consumer Protection Code”),Code,” which grants consumers certain rights and sets forth measures to be observed by suppliers, which must be complied with by financial institutions. The Brazilian Consumer Protection Code sets forth as consumer rights, among others, the assistance/facilitation in the defense of consumer’sconsumers’ rights, including through reverse burden of proof in their favor, and possibility of judicial review of contractual provisions deemed abusive.
Furthermore, banking regulation establishes procedures that financial institutions must observe when contracting any transactions, as well as when rendering services. We may highlight the following as examples of said procedures:
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to timely provide the necessary information |
to timely provide, to the |
formalization of an adequate instrument setting forth the rights and obligations for opening, using and maintaining a |
to forward a payment instrument to the |
identification of end users’ beneficiaries for payments or transfer in statements and bills of the payer, including in situations in which the payment service involves institutions participating in different payment arrangements. |
In April 2016, the CMN amended the abovementioned regulation in order to exclude financialFinancial institutions operating exclusively via digital means are excluded from the scope of certain aspects of the regulation.
Law No. 14,181, which amends the Brazilian Consumer Protection Code and Senior Citizens' Statute (Law No. 10,741 of October 1, 2003) to improve provisions related to the offering of consumer credit and provide for the prevention and treatment of over-indebtedness, came into effect on July 2, 2021.
Regarding the prevention of over-indebtedness, such rule created a chapter in the Brazilian Consumer Protection Code dedicated to responsible credit and financial education. The amendments determine the presentation of specific information to the consumer in the granting of credit or installment sales, such as the effective monthly interest rate, late payment interest and the total charges foreseen in the event of late payment.
The new law also regulates informational conduct to be observed by the credit supplier regarding the nature and modality of the credit offered, considering the age of the consumer.
The law also included a new chapter in the Brazilian Consumer Protection Code dedicated to the conciliation between debtor and creditor with respect to over-indebtedness. According to the new law, the over-indebted consumer may request the initiation of a debt renegotiation process, with the consumer being responsible for submitting a payment plan proposal, preserving the existential minimum. The unjustified non-attendance of the creditor or his attorney at the conciliation hearing may suspend the payment of the credit, with the interruption of the late payment charges. In the case of a successful conciliation, the court decision that ratifies the agreement will describe the debt payment plan and will be enforceable. A new debt renegotiation request may only be submitted after two years, counting from the settlement of the obligations provided for in the payment plan. In the case of unsuccessful conciliation, the judge, at the consumer's request, will institute proceedings for over-indebtedness to review and integrate the contracts and renegotiate the remaining debts, through a compulsory judicial plan.
Further, on September 30, 2021, the CMN published Resolution No. 4,949. The rule provides the principles and procedures to be adopted in the relationship with clients and users of products and services of financial institutions and other institutions authorized to operate by the Brazilian Central Bank. On October 13, 2021, the Brazilian Central Bank published Resolution No. 155, which establishes almost identical principles and procedures to be adopted by payment institutions and consortium administrators, which are regulated and supervised solely by the Brazilian Central Bank.
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CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 set forth new rules mainly with the goal of ensuring fair and equitable treatment at all stages of the relationship with institutions providing financial and payments services, as well as a convergence of the interests of such institutions with those of their consumers.
Under CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021, institutions authorized to operate by the Brazilian Central Bank shall prepare and implement an institutional policy for the relation with consumers and users. Such new policy should consolidate guidelines, strategic objectives and organizational values, so that the conduct of the institution’s activities is guided by the principles of ethics, responsibility, transparency and diligence.
CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 also provide that institutions authorized to operate by the Brazilian Central Bank and must indicate to such regulatory agency the officer responsible for complying with the obligations provided under the new rules.
The rules also impose other obligations to the regulated entities within their scope, such as the compliance with transparency and suitability rules. CMN Resolution No. 4,949 will enter into effect on March 1, 2022, and Central Bank Resolution No. 155 will enter into effect on October 10, 2022.
Policy for Relationship with Customers and Users of Financial Products and Services
In November 2016, CMN enacted a new rule providing the principles for Brazilian financialFinancial institutions and other institutions authorized to operate by the Brazilian Central Bank to dealmust have a policy governing the relationship with customers and users of financial products and services. According to this regulation,In addition, such entities shall comply with the principles of ethics, liability, transparency and diligence promoting the convergence of interests and the consolidation of the institutional image of credibility, security and expertise.
The policy must be approved by the Board of Directors (and in the absence of the Board of Directors, by the Executive Office) that is also responsible for the periodic review of the policy. CMN provided for a term of 360-days for the effectiveness of such new resolution.
Ombudsman
Financial institutions and other entities whichthat are authorized to operate by the Brazilian Central Bank must have an ombudsman office. In 2015, the CMN and the Brazilian Central Bank updated the regulatory framework that regulates the ombudsman office of the entities authorized to operate by the Brazilian Central Bank.
The new framework aims at establishing a more effective and transparent ombudsman office that is able to provide better assistance to the financial institutions’ customers. An ombudsman office has the following attributionsattributes according to the newcurrent regulation:
to provide last resort assistance in connection with customer claims that have not been resolved through the conventional customer service channels (including the banking correspondents and the |
to act as a communication channel between the financial institutions and their customers, including for dispute |
The new regulatory framework is already in force. Financial institutions must fully implement the new requirements by June 2016.
Institutions that are part of a financial group are allowed to establish one ombudsman department to service the whole group. The officer in charge of the ombudsman office must prepare a report every six months, which must be provided to the management and auditing bodies, as well asbodies. The reports and recordings of interactions of the ombudsman unit with consumers must be available to the Brazilian Central Bank for a period of at least five years.
Investment Funds Industry Regulation
Investment funds are subject to the regulation and supervision of the CMN and the CVM and, in certain specific matters, the Brazilian Central Bank. Investment funds may be managed by full-service banks, commercial banks, savings banks, investment banks, credit, financing and investment companies and brokerage and dealer companies within certain operational limits.
Investment funds may invest in any type of financial instrument available in the financial and capital markets, including, for example, fixed income instruments, stocks, debentures and derivative products, provided that, in addition to the denomination of the fund, a reference to the relevant type of fund is included.
Investment funds may not:
Broker-Dealer Regulation
Broker and dealer firms are part of the national financial system and are subject to CMN, Brazilian Central Bank and CVM regulation and supervision. Brokerage firms must be chartered by the Brazilian Central Bank and are the only institutions in Brazil authorized to trade on stock exchanges. Both brokers and dealers may act as underwriters in the public placement of securities and engage in the brokerage of foreign currency in any exchange market.
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BrokerSince August 29, 2019, securities brokers and dealer firmsdealers may not execute operations that may be qualified as the granting of loansloan their own securities to their customers includingas long as they use the assignmentfunds as collateral for operations in which the institution itself intermediates. The loan transaction consists of rightsthe transfer of assets from the institution: (i) to the customer, in conjunction with limited exceptions; collect commissions from their customers relatedthe transfer of that asset to transactionsthe clearinghouse or clearing and settlement service provider; or (ii) to the clearinghouse or clearing and settlement service provider on behalf of the customer through powers established in a formal written power of attorney. In either case, the assets or set of assets in question shall return to the positions originally held at the end of the period stipulated in the contract. To offer this new service, securities during the primary distribution; acquire real estate which is not for their own use; or obtain loans from financial institutions, except for (i) loansbrokers and dealers must appoint a director responsible for the acquisition of goods for use in connection with the firm’s corporate purpose or (ii) loans the amount of which does not exceed two times the relevant firm’s net worth.loan operations under consideration.
Since November 27, 2020, securities brokers and dealers may issue electronic currency and maintain payment accounts.
Foreign Exchange Market
Transactions involving the sale and purchase of foreign currency in Brazil may be conducted only by institutions duly authorized by the Brazilian Central Bank to operate in the foreign exchange market. There is no current limit to long or short positions in foreign currency for banks authorized to carry out transactions on the foreign exchange market. Other institutions within the national financial system are not allowed to have short positions in foreign currency, although there are no limits with respect to foreign exchange long positions.
The Brazilian Central Bank imposes a limit on the total exposure in foreign currency transactions and transactions subject to foreign exchange fluctuation undertaken by Brazilian financial institutions, including branches abroad, and their direct and indirect affiliates. The limit is currently equivalent to 30.0% of the financial institution’s regulatory capitalRegulatory Capital (Patrimônio de Referência), on a consolidated basis. The CMN, the Brazilian Central Bank and the Brazilian government may change the regulation applicable to foreign currency and foreign exchange transactions undertaken by Brazilian financial institutions in accordance with Brazil’s economic policy (including its foreign exchange policy).
In 2013,On December 20, 2021, the President of Brazil sanctioned Law No. 14,286, approved by the Brazilian Senate on December 8, 2021, or the “New Foreign Exchange Law.” The New Foreign Exchange Law, an initiative of the Brazilian Central Bank, issued twooverhauls the rules that have revoked and replaced the Regulation of Foreign Exchange and International Capital Market (Regulamento do Mercado de Câmbio e Capitais Internacionais, or the “RMCCI”) ofapplicable to the Brazilian Central Bank. These rules are intended to optimize and simplify regulation involving the foreign exchange market and contains provisions regarding Brazilian capital abroad and foreign capital within Brazil. The initiative aims to modernize, simplify and reduce legal doubts associated with current Brazilian foreign exchange legislation.
The main aspects of the New Foreign Exchange Law are: (i) ratification, at the legal level, that foreign exchange transactions may be carried out freely (provided such transactions are carried out by entities authorized to operate in this market and subject to applicable rules); (ii) granting of broad powers to the CMN and the Brazilian Central Bank to regulate the foreign exchange market and foreign exchange operations; (iii) expansion of international correspondence activities by Brazilian banks; (iv) possibility of Brazilian financial institutions investing and lending abroad funds that have been raised in Brazil previously contemplated byor abroad; (v) the RMCCI. The newexclusion from its scope of foreign exchange rules also aimcurrency purchase and sale operations of up to coverU.S.$500 carried out between individuals on an occasional and non-professional basis; and (vi) the granting of powers to the monetary authorities to establish situations that werein which the prohibition of the private offset of credits between residents and nonresidents, as well as payments in foreign currency in Brazil, would not contemplatedapply.
Law No. 14,286 will enter into effect in one year from the prior regulations.
date of its publication (which occurred on December 30, 2021).
Foreign Investment in Brazilian Financial Institutions
According to the Brazilian federal constitution, the acquisition of equity interests by foreign individuals or legal entities in the capital stock of Brazilian financial institutions is forbidden, unless permitted by bilateral international treaties or by the Brazilian government by means of a Presidentialpresidential decree. A Presidentialpresidential decree issued on November 13, 1997, issued in respect of Banco Meridional do Brasil S.A. (our legal predecessor) allows 100% foreign participation in our capital stock. Foreign investors may acquire the shares issued by Santander Brasil as a result of this decree. In addition, foreign investors may acquire publicly traded non-votingnonvoting shares of Brazilian financial institutions traded on a stock exchange or securities depositary receipts offered abroad representing shares without specific authorization.
In addition,Following the Brazilian constitution prohibits foreign financial institutions from establishing new branches or subsidiaries in Brazil except when duly authorized by the Presidentenactment of Brazil and byDecree No. 10,029, the Brazilian Central Bank. Bank published, on January 22, 2020, Circular No. 3,977 recognizing as an interest of the Brazilian government the foreign holding of equity or increase in equity interest of financial institutions headquartered in Brazil (which is still subject to the same requirements and procedures applicable to the acquisition of equity in any Brazilian financial institution), as well as the opening of local branches of foreign financial institutions. However, since Santander Brasil had already been granted a specific presidential decree authorizing the foreign interest in its share capital, prior to Decree 10,029/19 being issued it does not affect its operations in Brazil.
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A foreign financial institution duly authorized to operate in Brazil through a branch or a subsidiary is subject to the same rules, regulations and requirements that are applicable to any Brazilian financial institution.
BankingBank Correspondents
Financial institutions are allowed to provide specific services to clients,customers, including customer services, through other entities. These entities are called “bank correspondents” and the relationship between the financial institution and the bank correspondent is ruled by a specific regulation published by CMN and is subject to the supervision of the Brazilian Central Bank.
On July 29, 2021, the CMN published Resolution No. 4,935, which will revoke CMN Resolution No. 3,954, of February 24, 2011, changing the regulation of banking correspondents in Brazil. Banking correspondents are companies contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank to provide services to their contracting institutions.
The new rule determines that these institutions set forth a policy for the operation and hiring of their correspondents, and it should formalized by a specific document and approved by the institution’s board of officers or board of directors. This operation and contracting policy should provide for the criteria required for contracting correspondents, internal controls related to the correspondent and remuneration rules for the provision of services.
The contracting institutions will continue to be required to maintain adequate internal control systems in order to monitor the public service activities carried out by the contracted correspondents and the contracting institution’s internal audit must annually assess the effectiveness of these quality control mechanisms.
In addition, with the inclusion of the express possibility of the correspondents acting in a digital setting, some provisions were improved, highlighting the need for the correspondent’s digital platform itself to have a minimum technical qualification that allows the offering of products and services suited to the needs, interests and goals of the contracting institution’s clients.
CMN Resolution 4,935 came into effect on February 1, 2022.
Regulation of Branches
Authorization by the Brazilian Central Bank is required for operations of branches or subsidiaries of Brazilian financial institutions, upon the compliance with certain term, capital and equity requirements, as well as the submission of an economic and financial feasibility analysis.
The Brazilian Central Bank’s prior authorization is also required in order to: (i) allocate new funds to branches or subsidiaries abroad; (ii) subscribe capital increases, directly or indirectly, in subsidiaries abroad; (iii) increase equity participation, directly or indirectly, in subsidiaries abroad; and/or (iv) merge or spin off, directly or indirectly, subsidiaries abroad.
The Brazilian Central Bank determines that financial institutions can install the following establishments in Brazil: (i) branches, (ii) teller booths, (iii) automatic teller machines, and (iv) segregated administrative units, provided that, for items (i) to (iii), conformity with requirements of minimum capital and operating limits are necessary.
Cayman Islands Banking Regulation
We have a branch in the Cayman Islands with its own staff and representative officers. Theofficers, Banco Santander (Brasil) S.A. – Grand Cayman Islands branchBranch is licensed under The Banks and Trust Companies Law (2013 Revision), of the Cayman Islands, or the “Banks and Trust Companies Law,” as a Category “B” Bank and it is duly registered as a Foreign Company with
the Registrar of Companies in Grand Cayman,the Cayman Islands. The branch, therefore, is duly authorized to carry on banking business in the Cayman Islands. The branch was authorized by the local authorities to act as its own registered office and it is located at the Waterfront Centre Building, 28, North Church Street – 2nd floor, George Town, Grand Cayman, Cayman Islands, P.O. Box 10444 – KYI-1004, Phone: 1-345-769-4401 and Fax: 1-345-769-4601.
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Our Grand Cayman Islands branchBranch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual clientscustomers and extends credit to Brazilian and non-Brazilian clients,customers, mainly to support trade transactions with Brazil. The results of the operations of the Grand Cayman Islands branchBranch are consolidated in our consolidated financial statements.
Banks and trust companies wishing to conduct business from within the Cayman Islands must be licensed by the Cayman Islands Monetary Authority under the Banks and Trust Companies Law, (2009 Revision) (“Banks and Trust Companies Law”), independentirrespective of whether the business is to be actually conducted in the Cayman Islands.
Under the Banks and Trust Companies Law, there are two main categories of banking license: a category “A” license, which permits unrestricted domestic and offshore banking business, and a category “B” license, which permits principally offshore banking business. The holder of a category “B” license may have an office in the Cayman Islands and conduct business with other licensees and offshore companies but, except in limited circumstances, may not do banking business locally with the public or residents of the Cayman Islands. We have an unrestricted category “B” license.
There are no specific ratio or liquidity requirements under the Banks and Trust Companies Law, but the Cayman Islands Monetary Authority will expect observance of prudent banking practices, and the Banks and Trust Companies Law imposes a minimum net worth requirement of an amount equal to CI$400,000 (or, in the case of licensees holding a restricted category “B” or a restricted trust license, CI$20,000). As of December 31, 2016,2020, CI$1 was equivalent to R$3.9745,6.68, according to the Brazilian Central Bank.
Luxembourg Banking Regulation
Branches of credit institutions from outside the European Union (“non-EU credit institutions”) must be licensed by the Luxembourg Minister of Finance under the law of 5 April 1993 on the financial sector, as amended, in order to operate in Luxembourg.
We have a branch in Luxembourg with its own staff and representative officers. Our Luxembourg branch is licensed as a Luxembourg branch of a non-EU credit institution and is duly registered with the Luxembourg Trade and Companies’ Registry. The branch, therefore, is duly authorized to carry on banking business in Luxembourg. Its registered offices are at 35F, avenue J. F. Kennedy, 2nd floor, L-1855 Luxembourg, Grand Duchy of Luxembourg.
Our Luxembourg branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions involving Brazil. The results of the operations of the Luxembourg branch are consolidated in our consolidated financial statements.
Luxembourg law requires the Luxembourg branch to have a minimum endowment capital of €8,700,000 and the solvency, and liquidity requirements deriving, among others, from EU Regulation No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms apply to it.
Foreign Subsidiary
We had established an independent subsidiary in Spain, Santander EFC, in order to complement our foreign trade strategy for corporate clients,customers, which are composed of large Brazilian companies and their operations abroad. This allowshas allowed us to provide financial products and services by means of an offshore entity, which is not established in a “tax haven,” such as our Cayman Islands branch, in accordance with Law No. 12,249, of June 11, 2010, and Brazilian Federal Revenue Normative Ruling No. 1,037, of June 4, 2010.
The establishment of our foreign subsidiary was approved by the Brazilian Central Bank on September 26, 2011, by the SpanishMinisterio de Economia y Haciendaon February 6, 2012 and by the Bank of Spain on March 28, 2012. The remittance of resources to pay up the share capital of the subsidiary was carried out on March 5, 2012, totaling €748 million.million, Santander EFC has beenwas operational since March 2012.from 2012 to November 12, 2020, when we approved its liquidation. As a consequence of the liquidation, we, as sole shareholder of Santander EFC, have participated in the net assets of the corporation, in the net amount of €741 million.
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U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States Congress. In addition to laws and regulations, the U.S. bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance. Many changes have occurred as a result of the 2010 Dodd-Frank Act and its implementing regulations, most of which are now in place. The Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” retains the right to apply enhanced prudential standards to foreign banking organizations, or “FBOs,” with greater than $100 billion in global total consolidated assets, such as Santander Spain.
In October 2019, the federal banking agencies issued final rules, or the “Tailoring Rules,” that adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements apply to certain banking organizations, including large FBOs such as Santander Spain. As a result, Santander Spain is now generally subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under previously applicable regulations.
Under the current administration, however, banking organizations, including large FBOs, may become subject to increased scrutiny and more extensive legal and regulatory requirements than under the prior presidential and congressional regime. In addition, changes in key personnel at the agencies that regulate such banking organizations, including the federal banking regulators, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously.
Volcker Rule
Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and its implementing rules (collectively, the “Volcker Rule”) prohibitprohibits “banking entities” from engaging in certain forms of proprietary trading or from sponsoring or investing in “covered funds,” in each case subject to certain exceptions. The Volcker Rule also limits the ability of banking entities and their affiliates to enter into certain transactions with covered funds with which they or their affiliates have certain relationships.relationships, Banking entities such as Santander Brasil and Santander Spain were required to bring their activities and investments into compliance with the requirements of the Volcker Rule by the end of the conformance period applicable to each requirement. Santander Spain has assessed how the Volcker Rule affects its businesses and subsidiaries, including Santander Brasil, and has brought its activities into compliance. Santander Brasil has adopted processes to establish, maintain, enforce, review and test the compliance program designed to achieve and maintain compliance with the Volcker Rule. The Volcker Rule also contains exclusions and certain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations, as well as certain foreign government obligations, and trading solely outside the United States, and also permits certain ownership interests in certain types of funds to be retained. Banking entities such as Santander Brasil must bring their activities and investments into compliance with the requirements of the Volcker Rule by the end of the conformance period applicable to each requirement. In general, all banking entities were required to conform to the requirements of the Volcker Rule, except for provisions related to certain funds, and to implement a compliance program by July 21, 2015. In December 2014, the Board of Governors of the U.S. Federal Reserve (“Federal Reserve Board”) issued an order extending the Volcker Rule’s general conformance period until July 21, 2016 for
investments in and relationships with covered funds and certain foreign funds that were in place on or prior to December 31, 2013 (“legacy covered funds”). In July 2016, the Federal Reserve Board granted a final one-year extension of the general conformance period to July 21, 2017 for banking entities to conform ownership interests in and relationships with legacy covered funds. Banking entities such as Santander Spain must bring their activities and investments worldwide into compliance with the requirements of the Volcker Rule by the end of the conformance period. Santander Spain has assessed how the Volcker Rule affects its businesses, including Santander Brasil, and has brought its activities into compliance, with the exception of certain legacy covered funds activities. Santander Spain has further adopted the necessary measures to bring these legacy covered funds activities into compliance prior to July 21, 2017. Santander Brasil has adopted processes to establish, maintain, enforce, review and test the compliance program designed to achieve and maintain compliance with the Volcker Rule. Santander Spain’s non-U.S. banking organizations,organization subsidiaries, including Santander Brasil, are largely able to continue their activities outside the United States in reliance on the “solely outside the U.S.” exemptions from the Volcker Rule. Those exemptions generally exempt proprietary trading, and sponsoring or investing in covered funds if, among other restrictions, the essential actions take place outside the United States and any transactions are not with U.S. persons.
RegulationOn July 21, 2017, the five regulatory agencies charged with implementing the Volcker Rule announced the coordination of Swaps
Title VIIreviews of the Dodd-Frank Act provides for an extensive U.S. regulatory framework for OTC derivatives contracts, including swaps, security-based swaps and mixed swaps (generically referred to in this paragraph as “swaps”). Among other things, Title VII provides the Commodity Futures Trading Commission, or CFTC, and the SEC, with jurisdiction and regulatory authority over swaps, establishes a comprehensive registration and regulatory framework applicable to swap dealers, security-based swap dealers and other major market participants in swaps (referred to as “major swap participants” or “major security-based swap participants”), imposes clearing and execution requirements on many typestreatment of swaps, requires swap market participants to report all swaps transactions to swap data repositories and security-based swap data repositories and requires or will require higher margin payments for uncleared swaps as the uncleared swap margin rules are phased in from 2016 through 2020. Entitiescertain foreign funds that are swap dealers, security-based swap dealers, major swap participants or major security-based swap participantsinvestment funds organized and offered outside the United States and that are excluded from the definition of covered fund under the agencies’ implementing regulations. Also in July 2017, the Federal Reserve issued guidelines for banking entities seeking an extension to conform certain “seeding” investments in covered funds to the requirements of the Volcker Rule.
In June 2019, the five regulatory agencies charged with implementing the Volcker Rule finalized amendments to the Volcker Rule. These amendments tailor the Volcker Rule’s compliance requirements to the amount of a firm’s trading activity, revise the definition of trading account, clarify certain key provisions in the Volcker Rule, and modify the information companies are required to registerprovide the federal agencies. Santander Brasil will still largely rely on the “solely outside the U.S. exemption” to conduct its trading activities.
In June 2020, the five federal agencies finalized additional amendments to the Volcker Rule related to the restrictions on ownership interests, in sponsorship of and relationships with the CFTC or the SEC, or both,covered funds. These amendments became effective on October 1, 2020. Santander Spain will continue to monitor these Volcker Rule-related developments and are or will be subject to capital, margin, business conduct, recordkeeping, clearing, execution, reporting, and other requirements. The specific parametersassess their impact on its operations, including those of these requirements have been or will be implemented through CFTC, SEC and bank regulator rulemakings.Santander Brasil, as necessary.
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U.S. Anti-Money Laundering, Anti-Terrorist Financing, and Foreign Corrupt Practices Act Regulations
Santander Brasil, as a foreign private issuer whose securities are registered under the U.S. Securities Exchange Act, of 1934, is subject to the U.S. Foreign Corrupt Practices Act, (the “FCPA”).or the “FCPA.” The FCPA generally prohibits such issuers and their directors, officers, employees and agents from using any means or instrumentality of U.S. interstate commerce in furtherance of any offer or payment of money to any foreign official or political party for the purpose of influencing a decision of such person in order to obtain or retain business. It also requires that the issuer maintain books and records and a system of internal accounting controls sufficient to provide reasonable assurance that accountability of assets is maintained and accurate financial statements can be prepared. Penalties, fines and imprisonment of Santander Brasil’s officers and/or directors can be imposed for violations of the FCPA.
Furthermore, Santander Brasil is subject to a variety of U.S. anti-money laundering and anti-terrorist financing laws and regulations, such as the Bank Secrecy Act of 1970, as amended, and the USA PATRIOT ACTPatriot Act of 2001, as amended, and a violation of such laws and regulations may result in substantial penalties, fines and imprisonment of Santander Brasil’s officers and/or directors.
The Anti-Money Laundering Act of 2020, or “AML Act,” enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and Patriot Act impose on banks. The AML Act also contains provisions that promote increased information-sharing and use of technology and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.
U.S. Sanctions
“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, OFAC), the United Nations Security Council, the European Union or Her Majesty’s Treasury. The Office of Foreign Assets Control, or “OFAC,” is responsible for administering economic sanctions imposed against designated foreign countries, governments, individuals and entities pursuant to various Executive Orders, statutes and regulations.
OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on U.S. persons’ trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) blocking of assets of targeted governments or “specially designated nationals,” by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. Blocked assets, such as property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. In addition, non-U.S. persons can be liable for “causing” a sanctions violation by a U.S. person or can violate U.S. sanctions by exporting services from the United States to a sanctions target, for example by engaging in transactions with targets of U.S. sanctions denominated in U.S. dollars that clear through U.S. financial institutions (including through U.S. branches or subsidiaries of non-U.S. banks).
Failure to comply with applicable U.S. sanctions could have serious legal and reputational consequences, including significant civil monetary penalties and, in the most severe cases, criminal penalties.
In addition, the U.S. government has implemented various sanctions that target non-U.S. persons, including non-U.S. financial institutions that engage in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”) that involve Iran, North Korea, Russia, or Hezbollah or other persons designated by the United States under the Specially Designated Global Terrorist, or “SDGT,” sanctions program. If a non-U.S. financial institution were determined to have engaged in activities targeted by certain secondary U.S. sanctions or used proceeds produced by such activities targeted, it could lose its ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential consequences.
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Antitrust Regulation
According to the Brazilian antitrust law, actions whichthat concentrate market share must be previously submitted to CADE for approval if the following criteria are met: (i) at least one of the groups involved in the deal has posted annual gross revenues or volume of business equal to or over R$750 million, in Brazil, in the year prior to the transaction; and (ii) at least another group has posted annual gross revenues or volume of business equal to or over R$75 million, in Brazil, in the year prior to the transaction. Closing of a transaction without CADE’s approval will subject the parties to fines ranging from R$60 thousand60,000 to R$60 million.
The Brazilian Central Bank will also examine certain corporate reorganizations and other acts involving two or more financial institutions not only considering their potential effects on the financial system and its stability but also any potential impacts regarding market concentration and competition. Upon approval of the transaction, the Brazilian Central Bank may establish certain restrictions and require that the financial institutions execute an
agreement of market concentration control, pursuant to which the terms and conditions of the sharing of the efficiency gain resulting from the act shall be set forth.
In December 2018, the Brazilian Central Bank and CADE approved a joint normative act establishing procedures with the purpose of increasing efficiency for their respective actions regarding antitrust matters. Pursuant to the joint normative act, the authorities are authorized to share information for the purposes of their respective activities and carry out meetings with each other to discuss matters requiring the regulatory cooperation between both authorities.
Insolvency Laws Concerning Financial Institutions
Financial institutions are subject to the proceedings established by Law 6,024 of March 13, 1974, (“Law 6024”),or “Law 6024,” which establishes the applicable provisions in the event of intervention or extra-judicialextrajudicial liquidation by the Brazilian Central Bank, as well as to bankruptcy proceedings.
Intervention and extra-judicialextrajudicial liquidation occur when the Brazilian Central Bank has determined that the financial institution is in bad financial condition or upon the occurrence of events that may impact the creditors’ situation. Such measures are imposed by the Brazilian Central Bank in order to avoid the bankruptcy of the entity.
Intervention
An intervention can be carried out at the discretion of the Brazilian Central Bank in the following cases:
risk to the creditors due to mismanagement; |
consistent violation of Brazilian banking laws or regulations; or |
if the intervention is a feasible alternative to the liquidation of the financial institution. |
As of the date on which it is ordered, the intervention will automatically suspend the enforceability of the payable obligations; prevent early termination or maturity of any previously contracted obligations; and freeze deposits existing on the date on which the intervention is decreed.
The intervention will cease if interested parties undertake to continue the economic activities of the financial institution, by presenting the necessary guarantees, as determined by the Brazilian Central Bank, when the situation of the entity is regularized as determined by the Brazilian Central Bank; or when extra-judicialextrajudicial liquidation or bankruptcy of the entity is ordered.
Intervention may also be ordered upon the request of a financial institution’s management.
Extra-judicialExtrajudicial Liquidation
Extra-judicialExtrajudicial liquidation is an administrative proceeding decreed by the Brazilian Central Bank (except that it is not applicable to financial institutions controlled by the Brazilian federal government) and conducted by a liquidator appointed by the Brazilian Central Bank. This extraordinary measure aims at terminating the activities of the affected financial institution, liquidating its assets and paying its liabilities, as in a judicially decreed bankruptcy. The Brazilian Central Bank will extra-judicially liquidateplace a financial institution in extrajudicial liquidation if:
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the institution’s economic or financial situation is at risk, particularly when the institution ceases to meet its obligations as they become due, or upon the occurrence of an event that could indicate a state of insolvency under the rules of the Bankruptcy Law; |
management seriously violates Brazilian banking laws, regulations or rulings; |
the institution suffers a loss which subjects its unprivileged and unsecured creditors to severe risk; and/or |
upon revocation of the authorization to operate, the institution does not initiate ordinary liquidation proceedings within |
A request for liquidation procedures can also be filed on reasonable grounds by the officers of the respective financial institution or by the receiver appointed by the Brazilian Central Bank in the receivership procedure.
The decree of extra-judicialextrajudicial liquidation will: (i) suspend the actions or foreclose on rights and interests relating to the estate of the entity being liquidated, while no other actions or executions may be brought during the liquidation; (ii) accelerate the obligations of the entity; and (iii) interrupt the statute of limitations with regard to the obligations assumed by the institution.
Extra-judicialExtrajudicial liquidation procedures may be terminated:
by discretionary decision of the Brazilian Central Bank if the parties involved undertake the administration of the financial institution after having provided the necessary guarantees; or |
when the final accounts of the receiver are delivered and approved and subsequently registered in the relevant public records; |
when converted into ordinary liquidation; or |
when a financial institution is declared bankrupt. |
Temporary Special Administration Regime (Regime de Administração Especial Temporária or “RAET”)
In addition to the intervention procedures described above, the Brazilian Central Bank may also establish a RAET, under Law 9447, dated March 14, 1997 combined with Law 6,024/74, which is a less severe form of the Brazilian Central Bank intervention in private and non-federalnonfederal public financial institutions that allows institutions to continue to operate normally. The RAET may be ordered in the case of an institution which:
that:
continually enters into recurrent operations |
faces a shortage of assets; |
fails to comply with the compulsory reserves rules; |
reveals the existence of hidden liabilities; |
experiences the occurrence of situations that cause receivership pursuant to current legislation; |
has reckless or fraudulent management; or |
carries out activities which call for an intervention. |
The main objective of a RAET is to assist the recovery of the financial condition of the institution under special administration and thereby avoid intervention and/or liquidation. Therefore, a RAET does not affect the day-to-day business, operations, liabilities or rights of the financial institution, which continues to operate in the ordinary course of business. Measures which may be adopted by the institution include the transfer of assets, rights and obligations to other entities, and corporate restructuring of these entities, with a view to the continuity of the institution’s business or activities.
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There is no minimum term for a RAET, which ceases upon the occurrence of any of the following events: (i) acquisition by the Brazilian federal government of control of the financial institution, (ii) corporate restructuring, merger, spin-off,spinoff, amalgamation or transfer of the controlling interest of the financial institution, (iii) decision by the Brazilian Central Bank, or (iv) declaration of extra-judicialextrajudicial liquidation of the financial institution.
Bankruptcy Law
Law No. 11,101, (“Bankruptcy Law”)of February 9, 2005, as amended, or the “Bankruptcy Law,” regulates judicial reorganizations, out-of-court reorganizations and the bankruptcy of individuals and corporations that have occurred since 2005 and applies to financial institutions only with respect to the matters not specifically regulated by the intervention and extra-judicialextrajudicial liquidation regimes described above.
TableOn December 24, 2020, Law 14,112, or “Law 14,112/20,” was passed. Law 14,112/20 overhauls the current Bankruptcy Law in several material aspects. Law 14,112/20 came into effect on January 23, 2021. Certain changes arising from this new legislation may affect enforcement and priority matters, such as: (i) the possibility of Contentscreditors putting forward an alternative judicial reorganization plan; (ii) new rules on the approval of post-petition loans in judicial reorganization and on priority claims in case of conversion to bankruptcy liquidation; (iii) more flexible quorum and mechanics in the extrajudicial reorganization process; (iv) new rules to expedite the bankruptcy liquidation process; (v) new methods for restructuring of the debtor’s tax liabilities and installment payments, as well as new taxation schemes; and (vi) incorporation of rules on cross-border insolvency proceedings into the Brazilian framework.
Law 14,112/20 replicates, with some adjustments, the provisions of the UNCITRAL Model Law on Cross-Border Insolvency. As a result, Law 14,112/20 sets out some rules on access of foreign representatives to courts in Brazil, the method and requirements for recognition of foreign main and ancillary proceedings, authorization for the debtor and his representatives to act in other countries, methods of communication and cooperation between foreign authorities and representatives and the Brazilian jurisdiction, and the processing of concurrent proceedings.
Law 14,112/20 also sets forth, among other measures, (i) a protection for creditors that agree on the conversion of debt into equity against potential transfer of liability with regard to the debtor’s obligations; (ii) the stay period and constraints on the assets of the debtor under judicial reorganization; (iii) conciliation and mediation measures before and during judicial reorganization proceedings; and (iv) the rules on procedural and substantive consolidation. Law 14,112/20 also sets out that a bankruptcy decree does not reach beyond the bankrupt itself, save when the disregard doctrine is to apply.
Repayment of Creditors in a Liquidation or Bankruptcy
In the event of extra-judicialextrajudicial liquidation or bankruptcy of a financial institution, creditors are paid pursuant to their priorities and privileges. Pre-petitionPrepetition claims are paid on a ratable basis in the following order: labor credits; secured credits; tax credits; credits with special privileges; credits with general privileges; unsecured credits; contractual fines and pecuniary penalties for breach of administrative or criminal laws, including those of a tax nature; and subordinated credits.
The current law confers immunity from attachment of compulsory deposits maintained by financial institutions with the Brazilian Central Bank. Such deposits may not be attached in actions by a bank’s general creditors for the repayment of debts and require that the assets of any insolvent bank funded by loans made by foreign banks under trade finance lines be used to repay amounts owing under such lines in preference to those amounts owing to the general creditors of such insolvent bank.
Recovery Plans for Systematically Important Financial Institutions
In June 2016, the CMN enacted stricter guidelines for theSystemically important Brazilian financial institutions must implement a recovery plansplan (planosplano de recuperação) for systemically important Brazilian financial institutions. The new rule, which incorporate recommendations from, with the Financial Stability Board, aims to reestablishaim of reestablishing adequate levels of capital and liquidity and to preserve the viability of such institutions. The measures require, among others, that recovery plans must identify their critical functions for the National Financial System, adopt stress-testing scenarios, define clear and transparent governance procedures, assess possible barriers to the entity’s recovery, as well as implement effective communication plans with key stakeholders. Financial institutions have until December 2017 to adapt their recovery plans to the new requirements.
Deposit Insurance -– FGC
The purpose of the FGC is to guarantee the payment of funds deposited with financial institutions in case of intervention, liquidation, bankruptcy or insolvency. The FGC is funded by ordinary contributions made by the financial institutions in the amount of up to 0.0125% of the total amount of outstanding balances of the accounts corresponding to guaranteed obligations, and certain special contributions as determined. Delay in performing such contributions is subject to a penalty of 2% over the amount of the contribution.
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The total amount of credit in the form of demand deposits, savings deposits, time deposits, deposits maintained in accounts blocked for transactions with checks (for the registration and control of funds relating to the rendering of services of payment of salaries, earnings, pensions), bills of exchange, real estate bills, mortgage bills, real estate credit bills and repurchase and resale agreements which objectwhose objects are instruments issued after March 8, 2012 by a company of the same group due to each customer by a financial institution (or by financial institutions of the same financial group) will be guaranteed by the FGC for up to a maximum of R$250,000 per customer. When the assets of the FGC reach 2% of the total amounts they guarantee, the CMN may temporarily suspend or reduce the contribution of financial institutions to the FGC. As from February 2016, credits of financial institutions and other institutions authorized to operate by the Brazilian Central Bank, complementary welfare entities, insurance companies, capitalization companies, investment clubs and investment funds, as well as those representing any interest in or financial instrument held by such entities, are not protected by the ordinary guarantee of FGC. In December 2017, the CMN enacted a new rule amending certain provisions of the FGC regulation among which includes the establishment of a limit of R$1 million per four-year period for the coverage of the credits of a certain creditor against the group of associated financial institutions.
Administrative Proceedings in the Brazilian National Financial System, the Brazilian Payment System and Capital Markets
Law 13,506 of November 13, 2017 or “Law 13,506/17” applies to entities authorized or supervised by the Brazilian Central Bank or by the CVM, as well as to market participants. Some of the key aspects of Law 13,506 are that: (i) it increases the maximum fine applicable by the Brazilian Central Bank from R$250,000 to R$2 billion or 0.5% of the revenues of the company arising from services and financial products in the year prior to the violation; (ii) it increases the maximum fine applicable by the CVM from R$500,000 to R$50 million; (iii) it makes additional types of violations subject to penalties; (iv) it provides that the penalty of “public admonition” may be cumulative to other penalties applicable by the Brazilian Central Bank; (v) it provides that Brazilian Central Bank may enter into cease-and-desist commitments; and (vi) it provides that the Brazilian Central Bank and the CVM may enter into administrative agreements similar to leniency agreements.
Opening, Maintenance and Closing of Deposit Accounts
CMN Resolution No. 4,753/19 provides criteria for the opening, maintenance and closing of deposit accounts. The regulation determines that financial institutions must adopt procedures and controls that allow the verification and validation of the identity and qualification of the account holders and, if applicable, their representatives, as well as the authenticity of the information provided by the client. This information must be kept updated by the financial institution.
The rule also requires financial institutions to ensure, through the procedures and technology used for the opening, maintaining and closing of deposit accounts, the integrity authenticity and confidentiality, as well as the protection against unauthorized access, use, alteration, reproduction and destruction, of the information and the electronic documents used by them during the process.
Issuance of Credit Instruments Electronically
Provisional Measure No. 897, or “MP 897/2019,” among other provisions, (i) created a new credit instrument, the Rural Real Estate Note (Cédula Imobiliária Rural or “CIR”), with the purpose of advancing rural real estate financing by the creation of an instrument specifically designed to that end; (ii) changed the rules governing Bank Deposit Certificates (Certificado de Depósito Bancário or “CDB”), especially regarding their issuance and the transfer of their ownership, by providing among other changes that CDB issued in book-entry form should be transferred by electronic endorsement, exclusively by means of a specific notation in the issuing institution’s own electronic system or, when deposited in central depositary, by means of specific notation in the corresponding electronic system; and (iii) authorized that customary credit instruments such as the Agricultural Certificate of Deposit (Certificado de Depósito do Agronegócio - CDA), the Agricultural Warrant (Warrant Agropecuário - WA), the Real Estate Credit Certificate (Certificado de Crédito Imobiliário - CCI), the Bank Credit Note (Cédula de Crédito Bancário - CCB), the Rural Credit Note (Cédula de Crédito Rural - CCR), the Rural Promissory Note (Nota Promissória Rural - NPR), the Rural Trade Bill (Duplicata Rural - DR), may be issued in book-entry form through the electronic bookkeeping system held at a financial institution or other entity authorized by the Brazilian Central Bank to perform electronic bookkeeping activity.
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On July 15, 2020, the Brazilian Central Bank regulated, through Circular No. 4,036/20, the electronic issuance of book-entry CCBs and CCRs by financial institutions. A financial institution must render the following services in respect of the bookkeeping of CCBs and CCRs: (i) issue the instrument in book-entry form at the request of the borrower; (ii) include of all obligatory information related to CCBs and CCRs, as well as ancillary documents and/or information for the purposes of verifying the outstanding balance of the underlying credit transaction; (iii) verify the effective title or fiduciary title of the instruments; (iv) make the payment CCBs and CCRs for the settlement of obligations available to the debtor; (v) control the financial flow related to the CCBs and CCRs, including prepayments; (vi) record security interests in an entity authorized to perform centralized registration or deposit of financial assets; (vii) make information about the CCBs and CCRs available to debtors, holders, collateral beneficiaries or any other legally qualified interested party; and (viii) carry out the issuance of certificates regarding the instruments whenever required.
Limitation to the fees and interest rates on overdraft-secured checks
On November 27, 2019, the CMN issued Resolution No. 4,765 or “Resolution No. 4,765/2019,” providing for new rules on the overdraft granted by financial institutions in checking accounts held by individuals and individual microentrepreneurs. The new rule limits the charging of fees on overdraft-secured checks to: (i) 0% for the opening credit facilities of up to R$500.00; and (ii) 0.25% for the opening of credit facilities larger than R$500.00, calculated with the amount of the facility that exceeds R$500.00. It also limits interest rates over the overdraft-secured check to up to 8% per month, to which must be added a discount of the overdraft fees already charged monthly by the financial institution. If the interest is less than or equal to the overdraft fees, such interest rates must be equal to zero. In addition, Resolution No. 4,765/2019 establishes that the overdraft-secured check must be compatible with the customer’s risk profile.
Resolution No. 4,765/2019 came into force on January 6, 2020, for agreements executed after the referred date, came into force on June 1, 2020, for agreements executed prior to such date. Regarding the 8% limitation above, the rule applies to all contracts from January 6, 2020, regardless of the date the applicable contract was entered into.
On February 6, 2020, the Brazilian Central Bank issued Circular No. 3,981, which deals with the new information regarding overdraft facilities that must be highlighted in the statement of the checking accounts held by natural persons or MEIs. Circular No. 3,981 came into effect on June 1, 2020.
Automatic debit of banking accounts
On March 26, 2020, CMN issued Resolution No. 4,790, which sets forth new rules for the automatic debit payments from checking account and accounts designated for the payment of an individual’s wages. The new rule sets forth that financial institutions should only process automatic debit payments upon prior and express authorization of the client, and provides for the procedures for the authorization and cancellation of automatic debit payments. The new rule came into force on March 1, 2021, CMN Resolution No. 4,790 repealed CMN Resolution 4,771.
Taxation
Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)
The IRPJ is calculated at a rate of 15.0%, plus a surtax of 10.0% which is levied on profits exceeding the amount of R$240,000 per year and the CSLL is calculated at a rate of 20.0% (25.0% exceptionally in 2021, as per Law No. 14,183/2021) for financial institutions and 9.0% for companies, after adjustments determined by the tax legislation.
Deferred tax assets and liabilities are computedmeasured based on temporary differences between the book basis and tax basis of assets and liabilities, tax losses, and adjustments to fair value of securities and derivatives.
According to the requirements in the current regulations, the expected realization of deferred tax assets is based on projections of future results and a technical study approved by the Directors of Santander Brasil.
Income tax (IRPJ) and Social Contribution Tax (CSLL) on Foreign Exchange Variation of Hedges for Investments Held Abroad (Law No. 14,031/2020)
Pursuant to Law No. 14,031/2020, which came in force in July 2020, exchange rate variations arising from hedges on investments held abroad are taxable starting in 2021. Accordingly, in 2021, 50% of the exchange rate variation shall be taxable under the IRPJ and CSLL, while, in 2022, 100% of the exchange rate variation will be considered as taxable.
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The changes introduced by Law 11,638/2007 and by Law 11,941/2009 (articles 37 and 38), which modified the criteria for recognizing revenues, costs and expenses computed in the determination of net income, had no effect for purposes of determining the taxable profit for a legal entity which opted for the Transitional Tax Regime (“RTT”), being used for tax purposes the regulations in effect on December 31, 2007. The tax effects on the adoption of such rules are recorded, for accounting purposes, in the corresponding deferred assets and liabilities.
The RTT expired in 2015 by virtue of Law 12,973.
Tax on Services (ISS)
Each of the Municipalities of Brazil and the Federal District are responsible for establishing the applicable ISS rate, which is charged on the value of services provided by usthe company, to the municipality where we have branches or administrative centers.the service renderer is located. The rates vary from 2.0%2% to 5.0%5% and depend on the nature of the service.
On December 30, 2016, Complementary Law No. 157/2016 was enacted. This new legislation establishes a minimum rate of 2.0%2% for these types of taxes, (without anyno reductions or deductions being permitted)permitted. This legislation provides that the following services are subject to ISS in the municipality in which the service taker is located: (i) card management, including POS services, that may be paid to the municipality where the corresponding POS device has been registered; (ii) leasing; (iii) fund management; and (iv) consortium.
Before the aforementioned Law was enacted, the ISS was due in the municipality in which the service provider was located (irrespective of where the service taker was located). With this new legislation, ISS rates may vary depending on where the service taker is located.
There are several complications that may arise from this new legislation, including (i) as service takers are generally located in several municipalities, it is logistically difficult to comply and collect the taxes; and (ii) there are situations where the municipality of the service taker is not easily identifiable by the credit card company (as is the case for online transactions, for example).
Since the ISS is a municipal tax, the rule must be regulated by each municipality in order to be enforceable. This new rule is only applicable to triggering events occurring from 2018 onwards, when the municipal regulations applicable to Supplementary Law No. 157 come into force.
On March 23, 2018, the Brazilian municipalities have untilSupreme Court suspended the endapplication of 2017the Complementary Law No. 157. It is still suspended as of the date of this annual report. This suspension may be circumvented by the enactment of Complementary Law No. 175/20.
Complementary Law No. 175, published on September 24, 2020, was enacted to implement this law.create a unified ISS collection system, in which taxpayers would be able to collect ISS in every municipality in Brazil. It’s an effort to facilitate tax collection considering the complexity regarding the multiple rulings on ISS, since each municipality can pass its own laws on ISS.
The system is currently under development, and it is expected that it would enable Complementary Law No. 157 to be brought back into effect.
PIS and COFINS Tax Rates
PIS and COFINS (respectively, the profit participation contribution and the social security financing contribution, both of which are social contributions due on somecertain revenues net of somecertain expenses) payable by financial institutions and similar entities, as defined by law, are due at the rate of 0.65% and 4%, respectively. They are levied cumulatively on gross revenue billed, understoodwhich is defined as the total revenues earned by the legal entity, net of certain expenses, such as funding costs.
The non-financialNon-financial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to non-cumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Recent Amendments to the Brazilian Federal Tax Legislation
On May 14, 2014, Law No. 12,973 (the “2014 Tax Law”) was enacted, amending federal tax legislation with respect to IRPJ, CSLL, PIS and COFINS. The 2014 Tax Law governs the following matters, among others:
Tax on Financial Transactions (IOF)
IOF is a tax levied on credit, currency exchange, insurance and securities transactions and it is imposed on the following transactions and at the following rates:rates.
Decree No. 10,797/2021 temporarily increased IOF on credit transactions as follows:
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Transaction (1) | Maximum Legal Rate | Current Rate | ||
Credit extended by financial institutions and non-financial entities | 1.5% or 3% | (between 2.04% and 4.08% in 2021) | 0.0041% per day for loans contracted by legal entities and 0.0082% per day for individuals capped at 365 days. An additional 0.38% rate is applicable in both cases. | |
(Exceptionally, in 2021, 0.00559% per day for legal entities and 0.01118% per day for individuals). | ||||
Transactions relating to | securities (2) | 1.5% per day | 0.5% per day for certain investment funds. | |
0% on transactions with equity securities and certain debt securities, such as debentures and real estate receivables and agribusiness | ||||
1% per day on transactions with fixed income derived from federal, state, or municipal public and private bonds, and fixed income investment funds limited to certain percentages of the income raised from investment. This rate is reduced to zero from the 30th day following the acquisition date of the investment and on repurchase agreements carried out by financial institutions and other institutions authorized by the Brazilian Central Bank with debentures issued by institutions belonging to the same group (Decree 8,731/2016). | ||||
0% on the assignment of securities to permit the issuance of Depositary Receipts abroad. | ||||
Transactions relating to derivatives | 25% | |||
zero at this moment. | ||||
Insurance transactions entered into by insurance companies | 25% | 2.38% for health insurance. | ||
0.38% for life insurance. | ||||
7.38% for other types of insurance. | ||||
Foreign exchange transactions(2) | 25% | 0.38% (general rule). | ||
6.38% on credit card transactions as from April 27, 2011. | ||||
6.38% on withdrawals abroad using credit or debit cards as from December 28, 2013. | ||||
6.38% on purchase of travelers checks or loading of international prepaid card as from December 28, 2013. | ||||
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings. |
6% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is equal or less than 180 days. | ||||
0% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is higher than 180 days. | ||||
0% for interbank transactions. |
0% for exchange transactions in connection with the outflow of proceeds from Brazil for the remittance of interest on net equity and dividends to be received by foreign investors. | ||||
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors in the Brazilian financial and capital markets. | ||||
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors for purposes of initial or additional margin requirements in connection with transactions in stock exchanges. | ||||
0% for exchange transactions for the outflow of funds invested by foreign investors in the Brazilian financial and capital markets. | ||||
0% for exchange transactions for the inflow and outflow of funds invested by foreign investors, including by means of simultaneous foreign exchange transactions, in certificates of deposit of securities, known as | ||||
0% for revenues related to the export of goods and services transactions. | ||||
The applicable rate is 1.10% for acquisitions of foreign currency (Decree 8,731/2016). The applicable rate for credit on a foreign bank account belonging to a resident in Brazil is 1.10%, as from March 3, 2018. |
(1) | The transactions mentioned in the table are for illustration purposes and do not reflect an exhaustive list of transactions subject to the IOF. |
(2) | There are some exemptions or specific cases in which the applicable rate is zero. |
FATCA
The Foreign Account Tax Compliance Act, (“FATCA”)or “FATCA,” became law in the U.S.United States on March 18, 2010. The legislation requires Foreign Financial Institutions (“FFIs”)foreign financial institutions, or “FFIs,” (such as Santander Brasil) to enter into an FFI agreement andunder which they agree to identify and provide the U.S. Internal Revenue Service, (“IRS”)or “IRS,” with information on accounts held by U.S. persons and certain U.S.-owned foreign entities, or otherwise face a 30% withholding tax on certain U.S. source
withholdable payments. In addition, FFIs that have entered into an FFI agreement will be required to withhold on such payments made to FFIs that have not entered into an FFI agreement, account holders who fail to provide sufficient information to classify an account as a U.S. or non-U.S. account, and U.S. account holders who do not agree to the FFI reporting their accountaccounts to the IRS.
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On September 23, 2014, Brazil and the United States announced that they have entered into an intergovernmental agreement, (“IGA”),or “IGA,” which became effective in Brazil by virtue of Decree 8,506No. 8506 as of August 24, 2015. The aim of the IGA is to improve international tax compliance and implement FATCA. The IGA establishes an automatic annual bilateral exchange of information with the U.S. tax authorities. Under this agreement, Brazilian financial institutions will generally be required to provide certain information about their U.S. account holders to the Brazilian tax authorities (Receita Federal do Brasil), which will share that information with the IRS.
Complying with the required identification, withholding, and reporting obligations requires significant investment in an FFI’s compliance and reporting framework. We are continuing to follow developments regarding FATCA closely and are coordinating with all relevant authorities.
Common Reporting Standard
On December 28, 2016, Normative Ruling No.1,680No. 1680 was enacted, introducing the Common Reporting Standard in Brazil. The Common Reporting Standard provides for certain account reporting obligations similar to those existing under FATCA. It was created in the context of the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project, which is aimed at reducing tax avoidance. Normative Ruling No. 1,680 applies to legal entities required to present thee-Financeira pursuant to Normative Ruling No. 1,571,1571, dated July 2, 2016.
On the same date, the Normative Ruling No. 1,6811681 was enacted providing for the obligation to annually deliver the “Country to Country Statement,” an ancillary obligation also arising from the discussions under the BEPS Project, before the Brazilian Federal Revenue Service, (“RFB”)or “RFB,” as a measure to expand information exchange and improve the level of international tax transparency. This new regulation should not have any impact on Santander Brasil, since, as it is controlled by a legal entity resident in Spain, it is not required by the Brazilian regulation to present such statement.
Alterations Related to the Service Tax
On December 30, 2016, Complementary Law No. 157/2016 was enacted. This new legislation establishes a minimum rate of 2.0% for these types of taxes (without any reductions or deductions being permitted). Brazilian municipalities have until the end of 2017 to implement this law.
Tax Amnesty Program
On January 13, 2016, the Brazilian federal government enacted Law 13,254, complemented by Normative Ruling No. 1,627 of March 15, 2016, which introduced an amnesty program aiming at encouraging Brazilian taxpayers to voluntarily disclose to the tax authorities the Brazilian Central Bank unreported assets held abroad (the-so calledRegime Especial de Regularização Cambial e Tributária, or “RERCT”) until December 31, 2014.
Under the RERCT, taxpayers that declare previously unreported foreign assets to the competent authorities (without the need to bring these back to Brazil) will (i) be subject to the payment of income tax and a fine in the total amount of 30% on the total tax amount due and (ii) benefit from an amnesty in relation to any potential related criminal proceeding, provided that the assets are of legal origin. In order to benefit from the RERCT, the interested taxpayers had to file specific forms with the Brazilian tax authorities and the Brazilian Central Bank. According to IN 1,627/2016, the deadline to apply for participation in the RERCT expired on October 31, 2016.
In March 2016, the Brazilian Central Bank issued a regulation establishing the necessary operational procedures to implement the RERCT, which include amendments to the foreign exchange rules in order to allow the necessary remittance of funds to implement the RERCT. The Brazilian National Congress is currently discussing a reopening of these programs.
Income Tax Levied on Capital Gains
On September 22, 2015, the Brazilian federal government enacted Provisional MeasureLaw No. 692/2015 (“MP 692”), recently converted into Law 13,259, of March 16, 2016 (“Lawor “Law 13,259/16”), which introduced the application of progressive tax rates for income taxation over capital gains recognized by Brazilian individuals and by holders that are not domiciled in Brazil for purposes of Brazilian taxation (“Non-Resident Holders”) on the disposition of assets in general.general, Under Law 13,259/16, the income tax rates applicable to capital gains realized by these investors would be: (i) 15% for the partportion of the gains up to R$5 million, (ii) 17.5% for the partportion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the partportion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the partportion of the gain that exceeds R$30 million.
The provisions of Law 13,259/16 may apply to Non ResidentNon-Resident Holders pursuant to CMN Resolution 4,373, provided such Non Resident Holders are not located in a Tax Haven. However, Non Resident Holders (whether they are considered to be Non-Resident Holders as a result of CMN Resolution 43734,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and will continue to be taxed at a rate of 25.0%25%.
Most transactions carried out by Non-Resident Holders pursuant to CMN Resolution 4,373 and that result in capital gains are subject to taxation at a fixed 15% rate, provided they are not located in a Tax Haven.
The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.
Segmentation for the proportional application of the prudential regulation
In January 2017, the CMN enacted a resolution establishing segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for proportional application of the prudential regulation, considering the size, international activity and risk profile of members of each segment. According to such resolution, the segments are qualified as follows:
(i) Segment 1 comprises multiservice banks, commercial banks, investment banks, FX banks and savings bank with (a) an asset base equivalent or superior to 10% of Brasil’s GDP; or (b) perform relevant international activities, independently from the magnitude of the institution;
(ii) Segment 2 comprises multiservice banks, commercial banks, investment banks, FX banks and savings banks with (a) an asset base lower than 10% of Brasil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brasil’s GDP;
(iii) Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brasil’s GDP;
(iv) Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and
(v) Segment 5 comprises (a) institutions with an asset base lower than 0.1% of Brazil’s GDP that applies a simplified optional method for the verification of reference equity’s minimum requirements, except for multiservice banks, commercial banks, investment banks, FX banks and savings bank; and (b) institutions not subject to the verification of reference equity.
We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.
Secured Real Estate Bill
In 2015, Law No. 13,097 was issued to create the secured real estate bill (Letra Imobiliária Garantida- LIG), a new debt instrument for funding Brazilian financial institutions that follows the covered bonds structure. The law provides that the CMN shall regulate the provisions of Law No. 13,097, including as regards issuing conditions and terms, financial institutions authorized to issue LIGs, conditions of redemption and early maturity of LIGs, eligibility requirements, composition, sufficiency, maturity and liquidity of the related portfolio of assets, conditions of replacement and reinforcement of such assets, requirements for financial institutions to act as fiduciary agent and the assumptions, conditions and manner of their removal or replacement and its attributions.
In January 2017, the Brazilian Central Bank began a public consultation in relation to a draft of the rule regulating the provisions of Law No. 13,097.
Regulation of Risk and Capital Management Structure
In February 2017, the CMN enacted a new rule which unifies and expands the Brazilian regulation on risk and capital management for Brazilian financial institutions and other institutions authorized to operate by the Brazilian Central Bank. The new rule is also an effort to incorporate into Brazilian regulation new recommendations from the Basel Committee on Banking Supervision. The rule provides that risk management must be conducted through an integrated effort by the relevant entity (i.e., not only must risks be analyzed on an individual basis, but financial institutions and other institutions authorized to operate by the Brazilian Central Bank must also control and mitigate the adverse effects caused by the interaction between different risks). It also expands the rules and requirements on risk management governance and the competence and duties of the risk management officer.
The rule sets out different structures for risk and capital management which are applicable for different risk profiles, based on the risks profiles set out in the applicable regulation. This means a financial institution of smaller systemic importance can have a simplified structure of management, while institutions of larger complexity have to follow stricter protocols and implement the new rules until a closer deadline (180 days). Certain provisions of the new rule became effective on the date it was published and others will become effective within 360 days of such date.
Disclosure pursuant to Section 219 of the Iran threat reductionThreat Reduction and Syria Human Rights Act
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.
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Santander Brasil has no direct exposure to Iran. As we are part of the Santander Group, we must also disclose the exposure of other entities of the Santander Group to Iran. The following activities are disclosed in response to Section 13(r) with respect to affiliates of Santander UK plc (“Santander UK”), one of the affiliates within the Santander Group.Group and its affiliates. During the period covered by this annual report:
(a) Santander U.K. holds two savings accounts and one current account for two customers resident in the U.K. who are currently designated by the U.S. under the Specially Designated Global Terrorist (“SDGT”) sanctions program. Revenues and profits generated by Santander U.K. on these accounts in the year ended December 31, 2016 were negligible relative to the overall revenues and profits of Santander Spain.
(b) Santander U.K. held a savings account for a customer resident in the U.K. who is currently designated by the U.S. under the SDGT sanctions program. The savings account was closed on July 26, 2016. Revenue generated by Santander U.K. on this account in the year ended December 31, 2016 was negligible relative to the overall revenues of Santander Spain.
(c) Santander U.K. held a current account for a customer resident in the U.K. who is currently designated by the U.S. under the SDGT sanctions program. The current account was closed on December 22, 2016. Revenue generated by Santander U.K. on this account in the year ended December 31, 2016 was negligible relative to the overall revenues of Santander Spain.
(d) Santander U.K. holds two frozen current accounts for two U.K. nationals who are designated by the U.S. under the SDGT sanctions program. The accounts held by each customer have been frozen since their designation and have remained frozen through the year ended December 31, 2016. The accounts are in arrears (£1,844.73 in debit combined) and are currently being managed by Santander U.K. Collections & Recoveries department. Revenues and profits generated by Santander U.K. on these accounts in the year ended December 31, 2016 were negligible relative to the overall revenues and profits of Santander Spain.
(e) In addition, during the year ended December 31, 2016, Santander U.K. had an OFAC match on a power of attorney account. The power of attorney listed on the account is currently designated by the U.S. under the SDGT and Iranian Financial Sanctions Regulations (IFSR) sanctions program. The power of attorney was removed from the account on July 29, 2016. During the year ended December 31, 2016, revenues and profits generated by Santander U.K. were negligible relative to the overall revenues and profits of Santander Spain.
Santander UK holds seven blocked accounts for five customers that are currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A. |
(f) An Iranian national, resident in the U.K., who is currently designated by the U.S. under the Iranian Financial Sanctions Regulations and the Non-Proliferation of Weapons of Mass Destruction (NPWMD) designation, held a mortgage with Santander U.K. that was issued prior to such designation. The mortgage account was redeemed and closed on April 13, 2016. No further drawdown has been made (or would be allowed) under this mortgage although we continued to receive repayment instalments prior to redemption. Revenues generated by Santander U.K. on this account in the year ended December 31, 2016 were negligible relative to the overall revenues of Banco Santander S.A. The same Iranian national also held two investment accounts with Santander ISA Managers Limited. The funds within both accounts were invested in the same portfolio fund. The accounts remained frozen until the investments were closed on May 12, 2016 and bank checks issued to the customer. Revenues generated by Santander U.K. on these accounts in the year ended December 31, 2016 were negligible relative to the overall revenues of Santander Spain.
(g) In addition, during the year ended December 31, 2016, Santander U.K. held a basic current account for an Iranian national, resident in U.K., previously designated under the OFAC Iran designation. The account was closed in September 2016. Revenues generated by Santander U.K. on this account in the year ended December 31, 2016 were negligible relative to the overall revenues of Santander Spain.
In addition, the Santander Group has an outstanding legacy export credit facility with Bank Mellat. In 2005 Santander Spain participated in a syndicated credit facility for Bank Mellat of €15.5 million, which matured on July 6, 2015. As of December 31, 2016, the Group was owed €0.1 million not paid at maturity under this credit facility, corresponding to the 5% that was not covered by official export credit agencies.
Santander Spain has not been receiving payments from Bank Mellat under this or other credit facilities in recent years. Santander Spain has been and expects to continue to be repaid any amounts due by official export credit agencies. No funds have been extended by Santander under this facility since it was granted.
The Santander Group also has certain legacy performance guarantees for the benefit of Bank Sepah and Bank Mellat (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.
(b) | Santander Consumer Finance, S.A. holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by Santander Consumer Bank, S.A. on these accounts in the year ended December 31, 2021. |
(c) | Santander Brasil holds a blocked account for a customer with domicile in Brazil designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship with the customer preceded its designation under the sanctions program. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A. |
(d) | The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007. |
In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the year ended December 31, 2016,2021 which were negligible relative to the overall revenues and profits of Banco Santander, Spain.S.A. The Santander Group has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, deposit taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. The Santander Group is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, the Santander Group intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.
Regulatory Developments Related to COVID-19
The following section summarizes the measures implemented by the CMN and the Brazilian Central Bank to mitigate the consequences of the COVID-19 pandemic on the Brazilian financial system.
Temporary Suspension of Dividend Distributions and Other Payments
On May 29, 2020 the CMN enacted Resolution No. 4,820 in response to the COVID-19 pandemic. Resolution No. 4,820 prohibits financial institutions, such as us, to: (i) offset their capital, including by means of early payment, in excess of amounts equivalent to the minimum mandatory dividend required by the Brazilian Corporate Law, including as interest on capital (ii) repurchase their own shares, subject to certain exceptions as authorized by the Brazilian Central Bank; (iii) reduce their capital stock, except if such reduction is required by law or approved by the Brazilian Central Bank; and (iv) increase the compensation of their officers, directors and members of the board of directors and audit committee, including fixed and variable compensation, CMN Resolution No. 4,280 repealed CMN Resolution No. 4,797.
On December 23, 2020, the CMN enacted Resolution No. 4,885, which made the payment of dividends or interest on capital more flexible. As a result, financial institutions were not allowed to pay in excess of the greater of (x) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (y) the amount equivalent to the mandatory dividends as set forth in article 202 of the Brazilian Corporate Law. This is the only restriction still in force as a result of Resolution No. 4,820.
As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This measure was not applied by the Brazilian Central Bank in 2021.
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TableReduction of ContentsCapital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduces the Capital Conservation Buffer (where all rates relate to the total amount of risk weighted assets) required from financial institutions, from 2.5% to 1.25%. The rate of 1.25% will remain in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the Capital Conservation Buffer requirement will gradually be restored to 2.5%. The measure aims to increase the ability of banks to renegotiate credit transactions and maintain engagement in new transactions, considering the current scenario of increased demand for financial services. CMN Resolution No. 4,783 was replaced by CMN Resolution No. 4,958/2021, which maintains the same rates for the periods set forth in the previous rule.
Repos on Sovereign Bonds Denominated in U.S. Dollars
On March 18, 2020, the Brazilian Central Bank issued Circular No. 3,990, which allowed the repurchase transactions of U.S. Dollar denominated federal bonds between the Brazilian Central Bank and Brazilian financial institutions. The Brazilian Central Bank can purchase such bonds with a discount of 10% in comparison to market prices and the financial institution assumes the obligation to purchase the bonds in a future date. The rules also set out a margin transfer during the term of the transaction whenever the exposure is equal or greater than U.S.$500,000. The purpose of this measure is to provide liquidity to the Brazilian sovereign bonds market, by offering liquidity in U.S. Dollars to Brazilian banks and reducing trading volatility of such bonds. Circular No. 3,990 was revoked by Brazilian Central Bank Resolution No. 76, of February 23, 2021, which essentially maintains the same wording established in the previous rule.
Changes to Provision Requirements
On March 16, 2020 CMN enacted Resolution No. 4,782/20, which was amended by Resolution No. 4,856/20, exempting financial institutions from considering certain restructuring of contracts as an indicative that a counterparty may default. Therefore, the measure allows loans to be granted to solvent companies without requiring additional provisions through December 31, 2020. These measures were not applied in 2021.
New Time Deposits with Special Collateral
CMN Resolution No. 4,799/20 has regulated funding through new Time Deposits with Special Collateral (Novo Depósito a Prazo com Garantias Especiais or “DPGEs”), which are deposits taken by financial institutions and guaranteed by the Credit Guarantee Fund (Fundo Garantidor de Crédito or “FGC”). The resolution increased the cap from R$20 million to R$40 million and is intended to strengthen the liquidity strength of smaller financial institutions. The current limit, set forth 4,964/2021, is set at R$90 million.
Central Bank Loans Backed by Debentures and Financial Bills Held by Financial Institutions
On March 23, 2020, the CMN enacted Resolution No. 4,786, which authorized the Brazilian Central Bank to grant loans to multiservice banks, commercial banks, investment banks and saving banks, backed by debentures (corporate debt instruments) held by such institutions and acquired in the secondary market, provided that certain provisions set forth in the ruling are complied with. It is worth mentioning the ruling sets forth that said loans will also be secured by mandatory deposits in Bank Reserve Accounts, in amount equivalent to, at least, the total amount of the transactions, as well as by the debenture collateral.
This is considered a Temporary Special Liquidity Credit Facility, and was another measure to offer financial institutions more liquidity in their transactions. The loans established in Resolution No. 4,786/20 will be available to financial institutions until April 30, 2020 and could be engaged for a 125 business day term, which could be extended, at the Brazilian Central Bank’s discretion, for more 125 business days, provided the maximum term of 359 calendar days.
On April 2, 2020, the CMN enacted Resolution No. 4,795, which authorized the Brazilian Central Bank to grant loans to financial institutions under specific conditions, by means of a Temporary Special Liquidity Credit Facility, upon direct acquisition, in the primary market, of Financial Bills secured by financial assets or securities. The loan was available in tranches, and could reach 100% of the Reference Assets of such financial institutions. The facility became available to financial institutions through December 31, 2020 and the Financial Bills issued thereunder had a term between 30 and 359 calendar days. The first tranche was approved on May 12, 2020, in a total amount of R$17.5 billion. Both rules were revoked on November 1, 2021.
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Flexibilization of Funding Requirements Through Agribusiness Credit Notes (Letras de Crédito do Agronegócio or “LCAs”)
On March 23, 2020, the CMN issued Resolution No. 4,787, which adjusted the assessment base of the mandatory reserve requirements of funds raised through LCAs, which are credit notes issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain, with the purpose of increasing their liquidity. As a result, the rules for applying funds originated from agribusiness activities were relaxed. The Brazilian Central Bank expects an increase in credit extension directed to agribusiness of R$6.3 billion as a result of the measure. The measure was revoked on April 29, 2021.
Employment Support Program providing emergency payroll financing for small and medium-sized businesses
The CMN enacted Resolution No. 4,846 on August 24, 2020, which regulates the granting of loans under the Emergency Employment Support Program (Programa Emergencial de Suporte a Empregos or “PESE”), established through Provisional Measure No. 944/2020. PESE sets forth the offering of an emergency credit line of R$40 billion to finance, for two months, the payroll of small and medium-sized companies that adhere to the program, with the purpose of preserving jobs. Regarding the funding of said credit line, 85% will derive from the National Treasury and the remaining 15% from participating financial institutions, including Santander Brasil. The adhering small and medium-sized businesses will not be able to dismiss workers during the period that the loan is taken out and up to the 60th day after the business receives its last installment. The maximum amount financed per worker will be up to two minimum wages. The funding will go directly to the worker’s account, as is done today through payrolls operated by financial institutions. PESE came into effect on April 6, 2020. CMN Resolution No. 4,846 repealed CMN Resolution No. 4,800.
FX overhedge of equity interests abroad
On March 18, 2020, the CMN enacted Resolution No. 4,784, which amended CMN Resolution No. 4,192, of March 1, 2013. The rule sets forth that the tax credits arising from losses on excess FX position aimed at hedging of investments held abroad by financial institutions will not be deducted from their regulatory capital (patrimônio de referência). The measure aims at providing further capital relief and hence additional comfort for financial institutions to maintain and extend credit.
The changes were incorporated into CMN Resolution No. 4,955, of 2021, which repealed and replaced Resolution No. 4,192.
Higher ceiling for repurchase of financial bills (letras financeiras) by financial institutions
Pursuant to CMN Resolution No. 4,788, issued on March 23, 2020, financial institutions classified as Segment 1 for the proportional application of the prudential regulation, as is our case, may, from March 23 to April 30, 2020, repurchase up to 20% of financial bills of their own issuance, a substantial increase from the previous ceiling of 5%.
Brazilian Central Bank authorized to buy and sell government bonds and private financial assets and securities in the secondary market
Constitutional Amendment No. 106, enacted on May 7, 2020, sets forth emergency economic and budget measures for the Brazilian government during the COVID-19 pandemic. Among them, the Amendment authorizes the Brazilian Central Bank, for the duration of the pandemic, to buy and sell (i) government bonds in local and foreign secondary markets; and (ii) other assets, in domestic secondary financial, capital and payments markets, provided that, at the time of purchase, they have a credit risk rating in the local market equivalent to BB- or higher, conferred by at least one of the three largest international rating agencies, as well as a reference price published by a financial market entity accredited by the Brazilian Central Bank.
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SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes and is derived from, and should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 5. Operating and Financial Review and Prospects.”
Average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31, of the prior year and each of the month-end balances of the 12 subsequent months. Average income statement and balance sheet data and other related statistical information have been prepared on a consolidated annual basis.
The selected statistical information set forth below includes information atas of and for the years ended December 31, 2016, 2015, 2014, 20132021, 2020, and 20122019 extracted from the audited financial statements prepared in conformity with IFRS as issued by the IASB. See “Presentation of Financial and Other Information” and “Item 3. Key Information—A. Selected Financial Data.”
Average Balance Sheet and Interest Rates
The following tables show our average balances and interest rates for each of the periods presented. With respect to the tables below and the tables under “—Changes in Net Interest Income – Volume and Rate Analysis” and “—Assets—Earning Assets – Yield Spread,” (i) we have stated average balances on a gross basis, before netting impairment losses, except for the total average asset figures, which include such netting, and (ii) all average data have been calculated using month-end balances, which is not significantly different from having used daily averages. We stop accruing interest on loans once they are more than 60 days past due. All our non-accrual loans are included in the table below under “Other assets.”
For the year ended December 31, | ||||||||||||||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||||||||||||||
Assets and Interest Income | ||||||||||||||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 99,374 | 7,316 | 7.4 | % | 67,261 | 4,625 | 6.9 | % | 58,129 | 5,952 | 10.2 | % | ||||||||||||||||||||||||
Loans and amounts due from credit institutions | 33,982 | 7,473 | 22.0 | % | 41,622 | 5,076 | 12.2 | % | 34,933 | 4,115 | 11.8 | % | ||||||||||||||||||||||||
Loans and advances to customers | 239,762 | 43,978 | 18.3 | % | 245,749 | 41,845 | 17.0 | % | 215,524 | 37,084 | 17.2 | % | ||||||||||||||||||||||||
Debt instruments | 128,105 | 14,783 | 11.5 | % | 122,137 | 14,872 | 12.2 | % | 88,968 | 10,419 | 11.7 | % | ||||||||||||||||||||||||
Other interest – earning assets | — | 3,593 | — | — | 3,451 | — | — | 1,354 | — | |||||||||||||||||||||||||||
Total interest – earning assets | 501,222 | 77,143 | 15.4 | % | 476,769 | 69,870 | 14.7 | % | 397,554 | 58,924 | 14.8 | % | ||||||||||||||||||||||||
Equity instruments | 2,195 | 259 | 11.8 | % | 2,729 | 143 | 5.2 | % | 3,314 | 222 | 6.7 | % | ||||||||||||||||||||||||
Investments in associates | 878 | — | — | 903 | — | — | 1,073 | — | — | |||||||||||||||||||||||||||
Total earning assets | 504,296 | 77,401 | 15.3 | % | 480,401 | 70,013 | 14.6 | % | 401,940 | 59,146 | 14.7 | % | ||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 2,995 | — | — | 3,056 | — | — | 3,088 | — | — | |||||||||||||||||||||||||||
Loans and amounts due from credit institutions | 1,737 | — | — | 1,463 | — | — | 1,638 | — | — | |||||||||||||||||||||||||||
Impairment losses | (15,539 | ) | — | — | (14,212 | ) | — | — | (13,750 | ) | — | — | ||||||||||||||||||||||||
Other assets | 75,540 | — | — | 64,048 | — | — | 49,301 | — | — |
For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
Average Balance(1) | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||||||||||||||
Assets and Interest | ||||||||||||||||||||||||||||||||||||
Income | ||||||||||||||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 58,494 | 2,581 | 4.4 | % | 54,531 | 1,552 | 2.8 | % | 48,670 | 3,828 | 7.9 | % | ||||||||||||||||||||||||
Loans and amounts due from credit institutions | 95,513 | 5,191 | 5.4 | % | 104,759 | 1,519 | 1.4 | % | 101,981 | 3,844 | 3.8 | % | ||||||||||||||||||||||||
Of which: | ||||||||||||||||||||||||||||||||||||
Reverse repurchase agreements | 45,458 | 2,154 | 4.7 | % | - | - | - | - | - | - | ||||||||||||||||||||||||||
Loans and advances to customers | 461,141 | 49,538 | 10.7 | % | 384,389 | 44,104 | 11.5 | % | 323,180 | 50,406 | 15.6 | % | ||||||||||||||||||||||||
Debt instruments | 224,890 | 19,042 | 8.5 | % | 203,578 | 13,556 | 6.7 | % | 178,811 | 13,528 | 7.6 | % | ||||||||||||||||||||||||
Other interest – earning assets | - | 1,636 | - | - | 2,044 | - | - | 1,235 | - | |||||||||||||||||||||||||||
Total interest – earning assets | 840,038 | 77,988 | 9.3 | % | 747,257 | 62,775 | 8.4 | % | 652,642 | 72,841 | 11.2 | % | ||||||||||||||||||||||||
Equity instruments | 2,279 | 90 | 3.9 | % | 1,730 | 34 | 2.0 | % | 1,464 | 19 | 1.3 | % | ||||||||||||||||||||||||
Investments in associates | 952 | - | - | 1,098 | - | - | 1,060 | - | - | |||||||||||||||||||||||||||
Total earning assets | 843,269 | 78,077 | 9.3 | % | 750,085 | 62,809 | 8.4 | % | 655,166 | 72,860 | 11.1 | % | ||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 4,633 | - | - | 4,800 | - | - | 4,538 | - | - | |||||||||||||||||||||||||||
Loans and amounts due from credit institutions | 441 | - | - | 6,668 | - | - | 2,258 | - | - | |||||||||||||||||||||||||||
Impairment losses | (26,908 | ) | - | - | (23,936 | ) | - | - | (22,528 | ) | - | - | ||||||||||||||||||||||||
Other assets | 81,669 | - | - | 76,642 | - | - | 56,912 | - | - | |||||||||||||||||||||||||||
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Property, plant and equipment | 8,823 | - | - | 9,587 | - | - | 9,091 | - | - | |||||||||||||||||||||||||||
Intangible assets | 30,250 | - | - | 30,769 | - | - | 30,070 | - | - | |||||||||||||||||||||||||||
Total average assets | 942,177 | 78,077 | 8.3 | % | 854,615 | 62,809 | 7.3 | % | 735,507 | 72,860 | 9.9 | % | ||||||||||||||||||||||||
Liabilities and Interest Expense | ||||||||||||||||||||||||||||||||||||
Deposits from the Brazilian Central Bank and Deposits from credit institutions | 149,111 | 4,712 | 3.2 | % | 111,684 | 4,327 | 3.9 | % | 100,473 | 4,866 | 4.8 | % | ||||||||||||||||||||||||
Of which: | ||||||||||||||||||||||||||||||||||||
Repurchase agreements | 103,809 | 4,567 | 4.4 | % | - | - | - | - | - | - | ||||||||||||||||||||||||||
Customer deposits | 420,185 | 13,188 | 3.1 | % | 380,058 | 7,504 | 2.0 | % | 303,741 | 14,966 | 4.9 | % | ||||||||||||||||||||||||
Of which: | ||||||||||||||||||||||||||||||||||||
Repurchase agreements | 58,264 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Marketable debt securities | 63,906 | 4,537 | 7.1 | % | 68,585 | 2,786 | 3.7 | % | 76,194 | 5,138 | 6.7 | % | ||||||||||||||||||||||||
Subordinated debts | 14,550 | 955 | 6.6 | % | 13,102 | 909 | 6.6 | % | 10,779 | 660 | 6.1 | % | ||||||||||||||||||||||||
Other interest-bearing liabilities | - | 3,277 | - | - | 2,806 | - | - | 2,890 | - | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 647,752 | 26,669 | 4.2 | % | 573,429 | 18,332 | 3.2 | % | 491,187 | 28,520 | 5.8 | % | ||||||||||||||||||||||||
Noninterest bearing demand deposits | 33,893 | - | - | 28,581 | - | - | 14,612 | - | - | |||||||||||||||||||||||||||
Other liabilities | 155,133 | - | - | 150,759 | - | - | 133,255 | - | - | |||||||||||||||||||||||||||
Non-controlling interests | 329 | - | - | 315 | - | - | 617 | - | - | |||||||||||||||||||||||||||
Stockholders’ Equity | 105,070 | - | - | 101,531 | - | - | 95,836 | - | - | |||||||||||||||||||||||||||
Total average liabilities and equity | 942,177 | 26,669 | 2.8 | % | 854,615 | 18,332 | 2.1 | % | 735,507 | 28,520 | 3.9 | % |
(1) In the year ended December 31, 2021, we revisited the accounting treatment of Contentselectric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.
For the year ended December 31, | ||||||||||||||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||||||||||||||
Tangible assets | 6,786 | — | — | 6,881 | — | — | 6,725 | — | — | |||||||||||||||||||||||||||
Intangible assets | 29,832 | — | — | 30,222 | — | — | 29,625 | — | — | |||||||||||||||||||||||||||
Total average assets | 605,646 | 77,401 | 12.8 | % | 571,860 | 70,013 | 12.2 | % | 478,560 | 59,146 | 12.4 | % | ||||||||||||||||||||||||
Liabilities and Interest Expense | ||||||||||||||||||||||||||||||||||||
Deposits from the Brazilian Central Bank and Deposits from credit institutions | 68,761 | 3,370 | 4.9 | % | 67,375 | 4,584 | 6.8 | % | 42,563 | 3,216 | 7.6 | % | ||||||||||||||||||||||||
Customer deposits | 229,645 | 25,693 | 11.2 | % | 217,653 | 20,666 | 9.5 | % | 195,177 | 18,079 | 9.3 | % | ||||||||||||||||||||||||
Marketable debt securities | 95,760 | 12,213 | 12.8 | % | 84,118 | 10,048 | 11.9 | % | 67,376 | 6,347 | 9.4 | % | ||||||||||||||||||||||||
Subordinated debts | 13,901 | 1,233 | 8.9 | % | 16,070 | 1,523 | 9.5 | % | 13,523 | 1,319 | 9.8 | % | ||||||||||||||||||||||||
Other interest-bearing liabilities | — | 3,759 | — | — | 1,308 | — | — | 2,415 | — | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 408,067 | 46,269 | 11.3 | % | 385,215 | 38,129 | 9.9 | % | 318,639 | 31,377 | 9.8 | % | ||||||||||||||||||||||||
Noninterest bearing demand deposits | 15,393 | — | — | 14,792 | — | — | 13,568 | — | — | |||||||||||||||||||||||||||
Other liabilities | 97,283 | — | — | 89,820 | — | — | 67,536 | — | — | |||||||||||||||||||||||||||
Non-controlling interests | 638 | — | — | 557 | — | — | 344 | — | — | |||||||||||||||||||||||||||
Stockholders’ Equity | 84,283 | — | — | 81,475 | — | — | 78,474 | — | — | |||||||||||||||||||||||||||
Total average liabilities and equity | 605,646 | 46,269 | 7.6 | % | 571,860 | 38,129 | 6.7 | % | 478,560 | 31,377 | 6.6 | % |
Changes in Net Interest Income – Volume and Rate Analysis
The following tables present the changes in our net interest income allocated between changes in average volume and changes in average rate for the year ended December 31, 2016,2021, compared to the year ended December 31, 2015,2020, and for the year ended December 31, 20152020 compared to the year ended December 31, 2014.2019. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the years ended 2016/2015 | For the years ended 2015/2014 | For the Years Ended 2021/2020 | For the Years Ended 2020/2019 | |||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) due to changes in | Increase (decrease) due to changes in | |||||||||||||||||||||||||||||||||||||||||||||||
Volume | Rate | Net change | Volume | Rate | Net change | Volume | Rate | Net change | Volume | Rate | Net change | |||||||||||||||||||||||||||||||||||||
(in millions of R$) | (in millions of R$) | |||||||||||||||||||||||||||||||||||||||||||||||
Interest and Similar Income | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 2,344 | 346 | 2,690 | 836 | (2,162 | ) | (1,326 | ) | 113 | 854 | 1,029 | 414 | (2,690 | ) | (2,276 | ) | ||||||||||||||||||||||||||||||||
Loans and amounts due from credit institutions | (1,071 | ) | 3,468 | 2,397 | 811 | 149 | 961 | (134 | ) | 4,175 | 3,672 | 102 | (2,427 | ) | (2,325 | ) | ||||||||||||||||||||||||||||||||
Loans and advances to customers | (1,038 | ) | 3,172 | 2,133 | 5,150 | (389 | ) | 4,761 | 8,806 | (2,809 | ) | 5,436 | 8,493 | (14,797 | ) | (6,304 | ) | |||||||||||||||||||||||||||||||
Debt instruments | 708 | (798 | ) | (90 | ) | 4,024 | 429 | 4,453 | 1,419 | 3,681 | 5,486 | 1,753 | (1,725 | ) | 28 | |||||||||||||||||||||||||||||||||
Other interest-earning assets | 142 | — | 142 | 2,097 | — | 2,097 | (408 | ) | — | (408 | ) | 809 | — | 809 | ||||||||||||||||||||||||||||||||||
Total interest-earning assets | 1,085 | 6,188 | 7,273 | 12,919 | (1,973 | ) | 10,946 | 9,796 | 5,901 | 15,215 | 11,571 | (21,639 | ) | (10,068 | ) | |||||||||||||||||||||||||||||||||
Equity Instruments | 11 | 34 | 56 | 4 | 11 | 15 | ||||||||||||||||||||||||||||||||||||||||||
Total earning assets | 9,807 | 5,935 | 15,271 | 11,575 | (21,628 | ) | (10,053 | ) | ||||||||||||||||||||||||||||||||||||||||
Interest Expense and Similar Charges | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
Deposits from the Brazilian Central Bank and Deposits from credit institutions | 1,450 | (798 | ) | 385 | 504 | (1,043 | ) | (539 | ) | |||||||||||||||||||||||||||||||||||||||
Customer deposits | 792 | 4,431 | 5,690 | 3,095 | (10,563 | ) | (7,468 | ) | ||||||||||||||||||||||||||||||||||||||||
Marketable debt securities | (172 | ) | 2,355 | 2,023 | (471 | ) | (2,153 | ) | (2,624 | ) | ||||||||||||||||||||||||||||||||||||||
Subordinated liabilities | 95 | (51 | ) | 39 | 150 | 53 | 203 | |||||||||||||||||||||||||||||||||||||||||
Other interest-bearing liabilities | 2,421 | — | 2,421 | 235 | — | 235 | ||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 4,587 | 5,937 | 10,558 | 3,513 | (13,706 | ) | (10,193 | ) |
131 |
For the years ended 2016/2015 | For the years ended 2015/2014 | |||||||||||||||||||||||
Increase (decrease) due to changes in | ||||||||||||||||||||||||
Volume | Rate | Net change | Volume | Rate | Net change | |||||||||||||||||||
(in millions of R$) | ||||||||||||||||||||||||
Equity Instruments | (33 | ) | 148 | 116 | (35 | ) | (44 | ) | (79 | ) | ||||||||||||||
Total earning assets | 1,052 | 6,336 | 7,388 | 12,884 | (2,017 | ) | 10,866 | |||||||||||||||||
Interest Expense and Similar Charges | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Deposits from the Brazilian Central Bank and Deposits from credit institutions | 93 | (1,307 | ) | (1,214 | ) | 1,715 | (347 | ) | 1,368 | |||||||||||||||
Customer deposits | 1,187 | 3,840 | 5,027 | 2,125 | 462 | 2,587 | ||||||||||||||||||
Marketable debt securities | 1,454 | 711 | 2,165 | 1,781 | 1,920 | 3,700 | ||||||||||||||||||
Subordinated liabilities | (197 | ) | (93 | ) | (289 | ) | 242 | (38 | ) | 204 | ||||||||||||||
Other interest-bearing liabilities | 2,451 | — | 2,451 | (1,107 | ) | — | (1,107 | ) | ||||||||||||||||
Total interest-bearing liabilities | 4,988 | 3,152 | 8,140 | 4,756 | 1,996 | 6,752 |
Assets
Earning Assets – Yield Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the year ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Average earning assets | 504,296 | 480,401 | 401,940 | |||||||||
Interest and dividends on equity securities(1) | 77,401 | 70,013 | 59,146 | |||||||||
Net interest income | 31,133 | 31,884 | 27,769 | |||||||||
Gross yield(2) | 15.3 | % | 14.6 | % | 14.7 | % | ||||||
Net yield(3) | 6.2 | % | 6.6 | % | 6.9 | % | ||||||
Yield spread(4) | 4.0 | % | 4.7 | % | 4.9 | % |
For the Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Average earning assets | 840,038 | 747,257 | 652,642 | |||||||||
Interest and dividends on equity securities(1) | 78,078 | 62,807 | 72,860 | |||||||||
Net interest income | 49,193 | 44,480 | 44,340 | |||||||||
Gross yield(2)(*) | 9.3 | % | 8.4 | % | 11.2 | % | ||||||
Net yield(3)(*) | 5.9 | % | 6.0 | % | 6.8 | % | ||||||
Yield spread(4)(*) | 4.8 | % | 5.2 | % | 5.3 | % |
(*) | Yield information does not give effect to changes in fair value that are reflected as a component of stockholder’s equity. |
(1) | Total earning assets plus dividends from companies accounted for by the equity method (equity instruments). |
(2) | Gross yield is the amount of “Interest and dividends on equity securities” divided by “Average earning assets.” |
(3) | Net yield is the amount of “Net interest income” divided by “Average earning assets.” |
(4) | Yield spread is the difference between the average rate of “Total earning asset” and the average rate of “Total interest-bearing liabilities.” |
Return on Equity and Assets
The following table presents our selected financial ratios for the periods indicated.
For the year ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
ROAA: Return on average total assets | 1.2 | % | 1.7 | % | 1.2 | % | ||||||
ROAE: Return on average stockholders’ equity | 8.9 | % | 12.1 | % | 7.3 | % | ||||||
ROAE (adjusted) (1) | 13.3 | % | 18.5 | % | 11.3 | % | ||||||
Average stockholders’ equity as a percentage of average total assets | 13.9 | % | 14.2 | % | 16.4 | % | ||||||
Payout(2) | 71.6 | % | 63.4 | % | 27.1 | % |
132 |
For the Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
ROA: Return on average total assets | 1.7 | % | 1.6 | % | 2.3 | % | ||||||
ROE: Return on average stockholders’ equity | 14.8 | % | 13.3 | % | 17.4 | % | ||||||
ROE (adjusted) (1) | 20.2 | % | 18.5 | % | 24.6 | % | ||||||
Average stockholders’ equity as a percentage of average total assets | 11.2 | % | 11.9 | % | 13.0 | % | ||||||
Payout(2) | 62.0 | % | 24.7 | % | 64.9 | % | ||||||
(1) | “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” is a non-GAAP financial measure which adjusts “Return on average stockholders’ equity” to exclude the goodwill arising from the acquisition of Banco Real in |
(2) | Dividend payout ratio (dividends declared per preferred share divided by net income per preferred share). |
Interest-Earning Assets (other than Loans)
The following table shows the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the year ended December 31, | For the Year Ended December 31, | |||||||||||||||||||||||
2016 | 2015 | 2014 | 2021 | 2020 | 2019 | |||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 19.8 | % | 14.1 | % | 14.6 | % | 7.0 | % | 7.3 | % | 7.5 | % | ||||||||||||
Loans and amounts due from credit institutions | 6.8 | % | 8.7 | % | 8.8 | % | 11.4 | % | 14.1 | % | 15.6 | % | ||||||||||||
Loans and advances to customers | 47.8 | % | 51.5 | % | 54.2 | % | 54.9 | % | 51.4 | % | 49.5 | % | ||||||||||||
Debt instruments | 25.6 | % | 25.6 | % | 22.4 | % | 26.8 | % | 27.2 | % | 27.4 | % | ||||||||||||
Total interest-earning assets | 100.0 | % | 100.0 | % | 100.0 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Loans and Amounts Due from Credit Institutions
For further information about Loans and Amounts Due from Credit Institutions, see note 5 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows our short-term funds deposited with other banks at each of the dates indicated.
For the year ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$) | ||||||||||||
Time deposits | 2,070 | 3,627 | 4,819 | |||||||||
Reverse repurchase agreements | 848 | 153 | 2,408 | |||||||||
Escrow deposits | 9,836 | 9,493 | 8,170 | |||||||||
Cash and foreign currency investments | 13,195 | 24,058 | 12,398 | |||||||||
Other accounts | 2,014 | 5,271 | 1,264 | |||||||||
Total | 27,964 | 42,601 | 29,059 |
Investment Securities
As of December 31, 20162021 and 2015,2020, the book value of investment securities was R$146228 billion and R$118232 billion, respectively (representing 23.0%24.5% and 19.5%24.9%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$123171 billion, or 84.2%75.3% and R$93192 billion, or 78.8%82.8% of our investment securities as of December 31, 20162021 and 2015,2020, respectively. For a discussion of how our investment securities are valued, see notes 67 and 78 to our audited consolidated financial statements.
statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:
As of December 31, | As of December 31, | |||||||||||||||||||||||
2016 | 2015 | 2014 | 2021 | 2020 | 2019 | |||||||||||||||||||
(in millions of R$) | (in millions of R$) | |||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||
Government securities—Brazil | 122,972 | 93,440 | 103,598 | 171,437 | 191,896 | 135,848 | ||||||||||||||||||
Debentures and promissory notes | 12,923 | 11,967 | 13,428 | 19,882 | 17,072 | 13,875 | ||||||||||||||||||
Other debt securities | 7,931 | 10,307 | 3,685 | 33,894 | 21,134 | 23,609 | ||||||||||||||||||
Total domestic/debt securities | 143,825 | 115,714 | 120,711 | 225,212 | 230,102 | 173,332 | ||||||||||||||||||
Equity securities | ||||||||||||||||||||||||
Shares of Brazilian companies | 1,870 | 1,953 | 665 | |||||||||||||||||||||
Shares of foreign companies | 49 | 14 | — | |||||||||||||||||||||
Investment fund units and shares | 609 | 363 | 1,693 | |||||||||||||||||||||
Total equity securities | 2,528 | 2,329 | 2,358 | |||||||||||||||||||||
Total investment securities | 227,740 | 232,432 | 175,690 |
133 |
As of December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$) | ||||||||||||
Equity securities | ||||||||||||
Shares of Brazilian companies | 1,186 | 1,168 | 1,339 | |||||||||
Shares of foreign companies | 4 | 11 | 8 | |||||||||
Investment fund units and shares | 1,237 | 961 | 1,601 | |||||||||
Total equity securities | 2,426 | 2,141 | 2,948 | |||||||||
Total investment securities | 146,251 | 117,855 | 123,659 |
As of December 31, 20162021 and 2015,2020, we held no securities of single issuers or related groups of companies whose aggregate book or market value exceed 10.0%exceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented 145%151.5% and 117%180.5%, respectively of our stockholders’ equity. As of December 31, 20162021 and 2015,2020, the total value of our debt securities was approximately 170%212.5% and 145%217.4%, respectively, of stockholders’ equity.
The following table analyzes the maturities and weighted average yields of our debt investment securities not carried at fair value (before impairment allowance) as of December 31, 2016.2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
Maturing within 1 year | Maturing between 1 and 5 years | Maturing between 5 and 10 years | Maturing after 10 years | Total | ||||||||||||||||
(in R$ millions) | ||||||||||||||||||||
Debt securities | ||||||||||||||||||||
Government securities—Brazil (1) | 107,450 | 41,694 | 22,293 | - | 171,437 | |||||||||||||||
Other debt securities (2) | 34,295 | 3,045 | 16,435 | - | 53,776 | |||||||||||||||
Total debt investment securities | 141,745 | 44,739 | 38,728 | - | 225,212 |
Maturing within 1 year | Maturing between 1 and 5 years | Maturing between 5 and 10 years | Maturing after 10 years | Total | ||||||||||||||||
(in R$ millions) | ||||||||||||||||||||
Debt securities | ||||||||||||||||||||
Government securities—Brazil | 27,711 | 56,144 | 27,851 | 11,266 | 122,972 | |||||||||||||||
Other debt securities | 9,218 | 9,727 | 1,709 | 199 | 20,853 | |||||||||||||||
Total debt investment securities | 36,928 | 65,871 | 29,560 | 11,465 | 143,825 |
(1) | Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and NTN-F). |
(2) | Includes balances of debentures and promissory notes. |
The average rate for debt investment securities is 13.4%7.1%.
Investment Portfolio – Yields
The following table shows the balances and weighted-average yields for our debt securities not carried at fair value through earnings, for each range of maturities, as of December 31, 2021. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
Maturing within 1 year | Yield within 1 year | Maturing between 1 and 5 years | Yield between 1 and 5 years | Maturing between 5 and 10 years | Yield between 5 and 10 years | Maturing after 10 years | Yield after 10 years | |||||||||||||||||||||||||
(in R$ millions, except percentages) | ||||||||||||||||||||||||||||||||
Weighted-average yields | % | % | % | % | ||||||||||||||||||||||||||||
Domestic: | ||||||||||||||||||||||||||||||||
Brazilian Government | 16,969 | 9.8 | 61,237 | 8.4 | 19,282 | 6.8 | 5,297 | 6.8 | ||||||||||||||||||||||||
Other fixed-income securities | 25,793 | 8.4 | 27,239 | 9.0 | 207 | 7.8 | 369 | 9.2 | ||||||||||||||||||||||||
Impaired financial assets | 829 | 8.4 | 257 | 9.0 | 842 | 7.8 | - | - | ||||||||||||||||||||||||
Impairment losses | (13 | ) | 8.4 | (267 | ) | 9.0 | (784 | ) | 7.8 | - | - | |||||||||||||||||||||
Total domestic | 43,578 | 6.4 | 88,466 | 7.2 | 19,547 | 6.8 | 5,666 | 6.7 | ||||||||||||||||||||||||
International: | ||||||||||||||||||||||||||||||||
Foreign government | 1,588 | 5.0 | 7,756 | 5.0 | 1,917 | 4.7 | - | - | ||||||||||||||||||||||||
Other fixed-income securities | 720 | 4.3 | 5,122 | 2.7 | - | 2.7 | - | - | ||||||||||||||||||||||||
Impaired financial assets | 105 | 4.3 | - | 2.7 | - | 2.7 | - | - | ||||||||||||||||||||||||
Impairment losses | (32 | ) | 4.3 | (31 | ) | 2.7 | (64 | ) | 2.7 | - | - | |||||||||||||||||||||
Total international | 2,381 | 4.1 | 12,847 | 3.6 | 1,853 | 2.7 | - | - | ||||||||||||||||||||||||
Total weighted-average yields | 8.7 | 8.0 | 6.6 | 6.7 | ||||||||||||||||||||||||||||
Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, on December 31, 2016, 2015, and 2014:
As of December 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||
Domestic currency | Foreign currency | Domestic currency | Foreign currency | Domestic currency | Foreign currency | |||||||||||||||||||
(in millions of R$) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and Balances With The Brazilian Central Bank | 110,430 | 175 | 88,909 | 234 | 55,694 | 209 | ||||||||||||||||||
Debt instruments | 134,038 | 9,788 | 109,837 | 5,877 | 114,257 | 6,454 | ||||||||||||||||||
Equity instruments | 2,426 | — | 2,141 | — | 2,948 | — | ||||||||||||||||||
Loans and amounts due from credit institutions, gross | 25,421 | 2,542 | 18,631 | 23,970 | 15,470 | 13,590 | ||||||||||||||||||
Loans and advances to customers, gross | 257,170 | 11,267 | 264,491 | 2,775 | 208,353 | 40,127 | ||||||||||||||||||
Total Assets | 529,485 | 23,772 | 484,009 | 32,857 | 397,353 | 60,380 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Financial Liabilities at Amortized Cost | ||||||||||||||||||||||||
Deposits from Brazilian Central Bank and credit institutions | 51,340 | 27,294 | 33,056 | 36,395 | 39,520 | 24,154 | ||||||||||||||||||
Customer deposits | 247,445 | — | 232,344 | 10,699 | 211,188 | 9,457 | ||||||||||||||||||
Marketable debt securities | 92,132 | 7,711 | 82,507 | 12,151 | 59,870 | 10,485 | ||||||||||||||||||
Subordinated debts | 466 | — | 8,097 | — | 7,294 | — |
as of the dates indicated.
134 |
As of December 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||
Domestic currency | Foreign currency | Domestic currency | Foreign currency | Domestic currency | Foreign currency | |||||||||||||||||||
(in millions of R$) | ||||||||||||||||||||||||
Debt Instruments Eligible to Compose Capital | 8,312 | — | 9,959 | — | 6,773 | — | ||||||||||||||||||
Other financial liabilities | 36,879 | — | 32,073 | — | 23,446 | — | ||||||||||||||||||
Total Liabilities | 436,574 | 35,005 | 398,036 | 59,245 | 392,186 | 44,096 |
As of December 31, | ||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||
Domestic Currency | Foreign Currency | Domestic Currency | Foreign Currency | Domestic Currency | Foreign Currency | |||||||||||||||||||
(in millions of R$) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 21,543 | 10,851 | 4,531 | 15,617 | 4,878 | 15,250 | ||||||||||||||||||
Debt instruments | 208,133 | 17,080 | 226,787 | 3,315 | 164,447 | 8,885 | ||||||||||||||||||
Loans and amounts due from credit institutions, gross | 91,868 | 3,797 | 109,339 | 3,520 | 107,694 | 1,553 | ||||||||||||||||||
Loans and advances to customers, gross | 398,335 | 66,509 | 396,950 | 20,822 | 326,421 | 20,835 | ||||||||||||||||||
Equity Instruments | 2,078 | 45 | 1,675 | - | 2,358 | - | ||||||||||||||||||
Total assets | 721,957 | 98,282 | 739,283 | 43,275 | 605,798 | 46,523 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Financial Liabilities at Amortized cost: | ||||||||||||||||||||||||
Deposits from the Brazilian Central Bank and Deposits from credit institutions | 62,332 | 58,674 | 86,564 | 45,093 | 58,283 | 40,988 | ||||||||||||||||||
Customer deposits | 470,973 | - | 445,900 | - | 336,515 | - | ||||||||||||||||||
Marketable debt securities | 66,027 | 13,009 | 47,476 | 9,399 | 64,987 | 8,715 | ||||||||||||||||||
Debt instruments eligible to compose capital | - | 12,781 | - | 13,120 | - | 10,176 | ||||||||||||||||||
Other financial liabilities | 68,496 | 413 | 66,727 | 153 | 60,885 | - | ||||||||||||||||||
Total liabilities | 667,828 | 84,877 | 646,667 | 67,766 | 520,670 | 59,879 |
Loan Portfolio
As of December 31, 2016,2021, our total loans and advances to customers weretotaled R$268.4493 billion (42.3%(53.0% of our total assets). Net impairment losses, loans and advances to customers weretotaled R$252465 billion as of December 31, 2016 (39.7%2021 (49.9% of our total assets). In addition to loans, we had outstanding as of December 31, 2016, 2015, 2014, 2013 and 2012, R$91.2 billion, R$91.9 billion, R$98.6 billion, R$100.5 billion and R$106.8 billion respectively, of loan commitments drawable by third parties.parties totaling R$146.0 billion, R$131.7 billion, R$125.9 billion as of December 31, 2021, 2020, 2019, respectively.
Types of Loans by Type of Customer
Substantially allThe majority of ourthe loans we have outstanding are to borrowers domiciled in Brazil and are denominated inreais. The table below analyzes our loans and advances to customers (including securities purchased under agreements to resell), by type of customer loan, at each of the dates indicated. reais. For each loan category, of loan, we maintain specific risk management policies that are in line with the standards of the Santander Group, and aswhich in turn, are managed and monitored by our board of officers through the credit committee. Ourcommittee, The credit approval processesprocess for each loan category of loan areis structured primarily around our business segments. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk” for details on our credit approval policies for retail and wholesale lending.
We have a diversified loan portfolio, with no specific concentration exceeding 10% of our total loans. Furthermore, currently, 2%loans, Currently, 1.2% of our loan portfolio is allocated to our largest debtor and 10%7.4% to ourthe next 10 largest debtors.
As of December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Commercial and industrial(1) | 140,993 | 150,881 | 133,087 | 113,571 | 103,206 | |||||||||||||||
Real estate – (2) | 36,650 | 36,852 | 31,864 | 25,555 | 20,110 | |||||||||||||||
Installment loans to individuals(3) | 88,702 | 77,407 | 81,893 | 84,312 | 83,243 | |||||||||||||||
Lease financing(4) | 2,093 | 2,126 | 2,266 | 2,768 | 4,182 | |||||||||||||||
Loans and advances to customers, gross(5) | 268,438 | 267,266 | 249,111 | 226,206 | 210,741 | |||||||||||||||
Impairment losses | (16,435 | ) | (15,233 | ) | (13,421 | ) | (13,472 | ) | (13,967 | ) | ||||||||||
Loans and advances to customers, net | 252,003 | 252,033 | 235,690 | 212,734 | 196,774 |
Underwriting policies for this categoryour Loans and Maturity see sections “a - Breakdown” and “b – Detail” of loannote “9 – Loans and advances to customers” to our Wholesale Global Banking customers are focused on the type of guarantee or collateral provided. Certain loans (BNDES products) are generally secured by liens on financed machinery and equipment, though guarantees may be provided as additional security.audited consolidated financial statements included in this annual report.
Maturity
The following table sets forth an analysis by maturity of our loans, and advances to customers by type and status, as of loans on December 31, 2016.2021.
As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
Debt Sector by Maturity | Less than 1 year | % of total | Between 1 and 5 years | % of total | Between 5 and 15 years | % of total | More than 15 years | % of total | Total | % of total | ||||||||||||||||||||||||||||||
Commercial and industrial | 165,729 | 61.37 | % | 73,723 | 45.81 | % | 8,222 | 20.16 | % | - | - | 247,674 | 50.20 | % | ||||||||||||||||||||||||||
Real estate | 3,986 | 1.48 | % | 10,138 | 6.30 | % | 19,337 | 47.41 | % | 21,278 | 98.58 | % | 54,739 | 11.10 | % | |||||||||||||||||||||||||
Installment loans to individuals | 99,051 | 36.68 | % | 75,833 | 47.12 | % | 13,219 | 32.41 | % | 306 | 1.42 | % | 188,409 | 38.19 | % | |||||||||||||||||||||||||
Lease financing | 1,285 | 0.48 | % | 1,238 | 0.77 | % | 10 | 0.02 | % | - | - | 2,533 | 0.51 | % | ||||||||||||||||||||||||||
Loans and advances to customers, gross | 270,051 | 100.00 | % | 160,932 | 100.00 | % | 40,787 | 100.00 | % | 21,585 | 100.00 | % | 493,355 | 100.00 | % |
�� | Maturity | |||||||||||||||||||||||||||||||
Less than one year | One to five years | Over five years | Total | |||||||||||||||||||||||||||||
Balance | % of Total Loans | Balance | % of Total Loans | Balance | % of Total Loans | Balance | % of Total Loans | |||||||||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||||||||||
Commercial and industrial | 99,657 | 62.0 | 35,789 | 45.0 | 5,547 | 20.0 | 140,993 | 52.5 | ||||||||||||||||||||||||
Real estate | 8,649 | 5.3 | 11,761 | 14.8 | 16,240 | 59.2 | 36,650 | 13.7 | ||||||||||||||||||||||||
Installment loans to individuals | 52,206 | 32.3 | 30,868 | 38.9 | 5,628 | 20.5 | 88,702 | 33.0 | ||||||||||||||||||||||||
Lease financing | 1,152 | 0.7 | 938 | 1.2 | 2 | 0.0 | 2,093 | 0.8 | ||||||||||||||||||||||||
Loans and advances to customers, gross | 161,664 | 100 | 79,356 | 100 | 27,417 | 100 | 268,438 | 100 |
135 |
Fixed and Variable Rate Loans
The following table sets forth a breakdown of our fixed and variable rate loans by maturitytype and status as of December 31, 2016.2021.
Fixed and variable rate loans with maturity | ||||||||||||||||||||||||||||||||
Less than one year | One to five years | Over five years | Total | |||||||||||||||||||||||||||||
Balance | % of Total | Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||||||||||
Fixed rate | 123,542 | 76.4 | 47,332 | 59.6 | 7,356 | 26.8 | 178,231 | 66.4 | ||||||||||||||||||||||||
Variable rate | 38,122 | 23.6 | 32,024 | 40.4 | 20,061 | 73.2 | 90,207 | 33.6 | ||||||||||||||||||||||||
Total | 161,664 | 100 | 79,356 | 100 | 27,417 | 100 | 268,438 | 100 |
Fixed and variable rate loans maturing in | ||||||||||||||||||||||||
Less than one year | Between one and five years | Between five and 15 years | Over 15 years | Sub-total more than one year | Total | |||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||
Commercial and industrial | 111,499 | 29,745 | 1,941 | - | 31,865 | 143,185 | ||||||||||||||||||
Real estate | 24 | 73 | 62 | 18 | 153 | 177 | ||||||||||||||||||
Installment loans to individuals | 105,045 | 74,689 | 12,965 | 306 | 87,961 | 193,005 | ||||||||||||||||||
Lease financing | 522 | 694 | - | - | 695 | 1,217 | ||||||||||||||||||
Total Fixed rate | 217,090 | 105,201 | 14,968 | 324 | 120,493 | 337,583 | ||||||||||||||||||
Variable rate | ||||||||||||||||||||||||
Commercial and industrial | 37,149 | 33,524 | 2,109 | - | 35,633 | 72,782 | ||||||||||||||||||
Real estate | 3,962 | 10,065 | 19,274 | 21,260 | 50,600 | 54,562 | ||||||||||||||||||
Installment loans to individuals | 11,087 | 11,598 | 4,426 | - | 16,024 | 27,111 | ||||||||||||||||||
Lease financing | 763 | 544 | 9 | - | 553 | 1,316 | ||||||||||||||||||
Total Variable rate | 52,961 | 55,731 | 25,819 | 21,261 | 102,810 | 155,771 | ||||||||||||||||||
Total | 270,051 | 160,932 | 40,787 | 21,585 | 223,304 | 493,355 |
Cross-Border Outstandings
The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.
As of December 31, | ||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||
Balance | % of Total Assets | Balance | % of Total Assets | Balance | % of Total Assets | |||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||
OECD countries(1) | ||||||||||||||||||||||||
Spain | 108 | - | 437 | - | 1,984 | 0.3 | ||||||||||||||||||
United States | 835 | 0.1 | 12,674 | 1.4 | 3,721 | 0.5 | ||||||||||||||||||
Netherlands | - | - | 80 | - | 1,531 | 0.2 | ||||||||||||||||||
United Kingdom | 20 | - | 29 | - | 1,003 | 0.1 | ||||||||||||||||||
Luxembourg | 13,058 | 1.4 | - | - | - | - | ||||||||||||||||||
Other OECD countries(2) | 1,958 | 0.2 | 3,534 | 0.4 | 16,264 | 2.4 | ||||||||||||||||||
Total OECD | 15,979 | 1.7 | 16,754 | 1.8 | 24,503 | 3.6 | ||||||||||||||||||
Non-OECD countries | ||||||||||||||||||||||||
Latin American countries(2) | 560 | 0.1 | 1,204 | 0.1 | 1,382 | 0.2 | ||||||||||||||||||
Cayman Islands | 1,679 | 0.2 | 2,917 | 0.3 | 3,528 | 0.5 | ||||||||||||||||||
Other(2) | 282 | - | 1,189 | 0.1 | 2,397 | 0.3 | ||||||||||||||||||
Total non-OECD | 2,521 | 0.3 | 5,310 | 0.6 | 7,307 | 1.1 | ||||||||||||||||||
Total | 18,500 | 2.0 | 22,064 | 2.4 | 31,810 | 4.6 |
As of December 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||
Balance | % of Total Assets | Balance | % of Total Assets | Balance | % of Total Assets | |||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||
OECD countries(1) | ||||||||||||||||||||||||
Austria | 168 | 0.0 | — | — | 36 | — | ||||||||||||||||||
Spain | 1,495 | 0.2 | 240 | — | 217 | — | ||||||||||||||||||
United States | 1,692 | 0.3 | 2,686 | 0.4 | 8,094 | 1.6 | ||||||||||||||||||
Netherlands | 6,595 | 1.0 | 5,474 | 0.9 | 12,556 | 2.4 | ||||||||||||||||||
Other OECD countries(2) | 1,042 | 0.2 | 374 | 0.1 | 626 | 0.1 | ||||||||||||||||||
Total OECD | 10,992 | 1.7 | 8,774 | 1.4 | 21,529 | 4.1 | ||||||||||||||||||
Non-OECD countries | ||||||||||||||||||||||||
Latin American countries(2) | 55 | 0.0 | 522 | 0.1 | 128 | — | ||||||||||||||||||
Cayman Islands | 1,301 | 0.2 | 4,372 | 0.7 | 825 | 0.2 | ||||||||||||||||||
Other(2) | 463 | 0.1 | 574 | 0.1 | 267 | 0.1 | ||||||||||||||||||
Total non-OECD | 1,819 | 0.3 | 5,468 | 0.9 | 1,220 | 0.2 | ||||||||||||||||||
Total | 12,811 | 2.0 | 14,242 | 2.4 | 22,749 | 4.4 |
(1) | The Organization for Economic Cooperation and Development. |
(2) | Aggregate outstandings in any single country in this category do not exceed |
136 |
The following table presents the amounts of our cross-border outstandings as of December 31, 2016, 20152021, 2020 and 20142019 by type of borrower where outstandings in the borrower’s country exceeded 0.75%1.2% of our total assets.
Government | Banks and Other Financial Institutions | Commercial and Industrial | Other Loans | Total | Government | Banks and Other Financial Institutions | Commercial and Industrial | Other Loans | Total | |||||||||||||||||||||||||||||||
(in millions of R$) | (in millions of R$) | |||||||||||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||||||||||
United States | — | 8,023 | 71 | — | 8,094 | |||||||||||||||||||||||||||||||||||
Netherlands | — | 21 | 12,535 | — | 12,556 | |||||||||||||||||||||||||||||||||||
Cayman Islands | — | — | 510 | 53 | 563 | |||||||||||||||||||||||||||||||||||
Total | — | 8,044 | 13,116 | 53 | 21,213 | |||||||||||||||||||||||||||||||||||
2015 | ||||||||||||||||||||||||||||||||||||||||
United States | — | 2,621 | 59 | — | 2,680 | |||||||||||||||||||||||||||||||||||
Netherlands | — | — | 5,474 | — | 5,474 | |||||||||||||||||||||||||||||||||||
Cayman Islands | — | 2,265 | — | — | 2,265 | |||||||||||||||||||||||||||||||||||
Total | — | 4,886 | 5,533 | — | 10,419 | |||||||||||||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||||||||||||||
United States | — | 2,621 | 23 | 43 | 1,692 | - | 8,710 | 55 | 316 | 9,081 | ||||||||||||||||||||||||||||||
Netherlands | — | — | 6,595 | — | 6,595 | - | - | 2,355 | - | 2,355 | ||||||||||||||||||||||||||||||
Austria | — | 168 | — | — | 168 | - | - | 127 | (2 | ) | 125 | |||||||||||||||||||||||||||||
United Kingdom | - | - | 7 | 151 | 158 | |||||||||||||||||||||||||||||||||||
Cayman Islands | — | 778 | — | — | 778 | 469 | 263 | 488 | (752 | ) | 468 | |||||||||||||||||||||||||||||
Total | — | 2,572 | 6,618 | 43 | 9,233 | 469 | 8,973 | 3,032 | (287 | ) | 12,187 | |||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||||||||||||||
United States | - | 12,653 | 9 | 12 | 12,674 | |||||||||||||||||||||||||||||||||||
Netherlands | - | - | 80 | - | 80 | |||||||||||||||||||||||||||||||||||
Austria | - | - | - | 444 | 444 | |||||||||||||||||||||||||||||||||||
United Kingdom | - | 28 | - | 1 | 29 | |||||||||||||||||||||||||||||||||||
Cayman Islands | - | 1,341 | (1 | ) | 1,577 | 2,917 | ||||||||||||||||||||||||||||||||||
Total | - | 14,022 | 86 | 2,034 | 16,144 | |||||||||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||||||||||||||
United States | - | 3,943 | 1 | 12 | 3,956 | |||||||||||||||||||||||||||||||||||
Netherlands | - | - | 3 | - | 3 | |||||||||||||||||||||||||||||||||||
Austria | - | - | - | 595 | 595 | |||||||||||||||||||||||||||||||||||
United Kingdom | - | 28 | - | - | 28 | |||||||||||||||||||||||||||||||||||
Cayman Islands | - | 2,815 | - | 1,290 | 4,105 | |||||||||||||||||||||||||||||||||||
Total | - | 6,786 | 4 | 1,897 | 8,687 |
Non-current assets held for sale
For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.
Liabilities
Deposits
The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.
For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the maturity of time deposits (excluding inter-bank deposits) in denominations of U.S.$100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.
As of December 31, 2021 | ||||||||||
Domestic | International | |||||||||
(in millions of R$) | ||||||||||
Under 3 months | 255,120 | - | ||||||||
3 to 6 months | 25,742 | - | ||||||||
6 to 12 months | 51,483 | - | ||||||||
Over 12 months | 257,622 | - | ||||||||
Total | 589,967 | - |
137 |
The following table presents the total amount of Contentsuninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2021.
As of | Maturing | ||||
Three Months or Less | Over Three Months Through Six Months | Over Six Months Through | Over 12 months | ||
(in millions of R$) | |||||
Total uninsured deposits | 285,967 | 96,146 | 20,896 | 68,960 | 99,965 |
Short-Term Borrowings
The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.
As of December 31, | ||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||
Amount | Average Rate | Amount | Average Rate | Amount | Average Rate | |||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||
Securities sold under agreements to repurchase | ||||||||||||||||||||||||
As of December 31 | 115,964 | 1.76 | % | 112,477 | 1.90 | % | 123,941 | 5.00 | % | |||||||||||||||
Average during the period (1) | 114,484 | 2.58 | % | 112,096 | 2.71 | % | 100,473 | 4.84 | % | |||||||||||||||
Maximum month-end balance | 155,484 | 155,174 | 123,941 | |||||||||||||||||||||
Total short-term borrowings at year end | 115,964 | 112,477 | 123,941 |
(1) | The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months. |
Allowance for Loan Losses
Changes in Allowances for Impairment Losses on the Balances of “Loans and receivables”
The following tables analyze changes in our allowances for impairment losses for the periods indicated. For further discussion of movements in the allowances for impairment losses,information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the YearYears Ended December 31, 2016 Compared to the Year Ended December 31, 2015—Impairment Losses on Financial Assets (Net)”2021, 2020 and “—2019—Results of Operations for the Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014—Operations—Impairment Losses on Financial Assets (Net).”
As of December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Balance at beginning of year | 15,412 | 13,563 | 13,641 | 14,042 | 11,180 | |||||||||||||||
Impairment losses charged to income for the year | 14,383 | 13,723 | 12,049 | 14,356 | 18,004 | |||||||||||||||
Write-off of impaired balances against recorded impairment allowance | (11,605 | ) | (11,874 | ) | (12,126 | ) | (14,757 | ) | (15,142 | ) | ||||||||||
Balance at end of year | 18,191 | 15,412 | 13,563 | 13,641 | 14,042 | |||||||||||||||
Of which: | ||||||||||||||||||||
Loans and advances to customers | 16,435 | 15,233 | 13,421 | 13,472 | 13,967 | |||||||||||||||
Loans and amounts due from credit institutions | 201 | 179 | 142 | 168 | 75 | |||||||||||||||
Debt Instruments | 1,555 | 144 | — | — | — | |||||||||||||||
Recoveries of loans previously written off(1) | 994 | 757 | 855 | 456 | 1,528 |
As of December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Balance at beginning of year | 25,640 | 22,626 | 22,969 | 18,262 | 18,191 | |||||||||||||||
Initial adoption of IFRS 9 | - | - | - | 2,461 | - | |||||||||||||||
Balance adjusted | 25,640 | 22,626 | 22,969 | 20,723 | 18,191 | |||||||||||||||
Impairment losses charged to income for the year | 16,987 | 18,311 | 14,361 | 13,540 | 13,493 | |||||||||||||||
Write-off of impaired balances against recorded impairment allowance | (12,904 | ) | (15,297 | ) | (14,705 | ) | (11,294 | ) | (13,422 | ) | ||||||||||
Balance at end of year | 29,723 | 25,640 | 22,626 | 22,969 | 18,262 | |||||||||||||||
Of which: | ||||||||||||||||||||
Loans and advances to customers | 28,511 | 24,053 | 20,557 | 20,242 | 15,409 | |||||||||||||||
Loans and amounts due from credit institutions | 22 | 9 | 14 | 14 | 69 | |||||||||||||||
Debt Instruments | 1,191 | 1,577 | 2,055 | 2,714 | 2,784 | |||||||||||||||
Recoveries of loans previously written off(1) | 1,536 | 861 | 991 | 827 | 1,154 |
(1) | Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off. |
138 |
Allowance by Type of Borrower
The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Recoveries of loans previously charged off(1) | 1,536 | 861 | 991 | 827 | 1,154 | |||||||||||||||
Commercial and industrial | 463 | 422 | 520 | 345 | 413 | |||||||||||||||
Real estate – construction | 64 | 56 | 47 | 103 | 210 | |||||||||||||||
Installment loans to individuals | 1,002 | 370 | 417 | 370 | 521 | |||||||||||||||
Lease finance | 7 | 13 | 8 | 9 | 10 | |||||||||||||||
Impairment losses charged to income for the year(1) | 16,987 | 18,312 | 14,361 | 13,540 | 13,491 | |||||||||||||||
Commercial and industrial | 3,340 | 6,919 | 2,377 | 3,620 | 5,499 | |||||||||||||||
Real estate – construction | 116 | 81 | 95 | 193 | 471 | |||||||||||||||
Installment loans to individuals | 13,532 | 11,309 | 11,866 | 9,708 | 7,461 | |||||||||||||||
Lease finance | (1 | ) | 3 | 23 | 19 | 61 | ||||||||||||||
Write-off of impaired balances against recorded impairment allowance | (12,904 | ) | (15,297 | ) | (14,705 | ) | (11,294 | ) | (13,422 | ) | ||||||||||
Commercial and industrial | (5,153 | ) | (4,617 | ) | (5,713 | ) | (3,981 | ) | (5,716 | ) | ||||||||||
Real estate – construction | (167 | ) | (232 | ) | (108 | ) | (191 | ) | (342 | ) | ||||||||||
Installment loans to individuals | (7,576 | ) | (10,433 | ) | (8,834 | ) | (7,100 | ) | (7,312 | ) | ||||||||||
Lease finance | (8 | ) | (15 | ) | (49 | ) | (22 | ) | (52 | ) |
(1) | Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off. |
Allowance by Type of Borrower
The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.
For the year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Recoveries of loans previously written off(1) | 994 | 757 | 855 | 456 | 1,528 | |||||||||||||||
Commercial and industrial | 563 | 294 | 185 | 123 | 456 | |||||||||||||||
Real estate | 103 | 86 | 81 | 78 | 64 | |||||||||||||||
Installment loans to individuals | 314 | 348 | 560 | 215 | 960 | |||||||||||||||
Lease finance | 14 | 29 | 29 | 41 | 48 | |||||||||||||||
Impairment losses charged to income for the year(1) | 14,383 | 13,723 | 12,048 | 14,356 | 18,004 | |||||||||||||||
Commercial and industrial | 6,523 | 6,634 | 4,875 | 5,186 | 5,776 | |||||||||||||||
Real estate – mortgage | 369 | 91 | 38 | 126 | 149 | |||||||||||||||
Installment loans to individuals | 7,617 | 6,766 | 6,867 | 8,803 | 11,795 | |||||||||||||||
Lease finance | (125 | ) | 232 | 268 | 241 | 284 | ||||||||||||||
Write-off of impaired balances against recorded impairment allowance | (11,605 | ) | (11,874 | ) | (12,126 | ) | (14,757 | ) | (15,142 | ) | ||||||||||
Commercial and industrial | (4,553 | ) | (4,953 | ) | (4,494 | ) | (3,195 | ) | (4,992 | ) | ||||||||||
Real estate | (190 | ) | (77 | ) | (97 | ) | (177 | ) | (48 | ) | ||||||||||
Installment loans to individuals | (6,811 | ) | (6,622 | ) | (7,337 | ) | (11,093 | ) | (9,855 | ) | ||||||||||
Lease finance | (51 | ) | (222 | ) | (199 | ) | (292 | ) | (247 | ) |
The table below shows a breakdown of allowances for credit losses by type of borrowers and the percentage of loans in each category as a share of total loans at the date indicated.
As of December 31, | ||||||||||||||||||||||||
2021 | % of Total Loans | 2020 | % of Total Loans | 2019 | % of Total Loans | |||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||
Borrowers | ||||||||||||||||||||||||
Commercial and industrial | 8,325 | 28.0 | 9,757 | 38.1 | 7,455 | 33.0 | ||||||||||||||||||
Real estate | 154 | 0.5 | 194 | 0.8 | 345 | 1.5 | ||||||||||||||||||
Installment loans to individuals | 21,240 | 71.5 | 15,676 | 61.1 | 14,800 | 65.4 | ||||||||||||||||||
Lease financing | 4 | - | 14 | 0.1 | 26 | 0.1 | ||||||||||||||||||
Total | 29,723 | 100 | 25,640 | 100.0 | 22,626 | 100.0 | ||||||||||||||||||
As of December 31, | ||||||||||||||||||||||||
2016 | % of Total Loans | 2015 | % of Total Loans | 2014 | % of Total Loans | |||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||
Borrowers | ||||||||||||||||||||||||
Commercial and industrial | 10,555 | 58.0 | 8,586 | 55.7 | 6,905 | 50.9 | ||||||||||||||||||
Real estate | 364 | 2.0 | 184 | 1.2 | 170 | 1.3 | ||||||||||||||||||
Installment loans to individuals | 7,226 | 39.7 | 6,420 | 41. 7 | 6,276 | 46.3 | ||||||||||||||||||
Lease financing | 46 | 0.3 | 222 | 1.4 | 212 | 1.6 | ||||||||||||||||||
Total | 18,191 | 100 | 15,412 | 100.0 | % | 13,563 | 100.0 | % |
Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:
As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in millions of R$) | ||||||||||||
Internal Risk Rating | ||||||||||||
Low | 374,505 | 347,315 | 257,133 | |||||||||
Medium-low | 79,217 | 24,277 | 56,549 | |||||||||
Medium | 14,590 | 26,232 | 11,755 | |||||||||
Medium-high | 9,413 | 3,896 | 8,512 | |||||||||
High | 15,630 | 16,101 | 13,307 | |||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 |
As of December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$) | ||||||||||||
Internal Risk Rating (1) | ||||||||||||
Low | 207,890 | 211,645 | 199,201 | |||||||||
Medium-low | 32,104 | 29,501 | 27,044 | |||||||||
Medium | 10,941 | 8,639 | 7,935 | |||||||||
Medium-high | 6,977 | 8,552 | 5,899 | |||||||||
High | 10,526 | 8,929 | 9,032 | |||||||||
Loans and advances to customers, gross | 268,438 | 267,266 | 249,111 |
139 |
For further information on our internal risk rating levels and their corresponding probability of default, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk—Credit Monitoring.”
Renegotiation Portfolio
The renegotiation portfolio for the year ended on December 31, 20162021 amounted to R$1221.7 billion, compared to R$11.420.5 billion for the same period in 2015,2020, an increase of R$5971,193 million or 5.2%.5.8%, This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
The renegotiation portfolio was covered by allowances for impairment losses of 51.9%44.7% as of December 31, 20162021 and 50.4%44.0% as of December 31, 2015.2020. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
2016 | 2015 | 2014 | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Renegotiation Portfolio by type of customer | ||||||||||||
Commercial and industrial | 5,763 | 5,158 | 5,944 | |||||||||
Real Estate | — | — | — | |||||||||
Installment loans to individuals | 6,130 | 6,173 | 6,650 | |||||||||
Financial leasing | 99 | 64 | 56 | |||||||||
Total | 11,992 | 11,395 | 12,650 | |||||||||
Allowances for impairment losses | 6,226 | 5,740 | 5,784 | |||||||||
Coverage ratio | 51.92 | % | 50.4 | % | 45.7 | % |
2021 | 2020 | 2019 | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Renegotiation Portfolio by type of customer | ||||||||||||
Commercial and industrial | 5,322 | 5,862 | 5,141 | |||||||||
Installment loans to individuals | 16,356 | 14,623 | 10,102 | |||||||||
Financial leasing | 5 | 5 | 239 | |||||||||
Total | 21,683 | 20,490 | 15,482 | |||||||||
Allowances for impairment losses | 9,698 | 9,019 | 7,501 | |||||||||
Coverage ratio | 44.7 | % | 44.0 | % | 48.4 | % |
Balances are deemed to be impaired when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts on the dates indicated in the loan agreement, after taking into account the collateral guarantees received to secure (fully or partially) collection of the related balances.
In relation to renegotiated products, we, throughAs established in our internal renegotiation policy, require at least a minimum amount of payment of quotasin order for any renegotiated products to be consideredclassified as performing, we must, receive an amount equivalent to at least 10% of the total amount outstanding in the six months which follow the renegotiation date (note that the classification of suchthese transactions will remain classified as renegotiated operations will remain even after receiving such payments). Renegotiated loans that are more than 60 days late than due dateoverdue are also accounted for as impaired.
Since 2015, weWe increased our efforts regarding the collection of loans that are less than 60 days past due and also in relation to written off loans. We are also continuing with our strategy (in place since 2012) of granting loans to persons with low risk profile and higher levels of collaterals and guarantees.
Impaired Assets
The following table shows our impaired assets, excluding country risk.
As of December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Impaired assets | ||||||||||||||||||||
Past due and other impaired assets(1) | 18,887 | 18,599 | 14,011 | 14,022 | 16,057 | |||||||||||||||
Impaired assets as a percentage of total loans | 7.0 | % | 7.0 | % | 5.6 | % | 6.2 | % | 7.6 | % | ||||||||||
Net loan charge-offs as a percentage of total loans | 4.3 | % | 4.4 | % | 4.9 | % | 6.5 | % | 7.2 | % | ||||||||||
Net loan charge-offs as a percentage of average total loans | 4.5 | % | 4.5 | % | 5.3 | % | 6.8 | % | 7.5 | % |
As of December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Impaired assets | ||||||||||||||||||||
Past due and other impaired assets(1) | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | |||||||||||||||
Impaired assets as a percentage of total loans | 5.5 | % | 5.5 | % | 6.7 | % | 7.0 | % | 6.7 | % | ||||||||||
Net loan charge-offs as a percentage of total loans | 2.6 | % | 3.7 | % | 4.2 | % | 3.5 | % | 4.7 | % | ||||||||||
Net loan charge-offs as a percentage of average total loans | 2.8 | % | 3.8 | % | 4.6 | % | 3.8 | % | 4.8 | % |
(1) | Includes as of December 31, |
140 |
Evolution of Impaired Assets
Our impaired assets increased by 1.6%16.2%, or R$2893,747 million, to R$18,88826,923 million as of December 31, 2016,2021, compared to R$18,55923,176 million as of December 31, 2015.2020. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 18%15.9%, or R$2,7794,083 million, to R$18,191 29,723 million as of December 31, 2016,2021, compared to R$15,412 25,640 million as of December 31, 2015.2020. Offsetting these effects were recoveries of R$9941,536 million on loans previously written off as of December 31, 20162021 and R$757 861 million as of December 31, 2015.2020.
Santander Brasil believesWe believe the provisions it has takenmade were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2016 and as of the date of this annual report.
2021.
The following table shows the changes in our impaired assets at the dates indicated:
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||
(in millions of R$) | (in millions of R$) | |||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of year | 18,599 | 14,011 | 14,022 | 16,057 | 13,073 | 23,176 | 23,426 | 22,426 | 19,145 | 18,887 | 18,599 | |||||||||||||||||||||||||||||||||
Initial Adoption of IFRS9 (1) | - | - | - | 703 | - | - | ||||||||||||||||||||||||||||||||||||||
Adjusted Balance | 23,176 | 23,426 | 22,426 | 19,848 | 18,887 | 18,599 | ||||||||||||||||||||||||||||||||||||||
Net additions | 11,893 | 16,462 | 12,114 | 12,722 | 18,126 | 18,429 | 14,758 | 16,001 | 13,872 | 13,679 | 11,893 | |||||||||||||||||||||||||||||||||
Write-offs | (11,605 | ) | (11,874 | ) | (12,127 | ) | (14,757 | ) | (15,142 | ) | (14,681 | ) | (15,008 | ) | (15,000 | ) | (11,294 | ) | (13,422 | ) | (11,605 | ) | ||||||||||||||||||||||
Balance at end of year | 18,887 | 18,599 | 14,011 | 14,022 | 16,057 | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | 18,887 |
(1) | Further information, see notes 1 and 9 to our audited consolidated financial statements included elsewhere in this annual report. |
The amount of “net additions” for any period is assets that became impaired in that period less assets that were impaired but became performing in that period. The main addition in 2015 wasIn 2021, the debt of the companies of the gas sector. In 2016, betterrestructuring options were improved to restructure debts decreased themaintain consistent levels of “net additions” to impaired assets, keeping the amount relatively stable.
and “write-offs.”
Impaired Assets by Type of Customer
The following table shows the amount of our impaired assets by type of customers at the dates indicated:
As of December 31, | As of December 31, | |||||||||||||||
2016 | 2015 | 2021 | 2020 | |||||||||||||
(in millions of R$) | (in millions of R$) | |||||||||||||||
Commercial and industrial | 11,629 | 10,749 | 11,440 | 10,558 | ||||||||||||
Real estate | 719 | 829 | 470 | 456 | ||||||||||||
Installment loans to individuals | 6,488 | 6,970 | 14,996 | 12,144 | ||||||||||||
Lease financing | 52 | 52 | 17 | 17 | ||||||||||||
Total | 18,887 | 18,599 | 26,923 | 23,176 | ||||||||||||
Commercial and Industrial
Impaired assets in the portfolio of commercial and industrial loans portfolio amounted to R$11,62911,440 million as of December 31, 2016,2021, an increase of R$880881 million, or 8.2%8.3%, compared to R$10,74910,558 million as of December 31, 2015.2020. The increase in impaired assets in this portfolio was mainlythe result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the slowdown in the Brazilian economy observed in the last two years, affecting our commercial and industrial portfolio. Due to an increase in impaired assets, Santander Brasil kept its measures to manage impaired assets, especially collection practices with respect to our borrowers whereby we offered certain customers the chance to negotiate a restructuring of their debts.
COVID-19 pandemic.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$719470 million on December 31, 2016, a decrease2021, an increase of R$11114 million, or 13.27%3.1%, compared to R$829456 million as of December 31, 2015.2020. The decreaseincrease in impaired assets in this portfolio was primarily due to better managementthe result of this portfolio: with improved options for customers to restructure their debt causing the default rate to decrease to 1.96%, compared to 2.25% asrecurrent growth of December 31, 2015, even with a slowdown in the Brazilian economy, which resulted in higher unemployment rates, affecting the ability of our customers to honor their debts.credit portfolio.
141 |
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$6,48814,996 million as of December 31, 2016,2021, with a decreasean increase of R$4822,852 million, or 6.9%23.5%, compared to 2015. This decrease2020. The increase in impaired assets reflects the measures adopted by Santander Brasil since late 2012 to manage default rates in this portfolio which includedwas the adaptationresult of growth of the credit limits for new customers,portfolio and the developmentdeterioration of new loan models with “predictive scoring” enhancements and recovery campaigns to offer to delinquent customers loan terms adjustments to help them meet their payment obligations.the macroeconomic situation caused by the COVID-19 pandemic.
Lease Financing
Financial Leasing
Impaired assets in the lease financing lending portfolio totaled R$5217 million on December 31, 2016,2021, remaining stable comparedsimilar to the same period last year. This was primarily due to the stability in lending in this portfolio, which decreased by R$33 million, or 1.5%, from R$2,126 million on December 31, 2015 to R$2,093 million on December 31, 2016.2020.
Methodology for Impairment Losses
We evaluate all loans regarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or for loans accounted as amortized cost, collectively evaluated by grouping similar risk characteristics. Loans that are individually evaluated for impairment losses are not evaluated collectively.
To measure the impairment loss on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and financial situation, level of indebtedness, ability to generate income, cash flow, management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of assets, such as their nature and purpose, type,
sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.
To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk, or inrisk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.
The expected loss parameters used to calculate the provisions also consider the type of exposure risk, recovery history and payment of renegotiated portfolio, as well as the probability of default of these operations, which are usually higher when compared to operations which have not been renegotiated.
The impairment lossmeasurement is calculated using statistical models that considermade through the following factors:
Exposure at |
Probability of |
Loss |
Moreover, priorIn order to charging off past due loans (which is only done after we have completed all recovery efforts), we record provisions toestimate the remaining balance ofabove parameters, the loan so our allowanceBank has applied its experience in developing internal models for impairment losses fully covers our losses. Thus, we understand that our allowanceparameters calculation both for impairment losses methodology has been developed to fit its risk metricsregulatory and capture loans that could potentially become impaired.
management purposes.
Loans Past Due for Less Than 90 Days Butbut Not Classified as Impaired
The following table shows the loans past due for less than 90 days but not classified as impaired at the dates indicated:
142 |
As of December 31, | ||||||||||||||||
2016 | % of total | 2015 | % of total | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Commercial and industrial | 4,141 | 23.8 | 5,072 | 24.3 | ||||||||||||
Mortgage loans | 5,202 | 29.9 | 7,552 | 36.1 | ||||||||||||
Installment loans to individuals | 7,957 | 45.7 | 8,236 | 39.4 | ||||||||||||
Lease financing | 109 | 0.6 | 41 | 0.2 | ||||||||||||
Total (*) | 17,409 | 100.0 | % | 20,900 | 100.0 | % |
As of December 31, | ||||||||||||||||
2021 | % of total | 2020 | % of total | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Commercial and industrial | 4,892 | 20.7 | 5,132 | 25.8 | ||||||||||||
Mortgage loans | 3,606 | 15.2 | 3,085 | 15.5 | ||||||||||||
Installment loans to individuals | 15,150 | 64.0 | 11,661 | 58.6 | ||||||||||||
Lease financing | 11 | 0.1 | 13 | 0.1 | ||||||||||||
Total (*) | 23,659 | 100.0 | 19,891 | 100.0 |
(*) | Refers only to loans past due between 1 and 90 days. |
Impaired Asset Ratios
Our credit risk exposure portfolio decreasedincreased by approximately R$9.174.8 billion fromto R$310.9540.9 billion as of December 31, 20152021, compared to R$301.7466.1 billion as of December 31, 2016.2020. Our impaired assets increased by approximately R$289 million3,747 billion in the same period, from R$18.623.2 billion to R$18.926.9 billion. The default rate increaseddecreased by 30 basis points in 20162021 in comparison to 2015. The increase in provisions for impairment losses was mainly caused by2020, primarily due to the slowdown inrecurrent growth of the Brazilian economy in the last two years, which adversely affected our portfolio, in particular our commercial and industrialcredit portfolio. Because of this increase in provisions for impaired assets, we have improved our efforts to better manage our impaired assets and provisions for impairment losses, especially in the commercial and industrial portfolio, by offering certain customers the chance to negotiate and restructure their debts.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
As of December 31, | |||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | |||||||||||||||||
(in millions of R$ except percentages) | |||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | ||||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | ||||||||||||||||
Provisions for impairment losses | 29,723 | 25,640 | 22,626 | 22,969 | 18,262 | ||||||||||||||||
Credit risk exposure Non-GAAP – customers (1) | 540,873 | 466,104 | 391,569 | 364,194 | 330,474 | ||||||||||||||||
Ratios | |||||||||||||||||||||
Impaired assets to credit risk exposure | 5.0 | % | 5.0 | % | 6.0 | % | 6.2 | % | 5.8 | % | |||||||||||
Coverage ratio (2) | 110.4 | % | 110.6 | % | 96.6 | % | 102.4 | % | 95.4 | % | |||||||||||
Impairment losses | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | |||||||||||
Losses on other financial instruments not measured at fair value (3) | - | - | - | - | - | ||||||||||||||||
Impairment losses on financial assets (net) (4) | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | |||||||||||
As of December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$ except percentages) | ||||||||||||||||||||
Loans and advances to customers, gross | 268,438 | 267,266 | 249,111 | 226,206 | 210,741 | |||||||||||||||
Impaired assets | 18,887 | 18,599 | 14,011 | 14,022 | 16,057 | |||||||||||||||
Provisions for impairment losses | 18,191 | 15,412 | 13,563 | 13,641 | 14,042 | |||||||||||||||
Credit risk exposure Non-GAAP – customers (1) | 301,703 | 310,877 | 288,445 | 257,420 | 238,807 | |||||||||||||||
Ratios | ||||||||||||||||||||
Impaired assets to credit risk exposure | 6.3 | % | 6.0 | % | 4.9 | % | 5.4 | % | 6.7 | % | ||||||||||
Coverage ratio(2) | 96.3 | % | 82.9 | % | 96.8 | % | 97.3 | % | 87.5 | % | ||||||||||
Impairment losses | (13,390 | ) | (12,966 | ) | (11,193 | ) | (13,900 | ) | (16,476 | ) | ||||||||||
Losses on other financial instruments not measured at fair value(3) | 88 | (524 | ) | (78 | ) | (218 | ) | — | ||||||||||||
Impairment losses on financial assets (net)(4) | (13,301 | ) | (13,634 | ) | (11,272 | ) | (14,118 | ) | (16,476 | ) |
(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
(2) | Provisions for impairment losses as a percentage of impaired assets. |
(3) | Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).” |
(4) | As of December 31, |
The following chart shows our impaired assets to credit risk ratio from 20112017 through 2016:2021:
143 |
Non-current assets held for saleSelected Credit Ratios
The following table showspresents our selected credit ratios, along with each component of the movementratio’s calculation, as of December 31, 2021, 2020 and 2019.
The following information for Santander Brasil should be read in non-current assets held for sale atconjunction with, the dates indicated.consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”
As of December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Balance at beginning of year | 1,310 | 978 | 324 | |||||||||
Foreclosures loans and other assets transferred | 835 | 293 | 338 | |||||||||
Capital increase in companies held for sale | 10 | 355 | — | |||||||||
Change in the scope of consolidation (1) | (498 | ) | — | 419 | ||||||||
Sales | (239 | ) | (317 | ) | (103 | ) | ||||||
Final balance, gross | 1,418 | 1,310 | 978 | |||||||||
Impairment losses | (80 | ) | (73 | ) | (48 | ) | ||||||
Impairment as a percentage of foreclosed assets | 5.7 | % | 5.5 | % | 4.9 | % | ||||||
Balance at end of year | 1,338 | 1,237 | 930 |
As of December 31, | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Allowance for credit losses to total loans outstanding | ||||||||||||
Allowance for credit losses | 22,626 | 25,640 | 29,723 | |||||||||
Total loans outstanding | 347,257 | 417,822 | 493,355 | |||||||||
Credit ratio | 6.52 | % | 6.14 | % | 6.02 | % | ||||||
Nonaccrual loans to total loans outstanding | ||||||||||||
Total nonaccrual loans outstanding | 23,426 | 23,176 | 26,923 | |||||||||
Total loans outstanding | 347,257 | 417,822 | 493,355 | |||||||||
Credit ratio | 6.75 | % | 5.55 | % | 5.46 | % | ||||||
Allowance for credit losses to nonaccrual loans | ||||||||||||
Allowance for credit losses | 22,626 | 25,640 | 29,723 | |||||||||
Total nonaccrual loans outstanding | 23,426 | 23,176 | 26,923 | |||||||||
Credit ratio | 96.6 | % | 110.6 | % | 110.4 | % | ||||||
Net charge-offs during the period to average loans outstanding | ||||||||||||
Net charge-offs during the period | (14,705 | ) | (15,297 | ) | (12,904 | ) | ||||||
Average amount outstanding | 324,190 | 394,542 | 471,068 | |||||||||
Credit ratio | 4.5 | % | 3.9 | % | 2.7 | % | ||||||
Commercial and industrial: | ||||||||||||
Net charge-offs during the period | (5,713 | ) | (4,617 | ) | (5,153 | ) | ||||||
Average amount outstanding | 132,372 | 176,750 | 214,286 | |||||||||
Credit ratio | 4.3 | % | 2.6 | % | 2.4 | % | ||||||
Real estate: | ||||||||||||
Net charge-offs during the period | (108 | ) | (232 | ) | (167 | ) | ||||||
Average amount outstanding | 38,107 | 42,368 | 51,883 | |||||||||
Credit ratio | 0.3 | % | 0.5 | % | 0.3 | % | ||||||
Installment loans to individuals: | ||||||||||||
144 |
Net charge-offs during the period | (8,834 | ) | (10,433 | ) | (7,576 | ) | ||||||
Average amount outstanding | 151,735 | 173,336 | 202,578 | |||||||||
Credit ratio | 5.8 | % | 6.0 | % | 3.7 | % | ||||||
Lease financing: | ||||||||||||
Net charge-offs during the period | (49 | ) | (15 | ) | (8 | ) | ||||||
Average amount outstanding | 1,975 | 2,089 | 2,321 | |||||||||
Credit ratio | 2.5 | % | 0.7 | % | 0.3 | % |
LiabilitiesAllowance for credit losses to total loans outstanding
In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.
DepositsIn 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.
The principal componentsNonaccrual loans to total loans outstanding
In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers areDecember 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the principal source of our demand, time and notice deposits.growth in total loans outstanding over nonaccrual loans.
In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.
Allowance for credit losses to nonaccrual loans
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.
In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.
Net charge-offs during the period to average loans outstanding
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.
Commercial and Industrial Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.
145 |
The following tables analyzeReal Estate Loans
In 2021, our deposits atnet charge-offs during the dates indicated.
As of December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$) | ||||||||||||
Deposits from the Brazilian Central Bank and Credit Institutions | ||||||||||||
Time deposits | 49,549 | 55,795 | 42,045 | |||||||||
Demand deposits | 314 | 145 | 162 | |||||||||
Repurchase agreements | 28,771 | 13,511 | 21,468 | |||||||||
of which: | ||||||||||||
Backed operations with Private Securities(1) | 446 | 85 | 961 | |||||||||
Backed operations with Public Securities | 28,324 | 13,427 | 20,507 | |||||||||
Total deposits of the Brazilian Central Bank and Credit Institutions | 78,634 | 69,451 | 63,674 | |||||||||
Customer deposits | ||||||||||||
Current accounts | 15,868 | 15,580 | 15,507 | |||||||||
Savings accounts | 36,051 | 35,985 | 37,939 | |||||||||
Time deposits | 94,478 | 89,986 | 91,552 | |||||||||
Repurchase agreements | 101,047 | 101,492 | 75,645 | |||||||||
of which: | ||||||||||||
Backed operations with Private Securities(1) | 59,460 | 61,174 | 46,699 | |||||||||
Backed operations with Public Securities(1) | 41,586 | 40,318 | 28,946 | |||||||||
Total Customer deposits | 247,445 | 243,043 | 220,644 | |||||||||
Total deposits | 326,079 | 312,494 | 284,318 |
The following table shows the maturityperiod to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of time deposits (excluding inter-bank deposits)December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in denominationsaverage loans outstanding and a decrease of U$100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.
As of December 31, 2016 | ||||||||
Domestic | International | |||||||
(in millions of R$) | ||||||||
Under 3 months | 2,956 | 2,563 | ||||||
3 to 6 months | 18,135 | 436 | ||||||
6 to 12 months | 4,602 | 277 | ||||||
Over 12 months | 10,358 | 475 | ||||||
Total | 36,051 | 3,752 |
Short-Term Borrowings28.0% in net charge-offs.
The following table showsIn 2020, our short-term borrowings consistingnet charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of government securities that we sold under agreementsDecember 31, 2019 to repurchase for purpose0.5% as of funding our operations.December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.
As of December 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||
Amount | Average Rate | Amount | Average Rate | Amount | Average Rate | |||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||
Securities sold under agreements to repurchase | ||||||||||||||||||||||||
As of December 31 | 131,016 | 13.60 | % | 115,003 | 14.15 | % | 97,113 | 10.7 | % | |||||||||||||||
Average during the period (1) | 124,705 | 14.11 | % | 89,046 | 14.24 | % | 80,337 | 10.7 | % | |||||||||||||||
Maximum month-end balance | 131,016 | 103,105 | 96,844 |
Installment Loans to Individuals
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.
TableIn 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of ContentsDecember 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.
As of December 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||
Amount | Average Rate | Amount | Average Rate | Amount | Average Rate | |||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||||
Total short-term borrowings at year end | 131,016 | 115,003 | 97,113 |
Lease Financing Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.
4C. Organizational Structure |
Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V. (“Sterrebeeck”), or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2016,2021, Santander Spain held, directly and indirectly, 88.8%89.53% of our voting stock (not including the shares held by Banco Madesant - Sociedade Unipessoal).
Santander Spain ended December 2016 as the largest bank in the euro zone, with a market capitalization of approximately €72,314 million. As of December 31, 2016, Santander Spain’s attributable profit totaled €6,621 million, 0.8% higher than the previous year, and the total shareholder remuneration on account of the earnings for the 2016 financial year is €0.41 per share. The Santander Group operates principally in Spain, the United Kingdom, other European countries, Brazil and other Latin American countries and the United States, offering a wide range of financial products. In Latin America, the Santander Group has majority shareholdings in financial institutions in Argentina, Brazil, Chile, Mexico, Peru, Puerto Rico and Uruguay. As of December 31, 2016, Santander Brasil contributed 21% of the profit attributable to the Santander Group.
stock.
The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:
Ownership Interest | ||||||||||||
Activity | Country of Incorporation | Direct | Total Direct and Indirect | |||||||||
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. | ||||||||||||
Banco Bandepe S.A. | Bank | Brazil | 100.00 | % | 100.00 | % | ||||||
Santander Leasing S.A. Arrendamento Mercantil | Leasing | Brazil | 78.57 | % | 99.99 | % | ||||||
Aymoré Crédito, Financiamento e Investimento S.A. | Financial | Brazil | 100.00 | % | 100.00 | % | ||||||
Santander Brasil Administradora de Consórcio Ltda. | Buying club | Brazil | 100.00 | % | 100.00 | % | ||||||
Santander Microcrédito Assessoria Financeira S.A. | Microcredit | Brazil | 100.00 | % | 100.00 | % | ||||||
Santander Brasil Advisory Services S.A. | Other Activities | Brazil | 96.58 | % | 96.58 | % | ||||||
Atual Companhia Securitizadora de Créditos Financeiros. | Securitization | Brazil | 100.00 | % | 100.00 | % | ||||||
Santander Corretora de Câmbio e Valores Mobiliários S.A. | Broker | Brazil | 99.99 | % | 100.00 | % | ||||||
Santander Participações S.A. | Holding | Brazil | 100.00 | % | 100.00 | % | ||||||
GetNet Adquirência e Serviços para Meios de Pagamento S.A.(1) | Payment Institution | Brazil | 88.50 | % | 88.50 | % | ||||||
Sancap Investimentos e Participações S.A. | Holding | Brazil | 100.00 | % | 100.00 | % | ||||||
Santander Brasil, EFC | Financial | Spain | 100.00 | % | 100.00 | % | ||||||
Santander S.A. Serviços Técnicos, Administrativos e de Corretagem de Seguros | Insurance Broker | Brazil | 60.65 | % | 60.65 | % | ||||||
Controlled by Santander Serviços | ||||||||||||
Webcasas S.A. | Other Activities | Brazil | — | 100.00 | % |
Country of Incorporation | Ownership Interest | |||||||||||
Indirect | ||||||||||||
subsidiaries of Banco Santander (Brasil) S.A. (1) | ||||||||||||
Credit Recovery Services | Brazil | 100.00% | ||||||||||
Leasing | Brazil | 100.00% | ||||||||||
Aymoré Crédito, Financiamento e Investimento S.A. | Financial | Brazil | 100.00% | |||||||||
Santander Brasil Administradora de Consórcio Ltda. | Brazil | 100.00% | ||||||||||
Santander Corretora de Câmbio e Valores Mobiliários S.A. | Broker | Brazil | 100.00% | |||||||||
Brazil | 100.00% | |||||||||||
Holding | Brazil | 100.00% |
Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) | Holding | Brazil | 100.00% | |||||||||
F1RST Tecnologia e Inovação Ltda. | Technology | Brazil | 100.00% | |||||||||
Rojo Entretenimento S.A. | Other Activities | Brazil | 94.60% | |||||||||
Sanb Promotora de Vendas e Cobrança Ltda. | Other Activities | Brazil | 100.00% | |||||||||
BEN Benefícios e Serviços S.A. | Other Activities | Brazil | 100.00% | |||||||||
Esfera Fidelidade S.A. | Other Activities | Brazil | 100.00% | |||||||||
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. | Technology | Brazil | 80.00% | |||||||||
Paytec Tecnologia em Pagamentos Ltda. | Other Activities | Brazil | 100.00% | |||||||||
SX Negócios Ltda. | Other Activities | Brazil | 100.00% | |||||||||
Controlled by | Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.) | |||||||||||
Credit Recovery Services | ||||||||||||
Liderança Serviços Especializados em Cobranças Ltda. | Credit Recovery Services | Brazil | 100.00% | |||||||||
Controlled by | Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) | |||||||||||
Asset Management | ||||||||||||
Controlled by | Sancap Investimentos e Participações S.A. | |||||||||||
Savings and annuities | ||||||||||||
Social Securities | ||||||||||||
Controlled by | Aymoré Crédito, Financiamento e Investimento S.A. | |||||||||||
Bank | ||||||||||||
Banco Hyundai Capital Brasil S.A. (current name of BHJV Assessoria e Consultoria Empresarial Ltda.) | Bank | Brazil | 50.00% | |||||||||
Solutions 4 Fleet. | Other Activities | Brazil | 80.00% | |||||||||
Controlled by Santander | Leasing S.A. Arrendamento Mercantil | |||||||||||
Bank | ||||||||||||
PI Distribuidora de Títulos e Valores Mobiliários S.A. | Leasing | Brazil | 100.00% | |||||||||
Controlled by | ||||||||||||
Broker | 60.00% | |||||||||||
Brazil | 100.00% | |||||||||||
Santander Auto S.A. | Other Activities | 50.00% | ||||||||||
Santander Fundo de Investimento Unix Multimercado Crédito Privado | Investment Fund | Brazil | (a) | |||||||||
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) | |||||||||
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) | |||||||||
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado | Investment Fund | Brazil | (a) | |||||||||
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) |
Santander Paraty QIF PLC | Investment Fund | Brazil | (a) | |||||||||
Santander FI Hedge Strategies Fund | Investment Fund | Brazil | (a) | |||||||||
BRL V - Fundo de Investimento Imobiliário-FII | Real Estate Investment Fund | Brazil | ||||||||||
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado | Investment Fund | Brazil | ||||||||||
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos | Investment Fund | Brazil | (a) | |||||||||
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior | Investment Fund | Brazil | (a) | |||||||||
Verbena FCVS - Fundo de Investimento em Direitos Creditórios | Investment Fund | Brazil | (a) | |||||||||
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado | Investment Fund | Brazil | (a) |
(a) | Company to which we are exposed or have rights to variable returns and have the ability to affect those returns by making certain decisions in accordance with IFRS 10 - Consolidated Financial Statements. We and/or our subsidiaries hold 100% of the |
(1) |
(2) |
Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund. |
4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 426385 properties for the activities of our banking network and rent 1,6131,719 properties for the same purpose. Furthermore, in 2014, we opened and concluded the migration oftransferred our operation to thea new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—Item 4. Information on the Company—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Av.Avenida Presidente Juscelino Kubitschek, 2,041 and 2,235 (Torre Sã2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, Paulo)–Bloco A, Vila Olímpia, São Paulo, State04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A. Operating Results |
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2016, 20152021, 2020 and 20142019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated as a resultbecause of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2016, 20152021, 2020 and 2014,2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”
Financial Presentation
We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”
Brazilian Macroeconomic Environment
In 2012, in a challenging market environment, the economy slowed down substantially (with real GDP growth of 1.9%), which resulted in a direct impact on credit quality in Brazil. As a consequence, the financial system suffered an increase in overall delinquency ratios, driven mainly by lending to individuals. The efforts of the government and the Brazilian Central Bank to increase liquidity and boost the economy continued in 2012, with additional measures such as reducing reserve requirements on time deposits and demand deposits and channeling liquidity to smaller banks.
In 2013, the pace of economic growth accelerated (with real GDP growth of 3.0%), and the credit quality in Brazil had improved, especially in lending to individuals. The delinquency ratio decreased, in a reversal from the trend of an increasing delinquency ratio in 2012 as compared to 2011, reaching 2.8% as of December 31, 2013 as compared to 3.5% in 2012, and unemployment reached historically low rates.
In 2014, the economy slowed down substantially (with real GDP growth of 0.5%. However, the downward trend of the economy did not result in a direct impact on credit quality in Brazil. The improvement in credit quality throughout 2012 and 2013 did not result in a change in overall delinquency ratios, despite a slowdown of the economy. The delinquency ratio reached 2.7% as of December 31, 2014 as compared to 2.8% in 2013, and unemployment reached historically low rates.
In 2015, the economy deteriorated further and government policy adjustments resulted in further tightening of monetary policy, tightening of federal government spending and tax increases, the depreciation of thereal against the dollar and a realignment of public tariff prices. These factors contributed to a decrease in disposable income, which further slowed down the economy. Despite all the economic adjustments implemented throughout the year, the fiscal imbalance widened and the GDP contracted by 3.8% during 2015, which led to Brazil being downgraded to non-investment grade status by S&P in September 2015, Fitch Ratings in December 2015 and Moody’s in February 2016. Various major Brazilian companies were also downgraded. Such downgrades have further worsened the conditions of the Brazilian economy and the financial condition of Brazilian companies, especially those relying on foreign investments.
The recession continued throughout 2016, with GDP contracting 3.6%. However, market conditions improved markedly after a turbulent first quarter: inflation started to fall and ended the year within the official target band (at 6.3%), the currency strengthened, and the Central Bank started cutting the overnight interest rate. Fiscal deficits remained high, but a broad reform agenda, including the imposition of a freeze in government spending in real terms (already approved by the Congress) and a proposed social security reform helped to put the debt/GDP ratio on a more sustainable path, which appeared to have a positive impact on markets.
Other Factors Affecting Our Financial Condition and Results of Operations
Overview
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
149 |
For the year ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
GDP growth(1) | (3.6 | )% | (3.8 | )% | 0.5 | % | ||||||
CDI rate(2) | 14.0 | % | 13.2 | % | 10.8 | % | ||||||
TJLP(3) | 7.50 | % | 7.00 | % | 5.0 | % | ||||||
SELIC rate(4) | 13.75 | % | 14.25 | % | 11.75 | % | ||||||
Increase (decrease) inrealrate against the U.S. dollar | (17 | )% | 47.0 | % | 13.4 | % | ||||||
Selling exchange rate (at period end) R$ per U.S.$1.00 | 3.26 | 3.90 | 2.66 | |||||||||
Average exchange rate R$ per U.S.$1.00(5) | 3.49 | 3.33 | 2.35 | |||||||||
Inflation (IGP-M)(6) | 7.2 | % | 10.5 | % | 3.7 | % | ||||||
Inflation (IPCA)(7) | 6.3 | % | 10.7 | % | 6.4 | % |
As of and For the Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
GDP growth(1) | 4.6 | % | (4.1 | %) | 1.2 | % | ||||||
CDI Rate | 4.4 | % | 2.1 | % | 6.0 | % | ||||||
TJLP | 5.3 | % | 4.6 | % | 5.6 | % | ||||||
SELIC rate | 9.25 | % | 2.0 | % | 4.5 | % | ||||||
Selling exchange rate (at period end) R$ per U.S.$1.00 | 5.58 | 5.20 | 4.03 | |||||||||
Decrease (increase) in real rate against the U.S. dollar | 7.4 | % | 28.9 | % | 4.0 | % | ||||||
Average exchange rate R$ per U.S.$1.00(2) | 5.40 | 5.16 | 3.94 | |||||||||
Inflation (IGP-M) | 17.8 | % | 23.1 | % | 7.3 | % | ||||||
Inflation (IPCA) | 10.06 | % | 4.5 | % | 4.3 | % |
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) |
(2) |
Average of the selling exchange rate for the business days during the period. |
Interest Rates
The persistenceGeneral economic stability in Brazil following the onset of uncertaintythe global financial crisis in international markets and the first signs of a slowdown in domestic activity led2009 allowed the Brazilian Central Bank to begin monetary easing in August 2011. Thus, the SELIC rate was cut by 525 basis points between August 2011continue its policy of reducing interest rates. Due to inflation and December 2012. On October 10, 2012, the SELIC rate reached an annual rate of 7.25%, the lowest level in history. In 2013,other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a monetary tightening cycle due to rising inflation (in the 6% range), the depreciation of thereal, and a perception of the recovery of certain economic activity. The SELICbenchmark interest rate, was increased by 275 basis points, reaching 10% on November 27, 201310.00% at the last monetary policy committee meetingend of December 31, 2013, 11.75% at the year.end of December 31, 2014 and 14.25% at the end of December 31, 2015. The SELIC rate continued to increase in 2014, reaching 11.75% in December, 2014. On January 21, 2015, the SELIC rate was increased to 12.25%, reaching 12.75% on March 3, 2015. In April 2015, the SELIC rate was 13.25%. The monetary tightening cycle was extended until July 2015, when the SELIC rate reached 14.25%. In October 2016, the Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC rate toreaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has reached 12.25%increased the SELIC rate to 10.75% p.a. as of the date of this annual report. A.
The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial asset prices. Brazil’s economy has been severely affected by the COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.
Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.
Impact of COVID-19 on the Brazilian Economy
The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December
150 |
31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.
Interest Rates
An increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
The following table presents the low, high, average and period-end SELIC rate since 2012,2016, as reported by the Brazilian Central Bank:
Low | High(1) | Average(2) | Period-End | |||||||||||||
Year | ||||||||||||||||
2012 | 7.25 | 10.50 | 8.46 | 7.25 | ||||||||||||
2013 | 7.25 | 10.00 | 8.44 | 10.00 | ||||||||||||
2014 | 10.00 | 11.75 | 11.02 | 11.75 | ||||||||||||
2015 | 11.75 | 14.25 | 13.58 | 14.25 | ||||||||||||
2016 | 13.75 | 14.25 | 14.15 | 13.75 | ||||||||||||
2017 (through March 24) | 12.25 | 13.00 | 12.50 | 12.25 |
Low | High(1) | Average(2) | Period-End | |
Year | ||||
2016 | 13.75 | 14.25 | 14.15 | 13.75 |
2017 | 7.00 | 13.75 | 9.83 | 7.00 |
2018 | 6.50 | 7.00 | 6.75 | 6.50 |
2019 | 4.50 | 6.50 | 6.13 | 4.50 |
2020 | 2.00 | 4.50 | 2.81 | 2.00 |
2021 | 2.00 | 9.25 | 4.81 | 9.25 |
2022 (through February 22, 2022) | 9.25 | 10.75 | 9.86 | 10.75 |
(1) | Highest month-end rate. |
(2) | Average of month-end rates during the period. |
Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2016,2021, a 100 basis100-basis point increase in the yield curve would have resulted in R$385 553 million decline in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2012, with2019, the economic activity slowdown, the household debt burden (defined as the percentageratio of monthly available family income owed to service debt) increased to 22.5%, and the level of non-performingnonperforming loans to individuals was approximately 5.2%. The annual growth of outstanding credit decreased to 16.4%. The slowdown in credit growth continued through 2013 and 2014, even with a remarkable expansion of credit supply by state-owned banks. The total outstanding credit increased 14.5% and 11.3% in 2013 and 2014, respectively. The level of non-performing loans decreased to 3.7%,reached 3.5% and the household debt burden decreased to 21.9% at the endreached 23.9% of 2014. The slowdown in credit growth continued through 2015, with an annual growth ofhousehold income. In 2020, outstanding credit increased 15.6% as a result of 6.7%,credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of non-performingnonperforming loans to individuals increased to 4.2% and a decrease of 2.8% in 2021, while further increasing the household debt burden to 21.2%.24.4% of household income. In 2016,2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit contracted 3.5% in nominal terms, but delinquency continued to fall:expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of non-performingnonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 3.9%27.9% of household income).
The total outstanding credit to GDP ratio increased from 34.7% in December 2007 to 54.5% in December 2015 and fell to 49% in 2016.
2016 | 2015 | 2014 | ||||||||||
(in billions of R$) | ||||||||||||
Total Credit Outstanding (*) | 3,107 | 3,217 | 3,017 | |||||||||
Earmarked credit | 1,550 | 1,582 | 1,441 | |||||||||
Non-earmarked based credit | 1,557 | 1,635 | 1,577 | |||||||||
of which: | ||||||||||||
Corporate | 747 | 832 | 793 | |||||||||
Individuals (retail) | 809 | 803 | 783 |
2021 | 2020 | 2019 | |
(in billions of R$) | |||
Total Credit Outstanding (*) | 4,684 | 3,261 | 3,471 |
Earmarked credit | 1,881 | 1,500 | 1,465 |
Non-earmarked based credit | 2,803 | 1,761 | 2,006 |
of which: | |||
Corporate | 1,291 | 814 | 905 |
Individuals (retail) | 1,513 | 948 | 1,101 |
(*) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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Foreign Exchange Rates
Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2016,2021, we recorded foreign exchange revenuesexposure of R$4,575 million. In 2015, we recorded117,400 million, foreign exchange revenuesexposure of R$10,084 million. In 2014, we recorded (124,437) million in 2020 and foreign exchange lossesexposure of R$3,636 million.11,208 million in 2019. These results are due to the variation of the U.S. dollar against thereal on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”
, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. Most recently, thereal was R$1.566 per U.S.$1.00 in August 2008. Primarily as a result of the crisis in the global financial markets, thereal depreciated 31.9% against the U.S. dollar, reaching R$2.337 per U.S.$1.00 at year end 2008. In 2009 and 2010, thereal appreciated against the U.S. dollar and reaching R$1.666 per U.S.$1.00 at year end 2010. During 2011, thereal depreciated and on December 31, 2011 the exchange rate was R$1.876 per U.S.$1.00. During 2012, 2013 and 2014, thereal continued to depreciate and on December 31, 2014, the exchange rate was R$2.656 per U.S.$1.00. During 2015, thereal depreciated significantly mainly as a result of deteriorating economic conditions in Brazil, including Brazil being downgraded to non-investment grade status by S&P and Fitch Ratings, and a decrease in global commodities prices, and on December 31, 2015, the exchange rate was R$3.9048 per U.S.$1.00. During 2016, thereal appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a small depreciation of 1.5% to R$3.31 per U.S.$1.00 as of December 31, 2017. The real depreciated further against the U.S. dollar throughout 2018, with a depreciation of 17%, On December 31, 2018, the exchange rate was R$3.87 per U.S.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.
the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Inflation
The adoption of inflation targeting in 1999 resulted in a significant reduction in inflation rates in Brazil (measured by the IPCA, Consumer Price Index, the official inflation rate provided by the IBGE). In recent years, inflation hashad been oscillating around the target, which is set by the CMN. TheCMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target which is still in effect, has been set atthe last couple of years. From 2005 to 2018, the targeted level was 4.5% since 2005, with a tolerance interval of 2% above2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and below this target. The tolerance intervaladditional 0.25 percentage point decreases were defined for 2017the targets until 2024, when the goal will be 3.00%.
Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was reducedclose to 1.5% in 2015, and this narrower band was also adoptedthe top of the fluctuation range in the following year for 2018.
In 2012, consumer priceBrazilian Central Bank’s inflation showed a mild reduction to 5.8%, mainly due to the impact of reductions in the taxes applicable to durable goods. The inflation rate was 5.9% in 2013 due to inflation in the price of services of 8.7% combined with strong inflation in the price of food of 8.5%, which was partially offset by low inflation in certain price-regulated sectors, such as urban transport fares and electricity and telecommunication tariffs. However, in 2014, regulated prices inflation increased, bringing the overall rate of consumer inflation to 6.4%.targeting range. In 2015, as a result of the indexation of a significant portion of contracts for services to the inflation levels of the previous years, the impact of adjustment of tariffs and the impact of the depreciation of thereal on prices, the inflation rate reached a level of 10.7%, the highest on record since May 2005 and well above the Brazilian Central Bank’s inflation target of 4.5%. In 2016,2017, inflation fell substantially as a result of the consistent efforts of the Brazilian Central Bank to reduce the inflation rate, ending the year at 6.3% (twelve-month accumulated rate)2.95%. As a result, the Brazilian Central Bank was required to send a letter to the CMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the monetary policy in Brazil. In 2019, as a result of temporary price shocks affecting edible items, inflation ended the year slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and reached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which
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increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.
Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the operational results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our operational results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows the requirements for reserves and credit to which we are subject for each financing category:
Product | As of December 31, 2016 | As of December 31, 2015 | Form of Required Reserve | Yield | ||||||||
Demand deposits | ||||||||||||
Rural credit loans(1) | 34.0 | % | 34.0 | % | Loans | Cap rate: 9.5% p.a. | ||||||
Microcredit loans(2) | 2.0 | % | 2.0 | % | Loans | Cap rate: 2.0% p.m. | ||||||
Reserve requirements | 45.0 | % | 45.0 | % | Cash | Zero | ||||||
Additional reserve requirements | 0.0 | % | 0.0 | % | Cash | SELIC | ||||||
Free funding(3) | 19.0 | % | 19.0 | % | ||||||||
Savings accounts | ||||||||||||
Mortgage loans | 65.0 | % | 65.0 | % | Loans | Cap of TR + 12.0% p.a. | ||||||
TR + 6.17% p.a., or | ||||||||||||
Reserve requirements(4) | 24.5 | % | 24.5 | % | Cash | TR + 70.0% of the target SELIC | ||||||
Additional reserve requirements | 5.5 | % | 5.5 | % | Cash | SELIC | ||||||
Free funding(3) | 5.0 | % | 5.0 | % | ||||||||
Time deposits | ||||||||||||
Reserve requirements | 25.0 | % | 25.0 | % | ||||||||
In cash or other instruments(5) | 15.0 | % | 15.0 | % | Cash or other instruments | SELIC for Cash | ||||||
In cash | 10.0 | % | 10.0 | % | Cash | SELIC | ||||||
Additional reserve requirements | 11.0 | % | 11.0 | % | Cash | SELIC | ||||||
Free funding(3) | 64.0 | % | 64.0 | % |
Product | As of December 31, 2021 | As of December 31, 2020 | Form of Required Reserve | Yield | ||||||||
Demand deposits | ||||||||||||
Rural credit loans(1) | 25.00 | % | 27.50 | % | Loans | Cap rate: 7.5% p.a. | ||||||
Microcredit loans(2) | 2.00 | % | 2.00 | % | Loans | Cap rate: 4.0% p.m. | ||||||
Reserve requirements(3) | 21.00 | % | 21.00 | % | Cash | Zero | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Free funding(4) | 52.00 | % | 49.50 | % | ||||||||
Savings Accounts | ||||||||||||
Mortgage loans | 65.00 | % | 65.00 | % | Loans | Cap rate (SFH): TR + 12.0% p.a. | ||||||
Reserve requirements(2) | 20.00 | % | 20.00 | % | Cash | TR + 6.17% or TR + 70.00% of the target SELIC | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | Cash | n/a | |||||||
Free funding(4) | 15.00 | % | 15.00 | % | ||||||||
Time deposits | ||||||||||||
Reserve requirements(3) | 20.00 | % | 17.00 | % | Cash | SELIC | ||||||
In cash or other instruments | 0.00 | % | 0.00 | % | Cash or other instruments | n/a | ||||||
In cash | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Free funding(4) | 80.00 | % | 83.00 | % |
(1) | Rural credits are credits granted to farmers in the amount |
(2) |
(3) | Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145. |
(4) | Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category. |
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Taxes
See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”
Hedging in Foreign Investments
We operate a branchtwo foreign branches, one in the Cayman Islands, and aanother one in Luxembourg. We previously operated an independent wholly-owned subsidiary in Spain, named Santander Brasil EstablecimientoEstabelecimiento Financiero de Credito, EFC, or “Santander EFC” (an independent wholly-owned subsidiary in Spain) which iswe used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. Under Brazilian income tax rules, the gains or losses resultingLaw No. 14,031, dated July 28, 2020, set that, from the impact of appreciation or devaluationJanuary 2021 until December 2021 50% of thereal on foreign investments is non-taxable. This tax treatment results in volatilityexchange variation of the income tax line itemportion of investments abroad that are subject to hedge must be computed in our income statement. This asymmetry is offset through a derivative positionthe determination of real profits and in U.S. dollar futures, which generates gains or losses dependent on any devaluation or appreciationthe calculation of the taxable base of the social contribution over net income (realContribuição Social Sobre o Lucro Líquido), whichor “CSLL,” of an investing legal entity domiciled in Brazil. From January 2022, the foreign exchange variation of investments abroad is our strategy to protect our after-tax results.fully computed in the basis of the IRPJ and the CSLL. The reconciliation of our effective tax rate to the statutory tax rate is set forth in note 23b to our audited consolidated financial statements as ofincluded elsewhere in this annual report. Santander EFC was operational from 2012 until 2020, when we approved its liquidation. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and for the year ended December 31, 2016.Supervision—Other Applicable Laws and Regulations—Foreign Subsidiary.”
Goodwill of Banco Real
We generated goodwill of R$27 billion as a result of our acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill for impairment at least annually or whenever there are indications of impairment. In 2016, 20152021, 2020 and 2014,2019, the recoverable goodwill amounts are determined from “value in use” calculations. For this purpose, we estimate cash flow for a period of five years. We prepare cash flow estimates considering several factors, including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate of, and long-term adjustments to, cash flows. These estimates rely on assumptions regarding the likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by an independent research company, which is reviewed and approved by the board of directors. Therefore, amortization of goodwill related tofor tax purposes generates a permanent difference and, as a result, no record of the deferred tax liability.
The following table shows the main assumptions for the basis of valuation as of the dates indicated.
2016 | 2015 | 2014 | ||||||||||
(Value in use: cash flows) | ||||||||||||
Main Assumptions(*) | ||||||||||||
Basis of valuation | ||||||||||||
Period of the projections of cash flows(1) | 5 years | 5 years | 5 years | |||||||||
Growth rate(2) | 8.0 | % | 7.5 | % | 7.0 | % | ||||||
Discount rate(3) | 15.2 | % | 15.2 | % | 14.4 | % |
2021 | 2020 | 2019 | ||||||||||
(Value in use: cash flows) | ||||||||||||
Main Assumptions(*) | ||||||||||||
Basis of valuation | ||||||||||||
Period of the projections of cash flows(1) | 5 years | 5 years | 5 years | |||||||||
Growth rate(2) | 4.0 | % | 4.3 | % | 4.8 | % | ||||||
Discount rate(3) | 12.3 | % | 12.4 | % | 12.5 | % |
(1) | The projections of cash flow are prepared using internal budget and growth plans of management, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation. |
(2) | The growth rate is calculated based on areal growth rate of |
(3) | The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is |
(*) | The recoverability test |
We performed a sensitivity test in the goodwill impairment analysis considering the main assumptions that could reasonably be expected to possibly change, as required by the IFRS. Accordingly, we applied such a test considering the discount rate and perpetuity growth rate as the main assumption subject to reasonably possible change and we did not identify any impairment to goodwill.
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Other Factors Affecting the Comparability of Our Results of Operations
SaleIn addition, our results of SSS DTVM
On June 19, 2014, we executed preliminary documents containing the main termsoperations have been influenced and conditions of the sale of our qualified custody business and the sale of our subsidiary SSS DTVM, which renders third party fund administration services, to a holding company owned by Santander Spain and a group of private equity funds managed by Warburg Pincus. Following the sale, we will continue to act as the administrator of the funds, as per CVM Instruction No. 306, dated as of May 5, 1999, as amended.
The closing of the transaction occurred on August 31, 2015, when all of our shares in SSS DTVM were formally transferred to Santander Securities Brasil and SSS DTVM acquired our qualified custody business. We received R$859 million at the closing of the transaction which generated gains of R$751 million before taxes recorded in the “Other non-financial gains/losses” line.
Plans to Optimize our Capital Structure
On September 26, 2013, we announced that, in order to optimize our capital structure, our board of directors submitted a proposal to optimize the composition of our regulatory capital to our shareholders for their approval (“PR Optimization Plan”). The aim was to establish a more efficient capital structure, consistent with recent capital rules and aligned with our business strategy and asset growth plan. The PR Optimization Plan was composed of the following items: (i) an equity distribution to the shareholders of Santander Brasil in the total amount of R$6 billion, with no reduction in the number of shares; (ii) the issuance abroad of capital instruments to compose Tier I and Tier II of our regulatory capital; and (iii) a bonus share program and an adjustment in the composition of the Units, followed by a reverse share split (inplit), with the purpose of eliminating trading in cents ofreais.
Equity Distribution
On November 1, 2013, the proposal for equity distribution to shareholders was approved at a shareholders’ meeting. In January 2014, the conditions for us to be able to effect the equity distribution (i.e., end of the period of opposition from unsecured creditors, approval by the Brazilian Central Bank and filing of the minutes of the meeting at the JUCESP) were satisfied. The equity distribution to shareholders occurred on January 29, 2014, and our shares and Units have been traded ex-rights to the equity distribution since January 15, 2014.
Issuance of Notes
On January 14, 2014, our board of directors approved the issuance of U.S. Dollars – denominated notes outside of Brazil in an amount of R$6 billion (the “Notes”). The issuance of the Notes occurred on January 29, 2014. The specific characteristics of the Notes issued to compose the Tier I capital are:
influenced by:
On April 15, 2014, the Brazilian Central Bank approved the issued notes to compose the Tier I and Tier II of Bank’s regulatory capital since the issuance date.
Bonus Shares and Reverse Share Split (Inplit)
With the purpose of eliminating the trading in cents of SANB3 (common) and SANB4 (preferred) shares, increasing liquidity and reducing the transaction costs thereof, our shareholders approved on March 18, 2014 (i) a bonus share issue of 19,002,100,957 preferred shares to our shareholders, at the ratio of 0.047619048 preferred shares for each common share (SANB3) or preferred share (SANB4), which resulted in a bonus share issue of five preferred shares for each Unit (SANB11), through the capitalization of reserves in the amount of approximately R$172 million; and (ii) a reverse share split (inplit) of the totality of our common shares and preferred shares at a ratio of 1:55, so that each fifty-five common shares and fifty-five preferred shares would thereafter correspond to one common share and one preferred share, respectively. As a result, each Unit (ticker SANB11) came to be comprised of one common share and one preferred share. The bonus share issue and reverse share split were implemented on June 2, 2014.
Exchange Offer
On April 29, 2014, our indirect controlling shareholder, Santander Spain, announced its intention to launch the Brazilian Exchange Offer and the U.S. Exchange Offer. As a result of the transaction, we continued to be a listed company, although we changed from the Level 2 Segment to the basic listing segment of the BM&FBOVESPA.
On June 9, 2014, an Extraordinary General Meeting was held, at which the following items were approved: (a) the exit of the Bank from the Level 2 Segment; and (b) the appointment of NM Rothschild & Sons (Brasil) Ltda. (“Rothschild”) to prepare a valuation report for the purposes of the Brazilian Exchange Offer and the U.S. Exchange Offer and the consequent exit from the Level 2 Segment.
On June 13, 2014, Santander Brasil announced to the market that the valuation report prepared by Rothschild had been duly filed on that date with (i) the CVM; (ii) the BM&FBOVESPA; and (iii) the SEC. On the same date, Santander Brasil also announced to the market that an application for registration of the Brazilian Exchange Offer had been duly filed with the CVM on that same date.
On October 2, 2014, Santander Brasil’s board of directors issued an opinion regarding the Brazilian Exchange Offer and the U.S. Exchange Offer, and Santander Brasil filed with the SEC its position with respect to the proposed transaction by means of a Schedule 14D-9. On October 16, 2014, Santander Spain and Santander Brasil disclosed to the market an adjustment of the exchange ratio referred to in the public notice (edital) published on September 18, 2014. The exchange ratio, and consequently the amount of BDRs to which each subscription receipt was entitled, was adjusted from 0.70 BDR for each Unit, and 0.35 BDR for each share, either ordinary or preferred, to 0.7152 BDR for each Unit and 0.3576 BDR for each share, either ordinary or preferred, in view of the compensation declared by Santander Spain on October 16, 2014, under the “Santander Dividendo Elección” program, with a recorded date of October 17, 2014.
The Brazilian Exchange Offer and the U.S. Exchange Offer were concluded on October 30, 2014. On October 31, 2014, Santander Brasil together with Santander Spain announced to the market the results of the Brazilian Exchange Offer and the U.S. Exchange Offer, pursuant to which Santander Spain acquired 1,640,644 shares and 517,827,702 Units, representing, together, 13.65% of the share capital of Santander Brasil, thereby increasing the Santander Group’s stake in Santander Brasil to 88.30% (not including the shares held by Banco Madesant - Sociedade Unipessoal) of Santander Brasil’s total share capital (88.87% of its common shares and 87.71% of its preferred shares, also considering the ADRs, representing Units acquired in the United States). As a consequence of the Brazilian Exchange Offer and the U.S. Exchange Offer, Santander Brasil’s shares are no longer listed on the Level 2 Segment of the BM&FBOVESPA, and are now listed in the basic listing segment of BM&FBOVESPA.
Merger of GetNet Tecnologia em Captura e Processamento de Transações H.U.A.H. S.A. into GetNet Adquirência e Serviços para Meios de Pagamento S.A.
On July 31, 2014, we completed the acquisition of the operations of GetNet, which had been announced on April 4, 2014.
At the Extraordinary Shareholders’ Meeting of August 31, 2014, the shareholders of the companies approved the merger of GetNet into SGS under the terms of the Merger Protocol of GetNet into SGS (the “Protocol”) dated as of August 29, 2014.
Pursuant to the Protocol, SGS received the book value of all assets, rights and obligations of GetNet totaling R$42.9 thousand, which was extinguished and succeeded by SGS GetNet in all rights and obligations via a merger of GetNet into SGS. Considering that all the shares issued by GetNet were held by SGS, no increase of the capital of SGS was made following the approval of the merger, and the net assets of GetNet were registered by SGS GetNet in its investment account.
The implementation of the GetNet merger represented an important step in the simplification, integration and consolidation of the capture and processing activities of the Santander Group’s acquiring business in Brazil. The structure provides a higher flexibility to manage business with a new and more complete commercial approach and increasing operational leverage with economies of scale.
The GetNet merger was undertaken based on the balance sheet of GetNet as of July 31, 2014 which was prepared specifically for purposes of the merger. Any variations occurred between August 1, 2014 to August 31, 2014 were appropriated by SGS GetNet.
Sale of the Investment Fund Management and Managed Portfolio Operations
On December 17, 2013, we concluded the sale of our asset management business, by way of disposal of all of the shares of Santander Brasil Asset Management Distribuidora de Títulos e Valores Mobiliários S.A. (“Santander Brasil Asset”), a company then controlled by us. The asset management activities then performed by Santander Brasil Asset were segregated into a new asset manager created for that purpose. The sales price was R$2,243 million, generating a post-tax capital gain of R$1,205 million.
We remain the administrator of the funds and in charge of distribution activities, receiving remuneration in line with market practices. As the administrator of the funds, we will continue to oversee the management of the funds, perform services related directly or indirectly to the functioning and maintenance of the funds. Additionally, we will also continue to engage in sales and distribution activities. We will not manage the funds invested or make investment decisions with respect thereto, which duties are performed by the new asset manager.
The transaction was part of a worldwide partnership between Santander Spain and two of the world’s leading private equity companies, Warburg Pincus and General Atlantic. As part of this alliance, Santander Spain now holds 50% of a holding company called Santander Asset Management, which integrates the asset management businesses of the Santander Group in eleven countries (including Brazil), with the remaining 50% of shares in Santander Asset Management being held by Warburg Pincus and General Atlantic. In 2016, the Santander Group reached an agreement with Warburg Pincus and General Atlantic pursuant to which the Santander Group will acquire their 50% share in Santander Asset Management. This transaction on completion will bring Santander Asset Management back to the 100% ownership of Santander Group.
Net income derived from our asset management business amounted to R$74 million in 2011, R$55 million in 2012, and approximately R$55 million in 2013 through the date of sale.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
General
Our principalmain accounting policies are described in note 2 to our audited consolidated financial statements. The following discussion describes those areas that require use of certain critical accounting estimates and the most judgment or involve a higher degreeexercise of complexity
in the application of the accounting policies,judgement regarding matters that are inherently uncertain and estimates that currently affectimpact our financial condition and operational results. The accounting estimates made in these contexts require management to make assumptions about matters that are highly uncertain.results of operations. In this regard, if management decides to change these estimates, or even if changes in theseapply such estimates occur from period to period, these accounting estimates could havefor different durations a material impact on our financial condition and operational results.
results of operations could result.
Management bases its estimates and judgments on historical experience and on various other factors and circumstances, which are believed to be reasonable. Actual results may differ from these estimates if assumptions and conditions change. JudgmentsAny judgments or changes in assumptions are submitted to the audit committee and to our regulatory authorities and are disclosed in the related notes to our audited consolidated financial statements.statements, included elsewhere in this annual report.
Fair Value of Financial Instruments
Methodology for Impairment Losses
We record financial assets and liabilities as financial instrumentsevaluate all loans regarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or collectively evaluated by grouping similar risk characteristics. Loans that are classified at fair value through profit orindividually evaluated for impairment losses are not evaluated collectively.
To measure the impairment loss available-for-sale securities,on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and all derivatives at fair value on the balance sheet. The fair valuefinancial situation, level of a financial instrument is the price that would be receivedindebtedness, ability to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardlessgenerate income, cash flow, management, corporate governance and quality of whether that price is directly observable or estimated using another valuation technique.
In estimating the fair value of an asset or a liability, we take into accountinternal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the assetassets, such as their nature and liabilitypurpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.
To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.
The expected loss measurement date. That assumed transaction establishesis made through the pricefollowing factors:
● | Exposure at Default (EAD): is the amount of a transaction exposed to credit risk including the ratio of current outstanding balance exposure that could be provided at default. Developed models incorporate hypotheses considering possible modifications to the payment schedule. |
● | Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered. |
● | Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation. |
● | Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value. |
In order to sellestimate the asset or to transferabove parameters, the liability. InBank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.
Loans Past Due for Less Than 90 Days but Not Classified as Impaired
The following table shows the absence thereof,loans past due for less than 90 days but not classified as impaired at the price is established on the basis of valuation techniques commonly used by the financial markets.dates indicated:
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As of December 31, | ||||||||||||||||
2021 | % of total | 2020 | % of total | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Commercial and industrial | 4,892 | 20.7 | 5,132 | 25.8 | ||||||||||||
Mortgage loans | 3,606 | 15.2 | 3,085 | 15.5 | ||||||||||||
Installment loans to individuals | 15,150 | 64.0 | 11,661 | 58.6 | ||||||||||||
Lease financing | 11 | 0.1 | 13 | 0.1 | ||||||||||||
Total (*) | 23,659 | 100.0 | 19,891 | 100.0 |
(*) | Refers only to loans past due between 1 and 90 days. |
We use derivativeImpaired Asset Ratios
Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, 2020. Our impaired assets increased by approximately R$3,747 billion in the same period, from R$23.2 billion to R$26.9 billion. The default rate decreased by 30 basis points in 2021 in comparison to 2020, primarily due to the recurrent growth of the credit portfolio.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
As of December 31, | |||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | |||||||||||||||||
(in millions of R$ except percentages) | |||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | ||||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | ||||||||||||||||
Provisions for impairment losses | 29,723 | 25,640 | 22,626 | 22,969 | 18,262 | ||||||||||||||||
Credit risk exposure Non-GAAP – customers (1) | 540,873 | 466,104 | 391,569 | 364,194 | 330,474 | ||||||||||||||||
Ratios | |||||||||||||||||||||
Impaired assets to credit risk exposure | 5.0 | % | 5.0 | % | 6.0 | % | 6.2 | % | 5.8 | % | |||||||||||
Coverage ratio (2) | 110.4 | % | 110.6 | % | 96.6 | % | 102.4 | % | 95.4 | % | |||||||||||
Impairment losses | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | |||||||||||
Losses on other financial instruments not measured at fair value (3) | - | - | - | - | - | ||||||||||||||||
Impairment losses on financial assets (net) (4) | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | |||||||||||
(1) Credit risk exposure is a non-GAAP financial instruments for both trading and non-trading activities. The principal types of derivatives used are interest rate swaps, future rate agreements, interest rate options and futures, foreign exchange forwards, foreign exchange futures, foreign exchange options, foreign exchange swaps, cross-currency swaps, equity index futures, equity options and equity swaps. The fair value of exchange traded derivativesmeasure. Credit risk exposure is calculated based on published price quotations. The fair value of over-the-counter derivatives is calculated as the sum of the expected future cash flows arising from the instrument, discountedamortized cost amounts of loans and advances to present value at the datecustomers (including impaired assets) amounting to R$540,873 million as of measurement (“present value” or “theoretical close”) using valuation techniques commonly used by the financial marketsDecember 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as follows:
of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
(3) | Corresponds to the registration of losses of a permanent character in the realization value |
(4) | As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial instruments |
The following chart shows our impaired assets to credit risk ratio from 2017 through 2021:
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Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.
The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”
As of December 31, | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Allowance for credit losses to total loans outstanding | ||||||||||||
Allowance for credit losses | 22,626 | 25,640 | 29,723 | |||||||||
Total loans outstanding | 347,257 | 417,822 | 493,355 | |||||||||
Credit ratio | 6.52 | % | 6.14 | % | 6.02 | % | ||||||
Nonaccrual loans to total loans outstanding | ||||||||||||
Total nonaccrual loans outstanding | 23,426 | 23,176 | 26,923 | |||||||||
Total loans outstanding | 347,257 | 417,822 | 493,355 | |||||||||
Credit ratio | 6.75 | % | 5.55 | % | 5.46 | % | ||||||
Allowance for credit losses to nonaccrual loans | ||||||||||||
Allowance for credit losses | 22,626 | 25,640 | 29,723 | |||||||||
Total nonaccrual loans outstanding | 23,426 | 23,176 | 26,923 | |||||||||
Credit ratio | 96.6 | % | 110.6 | % | 110.4 | % | ||||||
Net charge-offs during the period to average loans outstanding | ||||||||||||
Net charge-offs during the period | (14,705 | ) | (15,297 | ) | (12,904 | ) | ||||||
Average amount outstanding | 324,190 | 394,542 | 471,068 | |||||||||
Credit ratio | 4.5 | % | 3.9 | % | 2.7 | % | ||||||
Commercial and industrial: | ||||||||||||
Net charge-offs during the period | (5,713 | ) | (4,617 | ) | (5,153 | ) | ||||||
Average amount outstanding | 132,372 | 176,750 | 214,286 | |||||||||
Credit ratio | 4.3 | % | 2.6 | % | 2.4 | % | ||||||
Real estate: | ||||||||||||
Net charge-offs during the period | (108 | ) | (232 | ) | (167 | ) | ||||||
Average amount outstanding | 38,107 | 42,368 | 51,883 | |||||||||
Credit ratio | 0.3 | % | 0.5 | % | 0.3 | % | ||||||
Installment loans to individuals: | ||||||||||||
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Net charge-offs during the period | (8,834 | ) | (10,433 | ) | (7,576 | ) | ||||||
Average amount outstanding | 151,735 | 173,336 | 202,578 | |||||||||
Credit ratio | 5.8 | % | 6.0 | % | 3.7 | % | ||||||
Lease financing: | ||||||||||||
Net charge-offs during the period | (49 | ) | (15 | ) | (8 | ) | ||||||
Average amount outstanding | 1,975 | 2,089 | 2,321 | |||||||||
Credit ratio | 2.5 | % | 0.7 | % | 0.3 | % |
Allowance for credit losses to total loans outstanding
In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.
In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.
Nonaccrual loans to total loans outstanding
In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.
In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.
Allowance for credit losses to nonaccrual loans
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.
In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.
Net charge-offs during the period to average loans outstanding
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.
Commercial and Industrial Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.
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Real Estate Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.
Installment Loans to Individuals
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.
Lease Financing Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.
4C. Organizational Structure
Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2021, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:
Country of Incorporation | Ownership Interest | |||
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1) | ||||
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. | Credit Recovery Services | Brazil | 100.00% | |
Santander Leasing S.A. Arrendamento Mercantil | Leasing | Brazil | 100.00% | |
Aymoré Crédito, Financiamento e Investimento S.A. | Financial | Brazil | 100.00% | |
Santander Brasil Administradora de Consórcio Ltda. | Buying club | Brazil | 100.00% | |
Santander Corretora de Câmbio e Valores Mobiliários S.A. | Broker | Brazil | 100.00% | |
Santander Corretora de Seguros, Investimentos e Serviços S.A. | Holding | Brazil | 100.00% | |
Sancap Investimentos e Participações S.A. | Holding | Brazil | 100.00% |
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Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) | Holding | Brazil | 100.00% |
F1RST Tecnologia e Inovação Ltda. | Technology | Brazil | 100.00% |
Rojo Entretenimento S.A. | Other Activities | Brazil | 94.60% |
Sanb Promotora de Vendas e Cobrança Ltda. | Other Activities | Brazil | 100.00% |
BEN Benefícios e Serviços S.A. | Other Activities | Brazil | 100.00% |
Esfera Fidelidade S.A. | Other Activities | Brazil | 100.00% |
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. | Technology | Brazil | 80.00% |
Paytec Tecnologia em Pagamentos Ltda. | Other Activities | Brazil | 100.00% |
SX Negócios Ltda. | Other Activities | Brazil | 100.00% |
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.) | |||
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) | Credit Recovery Services | Brazil | 100.00% |
Liderança Serviços Especializados em Cobranças Ltda. | Credit Recovery Services | Brazil | 100.00% |
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) | |||
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.) | Asset Management | Brazil | 100.00% |
Controlled by Sancap Investimentos e Participações S.A. | |||
Santander Capitalização S.A. | Savings and annuities | Brazil | 100.00% |
Evidence Previdência S.A. | Social Securities | Brazil | 100.00% |
Controlled by Aymoré Crédito, Financiamento e Investimento S.A. | |||
Banco PSA Finance Brasil S.A. | Bank | Brazil | 50.00% |
Banco Hyundai Capital Brasil S.A. (current name of BHJV Assessoria e Consultoria Empresarial Ltda.) | Bank | Brazil | 50.00% |
Solutions 4 Fleet. | Other Activities | Brazil | 80.00% |
Controlled by Santander Leasing S.A. Arrendamento Mercantil | |||
Banco Bandepe S.A. | Bank | Brazil | 100.00% |
PI Distribuidora de Títulos e Valores Mobiliários S.A. | Leasing | Brazil | 100.00% |
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A. | |||
Toro Corretora de Títulos de Valores Mobiliários Ltda. | Broker | Brazil | 60.00% |
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda. | |||
Toro Investimentos S.A. | Broker | Brazil | 100.00% |
Controlled by Sancap |
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data and other relevant factors. The use of different estimates
Santander Auto S.A. | Other Activities | Brazil | 50.00% |
Consolidated Investment Funds | |||
Santander Fundo de Investimento Unix Multimercado Crédito Privado | Investment Fund | Brazil | (a) |
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) |
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) |
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado | Investment Fund | Brazil | (a) |
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) |
Santander Paraty QIF PLC (2) | Investment Fund | Brazil | (a) |
Santander FI Hedge Strategies Fund (2) | Investment Fund | Brazil | (a) |
BRL V - Fundo de Investimento Imobiliário-FII | Real Estate Investment Fund | Brazil | (a) |
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado | Investment Fund | Brazil | (a) |
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos | Investment Fund | Brazil | (a) |
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior | Investment Fund | Brazil | (a) |
Verbena FCVS - Fundo de Investimento em Direitos Creditórios | Investment Fund | Brazil | (a) |
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado | Investment Fund | Brazil | (a) |
(a) | Company to which we are exposed or have rights to variable returns and have the ability to affect those returns by making certain decisions in accordance with IFRS 10 - Consolidated Financial Statements. We and/or |
(1) | This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report. |
(2) | Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund. |
See note 2d (iii)
4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 385 properties for the activities of our banking network and rent 1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A. Operating Results
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”
Financial Presentation
We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on valuation techniques used by usthe Spin-Off, see “Item 4. Information on the Company–A. History and detailsDevelopment of the principal assumptionsCompany–The Getnet Spin-Off” and estimates usednotes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in these modelsthis annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the sensitivitycontinuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”
Brazilian Macroeconomic Environment
Overview
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the valuation of financial instruments to changes inBrazilian economy for the principal assumptions used.periods indicated:
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As of and For the Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
GDP growth(1) | 4.6 | % | (4.1 | %) | 1.2 | % | ||||||
CDI Rate | 4.4 | % | 2.1 | % | 6.0 | % | ||||||
TJLP | 5.3 | % | 4.6 | % | 5.6 | % | ||||||
SELIC rate | 9.25 | % | 2.0 | % | 4.5 | % | ||||||
Selling exchange rate (at period end) R$ per U.S.$1.00 | 5.58 | 5.20 | 4.03 | |||||||||
Decrease (increase) in real rate against the U.S. dollar | 7.4 | % | 28.9 | % | 4.0 | % | ||||||
Average exchange rate R$ per U.S.$1.00(2) | 5.40 | 5.16 | 3.94 | |||||||||
Inflation (IGP-M) | 17.8 | % | 23.1 | % | 7.3 | % | ||||||
Inflation (IPCA) | 10.06 | % | 4.5 | % | 4.3 | % |
Impairment Losses on Financial Assets
Definition
A financial asset is considered impaired when there is objective evidence of any of the following:
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
business days during the |
As a general rule, when anyGeneral economic stability in Brazil following the onset of the events listed above occurs,global financial crisis in 2009 allowed the carrying amountBrazilian Central Bank to continue its policy of impairedreducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the SELIC rate to 10.75% p.a. as of the date of this annual report..
The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial assets is adjustedasset prices. Brazil’s economy has been severely affected by recordingthe COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a provision for losses on debts expenseresult of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as “Losses onset out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.
Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial assets (net)”conditions and results of operations. Any aggravation in the consolidated income statement. The reversal of previously recorded losses is recognized inCOVID-19 pandemic increases the consolidated income statement in the period in which the impairment and decrease can be related objectively to an event of recovery.
Financial assets are deemed to be impaired, and the interest accrual suspended, when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts and on the dates indicated in the loan agreement after taking into account the collateral guarantees received to secure (fully or partially) collection of the related balances.
For all non-performing past due assets, any collections relating to impaired loans and advances are used to recognize the accrued interest and the remainder, if any, is applied to reduce the principal amount outstanding.
Debt Instruments Carried at Amortized Cost
The amount of an impairment loss incurred for determination of the recoverable amount on a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred), discounted to the original effective interest rate of the financial asset (or the effective interest rate computed at initial recognition), and is presented as a reduction of the asset balance and recorded on income statements.
In estimating the future cash flows of debt instruments, the following factors are taken into account:
These cash flows are subsequently discounted using the instrument’s effective interest rate.
With regard to recoverable amount losses resulting from a materialization of the insolvency risk of the obligors (credit risk), a debt instrument is impaired due to insolvency when there is evidencechance of a deterioration in the obligor’s abilityoutlook for the Brazilian macroeconomic environment.
Impact of COVID-19 on the Brazilian Economy
The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to pay, either because such obligor ismitigate the effects of the pandemic in arrears orthe economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for other reasons.households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December
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31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.
WeInterest Rates
An increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have certain policies, methodsa positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
The following table presents the low, high, average and procedures for minimizingperiod-end SELIC rate since 2016, as reported by the Brazilian Central Bank:
Low | High(1) | Average(2) | Period-End | |
Year | ||||
2016 | 13.75 | 14.25 | 14.15 | 13.75 |
2017 | 7.00 | 13.75 | 9.83 | 7.00 |
2018 | 6.50 | 7.00 | 6.75 | 6.50 |
2019 | 4.50 | 6.50 | 6.13 | 4.50 |
2020 | 2.00 | 4.50 | 2.81 | 2.00 |
2021 | 2.00 | 9.25 | 4.81 | 9.25 |
2022 (through February 22, 2022) | 9.25 | 10.75 | 9.86 | 10.75 |
(1) | Highest month-end rate. |
(2) | Average of month-end rates during the period. |
Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to counterparty insolvency. These policies, methods and procedures are appliedincreases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2021, a 100-basis point increase in the granting, examinationyield curve would have resulted in R$ 553 million decline in the net interest income over a one-year period.
Credit Volume and documentationQuality in Brazil
In 2019, the ratio of nonperforming loans to individuals reached 3.5% and the household debt burden reached 23.9% of household income. In 2020, outstanding credit increased 15.6% as a result of credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).
2021 | 2020 | 2019 | |
(in billions of R$) | |||
Total Credit Outstanding (*) | 4,684 | 3,261 | 3,471 |
Earmarked credit | 1,881 | 1,500 | 1,465 |
Non-earmarked based credit | 2,803 | 1,761 | 2,006 |
of which: | |||
Corporate | 1,291 | 814 | 905 |
Individuals (retail) | 1,513 | 948 | 1,101 |
(*) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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Foreign Exchange Rates
Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2021, we recorded foreign exchange exposure of R$117,400 million, foreign exchange exposure of R$ (124,437) million in 2020 and foreign exchange exposure of R$11,208 million in 2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and contingentlosses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a small depreciation of 1.5% to R$3.31 per U.S.$1.00 as of December 31, 2017. The real depreciated further against the U.S. dollar throughout 2018, with a depreciation of 17%, On December 31, 2018, the exchange rate was R$3.87 per U.S.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.
Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Inflation
In recent years, inflation had been oscillating around the target, which is set by the CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases were defined for the targets until 2024, when the goal will be 3.00%.
Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was close to the top of the fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the indexation of a significant portion of contracts for services to the inflation levels of the previous years, the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, inflation rate reached a level of 10.7%, the highest on record since May 2005 and well above the Brazilian Central Bank’s inflation target of 4.5%. In 2017, inflation fell substantially as a result of the consistent efforts of the Brazilian Central Bank to reduce the inflation rate, ending the year at 2.95%. As a result, the Brazilian Central Bank was required to send a letter to the CMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the monetary policy in Brazil. In 2019, as a result of temporary price shocks affecting edible items, inflation ended the year slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and reached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which
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increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and commitments,financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the identificationgrowth of their recoverable amountthe Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.
Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows the requirements for reserves and credit to which we are subject for each financing category:
Product | As of December 31, 2021 | As of December 31, 2020 | Form of Required Reserve | Yield | ||||||||
Demand deposits | ||||||||||||
Rural credit loans(1) | 25.00 | % | 27.50 | % | Loans | Cap rate: 7.5% p.a. | ||||||
Microcredit loans(2) | 2.00 | % | 2.00 | % | Loans | Cap rate: 4.0% p.m. | ||||||
Reserve requirements(3) | 21.00 | % | 21.00 | % | Cash | Zero | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Free funding(4) | 52.00 | % | 49.50 | % | ||||||||
Savings Accounts | ||||||||||||
Mortgage loans | 65.00 | % | 65.00 | % | Loans | Cap rate (SFH): TR + 12.0% p.a. | ||||||
Reserve requirements(2) | 20.00 | % | 20.00 | % | Cash | TR + 6.17% or TR + 70.00% of the target SELIC | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | Cash | n/a | |||||||
Free funding(4) | 15.00 | % | 15.00 | % | ||||||||
Time deposits | ||||||||||||
Reserve requirements(3) | 20.00 | % | 17.00 | % | Cash | SELIC | ||||||
In cash or other instruments | 0.00 | % | 0.00 | % | Cash or other instruments | n/a | ||||||
In cash | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Free funding(4) | 80.00 | % | 83.00 | % |
(1) | Rural credits are credits granted to farmers in the amount R$13.6 billion on December 31, 2021 and December 31, 2020, respectively. |
(2) | Microcredit is a credit granted to very small businesses, with an open position of R$1.3 billion on December 31, 2021 and December 31, 2020, respectively. |
(3) | Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145. |
(4) | Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category. |
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Taxes
See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”
Hedging in Foreign Investments
We operate two foreign branches, one in the Cayman Islands, and another one in Luxembourg. We previously operated an independent wholly-owned subsidiary in Spain, named Santander Brasil Estabelecimiento Financiero de Credito, EFC, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. Under Brazilian income tax rules, Law No. 14,031, dated July 28, 2020, set that, from January 2021 until December 2021 50% of the foreign exchange variation of the portion of investments abroad that are subject to hedge must be computed in the determination of real profits and in the calculation of the taxable base of the social contribution over net income (Contribuição Social Sobre o Lucro Líquido), or “CSLL,” of an investing legal entity domiciled in Brazil. From January 2022, the foreign exchange variation of investments abroad is fully computed in the basis of the IRPJ and the CSLL. The reconciliation of our effective tax rate to the statutory tax rate is set forth in note 23b to our audited consolidated financial statements included elsewhere in this annual report. Santander EFC was operational from 2012 until 2020, when we approved its liquidation. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Foreign Subsidiary.”
Goodwill of Banco Real
We generated goodwill of R$27 billion as a result of our acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill for impairment at least annually or whenever there are indications of impairment. In 2021, 2020 and 2019, the recoverable goodwill amounts necessaryare determined from “value in use” calculations. For this purpose, we estimate cash flow for a period of five years. We prepare cash flow estimates considering several factors, including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate of, and long-term adjustments to, covercash flows. These estimates rely on assumptions regarding the related credit risk.likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by an independent research company, which is reviewed and approved by the board of directors. Therefore, amortization of goodwill for tax purposes generates a permanent difference and, as a result, no record of the deferred tax liability.
The following table shows the main assumptions for the basis of valuation as of the dates indicated.
2021 | 2020 | 2019 | ||||||||||
(Value in use: cash flows) | ||||||||||||
Main Assumptions(*) | ||||||||||||
Basis of valuation | ||||||||||||
Period of the projections of cash flows(1) | 5 years | 5 years | 5 years | |||||||||
Growth rate(2) | 4.0 | % | 4.3 | % | 4.8 | % | ||||||
Discount rate(3) | 12.3 | % | 12.4 | % | 12.5 | % |
(1) | The projections of cash flow are prepared using internal budget and growth plans of management, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation. |
(2) | The growth rate is calculated based on a real growth rate of 1% p.a. plus annual long-term inflation in 2021. |
(3) | The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 18.77% in 2021, 19.56% in 2020 and 17.88% in 2019. |
(*) | The recoverability test was performed during the second half of 2021. Goodwill is tested for impairment on an annual basis or whenever there is any indication of a potential impairment. At the end of each year, a qualitative assessment is carried out in order to check the existence of signs of impairment. For the years 2021, 2020 and 2019, no indication of impairment was identified. |
The procedures employedWe performed a sensitivity test in the identification, measurement, controlgoodwill impairment analysis considering the main assumptions that could reasonably be expected to possibly change, as required by the IFRS. Accordingly, we applied such a test considering the discount rate and reductionperpetuity growth rate as the main assumption subject to reasonably possible change and we did not identify any impairment to goodwill.
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Other Factors Affecting the Comparability of exposureOur Results of Operations
In addition, our results of operations have been influenced and will continue to credit risk, are applied on an individual basis or by grouping similar credit risk characteristics.
be influenced by:
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
General
Our main accounting policies are described in note 2 to our audited consolidated financial statements. The following discussion describes areas that require use of certain critical accounting estimates and the exercise of judgement regarding matters that are inherently uncertain and that impact our financial condition and results of operations. In this regard, if management decides to change these estimates, or apply such estimates for different durations a material impact on our financial condition and results of operations could result.
Management bases its estimates and judgments on historical experience and on various other factors and circumstances, which are believed to be reasonable. Actual results may differ from these estimates if assumptions and conditions change. Any judgments or changes in assumptions are submitted to the audit committee and to our regulatory authorities and are disclosed in the related notes to our audited consolidated financial statements, included elsewhere in this annual report.
Methodology for Impairment Losses
We evaluate all loans in respect ofregarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or for loans accounted as amortized cost, collectively evaluated by grouping similar risk characteristics. Loans that are individually evaluated for impairment losses are not evaluated collectively.
To measure the impairment loss on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and financial situation, level of indebtedness, ability to generate income, cash flow, management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.
To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.
The expected loss measurement is made through the following factors:
● | Exposure at Default (EAD): is the amount of a transaction exposed to credit risk including the ratio of current outstanding balance exposure that could be provided at default. Developed models incorporate hypotheses considering possible modifications to the payment schedule. |
● | Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered. |
● | Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation. |
● | Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value. |
In order to estimate the above parameters, the Bank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.
Loans Past Due for Less Than 90 Days but Not Classified as Impaired
The following table shows the loans past due for less than 90 days but not classified as impaired at the dates indicated:
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As of December 31, | ||||||||||||||||
2021 | % of total | 2020 | % of total | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Commercial and industrial | 4,892 | 20.7 | 5,132 | 25.8 | ||||||||||||
Mortgage loans | 3,606 | 15.2 | 3,085 | 15.5 | ||||||||||||
Installment loans to individuals | 15,150 | 64.0 | 11,661 | 58.6 | ||||||||||||
Lease financing | 11 | 0.1 | 13 | 0.1 | ||||||||||||
Total (*) | 23,659 | 100.0 | 19,891 | 100.0 |
(*) | Refers only to loans past due between 1 and 90 days. |
Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, 2020. Our impaired assets increased by approximately R$3,747 billion in the same period, from R$23.2 billion to R$26.9 billion. The default rate decreased by 30 basis points in 2021 in comparison to 2020, primarily due to the recurrent growth of the credit portfolio.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
As of December 31, | |||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | |||||||||||||||||
(in millions of R$ except percentages) | |||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | ||||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | ||||||||||||||||
Provisions for impairment losses | 29,723 | 25,640 | 22,626 | 22,969 | 18,262 | ||||||||||||||||
Credit risk exposure Non-GAAP – customers (1) | 540,873 | 466,104 | 391,569 | 364,194 | 330,474 | ||||||||||||||||
Ratios | |||||||||||||||||||||
Impaired assets to credit risk exposure | 5.0 | % | 5.0 | % | 6.0 | % | 6.2 | % | 5.8 | % | |||||||||||
Coverage ratio (2) | 110.4 | % | 110.6 | % | 96.6 | % | 102.4 | % | 95.4 | % | |||||||||||
Impairment losses | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | |||||||||||
Losses on other financial instruments not measured at fair value (3) | - | - | - | - | - | ||||||||||||||||
Impairment losses on financial assets (net) (4) | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | |||||||||||
(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
(2) | Provisions for impairment losses as a percentage of impaired assets. |
(3) | Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).” |
(4) | As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments. |
The following chart shows our impaired assets to credit risk ratio from 2017 through 2021:
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Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.
The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”
As of December 31, | ||||||||||||
2019 | 2020 | 2021 | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Allowance for credit losses to total loans outstanding | ||||||||||||
Allowance for credit losses | 22,626 | 25,640 | 29,723 | |||||||||
Total loans outstanding | 347,257 | 417,822 | 493,355 | |||||||||
Credit ratio | 6.52 | % | 6.14 | % | 6.02 | % | ||||||
Nonaccrual loans to total loans outstanding | ||||||||||||
Total nonaccrual loans outstanding | 23,426 | 23,176 | 26,923 | |||||||||
Total loans outstanding | 347,257 | 417,822 | 493,355 | |||||||||
Credit ratio | 6.75 | % | 5.55 | % | 5.46 | % | ||||||
Allowance for credit losses to nonaccrual loans | ||||||||||||
Allowance for credit losses | 22,626 | 25,640 | 29,723 | |||||||||
Total nonaccrual loans outstanding | 23,426 | 23,176 | 26,923 | |||||||||
Credit ratio | 96.6 | % | 110.6 | % | 110.4 | % | ||||||
Net charge-offs during the period to average loans outstanding | ||||||||||||
Net charge-offs during the period | (14,705 | ) | (15,297 | ) | (12,904 | ) | ||||||
Average amount outstanding | 324,190 | 394,542 | 471,068 | |||||||||
Credit ratio | 4.5 | % | 3.9 | % | 2.7 | % | ||||||
Commercial and industrial: | ||||||||||||
Net charge-offs during the period | (5,713 | ) | (4,617 | ) | (5,153 | ) | ||||||
Average amount outstanding | 132,372 | 176,750 | 214,286 | |||||||||
Credit ratio | 4.3 | % | 2.6 | % | 2.4 | % | ||||||
Real estate: | ||||||||||||
Net charge-offs during the period | (108 | ) | (232 | ) | (167 | ) | ||||||
Average amount outstanding | 38,107 | 42,368 | 51,883 | |||||||||
Credit ratio | 0.3 | % | 0.5 | % | 0.3 | % | ||||||
Installment loans to individuals: | ||||||||||||
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Net charge-offs during the period | (8,834 | ) | (10,433 | ) | (7,576 | ) | ||||||
Average amount outstanding | 151,735 | 173,336 | 202,578 | |||||||||
Credit ratio | 5.8 | % | 6.0 | % | 3.7 | % | ||||||
Lease financing: | ||||||||||||
Net charge-offs during the period | (49 | ) | (15 | ) | (8 | ) | ||||||
Average amount outstanding | 1,975 | 2,089 | 2,321 | |||||||||
Credit ratio | 2.5 | % | 0.7 | % | 0.3 | % |
Allowance for credit losses to total loans outstanding
In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.
In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.
Nonaccrual loans to total loans outstanding
In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.
In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.
Allowance for credit losses to nonaccrual loans
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.
In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.
Net charge-offs during the period to average loans outstanding
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.
Commercial and Industrial Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.
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Real Estate Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.
Installment Loans to Individuals
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.
Lease Financing Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.
