UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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(Mark One) |
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended |
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________ . |
OR
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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 |
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Commission file number:
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(Exact name of Registrant as specified in its charter)
SANTANDER (BRAZIL) BANK, INC.
(Translation of Registrant’s name into English)
Federative Republic of Brazil
(Jurisdiction of incorporation or organization)
Condomínio WTORRE JK, Vila Nova Conceição
Federative Republic of
(Address of principal executive offices)
Banco Santander, S.A.
New York Branch
(
(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:
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Title of each class |
Trading Symbols |
Name of each exchange on which registered |
| Units, each composed of one common share, no par value, and one 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* |
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| * | 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)
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.
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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.
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
☐
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.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated Filer ☐ | Non-accelerated Filer ☐ |
Emerging growth company
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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.
If securities are registered pursuant to Section 12(b) of the
Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ U.S. GAAP
☒
☐ 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
| TABLE OF CONTENTS |
| i |
| ii |
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” refer to Banco Santander (Brasil) S.A. and its 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$” are to the Brazilian real , the official currency of Brazil. All references to “U.S. dollars,” “dollars” or “U.S.$” 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 from reais 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, 2024, which was R$6.1923 to U.S.$1.00, or on the indicated dates (subject, on any applicable date, to rounding adjustments). We make no representation that the real 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 in reais , our functional currency and the presentation currency for our consolidated financial statements.
This annual report contains our consolidated financial statements for the years ended December 31, 2024, 2023 and 2022. Such consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB (currently referred to by the IFRS Foundation as the “IFRS accounting standards”) and the interpretations issued by the IFRS Interpretations Committee (formerly known as the International Financial Reporting Interpretations Committee). Our consolidated financial statements for the years ended December 31, 2024, 2023 and 2022 have been audited by PricewaterhouseCoopers Auditores Independentes Ltda., an independent registered public accounting firm, whose report and unqualified opinion is included herein.
IFRS differs in certain significant aspects in comparison with U.S. GAAP. IFRS also differs in certain significant aspects in comparison with the Brazilian GAAP. Appendix I to our audited consolidated financial statements for the years ended December 31, 2024, 2023 and 2022, included herein, contains information relating to certain differences between IFRS and Brazilian GAAP.
As required by the Brazilian Central Bank and Brazilian law, we must prepare our consolidated financial statements in accordance with IFRS. However, we also continue to prepare statutory financial statements in accordance with the Brazilian GAAP, as established by: (i) Brazilian Corporate Law; (ii) the National Monetary Council (CMN - Conselho Monetário Nacional ); (iii) the Brazilian Central Bank including the regulatory reports set forth in the Standard Chart of Accounts for Brazilian Financial Institutions ( Plano Contábil das Instituições do Sistema Financeiro Nacional ), (iv) the Brazilian Securities and Exchange Commission (CVM – Comissão de Valores Mobiliários ), to the extent that such practices do not conflict with the rules of the Brazilian Central Bank; (v) the Accounting Pronouncements Committee (CPC – C omitê de Pronunciamentos Contábeis ), to the extent that such practices are approved by the Brazilian Central 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 ), which is responsible for the supervision and control of the markets for insurance, open private pension funds and capitalization bonds in Brazil. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Auditing Requirements” for additional information.
| iii |
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. This data is 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 Association of Financial and Capital Markets Entities ( Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais ) or “ANBIMA”; the Brazilian Central Bank; the Brazilian Development 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 Federation ( Federação Brasileira de Bancos ), or “FEBRABAN”; the National Federation of Private Retirement and Life Insurance ( Federação Nacional de Previdência Privada e Vida ); the Getúlio Vargas Foundation (Fundação Getúlio Vargas) or “FGV”; the Brazilian Central Bank Information System (Sistema de Informações do Banco Central); the SUSEP; and the CVM, among others.
Calculation of Net Promoter Score
Net Promoter Score, or NPS, is a widely recognized research methodology used to measure customers’ willingness to recommend a company, its products, and its services. It assesses overall customer satisfaction and brand loyalty. The survey is distributed to customers in a random, representative sample and measures satisfaction on a scale from zero to 10. An example of the survey question is: “What are the chances of you recommending Santander to a friend or relative? Please respond on a scale from zero to 10.”
| • | Responses of nine or 10 are considered “promoters”; |
| • | Responses of seven or eight are considered “neutral”; and |
| • | Responses of six or less are considered “detractors.” |
An NPS score is calculated by the percentage of promoters less the percentage of detractors, thus using the total responses as a basis. The higher the number, the higher the measure of customer satisfaction. The grading scale can be negative 100 points to positive 100 points. The NPS calculation does not give weight to customers who did not respond to the survey question. To ensure greater consistency in NPS scores by increasing the response volume and extending the observation period, we evaluate scores using a 90-day period. This approach aggregates all responses over three months and recalculates the score, helping to minimize the effects of seasonal fluctuations during the evaluation period.
Our NPS score, as calculated by us in December 2023 and December 2024, was 56.5 points and 61.8 points, respectively.
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.
“AI” means artificial intelligence.
“B3” means the B3 S.A. – Brasil, Bolsa, Balcão , or the São Paulo Stock Exchange.
“Brazil” means the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil.
“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 |
“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 each month and annually) for the given year.
“CMN” means the National Monetary Council ( Conselho Monetário Nacional ). The CMN is comprised of the Brazilian Minister of Finance, the Brazilian Minister of Planning and Budget and the Governor of the Brazilian Central Bank.
“CNSP” means the National Council of Private Insurance ( Conselho Nacional de Seguros Privados ).
“COPOM” means the Brazilian Monetary Policy Committee ( Comitê de Política Monetária ).
“CPC” means the Accounting Pronouncements Committee (C omitê de Pronunciamentos Contábeis ).
“CSLL” means the Brazilian social contribution over net income ( Contribuição Social Sobre o Lucro Líquido ).
“CVM” means the Brazilian Securities and Exchange Commission ( Comissão de Valores Mobiliários ).
“ESG” is an acronym for the words “environmental,” “social” and “governance.”
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“GDP” means gross domestic product.
“Getnet” means Getnet Adquirência e Serviços para Meios de Pagamento S.A. and its consolidated subsidiaries.
“IBGC” means the Brazilian Institute of Corporate Governance ( Instituto Brasileiro de Governança Corporativa ).
“IPCA” means the Brazilian consumer prices index ( Índice de Preços ao Consumidor – Amplo ), as calculated by IBGE.
“IGP-M” means the Brazilian general index of market prices ( Índice Geral de Preços – Mercado ), as calculated by the FGV.
“IOF” means the Brazilian tax on financial transactions ( imposto sobre operações financeiras ).
“IRPJ” means the Brazilian federal corporate income tax ( imposto sobre a renda de pessoas jurídicas ).
“ISS” means the Brazilian municipal services tax ( imposto sobre serviços de qualquer natureza ).
“LGPD” means Law No. 13,709/2018, or the Brazilian General Data Protection Act ( Lei Geral de Proteção de Dados ).
“NYSE” means the New York Stock Exchange.
“PIX” means the Brazilian Central Bank’s instant payment scheme.
“PREVIC” means the National Superintendence of Supplementary Pensions ( Superintendência Nacional de Previdência Suplementar ).
“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 Santander Brasil and Getnet.
“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 Custódia ), 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.
“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).
| v |
“U.S. GAAP” means the generally accepted accounting principles in the United States.
“UN” means the United Nations.
