2022 will be more challenging for loans, says Santander Brasil CEO

Banco Santander Brasil SA will face a more challenging environment for loan growth and repayments in 2022 in light of the rising benchmark interest rate and high inflation in Latin America’s biggest economy, Chief Executive Sergio Rial said.

Rial said the bank’s consumer loan book was likely to expand between 9% and 12% next year, a steep decrease from the roughly 20% growth it is poised to post this year, and predicted fewer people will seek a mortgage because of higher interest rates.

Rial did not provide any estimate for loan defaults, but said the scenario will be “more challenging” in 2022.

Its 90-day loan default increased 0.2 percentage point in the third quarter to 2.4%, while loan-loss provisions also grew.

Many economists are slashing their GDP outlook for Brazil. Itau Unibanco Holding SA said GDP is likely to shrink 0.5% in 2022, as a hike in the benchmark interest rate is expected to tame inflation.

The Brazilian unit of Spain’s Banco Santander reported a recurring net income of 4.340 billion reais ($769.45 million), up 12.5% from a year earlier, driven by higher net interest income and fees.

The result gave Santander Brasil a return on equity (ROE) – a gauge of profitability – of 22.4%, its highest on record.

Analysts praised Santander Brasil’s performance in notes to clients, but highlighted some points of concern.

“Loan loss provisions and defaults started to come under pressure,” analysts at BTG Pactual wrote.

Original Story: Reuters | Carolina Mandl 
Photo: Santander Br
Edition: Prime Yield