4C. Organizational Structure
Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2021, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:
Activity | Country of Incorporation | Ownership Interest | ||
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1) | ||||
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. | Credit Recovery Services | Brazil | 100.00% | |
Santander Leasing S.A. Arrendamento Mercantil | Leasing | Brazil | 100.00% | |
Aymoré Crédito, Financiamento e Investimento S.A. | Financial | Brazil | 100.00% | |
Santander Brasil Administradora de Consórcio Ltda. | Buying club | Brazil | 100.00% | |
Santander Corretora de Câmbio e Valores Mobiliários S.A. | Broker | Brazil | 100.00% | |
Santander Corretora de Seguros, Investimentos e Serviços S.A. | Holding | Brazil | 100.00% | |
Sancap Investimentos e Participações S.A. | Holding | Brazil | 100.00% |
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Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) | Holding | Brazil | 100.00% |
F1RST Tecnologia e Inovação Ltda. | Technology | Brazil | 100.00% |
Rojo Entretenimento S.A. | Other Activities | Brazil | 94.60% |
Sanb Promotora de Vendas e Cobrança Ltda. | Other Activities | Brazil | 100.00% |
BEN Benefícios e Serviços S.A. | Other Activities | Brazil | 100.00% |
Esfera Fidelidade S.A. | Other Activities | Brazil | 100.00% |
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. | Technology | Brazil | 80.00% |
Paytec Tecnologia em Pagamentos Ltda. | Other Activities | Brazil | 100.00% |
SX Negócios Ltda. | Other Activities | Brazil | 100.00% |
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.) | |||
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) | Credit Recovery Services | Brazil | 100.00% |
Liderança Serviços Especializados em Cobranças Ltda. | Credit Recovery Services | Brazil | 100.00% |
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) | |||
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.) | Asset Management | Brazil | 100.00% |
Controlled by Sancap Investimentos e Participações S.A. | |||
Santander Capitalização S.A. | Savings and annuities | Brazil | 100.00% |
Evidence Previdência S.A. | Social Securities | Brazil | 100.00% |
Controlled by Aymoré Crédito, Financiamento e Investimento S.A. | |||
Banco PSA Finance Brasil S.A. | Bank | Brazil | 50.00% |
Banco Hyundai Capital Brasil S.A. (current name of BHJV Assessoria e Consultoria Empresarial Ltda.) | Bank | Brazil | 50.00% |
Solutions 4 Fleet. | Other Activities | Brazil | 80.00% |
Controlled by Santander Leasing S.A. Arrendamento Mercantil | |||
Banco Bandepe S.A. | Bank | Brazil | 100.00% |
PI Distribuidora de Títulos e Valores Mobiliários S.A. | Leasing | Brazil | 100.00% |
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A. | |||
Toro Corretora de Títulos de Valores Mobiliários Ltda. | Broker | Brazil | 60.00% |
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda. | |||
Toro Investimentos S.A. | Broker | Brazil | 100.00% |
Controlled by Sancap |
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Santander Auto S.A. | Other Activities | Brazil | 50.00% |
Consolidated Investment Funds | |||
Santander Fundo de Investimento Unix Multimercado Crédito Privado | Investment Fund | Brazil | (a) |
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) |
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) |
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado | Investment Fund | Brazil | (a) |
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) |
Santander Paraty QIF PLC (2) | Investment Fund | Brazil | (a) |
Santander FI Hedge Strategies Fund (2) | Investment Fund | Brazil | (a) |
BRL V - Fundo de Investimento Imobiliário-FII | Real Estate Investment Fund | Brazil | (a) |
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado | Investment Fund | Brazil | (a) |
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos | Investment Fund | Brazil | (a) |
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior | Investment Fund | Brazil | (a) |
Verbena FCVS - Fundo de Investimento em Direitos Creditórios | Investment Fund | Brazil | (a) |
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado | Investment Fund | Brazil | (a) |
(a) | Company to which we are exposed or have rights to variable returns and have the ability to affect those returns by making certain decisions in accordance with IFRS 10 - Consolidated Financial Statements. We and/or our subsidiaries hold 100% of the quotas of these investment funds. |
(1) | This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report. |
(2) | Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund. |
4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 385 properties for the activities of our banking network and rent 1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A. Operating Results
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”
Financial Presentation
We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”
Brazilian Macroeconomic Environment
Overview
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
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As of and For the Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
GDP growth(1) | 4.6 | % | (4.1 | %) | 1.2 | % | ||||||
CDI Rate | 4.4 | % | 2.1 | % | 6.0 | % | ||||||
TJLP | 5.3 | % | 4.6 | % | 5.6 | % | ||||||
SELIC rate | 9.25 | % | 2.0 | % | 4.5 | % | ||||||
Selling exchange rate (at period end) R$ per U.S.$1.00 | 5.58 | 5.20 | 4.03 | |||||||||
Decrease (increase) in real rate against the U.S. dollar | 7.4 | % | 28.9 | % | 4.0 | % | ||||||
Average exchange rate R$ per U.S.$1.00(2) | 5.40 | 5.16 | 3.94 | |||||||||
Inflation (IGP-M) | 17.8 | % | 23.1 | % | 7.3 | % | ||||||
Inflation (IPCA) | 10.06 | % | 4.5 | % | 4.3 | % |
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) | GDP growth for 2021 is based on Santander Brasil’s internal estimates. For 2020 the source is the IBGE’s revised series. |
(2) | Average of the selling exchange rate for the business days during the period. |
General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the SELIC rate to 10.75% p.a. as of the date of this annual report..
The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial asset prices. Brazil’s economy has been severely affected by the COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.
Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.
Impact of COVID-19 on the Brazilian Economy
The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December
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31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.
Interest Rates
An increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
The following table presents the low, high, average and period-end SELIC rate since 2016, as reported by the Brazilian Central Bank:
Low | High(1) | Average(2) | Period-End | |
Year | ||||
2016 | 13.75 | 14.25 | 14.15 | 13.75 |
2017 | 7.00 | 13.75 | 9.83 | 7.00 |
2018 | 6.50 | 7.00 | 6.75 | 6.50 |
2019 | 4.50 | 6.50 | 6.13 | 4.50 |
2020 | 2.00 | 4.50 | 2.81 | 2.00 |
2021 | 2.00 | 9.25 | 4.81 | 9.25 |
2022 (through February 22, 2022) | 9.25 | 10.75 | 9.86 | 10.75 |
(1) | Highest month-end rate. |
(2) | Average of month-end rates during the period. |
Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2021, a 100-basis point increase in the yield curve would have resulted in R$ 553 million decline in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2019, the ratio of nonperforming loans to individuals reached 3.5% and the household debt burden reached 23.9% of household income. In 2020, outstanding credit increased 15.6% as a result of credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).
2021 | 2020 | 2019 | |
(in billions of R$) | |||
Total Credit Outstanding (*) | 4,684 | 3,261 | 3,471 |
Earmarked credit | 1,881 | 1,500 | 1,465 |
Non-earmarked based credit | 2,803 | 1,761 | 2,006 |
of which: | |||
Corporate | 1,291 | 814 | 905 |
Individuals (retail) | 1,513 | 948 | 1,101 |
(*) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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Foreign Exchange Rates
Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2021, we recorded foreign exchange exposure of R$117,400 million, foreign exchange exposure of R$ (124,437) million in 2020 and foreign exchange exposure of R$11,208 million in 2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a small depreciation of 1.5% to R$3.31 per U.S.$1.00 as of December 31, 2017. The real depreciated further against the U.S. dollar throughout 2018, with a depreciation of 17%, On December 31, 2018, the exchange rate was R$3.87 per U.S.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.
Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Inflation
In recent years, inflation had been oscillating around the target, which is set by the CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases were defined for the targets until 2024, when the goal will be 3.00%.
Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was close to the top of the fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the indexation of a significant portion of contracts for services to the inflation levels of the previous years, the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, inflation rate reached a level of 10.7%, the highest on record since May 2005 and well above the Brazilian Central Bank’s inflation target of 4.5%. In 2017, inflation fell substantially as a result of the consistent efforts of the Brazilian Central Bank to reduce the inflation rate, ending the year at 2.95%. As a result, the Brazilian Central Bank was required to send a letter to the CMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the monetary policy in Brazil. In 2019, as a result of temporary price shocks affecting edible items, inflation ended the year slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and reached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which
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increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.
Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows the requirements for reserves and credit to which we are subject for each financing category:
Product | As of December 31, 2021 | As of December 31, 2020 | Form of Required Reserve | Yield | ||||||||
Demand deposits | ||||||||||||
Rural credit loans(1) | 25.00 | % | 27.50 | % | Loans | Cap rate: 7.5% p.a. | ||||||
Microcredit loans(2) | 2.00 | % | 2.00 | % | Loans | Cap rate: 4.0% p.m. | ||||||
Reserve requirements(3) | 21.00 | % | 21.00 | % | Cash | Zero | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Free funding(4) | 52.00 | % | 49.50 | % | ||||||||
Savings Accounts | ||||||||||||
Mortgage loans | 65.00 | % | 65.00 | % | Loans | Cap rate (SFH): TR + 12.0% p.a. | ||||||
Reserve requirements(2) | 20.00 | % | 20.00 | % | Cash | TR + 6.17% or TR + 70.00% of the target SELIC | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | Cash | n/a | |||||||
Free funding(4) | 15.00 | % | 15.00 | % | ||||||||
Time deposits | ||||||||||||
Reserve requirements(3) | 20.00 | % | 17.00 | % | Cash | SELIC | ||||||
In cash or other instruments | 0.00 | % | 0.00 | % | Cash or other instruments | n/a | ||||||
In cash | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Additional reserve requirements | 0.00 | % | 0.00 | % | Cash | n/a | ||||||
Free funding(4) | 80.00 | % | 83.00 | % |
(1) | Rural credits are credits granted to farmers in the amount R$13.6 billion on December 31, 2021 and December 31, 2020, respectively. |
(2) | Microcredit is a credit granted to very small businesses, with an open position of R$1.3 billion on December 31, 2021 and December 31, 2020, respectively. |
(3) | Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145. |
(4) | Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category. |
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Taxes
See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”
Hedging in Foreign Investments
We operate two foreign branches, one in the Cayman Islands, and another one in Luxembourg. We previously operated an independent wholly-owned subsidiary in Spain, named Santander Brasil Estabelecimiento Financiero de Credito, EFC, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. Under Brazilian income tax rules, Law No. 14,031, dated July 28, 2020, set that, from January 2021 until December 2021 50% of the foreign exchange variation of the portion of investments abroad that are subject to hedge must be computed in the determination of real profits and in the calculation of the taxable base of the social contribution over net income (Contribuição Social Sobre o Lucro Líquido), or “CSLL,” of an investing legal entity domiciled in Brazil. From January 2022, the foreign exchange variation of investments abroad is fully computed in the basis of the IRPJ and the CSLL. The reconciliation of our effective tax rate to the statutory tax rate is set forth in note 23b to our audited consolidated financial statements included elsewhere in this annual report. Santander EFC was operational from 2012 until 2020, when we approved its liquidation. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Foreign Subsidiary.”
Goodwill of Banco Real
We generated goodwill of R$27 billion as a result of our acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill for impairment at least annually or whenever there are indications of impairment. In 2021, 2020 and 2019, the recoverable goodwill amounts are determined from “value in use” calculations. For this purpose, we estimate cash flow for a period of five years. We prepare cash flow estimates considering several factors, including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate of, and long-term adjustments to, cash flows. These estimates rely on assumptions regarding the likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by an independent research company, which is reviewed and approved by the board of directors. Therefore, amortization of goodwill for tax purposes generates a permanent difference and, as a result, no record of the deferred tax liability.
The following table shows the main assumptions for the basis of valuation as of the dates indicated.
2021 | 2020 | 2019 | ||||||||||
(Value in use: cash flows) | ||||||||||||
Main Assumptions(*) | ||||||||||||
Basis of valuation | ||||||||||||
Period of the projections of cash flows(1) | 5 years | 5 years | 5 years | |||||||||
Growth rate(2) | 4.0 | % | 4.3 | % | 4.8 | % | ||||||
Discount rate(3) | 12.3 | % | 12.4 | % | 12.5 | % |
(1) | The projections of cash flow are prepared using internal budget and growth plans of management, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation. |
(2) | The growth rate is calculated based on a real growth rate of 1% p.a. plus annual long-term inflation in 2021. |
(3) | The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 18.77% in 2021, 19.56% in 2020 and 17.88% in 2019. |
(*) | The recoverability test was performed during the second half of 2021. Goodwill is tested for impairment on an annual basis or whenever there is any indication of a potential impairment. At the end of each year, a qualitative assessment is carried out in order to check the existence of signs of impairment. For the years 2021, 2020 and 2019, no indication of impairment was identified. |
We performed a sensitivity test in the goodwill impairment analysis considering the main assumptions that could reasonably be expected to possibly change, as required by the IFRS. Accordingly, we applied such a test considering the discount rate and perpetuity growth rate as the main assumption subject to reasonably possible change and we did not identify any impairment to goodwill.
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Other Factors Affecting the Comparability of Our Results of Operations
In addition, our results of operations have been influenced and will continue to be influenced by:
● | The Spin-Off of Getnet, as described under “Item 5. Operating And Financial Review And Prospects—A. Operating Results—Financial Presentation—The Getnet Spin-Off”; and |
● | the other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events” and note 3, to our audited consolidated financial statements included elsewhere in this annual report. |
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
General
Our main accounting policies are described in note 2 to our audited consolidated financial statements. The following discussion describes areas that require use of certain critical accounting estimates and the exercise of judgement regarding matters that are inherently uncertain and that impact our financial condition and results of operations. In this regard, if management decides to change these estimates, or apply such estimates for different durations a material impact on our financial condition and results of operations could result.
Management bases its estimates and judgments on historical experience and on various other factors and circumstances, which are believed to be reasonable. Actual results may differ from these estimates if assumptions and conditions change. Any judgments or changes in assumptions are submitted to the audit committee and to our regulatory authorities and are disclosed in the related notes to our audited consolidated financial statements, included elsewhere in this annual report.
Fair Value of Financial Instruments
We record a financial asset as measured at (i) fair value through profit or loss, (ii) fair value through other comprehensive income or (iii) amortized cost. In general, financial liabilities are measured at amortized cost. Exceptions include financial liabilities measured at: (i) fair value through profit or loss, (ii) other financial liabilities at fair value through profit or loss and (iii) financial liabilities designated as hedge items (or hedging instruments) measured at fair value. See “Item 3. Key Information—A. Selected Financial Data—Balance Sheet Data.”
The fair value of a financial instrument is the price that would be received to sell an asset, or the amount paid to transfer a liability between market participants, in a transaction on the date of which fair value is measured, regardless of whether that price is directly observable or estimated using another valuation technique.
In estimating the fair value of an asset or a liability, we take into account relevant characteristics if market participants would also consider the same when pricing the asset and liability at the time fair value is measured. An assumed transaction like this establishes an asset sale price or transfer cost for the liability. In the absence thereof, price is established using valuation techniques commonly used by financial markets.
We use derivative financial instruments for both trading and non-trading activities. The main types of derivatives used are interest rate swaps, options and future rate agreements; foreign exchange forwards, futures, options, and swaps; cross-currency swaps; equity index futures; and equity options and swaps. The fair value of exchange-traded derivatives is calculated based on published price quotations. The fair value of over-the-counter derivatives is calculated as the sum of expected future cash flows arising from the instrument, discounted to the (“present value” or “theoretical close”) at the date fair value is measured using techniques commonly applied by financial markets as follows:
● | The present value method is used for financial instruments permitting static hedging (principally, forwards and swaps), loans and advances. This method uses expected future cash flows that are discounted through interest rate curves of the applicable currencies. These interest rate curves are generally observable market data. |
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● | The Black-Scholes model is used to value financial instruments requiring dynamic hedging (principally structured options and other structured instruments). Certain observable market inputs are used in the model to generate variables such as the bid-offer spread, exchange rates, volatility, correlation between indexes and market liquidity, as appropriate. |
● | The present value method and the Black-Scholes model are used for valuing financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors. Main inputs used in these models are principally observable market data, including appropriate interest rate curves, volatilities, correlations and exchange rates. |
● | Dynamic models similar to those used in measuring of interest rate risk for measuring credit risk of linear instruments (such as bonds and fixed-income derivatives). In the case of non-linear instruments, if the portfolio is exposed to credit risk (such as credit derivatives), the joint probability of default is determined using the Standard Gaussian Copula model. The main inputs used to determine the underlying cost of credit for credit derivatives are quoted credit risk spreads, and the correlation between quoted credit derivatives of various issuers. |
● | The determination of fair value requires us to make certain estimates and assumptions. If quoted market prices are unavailable, fair value is then calculated using widely accepted pricing models that consider contractual terms and prices of the underlying financial instruments, yield curves, observable market data and other relevant factors. The use of different estimates or assumptions in these pricing models could lead to a different valuation being recorded in our consolidated financial statements. |
See note 2e (i) to our audited consolidated financial statements included elsewhere in this annual report for additional information on valuation techniques, details on our modeled main assumptions and estimates and a sensitivity analysis for the valuation of financial instruments to those changes in main assumptions and estimates and note 46.c.8 of our consolidated financial statements for a sensitivity analysis relating to the valuation of financial instruments to those changes in main assumptions.
Impairment Losses on Financial Assets
Definition
A financial asset is considered impaired when there is objective evidence that shows events have occurred which:
● | give rise to an adverse impact on future cash flows estimated at the transaction date, in the case of debt instruments (loans and debt securities); |
● | for equity instruments, their carrying amount may not be fully recovered; |
● | arise from the violation of terms of loans; and |
● | during the bankruptcy process. |
As a general rule, the value adjustment of impaired financial instruments is recognized in the consolidated income statement for the period in which the impairment becomes evident. The reversal, if any, is recognized in the same manner for previous statements for which the impairment is reversed or reduced. Financial assets are deemed to be impaired, and the accrued interest suspended, when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts and on the dates indicated in the loan agreement after taking into account collateral guarantees received to secure (fully or partially) the collection of related balances.
For all non-performing past due assets, any collections relating to impaired loans and advances are used to recognize the accrued interest. The remainder, if any, is applied to reduce the principal amount outstanding Debt Instruments Carried at Amortized Cost.
Debt Instruments Carried at Amortized Cost
The impairment loss amount incurred for determining a recoverable amount on a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its estimated future cash flows (excluding future credit losses not incurred). This cash flow is discounted to the financial asset’s
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original effective interest rate (or the effective interest rate at initial recognition), which is presented as a reduction of the asset balance and recorded on income statements.
In estimating the future cash flows of debt instruments, the following factors are taken into account:
● | all amounts that are expected to be obtained over the remaining life of the instrument, (such as provided guarantees); |
● | impairment loss considers the likelihood of collecting accrued interest receivable; |
● | various types of risk to which each instrument is subject; |
● | circumstances in which collections will foreseeably be made; and |
● | that cash flows are subsequently discounted using the instrument’s effective interest rate. |
A debt instrument is impaired due to insolvency when there is evidence of deterioration in the obligor’s ability to pay, either because such obligor is in arrears or for other reasons. An example is recoverable losses resulting from a materialization of the insolvency risk of obligors (credit risk).
We have certain policies, methods and procedures for minimizing our exposure to counterparty insolvency. These policies, methods and procedures are applied in the granting, examination and documentation of debt instruments, contingent liabilities and commitments; identification of recoverable amounts and calculation of amounts necessary to cover the related credit risk.
The procedures employed in the identification, measurement, control and reduction of exposure to credit risk, are applied on an individual basis or through grouping similar credit risk characteristics.
Customers with individual management include wholesale segment customers, financial institutions and certain companies. Risk management is performed through an analysis complemented by tools to support a decision-making model based on credit risk assessment using internal procedure.
Customers with standardized management include individuals and companies not classified as individual customers. Risk management models are based on automated decision-making and risk assessment procedure, which are complemented by teams of analysts specializing in credit risk. The credits related to standardized customers are usually considered to be not recoverable when they have experience of historical loss and a delay greater than 90 days.
Methodology for Impairment Losses
We evaluate all loans in respect of the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment or collectively evaluated by grouping similar risk characteristics for loans accounted as amortized cost. Loans that are individually evaluated for impairment losses are not evaluated collectively.
To measure the impairment loss on loans individually evaluated for impairment, we consider borrower conditions, such as their economic and financial situation; level of indebtedness; ability to generate income; cash flow; management; corporate governance and quality of internal controls; payment history; industry expertise; and contingencies and credit limits. The characteristics of assets are also considered, which include: the nature and purpose; type; sufficiency and liquidity level guarantees; total amount of credit; historical experience of impairment; and other circumstances known at the time of evaluation.
To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity ofto credit risk, or in other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.
The impairmentImpairment loss is calculated using statistical models that consider the following factors:
Exposure at |
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Probability of |
Loss |
resulting from the event of default by the borrower to honor the principal and/or interest payments). The LGD calculation is based on the net charge-offs on defaulted loans, taking into account the guarantees/collateral associated with the loans, the income and expenses associated with the recovery process and the timing of delinquency.
Loss |
Moreover, prior to charging off past due loans be written-off (which is only done after we havethe Bank has completed all recovery efforts)efforts and after about 360 days late), we record provisions toa fully registered provision (allowance for loan losses) of the loan’s remaining balance of the loan so our allowance for impairment lossesapplies. As a result, this provision fully covers ourthe losses. Thus, we understandthe Bank understands that ourits loan loss allowance for impairment losses methodology has been developed to fitmeet its risk metrics and capture loans that could potentially become impaired.
Impairment
Certain assets, such as intangible assets, including goodwill, equity method investments, financial assets not carried at fair value through profit or loss and other assets are subject to impairment review. We record impairment charges when we believe there is objective evidence of impairment, or that the cost of the assets may not be recoverable.
The assessment of what constitutes an impairment is based on the following models:
We test goodwill for impairment on an annual basis, or more frequently if events or changes in economic circumstances, such as an adverse change in Santander Brasil’s business condition or observable market data, indicate that these assets may be impaired. The recoverable amount determination used in the impairment assessment requires prices of comparable businesses, present value or other valuation techniques, or a combination thereof, requiring management to make subjective judgments and assumptions. Events and factors that may significantly affect the estimates include, among other things, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and technology, and changes in discount rates and specific industry or market sector conditions. If an impairment loss is recognized for goodwill, it may not be reversed in a subsequent period. The recognition of impairment is applicable when significant changes occur in the main estimates used to evaluate the recoverable amounts of the cash-generating unit recoverable amount below the carrying amount. Based on the assumptions described above, no impairment of goodwill in 20162021, 2020 and 20152019 was identified.
Given the level of uncertainty related to these assumptions, our officers carry out a sensitivity analysis using reasonably possible changes in the key assumptions on which the recoverable amount of the cash-generating units are based in order to confirm that the recoverable amounts still exceed the carrying amounts.
All debt and equity securities (other than those carried at fair value through profit or loss) are subject to impairment testing every reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred.
Evaluation for impairment includes both quantitative and qualitative information. For debt securities, such information includes actual and estimated incurred credit losses indicated by payment default, market data on (estimated) incurred losses and other current evidence that the issuer may not pay amounts when due. Equity securities are impaired when management believes that, based on a significant or prolonged decline of fair value below the acquisition price, there is sufficient reason to believe that the acquisition cost may not be recovered.recovered, “Significant” and “prolonged” are interpreted on a case-by-case basis for specific equity securities.
Upon the impairment of either debt or equity instruments, the amount considered as effective loss is recognized in profit or loss. In addition, we did not identify any impairment of tangible assetsproperty, plant and equipment in 20162021, 2020 and 2015(see2019 (see notes 14, 13 and 12, respectively, to our audited consolidated financial statements)statements included elsewhere in this annual report).
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Post-employment Benefit Plan
The Post-employment benefits plans includepost-employment benefit plan includes the following obligations undertaken by us: (i) to supplement the public social security system benefits, and (ii) medical assistance in the event of retirement, permanent disability or death for eligible employees and their direct beneficiaries.
Defined Contribution Plan
A defined contribution plan is the post-employment benefitsbenefit plan for which we and our controlled entities as employer entities payemployers make pre-determined contributions to a separate entity and, willin turn, have no legal or constructive obligation to pay further contributions if the separate entity does not hold sufficient assets to honor all benefits relating to the serviceservices rendered in the current and prior periods.
These contributions are recognized as personnel expenses in the consolidated income statement.
Defined Benefit Plans
Plan
A defined benefit plan is the post-employment benefit plan which is not a defined contribution plan andas is shown in note 21 to our audited consolidated financial statements. For this type of plan, the sponsoring entity’s obligation is to provide the agreed benefits to employees, assuming the potential actuarial risk that benefits will cost more than expected.
The amendment of IAS 19 established fundamental changes in the accounting for and disclosure of employee post-employment benefits such as removing the mechanism of the corridor approach for recording of the obligation of the plans, as well asplans. Fundamental changes also include changes in the criteria for recognition of conventional interest of plan assets (valuation based on the discount rate actuarial liability).
The adoption of this accounting policy involved, fundamentally, full recognition of liabilities on account of actuarial losses (actuarial deficit) not recognized previously, against the stockholders’ equity (Statements of Comprehensive Income).
Main Definitions:
The present value of the defined benefit obligation is the present value of expected future payments required to settle the obligation resulting from employee service in the current and past periods, without deducting any plan assets. |
Deficit or surplus is: (a) the present value of the defined benefit obligation, less (b) the fair value of plan assets. |
The sponsoring entity may recognize the plan’s assets in the balance sheet when they meet the following characteristics: (i) the assets of the fund are sufficient to meet all employee benefit plan or sponsor obligations; or (ii) the assets are returned to the sponsoring entity in order to reimburse it for employee benefits already paid. |
Actuarial gains and losses are changes in present value of defined benefit obligation resulting from: (a) adjustments due to experience (the effects of differences between the actuarial assumptions adopted and what has actually occurred); and (b) effects of changes in actuarial assumptions. |
Current service cost is the increase in the present value of the defined benefit obligation resulting from employee service in the current period. |
The past service cost is the change in present value of defined benefit obligation for employee service in prior periods resulting from a change in the plan or reductions in the number of employees covered. |
Post-employment benefits are recognized in the income statement in the lines ofwithin “Interest expense and similar charges” and “Provisions (net).”
The defined benefit plans are recorded based on an actuarial study, and conducted annually by an external consultant, at the end of each year to therein be effective for the subsequent period.
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TableRevised Accounting Treatment of ContentsCertain Energy Contracts
In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts.
To improve comparability, the amounts of principal of energy trading transactions recorded in equity accounts were deducted from “Derivatives—Forward and Other Contracts” in amounts of R$2,623.1 million and R$1,624.8 million as of December 31, 2020 and 2019, respectively. These deductions had a corresponding impact on our total assets and liabilities as of December 31, 2020 and 2019 as well as on "Financial assets measured at fair value in profit or loss held for trading" and "Financial liabilities measured at fair value in Income Held for Trading" in the statement of cash flows for the years ended December 31, 2020 and 2019. There was no change in the balance of stockholders' equity or income. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.
New Accounting Standards
The new IFRS standards effective after January 1, 2022 are mentioned in our audited consolidated financial statements included in this annual report. For further information, see note 1 to our audited consolidated financial statements included elsewhere in this annual report.
All accounting policies and measurement bases with a material effect on the consolidated financial statements for 2021 were applied in the preparation of such financial statements.
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Results of Operations for the YearYears Ended December 31, 2016 Compared to the Year Ended December 31, 2015
Highlights
For the year ended December 31, 2016, we reported a consolidated profit of R$7,465 million, a decrease of R$2,369 million as compared to the year ended December 31, 2015. This decrease was mainly due to non-recurring results before taxes of R$7.9 billion related to a reversal of tax provision regarding COFINS2021, 2020 and R$765 million of tax reimbursement related to COFINS that did not occur in 2016.2019
Our impaired assets to credit risk ratio was stable at 7.0% for the year ended December 31, 2016 and 7.0% for the year ended December 31, 2015, mainly due to our collection practices with respect to our borrowers whereby we offered certain customers the chance to negotiate a restructuring of their debts.
The coverage ratio (provisions for impairment losses as a percentage of impaired assets) was 96.3% in the year ended December 31, 2016, a 13.4 p.p. increase as compared to 82.9% in the year ended December 31, 2015.
Our total loan portfolio increased by 0.4%, from R$267.2 billion on December 31, 2015 to R$268.4 billion on December 31, 2016. Loans to large corporate customers decreased by R$5,120 million, a decrease which was offset by an increase of R$6,617 million in loans to individuals, during the year ended December 31, 2016 as compared to the year ended December 31, 2015.
Growth in lending to individuals was driven by an increase of 27.5% in payroll loans and 4.5% in mortgages. Our reduction in lending to our large corporate customers of 4.5% was a consequence of market conditions, reflecting the exchange rate variation and a decrease mainly in our working capital portfolio.
Deposits from the Brazilian Central Bank and deposits from credit institutions plus customer deposits increased by 4.3% to R$326.1 billion on December 31, 2016 from R$312.5 billion on December 31, 2015.
Our efficiency ratio was 30.6% in December 2016, a 16.6p.p. decrease from 47.1% in December 2015. Our Basel capital adequacy ratio, calculated in accordance with the regulations and guidance of the Brazilian Central Bank, was 16.3% as of December 31, 2016.
Executive Summary – Santander Brasil Results at a glance |
Total Income amounted to R$63,926 million in 2021, an increase of 32.5% in comparison with the year ended December 31, 2020, primarily due to the effects of the hedge for investment abroad, which had a significant impact in 2020 due to the exchange rate variation and the growth of the net interest income due to the increase in the volume of the credit portfolio, as a result of greater commercial activity supported by the growth of loyal customers and new acquisitions. Excluding the effects of the hedge for investment abroad, our growth in total income would be R$2,102 million an increase of 3.4% over the year ended December 31, 2020. Total income excluding the effects of the hedge for investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” Consolidated Net Income for 2021 totaled R$15,559 million, in the year ended December 31, 2021, an increase of 15.7% over the year ended December 31, 2020, mainly due to the increase in net interest income, due to higher transactionality, and the performance of gains/losses on financial assets and liabilities (net) and net interest income. | Loan Portfolio to customers amounted R$493 billion as of December 2021, an increase of 18.1% compared to December 31, 2020, mainly due to the increase in loans to commercial and industrial, and individual portfolios. Credit Quality remains at reasonable levels and supports our growth, Impaired assets to credit risk ratio was 5.0% for the year ended December 31, 2021, a 0.3 p.p. decrease as compared the previous year. Coverage ratio was 110.4% in the year ended December 31, 2021, a 0.2 p.p. increase from 110.6% the year ended December 31, 2020. Our Basel Capital adequacy ratio was 14.9% in the year ended December 31, 2021, a decrease of 0.3% compared to the year ended December 31, 2020. Deposits from Brazilian Central Bank and deposits from credit institutions plus customer deposits increased by 2.2% reaching R$ 590 billion in 2021. |
Results of Operations
The following table presents our consolidated results of operations for the yearyears ended December 31, 2016 as compared to the year ended December 31, 2015:2021, 2020 and 2019:
For the Year Ended December 31, | ||||||||||||||||||||
2021 |
2020 |
2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Net interest income | 51,318 | 44,443 | 44,321 | 15.5 | 0.3 | |||||||||||||||
Income from equity instruments | 90 | 34 | 19 | 166.8 | 78.9 | |||||||||||||||
Income from companies accounted for by the equity method | 144 | 112 | 149 | 28.4 | (24.8 | ) | ||||||||||||||
Net fee and commission income (expense) | 15,273 | 16,228 | 15,713 | (5.9 | ) | 3.3 | ||||||||||||||
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | (1,781 | ) | (11,703 | ) | (326 | ) | (84.8 | ) | 3,489.9 | |||||||||||
Other operating income (expenses) (net) | (1,119 | ) | (873 | ) | (1,108 | ) | 28.2 | (21.2 | ) | |||||||||||
Total income | 63,926 | 48,242 | 58,769 | 32.5 | (17.9 | ) | ||||||||||||||
Administrative expenses | (17,316 | ) | (17,115 | ) | (16,942 | ) | 1.2 | 1.0 | ||||||||||||
Depreciation and amortization | (2,434 | ) | (2,579 | ) | (2,392 | ) | (5.6 | ) | 7.8 | |||||||||||
Provisions (net) | (2,179 | ) | (1,657 | ) | (3,682 | ) | 31.6 | (55.0 | ) | |||||||||||
Impairment losses on financial assets (net) | (17,113 | ) | (17,450 | ) | (13,370 | ) | (1.9 | ) | 30.5 | |||||||||||
Impairment losses on other assets (net) | (166 | ) | (85 | ) | (131 | ) | 95.3 | (35.4 | ) | |||||||||||
Other non-financial gains (losses) | 33 | 308 | 20 | (89.5 | ) | 1,404.1 | ||||||||||||||
Operating income before tax | 24,750 | 9,664 | 22,273 | 156.1 | (56.6 | ) | ||||||||||||||
Income taxes | (9,191 | ) | 3,787 | (5,642 | ) | (342.7 | ) | (167.1 | ) | |||||||||||
Consolidated net income for the year | 15,559 | 13,451 | 16,631 | 15.7 | (19.1 | ) |
For the year ended December 31 | ||||||||||||||||
2016 | 2015 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Net interest income | 30,586 | 31,337 | (2.4 | )% | (751 | ) | ||||||||||
Income from equity instruments | 259 | 143 | 81.0 | % | 116 | |||||||||||
Income from companies accounted for by the equity method | 48 | 116 | (59.1 | )% | (69 | ) | ||||||||||
Net fees and commissions | 10,978 | 9,484 | 15.8 | % | 1,494 | |||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | 7,591 | (9,918 | ) | 176.5 | % | 17,509 | ||||||||||
Other operating income (expenses) | (625 | ) | (347 | ) | (79.9 | )% | (277 | ) | ||||||||
Total income | 48,837 | 30,814 | 58.5 | % | 18,022 | |||||||||||
Administrative expenses | (14,920 | ) | (14,515 | ) | 2.8 | % | (405 | ) | ||||||||
Depreciation and amortization | (1,483 | ) | (1,490 | ) | 0.5 | % | 7 | |||||||||
Provisions (net) | (2,725 | ) | (4,001 | ) | 31.9 | % | 1,277 | |||||||||
Impairment losses on financial assets (net) | (13,301 | ) | (13,634 | ) | 2.4 | % | 333 |
161 |
For the year ended December 31 | ||||||||||||||||
2016 | 2015 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Impairment losses on other assets (net) | (114 | ) | (1,221 | ) | 90.6 | % | 1,106 | |||||||||
Other non-financial gains/losses | 91 | 831 | (89.1 | )% | (740 | ) | ||||||||||
Operating profit before tax | 16,384 | (3,216 | ) | 609.5 | % | 19,600 | ||||||||||
Income taxes | (8,919 | ) | 13,050 | n.d. | (21,969 | ) | ||||||||||
Net profit from continuing operations | 7,465 | 9,834 | (24.1 | )% | (2,369 | ) | ||||||||||
Discontinued operations | — | — | ||||||||||||||
Consolidated Profit for the Year | 7,465 | 9,834 | (24.1 | )% | (2,369 | ) |
Summary
Consolidated Net Income for the Year
Our consolidated profitnet income for the year ended December 31, 20162021, was R$7.5 billion, a 24.1% decrease15,559 million, an increase of R$2,108 million, or 15.7%, as compared to the year ended December 31, 2015 for which our consolidated profit was R$9.8 billion.
This decrease in our consolidated profit for the year was mainly due to an increasenet income of R$21,96913,451 million in the “Income taxes” line item for the year ended December 31, 20162020, as compareda result of an increase in net interest income of R$6,875 million, or 15.5%, to R$51,318 million in the year ended December 31, 2015.2021 from R$44,443 million in the year December 31, 2020 to driven by our credit portfolio.
Our consolidated net income for the year ended December 31, 2020 was R$13,451 million, a decrease of R$3,180 million, or 19.1%, as compared to our consolidated net income of R$16,631 million for the year ended December 31, 2019 as a result of an increase of R$4,080 in impairment losses on financial assets (net) mainly due to the global COVID-19 pandemic that resulted in a R$3,200 million additional allowance for potential loan losses. This increase can be principally attributed to:
was partially offset by the growth of the credit portfolio.
Net Interest Income
Net interest income for the year ended December 31, 20162021, was R$30,58651,318 million, a 2.4%,15.5% or R$7516,875 million decreaseincrease from R$31,33744,443 million for the year ended December 31, 2015.2020. This decreaseincrease was principallymainly due to a non-recurring reversal of tax provision and a tax reimbursement15.7% increase in relation to COFINS in an amount of R$2.4 billion in 2015 that did not occur in 2016. For further information, please see note 24.c.1 and note 25 to our audited consolidated financial statements included in this annual report. Despite such decrease, revenues from deposits and others products related tocredit portfolio driven by our funding operations increased 31.1% or R$723 million, as compared to the year ended December 31, 2015, as a result of our focus on customer loyalty and active liability management.
Commercial Banking unit.
Average total earning assets in 20162021 were R$504.3843.2 billion, a 5.0%12.4% or R$23.993.2 billion increase from R$480.4750.1 billion in 2015.2020. The principal drivers of this increase were an increase of R$32.176.8 billion, or 47.7%, in the average of cash and balances with the Brazilian Central Bank partially offset by a decrease of R$7.6 billion, or 18.4%20.0%, in the average of loans and amounts due from credit institutions.advance to customers and an R$21.3 billion increase in average of debt instruments. Net yield (the net(net interest income divided by average earning assets) was 6.2%5.86% in 2016,2021 compared to 6.6%5.93% in 2015,2020, a decrease of 0.40.07 p.p.
Average total interest bearinginterest-bearing liabilities in 20162021 were R$408.1647.7 billion, a 5.9%13.0% or R$22.974.3 billion increase from R$385.2573.4 billion in 2015.2020. The main driversdriver of this growth werewas an increase of R$12.040.1 billion in customerCustomers deposits an increase ofand R$11.6 billion in marketable debt securities and an increase of R$1.437.4 billion in deposits from the Brazilian Central Bank and deposits from credit institutions, offset by R$2.2 billionas a result of a shift in other interest bearing liabilities.
investor preferences toward more stable instruments.
Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was 4.8% in 20162021, mainly due to the increase in the SELIC rate during the year ended December 31, 2021, from 2.0% as of December 31, 2020 and 9.25% as of December 31, 2021.
Net interest income for the year ended December 31, 2020, was 4.0%R$44,443 million, a 0.3% or R$122 million increase from R$44,321 million for the year ended December 31, 2019. This increase was mainly due to a 20.3% increase in our credit portfolio driven by our global wholesale banking segment.
Average total earning assets in 2020 were R$750.1 billion, a 14.5% or R$94.9 billion increase from R$655.2 billion in 2019, The principal drivers were an increase of R$61.2 billion, or 18.9%, 0.7in the average of loans and advance to customers and an R$24.8 billion increase in average of debt instruments. Net yield (the net interest income divided by average earning assets) was 5.9% in 2020 compared to 6.8% in 2019, a decrease of 0.8 p.p.
Net yield (net interest income divided by average earning assets) was 5.9% in 2020 compared to 6.8% in 2019, a decrease of 0.8 p.p.
Average total interest-bearing liabilities in 2020 were R$573.4 billion, a 16.7% or R$82.2 billion, increase from R$491.2 billion in 2019. The main driver of this growth was an increase of R$76.3 billion in customer deposits, given the shift in investor assets toward more stable instruments.
Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was 5.2% in 2020, mainly due to lower thanshare of our Commercial Banking segment in 2015, which was 4.7%.
the reduction in the SELIC interest rate in the year ended December 31, 2020 from 4.5% as of December 31, 2019 to 2.0% as of December 31, 2020.
Income from Equity Instruments
Income from equity instruments for the year ended December 31, 20162021, totaled R$25990 million, a R$11656 million increase from R$14334 million for the year ended December 31, 2015. This increase was2020, mainly due to higher dividend gains from an investment fund, Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior, as a result of gains in the equities positions towards derivatives hedge, R$84.8 million.
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Income from equity instruments for the year ended December 31, 2020, totaled R$34 million, a R$15 million increase from R$19 million for the year ended December 31, 2019, mainly due to higher dividend gains from the Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior as a result of gains in dividends from investments registered in available for sale financial assets.the equities positions towards derivatives hedge.
Income from Companies Accounted for by the Equity Method
Income from companies accounted for by the equity method for the year ended December 31, 20162021 was R$48144 million, a R$6932 million decreaseincrease from R$116112 million for the year ended December 31, 2015. This decrease was2020, mainly due to losses at Banco RCI Brasil S.A, aan increase of R$23.5 million in the results of operations of Tecban (Tecnologia Bancária S.A.), and an increase of R$7.0 million in the results of operations of Webmotors S.A., both jointly-controlled company.companies.
Net Fees and Commissions
Net fees and commissionsIncome from companies accounted for by the equity method for the year ended December 31, 2016 reached2020 was R$10,978112 million, a 15.8%, or R$1,49437 million increasedecrease from R$9,484149 million for the year ended December 31, 2015.2019, mainly due to a decrease of R$33 million in the results of operations of Banco RCI Brasil S.A. and a decrease of R$8 million in the results of operations of Gestora de Inteligência de Crédito, both jointly-controlled company. These results were partially offset by an increase of R$10 million in the results of operations of Tecban (Tecnologia Bancária S.A.), a jointly-controlled company.
Net Fee and Commission Income
Net fee and commission income for the year ended December 31, 2021, reached R$15,273 million, a 5.9% or R$956 million decrease compared to R$16,229 million for the year ended December 31, 2020, impacted mainly due to decrease of credit and debit cards, due to the higher card issuance costs as a result of the growth of the business and the impact of the Spin-Off of Getnet. This was partially offset by the growth of insurance, capitalization, asset management and pension funds.
Net fee and commission income for the year ended December 31, 2020 reached R$16,229 million, a 3.3% or R$515 million increase compared to R$15,713 million for the year ended December 31, 2019, impacted mainly due to the increase in (i) trade finance, (ii) insurance and capitalization and (iii) credit and debit cards.
Net fees and commissions from trade finance totaled R$1,758 million for the year ended December 31, 2021, an increase of 1.0% compared to the year ended December 31, 2020.
Net fees and commissions from trade finance totaled R$1,740 million for the year ended December 31, 2020, an increase of 32.1% compared to the year ended December 31, 2019, This increase was mainly due to an increasea result of R$512 millionhigher demand for this service during the COVID-19 pandemic and the effects of variations in revenues from credit and debit cards, R$430 million in revenues from bankingexchange rates.
Net fees and R$285 million in revenuescommissions from insurance and capitalization products.totaled R$4,311 million for the year ended December 31, 2021, an increase of 12.5% compared to the year ended December 31, 2020. This increase was mainly a result of an increase in our credit life insurance portfolio.
Net fees and commissions from insurance and capitalization totaled R$3,831 million for the year ended December 31, 2020, a 6.8% increase compared to the year ended December 31, 2019, For the year ended December 31, 2019, the net fees and commissions from insurance and capitalization totaled R$3,586 million, a 13.2% increase compared to the year ended December 31, 2018. The performance in both periods was primarily driven by increases in our portfolio of credit life insurance.
Net fees and commissions from credit and debit cards totaled R$3,0223,666 million for the year ended December 31, 2016, an increase2021, a decrease of 20.4%28.8% compared to the year ended December 31, 2015,2020. This decrease was mainly owing to higher interchange fees due to an increase in transaction volumes. Our credit card base decreased 2.8% although our numbera result of issued debit cards increased 8.5% for the year ended December 31, 2016, reaching a total 62.5 million issued cards.
Spin-Off of Getnet.
Net fees and commissions from banking feescredit and debit cards totaled R$3,0015,151 million for the year ended December 31, 2016,2020, an increase of 16.7%3.3% compared to the year ended December 31, 2015 primarily due to an increase in fees charged to our clients.
Net fees and commissions from insurance and capitalization products totaled R$2,478 million for the year ended December 31, 2016, a 13.0% increase compared to the year ended December 31, 2015.2019, This increase was mainly due to the marketing campaigns conducteda recovery of transaction volumes in the branch networksecond half of 2020, despite the reduction in volume during the first half of 2016.
2020.
The following table reflects the breakdown of net fee and commission income for the years ended December 31, 20162021, 2020 and 2015:2019:
For the year ended December 31 | ||||||||||||||||
2016 | 2015 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Banking fees | 3,001 | 2,570 | 16.7 | % | 430 | |||||||||||
Collection and payment services | 957 | 816 | 17.3 | % | 141 | |||||||||||
Insurance and Capitalization | 2,478 | 2,192 | 13.0 | % | 285 | |||||||||||
Asset Management and Pension Funds | 1,174 | 1,028 | 14.2 | % | 146 | |||||||||||
Credit and debit cards | 3,022 | 2,509 | 20.4 | % | 512 | |||||||||||
Capital markets | 590 | 501 | 17.8 | % | 89 | |||||||||||
Trade finance | 855 | 701 | 22.0 | % | 154 | |||||||||||
Tax on services | (515 | ) | (401 | ) | 28.3 | % | (113 | ) | ||||||||
Others | (584 | ) | (433 | ) | 35.0 | % | (151 | ) | ||||||||
Total | 10,978 | 9,484 | 15.8 | % | 1,494 |
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For the Year Ended December 31 | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Current account services | 3,549 | 3,716 | 4,051 | (4.5 | ) | (8.3 | ) | |||||||||||||
Collection and payment services | 1,626 | 1,459 | 1,313 | 11.4 | 11.1 | |||||||||||||||
Insurance and capitalization | 4,311 | 3,831 | 3,586 | 12.5 | 6.8 | |||||||||||||||
Asset Management and pension funds | 1,418 | 1,114 | 1,434 | 27.3 | (22.3 | ) | ||||||||||||||
Credit and debit cards | 3,666 | 5,151 | 4,986 | (28.8 | ) | 3.3 | ||||||||||||||
Capital markets | 1,053 | 858 | 1,211 | 22.8 | (29.2 | ) | ||||||||||||||
Trade finance | 1,758 | 1,740 | 1,317 | 1.0 | 32.1 | |||||||||||||||
Tax on services | (712 | ) | (678 | ) | (622 | ) | 5.1 | 8.9 | ||||||||||||
Others | (1,396 | ) | (964 | ) | (1,562 | ) | 44.8 | 38.2 | ||||||||||||
Total | 15,273 | 16,229 | 15,713 | (5.9 | ) | 3.3 |
Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net)
Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 20162021, were gainslosses of R$7,5911,781 million, a gain of R$17,5099,922 million increase fromover the losses of R$9,91811,703 million for the year ended December 31, 2015.2020. This variation is mainly explained by an increasedue to greater exposure to operations in Cayman and Luxembourg and unfavorable exchange rate variation in 2020. In 2021, there was a combination of R$17,059 million from derivatives transactions, as a consequencelower exchange rate variation and the end of ouroverhedge operations due to the change in taxation. Excluding the results of hedging on investments abroad which was offset by effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$731 million for the year ended December 31, 2021, a R$1,149 million, increase from gains of R$1,880 million compared to the year ended December 31, 2020, mainly due to the positive results in our derivative position.
Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the same amountyear ended December 31, 2020 were losses of R$11,703 million, a R$11,377 million increase from losses of R$326 million for the year ended December 31, 2019. This variation is mainly due to gains of R$9,732 million related to financial assets measure at fair value through profit or loss held for trading and losses of R$21,912 million related to exchange differences (net). Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$1,880 million for the year ended December 31, 2020, a R$942 million increase from gains of R$938 million compared to the year ended December 31, 2019 mainly due to the positive results in income taxes.our derivative position. Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “—Other Factors Affecting Our“Item 3. Key Information—A. Selected Financial ConditionData—Reconciliation of Non-GAAP Measures and Results of Operations—Hedging in Foreign Investments.Ratios to Their Most Directly Comparable IFRS Financial Measures.”
The following table presents our gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net) for the periods indicated,
For the Year Ended December 31 | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | (1,781 | ) | (11,703 | ) | (326 | ) | (84.8 | ) | 3,489.9 | |||||||||||
Effects of the hedge for investment held abroad | 2,512 | 13,583 | 1,264 | (81.5 | ) | 974.4 | ||||||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding Hedge Impact (1) | 731 | 1,880 | 938 | (61.1 | ) | 100.4 |
(1) | Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” |
164 |
Other Operating Income/Expenses
Other operating income/expenses for the year ended December 31, 20162021 were expenses of R$6251,119 million, an increase of R$277246 million compared to expenses of R$347873 million for the year ended December 31, 2015,2020, mainly due to the lower result of our expenses with Benefit Guarantor Fund – FGB (Fundo Garantidor de Crédito) pension plan and higher FGC (Fundo Garantidor de Crédito) expenses given the increase in the balance of deposits from R$436 million to R$478 million, which was primarily due to the reversalincrease in consumption of losses related toproducts covered by the private pension plan which occurred duringFGC. For the year ended December 31, 2015 that did not occur in2020, other operating income/expenses were expenses of R$873 million, compared to expenses of R$1,108 million for the year ended December 31, 2016, and an increase in operational losses relating to fraud.2019.
Administrative Expenses
Administrative expenses for the year ended December 31, 20162021, were R$14,92017,316 million, a R$405 202 million increases compared to expenses of R$17,115 million for the year ended December 31, 2020, mainly due wages and salaries, and technology and system due to the growth of the business. For the year ended December 31, 2020, our administrative expenses of R$17,115 million reflected a R$173 million increase compared to administrative expenses of R$14,51516,942 million for the year ended December 31, 2015.
2019, mainly as a result of higher expenses with technology and systems.
Personnel expenses increased R$578154 million for the year ended December 31, 2016 compared to the same period in 2015, due principally to2021, primarily resulting from higher wageemployee wages and salaries, andderiving from the R$155 million lump-sum bonus in connection with the renegotiation of our collective bargaining agreement in October 2016.
applied to the Company's salary base since September 2021. In the year ended December 31, 2020, our personnel expenses decreased R$456 million (compared to the year ended December 31, 2019). This performance can be attributed to primarily resulting from lower employee wages and salaries, benefits, and share-based compensation.
The following table reflectssets forth our personnel expenses asfor each of the periods indicated:
For the year ended December 31 | ||||||||||||||||
2016 | 2015 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Wages and salaries | 5,377 | 4,655 | 15.5 | % | 722 | |||||||||||
Social security costs | 1,273 | 1,316 | (3.3 | )% | (43 | ) | ||||||||||
Benefits | 1,278 | 1,184 | 7.9 | % | 94 | |||||||||||
Training | 63 | 93 | (32.7 | )% | (30 | ) | ||||||||||
Other personnel expenses | 386 | 550 | (29.8 | )% | (164 | ) | ||||||||||
Total | 8,377 | 7,799 | 7.4 | % | 578 |
The efficiency ratio decreased to 30.6% in the year ended December 31, 2016, as compared to 47.1% for the year ended December 31, 2015. Our adjusted efficiency ratio, which excludes the effect of profit-neutral tax hedging (see “—Hedging in Foreign Investments” and “Selected Financial Data—Selected Consolidated Non-GAAP Ratios”) increased from 34.8% in 2015 to 34.9% in 2016.
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Wages and salaries | 5,905 | 5,731 | 5,876 | 3.0 | (2.5 | ) | ||||||||||||||
Social security costs | 1,153 | 1,222 | 1,277 | (5.7 | ) | (4.3 | ) | |||||||||||||
Benefits | 1,435 | 1,390 | 1,491 | 3.2 | (6.8 | ) | ||||||||||||||
Training | 55 | 49 | 66 | 11.9 | (25.9 | ) | ||||||||||||||
Other personnel expenses | 477 | 479 | 617 | (0.4 | ) | (22.3 | ) | |||||||||||||
Total | 9,026 | 8,871 | 9,328 | 1.7 | (4.9 | ) |
Other administrative expenses decreasedincreased R$17347 million fromto R$6,7168,291 million for the year ended December 31, 2015 to2021, from R$6,5438,243 million for the year ended December 31, 2016. This2020, mainly as a result of higher expenses with property, fixtures and supplies and technology and systems, resulting from the expansion of our business, which was partially offset by the decrease was primarilyin expenses for communications.
Other administrative expenses increased R$630 million to R$8,243 million for the year ended December 31, 2020 from R$7,614 million for the year ended December 31, 2019 mainly due to lower expenses from specializeda R$297 million increase in technology and technical services, advertisingsystems, and per diems and travel expenses.a R$176 million increase in communications.
The following table sets forth our other administrative expenses for each of the periods indicated:
For the year ended December 31 | For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||
2016 | 2015 | % Change | Change | 2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||||||||||||||
(in millions of R$, except percentages) | (in millions of R$, except percentages) | |||||||||||||||||||||||||||||||||||
Specialized and technical services | 1,745 | 1,821 | (4.2 | )% | (76 | ) | 2,184 | 2,171 | 2,173 | 0.6 | (0.1 | ) | ||||||||||||||||||||||||
Property, fixtures and supplies | 1,279 | 1,268 | 0.8 | % | 10 | 889 | 744 | 748 | 19.6 | (0.6 | ) | |||||||||||||||||||||||||
Technology and systems | 1,247 | 1,193 | 4.6 | % | 54 | 2,474 | 2,355 | 2,059 | 5.1 | 14.4 | ||||||||||||||||||||||||||
Advertising | 487 | 523 | (7.0 | )% | (37 | ) | 621 | 654 | 713 | (5.0 | ) | (8.2 | ) | |||||||||||||||||||||||
Communications | 489 | 481 | 1.6 | % | 8 | 353 | 649 | 473 | (45.6 | ) | 37.2 | |||||||||||||||||||||||||
Per diems and travel expenses | 133 | 160 | (16.9 | )% | (27 | ) | 72 | 69 | 140 | 4.,2 | (50.8 | ) | ||||||||||||||||||||||||
Taxes other than income tax | 202 | 280 | 112 | (27.7 | ) | 150.1 | ||||||||||||||||||||||||||||||
Surveillance and cash courier services | 622 | 615 | 1.3 | % | 8 | 598 | 595 | 631 | 0.5 | (5.7 | ) | |||||||||||||||||||||||||
Insurance premiums | 22 | 17 | 35 | 34.6 | (52.2 | ) | ||||||||||||||||||||||||||||||
Other administrative expenses | 542 | 655 | (17.3 | )% | (114 | ) | 874 | 710 | 531 | 23.2 | 33.5 | |||||||||||||||||||||||||
Total | 6,543 | 6,716 | (2.6 | )% | (173 | ) | 8,291 | 8,243 | 7,614 | 0.6 | 8.3 |
The efficiency ratio, which we calculate as total administrative expenses divided by total income, decreased to 27.1% in the year ended December 31, 2021, as compared to 35.5% for the year ended December 31, 2020. This decrease of 8.4 p.p. in the ratio is primarily due to the effects of the hedge for investment held abroad and the growth in net interest income driven by the increase in the volume of the credit portfolio.
The efficiency ratio, which we calculate as total administrative expenses divided by total income, increased to 35.5% in the year ended December 31, 2020, as compared to 28.8% for the year ended December 31, 2019, This increase of 6.7 p.p. in the ratio is primarily due to the effects of the hedge for investment held abroad.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 20162021, depreciation and amortization was R$1,4832,434 million, a 5.6%, or R$7145 million, decrease from R$1,4902,579 million for the year ended December 31, 2015.2020, primarily due to a 24.0% decrease in expenses with amortization of hardware and software, which was primarily due to the volume of assets not deployed or under development and the effect of write-offs.
hardware and software items, resulting from investments made in this period.
Provisions (Net)
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$2,7252,179 million for the year ended December 31, 2016,2021, a decrease of31.5%, or R$1,277523 million, increase compared to R$4,0011,657 million for the year ended December 31, 2015. This2020, driven by the fact that the amounts provisioned are indexed to the SELIC rate (for tax proceedings), the National Consumer Price Index (Índice Nacional de Preços ao Consumidor) (for civil proceedings) and the Broad National Consumer Price Index — Special (Índice Nacional de Preços ao Consumidor Amplo — Especial) and SELIC rate for labor proceedings, each of which increased significantly in the year ended December 31, 2021.
In the year ended December 31, 2020, provisions (net) totaled R$1,657 million for the year ended December 31, 2020, a decrease wasof R$2,025 million compared to R$3,682 million for the year ended December 31, 2019, primarily due to a higher than usual level of provisions in 2019, as explained below.
In the year ended December 31, 2019, provisions (net) totaled R$3,682 million, an increase of R$1,682 million compared to R$2,000 million for the year ended December 31, 2018, mainly due to an increase of R$700 million related to the creation of an efficiency and productivity fund, an increase in civil and labor proceedings due to revision of the operational model and a decrease inconstitution of provisions related to tax and civil contingencies.
the legal proceeding brought by the association of retired employees of Banespa (Associação dos Funcionários Aposentados do Banco do Estado de São Paulo), or AFABESP, an association of former employees of Banespa in which the classification of the chance of loss was revised to probable in December 2019. For further information see note 22 to our audited consolidated financial statements included elsewhere in this annual report.
Impairment Losses on Financial Assets (Net)
Impairment Losseslosses on Financial Assets (Net)financial assets (net) for the year ended December 31, 20162021 were R$13.3 billion, a17,113 million, an R$333338 million decrease compared to R$13.617,450 million for the year ended December 31, 2020, primarily due to the resumption of economic activity in Brazil following the easing of the COVID-19 pandemic in the second half of 2021 and the use of the overlay provision constituted in the year ended December 31, 2020 in response to the potential effects of the COVID-19 pandemic.
For the year ended December 31, 2020, impairment losses on financial assets (net) were R$17,450 million, a R$4,080 million increase compared to R$13,370 million for the year ended December 31, 2019, principally due
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to the adverse effects of the COVID-19 pandemic which resulted in the creation of additional (overlay) R$3,200 million allowance for potential loan losses and to the recurrent growth of the credit portfolio.
Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021 compared to R$466.1 billion as of December 31, 2020, Furthermore, our impaired assets increased R$3.7 billion from R$23.2 billion as of December 31, 2020 to R$26.9 billion for the year ended December 31, 2015 principally due to:
Our credit risk exposure portfolio decreased by approximately R$9.174 billion from R$310.9 billion as of December 31, 2015 to R$301.7 billion as of December 31, 2016. Our impaired assets increased by approximately R$289 million in the same period from R$18.6 billion to R$18.9 billion (see “—Impaired Assets by Type of Loan”). The default rate on all loans and other financial assets increased by 30 basis points in 2016 in comparison to 2015.
2021.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio as of December 31, 20162021 and December 31, 2015.2020 and 2019.
As of December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$ except percentages) | ||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | |||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | |||||||||||||||
Provisions for impairment losses | 29,723 | 25,640 | 22,626 | 22,969 | 18,262 | |||||||||||||||
Credit risk exposure Non-GAAP – customers (1) | 540,873 | 466,104 | 391,569 | 364,194 | 330,474 | |||||||||||||||
Ratios | ||||||||||||||||||||
Impaired assets to credit risk exposure | 5.0 | % | 5.0 | % | 6.0 | % | 6.2 | % | 5.8 | % | ||||||||||
Coverage ratio (2) | 110.4 | % | 110.6 | % | 96.6 | % | 102.4 | % | 95.4 | % | ||||||||||
Impairment losses | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | ||||||||||
Losses on other financial instruments not measured at fair value (3) | - | - | - | - | - | |||||||||||||||
Impairment losses on financial assets (net) (4) | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) |
For the year ended December 31 | ||||||||||||||||
2016 | 2015 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Loans and advances to customers, gross | 268,438 | 267,266 | 0.44 | % | 1,172 | |||||||||||
Impaired assets | 18,888 | 18,599 | 1.55 | % | 289 | |||||||||||
Provisions for impairment losses | 18,191 | 15,412 | 18.03 | % | 2,779 | |||||||||||
Credit risk exposure – customers(1) | 301,703 | 310,877 | (2.95 | )% | (9,174 | ) | ||||||||||
Ratios | ||||||||||||||||
Impaired assets to credit risk exposure | 6.3 | % | 6.0 | % | — | 0.3p.p. | ||||||||||
Coverage ratio(2) | 96.3 | % | 82.9 | % | — | 26.69p.p. | ||||||||||
Impairment losses on loans and receivables | (13,390 | ) | (13,110 | ) | 2.1 | % | (280 | ) | ||||||||
Impairment losses on other financial instruments not measured at fair value through profit for loss(3) | 88 | (524 | ) | (116.9 | )% | 612 | ||||||||||
Total of Impairment losses on financial assets (net)(4) | (13,301 | ) | (13,634 | ) | (2.4 | )% | 333 |
(1) | Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$ |
(2) | Provisions for impairment losses as a percentage of impaired assets. |
(3) | Corresponds to registration of losses of a permanent character in the realization value of bonds and securities classified as “Securities available for sale” currently accounted for “Earnings on financials assets (net).” |
(4) | As of December 31, |
The following chart shows our impaired assets to credit risk ratio (impairment losses divided by loans and advances to customers, gross) from 20112017 through 2016:2021:
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Impaired Assets by Type of LoanNet Fee and Commission Income
The following table shows our impaired assets by type of loan as of December 31, 2016Net fee and December 31, 2015.
For the year ended December 31, | ||||||||||||||||
2016 | 2015 | % Change | Change | |||||||||||||
(in millions of R$) | ||||||||||||||||
Commercial and industrial | 11,629 | 10,749 | 8.2 | % | 880 | |||||||||||
Real estate | 719 | 829 | (13.3 | )% | (111 | ) | ||||||||||
Installment loans to individuals | 6,488 | 6,970 | (6.9 | )% | (482 | ) | ||||||||||
Lease financing | 52 | 52 | n/d | 0 | ||||||||||||
Total | 18,887 | 18,599 | 1.5 | % | 288 |
For a discussion of the evolution in impairment in our lending portfolios and our methodology for loan loss allowances with respect to the following lending portfolios, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology for Impairment Losses.” See also “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—Ongoing investigations relating to corruption and diversion of public funds that are being conducted by the Brazilian federal police as well as other Brazilian and non-Brazilian regulators and law enforcement officials may adversely affect the growth of the Brazilian economy and could have a material adverse effect on us” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—The financial problems faced by our customers could adversely affect us.”
Commercial and Industrial
Impaired assets in the portfolio of commercial and industrial loans amounted to R$11,629 million as of December 31, 2016, an increase of R$880 million, or 8.2%, compared to R$10,749 million as of December 31, 2015. The increase in impaired assets in this portfolio was mainly caused by the slowdown in the Brazilian economy in the last two years, affecting our commercial and industrial portfolio. For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology for Impairment Losses.”
Real Estate
Impaired assets in the real estate lending portfolio totaled R$719 million on December 31, 2016, a decrease of R$111 million compared to R$829 million as of December 31, 2015. The decrease in impaired assets was primarily due to better management of this portfolio, with improved options for customers to restructure their debt. For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology for Impairment Losses.”
Installment loans to individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$6,488 million on December 31, 2016, with a decrease of R$482 million, or 6.9%, compared to 2015. The decrease in impaired assets reflects the measures adopted by us since late 2012 to manage default rates in this portfolio, with improved options for customers to restructure their debt. For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology for Impairment Losses.”
Financial Leasing
Impaired assets in the financial leasing lending portfolio were stable in the period of comparison, totaling R$52 million as of December 31, 2016 and R$52 million as of December 31, 2015. For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology for Impairment Losses.”
Impairment Losses on Other Assets (Net)
Impairment losses on other assets (net)commission income for the year ended December 31, 2016 amounted to losses of2021, reached R$11415,273 million, a decrease of5.9% or R$1,106956 million asdecrease compared to 2015, mainly due to expenses of R$67516,229 million related to the impairment of software and expenses of R$534 million related to the impairment of payroll services related assets in 2015 that did not recur in 2016.
Other Non-Financial Gains/Losses
Other non-financial gains/losses were gains of R$91 million duringfor the year ended December 31, 2016,2020, impacted mainly due to decrease of credit and debit cards, due to the higher card issuance costs as a R$740 million decrease from gainsresult of R$831 million duringthe growth of the business and the impact of the Spin-Off of Getnet. This was partially offset by the growth of insurance, capitalization, asset management and pension funds.
Net fee and commission income for the year ended December 31, 2015,2020 reached R$16,229 million, a 3.3% or R$515 million increase compared to R$15,713 million for the year ended December 31, 2019, impacted mainly due to the increase in (i) trade finance, (ii) insurance and capitalization and (iii) credit and debit cards.
Net fees and commissions from trade finance totaled R$1,758 million for the year ended December 31, 2021, an increase of 1.0% compared to the year ended December 31, 2020.
Net fees and commissions from trade finance totaled R$1,740 million for the year ended December 31, 2020, an increase of 32.1% compared to the year ended December 31, 2019, This increase was mainly a result of higher demand for this service during the COVID-19 pandemic and the effects of variations in exchange rates.
Net fees and commissions from insurance and capitalization totaled R$4,311 million for the year ended December 31, 2021, an increase of 12.5% compared to the year ended December 31, 2020. This increase was mainly a result of an increase in our credit life insurance portfolio.
Net fees and commissions from insurance and capitalization totaled R$3,831 million for the year ended December 31, 2020, a 6.8% increase compared to the year ended December 31, 2019, For the year ended December 31, 2019, the net fees and commissions from insurance and capitalization totaled R$3,586 million, a 13.2% increase compared to the year ended December 31, 2018. The performance in both periods was primarily driven by increases in our portfolio of credit life insurance.
Net fees and commissions from credit and debit cards totaled R$3,666 million for the year ended December 31, 2021, a decrease of 28.8% compared to the year ended December 31, 2020. This decrease was mainly a result of the Spin-Off of Getnet.
Net fees and commissions from credit and debit cards totaled R$5,151 million for the year ended December 31, 2020, an increase of 3.3% compared to the year ended December 31, 2019, This increase was mainly due to a non-recurring gainrecovery of R$751 million fromtransaction volumes in the salesecond half of SSS DTVM2020, despite the reduction in 2015. For further information, see “Item 4. Information onvolume during the Company—A. History and Developmentfirst half of the Company—Important Events—Sale of Santander Securities Services Brasil DTVM S.A.”
Income Taxes
Income taxes expense includes income tax, social contribution, PIS and COFINS (which are social contributions due on certain revenues net of some expenses). Income taxes amounted to expenses of R$8,919 million for the year 2016, a R$21,969 million change from a R$13,050 million of tax benefit for the year 2015. This change is principally attributable to the following events: (i) negative variation of R$17,059 million as a consequence of the effects of foreign exchange rate variations affecting certain of our foreign branches, and the associated hedging instruments, affecting the “Gains (losses) on financial assets and liabilities (net)” line, (ii) gains of R$2.7 billion related to the reversal of a tax provision and a tax reimbursement related to the COFINS in 2015 that did not occur in 2016, and (iii) the recognition of tax credits derived from the increase of the CSLL tax rate from 15% to 20% in August 2015.
Results of Operations by Segment for the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015
2020.
The following tables show our resultstable reflects the breakdown of operationsnet fee and commission income for the years ended December 31, 20162021, 2020 and 2015, for each of our operating segments.2019:
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For the Year Ended December 31 | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Current account services | 3,549 | 3,716 | 4,051 | (4.5 | ) | (8.3 | ) | |||||||||||||
Collection and payment services | 1,626 | 1,459 | 1,313 | 11.4 | 11.1 | |||||||||||||||
Insurance and capitalization | 4,311 | 3,831 | 3,586 | 12.5 | 6.8 | |||||||||||||||
Asset Management and pension funds | 1,418 | 1,114 | 1,434 | 27.3 | (22.3 | ) | ||||||||||||||
Credit and debit cards | 3,666 | 5,151 | 4,986 | (28.8 | ) | 3.3 | ||||||||||||||
Capital markets | 1,053 | 858 | 1,211 | 22.8 | (29.2 | ) | ||||||||||||||
Trade finance | 1,758 | 1,740 | 1,317 | 1.0 | 32.1 | |||||||||||||||
Tax on services | (712 | ) | (678 | ) | (622 | ) | 5.1 | 8.9 | ||||||||||||
Others | (1,396 | ) | (964 | ) | (1,562 | ) | 44.8 | 38.2 | ||||||||||||
Total | 15,273 | 16,229 | 15,713 | (5.9 | ) | 3.3 |
Commercial BankingGains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net)
For the year ended December 31 | ||||||||||||||||
2016 | 2015 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Net interest income | 27,366 | 27,041 | 1.2 | % | 325 | |||||||||||
Income from equity instruments | 259 | 143 | 81.0 | % | 116 | |||||||||||
Income from companies accounted for by the equity method | 48 | 116 | (59.1 | )% | (69 | ) | ||||||||||
Net fee and commission income | 9,580 | 8,241 | 16.3 | % | 1,339 | |||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | 5,619 | (9,069 | ) | (162.0 | )% | 14,688 | ||||||||||
Other operating income (expenses) | (611 | ) | (335 | ) | 82.2 | % | (276 | ) | ||||||||
Total income | 42,261 | 26,136 | 61.7 | % | 16,124 | |||||||||||
Personnel expenses | (7,638 | ) | (7,123 | ) | 7.2 | % | (515 | ) | ||||||||
Other administrative expenses | (6,273 | ) | (6,450 | ) | (2.7 | )% | 177 | |||||||||
Depreciation and amortization | (1,382 | ) | (1,361 | ) | 1.5 | % | (20 | ) | ||||||||
Provisions (net) | (2,685 | ) | (4,013 | ) | (33.1 | )% | 1,328 | |||||||||
Impairment losses on financial assets (net) | (11,607 | ) | (12,365 | ) | (6.1 | )% | 758 | |||||||||
Impairment losses on other assets (net) | (114 | ) | (1,220 | ) | (90.6 | )% | 1,106 | |||||||||
Other nonfinancial gain (losses) | 91 | 831 | (89.1 | )% | (740 | ) | ||||||||||
Operating profit before tax | 12,652 | (5,565 | ) | (327.3 | )% | 18,217 | ||||||||||
Discontinued Operations | — | — | — | — |
Operating profit before tax attributed to the Commercial Banking segmentGains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2016 was R$12.6 billion, a R$18.2 billion increase from2021, were losses of R$5.6 billion1,781 million, a gain of R$9,922 million over the losses of R$11,703 million for the year ended December 31, 2015.
2020. This variation wasis mainly due to:to greater exposure to operations in Cayman and Luxembourg and unfavorable exchange rate variation in 2020. In 2021, there was a combination of lower exchange rate variation and the end of overhedge operations due to the change in taxation. Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$731 million for the year ended December 31, 2021, a R$1,149 million, increase from gains of R$1,880 million compared to the year ended December 31, 2020, mainly due to the positive results in our derivative position.
Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2020 were losses of R$11,703 million, a R$11,377 million increase from losses of R$326 million for the year ended December 31, 2019. This variation is mainly due to gains of R$9,732 million related to financial assets measure at fair value through profit or loss held for trading and losses of R$21,912 million related to exchange differences (net). Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$1,880 million for the year ended December 31, 2020, a R$942 million increase from gains of R$938 million compared to the year ended December 31, 2019 mainly due to the positive results in our derivative position. Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
The following table presents our gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net) for the periods indicated,
For the Year Ended December 31 | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | (1,781 | ) | (11,703 | ) | (326 | ) | (84.8 | ) | 3,489.9 | |||||||||||
Effects of the hedge for investment held abroad | 2,512 | 13,583 | 1,264 | (81.5 | ) | 974.4 | ||||||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding Hedge Impact (1) | 731 | 1,880 | 938 | (61.1 | ) | 100.4 |
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Other Operating Income/Expenses
Global Wholesale Banking
For the year ended December 31 | ||||||||||||||||
2016 | 2015 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Net interest income | 3,221 | 4,297 | (25.0 | )% | (1,076 | ) | ||||||||||
Net fee and commission income | 1,397 | 1,243 | 12.4 | % | 155 | |||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | 1,972 | (849 | ) | (332.1 | )% | 2,821 | ||||||||||
Other operating income (expenses) | (14 | ) | (12 | ) | 14.5 | % | (2 | ) | ||||||||
Total income | 6,576 | 4,678 | 40.6 | % | 1,898 | |||||||||||
Personnel expenses | (739 | ) | (675 | ) | 9.4 | % | (64 | ) | ||||||||
Other administrative expenses | (270 | ) | (267 | ) | 1.3 | % | (4 | ) | ||||||||
Depreciation and amortization | (101 | ) | (129 | ) | (21.6 | )% | 28 | |||||||||
Provisions (net) | (39 | ) | 12 | (439.4 | )% | (51 | ) | |||||||||
Impairment losses on financial assets (net) | (1,694 | ) | (1,269 | ) | 33.5 | % | (425 | ) | ||||||||
Impairment losses on other assets (net) | (0 | ) | (0 | ) | n.d. | 0 | ||||||||||
Operating profit before tax | 3,732 | 2,349 | 58.9 | % | 1,383 | |||||||||||
Discontinued Operations | — | — | — | — |
Profit before tax attributed to the Global Wholesale Banking segmentOther operating income/expenses for the year ended December 31, 20162021 were expenses of R$1,119 million, an increase of R$246 million compared to expenses of R$873 million for the year ended December 31, 2020, mainly due to the lower result of our expenses with Benefit Guarantor Fund – FGB (Fundo Garantidor de Crédito) pension plan and higher FGC (Fundo Garantidor de Crédito) expenses given the increase in the balance of deposits from R$436 million to R$478 million, which was primarily due to the increase in consumption of products covered by the FGC. For the year ended December 31, 2020, other operating income/expenses were expenses of R$3.7 billion,873 million, compared to expenses of R$1,108 million for the year ended December 31, 2019.
Administrative Expenses
Administrative expenses for the year ended December 31, 2021, were R$17,316 million, a 58.9%R$ 202 million increases compared to expenses of R$17,115 million for the year ended December 31, 2020, mainly due wages and salaries, and technology and system due to the growth of the business. For the year ended December 31, 2020, our administrative expenses of R$17,115 million reflected a R$173 million increase compared to administrative expenses of R$16,942 million for the year ended December 31, 2019, mainly as a result of higher expenses with technology and systems.
Personnel expenses increased R$154 million for the year ended December 31, 2021, primarily resulting from higher employee wages and salaries, deriving from the collective bargaining agreement applied to the Company's salary base since September 2021. In the year ended December 31, 2020, our personnel expenses decreased R$456 million (compared to the year ended December 31, 2019). This performance can be attributed to primarily resulting from lower employee wages and salaries, benefits, and share-based compensation.
The following table sets forth our personnel expenses for each of the periods indicated:
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Wages and salaries | 5,905 | 5,731 | 5,876 | 3.0 | (2.5 | ) | ||||||||||||||
Social security costs | 1,153 | 1,222 | 1,277 | (5.7 | ) | (4.3 | ) | |||||||||||||
Benefits | 1,435 | 1,390 | 1,491 | 3.2 | (6.8 | ) | ||||||||||||||
Training | 55 | 49 | 66 | 11.9 | (25.9 | ) | ||||||||||||||
Other personnel expenses | 477 | 479 | 617 | (0.4 | ) | (22.3 | ) | |||||||||||||
Total | 9,026 | 8,871 | 9,328 | 1.7 | (4.9 | ) |
Other administrative expenses increased R$47 million to R$8,291 million for the year ended December 31, 2021, from R$8,243 million for the year ended December 31, 2020, mainly as a result of higher expenses with property, fixtures and supplies and technology and systems, resulting from the expansion of our business, which was partially offset by the decrease in expenses for communications.
Other administrative expenses increased R$630 million to R$8,243 million for the year ended December 31, 2020 from R$7,614 million for the year ended December 31, 2019 mainly due to a R$297 million increase in technology and systems, and a R$176 million increase in communications.
The following table sets forth our other administrative expenses for each of the periods indicated:
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Specialized and technical services | 2,184 | 2,171 | 2,173 | 0.6 | (0.1 | ) | ||||||||||||||
Property, fixtures and supplies | 889 | 744 | 748 | 19.6 | (0.6 | ) | ||||||||||||||
Technology and systems | 2,474 | 2,355 | 2,059 | 5.1 | 14.4 | |||||||||||||||
Advertising | 621 | 654 | 713 | (5.0 | ) | (8.2 | ) | |||||||||||||
Communications | 353 | 649 | 473 | (45.6 | ) | 37.2 | ||||||||||||||
Per diems and travel expenses | 72 | 69 | 140 | 4.,2 | (50.8 | ) | ||||||||||||||
Taxes other than income tax | 202 | 280 | 112 | (27.7 | ) | 150.1 | ||||||||||||||
Surveillance and cash courier services | 598 | 595 | 631 | 0.5 | (5.7 | ) | ||||||||||||||
Insurance premiums | 22 | 17 | 35 | 34.6 | (52.2 | ) | ||||||||||||||
Other administrative expenses | 874 | 710 | 531 | 23.2 | 33.5 | |||||||||||||||
Total | 8,291 | 8,243 | 7,614 | 0.6 | 8.3 |
The efficiency ratio, which we calculate as total administrative expenses divided by total income, decreased to 27.1% in the year ended December 31, 2021, as compared to 35.5% for the year ended December 31, 2020. This decrease of 8.4 p.p. in the ratio is primarily due to the effects of the hedge for investment held abroad and the growth in net interest income driven by the increase in the volume of the credit portfolio.
The efficiency ratio, which we calculate as total administrative expenses divided by total income, increased to 35.5% in the year ended December 31, 2020, as compared to 28.8% for the year ended December 31, 2019, This increase of 6.7 p.p. in the ratio is primarily due to the effects of the hedge for investment held abroad.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2021, depreciation and amortization was R$2,434 million, a 5.6%, or R$1,383145 million, decrease from R$2,579 million for the year ended December 31, 2020, primarily due to a 24.0% decrease in expenses with amortization of hardware and software, which was primarily due to the volume of assets not deployed or under development and the effect of write-offs.
For the year ended December 31, 2020 was R$2,579 million, a R$187 million increase from R$2.32,392 million for the year ended December 31, 2019, primarily due to higher expenses with amortization of hardware and software items, resulting from investments made in this period.
Provisions (Net)
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$2,179 million for the year ended December 31, 2021, a 31.5%, or R$523 million, increase compared to R$1,657 million for the year ended December 31, 2020, driven by the fact that the amounts provisioned are indexed to the SELIC rate (for tax proceedings), the National Consumer Price Index (Índice Nacional de Preços ao Consumidor) (for civil proceedings) and the Broad National Consumer Price Index — Special (Índice Nacional de Preços ao Consumidor Amplo — Especial) and SELIC rate for labor proceedings, each of which increased significantly in the year ended December 31, 2021.
In the year ended December 31, 2020, provisions (net) totaled R$1,657 million for the year ended December 31, 2020, a decrease of R$2,025 million compared to R$3,682 million for the year ended December 31, 2019, primarily due to a higher than usual level of provisions in 2019, as explained below.
In the year ended December 31, 2019, provisions (net) totaled R$3,682 million, an increase of R$1,682 million compared to R$2,000 million for the year ended December 31, 2018, mainly due to an increase of R$700 million related to the creation of an efficiency and productivity fund, an increase in civil and labor proceedings due to revision of the operational model and a constitution of provisions related to the legal proceeding brought by the association of retired employees of Banespa (Associação dos Funcionários Aposentados do Banco do Estado de São Paulo), or AFABESP, an association of former employees of Banespa in which the classification of the chance of loss was revised to probable in December 2019. For further information see note 22 to our audited consolidated financial statements included elsewhere in this annual report.
Impairment Losses on Financial Assets (Net)
Impairment losses on financial assets (net) for the year ended December 31, 2021 were R$17,113 million, an R$338 million decrease compared to R$17,450 million for the year ended December 31, 2020, primarily due to the resumption of economic activity in Brazil following the easing of the COVID-19 pandemic in the second half of 2021 and the use of the overlay provision constituted in the year ended December 31, 2020 in response to the potential effects of the COVID-19 pandemic.
For the year ended December 31, 2020, impairment losses on financial assets (net) were R$17,450 million, a R$4,080 million increase compared to R$13,370 million for the year ended December 31, 2019, principally due
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to the adverse effects of the COVID-19 pandemic which resulted in the creation of additional (overlay) R$3,200 million allowance for potential loan losses and to the recurrent growth of the credit portfolio.
Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021 compared to R$466.1 billion as of December 31, 2020, Furthermore, our impaired assets increased R$3.7 billion from R$23.2 billion as of December 31, 2020 to R$26.9 billion for the year ended December 31, 2015.2021.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio as of December 31, 2021 and December 31, 2020 and 2019.
This variation was mainly due to:
As of December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$ except percentages) | ||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | |||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | |||||||||||||||
Provisions for impairment losses | 29,723 | 25,640 | 22,626 | 22,969 | 18,262 | |||||||||||||||
Credit risk exposure Non-GAAP – customers (1) | 540,873 | 466,104 | 391,569 | 364,194 | 330,474 | |||||||||||||||
Ratios | ||||||||||||||||||||
Impaired assets to credit risk exposure | 5.0 | % | 5.0 | % | 6.0 | % | 6.2 | % | 5.8 | % | ||||||||||
Coverage ratio (2) | 110.4 | % | 110.6 | % | 96.6 | % | 102.4 | % | 95.4 | % | ||||||||||
Impairment losses | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | ||||||||||
Losses on other financial instruments not measured at fair value (3) | - | - | - | - | - | |||||||||||||||
Impairment losses on financial assets (net) (4) | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) |
This variation was partially offset by:
Provisions for impairment losses as a |
(4) | As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial |
Results of Operations for the Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014
Highlights
For the year ended December 31, 2015, we reported a consolidated profit for the year of R$9.8 billion, an increase of R$4.1 billion as compared to the year ended December 31, 2014. This increase principally reflects non-recurring results before taxes of (i) R$7.9 billion related to a reversal of tax provision regarding COFINS, (ii) R$765 million of tax reimbursement related to COFINS, and (iii) gains of R$751 million from the sale of SSS DTVM to Santander Securities Brasil.
OurThe following chart shows our impaired assets to credit risk ratio increased by 1.4p.p, from 5.6% for the year ended December 31, 2014 to 7.0% in the year ended December 31, 2015, mainly due to the slowdown in the Brazilian economy, Brazil’s current political crisis which adversely affected a number of companies from the oil and gas, construction and infrastructure sectors.2017 through 2021:
The coverage ratio was 82.9% in the year ended December 31, 2015, a 13.9 p.p. decrease as compared to 96.8% in the year ended December 31, 2014.
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Our total loan portfolio increased by 7.3%, from R$249.1 billion on December 31, 2014 to R$267.3 billion on December 31, 2015. Loans to individuals and large corporate customers showed increases of R$6,769 million and R$11,324 million, respectively, during the year ended December 31, 2015 as compared to the year ended December 31, 2014.
Growth in lending to individuals was driven by an increase of 15.4% in mortgage loans. The growth in lending to our large corporate customers of 10.7% was positively impacted by the exchange rate variation.
Deposits from the Brazilian Central Bank and deposits from credit institutions plus customer deposits increased by 9.9% to R$312.5 billion on December 31, 2015 from R$284.3 billion on December 31, 2014.
Our efficiency ratio was 47.1% in December 2015, a 7.8 p.p. increase from 39.9% in December 2014. Our Basel capital adequacy ratio, in accordance with the Brazilian Central Bank, was 15.7% as of December 31, 2015.
Results of Operations
The following table shows the main components of our net income for 2015 and 2014:
For the year ended December 31 | ||||||||||||||||
2015 | 2014 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Net interest income | 31,337 | 27,229 | 15.1 | % | 4,109 | |||||||||||
Income from equity instruments | 143 | 222 | (35.7 | )% | (79 | ) | ||||||||||
Income from companies accounted for by the equity method | 116 | 91 | 27.7 | % | 25 | |||||||||||
Net fees and commissions | 9,484 | 8,766 | 8.2 | % | 718 | |||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | (9,918 | ) | (887 | ) | n.d. | (9,031 | ) | |||||||||
Other operating income (expenses) | (347 | ) | (470 | ) | (26.2 | )% | 123 | |||||||||
Total income | 30,814 | 34,950 | (11.8 | )% | (4,136 | ) | ||||||||||
Administrative expenses | (14,515 | ) | (13,942 | ) | 4.1 | % | (573 | ) | ||||||||
Depreciation and amortization | (1,490 | ) | (1,362 | ) | 9.4 | % | (128 | ) | ||||||||
Provisions (net) | (4,001 | ) | (2,036 | ) | 96.5 | % | (1,965 | ) | ||||||||
Impairment losses on financial assets (net) | (13,634 | ) | (11,272 | ) | 21.0 | % | (2,362 | ) | ||||||||
Impairment losses on other assets (net) | (1,221 | ) | 4 | n.d. | (1,224 | ) | ||||||||||
Other non-financial gains/losses | 831 | 101 | n.d. | 730 | ||||||||||||
Operating profit before tax | (3,216 | ) | 6,443 | (149.9 | )% | (9,659 | ) | |||||||||
Income taxes | 13,050 | (736 | ) | n.d. | 13,785 | |||||||||||
Net profit from continuing operations | 9,834 | 5,708 | 72.3 | % | 4,126 | |||||||||||
Discontinued operations | — | — | — | — | ||||||||||||
Consolidated Profit for the Year | 9,834 | 5,708 | 72.3 | % | 4,126 |
Our consolidated profit for the year ended December 31, 2015 was R$9.8 billion, a 72.3% increase as compared to the year ended December 31, 2014 for which our consolidated profit was R$5.7 billion.
This variation in our consolidated profit for the year was mainly due to an increase of R$13,785 million, in the “Income taxes” line item for the year ended December 31, 2015 as compared to the year ended December 31, 2014. This increase can be principally attributed to the following non-recurring events: (i) gains of R$2.7 billion related to the reversal of tax provisions and tax reimbursement regarding COFINS, and (ii) gains of R$10.9 billion in the year ended December 31, 2015 as a consequence of the effects of foreign exchange rate variations affecting certain of our foreign branches and the associated hedging instruments.
These increases were partially offset by an increase of R$9,031 million in losses on financial assets and liabilities (net) and exchange differences for the year ended December 31, 2015, compared to the year ended December 31, 2014. This variation was mainly due to losses of R$10.9 billion on derivatives transactions, as a consequence of our results of hedging the tax effect on investments abroad, which losses were offset by gains of the same amount in income taxes). For further information, see “—Other Factors Affecting Our Financial Condition and Results of Operations—Hedging in Foreign Investments.”
Net Interest Income
Net interest income for the year ended December 31, 2015 was R$31,337 million, a 15.1%, or R$4,109 million, increase from R$27,229 million for the year ended December 31, 2014. Revenues from lending activities increased R$2.1 billion, or 11.4%, during the year mainly explained by a 7.3% increase in the size of our loan portfolio, principally in the large corporates segment. In addition, we also benefitted from a non-recurring reversal of tax provisions and a tax reimbursement in relation to COFINS in an amount of R$2.4 billion. For further information, see notes 2.1.b and 31 to our audited consolidated financial statements.
Average total earning assets in 2015 were R$480.4 billion, a 19.5% or R$78 billion increase from R$401.9 billion in 2014. The principal drivers of this increase were an increase of R$33.2 billion, or 37.3%, in the average of debt instruments and an increase of R$6.7 billion, or 19.1%, in the average of loans and amounts due from credit institutions and of R$30.2 billion, or 14.0%, in loans and advances to customers. Net yield (the net interest income divided by average earning assets) was 6.6% in 2015, compared to 6.9% in 2014, a decrease of 0.3p.p.
Average total interest bearing liabilities in 2015 were R$385.2 billion, a 20.9% or R$66.6 billion increase from R$318.6 billion 2014. The main drivers of this growth were an increase of R$24.8 billion in deposits from credit institution, R$22.4 billion in customer deposits and an increase of R$16.7 billion in marketable debt securities.
Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) in 2015 was 4.7%, 0.2p.p. lower than in 2014, which was 4.9%.
Income from Equity Instruments
Income from equity instruments for the year ended December 31, 2015 totaled R$143 million, a R$79 million decrease from R$222 million for the year ended December 31, 2014. This decrease was mainly due to a decrease in dividends from investments registered in other financial instruments at fair value through profit or loss.
Income from Companies Accounted for by the Equity Method
Income from companies accounted for by the equity method for the year ended December 31, 2015 was R$116 million, a R$25 million increase from R$91 million for the year ended 2014. This increase was mainly due to the positive results of operations of Banco RCI Brasil S.A. (formerly, Companhia de Crédito, Financiamento e Investimento RCI Brasil), a jointly-controlled company. This increase was partially offset by the negative results of operations of TECBAN—Tecnologia Bancária S.A., a jointly-controlled company.
Net Fee and Commission Income
Net fee and commission income for the year ended December 31, 20152021, reached R$9,48415,273 million, an 8.2%,a 5.9% or R$718956 million increase fromdecrease compared to R$8,76616,229 million for the year ended December 31, 2014. This increase was2020, impacted mainly due to an increasedecrease of R$224 million in revenues from trade finance, R$196 million in revenues from credit and debit cards, due to the higher card issuance costs as a result of the growth of the business and anthe impact of the Spin-Off of Getnet. This was partially offset by the growth of insurance, capitalization, asset management and pension funds.
Net fee and commission income for the year ended December 31, 2020 reached R$16,229 million, a 3.3% or R$515 million increase ofcompared to R$193 million in revenues from insurance and capitalization products.
Revenues from credit and debit cards totaled R$2,50915,713 million for the year ended December 31, 2015,2019, impacted mainly due to the increase in (i) trade finance, (ii) insurance and capitalization and (iii) credit and debit cards.
Net fees and commissions from trade finance totaled R$1,758 million for the year ended December 31, 2021, an increase of 8.5%1.0% compared to the year ended December 31, 2014, mainly due to the increase in the volume of credit2020.
Net fees and debit card transactions and the GetNet acquisition. Our credit card base decreased 6.8% although our number of issued debit cards increased 8.3% for the year ended December 31, 2015, reaching a total 59.0 million issued cards.
Revenuescommissions from insurance and capitalization productstrade finance totaled R$2,1921,740 million for the year ended December 31, 2015,2020, an increase of 32.1% compared to the year ended December 31, 2019, This increase was mainly a 9.7%result of higher demand for this service during the COVID-19 pandemic and the effects of variations in exchange rates.
Net fees and commissions from insurance and capitalization totaled R$4,311 million for the year ended December 31, 2021, an increase of 12.5% compared to the year ended December 31, 2020. This increase was mainly a result of an increase in our credit life insurance portfolio.
Net fees and commissions from insurance and capitalization totaled R$3,831 million for the year ended December 31, 2020, a 6.8% increase compared to the year ended December 31, 2014.2019, For the year ended December 31, 2019, the net fees and commissions from insurance and capitalization totaled R$3,586 million, a 13.2% increase compared to the year ended December 31, 2018. The performance in both periods was primarily driven by increases in our portfolio of credit life insurance.
Net fees and commissions from credit and debit cards totaled R$3,666 million for the year ended December 31, 2021, a decrease of 28.8% compared to the year ended December 31, 2020. This decrease was mainly a result of the Spin-Off of Getnet.
Net fees and commissions from credit and debit cards totaled R$5,151 million for the year ended December 31, 2020, an increase of 3.3% compared to the year ended December 31, 2019, This increase was primarilymainly due to an increasea recovery of transaction volumes in revenues from life and personal injury insurance productsthe second half of 2020, despite the reduction in our SMEs segment.
2020.
The following table reflects the breakdown of net fee and commission income for the yearyears ended December 31, 20152021, 2020 and 2014:2019:
For the year ended December 31 | ||||||||||||||||
2015 | 2014 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Banking fees | 2,570 | 2,428 | 5.9 | % | 142 | |||||||||||
Collection and payment services | 816 | 741 | 10.1 | % | 75 | |||||||||||
Insurance and Capitalization | 2,192 | 1,999 | 9.7 | % | 193 | |||||||||||
Asset Management and Pension Funds | 1,028 | 973 | 5.6 | % | 54 | |||||||||||
Credit and debit cards | 2,509 | 2,314 | 8.5 | % | 196 | |||||||||||
Capital markets | 501 | 494 | 1.4 | % | 7 | |||||||||||
Trade finance | 701 | 476 | 47.1 | % | 224 | |||||||||||
Tax on services | (401 | ) | (375 | ) | 6.9 | % | (26 | ) | ||||||||
Others | (433 | ) | (285 | ) | 52.0 | % | (148 | ) | ||||||||
Total | 9,484 | 8,766 | 8.2 | % | 718 |
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For the Year Ended December 31 | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Current account services | 3,549 | 3,716 | 4,051 | (4.5 | ) | (8.3 | ) | |||||||||||||
Collection and payment services | 1,626 | 1,459 | 1,313 | 11.4 | 11.1 | |||||||||||||||
Insurance and capitalization | 4,311 | 3,831 | 3,586 | 12.5 | 6.8 | |||||||||||||||
Asset Management and pension funds | 1,418 | 1,114 | 1,434 | 27.3 | (22.3 | ) | ||||||||||||||
Credit and debit cards | 3,666 | 5,151 | 4,986 | (28.8 | ) | 3.3 | ||||||||||||||
Capital markets | 1,053 | 858 | 1,211 | 22.8 | (29.2 | ) | ||||||||||||||
Trade finance | 1,758 | 1,740 | 1,317 | 1.0 | 32.1 | |||||||||||||||
Tax on services | (712 | ) | (678 | ) | (622 | ) | 5.1 | 8.9 | ||||||||||||
Others | (1,396 | ) | (964 | ) | (1,562 | ) | 44.8 | 38.2 | ||||||||||||
Total | 15,273 | 16,229 | 15,713 | (5.9 | ) | 3.3 |
Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net)
Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 20152021, were losses of R$9,9181,781 million, a gain of R$9,0319,922 million increase fromover the losses of R$88711,703 million for the year ended December 31, 2014.2020. This variation is explained by lossesmainly due to greater exposure to operations in Cayman and Luxembourg and unfavorable exchange rate variation in 2020. In 2021, there was a combination of R$10.9 billion from derivatives transactions, as a consequencelower exchange rate variation and the end of ouroverhedge operations due to the change in taxation. Excluding the results of hedging on investments abroad (loss whicheffect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were offset by gains of R$731 million for the year ended December 31, 2021, a R$1,149 million, increase from gains of R$1,880 million compared to the year ended December 31, 2020, mainly due to the positive results in our derivative position.
Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the same amountyear ended December 31, 2020 were losses of R$11,703 million, a R$11,377 million increase from losses of R$326 million for the year ended December 31, 2019. This variation is mainly due to gains of R$9,732 million related to financial assets measure at fair value through profit or loss held for trading and losses of R$21,912 million related to exchange differences (net). Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$1,880 million for the year ended December 31, 2020, a R$942 million increase from gains of R$938 million compared to the year ended December 31, 2019 mainly due to the positive results in income taxes).our derivative position. Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “—Other Factors Affecting Our“Item 3. Key Information—A. Selected Financial ConditionData—Reconciliation of Non-GAAP Measures and Results of Operations—Hedging in Foreign Investments.Ratios to Their Most Directly Comparable IFRS Financial Measures.”
The following table presents our gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net) for the periods indicated,
For the Year Ended December 31 | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | (1,781 | ) | (11,703 | ) | (326 | ) | (84.8 | ) | 3,489.9 | |||||||||||
Effects of the hedge for investment held abroad | 2,512 | 13,583 | 1,264 | (81.5 | ) | 974.4 | ||||||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding Hedge Impact (1) | 731 | 1,880 | 938 | (61.1 | ) | 100.4 |
(1) | Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” |
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Other Operating Income/Expenses
Other operating income/expenses for the year ended December 31, 20152021 were expenses of R$3471,119 million, a decreasean increase of R$123246 million compared to expenses of R$470873 million for the year ended December 31, 2014,2020, mainly due to the lower result of our expenses with Benefit Guarantor Fund – FGB (Fundo Garantidor de Crédito) pension plan and higher FGC (Fundo Garantidor de Crédito) expenses given the increase in the balance of deposits from R$436 million to R$478 million, which was primarily due to gains from our private pension plan business which occurred duringthe increase in consumption of products covered by the FGC. For the year ended December 31, 2015.
Administrative Expenses
Administrative Expenses for the year ended December 31, 20152020, other operating income/expenses were expenses of R$14,515873 million, a R$573 million increase compared to expenses of R$13,9421,108 million for the year ended December 31, 2014.2019.
PersonnelAdministrative Expenses
Administrative expenses increasedfor the year ended December 31, 2021, were R$59517,316 million, a R$ 202 million increases compared to expenses of R$17,115 million for the year ended December 31, 2015,2020, mainly due principally to higher wagewages and salaries, and social securitytechnology and benefits expenses relatedsystem due to the consolidationgrowth of GetNet and Bonsucesso into Santander Brasil and the impact ofbusiness. For the year ended December 31, 2020, our collective bargaining agreement.
For the year ended December 31 | ||||||||||||||||
2015 | 2014 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Wages and salaries | 4,655 | 4,512 | 3.2 | % | 143 | |||||||||||
Social security costs | 1,316 | 1,203 | 9.4 | % | 113 | |||||||||||
Benefits | 1,184 | 1,093 | 8.3 | % | 91 | |||||||||||
Training | 93 | 99 | (6.1 | )% | (6 | ) | ||||||||||
Other personnel expenses | 550 | 296 | 85.8 | % | 254 | |||||||||||
Total | 7,799 | 7,203 | 8.3 | % | 595 |
Other administrative expenses decreasedof R$2217,115 million fromreflected a R$6,738173 million increase compared to administrative expenses of R$16,942 million for the year ended December 31, 2014 to2019, mainly as a result of higher expenses with technology and systems.
Personnel expenses increased R$6,716154 million for the year ended December 31, 2015. 2021, primarily resulting from higher employee wages and salaries, deriving from the collective bargaining agreement applied to the Company's salary base since September 2021. In the year ended December 31, 2020, our personnel expenses decreased R$456 million (compared to the year ended December 31, 2019). This performance can be attributed to primarily resulting from lower employee wages and salaries, benefits, and share-based compensation.
The following table sets forth our personnel expenses for each of the periods indicated:
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Wages and salaries | 5,905 | 5,731 | 5,876 | 3.0 | (2.5 | ) | ||||||||||||||
Social security costs | 1,153 | 1,222 | 1,277 | (5.7 | ) | (4.3 | ) | |||||||||||||
Benefits | 1,435 | 1,390 | 1,491 | 3.2 | (6.8 | ) | ||||||||||||||
Training | 55 | 49 | 66 | 11.9 | (25.9 | ) | ||||||||||||||
Other personnel expenses | 477 | 479 | 617 | (0.4 | ) | (22.3 | ) | |||||||||||||
Total | 9,026 | 8,871 | 9,328 | 1.7 | (4.9 | ) |
Other administrative expenses increased R$47 million to R$8,291 million for the year ended December 31, 2021, from R$8,243 million for the year ended December 31, 2020, mainly as a result of higher expenses with property, fixtures and supplies and technology and systems, resulting from the expansion of our business, which was partially offset by the decrease wasin expenses for communications.
Other administrative expenses increased R$630 million to R$8,243 million for the year ended December 31, 2020 from R$7,614 million for the year ended December 31, 2019 mainly due to a R$297 million increase in technology and systems, and a R$176 million increase in communications.
The following table sets forth our other administrative expenses for each of the periods indicated:
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Specialized and technical services | 2,184 | 2,171 | 2,173 | 0.6 | (0.1 | ) | ||||||||||||||
Property, fixtures and supplies | 889 | 744 | 748 | 19.6 | (0.6 | ) | ||||||||||||||
Technology and systems | 2,474 | 2,355 | 2,059 | 5.1 | 14.4 | |||||||||||||||
Advertising | 621 | 654 | 713 | (5.0 | ) | (8.2 | ) | |||||||||||||
Communications | 353 | 649 | 473 | (45.6 | ) | 37.2 | ||||||||||||||
Per diems and travel expenses | 72 | 69 | 140 | 4.,2 | (50.8 | ) | ||||||||||||||
Taxes other than income tax | 202 | 280 | 112 | (27.7 | ) | 150.1 | ||||||||||||||
Surveillance and cash courier services | 598 | 595 | 631 | 0.5 | (5.7 | ) | ||||||||||||||
Insurance premiums | 22 | 17 | 35 | 34.6 | (52.2 | ) | ||||||||||||||
Other administrative expenses | 874 | 710 | 531 | 23.2 | 33.5 | |||||||||||||||
Total | 8,291 | 8,243 | 7,614 | 0.6 | 8.3 |
The efficiency ratio, which we calculate as total administrative expenses divided by total income, decreased to 27.1% in the year ended December 31, 2021, as compared to 35.5% for the year ended December 31, 2020. This decrease of 8.4 p.p. in the ratio is primarily due to lower expenses from specializedthe effects of the hedge for investment held abroad and technical services, partially offsetthe growth in net interest income driven by technology and systems expenses.
the increase in the volume of the credit portfolio.
The efficiency ratio, which we calculate as total administrative expenses divided by total income, increased to 47.1%35.5% in the year ended December 31, 2015,2020, as compared to 39.9%28.8% for the year ended December 31, 2014.
The following table sets forth other administrative expenses for each6.7 p.p. in the ratio is primarily due to the effects of the periods indicated:
For the year ended December 31 | ||||||||||||||||
2015 | 2014 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Specialized and technical services | 1,821 | 2,005 | (9.2 | )% | (185 | ) | ||||||||||
Property, fixtures and supplies | 1,268 | 1,209 | 4.9 | % | 59 | |||||||||||
Technology and systems | 1,193 | 1,106 | 7.8 | % | 86 | |||||||||||
Advertising | 523 | 467 | 12.0 | % | 56 | |||||||||||
Communications | 481 | 501 | (3.9 | )% | (20 | ) | ||||||||||
Per diems and travel expenses | 160 | 141 | 13.6 | % | 19 | |||||||||||
Surveillance and cash courier services | 615 | 574 | 7.1 | % | 41 | |||||||||||
Other administrative expenses | 655 | 735 | (10.8 | )% | (79 | ) | ||||||||||
Total | 6,716 | 6,738 | (0.3 | )% | (22 | ) |
hedge for investment held abroad.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 20152021, depreciation and amortization was R$1,4902,434 million, a 5.6%, or R$128145 million, increasedecrease from R$1,3622,579 million for the year ended December 31, 2014, principally2020, primarily due to a 24.0% decrease in expenses with amortization of hardware and software, which was primarily due to the volume of assets not deployed or under development and the effect of write-offs.
For the year ended December 31, 2020 was R$2,579 million, a R$187 million increase from R$2,392 million for the year ended December 31, 2019, primarily due to higher expenses with amortization of our properties, fixtureshardware and supplies.
software items, resulting from investments made in this period.
Provisions (Net)
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$4,0012,179 million for the year ended December 31, 2015, an2021, a 31.5%, or R$523 million, increase of R$1,965 million compared to R$2,0361,657 million for the year ended December 31, 2014. This increase was mainly due to gains related2020, driven by the fact that the amounts provisioned are indexed to the installment programSELIC rate (for tax proceedings), the National Consumer Price Index (Índice Nacional de Preços ao Consumidor) (for civil proceedings) and cash paymentthe Broad National Consumer Price Index — Special (Índice Nacional de Preços ao Consumidor Amplo — Especial) and SELIC rate for labor proceedings, each of tax and social security debts generatedwhich increased significantly in the year ended December 31, 2021.
In the year ended December 31, 2020, provisions (net) totaled R$1,657 million for the year ended December 31, 20142020, a decrease of R$5682,025 million that did not occurcompared to R$3,682 million for the year ended December 31, 2019, primarily due to a higher than usual level of provisions in 2015, expenses2019, as explained below.
In the year ended December 31, 2019, provisions (net) totaled R$3,682 million, an increase of R$3011,682 million compared to R$2,000 million for the year ended December 31, 2018, mainly due to an increase of R$700 million related to the Efficiencycreation of an efficiency and Productivity Fund andproductivity fund, an increase in complementarycivil and labor proceedings due to revision of the operational model and a constitution of provisions expenses.
related to the legal proceeding brought by the association of retired employees of Banespa (Associação dos Funcionários Aposentados do Banco do Estado de São Paulo), or AFABESP, an association of former employees of Banespa in which the classification of the chance of loss was revised to probable in December 2019. For further information see note 22 to our audited consolidated financial statements included elsewhere in this annual report.
Impairment Losses on Financial Assets (Net)
Impairment losses on financial assets (net) for the year ended December 31, 2021 were R$17,113 million, an R$338 million decrease compared to R$17,450 million for the year ended December 31, 2020, primarily due to the resumption of economic activity in Brazil following the easing of the COVID-19 pandemic in the second half of 2021 and the use of the overlay provision constituted in the year ended December 31, 2020 in response to the potential effects of the COVID-19 pandemic.
For the year ended December 31, 2020, impairment losses on financial assets (net) were R$17,450 million, a R$4,080 million increase compared to R$13,370 million for the year ended December 31, 2019, principally due
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to the adverse effects of the COVID-19 pandemic which resulted in the creation of additional (overlay) R$3,200 million allowance for potential loan losses and to the recurrent growth of the credit portfolio.
Our credit risk exposure portfolio increased by R$22.474.8 billion or 7.8%, onto R$540.9 billion as of December 31, 2015,2021 compared to the year-end 2014, whileR$466.1 billion as of December 31, 2020, Furthermore, our impaired assets increased by 32.7%, or R$4.6 billion. The default rate had an increase of 110 basis points in 2015, compared to the same period of the prior year. The provisions for impairment losses on financial assets (net) in 2015 increased by 21.0%, or R$2.43.7 billion compared to 2014 (R$11.3 billion), accounting forfrom R$13.023.2 billion onas of December 31, 2015, mainly due2020 to R$26.9 billion for the slowdown in the Brazilian economy and political crisis, that have negatively impacted certain major companies active in the oil and gas, construction and infrastructure sectors to which we have extended credit.
year ended December 31, 2021.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio as of December 31, 20152021 and December 31, 2014.2020 and 2019.
As of December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$ except percentages) | ||||||||||||||||||||
Loans and advances to customers, gross | 493,355 | 417,822 | 347,257 | 321,933 | 287,829 | |||||||||||||||
Impaired assets | 26,923 | 23,176 | 23,426 | 22,426 | 19,145 | |||||||||||||||
Provisions for impairment losses | 29,723 | 25,640 | 22,626 | 22,969 | 18,262 | |||||||||||||||
Credit risk exposure Non-GAAP – customers (1) | 540,873 | 466,104 | 391,569 | 364,194 | 330,474 | |||||||||||||||
Ratios | ||||||||||||||||||||
Impaired assets to credit risk exposure | 5.0 | % | 5.0 | % | 6.0 | % | 6.2 | % | 5.8 | % | ||||||||||
Coverage ratio (2) | 110.4 | % | 110.6 | % | 96.6 | % | 102.4 | % | 95.4 | % | ||||||||||
Impairment losses | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) | ||||||||||
Losses on other financial instruments not measured at fair value (3) | - | - | - | - | - | |||||||||||||||
Impairment losses on financial assets (net) (4) | (17,113 | ) | (17,450 | ) | (13,370 | ) | (12,713 | ) | (12,338 | ) |
At December 31, | ||||||||||||||||
2015 | 2014 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Loans and advances to customers, gross | 267,266 | 249,111 | 7.3 | % | 18,155 | |||||||||||
Impaired assets | 18,599 | 14,011 | 32.7 | % | 4,588 | |||||||||||
Provisions for impairment losses | 15,412 | 13,563 | 13.6 | % | 1,849 | |||||||||||
Credit risk exposure – customers(1) | 310,877 | 288,445 | 7.8 | % | 22,432 | |||||||||||
Ratios | ||||||||||||||||
Impaired assets to credit risk exposure | 6.0 | % | 4.9 | % | — | 1.1 p.p. | ||||||||||
Coverage ratio(2) | 82.9 | % | 96.8 | % | — | (13.9) p.p. | ||||||||||
Impairment losses on loans and receivables | (13,110 | ) | (11,194 | ) | 17.1 | % | (1,916 | ) | ||||||||
Impairment losses on other financial instruments not measured at fair value through profit for loss (3) | (524 | ) | (78 | ) | n.d. | (446 | ) | |||||||||
Impairment losses on financial assets (net)(4) | (13,634 | ) | (11,272 | ) | 21.0 | % | (2,362 | ) |
(1) | Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$ |
(2) | Provisions for impairment losses as a percentage of impaired assets. |
(3) | Corresponds to registration of losses of a permanent character in the realization value of bonds and securities classified as “Securities available for sale” currently accounted for “Earnings on financials assets (net).” |
(4) | As of December 31, |
The following chart shows our impaired assets to credit risk ratio from 20112017 through 2015:2021:
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Impaired Assets by Type of Customer
Loan
The following table shows our impaired assets by type of loan as of December 31, 20152021, 2020 and December 31, 2014.2019.
For the year ended December 31, | For the Year Ended December 31, | |||||||||||||||||||||||||||
2015 | 2014 | 2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||||||||
(in millions of R$) | (in millions of R$, except percentages) | |||||||||||||||||||||||||||
Commercial and industrial | 10,749 | 6,737 | 11,440 | 10,558 | 10,073 | 8.3 | 4.8 | |||||||||||||||||||||
Real estate | 829 | 375 | 470 | 456 | 827 | 3.1 | (44.8 | ) | ||||||||||||||||||||
Installment loans to individuals | 6,970 | 6,839 | 14,996 | 12,144 | 12,497 | 23.5 | (2.8 | ) | ||||||||||||||||||||
Lease financing | 52 | 60 | 17 | 17 | 29 | (0.6 | ) | (40.6 | ) | |||||||||||||||||||
Total | 18,599 | 14,011 | 26,923 | 23,176 | 23,426 | 16.2 | (1.1 | ) |
For a discussion of the evolution in impairment in our lending portfolios and our methodology for loan loss allowances with respect to the following lending portfolios, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.” See also “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—Ongoing investigations relating to corruption and diversion of public funds that are being conducted by the Brazilian federal police as well as other Brazilian and non-Brazilian regulators and law enforcement officials may adversely affect the growth of the Brazilian economy and could have a material adverse effect on us” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—The financial problems faced by our customers could adversely affect us.”
Commercial and Industrial.
Impaired assets in the commercial and industrial loans portfolio amounted to R$11,440 million as of December 31, 2021, an increase of R$881 million, or 8.3%, compared to R$10,558 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the adverse macroeconomic situation caused by the COVID-19 pandemic.
Impaired assets in the portfolio of commercial and industrial loans amounted to R$10,74910,558 million onas of December 31, 2015,2020, an increase of R$4,012486 million, or 59.6%4.8%, compared to 2014.R$10,073 million as of December 31, 19, The increase in impaired assets in this portfolio was mainly causeddue to the collective assessment performed by Santander Brasil which was based on macroeconomic forecasts sensitiveness that indicated stage transfers upon the slowdown indeterioration of the Brazilian economy, for which the GDP decreased by 3.8%. portfolio,
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Short-Term Borrowings —Impaired Assets—Methodology for Impairment Losses.Losses,”
Real Estate.
Impaired assets in the real estate lending portfolio totaled R$829470 million on December 31, 2015,2021, an increase of R$45414 million, or 3.1%, compared to 2014.R$456 million as of December 31, 2020, The increase in impaired assets in this portfolio was the result of the recurrent growth of the credit portfolio.
Impaired assets in the real estate lending portfolio totaled R$456 million on December 31, 2020, a decrease of R$371 million, or 44.8%, compared to R$827 million as of December 31, 2019. The decrease was primarily duethe result of the measures that Santander Brasil put in place to the growth of this credit portfolio, which grew by 15.7% in 2015. manage it, including collection practices with respect to our borrowers.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”
Installment Loans to Individuals
Installment loans to individuals. Impaired assets in the installment loans to individuals lending portfolio totaled R$6,97014,996 million onas of December 31, 2015,2021, with an increase of R$1312,852 million, or 1.9%23.5%, compared to 2014.2020. The stabilityincrease in impaired assets reflectsin this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.
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Impaired assets in the installment loans to individuals lending portfolio totaled R$12,144 million as of December 31, 2020, with a decrease of R$353 million, or 2.8%, compared to 2019. The decrease in impaired assets in this portfolio was the result of the measures adopted bythat Santander Brasil since late 2012put in place to manage default rates in this portfolio.it, including collection practices with respect to our borrowers whereby we offered certain customers the chance to negotiate a restructuring of their debts, especially during the COVID-19 pandemic, or asset disposal. For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”
Financial Leasing.
Impaired assets in the financial leasinglease financing lending portfolio totaled R$5217 million on December 31, 2015, with2021, a reductionremaining similar to December 31, 2020.
Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2020, a decrease of 13.3%, or R$812 million compared to 2014, primarilyDecember 31, 2019. This decrease in impaired assets was mainly due to asset write-offs in an amount of R$15.3 million which took place in the reduction in lending in this portfolio. year ended December 31, 2020.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”
Impairment Losses on Other Assets (Net)
Impairment losses on other assets (net) for the year ended December 31, 20152021, amounted to losses of R$1,221166 million, an increase of R$1,22481 million as compared to 2014,R$ 85 million the year ended December 31, 2020, mainly due to expenses of R$675 million relatedmore intangible asset impairment losses, which was primarily due to the obsolescence of some of our information technology equipment. For the year ended December 31, 2020, impairment of software and expenseslosses on other assets (net) amounted to losses of R$53485 million, relateda decrease of R$47 million as compared to the year ended December 31, 2019, mainly due to less intangible asset impairment of payroll services related assets.
losses during the year.
Other Non-FinancialNonfinancial Gains/Losses
Other non-financialnonfinancial gains/losses were gains of R$83133 million during the year ended December 31, 2015,2021, a negative variation of R$730275 million increase from gains of R$101308 million during the year ended December 31, 2014,2020, mainly due to a non-recurring gainpositive extraordinary effects of 2020, highlighted below.
During the year ended December 31, 2020, other nonfinancial gains/losses were gains of R$751308 million during the year ended December 31, 2020, a positive variation of R$288 million from gains of R$20 million during the year ended December 31, 2019, primarily due to the R$169 million gain on the sale of SSS DTVMSuperdigital in the first quarter of 2020.
Operating Income Before Tax
Operating income before tax for the year ended December 31, 2021, was R$24,750 million, an increase of R$15,086 million, or 156.1%, as compared to Santander Securities Brasil.R$9,664 million for the year ended December 31, 2020. In the year ended December 31, 2019 our operating income before tax was R$22,273 million.
Excluding the effects of the hedge for investment held abroad operating income before tax amounted to R$27,262 million for the year ended December 31, 2021, a 17.3% increase from R$23,247 million compared to the year ended December 31, 2020. In the year ended December 31, 2019, operating income before tax was R$23,537 million. Operating income before tax excluding the effects of the hedge for investment held abroad is a non-GAAP measure. For further information, see “Item 4. Information on3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.
The table below presents our operating income before tax and our operating income before tax excluding the Company—A. History and Developmenteffects of the Company—Important Events—Sale of Santander Securities Services Brasil DTVM S.A. (current corporate name of CRV Distribuidora de Títulos e Valores Mobiliários S.A.).”hedge for investment held abroad for the periods presented.
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Operating Income Before Tax | 24,750 | 9,664 | 22,273 | 156.1 | (56.6 | ) | ||||||||||||||
Effects of the hedge for investment held abroad | 2,512 | 13,583 | 1,264 | (81.5 | ) | 974.4 | ||||||||||||||
Adjusted operating income before tax (1) | 27,262 | 23,247 | 23,537 | 17.3 | (1.2 | ) |
(1) | Adjusted operating income before tax is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” |
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Income Taxes
Income taxes expense includesexpenses include income tax, social contribution, PIS and COFINS (which are social contributions due on some revenuescertain income net of somecertain expenses). IncomeTotal income taxes totaled gains ofwere R$13,0509,191 million for the year of 2015, a R$13,785 million increase from losses of R$736 million for the year 2014. This increase can be principally attributed to the following non-recurring events: (i) gains of R$2.7 billion related to the reversal of tax provisions and a tax reimbursement relating to COFINS (for further information, see notes 2.1.b and 31 to our audited consolidated financial statements), and (ii) gains of R$10.9 billion in the year ended December 31, 20152021, an increase of 342.7%, or R$12,978 million, in relation to the income tax income balance of R$3,787 million in the year ended December 31, 2020. This expense increase was mainly attributed to the following events: (i) foreign exchange rate losses of R$2,512 million as a consequenceresult of the effects of foreign exchange rate variations affecting certain ofon investment abroad in our foreign branchessubsidiary and the associatedfor hedging instruments, registered inaffecting the line “Gains (losses) on financial assets and liabilities (net).,” The effective(ii) a 156.1% or R$15,086 million, increase in Operating income before tax arising from the entities' results of operations to R$24,750 million in the year ended December 31, 2021, from R$9,664 million in the year ended December 31, 2020, which was primarily due an increase in net interest income of R$6,875 million, or 15.5%, to R$51,318 million in the year ended December 31, 2021 from R$44,443 million in the year December 31, 2020 driven by our credit portfolio, and (iii) a R$1,237 million, increase in the rate is set forth inof CSLL for banks and other financial institutions for the period from July 1, 2021, to December 31, 2021, as a result of Law 14,183/2021. For more information, see note 23b24 to our audited consolidated financial statements.statements included in this annual report.
For the year ended December 31, 2020, income tax expenses amounted to positive R$3,787 million for the year of 2020, a R$9,429 million increase from expenses of R$5,642 million for the year ended December 31, 2019. This increase was mainly attributable to the following events: (i) losses of R$13,583 million as a result of the effects of exchange rate variations on foreign investment in our subsidiary and subsidiary abroad and for hedge instruments, affecting the “Gains (losses) on financial assets and liabilities (net)” line; (ii) the reduction in Operating Income before taxation resulting from the result of the entities’ operations, and (iii) the recognition of certain deferred tax credits during the year ended December 31, 2020. For more information, see note 23 to our financial statements audited consolidated figures included in this annual report.
The following table shows our income taxes and income taxes excluding the effects of the hedge for investment held abroad for the periods indicated.
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | %Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Income taxes | (9,191 | ) | 3,787 | (5,642 | ) | (342.7 | ) | (167.1 | ) | |||||||||||
Effects of the hedge for investment held abroad | (2,512 | ) | (13,583 | ) | (1,264 | ) | (81.5 | ) | 974.4 | |||||||||||
Income taxes excluding effects of the hedge for investment held abroad (*) | (11,703 | ) | (9,796 | ) | (6,906 | ) | 19.5 | 41.9 |
Income taxes excluding effects of the hedge for investment held abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” |
Results of Operations by Segment for the Year endedYears Ended December 31, 2015 Compared to the Year ended December 31, 2014
2021, 2020 and 2019
The following tables show our results of operations for the years ended December 31, 20152021, 2020 and 2014,2019, for each of our operating segments.
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Commercial Banking
For the year ended December 31 | ||||||||||||||||
2015 | 2014 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Net interest income | 27,041 | 25,042 | 8.0 | % | 1,998 | |||||||||||
Income from equity instruments | 143 | 222 | (35.7 | )% | (79 | ) | ||||||||||
Income from companies accounted for by the equity method | 116 | 91 | 27.7 | % | 25 | |||||||||||
Net fee and commission income | 8,241 | 7,749 | 6.3 | % | 492 | |||||||||||
Gains/losses on financial assets and liabilities (net) and exchange | ||||||||||||||||
differences (net) | (9,069 | ) | (1,480 | ) | n.d. | (7,589 | ) | |||||||||
Other operating income (expenses) | (335 | ) | (451 | ) | (25.6 | )% | 116 | |||||||||
Total income | 26,136 | 31,173 | (16.2 | )% | (5,037 | ) | ||||||||||
Personnel expenses | (7,123 | ) | (6,598 | ) | 8.0 | % | (526 | ) | ||||||||
Other administrative expenses | (6,450 | ) | (6,493 | ) | (0.7 | )% | 43 | |||||||||
Depreciation and amortization | (1,361 | ) | (1,226 | ) | 11.0 | % | (135 | ) | ||||||||
Provisions (net) | (4,013 | ) | (2,030 | ) | 97.6 | % | (1,983 | ) | ||||||||
Impairment losses on financial assets (net) | (12,365 | ) | (10,710 | ) | 15.4 | % | (1,655 | ) | ||||||||
Impairment losses on other assets (net) | (1,220 | ) | 14 | n.d. | (1,234 | ) | ||||||||||
Other nonfinancial gain (losses) | 831 | 101 | n.d. | 730 | ||||||||||||
Operating profit before tax | (5,565 | ) | 4,231 | (231.5 | )% | (9,796 | ) | |||||||||
Discontinued Operations | — | — | — | — |
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | % Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Net interest income | 46,236 | 41,457 | 42,044 | 11.5 | (1.4 | ) | ||||||||||||||
Income from equity instruments | 10 | 4 | 5 | 182.4 | (25.6 | ) | ||||||||||||||
Income from companies accounted for by the equity method | 105 | 84 | 149 | 25.6 | (43.8 | ) | ||||||||||||||
Net fee and commission income | 13,285 | 14,405 | 13,923 | (7.8 | ) | 3.5 | ||||||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | (1,433 | ) | (13,515 | ) | (1,541 | ) | (89.4 | ) | 777.0 | |||||||||||
Other operating income (expenses) | (974 | ) | (767 | ) | (1,069 | ) | 27.0 | (28.3 | ) | |||||||||||
Total income | 57,229 | 41,668 | 53,511 | 37.4 | (22.1 | ) | ||||||||||||||
Personnel expenses | (8,221 | ) | (8,140 | ) | (8,554 | ) | 1.0 | (4.8 | ) | |||||||||||
Other administrative expenses | (7,697 | ) | (7,635 | ) | (7,140 | ) | 0.8 | 6.9 | ||||||||||||
Administrative expenses | (15,918 | ) | (15,775 | ) | (15,694 | ) | 0.9 | 0.5 | ||||||||||||
Depreciation and amortization | (2,343 | ) | (2,489 | ) | (2,297 | ) | (5.9 | ) | 8.4 | |||||||||||
Provisions (net) | (2,177 | ) | (1,639 | ) | (3,669 | ) | 32.8 | (55.3 | ) | |||||||||||
Impairment losses on financial assets (net) | (17,170 | ) | (17,380 | ) | (13,423 | ) | (1.2 | ) | 29.5 | |||||||||||
Impairment losses on other assets (net) | (164 | ) | (28 | ) | (73 | ) | 477.2 | 61.2 | ||||||||||||
Other nonfinancial gain (losses) | 33 | 308 | 20 | (89.5 | ) | 1,404.1 | ||||||||||||||
Operating income before tax | 19,491 | 4,666 | 18,375 | 317.8 | (74.6 | ) |
For the Year Ended December 31, | ||||||||||||||||||||||
2021 | 2020 | 2019 | %Change 2021/2020 | %Change 2020/2019 | ||||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||||
Operating Income Before Tax | 19,491 | 4,666 | 18,375 | 317.8 | (74.6) | |||||||||||||||||
Effects of the hedge for investment held abroad | 2,512 | 13,583 | 1,264 | (81.5 | ) | 974.4 | ||||||||||||||||
Adjusted Operating Income Before tax (1) | 22,003 | 18,249 | 19,639 | 20.6 | (7.1) |
(1) | Adjusted operating income before tax is a non-GAAP measure. For further information, see "Item 3. Key Information–A. Selected Financial Data–Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures." |
2021 and 2020
Operating profitincome before tax attributed to the Commercial Banking segment for the year ended December 31, 2015 were losses of2021, was R$5.619.5 billion, a R$9.714.8 billion decreaseincrease from R$4.24.7 billion for the year ended December 31, 2014.
2020.
This variation was mainly due to:
● | losses on financial assets and liabilities and exchange differences of R$1.4 billion in the year ended December 31, 2021, compared to losses of R$13.5 billion in the year ended December 31, 2020 (a decrease of 89.4%, or R$12.0 billion) was due to the positive gains from increased market operations in derivatives and especially gains in the IPCA-indexed bonds portfolio. We believe that the variation between the years ended December 31, 2021 and 2020 is non-recurring. |
This variation was partially offset by a decrease of R$1.1 billion in net fee and commission income for the year ended December 31, 2021, compared to the year ended December 31, 2020, mainly due to the Spin-Off of Getnet.
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Excluding the effects of the hedge for investments held abroad on our revenues, our operating income before taxes would have been R$22.0 billion, 20.6% higher than in the fiscal year ended December 31, 2020. Operating income excluding the effects of the hedge for investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
2020 and 2019
Operating income before tax attributed to the Commercial Banking segment for the year ended December 31, 2020 was R$4.7 billion, a R$13.7 billion decrease from R$18.4 billion for the year ended December 31, 2019. This variation was mainly due to:
● | an increase of R$3,957 million in impairment losses on financial assets mainly due to |
● | a decrease of R$587 million in net interest income for the year ended December 31, 2020, compared to the |
This variation was partially offset by an increase of R$481 million in net fee and commission income for the year ended December 31, 2020, compared to the year ended December 31, 2019, mainly due to (i) an increase in revenues from the sale of insurance and capitalization, and (ii) an increase in revenues from trade finance, and (iii) an increase in revenues from credit and debit cards.
Excluding the effects of the hedge for investments held abroad on our revenues, our operating income before taxes would have been R$18.2 billion, 7.1% lower than in the fiscal year ended December 31, 2019. Operating income excluding the effects of the hedge for investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
Global Wholesale Banking
For the Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | % Change 2021/2020 | %Change 2020/2019 | ||||||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||||||
Net interest income | 5,082 | 2,985 | 2,277 | 70.2 | 31.1 | |||||||||||||||
Income from equity instruments | 80 | 30 | 14 | 165.2 | 114.2 | |||||||||||||||
Income from companies accounted for by the equity method | 39 | 28 | - | 37.5 | - | |||||||||||||||
Net fee and commission income | 1,988 | 1,823 | 1,790 | 9.1 | 1.8 | |||||||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | (347 | ) | 1,812 | 1,215 | (119.1 | ) | 49.2 | |||||||||||||
Other operating income (expenses) | (145 | ) | (105 | ) | (39 | ) | 37.6 | 172.4 | ||||||||||||
Total income | 6,697 | 6,574 | 5,258 | 1.9 | 25.0 | |||||||||||||||
Administrative expenses | (1,399 | ) | (1,340 | ) | (1,247 | ) | 4.3 | 7.4 | ||||||||||||
Personnel expenses | (805 | ) | (732 | ) | (773 | ) | 10.1 | 5.4 | ||||||||||||
Other administrative expenses | (593 | ) | (609 | ) | (474 | ) | (2.5 | ) | 28.4 | |||||||||||
Depreciation and amortization | (91 | ) | (91 | ) | (95 | ) | 0.8 | (4.6 | ) | |||||||||||
Provisions (net) | (3 | ) | (18 | ) | (13 | ) | (85.3 | ) | 37.9 | |||||||||||
Impairment losses on financial assets (net) | (57) | (71 | ) | 53 | (180.6 | ) | (232.1 | ) | ||||||||||||
Impairment losses on other assets (net) | (2 | ) | (57 | ) | (58 | ) | (96.7 | ) | (2.9 | ) | ||||||||||
Operating income before tax | 5,260 | 4,998 | 3,898 | 5.2 | 28.2 |
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Global Wholesale Banking 2021 and 2020
For the year ended December 31 | ||||||||||||||||
2015 | 2014 | % Change | Change | |||||||||||||
(in millions of R$, except percentages) | ||||||||||||||||
Net interest income | 4,297 | 2,186 | 96.5 | % | 2,110 | |||||||||||
Net fee and commission income | 1,243 | 1,017 | 22.2 | % | 226 | |||||||||||
Gains/losses on financial assets and liabilities (net) and exchange differences (net) | (849 | ) | 593 | (243.3 | )% | (1,442 | ) | |||||||||
Other operating income (expenses) | (12 | ) | (20 | ) | (39.6 | )% | 8 | |||||||||
Total income | 4,678 | 3,777 | 23.9 | % | 901 | |||||||||||
Personnel expenses | (675 | ) | (606 | ) | 11.5 | % | (70 | ) | ||||||||
Other administrative expenses | (267 | ) | (245 | ) | 8.7 | % | (21 | ) | ||||||||
Depreciation and amortization | (129 | ) | (136 | ) | (5.3 | )% | 7 | |||||||||
Provisions (net) | 12 | (6 | ) | (299.5 | )% | 17 | ||||||||||
Impairment losses on financial assets (net) | (1,269 | ) | (561 | ) | 126.1 | % | (708 | ) | ||||||||
Impairment losses on other assets (net) | (0 | ) | (10 | ) | n.d. | 10 | ||||||||||
Operating profit before tax | 2,349 | 2,212 | 6.2 | % | 137 | |||||||||||
Discontinued Operations | — | — | — | — |
ProfitOperating income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 20152021, was R$2.35.3 billion, an 6.2%,a 5.2% or R$137262 million increase from R$2.25.0 billion for the year ended December 31, 2014.2020, which was primarily due to an increase in Total Income driven in particular by an increase of R$165 million in net fee and commission income, and a reduction in expenses and losses mainly due to R$128 million in impairment losses on financial assets relating to an increase in the coverage for potential loan losses.
2020 and 2019
Operating income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 2020 was R$5.0 billion, a 28.2%, or R$1,100 million increase from R$3.9 billion for the year ended December 31, 2019.
This variation was mainly due to:
an increase of |
New Accounting PronouncementsThis variation was partially offset by an increase of R$123 million in impairment losses on financial assets due to an increase in the coverage for potential loan losses.
The new accounting standards which will come into force after December 31, 2016 are mentioned in our audited consolidated financial statements included in this annual report. For further information, see note 1b to our audited consolidated financial statements.
All accounting policies5B. Liquidity and measurement bases with a material effect on the consolidated financial statements for 2016 were applied in the preparation of such financial statements.
Capital Resources
Our asset and liability management strategy is set by the asset and liability committee, which operates under strict guidelines and procedures established by the Santander Group. The asset and liability committee establishes, among other policies, our funding strategy, and the target positioning with respect to structural balance sheet risk.
Pursuant to the Santander Group’s model, all subsidiaries have tomust be self-funded in terms of liquidity and capital. In addition, our general asset and liability management policy is to maintain a close match of maturity, interest rate and currency exposures. Subject to our internal risk management policies we aim to maintain adequate liquidity to meet our present and future financial obligations and to capitalize on business and market opportunities as they arise.
Most of our liquidity is raised in the local market and we maintain a portfolio of high quality public bonds for liquidity management. Legal reserve requirements consume a significant amount of funding in Brazil, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”
Due to our stable and diversified sources of funding, which include a large client deposit base in the local market and a large number of correspondent banks with long-standing relationships, historically we have not experienced liquidity problems. In our opinion, our current levels of liquidity and working capital are sufficient for our present requirements.
See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information.”
Liquidity and Funding
Market conditions and prospects, as well as the Brazilian Central Bank requirements for compulsory deposits and stress tests determine ourIn addition to a minimum liquidity levels.level that meets our stress scenarios, we monitor concentration of funding ratios and the short term (LCR) and long term (Net Stable Funding Ratio) liquidity metrics, which aims to guarantee a stable funding profile. We control, manage and review our liquidity analyzing current and expected levels of liquidity, structuring the sources of financing to achieve an optimal diversification in terms of maturities, instruments, currencies, markets, as well as setting forth contingency plans. The objective is to ensure that we have sufficient liquidity to honor our commitments in light of market conditions, our institutional needs and market opportunities.
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Due to our stable and diversified funding sources, which include a large base of customer deposits as detailed in below, we have historically had no liquidity deficiencies.
As part of our liquidity risk management, we have a formal plan with measures to be taken in the event of a systemic liquidity crisis and/or for liquidity concerns arising from possible reputational risk. Our liquidity contingency plan contains defined thresholds, preventive measures and actions to be taken when a liquidity deficiency occurs and our reserves fall below certain levels.
The following resources and strategies may be used as sources of financing for working capital and for investments in non-current assets and to cover liquidity deficiencies:funding: (i) increase of customer deposits; (ii) securities issuances; (iii) repurchase agreements; (iv) a review of transfer pricing practices; and (v) establishment of more restrictive credit policies.
For further information, see notes 16, 17, 18, 19 and 20 to our audited consolidated financial statements included elsewhere in this annual report.
The following tables present the composition of our consolidated funding at the dates indicated.
As of December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$) | ||||||||||||
Customer deposits | 247,445 | 243,043 | 220,644 | |||||||||
Current accounts | 15,868 | 15,580 | 15,507 | |||||||||
Savings accounts | 36,051 | 35,985 | 37,939 | |||||||||
Time deposits | 94,479 | 89,986 | 91,552 | |||||||||
Repurchase agreements | 101,047 | 101,492 | 75,645 | |||||||||
Backed operations with Private Securities(1) | 59,460 | 61,174 | 46,699 | |||||||||
Backed operations with Public Securities(1) | 41,586 | 40,318 | 28,946 | |||||||||
Deposits from the Brazilian Central Bank and credit institutions | 78,634 | 69,451 | 63,674 | |||||||||
Demand deposits | 314 | 145 | 162 | |||||||||
Time deposits(2) | 49,549 | 55,795 | 42,045 | |||||||||
Repurchase agreements | 28,771 | 13,512 | 21,468 | |||||||||
Backed operations with Private Securities(1) | 446 | 85 | 961 | |||||||||
Backed operations with Public Securities(1) | 28,324 | 13,427 | 20,507 | |||||||||
Total deposits | 326,079 | 312,494 | 284,318 | |||||||||
Marketable debt securities | 99,843 | 94,658 | 70,355 | |||||||||
Agribusiness Credit Notes | 6,981 | 2,097 | 1,903 | |||||||||
Treasury Bills | 61,157 | 55,301 | 33,998 | |||||||||
Real Estate Credit Notes | 23,983 | 23,795 | 22,669 |
As of December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$) | ||||||||||||
Bonds and other securities | 7,722 | 13,465 | 11,785 | |||||||||
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital | 8,312 | 9,959 | 6,773 | |||||||||
Subordinated liabilities | 466 | 8,097 | 7,294 | |||||||||
Total Funding | 434,700 | 425,209 | 368,740 |
As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in millions of R$) | ||||||||||||
Customer deposits | 468,961 | 445,814 | 336,515 | |||||||||
Current accounts | 41,742 | 35,550 | 28,231 | |||||||||
Savings accounts | 65,249 | 62,210 | 49,040 | |||||||||
Time deposits | 280,955 | 269,929 | 200,740 | |||||||||
Repurchase agreements | 81,014 | 78,124 | 58,504 | |||||||||
Backed operations with Private Securities(1) | 20,103 | 14,944 | 9,506 | |||||||||
Backed operations with Public Securities(1) | 60,911 | 63,180 | 48,997 | |||||||||
Deposits from the Brazilian Central Bank and credit institutions | 121,006 | 131,657 | 99,271 | |||||||||
Demand deposits | 126 | 296 | 685 | |||||||||
Time deposits(2) | 75,755 | 76,489 | 56,602 | |||||||||
Repurchase agreements | 45,125 | 54,872 | 41,984 | |||||||||
Backed operations with Private Securities(1) | 13,478 | 13,844 | 9,506 | |||||||||
Backed operations with Public Securities(1) | 31,647 | 41,028 | 32,478 | |||||||||
Total deposits | 589,967 | 577,470 | 435,786 | |||||||||
Marketable debt securities | 79,037 | 56,876 | 73,702 | |||||||||
Agribusiness Credit Notes | 16,989 | 14,747 | 14,777 | |||||||||
Treasury Bills | 25,074 | 12,750 | 27,587 | |||||||||
Real Estate Credit Notes | 24,020 | 19,979 | 21,266 | |||||||||
Bonds and other securities | 12,952 | 9,399 | 10,072 | |||||||||
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital | 19,641 | 13,120 | 10,176 | |||||||||
Total Funding | 688,645 | 647,466 | 519,664 |
(1) | Refers primarily to repurchase agreements backed by debentures |
(2) | This includes transactions with credit institutions in connection with export and import financing lines, BNDES and FINAME on-lending and abroad on other credit lines abroad. |
Deposits
Customer Deposits
Our balance of customer deposits was R$247.4468.9 billion on December 31, 2016,2021, R$243.0445.8 billion on December 31, 2015,2020 and R$220.6336.5 billion on December 31, 2014,2019, representing 56.9%68.1%, 57.2%68.9% and 59.8%64.8% of our total funding, respectively.
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Current Accounts
Our balance of current accounts was R$15.941.7 billion on December 31, 2016,2021, R$15.635.6 billion on December 31, 20152020 and R$15.5 28.2 billion on December 31, 2014,2019, representing 4.9%7.1%, 5.0%,6.2% and 5.5%6.5% of total deposits, respectively.
Customer Savings Deposits
Our balance of customer savings deposits was R$36.065.2 billion on December 31, 2016,2021, R$36.062.2 billion on December 31, 20152020 and R$37.949.0 billion on December 31, 2014,2019, representing 11.1%, 11.5%10.8% and 13.3%11.3% of total deposits, respectively.
Customer Time Deposits
Our balance of customer time deposits was R$94.5281,0 billion on December 31, 2016,2021, R$90.0269.9 billion on December 31, 20152020 and R$91.6200,7 billion on December 31, 2014,2019, representing 29.0%47.6%, 28.8%46.7% and 32.2%46.1% of total deposits, respectively.
Customer Deposits – Repurchase Agreements
We maintain a portfolio of Brazilian public and private sector debt instruments used to obtain overnight funds from other financial institutions or investment funds by selling such securities and simultaneously agreeing to repurchase them. Due to the short-term (overnight) nature of this funding source, such transactions are volatile and composed, generally, of Brazilian public securities and of repurchase agreements linked to debentures. Securities sold under repurchase agreements decreasedincreased to R$101.081.0 billion on December 31, 20162021 from R$101.578.1 billion on December 31, 20152020 and R$75.658.5 billion on December 31, 2014,2019, representing 31.0%13.7%, 32.5%13.5% and 26.6%13.4% of total deposits, respectively.
respectively
Deposits from the Brazilian Central Bank and Credit Institutions
Our balance of deposits from the Brazilian Central Bank and credit institutions was R$78.6121.0 billion on December 31, 2016,2021, R$69.4131.7 billion on December 31, 20152020 and R$63.799.3 billion on December 31, 2014,2019, representing 24.1%20.5%, 22.2%22.8% and 22.4%22.9% of total deposits, respectively.
Our balance of deposits includes mainly borrowings and domestic onlendings:
Borrowings. We have relationships with banks all over the world, providing credit lines as foreign currency-linked (either to the U.S. dollar or to a basket of foreign currencies). We apply the proceeds from these transactions mainly to U.S. dollar-linked lending operations and in particular to trade finance operations. |
these transactions mainly to U.S. dollar-linked lending operations and in particular to trade finance operations.
Domestic Onlendings. We |
Other Funding
Marketable Debt Securities
Our balance of marketable debt securities was R$99.879.0 billion on December 31, 2016,2021, R$94.756.9 billion on December 31, 20152020 and R$70.473.7 billion on December 31, 2014,2019, representing 23.0%11.6%, 22.3%8.8% and 19.1%14.2% of our total funding, respectively.
Agribusiness credit notes (Letra de Crédito do Agronegócio), which are credit notes that are freely negotiable and represent an unconditional promise of payment in cash, are issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain and the exchange acceptances, reached R$6.917.0 billion on December 31, 2016,2021, R$2.114.7 billion on December 31, 2015,2020 and R$1.914.8 billion on December 31, 2014.2019.
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Treasury bill instrumentsbills (Letras financeirasFinanceiras) are a funding alternative available to banks that can be characterized as senior or eligible to compose the Regulatory Capital.Capital, Pursuant to CMN Resolution 4,1234,733 of August 23, 2012,June 2019, its minimum term must be 24 months and it must be issued for a minimum amount of R$300,000 for subordinated transactions and R$150,00050,000 for senior transactions. Our balance of treasury bills instruments totaled R$61.225.1 billion as ofon December 31, 2016,2021, a 10.6%97% increase from December 2015.
31, 2020.
Real estate credit notes (Letras de Crédito Imobiliário) increased 0.8%20%, from R$23.820.0 billion on December 31, 20152020 to R$23.924.0 billion on December 31, 2016.
2021.
We undertake issuances of securities, including under our U.S.$10,000,000,000 Global Medium Term Notes Program. Our balance of bonds and other securities was R$13.513.0 billion on December 31, 20152021 and R$7.79.4 billion on December 31, 2016.2020. This change was principally due to the non-replacementfact that in 2021 we issued a greater aggregate amount of certain debt instruments reaching maturity.securities than those which matured in that year.
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital
We haveOn November 2018, we issued U.S. dollar-denominated Notes that constitute Tier 1 and Tier 2 regulatory capital as part of our plan to optimize our capital structure. structure, as follows:
These issuances were made through our branch in the and as a result they do not generate liability for income tax at source.
In November and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our Tier 2 regulatory capital, in the total amount of R$ 5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.
As of December 31, 20162021, the balance for both Tier 1 and Tier 2 debt instruments was R$8.319.6 billion compared to R$10.013.1 billion as of December 31, 2015.2020. This variationincrease of 49.3% was caused bydue to the depreciationissuance of the U.S. dollar against thereal.abovementioned Financial Bills.
For further information in relation to the Tier 1 and Tier 2 Notes, please see “—A. Operating Results—Factors Affecting the Comparability of Our Results of Operations—Plans to Optimize our Capital Structure” and “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Subscription of Tier 1 and Tier 2 Notes.”
Subordinated Liabilities
As ofOn December 31, 2016, our2018 the subordinated liabilities amountedwe had were repurchased, according to a total of R$0.5 billion of certificates of depositthe approval issued by usBrazilian Central Bank on December 18, 2018. For further information, see note 19 to our audited consolidated financial statements included elsewhere in the local market in various issuances at average interest rates indexed to CDI or IPCA, a decrease of R$7.6 billion from the amount of subordinated liabilities as of December 31, 2015. This decrease is due to the maturity of the abovementioned instruments which were not replaced.
this annual report.
Capital Management
Our capital management is based on conservative principles and continuous monitoring of the items that affect our solvency level. We are required to comply with Brazilian capital adequacy regulations under Brazilian Central Bank rules. In October 2013, the new regulations implementing the capital and the regulatory capital requirements of the Basel Committee on Banking Supervision (Basel III) came into effect in Brazil. TheFor additional information regarding minimum regulatory capital requirements is currently at 11%. The Tier I requirement is 6.0%, divided into core capital of at least 4.5%, consisting mainly of corporate capitallevel and profit reserves, including shares, units of ownership, reserves and earned income, and additional capital consisting mainly of certain reserves, revenue earned and hybrid securities and instruments as capital authorized by the Brazilian Central Bank.
According to the new rules on regulatory capital in Brazil, the value of goodwill for the calculation of capital base was deducted from the capital base according to the “phase-in” for implementation ofother Basel III in Brazil, which will be completed by January 1, 2019. The following table sets forth the percentage of required goodwill deduction for each year up to 2019:
Basel III Phase in | ||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||||
0 | % | 20 | % | 40 | % | 60 | % | 80 | % | 100 | % |
Source: Brazilian Central Bank; Resolution No. 4,192 of the Brazilian Central Bank of March 2013.
If Basel III requirements, were fully implemented as of the date hereof, we would continue to maintain an adequate regulatory capital ratio under Basel III and Brazilian Central Bank rules.
Our Basel capital adequacy ratio, calculated in accordance with the regulations and guidance of the Brazilian Central Bank was 16.3% as of December 31, 2016. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Capital Adequacy and Leverage—Basel.Leverage - Basel—Basel III” and note 30, Operational Ratios, to our audited consolidated financial statements included elsewhere in this annual report.
CMN regulations establish conservative capital and countercyclical buffers for Brazilian financial institutions, and determine the minimum percentages applicable as well as which sanctions and limitations will apply in case of non-compliance with such additional requirements. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Principal Limitations and Obligations of Financial Institutions.”
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Capital Expenditures
See “Item 4. Information on the Company—A. History and Development of the Company—Capital Expenditures and Divestitures.”
As of December 31, | ||||||||||||
2016(1) | 2015(1) | 2014(2) | ||||||||||
(in millions of R$, except percentages) | ||||||||||||
Tier I Regulatory Capital | 56,264.0 | 52,785.0 | 58,592.4 | |||||||||
CET 1 Common Equity Tier I | 52,136.8 | 47,840.2 | 55,228.7 | |||||||||
Supplementary Capital | 4,127.2 | 4,944.9 | 3,363.7 | |||||||||
Tier II Regulatory Capital | 4,280.8 | 5,182.1 | 4,971.0 | |||||||||
Regulatory Capital (Tier I and II) | 60,544.9 | 57,967.1 | 63,563.4 | |||||||||
Required Regulatory Capital | 36,669.6 | 40,531.2 | 40,010.1 | |||||||||
Portion of Credit Risk(3) | 31,309.9 | 36,355.9 | 35,527.9 | |||||||||
Market Risk Portions(4) | 2,388.6 | 2,301.0 | 2,807.8 | |||||||||
Operational Risk Portion | 2,971.0 | 1,874.3 | 1,674.4 | |||||||||
Tier I Ratio | 15.2 | % | 14.3 | % | 16.1 | % | ||||||
Basel Principal Capital | 14.0 | % | 13.0 | % | 15.2 | % | ||||||
Basel Ratio | 16.3 | % | 15.7 | % | 17.5 | % |
Off-Balance Sheet Arrangements
We have entered, in the normal course of business, into several types of off-balance sheet arrangements, including lines and letters of credit and financial guarantees. For more information, see note 43 to our audited consolidated financial statements included elsewhere in this annual report.
Lending-Related Financial Instruments and Guarantees
We use lines and letters of credit and financial guarantee instruments to meet the financing needs of our customers. The contractual amount of these financial instruments represents represent the maximum possible credit risk should the counterparty draw down the commitment or we fulfill our obligation under the guarantee, and the counterparty subsequently fails to perform according to the terms of the contract. Most commitments and guarantees expire without the counterparty drawing on the credit line or a default occurring. As a result, the total contractual amount of these instruments does not represent our future credit exposure or funding requirements. Further, certain commitments, primarily related to consumer financing are cancelable, upon notice, at our option.
The “maximum potential amount of future payments” represents a notional amount potentially lost if a total default by the guaranteed parties occurred, without considering possible recoveries from collateral held or pledged, or those under recourse provisions. There is no relationship between these amounts and probable losses on these guarantees, In fact, the maximum potential amount of future payments significantly exceeds inherent losses.
For further information, see note 43 to our audited consolidated financial statements included elsewhere in this annual report.
Contractual Obligations
Our contractual obligations as of December 31, 2021 are summarized as follows:
As of December 31, 2021 | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Deposits from the Brazilian Central Bank and credit institutions | 121,006 | 110,429 | 6,676 | 1,671 | 2,230 | |||||||||||||||
Customer deposits | 468,961 | 221,917 | 163,642 | 83,327 | 75 | |||||||||||||||
Marketable debt securities | 79,037 | 33,091 | 35,850 | 9,341 | 755 | |||||||||||||||
Debt Instruments Eligible to Compose Capital(1) | 19,641 | 5,552 | 14,089 | - | - | |||||||||||||||
Total | 688,646 | 370,990 | 220,257 | 94,339 | 3,060 |
(1) |
(2) |
The above table does not reflect amounts payable on derivative contracts as they are dependent on changes in financial markets. The net fair value position of our derivative contracts as of December 31, 2021 reflected liabilities of R$3,479 million, compared to liabilities of R$3,109 million as of December 31, 2020.
In addition, we lease several properties under standard lease contracts, which can be cancelled or renewed at our option and include escalation clauses. The total future minimum payments of non-cancelable operating leases as of December 31, 2021 was R$2,318 million. From this total, R$715 million matures in up to one year, R$1,421 million matures from one year to up to five years and R$181 million matures after five years. Additionally, we have contracts with indeterminate maturities totaling R$0.8 million for the year ended December 31, 2021.
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5C. Research and Development, Patents and Licenses, etc. |
We do not have any significant policiespolicy or projects relating tosignificate project involving research and development, and we do not own no relevant patents or licenses.patents licenses, bearing in mind that we only have licenses involving trademarks.
5D. Trend Information
The following discussion is based largely upon our current expectations about future events, and trends affecting our business. Actual results for our industry and performance could differ substantially. For further information related to our forward-looking statements, see “Forward-Looking Statements” and for a description of certain factors that could affect our industry in the future and our own future performance, see “Item 3. Key Information—3D. Risk Factors.”
Impact of COVID-19 on our Business
We expect that our business will continue to be affected by the COVID-19, and its variants, pandemic, and governmental responses to it, including by their respective impacts on our customers, suppliers and other third parties with whom interact as well as on Brazilian and global economic conditions. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”
Other Trends Affecting our Business
The following list sets forth, in our view, the most important trends, uncertainties and events that are reasonably likely to continue to have a material effect on our revenues, income from continuing operations, profitability, liquidity and capital resources, or that may cause reported financial information to be not necessarily indicative of future operating results or financial condition:
condition, in addition to those set forth under “—Impact of COVID-19 on our Business”:
since December 2019, a novel strain of coronavirus has spread in China and other countries, culminating in the COVID-19 pandemic. These events have caused disruption of regional or global economic activity and are expected to continue to have a negative impact on global economic activity. A continued downturn in local, regional or global economic conditions may adversely affect our business, results of operations and financial condition. The |
● | economic and political crisis in Brazil, including the impact of the current international economic environment and the macroeconomic conditions in Brazil, and the policies of the Brazilian administration that took office on January 1, 2019, may adversely affect the performance of the Brazilian economy. As a result, our credit portfolio, which is focused on Brazil, may not grow or could decrease and our provisions for loan losses |
● | a global economic downturn as a result of pandemics, epidemics or outbreaks of infectious diseases, or instability or conflicts, can have an adverse effect on the global market and economy, including Brazil. |
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It may decrease the interest of investors in Brazilian assets, in addition to making it difficult for us to access the capital markets and finance our operations, including on acceptable terms;
● | our ability to protect ourselves against cybersecurity risks; and |
Conversely, a recovery in the Brazilian economy by means of economic reforms (including the pension and the foreign trade reform, and inflation control) could have a positive effect on the Brazilian economy and, therefore, on our business.
For more information, see “Item 3. Key Information—D. Risk Factors” where we present the risks we face in our business that may affect our commercial activities, operating results or liquidity.
5E. Critical Accounting Estimates
WeOur financial statements are presented in IFRS as issued by the IASB. For summary information about critical judgments, assumptions and estimation uncertainties in applying accounting policies that have entered, in the normal course of business, into several types of off-balance sheet arrangements, including lines and letters of credit and financial guarantees.
Lending-Related Financial Instruments and Guarantees
We utilize lines and letters of credit and financial guarantee instruments to meet the financing needs of our customers. The contractual amount of these financial instruments represents the maximum possible credit risk
should the counterparty draw down the commitment or we fulfill our obligation under the guarantee, and the counterparty subsequently fails to perform according to the terms of the contract. Most of these commitments and guarantees expire without the counterparty drawingmost significant effect on the credit line or a default occurring. As a result, the total contractual amount of these instruments does not represent our future credit exposure or funding requirements. Further, certain commitments, primarily related to consumer financing are cancelable, upon notice, at our option.
The “maximum potential amount of future payments” represents the notional amount that could be lost if there were a total default by the guaranteed parties, without consideration of possible recoveries from collateral held or pledged, or recoveries under recourse provisions. There is no relationship between these amounts and probable losses on these guarantees. In fact, the maximum potential amount of future payments significantly exceeds inherent losses.
The following table sets forth the maximum potential amount of future payments under credit and financial guarantees.
As of December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(millions of R$) | ||||||||||||
Contingent liabilities | ||||||||||||
Guarantees and other sureties | 32,630 | 42,836 | 38,386 | |||||||||
Documentary credits | 635 | 774 | 948 | |||||||||
Total contingent liabilities | 33,265 | 43,611 | 39,334 |
We also manage certain funds that are not recorded on our balance sheet as detailed below for the periods indicated:
As of December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(millions of R$) | ||||||||||||
Funds under management | 1,534 | 2,542 | 4,592 | |||||||||
Total | 1,534 | 2,542 | 4,592 |
Finally, we hold certain third-party securities in custody which are not recorded on our balance sheet. As of December 31, 2016, 2015 and 2014, we held in custody debt securities and equity instruments entrusted to Santander Brasil by third parties totaling R$27.8 million, R$38.4 million and R$398.5 million, respectively.
Our contractual obligations as of December 31, 2016 are summarized as follows:
As of December 31, 2016 | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Deposits from the Brazilian Central Bank and credit institutions | 78,634 | 64,666 | 8,215 | 2,818 | 2,934 | |||||||||||||||
Customer deposits | 247,445 | 193,579 | 39,630 | 14,004 | 232 | |||||||||||||||
Marketable debt securities | 99,843 | 78,472 | 20,620 | 312 | 439 | |||||||||||||||
Debt Instruments Eligible to Compose Capital(1) | 8,312 | 114 | — | — | 8,198 | |||||||||||||||
Subordinated liabilities | 466 | — | 466 | — | — | |||||||||||||||
Contractual Interest payments(2) | 62,088 | 23,033 | 18,495 | 9,414 | 11,066 | |||||||||||||||
Total | 496,708 | 359,865 | 87,427 | 26,548 | 22,869 |
The above table does not reflect amounts that we may have to pay on derivative contracts. The amounts ultimately payable will depend upon movementsrecognized in the financial markets. The net fair value positionstatements, see “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Critical Accounting Policies” and note 2 to our derivative contracts as ofaudited consolidated financial statements for the fiscal years ended December 31, 2016 reflected assets of R$4,466 million, compared to assets of R$1,533 million as of December 31, 2015.2021, 2020 and 2019, included elsewhere in this annual report.
In addition, we lease many properties under standard real estate lease contracts, which can be canceled at our option and include renewal options and escalation clauses. Total future minimum payments of non-cancelable operating leases as of December 31, 2016 was R$2,933.2 million, of which R$646.8 million matures in up to one year, R$1,789.7 million from one year to up to five years and R$496.8 million after five years. Additionally, we have contracts with indeterminate maturities totaling R$0.1 million per month.
See “Forward-Looking Statements.”
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6A. Board of Directors and Board of Executive Officers |
Pursuant to our By-Laws, we are managed by a board of directors (conselho de administração) and a board of executive officers (diretoria executiva). The board of directors is our supervisory board as set out in our By-Laws and in applicable legislation. Our board of executive officers is responsible for our day-to-day management.
Our board of directors is composed ofcomprises a minimum of five (5) members and a maximum of twelve (12) members. A minimum of twenty percent (20.0%) of the members, of the board of directorswhich at least 20.0% must be independent members. The board of directors has a Chairmanchairman and a Vice-Chairman,vice-chairman, each elected at the general shareholders’ meeting by majority vote.
Our board of executive officers is composed ofcomprises a minimum of two (2) members and a maximum of seventy-five (75)75 members, one of them being appointed as the Chief Executive Officer, and the others may be appointed as senior vice president executive officers, vice president executive officers, investor relations officer,officers, executive officers and officers without specific designation. Certaindesignations. Some of our executive officers are also members of the boards of executive officers and/or boards of directors of our subsidiaries.
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Pursuant to Brazilian law, the election of each member of the board of directors and board of executive officers must be approved by the Brazilian Central Bank.
The following table presents the names, positions and dates of birth of the current members of our board of directors and board of executive officers:
Members of the Board of Directors:
Name | Position | Date of Birth | ||
Chairman | July 28, 1960 | |||
Mario Roberto Opice Leão | Member | |||
José Antonio Álvarez Álvarez | Member | January 6, 1960 | ||
José | ||||
Member | March 1, 1959 | |||
Member | May 26, 1966 | |||
Alberto Monteiro de Queiroz Netto | Member | November 30, 1967 | ||
Angel Santodomingo Martell | Member | November 16, 1965 | ||
Pedro Augusto de Melo | Independent Member |
Deborah Patricia Wright | Independent Member | September 4, 1957 | ||
Deborah Stern Vieitas | Independent Member | |||
Marília Artimonte Rocca | Independent Member |
Members of the Board of Executive Officers:
Name | Position | Date of Birth | ||
Mario Roberto Opice Leão | Chief Executive Officer | July | ||
Angel Santodomingo Martell | Vice President Executive Officer and Investor Relations Officer | November 16, 1965 | ||
Alessandro Tomao | Vice President Executive Officer | |||
Antonio Pardo de Santayana Montes | Vice President Executive Officer | November 5, 1971 | ||
Almeida | Vice President Executive Officer | |||
Ede Ilson Viani | Vice President Executive Officer | September 5, 1967 | ||
Elita Vechin Pastorelo Ariaz | Vice President Executive Officer | March 28, 1970 | ||
Jean Pierre Dupui | Vice President Executive Officer | September 23, 1968 | ||
João | Marcos Pequeno De Biase | Vice President Executive Officer | ||
Patricia Souto Audi | Vice President Executive Officer | |||
Vanessa de Souza Lobato Barbosa | Vice President Executive Officer | December 24, 1968 | ||
Alexandre | Guimarães Soares(*) | Officer | ||
Amancio Acúrcio Gouveia | Officer | March 31, 1963 | ||
Ana Paula | Vitali Janes Vescovi | Officer | ||
André de Carvalho Novaes | Officer | April 14, 1969 | ||
André Juaçaba de Almeida(*) | Officer | September 27, 1974 | ||
André Rosenblit(*) | Officer | May 1, 1969 | ||
Carlos Aguiar Neto | Officer | March 5, 1971 | ||
Cassio Schmitt | Officer | April 23, 1971 | ||
Celso Mateus de Queiroz(*) | Officer | |||
Claudenice Lopes Duarte | Officer | |||
Daniel Fantoni Assa | Officer | |||
Francisco Soares da Silva Junior | Officer | January 23, 1970 | ||
Franco Luigi Fasoli | September 18, 1975 | |||
Geraldo José Rodrigues Alckmin Neto | Officer | September 8, 1981 | ||
Germanuela de Almeida de Abreu | Officer | December 6, 1975 | ||
Gilberto Duarte de Abreu Filho | Officer | August 7, 1973 | ||
Gustavo Alejo Viviani | Officer | August 26, 1975 | ||
Gustavo de Souza Fosse | Officer | May 14, 1972 | ||
Igor Mario Puga | Officer | November 10, 1981 | ||
Jean Paulo Kambourakis | Officer | May 9, 1980 | ||
Leandro Alves(*) | Officer | January 5, 1984 | ||
Luciana de Aguiar Barros(*) | Officer | January 3, 1980 | ||
José Teixeira de Vasconcelos Neto | Officer | March 8, 1975 | ||
Luis Guilherme Mattos de Oliem Bittencourt | Officer | December 4, 1973 | ||
Luiz Masagão Ribeiro Filho | Officer | |||
Marcelo | Augusto Dutra Labuto | Officer | ||
Maria Teresa Mauricio da Rocha Pereira Leite | Officer | |||
Marilize Ferrazza Santinoni | Officer | November 20, 1965 |
Table of Contents |
Murilo Setti Riedel(*) | Officer | May 17, 1963 | ||
Paulo César Ferreira de Lima Alves(*) | October 18, 1968 | |||
Paulo Sérgio Duailibi(*) | Officer | |||
Ramón Sanchez Díez | Officer | October 29, 1968 | ||
Ramon Sanchez Santiago | Officer | May 25, 1969 | ||
Reginaldo Antonio Ribeiro | Officer | May 19, 1969 | ||
Magalhães | Officer | January 26, 1979 | ||
Roberto Alexandre Borges Fischetti | August 28, | |||
Robson de Souza Rezende | Officer | January 24, 1967 | ||
Rogério Magno Panca | Officer | |||
Sandro Kohler Marcondes | Officer | April 16, 1964 | ||
Sandro Mazerino Sobral | Officer | February 24, 1975 | ||
Sandro Rogério da Silva Gamba | Officer | August | ||
Thomaz Antonio Licarião Rocha(*) | Officer | March 02, 1977 | ||
Thomas Gregor Ilg | Officer | September 12, 1968 | ||
Tiago Celso Abate(*) | Officer | June 12, 1980 | ||
Vítor Ohtsuki | June 5, 1977 |
(*) Pending approval by the Brazilian Central Bank.
Below are the biographies of the members of our board(i) Board of directorsDirectors, which were elected at the Shareholders’ Meetings held on April 30, 2021 (election of all members but Mario Roberto Opice Leão, Angel Santodomingo Martell and boardAlberto Monteiro de Queiroz Netto); and December 17, 2021 (election of officers.
Executive Officers, as elected at the Board Meetings held on May 3, 2021 (election of all members but Sandro Mazerino Sobral, Rogério Magno Panca, Maria Teresa Mauricio da Rocha Pereira Leite, Gilberto Duarte de Abreu Filho and Andrea Marques de Almeida); July 1, 2021 (election of Sandro Mazerino Sobral and Rogério Magno Panca); November 1, 2021 (election of Andrea Marques de Almeida, Maria Teresa Mauricio da Rocha Pereira Leite and Gilberto Duarte de Abreu Filho); December 1, 2021 (election of Gustavo de Souza Fosse); December 17, 2021 (change of position of Mario Roberto Opice Leão from the position of Vice President Executive Officer to the position of Chief Executive Officer and the change of position of Andrea Marques de Almeida, Elita Vechin Pastorelo Ariaz and João Marcos Pequeno De Biase from the position of Officers to the position of Vice President Executive Officers); January 3, 2022 (elections of Alexandre Guimarães Soares, André Juaçaba de Almeida, André Rosenblit, Celso Mateus de Queiroz, Leandro Alves, Luciana de Aguiar Barros, Paulo César Ferreira de Lima Alves, Paulo Sérgio Duailibi, Thomaz Antonio Licarião Rocha and Tiago Celso Abate); and January 20, 2022 (election of Murilo Setti Riedel).
Members of the Board of Directors:
Álvaro Antonio Cardoso de SouzaSérgio Agapito Lires Rial. Mr. Souza is Portuguese and was born on September 5, 1948. He holds a degree in Economics and Business Administration from the Pontifícia Universidade Católica de São Paulo, and attended several specialization courses from a number of American universities, such as the University of Pittsburgh and The Wharton Business School of the University of Pennsylvania. Currently, he is an Officer of AdS – Gestão, Consultoria e Investimentos Ltda.; Chairman of the board of directors of Fundo Brasileiro para a Biodiversidade (FUNBIO) and a member of the boards of directors of the following companies and organizations: WWF International Board of Trustees, WWF-Brasil, Duratex S.A., AMBEV and Grupo Libra. He is a Certified Officer, an accreditation granted to him by Instituto Brasileiro de Governança Corporativa. He was General Officer of Banco de Investimentos Crefisul and Chief Executive Officer of Citibank / Brazil. He was also Chairman of the board of directors of Citibank in Switzerland, Chairman of the board of directors of Banco Crefisul and Credicard in Brazil, besides participating in the board of directors of Citibank Equity Investments (Argentina). He also worked as Senior Advisor for Latin America at Citibank until his retirement in September 2003. He was President of Banco ABC-Roma, an affiliate to Grupo Globo and was member of the board of directors of several Brazilian companies, such as Celbrás, Ultraquímica, SPCI Computadores, Signature Lazard, Banco Triângulo, CSU Cardsystems and Gol Linhas Aéreas. He was also member of the board of directors of MasterCard International and President of the American Chamber of Commerce in São Paulo. Currently, he is the Chairman of our board of directors and the coordinator of our Risk and Compliance Committee, Compensation Committee and Nomination and Governance Committee.
Conrado Engel. Mr. EngelRial is Brazilian and was born on May 30, 1957.July 28, 1960. He holds a degreejoined Santander Brasil, in Aeronautical Engineering from the Instituto Tecnológico de Aeronáutica - ITA. He started his career in 1981very early part of 2015, as management trainee of Citibank S.A., whereExecutive Chairman. From 2016, he worked for seven years. From 1992 to 1997 he wasacted as the responsible Officer for the businesses related to credit cards for Banco Nacional-Unibanco. In 1998 he was elected Chief Executive Officer of Financeira Losango.Santander Brasil (during six years until December 31, 2021), and as head of South America from 2019 to 2021. South America, of which Brazil is a significant component, is a key part of the Santander Group. In October 2003January 2022, Mr. Rial assumed the position of Chairman of Santander Brasil, remaining a board member of Santander Spain as well. Before joining the Santander Group, he became responsibleheld leadership positions in several large financial and agribusiness companies. Mr. Rial worked at ABN AMRO for the retail business of HSBC in Brazil and was18 years, serving as a member of its executive committee until the end of 2006. From January 2007ABN AMRO’s Global Executive Board (the first non-Dutch) and prior to May 2009 he was responsible for the retail business and was a member of the directive committee of HSBC in the Asian-Pacific region, in Hong Kong. In May 2008 he was appointed group general manager and took officethat, as Chief Executive Officer of HSBC BrasilAsia Pacific, SVP Client Coverage in June 2009, whereEurope, President in China and Hong Kong, and Head of the Fixed Income Emerging Markets Desks in Amsterdam. After ABN AMRO, he remained until March 2012. Asled Bear Stearn’s Capital Markets businesses internationally out of New York. Right after Bear Stearns, Mr. Rial joined Cargill’s team of senior executives, focusing initially on Cargill´s poultry and food ingredient business throughout Latin America and later on assuming Cargill’s Global Chief Financial Officer role out of Minneapolis, and being part of Cargill’s senior leadership team and board of directors. Returning to Brazil, he became the Chief Executive Officer of Marfrig Global Foods, the world’s second-largest meat company, leading one of our Senior Vice President Executive Officers,the most challenging restructuring stories in the country. He served on the boards of Mosaic Fertilizer and Carval in the U.S. and Cyrela Realty in Brazil. Currently, he is responsibleserves as a board member for the Wealth Management & Specialized Businesses Vice Presidency, including Auto Joint VenturesDelta Airlines in Atlanta and is membera co-chair of ourThe Nature Conservancy Board for Latin America, named LACC, and Chairman of Directors.Ebury, a cross-border payment fintech focused on SME´s. He is also currently the Chairman of CNF (Brazil´s Financial National Confederation) and is a member of the RiskFIESP (São Paulo’s Industrial Federation) Strategic Advisory Board. He studied Law and Compliance Committee of Santander Brasil, Chief Executive OfficerEconomics in Rio de Janeiro (UFRJ and UGF), holds a member of the board of directors of Santander Leasing S.A. Arrendamento Mercantil, Vice President Officer of Banco Bandepe S.A., Chief Executive Officer of Aymoré CFI, a deputy director of Banco RCI Brasil S.A., a member of the board of directors of Getnet Adquirência e Serviços para Meios de Pagamento S.A., a member of the advisory committee of Santander Brasil Gestão de Recursos Ltda., Chief Executive Officer of Santander Finance Arrendamento Mercantil S.A.MBA from IBMEC and Chairman of the boards of directors of Webmotorshas participated in several courses at Insead, Harvard and Banco Olé Bonsucesso Consignado.Wharton.
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José Antonio Álvarez Álvarez. Mr. Álvarez is Spanish and was born on January 6, 1960. He holds a bachelor’sBachelor’s degree (Hons) in Administration and Business Economics from Universidad Santiago de Compostela in Spain and an MBA from the University of Chicago’s Graduate School of Business. He started atMr. Álvarez became CEO of Santander Group on January 1, 2015, and Executive Vice Chairman on January 15, 2019. Prior to this, he served as Executive Vice President of Finance of Santander Spain infrom 2004 to 2015 and Head of the Finance Division from 2002 as the head of finance management and in November 2004to 2004. Before joining Santander Group, he was elected as Chief Financial Officer. He served as Head of the Finance Division of Banco Bilbao Vizcaya Argentaria, S.A. in Spain from 1999 to 2002 and as Financial Officer of Corporación Bancaria de España, S.A. (Argentaria) from 1995 to 1999. He was alsoPreviously, he served as Chief Financial Officer of Banco Hipotecario, S.A. in Spain, from 1993 to 1995 and vice presidentVice President of Finanpostal Gestión Fondos de Inversión y Pensiones, from 1990 to 1993, and held rolespositions at Banco de Crédito Industrial and Instituto Nacional de Industria. He wasserved as a member of the boardBoard of directorsDirectors of Santander Consumer Finance S.A., Santander Consumer Bank AG and Banco de Crédito Local S.A. from 2000 to 2002, among others, and Presidentserved on the supervisory boards of Santander Group’s independent subsidiaries, such as Poland, Germany and the United States. He was Chairman of the European Banking Federation’sFederation Board and chaired the Banking Supervision Committee from 2009 to 2012. Currently, he is the Chief Executive Officer of the Santander Group, a member of the board of directors of Santander Consumer Finance, S.A., a member of the Supervisory Board of Banco Zachodni WBK S.A., a member of the Supervisory Board of Santander Consumer Bank AG and Santander Consumer Holding GmbH and a member of the Supervisory Board of Santander Holdings USA, Inc. until January 2015. HeMr. Álvarez has been a member of our boardBoard of directorsDirectors since 2009.
José Maria Nus Badía. Mr. Badía is Spanish and was born on February 9, 1950. He serves as Chief Risk Officer at Banco Santander, S.A. and has been its Senior Executive Vice President since January 19, 2015. Mr. Badía served as an Executive Vice President of Risk, Head of Strategic Planning of Risk Division from March 2014 to January 2015. He also served as the Executive Vice President of Santander UK Operations at Banco Santander, S.A. and as the Chief Risk Officer and Executive Director at Santander UK plc from March 17, 2011 to March 1,
2014. He was also the Executive Vice President for Risk at Argentaria and Bankinter, and a member of the board of directors of Banco de Vitoria, Banco de Negocios Argentaria, Banco de Credito Local and Banco de Alicante. He also served as an Executive Director and Chief Risk Officer of Banco Banesto. Previously, he was Chief Risk Officer at Banco Español de Credito, S.A., where he was a member of the board of directors and the board of officers. He has been an Executive Director at Alliance & Leicester plc since March 17, 2011. He is also a member of the board of Societat Catalana d’Economia. He has been a member of our board of directors since 2015.
José de Paiva Ferreira. Mr. Paiva is Portuguese and was born on March 1, 1959. He has a specialization degree in Business Administration from the Fundação Getúlio Vargas, and an MBA from the Wharton School of Business at the University of Pennsylvania. He has worked in the financial markets for more than 40 years. He started at Banco Bradesco in 1973 and occupied several different positions. Afterwards, he joined Banco Geral do Comércio, Noroeste and Santander Brasil, where he was Vice President Executive Officer, responsible for the Business, Human Resources, Operations, Technology, Property, Products, Marketing, Credit Cards, Insurance, Leasing and Branch Network. From 2000 to 2001, he occupied the position of e-Business Officer for Latin America, forin the American Division of Santander Central Hispano. At the end of 2001, he came backreturned to Brazil in order to work at Banco Banespa as Vice President Executive Officer of Banco Banespa, where he was responsible for the OperationalHuman Resources, department.Technology, Operations and Patrimony. In 2003, he became Vice President Executive Officer responsible for Marketing, Products and Retail Business for Santander Brasil. In 2008, he became the Chief Executive Officer of Santander Brasil, a position that he occupied until the merger with Banco Real, when he became Senior Vice President Executive Officer, responsible for the Retail Business. In March 2011, he became Directora member of Santander Brasil’s boardBoard of directors,Directors, and joined the Board business groupMitsubishi Corp Group based in Los Angeles, California, USA, where his main activities involved technological innovations. Currently, he is a member of our board of directors, and sinceFrom July 2013 to December 2019, he alsoreturned to Santander Brasil and acted as Senior Vice President Executive Officer, responsible for the Human Resources, Organization, Property, Proceedings, Operations, Technology and Costs. He is alsoAdditionally, he performed the following functions: Executive Director of Febraban (2014 to 2019), Chairman of the boardFebraban Self-Regulation Board (2016 to 2019), Chairman of directorsthe Board of Santander Leasing S.A. Arrendamento Mercantil,Directors of CIP- Interbank Payment Chamber (2015 to 2018), President of Tecban Council - Banking Technology (2014 to 2015), Advisor of the Cancer Institute - SP (2009 to 2010) and Mentor of the Inova Unicamp Program (2011 to 2013). Currently, he is a member of the boardour Board of directors of TECBAN – Tecnologia Bancária, a member of the boards of directors of Getnet Adquirência e Serviços para Meios de Pagamento S.A.Directors and a member of our Riskrisk and Compliance Committee.compliance committee.
Sergio Agapito Lires RialJosé García Cantera. Mr. RialJosé García Cantera is Spanish and was born on May 26, 1966. He holds a degree in industrial engineering and also holds an MBA from IE Business School. Mr. García Cantera is Senior Executive Vice President of the Santander Group in Spain. He became Chief Financial Officer and Head of the Financial Management Division in January 2015. Prior to his current role, Mr. García Cantera was Head of Global Wholesale Banking, reporting directly to the Santander Group’s CEO. Mr. García Cantera became CEO of Banesto in 2006, having joined in September 2003 as Senior Executive Vice President of Wholesale Banking, comprising Corporate Banking, Treasury, Capital Markets, Banesto Bolsa and the Santander Group’s international operations. Before working at Banesto, Mr. García Cantera held senior executive positions at Salomon Brothers-Citigroup. He was a member of the Management Committee of Citigroup EMEA and of the Board of Directors of Citigroup Capital Markets UK and Citigroup EMEA. During his time as a Latin American stock analyst, he was rated as best analyst by a number of specialized publications including Institutional Investor, Reuters, Extel and Global Investor between 1995 and 2002.
Pedro Augusto de Melo. Mr. de Melo is Brazilian and was born on November 4, 1961. He has a degree in accounting sciences and a postgraduate degree in accounting and financial administration from the São Judas Tadeu University of Accounting Sciences (São Paulo). Since March 2, 2020 he has occupied the position of CEO of the Brazilian Institute of Corporate Governance (IBGC). In July 28, 1960.2021, he was appointed to coordinate the Audit Committee of Hospital Sírio Libanês. He developed his career in the Deloitte and KPMG audit areas. From 2008 to 2017, he was CEO of KPMG Brazil, in addition to being the CEO for KPMG South America from 2015 to 2017. On October 1, 2017, he assumed the roles of COO for South America and Leader of Customers and Markets for South America until he retired from the firm in early 2020. He also actively participated in other levels of Governance at KPMG International, KPMG Americas and KPMG South America. He was Chief Executive OfficerChairman of Marfrig Global Foods S.A. His professional career includes the postsBoard of Vice-President Executive OfficerDirectors of IBRACON - Brazilian Institute of Independent Auditors between 2009 and World Chief Financial Officer of Cargill.2010. He was also a member of the boardGovernance Committee of directors of Cargill for nine years. He was a Managing Director of Bear Stearns & Co., in New York, Officer of ABN AMRO BankAmcham Brasil and a memberexecutive of the boardUnion of directors of ABN AMRO Bank in the Netherlands, as well as a member of the board of directors of Mosaic Fertilizers. He has a degree in Law for the Universidade Federal do Rio de Janeiro and in Economics for Universidade Gama Filho, and also has an MBA from IBMEC in São Paulo, as well as specializations from Harvard Business School, the Wharton School of Business at the University of Pennsylvania and INSEAD, in France. Currently he is Vice-Chairman of the board of directors and the Chief Executive Officer of Santander Brasil, Chairman of the board of directors of Getnet Adquirência e Serviços para Meios de Pagamento S.A. and Universia Brasil S.A. and Chief Executive Officer of Santander Cultural.
Celso Clemente Giacometti. Mr. Giacometti is Brazilian and was born on October 13, 1943. He holds a degree in Business Administration from the Faculdade de Economia São Luís and graduated with an accounting sciences degree from the Faculdade de Ciências Econômicas de Ribeirão Preto. He started his career in 1960 as trainee and reviewer at Citibank. From 1963 to 2001 he worked at Arthur Andersen, becoming a partner in 1974 and acting as CEO of Brazilian operations from 1985 to 2000. He served on the board of directors and audit committees of Lojas Marisa S.A., Tarpon Investments, TIM Participações, Sabó Autopeças and Votorantim Indústrias. He was a member of the Fiscal Council of CTEEP/ISAAccounting Companies - Transmissão Paulista. He was also the CEO of Souto Vidigal, a holding company and family office, from 2004 to 2006. On February 3, 2010, he was elected as an independent member of our board of directors, a body which he presided over between October 2011 and June 2013 and between August 2013 and March 2015. He is President of the Fiscal Council and member of the Audit Committee of Ambev S. A. He is the manager partner of Giacometti Serviços Profissionais Ltda. Mr. Giacometti is also one of the co-founders and former board member of IBGC (Brazilian Institute of Corporate Governance) and a current member of its Governance and Nomination Commission. He is a member of the CAF (Comitê de Fusões e Aquisições).SESCON. Currently, he is an independent member of our boardthe Board of directors, as well as memberDirectors and the coordinator of our Compensationthe Risk and Compliance Committee and Nomination and Governance Committee.of the Banco Santander (Brasil) S.A.
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Deborah Patricia Wright. Mrs. Deborah Wright is Brazilian and was born on September 4, 1957. She holds a Business Administration degree from the São Paulo School of Business Administration (EAESP-FGV). Mrs. Wright started her career in 1980 at Kibon'sKibon’s Marketing Department, where she remained until 1989. In 1989, she joined Unilever as Marketing Manager and worked in the food division. In 1991, she returned to Kibon as Marketing Director, becomingand became Commercial Vice-PresidentVice President in 1994. In 1995 she became the General Manager of Kraft Suchard Foods. In 1997, she reached the position of General Manager of Kibon. At ICI/Paints, she was the General Manager for Tintas Coral Brasil from 1997 to 1999, and subsequently the Regional Manager for ICI. She was also General Officer at Parmalat Brasil in 1999, and Chief Executive Officer of Pão de Açúcar'scar’s Group Internet Division from 2000 to 2002.2001. From 2002 to 2007, she was Corporate Vice-President/Vice President/Commercial Vice-PresidentVice President in the area of Sales and Corporate Marketing of the Abril Group. From 2009 to 2010, she was Chief Executive Officer/Country Manager of Ipsos Brasil, a market research firm. She has been acting as board membera Board Member since 2001. From 2001 to 2005 she was a memberserved on the board of the Escola Americana deGraded - The American School of São Paulo's board (Graded School).Paulo. From 2005 to 2006 she was a member of the superior board Member of CONAR (National(Brazilian National Self-Regulatory Board of Advertising Self-Regulation)Advertising). From 2008 to 2014,2009 she was member of Lojas Renner's board, as well as Chairwoman of the Sustainability Committee from 2012 to 2014. She was a member of the consultative council of Eurofarma from 2013 to 2016. Currently, she is associated with: WCD Brazilian Group (Women Corporate Directors); Strategy and Innovation Committee of the IBGC (Brazilian Institute of Corporate Governance); the Commission of Strategy and of the Group; and Gender Diversity - Women in Boards. Currently she is member of our Nomination and Governance Committee and Compensation Committee.
José Luciano Duarte Penido. Mr. Penido is Brazilian and was born on March 8, 1948. He holds a Mining Engineering degree from the Engineering School of Universidade Federal de Minas Gerais. He started his career at ICOMI – Indústria e Comércio de Minérios in the manganese mine of Serra do Navio, in Amapá, where he worked until August 1973. From September 1973 to 1988, he worked at SAMITRI, a mining company from the Belgo Mineira Group, where he played several mineral research, mining, and industrial project management roles. From 1989 to 2003, he worked for SAMARCO, where he started as Development Officer and was the Chief Executive Officer for 12 years. From 2004 to 2009, he was the Chief Executive Officer of VCP – Votorantim Celulose e Papel. Since 2009, Mr. Penido has been chairing the board of directors of Fibria Celulose. He is also an independent member of the boards of directors of COPERSUCAR, Química Amparo YPÊ and the ALGAR Group. Additionally, he is a member of the Instituto Votorantim’s board. Mr. Penido is Vice-Chairman of the Executive Board of WBCSD – World Business Council for Sustainable Development. In his socio-environmental activities, Mr. Penido acts as Chairman of the ACEVP – Paraíba River Valley’s Ecological Corridor Association and as a member of the Board of Directors of the Rede Cidadã NGO.Samaritano Hospital in São Paulo. From 2008 to 2014 she was a board member for Lojas Renner, a Brazilian publicly-traded company, specializing in apparel retail, as well as Chairwoman of their Sustainability Committee from 2012 to 2014. From 2013 to 2016, she was member of the Advisory Board for Eurofarma, the fourth largest Brazilian pharmaceutical company, still privately owned and not listed on the stock exchange. Currently heshe is alsoassociated with the following entities: Brazilian subsidiary of WCD Group (Women Corporate Directors), which she co-founded in 2010; she is the coordinator of the IBGC (Brazilian Institute of Corporate Governance) Strategy Commission at IBGC, where she leads a work and study group of DEI (Diversity, Equity and Inclusion); AmCham’s (American Chamber of Commerce); Amcham’s Strategic Corporate Governance Forum; and she is an ambassador of the 30% Club and WOB (Women on Boards) and has been involved in advocacy for gender diversity for over a decade. Besides that, she is an independent member of the Board of Directors, a member of our Sustainability Committee.the nominations and governance committee and a chairwoman of the Compensation Committee of Banco Santander (Brasil) S.A.
Viviane Senna LalliDeborah Stern Vieitas. Ms. SennaMrs. Vieitas is Brazilian and was born on June 14,August 21, 1957. She holds a degree in PsychologyPublic Administration from FGV-SP and a degree in Journalism from the Pontifícia Universidade CatólicaSchool of Communications and Arts (Escola de Comunicações e Artes) of the University of São Paulo. She also holds a master’s degree in São PauloBusiness from FGV-SP and in Public Administration from École Nationale d’Administration. She is currently the Chief Executive Officer of American Chamber of Commerce Brazil (Amcham Brazil). From 2015 to 2017, she is specialist in Depth Psychology. From 1981 to 1996, she worked as a psychotherapist for adults and children, and as a trainer of therapists in Depth Psychology. In 1994 she founded the Ayrton Senna Institute, the mission of which is the production and application of a wide range of knowledge and innovation for the complete education of children and youth. Ms. Senna is also awas an independent member of the following boards of directors and committees: Council for Economic and Social Development (CDES); Advisory Council of FEBRABAN; Board of EducationAXA Seguros S.A. From 2008 to 2014, she was CEO and Board Member of CNIthe Banco Caixa Geral – Brasil. From 2000 to 2008, as Executive Vice President of Banco BNP Paribas Brasil, Mrs. Vieitas was responsible for Corporate Coverage and FIESP; Energias doLoan and Financing portfolios. From 1998 to 2000, she was an Executive Vice President of Banco CCF Brasil (EDP); ADVB; Worldand in charge of Large Corporate & Corporate Coverage, Capital Markets, Trade Center (WTC); “Todos pela Educação”;Finance and guidance and social investment committees of Bank Itaú-Unibanco.Foreign Exchange. Currently she is an independent member of our Board of Directors and chairwoman of the audit committee, in addition to having already been a member of the Risks and Compliance Committee.
Marília Artimonte Rocca. Mrs. Rocca has been CEO of Hinode Group, the largest Marketing Multilevel consumer goods company in Brazil, since November 2018. It also has operations in Latin America. Previously, she was Ticket’s Managing Director in Brazil, a food voucher Edenred Group company. Formerly, she served as vice president at TOTVS, the sixth largest software company worldwide, based in São Paulo. From 2008 till 2012, Mrs. Rocca was a managing partner at Mãe Terra, a natural and organic foods B-Corp sold to Unilever in 2017. Prior to that she co-founded and managed Endeavor Brazil, the most successful NGO supporting innovative entrepreneurship in the country. In 2000, she also co-founded Fundação Brava, a family foundation focused on transferring management tools to the public sector and Brazilian NGOs to boost their effectiveness. From 1995-98, Mrs. Rocca worked for Walmart as one of the organization’s first female directors in Brazil. For 20 years Mrs. Rocca has served as a board member at privately and publicly held companies in the Education, IT, Services and Consumer Goods industries. Mrs. Rocca earned a BA in Business Administration from EAESP/Fundação Getúlio Vargas and an MBA in Management from Columbia University, attending on the Fundação Estudar Scholarship. She is a 2006 Henry Crown Fellow of directorsThe Aspen Institute and a member of our Sustainability Committee.
Membersthe Aspen Global Leadership Network. Also, Marilia is an independent Board member and coordinator of the BoardSustainability Committee of Executive Officers:Banco Santander (Brasil) S.A.
Sergio Agapito Lires RialMario Roberto Opice Leão. See “—MembersMr. Leão is Brazilian and was born on July 21, 1975. He holds a degree in Production Engineering from the Escola Politecnica of the BoardUniversidade de São Paulo. He joined Santander Brasil in October 2015 as an Executive Director in Corporate and Investment Banking. In July 2017 he became Executive Vice President of Directors.”
Conrado Engel. See “—MembersCorporate and SMEs and a member of the Boardexecutive committee. Since January 2022 he has acted as Chief Executive Officer of Directors.”Santander Brasil. Before joining Santander Brasil, he was a Managing Director in Capital Markets at Morgan Stanley from 2008 to 2015, worked for Goldman Sachs from 2006 to 2008 and for Citibank from 1996 to 2006.
José de Paiva Ferreira. See “—Members of the Board of Directors.”
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Angel Santodomingo Martell. Mr. Santodomingo is Spanish and was born on November 16, 1965. He holds a degree in Economics and Business with a specialization in Finance from the ICADE University in Madrid and a CFA (Chartered Financial Analyst) from the CFA Society of the United States. As one of our Vice President Executive Officers, he holds the position of Chief Financial Officer and Investors’Investor Relations Officer.Officer since 2014. He started at the Santander Group in 2005 as Head of International Developments andDevelopment in the Asset Management and then has become globallyunit after which he became global responsible for the investor relationsSantander Group Investor Relations area. He has worked as OfficerPrior to this he was the head of Grupo Fortis in Spain and an officer and board member at Banesto Bolsa. AlsoHe also worked at Usera y Morenés S.V.B. - Sociedade de Valores y Bolsa and Arthur Andersen (Deloitte). From 1996 to 2008, he occupiedacted as founding member of the position of Chief Executive Officer ofnonprofit organization CFA Society in Spain, where he acted as founding
member of such nonprofit organization focused on serving the holders of financial analyst accreditation (CFA)also occupying different positions including President; and from 2009 to 2014 he was Vice President of AERI’s (Asociación Española de Relaciones con Inversores) boardBoard of directors.Directors. He is also Executive Officerwas Chairman of Aymoré CFI,the Board of Directors of Webmotors S.A. from 2018 to 2021. Currently, he is Chief Executive Officer of Santander ParticipaçõesLeasing S.A. Arrendamento Mercantil, Santander Corretora de Seguros, Investimentos e Serviços S.A., Executive Officera member of Santander Culturalthe Advisory Board of Fundo Garantidor de Créditos (FGC) and a member of the boards of directors of Banco Olé Bonsucesso ConsignadoHyundai Capital Brasil S.A., Banco PSA Finance Brasil S.A., Banco RCI Brasil S.A., Santander Leasing S.A. Arrendamento Mercantil, Super Pagamentos e Administração de Meios Eletrônicos S.A. and Getnet Adquirência e Serviços para Meios de Pagamento S.A.
Alexandre Silva D’Ambrosio. Mr. D'Ambrosio is Brazilian and was born on August 1, 1962. He holds a Bachelor's degree in Law from the University of São Paulo Law School; Master of Laws from Harvard Law School and Master of Comparative Law from the National Law Center, George Washington University. As one of our Executive Vice-Presidents, he is responsible for the Company's Legal and Corporate Affairs department since May 2016. From January 2014 to April 2016,HDI Seguros Brasil. On December 17, 2021, he was Global Executive Vice-President Officer, Legal and Governmental Affairs at Votorantim Cimentos S.A., the cement division of Votorantim Group. Still at the Votorantim Group, from June 2003 to January 2014, he served as Global Corporate Officer and General Counsel for Votorantim Industrial S.A., the holding company for all industrial activities of the Group worldwide, including cement, metals, mining, pulp and paper, orange juice, chemicals, steel, electrical power and trading activities. From 2001 to 2003, he served as Vice President, Legal and Corporate Affairs at Global Village Telecom Ltda. (GVT). Previously, from 1999 to 2001, he was Legal Officer, General Counsel and Secretary of the Board at Telemig Celular Participações S.A. (acquired by Vivo in 2008) and Tele Norte Celular Participações S.A. (acquired by Oi in 2008). He was Deputy General Counsel at the Odebrecht Group, from 1996 to 1999. Mr. D'Ambrosio practiced law as an attorney in the United States from 1985 through 1996. He was Counsel at Rogers & Wells in New York from 1994 through 1996. Previously, he was associate and partner at major law firms in Washington D.C. (Bishop & Wallace, Winston & Strawn and Patton Boggs Blow) from 1985 to 1994. He waselected a member of the Board of Directors of CitrosucoSantander Brasil.
Alberto Monteiro de Queiroz Netto. Mr. Monteiro is Brazilian and was born on November 30, 1967. He holds a bachelor’s degree in Business Administration from Faculdade de Ciências Políticas e Econômicas do Rio de Janeiro. He also completed a post-graduate degree in banking by FEA/USP and an MBA in Corporate Finance by FGV/RJ. From 2009 to 2011, he served as chief financial officer and investor relations officer at CSN – Companhia Siderúrgica Nacional. Between 2011 and 2014, he was also chief financial officer and investor relations officer of Suzano Papel e Celulose SA. Between 2014 and 2016, he held the position of executive vice president at GranInvestimentos S.A. (2014where he was responsible for finance. In 2017, Mr. Monteiro served as executive vice president at Banco do Brasil S.A., where he was in charge of the finance, investor relations and M&A departments. Currently Mr. Monteiro is the Vice President Executive Officer head of the Wealth Management segment of Santander Brasil, and on December 17, 2021, he was elected member of the Board of Directors of Santander Brasil.
Members of the Board of Executive Officers:
Mario Roberto Opice Leão. See “—Members of the Board of Directors.”
Alberto Monteiro de Queiroz Netto. See “—Members of the Board of Directors.”
Angel Santodomingo Martell.See “—Members of the Board of Directors.”
Alessandro Tomao. Mr. Tomao is Brazilian and was born on March 8, 1977. He holds a bachelor’s degree in law from the FMU University and a master’s degree in Business Administration - HR from the University of São Paulo. As one of our Executive Vice Presidents, he has been responsible for the Company’s Legal and Corporate Affairs department since February 2018. From June 2010 to 2016),February 2018, he has been the head of Companhia de Cimentos Itambéthe legal litigation, legal consulting in labor and pension funds departments at Santander Brasil. From 2000 to 2010, he served as head of the labor and pension funds legal department at Banco Itaú S.A. (2008 to 2016), andSince January 2020, he has been Executive Director of Aracruz Celulose S/A and Fibria S.A. (2005 to 2014).
FEBRABAN. He is also member of the Board of Directors at CACEIS as of 2019.
Antonio Pardo de Santayana MontesMontes.. Mr. Pardo de Santayana is Spanish and was born on November 5, 1971. He holds a degree in Economics and Law from the ICADE school of the Universidade Pontifícia Comillas. As one of our Vice-PresidentVice President Executive Officers, he is responsible for risk management department in Santander Brasil, having held before the post of Officer responsible for the Risk Credit Recovery area and Officer of Wholesale Risks and Aymoré CFI. He is also the South America Risk Lead for Santander Group, a member of the Global Executive Risk Committee and the Global Control Risk Committee and an Executive Officer in Banco Bandepe S.A., Aymoré CFI, Santander Leasing S.A. Arrendamento Mercantil and Sancap Investimentos e Participações S.A. He was a consultant at PricewaterhouseCoopers from 1995 to 1998, senior risk analyst for Santander Central Hispano/Santander Investment from 1998 to 2000 and senior manager of Monitor Company from 2000 to 2005, and returned to the Santander Group in 2005 as Associate Officer in the Wholesale Risks area, where he remained until 2009, when he came to work in Brazil. He
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Andrea Marques de Almeida. Ms. de Almeida is also Executive Officer of Banco Bandepe S.A., Aymoré CFI, Santander Leasing S.A. Arrendamento Mercantil, Santander Capitalização S.A. and Santander Finance Arrendamento Mercantil S.A. and administrator of F. Café Prestadora de Serviços Ltda.
Carlos Rey de Vicente. Mr. Rey is SpanishBrazilian and was born on February 20, 1974. He graduatedJanuary 13, 1971. She has a degree in Lawproduction engineering from the Universidad ComplutenseFederal University of Rio de Madrid,Janeiro, an MBA in Finance from IBMEC - Rio de Janeiro and he became a memberan MBA in management from the State University of São Paulo. Before joining Santander Brasil, Ms. de Almeida held management positions at Vale S.A in the Colégio de Abogados de Madrid in 1997. In 2010 he startedareas of risk management and finance. She also held the position of Executive Director of Finance and Investor Relations at Santander Spain, where he was responsible for the strategy and planning of the banks Santander México, Chile, Argentina, Puerto Rico, Uruguay, Peru and Colombia. From 2001 to May 2010, Mr. Rey was a partner of McKinsey & Co., where he was responsible for heading several projects on strategic consulting. His activities were always concentrated on banking and insurance matters, besides acting on team management. Before, he worked as a lawyer in two different law firms, where at one of them he was partner and founder, dealing mainly with insurance and civil responsibility.Petrobrás S.A. Currently, Mr. Reyshe is our Vice President Executive Officer responsible for the Finance and Strategy Qualitydepartments.
Ede Ilson Viani. Mr. Viani is Brazilian and was born on September 5, 1967. He holds a degree in Accounting and an MBA in Finance from IBMEC Instituto Brasileiro de Mercado de Capitais. He was an auditor at Banco Itaú S.A. from 1986 to 1990 and worked at BankBoston S.A for 16 years as a Senior Auditor, Credit Risk Management Superintendent, Head of Local Currency Loans and Head of the Small Business Segment. He joined Santander Brasil in 2007 as Small & Medium Companies Director and from July 2010 to 2014 was Retail Banking Risk Management Director. From 2014 he acted as the Director responsible for Small & Middle, Government & Institution and Agribusiness and after that as Retail Banking Network Director up to December, 2019 when he was promoted and became Technology & Operations Vice President.
Elita Vechin Pastorelo Ariaz. Ms. Ariaz is Brazilian and was born on March 28, 1970. She holds a law degree from the University of São Paulo, a master’s degree in law (LL.M.) from Temple University – Pennsylvania and an extension from the Corporate Matters department. HeFinance Special Program at New York University. She is also a member of the boardsBrazilian Bar Association and the New York State Bar Association. Between 1992 and 1996, she worked as an in-house lawyer at Tenenge – Técnica Nacional de Engenharia S.A.; between 1997 and 1998, she worked as a foreign associate at the law firm of directorsCameron & Hornbostel LLP in Washington, DC; between 1998 and 2001, she worked as an associate at the law firm of Santander Leasing S.A. Arrendamento Mercantil, Getnet Adquirência e Serviços para Meios de Pagamento S.A., ZurichLeBoeuf, Lamb, Greene and MacRae, LLP, in New York, NY. Between 2002 and 2018, she worked as an in-house lawyer at Grupo Safra, having started as the head of legal support for Grupo Safra’s offshore operations. In her last six years at Grupo Safra she was also responsible for providing legal support for the operations of the investment banking division of Grupo Safra as well as for its asset management division. In 2018, she joined Santander Brasil Seguros e Previdência S.A., Zurich Santander Brasil Seguros S.A.where she served as Director responsible for the Business Legal Department – wholesale and Santander Brasil Establecimiento Financeiro de Crédito S.A., an Administrative Officerretail until 2021. As one of Norchem Participações e Consultoria S.A. andour Executive Officer of Santander Cultural.
Vice Presidents, she is currently responsible for Human Resources area.
Jean Pierre Dupui. Mr. Dupui is Brazilian and was born on September 23, 1968. He holds a bachelor’s degree in Economics and a specialization degree from Boston University. Currently he is responsible for Global Corporate & Investment Banking at Santander Brasil. From 1992 to 1998 he worked at the structured finance and trade finance department of Lloyds TSB Group in São Paulo and London. From 1998 to 2001 he worked at the structured finance department of Citigroup Brasil. From 2001 to 2004 he worked for BBVA Brasil in the debt capital markets
department. From 2004 to 2006 he was a Corporate Finance Officer at Citigroup New York and São Paulo. He started his career in Santander Group in 2006, where he took charge of the Credit Markets department of Santander Brasil. From 2009 to 2012 he was responsible for Global Transaction Banking of Santander in Madrid. Mr. Dupui is also an Executive Officer of Banco Bandepe and Santander Cultural.
JoãCultural, a member of Curator Counsel at Fundação Guilherme de Andrade So Consiglio. Mr. Consiglio was born in São Paulo, on December 7, 1968. He holds a degree in Economics from Universidade de São PauloSantander and a Post Laurea from Universitá Degli Studi di Genova, Italy, Facoltá di Economia e Commercio. As an Executive Vice President Officer, he is responsible for the corporate segment. He was an economist at Bunge (Serfina S.A. Adm. e Participações) from 1990 to 1994, a manager of the economics department of Santista Corretora S.A. CVM from 1994 to 1995 and has been with Santander Brasil (ABN AMRO/Banco Real) since 1995. He started as a corporate banking manager, then assumed corporate development and private equity functions until 2005, when he became the Officer responsible for product management and development in Brazil. He became head of global transaction products in Brazil in 2008, and in 2010 assumed his current responsibilities as Corporate Vice President Officer. He served as a member of the boardboards of directors of CBSS (Visa Vale) until 2008, and as a member of the board of directors ofCâmara Interbancária de Pagamentos – CIP and a member of theConselho Superior of FUNCEX until 2010.S3 Caceis Brasil DTVM S.A.
Juan Sebastian Moreno BlancoJoão Marcos Pequeno De Biase. Mr. MorenoDe Biase is Brazilian and was born on December 17, 1964,October 12, 1967. He graduated in Spain. He graduatedEconomics from the Federal University of Rio de Janeiro - UFRJ. Before joining Banco Santander Brasil, Mr. De Biase worked at Banco Itaú BBA between 2008 and 2020, where he served as Global Head of Corporate and Investment Banking - CIB, Executive Director responsible for the commercial area and head of the bank’s origination team. From 2005 to 2008, he served as Director and Head of Sales and Global Market Coverage for Deutsche Bank. From 1998 to 2005, Mr. De Biase was Director of Investment Banking and Sales of fixed income products at Credit Suisse in São Paulo. From 1991 to 1998, he held various positions at Banco de Investimentos Garantia, including Head of the office located in Rio de Janeiro and Head of the Capital Markets area where he was responsible for the liquidation and back office of all Client Company Transactions. Mr. De Biase started his career in 1989 as a Trainee in the Economic Planning team at Petrobrás Comercial Internacional. Currently, Mr. De Biase holds the position of Executive Vice President of the Corporate segment of Banco Santander Brasil, responsible for serving larger and medium-sized companies, both national and multinational. At Santander since 2020, João was also Executive Director of the Corporate & Investment Banking area of the Global Corporate Banking segment.
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Patricia Souto Audi. Mrs. Souto Audi is Brazilian and was born on May 15, 1968. She holds a degree in Business Administration from the University of Houston, TX. From 1987 to 1994 he workedBrasilia and a Specialization in Public and Government Management, National School of Public Administration from the Public Management National School (ENAP) in Brasilia. She was Secretary of Transparency and Corruption Prevention at Bankinter as Commercial Officer, responsible for the commercial area as well as forMinistry of Transparency; INSS Benefits Director; ILO Coordinator (International Labor Organization) in Brazil; Secretary of Management at the Enterprises segment in Santander. From 1994 to 1997 he worked as Project Officer in the financial systemMinistry of MexicoPlanning, Budget and Brazil, for Booz, Allen & Hamilton, in Mexico. He joined the Santander Group in 1997, where he served as Executive Officer of Companies and Institutions, after which he became Executive Officer of Business Development at Banco Santander Mexico, with responsibility for activities in the area of productsManagement of the bank. In 2006, he became responsible forFederal Government and Secretary of the segmentsEconomic and Social Development Council, a civil society body that gives advice to the Presidency of Large Enterprises, Corporate,the Republic of Brazil. She joined Santander Brasil in August 2018 as the head of Institutional and High Income in Latin America, in addition to leading the product areas for the countries of Latin America (Comex, Cash Management, Payroll etc.). From 2008 to 2010, he performed the role of Chief Executive Officer of Banco Santander – Puerto Rico. As of 2010, he occupiedRelations. Nowadays, she holds the position of Executive Vice President, Officer of the Commercial area of Banco Santander Mexico, with responsibility for the business areas. At that time, he was also a member of the board of directors, steering committee, asset and liability committee, finance committee and risk committee. As a Vice President Executive Officer, hewhere she is responsible for our Retailinstitutional relations and Commercial Branches. He is also a member of the board of directors of Getnet Adquirência e Serviços Para Meios de Pagamento S.A.sustainability.
Manoel Marcos Madureira. Mr. Madureira is Brazilian and was born on December 30, 1951. He holds a bachelor’s degree in Mechanical Engineering from the Taubaté University in São Paulo and a degree in Administration from the Tokyo International Center in Japan. From 1976 to 2005 he worked in the automobile sector, as Institutional Relations and Communication Officer at Fiat Automóveis and Mercedes Benz do Brasil. From 1998 to 2005 he was also Vice President of the Associação de Fabricantes de Veículos Automotores and President of the Associação de Engenharia Automotora. In 2006 he was elected as Vice President of Corporate Affairs of Santander Brasil and in 2007 he was put in charge of the Vice Presidency of the Federação Brasileira de Bancos. In 2008 he was transferred to Santander Spain Group, as Communication Officer for Latin America, where he remained until September 2012. In October 2012 he returned to Brazil as Executive Officer to be in charge of the Corporate Communication and Institutional Relations Departments of Santander Brasil, and he is currently the Vice President Executive Officer responsible for the Communication, Marketing, Institutional Relations and Sustainability departments. Mr. Madureira is also Vice President Executive Officer of Santander Cultural and Executive Officer of Universia Brasil S.A.
Vanessa de Souza Lobato BarbosaEde Ilson Viani. Ms. LobatoMr. Viani is Brazilian and was born on December 24, 1968. She holds a bachelor’s degree in Business Administration from Pontifícia Universidade Católica de Minas Gerais, and a specialization degree in Marketing at Universidade Federal de Minas Gerais. From 1992 to 1995 she served as Marketing Local Manager at Banco Nacional, with responsibility for the sponsorship budget and micro marketing activities focused on the retail network. She also worked at Unibanco, in Recife, from 1995 to 1999, where she was responsible for different branches in the city of Recife. In 1999 she started at Santander Brasil, where she worked as General Manager of the Recife branch office. From 2001 to 2006 she served as Local Superintendent, where she was responsible for one of the Retail’s Locals, with head office in Belo Horizonte, covering the states of Minas Gerais, Goiás, as well as Brasília, and the states of the Northeast Region. From 2006 to 2013, Ms. Lobato became an Executive Superintendent of our branch network, with responsibility for one of our retail branches in Brazil, specifically the “SPI Centro Sul” branch based in Campinas, State of São Paulo, covering important cities such as:
Campinas, Jundiaí, Sorocaba, Piracicaba, Limeira and Americana. As one of our Vice President Executive Officers, she is currently responsible for the Human Resources department.
José Alberto Zamorano Hernandez. Mr. Zamorano is Spanish and was born on May 9, 1962.September 5, 1967. He holds a degree in Business AdministrationAccounting and an MBA in Finance from the Universidad ComplutenseIBMEC Instituto Brasileiro de Madrid. In 1991, he began his career in Santander GroupMercado de Capitais. He was an auditor at Banco Itaú S.A. from 1986 to 1990 and worked at BankBoston S.A for 16 years as managera Senior Auditor, Credit Risk Management Superintendent, Head of Local Currency Loans and Head of the internal audit areaSmall Business Segment. He joined Santander Brasil in 2007 as Small & Medium Companies Director and from 1995July 2010 to 2002, where2014 was Retail Banking Risk Management Director. From 2014 he acted as the Director responsible for Small & Middle, Government & Institution and Agribusiness and after that as Retail Banking Network Director up to December, 2019 when he was responsible for the credit risk audit in regional units of Galícia, Alicantepromoted and Castilla La Mancha. From 2002 to 2005, he was superintendent of internal audit of Santander Brasil and from 2005 to 2010, he was the Executive Officer responsible for internal audit in Grupo Financeiro Santander México. As one of our Executive Officers, Mr. Zamorano has been responsible for our internal audit area since 2011.became Technology & Operations Vice President.
Elita Vechin Pastorelo Ariaz.
José Roberto Machado Filho. Mr. Machado Ms. Ariaz is Brazilian and was born on August 25,March 28, 1970. She holds a law degree from the University of São Paulo, a master’s degree in law (LL.M.) from Temple University – Pennsylvania and an extension from the Corporate Finance Special Program at New York University. She is a member of the Brazilian Bar Association and the New York State Bar Association. Between 1992 and 1996, she worked as an in-house lawyer at Tenenge – Técnica Nacional de Engenharia S.A.; between 1997 and 1998, she worked as a foreign associate at the law firm of Cameron & Hornbostel LLP in Washington, DC; between 1998 and 2001, she worked as an associate at the law firm of LeBoeuf, Lamb, Greene and MacRae, LLP, in New York, NY. Between 2002 and 2018, she worked as an in-house lawyer at Grupo Safra, having started as the head of legal support for Grupo Safra’s offshore operations. In her last six years at Grupo Safra she was also responsible for providing legal support for the operations of the investment banking division of Grupo Safra as well as for its asset management division. In 2018, she joined Santander Brasil where she served as Director responsible for the Business Legal Department – wholesale and retail until 2021. As one of our Executive Vice Presidents, she is currently responsible for Human Resources area.
Jean Pierre Dupui. Mr. Dupui is Brazilian and was born on September 23, 1968. He holds a bachelor’s degree in Electrical EngineeringEconomics and a specialization degree from Faculdade de Engenharia IndustrialBoston University. Currently he is responsible for Global Corporate & Investment Banking at Santander Brasil. From 1992 to 1998 he worked at the structured finance and trade finance department of Lloyds TSB Group in São Paulo and hasLondon. From 1998 to 2001 he worked at the structured finance department of Citigroup Brasil. From 2001 to 2004 he worked for BBVA Brasil in the debt capital markets department. From 2004 to 2006 he was a master’s degree in business, economicsCorporate Finance Officer at Citigroup New York and finance from the Universidade de São Paulo. He started his career in Santander Group in 2006, where he took charge of the Credit Markets department of Santander Brasil. From 2009 to 2012 he was an engineerresponsible for Keumkang Limited from 1990 to 1991, a foreign exchange manager from 1992 to 1995 and a managerGlobal Transaction Banking of emerging markets trading desk from 1992 to 1996 of Banco CCF Brasil S.A. He wasSantander in Madrid. Mr. Dupui is also an Executive Officer of Banco Rabobank Internacional Brasil S.A. from 1998 to 2003Bandepe and was an Executive OfficerSantander Cultural, a member of Banco Real from 2003 to 2009. Currently, he is responsible for the Individuals Businesses area. He is also Executive Officer of Banco Bandepe S.A., Chairman of the board of directors of Super Pagamentos e AdministraçCurator Counsel at Fundação de Meios Eletrônicos S.A.Santander and a member of the boards of directors of Zurich SantanderS3 Caceis Brasil Seguros e Previdência S.A., Zurich Santander Brasil Seguros S.A. and CETIP S.A. – Mercados Organizados.
Maria Eugênia Andrade Lopez Santos. Ms. Santos is Brazilian and was born on January 23, 1966. She holds a degree in Economics from the Universidade Federal da Bahia and a specialization degree from Fundação Getúlio Vargas. As one of our Officers, she is responsible for Private Segments (Private Banking, Select, Van Gogh and Individual), Investments and Insurance (Equity Management). She also serves as a Chief Executive Officer of Santander Brasil Advisory ServicesDTVM S.A.
Alexandre Grossmann ZancaniJoão Marcos Pequeno De Biase. Mr. ZancaniDe Biase is Brazilian and was born on October 14, 1977.12, 1967. He holds a degreegraduated in Computer EngineeringEconomics from the Escola PolitécnicaFederal University of UniversidadeRio de São Paulo. He started his professional careerJaneiro - UFRJ. Before joining Banco Santander Brasil, Mr. De Biase worked at Banco RealItaú BBA between 2008 and from 2002 to 20042020, where he served as an analyst in different retail risks teams focused on portfolio monitoringGlobal Head of Corporate and decision models development.Investment Banking - CIB, Executive Director responsible for the commercial area and head of the bank’s origination team. From 20042005 to 20062008, he served as team managerDirector and Head of Sales and Global Market Coverage for Deutsche Bank. From 1998 to 2005, Mr. De Biase was Director of Investment Banking and Sales of fixed income products at Credit Suisse in São Paulo. From 1991 to 1998, he held various positions at Banco de Investimentos Garantia, including Head of the office located in Rio de Janeiro and Head of the Capital Markets area where he was responsible for the Basel II project. From 2006 to 2007, he wasliquidation and back office of all Client Company Transactions. Mr. De Biase started his career in 1989 as a Trainee in the Quantitative Methods Superintendent, with responsibility forEconomic Planning team at Petrobrás Comercial Internacional. Currently, Mr. De Biase holds the Basel project. In 2008, he was Risk Superintendentposition of Executive Vice President of the Corporate segment of Banco Santander Brasil, responsible for serving larger and served as project manager in the process for integration of different areas as partmedium-sized companies, both national and multinational. At Santander since 2020, João was also Executive Director of the merger with Banco Real. From 2009 to 2012, he became the Cards Risks Superintendent and, then, the Individuals Portfolio Management’s Superintendent. Currently, Mr. Zancani is the Executive Officer of Individual Risks and oversees our portfolio management and credit approval activities. He also serves as a memberCorporate & Investment Banking area of the board of directors of Banco PSA Finance Brasil S.A.Global Corporate Banking segment.
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Patricia Souto Audi.
Amancio Acúrcio Gouveia. Mr. GouveiaMrs. Souto Audi is Brazilian and was born on March 31, 1963. He holds a degree in Accounting from the Universidade Santa Úrsula. As one of our Officers, he has been acting as a controller working in accounting and fiscal management of our companies since 2001. He was an audit manager for KPMG until 1991, accounting manager of Unibanco – União de Bancos Brasileiros S.A. from 1991 to 1999, assistant superintendent of BankBoston Banco Múltiplo S.A. from 1999 to 2001. He is also a member of the board of directors of BW Guirapá I S.A., Chief Executive Officer of Banco Bandepe S.A. and Executive Officer of Santander Leasing S.A. Arrendamento Mercantil, Atual Companhia Securitizadora de Créditos Financeiros S.A., Santander Capitalização S.A., Aymoré CFI, Evidence Previdência S.A., Santander Finance Arrendamento Mercantil S.A. and SANCAP Investimentos e Participações S.A. He is also administrator of Santander Brasil Administradora de Consórcio Ltda., member of the Fiscal Council of Companhia Energética de São Paulo and an effective member of the Fiscal Council of Redentor Energia S.A.
Ana Paula Nader Alfaya. Ms. Nader is Brazilian and was born on August 7, 1971.May 15, 1968. She holds a degree in Publicity and AdvertisingBusiness Administration from the Universidade Paulista in São PauloUniversity of Brasilia and a specialization degreeSpecialization in communicationsPublic and Government Management, National School of Public Administration from the Escola Superior de Propaganda e Marketing. From 1996 to 1997, she served as MarketingPublic Management National School (ENAP) in Brasilia. She was Secretary of Transparency and Internal Communication Manager,Corruption Prevention at Unibanco. She served as Credit Card’s Communication Manager from 1997 to 1998the Ministry of Transparency; INSS Benefits Director; ILO Coordinator (International Labor Organization) in Brazil; Secretary of Management at BankBostonthe Ministry of Planning, Budget and after that, as Strategy and Planning Marketing Manager, from 1998 to 2000, still at BankBoston. She served as Planning Manager and Research Manager, from 2000 to 2003 at ABN AMRO, and as Retail Marketing Manager, from 2003 to 2004, and in the same year she became a superintendent of Strategy
Marketing Department for retail. From 2005 to 2010 she served as Executive SuperintendentManagement of the Brand, ResearchFederal Government and Marketing Department, and, since 2011, as Senior Executive Superintendent of Brand and Marketing department and since 2012 as OfficerSecretary of the BrandEconomic and Marketing department.
André de Carvalho Novaes. Mr. Novaes is Brazilian and was born on April 14, 1969. He holdsSocial Development Council, a degree in Economics from the Universidade Federal Fluminense, and an executive MBA from BPS Business School (São Paulo and Toronto). From 1993 to 1997, he served as products coordinator in Santander Brasil, where he was responsible for credit proposals analysis, and in several areas at Aymoré CFI and in posts as Commercial Operator, Credit and Collection Chief. In 1996, he served as coordinator of products in São Paulo. From 1997 to 2001, he served as Commercial Manager. From 2002 to 2008, he served as Regional Manager. From 2008 to 2012, he served within Santander Brasil as the person responsible for Other Assets segment in Aymoré CFI. Since 2012, he has served as Executive Superintendent in Santander Brasil, with responsibility for Aymoré CFI’s Vehicle Partnerships. On December 2012, he became the commercial coordinator of Aymoré CFI, with responsibility for the Commercial and Partnerships team. Currently, Mr. Novaes is head of Aymoré CFI and reportscivil society body that gives advice to the Vice Presidency of Wealth Management & Specialized Businesses. He is also Executive Officerthe Republic of Aymoré, administrator of Virtual Motors Páginas Eletrônicas Ltda., Vice-Chairman of the board of directors and Vice President Officer of Webmotors S.A. and a member of the board of directors and Institutional Relations Officer of Banco RCI Brasil S.A.
