Despite Santander Brazil reporting first-quarter net profit below market expectations and a decline in profitability metrics, the bank's CEO Mario Leão expressed strong confidence on Wednesday that its return on equity will resume growth by 2026.
Earnings results released earlier on Wednesday revealed a managed net profit of 3.79 billion Brazilian reais for Santander Brazil, down 1.9% year-on-year and slightly below analysts' forecast of 4.03 billion reais. The bank's return on equity fell to 16.0% from 17.5% in the same period last year, also declining 1.6 percentage points from the previous quarter.
Leão stated during a press conference, "We have absolute confidence that ROE will return to a growth trajectory within the year." He emphasized that a significant reason for the profit decline was the bank's payment of higher taxes, while pre-tax profit actually showed a positive trend.
Pre-tax profit for the period reached 4.583 billion reais, increasing 5.4% from the prior quarter. Leão explained that this performance is closely linked to the quality of the asset portfolio the bank is building. He provided a clear commitment regarding future profitability: "I guarantee that our annual profit this year will be higher than in 2021." Although ROE may not return to higher levels until 2028, overall profitability by 2026 is assured.
Leão further noted that the drop in ROE from 17.6% to 16% does not indicate a structural deterioration. This was partly due to increased bank earnings expanding the asset base, which, through dividend distributions and retained profits, relatively increased total equity and thereby affected the ratio's calculation.
The earnings report showed the bank's credit portfolio grew 3.4% in the first quarter to 705.6 billion reais, primarily driven by consumer finance and real estate lending. However, the non-performing loan ratio saw a slight increase, reflecting challenges in the macroeconomic environment. Analysts from Citi pointed out that asset quality pressures and the lower ROE limit the potential for profit expansion in the short term.
As Leão prepares to hand over leadership to former B3 CEO Gilson Finkelsztain in the coming months, he confidently stated that he will continue to take responsibility for the bank's full 2026 profit performance.