“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 4. Information on the Company—B. Business 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:
| • | general economic, political, social and business conditions in Brazil, including the impact of the current international economic environment and the macroeconomic conditions in Brazil; |
| • | exposure to various types of inflation and interest rate risks, and the Brazilian government’s efforts to control inflation and interest rates; |
| • | 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 countries, including a global downturn; |
| • | 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 an increase in the level of nonperforming loans or non-performance by counterparties to other types of financial instruments; |
| • | the effects of the ongoing war between Russia and the Ukraine or the war in the Middle East on the general economic and business conditions in Brazil, Latin America and globally; |
| • | climate-related conditions, regulations, targets and weather events; |
| • | uncertainty over the scope of actions that may be required by us, governments and others to achieve goals relating to climate, environmental and social matters, as well as the evolving nature of underlying science and industry and governmental standards and regulations; 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 our controlling shareholder; |
| • | 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; |
| vii |
| • | potential deterioration in the value of the collateral securing our loan portfolio; |
| • | changes in energy prices; |
| • | 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 activities; |
| • | 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,” “commitment,” “commit,” “focus,” “pledge” 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.
| viii |
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1A. Directors and Senior Management
Not applicable.
1B. Advisers
Not applicable.
1C. Auditors
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
2A. Offer Statistics
Not applicable.
2B. Method and Expected Timetable
Not applicable.
ITEM 3. KEY INFORMATION
3A. Selected Financial Data
The following tables set forth the selected financial information of Santander Brasil, as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022 prepared in accordance with IFRS as issued by the IASB. See “Item 18. Financial Statements.” This financial information should be read in conjunction “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.
Income Statement Data
| For the Year Ended December 31, | |||||||
| 2024 | 2024 | 2023 | 2022 | ||||
|
(in millions of U.S.$)(1) |
(in millions of R$) | ||||||
| Interest and similar income | 22,154 | 137,183 | 128,283 | 115,225 | |||
| Interest expense and similar expenses | (13,001) | (80,505) | (81,399) | (67,722) | |||
| Net interest income | 9,153 | 56,679 | 46,884 | 47,503 | |||
| Equity instrument income | 14 | 84 | 22 | 38 | |||
| Equity method income (loss) | 51 | 313 | 239 | 199 | |||
| Fee and commission income | 3,822 | 23,665 | 22,455 | 21,238 | |||
| Fee and commission expense | (1,043) | (6,460) | (6,815) | (6,362) | |||
| Gains (losses) on financial assets and liabilities (net) | (219) | (1,359) | 2,730 | 4,153 | |||
| Foreign exchange fluctuations (net) | 240 | 1,488 | 1,065 | 546 | |||
| Other operating expenses (net) | (105) | (652) | (716) | (841) | |||
| Total income | 11,911 | 73,757 | 65,864 | 66,475 | |||
| Administrative expenses | (3,297) | (20,417) | (19,563) | (18,240) | |||
| Depreciation and amortization | (441) | (2,731) | (2,741) | (2,586) | |||
| 1 |
| For the Year Ended December 31, | |||||||
| 2024 | 2024 | 2023 | 2022 | ||||
|
(in millions of U.S.$)(1) |
(in millions of R$) | ||||||
| Provisions (net)(2) | (742) | (4,595) | (4,424) | (1,215) | |||
| Impairment losses on financial assets (net)(3) | (4,600) | (28,484) | (28,008) | (24,829) | |||
| Impairment losses on other assets (net) | (41) | (252) | (250) | (161) | |||
| Gains (losses) on disposal of assets not classified as non-current assets held for sale | 292 | 1,806 | 998 | 22 | |||
| Gains (losses) on non-current assets held for sale not classified as discontinued operations | 17 | 106 | 45 | 109 | |||
| Operating income before tax | 3,099 | 19,190 | 11,922 | 19,575 | |||
| Income taxes | (933) | (5,776) | (2,423) | (5,235) | |||
| Consolidated net income for the fiscal year | 2,166 | 13,414 | 9,499 | 14,339 | |||
| (1) | Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, 2024 for reais into U.S. dollars of R$6.1923 to U.S.$1.00. |
| (2) | Mainly provisions for tax risks and legal obligations, and judicial and administrative proceedings of labor and civil lawsuits. For further discussion, see notes 21 and 22 to our audited consolidated financial statements included elsewhere in this annual report. |
| (3) | Credit loss allowance less recovery of loans previously written off. |
Earnings and Dividend per Share Information
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| Basic and Diluted Earnings per 1,000 shares | |||||
| From continuing and discontinued operations(1) | |||||
| Basic Earnings per shares (reais) | |||||
| Common Shares | 1,708.02 | 1,208.83 | 1,831.43 | ||
| Preferred Shares | 1,878.82 | 1,329.71 | 2,014.57 | ||
| Diluted Earnings per shares (reais) | |||||
| Common Shares | 1,708.02 | 1,208.83 | 1,831.43 | ||
| Preferred Shares | 1,878.82 | 1,329.71 | 2,014.57 | ||
| Basic Earnings per shares (U.S. dollars)(2) | |||||
| Common Shares | 275.83 | 195.22 | 295.76 | ||
| Preferred Shares | 303.41 | 214.74 | 325.33 | ||
| Diluted Earnings per shares (U.S. dollars)(2) | |||||
| Common Shares | 275.83 | 195.22 | 295.76 | ||
| Preferred Shares | 303.41 | 214.74 | 325.33 | ||
| From continuing operations | |||||
| Basic Earnings per shares (reais) | |||||
| Common Shares | 1,708.02 | 1,208.83 | 1,831.43 | ||
| Preferred Shares | 1,878.82 | 1,329.71 | 2,014.57 | ||
| Diluted Earnings per shares (reais) | |||||
| Common Shares | 1,708.02 | 1,208.83 | 1,831.43 | ||
| Preferred Shares | 1,878.82 | 1,329.71 | 2,014.57 | ||
| Basic Earnings per shares (U.S. dollars)(2) | |||||
| 2 |
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| Common Shares | 275.83 | 195.22 | 295.76 | ||
| Preferred Shares | 303.41 | 214.74 | 325.33 | ||
| Diluted Earnings per shares (U.S. dollars)(2) | |||||
| Common Shares | 275.83 | 195.22 | 295.76 | ||
| Preferred Shares | 303.41 | 214.74 | 325.33 | ||
| Dividends and interest on capital per 1,000 shares (undiluted) | |||||
| Common Shares ( reais ) | 766.78 | 794.10 | 1,035.69 | ||
| Preferred Shares ( reais ) | 853.45 | 873.51 | 1,139.27 | ||
| Common Shares (U.S. dollars)(2) | 123.83 | 128.24 | 167.25 | ||
| Preferred Shares (U.S. dollars)(2) | 137.82 | 141.06 | 183.98 | ||
| Weighted average share outstanding (in thousands) - basic | |||||
| Common Shares | 3,799,003 | 3,795,082 | 3,787,533 | ||
| Preferred Shares | 3,660,144 | 3,656,223 | 3,648,674 | ||
| Weighted average shares outstanding (in thousands) - diluted | |||||
| Common Shares | 3,799,003 | 3,795,082 | 3,787,533 | ||
| Preferred Shares | 3,660,144 | 3,656,223 | 3,648,674 | ||
| (1) | Per share amounts reflect the effects of the bonus share issue and reverse share split for each period presented. |
| (2) | Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, 2024 for reais into U.S. dollars of R$6.1923 to U.S.$1.00. |
Balance Sheet Data
| As of December 31, | |||||||
| 2024 | 2024 | 2023 | 2022 | ||||
| (in millions of U.S.$)(1) | (in millions of R$) | ||||||
| Assets | |||||||
| Cash | 5,989 | 37,084 | 23,123 | 22,003 | |||