Cassio Schmitt. Mr. Schmitt is Brazilian and was born on April 23, 1971. He holds a degree in Economics from the Universidade Federal do Rio Grande do Sul, a Master’s Degree in Corporate Economics from the Fundação Getúlio Vargas in São Paulo and an MBA from the Sloan School of Business, Massachusetts Institute of Technology (MIT). He was treasury economist of Banco de Crédito Nacional S.A. from 1995 to 1996, and senior economist at UNIBANCO – União de Bancos Brasileiros S.A. from 1996 to 1999. He was an associate of the leveraged finance team of UBS Warburg in 2000, project finance superintendent of UNIBANCO from 2001 to 2003 and corporate banking superintendent of UNIBANCO Representative Office in New York from 2003 to 2004. He was a superintendent in the M&A/Project Finance team ofBrazil. She joined Santander Brasil in 2004, and became responsible for project finance in Brazil in 2005 and also forAugust 2018 as the areashead of acquisition finance and syndicated lending in 2010. From 2011 to 2012, he became responsible forInstitutional Relations. Nowadays, she holds the GCB clients Risk Department, and until 2014 he was responsible for the Global Transaction Banking. Currently he is the Officer responsible for Credit Recovery Businesses. He is also the Chiefposition of Executive Officer of Atual Companhia Securitizadora de Créditos Financeiros S.A. and a member of the board of directors of Banco Olé Bonsucesso Consignado S.A.
Cassius Schymura. Mr. Schymura is Brazilian and was born on February 19, 1965. He holds a degree in Electrical Engineering from the Pontifícia Universidade Católica of Rio de Janeiro and an MBA from the Fundação Dom Cabral. As one of our Officers, heVice President, where she is responsible for the Multichannel Platform, including call centerinstitutional relations and electronic channels. He was investment products analyst at Banco Nacional S.A. from 1989 to 1991, products and marketing manager of Cardway Processamento from 1991 to 1994, products manager of Cartão Nacional from 1994 to 1996, marketing and products supervisory manager of Unicard Banco Múltiplo S.A. from 1996 to 1999, senior associate at Booz Allen & Hamilton in 1999, a member of the board of directors and Chief Executive Officer of Ideiasnet S.A. from 2000 to 2001, general manager of SOFTCORP from 2001 to 2004 and has been part of Santander Group since 2004, with responsibility, until 2015, for our Cards and Merchant Acquisition segment. He is also a member of the board of directors of Super Pagamentos e Administração de Meios Eletrônicos S.A.sustainability.
Ede Ilson Viani. Mr. Viani is Brazilian and was born on September 5, 1967. He holds a degree in Accounting and an MBA in Finance from IBMEC Instituto Brasileiro de Ensino e Pesquisa - Insper.Mercado de Capitais. He was an auditor at Banco Itaú S.A. from 1986 to 1990 and a senior auditorworked at BankBoston S.A., where he workedS.A for 1716 years acting in sequence as Officera Senior Auditor, Credit Risk Management Superintendent, Head of Local Currency Loans and Products and Officer forHead of the banking sector aimed at small and medium companies.Small Business Segment. He joined Santander Brasil in 2007 as Officer for Small & Medium Companies Director and Medium Business Banking andfrom July 2010 to 2014 was the Officer responsible for Retail Banking Risk Management Director. From 2014 he acted as the Director responsible for Small & Middle, Government & Institution and Agribusiness and after that as Retail Banking Network Director up to December, 2019 when he was promoted and became Technology & Operations Vice President.
Elita Vechin Pastorelo Ariaz. Ms. Ariaz is Brazilian and was born on March 28, 1970. She holds a law degree from July 2010 to 2014.the University of São Paulo, a master’s degree in law (LL.M.) from Temple University – Pennsylvania and an extension from the Corporate Finance Special Program at New York University. She is a member of the Brazilian Bar Association and the New York State Bar Association. Between 1992 and 1996, she worked as an in-house lawyer at Tenenge – Técnica Nacional de Engenharia S.A.; between 1997 and 1998, she worked as a foreign associate at the law firm of Cameron & Hornbostel LLP in Washington, DC; between 1998 and 2001, she worked as an associate at the law firm of LeBoeuf, Lamb, Greene and MacRae, LLP, in New York, NY. Between 2002 and 2018, she worked as an in-house lawyer at Grupo Safra, having started as the head of legal support for Grupo Safra’s offshore operations. In her last six years at Grupo Safra she was also responsible for providing legal support for the operations of the investment banking division of Grupo Safra as well as for its asset management division. In 2018, she joined Santander Brasil where she served as Director responsible for the Business Legal Department – wholesale and retail until 2021. As one of our Officers, heExecutive Vice Presidents, she is currently responsible for our Companies and Institutions segment.Human Resources area.
Felipe Pires Guerra de CarvalhoJean Pierre Dupui. Mr. GuerraDupui is Brazilian and was born on September 23, 1968. He holds a bachelor’s degree in Economics and a specialization degree from Boston University. Currently he is responsible for Global Corporate & Investment Banking at Santander Brasil. From 1992 to 1998 he worked at the structured finance and trade finance department of Lloyds TSB Group in São Paulo and London. From 1998 to 2001 he worked at the structured finance department of Citigroup Brasil. From 2001 to 2004 he worked for BBVA Brasil in the debt capital markets department. From 2004 to 2006 he was a Corporate Finance Officer at Citigroup New York and São Paulo. He started his career in Santander Group in 2006, where he took charge of the Credit Markets department of Santander Brasil. From 2009 to 2012 he was responsible for Global Transaction Banking of Santander in Madrid. Mr. Dupui is also an Executive Officer of Banco Bandepe and Santander Cultural, a member of Curator Counsel at Fundação Santander and a member of the boards of directors of S3 Caceis Brasil DTVM S.A.
João Marcos Pequeno De Biase. Mr. De Biase is Brazilian and was born on October 12, 1967. He graduated in Economics from the Federal University of Rio de Janeiro - UFRJ. Before joining Banco Santander Brasil, Mr. De Biase worked at Banco Itaú BBA between 2008 and 2020, where he served as Global Head of Corporate and Investment Banking - CIB, Executive Director responsible for the commercial area and head of the bank’s origination team. From 2005 to 2008, he served as Director and Head of Sales and Global Market Coverage for Deutsche Bank. From 1998 to 2005, Mr. De Biase was Director of Investment Banking and Sales of fixed income products at Credit Suisse in São Paulo. From 1991 to 1998, he held various positions at Banco de Investimentos Garantia, including Head of the office located in Rio de Janeiro and Head of the Capital Markets area where he was responsible for the liquidation and back office of all Client Company Transactions. Mr. De Biase started his career in 1989 as a Trainee in the Economic Planning team at Petrobrás Comercial Internacional. Currently, Mr. De Biase holds the position of Executive Vice President of the Corporate segment of Banco Santander Brasil, responsible for serving larger and medium-sized companies, both national and multinational. At Santander since 2020, João was also Executive Director of the Corporate & Investment Banking area of the Global Corporate Banking segment.
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Patricia Souto Audi. Mrs. Souto Audi is Brazilian and was born on May 10, 1978. He15, 1968. She holds a degree in Production EngineeringBusiness Administration from Universidade Federal do Rio de Janeiro. Hethe University of Brasilia and a Specialization in Public and Government Management, National School of Public Administration from the Public Management National School (ENAP) in Brasilia. She was Proprietary Trader, Market MakerSecretary of Transparency and TraineeCorruption Prevention at Banco Citibank (Brasil) S.A. from 2001 to 2004; Executivethe Ministry of Transparency; INSS Benefits Director; ILO Coordinator (International Labor Organization) in Brazil; Secretary of Management at the Ministry of Planning, Budget and Management of the Treasury F/X Desk from 2002Federal Government and Secretary of the Economic and Social Development Council, a civil society body that gives advice to 2004; Proprietary Desk Senior Trader from 2005 to 2010; Head Trader from 2011 to 2014; and GCB Treasurer since 2011 atthe Presidency of the Republic of Brazil. She joined Santander Brasil. Currently, he is an Officer andBrasil in August 2018 as the head of Institutional Relations. Nowadays, she holds the position of Executive Vice President, where she is responsible for our Markets Treasury Desk (Localinstitutional relations and International Prop. Trading & Market Making) and for the ACPM, Analysis, Quants and Tools and Controls areas under the GCB Structure.sustainability.
Flávio Tavares ValadãoVanessa de Souza Lobato Barbosa. Mr. ValadãoMs. Lobato is Brazilian and was born on JulyDecember 24, 1968. She holds a bachelor’s degree in Business Administration from Pontifícia Universidade Católica de Minas Gerais, and a specialization degree in Marketing from Universidade Federal de Minas Gerais. From 1990 to 1995 she served as Marketing Local Manager at Banco Nacional, with responsibility for the sponsorship budget and micro marketing activities focused on the retail network. She also worked at Unibanco, in Recife, from 1995 to 1999, where she was responsible for different branches in the city of Recife. In 1999 she started at Santander Brasil, where she worked as General Manager of the Recife branch office. From 2001 to 2006 she served as Local Superintendent, where she was responsible for one of the retail’s locals, with their head office in Belo Horizonte, covering the states of Minas Gerais, Goiás, as well as Brasília, and the states of the Northeast Region. From 2006 to 2013, Ms. Lobato became an Executive Superintendent of our branch network, with responsibility for one of our retail branches in Brazil, specifically the “SPI Centro Sul” branch based in Campinas, State of São Paulo, covering important cities such as Campinas, Jundiaí, Sorocaba, Piracicaba, Limeira and Americana, totaling 258 branches in 94 cities. From 2013 to 2020, she led, as one of our Executive Vice Presidents, the Vice President of Human Resources and is currently the Vice President responsible for Retail.
Adriana Marques Lourenço de Almeida. Ms. Almeida is Brazilian and was born on October 4, 1972. She holds a degree in Business Administration from Fundação Armando Álvares Penteado - FAAP and an MBA from Columbia Business School, in the United States. She has more than 25 years of experience in national and multinational banks. From 2017, she served as an executive at Banco Santander (Brasil) S.A., where she was responsible for managing business with multinational companies as well as with the automotive sector. Since 2019, she led the Global Transaction Banking division (cash management, supply chain finance and local currency loans) for the wholesale bank at Banco Santander (Brasil) S.A.
Alexandre Guimarães Soares. Mr. Soares is Brazilian and was born on August 27, 1969. He has a degree in engineering from the Escola Mauá de Engenharia and has an extension in economics from the Faculdade de Economia e Administração / USP and a post-graduate degree in marketing from the Escola Superior de Propaganda e Marketing. Prior to joining Santander Brasil, Mr. Soares held management positions at Banco Safra, BankBoston Banco Múltiplo S.A. and Banco Real S.A. He is an alternate member of the deliberative councils of the Câmara Interbancária de Pagamentos and TECBAN – Tecnologia Bancária. As one of our officers, Alexandre is Vice President responsible for Manufacturing and Technology & Operations.
Amancio Acúrcio Gouveia. Mr. Gouveia is Brazilian and was born on March 31, 1963. He holds a degree in Accounting from the Universidade Santa Úrsula. As one of our officers, he has been acting as a controller working in the Accounting and Fiscal management areas of our companies since 2001. He was an Audit Manager for KPMG until 1991 and an accounting manager of Unibanco – União de Bancos Brasileiros S.A. from 1991 to 1999, and assistant superintendent of BankBoston Banco Múltiplo S.A. from 1999 to 2001. He is Chief Executive Officer of Banco Bandepe S.A. and Executive Officer of Santander Leasing S.A. Arrendamento Mercantil, Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., Santander Capitalização S.A., Aymoré CFI, Evidence Previdência S.A. and Sancap Investimentos e Participações S.A. He is also Administrator of Santander Brasil Administradora de Consórcio Ltda. He also serves as a member of the Fiscal Council of the Brazilian Federation of Banks, of the National Federation of Banks, of the Brazilian Institute of Banking Science and of the Banks Union in the states of São Paulo, Paraná, Mato Grosso, Mato Grosso do Sul, Acre, Amazonas, Pará, Amapá, Rondônia and Roraima. He has professional experience as a teacher at ABEU—Faculdades Integradasm, as Professor III, between March 1991 and February 1999, as a teacher for General Accounting under the accounting degree curriculum; at the Faculdade de Direito Cândido Mendes, as a substitute professor between March of 1997 and December of 1998, where he taught Elements of Accounting under the law degree curriculum; and at the Sponsor of Seminars promoted by IOB and IBRACON, in the year 1990, where he taught as part of the Training Programs of Accounting for Non-Accountants.
Ana Paula Vitali Janes Vescovi. Mrs. Vescovi is Brazilian and was born on April 8, 1969. She has a degree in Economics from Universidade Federal do Espírito Santo, a Master in Public Administration from Brazilian School of Public Administration at Fundação Getúlio Vargas in Rio de Janeiro/RJ, a Master in Public Economics from Universidade de Brasilia/DF and a postgraduate degree in Public Policies and Government Management from the National School of Public Administration/DF. Since 1999, she has worked in public service, with an emphasis on fiscal and financial management and public policies, with executive experience in the three spheres of government. She served as Chairman of the Board of Directors of Banco do Estado do Espírito Santo – BANESTES, Instituto de Resseguros do Brasil and Caixa Econômica Federal, and is a member of the Board of Directors of Eletrobras. Nowadays, she serves as a member of the Board of Directors of Ultrapar. She held the positions of Secretary of the National Treasury and Executive Secretary at the Ministry of Economy, between 2016 and 2018. As one of our officers, she is responsible for the macroeconomic research area.
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André de Carvalho Novaes. Mr. Novaes is Brazilian and was born on April 14, 1969. He holds a degree in Economics from the Universidade Federal Fluminense and an executive MBA from BPS Business School (São Paulo and Toronto). From 1993 to 1997, he served as Products Coordinator in Santander Brasil, where he was responsible for credit proposals analysis, and in several areas at Aymoré CFI and in posts as commercial operator and credit and collection chief. In 1996, he served as coordinator of products in São Paulo. From 1997 to 2001, he served as commercial manager. From 2002 to 2008, he served as Regional Manager. From 2008 to 2012, he served within Santander Brasil as the person responsible for the Other Assets segment in Aymoré CFI. Since 2012, he has served as Executive Superintendent in Santander Brasil, with responsibility for Aymoré CFI’s Vehicle Partnerships. In December 2012, he became the Commercial Coordinator of Aymoré CFI, with responsibility for the Commercial and Partnerships team. Currently, Mr. Novaes is head of Santander Financiamentos and reports to the CFO. He is also Executive Officer of Aymoré CFI, Vice Chairman of the Board of Directors and Vice President Officer of Webmotors S.A., and a member of the Board of Directors of Banco Hyundai Capital Brasil S.A., Santander Auto S.A. and Loop Gestão de Pátios S.A. He is also a member of the Board of Directors and Institutional Relations Officer of Banco RCI Brasil S.A.
André Juaçaba de Almeida. Mr. Juaçaba de Almeida is Brazilian and was born on September 27, 1974. He holds a degree in economic sciences from Universidade Candido Mendes. Prior to joining Santander Brasil, Mr. Juaçaba de Almeida held positions in structured transaction at Citibank and at Banco Goldman Sachs in the commercial area of Foreign Exchange Derivatives, Interest and Commodities. As one of our officers, Mr. Juaçaba de Almeida is responsible for the relationship with large corporations: Banking, as well as our Investment Banking.
André Rosenblit. Mr. Rosenblit was born May 1, 1963.1969. He holds a degree in business administration from the Fundação Álvaro Penteado. Prior to joining Santander Brasil, Mr. Rosenblit held management positions at Banco Safra S.A. and Banco Deutsche. Currently he is also an officer of Santander Corretora de Câmbio e Valores Mobiliários S.A. As one of our officers, Mr. Rosenblit is responsible for the Equities Area.
Carlos Aguiar Neto. Mr. Aguiar is Brazilian and was born on March 5, 1971. He holds a degree in Electrical Engineering from the Escola de Engenharia MauáFundação Armando Alvares Penteado with a specialization in Business Administration from Fundação Getúlio Vargas. From 1996 to 2007, he worked as Treasurer of Cargill Agrícola S.A., an Accountingofficer of Cargill Previdência and Finance Degree from IBMEC and a Master’s Degree in Electrical Engineering from the University of Lille in France. He was Corporate FinanceExecutive Officer of Banco ParibasCargill S/A. From 2007 to 2010, he was CFO and Investor Relations at BrasilAgro – Cia Brasileira de Propriedades Agrícolas S.A. From 2010 to 2015, he was CEO at Macquarie Crop Partners LP at Macquarie Bank, responsible for funds that invest in farms and grain production in Brazil and Australia. Mr. Aguiar is also Executive Officer of ABAG (Associação Brasileira do Agronegócio), a member of COSAG (Conselho Superior do Agronegócio da Fiesp) and Executive Officer of FEBRABAN (Federação Brasileira de Bancos) on the Rural Credit Sector Commission. Since 2015, he has been responsible for the agribusiness area of Santander Brasil. He is also a member of our Sustainability Committee and Executive Officer of Banco Bandepe S.A.
Cassio Schmitt. Mr. Schmitt is Brazilian and was born on April 23, 1971. He holds a degree in Economics from 1990the Universidade Federal do Rio Grande do Sul, a master’s degree in Corporate Economics from Fundação Getúlio Vargas and an MBA from the Sloan School of Business, Massachusetts Institute of Technology. He was an Economist of Banco de Crédito Nacional S.A. and of UNIBANCO – União de Bancos Brasileiros S.A. from 1995 to 19981999. He was an associate of the Leveraged Finance team of UBS Warburg in 2000 in New York, Project Finance Superintendent of UNIBANCO from 2001 to 2003 and joinedCorporate Banker of UNIBANCO’s Representative Office in New York from 2003 to 2004. He became responsible for the project finance team of Santander Brasil from 2004 to 2010, adding the areas of acquisition finance and syndicated lending. From 2011 to 2012, he was the Director responsible for the Wholesale Risk Department, and from 2013 to 2014 he was responsible for Global Transaction Banking, including Cash and Trade. From 2015 onwards, he led several businesses in the Retail Banking, such the Credit Recovery Business and the Personal and SMEs Credit Products, including Payroll Loans, Agro and Mortgage Loans, and the Innovation team. Currently, Mr. Schmitt serves as our officer in charge of the Retail Corporate Business, Government and Institutional clients. He was member of the Board of Directors of Banco ABN AmroOlé Consignado S.A. and Super Pagamentos e Administração de Meios Eletrônicos S.A. (“Superdigital”).
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Celso Mateus de Queiroz. Mr. de Queiroz is Brazilian and was born on September 19, 1974. He holds a degree in Business Administration from UNIB – Universidade Ibirapuera and a postgraduate degree in marketing administration from Fundação Armando Alvares Penteado, an MBA in business management from Fundação Getúlio Vargas and an MBA in Business Management from INSPER. Prior to joining Santander Brasil, de Queiroz held management positions at Banco Real in 1998.S.A. As one of our officers, Mr. de Queiroz is responsible for Rede SP Capital.
Claudenice Lopes Duarte. Mrs. Duarte is Brazilian and was born on July 25, 1972. She holds a degree in Journalism from Faculdades Integradas Alcântara Machado with a specialization in Business Communication from Fundação Getúlio Vargas. From 1996 to 2009, she worked at GWA Comunicação Integrada as Senior Director. From 2009 to 2010, she was Executive Manager of Press Relations at Santander Brasil. From 2011 to 2012, she was Superintendent of Relations with the Press and Institutional Relations at Santander Brasil and, as one of our officers, she is currently responsible for Internal and External Communications at Santander Brasil.
Daniel Fantoni Assa. Mr. Assa is Brazilian and was born on December 12, 1975. He holds a degree in Business Administration from Fundação Alberto Alvares Penteado and an MBA from Instituto Brasileiro de Mercado de Capitais. He started his career at Banco Real working at Corporate and Investment Banking and was responsible for structuring the areas of the commercial bank and investment bank. At Santander Brasil, between 2008 and 2011, he was Executive Superintendent of Corporate & Investment Banking; between 2011 and 2014, he was Executive Superintendent of Credit Recovery; between 2015 and 2016, he was Executive Superintendent of Corporate; and between 2016 and 2019, he was Executive Superintendent of Wholesale Risk. As one of our officers, he is responsible for the Corporate Risks area.
Francisco Soares da Silva Júnior. Mr. Soares is Brazilian and was born on January 23, 1970. He holds a degree in accounting from the Centro Universitário do Maranhão and in Administration from Faculdade Natalense. He completed specialization courses in Human Resources from Fundação Getúlio Vargas. He worked at Banco Santander (Brasil) S.A. from 2001 to 2017, holding several management and superintendent-level positions at the Company. In 2017 he assumed the position of Chief Executive Officer at Banco Olé Consignado, where he served until 2020. Currently, as one of our Executive Officers, he is responsible for the Corporate Finance areaexternal distribution and sales channels.
Franco Luigi Fasoli. Mr. Fasoli is Brazilian and was born on September 18, 1975. He holds a degree in Business Administration from Fundação Armando Alvares Penteado and a postgraduate degree in Financial Economics from Universidade de São Paulo. Working since 1997 with financial institutions, he started his career at Santander Brasil.Brasil as Senior Manager of Products and Marketing. He worked for 13 years in Argentina, Italy and Spain, where he was responsible for multinational companies and later for Trade Finance & Correspondent Banking & Cash Management for Latin America. Since 2014, back in Brazil, he has been working in the Companies Market and in the Retail Network. As one of our officers, he is currently responsible for Small & Medium Companies.
Geraldo José Rodrigues Alckmin Neto. Mr. Rodrigues is Brazilian and was born on September 8, 1981. He graduated in Business Administration from Pontifícia Universidade Católica de São Paulo. At Santander Brasil he served as Executive Superintendent since 2013. Between 2008 and 2013 he was Executive Superintendent of Insurance at Banco Santander México, attending the “Programa de Futuros Diretivos.” From 2004 to 2008, he served as Relationship Manager and Foreign Trade. As one of our directors, he is currently responsible for the development of our investment business, as well as high-income clients and Santander Capitalização S.A.
Germanuela de Almeida de Abreu. Mrs. de Abreu is Venezuelan and was born on December 6, 1975. She holds a degree in Economics from Universidad Católica Andrés Bello – Caracas/Venezuela with an MBA in Human Resources from USP (Universidade de São Paulo – São Paulo). She completed the Development Program for Board Members by Fundação Dom Cabral. She served at Banco da Venezuela (Grupo Santander Caracas) as Senior Risk Analyst from 1999 to 2001. At Santander Brasil, she was Senior Sales Support Manager between 2001 and 2002, Human Resources Training Consultant between 2002 and 2003, HR Risk Consultant between 2003 and 2006, Executive Manager of HR between 2006 and 2008 and Superintendent of Human Resources between 2008 and 2013. At Banco Santander (Brasil) S.A., she served as Executive Superintendent between 2013 to 2018, where she was responsible for the strategy of Performance Management, Career, Compensation, Benefits and Budget and Expenditure Management for the Bank, and in 2018 she was elected an Officer in our Human Resources area.
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Gilberto Duarte de Abreu FilhoFilho.. Mr. Abreu is Brazilian and was born on August 7, 1973. He holds a degree in Industrial Engineering from the Universidade deUniversity of São Paulo and a MBA from the Massachusetts Institute of Technology in Massachusetts.Cambridge, MA. Before joining Santander Brasil, Mr. Abreu was a Senior Managersenior manager at McKinsey & Company, leadingmanaging projects in both the financial and retail areas. As one of our Officers, he is currently responsible for the Mortgage, Insurances and Fund-raising Businesses and the Individuals segments. He is also the Chief Executive Officer of Webcasas S.A. and Sancap Investimentos e Participações S.A., and Executive Officer of Banco Bandepe S.A.,
Gustavo Alejo Viviani. Mr. Alejo is Argentinian and was born on August 26, 1975. He holds a degree in Economics from Pontifícia Universidade Católica of São Paulo and a CFA (Chartered Financial Analyst) from the CFA Society of the United States. He completed academic extension courses in Business Administration at the University of California, Berkeley, and Advanced Corporate Finance at the London Business School. From July 1997 to March 1999, he was a Junior Research Analyst of Shares and Fixed Income at Citibank (Brasil). He has served at Santander Brasil since 2000, where he has been a Credit Consultant, a Trader, a Senior Relationship Manager, the Superintendent of Corporate and Investment Banking, the Managing Director of our Corporate and Investment Banking Division and the Director responsible for the Credit and Recovery Division in the Wholesale Bank. He currently serves as our Retail Chief Financial Officer and is responsible for the Retail Collections Division.
Gustavo de Souza Fosse. Mr. Fosse is Brazilian and was born on May 14, 1972. He holds a degree in Information Systems Management from União Educacional de Brasília and an MBA in IT Governance and Financial Consulting and Capital Markets. He was an employee of Banco do Brasil for 34 years, holding the positions of Chief Technology Officer and Vice President of ABECIPBusiness Development and Technology. In 2021 he was a member of the boardsBoard of directorsDirectors of CIBRASEC, Zurich Santander Brasil Seguros e PrevidênciaCielo S.A. As one of our officers, Mr. Fosse is responsible for Retail and Zurich Santander Brasil Seguros S.A.
Financial.
Igor Mario Puga. Mr. Puga is Brazilian and was born on November 10, 1981. He holds a degree in Social Communication from the Casper Líbero School of Social Communication and a degree in statisticsStatistics and applied researchApplied Research from the Institute of Mathematics and Statistics of the University of São Paulo. Currently, he is adjunct professor of the Alvares Penteado School of Commerce Foundation. After joining IG - Internet Group of Brazil (2000 to 2001) and Terra Networks (2002), he was JWT ‘sJWT’s Digital Intelligence Manager from 2003 to 2004 and Africa Propaganda’ s digital media managerPropaganda’s Digital Media Manager (from 2005 to 2006). From 2007 to 2014, as founding partnerFounding Partner and general officer,General Officer, he served in the ID\TBWA group. Between 2014 and 2016, he served as Chief Interactive Officer and then Vice President Officer of Integration and Innovation of the DM9DDB. Mr. Puga has joined Santander Brasil in 2016, as the Officerofficer responsible for the Marketing department.Department. He was the youngest ever winner of the Caboré Award, and nowadays, in addition of being CMO of Santander, he is Vice President of CENP.
Jean Paulo Kambourakis. Mr. Kambourakis is Brazilian and was born on May 9, 1980. He holds a degree in Electrical Engineering from Universidade de São Paulo and a degree in Business Administration from Fundação Getúlio Vargas. He started his career at Banco Real, where between 2004 and 2006, he was trainee, Senior Project Analyst and Project Consultant. He has been at Santander Brasil since 2006, where he has been Superintendent of Projects; Executive Superintendent of Organization and Efficiency; Executive Superintendent of Planning; and Executive Superintendent of Planning, Expenses and Efficiency. As one of our officers, he is currently responsible for the Securitization area. He is also Executive Officer of Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.
José Teixeira de Vasconcelos Neto. Mr. Neto is Brazilian and was born on March 8, 1975. He received degrees in business administration from the University of Pernambuco and in economics from the Catholic University of Pernambuco. He completed specialization courses in finance at the University of Pernambuco, received an MBA in marketing from Fundação Getúlio Vargas, and an MBA in retail from Fundação Getúlio Vargas. Previously, he was the general manager of Banco Citibank S.A. from 2000 to 2003, and a commercial superintendent and executive superintendent at Banco Citibank S.A. - Consumer Finance Unit (Citi Financial) from 2003 to 2007. He was also regional superintendent of Santander Brazil from August 2007 to July 2010, and, from August 2010 to September 2015, was an executive superintendent of the Banco HSBC Brasil network. He has been responsible for our network of branches since 2015, and, in January 2019, was made responsible for the Rede Direct area.
Leandro Alves. Mr. Alves is Brazilian and was born on January 5, 1984. He holds a degree in computer engineering from the Centro Universitário FIEO and a postgraduate degree in administration and Risk Management from Insper. Prior to joining Santander Brasil, Mr. Leandro held data management positions at Banco Real ABN AMRO. As one of our officers, Mr. Alves is responsible for Natural Person and Financial Risk.
Luciana de Aguiar Barros. Ms. de Aguiar Barros is Brazilian, and was born on January 3, 1980. She holds a degree in statistics from the Universidade de Campinas, a postgraduate degree in business administration from Fundação Getúlio Vargas and an MBA in credit risk management from INSPER. She has been a member of the Santander Group since 2010, having several roles in our credit area. As one of our officers, Ms. de Aguiar Barros is currently responsible for Consigned Credit area.
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Luis Guilherme Mattos de Oliem Bittencourt. Mr. Bittencourt is Brazilian and was born on December 4, 1973. He holds a degree in Computer Engineering from the University of Campinas. He started his professional career in Banco Itaú-Unibanco serving in the areas of Business Intelligence, Electronic Channels and CRM, where he acquired 14 years of experience. From 2010 to 2012, in Banco HSBC Brasil, Mr. Bittencourt served in the areas of Distribution, Digital Channels and Customer Relationship Management, or “CRM.” Since 2013, Mr. Bittencourt serveshas served in Santander Brasil, initially as Executive Superintendent of CRM, Digital Channels and Management Information System, Customers Intelligence and CRM, and currently serves as Officerthe officer responsible for Commercial Intelligence and Trade Marketing.
Customers’ Service.
Luiz Masagão Ribeiro FilhoFilho.. Mr. Masagão is Brazilian and was born on September 1, 1976. He holds a degree in Business Administration from the Fundação Getúlio Vargas and from the LEAD Program from IE Business School.Getulio Vargas. He started his career in 1997, serving as Operator of Interest Rates Options in Brazil at Banco Citibank S.A. until 2005. He was the Senior Operator of Foreign Exchange Options from February 2005 to September 2005 in ING Bank N.V. Back toat Banco Citibank S.A., he was Executive Manager from 2005 to 2008 and Superintendent from 2008 to 2009. HeMr. Masagão served as Executive Superintendent of Fixed Income Sales from 2009 to 2010 inat Morgan Stanley and then joined Santander Brasil’s team, initially serving as Chief of the GCB/Corporate Sales team, from 2010 to 2014, and at last as Brazil’s Sales Executive Superintendent. CurrentlyOn November 2018, he became the Treasurer of Santander Brasil, responsible for treasury operations, including Proprietary Trading, Market Making, Sales and Products. He is also Executive Officer of Banco Bandepe S.A. and Santander Corretora de Seguros, Investimentos e Serviços S.A.
Marcelo Augusto Dutra Labuto. Mr. Labuto is Brazilian and was born in Belo Horizonte, in the State of Minas Gerais on September 3, 1971. He holds a Bachelor’s Degree in Business Administration from UNB (Universidade de Brasília) with an MBA in Marketing from COPPEAD UFRJ (Instituto de Pós-Graduação em Administração e Pesquisa da Universidade Federal do Rio de Janeiro). He served as Vice President of Retail Business at Banco do Brasil between 2017 and 2018 and CEO between 2018 and 2019. Previously, Mr. Labuto was CEO of BB Seguridade Participações S.A; Officer of Insurance, Open Pension Plans and Capitalization; Loans and Financing Officer; General Manager at the Affiliated Entities Governance Unit and General Manager at the Strategic Partnerships Unit at Banco do Brasil. Mr. Labuto was a member of the Board of Directors of BB Seguridade Participações S.A.; Banco Votorantim; Brasilcap Capitalização S.A.; IRB Brasil Resseguros; Elo Participações S.A.; Companhia Brasileira de Soluções e Serviços; BB Mapfre SH1 Participações S.A.; Mapfre BB SH2 Participações S.A.; Brasilprev Seguros e Previdência S.A.; CIELO S.A.; Vale S.A.; Brasildental Planos Odontológicos; Alelo S.A; Movera S.A; Livelo S.A; and Banco CBSS. He served as a member of the Advisory Committee of Brasilprev Seguros e Previdência; a member of the Executive Committee of Grupo Segurador BB and Mapfre; a member of the Innovation Committee of CIELO S.A.; and a member of the Compliance and Risk Committee of Vale S.A. As one of our officers, he was responsible for the departmentsNatural Persons Area, in Retail during 2020 and 2021 and currently leads our distribution channels.
Maria Teresa Mauricio da Rocha Pereira Leite. Ms. Pereira Leite is Brazilian and was born on June 21, 1967. She holds a degree in finance from Fundação Armando Alvares Penteado. Prior to joining Santander Brasil, Ms. Pereira Leite held management positions at ABN AMRO Bank N.V., Royal Bank of salesScotland Business and managementDeutsche Bank. She was also CEO & Head of Corporate Banking at Deutsche Bank responsible for corporate banking products and relationships with multinational subsidiaries. Ms. Pereira Leite joined Santander Brasil in 2021 as a Statutory Director of the markets area products, including foreign exchange transactions, derivatives and fixed income products to all customers segments of Santander Brasil (retail, corporate and GCB).Corporate Banking division.
Marilize Ferrazza Santinoni. Mrs. Santinoni is Brazilian and was born on November 20, 1965. She holds a degree in Business Administration from the Universidade de Ijui-RS and an MBA of Business Management from Fundação Getúlio Vargas, Passo Fundo-RS. She has been an employee of Banco Santander (Brasil) S.A. since 1984, where she worked at several roles both in Management and Regional Superintendence. Since 2016, she has been acting as Executive Network Superintendent, and currently, as one of our officers, she is responsible for the banking network of Paraná and the northern region of Santa Catarina for Banco Santander (Brasil) S.A.
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Marcelo MalangaMurilo Setti Riedel. Mr. MalangaRiedel is Brazilian and was born on May 18, 1969.17, 1963. He holds a degree in Business Administrationbusiness administration from the University of São Paulo – FEA, and an MBA from the University of São Paulo – FEA. Before joining Santander, Mr. Riedel held management positions at HDI Seguros S.A, acting as Technical Director and Chief Executive Officer. From 2019 to 2022 he was chairman of the Board of Directors of Santander Auto S.A.
Paulo César Ferreira de Lima Alves. Mr. de Lima Alves is Brazilian, born on October 18, 1968. He holds a degree in economics from the Universidade de SãFortaleza – UNIFOR and a postgraduate degree in Financial Management and Controllership from the Fundação Getúlio Vargas. Prior to joining Santander Brasil, Mr. Paulo held management positions at Banco ABN AMRO Real S.A. As one of our officers, he is currently responsible for Northern Network Banking.
Paulo Sérgio Duailibi. Mr. Duailibi is Brazilian, born on September 28, 1966. He holds a degree in business administration from the Universidade Federal de Minas Gerais and a master’s degree in Finance and Accountingbusiness administration from Pontifícia Universidade Católica – PUC-SP. He has 25 years of experience in the financial markets. He served as Division Manager at Banco do Brasil S.A. from 1987 to 2001. From 1998 to 2001, he was the responsible for the Governments Business’ strategy in Brasília, serving as PROEX manager. In 2001, as Santander Brasil’s employee, he was responsible for building business relationships with state and local governments until 2004. From 2006 to 2009, he served as the superintendent responsible for the management and administration of several lines of business of Santander Brasil in the State of Rio de Janeiro. From 2009 to 2012 he was responsible for the overdue assets collection of Santander Brasil, Banco Real and Aymoré CFI, in the retail and wholesale segments. From 2012 to 2013, he was responsible for the Companies segment. Since 2013, he has served as a Branches Executive Superintendent.
Marcelo Zerbinatti. Mr. Zerbinatti is Brazilian and was born on February 5, 1974. He holds a degree in Business Administration from Faculdades Metropolitanas Unidas, a specialization degree in Negotiation from Fundação Getúlio Vargas and holds a Master’s Degree in Planning from Pontifícia Universidade Católica de São Paulo. He workedVargas. Prior to joining Santander Brasil, Mr. Duailibi held management positions at Banco BradescoSafra S.A. from 1988 to 1992 as Head of Service, at Bank Boston from 1992 to 1994 as Coordinator of Foreign Exchange, and atBankBoston Banco Real from 1994 to 2006 as Project Superintendent. From 2006 to 2008 he served as our Senior Organization Executive Superintendent responsible for Process and Management of Changes. In 2008 he became responsible for the coordinationMúltiplo S.A. He was Vice-Chairman of the Integration Office,Board of Directors and in 2011, he became an Officer, responsible for the Organization, Technology and Processes Department. As from October 2013, he became the Officer responsible for the Strategic Planning Department. As from 2015, he became the Officer responsible for the Quality and Customer Experience Department.
Marino Alexandre Calheiros Aguiar. Mr. Aguiar is Portuguese and was born on May 14, 1971. He graduated with a degree in Business Administration from the Technical University of Lisbon and an MBA in Information Technology and Internet. Mr. Aguiar started his career in 1994 as a systems analyst at Accenture in Portugal, responsible for Functional Design and Technical Computer Systems. From 1996 to 1999 he had the task of coordinator and in 1999 became manager responsible for providing consulting and technology services to banking institutions in Portugal and Brazil. He held the position of Senior Manager from 2002 to 2006, and was an Officer from 2006 to 2008, with responsibility for developing the commercial and relationship strategyEffective Member of the insurance segment. Between 2008 and 2010, he worked for CPM Braxis as an Officer, with responsibility for the technology program of a major financial institution in Brazil. In 2010, he was a statutory officer at Accenture Brazil, with responsibility for technology services to the financial industry in Latin America. He is currently one of our Officers, and is responsible for our technology area in the Vice Presidency of Proceedings, Technology and Operations unit.
Mario Adolfo Libert Westphalen. Mr. Westphalen is Brazilian and was born on July 9, 1968. He holds degree in Electrical Engineering from the University of Brasília. He started his career at Telecommunications Market where he served for more than five years as Officer of Autotrac S.A., Qualcomm Inc. and Piquet Participações. In 1998, he served as Special Advisor to the Ministry of Development, Industry and Trade of Brazil. From 1999 to 2001, he held the role of Senior Consultant at K2 Achievements Consultoria. From 2001 to 2003 he served as Executive Officer and partner of Concrete Solutions, a company which provides IT services. In 2004, he joined Santander Brasil, where he served as SuperintendentDeliberative Council of the Property and Facilities area until 2007, and then as Senior Executive Superintendent of corporate resources, until 2009. From 2010 to 2013 he served as Officer of Operations at Santander Global Facilities, in the U.S., being responsible for the implementation and operation of that company in the U.S.Associação Brasileira das Empresas de Crédito Imobiliário e Poupança. As one of our Officers he is responsible for cost management, organization and efficiency departments.
Nilton Sergio Silveira Carvalho. Mr. Carvalho is Brazilian and was born on January 1, 1957. He holds a degree in Electric Production Engineering from the Faculdade de Engenharia Industrial. Mr. Carvalho has been engaged in the banking business since 1981. From 1981 to 2005 he worked at Unibanco in several departments. From 2005 to 2008, he served as Operations Officer of Olé Financiamentos. From 2008 to September 2009, he was responsible for the Organization department at Santander. From October 2009 to October 2012 he was responsible for the operations structure of Aymoré CFI. Currently, as an Officer of Santander Brasil,officers, he is responsible for the Operations department,NI & Financial Technology Platform and he is also Executive Officer of Aymoré CFI, Banco Bandepe S.A., Santander Capitalização S.A., Santander Finance Arrendamento Mercantil S.A., Santander Leasing S.A. Arrendamento Mercantil and Evidence Previdência S.A., Deputy Director of Banco RCI Brasil S.A. and Tecnologia Bancária S.A. – TECBAN, a member of the board of directors of Webmotors S.A. and administratorhas been director of Santander Brasil Administradora de Consórcio Ltda.
Rafael Bello Noya. Mr. Noya is Brazilian and was born on October 19, 1977. He holds a degree in Business Administration from Universidade de São Paulo and from LEAD Program from IE Business School. He started his career in Citibank, in the division of commercial operations and finance, as analyst and negotiator, from 1996 to 2001, when he joined the local and international risk distribution area, with responsibility for the creation and implementation of new products during the period from 2001 to 2003. He then served as senior negotiator, from 2003 to 2005, and then as Superintendent from 2005 to 2007. He joined Santander Brasil in 2007, and was an Assistant Superintendent from 2007 to 2015, with responsibility for customer coverage in the following sectors: real estate, logistics, aviation, cellulose and paper, industry, cement, construction and infrastructure, steel, energy, petrochemistry and construction materials. Currently, he is an Officer with responsibility for generating local and international capital markets, risk syndication, projects and acquisitions financing and capital and assets structuring. He is also Chairman of the board of directors of BW Guirapá I S.A.
Holding Imobiliária since 2020.
Ramón Sanchez Díez. Mr. DíezSanchez is Spanish and was born on October 29, 1968. He holds a bachelor’s degree in Economics from the Universidad Autónoma de Madrid and has completed an Advanced Management Program at the Wharton School of Business at the University of Pennsylvania. He is a Certified Regulatory and Compliance Professional (CRCP) and a Certified Anti-Money Laundering Specialist (CAMS). He served as a Financial Analyst and Portfolio Manager for Santander Brasil’s New York branch from 1992 to 1997, and as an Officerofficer for Strategy and Analysis for Latin American banks at Santander Spain in Madrid from 1997 to 2003. He was an Officerofficer for Strategy and Investor Relations for Santander Brasil from 2004 to 2006, Head of Customer Acquisition from 2007 to 2009,2009. He was in charge of our retail banking channels (call center, internet, mobile and ATM) from 2009 until 2011 and, before his current position, he was the Head of Retail Commercial Planning and Communication. Mr. Díez was Presidentpresident of the Spanish Chamber of Commerce in Brazil between 2006 and 2009. As one of our Officers,officers, he is responsible for our compliance department.Compliance Department. He also serves as Executive Officer of Banco Bandepe S.A. and Santander Corretora de Seguros, Investimentos e Serviços S.A.
Ramon Sanchez Santiago. Mr. Ramon Sanchez Santiago is Spanish and was born on May 25, 1969. He graduated in Law from the University of Salamanca, Spain. From 2000 to 2010, he was Head for Internal Audit at different Banks of Santander Group (Puerto Rico, Chile, SCF). Between 2010 and 2011, he was Project Leader of the Santander Group, responsible for the project to reduce the Risk Weighted Assets (RWA) throughout the Group. He was also Head of Internal Audit at Santander UK from 2011 to 2014. From 2015 to 2018, he served as Internal Audit Officer of the Santander Group for Capital and Solvency. As one of our Executive Officers, Mr. Santiago has been responsible for our Internal Audit area since September 2018.
Reginaldo Antonio Ribeiro. Mr. Ribeiro is Brazilian and was born on May 19, 1969. He holds a degree in Economics from the Universidade Estadual de Campinas, an Accounting degree from the Universidade Paulista and an MBA from the Fundação Instituto de Pesquisas Contábeis, Atuariais e Financeiras – FIPECAFI of the Universidade de São Paulo. He served as a manager for Arthur Andersen Consultoria Fiscal Financeira S/C Ltda. from 1990 to 2001.2001 rendering tax advisory services to Brazilian and multinational entities. He was also a member of the Fiscal Council of Companhia Energética de São Paulo and AES Tietê from 2002 to 2006. As one of our Officers, he is responsible for tax issues, planning strategiesaccounting rules and corporate reorganization processes. He also serves as Administrator of Aquanima Brasil Ltda. and Summer Empreendimentos Ltda., as Executive Officer of Santander S.A. –Atual Serviços Técnicos, Administrativos e de Corretagem de Seguros, Aquanima Brasil Ltda., Atual Companhia SecuritizadoraRecuperação de Créditos Financeirose Meios Digitais S.A., Santander ParticipaçõesBanco Bandepe S.A., Fundação Santander and Santander Global Cards & Digital Solutions Brasil Advisory Services S.A., and Norchem Participaçõesas Vice President Officer of Santander Corretora de Seguros, Investimentos e ConsultoriaServiços S.A.
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Ricardo Olivare de Magalhães.
Roberto de Oliveira Campos Neto. Mr. CamposOlivare is Brazilian and was born on JuneJanuary 26, 1979. He holds a degree in Statistical Mathematics from the Institute of Mathematics and Statistics of the University of São Paulo and holds a Master’s degree in Applied Statistics also from the Institute of Mathematics and Statistics of the University of São Paulo. An employee of Banco Santander (Brasil) S.A. since 2001, he has held several positions in the Company’s credit area. In 2008 he held the position of CRM Deputy Director at Banco Santander México and as Director of Analytical Marketing from 2010. In 2012 he returned to Banco Santander (Brasil) S.A. to assume the position of Executive Superintendent responsible for the credit recovery strategy. In 2017 he became Executive Superintendent of products and channels of Aymore Crédito, Financiamento e Investimento S.A. He currently holds a position as Statutory Director of Aymore Crédito, Financiamento e Investimento S.A. and Webmotors S.A.
Roberto Alexandre Borges Fischetti. Mr. Fischetti is Brazilian and was born on August 28, 1969.1975. He holds a degree in Economics and a specialization degree in Economics with a focus on Finance from the business school of the University of California, Los Angeles. He worked at Banco Bozano Simonsen from 1996 to 1999, where he served as Operator of Derivatives of InterestSão Paulo (Faculdade de Economia, Administração e Contabilidade (FEA), Universidade de São Paulo). Mr. Fischetti has acted in the Brazilian financial market and Foreign Exchange (1996), Operator of External Debt (1997), Operator of the Area of Stock Exchanges (1998) and Head of the Area of International Fixed Income (1999).banking industry since 1998. From 20001998 to 2003, he servedworked at Deutsche Bank as Head of the International Area and Fixed Income in Santander Brasil. InTrader, responsible for management interest rate and foreign exchange positions. From 2004 he served as Portfolio Manager of Claritas. He joined Santander Brasil in 2005 as Operator and in 2006to 2007, he was HeadSuperintendent of the Trading Desk. In 2010, he becameTreasury Products at Banco Real, responsible for the Proprietary Tradingstructuring of operations and Market Making Local & International.treasury products and coordination of the product team. Since 2007, Mr. Fischetti was Financial Executive Superintendent of Santander Brasil, responsible for the management of structural interest and exchange rate exposures, local and external liquidity management, and the pricing of commercial operations. As one of our officers, he is responsible for the ALM financial management. He is currently responsible for our treasury department.
also a member of the Board of Directors of Banco RCI Brasil S.A.
Robson de Souza Rezende. Mr. Rezende is Brazilian, and was born on January 24, 1967. He holds a degree in Statistics from UniversidadeAssociação - Salgado de Oliveira – RJ.de Educação e Cultura in Niteroi in the state of Rio de Janeiro and an MBA in Marketing from ESPM-SP. He startedbegan his career at Unibanco, where he servedworked between 1985 and 1999 in the Management of Agencies and later in the FormationHuman Resources Area working in Training and Development area focusedwith a focus on the BranchesAgencies of Unibanco and Chief Manager of the Branch Network.Unibanco. Mr. Rezende joined Santander Brasil in 1999. From 1999 to 2003, he served as a Superintendent of Human Resources Superintendent.Resources. From 2003 to 2008, he served as Regional Superintendent. From 2008 to 2010, he servedworked as Superintendent of Commercial Model Superintendent, a period inModels, during which time he participated in the Commercial Model Integrationintegration of the commercial model of Santander Brasil and Banco Real. He also led the Santander branch expansion project in Brazil for three years from 2010 to 2013. He was responsible for the Branch network in the state of Rio de Janeiro, managing approximately 290 branches and 3,700 employees in the region. As one of our officers, he is currently responsible for the Commercial Retail Network.
Rogério Magno Panca. Mr. Panca is Brazilian and was born on December 30, 1970. He holds a degree in Economics from the Universidade Católica de Santos, holds a postgraduate degree in Business Administration from Fundação Getúlio Vargas and an MBA in International Business from FEA-USP. He served as executive manager of structured operations by Banco do Brasil between 2008 and 2011. In the period from 2011 to 2013, he was Head of Large Corporate for Banco do Brasil and in 2014, became Head of the Governance Unit of Entities Linked to Banco do Brasil. Between 2015 and 2019, he was a member of the Board of Directors of Banco Digio S.A., Cateno S.A., Elo Serviços S.A., Livelo S.A., Alelo S.A. and Cielo S.A. During this period he was also officer of Banco do Brasil responsible for division of Means of Payment. Since 2019, he is a superintendent and an officer and member of the Board of Directors of Elopar. He joined Santander Brasil in 2019 and currently is one of our directors responsible for the area of Cards and Digital Payments.
Sandro Kohler Marcondes. Mr. Marcondes is Brazilian and was born on April 16, 1964. He graduated in Business Administration from Unicentro Paraná. He completed his Master Degree in Business Administration by Fundação Getúlio Vargas. At Santander Brasil since 2018, he served as Executive Superintendent Global Debt Financing. In 2018, he served as Executive Officer of Financing and Investor Relations at Neoenergia S.A. From 2005 to 2018 he served as Executive Officer at Banco do Brasil S.A. and also at Banco do Brasil S.A. from 1999 to 2004 he served as General Manager in Paris and Assistant General Manager. Currently he is the Officer responsible for Global Debt Financing structure, managing the Rio de Janeiro and Espírito Santo branch networks, directly managing approximately 330 branches.activities of Debt Capital Markets.
Ronaldo Wagner RondinelliSandro Mazerino Sobral. Mr. RondinelliSobral is Brazilian and was born on February 24, 1975. He holds a degree in Economics from the Universidade Presbiteriana Mackenzie with a specialization in Economic Sciences from the FEA USP and in Banking from the IBMEC-SP. An employee of Banco Santander (Brasil) S.A. since 2003, he has held various positions in the Company’s capital markets and trading area, being responsible for managing the portfolios of fixed income, inflation, accrual, FX and equities. Since 2017 he has been in charge of our trading desks.
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Sandro Rogério da Silva Gamba. Mr. Gamba is Brazilian and was born on August 2, 1973.31, 1975. He holds a degree in EconomicsCivil Engineering from FAAP – Fundação Armando Álvares Penteado, and in Business Finance from FIA USP. From 1994 to 1996, he served in Banco Fenícia S.A. as Junior Information Analyst. Between 1996 and 1997, he served in Banco Santos as Analyst of Planning and Control – Managerial Information. In 1997, he served in Banco Real and ABN AMRO Bank as Senior Analyst of Managerial Information. Between 1997 and 1999, he served as Assistant to the Vice-President – Financial Control Coordination in Banco Real and ABN AMRO Bank, where he was responsible for the coordination of the finance areas in several countries of Latin America. Between 1999 and 2000, he served as Latin America Regional Controller for Banco Real and ABN Amro Bank. Between 2000 and 2004, he served as Planning and Control Superintendent at Banco Real and ABN AMRO Bank, where he was responsible for the management of the MIS area, local results reports and Head Office of Banco Real/ABN AMRO. In 2004, he served as Executive Superintendent of Strategic Decisions Support at Banco Real and ABN AMRO Bank, where he was responsible for the management of the areas of Planning, Budget, local Results Reports and Head Office of Banco Real/ABN AMRO. Between 2004 and 2008, he served as Presidency and COMEX Advisory Executive Superintendent in Banco Real and ABN AMRO Bank, where he served as Secretary of the Executive Committee and Executive Board of Officers of Banco Real and Assistant of the Chief Executive Officer of the bank. He joined Santander Brasil in 2008 and served as Executive Superintendent (Aymoré CFI) between 2008 and 2015, with responsibility for the management of the areas of Products, Prices, Segments, Auto Financing at the Branches of
Santander Brasil, Planning and Partnerships with automobile manufacturers. Currently, he is responsible for our Universities segment and isUniversidade Mackenzie, an Executive Officer of Universia Brasil S.A.
Sérgio Gonçalves. Mr. Gonçalves is Brazilian and was born on August 7, 1956. He holds a post-graduate degree in EconomicsProduction Engineering from Universidade de São Paulo –USP and Real Estate Business from Fundação Armando ÁlvaresAlvares Penteado Sã– FAAP and MBA from Insper. At Gafisa S.A., from 1998 to 2004 he held positions like: engineer, coordinator and manager; from 2004 to 2007 he served as new business manager; from 2007 to 2011 he served as Director; from 2011 to 2014 served as Executive Officer and, at last, he served as CEO from 2014 to 2018. In addition, he served as member of the Board of Directors of Construtora Tenda from 2012 to 2014 and of Alphaville Urbanismo from 2017 to 2019. Currently he is the Officer responsible for Real Estate Business and Real Estate Credit platforms.
Thomaz Antonio Licarião Paulo, with an International Executive MBARocha. Mr. Licarião Rocha is Brazilian, born on March 2, 1977. He has a degree in advertising and marketing from the UniversidadeEscola Superior de São Paulo. Since NovemberPropaganda e Marketing. He has been part of the Santander Group since 2000, he has beenhaving several roles within the commercial area. As one of our Officers, andofficers, he is currently responsible for the Companies, Government & Institutions departments. He worked as Corporate Banking Officer for 16 years (from 1979 to 1994) at Banco Crefisul, associate of Citibank. From 1995 to 2000, he was Products Officer at Banco Nossa Caixa (now, Banco do Brasil S.A.).
Assets and Risks Platform.
Thomas Gregor Ilg. Mr. Ilg is Brazilian and was born on September 12, 1968. He holds a degree in Agricultural Engineering from the Universidade Estadual de Campinas, and a postgraduate diploma in Business Administration from the Fundação Getúlio Vargas. He has been engaged in the financial markets for almost 2630 years, including 15almost 20 years with Santander Brasil and 10 years with The First National Bank of Boston, where he first joined as a Traineetrainee in the Risks and Business areas. At Santander Brasil, he was responsible for the Corporate Banking Business until the beginning of 2007 when he joined our Treasury Division to develop an area designed to distribute derivatives to the Middle Market, Private Banking and Retail Business in general. At the end of 2008, he moved to the Credit Division to manage the Corporate Banking Risk Area,area, and now, as an Officer,currently he is responsible for our retail risks function. He is also deputy director of Banco RCI Brasil S.A. and administrator of F. Café Prestadora de Serviços Ltda.SMEs Retail Risks area.
Tiago Celso Abate.
Ulisses Gomes Guimarães. Mr. GuimarãesAbate is Brazilian and was born on March 14, 1971.June 12, 1980. He holds a degree in Mechanical Engineeringeconomics from ITA – Instituto Tecnológico de Aeronáuticathe Pontifical Catholic University and a postgraduate degree in finance from INSPER and an Executive MBA in FinanceRetail Management and Digital Business from IBMEC.FIA and FIAP, respectively. He started his career as trainee and, then, as an analyst at Citibank from 1994has worked for Grupo Santander since 2005, having several roles related to 1997. He was manager, then Executive Superintendent at Banco Real/ABN AMRO Bank from 1997 to 2007. Starting in 2007, he was an Officer of Santander Brasil, with responsibility for the Human Resources area from 2007 to 2012. From 2012 to 2015 he served in Santander Spain as Executive Superintendent in theretail area of compensation and mobility politics. Currently, back to Santander Brasil, he serves asthe Bank. As one of our Officers, with responsibilityofficers, he is currently responsible for the implementationstructure of the Finance transformation program.Consumers and High Income in Retail.
Vitor Ohtsuki. Mr. Ohtsuki is Brazilian and was born on June 5, 1977. He holds a degree in Production Engineering from Universidade de São Paulo, an MBA degree in Marketing from Universidade de São Paulo and a Master’s Degree in Global Management from Stanford University. At Santander Brasil since 2004, he served as Private Banking Head, Executive Superintendent of Wealth Management, Private Banking Superintendent, Executive Manager and General Manager. Mr. Ohtsuki served as Marketing Manager at Banco Citibank S.A. from 2000 to 2004.
Certain Arrangements and Relationships
We have no knowledge of any arrangement or understanding with major shareholders, customers, suppliers or any other person, pursuant to which any person was selected as a director or executive officer. None of the members of our board of directors, or of our board of executive officers, have any family relationships with each other, or with any other members of our senior management.
6B. Compensation |
Compensation of Directors, Executive Officers and Members of the Audit Committee and Members of Our Fiscal Council
We endeavor to have a compensation policy that is consistent with the interests of our shareholders, creates long-term value and is compatible with adequate, rigorous risk management and long-term strategy, values and interests, while also enabling us to maintain a solid capital base.
Our shareholders establish the maximum total annual aggregate compensation of our directorsDirectors and officersOfficers at the annual shareholders’ meeting. CompensationThe compensation of the members of our audit committeeAudit Committee is established by our boardBoard of directors.Directors and the compensation of the members of our Fiscal Council is established at the annual shareholders’ meeting. The compensation of our directors, officers, members of our audit committee and members of our fiscal council is as follows:
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Board of Directors
All members of the boardour Board of directorsDirectors are entitled to a fixed compensation composed of monthly feespayments and benefits within the overall limit set by the annual compensation approved at our annual general shareholders’ meeting.meeting, In exceptional and fully justified cases, the chairmanChairman of our boardBoard of directorsDirectors may also receive an annual variable compensation for his or her duties, as determined by the compensation committeeCompensation Committee and the boardBoard of directors,Directors, within the annual limit set forth byat the annual shareholders meeting.shareholders’ meeting, If granted, such variable compensation should consider the form of payment and the different deferral percentages, according to the level of variable compensation received in the year, and observe the Malus clausemalus and/or clawback clauses with the possibility of reducing and/or returning up to 100% of the value of the variable compensation in the assumptions.
compensation.
In the cases whereevent that a member of the boardBoard of directorsDirectors is also a member of our audit committee, pursuant to the applicable regulations and the internal regulationsrules of the audit committee, such member must choose to receive the remunerationcompensation package of only one of the bodies. Regarding the other advisory committees, if one of the members ofeither the board of directors becomes a memberor the audit committee.
Board of it, in addition to the corresponding remuneration as a member of the board of directors he or she will be entitled to an additional compensation per meeting held in the relevant advisory committee, approved by the compensation committee.Executive Officers
The members of the board ofOur executive officers are entitled to fixed compensation composed of monthly payments, benefits, pensions and variable remuneration,compensation, always within the overall limit of the annual remunerationcompensation, approved at the annual general shareholders’ meeting.
The variable compensation shall be paid considering the different deferral percentages, depending on the level of the variable compensation received in the year (includes amount of Long-Term Incentive - ILP in the year of grant, valued at the granting price), and observeobserving the Malus clausemalus and/or clawback clauses with the possibility of reducing and/or returning up to 100% of the value of the variable compensation in the assumptions.
Audit Committee
The rule of payment is: (i) 30% in cash at the time of the award, (ii) 20% in cash in three equal subsequent instalments, (iii) 30% in units at the time of the award with a one year lock-up, and (iv) the remaining 20% in three separate tranches of units with a one-year lock-up each. If the amount of the variable compensation is between R$5.5 million and R$8 million, the deferral is 50%, 25% of each of which is deferred and paid in cash and 25% paid up until five tranches of units with a one-year lock-up each. If the variable compensation amount is equal to or greater than R$8 million, the deferral is 60%, 30% of each of which is deferred and paid in cash and 30% paid up until five tranches of units with a one-year lock-up each. In the case of the Chief Executive Officer, the deferral in this program is at least 50%, with at least 25% each of the items mentioned above.
Under Brazilian law, companies are required to disclose the highest, lowest and average compensation of our directors, members of the audit committee and officers without indicating any individual name. However, as members of the Brazilian Institute of Finance Executives (Instituto Brasileiro de Executivos de Finanças – IBEF) we were granted an injunction on March 2, 2010, allowing us not to disclose this information.
Shareholders at the general shareholders meeting held on April 29, 2016 set compensation for our directors and executive officers at a total of up to R$300 million and for our audit committee at a total of up to R$3.0 million for the 12-month period starting on January 1, 2016, as proposed by the board of directors at the meeting held on March 22, 2016. For the abovementioned twelve-month period, members of our board of directors and executive officers received a total of approximately R$246.5 million and members of our audit committee received a totalare entitled to fixed compensation consisting of approximately R$2.3 million. The total amountmonthly fees, as established by the Board of contributions for pension plans of our board of executive officers in 2016 was R$4 million.
The criteria for granting and paying variable compensation varyDirectors. However, according to the activities performed by the different areasapplicable regulations and therefore, paymentinternal rules of the variable compensation may differ depending oncommittee itself, if a member of the department and activities performed by each member. Pursuant to Brazilian law, variable compensationBoard of Directors is required to be compatible with the financial institution’s own risk management policies. At least 50% of variable compensation must be paid in stock or stock-based instruments and at least 40% of variable compensation must be deferred for future payment by at least 3 years. These rules are effective as from January 1, 2012.
As approved by our board of directors at the meeting held on December 23, 2009, we indemnify our directors and executive officers and membersalso a member of the audit committee, from claims arising duringsuch member should elect to receive compensation in relation to their functions for either the time they occupy their respective offices, exclusively relatedBoard of Directors or the audit committee.
Fiscal Council
Our Fiscal Council is a non-permanent body. Members of our fiscal council are entitled to court or administrative costs and attorneys’fixed compensation composed of monthly fees except in casesthe amount approved at our General Shareholders’ Meeting, the last of bad faith, gross negligence, willful misconduct or mismanagement by our directors or executive officers. This indemnitywhich was also granted to theheld on April 30, 2021.
Advisory Committees
The members of advisory committees are also entitled to fixed compensation composed of monthly fees. Only those members who do not occupy a position on the audit committee and the compensation committee.Board of Executive Officers are entitled to this compensation.
Compensation Plan Overview
At the general shareholders meeting held on April 30, 2021, the compensation limit was set up to R$433.94 million for our Directors and Executive Officers and R$4,832 million for our Audit Committee for the 12-month period starting on January 1, 2021, as proposed by the Board of Directors at the meeting held on March 26, 2021. As for the Fiscal Council, the general shareholders’ meeting approved a monthly compensation of R$11,985 thousand for each of the members, provided that the alternate members shall only receive such compensation in the event they replace the effective members. For the abovementioned twelve-month period, members of our Board of Directors and Executive Officers received a total of approximately R$352.6 million, members of our audit committee received a total of approximately R$3.2 million and members of our Fiscal Council received a total of approximately R$449.7 thousand. The total amount of contributions for pension plans of our Board of Directors and Executive Officers in 2021 was R$57 million.
We have three programsUnder Brazilian law, companies are required to disclose the highest, lowest and average compensation of their directors, members of the Fiscal Council, if installed, and officers without stating their names. The table below presents the information for long-term compensation: the Deferral Program,years ended 2021, 2020 and 2019:
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Board of Executive Officers | Board of Directors | Fiscal Council | |||||||
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |
Nº of members | 50.00 | 45.00 | 41.70 | 12.00 | 9.00 | 9.90 | 6.00 | 6.00 | 2.50 |
Nº of paid members | 45.16 | 39.00 | 40.90 | 5.58 | 4.75 | 4.80 | 3.00 | 3.00 | 1.30 |
Value of highest compensation (Reais) | 59,029,586.25 | 46,953,181.92 | 45,325,345.00 | 2,129,585.07 | 1,802,918.40 | 1,752,022.72 | 142,710.00 | 139,600.00 | 55,370.00 |
Value of lowest compensation (Reais)(1) | 2,098,466.40 | 1,791,418.04 | 1,843,405.07 | 762,000.00 | 762,000.00 | 769,131.80 | 142,710.00 | 139,600.00 | — |
Average value of compensation (Reais) | 7,674,778.20 | 6,495,886.87 | 664,784,260 | 1,064,162.32 | 1,037,445.25 | 1,012,232.27 | 149,901.00 | 139,600.00 | 132,888.00 |
(1) | The value of the lowest individual remuneration considers only members who have exercised their functions in the 12-month period of the fiscal year in question. The amounts do not include social charges. |
As approved by our Board of Directors at the Local Long-Term Incentive Program (the Stock Option Plan,meeting held on December 23, 2009, our Directors and Executive Officers, are indemnified in relation to claims arising during their time in office. The indemnity exclusively covers court or “SOP”administrative costs and legal fees, except in cases of bad faith, gross negligence, willful misconduct or mismanagement by our Directors or Executive Officers. This indemnity was disclosed to the members of the audit committee, the Compensation Committee and the Performance Share Plan,Fiscal Council.
Variable Compensation
The criteria for granting and paying variable compensation vary according to the activities performed by the different areas and, therefore, payment of the variable compensation may differ depending on the department and activities performed by each member.
Long Term Incentive Programs
Our long-term incentive plans are established in line with our business strategy. Each plan has a specific set of indicators and operating rules, and grants within our plans may be either global (i.e., based on shares in Santander Spain) or “PSP”)local (i.e., based on shares in Santander Brasil). The grants and payments under each of our long-term incentive plans must be approved by our governance, structures in place at the Global Long-Term Incentive Program (CRD-IV).
time of approval, including the human resources and finance departments, and must comply with applicable laws and regulations governing such plans.
Executive officers and executives in key positions are eligible to participate in these plans. The plans, which last three years, promotingand foster our executive officers and executives’ commitment to our long-term results.results, Members of the boardBoard of directorsDirectors can only participate in these plans only if they are executive officers, otherwise, the board members are not eligible to participate in any of these plans.
Executive Officers.
Deferral Program
Our deferral program is available to our statutory officers, officersStatutory Officers, Officers in positions of management and certain other eligible employees. As part of the deferral program, compensation, we defer between 40% and 60% of the variable compensation of an employee over a period of three to five years, depending on the employee’s level of responsibility.
Our deferralThe program aims to (i) align the program with the principles of the Financial Stability Board, or “FSB,” agreed upon at the G20; (ii) align our interests with those of the plan’s participants (to achieve sustainable and recurring growth and profitability of our businesses and to recognize the participants’ contributions); (iii) allow the retention of participants; and (iv) improve our performance and protect the interests of shareholders via a long-term commitment.
Pursuant to Brazilian law, payments made undervariable compensation is required to be compatible with the financial institution’s own risk management policies. At least 50% of variable compensation must be paid in stock or stock-based instruments and at least 40% of variable compensation must be deferred for future payment by at least 3 years. These rules became effective as from January 1, 2012.
The following table summarizes the rules of payment to variable compensation taking as an example the exercise ended on December 31, 2021.
2022 | 2023 | 2024 | 2025 |
At the time of the award | Deferred | ||
30% in cash | Remaining 20% in cash | ||
Payment calculated on ⅓ cash awarded | Payment calculated on ⅓ cash awarded | Payment calculated on ⅓ cash awarded | |
30% in units (with one year lockup) | Remaining 20% in units (with one year lockup) | ||
Payment calculated on ⅓ units awarded | Payment calculated on ⅓ units awarded | Payment calculated on ⅓ units awarded |
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The deferral programpercentage will also depend on the level of variable compensation received in the year, with the above-mentioned criteria applied as minimum.
Still pursuant to Brazilian law, all deferral plans are subject to total or partial cancellation, or claw back, in cases of: (i) our unsatisfactory financial performance (financial results audited lower than defined in our business plan or lossthe application of malus/clawback, that is, the Board of Directors of the Company, on the recommendation of the Compensation Committee and after the evaluation of the Malus/Clawback Committee, may approve to reduce up to 100% of the amount of each participant in the period); (ii) failure to comply with internal policies, specially policies for risk management (with the need for reclassification of operations or revision of provisions); (iii) substantial change in our financial condition, unless arising from changes in accounting standards (damages, financial loss); or (iv) significant changes in our share capital or risk profile. If the board of directors deems it necessary, it may also take into account any change in the capital base of the Santander Group.
cases previously approved by Internal Governance.
We renew and update our deferral program every year. As of December 31, 2016,2021, we had threesix plans outstanding: one for each fiscal year: 2013, 20142016, 2017, 2018, 2019 and 2015.2020. As of December 31, 2016,2021, we recorded total expenses of R$132.294186 million in connection with our Deferral Program compared to total expenses of R$149.758202 million in 2015.
2020.
Deferral Program – 2013
2016, 2017 and 2018
Our 20132016 to 2018 deferral program wasprograms are divided ininto two programs:
● | Collective Identified – Statutory officers and executives who take significant risks in Santander Brasil and are in charge of the control areas. Deferred compensation will be paid 50% in cash, indexed to 100% of the CDI, and 50% in units. |
● | Collective Unidentified – Employees, Individuals eligible for this program include manager employees and certain of our other employees. Deferred compensation will be paid 100% in cash, indexed to 100% of the CDI. |
• Collective Identified. Statutory officers and executives who take significant risks in Santander Brasil and are in charge of the control areas. Deferred compensation will be paid 50% in cash, indexed to 100% of the CDI, and 50% in Units.
• Collective Unidentified – Employees. Individuals eligible for this program include manager employees and certain of our employees. Deferred compensation will be paid 100% in cash, indexed to 110% of the CDI.
Deferral Program – 20142019, 2020 and 20152021
● | Since the financial year 2019, the rule for the Collective Unidentified was changed to “Other Employees,” which includes superintendents and other employees with variable compensation above a minimum established value, and they are also eligible to receive a specific deferral model, applicable according to the function and the level of the variable compensation. Deferred compensation will be paid 50% in cash, and 50% in units. |
Long-Term Incentive Plans
Our 2014long-term programs are divided into Local and 2015 deferral programs were dividedGlobal plans. Each plan has specific performance indicators and conditions to best maintain the participant’s employment relationship until the payment date in two programs:order to be entitled to the receipt.
• Collective Identified. Statutory officers and executives who take significant risks in Santander Brasil and are in chargeThe payment of the control areas. Deferred compensation will be paid 50% in cash, indexed to 100%plans is calculated based on the percentage of achievement of the CDI, and 50% in Units.
• Collective Unidentified – Employees. Individuals eligible for this program include manager employees and certain of our employees. Deferred compensation will be paid 100% in cash, indexed to 100% ofindicators applied on the CDI.
reference value (target).
Local Long-Term Incentive Program
We have eleven retention plans for key positions launched between 2019 and 2021. These plans will be paid in SANB11 units and are subject to the application of the malus/clawback clauses, which may result in a reduction or full cancellation in the number of shares to be delivered in cases of failure to comply with internal rules and exposure to excessive risks.
InEach participant has a reference value defined in cash, converted into SANB11 units, usually at the average price of the last 15 trading sessions immediately prior to the payment of the plan, At the end of the vesting period, the resulting shares are delivered with a one-year restriction, and this payment is still subject to the application of the malus/clawback clauses, which may reduce or cancel the shares to be delivered in cases of non-compliance with internal rules and exposure to excessive risks.
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For the fiscal year 2021, we incurred expenses of R$26 million, with respect to the Local Long-Term Incentive Program, we have two plans for different beneficiaries, a stock option plan, or SOP, and a performance share plan, or PSP. The SOP is an option plancompared to purchase our Units for our top management, andtotal expenses of R$11 million in the PSP is an incentive plan to compensate executives from all our areas. The objective of these plans is to retain our employees’ commitment to long-term results.
As ofyear ended December 31, 2016, we incurred pro rata daily expenses of R$15.789 million, with respect to the SOP plan and R$9.798 million with respect to the PSP plan.
Stock Option Plan – SOP
Our Stock Option Plan consists of three-year stock option plans to purchase our Units. The period for exercising the options is within two years of the vesting period. The volume equivalent to 40% of the Units resulting from the exercise of options cannot be sold by the participant during a period of one year from the exercise date. Plan participants must remain with us during the term of the plan in order to be eligible to exercise their options on their corresponding Units.
Incentive Plan Long-term – SOP 2013
On April 29, 2013, our shareholders approved the grant of the SOP 2013 plan, with an exercise period between June 30, 2016 and June 30, 2018. The number of Units exercisable by the participants was determined according to the total shareholder return, or “TSR” and reduced according to the result of the modifier return on risk-weighted assets, or “RoRWA,” based on a yearly comparison between realized and budgeted performance. The options issued under the plan have an option price of R$12.84 per Unit. Approximately 89.61% of the total number of Units available for delivery under the plan were delivered following the RoRWA-based adjustment described above once participants who lost the right to receive Units were excluded. On December 31, 2016, there were 2,216,479 outstanding options under the plan.
Performance Share Plan – PSP
Our PSP consists of share-based compensation, launched in a three-year cycle.
PSP – 2013
On April 29, 2013, our shareholders approved the PSP 2013 plan. Under this compensation plan, participants received 100% of the plan’s compensation in Units. The percentage of shares determined at the position of TSR may be reduced if the return on RoRWA is not achieved based on a comparison between realized and budgeted performance in each year, as determined by the board of directors. In July 2016, 1,512,966 Units were delivered, meaning that 89.61% of the total number of Units available under the plan were delivered following the RoRWA-based adjustment referred to in this paragraph.
Fair Value and Performance Parameters of SOP and PSP Plans
For the accounting of the local program’s plans, simulations were performed by an independent consultant, based on the Monte Carlo methodology, using the performance parameters used to calculate the shares to be granted. These parameters are associated with their respective probabilities of occurrence, which are updated at the closing of each period.
TSR Ranking | SOP and PSP 2013(1) | |||
(% of Shares exercisable) | ||||
1 | 100 | % | ||
2 | 75 | % | ||
3 | 50 | % | ||
4 | 0 | % |
2020.
Global Long-Term Incentive Program
First Long-Term Incentive Global Plan CRDIV – Grant 2014
In 2014, a long-term incentive plan was created for the overall group of executives included in the Collective Identified (“Global Plan CRDIV”). The indicator is used to measure the achievement of targets which will form a basis for comparison of the Total Shareholder Return (“TSR”) of the Santander Group with the TSR of the top 15 global competitors.
The indicator is calculated in two stages: initially for program verification (2014) and subsequently in the annual payment of each installment (2015, 2016 and 2017).
For program verification purposes, the established achievement threshold is such that for 100% of the plan to be applied, it is necessary that the Santander Group be positioned above the average of global competitors, as shown below. This measurement will be performed considering the TSR between January and December 2014.
For the payment of an installment of one third of the value determined, the TSR will be determined as shown below. The position of the Santander Group in the ranking of TSR will be measured considering the position accumulated until the year before each payment.
Each executive has a target inreais, which was converted into shares of the Santander Group for a price of R$19.2893, which will be delivered in installments in 2016, 2017 and 2018, with a lock-up of one year after each delivery.
In the year ended December 31, 2016, there were no expenses related to the costs of the cycles of the first long-term incentive global program.
Second Long-Term Incentive Global Plan CRDIV – Grant 2015
In 2015, a second global long-term incentivePayment for the Santander Spain shares resulting from the final achievement of the plan was created for executives includedmade in cash in March 2019 based at a price of R$45.49 to the “Extended Group” participants (without restriction of disposal) and to the participants of the Identified Collective (CRDIV Global Plan)in March 2020, after the one year restriction period, following which this plan was discontinued.
Long-Term Incentive Plan – Digital Transformation Award
We currently have two global plans launched in 2019 and 2020. Eligible executives had an incentive target set in reais. ThePayment according to the achievement of performance indicators that will be used to measure the attainmentcalculated in shares and options of the targets are presented below and will be used at two different stages: (i) to calculate the maximum targetSantander Spain (SAN), after a deferral period of each participant (2015-2016); and (ii) to calculate the amount of shares to be paid (2016, 2017 and 2018)three years, with equivalent settlement in reais.
Each executive has a target inreais, which has been converted into Santander Group shares for a price of R$17.473 which will be delivered in 2019, with a lockup of one year after each delivery.
InFor the year ended December 31, 2016, “pro rata”2021, we incurred expenses in an amount of R$8,8734.3 million were recorded relatingin connection with the Global Long-Term Incentive Program, compared to costs on the respective datestotal expenses of the cycles of the global program. The expenses related to the plans are recognized as “Other liabilities - Provision for share-based payments.”
R$0.9 million in 2020.
Contract termination
Termination
Employment contracts have an undefined period. The termination of the employment relationship for non-fulfillment of obligations or voluntarily does not entitle executives to any financial compensation.
Pension and Retirement Benefits
Members of our board of directors and our executive officers may enroll in our retirement plan, SantanderPrevi,SBPrevi, while they are affiliated with Santander Brasil. For further information on SantanderPrevi,SBPrev, please see “—D. Employees.”
6C. Board Practices |
Our shareholders elect members of our boardBoard of directorsDirectors at the Annual General Shareholders’ Meetingannual general shareholders’ meeting for two-year terms (members may be reelected). The boardBoard of directorsDirectors appoints our Executive Officersexecutive officers for two-year terms (members may be reelected).
The current members of the boardBoard of directorsDirectors were appointed duringelected at the Ordinary and Extraordinary Shareholders’ Meetingordinary shareholders’ meeting held on April 30, 20152021 and on the extraordinary shareholders’ meeting held on December 17, 2021, to serve until the Ordinary Shareholders’ Meeting to be held in 2017.
The current Executive Officers were elected at the board of directors meetings held on May 28, 2015, August 26, 2015, December 7, 2015 and January 26, 2016, with terms of office until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2017.
2023. The boardcurrent Executive Officers were elected at Board of directorsDirectors meetings held on May 3, 2021, July 1, 2021 and November 1, 2021 for terms of office until the first Board of Directors meeting occurs after the ordinary shareholders’ meeting, which is to be held in 2023. The Board of Directors usually meets regularly nine times a year, and extraordinarilybut meetings may be held more frequently as often as required.the discretion of the Chairman of the Board of Directors. The Executive Officers meet as often as required by the Chief Executive Officer, or by the Executive Officera designated by him.
person.
On January 26, 2016,May 27, 2020, our boardBoard of directorsDirectors approved its Code of Regulations. Shareholders may access such coderegulations, which can be accessed by shareholders on the websiteswebsite www.santander.com.br/ri, and www.santander.com.br/acionistas, in the section entitled “Corporate Governance – Governance—Management – Board—Regulations of the Board of Directors.”
The information contained on our website, any website mentioned in this annual report, or any website directly or indirectly linked to these websites, is not part of and is not incorporated by reference in, this annual report.
Fiscal Council
According to Brazilian Corporate Law, the adoption of a permanent fiscal council, by us as a publicly held company, is voluntary.voluntary, Our By-Laws provide for a nonpermanent fiscal council, which can be installed at the request of shareholders, representing at least one-tenthone percent of the voting shares or fivetwo percent of the nonvoting shares. CurrentlyThe fiscal council was installed at our ordinary shareholders’ meeting held on April 30, 2021. The current members of our fiscal council is not installed. were elected at the ordinary shareholders’ meeting held on April 30, 2021 and at the extraordinary shareholders meeting held on December 17, 2021 to serve until the ordinary shareholders’ meeting to be held in 2022.
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The fiscal council is an independent body elected by shareholders to supervise the activities of managers and independent auditors. The responsibilities of the fiscal council are established by Brazilian Corporate Law and include oversight of management’s compliance with laws and By-Laws, the issuance of a report on the company’s annual and quarterly reports, certain matters submitted for shareholders’ approval, calling of shareholders’ meetings in some cases and reporting on specific matters arising at those meetings.
The following table sets forth the members of our fiscal council as of the date of this annual report:
Name | Position | Date of Birth |
José Roberto Machado Filho | Member | August 25, 1968 |
Cassia Maria Matsuno Chibante | Member | May 19, 1978 |
Louise Barsi | Member | September 7, 1994 |
Manoel Marcos Madureira | Deputy Member | December 30, 1951 |
Luciano Faleiros Paolucci | Deputy Member | December 12, 1977 |
Valmir Pedro Rossi | Deputy Member | June 10, 1961 |
Below are the biographies of the members of our fiscal council,
José Roberto Machado Filho. Mr. Machado is Brazilian, born on August 25, 1968. He holds a bachelor’s degree in Electrical Engineering from the Faculty of Industrial Engineering (FEI) of São Paulo and a Master’s degree in Business Administration, Economics and Finance from the University of São Paulo. Mr. Machado was an engineer at Keumkang Limited from 1990 to 1991, foreign exchange manager from 1992 to 1995 and manager of trading desk for emerging markets from 1992 to 1996 at Banco CCF Brasil S.A. He was also an executive director of Banco Rabobank Internacional Brasil SA from 1998 to 2003 and was executive director of Banco Real from 2003 to 2009. He was also a member of the management of Banco Santander (Brasil) S.A. until April 2020. He is currently a member of the board of directors at Heluz, Can TeraMed | OnixCann and Bright Cities.
Cassia Maria Matsuno Chibante. Ms. Matsuno is Brazilian, born on May 19, 1978. She holds a Bachelor’s Degree in Law from the University of São Paulo (USP) and a Bachelor’s Degree in Business Administration from Fundação Getúlio Vargas. She also has an MBA in finance from IBMEC. Ms. Matsuno was a manager in the area of direct taxes at Arthur Andersen / Deloitte Touche Tohmatsu from 1999 to 2004. From 2004 to 2016, she was superintendent of finance at Banco Santander (Brasil) S.A., with a focus on the area of tax planning. From 2016 to 2018, she acted as superintendent of the corporate development area of Banco Santander (Brasil) S.A. In 2018, she became the superintendent of strategy and market analysis at Banco Santander (Brasil) S.A.
Louise Barsi. Ms. Barsi is Brazilian and was born on September 7, 1994. She holds a degree in Economics from Universidade Presbiteriana Mackenzie and in Accounting from Fundação Escola de Comércio Álvares Penteado (FECAP). She holds a postgraduate degree in Capital Markets from Fundação Escola de Comércio Álvares Penteado (FECAP). Ms. Barsi is a CNPI analyst, having worked at Elite Investimentos from 2015 to 2019, participated in the Fiscal Council of Unipar Carbocloro from April 2016 to October 2017 and the Fiscal Council of Aes Brasil from April 2019 to July 2020, and was a substitute member of the Fiscal Council of Eletropaulo (Enel). She is currently a member of the board of directors at Eternit since December 2017, where she also coordinates the Audit and Finance Committee, a Deputy Member of the board of directors at Unipar Carboclo since April 2018 and a Fiscal Council Member at Klabin since April 2019 and at Aes Brasil since April 2021. Ms. Barsi is also an effective member of Fiscal Council of Banco Santander (Brasil) S.A. for the term of 2021/2022, elected in separate votes by the majority of minority shareholders holding non-voting preferred shares attending the ordinary shareholder’s meeting held in April, 2021.
Manoel Marcos Madureira. Mr. Madureira is Brazilian and was born on December 30, 1951, He holds a Bachelor’s degree in Mechanical Engineering from the Universidade de Taubaté in São Paulo and a degree in Business Administration from the Tokyo International Center in Japan. From 1976 to 2005 he worked in the automotive industry, as an officer of institutional relations and communications for Fiat Automóveis and Mercedes Benz of Brasil. From 1998 to 2005 he was Vice President of the Automobile Manufacturers Association and President of the Automotive Engineering Association. In 2006, he was elected Vice President of the Corporate Affairs department of Santander Brasil, and in 2007 assumed the Vice Presidency of the Brazilian Federation of Banks. In 2008, he was transferred to the Santander Spain Group as the Communication Officer for Latin America, where he remained until September 2012. In October 2012, he returned to Brazil as Executive Officer in charge of the Corporate Communications and Institutional Relations Departments of Santander Brasil, and was Executive Vice President responsible for the Communication, Marketing, Institutional Relations and Sustainability departments of Santander Brasil until 2018. Mr. Madureira was also the Chief Executive Officer of Rojo Entretenimento
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S.A. and Executive Officer of Universia Brasil S.A. (companies part of Santander Group). Mr. Madureira is currently an alternate member of the Fiscal Council of Santander Brasil and President of the Brazilian – Spain Chamber of Commerce.
Luciano Faleiros Paolucci. Mr. Paolucci is Brazilian and Italian and was born on December 12, 1977. He has a degree in law from UNIFEB, with a Master’s Degree from the University of Sussex (England) - LLM International Commercial Law. He also holds two specializations in Corporate Law and Financial and Capital Markets by INSPER. He is currently studying for a Master’s Degree in Agribusiness Finance from ESALQ and the law school of University of São Paulo. Mr. Paolucci has four years of experience in England, where he worked as a foreign lawyer. Initially, he worked at the DMH Stallard Solicitors in Brighton, where he worked with contracts, real estate law and damages. Later, he worked at Simmons & Simmons in London, one of the largest law firms in the United Kingdom, working in Finance/Business Law within the department responsible for Project Finance and Oil & Gas. In Brazil, he worked as a lawyer in the corporate department of Demarest e Almeida Advogados, focused on M&A and Corporate Law. He then worked at Mattos Filho Advogados, where he focused his practice on commercial contracts in general. He was a lawyer at Santander Brasil for seven years, working in the Private Equity, Corporate Law and the M&A departments. He is currently one of the partners of De Luca & Oliveira Advogados, responsible for corporate related matters. Mr. Paolucci was an effective member of the Fiscal Board of Banco Olé Consignado between June 2019 and January 2020, and since April 2019, is an alternate member of the Fiscal Council of Santander Brasil.
Valmir Pedro Rossi. Mr. Rossi is Brazilian and was born on June 10, 1961. He holds a degree in Accounting from the Universidade de Passo Fundo, a postgraduate degree in Finance from the Universidade de Caxias do Sul, a Marketing degree from PUC Rio de Janeiro and MBAs from Universidade de São Paulo (USP) and from UNB-Brasília. He is a Board member and Fiscal Council member certified from the IBGC. He also acted as Accountant at Casfor Ogr. Contábeis and Bertol S.A., as consultant at Sebrae RS, and for 30 years occupied several positions at Banco do Brasil S.A, the State Superintendent of Pará, State Superintendent of Rio Grande do Sul, Superintendent of retail at São Paulo, and also Corporate and Regional Superintendent for Latin America. He also served as CEO of Banco da Amazônia, a publicly traded federal bank, headquartered in Belém (PA). He worked as a Board member or Fiscal Council member at the following companies: Metalúrgica Gerdau S.A., Brasilprev S.A., BB Seguridade S.A, Fucapi S.A., Banco da Amazônia S.A., besides several other entities and associations. He is currently an effective member of the Fiscal Council of KaMin Cadam S.A and CSN S.A and a member of the audit committee of BRF S.A. and SIMPAR S.A. (holding company of JSI, Movida, etc.). He is a member of the Ethics Committee in Corporate Governance of the IBGC - Instituto Brasileiro de Governança Corporativa and a member of the Fiscal Council of the Instituto Mulheres em Operações, and also an alternative member of the Fiscal Council of Banco Santander (Brasil) S.A. for the terms of 2020, 2021 and 2022, and was elected in a separate vote by the majority of shareholders along with minority shareholders holding preferred shares without voting rights attending the Annual General Meeting held in April 2021.
Board Advisory Committees
Audit Committee
According toUnder Brazilian law, including Brazilian Central Bank regulations, an audit committee is a statutory board, separate from the board of directors and created by a shareholders’ resolution. The members of the audit committee may be members of the board of directors, provided that they meet certain independence requirements. All members of our audit committee meet such independence requirements. In addition, under Brazilian law, the function of hiring independent auditors is reserved for the board of directors. As a result, as specified in Section 3(a)(58) of the Exchange Act, our board of directors functions as our audit committee for the purpose of approving any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or to us.
Pursuant to Exchange Act Rule 10A-3(c)(3), which provides for an exemption under the rules of the SEC regarding the audit committees of listed companies, a foreign private issuer, such as us, is not required to have an audit committee equivalent to or comparable with a U.S. audit committee, if the foreign private issuer has a body established and selected pursuant to home country legal or listing provisions expressly requiring or permitting such a body, and if the body meets certain requirements. As a foreign private issuer, we rely on the exemption under Rule 10A-3(c)(3) of the Exchange Act with respect to our audit committee, and we believe that our audit committee complies with the aforementioned exemption requirements. Except in these respects, our audit committee performs the functions of the audit committees of U.S. companies. For more information, see “Item 16D. Exemptions from the Listing Standards for Audit Committees.”
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Our audit committee is composed of three to six members, elected by our board of directors, among persons, members of the board of directors and others, who meet all statutory and regulatory requirements for the exercise of their office, including any requirements to ensure their independent judgment, and who shall serve for a one-year term and may be reelected pursuant to applicable legislation for up to four consecutive times to a maximum five-year term of office. One of the members shall be designated as the audit committee’s coordinator, and at least one member must have proven knowledge in the areas of accounting and auditing (financial expert).
Our audit committee has as its main functions:
to advise the board of directors on the engagement or replacement of the |
to |
to evaluate the effectiveness of the independent and internal audits, including in regard to compliance with normative provisions applicable to us, in addition to internal regulation and codes; |
to evaluate the fulfillment by our management of the recommendations made by the |
to prepare, at the end of the six-month period ended on June 30 and December 31 |
to receive and review the reports required by the regulatory bodies concerning the activities of the ombudsman, on |
The current members of the audit committee are Luiz Carlos Nannini,Deborah Stern Vieitas, who acts as coordinator, Maria Elena Cardoso Figueira, who acts as financial expert, and Elidie Palma Bifano, Celso Clemente GiacomettiVania Maria da Costa Borgerth, and René Luiz Grande, who each act as coordinator.Grande. Our audit committee meets twiceordinarily once a month. The current members of the audit committee were appointed on March 22, 2016May 3, 2021 and June 1, 2021 to serve until the first board meeting after the ordinary shareholders’ meeting to be held in 2017.
for a one-year term.
Set forth below are the biographies of the members of our audit committee:
Maria Elena Cardoso Figueira. Ms. Figueira is Brazilian, was born on November 29, 1965 and graduated in Economics from the Pontifícia Universidade Católica do Rio de Janeiro. Ms. Figueira is a board of directors, Supervisory Board and Audit Committee member certified by the IBGC (the Brazilian Institute of Corporate Governance) and a partner of Figueira Consultoria, her individual advisory firm. Ms. Figueira has attended training programs in Brazil (through ISE, FAAP, KPMG, Gonew and IBGC) and abroad (through IESE, IE and IBGC) and has extensive professional experience in finance and tax, including at Arthur Andersen, Banco Bilbao Vizcaya, KPMG, Santander (in Brazil, as Deputy Director in charge of Tax Planning, and in Spain, from April 2012 to May 2014, where she worked in the Department of Financial Regulation and Accounting Standards focusing on capital allocation). Since 2004, Ms. Figueira has also served as a member of the audit committees and advisory Boards of: (i) Santander Brasil, acting as an independent member of the audit committee since May 2018; (ii) HSBC Brasil S.A. - Banco de Investimentos (from June 2017 to April 2018), as a member and Chairman of the Advisory and Audit and Risk Committee; (iii) HSBC Brasil S.A. - Banco Multiplo, from October 2014 to June 2016, as chairman and member of the Advisory Board and the Audit and Risk Committee; and (iv) Santander Brasil, from August 2004 to April 2012, as an independent member of the audit committee, Coordinator and financial expert. Since 2015, Ms. Figueira has been an associate member and participant of the Financial Institutions Governance Committee, of the Independent Appellate Board and a coordinator of the Women Corporate Directors WCD, Brazil chapter. Since 2017, she has been an associate member and participant of the Strategic Governance Committee of Amcham Brasil. Since 2020, she is also a member of the Audit Committee of the Lojas Americanas S.A. and a member of the Supervisory Board of Camil Alimentos S.A. Since 2021 she has been a member of the Audit Committee of Hospital Sírio Libanês and an alternate member of the Fiscal Council of B3 S.A. Since 2022 she has been a member of the Audit Committee of Br Properties S.A.
Vania Maria Borgerth. Mrs. Borgerth holds a degree in Accounting from Universidade Santa Úrsula, an MBA in Finance from IBMEC, an MBA in IFRS from FIPECAFI and a specialization in accounting from Fundação Getúlio Vargas. She holds a master's degree in Business Administration from IBMEC and is a PhD student in Accounting and Business Administration from FUCAPE Business School. Ms. Borgerth has over 25 years of solid experience in the financial market. At BNDES, she held several executive positions such as Financial Policy
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and Investor Relations Manager, Chief Accountant, Advisor to the CEO and Controllership Superintendent, Council Member (Fiscal) at FAPES Pension Fund and Member of the Risk Committee. A member of the UN Council for Corporate Reporting (UNCTAD/ISAR), she headed the Brazilian delegation from 2013-2020. Representative of Brazil in several international standards bodies such as IFRS Foundation, IAASB (auditing standards), IESBA (accounting ethics standards), Shift Project (human rights) and IIRC (Integrated Reporting). At the IBGC, she coordinated the "Transparency" pillar of the Positive Governance Agenda, represents the Institute as an IIRC Council Member and participates in the Sustainability Regulation WG. She is the Operational Coordinator of the Federal Accounting Council Working Group that prepared OCPC no. 09 (CVM Resolution No. 14) which deals with Integrated Reporting. She is the author of a book focused on the ethical aspects of The Sarbanes Oxley Act and a lecturer. She holds an International Certificate in IFRS from the Association of Certified Chartered Accountants (ACCA) and a Board of Directors Certificate from the IBGC.
René Luiz Grande. Mr. Grande is Brazilian and was born on April 19, 1953. He holds a degree in Economics from Pontificia Universidade Católica de São Paulo, and a specialization degree in National Financial System from Fundação Instituto de Administração. He was an employee of the Brazilian Central Bank, qualified by the public examination since June, 1975, and worked in the Supervision and Inspection Department of the National Financial System. During his career in the Brazilian Central Bank he served as an analystAnalyst from 1975 to 1978; technical assistantTechnical Assistant from 1978 to 1989; inspection supervisorInspection Supervisor from 1989 to 1999; headHead of the Banking Supervisory and Technical Department from 1999 to 2003,2003; and deputy headDeputy Head of the Banking Supervisory and Financial Conglomerates Department from 2003 to 2011. Before working with the Brazilian Central Bank, he occupied the position of headHead of Human Resources with the Companhia Brasileira de Embalagens Metálicas BRASILATA from 1973 to 1975. Currently,At Banco Santander (Brasil) S.A., Mr. Grande serves aswas Coordinator of the Audit Committeeaudit committee between the years 2012 and is2017, a member of the RiskRisks and Compliance Committee of Santander Brasil.
Elidie Palma Bifano. Mrs. Bifanobetween January 2018 and June 2020, and is Brazilian and was born on May 16, 1947. She holds a bachelor’s degree in Law and Social Sciences from the Faculdade de Direito da Universidade de São Paulo. She holds a specialization degree in Tax Law from Universidade de São Paulo and Pontifícia Universidade Católica de São Paulo and a Master’s Degree and a Doctorate in Tax Law from Pontifícia Universidade Católica de São Paulo. From 1974 to 2012 she worked at PricewaterhouseCoopers, where she served as a partner in the tax advisory department for more than 20 years. In June 2012, she became a partner at Mariz Oliveira e Siqueira Campos Advogados. She is also a professor of postgraduate studies at Universidade de São Paulo, Pontifícia Universidade Católica, Fundação Getúlio Vargas, Instituto Brasileiro de Estudos Tributários and Instituto Brasileiro de Direito Tributário, or “IBDT.” For more than 18 years she has been serving as Chief Financial Officer of the Brazil-Canada Chamber of Commerce. She is also a member of the IBDT’s Council and the International Tax Law Magazine’s Editorial Council, at Quartier Latin Publishing. She has been acurrently an independent member of the Audit Committee of Santander Brasil since 2012.Committee.
Deborah Stern Vieitas
Luiz Carlos Nannini. Mr. Nannini is Brazilian and was born on January 2, 1960. He holds a degree in Accounting Sciences, with several specialization courses in Brazil and abroad, including a leadership course at Harvard. He has more than 30 years of experience in the conduct of independent audit services, including: the preparation of financial statements in accordance with IFRS and U.S. GAAP; due diligence; implementation of internal controls (including IT); corporate restructuring; tax planning and affairs; and participation in advisory councils in Brazil, the U.S. and globally.
Celso Clemente Giacometti., See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Compensation Committee
In compliance with regulations issued by the Brazilian Central Bank (specifically, CMN Resolution No. 3,921/2010 of November 25, 2010), on February 7, 2012, our shareholders established the compensation committee in our by-laws,By-laws, which also acts as the compensation committee for certain of our affiliates and subsidiaries.
Our compensation committee is composed of three to five members, appointed by the board of directors from among persons who meet all statutory and regulatory requirements for the exercise of their office. At least one of the members cannot be an executive officer and the others may or may not be members of our board of directors, and at least two members shall be independent, pursuant to paragraph 3 of article 14 of our By-Laws. The compensation committee shall have in its composition qualified members with the experience required for the competent and independent judgment aboutregarding our internal compensation policy and the repercussionrepercussions of this internal compensation policy on the risk management. Such persons shall serve for a term of two years and may be reelected for up to four consecutive times, pursuant to applicable legislation.
Our compensation committee has as its main functions:
to develop internal compensation policies applicable to our |
to supervise the implementation and coming into operation of the compensation policy for |
to propose to the board of directors the aggregate compensation of |
to analyze our internal officer and board compensation policies and procedures in comparison with market practice, and |
to prepare annually, within |
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to ensure that the |
The current members of the compensation committee are Álvaro Antonio Cardoso de Souza (whoDeborah Patricia Wright, who acts as coordinator), Celso Clemente Giacometti, Deborah Patricia Wrightcoordinator, Sérgio Agapito Lires Rial and Luiz Fernando Sanzogo Giorgi. The current members of the compensation committee were appointed on May 28, 2015,3, 2021 and December 15, 2016 and February 22, 201717, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held on 2017.
in 2023.
Set forth below are the biographies of the members of our compensation committee:
Álvaro Antonio Cardoso de SouzaDeborah Patricia Wright. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Celso Clemente GiacomettiSérgio Agapito Lires Rial. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Deborah Patricia Wright. See “—Members of the Board of Directors.”
Luiz Fernando Sanzogo Giorgi. Mr. Giorgi is Brazilian and was born on September 3, 1964. He has a bachelors’bachelor’s degree in Business Administration fromFundação Armando Alvares Penteado(FAAP) and over 26 years of experience in management. He started his career in 1982 at Price Waterhouse, where he worked until 1986, and, then at Embraer, where he worked between 1986 and 1989. From 1989 to 2003, he worked as a consultant and director at Hay Group, and from 2003 to 2005, he worked for the Suzano Group as a vice chairmanVice Chairman of Suzano Holding. He was a member of the Management Committee of the Boardboard of Directorsdirectors of Suzano Papel e Celulose, Chief Executive Officer of Suzano Petroquímica and a full member of the Board of Petroflex. In September of 2005, he founded LFG – Assessoria em Gestão Empresarial e Liderança. From 2007 to 2015, he served as a member of the Boardboard of Directorsdirectors of Santher S.A.; from From 2007 to 2011, he served as a full member of the Boardboard of Directorsdirectors of J. Macedo Alimentos S.A.; in In 2008, he served as a full member of the Boardboard of Directorsdirectors of Vix Logística S.A.; from From 2007 to 2008, he served as a member of the HR Committee of the Boardboard of Directorsdirectors of Grupo Libra S.A.; and in In 2013, he served as a member of the Boardboard of Directorsdirectors of Itautec S.A. Currently, heMr. Giorgi serves as a member of the Boardsboards of Directorsdirectors of Vonpar S.A. and Empresas Concremat. He is also a member of the Advisory Board of Heads Agencia DeAgência de Propaganda and chairman of the Boardboard of Directorsdirectors of Teadit S.A. He holds the position of member of the HR Committees of Sul América Seguros S.A,S.A., Lojas Marisa S.A,S.A. and Martins Atacadista S.A. He is also a member of our Nomination and Governance Committee.
Risk and Compliance Committee
The riskRisk and compliance committeeCompliance Committee is a consultative body, which has the responsibility ofis responsible for advising our boardBoard of directorsDirectors on subjects related to the policies, operational directions and methodologies of capital allocation, risk management and exposure edges, according to the applicable law,regulations, as well as advising on compliance practices that
enhance theour management of Santander Brasil, regarding the transparency and the monitoring of the compliance functions of the company.
institution. For more details about risk management, see the information under note 46, Risk Management of the financial statements.
The riskRisk and compliance committeeCompliance Committee is composed of three to fivesix members, provided that the majority of them: (i) may not be, nor may they have been, employees of Santander Brasil in the last six months prior to their appointment; (ii) may not be the spouse or relative of a person referred to in item (i) herein; (iii) cannot receive from us any compensation that does not relate to their role as a member of the risk and compliance committee or the board of directors; (iv) must have experience in risk management; and (v) may not be a controlling shareholder of Santander Brasil, nor participate in decisions at least two of these members must be independent.the executive level. The term of office of each of the committee’s members is of two years, re-electionreelection permitted, and the members may be removed at any time. The risk and compliance committee meetings are held at least four times a year or when extraordinarily convened by its coordinator.
The current members of the risk and compliance committee are Álvaro Antônio CardosoPedro Augusto de SouzaMelo (who acts as coordinator), Conrado Engel,Sérgio Agapito Lires Rial, José de Paiva Ferreira and René Luiz Grande.Virginie Genès-Petrolinho. The current members of the risk and compliance committee were appointed on May 28, 20153, 2021 and January 23, 2017December 17, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2017.2023.
Pedro Augusto de Melo
Álvaro Antônio Cardoso de Souza. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
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Conrado EngelSérgio Agapito Lires Rial. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
José de Paiva Ferreira. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
René Luiz GrandeVirginie Genès-Petronilho. See “—Audit Committee.”
Ms. Virginie Genès-Petronilho is a naturalized Brazilian and born in France on August 17, 1962. She holds a degree in business administration from ESCP EUROPE in Paris, France. With 34 years of experience in the banking and reinsurance sectors, she served as Executive Superintendent at BNP Paribas in São Paulo, being responsible for the business management of the customer relationship areas and for the credit portfolio management in Latin America. She also was responsible for the Management of the Credit Risk at Banco Caixa Brasil, also in São Paulo, from May 2009 to October 2011. She worked for 18 years in the ABN AMRO Group: she served as a senior corporate credit analyst at ABN AMRO in Amsterdam from 1997 until 2000, when she became Vice President of the Corporate Credit area within the Risk Department for Latin America at ABN AMRO Banco Real in São Paulo, performing this role until 2005. She was Risk Director at ABN AMRO Bank in Mexico between 2005 and 2008. She was Relationship Manager Banque de Neluflize, Schlumberger, Mallet, a filial from ABN AMRO Group in Paris from 1989 until 1997 and at Credit Commercial de France from 1985 until 1989. Currently, Ms. Genès-Petronilho has been a member of the board of directors of Camara França Brasil since March 2020 and since February 2017 she has been Vice President of Risk Management for Latin America of the Reinsurance Business Unit of SwissRe Brasil Group. She has also been member of Risk and Compliance Committee of the Banco Santander (Brasil) S.A. since June 2020.
Nomination and Governance Committee
The nomination and governance committee is a consultative body which is responsible for advising the board of directors on subjects related to the nomination and governance of Santander Brasil.
The committee is composed of three to fiveseven members, and at least twothe majority of these memberswhich must be independent.independent and, preferably also members of the board of directors. The term of office is of two years, re-electionreelection permitted, and the members may be removed at any time. The committee meetings are held at least four times a year or when extraordinarily convened by its coordinator.
The current members of the nomination and governance committee are Álvaro Antonio Cardoso de SouzaSérgio Agapito Lires Rial (who acts as coordinator), Celso Clemente Giacometti, Deborah Patricia Wright and Luiz Fernando Sanzogo Giorgi. The current members of the nomination and governance committee were appointed on January 23, 2017May 3, 2021 and February 22, 2017December 17, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2017.2023.
Sérgio Agapito Lires Rial.
Álvaro Antonio Cardoso de Souza. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Celso Clemente GiacomettiDeborah Patricia Wright. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Deborah Patricia Wright. See “—Members of the Board of Directors.”
Luiz Fernando Sanzogo Giorgi.. See “—Compensation Committee.”
Sustainability Committee
The sustainability committee is a consultative body which is responsible for advising the board of directors on subjects relating to social and sustainable development issues, including the promotion of sustainable development and other social initiatives.
The committee is composed ofcomprises three to five members, and at least twoone of these members must be independent. The term of office is of two years, re-electionreelection permitted, and the members may be removed at any time. The committee meetings are held at least four times a year or when extraordinarily convened by its coordinator.
The current members of the sustainability committee are José Luciano Duarte PenidoMarília Artimonte Rocca (who also acts as coordinator), Gilberto MifanoÁlvaro Antônio Cardoso de Souza, Andrea Marques de Almeida, Carlos Aguiar Neto, Luiz Masagão Ribeiro Filho and Viviane Senna Lalli.Tasso Rezende de Azevedo. The current members of the sustainability committee were appointed on January 23, 2017May 3, 2021 to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2017.2023.
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Marília Artimonte Rocca
José Luciano Duarte Penido. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Viviane Senna LalliÁlvaro Antônio Cardoso de Souza. See “—MembersMr. Álvaro de Souza is Portuguese and was born on September 5, 1948. He holds degrees in Economics and Business Administration from the Pontifícia Universidade Católica de São Paulo, and attended several specialization courses from a number of American universities, such as the University of Pittsburgh and the Wharton Business School of the University of Pennsylvania. He is the Managing Director of AdS - Management, Consulting and Investments, a firm which provides advice on investments and general management. He is Chairman of the Board of Directors.”
Gilberto MifanoSantander Global Board in Spain. He has worked in several banks, including Citibank, where he worked for 32 years in Brasil and abroad. In addition to the period he worked at Citigroup, he was founder and President of Banco ABC, then a subsidiary of Globo Group, Chairman of the Deliberative Council of Fundo Brasileiro para Biodiversidade (FUNBIO), and president of the American Chamber of Commerce in São Paulo (AmCham Brasil). Mr. Mifano isHe was also a board member of WWF International, Mastercard International and several Brazilian companies, such as AmBev S.A., Celbrás, Ultraquímica, SPCI Computers, Lazard Brazil Bank, Triângulo Bank, CSU Cardsystems, Duratex S/A. and Gol Airlines, and was born on November 11, 1949. He has a degree in Business Administration, from the School of Business Administration of São Paulo of Fundação Getúlio Vargas. He is Independent Director of Cielo S.A. and Ambar S.A., and he is an independent member of TOTVS’s Audit Committee. He is also external consultant of the audit committee, Risk Management and Finance of Natura S.A. and partner counselor of PRAGMA Patrimônio Ltda. From 2006 to 2012 he was a Director, Vice-Chairman and ChairmanPresident of the board of directors of IBGC –WWF Brasil. Mr. Souza was chairman of our board of directors from December 2016 to December 2021. He is currently a member of the Sustainability Committee of Santander Brasil and a member of the board of directors of Santander Group in Spain.
Andrea Marques de Almeida. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers.”
Carlos Aguiar Neto. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers.”
Luiz Masagão Ribeiro Filho. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers.”
Tasso Rezende de Azevedo. Mr. Azevedo is Brazilian, born in 1972. He has a degree in forestry engineering from the Luiz de Queiroz School of Agriculture at the University of São Paulo. He is a socio-environmental entrepreneur and consultant on forestry, climate change and sustainability. Mr. Azevedo is coordinator of the Greenhouse Gas Emissions and Removal Estimation System (SEEG) as well as the MAPBIOMAS Project, a platform that maps and monitors changes in land cover and use in Brazil, the Amazon Basin and other regions by through multi-institutional collaboration. He also serves as a visiting scholar at Princeton University and as a board member for several organizations including Rainforest Alliance, NEPCon, Imaflora and the Institute of Corporate Governance. From 1994 to 2008, he was General Officer of BOVESPA – Bolsa de Valores de São PauloEnergy and CBLC – Brazilian Clearing and Depository Company. During this period he was responsible, among other functions, for the creationEnvironment. Currently, Mr. Azevedo is also a member of the New Market, the integrationSustainability Committee of the Brazilian stock exchanges, demutualization and IPO of BOVESPA. He then organized the merger of BOVESPA and BM&F when he was elected as the first Chairman of BM&FBOVESPA. At international level, for about eight years, he was part of the Executive Committees of WFE – World Federation of Exchanges and FIAB – Ibero-American Federation of Exchanges. Previously, he was executive and officer in banks and financial companies in Brazil in the areas of credit, planning, products and marketing.
Banco Santander (Brasil) S.A.
Executive Committee
The Chief Executive Officer, Senior Vice President Executive Officers and Vice President Executive Officers make upconstitute the executive committeeExecutive Committee, which examines policies for business management, operational support, human resources and capital allocation. ItThe committee also deliberates on the main technological, infrastructure and services projects.
Contract termination
Employment contracts have an undefined period. The termination of the employment relationship for non-fulfillment of obligations or voluntary does not entitle executives to any financial compensation.
6D. Employees
On December 31, 2016,2021, we had 47,25248,834 full-time, permanent employees. The following table presents the breakdown of our full-time, permanent employees (in accordance with local criteria) at the datedates indicated.
As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Administrative employees | 17,630 | 12,722 | 12,188 | |||||||||
Commercial areas employees | 31,204 | 31,877 | 35,631 | |||||||||
Total | 48,834 | 44,599 | 47,819 |
As of December 31, 2016 | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Administrative employees | 10,256 | 9,884 | 8,976 | |||||||||
Commercial areas employees | 36,996 | 40,140 | 40,333 | |||||||||
Total | 47,252 | 50,024 | 49,309 |
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The following table presents a breakdown of our full-time, permanent employees (in accordance with local criteria) by geographic location within Brazil at the dates indicated.
As of December 31, | ||||||||||||||
2020 | 2019 | 2018 | ||||||||||||
Region | ||||||||||||||
Midwest | 1,047 | 1,430 | 1,021 | |||||||||||
Northeast | 4,547 | 4,066 | 4,283 | |||||||||||
North | 774 | 674 | 760 | |||||||||||
Southeast | 30,545 | 30,595 | 34,732 | |||||||||||
South | 10,839 | 3,596 | 5,957 | |||||||||||
Other | 1,082 | 4,238 | 1,066 | |||||||||||
Total | 48,834 | 44,599 | 47,819 |
We provide a competitive benefits package, which contributes to the engagement, attraction and retention of our employees. To ensure competitiveness, we compare our annual benefit package to market practices and trends. Policies are developed and offered contemplatingbased on the needs of our employees. We also have a policy of providing continuous training to our employees, allowing them to hone their skills and create a more effective team, committed to the values of the group.
We have a profit sharing plan with our employees based on predetermined goals for our annual operating and financial results. As a result, if we meet or exceed certain goals, our employees can share in our financial performance. See “—B. Compensation.”
We also offer our employees a defined contribution pension plan where employees can choose to contribute part of their wages and to which we can also make contributions on behalf of such employees. This plan provides retirement benefits, and disability and death benefits. Currently the largest plan is SantanderPrevi, a plan that is closed for new participants since July 2018. As of January 2018, the onlySBPrev pension plan, currently openadministered by Icatu Seguros, was implemented for new membership. Most of our current employees are registered with the SantanderPrevi plan.and new members. As of December 31, 2016, 42,9822021, 31,436 participants were enrolled in thatSantanderPrevi plan, makingand the total assets under management under the plan was approximately R$4.11 billion. As of December 31, 2021, we had 4,954 registered participants in the SBPrev plan, with total amount under management approximatelyof R$3.088 billion.431,922 million. For additional information on our pension plans, see note 2321 to our audited consolidated financial statements.
statements included elsewhere in this annual report.
The Brazilian Banking Employees’ Union represents most of our employees. Inemployees in the event of a potential conflict with our banking employees and/or the banking union, and negotiations are conducted by the FENABAN. Each year, generallyEvery two years, usually in September, all Brazilian banks have a collective negotiation period in which they revise salary structures. During this period, the Brazilian Banking Employees’ Union negotiates the percentages of readjustment for fixed salary and benefits of bank employees’ salaries within the scope of the Brazilian Banking Collective Agreement with the FENABAN. Negotiations pertainingrelated to wages and salaries for 2017the period 2020-2022 have already been concluded and the levels of compensation agreed are consistent with market practice. Since the acquisition of our predecessor banks by our indirect shareholder Santander Spain, we have not suffered significant losses through strikes and our management believes it has good relations with our employees.
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6E. Share Ownership |
The following table provides the names of our directors and executive officers as well as members of our Fiscal Council who owned shares of Santander Brasil as of December 31, 2016.February 22, 2022.
Shareholders | Common Shares | Percentage of Outstanding Common Shares | Preferred Shares | Percentage of Outstanding Preferred Shares | Percentage of Total Share Capital | |||||||||||||||
Alexandre Grossmann Zancani | 15,710 | (1) | 15,710 | (1) | (1) | |||||||||||||||
Alexandre Silva D’ Ambrósio | 16,166 | (1) | 16,166 | (1) | (1) | |||||||||||||||
Amancio Acurcio Gouveia | 72,238 | (1) | 72,238 | (1) | (1) | |||||||||||||||
Ana Paula Nader Alfaya | 37,117 | (1) | 37,118 | (1) | (1) | |||||||||||||||
Andre de Carvalho Novaes | 30,187 | (1) | 30,187 | (1) | (1) | |||||||||||||||
Angel Santodomingo Martell | 53,570 | (1) | 53,570 | (1) | (1) | |||||||||||||||
Antonio Pardo de Santayana Montes | 125,881 | (1) | 125,881 | (1) | (1) | |||||||||||||||
Carlos Rey de Vicente | 177,000 | (1) | 177,000 | (1) | (1) | |||||||||||||||
Cassio Schmitt | 102,112 | (1) | 102,112 | (1) | (1) | |||||||||||||||
Cassius Schymura | 59,987 | (1) | 59,987 | (1) | (1) | |||||||||||||||
Celso Clemente Giacometti | 1 | (1) | 0 | (1) | (1) | |||||||||||||||
Conrado Engel | 392,984 | (1) | 392,984 | (1) | (1) | |||||||||||||||
Ede Ilson Viani | 74,190 | (1) | 74,190 | (1) | (1) | |||||||||||||||
Felipe Pires Guerra de Carvalho | 201,977 | (1) | 201,977 | (1) | (1) | |||||||||||||||
Flavio Tavares Valadão | 156,558 | (1) | 156,558 | (1) | (1) | |||||||||||||||
Gilberto Duarte de Abreu Filho | 39,588 | (1) | 39,588 | (1) | (1) | |||||||||||||||
Jean Pierre Dupui | 104,003 | (1) | 104,003 | (1) | (1) | |||||||||||||||
João Guilherme de Andrade So Consiglio | 374,706 | (1) | 374,706 | (1) | (1) | |||||||||||||||
Jose Alberto Zamorano Hernandez | 153,334 | (1) | 153,334 | (1) | (1) | |||||||||||||||
José Antonio Álvarez Álvarez | 1 | (1) | 0 | (1) | (1) | |||||||||||||||
José de Paiva Ferreira | 141,799 | (1) | 141,798 | (1) | (1) | |||||||||||||||
José Roberto Machado Filho | 72,037 | (1) | 72,037 | (1) | (1) | |||||||||||||||
Juan Sebastian Moreno Blanco | 85,514 | (1) | 85,514 | (1) | (1) | |||||||||||||||
Luis Guilherme Matosso de Oliem Bittencourt | 18,421 | (1) | 18,421 | (1) | (1) | |||||||||||||||
Luiz Masagao Ribeiro Filho | 52,451 | (1) | 52,451 | (1) | (1) | |||||||||||||||
Manoel Marcos Madureira | 44,658 | (1) | 44,658 | (1) | (1) | |||||||||||||||
Marcelo Malanga | 29,403 | (1) | 29,403 | (1) | (1) | |||||||||||||||
Marcelo Zerbinatti | 48,515 | (1) | 48,515 | (1) | (1) | |||||||||||||||
Marcio Aurelio de Nobrega(2) | 65,007 | (1) | 65,007 | (1) | (1) | |||||||||||||||
Maria Eugênia Andrade Lopez Santos | 74,765 | (1) | 74,765 | (1) | (1) | |||||||||||||||
Mario Adolfo Libert Westphalen | 18,894 | (1) | 18,894 | (1) | (1) | |||||||||||||||
Nilton Sergio Silveira Carvalho | 40,790 | (1) | 40,790 | (1) | (1) | |||||||||||||||
Rafael Bello Noya | 39,683 | (1) | 39,683 | (1) | (1) | |||||||||||||||
Ramón Sanchez Díez | 63,841 | (1) | 63,841 | (1) | (1) | |||||||||||||||
Reginaldo Antonio Ribeiro | 59,600 | (1) | 59,600 | (1) | (1) | |||||||||||||||
Roberto de Oliveira Campos Neto | 282,926 | (1) | 282,926 | (1) | (1) | |||||||||||||||
Robson de Souza Rezende | 19,208 | (1) | 19,208 | (1) | (1) | |||||||||||||||
Ronaldo Wagner Rondinelli | 30,930 | (1) | 30,930 | (1) | (1) | |||||||||||||||
Sergio Agapito Lires Rial | 120,986 | (1) | 120,986 | (1) | (1) | |||||||||||||||
Sergio Gonçalves | 44,620 | (1) | 44,620 | (1) | (1) | |||||||||||||||
Thomas Gregor Ilg | 94,365 | (1) | 94,365 | (1) | (1) | |||||||||||||||
Ulisses Gomes Guimaraes | 23,434 | (1) | 23,434 | (1) | (1) | |||||||||||||||
Vanessa de Souza Lobato Barbosa | 65,476 | (1) | 65,476 | (1) | (1) | |||||||||||||||
Viviane Senna Lalli | 1 | (1) | 0 | (1) | (1) | |||||||||||||||
Employees | 3,915,021 | 0.10 | % | 3,929,105 | 0.11 | % | 0.10 | % | ||||||||||||
Total | 7,639,655 | 7,653,736 |
Principal Shareholders | Common Shares | Percentage of Outstanding Common Shares | Preferred Shares | Percentage of Outstanding Preferred Shares | Percentage of Total Share Capital |
Adriana Marques Lourenço de Almeida | 33,903 | (1) | 33,903 | (1) | (1) |
Alberto Monteiro de Queiroz Netto | 28,725 | (1) | 28,725 | (1) | (1) |
Alessandro Tomao | 117,040 | (1) | 117,040 | (1) | (1) |
Alexandre Guimarães Soares | 32,899 | (1) | 32,899 | (1) | (1) |
Amancio Acurcio Gouveia | 178,936 | (1) | 178,936 | (1) | (1) |
Ana Paula Vitali Janes Vescovi | 13,485 | (1) | 13,485 | (1) | (1) |
Andre de Carvalho Novaes | 45,885 | (1) | 45,885 | (1) | (1) |
André Juaçaba de Almeida | 16,974 | (1) | 16,974 | (1) | (1) |
Andre Rosenblit | 50,016 | (1) | 50,016 | (1) | (1) |
Angel Santodomingo Martell | 186,152 | (1) | 186,152 | (1) | (1) |
Antonio Pardo de Santayana Montes | 103,205 | (1) | 103,205 | (1) | (1) |
Carlos Aguiar Neto | 22,249 | (1) | 22,249 | (1) | (1) |
Cassio Schmitt | 130,810 | (1) | 130,810 | (1) | (1) |
Celso Mateus de Queiroz | 12,030 | (1) | 12,030 | (1) | (1) |
Claudenice Lopes Duarte | 9,286 | (1) | 9,286 | (1) | (1) |
Daniel Fantoni Assa | 87.854 | (1) | 87.854 | (1) | (1) |
Ede Ilson Viani | 106,138 | (1) | 106,138 | (1) | (1) |
Elita Vechin Pastorelo Ariaz | 29,415 | (1) | 29,415 | (1) | (1) |
Francisco Soares da Silva | 48,657 | (1) | 48,657 | (1) | (1) |
Franco Luigi Fasoli | 26,437 | (1) | 26,437 | (1) | (1) |
Geraldo Jose Rodrigues Alckmin Neto | 35,145 | (1) | 35,145 | (1) | (1) |
Germanuela de Almeida de Abreu | 10,707 | (1) | 10,707 | (1) | (1) |
Gilberto Duarte de Abreu Filho | 45,048 | (1) | 45,048 | (1) | (1) |
Gustavo Alejo Viviani | 177,714 | (1) | 177,714 | (1) | (1) |
Gustavo de Souza Fosse | 28,161 | (1) | 28,161 | (1) | (1) |
Igor Mario Puga | 9,800 | (1) | 9,800 | (1) | (1) |
Jean Paulo Kambourakis | 38,298 | (1) | 38,298 | (1) | (1) |
Jean Pierre Dupui | 213,704 | (1) | 213,704 | (1) | (1) |
Joao Marcos Pequeno de Biase | 70,121 | (1) | 70,121 | (1) | (1) |
José Antonio Álvarez Álvarez | 1 | (1) | — | (1) | (1) |
Jose de Paiva Ferreira | 473,067 | (1) | 473,066 | (1) | (1) |
José Roberto Machado Filho | 32,707 | (1) | 32,707 | (1) | (1) |
Leando Alves | 9,782 | (1) | 9,782 | (1) | (1) |
Luciana de Aguiar Barros | 36,121 | (1) | 36,122 | (1) | (1) |
Louise Barsi | — | (1) | 90,000 | (1) | (1) |
Luis Guilherme Mattoso de Oliem Bittencourt | 37,898 | (1) | 37,898 | (1) | (1) |
Luiz Masagao Ribeiro Filho | 208,343 | (1) | 208,343 | (1) | (1) |
Manoel Marcos Madureira | 158,208 | (1) | 158,208 | (1) | (1) |
Marcelo Augusto Dutra Labuto | 58,779 | (1) | 58,779 | (1) | (1) |
Maria Tereza Mauricio da Rocha Pereira Leite | 26,215 | (1) | 26,215 | (1) | (1) |
Marilize Ferrazza Santinoni | 33,197 | (1) | 33,197 | (1) | (1) |
Marino Alexandre Calheiros Aguiar (*) | 27,082 | (1) | 27,082 | (1) | (1) |
Mario Roberto Opice Leao | 196,072 | (1) | 196,072 | (1) | (1) |
Paulo César Ferreira de Lima Alves | 15,415 | (1) | 15,415 | (1) | (1) |
Paulo Sérgio Duailibi | 29,960 | (1) | 29,960 | (1) | (1) |
Patricia Souto Audi | 7,327 | (1) | 7,327 | (1) | (1) |
Ramon Sanches Santiago | 15,098 | (1) | 15,098 | (1) | (1) |
Ramon Sanchez Díez | 60,325 | (1) | 60,325 | (1) | (1) |
Reginaldo Antonio Ribeiro | 72,051 | (1) | 72,051 | (1) | (1) |
Ricardo Olivare de Magalhaes | 32,855 | (1) | 32,855 | (1) | (1) |
Roberto Alexandre Borges Fischetti | 187,726 | (1) | 187,726 | (1) | (1) |
Robson de Souza Rezende | 50,718 | (1) | 50,718 | (1) | (1) |
Rogério Magno Panca | 7,601 | (1) | 7,601 | (1) | (1) |
Sandro Kohler Marcondes | 17,205 | (1) | 17,205 | (1) | (1) |
Sandro Rogerio da Silva Gamba | 40,044 | (1) | 40,044 | (1) | (1) |
Sandro Mazerino Sobral | 34,234 | (1) | 34,234 | (1) | (1) |
Sérgio Agapito Lires Rial | 284,564 | (1) | 284,564 | (1) | (1) |
Thomas Gregor Ilg | 60,611 | (1) | 60,611 | (1) | (1) |
Thomaz Antino Licarião Rocha | 63,359 | (1) | 63,359 | (1) | (1) |
Tiago Celso Abate | 33,162 | (1) | 33,162 | (1) | (1) |
Valmir Pedro Rossi | 2,000 | (1) | 2,000 | (1) | (1) |
Vanessa de Souza Lobato Barbosa | 98,771 | (1) | 98,771 | (1) | (1) |
Vitor Ohtsuki | 31,801 | (1) | 31,801 | (1) | (1) |
Total | 4,351,328 | 4,441,327 |
(1) | Owns less than 0.01%. |
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Shares held by members of our boardBoard of directorsDirectors, our officers and members of our officersFiscal Council do not have special voting rights in relation to shares held by our other shareholders.
For a description of our equity compensation plans, see “Item 6. Directors, Senior Management and Employees ––“––B. Compensation.”
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7A. Major Shareholders |
As of December 31, 2016,February 22, 2022, Santander Spain directly and indirectly through its subsidiaries, Grupo Empresarial Santander, S.L. and Sterrebeeck B.V., owned approximately 88.8%89.53% of our total capital stock (not including the shares held by Banco Madesant - Sociedade Unipessoal).
stock.
The following table presents the beneficial ownership of our common and preferred shares as of December 31, 2016.February 22, 2022.
Principal Shareholders | Common Shares | Percentage of Outstanding Common Shares | Preferred Shares | Percentage of Outstanding Preferred Shares | Total Shares (thousands) | Percentage of Total Share Capital | ||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Sterrebeeck BV (4) | 1,809,583 | 46.99 | % | 1,733,644 | 46.70 | % | 3,543,227 | 46.85 | % | |||||||||||||||
Grupo Empresarial Santander SL | 1,107,673 | 28.76 | % | 1,019,645 | 27.47 | % | 2,127,318 | 28.13 | % | |||||||||||||||
Qatar Holding LLC (2) | 207,812 | 5.40 | % | 207,812 | 5.60 | % | 415,623 | 5.50 | % | |||||||||||||||
Banco Santander, S.A. | 521,964 | 13.55 | % | 519,268 | 13.99 | % | 1,041,232 | 13.77 | % | |||||||||||||||
Treasury Shares (1) | 25,786 | 0.67 | % | 25,786 | 0.69 | % | 51,572 | 0.68 | % | |||||||||||||||
Banco Madesant | 950 | 0.02 | % | 950 | 0.03 | % | 1,900 | 0.03 | % | |||||||||||||||
Employees (3) | 7,639 | 0.20 | % | 7,653 | 0.21 | % | 15,293 | 0.20 | % | |||||||||||||||
Other minority shareholders | 169,564 | 4.40 | % | 197,354 | 5.32 | % | 366,917 | 4.85 | % | |||||||||||||||
Total | 3,850,971 | 100.00 | % | 3,712,112 | 100.00 | % | 7,563,082 | 100.00 | % |
Principal Shareholders | Common Shares | Percentage of Outstanding Common Shares | Preferred Shares | Percentage of Outstanding Preferred Shares | Total Share (thousands) | Percentage of Total Share Capital | ||||||||||||||||||
Sterrebeeck BV (1) | 1,809,583,330 | 47.39 | % | 1,733,643,596 | 47.11 | % | 3,543,226,926 | 47.25 | % | |||||||||||||||
Grupo Empresarial Santander SL (1) | 1,627,891,019 | 42.63 | % | 1,539,863,493 | 41.85 | % | 3,167,754,512 | 42.25 | % | |||||||||||||||
Banco Santander, S.A. | 2,696,163 | 0.07 | % | - | - | 2,696,163 | 0.04 | % | ||||||||||||||||
Treasury Shares | 15,704,544 | 0.41 | % | 15,704,544 | 0.43 | % | 31,409,088 | 0.42 | % | |||||||||||||||
Administrators/Executives (2) | 4,887,646 | 0.13 | % | 4,977,644 | 0.14 | % | 9,865,290 | 0.13 | % | |||||||||||||||
Other minority shareholders | 357,932,329 | 9.37 | % | 385,646,743 | 10.48 | % | 743,579,072 | 9.92 | % | |||||||||||||||
Total | 3,818,695,031 | 100.00 | % | 3,679,836,020 | 100.00 | % | 7,498,531,051 | 100.00 | % |
(1) |
An affiliate within the Santander Group. |
(2) | Includes members of senior management. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” |
For further information of our ownership structure, see “Item 18. Financial Statements” of this annual report on Form 20-F, in notes 27 - Shareholders’ equity (letter a) and 45 - Related party transactions (letter c).
The total number of ADRs held by U.S. investors as of December 31, 2016, is 236,064,489.February 22, 2022 was 149,747,122. The total number of Units held by U.S. investors as of December 31, 2016,February 22, 2022, is 43,908,84251,185,526 (excluding Units held by The Bank of New York Mellon as depositary).
Significant Changes in Percentage Ownership of Principal Shareholders
On April 11, 2017, Qatar Holding LLC, or the “Selling Shareholder,” participated in a secondary offering of 80,000,000 units, each of which is composed of one common share, no par value, and one preferred share, no par value, of Santander Brasil. Furthermore, the Selling Shareholder granted the international underwriters the option to purchase up to 12,000,000 additional ADSs of Santander Brasil within 30 days from, but not including, April 5, 2017, solely to cover over-allotments of ADSs, if any. The international underwriters exercised the option for 5,065,000 ADSs, and the settlement took place on May 9, 2017.
On April 29, 2014, Santander Spain, our indirect controlling shareholder, announced its intention to launch the Brazilian Exchange Offer and the U.S. Exchange Offer to acquire up to all of our shares that were not held by the Santander Group, which represented approximately 25% of our share capital, with payment in BDRs or ADRs representative of Santander Spain’s common shares.
On October 30, 2014, the Brazilian Exchange Offer and the U.S. Exchange Offer were concluded. As a result of these offers, the Santander Group’s shareholding increased to 88.3% of our total share capital at that time (not including the shares held by Banco Madesant - Sociedade Unipessoal). Also as a result of the offer in Brazil, our units were delisted from Level 2 Segment and are now traded at the basic listing segment of BM&FBOVESPA.
On December 14, 2015,September 18, 2017, our shareholders approved the cancellation of 37,757,90864,551,366 shares held in treasury, representing 18,878,95432,275,683 common shares and 18,878,95432,275,683 preferred shares. Such treasury shares corresponded, as of
that date, to approximately 53.9% of the totality of the shares then held in treasury. As a result, as of
On December 31, 2015,2018, we held 40,435,46626,633,004 shares in treasury, of which 20,217,73313,316,502 were common shares and 20,217,73313,316,502 were preferred shares.
On December 31, 2016,2019, we held 51,571,84634,466,574 shares in treasury, of which 25,785,92317,233,287 were common shares and 25,785,92317,233,287 were preferred shares.
On December 22, 2020, (i) Santander Spain transferred to 519,268,168,572 ADRs issued by Santander Brasil to Grupo Empresarial Santander S.L. and (ii) Banco Madesant Sociedade Unipessoal S.A. transferred 950,000 ADRs issued by Santander Brasil to Grupo Empresarial Santander S.L. As these transfers were both within the Santander Group there was no change in our ultimate indirect control.
SubscriptionOn December 31, 2020, we held 37,657,924 shares in treasury, of Tier 1which 18,828,962 were common shares and Tier 2 Notes
At a shareholders’ meeting held on November 1, 2013, as part of the plan for optimization of our capital structure, our shareholders approved: (i) the equity distribution to our shareholders as a result of a capital reduction, in the total amount of R$6 billion, with no reduction in the number of shares; (ii) the issuance abroad of debt instruments to compose our Tier 1 and Tier 2 regulatory capital; and (iii) a bonus share program and an adjustment in the composition of the Units, followed by a reverse share split (inplit), with the purpose of eliminating trading in cents.
The distribution of Tier 1 and Tier 2 Notes was finalized on January 29, 2014. We issued U.S.$1,247,712,527 aggregate principal amount of 7.375% Tier 1 Subordinated Perpetual Notes, and U.S.$1,247,712,527 aggregate principal amount of 6.000% Tier 2 Subordinated Notes due January 29, 2024. The Tier 1 and Tier 2 Notes18,828,962 were offered directly to the holders of our ADRs, as well as to the holders of our units, and our common and preferred shares.
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On December 31, 2021, we held 31,510,410 shares in treasury, of which 15,755,205 were common shares and 15,755,205 were preferred shares.
On February 22, 2022, we held 31,409,088 shares in treasury, of which 15,704,544 were common shares and 15,704,544 were preferred shares.
Voting Rights of Principal Shareholders
Our principal shareholders do not have voting rights distinct from those of our other shareholders.shareholders, See “Item 10. Additional Information—B. By-Laws—Rights of Common Shares and Preferred Shares.”
7B. Related Party Transactions
We have a documented policy with respect to related party transactions approved by the board of directors,policy, which is intended to ensure that all transactions covered by the policy are conducted based onin our interest and that any related party transactions are conducted on an arm’s length basis on terms substantially similar to those of comparable transactions in the market. The policy defines related transactions as those occurring between us and our shareholders.shareholders, our subsidiaries, our employees, directors and officers, as well as our subsidiaries’ employees, directors and officers. The policy defines the power to approve certain transactions byas resting with the board of directors. The rules are also applied to all our directors, senior management, employees and subsidiaries. Additionally, related party transactions are also included in the regular auditing program developed by our internal audit.
We currently engage in, and expect from time to time in the future to engage in, financial and commercial transactions with our subsidiaries and affiliates and those of the Santander Group. We have credit lines outstanding with certain of our affiliates within the Santander Group and its affiliated financial institutions around the world.Group. As of December 31, 2016,2021, borrowings and deposits from the Santander Group represented approximately 2.0 %6.3% of our total funding. In addition, from time to time, we enter into certain transactions with the Santander Group and other related parties for the provision of advisory and advertising services. Such transactions are conducted aton an arm’s-length basis, based on terms that would have been applied for transactions with third parties.
The transactions and remuneration of services with related parties are made in the ordinary course of business on an arms’ length basis under similar conditions, including interest rates, terms and guarantees, and involve no greater risk than transactions with unrelated parties carried out in the ordinary course and have no other disadvantages. The following discussion describes all of our material related party transactions.
On December 17, 2013, we concluded the sale of our asset management business to an affiliate of Santander Spain, by way of disposal of all shares of Santander Brasil Asset. The sales price was R$2,243 million, generating a post-tax capital gain of R$1,205 million (after deducting costs). See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting the Comparability of Our Results of Operations—Sale of the Investment Fund Management and Managed Portfolio Operations.”
Information Technology Platform
We enterhave entered into certain agreements with some affiliates of the Santander Group (Ingeniería de Software Bancário(Santander Global Technology, S.L. (Spain), ISBANSantander Brasil Tecnologia S.A. (Chile), Produban Servicios Informáticos Generales S.L. (Spain), ISBAN S.A. (Brazil)Santander Global Technology Brasil Ltda. and Produban Serviços de Informática S.A. (Brazil)Santander Tecnologia e Inovação Ltda) for the outsourcing of certain products and services relating to
our information technology platform, including software development hosting and information processing. maintenance, infrastructure and cybersecurity.
We believe the provisions of these services are provided on an arm’s-length basis with terms substantially similar to those available from other providers in the market. In 20162020 and 2015,2021, Santander Group affiliates received approximately R$761 million1.0 billion and R$729 million,1.3 billion, respectively, for the products and outsourcing provided above. In addition, these affiliates are responsible for managing all third party technology contracts. See “Item 4. Company Information – on the Company—B. General Business Vision – Overview—Technology and Infrastructure.”
Procurement Services
We have entered into agreements with Aquanima Brasil Ltda., an affiliate of the Santander Group, which offersprovides procurement services (sourcing, e-procurement, outsourcing and consultancy) to Santander Brasil. Volume aggregation betweenwith Santander Brasil and other client companies allow forits affiliates. We hire solutions in trade negotiations, tactical and strategic purchasing, online procurement, supplier management, outsourcing, consulting, and vendor risk assessment. Among the strategies used, we highlight possible joint purchases forof materials and services between different customers and other economic groups, which allow greater efficiency in price negotiations and rationalization of different clients. The agreements entered into with Aquanima Brasil Ltda. were on an arm’s-length basis. Weservices, as well as the engagement of management real state in 2021, we paid Aquanima Brasil Ltda., approximately R$2547 million in 20162021 and R$2440 million in 2015.2020 for the services rendered in those years.
Spin-Off of Getnet and Related Arrangements
On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which was undertaken by our then-subsidiary, Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. Prior to the conclusion of the Spin-Off, Santander Brasil owned 100% of Getnet’s total capital stock. The Spin-Off was completed on October 26, 2021. As a result of the Spin-Off: (i) Santander Spain, our controlling shareholder, became Getnet’s controlling shareholder directly and indirectly through certain of its subsidiaries, (ii) Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and (iii) we stopped consolidating Getnet within our results of operations on March 31, 2021. For more information about the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off.”
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Partnership Agreement
On April 15, 2021, we entered into the Getnet Partnership Agreement with Getnet, which provides a framework for our relationship with Getnet following the Spin-Off. The Partnership Agreement described below is filed as an exhibit to this annual report. This summary below is qualified in its entirety by reference to the full text of the Partnership Agreement.
Prepayment of Receivables
Pursuant to the Partnership Agreement, we provide prepayment of receivables to merchants accredited by Getnet, except where Getnet opts to provide these services itself or where the merchant opts to obtain such services from another financial institution. For these purposes, we are required to accept those receivables which are duly registered in systems authorized by the Brazilian Central Bank. The prepayment of receivables is formalized through specific agreements to be entered into between the parties from time to time.
If we prepay the merchant’s receivables, the ownership of the receivables is transferred to Santander Brasil and Getnet is required to pay the amounts due thereunder to us upon receipt.
Income or loss arising from prepayment of receivables is attributed to Getnet’s business and recorded within Getnet’s results of operations. Under the Partnership Agreement, we calculate the results of the prepayments receivables transactions as the total revenue generated by these transactions, less the expenses incurred by us to provide prepayment of receivables to merchants, which include (i) acquiring expenses, which consist of the costs incurred by us in transferring funds to other banks as a result of the prepayment of receivables and the provision of payment services by Getnet, and (ii) prepayment expenses, which consist of (a) the costs incurred by us to fund prepayment of receivables transactions, (b) the expenses incurred by us with technology systems to support the prepayment of receivables to Getnet merchants; (c) taxes incurred in connection with the prepayment of receivables to Getnet merchants; (d) costs incurred by us to transfer funds to other banks in connection with the prepayment of receivables to Getnet merchants; and (e) our operating losses in the provision of prepayment of receivables services to Getnet merchants. Santander Brasil receives a monthly fee for participating in these arrangements.
If the prepayment of receivables results in a profit, we are required to pay Getnet the amount of profit made. If the prepayment of receivables results in a loss, Getnet is required to pay us an amount equivalent to the amount of the loss.
Santander Brasil Distribution Channel
We may, pursuant to the Partnership Agreement, market certain of Getnet products and services to our customer base. Any such distribution by Santander Brasil is based on marketing materials, guidelines and instructions provided by Getnet for this purpose. Getnet has also agreed, pursuant to the Partnership Agreement, to make such materials, guidelines and instructions available to us. Additionally, we have agreed to give Getnet access to its facilities so that we may distribute equipment to customers, as provided by the Services Agreement executed on January 24, 2019 between Getnet, Itrade Marketing Smollan Brasil Ltda. (third party provider) and Santander Brasil. Getnet pays certain amounts provided for in the Partnership Agreement to Santander as consideration for these distribution services.
Santander Brasil Integrated Account
Pursuant to the Partnership Agreement, Getnet has agreed to offer preferential terms and conditions to customers who hold current accounts with Santander Brasil as part of the “Santander Brasil Integrated Account” offer (Santander Conta Integrada), including discounts on equipment rental fees, discounts in the fees charged for prepayment of receivables, and discounts on monthly service fees. In view of the special abovementioned conditions granted to Santander Brasil’s clients, Santander Brasil has agreed to reimburse Getnet for the full amount of the discounts granted to such clients.
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Funding
Pursuant to the Partnership Agreement, Santander Brasil intends to provide funding for Getnet and/or its subsidiaries to extend credit to their customers. Any funding is subject to a separate funding agreement to be entered into by the parties at the time of the relevant transaction.
In addition, in order to facilitate the concession of credit by Getnet SCD, we and Getnet have agreed to either, at our discretion (i) enter into a transaction consisting of a securitization of certain Getnet SCD receivables, in which Santander Brasil will act as the investor and provide the necessary funding for Getnet SCD to operate, or (ii) constitute an investment fund focused on receivables (Fundo de Investimento em Direitos Creditórios), or “FIDC,” in which Santander Brasil will invest by subscribing for the equity interests which constitute the FIDC, which will acquire Getnet SCD receivables.
Credit Origination and Customer Referrals to Santander Brasil
The Partnership Agreement provides that Getnet will originate credit transactions as well as commercial leads for other products and services from its customer base to be referred to Santander Brasil, who will provide Getnet with the related marketing material and instructions. We will pay Getnet consideration for these referrals.
Getnet Discount
The Partnership Agreement provides that we will reimburse Getnet the amount of discounts that we provide to attract and/or retain customers which are deemed to be of strategic importance to Getnet and Santander Brasil. The total amount reimbursed is subject to cap of 0.2% of the total amount of transactions involved.
Use of Brands
We and Getnet may use each other’s brands in connection with the transactions covered by the Partnership Agreement subject to the terms and conditions of the Partnership Agreement.
Indemnification
We and Getnet have agreed to indemnify each other and each of the other’s directors, officers, managers, members, representatives, agents, and employees against certain liabilities incurred due to an act of the other party, or the other party’s employees or contractors under the scope of the Partnership Agreement.
Term/Termination
The Partnership Agreement is effective as from January 1, 2021 for an indefinite term. Both parties have the right to terminate the Partnership Agreement at will, upon one-year prior written notice to the other party. In case of fault by the other party, as described by the Partnership Agreement, such as due to insolvency, bankruptcy, loss of material license, among others, the non-defaulting party is free to terminate the Partnership Agreement by means of a simple notification sent to the other party.
Governing Law
The Partnership Agreement is governed by the laws of Brazil.
Other Related Party Transactions
From timeOn February 28, 2020, we sold our entire equity interest in Superdigital to time, we engage in lendingSuperdigital Holding Company, S.L., a company indirectly controlled by Santander Spain. For further information regarding this sale, see “Item 4. Information on the Company—A. History and borrowing transactions to fund our operations and other miscellaneous transactions with various companiesDevelopment of the Santander Group,Company—Important Events.”
For further information, see note 45 to our audited consolidated financial statements included elsewhere in compliance with restrictions on loans or advances imposed by Brazilian law. The following table shows the balances owed to us by such companies (assets) at eachthis annual report.
7C. Interests of December 31, 2016Experts and December 31, 2015 and the amounts owed by us to such companies (liabilities) at the same dates. The table also sets forth amounts received (income) or paid (expenses) to such companies for the year ended December 31, 2016 and December 31, 2015. All such transactions with Santander Group companies were conducted on an arm’s-length basis with terms substantially similar to those available from other providers in the market.Counsel
As of December 31, 2016 | As of December 31, 2015 | |||||||||||||||||||||||
Parent(1) | Jointly- controlled companies | Other Related Party(2) | Parent(1) | Jointly- controlled companies | Other Related Party(2) | |||||||||||||||||||
(in thousands of R$) | ||||||||||||||||||||||||
Assets | 10,919,116 | 794,800 | 556,248 | 23,245,276 | 954,190 | 805,572 | ||||||||||||||||||
Trading derivatives, net | (184,304 | ) | — | (400,570 | ) | (265,491 | ) | — | (536,215 | ) | ||||||||||||||
Santander Spain | (184,304 | ) | — | — | (265,491 | ) | — | — | ||||||||||||||||
Abbey National Treasury Services Plc | — | — | (91,828 | ) | — | — | (156,976 | ) | ||||||||||||||||
Real Fundo de Investimento Multimercado Santillana Crédito Privado | — | — | (308,742 | ) | — | — | (379,239 | ) | ||||||||||||||||
Loans and amounts due from credit institutions–Cash and overnight operations in foreign currency | 10,900,941 | — | 94,530 | 23,248,821 | — | 136,634 | ||||||||||||||||||
Santander Spain(3)(5) | 10,900,941 | — | — | 23,248,821 | — | — | ||||||||||||||||||
Banco Santander Totta, S.A. | — | — | 1,261 | — | — | 1,303 | ||||||||||||||||||
Abbey National Treasury Services Plc | — | — | 92,118 | — | — | 135,165 | ||||||||||||||||||
Bank Zachodni. | — | — | 117 | — | — | 101 | ||||||||||||||||||
Banco Santander, S.A. – México | — | — | 1,034 | — | — | 65 | ||||||||||||||||||
Loans and other values with customers | — | 136,354 | 862,288 | — | 11,112 | 1,205,153 | ||||||||||||||||||
Zurich Santander Brasil Seguros S.A. | — | — | 862,553 | — | — | 753,581 | ||||||||||||||||||
Webmotors S.A. | — | 136,354 | — | — | 11,112 | — | ||||||||||||||||||
Santander Brasil Gestão de Recursos Ltda. | — | — | (265 | ) | — | — | 186 | |||||||||||||||||
BW Guirapá I S.A. | — | — | — | — | — | 451,386 | ||||||||||||||||||
Loans and amounts due from credit institutions(1) | 25,546 | 656,806 | — | 26,414 | 940,236 | — | ||||||||||||||||||
Santander Spain | 25,546 | — | — | 26,414 | — | — | ||||||||||||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil | — | — | — | — | 939,861 | — | ||||||||||||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing) (8) | — | 656,806 | — | — | 375 | — | ||||||||||||||||||
Other Assets | 176,933 | 1,640 | — | 235,532 | 2,842 | — |
Not applicable.
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As of December 31, 2016 | As of December 31, 2015 | |||||||||||||||||||||||
Parent(1) | Jointly- controlled companies | Other Related Party(2) | Parent(1) | Jointly- controlled companies | Other Related Party(2) | |||||||||||||||||||
(in thousands of R$) | ||||||||||||||||||||||||
Santander Spain | 176,933 | — | — | 235,532 | — | — | ||||||||||||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil | — | — | — | — | 2,276 | — | ||||||||||||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing) (8) | — | 1,640 | — | — | 566 | — | ||||||||||||||||||
Liabilities | (11,984,199 | ) | (106,527 | ) | (1,222,556 | ) | (12,155,786 | ) | (255,330 | ) | (937,572 | ) | ||||||||||||
Deposits from credit institutions | (327,466 | ) | (40,202 | ) | (980,702 | ) | (219,037 | ) | (37,796 | ) | (650,620 | ) | ||||||||||||
Santander Spain(4) | (327,466 | ) | — | — | (219,037 | ) | — | — | ||||||||||||||||
Santander Securities Services Brasil DTVM S.A. | — | — | (208,059 | ) | (219,037 | ) | — | — | ||||||||||||||||
Santander Brasil Asset Management Distribuidora de Títulos e Valores Mobiliários S.A. | — | — | (12,079 | ) | — | — | (12,360 | ) | ||||||||||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil | — | — | — | — | (31,656 | ) | — | |||||||||||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | — | — | (757,874 | ) | — | — | (616,399 | ) | ||||||||||||||||
Banco Santander, S.A. – Uruguay | — | — | (2,158 | ) | — | — | (20,533 | ) | ||||||||||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing) (8) | — | (40,202 | ) | — | — | (6,140 | ) | — | ||||||||||||||||
Others | — | — | (532 | ) | — | — | (1,328 | ) | ||||||||||||||||
Marketable debt securities | — | — | — | (12,416 | ) | — | — | |||||||||||||||||
Santander Spain (6) | — | — | — | (12,416 | ) | — | — | |||||||||||||||||
Customer Deposits | — | (66,325 | ) | (189,794 | ) | — | (217,534 | ) | (285,870 | ) | ||||||||||||||
ISBAN Brasil S.A | — | — | (22,232 | ) | — | — | (43,842 | ) | ||||||||||||||||
Santander Securities Services Brasil DTVM S.A. | — | — | (52,484 | ) | — | — | (679 | ) | ||||||||||||||||
Produban Serviços de Informática S.A. | — | — | (19,653 | ) | — | — | (29,993 | ) | ||||||||||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | — | — | (44,840 | ) | — | — | (109,506 | ) | ||||||||||||||||
Santander Brasil Gestão de Recursos Ltda. | — | — | (39,361 | ) | — | — | (72,182 | ) | ||||||||||||||||
Webmotors S.A. | — | (66,325 | ) | — | — | (217,534 | ) | — | ||||||||||||||||
Others | — | — | (11,224 | ) | — | — | (29,668 | ) | ||||||||||||||||
Other liabilities – Dividends and Bonuses Payable | (3,794,130 | ) | — | (16,494 | ) | (2,488,510 | ) | — | (705 | ) | ||||||||||||||
Santander Spain | (589,227 | ) | — | — | (385,067 | ) | — | — | ||||||||||||||||
Grupo Empresarial Santander S.L.(1) | (1,201,612 | ) | — | — | (788,119 | ) | — | — | ||||||||||||||||
Santander Insurance Holding S.L. | — | — | — | (1,398 | ) | — | — | |||||||||||||||||
Sterrebeeck B.V.(1) | (2,003,291 | ) | — | — | (1,313,926 | ) | — | — | ||||||||||||||||
Banco Madesant – Sociedade Unipessoal S.A. | — | — | (1,075 | ) | — | — | (705 | ) | ||||||||||||||||
Santusa Holding, S.L. | — | — | (15,419 | ) | — | — | - | |||||||||||||||||
Other payables | (2,954 | ) | — | (35,566 | ) | — | — | (377 | ) | |||||||||||||||
Santander Spain | (2,954 | ) | — | — | ||||||||||||||||||||
Santander Brasil Asset Management Distribuidora de Títulos e Valores Mobiliários S.A. | — | — | (70 | ) | — | — | (68 | ) | ||||||||||||||||
ISBAN Brasil S.A | — | — | (339 | ) | — | — | (309 | ) | ||||||||||||||||
Santander Securities Services Brasil DTVM S.A. | — | — | (4,430 | ) | — | — | — | |||||||||||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | — | — | (30,684 | ) | — | — | — | |||||||||||||||||
Others | — | — | (43 | ) | — | — | — | |||||||||||||||||
Debt Instruments Eligible Capital | (7,859,649 | ) | — | — | (9,435,823 | ) | — | — | ||||||||||||||||
Santander Spain (2)(7) | (7,859,649 | ) | — | — | (9,435,823 | ) | — | — |
As of December 31, 2016 | As of December 31, 2015 | |||||||||||||||||||||||
Parent(1) | Joint-controlled | Other Related– | Parent(1) | Joint–controlled | Other Related– | |||||||||||||||||||
(in thousands of R$) | ||||||||||||||||||||||||
Income | (798,022 | ) | 136,111 | 1,197,489 | (761,189 | ) | 189,182 | 2,509,524 | ||||||||||||||||
Interest and similar income—Loans and amounts due from credit institutions | 39,677 | 114,909 | 396 | 31,930 | 163,684 | 104 | ||||||||||||||||||
Santander Spain | 39,677 | — | — | 31,930 | — | — | ||||||||||||||||||
Abbey National Treasury Services Plc | — | — | 396 | — | — | 104 | ||||||||||||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing) (6) | — | 114,909 | — | — | 163,684 | — | ||||||||||||||||||
Interest expenses and similar charges—Deposits from customers | (4,192 | ) | (26,996 | ) | (49,420 | ) | — | (25,330 | ) | (28,508 | ) | |||||||||||||
ISBAN Brasil S.A | — | — | (3,560 | ) | — | — | (7,841 | ) | ||||||||||||||||
Produban Serviços de Informática S.A. | — | — | (2,117 | ) | — | — | (3,752 | ) | ||||||||||||||||
Webmotors S.A | — | (26,996 | ) | — | — | (25,330 | ) | — | ||||||||||||||||
Santander Brasil Gestão de Recursos Ltda. | — | — | (12,417 | ) | — | — | (14,302 | ) | ||||||||||||||||
Santander Spain | (4,192 | ) | — | — | — | — | — | |||||||||||||||||
Santander Cultural | — | — | (11 | ) | — | — | — | |||||||||||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | — | — | (31,097 | ) | — | — | — | |||||||||||||||||
Others | — | - | (218 | ) | — | — | (2,613 | ) | ||||||||||||||||
Interest expenses and similar charges—Deposits from credit institutions | (512 | ) | (10,959 | ) | (115,458 | ) | (311 | ) | (1,447 | ) | (89,636 | ) | ||||||||||||
Santander Spain | (512 | ) | — | — | (311 | ) | — | — | ||||||||||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing) (6) | — | (10,959 | ) | — | — | (1,447 | ) | — | ||||||||||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | — | — | (88,467 | ) | — | — | (15,584 | ) | ||||||||||||||||
Santander Securities Services Brasil DTVM S.A. | — | — | (20,979 | ) | — | — | (71,939 | ) |
As of December 31, 2016 | As of December 31, 2015 | |||||||||||||||||||||||
Parent(1) | Joint-controlled companies | Other Related– Party(2) | Parent(1) | Joint–controlled companies | Other Related– Party(2) | |||||||||||||||||||
(in thousands of R$) | ||||||||||||||||||||||||
Santander Asset Management, S.A. SGIIC | — | — | (1,760 | ) | — | — | (2,113 | ) | ||||||||||||||||
Santander Securities | — | — | (4,119 | ) | — | — | — | |||||||||||||||||
SAM Brasil Participações | — | — | (133 | ) | ||||||||||||||||||||
Fee and commission income (expense) | 5,334 | 20,133 | 1,955,255 | (8,022 | ) | 21,376 | 1,889,138 | |||||||||||||||||
Santander Spain | 5,334 | — | — | (8,022 | ) | — | — | |||||||||||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil | — | — | — | — | 16,579 | — | ||||||||||||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing) (6) | — | 19,211 | — | — | 3,863 | — | ||||||||||||||||||
Banco Santander Internacional | — | — | 20,959 | — | — | 8,804 | ||||||||||||||||||
Santander Securities | — | — | 1,896 | — | — | — | ||||||||||||||||||
Webmotors S.A. | — | 922 | — | — | 934 | — | ||||||||||||||||||
Zurich Santander Brasil Seguros S.A. | — | — | 218,773 | — | — | 248,824 | ||||||||||||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | — | — | 1,711,138 | — | — | 1,626,288 | ||||||||||||||||||
Others | — | — | 2,489 | — | — | 5,222 | �� | |||||||||||||||||
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) | (613,168 | ) | 39,024 | 267,983 | (406,523 | ) | 30,899 | 953,678 | ||||||||||||||||
Santander Spain | (613,168 | ) | — | — | (406,523 | ) | — | — | ||||||||||||||||
Santander Benelux, S.A., N.V. | — | — | — | — | — | 424,182 | ||||||||||||||||||
Real Fundo de Investimento Multimercado Santillana Crédito Privado | — | — | 257,475 | — | — | 602,557 | ||||||||||||||||||
Abbey National Beta Investments Limited | — | — | 38,274 | — | — | (88,881 | ) | |||||||||||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing) (6) | — | 39,024 | — | — | 30,899 | — | ||||||||||||||||||
Santander Securities | — | — | (16,038 | ) | — | — | — | |||||||||||||||||
Santander Investment Securities Inc. | — | — | (15,115 | ) | — | — | — | |||||||||||||||||
Others | — | — | 3,387 | — | — | 15,820 | ||||||||||||||||||
Administrative expenses and amortization | — | — | (840,739 | ) | — | — | (982,135 | ) | ||||||||||||||||
ISBAN Brasil S.A. | — | — | (290,430 | ) | — | — | (406,662 | ) | ||||||||||||||||
Produban Serviços de Informática S.A. | — | — | (209,253 | ) | — | — | (205,137 | ) | ||||||||||||||||
ISBAN Chile S.A. | — | — | (26 | ) | — | — | (1,024 | ) | ||||||||||||||||
Ingeniería de Software Bancario, S.L. | — | — | (42,519 | ) | — | — | (57,293 | ) | ||||||||||||||||
Produban Servicios Informáticos Generales, S.L | — | — | (21,525 | ) | — | — | (22,834 | ) | ||||||||||||||||
TECBAN—Tecnologia Bancária S.A. | — | — | (213,194 | ) | — | — | (160,563 | ) | ||||||||||||||||
Konecta Brazil Outsourcing Ltda. | — | — | — | — | — | (98,492 | ) | |||||||||||||||||
Aquanima Brasil Ltda. | — | — | (24,557 | ) | — | — | (24,075 | ) | ||||||||||||||||
Santander Securities | — | — | (35,882 | ) | — | — | — | |||||||||||||||||
Others | — | — | (3,353 | ) | — | — | (6,055 | ) | ||||||||||||||||
Others Administrative expenses—Donation | — | — | (20,528 | ) | — | — | (18,071 | ) | ||||||||||||||||
Santander Cultural | — | — | (2,737 | ) | — | — | (3,231 | ) | ||||||||||||||||
Fundação Santander | — | — | (3,452 | ) | — | — | (3,500 | ) | ||||||||||||||||
Instituto Escola Brasil | — | — | (939 | ) | — | — | (1,140 | ) | ||||||||||||||||
Fundação Sudameris | — | — | (13,400 | ) | — | — | (10,200 | ) | ||||||||||||||||
Gains (losses) on non-current assets held for sale not classified as discontinued operations | — | — | — | — | — | 784,954 | ||||||||||||||||||
Capital Riesgo Global, SCR (Espanha) (3) | — | — | — | — | — | 34,404 | ||||||||||||||||||
Santander Securities Services Brasil Participações S.A. (4) | — | — | — | — | — | 750,555 | ||||||||||||||||||
Debt Instruments Eligible Capital | (225,161 | ) | — | — | (378,263 | ) | — | — | ||||||||||||||||
Santander Spain (2) (5). | (225,161 | ) | — | — | (378,263 | ) | — | — |
Not applicable.
8A. Consolidated Statements and Other Financial Information |
Consolidated Financial Statements
See “Item 18. Financial Statements,” which contains our audited consolidated financial statements prepared in accordance with IFRS as issued by the IASB.
Legal Proceedings
We are a party to lawsuits and administrative proceedings incidental to the normal course of our business. The main categories of lawsuits and administrative proceedings to which we are subject include:
administrative and judicial actions relating to taxes; |
administrative and indemnification suits for damages related to consumer rights, especially in |
lawsuits involving disputes related to contracts and instruments to which we are a party, including claims related to breach of |
civil lawsuits mainly from depositors and civil associations, including individual lawsuits and class actions, challenging monetary adjustments determined by government economic plans instituted to combat inflation during the 1980s and 1990s; |
lawsuits relating to the privatization of Banespa; |
class actions involving agreements and settlement of debts with the public sector; and |
suits brought by employees, former employees, associations and unions relating to alleged labor rights violations. |
In accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, we record provisions for administrative and judicial proceedings in which we assess the risk of loss to be probable and we do not record provisions when the risk of loss is possible or remote. In cases where there is ongoing litigation, we record a provision for our estimate of the probable loss based on historical data for similar claims. In addition, we record provisions (i) on a case-by-case basis based on the analysis and legal opinion of internal and external counsel or (ii) by considering the historical average amount of loss of such category of lawsuits.lawsuits, Due to the established provisions and the legal opinions provided by our counsel, we believe that any liabilities related to lawsuits or proceedings to which we are a party, both individually and in the aggregate, will not have a material adverse effect on our financial condition or results of operations.
As of December 31, 2016,2021, our judicial and administrative proceedings classified as probable loss risk (tax, labor and civil) and legal obligation amounted to approximately R$13.4 billion11,179 million and have been provisioned.provisioned, We believe that we have made adequate provisions related to the costs anticipated to be incurred in connection with our judicial and administrative proceedings.proceedings, Our judicial and administrative proceedings classified as possible loss risk (tax, labor and civil) amounted to approximately R$19.9 billion.32,145 million.
Tax Litigation
We are a party to several tax-related lawsuits and judicial and administrative proceedings.
proceedings,
The main lawsuits related to tax legal obligations fully recognized tax liabilities are as obligation are:
follows:
PIS/ |
210 |
As of December 31, 2016,2021, our tax proceedings with a probable loss risk for tax litigationof loss amounted to approximately R$2.5 billion6,249 million, which was fully provisioned, and our tax proceedings with a possible loss risk for tax litigationof loss amounted to approximately R$18.6 billion.
29,498 million.
The main judicial and administrative proceedings to whichclassified with a probable loss risk assessment relates are:
are as follows:
Tax on services for financial |
Social security contribution |
Taxes on banking |
Contingent liabilities classified as having a possible risk of loss refer to judicial and administrative proceedings involving tax matters assessedwhich were deemed by theour management, taking in accountbased on the advice of our legal counsels,counsel, as having a possible losses, whichrisk of loss, and were not recognized as liabilities. The such main lawsuits include:
Losses on loans |
Social Security Contribution – Profit Sharing Payments (Participação nos Lucros e Resultados, or “PLR”). We are involved in administrative and judicial proceedings arising from tax assessment with respect to the collection of social security contributions on profit sharing payments. The tax authorities claim that payments by us were not made in accordance with the law. We have appealed |
IRPJ and CSLL – Capital Gain |
211 |
Goodwill amortization of the acquisition of Banco |
Goodwill amortization of the acquisition of Banco |
Unrecognized Compensation: We are currently engaged in legal and administrative proceedings with the Brazilian Federal Revenue Service relating to the failure to ratify certain tax offsets with credits we were owed by the Brazilian government due to overpayment or undue payment. As of December 31, 2021, the amount related to these proceedings was approximately R$5,351 million. The risk of loss is classified as possible. |
● | Tax on Services (ISS) - Financial Institutions: We are currently party to proceedings relating to the payment of ISS to various municipalities with respect to various revenues arising from operations that are usually not classified as services. On December 31, 2021, the amounts related to these proceedings totaled approximately R$4,146 million. |
● | Use of CSLL Tax and Negative Tax Loss: We are currently party to proceedings relating to tax assessments issued by the Brazilian Federal Revenue Service in 2009. These proceedings relate to the alleged undue compensation of tax loss carryforwards and negative basis of CSLL, because of tax assessments drawn up in previous periods. A judgment is pending at the administrative level. As of December 31, 2021, the amount related to these assessments was R$1,093 million. |
Labor Litigation
Similar to many other Brazilian banks, we are party to lawsuits brought by labor unions, associations and individual employees seeking, in general, compensation for overtime work, lost wages and retiree complaints about pension benefits and other labor rights. We believe we have either paid for or adequately provisioned for all such potential liabilities. In addition, we are the defendants in labor lawsuits filed by third-party employees that rendered or render services to us through service providers. The Brazilian courts understandSuperior Labor Court has issued a binding judicial precedent determining that if a third-party service provider fails to pay its employee, the employee has the right to demand payment directly from the company to which it rendered its services.their services (secondary liability). If this happens, the service taker’s liability will be limited to the services that were rendered by each individual. As of December 31, 2016,2021, our labor proceedings with a probable loss risk of labor-related litigationloss amounted to R$3.1 billion,2,025 million, which amount has been provisioned. Our labor proceedings with a possible loss risk of labor-related litigationloss amounted to R$15267.3 million.
Former employeesEmployees of Banco do Estado de São Paulo S.A.:S. A. Litigation
A claim was filed in 1998 by the association of retired Banespa employees, or “AFABESP,” requesting the payment of a half-yearly bonus contemplated in the bylaws of Banespa in the event that Banespa obtained a profit and that the distribution of this profit were approved by the Board of Directors. The bonus was not paid in 1994 and 1995 since Banespa had not made a profit during those years. Partial payments were made from 1996 to 2000, as approved by the board of directors. The relevant clause in the bylaws was repealed in 2001. A Brazilian Regional Labor Court and the Brazilian Superior Labor Court ordered Santander Brasil, as successor to Banespa, to pay this half-yearly bonus for the period from 1996 to the present. On March 20, 2019, a decision of the STF rejected the extraordinary appeal filed by Santander Brasil. We have brought a rescission action to revert the decision in the main proceedings and suspend procedural enforcement. The rescission action was dismissed in 2020 and, as of the date of this annual report, the deadline to file an extraordinary appeal to the STF has not yet lapsed. Our legal advisors have classified the risk of loss as probable. The current court decision does not define a specific amount to be paid by the defendants (this would only be determined once a final decision is issued and the enforcement process has begun, which is not the case yet).
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IGP-DI Litigation
A lawsuit was filed in 2002 in the Brazilian federal court by AFABESP on behalf of its members requesting that certain pension supplements to which persons admitted to the relevant retirement plan before May 22, 1975 were entitled be adjusted in accordance with the General Index of Brazilian Domestic Availability Prices (Índice Geral de Preços - Disponibilidade Interna), or the IGP-DI, inflation index. The lower court ruling was favorable to the plaintiffs and ordered that the readjustment be made, but only for periods of time when no other form of readjustment was applied. Santander Brasil and Banesprev appealed this decision, but both appeals were denied. After the judgment of the appeals, we filed motions for clarification, which are pending judgment. At the same time, AFABESP filed for provisional compliance with the judgment in the lower court and, in response, we filed a motion to have certain members of AFABESP excluded from the list of beneficiaries of this decision, as these members were already plaintiffs in other legal proceedings related to these issues. The court has not definitively ruled on our claim, such that there is still no definitive list of beneficiaries of its decision. Based on the assessment of our legal advisors, the risk of loss is possible, which is why no provision has been recorded.
Abusive Targets Class Action
In 2017, the Brazilian Labor Prosecutor’s Office (Ministério Público Federal do Trabalho), or the “MPT,” filed a class action against Santander Brasil alleging that the method used to define and assess employees’ corporate targets is abusive and inappropriate. Specifically, the class action alleges that we apply constant pressure to meet those targets, which would allegedly be abusive, apply excessive and continuously increased goals, make excessive and inappropriate demands, impose an excessive workload resulting in physical and psychological strain, make constant threats of dismissal for failure to meet targets, have a staff too small to deal with the existing workload, run an organizational model based on stress and humiliation. The complaint further alleges that, as a result, we have allegedly caused irreparable damage to our employees’ physical and mental health as a result of which the public social security system has suffered losses of more than R$90 million due to the 7,677 accident-related and social security benefits granted to employees from 2010 to 2015.
The MPT’s complaint demands that we refrain from imposing certain corporate targets, refrain from subjecting employees to abusive targets, reduce the target levels, refrain from increasing targets by more than 10% per year, institute a quarterly targeting system, and refrain from adopting targets for operational areas. There is also a claim for the payment of indemnity for collective moral damages in an amount of not less than R$460 million, and that we be prohibited from contracting with the government for 10 years. The MPT is also demanding that a fine of R$500,000 be set for any breach by us of the obligations imposed on us following the judgment.
The lower court ruling prohibited submitting employees to abusive targets. It also determined that the targets should only be reviewed annually and that their annual variation should be subjected to collective bargaining between Santander Brasil and the unions. The ruling also prohibited us from setting targets for employees in the back office and control departments, and required payment of indemnity for collective moral damages in the amount of R$274.4 million, in addition to the imposition of certain daily fines. Finally, the ruling determined that we are required to implement a new experimental target program under the terms provided for in the decision dated January 1, 2020. We appealed this decision and obtained a temporary stay. We estimate the risk of loss as remote.
Civil Litigation
We are a party to civil lawsuits claiming damages and other civil remedies. These disputes normally fall within one of the following categories typical for Brazilian banks:categories: (i) actions requesting the review of contractual terms and conditions or seeking monetary adjustments, including the alleged effects of implementation of certain economic government plans (as described below); (ii) actions arising from loan agreements; (iii) execution actions; and (iv) actions seeking damages. As of December 31, 2016,2021, our probable loss risk in connection with civil litigation liabilitiesproceedings amounted to R$1.8 billion,2,905 million, which has been fully provisioned, in full and our possible loss risk in connection with civil litigation liabilitiesproceedings amounted to R$1.2 billion.2,380 million. For civil lawsuits considered to be common and similar in nature, the provisions are recorded based on statistically averaged previous payments and on the legal counsel’s evaluation of success. Provisions for other lawsuits are determined individually on a case-by-case basis.
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Economic Plans
Like the rest of the banking system, we have been the subject of claims from customers mostlyand depositors and of class actions brought for a common reason, arising from a series of legislative changes relating to the calculation of inflation in the 1980s and 1990s (“planos econômicos”). The claimants considered that their vested rights had been impaired due to the immediate application of these adjustments. The claims relate to adjustments to the calculation of inflation applied on the amounts held in (i) savings deposit accounts (depósitos em conta poupança); (ii) time deposits (CDBs); and (iii) court deposits (depósito judicial).
In April 2010, the High CourtSTJ set the statute of Justice (“STJ”) set a limitation period for these class actions at five years, as claimed by the banks, rather than twenty20 years, as sought by the claimants, which we believe should significantly reduceclaimants. There are no new claims in connection with this matter due to the numberstatute of actions brought and the amounts claimed in this connection. As regards the substance of the matter, thelimitations. The decisions issued to date have been
adverse for the banks, although some proceedings have been brought atto the STJ and the STF, with which the matter isare expected to be definitively settled. In August 2010, the STJ handed down a decision finding for the plaintiffs in terms of substance,as to the merits, but excluding one of the “planos”plans from the claim, thereby reducing the amount thereof,of the award and once again confirming the five-year statute of limitations period.limitations. Shortly thereafter, the STF issued an injunctive relief order whereby the proceedings in progress in this connection wereare stayed until the court issues a final decision ondecision. Although the matter. In spite of the fact that STF initiated judgment in November 2013, a formal ruling has not been handed down as of the date hereof and we cannot predict when a formal ruling will be handed down by either the STJ or the STF.
In December 2017, the Brazilian Attorney-General’s Office (Advocacia-Geral da União), the Brazilian Central Bank, the Brazilian Consumer Protection Institute (Instituto Brasileiro de Defesa do Consumidor), the Brazilian Savers’ Association (Frente Brasileira pelos Poupadores) and the FEBRABAN signed an agreement to resolve existing disputes over the impact of the economic plans on the amounts held by claimants in savings deposit accounts. The settlement discussions did not address the full value of the payments and focused on setting the amount that would be paid to each person according to the relevant balance at the plan date. The total amount of the payments will depend on the number of persons adhering, as well as on the number of persons who proved in court the existence of the account and the balance on the date of the anniversary of the change in indices. The terms of agreement were negotiated between the parties and submitted to the STF, which approved the terms of the agreement on March 1, 2018 (for further details about the agreement, please see the specific section on “Cartilha Planos Econômicos” on the FEBRABAN’s website, which is not incorporated herein by reference). All existing claims were suspended for two years, during which period claimants must decide whether or not they will adhere to the agreement. On March 3, 2020, the agreement was extended by means of an amendment, with the inclusion of actions that involve only the discussion of the Collor I Plan. This extension has a term of five years. The approval of the terms of the amendment occurred on June 3, 2020.
In November 2018, the STF handed down a decision recognizing the leading case status (repercussão geral) of an appeal discussing the matter of understated inflation in the monetary restatement of court deposits and determined that procedures related to this matter will be stayed until a final decision is reached by the court. Following ratification of the amendment to the settlement agreement in 2020, the STF determined an additional stay of the proceedings related to the matter for five years.
Insilene Indústria de Silenciosos do Nordeste Ltda.
Litigation
This is a judicial claim filed against our wholly-owned subsidiary Banco Bandepe S.A. Bank (“Bandepe”), or “Bandepe,” in connection with a loan agreement entered into between Bandepe and Insilene Indústria de Silenciosos do Nordeste Ltda. (“Insilene”)., or “Insilene.” According to the complaint, Bandepe never provided the loan established onforeseen in the agreement, as a result of which led Insilene towent into bankruptcy. In this judicial process,these proceedings, the judgefirst instance court ruled in favor of Insilene, and suchwhich decision already became unappealable.may no longer be appealable. The proceeding is in its liquidation phase, and there is disagreement between Bandepe and Insilene regarding the value to be paid. The Court of JusticeAn appellate court of the State of Pernambuco approved the amount indicated in the expert'sexpert’s report and deniedrejected the calculation criteria sustained by Bandepe. However, in light of the criteria used by the expert in its calculations, the controversy was referredBandepe filed an appeal to the STJ to reviewchange the prior judicial decision. Such court’sform of liquidation to a form more favorable to Bandepe, on the basis that Insilene could have foreseen the damages. This appeal was successful and the liquidation phase will be restarted. After such decision has not been issued asand considering the changes in the form of the date of this report. We estimateliquidation, the risk of effective financial loss was reclassified as possible.
remote.
Fundo de Investimento em Direitos Creditórios Trendbank Banco de Fomento – Multisetorial.
A legal proceeding was filed against us in connection with the provision of custody services to Fundo de Investimento em Direitos Creditórios Trendbank Banco de Fomento – Multisetorial, (the “Fund”)or the “Fund,” related to the acquisition of fake or defective bonds. In a decision by the first instance court, the case was dismissed in relation to us on the grounds that the custodian could not be held responsible for the acquisition of bonds. The procedure will continue in relation to other defendants. The Fund may file anOn appeal, against the first instance court’scourt reversed the decision to the Court of Justice of the Statelower court as a result of São Paulo.which the case will be retried following the expert phase. We estimate the risk of loss as possible.
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Camargo CorrêSimilar proceedings have been brought by the Federal General Accounting Office (Tribunal de Contas de União), or the “TCU,” and the CVM to determine the liability for losses caused to pension funds as a S.A. and Camargo Corrêa Administraçresult of their investments in the Fund. The pension funds involved in the CVM proceeding are PETROS - Fundação Petrobras de Seguridade Social and Postalis – Instituto de Previdência Complementar. Only damages to Postalis are under discussion in the TCU proceeding. We have presented defenses to both proceedings.
IBAMA Litigation
On October 10, 2016, after an inspection conducted in rural properties located in the State of Mato Grosso, the Brazilian Environment Authority (Instituto Brasileiro do Meio Ambiente e Participações Ltda.
dos Recursos Naturais Renováveis), or “IBAMA,” filed an infraction notice against us alleging that we had financed the production of corn in a protected area. The amount of the fine was set at R$47.5 million (approximately U.S.$8.5 million). According to IBAMA, financing seed production in protected areas is considered an environmental infraction due to the potential environmental damage that it may cause. We filed an administrative defense on November 9, 2016, stating that we had not financed production in a judicial proceeding alongprotected area, given that the financing agreement with certain affiliates of ours against Camargo Corrêa S.A. and Camargo Corrêa Administração e Participações Ltda. (“Camargo Corrêa”) inthe property owner had no connection with the association agreement entered into for the implementationproduction of seeds. As a consequence of the control and administration of Banco Geral do Comércio S.A. (“BGC”) and its affiliates (“Association Agreement”). Under this proceeding the plaintiffs seek compensation for damages arising from obligations originated from events which took place before the signaturefiling of the Association Agreement which only were revealed toadministrative defense, the parties after the implementationenforceability of the terms of such agreement andfine is suspended. Although we (along with our affiliates) assumed BGC’s management. In response, Camargo Corrêa filed a counterclaim arguing to be our creditor. The judge ruled partially against our affiliates and us.In an appeal decision, the Court of Justice of the State of São Paulo (TJSP) reversed the decision in full, following grounds and granting the compensation claimed by us and our affiliates. We estimatebelieve we have presented valid arguments, we believe that the risk of loss aspossible.
in the administrative proceedings is possible. If we were to lose the administrative proceedings, we may seek a review of the administrative finding by a court.
Other Litigation
In addition to the matters described above, we are from time to time subject to certain claims and party to certain legal proceedings incidental to the normal course of our business, including in connection with our lending activities, relationships with our employees and other commercial or tax matters.matters, In view of the inherent difficulty of predicting the outcome of these legal matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories, or those that involve a large number of parties or are in the early stages of discovery, we cannot state with confidence what the eventual outcome of these pending matters will be, what the timing of the ultimate resolution of these matters will be or what the eventual loss, fines or penalties related to each pending matter may be. We believe that we have made adequate provisions related to the costs anticipated to be incurred in connection with these various claims and legal proceedings and believe that liabilities related to such claims and proceedings should not have, in the aggregate, a material adverse effect on our business, financial condition, or results of operations. However, in light of the uncertainties involved in such claims and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the provisions currently accrued by us; as a result, the outcome of a particular matter may be material to our operating results for a
particular period, depending upon, among other factors, the size of the loss or liability imposed and our level of income for that period.
Contingent liabilities classified as remote risk of loss refer to judicial and administrative proceedings involving other matters assessed by legal counsels, such as remote losses, which werecounsel that have not provided for.been provisioned. The main lawsuits are discussed in the following paragraphs.
In December 2008, the Brazilian Federal Revenue Service issued a tax assessment against us in the total amount of R$3.9 billion with respect to IRPJ and CSLL related to 2002 to 2004. The tax authorities assert that we did not meet the legal requirements for deducting amortization of the goodwill arising from the acquisition of Banespa. On October 21, 2011, ana unanimous decision of the CARF was handed down to cancel the tax assessments corresponding to fiscal years 2002 to 2004. The Brazilian Federal Revenue Service appealed to the CARF’s superior appeals panel (Câmara Superior de Recursos Fiscais) with respect to the merits, but not due to the fine, and the 2002 fiscal year, which was already being prescribed. Becausesubject to the statute of these two items,limitation. As a result, the assessment was reduced to R$1.8 billion. In December 2017, this favorable decision was modified in favor of the Brazilian Federal Revenue Service. Concurrently with the administrative proceeding, through a class action (Ação Popular), the administrative proceeding was returned to the CARF for a new judgment, which has not yet been handed down. However, the Brazilian Federal Revenue Service continues to charge us; therefore, a new lawsuit was filed to discuss this issue. There has been no decision at first instance. In June 2010, the Brazilian Federal Revenue Service issued two other infraction notices in the total amount of R$1.4 billion, based on the same concepts as the previous notice, with respect to IRPJ and CSLL related to 2005 to 2007. In these cases, Santander Brasil was not granted a favorable decision, and it has been appealed on its merits, though there was a reduction in the fine of R$367 million, and the assessment was reduced to R$984 million.million, the proceedings were partially unfavorable. We have filed claims for cancellation of these tax assessments. As of December 2013, the Brazilian Federal Revenue Service issued another infraction notice, in the total amount of R$344 million with respect to income tax and social contribution related to 2008.2008, Santander Brasil challenged this tax assessment and was granted a favorable decision inby the first instance.trial court. The tax authority has appealed the decision which is pendingand this was accepted. We are currently awaiting a final judgment.decision. In accordance with the advice of our external legal counsel, we believe that the Brazilian Federal Revenue Service’s position is incorrect, and that the risk of loss is remote. We did not record any provision since this issue should not have an impact on our consolidated financial statements.
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In addition to the aforementioned proceedings, in June 2013, the Brazilian tax authorities issued an infraction notice against us as the responsible party liable for the tax on the capital gain allegedly obtained in Brazil by an entity which is not resident in Brazil, Sterrebeeck B.V., as a result of the “a shares merger (incorporação de ações” (a shares merger)) transaction carried out in August 2008. As a result of the aforementionedThrough this transaction, we acquired all the shares of Banco Real and AAB Dois Par throughby providing the delivery toshareholders of these entities’ shareholders of newly-issuednewly issued shares through a capital increase carried out for that purpose. The Brazilian tax authorities take the view that in the aforementioned transaction, Sterrebeeck B.V.B.V, obtained income subject to tax in Brazil consisting of the difference between the issuance value of our shares that were received and the acquisition cost of the shares delivered in the exchange. WeA new appeal was filed with the CARF, which is awaiting judgment. This appeal was partially allowed and we filed an appealinjunction against the infraction notice atunfavorable portion of the Federal Tax Office and consider, basedappeal. The case is currently awaiting judgment. Based on the advice of our external legal counsel, that the position taken by the Brazilian tax authorities is not correct, thatand there are arguments for appeal against the infraction notice and that, asnotice. As a result, the risk of loss is considered to be remote. Consequently, we have not recognizedmade any provisions in connection with these proceedings.
On October 10, 2016, after an inspection conducted in rural properties located in the State of Mato Grosso, the Brazilian Environment Authority (Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis), or IBAMA, filed an Infraction Notice against the Company based on the ground of financing of corn in an embargoed area. The fine amount was established in an amount of R$47.5 million (approximately US$ 15 million). According to IBAMA, financing seed production on embargoed areas is considered an environmental infraction due to potential environmental damage resulting therefrom. We filed an administrative defense on November 9, 2016, stating that we had not financed production on embargoed area, since the financing agreement with the property owner had no connection with production of seeds. As a consequence of the filing of the administrative defense, the enforceability of the fine is suspended. Although we believe we have presented valid arguments, our risk assessment is probable loss in the administrative proceeding. If we were to lose the administrative proceeding, we may seek review of the administrative finding by a court in a future lawsuit.
On December 8, 2016, the General Superintendencygeneral superintendent of the Brazilian Anti-Trust Authority (Superintendencia Geral doConselho Administrativo de Defesa Econômica), or “CADE,”CADE began an investigation into alleged anticompetitive conduct in therealonshore foreign exchange market. The investigation concerns 11 financial institutions, including Santander Brasil, and 19 individuals active in the Brazilian foreign exchange market between 2009 and 2012. Santander BrasilOn January 8, 2018, we filed an administrative defense stating our understandings that there is monitoring the investigations but is not aware of anyno evidence that it waswe were involved in the alleged conduct. Santander Brasil expectsWe expect that these investigations will not have an adversea significant financial impact on it.us.
The MPF has charged one of our officers in connection with the alleged bribery of a Brazilian tax auditor to secure favorable decisions in tax cases, resulting in a claimed benefit of R$83 million (approximately U.S.$15 million) for us. On October 23, 2018, the officer was formally indicted and asked to present his defense. On November 5, 2018 the officer in question presented his defense. The proceedings are currently ongoing. We are not a party to these proceedings. We have voluntarily provided information to the Brazilian authorities and have relinquished the benefit of certain tax credits to which the allegations relate in order to show good faith.
Dividend Policy
General Rules
We are required by Brazilian Corporate Law and our By-Laws to hold an annual general shareholders’ meeting by no later than the fourth month after each fiscal year, at which time, among other things, the allocation of the net profits inof the preceding year and the distribution of an annual dividend are approved by our shareholders. The payment of annual dividends is based on our consolidated audited financial statements prepared for the immediately preceding fiscal year.
Our By-Laws provide that an amount equal to at least 25.0% of our adjusted net income, after deducting allocations to the legal and contingency reserves, should be available for distribution as a dividend or interest attributable to shareholders’ equity in any given year. This amount represents the mandatory dividend.
Our board of directors may declare interim dividends or interest attributable to shareholders’ equity based on income verified in semi-annualsemiannual consolidated financial statements. The board of directors may also declare dividends or interest attributable to shareholders’ equity based on consolidated financial statements prepared for shorter periods, provided that the total dividends paid in each six-month period do not exceed the capital reserves amount required by Brazilian Corporate Law. The board of directors may also declare interim dividends or interest attributable to shareholders’ equity out of retained earnings or income reserves recorded in the last annual or semi-annualsemiannual balance sheet. Any payment of interim dividends or interest on shareholders’ equity may be set off against the amount of mandatory dividends relating to the net income earned in the year in which the interim dividends were paid.
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The amount distributed to shareholders as interest attributable to shareholders’ equity, net of any withholding tax, may be included as part of the minimum mandatory dividend. In accordance with applicable law, we are required to pay to shareholders an amount sufficient to ensure that the net amount they receive in respect of interest attributable to shareholders’ equity, after payment of the applicable withholding tax, plus the amount of declared dividends, is at least equivalent to the amount of the minimum mandatory dividend.
However, Brazilian Corporate Law allows however, our shareholders to suspend dividends distribution if our board of directors reports toat our annual shareholders’ meeting that the distribution would not be advisable given our financial condition. Our fiscal council, if in operation,installed, should review any suspension of the mandatory dividend. In addition, our management should submit a report to the CVM setting out the reasons for the suspension. Net income not distributed by virtue of a suspension is allocated to a separate reserve and, if not absorbed by subsequent losses, is required to be distributed as a dividend as soon as our financial condition permits such payment.
Current and Future Dividend Policy
WeOur board of directors currently recommendrecommends to our shareholders a 50% distribution of our yearly adjusted net income as dividends and/or interest attributable to shareholders’ equity. Our future dividend policy and the amount of future dividends and/or interest attributable to shareholders’ equity we decide to recommend to our shareholders for approval will depend on a number of factors, including, but not limited to, our cash flow, financial condition (including capital position), investment plans, prospects, legal requirements, economic climate, andregulatory provisions .and such other factors as we may deem relevant at the time.
Payment of Dividends
Any holdershareholder as of the record of shares at the timedate set once a dividend is declared is entitled to receive dividends. Under Brazilian Corporate Law, dividends are generally required to be paid within 60 days following the date on which the dividend is declared, unless the shareholders’ resolution establishes another payment date, which in any event, must occur prior to the end of the fiscal year in which such dividend was declared. Based on Brazilian Corporate Law, unclaimed dividends do not bear interest, are not monetarily adjusted and may revert to us three years after dividends werebeing declared.
The depositary is the registered owner of the units underlying the ADRs on the records of the registrar. Such units are held since December 13, 2016 by S3 Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A. (the current corporate name of Santander Securities Services Brasil Distribuidora de Títulos e Valores Mobiliários S.A.) in Brazil, acting as the custodian and agent for the depositary for our ADRs.
Payments of cash dividends and distributions, if any, are made inreais to the custodian on behalf of the depositary, which then converts such proceeds into U.S. dollars and causes such U.S. dollars to be delivered to the depositary for distribution to holders of ADRs. In the event that the custodian is unable to convert immediately the Brazilian currency received as dividends into U.S. dollars immediately, the amount of U.S. dollars payable to holders of ADRs may be adversely affected by depreciation ofchanges in the Brazilian currency.
exchange rate for reais into U.S. dollars.
The following table sets forth the amounts available for distribution as dividends based on the Brazilian GAAP calculation of net income.income, The reconciliation of net income under Brazilian GAAP to net income under IFRS is presented in note 45Appendix I of our audited consolidated financial statements for the years ended December 31, 2016, 20152021, 2020 and 2014.2019:
For the year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in millions of R$) | ||||||||||||
Net Income under Brazilian GAAP | 14,996 | 14,056 | 14,088 | |||||||||
(-) Legal Reserve | 750 | 703 | 704 | |||||||||
(=) Amounts Available for distribution | 14,246 | 13,353 | 13,384 | |||||||||
Mandatory Dividends – 25.0% | 3,561 | 3,338 | 3,346 | |||||||||
Interest on Shareholder’s Equity | 3,649 | 3,325 | 4,010 | |||||||||
Dividends | 6,000 | 512 | 6,790 | |||||||||
Total (Interest on Shareholder’s Equity and Dividends) | 9,649 | 3,837 | 10,800 | |||||||||
Dividends distributed in excess of the Mandatory Dividend | 7,388 | 499 | 7,454 |
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For the year ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
(in millions of R$) | ||||||||||||
Net Income under Brazilian GAAP | 5,522 | 6,983 | 2,153 | |||||||||
(-) Legal Reserve | 276 | 349 | 108 | |||||||||
(=) Amounts Available for distribution | 5,246 | 6,634 | 2,045 | |||||||||
Mandatory Dividends – 25.0% | 1,312 | 1,658 | 511 | |||||||||
Interest on Shareholder’s Equity | 3,850 | 1,400 | 690 | |||||||||
Dividends | 1,400 | 4,800 | 840 | |||||||||
Total (Interest on Shareholder’s Equity and Dividends) | 5,250 | 6,200 | 1,530 | |||||||||
Dividends distributed in excess of the Mandatory Dividend | 3,938 | 4,542 | 1,019 |
History of Payment of Dividends and Interest Attributable to Shareholders’ Equity
In 2016,2021, we declared dividends and interest on shareholders’ equity in the gross amount of R$5,250 million, R$5009,649 million, of which R$3,000 million was paid on August 26, 2016,June 2, 2021, R$3,400 million on September 3, 2021, R$3,000 million on December 3, 2021 and R$4,750249 million which was paid on February 23, 2017.
3, 2022. The table below shows the amounts paid to our shareholders in the periods indicated.
For the year ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
(in millions of R$, except per share figures) | ||||||||||||||||||||
Dividends | 6,000 | 512 | 6,790 | 2,500 | 1,400 | |||||||||||||||
Interest attributable to shareholders’ equity | 3,649 | 3,325 | 4,010 | 3,800 | 3,850 | |||||||||||||||
Total | 9,649 | 3,837 | 10,800 | 6,300 | 5,250 | |||||||||||||||
Dividends and interest on capital per 1,000 shares | ||||||||||||||||||||
Common shares | 1,397.75 | 489.83 | 1,379 | 776.17 | 666.21 | |||||||||||||||
Preferred shares | 1,537.54 | 538.82 | 1,517 | 853.79 | 732.83 |
For the year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(in millions of R$, except per share figures) | ||||||||||||||||||||
Dividends | 1,400 | 4,800 | 840 | 2,100 | 1,650 | |||||||||||||||
Interest attributable to shareholders’ equity | 3,850 | 1,400 | 690 | 300 | 1,020 | |||||||||||||||
Total | 5,250 | 6,200 | 1,530 | 2,400 | 2,670 | |||||||||||||||
Dividends and interest on capital per 1,000 shares | ||||||||||||||||||||
Common shares | 666.21 | 784.90 | 193.26 | 302.15 | 335.73 | |||||||||||||||
Preferred shares | 732.83 | 863.39 | 212.59 | 332.36 | 369.30 |
8B. Significant Changes |
There has been no significant change since the date of our last audited financial statements.
9A. Offering and Listing Details |
Market Price and Volume Information
On September 18, 2009, our boardBoard of directorsDirectors approved the implementation of the global public offering (“Global Offering”),Public Offering, which included the issue of 525,000,000 Units (each representing, at that date, 55 common shares and 50 preferred shares), which were all registered, without par value, free and clear of any liens or encumbrances, consistingencumbrances. This offering consisted of the simultaneous initial public offering of (i) Units in Brazil on the over-the-counter market, in accordance with CVM Instruction 400 of December 29, 2003, as amended, and (ii) Units abroad, including in the form of ADRs representing American Depositary Shares (“ADSs”)ADSs registered with the SEC under the Securities Act.
On October 6, 2009, the Global Public Offering priced shares at R$23.50 per unit and U.S.$13.40 per ADR. The Units have been traded on the BM&FBOVESPAB3 and since October 7, 2009, and our ADRs have been traded on the NYSE since October 7, 2009.
On April 29, 2014, Santander Spain, our indirect controlling shareholder, announced its intention to launch voluntary exchange offers in Brazil and in the United States to acquire up to all of our shares that were not held by the Santander Group, representing approximately 25% of our share capital, with payment in BDRsBrazilian depositary receipts or ADRs representative of Santander Spain’s common shares.
On October 30, 2014, the Brazilian Exchange Offer and the U.S. the Exchange Offer were concluded. As a result of these offers, the Santander Group’s shareholding increased to 88.3% of our total share capital (not including the shares held by Banco Madesant - Sociedade Unipessoal). Alsocapital. Further, as a result of the offer in Brazil, our Units were delisted from the Level 2 Segment and are now traded at the basic listing segment of BM&FBOVESPA.B3.
The uncertainties caused by the outbreak of the COVID-19 pandemic had an adverse impact on the global economy and global capital markets and in Brazil, including markets volatility, which resulted in the B3’s circuit breaker mechanism being triggered eight times during March 2020.
The price of our units and ADSs may experience volatility, which could negatively impact holders of our Units and ADSs.
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The following table shows our outstanding publicly traded common shares and preferred shares as of December 31, 2016:February 22, 2022:
Free Float | BM&FBOVESPA | NYSE | B3 | NYSE | ||||||||||||
Common shares | 146,175,156 | 236,064,489 | 208,185,207 | 149,747,122 | ||||||||||||
Preferred shares | 173,979,571 | 236,064,489 | 235,899,621 | 149,747,122 | ||||||||||||
Total | 320,154,727 | 472,128,978 | 444,084,828 | 299,494,244 |
Units, Common and Preferred Shares tradedTraded on BM&FBOVESPA
B3
The table below sets forth the high, low and last daily sales prices inreais for our common shares on the BM&FBOVESPAB3 for the periods indicated.
Reais per share – SANB3 (Common Shares) | ||||||||||||
High | Low | Last | ||||||||||
2012 Annual | 0.20 | 0.13 | 0.15 | |||||||||
2013 Annual | 0.16 | 0.11 | 0.14 | |||||||||
2014 Annual(1) | 8.50 | 0.10 | 6.70 | |||||||||
2015 Annual | 10.80 | 6.10 | 8.83 | |||||||||
1st Quarter | 8.21 | 6.10 | 7.75 | |||||||||
2nd Quarter | 10.80 | 7.80 | 9.40 | |||||||||
3rd Quarter | 10.08 | 6.40 | 6.50 | |||||||||
4th Quarter | 8.99 | 6.50 | 8.83 | |||||||||
2016 Annual | 19.46 | 6.60 | 19.36 | |||||||||
1st Quarter | 10.13 | 6.60 | 9.31 | |||||||||
2nd Quarter | 11.42 | 8.75 | 9.90 | |||||||||
3rd Quarter | 14.20 | 9.61 | 13.51 | |||||||||
4th Quarter | 19.46 | 12.90 | 19.36 | |||||||||
LAST 6 MONTHS | 22.92 | 12.90 | 20.11 | |||||||||
October 2016 | 16.80 | 12.90 | 16.63 | |||||||||
November 2016 | 19.16 | 13.95 | 17.50 | |||||||||
December 2016 | 19.46 | 15.35 | 19.36 | |||||||||
January 2017 | 21.10 | 18.61 | 20.25 | |||||||||
February 2017 | 22.92 | 20.05 | 21.40 | |||||||||
March 2017 (through March24, 2017) | 22.02 | 18.00 | 20.11 |
Reais per share – SANB3 (Common Shares) | ||||||||||||||
High | Low | Last | ||||||||||||
2017 Annual | 22.92 | 13.01 | 18.49 | |||||||||||
1st Quarter | 22.92 | 16.00 | 16.13 | |||||||||||
2nd Quarter | 17.60 | 13.01 | 14.75 | |||||||||||
3rd Quarter | 17.40 | 14.30 | 15.10 | |||||||||||
4th Quarter | 20.03 | 14.90 | 18.49 | |||||||||||
2018 Annual | 24.60 | 14.06 | 22.22 | |||||||||||
1st Quarter | 23.00 | 16.91 | 23.00 | |||||||||||
2nd Quarter | 24.60 | 14.16 | 15.05 | |||||||||||
3rd Quarter | 21.05 | 14.06 | 19.40 | |||||||||||
4th Quarter | 23.72 | 19.01 | 22.22 | |||||||||||
2019 Annual | 28.99 | 20.30 | 25.45 | |||||||||||
1st Quarter | 26.65 | 20.49 | 21.94 | |||||||||||
2nd Quarter | 23.71 | 20.50 | 23.00 | |||||||||||
3rd Quarter | 24.60 | 20.30 | 23.77 | |||||||||||
4th Quarter | 28.99 | 22.27 | 25.45 | |||||||||||
2020 Annual | 25.90 | 10.50 | 21.66 | |||||||||||
1st Quarter | 25.90 | 11.29 | 12.99 | |||||||||||
2nd Quarter | 16.57 | 10.50 | 13.97 | |||||||||||
3rd Quarter | 15.62 | 12.51 | 13.05 | |||||||||||
4th Quarter | 22.35 | 12.71 | 21.66 | |||||||||||
2021 Annual | 22.45 | 15.67 | 15.76 | |||||||||||
1st Quarter | 22.25 | 17.13 | 18.75 | |||||||||||
2nd Quarter | 22.45 | 17.84 | 19.61 | |||||||||||
3rd Quarter | 21.09 | 15.77 | 16.64 | |||||||||||
4th Quarter | 17.90 | 15.67 | 15.76 | |||||||||||
Last 6 Months | 21.09 | 14.00 | 14.92 | |||||||||||
June 2021 | 21.09 | 18.60 | 20.42 | |||||||||||
July 2021 | 21.07 | 15.77 | 16.64 | |||||||||||
August 2021 | 17.90 | 15.75 | 16.16 | |||||||||||
September 2021 | 21.07 | 15.77 | 16.64 | |||||||||||
October 2021 | 17.90 | 15.75 | 16.16 | |||||||||||
November 2021 | 17.43 | 15.19 | 15.50 | |||||||||||
December 2021 | 16.09 | 14.00 | 14.21 | |||||||||||
January 2022 | 16.24 | 14.22 | 15.60 | |||||||||||
February 2022* | 15.65 | 14.82 | 15.05 |
* Through February 22, 2022.
Reais per share – SANB4 (Preferred Shares) | ||||||||||||
High | Low | Last | ||||||||||
2012 Annual | 0.18 | 0.13 | 0.13 | |||||||||
2013 Annual | 0.16 | 0.11 | 0.14 | |||||||||
2014 Annual(1) | 8.18 | 0.10 | 6.02 | |||||||||
2015 Annual | 7.92 | 5.52 | 7.23 | |||||||||
1st Quarter | 6.75 | 5.80 | 6.15 | |||||||||
2nd Quarter | 7.89 | 6.10 | 7.40 | |||||||||
3rd Quarter | 7.80 | 5.52 | 5.89 | |||||||||
4th Quarter | 7.92 | 5.80 | 7.23 | |||||||||
2016 Annual | 10.59 | 5.40 | 10.05 | |||||||||
1st Quarter | 8.00 | 5.40 | 7.40 |
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The table below sets forth the high, low and last daily sales prices in reais for our preferred shares on the B3 for the periods indicated.
Reais per share – SANB4 (Preferred Shares) | ||||||||||||
High | Low | Last | ||||||||||
2nd Quarter | 8.27 | 7.20 | 8.09 | |||||||||
3rd Quarter | 9.64 | 7.86 | 8.53 | |||||||||
4th Quarter | 10.59 | 8.57 | 10.05 | |||||||||
LAST 6 MONTHS | 13.79 | 8.57 | 12.41 | |||||||||
October 2016 | 9.24 | 8.57 | 9.18 | |||||||||
November 2016 | 10.59 | 9.00 | 10.15 | |||||||||
December 2016 | 10.42 | 8.89 | 10.05 | |||||||||
January 2017 | 11.60 | 9.31 | 11.15 | |||||||||
February 2017 | 13.79 | 11.00 | 13.15 | |||||||||
March 2017 (through March 24, 2017) | 13.50 | 11.72 | 12.41 |
Reais per share – SANB4 (Preferred Shares) | ||||||||||||||
High | Low | Last | ||||||||||||
2017 Annual | 22.92 | 13.01 | 18.49 | |||||||||||
1st Quarter | 22.92 | 16.00 | 16.13 | |||||||||||
2nd Quarter | 17.60 | 13.01 | 14.75 | |||||||||||
3rd Quarter | 17.40 | 14.30 | 15.10 | |||||||||||
4th Quarter | 20.03 | 14.90 | 18.49 | |||||||||||
2018 Annual | 24.60 | 14.06 | 22.22 | |||||||||||
1st Quarter | 23.00 | 16.91 | 23.00 | |||||||||||
2nd Quarter | 24.60 | 14.16 | 15.05 | |||||||||||
3rd Quarter | 21.05 | 14.06 | 19.40 | |||||||||||
4th Quarter | 23.72 | 19.01 | 22.22 | |||||||||||
2019 Annual | 28.99 | 20.30 | 25.45 | |||||||||||
1st Quarter | 26.65 | 20.49 | 21.94 | |||||||||||
2nd Quarter | 23.71 | 20.50 | 23.00 | |||||||||||
3rd Quarter | 24.60 | 20.30 | 23.77 | |||||||||||
4th Quarter | 28.99 | 22.27 | 25.45 | |||||||||||
2020 Annual | 24.28 | 11.42 | 23.49 | |||||||||||
1st Quarter | 24.25 | 12.00 | 13.87 | |||||||||||
2nd Quarter | 16.46 | 11.42 | 14.22 | |||||||||||
3rd Quarter | 16.19 | 13.96 | 14.90 | |||||||||||
4th Quarter | 24.28 | 14.56 | 23.49 | |||||||||||
2021 Annual | 25.00 | 17.62 | 18.11 | |||||||||||
1st Quarter | 25.00 | 18.20 | 20.82 | |||||||||||
2nd Quarter | 24.26 | 19.25 | 21.06 | |||||||||||
3rd Quarter | 21.85 | 18.52 | 18.77 | |||||||||||
4th Quarter | 20.53 | 17.62 | 18.11 | |||||||||||
Last 6 Months | 21.84 | 15.90 | 16.87 | |||||||||||
June 2021 | 21.84 | 20.29 | 21.19 | |||||||||||
July 2021 | 21.44 | 18.52 | 18.77 | |||||||||||
August 2021 | 20.53 | 17.62 | 18.16 | |||||||||||
September 2021 | 21.44 | 18.52 | 18.77 | |||||||||||
October 2021 | 20.53 | 17.62 | 18.61 | |||||||||||
November 2021 | 19.53 | 17.52 | 17.82 | |||||||||||
December 2021 | 18.36 | 15.95 | 15.95 | |||||||||||
January 2022 | 18.49 | 15.90 | 17.89 | |||||||||||
February 2022* | 17.94 | 16.61 | 16.79 |
* Through February 22, 2022.
220 |
B3 Units – SANB11 | ||||||||||||||
High | Low | Last | ||||||||||||
R$ per share | ||||||||||||||
2017 Annual | 22.92 | 13.01 | 18.49 | |||||||||||
1st Quarter | 22.92 | 16.00 | 16.13 | |||||||||||
2nd Quarter | 17.60 | 13.01 | 14.75 | |||||||||||
3rd Quarter | 17.40 | 14.30 | 15.10 | |||||||||||
4th Quarter | 20.03 | 14.90 | 18.49 | |||||||||||
2018 Annual | 24.60 | 14.06 | 22.22 | |||||||||||
1st Quarter | 23.00 | 16.91 | 23.00 | |||||||||||
2nd Quarter | 24.60 | 14.16 | 15.05 | |||||||||||
3rd Quarter | 21.05 | 14.06 | 19.40 | |||||||||||
4th Quarter | 23.72 | 19.01 | 22.22 | |||||||||||
2019 Annual | 28.99 | 20.30 | 25.45 | |||||||||||
1st Quarter | 26.65 | 20.49 | 21.94 | |||||||||||
2nd Quarter | 23.71 | 20.50 | 23.00 | |||||||||||
3rd Quarter | 24.60 | 20.30 | 23.77 | |||||||||||
4th Quarter | 28.99 | 22.27 | 25.45 | |||||||||||
2020 Annual | 48.21 | 21.54 | 44.83 | |||||||||||
1st Quarter | 48.21 | 22.75 | 26.00 | |||||||||||
2nd Quarter | 32.47 | 21.54 | 27.59 | |||||||||||
3rd Quarter | 31.41 | 26.22 | 27.72 | |||||||||||
4th Quarter | 46.60 | 27.00 | 44.83 | |||||||||||
2021 Annual | 47.20 | 33.24 | 33.76 | |||||||||||
1st Quarter | 47.20 | 35.34 | 39.60 | |||||||||||
2nd Quarter | 46.80 | 37.36 | 40.50 | |||||||||||
3rd Quarter | 42.59 | 34.22 | 35.37 | |||||||||||
4th Quarter | 38.15 | 33.24 | 33.76 | |||||||||||
Last 6 Months | 42.59 | 29.84 | 31.43 | |||||||||||
June 2021 | 42.59 | 39.23 | 41.94 | |||||||||||
July 2021 | 42.40 | 34.22 | 35.37 | |||||||||||
August 2021 | 38.15 | 33.24 | 34.40 | |||||||||||
September 2021 | 42.40 | 34.22 | 35.37 | |||||||||||
October 2021 | 38.15 | 33.24 | 34.40 | |||||||||||
November 2021 | 36.97 | 32.63 | 32.96 | |||||||||||
December 2021 | 34.46 | 29.84 | 29.98 | |||||||||||
January 2022 | 34.82 | 30.08 | 32.87 | |||||||||||
February 2022* | 33.60 | 31.32 | 31.61 |
* Through February 22, 2022.
221 |
BM&FBOVESPA Units – SANB11 | ||||||||||||
High | Low | Last | ||||||||||
R$ per share | ||||||||||||
2012 Annual | 19.70 | 13.59 | 14.97 | |||||||||
2013 Annual | 16.07 | 12.64 | 13.98 | |||||||||
2014 Annual | 16.49 | 10.84 | 13.46 | |||||||||
2015 Annual | 17.99 | 12.21 | 16.04 | |||||||||
1st Quarter | 14.82 | 12.21 | 14.07 | |||||||||
2nd Quarter | 17.99 | 14.13 | 16.92 | |||||||||
3rd Quarter | 17.69 | 12.31 | 12.61 | |||||||||
4th Quarter | 16.85 | 12.62 | 16.04 | |||||||||
2016 Annual | 29.80 | 12.33 | 29.53 | |||||||||
1st Quarter | 18.63 | 12.33 | 16.95 | |||||||||
2nd Quarter | 19.46 | 16.53 | 18.18 | |||||||||
3rd Quarter | 23.45 | 17.74 | 22.00 | |||||||||
4th Quarter | 29.80 | 21.80 | 29.53 | |||||||||
LAST 6 MONTHS | 36.13 | 21.80 | 32.65 | |||||||||
October 2016 | 26.35 | 21.80 | 26.30 | |||||||||
November 2016 | 29.47 | 24.33 | 28.16 | |||||||||
December 2016 | 29.80 | 25.15 | 29.53 | |||||||||
January 2017 | 32.69 | 28.60 | 31.31 | |||||||||
February 2017 | 36.13 | 31.19 | 34.36 | |||||||||
March 2017 (through March 24, 2017) | 35.09 | 30.16 | 32.65 |
For information on the rights attaching to our common shares and to our preferred shares, please see “Item 10. Additional Information—B. By-Laws—Rights of Common Shares and Preferred Shares.”
ADRs tradedTraded on NYSE
Our ADRs have been listed and traded on the NYSE since October 7, 2009. Our Units abroad, including in the form of ADRs representing ADSs, are registered with the SEC under the Exchange Act.
The deposit agreement pursuant to which ADRs have been issued is between us and The Bank of New York Mellon, as depositary, and all the holders from time to time of ADRs. For further information on our arrangements with The Bank of New York Mellon, please see “Item 12. Description of Securities other than Equity Securities—D. American Depositary Receipts.Receipts,”
Since certain of our shares and our ADRs are held by nominees, the number of record holders may not be representative of the number of beneficial owners.
NYSE ADR – BSBR | ||||||||||||||
High | Low | Last | ||||||||||||
U.S.$ per ADR | ||||||||||||||
2017 Annual | 22.92 | 13.01 | 18.49 | |||||||||||
1st Quarter | 22.92 | 16.00 | 16.13 | |||||||||||
2nd Quarter | 17.60 | 13.01 | 14.75 | |||||||||||
3rd Quarter | 17.40 | 14.30 | 15.10 | |||||||||||
4th Quarter | 20.03 | 14.90 | 18.49 | |||||||||||
2018 Annual | 24.60 | 14.06 | 22.22 | |||||||||||
1st Quarter | 23.00 | 16.91 | 23.00 | |||||||||||
2nd Quarter | 24.60 | 14.16 | 15.05 | |||||||||||
3rd Quarter | 21.05 | 14.06 | 19.40 | |||||||||||
4th Quarter | 23.72 | 19.01 | 22.22 | |||||||||||
2019 Annual | 28.99 | 20.30 | 25.45 | |||||||||||
1st Quarter | 26.65 | 20.49 | 21.94 | |||||||||||
2nd Quarter | 23.71 | 20.50 | 23.00 | |||||||||||
3rd Quarter | 24.60 | 20.30 | 23.77 | |||||||||||
4th Quarter | 28.99 | 22.27 | 25.45 | |||||||||||
2020 Annual | 12.68 | 3.69 | 8.64 | |||||||||||
1st Quarter | 12.68 | 4.55 | 5.17 | |||||||||||
2nd Quarter | 6.74 | 3.69 | 5.22 | |||||||||||
3rd Quarter | 6.11 | 4.76 | 4.94 | |||||||||||
4th Quarter | 8.95 | 4.80 | 8.64 | |||||||||||
2021 Annual | 9.27 | 5.81 | 5.95 | |||||||||||
1st Quarter | 8.84 | 6.34 | 7.05 | |||||||||||
2nd Quarter | 9.27 | 6.62 | 8.20 | |||||||||||
3rd Quarter | 8.34 | 6.39 | 6.54 | |||||||||||
4th Quarter | 6.99 | 5.81 | 5.95 | |||||||||||
Last 6 Months | 8.30 | 5.19 | 5.79 | |||||||||||
June 2021 | 8.30 | 7.27 | 8.05 | |||||||||||
July 2021 | 8.17 | 6.39 | 6.54 | |||||||||||
August 2021 | 6.99 | 5.81 | 6.11 | |||||||||||
September 2021 | 8.17 | 6.39 | 6.54 | |||||||||||
October 2021 | 6.99 | 5.81 | 6.11 | |||||||||||
November 2021 | 6.57 | 5.74 | 5.82 | |||||||||||
December 2021 | 6.05 | 5.19 | 5.37 | |||||||||||
January 2022 | 6.50 | 5.33 | 6.27 | |||||||||||
February 2022* | 6.34 | 5.90 | 6.25 |
* Through February 22, 2022.
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NYSE ADR – BSBR | ||||||||||||
High | Low | Last | ||||||||||
U.S.$ per ADR | ||||||||||||
2012 Annual | 11.30 | 6.56 | 7.28 | |||||||||
2013 Annual | 8.08 | 5.71 | 5.97 | |||||||||
2014 Annual | 7.18 | 4.48 | 5.02 | |||||||||
2015 Annual | 5.98 | 2.96 | 3.89 | |||||||||
1st Quarter | 5.28 | 4.05 | 4.41 | |||||||||
2nd Quarter | 5.98 | 4.52 | 5.44 | |||||||||
3rd Quarter | 5.65 | 2.96 | 3.15 | |||||||||
4th Quarter | 4.35 | 3.10 | 3.89 | |||||||||
2016 Annual | 9.12 | 3.02 | 8.89 | |||||||||
1st Quarter | 4.93 | 3.02 | 4.65 | |||||||||
2nd Quarter | 5.74 | 4.41 | 5.70 | |||||||||
3rd Quarter | 7.19 | 5.33 | 6.70 | |||||||||
4th Quarter | 9.12 | 6.66 | 8.89 | |||||||||
LAST 6 MONTHS | 11.75 | 6.66 | 10.37 | |||||||||
October 2016 | 8.20 | 6.66 | 8.18 | |||||||||
November 2016 | 8.77 | 6.97 | 8.25 | |||||||||
December 2016 | 9.12 | 7.43 | 8.89 | |||||||||
January 2017 | 10.15 | 8.98 | 9.91 | |||||||||
February 2017 | 11.75 | 9.99 | 10.96 | |||||||||
March 2017 (through March 24, 2017) | 11.28 | 9.71 | 10.37 |
9B. Plan of Distribution |
Not applicable.
9C. Markets |
Our Units and common and preferred shares are traded on BM&FBOVESPA.the B3. The regulation of Brazilian securities markets which affects suchthese securities is describeddiscussed below. In addition, we also have ADRs which have been listed and traded on the NYSE since October 7, 2009. For further information, see “Item 9. The Offer and Listing—“—A. Offering and Listing Details.”
Regulation of Brazilian Securities Markets
The Brazilian securities market is regulated by the CVM, as provided for in the Brazilian Capital Markets Law and by Law 6,385 of December 7, 1976, or the “Brazilian Securities Market Law,” and Brazilian Corporate Law, as well as the CMN and the Brazilian Central Bank.
The Brazilian Central Bank and the CVM are responsible for the regulation and supervision of brokerage firms. The Brazilian Central Bank also regulates foreign investment and exchange transactions, pursuant to the guidelines set forth by the CMN, as provided for in the Brazilian Securities Market Law and Law 4,595 of December 31, 1964. These laws and regulations provide for, among other things, disclosure requirements, criminal sanctions for insider trading and price manipulation, protection of minority shareholders, the procedures for licensing and supervising brokerage firms and the governance of Brazilian stock exchanges.
Under Brazilian Corporate Law, a companycorporation is either publicly held (companhia aberta)(companhia aberta) or privately held (companhia fechada)(companhia fechada) and unlisted. All publicly-heldpublicly held companies must be registered with the CVM and are subject to reporting and other regulatory requirements. A company registered with the CVM may list its securities either on the Brazilian stock exchange market or on Brazilian over-the-counter markets. The shares of a listedpublicly held company may also be traded privately.
TheIn Brazil, the over-the-counter market is divided into two categories: (i) organized over-the-counter markets, in which the transactions are supervised by self-regulating entities authorized by the CVM; and (ii) non-organized over-the-
counterover-the-counter markets, in which the transactions are not supervised by self-regulating entities authorized by the CVM.supervised. In either case, the over-the-counter markets consist of direct trades, outside of the stock exchange market, through a financial institution registered with the CVM, which serves as an intermediary. No special application, other than registration with the CVM (and, in case of organized over-the-counter markets, registration with the applicable one), is necessary for securities of a public company to be traded in these markets.
To be listed on the BM&FBOVESPA,B3, a company must apply for registration with the CVM and BM&FBOVESPA.
the B3.
Trading on the BM&FBOVESPA
B3
The BM&FBOVESPAB3 currently gathersfacilitates all trading activities of shares and commodities in Brazil, including settlement, clearing and depositary services.
Trading on the Brazilian stock exchange is conducted by authorized members. Trading sessions in the shares market take place every business day, from 10:00 a.m. to 5:00 p.m. between March and October and from 10:00 a.m. to 6:00 p.m. between November and February, on an electronic trading system called PUMA. Trading is also conducted from March to October between 5:30 p.m. and 6:00 p.m. in an after-market system connected to both traditional brokerage firms and brokerage firms operating on the Internet.internet. This after-market trading is subject to regulatory limits on price volatility of securities traded by investors operating on the Internet.
internet.
The trading of securities on the BM&FBOVESPAB3 may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of the BM&FBOVESPAB3 or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the BM&FBOVESPA.B3.
223 |
In addition, in order to maintain control over the fluctuation of the BM&FBOVESPAB3 index, the BM&FBOVESPAB3 has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes, one hour, or a time to be defined by BM&FBOVESPA,B3, whenever the BM&FBOVESPAB3 index falls below 10.0%, 15.0% or 20.0%, respectively, in relation to the value of closing index levels of the previous trading session.
