Brazilian Banks: 2Q26 Preview: Keeping an eye on Asset Quality

Research evidence excerpt

Brazilian Banks: 2Q26 Preview: Keeping an eye on Asset Quality

Brazilian Banks UBS Research

Santander Brasil

Pressured earnings and profitability on higher cost of risk (partially

explained by accounting changes)

Reporting date: 29 April (before market opens)

We expect Santander Brasil's 2Q26 earnings to be relatively flattish QoQ driven by a

still pressured margin with the market and still high provisions driving a decrease on

EBT sequentially (lower taxes should offset part of the weak operating trends). The

bank's cost of risk should increase as Santander Brasil is adjusting its write-off

methodology (reducing the term for non-collateralized loans which should

temporary increase the provisions). Further, the bank should report a tepid loan

growth sequentially mainly driven by safer lines. All in, we estimate earnings of R

$4.1bn (+0.4% QoQ), yielding an ROAE of 15.4% (from 15.7% in 1Q26). Note that

unlike previous quarters, the Brazilian subsidiary will not report its results on the

same day as Santander (Group), which could create some additional volatility.

Below, we summarize the key points for 1Q26:

Modest loan growth in the quarter. During 1Q26, loans contracted a bit

sequentially reflecting seasonal contraction in cards and weak payroll loans.

For the 2Q26, we expect a moderate loan growth at 1.5% QoQ with the

increase mainly concentrated on safer lines (auto, high income, mortgage

loans).

Cost of risk to increase a bit. We expect asset quality metrics to remain

pressured in the quarter (in the 1Q26, NPL ratio increased 20bps QoQ) and

provisions should increase a bit (cost of risk up 10 bps QoQ). Note that the

bank is adjusting its write-off methodology - increasing the term for

collateralized loans and reducing for non-colletaralized, which should cause a