| Financial Assets Measured At Fair Value Through Profit Or Loss | 37,305 | 231,002 | 208,922 | 145,515 | |||
| Financial Assets Measured At Fair Value Through Other Comprehensive Income | 14,870 | 92,079 | 59,052 | 55,426 | |||
| Financial Assets Measured At Amortized Cost | 124,077 | 768,325 | 723,710 | 663,824 | |||
| Derivatives used as hedge accounting | 5 | 30 | 25 | 1,741 | |||
| Non-current assets held for sale | 168 | 1,042 | 914 | 699 | |||
| Investments in associates and joint ventures | 588 | 3,640 | 1,610 | 1,728 | |||
| Tax assets | 9,656 | 59,790 | 52,839 | 46,446 | |||
| Other assets | 1,123 | 6,955 | 5,997 | 8,275 | |||
| Permanent assets | 972 | 6,022 | 7,086 | 8,191 | |||
| Intangible assets | 5,301 | 32,827 | 32,376 | 31,603 | |||
| Total assets | 200,054 | 1,238,797 | 1,115,653 | 985,451 | |||
| Average total assets* | 191,404 | 1,185,228 | 1,059,806 | 967,041 | |||
| Liabilities | |||||||
| Financial liabilities measured at fair value through profit or loss | 13,359 | 82,723 | 49,581 | 49,668 | |||
| 3 |
| As of December 31, | |||||||
| 2024 | 2024 | 2023 | 2022 | ||||
| (in millions of U.S.$)(1) | (in millions of R$) | ||||||
| Financial liabilities at amortized cost | 161,746 | 1,001,581 | 910,551 | 795,284 | |||
| Credit institutions deposits | 25,607 | 158,565 | 118,512 | 116,079 | |||
| Customer deposits | 97,713 | 605,068 | 583,221 | 489,953 | |||
| Liabilities arising from securities(2) | 21,903 | 135,633 | 124,397 | 107,121 | |||
| Debt instruments eligible as capital | 3,737 | 23,138 | 19,627 | 19,538 | |||
| Other financial liabilities | 12,786 | 79,177 | 64,794 | 62,593 | |||
| Hedging derivatives | 21 | 130 | 1,177 | - | |||
| Provisions (3) | 1,773 | 10,977 | 11,474 | 9,115 | |||
| Tax liabilities | 1,643 | 10,175 | 9,000 | 7,811 | |||
| Other liabilities | 2,161 | 13,384 | 19,014 | 12,892 | |||
| Total liabilities | 180,703 | 1,118,970 | 1,000,796 | 874,771 | |||
| Stockholders’ equity | 20,380 | 126,199 | 118,421 | 114,669 | |||
| Other Comprehensive Income | (1,083) | (6,708) | (3,968) | (4,486) | |||
| Non-controlling interests | 54 | 335 | 403 | 497 | |||
| Total stockholders’ equity | 19,351 | 119,827 | 114,856 | 110,680 | |||
| Total liabilities and stockholders’ equity | 200,054 | 1,238,797 | 1,115,653 | 985,451 | |||
| Average interest-bearing liabilities(*) | 137,154 | 849,299 | 758,913 | 673,056 | |||
| Average total stockholders’ equity(*) | 19,357 | 119,862 | 112,249 | 107,613 | |||
| (*) | 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, 2024 for reais into U.S. dollars of R$6.1923 to U.S.$1.00. |
| (2) | In the year ended December 31, 2023, we revised the definition of marketable debt securities to include the line items “Financial liabilities measured at fair value in income held for trading” and “Financial liabilities at amortized cost,” instead of only including “Financial liabilities at amortized cost.” The amounts presented as of December 31, 2024, 2023 and 2022 reflect this change. |
| (3) | Mainly provisions for tax risks and legal obligations, and judicial and administrative proceedings of labor and civil lawsuits. |
Selected Consolidated Ratios
| As of and for the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (%) | |||||
| Profitability and performance | |||||
| Return on average total assets (*) | 1.1 | 0.9 | 1.6 | ||
| Asset quality | |||||
| Impaired assets as a percentage of loans and advances to customers (gross)(1) | 7.0 | 7.2 | 7.5 | ||
| Impaired assets as a percentage of total assets(1) | 3.4 | 3.6 | 4.0 | ||
| Impairment losses to customers as a percentage of impaired assets(1) | 79.5 | 84.1 | 86.7 | ||
| 4 |
| As of and for the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (%) | |||||
| Impairment losses, including the debt instruments accounted for as financial assets measured at amortized cost, to customers as a percentage of impaired assets(1) | 84.4 | 88.1 | 89.7 | ||
| Impairment losses to customers as a percentage of loans and advances to customers (gross) | 5.6 | 6.1 | 6.5 | ||
| Impairment losses, including the debt instruments accounted for as financial assets measured at amortized cost, to customers as a percentage of loans and advances to customers (gross) | 5.9 | 6.4 | 6.7 | ||
| Derecognized assets as a percentage of loans and advances to customers (gross) | 4.6 | 5.4 | 3.7 | ||
| Impaired assets as a percentage of stockholders’ equity(1) | 35.3 | 34.7 | 35.4 | ||
| Capital adequacy | |||||
| Basel capital adequacy ratio(2) | 14.3 | 14.5 | 13.9 | ||
| Efficiency | |||||
| Efficiency ratio(3) | 27.7 | 29.7 | 27.4 | ||
| (*) | 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) | 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—Allowance for Loan Losses.” |
| (2) | Basel capital adequacy ratio is measured pursuant to Brazilian Central Bank rules. |
| (3) | Efficiency ratio is determined by dividing administrative expenses by total income. |
See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Selected Credit Ratios.”
| 5 |
Selected Consolidated Ratios, Including Non-GAAP Ratios
| 2024 | 2023 | 2022 | |||
| (%) | |||||
| Profitability and performance | |||||
| Net interest margin(1) | 5.3 | 4.9 | 5.3 | ||
| Return on average stockholders’ equity(2) | 11.2 | 8.5 | 13.3 | ||
| Adjusted return on average stockholders’ equity(2) | 14.6 | 11.3 | 18.0 | ||
| Average stockholders’ equity as a percentage of average total assets(2)(*) | 10.1 | 10.6 | 11.1 | ||
| Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(2)(*) | 7.9 | 8.2 | 8.5 | ||
| Asset quality | |||||
| Impaired assets as a percentage of credit risk exposure(3) | 5.6 | 5.5 | 5.9 | ||
| Impaired assets as a percentage of stockholders’ equity excluding goodwill(2)(3) | 46.0 | 45.8 | 47.4 | ||
| Liquidity | |||||
| Loans and advances to customers, net as a percentage of total funding(4) | 61.1 | 60.8 | 66.2 | ||
| Efficiency ratio | 27.7 | 29.7 | 27.4 | ||
| (*) | 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) | “Net interest margin” 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 goodwill arising from acquisitions made in previous reporting periods, as further discussed in note 13 to our audited consolidated financial statements included elsewhere in this annual report. 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 goodwill arising from acquisitions made in previous reporting periods. 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. For a reconciliation of our selected ratios, see “—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” |
| (3) | Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets), guarantees and private securities (securities issued by nongovernmental entities). We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. The reconciliation of credit risk exposure 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 and financial liabilities at fair value in income held for trading, 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.” |
See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Selected Credit Ratios.”
| 6 |
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 to 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 goodwill arising from acquisitions made in previous reporting periods and the significance of other factors affecting stockholders’ equity and the related ratios, as further discussed in “Item 4. Information on the Company—A. History and Development of the Company—Important Events” and in note 13 to our audited consolidated financial statements included elsewhere in this annual report. 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.