When investors trade shares on the BM&FBOVESPA,B3, the trade is settled in threetwo business days after the trade date, without adjustments to the purchase price. The seller is ordinarily required to deliver the shares to the exchange on the thirdsecond business day following the trade date. Delivery of and payment for shares are made through the facilities of an independent clearing house, a division of the BM&FBOVESPA,B3, which handles the multilateral settlement of both financial obligations and transactions involving securities. According to the regulations of the BM&FBOVESPA,B3, financial settlement is carried out through the system of transfer of funds of the Brazilian Central Bank and the transactions involving the sale and purchase of shares are settled through the BM&FBOVESPAB3 custody system. All deliveries against final payment are irrevocable.
In order to keep our securities listed on the B3, we are required to comply with the provisions of the B3’s Issuer Manual (Manual do Emissor), which establishes technical and operational procedures and criteria applicable to companies that have securities listed on the B3. The most up-to-date version of the B3’s Issuer Manual became effective as of October 22, 2020.
Corporate Governance Practices
In 2000, BM&FBOVESPAthe B3 introduced three special listing segments, known as Levels 1 and 2 of Corporate Governance and Novo Mercado, which were aimed at fostering a secondary market for securities issued by Brazilian companies listed on the BM&FBOVESPA, and it prompted such companies to follow good corporate governance practices. The listing segments are designed for the trading of shares issued by companiesthat voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law. The listing requirements were updated on May 10, 2011.
Our Units were initially listed on the Level 2 Segment. However, as a result of the Brazilian Exchange Offer and the U.S. Exchange Offer launched by Santander Spain in Brazil for the acquisition of our shares, our Units were delisted from the Level 2 Segment and are now traded at the basic listing segment of BM&FBOVESPA.
the B3.
Within the BM&FBOVESPAB3, we are a part of one sustainability index: ISE. Thethe ISE (Índice de Sustentabilidade Empresarial– Entrepreneurial Sustainability Index) which is a reference for socially responsible investments in Brazil. To be part of the portfolio, currently composed by 40of 46 companies, the company participates in a careful process to evaluate its
company’s performance in regardsis evaluated with respect to sustainability, including economic efficiency, environmental balance, social practices and corporate governance.
In 2016, the Brazilian Code of Corporate Governance for Publicly-held Companies (Código Brasileiro de Governança Corporativa – Companhias Abertas), or the “Governance Code,” was published by the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança Corporativa). The Governance CodeIt sets forth corporate governance related principles, guidelines and actions applicable for publicly-heldpublicly held companies and establishes a “comply or explain” enforcement model. In December 2016, the CVM beganOn June 8, 2017, following a public consultation regarding a drafton the implications of a new setthe Governance Code for Brazilian companies, the CVM issued Normative Ruling No. 586 introducing the necessary changes to the existing securities regulation in order to make these consistent with the provisions of rules to implement the Governance Code.
The new rules established by this ruling apply to companies (i) which are registered as category “A” issuers, (ii) whose securities have been traded on the B3 since January 1, 2018, and (iii) which, on the publication date of CVM Instruction 586, had at least one of their securities included in the Brazil Index 100 – IBrX-100 (Índice Brasil 100) or within the Bovespa Index – IBOVESPA (Índice Bovespa). We fulfill all three of these criteria and are therefore subject to the new CVM rules.
Investment in Our Units by Non-Residents of Brazil
Investors residing outside Brazil, including institutional investors, may either register their investments in securities in Brazil, as a foreign direct investment under Law 4,131/62, or as a portfolio investment under the applicable regulation enacted by CMN and CVM. Foreign investors, regardless of whether their investments are made as direct investments or portfolio investments, must be enrolled with the Brazilian Internal Revenue. This registration process is undertaken by a financial institution or an institution authorized to operate by the Brazilian Central Bank as the investor’s legal representative in Brazil.
Since March 30, 2015, portfolio investments are regulated by CMN Resolution 4,373, ofenacted on September 29, 2014, (“CMNor “CMN Resolution 4,373”),4,373,” which revokedsuperseded CMN Resolution 2,689, of January 26, 2000, which had been in force for about 15 years.
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The main purpose of CMN Resolution 4,373 is to facilitate the entry of foreign investors in the Brazilian financial and capital markets. CMN Resolution 4,373 introduces the possibility for foreign investors of makingto make investments in local currency with funds held in their foreign bank accounts, of the non-resident investor, or with bills of payment denominated inreais but issued abroad.
With certain limited exceptions, CMN Resolution 4,373 allows investors to carry out any type of transaction in the Brazilian capital markets involving a security traded on a Brazilian stock or futures exchange, or through an organized over-the-counter market, but investors may not transfer the ownership of investments made under such regulation to other non-Brazilian holders through private transactions. Investments and remittances outside Brazil offor gains, dividends, profits or other payments under our Units are made through the foreign exchange market.
For further information on the requirements for the registration of foreign portfolio investments, see “Item 10. Additional Information—D. Exchange Controls—Foreign Investment in Brazil—Capital Markets Investment.”
In their turn, foreignForeign direct investors under Law 4,131/62 may sell their shares in both private and open market transactions, but these investors are currently subject to a less favorable tax treatment on gains, apart from being subject to taxation on the execution of foreign exchange transactions. For more information on foreign direct investors, see “Item 10. Additional Information—D. Exchange Controls—Foreign Investment in Brazil—Foreign Direct Investment.”
Since March 30, 2015, CMN Resolution 4,373 also deals with investments of foreign capitalscapital in Brazil through Depositary Receipts, (“DRs”),or “DRs,” and revokedsuperseded the former rule (CMN Resolution 1,927 of May 18, 1992).
We filed an application to have the ADRs approved under the former rule by the Brazilian Central Bank and the CVM, and we received final approval on October 1, 2009.
If a holder of ADRs decides to exchange such ADRs for the underlying Units, the holder will be entitled to (i) sell the Units on the BM&FBOVESPAB3 and rely on the depositary’s electronic registration for five business days from the date of exchange to obtain and remit U.S. dollars abroad upon the holder’s sale of our Units, (ii) convert its investment into a foreign portfolio investment under CMN Resolution 4,373, or (iii) convert its investment into a foreign direct investment under Law 4,131/62. See “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations” for a description of the tax consequences for an investor residing outside Brazil of investing in our Units in Brazil.
If a holder of ADRs wishes to convert its investment into either a foreign portfolio investment under CMN Resolution 4,373 or a foreign direct investment under Law 4,131/62, it should begin the process of obtaining its own
foreign investor registration with the Brazilian Central Bank or with the CVM, as the case may be, in advance of exchanging the ADRs for common shares.
Units.
The custodian is authorized to update the depositary’s electronic registration to reflect conversions of ADRs into foreign portfolio investments. If a holder of ADRs elects to convert its ADRs into a foreign direct investment under Law 4,131/62, the conversion will be effectedcarried out by the Brazilian Central Bank after receipt of an electronic request from the custodian with details of the transaction. This may also involve the need to changerequire the Units to be converted into shares.
If a foreign direct investor under Law 4,131/62 wishes to deposit its Units into the ADR program in exchange for ADRs, such holder will be required to present to the custodian evidence of payment of capital gains taxes. The conversion will be effectedcarried out by the Brazilian Central Bank after receipt of an electronic request from the custodian with details of the transaction. This may also involve the need to change the Units into shares.
The Brazilian federal constitution permits foreign individuals or companies to invest in the voting shares of Brazilian financial institutions only if they have specific authorization by the President of Brazil based on national interest or reciprocity. A presidential decree issued on November 13, 1997, in respect of Banco Meridional do Brasil S.A. (a predecessor entity) allows up to 100% foreign participation in our capital stock. Foreign investors may acquire our Units or ADRs as a result of this decree. In addition, foreign investors may acquire publicly traded non-votingnonvoting shares of Brazilian financial institutions traded on a stock exchange or depositary receipts offered abroad representing non-votingnonvoting shares without specific authorization. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Foreign Investment in Brazilian Financial Institutions.”
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9D. Selling Shareholders
Not applicable.
9E. Dilution |
Not applicable.
9F. Expenses of the Issue |
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
10A. Share Capital |
Not applicable.
10B. By-Laws |
We describe belowBelow we provide a summary of the important provisions of our By-Laws and of the corporate and Brazilian capital markets legislation and regulations. This description is not intended to be exhaustive. It is based on our By-Laws (an English translation of which is attached as an exhibit to this annual report), as well as on the legislation and regulations applicable to companies and the Brazilian capital market currently in effect.
Registration and Business Purpose
We are a publicly-heldpublicly held company, incorporated under Brazilian law. Our documents of incorporation are duly registered with JUCESP, under NIRE 35300332067.
Pursuant to article 4 of our By-Laws, our corporate purpose is to (i) participate in asset, liability and accessory transactions related to our respective authorized portfolios (commercial, investment, credit, financing and investment, real estate credit and leasing), as well as(ii) carry out foreign exchange transactions; (ii)(iii) manage investment portfolios andportfolios; (iv) any other transaction that would be allowed by law and regulations in force; and (iii)(v) participate, as shareholder or quotaholder, in other companies.
Managers’Directors’ and Executive Officers’ Role and Conflict of Interests
Brazilian Corporate Law imposes on the members of the boardBoard of directorsDirectors and officersOfficers the duty of diligence during the performance of their functions, as well as the duty of loyalty to the company, besides prohibiting the membermembers of the boardBoard of directorsDirectors and the officersOfficers from: (i) receiving any type of direct or indirect personal advantage from third parties, by virtue of the position occupied, without authorization in the By-Laws or from a shareholders’ meeting; (ii) taking part in any corporate transaction in which he or she has an interest that conflicts with our interest or in the decisions made by other directors on the matter; (iii) use any commercial opportunity which may come to his or her knowledge, by virtue of his or her position, for his or her own benefit or that of a third party, whether or not harmful to the company; (iv) fail to exercise or protect the company’s rights or to take advantage of a commercial opportunity of interest to the company, in seeking to obtain advantages for himself or herself or for a third party; and (v) acquire for resale with profit property or rights which he or she knows the company needs or which the company intends to acquire.
Additionally, since we areAs a financial institution, we are subject to certain prohibitionslimitations set forth inby the Banking Reform Law, 4,595, dated as of December 31, 1964, including the prohibition to grant loans and advance amounts to the members of our board of directors and officers,amended Law 13,506/17, as well as related regulations. For more information in relation to such limitations, see “Item 4. Information on the membersCompany—B. Business Overview—Regulation and Supervision—Principal Limitations and Obligations of our other consulting, administrative, fiscal or similar boardsFinancial Institutions” and “Item 4. Information on the respective spousesCompany—B. Business Overview—Regulation and 2nd degree relatives.
Supervision—Other Applicable Laws and Regulations—Administrative Proceedings in the Brazilian National Financial System, the Brazilian Payment System and Capital Markets.”
In addition to these provisions, Article 10 of our By-Laws provides that board members of the Board of Directors and officersOfficers are forbidden to be involved in the analysis, approval or settlement of business deals or loans relating to a company where they (i) they hold more than five percent (5%)5% of the capital stock as partners or shareholders, or where they are members of the management, or (ii) had been members within a period of up to six (6) months before their appointment. Finally, our policy for transactions with related parties also sets forth procedures to be followed by managers involved in such transactions, and when other potential conflicts of interest may arise.
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Rights of Common Shares and Preferred Shares
Each common share gives its holder the right to a vote at general meetings. In their turn,meetings, however, the preferred shares do not grant voting rights in our shareholders’ general meetings, except as related to the following matters:
change of corporate status, merger, consolidation or spin-off; |
approval of agreements entered into between us and our controlling shareholder, directly or indirectly, and agreements with other companies in which our controlling shareholder has an interest, whenever the law or the By-Laws provide that they must be approved at a shareholders’ general meeting; and |
the appraisal of assets to be contributed to increase our capital stock. |
As regardsRegarding the election of members of the boardBoard of directors,Directors, the Brazilian Corporate Law sets forth that, when members of the boardBoard of directorsDirectors are elected, minority holders of shares in public companies holding a minimum of 15% of the total number of voting shares, or holders of preferred shares without voting rights, or with restricted voting rights, representing 10% of the capital stock, or holders of common and preferred shares who jointly represent at least 10% of the capital stock,following parties have the right to elect one member of our boardBoard of directors in a separate vote. Directors:
● | minority holders of shares in public companies holding a minimum of 15% of the total number of voting shares, or |
● | holders of preferred shares without voting rights, or with restricted voting rights, representing 10% of the capital stock, or |
● | holders of common and preferred shares who jointly represent at least 10% of the capital stock, in a separate vote. |
Nevertheless, these rights can only be exercised by the holders of shares thatwho maintained their holding for at least three months before the date of the annual shareholders’ meeting. The Brazilian Corporate Law also permits a multiple vote procedure to be adopted, upon request by shareholders representing at least 10% of our voting capital. Pursuant to CVM Instruction 282 of June 26, 1998, the percentage needed to call for a multiple vote to elect members of the board of directors, in public companies with capital stock exceeding R$100 million, is 5% of the voting capital per request of multiple vote.
The holders of preferred shares are entitled to the following rights according to our By-Laws:
dividends and interest on shareholders’ own equity in an amount 10% higher than those attributed to common shares, as well as priority in the distribution; |
participation on equal terms with the common shares conditions, in capital increases arising from the capitalization of reserves and income, as well as in the distribution of bonus shares created by the capitalization of accrued income, reserves or any other resources; |
priority in reimbursement of capital, without payment of premium, in the case of liquidation; and |
tag-along rights in the event of a change in our control, under the same terms and conditions extended to our controlling shareholders. |
Common shares not belonging to the controlling shareholders also give their holders tag-along rights in the event that our control is transferred on the same terms and conditions as those granted to our controlling shareholders.
The shareholders’ general meeting may decide on conversion of the preferred shares into common shares.
The Brazilian Corporate Law sets forth that shares without voting rights or shares with restricted rights, including our preferred shares, shall be granted unrestricted voting rights if the company ceases to distribute, during three consecutive fiscal years, any fixed or minimum dividend granted to these shares, until the respective distributions are made.
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According to our By-Laws, the dividends that are not claimed by shareholders within three years, from the beginning of their payment, shall prescribe to our benefit.
Under the Brazilian Corporate Law, any change in the preferences or thatchanges which would have an adverse financial effect on the rights of the holders of our preferred shares, or any change that results in the creation of a more favored class of preferred shares, must be approved by a resolution at a general shareholders’ meeting and will become valid and effective only after approval by a majority of our preferred shareholders in a shareholders’ meeting.
shareholders.
Brazilian Corporate Law also sets forth that the following shareholders’ rights cannot be repealed or modified by our By-Laws or decisions made at shareholders’ meetings:
the right to vote at general meetings, in the case of holders of common shares; |
the right to share in the distribution of dividends and interest on shareholders’ equity, and to share in the surplus assets in the event of our liquidation; |
preemptive rights in subscribing for shares or convertible securities in specific circumstances; |
the right to monitor the management; and |
the right of withdrawal in the circumstances established by law, including our consolidation, merger and spin-off. |
Description of Units
The Units are share deposit certificates, each representing one common share and one preferred share, all of them free and unencumbered. The shares represented by the Units shall be registered in a trust account as linked to the Units, and their ownership can only be transferred by means of a transfer of the corresponding Units, upon written instructions from the holder. Earnings from the Units and the amount received in the case of redemption or repayment shall only be paid to the holder of the Units registered in the books of the custodian.
None of the shares underlying the Units, the earnings thereon or the corresponding redemption or repayment amounts may be pledged, encumbered or in any other way given in guarantee by the holder of the Units, nor may they be subject to attachment (penhora), seizure (arresto), impounding (sequestro), search and apprehension (busca e apreensão), or to any other lien or encumbrance.
The Units are held by us (except units that underlie the ADSs which are held by our affiliate, Santander Securities ServicesCaceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A.), as the custodian, in book-entry form in an account opened in the holder’s name and thename. The transfer of ownership is effected by debiting the seller’s Unit account and crediting the buyer’s Unit account according to a written transfer order issued by the seller or a court authorization or transfer order delivered to the custodian. The custodian, will retain all the written transfer orders sentof which are retained by the holders of the Units, as well as the court authorizations or transfer orders.custodian. Dividends, interest on shareholders’ equity and/or cash bonuses shall be paid to the custodian and the custodian shall then transfer the amount to the
custody agents for payment to the Unit holders. The pledge, usufruct, right of succession, fiduciary transfer in guarantee and any other conditions, onus or encumbrances on the Units must be registered in the custodian’s records, as well as noted in the corresponding statement of account of Units.
The custodianshall provide Unit holders with a statement of account at the end of each month in which there is movement and, even ifwhen there is no movement, at least once a year. The statement shall show the date and place of issue, the name and details of the holder of the Unit account, an indication that it is a statement of Unit account, details of the shares deposited, a statement that the shares deposited, their earnings and any amounts received in the event of redemption or repayment shall only be paid to the holder of the Unit account or to the holder’s order in writing, our charge for the deposit, if any, and the addresses where Unit holders may obtain assistance.
Upon a written order issued by the holder of the Unit account to a broker authorized by the stock exchange where the Units are traded, the custodian shall block the corresponding Units and transfer them to the buyer upon receipt of a confirmation of the sale from the stock exchange.
The Unit holder shall have the right, at any time, to instruct a broker to cancel Units and transfer the underlying shares. The broker must request to us, as the agent, to transfer the Units to the share deposit accounts held by the custodian in the holder’s name. The Unit holder shall bear any transfer and cancellation costs involved. Similarly, the holder may instruct a broker to assemble Units by transferring the number of shares that jointly represent a Unit, which shall be registered by the custodian in a trust account linked to the Units.
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The right to cancel Units may be suspended in the event of a public offering for distribution of Units, either in the domestic or the international market, in which case the suspension may not last longer than 180 days. Units subject to any lien or encumbrance may not be cancelled.
The following rules apply to the exercise of the rights granted to the shares represented by Units:
Dividends and share redemption or repayment amounts delivered to us, as depository of the shares, shall be paid by us to the Unit holder; |
Only the Unit holder shall have the right to attend our general meetings and to exercise all |
In the event of a stock split, cancellation or reverse stock split or new issuances of shares by us while the Units are in existence, the following rules will be observed: |
(1) In the event there is a change in the number of shares represented by Units as a result of a reverse stock split or cancellation of shares, we will debit from the Unit accounts the number of cancelled shares of each Unit holder and proceed with the automatic cancelation of Units, observing the ratio of one common share and one preferred share issued by us to each Unit. We will deliver to the shareholders those shares that are insufficient to constitute a Unit in the form of shares, rather than Units; and
(2) In the event there is a change in the number of shares represented by the Units as a result of a stock split or new issuances of shares, the custodian will register the deposit of the new shares and issue new Units, registering them in the accounts of their respective holders, so as to reflect the new number of shares held by unit holders, maintaining a ratio of one common share and one preferred share issued by us and represented by Units, and will deliver to holders those shares that are insufficient to constitute a Unit in the form of shares rather than Units;
(1) | In the event there is a change in the number of shares represented by Units as a result of a reverse stock split or cancellation of shares, we will debit the number of cancelled shares from each Unit holder’s account and proceed with the automatic cancellation of Units, observing the ratio of one common share and one preferred share issued by us to each Unit. We will deliver to the shareholders the shares which are insufficient to constitute a Unit in the form of shares, rather than Units; and |
(2) | In the event there is a change in the number of shares represented by the Units as a result of a stock split or new issuances of shares, the custodian will register the deposit of the new shares and issue new Units, registering them in the accounts of their respective holders, so as to reflect the new number of shares held by unit holders. In this way, the accounts will maintain a ratio of one common share and one preferred share issued by us and represented by Units, and the custodian will deliver to holders the shares which are insufficient to constitute a Unit in the form of shares rather than Units; |
In the event of a capital increase, by means of the issueissuance of shares that may be converted into new Units, Unit holders may exercise the preemptionpreemptive rights belonging to the shares represented by their Units. We shall create new Units in the register of book-entry Units and credit them to their holders so as to reflect the new number of common and preferred shares issued by us, subject to the current proportion of ordinary and preferred shares to constitute the Units.Units, Shares that are too few to constitute a Unit shall be delivered to the shareholders as shares, rather than Units. There shall be no automatic credit of Units in the event of the exercise of preemptionpreemptive rights in the issue of securities other than shares; and
shares.
Unit holders will be entitled to receive any shares issued as a result of our spin-off, consolidation or merger.
General Meetings
At our duly convened and installed general meetings, our shareholders are authorized to resolvemake resolutions on business relatedmatters relating to our activities and to take themake decisions they deemdeemed to be in our best interests.
Our shareholders are exclusively responsible for approving the financial statements at the annual general meeting, and to decide on the destination of net earnings and the distribution of dividends for the year immediately preceding the meeting. The members of the boardBoard of directorsDirectors and fiscal councilFiscal Council are, as a general rule, elected at annual general meetings unless for an exceptional reason they have to be elected at an extraordinary general meeting.
An extraordinary general meeting may be held at any time, including together with an annual general meeting.meeting, Our shareholders in a general meeting are exclusively responsible for approving, among other matters: (i) amendments to our By-Laws; (ii) election and dismissal of members of our board of directors; (iii) creation of any reserves of profits, other than the legal reserve; (iv) suspension of the rights of a shareholder that has failed to comply with obligations under the law or our By-Laws; (v) approval of our incorporation, merger or spin-off; and (vi) approval of our dissolution or liquidation, approval of reports prepared by the liquidators and the election of a liquidator and members of the fiscal council to operate during a liquidation.
Quorum of General Meetings
As a general rule, the Brazilian Corporate Law sets forth that a general meeting can be held if shareholders holding at least 25% of the voting capital stock are present, at the first call, and at the second call if any number of holders of voting shares are present. If the shareholders have been convened to resolve on amendments to the By-Laws, the quorum at the first call must be at least 2/3two-thirds of the voting shares and, at the second call, any number of holders of voting shares.
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The CVM may authorize the aforementioned quorum, set forth in the Brazilian Corporate Law, to be reduced in the case of a publicly held company with widely held shares, and where the last three general meetings have been attended by shareholders representing less than half the voting shares.
In general, the approval of any matter must occur through votes of shareholders attending a general meeting in person, or through a proxy, corresponding to at least to athe majority of the common shares represented at the meeting, and abstentions are not taken into account for this calculation. Nevertheless, the affirmative vote of shareholders representing at least one halfone-half of the voting shares is needed for the approval of the following matters, among others: (i) reduction of the mandatory dividend to be distributed to our shareholders; (ii) changes in our business purpose; (iii) our merger, spin-off or incorporation; (iv) our participation in a corporate group (as defined by the Brazilian Corporate Law); (v) the termination of a state of liquidation; and (vi) our dissolution.
Call Notice of ourOur Shareholders’ General Meetings
The Brazilian Corporate Law requires all general meetings to be called by a minimum of three entries in the Official Gazette of the State of São Paulo and in anotherother mass circulation newspapernewspapers in São Paulo, where the BM&FBOVESPAB3 is located. Our call notices offor meetings are currently published in the Official Gazette of the State of São Paulo, the official journal of São Paulo state, and in the Valor Econômico newspaper. The first call must be published not more than 30 days before the date of the meeting, and the second call not more than eight days in advance. However, in certain circumstances, at the request of any shareholder, the CVM may (i) after consulting us, require the shareholders’ meeting to be postponed and held 30 days after the first call; and/or (ii) suspend for up to 15 days the advance notice required for an extraordinary general meeting, to give the shareholder time to understand and analyze the proposals to be voted on at the meeting. The call notices must give full details of the agenda for the meeting (the term “general matters” being prohibited) and the adequate supporting documents must be available to the public on the CVM’s website from the date of publication of the first call.
Place of ourOur Shareholders’ General Meetings
Our shareholders’ meetings are held at our headquarters at Avenida Presidente Juscelino Kubitschek, 2041/2235, Bloco2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Olímpia,Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil. The Brazilian Corporate Law allows our shareholders to hold meetings outside our headquarters in an event of force majeure, provided that the
meetings are held in the city of São Paulo and the relevant notice contains a clear indication of the place where the meeting will be held.
Responsibility for Calling General Meetings
It is usually the responsibility of our boardBoard of directorsDirectors to call a general meeting, provided that such meetings may also be called by the following persons or bodies: (i) any shareholder, when our directors fail to call a meeting within 60 days of the date required by law or by our By-Laws; (ii) shareholders representing a minimum of 5% of our capital stock, if our managers fail to call a meeting, within eight days, in response to a justified request submitting matters to be discussed; (iii) shareholders representing a minimum of 5% of our capital stock, if our boardBoard of directors failDirectors fails to call a meeting intended to install a fiscal council,Fiscal Council, within eight days of the request being made; and (iv) the fiscal councilFiscal Council (if already installed), if our boardBoard of directorsDirectors fails to call the annual general meeting; and the fiscal councilFiscal Council can also call an extraordinary general meeting whenever there are serious or urgent reasons.
Conditions for Admission to a General Shareholders’ Meetings
Shareholders attending general meetings must prove that they are the holders of shares with voting rights, as set forth in the Brazilian Corporate Law. Our shareholders may be represented by a proxy (including a public proxy in accordance with CVM Instruction 481, of December 17, 2009, as amended), appointed not more than one year before the date of the meeting, and this representative must be a shareholder, a manager, a lawyer or, in the case of a publicly-heldpublicly held company, as ours is, a financial institution.institution, Investment funds may be represented by their respective administrators.
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Remote Voting
The CVM has enacted a regulation which establishes rules for remote participation and voting in general meetings of publicly-heldpublicly held companies. The mandatory applicability of this rule was postponed by a decision of the CVM in late 2015, and remained optional throughout 2016.
From January 1, 2017 the rule became applicable to all publicly-held companies that on April 9, 2015 had at least one type or class of share listed included in either the IBrX-100 or the IBOVESPA indices, as is our case. Accordingly, as from 2017 we will have put in place the necessary structure to allow our shareholders to participate and vote remotely at general meetings. For this purpose, our shareholders must follow the voting procedures disclosed by us in the call notice for the relevant general meeting to transfer the voting pronouncements including by contacting either us or the custodians (whom(who will be responsible for transferring the voting pronouncements to us), pursuant to the terms of the applicable regulation.
regulations.
Policy on Trading in Our Own Securities
The objective of our Policy on Trading in Our Own Securities, prepared in accordance with in accordance with CVM Instruction 358Resolution 44 of January 3, 2002, as amended (“CVM Instruction 358”),August 23, 2021, or “CVM Resolution 44,” is: (i) to control and punish those persons with access to privileged information and who use this information to trade in securities issued by us; and (ii) to establish rules for trading in our securities.
The purpose of this policy is to avoid insider trading (the furnishing of privileged information from which third parties may benefit) and to ensure transparency in the trading of our securities.securities, Our trading policy establishes blackout periods for trading in our shares by ourselves, our controlling shareholders (direct or indirect), members of the boardBoard of Directors, Executive Officers and members of our fiscal councilFiscal Council (when one has been installed) and other technical or consultative bodies or other persons who, by virtue of their job, position or commercial, professional or trust relationship with us, have access to any privileged information. This is intended to avoid improper use of information not disclosed toby us.
Among other matters, our policy establishes that the persons subject to itour policy shall refrain from buying or selling, by themselves or via theirthrough direct dependents or by using directly or indirectly controlled companies, any securities issued by us, or backed by them, as well as their respective derivatives:derivatives, including:
(1) From the time when such persons become aware of material information that may affect the value of our securities, until such information is disclosed to the public. Those subject to the policy may trade in Company securities received or acquired under our variable compensation plans only during a period of 30 days from the date
From the time when such persons become aware of material information that may affect the value of our securities, until such information is disclosed to the public. Those subject to the policy may trade in Company securities received or acquired under our variable compensation plans only during a period of 30 days from the date when such securities are vested, and after the end of the corresponding lock-up period, for the purpose of disposing of them, subject to the undertakings described in the following items; |
when such securities are vested, and after the end of the corresponding lock-up period, for the purpose of disposing of them, subject to the undertakings described in the following items;
(2) During the period between our decision to increase capital stock, issue securities, distribute dividends, pay bonuses, or execute a stock split or a reverse stock split, and the publication of the corresponding notices or announcements;
(3) When it is intended to carry out a takeover, a total or partial spin-off, transformation or corporate reorganization;
(4) During the 30-day period prior to the publication of annual or six-monthly financial statements, or quarterly financial information. However, exceptionally in the case of issues of fixed-rate securities by us by means of a public offer overseas, in order to raise funds for us in the ordinary course of our business, including medium term notes issued by us, this period shall be reduced to 15 days before the publication of such statements.
(2) | During the period between our decision to increase capital stock, issue securities, distribute dividends, pay bonuses, or execute a stock split or a reverse stock split, and the publication of the corresponding notices or announcements; |
(3) | When it is intended to carry out a takeover, a total or partial spin-off, transformation or corporate reorganization; and |
(4) | During the 30-day period prior to the publication of annual or six-monthly financial statements, or quarterly financial information. However, exceptionally in the case of issues of fixed-rate securities by us by means of a public offer overseas, in order to raise funds for us in the ordinary course of our business, including medium term notes issued by us, this period shall be reduced to 15 days before the publication of such statements. |
Our policy also establishes that our controlling shareholders, officers, and members of our boardBoard of directors,Directors, members of our fiscal councilFiscal Council (when there is an active one) and members of any other bodies with technical or consulting functions created by a provision in the By-Laws, shall not trade securities issued by us or their respective derivatives on the same day that we, our controlled or associated companies or any other company under their common control are selling shares held in treasury or purchasing shares to be held in treasury, or while holding open orders to deal in our shares. However, such prohibition shall not apply if the acquisition or sale of our shares by us has the specific purpose of making feasiblemanaging the management of risk arising out of our activities asmarket maker of certain funds indexes.indexes.
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Right to Withdrawal
The Brazilian Corporate Law gives our shareholders the right to withdraw from Santander Brasil, upon reimbursement of the equity value of their shares, if the shareholder disagrees with or abstains from voting on certain resolutions approved in shareholders’ general meetings.
According to the Brazilian Corporate Law, the right of withdrawal may be exercised in the following circumstances, among others as provided by law: (i) a change in the preferences, privileges or repayment or redemption conditions granted to our preferred shares, or the creation of a new, more favored class of shares (in which case, only a shareholder who is adversely affected by such change or creation shall have the right of withdrawal); (ii) spin-off (subject to the conditions below); (iii) a reduction in our mandatory dividend; (iv) a change in our corporate purpose; (v) a merger or incorporation with another company in specific circumstances (as described below); (vi) our joining to a group of companies, as defined in the Brazilian Corporate Law; (vii) a corporate transformation; (viii) the takeover of all of our shares by another Brazilian company, so as to make us its wholly-owned subsidiary; or (ix) the acquisition of control of another company at a price exceeding the legal limits.
The Brazilian Corporate Law also provides that a spin-off of a company shall entitle its shareholders to withdraw only if it results in: (i) a change in the corporate purpose, unless the assets spun off are transferred to a company whose principal activity coincides with the business purpose of the spun-off company; (ii) a reduction in the mandatory dividend; or (iii) becoming part of a group of companies, as defined in the Brazilian Corporate Law. Besides,Law, In addition, in the event of a consolidation or merger of us into another company, or when we become part of a group of companies (as defined in the Brazilian Corporate Law), our shareholders will not be entitled to withdraw from our company if the shares of such companies (a) are liquid, i.e., are listed on the BM&FBOVESPAthree general indexindexes or on any other Stock Exchange index, as defined by the CVM, and (b) are widely held, such that our controlling shareholders or other companies under common control hold less than half the shares of the type or class to which the right of withdrawal corresponds. The right of withdrawal must be exercised within 30 days of publication of the minutes of the general meeting resolving on the matter that gave rise to such right. Furthermore, we have the right to reconsider any resolution that has given rise to a right of withdrawal, during the ten10 days following the end of the period for exercising the right, if we consider that the payment of the price for buying out dissident shareholders would put our financial stability at risk.
Shareholders who exercise the right to withdrawal shall receive the equity value of their shares, based on the latest balance sheet approved at a general meeting. If, however, the resolution giving rise to the right of withdrawal was passed more than 60 days after the date of the latest approved balance sheet, a shareholder may call for a special balance sheet to be prepared as of a date not more than 60 days before the resolution, to assess the value of the
shares. shares, In this case, we must immediately pay 80% of the reimbursement value, calculated according to the latest balance sheet approved by our shareholders, and the balance within 120 days of the date of the resolution of the general meeting.
Redemption of Shares
According to the Brazilian Corporate Law, we may redeem our shares by means of a resolution passed at a general meeting by votes representing at least 50% of the shares affected by the redemption. Shares may be redeemed out of retained profits, revenues reserves or capital reserves. If not all of the shares are to be redeemed, a lottery ballot shall be held. If custody shares are selected in the ballot and the custody agreement does not provide for the situation, the financial institution must specify the proportion of shares to be redeemed.
PreemptionPreemptive Rights
Our shareholders have preemptive rights to subscribe for shares in any capital increase, in proportion to their shareholding at the time of the increase. Our shareholders also have preemptive rights in any offer of our shares or subscription warrants. A period of not less than 30 days from the publication of the notice to shareholders of the capital increase is allowed for the exercise of preemptive rights, and these rights are transferable.
However, according to the Brazilian Corporate Law and our By-Laws, our shareholders do not have preemptive rights in cases of granting or exercise of any share call option. In addition, our boardBoard of directorsDirectors may exclude the preemptive right of our shareholders or reduce the exercise period, in the issuance of shares and subscription warrants whose placement is made through sale on stock exchange or public subscription, or share exchange, in a public offering of control acquisition.
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Purchase of Our Own Shares
Our By-Laws authorize our boardBoard of directorsDirectors to approve the purchase of our own shares. In any of the following circumstances, the decision will only become effective upon prior approval byat a shareholders meeting: (i) acquisition on an organized securities market involving more than 5% of our outstanding shares of a certain type or class in less than 18 months; (ii) acquisition on an organized securities market for prices 10% above the market price; (iii) acquisition aiming at changing or preserving our share control composition or our management structure; or (iv) where the counterparty in an acquisition out of the organized securities markets is related to us (according to the applicable accounting rules). The decision to purchase our shares will be disclosed to the markets and the respective trade will be settled within 18 months from the approval.
The decision to acquire our shares is also subject to certain restrictions. It may not, among others:other things: (i) aim for the acquisition of shares belonging to our controlling shareholders; (ii) be carried out in the organized markets for prices above the market prices; (iii) take place simultaneously with a public offering for the purchase of our shares; or (iv) require the use of funds exceeding the available funds (considered all capital or profits reserves plus the realized results of the ongoing fiscal year, excluded,excluding, in both cases, the legal reserve, the reserve for realizable profits, the special reserve for non-distributed compulsory dividends and the tax incentives).
We may not hold in treasury more than 10% of our outstanding shares of a certain type or class, including shares held by our subsidiaries and affiliated companies and the shares corresponding to the economical exposure arising from derivatives or deferred settlement transactions entered into by us, our subsidiaries and affiliated companies. This limit does not apply to reimbursed shares, or forfeited shares, andor acquisitions in the scope of a public offering for acquisition of shares, which will be subject to specific laws and regulation.
We may purchase our shares on the stock exchange, but not for a price above the market value. Acquisitions by means of private transactions must observe the applicable limitations and the approval by the shareholders meeting may be required. We may also buy our own shares in the event that we should cease to be a publicly-heldpublicly held company., We may also purchase or issue put or call options on our shares.
On September 18, 2017, our shareholders approved the cancellation of 64,551,366 shares held in treasury, representing 32,275,683 common shares and 32,275,683 preferred shares. Such treasury shares corresponded, as of that date, to the totality of the shares then held in treasury.
On November 3, 2016,1, 2019, our boardBoard of directorsDirectors approved the Unit repurchase program to cover the acquisition of up to 38,042,97237,256,072 Units or ADRs, representing 38,042,97237,256,072 common shares and 38,042,97237,256,072 preferred shares or ADRs by us or our branch in Cayman, corresponding to approximately 1.02%1% of the totality of our corporate capital. The repurchase program ended on November 4, 2020.
On February 2, 2021, our Board of Directors approved the Unit repurchase program to cover the acquisition, by us or our branch in Cayman, of up to 36,956,402 Units or ADRs, representing 36,956,402 common shares and 36,956,402 preferred shares, corresponding to approximately 1% of the totality of our corporate capital. The repurchase program ends on November 3, 2017.
On December 14, 2015, our shareholders approved the cancellation of 37,757,908 shares held in treasury, representing 18,878,954 common shares and 18,878,954 preferred shares. Such treasury shares corresponded, as of that date, to approximately 53.9% of the totality of the shares then held in treasury. As a result, as of December 31, 2016 (and 2015), we held 51,571,846 (40,435,466) shares in treasury, of which 25,785,923 (20,217,733) were common shares and 25,785,923 (20,217,733) were preferred shares.
August 2, 2022.
Cancellation of Registration as a Publicly-HeldPublicly Held Company
We may cancel our registration as a publicly-heldpublicly held company and, for this purpose, our controlling shareholders must necessarily make a public offer to acquire all our shares in the market, according to the Brazilian Corporate Law and the regulations issued by the CVM. The minimum offer price must be at least equal to the economic value of our shares, as valued by a specialized company using any generally accepted and recognized valuation method, or any other criteria defined by the CVM.
The valuation report must be prepared by a specialized and experienced appraiser, who is independent of Santander Brasil, our management team and our controlling shareholders and who shall be chosen by the board of directors. The controlling shareholder shall bear the costs of preparing the valuation report.
Disposal of Control
Our By-Laws state that disposal of control of our company, either in a single transaction or in a series of transactions, must be subject to the condition, whether a suspensive or resolutory condition, that the acquirer undertakesis obligated to make a public offer to acquire all the shares held by our other shareholders, both common and preferred,preferred. This is further pursuant to the conditions and deadlines required by the current legislation, so as to ensureensuring that they receive equal treatment with respect to the controlling shareholder in the disposal.
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This offer will still be required (i) in cases where there is assignment for consideration of rights to subscribe for shares that may result in the disposal of the company’s control; and (ii) in case of disposal of control of a company that holds the controlcontrolling power over us.
Requirement for Disclosure of Information
As a publicly-heldpublicly held company, we must comply with the requirements for disclosure of information set forth by the Brazilian Corporate Law and the CVM.
Periodic and Occasional Disclosure of Information
The regulations applicable to publicly-heldpublicly held companies issued by the CVM, including CVM Instruction 358,Resolution 44, provide that we must disclose a number of items ofboth periodic and occasional information. Among such items of information are, for example, our financial statements accompanied by the management reports and the reports of our independent auditors, our standard financial information form (formulário de informações financeiras padronizadas – DFP), our quarterly report (formulário de informações trimestrais – ITR) and our reference form (formulário de referência).
According to CVM Instruction 480, of December 7, 2009, as amended, the reference form (formulá(formulário de referência)ncia) must be filed with the CVM annually, within five months of the closing date of the reporting period, in the form established by the regulation. The reference form (formulá(formulário de referência)ncia) shall be updated, prior to a public offer, as well as upon the occurrence of certain events determined by the regulation that alter the information described therein, within 7seven business days of the date of the respective change. This document contains complete information regarding us including,and, in general, includes the matters addressed in this annual report.
CVM Instruction 457, of July 13, 2007, as amended, (“CVMor “CVM Instruction 457”)457,” provides that we are also subject to the disclosure of our consolidated financial statements based on the International Financial Reporting Standards, or IFRS within four months of the end of each reporting period. The financial statements mentioned by CVM Instruction 457 must be disclosed in their entirety, together with (i) the management report, (ii) explanatory note expressly stating without reservation that the consolidated financial statements are in accordance with IFRS as issued by the IASB and Brazilian GAAP, and (iii) the opinion of the independent auditors. Within 15 days following the term established by Brazilian law for disclosure of our quarterly information, we must: (i) disclose our full quarterly information translated into the English language;English; or (ii) disclose our financial statements or consolidated
financial statements in accordance with IFRS as issued by the IASB, accompanied by the independent auditors’ review report.
Disclosure of Information about Trading by Our Managers and Related Persons
Our officers,Officers, members of our boardBoard of directors, fiscal council,Directors, Fiscal Council, if in operation, and any technical or consulting body created by our By-Laws must disclose to us the securities issued by us, our controlling or controlled companies, when publicly-held,publicly held, and the derivatives and other securities referenced by such securities that are held by them, as well as the trades with such securities. This obligation includes the securities held by the spouses, companions and any dependents of the aforementioned persons, as well as the companies directly or indirectly controlled by them.
We are obliged to send such information to CVM and BM&FBOVESPAB3 within ten10 days following the end of the month in which there is a change in the holding position or the month in which the relevant person is invested in the position (including name of person acquiring the shares, number and characteristics of the securities, form, price and date of acquisition)., Upon the issuance of CVM Instruction 568 ofon September 17, 2015, it also became mandatory to provide the CVM and BM&FBOVESPAB3 within the same time period the information related to the securities traded by us, our entities and affiliated companies.
Disclosure of Information about ourOur Shareholders with Relevant Interest
CVM Instruction 358Resolution 44 sets forth that (i) any direct or indirect controlling shareholders, (ii) any shareholders entitled to elect members of the board of directors and fiscal council, as well as (iii) any person or group of persons acting jointly with the aforementioned persons or representing the same interest, that carries out relevant transactions (that is, transactions whereby the direct or indirect holding of the aforementioned persons surpasses, upwards or downwards the thresholds of 5%, 10%, 15%, and so on successively, of our shares of a certain class and type) must disclose to us information on their trades, which will be forwardedsent to the CVM.
The rulingresolution establishes that the following information must be provided: (i) the name and qualification of the person acquiring the shares, including the registration number in the Natural Persons Registry (CPF) or the National Register of Legal Entities (CNPJ); (ii) the reason for the participation and aimed quantity of shares, containing, if it were the case, a declaration by the acquiring party that it does not intend to alter the composition of its control or the structure of the company’s administration; (iii) the number of shares and other securities or other financial instruments referenced in such shares, of physical or financial settlement, specifying the number, class and type of such shares; (iv) indication of any agreements ruling the exercise of voting rights or the purchase and sale of our securities; and (v) if the shareholder is resident or domiciled abroad, the name and the registration number in the Natural Persons Registry (CPF) or the National Register of Legal Entities (CNPJ) of its agent or legal representative in Brazil for the purposes of article 119 of the Brazilian Corporate Law.
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Such obligations also apply to (i) the acquisition of any right over our shares and other securities subject to disclosure; and (ii) execution of any derivative financial instruments referenced in our shares, even without physical settlement provisions.
Our investor relations officerInvestor Relations Officer is responsible for sending this information to the CVM and to BM&FBOVESPAthe B3 as soon as received.
Disclosure of Material Facts
The Brazilian Securities Market Law and CVM Instruction 358Resolution 44 set forth that we must disclose any decision of ourmade by a controlling shareholder, of aby the general shareholders’ meeting or ofby any of our management bodies, or by any other act or event in connection with our business that could influence: (i) the trading price of our securities or securities referenced to our securities; (ii) the decision by investors to buy, sell or keep those securities; and (iii) the decision by investors to exercise any rights they have as holders of those securities.
Examples of material facts are: the signing of shareholders’ agreements, the transfer of control of the company, a consolidation, merger or spin-off involving the company or associated companies, the change in rights and advantages of the securities issued by the company, the split or reverse split of shares, among others.
Our investor relations officerInvestor Relations Officer is responsible for the disclosure of any material facts to the market.
The applicable regulation authorizes us, on an exceptional basis, to request confidential treatment of certain material developments from the CVM when our management believes that disclosure of the respective fact to the public could result in adverse consequences to us.
10C. Material Contracts |
For the two years immediately preceding the publication of this annual report, we were not a party to any material contract outside the ordinary course of business.
10D. Exchange Controls |
Foreign Investment in Brazil
Foreign Direct Investment
Foreign Direct Investmentdirect investment in Brazil is regulated by Law No. 4,131, and Law 4,390, enacted on September 3, 1962, and August 29, 1964, respectively, as amended.amended, including by the New Foreign Exchange Law. A foreign direct investor under Law No. 4,131/62 must:
register as a foreign direct investor with the Brazilian Central Bank; |
obtain a taxpayer identification number from the Brazilian tax authorities; |
appoint a tax representative in Brazil; and |
appoint a representative in Brazil for service of process in respect of suits based on the Brazilian Corporate Law. |
Foreign capital must be registered with the Brazilian Central Bank through the Electronic Registration System – Foreign Direct Investment, (theor the “Registro Declaratório Eletrônico – Investimento Externo Direto,”) within 30 days of the flow of funds into Brazil in accordance with Law No. 4,131. The registration of foreign capital is required for the remittance of profits abroad, the repatriation of capital and the registration of reinvestments. Investments will always be registered in the foreign currency in which they are actually made, or in Brazilian currency, if the funds are derived from a non-resident account properly held in Brazil.
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On December 28, 2006, Law No. 11,371 allowed the registration of the foreign capital invested in Brazilian companies but not yet duly registered and not subject to other types of registration. For the purposes of such registration the amount of foreign capital inreais to be registered must be evidenced in the accounting records of the relevant Brazilian company and must be registered prior to the last business day of the subsequent calendar year during which the company becomes obligated to register the capital.
Other than such registration, foreign investment is not subject to government approvals or authorizations and there are no requirements regarding minimum investment or local participation in capital (except in very limited cases such as in regard to financial institutions, insurance companies and other entities subject to specific regulations). Foreign participation, however, is limited (that is, subject to approvals) or forbidden in several sectors.
Foreign investments in currency must be officially channeled through financial institutions duly authorized to deal in foreign exchange. Foreign currency must be converted into Brazilian currency and vice versa through the execution of an exchange contract. Foreign investments may also be made through the contribution of assets and equipment intended for the local production of goods and services.
Capital Markets Investment
Investors residing outside Brazil, including institutional investors, are authorized to purchase securities in Brazil on the Brazilian stock exchange, provided that they comply with the registration requirements set forth in the applicable regulation enacted by CMN and the CVM.
Since March 30, 2015, portfolio investments arehave been regulated by CMN Resolution 4,373, which revoked the former rule (CMN Resolution 2,689, of January 26, 2000) which had been in force for about 15 years.
The main purpose of CMN Resolution 4,373 is to facilitate the entry of foreign investors in the Brazilian financial and capital markets. It introduced, among other things, the possibility for foreign investors of making investments in local currency with funds held in foreign bank accounts of the non-resident investor, or with bills of payment denominated inreais but issued abroad.
With certain limited exceptions, under CMN Resolution 4,373 investors are permitted to carry out any type of transaction in the Brazilian capital markets involving a security traded on a stock or futures exchange or an organized over-the-counter market, but may not transfer the ownership of investments made under such regulation to other non-Brazilian holders through private transactions. Investments and remittances outside Brazil of gains, dividends, profits or other payments under Santander Brasil’s shares are made through the commercial rate exchange market.
Under CMN Resolution 4,373, an investor residing outside Brazil must:
appoint at least one financial institution or an institution authorized to operate by the Brazilian Central Bank as representative in Brazil that will be responsible for complying with the registration and reporting requirements and reporting procedures of the Brazilian Central Bank and the CVM; |
register as a foreign investor with the CVM; |
appoint one or more custodians authorized by the CVM; |
register the foreign investment with the Brazilian Central Bank; |
appoint a tax representative in Brazil; and |
obtain a taxpayer identification number from the Brazilian federal tax authorities. |
Securities and other financial assets held by foreign investors pursuant to said regulation must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Brazilian Central Bank or the CVM. In addition, securities trading by foreign investors is generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by the CVM.
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Instruction CVM 560Resolution No. 13, of March 27, 2015, as amended, introduced in Brazilian securities regulationNovember 11, 2020 establishes the obligation of the representatives of investors residing outside Brazil to inform the CVM of the movements and applications of funds of such investors participating in collective accounts and holders of own accounts represented by them.
10E. Taxation |
The following summary contains a description of certain Brazilian and U.S. federal income tax consequences of the ownership and disposition of units or ADRs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to the ownership or disposition of units or ADRs. The summary is based on the tax laws of Brazil and regulations thereunder and on the tax laws of the United States and regulations thereunder, as of the date hereof, which are subject to change.
Although there is at present no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in a treaty. No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. Holders (as defined below) of units or ADRs. Prospective holders of units or ADRs should consult their tax advisors as to the tax consequences of the acquisition, ownership, and disposition of units or ADRs in their particular circumstances.
Brazilian Tax Considerations
The following discussion is a summary of the Brazilian tax considerations relating to the acquisition, exchange, ownership, and disposition of units or ADRs by a Non-Resident Holder. The discussion is based on Brazilian law as currently in effect, which is subject to change, possibly with retroactive effect, and to differences of interpretation. Any change in such law may change the consequences described below.
The tax consequences described below do not take into accountconsider the effects of any tax treaties or reciprocity of tax treatment entered into by Brazil and other countries. The discussion also does not address any tax consequences under the tax laws of any state or locality of Brazil.
The description below is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, exchange, ownership, and disposition of our units or ADRs.ADRs, Holders of units or ADRs and prospective purchasers thereof should consult their tax advisors with respect to the tax consequences of owning and disposing of our units or ADRs in light of their particular investment circumstances.
Income Tax
Dividends
Dividends paid by a Brazilian company, such as ourselves, including stock dividends to a Non-Resident Holder are currently not subject to withholding income tax in Brazil, to the extent that such amounts are related to profits generated since January 1, 1996. Dividends relating to profits generated prior to January 1, 1996 may be subject to Brazilian withholding tax at varying rates, depending on the year the profits were generated.
Interest Attributable to Shareholders’ Equity
Law 9,249, dated December 1995, as amended, allows a Brazilian corporation, such as ourselves, to make distributions to shareholders of interest on net equity and to treat those payments as a deductible expense for purposes of calculating Brazilian corporate income tax and social contribution on net profits, subject to the limits described below. These distributions may be paid in cash. For tax purposes, this interest is limited to the daily pro rata variation of the Long-Term Interest Rate (Taxa de Juros de Longo Prazo – TJLPTLP), as determined by the Brazilian Central Bank from time to time, and the amount of this deductible expense may not exceed the greater of:
Payment of interest on shareholders’ equity to a Non-Resident Holder is subject to withholding income tax at the rate of 15.0%15%, or 25.0%25% for individuals or entities residing in a “Tax Haven.” According to Brazilian legislation, a “Tax Haven” jurisdiction is one in which there is no income taxation or where the local income tax rate is generally applied at rates under 20%. Ordinance 488 dated December 12, 2014 provided for the possibility of that 20% threshold being reduced to 17% if the corresponding jurisdictions are aligned with international standards of fiscal transparency in accordance with rules to be established by the Brazilian tax authorities, or where local legislation imposes restrictions on disclosure regarding shareholder composition or investment ownership. These payments may be included, at their net value, as part of any mandatory dividend, as discussed above under “—“Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.”
Distributions of interest on shareholders’ equity to Non-Resident Holders may be converted into U.S. dollars and remitted outside Brazil, subject to applicable exchange controls, if the investment is registered with the Brazilian Central Bank.
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Capital Gains
(i) Taxation of Capital Gain Earned in the Country in a Transaction Not Carried Out on the Brazilian Stock Exchange (Or Similar Exchange)
According to Law 10,833/03, the gains recognized on a disposition of assets located in Brazil, such as our units, by a Non-Resident Holder, could be subject to withholding tax in Brazil. This rule is applicable regardless of whether the disposition occurs in Brazil or abroad and regardless of whether the disposition is made to an individual or entity resident or domiciled in Brazil.
As a general rule, capital gains realized as a result of a disposition of units are the positive difference between the amount realized on the disposition of the units and the acquisition cost of such units.
Historically, the income tax on these gains had to be withheld at source and the tax rate would vary depending on the domicile of the Non-Resident Holder:
If the Non-Resident Holder is not located in a Tax Haven, |
The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.
(ii) Taxation of the Capital Gains Earned in the Country in a Transaction Carried Out on the Brazilian Stock Exchange (Or Similar Exchange)
There could also be the levy of income tax on net gains earned by a Non-Resident Holder on the disposition of units sold on the Brazilian stock exchange, commodities or futures exchange (or similar exchange). The tax rate will vary according to the type of investment registration made by the Non-Resident Holder at the Brazilian Central Bank, as well as the location of the beneficiary:
Capital gains earned by a Non-Resident Holder who (i) has its investment registered in Brazil with the Brazilian Central Bank under the rules of CMN Resolution 4,373, |
Capital gains earned by a Non-Resident Holder who is not a Registered Holder or is a Tax Haven resident (Registered Holder or not) are currently subject to income tax at a rate of |
Any other gains realized on a disposition of units that is not carried out in an exchange environment or that is conducted in the non-organized “OTC market” are subject to the same rules set forth in item “(i) Taxation of Capital Gain Earned in the Country in a Transaction Not Carried Out on the Brazilian Stock Exchange (Or(or Similar Exchange).” Gains realized by a Non-Resident Holder on the disposition of preemptive rights held in stock will be subject to Brazilian income tax, according to the same rules applicable to the sale of units or ADRs.
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(iii) Capital Reduction
In the case of a capital reduction by a Brazilian corporation, such as ourselves, the positive difference between the amount received by the Non-Resident Holder and the acquisition cost of the shares is treated as capital gain derived from a transaction held out of a Brazilian exchange described above in (i) and is therefore currently subject to withholding tax at the ratefollowing progressive rates: (i) 15% for the portion of 15.0%the gains up to R$5 million, (ii) 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million for a Non-Resident Holder not located in a Tax Haven or up to 25.0%25% for a Non-Resident Holder located in a Tax Haven, for the year of 2016.Haven.
As mentioned above, in this case, as from January 1, 2017, althoughAlthough subject to interpretation, in the case of Non-Resident Holders carrying out investments pursuant to CMN Resolution 4,373, it is possible to sustain that the income tax should not apply at progressive rates under Law 13,259/16.16, but at a fixed rate of 15%. Moreover, Non-Resident Holders located in a Tax Haven jurisdiction are subject to a specific tax regulation and remain taxed to a tax rate of 25.0%25%.
Sale of ADRs
Pursuant to Section 26 of Law 10,833/10833/2003, the sale of an asset located in Brazil by a Non-Resident Holder, whether to a Brazilian resident or to another Non-Resident Holder, is subject to Brazilian income tax. Our understanding is that ADRs do not qualify as assets located in Brazil and thus should not be subject to the Brazilian income tax. Notwithstanding the foregoing, since the tax rule referred to in Section 26 of Law 10,833 provides broad language and has not been definitely analyzed by the administrative or judicial courts, we are unable to assure you of the final outcome of such discussion.
Gains on the exchangeExchange of ADRs for units
Units
Non-Resident Holders may exchange ADRs for the underlying units, sell the units on the Brazilian stock exchange and the sale proceeds may be remitted abroad. As a general rule, the exchange of ADRs for shares is not subject to income taxation in Brazil.
Upon receipt of the underlying units in exchange for ADRs, Non-Resident Holders may also elect to register with the Brazilian Central Bank the U.S. dollar value of such units as a foreign portfolio investment under CMN Resolution 4373,4,373, which will entitle them to the tax treatment applicable to Registered Holders described above.
Alternatively, the Non-Resident Holder is also entitled to register with the Brazilian Central Bank the U.S. dollar value of such units as a foreign direct investment under Law No. 4,131/62, in which case the respective sale would be subject to the tax treatment applicable to transactions carried out of by a Non-Resident Holder that is not a Registered Holder.
Gains on the exchangeExchange of unitsUnits for ADRs
The deposit of units in exchange for ADRs by a Non-Resident Holder may be subject to Brazilian income tax on capital gains if the acquisition cost of the units is lower than the market price for such units.
The difference between the acquisition cost and the average price of the units is considered a capital gain currently subject to income tax at a ratethe following progressive rates: (i) 15% for the portion of 15.0% (for the yeargains up to R$5 million, (ii) 17.5% for the portion of 2016)the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million), or 25.0% for Tax Haven residents. If a Non-Resident Holder that is a foreign direct investor under Law 4,131/4131/62 wishes to deposit its units into the ADR program in exchange for ADRs, such Non-Resident Holder will be required to present to the custodian evidence, if applicable, of payment of the income tax assessed on capital gains at the rate of 15.0%(for the year of 2016)aforementioned progressive rates or, in the case of a Tax Haven resident, 25.0%25%.
As mentioned above, in this case, from January 1, 2017 pursuantPursuant to CMN Resolution 4,373 the progressive rates of Law 13,259/16 to capital gains obtained by Non-Resident Holders not located in a Tax Haven will be applicable and for Non ResidentNon-Resident Holders (whether they are considered to be Non-Resident Holders as a result of CMN Resolution 43734,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and remain taxed to a tax rate of 25.0%25%.
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However, in certain circumstances, there may be arguments to sustain the position that such taxation is not applicable to 4,373 Holders that are not resident or domiciled in a Low or Nil Tax Jurisdiction, which should be subject to the assessment of the withholding income tax at a fixed 15% rate.
However,Moreover, there are arguments to support the position that there should be no withholding tax on this transaction, because: (i) the deposit of units would not have represented the disposal of the investment; and (ii) the transaction is registered on the stock exchange. Given the uncertainty of these two positions, we recommend that you consult your tax advisors.
Tax on Foreign Exchange Transactions (IOF/Exchange)
The Tax on Foreign Exchange Transactions, (IOF/Exchange),or “IOF/Exchange,” is due on the conversion of Brazilian or foreign currency, or any document that represents it, into an available equivalent amount. Currently, for most foreign exchange transactions, the IOF/Exchange rate is 0.38%.
However, currently different IOF/Exchange rates apply to foreign exchange transactions carried out in connection with investments made by Non-Resident Holders in the Brazilian financial and capital markets under CMN Resolution 4373. These rates are:
Under the provisions of the Law, the Brazilian government may increase any of these rates at any time, up to 25.0%25%. However, any increase in rates may only apply to future transactions.
Tax on Transactions Involving Bonds and Securities and Derivatives
Brazilian law imposes a Tax on Transactions Involving Bonds and Securities, known as “IOF/Bonds Tax.”
Currently, the IOF Bonds Tax is due at a daily rate of 1.0%, limited to 96.0% of the income generated by fixed income bonds, on the redemption amount or the amount received from assignment or renegotiation. The rate is reduced to zero as from the thirtieth day.
The rate of IOF/Bonds Tax applicable to transactions of variable income securities, including those traded in stock, commodities or futures markets that involve shares, or units composed of shares, is reduced to zero.
The IOF Derivatives Tax was established by Decree 7,563 of September 16, 2011, with the original levy of 1.0% per day1% on the notional value of the adjusted purchase sale or maturity of financial derivative contract in the countryBrazil that individually results in an increased foreign exchange exposure on a short position. However, under Decree 8,027 of June 12, 2013 the tax rate was reduced to zero.
Other Brazilian Taxes
The inheritance and gift tax, (“ITCMD”)or “ITCMD” is applicable to the transfer of any goods or rights by gift or bequest. The transfer of shares, or units comprised of shares, that are abroad to individuals who are domiciledresident in Brazil is subject to taxation. If the shares are in Brazil and are transferred to a non-resident, the ITCMD will apply if the donor is domiciled in Brazil and the recipient is domiciled abroad. The ITCMD is a state tax with a maximum rate of 8%.
Material U.S. Federal Income Tax Considerations for U.S. Holders
The following summary describes the material U.S. federal income tax consequences of the ownership and disposition of ADRs or units, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to acquire such securities. This summary does not address “Medicare contribution tax” consequences and applies only to U.S. Holders (as defined below) that hold ADRs or units as capital assets for U.S. federal income tax purposes and does not address special classes of holders, such as:
i. | certain financial institutions; |
ii. | insurance companies; |
iii. | dealers and traders in securities that use a mark-to-market method of tax accounting; |
iv. | persons holding ADRs or units as part of a hedge, “straddle,” conversion transaction or integrated transaction; |
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v. | holders whose “functional currency” is not the U.S. dollar; |
vi. | holders liable for the alternative minimum tax; |
vii. | tax exempt entities, including “individual retirement accounts” and “Roth IRAs”; |
viii. | partnerships or other entities classified as partnerships for U.S. federal income tax purposes; |
ix. | holders that own or are deemed to own 10% or more of our |
x. | persons holding ADRs or units in connection with a trade or business conducted outside the United States; and |
persons who acquired ADRs or units pursuant to the exercise of an employee stock option or otherwise as compensation. |
If an entity that is classified as a partnership for U.S. federal income tax purposes holds units or ADRs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership.partnership, Partnerships holding units or ADRs and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of holding and disposing of the units or ADRs.
The summary is based upon the Internal Revenue Code of 1986, as amended, (theor the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, all as of the date hereof, changes to any of which may affect the tax consequences described herein, possibly with retroactive effect. In addition, the summary is based in part on representations of the depositary and assumes that each obligation provided for in, or otherwise contemplated by, the deposit agreement or any other related document will be performed in accordance with its terms.terms, U.S. Holders are urged to consult their tax advisors as to the U.S. federal income tax consequences of the acquisition, ownership and disposition of ADRs or units in their particular circumstances.
As used herein, a “U.S. Holder” is, for U.S. federal income tax purposes, a beneficial owner of ADRs or units that is:
(1) an individual who is a citizen or resident of the United States;
(2) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
(3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
(4) a trust if (a) a court within the United States is able to exercise primary supervision for the administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has validly elected under applicable Treasury Regulations to be treated as a U.S. person.
an individual who is a citizen or resident of the United States; |
(2) | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
(3) | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
(4) | a trust if (a) a court within the United States is able to exercise primary supervision for the administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has validly elected under applicable Treasury Regulations to be treated as a U.S. person. |
In general, for U.S. federal income tax purposes, U.S. Holders of ADRs will be treated as the owners of the underlying units represented by those ADRs.ADRs, Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADRs for the underlying units represented by those ADRs.
The U.S. Treasury has expressed concerns that parties to whom American depositary shares are released before delivery of shares to the depositary (a practice called “pre-release”) or intermediaries in the chain of ownership between U.S. Holders and the issuer of the security underlying the American depositary shares, may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of American depositary shares. These actions would also be inconsistent with the claiming of the preferential tax rates described below, applicable to dividends received by certain non-corporate holders. Accordingly, the creditability of Brazilian taxes and the availability of the preferential tax rates for dividends received by certain non-corporate holders, each described below, could be affected by actions taken by these parties or intermediaries.
Taxation of Distributions
Distributions paid on our units or ADRs (including distributions to shareholders that are treated as interest on net equity for Brazilian tax purposes and amounts withheld in respect of Brazilian tax), other than certain pro rata distributions of our common shares, will be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders as dividends. These dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s (or in the case of ADRs, the depositary’s) receipt of the dividend, and will not be eligible for the “dividends received deduction” generally allowed to corporations receiving dividends from domestic corporations under the Code. The amount of the distribution will equal the U.S. dollar value of thereaisreceived, calculated by reference to the exchange rate in effect on the date that distribution is received (which, for U.S. Holders of ADRs, will be the date on which the distribution is received by the depositary), whether or not the depositary or U.S. Holder in fact converts anyreais received into U.S. dollars at that time. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. Any gains or losses resulting from the conversion ofreais into U.S. dollars will be treated as ordinary income or loss, as the case may be, of the U.S. Holder and will generally be U.S. source.
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Subject to applicable limitations (including the requirement that the ADRs be readily tradable on an established securities market in the United States), the discussion above regarding concerns expressed by the U.S. Treasury and the discussion of the passive foreign investment company rules below, under current law, dividends paid with respect to our ADRs to certain non-corporate U.S. Holders will be taxable at the preferential rates applicable to long-term capital gain. Non-corporate U.S. Holders should consult their tax advisors regarding the availability of these favorable rates in their particular circumstances.
Sale or Other Disposition of ADRs or Units
Subject to the discussion of the passive foreign investment company rules below, gain or loss realized by a U.S. Holder on the sale or exchange of ADRs or units will be subject to U.S. federal income tax as capital gain or loss in an amount equal to the difference between the U.S. Holder’s adjusted tax basis in the ADRs or units and the amount realized on the disposition, in each case as determined in U.S. dollars. Such gain or loss will be long-term capital gain or loss to the extent that the U.S. Holder’s holding period with respect to the ADRs or units exceeds one year.year, Gain or loss, if any, will generally be U.S. source for foreign tax credit purposes. The deductibility of capital losses is subject to limitations. Long-term capital gain of a non-corporate U.S. Holder is generally taxed at preferential rates. If a Brazilian tax is withheld on the sale or other disposition of ADRs or units, a U.S. Holder’s amount realized will include the gross amount of proceeds of the sale or disposition before the deduction of the Brazilian tax. See “—Brazilian Tax Considerations” for a description of when a disposition may be subject to taxation by Brazil.
Foreign Tax Credits
Subject to certain generally applicable limitations, which may vary depending upon a U.S. Holder’s circumstances, and subject to the discussion above regarding concerns expressed by thea U.S. Treasury, a U.S.
Holder will be entitled to a credit against its U.S. federal income tax liability for Brazilian income taxes withheld from dividends on ADRs or units. A U.S. Holder will be entitled to use these foreign tax credits to offset only the portion of its U.S. tax liability that is attributable to foreign-source income. This limitation on foreign taxes eligible for credit is calculated separately with regard to specific classes of income. In addition, a U.S. Holder must satisfy minimum holding period requirements in order to be eligible to claim a foreign tax credit for foreign taxes withheld on dividends.
Because a U.S. Holder’s gains from the sale or exchange of ADRs or units will generally be treated as U.S. source income, the limitation described above may preclude a U.S. Holder from claiming a credit for all or a portion of the foreign taxes imposed on any such gains. U.S. Holders should consult their tax advisors as to whether these Brazilian taxes may be creditable against the U.S. Holder’s U.S. federal income tax liability on foreign-source income from other sources. Instead of claiming a credit, a U.S. Holder may, at its election, deduct such otherwise creditable Brazilian income taxes in computing taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.
The Brazilian IOF/Exchange Tax imposed on the purchasespurchase of units and the IOF/Bonds Tax on the depositsdeposit of units in exchange for ADRs (as discussed above under “—Brazilian Tax Considerations”), will not be treated as creditable foreign tax for U.S. federal income tax purposes. U.S. Holders should consult their tax advisors as to whether those taxes would be deductible for U.S. federal income tax purposes.
The rules governing foreign tax credits are complex and, therefore, U.S. Holders are urged to consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to make effective use of foreign tax credits.
Passive Foreign Investment Company Rules
Based on proposed Treasury Regulations, including regulations which are proposed to be effective for taxable years beginning after December 31, 1994, we believe we were not a passive foreign investment company (a “PFIC”) for our taxable year ended December 31, 2016.2021. However, because the proposed Treasury Regulations may not be finalized in their current form, because the application of the proposed regulations is not entirely clear and because the composition of our income and assets will vary over time, there can be no assurance that we will not be a PFIC for any taxable year. The determination of whether we are a PFIC is made annually and is based upon the composition of our income and assets (including, among others, entities in which we hold at least a 25.0% interest), and the nature of our activities.
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If we were a PFIC for any taxable year during which a U.S. Holder held our ADRs or units, any gain recognized by a U.S. Holder on a sale or other disposition of ADRs or units would be allocated ratably over the U.S. Holder’s holding period for the ADRs or units. The amounts allocated to the taxable year of the sale or other exchange and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to all other taxable years would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the resulting tax liability for each of those taxable years.years, Further, the portion of any distribution in respect of ADRs or units that is in excess of 125.0%125% of the average of the annual distributions on ADRs or units received by the U.S. Holder during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, would be subject to taxation as described above. Certain elections may be available that would result in alternative treatments (such as mark-to-market treatment) of the ADRs or units.units, U.S. Holders should consult their tax advisors to determine whether any of these elections would be available and, if so, what the consequences of the alternative treatments would be in their particular circumstances.
If we were to be treated as a PFIC in any taxable year in which a U.S. holderHolder held units or ADRs, a U.S. holderHolder would generally be required to file IRS Form 8621 with its annual U.S. federal income tax returns, subject to certain exceptions.
In addition, if we were to be treated as a PFIC in a taxable year in which we pay a dividend or the prior taxable year, the preferential dividend rates discussed above with respect to certain dividends paid to non-corporate holders would not apply.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding unless (i) the U.S. Holder is an exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
Certain U.S. Holders who are individuals (and specified entities that are formed or availed of for purposes of holding certain foreign financial assets) may be required to report information relating to their ownership of an interest in certain foreign financial assets, including stock of a non-U.S. entity, subject to certain exceptions (including an exception for publicly traded stock and interests held in custodial accounts maintained by a U.S. financial institution). U.S. Holders are urged to consult their tax advisors regarding the effect, if any, of this requirement on the ownership and disposition of ADRs or units.
FATCA
The United States has enacted legislation, commonly referred to as “FATCA,” that generally imposes a reporting and withholding regime with respect to certain U.S. source payments (including interest and dividends), and beginning January 1, 2019, to payments of gross proceeds from the disposition of property that can produce U.S. source interest and dividends and certain payments made by entities that are classified as financial institutions under FATCA. However, regulations proposed in 2018 (the preamble to which specifies that taxpayers are permitted to rely on them pending finalization) eliminate the withholding requirement on payments of gross proceeds of a taxable disposition. The United States has entered into an intergovernmental agreement regarding the implementation of FATCA with Brazil, (the “IGA”).or the “IGA.” For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—FATCA,” above. Under the current terms and conditions of the IGA, we do not expect payments made on or with respect to the ADRs or units to be subject to withholding under FATCA. However, significant aspects of when and how FATCA will apply remain unclear, and no assurance can be given that withholding under FATCA will not become relevant with respect to payments made on or with respect to the ADRs or units in the future. Prospective investors should consult their own tax advisors regarding the potential application of FATCA.
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10F. Dividends and Paying Agents
Not applicable.
10G. Statement by Experts |
Not applicable.
10H. Documents on Display |
We are subject to the information requirements of the Exchange Act, except that as a foreign issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file with or furnish reports and other information to the SEC. Reports and other information filed or furnished by us to the SEC may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 100 F Street, N.E., Washington, D.C. 20549. Copies of such material may also be inspected at the offices of the NYSE, 11 Wall Street, New York, New York 10005, on which our ADRs are listed. In addition, the SEC maintains a website that contains information which we have filed electronically with the SEC, which can be accessed over the internet at http://www.sec.gov.
We also file consolidated financial statements and other periodic reports with the CVM located at Rua Sete de Setembro, 111, Rio de Janeiro, Rio de Janeiro 20159-900, Brazil. The CVM maintains an Internetinternet website that contains reports and other information about issuers, like us, that file electronically with the CVM.CVM, The address of that website is http://www.cvm.gov.br. We also file consolidated financial statements and other periodic information with BM&FBOVESPA.the B3. The address of the BM&FBOVESPAB3 website is http://www.bovespa.com.br.www.bmfbovespa.com.br.
10I. Subsidiary Information |
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Overview
To manage the risks of our operations, inIn addition to establishing and applying our local risk management policies and procedures, we have incorporated the Santander Group’s global risk management functions at various levels of our organization, to ensure a consistent management approach worldwide, by implementing the Santander Group’s risk management policies for all areas, including financial, credit, market, operational and compliance risk, among others.
to ensure a consistent approach worldwide.
In addition, committees headedled by senior management are responsible for controlling risks by overseeing credit approval and risk control, taking into accountcompliance with the parameters and limits of exposure policies defined and approved by the Bank’s board of directors.
The Control department and Risk Consolidation department provided their respective Risk management reports provided to our senior management are generated mainly by the control department and the risk consolidation department based on the databases corresponding to each department.management. Likewise, the reports for senior management of the Santander Group’s financial entities and foreign branches are generated mainly by the risk control departments of each of those entities and branches.
The presentation of risk managementsuch information to senior management is designed to enhance the understanding and management of risks for the Santander Group’s administrative bodies and branches. These reports are targeted to differentThe type of information and highlights in each report varies depending on the intended audiences within senior management, whethersuch as the Santander Group, its financial entities, or its foreign branches, depending on the kind of information and of each type of report highlights.branches. Information maycan be transmitted to senior management either through our intranet risk reporting tool, throughby e-mail or bythrough live presentations.
Information, analyses and decisions are also disseminated through the channels described below, fostering communication among all areas within Santander Brasil and withinof the risk management process:
organization:
i. | internal department mailboxes, which allow for the exchange of information within groups and areas; |
ii. | periodic meetings (departmental, monthly, quarterly, off-site, conventions), which allow for regular exchange of information on an in-person basis; |
iii. | our regulations portal, which is an internal portal within our intranet where we maintain our current risk management policies; |
iv. | e-mail; |
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v. | video and teleconferences with Santander Spain; and |
vi. | risk committees, including the |
Information is prepared in an effort to improvewith the goal of improving risk management and is classified as standard information or non-standard information.
into two groups:
i. | Standard information: |
ii. | Non-standard information: this includes presentations and |
iii. |
Quantitative Information. Quantitative information includes risk metrics that permit our senior management to better analyze situations, trends and developments in each segment, activity or portfolio, relating to planned scenarios or defined limits, with emphasis on any scenarios falling outside such limits. Quantitative information is developed primarily to analyzeaddressed the liquidity and market risks,risk (trading and solvency risks. Information related to liquidity and market riskbanking book) which includes, among other items, measurements of positions, mark-to-market valuations, sensitivity analyses, volume analyses, measures of liquidity gaps and country risk models, impacts of risks on results, economic risks, stress test simulations and back-testing. Information related to solvency risks includes, among other items, credit exposure measures, abnormal events, doubtful asset measurements, impacts of solvency risks on our results, measures of expected loss, stress test simulations, and other information related to economic and market risks.
Qualitative Information. Qualitative information includes internal and external events relating to the economic, financial or competitive environment, and an evaluation and analysis of the causes and consequencesknown or foreseeable consequences of such events. These also include measures used to prepare such models.
The frequency with which quantitative and qualitative risk management information is prepared is determined bydepends on the kind of information provided, as follows:
Daily information:
i. | liquidity and market risk: includes data on treasury limits (VaR, positions, sensitivity of linear and non-linear econometric models) and the principal changes in the treasury |
Weekly information:
i. | focuses on generating updated high-level information in different segments (focused on solvency risk) or portfolios (focused on market risk), as well as a summary of the relevant facts and expected short-term changes; |
ii. | is generated for our senior management, including the chief executive officer and vice president executive officers of retail, risks and finance, and an independent member of our board of directors; and |
iii. | is drawn from our risk management framework and policies globally and is validated by local market |
Monthly information:
i. | liquidity and market risk: |
Monthly information is generally more detailed than weekly information.
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Risk Management Committees
The following table describes our principal credit and marketthe main risk management committees in Brazil the(which are responsible for credit decisions and for ongoing control of credit risk matters), including their responsibilities, members and membersfrequency of each such committee and the frequency with which such committees meets.
meetings.
Committee | Main Responsibilities | Members | Meeting Frequency | |||||
Executive Risk Committee | ● | ● | CEO | Weekly | ||||
● | ||||||||
● | Vice President Executive
| Officer (Chief Risk Officer), | ||||||
● | ||||||||
● | Vice President Executive | Legal and Corporate Affairs | ||||||
● | ||||||||
● |
| |||||||
● | ||||||||
● | Vice-President Executive Officer of Corporate and Investment Banking | |||||||
● | ||||||||
● | Vice President Executive Officer of Corporate | |||||||
● | Approve predefined internal risk regulations and monitor the Strategic Business Plan main indicators; | ● | Vice President Executive Officer of Private Banking and Wealth Management | |||||
● | ||||||||
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● | Approve the policy and standards of methodological models and validate their effectiveness; | ● | ||||
● | ||||||
● | ||||||
● | ||||||
● | ||||||
● | ||||||
● | ||||||
Risk Control Committee | ● | ● | Chief Financial Officer | Biweekly | ||
● | ||||||
● |
|
| ||||||
● | Conduct an independent and periodic control report on risk management activities, which includes: | ● | Executive Superintendent of- Enterprise Risk Management | |||
● | ● | Executive Superintendent of GIR and Relationship with Supervisors |
| ||||||
●Approve the secondary metrics of Risk Appetite, ●Review and monitor compliance with the General Risk Framework and Risk Appetite, identifying exposures to the most relevant risks through risk reports ●Monitor all relevant aspects of capital management and its impacts ●Approve, review and guarantee the correct and effective risk governance, including the control and decision forums, structures, policies and reports to ensure that all relevant risks are identified, managed and reported, ●Approve and review the Strategic, Financial, Business Continuity and Recovery Plans | ●Vice President Executive Officer of Finance and Strategy, ●Chief Compliance Officer ●Vice President Executive Officer of Legal and Corporate Affairs ●Chief Data Officer ●Audit Director ●Chief Information Security Officer | |||||
results; | ||||||
board; | ||||||
audit; |
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●Provide the board of directors, through the board risk committee, and the executive committee the information and assistance needed regarding risks for the fulfillment of its functions in risk management matters assigned to it by law, the | RCC; and ●Approve the operation of hierarchically lower-risk control committees and their respective regulations; ●aspects related to capital management, including: ●Present the impact of new regulations and the results of the elaboration of QIS (Quantitative Impact Study); ●Review and evaluate responses to additional requests made by regulators regarding capital management issues; ●Carry out the analysis and supervision of the results of the capital adequacy assessment exercises and their main components (schedule, assumptions, economic scenarios, methodologies, results, capital buffer, contingency plans and other relevant aspects) of the following processes: ICAAP, TEBU (Bottom-up Stress Test), Strategic. |
Our executive credit committee makesThe Executive Risk Committee and Risk Control Committee, which are described in detail above, make decisions with regard to risk management in Brazil with representatives of our senior management, including our Chief Executive Officer (CEO), our Vice President Executive Officer of Risk Management (CRO) and the other members of our executive committee.the Executive Committee. The main responsibilities of the executive credit committeeExecutive Risk Committee and Risk Control Committee include defining our level of risk tolerance, monitoring our loan portfolios and market conditions, as well as following up on any recommendations made by the Brazilian Central Bank. The executive credit committeeThey also raisesraise any matters to our board of directors that exceed the authority of the committee. Each of our risk management committees has certain powersauthority and approval levels, in each case subject to Brazilian law and regulations. Decisions at the committee level are intended to be collegial in a manner to ensure that differing opinions are all considered.
Credit Risk
The Santander GroupGroup’s risk management model is based on a prudent management, driven by the risk managementappetite defined by the unit and approved by the definition of risk tolerance by our board of executive officers.headquarters. We operate within the risk management culturelimits of the Santander Group following theGroup's risk management guidelines of our board of executive officers, theand Brazilian Central Bank regulations, and international best practices,in order to protect and optimize capital and promote profitability. One of our credit risk management principles is that of independence among our business areas, which providesproviding sufficient autonomy to accomplish appropriatefor proper risk management. Another important characteristic of our credit modelrisk management is the direct involvement of our senior management in the decision-making process through credit committees. Our credit approvalrisk management process, particularly theespecially new loan approval of new loans and risk monitoring, is structured according to our classification of customerscustomer and products between ourproduct classifications, and is divided into retail and wholesale lending operations.lending.
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Retail Lending
In retail banking, credit requests made by individuals are analyzed by a credit approval system, applying various types of processes dependingwhich assigns a credit rating based on our policies and approved scoring model, which takes into account the credit history of the individual, the individual’s relationship with us and the type of credit requested. For standard credit
These requests approval is generally made atcan come from one of our many service channels, including branches, basedinternet banking, mobile applications and ATMs.
We use two distinct scoring models depending on an automatic, standardized process. When the customer’s request is submitted for credit approval, we collect relevant credit information fromphase in which the customer including the individual’s profession, level of income, internal and external financial restrictions, credit history, current indebtedness, and relationshipis in with us. Based on this datarespect to their interaction with us (the “application” phase and the type of credit requested, our credit rating system automatically assigns a credit rating based on a scoring model and our risk management policies. We use our scoring models in two different phases: during the “application” process and later in the “ongoing” phase.“behavior” phase). A credit scoring model is applied in the application phase when the customer begins a relationship with us and a behavioral scoring model is used when the customer has already had a relationship with us for a period established by our risk management policies.policies (i.e., during the “ongoing” phase). This policy allows us to evaluate our existing customers with a more complete analysis than if we applied a pure scoring model for all customers.
For financing products offered to SMEs (retail business)businesses), the method used to evaluate if approval should be granted is based on internally-developed credit risk approval process can involve an automated scoringlimits, as well as the customer´s creditworthiness. These approval methods include system based on credit policies, and/automation, or be manually and individually analyzed and approved, based on the creditworthiness of the SME, in accordance with the respective credit risk approval authority levels developed internally. This preliminarymanual individual analysis, alsowhich generates a credit risk rating based on our internal models.
Additional information, such as the characteristics of the financing product being offered, including related terms and conditions, andas well as collateral granted in connection therewith, is also taken into account as part ofin the approval process.
Pre-approved limits on lines of credit for a particular individual or an SMEboth individuals and SMEs are granted based on the creditworthiness, and size as determined according toby our scoring criteria. Credit approval by our branches is allowed by authorized personnel according to established parameters. Credit limits are managed based on the performance of the customers, taking into accountconsidering each customer’s risk profile.
Credit authorizationsauthorization limits are established through policies that defineand these are automatically applied to all credit requests. When an automatic credit decision results in the rules and responsibilities ofcustomer’s needs, the members of each committee. We have established procedures and authorized certain organizational bodiescommercial area has the authority to approve credit requests in amounts greater than those delegated to individual branches (bothsubmit a request for individuals and SMEs).manual approval. Such approvals are made following applicationsubjected to review by analysts or committees, depending on the value of the relevant scoring model and individualized analysis by the relevant authorized organization body.
loan sought.
The following table presents the individuals or organizational bodies authorized to make extensions of credit to retail borrowers for the amounts specified:
Authorization Required | Amount | |
Branch | Up to R$500 thousand | |
Decision | Up to R$30 million | |
Retail Risk Higher Committee and | Up to R$ |
(1) Members of risk decision-making centers include superintendents and other representatives of the risk area.
(2) Members of the higher Risk Committee include, among others, the Chief Executive Officer of the group, the officers of Wholesale, Retail, Market Risk, Recovery and representatives of the Risk and Compliance Departments.
There is also a more robust model called Rating Plus which is addressed to mid-size companies a few other retail clients. This model combines the clients’ internal and external financial behavior, information obtained from their balance sheets and a questionnaire that is adapted in accordance with the companies’ individualities.
The evaluation made by Rating Plus seeks to attribute an internal classification for the costumers defining their risk level in comparison with their creditworthiness. The classification as well as the credit analyses for these clients are usually made manually through specific proposals or limits.
Wholesale Lending
With respect to ourIn wholesale customers, the approval process is determined forbanking, each customer is analyzed on an individual basis, Commercial and product separately, taking into accountrisk areas analyze the customer’s financial condition as well as other relevant information pertainingclient’s needs and indicators, analyzing profitability, creditworthiness and adequacy to the customer. risk metrics of Santander Group RAS – Risk Appetite Statement, in order to determine and submit it for approval.
Wholesale lending risk appetite metrics and limits are set annually and tracked monthly through reports sent to the headquarters of the Santander Group. These limits are defined considering the risk appetite of Santander Brasil and the wider Santander Group, in line with current regulations (Brazilian Central Bank and European
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Central Bank), and the expectations of the commercial area. Individual and sectoral portfolio concentrations are monitored to mitigate the risk of the portfolio.
All credit requests byfrom our wholesale customers must be approved by the relevanta credit committees.
committee, which are outlined below:
Authorization Required | Limit | |
Up to R$ | ||
Superior and High Risk Committee | Up to R$ | |
Wholesale Committee | Up to R$ | |
Executive Risk Committee | Up to R$ |
Credit Monitoring
Credit lines to retail banking SME customers are reviewed on a weekly, basis. Credit lines to retail bankingwhereas individual clientscustomers are systematically reviewed systemically, on a daily, basis, based on athe client’s credit rating. This process allows for improvements in the credit exposure ofto customers who have presentedpresent good credit quality. SpecificAdditional specific early warnings are automatically generated in the case of thewhen deterioration of a customer’s credit quality. Inquality is identified. When this case, with the identification of the client’s solvency problem,occurs, a process to reduce credit risk designed toand prevent default is implemented. For example, early warnings are automatically generated for SMEs, andthis includes monthly monitoring of their financial performance, is monitored monthly. In addition, the financial situation of each enterprise is discussed by specific committees in the presence of the commercial area, These processes are implemented, with the aimgoal of continuously improving the quality of our loan portfolio.
Credit lines to wholesale customers and related credit quality are reviewed on an annual basis. There is a monitoring procedure and, forbasis, When any specific concern in regard to the credit quality of a certain customer, we use a system of customer monitoring system known as FEVE (Firmas em Vigilância Especial - Firms under Special Vigilance)SCAN (Santander Customer Assessment Note), withwhich allows possible actions to be taken under the following categories: “monitor,“monitoring,” “reduce exposure,“intensive monitoring,” “seek collateral”“proactive monitoring” or
“cancel. “block and exit.” A customer subject to action under one of these categories will be reviewed on a quarterly or a semi-annual basis, depending on the situation.
We use proprietary internal rating models to measure the credit quality of a given customer or transaction.transaction, Each rating relates to a certain probability of default or non-payment, determined on the basis of the customer’s history, with the exception of certain portfolios classified as “low default portfolios.” These ratings and models are used in our loan approval and risk monitoring processes.
The table below shows the internal risk rating levels and their corresponding probability of default:
Internal Risk Rating | Probability of Default | |
Low | ||
Medium-low | ||
Medium | ||
Medium-high | ||
High |
For a breakdown of our portfolio by internal risk rating, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Movements in Allowances for Impairment Losses—Short-Term Borrowings—Internal Risk Rating.”
Recovery
Our business recovery area is responsible for all of our non-performingnonperforming portfolios. This area uses statistical tools to study the behavior of customers and then defines, implements and monitors strategies and performance related to non-performingthese portfolios, seeking to ensure maximum efficiency in recovery subject to applicable Brazilian law and regulation.
The business recovery area uses statistical tools to study the behavior of clients and develop strategies for more effective recovery. Customers with greater probability of payment are classified as low risklow-risk customers and those with a low probability of payment are classified as high risk. The aforementioned risk classification determines the intensity of collection efforts expended.
The channels of operation are defined as “Mapa“Mapa de Responsabilidade,” (Responsibility Map), using the time value of default versus risk value, in addition to other characteristics, to create strategies for recovery.
Our credit recovery tools include daily contact through our call center, inclusion of defaulting clientscustomers within external sources of credit protection, sending collection letters, and direct contact through our branch network. In addition to the aforementioned tools, we use the following strategies:
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Internal teams specialized in restructuring and debt recovery work directly with defaulting |
We use specialized external firms to collect, report and assess high-risk customers. These firms are remunerated according to pre-established percentages applied to the amounts recovered. |
● | In addition, we use digital channels as a mean of increasing the availability of renegotiation offers to our customers. |
Once we have exhausted all of the credit recovery resources available to us, we conduct sales of any remaining non-performingnonperforming loans. These sales of non-performing loans are held periodically through an auction process, with the aim of obtaining optimal prices in the markets and thereby reducereducing the impact on us.
Assets and Liabilities Committee
Our asset and liability management strategy is defined by our assets and liabilities committee (ALCO), which operates under the strict guidelines and procedures established by the Santander Group. Members of the committee include our Chief Executive Officer, Chief Risk Officer, Vice President Executive Officer of Risk Management, Chief Financial- Finance and Strategy, Vice President Executive Officer Treasurer, Executive Superintendent of- CFO, Director - Financial Management and the Chief Economist. The assets and liabilities committee establishes and implements strategies, policies and procedures with the objective of managing our balance sheet and risk structure.
Market Risk
Types of market risk
Interest rate risk
Interest rate risk is the possibility that changes in interest rates could adversely affect the value of a financial instrument, a portfolio or our operations as a whole. We are exposed to interest rate risk whenever there is a mismatch between interest rate sensitive assets and liabilities, subject to any hedging we have engaged in using interest rate swaps or other off-balance sheet derivative instruments. Interest rate risk arises in connection with both our trading and non-trading activities.
Credit spread risk
Credit spread risk arises wheredue to changes in credit spread curves associated with specific issuers and debt types may adversely affect the value of a financial instrument, a portfolio or adversely affect Santander Group as a whole. The “spread” refers to the margin charged on financial instruments based on benchmark rates (i.e., the difference between the rate on the relevant instrument and the underlying benchmark rate), with the latter usually being the internal rate of return of government bonds and interbank interest rates.
Exchange rate risk
Exchange rate risk arises due to the sensitivity of the value of a foreign currency position in relation to a base currency (in our case,reais) due to a potential change in exchange rates. We are exposed to foreign exchange rate risk as a result of mismatches between assets and liabilities, and off-balance sheet items denominated in different currencies, either as a result of trading or in the normal course of business. We maintain non-trading open currency positions arising from our investments in overseas subsidiaries (such as our Cayman Islands branch)and Luxembourg branches), affiliates and their respective currency funding. Our principal non-trading currency exposure is the U.S. dollar, which, as mandated by our policies, is hedged to thereal within established limits.
Equity price risk
Equity price risk arises due to the sensitivity of the value of an investment position in equity markets to adverse movements in the market prices or in response to expectations of future dividends. Among other instruments, equity price risk affects positions in shares, stock market indices and derivatives using shares as the underlying asset (puts, calls, and equity swaps). We are exposed to equity price risk in both our trading and non-trading investments in equity securities.
Commodities price risk
Commodities price risk isrelates to the risk derived from thepotential negative effect of potential changechanges in commodity prices. Our exposure to this risk is not significant and ismostly concentrated in derivative operations involving commodities for clients.customers.
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Inflation risk
Inflation risk is the risk that changes in inflation rates may adversely affect the value of a financial instrument, a portfolio or Santander Group as a whole.
Volatility risk
Volatility risk is the sensitivity of the value of a portfolio to changesvolatility in the volatility of a number of risk factors, including volatility of interest rates, exchange rates, share prices and of commodity prices. This risk is applicable to financial instruments which have volatility as a variable in their valuation model.
Other, more complex, risks to which we may be exposed include:
Correlation risk
Correlation risk is the sensitivity of the value of a portfolio to changes in the relation between risk factors, whether of the same type (for example, between two exchange rates) or of a different nature (for example, between an interest rate and the price of a commodity).
Market liquidity risk
Market liquidity risk is the possibility of a Bank entity or the Santander Group as a whole finding itself unable to exit or close a position in time without affecting the market price or the cost of the transaction. This risk can be caused by a decrease in the number of market makersparticipants or institutional investors, the execution of large volumes of operations, market instability andor increases of the concentration existing in certain products and currencies. Market depth is the main liquidity driver in our trading portfolio, even though our policy is to trade the most liquid assets.assets, Our liquidity risk also arises in non-trading activity, due to the maturity gap between assets and liabilities mostly in the retail banking business.
Risk of prepayment or cancellation
In certain transactions, the relevant loan agreement allows, explicitly or implicitly, voluntary prepayment prior to maturity without any penalty, which creates a risk that the cash flows expected from that particular credit line have toreceived as a result of the prepayment will be reinvested at a potentially lower interest rate. This mainly affects loans or mortgage securities.
mortgage.
Underwriting risk
Underwriting risk occurs as a result of participation in the underwriting of a placement of securities or another type of debt, assuming the risk of partially owning the issue or the loan due to non-placement of all or any proportion of any issuance among potential buyers.
Derivatives used in Managing Market Risks
We use derivatives both in trading and non-trading activities to manage market risks. Trading derivatives are used to eliminate, reduce or modify risk in trading portfolios (interest rate, foreign exchange, commodities and equity price risk), and to provide financial services to customers. Our principal counterparties (in addition to customers) for this activity are financial institutions and the BM&FBOVESPA.B3. Our principal derivative instruments include interest rate swaps, interest rate futures, foreign exchange forwards, foreign exchange futures, foreign exchange options, cross currency swaps, commodities derivatives, equity index futures and equity options and interest rate options. With respect to non-trading activity, derivatives are used in order to manage interest rate risks and foreign exchange risks arising from asset and liability management activity. We also use interest rate and foreign exchange linear derivatives in non-trading activity. We have no credit derivatives in Brazil, as there is no market for credit derivatives in Brazil.
Activities subject to market risk
Our market risk area is responsible for measuring, controlling and monitoring risk, in respect of those operations where risk to our business arisesthe above identified areas, as a result of changes in market factors. Market risk arises due to changes and potential volatility in interest rates, exchange rates, share prices and commodities prices, as well as due to liquidity risk of the various products and markets in which we operate.
The following paragraphs summarizeoutlines the principal market risks tomain source of risk for which we are exposed.exposed:
On the basis of the origin of the risk to which we are exposed, our activities are classified as follows:
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Trading book
The trading book includes financial services to customers and purchase-sale and positioning mainly in fixed income, equity and currency products. The trading book comprises our proprietary positions in financial instruments held for resale and/or bought to take advantage of current and/or expected differences between purchase and sale prices. This portfolio also includes positions in financial instruments deriving from market-making and sales activities. As a result of trading fixed income, securities, equity, securitiescommodities and foreign exchange products, we are exposed to interest rate, equity price and foreign exchange ratetheir respective market risks. We are also exposed to volatility when non-linear derivatives are used.
Non-trading book (banking/structural)
The non-trading book is constitutedconsists of market risks inherent in the balance sheet, excluding the trading portfolio. These include:
i. | Structural interest rate risks. This arises from mismatches in the maturities and re-pricing of all assets and liabilities. |
ii. | Structural exchange rate risk/hedging of |
Market Risk Management Framework
Our board of directors is responsible for establishing our policies, procedures and limits with respect to market risk, including which businesses to enter intoinvest in and maintain. The risk committee monitors our overall performance in light ofrelation the risks we assume. Together with the local and global assets and liabilities committees, each market risk unit measures and monitors our market and liquidity risk and provides figures to the assets and liabilities committees to use in managing such risks.
Market risk is regulated and controlled through certain policies, set forth in our market and liquidity risk management policies manual, andas well as through structures setting forth specific limits to our exposure to market risk which is based on global limits established for the entire Santander Group. In addition, authorized products are listed and reviewed periodically.
These policies, procedures and limits on market risk are applicable to all units, businesses or portfolios susceptible to market risk, and restare built on five basic pillars, which we believe are vital for correct management of market risks:
i. | Market and structural risk measurement, analysis and control; |
ii. | Calculation, analysis, explanation and reconciliation of profit and loss (P&L); |
iii. | Definition, capture, validation and distribution of market data; |
iv. | Definition of limits, products and underlyings; and |
v. | Consolidation of |
In turn, our market risk management is guided by the following basic principles:
i. | Independence of the trading and balance sheet activities; |
ii. | Global overview of the risks taken; |
iii. | Definition of limits and empowerment; |
iv. | Control and oversight; |
v. | Homogeneous aggregated metrics; |
vi. | Homogeneous and documented methodologies; |
vii. | Measuring risk; |
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viii. | Information consolidation; and |
ix. | Contingency plans and technical |
Structure of Limits Regarding Market Risk
The market risk limit structure represents Santander Brasil’s risk appetite and is aligned with our global market risk management policies, which encompass all of our business units and serve to:
i. | identify and define the main types of risk incurred in a manner consistent with our business strategy; |
ii. | quantify and report to our business segments with respect to appropriate risk levels and risk profile in line with senior management’s assessment of risks to help avoid any of our business segments taking undesired risks; |
iii. | provide flexibility to our business segments to timely and efficiently establish risk positions that are responsive to market changes and our business strategies, and always within risk levels acceptable to Santander Brasil; |
iv. | allow the individuals and teams originating new business to take prudent risks that will help attain budgeted results; |
v. | establish investment alternatives by limiting equity requirements; and |
vi. | define the range of products and underlying assets within which each unit of treasury can operate, taking into consideration our risk modeling and valuation systems and our liquidity tools. This will help to constrain market risk within our defined risk strategy. |
Global market risk management policies define our risk limit structure while the risk committee reviews and approves such policies. Business managers administer their activities within these limits. The risk limit structure covers both our trading and non-trading portfolios and includes limits on fixed income instruments, equity securities, foreign exchange and derivative instruments.
Limits considered to be global limits refer to the business unit level. To date, system restrictions prevent intra-day limits. Our business units must comply with approved limits. Potential excesses require a range of actions carried out by the global market risk function unit including (i) providing risk-reducing suggestions and controls, which are the result of breaking “alarm” limits and (ii) taking executive actions that require risk takers to close out positions in order to reduce risk levels.
The market risk limits used by us are established along different metrics intended to cover all activity subject to market risk from many perspectives, applying criteria we believe to be conservative. The principal limits include:
Trading limits
i. VaR limits;
limits of equivalent positions and/or nominal; |
sensitivity limits to interest rates; |
iv. |
v. | limits aimed at reducing the volume of effective losses or protecting results already generated during the period: |
loss trigger; and |
stop loss. |
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Structural limits
i. | structural interest rate risk of the balance sheet: |
sensitivity limit of net interest margin (“NIM”) over a one year horizon; and |
sensitivity limit of market value of equity (“MVE”); |
ii. | structural exchange rate risk comprised of the net position in each currency; and |
iii. | liquidity risk: limits defined |
Market Risk Statistical Tools
Locally, we use a variety of mathematical and statistical models, including VaR models, historical simulations and stress testing to measure, monitor, report and manage market risk. Such numbers, produced locally, also serve as input for global activities such as evaluations of RORAC, and to allocate economic capital to various activities in order to evaluate the RORAC of such activities.
Trading Activity
VaR: as calculated by us, our internal VaR model is an estimate of the expected maximum loss in the market value of a given portfolio over a one-day time horizon at a 99% confidence level, subject to certain assumptions and limitations discussed below. Our standard methodology is based on historical simulation of 520 days and is calculated using the VaR methodology “full revaluation.” In order to capture recent market volatility in the model, the reported VaR is the higher between the 1% percentile and the 1% weighted percentile of |
1. | Assumptions and limitations: our VaR methodology should be interpreted in light of the limitations that (i) a one-day time horizon may not fully capture the market risk of positions that cannot be liquidated or hedged within one day and (ii) at present, we compute VaR at the close of business and trading positions may change substantially during the course of the trading day. |
2. | Calibration measures: in order to calibrate our VaR model, we use back testing, which is a comparative analysis between VaR estimates and the daily clean Profit and Loss (theoretical result generated assuming the mark-to-market daily variation of the portfolio considering only the movement of the market variables). The purpose of these tests is to verify and measure the precision of the models used to calculate VaR. |
Stressed VaR: our stressed VaR model uses the same calculation methodology as VaR with the following two exceptions: (i) the stressed VaR uses a window of |
Stress Test: this is a simulation technique, which consists of estimating the potential impact on results by applying different stress scenarios to all the trading portfolios and considering the same assumptions according to the relevant risk factor. These scenarios can replicate events that happened in the past (such as crisis events) or hypothetical |
Sensitivities: our market risk sensitivity measures |
of an instrument to changes in market factors may be obtained through analytical approximations by partial derivatives or through a full revaluation of the portfolio. |
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Non-trading Activities
Interest rate gap of assets and liabilities: |
NIM sensitivity: |
MVE sensitivity: Net worth sensitivity measures the interest risk implicit in net worth (equity) over the entire life of the operation on the basis of the effect that a change in interest rates has on the current values of financial assets and liabilities. This is an additional measure to the sensitivity of the NIM. |
Value at risk: The VaR for balance sheet activity and investment |
Analysis of results arising from the interest rate scenarios established by Circular No. 3,876 of |
Liquidity risk: |
Liquidity gap: |
Analysis of scenarios/contingency plan: includes the local and external activities and consists of a formal set of preventive and corrective actions taken in times of liquidity crises. Using analysis of historical scenarios and simulations of impacts on bank liquidity, we define action plans and contingencies to establish roles and responsibilities and levels to trigger the contingency plan. Each unit should prepare its contingency plan. Additionally, Santander Spain must be periodically informed about the contingency plan of each subsidiary. The frequency with which this plan must be updated depends on market liquidity conditions.
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Quantitative Analysis
Trading Activity
Quantitative Analysis of Daily VaR in 2016
2021
Our risk performance with regard to trading activity in financial markets between 20142019 and 2016,2021, measured by daily VaR (measured at a 99% of confidence level, over a one day time frame), is shown in the following graph.
During 2016, VaR remained relatively more stable in comparison to 2014 and 2015, fluctuating between R$20.9 million and R$103.7 million. In contrast, in 2015,2021, VaR fluctuated between R$16.730 million and R$299.740 million, with an average of R$34.5 million. VaR remained relatively stable during most of 2016, with significantly higher levels in October 2016, driven by an optimistic scenario regarding the Brazilian economy after the impeachment. However, just after US elections, uncertainties related to global economic scenarios resulted in a gradual decrease of VaR until the end of the year.
The histogram below shows the distribution of average risk in terms of VaR in 20162021 where the accumulation of days with VaR levels between R$4020 million and R$6040 million can be observed in 68.5%79.8% of the distribution.
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VaR by Risk Factor
The minimum, maximum, average and year-end 20162021 VaR values by risk factor were as follows:
2015 | 2016 | 2020 | 2021 | |||||||||||||||||||||||||||||||||||||
Period End | Low | Average | High | Period End | Period End | Low | Average | High | Period End | |||||||||||||||||||||||||||||||
(in millions of R$) | (in millions of R$) | |||||||||||||||||||||||||||||||||||||||
Trading VaR | 44.76 | 20.9 | 49.0 | 103.7 | 37.7 | 31.6 | 16.7 | 34.5 | 63.1 | 34.4 | ||||||||||||||||||||||||||||||
Diversification Effect | (3.85 | ) | 0.7 | (16.6 | ) | (67.8 | ) | (10.0 | ) | (33.7 | ) | (5.2 | ) | (27.6 | ) | (54.4 | ) | (12.8 | ) | |||||||||||||||||||||
Interest Rate VaR | 39.97 | 19.6 | 37.8 | 85.3 | 34.7 | 26.6 | 12.7 | 31.8 | 72.3 | 34.9 | ||||||||||||||||||||||||||||||
Equity VaR | 2.55 | 0.6 | 4.6 | 13.4 | 2.7 | 2.8 | 2.6 | 7.5 | 21.5 | 6.4 | ||||||||||||||||||||||||||||||
Foreign Exchange VaR | 6.10 | 1.9 | 23.1 | 65.2 | 10.3 | 35.6 | 4.0 | 19.0 | 48.9 | 5.9 | ||||||||||||||||||||||||||||||
Commodity VaR | 0.3 | 0.1 | 3.8 | 21.4 | 0.1 |
The average VaR for 20162021 was R$49.034.5 million, with most of the risk due to foreign exchange and interest rate positions. Santander Brasil was relatively conservative in equity and commodities trading activity.
activity in line with the approach taken over the last few years.
The average VaR of the threefour main risk factors, interest rates, equity prices, and exchange rates and commodities were R$37.831.8 million, R$4.67.5 million, R$19.0 million and R$23.13.8 million respectively, with a negative average diversification effect of R$16.627.6 million. The chart below shows the evolution of the risk groups VaR interest rates (IR), VaR exchange rates (FX) and, VaR equity prices (EQ) (atand Commodities (CM), at a 99% confidence level, over a day time frame and a 15 day15-day moving average).average.
Risk Management of Structured Derivatives
Our structured derivatives activity is mainly focused on designing investment products and managing hedging risks for clients.customers. Our risk management is focused on ensuring that the net risk exposure is the lowest possible. These transactions include options on equities, currencies, fixed-income instruments and mostly market making books.instruments.
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The chart below shows the VaR Vega performance of our structured derivatives business in 2014, 20152021, 2020 and 2016, which2019. In the most recent year, this figure fluctuated around an average of R$2.798.23 million. In general, the periods with higher VaR Vega levels are related to episodes of significant increases in market volatility.
Scenario analysis
Different stress test scenarios were analyzed during 2016.2021, A correlation break scenario generated the results presented below.
Worst Case Scenario
The table below shows the maximum daily losses for each risk factor (fixed-income, equities and currencies) as of December 31, 2016,2021, in a scenario that uses historical volatilities and simulates variations of the risk factors for +/-3 and +/-6 standard deviations on a daily basis.basis, From this group of scenarios, we generate a table of stress test results, which identifies the largest loss per risk factor.factor, The sum of the largest losses of each risk factor is the result of the Worst Case Scenario, which considers the break of correlation between risk factors.
Worst Case Stress Test | Exchange Rate | Fixed Income | Equity | Total | Exchange Rate | Fixed Income | Equity | Total | ||||||||||||||||||||||
(in millions of R$) | (in millions of R$) | |||||||||||||||||||||||||||||
Total trading | (7.8 | ) | (152.7 | ) | (5.5 | ) | (166.0 | ) | (14.5) | (19.7 | ) | (14.8 | ) | (49.0 | ) |
The stress test shows that the economic loss suffered by the group in the marked-to-market result would be, if this scenario materialized in the market, R$166.0180.2 million.
Non-trading Activity
Quantitative Analysis of Interest Rate Risk in 2016
2021
Convertible Currencies
At the end of 2016,2021, the sensitivity of NIM at one year, to a parallel rise of 100 basis points in the local yield curve was R$385553 million.
In addition, at the end of 2016,2021, the sensitivity of net worthMVE to parallel rises of 100 basis points in the yield curves was R$1,6801,678.0 million in the local currency yield curve.
Structural Gap
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Structural Gap
The following table shows the managerial gaps between the re-pricing dates of our assets and liabilities as of December 31, 20162021 in millions ofreais. reais.
Total | 0-1 month | 1-3 months | 3-6 months | 6-12 months | 1-3 years | 3-5 years | > 5 years | Not Sensitive | ||||||||||||||||||||||||||||
(in millions of R$) | ||||||||||||||||||||||||||||||||||||
Structural Gap | ||||||||||||||||||||||||||||||||||||
Money Market | 309,426 | 115,341 | 859 | 1,347 | 21,303 | 18,675 | 37,938 | 20,504 | 93,459 | |||||||||||||||||||||||||||
Loans | 470,730 | 138,528 | 62,721 | 50,867 | 60,773 | 56,304 | 54,350 | 47,394 | (208 | ) | ||||||||||||||||||||||||||
Permanent | 15,836 | - | - | - | - | - | - | - | 15,836 | |||||||||||||||||||||||||||
Other | 199,895 | 35,519 | - | 23 | - | 2 | - | - | 164,351 | |||||||||||||||||||||||||||
Total Assets | 995,886 | 289,388 | 63,580 | 52,237 | 82,076 | 74,981 | 92,288 | 67,898 | 273,437 | |||||||||||||||||||||||||||
Money Market | (126,572 | ) | (73,371 | ) | (1,934 | ) | (2,839 | ) | (4,595 | ) | (18,206 | ) | (7,959 | ) | (13,862 | ) | (3,807 | ) | ||||||||||||||||||
Deposits | (498,828 | ) | (305,888 | ) | (16,114 | ) | (6,422 | ) | (10,091 | ) | (13,844 | ) | (15,886 | ) | (93,436 | ) | (37,147 | ) | ||||||||||||||||||
Equity and Other | (370,486 | ) | (63,009 | ) | (23,483 | ) | (16,556 | ) | (23,913 | ) | (1,462 | ) | (5,224 | ) | (3,319 | ) | (233,521 | ) | ||||||||||||||||||
Total Liabilities | (995,886 | ) | (442,267 | ) | (41,531 | ) | (25,817 | ) | (38,599 | ) | (33,512 | ) | (29,069 | ) | (110,617 | ) | (274,474 | ) | ||||||||||||||||||
– Balance Gap | 0 | (152,879 | ) | 22,049 | 26,420 | 43,478 | 41,469 | 63,219 | (42,719 | ) | (1,037 | ) | ||||||||||||||||||||||||
Off-Balance Gap | 18,976 | 22,280 | (4,189 | ) | 496 | (957 | ) | (23,496 | ) | 4,750 | 3,164 | 16,929 | ||||||||||||||||||||||||
Total Structural Gap | 18,976 | (130,599 | ) | 17,860 | 26,916 | 42,520 | 17,973 | 67,969 | (39,556 | ) | 15,892 | |||||||||||||||||||||||||
Accumulated Gap | 18,976 | (111,623 | ) | (93,763 | ) | (66,847 | ) | (24,327 | ) | (6,354 | ) | 61,615 | 22,060 | 37,951 |
Total | 0-1 month | 1-3 months | 3-6 months | 6-12 months | 1-3 years | 3-5 years | > 5 years | Not Sensitive | ||||||||||||||||||||||||||||
(in millions of R$) | ||||||||||||||||||||||||||||||||||||
Structural Gap | ||||||||||||||||||||||||||||||||||||
Money Market | 240,345 | 106,861 | 39,973 | 6,037 | 2,790 | 29,854 | 16,796 | 38,526 | (491 | ) | ||||||||||||||||||||||||||
Loans | 247,747 | 64,188 | 28,622 | 32,988 | 32,746 | 40,920 | 13,816 | 16,709 | 17,758 | |||||||||||||||||||||||||||
Permanent | 210,235 | 55,286 | 21,541 | 21,554 | 26,029 | 39,411 | 13,084 | 16,697 | 16,633 | |||||||||||||||||||||||||||
Other | 37,512 | 8,902 | 7,081 | 11,434 | 6,717 | 1,508 | 732 | 12 | 1,126 | |||||||||||||||||||||||||||
Total Assets | 706,555 | 283,430 | 68,660 | 39,042 | 35,541 | 70,773 | 30,612 | 55,235 | 123,263 | |||||||||||||||||||||||||||
Money Market | (139,915 | ) | (98,428 | ) | (5,229 | ) | (1,817 | ) | (5,018 | ) | (13,725 | ) | (3,818 | ) | (4,698 | ) | (7,182 | ) | ||||||||||||||||||
Deposits | (10,371 | ) | (2,958 | ) | (10 | ) | (217 | ) | (5 | ) | – | – | – | (7,182 | ) | |||||||||||||||||||||
Equity and Other | (129,544 | ) | (95,470 | ) | (5,218 | ) | (1,600 | ) | (5,014 | ) | (13,725 | ) | (3,818 | ) | (4,698 | ) | 0 | |||||||||||||||||||
Total Liabilities | (706,555 | ) | (464,504 | ) | (22,860 | ) | (10,083 | ) | (14,611 | ) | (25,152 | ) | (12,828 | ) | (24,140 | ) | (132,376 | ) | ||||||||||||||||||
– Balance Gap | – | (181,074 | ) | 45,800 | 28,959 | 20,930 | 45,621 | 17,784 | 31,095 | (9,114 | ) | |||||||||||||||||||||||||
Off-Balance Gap | (30,225 | ) | 63,683 | (11,947 | ) | 8,065 | 544 | 8,837 | (479 | ) | 8,189 | (107,154 | ) | |||||||||||||||||||||||
Total Structural Gap | (30,225 | ) | (117,391 | ) | 33,852 | 37,024 | 21,474 | 54,457 | 17,304 | 39,284 | (116,267 | ) | ||||||||||||||||||||||||
Accumulated Gap | (30,225 | ) | (117,391 | ) | (83,539 | ) | (46,515 | ) | (25,041 | ) | 29,416 | 46,720 | 86,004 | (30,263 | ) |
The interest rate risk of our balance sheet management portfolios, measured by the sensitivity of the net margin to a parallel movement of 100 basis points, decreasedincreased R$140121 million during 2016,2021, reaching a maximum of R$569607 million in April.June, The sensitivity of the market value decreased R$12093 million during 2016,2021, reaching a maximum of R$2,2041,882 million in July.September, The main factors in 20162021 that influenced the sensitivity were the volatility of the yieldinterest curve, updating of methodologies and the portfolio decay, the methodologieseffects of strategies in the cash flows and the effect of liquidity.
business areas.
The following chart shows our NIM and MVE sensitivity during each month in 2016.2021.
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Interest Rate Risk Profile as of December 31, 2016
2021
The currency gap tables below show the managerial distribution of risk by maturity and currency in Brazil as of December 31, 20162021 in millions ofreais.
Total | 0-1 month | 1-3 months | 3-6 months | 6-12 months | 1-3 years | 3-5 years | > 5 years | Not Sensitive | Total | 0-1 month | 1-3 months | 3-6 months | 6-12 months | 1-3 years | 3-5 years | > 5 years | Not Sensitive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gaps in local currency | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Money Market | 215,088 | 95,784 | 39,931 | 5,874 | 2,531 | 28,513 | 14,926 | 30,953 | (3,424 | ) | 268,082 | 112,019 | 823 | 1,060 | 18,672 | 15,816 | 22,730 | 18,170 | 78,792 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | 213,492 | 59,970 | 20,335 | 21,650 | 26,251 | 39,954 | 13,393 | 16,709 | 15,228 | 382,313 | 90,863 | 49,412 | 41,903 | 52,908 | 54,584 | 53,957 | 43,028 | (4,344 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Permanent | 16,821 | – | – | – | – | – | – | – | 16,821 | 15,804 | - | - | - | - | - | - | - | 15,804 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Others | 111,081 | 23,180 | – | – | – | – | – | – | 87,902 | 128,760 | 18,923 | - | 23 | - | 2 | - | - | 109,812 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Assets | 556,482 | 178,933 | 60,266 | 27,524 | 28,782 | 68,467 | 28,319 | 47,662 | 116,528 | 794,960 | 221,806 | 50,235 | 42,986 | 71,580 | 70,402 | 76,687 | 61,198 | 200,064 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Money Market | (123,678 | ) | (98,359 | ) | (272 | ) | (1,056 | ) | (2,411 | ) | (5,892 | ) | (3,808 | ) | (4,698 | ) | (7,182 | ) | (99,888 | ) | (71,740 | ) | (1,006 | ) | (1,901 | ) | (3,868 | ) | (3,020 | ) | (6,747 | ) | (7,986 | ) | (3,620 | ) | ||||||||||||||||||||||||||||||||||||
Deposits | (300,866 | ) | (251,427 | ) | (2,045 | ) | (1,424 | ) | (3,162 | ) | (8,330 | ) | (5,846 | ) | (16,589 | ) | (12,042 | ) | (463,227 | ) | (290,333 | ) | (5,332 | ) | (4,382 | ) | (7,209 | ) | (8,943 | ) | (11,999 | ) | (89,470 | ) | (45,558 | ) | ||||||||||||||||||||||||||||||||||||
Equity and Other | (141,040 | ) | (18,403 | ) | (2,626 | ) | (1,071 | ) | 291 | (2,118 | ) | (2,614 | ) | (2,853 | ) | (111,645 | ) | (214,666 | ) | (24,490 | ) | (44 | ) | (66 | ) | (132 | ) | (264 | ) | 3,149 | (3,319 | ) | (189,499 | ) | ||||||||||||||||||||||||||||||||||||||
Total Liabilities | (565,583 | ) | (368,189 | ) | (4,943 | ) | (3,552 | ) | (5,282 | ) | (16,340 | ) | (12,268 | ) | (24,140 | ) | (130,869 | ) | (777,780 | ) | (386,563 | ) | (6,383 | ) | (6,349 | ) | (11,209 | ) | (12,227 | ) | (15,597 | ) | (100,775 | ) | (238,677 | ) | ||||||||||||||||||||||||||||||||||||
Off-Balance Gap | 9,928 | 84,074 | 3,121 | (332 | ) | 2,210 | 19,093 | (995 | ) | 9,938 | (107,183 | ) | 36,988 | 23,679 | 8,421 | (585 | ) | (1,113 | ) | (21,346 | ) | 5,925 | 3,083 | 18,923 | ||||||||||||||||||||||||||||||||||||||||||||||||
Gap | 827 | (105,181 | ) | 58,444 | 23,640 | 25,711 | 71,220 | 15,057 | 33,460 | (121,525 | ) | 54,167 | (141,078 | ) | 52,274 | 36,052 | 59,258 | 36,829 | 67,016 | (36,494 | ) | (19,690 | ) |
Total | 0-1 month | 1-3 months | 3-6 months | 6-12 months | 1-3 years | 3-5 years | > 5 years | Not Sensitive | Total | 0-1 month | 1-3 months | 3-6 months | 6-12 months | 1-3 years | 3-5 years | > 5 years | Not Sensitive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gaps in foreign currency | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Money Market | 25,257 | 11,078 | 42 | 163 | 258 | 1,341 | 1,870 | 7,573 | 2,932 | 41,344 | 3,322 | 36 | 287 | 2,631 | 2,859 | 15,208 | 2,334 | 14,667 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | 34,255 | 4,218 | 8,286 | 11,337 | 6,495 | 966 | 423 | (0 | ) | 2,530 | 88,417 | 47,664 | 13,309 | 8,964 | 7,865 | 1,720 | 393 | 4,366 | 4,135 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Permanent | 7 | – | – | – | – | – | – | – | 7 | 31 | - | - | - | - | - | - | - | 31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Others | 90,554 | 89,201 | 66 | 17 | 5 | – | – | – | 1,266 | 71,135 | 16,595 | - | - | - | - | - | - | 54,539 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Assets | 150,073 | 104,496 | 8,394 | 11,517 | 6,758 | 2,307 | 2,293 | 7,573 | 6,735 | 200,927 | 67,582 | 13,345 | 9,251 | 10,496 | 4,579 | 15,600 | 6,700 | 73,373 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Money Market | (16,237 | ) | (69 | ) | (4,956 | ) | (761 | ) | (2,608 | ) | (7,833 | ) | (10 | ) | – | – | (26,684 | ) | (1,630 | ) | (928 | ) | (938 | ) | (727 | ) | (15,186 | ) | (1,212 | ) | (5,876 | ) | (187 | ) | ||||||||||||||||||||||||||||||||||||||
Deposits | (4,574 | ) | (1,590 | ) | (1,894 | ) | (246 | ) | (641 | ) | (178 | ) | (26 | ) | – | – | (35,601 | ) | (15,555 | ) | (10,782 | ) | (2,040 | ) | (2,882 | ) | (4,901 | ) | (3,887 | ) | (3,966 | ) | 8,411 | |||||||||||||||||||||||||||||||||||||||
Equity and Other | (120,161 | ) | (94,656 | ) | (11,067 | ) | (5,524 | ) | (6,081 | ) | (801 | ) | (525 | ) | – | (1,507 | ) | (155,821 | ) | (38,519 | ) | (23,439 | ) | (16,490 | ) | (23,781 | ) | (1,198 | ) | (8,373 | ) | - | (44,022 | ) | ||||||||||||||||||||||||||||||||||||||
Total Liabilities | (140,972 | ) | (96,315 | ) | (17,917 | ) | (6,531 | ) | (9,329 | ) | (8,812 | ) | (561 | ) | – | (1,507 | ) | (218,106 | ) | (55,704 | ) | (35,148 | ) | (19,468 | ) | (27,390 | ) | (21,285 | ) | (13,472 | ) | (9,842 | ) | (35,797 | ) | |||||||||||||||||||||||||||||||||||||
Off-Balance Gap | (40,152 | ) | (20,391 | ) | (15,069 | ) | 8,397 | (1,667 | ) | (10,257 | ) | 516 | (1,749 | ) | 29 | (18,012 | ) | (1,399 | ) | (12,610 | ) | 1,081 | 156 | (2,150 | ) | (1,175 | ) | 81 | (1,994 | ) | ||||||||||||||||||||||||||||||||||||||||||
Gap | (31,051 | ) | (12,210 | ) | (24,592 | ) | 13,384 | (4,238 | ) | (16,762 | ) | 2,247 | 5,823 | 5,258 | (35,192 | ) | 10,479 | (34,413 | ) | (9,136 | ) | (16,738 | ) | (18,857 | ) | 953 | (3,061 | ) | 35,582 |
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Market Risk: VaR Consolidated Analysis
Our total daily VaR as of December 31, 20152020 and December 31, 2016,2021, broken down by trading and structural (non-trading) portfolios, is set forth below. Our VaR data for trading and non-trading portfolios were summed and thus do not reflect the diversification effect.
2016 | 2015 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Trading | 20.9 | 49.0 | 103.7 | 37.7 | 44.8 | |||||||||||||||
Non-trading | 588.0 | 804.6 | 900.0 | 588.0 | 911.6 | |||||||||||||||
Diversification effect | – | – | – | – | – | |||||||||||||||
Total | 608.9 | 853.6 | 1,003.7 | 625.7 | 956.4 |
2021 | 2020 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Trading | 16.7 | 34.5 | 63.1 | 34.4 | 31.6 | |||||||||||||||
Non-trading | 1,663.4 | 2,451.7 | 4,274.1 | - | 1,755.1 | |||||||||||||||
Diversification effect | - | - | - | - | - | |||||||||||||||
Total | 1,680.1 | 2,486.2 | 4,337.2 | 34.4 | 1,786.7 |
Note: | VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect. |
Our daily VaR estimates of interest rate risk, foreign exchange rate risk and equity price risk were as set forth below:
Interest Rate Risk
2016 | 2015 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Interest rate risk | ||||||||||||||||||||
Trading | 19.6 | 37.8 | 85.3 | 34.7 | 40.0 | |||||||||||||||
Non-trading | 588.0 | 804.6 | 900.0 | 588.0 | 911.6 | |||||||||||||||
Diversification effect | – | – | – | – | – | |||||||||||||||
Total | 607.5 | 842.5 | 985.4 | 622.7 | 951.6 |
2021 | 2020 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Interest rate risk | ||||||||||||||||||||
Trading | 12.7 | 31.8 | 72.3 | 34.9 | 26.6 | |||||||||||||||
Non-trading | 1,663.4 | 2,451.7 | 4,274.1 | - | 1,364.7 | |||||||||||||||
Diversification effect | - | - | - | - | - | |||||||||||||||
Total | 1,676.1 | 2,483.5 | 4,346.4 | 34.9 | 1,391.3 |
Note: | VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect. |
Foreign Exchange Rate Risk
2016 | 2015 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Exchange rate risk | ||||||||||||||||||||
Trading | 1.9 | 23.1 | 65.2 | 10.3 | 6.1 | |||||||||||||||
Non–trading | N.A. | N.A. | N.A. | N.A. | N.A. | |||||||||||||||
Diversification effect | – | – | – | – | – | |||||||||||||||
Total | 1.9 | 23.1 | 65.2 | 10.3 | 6.1 |
2021 | 2020 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Exchange rate risk | ||||||||||||||||||||
Trading | 4.0 | 19.0 | 48.9 | 5.9 | 35.6 | |||||||||||||||
Non–trading | - | - | - | - | - | |||||||||||||||
Diversification effect | - | - | - | - | - | |||||||||||||||
Total | 4.0 | 19.0 | 48.9 | 5.9 | 35.6 |
Note: | VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect. |
Equity Price Risk
2021 | 2020 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Equity price risk | ||||||||||||||||||||
Trading | 2.6 | 7.5 | 21.5 | 6.4 | 2.8 | |||||||||||||||
Non–trading | - | - | - | - | - | |||||||||||||||
Diversification effect | - | - | - | - | - | |||||||||||||||
Total | 2.6 | 7.5 | 21.5 | 6.4 | 2.8 |
2016 | 2015 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Equity price risk | ||||||||||||||||||||
Trading | 0.6 | 4.6 | 13.4 | 2.7 | 2.5 | |||||||||||||||
Non–trading | N.A. | N.A. | N.A. | N.A. | N.A. | |||||||||||||||
Diversification effect | – | – | – | – | – | |||||||||||||||
Total | 0.6 | 4.6 | 13.4 | 2.7 | 2.5 |
Note: | VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect. |
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Commodity Price Risk
At December 31, | ||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Commodity price risk | ||||||||||||||||||||
Trading | 0.1 | 3.8 | 21.4 | 0.1 | 0.3 | |||||||||||||||
Non-trading | N.A. | N.A. | N.A. | N.A. | N.A | |||||||||||||||
Diversification effect | - | - | - | - | - | |||||||||||||||
Total | 0.1 | 3.8 | 21.4 | 0.1 | 0.3 |
Our daily VaR estimates by activity were as set forth below:
2016 | 2015 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Trading | ||||||||||||||||||||
Interest rate risk | 19.6 | 37.8 | 85.3 | 34.7 | 40.0 | |||||||||||||||
Exchange rate risk | 1.9 | 23.1 | 65.2 | 10.3 | 6.1 | |||||||||||||||
Equity | 0.6 | 4.6 | 13.4 | 2.7 | 2.5 | |||||||||||||||
Total | 20.9 | 49.0 | 103.7 | 37.7 | 44.8 |
2016 | 2015 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Non-trading interest rate | ||||||||||||||||||||
Interest rate | 588.0 | 804.6 | 900.0 | 588.0 | 911.6 | |||||||||||||||
Non-trading foreign exchange | ||||||||||||||||||||
Exchange rate | N.A. | N.A. | N.A. | N.A. | N.A. | |||||||||||||||
Non-trading equity | ||||||||||||||||||||
Equity | N.A. | N.A. | N.A. | N.A. | N.A. | |||||||||||||||
Total | 588.0 | 804.6 | 900.0 | 588.0 | 911.6 | |||||||||||||||
Total (Trading + Non-Trading) | 608.9 | 853.6 | 1,003.7 | 625.7 | 956.3 | |||||||||||||||
Interest rate | 607.5 | 842.5 | 985.4 | 622.7 | 951.5 | |||||||||||||||
Exchange rate | 1.9 | 23.1 | 65.2 | 10.3 | 6.1 | |||||||||||||||
Equity | 0.6 | 4.6 | 13.4 | 2.7 | 2.5 |
2021 | 2020 | |||||||||||||||||||
Low | Average | High | Period End | Period End | ||||||||||||||||
(in millions of R$) | ||||||||||||||||||||
Trading | ||||||||||||||||||||
Interest rate risk | 26.8 | 12.7 | 31.8 | 72.3 | 34.9 | |||||||||||||||
Exchange rate risk | 2.8 | 2.6 | 7.5 | 21.5 | 6.4 | |||||||||||||||
Equity price risk | 35.6 | 4.0 | 19.0 | 48.9 | 5.9 | |||||||||||||||
Commodity price risk | 0.3 | 0.1 | 3.8 | 21.4 | 0.1 | |||||||||||||||
Total Trading | 31.6 | 16.7 | 34.5 | 63.1 | 34.4 | |||||||||||||||
Non-trading | ||||||||||||||||||||
Interest rate risk | 1,663.4 | 2,451.7 | 4,274.1 | - | 1,755.1 | |||||||||||||||
Exchange rate risk | N.A. | N.A. | N.A. | N.A. | N.A. | |||||||||||||||
Equity price risk | N.A. | N.A. | N.A. | N.A. | N.A. | |||||||||||||||
Commodity price risk | N.A. | N.A. | N.A. | N.A. | N.A. | |||||||||||||||
Total Non-Trading | 1,663.4 | 2,451.7 | 4,274.1 | - | 1,755.1 | |||||||||||||||
Total (Trading + Non-Trading) | 1,663.4 | 2,451.7 | 4,274.1 | - | 1,755.1 | |||||||||||||||
Interest rate risk | 1,663.4 | 2,451.7 | 4,274.1 | - | 1,755.1 | |||||||||||||||
Exchange rate risk | 1.4 | 9.3 | 42.4 | 35.6 | 7.5 | |||||||||||||||
Equity price risk | 1.2 | 5.8 | 34.0 | 2.8 | 7.4 | |||||||||||||||
Commodity price risk | - | 0.2 | 2.5 | 0.3 | - |
Note: | VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect. |
Operational Risk
OperationalWe have adopted the definition of the Basel Committee and Brazilian Central Bank for operational risk, which defines operational risk as the possibility of losses can occur due toresulting from inadequate processes, people and systems, failures, or even from external events suchevents. This definition includes legal risk associated with the inadequacy or deficiency in executed agreements, as natural disasters, terrorism, robberywell as penalties for noncompliance with legal provisions and vandalism.damages for third parties resulting from our activities. This definition does not include strategic risk. Operational risk losses mayevents might result in financial losses, adversely affectadverse effects on the continuity of our business, and also negatively affect the public’snegative effects on public image of us.
and customer experience.
To accomplish our operational risk objectives, we have established an operationala risk model based on three lines of defense, with the objective ofaimed at continuously improving and developing our management and control of operational risks. The three lines of defense are as follows:
are:
First line of defense: all business and support areas within Santander Brasil are responsible for identifying, managing, mitigating and reporting operational |
Second line of defense: the |
264 |
Third line of defense: the |
The objectives of ourthe operational risk management model are:
to disseminate a culture of operational risk management and control, to foster the prevention of risk events and operational risks losses, and to mitigate their financial, |
to provide support to decision-makers within Santander Brasil; |
to ensure there is sufficient coverage to cover the |
to maintain control of |
The following bodies are involved in the implementation of our risk management model:
model in order to ensure we have a structured process of operational risk management and decision maker:
Risk Control Committee (Comitê de Controle de Riscos): |
Senior Forum of Internal Control and Operational Risk |
Operational Risk |
Our risk management model assists managers in achieving their strategic objectives by contributing to the decision-making process and by reducingseeking to reduce operational risk losses. It is based on best market practice in the identification, assessment, monitoring, managementexposure and control of risks.losses. It is compliant with the applicable regulatory requirementsrequirements.
Social and seeksEnvironmental Risk
Since 2002, we have remained at the forefront of social and environmental risk analysis in Brazil. We consider social and environmental risk when deciding whether to ensureextend credit. Our Social and Environmental Responsibility Policy, or “PRSA,” complies with National Monetary Council Resolution 4,327/2014 and the sustained improvementSARB 14 self-regulation issued by Febraban. Our PRSA establishes guidelines for social-environmental practices applicable to business and stakeholder relations, such as relations with suppliers. These practices include social and environmental risk assessment in granting or using credit. This is carried out through the analysis of the internal controls environment.socio-environmental practices of wholesale and Empresas Nucleo (Core Companies) SME customers, which have limits or credit risk greater than R$5 million and belong to one of 14 social and environmental focuses.
Furthermore, the Brazilian Central Bank has recently issued new regulations and standards applicable to us relating to the management and governance of social, environmental and climate risks by financial institutions. These rules relate both to risks resulting from our products, services and activities, and to risks arising out of the activities of our counterparties, controlled entities, suppliers and outsourced service providers. One such regulation is National Monetary Council Resolution 4,945/2021, which will revoke Resolution 4,327/2014 and institute new guidelines applicable to the PRSA. The majority of these regulations will enter into effect in July 2022. See “Item 4. B Information on the Company—B, Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Environmental, Social and Governance (ESG) requirements applicable to financial institutions.”
Environmental and Social Risk
265 |
We have anbeen signatories of the Equator Principles since 2009. The Equator Principles are a framework used by financial institutions to determine, assess and manage environmental and social risk management system for analyzing clientsin projects, and are based on the Performance Standards on Social and Environmental Sustainability of International Finance Corporation (IFC) and the World Bank Group.
In 2016, we started to take into account climate change related matters in the credit rating of wholesale segment. Under this system, clients who are partcustomers. In 2020, we began to use a water stress calculator in our socio-environmental assessments. This tool considers the client’s economic activity, hydrographic basin location and measures adopted to save water. It was developed considering the customer’s vulnerability to climate change in general, including as a result of onechanges in legislation or consumer preferences.
We believe that assessing the socio-environmental risk in our operations, also enables us to mitigate issues of our 14 sectors of special social and environmental attention and haveoperational, capital, credit limits and/or risk greater than R$1.0 million are screened for environmental and social concerns. These aspects include contaminated land, illegal deforestation, labor violations and other major environmental and social issues where there are potential legal penalties and reputational risk. In 2016,2021, we screened 2,635911 wholesale corporate clients, including about 29customers, 1,049 Empresas Nucleo (Core Companies) customers, and 28 major new projects (including both those that are and that are not subject to the Equator Principles and non-Equator Principles, for these types of risks. A specialized team with backgrounds in biology, health and safety engineering, chemical engineering and geology monitors our customers’ environmental practices and point out to our financial analysts unfavorable environmental conditions that may cause damage to our customers’ financial condition and collateral, among other effects.Principles). Furthermore, wholesale segment clients, when starting their commercial relationship with us,customers are screened for environmental and social concerns by the new clients’customer acceptance area. The socialdepartment, when they begin their commercial relationship with us. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—Social and environmental risks may have a material adverse effect on us.”
Cybersecurity Risk
We have security measures in place to mitigate the risk unit usesof cybersecurity threats affecting our technology platforms and our business. We have taken into consideration the practices set forth in the ISO-27002 security standard to assist us in formulating such security measures. Our security measures, include, but are not limited to access and privilege management, segregation of test and production environments, network security analysis, cyber incident management, baseline configuration of hardware and software, that optimizes, organizesactivity log correlation, malware prevention and standardizes theremediation, and security analysis process, leading to more preciseof third-party operations. We employ a range of security processes, solutions and dissemination of these measures, including regular compliance checks and continuous monitoring of clients.network activity by our Security Operations Center (SOC). We also perform periodic reviews of cybersecurity threats and related controls, including periodic penetration tests performed by independent third parties. In addition, we are constantly train our creditinvesting in technology and commercial areas about howsecurity solutions, as well as conducting user training and awareness efforts. Furthermore, we cooperate and exchange information and experience relating to apply environmentalcybersecurity with local and social risk standards in the credit approval process for companies. In 2016, we trained 78%international security communities, such as local telecommunications companies and other financial institutions, and as a member of the new employeesFinancial Services - Information Sharing and Analysis Center community. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”
Other Information
Volatile market conditions arising from the COVID-19 pandemic may result in significant changes in macroeconomic conditions, foreign exchange rates, interest rates, and the prices of those areas in socialour securities, which may adversely affect us, see “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and environmental risk.Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
12A. Debt Securities |
Not applicable.
12B. Warrants and Rights
Not applicable.
12C. Other Securities
Not applicable.
Not applicable.
12D. American Depositary Receipts |
Depositary
The Bank of New York Mellon, or BNYM, has acted as depositary in relation to our ADR program since October 20, 2015. The principal executive office of BNYM is located at One Wall240 Greenwich Street, New York, New York 10286, United States.
Fees and Expenses
BNYM, as depositary, may charge the following fees and expenses to the ADR holders, any party depositing or withdrawing Units or any party surrendering ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADRs), as applicable:
a fee of U.S.$5.00 or less for each 100 ADRs (or portion thereof) issued, delivered or surrendered, as the case may be; |
a fee of U.S.$0.05 or less per ADR (or portion thereof) for any cash distribution made pursuant to the deposit agreement; |
a fee of U.S.$0.05 or less per ADR (or portion thereof) per annum for depositary services; |
a fee for the distribution of securities or of rights (where the depositary will not exercise or sell those rights on behalf of the ADR holders), such fee being in an amount equal to the fee for the execution and delivery of ADRs which would have been charged as a result of the deposit of such securities under the deposit agreement entered into with BNYM (for these purposes treating all such securities as if they were Units) but which securities are instead distributed by the depositary to the ADR holders; |
such registration fees as may from time to time be in effect for the registration of transfers of Units generally on the registrar’s unit register and applicable to transfers of Units to or from the name of the depositary or its nominee or the name of the custodian for the depositary or its nominee on the making of deposits or withdrawals; |
certain other cable and facsimile transmission fees and expenses; |
such expenses as are incurred by the depositary in the conversion of foreign currency; |
stock transfer or other taxes and other governmental charges; and |
any other charges payable by the depositary or the custodian of the depositary, any of the depositary’s or such custodian’s agents or the agents of the depositary’s or such custodian’s agents, in connection with the servicing of Units or other deposited securities (which charges shall be assessed against the ADR holders as of the date or dates set by the depositary in accordance with the deposit agreement which we have entered into with BNYM and shall be payable at the sole discretion of the depositary by billing those ADR holders for those charges or by deducting those charges from one or more cash dividends or other cash distributions). |
The depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to be distributed, to ADR holders that are obligated to pay those fees.
We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The fees described above may be amended from time to time.
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Direct and Indirect Payments
BNYM has agreed to reimburse us for certain expenses related to the establishment and maintenance of the ADR program including, among others, expenses incurred in connection with investor relations activities and any other ADR program expenses. Under certain circumstances, including the removal of BNYM as depositary, we are required to repay to BNYM amounts reimbursed in prior periods. For the year ended December 31, 2016,2021, such reimbursements amounted to U.S.$7.03.2 million.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
No matters to report.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
No matters to report.
ITEM 15. CONTROLS AND PROCEDURES
15A. Disclosure Controls and Procedures |
As of December 31, 2016, under2021, with the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial officer and Chief Accounting Officer (CFO), we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). There are, asAs described below, there are inherent limitations to the effectiveness of any control system, including disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives.
Based on such evaluation, our Chief Executive Officer, Chief Financial OfficerCEO and Chief Accounting OfficerCFO concluded that our disclosure controls and procedures are effective in ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial OfficerCEO and Chief Accounting Officer,CFO, as appropriate to allow timely decisions regarding required disclosures.
Additionally to this and in accordance with the legal requirements (Resolutions 2,554/98 and Circular 3,467/09), we produced and issued an internal report on March 13, 2017, according toIn addition, as required by the Brazilian Central Bank’s requirements regardingBank through CMN Resolution 4,968/21 and Brazilian Central Bank Circular 130/21, the effectivenessreport related to the quality and adequacy of the internal control environment.controls will be issued within 45 days after the expected date of publication of the Brazilian GAAP financial statements, which is scheduled to be March 18, 2022 (Brazilian Central Bank – GAAP).
15B. Management’s Annual Report on Internal Control over Financial Reporting |
Our management is responsible for establishing and maintaining an adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.
Our internal control over financial reporting process is a process designed by, or under the supervision of, our principal executive and principal financial officers and incorporates supervision from effected by our boardBoard of directors,Directors, management and other personnel,personnel. The purpose is to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with generally accepted accounting principles. For us, generally accepted accounting principles refer to IFRS as issued by the IASB.
Our internal control over financial reporting includes those policies and procedures that:
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and officers; and |
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provide reasonable assurance of prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projectionsprojected effectiveness of any evaluation of effectiveness tocontrols in future periods areis subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
deteriorates.
We have adapted our internal control over financial reporting to the international standards and comply with the guidelines set by the Committee of Sponsoring Organizations of the Treadway Commission, (“COSO”)or “COSO,” in its Internal Control – Integrated Framework 2013. These guidelines have been extended and implemented for the Group,Santander Brasil group, applying a common methodology and standardizing the procedures for identifying processes, risks and controls.
Risk Management Integrated Framework
The documentation process in our companies has been constantly directed and monitored by a global coordination team, which set thesets development guidelines for its development and supervised itssupervises execution at the unit level.
The general framework is consistent, as it assigns specific responsibilities to management specific responsibilities regarding the structure and effectiveness of the processes related directly and indirectly with the production of consolidated financial statements, as well as the controls needed to mitigate the risks inherent in these processes.
UnderWith the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial OfficerCEO and Chief Accounting Officer,CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2016,2021, based on the framework set by the COSO Integrated Framework 2013.
Based on this assessment, which was carried out through March 27, 2017,February 24, 2022, our management concluded that as of December 31, 2016,2021, its internal control over financial reporting was effective based on those criteria.
PricewaterhouseCoopers Auditores Independentes Ltda. which has audited our consolidated financial statements for the year ended December 31, 2021, has also audited the effectiveness our internal controls over financial reporting under auditing standards of the Public Company Accounting Oversight Board (United States) as stated in their report appearing in our consolidated financial statements included in “Item 18, Financial Statements.”
Our15C. Attestation Report of the Registered Public Accounting Firm
For the report, dated February 24, 2022, from PricewaterhouseCoopers Auditores Independentes Ltda., our registered public accounting firm, on the effectiveness of our internal control over financial reporting as of December 31, 2016, has been audited by an independent registered public accounting firm which has issued a report on the effectiveness of our Internal Control over financial reporting as of December 31, 2016, for which see “Item 15C. Audit Report of the Registered Public Accounting Firm.”
For the report of PwC, our registered public accounting firm, dated March 27, 2017, on the effectiveness of our Internal Control over financial reporting as of December 31, 2016,2021, see “Item 18. Financial Statements.”
15D. Changes in Internal Control over Financial Reporting |
There was no change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Audit Committee Financial Expert
The boardBoard of directorsDirectors has determined that one of the members of our audit committee, Mr. Luiz Carlos NanniniMs. Maria Elena Cardoso Figueira is an “Audit Committee Financial Expert” and meets the requirements set forth by the SEC and NYSE. HeShe is, as are all other current members of the audit committee, deemed independent under the applicable Brazilian law and the regulations of the SEC and NYSE.
For more details about the audit committee, seerefer to “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee”Committee.”
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ITEM 16B. SANTANDER BRASIL’S CODE OF ETHICAL CONDUCT
Santander Brasil’s Code of Ethical Conduct
The Code of Ethical Conduct, the central element of the Governance Compliance, is applicable to the members of the boardBoards of directorsDirectors, Executive Officers and to all employees and trainees (“Persons Subject to the Code of Ethical Conduct”) of Santander Brasil and its subsidiaries. It defines the principles that should guide both the personal and professional behavior of the Persons Subject to the Code of Ethical Conduct. They must know the Code of Ethical Conduct and seek to broadenpromote it, by championing and striving for its enforcement. To that effect, Persons Subject to the Code of
Ethical Conductenforcement, and also have the obligation to attend and participate in all assigned training activities to which they are summoned in order to become appropriately acquainted with the Code of Ethical Conduct. The Persons Subject to the Code of Ethical Conduct should be guided by ethical principles and rules of conduct that are consistent with the companies’our values.
The Code of Ethical Conduct helps us to establish respectful and transparent relationships and aims for the accomplishment of Santander Brasil’s obligations withto its customers, employees, shareholders, partners, regulators and society as a whole. The Code of Ethical Conduct should also be a reference for compliance with legal duties and for the maintenance of commercial relationships founded on trust with partners and clients.
customers.
The full version of the Santander Code of Ethical Conduct, which does not form part of this annual report on Form 20-F, is available on our website at https://www.santander.com.br/ri.ri/estatuto-codigo-politicas.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Principal Accountant Fees and Services
The balance of “Other general administrative expenses—Technical reports” includes the fees paid by the consolidated companies (detailed in the accompanying Appendix I of the consolidated financial statements included elsewhere in this annual report) to PwCPricewaterhouseCoopers Auditores Independentes Ltda. for the fiscal yearyears ended December 31, 20162021, 2020 and to Deloitte for the fiscal year ended December 31, 2015,2019, as follows:
For the year ended December 31, | ||||||||
2016 | 2015 | |||||||
(in millions of R$) | ||||||||
Audit of the annual financial statements of the companies audited (constant scope of consolidation)(1) | 9.2 | 12.0 | ||||||
Audit related | 0.1 | 1.5 | ||||||
Tax | — | – | ||||||
All other | 0.7 | 1.7 | ||||||
Total | 10.0 | 15.2 |
For the year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in R$ millions) | ||||||||||||
Audit of the annual financial statements of the companies audited (constant scope of consolidation) | 26.3 | 24.0 | 25.2 | |||||||||
Audit related | 0.2 | 0.4 | 0.1 | |||||||||
All other | 0,4 | - | 0.3 | |||||||||
Total | 26.9 | 24.4 | 25.6 |
The approximate value of withholding taxes in respect of the audit fees for the year ended December 31, 20162021 according to applicable law totaled R$1.81.9 million.
The services commissioned from our auditors meet the independence requirements stipulated by the Brazilian Central Bank and CVM regulation and by the Sarbanes-Oxley Act of 2002, and they did not involve the performance of any work that is incompatible with the audit function.
If we are required to engage an auditing firm for audit and audit-related services, those services and any fees paid to the auditing firms by us have tomust be pre-approved by the audit committee.
Our audit committeeAudit Committee pre-approves all audit and non-audit services to be performed by our registered public accounting firm.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Exemptions from the Listing Standards for Audit Committees
Under NYSE and SEC rules for listed companies, we must comply with Rule 10A-3 under the Securities Exchange Act (Listing Standards Relating to Audit Committees)., Rule 10A-3 provides that we should establish an audit committee composed of members of the boardBoard of directors,Directors, meet the requirements specified in the listing standards, or appoint and establish a board of auditors or similar body to perform the role of the audit committee, in reliance on the general exemption of audit committees of foreign private issuers set forth in Rule 10A-3(c) (3) of the Securities Exchange Act.
In accordance with the rules of the Brazilian Central Bank, we constituted a body similar to the audit committee of the boardBoard of directorsDirectors of an American company, which we refer to as our “audit committee.“Audit Committee.”
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Our audit committee observesAudit Committee complies with Brazilian legislation, including CMN and Brazilian Central Bank regulations, and performs all the functions of an Audit Committee under Rule 10A-3. Under Brazilian law, including Brazilian Central Bank regulations, an audit committee under Rule 10A 3. As provided in Brazilian law, ouris a statutory board, separate from the board of directors and created by a shareholders’ resolution. The members of the audit committee are distinct statutory entities. Moreover, according tomay be members of the board of directors, provided that they meet certain independence requirements. All members of our audit committee meet such independence requirements. In addition, under Brazilian law, the function of hiring independent auditors is a power reserved exclusively tofor the board of directorsdirectors. As a result, as specified in Section 3(a)(58) of the company, under the specific and express recommendation issued from the audit committee, as the case may be, for the engagement or replacement of independent auditors, andExchange Act, our board of directors actsfunctions as our audit committee for the purposespurpose of nominatingapproving any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or to us.
Pursuant to Exchange Act Rule 10A-3(c)(3), which provides for an exemption under the rules of the SEC regarding the audit committees of listed companies, a foreign private issuer, such independent auditors.
as us, is not required to have an audit committee equivalent to or comparable with a U.S. audit committee, if the foreign private issuer has a body established and selected pursuant to home country legal or listing provisions expressly requiring or permitting such a body, and if the body meets certain requirements. As a foreign private issuer, we rely on the exemption under Rule 10A-3(c)(3) of the Exchange Act with respect to our Audit Committee, and we believe that our audit committee complies with the aforementioned exemption requirements. Except in these respects, our audit committee is comparable to an audit committeeperforms the functions of the boardaudit committees of U.S. companies.
16E. Purchases of Equity Securities by the Issuer and performs the same functions of an American company. Our audit committee is able to act independently in carrying out the responsibilities of an audit committee under the Sarbanes-Oxley Act, meets the exemption requirements of Rule 10A-3(c)(3) and therefore is in compliance with Rule 10A-3 of the Securities Exchange Act.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Affiliated Purchasers
The following table reflects purchases of our equity securities, including in the form of ADRs, by us or our affiliates in 2016.
2021.
Santander Brasil – Buyback Program Units
Months | Total Number of Units Purchased (3) | Average Price Paid per Unit in U.S.$ (4) | Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1) (5) | Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (2) | ||||||||||||||
November 2020 | ||||||||||||||||||
December 2020 | ||||||||||||||||||
January 2021 | ||||||||||||||||||
February 2021 | 447 | 4.9208 | 447 | - | ||||||||||||||
March 2021 | - | - | - | - | ||||||||||||||
April 2021 | - | - | - | - | ||||||||||||||
May 2021 | - | - | - | - | ||||||||||||||
June 2021 | - | - | - | - | ||||||||||||||
July 2021 | 868,600 | 8.0397 | 868,600 | - | ||||||||||||||
August 2021 | - | - | - | - | ||||||||||||||
September 2021 | - | - | - | - | ||||||||||||||
October 2021 | - | - | - | - | ||||||||||||||
November 2021 | - | - | - | - | ||||||||||||||
December 2021 | - | - | - | - | ||||||||||||||
Total | 869,047 | 12.96 | 869,047 | 36,956,402 |
Months | Total Number of Units Purchased (3) | Average Price Paid per Unit in U.S.$ (4) | Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1)(5) | Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (2) | ||||||||||||
November 2015 | 453,800 | 15.155773 | 453,800 | — | ||||||||||||
December 2015 | 4,067,997 | 15.719481 | 4,067,997 | — | ||||||||||||
January 2016 | 70,900 | 12.679589 | 70,900 | — | ||||||||||||
February 2016 | 2,503,800 | 13.763915 | 2,503,800 | — | ||||||||||||
March 2016 | 4,003,900 | 16.775495 | 4,003,900 | — | ||||||||||||
April 2016 | — | — | — | — | ||||||||||||
May 2016 | 1,790,700 | 18.204826 | 1,790,700 | — | ||||||||||||
June 2016 | 1,389,500 | 17.891631 | 1,389,500 | — | ||||||||||||
July 2016 | — | — | — | — | ||||||||||||
August 2016 | 840,400 | 21.466152 | 840,400 | — | ||||||||||||
September 2016 | 776,800 | 22.070555 | 776,800 | — | ||||||||||||
October 2016 | 1,318,600 | 25.695899 | 1,318,600 | — | ||||||||||||
Total | 17,216,397 | — | 17,216,397 | 39,391,314 |
(1) | The buyback program, as approved by our board of directors on November |
August 2, 2022. The repurchase plans define |
Santander Brasil – Buyback Program ADRs
the column “Maximum Number (or Approximate Dollar Value) of units that May Yet Be Purchased Under the Plans or Programs” refers to the number of Units which may be repurchased in the periods as approved by our board of directors. The total number of Units that may be repurchased for the period from February 3, 2021 to August 2, 2022 as approved by our board of directors is 36,956,402.
For further information on our buyback program, please see “Item 4. Information on the Company—A. History and Development of the Company—Important Events—Buyback Program.”
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Change in Registrant’s Certifying Accountant
Not applicable.
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ITEM 16G. CORPORATE GOVERNANCE
Corporate Governance
In December 2012, primarily in response to the requirements of the European Banking Authority, Santander Spain adopted a corporate governance framework (Marco de Gobierno Interno del Grupo Santander). The purpose of the framework is to organize and standardize the corporate governance practices of Santander Spain and its most significant subsidiaries, including us, in order to enhance the ability of Santander Spain to manage the risks arising from Santander group operations around the world.
The three pillars of the framework are (i) an organizational model based on functions subject to internal governance, (ii) terms of reference according to which Santander Spain exercises control and oversight over its subsidiaries and participates in specific decisions as their controlling shareholder, and (iii) corporate models establishing common guidelines for the management and control of Santander Spain’s subsidiaries, subject to local autonomy considerations. In general, the framework purports to implement organizational and procedural changes
rather than mandating particular substantive outcomes. However, in some cases, and subject to the limitations there set forth, the framework states that Santander Spain may require that its subsidiaries make substantive changes or take specific actions. The framework enables Santander Spain to participate in the decision-making processes of its subsidiaries by requiring its approval of certain decisions that may have a significant impact on the Santander Group as a whole due to their significance or potential risk, such as decisions relating to mergers and acquisitions, capital structure, dividends and risk tolerance, among other things. The framework also requires that a single person at each subsidiary be in charge of each function subject to internal governance and gives Santander Spain the authority to participate in the appointment, evaluation and compensation of each such person.
By its own terms, the framework as a whole is premised on the legal and financial autonomy of the subsidiaries and does not empower Santander Spain to supplant its subsidiaries’ decision-making processes. Moreover, each of the three pillars of the framework is explicitly made subject to local legal requirements. We approved the adoption of this corporate governance framework in May 2013, and have approved all subsequent amendments since then (the latest one was approved in December 2019), subject to the precedence of applicable Brazilian laws and regulations and the limitations imposed thereby such as banking secrecy laws, and subject also to our corporate governance practices, including our policies for related party transactions and for disclosure of material acts and facts.
As a result of the precedence given to local legal requirements in the framework itself and in our adopting resolutions, we do not expect that the adoption of the corporate governance framework will affect our ability to comply with applicable corporate governance regulations, including the rules of the Brazilian Central Bank, CVM and BM&FBOVESPA,B3, and SEC and NYSE rules applicable to foreign private issuers.
Pursuant to Section 303A.11 of the Listed Company Manual of the NYSE, we are required to provide a summary of the significant ways in which our corporate governance practices differ from those required for United States resident companies under the NYSE listing standards. Section 303A of the NYSE Listed Company Manual sets forth certain corporate governance requirements that a company must satisfy to be listed on the NYSE. However, exemptions from many of the requirements are available to foreign private issuers such as us. As a foreign private issuer, we are permitted to and we will, follow home country practice in lieu of the NYSE corporate governance standards, from which we are exempt.
A discussion of the significant differences between Brazilian corporate governance standards that govern our practices and the NYSE standards applicable to U.S. companies follows below. It includes only a brief summary description of our corporate governance practices.
Principal Differences between Brazilian and U.S. Corporate Governance Practices
We are also subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies. Under the NYSE rules, we are required only to: (i) have an audit committeeAudit Committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our Chief Executive Officer of any material non-compliancenoncompliance with any applicable NYSE corporate governance rules, (iii) submit an executed written affirmation annually to the NYSE and submit an interim written affirmation each time a change occurs to the board or any of the committees subject to Section 303A of the NYSE rules, and (iv) provide a brief description of the significant differences between our corporate governance practices and the NYSE, corporate governance practicepractices required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below, as required for foreign private issuers by NYSE Rule 303A.11.
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Majority of Independent Directors
The NYSE rules require that a majority of the board must consist of independent directors. As a company with a majority of our voting shares being beneficially owned by another entity (Santander Spain), we are not required to comply with this rule. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Currently, our boardBoard of directorsDirectors must have at least five members, at least 20.0% of which must be independent, as determined pursuant to Article 14 of our By-Laws.By-Laws, Currently, fivefour members of our boardBoard of directorsDirectors are deemed independent (representing 50%36% of the composition of our boardBoard of directors)Directors). Also, Brazilian Corporate Law, the Brazilian Central Bank and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation, duties and
responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. While we believe that these rules provide adequate assurances that our directors are independent and meet the requisite qualification requirements under Brazilian law, we believe that such rules would permit us to have directors that would not otherwise pass the test for director independence established by the NYSE.NYSE, Brazilian Corporate Law requires that our directors shall be elected by our shareholders at an annual shareholders’ meeting. Currently, all of our directors are elected by our shareholders after recommendation of the Nomination and Governance Committee, for a term of 2two years.
Executive Sessions
NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present.present, Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one-third of the members of the boardBoard of directorsDirectors can be elected from management members. Our Chief Executive Officer, Mr. Sergio Agapito Lires Rial, and the Senior Vice President Executive Officers, Mr. José de Paiva Ferreira and Conrado Engel are membersMario Roberto Opice Leão, is a member of our boardBoard of directors.Directors. There is no requirement that our non-management directors meet regularly without management. As a result, the non-management directors on our board do not typically meet in executive session.
Committees
NYSE rules require that listed companies have a nominating/corporate governance committeeNominating/Corporate Governance Committee and a remuneration committeeRemuneration Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. As a company whose majority of voting shares is held by another group, we are not required to comply with this rule. The responsibilities of the nominating/corporate governance committeeNominating/Corporate Governance Committee include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. The responsibilities of the remuneration committee,Remuneration Committee, in turn, include, among other things, reviewing corporate goals relevant to the Chief Executive Officer’s compensation, evaluating the Chief Executive Officer’s performance, approving the Chief Executive Officer’s compensation levels and recommending to the board non-chief executive officer compensation, incentive-compensationincentive compensation and equity-based plans.
In January 2016,February 2017, our boardBoard of directorsDirectors approved the terms for the establishment of our Nomination and Governance Committee. The Nomination and Governance Committee will overseealso oversees corporate governance and compliance at Santander Brasil.
CMN rules require us to have a compensation committeeCompensation Committee composed of at least three members. We have created the compensation committee,Compensation Committee whose function is to advise our boardBoard of directorsDirectors on matters in connection with, but not limited to (i) fixed and variable remunerationcompensation policies and benefits and (ii) the long-term incentive plan.
See “Item 6. Directors, Senior Management and Employees—C. Board Practices” for a complete description of all of our board advisory committees.
Pursuant to Brazilian Corporate Law, the aggregate compensation for our directors and executive officers is established by our shareholders.
Audit Committee and Audit Committee Additional Requirements
NYSE rules require that listed companies have an audit committee composed that (i) is composed of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding audit committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities.
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CMN rules require us to have an audit committee of at least three independent members. The audit committee is elected by the boardBoard of directors.Directors, SEC Rule 10A-3 provides that the listing of securities of foreign private issuers will be exempt from the audit committee requirements if the issuer meets certain requirements. Our audit committeeAudit Committee allows us to meet the requirements set forth by this rule. See “Item 16D. Exemptions from the Listing Standards for Audit Committees.”
Shareholder Approval of Equity Compensation Plans
NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions.exceptions, Under Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval.approval, Our shareholders do not have the opportunity to vote on all equity compensation plans.
Corporate Governance Guidelines
NYSE rules require that listed companies adopt and disclose corporate governance guidelines. We comply with the corporate governance guidelines under applicable Brazilian law. The corporate governance guidelines applicable to us under Brazilian law are consistent with the guidelines established by the NYSE.
Pursuant to bestthe practices of corporate governance guidelines, on September 22, 2010, our boardBoard of directorsDirectors approved a policy that regulates related party transactions, which was last revised on March 18, 2015.27, 2019. This policy provides rules which aim to ensure that all decisions, in particular those involving related parties and other situations with potential conflict of interests will be aligned with our interests and those of our shareholders. The policy applies to all employees, directorsDirectors and executive officersExecutive Officers of Santander Brasil.
Code of Business Conduct and Ethics
NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officersDirectors, Officers and employees, and promptly disclose any waivers of the code for directorsDirectors or executive officers.Executive Officers. Applicable Brazilian law does not have a similar requirement. We adopted a Code of EthicsEthical Conduct on February 27, 2009, last revised on September 28, 2016, which regulates the set of ethical principles that shall guide the conduct of our employees, officers and directors of Santander Brasil, as well as of its affiliates. Our Code of EthicsEthical Conduct complies with the requirements of the Sarbanes-Oxley Act and the NYSE rules.
Internal Audit Function
NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control.controls.
OurCMN rules also require us to have an internal audit function, and our internal audit department works independently to conduct methodologically structured examinations, analysis,analyses, surveys and fact findingfact-finding to evaluate the integrity, adequacy, effectiveness, efficiency and economy of the information systems processes and internal controls related to our risk management. The internal audit department reports on an ongoing basis to the audit committee. In carrying out its duties, the internal audit department has access to all documents, records, systems, locations and professionals involved with the activities under review.
Other Corporate Frameworks
On the recommendation of our controlling shareholder, our boardBoard of directorsDirectors analyzed and approved the adoption of a series of corporate frameworks which aim to foster the adoption of best practices applicable to matters such as: (i) risk control;internal audit; (ii) accounting and disclosure of financial information; (iii) risk assessment;control; (iv) communication and branding; (v) human resources; (vi) information technology; and (vii) money launderingmoney-laundering protection. During 2016, from the actual 23,Currently, we have a total of nine16 frameworks (Marcos Corporativos) were assessed by the board of directors and created and/or adjusted in order to comply with applicable Brazilian laws and regulations. Onceforce. We believe that these frameworks are adopted by us, we believe they will continue to enhance the formalization of our governance and internal controls structures.
Website
Our corporate governance codes, which do not form part of this annual report, are available to the public on our website in Portuguese and English at www.santander.com.br under the heading “Investor Relations—Corporate Governance.” The information contained on our website, any website mentioned in this annual report, or anywebsite directly or indirectly linked to these websites is not part, of and is not incorporated by reference in, this annual report.
274 |
ITEM 16H. MINE SAFETY DISCLOSURE
Mine Safety Disclosure
Not applicable.
16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
275 |
We have responded to Item 18 in lieu of this item.
Consolidated Financial Statements are filed as part of this annual report, see pages F-1 to F-113.starting on page F-1.
(a) Index to Consolidated Financial Statements |
Page | |
Independent auditor’s Report | |
Consolidated Statement of | |
F-6 | |
Consolidated | F-7 |
Consolidated | F-8 |
Consolidated | |
Notes to the Consolidated Financial Statements for the years ended December 31, |
(b) List of Exhibits. |
We are filing the following documents as part of this annual report on Form 20-F:
276 |
* Certain information has been omitted from this exhibit pursuant to Item 4 of the Instructions As To Exhibits of Form 20-F because it is both not material and is the type that the registrant treats as private or confidential. The registrant hereby agrees to furnish an unredacted copy of the exhibit and its materiality and privacy or confidentiality to the U.S. Securities and Exchange Commission upon request.
277 |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
BANCO SANTANDER (Brasil) S.A. | |||
By: | /s/ | ||
Name: | |||
Title: | Chief Executive Officer |
Date: MarchFebruary 28, 20172022
278 |
Banco Santander (Brasil) S.A.
Consolidated Financial Statements
Prepared in accordance with International Financial Reporting
Standards - IFRS
December 31, 2021
BANCO SANTANDER (BRASIL) S.A.CONSOLIDATED FINANCIAL STATEMENTS
INDEX | ||||||||
Banco Santander (Brasil) S.A.
Report of independent registered public
accounting firm
December 31, 2021
Report of Independent Registered Public Accounting Firmindependent registered public accounting firm
To the Board of Directors and Stockholders of
Banco Santander (Brasil) S.A.
In our opinion,
Opinions on the financial statements and
internal control over financial reporting
We have audited the accompanying consolidated statement of financial position as of December 31, 2016 and the related consolidated income statement, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended present fairly, in all material respects, the financial positionbalance sheets of Banco Santander (Brasil) S.A. and its subsidiaries (the "Company") as of December 31, 2016,2021, 2020 and 2019, and the resultsrelated consolidated statements of their operationsincome, comprehensive income, changes in stockholders' equity and their cash flows for each of the year thenthree years in the period ended in conformity with International Financial Reporting StandardsDecember 31, 2021, including the related notes (collectively referred to as issued by the International Accounting Standards Board. Also in our opinion,"consolidated financial statements"). We also have audited the Company maintained, in all material respects, effectiveCompany's internal control over financial reporting as of December 31, 2016,2021, based on criteria established inInternal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’sCompany's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sItem 15B - Management´s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on thesethe Company's consolidated financial statements and on the Company’sCompany's internal control over financial reporting based on our integrated audit. audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
PricewaterhouseCoopers, Av. Francisco Matarazzo 1400, Torre Torino, São Paulo, SP, Brasil, 05001-903, Caixa Postal 60054, T: +55 (11) 3674 2000, www.pwc.com.br |
Our auditaudits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidated financial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our auditaudits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit providesaudits provide a reasonable basis for our opinions.
Supplemental Information
The Reconciliationreconciliation of Shareholders' Equitystockholders' equity and Net Income –net income - BRGAAP vs IFRS as of and for the yearyears ended December 31, 20162021, 2020 and 2019 and the Statementstatements of Value Addedvalue added for the yearyears ended December 31, 2016,2021, 2020 and 2019, included in APPENDIX I and II respectively, have been subjected to audit procedures performed in conjunction with the audit of the Company’sCompany's consolidated financial statements. TheThis supplemental information is the responsibility of the Company’sCompany's management. Our audit procedures included determining whether the supplemental information reconciles to the consolidated financial statements or the underlying accounting and other records, as applicable, and prescribed performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with Brazilian Corporate Law. In our opinion, the Reconciliationreconciliation of Shareholders' Equitystockholders' equity and Net Income –net income - BRGAAP vs IFRS as of and for the yearyears ended December 31, 20162021, 2020 and 2019 and the Statementstatements of Value Addedvalue added for the yearyears ended December 31, 20162021, 2020 and 2019 are fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.
Definition and limitations of internal
control over financial reporting
PricewaterhouseCoopers, Av. Francisco Matarazzo 1400, Torre Torino, São Paulo, SP, Brasil 05001-903, Caixa Postal 61005
T: (11) 3674-2000, www.pwc.com/br
A company’scompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’scompany's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’scompany's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/PricewaterhouseCoopers Auditores Independentes
São Paulo, Brazil
March 27, 2017
|
Critical audit matters
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ToThe critical audit matters communicated below are matters arising from the Boardcurrent period audit of Directors and Shareholders of
Banco Santander (Brasil) S.A.
Sao Paulo - SP - Brazil
We have audited the accompanying consolidated balance sheets of Banco Santander (Brasil) S.A. and its subsidiaries (the “Bank”) as of December 31, 2015 and 2014, and the related consolidated income statements, statements of comprehensive income and changes in total equity, and cash flows statements for each of the two years in the period ended December 31, 2015, all expressed in Brazilian reais. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referredthat were communicated or required to above present fairly,be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in all material respects, the financial position of Banco Santander (Brasil) S.A. and its subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in conformity with International Financial Reporting Standards – IFRS as issued by the International Accounting Standards Board - IASB.
Our audits were conducted for the purpose of forming anany way our opinion on the basicconsolidated financial statements, taken as a whole.whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Measurement of expected credit losses
As described in Notes 1.c.2.1.ii, 2.h, 9, 43.h and 46.b to the consolidated financial statements, management measures the expected credit losses at the probability-weighted estimate of credit losses, that involves management's judgment, as set forth in IFRS 9 - Financial Instruments. At December 31, 2021, the impairment losses on loans and receivables was BRL 28,510,660 thousand on total loans and receivables at amortized cost of BRL 493,354,702 thousand. Management calculates expected credit losses (‘ECL') using three main components: a probability of default (‘PD'), loss given default (‘LGD') and exposure at default (‘EAD') including individual and collective models. The supplementary information includedECL measurement is based on management's estimate of present value expected to be received, including the use of a variety of assumptions such as historical loss experience, credit quality, portfolio size, concentration, economic factors and estimated future cash flows. Additionally, management has assessed the Covid-19 pandemic impact in the Appendix IIestimation of credit losses process. In this assessment, management has considered forward-looking information, including changes in macroeconomic scenarios, impacting the calculation model for provisioning expected credit losses.
The principal considerations for our determination that performing procedures relating to the notes undermeasurement of expected credit losses is a critical audit matter are (i) there was significant judgment used by management in determining the caption Statementsexpected credit losses, in particular the assumptions used in determining the PD and LGD, which in turn led to a high degree of Value Added is presented forauditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained relating to these assumptions; (ii) the purposeaudit effort involved use of additional analysis, whose presentation by publicly-held companies is required by Brazilian Corporate Law,professionals with specialized skill and is not a required partknowledge to assist in evaluating those assumptions; and (iii) the consideration of the basic financial statementsCovid-19 pandemic impacts in conformitymeasuring then expected credit losses with International Financial Reporting Standards – IFRS as issued by the International Accounting Standards Board – IASB. This supplementary information iscurrent scenario of uncertainty.
Addressing the responsibility ofmatter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the Bank's management. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, when considered in relation to the basic financial statements taken as a whole.
/s/ Deloitte Touche Tohmatsu Auditores Independentes
São Paulo, Brazil
April 29, 2016
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.
Deloitte provides audit, consulting, financial advisory, risk management, tax and relates services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500® companies through a globally connected network of member firms in more than 150 countries bringing world-class capabilities, insights, and high-quality service to address clients’ most complex business challenges. To learn more about how Deloitte’s approximately 225,000 professionals make an impact that matters, please connect with us on Facebook, Linkedln or Twitter.
© 2017 Deloitte Touche Tohmatsu. All rights reserved.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Thousands of Brazilian Reais - R$)
Assets | Note | 2016 | 2015 | 2014 | ||||||||||||
Cash and Balances With The Brazilian Central Bank | 5 | 110,604,911 | 89,143,353 | 55,903,848 | ||||||||||||
Financial Assets Held For Trading | 84,873,663 | 50,536,731 | 56,013,603 | |||||||||||||
Debt instruments | 7 | 59,994,946 | 25,193,598 | 47,106,811 | ||||||||||||
Equity instruments | 8 | 398,461 | 404,973 | 391,656 | ||||||||||||
Trading derivatives | 9 | 24,480,256 | 24,938,160 | 8,515,136 | ||||||||||||
Other Financial Assets At Fair Value Through Profit Or Loss | 1,711,204 | 2,080,234 | 996,694 | |||||||||||||
Debt instruments | 7 | 1,668,749 | 1,506,570 | 93,900 | ||||||||||||
Equity instruments | 8 | 42,455 | 573,664 | 902,794 | ||||||||||||
Available-For-Sale Financial Assets | 57,815,045 | 68,265,606 | 75,164,342 | |||||||||||||
Debt instruments | 7 | 55,829,572 | 67,103,274 | 73,510,698 | ||||||||||||
Equity instruments | 8 | 1,985,473 | 1,162,332 | 1,653,644 | ||||||||||||
Held to maturity investments | 7 | 10,048,761 | 10,097,836 | - | ||||||||||||
Loans and Receivables | 296,048,506 | 306,268,788 | 264,607,746 | |||||||||||||
Loans and amounts due from credit institutions | 6 | 27,762,473 | 42,422,638 | 28,917,397 | ||||||||||||
Loans and advances to customers | 10 | 252,002,774 | 252,033,449 | 235,690,349 | ||||||||||||
Debt instruments | 7 | 16,283,259 | 11,812,701 | - | ||||||||||||
Hedging Derivatives | 9 | 222,717 | 1,312,202 | 212,552 | ||||||||||||
Non-Current Assets Held For Sale | 11 | 1,337,885 | 1,237,493 | 929,948 | ||||||||||||
Investments in Associates and Joint Ventures | 12 | 990,077 | 1,060,743 | 1,023,461 | ||||||||||||
Tax Assets | 25 | 28,753,184 | 34,769,848 | 23,019,696 | ||||||||||||
Current | 4,316,072 | 4,194,344 | 2,981,696 | |||||||||||||
Deferred | 24,437,112 | 30,575,504 | 20,038,000 | |||||||||||||
Other Assets | 16 | 5,104,012 | 3,802,118 | 5,066,726 | ||||||||||||
Tangible Assets | 13 | 6,646,433 | 7,005,914 | 7,071,036 | ||||||||||||
Intangible Assets | 30,236,842 | 29,813,662 | 30,221,258 | |||||||||||||
Goodwill | 14 | 28,355,039 | 28,332,719 | 28,270,955 | ||||||||||||
Other intangible assets | 15 | 1,881,803 | 1,480,943 | 1,950,303 | ||||||||||||
TOTAL ASSETS | 634,393,240 | 605,394,528 | 520,230,910 |
The accompanying Notes are an integral part of these consolidated financial statements. These procedures included understanding and testing the effectiveness of controls relating to management's measurement of expected credit losses, which included controls over the assumptions used. These procedures also included, among others: (i) the involvement of professionals with specialized skill and knowledge to assist in testing management's process for determining the expected credit losses, including evaluating the appropriateness of the methodology and models, testing the accuracy and completeness of data used, and evaluating the reasonableness of significant assumptions; (ii) the analysis of management's accounting policies in comparison with IFRS 9; (iii) analysis over management's disclosures in the financial statements; and (iv) understanding of the procedures adopted by management in considering the impacts of Covid-19 in the estimation of additional expected credit loss, evaluating the reasonableness of the estimation considering models, assumptions and data used.
F-4
Provisions for judicial and administrative proceedings
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs described in Notes 1.c.2.1.iv, 2.q and 22 to the consolidated financial statements, Provisions for judicial and administrative proceedings are recorded when their risk of loss are considered probable and the amounts can be reliably measured, based on the nature, complexity and history of lawsuits and the opinion of legal counsel. At December 31, 2021, the Company has recorded provisions for judicial and administrative proceedings of BRL 7,668,914 thousand. The Company also discloses the contingency in circumstances where management concludes no loss is probable or reasonably estimable, but it is reasonably possible that a loss may be incurred.
(ThousandsThe principal considerations for our determination that performing procedures relating to provisions for judicial and administrative proceedings is a critical audit matter are there was significant judgment by management when assessing the likelihood of Brazilian Reais - R$)a loss being incurred and the potential amount of the judicial and administrative proceedings. This in turn led to a high degree of auditor judgment and effort in evaluating management's assessment of the provisions for judicial and administrative proceedings, including the involvement of professionals with specialized skills and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the understanding and testing the design and the effectiveness of controls relating to identifying, assessing, monitoring, measuring, recording, and disclosing the provisions for judicial and administrative proceedings, including the completeness and accuracy of the data used. Our procedures also included testing the recognition and measurement of the Company's provisions for judicial and administrative proceedings and performing external confirmation procedures with law firms responsible for a sample of the judicial and administrative proceedings to evaluate the reasonableness of management's assessment of the provisions. With the assistance of our professionals with specialized skill and knowledge, we evaluated the reasonableness management's assessment of a sample of proceedings taking into account the individual progress of similar proceedings.
São Paulo, February 24, 2022
/s/ PricewaterhouseCoopers Auditores Independentes Ltda.
We have served as the Company's auditor since 2016.
* Values expressed in thousands, except when indicated.
Liabilities and Stockholders' Equity | Note | 2016 | 2015 | 2014 | ||||||||||
Financial Liabilities Held For Trading | 51,619,869 | 42,387,768 | 19,569,791 | |||||||||||
Trading derivatives | 9.a | 19,925,600 | 22,340,137 | 8,284,360 | ||||||||||
Short positions | 9.b | 31,694,269 | 20,047,631 | 11,285,431 | ||||||||||
Financial Liabilities at Amortized Cost | 471,579,467 | 457,281,656 | 392,186,593 | |||||||||||
Deposits from Brazilian Central Bank and deposits from credit institutions | 17 | 78,634,072 | 69,451,498 | 63,674,201 | ||||||||||
Customer deposits | 18 | 247,445,177 | 243,042,872 | 220,644,019 | ||||||||||
Marketable debt securities | 19 | 99,842,955 | 94,658,300 | 70,355,249 | ||||||||||
Subordinated debts | 20 | 466,246 | 8,097,304 | 7,294,077 | ||||||||||
Debt Instruments Eligible to Compose Capital | 21 | 8,311,918 | 9,959,037 | 6,773,312 | ||||||||||
Other financial liabilities | 22 | 36,879,099 | 32,072,645 | 23,445,735 | ||||||||||
Hedging Derivatives | 9 | 311,015 | 2,376,822 | 893,902 | ||||||||||
Provisions | 11,776,491 | 11,409,677 | 11,127,444 | |||||||||||
Provisions for pensions funds and similar obligations | 23 | 2,710,627 | 2,696,653 | 3,869,728 | ||||||||||
Provisions for judicial and administrative proceedings, commitments and other provisions | 24 | 9,065,864 | 8,713,024 | 7,257,716 | ||||||||||
Tax Liabilities | 25 | 6,094,740 | 5,253,125 | 12,423,002 | ||||||||||
Current | 4,826,703 | 4,436,000 | 12,110,582 | |||||||||||
Deferred | 1,268,037 | 817,125 | 312,420 | |||||||||||
Other Liabilities | 26 | 8,199,099 | 6,850,196 | 5,346,885 | ||||||||||
Total Liabilities | 549,580,681 | 525,559,244 | 441,547,617 | |||||||||||
Stockholders' Equity | 29 | 85,434,855 | 83,531,754 | 80,105,041 | ||||||||||
Share capital | 57,000,000 | 57,000,000 | 56,806,384 | |||||||||||
Reserves | 27,881,326 | 24,388,967 | 20,594,135 | |||||||||||
Treasury shares | (514,034 | ) | (423,953 | ) | (445,501 | ) | ||||||||
Option for Acquisition of Equity Instrument | (1,017,000 | ) | (1,017,000 | ) | (950,000 | ) | ||||||||
Profit for the year attributable to the Parent | 7,334,563 | 9,783,740 | 5,630,023 | |||||||||||
Less: dividends and remuneration | (5,250,000 | ) | (6,200,000 | ) | (1,530,000 | ) | ||||||||
Other Comprehensive Income | (1,347,800 | ) | (4,131,532 | ) | (1,801,921 | ) | ||||||||
Stockholders' Equity Attributable to the Parent | 84,087,055 | 79,400,222 | 78,303,120 | |||||||||||
Non - Controlling Interests | 28 | 725,504 | 435,062 | 380,173 | ||||||||||
Total Stockholders' Equity | 84,812,559 | 79,835,284 | 78,683,293 | |||||||||||
Total Liabilities and Stockholders' Equity | 634,393,240 | 605,394,528 | 520,230,910 |
Consolidated Balance Sheet
Assets | Note | 2021 | 2020 | 2019 | ||||||||||||
Cash | 4 | 16,657,201 | 20,148,725 | 20,127,364 | ||||||||||||
Financial assets measured at fair value through profit or loss | 18,858,842 | 60,900,466 | 32,342,306 | |||||||||||||
Debt instruments | 6 | 3,122,017 | 3,545,660 | 3,735,076 | ||||||||||||
Balances with the Brazilian Central Bank | 15,736,825 | 57,354,806 | 28,607,230 | |||||||||||||
Financial assets measured at fair value through profit or loss held for trading | 70,570,665 | 95,843,126 | 55,396,069 | |||||||||||||
Debt instruments | 6 | 47,752,595 | 68,520,799 | 34,885,631 | ||||||||||||
Equity instruments | 7 | 2,020,610 | 1,818,276 | 2,029,470 | ||||||||||||
Trading derivatives | 8.a | 20,797,460 | 25,504,051 | 18,480,968 | ||||||||||||
Non-trading financial assets mandatorily measured at fair value through profit or loss | 870,162 | 499,720 | 171,453 | |||||||||||||
Equity instruments | 7 | 477,707 | 438,912 | 171,453 | ||||||||||||
Loans and advances to customers | 9 | 392,455 | 60,808 | — | ||||||||||||
Financial assets measured at fair value through other comprehensive income | 101,241,787 | 109,740,387 | 96,120,233 | |||||||||||||
Debt instruments | 6 | 101,212,600 | 109,668,214 | 95,962,927 | ||||||||||||
Equity instruments | 7 | 29,187 | 72,173 | 157,306 | ||||||||||||
Financial assets measured at amortized cost | 633,241,352 | 554,924,796 | 474,680,904 | |||||||||||||
Loans and amounts due from credit institutions | 5 | 95,664,754 | 112,849,776 | 109,233,128 | ||||||||||||
Loans and advances to customers | 9 | 464,451,587 | 393,707,229 | 326,699,480 | ||||||||||||
Debt instruments | 6 | 73,125,011 | 48,367,791 | 38,748,296 | ||||||||||||
Hedging derivatives | 8.a | 342,463 | 743,463 | 339,932 | ||||||||||||
Assets held for sale | 10 | 816,345 | 1,092,909 | 1,325,335 | ||||||||||||
Investments in associates and joint ventures | 11 | 1,232,646 | 1,094,985 | 1,070,762 | ||||||||||||
Tax assets | 41,757,332 | 41,063,782 | 33,599,178 | |||||||||||||
Current | 4,117,035 | 3,082,084 | 3,304,116 | |||||||||||||
Deferred | 23.d | 37,640,297 | 37,981,698 | 30,295,062 | ||||||||||||
Other assets | 15 | 6,049,028 | 7,222,411 | 5,061,337 | ||||||||||||
Property, plant and equipment | 12 | 8,783,785 | 9,537,111 | 9,781,957 | ||||||||||||
Intangible assets | 30,786,788 | 30,766,498 | 30,595,788 | |||||||||||||
Goodwill | 13 | 27,915,469 | 28,360,137 | 28,375,004 | ||||||||||||
Other intangible assets | 14 | 2,871,319 | 2,406,361 | 2,220,784 | ||||||||||||
Total assets | 931,208,396 | 933,578,379 | 760,612,618 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
Consolidated Financial Statements | December 31, 2021 | F-4 |
* Values expressed in thousands, except when indicated. |
Liabilities and stockholders' equity | Note | 2021 | 2020 | 2019 | ||||||||||||
Financial liabilities measured at fair value through profit or loss held for trading | 36,952,567 | 75,020,184 | 44,439,835 | |||||||||||||
Trading derivatives | 8.a | 24,172,008 | 29,212,238 | 20,604,182 | ||||||||||||
Short positions | 8.b | 12,780,559 | 45,807,946 | 23,835,653 | ||||||||||||
Financial Liabilities Measured at Fair Value Through Profit or Loss | 7,459,784 | 7,038,467 | 5,319,416 | |||||||||||||
Deposits from Brazilian Central Bank and deposits from credit institutions | 20 | 7,459,784 | 7,038,467 | 5,319,416 | ||||||||||||
Financial Liabilities at Amortized Cost | 750,093,694 | 707,288,791 | 575,230,401 | |||||||||||||
Deposits from Brazilian Central Bank and deposits from credit institutions | 16 | 121,005,909 | 131,656,962 | 99,271,415 | ||||||||||||
Customer deposits | 17 | 468,961,069 | 445,813,972 | 336,514,597 | ||||||||||||
Marketable debt securities | 18 | 79,036,792 | 56,875,514 | 73,702,474 | ||||||||||||
Debt instruments eligible to compose capital | 19 | 19,641,408 | 13,119,660 | 10,175,961 | ||||||||||||
Other financial liabilities | 20 | 61,448,516 | 59,822,683 | 55,565,954 | ||||||||||||
Hedging derivatives | 8.a | 446,973 | 144,594 | 200,961 | ||||||||||||
Provisions | 11,604,482 | 13,814,978 | 16,331,825 | |||||||||||||
Provisions for pensions funds and similar obligations | 21 | 2,728,126 | 3,929,265 | 4,960,620 | ||||||||||||
Provisions for judicial and administrative proceedings, commitments and other provisions | 22 | 8,876,356 | 9,885,713 | 11,371,205 | ||||||||||||
Tax liabilities | 8,175,023 | 10,130,248 | 10,960,075 | |||||||||||||
Current | 5,949,833 | 5,583,653 | 5,419,202 | |||||||||||||
Deferred | 23.d | 2,225,190 | 4,546,595 | 5,540,873 | ||||||||||||
Other liabilities | 24 | 10,501,378 | 14,051,245 | 10,920,944 | ||||||||||||
Total liabilities | 825,233,901 | 827,488,507 | 663,403,457 | |||||||||||||
Stockholders' equity | 27 | 109,046,574 | 106,205,067 | 96,736,290 | ||||||||||||
Share capital | 55,000,000 | 57,000,000 | 57,000,000 | |||||||||||||
Reserves | 48,880,561 | 40,414,981 | 34,877,493 | |||||||||||||
Treasury shares | (713,039 | ) | (791,358 | ) | (681,135 | ) | ||||||||||
Option for acquisition of equity instrument | — | — | (67,000 | ) | ||||||||||||
Profit for the year attributable to the parent | 15,528,052 | 13,418,529 | 16,406,932 | |||||||||||||
Less: dividends and remuneration | (9,649,000 | ) | (3,837,085 | ) | (10,800,000 | ) | ||||||||||
Other Comprehensive Income | (3,406,428 | ) | (428,080 | ) | (85,710 | ) | ||||||||||
Stockholders' Equity Attributable to the Parent | 105,640,146 | 105,776,987 | 96,650,580 | |||||||||||||
Non - controlling interests | 26 | 334,349 | 312,885 | 558,581 | ||||||||||||
Total stockholders' equity | 105,974,495 | 106,089,872 | 97,209,161 | |||||||||||||
Total liabilities and stockholders' equity | 931,208,396 | 933,578,379 | 760,612,618 |
The accompanying Notes are an integral part of these consolidated financial statements.
Consolidated Financial Statements | December 31, 2021 | F-5 |
* Values expressed in thousands, except when indicated. |
CONSOLIDATED INCOME STATEMENTS
(ThousandsConsolidated Statement of Brazilian Reais - R$, except for per share data)Income
Note | 2021 | 2020 | 2019 | |||||||||||||
Interest and similar income | 31 | 77,987,308 | 62,774,940 | 72,841,060 | ||||||||||||
Interest expense and similar charges | 32 | (26,668,842 | ) | (18,332,228 | ) | (28,519,953 | ) | |||||||||
Net interest income | 51,318,466 | 44,442,712 | 44,321,107 | |||||||||||||
Income from equity instruments | 33 | 90,040 | 33,754 | 18,933 | ||||||||||||
Income from companies accounted for by the equity method | 11 | 144,184 | 112,261 | 149,488 | ||||||||||||
Fee and commission income | 34 | 20,388,089 | 20,606,707 | 20,392,458 | ||||||||||||
Fee and commission expense | 35 | (5,114,788 | ) | (4,378,493 | ) | (4,679,306 | ) | |||||||||
Gains (losses) on financial assets and liabilities (net) | 36 | 221,782 | 12,998,060 | 2,462,545 | ||||||||||||
Financial assets at fair value through profit or loss | 1,555,837 | 711,949 | 252,253 | |||||||||||||
Financial assets measured at fair value through profit or loss held for trading | 3,519,626 | 12,122,794 | 2,391,080 | |||||||||||||
Non-trading financial assets mandatorily measured at fair value through profit or loss | 205,016 | 172,828 | 11,501 | |||||||||||||
Financial instruments not measured at fair value through profit or loss | (665,853 | ) | (239,054 | ) | (57,522 | ) | ||||||||||
Other | (4,392,844 | ) | 229,543 | (134,767 | ) | |||||||||||
Exchange differences (net) | 37 | (2,002,286 | ) | (24,700,962 | ) | (2,788,537 | ) | |||||||||
Other operating expense (net) | 38 | (1,119,380 | ) | (872,510 | ) | (1,107,719 | ) | |||||||||
Total income | 63,926,107 | 48,241,529 | 58,768,969 | |||||||||||||
Administrative expenses | (17,316,419 | ) | (17,114,960 | ) | (16,941,526 | ) | ||||||||||
Personnel expenses | 39 | (9,025,702 | ) | (8,871,482 | ) | (9,327,714 | ) | |||||||||
Other administrative expenses | 40 | (8,290,717 | ) | (8,243,478 | ) | (7,613,812 | ) | |||||||||
Depreciation and amortization | (2,433,921 | ) | (2,579,127 | ) | (2,391,857 | ) | ||||||||||
Tangible assets | 12 | (1,850,780 | ) | (2,039,805 | ) | (1,870,836 | ) | |||||||||
Intangible assets | 14 | (583,141 | ) | (539,322 | ) | (521,021 | ) | |||||||||
Provisions (net) | (2,179,417 | ) | (1,656,547 | ) | (3,681,586 | ) | ||||||||||
Impairment losses on financial assets (net) | (17,112,734 | ) | (17,450,188 | ) | (13,369,905 | ) | ||||||||||
Financial assets measured at amortized cost and contingent commitments | (17,112,734 | ) | (17,450,188 | ) | (13,369,905 | ) | ||||||||||
Impairment losses on other assets (net) | (165,799 | ) | (84,908 | ) | (131,435 | ) | ||||||||||
Other intangible assets | 14 | (30,160 | ) | (66,269 | ) | (103,924 | ) | |||||||||
Other assets | (135,639 | ) | (18,639 | ) | (27,511 | ) | ||||||||||
Gains (losses) on disposal of assets not classified as assets held for sale | 41 | (15,113 | ) | 230,713 | 10,646 | |||||||||||
Gains (losses) on assets held for sale not classified as discontinued operations | 42 | 47,625 | 77,463 | 9,843 | ||||||||||||
Operating income before tax | 24,750,329 | 9,663,975 | 22,273,149 | |||||||||||||
Income taxes | 23 | (9,191,005 | ) | 3,786,778 | (5,641,699 | ) | ||||||||||
Consolidated net income for the period | 15,559,324 | 13,450,753 | 16,631,450 | |||||||||||||
Profit attributable to the parent | 15,528,052 | 13,418,529 | 16,406,932 | |||||||||||||
Profit attributable to non-controlling interests | 26 | 31,272 | 32,224 | 224,518 |
Note | 2016 | 2015 | 2014 | |||||||||||
Interest and similar income | 33 | 77,146,077 | 69,870,200 | 58,923,916 | ||||||||||
Interest expense and similar charges | 34 | (46,559,584 | ) | (38,533,089 | ) | (31,695,404 | ) | |||||||
Net interest income | 30,586,493 | 31,337,111 | 27,228,512 | |||||||||||
Income from equity instruments | 35 | 258,545 | 142,881 | 222,302 | ||||||||||
Income from companies accounted for by the equity method | 12 | 47,537 | 116,312 | 91,096 | ||||||||||
Fee and commission income | 36 | 13,548,481 | 11,797,191 | 11,368,098 | ||||||||||
Fee and commission expense | 37 | (2,570,885 | ) | (2,313,682 | ) | (2,602,212 | ) | |||||||
Gains (losses) on financial assets and liabilities (net) | 38 | 3,016,156 | (20,002,859 | ) | 2,748,163 | |||||||||
Financial assets held for trading | 3,166,399 | (19,936,801 | ) | 2,270,059 | ||||||||||
Other financial instruments at fair value through profit or loss | 82,638 | 46,859 | (77,624 | ) | ||||||||||
Financial instruments not measured at fair value through profit or loss | (115,202 | ) | (120,523 | ) | 512,190 | |||||||||
Other | (117,679 | ) | 7,606 | 43,538 | ||||||||||
Exchange differences (net) | 39 | 4,574,814 | 10,084,420 | (3,635,599 | ) | |||||||||
Other operating expense (net) | 40 | (624,571 | ) | (347,123 | ) | (470,477 | ) | |||||||
Total Income | 48,836,570 | 30,814,251 | 34,949,883 | |||||||||||
Administrative expenses | (14,920,410 | ) | (14,515,132 | ) | (13,941,816 | ) | ||||||||
Personnel expenses | 41 | (8,377,265 | ) | (7,798,792 | ) | (7,203,442 | ) | |||||||
Other administrative expenses | 42 | (6,543,145 | ) | (6,716,340 | ) | (6,738,374 | ) | |||||||
Depreciation and amortization | (1,482,639 | ) | (1,490,017 | ) | (1,362,129 | ) | ||||||||
Tangible assets | 13 | (1,154,588 | ) | (1,029,706 | ) | (872,749 | ) | |||||||
Intangible assets | 15 | (328,051 | ) | (460,311 | ) | (489,380 | ) | |||||||
Provisions (net) | (2,724,742 | ) | (4,001,294 | ) | (2,036,237 | ) | ||||||||
Impairment losses on financial assets (net) | (13,301,445 | ) | (13,633,989 | ) | (11,271,605 | ) | ||||||||
Loans and receivables | 6&10.c | (13,389,834 | ) | (13,110,319 | ) | (11,193,571 | ) | |||||||
Other financial instruments not measured at fair value through profit or loss | 88,389 | (523,670 | ) | (78,034 | ) | |||||||||
Impairment losses on other assets (net) | (114,321 | ) | (1,220,645 | ) | 3,751 | |||||||||
Other intangible assets | 15 | (5,838 | ) | (679,254 | ) | (5,123 | ) | |||||||
Other assets | (108,483 | ) | (541,391 | ) | 8,874 | |||||||||
Gains (losses) on disposal of assets not classified as non-current assets held for sale | 43 | 3,816 | 780,615 | 86,846 | ||||||||||
Gains (losses) on non-current assets held for sale not classified as discontinued operations | 44 | 87,073 | 50,493 | 14,636 | ||||||||||
Operating Profit Before Tax | 16,383,902 | (3,215,718 | ) | 6,443,329 | ||||||||||
Income taxes | 25 | (8,918,984 | ) | 13,049,544 | (735,553 | ) | ||||||||
Consolidated Profit for the Year | 7,464,918 | 9,833,826 | 5,707,776 | |||||||||||
Profit attributable to the Parent | 7,334,563 | 9,783,740 | 5,630,023 | |||||||||||
Profit attributable to non-controlling interests | 28 | 130,355 | 50,086 | 77,753 | ||||||||||
Earnings Per Share (Brazilian Reais) | 30 | |||||||||||||
Basic earnings per 1,000 shares (Brazilian Reais) | ||||||||||||||
Common shares | 929.93 | 1,236.96 | 709.69 | |||||||||||
Preferred shares | 1,022.92 | 1,360.66 | 780.66 | |||||||||||
Diluted earnings per 1,000 shares (Brazilian Reais) | ||||||||||||||
Common shares | 929.03 | 1,235.79 | 709.40 | |||||||||||
Preferred shares | 1,021.93 | 1,359.36 | 780.34 | |||||||||||
Net Profit attributable - Basic (Brazilian Reais) | ||||||||||||||
Common shares | 3,560,288 | 4,748,896 | 2,733,205 | |||||||||||
Preferred shares | 3,774,275 | 5,034,844 | 2,896,818 | |||||||||||
Net Profit attributable - Diluted (Brazilian Reais) | ||||||||||||||
Common shares | 3,560,222 | 4,748,810 | 2,733,184 | |||||||||||
Preferred shares | 3,774,341 | 5,034,930 | 2,896,839 | |||||||||||
Weighted average shares outstanding (in thousands) - Basic | ||||||||||||||
Common shares | 3,828,555 | 3,839,159 | 3,851,278 | |||||||||||
Preferred shares | 3,689,696 | 3,700,299 | 3,710,746 | |||||||||||
Weighted average shares outstanding (in thousands) - Diluted | ||||||||||||||
Common shares | 3,832,211 | 3,842,744 | 3,852,823 | |||||||||||
Preferred shares | 3,693,352 | 3,703,884 | 3,712,291 |
The accompanying Notes are an integral part of these consolidated financial statements.
The accompanying Notes are an integral part of these consolidated financial statements.
Consolidated Financial Statements | December 31, 2021 | F-6 |
* Values expressed in thousands, except when indicated. |
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
(ThousandsConsolidated Statement of Brazilian Reais - R$)Comprehensive Income
2016 | 2015 | 2014 | 2021 | 2020 | 2019 | |||||||||||||||||
Consolidated Profit for the Year | 7,464,918 | 9,833,826 | 5,707,776 | 15,559,324 | 13,450,753 | 16,631,450 | ||||||||||||||||
Other Comprehensive Income that will be reclassified subsequently to profit or loss when specific conditions are met: | 3,725,565 | (3,069,317 | ) | 720,473 | ||||||||||||||||||
Available-for-sale financial assets | 3,311,607 | (2,718,709 | ) | 545,239 | ||||||||||||||||||
Valuation adjustments - Gains / (Losses) | 5,458,735 | (4,155,414 | ) | 841,725 | ||||||||||||||||||
Amounts transferred to income statement | 82,638 | 46,859 | (39,746 | ) | ||||||||||||||||||
Other comprehensive income that will be reclassified subsequently to profit or loss when specific conditions are met: | (3,245,041 | ) | (897,996 | ) | 1,468,651 | |||||||||||||||||
Financial assets measured at fair value through other comprehensive income | (2,389,705 | ) | (1,003,155 | ) | 1,352,702 | |||||||||||||||||
Financial assets measured at fair value through other comprehensive income | (4,255,996 | ) | (1,976,013 | ) | 2,926,285 | |||||||||||||||||
Income taxes | (2,229,766) | 1,389,846 | (256,740 | ) | 1,866,291 | 972,858 | (1,573,583 | ) | ||||||||||||||
Cash flow hedges | 413,958 | (350,608 | ) | 175,234 | (855,335 | ) | 105,159 | 115,949 | ||||||||||||||
Valuation adjustments | 761,423 | (842,073 | ) | 278,645 | (1,628,393 | ) | 168,015 | 270,119 | ||||||||||||||
Amounts transferred to income statement | 1,580 | 144,196 | 26,597 | — | — | 6,767 | ||||||||||||||||
Income taxes | (349,045) | 347,269 | (130,008 | ) | 773,058 | (62,856 | ) | (160,937 | ) | |||||||||||||
Net investment hedge | 634,207 | (791,228 | ) | (181 | ) | |||||||||||||||||
Net investment hedge | 1,209,338 | (1,460,720 | ) | (301 | ) | |||||||||||||||||
Income taxes | (575,131) | 669,492 | 120 | |||||||||||||||||||
Exchange on investments Abroad | (634,207) | 791,228 | 181 | |||||||||||||||||||
Exchange on investments Abroad | (634,207) | 791,228 | 181 | |||||||||||||||||||
Other Comprehensive Income that will not be Reclassified to net Income: | (941,833) | 739,706 | (549,089 | ) | ||||||||||||||||||
Other comprehensive income that will not be reclassified to net income: | 266,692 | 555,624 | (675,497 | ) | ||||||||||||||||||
Defined benefits plan | (941,833) | 739,706 | (549,089 | ) | 266,692 | 555,624 | (675,497 | ) | ||||||||||||||
Defined benefits plan | (1,568,122) | 1,186,862 | (912,636 | ) | 592,967 | 1,110,034 | (1,358,578 | ) | ||||||||||||||
Income taxes | 626,289 | (447,156 | ) | 363,547 | (326,275 | ) | (554,410 | ) | 683,081 | |||||||||||||
Total Comprehensive Income | 10,248,650 | 7,504,215 | 5,879,160 | |||||||||||||||||||
Total comprehensive income | 12,580,976 | 13,108,381 | 17,424,604 | |||||||||||||||||||
Attributable to the parent | 10,118,295 | 7,454,129 | 5,801,407 | 12,549,704 | 13,076,157 | 17,200,086 | ||||||||||||||||
Attributable to non-controlling interests | 130,355 | 50,086 | 77,753 | 31,272 | 32,224 | 224,518 | ||||||||||||||||
Total Comprehensive Income | 10,248,650 | 7,504,215 | 5,879,160 | |||||||||||||||||||
Total comprehensive income | 12,580,976 | 13,108,381 | 17,424,604 | |||||||||||||||||||
The accompanying Notes are an integral part of these consolidated financial statements. | The accompanying Notes are an integral part of these consolidated financial statements. |
Consolidated Financial Statements | December 31, 2021 | F-7 |
* Values expressed in thousands, except when indicated. |
Consolidated Statement of Changes in Stockholders’ Equity
Stockholders´ Equity Attributable to the Parent | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note | Share Capital | Reserves | Treasury shares | Option for acquisition of equity instrument | Profit attributed to the parent | Dividends and remuneration | Total stockholders´ equity | Financial assets measured at fair value through other comprehensive income | Defined benefits plan | Adjustments investment abroad | Gains and losses - cash flow hedge and investment | Total | Non-controlling interests | Total stockholders' | ||||||||||||||||||||||||||||||||||||||||||||||
Balance on december 31, 2018 | 57,000,000 | 30,440,288 | (461,432 | ) | (1,017,000 | ) | 12,582,477 | (6,600,000 | ) | 91,944,333 | 1,992,581 | (3,071,040 | ) | 859,370 | (659,774 | ) | 91,065,470 | 529,990 | 91,595,460 | |||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | 16,406,932 | — | 16,406,932 | 1,352,702 | (675,497 | ) | — | 115,949 | 17,200,086 | 224,518 | 17,424,604 | |||||||||||||||||||||||||||||||||||||||||||||
Net profit | — | — | — | — | 16,406,932 | — | 16,406,932 | — | — | — | — | 16,406,932 | 224,518 | 16,631,450 | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | 1,352,702 | (675,497 | ) | — | 115,949 | 793,154 | — | 793,154 | |||||||||||||||||||||||||||||||||||||||||||||
Financial assets measured at fair value through other comprehensive income | — | — | — | — | — | — | — | 1,352,702 | — | — | — | 1,352,702 | — | 1,352,702 | ||||||||||||||||||||||||||||||||||||||||||||||
Employee benefit plan | — | — | — | — | — | — | — | — | (675,497 | ) | — | — | (675,497 | ) | — | (675,497 | ) | |||||||||||||||||||||||||||||||||||||||||||
Gain and loss - cash flow and investment hedge | — | — | — | — | — | — | — | — | — | — | 115,949 | 115,949 | — | 115,949 | ||||||||||||||||||||||||||||||||||||||||||||||
Appropriation of net income from prior years | — | 12,582,477 | — | — | (12,582,477 | ) | — | — | — | — | — | — | — | — | - | |||||||||||||||||||||||||||||||||||||||||||||
Option to acquire own instrument | (1,598,336 | ) | — | 950,000 | — | — | (648,336 | ) | — | — | — | — | (648,336 | ) | — | (648,336 | ) | |||||||||||||||||||||||||||||||||||||||||||
Dividends and interest on capital | 27. | b | — | (6,600,000 | ) | — | — | — | (4,200,000 | ) | (10,800,000 | ) | — | — | — | — | (10,800,000 | ) | — | (10,800,000 | ) | |||||||||||||||||||||||||||||||||||||||
Share based compensation | 39. | b | — | 50,886 | — | — | — | — | 50,886 | — | — | — | — | 50,886 | — | 50,886 | ||||||||||||||||||||||||||||||||||||||||||||
Treasury shares | 27. | d | — | — | (219,703 | ) | — | — | — | (219,703 | ) | — | — | — | — | (219,703 | ) | — | (219,703 | ) | ||||||||||||||||||||||||||||||||||||||||
Treasury shares income | 27. | d | — | 5,796 | — | — | — | — | 5,796 | — | — | — | — | 5,796 | — | 5,796 | ||||||||||||||||||||||||||||||||||||||||||||
Other | — | (3,618 | ) | — | — | — | — | (3,618 | ) | — | — | — | — | (3,618 | ) | (195,927 | ) | (199,545 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance on december 31, 2019 | 57,000,000 | 34,877,493 | (681,135 | ) | (67,000 | ) | 16,406,932 | (10,800,000 | ) | 96,736,290 | 3,345,283 | (3,746,537 | ) | 859,370 | (543,825 | ) | 96,650,580 | 558,581 | 97,209,161 |
Consolidated Financial Statements | December 31, 2021 | F-8 |
* Values expressed in thousands, except when indicated. |
Stockholders´ Equity Attributable to the Parent | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note | Share Capital | Reserves | Treasury Shares | Option for Acquisition of Equity Instrument | Profit Attributed to the Parent | Dividends and Remuneration | Total Stockholders´ Equity | Financial Assets Measured at Fair Value Through Other Comprehensive Income | Defined Benefits plan | Adjustments investment abroad | Gains and losses - Cash flow hedge and Investment | Total | Non-controlling Interests | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||
Balance on December 31, 2019 | 57,000,000 | 34,877,493 | (681,135 | ) | (67,000 | ) | 16,406,932 | (10,800,000 | ) | 96,736,290 | 3,345,283 | (3,746,537 | ) | 859,370 | (543,825 | ) | 96,650,580 | 558,581 | 97,209,161 | |||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | 13,418,529 | — | 13,418,529 | (1,003,154 | ) | 555,624 | — | 105,159 | 13,076,158 | 32,224 | 13,108,382 | |||||||||||||||||||||||||||||||||||||||||||||
Net profit | — | — | — | — | 13,418,529 | — | 13,418,529 | — | — | — | — | 13,418,529 | 32,224 | 13,450,753 | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | (1,003,154 | ) | 555,624 | — | 105,159 | (342,371 | ) | — | (342,371 | ) | |||||||||||||||||||||||||||||||||||||||||||
Financial Assets Measured at Fair Value Through Other Comprehensive Income | — | — | — | — | — | — | — | (1,003,154 | ) | — | — | — | (1,003,154 | ) | — | (1,003,154 | ) | |||||||||||||||||||||||||||||||||||||||||||
Employee benefit plan | — | — | — | — | — | — | — | — | 555,624 | — | — | 555,624 | — | 555,624 | ||||||||||||||||||||||||||||||||||||||||||||||
Gain and loss - Cash flow and investment hedge | — | — | — | — | — | — | — | — | — | — | 105,159 | 105,159 | — | 105,159 | ||||||||||||||||||||||||||||||||||||||||||||||
Appropriation of net income from prior years | — | 16,406,932 | — | — | (16,406,932 | ) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Option to Acquire Own Instrument | — | (67,000 | ) | — | 67,000 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Dividends and interest on capital from prior years | 27.b | — | (10,800,000 | ) | — | — | — | 10,800,000 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Dividends and interest on capital | 27.b | — | — | — | — | — | (3,837,085 | ) | (3,837,085 | ) | — | — | — | — | (3,837,085 | ) | — | (3,837,085 | ) | |||||||||||||||||||||||||||||||||||||||||
Treasury shares | 27.d | — | — | (110,223 | ) | — | — | — | (110,223 | ) | — | — | — | — | (110,223 | ) | — | (110,223 | ) | |||||||||||||||||||||||||||||||||||||||||
Other | — | (2,443 | ) | — | — | — | — | (2,443 | ) | — | — | — | — | (2,443 | ) | (277,920 | ) | (280,363 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance on December 31, 2020 | 57,000,000 | 40,414,981 | (791,358 | ) | — | 13,418,529 | (3,837,085 | ) | 106,205,067 | 2,342,129 | (3,190,913 | ) | 859,370 | (438,666 | ) | 105,776,987 | 312,885 | 106,089,872 |
Consolidated Financial Statements | December 31, 2021 | F-9 |
* Values expressed in thousands, except when indicated. |
Stockholders´ Equity Attributable to the Parent | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note | Share Capital | Reserves | Treasury Shares | Option for Acquisition of Equity Instrument | Profit Attributed to the Parent | Dividends and Remuneration | Total Stockholders´ Equity | Financial Assets Measured at Fair Value Through Other Comprehensive Income | Defined Benefits plan | Adjustments investment abroad | Gains and losses - Cash flow hedge and Investment | Total | Non-controlling Interests | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||
Balance on December 31, 2020 | 57,000,000 | 40,414,981 | (791,358 | ) | — | 13,418,529 | (3,837,085 | ) | 106,205,067 | 2,342,129 | (3,190,913 | ) | 859,370 | (438,666 | ) | 105,776,987 | 312,885 | 106,089,872 | ||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | 15,528,052 | — | 15,528,052 | (2,389,705 | ) | 266,692 | — | (855,335 | ) | 12,549,704 | 31,272 | 12,580,976 | ||||||||||||||||||||||||||||||||||||||||||||
Net profit | — | — | — | — | 15,528,052 | — | 15,528,052 | — | — | — | — | 15,528,052 | 31,272 | 15,559,324 | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | (2,389,705 | ) | 266,692 | — | (855,335 | ) | (2,978,348 | ) | — | (2,978,348 | ) | ||||||||||||||||||||||||||||||||||||||||||
Financial Assets Measured at Fair Value Through Other Comprehensive Income | — | — | — | — | — | — | — | (2,389,705 | ) | — | — | — | (2,389,705 | ) | — | (2,389,705 | ) | |||||||||||||||||||||||||||||||||||||||||||
Employee benefit plan | — | — | — | — | — | — | — | — | 266,692 | — | — | 266,692 | — | 266,692 | ||||||||||||||||||||||||||||||||||||||||||||||
Gain and loss - Cash flow and investment hedge | — | — | — | — | — | — | — | — | — | — | (855,335 | ) | (855,335 | ) | — | (855,335 | ) | |||||||||||||||||||||||||||||||||||||||||||
Appropriation of net income from prior years | — | 13,418,529 | — | — | (13,418,529 | ) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Spin-Off | 27.a & 27.c | (2,000,000 | ) | (1,167,674 | ) | — | — | — | — | (3,167,674 | ) | — | — | — | — | (3,167,674 | ) | — | (3,167,674 | ) | ||||||||||||||||||||||||||||||||||||||||
Dividends and interest on capital from prior years | 27.b | — | (3,837,085 | ) | — | — | — | 3,837,085 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Dividends and interest on capital | 27.b | — | — | — | — | — | (9,649,000 | ) | (9,649,000 | ) | — | — | — | — | (9,649,000 | ) | — | (9,649,000 | ) | |||||||||||||||||||||||||||||||||||||||||
Treasury shares | 27.d | — | — | 78,319 | — | — | — | 78,319 | — | — | — | — | 78,319 | — | 78,319 | |||||||||||||||||||||||||||||||||||||||||||||
Other | — | 51,810 | — | — | — | — | 51,810 | — | — | — | — | 51,810 | (9,808 | ) | 42,001 | |||||||||||||||||||||||||||||||||||||||||||||
Balance on December 31, 2021 | 55,000,000 | 48,880,561 | (713,039 | ) | — | 15,528,052 | (9,649,000 | ) | 109,046,574 | (47,576 | ) | (2,924,221 | ) | 859,370 | (1,294,001 | ) | 105,640,146 | 334,349 | 105,974,495 |
The accompanying Notes are an integral part of these consolidated financial statements.
Consolidated Financial Statements | December 31, 2021 | F-10 |
* Values expressed in thousands, except when indicated. |
Consolidated Statement of Cash Flows
Note | 2021 | 2020 | 2019 | |||||||||||||
1. Cash Flows From Operating Activities | ||||||||||||||||
Consolidated profit for the year | 15,559,324 | 13,450,753 | 16,631,450 | |||||||||||||
Adjustments to profit | (13,898,808 | ) | (31,268,076 | ) | 14,654,879 | |||||||||||
Depreciation of tangible assets | 12.a | 1,850,780 | 2,039,805 | 1,870,836 | ||||||||||||
Amortization of intangible assets | 14 | 583,141 | 539,322 | 521,021 | ||||||||||||
Impairment losses on other assets (net) | 165,799 | 84,908 | 131,435 | |||||||||||||
Provisions and impairment losses on financial assets (net) | 19,292,151 | 19,106,735 | 17,051,491 | |||||||||||||
Net gains (losses) on disposal of tangible assets, investments and non-current assets held for sale | 41&42 | (32,512 | ) | (308,176 | ) | (20,489 | ) | |||||||||
Income from companies accounted by the equity method | 11.a | (144,184 | ) | (112,261 | ) | (149,488 | ) | |||||||||
Changes in deferred tax assets and liabilities | 23.d | 2,265,227 | (8,232,869 | ) | (2,912,279 | ) | ||||||||||
Monetary adjustment of escrow deposits | (433,629 | ) | (219,447 | ) | (574,399 | ) | ||||||||||
Recoverable taxes | (217,820 | ) | (120,220 | ) | (182,469 | ) | ||||||||||
Effects of changes in foreign exchange rates on cash and cash equivalents | — | — | 99 | |||||||||||||
Effects of changes in foreign exchange rates on assets and liabilities | (35,669,654 | ) | (44,250,466 | ) | (2,609,679 | ) | ||||||||||
Other | (1,558,107 | ) | 204,593 | 1,528,800 | ||||||||||||
Net (increase) decrease in operating assets | 22,502,791 | (139,525,961 | ) | (42,332,510 | ) | |||||||||||
Financial assets measured at fair value through profit or loss | 42,041,624 | (26,198,034 | ) | 11,080,730 | ||||||||||||
Financial assets measured at fair value through profit or loss held for trading | 50,833,925 | (43,070,163 | ) | 11,831,411 | ||||||||||||
Non-trading financial assets mandatorily measured at fair value through profit or loss | (370,442 | ) | (328,267 | ) | 746,024 | |||||||||||
Financial assets measured at fair value through other comprehensive income | 4,094,548 | (14,905,798 | ) | (8,835,552 | ) | |||||||||||
Financial assets measured at amortized cost | (86,179,125 | ) | (80,800,357 | ) | (60,461,392 | ) | ||||||||||
Other assets | 12,082,261 | 25,776,658 | 3,306,269 | |||||||||||||
Net increase (decrease) in operating liabilities | (12,821,626 | ) | 200,930,390 | 41,219,165 | ||||||||||||
Financial liabilities measured at fair value through profit or loss held for trading | (38,067,617 | ) | 33,203,455 | (4,874,323 | ) | |||||||||||
Financial liabilities measured at fair value through profit or loss | 421,317 | 1,516,522 | 3,373,359 | |||||||||||||
Financial liabilities at amortized cost | 30,512,246 | 165,920,919 | 40,961,046 | |||||||||||||
Other liabilities | (5,687,572 | ) | 289,494 | 1,759,083 | ||||||||||||
Tax paid | 23.a | (4,534,538 | ) | (1,269,150 | ) | (5,301,184 | ) | |||||||||
Total net cash flows from operating activities (1) | 6,807,143 | 42,317,956 | 24,871,800 | |||||||||||||
2. Cash Flows From Investing Activities | ||||||||||||||||
Investments | (2,679,473 | ) | (2,019,278 | ) | (3,500,499 | ) | ||||||||||
Acquisition of subsidiary, less net cash in the acquisition | (13,746 | ) | (13,570 | ) | (746 | ) | ||||||||||
Tangible assets | 12.a | (1,162,774 | ) | (1,235,923 | ) | (1,924,783 | ) | |||||||||
Intangible assets | (1,202,416 | ) | (769,785 | ) | (1,519,725 | ) | ||||||||||
Corporate Restructuring | (300,537 | ) | — | (55,245 | ) | |||||||||||
Disposal | 752,781 | 856,181 | 987,164 | |||||||||||||
Tangible assets | 12.a | 37,576 | 47,096 | 29,911 | ||||||||||||
Non - current assets held for sale | 563,205 | 663,067 | 808,980 | |||||||||||||
Dividends and interest on capital received | 152,000 | 146,018 | 148,273 | |||||||||||||
Total net cash flows from investing activities (2) | (1,926,692 | ) | (1,163,097 | ) | (2,513,335 | ) | ||||||||||
3. Cash Flows From Financing Activities | ||||||||||||||||
Acquisition of own shares | 27.d | 78,319 | (110,223 | ) | (219,703 | ) | ||||||||||
Issuance of Instruments Eligible to Compose Capital | 19 | 5,500,000 | — | — | ||||||||||||
Issuance of other long-term financial liabilities | 18 | 101,784,961 | 60,047,656 | 53,017,039 | ||||||||||||
Dividends and interest on capital paid | (9,907,319 | ) | (10,280,430 | ) | (6,953,718 | ) | ||||||||||
Payments of other long-term financial liabilities | 18 | (97,220,580 | ) | (82,900,914 | ) | (61,914,716 | ) | |||||||||
Payments of subordinated liabilities | 19 | — | — | (9,885,607 | ) | |||||||||||
Payments of interest of Debt Instruments Eligible to Compose Capital | 19 | (911,306 | ) | (914,645 | ) | (328,892 | ) | |||||||||
Net increase in non-controlling interests | 17,415 | 6,842 | (14,266 | ) | ||||||||||||
Capital Increase in Subsidiaries, by Non-Controlling Interests | — | — | 100,000 | |||||||||||||
Total net cash flows from financing activities (3) | (658,510 | ) | (34,151,714 | ) | (26,199,863 | ) | ||||||||||
Exchange variation on Cash and Cash Equivalents (4) | — | — | (99 | ) | ||||||||||||
Net Increase in Cash (1+2+3+4) | 4,221,941 | 7,003,145 | (3,841,497 | ) | ||||||||||||
Cash and cash equivalents at beginning of year | 28,446,808 | 21,443,663 | 25,285,160 | |||||||||||||
Cash and cash equivalents at end of year | 32,668,749 | 28,446,808 | 21,443,663 | |||||||||||||
The accompanying Notes are an integral part of these consolidated financial statements. |
Consolidated Financial Statements | December 31, 2021 | F-11 |
* Values expressed in thousands, except when indicated. |
Cash and cash equivalents components | Note | 2021 | 2020 | 2019 | ||||||||||||
Cash | 4 | 16,657,201 | 20,148,725 | 20,127,364 | ||||||||||||
Loans and other | 5 | 16,011,548 | 8,298,083 | 1,316,299 | ||||||||||||
Total of cash and cash equivalents | 32,668,749 | 28,446,808 | 21,443,663 | |||||||||||||
Non-cash transactions | ||||||||||||||||
Foreclosures loans and other assets transferred to non-current assets held for sale | 10 | 235,904 | 445,173 | 735,864 | ||||||||||||
Dividends and interest on capital declared but not paid | 27.b | 249,000 | 1,177,085 | 7,800,000 | ||||||||||||
Supplemental information | ||||||||||||||||
Interest received | 77,987,308 | 62,774,940 | 72,841,060 | |||||||||||||
Interest paid | (26,668,842 | ) | (18,332,228 | ) | (28,519,953 | ) |
The accompanying Notes are an integral part of these consolidated financial statements.
Consolidated Financial Statements | December 31, 2021 | F-12 |
* Values expressed in thousands, except when indicated. |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Thousands of Brazilian Reais - R$)
Stockholders´ Equity Attributable to the Parent | Non- controlling Interests | Total Stockholders' Equity | ||||||||||||||||||||||||||
Other Comprehensive Income | ||||||||||||||||||||||||||||
Note | Share Capital | Reserves | Treasury Shares | Option for Acquisition of Equity Instrument | Profit Attributed to the Parent | Dividends and Remuneration | Total | Available- for-sale Financial Assets | Defined Benefit Plans | Translation adjustments investment abroad | Gains and losses - Cash flow hedge and Investment | Total | ||||||||||||||||
Balances at December 31, 2013 | 62,634,585 | 17,673,134 | (291,707) | - | 5,723,494 | (2,400,000) | 83,339,506 | (471,947) | (1,332,261) | 702,168 | (871,265) | 81,366,201 | 289,101 | 81,655,302 | ||||||||||||||
Total comprehensive income | - | - | - | - | 5,630,023 | - | 5,630,023 | 545,239 | (549,089) | 181 | 175,053 | 5,801,407 | 77,753 | 5,879,160 | ||||||||||||||
Appropriation of net profit for the year | - | 5,723,494 | - | - | (5,723,494) | - | - | - | - | - | - | - | - | - | ||||||||||||||
Dividends and interest on capital | 29.b | - | (2,400,000) | - | - | - | 870,000 | (1,530,000) | - | - | - | - | (1,530,000) | - | (1,530,000) | |||||||||||||
Share based payments | 41.b | - | (89,339) | - | - | - | - | (89,339) | - | - | - | - | (89,339) | - | (89,339) | |||||||||||||
Treasury shares | 29.d | - | - | (153,748) | - | - | - | (153,748) | - | - | - | - | (153,748) | - | (153,748) | |||||||||||||
Capital restructuring | (5,828,201) | (185,312) | (46) | - | - | - | (6,013,559) | - | - | - | - | (6,013,559) | - | (6,013,559) | ||||||||||||||
Results of treasury shares | 29.d | - | (4,926) | - | - | - | - | (4,926) | - | - | - | - | (4,926) | - | (4,926) | |||||||||||||
Option for Acquisition of Equity Instrument | - | - | - | (950,000) | - | - | (950,000) | - | - | - | - | (950,000) | - | (950,000) | ||||||||||||||
Other | - | (122,916) | - | - | - | - | (122,916) | - | - | - | - | (122,916) | 13,319 | (109,597) | ||||||||||||||
Balances at December 31, 2014 | 56,806,384 | 20,594,135 | (445,501) | (950,000) | 5,630,023 | (1,530,000) | 80,105,041 | 73,292 | (1,881,350) | 702,349 | (696,212) | 78,303,120 | 380,173 | 78,683,293 | ||||||||||||||
Total comprehensive income | - | - | - | - | 9,783,740 | - | 9,783,740 | (2,718,709) | 739,706 | 791,228 | (1,141,836) | 7,454,129 | 50,086 | 7,504,215 | ||||||||||||||
Appropriation of net profit for the year | - | 5,630,023 | - | - | (5,630,023) | - | - | - | - | - | - | - | - | - | ||||||||||||||
Dividends and interest on capital | 29.b | - | (1,530,000) | - | - | - | (4,670,000) | (6,200,000) | - | - | - | - | (6,200,000) | - | (6,200,000) | |||||||||||||
Share based payments | 41.b | - | 160,916 | - | - | - | - | 160,916 | - | - | - | - | 160,916 | - | 160,916 | |||||||||||||
Treasury shares | 29.d | - | - | (246,975) | - | - | - | (246,975) | - | - | - | - | (246,975) | - | (246,975) | |||||||||||||
Capital restructuring | - | - | (50) | - | - | - | (50) | - | - | - | - | (50) | - | (50) | ||||||||||||||
Treasury shares income | 29.d | - | (3,918) | - | - | - | - | (3,918) | - | - | - | - | (3,918) | - | (3,918) | |||||||||||||
Option for Acquisition of Equity Instrument | 4.c | - | - | - | (67,000) | - | - | (67,000) | - | - | - | - | (67,000) | (240,000) | (307,000) | |||||||||||||
Cancellation of Shares | - | (268,573) | 268,573 | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||
Other | 29.a | 193,616 | (193,616) | - | - | - | - | - | - | - | - | - | - | 244,803 | 244,803 | |||||||||||||
Balances at December 31, 2015 | 57,000,000 | 24,388,967 | (423,953) | (1,017,000) | 9,783,740 | (6,200,000) | 83,531,754 | (2,645,417) | (1,141,644) | 1,493,577 | (1,838,048) | 79,400,222 | 435,062 | 79,835,284 | ||||||||||||||
Total comprehensive income | - | - | - | - | 7,334,563 | - | 7,334,563 | 3,311,607 | (941,833) | (634,207) | 1,048,165 | 10,118,295 | 130,355 | 10,248,650 | ||||||||||||||
Appropriation of net profit for the year | - | 9,783,740 | - | - | (9,783,740) | - | - | - | - | - | - | - | - | - | ||||||||||||||
Dividends and interest on capital | 29.b | - | (6,200,000) | - | - | - | 950,000 | (5,250,000) | - | - | - | - | (5,250,000) | - | (5,250,000) | |||||||||||||
Share based payments | - | (35,463) | - | - | - | - | (35,463) | - | - | - | - | (35,463) | - | (35,463) | ||||||||||||||
Treasury shares | 29.d | - | - | (90,031) | - | - | - | (90,031) | - | - | - | - | (90,031) | - | (90,031) | |||||||||||||
Capital restructuring | - | - | (50) | - | - | - | (50) | - | - | - | - | (50) | - | (50) | ||||||||||||||
Treasury shares income | 29.d | - | (11,574) | - | - | - | - | (11,574) | - | - | - | - | (11,574) | - | (11,574) | |||||||||||||
Other | - | (44,344) | - | - | - | - | (44,344) | - | - | - | - | (44,344) | 160,087 | 115,743 | ||||||||||||||
Balances at December 31, 2016 | 57,000,000 | 27,881,326 | (514,034) | (1,017,000) | 7,334,563 | (5,250,000) | 85,434,855 | 666,190 | (2,083,477) | 859,370 | (789,883) | 84,087,055 | 725,504 | 84,812,559 |
1. | Introduction, basis of presentation of the consolidated financial statements and other information |
The accompanying Notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Brazilian Reais - R$)
Note | 2016 | 2015 | 2014 | |||||||||||
1. Cash Flows From Operating Activities | ||||||||||||||
Consolidated profit for the year | 7,464,918 | 9,833,826 | 5,707,776 | |||||||||||
Adjustments to profit | 24,068,364 | (1,555,376 | ) | 11,036,674 | ||||||||||
Depreciation of tangible assets | 13 | 1,154,588 | 1,029,706 | 872,749 | ||||||||||
Amortization of intangible assets | 15 | 328,051 | 460,311 | 489,380 | ||||||||||
Impairment losses on other assets (net) | 114,321 | 1,220,645 | (3,751 | ) | ||||||||||
Provisions and Impairment losses on financial assets (net) | 16,026,187 | 17,635,283 | 13,307,842 | |||||||||||
Net Gains (losses) on disposal of tangible assets, investments and non-current assets held for sale | (90,889 | ) | (831,108 | ) | (101,482 | ) | ||||||||
Share of results of entities accounted for using the equity method | 12 | (47,537 | ) | (116,312 | ) | (91,096 | ) | |||||||
Changes in deferred tax assets and liabilities | 25.d | 5,343,885 | (9,417,913 | ) | (2,055,872 | ) | ||||||||
Monetary Adjustment of Escrow Deposits | (749,040 | ) | (650,314 | ) | (433,296 | ) | ||||||||
Recoverable Taxes | (215,228 | ) | (985,776 | ) | (332,265 | ) | ||||||||
Effects of Changes in Foreign Exchange Rates on Cash and Cash Equivalents | 2,289,849 | (2,106,652 | ) | (521,270 | ) | |||||||||
Others(1) | (85,823 | ) | (7,793,246 | ) | (94,265 | ) | ||||||||
Net (increase) decrease in operating assets | (56,779,768 | ) | (79,770,025 | ) | (89,899,611 | ) | ||||||||
Balance with the Brazilian Central Bank | (24,156,755 | ) | (35,884,381 | ) | 2,063,056 | |||||||||
Financial assets held for trading | (34,320,260 | ) | 5,476,872 | (25,794,816 | ) | |||||||||
Other financial assets at fair value through profit or loss | 457,419 | (1,607,210 | ) | 223,568 | ||||||||||
Available-for-sale financial assets | 10,127,344 | (16,354,040 | ) | (29,116,008 | ) | |||||||||
Loans and receivables | (10,121,085 | ) | (30,420,173 | ) | (38,070,720 | ) | ||||||||
Held to maturity investments | 49,075 | 318,169 | - | |||||||||||
Other assets | 1,184,494 | (1,299,262 | ) | 795,309 | ||||||||||
Net increase (decrease) in operating liabilities | 36,235,208 | 76,687,887 | 69,113,699 | |||||||||||
Financial liabilities held for trading | 9,232,101 | 22,817,977 | 6,010,910 | |||||||||||
Financial liabilities at amortized cost | 25,685,022 | 53,503,471 | 61,706,449 | |||||||||||
Other liabilities | 1,318,085 | 366,439 | 1,396,340 | |||||||||||
Paid taxes | 25.a | (4,240,115 | ) | (1,170,020 | ) | (573,684 | ) | |||||||
Total net cash flows from operating activities (1) | 6,748,607 | 4,026,292 | (4,615,146 | ) | ||||||||||
2. Cash Flows From Investing Activities | ||||||||||||||
Investments | (1,945,372 | ) | (2,136,002 | ) | (3,503,603 | ) | ||||||||
Increase / Acquisition of Investments in subsidiaries | (3,105 | ) | - | (1,085,470 | ) | |||||||||
Tangible assets | (873,140 | ) | (1,070,288 | ) | (1,838,284 | ) | ||||||||
Intangible assets | (670,576 | ) | (710,176 | ) | (579,849 | ) | ||||||||
Acquisition of subsidiary, less net cash in the acquisition | (392,998 | ) | - | - | ||||||||||
Non - current assets held for sale | 11 | (10,462 | ) | (355,538 | ) | - | ||||||||
Change in the scope of consolidation | 4 | 4,909 | - | - | ||||||||||
Disposal | 677,088 | 1,375,167 | 347,048 | |||||||||||
Net cash received from disposal of subsidiaries | - | 857,830 | - | |||||||||||
Capital reduction of investee in joint control | 12.b | 76,860 | - | - | ||||||||||
Subsidiaries, jointly controlled entities and associates | 3 | - | - | 55,493 | ||||||||||
Tangible assets | 13&43 | 42,226 | 55,220 | 216,750 | ||||||||||
Non - current assets held for sale | 11&43 | 208,232 | 317,321 | - | ||||||||||
Acquisition of subsidiary, less net cash in the acquisition | - | 59 | - | |||||||||||
Dividends and interest on capital received | 349,770 | 144,737 | 74,805 | |||||||||||
Total net cash flows from investing activities (2) | (1,268,284 | ) | (760,835 | ) | (3,156,555 | ) | ||||||||
3. Cash Flows From Financing Activities | ||||||||||||||
Capital Reduction | 29.e | - | - | (6,000,000 | ) | |||||||||
Issuance of Debt Instruments Eligible to Compose Capital | 21 | - | - | 6,000,000 | ||||||||||
Payment of Debt Instruments Eligible to Compose Capital | 21 | (701,671 | ) | (609,035 | ) | (291,241 | ) | |||||||
Own shares Acquisition | 29 | (90,031 | ) | (247,025 | ) | (167,307 | ) | |||||||
Issuance of other long-term financial liabilities | 19 | 50,313,469 | 72,936,057 | 53,187,121 | ||||||||||
Dividends paid and interest on capital | (3,210,762 | ) | (3,992,956 | ) | (2,196,101 | ) | ||||||||
Payments of subordinated liabilities | 20 | (8,362,652 | ) | (216,075 | ) | (2,495,283 | ) | |||||||
Payments of other long-term financial liabilities | 19 | (56,164,769 | ) | (63,516,234 | ) | (55,388,115 | ) | |||||||
Increase/ Decrease in non-controlling interests | 23,909 | 4,803 | 13,319 | |||||||||||
Total net cash flows from financing activities (3) | (18,192,507 | ) | 4,359,535 | (7,337,607 | ) | |||||||||
Exchange variation on Cash and Cash Equivalents (4) | (2,289,849 | ) | 2,106,652 | 521,270 | ||||||||||
Net Increase in Cash (1+2+3+4) | (15,002,033 | ) | 9,731,644 | (14,588,038 | ) | |||||||||
Cash and cash equivalents at beginning of year | 33,131,614 | 23,399,970 | 37,988,008 | |||||||||||
Cash and cash equivalents at end of year | 18,129,581 | 33,131,614 | 23,399,970 | |||||||||||
Cash and cash equivalents components | ||||||||||||||
Cash | 5 | 4,445,940 | 7,141,137 | 9,786,013 | ||||||||||
Loans and other | 6 | 13,683,641 | 25,990,477 | 13,613,957 | ||||||||||
Total of cash and cash equivalents | 18,129,581 | 33,131,614 | 23,399,970 |
Non-cash transactions | ||||||||||||||
Foreclosures loans and other assets transferred to non-current assets held for sale | 11 | 834,903 | 293,440 | 337,840 | ||||||||||
Dividends and interest on capital declared but not paid | 29.b | 4,750,000 | 3,000,000 | 690,000 | ||||||||||
Supplemental information | ||||||||||||||
Interest received | 75,818,511 | 70,566,274 | 58,461,650 | |||||||||||
Interest paid | 46,051,070 | 37,912,698 | 31,004,745 |
(1) In 2015 includes mainly the effect noted in footnote 25.a.
The accompanying Notes are an integral part of these consolidated financial statements.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
1. Introduction, basis of presentation of the consolidated financial statements and other information
a) Introduction
a) | Introduction |
Banco Santander (Brasil) S.A. (Banco Santander or Bank), directly and indirectly controlled by Banco Santander, S.A., basedheadquartered in Spain (Banco Santander Spain), is the lead institution of the Financial and Prudential GroupConglomerates (Conglomerate Santander) towardsbefore the Central Bank of Brazil (Bacen), established as a joint-stock corporation, with headquartershead office at Avenida Presidente Juscelino Kubitschek, 2041 and 2235 -– Building A Block - Vila Olímpia, -in the City of São Paulo, - SP.State of São Paulo. Banco Santander operates as a multiple service bank, conducting its operations by means of portfolios such asits commercial, investment, lending and financing,loans, mortgage lending,loans, leasing credit card operations and foreign exchange.exchange portfolios. Through its subsidiaries, the Bank also operates in the payment institution, leasing, buyingsegments of payments, management of shares’ club, managementsecurities and securities, insurance brokerage operations, capitalizationpremium bonds, consumer finance, payroll loans, digital platforms, benefit vouchers, management and recovery of non-performing loans and private pension plan.products. The Bank's activitiesoperations are conducted within the context of a group of institutions that operateoperates in the financial market on an integrated basis in the financial market.basis. The corresponding benefits and costs of providing services are absorbed between them theyand are conducted in the normal course of business and under commutative conditions.
The consolidated financial statementsBoard of Directors authorized the issuance of the Financial Statements for the year ended on December 31, 2016, 2015 and 2014 were authorized for issue by the Board of directors2021, at the meeting held on February 24, 2017.
b) Basis of presentation of the consolidated financial statements2022.
These Financial Statements and the accompanying documents were the subject of an unqualified report of the Independent Auditors and a recommendation for approval issued by the Company's Audit Committee and a favorable opinion of the Company's Fiscal Council.
b) | Basis of presentation of the condensed consolidated financial statements |
The consolidated financial statements werehave been prepared in accordance with the standards of the International Financial Reporting Standards (IFRS) issued by the International AccountingAccountant Standards Board (IASB), and the interpretations issued by the IFRS Interpretations Committee (Current(current name ofInternational Financial Reporting Interpretations Committee - IFRIC). All the relevant information specificspecifically related to Banco Santander'sthe financial statements of Banco Santander, and only in relation to these, are being evidenced, and correspond to thosethe information used by Banco Santander in its management.
As described in FN 8 a.1), the comparative information for prior periods was adjusted to reflect the remeasurement of the commercialization of electric energy operation.
c) Other information
c.1) Adoption of new standards and interpretations
The Bankfollowing standard changes were adopted for the first time for the year beginning January 1, 2021:
● | Amendments to IFRS 9, IAS 39, IFRS 7 “Financial Instruments”, IFRS 4 “Insurance Contracts” and IFRS 16 “Leases”: |
The changes provided for in Phase 2 of the IBOR reform address issues that may affect the Financial Statements during the reform of a benchmark interest rate, including the effects of changes in contractual cash flows or hedging relationships arising from the substitution of a rate for a alternative reference rate (replacement issues). The effective date of application of this change was January 1, 2021.
The Group's contracts linked to LIBOR were reviewed between the parties and updated by the respective alternative rates disclosed, plus a spread. Management has adopted all standardsverified that the updated cash flows are economically equivalent to the original ones, so that there were no material impacts related to this replacement.
Therefore, the implementations above had no significant impact on these Financial Statements.
Rules and interpretations that became effective up to January 1, 2016. The following standards and interpretations are applicable to the Bank and had nowill come into effect on the financial statements:
• Amendment IFRS 11 - Business Jointly - The amendment establishes accounting methods for the acquisition of joint ventures and joint operations which constitute an business, as established methodology in the IFRS 3 - Business Combinations. Effective for years beginning on January 1, 2016.
• Amendment to IAS 1 - Presentation of Financial Statements - The amendments are related to materiality concepts, order of notes, subtotals, accounting policies and breakdown. Effective for years beginning on January 1, 2016.
• Amendments to IFRS 10 - Consolidated Financial Statements and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - These amendments establish that a gain or loss must be recognized for the full amount when the transaction involves assets that constitute a business (whether the business is housed in a subsidiary or not). When the transaction involves assets that do not constitute a business, a partial gain or loss is recognized, even if these assets are housed in a subsidiary. Effective for years beginning on January 1, 2016.
• Amendment to IAS 16 - Tangible assets and IAS 38 - Intangible Assets - The amendment clarifies the principle basis for depreciation and amortization as the expected pattern of consumption of future economic benefits of the asset. Effective for years beginning on January 1, 2016.
Improvements to IFRSs, 2012-2014 cycle (obligatory for reporting annual periods, that beginning on 1 January 2016) - These improvements introduce minor amendments to IFRS 5 - Non- current Assets Held for Sale and Discontinued Operations, IFRS 7 - Financial Instruments, IAS 19 - Employee Benefits and IAS 34 - Interim Financial Reporting.
The amendments to IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations - Address the circumstances in which an entity reclassifies an asset (or disposal group) from held for sale to held for distribution (or vice versa).The amendments clarify that this change must be considered as a continuation of the original disposal plan and therefore the requirements of IFRS 5 relating to alteration of the sales plan are not applicable. The amendments also clarify the guidance regarding discontinuation of accounting "held for distribution".
The amendments to IFRS 7 - Financial Instruments, provide clarification on whether servicing agreements constitute continuing involvement for the purpose of the transfer disclosures.
The amendments to IAS 19 - Employee Benefits, clarify that the rate used to discount post-retirement benefit obligations must be determined based on market yields at the end of the reporting period with respect to corporate bonds of high quality. The evaluation of the depth of a market for corporate bonds of high quality must be the level of the currency (i.e., the same currency in which the benefits will be paid). For currencies for which there are no high liquidity for these corporate bonds of high quality market, must be based on the market yields on government securities denominated in that currency at the end of the reporting period.
The amendments to IAS 34 - Interim Financial Reporting, were made to clarify the meaning of disclosure of information "elsewhere in the interim financial report" and to require the inclusion of a cross-reference from the interim financial statements to the location of this information.
Changes arising from IFRS Update cycles, did not produce a material impact on the financial statements of the Bank.
Standards and Interpretations that became effective after December 31, 20162021
Lastly, atOn the date of preparation of these consolidated financial statements, the following standards that have effective adoption date after January 1, 2022 and interpretations which effectively come into force after December 31, 2016 hadhave not yet been adopted by the Bank:Bank are:
● | Amendment to IAS 37 “Provision, Contingent Liabilities and Contingent Assets”: in May 2020, the IASB issued this amendment to clarify that, for the purpose of assessing whether a contract is onerous, the cost of contract performance includes the incremental costs of performance contract and an allocation of other costs that are directly related to its performance. The effective date of application of this change is the 1st. January 2022. |
● | IFRS 17 - In May 2017, the IASB issued the IFRS for insurance contracts that aims to replace IFRS 4. The implementation date of IFRS 17 is January 1, 2023. This standard is intended to demonstrate greater transparency and information useful in financial statements, one of the main changes being the recognition of earnings as the measure of delivery of insurance services, in order to assess the performance of insurers over time. Banco Santander is evaluating the possible impacts when adopting the standard. |
Consolidated Financial Statements | December 31, 2021 | F-13 |
* Values expressed in thousands, except when indicated. |
● | Amendment to IFRS 3 “Business Combinations”: issued in May 2020, with the aim of replacing the references from the older version of the conceptual framework to the newer one. The amendment to IFRS 3 is effective from January 1, 2022. |
● | Annual improvements – 2018-2020 cycle: in May 2020, the IASB issued the following amendments as part of the annual improvement process, applicable from January 1, 2022: |
(i) | IFRS 9 - "Financial Instruments" - clarifies which fees should be included in the 10% test for writing off financial liabilities. |
(ii) | IFRS 16 - "Leases" - amendment to example 13 in order to exclude the example of lessor payments related to improvements in the leased property. |
(iii) | IFRS 1 "Initial Adoption of International Financial Reporting Standards" - simplifies the application of said standard by a subsidiary that adopts IFRS for the first time after its parent, in relation to measuring the accumulated amount of exchange rate variations. |
● | Classification of Liabilities, amendments to IAS 1 “Presentation of Financial Statements”, considering non-current liabilities those in which the entity has the possibility of deferring payment for more than 12 months from the closing date of the reporting period. The amendments to IAS 1 are effective as of January 1, 2023. |
● | Modification of IAS 8 – Presentation of Financial Statements and IAS 8 Accounting Policies: changes in accounting estimates and errors, which use a consistent definition of materiality for the purpose of making material judgements and deciding on the information to be included in the financial statements. The amendments to IAS 1 are effective as of January 1, 2023. |
● | Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 1 January 2023: The amendments to IAS 12 Income Taxes require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities. The amendments to IAS 12 are effective as of January 1, 2023. |
There are no other IFRS standards or IFRIC interpretations that have not yet come into effect that could have a material impact on the Bank's financial statements.
• IFRS 9, Financial Instruments (mandatory for annual reporting periods beginning on or after 1st January 2018) issued in July 2014, the International Accounting Standards Board (IASB) approved the IFRS 9, to replace IAS39 – Financial instruments: establishing the requirements for the recognition and measurement of financial instruments to be applied as from January 2018.
BANCO SANTANDER (BRASIL) S.A.c.2) Estimates used
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
1. Model proposed by IFRS 9
The main new developments of the standard are as follows:
1.a) Classification of financial instruments
The criterion for classifying financial assets will depend both on their business management model and the features of the contractual flows. Consequently, the asset will be measured at i) amortized cost, at ii) fair value with changes in equity, or at iii) fair value with changes in profit/loss for the period. IFRS 9 also establishes the option of designating an instrument at fair value with changes in P/L under certain conditions.
The main activity of Banco Santander is the concession of retail banking operations and does not concentrate its exposure on complex financial products and the Bank is currently implementing an analysis of its portfolios in order to identify and classify the financial instruments into their corresponding portfolio under IFRS 9 and identify existing business models.
Based on current analysis, the Bank has not significant differences with respect to the composition of the portfolios until 2018 are expected, it is considered that there will be no significant changes with respect to the classification that was being carried out under pre-existing regulation:
• Financial assets classified as Loans and Advances and Held-to-Maturity under IAS 39 will generally be classified into amortized cost.
• Available for sale debt instruments will generally continue to be classified into fair value with changes in other comprehensive income, unless cash flows features imply its classification into other portfolio.
• Available for sale equity instruments will be classified into fair value, and depending on the nature of the investment, their variations will be recorded in the income statement or in other comprehensive income (irrevocably).
• Financial instruments currently classified into fair value through profit or loss will generally continue to be classified into this category, not expecting reclassifications.
1.b) Credit risk impairment model
The most important new development compared with the current model is that the new accounting standard introduces the concept of expected loss, whereas the current model (IAS 39) is based on incurred loss.
Scope of application
The IFRS 9 asset impairment model is applicable to financial assets classified in categories at amortized cost, to debt instruments valued at fair value through other comprehensive income, to leasing receivables, and to contingent risks and commitments not valued at fair value e availability of credit lines.
Classification of financial instruments by phases
The financial instruments portfolio for impairment purposes will be divided into three categories, depending on the phase each instrument has with regard to its credit risk:
- Stage 1: a financial instrument is in phase 1 when there has been no significant increase in its risk since it was initially registered. If applicable, the valuation correction for losses will amount to the possible credit expected losses arising from possible defaults with ta period of 12 months following the reporting date.
- Stage 2: if there has been a significant increase in risk since the date in which the instrument was initially registered, but the impairment has not actually materialized, then the financial instrument will be included in this stage. In this case, the amount of the valuation correction for losses will be the expected losses owing to defaults throughout the residual life of the financial instrument. In order to assess the significant increase in credit risk, both quantitative indicators used in the ordinary credit risk management and other qualitative variables such as the forbearance flag for not impaired exposures or the facilities are included in a special debt sustainability agreement shall be taken into account.
- Stage 3: a financial instrument will be included in this phase when it is considered to be effectively impaired. In this case, the amount of the valuation correction for losses will be the expected credit risk losses throughout the residual life of the financial instrument.
Impairment estimation methodology
Expected loss is measured using the following factors:
- Exposure at Default (EAD): is the amount of the transaction exposed to credit risk including the ratio of current undrawn exposure that could be drawn at default. Developed models incorporate hypotheses considering possible modifications in the payment schedule.
- Probability of Default (PD): is the likelihood that a counterparty will fail to meet its obligation to pay principal or interest. For the purposes of IFRS 9, this will consider both PD-12 months, which is the probability of the financial instrument entering default within the next 12 months, and also lifetime PD, which is the probability of the transaction entering into default between the reporting date and the transaction’s residual maturity date. Future information of relevance is considered to be needed to estimate these parameters, according to the standard.
- Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the ability to demand additional collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.
- Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value. When calculating the discount rate, expected losses for default when estimating future cash flows are not generally taken into account, except in cases in which the asset is considered to be impaired, in which case the interest rate applied will take into account such losses, and it will be known as the effective interest rate adjusted for credit risk.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
In order to estimate the above parameters, the Bank has applied on its experience in developing internal models for the estimation of parameters both for regulatory and management purposes.
Use of present, past and future information
Apart from using present and past information, the Bank currently uses forward-looking information in internal management and regulatory processes, considering several scenarios. In this sense, the Bank will re-use its experience in the management of such information and maintain consistency with the information used in the other processes.
1.c) Accounting of hedges
IFRS 9 includes new hedge accounting requirements which have a twofold objective: to simplify current requirements, and to bring hedge accounting in line with risk management, so allowing there to be a greater variety of derivative financial instruments which may be considered to be hedging instruments.
However, the Bank (at the moment) decided to keep its Hedge Accounting hedges in line with the accounting guidelines established in IAS 39, having seen the pronouncement provided by the Board of the IASB.
Once the analysis of the advantages and disadvantages of the proposal is completed, the Bank shall make its decision for hedge accounting under IFRS 9.
2. IFRS 9 implementation strategy
The Santander Spain Group together with its subsidiaries has established a global work stream with the aim of adapting its processes to the new classification standards for financial instruments, accounting of hedges and estimating credit risk impairment, so that such processes are applicable in a uniform way for all Bank units, and, at the same time, can be adapted to each unit’s individual features.
Accordingly, the Bank is working towards defining an objective internal model and analyzing all the changes which are needed to adapt accounting classifications and credit risk impairment estimation models in force in each unit to the previous definitions.
In principle, the governance structure currently implemented at both corporate level and in each one of the units, complies with the requirements set out in the new standards.
The project’s main phases and milestones
During this exercise, the Bank has successfully completed the design and development phase of the implementation plan. The major milestones achieved include the definition of functional requirements as well as the design of an operational model adapted to the requirements of IFRS 9. At the IT environment, the technological needs have been identified as well as the necessary adaptations to the existing control environment.
The Bank is currently in the implementation phase of the models and requirements defined. The objective of the Bank at this stage is to ensure an efficient implementation, optimizing its resources as well as the designs elaborated in previous stages.
Once the implementation phase is completed, the Bank will test the effective performance of the model through several simulations and ensuring that the transition to the new operating model meets the objectives established in the previous phases. This last stage includes the parallel execution of the provisions calculation.
• IFRS 15 - Revenue from Customers Contracts : The standard was issued in May 2014 and applies to an annual reporting period beginning on January 1, 2018. The standard specifies how and when an entity will recognize revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures. The standard provides five basic principles to be applied to all contracts with customers, which are: i) identify the contract with the customer; ii) identify the implementing obligations under the contract; iii) determine the transaction price; iv) allocate the transaction price to performance obligations; and v) recognize revenue at the moment (or the extent to which) the entity carrying out an obligation of execution.
• IFRS 16 - Leases Contracts - The standard was issued in January 2016 and the effective date after January 1st, 2019. This standard contains a new approach to lease accounting that requires a lessee to recognize assets and liabilities for the rights and obligations created by leases.
• Amendment to IFRS 2 - Share-based payment – The standard was issued in June 2016, and the effective date after January,1st 2017. This standard is intended to clarify the accounting for a share-based payment according to officials in situations in which the financial settlement award is canceled and replaced by a new award that its market value is higher than the original.
The potential impacts of changes in force from 2017 are under review by the Bank, which should be completed by the entry into force of the standard.
c) Used estimates
The consolidated results and the determinationcalculation of consolidated equity are influencedimpacted by the accounting policies, assumptions, estimates and measurement basesmethods used by the managementBank's directors in the preparation of the Bank in preparing theinterim consolidated financial statements. The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities of future periods. All estimates and assumptions required, in conformityaccordance with IFRS, are the best estimates undertaken in accordance with the applicable standard.
In the consolidated
Consolidated financial statementsmanagement, as estimates wereare made by the managementnote of the Bank and of the consolidated entities in order to quantify certain assets, liabilities, revenues,income and expenses and disclosuredisclosures of explanatory notes.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
c.1)c.2.1) Critical estimates
The critical estimates and critical assumptions that have the most significant impact on the carrying amountsaccounting balances of certain assets, liabilities, revenues and expenses and in the disclosure of explanatory notes, are described below:
i. Fair value assessment of certain financial instruments
Financial instruments are initially recognized at fair value and those that are not measured at fair value through profit or loss are adjusted for transaction costs.
Financial assets and liabilities are subsequently measured, at the end of each period, using valuation techniques. This calculation is based on assumptions, which consider Management's judgment based on information and market conditions existing at the balance sheet date.
Banco Santander classifies fair value measurements using the fair value hierarchy that reflects the model used in the measurement process, segregating financial instruments into Levels I, II or III.
Notes 2.e & 46.c8 of the Consolidated Financial Statements as of December 31, 2021 present the accounting practice and sensitivity analysis for the Financial Instruments, respectively.
ii. Allowance for loan losses due to impairment
The carrying amount of impairednon-recoverable financial assets is adjusted by recording a provision for lossesimpairment chargeable to “Losses on debts of "Impairment Losses onfinancial assets (net) – Financial Assets (Net) - Loans and Receivables"assets measured at amortized cost” in the consolidated income statement.statement of income. The reversal of previously recorded losses is recognized in the consolidated income statement in the period in which the impairment decreaseloss decreases and it can be objectively related objectively to an event of recovery.a recovery event.
Consolidated Financial Statements | December 31, 2021 | F-14 |
* Values expressed in thousands, except when indicated. |
To determine the balance of “Provision for Impairment Losses”, Banco Santander first assesses whether there is objective evidence of impairment loss individually for financial assets that are significant, and individually or collectively for financial assets that are not significant.
To measure the impairment loss onof loans individually evaluatedassessed for impairment, the Bank considers the counterparty's conditions, of the borrower, such as theirits economic and financial situation, level of indebtedness, abilitycapacity to generate income, cash flow, management,administration, corporate governance and quality of internal controls, payment history, industry expertise,experience, contingencies and credit limits, as well as asset characteristics, of assets, such as itstheir nature and purpose, type, sufficiency and guarantees of liquidity level guarantees and total amount of credit as well asvalue , and also based on historical impairment experience of impairment and other circumstances known at the momenttime of evaluation.the valuation.
To measure the impairment loss onof loans collectively evaluatedassessed for impairment, the Bank segregatesseparates financial assets into groups considering the characteristics and similaritysimilarities of credit risk, in other words,that is, according to the segment, the type of assets, guarantees and other factors associated as thewith historical impairment experience of impairment and other circumstances known at the time of assessment.the valuation.
For further details see Note 2.i.Notes 2.h & 46.b2 to the Consolidated Financial Statements as of December 31, 2021, present the accounting practice and measures for measuring credit risk, respectively.
ii. Income Tax (IRPJ) and Social Contribution on Net Income (CSLL)
iii. Provisions for pension funds
The current income tax expense is calculatedDefined benefit plans are recorded based on an actuarial study, carried out annually by suma specialized company, at the end of the current tax, social contribution, pis and cofins resulting from application of the appropriate tax rate to the taxable profiteach year, effective for the year (net of any deductions allowable for tax purposes),subsequent period and of the changes in deferred tax assets and liabilitiesare recognized in the consolidated income statement.statement under Interest and similar expenses and Provisions (net).
The present value of a defined benefit obligation is the present value, less any plan assets, of expected future payments necessary to settle the obligation resulting from employee service in current and past periods.
Additional details can be found in note 2.w to the Consolidated Financial Statements as of December 31, 2021.
iv. Provisions, assets and contingent liabilities
Provisions for judicial and administrative proceedings are constituted when the risk of loss of the judicial or administrative action is assessed as probable and the amounts involved are measurable with sufficient security, based on the nature, complexity and history of the actions and the opinion of the legal advisors internal and external.
Explanatory note 2.q to the Bank's consolidated financial statements for the year ended December 31, 2021, features information on provisions and contingent assets and liabilities. There were no significant changes in provisions and contingent assets and liabilities of the Bank between December 31, 2020 and December 31, 2021, the date of preparation of these consolidated financial statements.
v. Goodwill
The goodwill recorded is subject to the impairment test, at least once a year or in a shorter period, in the event of any indication of impairment of the asset.
The basis used for the recoverability test is the value in use and, for this purpose, the cash flow is estimated for a period of 5 years. Cash flow was prepared considering several factors, such as: (i) macroeconomic projections of interest rates, inflation, exchange rate and others; (ii) behavior and growth estimates of the national financial system; (iii) increased costs, returns, synergies and investment plan; (iv) customer behavior; and (v) growth rate and adjustments applied to flows in perpetuity. The adoption of these estimates involves the probability of future events occurring and the alteration of any of these factors could have a different result. The cash flow estimate is based on a valuation prepared by an independent expert annually or whenever there is evidence of a reduction in its recoverable amount, which is reviewed and approved by management.
Further details are in note 13.
vi. Expectation of realization of tax credits
Deferred tax assets and liabilities include temporary differences, which are identified as the amounts expected to be payablepaid or recoverablerecovered on differences between the carrying amounts book values of assets and liabilities and their related taxrespective calculation bases, and accumulated tax losscredits and tax credit carry forwards.losses and the negative CSLL base. These amounts are measured at the tax rates that are expected to applybe applied in the period whenin which the asset is realized or the liability is settled. Deferred tax assets are only recognized for temporary differences to the extent that it is considered probable that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets can be utilized,used, and the deferred tax assets do not ariseresult from the initial recognition (except in a business combination) of other assets and liabilities in a transactionan operation that affects neither taxable profit or accounting profit.income nor taxable income. Other deferred tax assets (tax losscredits and accumulated tax credit carry forwards)losses) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable profits against which they canto be utilized.used.
The deferred
Consolidated Financial Statements | December 31, 2021 | F-15 |
* Values expressed in thousands, except when indicated. |
Deferred tax assets and liabilities recognized are reassessed atrevalued on the date of each balance sheets date in order to ascertain whether they still exist, and thesheet, making appropriate adjustments are madebased on the basis of the findings of the analyses performed. Under the current regulation, the expectedanalyzes carried out. The expectation of realization of the Bank's deferred tax creditsassets is based on the Bank's projections of future results and based on a technical study.
For morefurther details, see note 2.aa2.z to the Consolidated Financial Statements of December 31, 2021.
iii. Fair value measurement of certain financial instruments
Financial instruments are initially recognized at fair value, which is considered equivalent to the transaction price, until proven otherwise, and those that are not measured at fair value through profit are adjusted by the transaction costs.
Financial assets and liabilities are subsequently measured at each period-end by using valuation techniques. This calculation is based on assumptions, which take into account management's judgment based on existing information and market conditions at the date of financial statements.
Banco Santander classifies fair value measurements using a fair value hierarchy that reflects the model used in the measurement process, segregating financial instruments between Level I, II or III.
Notes 2.e & 48.c8 present the sensitivity analysis and accounting policies for Financial Instruments, respectively.
iv. Post-employment benefits
The defined benefit plans are recorded based on an actuarial study, conducted annually by specialized company, at the end of each year to be effective for the subsequent period and are recognized in income in "Interest expense and similar Charges" and "Provisions (net)".
The present value of the defined benefit obligation is the present value without any assets deductions of expected future payments required to settle the obligation resulting from employee service in the current and past periods.
Notes 2 & 23.iii present the sensitivity analysis and accounting policies for Post-employment benefits, respectively.
v. Provisions, contingent assets and liabilities
Provisions for the judicial and administrative proceedings are recorded when the risk of loss of administrative or judicial proceeding is considered probable and the amounts can be reliably measured, based on the nature, complexity and history of lawsuits and the opinion of legal counsel internal and external.
Provisions are made when the risk of loss of judicial or administrative proceedings is assessed as probable and the amounts involved can be measured with sufficient accuracy, based on best available information. They are fully or partially reversed when the obligations cease to exist or are reduced. Given the uncertainties arising from the proceedings, it is not practicable to determine the timing of any outflow (cash disbursement).
For more details see note 2.r
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
vi. Goodwill
The goodwill recorded is subject to impairment test at least annually or in a short period, if any indication of impairment of assets.
The recoverable goodwill amounts are determined from value in use calculations. For this purpose, we estimate cash flow for a period of 5 years. We prepare cash flows considering several factors, including: (i) macro-economic projections, such as interest rates, inflation and exchange rates, among other, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate and long-term adjustments to cash flows. These estimates rely on assumptions regarding the likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by independent research company or whenever there is evidence of reduction to its recoverable amount, which is reviewed annually or whenever there is an evidence of reduction on its recoverable value and approved by the Executive Board.
For additional details see note 14.
d) Capital management
Capital management considers the regulatory and economic levels. The objective is to achieve an efficient capital structure in terms of cost and compliance, meeting the requirements of the regulatory body and contributing to achieving the goals of the classification of rating agencies and investors' expectations. The capital management includes securitization, sale of assets, raising capital through issue of shares, subordinated liabilities and hybrid instruments.
From an economic standpoint, capital management seeks to optimize value creation at the Bank and at its different business segment. To this end, the economic capital, RORAC (return on risk-adjusted capital) and value creation data for each business segment are generated, analyzed and reported to the management committee on a quarterly basis. Within the framework of the internal capital adequacy assessment process (Pillar 2 of the Basel Capital Accord), the Group uses an economic capital measurement model with the objective of ensuring that there is sufficient capital available to support all the risks of its activity in different economic scenarios, with the solvency levels agreed upon by the Bank.
In order to adequately manage the Bank’s capital, it is essential to estimate and analyze future needs, in anticipation of the various phases of the business cycle. Projections of regulatory and economic capital are made based in financial projections (balance sheets, income statement, etc.) and on macroeconomic scenarios estimated by the Economic Research Service. These estimates are used by the Bank as a reference to plan the management actions (issues, securitizations, etc.) required to achieve its capital targets.
2. Accounting policies and method of measurement
2. | Accounting policies and method of measurement |
The accounting policies and method of measurement applied in preparing the consolidated financial statements were as follows:
a) Foreign currency transactions
The consolidated financial statements of Banco Santander are presented in Brazilian Reais, the functional and reporting currency of these financial statements.Banco Santander and its subsidiaries.
For each subsidiary, entity under joint control and investment in an unconsolidated company, Banco Santander has defined the functional currency. The assets and liabilities of these entities with functional currency other than the Brazilianand foreign subsidiary are converted to Real are translated as follows:
- Assets and liabilities are translated at the exchange rate at the balance sheets date.
- Revenues and expenses are translated at the monthly average exchange rates.
- Gain and losses on translation of net investment are recorded in the statement of comprehensive income, in “exchange rate of investees located abroad”.
b) Basis of consolidation
i. Subsidiaries
“Subsidiaries” are defined as entities over which the Bank has control. Control is based on whether the Bank has: i) power over the investee; ii) exposure, or rights, to variable returns from its involvement with the investee; and iii) the ability to use its power over the investee to affect the amount of the returns, as set forth in the law, the Bylaws or agreement.
Consolidation of a subsidiary begins when the Bank obtains control over the subsidiary and ceases when the Bank loses control of the subsidiary. Specifically, income and expense of a subsidiary acquired or disposed during the year are included in the consolidated income statement and other comprehensive income from the date the Bank gains controls until the date when the Bank ceases to control the subsidiary.
Profit or loss and each component of Other Comprehensive Income are attributed to the owners of the Bank and to the non-controlling interests even if the effect is attributed to non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling interest even if this generates a negative balance for non-controlling interests. All transactions, balances, income and expenses between the companies of the Santander Group are eliminated in the consolidated financial statements.
Changes in the Bank’sSantander Group’s interest in a subsidiary that do not result in loss of control are accounted forregistered as equity transactions. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.
When the Bank loses control of a subsidiary,controlled delivery, or the profit or loss on disposal is calculated asrecognized in the income statement and is the difference betweenbetween: (i) the aggregatesum of the fair value of the considerationdeliveries received and the fair value of any retained interestthe residual interest; and (ii) the previous carrying amountprior balance of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amountsnon-equity interests, if any. All amounts previously recognized in other comprehensive income in relation“Other Comprehensive Income” related to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevantBank had directly disposed of the corresponding assets or liabilities are disposed of.of the subsidiary (i.e., reclassified to income or transferred to another equity account, as mandatory or mandatory authorized by IFRS). The fair value of anyan investment retained inheld on the former subsidiary at the date whenof loss of control is lost is regardedconsidered as the fair value on initial recognition for subsequent accounting under IAS 39IFRS 9 Financial Instruments: Recognition and MeasurementInstruments or, when applicable, the costsrecognition on initial recognition of an investment in an associate or jointly controlled entity.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)joint venture.
ii. Interests in joint ventures (jointly controlled entities) and associates
Joint ventures mean interests in entities that are not subsidiaries but which are jointly controlled by two or more unrelated entities. This is evidenced by contractual arrangements whereby two or more entities (“ventures”) acquire interests in entities (jointly controlled entities) or carry out transactions or hold assets so that strategic financial and operating decisions affecting the joint venture require the unanimous consent of the ventures.
Consolidated Financial Statements | December 31, 2021 | F-16 |
* Values expressed in thousands, except when indicated. |
Associates are entities over which the Bank is in a position to exercise significant influence (significant influence is the power to participate in the financial and operating policy decisions of the investee) but it does not control or has joint control over those policies.the investee.
In the consolidated financial statements, interest in joint ventures and investments in associates are accounted forregistered using the equity method, i.e. at the Bank’s share of net assets of the investee, after taking into accountconsideration the dividends received from capital reductions and other related transactions. In the case of transactions with an associate, the related profits or losses are eliminated to the extent of the Bank’s investment in the associate. Relevant information regarding companies accounted forregistered under the equity method by the Bank is provided in note 12.11.
iii. Business combinations, acquisitions and disposals
A business combination is the combination of two or more separate entities or economic units into one single entity or group of entities and is accounted forregistered in accordance with IFRS 3 - “Business Combinations”.
Business combinations are carried out so that the Bank obtains control over an entity and are recognized for accounting purposes as follows:follow:
• The Bank measures the cost of the business combination, defined as the fair value of the assets offered, the liabilities incurred and the equity instruments issued, if any.
• The fair values of the assets, liabilities and contingent liabilities of the acquired entity or business, including any intangible assets which might not have been recognized by the acquiree, are estimated at the acquisition date and recognized in the consolidated balance sheets.financial statement.
• The excess of the acquisition cost over the fair valuesvalue of the identifiable net assets acquired are recognized as goodwill (note 14)13). The excess of fair valuesvalue of the identifiable net assets over the acquisition cost is bargainan advantageous purchase gain and it is recorded as income on the date of the acquisition.
Also,The note 4 below3 includes a description of the most significant transaction carried out in 2016, 20152021, 2020 and 2014.2019.
iv. Investment Funds
These include investment funds in which the Santander Group companies hold a substantial participation interest or the entirety of the participation interests and are therefore exposed to, or have rights, to variable returns and have the ability to affect those returns through power over the fund, in accordance with IFRS 10 - Consolidated Financial Statements and are therefore, consolidated in these financial statements.
c) Definitions and classification of financial instruments
i. Definitions
i. Definitions
A “financial“Financial instrument” is any contract that gives rise to a financial asset of one entity and, simultaneously, to a financial liability or financial interest of another entity.
An “equity“Equity instrument” is any agreement that evidences a residual interest in the assetsasset of the issuing entity after deducting all of its liabilities.
A “financial“Financial derivative” is a financial instrument whose value changes in response to the change in an observable market variable (such as an interest rate, foreign exchange rate, financial instrument price, market index or credit rating), whose initial investment is zero or very small compared with other financial instruments with a similar response to changes in market factors, and which is generally settled at a future date.
“Hybrid financial instruments” are contracts that simultaneously include a non-derivative host contract together with a derivative, known as an embedded derivative, that is not separately transferable and has the effect that someto make part of the cash flowsflow of the hybrid contract vary in a way similar to a stand-alone derivative.
The following transactions are not treated for accounting purposes as financial instruments:
Consolidated Financial Statements | December 31, 2021 | F-17 |
* Values expressed in thousands, except when indicated. |
• Investments in subsidiaries, jointly controlled entities and associates (note 3&12)&11).
• Rights and obligations under employee benefit plans (note 23)21).
ii. Classification of financial assets for measurement purposes
Financial assets are initially classified into the various categories used for management and measurement purposes, unless they have to be presented as “Non-current assetsAssets held for sale”sale or they relate to “CashCash, cash balances at Central Banks and balances withother deposits on demand, Changes in the Brazilian Central Bank”fair value of hedged items in portfolio hedges of interest rate risk (asset side), “Hedging derivatives”Hedging derivatives and “Investment in associates”,Investments, which are reported separately.
Financial assets are included for measurement purposes in one of the following categories:
• Financial assets heldAssets Measured at Fair Value Through Profit or Loss Held for trading (at fair value through profit or loss):Trading: this category includes the financial assets acquired forto generate short-term profit resulting from the purposefluctuation of generating a profit in the near term from fluctuations in theirits prices and financial derivatives that are not designatedclassified as hedging instruments.instruments, whose primary intention of the Bank is to trade them frequently.
• Other financial assetsFinancial Assets Measured at fair value through profitFair Value Through Profit or loss:Loss: this category includes hybridthe financial assets that did not held for tradingmeet the pre-established criteria when evaluating the SPPI Test (Solely Payment of Principal and Interest).
• Non-Trading Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss: this category includes the financial assets that are measured entirely at the time of initial designation was made the fair value and financial assets not held for trading that are included in this category in order to obtain more relevant information, either because this eliminates or significantly reduces recognition or measurement inconsistencies (“accounting mismatches”) that would arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases, or because a group of financial assets or financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided on that basis to the Bank’s key management personnel.option.
• Financial instruments included in this category (and “Other financial liabilitiesAssets Measured at fair value through profitFair Value Through Profit or loss”) are permanently subject to a consistent system of measuring, managing and controlling risks and returns that enables all the financial instruments involved to be monitored and identified and allows the effective reduction of risk to be checked. Financial assets may only be included in this category on the date they are acquired or originated.
Available-for-sale financial assetsLoss: are stated at fair value. This category includesdoes not include debt instruments not classified as “Held-to-maturity investments”, “Loans and receivables” or “Financial assets at fair value through profit or loss”, and equity instruments issued by entities other than subsidiaries, associates and jointly controlled entities, provided that such instruments have not been classified as “Financial assets held for trading” or as “Other financial assets at fair value through profit or loss”. Gains and losses
Results arising from changes in fair value are recognized in "Equity"the item adjustment to market value in the line item "Valuation Adjustment"equity, with the exception of cumulativeimpairment losses, for non-recovery, which are recognized in profit or loss. When the investment is disposed of or is determinedhas evidence of a decline in fair value due to be impaired,non-recovery, the cumulative gain or lossresult previously accumulated in "Equity - Valuation Adjustments"the account of adjustments to fair value in equity is reclassified to profit or loss.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)income.
• Loans and receivables:Financial Assets Measured at Amortized Cost: this category includes financing granted to third parties, based on their nature, irrespective of the type of borrower and the form of financing, including finance lease transactions in which the consolidated entities act as lessors. The consolidated entities generally intend to hold the loans and credits granted by them until their final maturity and, therefore, they are presented in the consolidated balance sheets at their amortized cost (which includes the required adjustments to reflect estimated impairment losses).
• Held-to-maturity investments: this category includes debt instruments traded in an active market, with fixed maturity and with fixed or determinable payments, for which the Bank has both the intention and proven ability to hold to maturity. These investments are measured at amortized cost less any impairment, with revenue recognized on an effective yield basis.
iii. Classification of financial assets for presentation purposes
Financial assets are classified by nature into the following itemsheadings in the consolidated balance sheets:financial statements:
• Cash and balances with the Brazilian Central Bank:Bacen: cash balances and balances receivable on demand relating to deposits with the Brazilian Central Bank.Bacen and credit institutions.
Consolidated Financial Statements | December 31, 2021 | F-18 |
* Values expressed in thousands, except when indicated. |
• Loans and receivables:Financial Assets Measured At Amortized Cost: includes the balancedebit balances of all credit and loans granted by the Bank, other than those represented by securities, as well as finance lease receivables and other debit balances of a financial nature in favor of the Bank, such as checks drawn on credit institutions, balances receivable from clearing houses and settlement agencies for transactions on the stock exchange and organized markets, bonds given in cash, capital calls, fees and commissions receivable for financial guarantees and debit balances arising from transactions not originatedoriginating in Bankingbanking transactions and services, such as the collection of rentals and similar items.
• Loans and other amounts due fromwith credit institutions: credit of any nature in the name of financial institutions.
• Loans and advances to customers:clients: includes the debit balances of all the remaining credit and loans granted by the Bank, including money market operations through centralcentralized counterparties.
• Debt instruments: bonds and other securities that represent a debt for their issuer, that generate an interest return, and that are in the form of certificates or book entries.
• Equity instruments: financialFinancial instruments issued by other entities, such as shares, which have the nature of equity instruments for the issuer, unless they areother than investments in subsidiaries, jointly controlled entitiesjoint ventures or associates. Investment fund units not consolidated are included in this item.
• Trading derivatives: includes the fair value in favor of the Bank of derivatives which do not form part of hedge accounting.
• Hedging derivatives: includes the fair value in favor of the Bank of derivatives designated as hedging instruments in hedge accounting.
• Investments in associates:associates and jointly controlled companies: includes the investments made in the share capital of associates.associates and jointly controlled companies.
iv. Classification of financial liabilities for measurement purposes
Financial liabilities are classified for measurement purposes into one of the following categories:
• Other Financial liabilities held for trading (at fair value through profit or loss):Assets At Fair Value Through Profit Or Loss: this category includes the financial liabilities issuedincurred for the purpose of generating a profit in the shortnear term from fluctuations in their prices, financial derivatives not considered to qualify for hedge accountingdesignated as hedging instruments, and financial liabilities arising from the directoutright sale of financial assets purchasedacquired under resalereverse repurchase agreements ("reverse repos") or borrowed (“Short positions”)(short positions).
• Other financial liabilities at fair value through profit or loss:Financial Assets At Fair Value Through Profit Or Loss: financial liabilities are included in this category when they provide more relevant information, is obtained, either because this eliminates or significantly reduces recognition or measurement inconsistencies (“accounting mismatches”)(accounting mismatches) that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases, or because a group of financial liabilities or financial assets and liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the Bankgroup is provided on that basis to the Bank’sGroup's key management personnel.
• Financial liabilities at amortized cost: financial liabilities, irrespective of their instrumentation and maturity, not included in any of the abovementionedabove-mentioned categories which arise from the funding-takingordinary borrowing activities carried on by financial institutions.
v. Classification of financial liabilities for presentation purposes
Financial liabilities are classified by nature into the following items in the consolidated balance sheets:financial statements:
• Deposits from the Brazilian Central Bank:Bacen: deposits of any nature received from the Brazilian Central Bank.Bacen.
• Deposits from credit institutions: deposits of any nature, including Borrowings and On endingscredit received and money market funding received fromoperations in the name of credit institutions.
• CustomerClient deposits: includes deposits of any nature such as demand deposits, saving deposits and time deposits including money market operation received from customer.client.
• Marketable debt securities: includes the amount of bonds and other debt represented by marketable securities, other than subordinated liabilities.
Consolidated Financial Statements | December 31, 2021 | F-19 |
* Values expressed in thousands, except when indicated. |
• Trading derivatives: includes the fair value, with a negative balance for the Bank, of derivatives which do not form part of hedge accounting.
• Short positions: includes the amount of financial liabilities arising from the outright sale of financial assets purchased under reverse repurchase agreements or borrowed.
• Subordinated liabilities: amount of financing received which, for the purposes of payment priority, ranks behind ordinary debt. This category also includes the financial instruments issued by the Bank which, although equity for legal purposes, do not meet the requirements for classification as equity.
• Other financial liabilities: includes the amount of payment obligations having the nature of financial liabilities not included in other items, and liabilities under financial guarantee contracts, unless they have been classified as doubtful.non-performing.
• Hedging derivatives: includes the fair value of the Bank’sBank's liability in respect of derivatives, including embedded derivatives separated from hybrid financial instruments, designated as hedging instruments in hedge accounting.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts•Equity instruments: financial instruments issued by other entities, such as shares, with the nature of equity instruments for the issuer, except investments in thousands of Brazilian Reais - R$, unless otherwise stated)subsidiaries, jointly controlled entities or associates.
d) Funding, debt notes issued and other liabilities
Funding debt rates and other liabilities Instruments are recognized initially at fair value, considered primarily as the transaction price. They are subsequently measured at amortized cost and its expenses are recognized as a financial cost.
Among the liabilities initial recognition methods, it is important to emphasize those compound financial instruments which are classified as such due to the fact that the instruments contain both, a debt instrument (liability) and an embedded equity component (derivative).
The recognition of a compound instrument consists of a combination of (i) a main instrument, which is recognized as an entity’s genuine liability (debt) and (ii) an equity component (derivative convertible into ordinary share).
The issue of "Notes" must be registered atin specific accountheading liabilities and updated according to the agreed rates and adjusted by the effect of exchange rate variations, when denominated in foreign currency. All remuneration related to these instruments, such as interest and Exchange variation (difference between the functional currency and the currency in which the instrument was named) shall be accounted forrecognized as expenses for the period, according to the accrual basis.
The relevant details of these issued instruments are described in explanatory note 21.19.
e) Measurement of financial assets and liabilities and recognition of fair value changes
In general, financial assets and liabilities are initially recognized at fair value which, in the absence of evidence to the contrary, is deemed to be the transaction price. Financial instruments not measured at fair value through profit or loss, are adjusted by the transaction costs. Financial assets and liabilities are subsequently measured at each period-end as follows:
i. Measurement of financial assets
Financial assets are measured at fair value, without deduction of estimated costs of transaction that may be incurred on their disposal, except for loans and receivables, held-to-maturity investments, equity instruments whose fair value cannot be determined in a sufficiently objective manner and financial derivatives that have as equity instruments subject and are settled by delivery of those instruments.
"Fair value"The fair value of a financial instrument on a given date is taken to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.participants. The most objective and ordinarycommon reference tofor the fair value of a financial instrument areis the price that would be paid for a financial instrumentit on significativean active, transparent and transparent market. ("deep market price")(quoted price or market price).
If there is no market price for a given financial instrument, its fair value is estimated on the basis of valuation techniques commonly used by the international financial community, according to the specific features of the instrument to be measured and, particularly, the various types of risk associated with it.
Consolidated Financial Statements | December 31, 2021 | F-20 |
* Values expressed in thousands, except when indicated. |
All derivatives are recognized in the balance sheets at fair value from the trade date. If the fair value is positive, they are recognized as assets and if the fair value is negative, they are recognized as liabilities. The changes in the fair value of derivatives from the trade date are recognized in “Gains (losses) on financial assets and liabilities” in the consolidated income statement. Specifically, the fair value of standard financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price and if, for exceptional reasons, the quoted price cannot be determined on a given date, these financial derivatives are measured using methods similar to those used to measure over the counter “OTC” derivatives.
The fair value of OTC derivatives is taken to be the sum of the future cash flows arising from the instrument, discounted to present value at the date of measurement (“present value” or “theoretical close”) using valuation techniques commonly used by the financial markets: “net present value” (NPV), option pricing models and other methods.
“Loans and receivables”Financial Assets Measured At Amortized Cost” and “Held-to-maturity investments” are measured at amortized cost using the effective interest method. “Amortized cost” is the acquisition cost of a financial asset or liability plus or minus, as appropriate, the principal repayments and the cumulative amortization (taken to the income statement) between the difference of the initial cost and the maturity amount. In the case of financial assets, amortized cost furthermore includes any reductions for impairment or uncollectibility. In the case of loans and receivables hedged in fair value hedges, the changes in the fair value of these assets related to the risk or risks being hedged are recognized.
The “effective interest rate” is the discount rate that exactly matches the initial amount of a financial instrument to all its estimated cash flows of all kinds over its remaining life. For fixed rate financial instruments, the effective interest rate coincides with the contractual interest rate established on the acquisition date plus, where applicable, the fees and transaction costs that, because of their nature, form part of their financial return. In the case of floating rate financial instruments, the effective interest rate coincides with the rate of return prevailing in all connections until the next benchmark interest reset date.
Equity instruments whose fair value cannot be determined in a sufficiently objective manner are measured at acquisition cost adjusted, where appropriate, by any related impairment loss.
The amounts at which the financial assets are recognized represent, in all material respects, the Bank’s maximum exposure to credit risk at each reporting date. Also, the Bank has received collateral and other credit enhancements to mitigate its exposure to credit risk, which consist mainly of mortgage guarantees, cash collateral, equity instruments and personal security, assets leased out under leasing and renting agreements, assets acquired under repurchase agreements and securities loans and derivatives.
ii. Measurement of financial liabilities
In general, financial liabilities are measured at amortized cost, as defined above, except for those included under “Financial liabilities held for trading”Assets Measured at Fair Value Through Profit or Loss” and “Other financial liabilities at fair value through profit or loss” and financial liabilities designated as hedge items (or hedging instruments) in fair value hedges, which are measured at fair value.
iii. Recognition of fair value changes
As a general rule, changes in the carrying amount of financial assets and liabilities are recognized in the consolidated income statement, distinguishing between those arising from the accrual of interest and similar items -which are recognized under “Interest and similar income” or “Interest expense and similar charges”, as appropriate-appropriate - and those arising for other reasons, which are recognized at their net amount underin the heading “Gains (losses) on financial assets and liabilities (net)”.
Adjustments due to changes in fair value arising from Available-for-sale financial assets are recognized temporarily in equity underin then heading “Other Comprehensive Income”. Items charged or credited to this account remain in the Bank’s consolidated equity until the related assets are written-off, whereupon they are charged to the consolidated income statement.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
iv. Hedging transactions
The consolidated entities use financial derivatives for the following purposes: i) to provide these instruments to customersclients who request them in the management of their market and credit risks; ii) to use these derivatives in the management of the risks of the Bank entities' own positions and assets and liabilities (“hedging derivatives”); and iii) to obtain gains from changes in the prices of these derivatives (“financial derivatives”).
Financial derivatives that do not qualify for hedge accounting are treated for accounting purposes as trading derivatives.
Consolidated Financial Statements | December 31, 2021 | F-21 |
* Values expressed in thousands, except when indicated. |
A derivative qualifies for hedge accounting if all the following conditions are met:
1. The derivative hedges one of the following three types of exposure:
a. Changes in the fair value of assets and liabilities due to fluctuations, among other, in the interest rate and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”);
b. Changes in the estimated cash flows arising from financial assets and liabilities, commitments and highly probable forecast transactions (“cash flow hedge”);
c. The net investment in a foreign operation (“hedge(hedge of a net investment in a foreign operation”)operation).
2. It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that:
a. At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (“prospective effectiveness”)(prospective effectiveness).
b. There is sufficient evidence that the hedge was actually effective during the whole life of the hedged item or position (“retrospective effectiveness”)(retrospective effectiveness).
3. There must be adequate documentation evidencing the specific designation of the financial derivative to hedge certain balances or transactions and how this effective hedge was expected to be achieved and measured, provided that this is consistent with the Bank’s management of own risks.
The changes in value of financial instruments qualifying for hedge accounting are recognized as follows:
a. In fair value hedges, the gains or losses arising on both the hedging instruments and the hedged items (attributable to the type of risk being hedged) are recognized directly in the consolidated income statement.
b. In cash flow hedges, the effective portion of the change in value of the hedging instrument is recognized temporarily in equity under “Other comprehensive Income - Cash flow hedges” until the forecastedforecast transactions occur, when it is recognized in the consolidated income statement, unless, if the forecast transactions result in the recognition of non-financial assets or liabilities, it is included in the cost of the non-financial asset or liability. The ineffective portion of the change in value of hedging derivatives is recognized directly in the consolidated income statement.
c. The ineffective portion of the gains and losses on the hedging instruments of cash flow hedges and hedges of a net investment in a foreign operation are recognized directly under “Gains (losses) on financial assets and liabilities (net)” in the consolidated income statement.
If a derivative designated as a hedge instrument no longer meets the requirements described above due to expiration, ineffectiveness or for any other reason, the derivative is classified as a trading derivative.derivative measured at fair value through profit or loss.
When fair value hedge accounting is discontinued (expired, sold our no longer meet hedge accounting criteria) the adjustments previously recognized on the hedged item are transferred to profit or loss at the effective interest rate re-calculated at the date of hedge discontinuation. The adjustments must be fully amortized untilat maturity.
When cash flow hedges are discontinued, any cumulative gain or loss on the hedging instrument recognized in equity underin the heading "Other comprehensive Income” (from the period when the hedge was effective) remains recognized in equity until the forecast transaction occurs at which time it is recognized in profit or loss, unless the transaction is no longer expected to occur, in which case any cumulative gain or loss is recognized immediately in profit or loss.
For the accounting and disclosure of the hedge accounting structures as of December 31, 2019, the bank used the faculty of IFRS 9, to maintain the practices determined by IAS 39.
f) Settlement of financial assets and liabilities
Write-off of Financial Assets
The Bank derecognizes a financial asset when the contractual rights to the cash flows from the asset expire or when it transfers the rights to receive the contractual cash flows in a transaction in which essentially all the risks and rewards of ownership of the financial asset are transferred or in which the Bank does not transfer or retain substantially all the risks and rewards of ownership of the financial asset and does not control the financial asset.
Consolidated Financial Statements | December 31, 2021 | F-22 |
* Values expressed in thousands, except when indicated. |
On derecognition of a financial asset, the difference between the carrying amount of the asset (or carrying amount allocated to the portion of the asset derecognized) and the sum of (i) the consideration received (including any new asset obtained, less any new liability assumed) and (ii) any accumulated gains or losses recognized in “Other Comprehensive Income” are recorded in income.
As of the IFRS opening date, mentioned above, any accumulated gains/losses recognized in “Other Comprehensive Income” in relation to equity instruments designated at fair value through Other Comprehensive Income are not recorded in income upon derecognition of these securities.
The Bank carries out operations in which it transfers the assets recognized in its balance sheet, but retains all or substantially all the risks and benefits of the transferred assets or part of them. In these cases, the transferred assets are not written off. Examples of these operations include assignments of loan portfolios with recourse. In transactions in which the Bank does not retain or transfer substantially all the risks and rewards of ownership of a financial asset and controls the asset, the Bank continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.
Write-off of Financial Assets by Assignment of Credit
The accounting treatment of transfers of financial assets depends on the extent to which the risks and rewards associated with the transferred assets are transferred to third parties:
1. If the Bank transfers substantially all the risks and rewards to third parties-unconditional sale of financial assets, sale of financial assets under an agreement to repurchase them at their fair value at the date of repurchase, sale of financial assets with a purchased call option or written put option that is deeply out of the money, securitization of assets in which the transferor does not retain a subordinated debt or grant any credit enhancement to the new holders, and other similar cases, the transferred financial asset is derecognized and any rights or obligations retained or created in the transfer are recognized simultaneously.
2. If the Bank retains substantially all the risks and rewards associated with the transferred financial asset -sale of financial assets under an agreement to repurchase them at a fixed price or at the sale price plus interest, a securities lending agreement in which the borrower undertakes to return the same or similar assets, and other similar cases, the transferred financial asset is not derecognized and continues to be measured by the same criteria as those used before the transfer. However, the following items are recognized:
a. An associated financial liability, for an amount equal to the consideration received; this liability is subsequently measured at amortized cost.
b. The income from the transferred financial asset not derecognized and any expense incurred on the new financial liability.
3. If the Bank neither transfers or retains substantially all the risks and rewards associated with the transferred financial asset - sale of financial assets with a purchased call option or written put option that is not deeply in or out of the money, securitization of assets in which the transferor retains a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar cases, the following distinction is made:
a. If the transferor does not retain control of the transferred financial asset, the asset is derecognized and any rights or obligations retained or created in the transfer are recognized.
b. If the transferor retains control, it continues to recognize the transferred financial asset for an amount equal to its exposure to changes in value and recognizes a financial liability associated with the transferred financial asset. The net carrying amount of the transferred asset and the associated liability is the amortized cost of the rights and obligations retained, if the transferred asset is measured at amortized cost, or the fair value of the rights and obligations retained, if the transferred asset is measured at fair value.
Accordingly,Write-off of Financial Liabilities
The Bank writes off a financial assetsliability when its contractual obligations are only settled when the rights on the cash flows they generate have been extinguished, or when substantially all the inherent risks and rewards have been transferred to third parties. Similarly, financial liabilities are only derecognized when the obligations they generate have been extinguishedcanceled or when they are acquired, with the intention of either to cancel them or to resell them.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)expire.
g) Offsetting of financial instruments
Financial asset and liability balances are offset (i.e. reported in the consolidated balance sheets at their net amount) only if the Bank and their subsidiaries currently have a legally enforceable right to set off the recognized amounts and intend either to settle on a net basis, or to realize the asset and settle the liability simultaneously.simultaneously, as provided for in IFRS 7 / IAS 32, additionally the Bank has an agreement for the clearing and settlement of obligations under the National Financial System (SFN), signed with individuals and legal entities, whether or not members of the SFN, resulting in higher financial settlement guarantee, with the parties that have this modality of agreement. These agreements establish that payment obligations to Banco Santander arising from credit and derivative operations, in the event of default by the counterparty, will be offset against Banco Santander's payment obligations with the counterparty.
Consolidated Financial Statements | December 31, 2021 | F-23 |
* Values expressed in thousands, except when indicated. |
The following table provides details of financial assets and liabilities subject to offsetting at December 31, 2016, 20152021, 2020 and 2014:2019:
Thousand of reais | 2021 | |||||||||||
Assets: | Financial assets, gross | Financial assets offset in the balance sheet, gross | Financial assets offset in the balance sheet, net | |||||||||
Derivatives | 21,575,848 | (435,925) | 21,139,923 | |||||||||
Liabilities: | Financial liabilities, gross | Financial liabilities offset in the balance sheet, gross | Financial liabilities offset in the balance sheet, net | |||||||||
Derivatives | 25,054,906 | (435,925) | 24,618,981 | |||||||||
Thousand of reais | 2020 | |||||||||||
Assets: | Financial assets, gross | Financial assets offset in the balance sheet, gross | Financial assets offset in the balance sheet, net | |||||||||
Derivatives | 26,808,181 | (560,666) | 26,247,515 | |||||||||
Financial liabilities, gross | Financial liabilities offset in the balance sheet, gross | Financial liabilities offset in the balance sheet, net | ||||||||||
Liabilities: | ||||||||||||
Derivatives | 29,917,498 | (560,666) | 29,356,832 | |||||||||
Thousand of reais | 2019 | |||||||||||
Assets: | Financial assets, gross | Financial assets offset in the balance sheet, gross | Financial assets offset in the balance sheet, net | |||||||||
Derivatives | 19,279,829 | (458,929) | 18,820,900 | |||||||||
Liabilities: | Financial liabilities, gross | Financial liabilities offset in the balance sheet, gross | Financial liabilities offset in the balance sheet, net | |||||||||
Derivatives | 21,264,072 | (458,929) | 20,805,143 |
In thousands of Reais | 2016 | |||
Financial assets | Financial assets | |||
Assets: | Financial assets, gross | offset in the balance sheet, gross | offset in the balance sheet, net | |
Derivatives | 16,510,517 | - | 16,510,517 | |
Repurchase agreements | 47,424,919 | - | 47,424,919 | |
Financial liabilities | Financial liabilities | |||
Liabilities: | Financial liabilities, gross | offset in the balance sheet, gross | offset in the balance sheet, net | |
Derivatives | 11,913,799 | - | 11,913,799 | |
Repurchase agreements | 126,048,442 | - | 126,048,442 | |
In thousands of Reais | 2015 | |||
Financial assets, gross | Financial assets | Financial assets | ||
Assets: | offset in the balance sheet, gross | offset in the balance sheet, net | ||
Derivatives | 26,250,362 | - | 26,250,362 | |
Repurchase agreements | 31,987,323 | - | 31,987,323 | |
Financial liabilities | Financial liabilities | |||
Liabilities: | Financial liabilities, gross | offset in the balance sheet, gross | offset in the balance sheet, net | |
Derivatives | 24,716,959 | - | 24,716,959 | |
Repurchase agreements | 115,003,783 | - | 115,003,783 | |
In thousands of Reais | 2014 | |||
Financial assets | Financial assets | |||
Assets: | Financial assets, gross | offset in the balance sheet, gross | offset in the balance sheet, net | |
Derivatives | 8,727,688 | - | 8,727,688 | |
Repurchase agreements | 24,887,260 | - | 24,887,260 | |
Financial liabilities | Financial liabilities | |||
Liabilities: | Financial liabilities, gross | offset in the balance sheet, gross | offset in the balance sheet, net | |
Derivatives | 9,178,262 | - | 9,178,262 | |
Repurchase agreements | 97,113,281 | - | 97,113,281 |
On December 31, 2016, 2015 and 2014, the Bank has no financial instruments that meet the conditions for recognition on a net basis.
h) Regular way purchases of financial assets
Regular way purchases of financial assets are recognized on trade date. The assets are settled when the rights to receive cash flows have expired or the Bank has transferred substantially all the risks and rewards of ownership.
i) Impairment of financial assets
i. Definition
A financial asset is considered impaired when there is objective evidence that events have occurred which:
• Give rise to an adverse impact on the future cash flows that were estimated at the transaction date, in the case of debt instruments (loans and debt securities);
Consolidated Financial Statements | December 31, 2021 | F-24 |
* Values expressed in thousands, except when indicated. |
• MeanIn the case of equity instruments, mean that their carrying amount cannotmay not be fully recovered, in the case of equity instruments;recovered.
• Arising from the violation of terms of loans, and
• During the Bankruptcy process.
As a general rule, when the events above are observed,adjustment of the carrying amountvalue of the impaired financial assets is adjusted by recording a provision for losses on debts expense as "Losses on financial assets (net)" in the consolidated income statement. The reversal of previously recorded lossesinstruments is recognized in the consolidated income statement infor the period in which the impairment becomes evident, and decrease can be related objectively to an eventthe reversal, if any, of recovery.
previously recognized impairment loss is recognized in the consolidated income statement for the period in which the impairment is reversed or reduced.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
ii. Debt instruments carried at amortized cost
The amount of an impairment loss incurred for determination of the recoverable amount on a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred) discounted the original effective interest rate of the financial asset (or the effective interest rate computed at initial recognition), and is presented as a reduction of the asset balance and recorded in income statements.
In estimating the future cash flows of debt instruments the following factors are taken into account:considered:
• All the amounts that are expected to be obtained over the remaining life of the instrument, in this case, the provided guarantees. The impairment loss takes into accountconsiders the likelihood of collecting accrued interest receivable.
• The various types of risk to which each instrument is subject; and
• The circumstances in which collections will foreseeably be made.
These cash flows are subsequently discounted using the instrument's effective interest rate.
Specifically, in regards to recoverable amount losses resulting from materialization of the insolvency risk of the obligors (credit risk), a debt instrument is impaired due to insolvency when there is evidence of a deterioration of the obligor's ability to pay, either because it is in arrears or for other reasons.
The Bank has certain policies, methods and procedures for covering its credit risk arising both from insolvency allocable to counterparties.
These policies, methods and procedures are applied in the granting, in the examination and documentation ofto document debt instruments, and contingent liabilities and commitments, the identification of their recoverable amount and the calculation of the amounts necessary to cover the related credit risk.
The procedures applied in the identification, measurement, control and reducereduction of the exposure to credit risk, are based on an individual basis or grouped by similarity.
• CustomersClients with individual management: Wholesale segment customers,clients, financial institutions and certain companies. Risk management is performed through an analysis complemented by tools to support the decision-making model-basedbased in internal risk assessment internal procedure.assessment.
• CustomersClients with standardized management: individuals and companies not classified as individual clients. Risk management models based on automated decision-making and risk assessment procedure, complemented, when the model is not comprehensive or accurate enough, by teams of analysts specializingspecialized in this type of risk. The credits related to customersclients standardized, are usually considered not recoverable when they have historical loss experience and delay greater than 90 days.
Regarding the provision for impairment losses from credit risk, the Bank evaluates all loans. Loans are either individually evaluated for impairment or collectively evaluated for impairment. Loans accounted as amortized cost, which are not individually evaluated for impairment, are collectively evaluated for impairment, grouping them considering the similarity of risk. Loans individually evaluated for impairment are not included in balances that are collectively evaluated for impairment.
The Bank first assesses whether objective evidence of impairment loss individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant.
To measure the impairment loss on loans individually evaluated for impairment, the Bank considers the conditions of the borrower, such as theirhis economic and financial situation, level of indebtedness, ability to generate income, cash flow , management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as characteristics of assets, such as itstheir nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the moment of evaluation.
Consolidated Financial Statements | December 31, 2021 | F-25 |
* Values expressed in thousands, except when indicated. |
To measure the impairment loss on loans collectively evaluated for impairment, the Bank segregates financial assets into groups considering the characteristics and similarity of credit risk, in other words, according to segment, the type of assets, guarantees and other factors associated as the historical experience of impairment and other circumstances known at the time of assessment.
In some cases, the observable data required to estimate the amount of an impairment loss on a financial asset may be limited or no longer fully relevant to current circumstances.
In such cases, an entity uses its experienced judgment to estimate the amount of any impairment loss. Similarly, an entity uses its experienced judgment to adjust observable data for a group of financial assets to reflect current circumstances.
The impairment loss is calculated by using statistical models that consider the following factors:
• Exposure at default or “EAD”(EAD) is the amount of risk exposure at the date of default by the borrower.counterparty. The timing of default is considered in the PD measurement.
• In accordance with IFRS, the exposure at default used for this calculation is the current exposure, as reported in the balance sheets.
• Probability of default, or “PD”, is the probability of the borrower failing to meet its principal and/or interest payment obligations.
PD is measured using a time horizon of one year; that is, it quantifies the probability of the borrower defaultingdefault in the coming year. A loan is in defaultwill be defaulted if either the principal or interest isbecome past due by ninety days or more or the loan is currentactive but there are doubts as toabout the solvency of the counterparty (subjective doubtful assets).
• Loss is given default, or “LGD”, is the loss arising in the event of default.
LGD calculation is based on the net charge offs on defaulted loans, taking into accountconsidering the guarantees/collateral associated with the loans, the income and expenses associated with the recovery process and the timing of delinquency.default.
• Loss identification period, or “LIP,”"LIP - Loss identification period", is the period of time period between the occurrence of a loss event and the identification of an objective evidence of thissuch loss. In other words, it represents the time horizon from the occurrence of the credit loss occurrence untilto the effective confirmation of such loss.
• In addition, prior to charging off past due loans be written-off (which is only done after the Bank have completed all recovery efforts and after about 360 days late), it is composedregistered fully provision of the loan´s remaining balance of the loan so our allowancethis provision (allowance for loan losseslosses) fully covercovers the losses. Thus, the Bank understands that its loan loss allowance methodology has been developed to fitmeet its risk metrics and capture loans that could potentially become impaired.
iii. Debt or equity instruments classified as available for salefinancial assets measured at fair value through other comprehensive income
The difference between the amortized cost and fair value of debt or equity instruments classified as available for sale are recorded in equity under "Other Comprehensive Income."
When there is objective evidence that the aforementioned differences are due to a prolonged decline in fair value, they are no longer recognized in equity and are reclassified, at the cumulative amount at that date, to the consolidated income statement. Losses from a prolonged decline in fair value relating to an investment in equity instruments are not reversed in subsequent periods.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
j) i) Repurchase agreements
Purchases (disposal)(sales) of financial assetsinstruments under a non-optional resale (repurchase) agreement at a fixed price (repos) are recognized in the consolidated balance sheetsfinancial statements as Investment (funding)financing granted (received), in repurchase agreements based on the nature of the debtor (creditor), under “CashLoans and balancesadvances with the Brazilian Central Bank”, “Loans and amounts due from credit institutions” or “LoansBacen, Loans and advances to customers” (“credit institutions or Loans and advances to clients (Deposits from Bacen, Deposits from the Brazilian Central Bank”, “Deposits from credit institutions”institutions or “Customer deposits”)Client deposits).
Differences between the purchase and sale prices are recognized as interest over the contract term.duration of the contract.
Consolidated Financial Statements | December 31, 2021 | F-26 |
* Values expressed in thousands, except when indicated. |
j) Accounting for leases
As of January 1, 2019, the Bank adopted IFRS 16, which replaces IAS 17.
I. Lease Identification
Upon adoption of IFRS 16, the Bank recognizes lease liabilities, following the principles of IFRS 16 - Leases.
k)The following exemptions from recognition are also being used:
• Accounting for leases with a remaining term of less than 12 months as at 1 January 2019 as short-term leases;
i. Financial • Accounting for leases where the underlying asset is of low value;
Financial• Until January 1, 2019, leases are leases that transferof fixed assets, in which the Bank, as lessee, held substantially all the risks and rewards incidentalof ownership were classified as leases. The balances shown are immaterial.
The Bank leases several properties and equipment. Predominantly, the assets subject to ownershipthe lease agreements are real estate business related to the branches.
Banco Santander does not have right-of-use assets that meet the definition of investment properties.
II. Lease Term
Lease agreements are individually formalized, analyzed and renegotiated and contain a wide range of different terms and conditions. The Bank assesses the term of the contract, as well as the intention to remain in the properties. Thus, time estimates may vary according to contractual conditions, considering extension options, and also according to legal provisions.
The Bank assumes that the fines for contractual termination charged before the due date do not make up a significant portion.
Lease agreements does not contain restrictive clauses, but leased assets cannot be used as collateral for loans.
Consolidated Financial Statements | December 31, 2021 | F-27 |
* Values expressed in thousands, except when indicated. |
III. Initial Measurement
On their initial recording, leases are recognized as a right-of-use asset and a corresponding liability on the date the leased asset becomes available for use by the Group.
The right of use to be recorded is measured at cost as a contra entry to the lessee.
When the consolidated entities act as the lessors of an asset, all types of finances leases have guaranteed residual values, and the sum oflease liability that represents the present value of lease payments that are not made to date. Lease payments are discounted using the lessee's incremental borrowing rate. There is no onerous contract that required an adjustment to the rights of use to be recorded as assets on the date of first-time adoption.
Rights of use are measured at amortized cost in accordance with the following:
• The initial measurement value of the lease liability;
• Any lease payments receivable frommade before or on the commencement date less any incentive received;
• Any directly attributable upfront cost; and
• Restoration costs, if the requirements of IAS 37 are met for recording Provisions, Contingent Liabilities and Contingent Assets.
Grupo Santander uses as an incremental rate the interest rate it would have to pay when borrowing the funds necessary to obtain the asset with a value similar to the asset subject to the lease, for a term, guarantee and similar economic scenarios, represented in Santander Brasil, by the curve cost of funding (funding) of a free asset, applied individually to each contract in accordance with the estimates projected as the lease term.
Lease liabilities include the net present value of the following lease payments:
• Reduced fixed payments of any incentive;
• Variable payments that are based on a rate or index;
• Amounts expected to be paid by the lessee plusbased on the guaranteed residual value which is theof guarantees;
• The exercise price of a call option, if the purchase optionlessee has reasonable certainty about exercising the option; and
• Payment of penalties for terminating the lease if the term of the lessee attransaction reflects the endexercise of the option by the lessee.
Lease liabilities are mainly adjusted for inflation (IGP-M), whose estimated projections on the base date of December 31, 2021 are presented below:
IGP-M Projection (annual) | |
Until 3 months | 17.8% |
From 3 to 12 months | 6.6% |
From 1 to 3 years | 3.5% |
From 3 to 5 years | 3.5% |
More than 5 years | 3.5% |
IV. Subsequent Measurement
After the initial measurement, the values of the assets recorded as right of use are being updated using the cost method, thus any accumulated depreciation is deducted monthly, in accordance with the criteria of IAS 16 / CPC 27 - Fixed Assets on asset depreciation right of use and corrected any remeasurement of the lease termliability, where applicable.
The lease liability initially recorded is recognized as loans to third partiesupdated monthly by increasing the amount of the liability for the interest portion of each lease agreement and reducing the amount of monthly lease payments and corrected for any lease remeasurement, when applicable.
The lease liability is therefore included under “Loans and receivables”remeasured, in the consolidated balance sheets.
The finance income arising from these contracts is credited to “Interest and similar income”event of changes in the consolidated income statement so as to achieve a constant ratelease term or contract value, the amount resulting from the new determination of return over the lease term.liability is recorded as a contra entry to the corresponding right-of-use asset.
Consolidated Financial Statements | December 31, 2021 | F-28 |
* Values expressed in thousands, except when indicated. |
l) Non-current assets
The effects of the adoption of IFRS 16 have an impact exclusively on the operating segment – Commercial Banking.
k) Assets held for sale
“Non-current assetsAssets held for sale” includes the carrying amount of individual items or disposal groups or items forming part of a business unit earmarked for disposal (“Discontinued operations”), whose sale in their present condition is highly probable and is expected to occur within one year, the property or other non-current assets received by the consolidated entities as total or partial settlement of their debtors' payment obligations to them are deemed to be non-current assets held for sale through the completion of actions which normally occurs up to one year.
Non-current assetsAssets held for sale are measured at the lower of fair value less costs to sell and their carrying amount at the date of classification in this category. Non-currentThese assets held for sale are not depreciated.
Impairment losses on an asset or disposal group arising from a reduction in its carrying amount to its fair value (less costs to sell) are recognized underin the heading “Gains (losses) on disposal and expenses of non-current assets held for sale not classified as discontinued operations” in the consolidated income statement. The gains on a non-current asset held for sale resulting from subsequent increases in fair value (less costs to sell) increase its carrying amount and are recognized in the consolidated income statement up to an amount equal to the impairment losses previously recognized.
m) l) Residual maturity periods and average interest rates
The analysis of the maturities of the balances of certain items in the consolidated balance sheetsfinancial statements at December 31, 2021, 2020 and the average interest rates at 2016, 2015 and 2014 year-end2019 is provided in note 45-d.43-d.
n) m) Tangible assets
“Tangible assets” includes the amount of buildings, land, furniture, vehicles, computer hardware, right-of-use of assets and other fixtures owned by the Bank, including tangible assets received by the Bank in full or partial satisfaction of financial assets representing receivables from third parties which are intended to be held for continuing use and tangible assets acquired under finance leases are presented at acquisition cost, less the related accumulated depreciation and any impairment losses (net carrying amount higher than recoverable amount).
Depreciation is calculated, using the straight-line method, on the basis of the acquisition cost of the assets less their residual value. The land on which the buildings and other structures are located has an indefinite life and, therefore, it is not depreciated.
The Depreciation expense on tangible asset depreciation chargeassets is recognized in the consolidated statement of income statement and is basically calculated basically using the following depreciation rates (based on the average years of estimated useful lifelives of the variousdifferent assets):
Annual Rate | |||||||||||
Buildings for own use | 4% | ||||||||||
Furniture | 10% | ||||||||||
Fixtures | 10% | ||||||||||
Office and IT equipment | 20% | ||||||||||
Leasehold improvements | 10% or up to contractual maturity |
The Bank assesses at end of each reporting period, if there is no indication that the items of tangible assets carrying amount may be impaired, that is if there is an asset with its carrying amount exceedsbigger than its recoverable amount, either for useuse or sale.
Once a reduction in thean impairment loss of tangible assets is identified, it is adjusted to reach its recoverable amount by recognizing an impairment loss recorded in the heading "Impairment loss on other assets (Net)". Additionally, the value of depreciation of that asset is recalculated in order to adjust the value of the life of the asset.
Consolidated Financial Statements | December 31, 2021 | F-29 |
* Values expressed in thousands, except when indicated. |
In case of evidence or indication of an impairment lossa recovery of a tangible asset value, the Bank recognizes the reversal of the impairment loss amount recorded in prior years and should adjust the future depreciation expenses according to the lifetime value of the property.asset. Under no circumstance, a reversal of impairment loss of an asset will increase its carrying amount higher than the amount that it would have had no impairment loss been recognized in prior years.
Upkeep and maintenance expenses relating to property, plant and equipment for own use are recognized as an expense in the period in which they are incurred.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
o) n) Intangible assets
Intangible assets are identifiable non-monetary assets (separable from other assets) without physical substance which arise as a result of a legal transaction or software development. Only assets whose cost can be estimated reliably and from which the consolidated entities consider it probable that future economic benefits will be generated are recognized.
Intangible assets are recognized initially at acquisition or production cost and are subsequently measured deducting any accumulated amortization and any accumulated impairment losses.
i. Goodwill
In the acquisition and/or merger of investment in subsidiary, any difference between the investment cost and the investor's share in net fair value of assets, liabilities and contingent liabilities of the investee (subsidiary or affiliate) is accounted for in accordance with IFRS 3 "Business Combination ".
Goodwill is only recognized only when the amount of the investeeit has been acquired exceeds the fair value at the acquisition date,for consideration and represents, therefore, represents a payment made by the acquirer in anticipation of future economic benefits offrom assets of the acquired entity that canare not becapable of being individually identified and recognized separately.separately recognized.
At the end of each annual reporting period or whenever there is any indication of impairment the goodwill is reviewed for impairment (impairment test)(i.e. a reduction in its recoverable amount to below its carrying amount) and, if there is any impairment, the goodwill is written down againstwith a charge to Impairment losses on Goodwill and other intangiblenon financial assets (net) - Intangible assets in the consolidated income statement.
The net fair value adjustments of assets, liabilities and contingent liabilities of the investee in relation to itstheir carrying amount are allocated to individual identifiable assets acquired and liabilities assumed that comprise itthem based on their respective fair values at the date of purchase.
In the case of a business combination achievedmade in stages, prior interest in the acquireacquired is measured again at fair value at the acquisition date when control of the acquireacquired is obtained.
ii. Other intangible assets
Other intangible assets are non-monetary assetassets without physical substance. Generally arising from software development and acquisition of rights that can generate benefits for the Bank. They can have characteristics of definite or indefinite period.
Other intangible assets are considered tocan have an indefinite useful life when,-when, based on an analysis of all the relevant factors, it is concluded that there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Bank,consolidated entities- or a finite useful life, in all other cases.
Intangible assets with indefinite useful lives are not amortized, but rather at the end of each reporting period or whenever there is any indication of impairment the entity reviewsconsolidated entities review the remaining useful lifelives of the assets in order to determine ifwhether they are still undefinedcontinue to be indefinite and, if this is not the case, to take the change should be accounted for as a change in accounting estimate.appropriate steps.
Intangible assets with definitefinite useful lifelives are amortized over itsthose useful life bylives using methods similar to those used to depreciate tangible assets. The amortization expense is recognized under "Depreciation and amortization" in the consolidated income statement.
The Bank assesses at the end of each period, if there is any indication that the items of intangible assets may present an impairment loss, i.e. an asset that presents the carrying amount higher than the net realizable value. After identifying any reduction in impairment loss, it is adjusted to reach its fair value.
Measurement of the recoverable amount of other intangible assets - software is made based on the value in use, as well as the analysis of the discontinuity of the asset in relation to the activities of the Bank.
Consolidated Financial Statements | December 31, 2021 | F-30 |
* Values expressed in thousands, except when indicated. |
Expenditures for acquisition and development of software are amortized over a maximum period of 5 years.years.
p)
o) Other assets
Other Assets include the balancebalances of all prepayments and accrued income (excluding accrued interest), acquired customerclient list, the net amount of the difference between pension plan obligations and the fair value of the plan assets with a balance on the entity’s behalf, when this net amount is toshall be reporteddisclosed in the consolidated balance sheets,financial statements, and the amount of any other assets not included in other items.
The Bank uses the value in use of customerclient relationship as a basis for measuring the impairment since it is not reasonably possible to determine the net value of sales, because there is no basis for making a reliable estimate of the value to be obtained by selling the asset in a transaction at cumulative basis, between knowledgeable, willing parties. The value in use of customerclient lists acquired related to the purchase of the "payroll" will be determined individually. An analysesanalysis that aims to demonstrate the expectation of generating future economic benefit and the present value of expected cash flows is prepared by the business areas. Quarterly, these analyses are reviewed based on the actual cash flows of each business (value in use), which are compared with the carrying amount, checking whether there is a need to record a loss on non-recoverability.
q) p) Liabilities for insurance contracts
The liabilities for insurance contracts are comprised substantially by mathematicalactuarial provisions for current and future benefits (PMBaC and PMBC). Insurance contracts are contracts under which the Bank accepts a significant risk, other than a financial risk, from a policyholder by agreeing to compensate the beneficiary on the occurrence of an uncertain future event by which the policyholder will be adversely affected.
Insurance liabilities are recognized when the contract is entered into and the premiums are charged. Contracts that have been classified as insurance are not reclassified subsequently. The liability is derecognized when the contract expires or is cancelled.
All valuation methods used by the subsidiaries are based on the general principle that the carrying amount of the net liability must be sufficient to meet any reasonably foreseeable obligation resulting from the insurance contracts. Investment assumptions are either determined by the local regulator and based on management’s future expectations. In the latterlater case, the anticipated future investment returnyield is set by management, considering the available market information and economic indicators. A significant assumption related to estimated gross profits on variable annuities, is the annual long-term growth rate of the underlying assets.
At each balance sheetsfinancial statement date an assessment is made ofin order to verify whether the provisions for Mathematicalactuarial provisions are adequate.
In the years ended December 31, 2016, 20152021, 2020 and 2014,2019, as determined by IFRS 4 - Contracts classification and subsequent amendments, the adequacy of the technical provisions constituted were evaluated through Liability Adequacy Test (LAT)(LAP).
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
InAt December 31, 2016,2021, the LAT indicated the need for the additional constitution of technical provisions amounted to R$85,395 (2015209,277 (12/31/2020 - R$57,523)285,554 and 12/31/2019 - R$357,539) for Indemnity Funds for Benefit (FGB) plans.
r) Provisionq) Provisions for contingent assetslegal and liabilitiesadministrative proceedings, commitments and other provisions
Banco Santander and its subsidiaries are involved in judiciallawsuits and administrative proceedings related to tax, labor and civil, in the normal course of their activities.
The provisions include legal obligations, judiciallawsuits and administrative proceedings related to tax and social security obligations, whose object is to challenge their legality or constitutionality, regardless of the assessment that the probability of success, the amounts are fully recognized in the financial statements.
Provisions are reviewed at each balance sheetfinancial statement date and adjusted to reflect the current best estimate and may be fully or partially reversed or reduced when the outflows of resources and obligations relevant to the process are no longer probable, including decay of legal deadlines, among others.
Consolidated Financial Statements | December 31, 2021 | F-31 |
* Values expressed in thousands, except when indicated. |
Provisions for the judiciallawsuits and administrative proceedings are recorded when thetheir risk of loss of administrative or judicial proceeding is considered probable and the amounts can be reliably measured, based on the nature, complexity and history of lawsuits, the legal opinion of the internal and external advisors, based on the best available information. For provisionsthose lawsuits for which the risk of loss is possible, are not recorded and the information is disclosed in the financial statements (Note 24.h.) and for thosethe lawsuits for which the risk of loss is remote, no disclosure is required. On the favorable decisions to Santander, the counterparty has the right, in the event of specific legal requirements, to file a rescission action within a period determined by current legislation.
Contingent assets are not recognized, except when there are guarantees or favorable judiciallawsuits decisions, about which features no longer fit, characterizing the gain as practically certain. Assets with probable success, if any, are only disclosed in the financial statements.
s) On the favorable decisions to Santander, the counterparty has the right, in the event of specific legal requirements, to file a rescission lawsuit within a period determined by current legislation. Rescission lawsuits are considered as new events and will be evaluated for contingent liability purposes if and when they are filed.
r) Other liabilities
“Other liabilities” includes the balance of all accrued expenses and deferred income, excluding accrued interest, and the amount of any other liabilities not included in other categories.
The Bank has long-term compensation plans with vesting conditions. The main vesting conditions are: (1) service conditions, since it is necessary that the participant continues to be employed by the Bank during the term of the Plan for theirhis rights to vest; (2) performance conditions, since the number of Units that ultimately vest will be determined according to the result of certain performance parameter of the Bank, such as: total Shareholder Return (TSR) and may be reduced in case of failure to achieve the goals of reducing the Return on Risk Adjusted Capital (RORAC), comparison between actual and budget in each year, as determined by the Board of Directors and (3) market conditions, since some parameters are linked to the market price of the Bank´s shares. The Bank measures the fair value of the services rendered by reference to the fair value of the equity instruments granted at the grant date, taking into accountconsidering the market conditions for each plan when estimating the fair value.
Settlement in shares
The Bank measures the fair value of the services received by reference to the fair value of the equity instruments granted at the grant date, taking into accountconsidering the market conditions for each grant when estimating the fair value. In order to recognize the personnel expenses against equity reserves throughout the vesting period, as the services are received, the Bank considers the treatment of service conditions and recognize the amount for the services received during the vesting period based on the best available estimate of the number of equity instruments expected to vest. Semi-annually, the Bank reviews the estimate of the number of equity instruments expected to vest.
Settlement in cash
For cash-settled share-based compensation (in the form of share appreciation rights), the Bank measures the fair value of services rendered and the corresponding liability incurred, based on the fair value of the share appreciation rights at the grant date and until the liability is settled. The Banks remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period. In order to recognize the personnel expenses against a provision in “other liabilities” throughout the vesting period, reflecting the period as the services are received, the Bank bases the total liability on the best estimate of the number of share appreciation rights that will vest at the end of the vesting period and recognizes the amount for the services received during the vesting period based on such best available estimate. Periodically, the Bank reviews such estimate of the number of share appreciation rights that will vest at the end of vesting period.
u) t) Recognition of income and expenses
The most significant criteria used by the Bank to recognize its income and expenses are summarized as follows:
i. Interest income, interest expenses and similar items
Interest income, interest expenses and similar items are generally recognized on an accrual basis using the effective interest method. Dividends received from other companies are recognized as income when the consolidated entities' right to receive them arises.
Consolidated Financial Statements | December 31, 2021 | F-32 |
* Values expressed in thousands, except when indicated. |
ii. Commissions, fees and similar items
Fees and commission income and expenses are recognized in the income statement using criteria that vary according to their nature (note 36)34). The main criteria are as follows:
• Fee and commission income and expenses relating to financial assets and financial liabilities measured at fair value through profit or loss are recognized when paid;
• Those arising from transactions or services that are performed over a period of time are recognized over the life of these transactions or services; and
• Those relating to services provided in a single act are recognized when the single act has been performed.
Certain 2014 and 2015 (notes 36 and 37) fee and commission income and expense related to the business activities of the subsidiary Getnet S.A., acquired in 2014, have been reclassified to conform to the 2016 presentation.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
iii. Non-financial income and expenses
These are recognized for accounting purposes on an accrual basis.
iv. Deferred collections and payments
These are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market rates.
v. Loan arrangement fees
Loan arrangement fees, mainly loan origination and application fees, are accrued and recognized in the income statement over the term of the loan. In the case of loan origination fees, the portion relating to the associated direct costs incurred in the loan arrangement is recognized immediately in the consolidated income statement.
v) u) Guarantees
v.1) Financial guarantees
“Financial guarantees” are defined as contracts whereby an entity undertakes to make specific payments for a third party if the latter does not do so, irrespective of the various legal forms they may have, such as guarantees, irrevocable documentary credits issued or confirmed by the entity, among others.
The Bank initially recognizes the commission of the financial guarantees as liability in the consolidated balance sheetsfinancial statements at fair value, which is generally the present value of the fees, commissions and similar interest receivable from these contracts over their term.
Financial guarantees, regardless of the guarantor, type of instrument or other circumstances, are reviewed periodically so as to determine the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required. The credit risk is determined by application of criteria similar to those established for quantifying impairment losses on debt instruments measured at amortized cost.
The provisions made for these transactions are recognized underin the heading “Provisions - Provisions for contingent liabilities, commitments and other provisions” in the consolidated balance sheetsfinancial statements (note 24)22).
If a specific provision is required for financial guarantees, the related unearned commissions are recognized underin the heading “Financial liabilities at amortized cost – Other financial liabilities” in the consolidated balance sheetsfinancial statements are reclassified to the appropriate provision.
v.2) Guarantees and Credit Risk Mitigation Policy
Banco Santander controls the credit risk throughusing the use of collateral in its operations. Each business unit is responsible for credit risk management and formalizes the use of collateral in its lending policies.
Banco Santander uses guarantees in order to increase their resilience in theits ability to recover operations subject to credit risk operations.risk. The guarantees can be used fiduciary, real, legal structures with power mitigation and compensation agreements. The Bank periodicallyAnnually the bank reviews its policy guarantees bypolicies to capture changes in the market, in the characteristics of the assets given as guarantees and the conditions of the assets, these are examples of technical parameters normative and also its historical basis, to determine whether the guarantee is legally valid and enforceable.reviewed.
Credit limits are continually monitored and changed in customerclient behavior function. Thus, the potential loss values represent a fraction of the amount available.
w)
Consolidated Financial Statements | December 31, 2021 | F-33 |
* Values expressed in thousands, except when indicated. |
v) Assets under management and investment and pension funds managed by the Bank
Assets owned by third parties and managed by the consolidated entities are not presented in the consolidated balance sheets.financial statements. Management fees are included in “Fee and commission income” in the consolidated income statement. Note 45-b43-b contains information on the third-party assets managed by the Bank.
The investment funds and pension funds managed by the consolidated entities are not recorded in the consolidated balance sheetsfinancial statements since the related assets are owned by third parties. The fees and commissions earned in the year for the services rendered by the Bank entities to these funds (asset management and custody services) are recognized underin the heading “Fee and commission income” in the consolidated income statement.
x) w) Post-employment benefits
Post-employment benefit plans include the commitments of the Bank: (i) addition to the benefits of public pension plan; and (ii) healthcare in case of retirement, permanent disability or death for those employees, and their direct beneficiaries.
Defined contribution plans
Defined benefitcontribution plans isare the post-employment benefit plan which the Bank, and its subsidiaries, as the sponsoring entity pays fixed contributions into a pension fund, not having a legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all benefits relating to services provided in the current and in previous periods.
The contributions made in this connection are recognized underin the heading "Interest Expense and Similar Charges" in the income statement.
Defined benefit plans
Defined benefit plan is the post-employment benefit plan which is not a defined contribution plan and is shown in Note 2321. For this type of plan, the sponsoring entity's obligation is to provide the benefits agreed with the former employees, assuming the potential actuarial risk that benefits will cost more than expected.
For defined benefit plan, the amendment of IAS 19 established fundamental changes in the accounting for and disclosure of employee post-employment benefits such as removing the corridor approach in the accounting for the obligation of the plans, as well as changes in the criteria for recognition of conventional interest of plan assets (valuation based on the discount rate actuarial liability).
In addition, it occursthere is full recognition ofin liabilities on accountheading of actuarial losses (actuarial deficit) not recognized previously when they occur, which its counterparty is a heading in contrast to the stockholders’ equity (Other Comprehensive Income).
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Main Definitions
- The present value of the defined benefit obligation is the present value without any deduction from the plan assets, deductions of expected future payments required to settle the obligation resulting from employee service in the current and past periods, without deducting any plan assets.periods.
- Deficit or surplus is: (a) the present value of the defined benefit obligation, less (b) the fair value of plan assets.
- The sponsoring entity may recognize the plan'splan assets in the balance sheetsfinancial statements when they meet the following characteristics: (i) the fund assets of the fund are sufficient to meet all employee benefit plan or athe sponsor obligations; or (ii) the assets are returned to the sponsoring entity in order to reimburse it for employee benefits already paid.
- Actuarial gains and losses correspond to changes in the present value of defined benefit obligation resulting from: (a) adjustments by experience (the effects of differences between the actuarial assumptions adopted and what has actually occurred); and (b) effects of changes in actuarial assumptions.
- Current service cost is the increase in the present value of the defined benefit obligation resulting from employee service provided in the current period.
- The past service cost is the change in present value of defined benefit obligation for employee service provided in prior periods resulting from a change in the plan or reductions in the number of employees covered.
Consolidated Financial Statements | December 31, 2021 | F-34 |
* Values expressed in thousands, except when indicated. |
Post-employment benefits are recognized in income in the headings "Interest expense and similar Charges" and "Provisions (net)".
The defined benefit plans are recorded based on an actuarial study, conducted annually by an external consulting firm, at the end of each year to be effective for the subsequent period.
y) x) Other long-term employee benefits
“Other long-term employee benefits”, defined as obligations to early retirees considered as those who have ceased to render services at the entity but who, without being legally retired, continue to have economic rights relating to the entity until they acquire the legal status of retiree, long-service bonuses, obligations for death of spouse or disability before retirement that depend on the employee's length of service at the entity and other similar items, are treated for accounting purposes, where applicable, as established above for defined benefit post-employment plans, except that all past service costs and actuarial gains and losses are recognized immediately (note 23)21).
z) y) Termination benefits
Termination benefits are recognized when there is a detailed formal plan identifying the basic changes to be made, provided that implementation of the plan has begun, its main features have been publicly announced or objective facts concerning its implementation have been disclosed.
aa) z) Income taxes (IRPJ), Social Contribution (CSLL), Social Integration Program (PIS) and Tax for Social Security Financing (COFINS)
The income tax expense is obtained by adding the Income Tax, Social Contribution, PIS and COFINS. Current Income Tax and Social Contribution arise from the application of the respective rates on taxable income, and the PIS and COFINS rates applied on the respective calculation base provided for in the specific legislation, also added to the changes in deferred tax assets and liabilities recognized in the consolidated income statement. The CSLL rate, for banks of any kind, was raised from 15% to 20%, effective as of March 1, 2020, pursuant to article 32 of Constitutional Amendment 103, published on November 13, 2019.
The IRPJ charge is calculated at the rate of 15%, plus a surcharge of 10% levied, applied on the profit, after making the adjustments determined by tax legislation. The social contribution (CSLL)CSLL is calculated at the rate of 20%15% for financial institutions (15% up to August 2015)and legal entities of private insurance and capitalization and 9% for other companies, levied on the profit, after considering the adjustments determined by tax legislation.
The CSLL rate for banks of any kind, financial institutions, legal persons of private insurance companies and capitalization companies (financial sector companies) was increased from 15% to 20%by 5% for the fiscalbase period between SeptemberJuly 1, 20152021 and 31 December 31, 2018,2021, pursuant to Law 13,169/2015 (a result14,183/2021 (result of the conversion into law ofthe Provisional Measure 675/2015)Law (MP) 1,034/2021).
The expense for corporate income tax is recognized in the consolidated income statement, except when it results from a transaction recognized directly in equity, in which case the tax effect is also recognized in equity.
The current income tax expense is calculated as the sum of the current tax resulting from application of the appropriate tax rate to the taxable profit for the year (net of any deductions allowable for tax purposes), and of the changes in deferred tax assets and liabilities recognized in the consolidated income statement.
Tax assets classified as "Current" are amounts of tax to be recovered within the next twelve months.
Tax liabilities includes the amount of all tax liabilities (except provisions for taxes), which are broken down into “current” amount payable in respect of the income tax on the taxable profit for the year and other taxes in the next twelve months.
Deferred tax assets and liabilities include temporary differences, which are identified as the amounts expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their related tax bases, and tax loss and tax credit carry forwards. These amounts are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled.
Deferred tax assets are only recognized foras temporary differences to the extent that it is considered probable that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets can be utilized, and the deferred tax assets do not arise from the initial recognition (except in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit or accounting profit. Other deferred tax assets (tax loss and tax credit carry forwards) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable profits against which they can be utilized.
Due to the change in social contribution tax rate, the group companies made the remeasurement of tax credit assets and deferred liabilities at the rates applicable to the period in which estimates the realization of assets and settlement of liabilities.
Income and expenses recognized directly in stockholders equity are accounted for as temporary differences.
The deferred tax assets and liabilities recognized are reassessed at each balance sheetsfinancial statement date in order to ascertain whether they still exist, and the appropriate adjustments are made on the basis of the findings of the analyses performed.
Under the current regulation, the expected realization of tax credits is based on the Bank's projections of future results and based on technical study,analysis of the realization of the temporary differences, as shown in Note 25.note 23.
Consolidated Financial Statements | December 31, 2021 | F-35 |
* Values expressed in thousands, except when indicated. |
PIS (Social Integration Program)
• IFRIC 23 - Published in June 2017 by the IASB, IFRIC 23 - Uncertainty about the Treatment of Income Tax on Income is mandatory from January 1, 2019 and COFINS (Taxaims to clarify procedures for Social Security Financing) taxes have been computed at a combined ratethe application of 4.65% on certain gross revenuesrecognition and expenses. Financial institutions may deduct financial expensesmeasurement requirements established in determining the PIS/COFINS tax basis. PIS and COFINS are considered a profit-base component (net basis of certain revenues and expenses), therefore and accordingly to IAS 12 itIncome Taxes when there is recordeduncertainty as income taxes.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)to the treatment to be adopted for Income Taxes. Said standard did not generate significant impacts on these Financial Statements.
ab)aa) Consolidated cash flow statements
The following terms are used in the consolidated cash flow statements with the following meanings:
• Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value and original maturity of three months or less.
• Operating activities: the primary revenue-generating activities of credit institutions and other activities that are not investing or financing activities.
• Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.
• Financing activities: activities that result in changes in the size and breakdowncomposition of the equity and liabilities that are not operating activities.
In preparing the consolidated cash flows statement, the high liquidity investments with insignificant risk of changes in their values were classified as "Cash and cash equivalents". The Bank classifies as cash and cash equivalents balances recorded under "Cash and balance within the Brazilian Central Bank"headings "Cash" and "Loans and amounts due from credit institutions" in the consolidated balance sheets,financial statements, except restricted resources and long-term transactions.
The interest paid and received correspond basically to operating activities of Banco Santander.
Consolidated Financial Statements | December 31, 2021 | F-36 |
* Values expressed in thousands, except when indicated. |
3. | Basis of consolidation |
Below are highlighthighlighted the controlled entities and investment funds included in the consolidated financial statements of Banco Santander. Similar information regarding companies accounted for underby the equity method by the Bank is provided in Note 12.11.
Quantity of Shares or Quotas Owned (in Thousands) | 12/31/2021 | |||||
Investments | Activity | Common Shares and Quotas | Preferred Shares | Direct Participation | Consolidated Participation | |
Controlled by Banco Santander | ||||||
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. | Recovery of Defaulted Credits | 2,142,011 | - | 100.00% | 100.00% | |
Aymoré Crédito, Financiamento e Investimento S.A. (Aymoré CFI) | Financial | 2,877 | - | 100.00% | 100.00% | |
BEN Benefícios e Serviços S.A. (BEN Benefícios) | Other Activities | 90,000 | - | 100.00% | 100.00% | |
Esfera Fidelidade S.A. | Other Activities | 10,001 | - | 100.00% | 100.00% | |
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. | Tecnology | 381 | - | 80.00% | 80.00% | |
Rojo Entretenimento S.A. | Other Activities | 7,417 | - | 94.60% | 94.60% | |
Sanb Promotora de Vendas e Cobrança Ltda. | Other Activities | 30,988 | - | 100.00% | 100.00% | |
Sancap Investimentos e Participações S.A. (Sancap) | Holding | 23,538,159 | - | 100.00% | 100.00% | |
Santander Brasil Administradora de Consórcio Ltda. (Santander Brasil Consórcio) | Buying Club | 436,441 | - | 100.00% | 100.00% | |
Santander Corretora de Títulos e Valores Mobiliários S.A. (Santander CCVM) | Broker | 14,067,640 | 14,067,640 | 99.99% | 100.00% | |
Santander Corretora de Seguros, Investimentos e Serviços S.A. (Santander Corretora de Seguros) | Other Activities | 7,184 | - | 100.00% | 100.00% | |
Santander Holding Imobiliária S.A. | Holding | 558,601 | - | 100.00% | 100.00% | |
Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing) | Leasing | 164 | - | 100.00% | 100.00% | |
F1RST Tecnologia e Inovação Ltda. | Other Activities | 196,979 | - | 100.00% | 100.00% | |
Paytec Tecnologia em Pagamentos Ltda. | Other Activities | 348 | - | 100.00% | 100.00% | |
SX Negócios Ltda. | Other Activities | 75,050 | - | 100.00% | 100.00% | |
Controlled by Aymoré CFI | ||||||
Bank PSA | Bank | 105 | - | 0.00% | 50.00% | |
Bank Hyundai Capital Brasil S.A. | Bank | 150,000 | - | 0.00% | 50.00% | |
Solutions 4Fleet | Other Activities | 328 | - | 0.00% | 80.00% | |
Controlled by Santander Leasing | ||||||
Bank Bandepe S.A. | Bank | 3,589 | - | 0.00% | 100.00% | |
PI Distribuidora de Títulos e Valores Mobiliários S.A. | Leasing | 348 | - | 0.00% | 100.00% | |
Controlled by Sancap | ||||||
Santander Capitalização S.A. (Santander Capitalização) | Capitalization | 64,615 | - | 0.00% | 100.00% | |
Evidence Previdência S.A. | Private Pension | 42,819,564 | - | 0.00% | 100.00% | |
Controlled by Santander Holding Imobiliária S.A. | ||||||
Summer Empreendimentos Ltda. | Other Activities | 17,084 | - | 0.00% | 100.00% | |
Apê11 Tecnologia e Negócios Imobiliários S.A. | Other Activities | 3,808 | - | 0,00% | 90,00% | |
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. | ||||||
Return Capital Serviços de Recuperação de Créditos S.A. | Collection and Recover of Credit Management | 200 | - | 0.00% | 100.00% | |
Liderança Serviços Especializados em Cobranças Ltda. | Collection and Recover of Credit Management | 250 | - | 0.00% | 100.00% | |
Controlled by Paytec Tecnologia em Pagamentos Ltda. | ||||||
Paytec Logística e Armazém Ltda. | Other Activities | 100 | - | 0.00% | 100.00% | |
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A. | ||||||
Toro Corretora de Títulos e Valores Mobiliários Ltda. | Broker | 19,140 | - | 0.00% | 60.00% | |
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda. | ||||||
Toro Investimentos S.A. | Broker | 98,400 | - | 0.00% | 100.00% | |
Jointly Controlled Companies by Sancap | ||||||
Santander Auto S.A. | Other Activities | 22,452 | - | 0.00% | 50.00% | |
Consolidated Financial Statements | December 31, 2021 | F-37 |
* Values expressed in thousands, except when indicated. |
Directly and Indirectly controlled by Banco Santander (Brasil) S.A. | Participation % | |||||||
Activity | Direct | Direct and Indirect | ||||||
Banco Bandepe S.A. | Bank | 100.00% | 100.00% | |||||
Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing) | Leasing | 78.57% | 99.99% | |||||
Aymoré Crédito, Financiamento e Investimento S.A. (Aymoré CFI) | Financial | 100.00% | 100.00% | |||||
Santander Brasil Administradora de Consórcio Ltda. | Buying club | 100.00% | 100.00% | |||||
Santander Microcrédito Assessoria Financeira S.A. | Microcredit | 100.00% | 100.00% | |||||
Santander Brasil Advisory Services S.A. | Other Activities | 96.58% | 96.58% | |||||
Atual Companhia Securitizadora de Créditos Financeiros | Securitization | 100.00% | 100.00% | |||||
Santander Corretora de Câmbio e Valores Mobiliários S.A. | Broker | 99.99% | 100.00% | |||||
Santander Participações S.A. | Holding | 100.00% | 100.00% | |||||
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Getnet S.A.)(1) | Payment Institution | 88.50% | 88.50% | |||||
Sancap Investimentos e Participações S.A. (Sancap) | Holding | 100.00% | 100.00% | |||||
Santander Brasil EFC | Financial | 100.00% | 100.00% | |||||
Santander S.A. Serviços Técnicos, Administrativos e de Corretagem de Seguros (Santander Serviços) | Insurance Broker | 60.65% | 60.65% | |||||
Controlled by Santander Serviços | ||||||||
Webcasas S.A. | Other Activities | - | 100.00% | |||||
Controlled by Getnet S.A. | ||||||||
Auttar HUT Processamento de Dados Ltda. (Auttar HUT) | Other Activities | - | 100.00% | |||||
Integry Tecnologia e Serviços A.H.U Ltda. (Integry Tecnologia) | Other Activities | - | 100.00% | |||||
Toque Fale Serviços de Telemarketing Ltda. (Toque Fale) | Other Activities | - | 100.00% | |||||
Controlled by Sancap | ||||||||
Santander Capitalização S.A. | Savings and annuities | - | 100.00% | |||||
Evidence Previdência S.A. | Social Securities | - | 100.00% | |||||
Controlled by Aymoré CFI | ||||||||
Super Pagamentos e Administração de Meios Eletrônicos Ltda. (Super)(2) | Other Activities | - | 100.00% | |||||
Banco Olé Bonsucesso Consignado S.A. (Olé Consignado) (Current Company Name of Banco Bonsucesso Consignado)(3) | Bank | - | 60.00% | |||||
Banco PSA Finance Brasil S.A.(6) | Bank | - | 50.00% | |||||
Controlled by Olé Consignado (Current Company Name of Banco Bonsucesso Consignado) | ||||||||
BPV Promotora de Vendas e Cobrança Ltda. | Other Activities | - | 100.00% | |||||
Bonsucesso Tecnologia Ltda (Current Company Name of BSI Informática Ltda.) | Other Activities | - | 100.00% | |||||
Controlled by Santander Leasing | ||||||||
Santander Finance Arrendamento Mercantil S.A (Current Company Name of PSA Finance Arrendamento Mercantil S.A)(6) | Leasing | - | 100.00% | |||||
Controlled by Santander Participações | ||||||||
BW Guirapá I S.A.(4) | Holding | - | 86.81% | |||||
Controlled by BW Guirapá I S.A.(4) | ||||||||
Central Eólica Angical S.A.(4) | Wind Energy | - | 100.00% | |||||
Central Eólica Caititu S.A.(4) | Wind Energy | - | 100.00% | |||||
Central Eólica Coqueirinho S.A.(4) | Wind Energy | - | 100.00% | |||||
Central Eólica Corrupião S.A.(4) | Wind Energy | - | 100.00% | |||||
Central Eólica Inhambu S.A.(4) | Wind Energy | - | 100.00% | |||||
Central Eólica Tamanduá Mirim S.A.(4) | Wind Energy | - | 100.00% | |||||
Central Eólica Teiu S.A.(4) | Wind Energy | - | 100.00% |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)Consolidated Investment Funds
● | |||
Santander Fundo de Investimento |
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior (Santander FI Diamantina); |
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior (Santander FI Guarujá); |
Santander Fundo de Investimento |
Santander Fundo de Investimento |
Santander Paraty QIF PLC |
Prime 16 – Fundo de Investimento Imobiliário (atual denominação do BRL V - Fundo de Investimento Imobiliá |
Santander FI Hedge Strategies Fund (Santander FI Hedge Strategies) (2); |
● | Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado (Fundo Investimento Ipanema NPL VI) (3); |
● | Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos (4); |
● | Fundo de Investimentos em Direitos Creditórios Atacado – Não Padronizado (5); |
● | Atual - Multimarket Investment Fund Private Credit Investment Abroad (6); |
(a)Company over which the Bank is exposed, or has rights, to variable returns and have the ability to affect those returns through the power of decision, in accordance with IFRS 10 - Consolidated Financial Statements.(1) Banco Santander and its subsidiaries holds 100%was a creditor of certain overdue credit operations that had real estate as collateral. The operation for the recovery of these credits consists of the sharescontribution of these investment funds.
(1) In May, 2016, it was approved by Brazil Central Bankproperties as collateral to the authorization process for operationcapital of the Company asReal Estate Investment Fund and the consequent transfer of the Fund's quotas to Banco Santander, by means of a payment institution.
(2) On January 4, 2016, Aymoré CFI informed the ownersin payment of the shares representing the remaining 50% of Super Pagamentos total voting capital its decision to exercise the call option for the acquisition of such shares, for a value of approximately R$113 million. The transaction was concluded on March 10, 2016. (Note 4.b)
(3)aforementioned credit operations. At the ESM of March 3, 2016 was approvedExtraordinary General Meeting (AGE) held on October 30, 2018, the change of name from the name of Banco Bonsucesso Consignado S.A. for Banco Olé Bonsucesso Consignado S.A., the change process has been approved by the Bacen on June 1, 2016. At the ESM of November 1, 2016,BRL V - Fundo de Investimento Imobiliário - FII to Prime 16 - Fundo de Investimento Imobiliário was approved the capital increase of Olé Consignado in the amount of R$50,000, from the current R$350,000 to R$400,000, through the issuance of 28,509,708 new nominated ordinary shares, without nominal value. The process of the increase was approved by the Bacen in November 22, 2016.approved.
(4) Investments transferred from the non-current assets held for sale caption in September, 2016 (Note 11).
(5)(2) Banco Santander, through its subsidiaries, holds the risks and benefits of the Santander Paraty and the Sub-fund Santander FI Hedge Strategies basedSub-Fund, residing in Ireland, and both are fully consolidated in its financial statements. Thetheir Consolidated Financial Statements. In the Irish market, an investment fund cannot act directly and, therefore, therefor this reason, it was the neednecessary to create another structure (a sub-fund), Santander FI Hedge Strategies. The Santander Paraty has nodoes not have an equity position, and all derivedrecords come from the financial position of the balance sheet of Santander FI Hedge Strategies.
(3) This fund was created and started to be consolidated in September 2017. It refers to a structure in which Banco Santander sold certain credit operations, which had already been transferred to losses (operations overdue for more than 360 days) to this fund. Atual Serviços de Recuperação de Creditos e Meios Digitais S.A. (current corporate name of Atual Companhia Securitizadora de Creditos Financeiros), a company controlled by Banco Santander, holds 100% of the shares in this fund.
(4) This fund was consolidated in November 2018 and is controlled through Banco Bandepe S.A.
(5) This fund started to be consolidated in June 2019 and is controlled through Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.
(6) Investment acquired onThis fund started to be consolidated in August 1, 2016 (Note 4.e).
2020 and is controlled through Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.
(7) This fund was establishedconsolidated in February 2021 and became consolidated from August 2016. It is a structure where thecontrolled through Banco Santander figured as lender of certain debts (loans). The real object guarantee of said operations were converted into capital contributions by Fundo de Investimento Imobiliário, in conjunction concomitant transfer of the same shares to Banco Santander through dation process of payment of the above credit operations.
On July 14, 2016 it has completed the sales transaction ofBrasil S.A. It holds 100% of the shares representingin this fund.
Corporate movements were implemented in order to reorganize the operations and activities of the entities in accordance with the business plan of the Santander Conglomerate.
i) Acquisition of equity interest in Apê11 Tecnologia e Negócios Imobiliários Ltda.
On September 2, 2021, Santander Holding Imobiliária S.A. (“SHI”) – a wholly owned subsidiary of the Company – celebrated, with the partners of Apê11 Tecnologia e Negócios Imobiliários Ltda. (“Apê11”), certain Share Purchase and Sale Agreement and Investment Agreement, by which, once the transaction is carried out, it will hold 90% of the capital stock of Mantiq by Banco SantanderApê11 (“Transaction”). Apê11 acts as a collaborative marketplace, pioneering the digitization of the purchase journey of houses and by Santander Participações to Angra Ventures Participaçõesapartments. After the fulfillment of the precedent conditions established in the Share Purchase and Sale Investment Agreement, the closing of the Transaction was formalized on December 16, 2021.
Consolidated Financial Statements | December 31, 2021 | F-38 |
* Values expressed in thousands, except when indicated. |
ii) Acquisition of equity interest in Liderança Serviços Especializados em Cobranças Ltda. and Fozcobra Agência de Collections Ltda.
4. ChangeOn August 4, 2021, Atual Serviços de Recovery de Créditos e Meios Digitais S.A. (“Atual”) – a wholly-owned subsidiary of the Company – celebrated, with the partners of Liderança Serviços Especializados em Cobranças Ltda. (“Liderança”), a certain Agreement for the Assignment of Quotas and Other Covenants, whereby, once the transaction is carried out, it will hold 100% of the share capital of Liderança (“Transaction”). Liderança operates in the scopearea of consolidationoverdue credit recovery, providing extrajudicial collection services to financial institutions of different sizes, retail networks, telecommunications operators and automakers, among others, and has a subsidiary, Fozcobra Agência de Cobranças Ltda. After the fulfillment of the precedent conditions established in the Agreement for the Assignment of Quotas and Other Covenants, the closing of the Transaction was formalized on October 1, 2021. Subsequently, Fozcobra was merged into Leadership on October 4, 2021.
iii) Acquisition of Equity Interest in Solutions 4Fleet Consultoria Empresarial Ltda.
a)On July 13, 2021, Aymoré Crédito, Financiamento e Investimento S.A. (“Aymoré”), celebrated with the partners of Solution 4Fleet Consultoria Empresarial Ltda. (“Solutions 4Fleet”), certain Investment Agreement and Share Purchase and Sale Agreement, by which, once the transaction is carried out, Aymoré will hold 80% of the capital stock of Solution 4Fleet (“Transaction”). Solutions 4Fleet specializes in structuring vehicle rental and subscription businesses – long-term rental for individuals. After the fulfillment of the precedent conditions established in the Share Purchase and Sale Investment Agreement, the closing of the Transaction was formalized on October 8, 2021.
iv) Acquisition of equity interest in Car10 Tecnologia e Informação S.A and Pag10 Fomento Mercantil Eireli.
On July 13, 2021, Webmotors S.A. (“Webmotors”), celebrated with the partners of Car10 Tecnologia e Informação S.A. (“Car10 Tecnologia”) and Pag10 Fomento Mercantil Eireli (“Pag10” and, together with Car10 Tecnologia, “Car10”), certain Investment Agreements and Share Purchase and Sale Agreements, under which, once the transaction is carried out, Webmotors will hold approximately 66.7% of the share capital of Car10 Tecnologia, which, in turn, is the sole holder of Pag10 (“Transaction”). Car10 acts as a marketplace that brings together more than 7,000 service providers such as workshops and autocenters; auto body and Paint; and cleaning and sanitizing, as well as emergency assistance and towing. After compliance with the condition’s precedent established in the Investment Agreement for the Purchase and Sale of Santander Securities Services Brasil DTVM S.A.Shares, the closing of the Transaction was formalized on September 20, 2021.
v) Acquisition of Equity Interest in Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.
On June 19, 2014, preliminary documents were executed containing the main terms and conditions related to the sale of the operation of qualified custody business, currently performed by Banco Santander, and all of the shares issued by Santander Securities Services Brasil15, 2021, Pi Distribuidora de Títulos e Valores Mobiliários S.A. (“Pi”), Toro Corretora de Títulos e Valores Mobiliários S.A. (“Toro CTVM”), and Toro Investimentos S.A. (“Toro Investimentos” and, together, with Toro CTVM, “Toro”) entered into, with the partners of Monetus Investimentos Ltda., and Monetus Corretora de Seguros Ltda. (jointly “Monetus”), investment agreement and other covenants, whereby, once the transaction is carried out, Toro Investimentos will hold 100% of the capital stock of Monetus (“Transaction”). Monetus, originally from Belo Horizonte, carries out its activities through an automated investment application based on objectives, after considering the client's needs and risk profile, the application automatically creates, executes and tracks a diversified and personalized investment strategy that use the platform to undertake and serve customers in the best way. The execution of the Transaction will be subject to the execution of the definitive instruments and the implementation of certain usual conditions in this type of transaction, including the applicable regulatory approvals.
vi) Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.
On August 31, 2015 the sales transaction of the qualified custody business, with the sale of all shares of Santander Securities Services BrazilJune 15, 2021, Pi Distribuidora de Títulos e Valores Mobiliários S.A. (“Pi”), Toro Corretora de Títulos e Valores Mobiliários S.A. (“Toro CTVM”), and Toro Investimentos S.A. (“Toro Investimentos” and, together, with Toro CTVM, “Toro”) entered into, with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda. (together “Mobills”), an investment agreement and other covenants, by which, once effective In the transaction, Toro Investimentos will hold 100% of the capital stock of Mobills (“Transaction”). Based in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning. The execution of the Transaction will be subject to the execution of the definitive instruments and the implementation of certain usual conditions in this type of transaction, including the applicable regulatory approvals.
vii) Corporate reorganization Santander Leasing S.A. Arrendamento Mercantil and Banco Bandepe S.A.
On May 11, 2021, Banco Santander (Brasil) S.A. (“Banco Santander”) and Banco Bandepe S.A. (“Bandepe”) entered into a Share Purchase Agreement through which Banco Santander acquired the entire interest shareholding held by Bandepe in Santander Leasing S.A. Arrendamento Mercantil (“Santander Leasing”), which corresponds to 21.42%. In this operation, Banco Santander became the sole shareholder of Santander Leasing. On May 27, 2021, the merger of all the shares of Bandepe by Santander Leasing was resolved, in order to convert Bandepe into a wholly owned subsidiary of Santander Leasing (“Incorporation of Shares”). The Merger of Shares resulted in an increase in the capital stock of Santander Leasing of R$ 5,365,189,080.65 (five billion, three hundred and sixty-five million, one hundred and eighty-nine thousand, eighty reais and sixty-five cents), in reason for the merger of shares issued by Banco Bandepe held by Banco Santander.
Consolidated Financial Statements | December 31, 2021 | F-39 |
* Values expressed in thousands, except when indicated. |
viii) Partial spin-off and segregation of Getnet Adquirência e Serviços para Meios de Pagamentos S.A.
After the approval of the studies and favorable proposal of the Board of Directors of Santander Brasil, on March 31, 2021, the shareholders of Santander Brasil approved the partial spin-off of Santander Brasil, for the segregation of shares owned by them issued by Getnet Acquirência e Serviços for Meios de Pagamentos S.A. (“Getnet”), with a version of the split portion for Getnet itself. Upon completion of the spin-off, the shareholders of Santander Brasil will become direct shareholders of Getnet in proportion to their participation in the capital of Santander Brasil and the shares and Units of Santander Brasil will be traded with the right to receive the shares and Units of issue of Getnet.
As a result of the Spin-off, Santander Brasil's share capital was reduced in the total amount of 2,000,000 (two billion reais), without the cancellation of shares, with Santander Brasil's share capital increasing to 57,000,000 (fifty-seven billion reais) to 55,000,000 (fifty-five billion reais).
ix) Signing of an agreement for the Acquisition of Paytec Tecnologia em Pagamentos Ltda. and Paytec Logística e Armazém Eireli.
On December 8, 2020, Banco Santander celebrated, with the partners and owners of Paytec Tecnologia em Pagamentos Ltda. and Paytec Logística and Armazém Eireli (together “Paytec”), a share purchase and sale agreement, transfer of ownership and other covenants, whereby, once the transaction is carried out, it will hold 100% of the share capital of Paytec. Paytec acts as a logistics operator with national coverage and focused on the payments market. After approval of the transaction by the Central Bank of Brazil, the transaction was carried out on March 12, 2021, with Banco Santander now holding 100% of the share capital of the Paytec companies.
x) Dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A.
On November 12, 2020, by decision of its sole partner, the dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A. (which had its corporate name changed to Santander Securities Services Brasil, SAU), an offshore entity headquartered in Spain, was approved. fully owned by Banco Santander Brasil, which acted to complement the foreign trade strategy for corporate clients (large Brazilian companies and their operations abroad) and to offer financial products and services. The capital invested abroad was repatriated in November 2020. The company's dissolution and liquidation deed were registered in the Madrid Registry with effect from December 15, 2020. These activities are now carried out by the Bank's branch in Luxembourg.
xi) Disposal of Investments in Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A.
On October 8, 2020, Banco Santander (Brasil) S.A. withdrew from the shareholder structure of Norchem Participações e Consultoria SA (NPC) and Norchem Holding e Negócios S.A. (NHN), upon capital reduction in the amounts of R$19,950 million and R$14,770 million, respectively, and consequent cancellation of shares held by Banco Santander (Brasil) S.A.
xii) Acquisition of Equity Interest in Toro Controle
On September 29, 2020, Pi Distribuidora de Títulos e Investimentos S.A. (“Pi”), which is indirectly controlled by Banco Santander, Spain was concludedentered into an investment agreement with the shareholders of Toro Controle e Participações S.A. (“Toro Controle”) and other covenants. Toro Controle had been a holding company that, ultimately, had controlled Toro Corretora de Títulos e Valores Mobiliários Ltda. (“Toro CTVM”) and Toro Investimentos S.A. (“Toro Investimentos” and, together, “Toro”). Toro is an investment platform founded in Belo Horizonte in 2010. In 2018, it received the necessary authorizations and started its operation as a securities brokerage aimed at the amountretail public. After compliance with all applicable conditions precedent, including approval by the Central Bank of Brazil, the transaction was carried out on April 30, 2021, with the acquisition of shares representing 60% of the capital stock of Toro Controle and its immediate incorporation by Toro CTVM, so that Pi became the direct holder of the equivalent of 60% of the share capital of Toro CTVM which, in turn, holds 100% of the share capital of Toro Investimentos.
xiii) Signing of an Agreement for the Acquisition of Equity Interest in Gira – Gestão Integrada de Recebíveis do Agronegócio S.A.
On August 11, 2020, Banco Santander signed a share purchase and sale agreement and other agreements with the shareholders of Gira – Integrated Management of Receivables of Agronegócio S.A. Gira is a technology company that operates in the management of agribusiness receivables and has a robust technological platform, capable of adding greater security to agricultural credit operations. Upon compliance with the conditions established in the contract, in particular the applicable regulatory approvals, the parties formalized the definitive instruments on January 8, 2021. With the completion of the transaction, Banco Santander now holds 80% of Gira's share capital.
xiv) Acquisition of direct equity interest in Toque Fale Serviços de Telemarketing Ltda.
On March 24, 2020, the Bank acquired the shares representing the entire share capital of Toque Fale Serviços de Telemarketing Ltda. (“Toque Fale”) for R$8591,099 million, according to was informedcorresponding to the marketbook value of the shares on June 19, 2014.February 29, 2020, previously held by Getnet Acquirência e Serviços para Meios de Pagamento S.A. and Auttar HUT Processamento de Dados Ltda. As a result, the Bank became a direct shareholder of Toque Fale and holder of 100% of its capital.
Consolidated Financial Statements | December 31, 2021 | F-40 |
* Values expressed in thousands, except when indicated. |
The transaction generated a gainxv) Disposal of R$750,550 before taxes, recorded in the caption Result on disposal of assets not classified as non-current assetsequity interest held for sale.
The operation fits into the context of a global strategic partnership between Banco Santander Spain and a group led by Warburg Pincus LLC in qualified custody activity in Spain, Brazil and Mexico.
b) Investment in Super Pagamentos e Administração de Meios Eletrônicos Ltda. (“Super Pagamentos”)
S.A.
On October 3, 2014, Aymoré CFI signed an investment agreement ("Agreement") with a view to make an investmentFebruary 28, 2020, the equity interest held in Super Pagamentos which would result in the subscription and payment of new shares issuede Administração de Meios Eletrônicos S.A. was sold to Superdigital Holding Company, SL, a company indirectly controlled by Super, representing 50% of its total and voting capital.
The closing of the operation occurred on December 12, 2014 and was subject to completion of certain conditions precedent set forth in the Agreement, including the prior approval of the Central Bank (obtained on December 2, 2014). Aymoré CFI subscribed and paid share capital of Super Pagamentos in R$31,128, through the issuance of 20 million new common shares.
On January 4, 2016, Aymoré CFI informed the ownersBanco Santander, S.A., of the shares representing the remaining 50% of Super Pagamentos´ total voting capital its decision to exercise the call option for the acquisition of such shares, for a value of approximately R$113 million. The transaction was concluded on March 10, 2016.
Accordingly, Aymoré as the parent company purchased the remaining equity instruments of Super Pagamentos entity and should therefore consider the paid value of goodwill for expected future profitability as a reduction of shareholders' equity, since, according to the IFRS 10 this transaction is characterized as transactions between partners. For the same reason, the amount paid for the equity value of the interest participation acquired from non-controlling shareholder is a movement among Stockholders' Equity accounts.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
c) Investment Agreement between Banco Santander and Banco Bonsucesso S.A. (Banco Bonsucesso)
On July 30, 2014 Banco Santander, through its controlled company Aymore CFI, and Banco Bonsucesso entered into an Investment Agreement whereby agreed to form an association in payroll credit card loan segment and payroll loans (Olé Consignado).
On February 10, 2015, with the approval of the BACEN, the transaction was completed and Banco Santander, through Aymoré CFI, became the controlling shareholder of Olé Consignado, with 60% of the total and voting capital through an investment of R$460 million. Banco Bonsucesso remained with the remaining portiontotality of the share capital (40%).
In December 2015, it has completed the study of the allocationSuper Payments and Administration of the purchase price (Purchase Price Allocation - PPA) on the acquisition of Bonsucesso by Aymoré, based on acquisition date as below:
Book value | Fair value | |||||||
Available-for-Sale Financial Assets | 121,468 | 121,468 | ||||||
Loans and Receivables | 508,147 | 508,147 | ||||||
Others Assets | 374,151 | 374,151 | ||||||
Intangible Assets(1) | - | 62,000 | ||||||
Total assets | 1,003,766 | 1,065,766 | ||||||
Financial liabilities | 466,162 | 466,162 | ||||||
Others liabilities | 397,604 | 397,604 | ||||||
Total liabilities | 863,766 | 863,766 | ||||||
Capital increase by Aymore CFI | 460,000 | 460,000 | ||||||
Total of net assets acquired | 600,000 | 662,000 | ||||||
Non-controlling interest(2) | 264,800 | |||||||
Total consideration transferred by Aymore to acquire control | 460,000 | |||||||
Goodwill(3) | 62,800 |
(1) Intangible assets identified relate to brand and customer relationship with estimated useful life of 10 years and 4 years, respectively.
(2) Amount of non-controlling interests were measured at R$240 million as the proportional value of the net assets of the investee.
(3) Goodwill will be tax deductible under current legislation.
Olé Consignado has become the exclusive vehicle of Banco Bonsucesso and its affiliates for the payroll credit supply in Brazil and should consolidate existing payroll loans at Banco Santander and Banco Bonsucesso, in accordance with the association. Banco Santander will continue to originate from payroll loans through their own channels independently.
In the operation context, it was granted between institutions a put option (right of Olé Consignado to sell) and purchase (right of Banco Santander acquisition), relating to the shares held by Banco Bonsucesso, equivalent to 40% of capital of this company. According to IAS 32, it has recognized a financial liabilityMeios Eletrônicos S.A. (“Superdigital”) for the amount of R$307 million270 million. As a result, the Bank is no longer a shareholder of Superdigital.
xvi) Acquisition of Summer Empreendimentos Ltda.
On May 14, 2019, Banco Santander (Brasil) S.A. and its wholly owned subsidiary Santander Holding Imobiliária S.A. (“SHI”) entered into a binding document with the partners of Summer Empreendimentos Ltda. (“Summer”) establishing the terms of the negotiation of purchase and sale of shares representing the entirety of Summer's capital stock. The acquisition was approved by BACEN on September 16, 2019 and concluded on September 20, 2019, so that SHI now holds 99.999% and Banco Santander 0.001% of the commitment madeshares representing Summer's capital stock. Due to the Entity's short-term sale plan, Summer was initially recorded as an Asset Held by Sale, at its cost value. In June 2020, with the non-execution of the established plan, Summer became part of the scope of Banco Santander's Consolidated Financial Statements.
xvii) Sale option of interest in relation toBanco Olé Consignado S.A. and merger of Banco Olé Consignado S.A. and Bosan Participações S.A.
On March 14, 2019, the minority shareholder of Banco Olé Consignado S.A. (“Banco Olé”) formalized its interest in exercising the put option accountedprovided for in Shareholders' Equity, the amountInvestment Agreement, entered into on July 30, 2014, for the sale of R$67 million and non-controlling interests,its interest in 40% in the amountshare capital of R$240 million.
At the ESM occurred on March 3, 2016 the amendment of the corporate name of Banco Bonsucesso Consignado S.A.Olé Consigned to Banco Olé Bonsucesso ConsignadoSantander (Brasil) S.A. was approved, the process was approved by the Bacen on June 1, 2016 (“Banco Santander”).
d) Partnership Formation with the Hyundai Group in Brazil
On April 28, 2016,December 20, 2019, the Aymoré CFI and Banco Santanderparties entered into a transactionbinding agreement for the formation of a partnership with Hyundai Motor Brasil Montadora de Automóveis Ltda. (Hyundai Motor Brazil) and Hyundai Capital Services, Inc. (Hyundai Capital) for the constitution of Banco Hyundai Capital Brasil S.A. and an insurance brokerage company to provide, respectively, auto finance and insurance brokerage services and products to consumers and Hyundai dealerships in Brazil. The partnership capital structure will have a shareholding of 50% (fifty percent) of the Aymoré, 25% (twenty five percent) of Hyundai Capital and 25% (twenty five percent) of Hyundai Motor Brazil. The execution of the operation shall be subject to the fulfillment of certain conditions precedent usual in similar transactions, including obtaining the applicable regulatory approvals.
e) Agreement on the Acquisition, of part of the Financial Operation of PSA Group in Brazil and a consequent creation of a Joint Venture
On August 1, 2016, after the fulfillment of the applicable conditions precedent, including obtaining the appropriate regulatory approvals, the Aymoré CFI and Banco Santander, in the context of a partnership between the Banque PSA Finance (Banque PSA) and Santander Consumer Finance in Europe for joint operation of the vehicle financing business of PSA brands (Peugeot, Citroën and DS), signed definitive documents for the formation of a financial cooperation with Banque PSA to offer a range of financial and insurance products to consumers and dealers of PSA in Brazil.
The main vehicle of financial cooperation is Banco PSA Finance Brasil S.A. which is now held in the proportion of 50% by Aymoré CFI, a subsidiary of Banco Santander, and 50% by Banque PSA.. The purchase price was equal to the book value (proportional to the 50% acquired) on the closing date (08/01/2016). The operation also included the acquisition, by Banco Santander, subsidiary, 100% of Santander Finance Arrendamento Mercantilall shares issued by Bosan Participações S.A. (Current Company Name(holding whose only asset are shares representing 40% of PSA Finance Arrendamento Mercantil S.A.Banco Olé's share capital), for the amount total of R$1.6 billion (“Transaction”), whose price was equivalent to 74% of the equity valuebe paid on the closing date recording a bargain purchase gain, and also 50% of PSA Corretora de Seguros e Serviços Ltda., whose purchase price was equal to the book value (proportional) on the closing date.
Banco Santander started to consolidate these companies from August 1, 2016, considering its shareholder agreement over Santander Finance Arrendamento Mercantil S.A and majority holding in the other investments.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
f) Merger of Getnet Tecnologia em Captura e Processamento de Transações H.U.A.H. S.A. (Getnet) into Getnet Adquirencia e Serviços para Meios de Pagamento S.A. (current corporate name of Santander Getnet)
Banco Santander announced to the market on April 7, 2014, the company's purchase of Getnet ("Transaction"), through its subsidiary SGS, partner of Banco Santander in the development of the activities of acquiring and processing debit and credit cards payments.
At the Extraordinary General Meeting occurred on July 31, 2014, the capital increase of SGS of R$1 million was approved, from the current R$16,000 to R$1,189,503 through the issuance of 54 million new common shares, nominative and without par value, fully subscribed and paid by Banco Santander as follows: R$1 million in local currency and R$17,240 in through the carrying amount, by Banco Santander of 5,300 common shares without par value issued by the iZettle do Brasil Meios de Pagamento S.A to the capital of SGS, which raised the share of Banco Santander from in Getnet S.A. 50.0% to 88.5%.
Transaction.
On JulyJanuary 31, 2014, SGS acquired all2020, the sharesBank and the shareholders of Getnet,Bosan Participações S.A. (“Bosan”) concluded the total price of R$1,156.3 million (R$1,089.1 million paiddefinitive agreement and R$67.2 million payable). At December 31, 2014, has completed the study of the allocation ofsigned the purchase price (Purchase Price Allocation - PPA), based on stockholders equityand sale agreement for 100% of July 31, 2014 and a summary of values is informed below:
(1) Recorded under Tangible Assets.
(2) Goodwill is tax deductible under current legislation.
At the Extraordinary General Meeting occurred on August 31, 2014, it was approved the merger of Getnet by SGS, which had its name changed to "Getnet Adquirencia e Serviços para Meios de Pagamento S.A." (Getnet S.A.) under the "Private Instrument of Protocol and Justification of Merger of Getnet by Getnet Adquirencia e Serviços para Meios de Pagamento S.A. (Protocol) of August 29, 2014 (the Merger).
The implementation of the Merger represents an important step in the simplification, consolidation and integration of capture and processing of operations activities of electronic payments Group Santander in Brazil, allowing for the consolidation for all commercial, financial and accounting purposes.
By the Protocol, Getnet S.A. received the book value of all assets, rights and obligations of Getnet totaling R$42,895 which was extinguished and succeeded by Getnet S.A. in all their rights and obligations. In view that all the shares issued by Getnet areBosan, through the propertytransfer of GetnetBosan's shares to Bank and payment to sellers in the total amount of R$1,608,772. As a result, Banco Santander became, directly and indirectly, the holder of 100% of the shares of Banco Olé.
On August 31, 2020, Banco Santander shareholders approved the merger by the Bank of Banco Olé Consignado S.A., there was no and Bosan Participações S.A. The mergers did not result in an increase in the share capital of Getnet S.A. following the approval of the Merger, so the net assets of Getnet was registered in Getnet S.A. in return of the investment account.Santander Brasil.
The acquisition of Getnet and their incorporation by SGS enabled Getnet S.A. pass to consolidate all activities of acquiring and credit and debit cards payment processing, still subject to approval by the Bacen.
4. | Cash and balances with the Brazilian Central Bank |
The context of the transaction, Banco Santander has granted to the minority shareholders of Getnet S.A. a put option over shares of Getnet S.A. held by them equivalent to 11.5% of the total capital of the company. As set out in IAS 32, was recognized for the commitment made, as counterpart to a specific account in stockholders' equity in the amount of R$950 million.
5. Cash and balances with the Brazilian Central Bank
Thousand of reais | 2021 | 2020 | 2019 | ||
Cash and cash equivalents | 16,657,201 | 20,148,725 | 20,127,364 | ||
of which: | |||||
Cash | 4,026,282 | 4,266,197 | 4,877,849 | ||
Cash and Foreign currency application abroad | 12,630,919 | 15,882,528 | 15,249,515 | ||
Total | 16,657,201 | 20,148,725 | 20,127,364 |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Cash and cash equivalents | 4,445,940 | 7,141,137 | 9,786,013 | |||||||||
of which: | ||||||||||||
Cash | 3,316,800 | 2,995,112 | 3,525,864 | |||||||||
Money market investments | 1,129,140 | 4,146,025 | 6,260,149 | |||||||||
Money market investments(1) | 45,242,674 | 27,170,892 | 16,212,907 | |||||||||
Central Bank compulsory deposits(2) | 60,916,297 | 54,831,324 | 29,904,928 | |||||||||
Total | 110,604,911 | 89,143,353 | 55,903,848 |
(1) Includes securities purchased under agreements to resell, long term and not considered cash equivalents.
(2) Central Bank compulsory deposits relate to a minimum balance that financial institutions are required to maintain with the Central Bank of Brazil based on a percentage of deposits received from third parties, considered as restricted use of resources.
Loans and amounts due from credit institutions |
The breakdown, by classification, type and currency, of the balances of “Loans and amounts due from credit institutions” in the consolidated balance sheetsfinancial statements is as follows:
Thousand of reais | 2021 | 2020 | 2019 | |
Classification: | ||||
Financial Assets Measured at Amortized Cost | 95,664,754 | 112,849,776 | 109,233,128 | |
Of which: | ||||
Loans and amounts due from credit institutions, gross | 95,686,579 | 112,858,840 | 109,246,671 | |
Impairment losses (note 9.c) | (21,825) | (9,064) | (13,543) | |
Loans and amounts due from credit institutions, net | 95,664,754 | 112,849,776 | 109,233,128 | |
Loans and amounts due from credit institutions, gross | 95,686,579 | 112,858,840 | 109,247,248 | |
Type: | ||||
Time deposits | 73,780,552 | 63,673,689 | 66,908,232 | |
Reverse repurchase agreements (1) | 4,129,438 | 699,034 | 100,246 | |
Escrow deposits | 10,200,137 | 10,773,280 | 11,424,537 | |
Other accounts (2) | 7,576,452 | 37,712,838 | 30,814,233 | |
Total | 95,686,579 | 112,858,840 | 109,247,248 |
(1) | Guaranteed by debt instruments. |
(2) | Changes refers substantially to the effect of the write-off of receivables from Getnet spin-off. |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Classification: | ||||||||||||
Loans and receivables | 27,762,473 | 42,422,638 | 28,917,397 | |||||||||
Of which: | ||||||||||||
Loans and amounts due from credit institutions, gross | 27,963,914 | 42,601,397 | 29,059,676 | |||||||||
Impairment losses (note 10.c) | (201,441 | ) | (178,759 | ) | (142,279 | ) | ||||||
Loans and amounts due from credit institutions, net | 27,762,473 | 42,422,638 | 28,917,397 | |||||||||
Loans and amounts due from credit institutions, gross | 27,963,914 | 42,601,397 | 29,059,676 |
F-30
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Type: | ||||||||||||
Applications in time deposits(2) | 2,070,151 | 3,626,514 | 4,818,894 | |||||||||
Reverse repurchase agreements(1) (2) | 848,096 | 152,870 | 2,407,741 | |||||||||
Escrow deposits | 9,836,300 | 9,493,169 | 8,170,504 | |||||||||
Cash and Foreign currency investments(2) | 13,194,923 | 24,057,973 | 12,398,350 | |||||||||
Other accounts | 2,014,444 | 5,270,871 | 1,264,187 | |||||||||
Total | 27,963,914 | 42,601,397 | 29,059,676 | |||||||||
Currency: | ||||||||||||
Brazilian Real | 25,421,465 | 18,631,226 | 15,469,912 | |||||||||
US dollar | 1,658,980 | 23,607,170 | 12,180,659 | |||||||||
Euro | 779,314 | 323,053 | 1,371,277 | |||||||||
Pound sterling | 51,972 | 4,964 | 12,656 | |||||||||
Other currencies | 52,183 | 34,984 | 25,172 | |||||||||
Total | 27,963,914 | 42,601,397 | 29,059,676 |
Consolidated Financial Statements | December 31, 2021 | F-41 |
* Values expressed in thousands, except when indicated. |
(1) Collateralized by debt instruments.
(2) Includes R$13,683,641 (2015
Loans and amounts due from credit institutions - R$25,990,477 and 2014 - R$13,613,957), of short-term transactions and low risk of change in its value, considered cash equivalents.Currency
Thousand of reais | 2021 | 2020 | 2019 | |||||
Currency: | ||||||||
Brazilian Real | 91,889,990 | 109,287,868 | 107,693,973 | |||||
US dollar | 2,445,781 | 2,778,911 | 1,401,601 | |||||
Euro | 1,350,808 | 792,061 | 151,674 | |||||
Total | 95,686,579 | 112,858,840 | 109,247,248 |
Cash equivalents
Thousand of reais | 2021 | 2020 | 2019 | |
Cash equivalents: | ||||
Short-term transactions and low risk of change in its value (1) | 16,011,548 | 8,298,083 | 1,316,299 |
(1) | The Amount refers to investments in the open market (repurchase agreements) and investments in interbank deposits (CDI) at |
short term
Note 45-d43-d contains a detail of the residual maturity periods of loans and receivables and of the related average interest rates.financial assets measured at amortized cost.
6. | Debt instruments |
The breakdown, by classification, type and currency, of the balances of “Debt instruments” is as follows:follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Classification: | ||||||||||||
Financial assets held for trading | 59,994,946 | 25,193,598 | 47,106,811 | |||||||||
Other financial assets at fair value through profit or loss | 1,668,749 | 1,506,570 | 93,900 | |||||||||
Available-for-sale financial assets(2) | 55,829,572 | 67,103,274 | 73,510,698 | |||||||||
Held to maturity investments(2) | 10,048,761 | 10,097,836 | - | |||||||||
Loans and receivables(2) | 16,283,259 | 11,812,701 | - | |||||||||
Of which: | ||||||||||||
Loans and receivables - Debt Instruments | 17,838,162 | 11,957,161 | - | |||||||||
Provision for impairment losses (impairment) | (1,554,903 | ) | (144,460 | ) | - | |||||||
Total | 143,825,287 | 115,713,979 | 120,711,409 | |||||||||
Type: | ||||||||||||
Government securities - Brazil(1) | 122,971,854 | 93,439,724 | 103,598,096 | |||||||||
Debentures and Promissory notes | 12,922,763 | 11,967,222 | 13,428,165 | |||||||||
Other debt securities | 7,930,670 | 10,307,033 | 3,685,148 | |||||||||
Total | 143,825,287 | 115,713,979 | 120,711,409 | |||||||||
Currency: | ||||||||||||
Brazilian Real | 134,037,665 | 109,836,568 | 114,257,666 | |||||||||
US dollar | 9,107,513 | 5,111,982 | 6,453,743 | |||||||||
Euro | 680,109 | 765,429 | - | |||||||||
Total | 143,825,287 | 115,713,979 | 120,711,409 |
Thousand of reais | 2021 | 2020 | 2019 | ||
Classification: | |||||
Financial assets measured at fair value through profit or loss | 3,122,017 | 3,545,660 | 3,735,076 | ||
Financial assets measured at fair value through profit or loss held for trading | 47,752,595 | 68,520,799 | 34,885,631 | ||
Financial assets measured at fair value through other comprehensive income | 101,212,600 | 109,668,214 | 95,962,927 | ||
Financial assets measured at amortized cost | 73,125,011 | 48,367,791 | 38,748,296 | ||
Of which: | |||||
Debt instruments | 74,315,903 | 49,945,226 | 40,803,323 | ||
Impairment losses | (1,190,892) | (1,577,435) | (2,055,027) | ||
Total | 225,212,223 | 230,102,464 | 173,331,930 | ||
Type: | |||||
Government securities - brazil (1) | 171,436,589 | 191,896,439 | 135,848,053 | ||
Debentures and promissory notes | 19,881,934 | 17,071,856 | 13,874,883 | ||
Other debt securities (2) | 33,893,700 | 21,134,169 | 23,608,994 | ||
Total | 225,212,223 | 230,102,464 | 173,331,930 |
(1) | Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) e National Treasury Notes (NTN-A, NTN-B, NTN-C e NTN-F). |
(1) Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) e National Treasury Notes (NTN-A, NTN-B, NTN-C e NTN-F).
(2) | Substantially refer to securities issued by the Official Credit Institute (ICO) of Spain. |
Transfer between categories(2)The debt instruments are composed, majority by:
Thousand of reais | 2021 | 2020 | 2019 | ||||||||
Currency: | |||||||||||
Brazilian Real | 208,599,863 | 207,752,590 | 164,447,235 | ||||||||
US dollar | 16,612,360 | 22,292,647 | 8,884,695 | ||||||||
Euro | - | 57,227 | - | ||||||||
Total | 225,212,223 | 230,102,464 | 173,331,930 |
Consolidated Financial Statements | December 31, 2021 | F-42 |
* Values expressed in thousands, except when indicated. |
Debt Instruments linked to
Thousand of reais | 2021 | 2020 | 2019 | ||
Debt Instruments linked to: | |||||
Repo Operations | 76,211,049 | 101,371,733 | 102,849,859 | ||
Operations guarantees in B3 S.A. - Brasil, Bolsa, Balcão (B3 S.A.) | 19,470,624 | 12,963,251 | 6,618,651 | ||
Associated to judiciary deposits and other guarantees (1) | 23,291,528 | 9,665,135 | 9,573,331 | ||
Total | 118,973,201 | 124,000,119 | 119,041,841 |
(1) | Substantially refers to securities issued by the Official Credit Institute (ICO) of Spain. |
In January 2014, the Bank made an issue of securities eligible to compose the capital of Tier I and Reference Equity (PR) Tier II, in the amount of US$2.5 billion (equivalent to R$6 billion) (Note 29.e). Aiming to mitigate the risk of interest rates in US dollars, it was made the purchase of assets indexed in this currency: NTN-A and Eurobonds issued by the federal government of Brazil and BNDES (acquired via Santander Cayman). Initially, these securities were classified as "Available-For-Sale Financial Assets - Debt instruments", and in July 1, 2015, were reclassified to "Held to maturity investments". On December 31, 2016 such securities amounted to R$10,048,761 (2015 - R$10,097,836). Banco Santander has the financial capacity and intention to hold to maturity securities classified as held-to-maturity. Additionally, were reclassified securities from "Available-For-Sale Financial Assets - Debt instruments" to "Loans and Receivables - Debt instruments". On December 31, 2016 such securities amounted to R$16,283,259 (2015 - R$11,812,701).
The fair value of this operation is R$10,555,437 (note 31).
Additionally, in the first quarter of 2016, due to the Banco Santander's strategy change, it was reclassified from Available Financial Assets for sale - Debt instruments to Loans and Receivables - Debt Instruments the total amount of R$4,562,869, meeting the required in IAS 39.
The transfers above comply with IAS 39.
The Debts Instruments are comprised, mainly, of R$71,810,310 (2015 - R$58,958,355 and 2014 - R$72,884,242) of debt securities relating to repurchase agreements, R$3,044,896 (2015 - R$6,216,315 and 2014 - R$8,859,309) to compulsory deposits in Central Bank, R$6,221,046 (2015 - R$10,197,025 and 2014 - R$7,588,094) to guarantee of BM&FBovespa transactions and R$5,358,604 (2015 - R$4,939,160 and 2014 - R$3,111,724) to escrow deposits and other guarantee.
Note 45-d43-d contains a detaildetails of the residual maturity periods of available-for-sale financial assets measured at fair value through Other Results Comprehensive and of loans and receivables and of the related average interest rates.corresponding financial assets measured at amortized cost.
7. | Equity instruments |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
a) Breakdown
The breakdown, by classification and type, of the balances of “Equity instruments” is as follows:follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | |||||||||||||
Classification: | ||||||||||||||||
Financial assets held for trading | 398,461 | 404,973 | 391,656 | |||||||||||||
Other financial assets at fair value through profit or loss | 42,455 | 573,664 | 902,794 | |||||||||||||
Available-for-sale financial assets | 1,985,473 | 1,162,332 | 1,653,644 | |||||||||||||
Financial assets measured at fair value through profit or loss held for trading | Financial assets measured at fair value through profit or loss held for trading | 2,020,610 | 1,818,276 | 2,029,470 | ||||||||||||
Non-trading financial assets mandatorily measured at fair value through profit or loss | Non-trading financial assets mandatorily measured at fair value through profit or loss | 477,707 | 438,912 | 171,453 | ||||||||||||
Financial assets measured at fair value through other comprehensive income | Financial assets measured at fair value through other comprehensive income | 29,187 | 72,173 | 157,306 | ||||||||||||
Total | 2,426,389 | 2,140,969 | 2,948,094 | 2,527,504 | 2,329,361 | 2,358,229 | ||||||||||
Type: | ||||||||||||||||
Shares of Brazilian companies | 1,185,653 | 1,168,186 | 1,338,776 | Shares of Brazilian companies | 1,869,824 | 1,953,128 | 665,027 | |||||||||
Shares of foreign companies | 3,588 | 11,445 | 8,401 | Shares of foreign companies | 48,825 | 13,617 | - | |||||||||
Investment fund units and shares(1) | 1,237,148 | 961,338 | 1,600,917 | |||||||||||||
Investment funds (1) | 608,855 | 362,616 | 1,693,202 | |||||||||||||
Total | 2,426,389 | 2,140,969 | 2,948,094 | 2,527,504 | 2,329,361 | 2,358,229 |
(1) | Composed mainly by investment on fixed income, public and private securities. |
(1) Comprised mainly by investing in stocks, which mainly correspond to investments in assets in the electricity segment and technology, which is consistent with the established rules and accounting practices.
b) Changes
The changes in the balance of “Equity instruments – Financial assets measured at fair value through profit or loss held for trading” were as follows:
Equity instruments - Financial assets measured at fair value through profit or loss held for trading
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of year | 404,973 | 391,656 | 477,577 | |||||||||
Net additions /disposals | (7,125 | ) | 26,273 | (73,963 | ) | |||||||
Valuation adjustments | 613 | (12,956 | ) | (11,958 | ) | |||||||
Balance at end of year | 398,461 | 404,973 | 391,656 |
Thousand of reais | 2021 | 2020 | 2019 | |
Balance at beginning of year | 1,818,276 | 2,029,470 | 766,333 | |
Net additions (disposals) / adjustments | 202,334 | (211,194) | 1,263,137 | |
Balance at end of year | 2,020,610 | 1,818,276 | 2,029,470 |
The changes in the balance of “Equity instruments – Other financial assetsNon-Trading Financial Assets Mandatorily Measured at fair value through profitFair Value Through Profit or loss”Loss” were as follows:
Equity instruments - Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss
Thousand of reais | 2021 | 2020 | 2019 | |
Balance at beginning of year | 438,912 | 171,453 | 298,297 | |
Net additions (disposals) / adjustments | 38,795 | 267,459 | (126,844) | |
Balance at end of year | 477,707 | 438,912 | 171,453 |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of year | 573,664 | 902,794 | 1,192,334 | |||||||||
Net additions /disposals | (531,209 | ) | (318,307 | ) | (289,540 | ) | ||||||
Valuation adjustments | - | (10,823 | ) | - | ||||||||
Balance at end of year | 42,455 | 573,664 | 902,794 |
Consolidated Financial Statements | December 31, 2021 | F-43 |
* Values expressed in thousands, except when indicated. |
The changes in the balance of “Equity instruments – Available-for-sale financial assets”Financial Assets Measured at Fair Value Through Other Comprehensive Income” were as follows:
Equity instruments - Financial Assets Measured At Fair Value Through Other Comprehensive Income
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of year | 1,162,332 | 1,653,644 | 1,329,810 | |||||||||
Net additions /disposals | 852,820 | (482,406 | ) | 307,917 | ||||||||
Valuation adjustments | (29,679 | ) | (8,906 | ) | 15,917 | |||||||
Balance at end of year | 1,985,473 | 1,162,332 | 1,653,644 |
Thousand of reais | 2021 | 2020 | 2019 | |
Balance at beginning of year | 72,173 | 157,306 | 40,986 | |
Net additions (disposals) / adjustments | (42,986) | (85,133) | 116,320 | |
Balance at end of year | 29,187 | 72,173 | 157,306 |
8. | Derivative financial instruments and short positions |
The main risk factors associated to derivatives contracted are related to exchange rates, interest rates and Short positionsstocks. To manage these and other market risk factors the Bank uses practices which include the measurement and follow up of the limit´s usage previously defined on internal committees, as well as the daily follow up of the portfolios values in risk, sensitivities and changes in the interest rate and exchange exposure, liquidity gaps, among other practices which allow the control and follow up on the main risk metrics that can affect the Bank´s position in the several markets which it acts. Based on this management model the Bank has accomplished its goal, using operations with derivatives, in optimize the relation risk/benefits even in situation with great volatility.
The derivatives fair value is determined through quotation of market prices. The swaps contracts fair value is determined using discounted cash flow modeling techniques, reflecting suitable risk factors. The fair value of NDF and Future contracts are also determined based on the quotation of market prices for derivatives traded in specific chamber (i.e. stock Exchange for example) or using the same methodology applied for swap contracts. The fair value of options derivatives (call and put) is determined based on the mathematical models, such as Black & Scholes, using yield rates, implied volatilities and the fair value of the corresponding asset. The current market prices are used to price the volatilities. For the derivatives which do not have prices directly disclosed by specific chamber, their fair values are obtained through pricing models which use market information, based on disclosed prices of more liquid assets. Interest rate curves and market volatilities are extracted from these prices to be used as first input in these models.
a) Trading and hedging derivatives
a.1) Derivatives recorded in the balance sheet and compensation accounts
Portfolio summary of trading derivative and used as hedge
2021 | 2020 | 2020 | 2020 | 2019 | 2019 | 2019 | ||
As Previously Reported | Adjustment | As Revised | As Previously Reported | Adjustment | As Revised | |||
Assets | ||||||||
Swap Differentials Receivable | 7,641,355 | 14,729,642 | - | 14,729,642 | 14,634,863 | - | 14,634,863 | |
Option Premiums to Exercise | 1,385,889 | 4,974,618 | - | 4,974,618 | 1,065,753 | - | 1,065,753 | |
Forward Contracts and Others | 12,112,679 | 9,166,360 | (2,623,106) | 6,543,254 | 4,745,118 | (1,624,834) | 3,120,284 | |
Total | 21,139,923 | 28,870,620 | (2,623,106) | 26,247,514 | 20,445,734 | (1,624,834) | 18,820,900 | |
Liabilities | ||||||||
Swap Differentials Payable | 8,538,705 | 18,327,611 | - | 18,327,611 | 16,458,397 | - | 16,458,397 | |
Option Premiums Launched | 2,256,244 | 4,926,994 | - | 4,926,994 | 1,699,729 | - | 1,699,729 | |
Forward Contracts and Others | 13,824,032 | 8,725,333 | (2,623,106) | 6,102,227 | 4,271,851 | (1,624,834) | 2,647,017 | |
Total | 24,618,981 | 31,979,938 | (2,623,106) | 29,356,832 | 22,429,977 | (1,624,834) | 20,805,143 |
In 2021, the Company revisited the accounting treatment in relation to the electric energy commercialization contracts, which no longer include the amount of the "principal" and, therefore, only the adjustments to fair value and interest determined in these operations are recorded in equity accounts.
a.1) Derivatives RecordedFor better comparability purposes, the amounts of “principal” of energy trading operations recorded in Memorandumequity accounts, on December 31, 2020 and Balance sheets2019, were reduced from the headings of “Derivatives => Forward and Other Contracts” in the amounts of BRL 2,623,106 (2019 - BRL 1,624,834), with corresponding impact on total assets and liabilities and between the lines "Financial assets measured at fair value in profit or loss held for trading" and "Financial liabilities measured at fair value in Income Held for Trading" in the statement of cash flows as of December 31, 2020 and 2019. There was no change in the balance of stockholders' equity or income. The financial statements as of December 31, 2020 and 2019, presented for comparison purposes, already include the aforementioned adjustments.
Portfolio Summary of Trading Derivative and Used as Hedge
2016 | 2015 | 2014 | ||||||||||
Assets | ||||||||||||
Swap Differentials Receivable | 15,321,646 | 22,312,106 | 5,538,082 | |||||||||
Option Premiums to Exercise | 935,520 | 895,684 | 628,851 | |||||||||
Forward Contracts and Others | 8,445,807 | 3,042,572 | 2,560,755 | |||||||||
Total | 24,702,973 | 26,250,362 | 8,727,688 | |||||||||
Liabilities | ||||||||||||
Swap Differentials Payable | 12,267,819 | 20,154,760 | 6,552,166 | |||||||||
Option Premiums Launched | 1,166,002 | 827,757 | 569,011 | |||||||||
Forward Contracts and Others | 6,802,794 | 3,734,442 | 2,057,085 | |||||||||
Total | 20,236,615 | 24,716,959 | 9,178,262 |
F-32
Consolidated Financial Statements | December 31, 2021 | F-44 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
* Values expressed in thousands, except when indicated. |
Summary by Category
Summary by Category | ||||||||||||||||
Trading | 2021 | 2020 | 2019 | |||||||||||||
Notional (1) | Curve Value | Fair Value | Notional (1) | Curve Value | Fair Value | Notional (1) | Fair Value | |||||||||
Swap | 837,762,019 | (1,804,744) | (897,350) | 398,925,842 | (3,076,947) | (3,597,969) | 561,967,799 | (1,823,534) | ||||||||
Assets | 418,137,448 | 13,162,674 | 7,641,355 | 278,752,387 | 6,249,519 | 14,729,642 | 282,164,189 | 147,010,930 | ||||||||
CDI (Interbank Deposit Rates) | 66,837,268 | 318,541 | (778,177) | 41,316,315 | 326,586 | 3,010,880 | 40,550,627 | 16,908,791 | ||||||||
Fixed Interest Rate - Real | 231,741,021 | 9,269,271 | 6,412,471 | 54,159,848 | 4,013,563 | 9,607,342 | 47,140,927 | - | ||||||||
Indexed to Price and Interest Rates | 2,089,110 | - | (234,488) | 5,124,411 | - | - | 2,388,118 | - | ||||||||
Foreign Currency | 91,837,446 | 799,550 | 2,003,728 | 178,076,136 | 959,322 | 1,039,529 | 192,084,517 | 130,102,139 | ||||||||
Others | 25,632,603 | 2,775,313 | 237,822 | 75,676 | 950,048 | 1,071,891 | - | - | ||||||||
Liabilities | 419,624,571 | (14,967,418) | (8,538,705) | 120,173,455 | (9,326,465) | (18,327,611) | 279,803,610 | (148,834,464) | ||||||||
CDI (Interbank Deposit Rates) | 321,402,883 | (4,171,481) | (12,327,484) | 33,239,801 | (6,911,748) | (13,693,733) | 24,353,405 | - | ||||||||
Fixed Interest Rate - Real | 48,874,762 | (6,760,576) | 2,467,425 | 45,088,689 | (2,183,507) | (2,772,479) | 67,937,624 | (24,079,732) | ||||||||
Indexed to Price and Interest Rates | 22,827,336 | - | (728,677) | 33,026,692 | - | (450,958) | 125,829,755 | (123,445,067) | ||||||||
Foreign Currency | 887,129 | (28,407) | 2,287,852 | 6,636,885 | (25) | 153,695 | 60,394,529 | - | ||||||||
Others | 25,632,461 | (4,006,955) | (237,822) | 2,181,388 | (231,186) | (1,564,135) | 1,288,297 | (1,309,665) | ||||||||
Options | 1,130,172,099 | (595,345) | (885,703) | 2,043,286,085 | (282,110) | 47,624 | 1,446,536,133 | (1,222,465) | ||||||||
Purchased Position | 564,829,758 | 1,240,879 | 1,385,889 | 1,006,266,897 | 1,869,806 | 4,974,618 | 678,089,904 | 381,706 | ||||||||
Call Option - US Dollar | 9,898,179 | 271,464 | 382,237 | 1,188,387 | 47,898 | 39,202 | 171,871 | (281) | ||||||||
Put Option - US Dollar | 4,094,316 | 140,280 | 187,123 | 1,948,673 | 79,019 | 109,075 | 1,456,975 | 4,355 | ||||||||
Call Option - Other | 31,248,540 | 459,995 | 510,976 | 134,761,947 | 558,794 | 1,093,583 | 98,154,363 | 818,664 | ||||||||
Interbank Market | 28,499,055 | 444,446 | 495,214 | 101,421,659 | 557,167 | 556,039 | 98,154,363 | 819,262 | ||||||||
Others (2) | 2,749,485 | 15,549 | 15,763 | 33,340,288 | 1,627 | 537,544 | - | (598) | ||||||||
Put Option - Other | 519,588,723 | 369,140 | 305,553 | 868,367,889 | 1,184,095 | 3,732,758 | 578,306,695 | (441,032) | ||||||||
Interbank Market | 519,588,723 | 369,140 | 305,553 | 864,852,555 | 1,183,630 | 3,729,297 | 578,306,695 | (440,959) | ||||||||
Others (2) | - | - | - | 3,515,334 | 464 | 3,461 | - | (73) | ||||||||
Sold Position | 565,342,341 | (1,836,224) | (2,256,244) | 1,037,019,188 | (2,151,915) | (4,926,994) | 768,446,229 | (1,604,171) | ||||||||
Call Option - US Dollar | 4,111,016 | (170,553) | (152,348) | 1,537,670 | (70,201) | 699,243 | 254,945 | (1,472) | ||||||||
Put Option - US Dollar | 4,017,161 | (348,715) | (287,825) | 2,315,919 | (137,061) | (192,335) | 263,994 | (2,842) | ||||||||
Call Option - Other | 33,383,234 | (719,460) | (872,335) | 130,919,394 | (588,023) | (453,919) | 174,166,802 | (440,731) | ||||||||
Interbank Market | 31,730,928 | (713,773) | (858,586) | 120,156,285 | (566,813) | (464,405) | 174,166,802 | (440,959) | ||||||||
Others (2) | 1,652,305 | (5,687) | (13,749) | 10,763,109 | (21,210) | 10,486 | - | 228 | ||||||||
Put Option - Other | 523,830,930 | (597,497) | (943,736) | 902,246,206 | (1,356,630) | (4,979,984) | 593,760,488 | (1,159,126) | ||||||||
Interbank Market | 523,830,930 | (597,497) | (943,736) | 869,328,317 | (1,350,314) | (4,597,427) | 593,760,488 | (1,159,038) | ||||||||
Others (2) | - | - | - | 32,917,888 | (6,316) | (382,557) | - | (88) | ||||||||
Futures Contracts | 287,984,278 | - | - | 270,258,566 | - | - | 433,873,180 | - | ||||||||
Purchased Position | 148,237,279 | - | - | 110,275,866 | - | - | 72,912,029 | - | ||||||||
Exchange Coupon (DDI) | 85,931,389 | - | - | 12,438,695 | - | - | 7,394,951 | - | ||||||||
Interest Rates (DI1 and DIA) | 28,491,764 | - | - | 97,837,171 | - | - | 55,430,519 | - | ||||||||
Foreign Currency | 33,797,350 | - | - | - | - | - | 9,978,419 | - | ||||||||
Indexes (3) | 16,776 | - | - | - | - | - | - | - | ||||||||
Others | - | - | - | - | - | - | 108,140 | - | ||||||||
Sold Position | 139,746,999 | - | - | 159,982,699 | - | - | 360,961,151 | - | ||||||||
Exchange Coupon (DDI) | 60,606,204 | - | - | 73,114,014 | - | - | 146,032,485 | - | ||||||||
Interest Rates (DI1 and DIA) | 53,267,620 | - | - | 67,958,767 | - | - | 196,170,105 | - | ||||||||
Foreign Currency | 25,678,296 | - | - | 18,653,658 | - | - | 17,305,604 | - | ||||||||
Indexes (3) | 194,879 | - | - | 256,261 | - | - | 290,254 | - | ||||||||
Treasury Bonds/Notes | - | - | - | - | - | - | 1,162,703 | - | ||||||||
Forward Contracts and Others | 167,611,313 | 2,836,843 | (1,711,352) | 165,663,806 | 2,693,759 | 441,028 | 169,401,317 | 483,267 | ||||||||
Purchased Commitment | 93,097,212 | 5,345,415 | 12,112,679 | 96,309,648 | 1,370,654 | 6,543,254 | 79,970,842 | 3,120,284 | ||||||||
Currencies | 83,752,185 | 2,738,485 | 8,501,934 | 87,254,202 | 1,370,654 | 5,026,566 | 78,344,925 | 2,794,330 | ||||||||
Others | 9,345,027 | 2,606,930 | 3,610,745 | 9,055,447 | - | 1,516,688 | 1,625,917 | 325,954 | ||||||||
Sold Commitment | 74,514,101 | (2,508,572) | (13,824,032) | 69,354,158 | 1,323,105 | (6,102,227) | 89,430,475 | (2,647,017) | ||||||||
Currencies | 71,611,500 | (1,141,826) | (11,932,009) | 64,986,757 | 1,323,328 | (4,846,929) | 87,801,864 | (2,275,227) | ||||||||
Others | 2,902,602 | (1,366,746) | (1,892,023) | 4,367,401 | (223) | (1,255,298) | 1,628,611 | (371,790) |
Trading | 2016 | 2015 | 2014 | |||||||||||||||||||||
Notional | Fair Value | Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||
"Swap" | 381,238,135 | 3,142,125 | 611,162,351 | 3,221,966 | 569,872,773 | (332,734 | ) | |||||||||||||||||
Asset | 196,887,188 | 24,311,485 | 315,466,085 | 38,512,406 | 284,533,034 | 67,713,764 | ||||||||||||||||||
CDI (InterBank Deposit Rates) | 44,868,680 | 22,759,822 | 38,808,344 | 9,081,792 | 70,772,781 | - | ||||||||||||||||||
Fixed Interest Rate - Real | 126,300,261 | - | 200,528,046 | - | 83,317,134 | 67,425,070 | ||||||||||||||||||
Indexed to Price and Interest Rates | 9,225,789 | - | 15,491,509 | 6,421,310 | 31,603,343 | 288,694 | ||||||||||||||||||
Foreign Currency | 16,492,458 | 1,551,663 | 60,626,540 | 23,009,304 | 98,810,878 | - | ||||||||||||||||||
Others | - | - | 11,646 | - | 28,898 | - | ||||||||||||||||||
Liabilities | 184,350,947 | (21,169,360 | ) | 295,696,266 | (35,290,440 | ) | 285,339,739 | (68,046,498 | ) | |||||||||||||||
CDI (InterBank Deposit Rates) | 23,178,722 | - | 32,000,584 | - | 101,623,563 | (30,163,786 | ) | |||||||||||||||||
Fixed Interest Rate - Real | 133,185,717 | (17,414,147 | ) | 218,588,847 | (35,280,694 | ) | 16,491,571 | - | ||||||||||||||||
Indexed to Price and Interest Rates | 12,767,212 | (3,518,297 | ) | 6,930,103 | - | 31,118,848 | - | |||||||||||||||||
Foreign Currency | 15,049,776 | (38,836 | ) | 38,176,732 | (9,746 | ) | 136,072,590 | (37,879,212 | ) | |||||||||||||||
Others | 169,520 | (198,080 | ) | - | - | 33,167 | (3,500 | ) | ||||||||||||||||
Options | 175,841,405 | (230,482 | ) | 91,877,351 | 67,927 | 240,746,222 | 59,840 | |||||||||||||||||
Purchased Position | 83,883,966 | 935,520 | 46,024,648 | 895,684 | 116,184,661 | 628,851 | ||||||||||||||||||
Call Option - US Dollar | 12,693,748 | 181,463 | 5,018,652 | 665,655 | 3,942,457 | 331,533 | ||||||||||||||||||
Put Option - US Dollar | 3,788,161 | 392,048 | 2,735,625 | 31,520 | 1,767,822 | 49,704 | ||||||||||||||||||
Call Option - Other | 20,115,932 | 62,517 | 14,106,701 | 113,809 | 56,931,274 | 153,976 | ||||||||||||||||||
InterBank Market | 17,391,500 | 7,062 | 13,114,822 | 93,435 | 51,308,444 | 118,061 | ||||||||||||||||||
Others(1) | 2,724,432 | 55,455 | 991,879 | 20,374 | 5,622,830 | 35,915 | ||||||||||||||||||
Put Option - Other | 47,286,125 | 299,492 | 24,163,670 | 84,700 | 53,543,108 | 93,638 | ||||||||||||||||||
InterBank Market | 46,106,600 | 18,029 | 23,350,994 | 4,558 | 49,105,277 | 1,335 | ||||||||||||||||||
Others(1) | 1,179,525 | 281,463 | 812,676 | 80,142 | 4,437,831 | 92,303 | ||||||||||||||||||
Sold Position | 91,957,439 | (1,166,002 | ) | 45,852,703 | (827,757 | ) | 124,561,561 | (569,011 | ) | |||||||||||||||
Call Option - US Dollar | 4,314,988 | (141,172 | ) | 3,331,244 | (596,729 | ) | 4,239,625 | (428,681 | ) | |||||||||||||||
Put Option - US Dollar | 7,390,733 | (952,407 | ) | 4,402,202 | (73,815 | ) | 1,774,640 | (25,163 | ) | |||||||||||||||
Call Option - Other | 30,441,646 | (46,940 | ) | 14,567,407 | (122,683 | ) | 54,354,491 | (103,436 | ) | |||||||||||||||
InterBank Market | 27,597,764 | (4,087 | ) | 13,730,262 | (112,707 | ) | 53,571,293 | (72,078 | ) | |||||||||||||||
Others(1) | 2,843,882 | (42,853 | ) | 837,145 | (9,976 | ) | 783,198 | (31,358 | ) | |||||||||||||||
Put Option - Other | 49,810,072 | (25,483 | ) | 23,551,850 | (34,530 | ) | 64,192,805 | (11,731 | ) | |||||||||||||||
InterBank Market | 49,245,495 | (5,793 | ) | 23,218,228 | (1,615 | ) | 60,555,093 | (1,950 | ) | |||||||||||||||
Others(1) | 564,577 | (19,690 | ) | 333,622 | (32,915 | ) | 3,637,712 | (9,781 | ) | |||||||||||||||
Futures Contracts | 104,651,180 | - | 184,191,204 | - | 302,239,388 | - | ||||||||||||||||||
Purchased Position | 40,396,456 | - | 41,186,341 | - | 105,230,874 | - | ||||||||||||||||||
Exchange Coupon (DDI) | 14,473,180 | - | 4,274,352 | - | 6,888,319 | - | ||||||||||||||||||
Interest Rates (DI1 and DIA) | 23,756,523 | - | 22,760,484 | - | 94,307,498 | - | ||||||||||||||||||
Foreign Currency | 1,393,538 | - | 11,710,934 | - | 3,897,223 | - | ||||||||||||||||||
Indexes(2) | 195,160 | - | 577,149 | - | 137,834 | - | ||||||||||||||||||
Others | 578,055 | - | 1,863,422 | - | - | - | ||||||||||||||||||
Sold Position | 64,254,724 | - | 143,004,863 | - | 197,008,514 | - | ||||||||||||||||||
Exchange Coupon (DDI) | 15,048,490 | - | 58,499,504 | - | 50,378,949 | - | ||||||||||||||||||
Interest Rates (DI1 and DIA) | 29,047,678 | - | 20,836,314 | - | 57,355,214 | - | ||||||||||||||||||
Foreign Currency | 17,384,256 | - | 35,463,589 | - | 15,845,107 | - | ||||||||||||||||||
Indexes(2) | 185,506 | - | 500,993 | - | 8,418 | - | ||||||||||||||||||
Treasury Bonds/Notes | 2,588,794 | - | 49,163 | - | 249,203 | - | ||||||||||||||||||
Others | - | - | 27,655,300 | - | 73,171,623 | - | ||||||||||||||||||
Forward Contracts and Others | 50,853,154 | 1,643,013 | 51,051,014 | (691,870 | ) | 46,406,749 | 503,670 | |||||||||||||||||
Purchased Commitment | 20,864,170 | 3,386,347 | 21,570,405 | 3,028,038 | 20,552,988 | 270,611 | ||||||||||||||||||
Currencies | 19,951,984 | 3,391,275 | 21,570,405 | 2,690,632 | 20,302,193 | 19,677 | ||||||||||||||||||
Others | 912,186 | (4,928 | ) | - | 337,406 | 250,795 | 250,934 | |||||||||||||||||
Sold Commitment | 29,988,984 | (1,743,334 | ) | 29,480,609 | (3,719,908 | ) | 25,853,761 | 233,059 | ||||||||||||||||
Currencies | 29,911,406 | (1,826,965 | ) | 29,140,219 | (3,382,384 | ) | 25,708,788 | 474,273 | ||||||||||||||||
Others | 77,578 | 83,631 | 340,390 | (337,524 | ) | 144,973 | (241,214 | ) |
(1) | Nominal value of updated contracts. |
(2) | Includes options of index, mainly being options involving US treasury, shares and stock indexes. |
(3) | Includes Bovespa and S&P index. |
(1) Includes stock options, indices and commodities.
(2) Includes Bovespa index and S&P.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Consolidated Financial Statements | December 31, 2021 | F-45 |
* Values expressed in thousands, except when indicated. |
a.2) Derivatives Financial Instruments by Counterparty
Notional | 2016 | |||||||||||||||
Customers | Related Parties | Financial Institutions(1) | Total | |||||||||||||
"Swap" | 43,082,605 | 15,910,871 | 137,893,712 | 196,887,188 | ||||||||||||
Options | 5,916,105 | 839,182 | 169,086,118 | 175,841,405 | ||||||||||||
Futures Contracts | - | - | 104,651,180 | 104,651,180 | ||||||||||||
Forward Contracts and Others | 29,044,676 | 17,563,319 | 4,245,159 | 50,853,154 |
(1) Includes trades with the BM&FBovespaNotional 2021 Related Financial Customers Parties Institutions (1) Total Swap 152,650,125 233,667,783 31,819,540 418,137,448 Options 1,127,446,708 1,641,361 1,084,030 1,130,172,099 Futures Contracts 287,984,278 - - 287,984,278 Forward Contracts and Others 70,457,399 96,857,222 296,692 167,611,313
(1) | Includes trades with B3 S.A. and other securities and commodities exchanges. |
Notional | 2020 | 2019 | |||||
Related | Financial | ||||||
Customers | Parties | Institutions (1) | Total | Total | |||
Swap | 40,241,232 | 97,784,443 | 140,726,712 | 278,752,387 | 282,164,189 | ||
Options | 23,788,051 | 922,740 | 2,018,575,293 | 2,043,286,085 | 1,446,522,955 | ||
Futures Contracts | 3,198,239 | - | 267,060,326 | 270,258,566 | 433,873,182 | ||
Forward Contracts and Others | 67,837,797 | 49,447,532 | 45,755,371 | 163,040,700 | 169,401,317 |
(1) | Includes trades with B3 S.A. and other securities and commodities exchanges. |
Notional | 2015 | 2014 | ||||||||||||||||||
Customers | Related Parties | Financial Institutions(1) | Total | Total | ||||||||||||||||
"Swap" | 127,294,285 | 129,084,483 | 59,087,317 | 315,466,085 | 284,533,034 | |||||||||||||||
Options | 3,958,901 | 1,458,552 | 86,459,898 | 91,877,351 | 240,746,222 | |||||||||||||||
Futures Contracts | - | - | 184,191,204 | 184,191,204 | 302,239,388 | |||||||||||||||
Forward Contracts and Others | 32,603,287 | 15,172,977 | 3,274,750 | 51,051,014 | 46,406,749 |
(1) Includes trades with the BM&FBovespa and other securities and commodities exchanges.
a.3) Derivatives Financial Instruments by Maturity
Notional | 2021 | ||||||
Up to | From 3 to | Over | |||||
3 Months | 12 Months | 12 Months | Total | ||||
Swap | 30,501,795 | 99,817,727 | 287,817,926 | 418,137,448 | |||
Options | 749,406,698 | 128,500,299 | 252,265,102 | 1,130,172,099 | |||
Futures Contracts | 167,320,563 | 45,239,639 | 75,424,076 | 287,984,278 | |||
Forward Contracts and Others | 72,761,669 | 67,060,436 | 27,789,208 | 167,611,313 | |||
Notional | 2020 | 2019 | |||||
Up to | From 3 to | Over | |||||
3 Months | 12 Months | 12 Months | Total | Total | |||
Swap | 58,388,872 | 98,073,784 | 122,289,731 | 278,752,387 | 282,164,189 | ||
Options | 931,156,902 | 572,661,800 | 539,467,382 | 2,043,286,084 | 1,446,522,962 | ||
Futures Contracts | 181,521,486 | 36,328,390 | 52,408,689 | 270,258,566 | 433,873,181 | ||
Forward Contracts and Others | 104,098,351 | 33,788,798 | 25,153,551 | 163,040,700 | 169,401,317 |
Notional | 2016 | |||||||||||||||
Up to | From 3 to | Over | ||||||||||||||
3 Months | 12 Months | 12 Months | Total | |||||||||||||
"Swap" | 17,499,576 | 26,810,380 | 152,577,232 | 196,887,188 | ||||||||||||
Options | 10,785,982 | 10,624,762 | 154,430,661 | 175,841,405 | ||||||||||||
Futures Contracts | 66,298,799 | 16,041,642 | 22,310,739 | 104,651,180 | ||||||||||||
Forward Contracts and Others | 28,235,186 | 17,826,727 | 4,791,241 | 50,853,154 |
Consolidated Financial Statements | December 31, 2021 | F-46 |
* Values expressed in thousands, except when indicated. |
Notional | 2015 | 2014 | ||||||||||||||||||
Up to | From 3 to | Over | ||||||||||||||||||
3 Months | 12 Months | 12 Months | Total | Total | ||||||||||||||||
"Swap" | 20,862,816 | 28,175,069 | 266,428,200 | 315,466,085 | 284,533,034 | |||||||||||||||
Options | 36,064,710 | 52,183,999 | 3,628,642 | 91,877,351 | 240,746,222 | |||||||||||||||
Futures Contracts | 59,763,763 | 92,346,365 | 32,081,076 | 184,191,204 | 302,239,388 | |||||||||||||||
Forward Contracts and Others | 26,545,840 | 16,772,668 | 7,732,506 | 51,051,014 | 46,406,749 | |||||||||||||||
a.4) Derivatives by Market Trading | ||||||||||||||||||||
Notional | 2016 | |||||||||||||||
Stock Exchange(1) | Cetip(2) | Over the Counter | Total | |||||||||||||
"Swap" | 133,759,441 | 61,856,098 | 1,271,649 | 196,887,188 | ||||||||||||
Options | 166,899,868 | 8,234,147 | 707,390 | 175,841,405 | ||||||||||||
Futures Contracts | 104,651,180 | - | - | 104,651,180 | ||||||||||||
Forward Contracts and Others | - | 35,427,573 | 15,425,581 | 50,853,154 |
(1) a.4) Derivatives by Market Trading
Notional | Stock Exchange (1) | Over the Counter | 2021 | ||||
Total | |||||||
Swap | 111,418,682 | 306,718,767 | 418,137,448 | ||||
Options | 1,094,484,434 | 35,687,665 | 1,130,172,099 | ||||
Futures Contracts | 287,984,278 | - | 287,984,278 | ||||
Forward Contracts and Others | 7,108,898 | 160,502,415 | 167,611,313 |
(1) | Includes trades with B3 S.A. |
Notional | Stock Exchange (1) | Over the Counter | 2020 | 2019 | |||
Total | Total | ||||||
Swap | 82,122,957 | 196,629,429 | 278,752,387 | 282,164,189 | |||
Options | 1,940,172,322 | 103,113,762 | 2,043,286,084 | 1,446,522,962 | |||
Futures Contracts | 270,258,566 | - | 270,258,566 | 433,873,181 | |||
Forward Contracts and Others | 25,182,494 | 137,858,206 | 163,040,700 | 169,401,317 |
(1) | Includes trades with B3 S.A. |
a.5) Information on Credit Derivatives
Banco Santander uses credit derivatives with the BM&FBovespaobjectives of performing counterparty risk management and other securitiesmeeting its customers' demands, performing protection purchase and commodities exchanges.sale transactions through credit default swaps and total return swaps, primarily related to Brazilian sovereign risk securities.
(2) Includes amounts tradedTotal Return Swaps – TRS
Credit derivatives are where the exchange of the return of the reference obligation occurs through a cash flow and where, in the event of a credit event, the protection buyer is usually entitled to receive from the protection seller the equivalent of the difference between the and the fair value (market value) of the reference obligation on other clearinghouses.the settlement date of the contract.
Credit Default Swaps – CDS
They are credit derivatives where, in the event of a credit event, the protection buyer is entitled to receive from the protection seller the equivalent to the difference between the face value of the CDS contract and the fair value (market value) of the reference obligation on the settlement date of the contract. In return, the seller receives a fee for the sale of the protection.
Below, the composition of the Credit Derivatives portfolio shown by its reference value and effect on the calculation of Required Shareholders' Equity (PLE).
Composition of the Credit Derivatives portfolio shown by its reference value and effect in the calculation of Required Stockholders' Equity
2021 | 2020 | 2019 | |||||||||
Nominal Value | Nominal Value | Nominal Value | Nominal Value | Nominal Value | Nominal Value | ||||||
Retained Risk | Transferred Risk - | Retained Risk | Transferred Risk - | Retained Risk | Transferred Risk - | ||||||
Total Rate of Return Swap | Credit Swap | Total Rate of Return Swap | Credit Swap | Total Rate of Return Swap | Credit Swap | ||||||
Credit swaps | 3,984,392 | - | 3,483,628 | 519,670 | 2,435,880 | - | |||||
Total | 3,984,392 | - | 3,483,628 | 519,670 | 2,435,880 | - |
During the period, there was no occurrence of credit event related to triggering events provided for in the contracts.
Consolidated Financial Statements | December 31, 2021 | F-47 |
* Values expressed in thousands, except when indicated. |
2021 | 2020 | 2019 | |||||||
Over | Over | Over | |||||||
Maximum Potential for Future Payments - Gross | 12 Months | Total | 12 Months | Total | 12 Months | Total | |||
Per Instrument | |||||||||
CDS | 3,984,392 | 3,984,392 | 4,003,298 | 4,003,298 | 2,435,880 | 2,435,880 | |||
Total | 3,984,392 | 3,984,392 | 4,003,298 | 4,003,298 | 2,435,880 | 2,435,880 | |||
Per Risk Classification | |||||||||
Below Investment Grade | 3,984,392 | 3,984,392 | 4,003,298 | 4,003,298 | 2,435,880 | 2,435,880 | |||
Total | 3,984,392 | 3,984,392 | 4,003,298 | 4,003,298 | 2,435,880 | 2,435,880 | |||
Per Reference Entity | |||||||||
Brazilian Government | 3,984,392 | 3,984,392 | 4,003,298 | 4,003,298 | 2,435,880 | 2,435,880 | |||
Total | 3,984,392 | 3,984,392 | 4,003,298 | 4,003,298 | 2,435,880 | 2,435,880 |
a.6) Hedge Accounting
Notional | 2015 | 2014 | ||||||||||||||||||
Stock Exchange(1) | Cetip(2) | Over the Counter | Total | Total | ||||||||||||||||
"Swap" | 157,833,059 | 114,219,144 | 43,413,882 | 315,466,085 | 284,533,034 | |||||||||||||||
Options | 87,165,911 | 4,129,727 | 581,713 | 91,877,351 | 240,746,222 | |||||||||||||||
Futures Contracts | 184,191,204 | - | - | 184,191,204 | 302,239,388 | |||||||||||||||
Forward Contracts and Others | - | 33,428,467 | 17,622,547 | 51,051,014 | 46,406,749 |
(1) Includes trades with the BM&FBovespa
There are three types of hedge accounting: Fair Value Hedge, Cash Flow Hedge and other securities and commodities exchanges.Foreing Currency Investments Hedge.
(2) Includes amounts traded on other clearinghouses.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
a.5) Derivatives Used as Hedge Instruments
DerivativesThe derivatives used as hedge by indexhedging instruments are represented as follows:
a.6.I ) Fair Value Hedge
Banco Santander’s fair value hedging strategy consists of hedging the exposure to changes in fair value in receivables and interest payments related to recognized assets and liabilities.
The adopted fair value strategy adopted by management methodology segregates transactions by risk factor (e.g. Real/Dollar foreign exchange risk, fixed Reais interest rate risk, Dollar foreign exchange coupon risk, inflation risk, interest rate risk, etc.). The transactions generate exposures that are consolidated by risk factor and compared with internal pre-established limits.
In order to hedge againstthe changes of fair value in receivables and interest payments, Santander uses interest rate Swap contracts related to pre-fixed (pre-define interest rate at inception) assets and liabilities.
Banco Santander applies fair value hedgeshedge as follows:
• It contractsDesignates Foreign Currency + Coupon against % CDI swapsversus %CDI and Pre - Real Interest Rate or contracts dollar futures (DOL, DDI/DI) as derivatives instruments in Hedge Accounting structures, with foreign currency loan operations being the object of such transactions.
• The Bank has a portfolio of credit assets denominated in US dollars at the fixed rate in the balance sheet of Santander EFC, whose operations are recorded in Euro. As a way of managing this mismatch, the Bank designates each Euro Floating Foreign Currency swap versus Fixed Dollar as the market risk hedge of the corresponding loan.
• The Bank has a portfolio of assets indexed to the Euro and traded at offshore branches. In the transaction, the value of the asset in Euro will be converted to the Dollar by the rate of the exchange contract of the transaction. As from the conversion, the principal amount of the funding, already expressed in US dollars, will be adjusted by a floating or fixed rate. The assets will be covered with Swap Cross Currency in order to cross the risk in Euro for LIBOR + Coupon.
• The Bank has a pre-fixed interest rate risk generated by government securities (NTN-F and LTN) in the Financial Assets portfolio measured through Other Comprehensive Income. To manage this mismatch, the entity contracts DI futures on the Stock Exchange and designates them as a derivative instrument in a hedge accounting framework.
• The Bank has pre-fixed interest rate risk on its liabilities through issues of real estate credit bills (LCI). To manage this risk, the entity contracts DI futures on the Exchange and designates them as a hedging instrument in a hedge accounting structure.
• The Bank has a risk to the IPCA index generated by the issuance of Guaranteed Real Estate Bills. To manage this risk, the Bank contracts IPCA futures (DAP) on the Exchange and designates them as a hedging instrument in a Hedge Accounting structure.
• The Bank has a risk to the IPCA (Broad pricing to consumers index) generated by debentures in the portfolio of securities available for sale. To manage this mismatch, it contracts IPCA (DAP) futures on the Stock Exchange and designates them as a derivative instrument in a Hedge Accounting structure, having funding operations as the hedged item in this relationship, based on the instrument of Assumption of Foreign Currency Debt. The hedging relationships were designated in March 2015 and the related Swaps will mature between January 2017 and 2020.structure.
• It contracts Foreign Currency + Coupon against % CDI swaps (sold jointly to the client) and designates them as a derivative instrument in a Hedge Accounting structure, having foreign currency loans as the hedged item in this relationship. The hedging relationships were designated in January 2016 and the related Swaps will mature between January 2017 and 2021.
• Banco Santander has a portfolio of Reais-indexed Assets traded in the Cayman Islands. In the Reais transaction, the value of the Dollar asset will be converted into Reais at the exchange rate in the contract on the date of recorded of the transaction. After the conversion, the principal, already denominated in Reais will be restated by % CDI or a pre-fixed rate. The Assets will be covered by Cross Currency Swaps in order to transfer the risk in Reais to LIBOR + Coupon. The hedging relationships were designated in October 2015 and the related Swaps will mature between March 2017 and 2021.
• Banco Santander has a portfolio of loan assets issued in foreign currency - Dollar at a fixed rate in the Balance Sheet of the “Santander EFC” (independent subsidiary in Spain), whose functional currency is the euro. In order to manage this mismatch, the Bank designates each Foreign Currency Floating EUR X Fixed Dollar swap as the fair value hedge of the corresponding loan. The hedging relationships were designated in 2013 and the related Swaps will mature between June 2017 and 2020.
• Banco Santander has a portfolio of private securities indexed to Brazilian inflation (IPCA and IGPM) combined with (IPCA or IGPM) + Coupon against CDI swaps; the Bank designates each Inflation + Coupon against CDI swap as the fair value hedge of the corresponding asset. The hedging relationships were designated between 2012 and 2015 and was matured June 2016.
• Santander has a portfolio of private securities in foreign currency combined with Foreign Currency + Coupon against CDI swaps; the Bank designates each Foreign Currency + Coupon against CDI swap as the fair value hedge of the corresponding asset. The hedging relationships were designated in 2011 and 2012 and was matured June 2016.
• Banco Santander has a portfolio of private securities indexed to the TJLP (Long-term Interest Term) combined with (TJLP) + Coupon against CDI swaps; the Bank designates each TJLP + Coupon against CDI swap as the fair value hedge of the corresponding asset. The hedging relationships were designated between 2012 and 2015 and was matured June 2016.
In order to assess the effectiveness and measure the ineffectiveness of the strategies, the institution complies with international accounting standard IAS 39, which requires that the effectiveness test be performed at the beginning (prospective test) of the hedge structure and be repeated periodically (prospective and retrospective tests) in order to demonstrate that the hedge ratio remains effective.
Consolidated Financial Statements | December 31, 2021 | F-48 |
* Values expressed in thousands, except when indicated. |
To assess the effectiveness and measure the ineffectiveness of the strategies, the Bank follows IAS 39, which requires that the effectiveness test be performed at the beginning (prospective test) of the hedge structure, and repeated periodically (prospective and retrospective test) to demonstrate that the hedge relationship remains effective.
a) Prospective test:In accordance with according to the standard, the prospective test must be performeddone on the inceptionstart date (inception) and on a quarterly basis in order to demonstrate that the expectationsexpectation regarding the effectiveness of the hedge ratio arerelationship is high.
a.1) InitialThe initial prospective test (at inception):it is restricted to a qualitative review of the critical terms and conditions of the hedging instrument and the hedged item in orderobject, to conclude whethera conclusion that changes in the fairmarket value of the twoboth instruments are expected to fully offsetcompletely cancel each other.other out.
a.2) PeriodicThe prospective periodic test:the sensitivity of the fairpresent value of the hedged itemobject and the hedging instrument will be periodically computed atto a parallel variation of 10 basis pointsBasis Points in the interest rate curve.curve will be computed periodically. For the purposes of effectiveness, thesethe ratio of the two sensitivity ratios shouldsensitivities must be between 80% and 125%.
b) Retrospective test:the retrospective effectiveness test will be performedconducted by comparing the MTM changemarket to market (mtm) variation of the hedginghedge instrument sincefrom the inceptionbeginning date with the MTM changevariation of the hedged item sincehedge object's mtm from the inception date, excluding the transaction’s liquidity and credit spread:beginning.
In fair value hedges, gains or losses, both on hedginghedge instruments and on hedged items (attributable to the type of risk being hedged)protected) are recognized directly in the consolidated statementincome statement.
Attributable to the type of income.risk being hedged
2021 | 2020 | 2019 | ||||||
Hedge Structure | Effective Portion Accumulated | Portion Ineffective | Effective Portion Accumulated | Portion Ineffective | Effective Portion Accumulated | Portion Ineffective | ||
Fair Value Hedge | ||||||||
Brazilian Treasury Bonds (LTN, NTN-F) | 3,756,394 | 0 | (2,183,841) | 0 | (2,853,807) | 0 | ||
Bonds (LEA) | 0 | 0 | - | 0 | (61,761) | 0 | ||
Resolution 2770 | 0 | 0 | - | 0 | (94) | 0 | ||
Trade Finance Off | 728 | 0 | (5,092) | 0 | (4,015) | 0 | ||
Total | 3,757,122 | 0 | (2,188,933) | 0 | (2,919,677) | 0 |
Hedge Instruments
12/31/2016 | 12/31/2015 | |||||||||||||||
Hedge Structure | Effective Portion Accumulated | Portion Ineffective | Effective Portion Accumulated | Portion Ineffective | ||||||||||||
Fair Value Hedge | ||||||||||||||||
Debentures | - | - | 10,502 | - | ||||||||||||
Eurobonds | 13,163 | - | 2,051 | - | ||||||||||||
NCE | - | - | 53,131 | - | ||||||||||||
Resolution 2770 | - | - | 35,338 | - | ||||||||||||
Trade Finance Off | 20,471 | - | 11,046 | - | ||||||||||||
Total | 33,634 | - | 112,068 | - |
12/31/2021 | ||||||||
Hedge | ||||||||
Hedge Instruments | Objects | |||||||
Curve | Adjustment to | Accounting | Curve | Adjustment to | Accounting | |||
Strategies | Value | Market Value | Value | Value | Market Value | Value | ||
Swap Contracts | 84,767 | (2,204) | 82,563 | 84,937 | 3,175 | 88,112 | ||
Credit Operations Hedge | 84,767 | (2,204) | 82,563 | 84,937 | 3,175 | 88,112 | ||
Future Contracts | 41,437,967 | (7,913) | 41,430,054 | 46,351,128 | (2,031,108) | 44,320,021 | ||
Credit Operations Hedge | 2,850,589 | (14,439) | 2,836,150 | 2,738,830 | 15,685 | 2,754,515 | ||
Hedge of Securities | 38,587,378 | 6,527 | 38,593,904 | 43,612,299 | (2,046,793) | 41,565,506 | ||
12/31/2020 | ||||||||
Hedge | ||||||||
Hedge Instruments | Objects | |||||||
Curve | Adjustment to | Accounting | Curve | Adjustment to | Accounting | |||
Strategies | Value | Market Value | Value | Value | Market Value | Value | ||
Future Contracts | 46,649,331 | - | 46,649,331 | 42,529,036 | 2,802,690 | 45,331,727 | ||
Hedge of Securities | 46,649,331 | - | 46,649,331 | 42,529,036 | 2,802,690 | 45,331,727 | ||
12/31/2019 | ||||||||
Hedge | ||||||||
Hedge Instruments | Objects | |||||||
Curve | Adjustment to | Accounting | Curve | Adjustment to | Accounting | |||
Strategies | Value | Market Value | Value | Value | Market Value | Value | ||
Swap Contracts | 3,249,741 | 101,264 | 3,351,004 | 3,555,326 | 662,773 | 4,218,099 | ||
Credit Operations Hedge | 1,118,210 | 28,993 | 1,147,202 | 1,423,809 | 63,231 | 1,487,040 | ||
Hedge of Securities | 2,131,532 | 72,271 | 2,203,802 | 2,131,517 | 599,542 | 2,731,059 | ||
Future Contracts | 789,631 | - | 789,631 | 45,427,125 | 3,000,490 | 48,427,614 | ||
Hedge of Securities | 789,631 | - | 789,631 | 45,427,125 | 3,000,490 | 48,427,614 |
(*) | The Bank has market risk hedge strategies, the objects of which are assets in its portfolio, which is why we demonstrate the passive edge of the respective instruments. For structures whose instruments are futures, we show the balance of the calculated daily adjustment, recorded in a clearing account. |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2016 | 2015 | 2014 | ||||||||||||||||||||||
Adjustment | Adjustment | Adjustment | ||||||||||||||||||||||
to Market | Fair Value | to Market | Fair Value | to Market | Fair Value | |||||||||||||||||||
Hedge Instruments | ||||||||||||||||||||||||
Swap Contracts | (26,703 | ) | (136,467 | ) | (66,990 | ) | 86,822 | (80,671 | ) | (163,307 | ) | |||||||||||||
Asset | 11,486 | 1,046,012 | 57,829 | 7,130,753 | 62,296 | 3,126,038 | ||||||||||||||||||
CDI (InterBank Deposit Rates)(1) (2) (7) | - | - | 4,376 | 1,783,075 | 1,549 | 1,515,508 | ||||||||||||||||||
Fixed Interest Rate - Real(2) | - | - | 27,184 | 3,549,659 | 707 | 492,912 | ||||||||||||||||||
Indexed to Foreign Currency - Pre Dollar(7) | 1,103 | 17,678 | 790 | 94,472 | - | - | ||||||||||||||||||
Indexed to Foreign Currency - USD/BRL - Dollar(3) | (8,957 | ) | 744,260 | (10,904 | ) | 665,025 | - | - | ||||||||||||||||
Indexed to Foreign Currency - Libor - Dollar(2) (4) (5) (7) | - | - | 1,962 | 612,623 | 10,850 | 352,587 | ||||||||||||||||||
Indexed to Foreign Currency - Swiss Franc(5) | - | - | - | - | 2,628 | 339,980 | ||||||||||||||||||
Indexed to Foreign Currency - Euro(7) | 19,340 | 284,074 | 34,347 | 390,156 | 46,092 | 400,066 | ||||||||||||||||||
Indexed to Foreign Currency - Pre YEN(8) | - | - | 74 | 35,743 | 470 | 24,985 | ||||||||||||||||||
Liabilities | (38,189 | ) | (1,182,479 | ) | (124,819 | ) | (7,043,931 | ) | (142,967 | ) | (3,289,345 | ) | ||||||||||||
Indexed to Foreign Currency - US Dollar(1)(7) | (14,958 | ) | (323,197 | ) | (55,892 | ) | (1,082,503 | ) | (82,987 | ) | (1,155,573 | ) | ||||||||||||
Indexed Indices of Prices and Interest(2) | - | - | (30,982 | ) | (831,156 | ) | (43,771 | ) | (1,291,277 | ) | ||||||||||||||
Indexed to Foreign Currency - Pre Dollar(4) | (1,103 | ) | (17,676 | ) | - | - | (555 | ) | (15,776 | ) | ||||||||||||||
CDI (InterBank Deposit Rates)(3) (5) | (18,395 | ) | (804,059 | ) | (12,298 | ) | (3,279,438 | ) | (900 | ) | (26,875 | ) | ||||||||||||
Indexed to Foreign Currency - Libor - US Dollar(6) (8) | - | - | (61 | ) | (41,513 | ) | (2,810 | ) | (376,420 | ) | ||||||||||||||
Fixed Interest Rate - Real(7) | (3,733 | ) | (37,547 | ) | (25,586 | ) | (1,809,321 | ) | (11,944 | ) | (423,424 | ) | ||||||||||||
Object of Hedge | ||||||||||||||||||||||||
Assets | 23,165 | 693,132 | 110,003 | 3,103,783 | 119,205 | 2,296,907 | ||||||||||||||||||
Loans and Receivables | 23,165 | 693,132 | 94,104 | 2,218,727 | 82,368 | 1,666,203 | ||||||||||||||||||
Indexed to Foreign Currency - US Dollar | 4,809 | 323,780 | 42,348 | 1,295,383 | 46,947 | 954,266 | ||||||||||||||||||
Indexed to Foreign Currency - Pre Dollar | - | - | - | - | (423 | ) | 15,365 | |||||||||||||||||
Indexed Indices of Prices and Interest | - | - | 52,984 | 916,765 | 32,415 | 453,559 | ||||||||||||||||||
CDI (InterBank Deposit Rates) | 13,253 | 331,805 | - | - | 600 | 25,110 | ||||||||||||||||||
Fixed Interest Rate - Real | 5,103 | 37,547 | (1,228 | ) | 6,579 | 2,829 | 217,903 | |||||||||||||||||
Debt instruments | - | - | 15,899 | 885,056 | 36,837 | 630,704 | ||||||||||||||||||
CDI (InterBank Deposit Rates) | - | - | 10,578 | 503,415 | - | - | ||||||||||||||||||
Fixed Interest Rate - Real | - | - | 5,321 | 381,641 | - | - | ||||||||||||||||||
Available-for-Sale Securities - Debentures | - | - | - | - | 36,837 | 630,704 | ||||||||||||||||||
Liabilities | 12,830 | (803,929 | ) | (8,383 | ) | (3,520,951 | ) | (2,826 | ) | (366,992 | ) | |||||||||||||
Foreign Borrowings | 12,830 | (803,929 | ) | (8,342 | ) | (3,485,167 | ) | - | - | |||||||||||||||
Indexed to Foreign Currency - US Dollar | 12,830 | (803,929 | ) | (8,342 | ) | (3,485,167 | ) | - | - | |||||||||||||||
Marketable debt securities | - | - | (41 | ) | (35,784 | ) | (2,826 | ) | (366,992 | ) | ||||||||||||||
Eurobonds | - | - | (41 | ) | (35,784 | ) | (2,826 | ) | (366,992 | ) |
(1) Instruments whose the hedge object are loans operations indexed in foreign currency - dollar with fair value R$323,780 (2015 - R$1,295,383 and 2014 - R$954,266) and on December 31, 2015 securities shown by debentures with fair value R$59,615 (2014 - R$82,819).
(2) On December 31, 2015, instruments whose hedge objects are indexed loans in price indices and interest amounted to R$916,765 (2014 - R$453,559) and instruments whose hedge object are securities shown by debentures with fair value R$443,800 (2014 - R$547,885).
(3) On December 31, 2014, instruments whose the hedge item are loans operations indexed in foreign currency fixed interest - US dollar with fair value R$15,365.
(4) Instruments whose the hedge item are loan operations indexed in CDI with fair value R$331,805 (2014 - R$25,110).
(5) On December 31, 2015, instruments whose hedge objects are obligations for securities abroad - Eurobonds with fair value R$35,784 (2014 - R$366,992).
(6) Instruments whose hedge objects are loans operations indexed pre fixed interest - Reais with a market value of R$37,547 (2015 - R$6,579 and 2014 - R$217,903).
(7) Instruments whose hedge objects are foreign loans operations indexed foreign currency - dollar with a market value of R$803,929 and on December 31, 2015, assets instruments whose objects of hedge are securities represented by promissory notes indexed to fixed interest rates - real with a market value of R$381,641.
(8)In June of 2016, the management decided to change the strategic position of the hedged items relating to loans and debentures operations: indexed to foreign currency dollar, foreign currency pre-dollar, price indexes and pre-real interest rate that no longer have hedge accounting and remained economic hedge, with effect on Income statements for the period an expense of R$12,102 net of tax.
Consolidated Financial Statements | December 31, 2021 | F-49 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
* Values expressed in thousands, except when indicated. |
a.6.II) Cash Flow Hedge
Banco Santander’sThe Bank's cash flow hedge strategies consist of hedging exposure to changes in cash flows, interest payments and the exchange rate exposure, which are attributable to changes in the interest rates related toon recognized assets and liabilities and changes in the exchange rate of non-recognizedrates for unrecognized assets and liabilities.
Banco SantanderThe Bank applies the cash flow hedgeshedge as follows:
• It contracts Fixed Dollar LiabilitiesEnters into fixed-rate asset swaps and Reais Asset swapsforeign currency liabilities and designates them as a derivativehedging instrument in a Cash Flow Hedge structure, with the object of foreign currency loan operations negotiated with third parties through offshore agencies and securities Brazilian foreign debt held to maturity.
• It contracts Dollar futures or DDI + DI futures (Synthetic Dollar Futures) and designates them as a protection instrument in a Cash Flow Hedge structure, having Reais funding operationsas object item the Bank's credit portfolio in Dollars and Promissory Notes in securities portfolio available for sale.
• The Bank has a portfolio of assets indexed to the Euro and traded at Offshore agencies. In the transaction, the value of the asset in Euro will be converted to Dollar at the exchange contract rate for entering the transaction. As of the conversion, the principal amount of the transaction, already expressed in dollars, will be corrected by a floating or pre-fixed rate. The assets will be hedged with third-partiesSwap Cross Currency, in the Cayman Islands as the hedged item in this relationship. The hedging relationships were designated in January 2016 and the related hedges will mature between 2017 and 2021.