| Reconciliation of Non-GAAP Ratios to Their Most | As of and for the Year Ended December 31, | ||||
| Directly Comparable IFRS Financial Measures | 2024 | 2023 | 2022 | ||
| (in millions of R$, except as otherwise indicated) | |||||
| Return on average stockholders’ equity: | |||||
| Consolidated net income for the period | 13,414 | 9,499 | 14,339 | ||
| Average stockholders’ equity(*) | 119,862 | 112,249 | 107,613 | ||
| Return on average stockholders’ equity(*) | 11.2 % | 8.5 % | 13.3 % | ||
| Adjusted return on average stockholders’ equity(*): | |||||
| Consolidated net income for the period | 13,414 | 9,499 | 14,339 | ||
| Average stockholders’ equity(*) | 119,862 | 112,249 | 107,613 | ||
| Average goodwill(*) | 28,031 | 27,868 | 27,928 | ||
| Average stockholders’ equity excluding goodwill(*) | 91,831 | 84,381 | 79,685 | ||
| Adjusted return on average stockholders’ equity(*) | 14.6 % | 11.3 % | 18.0 % | ||
| Average stockholders’ equity as a percentage of average total assets(*): | |||||
| Average stockholders’ equity(*) | 119,862 | 112,249 | 107,613 | ||
| Average total assets(*) | 1,185,228 | 1,059,806 | 967,041 | ||
| Average stockholders’ equity as a percentage of average total assets(*) | 10.1 % | 10.6 % | 111.3 % | ||
| Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*): | |||||
| Average stockholders’ equity(*) | 119,862 | 112,249 | 107,613 | ||
| Average goodwill(*) | 28,031 | 27,868 | 27,928 | ||
| Average stockholders’ equity excluding goodwill(*) | 91,831 | 84,381 | 79,685 | ||
| Average total assets(*) | 1,185,228 | 1,059,806 | 967,041 | ||
| Average goodwill(*) | 28,031 | 27,868 | 27,928 | ||
| Average total assets excluding goodwill(*) | 1,157,197 | 1,031,938 | 939,113 | ||
| Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*) | 7.9 % | 8.2 % | 8.5 % | ||
| Impaired assets as a percentage of stockholders’ equity: | |||||
| 7 |
| Reconciliation of Non-GAAP Ratios to Their Most | As of and for the Year Ended December 31, | ||||
| Directly Comparable IFRS Financial Measures | 2024 | 2023 | 2022 | ||
| (in millions of R$, except as otherwise indicated) | |||||
| Impaired assets | 42,242 | 39,887 | 39,224 | ||
| Stockholders’ equity | 119,827 | 114,856 | 110,680 | ||
| Impaired assets as a percentage of stockholders’ equity | 35.3 % | 34.7 % | 35.4 % | ||
| Impaired assets as a percentage of stockholders’ equity excluding goodwill: | |||||
| Impaired assets | 42,242 | 39,887 | 39,224 | ||
| Stockholders’ equity | 119,827 | 114,856 | 110,680 | ||
| Goodwill | 27,893 | 27,853 | 27,889 | ||
| Stockholders’ equity excluding goodwill | 91,934 | 87,004 | 82,791 | ||
| Impaired assets as a percentage of stockholders’ equity excluding goodwill | 45.9 % | 45.8 % | 47.4 % | ||
| Impaired assets as a percentage of loans and receivables: | |||||
| Loans and advances to customers, gross | 599,688 | 551,536 | 524,655 | ||
| Impaired assets | 42,242 | 39,887 | 39,224 | ||
| Impaired assets as a percentage of loans and receivables | 7.0 % | 7.2 % | 7.5 % | ||
| Credit risk exposure: | |||||
| Loans and advances to customers, gross | 599,688 | 551,536 | 524,655 | ||
| Guarantees | 64,388 | 65,671 | 57,379 | ||
| Private securities | 86,281 | 102,673 | 82,503 | ||
| Credit risk exposure(1) | 750,357 | 719,881 | 664,537 | ||
| Impaired assets as a percentage of credit risk exposure: | |||||
| Impaired assets | 42,242 | 39,887 | 39,224 | ||
| Credit risk exposure(1) | 750,357 | 719,881 | 664,537 | ||
| Impaired assets as a percentage of credit risk exposure | 5.6 % | 5.5 % | 5.9 % | ||
| Loans and advances to customers, net as a percentage of total funding: | |||||
| Loans and advances to customers, gross | 599,688 | 551,536 | 524,655 | ||
| Impairment losses(2) | (33,598) | (33,559) | (34,025) | ||
| Total funding(3) | 926,450 | 851,743 | 741,613 | ||
| Loans and advances to customers, net as a percentage of total funding(3) | 61.1 % | 60.8 % | 66.2 % | ||
| (*) | 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) | Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets), guarantees and private securities (securities issued by nongovernmental entities). We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. |
| (2) | Provision for impairment losses of loans and advances to customers. |
| (3) | Total funding is the sum of financial liabilities at amortized cost and financial liabilities at fair value in income held for trading, excluding other financial liabilities. |
| 8 |
3B. Capitalization and Indebtedness
Not applicable.
3C. Reasons for the Offer and Use of Proceeds
Not applicable.
3D. Risk Factors
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, results of operations or financial condition could be impacted if any of these risks materialize and, as a result, the market price of our units and of our ADRs could be affected.
Summary of Risk Factors
Summary of Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally
| • | The Brazilian government has exercised significant influence over the Brazilian economy. The Brazilian government’s macroeconomic management strategies, new rules as well as 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, including as a result of the ongoing war between Russia and Ukraine and the war in the Middle East, 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 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. |
| • | Social and environmental risks may have a material adverse effect on us. |
| • | In addition, climate change can create transition risks, physical risks and other risks that could adversely affect 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. |
| 9 |
| • | Disclosure controls and procedures over financial and nonfinancial reporting may not prevent or detect all errors or acts of fraud. |
| • | Changes in taxes and other fiscal assessments may have a negative effect on 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. |
| • | Furthermore, 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 main 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 decline and become insufficient, 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. |
| • | 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. |
| • | Our business is highly dependent on the proper functioning of information technology systems. We are also subject to increasing scrutiny and regulation governing cybersecurity risks. |
| • | We utilize artificial intelligence, which could expose us to liability or adversely affect our business. |
| • | 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 variables, 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. |
| • | The outbreak of highly contagious diseases or other public health emergencies could materially and adversely impact our business, financial condition, liquidity and results of operations. |
Summary of 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. |
| • | 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 United States. |
| • | 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. |
| 10 |
| • | Holders of our units and our ADRs may not receive any dividends or interest on stockholders’ equity. They may also be unable to exercise preemptive rights with respect to our units underlying the ADRs and find it difficult to exercise voting rights at our shareholders’ meetings. |
| • | Investors may find it difficult to enforce civil liabilities against us or our directors or officers. In addition, judgments of Brazilian courts with respect to our units or ADRs will be payable only in reais . |
| • | 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 Brazilian government has exercised significant influence over the Brazilian economy. The Brazilian government’s macroeconomic management strategies, new rules as well as political and economic conditions, could adversely affect us 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; |
| • | nonperforming 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. |
In the past, the Brazilian government has intervened in the economy and has on occasion made significant changes in policy and regulations, 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 and the Brazilian Congress have adopted important measures, such as changes in tax policies, and constraints that have affected and could affect the price of our securities.
Uncertainty over whether the Brazilian government will continue to implement changes in policy or regulation and over which of the proposed changes will be implemented creates instability in the Brazilian economy, increasing the volatility of the Brazilian securities markets, which may have an adverse effect on us and our securities. As a result, the prices of Brazilian financial assets have experienced a high level of volatility in 2024 and in 2025 through the date of this annual report. We cannot assure you that Brazilian financial markets will not experience significant volatility going forward. Economic and political developments in Brazil may also affect the business of the Brazilian financial industry.
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 policymakers may impact our business. Although the incumbent administration has presented its priority initiatives for 2025 and 2026, there is a considerable level of uncertainty regarding future economic measures that may be implemented and how they could 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, may materially adversely affect our business.
| 11 |
The political environment 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 by impacting the confidence of investors and the general public, which has resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies.