• It contracts Fixed Dollar Asset and Floating Reais Liability swaps and designates them as a derivative instrument in a Cash Flow Hedge structure, having floating-Reais-indexed loan operations with third-parties in the Cayman Islands as the hedged item in this relationship. The hedging relationships were designated in January 2016 and the related hedges will mature between January 2017 and 2021.
• It contracts USD futures or DDI + DI Futures (Synthetic Dollar Futures) and designates them as a derivative instrument in a Cash Flow Hedge structure, having part of its dollar Loan portfolio as the hedged item in this relationship. The hedging relationships were designated in 2007 and the related hedges will mature between January 2017 and 2025.
In order to transfer the risk in Euro to IBOR + Coupon.
To assess the effectiveness and measure the ineffectiveness of these strategies, Banco Santander follows the IAS 39, which recommendsindicates that the hedge effectiveness test must be performed atcarried out in the inception/beginning (prospective test)design/start of the hedge structure (prospective test) and be repeated periodically (prospective and retrospective tests) in order totest) for demonstrate that the expectedexpectation of the hedge ratiorelationship remains effective (between 80%80 and 125%).
In this hedge strategy, the effectiveness tests (prospective and (prospective/retrospective) are conducted through creation ofby comparing two hypothetical derivatives,proxies, one for the hedged object and anotherthe other for the instrument.
The hypothetical derivative of thehedge object proxy is a conceptual“conceptual” swap, where the liability legpassive “tip” simulates the “stable portion”part of the Stable Portion to be protected and the asset legactive pre-fixed “tip” is identical to the Pre-fixed legset of the derivativefutures designated as hedge. Fora hedge, being consistent with market rates practiced on the hypothetical derivativeday the hedge is designated. The hedge instrument proxy is a “conceptual” swap, where the active “tip” is made up of the instrument the asset leg will be set by the number of futures contracts of the futuredesignated as hedging, and the liability leg will bepassive pre-fixed “tip” is the pre-fixed rate negotiated onin the acquisition of these contracts. The hypothetical derivativeproxy is stable oncethroughout the strategy since the contracts are keptmaintained until the maturity.
Any ineffectiveness will beis recognized in profit or loss.the income statement in the line Gains (losses) on financial assets and liabilities (net).
a) Prospective Test:in accordance with according to the standard,regulations, the prospective test shouldmust be performed on the inceptionstart date and on a quarterly basis in order to demonstrate that the expectationsexpectation regarding the effectiveness of the hedge ratio are high. However,relationship is high, however the tests are carried out on a monthly basis in order to monitor the projections in afor proactive monitoring and more efficient manner,projections, in addition to ensuring better maintenance of test-relatedtesting-related routines.
a.1) Periodic Prospective Test:According to the agreed process flow, Market Risk performsmakes the projections of three scenarios tofor the tests, being: 1st 10bps inon the curve; 2nd 50bps inon the curve and 3rd 100bps inon the curve. Using the validated estimates, VPE Finance Strategy and Quality - Management Information | Products & Segments will perform the prospective tests throughare performed by valuing the valuationtwo variable legs of the two legs variable from operationtransaction to market.
a.2) Initial Prospective Test:the methodology of the periodic prospective test should also be applied on the initialstart date of each new strategy. The Ineffective portion will be recognized using the hedge prospective test.
Ineffective Portion = Prospective Effectiveness – 100%
b) Retrospective Test:testIt should: it must be madeperformed monthly with historical data to demonstrate cumulatively that the hedge was effective, according to the methodology presented previously.above. Any ineffectiveness will beis recognized in profit or loss.the income statement.
Consolidated Financial Statements | December 31, 2021 | F-50 |
* Values expressed in thousands, except when indicated. |
The Ineffective portion will be recognized throughis measured using the prospective hedge test.test and if identified recognized in the income statement in the line Gains (losses) on financial assets and liabilities (net).
Effectiveness should rangebe between 80% and 125%.
In cash flow hedges, the effective portion of changesthe variation in the value of the hedginghedge instrument is temporarily recognized in equity under the caption “Other comprehensive income - cash flow hedges” (Note 25) until the expectedanticipated transactions occur, when this portion is then recognized in the consolidated income statement. However,statement, except if the expectedanticipated transactions result in the recognition of non-financial assets or liabilities, this portfolioportion will be included in the cost of the financial assetsasset or liabilities.liability. The non-effective portion of the changevariation in the value of foreign exchange hedginghedge derivatives is recognized directly in the consolidated income statement. And the non-effectiveineffective portion of the gains and losses on cash flow hedginghedge instruments in a foreignan operation abroad is recognized directly in “Gains (losses) with (net)on financial assets and liabilities”liabilities (net)” in the consolidated income statement.statements of income.
Hedge Structure - Cash Flow
2021 | 2020 | 2019 | ||||||
Hedge Structure | Effective Portion Accumulated | Portion Ineffective | Effective Portion Accumulated | Portion Ineffective | Effective Portion Accumulated | Portion Ineffective | ||
Cash Flow Hedge | ||||||||
Eurobonds | 0 | 0 | 14,666 | 0 | (6,074) | 0 | ||
Trade Finance Off | (236,630) | 0 | 58,088 | 0 | 139,852 | 0 | ||
Government Securities (LFT) | (982,648) | - | 727,437 | - | 503,665 | - | ||
Bank Deposit Certificate - CDB | 402,779 | - | - | - | - | - | ||
Total | (816,500) | - | 800,190 | - | 637,443 | - |
Hedge Instruments / Hedge Object
12/31/2016 | 12/31/2015 | |||||||||||||||
Hedge Structure | Effective Portion Accumulated | Portion Ineffective | Effective Portion Accumulated | Portion Ineffective | ||||||||||||
Cash Flow Hedge | ||||||||||||||||
Eurobonds | (20,535 | ) | - | (29,750 | ) | - | ||||||||||
Loans and Receivables | 174,956 | - | (575,571 | ) | - | |||||||||||
Total | 154,421 | - | (605,321 | ) | - |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
12/31/2021 | ||||||||
Hedge Instruments | Hedge Object | |||||||
Curve | Accounting | Adjustment to | Curve | Market | Accounting | |||
Strategies | Value | Value - liability | Market Value | Value | Value | Value | ||
Future Contracts | 110,932,644 | (616,062) | 110,316,582 | 128,673,067 | (8,912,769) | 119,760,298 | ||
Credit Operations Hedge (1) | 28,542,862 | (577,845) | 27,965,018 | 28,659,545 | 1,508,397 | 30,167,942 | ||
Hedge of Securities | 71,320,781 | (26) | 71,320,756 | 89,837,000 | (10,543,430) | 79,293,570 | ||
Funding Hedge | 11,069,000 | (38,191) | 11,030,809 | 10,176,522 | 122,264 | 10,298,786 | ||
12/31/2020 | ||||||||
Hedge Instruments | Hedge Object | |||||||
Accounting | Adjustment to | Market | Accounting | |||||
Strategies | Value - liability | Market Value | Value | Value | ||||
Swap Contracts | 1,428,053 | 1,428,053 | 1,302,666 | 1,302,666 | ||||
Hedge of Securities | 1,428,053 | 1,428,053 | 1,302,666 | 1,302,666 | ||||
Future Contracts | 19,500,234 | 19,500,234 | 23,447,934 | 23,447,934 | ||||
Credit Operations Hedge (1) | 19,500,234 | 19,500,234 | 23,447,934 | 23,447,934 | ||||
12/31/2019 | ||||||||
Hedge Instruments | Hedge Object | |||||||
Accounting | Adjustment to | Market | Accounting | |||||
Strategies | Value - liability | Market Value | Value | Value | ||||
Swap Contracts | 1,361,658 | 35,110 | 1,396,768 | 1,324,685 | ||||
Credit Operations Hedge | 435,872 | (3,494) | 432,378 | 399,831 | ||||
Hedge of Securities | 925,786 | 38,604 | 964,390 | 924,854 | ||||
Future Contracts | 54,460,972 | - | 54,460,972 | 7,726,566 | ||||
Credit Operations Hedge (1) | 50,975,253 | - | 50,975,253 | 4,506,878 | ||||
Hedge of Securities | 3,485,719 | - | 3,485,719 | 3,219,688 |
(*) | The Bank has cash flow hedge strategies, the objects of which are assets in its portfolio, which is why we have shown the liability side of the respective instruments. For structures whose instruments are futures, we show the notional's balance, recorded in a clearing account. |
2016 | 2015 | 2014 | ||||||||||||||||||||||
Adjustment | Adjustment | Adjustment | ||||||||||||||||||||||
to Fair Value | Fair Value | to Fair Value | Fair Value | to Fair Value | Fair Value | |||||||||||||||||||
Hedge Instruments | ||||||||||||||||||||||||
Swap Contracts | (27,261 | ) | 48,169 | (35,492 | ) | (1,151,442 | ) | (108,678 | ) | (518,043 | ) | |||||||||||||
Asset | 137,664 | 1,952,189 | 151,793 | 7,931,100 | 128,759 | 3,949,062 | ||||||||||||||||||
Indexed to Foreign Currency - Swiss Franc(1) | - | - | 6,998 | 1,244,985 | 20,210 | 620,028 | ||||||||||||||||||
Indexed to Foreign Currency - Chile(2) | - | - | 1,622 | 302,907 | 4,624 | 105,428 | ||||||||||||||||||
Indexed in Reais(3) | - | - | (13,690 | ) | 3,733,095 | (36,351 | ) | 1,242,260 | ||||||||||||||||
Indexed to Foreign Currency - Pre Dollar(4) (5) | 84,812 | 1,477,821 | 127,632 | 2,170,572 | 97,890 | 1,033,677 | ||||||||||||||||||
Indexed to Foreign Currency - Euro(6) | 52,852 | 474,368 | 29,231 | 479,541 | 42,386 | 947,669 | ||||||||||||||||||
Liabilities | (164,925 | ) | (1,904,020 | ) | (187,285 | ) | (9,082,542 | ) | (237,437 | ) | (4,467,105 | ) | ||||||||||||
Deposit Certificate Interbank - CDI | (995 | ) | (341,938 | ) | - | - | - | - | ||||||||||||||||
Indexed to Foreign Currency - Pre Dollar(1) (2) (3) (4) | - | - | (17,767 | ) | (6,598,073 | ) | (63,132 | ) | (2,514,597 | ) | ||||||||||||||
Indexed to Foreign Currency - Reais(4) | (1,288 | ) | (199,954 | ) | - | (22,855 | ) | (15,444 | ) | (120,394 | ) | |||||||||||||
Indexed to Foreign Currency - Pre Euro(4) | (102,998 | ) | (805,326 | ) | (133,376 | ) | (1,851,822 | ) | (108,193 | ) | (767,424 | ) | ||||||||||||
Indexed to Foreign Currency - Dollar (5) | (59,367 | ) | (548,684 | ) | (34,379 | ) | (544,339 | ) | (40,440 | ) | (528,305 | ) | ||||||||||||
Indexed to Foreign Currency - Reais(5) | (277 | ) | (8,118 | ) | (1,763 | ) | (65,453 | ) | (10,228 | ) | (536,385 | ) |
Consolidated Financial Statements | December 31, 2021 | F-51 |
* Values expressed in thousands, except when indicated. |
2016 | 2015 | 2014 | ||||||||||
Notional | Notional | Notional | ||||||||||
Hedge Instruments | ||||||||||||
Future Contracts | 80,149,530 | 72,798,063 | 16,053,248 | |||||||||
Trade Finance Operations(6) | 80,149,530 | 72,798,063 | 16,053,248 | |||||||||
Foreign Currency - Dollar | 450,571 | 2,651,572 | 16,053,248 | |||||||||
Interest Rate (DI1 and DIA) | 46,314,644 | 34,303,028 | - | |||||||||
Interest Rate DDI1 | 33,384,315 | 35,843,463 | - |
2016 | 2015 | 2014 | ||||||||||
Hedge Item - Cost | ||||||||||||
Assets | 27,858,923 | 37,251,860 | 17,678,432 | |||||||||
Lending Operations - Financing and Export Credit and Imports | 24,720,800 | 35,743,885 | 15,999,182 | |||||||||
Loans and Receivables | 496,874 | 641,421 | 1,023,468 | |||||||||
Brazilian Foreign Debt Bonds | 701,300 | 866,554 | 655,782 | |||||||||
Available for sale - Promissory Notes - NP | 1,939,949 | - | - | |||||||||
Liabilities | (1,332,972 | ) | (1,995,118 | ) | (1,960,197 | ) | ||||||
Foreign Borrowings | (1,332,972 | ) | - | - | ||||||||
Eurobonds | - | (1,995,118 | ) | (1,960,197 | ) |
(1) On December 31, 2015, operations due April 12, 2016 (2014 - operations due March 4, 2015 and April 12, 2016), whose object of "hedging" transactions are Eurobonds.
(2) On December 31, 2015, operation due April 13, 2016 (2014 - operation due April 13, 2016), whose object of "hedge" is an operation of Eurobonds.
(3) On December 31, 2015, operation due March 18, 2016 (2014 - operations due March 18, 2015, September 18, 2015 and March 18, 2016), whose object of "hedge" is an operation of Eurobonds.
(4) Operation maturing on April 01, 2021 (2015 - operation due March 18, 2016 and April 1, 2021 and 2014 - operation due October 26, 2015 and April 1, 2021) which hedge objects its securities operation represented by Brazilian External Debt Bonds and loans operation.
(5) Operations maturing between January 2017 and December 2025 (2015 - operations maturing between August 2016 and June 2021 and 2014 - operations maturing between May, 2015 and June, 2021), whose objects "hedge "contracts are loans from lending institutions.
(6) Operation maturing between January 2017 and January 2018 (2015 - operation maturing between January 2016 and December 2024 and 2014 - operation maturing February 2, 2015) andIn Consolidated, the updated value of the instruments of R$29,164,917 (2015 - R$35,743,844 and 2014 - R$15,991,293), whose object of "hedge" are the loans - loan agreements and credit export and import.
Between July and September 2014 operations were contracted to hedge accounting of cash flow with the object of hedge Bank deposit certificates (CDB). In October, 2014 this structure was discontinued. Themark-to-market effect of marking to market theswap and future contracts net of tax effects that will be recognized in income and is posted in equity corresponds to a credit of R$904,049 which will be amortized over the contract terms.
The effect of marking to market the swaps and futureasset contracts corresponds to a credit in the amount of R$69,489 (2015193,793 (12/31/2020 - corresponds to a debit in the amount of R$345,37311,169) and 2014 - corresponds to a debit in the amount of R$77,261) accounted on Stockholders equity, net of tax effects.
Hedging of Foreign Investments
Banco Santander operates a branch in the Cayman Islands and a subsidiary called Santander Brasil Establecimiento Financeiro de Credito, EFC, or “Santander EFC” (independent subsidiary in Spain), which are used mainly to raise funds in international funding and financial markets, to provide the Bank with credit lines that are extended to its customers to finance foreign trade and working capital.
In order to hedge against changes in future cash flows and the impact of the exchange rate on net investments in foreign operations, the Bank uses futures contracts traded at the BM&FBovespa, forward contracts and Spot contracts.
Santander EFC’s functional currency is the euro; however, the foreign exchange differences generated in the conversion of this investment into reais are recorded under “Other Comprehensive Income”. The Cayman Islands branch’s functional currency is Real. As a result, exchange rate differences of dollar operations are recorded in profit or loss. In order to cover the exchange rate exposure, the Bank uses derivatives. In accordance with the Brazilian tax rules, gains or losses arising from the impact of the appreciation or depreciation of the real on foreign investments are not taxable or deductible for PIS/COFINS/IR/CSLL purposes, while gains and losses from derivatives used as hedges are taxable. The objective of this derivative is to protect net income after taxes. Given that the exchange rate effects are not taxable or deductible and that the effect of the changes in said derivatives is taxed or deductible, the notional value of the contracted derivatives is higher than the value of the hedged net assets.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
In the case of Santander EFC, the Bank uses Hedge Accounting. The changes in the value of derivatives and their tax effects are recorded in “Other Comprehensive Income”, offsetting the exchange rate changes caused by the conversion of the investment into reais when the hedging is effective.
The Bank does not use Hedge Accounting in the Cayman Islands branch. The foreign exchange variation of dollar operations and the effect of the derivatives used in economic hedging (futures contracts) are recorded in profit or loss. The special tax treatment of these foreign currency changes result in volatility in Operating Income (Loss) before Taxes and in “Income Taxes”.
The ineffective portion of gains and losses on hedging instruments of net investment in a foreign operation is recognized directly in “Gains(losses) with (net) financial assets and liabilities” in the consolidated income statement.
a) Prospective Test:in accordance with the standard, the prospective test should be performed on the inception date and on a quarterly basis in order to demonstrate that the expectations regarding the effectiveness of the hedge ratio are high. However, the tests are carried out on a monthly basis in order to monitor the projections in a proactive and more efficient manner, in addition to ensuring better maintenance of test-related routines.
a.1) Periodic Prospective Test:The prospective test will be performed comparing the sensitivity of the object with the sensitivity of the instrument to the exchange variation. The sensitivity will be calculated based on 3 scenarios with a 10%, 20% and 30% variation in the EUR / BRL exchange rate and the USD / BRL exchange rate.
a.2) Initial Prospective Test:the methodology of the periodic prospective test should also be applied on the initial date of each new strategy.
The Ineffective portion will be recognized using the hedge prospective test.
Ineffective Portion = Prospective Effectiveness – 100%
b) Retrospective Test:The retrospective test will be performed by comparing the cumulative exchange variation from the beginning of the designation of the object with the cumulative exchange variation of the hedging instrument.
The Ineffective portion will be recognized through the prospective hedge test.
Effectiveness should range between 80% and 125%.
Hedge of foreign investments, the effective portion of changes in the value of the hedging instrument is temporarily recognized in equity until the expected transactions occur, when this portion is then recognized in the consolidated income statement. However, if the expected transactions result in the recognition of non-financial assets or liabilities, this portfolio will be included in the cost of financial assets or liabilities. The non-effective portion of the change in the value of exchange rate hedging derivatives is recognized directly in the consolidated income statement. And the non-effective portion of gains and losses on cash flow hedging instruments in a foreign operation is recognized directly in “Gains (losses) with (net) financial assets and liabilities” in the consolidated income statement.
12/31/2016 | 12/31/2015 | |||||||||||||||
Hedge Structure | Effective Portion Accumulated | Portion Ineffective | Effective Portion Accumulated | Portion Ineffective | ||||||||||||
Foreign investment | ||||||||||||||||
Forward / Spot | 44,844 | - | 13,462 | - | ||||||||||||
Total | 44,844 | - | 13,462 | - |
On December 31, 2016, the notional value of this Investment Hedge is R$2,687,347, maturing between January, 2017 to June, 2017 and the effect of R$2,552,596, of exchange rate changes recorded in equity, netreduced tax effects, of taxes.which R$ 569 will be realized against revenue in the next twelve months.
a.6) DerivativesDerivative Financial Instruments - Margins Pledged as Guarantee
The margin given in guarantee marginfor transactions traded on the BM&FBovespa usingat B3 S.A. with its own and third-party derivativesthird party derivative financial instruments is composed of federal public securities.
Composed of government securities.securities
2016 | 2015 | 2014 | 2021 | 2020 | 2019 | ||||||||||||||
Financial Treasury Bill - LFT | 1,556,804 | 330,605 | 1,135,366 | ||||||||||||||||
National Treasury Bill - LTN | 4,636,644 | 8,757,097 | 4,688,978 | ||||||||||||||||
Financial Treasury Bills - LFT | 31,305,549 | 4,363,666 | 5,342,992 | ||||||||||||||||
National Treasury Bills - LTN | 3,751,223 | 6,155,276 | 1,086,556 | ||||||||||||||||
National Treasury Notes - NTN | 27,598 | 757,969 | 1,763,751 | 7,725,538 | 2,814,274 | 660,918 | |||||||||||||
Total | 6,221,046 | 9,845,671 | 7,588,095 | 42,782,310 | 13,333,215 | 7,090,466 |
b) Short positionsPositions
OnAs of December 31, 20162021, the balance of short positions totaled R$31,694,269 (201512,780,599 (2020 - R$20,047,63145,807,946 and 20142019 - R$11,285,431)23,835,653) which includes the amount of financial liabilities resulting from the direct sale of financial assets purchased throughunder commitments for resale or loan commitments.borrowed.
9. | Loans and advances to clients |
10. Loans and advances to customers a) Breakdown
The breakdown, by classification, of the balances of “Loans and advances to customers”clients” in the consolidated balance sheetsfinancial statements is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Loans and receivables | 252,002,774 | 252,033,449 | 235,690,349 | |||||||||
Of which: | ||||||||||||
Loans and receivables at amortized cost | 268,437,556 | 267,266,449 | 249,110,881 | |||||||||
Provision for impairment losses (impairment) | (16,434,782 | ) | (15,233,000 | ) | (13,420,532 | ) | ||||||
Loans and advances to customers, net | 252,002,774 | 252,033,449 | 235,690,349 | |||||||||
Loans and advances to customers, gross | 268,437,556 | 267,266,449 | 249,110,881 | |||||||||
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Type: | ||||||||||||
Loans operations(1) | 257,256,452 | 257,671,667 | 243,424,562 | |||||||||
Lease Portfolio | 2,092,882 | 2,126,210 | 2,265,807 | |||||||||
Repurchase agreements | 308,483 | 517,536 | 6,463 | |||||||||
Other receivables(2) | 8,779,739 | 6,951,036 | 3,414,049 | |||||||||
Total | 268,437,556 | 267,266,449 | 249,110,881 |
(1) Thousand of reais 2021 2020 2019 Classification: Non-trading financial assets mandatorily measured at fair value through profit or loss 392,455 60,808 - Loans and receivables - - - Financial assets measured at amortized cost 464,451,587 393,707,229 326,699,480 Of which: Loans and receivables at amortized cost 492,962,247 417,761,218 347,256,660 Impairment losses (28,510,660) (24,053,989) (20,557,180) Loans and advances to customers, net 464,844,042 393,768,037 326,699,480 Loans and advances to customers, gross 493,354,702 417,822,026 347,256,660 Thousand of reais 2021 2020 2019 Type: Loans operations (1) 457,384,432 390,941,415 329,910,319 Lease Portfolio 2,532,048 2,096,240 2,111,842 Repurchase agreements 6,044,808 4,530,041 10,500 Other receivables (2) 27,393,414 20,254,330 15,223,999 Total 493,354,702 417,822,026 347,256,660
(1) | Includes loans and other loans with credit characteristics. |
(2) | Refers substantially to Foreign Exchange Transactions and Other Receivables with credit granting characteristics. |
(2) Refer substantially to Exchange Operations and Other Receivables without characteristics of credit granting.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Note 45-d43-d contains a detaildetails of the residual maturity periods of loans and receivables and offinancial assets measured at the related average interest rates.corresponding amortized cost. There are no loans and advances to customers for materialin significant amounts without fixed maturity dates.
Consolidated Financial Statements | December 31, 2021 | F-52 |
* Values expressed in thousands, except when indicated. |
b) Detail
Following is a detail,Below, the details, by loancondition and type and status, borrowerof credit, debtor sector and interest rate formula, of the loans and advances to customers, which reflect the Bank’sBank's exposure to credit risk in its core business,main activity, gross of impairment losses:reduction losses to recoverable value:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | |||||||||||||||||
Loan borrower sector: | ||||||||||||||||||||
Commercial, and industrial | 140,993,043 | 150,880,864 | 133,087,371 | Commercial, and industrial | 215,967,128 | 191,281,653 | 145,387,439 | |||||||||||||
Real estate-construction | 36,650,011 | 36,851,879 | 31,864,656 | Real estate-construction | 54,738,606 | 45,791,869 | 39,720,713 | |||||||||||||
Installment loans to individuals | 88,701,763 | 77,407,496 | 81,893,047 | Installment loans to individuals | 220,115,963 | 178,652,145 | 160,036,668 | |||||||||||||
Lease financing | 2,092,739 | 2,126,210 | 2,265,807 | 2,533,004 | 2,096,359 | 2,111,840 | ||||||||||||||
Total | 268,437,556 | 267,266,449 | 249,110,881 | 493,354,702 | 417,822,026 | 347,256,660 |
(1) It includes commercial credit, secured loans, reverse repurchase agreements, finance leases, other term loans and impaired assets.Interest rate formula
Interest rate formula: | ||||||||||||
Fixed interest rate | 178,231,509 | 173,018,504 | 172,649,313 | |||||||||
Floating rate | 90,206,047 | 94,247,945 | 76,461,568 | |||||||||
Total | 268,437,556 | 267,266,449 | 249,110,881 |
Debt Sector by Maturity | Less than 1 year | % of total | Between 1 and 5 years | % of total | More than 5 years | % of total | Total | % of total | ||||||||||||||||||||||||
Commercial and industrial | 99,657,167 | 61.65 | % | 35,789,118 | 45.10 | % | 5,546,758 | 20.23 | % | 140,993,043 | 52.52 | % | ||||||||||||||||||||
Real estate | 8,648,702 | 5.35 | % | 11,761,420 | 14.82 | % | 16,239,889 | 59.23 | % | 36,650,011 | 13.65 | % | ||||||||||||||||||||
Installment loans to individuals | 52,205,927 | 32.29 | % | 30,867,880 | 38.90 | % | 5,627,956 | 20.53 | % | 88,701,763 | 33.05 | % | ||||||||||||||||||||
Lease financing | 1,152,436 | 0.71 | % | 937,950 | 1.18 | % | 2,353 | 0.01 | % | 2,092,739 | 0.78 | % | ||||||||||||||||||||
Loans and advances | ||||||||||||||||||||||||||||||||
to customers, gross | 161,664,232 | 100.00 | % | 79,356,368 | 100.00 | % | 27,416,956 | 100.00 | % | 268,437,556 | 100.00 | % |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Maturity | ||||||||||||
Less than 1 year | 161,664,232 | 116,555,381 | 150,953,694 | |||||||||
Between 1 and 5 years | 79,356,369 | 104,563,829 | 79,939,575 | |||||||||
More than 5 years | 27,416,955 | 46,147,239 | 18,217,612 | |||||||||
Loans and advances to customers, gross | 268,437,556 | 267,266,449 | 249,110,881 | |||||||||
Internal risk classification | ||||||||||||
Low | 207,889,639 | 211,645,464 | 199,200,968 | |||||||||
Medium-low | 32,104,168 | 29,500,791 | 27,043,995 | |||||||||
Medium | 10,940,879 | 8,638,914 | 7,934,964 | |||||||||
Medium - high | 6,976,969 | 8,552,474 | 5,899,116 | |||||||||
High | 10,525,901 | 8,928,806 | 9,031,838 | |||||||||
Loans and advances to customers, gross | 268,437,556 | 267,266,449 | 249,110,881 |
Thousand of reais | 2021 | 2020 | 2019 | |||||||
Interest rate formula: | ||||||||||
Fixed interest rate | 337,583,246 | 292,884,352 | 258,760,620 | |||||||
Floating rate | 155,771,456 | 124,937,674 | 88,496,040 | |||||||
Total | 493,354,702 | 417,822,026 | 347,256,660 | |||||||
Debt sector by maturity
2021 | ||||||||||
Debt Sector by Maturity | Less than 1 year | % of total | Between 1 and 5 years | % of total | More than 5 years | % of total | Total | % of total | ||
Commercial and industrial | 165,729,422 | 61.37% | 73,723,212 | 45.81% | 8,221,617 | 13.18% | 247,674,251 | 50.20% | ||
Real estate | 3,985,684 | 1.48% | 10,137,988 | 6.30% | 40,614,935 | 65.12% | 54,738,607 | 11.10% | ||
Installment loans to individuals | 99,050,959 | 36.68% | 75,832,619 | 47.12% | 13,525,262 | 21.69% | 188,408,840 | 38.19% | ||
Lease financing | 1,284,868 | 0.48% | 1,238,498 | 0.77% | 9,638 | 0.02% | 2,533,004 | 0.51% | ||
Loans and advances to customers, gross | 270,050,934 | 100.00% | 160,932,317 | 100.00% | 62,371,452 | 100.00% | 493,354,702 | 100.00% | ||
2020 | ||||||||||
Debt Sector by Maturity | Less than 1 year | % of total | Between 1 and 5 years | % of total | More than 5 years | % of total | Total | % of total | ||
Commercial and industrial | 127,569,542 | 58.23% | 60,190,422 | 40.94% | 3,521,688 | 6.81% | 191,281,652 | 45.78% | ||
Real estate | 3,419,553 | 1.56% | 8,973,495 | 6.10% | 33,398,822 | 64.54% | 45,791,870 | 10.96% | ||
Installment loans to individuals | 87,174,594 | 39.79% | 76,667,187 | 52.15% | 14,810,364 | 28.62% | 178,652,145 | 42.76% | ||
Lease financing | 899,055 | 0.41% | 1,182,713 | 0.80% | 14,591 | 0.03% | 2,096,359 | 0.50% | ||
Loans and advances to customers, gross | 219,062,744 | 100.00% | 147,013,817 | 100.00% | 51,745,465 | 100.00% | 417,822,026 | 100.00% | ||
2019 | ||||||||||
Debt Sector by Maturity | Less than 1 year | % of total | Between 1 and 5 years | % of total | More than 5 years | % of total | Total | % of total | ||
Commercial and industrial | 102,083,249 | 54.83% | 39,408,727 | 33.44% | 3,895,463 | 9.01% | 145,387,439 | 41.87% | ||
Real estate | 3,633,231 | 1.95% | 8,145,568 | 6.91% | 27,941,913 | 64.65% | 39,720,713 | 11.44% | ||
Installment loans to individuals | 79,624,744 | 42.76% | 69,034,596 | 58.58% | 11,377,328 | 26.33% | 160,036,668 | 46.09% | ||
Lease financing | 855,624 | 0.46% | 1,252,673 | 1.06% | 3,543 | 0.01% | 2,111,840 | 0.61% | ||
Loans and advances to customers, gross | 186,196,848 | 100.00% | 117,841,564 | 100.00% | 43,218,247 | 100.00% | 347,256,660 | 100.00% | ||
Consolidated Financial Statements | December 31, 2021 | F-53 |
* Values expressed in thousands, except when indicated. |
Maturity
Thousand of reais | 2021 | 2020 | 2019 | |||||
Maturity | ||||||||
Less than 1 year | 270,050,934 | 219,062,744 | 186,196,849 | |||||
Between 1 and 5 years | 160,932,317 | 147,013,817 | 117,841,564 | |||||
More than 5 years | 62,371,451 | 51,745,465 | 43,218,247 | |||||
Loans and advances to customers, gross | 493,354,702 | 417,822,026 | 347,256,660 | |||||
Internal risk classification | ||||||||
Low | 374,505,212 | 347,315,357 | 257,133,115 | |||||
Medium-low | 79,216,725 | 24,277,404 | 56,549,196 | |||||
Medium | 14,589,977 | 26,231,871 | 11,754,806 | |||||
Medium - high | 9,413,110 | 3,896,457 | 8,512,386 | |||||
High | 15,629,678 | 16,100,937 | 13,307,156 | |||||
Loans and advances to Customers, gross | 493,354,702 | 417,822,026 | 347,256,660 | |||||
c) Impairment losses
The tables below show the reconciliations of the beginning and ending balances of the allowance for losses by category of financial instrument. The terms expected credit losses over 12 months, expected credit losses over their useful life and impairment losses are explained in the accounting practices note.
The changes in provisions for impairment losses in the balances of the item "Financial assets measured at amortized cost" are as follows:
Considering the amounts recognized in "Loss due to impairment of the amount of the recoverable value against the result" and the "Recoveries of loans written off as loss", and "PDD of Avals", the "Loss with financial assets - Financial assets measured at amortized cost" totaled in December 31, 2021, R$17,112,734 (2020 - R$17,450,188 and 2019 - R$13,369,905).
Changes in the allowances for the impairment losses on the balances of “LoansLoans and receivables” were as follows:receivables
Thousand of reais | 2021 | |||||||
Stage 1 | Stage 2 | Stage 3 | ||||||
Credit losses expected in 12 months | Expected credit losses over a useful life not subject to impairment | Expected credit losses during the useful life subject to impairment | Total | |||||
Balance at beginning of year | 5,837,199 | 4,928,606 | 14,874,684 | 25,640,489 | ||||
Impairment losses charged to income for the year | 3,200,608 | 4,883,553 | 8,902,534 | 16,986,695 | ||||
Transfers between stages | (553,054) | 31,154 | 10,221,329 | 9,699,429 | ||||
Movement of the period | 3,753,662 | 4,852,399 | (1,318,795) | 7,287,266 | ||||
Of which: | ||||||||
Commercial and industrial | 347,359 | 1,779,043 | 1,213,907 | 3,340,309 | ||||
Real estate-construction | 4,411 | (50,798) | 162,418 | 116,031 | ||||
Installment loans to individuals | 2,851,686 | 3,155,946 | 7,524,183 | 13,531,815 | ||||
Lease financing | (2,848) | (638) | 2,026 | (1,460) | ||||
Variation by Stage | (2,060,142) | (4,058,304) | 6,118,446 | - | ||||
Write-off of impaired balances against recorded impairment allowance | - | - | (12,903,807) | (12,903,807) | ||||
Of which: | ||||||||
Commercial and industrial | - | - | (5,153,345) | (5,153,345) | ||||
Real estate-construction | - | - | (166,579) | (166,579) | ||||
Installment loans to individuals | - | - | (7,575,967) | (7,575,967) | ||||
Lease financing | - | - | (7,916) | (7,916) | ||||
Balance at end of year | 6,977,664 | 5,753,855 | 16,991,855 | 29,723,376 | ||||
Of which: | ||||||||
Loans and advances to customers | 6,861,404 | 5,703,285 | 15,945,970 | 28,510,659 | ||||
Loans and amounts due from credit institutions (Note 5) | 21,825 | - | - | 21,825 | ||||
Provision for Debt Instruments (Note 6) | 94,435 | 50,570 | 1,045,887 | 1,190,892 | ||||
Recoveries of loans previously charged off | - | - | 1,536,336 | 1,536,336 | ||||
Of which: | ||||||||
Commercial and industrial | - | - | 462,523 | 462,523 | ||||
Real estate-construction | - | - | 64,257 | 64,257 | ||||
Installment loans to individuals | - | - | 1,002,257 | 1,002,257 | ||||
Lease financing | - | - | 7,299 | 7,299 | ||||
Discount granted | - | - | (1,662,375) | (1,662,375) |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of year | 15,411,759 | 13,562,811 | 13,640,545 | |||||||||
Impairment losses charged to income for the year | 14,383,935 | 13,723,179 | 12,048,587 | |||||||||
Of which: | ||||||||||||
Commercial and industrial | 6,523,051 | 6,634,110 | 4,875,243 | |||||||||
Real estate-construction | 369,431 | 91,196 | 37,891 | |||||||||
Installment loans to individuals | 7,616,819 | 6,765,541 | 6,867,258 | |||||||||
Lease financing | (125,366 | ) | 232,332 | 268,195 | ||||||||
Write-off of impaired balances against recorded impairment allowance | (11,604,568 | ) | (11,874,231 | ) | (12,126,321 | ) | ||||||
Of which: | ||||||||||||
Commercial and industrial | (4,553,166 | ) | (4,953,324 | ) | (4,493,800 | ) | ||||||
Real estate-construction | (189,625 | ) | (77,412 | ) | (96,715 | ) | ||||||
Installment loans to individuals | (6,810,997 | ) | (6,621,809 | ) | (7,336,858 | ) | ||||||
Lease financing | (50,780 | ) | (221,686 | ) | (198,948 | ) | ||||||
Balance at end of year | 18,191,126 | 15,411,759 | 13,562,811 | |||||||||
Of which: | ||||||||||||
Loans and advances to customers | 16,434,782 | 15,233,000 | 13,420,532 | |||||||||
Loans and amounts due from credit institutions (Note 6) | 201,441 | 178,759 | 142,279 | |||||||||
Provision for Debt Instruments (Note 7) | 1,554,903 | - | - | |||||||||
Recoveries of loans previously charged off | 994,101 | 757,320 | 855,016 | |||||||||
Of which: | ||||||||||||
Commercial and industrial | 562,393 | 293,668 | 184,908 | |||||||||
Real estate-construction | 102,826 | 86,360 | 80,804 | |||||||||
Installment loans to individuals | 314,422 | 348,090 | 559,826 | |||||||||
Lease financing | 14,460 | 29,202 | 29,478 |
F-40
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Consolidated Financial Statements | December 31, 2021 | F-54 |
* Values expressed in thousands, except when indicated. |
Taking into account these
Thousand of reais | 2021 | 2020 | 2019 | |||||
Balance at beginning of year | 25,640,489 | 22,625,750 | 22,969,315 | |||||
Impairment losses charged to income for the year | 16,986,695 | 18,311,441 | 14,361,382 | |||||
Of which: | ||||||||
Commercial and industrial | 3,340,309 | 6,918,671 | 2,376,910 | |||||
Real estate-construction | 116,031 | 81,415 | 94,957 | |||||
Installment loans to individuals | 13,531,815 | 11,308,689 | 11,866,475 | |||||
Lease financing | (1,460) | 2,666 | 23,040 | |||||
Write-off of impaired balances against recorded impairment allowance | (12,903,808) | (15,296,703) | (14,704,948) | |||||
Of which: | ||||||||
Commercial and industrial | (5,153,346) | (4,616,722) | (5,713,369) | |||||
Real estate-construction | (166,579) | (232,262) | (108,294) | |||||
Installment loans to individuals | (7,575,967) | (10,433,131) | (8,834,391) | |||||
Lease financing | (7,916) | (14,588) | (48,893) | |||||
Balance at end of year | 29,723,376 | 25,640,488 | 22,625,750 | |||||
Of which: | ||||||||
Loans and advances to customers | 28,510,659 | 24,053,989 | 20,557,180 | |||||
Loans and amounts due from credit institutions (Note 5) | 21,825 | 9,065 | 13,543 | |||||
Provision for Debt Instruments (Note 6) | 1,190,892 | 1,577,435 | 2,055,027 | |||||
Recoveries of loans previously charged off | 1,536,336 | 861,253 | 991,476 | |||||
Of which: | ||||||||
Commercial and industrial | 462,523 | 422,023 | 519,594 | |||||
Real estate-construction | 64,257 | 55,631 | 46,639 | |||||
Installment loans to individuals | 1,002,257 | 370,491 | 417,477 | |||||
Lease financing | 7,299 | 13,107 | 7,767 |
Considering the amounts recognized in “Impairment losses charged“Loss due to impairment of income for the year”against income” and the "Recoveries“Recoveries of loans previously charged off"written off as loss”, and “Available allowances” the "Impairment losses“Losses on financial assets - LoansFinancial assets measured at amortized cost” totaled in December 31, 2021, R$17,112,734 (2020- R$17,450,188 and receivables” amounted to2019 - R$13,389,834 in 2016, R$12,965,859 in 2015 and R$11,193,571 in 2014.13,369,905).
The balances of the provision for losses due to non-recovery by debtor sector are as follows:
Thousand of reais | 2021 | 2020 | 2019 | |||||
Commercial and industrial | 8,324,614 | 9,757,193 | 7,455,243 | |||||
Real estate - Construction | 154,248 | 193,935 | 344,782 | |||||
Installment loans to individuals | 21,240,296 | 15,675,765 | 14,800,208 | |||||
Lease financing | 4,218 | 13,594 | 25,517 | |||||
Total | 29,723,376 | 25,640,488 | 22,625,750 |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Commercial and industrial | 10,555,109 | 8,585,225 | 6,905,522 | |||||||||
Real estate | 363,859 | 184,053 | 170,269 | |||||||||
Installment loans to individuals | 7,225,822 | 6,420,000 | 6,275,183 | |||||||||
Lease financing | 46,336 | 222,481 | 211,837 | |||||||||
Total | 18,191,126 | 15,411,759 | 13,562,811 |
d) Impaired assets
The detaildetails of the changes in the balance of the financial assets classified as “Loans and receivables – loans and advances to customers”clients” (as defined at Note 1.i) and considered to be impaired due to credit risk isare as follows:
Loans and receivables - loans and advances to customers
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | |||||||||||||||||
Balance at beginning of year | 18,599,379 | 14,011,225 | 14,021,777 | Balance at beginning of year | 23,176,039 | 23,426,076 | 22,425,801 | |||||||||||||
Net additions | 11,892,321 | 16,462,385 | 12,115,769 | 18,428,727 | 14,757,908 | 16,000,733 | ||||||||||||||
Written-off assets | (11,604,568 | ) | (11,874,231 | ) | (12,126,321 | ) | (14,681,454) | (15,007,946) | (15,000,458) | |||||||||||
Balance at end of year | 18,887,132 | 18,599,379 | 14,011,225 | 26,923,312 | 23,176,039 | 23,426,076 |
Following is a detail of the financial assets considered to be impaired classified by age of the oldest past-due amount:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
With no Past-Due Balances or Less than 3 Months Past Due | 10,550,548 | 10,307,442 | 6,056,246 | |||||||||
With Balances Past Due by | ||||||||||||
3 to 6 Months | 2,983,575 | 3,763,466 | 3,042,247 | |||||||||
6 to 12 Months | 4,921,527 | 4,186,323 | 4,343,615 | |||||||||
12 to 18 Months | 339,596 | 265,407 | 398,782 | |||||||||
18 to 24 Months | 53,578 | 20,045 | 88,955 | |||||||||
More than 24 Months | 38,308 | 56,696 | 81,380 | |||||||||
Total | 18,887,132 | 18,599,379 | 14,011,225 | |||||||||
Debt Sector | ||||||||||||
Commercial and industrial | 11,628,655 | 10,748,644 | 6,736,928 | |||||||||
Real estate | 718,514 | 828,966 | 375,291 | |||||||||
Installment loans to individuals | 6,487,717 | 6,970,241 | 6,838,576 | |||||||||
Lease financing | 52,246 | 51,528 | 60,430 | |||||||||
Total | 18,887,132 | 18,599,379 | 14,011,225 |
Consolidated Financial Statements | December 31, 2021 | F-55 |
* Values expressed in thousands, except when indicated. |
Thousand of reais | 2021 | 2020 | 2019 | |||||
With no Past-Due Balances or Less than 3 Months Past Due | 12,885,506 | 12,966,813 | 11,729,920 | |||||
With Balances Past Due by | ||||||||
3 to 6 Months | 4,717,302 | 3,049,974 | 3,961,042 | |||||
6 to 12 Months | 6,866,628 | 4,798,859 | 5,721,762 | |||||
12 to 18 Months | 1,253,046 | 1,243,809 | 985,476 | |||||
18 to 24 Months | 659,702 | 607,527 | 523,441 | |||||
More than 24 Months | 541,129 | 509,056 | 504,435 | |||||
Total | 26,923,312 | 23,176,039 | 23,426,076 | |||||
Thousand of reais | 2021 | 2020 | 2019 | |||||
Debt Sector | ||||||||
Commercial and industrial | 11,439,692 | 10,558,213 | 10,072,655 | |||||
Real estate - Construction | 470,115 | 456,130 | 826,863 | |||||
Installment loans to individuals | 14,996,152 | 12,144,238 | 12,497,179 | |||||
Lease financing | 17,353 | 17,458 | 29,379 | |||||
Total | 26,923,312 | 23,176,039 | 23,426,076 |
e) Loan past due for less than 90 days but not classified as impaired
Thousand of reais | 2021 | % of total loans past due for less than 90 days | 2020 | % of total loans past due for less than 90 days | 2019 | % of total loans past due for less than 90 days | ||
Commercial and industrial | 4,892,277 | 20.68% | 5,131,885 | 25.80% | 3,517,086 | 15.42% | ||
Real estate - Construction | 3,605,641 | 15,24% | 3,085,498 | 15.51% | 5,781,977 | 25.35% | ||
Installment loans to individuals | 15,150,254 | 64.04% | 11,660,666 | 58.62% | 13,489,513 | 59.13% | ||
Financial Leasing | 10,961 | 0,05% | 13,292 | 0.07% | 24,325 | 0.11% | ||
Total (1) | 23,659,133 | 100.00% | 19,891,340 | 100.00% | 22,812,900 | 100.00% |
(1) | Refers exclusively to loans between 1 and 90 days. |
Thousands of Reais | 2016 | % of total loans past due for less than 90 days | 2015 | % of total loans past due for less than 90 days | 2014 | % of total loans past due for less than 90 days | ||||||||||||||||||
Commercial and industrial | 4,141,349 | 23.79 | % | 5,072,197 | 24.27 | % | 4,579,622 | 23.20 | % | |||||||||||||||
Mortgage loans | 5,201,709 | 29.88 | % | 7,551,584 | 36.13 | % | 6,095,965 | 30.88 | % | |||||||||||||||
Installment loans to individuals | 7,957,294 | 45.71 | % | 8,235,699 | 39.40 | % | 8,974,454 | 45.45 | % | |||||||||||||||
Financial Leasing | 108,607 | 0.62 | % | 41,013 | 0.20 | % | 93,035 | 0.47 | % | |||||||||||||||
Total(1) | 17,408,959 | 100.00 | % | 20,900,493 | 100.00 | % | 19,743,076 | 100.00 | % |
(1) Refers only to loans past due between 1 and 90 days.
f) Lease at present value
As at December 31, 2016,20152021, 2020 and 20142019 there were no materialleasing agreements for lease contracts.or commitments that are considered individually relevant.
Breakdown by maturity
Gross investment in lease transactions
Thousand of reais | 2021 | 2020 | 2019 | |||||
Overdue | 3,531 | 2,740 | 3,233 | |||||
Due to: | ||||||||
Up to 1 year | 1,067,567 | 952,172 | 978,748 | |||||
From 1 to 5 years | 1,642,506 | 1,394,525 | 1,442,244 | |||||
Over 5 years | 132,459 | 20,128 | 4,014 | |||||
Total | 2,846,063 | 2,369,565 | 2,428,239 |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Overdue | 16,051 | 21,127 | 35,292 | |||||||||
Due to: | ||||||||||||
Up to 1 year | 1,207,473 | 1,241,798 | 1,270,897 | |||||||||
From 1 to 5 years | 1,190,844 | 1,184,418 | 1,263,873 | |||||||||
Over 5 years | 4,079 | 6,078 | 7,413 | |||||||||
Total | 2,418,447 | 2,453,421 | 2,577,475 |
F-41
Consolidated Financial Statements | December 31, 2021 | F-56 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
* Values expressed in thousands, except when indicated. |
g) Transfer of financial assets with retention of risks and benefits
InOn December 31, 2016,2021, the amount recorded on “Loans and advances to customers”clients” related to loan portfolio assigned is R$783,967 (201540,790 (2020 - R$202,11355,284 and 20142019 - R$262,515),76,028) and R$774,673 (201540,511 (2020 - R$190,33355,105 and 20142019 - R$242,024)75,500) of “Other financial liabilities - Financial Liabilities Associated with Assets Transfer” (Note 20).
The foregoing transferassignment operation was conductedcarried out with a recourseco-obligation clause, and the mandatorywith compulsory repurchase is provided for in the following events:situations:
- agreements in defaultdefaulted contracts for longera period of more than 90 consecutive days;
- agreements under renegotiation;
- agreementscontracts subject to novationrenegotiation;
- contracts subject to portability, pursuant to Resolution 3,401 of the BrazilianNational Monetary Council (CMN);
- agreementscontracts subject to rights of intervention by certain parties to the contract.intervention.
11. Non-current assets held for sale
10. | Non-current assets held for sale |
At December 31, 2016, 20152021, 2020 and 2014,2019, the total amount of non-current assets held for sale includes foreclosed assets and other tangible assets. The change in the "Non-current assets"Assets held for sale" is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of year | 1,310,033 | 978,274 | 324,412 | |||||||||
Foreclosures loans | 834,903 | 293,440 | 337,840 | |||||||||
Capital Increase in Companies held for sale | 10,462 | 355,538 | - | |||||||||
Change in the scope of consolidation(1) (4) | (497,847 | ) | - | 418,846 | ||||||||
Sales(2) | (239,291 | ) | (317,321 | ) | (102,850 | ) | ||||||
Others | 48 | 102 | 26 | |||||||||
Final balance, gross(3) | 1,418,308 | 1,310,033 | 978,274 | |||||||||
Impairment losses | (80,423 | ) | (72,540 | ) | (48,326 | ) | ||||||
Impairment as a percentage of foreclosed assets | 5.67 | % | 5.54 | % | 4.94 | % | ||||||
Balance at end of year | 1,337,885 | 1,237,493 | 929,948 |
Thousand of reais | 2021 | 2020 | 2019 | ||||
Balance at beginning of year | 1,362,602 | 1,580,496 | 1,598,367 | ||||
Loan repayments - repossession of assets | 235,904 | 445,173 | 735,864 | ||||
Capital Increase in Companies held for sale (1) | 66,197 | - | 55,245 | ||||
Sales | (599,283) | (663,067) | (808,980) | ||||
Final balance, gross | 1,065,420 | 1,362,602 | 1,580,496 | ||||
Impairment losses (2) | (249,075) | (269,693) | (255,161) | ||||
Impairment as a percentage of foreclosed assets | 23.38% | 19.79% | 16.14% | ||||
Balance at end of year | 816,345 | 1,092,909 | 1,325,335 |
(1) | On September 20, 2019, Santander Holding Imobiliária completed the acquisition of the company Summer Empreendimentos Ltda. (“Summer”), whose main asset is a branch located on Avenida Faria Lima in the city of São Paulo, for the amount of R$45,245. Upon completion of the transaction, a structured plan for the sale of this company to a third party in the short term was formalized. In December 2019, Santander Holding Imobiliária carried out a capital increase in Summer in the amount of R$10,000. |
(1) On September 30, 2014 based on the sale plan, investments in Wind Energy entities were transferred to this heading whose current condition is for sale; as approved by the Directors of Banco Santander, in compliance with required by IFRS 5.
(2) | In 2021, includes the amount of R$182,448 (2020 – R$24,751 and 2019 – R$251,945) of reversal of provisions for devaluations on real estate and R$2,194 (2020 - R$122) of provisions for devaluations on vehicles , based on appraisal reports prepared by a specialized external consultancy, accounted for as a provision for impairment losses. |
11. | Investments in associates and joint ventures |
(2) In 2015, refers mainly to the sale by Santander Participações S.A. of all of its interest in Santos Energia and its subsidiaries, and the Special Purpose Entities Gestamp Eólica Sierra de Santana S.A., Gestamp Eólica Paraíso S.A., Gestamp Eólica Lanchinha S.A., Gestamp Eólica Seridó S.A. and Gestamp Eólica Lagoa Nova S.A. In 2014, includes sale of administrative buildings.
(3) Refers mainly to buildings and vehicles arising from executions of loans.
(4) On September 30, 2016, due to no expectation of sale of this investment by the current market situation, management decided to transfer the total of this balance, to caption investments in affiliates and subsidiaries in the country (Note 2).
12. Investments in associates and joint ventures
Jointly controlled
Banco Santander considers investments classified as jointly controlled:controlled when they possess a shareholders' agreement, which sets that the strategic, financial and operating decisions requirerequires the unanimous consent of all investors.
Significant Influence
Banco Santander considers investments classified asAssociates are entities over which the Bank is in a position to exercise significant influence (significant influence is the power to participate in the financial and operating decisions of the investee) but it does not control or has joint control over the associates who have indication of board members.investee.
a) Breakdown
Jointly controlled and Significant Influence - Participation
Participation % | |||||
Jointly Controlled by Banco Santander | Activity | Country | 2016 | 2015 | 2014 |
Banco RCI Brasil S.A. (Current Company Name of RCI | |||||
Brasil Leasing)(5) | Financial | Brazil | 39.89% | 39.89% | 39.89% |
Norchem Participações e Consultoria S.A.(1) | Other Activities | Brazil | 50.00% | 50.00% | 50.00% |
Cibrasec - Companhia Brasileira de Securitização(1) (7) | Securitization | Brazil | 9.72% | 13.64% | 13.64% |
Estruturadora Brasileira de Projetos S.A. - EBP(1) | Other Activities | Brazil | 11.11% | 11.11% | 11.11% |
Campo Grande Empreendimentos | Other Activities | Brazil | 25.32% | 25.32% | - |
Jointly Controlled by Santander S.A. Serviços | |||||
Técnicos, Administrativos e de Corretagem de | |||||
Seguros (Santander Serviços) | |||||
Webmotors S.A.(3) (9) | Other Activities | Brazil | 70.00% | 70.00% | 70.00% |
Tecnologia Bancária S.A. - TECBAN(1) (4) | Other Activities | Brazil | 19.81% | 19.81% | 19.81% |
Jointly Controlled by Getnet S.A. | |||||
iZettle do Brasil Meios de Pagamento S.A. ("iZettle do | |||||
Brasil”)(6) | Other Activities | Brazil | - | 50.00% | 50.00% |
Jointly Controlled by Santander Participações S.A. | |||||
PSA Corretora de Seguros e Serviços Ltda.(8) | Insurance Broker | Brazil | 50.00% | - | - |
Significant Influence of Banco Santander | |||||
Norchem Holding e Negócios S.A.(1) | Other Activities | Brazil | 21.75% | 21.75% | 21.75% |
Participation % | |||||||||
Jointly Controlled by Banco Santander | Activity | Country | 2021 | 2020 | 2019 | ||||
Banco RCI Brasil S.A. | Bank | Brazil | 39.89% | 39.89% | 39.89% | ||||
Norchem Participações e Consultoria S.A. (1) | Other Activities | Brazil | 0.00% | 0.00% | 50.00% | ||||
Estruturadora Brasileira de Projetos S.A. - EBP (1)(2) | Other Activities | Brazil | 11.11% | 11.11% | 11.11% | ||||
Gestora de Inteligência de Crédito (1) | Credit Bureau | Brazil | 19.45% | 20.00% | 20.00% | ||||
Campo Grande Empreendimentos (5) | Other Activities | Brazil | 25.32% | 25.32% | 25.32% | ||||
Santander Auto S.A. | Other Activities | Brazil | 50.00% | 50.00% | 50.00% | ||||
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) | |||||||||
Webmotors S.A. (3) | Other Activities | Brazil | 70.00% | 70.00% | 70.00% | ||||
Tecnologia Bancária S.A. - TECBAN (1) | Other Activities | Brazil | 18.98% | 18.98% | 18.98% | ||||
Hyundai Corretora de Seguros | Insurance Broker | Brazil | 50.00% | 50.00% | 50.00% | ||||
PSA Corretora de Seguros e Serviços Ltda. (4) | Insurance Broker | Brazil | 50.00% | 50.00% | 50.00% | ||||
Jointly Controlled by Aymoré CFI | |||||||||
Solutions 4Fleet | Other Activities | Brazil | 80.00% | 0.00% | 0.00% | ||||
Significant Influence of Banco Santander | |||||||||
Norchem Holding e Negócios S.A. (1) | Other Activities | Brazil | 0.00% | 0.00% | 21.75% |
F-42
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Investments | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Jointly Controlled by Banco Santander | 578,761 | 567,367 | 545,110 | |||||||||
Banco RCI Brasil S.A.(5) | 538,756 | 526,680 | 502,894 | |||||||||
Norchem Participações e Consultoria S.A.(1) | 26,302 | 23,665 | 23,739 | |||||||||
Cibrasec - Companhia Brasileira de Securitização(1) (7) | 7,435 | 10,325 | 10,236 | |||||||||
Estruturadora Brasileira de Projetos S.A. - EBP(1) | 6,268 | 6,697 | 8,241 | |||||||||
Jointly Controlled by Santander S.A. Serviços Técnicos, Administrativos e de Corretagem de Seguros (Santander Serviços) | 389,678 | 476,640 | 458,444 | |||||||||
Webmotors S.A.(3) (9) | 246,965 | 339,899 | 327,615 | |||||||||
Tecnologia Bancária S.A. - TECBAN(1) (4) | 142,713 | 136,741 | 130,829 | |||||||||
Jointly Controlled by Santander Participações S.A | 658 | - | - | |||||||||
PSA Corretora de Seguros e Serviços Ltda.(8) | 658 | - | - | |||||||||
Jointly Controlled by Getnet S.A. | - | (2,768 | ) | 491 | ||||||||
iZettle do Brasil(6) | - | (2,768 | ) | 491 | ||||||||
Significant Influence of Banco Santander | 20,980 | 19,504 | 19,416 | |||||||||
Norchem Holding e Negócios S.A.(1) | 20,980 | 19,504 | 19,416 | |||||||||
Total | 990,077 | 1,060,743 | 1,023,461 |
Results of Investments | ||||||||||||
1/01 to 12/31/2016 | 1/01 to 12/31/2015 | 1/01 to 12/31/2014 | ||||||||||
Jointly Controlled by Banco Santander | 16,748 | 85,993 | 49,094 | |||||||||
Banco RCI Brasil S.A.(5) | 14,175 | 85,221 | 54,414 | |||||||||
Norchem Participações e Consultoria S.A.(1) | 2,637 | 1,976 | 4,434 | |||||||||
Cibrasec - Companhia Brasileira de Securitização(1) (7) | 366 | 340 | 179 | |||||||||
Estruturadora Brasileira de Projetos S.A. - EBP(1) | (430 | ) | (1,544 | ) | (2,768 | ) | ||||||
BW Guirapá I S.A.(2) | - | - | (7,165 | ) | ||||||||
Jointly Controlled by Santander Serviços | 28,990 | 29,309 | 40,823 | |||||||||
Webmotors S.A.(3) (9) | 23,019 | 23,397 | 21,539 | |||||||||
Tecnologia Bancária S.A. - TECBAN(1) (4) | 5,971 | 5,912 | 19,284 | |||||||||
Jointly Controlled by Santander Participações S.A | 548 | - | - | |||||||||
PSA Corretora de Seguros e Serviços Ltda.(8) | 548 | - | - | |||||||||
Jointly Controlled by Getnet S.A. | (225 | ) | (491 | ) | (1,779 | ) | ||||||
iZettle do Brasil(6) | (225 | ) | (491 | ) | (1,779 | ) | ||||||
Significant Influence of Banco Santander | 1,476 | 1,501 | 2,958 | |||||||||
Norchem Holding e Negócios S.A.(1) | 1,476 | 1,501 | 2,958 | |||||||||
Total | 47,537 | 116,312 | 91,096 |
2016 | ||||||||||||
Total assets | Total liabilities | Total profit(11) | ||||||||||
Jointly Controlled by Banco Santander | 8,831,611 | 7,318,656 | 89,544 | |||||||||
Banco RCI Brasil S.A.(5) | 8,603,844 | 7,276,320 | 79,223 | |||||||||
Norchem Participações e Consultoria S.A.(1) | 78,833 | 26,228 | 5,274 | |||||||||
Cibrasec - Companhia Brasileira de Securitização(1) (7) | 91,083 | 14,659 | 7,011 | |||||||||
Estruturadora Brasileira de Projetos S.A. - EBP(1) | 57,851 | 1,449 | (1,964 | ) | ||||||||
Jointly Controlled by Santander Serviços | 1,456,444 | 940,962 | 57,502 | |||||||||
Webmotors S.A.(3) (9) | 145,499 | 35,231 | 29,934 | |||||||||
Tecnologia Bancária S.A. - TECBAN(1) (4) | 1,310,945 | 905,731 | 27,568 | |||||||||
Jointly Controlled by Santander Participações S.A | 3,382 | 2,066 | 1,093 | |||||||||
PSA Corretora de Seguros e Serviços Ltda.(8) | 3,382 | 2,066 | 1,093 | |||||||||
Significant Influence of Banco Santander | 127,598 | 31,136 | 6,792 | |||||||||
Norchem Holding e Negócios S.A.(1) | 127,598 | 31,136 | 6,792 | |||||||||
Total | 10,419,035 | 8,292,820 | 154,931 |
F-43
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2015 | ||||||||||||
Total assets | Total liabilities | Total profit(11) | ||||||||||
Jointly Controlled by Banco Santander | 8,702,727 | 7,170,602 | 180,663 | |||||||||
Banco RCI Brasil S.A.(5) | 8,474,418 | 7,125,614 | 174,629 | |||||||||
Norchem Participações e Consultoria S.A.(1) | 73,288 | 25,958 | 3,953 | |||||||||
Cibrasec - Companhia Brasileira de Securitização(1) (7) | 92,495 | 16,775 | 1,932 | |||||||||
Estruturadora Brasileira de Projetos S.A. - EBP(1) | 62,526 | 2,255 | 149 | |||||||||
Jointly Controlled by Santander Serviços | 1,531,883 | 890,028 | 83,902 | |||||||||
Webmotors S.A.(3) (9) | 279,935 | 36,904 | 36,636 | |||||||||
Tecnologia Bancária S.A. - TECBAN(1) (4) | 1,251,948 | 853,124 | 47,266 | |||||||||
Jointly Controlled by Getnet S.A. | 20,210 | 25,747 | (2,420 | ) | ||||||||
iZettle do Brasil(6) | 20,210 | 25,747 | (2,420 | ) | ||||||||
Significant Influence of Banco Santander | 119,687 | 30,017 | 6,902 | |||||||||
Norchem Holding e Negócios S.A.(1) | 119,687 | 30,017 | 6,902 | |||||||||
Total | 10,374,507 | 8,116,394 | 269,047 |
2014 | ||||||||||||
Total assets | Total liabilities | Total profit(11) | ||||||||||
Jointly Controlled by Banco Santander | 9,575,690 | 8,102,926 | 159,601 | |||||||||
Banco RCI Brasil S.A.(5) | 9,316,712 | 8,049,342 | 148,644 | |||||||||
Norchem Participações e Consultoria S.A.(1) | 81,395 | 25,220 | 8,868 | |||||||||
Cibrasec - Companhia Brasileira de Securitização(1) (7) | 98,490 | 23,444 | 3,618 | |||||||||
Estruturadora Brasileira de Projetos S.A. - EBP(1) | 79,093 | 4,920 | (1,529 | ) | ||||||||
Jointly Controlled by Santander Serviços | 1,191,219 | 605,654 | 110,078 | |||||||||
Webmotors S.A.(3) (9) | 260,531 | 20,275 | 31,097 | |||||||||
Tecnologia Bancária S.A. - TECBAN(1) (4) | 930,688 | 585,379 | 78,981 | |||||||||
Jointly Controlled by Getnet S.A. | 8,438 | 11,555 | (13,380 | ) | ||||||||
iZettle do Brasil(6) | 8,438 | 11,555 | (13,380 | ) | ||||||||
Significant Influence of Banco Santander | 156,942 | 67,674 | 13,602 | |||||||||
Norchem Holding e Negócios S.A.(1) | 156,942 | 67,674 | 13,602 | |||||||||
Total | 10,932,289 | 8,787,809 | 269,901 |
b) Changes
The changes in the balance of this item were as follows:
2016 | 2015 | 2014 | ||||||||||
Jointly Controlled by Banco Santander | ||||||||||||
Balance at beginning of year | 1,041,239 | 1,004,045 | 947,992 | |||||||||
Change in the scope of consolidation(2) | (2,926 | ) | - | 7,165 | ||||||||
Low/ Additions(6) (8) | 3,105 | (2,768 | ) | (4,393 | ) | |||||||
Capital gains/reduction(9) | (76,860 | ) | - | 368 | ||||||||
Income from companies accounted for by the equity method | 46,061 | 114,811 | 88,138 | |||||||||
Dividends proposed/received | (39,424 | ) | (74,849 | ) | (35,197 | ) | ||||||
Others | (2,098 | ) | - | (28 | ) | |||||||
Balance at end of year | 969,097 | 1,041,239 | 1,004,045 | |||||||||
Significant Influence of Banco Santander | ||||||||||||
Balance at beginning of year | 19,504 | 19,416 | 115,811 | |||||||||
Change in the scope of consolidation(2) | - | - | (88,715 | ) | ||||||||
Income from companies accounted for by the equity method | 1,476 | 1,501 | 2,958 | |||||||||
Dividends proposed/received | - | (1,413 | ) | (10,638 | ) | |||||||
Balance at end of year | 20,980 | 19,504 | 19,416 |
(1) Companies with a one-month lag of one monthin the equity calculation. To account for the equity calculation. Accounting for equity income, the position of 11/30/2021 was used on 12/31/20162021.
(2) Although the positioninterest is less than 20%, the Bank exercises joint control in the entity with the other majority shareholders, through a shareholders' agreement in which no business decision can be taken by a single shareholder.
(3) Although the interest exceeds 50%, in accordance with the shareholders' agreement, control is shared by Santander Corretora de Seguros and Carsales.com Investments PTY LTD. (Carsales).
(4) In accordance with the shareholders' agreement, control is shared by Santander Corretora de Seguros and PSA Services LTD.
(5) Interest arising from credit recovery of 11/30/2016.
(2) On September, 2014 the investment heldBanco Comercial e de Investimentos Sudameris S.A., merged in BW Guirapá I S.A.2009 by Banco ABN AMRO Real S.A., which in the same year was merged into Banco Santander was transferred to Santander Participações and was reclassified to non-current assets held for sale (Note 11). Investments transferred from the non-current assets item held for sale in September 2016.
(3) In March 7, 2014 was concluded acquisition by company Webmotors SA, 100%(Brasil) S.A., one of the share capital of KM Locanet Ltd. - ME (Compreauto).
(4) On 18 July 2014 it was published a Notice toCompany's partners. The partners are conducting the Market with a view to inform thatprocedures for the country’s leading retail Banks, among them Banco Santander, by means of one of its subsidiaries, (“Shareholders”), executed on July 17, 2014 a new Shareholders’ Agreement of Tecban (“New Shareholders’ Agreement”). The New Shareholders’ Agreement establishes that, within approximately 4 years from its effective date, the Shareholders shall have replaced part of their own external-access Automated Teller Machines (“ATMs”) with ATMs from Rede Banco24Horas, which are and will continue to be managed by Tecban, thus enhancing the efficiency, quality and points of services to their clients. The effectiveness of the Shareholders’ Agreement is subject to certain conditions precedent, among which its approval by the competent regulatory body (The General Superintendency of CADE published in the Diário Oficial da União, on October 23, 2014, its decision in which approved, without restrictions, the related transaction).
(5) The EGM of July 21, 2015, approved the Company's transformation into a multiple bank, with investment portfolios, leasing and credit, financing and investment and also the change of the name of the Companhia de Arrendamento Mercantil RCI Brasil to Banco RCI Brasil S.A. This process was approved by the BACEN on October 28, 2015.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
(6) In June 2016 the interest held in iZetlle do Brasil S.A was sold.
(7) At the ESM held on April 29, 2016 was approved the reform in the distribution structure of the capital of Cibrasec through the creation of preferred shares issued by the Company with voting rights and the share conversion of the common shares of Company into preferred shares, this reform was ratified at the ESM held on May 30, 2016. Banco Santander became part of their ordinary shares held in the capital of Cibrasec, the corresponding amount to five thousand (5,000) common shares issued by Cibrasec 50 (fifty) preferred shares in the proportion of 100 (one hundred) common shares for each one (1) preferred share, and still held 4,000 (four thousand) common shares in the capital of Cibrasec. Each preferred share entitles the holder the right to one hundred (100) times the right to dividends of the common shares, so that the economic rights were maintained, however, the conversion resulted in reduction in the percentage shareholding in Cibrasec.
(8) Investment acquired on August 1, 2016.
(9) At the ESM realized in September 26, 2016, was approved the reduction of the capital of Webmotors S.A. without cancellation of shares in the amount of R$109,800 to be considered excessive to maintain its activities, and the capital of R$194,580 to R$84,780.
(10) On 31 December 2016, 2015 and 2014 the balances of Assets, Liabilities and Profit refer to 100%dissolution of the company, balance sheet. There is not balance towhich depends on the "Other Comprehensive Income" in these companies.sale of a property. Once sold, the company will be liquidated and each partner will receive their share of the equity.
Consolidated Financial Statements | December 31, 2021 | F-57 |
* Values expressed in thousands, except when indicated. |
Jointly controlled and Significant Influence - Investments
Investments |
2021 | 2020 | 2019 | |||||||
Jointly Controlled by Banco Santander | 628,040 | 590,219 | 595,230 | ||||||
Banco RCI Brasil S.A. | 591,745 | 544,236 | 509,890 | ||||||
Norchem Participações e Consultoria S.A. | - | - | 21,078 | ||||||
Estruturadora Brasileira de Projetos S.A. - EBP | 1,257 | 1,273 | 3,889 | ||||||
Gestora de Inteligência de Crédito | 13,522 | 28,680 | 47,744 | ||||||
Campo Grande Empreendimentos | 255 | 255 | 255 | ||||||
Santander Auto S.A. | 21,261 | 15,775 | 12,374 | ||||||
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) | 593,002 | 504,766 | 454,280 | ||||||
Webmotors S.A. | 359,092 | 316,597 | 296,216 | ||||||
Tecnologia Bancária S.A. - TECBAN | 232,109 | 186,357 | 156,589 | ||||||
Hyundai Corretora de Seguros | 1,260 | 1,044 | 934 | ||||||
PSA Corretora de Seguros e Serviços Ltda. | 541 | 768 | 541 | ||||||
Jointly Controlled by Aymoré CFI | 11,604 | - | - | ||||||
Solutions 4Fleet | 11,604 | - | - | ||||||
Significant Influence of Banco Santander | - | - | 21,252 | ||||||
Norchem Holding e Negócios S.A. | - | - | 21,252 | ||||||
Total | 1,232,646 | 1,094,985 | 1,070,762 |
Jointly controlled and Significant Influence - Results of Investments
Results of Investments | |||||||||
2021 | 2020 | 2019 | |||||||
Jointly Controlled by Banco Santander | 54,493 | 50,915 | 92,976 | ||||||
Banco RCI Brasil S.A. | 62,813 | 72,057 | 105,250 | ||||||
Norchem Participações e Consultoria S.A. | - | 333 | 975 | ||||||
Cibrasec - Companhia Brasileira de Securitização | - | - | 75 | ||||||
Estruturadora Brasileira de Projetos S.A. - EBP | (16) | 9 | 199 | ||||||
Gestora de Inteligência de Crédito | (14,419) | (19,064) | (11,354) | ||||||
Santander Auto S.A. | 6,115 | (2,421) | (2,169) | ||||||
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) | 91,833 | 61,380 | 55,936 | ||||||
Webmotors S.A. | 45,817 | 38,823 | 42,848 | ||||||
Tecnologia Bancária S.A. - TECBAN | 45,752 | 22,219 | 12,498 | ||||||
Hyundai Corretora de Seguros | 216 | 110 | (66) | ||||||
PSA Corretora de Seguros e Serviços Ltda. | 48 | 226 | 656 | ||||||
Jointly Controlled by Aymoré CFI | (2,142) | - | - | ||||||
Solutions 4Fleet | (2,142) | - | - | ||||||
Significant Influence of Banco Santander | - | (33) | 576 | ||||||
Norchem Holding e Negócios S.A. | - | (33) | 576 | ||||||
Total | 144,184 | 112,261 | 149,488 |
Consolidated Financial Statements | December 31, 2021 | F-58 |
* Values expressed in thousands, except when indicated. |
Jointly controlled and Significant Influence - Total
2021 | |||||||||
Total Assets | Total Liabilities | Total Income | |||||||
Jointly Controlled by Banco Santander | 12,488,103 | 12,473,458 | 95,420 | ||||||
Banco RCI Brasil S.A. | 11,147,493 | 11,080,238 | 157,462 | ||||||
Estruturadora Brasileira de Projetos S.A. - EBP | 11,339 | 11,476 | (136) | ||||||
Gestora de Inteligência de Crédito | 1,173,234 | 1,237,937 | (74,136) | ||||||
Santander Auto S.A. | 156,037 | 143,807 | 12,230 | ||||||
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) | 3,055,130 | 2,824,094 | 231,035 | ||||||
Webmotors S.A. | 342,195 | 276,743 | 65,452 | ||||||
Tecnologia Bancária S.A. - TECBAN | 2,707,571 | 2,542,515 | 165,056 | ||||||
Hyundai Corretora de Seguros Ltda. | 3,353 | 2,921 | 431 | ||||||
PSA Corretora de Seguros e Serviços Ltda. | 2,011 | 1,915 | 96 | ||||||
Controlled by Aymoré CFI | 14,871 | 17,548 | (2,677) | ||||||
Solutions 4Fleet. | 14,871 | 17,548 | (2,677) | ||||||
Total | 15,558,104 | 15,315,100 | 323,778 | ||||||
2020 | |||||||||
Total Assets | Total Liabilities | Total Income | |||||||
Jointly Controlled by Banco Santander | 12,900,571 | 11,255,396 | 51,847 | ||||||
Banco RCI Brasil S.A. | 11,620,304 | 10,255,995 | 99,951 | ||||||
Norchem Participações e Consultoria S.A. | 70,475 | 27,781 | 534 | ||||||
Estruturadora Brasileira de Projetos S.A. - EBP | 11,562 | 39 | 148 | ||||||
Gestora de Inteligência de Crédito | 1,126,424 | 933,115 | (45,410) | ||||||
Santander Auto S.A. | 71,807 | 38,466 | (3,376) | ||||||
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) | 2,952,308 | 1,692,770 | 68,469 | ||||||
Webmotors S.A. | 512,687 | 78,856 | 21,529 | ||||||
Tecnologia Bancária S.A. - TECBAN | 2,435,377 | 1,612,822 | 46,735 | ||||||
Hyundai Corretora de Seguros Ltda. | 2,076 | 251 | (43) | ||||||
PSA Corretora de Seguros e Serviços Ltda. | 2,168 | 841 | 247 | ||||||
Significant Influence of Banco Santander | 126,877 | 29,391 | (225) | ||||||
Norchem Holding e Negócios S.A. | 126,877 | 29,391 | (225) | ||||||
Total | 15,979,756 | 12,977,558 | 120,091 | ||||||
2019 | |||||||||
Total Assets | Total Liabilities | Total Income | |||||||
Jointly Controlled by Banco Santander | 14,121,618 | 12,502,780 | 206,482 | ||||||
Banco RCI Brasil S.A. | 13,452,716 | 12,174,504 | 263,851 | ||||||
Norchem Participações e Consultoria S.A. | 69,865 | 27,709 | 1,949 | ||||||
Estruturadora Brasileira de Projetos S.A. - EBP | 35,314 | 311 | 1,790 | ||||||
Gestora de Inteligência de Crédito | 527,362 | 288,643 | (56,769) | ||||||
Santander Auto S.A. | 36,361 | 11,613 | (4,339) | ||||||
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) | 2,873,140 | 1,628,364 | 125,439 | ||||||
Webmotors S.A. | 484,454 | 60,734 | 61,212 | ||||||
Tecnologia Bancária S.A. - TECBAN | 2,382,907 | 1,564,801 | 63,046 | ||||||
Hyundai Corretora de Seguros Ltda. | 1,909 | 41 | (132) | ||||||
PSA Corretora de Seguros e Serviços Ltda. | 3,870 | 2,788 | 1,313 | ||||||
Significant Influence of Banco Santander | 126,937 | 29,226 | 2,650 | ||||||
Norchem Holding e Negócios S.A. | 126,937 | 29,226 | 2,650 | ||||||
Total | 17,121,695 | 14,160,370 | 334,571 |
Consolidated Financial Statements | December 31, 2021 | F-59 |
* Values expressed in thousands, except when indicated. |
(*) The Bank does not have collateralhas no guarantees granted to companies with associatesjoint control and joint ventures.significant influence.
(**) The Bank does not have contingent liabilities with significant possible risk of possible lossesloss related to investments for companies with joint control and significant influence.
b) Changes
The changes in affiliates.the balance of this item in the years ended December 31, 2021, 2020 and 2019 were:
Jointly controlled and Significant Influence - Changes in the balance
2021 | 2020 | 2019 | |||||||
Jointly Controlled by Banco Santander | |||||||||
Balance at beginning of year | 1,094,985 | 1,049,510 | 1,032,382 | ||||||
Additions / disposals (net) due to change in the scope of consolidation | (739) | (41,851) | (51,073) | ||||||
Additions /disposals | 13,746 | 13,571 | 746 | ||||||
Share of results of entities accounted for using the equity method | 144,184 | 112,293 | 148,912 | ||||||
Dividends proposed/received | (66,878) | (59,784) | (69,904) | ||||||
Others | 47,348 | 21,246 | (11,553) | ||||||
Balance at end of year | 1,232,646 | 1,094,985 | 1,049,510 | ||||||
Significant Influence of Banco Santander | |||||||||
Balance at beginning of year | - | 21,252 | 20,933 | ||||||
Share of results of entities accounted for using the equity method | - | (33) | 576 | ||||||
Dividends proposed/received | - | (239) | (257) | ||||||
Alienation | - | (20,980) | - | ||||||
Balance at end of year | - | - | 21,252 |
c) Impairment losses
No impairment losses were recognized on investments in associates and joint ventures in 2016, 20152021, 2020 and 2014.2019.
d) Other information
Details of the principal jointly controlled entities:
•Banco RCI Brasil S.A.:A company incorporated in the form of corporation headquartereda joint stock company with headquarters in Parana, is primarily engaged inParaná, aims to the main practice of loans in orderinvestment, leasing, credit, financing and investment operations, with a view to sustain the growth of the automotive brands Renault and Nissan in the Brazilian market, bywith operations focused on, mainly to financing and leasing to the dealer network and the endfinal consumer. It is a financial institution that is part of the RCI Group Banque Group and Santander Conglomerate, their operations being conducted in the Santander Group, with operations conducted as partcontext of a set of institutions that operate in the financial market. According to the Shareholders' Agreement, the keymain decisions that impact this society arecompany is taken jointly between Banco Santander and other controllers. On July 21, 2015 the Company's transformation into a Multiple Bank was approved, with investment portfolios, leasing and credit, financing and investment and also the change of company name of Companhia de Arrendamento Mercantil RCI Brasil to Banco RCI Brasil S.A. This process was approved by the Central Bank of Brazil on October 28, 2015. On January 29, 2016, the Companhia de Crédito, Financiamento e Investimento RCI Brasil was merged into its subsidiary Banco RCI Brasil S.A., with this process the interest previously held by RCI Brasil went to Banco Santander.controlling shareholders.
• Webmotors S.A.:A company incorporated in the form of capitala privately held company with headquarters in São Paulo and is engaged in the design,has as its object development, implementation and / or availability of electronic catalogs, space, products,product, services or means for the sale of marketing products and / or services related to the automotiveautomobile industry, on the Internet through the "website" www.webmotors.com.br (owned by Webmotors) or other means related to e-commerceelectronic commerce activities and other uses or applications of the Internet, applications, as well as participation in the capital inof other companies and the management of business venturesrelated businesses and the like.ventures. It is a companymember of the EconomicSantander Economic-Financial Conglomerate - Financial Santander (Santander Group)(Conglomerado Santander) and Carsales.com Investments PTY LTD (Carsales), andwith its operations conducted as partin the context of a groupset of institutions that operate jointly.act in an integrated manner. According to the Shareholders' Agreement, the keymain decisions that impact this societycompany are taken jointly between Banco Santander and other controllers.
In thousands of Reais | 2016 | 2015 | ||||||||||||||
Banco RCI Brasil | Webmotors | Banco RCI Brasil | Webmotors | |||||||||||||
Current assets | 4,103,866 | 23,071 | 5,038,181 | 85,552 | ||||||||||||
Non-current assets | 4,499,978 | 122,428 | 3,436,237 | 194,383 | ||||||||||||
Current liabilities | 3,629,575 | 32,601 | 3,998,536 | 30,877 | ||||||||||||
Non-current liabilities | 3,646,745 | 2,630 | 3,127,078 | 6,027 | ||||||||||||
Cash and cash equivalents | 23,612 | 1,663 | 38,217 | 681 | ||||||||||||
Depreciation and amortization | (911 | ) | (12,295 | ) | (3,783 | ) | (9,883 | ) | ||||||||
Revenue | 1,575,550 | 135,242 | 591,810 | 137,947 | ||||||||||||
Interest income | 1,368,643 | 28,047 | 1,424,211 | 27,854 | ||||||||||||
Interest expense | (903,061 | ) | - | (903,864 | ) | (69 | ) | |||||||||
Tax Income / (expense) | (3,326 | ) | (13,370 | ) | (108,837 | ) | (16,086 | ) | ||||||||
Current financial liabilities (excluding trade and other payables and provisions) | 3,629,575 | 31,707 | 3,436,699 | 30,110 | ||||||||||||
Non-current financial liabilities (excluding trade and other payables and provisions) | 3,646,745 | 1,736 | 2,565,241 | 5,260 |
Consolidated Financial Statements | December 31, 2021 | F-60 |
* Values expressed in thousands, except when indicated. |
Principal jointly controlled entities
2021 | 2020 | 2019 | |||||||
Banco RCI Brasil | Webmotors | Banco RCI Brasil | Webmotors | Banco RCI Brasil | Webmotors | ||||
Current assets | 10,187,883 | 342,195 | 11,270,565 | 276,170 | 12,052,008 | 241,919 | |||
Current liabilities | 8,754,744 | 71,742 | 9,825,654 | 220,707 | 10,781,921 | 61,290 | |||
Cash and cash equivalents | 341,015 | 2,746 | 201,142 | 1,411 | 489,400 | 1,667 | |||
Depreciation and amortization | (1,628) | (19,152) | (1,577) | (14,949) | (1,666) | (9,234) | |||
Revenue | 637,856 | 331,586 | 732,253 | 277,270 | 661,215 | 165,049 | |||
Interest income | 1,308,649 | 3,938 | 1,354,283 | 2,283 | 1,401,154 | 5,079 | |||
Interest expense | (592,776) | - | (483,506) | - | (547,546) | 0 | |||
Tax Income / (expense) | (105,266) | (32,819) | (169,957) | (26,314) | (83,455) | (26,863) | |||
Current financial liabilities (excluding trade and other payables and provisions) | 3,293,251 | 58,910 | 3,279,806 | 58,910 | 4,178,761 | 53,807 | |||
Non-current financial liabilities (excluding trade and other payables and provisions) | 5,218,945 | 796 | 5,947,683 | 796 | 470,081 | 1,006 |
12. | Property, plant and equipment |
Tangible assets of the Bank relate to property plant and equipment for the Bankits own use. The Bank does not have tangible assets held as investment property nor leased out under operating leases. The Bank is also not a part of any financial lease contracts as of and during fiscal years ended December 31, 2016, 2015 and 2014.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
a) Breakdown
The detail, by class of asset, of the tangible assets in the consolidated balance sheets is as follows:
Tangible assets in the consolidated balance sheets
Thousand of reais | ||||||
Cost | Land and buildings | IT equipment and fixtures | Furniture and vehicles | Leased Fixed Assets | Others | Total |
Balance on December 31, 2018 | 2,779,038 | 4,628,325 | 9,231,131 | - | 1,683 | 16,640,177 |
Initial adoption IFRS 16 | - | - | - | 2,465,750 | - | 2,465,750 |
Additions | 85,333 | 826,685 | 1,012,395 | - | 370 | 1,924,783 |
Additions resulting mergers | - | - | - | 689,982 | - | 689,982 |
Cancellation of lease agreements | - | - | - | (72,951) | - | (72,951) |
Write-off | (17,041) | (122,926) | (122,279) | - | - | (262,246) |
Transfers | (7,160) | 13,236 | 51,445 | - | - | 57,521 |
Balance on December 31, 2019 | 2,840,170 | 5,345,320 | 10,172,692 | 3,082,781 | 2,053 | 21,443,016 |
Initial adoption IFRS 16 | - | - | - | - | - | - |
Additions | 8,831 | 559,388 | 667,704 | - | - | 1,235,923 |
Additions resulting mergers | - | - | - | 738,603 | - | 738,603 |
Cancellation of lease agreements | - | - | - | (246,308) | - | (246,308) |
Write-off | (23,771) | (2,241,220) | (416,600) | - | (2,681,591) | |
Transfers | (8,485) | 120,158 | 39,861 | - | (806) | 150,728 |
Balance on December 31, 2020 | 2,816,745 | 3,783,646 | 10,463,657 | 3,575,076 | 1,247 | 20,640,371 |
Initial adoption IFRS 16 | - | - | - | - | - | - |
Additions | 32,959 | 435,858 | 693,957 | - | - | 1,162,774 |
Additions by Company Acquisition | - | - | - | 103,449 | - | 103,449 |
Cancellation of lease agreements | - | - | - | (254,101) | - | (254,101) |
Write-off | (50,181) | (1,584,956) | (402,817) | - | - | (2,037,954) |
Transfers | - | 651,607 | (468,561) | - | - | 183,046 |
Balance on December 31, 2021 | 2,799,523 | 3,286,155 | 10,286,236 | 3,424,424 | 1,247 | 19,797,585 |
In thousands of reais | Land and | IT equipment and | Furniture and | Works in progress and | ||||||||||||||||
Cost | buildings | fixtures | vehicles | others | Total | |||||||||||||||
Balance at December 31, 2013 | 3,020,484 | 2,142,937 | 5,583,177 | 4,465 | 10,751,063 | |||||||||||||||
Additions | 160,091 | 431,813 | 1,246,380 | - | 1,838,284 | |||||||||||||||
Additions resulting mergers | - | 67,581 | 587,049 | - | 654,630 | |||||||||||||||
Write-off | (20,574 | ) | (2,757 | ) | (277,438 | ) | - | (300,769 | ) | |||||||||||
Transfers | (386,453 | ) | 49,416 | (171,866 | ) | - | (508,903 | ) | ||||||||||||
Balance at December 31, 2014 | 2,773,548 | 2,688,990 | 6,967,302 | 4,465 | 12,434,305 | |||||||||||||||
Additions | 15,997 | 120,378 | 933,913 | - | 1,070,288 | |||||||||||||||
Additions resulting mergers | - | 2,723 | 4,739 | - | 7,462 | |||||||||||||||
Write-off | (19,991 | ) | (12,233 | ) | (228,324 | ) | - | (260,548 | ) | |||||||||||
Transfers | (44,695 | ) | 350,889 | (314,139 | ) | (706 | ) | (8,651 | ) | |||||||||||
Balance at December 31, 2015 | 2,724,859 | 3,150,747 | 7,363,491 | 3,759 | 13,242,856 | |||||||||||||||
Additions | 3,024 | 154,852 | 715,264 | - | 873,140 | |||||||||||||||
Additions resulting mergers | - | 2,021 | 3,961 | - | 5,982 | |||||||||||||||
Write-off | (29,174 | ) | (15,011 | ) | (141,442 | ) | - | (185,627 | ) | |||||||||||
Change in the scope of consolidation | - | 45 | 257 | - | 302 | |||||||||||||||
Transfers | 12,484 | 74,361 | (82,650 | ) | - | 4,195 | ||||||||||||||
Balance at December 31, 2016 | 2,711,193 | 3,367,015 | 7,858,881 | 3,759 | 13,940,848 | |||||||||||||||
Accumulated depreciation | ||||||||||||||||||||
Balance at December 31, 2013 | (407,068 | ) | (1,412,264 | ) | (2,005,320 | ) | - | (3,824,652 | ) | |||||||||||
Additions | (59,533 | ) | (332,629 | ) | (480,587 | ) | - | (872,749 | ) | |||||||||||
Additions resulting mergers | - | - | (652,155 | ) | - | (652,155 | ) | |||||||||||||
Write-off | 1,742 | 6,725 | 163,105 | - | 171,572 | |||||||||||||||
Transfers | (310 | ) | (1,627 | ) | (152,052 | ) | - | (153,989 | ) | |||||||||||
Balance at December 31, 2014 | (465,169 | ) | (1,739,795 | ) | (3,127,009 | ) | - | (5,331,973 | ) | |||||||||||
Additions | (83,106 | ) | (343,642 | ) | (602,958 | ) | - | (1,029,706 | ) | |||||||||||
Additions resulting mergers | - | (831 | ) | (3,357 | ) | - | (4,188 | ) | ||||||||||||
Write-off | 17,353 | 10,531 | 207,420 | - | 235,304 | |||||||||||||||
Transfers | (624 | ) | (19,143 | ) | (76,827 | ) | - | (96,594 | ) | |||||||||||
Balance at December 31, 2015 | (531,546 | ) | (2,092,880 | ) | (3,602,731 | ) | - | (6,227,157 | ) | |||||||||||
Additions | (82,963 | ) | (387,855 | ) | (683,770 | ) | - | (1,154,588 | ) | |||||||||||
Additions resulting mergers | - | (1,594 | ) | (1,234 | ) | - | (2,828 | ) | ||||||||||||
Write-off | 13,999 | 13,092 | 121,338 | - | 148,429 | |||||||||||||||
Change in the scope of consolidation | - | (26 | ) | (76 | ) | - | (102 | ) | ||||||||||||
Transfers | 6,300 | (39,836 | ) | (5,761 | ) | - | (39,297 | ) | ||||||||||||
Balance at December 31, 2016 | (594,210 | ) | (2,509,099 | ) | (4,172,234 | ) | - | (7,275,543 | ) | |||||||||||
Losses from non-recovery (impairment) | ||||||||||||||||||||
Balance at December 31, 2013 | (40,484 | ) | - | - | - | (40,484 | ) | |||||||||||||
Impacts on results | 9,188 | - | - | - | 9,188 | |||||||||||||||
Balance at December 31, 2014 | (31,296 | ) | - | - | - | (31,296 | ) | |||||||||||||
Impacts on results | (2,077 | ) | - | - | - | (2,077 | ) | |||||||||||||
Write-off | 23,588 | - | - | - | 23,588 | |||||||||||||||
Balance at December 31, 2015 | (9,785 | ) | - | - | - | (9,785 | ) | |||||||||||||
Impacts on results | (3,246 | ) | - | (5,841 | ) | - | (9,087 | ) | ||||||||||||
Balance at December 31, 2016 | (13,031 | ) | - | (5,841 | ) | - | (18,872 | ) | ||||||||||||
Carrying amount | ||||||||||||||||||||
Balance at December 31, 2014 | 2,277,083 | 949,195 | 3,840,293 | 4,465 | 7,071,036 | |||||||||||||||
Balance at December 31, 2015 | 2,183,528 | 1,057,867 | 3,760,760 | 3,759 | 7,005,914 | |||||||||||||||
Balance at December 31, 2016 | 2,103,952 | 857,916 | 3,680,806 | 3,759 | 6,646,433 |
Consolidated Financial Statements | December 31, 2021 | F-61 |
* Values expressed in thousands, except when indicated. |
Accumulated depreciation | Land and buildings | IT equipment and fixtures | Furniture and vehicles | Leased Fixed Assets | Others | Total |
Balance on December 31, 2018 | (760,844) | (3,714,712) | (5,511,258) | - | - | (9,986,814) |
Additions | (93,455) | (482,256) | (730,993) | (564,132) | - | (1,870,836) |
Write-off | 10,517 | 148,486 | 65,016 | 8,316 | - | 232,335 |
Transfers | 15,091 | 10,272 | (9,183) | - | - | 16,180 |
Balance on December 31, 2019 | (828,691) | (4,038,210) | (6,186,418) | (555,816) | - | (11,609,135) |
Additions | (86,954) | (537,908) | (846,881) | (568,062) | - | (2,039,805) |
Write-off | 11,020 | 2,263,857 | 359,618 | - | - | 2,634,495 |
Transfers | 1,765 | 66,717 | (88,612) | - | - | (20,130) |
Balance on December 31, 2020 | (902,860) | (2,245,544) | (6,762,293) | (1,123,878) | - | (11,034,575) |
Additions | (108,946) | (291,174) | (896,705) | (553,955) | - | (1,850,780) |
Write-off | 38,337 | 940,737 | 448,471 | 572,833 | - | 2,000,378 |
Transfers | - | 10 | (102,187) | - | - | (102,177) |
Additions by Company Acquisition | - | - | - | - | - | - |
Change in scope of consolidation | - | - | - | - | - | - |
Balance on December 31, 2021 | (973,469) | (1,595,971) | (7,312,714) | (1,105,000) | - | (10,987,154) |
Losses from non-recovery (impairment) | ||||||
Balance on December 31, 2018 | (13,859) | - | (50,529) | - | - | (64,388) |
Impacts on results | (587) | - | 13,050 | - | - | 12,463 |
Balance on December 31, 2019 | (14,446) | - | (37,479) | - | - | (51,925) |
Impacts on results | (11,162) | - | 7,789 | - | (13,387) | (16,760) |
Balance on December 31, 2020 | (25,608) | - | (29,690) | - | (13,387) | (68,685) |
Impacts on results | 3,310 | - | 38,729 | - | - | 42,039 |
Balance on December 31, 2021 | (22,298) | - | 9,039 | - | (13,387) | (26,646) |
Carrying amount | ||||||
Balance on December 31, 2019 | 1,997,033 | 1,307,110 | 3,948,795 | 2,526,965 | 2,053 | 9,781,957 |
Balance on December 31, 2020 | 1,888,277 | 1,538,102 | 3,671,674 | 2,451,198 | (12,140) | 9,537,111 |
Balance on December 31, 2021 | 1,803,756 | 1,690,184 | 2,982,561 | 2,319,424 | (12,140) | 8,783,785 |
The depreciation expenses has been included in the line itemheading “Depreciation and amortization” in the income statement.
b) Tangible asset purchase commitments
On December 31, 20162021 the Bank has contractualowns R$58,413 on commitments for the acquisition of tangible assets amount of R$9.1 million (2015(2020 - R$0 and 20142019 R$0)0 million).
BANCO SANTANDER (BRASIL) S.A.
13. | Intangible assets - Goodwill |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
14. Intangible assets - Goodwill
Goodwill is the differenceexcess between the acquisition cost and the Bank's participationinterest in the net fair value of the acquiree's assets, liabilities and contingent liabilities of the acquire.liabilities. When the differenceexcess is negative (negative goodwill), it is immediately recognized immediately through profit or loss.in the income statement. In accordance with IFRS 3 Business Combinations,IAS 36, goodwill is stated at cost and is not amortized but tested annually for impairment purposes or whenever there is an evidence of reduction on the recoverable valueimpairment of the cash generatingcash-generating unit to which the goodwillit was allocated. Goodwill is recognizedrecorded at cost considering theless accumulated impairment losses. ImpairmentRecognized impairment losses related toon goodwill are not reversible.reversed. Gains and losses related toon the saledisposal of an entity include the carrying amount of goodwill relating to the entity sold.
The goodwill recorded is subject to impairment test (note 2.o.i)2.n.i) and has been allocated according to the operating segments (note 46)44).
Based on the assumptions described above management has not identified any evidence ofbelow, no impairment(3) on loss was recognized for goodwill at December 31, 2016, 20152021, 2020 and 2014.2019.
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Breakdown | ||||||||||||
Banco ABN Amro Real S.A. (Banco Real) | 27,217,565 | 27,217,565 | 27,217,565 | |||||||||
Olé Consignado (Current Company name of Banco Bonsucesso Consignado) | 62,800 | 62,800 | - | |||||||||
Super Pagamentos e Administração de Meios Eletrônicos Ltda. (Super) | 13,050 | 13,050 | 14,086 | |||||||||
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet) | 1,039,304 | 1,039,304 | 1,039,304 | |||||||||
BW Guirapá I S.A. | 22,320 | - | - | |||||||||
Total | 28,355,039 | 28,332,719 | 28,270,955 |
Consolidated Financial Statements | December 31, 2021 | F-62 |
* Values expressed in thousands, except when indicated. |
Breakdown
Thousand of reais | 2021 | 2020 | 2019 | |||||
Breakdown | ||||||||
Banco ABN Amro Real S.A. (Banco Real) | 27,217,565 | 27,215,749 | 27,217,565 | |||||
Toro Corretora de Títulos e Valores Mobiliários Ltda. | 305,937 | - | - | |||||
Liderança Serviços Especializados em Cobranças Ltda. | 237,663 | - | - | |||||
Olé Consignado (current denomination of Banco Bonsucesso Consignado) | 62,800 | 62,800 | 62,800 | |||||
Solutions 4Fleet Consultoria Empresarial S.A. | 32,613 | - | - | |||||
Return Capital Serviços de Recuperação de Créditos S.A. (current denomination of Ipanema Empreendimentos e Participações S.A.) | 24,346 | 24,346 | 24,346 | |||||
Santander Brasil Tecnologia S.A. | 16,381 | 16,381 | 16,382 | |||||
Paytec Tecnologia em Pagamentos Ltda. | 11,336 | - | - | |||||
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. | 5,271 | - | - | |||||
Banco PSA Finance Brasil S.A. | 1,557 | 1,557 | 1,557 | |||||
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet) | - | 1,039,304 | 1,039,304 | |||||
Super Pagamentos e Administração de Meios Eletrônicos Ltda. (Super) | - | - | 13,050 | |||||
Total | 27,915,469 | 28,360,137 | 28,375,004 |
Commercial Banking | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Main assumptions: | ||||||||||||
Basis of determining recoverable amounts | Value in use: cash flows | |||||||||||
Period of the projections of cash flows(1) | 5 years | 5 years | 5 years | |||||||||
Growth rate perpetual | 8.0 | % | 7.5 | % | 7.0 | % | ||||||
Discount rate(2) | 15.2 | % | 15.2 | % | 14.4 | % |
(1) Main assumptions
| ||||||||
Commercial Banking | ||||||||
2021 | 2020 | 2019 | ||||||
Main assumptions: | ||||||||
Basis of determining recoverable amounts | Value in use: cash flows | |||||||
Period of the projections of cash flows (1) | 5 years | 5 years | 5 years | |||||
Growth rate perpetual (1) | 4.8% | 4.3% | 4.8% | |||||
Discount rate (2) | 12.3% | 12.4% | 12.5% |
(1) | The projections of cash flow are prepared using Management´s growth plans and internal budget, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation. |
(2) | The discount rate is calculated based on the capital asset pricing model (CAPM). The discount rate before tax is 18.77% (2020 – 19.56% and 2019 – 17.88%). |
Changes of cash flowgoodwill
Thousand of reais | 2021 | 2020 | 2019 | |||||
Balance at beginning of the year | 28,360,137 | 28,375,004 | 28,378,288 | |||||
Additions (loss): | ||||||||
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet) | (1,039,304) | - | - | |||||
Toro Corretora de Títulos e Valores Mobiliários Ltda. | 305,937 | - | - | |||||
Liderança Serviços Especializados em Cobranças Ltda. | 237,663 | - | - | |||||
Solution 4Fleet Consultoria Empresarial S.A. | 32,613 | - | - | |||||
Paytec Tecnologia em Pagamentos Ltda. | 11,336 | - | - | |||||
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. | 5,271 | - | - | |||||
Others | 1,816 | (14,867) | (3,284) | |||||
Balance at end of the year | 27,915,469 | 28,360,137 | 28,375,004 |
Goodwill tests are prepared using growth plansperformed annually or when there are indications of impairment. A quantitative goodwill impairment test is carried out annually in the second half of 2021 and internal budget of the administration, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.
(2) The discount rate is calculated based on the capital asset pricing model (CAPM). The discount rate before tax is 20.23% (2015 - 20.11%).
(3) The recoverability test base date is December 31, 2016, since at the end of each reportable period or wheneveryear an analysis is carried out on the existence of signs of impairment. For the year 2021, 2020 and 2019, there is any indicationwere no indications of impairment, goodwill (tested for impairment Recoverability).impairment.
The changes of goodwill in December, 31 2016, 2015 and 2014 were as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of the year | 28,332,719 | 28,270,955 | 27,217,565 | |||||||||
Additions: | ||||||||||||
Getnet S.A./Super/Bonsucesso/BW Guirapá(1) | 22,320 | 61,764 | 1,053,390 | |||||||||
Balance at end of the year | 28,355,039 | 28,332,719 | 28,270,955 |
(1) In 2016 refers to goodwill of BW Guirapá. In 2015, investment contract which Banco Santander, through Aymoré CFI, became the controlling shareholder of Banco Bonsucesso Consignado, with 60% of capital. In 2014, includes the goodwill onimpairment test, discount rates and perpetuity growth are the acquisitionmost sensitive assumptions for calculating the present value (value in use) of alldiscounted future cash flows. With a variation of +0.25% or -0.25% in these rates, the shares issued by Getnet andvalue of future cash flows discounted to present value continues to indicate the resultabsence of the acquisition by Aymoré in company Super Pagamentos e Administração de Meios Eletrônicos Ltda.impairment.
15. Intangible assets - Other intangible assets
Consolidated Financial Statements | December 31, 2021 | F-63 |
* Values expressed in thousands, except when indicated. |
14. | Intangible assets - Other intangible assets |
The details, by asset category, of the "otherother intangible assets" ofassets in the consolidated balance sheets are as follow:follows:
Cost | IT developments | Other assets | Total | |||||||||
Balance at December 31, 2013 | 3,892,521 | 345,343 | 4,237,864 | |||||||||
Additions | 571,018 | 11,841 | 582,859 | |||||||||
Additions resulting mergers | 171,071 | - | 171,071 | |||||||||
Write-off | (10,651 | ) | (316 | ) | (10,967 | ) | ||||||
Transfers | (46,885 | ) | - | (46,885 | ) | |||||||
Balance at December 31, 2014 | 4,577,074 | 356,868 | 4,933,942 | |||||||||
Additions | 607,642 | 3,647 | 611,289 | |||||||||
Additions resulting mergers | 759 | 1 | 760 | |||||||||
Write-off | (11,282 | ) | - | (11,282 | ) | |||||||
Transfers | 28,307 | 37,200 | 65,507 | |||||||||
Balance at December 31, 2015 | 5,202,500 | 397,716 | 5,600,216 | |||||||||
Additions | 652,490 | 18,395 | 670,885 | |||||||||
Additions resulting mergers | 250 | 89 | 339 | |||||||||
Write-off | (450 | ) | (10,202 | ) | (10,652 | ) | ||||||
Change in the scope of consolidation | 4 | - | 4 | |||||||||
Transfers | 12,150 | - | 12,150 | |||||||||
Balance at December 31, 2016 | 5,866,944 | 405,998 | 6,272,942 |
F-47
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Accumulated amortization | IT developments | Other assets | Total | |||||||||
Balance at December 31, 2013 | (1,891,927 | ) | (212,929 | ) | (2,104,856 | ) | ||||||
Additions | (468,461 | ) | (20,919 | ) | (489,380 | ) | ||||||
Additions resulting mergers | (110,193 | ) | - | (110,193 | ) | |||||||
Write-off | 2,155 | 316 | 2,471 | |||||||||
Transfers | 4,153 | - | 4,153 | |||||||||
Balance at December 31, 2014 | (2,464,273 | ) | (233,532 | ) | (2,697,805 | ) | ||||||
Additions | (413,450 | ) | (46,861 | ) | (460,311 | ) | ||||||
Additions resulting mergers | (115 | ) | - | (115 | ) | |||||||
Write-off | 10,169 | - | 10,169 | |||||||||
Transfers | 18,675 | 13,614 | 32,289 | |||||||||
Balance at December 31, 2015 | (2,848,994 | ) | (266,779 | ) | (3,115,773 | ) | ||||||
Additions | (304,046 | ) | (24,005 | ) | (328,051 | ) | ||||||
Additions resulting mergers | (249 | ) | - | (249 | ) | |||||||
Write-off | 141 | 10,202 | 10,343 | |||||||||
Change in the scope of consolidation | (1 | ) | - | (1 | ) | |||||||
Transfers | 32,167 | 3,427 | 35,594 | |||||||||
Balance at December 31, 2016 | (3,120,982 | ) | (277,155 | ) | (3,398,137 | ) | ||||||
Losses from non-recovery (Impairment) - IT | ||||||||||||
Balance at December 31, 2013 | (286,197 | ) | - | (286,197 | ) | |||||||
Impact on net profit | (5,123 | ) | - | (5,123 | ) | |||||||
Write-off | 5,486 | - | 5,486 | |||||||||
Balance at December 31, 2014 | (285,834 | ) | - | (285,834 | ) | |||||||
Impact on net profit(1) | (670,556 | ) | (8,698 | ) | (679,254 | ) | ||||||
Write-off | (38,412 | ) | - | (38,412 | ) | |||||||
Balance at December 31, 2015 | (994,802 | ) | (8,698 | ) | (1,003,500 | ) | ||||||
Impact on net profit | 898 | (6,736 | ) | (5,838 | ) | |||||||
Transfers | 16,193 | 143 | 16,336 | |||||||||
Balance at December 31, 2016 | (977,711 | ) | (15,291 | ) | (993,002 | ) | ||||||
Carrying amount | ||||||||||||
Balance at December 31, 2014 | 1,826,967 | 123,336 | 1,950,303 | |||||||||
Balance at December 31, 2015 | 1,358,704 | 122,239 | 1,480,943 | |||||||||
Balance at December 31, 2016 | 1,768,251 | 113,552 | 1,881,803 |
(1) In 2015, includesCost IT Developments Other Assets Total Balance on December 31, 2018 6,910,273 411,071 7,321,344 Additions 1,290,686 15,757 1,306,443 Write-off (2,544,403) (130,622) (2,675,025) Transfers (26,758) (2,481) (29,239) Balance on December 31, 2019 5,629,798 293,725 5,923,523 Additions 990,184 73,238 1,063,422 Write-off (240,626) (7,803) (248,429) Transfers (25,515) 3,036 (22,479) Balance on December 31, 2020 6,353,841 362,196 6,716,037 Additions 1,429,459 71,103 1,500,562 Write-off (633,534) (3,270) (636,804) Transfers (124,157) - (124,157) Balance on December 31, 2021 7,025,609 430,029 7,455,638 Accumulated amortization Balance on December 31, 2018 (5,032,693) (311,950) (5,344,643) Additions (501,682) (19,339) (521,021) Write-off 2,326,982 79,945 2,406,927 Transfers (241,395) (288) (241,683) Balance on December 31, 2019 (3,448,788) (251,632) (3,700,420) Additions (534,000) (5,322) (539,322) Balance on December 31, 2020 (3,982,788) (256,954) (4,239,742) Additions (569,370) (13,771) (583,141) Write-off 343,216 (4,558) 338,658 Balance on December 31, 2021 (4,208,942) (275,283) (4,484,225) Losses from non-recovery (Impairment) - IT IT developments Other assets Total Balance on December 31, 2018 (320,710) (15,291) (336,001) Impact on net profit (1) 110,466 - 110,466 Write-off 207,925 15,291 223,216 Balance on December 31, 2019 (2,319) - (2,319) Impact on net profit (1) (66,269) - (66,269) Transfers (1,346) - (1,346) Balance on December 31, 2020 (69,934) - (69,934) Impact on net profit (1) (23,066) (7,094) (30,160) Write-off - - - Balance on December 31, 2021 (93,000) (7,094) (100,094) Carrying amount Balance on December 31, 2019 2,178,691 42,093 2,220,784 Balance on December 31, 2020 2,301,119 105,242 2,406,361 Balance on December 31, 2021 2,723,667 147,652 2,871,319
(1) | Refers to the impairment |
software was recorded due to obsolescence function and disruptiondiscontinuity of thesethe referred systems.
The amortizationAmortization expenses has beenwere included in the line item “Depreciationunder "Depreciation and amortization”amortization" in the income statement.
* Values expressed in thousands, except when indicated. |
15. | Other assets |
The breakdown of the balance of “Other assets” is as follows:follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Customer relationships(1) | 62,625 | 221,478 | 946,571 | |||||||||
Prepayments and accrued income | 1,825,467 | 1,383,476 | 1,289,624 | |||||||||
Contractual guarantees of former controlling stockholders (Note 24.c.5) | 814,925 | 789,974 | 783,909 | |||||||||
Actuarial asset (Note 23) | 153,661 | - | 557 | |||||||||
Amounts receivable of covenants | - | 8 | 530,311 | |||||||||
Other receivables(2) | 2,247,334 | 1,407,182 | 1,515,754 | |||||||||
Total | 5,104,012 | 3,802,118 | 5,066,726 |
Thousand of reais | 2021 | 2020 | 2019 | ||||||
Customer relationships | 922,860 | 1,873,048 | 1,926,536 | ||||||
Prepayments and accrued income | 797,365 | 1,007,792 | 1,059,223 | ||||||
Contractual guarantees of former controlling stockholders (Note 22.c.5) | 496 | 496 | 103,272 | ||||||
Actuarial asset (Note 21) | 287,808 | 361,149 | 346,422 | ||||||
Other receivables (1) | 4,040,499 | 3,979,926 | 1,625,884 | ||||||
Total | 6,049,028 | 7,222,411 | 5,061,337 |
(1) | Corresponds mainly to receivables from third parties. |
(1) In 2015, the balance shown is net of provision for non-recoverable loss of the asset recorded for the purchase of rights to the provision of payroll services in the amount of R$534,281 recorded in "Impairment losses on other assets (net) - Others". The loss on the rights in the acquisition of payrolls was recorded due to the reduction of the expected return value in the management of payrolls and contracts break history.
(2) Corresponds mainly to receivables from third parties.
16. | Deposits from the Brazilian Central Bank and Deposits from credit institutions |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
17. Deposits from the Brazilian Central Bank and Deposits from credit institutions
The breakdown, by classification, type and currency, of the balances of these items is as follows:
Classification, type and currency, of the balances
Thousand of reais | 2021 | 2020 | 2019 | |||
Classification: | ||||||
Financial liabilities at amortized cost | 121,005,909 | 131,656,962 | 99,271,415 | |||
Total | 121,005,909 | 131,656,962 | 99,271,415 | |||
Type: | ||||||
Deposits on demand (1) | 126,203 | 296,340 | 685,026 | |||
Time deposits (2) | 75,754,363 | 76,489,490 | 56,602,470 | |||
Repurchase agreements | 45,125,343 | 54,871,132 | 41,983,919 | |||
Of which: | ||||||
Backed operations with Private Securities (3) | 13,478,131 | 13,843,463 | 9,506,255 | |||
Backed operations with Government Securities | 31,647,212 | 41,027,669 | 32,477,663 | |||
Total | 121,005,909 | 131,656,962 | 99,271,415 |
(1) | Non-interest bearing accounts. |
(2) | Includes operations with credit institutions resulting from export and import financing lines, transfers from the country (BNDES and Finame) and abroad, and other credit lines abroad. |
(3) | Refers primarily to repurchase agreements backed by own-issued debentures. |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Classification: | ||||||||||||
Financial liabilities at amortized cost | 78,634,072 | 69,451,498 | 63,674,201 | |||||||||
Total | 78,634,072 | 69,451,498 | 63,674,201 | |||||||||
Type: | ||||||||||||
Demand deposits(1) | 314,112 | 144,596 | 161,538 | |||||||||
Time deposits(2) | 49,548,858 | 55,795,205 | 42,044,680 | |||||||||
Repurchase agreements | 28,771,102 | 13,511,697 | 21,467,983 | |||||||||
Of which: | ||||||||||||
Backed operations with Private Securities(3) | 446,429 | 84,573 | 961,359 | |||||||||
Backed operations with Government Securities | 28,324,673 | 13,427,124 | 20,506,624 | |||||||||
Total | 78,634,072 | 69,451,498 | 63,674,201 | |||||||||
Currency: | ||||||||||||
Reais | 51,339,830 | 33,056,128 | 39,519,636 | |||||||||
Euro | 576,994 | 528,465 | 66,735 | |||||||||
US dollar | 26,546,404 | 35,612,670 | 24,085,176 | |||||||||
Other currencies | 170,844 | 254,235 | 2,654 | |||||||||
Total | 78,634,072 | 69,451,498 | 63,674,201 |
(1) Non-interest bearing accounts.Deposits from the Brazilian Central Bank and Deposits from credit institutions - by currency
Thousand of reais | 2021 | 2020 | 2019 | |||
Currency: | ||||||
Reais | 62,322,887 | 77,743,482 | 58,282,793 | |||
Euro | 9,309 | 13,156 | 39,522 | |||
US dollar | 58,673,713 | 53,900,324 | 40,949,100 | |||
Total | 121,005,909 | 131,656,962 | 99,271,415 |
(2) It includes the operation with credit institution arising from export and import financing lines, BNDES and Finame on-lending and abroad and other credit lines abroad.
(3) Refers basically to repurchase agreements backed by debentures own issue.
Note 45-d contains a detail of the remaining maturity of financial liabilities at amortized cost and of the related average interest rates.
17. | Client deposits |
The breakdown, by classification and type, of the balance of “Customer deposits” is as follows:
Balance of Customer deposits
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Classification: | ||||||||||||
Financial liabilities at amortized cost | 247,445,177 | 243,042,872 | 220,644,019 | |||||||||
Total | 247,445,177 | 243,042,872 | 220,644,019 | |||||||||
Type: | ||||||||||||
Demand deposits | ||||||||||||
Current accounts(1) | 15,868,201 | 15,579,923 | 15,507,604 | |||||||||
Savings accounts | 36,051,476 | 35,984,838 | 37,938,936 | |||||||||
Time deposits | 94,478,875 | 89,986,025 | 91,552,181 | |||||||||
Repurchase agreements | 101,046,625 | 101,492,086 | 75,645,298 | |||||||||
Of which: | ||||||||||||
Backed operations with Private Securities(2) | 59,460,210 | 61,173,979 | 46,699,288 | |||||||||
Backed operations with Government Securities | 41,586,415 | 40,318,107 | 28,946,010 | |||||||||
Total | 247,445,177 | 243,042,872 | 220,644,019 |
(1) Non-interest bearing accounts.
(2) Refers basically to repurchase agreements backed by debentures own issue.
Thousand of reais | 2021 | 2020 | 2019 | ||||||
Classification: | |||||||||
Financial liabilities at amortized cost | 468,961,069 | 445,813,972 | 336,514,597 | ||||||
Total | 468,961,069 | 445,813,972 | 336,514,597 | ||||||
Type: | |||||||||
Demand deposits | |||||||||
Current accounts (1) | 41,742,247 | 35,550,105 | 28,231,479 | ||||||
Savings accounts | 65,248,913 | 62,210,443 | 49,039,857 | ||||||
Time deposits | 280,955,456 | 269,929,085 | 200,739,544 | ||||||
Repurchase agreements | 81,014,453 | 78,124,340 | 58,503,717 | ||||||
Of which: | |||||||||
Backed operations with Private Securities (2) | 20,103,099 | 14,944,250 | 9,506,255 | ||||||
Backed operations with Government Securities | 60,911,354 | 63,180,090 | 48,997,462 | ||||||
Total | 468,961,069 | 445,813,972 | 336,514,597 |
(1) | Non-interest bearing accounts. |
(2) | Refers primarily to repurchase agreements backed by own-issued debentures. |
Note 45-d43-d contains a detail of the residual maturity periods of financial liabilities at amortized cost and of the related average interest rates.cost.
* Values expressed in thousands, except when indicated. |
18. | Marketable debt securities |
The breakdown, by classification and type, of the balance of “Marketable debt securities” is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | ||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||||||||
Classification: | |||||||||||||||||||
Financial liabilities at amortized cost | 99,842,955 | 94,658,300 | 70,355,249 | 79,036,792 | 56,875,514 | 73,702,474 | |||||||||||||
Total | 99,842,955 | 94,658,300 | 70,355,249 | 79,036,792 | 56,875,514 | 73,702,474 | |||||||||||||
Type: | |||||||||||||||||||
Real estate credit notes - LCI(1) | 23,983,429 | 23,795,322 | 22,669,332 | 21,459,182 | 18,846,138 | 21,266,079 | |||||||||||||
Bonds and other securities | 7,721,646 | 13,465,373 | 11,784,701 | ||||||||||||||||
Eurobonds | 12,952,068 | 9,399,277 | 8,715,382 | ||||||||||||||||
Treasury Bills(2) | 61,157,037 | 55,300,989 | 33,998,433 | 25,074,264 | 12,749,911 | 27,587,340 | |||||||||||||
Agribusiness credit notes - LCA | 6,980,843 | 2,096,616 | 1,902,783 | 16,989,434 | 14,746,831 | 14,776,877 | |||||||||||||
Guaranteed Real Estate Credit Notes (3) | Guaranteed Real Estate Credit Notes (3) | 2,561,845 | 1,133,356 | 1,356,796 | |||||||||||||||
Total | 99,842,955 | 94,658,300 | 70,355,249 | 79,036,792 | 56,875,514 | 73,702,474 |
(1) | Real estate credit bills are fixed-income securities backed by real estate credits and guaranteed by mortgage or fiduciary sale of real estate. On December 31, 2021, they mature between 2022 and 2028 (2020 - with maturity between 2021 to 2027 2019 - with maturity between 2020 to 2026). |
(2) | The main characteristics of the financial bills are a minimum term of two years, a minimum face value of R$50 and early redemption permit of only 5% of the issued amount. As of December 31, 2021, they mature between 2022 and 2031 (2020 – with maturity between 2021 to 2025 and 2019 – with maturity between 2020 to 2025). |
(3) | Guaranteed Real Estate Bills are fixed-income securities backed by real estate credits guaranteed by the issuer and by a pool of real estate credits separated from the other assets of the issuer. As of December 31, 2021, they have a maturity period between 2022 and 2035 (12/31/20120- with a maturity period between 2021 and 2023). |
F-49
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Indexers
Domestic | Abroad | ||||||
Treasury Bills | 100% to 112% of CDI | - | |||||
100% of IGPM | - | ||||||
100% of IPCA | - | ||||||
Pre fixed: 3.41% to 16.97% | - | ||||||
104.75% of SELIC | - | ||||||
Real estate credit notes - LCI | 86% to 105.8% of CDI | - | |||||
Pre fixed: 3.03% of 13.29% | - | ||||||
100% of | - | ||||||
1.5% to 1.7% of | - | ||||||
100% of TR | - | ||||||
Agribusiness credit notes - LCA | 70% to | - | |||||
3.33% to | |||||||
Guaranteed Real Estate Credit Notes - LIG | 94% to | - | |||||
95% TO 108.5 do IPCA | |||||||
Eurobonds | - | 0.0% to 9% | |||||
- | CDI+6.4% |
(1) Real Estate Credit Notes are fixed income securities pegged by mortgages and mortgage-backed securities or liens on property. On December 31, 2016, have maturities between 2017 to 2026 (12/31/2015 - there are maturities between 2016 to 2020).
(2) The main features of the Treasury Bills are the minimum period of two years, minimum notional of R$300 and permission for early redemption of only 5% of the issued amount. On December 31, 2016, have a maturity between 2017 to 2025 (2015 - have a maturity between 2016 to 2025 and 2014 - have a maturity between 2015 to 2025).
(3) Agribusiness credit notes are fixed income securities in which resources are allocated to the promotion of agribusiness. On December 31, 2016, have maturities between 2017 to 2018 (12/31/2015 - they have a maturity between 2016 to 2018).
Consolidated Financial Statements | December 31, 2021 | F-66 |
* Values expressed in thousands, except when indicated. |
The breakdown, by currency, of the balance of this account is as follows:
Thousand of reais | |||||||
Currency: | 2021 | 2020 | 2019 | ||||
Real | 66,084,725 | 47,490,706 | 64,987,092 | ||||
US dollar | 12,952,068 | 9,384,808 | 8,715,382 | ||||
Total | 79,036,792 | 56,875,514 | 73,702,474 |
Thousands of Reais | ||||||||||||
Currency: | 2016 | 2015 | 2014 | |||||||||
Real | 92,132,195 | 82,506,826 | 59,870,381 | |||||||||
US dollar | 7,645,542 | 11,180,678 | 9,418,869 | |||||||||
Swiss Francs | - | 603,889 | 940,256 | |||||||||
Peso/Chile | - | 135,388 | 101,264 | |||||||||
Iene | - | 35,743 | 24,479 | |||||||||
Euro | 65,218 | 195,776 | - | |||||||||
Total | 99,842,955 | 94,658,300 | 70,355,249 |
Average interest (%) | |||||||
Currency: | 2021 | 2020 | 2019 | ||||
Real | 1.5% | 2.5% | 5.0% | ||||
US dollar | 5.7% | 5.2% | 4.1% | ||||
Total | 3.5% | 3.9% | 4.5% |
Average interest (%) | ||||||||||||
Currency: | 2016 | 2015 | 2014 | |||||||||
Real | 11.7 | % | 12.1 | % | 9.6 | % | ||||||
US dollar | 3.7 | % | 1.0 | % | 3.0 | % | ||||||
Swiss Francs | - | - | 1.8 | % | ||||||||
Peso/Chile | - | - | 4.6 | % | ||||||||
Iene | - | 3.1 | % | 5.6 | % | |||||||
Total | 12.1 | % | 11.3 | % | 9.6 | % |
The changesvariations in the balance of Marketable debt instruments“Obligations for bonds and securities” were as follows:follows:
Thousand of reais | 2021 | 2020 | 2019 | ||||
Balance at beginning of the year | 56,875,514 | 73,702,474 | 74,626,232 | ||||
Issuances | 101,784,961 | 60,047,656 | 53,017,039 | ||||
Payments | (97,220,580) | (82,900,914) | (61,914,716) | ||||
Interest (Note 32) | 4,536,849 | 2,785,942 | 5,138,306 | ||||
Exchange differences and Others(1) | 13,060,048 | 3,240,356 | 2,835,613 | ||||
Balance at end of the year | 79,036,792 | 56,875,514 | 73,702,474 |
(1) | Exchange variation linked to “Obligations for bonds and securities” are related to Eurobonds. |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||||
Balance at beginning of the year | 94,658,300 | 70,355,249 | 65,300,548 | |||||||||||
Issuances | 50,313,469 | 72,936,057 | 53,187,121 | |||||||||||
Payments | (56,164,769 | ) | (63,516,234 | ) | (55,388,115 | ) | ||||||||
Interest (Note 34) | 12,212,922 | 10,047,874 | 6,347,571 | |||||||||||
Exchange differences and Others | (1,305,204 | ) | 4,835,354 | 1,125,481 | ||||||||||
Transfer Held For Sale | - | - | (217,357 | ) | ||||||||||
Additions arising from acquisitions of companies | 128,237 | - | - | |||||||||||
Balance at end of the year | 99,842,955 | 94,658,300 | 70,355,249 |
AtOn December 31, 2016, 20152021, 2020 and 2014,2019, none of these instruments was convertible into Bank shares or granted privileges or rights which, in certain circumstances, make them convertible into shares.
The note 45-d43-d contains a detail of the residual maturity periods of financial liabilities at amortized cost and of the related average interest rates in each year.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The breakdown of "Bonds and other securities" is as follows:follows:
Issuance | Maturity | Currency | Interest rate (p.y) | 2021 | 2020 | 2019 | |
Eurobonds | 2017 | 2020 | BRL | 4.4% | - | - | 929,042 |
Eurobonds | 2018 | 2020 | USD | Until 3.5% | - | - | 37,476 |
Eurobonds | 2018 | 2020 | USD | Over 3.5% | - | - | 35,438 |
Eurobonds | 2019 | 2020 | USD | 0% to 4.4% | - | - | 3,556,724 |
Eurobonds | 2017 | 2025 | USD | 4.4% | 117,150 | 14,469 | 63,181 |
Eurobonds | 2018 | 2025 | USD | 0% to 4.4% | 771,300 | - | |
Eurobonds | 2017 | 2024 | USD | 2.4% to 10% | - | 853,929 | 664,996 |
Eurobonds | 2018 | 2024 | USD | 6.6% to 6.7% | - | 1,625,192 | 1,260,099 |
Eurobonds | 2018 | 2025 | USD | Until 9% | - | 1,720,187 | 1,427,601 |
Eurobonds | 2019 | 2025 | USD | 0% to 4.4% | 225,533 | - | - |
Eurobonds | 2019 | 2026 | USD | 4.4% | 75,716 | - | - |
Eurobonds | 2019 | 2027 | USD | 0% to 4.4% | 632,831 | - | - |
Eurobonds | 2020 | 2022 | USD | 4.4% | 306,253 | - | - |
Eurobonds | 2020 | 2023 | USD | 0% to 4.4% | 455,666 | - | - |
Eurobonds | 2019 | 2027 | USD | CDI+6.4% | - | 1,279,506 | 727,118 |
Eurobonds | 2020 | 2021 | USD | 0% to 4% | - | 3,252,482 | - |
Eurobonds | 2020 | 2021 | USD | CDI+1.9% | - | 170,257 | - |
Eurobonds | 2020 | 2022 | USD | 0% to 4% | - | 16,923 | - |
Eurobonds | 2020 | 2022 | USD | CDI+1.9% | - | 121,926 | - |
Eurobonds | 2020 | 2025 | USD | 0% to 8% | 46,655 | 22,888 | - |
Eurobonds | 2020 | 2023 | USD | CDI+1.9% | - | 223,435 | - |
Eurobonds | 2020 | 2024 | USD | CDI+1.9% | - | 98,082 | - |
Eurobonds | 2021 | 2022 | USD | 0% a 4.4% | 2,005,534 | - | - |
Eurobonds | 2021 | 2022 | USD | Until 9% | 41,749 | - | - |
Eurobonds | 2021 | 2022 | USD | CDI+1.9% | 205,624 | - | - |
Eurobonds | 2021 | 2022 | USD | CDI + 2.65% | 181,116 | - | - |
Eurobonds | 2021 | 2023 | USD | 0% to 4.4% | 408,824 | - | - |
Eurobonds | 2021 | 2023 | USD | CDI+1.9% | 157,370 | - | - |
Eurobonds | 2021 | 2023 | USD | CDI + 2.65% | 5,316 | - | - |
Eurobonds | 2021 | 2024 | USD | 0% to 4.4% | 246,192 | - | - |
Eurobonds | 2021 | 2025 | USD | 0% to 4.4% | 593,036 | - | - |
Eurobonds | 2021 | 2026 | USD | 0% to 4.4% | 3,890,578 | - | - |
Eurobonds | 2021 | 2026 | USD | CDI + 2.65% | 210,639 | - | - |
Eurobonds | 2021 | 2027 | USD | 0% to 4.4% | 101,029 | - | - |
Eurobonds | 2021 | 2028 | USD | Until 9% | 30,126 | - | - |
Eurobonds | 2021 | 2028 | USD | CDI+6.4% | 26,018 | - | - |
Eurobonds | 2021 | 2031 | USD | 0% a 4.4% | 2,217,811 | - | - |
Other | - | - | 13,707 | ||||
Total | 12,952,068 | 9,399,276 | 8,715,382 |
Issuance | Maturity | Currency | Interest rate (p.a) | 2016 | 2015 | 2014 | ||||||||||||||||
Eurobonds | apr and nov-10 | apr-15 | US$ | 4.5 | % | - | - | 2,173,398 | ||||||||||||||
Eurobonds | jan and jun-11 | jan-16 | US$ | 4.3 | % | - | 3,268,431 | 2,256,237 | ||||||||||||||
Eurobonds | feb and sep-12 | feb-17 | US$ | 4.6 | % | 4,116,309 | 5,025,982 | 3,575,617 | ||||||||||||||
Eurobonds(2) | apr-12 | apr-16 | CHF | 3.3 | % | - | 603,889 | 412,596 | ||||||||||||||
Eurobonds(2) | mar-13 | apr-18 | US$ | 4,5% a 8,4%(1) | - | - | 892,090 | |||||||||||||||
Eurobonds(2) | mar and may-13 | mar-16 | R$ | 8.0 | % | - | 1,255,841 | 1,258,363 | ||||||||||||||
Eurobonds(2) | jun-13 | jun-15 | CHF | 1.1 | % | - | - | 339,686 | ||||||||||||||
Eurobonds(2) | mar-13 | mar-15 | CHF | 1.7 | % | - | - | 187,974 | ||||||||||||||
Eurobonds(2) | apr-12 | apr-16 | CLP | 4.6 | % | - | 135,388 | 101,264 | ||||||||||||||
Eurobonds | oct-14 | oct-16 | US$ | 2.0 | % | - | 102,708 | 51,488 | ||||||||||||||
Eurobonds(2) | sep-14 | sep-16 | JPY | 1.8 | % | - | 35,743 | 24,480 | ||||||||||||||
Eurobonds | dec-15 | jul-16 | US$ | 2.7 | % | - | 195,254 | - | ||||||||||||||
Eurobonds | dec-15 | jun-16 | EUR | 1.0 | % | - | 170,053 | - | ||||||||||||||
Eurobonds | jun-15 | jan-16 | US$ | 1.1 | % | - | 173,487 | - | ||||||||||||||
Eurobonds | jul-15 | jan-16 | US$ | 1.1 | % | - | 839,956 | - | ||||||||||||||
Eurobonds | aug-15 | feb-16 | US$ | 1.2 | % | - | 510,082 | - | ||||||||||||||
Eurobonds | aug-15 | feb-16 | US$ | 1.1 | % | - | 291,345 | - | ||||||||||||||
Eurobonds | feb-15 | feb-18 | US$ | 2.2 | % | 39,727 | 47,598 | - | ||||||||||||||
Eurobonds | jul-15 | jul-20 | US$ | 3.0 | % | 10,206 | 11,877 | - | ||||||||||||||
Eurobonds | feb-16 | mar-17 | US$ | 2.5 | % | 39,940 | - | - | ||||||||||||||
Eurobonds | jun-16 | jun-17 | US$ | 1.0 | % | 475,424 | - | - | ||||||||||||||
Eurobonds | apr-16 | apr-17 | US$ | 1.0 | % | 111,059 | - | - | ||||||||||||||
Eurobonds | jul-16 | jul-17 | US$ | 2.0 | % | 761,129 | - | - | ||||||||||||||
Eurobonds | aug-16 | aug-17 | US$ | 2.0 | % | 185,533 | - | - | ||||||||||||||
Eurobonds | sep-16 | sep-17 | US$ | 2.0 | % | 195,206 | - | - | ||||||||||||||
Eurobonds | sep-16 | mar-17 | US$ | 1.4 | % | 50,045 | - | - | ||||||||||||||
Eurobonds | sep-16 | sep-17 | US$ | 2.1 | % | 35,562 | - | - | ||||||||||||||
Eurobonds | oct-16 | jan-17 | US$ | 0.9 | % | 32,422 | - | - | ||||||||||||||
Eurobonds | nov-16 | feb-17 | US$ | 0.9 | % | 93,498 | - | - | ||||||||||||||
Eurobonds | dec-16 | mar-17 | US$ | 0.9 | % | 62,219 | - | - | ||||||||||||||
Eurobonds | nov-16 | mai-17 | US$ | 1.4 | % | 34,720 | - | - | ||||||||||||||
Eurobonds | dec-16 | jun-17 | US$ | 1.4 | % | 62,105 | - | - | ||||||||||||||
Eurobonds | oct-16 | oct-17 | US$ | 2.2 | % | 249,214 | - | - | ||||||||||||||
Eurobonds | oct-16 | oct-17 | EUR | 0.4 | % | 37,507 | - | - | ||||||||||||||
Eurobonds | nov-16 | nov-17 | US$ | 2.0 | % | 130,791 | - | - | ||||||||||||||
Eurobonds | nov-16 | nov-17 | US$ | 1.8 | % | 138,605 | - | - | ||||||||||||||
Eurobonds | dec-16 | dec-17 | US$ | 1.8 | % | 48,448 | - | - | ||||||||||||||
Others | 811,977 | 797,739 | 511,508 | |||||||||||||||||||
Total | 7,721,646 | 13,465,373 | 11,784,701 |
19. | Debt Instruments Eligible to Compose Capital |
(1) The transaction was settled in advance in the first quarter of 2015 and had compound interest flow: up to April 17, 2013 equal to 4.5% per year in the period from April 18, 2013 to October 17, 2017 equal to 8.4% pa and October 18, 2017 to April 17 2018 equal to 7.0% p.a.
(2) On December 31, 2015 includes R$1,995,118 (2014 - R$1,960,197) in cash flow hedge operations, being R$1,255,841 indexed in Reais (2014 - R$1,258,363), R$603,889 indexed on foreign currency - Swiss Franc (2014 - R$600,570), R$R$135,388 in Chilean Peso (2014 - R$101,264) and R$35,743 for market risk hedge operations (2014 - R$364,166), being R$35.743 (2014 - R$24,480) indexed to foreign currency - YEN and the value at December 31,2014 R$339,686 indexed to foreign currency - Swiss Franc.
The detail of the balance of “Subordinated liabilities” is as follows:
Thousands of Reais | ||||||||||||||||||||
Issuance | Maturity(1) | Amount (millions) | Interest rate | 2016 | 2015 | 2014 | ||||||||||||||
Subordinated Liabilities | jun-06 | jul-16 | R$1,500 | 105.0% CDI | - | 4,196,347 | 3,683,128 | |||||||||||||
Subordinated Liabilities | oct-06 | sep-16 | R$850 | 104.5% CDI | - | 2,266,789 | 1,990,794 | |||||||||||||
Subordinated Liabilities | jul-06 to oct-06 | jul-16 | R$447 | 104.5% CDI | - | 1,230,505 | 1,080,684 | |||||||||||||
Subordinated Liabilities | may-08 | may-15 to may-18 | R$283 | CDI(2) | 98,378 | 114,467 | 114,050 | |||||||||||||
Subordinated Liabilities | may-08 to jun-08 | may-15 to jun-18 | R$268 | IPCA(3) | 367,868 | 289,196 | 425,421 | |||||||||||||
Total | 466,246 | 8,097,304 | 7,294,077 |
(1) Subordinated certificates of deposit issued by Banco Santander S.A. with yield paid at the end of the term together with the principal.
(2) Indexed to 100% and 112% of the CDI.
(3) Indexed to the IPCA (extended consumer price index) plus interest of 8.3% p.a. to 8.4% p.a.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The detail by currency, of the balance of “Subordinated liabilities” is as follows:
Thousands of Reais | Average Interest Rate (%) | |||||||||||||||||||||||
Currency: | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
Real | 466,246 | 8,097,304 | 7,294,077 | 9.6 | % | 14.6 | % | 11.2 | % | |||||||||||||||
Total | 466,246 | 8,097,304 | 7,294,077 | 9.6 | % | 14.6 | % | 11.2 | % |
The changes in “Subordinated liabilities” were as follows:
2016 | 2015 | 2014 | ||||||||||
Balance at beginning of year | 8,097,304 | 7,294,077 | 8,906,144 | |||||||||
Payments | (8,362,652 | ) | (216,075 | ) | (2,495,282 | ) | ||||||
Interest (Note 34) | 731,594 | 1,019,302 | 883,215 | |||||||||
Balance at end of year | 466,246 | 8,097,304 | 7,294,077 |
Note 45-d contains a detail of the residual maturity periods of subordinated liabilities at each year-end and of the related average interest rates in each year.
21. Debt Instruments Eligible to Compose Capital
Details of the balance of "Debt Instruments Eligible to Compose Capital" for the issuance of such instruments to compose the Tier I and Tier II of regulatory capital due to the Regulatory Capital Optimization Plan, (Note 29.e), are as follows:
2016 | 2015 | 2014 | ||||||||||||||||||||
Issuance | Maturity | Issuance Value | Interest Rate (p.a.)(3) | |||||||||||||||||||
Tier I(1) | jan-14 | no maturity (perpetual) | R$3,000 | 7.4 | % | 4,125,557 | 4,943,194 | 3,361,971 | ||||||||||||||
Tier II(2) | jan-14 | jan-24 | R$3,000 | 6.0 | % | 4,186,361 | 5,015,843 | 3,411,341 | ||||||||||||||
Total | 8,311,918 | 9,959,037 | 6,773,312 |
(1) Interest quarterly paid from April 29, 2014.
(2) Interest semiannually paid from July 29, 2014.
(3) The effective interest rate, considering the income tax source assumed by the issuer, is 8.676% and 7.059% for instruments Tier I and Tier II, respectively.
Consolidated Financial Statements | December 31, 2021 | F-67 |
* Values expressed in thousands, except when indicated. |
2021 | 2020 | 2019 | |||||
Issuance | Maturity | Issuance Value | Interest Rate (p.a.) | ||||
Tier I (1) | nov-18 | No-Maturity (Perpetual) | US$1,250 | 7.250% | 7,050,080 | 6,554,451 | 5,092,153 |
Tier II (1) | nov-18 | nov/28 | US$1,250 | 6.125% | 7,038,527 | 6,565,209 | 5,083,808 |
Financial Bills - Tier II (2) | nov-21 | nov-31 | R$ 5,300 | CDI+2% | 5,351,046 | - | - |
Financial Bills - Tier II (2) | dez-21 | dez-31 | R$ 200 | CDI+2% | 201,755 | - | - |
Total | 19,641,408 | 13,119,660 | 10,175,961 |
(1) | The issues were carried out through the Cayman Branch and there is no Income Tax at source, and interest is paid semiannually, as of May 8, 2019. |
(2) | Letras Financeiras issued in November 2021 have a redemption and repurchase option. |
Notes have the following common characteristics:
(a) Unit value of at least US$150 thousand and in integral multiples of US$1 thousand which exceeds such minimum value;
(b) The Notes may be repurchased or redeemed by Banco Santander after the 5th (fifth) anniversary from the date of issue of the Notes, at the Bank's sole discretion or due to changes in the tax legislation applicable to the Notes; or at any time, due to the occurrence of certain regulatory events.
Changes in the balance of "Debt Instruments Eligible to Compose Capital" in twelve-months period ended December 31, 2016, 2015 and 2014 were as
2016 | 2015 | 2014 | ||||||||||
Balance at beginning of the year | 9,959,037 | 6,773,312 | - | |||||||||
Issues | - | - | 6,000,000 | |||||||||
Interest payment Tier I(1) | 276,587 | 277,024 | 239,931 | |||||||||
Interest payment Tier II(1) | 225,161 | 226,266 | 195,541 | |||||||||
Exchange differences / Others | (1,447,196 | ) | 3,291,470 | 629,081 | ||||||||
Payments of interest - Tier I | (379,039 | ) | (347,201 | ) | (191,466 | ) | ||||||
Payments of interest - Tier II | (322,632 | ) | (261,834 | ) | (99,775 | ) | ||||||
Balance at end of the year | 8,311,918 | 9,959,037 | 6,773,312 |
(1) The remuneration of interest relating to the Debt Instruments Eligible to Compose Capital Tier I and II were recorded against income for the period as "Interest expense and similar charges" (Note 34).
2021 | 2020 | 2019 | |||||
Balance at beginning of the year | 13,119,660 | 10,175,961 | 9,779,944 | ||||
Issuance - Tier II | 5,500,000 | - | - | ||||
Interest payment Tier I (1) | 505,300 | 506,771 | 272,947 | ||||
Interest payment Tier II (1) | 449,899 | 402,622 | 230,594 | ||||
Exchange differences / Others | 977,855 | 2,948,951 | 221,368 | ||||
Payments of interest - Tier I | (493,071) | (495,789) | (178,278) | ||||
Payments of interest - Tier II | (418,235) | (418,856) | (150,614) | ||||
Balance at end of the year | 19,641,408 | 13,119,660 | 10,175,961 |
(1) | The remuneration of interest relating to the Debt Instruments Eligible to Compose Capital Tier I and II was recorded against income for the period as "Interest expense and similar charges" (Note 32). |
22. Other financial liabilities
20. | Other financial liabilities |
The breakdown of the balances of these items is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | |||||||||||||||||||
Credit card obligations | 25,420,237 | 20,611,690 | 19,909,272 | 45,976,315 | 48,912,963 | 38,531,519 | ||||||||||||||||
Unsettled financial transactions | 3,829,374 | 5,814,199 | 1,106,011 | 10,861,143 | 7,210,396 | 7,239,785 | ||||||||||||||||
Dividends payable | 4,346,128 | 2,846,433 | 849,322 | |||||||||||||||||||
Dividends and Interest on Capital payable | 1,029,952 | 1,223,310 | 7,826,247 | |||||||||||||||||||
Tax collection accounts - Tax payables | 1,157,386 | 879,834 | 676,405 | 969,939 | 864,292 | 883,768 | ||||||||||||||||
Liability associated with the transfer of assets (Note 10.g) | 774,673 | 190,333 | 242,024 | |||||||||||||||||||
Liability associated with the transfer of assets (Note 9.g) | Liability associated with the transfer of assets (Note 9.g) | 40,511 | 55,105 | 75,500 | ||||||||||||||||||
Other financial liabilities | 1,351,301 | 1,730,156 | 662,701 | 10,030,440 | 8,595,084 | 6,328,551 | ||||||||||||||||
Total | 36,879,099 | 32,072,645 | 23,445,735 | 68,908,300 | 66,861,150 | 60,885,370 |
(1) | Includes operations to settle with B3 S.A. (Current Company Name of BM&FBovespa) and payment orders in foreign currency. |
(2) | Refers substantially to cancelable financial liabilities, designated at fair value through profit or loss. |
(1)
21. | Provisions for pensions and similar obligations |
On December 31, 2016, 2015 and 2014 includes the financial liabilities in the amount of R$307 million related to the put option of the commitment of the shares held by Banco Bonsucesso and R$950 million related to the put option having as object the shares held by non-controlling of Getnet SA.
(2) Includes operations to liquidate with BM&FBovespa and payment orders in foreign currency.
Note 45-d contains a detail of the residual maturity periods of other financial assets and liabilities at each year-end.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
23. Provisions for pensions and similar obligations
On December 31, 20162021 the balance of provisions for pension funds and similar obligations totaled R$2,710,627 (20152,728,126 (2020 - R$2,696,6533,929,265 and 20142018 - R$3,869,728)4,960,620).
Consolidated Financial Statements | December 31, 2021 | F-68 |
* Values expressed in thousands, except when indicated. |
i.
I. Supplemental Pension Plan
The Banco Santander and its subsidiaries sponsor privatethe closed pension entities and plans exclusive to employees and former employees, pension funds and cash assistance withfor the purpose of providing retirementgranting pensions and pension benefits that supplementsupplementary pensions over those providedgranted by the government,Social Security, as defined in the basic regulations of each plan.
● | Banesprev - Fundo Banespa de Seguridade Social (Banesprev) |
• Banesprev - Fundo Banespa de Seguridade Social (Banesprev)
- Plan I: defined benefit plan fully fundedsponsored by Banco Santander, it covers employees hired after May 22, 1975 called Participants Recipients, and those hired until May 22, 1975 called Participants Aggregates, who are also entitled to death benefits. PlanThis plan is closed to new employeesentrants since March 28, 2005.
- Plan II: defined benefit plan, constituted from July 27, 1994, effective of the new text of the Statute and Regulations of the Basic Plan II, Plan I participants who chose the new plan began to contribute to the rate of 44.9% stipulated by the actuary for funding each year, introduced in April 2012 extraordinary cost to the sponsor and participants, as agreed with the PREVIC - Superintendence of Pension Funds, due Deficitto deficit in the plan. PlanThis plan is closed to new entrants since June 3, 2005.
- Plan V:III: defined benefit plan fully defrayedsponsored by Banco Santander, it covers employees hired until after May 22, 1975,closed and settled.paid off.
- Supplemental Pension Plan:Plan Pré 75: defined benefit plan was created in view of the privatization of Banespa and is managed by Banesprev and offered only to employees hired before May 22, 1975, this Planwhich its effective date is January 1, 2000. PlanThis plan is closed to new entrants since April 28, 2000.
- Plan III:I: variable contribution plan, for employees hired after May 22,1975, previously served by the Plans I and II. Under thisThis plan receives contributions are made by Banco Santanderfrom the sponsor and the participants. Plan structured asThe benefits are in the form of defined contribution during the period of contribution and defined benefit during the receipt of benefit, if paid as monthly income for life. Plan is closed to new entrants since September 1, 2005.
- Plan IV:II: variable contribution plan, designed for employees hired as of November 27, 2000, Sponsor fundsin which the sponsor only contributes to the risk benefits and administrative expenses only.expenses. In this plan the benefit is set in the form of defined contribution during the period of contribution and defined benefit during the receipt of benefits in the form of monthly income for life, in whole or in part of the benefit. Risk benefit modeled asThe risk benefits of the plan are in defined benefits. Planbenefit. This plan is closed to new entrants since July 23, 2010.
- Three plans (DCA, DAB and CACIBAN): additional retirement and former employees associated pension, arising from the process of acquisition of the former Banco Meridional, established under the defined benefit plan. The plans arewere closed to new participants.participants prior to the acquisition of Grupo Bozano Simonsen by Banco Santander in November 1999.
• Sanprev - Santander Associação de Previdência (Sanprev)
- Plan Sanprev I: defined benefit plan, established on September 27, 1979, covering employees enrolled in the plan sponsor and it is in process of extinction since June 30, 1996.
- Plan Sanprev II: plan that provides insurance risk, pension supplement temporary, disability retirement annuity and the supplemental death and sickness allowance and birth, including employees enrolled in the plan sponsor and is funded solely by sponsors through monthly contributions, as indicated by the actuary. PlanThis plan is closed to new entrants since March 10, 2010.
- Plan Sanprev III: variable contribution plan covering employees of the sponsors who made the choice to contribute, by contributingcontribution freely chosen by participants from 2% of salary contribution.their salary. That the benefit plan is a defined contribution during the contribution and defined benefit during the receipt of the benefit, being in the form of monthly income for life, in whole or in part of the benefit. PlanThis plan is closed to new entrants since March 10, 2010.
● | Sanprev – Santander Associação de Previdência (Sanprev) |
• Bandeprev - Bandepe Previdência Social (Bandeprev)Closed-End Private Pension Entity that used to manage three benefit plans, 2 in the Defined Benefit modality and 1 in the modality of Variable Contribution, whose process of management transfer of these plans to Banesprev occurred in January 2017. According to Portaria 389 of PREVIC, of May 8, 2018, it was approved the closure of the authorization of operation of Sanprev.
● | Bandeprev - Bandepe Previdência Social (Bandeprev) |
Defined benefit plan, sponsored by Banco Bandepe and Banco Santander, managed by Bandeprev. The plans are divided into basic plan and special retirement supplement plan, with different eligibility requirements, contributions and benefits by subgroups of participants. The plans are closed to new entrants since 1999 for Banco Bandepe’s employees and for others since 2011.
● | Other Plans |
• Other plans
SantanderPrevi - Sociedade de Previdência Privada (SantanderPrevi):it´s a closedclosed-end private pension entity, which aims at setting upentity with the purpose of constitution and implementation of benefitsocial security pension plans, pension character, complementary to the general welfare,social security contribution, in the form of actual legislation.
Consolidated Financial Statements | December 31, 2021 | F-69 |
* Values expressed in thousands, except when indicated. |
The Retirement Plan of SantanderPrevi is the only structured as Defined Contribution and openclosed to new members since July 2018 as approved by PREVIC, with contributions shared between sponsors and plan participants. The appropriate values by the sponsors in the year of 20162021 was R$87,603 (2015 -69,142 (2020 – R$79,365)69,142 e 2019 – R$110,325).
It has 10 cases of lifetime income with benefits arising from the previous plan.
ii. Actuarial Techniques
The amountSBPREV - Santander Brasil Open Pension Plan: As from January 2, 2018, Santander started to offer this new optional supplementary pension plan for new employees hired and for employees who are not enrolled in any other pension plan managed by the Closed Entities Complementary Pension Plan of the defined benefit obligations was determinedGroup. This new program includes the PGBL- Free Benefit Generation Plan and VGBL-Free Benefit Generator Life managed by independent actuaries usingIcatu Seguros, the following actuarial techniques:
• Valuation method:
Projected unit credit method,Open Entity of Complementary Pension Plan, which sees eachare open for new accessions, with similar characteristics to SantanderPrevi's plan. the instituting / stipulating companies and the participants in the plans. The appropriated values by the sponsors in the year of service as giving rise to an additional unit of benefit entitlement and measures each unit separately.
• Nominal discount rate for actuarial obligation and calculation of interest on assets:
- Banesprev, Sanprev, SantanderPrevi, Bandeprev and Other Plans - 10.9% (2015 - 12.3% and 2014 - 10.9%2021 were R$17,880 (2020 – R$14,054).
- Cabesp, Law 9,656 and others obligations - 10.8% (2014 - 12.03% and 2014 - 11.0%).
• Estimated long-term inflation rate:
- Banesprev, Sanprev, SantanderPrevi, Bandeprev and Other Plans - 4.5% (2015 - 4.5% and 2014 - 4.5%).
• Estimate salary increase rate:
- Banesprev, Sanprev, SantanderPrevi, Bandeprev Básico and Other Plans - 5.0% (2015 - 5.0% and 2014 - 5.0%).
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
iii.II. Health and Dental Care Plan
• Cabesp - Caixa Beneficente dos Funcionários do Banco do Estado de São Paulo S.A.:
Entity that covers health and dental care expenses of employees hired until Banespa privatization in 2000, as defined in the entity's bylaws.
• HolandaPrevi’s Retirees (current corporate name of SantanderPrevi):
For the health care plan Retirement has lifelonglifetime nature and is a closed group. In shutdownhis termination the employee should have completed 10 years of employment with Banco Real and 55 years of age. In this case it was offered the continuity of health care plan where the employee bearspays 70% and the Bank pays 30% of the monthly and Bank subsidizes 30%.payment. This rule lasted until December, 2002 and after this period that the employee was off likegot terminated with the status Retired Holandaprevi, bearshe pays 100% of the health plan monthly health plan.payment.
• Former employees of Banco Real S.A. (retiree(Retiree by Circulars):
It refersgrants entitlement to health insurance forhealthcare to former employees of Banco Real's employees, whoseReal, with lifetime benefit has beenit was granted in the same condition as the active employees,employee, in this case, with the same coverage and plan characteristics.design.
Eligible only tofor basic plans basic and standard firstpremium apartment, optingif the beneficiary chooses for the apartment plan he takespays the difference between the plans moreplus the co-participation in the basic plan. Not allowed new additions of dependents. It has subsidizes ofis subsidized in 90% of the plan.
• Bandeprev’s retireesretirees:
The health
Health care plan granted to Bandeprev’s retirees of Bandeprev’s pension plan beneficiaries isas a lifetime benefit, for which Banco Santander is responsible for defrayingsubsidizing 50% of the benefits of employees retired until November 27, 1998 and 30% of the benefits of employees1998. For whom retired after privatization.this date, the subsidy is 30%.
• OfficerDirectors with Lifetime Benefits (Lifetime Officers)Directors):
Lifetime health care benefit granted to a small closed group of former officers ofdirectors coming from Banco Sudameris, Brasil S.A. In this case, no conclusion, being 100% fundedsubsidized by the Bank.
• Health Directors:
Directors, Executive Directors, Vice-President Directors and Chief Executive Officer, may, by choice, choose to remain medical assistance, in case of termination of the link with Banco Santander or companies in its conglomerate without cause; as long as they comply the following requirements: have contributed for at least 3 (three) years to the health plan; having served as a director at Banco Santander or companies its conglomerate for at least 3 (three) years; be 55 years of age. The plan will be maintained in the same way as the DIRECTOR enjoyed at the time of his dismissal, including the payment of his share, which must be paid by bank slip. The dependents active at the time of termination will be kept on the same plan as the director, and the inclusion of new dependents in no chance.
• Free ClinicClinic:
Health care plan (free clinic) is offered for lifea lifetime to retirees who have contributed to the Foundation Sudameris for at least 25 years and has difference in default if the user chooses apartment. The plan is only offered in standard wardinfirmary where the cost is 100% of the Foundation Sudameris.
Consolidated Financial Statements | December 31, 2021 | F-70 |
* Values expressed in thousands, except when indicated. |
• Life insurance for Banco Real’s retirees (Life Insurance):
For Retirees from Circulars: indemnity in case of Natural Death, Disease Disability, Accidental Death. The subsidy is 45.28%45% of the value. This benefit is also granted to retirees Fundação Sudameris where cost is 100% of the retired. It is a closed group.
• Life Insurance Assistance Boxes (Life Insurance):
Included in the bulk of the life insurance in December 2018 the insurance of the retirees of the DCA, DAB and CACIBAN plans. This insurance was granted to retirees of the former Southern Bank, coverage was according to the choice of retiree at the time of joining the benefit. The Bank's allowance is 50% of the premium amount for the holder and some retirees have the spouse clause bearing 100% of the cost. The plan is closed for new participants.
Additionally, it is assured to retired employees, since they meet to certain legal requirements and full paysfully pay their respective contributions, the right to be maintaining as a beneficiary of the Banco Santander health plan, in the same conditions for healthcare coverage, taken place during their employment contract. Banco Santander provisions related to thisthese retired employees are accruedcalculated using actuarial calculations based in the present value of the current cost.
III. Actuarial Techniques
The amount of the defined benefit obligations was determined by independent actuaries using the following actuarial techniques:
• Valuation method:
Projected unit credit method, which uses each year of service as giving rise to an additional unit of benefit entitlement and measures each unit separately.
• Nominal discount rate for actuarial obligation and calculation of interest on assets
- Banesprev, Sanprev, SantanderPrevi, Bandeprev and Other Plans – 8.39% (2020 – 6.8% e 2019 – 7.1%).
- Cabesp, Law 9,656 and others obligations – 8.44% (2020 – 7.1% e 2019 – 7.2%).
• Estimated long-term inflation rate
- Banesprev, Sanprev, SantanderPrevi, Bandeprev and Other Plans – 3.0% (2020 – 3.3% e 2019 – 3.5%).
• Estimate salary increase rate
- Banesprev, Sanprev, SantanderPrevi, Bandeprev Básico and Other Plans – 3.52% (2020 – 3.8% e 2019 – 4.0%).
The funding status of the defined benefit obligations in 20162021 and in the last 32 years are as follows:
Funding status of the defined benefit obligations
2021 | 2020 | 2019 | |||||||
Present value of the obligations - Post-employment plans: | |||||||||
To current employees | 320,202 | 478,837 | 687,786 | ||||||
Vested obligations to retired employees | 26,183,758 | 28,202,580 | 27,369,696 | ||||||
Total | 26,503,960 | 28,681,417 | 28,057,482 | ||||||
Less: | |||||||||
Fair value of plan assets | 28,321,826 | 28,634,891 | 25,822,890 | ||||||
Unrecognized assets (1) | (3,645,083) | (2,762,220) | (1,346,547) | ||||||
Provisions – Post-employment plans, net | 1,827,217 | 2,808,746 | 3,581,139 | ||||||
Present value of the obligations - Other similar obligations: | |||||||||
To current employees | 97,004 | 135,902 | 204,439 | ||||||
Vested obligations to retired employees | 5,026,865 | 5,782,124 | 6,047,368 | ||||||
Total | 5,123,869 | 5,918,026 | 6,251,807 | ||||||
Less: | |||||||||
Fair value of plan assets | 5,096,262 | 5,398,667 | 5,222,517 | ||||||
Unrecognized assets (1) | (585,495) | (240,010) | - | ||||||
Provisions – Other similar obligations, net | 613,101 | 759,370 | 1,029,290 | ||||||
Total provisions for pension plans, net | 2,440,318 | 3,568,115 | 4,610,429 | ||||||
Of which: | |||||||||
Actuarial provisions | 2,728,126 | 3,929,265 | 4,960,620 | ||||||
Actuarial assets (note 15) | 287,808 | 361,149 | 350,191 |
(1) | Refers to fully funded surplus plans Banesprev I and III, Sanprev I,II and III and Bandeprev. |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Present value of the obligations - Post-employment plans: | ||||||||||||
To current employees | 770,423 | 753,697 | 871,376 | |||||||||
Vested obligations to retired employees | 19,998,703 | 16,772,102 | 17,019,976 | |||||||||
20,769,126 | 17,525,799 | 17,891,352 | ||||||||||
Less: | ||||||||||||
Fair value of plan assets | 20,116,916 | 16,275,269 | 16,067,029 | |||||||||
Unrecognized assets(1) | (969,162 | ) | (963,031 | ) | (874,304 | ) | ||||||
Provisions – Post-employment plans, net | 1,621,372 | 2,213,561 | 2,698,627 | |||||||||
Present value of the obligations - Other similar obligations: | ||||||||||||
To current employees | 200,009 | 315,474 | 340,123 | |||||||||
Vested obligations to retired employees | 4,046,480 | 5,719,260 | 5,737,398 | |||||||||
4,246,489 | 6,034,734 | 6,077,521 | ||||||||||
Less: | ||||||||||||
Fair value of plan assets | 3,310,895 | 5,673,071 | 4,906,977 | |||||||||
Unrecognized assets(1) | - | (121,429 | ) | - | ||||||||
Provisions – Other similar obligations, net | 935,594 | 483,092 | 1,170,544 | |||||||||
Total provisions for pension plans, net | 2,556,966 | 2,696,653 | 3,869,171 | |||||||||
Of which: | ||||||||||||
Actuarial provisions | 2,710,627 | 2,696,653 | 3,869,728 | |||||||||
Actuarial assets (note 16) | 153,661 | - | 557 |
(1) Refers to fully funded plans Banesprev I and III, Sanprev I, II and III and Bandeprev.
Consolidated Financial Statements | December 31, 2021 | F-71 |
* Values expressed in thousands, except when indicated. |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The amounts recognized in the consolidated income statement in relation to the aforementioned defined benefit obligations are as follows:
Post-Employment Plans | |||||||||
2021 | 2020 | 2019 | |||||||
Staff costs - Current service costs (note 39) | 1,799 | 4,186 | 2,774 | ||||||
Interest and similar income and expenses - Interest cost (net) (notes 31 and 32) | (81,681) | 108,268 | 149,232 | ||||||
Interest and similar income and expenses - Interest on unrecognized assets (notes 31 and 32) | 252,608 | 97,291 | 100,346 | ||||||
Other movements - Extraordinary charges | 2,117 | 16,786 | (1,101) | ||||||
Total | 174,843 | 226,532 | 251,251 |
Thousands of Reais | Post-Employment Plans | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Current service cost | 15,416 | 20,560 | 11,189 | |||||||||
Interest cost (net) | 120,524 | 187,650 | 134,076 | |||||||||
Interest on assets not recognized | 117,981 | 95,652 | - | |||||||||
Other movements | 4,355 | (2,607 | ) | (3,481 | ) | |||||||
Total | 258,276 | 301,255 | 141,784 |
Amounts recognized in the consolidated income statement in relation to defined benefit obligations - Other Similar Obligations
Thousands of Reais | Other Similar Obligations | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Current service cost | 9,064 | 10,740 | 10,606 | |||||||||
Interest cost (net) | 38,064 | 124,469 | (384,410 | ) | ||||||||
Interest on assets not recognized | 14,608 | - | - | |||||||||
Other movements | 55,943 | 27 | (77,165 | ) | ||||||||
Total | 117,679 | 135,236 | (450,969 | ) |
Other Similar Obligations | |||||||||
2021 | 2020 | 2019 | |||||||
Staff costs - Current service costs (note 39) | 6,820 | 5,860 | 8,142 | ||||||
Interest and similar income and expenses - Interest cost (net) (notes 31 and 32) | 14,985 | 71,374 | 61,845 | ||||||
Interest and similar income and expenses - Interest on unrecognized assets (notes 31 and 32) | 31,500 | - | 3,173 | ||||||
Other movements - Extraordinary charges(2) | (135) | (142) | 22,624 | ||||||
Total | 53,170 | 77,092 | 95,784 |
The changes in the present value of the accrued defined benefit obligations were as follows:
Thousands of Reais | Post-Employment Plans | ||||||||||||||||||||
Post-Employment Plans | |||||||||||||||||||||
2016 | 2015 | 2014 | 2021 | 2020 | 2019 | ||||||||||||||||
Present value of the obligations at beginning of year | 17,525,799 | 17,891,352 | 16,497,830 | Present value of the obligations at beginning of year | 28,681,417 | 28,057,482 | 24,013,207 | ||||||||||||||
Current service cost | 15,416 | 20,560 | 11,146 | ||||||||||||||||||
Current service cost (Note 39) | Current service cost (Note 39) | 1,799 | 4,186 | 2,774 | |||||||||||||||||
Interest cost | 2,046,949 | 1,877,942 | 1,770,565 | 1,971,031 | 1,940,515 | 2,087,484 | |||||||||||||||
Benefits paid | (1,679,794 | ) | (1,530,082 | ) | (1,445,736 | ) | (2,159,866) | (2,060,960) | (1,960,103) | ||||||||||||
Actuarial (gains)/losses | 2,844,733 | (753,155 | ) | 1,056,019 | (1,992,512) | 722,261 | 3,908,350 | ||||||||||||||
Others | 16,023 | 19,182 | 1,528 | 2,091 | 17,933 | 5,770 | |||||||||||||||
Present value of the obligations at end of year | 20,769,126 | 17,525,799 | 17,891,352 | Present value of the obligations at end of year | 26,503,960 | 28,681,417 | 28,057,482 |
Thousands of Reais | Other Similar Obligations | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Present value of the obligations at beginning of year | 6,034,734 | 6,077,521 | 5,524,178 | |||||||||
Current service cost | 9,064 | 10,740 | 10,607 | |||||||||
Interest cost | 703,874 | 653,206 | 608,412 | |||||||||
Benefits paid | (465,029 | ) | (421,429 | ) | (342,936 | ) | ||||||
Actuarial (gains)/losses | 1,330,371 | (285,304 | ) | 279,855 | ||||||||
Other(1) | (3,366,525 | ) | - | (2,595 | ) | |||||||
Present value of the obligations at end of year | 4,246,489 | 6,034,734 | 6,077,521 |
(1) In the fourth quarter of 2016, Banco Santander updated the procedures for recognizing its obligations to the entity CABESP, in accordance with its bylaws, which establishes the coverage of medical costs
Consolidated Financial Statements | December 31, 2021 | F-72 |
* Values expressed in thousands, except when indicated. |
Changes in the equalitypresent value of proportion between associates and sponsor.the accrued defined benefit obligations - Other Similar Obligations
Other Similar Obligations | |||||||||
2021 | 2020 | 2019 | |||||||
Present value of the obligations at beginning of year | 5,918,026 | 6,251,807 | 4,789,072 | ||||||
Current service cost (Note 39) | 6,820 | 5,860 | 8,142 | ||||||
Interest cost | 417,536 | 448,836 | 443,837 | ||||||
Benefits paid | (373,341) | (337,742) | (378,782) | ||||||
Actuarial (gains)/losses | (845,173) | (450,735) | 1,366,837 | ||||||
Other | - | - | 22,701 | ||||||
Present value of the obligations at end of year | 5,123,869 | 5,918,026 | 6,251,807 |
The changes in the fair value of the plan assets were as follows:
Thousands of Reais | Post-Employment Plans | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Fair value of plan assets at beginning of year | 16,275,269 | 16,067,029 | 15,271,532 | |||||||||
Interest (Expense) Income | 1,926,424 | 1,690,293 | 1,652,774 | |||||||||
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net | 1,589,517 | (297,461 | ) | 241,663 | ||||||||
interest expense | ||||||||||||
Contributions | 2,001,806 | 298,198 | 300,624 | |||||||||
Of which: | ||||||||||||
By the Bank | 1,985,722 | 279,111 | 280,996 | |||||||||
By plan participants | 16,084 | 19,087 | 19,627 | |||||||||
Benefits paid | (1,676,116 | ) | (1,482,914 | ) | (1,399,142 | ) | ||||||
Exchange differences and other items | 16 | 124 | (422 | ) | ||||||||
Fair value of plan assets at end of year | 20,116,916 | 16,275,269 | 16,067,029 |
Thousands of Reais | Other Similar Obligations | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Fair value of plan assets at beginning of year | 5,673,071 | 4,906,977 | 4,629,910 | |||||||||
Interest (Expense) Income | 665,811 | 528,737 | 496,373 | |||||||||
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net interest expense | 718,628 | 581,755 | 187,841 | |||||||||
Contributions | - | 52,894 | 50,468 | |||||||||
Of which: | ||||||||||||
By the Bank | - | 52,894 | 50,468 | |||||||||
Benefits paid | (3,746,615 | ) | (397,292 | ) | (319,550 | ) | ||||||
Exchange differences and other items | - | - | (138,065 | ) | ||||||||
Fair value of plan assets at end of year | 3,310,895 | 5,673,071 | 4,906,977 |
F-55
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Post-Employment Plans | ||||||||||
2021 | 2020 | 2019 | ||||||||
Fair value of plan assets at beginning of year | 28,634,891 | 25,822,890 | 22,708,990 | |||||||
Interest (Expense) Income | 2,052,712 | 1,832,247 | 1,938,252 | |||||||
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net interest expense | (791,317) | 2,994,598 | 3,087,544 | |||||||
Contributions/(surrenders) | 589,006 | 49,716 | 51,807 | |||||||
Of which: | ||||||||||
By the Bank | 585,437 | 44,970 | 44,752 | |||||||
By plan participants | 3,569 | 4,746 | 7,055 | |||||||
Benefits paid | (2,159,866) | (2,060,960) | (1,960,103) | |||||||
Exchange differences and other items | (3,600) | (3,600) | (3,600) | |||||||
Fair value of plan assets at end of year | 28,321,826 | 28,634,891 | 25,822,890 |
Changes in the fair value of the plan assets - Other Similar Obligations
Other Similar Obligations | ||||||||||
2021 | 2020 | 2019 | ||||||||
Fair value of plan assets at beginning of year | 5,398,667 | 5,222,517 | 4,157,251 | |||||||
Interest (Expense) Income | 402,551 | 377,462 | 381,992 | |||||||
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net interest expense | (521,100) | (34,409) | 915,626 | |||||||
Contributions/(surrenders) | 151,926 | 132,416 | 107,037 | |||||||
Of which: | ||||||||||
By the Bank | 151,926 | 132,416 | 107,037 | |||||||
Benefits paid | (335,781) | (299,319) | (339,389) | |||||||
Fair value of plan assets at end of year | 5,096,263 | 5,398,667 | 5,222,517 |
Breakdown of gains (losses) actuarial by experience, financial assumptions and demographic hypotheses:
Opening of gains (losses) Actuarial from experience, financial assumptions and demographic hypotheses:hypotheses
Consolidated Financial Statements | December 31, 2021 | F-73 |
* Values expressed in thousands, except when indicated. |
Post-Employment Plans | |||||||||
2021 | 2020 | 2019 | |||||||
Experience Plan | (2,640,120) | (807,895) | (446,444) | ||||||
Changes in Financial Assumptions | 4,632,632 | 85,634 | (2,615,119) | ||||||
Changes in Financial Demographic | - | - | 1,228 | ||||||
Gain (Loss) Actuarial - Obligation | 1,992,512 | (722,261) | (3,060,335) | ||||||
Return on Investment, Return Unlike Implied Discount Rate | (791,317) | 2,994,598 | 2,624,960 | ||||||
Gain (Loss) Actuarial - Asset | (791,317) | 2,994,598 | 2,624,960 | ||||||
Changes in Surplus / Deficit Uncollectible | (630,255) | (1,318,382) | (164,428) |
Opening of gains (losses) Actuarial from experience, financial assumptions and demographic hypotheses - Other Similar Obligations
Other Similar Obligations | |||||||||
2021 | 2020 | 2019 | |||||||
Experience Plan | (290,878) | 289,237 | (209,175) | ||||||
Changes in Financial Assumptions | 1,136,497 | 182,120 | (1,157,662) | ||||||
Changes in Financial Demographic | (446) | (20,621) | - | ||||||
Gain (Loss) Actuarial - Obligation | 845,173 | 450,735 | (1,366,837) | ||||||
Return on Investment, Return Unlike Implied Discount Rate | (521,100) | (34,409) | 915,626 | ||||||
Gain (Loss) Actuarial - Asset | (521,100) | (34,409) | 915,626 | ||||||
Changes in Surplus Uncollectible | (313,984) | (240,010) | 71,698 |
Thousands of Reais | Post-Employment Plans | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Experience Plan | (696,910 | ) | (1,299,660 | ) | (580,616 | ) | ||||||
Changes in Financial Assumptions | (2,135,189 | ) | 2,049,061 | (475,403 | ) | |||||||
Changes in Financial Demographic | (12,773 | ) | - | - | ||||||||
Gain (Loss) Actuarial - Obligation | (2,844,872 | ) | 749,401 | (1,056,019 | ) | |||||||
Return on Investment, Return Unlike Implied Discount Rate | 1,589,446 | (297,271 | ) | 241,663 | ||||||||
Gain (Loss) Actuarial - Asset | 1,589,446 | (297,271 | ) | 241,663 | ||||||||
Changes in Superavit Uncollectible | 111,926 | - | - |
Thousands of Reais | Other Similar Obligations | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Experience Plan | (1,116,845 | ) | (433,550 | ) | (80,468 | ) | ||||||
Changes in Financial Assumptions | (537,952 | ) | 718,854 | (199,387 | ) | |||||||
Changes in Financial Demographic | (379 | ) | - | - | ||||||||
Gain (Loss) Actuarial - Obligation | (1,655,176 | ) | 285,304 | (279,855 | ) | |||||||
Return on Investment, Return Unlike Implied Discount Rate | 718,628 | 581,755 | 187,841 | |||||||||
Gain (Loss) Actuarial - Asset | 718,628 | 581,755 | 187,841 | |||||||||
Changes in Superavit Uncollectible | 136,037 | - | - | |||||||||
Effect without Risk Sharing | 380,434 | - | - | |||||||||
The experience adjustments arising from plan assets and liabilities are shown below: | ||||||||||||
Post - Employment Plans | ||||||||||||
In thousands of reais | 2016 | 2015 | 2014 | |||||||||
Experience in Net Assets Adjustments | 1,589,517 | (297,461 | ) | 241,663 |
Other Similar Obligations | ||||||||||||
In thousands of reais | 2016 | 2015 | 2014 | |||||||||
Experience in Net Assets Adjustments | 718,628 | 581,755 | 187,841 |
The experience adjustments arising from plan assets and liabilities are shown bellow:
Post - Employment Plans | ||||||||||
2021 | 2020 | 2019 | ||||||||
Experience in Net Assets Adjustments | (791,317) | 2,994,598 | 2,624,960 |
Other Similar Obligations | ||||||||||
2021 | 2020 | 2019 | ||||||||
Experience in Net Assets Adjustments | (521,100) | (34,409) | 915,626 |
The amounts of actuarial obligation of defined benefit plans uninsurednot covered and defined benefit plans partially or totally covered are shown below:
In thousands of reais | 2016 | 2015 | 2014 | ||||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||||||
Defined benefit plans uninsured | 555,160 | 826,963 | 878,550 | 613,101 | 759,370 | 815,929 | |||||||||||||||
Defined benefit plans partially or totally covered | 24,442,275 | 22,734,017 | 23,090,769 | 31,014,727 | 33,840,073 | 33,493,360 |
In 2017 the Bank expects to make contributions to fund these obligations for amounts similar to those made in 2016.
The main categories of plan assets as a percentage of total plan assets are as follows:
2021 | 2020 | 2019 | |||||||
Debt instruments | 96.68% | 97.41% | 92.92% | ||||||
Properties | 0.17% | 0.17% | 0.26% | ||||||
Other | 3.15% | 2.45% | 6.82% |
2016 | 2015 | 2014 | ||||||||||
Equity instruments | 1.00 | % | 0.48 | % | 3.04 | % | ||||||
Debt instruments | 98.16 | % | 98.54 | % | 93.94 | % | ||||||
Properties | 0.30 | % | 0.28 | % | 0.32 | % | ||||||
Other | 0.54 | % | 0.70 | % | 2.70 | % |
Consolidated Financial Statements | December 31, 2021 | F-74 |
* Values expressed in thousands, except when indicated. |
The expected return on plan assets was determined based on the basis of the market expectations for returns over the duration of the related obligations.
The actual return on plan assets was R$4,900,380 (20151,198,815 (2020 - R$2,503,610 and 20144,826,845 e 2019 - R$2,578,652)6,301,111).
The following table shows the estimated benefits payable at December 31, 2016 for the next ten years:years from December 31, 2021:
Thousands of Reais | ||||
2017 | 2,016,693 | |||
2018 | 2,105,021 | |||
2019 | 2,196,158 | |||
2020 | 2,288,697 | |||
2021 to 2026 | 15,541,948 | |||
Total | 24,148,517 |
2022 | 2,511,841 | ||||||||
2023 | 2,561,598 | ||||||||
2024 | 2,608,572 | ||||||||
2025 | 2,651,957 | ||||||||
2026 | 2,691,303 | ||||||||
2027 to 2031 | 13,884,478 | ||||||||
Total | 26,909,749 |
PresumptionsAssumptions about the rates related to medical care costs have a significant impact on the amounts recognized in income. A The change of one percentage point in the medical care cost rates would have the effects as follows:
Thousands of Reais | ||||||||
Sensitivity | ||||||||
(+1,0%) | (-)1,0% | |||||||
Effect on current service cost and interest on actuarial liabilities | 58,416 | (24,839 | ) | |||||
Effects on present value of obligation | 527,586 | (451,242 | ) |
F-56
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Sensitivity | ||||||||||
2021 | 2020 | 2019 | ||||||||
Current Service Cost and Interest | Present Value of Obligations | Current Service Cost and Interest | Present Value of Obligations | Current Service Cost and Interest | Present Value of Obligations | |||||
Discount Rate | ||||||||||
(+)0,5% | (25,444) | (305,114) | (28,711) | (402,547) | (31,672) | (440,072) | ||||
(-)0,5% | 28,133 | 337,349 | 32,099 | 450,049 | 35,572 | 494,257 | ||||
Boards of Mortality | ||||||||||
Applied (+) 2 years | (44,619) | (535,039) | (47,637) | (667,904) | (51,720) | (718,632) | ||||
Applied (-) 2 years | 47,934 | 574,793 | 54,226 | 760,289 | 56,687 | 787,636 | ||||
Cost of Medical Care | ||||||||||
(+)0,5% | 31,280 | 375,089 | 34,718 | 486,769 | 38,388 | 533,380 | ||||
(-)0,5% | (28,762) | (344,891) | (31,637) | (443,569) | (35,060) | (487,146) |
The following table shows the durationduration of the actuarial liabilities of the plans sponsored by Banco Santander:
Plans | Post - Employment Plans | ||||||||||
Duration (in years) | |||||||||||
Banesprev Plans I | 12.57 | ||||||||||
Banesprev Plans II | 12.92 | ||||||||||
Banesprev Plans III | 11.54 | ||||||||||
Banesprev Plans IV | 14.82 | ||||||||||
Banesprev Plans V | 9.51 | ||||||||||
Banesprev Pre-75 | 10.45 | ||||||||||
Sanprev I | 6.79 | ||||||||||
Sanprev II | 12.76 | ||||||||||
Sanprev III | 11.06 | ||||||||||
Bandeprev Basic | 10.53 | ||||||||||
Bandeprev Special I | 7.23 | ||||||||||
Bandeprev Special II | 6.46 | ||||||||||
SantanderPrevi | 8.11 | ||||||||||
CACIBAN / DAB / DCA | 7.27/ | 6.47 |
Consolidated Financial Statements | December 31, 2021 | F-75 |
* Values expressed in thousands, except when indicated. |
Duration of the actuarial liabilities of the plans sponsored - Other Similar Obligations
Plans | Other Similar Obligations | ||||||||||
Cabesp | 16.03 | ||||||||||
Bandepe | 18.03 | ||||||||||
Free Clinic | 12.28 | ||||||||||
Lifetime officers | 9.36 | ||||||||||
Health officers | 30.28 | ||||||||||
Circulars(1) | 11.62 E 12.97 | ||||||||||
Life Insurance | 8.04 |
(1) The duration 12.9112.15 refers to the plan of Former Employees of Banco ABN Amro and 10.0511.93 to the plan of Former Employees of Banco Real.
Actuarial Assumptions Adopted in Calculations | ||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||
Pension | Health | Pension | Health | Pension | Health | |||||||||||||||||||
Nominal Discount Rate for Actuarial Obligation | 10.9 | % | 10.8 | % | 12.3 | % | 12.0 | % | 10.9 | % | 11.0 | % | ||||||||||||
Rate Calculation of Interest Under Assets to the | ||||||||||||||||||||||||
Next Year | 10.9 | % | 10.8 | % | 12.3 | % | 12.0 | % | 10.9 | % | 11.0 | % | ||||||||||||
Estimated Long-term Inflation Rate | 4.5 | % | 4.5 | % | 4.5 | % | 4.5 | % | 4.5 | % | 4.5 | % | ||||||||||||
Estimated Salary Increase Rate | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | 5.0 | % | ||||||||||||
Boards of Mortality | AT2000 | AT2000 | AT2000 | AT2000 | AT2000 | AT2000 |
(1) For Banesprev II, V and Pré 75 plans.
(2) For Cabesp plans.
24. Provisions for judicial and administrative proceedings, commitments and other provisionsActuarial Assumptions Adopted in Calculations
2021 | 2020 | 2019 | ||||||||
Pension | Health | Pension | Health | Pension | Health | |||||
Nominal Discount Rate for Actuarial Obligation | 8.4% | 8.4% | 6.8% | 7.1% | 7.1% | 7.2% | ||||
Rate Calculation of Interest Under Assets to the Next Year | 8.4% | 8.4% | 6.8% | 7.1% | 7.1% | 7.2% | ||||
Estimated Long-term Inflation Rate | 3.0% | 3.0% | 3.3% | 3.3% | 3.5% | 3.5% | ||||
Estimated Salary Increase Rate | 3.5% | N/A | 3.8% | N/A | 4.0% | 4.0% | ||||
Mortality tables | AT2000 | AT2000 | AT2000 | AT2000 | AT2000 | AT2000 |
22. | Provisions for judicial and administrative proceedings, commitments and other provisions |
a) Breakdown
The breakdown of the balance of “Provisions” is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Judicial and administrative proceedings under the responsibility of former controlling stockholders | 814,925 | 789,974 | 783,909 | |||||||||
Judicial and administrative proceedings | 7,470,344 | 7,000,680 | 5,487,882 | |||||||||
Of which: | ||||||||||||
Civil | 1,842,549 | 1,986,602 | 1,755,367 | |||||||||
Labor | 3,138,645 | 2,501,426 | 1,982,393 | |||||||||
Tax and Social Security | 2,489,150 | 2,512,652 | 1,750,122 | |||||||||
Others provisions(1) | 780,595 | 922,370 | 985,925 | |||||||||
Total | 9,065,864 | 8,713,024 | 7,257,716 |
(1) In 2016, includes R$450,284 (2015 - R$301,447) relating toThe breakdown of the expensesbalance of projects aimed at improving operational productivity and efficiency.Provisions
Thousand of reais | 2021 | 2020 | 2019 | |||
Pension fund provisions and similar requirements | 2,728,126 | 3,929,265 | 4,960,620 | |||
Provisions for lawsuits and administrative proceedings, commitments and other provisions | 8,876,356 | 9,885,713 | 11,371,205 | |||
Judicial and administrative proceedings under the responsibility of former controlling stockholders (Note 15) | 496 | 496 | 103,272 | |||
Judicial and administrative proceedings | 7,668,914 | 8,648,892 | 9,226,735 | |||
Of which: | ||||||
Civil | 3,231,004 | 3,429,155 | 3,201,061 | |||
Labor | 2,071,811 | 2,886,990 | 3,504,296 | |||
Tax and Social Security | 2,366,099 | 2,332,747 | 2,521,378 | |||
Provisions for contingent commitments (Note 22.b.1) | 908,027 | 724,779 | 683,918 | |||
Others provisions | 298,919 | 511,546 | 1,357,280 | |||
Total | 11,604,482 | 13,814,978 | 16,331,825 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
b) Changes
Consolidated Financial Statements | December 31, 2021 | F-76 |
* Values expressed in thousands, except when indicated. |
b) Changes
The changes in “Provisions” were as follows:
Changes in Provisions
Thousand of reais | 2021 | |||||
Pensions (1) | Other Provisions | Total | ||||
Balance at beginning of year | 3,929,265 | 9,885,713 | 13,814,978 | |||
Additions charged to income: | ||||||
Interest expense and similar charges | 217,413 | - | 217,413 | |||
Personnel Expenses (Note 39) | 8,619 | - | 8,619 | |||
Constitutions / Reversals and Adjustment of provisions | (1,618) | 1,997,788 | 1,996,170 | |||
Other Comprehensive Income | (833,511) | - | (833,511) | |||
Additions to provisions for contingent commitments | - | 183,248 | 183,248 | |||
Payments to external funds | (619,086) | - | (619,086) | |||
Amount paid | - | (3,222,395) | (3,222,395) | |||
Transfer to other assets - actuarial assets (Note 15) | 27,045 | - | 27,045 | |||
Transfers, exchange differences and other changes | - | 32,002 | 32,002 | |||
Balance at end of year | 2,728,126 | 8,876,356 | 11,604,482 |
Thousand of reais | 2020 | |||||
Pensions (1) | Other Provisions | Total | ||||
Balance at beginning of year | 4,960,620 | 11,365,589 | 16,326,209 | |||
Additions charged to income: | ||||||
Interest expense and similar charges | 276,933 | - | 276,933 | |||
Personnel Expenses (Note 39) | 10,046 | - | 10,046 | |||
Constitutions / Reversals and Adjustment of provisions | 13,044 | 1,565,402 | 1,578,446 | |||
Other Comprehensive Income | (1,133,245) | - | (1,133,245) | |||
Additions to provisions for contingent commitments | - | 40,861 | 40,861 | |||
Payments to external funds | (215,829) | - | (215,829) | |||
Amount paid | - | (3,136,423) | (3,136,423) | |||
Transfer to other assets - actuarial assets (Note 15) | 17,695 | - | 17,695 | |||
Transfers, exchange differences and other changes | - | 50,284 | 50,284 | |||
Balance at end of year | 3,929,265 | 9,885,713 | 13,814,978 |
Thousand of reais | 2019 | |||||
Pensions (1) | Other Provisions | Total | ||||
Balance at beginning of year | 3,357,654 | 11,338,244 | 14,695,898 | |||
Additions charged to income: | ||||||
Interest expense and similar charges | 314,596 | - | 314,596 | |||
Personnel Expenses (Note 39) | 10,917 | - | 10,917 | |||
Constitutions / Reversals and Adjustment of provisions | 21,523 | 2,936,187 | 2,957,710 | |||
Other Comprehensive Income | 1,416,815 | - | 1,416,815 | |||
Additions to provisions for contingent commitments | - | (57,651) | (57,651) | |||
Payments to external funds | (183,899) | - | (183,899) | |||
Amount paid | - | (2,865,087) | (2,865,087) | |||
Transfer to other assets - actuarial assets (Note 15) | 23,014 | - | 23,014 | |||
Transfers, exchange differences and other changes | - | 19,512 | - | 19,512 | ||
Balance at end of year | 4,960,620 | 11,371,205 | 16,331,825 |
(1) | For further information, see note 22. Provisions for pension funds and similar obligations. |
Consolidated Financial Statements | December 31, 2021 | F-77 |
* Values expressed in thousands, except when indicated. |
b.1) Provisions for contingent payments
Thousands of Reais | 2016 | |||||||||||
Other | ||||||||||||
Pensions | Provisions | Total | ||||||||||
Balance at beginning of year | 2,696,653 | 8,713,024 | 11,409,677 | |||||||||
Additions charged to income: | ||||||||||||
Interest expense and similar charges (Note 33 & 34) | 287,576 | - | 287,576 | |||||||||
Personnel Expenses (Note 41) | 24,481 | - | 24,481 | |||||||||
Additions to provisions | 60,309 | 2,645,764 | 2,706,073 | |||||||||
Other Comprehensive Income | 1,876,888 | - | 1,876,888 | |||||||||
Payments to external funds | (2,074,873 | ) | - | (2,074,873 | ) | |||||||
Amount used | - | (2,330,283 | ) | (2,330,283 | ) | |||||||
Transfer to other assets - actuarial assets (Note 16) | (153,595 | ) | - | (153,595 | ) | |||||||
Transfers, exchange differences and other changes | (6,812 | ) | 37,359 | 30,547 | ||||||||
Balance at end of year | 2,710,627 | 9,065,864 | 11,776,491 |
According to note 1.iii, IFRS 9 requires that the provision for expected credit losses be recorded for contracts of financial guarantees rendered, which have not yet been honored. Provision expense reflecting credit risk should be measured and accounted for when the honor of these guarantees occurs and the client accused does not comply with its contractual obligations. The movement of these provisions in 2021 and 2020 is as follows:
Movement of provisions
Thousand of reais | 2021 | 2020 | 2019 | |||
Balance at beginning of year | 724,779 | 683,918 | 626,267 | |||
Creation of provision for contingent commitments | 183,248 | 40,861 | 57,651 | |||
Balance at end of year | 908,027 | 724,779 | 683,918 |
Thousands of Reais | 2015 | |||||||||||
Other | ||||||||||||
Pensions | Provisions(1) | Total | ||||||||||
Balance at beginning of year | 3,869,728 | 7,257,716 | 11,127,444 | |||||||||
Additions charged to income: | ||||||||||||
Interest expense and similar charges (Note 34) | 404,171 | - | 404,171 | |||||||||
Personnel Expenses (Note 41) | 31,332 | - | 31,332 | |||||||||
Additions to provisions | (3,912 | ) | 3,997,463 | 3,993,551 | ||||||||
Other Comprehensive Income | (1,201,893 | ) | - | (1,201,893 | ) | |||||||
Payments to pensioners and early retirees with a charge to internal provisions | (47,682 | ) | - | (47,682 | ) | |||||||
Payments to external funds | (354,534 | ) | - | (354,534 | ) | |||||||
Amount used | - | (2,225,641 | ) | (2,225,641 | ) | |||||||
Other Comprehensive Income | (557 | ) | - | (557 | ) | |||||||
Transfers, exchange differences and other changes | - | (315,646 | ) | (315,646 | ) | |||||||
Sale of companies(1) | - | (868 | ) | (868 | ) | |||||||
Balance at end of year | 2,696,653 | 8,713,024 | 11,409,677 | |||||||||
(1) Sale of Santander Securities. |
Thousands of Reais | 2014 | |||||||||||
Other | ||||||||||||
Pensions | Provisions(1) | Total | ||||||||||
Balance at beginning of year | 3,043,311 | 7,849,077 | 10,892,388 | |||||||||
Additions charged to income: | ||||||||||||
Interest expense and similar charges (Note 34) | 318,267 | - | 318,267 | |||||||||
Personnel Expenses (Note 41) | 21,830 | - | 21,830 | |||||||||
Additions to provisions | (3,833 | ) | 2,109,856 | 2,106,023 | ||||||||
Payments to pensioners and early retirees with a charge to internal provisions | (66,250 | ) | - | (66,250 | ) | |||||||
Payments to external funds | (354,117 | ) | - | (354,117 | ) | |||||||
Amount used | - | (2,666,217 | ) | (2,666,217 | ) | |||||||
Other Comprehensive Income | 910,859 | - | 910,859 | |||||||||
Transfer to other assets - actuarial assets (Note 16) | (339 | ) | - | (339 | ) | |||||||
Transfers, exchange differences and other changes | - | (35,000 | ) | (35,000 | ) | |||||||
Balance at end of year | 3,869,728 | 7,257,716 | 11,127,444 |
(1) Includes, primarily, provisions for tax risks and legal obligations, and judicial and administrative proceedings of labor and civil lawsuits.
c) Provisions for civil, labor, taxTax and social security contingenciesSocial Security, Labor and Civil Provisions
Banco Santander and its subsidiaries are involved in litigationlawsuits and administrative proceedings related to tax, labor, social security and civil proceedings arising in the normal course of its activities.
The provisions were constituted based on the nature, complexity, lawsuits historic and historycompany´s assessment of actions and evaluation of successful businesseslawsuit losses based on the opinions of internal and external legal advisors. The Santander has the policy to accrue theconstitute provision of full amount of proceedings whoselawsuits who’s the result of loss assessment is probable. The legal obligation statutoryof tax and social security were fully recognized in the financial statements.
Management understands that the provisions recordedmade are sufficient to meet legal obligations and any losses arising from lawsuitslegal and administrative proceedings as follows:
c.1) Lawsuits and Administrative Proceedings -– related to Tax and Social Security
The Bankmain legal obligations and its subsidiaries adhered, in August 2014, to the program of amnesty established by Law 12.996/14.
Joining the program includes administrative charge resulting from the deduction of taxes expenses and interest, with preliminary decision that suspended payments related to the IRPJ and da CSLL between the years 2006 and 2008. Such case was pending from decisionproceedings, recorded at the administrative level, risk classification was assessedline of “Tax Liabilities – Current”, recorded integrality as possible losses, according to legal counsel. Other administrative and judicial proceedings were also included this program.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Tax and social security contingencies procedures included in payment were registered at the time of subscription on the program through financial settlement in the amount of R$412,602, after the recorded deferred tax assets, was zero in net income.
The main lawsuits related to tax legal obligations, recorded in the line "Tax Liabilities - Current", fully registered asan obligation are described below:as follows:
• PIS and Cofins -R$3,290,900 (20154,075,496(2020 - R$3,015,147 and 2014 - R$10,463,919)3,993,873): Banco Santander and its subsidiaries filed lawsuits seeking to eliminate the application of Law 9,718/1998, which modified the calculation basis for PIS and Cofins to cover all revenues of legal entities and not only those arising from the provision of services and sale of goods. Regarding the Banco Santander Process, on April 23, 2015, a STF decision was issued admitting the Extraordinary Appeal filed by the Federal Government regarding PIS and denying the follow-up to the Extraordinary Appeal of the Federal Public Prosecutor regarding Cofins. Both appealed this decision, without any success, so that the suit relating to Cofins is defined, ruling the judgment of the Federal Regional Court of the 4th Region of August 2007, favorable to Banco Santander. ThePursuant to the STF, Banco Santander'sSantander’s PIS and the PIS and Cofins liabilities of the other controlled companiessubsidiaries are pending final judgment by the STF. In fiscal year 2015, with the decision of the STF, Banco Santander reversed the balance of the provision constituted to cover legal obligations related to Cofins, in the amount of R$7,950 million (R$4,770 million, after tax effects).judgment.
• Increase in CSLL tax rate -R$851,744 (2015 - R$795,859Main lawsuits and 2014 - R$1,357,957) – The Bank and its subsidiaries are discussing the increase in the CSLL tax rate, from 9% to 15%, established by Executive Act 413/2008, which subsequently became Law 11,727/2008, in April 2008. Judicialadministrative proceedings are pending of judgment.with probable loss risk
Banco Santander and its subsidiaries are parties to judicialin lawsuits and administrative proceedings related to tax and social security matters, which aretheir risk of loss is classified as probable, based on the opinion of legal counsel as probable loss risk.
Thecounsel. Those are de main topics discussed in these lawsuits are:themes at the proceedings:
• CSLLProvisional Contribution on Financial Transactions (CPMF) on Customer Operations - equal R$ 945,715 (2020 - R$ 924,457 ): in May 2003, the Federal Revenue Service issued a tax assessment against Santander Distribuidora de Títulos e Valores Mobiliários Ltda. (Santander DTVM) and another tax assessment against Banco Santander Brasil S.A. The tax assessments refer to the collection of CPMF tax on transactions conducted by Santander DTVM in the cash management of its customers’ funds and clearing services provided by Banco to Santander DTVM in 2000, 2001 and 2002. Based on the risk assessment of legal counsel, the tax treatment -R$54,245 (2015 - R$52,268was accurate. Santander DTVM had a favorable decision at the Board of Tax Appeals (CARF). Banco Santander had an unfavorable decision and 2014 - R$54,111) - Thewas considered responsible for the collection of the CPMF tax. Both decisions were appealed by the respective losing party to the highest jurisdiction of CARF. In June 2015, Bank and its subsidiariesDTVM had obtained a non-favorable decision at CARF. On July 3, 2015, Banco and Santander Brasil Tecnologia S.A. (current name of Produban Serviços de Informática S.A. and Santander DTVM) filed a lawsuit challengingseeking to cancel both tax debts. This lawsuit was ruled groundless and is currently awaiting judgment by the application of an increased CSLL rate of 18% for financial companies, applicable until 1998, compared to the CSLL rate of 8% for non-financial companiesRegional Federal Court (TRF 3). Based on the basis oflegal advisors' assessment, a provision was set up to cover the constitutional principle of equal tax treatment.loss considered probable in the lawsuit.
Consolidated Financial Statements | December 31, 2021 | F-78 |
* Values expressed in thousands, except when indicated. |
• Tax on Services for Financial Institutions (ISS) -R$621,437 (2015 - R$755,211 and 2014 - R$722,366): The Bank and its subsidiaries filed lawsuits, in administrative and judicial proceedings, some municipalities collection of ISS on certain revenues derived from transactions not usually classified as services.
• Social Security Contribution (INSS) -R$266,391 (201553,936 (2020 - R$527,111 and 2014 - R$442.583): The Bank51,409 ): Banco Santander and its subsidiaries are involved in administrative and judicial proceedings regarding the collection of income tax on social security and education allowance contributions over several funds that, according to the evaluation of legal advisors, do not have nature of salary.
• Provisional ContributionTax on Services (ISS) - Financial Transactions (CPMF) on Customer OperationsInstitutions -R$689,987 (2015 –283,528 (2020 - R$657,750263,183 and 2014 –2019 - R$0)224,631): In May 2003, the Federal Revenue Service of Brazil issued an assessment notice in Santander Distribuidora de Títulos e Valores Mobiliários Ltda. (Santander DTVM) and another suit at Banco Santander Brasil S.A. The subjectand its subsidiaries discuss administrative and legal requirements, by several municipalities, of the suit was the collectionpayment of CPMFISS on various revenues arising from operations carried out by Santander DTVM in the administrationthat are usually not classified as services (Part of its clients' funds and compensation services provided by the Bank to Santander DTVM, which occurred during the years 2000, 2001 and 2002. In June 2015, the defenses were assessed with unfavorable decisionsthis process is at the administrative level (CARF). On July 3, 2015, Banco and Produban Serviços de Informática S.A. (current namerisk of Santander DTVM) filed a lawsuit seeking to cancel both tax debts, which in the period ended December 31, 2016 totaled R$1,382 million. Based on the assessment of the legal advisors, a provision was set up to cover thepossible loss considered probable in the lawsuit.as per note note 22.c.4 – Possible Risk Loss).
c.2) LawsuitsLegal and Administrative Proceedings -Lawsuits of a Labor Nature
These are lawsuits broughtfiled by labor Unions, Associations, the Public ProsecutorsMinistry of Labor and former employees claiming labor rights they believe aredeem to be due, especiallyin particular the payment for overtimeof “overtime” and other labor rights, including lawsuits related to retirement benefit lawsuits.benefits.
For claimslawsuits considered to becommon and similar and usual,in nature, provisions are recognizedrecorded based on the historyhistorical average of payments and successes.closed proceedings. Claims that do not fitmeet the previousabove criteria are accrued according toprovisioned based on an individual assessment performed,carried out, and the provisions are set up based on the probable risk of loss, in the law and jurisprudence according toin case law, in accordance with the assessment of loss carried out by the legal advisors.
Former employees of Banespa. Action distributed in 1998 by the Association of Retired Persons of Banespa (AFABESP) requesting the payment of a semiannual bonus provided for in the regulations of Banco Banespa for approximately 8,400 former employees (retirees), according to which the payment will be made in the event that the Bank makes a profit and the distribution of this profit is approved by the board of directors. The bonus was not paid in 1994 and 1995 because Banespa bank did not make a profit during these years. Partial payments were made between 1996 and 2000 as approved by the board of directors. Said clause was excluded from the regulation in 2001. The Regional Labor Court and the Superior Labor Court ordered Santander Brasil, as successor to Banespa, to pay the semiannual bonus for the periods relating to the second semester of 1996 and the semesters of 1997. On March 20, 2019, a decision of the Federal Supreme Court (Supreme Federal Court, or “STF”) rejected the extraordinary appeal filed by Banco Santander, which did not resolve the merits of the case. We filed a rescission action to annul the sentence due to the lack of legitimacy of AFABESP (second precedent No. 573.232 of the STF) or to recognize the nullity of the TRT judgment that did not notify Banco Santander about the modifying effects of the decision, as well as to suspend the execution in the main process. The rescission action was dismissed, and this decision was filed a motion for clarification, due to the absence of an explicit statement about the arguments brought by the Bank. Regarding the Motions for Clarification, the points of omission were not answered as required by law, which is why an Extraordinary Appeal was filed, which was denied by the TST. From this decision, the Bank filed an interlocutory appeal, which is pending admissibility, considering that the decisions rendered by the Superior Labor Court contradict the already peaceful position in the STF (precedent No. 573,232), according to which the Association needs a specific power of attorney to sue in judgment, and also the decision affronts constitutional precepts about access to justice (item XXXV of art. 5 of the CF) by determining excessive collection of costs. In relation to the main action, in August 2021, a decision was rendered that determined that the execution be carried out individually in the court corresponding to each defendant and AFABESP filed an appeal, however, so far there has been no decision in this regard.
Our legal counsel.advisors classified the risk of loss as probable. The current decisions of the court, and neither of the court in the main proceedings, do not define a specific amount to be paid by the substituted, and the amounts must be calculated in regular settlement of the sentence.
On December 31, 2021, the case is classified as probable loss and the provision was constituted based on the estimated loss
c.3) LawsuitsCivil Judicial and Administrative Proceedings - Civil
These provisions are generally caused by:arise from: (1) Action with a request forlawsuits requesting revision of contractual terms and conditions or requests for monetary adjustments, including supposedalleged effects of the implementation of various government economic plans, (2) action deriving oflawsuits arising from financing agreements,contracts, (3) execution action;actions; and (4) action indemnity by loss and damage.damages claims. For civil actions considered common and similar in nature, provisions are recorded based on the historical average of cases closed.closed proceedings. Claims that do not fitmeet the previousabove criteria are accrued according toprovisioned based on an individual assessment performed,carried out, and the provisions are set up based on the probable risk of loss, in the law and jurisprudence according toin case law, in accordance with the assessment of loss madecarried out by the legal counsel.advisors.
Consolidated Financial Statements | December 31, 2021 | F-79 |
* Values expressed in thousands, except when indicated. |
The main lawsuits classified as risk of probable loss are described below:
LawsuitsIndemnity Actions - These refer to compensation for indemnity -seeking indemnity for propertymaterial and/or moral damage, and/or emotional distress, regardingrelating to the consumer relationship, on matters relateddealing mainly with issues relating to credit cards, direct consumer credit, bankchecking accounts, collection and loans and other operations.matters. In the civil lawsuitsactions related to causes considered to be similar and usual provisions are recordedfor the business, in the normal course of the Bank's activities, the provision is constituted based on the historical average of cases closed. Civil lawsuitsclosed processes. Claims that do not fit intomeet the previous criterionabove criteria are accrued according to theprovisioned based on an individual assessment made,carried out, and the provisions are recognizedset up based on the probable risk of loss, in the law and jurisprudence according toin case law, in accordance with the assessment of loss madecarried out by the legal counsel.advisors.
Economic Plans- effortsRefer to recover actions with collective the deficient inflation adjustments in savings accountslegal disputes, claiming alleged inflationary purges arising from the Economic Plans (Bresser, Verão, Collor I and II). These refer to the lawsuits filed by savings accountholders disputing the interest credited by the Banco Santander under, as they understand that such plans as they considered that such legal amendments infringed on theviolated acquired rights acquired with regardrelated to the application of the inflation indexes. Provisionsindices supposedly due to Savings Accounts, Judicial Deposits and Time Deposits (CDBs). The lawsuits are recordedprovisioned based on the average losses of cases closed.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Civil lawsuits that do not fit into the previous criterion are accrued according to the individual assessment made, and provisions are recognized based on the probable loss, the law and jurisprudence according to theindividualized assessment of loss madecarried out by the legal counsel. The advisors.
Banco Santander is also a party into public class action suitscivil actions, on the same issuematter, filed by consumer rights organizations,protection entities, the Public Prosecutor’s Offices andMinistry or Public Defender’s Offices. In these cases, theDefenders. The constitution of a provision is made only after the final unappeasable sentence is handed down on the lawsuits,for cases with probable risk, based on therequests for individual execution orders.executions. The Superior Tribunal da Justiça (STJ - Justice Superior Court) decided against the bank’s. The STFissue is still analyzingunder review at the subject and has already ordered the suspension of all the procedures except those that were not already decided in trial courts and those who have a final decision. However, the assessment of this questionSTF. There is paralyzedjurisprudence in the Supreme Court for lack of quorum, considering that some of his ministers declared themselves unable to judge the matter and therefore is likely to judgment remains paralyzed for several years yet. There are decisionsSTF favorable to banks at the STF with regard to theBanks regarding economic phenomenon similar to that of savings, accounts, as in the case of monetary restatementcorrection of time deposits - CDB(CDBs) and agreements (present value table)corrections applied to contracts (table).
Moreover, there are precedents atHowever, the jurisprudence of the STF regardinghas not yet been consolidated on the constitutionality of the norms that changed Brazil’smodified the monetary standard.standard in Brazil. On April 14, 2010, in the STJ was recently decidedSupreme Court of Justice (STJ) ruled that the deadline for bringing public civil actions discussing the filingpurges is 5 years from the date of civil lawsuits that argue the government's purge of five years,plans, but this decision has not handed down on the lawsuits yet.yet become final. Thus, with this decision, a majority stake,large part of the actions, as wasthey were proposed after thea period of 5 years, is likely towill probably be rejected,dismissed, reducing the valuesamounts involved. Still, the STFThe STJ also decided that the deadlineperiod for individual savers to qualify in the public civil litigations,for Public Civil Actions is also is five5 years, counted from the final judgmentand unappealable decision of theirthe respective sentence. Banco Santander believes in the success of the argumentstheses defended inbefore these courts based onfor their content and foundation.
At the soundend of 2017, the Federal General Counsel (AGU), Bacen, the Consumer Defense Institute (Idec), the Brazilian Savings Front (Febrapo) and the Brazilian Federation of Banks (Febraban) signed an agreement that seeks to end the legal basis.disputes over the Economic Plans.
Discussions focused on defining the amount that would be paid to each author, according to the balance in the passbook on the date of the plan. The total value of the payments will depend on the number of subscriptions, and also on the number of savers who have proven in court the existence of the account and the balance on the anniversary date of the change in the indices. The term of agreement negotiated between the parties was approved by the STF.
In a decision handed down by the STF, there was a national suspension of all processes that deal with the issue for the period of validity of the agreement, with the exception of cases in which the sentence was definitively complied with.
On March 11, 2020, the agreement was extended by means of an amendment, with the inclusion of actions that involve only the discussion of the Collor I Plan. June 2020
Management considers that the provisions made are sufficient to cover the risks involved with the economic plans, considering the approved agreement.
c.4) Tax and Social Security, Labor and Civil labor, tax and social security contingencies classifiedContingent Liabilities Classified as possible loss riskRisk of Possible Loss
Refer to judicialThese are legal and administrative proceedings involving civil, labor,of a tax, and social security, matters assessed bylabor and civil nature classified, based on the opinion of legal counsels as possible loss risk, which were not accruedadvisors, as a provision.possible risk of loss, and therefore not provisioned.
Tax lawsuits classified as possible loss risk,losses totaled R$18,653 million, including29,498,172 in the followingConsolidated, with the main lawsuits:lawsuits being as follows:
• Credit LossesINSS on Profit Sharing (PLR) -The the Bank and its companies challengedsubsidiaries have legal and administrative proceedings arising from questionings by the tax assessments issued byauthorities regarding the Federal Revenue Services challenging the deduction for credit losses because they fail to meet the relevant requirements under applicable law.collection of social security contributions on payments made as profit sharing. As of December 31, 20162021, the amount related to this challenge iswas approximately R$730 million.7,340,746.
• INSSTax on Profit Sharing Payments –Services (ISS)The Bank - Financial Institutions - Banco Santander and theits subsidiaries are involveddiscussing administratively and in court the demand, by several legal and administrative proceedings against the tax authorities in connection with the taxation for social security purposesmunicipalities, of certain items whichpayment of ISS on various revenues arising from operations that are not considered to be employee remuneration.usually classified as services rendered. As of December 31, 2016 amounts related to these proceedings totaled2021, the amount was approximately R$2,978 million.4,145,661.
Consolidated Financial Statements | December 31, 2021 | F-80 |
* Values expressed in thousands, except when indicated. |
•IRPJNon-Approved Compensation - the Bank and CSLL - Capital Gain -its affiliates are discussing administratively and judicially with the Brazilian Federal Revenue Service issued infraction notices against Zurich Santander Brasil Seguros e Previdência S.A., successor companythe non-approval of ABN AMRO Brasil Dois Participações S.A. (AAB Dois Par), charging income Tax and Social Contribution to related to 2005 tax claiming that capital gain in sales shares of Real Seguros S.A and Real Vida Previdência S.A. by AAB Dois Par should be taxed an rate of 34% instead 15%. The assessment was contested administratively based on understanding tax treatment adopted at the transaction was in compliance and capital gain tax paid was in complianceoffsets with the legislation. We had a partial favorable the decision on CARF, that disregard the fine and interest on this fine. Currently awaiting the assessment of a Amendment of Judgment by Zurich and the judgment of the Extraordinary Appeal filed by the Federal Government . The Banco Santander is responsible for any adverse outcome in this process as former controlling of Zurich Santander Brasil Seguros e Previdência S.A.credits arising from overpayments or undue payments. As of December 31, 20162021, the amount related to this proceeding iswas approximately R$279 million.5,351,349.
• Goodwill amortizationAmortization of Banco Real –Real's GoodwillThe Brazilian Internal - the Federal Revenue Service of Brazil issued a tax assessment notice against the Bank to requiredemand the payment of IRPJ and CSLL, payments, including late payment charges, for the 2009 base period. The Tax Authorities considered that the goodwill related to the acquisition of Banco Real, amortized before its incorporation,merger, could not be deducted by Banco Santander for tax purposes. The tax assessment notice of infringement was duly challenged. On July 14, 2015,challenged and we are currently awaiting judgment before the RFB's Trial Division decided favorably to Banco Santander, which led to the filing of an Appeal (ex officio) by the Treasury. On November 10, 2016, the appeal was filed, prompting the Bank to lodge an appeal with CARF, which is awaiting judgment.CARF. As of December 31, 2016,2021, the amount was approximately R$1,259 million.1,466,444.
•Goodwill amortizationLosses on Credit Operations - the Bank and its subsidiaries challenged the tax assessments issued by the Federal Revenue of Brazil alleging the improper deduction of losses on credit operations from the IRPJ and CSLL calculation bases for allegedly not complying with the requirements of applicable laws. As of December 31, 2021, the amount was approximately R$ 1,175,511.
Use of CSLL Tax Loss and Negative Basis – Tax assessment notices issued by the Brazilian Federal Revenue Service in 2009 for alleged undue compensation of CSLL tax loss and negative basis, as a result of tax assessment notices issued in previous periods. Awaiting judgment at the administrative level. As of December 31, 2021, the amount was approximately R$ 1,092,625.
Amortization of Banco Sudameris –Goodwill The Tax Authorities have- the tax authorities issued infractiontax assessment notices to requiredemand the payments of IRPJ and CSLL, including late payment charges, referring to the tax deduction of the amortization of the goodwill paid on the acquisition of Banco Sudameris, referring to the base period 2007 to 2012. Banco Santander presented the respective administrative defenses, which were judged unfavorably. Currently, the processes are awaiting judgment at CARF. As of December 31, 2021, the amount was approximately R$ 569,114.
IRPJ and CSLL - Capital Gain - the Internal Revenue Service of Brazil issued a tax assessment notice against Santander Seguros (legal successor of ABN AMRO Brasil Dois Participações SA (AAB Dois Par) charging income tax and social contribution payments, including late charges, relatingrelated to the fiscal year de 2005. The Federal Revenue Service of Brazil claims that the capital gain on the sale of the shares of Real Seguros SA and Real Vida e Previdência SA by AAB Dois Par should be taxed at a rate of 34.0% instead of 15.0 %. The assessment was challenged administratively based on the understanding that the tax deduction of amortization of goodwill fromtreatment adopted in the acquisition of Banco Sudameris, related period of 2007transaction was in accordance with current tax legislation and the capital gain was duly taxed. The administrative proceeding ended unfavorably to 2012.the Company. In July 2020, the Company filed a lawsuit seeking to cancel the debt. The lawsuit is awaiting judgment. Banco Santander timely presented their appeals, which are pending. Onis responsible for any adverse outcome in this proceeding as the former controlling shareholder of the Zurich Santander Brasil Seguros e Previdência S.A. As of December 31, 2016,2021, the figureamount was approximately R$568 million.496,231.
The labor lawsuitsLabor claims classified as possible loss risk totaled R$15 million, 267,267 in the Consolidated, excluding the lawsuitprocess below:
Semiannual Bonus or Profit Sharing -a labor lawsuit relating to the payment of a semiannual bonus or, alternatively, profit sharing, to retired employees from the former Banco do Estado de São Paulo S.A. - Banespa, that had been hired up to May 22, 1975, filed as Banespa’s Retirees Association. This lawsuit was dismissed against the Bank by the Superior Labor Court. The STF rejected the extraordinary appeal of the Bank by a monocratic decision maintaining the earlier condemnation. Santander brought Regimental Appeal which awaits decision by the STF. The Regimental Appeal is an internal appeal filed in the STF itself, in order to refer the monocratic decision to a group of five ministers. The 1st Class of the STF upheld the appeal by the Bank and denied the Afabesp. The materials of the extraordinary appeal of the Bank now proceed to the STF for decision on overall impact and judgment. The amount related to this claim is not disclosed due to the current stage of the lawsuit and the possible impact such disclosure may have on the progress of the claim.
Readjustment of the Pension Supplements of Banesprev retirement complements by the IGPDI -lawsuit – action filed in 2002 in the Federal Court by the Association of Retired Employees of the Bank of the State of São Paulo requesting the readjustment of the pension supplementation of retirement by the IGPDI for Banespa retirees who have been admitted until May 22 Ofof 1975. The judgment granted the correction, but only in the periods in which no other form of adjustment was applied. The Bank and Banesprev have appealed this decision and although the appeals have not yet been judged, the Bank's success rate in this regard in the High Courts is around 90%.are still pending judgment. In Provisional Execution, calculations were presented by the Bank and Banesprev with "zero" result due to the exclusion of participants who, among other reasons, are listedappear as authorsplaintiffs in other actions or have already had some type of adjustment.readjustment. The amount related to this actioninvolved is not disclosed due to the current procedural stage of the processcase and the possible impact that such disclosure may generate onpotentially affecting the progress of the action.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The liabilitiesLiabilities related to civil lawsuits with possible risk of loss risk totaled R$1,211 million, being2,380,226 in the Consolidated, with the main processes as follows:lawsuits:
• Action for Indemnity lawsuit arising of the Banco Bandepe- relatedReferring to mutual agreement on appeal to the Justice Superior Court (STJ - Superior Tribunal de Justiça)
Indemnity lawsuit related to custody servicesCustody Services- provided by Banco Santander (Brasil) S.A. at an earlyinitial stage and still notwithout a sentence handed down;down.
• Lawsuit arising out of a contractual disputeAction Arising from Contractual Dispute- in the acquisition of Banco Geral do Comércio S.A. onSA under appeal toby the Court of Justice of the State of São Paulo (TJSP - Tribunal de Justiça do Estado de São Paulo)(TJSP).
c.5) Judicial and administrative proceedings underOther Lawsuits for the responsibilityLiability of former controlling stockholdersFormer Controllers
ReferThey refer to tax, labor and civil lawsuits, in the amounts of R$810,383, R$712 and R$3,830 (2015496 (12/31/2020 - R$785,837, R$890 and R$3,247 and 2014 - R$773,304, R$2,520 and R$8,085)496), withof responsibility of the former controlling stockholderscontrollers of the banks and acquired entities.companies. Based on the agreements signed contracts, these lawsuits have guarantees ofactions are guaranteed full reimbursement by the former controlling stockholders, and amounts reimbursablecontrollers, whose respective rights were recorded underin other assets.