As mentioned, there are uncertainties regarding the policies to be followed by the incumbent government, the ability of this administration to continue implementing policies and reforms, as well as the external perception of the Brazilian economy and political environment, all of which could have a negative impact on our business and the price of our securities. In addition, although the tax reform on duties levied on consumption was approved by the Brazilian Congress in 2023, it continues to require adoption of subordinate regulation and approval of additional legislation by the lawmakers in 2025 to be fully implemented by the Brazilian government. A new round of tax reforms focused on income tax is also expected to be presented to the Brazilian Congress by the Brazilian government in 2025. The main measure announced aims to exempt persons who earn less than R$5,000 a month from income tax, although it is unclear as of the date of this annual report how the Brazilian government intends to fund this measure. The revocation of the income tax exemption on the payment of dividends may be included as an alternative, which, if enacted, would increase the tax expenses associated with any dividend or distribution by Brazilian companies and could impact our capacity to receive future cash dividends or distributions net of taxes from our subsidiaries. The expectation is that the incumbent administration will proceed with the abovementioned income tax overhaul approval in 2025, along with other economic reforms. Any such new policies or changes to current policies may have a material adverse effect on us.
Furthermore, expenditures by the Brazilian federal government have historically led to fiscal deficits at the federal level, resulting in seven straight years of deficits between 2014 and 2020. However, the Brazilian federal government recorded a budget surplus in 2022, due in part to rising commodity prices and higher inflation. In 2023, as commodity prices stabilized, inflation receded and cyclical activities slowed down, government revenue also decreased, while expenditures continued to rise, resulting in a budget deficit. In 2024, although total fiscal revenues at the federal level increased 9.6% as compared to 2023 (in inflation-adjusted terms) as a result of ad hoc measures approved in the end of 2023), public expenditures continued to rise at a faster pace, and Brazil registered another budget deficit in the period. The Brazilian government continues to face a challenging fiscal environment despite the approval of a new fiscal framework in 2023. Similarly, the governments of Brazil’s constituent states are grappling with fiscal challenges due to high debt burdens, declining revenues, and inflexible expenditures, extensive federal economic relief programs, and aid efforts to address the impacts of the early 2024 floods in Rio Grande do Sul.
The uncertainties regarding the implementation of the Brazilian government’s agenda, considering the scenario for 2025 (completion of the tax reform on consumption, approval of measures to curb public expenditures, assessment of changes to income tax rules, the relationship between the executive, legislative, and judiciary branches, interactions among leading political parties and the incumbent administration’s approval rating) and changes related to monetary, fiscal, and social security policies could affect the Brazilian economy. Any such developments may contribute to economic instability in Brazil and increase the volatility of securities issued by Brazilian companies, including 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.
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. In particular, inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA, and the IGP-M.
For example, considering the amounts in 2024, each additional percentage point change in the IPCA rate would impact our personnel and other administrative expenses by approximately R$108 million and R$87 million, respectively.
| 12 |
Inflation for the years ended December 31, 2024, 2023 and 2022, as measured by the IPCA, was 4.8%, 4.6%, and 5.8%, respectively. Increased inflation in the year ended December 31, 2022, resulted mainly from temporary supply shocks affecting the prices of foodstuffs. These inflationary pressures were compounded by additional factors, including events that hit electricity generation and led to an increase in energy prices, disruptions in supply chains, the depreciation of the real , the ongoing war between Ukraine and Russia, the war in the Middle East, and the COVID-19 pandemic (particularly in China), among others. As a result, inflation in mid-2022 peaked at multiple-year highs of 12.1% in Brazil (as measured by the IPCA in April 2022), which led the Brazilian government to introduce tax cuts on selected items. This helped to ease pressures on prices and led to the accumulated IPCA for the year ended December 31, 2022, being 5.79%. Some of the tax exemptions put in place in 2022 were reversed in 2023, thus adding to the inflationary pressures affecting the Brazilian economy in 2023. However, the delayed effects of tight monetary policy, favorable climatic conditions, and a stronger real in 2023 than in 2022 helped reduce inflation in the second half of 2023, which led the IPCA to end 2023 at 4.6%, below the level recorded in 2022, but still above the 3.25% targeted level set by the Brazilian Central Bank pursuant to applicable law. The IPCA showed a declining trend in the beginning of 2024 in year-over-year terms, but adverse climatic conditions affecting energy and food prices, combined with the depreciation of the real and strong economic activity with a low unemployment rate, fueled renewed inflationary pressures. These factors contributed to inflation ending the year at 4.5%, above the upper limit set by the Brazilian Central Bank pursuant to applicable law.
Moreover, the measures to fight inflation, mainly carried out by the Brazilian Central Bank, have had significant effects on the Brazilian economy and our business, and could continue to do so. As a result of inflationary pressures that arose in Brazil in early 2021 and intensified globally throughout 2022, the Brazilian Central Bank began tightening its monetary policy, raising the SELIC rate starting in mid-March 2021, ultimately reaching 9.25% by the end of 2021. This cycle continued into 2022, with the SELIC rate peaking at 13.75% in August 2022, at which point the Brazilian Central Bank opted to maintain that level. The SELIC rate stayed at 13.75% for nearly a year, as inflation hovered near the upper limit of the Brazilian Central Bank’s target range pursuant to applicable law (3.25% for 2023 and 3.0% thereafter). In August 2023, as inflationary pressures eased, the Brazilian Central Bank began reducing the SELIC rate, which fell to 10.50% by May 2024. Nevertheless, renewed inflationary pressures—driven in part by fiscal concerns stemming from persistent budget deficits and increased government spending—prompted the Brazilian Central Bank to reverse course and resume hiking rates in September 2024, with the SELIC rate reaching 12.25% by December 2024. As of the date of this annual report, the SELIC rate stands at 13.25% per annum, reflecting the challenges of controlling inflation amid a strong economy, historically low unemployment levels, and fiscal imbalances requiring tighter monetary policy to maintain economic stability.
Our income, expenses, assets and liabilities are impacted by interest rates levels and volatility. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and monetary policies. Changes in these variables may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. For more information about our risk management, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk." 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 the risk of default by our customers in the short run.
Moreover, tight monetary policies with 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, 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.
Finally, the term of office of the current president of the Brazilian Central Bank concluded at the end of the 2024 fiscal year. The President of Brazil appointed the current director for monetary policy of the Brazilian Central Bank to be the next president of the Brazilian Central Bank for a four-year term starting in January 2025. This transition in leadership is likely to influence the Brazilian Central Bank’s approach to inflation control and interest rate policy, both of which are critical to Brazil’s economic stability. As monetary policy priorities may shift under new leadership, it is uncertain how inflation and interest rate management will evolve and whether potential changes could adversely impact the Brazilian economy or our operations.
Exposure to Brazilian federal government debt could have a material adverse effect on us.
We invest in Brazilian federal government bonds. As of December 31, 2024, approximately 15.4% of our total assets, and 67.1% of our securities portfolio, consisted of debt securities issued by the Brazilian federal government. Any failure by the Brazilian government 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.
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Fluctuations in interest rates and other factors may affect our obligations under legacy employee pension funds.
We sponsor defined benefit pension plans and a healthcare plan for former and current employees, most of which were inherited from legacy plans and/or the acquisition of other banks (though we discontinued the use of defined benefit pension plans for our employees in 2005). In order to determine our current obligations, we use actuarial methods and assumptions that are inherently uncertain and involve the exercise of significant judgment, including with respect to interest rates, which are one of the most important variables used in determining our current pension obligations.
Changes in the present value of our obligations under our legacy defined benefit pension plans could require us to increase contributions, 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.
Decreases in interest rates can increase the present value of obligations under our legacy defined benefit pension plans and lifetime medical assistance plan, which contributed to an increase in our provisions in the amount of R$0.7 billion in 2023. Increases in interest rates have the opposite effect, however, which contributed to a decrease in our provisions in the amount of R$1.1 billion in 2024.
As of December 31, 2024 our provisions for pensions and similar obligations totaled R$1.4 billion (out of total provisions for legal and administrative proceedings, commitments, pensions and other matters of R$11.0 billion). For additional information, see note 21 to our audited consolidated financial statements included in this annual report.
Exchange rate volatility may have a material adverse effect on the Brazilian economy and on us.
The Brazilian currency has experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. The Brazilian government has used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system.
Although long-term depreciation of the real is generally linked to the rate of inflation in Brazil, depreciation of the real occurring over shorter periods of time has resulted in significant variations in the exchange rate among the real, the U.S. dollar and other currencies. As a result of fluctuations in commodity prices, international developments and periods of progress and setbacks on the domestic front—such as during the presidential impeachment process in 2016, or the approval of the national pension system reform in 2019—the real has weakened over the last few years. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.6175 to R$5.7042 per U.S.$1.00 as a result of ongoing economic and political uncertainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.2177 per U.S.$1.00. In 2023, the volatility in the R$/U.S.$ exchange rate persisted as it ranged from R$4.7202 to R$5.4459 per U.S.$1.00 as a result of geopolitical issues, increases in interest rate and economic uncertainties abroad combined with uncertainty regarding Brazil’s fiscal and budgetary position. As a result, the exchange rate was R$4.8413 per U.S.$1.00 on December 31, 2023. In 2024, the real experienced a significant devaluation against the U.S. dollar, influenced in part by the outcome of the U.S. presidential election, which is expected to result in a stronger U.S. dollar relative to other currencies, as well as concerns surrounding the Brazilian economy and the Brazilian federal government’s fiscal situation. The exchange rate was R$6.1923 per U.S.$1.00 on December 31, 2024. There can be no assurance that the real will not substantially depreciate or appreciate further against the U.S. dollar.
In the year ended December 31, 2024, 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$2.1 million.
Past episodes of depreciation of the real relative to the U.S. dollar created additional inflationary pressures in Brazil, which 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 balance of payments, as well as hinder export-driven growth. Depending on the circumstances, either a 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.
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Infrastructure, 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 GDP growth has fluctuated over the past few years. In 2020, Brazilian GDP contracted by 3.3% as a result of the effects of the COVID-19 pandemic and despite the significant economic support measures put in place by the Brazilian government (although it is believed that these measures averted an even stronger contraction). In 2021, the extension of income support programs and the relaxation of certain mobility restrictions that allowed some businesses to resume their activities boosted the industrial and services sectors and resulted in GDP growth of 4.8% in 2021. This level of growth was in part due to a low basis of comparison given the significant contraction in GDP in 2020 (against which 2021 growth was measured), an effect which was not present in 2022 and helps explain the deceleration of GDP growth in 2022 to 3.0% despite the significant volume of fiscal stimulus. In 2023, GDP growth reached 3.1%, driven by a record grain harvest. For 2024, we estimate GDP growth at 3.5%, supported by a strong economy and historically low unemployment levels . The growth and performance of the Brazilian economy may be impacted by other factors such as nationwide strikes, natural disasters, pandemics or other disruptive events. 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 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, investors’ reactions to developments in these countries may have an adverse effect on the market value of securities of Brazilian issuers.
Investors’ perceptions of the risks associated with our securities may also be affected by allegations of fraud, accounting misstatements, corruption, bribery or other matters involving other Brazilian issuers. Investors’ perceptions of the risks associated with our securities may also be affected by perception of risk conditions in Spain. Additionally, crises in other emerging market countries may reduce 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.
In 2020 and 2021, the fallout of the COVID-19 pandemic significantly affected the performance of Brazilian markets, an effect that was less pronounced in 2022 in Brazil. These factors persisted in 2022 and have been compounded by the war between Russia and Ukraine, which has contributed to inflationary pressures worldwide and spurred central banks to increase interest rates, thereby spurring fears of a global economic slowdown. Continued COVID-19 outbreaks in China in 2022 and early 2023 and the response of the Chinese government to these outbreaks adversely affected the Chinese economy. During 2023 and 2024, the Chinese government resumed introducing monetary and fiscal stimuli in order to reverse that setback and meet its economic growth goals. The global economy was also adversely affected by the war in the Middle East, which started in October 2023 and has been ongoing since then. In addition, inflationary pressures in advanced economies proved to be more resilient than previously imagined, thus leading monetary authorities in these economies to extend their monetary tightening cycle and renewing fears of a global recession, which weighed on the market value of our securities. In response to the monetary tightening cycles launched in advanced economies and the extension of a subdued economic growth in China, global inflationary pressures started abating and opened room for the monetary authorities around the world to start reducing their base interest rates (e.g., the European Central Bank in June 2024 and the U.S. Federal Reserve in September 2024), which translated into favorable prospects for a recovery in the world economic growth in the near future. However, these developments may not necessarily be felt in Brazil, where inflationary pressures have persisted, and the Brazilian Central Bank has continued to raise interest rates in response to fiscal concerns and other domestic challenges. See “—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.”
In addition, we continue to be exposed to disruptions and volatility in the global financial markets due to their effects on the financial and economic environment, particularly in Brazil, which could include a slowdown in the economy, an increase in the unemployment rate, a decrease in the purchasing power of consumers and a lack of credit availability. We lend primarily to Brazilian borrowers, and these effects could materially and adversely affect our customers and increase our nonperforming 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.
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A global economic downturn could have a material adverse effect on us.
The global macroeconomic environment is facing challenges, including the ongoing war between Russia and Ukraine, the war in the Middle East, supply chain disruptions, high energy prices, resilient inflationary pressures, trade disruptions and an economic slowdown in China. Although most central banks around the world have started reducing their base interest rates, there is considerable uncertainty over the lagged effects of the prior tight monetary policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States, which may result in GDP contractions across major economies in the short and medium term.
In 2022, the war between Russia and Ukraine contributed 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. 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 are involved in controversies related to trade barriers in China that have threatened a trade war between the countries, which have implemented or proposed to implement tariffs on certain imported products. Sustained tensions between the United States and China could significantly undermine the stability of the global economy. This risk is heightened by the outcome of the U.S. presidential election in November 2024, with the new administration being expected to reignite trade disputes, including the reimplementation or escalation of tariffs on Chinese goods, as well as measures aimed at reducing U.S. reliance on Chinese supply chains.
Furthermore, after taking office, the U.S. president has increased and is expected to continue to increase trade tariffs on key trade partners of the United States, such as Mexico and Canada, and also imposed a series of significant economic tariffs on a wide array of goods imported into the United States, including certain imports from China as well as on imports of steel and aluminum from around the world. Brazil, as an exporter of steel and aluminum to the United States, will be adversely affected by these tariffs. The U.S. administration has also expressed a desire to put in place reciprocal tariffs on countries around the world. Brazil may also be affected by these reciprocal tariffs given its trade relationship with the United States. There is no guarantee that the United States will not impose additional tariffs on Brazilian exports, whether directly on Brazilian goods more broadly or indirectly through tariffs on other products that incorporate Brazilian inputs. Such measures may have a material adverse effect on both Brazil’s economy and the global economy. In addition, any additional tariffs or the development of a fully-fledged trade war could exacerbate economic tensions globally, disrupt global trade flows, add to economic uncertainty and have a material adverse effect on both Brazil’s economy and the global economy.
On October 7, 2023, Hamas launched an attack on Israel targeting Israeli civilians. In response, Israel declared war against Hamas, attacking Hamas targets in Gaza and the region. In 2024, in response to attacks from Lebanon and Iran, Israel attacked Lebanon targeting Hezbollah infrastructure and leaders and carried out airstrikes against Iranian military sites. The war, a further escalation of the conflict and any resulting conflicts in the region would exacerbate the ongoing humanitarian crisis and could lead to higher oil and gas prices, the imposition of sanctions, travel and import/export restrictions, further disruptions in supply chains, inflationary pressures and market volatility, among other potential consequences. It remains unclear whether these challenges and uncertainties will be contained or resolved, or what effects they may have on global political and economic conditions in the long term.