* Values expressed in thousands, except when indicated. |
23. | Tax assets and liabilities |
a) Income and Social Contribution Taxes
The total charge for the year can be reconciled to accounting profit as follows:
Thousands of Reais | 2016 | 2015 | 2014 | ||||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||||||||||
Operating Profit Before Tax | 16,383,902 | (3,215,718 | ) | 6,443,329 | Operating Profit Before Tax | 24,750,329 | 9,663,975 | 22,273,149 | |||||||||||||
Interest on capital(1) | (3,850,000 | ) | (1,400,000 | ) | (690,000 | ) | |||||||||||||||
Unrealized profits | - | - | (142 | ) | |||||||||||||||||
Operating Profit Before Tax | 12,533,902 | (4,615,718 | ) | 5,753,187 | Operating Profit Before Tax | 24,750,329 | 9,663,975 | 22,273,149 | |||||||||||||
Rates (25% income tax and 20% social contribution tax in 2015 and 15% social contribution tax in 2014) | (5,640,256 | ) | 2,077,073 | (2,301,275 | ) | ||||||||||||||||
PIS and COFINS (net of income and social contribution taxes)(2) (8) | (1,641,181 | ) | 1,861,767 | (813,814 | ) | ||||||||||||||||
Rates (25% income tax and 25% social contribution tax) | Rates (25% income tax and 25% social contribution tax) | (12,375,164) | (4,348,789) | (8,909,260) | |||||||||||||||||
PIS and COFINS (net of income and social contribution taxes) (1) | PIS and COFINS (net of income and social contribution taxes) (1) | (1,679,789) | (1,589,260) | (1,983,839) | |||||||||||||||||
Non-taxable/Non-deductible: | Non-taxable/Non-deductible: | ||||||||||||||||||||
Equity in affiliates | 21,392 | 52,340 | 36,438 | 72,114 | 85,723 | 59,795 | |||||||||||||||
Goodwill(3) | 734,952 | 1,252,578 | 1,471,590 | ||||||||||||||||||
Exchange variation - foreign branches(4) | (3,561,133 | ) | 5,913,741 | 920,694 | |||||||||||||||||
Goodwill | (559,247) | (183,854) | (137,175) | ||||||||||||||||||
Exchange variation - foreign branches (2) | Exchange variation - foreign branches (2) | 768,902 | 6,831,484 | 715,424 | |||||||||||||||||
Net Indeductible Expenses of Non-Taxable Income (3) | Net Indeductible Expenses of Non-Taxable Income (3) | (230,958) | (57,663) | 214,242 | |||||||||||||||||
Adjustments: | |||||||||||||||||||||
Constitution of income and social contribution taxes on temporary differences(5) | 605,058 | 1,266,588 | 29,257 | ||||||||||||||||||
Effects of change in rate of social contribution taxes(6) | (613,202 | ) | 52,145 | 11,419 | |||||||||||||||||
Other adjustments(7) (9) | 1,175,386 | 573,312 | (89,862 | ) | |||||||||||||||||
Constitution of income and social contribution taxes on temporary differences | Constitution of income and social contribution taxes on temporary differences | 264,191 | 551,983 | 70,223 | |||||||||||||||||
Effects of change in rate of social contribution taxes | Effects of change in rate of social contribution taxes | 1,820,072 | 1,478,138 | 1,604,000 | |||||||||||||||||
CSLL Aliquot Differential Effect (4) | CSLL Aliquot Differential Effect (4) | 1,192,687 | 353,777 | 2,796,493 | |||||||||||||||||
Other adjustments | 1,536,187 | 665,239 | (71,602) | ||||||||||||||||||
Income taxes | (8,918,984 | ) | 13,049,544 | (735,553 | ) | (9,191,005) | 3,786,778 | (5,641,699) | |||||||||||||
Of which: | |||||||||||||||||||||
Current tax | (3,575,099 | ) | 3,631,631 | (2,791,425 | ) | (8,087,119) | (5,111,380) | (6,692,328) | |||||||||||||
Deferred taxes | (5,343,885 | ) | 9,417,913 | 2,055,872 | (1,103,886) | 8,898,158 | 1,050,629 | ||||||||||||||
Taxes paid in the year | (4,240,115 | ) | (1,170,020 | ) | (573,684 | ) | Taxes paid in the year | (4,534,538) | (1,269,150) | (5,301,184) |
(1) | PIS and COFINS are considered as components of the profit base (net base of certain income and expenses); therefore, and in accordance with IAS 12, they are accounted for as income taxes. |
(2) | Permanent differences related to investment in overseas subsidiaries are considered to be non-taxable/deductible (see details below). |
(3) | Mainly includes the tax effect on income from judicial deposit updates and other income and expenses that do not qualify as temporary differences |
(4) | Effect of the rate differential for other non-financial and financial companies, whose social contribution rates are 9% and 20% |
(1) Amount distributed to shareholders as interest attributable to shareholders’ equity. For accounting purposes, although the interest should be reflected in the statement of income for tax deduction, the charge is reversed before the calculation
Currency Hedge of the net income in the statutory financial statements and deducted from the shareholders’ equity since is considered as dividend.
(2) PIS and COFINS are considered a profit-base component (net basis of certain revenues and expenses), therefore and accordingly to IAS 12 it is recorded as income taxes.
(3) Tax-deductible goodwill originating from the acquisition of Banco ABN Amro Real S.A. (in 2007) as a result of a subsequent group restructuring. The amortization of the tax deductible goodwill is expected to continue until 2017 and the income tax benefit is shown in the income tax reconciliation. The tax-deductible goodwill is not considered to generate taxable temporary difference and thus no deferred income tax liability is recorded.
(4) Permanent difference related of foreign currency exchange variation on investments abroad nontaxable/ deductible (see details below).
(5) In 2015, includes the increase in CSLL tax rate
(6) Effect of rate differences for the other non-financial corporations, which the social contribution tax rate is 9%.
(7) In 2016, includes the IAS 21 amounted to R$575,131 (see Hedge of Investments Abroad below) and non-taxable income/non-deductible expenses R$349,120.
Cofins(8)
In June 2015, Banco Santander recorded the reversal of legal liabilities (recorded under tax liabilities - current) amounted to R$7,950 million related to Cofins. On the Consolidated Income Statements the registration occurred on "Interest expense and similar charges" amounted to R$2,057 million and "Income Taxes", amounted to R$5,893 million (Note 23-c.1). Such gain taxed at the current rates of IR and CSLL, resulted in a R$3,180 of tax expense also recorded in "Income taxes."
With this decision handed down on the lawsuits , the Bank also recognizes the right to offset COFINS paid in the period 1999-2006, under the Income taxes of R $381,597 and under Interest and similar income update as to tax offset the amount of R$383,560. The amount of taxes on these revenues amounted to R$306,102.
Hedge of Investments abroad(9)Grand Cayman Agency, Luxembourg
Banco Santander operateoperates a branch in the Cayman Islands, and subsidiary called Santander Brasil Establecimiento Financiero de Credito, EFC, or “Santander EFC” (independent subsidiary in Spain) whichLuxembourg that is used primarily for sourcingto raise funds in the international bankingcapital and capitalfinancial markets, to provide the Bank with lines of credit lines, whichthat are extended to ourits customers for working capitalfinancing foreign trade and trade-related financings.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousandscapital. of Brazilian Reais - R$, unless otherwise stated)spinning.
The functional currency of Santander EFC is the Euro, so the exchange rate differences generated for converting that investment to the real are recorded in "Other comprehensive income". In the case of the Cayman branch, its functional currency is the Real. Thus, the foreign exchange differences of operations that are carried out in US dollars are recorded as a result. To hedgecover exposure to foreign exchange variations, the Bank uses derivative. According toderivatives and funding. Under Brazilian tax rules, gains or losses resultingarising from the impact of the appreciation or depreciationdevaluation of the realReal on foreign investment areinvestments were not taxable, but from January 2021 onwards, they became taxable or deductible for PIS/ COFINS / Cofins/IR / CSLL purposespurposes. /CSLL, while gains or losses fromon derivatives used as hedgeshedging are taxable.taxable or deductible. The purpose of these derivatives is to protect the net resultincome after tax. Whereastaxes.
Law 14,031, of July 28, 2020, determined that as of January 2021, 50% of the effect of exchange rate changes are notvariation on investments abroad must be computed in the determination of taxable income and the effect of changes in these derivatives suffer taxation,basis for calculating the notionalSocial Contribution on Net Income ( CSLL) of the derivative contracts is greater thaninvesting company domiciled in the amountcountry. As of net assets protected.2022, the exchange variation will be fully computed in the taxable bases of IRPJ and CSLL.
In the case of Santander EFC, the Bank uses hedge accounting (Net Investment Hedge). Changes in the value of derivatives, as well as related tax effect, are recorded in other comprehensive income, offsetting the exchange differences produced by the conversion of the investment for real when the hedges are effective.
In the case of the Cayman Islands branch, the Bank does not use hedge accounting. Exchange differences of operations in dollars and the effects of derivatives used for economic protection (futures contracts) are recorded in income. The different taxTax distinct treatment offrom such exchange rate differences resultresults in volatility in Operating Profit"Operating Income Before TaxTax" and Tax on income account. Exchange rate"Income taxes". The foreign exchange variations recorded in results from operations in dollarsas a result of foreign investments in the Cayman branch in the nine monthsyear ended on December 31, 2016, resulted in2021, 2020 and 2019.
Foreign exchange variations recorded as a lossresult of R$6,770 million. On the other hand, contracts for derivatives contracted to cover these positions generated a gain in earnings account (losses) on financial assets and liabilities of R$12,910 million. The tax effect of these derivatives impacted the line Income taxes, generating a tax loss of R$6,140 million consisting of R$600 million PIS/COFINS and R$5,539 million IR and CSLL.foreign investments
2021 | 2020 | 2019 | ||||||||
Exchange differences (net) | ||||||||||
Result generated by the exchange rate variations on the Bank's investment in the Cayman, Luxemburg and EFC Branch | 3,862,128 | 16,791,857 | 1,512,322 | |||||||
Gains (losses) on financial assets and liabilities (net) | ||||||||||
Result generated by derivative contracts used as hedge | (6,374,108) | (30,374,869) | (2,776,601) | |||||||
Income Taxes | ||||||||||
Tax effect of derivative contracts used as hedge - PIS / COFINS | 275,052 | 311,819 | (106,497) | |||||||
Tax effect of derivative contracts used as hedge - IR / CS | 2,236,928 | 13,271,193 | 1,370,776 | |||||||
Consolidated Financial Statements | December 31, 2021 | F-82 |
* Values expressed in thousands, except when indicated. |
b) Effective tax rate calculation
The effective tax rate is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Operating Profit Before Tax | 16,383,902 | (3,215,718 | ) | 6,443,329 | ||||||||
Income tax | 8,918,984 | (13,049,544 | ) | 735,553 | ||||||||
Effective tax rate(1) | 54.44 | % | 405.80 | % | 11.42 | % |
(1) In 2016, 2015 and 2014, considering the tax effect of the exchange variation over foreign branches and the economic hedge, accounted in the Gains (losses) on financial assets and liabilities (net) (note 37) theThe effective tax rate would have been 27.1%, -18.3% and 29.6%, respectively. In 2015 there were the gain on the Cofins judicial action (see disclosure above), which excluding the effects the effective tax rate would be 19.1%.
Thousand of reais | 2021 | 2020 | 2019 | ||||||
Operating Profit Before Tax | 24,750,328 | 9,663,975 | 22,273,149 | ||||||
Income tax | 9,191,005 | (3,786,778) | 5,641,699 | ||||||
Effective tax rate | 37.13% | (39.18%) | 25.33% |
c) Tax recognized in equity
In addition to the income tax recognized in the consolidated income statement, the Bank recognized the following amounts in consolidated equity:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Tax credited to equity | 2,955,552 | 4,943,957 | 2,477,167 | |||||||||
Measurement of available-for-sale securities | 963,990 | 2,743,797 | 756,760 | |||||||||
Measurement of cash flow hedges | 4,145 | 267,511 | 4,667 | |||||||||
Measurement of investment hedges | 562,353 | 1,137,484 | 467,992 | |||||||||
Defined benefit plan | 1,425,064 | 795,165 | 1,247,748 | |||||||||
Tax charged to equity | (1,795,115 | ) | (1,255,867 | ) | (748,528 | ) | ||||||
Measurement of available-for-sale securities | (1,701,732 | ) | (1,251,773 | ) | (654,582 | ) | ||||||
Measurement of cash flow hedges | (87,929 | ) | (2,250 | ) | (86,675 | ) | ||||||
Defined benefit plan | (5,454 | ) | (1,844 | ) | (7,271 | ) | ||||||
Total | 1,160,437 | 3,688,090 | 1,728,639 |
The Bank recognized the following amounts in consolidated equity
Thousand of reais | 2021 | 2020 | 2019 | ||||||
Tax credited to equity | 4,583,297 | 3,008,035 | 3,517,590 | ||||||
Measurement at fair value through other comprehensive income | 1,978,165 | 472,472 | 416,748 | ||||||
Measurement of cash flow hedges | 388,307 | 1,533 | 186 | ||||||
Measurement of investment hedges | 562,353 | 562,353 | 562,353 | ||||||
Defined benefit plan | 1,654,472 | 1,971,677 | 2,538,303 | ||||||
Tax charged to equity | (2,349,500) | (3,087,311) | (3,952,457) | ||||||
Measurement at fair value through other comprehensive income | (2,340,394) | (2,700,991) | (3,618,126) | ||||||
Measurement of cash flow hedges | - | (386,284) | (322,080) | ||||||
Defined benefit plan | (9,106) | (36) | (12,251) | ||||||
Total | 2,233,797 | (79,276) | (434,867) |
Relates to deferred taxes recognized in equity due to temporary differences accounted for in equity.
d) Deferred taxes
The detail of the balances of “Tax assets – Deferred” and “Tax liabilities – Deferred” is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Deferred Tax assets | 24,437,112 | 30,575,504 | 20,038,000 | |||||||||
Of which: | ||||||||||||
Temporary differences(1) | 23,398,886 | 29,538,257 | 18,333,315 | |||||||||
Tax loss carry forwards | 382,867 | 381,888 | 1,049,326 | |||||||||
Social contribution taxes 18% | 655,359 | 655,359 | 655,359 | |||||||||
Tax offset | - | - | - | |||||||||
Total deferred tax assets | 24,437,112 | 30,575,504 | 20,038,000 | |||||||||
Deferred tax liabilities | 1,268,037 | 817,125 | 312,420 | |||||||||
Of which: | ||||||||||||
Excess depreciation of leased assets | 144,623 | 185,531 | 245,471 | |||||||||
Adjustment to fair value of trading securities and derivatives | 1,123,414 | 631,594 | 66,949 | |||||||||
Total deferred tax liabilities | 1,268,037 | 817,125 | 312,420 |
(1) Temporary differences relate mainly to impairment losses on loansBalances of Tax assets - Deferred and receivables and provisions for judicial and administrative proceedings, and the effect of the fair value of financial instruments.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian ReaisTax liabilities - R$, unless otherwise stated)Deferred
Thousand of reais | 2021 | 2020 | 2019 | ||||||
Tax assets: | 37,640,297 | 37,981,698 | 30,295,062 | ||||||
Of which: | |||||||||
Temporary differences (1) | 32,884,314 | 32,113,436 | 29,565,702 | ||||||
Tax loss carry forwards | 4,755,983 | 5,693,104 | 367,120 | ||||||
Social contribution taxes 18% | - | 175,158 | 362,240 | ||||||
Total deferred tax assets | 37,640,297 | 37,981,698 | 30,295,062 | ||||||
Tax liabilities: | 2,225,190 | 4,546,595 | 5,540,873 | ||||||
Of which: | |||||||||
Excess depreciation of leased assets | - | 166,903 | 148,839 | ||||||
Adjustment to fair value of trading securities and derivatives | 2,225,190 | 4,379,692 | 5,392,034 | ||||||
Total deferred tax liabilities | 2,225,190 | 4,546,595 | 5,540,873 |
(1) | Temporary differences that refer mainly to impairment losses on loans and receivables, provisions for legal and administrative proceedings and the effect of the fair value of financial instruments. |
Accordingly, Banco Santander (Brasil) recognizes the tax credits based on the projection of taxable income for the Bank and each subsidiary individually, based on a history of profitability over a foreseeable horizon of up to 10 years considered as a reasonable level of security, given the economic scenario where the Bank operates. In the case of the tax loss was also considered the fiscal limitation of use of 30% of the taxable income of each year.
It was not recorded deferred tax assets related to tax loss and temporary differences in amount of R$1,085,272 in 2016 (2015 - R$1,438,349), R$1,084,230 on tax loss of Banco Santander (2015 - R$1,234,794) . Based on a technical study for the realization of deferred tax assets and liabilities drawn up by the Directors of Banco Santander, these tax credits should be accounted to the extent that it becomes probable that future taxable profit will allow their recovery.
Consolidated Financial Statements | December 31, 2021 | F-83 |
* Values expressed in thousands, except when indicated. |
The changes in the balances of “Tax Assets – Deferred” and “Tax Liabilities – Deferred” in the last three years were as follows:
Thousands of Reais | Balances at December 31, 2015 | Adjustment to Income | Valuation adjustments(1) | Other(2) | Acquisition / Merger | Balances at December 31, 2016 | ||||||||||||||||||
Deferred tax assets | 30,575,504 | (5,318,219 | ) | (1,580,025 | ) | 652,599 | 107,253 | 24,437,112 | ||||||||||||||||
Temporary differences | 29,538,257 | (5,319,198 | ) | (1,580,025 | ) | 652,599 | 107,253 | 23,398,886 | ||||||||||||||||
Tax loss carry forwards | 381,888 | 979 | - | - | - | 382,867 | ||||||||||||||||||
Social contribution taxes 18% | 655,359 | - | - | - | - | 655,359 | ||||||||||||||||||
Deferred tax liabilities | 817,125 | 25,666 | 947,628 | (523,182 | ) | 800 | 1,268,037 | |||||||||||||||||
Temporary differences | 817,125 | 25,666 | 947,628 | (523,182 | ) | 800 | 1,268,037 | |||||||||||||||||
Total | 29,758,379 | (5,343,885 | ) | (2,527,653 | ) | 1,175,781 | 106,453 | 23,169,075 |
Changes in the balances of Tax Assets - Deferred and Tax Liabilities - Deferred
Thousand of reais | Balances at December 31, 2018 | Adjustment to Income | Valuation adjustments (1) | Other (2) | Acquisition / Merger | Balance on December 31, 2021 |
Tax assets: | 37,981,699 | (3,609,495) | 1,696,091 | 1,572,002 | - | 37,640,297 |
Temporary differences | 32,113,436 | (2,497,215) | 1,696,091 | 1,572,002 | - | 32,884,315 |
Tax loss carry forwards | 5,693,104 | (937,121) | - | - | - | 4,755,983 |
Social contribution taxes 18% | 175,159 | (175,159) | - | - | - | - |
Tax liabilities: | 4,546,595 | (1,344,268) | (977,137) | - | - | 2,225,190 |
Temporary differences | 4,546,595 | (1,344,268) | (977,137) | - | - | 2,225,190 |
Total | 33,435,104 | (2,265,227) | 2,673,228 | 1,572,002 | - | 35,415,107 |
Thousand of reais | Balances at December 31, 2017 | Adjustment to Income | Valuation adjustments (1) | Other (2) | Acquisition / Merger | Balance on December 31, 2020 |
Tax assets: | 30,295,060 | 8,362,100 | (400,583) | (418,784) | 161,603 | 37,999,396 |
Temporary differences | 29,565,700 | 3,223,197 | (400,583) | (418,784) | 161,603 | 32,131,133 |
Tax loss carry forwards | 367,120 | 5,325,984 | - | - | - | 5,693,104 |
Social contribution taxes 18% | 362,240 | (187,081) | - | - | - | 175,159 |
Tax liabilities: | 5,540,873 | 129,231 | (1,063,160) | (60,349) | - | 4,546,595 |
Temporary differences | 5,540,873 | 129,231 | (1,063,160) | (60,349) | - | 4,546,595 |
Total | 24,754,187 | 8,232,869 | 662,577 | (358,435) | 161,603 | 33,452,801 |
Thousand of reais | Balances at December 31, 2016 | Adjustment to Income | Valuation adjustments (1) | Other (2) | Acquisition / Merger | Balance on December 31, 2019 |
Tax assets: | 27,680,578 | 3,693,727 | 471,499 | (1,550,744) | - | 30,295,060 |
Temporary differences | 26,416,527 | 4,240,405 | 471,499 | (1,562,731) | - | 29,565,700 |
Tax loss carry forwards | 846,587 | (491,454) | - | 11,987 | - | 367,120 |
Social contribution taxes 18% | 417,464 | (55,224) | - | - | - | 362,240 |
3,031,389 | 781,448 | 1,773,065 | (45,029) | - | 5,540,873 | |
Temporary differences | 3,031,389 | 781,448 | 1,773,065 | (45,029) | - | 5,540,873 |
Total | 24,649,189 | 2,912,279 | (1,301,566) | (1,505,715) | - | 24,754,187 |
Thousands of Reais | Balances at December 31, 2014 | Adjustment to Income | Valuation adjustments(1) | Other(2) | Acquisition / Merger | Balances at December 31, 2015 | ||||||||||||||||||
Deferred tax assets | 20,038,000 | 8,866,221 | 1,575,891 | 93,991 | 1,401 | 30,575,504 | ||||||||||||||||||
Temporary differences | 18,333,315 | 9,535,994 | 1,575,891 | 93,991 | (934 | ) | 29,538,257 | |||||||||||||||||
Tax loss carry forwards | 1,049,326 | (669,773 | ) | - | - | 2,335 | 381,888 | |||||||||||||||||
Social contribution taxes 18% | 655,359 | - | - | - | - | 655,359 | ||||||||||||||||||
Deferred tax liabilities | 312,420 | (551,692 | ) | 962,406 | 93,991 | - | 817,125 | |||||||||||||||||
Temporary differences | 312,420 | (551,692 | ) | 962,406 | 93,991 | - | 817,125 | |||||||||||||||||
Total | 19,725,580 | 9,417,913 | 613,485 | - | 1,401 | 29,758,379 |
Thousands of Reais | Balances at December 31, 2013 | Adjustment to Income | Valuation adjustments(1) | Other(2) | Acquisition / Merger | Balances at December 31, 2014 | ||||||||||||||||||
Deferred tax assets | 19,195,626 | 1,807,815 | 105,838 | (1,187,475 | ) | 116,196 | 20,038,000 | |||||||||||||||||
Temporary differences | 17,131,721 | 2,222,326 | 105,838 | (1,187,475 | ) | 60,905 | 18,333,315 | |||||||||||||||||
Tax loss carry forwards | 1,366,178 | (372,143 | ) | - | - | 55,291 | 1,049,326 | |||||||||||||||||
Social contribution taxes 18% | 697,727 | (42,368 | ) | - | - | - | 655,359 | |||||||||||||||||
Deferred tax liabilities | 1,623,593 | (248,057 | ) | 124,359 | (1,187,475 | ) | - | 312,420 | ||||||||||||||||
Temporary differences | 1,623,593 | (248,057 | ) | 124,359 | (1,187,475 | ) | - | 312,420 | ||||||||||||||||
Total | 17,572,033 | 2,055,872 | (18,521 | ) | - | 116,196 | 19,725,580 |
(1) It relates to tax recognized in equity.
(2) In 2016, it mainly refers to net of deferred taxes amounted to R$523,182 (2015 - R$93,991 and 2014 - R$1,187,475), which have the same counterparty and realization period and R$1,343,410 related taxes to compensate.
(1) | It relates to deferred taxes recognized in equity due to temporary differences accounted in equity. |
(2) | In 2021, it mainly refers to net of deferred taxes amounted to R$1,572,003 (2020 - R$1,358,435 and 2019 - R$1,505,715), which have the same counterparty and realization period. |
e) Expected realization of deferred tax assets
Temporary | Tax loss carry | Social contribution | ||||||||||
Year | differences | forwards | taxes 18% | |||||||||
2017 | 6,903,158 | 104,401 | 32,254 | |||||||||
2018 | 5,438,202 | 66,406 | 537 | |||||||||
2019 | 6,516,520 | 35,755 | 18,998 | |||||||||
2020 | 2,973,550 | 77,469 | 103,069 | |||||||||
2021 | 273,869 | 41,564 | 451,685 | |||||||||
2022 to 2024 | 564,872 | 45,813 | 48,816 | |||||||||
2025 to 2026 | 728,715 | 11,459 | - | |||||||||
Total | 23,398,886 | 382,867 | 655,359 |
Expected realization of deferred tax assets
Tax assets | Tax liabilities | ||||||||
Year | Temporary differences | Tax loss carry forwards | Total | Temporary differences | Total | ||||
2022 | 10,032,946 | 1,917,879 | 11,950,826 | 573,982 | 573,982 | ||||
2023 | 10,544,315 | 1,781,778 | 12,326,093 | 573,982 | 573,982 | ||||
2024 | 8,684,796 | 987,568 | 9,672,364 | 458,404 | 458,404 | ||||
2025 | 1,870,257 | 40,732 | 1,910,989 | 546,114 | 546,114 | ||||
2026 | 976,574 | 7,063 | 983,637 | 12,717 | 12,717 | ||||
2027 a 2031 | 775,250 | 21,139 | 796,388 | 59,991 | 59,991 | ||||
Total | 32,884,138 | 4,756,159 | 37,640,297 | 2,225,190 | 2,225,190 |
Projections of future taxable income include estimates referring to macroeconomic variables, exchange rate and interest rate fluctuations, the history of recent tax losses, among others, which may vary from the actual amounts.
Consolidated Financial Statements | December 31, 2021 | F-84 |
* Values expressed in thousands, except when indicated. |
f) Current Taxes
24. | Other liabilities |
The current tax assets refers to the balance of Income, Social Contribution Taxes, PIS/COFINS Offset.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The breakdown of the balance of “Other Liabilities” is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | ||||||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||||||||||||
Accrued expenses and deferred income(1) | 2,925,598 | 2,480,666 | 2,444,231 | Accrued expenses and deferred income (1) | 2,649,744 | 5,115,936 | 5,038,011 | ||||||||||||||||
Transactions in transit | 916,844 | 900,089 | 631,611 | 796,671 | 674,162 | 785,418 | |||||||||||||||||
Provision for share-based payment | 212,384 | 186,526 | 250,062 | Provision for share-based payment | 319,660 | 325,930 | 317,539 | ||||||||||||||||
Liabilities for insurance contracts | 1,584,303 | 1,365,793 | - | Liabilities for insurance contracts | 2,011,596 | 1,987,577 | 1,901,801 | ||||||||||||||||
Other(2) | 2,559,970 | 1,917,122 | 2,020,981 | 4,723,707 | 5,947,640 | 2,878,175 | |||||||||||||||||
Total | 8,199,099 | 6,850,196 | 5,346,885 | 10,501,378 | 14,051,245 | 10,920,944 |
(1) | Corresponds, mainly, to payments to be made - personnel expenses. |
(2) | Includes credits for funds to be released, such as Administratives expenses, amounts due to associates and suppliers. |
(3) | Includes mainly the amounts to transfer to the credit card companies (resources in transit) and amount to release referred to the real estate credits. |
(1) Corresponds, mainly, the payments to be made - personnel expenses.
(2) Includes credits for funds to be released.
27. Other Comprehensive Income
25. | Other Comprehensive Income |
The balances of Other Comprehensive Income include the amounts, net of the related tax effect, of the adjustments to assets and liabilities recognized temporarily in equity stated in the Consolidated Statement of Changes in Equity and Consolidated Statements of Comprehensive Income until they are extinguished or realized, when they are recognized in the consolidated income statement. The amounts attributable to subsidiaries, investments in associates and joint ventures are presented, on a line by line basis, in the appropriate items based on their nature.
It should be noted that the consolidated Statements of Comprehensive Income includes the changes to Other Comprehensive Income as follows:
- Revaluation gains (losses): This includes the amount of the gains, net of losses incurred in the year, recognized directly in equity. The amounts recognized in equity in the year remain under this item,heading, even if in the same year they are transferred to the income statement or to the initial carrying amount of the assets or liabilities or are reclassified to another line item.
heading.
- Amounts transferred to income statement: This includes the amount of the revaluation gains (losses) previously recognized in equity, even in the same year, which are subsequently recognized in the income statement.
- Amounts transferred to the initial carrying amountnumber of hedged items:objects: This includes the amount of the revaluation gains (losses) previously recognized in Equity, even in the same year, which are recognized in the initial carrying amount of assets or liabilities as a result of cash flow hedges.
- Other transfers: This includes the amount of the transfers made in the year between the various Other Comprehensive Income items.
In the Consolidated Statements of Comprehensive Income, the amounts in "Other Comprehensive Income" are recognized gross, including the amount relating to non-controlling interests, and the corresponding tax effect is presented under a separate item,heading, except in the case of entities accounted for using the equity method, the amounts for which are presented net of the tax effect.
a) Financial assets measured at fair value through other comprehensive income
a) Available-for-sale financiala.1) Financial assets
measured at fair value through other comprehensive income
Other Comprehensive Income - Available-for -sale financial– Financial assets measured at fair value through other comprehensive income includes the net amount of unrealized changes in the fair value of assets classified as available-for-sale financial assets (see Notes 76 and 8)7), net of taxes.
The breakdown, by type of instrument and geographical origin of the issuer, of Other Comprehensive Income Available-for-sale financialFinancial assets measured at fair value through other comprehensive income (IFRS 9) on December 31, 2016, 2015 and 20142021 is as follows:
2016 | ||||||||||||||||
In thousands of reais | Revaluation gains | Revaluation losses | Net revaluation gains/(losses) | Fair value | ||||||||||||
Debt Instruments | ||||||||||||||||
Government debt securities | 454,609 | (31,288 | ) | 423,321 | 50,384,382 | |||||||||||
Private-sector debt securities | 101,593 | (6,501 | ) | 95,092 | 5,445,190 | |||||||||||
Equity instruments | ||||||||||||||||
Domestic | 220,535 | (72,758 | ) | 147,777 | 1,985,473 | |||||||||||
Of which: | ||||||||||||||||
Listed | 147,844 | (50,269 | ) | 97,575 | 1,024,505 | |||||||||||
Unlisted | 72,691 | (22,489 | ) | 50,202 | 960,968 | |||||||||||
Total | 776,737 | (110,547 | ) | 666,190 | 57,815,045 |
Consolidated Financial Statements | December 31, 2021 | F-85 |
* Values expressed in thousands, except when indicated. |
2015 | ||||||||||||||||
In thousands of reais | Revaluation gains | Revaluation losses | Net revaluation gains/(losses) | Fair value | ||||||||||||
Debt Instruments | ||||||||||||||||
Government debt securities | 2,110 | (2,692,507 | ) | (2,690,397 | ) | 57,720,858 | ||||||||||
Private-sector debt securities | 10,585 | (67,277 | ) | (56,692 | ) | 9,382,416 | ||||||||||
Equity instruments | ||||||||||||||||
Domestic | 213,299 | (111,627 | ) | 101,672 | 1,162,332 | |||||||||||
Of which: | ||||||||||||||||
Listed | 119,436 | (99,357 | ) | 20,079 | 77,299 | |||||||||||
Unlisted | 93,863 | (12,270 | ) | 81,593 | 1,085,033 | |||||||||||
Total | 225,994 | (2,871,411 | ) | (2,645,417 | ) | 68,265,606 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
In thousand of reais | 2014 | |||||||||||||||
Revaluation gains | Revaluation losses | Net revaluation gains/(losses) | Fair value | |||||||||||||
Debt Instruments | ||||||||||||||||
Government debt securities | 137,165 | (286,905 | ) | (149,740 | ) | 52,557,244 | ||||||||||
Private-sector debt securities | 283,541 | (124,230 | ) | 159,311 | 20,953,454 | |||||||||||
Equity instruments | ||||||||||||||||
Domestic | 535,849 | (472,128 | ) | 63,721 | 1,653,644 | |||||||||||
Of which: | ||||||||||||||||
Listed | 467,854 | (431,239 | ) | 36,615 | 542,188 | |||||||||||
Unlisted | 67,995 | (40,889 | ) | 27,106 | 1,111,456 | |||||||||||
Total | 956,555 | (883,263 | ) | 73,292 | 75,164,342 |
Thousand of reais | 2021 | |||||
Revaluation gains | Revaluation losses | Net revaluation gains (losses) | Fair value | |||
Debt Instruments | ||||||
Government debt securities | 6,756,252 | (9,937,757) | (3,181,505) | 101,158,055 | ||
Private-sector debt securities | 795,765 | (3,965) | 791,800 | 54,545 | ||
Total | 7,552,017 | (9,941,722) | (2,389,705) | 101,212,600 | ||
Thousand of reais | 2020 | |||||
Revaluation gains | Revaluation losses | Net revaluation gains (losses) | Fair value | |||
Debt Instruments | ||||||
Government debt securities | 11,061,691 | (8,832,504) | 2,229,187 | 109,317,614 | ||
Private-sector debt securities | 953,043 | (840,101) | 112,942 | 38,131 | ||
Total | 12,014,734 | (9,672,605) | 2,342,129 | 109,355,745 | ||
Thousand of reais | 2019 | |||||
Revaluation gains | Revaluation losses | Net revaluation gains (losses) | Fair value | |||
Debt Instruments | ||||||
Government debt securities | 7,251,721 | (3,952,558) | 3,299,163 | 95,961,823 | ||
Private-sector debt securities | 824,294 | (778,175) | 46,119 | 1,104 | ||
Total | 8,076,015 | (4,730,733) | 3,345,282 | 95,962,927 |
At each reporting date, the Bank assesses whether there is any objective evidence indicating that the available-for-sale financial assets (debt securities and equity instruments) are impaired.
This assessment includes but is not limited to an analysis of the following information: i) the issuer’s economic and financial position, any default or late payments, issuer’s solvency, the evolution of its business, short-term projections, trends observed with respect to its earnings and, if applicable, its dividend distribution policy; ii) market-related information such as changes in the general economic situation, changes in the issuer’s industry which might affect its ability to pay; iii) changes in the fair value of the security analyzed, and analysis of the reasons of such changes—whether they are specific to the security or the result of the general uncertainty concerning the economy or the country—and iv) independent analysts’ reports and forecasts and other independent market information.
In the case of equity instruments, when the changes in the fair value of the equity instrument being evaluated are assessed, the duration and significance of the decline in its market price below cost is taken into account. Nevertheless, it should be noted that the Bank assesses, on a case-by-case basis each of the equity instruments that have incurred losses, and monitors the performance of their market prices, recognizing an impairment loss as soon as it is determined that the recoverable amount could be decreased.
If, after completing the above assessment, the Bank considers that the presence of one or more of these factors affect recovery of the cost of the financial asset, an impairment loss is recognized in the consolidated income statement for the amount of the loss in equity under Other Comprehensive Income. Also, where the Bank does not intend and/or is not able to hold the investment for a sufficient amount of time to recover the cost, the financial asset is written down to its fair value.
b) Cash flow hedges
Other Comprehensive Income—Income — Cash flow hedges includes the gains or losses attributable to hedginghedge instruments that qualify as effective hedges. These amounts will remain under this heading until they are recognized in the consolidated income statement in the periods in which the hedged items affect itthem (see Note 9)8).
Accordingly, amounts representing valuation losses will be offset in the future by gains generated by the hedged items.
c) Hedges of net investments in foreign operations and Translation adjustments foreign investment
Other Comprehensive Incomes—Incomes — Hedges of net investments in foreign operations includes the net amount of changes in the value of hedging instruments in hedges of net investments in foreign operations, for the portion of these changes considered as effective hedgesoperations. In 2019 this hedge was discontinued (Note 9)8.a5).
Other Comprehensive Income—Income — Exchange differences includes the net amount of the differences arising on the translation to Reais of the balances of the consolidated entities whose functional currency is not the Reais (Note 2.a).
The Bank has recorded a transaction of investment hedge on its investment in Santander EFC, an independent subsidiary in Spain. Accordingly, amounts representing valuation losses will be offset in the future by gains generated by the hedged instruments.
26. | Non-controlling interests |
28. "Non-controlling interests
“Non-controlling interests” includeinterests" refer to the net amount of the equity of subsidiariesvalue attributable to equity instruments that do not belong, directly or indirectly, to the Bank, including the portion of the annual profit attributed to them of profit for the year.subsidiaries.
a) Breakdown
The detail, by company, of the balance of “Equity - Non-controlling interests” is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Santander Leasing S.A. Arrendamento Mercantil | 441 | 421 | 408 | |||||||||
Santander Brasil Advisory Services S.A | 529 | 516 | 473 | |||||||||
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | 14,664 | - | |||||||||
Getnet S.A. | 168,863 | 176,278 | 155,217 | |||||||||
Banco Olé Bonsucesso Consignado S.A. (Olé Consignado) (Current Company Name of Banco Bonsucesso Consignado) | 30,425 | 5,014 | - | |||||||||
Santander Serviços Técnicos, Administrativos e de Corretagem de Seguros | 318,498 | 238,169 | 224,075 | |||||||||
BW Guirapá S.A. | 68,691 | - | - | |||||||||
Banco PSA Finance Brasil S.A. | 138,057 | - | - | |||||||||
Total | 725,504 | 435,062 | 380,173 |
F-65
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Thousand of reais | 2021 | 2020 | 2019 | |||||
Financial Position of non-controlling interest | 334,349 | 312,885 | 558,581 | |||||
Santander Leasing S.A. Arrendamento Mercantil | - | - | 447 | |||||
Olé Consignado S.A. | - | - | 271,078 | |||||
Banco PSA Finance Brasil S.A. | 129,289 | 138,644 | 131,222 | |||||
Rojo Entretenimento S.A. | 6,939 | 7,087 | 7,245 | |||||
Banco Hyundai Capital | 183,538 | 167,155 | 148,589 | |||||
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. | 3,109 | - | - | |||||
Toro Corretora de Títulos e Valores Mobiliários Ltda. | 11,474 | - | - |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Profit attributable to non-controlling interests | 130,355 | 50,086 | 77,753 | |||||||||
Of which: | ||||||||||||
Santander Leasing S.A. Arrendamento Mercantil | 41 | 38 | 17 | |||||||||
Santander Brasil Advisory Services S.A | 34 | 49 | 24 | |||||||||
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | (2,379 | ) | - | ||||||||
Getnet S.A. | 27,209 | 35,932 | 37,912 | |||||||||
Banco Olé Bonsucesso Consignado S.A. (Olé Consignado) (Current Company Name of Banco Bonsucesso Consignado) | 5,432 | 4,996 | - | |||||||||
Santander Serviços Técnicos, Administrativos e de Corretagem de Seguros | 98,717 | 10,859 | 40,182 | |||||||||
BW Guirapá S.A. | (2,957 | ) | - | - | ||||||||
Banco PSA Finance Brasil S.A. | 1,879 | - | - | |||||||||
Other companies | - | 591 | (382 | ) |
b) Changes
Consolidated Financial Statements | December 31, 2021 | F-86 |
* Values expressed in thousands, except when indicated. |
Balance of Profit attributable to non-controlling interests
Thousand of reais | 2021 | 2020 | 2019 | |||||
Profit attributable to non-controlling interests | 31,272 | 32,224 | 224,518 | |||||
Of which: | ||||||||
Santander Leasing S.A. Arrendamento Mercantil | - | (444) | 3 | |||||
Getnet S.A. | - | - | 3,962 | |||||
Olé Consignado S.A. | - | - | 199,332 | |||||
Banco PSA Finance Brasil S.A. | 12,688 | 14,146 | 15,887 | |||||
Rojo Entretenimento S.A. | (148) | (159) | 230 | |||||
Banco Hyundai Capital | 21,563 | 18,681 | 2,520 | |||||
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. | 1,569 | - | - | |||||
Toro Corretora de Títulos e Valores Mobiliários Ltda. | (4,400) | - | - | |||||
Return Capital Serviços de Recuperação de Créditos S.A. (Current name of Ipanema Empreendimentos e Participações Ltda.) | - | - | 2,584 |
b) Changes
The changes in the balance of “Non-controlling interests” are summarized as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of year | 435,062 | 380,173 | 289,101 | |||||||||
Change in the scope of consolidation(1) (2) | 159,469 | 16,608 | 60,744 | |||||||||
Dividends paid / Interest on Capital | (18,140 | ) | (2,754 | ) | (47,216 | ) | ||||||
Capital increase(3) | 20,000 | - | - | |||||||||
Profit attributable to non-controlling interests | 130,355 | 50,086 | 77,753 | |||||||||
Transition Adjustments to the amendments to the IAS 19 | (1,604 | ) | 5,916 | (209 | ) | |||||||
Others | 362 | (14,967 | ) | - | ||||||||
Balance at end of year | 725,504 | 435,062 | 380,173 |
(1) In 2016Thousand of reais 2021 2020 2019 Balance at beginning of year 312,885 558,581 529,990 Additions / disposals (net) due to change in the scope of consolidation (1) 17,415 (271,078) 51,073 Dividends paid / Interest on Capital (19,138) - (92,734) Capital increase (2) - - 100,000 Profit attributable to non-controlling interests 31,272 32,224 224,518 Update PUT Olé Consignado S.A. - - (240,000) Others (8,085) (6,842) (14,266) Balance at end of year 334,349 312,885 558,581
(1) | In 2019, mainly refers to Banco Hyundai Capital, which was consolidated using the equity method. In 2020, it refers to the merger of Banco Olé Consignado S.A by the Company. In 2021, it refers to the merger of Toro Corretora de Títulos e Valores Mobiliários S.A and Gira – Gestão Integrada de Receivíveis do Agronegócio S.A. |
(2) | In 2019, refers to the
|
27. | Shareholders’ equity |
a) Capital
According to the by-laws, Banco Santander's capital stock may be increased up to the limit of its authorized capital, regardless of statutory reform, by resolution of the Board of Directors and through the issuance of up to shareholders`stockholders' approval.
At the Extraordinary Shareholders' Meeting held on March 31, 2021, it was approved in the context of the partial spin-off of Santander Brasil, which resulted in the segregation of the shares of its ownership issued by Getnet Adquirência e Serviços para Meios de Contas SA. (“Getnet”), with version of the spun-off portion for Getnet, the reduction in the share capital of Santander Brasil in the total amount of two billion reais, without the cancellation of shares, increasing the share capital of Santander Brasil from fifty-seven billion reais to fifty-five billion of reais.
Thousands of shares | ||||||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||||||
Common | Preferred | Total | Common | Preferred | Total | |||||||||||||||||||
Brazilian residents | 67,498 | 92,949 | 160,447 | 56,306 | 81,280 | 137,586 | ||||||||||||||||||
Foreign residents | 3,783,473 | 3,619,163 | 7,402,636 | 3,794,666 | 3,630,833 | 7,425,499 | ||||||||||||||||||
Total shares | 3,850,971 | 3,712,112 | 7,563,083 | 3,850,972 | 3,712,113 | 7,563,085 | ||||||||||||||||||
(-) Treasury shares | (25,786 | ) | (25,786 | ) | (51,572 | ) | (20,218 | ) | (20,218 | ) | (40,436 | ) | ||||||||||||
Total outstanding | 3,825,185 | 3,686,326 | 7,511,511 | 3,830,754 | 3,691,895 | 7,522,649 |
Thousands of shares | ||||||||||||
2014 | ||||||||||||
Common | Preferred | Total | ||||||||||
Brazilian residents | 127,192 | 153,105 | 280,297 | |||||||||
Foreign residents | 3,742,658 | 3,577,885 | 7,320,543 | |||||||||
Total shares | 3,869,850 | 3,730,990 | 7,600,840 | |||||||||
(-) Treasury shares | (29,612 | ) | (29,612 | ) | (59,224 | ) | ||||||
Total outstanding | 3,840,238 | 3,701,378 | 7,541,616 |
Consolidated Financial Statements | December 31, 2021 | F-87 |
* Values expressed in thousands, except when indicated. |
In 2015, issuance costs of the Global Offering of Shares held in October 2009, have been reclassified from Capital to Reserves heading for a better presentation amounted to R$193,616.
Thousand of shares | |||||||||
2021 | 2020 | ||||||||
Common | Preferred | Total | Common | Preferred | Total | ||||
Brazilian residents | 109,718 | 135,345 | 245,063 | 109,885 | 135,438 | 245,323 | |||
Foreign residents | 3,708,977 | 3,544,491 | 7,253,468 | 3,708,810 | 3,544,398 | 7,253,208 | |||
Total shares | 3,818,695 | 3,679,836 | 7,498,531 | 3,818,695 | 3,679,836 | 7,498,531 | |||
(-) Treasury shares | (15,755) | (15,755) | (31,510) | (18,829) | (18,829) | (37,658) | |||
Total outstanding | 3,802,940 | 3,664,081 | 7,467,021 | 3,799,866 | 3,661,007 | 7,460,873 | |||
Thousand of shares | |||||||||
2019 | |||||||||
Common | Preferred | Total | |||||||
Brazilian residents | 90,069 | 115,785 | 205,854 | ||||||
Foreign residents | 3,728,626 | 3,564,051 | 7,292,677 | ||||||
Total shares | 3,818,695 | 3,679,836 | 7,498,531 | ||||||
(-) Treasury shares | (16,702) | (16,702) | (33,404) | ||||||
Total outstanding | 3,801,993 | 3,663,134 | 7,465,127 |
b) Dividends and Interest on Capital
According to the Bank’s bylaws,By-laws, shareholders are entitled toguaranteed a minimum dividend equivalent toof 25% of net income for theeach year, adjusted according toin accordance with legislation. Preferred shares are nonvotingdo not have voting rights and nonconvertible,cannot be converted into common shares, but they have the same rights and advantages granted to common shares, in addition to priority in the paymentdistribution of dividends at a rate that isand an additional 10% higher than thoseon dividends paid onto common shares, and in the reimbursement of capital, reimbursement, without premium, in the event of liquidation of the Bank.Bank's dissolution.
Dividend have been and will continue to beDividends were calculated and paid in accordance with Brazilian Corporate Law.
Prior toBefore the annual shareholders meeting,Annual Shareholders' Meeting, the Board of Directors may resolvedecide on the declaration and payment of dividends on earningsthe profits earned, based onon: (i) balance sheets or earningprofit reserves shownexisting in the last balance sheet;sheet or (ii) balance sheets issued in the period shorterperiods of less than 6six months, provided that the total dividends paid in each halfsemester of the fiscal year shalldoes not exceed the amount of capital reserves. These dividends are fully attributedimputed to the mandatory dividend.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2016 | ||||||||||||||||
Thousands of | Real per Thousand Shares / Units | |||||||||||||||
Reais | Common | Preferred | Units | |||||||||||||
Interest on Capital(1) (4) | 500,000 | 63.4290 | 69.7719 | 133.2009 | ||||||||||||
Intermediate Dividends(2) (5) | 700,000 | 88.8309 | 97.7140 | 186.5448 | ||||||||||||
Intercalary Dividends(2) (5) | 700,000 | 88.8309 | 97.7140 | 186.5448 | ||||||||||||
Interest on Capital(3) (5) | 3,350,000 | 425.1192 | 467.6311 | 892.7503 | ||||||||||||
Total | 5,250,000 |
(1) EstablishedCMN Resolution No. 4,885, of December 23, 2020, prohibits institutions authorized to operate by the Central Bank of Brazil from remunerating equity above the highest between: i) 30% of net income adjusted pursuant to item I of article 20 of Law No. 6.404/76; or ii) mandatory minimum dividends established by article 202 of Law 6,404/76, including in the form of Interest on Equity, until December 31, 2020. The rule also prohibits the reduction of the share capital, except in specific situations, and the increase in the remuneration of its officers, administrators and members of the Board of Directors in June 2016, Common Shares - R$53.9146, preferred - R$59.3061 and Units - R$113.2207 netthe Fiscal Council.
We present below the distribution of taxes.dividends and Interest on Equity made on December 31, 2021 and December 31, 2020 and 2019.
2021 | |||||||||||
Real per Thousand Shares / Units | |||||||||||
Thousand of reais | Gross | Net | |||||||||
Common | Preferred | Units | Common | Preferred | Units | ||||||
Dividends (1)(5) | 3,000,000 | 382.98 | 421.28 | 804.26 | 382.98 | 421.28 | 804.26 | ||||
Interest on Capital (2)(5) | 3,400,000 | 434.04 | 477.45 | 911.49 | 368.94 | 405.83 | 774.77 | ||||
Dividends (3)(5) | 3,000,000 | 382.98 | 421.28 | 804.26 | 382.98 | 421.28 | 804.26 | ||||
Interest on Capital (4) (5) | 249,000 | 31.79 | 34.97 | 66.75 | 27.02 | 29.72 | 56.74 | ||||
Total | 9,649,000 |
(1) | Resolved by the Board of Directors on April 27, 2021, paid on June 2, 2021, without any remuneration as monetary restatement. |
(2) | Resolved by the Board of Directors on July 27, 2021, paid on September 3, 2021, without any remuneration as monetary restatement. |
(3) | Resolved by the Board of Directors on October 26, 2021, paid on December 3, 2021, without any remuneration as monetary restatement. |
(4) | Resolved by the Board of Directors on December 28, 2021, paid on February 3, 2022, without any remuneration as monetary restatement. |
(5) | They were fully imputed to the mandatory minimum dividends distributed by the Bank for the year 2021. |
Consolidated Financial Statements | December 31, 2021 | F-88 |
* Values expressed in thousands, except when indicated. |
2020 | |||||||||||
Real per Thousand Shares / Units | |||||||||||
Thousand of reais | Gross | Net | |||||||||
Common | Preferred | Units | Common | Preferred | Units | ||||||
Interest on Capital (1) (5) | 890,000 | 113.71 | 125.08 | 238.80 | 96.65 | 106.32 | 202.97 | ||||
Interest on Capital (2) (5) | 770,000 | 98.37 | 108.21 | 206.58 | 83.62 | 91.98 | 175.61 | ||||
Interest on Capital (3) (5) | 1,000,000 | 127.76 | 140.54 | 268.30 | 108.59 | 119.45 | 228.04 | ||||
Interest on Capital (4) (5) | 665,000 | 84.96 | 93.45 | 178.41 | 72.21 | 79.44 | 151.65 | ||||
Dividends (5)(6) | 512,085 | 65.43 | 71.97 | 137.39 | 65.43 | 71.97 | 137.39 | ||||
Total | 3,837,085 |
(1) | Resolved by the Board of Directors on April 27, 2020, paid on June 24, 2020, without any remuneration as restatement. |
(2) | Resolved by the Board of Directors on July 28, 2020, paid on September 25, 2020, without any remuneration on account of monetary restatement. |
(2) Established by the Board of Directors in December 2016.
(3) | Resolved by the Board of Directors on October 26, 2020, paid on December 23, 2020, without any remuneration to monetary restatement title. |
(3) Established by the Board of Directors in December 2016, Common Shares- R$361.3513, preferred - R$397.4864 and Units - R$758.8377 net of taxes.
(4) | Resolved by the Board of Directors on December 28, 2020, paid from February 1, 2021, without any remuneration by way of monetary restatement. |
(4) The amount of the interest on capital will be fully input into the mandatory dividends for the year 2016 and were be paid from August 26, 2016 without any compensation as monetary correction.
(5) The amount of intermediate, intercalary dividends and interest on capital will be fully attributed to supplementary and mandatory dividends for the year 2016 and will be paid from February 23, 2017, without any compensation to the restatement.
(5) | They were fully allocated to the mandatory minimum dividends to be distributed by the Bank for the year 2020. |
(6) | Deliberated by the Board of Directors on February 2, 2021, paid on March 3, 2021, without any monetary restatement. |
2015 | ||||||||||||||||
Thousands of | Real per Thousand Shares / Units | |||||||||||||||
Reais | Common | Preferred | Units | |||||||||||||
Intercalary Dividends(1) (3) | 150,000 | 18.9474 | 20.8421 | 39.7895 | ||||||||||||
Intermediary Dividends(2) (4) | 3,050,000 | 385.8116 | 424.3927 | 810.2043 | ||||||||||||
Intercalary Dividends(3) (7) | 1,600,000 | 202.7412 | 223.0153 | 425.7564 | ||||||||||||
Interest on Capital(4) (7) | 1,400,000 | 177.3985 | 195.1384 | 372.5369 | ||||||||||||
Total | 6,200,000 |
(1) Established by the Board of Directors in March 2015.
(2) Established by the Board of Directors in September 2015.
(3) Established by the Board of Directors in December 2015.
(4) Established by the Board of Directors in December 2015, Common Shares - R$150.7887, preferred - R$165.8676 and Units - R$316.6563 net of taxes.
(5) The amount of the interim dividend were fully attributed to supplementary and mandatory dividends, respectively, for the year 2015 and were paid from August 28, 2015, without any compensation to the restatement.
(6) The amount of the interim dividend were fully attributed to supplementary and mandatory dividends, respectively, for the year 2015 and were paid from October 05, 2015, without any compensation to the restatement.
(7) The amount of the interim dividends and interest on capital were fully input into the mandatory dividends for the year 2015 and were paid from February 25, 2016, without any compensation as monetary correction.
2019 | |||||||||||
Reais per Thousand Shares / Units | |||||||||||
Thousand of reais | Gross | Net | |||||||||
Common | Preferred | Units | Common | Preferred | Units | ||||||
Interest on Capital (1) (6) | 1,000,000 | 127.59 | 140.34 | 267.93 | 108.45 | 119.29 | 227.74 | ||||
Interest on Capital (2) (6) | 1,000,000 | 127.64 | 140.40 | 268.04 | 127.64 | 140.40 | 268.04 | ||||
Interest on Capital (3) (6) | 1,000,000 | 127.66 | 140.43 | 268.09 | 108.51 | 119.36 | 227.87 | ||||
Interim Dividends (4) (6) | 1,010,000 | 128.97 | 141.86 | 270.83 | 109.62 | 120.58 | 230.21 | ||||
Interest on Capital (5) (6) | 6,790,000 | 867.02 | 953.72 | 1,820.74 | 867.02 | 953.72 | 1,820.74 | ||||
Total | 10,800,000 |
2014 | ||||||||||||||||
Thousands of | Reais per Thousand Shares / Units | |||||||||||||||
Reais | Common | Preferred | Units | |||||||||||||
Interim Dividends(1) (5) | 99,807 | 12.6008 | 13.8609 | 26.4617 | ||||||||||||
Intercalary Dividends(1)(5) | 120,193 | 15.1745 | 16.6919 | 31.8664 | ||||||||||||
Intercalary Dividends(2)(5) | 400,000 | 50.5005 | 55.5505 | 106.0510 | ||||||||||||
Intercalary Dividends(3)(6) | 220,000 | 27.7738 | 30.5512 | 58.3250 | ||||||||||||
Interest on Capital(4) (6) | 690,000 | 87.2120 | 95.9332 | 183.1452 | ||||||||||||
Total | 1,530,000 |
(1) Established by the Board of Directors in March 2014.
(2) Established by the Board of Directors in June 2014.
(3) Established by the Board of Directors in September 2014.
(4) Established by the Board of Directors in December 2014, common R$74.1309, preferred - R$81.5442 e units - R$155.6751, net of taxes.
(5) The amount of interim and intercalary dividends were fully attributed to supplementary and mandatory dividends for the year 2014 and were paid from August 28, 2014, without any compensation to the restatement.
(6) The amount of intercalary dividends were fully attributed to supplementary and mandatory dividends for the year 2014 and were paid from February 26, 2015, without any compensation to the restatement.
(1) | Resolved by the Board of Directors on March 29, 2019, paid on May 28, 2019, without any remuneration as monetary restatement. |
(2) | Resolved by the Board of Directors on June 28, 2019, paid on July 31, 2019, without any remuneration as monetary restatement. |
(3) | Resolved by the Board of Directors on September 30, 2019, paid on October 30, 2019, without any remuneration as monetary restatement. |
(4) | Resolved by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any remuneration as monetary restatement. |
(5) | Resolved by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any remuneration as monetary restatement. |
(6) | The amount of interest on equity and interim dividends were fully allocated to the mandatory minimum dividends distributed by the Bank for the year 2019. |
c) Reserves
The reserves are allocated as follows after the deductions and statutory provisions, from the net income:
Legal reserve
In accordance with Brazilian Corporate Law, 5% is transferred to the legal reserve, until it reaches 20% of the share capital. This reserve is designed to ensure the integrity of the capital and can only be used to offset losses or increase capital.
Capital reserve
The Bank´s capital reserve consists of: goodwill reserve of goodwill for the subscription of shares and other capital reserves, and can only be used to absorb losses that exceed retained earnings and profit reserves, redemption, repaymentreimbursement or purchaseacquisition of shares of our treasury; incorporation offor the Bank´s own issue; capital increase, or payment of dividends to preferred shares inunder certain circumstances.
Consolidated Financial Statements | December 31, 2021 | F-89 |
* Values expressed in thousands, except when indicated. |
Reserve for equalization dividend
After the destinationallocation of dividends, the remaining balance if any, may, upon proposal of the Executive Board and approved by the Board of Directors, be designatedallocated to constitute a reserve for equalization of dividends, which iswill be limited to 50% of the Capital.capital. This reserve aims to ensure funds for the payment of dividends, including the form of Interestas interest on Capital,own capital, or any interim payment to maintain the flow of shareholders remuneration.
BANCO SANTANDER (BRASIL)At the Extraordinary General Meeting held on March 31, 2021, it was approved in the context of the partial spin-off of Santander Brasil, which resulted in the segregation of the shares owned by it issued by Getnet Adquirência e Serviços para Meios de Pagamentos S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts (“Getnet”), with version of the spun-off portion to Getnet, the reduction of reserves for equalization of dividends of Santander Brasil in thousandsthe total amount of Brazilian Reais - R$, unless otherwise stated)1,167,674.
The reduction includes the remaining balance of the equity of the spun-off portion, as well as the write-off of the option to acquire an equity instrument.
d) Treasury shares
In theAt a meeting held on November 3, 2016,February 2, 2021, the Bank’s Board of Directors approved, in continuation ofcontinuity with the buyback program that expired on November 4, 2016, the2020, a new buyback program of itsfor Units and ADRs issued by the BankBanco Santander, directly or through its agencybranch in Cayman, to be heldfor maintenance in treasury or subsequently sold.subsequent disposal.
The Buyback Program covers the acquisition of up to 36,956,402 Units, representing 36,956,402 common shares and 36,956,402 preferred shares, which corresponded, on December 31, 2021, to approximately 1% of the Bank's capital stock. As of December 31, 2021, Banco Santander had common shares and preferred shares outstanding.
The Buyback Program will cover the acquisition up to 38,402,972 Units, representing 38,402,972 common shares and 38,402,972 preferred shares, or the ADRs, which, on September 30, 2016, corresponded to approximately 1.02% of the Bank’s share capital. On September 30, 2016, the Bank held 384,029,725 common shares and 411,834,140 preferred shares being traded.
The Buyback has the purposerepurchase aims to (1) maximize the generation of value creation tofor shareholders by means ofthrough an efficient management of the capital structure management;structure; and (2) enable the payment of officers,administrators, management level employees and others Bank’sother employees of the Bank and of companies under its control, according tounder the Long Termterms of the Long-Term Incentive Plans.
The term of the Buyback Program is 365 days countedup to 18 months from November 4, 2016, and will expireFebruary 3, 2021, ending on November 3, 2017.August 2, 2022.
2016 | 2015 | 2014 | ||||||||||||||||||||||
Quantity | Quantity | Quantity | ||||||||||||||||||||||
Units | ADRs | Units | ADRs | Units | ADRs | |||||||||||||||||||
Treasury shares at beginning of the period | 7,080,068 | 13,137,665 | 16,531,177 | 13,080,565 | 11,823,638 | 6,748,347 | ||||||||||||||||||
Shares Acquisitions | 14,284,400 | - | 13,873,413 | 57,100 | 7,425,000 | 6,332,218 | ||||||||||||||||||
Cancellation of ADRs(1) | 13,137,665 | -13,137,665 | - | - | - | - | ||||||||||||||||||
Cancellation of Shares(2) | - | - | (18,878,954 | ) | - | - | - | |||||||||||||||||
Payment - Share-based compensation | (8,716,213 | ) | - | (4,445,568 | ) | - | (2,717,461 | ) | - | |||||||||||||||
Treasury shares at end of period | 25,785,920 | - | 7,080,068 | 13,137,665 | 16,531,177 | 13,080,565 | ||||||||||||||||||
Balance of Treasury Shares in thousands of reais(2) (3) | R$ 513,889 | R$ 0 | R$ 106,764 | R$ 317,094 | R$ 230,420 | R$ 215,036 |
2021 | 2020 | 2019 | ||||||
Quantity | Quantity | Quantity | ||||||
Units | Units | Units | ||||||
Treasury shares at beginning of the period | 18,829 | 16,702 | 13,317 | |||||
Shares Acquisitions | 91 | 5,052 | 6,465 | |||||
Payment - Share-based compensation | (3,165) | (2,925) | (3,080) | |||||
Treasury shares at end of the period | 15,755 | 18,829 | 16,702 | |||||
Balance of Treasury Shares in thousand of reais | R$ 711,268 | R$ 789,587 | R$ 679,364 | |||||
Emission Costs in thousands of Reais | R$ 1,771 | R$ 1,771 | R$ 1,771 | |||||
Balance of Treasury Shares in thousands of reais | R$ 713,039 | R$ 791,358 | R$ 681,135 | |||||
Cost/Share Price | Units | Units | Units | |||||
Minimum cost (1) | R$7.55 | R$7.55 | R$7.55 | |||||
Weighted average cost (1) | R$33.86 | R$33.24 | R$28.59 | |||||
Maximum cost (1) | R$49.55 | R$49.55 | R$43.84 | |||||
Share Price | R$29.98 | R$44.83 | R$42.70 |
(1) | ||||||||||||||||
(1) In January 2016 was the transformation of all ADRs that were held in treasury for UNIT's.
(2) Extraordinary General Meeting held on December 14, 2015 the cancellation of 18,878,954 Units was approved (18,878,954 ON and 18,878,954 PN totaling 37,757,908 treasury shares) equivalent to R$268,573.
(3) The total number of treasury shares on December 31, 2016 is R$514,034 (2015 - R$423,953 and 2014 - R$445,501) and includes issuance costs amounted to R$145 (2015 - R$95 and 2014 - R$45).
Additionally, in the year ended December 31, 2016,2021, treasury shares were sold, that resulted in a gain of R$ (2020 - loss of R$11,574 (2015 and 2019 - loss of R$3,918 and 2014 - R$4,926) ) recorded directly in equity in capital reserves.
On September 26, 2013, the Bank disclosed a Material Fact announcing that, in order to optimize its capital structure, the Board of Directors submitted a proposal to optimize the composition of Banco Santander’s regulatory capital to the shareholders for their approval ("PR Optimization Plan"). The aim is to establish a more efficient capital structure, consistent with the new prudent capital rules and aligned with Banco Santander’s business plan and asset growth. The PR Optimization Plan had the following items: (i) the redistribution of equity to the shareholders of Banco Santander in the total amount of R$6,000,000, with no reduction in the number of shares; (ii) the issuance abroad of capital instruments to compose Tier I and Tier II of Banco Santander’s regulatory capital and; (iii) a bonus share program and an adjustment in the composition of the Units, followed by a reverse share split (inplit), with the purpose of eliminating trading in cents.
Equity Distributions
On November 1, 2013, the proposals for return of funds to shareholders was approved on Shareholders’ Meeting. In January 2014, conditions for effective recovery of resources (end of the period of opposition from unsecured creditors, approval by the Bacen and filing the minutes of the meeting at the Junta Comercial do Estado de São Paulo - JUCESP) were satisfied. The Equity Distributions to shareholders occurred on January 29, 2014, and the Bank's shares and Units have been traded ex-rights to the Equity Distributions since January 15, 2014.
Issuance Notes
On January 14, 2014 the Board of Directors approved the issuance of notes outside Brazil, in dollars, amounting to R$6,000,000. The issuance of Notes held on January 29, 2014.
The specific characteristics of the Notes issued to compose the Tier I are: (a) Notional: US$1,247,713, equivalent to R$3,000,000, (b) Interest Rate: 7.375% p.a. (c) Maturity: The Tier I Notes shall be perpetual; (d) Frequency of interest payment: interest will be paid quarterly from April 29, 2014; (e) Discretion: Banco Santander can cancel the distribution of interest at any time, for an unlimited period, with no accumulation rights and this suspension shall not be considered as a default event; (f) Subordination: in the case of insolvency, the Notes' financial settlement is subordinated to all Tier II capital instruments. The specific characteristics of the Notes issued to form the Tier II are: (a) Notional: US$1,247,713, equivalent to R$3,000,000 (b) Interest Rate: 6.0% p.a. (c) Maturity: the Tier II Notes will mature on January 29, 2024, and (d) Frequency of interest payment: interest payable semi-annually from July 29, 2014.
On April 15, 2014, the Bacen approved the issued notes to compose the Tier I and Tier II of Bank’s regulatory capital since the issuance date.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Bonus Shares and Share Reverse Split (inplit)
With the purposes of eliminating the trading in cents of SANB3 (common) and SANB4 (preferred) shares, increasing liquidity and reducing costs of transaction thereof, on March 18, 2014, our shareholders, in the extraordinary general meeting approved, (i) a bonus share of 19,002,100,957 preferred shares to our shareholders, at the ratio of 0.047619048 preferred shares for each common share (SANB3) or preferred share (SANB4), which results in bonus share of five (5) preferred shares for each Unit (SANB11), through the capitalization of reserves in the amount of R$171,799; and (ii) share reverse split (inplit) of the totality of our common shares and preferred shares in a ratio of 1:55, so that each fifty-five (55) common shares and fifty-five (55) preferred shares will henceforth correspond to one (1) common share and one (1) preferred share, respectively. As a result, each Unit (SANB11) will be comprised of one common share and one preferred share. These events were implemented on June 2, 2014.
Exchange Offer
On April 29, 2014 the Bank published Material Fact in order to inform that it was informed by its indirect controlling shareholder, Banco Santander Spain, that it would launch a voluntary exchange offer in Brazil and United States for acquisition of up to the totality of the shares of Banco Santander that are not held by Banco Santander Spain, which represented approximately 25% of Banco Santander’s share capital, with payment in shares of Banco Santander Spain. As a result of the Transaction, Bank would continue to be a listed company, although it would change from the Level 2 (Nivel 2) of Corporate Governance of BM&FBovespa to the traditional segment.
On June 9, 2014, it was held an extraordinary shareholder meeting, which resolved on the following Agenda: (a) the exit of the Bank from Level 2 of Corporate Governance; and (b) the selection of the specialized firm NM Rothschild & Sons (Brasil) Ltda., to be hired to prepare a valuation report, called a “laudo”, based on the Bank’s economic value, for purposes of the Exchange Offer and the consequent exit from Level 2.
On June 13, 2014, the Bank published Material Fact, in order to inform that the valuation report, called a “laudo”, prepared by N M Rothschild & Sons (Brasil) Ltda., was duly filed on the date hereof with (i) the CVM; (ii) the BM&FBovespa; and (iii) the U.S. Securities and Exchange Commission - SEC. The Company informed as well that an application for registration of the Exchange Offer was duly filed with the CVM on the date hereof.
On October 2, 2014 Banco Santander´s Board of Directors issued an opinion regarding the Offer and Banco Santander filed with the U.S. Securities and Exchange Commission its position with respect to the proposed transaction by means of a Schedule 14D-9. On October 16, 2014 Banco Santander Spain and Banco Santander disclosed to the market the adjustment of exchange ratio of the Voluntary Exchange Tender Offer referred to in the Public Notice (edital) published on September 18, 2014. In accordance with the Public Notice, the exchange ratio, and consequently the amount of BDR that entitles each Subscription Receipt, was adjusted from 0.70 BDR for each Unit BDR and 0.35 BDR for each share, either ordinary or preferred, to 0.7152 BDR each Unit and 0.3576 BDR for each share, either ordinary or preferred, in view of the compensation declared by Banco Santander Spain on October 16, 2014, under the Santander Dividendo Elección program, with record date on October 17, 2014.
On October 31, 2014, Banco Santander together with Banco Santander Spain has published a Material Fact regarding the Exchange Offers Results. Banco Santander Spain acquired 1,640,644 shares and 517,827,702 Units, representing, together, 13.65% of the share capital of Bank, thereby, the participation of Grupo Santander in Banco Santander would be 88.30% of its total share capital, 88.87% of its common shares and 87.71% of its preferred shares, considering also the American Depositary Receipts - ADRs representative of Units acquired in the Exchange in the USA. As consequence of the Offer, Santander Brasil´s shares are no longer listed on Level 2 of BM&FBovespa, and are trading on the traditional listing segment.
28. | Earnings per share |
a) Basic earnings per share
2016 | 2015 | 2014 | ||||||||||
Profit attributable to the Parent | 7,334,563 | 9,783,740 | 5,630,023 | |||||||||
Earnings per share (Brazilian Reais) | ||||||||||||
Basic earnings per 1,000 shares (Brazilian Reais) | ||||||||||||
Common shares | 929.93 | 1,236.96 | 709.69 | |||||||||
Preferred shares | 1,022.92 | 1,360.66 | 780.66 | |||||||||
Net Profit attributable - Basic (Brazilian Reais) | ||||||||||||
Common shares | 3,560,288 | 4,748,896 | 2,733,205 | |||||||||
Preferred shares | 3,774,275 | 5,034,844 | 2,896,818 | |||||||||
Weighted average shares outstanding - Basic | ||||||||||||
Common shares | 3,828,555 | 3,839,159 | 3,851,278 | |||||||||
Preferred shares | 3,689,696 | 3,700,299 | 3,710,746 |
Consolidated Financial Statements | December 31, 2021 | F-90 |
* Values expressed in thousands, except when indicated. |
2021 | 2020 | 2019 | |||||||||
Profit attributable to the Parent | 15,528,052 | 13,418,529 | 16,406,932 | ||||||||
Earnings per share (R$) | |||||||||||
Basic earnings per 1,000 shares (R$) | |||||||||||
Common shares | 1,981.65 | 1,713.45 | 2,094.83 | ||||||||
Preferred shares | 2,179.82 | 1,884.80 | 2,304.32 | ||||||||
Net Profit attributable - Basic (R$) | |||||||||||
Common shares | 7,535,924 | 6,511,367 | 7,965,194 | ||||||||
Preferred shares | 7,992,128 | 6,907,162 | 8,441,738 | ||||||||
Weighted average shares outstanding (in thousands) - Basic | |||||||||||
Common shares | 3,802,851 | 3,800,140 | 3,802,303 | ||||||||
Preferred shares | 3,666,423 | 3,664,666 | 3,663,444 |
b) Diluted earningsearning per share
Diluted earnings per share
2021 | 2020 | 2019 | ||||||||||
Profit attributable to the Parent |
15,528,052 | 13,418,529 | 16,406,932 | |||||||||
Earnings per share (R$) | ||||||||||||
Diluted earnings per 1,000 shares (R$) | ||||||||||||
Common shares | 1,981,65 | 1,713,45 | 2,094,83 | |||||||||
Preferred shares | 2,179,82 | 1,884,80 | 2,304,32 | |||||||||
Net Profit attributable - Basic (R$) | ||||||||||||
Common shares | 7,535,924 | 6,511,367 | 7,965,194 | |||||||||
Preferred shares | 7,992,128 | 6,907,162 | 8,441,738 | |||||||||
Weighted average shares outstanding (in thousand) - Diluted | ||||||||||||
Common shares | 3,802,851 | 3,800,140 | 3,802,303 | |||||||||
Preferred shares | 3,666,423 | 3,664,666 | 3,663,444 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2016 | 2015 | 2014 | ||||||||||
Profit attributable to the Parent | 7,334,563 | 9,783,740 | 5,630,023 | |||||||||
Earnings per share (Brazilian Reais) | ||||||||||||
Diluted earnings per 1,000 shares (Brazilian Reais) | ||||||||||||
Common shares | 929.03 | 1,235.79 | 709.40 | |||||||||
Preferred shares | 1,021.93 | 1,359.36 | 780.34 | |||||||||
Net Profit attributable - Basic (Brazilian Reais) | ||||||||||||
Common shares | 3,560,222 | 4,748,810 | 2,733,184 | |||||||||
Preferred shares | 3,774,341 | 5,034,930 | 2,896,839 | |||||||||
Weighted average shares outstanding (in thousands) - Diluted | ||||||||||||
Common shares | 3,832,211 | 3,842,744 | 3,852,823 | |||||||||
Incremental shares from stock options granted under Stock Option Plan - Units | 3,656 | 3,585 | 1,545 | |||||||||
Preferred shares | 3,693,352 | 3,703,884 | 3,712,291 | |||||||||
Incremental shares from stock options granted under Stock Option Plan - Units | 3,656 | 3,585 | 1,545 |
31. Fair value of financial assets and liabilities
29. | Fair value of financial assets and liabilities |
Under IFRS 13, the fair value measurement usinguses a fair value hierarchy that reflects the model used in the measurement process which should be in accordance with the following hierarchical levels:
Level 1:Determined on the basis of public (unadjusted) quoted prices in highly active markets for identical assets and liabilities, these include public debt securities, stocks, derivatives listed.
Level 2:Are They are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3:Are They are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Trading Financial Assets, OthersOther financial assets at fair value on through profit or loss,income statement, Available-for-sale financial assets and Financial liabilities held for trading.
Level 1:The securities with high liquidity and observablequoted prices in an active market are classified as level 1. At this level there were classified most of the Brazilian Government Securities (mainly LTN, LFT, NTN-B, NTN-C and NTN-F), shares in stocksstock exchange and other securities traded in anthe active market.
Consolidated Financial Statements | December 31, 2021 | F-91 |
* Values expressed in thousands, except when indicated. |
Level 2:When quoted price quotations cannot be observed, the Management, using theirits own internal models, make theirits best estimate of the price that would be set by the market. These models use data based on observable market parameters as an important reference. Various techniques are used to make these estimates, including the extrapolation of observable market data and extrapolation techniques. The best evidence of fair value of a financial instrument on initial recognition is the transaction price, unless the fair value of the instrument can be obtained from other market transactions carried out with the same instrument or similar instruments or can be measured using a valuation technique in which the variables used include only data from observable market, especially interest rates. These securities are classified within Levelat level 2 of the fair value hierarchy and are composed mainly by Privateof Government Securities (prominently on Debenture portfolio)(repo, LCI Cancelable and NTN) in a market with less liquidityliquid market than those classified at Levellevel 1.
Level 3:When there is information that is not based on observable market data, Banco Santander uses internally developed models, from curves generated according to the internal model. Level 3 comprises mainly unlisted shares that are not generally traded in an active market.
shares.
Derivatives
Level 1:Derivatives traded on stock exchanges are classified in Level 1 of the hierarchy.
Level 2:For the valuation derivatives traded over the counter, and the valuation of financial instruments (primarily swaps and options), are usually used asuses observable market data:data, such as: exchange rates, interest rates, volatility, correlation between indexes and market liquidity.
When pricing the financial instruments mentioned, uses the method ofaforementioned, it is used the Black-Scholes modelModel (exchange rate options, interest rate options; caps and floors) and the method of present value method (discount of future values by market curves).
Level 3:Derivatives not traded in the stock marketon an exchange and that do not have an observable datainformation in aan active market were classified as Levellevel 3, these and are composed, of complexincluding exotic derivatives.
Category | Type Asset/Liability | Valuation technique | Main unobservable inputs |
Linear derivatives | Coupon Fra | BMF Closing Prices | Currency Coupon rate - long term |
Inflation Swap | Discounted cash flow | IGPM Coupon rate | |
Interest Rate Swap | Discounted cash flow | Pre-fixed rates – long term | |
Non linear derivatives | Equities Options | Black&Scholes | Implicit volatility- long term |
Inflation Options | Black&Scholes | IPCA Implicit volatility- long term | |
Interest Rate Options | Black&Scholes | IDI Implicit volatility- long term | |
Currency Options | Black&Scholes | USD/BRL Implicit volatility- long term | |
Cash | Pension Plan Liability | Actuarial Model | IGPM Coupon rate |
Private Bonds | Discounted cash flow | Discount rate ("Yields") | |
Public Bonds | Discounted cash flow | NTN-C and TDA Discount rate ("Yields") | |
Put options | Put Options | Discounted cash flow | Growth and Discount rates |
The following table below shows a summary of the fair values of financial assets and liabilities for the years ended December 31, 2016, 20152021, 2020 and 2014,2019, classified based on severalthe various measurement methods adopted by the Bank to determine their fair value:value
Summary of the fair values of financial assets and liabilities
12/31/2021 | ||||||||
Level 1(1) | Level 2 | Level 3 | Total | |||||
Financial Assets Measured at Fair Value Through Profit or Loss | 601,204 | 15,736,825 | 2,520,813 | 18,858,842 | ||||
Debt instruments | 601,204 | - | 2,520,813 | 3,122,017 | ||||
Balances with The Brazilian Central Bank | - | 15,736,825 | - | 15,736,825 | ||||
Financial Assets Measured at Fair Value Through Profit or Loss Held for Trading | 49,462,429 | 20,608,008 | 500,228 | 70,570,665 | ||||
Debt instruments | 47,582,871 | 19,329 | 150,395 | 47,752,595 | ||||
Equity instruments | 1,879,558 | 85,029 | 56,023 | 2,020,610 | ||||
Derivatives | - | 20,503,650 | 93,810 | 20,797,460 | ||||
Non-Trading Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss | - | 420,898 | 449,264 | 870,162 | ||||
Equity instruments | - | 98,921 | 378,786 | 477,707 | ||||
Loans and advances to customers | - | 321,977 | 70,478 | 392,455 | ||||
Financial Assets Measured at Fair Value Through Other Comprehensive Income | 98,977,403 | 1,662,779 | 601,605 | 101,241,787 | ||||
Debt instruments | 98,975,973 | 1,649,925 | 586,702 | 101,212,600 | ||||
Equity instruments | 1,430 | 12,854 | 14,903 | 29,187 | ||||
Hedging derivatives (assets) | - | 342,463 | - | 342,463 | ||||
Financial Liabilities Measured at Fair Value Through Profit or Loss Held For Trading | - | 36,484,135 | 468,432 | 36,952,567 | ||||
Trading derivatives | - | 23,703,576 | 468,432 | 24,172,008 | ||||
Short positions | - | 12,780,559 | - | 12,780,559 | ||||
Financial Liabilities Measured at Fair Value Through Profit or Loss | - | 7,459,784 | - | 7,459,784 | ||||
Other financial liabilities | - | 7,459,784 | - | 7,459,784 | ||||
Hedging derivatives (liabilities) | - | 446,973 | - | 446,973 | ||||
In thousands of Reais | 2016 | |||||||||||||||
Level 1(1) | Level 2(1) | Level 3 | Total | |||||||||||||
Financial assets held for trading | 59,410,908 | 25,462,755 | - | 84,873,663 | ||||||||||||
Debt instruments | 59,034,363 | 960,583 | - | 59,994,946 | ||||||||||||
Equity instruments | 376,545 | 21,916 | - | 398,461 | ||||||||||||
Trading derivatives | - | 24,480,256 | - | 24,480,256 | ||||||||||||
Other financial assets at fair value through profit or loss | 1,597,660 | 76,035 | 37,509 | 1,711,204 | ||||||||||||
Debt instruments | 1,592,714 | 76,035 | - | 1,668,749 | ||||||||||||
Equity instruments | 4,946 | - | 37,509 | 42,455 | ||||||||||||
Available-for-sale financial assets | 51,160,044 | 5,703,389 | 951,612 | 57,815,045 | ||||||||||||
Debt instruments | 50,172,609 | 5,656,963 | - | 55,829,572 | ||||||||||||
Equity instruments | 987,435 | 46,426 | 951,612 | 1,985,473 | ||||||||||||
Hedging derivatives (assets) | - | 222,717 | - | 222,717 | ||||||||||||
Financial liabilities held for trading | 31,694,269 | 19,925,600 | - | 51,619,869 | ||||||||||||
Trading derivatives | - | 19,925,600 | - | 19,925,600 | ||||||||||||
Short positions | 31,694,269 | - | - | 31,694,269 | ||||||||||||
Hedging derivatives (liabilities) | - | 311,015 | - | 311,015 |
(1) There was no transfer between levels 1 and 2.
Consolidated Financial Statements | December 31, 2021 | F-92 |
* Values expressed in thousands, except when indicated. |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
12/31/2020 | ||||||||
Level 1(1) | Level 2 | Level 3 | Total | |||||
Financial Assets Measured At Fair Value Through Profit Or Loss | 588,778 | 57,354,806 | 2,956,882 | 60,900,466 | ||||
Debt instruments | 588,778 | - | 2,956,882 | 3,545,660 | ||||
Balances with The Brazilian Central Bank | - | 57,354,806 | - | 57,354,806 | ||||
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading | 70,139,962 | 27,508,722 | 817,548 | 98,466,232 | ||||
Debt instruments | 68,461,854 | 11,848 | 47,097 | 68,520,799 | ||||
Equity instruments | 1,678,108 | 128,251 | 11,917 | 1,818,276 | ||||
Derivatives | - | 27,368,623 | 758,534 | 28,127,157 | ||||
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss | - | 217,569 | 282,151 | 499,720 | ||||
Equity instruments | - | 185,790 | 253,122 | 438,912 | ||||
Loans and advances to customers | - | 31,779 | 29,029 | 60,808 | ||||
Financial Assets Measured At Fair Value Through Other Comprehensive Income | 106,456,132 | 1,987,234 | 1,297,021 | 109,740,387 | ||||
Debt instruments | 106,454,645 | 1,953,504 | 1,260,065 | 109,668,214 | ||||
Equity instruments | 1,487 | 33,730 | 36,956 | 72,173 | ||||
Hedging derivatives (assets) | - | 743,463 | - | 743,463 | ||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading | - | 76,890,170 | 753,121 | 77,643,291 | ||||
Trading derivatives | - | 31,082,223 | 753,121 | 31,835,344 | ||||
Short positions | - | 45,807,947 | - | 45,807,947 | ||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss | - | 7,038,467 | - | 7,038,467 | ||||
Other Financial Liabilities | - | 7,038,467 | - | 7,038,467 | ||||
Hedging derivatives (liabilities) | - | 144,594 | - | 144,594 | ||||
12/31/2019 | ||||||||
Level 1(1) | Level 2 | Level 3 | Total | |||||
Financial Assets Measured At Fair Value Through Profit Or Loss | 975,393 | 28,739,507 | 2,627,405 | 32,342,305 | ||||
Debt instruments | 975,393 | 132,277 | 2,627,405 | 3,735,075 | ||||
Balances with The Brazilian Central Bank | - | 28,607,230 | - | 28,607,230 | ||||
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading | 35,057,803 | 21,247,552 | 715,548 | 57,020,903 | ||||
Debt instruments | 33,028,333 | 1,726,441 | 130,857 | 34,885,631 | ||||
Equity instruments | 2,029,470 | - | - | 2,029,470 | ||||
Derivatives | - | 19,521,111 | 584,691 | 20,105,802 | ||||
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss | 143,077 | 627 | 27,749 | 171,453 | ||||
Equity instruments | 143,077 | 627 | 27,749 | 171,453 | ||||
Financial Assets Measured At Fair Value Through Other Comprehensive Income | 93,555,527 | 1,612,741 | 951,966 | 96,120,234 | ||||
Debt instruments | 93,531,617 | 1,612,741 | 818,569 | 95,962,927 | ||||
Equity instruments | 23,910 | - | 133,397 | 157,307 | ||||
Hedging derivatives (assets) | - | 339,932 | - | 339,932 | ||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading | - | 45,499,913 | 564,757 | 46,064,670 | ||||
Trading derivatives | - | 21,664,260 | 564,757 | 22,229,017 | ||||
Short positions | - | 23,835,653 | - | 23,835,653 | ||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss | - | 3,719,416 | 1,600,000 | 5,319,416 | ||||
Hedging derivatives (liabilities) | - | 200,961 | - | 200,961 |
In thousands of Reais | 2015 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets held for trading | 24,952,744 | 25,583,987 | - | 50,536,731 | ||||||||||||
Debt instruments | 24,579,100 | 614,498 | - | 25,193,598 | ||||||||||||
Equity instruments | 373,644 | 31,329 | - | 404,973 | ||||||||||||
Trading derivatives | - | 24,938,160 | - | 24,938,160 | ||||||||||||
Other financial assets at fair value through profit or loss | 1,420,332 | 86,238 | 573,664 | 2,080,234 | ||||||||||||
Debt instruments | 1,420,332 | 86,238 | - | 1,506,570 | ||||||||||||
Equity instruments | - | - | 573,664 | 573,664 | ||||||||||||
Available-for-sale financial assets | 56,497,320 | 10,910,469 | 857,817 | 68,265,606 | ||||||||||||
Debt instruments | 56,250,013 | 10,853,261 | - | 67,103,274 | ||||||||||||
Equity instruments | 247,307 | 57,208 | 857,817 | 1,162,332 | ||||||||||||
Hedging derivatives (assets) | - | 1,312,202 | - | 1,312,202 | ||||||||||||
Financial liabilities held for trading | 20,047,631 | 22,340,137 | - | 42,387,768 | ||||||||||||
Trading derivatives | - | 22,340,137 | - | 22,340,137 | ||||||||||||
Short positions | 20,047,631 | - | - | 20,047,631 | ||||||||||||
Hedging derivatives (liabilities) | - | 2,376,822 | - | 2,376,822 |
In thousands of Reais | 2014 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets held for trading | 46,771,577 | 9,238,697 | 3,329 | 56,013,603 | ||||||||||||
Debt instruments | 46,478,155 | 628,656 | - | 47,106,811 | ||||||||||||
Equity instruments | 293,422 | 94,905 | 3,329 | 391,656 | ||||||||||||
Trading derivatives | - | 8,515,136 | - | 8,515,136 | ||||||||||||
Other financial assets at fair value through profit or loss | - | 93,900 | 902,794 | 996,694 | ||||||||||||
Debt instruments | - | 93,900 | - | 93,900 | ||||||||||||
Equity instruments | - | - | 902,794 | 902,794 | ||||||||||||
Available-for-sale financial assets | 54,241,121 | 20,025,265 | 897,956 | 75,164,342 | ||||||||||||
Debt instruments | 53,668,491 | 19,842,207 | - | 73,510,698 | ||||||||||||
Equity instruments | 572,630 | 183,058 | 897,956 | 1,653,644 | ||||||||||||
Hedging derivatives (assets) | - | 212,552 | - | 212,552 | ||||||||||||
Financial liabilities held for trading | 11,285,431 | 8,284,360 | - | 19,569,791 | ||||||||||||
Trading derivatives | - | 8,284,360 | - | 8,284,360 | ||||||||||||
Short positions | 11,285,431 | - | - | 11,285,431 | ||||||||||||
Hedging derivatives (liabilities) | - | 893,902 | - | 893,902 |
Certain financial instruments in 2014 and 2015 have been reclassified in the table above in line with the submission of 2016.
Consolidated Financial Statements | December 31, 2021 | F-93 |
* Values expressed in thousands, except when indicated. |
Movements in fair value of Level 3
The following tables demonstrate the movements during 2016, 20152021, 2020 and 20142019 for the financial assets and liabilities classified as Level 3 in the fair value hierarchy:
Fair value hierarchy
Fair Value 12/31/2020 | Gains/ losses (Realized/Not Realized) | Transfers to Level 3 | Additions / Low | Fair value 12/31/2021 | ||||||
Financial Assets Measured At Fair Value Through Profit Or Loss | 2,956,882 | 99,401 | - | (535,470) | 2,520,813 | |||||
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading | 817,548 | (802,760) | (36,051) | 483,419 | 462,156 | |||||
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss | 282,151 | 78,853 | - | 88,260 | 449,264 | |||||
Financial Assets Measured At Fair Value Through Other Comprehensive Income | 1,297,021 | (268,095) | - | (427,322) | 601,604 | |||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss | 753,121 | (337,847) | (137,963) | 156,272 | 433,583 |
In thousands of reais | Fair Value 2015 | Gains/ losses (Realized-Not Realized) | Transfers in and/ or out of Level 3 | Additions | Settled | Fair value 2016 | ||||||||||||||||||
Other financial assets at fair value through profit or loss | 573,664 | 2,806 | (14,345 | ) | 111 | (524,727 | ) | 37,509 | ||||||||||||||||
Available-for-sale financial assets | 857,817 | (60,934 | ) | (3,085 | ) | 461,185 | (303,371 | ) | 951,612 | |||||||||||||||
In thousands of reais | Fair Value 2014 | Gains/ losses (Realized-Not Realized) | Transfers in and/ or out of Level 3 | Additions | Settled | Fair value 2015 | ||||||||||||||||||
Financial assets held for trading | 3,329 | - | - | - | (3,329 | ) | - | |||||||||||||||||
Other financial assets at fair value through profit or loss | 902,794 | (329,130 | ) | - | - | - | 573,664 | |||||||||||||||||
Available-for-sale financial assets | 897,956 | (58,008 | ) | - | 54,785 | (36,916 | ) | 857,817 | ||||||||||||||||
In thousands of reais | Fair Value 2013 | Gains/ losses (Realized-Not Realized) | Transfers in and/ or out of Level 3 | Additions | Settled | Fair value 2014 | ||||||||||||||||||
Financial assets held for trading | 3,453 | (124 | ) | - | - | - | 3,329 | |||||||||||||||||
Other financial assets at fair value through profit or loss | 1,192,334 | 138,016 | - | 35,426 | (462,982 | ) | 902,794 | |||||||||||||||||
Available-for-sale financial assets | 553,355 | 24,133 | - | 320,468 | - | 897,956 | ||||||||||||||||||
Fair Value 12/31/2019 | Gains/ losses (Realized/Not Realized) | Transfers to Level 3 | Additions / Low | Fair value 12/31/2020 | ||||||
Financial Assets Measured At Fair Value Through Profit Or Loss | 2,627,405 | 83,832 | (239,512) | 485,157 | 2,956,882 | |||||
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading | 715,548 | 502,596 | (231,468) | (169,128) | 817,548 | |||||
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss | 27,749 | 100,091 | 125,282 | 29,029 | 282,151 | |||||
Financial Assets Measured At Fair Value Through Other Comprehensive Income | 951,966 | (21,677) | (197,098) | 563,830 | 1,297,021 | |||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss | 564,757 | 500,159 | (406,971) | 95,176 | 753,121 | |||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading | 1,600,000 | - | - | (1,600,000) | - | |||||
Fair Value 12/31/2018 | Gains/ losses (Realized/Not Realized) | Transfers to Level 3 | Additions / Low | Fair value 12/31/2019 | ||||||
Financial Assets Measured At Fair Value Through Profit Or Loss | 510,887 | 290,773 | 1,700,499 | 125,246 | 2,627,405 | |||||
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading | 1,370,270 | 238,632 | (1,031,076) | 137,722 | 715,548 | |||||
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss | 154,947 | (101,541) | - | (25,657) | 27,749 | |||||
Financial Assets Measured At Fair Value Through Other Comprehensive Income | 709,956 | 253,803 | 291 | (12,084) | 951,966 | |||||
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading | 641,458 | 190,813 | (586,346) | 318,832 | 564,757 |
Consolidated Financial Statements | December 31, 2021 | F-94 |
* Values expressed in thousands, except when indicated. |
Fair value movements linked to credit risk
Changes in fair value attributable to changes in credit risk are determined based on changes in the prices of credit default swaps compared to similar obligations of the same obligor when such prices are observable, as these credit default swaps better reflect the market's valuation of the debtors. credit risk for a specific financial asset. When such prices are unobservable, changes in fair value attributable to changes in credit risk are determined as the total amount of changes in fair value not attributable to changes in the benchmark interest rate or other observed market rates. In the absence of specific observable data, this approach provides a reasonable approximation of changes attributable to credit risk, as it estimates the change in margin above the benchmark that the market may demand for the financial asset.
Financial assets and liabilities not measured at fair value
The financial assets owned by the Bank are measured at fair value in the accompanying consolidated balance sheets, except for loans and receivables.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Similarly, the Bank’s financial liabilities except for financial liabilities held for trading and those measured at fair value - are measured at amortized cost in the consolidated balance sheets.
i) Financial assets measured at other than fair value
FollowingBelow is a comparison of the carrying amounts of financial assets of the Bank’sBank measured by a value other than the fair value and their respective fair values on December 31, 2021, 2020 and 2019:
Comparison of the carrying amounts of the Bank's financial assets measured at other than fair value and their respective fair values at December 31, 2016, 2015 and 2014:
12/31/2021 | ||||||||||
Assets | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Open market investments - Central Bank of Brazil | 16,657,201 | 16,657,201 | 16,657,201 | - | - | |||||
Financial Assets Measured At Amortized Cost | - | - | - | - | - | |||||
Loans and amounts due from credit institutions | 95,664,754 | 95,664,754 | - | 73,308,279 | 22,356,475 | |||||
Loans and advances to customers | 464,451,587 | 460,525,749 | - | 6,044,808 | 454,480,941 | |||||
Debt instruments | 73,125,011 | 74,074,095 | 28,472,612 | 12,124,154 | 33,477,329 | |||||
Total | 649,898,553 | 646,921,799 | 45,129,813 | 91,477,241 | 510,314,745 | |||||
12/31/2020 | ||||||||||
Assets | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Open market investments - Central Bank of Brazil | 20,148,725 | 20,148,725 | 20,148,725 | - | - | |||||
Financial Assets Measured At Amortized Cost | - | - | - | - | - | |||||
Loans and amounts due from credit institutions | 112,849,776 | 112,849,776 | - | 59,492,738 | 53,357,038 | |||||
Loans and advances to customers | 393,707,229 | 396,878,319 | - | 4,530,041 | 392,348,278 | |||||
Debt instruments | 48,367,791 | 49,963,947 | 4,425,723 | 17,486,057 | 28,052,167 | |||||
Total | 575,073,521 | 579,840,767 | 24,574,448 | 81,508,836 | 473,757,483 | |||||
12/31/2019 | ||||||||||
Assets | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Open market investments - Central Bank of Brazil | 15,249,515 | 15,249,515 | - | 15,249,515 | - | |||||
Financial Assets Measured At Amortized Cost | - | - | - | - | - | |||||
Loans and amounts due from credit institutions | 109,233,128 | 109,233,128 | - | 109,233,128 | - | |||||
Loans and advances to customers | 326,699,480 | 327,278,243 | - | - | 327,278,243 | |||||
Debt instruments | 38,748,296 | 39,678,192�� | 5,378,791 | 7,858,612 | 26,440,789 | |||||
Total | 489,930,419 | 491,439,078 | 5,378,791 | 132,341,255 | 353,719,032 |
Thousands of Reais | 2016 | |||||||||||||||||||
Assets | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Money market investments - Brazilian Central Bank (note 5) | 46,371,814 | 46,341,971 | - | 46,341,971 | - | |||||||||||||||
Held to maturity investments (note 7) | 10,048,761 | 10,555,437 | 6,942,173 | 3,613,264 | - | |||||||||||||||
Loans and receivables: | ||||||||||||||||||||
Loans and amounts due from credit institutions (note 6) | 27,762,473 | 27,757,607 | - | 27,757,607 | - | |||||||||||||||
Loans and advances to customers (note 10) | 252,002,774 | 253,860,027 | - | - | 253,860,027 | |||||||||||||||
Loans and receivables - Debt instruments (note 7) | 16,283,259 | 16,003,885 | - | 16,003,885 | - | |||||||||||||||
Total | 352,469,081 | 354,518,927 | 6,942,173 | 93,716,727 | 253,860,027 |
Thousands of Reais | 2015 | |||||||||||||||||||
Assets | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Money market investments - Brazilian Central Bank (note 5) | 31,316,917 | 31,310,136 | - | 31,310,136 | - | |||||||||||||||
Held to maturity investments (note 7) | 10,097,836 | 9,257,519 | 5,698,211 | 3,559,308 | - | |||||||||||||||
Loans and receivables: | ||||||||||||||||||||
Loans and amounts due from credit institutions (note 6) | 42,422,638 | 42,381,130 | - | 42,381,130 | - | |||||||||||||||
Loans and advances to customers (note 10) | 252,033,449 | 251,319,173 | - | - | 251,319,173 | |||||||||||||||
Loans and receivables - Debt instruments (note 7) | 11,812,701 | 11,457,378 | - | 11,457,378 | - | |||||||||||||||
Total | 347,683,541 | 345,725,336 | 5,698,211 | 88,707,952 | 251,319,173 |
Thousands of Reais | 2014 | |||||||||||||||||||
Assets | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Money market investments - Brazilian Central Bank (note 5) | 22,473,056 | 22,467,107 | - | 22,467,107 | - | |||||||||||||||
Loans and receivables: | ||||||||||||||||||||
Loans and amounts due from credit institutions (note 6) | 28,917,397 | 28,878,632 | - | 28,878,632 | - | |||||||||||||||
Loans and advances to customers (note 10) | 235,690,349 | 235,086,295 | - | - | 235,086,295 | |||||||||||||||
Total | 287,080,802 | 286,432,034 | - | 51,345,739 | 235,086,295 |
Certain financial instruments in 2014 and 2015 have been reclassified in the table above in line with the submission of 2016.
Consolidated Financial Statements | December 31, 2021 | F-95 |
* Values expressed in thousands, except when indicated. |
ii) Financial liabilities measured at other than fair value
Following is a comparison of the carrying amounts of Bank´s financial liabilities measured by a value other than fair value and their respective fair values on December 31, 2021, 2020 and 2019:
During 2020, The Bank reclassified R$ 73,075,341 of “Deposits of Brazil's Central Bank and deposits of credit institutions” and R$
390,760,088 of “Customer deposits” from level 2 to level 3, as there was no active trading market for these instruments.”
Comparison of the Bank’scarrying amounts of the Bank's financial liabilities measured at other than fair value and their respective fair values at December 31, 2016, 2015 and 2014:
Thousands of Reais | 2016 | |||||||||||||||||||
Liabilities | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||||||||
Deposits from Bacen and credit institutions (note 17) | 78,319,960 | 78,323,271 | - | - | 78,323,271 | |||||||||||||||
Customer deposits (note 18) | 231,079,303 | 231,125,526 | - | - | 231,125,526 | |||||||||||||||
Marketable debt securities (note 19) | 99,842,955 | 99,671,288 | - | 7,321,870 | 92,349,418 | |||||||||||||||
Subordinated liabilities (note 20) | 466,246 | 452,439 | - | - | 452,439 | |||||||||||||||
Debt Instruments Eligible to Compose Capital (note 21) | 8,311,918 | 8,311,918 | - | 8,311,918 | - | |||||||||||||||
Other financial liabilities (note 22) | 36,879,099 | 35,622,099 | - | - | 35,622,099 | |||||||||||||||
Total | 454,899,481 | 453,506,541 | - | 15,633,788 | 437,872,753 |
Thousands of Reais | 2015 | |||||||||||||||||||
Liabilities | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||||||||
Deposits from Bacen and credit institutions (note 17) | 69,306,902 | 69,307,617 | - | - | 69,307,617 | |||||||||||||||
Customer deposits (note 18) | 227,462,949 | 227,422,985 | - | - | 227,422,985 | |||||||||||||||
Marketable debt securities (note 19) | 94,658,300 | 95,486,114 | - | 13,712,057 | 81,774,057 | |||||||||||||||
Subordinated liabilities (note 20) | 8,097,304 | 8,142,296 | - | - | 8,142,296 | |||||||||||||||
Debt Instruments Eligible to Compose Capital (note 21) | 9,959,037 | 9,959,037 | - | 9,959,037 | - | |||||||||||||||
Other financial liabilities (note 22) | 32,072,645 | 30,815,646 | - | - | 30,815,646 | |||||||||||||||
Total | 441,557,137 | 441,133,695 | - | 23,671,094 | 417,462,601 |
F-72
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Thousands of Reais | 2014 | |||||||||||||||||||
Liabilities | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||||||||
Deposits from Bacen and credit institutions (note 17) | 63,512,663 | 63,536,717 | - | - | 63,536,717 | |||||||||||||||
Customer deposits (note 18) | 205,136,415 | 205,292,422 | - | - | 205,292,422 | |||||||||||||||
Marketable debt securities (note 19) | 70,355,249 | 71,058,657 | - | 12,353,107 | 58,705,550 | |||||||||||||||
Subordinated liabilities (note 20) | 7,294,077 | 7,382,396 | - | - | 7,382,396 | |||||||||||||||
Debt Instruments Eligible to Compose Capital (note 21) | 6,773,312 | 6,773,312 | - | 6,773,312 | - | |||||||||||||||
Other financial liabilities (note 22) | 23,445,735 | 22,495,735 | - | - | 22,495,735 | |||||||||||||||
Total | 376,517,451 | 376,539,239 | - | 19,126,419 | 357,412,820 |
Certain financial instruments in 2014 and have been reclassified in the table above in line with the submission of 2016.
12/31/2021 | ||||||||||
Liabilities | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Financial Liabilities at Measured Amortized Cost: | ||||||||||
Deposits of Brazil's Central Bank and deposits of credit institutions | 121,005,909 | 121,005,909 | - | 26,200,162 | 94,805,747 | |||||
Customer deposits | 468,961,069 | 468,960,950 | - | 60,911,279 | 408,049,671 | |||||
Marketable debt securities | 79,036,792 | 79,035,644 | - | - | 79,035,644 | |||||
Subordinated Debt | - | - | - | - | - | |||||
Debt instruments Eligible Capital | 19,641,408 | 19,641,408 | - | - | 19,641,408 | |||||
Other financial liabilities | 61,448,516 | 61,448,516 | - | - | 61,448,516 | |||||
Other financial liabilities | 750,093,694 | 750,092,427 | - | 87,111,441 | 662,980,986 | |||||
12/31/2020 | ||||||||||
Liabilities | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Financial Liabilities at Measured Amortized Cost: | ||||||||||
Deposits of Brazil's Central Bank and deposits of credit institutions | 131,656,962 | 131,654,431 | - | 58,579,090 | 73,075,341 | |||||
Customer deposits | 445,813,972 | 445,856,090 | - | 55,096,002 | 390,760,088 | |||||
Marketable debt securities | 56,875,514 | 57,265,307 | - | - | 57,265,307 | |||||
Subordinated Debt | - | - | - | - | - | |||||
Debt instruments Eligible Capital | 13,119,660 | 13,119,660 | - | - | 13,119,660 | |||||
Other financial liabilities | 59,822,683 | 59,822,683 | - | - | 59,822,683 | |||||
Other financial liabilities | 707,288,791 | 707,718,171 | - | 113,675,092 | 594,043,080 | |||||
12/31/2019 | ||||||||||
Liabilities | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Financial Liabilities at Measured Amortized Cost: | ||||||||||
Deposits of Brazil's Central Bank and deposits of credit institutions | 99,271,415 | 99,271,415 | - | 99,271,415 | - | |||||
Customer deposits | 336,514,597 | 336,593,455 | - | 336,593,455 | - | |||||
Marketable debt securities | 73,702,474 | 73,889,348 | - | 10,205,065 | 63,684,284 | |||||
Subordinated Debt | 10,175,961 | 10,175,961 | - | 10,175,961 | - | |||||
Other financial liabilities | 55,565,954 | 55,565,954 | - | - | 55,565,954 | |||||
Other financial liabilities | 575,230,401 | 575,496,132 | - | 456,245,896 | 119,250,238 |
The methods and assumptions used to estimate the fair valuevalues summarized in the tables above are definedset forth below:
- Money market investments - Brazilian Central Bank - The carrying amount is approximated to the fair value.
- Loans and amounts due from credit institutions and from customers clients – Fair value are estimated for groups of loans with similar characteristics. The fair value was measured by discounting estimated cash flow using the average interest rate of new contracts.
That is, the future cash flow of the current loan portfolio is estimated using the contractual rates, and then the new loans spread over the risk free interest rate are incorporated to the risk free yield curve in order to calculate the loan portfolio fair value. In terms of behavior assumptions, it is important to underlinehighlight that a prepayment rate is applied to the loan portfolio, thus a more realistic future cash flow is achieved.
- Deposits from Bacen and credit institutions and CustomerClient deposits – The fair value of deposits was calculated by discounting the difference between the cash flows on a contractual basis and current market rates for instruments with similar maturities. For variable-rate deposits, the carrying amount was considered to approximates fair value.
- Marketable debt
Consolidated Financial Statements | December 31, 2021 | F-96 |
* Values expressed in thousands, except when indicated. |
Bonds and securities Subordinated liabilities and Debt Instruments Eligible to Compose Capital – The fair value values of long-term loansthese items were estimated by calculating the discounted cash flow discounted atusing the interest raterates offered onin the market for bonds with similar terms and maturities.
Debt Instruments Eligible for Capital – refer to the transaction fully agreed with a related party, in the context of the Capital Optimization Plan, whose book value is similar to the fair value.
The valuation techniques used to estimate each level are defined in note 2.e.
32. Operational RatiosManagement revised the criteria assigned to classify the fair value level of assets and liabilities measured at amortized cost, presented exclusively for disclosure purposes, and concluded that they are better classified as level 3 in light of observable market data.
Financial
30. | Operational Ratios |
Bacen determines that financial institutions are required to maintain Regulatory Capitala Reference Equity (PR), Tier I Equity and PrincipalCore Capital consistentcompatible with the risks of their risk activities, higher tothan the minimum requirement of the Regulatory Capital Requirement,Required Reference Equity, represented by the sum of the partial credit risk, market risk and operational risk.
The minimum RegulatoryAs established in CMN Resolutions No. 4,193/2013 and No. 4,783/2020, until September 2021 the PR requirement was 10.625%, including 8.00% of Minimum Reference Equity plus 1.625% of Additional for Capital requirement (PR) was 11% until December 31, 2015, reducing gradually to 8% on JanuaryConservation and 1 2019.The minimum Regulatory Capital requirement until December 31, 2016 is 9.875%. The minimum Total Capital.00% Systemic Additional. Tier I requirement is 6% from January 1, 2015PR was 8.625% and the minimumMinimum Principal Capital requirement is 4.5% from October 1, 2013.was 7.125%.
In July 2008October 2021, the Additional for Capital Conservation increased to 2.00%. Thus, in December the PR requirement is 11.00%. It is considered 8.00% of Minimum Reference Equity plus 2.00% of Additional for Capital Conservation and 1.00% of Additional Systemic, with the requirement of Tier I PR of 9.00% and of Core Capital Minimum of 7.50%. As of April 2022, the PR requirement will reach 11.50%, considering 8.00% of Minimum Reference Equity plus 2.50% of Capital Conservation Additional and 1.00% of Systemic Additional, with requirement Tier I PR and Minimum Principal Capital of 9.50% and 8.00%, respectively.
Continuing the adoption of the rules established by CMN Resolution No. 4,192/2013, as of January 2015, the Prudential Consolidated, defined by CMN Resolution No. 4,280/2013, came into force the rules on regulatory capital measurement by the Standardized Approach offorce.
The Basel II. These rules were repealed by Resolution 4,192/2013 and 4,278/2013 which took effect on October 01, 2013. And the Resolution 4,193 and 4,281 of 2013, establishing the model for calculating the minimum Regulatory Capital requirements (PR), Tier I and Principal Capital. These resolutions state that the composition of the Regulatory Capital is done through equity, subordinated debt, hybrid capital instruments. The index is calculated on a consolidated basis,in accordance with the Financial Statements of the Prudential Conglomerate prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen, as shown below:
Financial Conglomerate | ||||||||||||
Thousands of Reais | 2016(1) | 2015(1) | 2014(2) | |||||||||
Tier I Regulatory Capital | 56,264,021 | 52,785,049 | 58,592,358 | |||||||||
Principal Capital | 52,136,837 | 47,840,179 | 55,228,661 | |||||||||
Supplementary capital | 4,127,184 | 4,944,870 | 3,363,697 | |||||||||
Tier II Regulatory Capital | 4,280,864 | 5,182,065 | 4,970,999 | |||||||||
Regulatory Capital (Tier I and II) | 60,544,885 | 57,967,114 | 63,563,357 | |||||||||
Required Regulatory Capital | 36,669,570 | 40,531,194 | 40,010,083 | |||||||||
Portion of Credit Risk(3) | 31,309,944 | 36,355,897 | 35,527,889 | |||||||||
Market Risk Portions(4) | 2,388,626 | 2,300,969 | 2,807,798 | |||||||||
Operational Risk Portion | 2,971,000 | 1,874,328 | 1,674,396 | |||||||||
Basel I Ratio | 15.2 | 14.3 | 16.1 | |||||||||
Basel Principal Capital | 14.0 | 13.0 | 15.2 | |||||||||
Basel | 16.3 | % | 15.7 | % | 17.5 | % |
(1) Amounts calculated based on the consolidated information provided by the Consolidated Prudencial.Financial Conglomerate
(2) Amounts calculated based on the consolidated information provided by the financial institutions (Financial Conglomerate).
(3) To calculate the capital allocation for credit risk were considered modifications and inclusions of Bacen Circular 3,714 of August 20, 2014, Bacen Circular 3,770 of October 29,2015, which amending Circular 3,644 of March 4, 2013.
(4) Includes portions for market risk exposures subject to variations in rates of foreign currency coupons (PJUR2), price indexes (PJUR3) and interest rate (PJUR1/PJUR4), the price of commodities (PCOM), the price of shares classified as trading portfolios (PACS), and portions for gold exposure and foreign currency transactions subject to foreign exchange (PCAM).
BASEL INDEX % | dec-21 | dec-20 | dec-19 | |
Tier I Regulatory Capital | 76,969.9 | 77,571.5 | 66,481.7 | |
Principal Capital | 69,919.9 | 71,006.3 | 61,389.5 | |
Supplementary Capital | 7,050.1 | 6,565.2 | 5,092.2 | |
Tier II Regulatory Capital | 12,591.3 | 6,554.5 | 5,083.8 | |
Regulatory Capital (Tier I and II) | 89,561.3 | 84,126.0 | 71,565.5 | |
Credit Risk | 527,119.3 | 478,303.5 | 407,786.2 | |
Market Risk | 15,122.2 | 15,846.3 | 20,235.2 | |
Operational Risk | 58,499.8 | 57,419.4 | 47,965.5 | |
Total RWA | 600,741.3 | 551,569.2 | 475,986.9 | |
Basel I Ratio | 12.81 | 14.06 | 13.97 | |
Basel Principal Capital | 11.64 | 12.87 | 12.90 | |
Basel Regulatory Capital | 14.91 | 15.25 | 15.04 |
The risk activity is governed by the following basic principles, which are aligned with the strategy and business model of the Santander Group, and takes into account the recommendations of the supervisory authorities, regulators and the best market practices.
• Integration in the Culture of Risks;
• Management Involvement;
• Independence of the Risk Function;
• Formulation of Risk Appetite;
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
• Fully Risk Consideration;
• Anticipation and Predictability;
• Common Management Instruments;
• Decision and Collegiate Bodies;
• Organizational structure;
• Limits Authority and Responsibilities;
• Risks Limitation;
• Efficient Information Channels.
The fundamental principles governing the risk governance model are:
• Independence of the risk function in relation to the business area;
• Management involvement in decision-making;
• Collegiate decisions and consensus on credit operations.
Based on these principles, the governance structure of the decision-making process is composed by committees that act in accordance to pre-defined levels of authority. The ERC - Executive Risk Committee is the local decision forum, which has representatives of the management, including the CEO, the Risk Executive Vice President and Executive Vice Presidents that are member of the executive committee and officers that report to them . The main responsibilities of this committee are:
• Follow the evolution of credit and market portfolios;
• Decide on credit proposals;
• Define and follow the Risk Appetite fulfilment;
• Define the actions regarding the recommendations formulated by the local regulator;
• Approve the risk regulation as well as the changes in risk policies that impact revenues, margin or provision expenses.
The Capital Policies of Banco Santander establish the general guidelines that should govern the areas involved operations in the capital management and control processes.
The content is structured as follows:
• Strategic Capital Policies;
• Capital Management and Control Policies;
• Operational Capital Policies;
• Organizational Structure and Governance Policies.
All processes related to capital issues follow a governance of approval that is aligned with the standards established in the Risk Governance Model mentioned above.
The definition of committees and approvals are established from the lines of defense:
• 1st Line of Defense: the main functions is the process of capital management coordination, annual capital planning definition, capital structure establishment, annual capital budgets monitoring, etc. .;
• 2nd Line of Defense: must ensure effective control of capital risk management and certify that the level of risk appetite is covering the institution's capital;
• 3rd Line of Defense: represents the role of independent reviewer.
(1) | Exposures to credit risk subject to the calculation of the capital requirement using a standardized approach (RWACPAD) are based on the procedures established by Circular Bacen 3,644, dated March 4, 2013 and its subsequent complements through the wording of Circular Bacen 3,174 of August 20, 2014 and Bacen Circular 3,770 of October 29, 2015. |
(2) | Includes portions for market risk exposures subject to variations in rates of foreign currency coupons (RWAjur2), price indexes (RWAjur3) and interest rate (RWAjur1/RWAjur4), the price of commodities (RWAcom), the price of shares classified as trading portfolios (RWAacs), and portions for gold exposure and foreign currency transactions subject to foreign exchange (RWAcam). |
(3) | Risk Weighted Assets. |
Banco Santander, quarterly disclosediscloses Pillar III information relating to risk management, and Required Regulatory Capital (PRE) which is not an extension of the Financial Statements and it isn't audited.Risk Weighted Assets. A report with further details of the structure and methodology will be disclosed aton the website www.santander.com.br/www.ri.santander.com.br/ri.
Financial institutions are required to maintain investments in tangiblepermanent assets compatible with adjusted regulatory capital. Funds invested in tangiblepermanent assets, calculated on a consolidated basis, are limited to 50% of adjusted regulatory capital, as per prevailing regulation. On December 31, 2016, 2015 and 2014 Banco Santander classifies for said index. The Bank is following the requirements aforementioned.
Consolidated Financial Statements | December 31, 2021 | F-97 |
* Values expressed in thousands, except when indicated. |
31. | Interest and similar income |
Interest and similar income
“Interest and similar income” in the consolidated income statement comprises theconsists of interest accruingaccrued in the year on all financial assets with an implicit or explicit return, calculated by applyingusing the effective interest method, irrespectiveregardless of measurement atthe fair value;value measurement, and the rectifications of incomeresult as a result of hedge accounting. Interest is recognized on a gross basis, without deducting any taxtaxes withheld at source.
The breakdown of the main items of interest and similar charges accrued in 2016, 20152021, 2020 and 20142019 is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | ||||||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 7,315,570 | 4,625,467 | 5,951,667 | Cash and balances with the Brazilian Central Bank | 2,581,083 | 1,552,121 | 3,827,648 | ||||||||||||||||
Loans and amounts due from credit institutions | 7,472,729 | 5,075,636 | 4,114,877 | ||||||||||||||||||||
Loans and advances to customers | 43,977,981 | 41,844,940 | 37,083,942 | ||||||||||||||||||||
Loans and advances - Credit institutions | Loans and advances - Credit institutions | 5,190,799 | 1,518,557 | 3,843,798 | |||||||||||||||||||
Loans and advances - Customers | Loans and advances - Customers | 49,537,564 | 44,103,997 | 50,406,078 | |||||||||||||||||||
Debt instruments | 14,783,164 | 14,872,834 | 10,419,408 | 19,041,947 | 13,556,403 | 13,528,096 | |||||||||||||||||
Pensions (note 24.b) | 3,344 | - | - | ||||||||||||||||||||
Pension Plans | 19,613 | 16,720 | 27,353 | ||||||||||||||||||||
Other interest | 3,593,289 | 3,451,323 | 1,354,022 | 1,616,302 | 2,027,142 | 1,208,087 | |||||||||||||||||
Total | 77,146,077 | 69,870,200 | 58,923,916 | 77,987,308 | 62,774,940 | 72,841,060 |
F-74
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
32. | Interest expense and similar charges |
"Interest and similar charges
“Interest expense and similar charges”expenses" in the consolidated income statement includes theconsist of interest accruingaccrued in the year on all financial liabilities with an implicit or explicit return, including remuneration in kind, calculated by applyingusing the effective interest method, irrespectiveregardless of the measurement atof the fair value; the rectifications ofvalue, cost adjustments as a result of hedge accounting;accounting and the interest cost attributablecosts attributed to pension funds.
The breakdown of the main items of interest expense and similar charges accrued in 2016, 20152021, 2020 and 20142019 is as follows:follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Deposits from credit institutions | 3,369,931 | 4,584,244 | 3,216,162 | |||||||||
Customer deposits | 25,693,236 | 20,666,382 | 18,079,417 | |||||||||
Marketable debt securities and subordinated liabilities: | ||||||||||||
Marketable debt securities (note 19) | 12,212,922 | 10,047,874 | 6,347,571 | |||||||||
Subordinated liabilities (note 20) | 731,594 | 1,019,302 | 883,215 | |||||||||
Debt Instruments Eligible to Compose Capital (note 21) | 501,748 | 503,290 | 435,472 | |||||||||
Pensions (note 24.b) | 290,920 | 404,171 | 318,267 | |||||||||
Other interest(1) | 3,759,233 | 1,307,826 | 2,415,300 | |||||||||
Total | 46,559,584 | 38,533,089 | 31,695,404 |
Thousand of reais | 2021 | 2020 | 2019 | |
Credit institutions deposits | 4,712,388 | 4,327,276 | 4,866,357 | |
Customer deposits | 13,187,967 | 7,504,276 | 14,965,958 | |
Marketable debt securities and subordinated liabilities: | ||||
Marketable debt securities (note 18) | 4,536,849 | 2,785,942 | 5,138,306 | |
Debt Instruments Eligible to Compose Capital (note 19) | 955,199 | 909,393 | 503,541 | |
Pension Plans | 248,312 | 301,389 | 342,068 | |
Other interest (1) | 3,028,127 | 2,503,953 | 2,703,723 | |
Total | 26,668,842 | 18,332,228 | 28,519,953 |
(1) Include R$2,057 million related to the reversal of legal obligations realized in June 2015.
(1) | It is mainly composed of Expenses with Interest on Repo Agreements |
35. Income from equity instruments
33. | Income from equity instruments |
“Income from equity instruments” includes the dividends and payments on equity instruments out of profits generated by investees after the acquisition of the equity interest.
The breakdown of the balance of this item is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Equity instruments classified as: | ||||||||||||
Financial assets held for trading | 21,489 | 44,312 | 52,910 | |||||||||
Available-for-sale financial assets | 237,056 | 85,703 | 75,762 | |||||||||
Other financial instruments at fair value through profit or loss | - | 12,866 | 93,630 | |||||||||
Total | 258,545 | 142,881 | 222,302 |
Breakdown of the balance of this item
Thousand of reais | 2021 | 2020 | 2019 | ||||||||
Equity instruments classified as: | |||||||||||
Financial Assets Measured At Fair Value Through Profit Or Loss | 89,563 | 30,232 | 13,398 | ||||||||
Financial Assets Measured At Fair Value Through Other Comprehensive Income | 477 | 3,522 | 5,535 | ||||||||
Total | 90,040 | 33,754 | 18,933 |
Consolidated Financial Statements | December 31, 2021 | F-98 |
* Values expressed in thousands, except when indicated. |
34. | Fee and commission income |
“FeeThe heading “Fee and commission income” comprises the amount of all fees and commissions accruing in favor of the Bank in the year, except those that form an integral part of the effective interest rate on financial instruments.
The breakdown of the balance of this item is as follows:follows:
Thousands of Reais | 2016 | 2015 | 2014 | ||||||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||||||||||||
Collection and payment services: | |||||||||||||||||||||||
Bills | 789,996 | 654,340 | 572,886 | 1,163,616 | 1,083,262 | 1,143,229 | |||||||||||||||||
Demand accounts | 1,786,175 | 1,496,535 | 1,364,654 | 2,664,586 | 2,425,416 | 2,554,559 | |||||||||||||||||
Cards (Credit and Debit) and Acquiring Services | 4,090,766 | 3,479,361 | 3,562,098 | 5,338,649 | 6,009,780 | 6,620,708 | |||||||||||||||||
Checks and other | 169,100 | 154,400 | 160,486 | 127,509 | 138,483 | 188,249 | |||||||||||||||||
Orders | 364,102 | 318,322 | 303,149 | 695,293 | 856,723 | 720,521 | |||||||||||||||||
Total | 7,200,139 | 6,102,958 | 5,963,273 | 9,989,653 | 10,513,664 | 11,227,266 | |||||||||||||||||
Marketing of non-Banking financial products: | Marketing of non-Banking financial products: | ||||||||||||||||||||||
Investment funds | 1,014,401 | 982,533 | 954,697 | 731,817 | 450,940 | 725,494 | |||||||||||||||||
Insurance | 2,114,316 | 2,156,230 | 1,693,475 | 3,566,596 | 3,134,723 | 3,120,471 | |||||||||||||||||
Capitalization | 325,531 | 15,765 | 275,569 | ||||||||||||||||||||
Capitalization plans | 711,351 | 634,775 | 829,852 | ||||||||||||||||||||
Total | 3,454,248 | 3,154,528 | 2,923,741 | 5,009,764 | 4,220,438 | 4,675,817 | |||||||||||||||||
Securities services: | |||||||||||||||||||||||
Securities underwriting and placement | 357,513 | 280,471 | 278,926 | Securities underwriting and placement | 935,464 | 695,978 | 721,793 | ||||||||||||||||
Securities trading | 115,334 | 105,979 | 123,731 | 318,590 | 281,686 | 186,847 | |||||||||||||||||
Administration and custody | 65,667 | 81,154 | 91,321 | 647,054 | 495,457 | 401,310 | |||||||||||||||||
Asset management | 1,863 | 1,705 | 1,771 | 987 | 1,144 | 2,291 | |||||||||||||||||
Total | 540,377 | 469,309 | 495,749 | 1,902,095 | 1,474,265 | 1,312,241 | |||||||||||||||||
Other: | |||||||||||||||||||||||
Foreign exchange | 722,912 | 597,620 | 441,347 | 1,512,326 | 1,450,636 | 968,270 | |||||||||||||||||
Financial guarantees | 634,375 | 507,921 | 378,698 | 838,790 | 728,232 | 650,241 | |||||||||||||||||
Other fees and commissions | 996,430 | 964,855 | 1,165,290 | Other fees and commissions | 1,135,461 | 2,219,472 | 1,558,623 | ||||||||||||||||
Total | 2,353,717 | 2,070,396 | 1,985,335 | 3,486,577 | 4,398,340 | 3,177,134 | |||||||||||||||||
Total | 13,548,481 | 11,797,191 | 11,368,098 | 20,388,089 | 20,606,707 | 20,392,458 |
37. Fee and commission expense
35. | Fee and commission expense |
“
Fee and commission expense” shows the amount of all fees and commissions paid or payable in the year, except those that form an integral part of the effective interest rate on financial instruments.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The breakdown of the balance of this item is as follows:
Amount of all fees and commissions paid or payable in the year
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Fees and commissions assigned to third parties(1) | 1,620,812 | 1,520,480 | 1,539,947 | |||||||||
Other fees and commissions | 950,073 | 793,202 | 1,062,265 | |||||||||
Total | 2,570,885 | 2,313,682 | 2,602,212 |
(1) Composite, principally, by Credit
Thousand of reais | 2021 | 2020 | 2019 | |||
Commissions assigned to third parties (1) | 2,743,339 | 2,685,005 | 3,639,239 | |||
Other fees and commissions | 2,371,449 | 1,693,488 | 1,040,066 | |||
Total | 5,114,788 | 4,378,493 | 4,679,306 |
(1) | Composed, mainly, by credit cards. |
38. Gains (losses) on financial assets and liabilities (net)
Consolidated Financial Statements | December 31, 2021 | F-99 |
* Values expressed in thousands, except when indicated. |
36. | Gains or losses on financial assets and liabilities |
Gains (losses) on financial assets and liabilities (net) includes the amount of the valuation adjustments of financial instruments, except those attributable to interest accrued as a result of application of the effective interest method and to allowances, and the gains or losses derived from the sale and purchase thereof.
The breakdown of the balance of this item, by type of instrument, is as follows:
The breakdown of the balance of this item, by type of instrument, is as follows:
Thousand of reais | 2021 | 2020 | 2019 | ||||
Financial Assets Measured At Fair Value Through Profit Or Loss | 1,555,837 | 711,949 | 252,253 | ||||
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading (1) | 3,519,626 | 12,122,794 | 2,391,080 | ||||
Non-Tranding Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss | 205,016 | 172,828 | 11,501 | ||||
Financial Assets Not Measured At Fair Value Through Profit Or Loss | (665,853) | (239,054) | (57,522) | ||||
Financial Assets available-for-sale | |||||||
Debt instruments | (432,510) | (207,011) | (46,136) | ||||
Equity instruments | (233,344) | (32,043) | (11,386) | ||||
Financial Assets Measured At Fair Value Through Other Comprehensive Income | |||||||
Gains or losses from hedge accounting, net | (4,392,844) | 229,543 | (134,767) | ||||
Total | 221,782 | 12,998,060 | 2,462,545 |
(1) | Includes the exchange hedge of the Bank’s interest in Cayman (note 23). |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Held for trading(1) | 3,166,399 | (19,936,801 | ) | 2,270,059 | ||||||||
Other financial instruments at fair value through profit or loss(2) | 82,638 | 46,859 | (77,624 | ) | ||||||||
Financial instruments not measured at fair value through profit or loss | (115,202 | ) | (120,523 | ) | 512,190 | |||||||
Of which: Available-for-sale financial assets | ||||||||||||
Debt instruments | (108,318 | ) | 385,605 | 528,824 | ||||||||
Equity instruments | (6,884 | ) | (506,128 | ) | (16,634 | ) | ||||||
Hedging derivatives and other | (117,679 | ) | 7,606 | 43,538 | ||||||||
Total | 3,016,156 | (20,002,859 | ) | 2,748,163 |
(1) Includes the economic hedge of the Bank’s position in Cayman, which is a non-autonomous subsidiary (note 25).
(2) Includes the net gain arising from transactions involving debt securities, equity instruments and derivatives included in this portfolio, since the Bank manages its risk in these instruments on a global basis.
37. | Exchange differences (net) |
39. Exchange differences (net)
"Exchange differences" demonstrate the gains or losses on foreign currency transactions, the differences that arise on translations of monetary items in foreign currencies to the functional currency, and those disclosed on non-monetary assets in foreign currency at the time of their disposal. On December 31, 2016 the amount was R$4,574,814, of which R$16,634,809 Revenue with Exchange variations and R$12,059,995 of expenses with Exchange Variations (2015 - R$52,013,425 of revenue and R$41,929,005 of expenses and 2014 - R$13,920,938 of revenue and R$17,556,537 of expenses).
Thousand of Reais | 2021 | 2020 | 2019 | ||||||||
Revenue with Exchange variations | 196,480,319 | 78,578,786 | 23,622,963 | ||||||||
Expenses with Exchange Variations | (198,482,605) | (103,279,748) | (26,411,500) | ||||||||
Total | (2,002,286) | (24,700,962) | (2,788,537) |
40. Other operating expense (net)
38. | Other operating income and expenses |
The
The breakdown of "Other operating income (expense)" is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | ||||||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||||||||||||
Other operating income | 690,310 | 566,006 | 332,343 | 914,084 | 792,639 | 591,125 | |||||||||||||||||
Other operating expense | (1,067,560 | ) | (668,444 | ) | (572,539 | ) | (1,559,663) | (1,237,133) | (1,351,568) | ||||||||||||||
Contributions to fund guarantee of credit - FGC | (247,321 | ) | (244,685 | ) | (230,281 | ) | (473,801) | (428,016) | (347,276) | ||||||||||||||
Total | (624,571 | ) | (347,123 | ) | (470,477 | ) | (1,119,380) | (872,510) | (1,107,719) |
39. | Personnel expenses |
a) Breakdown
a) Breakdown
The breakdown of “Personnel expenses” is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | ||||||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||||||||||||
Wages and salaries | 5,377,284 | 4,655,400 | 4,512,303 | 5,905,394 | 5,730,779 | 5,876,328 | |||||||||||||||||
Social security costs | 1,273,486 | 1,316,282 | 1,203,028 | 1,153,164 | 1,222,352 | 1,276,620 | |||||||||||||||||
Benefits | �� | 1,277,781 | 1,183,902 | 1,092,996 | 1,434,815 | 1,390,044 | 1,491,485 | ||||||||||||||||
Defined benefit pension plans (note 24) | 24,481 | 31,332 | 21,830 | ||||||||||||||||||||
Defined benefit pension plans (note 22) | 6,415 | 6,892 | 10,917 | ||||||||||||||||||||
Contributions to defined contribution pension plans | 86,576 | 78,785 | 65,434 | 152,156 | 117,216 | 131,885 | |||||||||||||||||
Share-based compensation | 86,963 | 175,976 | 74,148 | 24,045 | 19,348 | 88,248 | |||||||||||||||||
Training | 62,518 | 92,883 | 98,963 | 54,858 | 49,037 | 66,215 | |||||||||||||||||
Other personnel expenses | 188,176 | 264,232 | 134,740 | 294,855 | 335,814 | 386,016 | |||||||||||||||||
Total | 8,377,265 | 7,798,792 | 7,203,442 | 9,025,702 | 8,871,482 | 9,327,714 |
Consolidated Financial Statements | December 31, 2021 | F-100 |
* Values expressed in thousands, except when indicated. |
b) Share-Based Compensation
Banco Santander has long-termlong-terms compensation plans linked to the market price of the shares .shares. The members of the Executive Board of Banco Santander are eligible for these plans, besides theas well as other members selected by the Board of Directors, and informed to the Human Resources, may also be eligible according to thewhose selection will take into account seniority of the group. For the Board of Directors members in order to be eligible, they are requiredit is necessary to exercise Executive Board functions. These amounts are recorded under Other liabilities (note 26)(Note 24) and personnel expenses (Note 41)39.a).
BANCO SANTANDER (BRASIL) S.A.b.1) Local and Global Program
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
b.1)
01/01 to 12/31/2021 | 01/01 to 12/31/2020 | |||||||||||||||||||
Program | Settlement Type | Vesting Period | Period of Exercise | |||||||||||||||||
01/2019 to 12/2021 | 2022 and 2023 | R$ 4,216,667 | (*) | R$ 4,916,667 | ||||||||||||||||
01/2020 to 12/2022 | 2023 | R$ 3,668,000 | (*) | R$ - | ||||||||||||||||
01/2020 to 12/2022 | 2023 and 2024 | R$ 2,986,667 | (*) | R$ 9,440,000 | ||||||||||||||||
01/2021 to 09/2024 | 2024 | R$ 13,520,000 | (*) | R$ - | ||||||||||||||||
01/2021 to 12/2023 | 2023 | R$ 1,834,000 | (*) | R$ - | ||||||||||||||||
Local | Santander Brasil Bank Shares | 07/2019 to 06/2022 | 2022 | 111,962 | SANB11 | 109,677 | SANB11 | |||||||||||||
09/2020 to 09/2022 | 2022 | 301,583 | SANB11 | 450,738 | SANB11 | |||||||||||||||
01/2020 to 09/2023 | 2023 | 249,666 | SANB11 | 281,031 | SANB11 | |||||||||||||||
01/2021 to 12/2022 | 2023 | 177,252 | SANB11 | - | SANB11 | |||||||||||||||
01/2021 to 12/2023 | 2024 | 327,065 | SANB11 | - | SANB11 | |||||||||||||||
01/2021 to 01/2024 | 2024 | 30,545 | SANB11 | - | SANB11 | |||||||||||||||
01/2020 to 12/2022 | 2023 | 309,576 | SAN (**) | 318,478 | SAN (**) | |||||||||||||||
Global | Santander Spain Shares and Options | 01/2020 to 12/2022 | 2023, with limit for options' exercise until 2030 | 1,618,445 | Options s/ SAN (**) | 1,664,983 | Options s/ SAN (**) | |||||||||||||
01/2021 to 12/2023 | 02/2024 | 135,632 | SAN (**) | - | ||||||||||||||||
01/2021 to 12/2023 | 02/2024, with limit for options' exercise until 02/2029 | 404,630 | Options s/ SAN (**) | - | ||||||||||||||||
R$ 26,225,334 | (*) | R$ 14,356,667 | (*) | |||||||||||||||||
Balance of Plans on December 31, 2021 | 1,198,073 | SANB11 | 841,446 | SANB11 | ||||||||||||||||
445,208 | SAN | 318,478 | SAN | |||||||||||||||||
2,023,075 | Options s/ SAN | 1,664,983 | Options s/ SAN |
(*) Plan target in Reais, to be converted into SANB11 shares according to the achievement of the plan's performance indicators at the end of the vesting period, based on the quotation of the last 15 trading sessions of the month immediately preceding the grant.
(**) Target of the plan in SAN shares and options, to be paid in cash at the end of the vesting period, according to the achievement of the plan's performance indicators.
Our long-term programs are divided into Local Programand Global plans, with specific performance indicators and condition of maintaining the participant's employment relationship until the payment date in order to be entitled to receive.
The Local Program Banco Santandercalculation of payment for the plans is divided into two typesbased on the percentage of independent plans: (i) share purchase plans and (ii) Share Delivery Plans.
On 25 October 2011, Banco Santander held an EGM, which approved the grantachievement of the Incentive Long - Term Incentive Plan (SOP 2014) - Investmentindicators applied to the reference value (target), with the Local plans being paid in Certificates of Deposit Shares ("Units") to certain directors and Managerial level employees of the Bank and companies under its control.
On 29 April, 2013, Banco Santander held an EGM, which approved the grant of the Banco Santander’s share-based compensation program - Stock Option Plan for Share Deposit Certificates – Units (SOP 2013)SANB11 units and the Long-Term Incentive Plan - InvestmentGlobal plans in Share Deposit Certificates (PSP 2013)shares and options of Grupo Santander (SAN).
(i) Share purchaseEach participant has a reference value defined in cash, converted into SANB11 units or into shares and options of Grupo Santander (SAN), normally based on the quotation of the last 15 trading sessions of the month immediately preceding the granting of each plan. At the end of the vesting period, the payment of either the resulting shares in the case of local plans,
The share purchase plans correspond or the cash value corresponding to the Option Plansshares/options of Purchase Share Deposit Certificates - Units (SOP).
The characteristic of each plan are:
Long-Term Incentive Plan - SOP 2014:It wasthe global plans, is made with a 3 year Call Option Plan. The period for exercise was between June 30, 2014 to June 30, 2016. The number of Units exercisable by the participants were determined according1-year restriction, and this payment is still subject to the resultapplication of the determination of a performance parameter of the Bank: total Shareholder Return (TSR) and adjusted by the indicator the Return on Risk Adjusted Capital (RORAC), comparison made between realized and budgeted in each year, as determined by the Board of Directors. The final result of the plan was 15%.
Long-Term Incentive Plan – SOP 2013:It is a call option plan with 3 years of vesting. The period for the exercise comprises is between June 30, 2016 to June 30, 2018. The number of Units to be exercised by the participants were determined according to the result of measurement of a performance parameter of the Bank: Total Shareholder Return (TSR) and adjusted by the indicator Return on Assets by Risk (RoRWA), comparison between realized and budgeted in each year. The final result of the plan was 89.61%.
(ii) Stock Delivery Plans
The stock delivery plans consist of the Long Term Incentive Plan - Investment in Share Deposit Certificates - Units (PSP).
Long-Term Incentive Plan – PSP 2013:Share-based compensation plan, promoting a commitment of executives with the long-term results. The Plan had as its object the variable compensation by the Bank to Participants, 100% (one hundred percent) in Units.
b.1.1) Fair Value and Plans Performance Parameters
For accounting of the Local Program plans, an independent consultant promoted simulations based on Monte Carlo methodology's, as presented the performance parameters used to calculateMalus clauses /Clawback, which may reduce or cancel the shares to be granted. Such parameters are associateddelivered in cases of non-compliance with their respective probabilities of occurrence, which are updated at the close of each period.internal rules and exposure to excessive
(1) The percentage of shares determined at the position of TSR is subject to a penalty according to the implementation of the RoRWA.
Consolidated Financial Statements | December 31, 2021 | F-101 |
* Values expressed in thousands, except when indicated. |
(1) The percentage of shares determined at the position of TSR is subject to a penalty according to the implementation of the Return
Impact on Risk Adjusted Capital (RORAC).Income
For measurement ofThe impacts on the fair valueresult are recorded in the following premises was used:Personnel Expenses item, as follows:
SOP 2013 | SOP 2014 | |||||||
Method of Assessment | Black&Scholes | Black&Scholes | ||||||
Volatility | 40.00 | % | 40.00 | % | ||||
Rate of Dividends | 3.00 | % | 3.00 | % | ||||
Vesting Period | 3 years | 3 years | ||||||
Average Exercise Time | 5 years | 5 years | ||||||
Risk-Free Rate | 11.80 | % | 10.50 | % | ||||
Probability of Occurrence | 60.27 | % | 71.26 | % | ||||
Fair Value of the Option Shares | R$5,96 | R$6,45 |
Consolidated | |||||||||
01/01 to 12/31/2021 | 01/01 to 12/31/2020 | ||||||||
Program | Settlement Type | ||||||||
Local | Santander Actions (Brazil) | 20,720 | 10,776 | ||||||
Global | Santander Spain shares and stock options | 3,534 | 846 |
The average value of shares SANB11(Shares of the Bank in BM&FBovespa) of the year is R$19.94 (2015 - R$14.96 and 2014 - R$15.06).
In 2016, daily pro-rata expenses amounted to R$15,789 (2015 - R$R$11,642 and 2014 - R$85,898), relating to the SOP plan and expenses amounted to R$9,798 (2015 - R$7,775 and 2014 - R$2,692) relating to the PSP plan.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Number of Units | Exercise Price in Reais | Year Granted | Employees | Date of Commencement of Exercise Period | Expiration Date of Exercise Period | |||||||||||||||||||
Final Balance on December 31, 2014 | 13,830,464 | |||||||||||||||||||||||
Cancelled options (SOP - 2013) | (748,408 | ) | 14.43 | 2013 | Managers | 06/30/16 | 06/30/18 | |||||||||||||||||
Cancelled options (PSP - 2013) | (117,453 | ) | 2013 | Managers | 08/13/13 | 06/30/16 | ||||||||||||||||||
Cancelled options (SOP delivery 2014) | (52,500 | ) | 14.31 | 2011 | Managers | 06/30/14 | 06/30/16 | |||||||||||||||||
Exercised options (SOP delivery 2014) | (248,499 | ) | 2011 | Managers | 06/30/14 | 06/30/16 | ||||||||||||||||||
Final Balance on December 31, 2015 | 12,663,604 | |||||||||||||||||||||||
Cancelled options (SOP - 2013) | (1,346,779 | ) | 12.84 | 2013 | Managers | 06/30/16 | 06/30/18 | |||||||||||||||||
Exercised options (SOP - 2013) | (5,386,523 | ) | 12.84 | 2013 | Managers | 06/30/16 | 06/30/18 | |||||||||||||||||
Granted options (SOP - 2013) | 220,606 | 12.84 | 2013 | Managers | 06/30/16 | 06/30/18 | ||||||||||||||||||
Cancelled options (PSP - 2013) | (298,446 | ) | 2013 | Managers | 08/13/13 | 06/30/16 | ||||||||||||||||||
Granted options (PSP - 2013) | (2,147,515 | ) | 2013 | Managers | 08/13/13 | 06/30/16 | ||||||||||||||||||
Cancelled options (SOP - 2014) | (34,196 | ) | 14.31 | 2011 | Managers | 06/30/14 | 06/30/16 | |||||||||||||||||
Exercised options (SOP - 2014) | (693,230 | ) | 12.72 | 2011 | Managers | 06/30/14 | 06/30/16 | |||||||||||||||||
Final Balance on December 31, 2016 | 2,977,521 | |||||||||||||||||||||||
SOP 2014 | - | 12.72 | 2011 | Managers | 06/30/14 | 06/30/16 | ||||||||||||||||||
SOP 2013 | 2,977,521 | 12.84 | 2013 | Managers | 06/30/16 | 06/30/18 | ||||||||||||||||||
PSP 2013 | - | 2013 | Managers | 08/13/13 | 06/30/16 | |||||||||||||||||||
Total | 2,977,521 |
b.2) Global Program
Long-Term Incentive Policy
In 2014, it was released a share delivery plan called 1st Long Term Incentive Global CRDIV - Grant 2014. This plan is subject to achievement of performance indicator Total Shareholder Return (TSR) of the Santander Group, comparing the evolution of the Group in this indicator for the main global competitors and the settlement will be in the World Group Santander shares.
In 2016 it was launched a stock delivery plan called 2nd Long -Term Incentive Global Plan CRDIV - Grant 2015.
Fair Value of Global Plan
1st Long-Term Incentive Global Plan Grant 2014 - ILP CRDIV
It was assumed that the grantee will not leave the Bank’s employment during the term of each plan. The fair value of the 50% linked to the Bank’s relative TSR position was calculated, on the grant date, on the basis of the report provided by external valuators whose assessment was carried out using a Monte Carlo valuation model, performing 10 thousand simulations to determine the TSR of each of the companies in the Benchmark Group, taking into account the variables set forth below. The results (each of which represents the delivery of a number of shares) are classified in decreasing order by calculating the weighted average and discounting the amount at the risk-free interest rate.
In view of the high correlation between TSR and EPS, it was considered feasible to extrapolate that (in a high percentage of cases) the TSR value is also valid for EPS. Therefore, it was initially determined that the fair value of the portion of the plans linked to the Bank’s relative EPS position, i.e. of the remaining 50% of the options granted, was the same as that of the 50% corresponding to the TSR. Since this valuation refers to a non-market condition, it is reviewed and adjusted on a yearly basis.
Long Term Incentive Global CRDIV - Grant 2014
2 years | 3 years | 4 years | ||||||||||||||
Future income Dividend | 11.1% | 10.8% | 9.5% | |||||||||||||
Expected Volatility | 32.7% | 34.7% | 36.9% | |||||||||||||
Volatility comparator | 12% -52% | 16% - 56% | 16% - 52% | |||||||||||||
Risk-free interest rate | 1.7% | 2.1% | 2.5% | |||||||||||||
Correlation | 0.55 | 0.55 | 0.55 |
The indicator will be used to measure the achievement of targets will be the comparison of the Total Shareholder Return (TSR) of the Santander Group with the RTA of fifteen leading the Group's global competitors.
The indicator is calculated in two stages: initially for program verification in 2014 and a second time in the annual payment of each installment (2015, 2016 and 2017).
Each executive has a target in dollars. If the indicators are reached, the target will be converted to Group's shares awarded in installments in the years 2016, 2017 and 2018, with sale restriction of one (1) year after each delivery.
2nd Long -Term Incentive Global Plan CRDIV - Grant 2015.
The agreed ILP values for each participant will be obtained from the verification of the achievement of indicators in two moments: the first time to determine the eligibility (2015-2016) and a second time to calculate the number of actions due (2016, 2017 and 2018).
Indicators - First time
Each executive has a target in reais, converted to Santander Group's shares (SAN) for a price of R$17,473, which will be delivered in 2019, with a restriction of one (1) year after delivery.
Number of Shares | Granted Year | Employees | Commencement of the Period | Data of Expiry of Period | ||||||||||||||||
1st Long Term Incentive Global CRDIV - Grant 2014 | 1,613,057 | 2014 | Executives | jan - 2014 | dec - 2017 | |||||||||||||||
2nd Long -Term Incentive Global Plan CRDIV - Grant 2015 | 1,775,049 | 2016 | Executives | jan - 2015 | dec - 2018 | |||||||||||||||
Balance Plans on December 31, 2016 | 3,388,106 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
In 2016, were recognized daily pro-rata expenses amounted to R$8,873 (2015 - R$6,760 and 2014 - R$7,491), related to costs to the respective dates of the above cycles, for total plans of the Global Program.
Plans do not result in dilution of the share capital of the Bank, because they are paid in shares of Banco Santander Spain.
b.3) Variable Remuneration based in shares
The Annual stockholders’ Meeting of Banco Santander Spain, held on June 11, 2010, approved the new policy for executive compensation through a referenced variable remuneration in shares plan effective for all the companies of the Group, including Banco Santander. This new policy, subject to adjustments applicable to Banco Santander, were approved by Appointment and Compensation Committee and Board of Directors at the meeting held on February 2, 2011.
The plan's objectives are: (i) to align the compensation program with the principles of the “Financial Stability Board” (FSB) agreed upon at the G20; (ii) to align Banco Santander’s interests with those of the plan’s participants (to achieve the sustainable and recurring growth and profitability of Banco Santander’s businesses and to recognize the participants’ contributions); (iii) to allow the retention of participants; and (iv) to improve Banco Santander’s performance and defend the interests of stockholders' via a long-term commitment.
The purpose of the plan is the cash or shares payment of part of the variable compensation owed by Banco Santander to the plan’s participants pursuant to the Bank’s compensation policy, based on the future performance of the bank’s shares.
The referenced variable remuneration in shares is within the limits of the overall management compensation approved by Banco Santander's Annual Stockholders' Meeting.
The total number of shares on which the compensation plan is based will be settled in three installments and equally allocated to each of the three fiscal years following the reference year.
On December 19, 2012, the Board of Directors approved the proposed new incentive plan (deferred)(deferral) sets forth the requirements for payment of thefuture deferred installments of variable remuneration, considering the long-term sustainable financial bases, including the possibility of directors and certain employees, which will be subject to resolution of the ordinary general meeting on February 15, 2013.
On April 24, 2013, the Board of Directors approved the proposed new incentive plan (deferred) for payment of the variable remuneration of directors and certain employees, which was approved in AGE (Extraordinary General Meeting) of June 3, 2013.
On March 18, 2015, the Board of Directors approved the proposed new incentive plan (deferred) for payment of the variable remuneration of directors and certain employees, which was approved in AGE (Extraordinary General Meeting) of April 30, 2015.
On September 29, 2015, the Board of Directors approved the proposed new incentive plan (deferred) for payment of the variable remuneration of directors and certain employees, which was approved in AGE (Extraordinary General Meeting) of December 14, 2015.
On October 25, 2016, the Board of Directors approved the proposed new incentive plan (deferred) for payment of the variable remuneration of directors and certain employees, which was approved in AGE (Extraordinary General Meeting) of December 21, 2016.
This proposal includes certain requirements for deferred payment of part of the future variable compensation due to its managers and other employees, given the financial basis for sustainable long-term adjustments in future paymentsapplying reductions or cancellations due to the risks assumed and fluctuations inthe cost of capital.
The variable compensationremuneration plan with payment referenced in Banco Santander has been assessed and becameshares is divided into two2 programs: (i) Identified Collective Identified and (ii) Collective unidentified.Other Employees. The impacts on the result are accounted for under Personnel Expenses, as follows:
Program | Participant | Liquidity Type | 01/01 to 12/31/2021 | 01/01 to 12/31/2020 | ||||
Collective Identified | Members of the Executive Committee, Statutory Officers and other executives who assume significant and responsible risks of control areas | 50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11) | 63,658 | 103,696 | ||||
Other Employees | Superintendence level employees and other employees with variable remuneration above a minimum amount established | 50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11) | 111,995 | 98,069 |
40. | Other general administrative expenses |
a) Identified Collective - Participants of the Executive Committee, Statutory Officers and other executives who take significant risks in the Bank and are responsible for the control areas. The payment deferral will be held in two ways: 50% in cash, indexed to 100% of CDI and 50% in shares (Units SANB11). On the period ended on December 31, 2016, was recorded loss amounted to R$52,500 (2015 - R$89,961 and 2014 - R$28,371), regarding the provision of the deferral plan in shares.Breakdown
b) Collective Unidentified - managerial employees and other employees of the organization that will be benefited from the deferral plan. The deferred amount will be paid 100% cash, indexed to 100% of CDI. On the year ended on December 31, 2016, there were expense of R$79,794 (2014 - R$59,797 and 2014 - R$41,553).
42. Other administrative expenses a) Breakdown
The breakdowndetail of the balance of this itemother general administrative expenses is as follows:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Property, fixtures and supplies | 1,278,556 | 1,268,498 | 1,209,401 | |||||||||
Technology and systems | 1,246,809 | 1,192,533 | 1,106,392 | |||||||||
Advertising | 486,772 | 523,343 | 467,096 | |||||||||
Communications | 488,799 | 481,217 | 501,419 | |||||||||
Per diems and travel expenses | 133,123 | 160,135 | 140,986 | |||||||||
Taxes other than income tax | 84,932 | 128,022 | 78,389 | |||||||||
Surveillance and cash courier services | 622,362 | 614,596 | 573,697 | |||||||||
Insurance premiums | 21,308 | 20,975 | 17,004 | |||||||||
Specialized and technical services | 1,744,726 | 1,820,657 | 2,004,874 | |||||||||
Technical reports | 437,683 | 406,755 | 404,548 | |||||||||
Others specialized and technical services | 1,307,043 | 1,413,902 | 1,600,326 | |||||||||
Other administrative expenses | 435,758 | 506,364 | 639,116 | |||||||||
Total | 6,543,145 | 6,716,340 | 6,738,374 |
F-79
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian ReaisBreakdown - R$, unless otherwise stated)Other administrative expenses
Thousand of reais | 2021 | 2020 | 2019 | |||||
Genreal maintenance expenses | 889,077 | 743,580 | 748,196 | |||||
Technology maintenance expenses | 2,474,348 | 2,355,310 | 2,058,619 | |||||
Advertising | 621,425 | 654,175 | 712,855 | |||||
Communications | 353,271 | 648,856 | 472,873 | |||||
Per diems and travel expenses | 71,840 | 68,922 | 140,016 | |||||
Taxes other than income tax | 202,440 | 280,098 | 112,012 | |||||
Surveillance and cash courier services | 597,946 | 594,953 | 630,585 | |||||
Insurance premiums | 22,374 | 16,620 | 34,778 | |||||
Specialized and technical services | 2,184,139 | 2,171,460 | 2,172,567 | |||||
Technical reports | 355,343 | 319,814 | 360,990 | |||||
Others specialized and technical services | 1,828,795 | 1,851,646 | 1,811,577 | |||||
Other administrative expenses (1) | 873,857 | 709,504 | 531,311 | |||||
Total | 8,290,717 | 8,243,479 | 7,613,812 |
(1) | In December 31, 2021, includes mainly Data Processing Expenses in the balance of R$160,716 (2020 – R$176,105 and 2019 - R$67,724), Service Expenses in the balance of R$51,689 (2020 - revenue of R$27,751 and 2019 - R$87,199), Expenses with Benefit Guarantor Fund - FGB R$3,864 (2020 – R$8,478 and 2019 - R$34,996) and Recovery of Charges and Expenses R$378,604 (2020 – R$ 212,850 and 2019 – R$92,408). |
b) Other information
The balance of “Technical reports” includes the fees paid by the consolidated companies to their respective auditors, the detail beingare as follows:
Millions of Reais | 2016 | 2015 | 2014 | |||||||||
Audit of the annual financial statements of the companies audited by external audit(1) (constant scope of consolidation) | 9.2 | 12.0 | 10.4 | |||||||||
Audit Related | 0.1 | 1.5 | 1.3 | |||||||||
Taxes | - | - | 0.1 | |||||||||
Others | 0.7 | 1.7 | 0.4 | |||||||||
Total | 10.0 | 15.2 | 12.2 |
(1) On March 18, 2016, the Banco Santander contracted PricewaterhouseCoopers Auditores Independentes (PWC), to act as an independent auditBalance of the Bank and the companies that make up the Conglomerate Santander in Brazil, to replace Deloitte Touche Tohmatsu Auditores Independentes (Deloitte), which provided an independent audit service until December 2015.Technical reports
Consolidated Financial Statements | December 31, 2021 | F-102 |
* Values expressed in thousands, except when indicated. |
Millions of Reais | 2021 | 2020 | 2019 | |||
Audit of the annual financial statements of the companies audited by external audit (constant scope of consolidation) | 26.3 | 24.0 | 25.2 | |||
Audit Related | 0.2 | 0.4 | 0.1 | |||
Others | 0.4 | 0.0 | 0.3 | |||
Total | 26.9 | 24.4 | 25.6 |
The approximate value of taxes according to law 12,741/2012 totaled R$1.8 million.
Services provided by other audit firms totaled R$4.91.9 million (2015 (2020 - R$4.21.5 million and 2014 e 2019 - R$6.2 million)3.6 million).
41. | Gains or losses on non-financial assets and investments, net |
The breakdown of the balance of this item is as follows:
Gains (losses) on disposal of assets not classified as non-current assets held for sale
The the breakdown of the balance of this item is as follows:
Thousand of reais | 2021 | 2020 | 2019 | ||||||||
Gains | 45,780 | 285,335 | 55,709 | ||||||||
Tangible and intangible assets | 45,780 | 36,778 | 55,709 | ||||||||
Investments | - | 248,557 | - | ||||||||
Losses | (60,893) | (54,622) | (45,063) | ||||||||
Tangible and intangible assets | (32,863) | (14,517) | (45,063) | ||||||||
Investments | (28,030) | (40,105) | - | ||||||||
Total | (15,113) | 230,713 | 10,646 |
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Gains | 12,584 | 787,628 | 87,696 | |||||||||
On disposal of tangible assets | 12,575 | 30,478 | 87,696 | |||||||||
On disposal of investments(1) | 9 | 757,150 | - | |||||||||
Losses | (8,768 | ) | (7,013 | ) | (850 | ) | ||||||
On disposal of tangible assets | (7,547 | ) | (502 | ) | (143 | ) | ||||||
On disposal of investments | (1,221 | ) | (6,511 | ) | (707 | ) | ||||||
Total | 3,816 | 780,615 | 86,846 |
42. | Gains (losses) on disposal and expenses of non-current assets held for sale not classified as discontinued operations |
(1) In 2015 includes a gain
As of December 31, 2021, revenue of R$750,550, related to the operation with48 million is mainly composed of revenue of R$101 million from the sale of Santander Securities Services Brasil DTVM S.A. (note 4.a).
44. Gains (losses)assets received in the recovery of credits with customers, and as of December 31, 2020, revenue from R$77 million is mainly composed of revenue of R$24 million from the reversal of the provision for losses on disposalother assets and expensesassets, net of non-currentthe constitution of the provision for the loss of the recoverable value of properties, the constitution of a provision for losses on other assets held forand R$49 million of income from the sale not classified as discontinued operations
It refers basically to the result on disposal of propertyassets received in the processes of recovery of loans tocredits with customers and on December 31, 2019 mainly includes, R$16 million of expense with the constitution of the provision for impairment of properties, constitution of provision for losses in other values and assets and of R$34 million in income from the recoverable valuesale of these assets.assets received in the processes of recovery of credits with customers.
43. | Other disclosures |
a) Guarantees and commitments
The Bank provides a variety of guarantees to its customersclients to improve their credit standing and allow them to compete. Thecompete the following table summarizes at December 31, 2016, 20152021, 2020 and 20142019 all of the guarantees.
As required, the “maximum potential amount of future payments” represents the notional amounts that could be lostconsidered as a loss if there were a total default by the guaranteed parties, without consideration of possible recoveries from collateral held or pledged, or recoveries under recourse provisions. There is no relationship between these amounts and probable losses on these guarantees. In fact, "maximum potential amount of future payments" significantly exceeds inherent losses.
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Maximum potential amount of future payments | ||||||||||||
Contingent liabilities | ||||||||||||
Guarantees and other sureties | 32,629,975 | 42,836,334 | 38,386,017 | |||||||||
Financial guarantees | 24,475,507 | 41,183,159 | 37,034,862 | |||||||||
Performance guarantees | 532,232 | 521,373 | 565,032 | |||||||||
Financial letters of credit | 7,462,761 | 874,661 | 523,608 | |||||||||
Other | 159,475 | 257,141 | 262,515 | |||||||||
Other contingent exposures | 635,055 | 774,383 | 948,300 | |||||||||
Documentary Credits | 635,055 | 774,383 | 948,300 | |||||||||
Total Contingent Liabilities | 33,265,030 | 43,610,717 | 39,334,317 | |||||||||
Commitments | ||||||||||||
Loan commitments draw able by third parties(1) | 91,251,198 | 91,960,299 | 98,592,601 | |||||||||
Total Commitments | 91,251,198 | 91,960,299 | 98,592,601 | |||||||||
Total | 124,516,228 | 135,571,016 | 137,926,918 |
(1) Includes the approved limits and unused overdraft, credit card and others.
Consolidated Financial Statements | December 31, 2021 | F-103 |
* Values expressed in thousands, except when indicated. |
Maximum potential amount of future payments
Thousand of reais | 2021 | 2020 | 2019 | |||||||||
Maximum potential amount of future payments | ||||||||||||
Contingent liabilities | ||||||||||||
Guarantees and other sureties | 49,391,839 | 45,930,486 | 41,870,332 | |||||||||
Financial guarantees | 33,192,559 | 32,477,336 | 29,397,344 | |||||||||
Performance guarantees | 1,167,603 | 989,979 | 1,009,367 | |||||||||
Financial letters of credit | 14,990,887 | 12,407,888 | 11,387,788 | |||||||||
Other | 40,790 | 55,283 | 75,833 | |||||||||
Other contingent exposures | 4,028,516 | 2,351,530 | 2,442,235 | |||||||||
Documentary Credits | 4,028,516 | 2,351,530 | 2,442,235 | |||||||||
Total Contingent Liabilities | 53,420,355 | 48,282,016 | 44,312,567 | |||||||||
Commitments | ||||||||||||
Loan commitments drawable by third parties (1) | 145,958,258 | 131,706,433 | 125,876,671 | |||||||||
Total Commitments | 145,958,258 | 131,706,433 | 125,876,671 | |||||||||
Total | 199,378,613 | 179,988,449 | 170,189,238 |
(1) | Includes the approved limits and unused overdraft, credit card and others. |
Financial guarantees are provided to ourBank´s clients in respect of their obligations to third parties. We haveThe Bank has the right to seek reimbursement from ourthe clients for any amount weit shall have to pay under such guarantee. Additionally, wethe Bank may hold cash or other highly liquid collateral for these guarantees.
These guarantees are subject to the same credit evaluation performed on the origination of loans.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
We expectThe Bank´s expectation is that many of these guarantees to expire without the need to disburse any cash.of cash disbursement in advance. Therefore, in the ordinary course of business, we expectthe Bank expects that these guarantees will have virtually no impact on ourits liquidity.
Performance guarantees are issued to guaranteed customersclients obligations such as to make contractually specified investments, to supply specified products, commodities, or maintenance or warranty services to a third party, completion of projects in accordance with contract terms, etc. Financial standby letters of credit include guarantees of payment of loans, credit facilities, promissory notes and trade acceptances. The Bank always requires collateral to grant this kind of financial guarantees. In Documentary Credits, the Bank acts as a payment intermediary between trading companies located in different countries (import-export transactions). Under a documentary credit transaction, the parties involved deal with the documents rather than the commodities to which the documents may relate. Usually the traded commodities are used as collateral to the transaction and the Bank may provide some credit facilities. Loan commitments draw able by third parties include mostly credit card lines and commercial commitments. Credit card lines are unconditionally cancelable by the issuer. Commercial commitments are mostly 1 year1-year facilities subject to information requirements to be provided by our customers.Banks´s clients.
The risk criteria followed to issue all kinds of guarantees, financial standby letters of credit, documentary credits and any risks of signature are in general the same as those used for other products of credit risk, and therefore subject to the same admission and monitoring standards. The guarantees granted on behalf of our customersBank´s clients are subject to the same credit quality review process as any other risk product. On a regular basis, at least once a year, the solvency of the mentioned customersclients is checked as well as the probability of those guarantees to be executed. In case that any doubt on the customer’sclient’s solvency may arise, we create allowances with charge to net income, by the amount of the inherent losses even if there is no claim to us.
The provision for losses on the non-recovery guarantees and other securities (Note 10.c)9.c) is recorded as "Impairment losses on financial assets (net)” on consolidated income statement and its calculation is described in note 2.i.
Additionally, the liability recognized as deferred revenue for the premium received for providing the above guarantees, which is being amortized into income over the life of the related guarantees is R$476,564 (2015382,255 (2020 - R$385,169356,226 and 20142019 - R$325,039).285,218 ).
b) Off-balance-sheetsOff-balance funds under management
Banco Santander has under its management investment funds for which we doit does not hold any substantial participation interests and we dodoes not act as principal over the funds, and therefore no ownership init does not own any shares of such funds. Based on the contractual relationship governing the management of such funds, third parties who hold the participation interests in such funds are those who are exposed to, or have rights, to variable returns and have the ability to affect those returns through power over the fund. Moreover, though the BankSantander Brasil acts as fund manager, in analyzing the fund manager’s remuneration regime, the remuneration regime is proportionate to the service rendered, and therefore does not create exposure of such importance to indicate that the fund manager is acting as the principal (Note 2.w)2.v).
Consolidated Financial Statements | December 31, 2021 | F-104 |
* Values expressed in thousands, except when indicated. |
The detail of off-balance-sheets funds managed by Banco Santander not recorded in the Bank isbalance sheet are as follows:
Thousands of Reais | 2016 | 2015 | 2014 | ||||||||||||||||||||
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||||||||||||
Funds under management | 1,533,620 | 2,542,286 | 4,591,810 | 2,770,684 | 2,716,477 | 2,034,999 | |||||||||||||||||
Managed Funds | 192,927,475 | 191,873,169 | 230,199,261 | ||||||||||||||||||||
Total | 1,533,620 | 2,542,286 | 4,591,810 | 195,698,159 | 194,589,646 | 232,234,260 |
c) Third-party securities held in custody
AtOn December 31, 2016,2021, the Bank held in custody debt securities and equity instruments totaling R$27,772,714 (201537,998,502 (2020 - R$38,412,152 and 201435,519,498 e 2019 - R$398,499,007)27,283,548) entrusted to it by third parties.
d) Residual maturity periods and Average interest rates
The breakdown, by maturity, of the balances of certain items in the consolidated balance sheets is as follows:
2021 | ||||||||||||||
Thousand of reais | ||||||||||||||
On Demand | Up to 3 Months | 3 to 12 Months | 1 to 3 Years | 3 to 5 Years | After 5 Years | Total | ||||||||
Assets: | ||||||||||||||
Cash and balances with the Brazilian Central Bank | 15,430,680 | 1,226,521 | - | - | - | - | 16,657,201 | |||||||
Debt instruments | 1,612,213 | 119,780,229 | 20,352,554 | 5,834,524 | 38,904,369 | 38,728,334 | 225,212,223 | |||||||
Equity instruments | - | - | - | - | - | 2,527,504 | 2,527,504 | |||||||
Loans and amounts due from credit institutions | 80,355,763 | 2,717,359 | 1,748,733 | 10,827,639 | 15,057 | 203 | 95,664,754 | |||||||
Loans and advances to customer | 70,399,332 | 82,203,458 | 84,986,074 | 152,608,938 | 31,902,231 | 42,744,009 | 464,844,042 | |||||||
Derivatives | - | 8,667,809 | 2,836,098 | 1,645,538 | 5,989,792 | 2,000,686 | 21,139,923 | |||||||
Total | 167,797,988 | 214,595,376 | 109,923,459 | 170,916,639 | 76,811,449 | 86,000,736 | 826,045,647 | |||||||
2021 | ||||||||||||||
Thousand of reais | ||||||||||||||
On Demand | Up to 3 Months | 3 to 12 Months | 1 to 3 Years | 3 to 5 Years | After 5 Years | Total | ||||||||
Liabilities: | ||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||
Deposits from credit institutions(1) | 10,052,363 | 60,636,478 | 39,748,331 | 6,681,493 | 1,656,909 | 2,230,335 | 121,005,909 | |||||||
Customer deposits(1) | 86,051,583 | 79,687,549 | 56,178,087 | 163,641,875 | 83,326,774 | 75,201 | 468,961,069 | |||||||
Marketable debt securities (1) | - | 28,052,200 | 5,038,906 | 35,844,265 | 9,341,229 | 760,192 | 79,036,792 | |||||||
Debt Instruments Eligible to Compose Capital | - | 5,552,801 | - | 14,088,607 | - | - | 19,641,408 | |||||||
Other financial liabilities | 3,935,498 | 10,732,613 | 19,132,399 | 35,107,790 | - | - | 68,908,300 | |||||||
Short positions | - | 12,780,559 | - | - | - | - | 12,780,559 | |||||||
Derivatives | 641,571 | 7,239,697 | 2,503,888 | 9,117,265 | 3,773,251 | 1,343,309 | 24,618,981 | |||||||
Total | 100,681,015 | 204,681,897 | 122,601,611 | 264,481,295 | 98,098,163 | 4,409,037 | 794,953,018 | |||||||
Difference (assets less liabilities) | 67,116,973 | 9,913,479 | (12,678,152) | (93,564,656) | (21,286,714) | 81,591,699 | 31,092,629 |
Consolidated Financial Statements | December 31, 2021 | F-105 |
* Values expressed in thousands, except when indicated. |
2020 | ||||||||||||||
Thousand of reais | ||||||||||||||
On Demand | Up to 3 Months | 3 to 12 Months | 1 to 3 Years | 3 to 5 Years | After 5 Years | Total | ||||||||
Assets: | ||||||||||||||
Cash and balances with the Brazilian Central Bank | 7,373,662 | 12,775,063 | - | - | - | - | 20,148,725 | |||||||
Debt instruments | 432,579 | 13,195,527 | 33,903,698 | 64,225,680 | 70,182,705 | 48,162,275 | 230,102,464 | |||||||
Equity instruments | - | - | - | - | - | 2,329,361 | 2,329,361 | |||||||
Loans and amounts due from credit institutions | 57,722,384 | 2,777,562 | 36,783,150 | 15,155,444 | 363,135 | 48,101 | 112,849,776 | |||||||
Loans and advances to customer | 29,385,631 | 80,281,579 | 93,750,065 | 98,550,271 | 47,160,700 | 44,639,790 | 393,768,036 | |||||||
Derivatives | - | 14,558,434 | 1,994,418 | 4,103,735 | 1,869,509 | 3,721,418 | 26,247,514 | |||||||
Total | 94,914,256 | 123,588,165 | 166,431,331 | 182,035,130 | 119,576,049 | 98,900,945 | 785,445,876 | |||||||
Liabilities: | ||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||
Deposits from credit institutions(1) | - | 83,922,876 | 43,315,412 | 3,764,159 | - | 654,516 | 131,656,962 | |||||||
Customer deposits(1) | 85,433,287 | 139,191,140 | 121,804,752 | 62,768,886 | 36,578,335 | 37,572 | 445,813,972 | |||||||
Marketable debt securities(1) | - | 8,815,410 | 18,736,230 | 28,158,133 | 747,340 | 418,401 | 56,875,514 | |||||||
Debt Instruments Eligible to Compose Capital | - | 220,425 | - | 12,899,235 | - | - | 13,119,660 | |||||||
Other financial liabilities | 23,352 | 21,858,532 | 20,730,398 | 17,203,162 | 4,787 | 2,452 | 59,822,683 | |||||||
Short positions | - | 45,807,946 | - | - | - | - | 45,807,946 | |||||||
Derivatives | - | 2,046,924 | 1,973,701 | 5,387,607 | 7,744,145 | 12,204,455 | 29,356,832 | |||||||
Total | 85,456,639 | 301,863,252 | 206,560,493 | 130,181,182 | 45,074,607 | 13,317,396 | 782,453,569 | |||||||
Difference (assets less liabilities) | 9,457,617 | (178,275,087) | (40,129,162) | 51,853,948 | 74,501,441 | 85,583,548 | 2,992,307 | |||||||
Consolidated Financial Statements | December 31, 2021 | F-106 |
* Values expressed in thousands, except when indicated. |
2019 | ||||||||||||||
Thousand of reais | ||||||||||||||
On Demand | Up to 3 Months | 3 to 12 Months | 1 to 3 Years | 3 to 5 Years | After 5 Years | Total | ||||||||
Assets: | ||||||||||||||
Cash and balances with the Brazilian Central Bank | 6,549,535 | 13,577,829 | - | - | - | - | 20,127,364 | |||||||
Debt instruments | 7,747,516 | 1,174,094 | 22,926,088 | 45,058,398 | 35,118,355 | 61,307,478 | 173,331,929 | |||||||
Equity instruments | - | - | - | - | - | 2,358,229 | 2,358,229 | |||||||
Loans and amounts due from credit institutions | 69,135,371 | 1,943,291 | 21,064,571 | 14,525,161 | 2,411,265 | 153,469 | 109,233,128 | |||||||
Loans and advances to customer | 9,451,762 | 84,839,695 | 43,180,508 | 89,624,089 | 34,092,967 | 65,510,459 | 326,699,480 | |||||||
Derivatives | 6,806,370 | 1,893,308 | 2,649,730 | 1,921,248 | 1,950,678 | 3,599,566 | 18,820,900 | |||||||
Total | 99,690,554 | 103,428,217 | 89,820,897 | 151,128,896 | 73,573,264 | 132,929,201 | 650,571,030 | |||||||
Liabilities: | ||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||
Deposits from credit institutions(1) | 390,626 | 16,584,181 | 49,097,816 | 25,655,631 | 4,877,076 | 2,666,086 | 99,271,415 | |||||||
Customer deposits(1) | 69,048,756 | 130,872,214 | 76,244,908 | 43,395,748 | 16,923,318 | 29,654 | 336,514,597 | |||||||
Marketable debt securities(1) | - | 10,675,356 | 695,071 | 37,268,809 | 3,900,484 | 21,162,755 | 73,702,474 | |||||||
Debt Instruments Eligible to Compose Capital | - | 170,939 | - | 10,005,022 | - | - | 10,175,961 | |||||||
Other financial liabilities | 10,334 | 24,360,724 | 14,509,911 | 16,678,725 | 4,717 | 1,543 | 55,565,954 | |||||||
Financial liabilities held for trading: | ||||||||||||||
Short positions | - | 4,748,545 | 1,554,274 | 1,256,416 | 3,747,700 | 12,528,718 | 23,835,653 | |||||||
Derivatives | 6,776,746 | 4,345,286 | 406,383 | 3,071,989 | 2,502,040 | 3,702,699 | 20,805,143 | |||||||
Total | 76,226,462 | 191,757,244 | 142,508,362 | 137,332,340 | 31,955,334 | 40,091,454 | 621,496,030 | |||||||
| Difference (assets less liabilities) | 23,464,093 | (88,329,028) | (52,687,465) | 13,796,556 | 41,617,931 | 92,837,747 | 30,699,834 |
2016 | ||||||||||||||||||||||||||||||||
Thousands of Reais | ||||||||||||||||||||||||||||||||
On Demand | Up to 3 Months | 3 to 12 Months | 1 to 3 Years | 3 to 5 Years | After 5 Years | Total | Average Interest Rate | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 14,917,634 | 42,538,383 | 3,833,431 | - | - | 49,315,463 | 110,604,911 | 13.5 | % | |||||||||||||||||||||||
Debt instruments(2) | - | 21,709,350 | 10,136,133 | 26,674,215 | 28,135,295 | 30,838,274 | 117,493,267 | 14.2 | % | |||||||||||||||||||||||
Equity instruments | 593,594 | 48,054 | 252,087 | 486,408 | 21,313 | 1,024,933 | 2,426,389 | - | ||||||||||||||||||||||||
Loans and amounts due from credit institutions | 13,614,198 | 2,849,696 | 923,308 | 532,399 | 34,458 | 9,808,414 | 27,762,473 | 8.6 | % | |||||||||||||||||||||||
Loans and advances to customer | 30,408,851 | 68,218,474 | 60,047,442 | 54,558,381 | 17,357,244 | 21,412,382 | 252,002,774 | 26.5 | % | |||||||||||||||||||||||
Loans and Receivables - Debt instruments | 822,874 | 1,287,372 | 2,960,099 | 5,044,803 | 4,472,758 | 1,695,353 | 16,283,259 | 13.6 | % | |||||||||||||||||||||||
Held to maturity investments | - | - | 12,378 | 371,621 | 1,173,360 | 8,491,402 | 10,048,761 | 4.0 | % | |||||||||||||||||||||||
Derivatives | 620,422 | 9,209,421 | 3,571,126 | 3,813,687 | 5,481,210 | 2,007,107 | 24,702,973 | |||||||||||||||||||||||||
Total | 60,357,151 | 136,651,329 | 78,164,878 | 87,667,827 | 51,194,428 | 122,586,221 | 536,621,834 | 18.4 | % |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2016 | ||||||||||||||||||||||||||||||||
Thousands of Reais | ||||||||||||||||||||||||||||||||
On Demand | Up to 3 Months | 3 to 12 Months | 1 to 3 Years | 3 to 5 Years | After 5 Years | Total | Average Interest Rate | |||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||||||||||||||||||||
Deposits from credit institutions(1) | 770,467 | 40,581,025 | 23,315,006 | 8,215,378 | 2,818,095 | 2,934,101 | 78,634,072 | 16.0 | % | |||||||||||||||||||||||
Customer deposits(1) | 60,919,032 | 64,154,475 | 68,505,808 | 39,630,274 | 14,003,821 | 231,767 | 247,445,177 | 13.3 | % | |||||||||||||||||||||||
Marketable debt securities(1) | - | 21,833,927 | 56,637,880 | 20,620,077 | 312,143 | 438,928 | 99,842,955 | 12.7 | % | |||||||||||||||||||||||
Subordinated liabilities | - | - | - | 466,246 | - | - | 466,246 | 9.6 | % | |||||||||||||||||||||||
Debt Instruments Eligible to Compose Capital | - | 113,995 | - | - | - | 8,197,923 | 8,311,918 | - | ||||||||||||||||||||||||
Other financial liabilities | 3,004,041 | 33,559,710 | 356 | 7,992 | - | 307,000 | 36,879,099 | - | ||||||||||||||||||||||||
Financial liabilities held for trading: | ||||||||||||||||||||||||||||||||
Short positions | - | 743 | 2,887,723 | 8,333,584 | 3,344,083 | 17,128,136 | 31,694,269 | 9.8 | % | |||||||||||||||||||||||
Derivatives | 333,287 | 8,052,349 | 2,506,131 | 2,523,506 | 5,376,180 | 1,445,162 | 20,236,615 | - | ||||||||||||||||||||||||
Total | 65,026,827 | 168,296,224 | 153,852,904 | 79,797,057 | 25,854,322 | 30,683,017 | 523,510,351 | 12.0 | % | |||||||||||||||||||||||
Difference (assets less liabilities) | (4,669,676 | ) | (31,644,895 | ) | (75,688,026 | ) | �� | 7,870,770 | 25,340,106 | 91,903,204 | 13,111,483 | - | ||||||||||||||||||||
2015 | ||||||||||||||||||||||||||||||||
Thousands of Reais | ||||||||||||||||||||||||||||||||
On Demand | Up to 3 Months | 3 to 12 Months | 1 to 3 Years | 3 to 5 Years | After 5 Years | Total | Average Interest Rate | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 57,826,436 | 26,530,459 | 4,786,458 | - | - | - | 89,143,353 | 14.5 | % | |||||||||||||||||||||||
Debt instruments | 109,808 | 5,094,088 | 11,456,643 | 30,805,793 | 14,821,110 | 53,426,537 | 115,713,979 | 9.6 | % | |||||||||||||||||||||||
Equity instruments | 2,140,969 | - | - | - | - | - | 2,140,969 | - | ||||||||||||||||||||||||
Loans and amounts due from credit institutions | 29,064,151 | 781,340 | 1,298,609 | 2,448,123 | 133,299 | 8,697,116 | 42,422,638 | 9.5 | % | |||||||||||||||||||||||
Loans and advances to customer | 22,662,559 | 73,674,326 | 59,527,021 | 54,371,603 | 18,227,451 | 23,570,489 | 252,033,449 | 22.2 | % | |||||||||||||||||||||||
Total | 111,803,923 | 106,080,213 | 77,068,731 | 87,625,519 | 33,181,860 | 85,694,142 | 501,454,388 | 17.2 | % | |||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||||||||||||||||||||
Deposits from credit institutions(1) | 943,539 | 29,303,606 | 24,374,967 | 8,819,650 | 3,346,250 | 2,663,486 | 69,451,498 | 12.1 | % | |||||||||||||||||||||||
Customer deposits(1) | 52,009,232 | 74,456,462 | 39,245,968 | 62,868,721 | 14,305,045 | 157,444 | 243,042,872 | 14.1 | % | |||||||||||||||||||||||
Marketable debt securities(1) | - | 16,639,669 | 26,833,967 | 50,815,528 | 298,178 | 70,958 | 94,658,300 | 8.7 | % | |||||||||||||||||||||||
Subordinated liabilities | - | - | 7,685,328 | 411,976 | - | - | 8,097,304 | 14.6 | % | |||||||||||||||||||||||
Debt Instruments Eligible to Compose Capital | - | - | - | - | - | 9,959,037 | 9,959,037 | - | ||||||||||||||||||||||||
Other financial liabilities | 199,805 | 30,095,592 | 1,438,387 | 31,862 | - | 307,000 | 32,072,646 | - | ||||||||||||||||||||||||
Financial liabilities held for trading: | ||||||||||||||||||||||||||||||||
Short positions | - | - | - | 2,865,813 | 7,915,932 | 9,265,886 | 20,047,631 | 11.8 | % | |||||||||||||||||||||||
Derivatives | 5,600 | 2,666,788 | 1,863,221 | 2,953,682 | 2,122,437 | 12,728,409 | 22,340,137 | - | ||||||||||||||||||||||||
Total | 53,158,176 | 153,162,117 | 101,441,838 | 128,767,232 | 27,987,842 | 35,152,220 | 499,669,425 | 12.4 | % | |||||||||||||||||||||||
Difference (assets less liabilities) | 58,645,747 | (47,081,904 | ) | (24,373,107 | ) | (41,141,713 | ) | 5,194,018 | 50,541,922 | 1,784,963 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2014 | ||||||||||||||||||||||||||||||||
Thousands of Reais | ||||||||||||||||||||||||||||||||
On Demand | Up to 3 Months | 3 to 12 Months | 1 to 3 Years | 3 to 5 Years | After 5 Years | Total | Average Interest Rate | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 33,434,065 | 22,168,842 | 300,941 | - | - | - | 55,903,848 | 10.9 | % | |||||||||||||||||||||||
Debt instruments | - | 15,337,090 | 20,758,336 | 34,258,870 | 17,315,307 | 33,041,806 | 120,711,409 | 10.5 | % | |||||||||||||||||||||||
Equity instruments | 2,948,094 | - | - | - | - | - | 2,948,094 | - | ||||||||||||||||||||||||
Loans and amounts due from credit institutions | 14,735,346 | 1,333,206 | 4,844,420 | 1,430,260 | 466,904 | 6,107,261 | 28,917,397 | 11.5 | % | |||||||||||||||||||||||
Loans and advances to customer | 9,110,511 | 66,015,934 | 71,124,998 | 57,395,636 | 14,967,223 | 17,076,047 | 235,690,349 | 22.6 | % | |||||||||||||||||||||||
Total | 60,228,016 | 104,855,072 | 97,028,695 | 93,084,766 | 32,749,434 | 56,225,114 | 444,171,097 | 17.0 | % | |||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Financial liabilities at amortized cost: | ||||||||||||||||||||||||||||||||
Deposits from credit institutions(1) | 182,108 | 31,587,311 | 19,689,042 | 8,331,404 | 2,228,999 | 1,655,337 | 63,674,201 | 11.1 | % | |||||||||||||||||||||||
Customer deposits(1) | 54,303,688 | 59,729,834 | 25,106,427 | 68,866,674 | 12,637,396 | - | 220,644,019 | 11.2 | % | |||||||||||||||||||||||
Marketable debt securities(1) | - | 17,563,577 | 30,819,783 | 19,969,449 | 1,907,628 | 94,812 | 70,355,249 | 10.8 | % | |||||||||||||||||||||||
Subordinated liabilities | - | - | 199,124 | 6,747,305 | 347,648 | - | 7,294,077 | 11.2 | % | |||||||||||||||||||||||
Debt Instruments Eligible to Compose Capital | - | 147,165 | - | - | - | 6,626,147 | 6,773,312 | 0.0 | % | |||||||||||||||||||||||
Other financial liabilities | 60,649 | 21,614,192 | 1,430,693 | 103,355 | 9,923 | 226,923 | 23,445,735 | - | ||||||||||||||||||||||||
Total | 54,546,445 | 130,642,079 | 77,245,069 | 104,018,187 | 17,131,594 | 8,603,219 | 392,186,593 | 10.9 | % | |||||||||||||||||||||||
Difference (assets less liabilities) | 5,681,571 | (25,787,007 | ) | 19,783,626 | (10,933,421 | ) | 15,617,840 | 47,621,895 | 51,984,504 |
(1) Include obligations which may be subject to early repayment, being: sight and time deposits, repurchase agreements with customers, LCI and LCA.
(2) In 2015, includes Held to maturity investments.
(1) | Includes obligations which may be subject to early payment, being: demand and time deposits, repurchase agreements with clients, LCI and LCA. |
e) Equivalent value in Reais of assets and liabilities
The main foreign currency balances in the consolidated balance sheets,financial statements, based on the nature of the related items, isare as follows:
Equivalent Value in Thousands of Reais | 2016 | 2015 | 2014 | |||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
Cash and balances with the Brazilian Central Bank | 174,605 | - | 230,881 | - | 206,750 | - | ||||||||||||||||||
Financial assets/liabilities held for trading | 402,186 | 371,100 | 2,109,665 | 2,276,540 | 52,511 | 1,423,571 | ||||||||||||||||||
Available-for-sale financial assets | 9,787,622 | - | 4,142,821 | - | 7,112,048 | - | ||||||||||||||||||
Loans and receivables | 28,061,831 | - | 36,418,917 | - | 35,662,235 | - | ||||||||||||||||||
Financial liabilities at amortized cost | - | 39,465,409 | - | 58,294,796 | - | 33,775,217 | ||||||||||||||||||
Total | 38,426,244 | 39,836,509 | 42,902,284 | 60,571,336 | 43,033,544 | 35,198,788 |
Equivalent Value in Thousand of Reais | 2021 | 2020 | 2019 | |||
Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | |
Cash and reserves at the Central Bank of Brazil | 10,851,016 | - | 15,835,124 | - | 15,359,225 | - |
Financial ssets/liabilities measured at fair value through profit or loss held for trading | 2,587,588 | 21,784,041 | 27,012,315 | 7,867,168 | 3,349,879 | 3,210,360 |
Financial assets measured at fair value through other comprehensive income | 17,102,273 | - | 17,062,156 | - | 20,386,034 | - |
Financial assets/liabilities measured at amortized cost | 70,283,097 | 86,184,330 | 52,002,476 | 118,142,613 | 68,996,884 | 44,140,284 |
Total | 100,823,974 | 107,968,371 | 111,912,070 | 126,009,781 | 108,092,022 | 47,350,644 |
f) Other Obligations
The Banco Santander rents properties, mainly used for branches, based on a standard contract which may be cancelled at its own criterion and includes the right to opt for renewals and adjustment clauses. The leases are classified as operating leases. Total
Consolidated Financial Statements | December 31, 2021 | F-107 |
* Values expressed in thousands, except when indicated. |
The total of the future minimum payments of non-cancelablenon-cancellable operating leases as of December 31, 2016 is R$2,933,276 (2015 - R$3,199,111 and 2014 - R$2,521,985), of which R$646,804 (2015 - R$640,132 and 2014 - R$654,925) up to 1 year, R$1,789,670 (2015 - R$1,873,889 and 2014 - R$1,497,161) from 1 year to up to 5 years and R$496,802 (2015 - R$685,090 and 2014 - R$369,899) after 5 years. shown below:
2021 | 2020 | 2019 | |||||||||||
Up to 1 Year | 715,576 | 670,619 | 651,207 | ||||||||||
Between1 to 5 Years | 1,420,853 | 1,607,995 | 1,492,289 | ||||||||||
More than 5 Years | 181,417 | 171,420 | 147,125 | ||||||||||
Total | 2,317,846 | 2,450,034 | 2,290,621 |
Additionally, Banco Santander has contracts for a matures indeterminate, totaling R$1,013 (2015801 (2020 - R$696880 and 20142019 - R$967)918) monthly rent corresponding to the contracts with this feature. Payment of operating leases recognized as expenses in 20162021 fiscal year were R$663,801 (2015369,482 (2020 - R$659,332358,656 and 2014 -2019 R$679,379)700,958).
Monthly rental contracts will be adjusted on an annual basis, as per prevailing legislation, at Índice Geral de Preços do Mercado (IGPM) variation. The lessee is entitled to unilaterally rescind the agreement, at any time, as contractual clauses and legislation.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
g) Obligation offset and settlement agreements
Obligation offset and settlement agreements - Resolution CMN 3,263/2005 – The Bank has an obligation offset and settlement agreement within the ambit of national financial institutions (SFN), entered into with individuals and legal entities which may or may not be members of SFN, resulting in improved assurance of financial settlement, with the parties with which it has this type of agreement. These agreements establish that payment obligations with the Bank, arising from loans and derivative transactions, in case of default of the counterparty, will be offset against payment obligations of the Bank with the counterparty.
h) Contingent assets
On December 31, 2016, 20152021, 2020 and 20142019 no contingent assets were recorded.
46. Business segment reportingh) COVID- 19
Since the Pandemic in 2000, the Bank has monitored its effects on the quality of the credit portfolio and the beginning of the continuity of its results. Strategic initiatives were implemented in a timely manner, sufficient to mitigate the impacts against the scenario of increased default events due to the pandemic.
Management procedures were structured in line with the guidelines and measures of the Federal Government through the National Monetary Council and the Central Bank of Brazil to mitigate the impacts caused by COVID-19, such as: (a) measures to facilitate the renegotiations of the credit operations without increasing provisions, (b) reduction of capital requirements, in order to expand the granting of credit by the Financial System and (c) reduction of compulsory reserve rates, to improve liquidity conditions.
The Bank, awareness of its responsibilities, availability of changes, changes in classification, availability of new products, reinforced credit in segments and more impacts and preventive recovery and collection actions. These actions carried out as a result of alerts were identified by the constant monitoring of the portfolio.
The operations benefiting from amendments made, in general, had a grace period of 60 days with the possibility of extending it for another month for individual customers. In the case of legal entities, extensions were granted with a grace period of up to 6 months in line with the BNDES (National Bank for Economic and Social Development).
These measures made it possible to extend operations in good standing, with temporary criteria for classifying problem assets and restructurings, as well as allowing the maintenance of the classifications of credit operations, extended until December 2020.
During the period of extensions, the actions adopted by the Bank benefited 1,728,197 customers, R$40,592 million in extended credit, equivalent to 9.72% of the total credit portfolio for the year. Of the total extensions that expired on December 31, 2020 of R$37,538 million, R$28,348 million were in stage 1, R$6,608 million were in stage 2 and R$2,567 million were in stage 3.
In order to face the scenario of uncertainty and increase in delinquency, in 2020 the Bank constituted an additional provision in the amount of R$3,200,000. This provision was calculated based on the analysis of potential macroeconomic effects and considered quantitative and qualitative indicators, as well as the identification of risks and a collective assessment of exposures.
Throughout 2021, follow-ups were carried out until the end of grace periods and extension actions with the resumption of operations added to the standard model of credit management adopted by the bank. In this sense, the macroeconomic scenarios were updated in the process of measuring credit risk provisions, as well as identifying the credit portfolios impacted by the pandemic, using the total balance of additional provisions constituted in 2020 to absorb the need to increase expected losses from credit.
To estimate the expected loss, Santander Brasil uses prospective information. Three macroeconomic scenarios are considered, being Base, Pessimistic and Optimistic scenarios. For the elaboration of the methodology, the 5-year evolution of the following main macroeconomic indicators was considered:
Prospectus for loss estimation
Pessimistic Scenarios | Base Scenarios | Optimistic Scenarios | |||||||||||||||
Variables | 2021 | 2022 | 2023 | 2024 | 2025 | 2021 | 2022 | 2023 | 2024 | 2025 | 2021 | 2022 | 2023 | 2024 | 2025 | ||
Interest rate | 7.3% | 14.3% | 13.0% | 13.0% | 13.0% | 7.3% | 7.3% | 6.5% | 6.5% | 6.5% | 7.3% | 5.5% | 5.5% | 4.0% | 4.0% | ||
Unemployment | 14.4% | 16.3% | 18.2% | 18.5% | 18.2% | 14.4% | 13.8% | 12.9% | 12.1% | 11.3% | 14.4% | 11.4% | 9.1% | 8.5% | 7.9% | ||
Housing Prices | 9.0% | 2.2% | 2.2% | 2.1% | 2.0% | 9.0% | 9.2% | 9.0% | 8.6% | 8.3% | 9.0% | 13.8% | 13.4% | 12.9% | 12.5% | ||
GDP growth | 5.6% | -3.5% | -2.0% | 0.2% | 0.2% | 5.6% | 2.7% | 2.2% | 2.0% | 2.0% | 5.6% | 6.5% | 4.0% | 4.0% | 4.0% | ||
Income Commitment | 31.7% | 38.2% | 38.9% | 39.1% | 38.9% | 31.7% | 32.7% | 34.6% | 35.1% | 35.6% | 31.7% | 29.1% | 29.2% | 29.3% | 29.1% | ||
In the process of estimating the expected loss, a weight is assigned to each scenario, with greater relevance being attributed to the base scenario (80%), while lower weights are attributed to the pessimistic (10%) and optimistic (10%) scenarios . The weights assigned to the scenarios in the last 3 years are as follows:
Macroeconomic scenario
Ponderations | 2021 | 2020 | 2019 |
Pessimistic Scenarios | 10% | 10% | 10% |
Base Scenarios | 80% | 80% | 80% |
Optimistic Scenarios | 10% | 10% | 10% |
Consolidated Financial Statements | December 31, 2021 | F-108 |
* Values expressed in thousands, except when indicated. |
44. | Business segment reporting |
In accordance with IFRS 8, an operating segment is a component of an entity:
(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity),
(b) whose operating results are regularly reviewed by the entity’s Management responsible to make decisions about resources to be allocated to the segment and assess its performance, and
(c) For which discretedifferent financial information are available.
Based on these guidelines, the Bank has identified the following reportable operating segments:
• Commercial Banking,
• Global Wholesale Banking,
The Bank has two segments, the commercial (except for the Corporate Banking business managed globally using the Global Relationship Model) and the Global Wholesale Banking segment includes the Investment Banking and Markets operations, including departments cash and stock trades.
Consolidated Financial Statements | December 31, 2021 | F-109 |
* Values expressed in thousands, except when indicated. |
The Bank operates in Brazil and abroad, through the Cayman branch, Luxembourg branch and its subsidiary in Spain, with Brazilian clients and therefore has no geographical segments.
The Commercial Banking segment encompasses the entire commercial banking business (except for the Corporate Banking business managed globally using the Global Relationship Model). The Global Wholesale Banking segment reflects the returns on the Global Corporate Banking business, those on Investment Banking and Markets worldwide, including all treasury departments and the equities business.
The income statements and other significant data are as follows:
Thousands of Reais | 2016 | |||||||||||
Global | ||||||||||||
Commercial | Wholesale | |||||||||||
(Condensed) Income Statement | Banking | Banking | Total | |||||||||
NET INTEREST INCOME | 27,365,857 | 3,220,636 | 30,586,493 | |||||||||
Income from equity instruments | 258,545 | - | 258,545 | |||||||||
Income from companies accounted for by the equity method | 47,537 | - | 47,537 | |||||||||
Net fee and commission income | 9,580,332 | 1,397,264 | 10,977,596 | |||||||||
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net)(1) | 5,619,356 | 1,971,614 | 7,590,970 | |||||||||
Other operating expense (net) | (611,051 | ) | (13,520 | ) | (624,571 | ) | ||||||
TOTAL INCOME | 42,260,576 | 6,575,994 | 48,836,570 | |||||||||
Personnel expenses | (7,638,124 | ) | (739,141 | ) | (8,377,265 | ) | ||||||
Other administrative expenses | (6,272,987 | ) | (270,158 | ) | (6,543,145 | ) | ||||||
Depreciation and amortization | (1,381,742 | ) | (100,897 | ) | (1,482,639 | ) | ||||||
Provisions (net) | (2,685,278 | ) | (39,464 | ) | (2,724,742 | ) | ||||||
Impairment losses on financial assets (net) | (11,607,468 | ) | (1,693,977 | ) | (13,301,445 | ) | ||||||
Impairment losses on non-financial assets (net) | (114,154 | ) | (167 | ) | (114,321 | ) | ||||||
Other non-financial gains (losses) | 90,889 | - | 90,889 | |||||||||
OPERATING PROFIT BEFORE TAX(1) | 12,651,712 | 3,732,190 | 16,383,902 | |||||||||
Other: | ||||||||||||
Total assets | 557,624,385 | 76,768,855 | 634,393,240 | |||||||||
Loans and advances to customers | 191,433,209 | 60,569,565 | 252,002,774 | |||||||||
Customer deposits | 228,923,947 | 18,521,230 | 247,445,177 |
(1) Includes in the Commercial Bank, the fiscal hedge of investment in dollar (a strategy to mitigate the effects of fiscalIncome statements and exchange rate variation of offshore investments on net income), the result of which is recorded in "Gains (losses) on financial assets and liabilities" net of taxes. Adjusted for an amounted to R$6,139,714 due to the effects of the valuation of the Real against the Dollar in 2016, the Operating Profit before Tax for the Commercial Bank segment was R$6,511,998.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)other significant data
Thousands of Reais | 2015 | |||||||||||
Global | ||||||||||||
Commercial | Wholesale | |||||||||||
(Condensed) Income Statement | Banking | Banking | Total | |||||||||
NET INTEREST INCOME | 27,040,507 | 4,296,604 | 31,337,111 | |||||||||
Income from equity instruments | 142,881 | - | 142,881 | |||||||||
Income from companies accounted for by the equity method | 116,312 | - | 116,312 | |||||||||
Net fee and commission income | 8,240,868 | 1,242,641 | 9,483,509 | |||||||||
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net)(1) | (9,068,985 | ) | (849,454 | ) | (9,918,439 | ) | ||||||
Other operating expense (net) | (335,318 | ) | (11,805 | ) | (347,123 | ) | ||||||
TOTAL INCOME | 26,136,265 | 4,677,986 | 30,814,251 | |||||||||
Personnel expenses | (7,123,390 | ) | (675,402 | ) | (7,798,792 | ) | ||||||
Other administrative expenses | (6,449,732 | ) | (266,608 | ) | (6,716,340 | ) | ||||||
Depreciation and amortization | (1,361,330 | ) | (128,687 | ) | (1,490,017 | ) | ||||||
Provisions (net) | (4,012,922 | ) | 11,628 | (4,001,294 | ) | |||||||
Impairment losses on financial assets (net) | (12,365,037 | ) | (1,268,952 | ) | (13,633,989 | ) | ||||||
Impairment losses on non-financial assets (net) | (1,220,161 | ) | (484 | ) | (1,220,645 | ) | ||||||
Other non-financial gains (losses) | 831,108 | - | 831,108 | |||||||||
OPERATING PROFIT BEFORE TAX(1) | (5,565,199 | ) | 2,349,481 | (3,215,718 | ) | |||||||
Other: | ||||||||||||
Total assets | 524,192,046 | 81,202,482 | 605,394,528 | |||||||||
Loans and advances to customers | 185,371,651 | 66,661,798 | 252,033,449 | |||||||||
Customer deposits | 223,165,976 | 19,876,896 | 243,042,872 |
(1) Includes in the Commercial Bank, the fiscal hedge of investment in dollar (a strategy to mitigate the effects of fiscal and exchange rate variation of offshore investments on net income), the result of which is recorded in "Gains (losses) on financial assets and liabilities" net of taxes. Adjusted for losses amounted to R$11,531,844 due to the effects of the devaluation of the Real against the Dollar in 2015, the Operating Profit before Tax for the Commercial Bank segment was R$5,966,645.
Thousand of reais | 2021 | |||||||
(Condensed) Income Statement | Commercial Banking | Global Wholesale Banking | Total | |||||
NET INTEREST INCOME | 46,236,026 | 5,082,440 | 51,318,466 | |||||
Income from equity instruments | 10,216 | 79,824 | 90,040 | |||||
Income from companies accounted for by the equity method | 105,403 | 38,781 | 144,184 | |||||
Net fee and commission income | 13,285,099 | 1,988,202 | 15,273,301 | |||||
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) | (1,433,236) | (347,268) | (1,780,504) | |||||
Other operating expense (net) | (974,391) | (144,989) | (1,119,380) | |||||
TOTAL INCOME | 57,229,117 | 6,696,990 | 63,926,107 | |||||
Personnel expenses | (8,220,544) | (805,158) | (9,025,702) | |||||
Other administrative expenses | (7,697,346) | (593,371) | (8,290,717) | |||||
Depreciation and amortization | (2,342,639) | (91,282) | (2,433,921) | |||||
Provisions (net) | (2,176,774) | (2,643) | (2,179,417) | |||||
Impairment losses on financial assets (net) | (17,169,630) | 56,896 | (17,112,734) | |||||
Impairment losses on non-financial assets (net) | (163,935) | (1,864) | (165,799) | |||||
Other non-financial gains (losses) | 32,512 | - | 32,512 | |||||
OPERATING PROFIT BEFORE TAX (1) | 19,490,761 | 5,259,568 | 24,750,329 | |||||
Currency Hedge(1) | 2,511,980 | - | 2,511,980 | |||||
ADJUSTED OPERATING INCOME BEFORE TAX (1) | 22,002,741 | 5,259,568 | 27,262,309 |
Thousands of Reais | 2014 | |||||||||||||||||||
Global | ||||||||||||||||||||
Thousand of reais | 2020 | |||||||||||||||||||
Commercial | Wholesale | |||||||||||||||||||
(Condensed) Income Statement | Banking | Banking | Total | (Condensed) Income Statement | Commercial Banking | Global Wholesale Banking | Total | |||||||||||||
NET INTEREST INCOME | 25,042,170 | 2,186,342 | 27,228,512 | NET INTEREST INCOME | 41,457,352 | 2,985,361 | 44,442,713 | |||||||||||||
Income from equity instruments | 222,302 | - | 222,302 | Income from equity instruments | 3,617 | 30,137 | 33,754 | |||||||||||||
Income from companies accounted for by the equity method | 91,096 | - | 91,096 | Income from companies accounted for by the equity method | 84,051 | 28,210 | 112,261 | |||||||||||||
Net fee and commission income | 7,748,888 | 1,016,998 | 8,765,886 | Net fee and commission income | 14,405,280 | 1,822,934 | 16,228,214 | |||||||||||||
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net)(1) | (1,480,288 | ) | 592,852 | (887,436 | ) | Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) | (13,515,305) | 1,812,403 | (11,702,902) | |||||||||||
Other operating expense (net) | (450,936 | ) | (19,541 | ) | (470,477 | ) | Other operating expense (net) | (767,088) | (105,422) | (872,510) | ||||||||||
TOTAL INCOME | 31,173,232 | 3,776,651 | 34,949,883 | 41,667,906 | 6,573,623 | 48,241,529 | ||||||||||||||
Personnel expenses | (6,597,680 | ) | (605,762 | ) | (7,203,442 | ) | (8,139,785) | (731,697) | (8,871,482) | |||||||||||
Other administrative expenses | (6,493,024 | ) | (245,350 | ) | (6,738,374 | ) | Other administrative expenses | (7,634,670) | (608,808) | (8,243,478) | ||||||||||
Depreciation and amortization | (1,226,196 | ) | (135,933 | ) | (1,362,129 | ) | Depreciation and amortization | (2,488,517) | (90,610) | (2,579,127) | ||||||||||
Provisions (net) | (2,030,408 | ) | (5,829 | ) | (2,036,237 | ) | (1,638,787) | (17,759) | (1,656,546) | |||||||||||
Impairment losses on financial assets (net) | (10,710,448 | ) | (561,157 | ) | (11,271,605 | ) | Impairment losses on financial assets (net) | (17,379,570) | (70,619) | (17,450,189) | ||||||||||
Impairment losses on non-financial assets (net) | 13,943 | (10,192 | ) | 3,751 | Impairment losses on non-financial assets (net) | (28,403) | (56,504) | (84,907) | ||||||||||||
Other non-financial gains (losses) | 101,482 | - | 101,482 | Other non-financial gains (losses) | 308,176 | - | 308,176 | |||||||||||||
OPERATING PROFIT BEFORE TAX(1) | 4,230,901 | 2,212,428 | 6,443,329 | OPERATING PROFIT BEFORE TAX (1) | 4,666,350 | 4,997,625 | 9,663,975 | |||||||||||||
Currency Hedge(1) | 13,583,011 | - | 13,583,011 | |||||||||||||||||
ADJUSTED OPERATING INCOME BEFORE TAX (1) | ADJUSTED OPERATING INCOME BEFORE TAX (1) | 18,249,361 | 4,997,625 | 23,246,986 | ||||||||||||||||
Other: | ||||||||||||||||||||
Total assets | 447,099,883 | 73,131,027 | 520,230,910 | |||||||||||||||||
Loans and advances to customers | 177,426,688 | 58,263,661 | 235,690,349 | |||||||||||||||||
Customer deposits | 199,721,072 | 20,922,947 | 220,644,019 |
(1) Includes in the Commercial Bank, the fiscal hedge of investment in dollar (a strategy to mitigate the effects of fiscal and exchange rate variation of offshore investments on net income), the result of which is recorded in "Gains (losses) on financial assets and liabilities" net of taxes. Adjusted for losses amounted to R$1,668,111 due to the effects of the devaluation of the Real against the Dollar in 2014, the Operating Profit before Tax for the Commercial Bank segment was R$5,899,012.
Consolidated Financial Statements | December 31, 2021 | F-110 |
* Values expressed in thousands, except when indicated. |
Thousand of reais | 2019 | |||||||
(Condensed) Income Statement | Commercial Banking | Global Wholesale Banking | Total | |||||
NET INTEREST INCOME | 42,043,774 | 2,277,333 | 44,321,107 | |||||
Income from equity instruments | 4,864 | 14,069 | 18,933 | |||||
Income from companies accounted for by the equity method | 149,488 | - | 149,488 | |||||
Net fee and commission income | 13,923,272 | 1,789,880 | 15,713,152 | |||||
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) | (1,541,343) | 1,215,351 | (325,992) | |||||
Other operating expense (net) | (1,069,052) | (38,668) | (1,107,720) | |||||
TOTAL INCOME | 53,511,003 | 5,257,965 | 58,768,968 | |||||
Personnel expenses | (8,554,254) | (773,460) | (9,327,714) | |||||
Other administrative expenses | (7,139,828) | (473,984) | (7,613,812) | |||||
Depreciation and amortization | (2,297,010) | (94,847) | (2,391,857) | |||||
Provisions (net) | (3,668,709) | (12,877) | (3,681,586) | |||||
Impairment losses on financial assets (net) | (13,423,361) | 53,455 | (13,369,906) | |||||
Impairment losses on non-financial assets (net) | (73,216) | (58,219) | (131,435) | |||||
Other non-financial gains (losses) | 20,489 | - | 20,489 | |||||
OPERATING PROFIT BEFORE TAX (1) | 18,375,114 | 3,898,033 | 22,273,147 | |||||
Currency Hedge(1) | 1,264,279 | - | 1,264,279 | |||||
ADJUSTED OPERATING INCOME BEFORE TAX (1) | 19,639,393 | 3,898,033 | 23,537,426 |
(1) | Includes, in the Commercial Bank, the currency hedge of the investment in dollars (a strategy to mitigate the tax effects and the variation of the exchange rate of offshore investments on net income), the result of which is recorded under “on financial assets and liabilities "fully offset in the line of Taxes |
47. Related party transactions
Consolidated Financial Statements | December 31, 2021 | F-111 |
* Values expressed in thousands, except when indicated. |
Other aggregates
2021 | ||||||||
Other aggregates: | Commercial Banking | Global Wholesale Banking | Total | |||||
Total assets | 838,267,118 | 92,941,277 | 931,208,396 | |||||
Loans and advances to customers | 394,086,048 | 70,757,994 | 464,844,042 | |||||
Customer deposits | 344,180,608 | 124,780,461 | 468,961,069 |
2020 | ||||||||
Other aggregates: | Commercial Banking | Global Wholesale Banking | Total | |||||
Total assets | 837,339,314 | 96,239,065 | 933,578,379 | |||||
Loans and advances to customers | 317,553,409 | 76,214,628 | 393,768,037 | |||||
Customer deposits | 322,328,033 | 123,485,939 | 445,813,972 |
2019 | ||||||||
Other aggregates: | Commercial Banking | Global Wholesale Banking | Total | |||||
Total assets | 675,514,634 | 85,097,984 | 760,612,618 | |||||
Loans and advances to customers | 259,644,994 | 67,054,486 | 326,699,480 | |||||
Customer deposits | 253,313,187 | 83,201,410 | 336,514,597 |
45. | Related party transactions |
The parties related to the Bank are deemed to include, in addition to its subsidiaries, associates and jointly controlled entities, the Bank’s key management personnel and the entities over which the key management personnel may exercise significant influence or control.
Following is a detail of the business transactions performed by the Bank with its related parties on December 31, 2016, 2015 and 2014:
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
a) Key-person management compensation
The Board of Directors' meeting held on March 22, 2016, was approved in accordance with the Compensation and Appointment Committee the global compensation proposal of directors (Board of Directors and Executive Officers) for the year 2016, amounting to R$300,000, covering fixed remuneration, variable and equity-based and other benefits. The proposal was approved by the extraordinary stockholders' meeting held on April 29, 2016.
i) Long-term benefits
The Banco Santander as well as Banco Santander Spain, as other subsidiaries of Santander Group, have long-term compensation programs tied to their share's performance, based on the achievement of goals.
ii) Short-term benefits
The following table shows the Board of Directors’ and Executive Board’s:
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Fixed compensation | 90,169 | 69,779 | 53,170 | |||||||||
Variable compensation | 120,443 | 108,087 | 86,990 | |||||||||
Other | 14,579 | 15,246 | 14,971 | |||||||||
Total Short-term benefits | 225,191 | 193,112 | 155,131 | |||||||||
Share-based payment | 49,488 | 11,777 | 23,697 | |||||||||
Total Long-term benefits | 49,488 | 11,777 | 23,697 | |||||||||
Total(1) | 274,679 | 204,889 | 178,828 |
(1) Refers to the amount paid by Banco Santander to its executives officers for the positions which they hold in the Bank and other companies of the conglomerate.
Additionally, in 2016, withholding taxes were collected on management compensation in the amount of R$30,312 (2015 - R$28,044 and 2014 - R$28,493).
iii) Contract termination
The termination of the employment relationship for non-fulfillment of obligations or voluntarily does not entitle executives to any financial compensation.
b) Lending operations
Under current law, it is not granted loans or advances involving:
I - directors, members of board of directors and audit committee as well as their spouses and relatives up to the second degree;
II - individuals or legal entities of Banco Santander, which hold more than 10% of the share capital;
III - Legal entities which hold more than 10% of the share capital, Banco Santander and its subsidiaries;
IV - legal entities which hold more than 10% of the share capital, any of the directors or members of the Board of Directors and Audit Committee or management's own financial institution, as well as their spouses or relatives up to the second degree.
c) Ownership Interest
The table below shows the direct interest (common shares and preferred shares) as of December 31, 2016, 2015 and 2014:
2016 | ||||||||||||||||||||||||
Common | Preferred | Total | ||||||||||||||||||||||
Shares | Common | Shares | Preferred | Shares | Total | |||||||||||||||||||
Stockholders' | (thousands) | Shares (%) | (thousands) | Shares (%) | (thousands) | Shares (%) | ||||||||||||||||||
Grupo Empresarial Santander, S.L.(1) | 1,107,673 | 28.8 | % | 1,019,645 | 27.5 | % | 2,127,318 | 28.1 | % | |||||||||||||||
Sterrebeeck B.V.(1) | 1,809,583 | 47.0 | % | 1,733,644 | 46.7 | % | 3,543,227 | 46.9 | % | |||||||||||||||
Banco Santander, S.A.(1) | 521,965 | 13.6 | % | 519,268 | 14.0 | % | 1,041,233 | 13.8 | % | |||||||||||||||
Qatar Holding, LLC | 207,812 | 5.4 | % | 207,812 | 5.6 | % | 415,624 | 5.5 | % | |||||||||||||||
Employees | 3,914 | 0.1 | % | 3,929 | 0.1 | % | 7,843 | 0.1 | % | |||||||||||||||
Members of the Board of Directors | (*) | (*) | (*) | (*) | (*) | (*) | ||||||||||||||||||
Members of the Executive Board | (*) | (*) | (*) | (*) | (*) | (*) | ||||||||||||||||||
Other | 174,238 | 4.5 | % | 202,028 | 5.5 | % | 376,266 | 5.0 | % | |||||||||||||||
Total | 3,825,185 | 99.4 | % | 3,686,326 | 99.4 | % | 7,511,511 | 99.4 | % | |||||||||||||||
Treasury shares | 25,786 | 0.6 | % | 25,786 | 0.6 | % | 51,572 | 0.6 | % | |||||||||||||||
Total | 3,850,971 | 199.4 | % | 3,712,112 | 199.4 | % | 7,563,083 | 199.4 | % | |||||||||||||||
Free Float(2) | 385,964 | 10.0 | % | 413,769 | 11.1 | % | 799,733 | 10.6 | % |
F-86
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2015 | ||||||||||||||||||||||||
Common | Preferred | Total | ||||||||||||||||||||||
Shares | Common | Shares | Preferred | Shares | Total | |||||||||||||||||||
Stockholders' | (thousands) | Shares (%) | (thousands) | Shares (%) | (thousands) | Shares (%) | ||||||||||||||||||
Grupo Empresarial Santander, S.L.(1) | 1,107,673 | 28.8 | % | 1,019,645 | 27.5 | % | 2,127,318 | 28.1 | % | |||||||||||||||
Sterrebeeck B.V.(1) | 1,809,583 | 47.0 | % | 1,733,644 | 46.7 | % | 3,543,227 | 46.9 | % | |||||||||||||||
Banco Santander, S.A.(1) | 518,207 | 13.5 | % | 519,089 | 14.0 | % | 1,037,296 | 13.7 | % | |||||||||||||||
Santander Insurance Holding(1) | 3,758 | 0.1 | % | 179 | - | 3,937 | 0.1 | % | ||||||||||||||||
Qatar Holding, LLC | 207,812 | 5.4 | % | 207,812 | 5.6 | % | 415,624 | 5.5 | % | |||||||||||||||
Employees | 3,066 | 0.1 | % | 3,088 | 0.1 | % | 6,154 | 0.1 | % | |||||||||||||||
Members of the Board of Directors | (*) | (*) | (*) | (*) | (*) | (*) | ||||||||||||||||||
Members of the Executive Board | (*) | (*) | (*) | (*) | (*) | (*) | ||||||||||||||||||
Other | 180,655 | 4.7 | % | 208,438 | 5.6 | % | 389,093 | 5.1 | % | |||||||||||||||
Total | 3,830,754 | 99.5 | % | 3,691,895 | 99.5 | % | 7,522,649 | 99.5 | % | |||||||||||||||
Treasury shares | 20,218 | 0.5 | % | 20,218 | 0.5 | % | 40,436 | 0.5 | % | |||||||||||||||
Total | 3,850,972 | 100.0 | % | 3,712,113 | 100.0 | % | 7,563,085 | 100.0 | % | |||||||||||||||
Free Float(2) | 391,533 | 10.2 | % | 419,338 | 11.3 | % | 810,871 | 10.7 | % |
2014 | ||||||||||||||||||||||||
Common | Preferred | Total | ||||||||||||||||||||||
Shares | Common | Shares | Preferred | Shares | Total | |||||||||||||||||||
Stockholders' | (thousands) | Shares (%) | (thousands) | Shares (%) | (thousands) | Shares (%) | ||||||||||||||||||
Grupo Empresarial Santander, S.L.(1) | 1,107,673 | 28.6 | % | 1,019,645 | 27.3 | % | 2,127,318 | 28.0 | % | |||||||||||||||
Sterrebeeck B.V.(1) | 1,809,583 | 46.8 | % | 1,733,644 | 46.5 | % | 3,543,227 | 46.6 | % | |||||||||||||||
Banco Santander, S.A.(1) | 518,207 | 13.4 | % | 519,089 | 13.9 | % | 1,037,296 | 13.6 | % | |||||||||||||||
Santander Insurance Holding(1) | 3,758 | 0.1 | % | 179 | 0.0 | % | 3,937 | 0.1 | % | |||||||||||||||
Qatar Holding, LLC | 207,812 | 5.1 | % | 207,812 | 5.3 | % | 415,624 | 5.2 | % | |||||||||||||||
Employees | 4,098 | 0.1 | % | 4,121 | 0.1 | % | 8,219 | 0.1 | % | |||||||||||||||
Members of the Board of Directors | (*) | (*) | (*) | (*) | (*) | (*) | ||||||||||||||||||
Members of the Executive Board | (*) | (*) | (*) | (*) | (*) | (*) | ||||||||||||||||||
Other | 189,107 | 5.2 | % | 216,888 | 6.2 | % | 405,995 | 5.7 | % | |||||||||||||||
Total | 3,840,238 | 99.3 | % | 3,701,378 | 99.3 | % | 7,541,616 | 99.3 | % | |||||||||||||||
Treasury shares | 29,612 | 0.7 | % | 29,612 | 0.7 | % | 59,224 | 0.7 | % | |||||||||||||||
Total | 3,869,850 | 100.0 | % | 3,730,990 | 100.0 | % | 7,600,840 | 100.0 | % | |||||||||||||||
Free Float(2) | 401,017 | 10.4 | % | 428,821 | 11.5 | % | 829,838 | 10.9 | % |
(1) Companies of the Santander Spain Group.
(2) Composed of Employees, Qatar Holding and other.
(*) None of the members of the Board of Directors and the Executive Board holds 1.0% or more of any class of shares.
d) Related-Party Transactions
The transactions and compensation for services among Banco Santander companies are carried out under usual market value, rates and terms, and on an arm´s length basis.
Banco Santander has the Policy on Related Party Transactions approved by the Board of Directors, which aim to ensure that all transactions are made on the policy typified in view the interests of Banco Santander and its stockholders'. The policy defines powers to approve certain transactions by the Board of Directors. The rules laid down are also applied to all employees and directors of Banco Santander and its subsidiaries.