Scenarios of political tensions and instability throughout the world stemming from a variety of factors such as heightened polarization and political fragmentation, may lead to shifting and unpredictable outcomes in political elections, legislative and policy-making efforts, social conditions and the global economy, to the progressive erosion of the rule of law in certain long-standing democracies. Furthermore, increasing public debt levels together with high interest costs may not be sustainable and could lead certain countries to have higher sovereign risk premia and sovereign debt crises. The inauguration of the newly elected administration in the United States is expected to introduce additional volatility to financial markets, driven by anticipated policies such as increased tariffs, a more protectionist trade agenda, and potential fiscal measures, which could significantly impact securities prices, interest rates, and exchange rates. A deterioration of the global economic, political, social and financial environment, particularly in Europe and the Americas, could have a material adverse impact on the financial sector, affecting our operating results, financial position and prospects.
Moreover, the risk of returning in Europe to a fragile and volatile environment, heightened political tensions or recession could be aggravated if, among others, (i) the German economy falls into recession due to reduced competitiveness of its industrial sector, (ii) the policies implemented to provide emergency assistance and support to Ukraine, to alleviate the consequences of the war in the EU and to contain inflation do not succeed, (iii) the reforms aimed at improving the labor market, productivity and competitiveness fail, (iv) the banking union and other measures of European integration do not take hold, or (v) 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.
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In addition, growing protectionism and trade tensions, such as the ongoing tensions between the United States and China as well as a more protectionist trade agenda generally in the United States, could intensify their negative impact on the global economy. Meanwhile, China’s economic deceleration, driven by structurally low growth, real estate distress, and slow population growth, could exacerbate global economic challenges and impact our operating results, financial condition, and prospects.
Additionally, the UK ceased to be a member of the EU in 2020. A limited trade deal was agreed between the UK and the EU with the relevant new regulations coming into force on January 1, 2021. The trade deal, however, did not include agreements on certain areas such as financial services and data adequacy. 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.
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.
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 global financial and credit markets, including as a result of the ongoing wars between Russia and Ukraine and in the Middle East, could adversely 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, if there is increased collateral credit risk or if 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.
The continuance or escalation of the wars in Ukraine and in the Middle East could materially affect our financial position and increase our operational risk.
On February 24, 2022, Russia launched a large-scale military action against Ukraine. The war in Ukraine has caused an ongoing humanitarian crisis in Europe as well as volatility in financial markets globally, heightened inflation, shortages and increases in the prices of energy, oil, gas and other commodities. The continuance or escalation of the war, including its extension to other countries in the region, has led to, and could continue to lead to, further increases in energy, oil and gas prices (particularly if supplies to Europe are interrupted) and inflationary pressures, which in turn could lead to increases in interest rates and market volatility. In addition, the war has exacerbated supply chain problems, particularly to those businesses most sensitive to rising energy prices. The war and its effects has exacerbated and could continue to exacerbate the slowdown in the global economy and could negatively affect the payment capacity of some of our customers, especially those with more exposure to the Russian or Ukrainian markets.
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In response to the Russian military action against Ukraine, several countries, including the United States, the European Union member states, the United Kingdom and other UN member states, have imposed severe sanctions on Russia and Belarus, including freezing/blocking assets, targeting major Russian banks, the Russian central bank, and certain Russian companies and individuals, imposing trade restrictions against Russia and Russian interests, as well as the disconnection of certain Russian banks from the SWIFT system (Society for Worldwide Interbank Financial Telecommunication). In addition, the sanctions imposed also include a ban on trading in sovereign debt and other securities. The scale of sanctions is unprecedented, complex and rapidly evolving, and poses continuously increasing operational risk to us. Our corporate framework and policies are designed to ensure compliance with applicable laws, regulations and economic sanctions in the countries in which we operate, including U.S., EU, UK and UN economic sanctions. We cannot predict whether Brazil or any of the jurisdictions whose sanctions frameworks we adhere to will enact additional economic sanctions or trade restrictions in response to the Russian military action against Ukraine. While we do not knowingly engage in direct or indirect dealings with sanctioned parties according to applicable sanctions, or in direct dealings with the sanctioned countries/territories, we may on occasion have indirect dealings within the sanctioned countries/territories, but aim to operate in line with applicable U.S., EU, UK and UN blocking and sectoral sanctions regulations.
Furthermore, we believe that the risk of cyberattacks on companies and institutions has increased and could increase even further as a result of the aforementioned conflicts and in response to the sanctions imposed, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures. Although we actively monitor for cyberattacks, there can be no assurance that our cybersecurity and data protection measures and defenses will be effective at identifying, preventing, mitigating or remediating any such cyberattacks.
It remains unclear whether the challenges and uncertainties caused by the ongoing war between Israel and Hamas will be contained or resolved, or what effects they may have on global political and economic conditions in the long term. Continuation or escalation of the war could lead to higher oil and gas prices, the imposition of sanctions, travel and import/export restrictions, further disruptions in supply chains, inflationary pressures and market volatility, among other potential consequences.
We do not have a physical presence in Russia, Ukraine or in the Middle East and our direct exposure to Russian, Ukrainian or Middle Eastern markets is not material. However, the impact of the wars and sanctions on global markets and macroeconomic conditions globally, and other potential future geopolitical tensions and consequences remain uncertain and may exacerbate our operational risk. Episodes of economic and market volatility and pressure on supply chains and inflation may continue to occur and could worsen if wars persist or increase in severity. As a result, our businesses, results of operations and financial position could be adversely affected by any of these factors directly or indirectly arising from the wars in Ukraine and in the Middle East.
Ongoing or future investigations relating to corruption, diversion of public funds, money laundering fraud and other matters 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 have faced and continue to face investigations and prosecutions by the CVM, the U.S. Securities and Exchange Commission, 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, money laundering and other allegations of wrongdoing. Anticorruption or other investigations may lead to significant reputational harm, which may affect the investigated corporations’ images and revenues and result in downgrades from rating agencies or funding restrictions, among other negative effects. Allegations of bribery, corruption, fraud, money laundering improper accounting practices or other similar matters among certain large Brazilian companies may also adversely affect investors’ perceptions of the risks involved in investing in Brazilian companies and result in volatility in financial markets. Given the significance of the companies that historically have been subject to investigations in the Brazilian economy, the investigations and their fallout have had and may continue to have an adverse effect on Brazil’s economic growth prospects in the short to medium term.
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. Although we have reduced our exposure to companies involved in 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 investigations, we may also be materially adversely affected. In addition, investigations have involved members of the Brazilian executive and legislative branches, which caused considerable political tensions, and, as a result, persistently poor economic conditions in Brazil could have a material adverse effect on us. It is difficult to calculate the size and extension of the effects derived from such political tensions, which may further deteriorate Brazil’s economic conditions.
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Risks Relating to the Brazilian Financial Services Industry and Our Business
Our growth, asset quality and profitability, among others, may be adversely affected by a slowdown in Brazil and volatile macroeconomic and political conditions.
A slowdown or recession in Brazil and other major world economies 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 in 2021 and 2022 have increased considerably in Brazil and globally, due to the strong increase in aggregate demand and bottlenecks in supply and production chains due to shortages of inputs. In 2023, inflation in Brazil was moderate compared to the levels observed at the end of 2022, reflecting tighter monetary policy, a stronger Brazilian real, and favorable supply-side factors, including a record grain harvest. However, the path toward achieving the 3.0% inflation target set by the Brazilian Central Bank under applicable law proved uncertain. This became evident in 2024, as inflationary pressures resurfaced, driven by a combination of adverse climatic conditions impacting energy and food prices, a significant depreciation of the real against the U.S. dollar—partly due to the outcome of the U.S. presidential election—and persistent fiscal concerns in Brazil, which compounded domestic economic challenges.
In Brazil, the generalized increase in prices was exacerbated by the depreciation of the real against the U.S. dollar and other major currencies, leading the Brazilian Central Bank to raise the SELIC rate from 2.0% at the end of 2020 to 13.75% at the end of 2022. The SELIC rate remained at this high level until August 2023, when the decrease in inflationary pressures and a more favorable economic outlook allowed the Brazilian Central Bank to begin loosening monetary policy. The SELIC rate at the end of 2023 stood at 11.75%. Rate cuts continued into 2024, with the SELIC rate reaching 10.50% in May 2024. However, renewed inflationary pressures in the second half of 2024—driven by adverse weather conditions, a significant devaluation of the real amid the global strength of the U.S. dollar following the U.S. presidential election, and Brazil’s persistent fiscal challenges—led the Brazilian Central Bank to reverse course, initiating a tightening cycle in September 2024. As of the date of this annual report, the SELIC rate stands at 13.25%.