The transactions and remuneration of services with related parties are carried out in the ordinary course of business and under commutative conditions, including interest rates, terms and guarantees, and do not involve risks greater than normal collection or present other disadvantages.
a) Key-person management compensation
The Bank's Board of Directors' Meeting held on March 26, 2021 approved, in accordance with the favorable recommendation of the Compensation Committee, the proposal for the maximum global compensation for Managers (Board of Directors and Executive Board) for the year of 2021, in the amount of up to R$
, covering fixed, variable and share-based compensation and other benefits. The proposal was discussed at the Annual General Meeting (AGM) to be held on April 30, 2021.i) Long-term benefits
The Banco Santander as well as Banco Santander Spain, as other subsidiaries of Santander Group, have long-term compensation programs tied to their share's performance, based on the achievement of goals.
ii) Short-term benefits
The following table shows the Board of Directors’ and Executive Board’s:
Consolidated Financial Statements | December 31, 2021 | F-112 |
* Values expressed in thousands, except when indicated. |
Thousand of reais | 2021 | 2020 | 2019 | ||||||||||
Fixed Compensation | 96,544 | 90,889 | 89,518 | ||||||||||
Variable Compensation - in cash | 115,627 | 83,352 | 70,816 | ||||||||||
Variable Compensation - in shares | 94,607 | 81,306 | 80,832 | ||||||||||
Others (1) | 67,883 | 47,832 | 46,937 | ||||||||||
Total Short-Term Benefits | 374,661 | 303,379 | 288,103 | ||||||||||
Variable Compensation - in cash | 101,837 | 98,407 | 92,704 | ||||||||||
Variable Compensation - in shares | 109,918 | 97,729 | 102,046 | ||||||||||
Total Long-Term Benefits | 211,755 | 196,136 | 194,750 | ||||||||||
Total (2) | 586,416 | 499,515 | 482,853 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AmountsAdditionally, in thousandsthe exercise ended on December 31, 2021, withholding taxes were collected on management compensation in the amount of Brazilian ReaisR$32,086 (2020 - R$, unless otherwise stated)29,162 and 2019 - R$33,912).
iii) Contract termination
The termination of the employment relationship for non-fulfillment of obligations or voluntarily does not entitle executives to any financial compensation.
b) Lending operations
Under current law, it is not granted loans or advances involving:
I - directors, members of board of directors and audit committee as well as their spouses and relatives up to the second degree;
II - individuals or legal entities of Banco Santander, which hold more than 10% of the share capital;
III - Legal entities which hold more than 10% of the share capital, Banco Santander and its subsidiaries; and
IV - legal entities in which any of the officers, members of the Board of Directors and Audit Committee, as well as their spouses or relatives up to the second degree, hold more than 10% of the share capital.
c) Ownership Interest
2021 | ||||||
Common | Preferred | Total | ||||
Shares | Common | Shares | Preferred | Shares | Total | |
Stockholders' | (thousand) | Shares (%) | (thousand) | Shares (%) | (thousand) | Shares (%) |
Sterrebeeck B.V. (1) | 1,809,583 | 47.4% | 1,733,644 | 47.1% | 3,543,227 | 47.3% |
Grupo Empresarial Santander, S.L. (1) | 1,627,891 | 42.6% | 1,539,863 | 41.9% | 3,167,754 | 42.2% |
Banco Santander, S.A. (1) | 2,696 | 0.1% | - | 0.0% | 2,696 | 0.0% |
Directors (*) | 4,939 | 0.1% | 5,029 | 0.1% | 9,968 | 0.1% |
Others | 357,831 | 9.4% | 385,545 | 10.5% | 743,374 | 9.9% |
Total | 3,802,940 | 99.6% | 3,664,081 | 99.6% | 7,467,019 | 99.5% |
Treasury shares | 15,755 | 0.4% | 15,755 | 0.4% | 31,510 | 0.5% |
Total | 3,818,695 | 100.0% | 3,679,836 | 100.0% | 7,498,529 | 100.0% |
Free Float (2) | 357,830 | 9.4% | 385,544 | 10.5% | 743,374 | 9.9% |
2020 | ||||||
Common | Preferred | Total | ||||
Shares | Common | Shares | Preferred | Shares | Total | |
Stockholders' | (thousand) | Shares (%) | (thousand) | Shares (%) | (thousand) | Shares (%) |
Sterrebeeck B.V. (1) | 1,809,583 | 47.4% | 1,733,644 | 47.1% | 3,543,227 | 47.3% |
Grupo Empresarial Santander, S.L. (1) | 1,627,891 | 42.6% | 1,539,863 | 41.8% | 3,167,755 | 42.2% |
Banco Santander, S.A. (1) | 2,696 | 0.1% | - | 0.0% | 2,696 | 0.04% |
Employees | 2,046 | 0.1% | 2,046 | 0.1% | 4,092 | 0.05% |
Directors (*) | 4,034 | 0.1% | 4,034 | 0.1% | 8,067 | 0.11% |
Others | 353,616 | 9.3% | 381,420 | 10.4% | 735,036 | 9.8% |
Total | 3,799,866 | 99.5% | 3,661,007 | 99.5% | 7,460,873 | 99.5% |
Treasury shares | 18,829 | 0.5% | 18,829 | 0.5% | 37,658 | 0.5% |
Total | 3,818,695 | 100.0% | 3,679,836 | 100.0% | 7,498,531 | 100.0% |
Free Float (2) | 355,662 | 9.3% | 383,466 | 10.4% | 739,128 | 9.9% |
Consolidated Financial Statements | December 31, 2021 | F-113 |
* Values expressed in thousands, except when indicated. |
2019 | ||||||
Common | Preferred | Total | ||||
Shares | Common | Shares | Preferred | Shares | Total | |
Stockholders' | (thousand) | Shares (%) | (thousand) | Shares (%) | (thousand) | Shares (%) |
Grupo Empresarial Santander, S.L. (1) | 1,107,673 | 29.0% | 1,019,645 | 27.7% | 2,127,318 | 28.4% |
Sterrebeeck B.V. (1) | 1,809,583 | 47.4% | 1,733,644 | 47.1% | 3,543,227 | 47.3% |
Banco Santander, S.A. (1) | 521,964 | 13.7% | 519,268 | 14.1% | 1,041,232 | 13.9% |
Employees | 2,526 | 0.1% | 2,533 | 0.1% | 5,059 | 0.1% |
Administrators (*) | 4,525 | 0.1% | 4,524 | 0.1% | 9,049 | 0.1% |
Others | 355,722 | 9.3% | 383,519 | 10.4% | 739,241 | 9.9% |
Total | 3,801,993 | 99.6% | 3,663,133 | 99.5% | 7,465,126 | 99.6% |
Treasury shares | 16,702 | 0.4% | 16,702 | 0.5% | 33,404 | 0.4% |
Total | 3,818,695 | 100.0% | 3,679,835 | 100.0% | 7,498,530 | 100.0% |
Free Float (2) | 358,248 | 9.4% | 386,053 | 10.5% | 744,301 | 9.9% |
(1) Companies of the Santander Spain Group.
(2) Composed by Employees, Qatar Holding and other.
(*) None of the members of the Board of Directors and the Executive Board holds 1.0% or more of any class of shares.
d) Related-Party Transactions
Santander has a Policy for Related Party Transactions approved by the Board of Directors, which aims to ensure that all transactions typified by the policy to take effect in view of the interests of Banco Santander and its stockholders. The principalpolicy defines the power to approve certain transactions by the Board of Directors. The planned rules also apply to all employees and officers of Banco Santander and its subsidiaries.
Operations and charges for services with related parties are carried out in the ordinary course of business and under reciprocal conditions, including interest rates, terms and guarantees, and do not entail greater risk than the normal collection or have other disadvantages.
Consolidated Financial Statements | December 31, 2021 | F-114 |
* Values expressed in thousands, except when indicated. |
Principal transactions and balances are as follows:- Assets And Liabilities
Thousand of reais | 2021 | |||||
Parent (1) | Joint-controlled companies | Other Related-Party (2) | ||||
Assets | 895,492 | 3,347 | 32,135,748 | |||
Financial assets for trading | (3,043,904) | - | (73,209) | |||
Banco Santander, S.A. – Espanha (1) | (3,043,904) | - | - | |||
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | - | 241,716 | |||
Santander FI Santillana Multimercado Crédito Privado (2) | - | - | (1,241,109) | |||
Apolo Fundo de Investimento em Direitos Creditórios | - | - | 955,737 | |||
FIDC Venda de Veículos | - | - | (29,553) | |||
Loans and other values with credit institutions - Cash and overnight operations in foreign currency | 3,930,078 | 850 | 27,590,541 | |||
Banco Santander, S.A. – Espanha (3) | 3,930,078 | - | - | |||
PSA Corretora de Seguros e Serviços Ltda. | - | - | 48 | |||
Santander Bank, National Association | - | - | 8,538,165 | |||
Banco Santander Totta, S.A. (2) | - | - | 950 | |||
Santander Bank Polska S.A. (2) | - | - | 99 | |||
Santander UK plc | - | - | 171,920 | |||
Banco Santander, S.A. – México (2) | - | - | 21,123 | |||
Banco RCI Brasil S.A. | - | 850 | - | |||
Hyundai Corretora de Seguros Ltda. | - | - | 3 | |||
Santander Global Technology, S.L., SOCI | - | - | 192 | |||
Getnet S.A. | - | - | 18,858,041 | |||
Loans and advances to customers | 109 | - | 3,570,635 | |||
Webmotors S.A. | - | - | 21,763 | |||
Banco Santander Espanha (1) | 109 | - | - | |||
Santander Tecnología México, S.A. de C.V. | - | - | 122 | |||
Gesban Servicios Administrativos Globales, S.L. | - | - | 23 | |||
Santander Brasil Gestão de Recursos Ltda. | - | - | 169 | |||
Gestora de Inteligência de Crédito | - | - | 67,511 | |||
Loop Gestão de Pátios S.A. | - | - | 9,861 | |||
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | - | 191 | |||
Getnet S.A. | - | - | 3,450,923 | |||
Car10 Tecnologia e Informação S.A. | - | - | 38 | |||
Key Management Personnel (5) | - | - | 20,034 | |||
Other Assets | 9,209 | 2,497 | 1,048,039 | |||
Banco Santander, S.A. – Espanha (1) | 9,209 | - | - | |||
Banco RCI Brasil S.A. | - | 2,497 | - | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | 965,926 | |||
Getnet S.A. | - | - | 15 | |||
Others | - | - | 82,098 | |||
Guarantees and Limits | - | - | (258) | |||
Key Management Personnel (5) | - | - | (258) | |||
Liabilities | (25,832,894) | (63,599) | (9,602,791) | |||
Deposits of Brazil Central Bank and deposits of credit institutions | (11,178,490) | (63,599) | (7,802,709) | |||
Banco Santander, S.A. – Espanha (1) | (11,178,490) | - | - | |||
Banco RCI Brasil S.A. | - | (63,599) | - | |||
Santander Caceis Brasil DTVM S.A.(2) | - | - | (722,222) | |||
Getnet S.A. | - | - | (7,079,955) | |||
Others | - | - | (532) | |||
Securities | - | - | (128,593) | |||
Key Management Personnel (5) | - | - | (128,593) | |||
Customer deposits | - | - | (828,107) | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | (63,864) | |||
Santander Brasil Gestão de Recursos Ltda. | - | - | (44,141) | |||
Webmotors S.A. | - | - | (3,744) | |||
Santander Caceis Brasil DTVM S.A. | - | - | (562) | |||
Gestora de Inteligência de Crédito | - | - | (36,097) | |||
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | - | (21,725) | |||
Getnet S.A. | - | - | (372,151) | |||
Key Management Personnel (5) | - | - | (28,672) | |||
Others | - | - | (257,151) | |||
Other financial liabilities - Dividends and interest on capital Payable | (564,786) | - | - | |||
Banco Santander Espanha | (73) | - | - | |||
Grupo Empresarial Santander, S.L. (1) | (464,295) | - | - | |||
Sterrebeeck B.V. (1) | (100,418) | - | - | |||
Other Payables | (1,011) | - | (843,382) | |||
Banco Santander Espanha (1) | (1,011) | - | - | |||
Santander Caceis Brasil DTVM S.A. | - | - | (12,286) | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | (28,801) | |||
Getnet S.A. | - | - | (123,863) | |||
Key Management Personnel (5) | - | - | (664,264) | |||
Others | - | - | (14,168) | |||
Debt Instruments Eligible to Compose Capital | (14,088,607) | - | - | |||
Banco Santander Espanha (1) | (14,088,607) | - | - | |||
Thousands of Reais | 2016 | |||||||||||
Joint- controlled | Other Related- | |||||||||||
Parent(1) | companies | Party(2) | ||||||||||
Assets | 10,919,116 | 794,800 | 556,248 | |||||||||
Financial assets for trading - Derivatives net | (184,304 | ) | - | (400,570 | ) | |||||||
Banco Santander, S.A. – Spain | (184,304 | ) | - | - | ||||||||
Abbey National Treasury Services Plc | - | - | (91,828 | ) | ||||||||
Real Fundo de Investimento Multimercado Santillana | - | - | (308,742 | ) | ||||||||
Credito Privado | ||||||||||||
Loans and other values with credit institutions - Cash and overnight operations in foreign currency | 10,900,941 | - | 94,530 | |||||||||
Banco Santander, S.A. – Spain(3) (5) | 10,900,941 | - | - | |||||||||
Banco Santander Totta, S.A. | - | - | 1,261 | |||||||||
Abbey National Treasury Services Plc | - | - | 92,118 | |||||||||
Bank Zachodni | - | - | 117 | |||||||||
Banco Santander, S.A. – Mexico | - | - | 1,034 | |||||||||
Loans and advances to customers | - | 136,354 | 862,288 | |||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 862,553 | |||||||||
Webmotors S.A. | - | 136,354 | - | |||||||||
Santander Brasil Gestão de Recursos Ltda | - | - | (265 | ) | ||||||||
Loans and other values with credit institutions(1) | 25,546 | 656,806 | - | |||||||||
Banco Santander – Spain | 25,546 | - | - | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(8) | - | 656,806 | - | |||||||||
Other Assets | 176,933 | 1,640 | - | |||||||||
Banco Santander – Spain | 176,933 | - | - | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(8) | - | 1,640 | - | |||||||||
Liabilities | (11,984,199 | ) | (106,527 | ) | (1,222,556 | ) | ||||||
Deposits of Brazil Central Bank and deposits of credit institutions | (327,466 | ) | (40,202 | ) | (980,702 | ) | ||||||
Banco Santander, S.A. – Spain(4) | (327,466 | ) | - | - | ||||||||
Santander Securities | - | - | (208,059 | ) | ||||||||
Santander Brasil Asset | - | - | (12,079 | ) | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (757,874 | ) | ||||||||
Banco Santander, S.A. – Uruguay | - | - | (2,158 | ) | ||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(8) | - | (40,202 | ) | - | ||||||||
Others | - | - | (532 | ) | ||||||||
Customer deposits | - | (66,325 | ) | (189,794 | ) | |||||||
ISBAN Brasil S.A. | - | - | (22,232 | ) | ||||||||
Santander Securities | - | - | (52,484 | ) | ||||||||
Produban Serviços de Informática S.A. | - | - | (19,653 | ) | ||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | (44,840 | ) | ||||||||
Santander Brasil Gestão de Recursos Ltda. | - | - | (39,361 | ) | ||||||||
Webmotors S.A. | - | (66,325 | ) | - | ||||||||
Others | - | - | (11,224 | ) | ||||||||
Other financial liabilities - Dividends and interest on capital Payable | (3,794,130 | ) | - | (16,494 | ) | |||||||
Banco Santander – Spain | (589,227 | ) | - | - | ||||||||
Grupo Empresarial Santander, S.L.(1) | (1,201,612 | ) | - | - | ||||||||
Sterrebeeck B.V.(1) | (2,003,291 | ) | - | - | ||||||||
Banco Madesant - Sociedade Unipessoal, S.A. | - | - | (1,075 | ) | ||||||||
Santusa Holding, S.L. | - | - | (15,419 | ) | ||||||||
Other Payables | (2,954 | ) | - | (35,566 | ) | |||||||
Banco Santander, S.A. – Spain | (2,954 | ) | - | - | ||||||||
Santander Brasil Asset | - | - | (70 | ) | ||||||||
ISBAN Brasil S.A. | - | - | (339 | ) | ||||||||
Santander Securities | - | - | (4,430 | ) | ||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | (30,684 | ) | ||||||||
Others | - | - | (43 | ) | ||||||||
Debt Instruments Eligible to Compose Capital | (7,859,649 | ) | - | - | ||||||||
Banco Santander – Spain(2) (7) | (7,859,649 | ) | - | - |
F-88
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Thousands of Reais | 2015 | |||||||||||
Joint- controlled | Other Related- | |||||||||||
Parent(1) | companies | Party(2) | ||||||||||
Assets | 23,245,276 | 954,190 | 805,572 | |||||||||
Financial assets for trading - Derivatives net | (265,491 | ) | - | (536,215 | ) | |||||||
Banco Santander, S.A. – Spain | (265,491 | ) | - | - | ||||||||
Abbey National Treasury Services Plc | - | - | (156,976 | ) | ||||||||
Real Fundo de Investimento Multimercado Santillana | - | - | (379,239 | ) | ||||||||
Credito Privado | ||||||||||||
Loans and other values with credit institutions - Cash and overnight operations in foreign currency | 23,248,821 | - | 136,634 | |||||||||
Banco Santander, S.A. – Spain(3) (5) | 23,248,821 | - | - | |||||||||
Banco Santander Totta, S.A. | - | - | 1,303 | |||||||||
Abbey National Treasury Services Plc | - | - | 135,165 | |||||||||
Bank Zachodni | - | - | 101 | |||||||||
Banco Santander, S.A. – Mexico | - | - | 65 | |||||||||
Loans and advances to customers | - | 11,112 | 1,205,153 | |||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 753,581 | |||||||||
Webmotors S.A. | - | 11,112 | - | |||||||||
Santander Brasil Gestão de Recursos Ltda. | - | - | 186 | |||||||||
BW Guirapá | - | - | 451,386 | |||||||||
Loans and other values with credit institutions(1) | 26,414 | 940,236 | - | |||||||||
Banco Santander – Spain | 26,414 | - | - | |||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(8) | - | 939,861 | - | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(8) | - | 375 | - | |||||||||
Other Assets | 235,532 | 2,842 | - | |||||||||
Banco Santander ��� Spain | 235,532 | - | - | |||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(8) | - | 2,276 | - | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(8) | - | 566 | - | |||||||||
Liabilities | (12,155,786 | ) | (255,330 | ) | (937,572 | ) | ||||||
Deposits of Brazil Central Bank and deposits of credit institutions | (219,037 | ) | (37,796 | ) | (650,620 | ) | ||||||
Banco Santander, S.A. – Spain(4) | (219,037 | ) | - | - | ||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(8) | - | (31,656 | ) | - | ||||||||
Santander Brasil Asset | - | - | (12,360 | ) | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (616,399 | ) | ||||||||
Banco Santander, S.A. – Uruguay | - | - | (20,533 | ) | ||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(8) | - | (6,140 | ) | - | ||||||||
Others | - | - | (1,328 | ) | ||||||||
Marketable debt securities | (12,416 | ) | - | - | ||||||||
Banco Santander, S.A. – Spain(6) | (12,416 | ) | - | - | ||||||||
Customer deposits | - | (217,534 | ) | (285,870 | ) | |||||||
ISBAN Brasil S.A. | - | - | (43,842 | ) | ||||||||
Santander Securities | - | - | (679 | ) | ||||||||
Produban Serviços de Informática S.A. | - | - | (29,993 | ) | ||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | (109,506 | ) | ||||||||
Santander Brasil Gestão de Recursos Ltda | - | - | (72,182 | ) | ||||||||
Webmotors S.A. | - | (217,534 | ) | - | ||||||||
Others | - | - | (29,668 | ) | ||||||||
Other financial liabilities - Dividends and interest on capital Payable | (2,488,510 | ) | - | (705 | ) | |||||||
Banco Santander – Spain | (385,067 | ) | - | - | ||||||||
Grupo Empresarial Santander, S.L.(1) | (788,119 | ) | - | - | ||||||||
Santander Insurance Holding, S.L. | (1,398 | ) | - | - | ||||||||
Sterrebeeck B.V.(1) | (1,313,926 | ) | - | - | ||||||||
Banco Madesant - Sociedade Unipessoal, S.A. | - | - | (705 | ) | ||||||||
Other Payables | - | - | (377 | ) | ||||||||
Santander Brasil Asset | - | - | (68 | ) | ||||||||
ISBAN Brasil S.A. | - | - | (309 | ) | ||||||||
Debt Instruments Eligible to Compose Capital | (9,435,823 | ) | - | - | ||||||||
Banco Santander – Spain(2) (7) | (9,435,823 | ) | - | - |
F-89
Consolidated Financial Statements | December 31, 2021 | F-115 |
* Values expressed in thousands, except when indicated. |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Thousands of Reais | 2014 | |||||||||||
Joint- controlled | Other Related- | |||||||||||
Parent(1) | companies | Party(2) | ||||||||||
Assets | 11,033,229 | 1,880,176 | 546,856 | |||||||||
Financial assets for trading - Derivatives net | (98,286 | ) | - | (87,161 | ) | |||||||
Banco Santander, S.A. – Spain | (98,286 | ) | - | - | ||||||||
Santander Benelux, S.A., N.V. | - | - | 381,956 | |||||||||
Abbey National Treasury Services Plc | - | - | (871 | ) | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (468,246 | ) | ||||||||
Loans and other values with credit institutions - Cash and overnight operations in foreign currency | 10,913,872 | - | 2,787 | |||||||||
Banco Santander, S.A. – Spain(3) (5) | 10,913,872 | - | - | |||||||||
Banco Santander Totta, S.A. | - | - | 2,787 | |||||||||
Loans and advances to customers | - | 10,340 | 631,149 | |||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 630,694 | |||||||||
Webmotors S.A. | - | 10,340 | - | |||||||||
Santander Brasil Gestão de Recursos Ltda | - | - | 455 | |||||||||
Loans and other values with credit institutions(1) | 11,900 | 1,867,750 | 81 | |||||||||
Banco Santander – Spain | 11,900 | - | - | |||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(8) | - | 1,867,138 | - | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(8) | - | 612 | - | |||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | 81 | |||||||||
Other Assets | 205,743 | 2,086 | - | |||||||||
Banco Santander – Spain | 205,743 | - | - | |||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(8) | - | 2,086 | - | |||||||||
Liabilities | (7,375,101 | ) | (161,871 | ) | (612,659 | ) | ||||||
Deposits of Brazil Central Bank and deposits of credit institutions | (416,969 | ) | (19,186 | ) | (286,348 | ) | ||||||
Banco Santander, S.A. – Spain(4) | (416,969 | ) | - | - | ||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(8) | - | (15,699 | ) | - | ||||||||
Santander Brasil Asset | - | - | (16,742 | ) | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (261,865 | ) | ||||||||
Banco Santander, S.A. – Uruguay | - | - | (7,741 | ) | ||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(8) | - | (3,487 | ) | - | ||||||||
Marketable debt securities | (6,082 | ) | - | - | ||||||||
Banco Santander, S.A. – Spain(7) | (6,082 | ) | - | - | ||||||||
Customer deposits | - | (142,685 | ) | (271,753 | ) | |||||||
ISBAN Brasil S.A. | - | - | (70,449 | ) | ||||||||
Produban Serviços de Informática S.A. | - | - | (41,646 | ) | ||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | (49,526 | ) | ||||||||
Santander Brasil Gestão de Recursos Ltda | - | - | (89,830 | ) | ||||||||
Webmotors S.A. | - | (142,685 | ) | - | ||||||||
Others | - | - | (20,302 | ) | ||||||||
Other financial liabilities - Dividends and interest on capital Payable | (538,636 | ) | - | (47,271 | ) | |||||||
Banco Santander, S.A. – Spain | (25,084 | ) | - | - | ||||||||
Grupo Empresarial Santander, S.L.(1) | (134,413 | ) | - | - | ||||||||
Santander Insurance Holding, S.L. | (403 | ) | - | - | ||||||||
Sterrebeeck B.V.(1) | (378,736 | ) | - | - | ||||||||
Banco Madesant - Sociedade Unipessoal, S.A. | - | - | (55 | ) | ||||||||
Santusa Holding, S.L. | - | - | (47,216 | ) | ||||||||
Other Payables | (7,719 | ) | - | (7,287 | ) | |||||||
Banco Santander – Spain | (7,719 | ) | - | - | ||||||||
Produban Serviços de Informática S.A. | - | - | (441 | ) | ||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | (35 | ) | ||||||||
Santander Brasil Asset | - | - | (6,811 | ) | ||||||||
Debt Instruments Eligible to Compose Capital | (6,405,695 | ) | - | - | ||||||||
Banco Santander – Spain(2) (7) | (6,405,695 | ) | - | - |
Thousand of Reais | 2020 | |||||
Parent (1) | Joint-controlled companies | Other Related-Party (2) | ||||
Assets | 2,966,012 | 3,589,575 | 8,962,950 | |||
Financial assets for trading - Derivatives net | (1,326,965) | - | (2,527,296) | |||
Banco Santander, S.A. – Espanha (1) | (1,326,965) | - | - | |||
Super Pagamentos e Administração de Meios Eletrônicos S.A. (2) | - | - | (211,154) | |||
Santander FI Santillana Multimercado Crédito Privado (2) | - | - | (2,316,142) | |||
Loans and other values with credit institutions - Cash and overnight operations in foreign currency | 4,240,680 | 3,587,028 | 10,446,557 | |||
Banco Santander, S.A. – Espanha (3) | 4,240,680 | - | - | |||
PSA Corretora de Seguros e Serviços Ltda. | - | - | 113 | |||
Santander Digital Assets, SL | - | - | 8,105 | |||
Santander Bank, National Association | - | - | 10,315,450 | |||
Banco Santander Totta, S.A. (2) | - | - | 1,250 | |||
Bank Zachodni (2) | - | - | 171 | |||
Santander UK plc | - | - | 92,703 | |||
Banco Santander, S.A. – México (2) | - | - | 27,993 | |||
Banco RCI Brasil S.A. | - | 3,587,028 | - | |||
Hyundai Corretora de Seguros Ltda. | - | - | 3 | |||
Integry Tecnologia e Serviços A.H.U Ltda. | - | - | 45 | |||
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | - | 532 | |||
Santander Global Technology, S.L., SOCI | - | - | 192 | |||
Loans and advances to customers | - | - | 998,063 | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | 823,467 | |||
Zurich Santander Brasil Seguros S.A. (4) | - | - | 57,081 | |||
Webmotors S.A. | - | - | 18,455 | |||
Banco Santander Espanha (1) | - | - | 224 | |||
Isban Mexico, S.A. de C.V. | - | - | 122 | |||
Gesban Servicios Administrativos Globales, S.L. | - | - | 23 | |||
Santander Brasil Gestão de Recursos Ltda. | - | - | 169 | |||
Gestora de Inteligência de Crédito | - | - | 66,667 | |||
Loop Gestão de Pátios S.A. | - | - | 11,966 | |||
Key Management Personnel (5) | - | - | 19,889 | |||
Other Assets | 52,297 | 2,547 | 34,589 | |||
Banco Santander, S.A. – Espanha (1) | 52,297 | - | - | |||
Banco RCI Brasil S.A. | - | 2,547 | - | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | 34,589 | |||
Guarantees and Limits | - | - | 11,038 | |||
Key Management Personnel (5) | - | - | 11,038 | |||
Liabilities | (24,084,795) | (226,046) | (1,779,587) | |||
Deposits of Brazil Central Bank and deposits of credit institutions | (10,456,623) | (226,046) | (37,214) | |||
Banco Santander, S.A. – Espanha (1) | (10,456,623) | - | - | |||
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | - | (36,390) | |||
Loop Gestão de Pátios S.A. | - | - | (824) | |||
Banco RCI Brasil S.A. | - | (226,046) | - | |||
Securities obligations | - | 0 | (117,368) | |||
Key Management Personnel (5) | - | - | (117,368) | |||
Customer deposits | - | 0 | (869,888) | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | (64,836) | |||
Santander Brasil Gestão de Recursos Ltda. | - | - | (335) | |||
Webmotors S.A. | - | - | (1,411) | |||
Santander Caceis Brasil DTVM S.A. | - | - | (581,543) | |||
Santander Brasil Asset (2) | - | - | (100) | |||
Gestora de Inteligência de Crédito | - | - | (149,257) | |||
Key Management Personnel (5) | - | - | (36,762) | |||
Others | - | - | (35,644) | |||
Other financial liabilities - Dividends and interest on capital Payable | (508,491) | - | - | |||
Banco Santander Espanha | (195) | - | - | |||
Grupo Empresarial Santander, S.L. (1) | (239,890) | - | - | |||
Sterrebeeck B.V. (1) | (268,406) | - | - | |||
Other Payables | (21) | - | (755,117) | |||
Banco Santander Espanha (1) | (21) | - | - | |||
Santander Brasil Asset (2) | - | - | (95) | |||
Santander Caceis Brasil DTVM S.A. | - | - | (9,373) | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | (78,686) | |||
Key Management Personnel (5) | - | - | (633,276) | |||
Others | - | - | (33,687) | |||
Debt Instruments Eligible to Compose Capital | (13,119,660) | - | - | |||
Banco Santander Espanha (1) | (13,119,660) | - | - | |||
(*)
Consolidated Financial Statements | December 31, 2021 | F-116 |
* Values expressed in thousands, except when indicated. |
Thousand of Reais | 2019 | |||||
Parent (1) | Joint-controlled companies | Other Related-Party (2) | ||||
Assets | 5,294,152 | 4,387,013 | 874,668 | |||
Financial assets for trading - Derivatives net | (763,547) | - | (113,931) | |||
Banco Santander, S.A. – Espanha (1) | (763,547) | - | - | |||
Santander FI Santillana Multimercado Crédito Privado (2) | - | - | (113,931) | |||
Loans and other values with credit institutions - Cash and overnight operations in foreign currency | 5,896,120 | - | 70,261 | |||
Banco Santander, S.A. – Espanha (3) | 5,896,120 | - | - | |||
Banco Santander Totta, S.A. (2) | - | - | 7,921 | |||
Bank Zachodni (2) | - | - | 94 | |||
Santander UK plc | - | - | 16,701 | |||
Banco Santander, S.A. – México (2) | - | - | 45,545 | |||
Loans and advances to customers | 912 | 20,367 | 884,696 | |||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 814,320 | |||
Zurich Santander Brasil Seguros S.A. | - | - | 58,778 | |||
Webmotors S.A. | - | 20,367 | - | |||
Banco Santander Espanha (1) | 912 | - | - | |||
Isban Mexico, S.A. de C.V. | - | - | 122 | |||
Gesban Servicios Administrativos Globales, S.L. | - | - | 23 | |||
Santander Brasil Gestão de Recursos Ltda. | - | - | 169 | |||
Key Management Personnel (5) | - | - | 11,284 | |||
Loans and other values with credit institutions (1) | 86,638 | 4,365,518 | 192 | |||
Banco Santander, S.A. – Espanha (1) | 86,638 | - | - | |||
Banco RCI Brasil S.A. | - | 4,365,518 | - | |||
Santander Global Technology, S.L., SOCI | - | - | 192 | |||
Other Assets | 74,029 | 1,128 | 28,476 | |||
Banco Santander, S.A. – Espanha (1) | 74,029 | - | - | |||
Banco RCI Brasil S.A. | - | 1,128 | - | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | 28,476 | |||
Guarantees and Limits | - | - | 4,974 | |||
Key Management Personnel (5) | - | - | 4,974 | |||
Liabilities | (17,105,753) | (169,103) | (1,529,828) | |||
Deposits of Brazil Central Bank and deposits of credit institutions | (42,060) | (167,017) | (20,571) | |||
Banco Santander, S.A. – Espanha (1) | (42,060) | - | - | |||
Santander FI Santillana Multimercado Crédito Privado (2) | - | - | (20,571) | |||
Banco RCI Brasil S.A. | - | (167,017) | - | |||
Bonds and securities | - | - | (89,074) | |||
Key Management Personnel (5) | - | - | (89,074) | |||
Customer deposits | - | (2,086) | (1,008,416) | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | (199,934) | |||
Santander Brasil Gestão de Recursos Ltda | - | - | (332,916) | |||
Webmotors S.A. | - | (2,082) | - | |||
Santander Caceis Brasil DTVM S.A. | - | - | (404,427) | |||
Santander Brasil Asset (2) | - | - | (16,762) | |||
Key Management Personnel (5) | - | - | (36,104) | |||
Others | - | (4) | (18,273) | |||
Other financial liabilities - Dividends and interest on capital payable | (6,874,602) | - | (12,226) | |||
Banco Santander, S.A. – Espanha (1) | (1,067,623) | - | - | |||
Grupo Empresarial Santander, S.L. (1) | (2,177,207) | - | - | |||
Sterrebeeck B.V. (1) | (3,629,772) | - | - | |||
Banco Madesant (2) | - | - | (1,948) | |||
Key Management Personnel (5) | - | - | (10,278) | |||
Other Payables | (13,130) | - | (399,541) | |||
Banco Santander, S.A. – Espanha (1) | (13,130) | - | - | |||
Santander Brasil Asset | - | - | (7,203) | |||
Santander Caceis Brasil DTVM S.A. | - | - | (5,066) | |||
Zurich Santander Brasil Seguros e Previdência S.A. (4) | - | - | (21,219) | |||
Key Management Personnel (5) | - | - | (357,249) | |||
Others | - | - | (8,804) | |||
Debt Instruments Eligible to Compose Capital | (10,175,961) | - | - | |||
Banco Santander, S.A. – Espanha (1) | (10,175,961) | - | - |
All loans and other amounts towith related parties were made in our ordinarythe normal course of business and on a sustainable basis, including interest rates and collateralguarantees and did do
not involve morerisks greater than the normal risk of collectabilitycollection or presenthave other unfavorable features.
disadvantages.
(1) Banco Santander (Brasil) S.A. is indirectly controlled by Banco Santander SpainEspanha (note 1-a), through its subsidiarythe subsidiaries Grupo Empresarial Santander, S.L. and Sterrebeeck B.V.
(2) Refers to the Company'sparent company's subsidiaries (Banco Santander Spain)Espanha).
(3) InAs of December 31, 2016,2021, it refers to the cash of R$582,571 (2015 - R$1,866,683 and 2014 - R$410,193).
(4) As at December 31, 2016, refers to raising funds through operations transfers abroad amounted to R$327,466 (2015 - R$219,037 and 2014 - R$416,969), with maturity until November, 2017 and interest between 0.56% and 12.95%p.a.
(5) On December 30, 2016, include foreign currency investments (overnight applications) due on January 03, 2017cash equivalents in the amount of R$10,269,812 (2015 -1,476,611 (2020 – R$20,699,539 and 2014 - R$10,663,319) and interest 2,459,371).
(4) Significant influence of 0.68% p.a held at Santander Establishment Credit Financial, Banco Santander Brazil and its Grand Cayman Branch. Espanha.
(6) Refers the emissions of Eurobonds of Grand Cayman Branch, maturing between from January 16 2016(5) The balance with key management personnel refers to February 13, 2017 and interest of 3.152% p.a and 4.625% p.a.
(7) Refersoperations contracted prior to the portion acquired byterm of the controller with the PR Optimization Plan held in the first half of 2014.
(8) In February, 2016 the Cia de Crédito, Financiamento e Investimentos Renault was acquired by Banco RCI Brasil.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)mandates.
Thousands of Reais | 2016 | |||||||||||
Joint- controlled | Other Related- | |||||||||||
Parent(1) | companies | Party(2) | ||||||||||
Income | (798,022 | ) | 136,111 | 1,197,489 | ||||||||
Interest and similar income - Loans and amounts due from credit institutions | 39,677 | 114,909 | 396 | |||||||||
Banco Santander, S.A. – Spain | 39,677 | - | - | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(6) | - | 114,909 | - | |||||||||
Abbey National Treasury Services Plc | - | - | 396 | |||||||||
Interest expense and similar charges - Customer deposits | (4,192 | ) | (26,996 | ) | (49,420 | ) | ||||||
ISBAN Brasil S.A. | - | - | (3,560 | ) | ||||||||
Banco Santander, S.A. – Spain | (4,192 | ) | - | - | ||||||||
Santander Brasil Gestão de Recursos Ltda | - | - | (12,417 | ) | ||||||||
Santander Cultural | - | - | (11 | ) | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (31,097 | ) | ||||||||
Webmotors S.A. | - | (26,996 | ) | - | ||||||||
Produban Serviços de Informática S.A. | - | - | (2,117 | ) | ||||||||
Others | - | - | (218 | ) | ||||||||
Interest expense and similar charges - Deposits from credit institutions | (512 | ) | (10,959 | ) | (115,458 | ) | ||||||
Banco Santander, S.A. – Spain | (512 | ) | - | - | ||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(6) | - | (10,959 | ) | - | ||||||||
Santander Securities | - | - | (20,979 | ) | ||||||||
SAM Brasil Participações | - | - | (133 | ) | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (88,467 | ) | ||||||||
Santander Securities | - | - | (4,119 | ) | ||||||||
Santander Asset Management, S.A. SGIIC. | - | - | (1,760 | ) | ||||||||
Fee and commission income (expense) | 5,334 | 20,133 | 1,955,255 | |||||||||
Banco Santander, S.A. – Spain | 5,334 | - | - | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(6) | - | 19,211 | - | |||||||||
Banco Santander International | - | - | 20,959 | |||||||||
Santander Securities | - | - | 1,896 | |||||||||
Webmotors S.A. | - | 922 | - | |||||||||
Zurich Santander Brasil Seguros S.A. | - | - | 218,773 | |||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 1,711,138 | |||||||||
Others | - | - | 2,489 | |||||||||
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | (613,168 | ) | 39,024 | 267,983 | ||||||||
Banco Santander, S.A. – Spain | (613,168 | ) | - | - | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | 257,475 | |||||||||
Abbey National Treasury Services Plc | - | - | 38,274 | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(6) | - | 39,024 | - | |||||||||
Santander Securities | - | - | (16,038 | ) | ||||||||
Santander Investment Securities Inc. | - | - | (15,115 | ) | ||||||||
Others | - | - | 3,387 | |||||||||
Administrative expenses and Amortization | - | - | (840,739 | ) | ||||||||
ISBAN Brasil S.A. | - | - | (290,430 | ) | ||||||||
Produban Serviços de Informática S.A. | - | - | (209,253 | ) | ||||||||
ISBAN Chile S.A. | - | - | (26 | ) | ||||||||
Aquanima Brasil Ltda. | - | - | (24,557 | ) | ||||||||
TECBAN - Tecnologia Bancaria Brasil | - | - | (213,194 | ) | ||||||||
Produban Servicios Informaticos Generales, S.L. | - | - | (21,525 | ) | ||||||||
Ingeniería de Software Bancario, S.L. | - | - | (42,519 | ) | ||||||||
Santander Securities | - | - | (35,882 | ) | ||||||||
Others | - | - | (3,353 | ) | ||||||||
Others Administrative expenses - Donation | - | - | (20,528 | ) | ||||||||
Santander Cultural | - | - | (2,737 | ) | ||||||||
Fundacao Santander | - | - | (3,452 | ) | ||||||||
Instituto Escola Brasil | - | - | (939 | ) | ||||||||
Fundação Sudameris | - | - | (13,400 | ) | ||||||||
Debt Instruments Eligible to Compose Capital | (225,161 | ) | - | - | ||||||||
Banco Santander Espanha(2)(8) | (225,161 | ) | - | - |
F-91
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Thousands of Reais | 2015 | |||||||||||
Joint- controlled | Other Related- | |||||||||||
Parent(1) | companies | Party(2) | ||||||||||
Income | (761,189 | ) | 189,182 | 2,509,524 | ||||||||
Interest and similar income - Loans and amounts due from credit institutions | 31,930 | 163,684 | 104 | |||||||||
Banco Santander, S.A. – Spain | 31,930 | - | - | |||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(6) | - | 163,684 | - | |||||||||
Abbey National Treasury Services Plc | - | - | 104 | |||||||||
Interest expense and similar charges - Customer deposits | - | (25,330 | ) | (28,508 | ) | |||||||
ISBAN Brasil S.A. | - | - | (7,841 | ) | ||||||||
Santander Brasil Gestão de Recursos Ltda | - | - | (14,302 | ) | ||||||||
Webmotors S.A. | - | (25,330 | ) | - | ||||||||
Produban Serviços de Informática S.A. | - | - | (3,752 | ) | ||||||||
Others | - | - | (2,613 | ) | ||||||||
Interest expense and similar charges - Deposits from credit institutions | (311 | ) | (1,447 | ) | (89,636 | ) | ||||||
Banco Santander, S.A. – Spain | (311 | ) | - | - | ||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(6) | - | (1,447 | ) | - | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (15,584 | ) | ||||||||
Santander Securities | - | - | (71,939 | ) | ||||||||
Santander Asset Management, S.A. SGIIC. | - | - | (2,113 | ) | ||||||||
Fee and commission income (expense) | (8,022 | ) | 21,376 | 1,889,138 | ||||||||
Banco Santander, S.A. – Spain | (8,022 | ) | - | - | ||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(6) | - | 3,863 | - | |||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(6) | - | 16,579 | - | |||||||||
Banco Santander International | - | - | 8,804 | |||||||||
Webmotors S.A. | - | 934 | - | |||||||||
Zurich Santander Brasil Seguros S.A. | - | - | 248,824 | |||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 1,626,288 | |||||||||
Others | - | - | 5,222 | |||||||||
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | (406,523 | ) | 30,899 | 953,678 | ||||||||
Banco Santander, S.A. – Spain | (406,523 | ) | - | - | ||||||||
Santander Benelux, S.A., N.V. | - | - | 424,182 | |||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | 602,557 | |||||||||
Abbey National Treasury Services Plc | - | - | (88,881 | ) | ||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(6) | - | 30,899 | - | |||||||||
Others | - | - | 15,820 | |||||||||
Administrative expenses and Amortization | - | - | (982,135 | ) | ||||||||
ISBAN Brasil S.A. | - | - | (406,662 | ) | ||||||||
Produban Serviços de Informática S.A. | - | - | (205,137 | ) | ||||||||
ISBAN Chile S.A. | - | - | (1,024 | ) | ||||||||
Aquanima Brasil Ltda. | - | - | (24,075 | ) | ||||||||
TECBAN - Tecnologia Bancaria Brasil | - | - | (160,563 | ) | ||||||||
Produban Servicios Informaticos Generales, S.L. | - | - | (22,834 | ) | ||||||||
Konecta Brazil Outsourcing Ltda | - | - | (98,492 | ) | ||||||||
Ingeniería de Software Bancario, S.L. | - | - | (57,293 | ) | ||||||||
Others | - | - | (6,055 | ) | ||||||||
Others Administrative expenses - Donation | - | - | (18,071 | ) | ||||||||
Santander Cultural | - | - | (3,231 | ) | ||||||||
Fundacao Santander | - | - | (3,500 | ) | ||||||||
Instituto Escola Brasil | - | - | (1,140 | ) | ||||||||
Fundação Sudameris | - | - | (10,200 | ) | ||||||||
Debt Instruments Eligible to Compose Capital | (378,263 | ) | - | - | ||||||||
Banco Santander Espanha(2)(8) | (378,263 | ) | - | - | ||||||||
Gain on disposal of non-current assets held for sale not classified as discontinued operations | - | - | 784,954 | |||||||||
Capital Riesgo Global(3) | - | - | 34,404 | |||||||||
Santander Securities Services Brasil Participações S.A.(5) | - | - | 750,550 |
F-92
Consolidated Financial Statements | December 31, 2021 | F-117 |
* Values expressed in thousands, except when indicated. |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian ReaisPrincipal transactions and balances - R$, unless otherwise stated)Income
Thousand of Reais | 2021 | |||
Parent (1) | Joint-controlled companies | Other Related-Party (2) | ||
Income | (2,896,127) | 37,036 | 1,622,821 | |
Interest and similar income - Loans and amounts due from credit institutions | 7,534 | - | 77,832 | |
Banco Santander Espanha | 7,534 | - | - | |
Apolo Fundo de Investimento em Direitos Creditórios | - | - | 76,004 | |
Key Management Personnel | - | - | 1,828 | |
Guarantees and Limits | - | - | 45 | |
Key Management Personnel | - | - | 45 | |
Interest expense and similar charges - Customer deposits | - | - | (634,659) | |
Santander Brasil Gestão de Recursos Ltda. | - | - | (1,159) | |
Gestora de Inteligência de Crédito | - | - | (2,354) | |
Webmotors S.A. | - | - | (233) | |
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | - | (6,916) | |
Getnet S.A. | - | - | (23,448) | |
Banco Santander (Suisse), S.A. | - | - | (1,437) | |
Key Management Personnel | - | - | (594,194) | |
Others | - | - | (4,918) | |
Interest expense and similar charges - Deposits from credit institutions | (122,318) | - | (4,652) | |
Banco Santander – Espanha | (122,318) | - | - | |
Santander FI Santillana Multimercado Crédito Privado (1) | - | - | (30,024) | |
Santander Caceis Brasil DTVM S.A. (2) | - | - | 25,372 | |
Fee and commission income (expense) | - | 37,036 | 3,511,120 | |
Banco RCI Brasil S.A. | - | 37,036 | - | |
Banco Santander International | - | - | 43,375 | |
Zurich Santander Brasil Seguros S.A. | - | - | 118,324 | |
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 3,200,930 | |
Getnet S.A. | - | - | 145,554 | |
Key Management Personnel | - | - | 399 | |
Others | - | - | 2,538 | |
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | (2,560,112) | - | (769,218) | |
Banco Santander, S.A. Espanha | (2,560,112) | - | - | |
Santander FI Santillana Multimercado Crédito Privado | - | - | (3,666) | |
Santander Caceis Brasil DTVM S.A. (2) | - | - | (29,413) | |
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | (152,376) | |
Zurich Santander Brasil Seguros S.A. (3) | - | - | 310,706 | |
Getnet S.A. | - | - | (881,699) | |
Key Management Personnel | - | - | (13,083) | |
Others | - | - | 313 | |
Administrative expenses and Amortization | (221,231) | - | (558,452) | |
Banco Santander, S.A. Espanha | (221,231) | - | - | |
ISBAN Chile S.A. | - | - | (4) | |
Aquanima Brasil Ltda. | - | - | (29,526) | |
Santander Caceis Brasil DTVM S.A. (2) | - | - | (45,196) | |
Santander Global Technology, S.L., SOCI | - | - | (446,313) | |
Getnet S.A. | - | - | (2,092) | |
Others | - | - | (35,321) | |
Others Administrative expenses - Donation | - | - | 805 | |
Fundação Sudameris | - | - | 805 | |
Thousands of Reais | 2014 | |||||||||||
Joint- controlled | Other Related- | |||||||||||
Parent(1) | companies | Party(2) | ||||||||||
Income | (1,165,021 | ) | 147,917 | 1,178,208 | ||||||||
Interest and similar income - Loans and amounts due from credit institutions | 11,523 | 117,531 | 9 | |||||||||
Banco Santander, S.A. – Spain | 11,523 | - | - | |||||||||
Abbey National Treasury Services Plc | - | - | 5 | |||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(6) | - | 117,531 | - | |||||||||
Santander Benelux, S.A., N.V. | - | - | 4 | |||||||||
Interest expense and similar charges - Customer deposits | - | (14,187 | ) | (20,064 | ) | |||||||
ISBAN Brasil S.A. | - | - | (7,342 | ) | ||||||||
Produban Serviços de Informática S.A. | - | - | (3,075 | ) | ||||||||
Webmotors S.A. | - | (14,187 | ) | - | ||||||||
Santander Brasil Gestão de Recursos Ltda | - | - | (8,528 | ) | ||||||||
Others | - | - | (1,119 | ) | ||||||||
Interest expense and similar charges - Deposits from credit institutions | (125 | ) | (5,669 | ) | (62,396 | ) | ||||||
Banco Santander, S.A. – Spain | (125 | ) | - | - | ||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(6) | - | (5,669 | ) | - | ||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (51,313 | ) | ||||||||
Santander Asset Management, S.A. SGIIC. | - | - | (11,083 | ) | ||||||||
Expense and similar charges - Marketable debt securities | (364 | ) | - | - | ||||||||
Banco Santander, S.A. – Spain | (364 | ) | - | - | ||||||||
Fee and commission income (expense) | (40,549 | ) | 27,704 | 1,708,494 | ||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(6) | - | 21,899 | - | |||||||||
Banco RCI Brasil S.A. (Current Company Name of Social da RCI Brasil Leasing)(6) | - | 4,038 | - | |||||||||
Banco Santander, S.A. – Spain | (40,549 | ) | - | - | ||||||||
Webmotors S.A. | - | 1,767 | - | |||||||||
Zurich Santander Brasil Seguros S.A. | - | - | 36,799 | |||||||||
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 1,668,597 | |||||||||
Others | - | - | 3,098 | |||||||||
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | (786,665 | ) | 22,538 | 477,107 | ||||||||
Banco Santander, S.A. – Spain | (786,665 | ) | - | - | ||||||||
Santander Benelux, S.A., N.V. | - | - | 473,512 | |||||||||
Real Fundo de Investimento Multimercado Santillana Credito Privado | - | - | (15,355 | ) | ||||||||
Abbey National Treasury Services Plc | - | - | 16,117 | |||||||||
Companhia de Crédito, Financiamento e Investimento RCI Brasil(6) | - | 22,538 | - | |||||||||
Others | - | - | 2,833 | |||||||||
Administrative expenses and Amortization | - | - | (903,073 | ) | ||||||||
ISBAN Chile S.A. | - | - | (2,461 | ) | ||||||||
ISBAN Brasil S.A. | - | - | (396,611 | ) | ||||||||
Produban Serviços de Informática S.A. | - | - | (213,703 | ) | ||||||||
Ingeniería de Software Bancario, S.L. | - | - | (49,783 | ) | ||||||||
Produban Servicios Informaticos Generales, S.L. | - | - | (26,230 | ) | ||||||||
TECBAN - Tecnologia Bancaria Brasil | - | - | (129,057 | ) | ||||||||
Konecta Brazil Outsourcing Ltda | - | - | (51,033 | ) | ||||||||
Aquanima Brasil Ltda. | - | - | (24,075 | ) | ||||||||
Others | - | - | (10,120 | ) | ||||||||
Others Administrative expenses - Donation | - | - | (21,869 | ) | ||||||||
Santander Cultural | - | - | (4,929 | ) | ||||||||
Fundacao Santander | - | - | (3,440 | ) | ||||||||
Instituto Escola Brasil | - | - | (1,500 | ) | ||||||||
Fundação Sudameris | - | - | (12,000 | ) | ||||||||
Debt Instruments Eligible to Compose Capital | (348,841 | ) | - | - | ||||||||
Banco Santander Espanha(2)(7) | (348,841 | ) | - | - |
Consolidated Financial Statements | December 31, 2021 | F-118 |
* Values expressed in thousands, except when indicated. |
Thousand of Reais | 2020 | ||
Parent (1) | Joint-controlled companies | Other Related-Party (2) | |
Income | (2,164,484) | 204,209 | 1,442,100 |
Interest and similar income - Loans and advances to customers | 13,934 | 185,646 | 1,485 |
Banco Santander Espanha | 13,934 | - | - |
Banco RCI Brasil S.A. | - | 185,646 | - |
Key Management Personnel | - | - | 1,485 |
Guarantees and Limits | - | - | 61 |
Key Management Personnel | - | - | 61 |
Interest expense and similar charges - Customer deposits | - | - | (19,215) |
Santander Brasil Gestão de Recursos Ltda. | - | - | (5,664) |
Gestora de Inteligência de Crédito | - | - | (1,039) |
Webmotors S.A. | - | - | (2) |
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | - | (7,198) |
Key Management Personnel | - | - | (4,657) |
Others | - | - | (655) |
Interest expense and similar charges - Deposits from credit institutions | (569,355) | (6,226) | (15,032) |
Banco Santander Espanha | (569,355) | - | - |
Banco RCI Brasil S.A. | - | (6,226) | - |
SAM Brasil Participações | - | - | (3) |
Santander Caceis Brasil DTVM S.A. (2) | - | - | (14,645) |
Santander Asset Management, S.A. SGIIC. | - | - | (384) |
Fee and commission income (expense) | (2,002) | 24,789 | 3,092,951 |
Banco Santander Espanha | (2,002) | - | - |
Banco RCI Brasil S.A. | - | 24,789 | - |
Banco Santander International | - | - | 45,261 |
Webmotors S.A. | - | - | 223 |
Zurich Santander Brasil Seguros S.A. | - | - | 321,008 |
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 2,706,398 |
Key Management Personnel | - | - | 308 |
Others | - | - | 19,753 |
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | (541,693) | - | (413,101) |
Banco Santander, S.A. Espanha | (541,693) | - | - |
Santander FI Santillana Multimercado Crédito Privado | - | - | (396,689) |
Santander Caceis Brasil DTVM S.A. (2) | - | - | (4,662) |
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | (17,344) |
Key Management Personnel | - | - | 180 |
Others | - | - | 5,414 |
Administrative expenses and Amortization | (202,787) | - | (1,354,006) |
Banco Santander, S.A. Espanha | (202,787) | - | - |
ISBAN Chile S.A. | - | - | (20) |
Aquanima Brasil Ltda. | - | - | (52,431) |
TECBAN - Tecnologia Bancária Brasil | - | - | (364,349) |
Santander Caceis Brasil DTVM S.A. (2) | - | - | (46,813) |
Santander Global Technology, S.L., SOCI | - | - | (358,364) |
Key Management Personnel | - | - | (499,514) |
Others | - | - | (32,515) |
Others Administrative expenses - Donation | - | - | (19,630) |
Santander Cultural | - | - | (330) |
Fundação Santander | - | - | (1,600) |
Instituto Escola Brasil | - | - | (700) |
Fundação Sudameris | - | - | (17,000) |
Result on the sale of assets not classified as assets held for sale | - | - | 168,588 |
Super Pagamentos e Administração de Meios Eletrônicos S.A. | - | - | 168,588 |
Debt Instruments Eligible to Compose Capital | (862,581) | - | - |
Banco Santander Espanha | (862,581) | - | - |
Consolidated Financial Statements | December 31, 2021 | F-119 |
* Values expressed in thousands, except when indicated. |
Thousand of Reais | 2019 | ||
Parent (1) | Joint-controlled companies | Other Related-Party (2) | |
Income | (1,458,386) | 226,141 | 1,254,022 |
Interest and similar income - Loans and advances to customers | 219,060 | 437,322 | 630 |
Interest and similar income - Loans and amounts due from credit institutions | 109,530 | 218,661 | 630 |
Banco Santander Espanha | 109,530 | - | - |
Banco RCI Brasil S.A. | - | 218,661 | - |
Key Management Personnel | - | - | 630 |
Guarantees and Limits | - | - | 24 |
Key Management Personnel | - | - | 24 |
Interest expense and similar charges - Customer deposits | - | (25) | (27,433) |
Santander Brasil Gestão de Recursos Ltda. | - | - | (16,387) |
Gestora de Inteligência de Crédito | - | - | (3,275) |
Webmotors S.A. | - | (25) | - |
Key Management Personnel | - | - | (7,747) |
Others | - | - | (24) |
Interest expense and similar charges - Deposits from credit institutions | (174) | (3,375) | (96,579) |
Banco Santander – Espanha | (174) | - | - |
Banco RCI Brasil S.A. | - | (3,375) | - |
SAM Brasil Participações | - | - | (37) |
Santander FI Santillana Multimercado Crédito Privado | - | - | (67,821) |
Santander Securities Services Brasil DTVM S.A. (2) | - | - | (27,595) |
Santander Asset Management, S.A. SGIIC. | - | - | (1,126) |
Fee and commission income (expense) | 2,310 | 10,418 | 2,635,325 |
Banco Santander – Espanha | 2,310 | - | - |
Banco RCI Brasil S.A. | - | 10,201 | - |
Banco Santander International | - | - | 35,294 |
Webmotors S.A. | - | 217 | - |
Zurich Santander Brasil Seguros S.A. | - | - | 231,920 |
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 2,356,596 |
Key Management Personnel | - | - | 343 |
Others | - | - | 11,172 |
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | (724,169) | 462 | 44,858 |
Banco Santander, S.A. – Espanha | (724,169) | - | - |
Santander FI Santillana Multimercado Crédito Privado | - | - | (598) |
Santander Caceis Brasil DTVM S.A. (2) | - | - | (2,297) |
Zurich Santander Brasil Seguros e Previdência S.A. | - | - | 43,858 |
Key Management Personnel | - | - | 168 |
Others | - | 462 | 3,727 |
Administrative expenses and Amortization | (153,332) | - | (1,283,788) |
Banco Santander, S.A. – Espanha | (153,332) | - | - |
ISBAN Chile S.A. | - | - | (28) |
Aquanima Brasil Ltda. | - | - | (32,032) |
TECBAN - Tecnologia Bancária Brasil | - | - | (345,610) |
Santander Caceis Brasil DTVM S.A. (2) | - | - | (49,241) |
Santander Global Technology, S.L., SOCI | - | - | (336,952) |
Key Management Personnel | - | - | (482,852) |
Others | - | - | (37,073) |
Others Administrative expenses - Donation | - | - | (19,015) |
Fundação Santander | - | - | (1,615) |
Instituto Escola Brasil | - | - | (1,300) |
Fundação Sudameris | - | - | (16,100) |
Debt Instruments Eligible to Compose Capital | (692,551) | - | - |
Banco Santander Espanha | (692,551) | - | - |
(1) Banco Santander (Brasil) S.A. is indirectly controlled by Banco Santander Spain, through its subsidiary Grupo Empresarial Santander, S.L. and Sterrebeeck B.V.
(2) Refers to the Company's subsidiaries (Banco Santander, S.A .-..- Spain).
(3) Refers the profit on disposal of the company MS Participações.
(4) Refers the profit on disposal of the company Santander Brasil Asset Management.
(5) Refers the profit on disposal of the company Santander Securities Services Brasil DTVM S.A.
(6) In February, 2016 the Cia de Crédito, Financiamento e Investimentos Renault was acquired by Banco RCI Brasil.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
46. | Risk management |
Risk management at Banco Santander is based on the following principles:
1.A. Independence of the management activities related to the business;
2.B. Involvement of the Senior Management in decision-making;
3.C. Consensus in the decision making on credit operations between the areas of Risk and Business;Business departments;
4.D. Collegiate decision-making, which includes the branch network, aiming to encourage opinion diversity of opinions and avoiding the attribution of individual decisions;
5.E. The use of statistical tools to estimate default, which includes internal rating, credit scoring and behavior scoring, RORAC (Return on Risk Adjusted Capital), VaR (Value at Risk), economic capital, scenario assessment, among others;
6.F. Global approach, which an integrated treatment of risk factors in the business departments and the concept of economic capital as a consistent metric for risk undertaken and for business management;
7.G. Common management tools
8.H. Organizational structure
9.I. Scopes and responsibilities
10.J. Risk limitation
Consolidated Financial Statements | December 31, 2021 | F-120 |
* Values expressed in thousands, except when indicated. |
11.K. Recognition
12.L. Effective information channel
13.M. Maintenance of a medium-low risk profile, and low volatility by:
• The portfolio diversification, limiting concentration in customers,clients, groups, sectors, products or geographically speaking; the complexity level of market operations reduction; the analysis of social and environmental risks of businesses and projects financed by the bank; continuous follow up to prevent the portfolios from deteriorating.
• Policies and procedures definition that are part of the Regulatory Framework Risk, which regulates the risk activities and processes. They follow the instructions of the Board of Directors, the regulations of the BACEN and the international best practices in order to protect the capital and ensure business' profitability.
At Banco Santander, the risk management and control process is structured using as reference the framework defined at corporate level and described according to the following phases:
a)I. Adaptation of corporate management frameworks and policies that reflect Banco Santander’s risk management principles.
Within this regulatory framework, the Corporate Risk Management Framework, regulates the principles and standards governing Banco Santander´s risk activities, based on the corporate organization and a management models, meeting the necessary regulatory requirements for credit management.
The organizational model comprises the management map, which defines the risk function and governance, and the regulatory framework itself.
b)II. Identification of risks through the constant review and monitoring of exposures, the assessment of new products, businesses and deals (singular transactions);
c)III. Risks measurement using methods and models periodically tested.
d)IV. Preparation and distribution of a complete set of reports that are reviewed daily by the heads at all levels of Banco Santander management.
e)V. Implementation of a risk control system which checks, on a daily basis, the degree to which the Bank´s risk profile matches the risk policies approved and the risk limits set. The most noteworthy corporate tools and techniques (abovementioned)(aforementioned) already in use at Banco Santander are in different stages of maturity regarding the level of implementation and use in the Bank. For wholesale segment, these techniques are quite in line with the corporate level development. For local segments, internal ratings and scoringsscoring based models, VaR and market risk scenario analysis and stress testing were already embedded in risk management routine while Expected loss, Economic Capital and RORAC have been integrated in risk management.
f)VI. Internal ratings- and scorings-based models which, by assessing the various qualitative and quantitative risk components by customerclient and transaction, making it possible to estimate, firstly, the probability of default and, subsequently, the expected loss, based on Loss Given Default (LGD) estimates.
g)VII. Economic capital, as a homogeneous measurement of the assumed risk and the basis for the measurement of the performance management.
h)VIII. RORAC, used both as a transaction pricing tool in the whole sale segment (more precisely in global ranking and markets - bottom-up approach) as for in the analysis of portfolios and units (top-down approach).
i)IX. VaR, which is used for controlling and setting the market risk limits for the various treasury portfolios.
j)X. Scenario analysis and stress testing to supplement the analysis market and credit risk in order to assess the impact of alternative scenarios, even over provisions and capital.
a) Corporate Governance of the Risk Function
The structure of Banco Santander’s Risk Committee is defined in accordance with the highest standards of prudent management, while respecting local legal and regulatory environment.
Its main responsibilities are:
-A. Integrate and adapt the Bank's risk to local level, as well asfurther than the risk management strategy, tolerance level and predisposition to the willingness and level of risk, tolerance, previously approved by the executive committee and board of directors, all matched with corporate standards of Banco Santander Spain;
-B. Approve the proposals, operations and limits of clients and portfolio;
C. Regularly monitor all the risks inherent to the business, proving if your profile is adequate to what was established in the risk appetite.
-
Consolidated Financial Statements | December 31, 2021 | F-121 |
* Values expressed in thousands, except when indicated. |
D. Authorize the use of management tools and local risk models and being aware of the result of their internal validation.
-E. Keeping updated, assessing and monitoring any observations and recommendations periodically formulated by the supervisory authorities regarding their functions.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The organizational structure of the executive vice-presidency consists of areas which are responsible for credit risk management, market and structural, operationalmodel risk management and risk model.non-financial risks. The credit risk management structure is composed ofby directors who act from the point of view of retail and wholesale portfolios management. A specific area has the mission to consolidate the portfolios and their respective risks, supporting the management with the integrated risk vision. In addition to this award, it is also responsible for compliance with regulators, external and internal auditors,vision, as well as the Group's headquarters in Spain. There is an area responsible for the attendance to regulators, external and internal auditors.
A specific structure is responsible for serving internal and external regulators, supervisors and auditors.
It has a departmentcore called ERM-Enterprise risk architecture, which includesmanagement, integrated by a set of transverse functions, oftransversal to all risk factorsrisks, necessary for the construction of an advanced management model. Methodology (development, parameterization models that reach allits adequate management. These areas of risk), Governance, Policy and Risk Culture, Capital, Stress Test and Risk MI (responsible for the generation, exploitation and dissemination of information beyond the project information systems) are areas part of this structure.
Further detailsstructure of the structure, methodologiesMethodology (development and control system related to riskparameterization of models); Credit Risk Control; Risk Control and Performance (covering Risk Culture); Integrated management is described in the report available on the website www.santander.com.br.
and Relationship with Supervisors and Stress Test.
b) Credit Risk
b.1) Introduction to the treatment of credit risk
The Credit Risk Management provides subsidies to define strategies as risk appetite, to establish limits, including exposure analysis and trends as well as the effectiveness of the credit policy. The goal is to maintain a risk profile and adequate minimum profitability to offset the estimated default, both client and portfolio, as defined by the Executive Committee and Board of Directors. Additionally, it is responsible for the risk management systems applied in the identification, measurement, control and reduction of exposure to risk in individual or clustered by similar operations.
The Risk Management is specialized according to each clients' characteristics, being segregated between individual clients (with the accompanied of dedicated analysts) and customers with similar characteristics (standardized).
• Individualized management: It is performed by a defined risk analyst, set, which prepares the analysis, and forwards it to the Risk Committee and monitors the client's progress. It covers the Wholesale segment customersclients (Corporate and GB&M), financial institutionsRetail (Companies 3 and certain companies;
Governments, Institutions and Universities);
• Standardized management: Aimed at individuals and companies not classified as individualized customers.clients. Based on automated models of decision-making and internal risk assessment, complemented by commercial heave and analysts specialized teams to handle exceptions.
Macroeconomic aspects and market conditions, sectored and geographical concentration, as well as customerclient profiling and economic prospects are also evaluated and considered in the appropriate measuring of credit risk.
b.2) Reduction to recoverable value (“impairment”)
The Bank recognizes adjustments for expected credit losses with respect to the following financial instruments that are not measured at fair value through profit or loss:
- financial assets that are debt instruments;
- amounts receivable from leasing;
- financial guarantee contracts issued; and
- loan commitments issued.
No impairment losses are recognized on equity instruments.
The Bank measures the adjustments for losses at an amount equal to the expected credit losses over the useful life, except for the instruments below, for which they are recorded as expected credit losses in 12 months:
- debt instruments that present a low credit risk at the closing date; and
- other financial instruments (except lease receivables) in which the credit risk has not increased substantially since their initial recognition.
Adjustments for losses on lease receivables are always measured at an amount equal to expected credit losses over their useful life.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. They are measured as follows:
- financial assets subject to impairment at the closing date: as the difference between the gross book value and the present value of estimated future cash flows;
- loan commitments: as the present value of the difference between the contractual cash flows due to the Bank if the commitment is used in full and the cash flows that the Bank expects to receive; and
- financial guarantee contracts: payments expected to reimburse the holder, less any amounts that the Bank expects to recover.
Modified assets
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced by a new asset due to the debtor's financial difficulties, it is necessary to assess whether the financial asset should be derecognized and expected credit losses are measured as follows :
- If the expected restructuring does not result in a write-off of the existing asset, the expected cash flows arising from the modified financial asset are included in the calculation of the cash insufficiencies of the existing asset.
- If the expected restructuring results in the derecognition of the existing asset, the expected fair value of the new asset is treated as the final cash flow of the existing financial asset at the time of its derecognition.
This amount is included in the calculation of cash shortfalls arising from the existing financial asset discounted from the estimated retirement date to the closing date, using the original effective interest rate of the existing financial asset.
Consolidated Financial Statements | December 31, 2021 | F-122 |
* Values expressed in thousands, except when indicated. |
Determination of significant increases in credit risk
On each balance sheet date, the Bank assesses whether financial assets recorded at amortized cost and debt financial instruments recorded at fair value through Other Comprehensive Income are subject to impairment, as well as other financial instruments subject to that assessment.
A financial asset is “subject to impairment” when one or more events that have a negative impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is subject to impairment includes the following observable data:
- significant financial difficulty of the debtor or issuer;
- delays in contractual obligations;
- breach of contract, such as default or delay;
- the restructuring of a loan or advance by the Bank under conditions that the Bank would not consider as interesting to carry out;
- the likelihood that the debtor will enter bankruptcy or other financial reorganization; or
- the disappearance of an active market for a security due to financial difficulties.
A financial instrument that has been renegotiated due to deterioration in the borrower's condition is generally considered to be subject to impairment, unless there is evidence that the risk of not receiving the contractual cash flows has been significantly reduced and there are no other indicators of impairment.
Presentation of the provision for impairment losses in the balance sheet
Provisions for impairment losses are presented in the balance sheet as follows:
- financial assets measured at amortized cost: as a deduction from the gross carrying amount of the assets;
- loan commitments and financial guarantee contracts: as a provision; and
- debt instruments measured at fair value through Other Comprehensive Income: no provision for losses is recognized in the balance sheet, as the book value of these assets corresponds to their fair value.
Individual or collective assessment
An individual measurement of impairment was based on Management's best estimate of the present value of cash flows expected to be received. In estimating these cash flows, Management exercised judgment as to the financial situation of a debtor and the net realizable value of any underlying collateral. Each asset reduced to recoverable value was evaluated on its merits, while the test strategy and the estimate of cash flows considered recoverable were approved by the Bank's credit risk officers.
When assessing the need for collective allowance for losses, Management considered factors such as credit quality, portfolio size, concentrations and economic factors. To estimate the necessary allowance, assumptions were established to define how the inherent losses were modeled and to determine the necessary data parameters, based on historical experience and current economic conditions.
Measurement of impairment
Losses due to impairment of assets measured at amortized cost were calculated as the difference between the book value and the present value of estimated future cash flows, discounted at the asset's original effective interest rate. Impairment losses on assets measured at fair value through Other Comprehensive Income were calculated as the difference between book value and fair value.
Reversal of impairment
For assets measured at amortized cost: If an event that occurred after the impairment caused a reduction in the amount of the impairment loss, the reduction in the impairment loss was reversed through profit or loss.
For debt securities measured at fair value through Other Comprehensive Income: If, in a subsequent period, the fair value of a debt security reduced to recoverable amount has increased and that increase could be objectively linked to an event that occurred after recognition from the impairment loss, the impairment loss was reversed through profit or loss; otherwise, any increase in fair value was recognized through Other Comprehensive Income.
Any subsequent recovery in the fair value of an equity security measured at fair value through Other Comprehensive Income and reduced to recoverable amount was recognized at any time in Other Comprehensive Income.
Information, assumptions and techniques used in estimating the impairment
Classification of financial instruments by stages
The portfolio of financial instruments subject to impairment is divided into three levels, based on the stage of each instrument related to its level of credit risk:
- Stage 1: It is understood that a financial instrument at this stage does not have a significant increase in risk since its initial recognition. The provision for this Asset represents the expected loss resulting from possible non-compliance over the next 12 months;
- Stage 2: If a significant increase in risk is identified since initial recognition, without having materialized deterioration, the financial instrument will be classified within this stage. In this case, the amount referring to the provision for expected loss due to default reflects the estimated loss of the residual life of the financial instrument. For the assessment of the significant increase in credit risk, the quantitative measurement indicators used in the normal management of credit risk will be used, as well as other qualitative variables, such as the indication that it is a non-impaired operation if considered as refinanced or operations included in a special arrangement; and
- Stage 3: A financial instrument is recorded within this stage, when it shows evident signs of deterioration as a result of one or more events that have already occurred and that materialize in a loss. In this case, the amount referring to the allowance for losses reflects the expected losses from credit risk over the expected residual life of the financial instrument.
Consolidated Financial Statements | December 31, 2021 | F-123 |
* Values expressed in thousands, except when indicated. |
Impairment estimation methodology
The measurement of the impairment loss is carried out through the following factors:
- Default Exposure or EAD: is the transaction value exposed to credit risk, including the current available balance ratio that could be provided at the time of default. The models developed incorporate assumptions about changes in the payment schedule for operations.
- Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay principal and/or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - lifetime (Stages 2 and 3) , which considers the probability that the operation will default between the balance sheet date and the operation's residual maturity date. The standard requires that future information relevant to the estimation of these parameters must be considered.
- Loss on Default (LGD): is the loss resulting from default, ie the percentage of exposure that cannot be recovered in the event of default. It mainly depends on the guarantees associated with the operation, which are considered as risk mitigation factors associated with each credit financial asset and the expected future cash flows to be recovered. As established in the regulation, future information must be considered for its estimation.
- Discount rate: is the rate applied to estimated future cash flows over the expected life of the asset, to bring them to present value.
In order to estimate the aforementioned parameters, the Bank has applied its experience in the development of internal models to calculate the parameters both for regulatory purposes and for internal management.
Default definition
The Bank considers a financial asset to be in default when:
- it is probable that the debtor will not pay its credit obligations to the Bank in full; or
- the debtor has significant credit obligations to the Bank overdue for more than 90 days, as a general rule.
Overdrafts are considered overdue if the customer violates a recommended limit or has been granted a limit lower than the current outstanding amount.
When assessing whether a debtor is in default, the Bank considers indicators:
- qualitative – for example, breaches of covenants;
- quantitative – for example, overdue status and non-payment of another obligation of the same issuer to the Bank; and
- based on data collected internally and obtained from external sources.
b.3) Measures and measurement tools
Rating tools
The Bank uses proprietary internal rating models to measure the credit quality of a given customer or transaction. Each rating relates to a certain probability of default or non-payment, determined on the basis of the customer's historical experience, with the exception of certain portfolios classified as “low default portfolios”.to predict default. Rating/Scores models are used in the Bank’s loan approval and risk monitoring process.
In some cases the observable data required to estimate the amount of an impairment loss on a financial asset may be limited or no longer fully relevant to current circumstances. In such cases, an entity uses its experienced judgment to estimate the amount of any impairment loss. Similarly an entity uses its experienced judgment to adjust observable data for a group of financial assets to reflect current circumstances.
The classification of loans into different categories is made according to the analysis of economic and financial situation of the client and any other registeredregistratered information updated frequently. New modes of operation are subject to credit risk evaluation, verification and adaptation to the controls adopted by the Bank.
Ratings assigned to customers are reviewed periodically to include any new financial information available and the experience in the Banking relationship. The frequency of the reviews is increased in case of customers that reach certain levels in the automatic warning systems and of customers classified as requiring special monitoring. The own rating tools are monitored and reviewed to qualifications by them awarded are progressively cleared.
enhanced.
Credit risk parameters
We assess all borrowings for an allowance for impairment of credit risk. Loans are individually assessed for impairment or collectively assessed by grouping similar risk characteristics. Loans individually assessed for impairment are not collectively assessed.
The estimative
To individually measure the impairment loss of loans assessed for impairment, we consider borrowers' conditions, such as their economic and financial situation, level of indebtedness, capacity to generate cash flow, quality of management, corporate governance, quality of internal controls, payment history, industry experience, contingencies and credit limits, as well as asset characteristics, such as their nature and purpose, type, sufficiency and liquidity level of guarantees, and also based on experience historical impairment loss and other circumstances known at the time of valuation.
Consolidated Financial Statements | December 31, 2021 | F-124 |
* Values expressed in thousands, except when indicated. |
To measure the impairment loss of loans collectively assessed for impairment, we separate financial assets into groups considering credit risk characteristics and similarities. In other words, according to the segment, type of assets, guarantees and other factors associated with the historical impairment experience and other circumstances known at the time of the assessment. The impairment loss is calculated using statistical models that consider the following factors:
Default Exposure (EAD): is the amount of a transaction exposed to credit risk, including the proportion of current outstanding balance exposure that could be provided at default. Models developed incorporate hypotheses considering possible changes in the payment schedule.
Default probability (PD): is the probability that a counterparty will not fulfill its obligation to pay principal and/or interest. For the purposes of IFRS 9, this will consider both the PD-12 months, which is the probability that the financial instrument will default in the next 12 months, as well as the lifetime PD, which is the probability of the transaction to default considering its term. remaining. Future relevant information is considered necessary to estimate these parameters Probability of Default (PD) and as per the standard.
Loss Given Default (LGD) are based on internal experience, i.e. on default observations and on the experience in defaulted loan recoveries during a defined credit cycle.
For low risk portfolios, such as banks, sovereign risk or global wholesale clients, the parameters are based on CDS market data and with global broadness, using Group Santander´s world presence.
For the other portfolios, parameter estimative are based on the Bank’s internal experience.
In addition to the Probability of Default (PD), the Bank: is managing its credit portfolio, seeking to make loans to borrowers that have higher volumes of guarantees associated with the operations and also works constantly on strengthening its credit recovery area. These and other actions combined, are responsible for ensuring the adequacy of LGD parameters (Loss Given Default, the loss resulting from the borrower's default event to honor the principal and/or interest payments).
LGD calculation is based on net lossesproduced in case of non-performing loans, considering the guarantees associated with the transaction, revenues and expenses related to the recovery process and also the timing thereof.
Besides that , the Loss identification period, or “LIP,” is also considered in the estimation of the risk parameters that is represented by the time period between the occurrence of a loss event and the identification of an objective evidence of this loss.default. In other words, it representsreflects the time horizon frompercentage of exposure that could not be recovered in the event of a default event. It mainly depends on the guarantees, which are considered to mitigate the credit loss occurrence untilrisk associated with each financial asset, and the effective confirmation of such loss.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amountsfuture cash flows that are expected to be recovered. According to the standard, forward-looking information must be considered in thousands of Brazilian Reais - R$, unless otherwise stated)the estimate.
TheDiscount rate: the rate applied to estimated future cash flows during the expected life of the asset, which is equal to the net present value of the financial instrument at its book value.
To estimate the above parameters, the Bank use proprietaryapplied its experience in the development of internal rating models to measure the credit quality of a given customer or transaction. Each rating relates to a certain probability of default or non-payment, determined on the basis of the customer's history, with the exception of certain portfolios classified as “low default portfolios”. These ratingscalculate parameters for both regulatory and models are used in loan approval and risk monitoring processes.management purposes.
The table belowshown in note 9.b shows our loansthe portfolio by the internal risk rating levels and their correspondingits probability of default:default.
Internal Risk Model | 2016 | 2015 | 2014 | |||||||||
Low | 207,922,810 | 211,645,463 | 199,200,968 | |||||||||
Medium-low | 32,104,167 | 29,500,790 | 27,043,995 | |||||||||
Medium | 10,940,879 | 8,638,914 | 7,934,964 | |||||||||
Medium - high | 6,976,969 | 8,552,474 | 5,899,116 | |||||||||
High | 10,492,731 | 8,928,808 | 9,031,838 | |||||||||
Loans and advances to customers, gross | 268,437,556 | 267,266,449 | 249,110,881 |
Thousand of reais | 2021 | 2020 | 2019 | |
By maturity | ||||
Less than 1 Year | 270,050,934 | 219,062,744 | 186,196,849 | |
Between 1 and 5 years | 160,932,317 | 147,013,817 | 117,841,564 | |
More than 5 years | 62,371,451 | 51,745,465 | 43,218,247 | |
Loans and advances to customers, gross | 493,354,702 | 417,822,026 | 347,256,660 | |
By internal classification of risk | ||||
Low | 374,505,211 | 347,315,357 | 257,133,115 | |
Medium-low | 79,216,725 | 24,277,404 | 56,549,196 | |
Medium | 14,589,977 | 26,231,871 | 11,754,806 | |
Medium-High | 9,413,111 | 3,896,457 | 8,512,386 | |
High | 15,629,678 | 16,100,937 | 13,307,156 | |
Loans and advances to customers, gross | 493,354,702 | 417,822,026 | 347,256,660 |
b.3)Expected credit losses, measured using sufficient and available historical data, are presented below.
2021 | ||||
Probability of default (PD) | Default loss (LGD) | |||
Exposure | ||||
Commercial and industrial | 247,674,251 | 6% | 50% | |
Real Estate Credit - construction | 54,738,606 | 2% | 8% | |
Individual loans | 188,408,840 | 10% | 61% | |
Leasing | 2,533,004 | 2% | 31% |
Consolidated Financial Statements | December 31, 2021 | F-125 |
* Values expressed in thousands, except when indicated. |
2020 | ||||
Probability of default (PD) | Default loss (LGD) | |||
Exposure | ||||
Commercial and industrial | 191,281,653 | 5% | 41% | |
Real Estate Credit - construction | 45,791,869 | 3% | 7% | |
Individual loans | 178,652,145 | 9% | 52% | |
Leasing | 2,096,359 | 1% | 31% | |
2019 | ||||
Probability of default (PD) | Default loss (LGD) | |||
Exposure | ||||
Commercial and industrial | 145,387,439 | 7% | 40% | |
Real Estate Credit - construction | 39,720,713 | 3% | 10% | |
Individual loans | 160,036,668 | 10% | 64% | |
Leasing | 2,111,840 | 2% | 41% |
b.4) Observed loss: measures of credit cost
The Bank monthlyperiodically estimate losses related to credit risk and then we compare those estimates with actual losses of the month. Periodically conduct tests in order to monitor and maintain control over credit risk.
To complement the use of admission and rating, the Bank use other measures that supports the prudent and effective management of credit risk, based on the loss observed.
The cost of credit is measured by the sum of credit losses of year and to the average loansloans’ portfolio of the same year.
b.4)b.5) Credit risk cycle
Banco Santander has a global view of its credit portfolio throughout the various phases of the risk cycle, with a level of detail that allows us to evaluate the current situation of risk and any movements. This mapping is accompaniedfollowed by the Board of Directors and the Executive Committee of the bank that no only sets policies and risk procedures, limits and delegates responsibilities. It also approves and supervises the activities of the area.
The risk management process consists of identifying, measuring, analyzing, controlling, negotiating and deciding on, as appropriate, the risks incurred in the Bank’s operations and companies of the conglomerate. The risk cycle comprises three different phases:
• Pre-sale: this phase includes the risk planning and setting targets, determination of the Bank’s risk appetite, approval of new products, risk analysis and credit rating process, and limit setting.
• Sale: this is the decision-making phase for both pre-classified and specific transactions.
• Post-sale: this phase comprises the risk monitoring, measurement and control processes and the recovery process.
Planning and setting risk limits
Risk limit setting is a dynamic process that identifies Banco Santander’s risk appetite by assessing business proposals and its risk attitude. This process is defined inthrough the global risk limit plan, an agreed-upon comprehensive document for the integrated management of the balance sheets and its inherent risks. The risk limits are founded on two basic structures: customers/segments and products.
Withinappetite approved by the Bank's strategic planning,Management and the limitsunits.
In the case of risk appetite are based. Business proposals have to be aligned with the limits set by management. It defines a document with the limits previously agreed with the management, these limits have to be observed for the preparation of business proposals.
For individualized risks, customers represent the most basic level tois the customer, for which individual limits are established (pre-classification), defining the maximum acceptable level of credit risk with the customer and minimum return required on the basis of allocated capital.
set.
For large corporate groups we useGCB clients, a pre-classification model is used based on ana system of measurement and monitoring of economic capital allocated.
For other groups of companies, we use a simplified pre-classificationcapital. In relation to the Corporate segment, the operational limit model is used in maximum nominal amounts of credit for each period.
amounts.
To the risks of customers with standardized management, the limits of the portfolios are planned using credit management programs (SGP) agreed document for the areas of business and risks, and approved by the Executive Committee. This document contains the results expected for the business in terms of risk and return, beyond the limits which govern the activity and risk management. This client group has a more automated treatment in risks.
Risk analysis and rating process
Risk analysis is a pre-requisite for the approval of loans to customersclients by the Bank. This analysis consists of examining the counterparty’s ability on meeting its contractual obligations to the Banco Santander, which involves analyzing the customer’sclient’s credit quality, its risk transactions, solvency, and sustainability of business and the return to be obtained in view of the risk assumed.
The risk analysis is conducted yearly,annually, at least, and can be held shortly when client profile indicates (through systems with centralized alerts, managers visits to clients or specific credit analysis), or when operations are not covered by pre-classification.
Consolidated Financial Statements | December 31, 2021 | F-126 |
* Values expressed in thousands, except when indicated. |
Decision-Making on Operations
The process of decision making on operations aims to analyze them and adopt resolutions, taking into account interest risks (risk appetite)adopt in accordance with pre-established policies, considering risk appetite and any important elements of the operation to offset thethat are important in assessing risk and return.
The Banco Santander uses, among others, the RORAC methodology (return(profitability on risk-adjusted capital), for risk analysis and pricing in the decision-making process on transactions and deals.
Risk monitoring and control
In Individual retail, customers are systematically reviewed through a daily credit rating process. This process allows for reassessments in credit exposure, allowing for increases in exposure for customers with good credit quality. In case of detection of deterioration in the risk level, actions to contain credit risk and preventive actions are automatically generated.
In addition to the tasks performed bycase of individual management, preventive detection of deterioration in the Internal Audit Division, the Vice Presidency of Risks has a specific area of risk monitoring function for adequate credit quality control, formed by local and global teamsof the operation is the responsibility of the commercial manager together with specific resources, for adequate credit quality control.
This monitoring function is based on process ofthe risk analyst. Additionally, risks are monitored through a permanent observation to enableprocess for early detectionidentification of any incidents that might arisemay result in the evolution of the risk, the transactions, theoperations, customers and their environment,environment.
This monitoring can result in the classification of the client in SCAN (this is a system that allows the differentiation of the management level and the adoption of preventive actions. The risk monitoring function is specialized by customer segment.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
For this purposeaction to be taken on a system called “firms under special surveillance” (FEVE, using the Spanish acronym) was designed that we can distinguish in four categories based on the degree of concern raised by the circumstances observed (extinguish, secure, reduce and monitor. The inclusion of a company in the FEVE system does not mean that there has been a losses due to default, but rather that has deemed advisable to adopt a specific policy for this company, to place a person in charge and to set the policy implementation period. Customers classified as FEVE are revised at least every six months, or every three months for those classified in the most severe categories. A company is classified as FEVE by different ways, such as a result of the monitoring process itself, a review performed by Internal Audit, a decision made by the sales manager responsible for that company or the triggering of the automatic warning system. The assigned rating is avoided at least once a year.
For exposures to standardized customers, the key indicators are monitored in order to detect any variance in the performance of the loan portfolio in respect to the forecasts contained in the credit management programs.
case-by-case basis).
Risk control function
The control function is performed by assessing risks from various complementary perspectives, the main pillars beingare the control by geographical location, business area, management model, product and process, facilitating thus the detection of specific areas requiring measures for which decisions should be taken. GetTo obtain an overview of the bank's loan portfolio over the various phases of the credit cycle, with a level of detail that allows the assessment of the current risk situation and any movements.
Any changes in the Bank’s risk exposure are controlled on an ongoing and systematic basis against budgets, limits and benchmarks, and thebasis. The impacts of these changes in certain future situations, both of an exogenous nature and those arising from strategic decisions, are assessed in order to establish measures that place the profile and amount of the loss portfolio within the parameters set by Executive Commission.
b.5)b.6) Credit recovery
"Strategies and action channels are defined according to the days of past due loans and the amounts, that result in a Map of Responsibilities and always look as the first alternative, the client's recovery.
The Bank uses tools as behavioral scoring to study the collection performance of certain groups, in order to reduce costs and increase recoveries. These models seek to measure the probability of clients becoming overdue adjusting collection efforts so that clients less likely to recover, receive timely actions. In cases the payments is most likely to happen, the focus is given in maintaining a healthy relationship with customers.clients. All customersclients with severe or rescheduled credits delays values have internal restrictions.
CustomersClients with higherhigh risk index have a model of recovery, with a commercial follow-up and a recovery specialist.
b.6)b.7) Credit risk from other outlook
perspective
Certain areas and specific views of credit risk deserve a specialist’s attention, complementary to global risk management.
Concentration risk
Concentration risk is an essential factor to be analyzed in the area of credit risk management.management area. The Bank constantlycontinuously monitors the degree of concentration of its credit risk in its portfolios, by geographical area/country, economic sector, productgeographic location/country, groups of customers and customer group.
products.
The risk committeeRisk Committee establishes the risk policies and reviewsanalyzes the exposure limits required to ensure adequatefor the proper management of the portfolio's credit risk portfolio concentration.
From thea sectorial standpoint,point of view, the distribution of the corporate client portfolio is adequately diversified.
The Bank’s Risk AreaBank's Executive Vice President for Risks works closelytogether with the Executive Vice President for Strategic Finance Area in the active management of credit portfolios, which includes reducing the concentration of exposures through severalvarious techniques, such asincluding the arrangementmaintenance of creditguarantees to mitigate the risk of companies, derivatives for hedgingprotection purposes (hedge) or the performanceexecution of securitization transactions in order to optimize the risk/return ratiorate of the total portfolio.
portfolio as a whole.
Credit risk from financial market operations
This heading includes the credit risk arising in treasury operations with customers,clients, mainly credit institutions. These operations are performed both via money market financing products with different financial institutions and via derivative instruments arranged for the purpose of serving our customers.
clients.
Risk control is performed using an integrated, real-time system that enables the Bank to know at any time the unused exposure limit with respect to any counterparty, any product and maturity and at any Bank unit.
Consolidated Financial Statements | December 31, 2021 | F-127 |
* Values expressed in thousands, except when indicated. |
Credit risk is measured at its current market value and its potential value (exposure value considering the future variation in the underlying market factors). Therefore, the equivalent credit risk (CRE) is defined as the sum of net replacement value plus the maximum potential value of the contracts in the future.
Environmental risk
The Banco Santander's Social and Environmental RiskResponsibility Policy (PRSA), which follows the guidelines of CMN Resolution 4,945/2021 and the SARB Regulation Nº. 14 of Febraban, establishes guidelines and consolidates specific policies for socio-environmental practices in business and in relationships with stakeholders. These practices include the management for the Wholesale Bankof socio-environmental risks, impacts and opportunities related to topics such as adequacy in credit granting and use, supplier management and socio-environmental risk analysis, which is performedcarried out through the analysis of socialclients' socio-environmental practices. and environmental practicesVarejo, of customers whothe Corporate segment 3 (one of the Corporate Retail segments of the Bank), which have limits or credit risk over R$1 million. This analysis considers items such as contaminated land, deforestation, working conditionsabove R $ 5 million and other possible pointswhich are part of environmental attention where you can have possibilitythe 14 socio-environmental care sectors. In this case, the socio-environmental risk is analyzed in order to mitigate the issues of penaltiesoperational risk, capital risk, credit risk and losses. The procedurereputational risk. Since 2009, Santander has been a signatory to the Equator Principles and this set of guidelines is performed by a specialized team, trained in Biology, Health and Safety Engineering, Geology and Chemistry Engineering. A team of financial analysis considers the potential damage and impact that unfavorable environmental condition may compromise the financial condition and customer guarantees. The analysis focuses on preserving capital and reputationused to mitigate socio-environmental risks in the market and the spreadfinancing of the practice is achieved through the constant training of commercial and credit areas on the applicationlarge projects.
Mitigation of social and environmental risk patternsrisks in the credit approval process for corporate clients in the Wholesale Bank.
The environmental risk management for suppliersfinancing large projects is done throughout the purchasing process and iscarried out based on analyzes based on the 10 principlesguidelines of the Global CompactEquator Principles, a set of the United Nations which considers items such as: human rights, working conditions, environmental and ethical issues. To participate in a bidding process, the company must show respect to these principles. During the approval, the Bank does a technical evaluation that includes social and environmental criteria. Beyond this step, suppliers classified as high impact, include a more detailed assessmentcriteria referenced in the International Finance Corporation's (IFC) Performance Standards on Social and Environmental Sustainability and in the Environmental Guidelines , Health and Safety of the operational, financial, administrative, fiscal, legal, governance,World Bank Group.
The commitments assumed in the PRSA are detailed in other Bank policies, such as the Anti-Corruption Policy, Supplier Relationships and Homologation Policies and Social and Environmental Risk Policies, as well as the Private Social Investment Policy, which aims to guide the strategy in this area. and to present guidelines for social and environmental. This step includes a visit to verify the evidence and obtain answers provided by the company during the evaluation.
programs that strengthen this strategy.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reaisb.8) Credit Management - R$, unless otherwise stated)
b.7) Variations in main aggregates in 2016 (unaudited)
Main changes
The business trends observed in 2016the year 2021 were consistent with those of 2015,the trends presented 2020, where underin a challenging economic environment, the Santander model proved to be effective.scenario. The Bank succeeded in preservingmaintained the good quality of ourits business decreasing the default rates from 7.0%and did not presented major variances in its delinquency ratios. In December 20152021, this ratio achieved 5.46% compared to 6.2% in5.55% of December 2016.2020 and 6.75%, of December, 2019.
This income was possible thanks toBelow is a combination of factors. Among them, a credit mix with focus on safer lines; partnerships; a deep knowledge and monitoring of the customer’s financial life; and the deployment of strong debt renegotiation campaigns.
The involvement of senior management in decision making (held collectively at our Committees), besides independence Risks relating to the business, allow more assertive decisions and reducing credit risk.
The analysis of credit for projects and companies in the Wholesale segment, continue to integrate opinions of our area of Environmental Risk. Below the table (audited) ofshowing the evolution of the main credit indicators of credit..
2021 | 2020 | 2019 | ||
Credit risk exposure - customers (Thousand of Reais) | 540,872,632 | 466,104,042 | 391,569,227 | |
Loans and advances to customers, gross (note 9) | 493,354,702 | 417,822,026 | 347,256,660 | |
Contingent Liabilities - Guarantees and other sureties (note 43.a) | 47,517,931 | 48,282,016 | 44,312,567 | |
Non-performing loans ratio (%) - unaudited | 5.46% | 5.55% | 6.75% | |
Impairment coverage ratio (%) - unaudited | 110.40% | 110.64% | 96.58% | |
Specific credit loss provisions, net of RAWO (*) (Thousand of Reais) - unaudited | 29,723,376 | 25,640,488 | 22,625,750 | |
Cost of credit (% of risk) - unaudited | 3.73% | 4.35% | 3.93% | |
Data prepared on the basis of management criteria and the accounting criteria of the controller unit. | ||||
(*) RAWO = Recoveries of Assets Derecognized. |
2016 | 2015 | 2014 | ||||||||||
Credit risk exposure - customers (Thousands of Reais) | 301,702,586 | 310,877,166 | 288,445,198 | |||||||||
Loans and advances to customers, gross (note 10) | 268,437,556 | 267,266,449 | 249,110,881 | |||||||||
Contingent Liabilities - Guarantees and other sureties (note 44) | 33,265,030 | 43,610,717 | 39,334,317 | |||||||||
Non-performing loans ratio (%) | 7.04 | % | 7.00 | % | 5.62 | % | ||||||
Impairment coverage ratio (%) | 96.31 | % | 82.86 | % | 96.80 | % | ||||||
Specific credit loss provisions, net of RAWO (*) (Thousands of Reais) | 18,191,126 | 15,411,760 | 13,562,809 | |||||||||
Cost of credit (% of risk) | 4.52 | % | 5.07 | % | 3.79 | % |
Data prepared onThe Bank incorporates information about the basisfuture both in its assessment if the credit risk of management criteriaan instrument has increased substantially since the initial recognition and the accounting criteriain its measurement of the controller unit.expected credit losses. Based on guidance from its internal committees and economic experts and considering a range of actual and anticipated external information, the Bank develops a base scenario as well as other possible scenarios. This process involves the projection of two or more additional economic scenarios and considers the respective probabilities of each result. External information includes economic data and forecasts published by government agencies and monetary authorities and selected private sector analysts and academics.
The base case represents the most likely result and is in line with the information used by the Bank for other purposes, such as strategic planning and budgeting. The other scenarios represent more optimistic and pessimistic results. Periodically, the Bank conducts more extreme stress tests to adjust its determination of these other representative scenarios
(*) RAWO = Recoveries of Assets Derecognized.
c) Market Risk
Market risk is the exposure to risks such as interest rates, exchange rates, prices of goods, prices in the stock market and others values, according to the type of product, volume of operations, term and conditions of the agreement and underlying volatility.
The Bank operates according to global policies, within the Group’s risk tolerance level, aligned with the objectives in Brazil and in the world.
Consolidated Financial Statements | December 31, 2021 | F-128 |
* Values expressed in thousands, except when indicated. |
With this purpose, it has developed its own Risk Management model, according to the following principles:
- ●Functional independence;
- ●Executive capacity sustained by knowledge and proximity with the client;
- ●Global reach of the function (different types of risks);
- ●Collective decision-making, that evaluates a variety of possible scenarios and do not compromise the results with individual decision (including Brazil Executive Risk Committee - Comitê Executivo de Riscos Brasil). This CommitteeComitee delimits and approves the operations. The Asset and Liabilities Committee, which responds for the capital management and structural risks, including country-risk, liquidity and interest rates.
- ●Management and improvement of the equation risk/return; and
- ●Advanced methodologies for risk management, such as Value at Risk – VaR (historical simulation of 521 days with a confidence level of 99% and time horizon of one day), scenarios, financial margin sensibility, equity value and contingency plan.
The Market Risks structure is part of the Vice Presidency of Credit and Market Risks, an independent area that applies risk policies taking into consideration the guidelines of the Board of Directors and the Risks Division of Santander in Spain.
c.1) Activities subject to market risk
The measurement, control and monitoring of the market risk area comprises all operations in which net worth risk is assumed. This risk arises from changes in the risk factors –interest rate, exchange rate, equities, commodity prices and the volatility thereof– and from the solvency and liquidity risk of the various products and markets in which the Bank operates.
The activities are segmented by risk type as follows:
I. | Trading: this item includes financial services for clients, trading operations and positioning mainly in fixed-income, equity , foreign currency products and shares. |
II. | Balance sheets management: A risk management assessment aims to give stability to interest income from the commercial and economic value of the Bank, maintaining adequate levels of liquidity and solvency. The risk is measured by the balance sheets exposure to movements in interest rates and level of liquidity. |
III. | Structural risks: |
- Trading: this item includes financial services for customers, trading operations and positioning mainly in fixed-income, equity , foreign currency products and shares.
- Balance sheets management: A risk management assessment aims to give stability to interest income from the commercial and economic value of the Bank, maintaining adequate levels of liquidity and solvency. The risk is measured by the balance sheets exposure to movements in interest rates and level of liquidity.
- Structural risks:
i. ●Structural foreign currency risk/hedges of results: foreign currency risk arising from the currency in which investments in consolidable and non-consolidable companies are made (structural exchange rate). This item also includes the positions taken to hedge the foreign currency risk on future results generated in currencies other than the Real (hedges of results).
●Structural equities risk: this item includes equity investments |
The Treasury area is responsible for managing the positions taken in the trading activity.
non-consolidated financial and non-financial companies that give rise to equities risk.
The Financial Management area is responsible for the balance sheet management risk and structural risks through the application of uniform methodologies adapted to the situation of each market in which the Bank operates. Thus, in the convertible currencies area, Financial Management directly manages the Parent's risks and coordinates the management of the other units operating in these currencies. Decisions affecting the management of these risks are taken through the ALCO (Asset Liability Control committees) in the respective countries.
The Financial Management goal is to ensure the stability and recurring nature of both the net interest margin of the commercial activity and the Bank’s economic value, whilst maintaining adequate liquidity and solvency levels.
Each of these activities is measured and analyzed using different tools in order to reflect their risk profiles as accurately as possible.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Interest rate Risk
TheThe following table aggregates by product the operations cash flows of companies’the operations of our perimeter of companies that have interest income. The transactions are demonstratedpresented by the book balance forat the endingclosing date forof the years 20152021, 2020 and 2016.2019. It is not associated towith the risk management of changes in interest rates or indexindexer mismatches, which is done by using Market Risk metrics.monitoring metrics of Marketplace. However, it allows to evaluate the analysesconcentrations of maturity concentrationsterm and possible risks and below it, the amountsbalances of the same products are allocated by theirpresented at the redemption value at maturity, except for the account aboutline dealing with receivables and obligations linked to derivative contracts.
2016 | ||||||||||||||||||||||||
Position of accounts subject to interest rate risk | In millions of Reais | |||||||||||||||||||||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Financial Assets Held For Trading | 26,960 | 5,242 | 4,593 | 31,938 | 14,918 | 83,651 | ||||||||||||||||||
Debt instruments | 20,232 | 2,370 | 2,711 | 23,479 | 10,335 | 59,127 | ||||||||||||||||||
Equity instruments | 397 | - | - | - | - | 397 | ||||||||||||||||||
Trading derivatives | 6,331 | 2,872 | 1,882 | 8,459 | 4,582 | 24,126 | ||||||||||||||||||
Available-For-Sale Financial Assets | 2,940 | 1,350 | 1,761 | 42,683 | 11,046 | 59,780 | ||||||||||||||||||
Debt instruments | 954 | 1,350 | 1,761 | 42,683 | 11,046 | 57,794 | ||||||||||||||||||
Equity instruments | 1,985 | - | - | - | - | 1,985 | ||||||||||||||||||
Or Loss | 80 | 14 | 50 | 486 | 981 | 1,611 | ||||||||||||||||||
Debt instruments | 38 | 14 | 50 | 486 | 981 | 1,569 | ||||||||||||||||||
Equity instruments | 42 | - | - | - | - | 42 | ||||||||||||||||||
Non-Current Assets Held For Sale | 79 | 168 | 220 | 2,920 | 6,549 | 9,936 | ||||||||||||||||||
Reserves from Brazilian Central Bank | 58,594 | - | - | - | - | 58,594 | ||||||||||||||||||
Loans and Receivables | 16,435 | 99,924 | 32,590 | 79,467 | 68,120 | 296,536 | ||||||||||||||||||
Total | 105,088 | 106,698 | 39,214 | 157,494 | 101,614 | 510,108 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits from credit institutions | 135,457 | 49,973 | 46,686 | 69,605 | 4,987 | 306,708 | ||||||||||||||||||
Subordinated debts | - | 268 | 255 | 8,260 | - | 8,783 | ||||||||||||||||||
Marketable debt securities | 6,214 | 40,229 | 33,336 | 23,647 | 495 | 103,921 | ||||||||||||||||||
Trading derivatives | 6,046 | 1,308 | 1,268 | 7,123 | 4,167 | 19,912 | ||||||||||||||||||
Short positions | 31,551 | - | - | - | - | 31,551 | ||||||||||||||||||
Total | 179,268 | 91,778 | 81,545 | 108,635 | 9,649 | 470,875 |
2015 | ||||||||||||||||||||||||
Position of accounts subject to interest rate risk | In millions of Reais | |||||||||||||||||||||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Financial Assets Held For Trading | 3,399 | 5,288 | 6,917 | 21,436 | 8,149 | 45,189 | ||||||||||||||||||
Debt instruments | 1,225 | 1,806 | 4,542 | 12,038 | 4,182 | 23,793 | ||||||||||||||||||
Equity instruments | 405 | - | - | - | - | 405 | ||||||||||||||||||
Trading derivatives | 1,769 | 3,482 | 2,374 | 9,398 | 3,967 | 20,990 | ||||||||||||||||||
Available-For-Sale Financial Assets | 2,210 | 3,109 | 8,643 | 31,242 | 21,842 | 67,046 | ||||||||||||||||||
Debt instruments | 1,047 | 3,109 | 8,643 | 31,242 | 21,842 | 65,883 | ||||||||||||||||||
Equity instruments | 1,162 | - | - | - | - | 1,162 | ||||||||||||||||||
Or Loss | 611 | 12 | 48 | 427 | 893 | 1,991 | ||||||||||||||||||
Debt instruments | 38 | 12 | 48 | 427 | 893 | 1,418 | ||||||||||||||||||
Equity instruments | 574 | - | - | - | - | 574 | ||||||||||||||||||
Non-Current Assets Held For Sale | 80 | 163 | 215 | 2,096 | 7,327 | 9,881 | ||||||||||||||||||
Reserves from Brazilian Central Bank | 52,183 | - | - | - | - | 52,183 | ||||||||||||||||||
Loans and Receivables | 20,259 | 79,073 | 40,635 | 82,695 | 59,986 | 282,648 | ||||||||||||||||||
Total | 78,742 | 87,645 | 56,458 | 137,896 | 98,197 | 458,938 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits from credit institutions | 116,365 | 39,972 | 36,960 | 95,602 | 5,764 | 294,663 | ||||||||||||||||||
Subordinated debts | 44 | 87 | 7,990 | 9,694 | - | 17,815 | ||||||||||||||||||
Marketable debt securities | 8,070 | 24,823 | 12,484 | 52,032 | 52 | 97,461 | ||||||||||||||||||
Trading derivatives | 1,550 | 3,671 | 1,430 | 7,122 | 2,854 | 16,627 | ||||||||||||||||||
Short positions | 20,899 | - | - | - | - | 20,899 | ||||||||||||||||||
Total | 146,928 | 68,553 | 58,864 | 164,450 | 8,670 | 447,465 |
F-99
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Currency Risk
2016 | ||||||||||||||||
Position of accounts subject to currency risk | In millions of Reais | |||||||||||||||
Asset: | Dollar | Euro | Others | Total | ||||||||||||
Cash/Applications/Securities (FC/foreign) | 4,839 | - | - | 4,839 | ||||||||||||
Loans Operations and Leasing, net | 3,485 | - | - | 3,485 | ||||||||||||
Foreign Permanent Asset | 34,337 | 2,662 | - | 36,999 | ||||||||||||
Derivatives | 166,626 | 24,173 | 11,241 | 202,040 | ||||||||||||
Others | 25,273 | 1,020 | - | 26,293 | ||||||||||||
Total | 234,560 | 27,855 | 11,241 | 273,656 |
Liabilities: | Dollar | Euro | Others | Total | ||||||||||||
Funding in foreign currency | 32,255 | 640 | - | 32,895 | ||||||||||||
Derivatives | 183,277 | 27,973 | 11,426 | 222,676 | ||||||||||||
Others | 19,198 | - | 104 | 19,302 | ||||||||||||
Total | 234,730 | 28,613 | 11,530 | 274,873 |
Consolidated Financial Statements | December 31, 2021 | F-129 |
* Values expressed in thousands, except when indicated. |
2021 | ||||||
Position of accounts subject to interest rate risk | In millions of Reais | |||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |
Remunerated Assets: | ||||||
Financial assets measured at fair value in income | - | - | - | - | 3,122 | 3,122 |
Debt instruments | - | - | - | - | 3,122 | 3,122 |
Equity instruments | - | - | - | - | - | - |
Derivatives | - | - | - | - | - | - |
Financial assets measured at fair value in profit or loss for trading | 5,573 | 4,205 | 5,128 | 17,846 | 12,447 | 45,199 |
Debt instruments | 355 �� | 858 | 2,358 | 10,267 | 9,963 | 23,801 |
Equity instruments | 21 | 1 | 8 | 11 | 3 | 44 |
Derivatives | 5,197 | 3,346 | 2,762 | 7,568 | 2,481 | 21,354 |
Financial assets not intended for trading Mandatory measured at the fair value of the result | 54,053 | 1,012 | 4,779 | 59,267 | 32,808 | 151,919 |
Debt instruments | 54,053 | 1,012 | 4,779 | 59,267 | 32,808 | 151,919 |
Loans and Advances to Customers | - | - | - | - | - | - |
Financial assets measured at fair value in other comprehensive income | - | - | - | - | - | - |
Debt instruments | - | - | - | - | - | - |
Equity instruments | - | - | - | - | - | - |
Financial Assets Measured at Amortized Cost | 135,081 | 131,966 | 96,793 | 178,655 | 102,292 | 644,787 |
Loans and Other Amounts with Credit stitutions | 73,293 | 1,479 | 2,255 | 2,616 | - | 79,643 |
Loans and advances to customers | 60,735 | 128,631 | 71,041 | 158,933 | 94,368 | 513,708 |
Debt Instruments | 1,053 | 1,856 | 23,497 | 17,106 | 7,924 | 51,436 |
Total | 194,707 | 137,183 | 106,700 | 255,768 | 150,669 | 845,027 |
- | - | - | - | - | - | |
Remunerated Liabilities: | - | - | - | - | - | - |
- | - | - | - | - | - | |
Financial Liabilities Measured at Fair Value in income Held for Trading | 18,955 | 2,564 | 2,191 | 11,196 | 2,703 | 37,609 |
Derivatives | 6,174 | 2,564 | 2,191 | 11,196 | 2,703 | 24,828 |
Short Positions | 12,781 | - | - | - | - | 12,781 |
Financial liabilities at amortized cost | 309,659 | 116,052 | 108,718 | 180,572 | 31,897 | 746,898 |
Deposits from the Central Bank of Brazil and deposits from credit institutions | 43,414 | 48,359 | 27,340 | 11,415 | 4,035 | 134,563 |
Customer deposits | 260,711 | 50,470 | 70,403 | 110,290 | 24 | 491,898 |
Bonds and securities | 5,534 | 17,223 | 10,975 | 58,867 | 8,334 | 100,933 |
Debt Instruments Eligible to Capital | - | - | - | - | 19,504 | 19,504 |
Total | 328,614 | 118,616 | 110,909 | 191,768 | 34,600 | 784,507 |
Consolidated Financial Statements | December 31, 2021 | F-130 |
* Values expressed in thousands, except when indicated. |
2020 | ||||||
Position of accounts subject to interest rate risk | In millions of Reais | |||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |
Remunerated Assets: | ||||||
Financial assets measured at fair value in income | - | 153 | 50 | 250 | 1,747 | 2,200 |
Debt instruments | - | 153 | 50 | 250 | 1,747 | 2,200 |
Equity instruments | - | - | - | - | - | - |
Derivatives | - | - | - | - | - | - |
Financial assets measured at fair value in profit or loss for trading | 15,635 | 18,487 | 4,867 | 57,091 | 17,707 | 113,788 |
Debt instruments | 3,480 | 11,789 | 3,150 | 47,287 | 14,078 | 79,784 |
Equity instruments | 1,164 | - | - | - | - | 1,164 |
Derivatives | 10,992 | 6,698 | 1,717 | 9,804 | 3,629 | 32,840 |
Financial assets not intended for trading Mandatory measured at the fair value of the result | 439 | - | - | - | - | 439 |
Debt instruments | 439 | - | - | - | - | 439 |
Loans and Advances to Customers | - | - | - | - | - | - |
Financial assets measured at fair value in other comprehensive income | 3,455 | 3,625 | 12,177 | 63,651 | 22,430 | 105,339 |
Debt instruments | 3,383 | 3,625 | 12,177 | 63,651 | 22,430 | 105,267 |
Equity instruments | 72 | - | - | - | - | 72 |
Financial Assets Measured at Amortized Cost | 50,776 | 130,066 | 55,339 | 152,438 | 63,844 | 452,462 |
Loans and Other Amounts with Credit stitutions | 25,201 | 39,879 | 2,765 | 3,799 | - | 71,644 |
Loans and advances to customers | 25,490 | 88,071 | 50,829 | 134,805 | 61,795 | 360,990 |
Debt Instruments | 85 | 2,117 | 1,745 | 13,833 | 2,049 | 19,828 |
Total | 70,305 | 152,331 | 72,433 | 273,429 | 105,728 | 674,227 |
Remunerated Liabilities: | ||||||
Financial Liabilities Measured at Fair Value in income Held for Trading | 55,313 | 7,878 | 2,088 | 12,629 | 3,515 | 81,424 |
Derivatives | 10,160 | 7,878 | 2,088 | 12,629 | 3,515 | 36,270 |
Short Positions | 45,153 | - | - | - | - | 45,153 |
Financial liabilities at amortized cost | 174,848 | 100,497 | 91,433 | 131,589 | 16,667 | 515,035 |
Deposits from the Central Bank of Brazil and deposits from credit institutions | 4,007 | 32,846 | 22,603 | 7,891 | 3,031 | 70,379 |
Customer deposits | 163,297 | 44,035 | 61,293 | 98,867 | 203 | 367,694 |
Bonds and securities | 7,544 | 23,616 | 7,537 | 24,832 | 313 | 63,841 |
Debt Instruments Eligible to Capital | - | - | - | - | 13,120 | 13,120 |
Total | 230,161 | 108,376 | 93,521 | 144,218 | 20,182 | 596,458 |
Consolidated Financial Statements | December 31, 2021 | F-131 |
* Values expressed in thousands, except when indicated. |
2019 | ||||||
Position of accounts subject to interest rate risk | In millions of Reais | |||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |
Interest-earning assets: | ||||||
Financial Assets Held for Trading | 3,891 | 1,091 | 737 | 8,444 | 4,446 | 18,609 |
Debt instruments | - | 3 | 140 | 188 | 889 | 1,220 |
Equity instruments | 171 | - | - | - | - | 171 |
Trading derivatives | 3,720 | 1,088 | 597 | 8,256 | 3,557 | 17,218 |
Other Financial Assets at Fair Value Through Profit Or Loss | 4,261 | 802 | 3,981 | 16,737 | 7,075 | 32,856 |
Debt instruments | 2,232 | 802 | 3,981 | 16,737 | 7,075 | 30,827 |
Equity instruments | 2,029 | - | - | - | - | 2,029 |
Investments Held to Maturity | 98 | 96 | 280 | 3,679 | 3,981 | 8,134 |
Reserves from Brazilian Central Bank | 69,663 | - | - | - | - | 69,663 |
Financial Assets Measured at Amortized Cost | 28,416 | 75,794 | 51,603 | 112,467 | 54,815 | 323,095 |
Total | 106,329 | 77,783 | 56,601 | 141,327 | 70,317 | 452,357 |
Interest-bearing liabilities: | ||||||
Deposits from credit institutions | 224,610 | 62,181 | 69,277 | 70,882 | 2,556 | 429,506 |
Subordinated debts | - | - | - | 10,077 | - | 10,077 |
Marketable debt securities | 3,677 | 25,781 | 19,125 | 28,134 | 3,475 | 80,192 |
Trading derivatives | 4,597 | 1,621 | 1,074 | 9,119 | 3,828 | 20,239 |
Short positions | 23,501 | - | - | - | - | 23,501 |
Total | 256,385 | 89,583 | 89,476 | 118,212 | 9,859 | 563,515 |
Position of accounts subject to currency risk
Currency Risk | ||||||
2021 | ||||||
Position of accounts subject to currency risk | In millions of Reais | |||||
Asset: | Dollar | Euro | Others | Total | ||
Cash/Applications/Debt Instruments | 114,021 | 1,337 | 5,163 | 120,521 | ||
Loans and advances to customers | 5,529 | 2,218 | 608 | 8,355 | ||
Derivatives | 289,245 | 14,190 | 8,011 | 311,446 | ||
Others | 1,251 | - | - | 1,251 | ||
Total | 410,046 | 17,744 | 13,782 | 441,573 | ||
Liabilities: | Dollar | Euro | Others | Total | ||
Funding in foreign currency | 80,991 | 2,194 | 2,130 | 85,315 | ||
Derivatives | 225,554 | 14,279 | 8,631 | 248,464 | ||
Others | 105,570 | 1,220 | 2,912 | 109,701 | ||
Total | 412,115 | 17,711 | 13,673 | 443,480 | ||
Consolidated Financial Statements | December 31, 2021 | F-132 |
* Values expressed in thousands, except when indicated. |
2020 | ||||||
Position of accounts subject to currency risk | In millions of Reais | |||||
Asset: | Dollar | Euro | Others | Total | ||
Cash/Applications/Debt Instruments | 42,860 | 1,870 | 569 | 45,299 | ||
Loans and advances to customers | 5,803 | 3,187 | 1,140 | 10,130 | ||
Investments in Foreign Subsidiaries and Dependence | 57,914 | 215 | - | 58,129 | ||
Derivatives | 125,495 | 10,451 | 2,795 | 138,741 | ||
Others | 25,866 | - | - | 25,866 | ||
Total | 257,938 | 15,723 | 4,504 | 278,165 | ||
Liabilities: | Dollar | Euro | Others | Total | ||
Funding in foreign currency | 61,173 | 384 | - | 61,557 | ||
Derivatives | 147,911 | 14,449 | 2,854 | 165,214 | ||
Others | 39,972 | 219 | 437 | 40,629 | ||
Total | 249,056 | 15,052 | 3,291 | 267,400 |
2019 | ||||||
Position of accounts subject to currency risk | In millions of Reais | |||||
Asset: | Dollar | Euro | Others | Total | ||
Cash/Applications/Debt Instruments | 12,406 | 224 | 1 | 12,631 | ||
Loans and advances to customers | 4,776 | 1,920 | - | 6,696 | ||
Investments in Foreign Subsidiaries and Dependence | 50,193 | 3,557 | - | 53,750 | ||
Derivatives | 150,538 | 13,053 | 9,712 | 173,303 | ||
Others | 10,521 | 574 | - | 11,095 | ||
Total | 228,434 | 19,328 | 9,713 | 257,475 | ||
Liabilities: | Dollar | Euro | Others | Total | ||
Funding in foreign currency | 59,416 | 925 | 49 | 60,390 | ||
Derivatives | 169,136 | 20,184 | 8,515 | 197,835 | ||
Others | - | 60 | 1,009 | 1,069 | ||
Total | 228,552 | 21,169 | 9,573 | 259,294 |
Consolidated Financial Statements | December 31, 2021 | F-133 |
* Values expressed in thousands, except when indicated. |
c.2) Methodologies
Trading
The BankBanco Santander calculates its market riskminimum capital requirement for market risks using a standardthe internal model providedsince approval by Central Bank of Brazil.
Bacen in May 2018.
The standard methodology applied to trading activities by the Banco Santander in 20162021, 2020 and 2019 was the value at risk (VaR), which measures the maximum expected loss with a given confidence level and time horizon. This methodology was based on a standard historical simulation with a 99% confidence level and a one-day time horizon. Statistical adjustments were made to enable the swift and efficient incorporation of the most recent events that condition the level of risk assumed.
Specifically, the Bank uses a time window of two years or 521 daily data obtained retrospectively from the reference date of the VaR calculation. Two figures are calculated each day, one by applying an exponential decline factor which gives a lesser weighting to more distant observations in time, and another with uniform weightings for all observations. The VaR reported is the higher of these two figures.
VaR is not the only measure. It is used because it is easy to calculate and because it provides a good reference of the level of risk incurred by the Bank. However, other measures are simultaneously being implemented to enable the Bank to exercise greater risk control in all the markets in which it operates.
One of these measures is scenario analysis, which consists of defining behavior scenarios for various financial variables and determining the impact on results of applying them to the Bank’s activities. These scenarios can replicate past events (such as crisis) or, conversely, determine plausible scenarios that are unrelated to past events. A minimum of three types of scenarios are defined (plausible, severe and extreme) which, together with VaR, make it possible to obtain a much more complete spectrumview of the risk profile.
The positions are monitored daily through an exhaustive control of changes in the portfolios, aiming to detect possible incidents and correct them immediately. The daily preparation of an income statement is an excellent risk indicator, once it allows us to observe and detect the impact of changes in financial variables on the portfolios. The daily calculation of the result is also an excellent indicator of the risk, as it allows usthe Bank to observe and detect the impact of changes in financial variables in the portfolios.
Lastly, due to their atypical nature, derivatives and credit trading management (actively traded credit – Trading Book) activities are controlled by assessing specific measures on a daily basis. In the case of derivatives, these measures are sensitive to fluctuations in the price of the underlying (delta and gamma), in volatility (vega) and in time (theta). For credit trading management activities, the measures controlled include sensitivity to spread, jump-to-default and position concentrations by rating level.
In respect to the credit risk inherent in the trading portfolios (Credit Trading portfolios), and in keeping with the recommendations made by the Basel Committee of Banking Supervision, an additional measure has been introduced, the Incremental Risk Charge (IRC), in order to cover the default risk which is not properly captured in the VaR, through the variation of the related market prices of credit spreads. The instruments affected are basically fixed-income bonds, , derivatives on bonds (forwards, options, etc.) and credit derivatives (credit default swaps, asset-backed securities, etc.). The method used to calculate the IRC, is defined globally at Group level.
c.3) Balance-sheetsBalance-sheet management
Interest rate risk
The Bank analyses the sensitivity of the net interest margin and market value of equity to changes in interest rates. This sensitivity arises from maturity and interest rate repricing gaps in the various balance sheets items.
On the basis of the balance-sheets interest rate position, and considering the market situation and outlook, the necessary financial measures are adopted to align this position with that desired by the Bank. These measures can range from the taking of positions on markets to the definition of the interest rate features of commercial products.
Consolidated Financial Statements | December 31, 2021 | F-134 |
* Values expressed in thousands, except when indicated. |
The measures used by the Bank to control interest rate risk in these activities are the interest rate gap, the sensitivity of net interest margin (NIM) and market value of equity (MVE) to changes in interest rates, the duration of capital, value at risk (VaR), the EaR (Earning at Risk) and scenario analysis.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
Interest rate gap of assets and liabilities
The interest rate gap analysis focuses on the mismatches between the interest reset periodsreevaluation deadlines of on-balance-sheets assets and liabilities and of off-balance-sheets items. This analysis facilitates a basic snapshot of the balance sheetssheet structure and enables concentrations of interest rate risk in the various maturities to be detected. Additionally, it is a useful tool for estimating the possible impact of potential changes in interest rates on the entity's net interest margin and market value of equity.
The flows of all the on-on and off-balance-sheets aggregatesoff-balance sheet headings must be broken down and placed at the point of repricing or maturity. The duration and sensitivity of aggregatescontracts that do not have a contractual maturity date they are analyzed and estimated using an internal model.
Net interest margin (NIM) sensitivity
The sensitivity of the net interest margin measures the change in the expected accruals for a specific period (12 months) given a shift in the interest rate curve.
The sensitivity of the net interest margin is calculated by simulating the margin both for a scenario of changes in the interest rate curve and for the current scenario, thescenario. The sensitivity beingis the difference between the two margins so calculated.
Market value of equity (MVE) sensitivity
The sensitivity of the market value of equity is a complementary measure to the sensitivity of the net interest margin.
This sensitivity measures the interest rate risk implicit in the market value of equity based on the effect of changes in interest rates on the present values of financial assets and liabilities.
Value at risk (VaR) and Earnings at Risk (EaR)
It is defined with 99% base points of the MVE’s loss distribution function, calculated considering the market value of the positions, based on the payback obtained in the last two years and with degree of statistical certainty (level of trust) to a defined time horizon.
It is also applied a similar methodology to calculate the maximum loss in NII (EaR), in order to consider the interest rate risk even in economic value impact as in financial margin.
The value at risk for balance sheets aggregates and investment portfolios is calculated by applyingunit sums the same standard as that used for trading: historical simulation with a confidence interval of 99% . Statistical adjustments were made to enable the swift and efficient incorporationreturn vectors of the most recent eventsVAR with the return vectors of EaR, resulting the total return vector. The composition is made considering in the metric of EaR the losses in financial margin that conditionoccur between the levelinitial moment (reference date) and the holding period of risk assumed.the not-trading portfolio. The losses in the economic value takes in consideration the impact of the ending positions after the holding period.
c.4) Liquidity risk
Liquidity risk is associated with the Bank’sBank's ability to finance itspurchase commitments at reasonable market prices and to carry out its business plans with stable sources of funding. The Bank permanently monitors maximum gap profiles.financing.
The measures used to control liquidity risk in balance sheets management are the liquidity gap, liquidity ratios, stress scenarios and contingency plans.Liquidity Management of Santander Bank
Liquidity gapFor the control and liquidity management, the Santander bank uses short and long-term metrics and stress metrics that are capable of measuring the safe liquidity buffer so that the bank comfortably honors its obligations to the market and shareholders.
Then, we can cite:
TheShort-term metrics and liquidity gap determines the inflow and outflow of funds for assets, liabilities (note 45.d) and off-balance sheets accounts at a given time horizon, making it possible to analyze mismatches between the Bank's expected inflow and outflow of funds.stress:
A liquidity gap may be prepared and analyzed as divided into local currency liquidity gap and foreign currency liquidity gap, under which cash and cash equivalents, inflows and outflows and strategies are segregated into local and foreign currency, respectively.
a. LCR
The Santander Bank prepares three types of Liquidity Gap analysis:
1 - Contractual liquidity gap
The Contractual Liquidity Gap determines the contractual maturity flows of the Bank’s major products on a consolidated basis, and any existing mismatches. It also informs the available liquidity in one day and the consumption of or increase in liquidity in the period.
2 - Operational liquidity gap
Daily cash monitoring and management considering the market situation, maturities and renewal of assets and liabilities, liquidity requirement and specific events.
3 - Projected liquidity gap
Based on the Contractual Liquidity Gap, new maturity flows are projected considering the Bank’s budget plan.
Liquidity ratios
In addition touses the Liquidity Gap analysis, a Structure Liquidity model is also prepared to assess the structure profile of the sources and uses of the Bank’s funds, which includes LiquidityCoverage Ratio studies.
The key Liquidity Ratios analyzed are as follows:
• Deposits / Lending operations – measures the Institution’s ability to finance lending operations with more stable and lower-cost funding.
• Stable Liabilities / Permanent Assets – measures the ration between Capital + Other Stable Liabilities and Investments + Other Permanent Assets.
• Market Funding / Total Assets – measures the percentage of the Group’s assets financed with less stable and higher-cost funding.
• Short-term market funding / Market Funding – measures the percentage of probable liquidity loss (less than 90 days) on total less stable funding.
• Net Assets / Short-term Market Funding – measures the commitment ratio of highly-liquid assets and probable liquidity loss(less than 90 days).
Banco Santander uses(LCR) in its liquidity risk management the Liquidity Coverage Ratio (LCR).management. LCR (Liquidity Coverage Ratio) is a short-term liquidity ratioindex for a 30-day30 days stress scenario. Represents the result ofscenario, results from the division of the high qualityhigh-quality assets and the net cash outflows.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amountsoutflows in thousands of Brazilian Reais - R$, unless otherwise stated)
30 days.
The total of theTotal High Quality Liquidity Assets – HQLA is composed mainly byof Brazilian federal government bonds and reserve requirementscompulsory returns. The Net Outflowsnet outflows are composed mainly composed byof losses of deposits, compensatedoffset in part by Inflows,inflows, mainly loans.
Consolidated Financial Statements | December 31, 2021 | F-135 |
* Values expressed in thousands, except when indicated. |
b. Liquidity stress scenarios:
The Liquidity management requires the analysis of financial scenarios in which potential problems whit liquidity are mainly credits.assessed, for which is necessary to construct and study scenarios in crisis situations. The model used for this analysis is the Stress Test
The stress test evaluates the financial structure of the institution and its capacity to resist and react to more extreme situations.
The purpose of the Liquidity Stress Test is to allow the simulation of adverse market conditions, making it possible to evaluate the impacts on the institution´s liquidity and ability to payments, in order to anticipate the solutions or even avoid positions that excessively liquidity in stress scenarios.
The scenarios are defined from the analysis of market behavior during previous crisis. Four crisis scenarios are developed, with different intensities.
From the stress model’s analysis, the concept of minimum liquidity was defined, which is sufficient to support liquidity losses for a determined day horizon in all simulated crisis scenarios.
ThroughoutLong-term metrics
Its objective is to measure the three observations in this disclosure (exercise with endstability of October, Novembersources of financing against the assets committed. The NSFR metric developed by BIS and December 2016)adapted by the local regulator, which objective through determined percentages, to verify if the institution presented a surplus (difference between net assetshas stable source of funding to sustain its assets. This metrics has different weights by term, client’s segment and net outflows) of R$32.1 billion, which resulted in an LCR of 174%(1) (2015 - 136%), comfortably aboveproduct type. It is calculated monthly by the regulatory requirement of 70%.institution.
(1) Refersc. Liquidity indicators
In order to the averagehelp management, some liquidity indicators are calculated on a monthly basis, like ratios of the quarter as indicated in the publication of Circular 3,678 of the local regulator.concentration by counterparties and concentration by segments.
CustomersClients Funding
The Bank has different funding sources, both in products and mix of clients, with a healthy distribution between the segments. The total of clients’ resources is currently in R$ 78,6 billion and presented an increase comparing with 2019 amount, highlighting the increasing of time deposit funding and the keeping of financial letters inventory.
highlighting the increasing of time deposit funding and the keeping of financial letters
In millions of Reais | ||||||
Customers Funding | 2021 | 2020 | ||||
0 a 30 days | Total | % | 0 a 30 days | Total | % | |
Demand deposits | 39,574 | 39,574 | 100% | 35,550 | 35,550 | 100% |
Savings accounts | 65,220 | 65,220 | 100% | 62,210 | 62,210 | 100% |
Time deposits | 92,496 | 308,950 | 30% | 77,298 | 279,778 | 28% |
Interbank deposit | 763 | 4,001 | 19% | 818 | 5,145 | 16% |
Funds from acceptances and issuance of securities | 5,621 | 88,089 | 6% | 7,544 | 70,628 | 11% |
Borrowings and Onlendings | - | 90,709 | 0% | 3,189 | 67,760 | 5% |
Subordinated Debts / Debt Instruments Eligible to Compose Capital | - | 19,641 | 0% | - | 13,120 | 0% |
Total | 203,674 | 616,184 | 33% | 186,609 | 534,191 | 100% |
In millions of Reais | ||||||
Customers Funding | 2019 | |||||
0 a 30 days | Total | % | ||||
Demand deposits | 29,524 | 29,524 | 100% | |||
Savings accounts | 49,040 | 49,040 | 100% |
Time deposits | 53,321 | 190,344 | 28% | |||
Interbank deposit | 871 | 4,299 | 20% | |||
Funds from acceptances and issuance of securities | 3,921 | 85,963 | 5% | |||
Borrowings and Onlendings | 5,077 | 54,880 | 9% | |||
Subordinated Debts / Debt Instruments Eligible to Compose Capital | - | 10,175 | 0% | |||
Total | 141,754 | 424,225 | 33% |
Time deposits | 53,321 | 190,344 | 28% | |||
Interbank deposit | 871 | 4,299 | 20% | |||
Funds from acceptances and issuance of securities | 3,921 | 85,963 | 5% | |||
Borrowings and Onlendings | 5,077 | 54,880 | 9% | |||
Subordinated Debts / Debt Instruments Eligible to Compose Capital | - | 10,175 | 0% | |||
Total | 141,754 | 424,225 | 33% |
Consolidated Financial Statements | December 31, 2021 | F-136 |
* Values expressed in thousands, except when indicated. |
Santander has different sources of funding, both in terms of products and the mix of customers, with emphasis on retail operations of the Time Deposits. Total customer funds are currently at the level of R$364,788 million and showed stability compared to volumes at the end of 2015.
In millions of Reais | ||||||||||||||||||||||||
Customers Funding | 2016 | 2015 | ||||||||||||||||||||||
0 a 30 days | Total | % | 0 a 30 days | Total | % | |||||||||||||||||||
Demand deposits | 15,794 | 15,794 | 100 | % | 14,990 | 14,990 | 100 | % | ||||||||||||||||
Savings accounts | 35,901 | 35,901 | 100 | % | 35,842 | 35,842 | 100 | % | ||||||||||||||||
Time deposits | 24,452 | 150,686 | 16 | % | 22,048 | 148,682 | 15 | % | ||||||||||||||||
InterBank deposit | 944 | 2,379 | 40 | % | 1,896 | 2,855 | 66 | % | ||||||||||||||||
Funds from acceptances and issuance of securities | ||||||||||||||||||||||||
6,304 | 105,120 | 6 | % | 8,126 | 98,246 | 8 | % | |||||||||||||||||
Borrowings and Onlendings | 4,114 | 46,124 | 9 | % | 2,836 | 52,769 | 5 | % | ||||||||||||||||
Subordinated Debts / Debt Instruments | ||||||||||||||||||||||||
Eligible to Compose Capital | - | 8,784 | 0 | % | 234 | 18,006 | 1 | % | ||||||||||||||||
Total | 87,509 | 364,788 | 24 | % | 85,972 | 371,390 | 23 | % |
Assets and liabilities in accordance with the remaining contractual maturities, considering the undiscounted flows are as follows:
2016 | ||||||||||||||||||||||||
Non-Discounted Future Flows Except Derivatives | In millions of Reais | |||||||||||||||||||||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Financial Assets Held For Trading | 27,093 | 5,262 | 4,749 | 36,135 | 25,573 | 98,812 | ||||||||||||||||||
Debt instruments | 20,762 | 2,390 | 2,867 | 27,676 | 20,991 | 74,686 | ||||||||||||||||||
Trading derivatives | 6,331 | 2,872 | 1,882 | 8,459 | 4,582 | 24,126 | ||||||||||||||||||
Available-For-Sale Financial Assets | 1,492 | 1,373 | 1,819 | 55,056 | 29,854 | 89,594 | ||||||||||||||||||
Debt instruments | 1,492 | 1,373 | 1,819 | 55,056 | 29,854 | 89,594 | ||||||||||||||||||
Other Financial Assets At Fair Value Through Profit | 38 | 14 | 52 | 586 | 1,824 | 2,514 | ||||||||||||||||||
Or Loss | ||||||||||||||||||||||||
Debt instruments | 38 | �� | 14 | 52 | 586 | 1,824 | 2,514 | |||||||||||||||||
Non-Current Assets Held For Sale | 79 | 170 | 227 | 3,307 | 9,979 | 13,762 | ||||||||||||||||||
Reserves from Brazilian Central Bank | 58,594 | - | - | - | - | 58,594 | ||||||||||||||||||
Loans and Receivables | 18,151 | 112,337 | 42,763 | 106,518 | 82,770 | 362,539 | ||||||||||||||||||
Total | 105,447 | 119,156 | 49,610 | 201,602 | 150,000 | 625,815 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits from credit institutions | 135,725 | 51,098 | 50,024 | 86,535 | 7,444 | 330,826 | ||||||||||||||||||
Subordinated Debts / Debt Instruments Eligible to | ||||||||||||||||||||||||
Compose Capital | - | 347 | 330 | 10,633 | - | 11,310 | ||||||||||||||||||
Marketable debt securities | 6,234 | 41,431 | 35,390 | 27,344 | 521 | 110,920 | ||||||||||||||||||
Trading derivatives | 6,046 | 1,308 | 1,268 | 7,123 | 4,167 | 19,912 | ||||||||||||||||||
Short positions | 31,551 | - | - | - | - | 31,551 | ||||||||||||||||||
Total | 179,556 | 94,184 | 87,012 | 131,635 | 12,132 | 504,519 |
2021 | ||||||
In millions of Reais | ||||||
Future Cash Flows Except for Derivatives | 0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total |
Remunerated Assets: | ||||||
Financial assets measured at fair value in income | - | - | - | - | 3,122 | 3,122 |
Debt instruments | - | - | - | - | 3,122 | 3,122 |
Financial assets measured at fair value in profit or loss for trading | 5,573 | 4,197 | 5,031 | 16,366 | 8,023 | 39,191 |
Debt instruments | 355 | 850 | 2,261 | 8,786 | 5,539 | 17,791 |
Equity Instruments | 21 | 1 | 8 | 11 | 3 | 44 |
Derivatives | 5,197 | 3,346 | 2,762 | 7,568 | 2,481 | 21,354 |
Financial assets measured at fair value in other comprehensive income | 54,012 | 1,007 | 4,690 | 50,092 | 15,833 | 125,635 |
Debt instruments | 54,012 | 1,007 | 4,690 | 50,092 | 15,833 | 125,635 |
Equity Instruments | - | - | - | - | - | - |
Financial assets measured at amortized cost | 109,330 | 98,848 | 78,187 | 172,736 | 78,053 | 537,155 |
Loans and Other Amounts with Credit Institutions | 73,290 | 1,464 | 2,041 | 2,313 | - | 79,108 |
Loans and advances to customers | 34,989 | 94,872 | 55,118 | 150,204 | 76,554 | 411,737 |
Debt instruments | 1,051 | 2,512 | 21,028 | 20,219 | 1,499 | 46,310 |
Total | 168,915 | 104,053 | 87,907 | 239,195 | 105,032 | 705,102 |
Remunerated Liabilities: | ||||||
Financial Liabilities Measured at Fair Value in Income Held for Trading | 18,955 | 2,564 | 2,191 | 11,196 | 2,703 | 37,609 |
Derivatives | 6,174 | 2,564 | 2,191 | 11,196 | 2,703 | 24,828 |
Short positions | 12,781 | - | - | - | - | 12,781 |
Financial liabilities at amortized cost | 289,743 | 106,358 | 102,585 | 165,145 | 25,366 | 689,197 |
Deposits from the Central Bank of Brazil and deposits from credit institutions | 33,714 | 46,465 | 25,626 | 10,610 | 2,742 | 119,157 |
Customer deposits | 252,070 | 48,364 | 67,467 | 105,690 | 23 | 473,613 |
Bonds and securities | 3,959 | 11,529 | 9,492 | 48,845 | 3,097 | 76,922 |
Debt Instruments Eligible to Capital | - | - | - | - | 19,504 | 19,504 |
Total | 308,698 | 108,922 | 104,776 | 176,341 | 28,069 | 726,806 |
F-102
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2015 | ||||||||||||||||||||||||
Non-Discounted Future Flows Except Derivatives | In millions of Reais | |||||||||||||||||||||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Financial Assets Held For Trading | 2,831 | 4,125 | 7,031 | 24,032 | 16,623 | 54,642 | ||||||||||||||||||
Debt instruments | 1,226 | 1,860 | 4,761 | 15,430 | 13,151 | 36,428 | ||||||||||||||||||
Trading derivatives | 1,605 | 2,265 | 2,270 | 8,602 | 3,472 | 18,214 | ||||||||||||||||||
Available-For-Sale Financial Assets | 1,048 | 3,185 | 9,475 | 41,894 | 55,640 | 111,242 | ||||||||||||||||||
Debt instruments | 1,048 | 3,185 | 9,475 | 41,894 | 55,640 | 111,242 | ||||||||||||||||||
Other Financial Assets At Fair Value Through Profit Or Loss | 38 | 12 | 48 | 427 | 893 | 1,418 | ||||||||||||||||||
Debt instruments | 38 | 12 | 48 | 427 | 893 | 1,418 | ||||||||||||||||||
Non-Current Assets Held For Sale | 80 | 163 | 219 | 2,360 | 10,358 | 13,180 | ||||||||||||||||||
Reserves from Brazilian Central Bank | 52,183 | - | - | - | - | 52,183 | ||||||||||||||||||
Loans and Receivables | 22,717 | 89,907 | 51,196 | 110,204 | 73,132 | 347,156 | ||||||||||||||||||
Total | 78,897 | 97,392 | 67,969 | 178,917 | 156,646 | 579,821 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits from credit institutions | 116,525 | 40,676 | 40,453 | 128,627 | 8,594 | 334,875 | ||||||||||||||||||
Subordinated Debts / Debt Instruments Eligible to | ||||||||||||||||||||||||
Compose Capital | 297 | 113 | 8,845 | 12,606 | - | 21,861 | ||||||||||||||||||
Marketable debt securities | 8,093 | 25,732 | 13,900 | 67,049 | 116 | 114,890 | ||||||||||||||||||
Trading derivatives | 1,230 | 1,937 | 1,265 | 6,915 | 2,604 | 13,951 | ||||||||||||||||||
Short positions | 20,899 | - | - | - | - | 20,899 | ||||||||||||||||||
Total | 147,044 | 68,458 | 64,463 | 215,197 | 11,314 | 506,476 |
Consolidated Financial Statements | December 31, 2021 | F-137 |
* Values expressed in thousands, except when indicated. |
2020 | ||||||
Non-Discounted Future Flows Except Derivatives | In millions of Reais | |||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |
Interest-earning assets: | ||||||
Financial assets measured at fair value in income | - | 174 | 98 | 667 | 2,900 | 3,839 |
Debt instruments | - | 174 | 98 | 667 | 2,900 | 3,839 |
Financial assets measured at fair value in profit or loss for trading | 16,028 | 19,211 | 5,763 | 63,618 | 25,489 | 130,108 |
Debt instruments | 3,873 | 12,513 | 4,046 | 53,814 | 21,859 | 96,104 |
Equity Instruments | 1,164 | - | - | - | - | 1,164 |
Derivatives | 10,992 | 6,698 | 1,717 | 9,804 | 3,629 | 32,840 |
Financial assets not intended for trading Mandatory measured at the fair value of the result | 439 | - | - | - | - | 439 |
Equity Instruments | 439 | - | - | - | - | 439 |
Financial assets measured at fair value in other comprehensive income | 5,000 | 3,874 | 13,850 | 75,849 | 35,538 | 134,110 |
Debt instruments | 4,928 | 3,874 | 13,850 | 75,849 | 35,538 | 134,038 |
Equity Instruments | 72 | - | - | - | - | 72 |
Financial assets measured at amortized cost | 53,147 | 145,280 | 69,004 | 208,295 | 135,783 | 611,509 |
Loans and Other Amounts with Credit Institutions | 24,638 | 40,579 | 2,901 | 4,205 | - | 72,324 |
Loans and advances to customers | 28,424 | 102,379 | 64,194 | 188,430 | 135,987 | 519,415 |
Debt instruments | 85 | 2,321 | 1,909 | 15,660 | (205) | 19,771 |
Total | 74,615 | 168,538 | 88,715 | 348,429 | 199,709 | 880,005 |
Remunerated Liabilities: | ||||||
Financial Liabilities Measured at Fair Value in Income Held for Trading | 55,313 | 7,878 | 2,088 | 12,629 | 3,515 | 81,424 |
Derivatives | 10,160 | 7,878 | 2,088 | 12,629 | 3,515 | 36,270 |
Short positions | 45,153 | - | - | - | - | 45,153 |
Financial liabilities at amortized cost | 176,223 | 101,111 | 93,103 | 145,931 | 16,471 | 532,838 |
Deposits from the Central Bank of Brazil and deposits from credit institutions | 3,707 | 33,039 | 22,860 | 8,014 | 2,802 | 70,421 |
Customer deposits | 165,171 | 44,571 | 62,606 | 110,809 | 215 | 383,372 |
Bonds and securities | 7,345 | 23,502 | 7,637 | 27,109 | 333 | 65,925 |
Debt Instruments Eligible to Capital | - | - | - | - | 13,120 | 13,120 |
Total | 463,072 | 217,979 | 190,382 | 317,119 | 39,972 | 1,228,525 |
Consolidated Financial Statements | December 31, 2021 | F-138 |
* Values expressed in thousands, except when indicated. |
2019 | ||||||
Non-Discounted Future Flows Except Derivatives | In millions of Reais | |||||
0 to 30 days | 31 to 180 days | 181 to 365 days | 1 to 5 years | Above 5 years | Total | |
Interest-earning assets: | ||||||
Financial Assets Held For Trading | 3,766 | 1,103 | 802 | 8,894 | 6,157 | 20,722 |
Debt instruments | 46 | 15 | 205 | 638 | 2,600 | 3,504 |
Trading derivatives | 3,720 | 1,088 | 597 | 8,256 | 3,557 | 17,218 |
Other financial assets at fair value through profit or loss | 2,642 | 1,160 | 4,853 | 23,638 | 15,502 | 47,795 |
Debt instruments | 2,642 | 1,160 | 4,853 | 23,638 | 15,502 | 47,795 |
Investments Held to Maturity | 99 | 111 | 327 | 4,066 | 6,030 | 10,633 |
Reserves from Brazilian Central Bank | 69,663 | - | - | - | - | 69,663 |
Financial Assets Measured at Amortized Cost | 32,417 | 89,335 | 65,395 | 159,615 | 110,607 | 457,369 |
Total | 108,587 | 91,709 | 71,377 | 196,213 | 138,296 | 606,182 |
Interest-bearing liabilities: | ||||||
Deposits from credit institutions | 218,883 | 61,461 | 71,953 | 79,666 | 2,660 | 434,623 |
Subordinated Debts / Debt Instruments Eligible to Compose Capital | - | - | - | 12,673 | - | 12,673 |
Marketable debt securities | 3,697 | 26,096 | 19,829 | 31,407 | 4,628 | 85,657 |
Trading derivatives | 4,597 | 1,621 | 1,074 | 9,119 | 3,828 | 20,239 |
Short positions | 23,501 | - | - | - | - | 23,501 |
Total | 250,678 | 89,178 | 92,856 | 132,865 | 11,116 | 576,693 |
Scenario analysis / Contingency plan
Liquidity management requires an analysis of financial scenarios where possible liquidity issues are evaluated. For this, crisis scenarios are built and then studied. The model used for this analysis is the Liquidity Stress Test.
The Liquidity Stress Test assesses the institution’s financial structure and ability to resist and respond to the most extreme situations.
The purpose of the Liquidity Stress Test is to simulate adverse market conditions, making it possible assess impacts on the institution’s liquidity and payment ability, so as to take preventive actions or avoid positions that may adversely affect liquidity in worst-case scenarios.
Scenarios are determined based on an analysis of the market commitment during prior crisis and future estimates. Four scenarios with different intensity levels are prepared.
Based on an analysis of the stress models, the Minimum Liquidity concept was determined, which is the minimum liquidity required to support the liquidity losses of up to 90% for 90 days in all crisis scenarios simulated.
Based on the results obtained throughin the Liquidity Stress Test, the Bank prepares itsthe Liquidity Contingency Plan, which isconsists of a formal combinationset of preventive and corrective actions to be taken in moments of liquidity crisis scenarios.
crisis. The Liquidity Contingencyactivation of the Plan is primarily intendedresults from the monitoring of internal parameters related to the following:
• Crisis identification – the preparationBank's market and liquidity conditions. Such parameters serve to identify different levels of a Liquidity Contingency Plan requires the determination in advance of a measurable parameter determining the institution’s liquidity conditioncrisis severity and, structure. This parameter is the Liquidity Minimum Limit determined by the Liquidity Stress Test. When this limit is exceeded,thus, determine whether or not there is a liquidity crisis environment, and thus,need to start the Contingency Plan is used.activation process.
• Internal Communication – afterAfter the crisis is identified, it is necessary to establisha clear communication channels to mitigateis established between the problems raised. People held accountable for taking these contingencyinternal areas capable of executing corrective actions should be notifiedand mitigating the problems
caused. These corrective actions are measures capable of the extent of the contingency and measures to be taken.
• Corrective actions – Actions intended to actually generate the funds requiredgenerating liquidity to solve or mitigate the effects of the crisis as follows:and are taken considering its complexities, implementation deadlines and liquidity impact.
- Assess the typeThe parameters and severitymeasures of the crisis;
- Identify the most impacted segment;
- Put in practice the measures planned to generate funds, considering the required amount and cost of the additional resource, either financial or image cost.
ALCO reviews and approves stress models, Minimum Liquidity and Contingencythis Plan on a semi-annual basis.
If adverse market conditions occur, ALCO mayare reviewed at any time that it becomes necessary, however its minimum review and approve new models, Minimum Liquidity and Contingency Plan when needed.period is annual.
c.5) Structural foreign currency risk / Hedges of results / Structural equities risk
These activities are monitored by measuring positions, VaR and results.
c.5.1) Complementary measures
Calibration and test measures
Back-testingThe back-testing consists of performing a comparative analysis between VaRthe estimates of Value at Risk (VaR) and the daily “clean” results (profit or loss on(result of the portfolios at the endclose of the precedingprevious day, valuedevaluated at following-day prices)the prices of the following day) and “dirty” (managerial income taking into accountresult leading to also theconsidering costs, intraday results and loading). The aimpurpose of these tests is to verify and provide a measure of the accuracy of the models used to calculate VaR.in the VaR calculation.
Back-testing analyses performed atThe back-testing analyzes carried out by Banco Santander comply, at the very least, with the BIS recommendations regarding the verification of the internal systems used to measurein the measurement and managemanagement of financial risks. Additionally, the SantanderThe Bank also conductsperforms hypothesis tests: excess tests, normality tests, Spearman’s rankSpearman correlation, average excess measures, etc.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The assessmentEvaluation models are regularly calibrated and tested by a specialized unit.
Consolidated Financial Statements | December 31, 2021 | F-139 |
* Values expressed in thousands, except when indicated. |
c.6) Control system
Limit setting
The limitboundary setting process is performed together withruns alongside the budgeting activity and is thea tool used to establish the assets and liabilities available tofor each business activity. Limit settingSetting limits is a dynamic process that responds to the level of risk considered acceptable by management.
Management. The limitsboundary structure requiresconsists of developing a process to be performed that pursues,considers, among others, the following objectives:aspects:
1. To identifyIdentify and delimit, in an efficientefficiently and comprehensive manner,comprehensively, the main types of financial risk incurred,risks generated, so that they are consistent with the management of the business management and with the defined strategy.
2. To quantifyQuantify and communicate to the business areas the riskwhat levels and profile deemedrisk profiles are considered acceptable by senior management so asManagement, in order to avoid undesiredunwanted risks.
3. To giveGive flexibility to the business areas for theto assume financial risks in an efficient and timely assumption of financial risks, depending onmanner, due to changes in the market changes, and for the implementation of the business strategies, provided thatand always within the risk levels considered acceptable levels of risk are not exceeded.by the institution.
4. To allowAllow business makersgenerators to assumetake risks which, althoughin a prudent areand sufficient volume to obtainachieve the budgeted results.
5. To delimitDelimit the range of products and underlying assets withunderlyings in which each Treasury unit can operate, taking into account featuresconsidering characteristics such as assessment modelmodels and valuation systems, liquidity of the instruments involved, etc.
c.7) Risks and results in 20162021
Financial Intermediation Activities
The average VaR from negotiationthe Bank´s trading portfolio of the bank in 20162021 ended in R$804 thousands (2015 - R$525 million and 2014 – R$32,3 million). 34.5 million. The dynamic management of this profile allows the Bank to change its strategy to capitalize the opportunities offered by aan uncertain environment.
c.7.1) Asset and liabilitybalance sheet management(1)
Interest rate risk
Convertible currencies
At 2016 year-the end of 2021, the sensitivity of the net interest margin at one year to parallel increases of 100 basis points applied to Banco Santander portfolios was concentrated on the BRL interest rate curve was positive by R$385553 million.
Also, at 20162021 year-end, the sensitivity market value of equity to parallel increases of 100 basis points applied to the Banco Santander in the BRL interest rate curve was positive by R$1,6801,675 million.
Quantitative risk analysis
The interest rateInterest risk in balance sheetssheet management portfolios, measured in terms of sensitivity of the net interest margin (NIM) atincome sensitivity, for one year toat a parallel increaserise of 100 b.p. inbasis points of the interest rate curve, increased by R$121 million between 2021 and 2020, reaching the maximum of R$607 million in June, 2021. Value sensitivity decreased by R$14096 million over 2016,during the year 2021, reaching a maximum level of R$5691,882 million in April. The sensitivity value decreased R$120 million during 2016, reaching a maximum of R$2,204 million in July. September, 2021. The main factors that occurred in 20162021 and influenced in sensitivitythe sensitivities were the volatilityfall in the yield curve (convexity effect), portfolio decline and updating of the exchange rate (convexity effect), portfolio’s decay, updateimplicit methodologies on the cash flows of implicit methodology on cash flow of the Bank’s products and liquidity.Banco Santander products.
Thousands of Reais | 2016 | 2015 | 2014 | |||||||||
Sensibilities | ||||||||||||
Net Interest Margin | 385 | 525 | 490 | |||||||||
Market Value of Equity | 1,680 | 1,800 | 1,846 | |||||||||
Value at Risk - Balance | ||||||||||||
VaR | 804 | 926 | 605 |
(1) Includes the balance sheets total, except for the financial assets and liabilities held for trading.
Million of Reais | ||||||
2021 | 2020 | 2019 | ||||
Sensibilities | ||||||
Net Interest Margin | 553 | 432 | 334 | |||
Market Value of Equity | 1,675 | 1,771 | 2,063 | |||
Value at Risk - Balance | ||||||
VaR | 791 | 1,365 | 1,755 |
Structural liquidity management
Structural liquidity management seeks to finance the Bank’s recurring business with optimal maturity and cost conditions, avoiding the need to assume undesired liquidity risks.
The main features of the structural liquidity management in 2016 were as follows:
• Ample structural liquidity position. Since Banco Santander is basically a commercial Bank, customer deposits constitute the main source of liquidity in its financing structure. These deposits, combined with capital and other similar instruments, enable the Bank to cover most of its liquidity requirements and, as a result, the financing raised in wholesale markets is moderate with respect to the size of its balance sheets.
• In Brazil, the legal reserve requirement takes a considerable part of the funding.
• Obtainment of liquidity through diversification in instruments. Additionally, subordinated and senior debts have an overall long maturity.
• The local balance sheets should be self-funded.
• Based on stress test results, a minimum liquidity buffer is maintained.
• Banco Santander reliance in international funding is not considerable.
• The aim is that hard currency related activities be funded with third parties hard currency funding.
• Though, given the potential disruptions in this market, Banco Santander has mechanisms to use the local liquidity in order to support hard currency activities.
• High capacity to obtain on-balance-sheets liquidity. Government bond positions are held for liquidity management purposes.
• The Bank performs control and management functions, which involves planning its funding requirements, structuring the sources of financing to achieve optimum diversification in terms of maturities and instruments, and defining contingency plans.
Consolidated Financial Statements | December 31, 2021 | F-140 |
* Values expressed in thousands, except when indicated. |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
In practice, the liquidity management performed by the Bank consists of the following:
• Each year, a liquidity plan is prepared on the basis of the financing needs arising from the budgets of each business. Based on these liquidity requirements and taking into account certain prudential limits on the obtainment of short-term market financing, the Bank establishes an issue and securitization plan for the year.
• Throughout the year the Bank periodically monitors the actual changes in financing requirements and updates this plan accordingly.
• Control and analysis of liquidity risk. The primary objective is to guarantee that the Bank has sufficient liquidity to meet its short- and long-term financing requirements in normal market situations. To this end, the Bank employs certain balance-sheets control measures, such as the liquidity gap and liquidity ratios.
Simultaneously, various scenario (or stress-scenario) analysis are conducted which consider the additional requirements that could arise if certain extreme but plausible events occur. The aim pursued is to cover a broad spectrum of situations that are more or less likely to affect the Bank, thus enabling it to prepare the related contingency plans.
c.8) Sensitivity analysis
The risk management is focused on portfolios and risk factors pursuant to the requirements of regulators and good international practices.
Financial instruments are segregated into trading and Banking portfolios, as in the management of market risk exposure, according to the best market practices and the transaction classification and capital management criteria of the New Standardized Approach of regulators. The trading portfolio consists of all transactions with financial instruments and products, including derivatives, held for trading, and the Banking portfolio consists of core business transactions arising from the different Banco Santander business lines and their possible hedges. Accordingly, based on the nature of Banco Santander’s activities, the sensitivity analysis was presented for trading and Banking portfolios.
Banco Santander performs the sensitivity analysis of the financial instruments in accordance with requirements of regulatory bodies and international best practices, considering the market information and scenarios that would adversely affect the positions and the income of the Bank.
The table below summarizes the stress amounts generated by Banco Santander’s corporate systems, related to the Banking and trading portfolio, for each one of the portfolio scenarios as atof December 31, 2016.2021.
Trading portfolio
2016 | 2021 | ||||||||||||||||||
Risk Factor | Description | Scenario 1 | Scenario 2 | Scenario 3 | Description | Scenario 1 | Scenario 2 | Scenario 3 | |||||||||||
Interest Rate - Reais | Exposures subject to changes in interest fixed rate | (6,274 | ) | (242,001 | ) | (484,003 | ) | Exposures subject to changes in interest fixed rate | (4,943) | (108,670) | (217,339) | ||||||||
Coupon Interest Rate | Exposures subject to changes in coupon rate of interest rate | (3,458 | ) | (39,970 | ) | (79,939 | ) | Exposures subject to changes in coupon rate of interest rate | (550) | (7,132) | (14,265) | ||||||||
Inflation | Exposures subject to change in coupon rates of price indexes | (5,428 | ) | (88,258 | ) | (176,515 | ) | ||||||||||||
Coupon - US Dollar | Exposures subject to changes in coupon US Dollar rate | (21 | ) | (5,106 | ) | (10,212 | ) | Exposures subject to changes in coupon US Dollar rate | (5,564) | (34,407) | (68,815) | ||||||||
Coupon - Other Currencies | Exposures subject to changes in coupon foreign currency rate | (357 | ) | (6,048 | ) | (12,097 | ) | Exposures subject to changes in coupon foreign currency rate | (5,270) | (19,539) | (39,077) | ||||||||
Foreign currency | Exposures subject to foreign exchange | (6,547 | ) | (163,687 | ) | (327,373 | ) | Exposures subject to foreign exchange | (1,127) | (1,900) | (3,801) | ||||||||
Eurobond/Treasury/Global | Exposures subject to changes in interest rate negotiated roles in international | (2 | ) | (90 | ) | (179 | ) | Exposures subject to Interest Rate Variation on Papers Traded on the International Market | (426) | (10,658) | (21,315) | ||||||||
market | |||||||||||||||||||
Inflation | Exposures subject to change in coupon rates of price indexes | (5,218) | (6,018) | (12,035) | |||||||||||||||
Shares and Indexes | Exposures subject to change in shares price | (618 | ) | (15,458 | ) | (30,915 | ) | Exposures subject to change in shares price | (1,553) | (38,814) | (77,629) | ||||||||
Other | Exposures not meeting the previous settings | (17,786 | ) | (2,276 | ) | (4,551 | ) | ||||||||||||
Commodities | Exposures subject to change in commodities' prices | (1,184) | (29,609) | (59,217) | |||||||||||||||
Total(1) | (40,491 | ) | (562,894 | ) | (1,125,784 | ) | (25,835) | (256,747) | (513,493) |
(1) Amounts net of taxes.
Scenario 1:a shock of 10 base points on the interest curves and 1% to price changes (currency and stocks);
Scenario 2:a shock of +25% and -25% in all risk factors, are considered the greatest losses per risk factor;
Scenario 3:a shock of +50% and -50% in all risk factors, are considered the greatest losses per risk factor.
Portfolio Banking
2016 | 2021 | ||||||||||||||||||
Risk Factor | Description | Scenario 1 | Scenario 2 | Scenario 3 | Description | Scenario 1 | Scenario 2 | Scenario 3 | |||||||||||
Interest Rate - Reais | Exposures subject to changes in interest fixed rate | (53,558 | ) | (1,376,404 | ) | (2,621,638 | ) | Exposures subject to changes in interest fixed rate | (48,956) | (1,673,128) | (3,756,544) | ||||||||
TR and Long-Term Interest Rate - | |||||||||||||||||||
(TJLP) | Exposures subject to changes in Exchange of TR in TJLP | (3,128 | ) | (82,938 | ) | (177,829 | ) | ||||||||||||
TR and Long-Term Interest Rate - (TJLP) | Exposures subject to changes in Exchange of TR in TJLP | (6,413) | (97,524) | (145,711) | |||||||||||||||
Inflation | Exposures subject to change in coupon rates of price indexes | (11,551 | ) | (206,934 | ) | (354,086 | ) | Exposures subject to change in coupon rates of price indexes | (34,286) | (455,628) | (838,652) | ||||||||
Coupon - US Dollar | Exposures subject to changes in coupon US Dollar rate | (412 | ) | (57,174 | ) | (103,108 | ) | Exposures subject to changes in coupon US Dollar rate | (13,530) | (60,291) | (117,298) | ||||||||
Coupon - Other Currencies | Exposures subject to changes in coupon foreign currency rate | (7,224 | ) | (45,407 | ) | (91,225 | ) | Exposures subject to changes in coupon foreign currency rate | (3,891) | (7,770) | (15,642) | ||||||||
Interest Rate Markets International | Exposures subject to changes in interest rate negotiated roles in international market | (13,143 | ) | (190,043 | ) | (352,433 | ) | Exposures subject to changes in interest rate negotiated roles in international market | (31,456) | (78,782) | (161,417) | ||||||||
Foreign Currency | Exposures subject to Foreign Exchange | (722 | ) | (18,048 | ) | (36,097 | ) | Exposures subject to Foreign Exchange | 560 | 13,995 | 27,989 | ||||||||
Total(1) | (89,738 | ) | (1,976,948 | ) | (3,736,416 | ) | (137,972) | (2,359,128) | (5,007,275) |
(1) Amounts net of taxes.
Scenario 1:a shock of 10 base points+10bps and -10bps in interest rate curves and 1% price variance (currency)(currency and stocks);
are considered the greatest losses per risk factor;
Scenario 2:a shock of +25% and -25% in all risk factors, are considered the greatest losses per risk factor;
Scenario 3:a shock of +50% and -50% in all risk factors, are considered the greatest losses per risk factor.
Consolidated Financial Statements | December 31, 2021 | F-141 |
* Values expressed in thousands, except when indicated. |
d) Bank´s business is highly dependent on the proper functioning of information technology systems.
d)Our business is highly dependent on the ability of our information technology systems to accurately process a large number of transactions across numerous and diverse markets and products in a timely manner, and on our ability to rely on our digital technologies, computer and email services, software and networks, as well as on the secure processing, storage and transmission of confidential data and other information in our computer systems and networks. The proper functioning of our financial control, risk management, accounting, customer service and other data processing systems is critical to our business and our ability to compete effectively.
e) Independent Structure
The local corporativeOperational Risk & Internal Control area, called Non-Financial Risks, is responsible for implementing the management and control model of Operational Risks and Internal Controls of Banco Santander. It is subordinated to the Executive Vice-Presidentvice Presidency of RisksRisk, operates independently as a second line of defense, supporting and count with people, structure, standards, methodologieschallenging the first line of defense. They maintain guidelines, policies and tools for ensuringprocesses to ensure the conduct and adequacy of the managementOperational Risk Control and control model.
Management Model.
The Administration is an acting part and is aligned witharea adopts the missiondefinition of the areas, recognizing, participatingBasel Committee, the Central Bank of Brazil and sharing responsibility for the continuous improvementCorporative instructions applicable locally to Operational Risk as the possibility of losses resulting from the inadequacy or failure of processes, operational and technological risk management culture and structure as well as ofsystems, or from external events. In addition, the internal control system. Then they can ensure compliance with the established objectives and goals, as well as the security and quality of the products and services provided by the Bank.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
The Bank'sBank´s Board of Directors Santander opted to adoptfor the Alternative Standardized Approach (ASA) to calculatefor the installmentcalculation of Required Notionalthe portion of Reference Equity (PRE)(PR) related to operational risk.Operational Risk.
d.1) Non-Financiale.1) Operational Risks & Internal Control
ItThe Operational Risk & Internal Control area has asa mission towardswith Banco Santander: Support forTo support the achievementfulfillment of the strategic objectives and the decision-making process, the adequacyin adapting and attendancemeeting mandatory requirements, the maintenance of solidity,maintaining soundness, reliability, reductionreducing and mitigation ofmitigating losses due to risks operational, risks, further onin addition to the implementation, dissemination of the culture of operational risks and internal controls.Operational Risk culture.
Acts in preventingAdditionally, the operational riskOperational Risk & Internal Control area works to prevent Operational Risks and supports for the continuedcontinuous strengthening of the internal controlInternal Controls system, attendingmeeting the requirements of regulatory agencies, Newthe Regulatory Bodies, Basel Agreement – BIS II and Sarbanes Oxley requirements andAccord, resolutions of the National Monetary Council.Council (CMN) and Applicable Regulators. This modelModel also follows the guidelines established by Banco Santander Spain which was based on COSO-Committeethe COSO - Committee of Sponsoring Organizations of the Tread way Commission-Internal Control –Treadway Commission –Internal Control– Integrated Framework 2013.
The procedures developedControl and adopted are intended to ensure management model
Santander Bank continuous presence among the select group of financial institutions recognized as having the best operational risk management practices, thereby helping to continuously improve its reputation, solidity and reliability in the local and international markets.
In the second half of 2014, was consolidated the adoption if the approaches byBrasil has implemented a model based on lines of defense that aims to improve and continuously develop the management and control of operational risks, ensuring that structures can assess, monitor, control, mitigate, report and reduce the risks and losses to which started in April, 2014they are exposed.
The attributions of this model include carrying out activities for the identification, evaluation, monitoring, control, mitigation and approvedreporting of Operational Risk. Thus, different analyzes and follow-ups are carried out and reported. The main instruments that make up the Operational Risk Control and management Model are presented below:
● | Definition of the operational risk appetite; |
● | Capture and evaluation of loss events (internal and external); |
● | Training, Communication and Culture; |
● | Evaluation of products and services; |
● | Self-assessment of operational risks; |
● | Scenario analysis; |
● | Risk and Control Indicators; |
● | Internal controls. |
Model Governance
The Model has the approval of the Executive Risk Committee and approval by the Board of Directors, integrating the Organization's corporate governance structure and responsibility. Periodically, the relevant matters of Operational Risks are communicated to senior management for awareness and deliberations.
Consolidated Financial Statements | December 31, 2021 | F-142 |
* Values expressed in thousands, except when indicated. |
As part of the Risk Governance system, the Senior Forum on Internal Controls and Operational Risks (CIRO) is also implemented, whose objective is to deliberate for the Risk Pro Officers (RPO), of the 1st Line of Defense, policies, processes, procedures, strategy and decisions on the topics to be applied in the Executive Committee.business units, and has a bimonthly periodicity.
In order to ensure a structured process for disseminating the culture of Operational Risk management and control, the relevant topics are dealt with in specific Committees and Forums.
Defence Line Modele.2) Responsibilities and duties of the Operational Risks and Internal Controls area
Non-financial risks is theThe Operational Risks & Internal Control area acts as second line of defense in Santander'sthe Santander’s operational risk model and aimsaim to maintain the fulfillment, alignment andachieve compliance with Santander Group’s corporate guidelines ofpolicies, and other regulations established by both local and global regulators. In addition, the Santander group,area is responsible for the Basle Accord and resolutions of the National Monetary Council. Also acts in the controloversight and challenge of the activities performed by the first line of Defense, contributingdefense and aim to its strengthening.achieve an integrated operational risk management approach. The main responsibilities attributed to the Operational Risk and Internal Control are listed below:
InDisseminate the Operational Risk and Internal Controls management-oriented culture and converge towards the prevention and reduction of Operational Risk events and losses, mitigating the financial, legal, and reputational impacts.
• Improve risk analysis to reduce, consolidate and prioritize mitigation actions.
• Maintain the dynamics and control of operational risk exposure in line with risk appetite.
• Establish roles and responsibilities, with follow-up with those responsible in the strengtheninglines of an independent structuredefense.
• Ensure business continuity and glimpsing an integrated approach to risk management,strengthen the Internal Controls area became partenvironment.
• Provide adequate level of coverage in business units.
• Provide support for the structure of non-financial Risks.
The internal control Model ("MCI") deployed at Banco Santander isOrganization's strategic decisions based on the methodology developed by the Committee of Sponsoring Organizations of the Tread way Commission ("COSO"), which covers for strategic components, operational, financialintegrated Operational Risk profile and compliance, disclosure that were set within the framework of internal control. The Bank has adapted its MCI to the most demanding international standards established by COSO (Internal Control – Integrated Framework 2013) having as main goals the mitigation of risks, providing transparency to the preparation and disclosure of financial statements and comply with the requirements of current legislation and of the regulatory agencies. The MCI is based on self- assessment by responsible of activities, processes, sub-processes, and controls (control self assessment- CSA) and disseminates within the Bank through regulatory, internal notes and instruction guides available on the local Intranet, Internal Controls Portal and the Norms Portal.
The system supports the Administration in the management of MCI, besides documenting the sub-processes, risks and associated control, indicators, and also in certification by the managers responsible for controls activities, sub-processes, processes, activities and subgroups, which provides comfort as to the financial statements for certification for the CEO and the Director Executive Vice President.
d.2) Comprehensiveness and Sustainability
The scope of operational risk control and management, exceeds the allocation of regulatory capital, ensuring its sustainable development, including:
emerging trends.
• Improvement of operational efficiency and productivity inImplement the activities and processes.
• Compliance with existing regulations: Bacen, Susep, CVM and BIS, as well as new requirements and monitoring the timely fulfillment of requests from regulators.
• Strengthening of the reputation and improvement in the relation of Risk x Return to the public with whom the Bank maintains relationship.
• Maintenance and preservation of the quality and reliability of products and services.
• Identifying and addressing timely the corrections of identified vulnerabilities in processes.
• Dissemination of culture of advancedbest practices for management and control of Operational Risks, by means of internal communication (intranet, personal course, "online" courses and monthly communication by “Boletim de RO” and “Boletim Flash de RO”), with reinforcementoperational risks in the "Accountability".1st and 2nd Lines of Defense.
• Identify the Operational Risk profile of the Organization.
This solid and efficient structure permits the• Provide continuous enhancementimprovement of existing methodologies and the further dissemination ofdeepening the culture of responsibility in regard to the advanced management of operational risk.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)for Operational Risks and Internal Controls
d.3)e.3) Differential factor
The Non-financial RiskOperational Risks & Internal Control area invests in the development, training and updating of its professionals so they can keep up with changes in the business environment, in addition to offering training programs for other professionals through the intranet and on-site courses. Among the personal course, we highlight the achievement of training aimed at increasing culture of RO management, training to perform risk control and self-assessment exercises (RCSA), and training for the capture of operational losses, among others.
This has made a significant contribution to Santanderthe Bank consistently achievingachieve its strategic and operational goals, by providing knowledge of the exposure to assumed operational risks and the controlled environment, maintaining the Bank’s low-risk profile and ensuring the sustainable development of its operations.
The Bank stand out:
• Annual Operational and Technological Risk Prevention and Control Week;
• Training on the necessary procedures for evaluating the internal control environment;highlights:
• Mandatory training for all Banco Santander employees through NetCurses,e-learnings ("NetCursos"), addressing the issue of operational risks, and business continuity;
• The creation, dissemination, and maintenance of Instruction Manuals, promoting corporate values and commitment;
commitment.
• Coordination of the annual process for projecting losses caused by operational risks, defining action plans to reduce these losses and for accountability;
accountability.
• Development of key risk indicators, aiming to ensure absolute and relative analyses based on volumetric and market analysis;
monitor the main operational risks.
• CompositionManagement of lines of defense creating new functions for the role“ORMN – Operational Risk Management Network” considering roles performed by:
i)“RPO-Risk Pro Officer” monitoring and reporting of operational risk representative: "Coordinator"management aspects to the Senior Management, ii) “RPA-Risk Pro Agent" and "Coordinator Assist"iii) “Operational Risk Assistants” management and implementation of the Operational Risk covering the perimeter of ROManagement Model within its Division and "experts" in cases where the“Risk Experts” specifically for “transversal” operational risk is transverse to the organization.management purposes.
• Six-monthly review of Internal Controls of the company by the responsible managers for the controls, sub processes, processes and activities documented in MCI to support the Chief Executive Officer and Executive Vice President of Finance.
• Accession to the new model released by COSO - Framework 2013 with the adequacy of existing controls to 17 new principles.
d.4) Communicatione.4) Policy
The Non-Financial RiskOperational Risks & Internal Control area is part of Santander’s governance structure and produces a series of specific monthly reports for management through the Integrated Operational Risk Committee (“FSCIRO”) and the “Reunião de RO” (Operational Risk Forum detailing events that occurred, the main activities undertaken, and the corrective, and precautionarypreventive action plans identified and monitored,follow-up, ensuring transparency and providing knowledge forto the governance forums.
Consolidated Financial Statements | December 31, 2021 | F-143 |
* Values expressed in thousands, except when indicated. |
Semiannually, it prepares the Management Report and Control of Operational, Technological Risk , the Management of Business Continuity and the Evaluation of Internal Controls. Which is presented to the Bank’s Board of Directors and the Quality Assessment Report and Adequacy of the Internal Control Model presented on the Executive Committee for its awareness and to enable it to take resolutions on the results and activities developed in the period.
Additional information can be obtained from the Bank’s Social and Annual Reports on its website.
e) Reputationalf) Reputation Risk
e.1) Reputationalf.1) Reputation Risk
ReputationalThe reputation risk is defined as a risk of a negative economic impact, current and potential, due to a perception unfavorable of the exposureBank by its employees, clients, shareholders/investors and society in general.
The reputation risk may arise from multiple sources and, in many cases, is derived from other risk events. In general, these sources might be related to the business and other support activities that are realized by the Bank, the economic context, social or politic, or even by other events arising from negative public opinion, irrespective of whether this opinion is based on facts or merely on public perception. The reputational risk management is accomplished through responsible involvement inother competitors that might affect the right business with the right client.Bank.
Accordingly Banco Santander aims to offer the most suitable product according to the each customer profile.
e.2)f.2) Compliance
The Compliance RiskIt is thedefined as legal risk, orof regulatory sanctions, financial loss or damages to the Bank reputation that an institution may suffer as a result of failure to complyfailures in the compliance with laws, regulations,rules, ethics and conduct codes of conduct and good Banking practices inbank practices. The compliance risk management has the exercisegoal of their activity. The Compliance at Banco Santander has a proactive approach, working in educationalbeing preventive and includes the monitoring, educative processes, monitoringConsulting, risk evaluation and corporate communications.corporative communication related to the rules and legislation applicable to each business department.
The Compliance area operates independently, reporting to Management and Regulatory Compliance Panel, contributing for the maintenance of the reputation and integrity of Banco Santander.
e.3)f.3) Directives
a. Compliance principles – Ethics and Conduct in the Securities Markets
The Bank’s ethical principles and conduct parameters are established in internal policies which are made available to all employees. Conduct Code in the Securities Markets and its formal acknowledgement is mandatory to all staff working close to securities markets. Proper communication channels are in place to clarify doubts and complaints from employees, the monitoring and controlling of these information are conducted in a way that adherence to the rules established is secured.
b. Money Laundering Prevention
The Bank’s money Laundering Prevention policies and terrorism financing prevention are based on the knowledge and rigorousness of the acceptance of new clients, the Bank complemented by the continuous scrutiny of all transactions where the Bank are involved in. The importance given to the theme is reflected on the direct involvement of management, namely the Operational Money Laundering Prevention and Compliance Committee, which meets each trimestermonth to deliberate on issues regarding the theme and to be directly involved with new clientsclient’s acceptance and suspicious transactions reporting.
c. New products and services and suitability
All new products and services are debated/analyzed internally at various levels until theirby different technical areas, ensuring a multidisciplinary mapping of risks, have been fully mitigated, and subsequently approved by the Commercialization Local Comercialization Committee (CLC), composed of Santander executives. After reviewanalysis and approval, the new products and services are monitored tryingsubject to identify them so timely events that may pose reputationalmonitoring and tests carried out to mitigate any conduct risk which if identified, are reported toin the CLC.
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)sale.
f)g) Compliance with the new regulatory framework
The Banco Santander Brazil has assumed froman integrated management of risks and capital for the outset a firm commitmentdecision-making process, respecting the guidelines of Resolution BCB No. 4,557. This process contributes to the principles underlyingoptimization and efficiency in the “Revised Frameworkuse of International Convergencecapital in its operations, considering the objectives of Capital Measurementthe Institution with respect to capital ratios and Capital Standards” (Basel II). This framework allows entitiesreturn to make internal estimatesshareholders.
The Brazilian participation in the Basel Committee on Banking Supervision (BCBS) encourages the timely implementation of international prudential standards in the Brazilian regulatory framework.
Consolidated Financial Statements | December 31, 2021 | F-144 |
* Values expressed in thousands, except when indicated. |
Aligned with this perspective, Santander Brazil invests in the continuous improvement of capital management processes and practices, in accordance with regulatory and supervisory benchmarks.
The Institution's capital management consists of a continuous process of planning, evaluation, control and monitoring of the capital they are required to hold in ordercover the Conglomerate's relevant risks. It considers the capital necessary to safeguard their solvency against events caused by various typessupport Pillar 1 risks (credit, market and operational); development of risk. As a resultmethodologies for quantifying additional capital for Pillar 2 risks; Internal Capital Adequacy Assessment Process (ICAAP); projection and monitoring of this commitment, the Santander Bank has devoted all the human and material resources required to ensure the successcapital ratios; preparation of the Basel II implementation plan. For this purpose, a Basel II team was created in the past, consisting of qualified professionals from the Bank’s different areas: mainly Finance, Risks, Technologycapital plan and Operations, Internal Audit −to verify the whole process, as the last layer of control at the entity−, and Business −particularly as regards the integrationcontingency plan; preparation of the internal models into management. Additionally, specific work teams have been set up to guarantee the proper managementrecovery plan; stress tests; and preparation of the most complex aspects of the implementation.quarterly risk and capital management report - Pillar 3.
Supplementing the efforts of the Basel II operating team, Santander Bank management has displayed total involvement from the very beginning. Thus, the progress of the project and the implications of the implementation of the New Capital Accord for the Banco Santander have been reported to the management committee and to the board of directors on a regular basis.
In the specific case of credit risk, the implementation of Basel II entails the recognition, for regulatory capital purposes, of the internal models that have been used for management purposes.
The Bank intends to apply, over the next five years, the advanced internal ratings-based (AIRB) approach under Basel II for substantially all its Banks, until the percentage of net exposure of the loan portfolio covered by this approach is close to 100%.
The additional capital requirements derived from the self assessment process (Pillar II) should be offset by the risk profile that characterizes the Bank's business activities (low average risk), due to its focus on Banco Comercial (small and medium-sized enterprises and Individuals) and the diversification of the business. The Pillar 2 which takes into account the impact of risks not addressed under Pillar I (regulatory capital) and the benefits arising from the diversification among risks, businesses and geographical locations.
The Banco Santander continued in 2014 with the project for the progressive implementation of the technology platforms and methodological developments required for the roll-out of the AIRB approaches for regulatory capital calculation purposes.
Regarding the other risks addressed under Pillar I of Basel II, Banco Santander is developing internal models for market risk and will remain using the standardized method for operational risk, since it considers the premature use of advanced models (AMA) for this purpose . Regarding the Market Risk, Banco Santander presented his candidacy in the second half of 2011, pending approval with the regulators for the use of internal models for calculating regulatory capital.
Pillar II is another significant line of action under the Basel Corporate Framework. In addition to reviewing and strengthening the methodology supporting the economic capital model, the technology was brought into line with the platform supporting Pillar I, so that all the information on credit risk will come from this source.
Besides the Basel II implementations, Banco Santander complies with the new regulations of Basel III, as standards released by Bacen.
According to the definition proposed by the Basel Committee (Basel III), Credit Valuation Adjustment (CVA) is an adjustment to the fair value of derivative financial instruments in order to measure the credit risk of a counterparty. Thus, the CVA depends on the credit spread of the counterparty, as well as the market risk factors that drive the values of the derivatives and, therefore, their exposure. In an analytical way, the CVA can be defined by the following expression:
CVA = EE * PD * DF * LGD(1)
(1) EE=Expected Exposure; PD=Probability of Default; DF=Discount Factor; LGD=Loss Given Default
Expected Exposure (EE) is the future exposure of the derivative based on the counterparty's market risk. The probability of default (PD) is calculated based on credit spreads and is also valued at market. The discount factor (DF) is the factor that brings to the present value the projected exposure weighted by its respective probability of default. A Loss Given Default (LGD) is the estimated loss in the event of a credit event.
f.1)g.1) Internal validation of risk models
Internal validation is an important stage of model life cycle besides of being a pre-requisite for the supervisory validation process by Basel II implementation. A specialized unitteam of the Entity, with sufficient independence, obtains a technical opinion on the adequacy of the internal models for the intended internal or regulatory purposes, and concludes on their usefulness and effectiveness. This unitteam must also assess whether the risk management and control procedures are adequate for the Entity’s risk strategy and profile.
In addition to complying with the regulatory requirement compliance, the internal validation areadepartment provides an essential support to the risk committee and management, as they are responsible for ensuring that appropriate procedures and systems are in place to monitor and control the entity's risks. In this case,since the internal validation area is responsible for providing a qualified and independent opinion so that the responsible authorities decide on the authorization of the use of models (for management purposes as well as regulatory use).
Internal model validation at Banco Santander encompasses credit risk models, market risk models, compliance, operational, ALM, pricing models, stress test models, the economic capital model and other models related to the exercise of ICAAP. The scope of the validation includes not only the more theoretical or methodological aspects, but also the technology systems and the quality of the data they provide, on which their effective operation relies, and, in general, all the relevant aspects of advanced risk management (controls, reporting, uses, involvement of management, etc.). Therefore, the aimgoal of internal validation is to review quantitative, qualitative, technological and corporate governance related to regulatory and risk management aspects concerning the model risk control.
Amongprocesses.Among the main functions of the Internal Model Validation areadepartment are the following:
i. Establish general validation principles, conducting an independent evaluation process including (I) data quality, (II) use of the methodology and (III) functioning of the models;
ii. Propose documents and model validation guides;
iii. Evaluate the methodology and data used in the development of the model and challenge the model and its use, stating the implications and limitations of the model, as well as the associated risks;
iv. Issue a technical opinion on the adequacy of internal models for the intended internal and regulatory effects, concluding on their usefulness and effectiveness; and
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
v. Provide essential support to risk committees and management of the Bank, through a qualified and independent opinion for responsible decision-making on the authorization of the use of models (for management purposes as well as regulatory use).
i. | Establish general validation principles, conducting an independent evaluation process including (I) data quality, (II) Methodology aspects (III) technological environment, (IV) performance and (V) use and government; |
ii. | Evaluate the methodology and data used in the development of the model and challenge the model and its use, stating the implications and limitations of the model, as well as the associated risks; |
iii. | Issue a technical opinion on the adequacy of internal models for the intended internal and regulatory effects, concluding on their usefulness and effectiveness; and |
iv. | Provide essential support to risk committees and management of the Bank, through a qualified and independent opinion for responsible decision-making on the authorization of the use of models (for management purposes as well as regulatory use). |
It is important to note that Banco Santander's internal validation function is fully consistent with the independent validation criteria for advanced approach issued by the Basel Committee, the European supervisor 'home regulator' (Banco de España and the European Central Bank) and the Bacen in compliance with the provisions ofrules Circular 3,648 dated March 4, 2013 (Chapter III), Circular Letter 3,565 of September 6, 2012, and Circular 3,547 of July 2011. 2011, and Circ. 3648 IRB, 3646 IMA of 4/3/13, and Res. 4.277 of 31/10/13 and 4389 of 18/12/14 fair value, Res. 4557 of 23/02/17 GIR and Circ. 3876 of 31/01/18 IRRBB.
In this case, the Bank maintains a Segregation of functions between internal validation and internal audit, which is the last layer of validation of Bank control.
control validation.
The internal auditInternal Audit is responsible for evaluating and reviewing the internal validation methodology and work and issues opinions with an effective level of autonomy. Internal Audit (third line of defense), as the ultimate control function in the Group, should (i) periodically assess the adequacy of policies, methods and procedures and (ii) confirm that they are effectively implemented in the management .
f.2)g.2) Capital Management
Capital management considers the regulatory and economic aspects and its objective is to achieve an efficient capital structure in terms of cost and compliance, meeting the requirements of the regulatory authorities and supporting to accomplish the goals of the classification of rating agencies and investors' expectations. TheDetails regarding the capital management includes securitization, sale of assetsprocess can be found at www.ri.santander.com.br Corporate Governance -> Risk Management -> Risk and raise capital through issuing shares, subordinated liabilities and hybrid instruments.Capital Management Structure.
Consolidated Financial Statements | December 31, 2021 | F-145 |
* Values expressed in thousands, except when indicated. |
From an economic standpoint, capital management seeks to optimize value creation at the Bank and at its different business segment. To this end, the economic capital, RORAC (return on risk-adjusted capital) and data about the value creation of each business segment are generated. Within the framework of the internal capital adequacy assessment process (Pillar II of the Basel Capital Accord) the Group uses an economic capital measurement model with the objective of ensuring that there is sufficient capital available to support all the risks of its activity in different economic scenarios, with the solvency levels agreed upon by the Group.
In order to adequately manage the Bank’s capital, it is essential to estimate and analyze future needs, in anticipation of the various phases of the business cycle. Projections of regulatory and economic capital are made based on financial projections (balance sheets, income statement, etc.) and on macroeconomic scenarios estimated by the Economic Research Service. These estimative are used by the Bank as a reference to plan the management actions (issues, securitizations, etc.) required to achieve its capital targets and ensure adequate solvency levels.
g)h) Economic capital
g.1)h.1) Main objectives
The development of economic capital models in finance aims to solve a fundamental problem of regulatory capital, Sensitivity Risk.
In this context, the economic capital models are essentially designed to generate risk-sensitive estimative, allowing greater precision in risk management, as well as better allocation of economic capital by business units of Banco Santander.
The Banco Santander has directed efforts to build a model of robust and integrated economic capital to the business management.
The main objectives of the structure of economic capital of the Banco Santander are:
1 - Consolidate Pillar I and other risks which affect business in a single quantitative model, and determine estimates of capital by establishing correlations between different risks;
2 - Quantify and monitor different types of variations in risk;
3 - Distribute capital consumption between the different portfolios and manage the efficiency of return on capital (RORAC);
4 - Estimating the Economic Value Added for each business unit. Economic profit must exceed the cost of the Bank's capital;
5 - Accordance with the regulation in areaslocations where the Bank operates in the review process of Pillar II by supervisors.
g.2)h.2) The Economic Capital Model
In calculating the economic capital, it is the Bank's definition of losses to be covered. Thus, it is used a confidence interval necessary to ensure business continuity. The confidence interval for the Banco Santander is 99.90% higher than required by Basel II.
The risk profile in Brazil is distributed by Credit risk, Market, ALM, Business, Operations and fixedmaterials assets. However, to successfully anticipate the changes proposed in Basel III, new risks have been incorporated to model: Intangibles, pension funds (defined benefit) and deferred tax credits,assets, which allow the Bank to adopt a position even more conservative and prudent.
% Capital | 2016 | 2015 | 2014 | |||||||||
Risk Type | New Methodology | New Methodology | New Methodology | |||||||||
Credit | 62 | % | 56 | % | 60 | % | ||||||
Market | 5 | % | 4 | % | 5 | % | ||||||
ALM | 9 | % | 9 | % | 9 | % | ||||||
Business | 8 | % | 8 | % | 4 | % | ||||||
Operational | 6 | % | 5 | % | 7 | % | ||||||
Fixed Assets | 2 | % | 1 | % | 1 | % | ||||||
Intangible Assets | 1 | % | 6 | % | 2 | % | ||||||
Pension Funds | 1 | % | 2 | % | 2 | % | ||||||
Deferred Tax Assets | 6 | % | 9 | % | 10 | % | ||||||
TOTAL | 100 | % | 100 | % | 100 | % |
F-109
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
% Capital | 2021 | 2020 | 2019 | |
Risk Type | New Methodology | New Methodology | New Methodology | |
Credit | 62% | 69% | 71% | |
Market | 2% | 2% | 2% | |
ALM | 6% | 2% | 5% | |
Business | 7% | 3% | 3% | |
Operational | 7% | 6% | 7% | |
Fixed Assets | 1% | 2% | 2% | |
Intangible Assets | 5% | 5% | 1% | |
Pension Funds | 1% | 2% | 4% | |
Deferred Tax Assets | 9% | 9% | 5% | |
TOTAL | 100% | 100% | 100% |
Still, for being
Even so, as it is a commercial Bank, creditbank, Credit is theBanco Santander's main source of risk in Banco Santander and the evolution of thisits portfolio is a leading factor for oscillation.
Banco Santander periodically evaluates the level and evolution of RORAC (risk-adjusted return)one of the main business units. The RORAC is the quotient of the profit generated on allocated capital, using the following formula:
RoRAC=Profit/Economic Capital
Banco Santander also makes the planning of capital in order to obtain future projections of economic and regulatory capital. The estimative obtainedfactors for the Bank are incorporated to different scenarios consistently, including its strategic objectives (organic growth, M & A, payout ratio, credits, etc.). Possible management strategies leading to optimize capital and solvency return of the Bank are identified.fluctuation.
RoRAC
Banco Santander has used the RORAC, with the following objectives:
1 – Analyze and set a minimum price for operations (admission) and clients (monitoring).
2 – Estimate capital consumption of each customer,client, economic groups, portfolio or business segment, in order to optimize the allocation of economic capital, maximizing the efficiency of the Bank.
3 – Measure and monitor business performance.
To evaluate the operations of global customers,clients, the calculation of economic capital takes into accountconsiders some variables used in the calculation of expected and unexpected losses.
Among these variables are:
1 – Counterparty rating;
2 – Maturity;
3 – Guarantees;
4 – Type of financing;
The return on capitaleconomic value added is determined by the cost of capital. To create value for shareholders, the minimum return operation must exceed the cost of capital of Banco Santander.
BANCO SANTANDER (BRASIL) S.A.
Consolidated Financial Statements | December 31, 2021 | F-146 |
* Values expressed in thousands, except when indicated. |
47. | Subsequent Events |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AmountsAcquisition of Equity Interest in thousands of Brazilian Reais - R$, unless otherwise stated)Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.
On January 4, 2022, upon compliance with the applicable conditions precedent, Pi Distribuidora de Títulos e Valores Mobiliários SA (“Pi”), Toro Corretora de Títulos e Valores Mobiliários SA (“Toro CTVM”), and Toro Investimentos SA ( “Toro Investimentos” and, together with Toro CTVM, “Toro”) formalized, together with the partners of Monetus Investimentos Ltda., and Monetus Corretora de Seguros Ltda. (together “Monetus”), the closing of the transaction resulting from the investment agreement and other covenants, formalized on June 15, 2021 (“Closing”). As a result of the Closing, Toro Investimentos now holds 100% of Monetus' share capital. Monetus, originally from Belo Horizonte, carries out its activities through an automated objective-based investment application, after considering the client's needs and risk profile, the application automatically creates, executes and monitors a diversified and personalized investment strategy that use the platform to undertake and serve customers in the best way.
Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.
On January 4, 2022, upon compliance with the applicable conditions precedent, Pi Distribuidora de Títulos e Valores Mobiliários SA (“Pi”), Toro Corretora de Títulos e Valores Mobiliários SA (“Toro CTVM”), and Toro Investimentos SA ( “Toro Investimentos” and, together with Toro CTVM, “Toro”), formalized, together with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda (together “Mobills”), the closing of the transaction resulting from of the investment agreement and other covenants, formalized on June 15, 2021 (“Closing”). As a result of the Closing, Toro Investimentos now holds 100% of the share capital of Mobills. Based in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning.
Acquisition of Equity Interest in CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A.
On January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A. ("Santander Corretora"), together with other investors – including Banco BTG Pactual S.A. and CBOE III, LLC – formalized, together with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A. ("CSD BR ") and their respective shareholders, an investment agreement for the subscription of a minority equity interest in CSD BR ("Transaction "). CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Central Bank of Brazil, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários) and the Superintendence of Private Insurance (Superintendência de Seguros Privados). The effectiveness of the Transaction will be subject to the conclusion of the definitive instruments and the implementation of certain customary precedent conditions, with the applicable regulatory approvals. After the implementation of these conditions and with the closing of the Transaction, Santander Corretora's equity interest in CSD BR will be 20% (twenty percent).
Deliberation on Interim Dividends and Interest on Equity
The Board of Directors, at a meeting held on February 1, 2022, approved the proposal of the Executive Board, ad referendum of the Annual General Meetings to be held in 2022 and 2023 respectively, for the distribution of Interim Dividends, in the amount of R$ 1,300,000,000.00 (one billion, three hundred million reais), based on the profit for the year calculated until the balance sheet of December 31, 2021 and Interest on Equity, in the gross amount of R$ 1,700,000,000.00 (one billion and seven hundred million reais), based on the balance of the Company's Dividend Equalization Reserve. Shareholders who are registered in the Bank's records at the end of February 10, 2022 (inclusive) will be entitled to Dividends and Interest on Equity. Thus, as of February 11, 2022 (inclusive), the Bank's shares will be traded “Ex-Dividends and Ex-Interest on Equity”. The amount of Dividends and Interest on Equity will be paid as of March 4, 2022. Dividends will be fully allocated to the minimum mandatory dividends to be distributed by the Bank, referring to the year 2021 and Interest on Equity will be imputed in full to the mandatory minimum dividends to be distributed by the Bank, referring to the year 2022, without any monetary restatement for both. The decision was approved by the Fiscal Council, as per the meeting held on the same date.
Consolidated Financial Statements | December 31, 2021 | F-147 |
* Values expressed in thousands, except when indicated. |
APPENDIX I – RECONCILIATION OF SHAREHOLDERS’STOCKHOLDERS’ EQUITY AND NET INCOME - BRGAAP vs IFRS
The table below presents a conciliation of stockholders' equity and net income attributed to the parent between standards adopted in Brazil (BRGAAP) and IFRS, with the conceptual description of the main adjustments:
Thousands of Reais | Note | 2016 | 2015 | 2014 | ||||||||||||||||||
Thousand of Reais | Note | 2021 | 2020 | 2019 | ||||||||||||||||||
Shareholders' equity attributed under to the Parent Brazilian GAAP | 57,771,524 | 54,819,073 | 57,320,685 | |||||||||||||||||||
Stockholders' equity attributed under to the Parent Brazilian GAAP | Stockholders' equity attributed under to the Parent Brazilian GAAP | 78,739,563 | 78,968,183 | 69,773,232 | ||||||||||||||||||
IFRS adjustments, net of taxes, when applicable: | IFRS adjustments, net of taxes, when applicable: | |||||||||||||||||||||
Impairment on loans and receivables | a | 124,787 | 132,878 | 128,080 | ||||||||||||||||||
Category transfers | b | 650,109 | 704,519 | - | ||||||||||||||||||
Reclassification of financial instruments at fair value through profit or loss | Reclassification of financial instruments at fair value through profit or loss | i | (103,386) | (882) | 8,767 | |||||||||||||||||
Reclassification of fair value through other comprehensive income | Reclassification of fair value through other comprehensive income | j | 182,094 | (522,107) | 73,431 | |||||||||||||||||
Impairment of financial assets measured at amortized cost | Impairment of financial assets measured at amortized cost | a | (1,468,494) | (635,194) | (23,589) | |||||||||||||||||
Remensurations, Debt instruments, due to reclassifications IFRS 9 | Remensurations, Debt instruments, due to reclassifications IFRS 9 | - | 907 | - | ||||||||||||||||||
Category transfers - IFRS 9 | b | (141,260) | 357,972 | (206,984) | ||||||||||||||||||
Deferral of financial fees, commissions and inherent costs under effective interest rate method | c | 216,192 | 138,314 | 114,780 | Deferral of financial fees, commissions and inherent costs under effective interest rate method | c | 1,549,438 | 1,324,853 | 1,197,325 | |||||||||||||
Reversal of goodwill amortization | d | 25,123,410 | 23,344,320 | 20,560,813 | d | 26,709,187 | 27,527,699 | 26,933,892 | ||||||||||||||
Realization on purchase price adjustments | e | 778,882 | 798,776 | 874,738 | Realization on purchase price adjustments | e | 603,544 | 615,953 | 477,366 | |||||||||||||
Recognition of fair value in the partial sale in subsidiaries | f | 112,052 | 112,052 | 112,052 | Recognition of fair value in the partial sale in subsidiaries | f | - | - | 112,052 | |||||||||||||
Option for Acquisition of Equity Instrument | g | (1,017,000 | ) | (1,017,000 | ) | (950,000 | ) | Option for Acquisition of Equity Instrument | g | (763,988) | (1,744,336) | (1,816,799) | ||||||||||
Negative goodwill PSA | h | 52,686 | - | - | ||||||||||||||||||
Goodwill acquisition Santander Services (Santusa) | Goodwill acquisition Santander Services (Santusa) | h | (179,387) | (209,285) | (239,182) | |||||||||||||||||
Tax Credit with realization over 10 years | Tax Credit with realization over 10 years | - | - | 184,005 | ||||||||||||||||||
Others | 274,413 | 367,290 | 141,972 | 512,835 | 93,224 | 177,064 | ||||||||||||||||
Shareholders' equity attributed to the parent under IFRS | 84,087,055 | 79,400,222 | 78,303,120 | |||||||||||||||||||
Stockholders' equity attributed to the parent under IFRS | Stockholders' equity attributed to the parent under IFRS | 105,640,146 | 105,776,987 | 96,650,580 | ||||||||||||||||||
Non-controlling interest under IFRS | 725,504 | 435,062 | 380,173 | 334,349 | 312,885 | 558,581 | ||||||||||||||||
Shareholders' equity (including non-controlling interest) under IFRS | 84,812,559 | 79,835,284 | 78,683,293 | |||||||||||||||||||
Thousands of Reais | Note | 2016 | 2015 | 2014 | ||||||||||||||||||
Net income attributed to the Parent under Brazilian GAAP | 5,532,962 | 6,998,196 | 2,161,170 | |||||||||||||||||||
IFRS adjustments, net of taxes, when applicable: | ||||||||||||||||||||||
Impairment on loans and receivables | a | (8,091 | ) | 4,798 | 36,998 | |||||||||||||||||
Deferral of financial fees, commissions and inherent costs under effective interest rate method | c | 77,878 | 23,534 | (11,053 | ) | |||||||||||||||||
Reversal of goodwill amortization | d | 1,756,587 | 2,783,507 | 3,683,391 | ||||||||||||||||||
Realization on purchase price adjustments | e | (76,247 | ) | (75,962 | ) | (75,151 | ) | |||||||||||||||
Negative goodwill PSA | h | 52,686 | - | - | ||||||||||||||||||
Others | (1,212 | ) | 49,667 | (165,332 | ) | |||||||||||||||||
Net income attributed to the parent under IFRS | 7,334,563 | 9,783,740 | 5,630,023 | |||||||||||||||||||
Non-controlling interest under IFRS | 130,355 | 50,086 | 77,753 | |||||||||||||||||||
Net income (including non-controlling interest) under IFRS | 7,464,918 | 9,833,826 | 5,707,776 | |||||||||||||||||||
Stockholders' equity (including non-controlling interest) under IFRS | Stockholders' equity (including non-controlling interest) under IFRS | 105,974,495 | 106,089,872 | 97,209,161 |
Thousand of Reais | Note | 2021 | 2020 | 2019 | ||||
Net income attributed to the Parent under Brazilian GAAP | 14,987,716 | 13,469,380 | 14,180,987 | |||||
IFRS adjustments, net of taxes, when applicable: | ||||||||
Reclassification of financial instruments at fair value through profit or loss | i | (83,995) | (27,428) | 422 | ||||
Reclassification of fair value through other comprehensive income | j | 45,826 | 68,960 | 451 | ||||
Impairment of financial assets measured at amortized cost | a | (1,028,937) | (498,778) | 1,872,553 | ||||
Remensurations, Debt instruments, due to reclassifications IFRS 9 | - | 907 | (16,659) | |||||
Category transfers - IFRS 9 | b | 126,520 | (78,057) | 6,437 | ||||
Deferral of financial fees, commissions and inherent costs under effective interest rate method | c | 215,525 | 185,478 | 346,298 | ||||
Reversal of goodwill amortization | d | 29,658 | 145,903 | 175,257 | ||||
Realization on purchase price adjustments | e | (17,758) | (5,348) | (153,752) | ||||
Option to Acquire Own Equity Instrument | g | 1,180,949 | 318,929 | - | ||||
Goodwill acquisition Santander Services (Santusa) | h | 29,898 | 29,898 | 29,898 | ||||
Tax credit with realization over 10 years | - | (184,005) | (75,995) | |||||
Others | 42,648 | (7,311) | 41,035 | |||||
Net income attributed to the parent under IFRS | 15,528,051 | 13,418,528 | 16,406,932 | |||||
Non-controlling interest under IFRS | 31,272 | 32,224 | 224,518 | |||||
Net income (including non-controlling interest) under IFRS | 15,559,323 | 13,450,752 | 16,631,450 |
a) Impairment on loans and receivables:receivables and financial assets measured at amortized cost:
On the income refersRefers to the adjustadjustment resulting from the estimate of the expected loss on the portfolio of assets subject to impairment, loan commitments to be released and financial guarantee contracts, calculated based on estimated losses on loansthe criteria described in the accounting practice note and receivables portfolio, which was establishedin accordance with based on historical loss of impairment and other circumstances known at the time of evaluation, according to the guidance provided by IAS 39 "Financial Instruments: Recognition and Measurement. TheseIFRS. Such criteria differ in certain aspects of the criteriafrom those adopted under BRGAAP, which uses certainthe regulatory limits setdefined by the Central Bank.Bank (Bacen), in addition to the difference in scope of the basis for calculating these losses, which for IFRS purposes considers other assets in addition to those provided by Bacen.
Consolidated Financial Statements | December 31, 2021 | F-148 |
* Values expressed in thousands, except when indicated. |
b) TransferCategories of categoryfinancial assets
The IAS 39 permits reclassificationAs detailed in the accounting practices note, IFRS9 provides for the definition of the category "availablebusiness models associated with each portfolio, as well as the performance of the SPPI test - if the returns of that asset are exclusively principal and interest, for sale" to "held to maturity" and "available for sale" to "loans and receivables" at any time, provided thatclassification in the entity has the intention and ability to hold the financial asset in this category. However, for the purpose of local books (BR GAAP), pursuant to art. 5 of BACEN Circular 3,068, the revaluation regarding the classification into categories of securities may onlyfinancial assets. BRGAAP provides for certain differences in the categorization of these financial assets, as well as establishing as an indicator the Management's intention for classification to be made when preparingmade. The criteria for reclassification between categories are also different between the half-yearly and the yearly financial statements. For purposes of IFRS financial statements of December 2015 Banco Santander reclassified some securities therefore July 1, 2015 and to Brazilian GAAP purposes due to local requirements mentioned above such change occurred at December 31, 2015.two accounting practices.
c) Deferral of financial fees, commissions and other costs under effective interest rate method:
Under IFRS, in accordance with IAS 39 “Financial Instruments: Recognition and Measurement”, financial fees, commissions and other costs that are integral part of effective interest rate of financial instruments measured at amortized cost are recognized in profit or lossthe income statement over the term of the corresponding contracts. Under BRGAAP these fees and expenses are recognized directly as income when received or paid.
d) Reversal of goodwill amortization:
Under BRGAAP, goodwill is systematically amortized systematically over a period of up to 10 years, and additionally,subject to the goodwill recorded is measured annuallyimpairment test at least once a year or whenever there isin a shorter period, in the event of any indication that the asset may be impaired.additional evidence. Under IFRS, in accordance with IAS 38 “Intangible Assets”, goodwill is not amortized, but instead, is tested for impairment, at least annually, and whenever there is an indication that the goodwill may be impaired; comparing its recoverable amount with its carrying value.impaired. The tax amortization of goodwill of Banco ABN Amro Real SA represents a difference between book and tax basis of a permanent nature and definitive as the possibility of future use of resources to settle a tax liability is considered remote by management, supported by the opinion of expert external advisors. The tax amortization of goodwill is permanent and definitive, and therefore does not apply to the recognition of a deferred tax liability in accordance with IAS 12, on temporary differences.
e) Realization on purchase price adjustments:
As part of the allocation of the purchase price related toallocation in acquisitions of an entity, substantially, in the acquisition of Banco Real, following the requirements of IFRS 3, the Bank has recognized the assets and liabilities of the acquiree to fair value, including identifiable intangible assets with finite lives. Under BRGAAP, in a business combination, the assets and liabilities are kept at their book value. This purchase price adjustment relates substantially to the following items:
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
• The allocation related to the value of assets in the loan portfolio. The initial recognition of value of the loans at fair value, adjustment to the yield curve of the loan portfolio in comparison to its nominal value, which is apportionrecognized by its average realization period.
• The amortization of the identified intangible assets with finite lives over their estimated useful lives.
f) Recognition of fair value in the partial disposal of investments in subsidiaries
Under IFRS in accordance with IFRS 10 "Consolidated Financial Statements" on partial disposal of a permanent investment when control is lost, the fair value is recognized over the remaining portion is remeasured at its fair value, the effect of this update being recognized in result (Webmotors). Under BRGAAP, this type of operation, ongoing participation is accounted forregistered by its book value.
g) Option for Acquisition of Equity Instrument
Within the context of transaction, Banco Santander has granted to the members of Getnet S.A. and Banco BonsucessoOlé Consignado a put option over all shares of Getnet S.A. and Banco BonsucessoOlé Consignado held by them. The overall out in IAS 32, a financial liability was recognized for this commitment, with a specific charge in an accounta heading in stockholders' equity in the amount of R$950 million and R$67 million, respectively. Subsequently, the options have been updated and their effect is recognized in income. On December 19, 2018, Banco Santander and the Minority shareholders of Getnet SA entered into an addendum to the Purchase and Sale Agreement for Shares and Other Covenants of Getnet SA, in which Banco Santander committed to acquire all the shares of the Minority Shareholders, corresponding to 11.5% of the share capital of Getnet SA, for the amount of R$1,431,000. The acquisition was approved by BACEN on February 18, 2019 and concluded on February 25, 2019, so that Banco Santander now holds 100% of the shares representing Getnet SA's share capital. On March 14, 2019, the shareholder minority stake in Banco Olé Bonsucesso Consignado SA formalized its interest in exercising the put option provided for in the Investment Agreement, entered into on July 30, 2014, to sell its 40% stake in Olé Consignado to Banco Santander (Brazil) SA On December 20, 2019, the parties entered into a binding agreement for the acquisition, by Banco Santander, of all the shares issued by Bosan Participações SA, for the total amount of R$1.6 billion, to be paid on the closing date of the Operation. On January 30, 2020, the name of Banco Olé from Banco Olé Bonsucesso Consignado SA was changed to Banco Olé Cosignado SA On January 31, 2020, the Bank and the shareholders of Bosan Participações SA concluded the final agreement and signed the purchase and sale of 100% of the shares issued by Bosan, through the transfer of Bosan's shares to the Bank and payment to sellers in the total amount of R$1,608,772,783.47. As a result, the Bank became, directly and indirectly, the holder of 100% of Banco Olé's shares.
On March 31, 2021, the partial spin-off of Santander Brasil was approved, which resulted in the segregation of the shares owned by it issued by Getnet Adquirência e Serviços para Meios de Pagamentos SA (“Getnet”), with the spun-off portion being transferred to Getnet whose the effects are mentioned in note 27.a.
h) NegativeSantander Serviços goodwill PSA(Santusa)
Aymoré Crédito e Financiamento acquired 100%According to the IFRS 3 "Business Combination", when the owner acquires more shares or other equity instruments of PSA Leasing and therefore a negative goodwillan entity already controlled, it shall consider such amount as an equity reduction. According to the BRGAAP this amount shall be registered in the asset as goodwill or discount on the acquisition f the investment, which is the difference between the acquisition cost and the equity amount of R$93 million was identifiedthe shares.
Consolidated Financial Statements | December 31, 2021 | F-149 |
* Values expressed in thousands, except when indicated. |
i) Reclassification of financial instruments at fair value through profit or loss
Under BRGAAP, all loans, financing and deposits are recorded at amortized cost. In IFRS, in this acquisition. In accordance with IFRS 3 (Business Combinations)9 "Financial Instruments: Recognition and Measurement", negative goodwill is understoodfinancial assets may be measured at fair value and included in the category "Other financial assets at fair value through profit or loss", in order to eliminate or significantly reduce accounting mismatches ( accounting mismatch) of recognition or measurement derived from the measurement of assets or liabilities or from the recognition of gains or losses on these assets / liabilities on a number of bases, which are managed and their performances valued at fair value. Accordingly, the Bank classified loans, financing and deposits that meet these parameters as "fair value through profit or loss", as well as certain debt instruments classified as "available for sale" in BRGAAP. The Bank opted for this classification base in IFRS, since it eliminates an accounting mismatch in the greaterrecognition of the net value, at the acquisition date, of the identifiable assets acquiredrevenues and the amount actually paid, and is recognized against income.expenses.
j) Reclassification of financial assets measured at fair value through other comprehensive income
According to the BRGAAP, the Bank registers some investments, for example, debt instruments initially measured at amortized cost and equity instruments at cost. At the time of this balance sheet, the management reviewed the managing strategy of its investments and according to Bacen Circular 3.068, the debt instruments were reclassified to "trading" measured at fair value with changes in the income statement. According to the IFRS, the Bank is classifying these investments as financial assets measured at fair value through other comprehensive income them at fair value with changes in "other comprehensive income", in line with IAS 9 "Financial Instruments ", which does not allow the reclassification of any financial instrument to fair value with changes in the income statement after the initial recognition.
Consolidated Financial Statements | December 31, 2021 | F-150 |
* Values expressed in thousands, except when indicated. |
APPENDIX II – STATEMENTS OF VALUE ADDED
The following Statements of value added is not required under IFRS but being presented as supplementary information as required by Brazilian Corporate Law for publicly-held companies, and has been derived from the Bank´s consolidated financial statements prepared in accordance with IFRS.
2021 | 2020 | 2019 | ||||||
Thousand of Reais | ||||||||
Interest and similar income | 77,987,308 | 62,774,940 | 72,841,060 | |||||
Net fee and commission income | 15,273,301 | 16,228,214 | 15,713,152 | |||||
Impairment losses on financial assets (net) | (17,112,734) | (17,450,188) | (13,369,905) | |||||
Other income and expense | (3,843,999) | (5,012,403) | (4,025,384) | |||||
Interest expense and similar charges | (28,885,478) | (18,332,228) | (28,519,953) | |||||
Third-party input | (8,078,399) | (7,946,539) | (7,544,695) | |||||
Materials, energy and others | (713,400) | (641,831) | (659,656) | |||||
Third-party services | (6,231,129) | (6,424,755) | (6,047,498) | |||||
Impairment of assets | (165,799) | (84,908) | (131,435) | |||||
Other | (968,071) | (795,045) | (706,106) | |||||
Gross added value | 35,339,999 | 30,261,796 | 35,094,275 | |||||
Retention | ||||||||
Depreciation and amortization | (2,433,921) | (2,579,127) | (2,391,857) | |||||
Added value produced | 32,906,078 | 27,682,669 | 32,702,418 | |||||
Investments in affiliates and subsidiaries | 144,184 | 112,261 | 149,488 | |||||
Added value to distribute | 33,050,262 | 27,794,930 | 32,851,906 | |||||
Added value distribution | ||||||||
Employee | 8,045,893 | 24.3% | 7,943,711 | 28.6% | 8,457,212 | 25.7% | ||
Compensation | 5,929,439 | 5,749,669 | 5,961,765 | |||||
Benefits | 1,593,386 | 1,514,611 | 1,637,099 | |||||
Government severance indemnity funds for employees - FGTS | 431,249 | 448,457 | 502,173 | |||||
Other | 91,819 | 230,974 | 356,175 | |||||
Taxes | 9,269,368 | 28.0% | 6,298,717 | 22.7% | 7,674,704 | 23.4% | ||
Federal | 8,332,994 | 10,088,318 | 6,571,450 | |||||
State | 813 | (830,771) | 54 | |||||
Municipal | 935,561 | (2,958,830) | 1,103,200 | |||||
Compensation of third-party capital - rental | 175,677 | 0.5% | 101,749 | 0.4% | 88,540 | 0.3% | ||
Remuneration of interest on capital | 15,559,324 | 47.1% | 13,450,753 | 48.4% | 16,631,450 | 50.6% | ||
Dividends and interest on capital | 9,649,000 | 3,837,085 | 10,800,000 | |||||
Profit Reinvestment | 5,879,052 | 9,581,444 | 5,606,932 | |||||
Profit (loss) attributable to non-controlling interests | 31,272 | 32,224 | 224,518 | |||||
Total | 33,050,262 | 100.0% | 27,794,930 | 100.0% | 32,851,906 | 100.0% |
2016 | ||||||||
Thousands of Reais | ||||||||
Interest and similar income | 77,146,077 | |||||||
Net fee and commission income | 10,977,596 | |||||||
Impairment losses on financial assets (net) | (13,301,445 | ) | ||||||
Other income and expense | (751,727 | ) | ||||||
Interest expense and similar charges | (46,559,584 | ) | ||||||
Third-party input | (5,804,939 | ) | ||||||
Materials, energy and others | (510,961 | ) | ||||||
Third-party services | (4,589,468 | ) | ||||||
Impairment of assets | (114,321 | ) | ||||||
Other | (590,189 | ) | ||||||
Gross added value | 21,705,978 | |||||||
Retention | ||||||||
Depreciation and amortization | (1,482,639 | ) | ||||||
Added value produced | 20,223,339 | |||||||
Investments in affiliates and subsidiaries | 47,537 | |||||||
Added value to distribute | 20,270,876 | |||||||
Added value distribution | ||||||||
Employee | 7,378,374 | 36.4 | % | |||||
Compensation | 5,455,374 | |||||||
Benefits | 1,397,711 | |||||||
Government severance indemnity funds for employees - FGTS | 352,939 | |||||||
Other | 172,350 | |||||||
Taxes | 4,659,989 | 23.0 | % | |||||
Federal | 4,101,629 | |||||||
State | 717 | |||||||
Municipal | 557,643 | |||||||
Compensation of third-party capital - rental | 767,595 | 3.8 | % | |||||
Remuneration of interest on capital | 7,464,918 | 36.8 | % | |||||
Dividends and interest on capital | 4,550,000 | |||||||
Profit Reinvestment | 2,784,563 | |||||||
Profit (loss) attributable to non-controlling interests | 130,355 | |||||||
Total | 20,270,876 | 100.0 | % |
F-112
Consolidated Financial Statements | December 31, 2021 | F-151 |
BANCO SANTANDER (BRASIL) S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)
2015 | 2014 | |||||||||||||||
Thousands of Reais | ||||||||||||||||
Interest and similar income | 69,870,200 | 58,923,916 | ||||||||||||||
Net fee and commission income | 9,483,509 | 8,765,886 | ||||||||||||||
Impairment losses on financial assets (net) | (13,633,989 | ) | (11,271,605 | ) | ||||||||||||
Other income and expense | (3,867,959 | ) | (1,350,357 | ) | ||||||||||||
Interest expense and similar charges | (38,533,089 | ) | (31,695,404 | ) | ||||||||||||
Third-party input | (7,061,296 | ) | (5,958,217 | ) | ||||||||||||
Materials, energy and others | (520,831 | ) | (511,384 | ) | ||||||||||||
Third-party services | (4,632,346 | ) | (4,653,478 | ) | ||||||||||||
Impairment of assets | (1,220,645 | ) | 3,751 | |||||||||||||
Other | (687,474 | ) | (797,106 | ) | ||||||||||||
Gross added value | 16,257,376 | 17,414,219 | ||||||||||||||
Retention | ||||||||||||||||
Depreciation and amortization | (1,490,017 | ) | (1,362,129 | ) | ||||||||||||
Added value produced | 14,767,359 | 16,052,090 | ||||||||||||||
Added value received from transfer | ||||||||||||||||
Investments in affiliates and subsidiaries | 116,312 | 91,096 | ||||||||||||||
Added value to distribute | 14,883,671 | 16,143,186 | ||||||||||||||
Added value distribution | ||||||||||||||||
Employee | 6,829,965 | 45.9 | % | 6,312,224 | 39.1 | % | ||||||||||
Compensation | 4,824,615 | 4,578,960 | ||||||||||||||
Benefits | 1,300,788 | 1,187,751 | ||||||||||||||
Government severance indemnity funds for employees - FGTS | 391,608 | 310,561 | ||||||||||||||
Other | 312,954 | 234,952 | ||||||||||||||
Taxes | (2,527,787 | ) | -17.0 | % | 3,425,169 | 21.2 | % | |||||||||
Federal | (3,023,224 | ) | 3,366,835 | |||||||||||||
State | 659 | 1,235 | ||||||||||||||
Municipal | 494,778 | 57,099 | ||||||||||||||
Compensation of third-party capital - rental | 747,667 | 5.0 | % | 698,017 | 4.3 | % | ||||||||||
Remuneration of interest on capital | 9,833,826 | 66.1 | % | 5,707,776 | 35.4 | % | ||||||||||
Dividends and interest on capital | 6,200,000 | 1,430,193 | ||||||||||||||
Profit Reinvestment | 3,583,740 | 4,199,830 | ||||||||||||||
Profit (loss) attributable to non-controlling interests | 50,086 | 77,753 | ||||||||||||||
Total | 14,883,671 | 100.0 | % | 16,143,186 | 100.0 | % |
F-113