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; |
| • | 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; |
| • | polarization of the political scenario in Brazil amid the process of submission of key legislation to the Brazilian Congress’ approval. In addition, the Brazilian Congress has new leadership in the House of Representatives and in the Senate, which is expected to result in negotiations to form new political alliances that may result in a more complex political scenario; |
| • | intensification of government action in regulation (including banking regulation with respect to the Agenda BC#, such as regulations on social and environmental risks, or CSLL, IOF and other tax reform), technological disruptions (including as a result of 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; |
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| • | increased regulation of our industry and compliance with such regulation would likely 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. |
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 and 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 by the level of economic activity in Brazil.
The recoverability of our loan portfolios, our ability to increase the amount of loans outstanding in our portfolio and our results of operations and financial condition in general are dependent to a significant extent on the level of economic activity in Brazil. The quality of our loan portfolio may deteriorate as a result of these risks and our loan loss reserves could be insufficient to cover our loan losses, which could have a material adverse effect on us. 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, 2024 was R$190.6 billion (or 15.4% of our total assets as of that date) and consisted principally of National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and 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.
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.”
Our revenues are also subject to a 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 and tax and monetary policies.
The economy of Brazil faces long-standing structural problems, including weaknesses in infrastructure, economic competitiveness and education, high levels of social inequality, rising inflation and increasing public debt levels, and 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, fiscal and monetary policy measures enacted by the Brazilian government in response to the COVID-19 pandemic significantly increased governmental debt through 2021 and 2022. In 2023 and 2024, despite economic growth and positive developments from a revenue standpoint, the level of governmental debt (as a percentage of the GDP) has continued to increase.
Among the risks that could negatively affect the Brazilian economy and financial markets and lead to a slowdown of the global economy, recession, inflationary pressures and/or stagflation are: (i) further increases in the prices of energy and other commodities; (ii) the breakdown of global supply chains; (iii) the continuance or escalation of the wars in Ukraine and in the Middle East; (iv) additional fiscal incentives, which have hitherto contributed to keeping inflation above target levels; (v) a decline in governmental revenue, which could lead to a steep growth in governmental debt; (vi) increasing governmental costs, including those arising from public policies and social programs the current administration seeks to implement, which could exacerbate fiscal imbalances; and (vii) the return to or maintenance of tight monetary and fiscal policies or the tightening thereof, including by rising or maintaining high interest costs. 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.
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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, 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, including through portability of loans. In particular, we face the challenge of competing 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 that 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. This could be accelerated by the advent of open banking and open finance, which could result in our competitors gaining access to valuable data regarding our customers which may help them compete with us. In addition, the alliances that our competitors are starting to build with large technology firms can make it more difficult for us to successfully compete with them and could adversely affect us.
Moreover, nontraditional providers of banking services, such as internet-based e-commerce providers, mobile telephone companies and internet search engines, as well as payment services for blockchain technologies, may offer and/or increase their offerings of financial products and services directly to customers. These nontraditional 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 and marketing capabilities as well as other resources. They may adopt more aggressive prices and rates and devote more resources to technology, infrastructure and marketing. These new competitors, in addition to neobanks, 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 our competitive position and business. Furthermore, the widespread adoption of new technologies, including distributed ledger, artificial intelligence and/or biometrics, to provide services such as digital currencies, 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 capabilities. Our customers may choose to conduct business or offer products in areas that may be considered speculative or risky. Further growth of such new technologies and mobile banking platforms could negatively impact the value of our investments in bank premises, equipment and personnel for our branch network. The persistence or acceleration of this shift in demand toward internet and mobile banking may necessitate changes to our retail distribution strategy. Our failure to implement changes to our distribution strategy swiftly and effectively could have an adverse effect on our competitive position.
In addition, on November 16, 2020, the Brazilian Central Bank instituted 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 day, seven days a week, and every day in the year. This ecosystem promotes innovation of the existing payment infrastructure. Although the regulations relating to the PIX ecosystem are subject to further developments from time to time, such initiatives may promote greater competition in the industry, and could cause customers to move away from the solutions we offer towards PIX solutions. In particular, PIX has made processing payments faster and less expensive, has fostered and is expected to continue to foster additional competition and allow new entrants to join the market, while also serving as a significant source of data that will contribute to the ongoing transformation of the financial industry in Brazil. Such developments could therefore materially and adversely affect our business and results of operations.
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Increasing competition could also require that we increase the rates offered on our deposits or lower the rates we charge on loans, which could also have a material adverse effect on our profitability, as well as limit our ability to increase our customer base and expand our operations, further increasing competition for investment opportunities.
The success of our operations, our profitability and our ability to maintain our competitive position 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, we may not be able to manage emerging risks as we develop new products and services, which could have a material adverse effect on us. Moreover, 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 customer behavior. If we cannot respond in a timely fashion to the changing needs and/or desires of our customers, including as a result of ageing population, we may lose existing or prospective customers, which could in turn materially and adversely affect us. In addition, the cost of developing products is likely to affect our results of operations.
We face the challenge of simplifying the range of our products and services and, at the same time, being able to satisfy the needs of our clients by offering new products and services. The development of these new products and services exposes us to new and potentially increasingly complex risks, such as the conduct risk in the relationship 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.
Should our customer service levels ever be perceived by the market to be materially below those of our competitor
financial institutions, we could lose existing and potential new 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.
We are subject to extensive regulation and regulatory and governmental oversight, which could adversely affect 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 regulations governing Brazilian financial institutions are 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 limit 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 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.
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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 continuously 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. Regulations may be unexpectedly and immediately imposed by governments and regulators in response to a crisis, and these may especially affect financial institutions such as those that may be deemed to be systemically important. In addition, the volume, granularity, frequency and scale of regulatory and other reporting requirements require 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 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 its 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, many changes have occurred as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) 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 outcome of any financial regulatory reforms in the European Banking Union, the United States or other 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.
We are subject to potential intervention by any of our regulators or supervisors.
Our business and operations are subject to increasingly significant rules and regulations set by the Brazilian Central Bank, the CVM, the PREVIC, the SUSEP, the CNSP and the CMN, with which we are required to comply to conduct our banking and financial services business. These apply to business operations, affect our 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 high levels of 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.
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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 we believe that 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.
Increases in reserve, compulsory deposit and minimum capital requirements may have a material adverse effect on us.
Compulsory deposit requirements in Brazil require banks to hold part of funding received from customers with the Brazilian Central Bank, which sets these requirements as a means of controlling liquidity in the financial markets and preserving the solvency of financial institutions. The Brazilian Central Bank has periodically changed the level of reserves and compulsory deposits that financial institutions in Brazil are required to maintain, as well as determined compulsory allocation requirements to finance government programs. These changes are a continuing source of risk, as new or an increase in existing reserve and compulsory deposit or allocation requirements, may adversely affect our liquidity and our ability 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 recent 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.
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—Basel III” and “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding—Capital Management.”
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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 and anti-terrorism, or “AML/CFT,” antibribery and corruption, sanctions and other laws and regulations (collectively, financial crime and compliance (“FCC”) regulations) applicable to us. These laws and regulations require us, among other things, to conduct full customer due diligence (including sanctions and politically exposed person screening) and keep our customer, account and transaction information up to date. We have FCC policies and procedures in place detailing what is required from those responsible. We are also required to conduct FCC training for our employees and to report suspicious transactions and activity to appropriate law enforcement following full investigation by our special incidents area.
Financial crime continues to be the subject of enhanced regulatory scrutiny and supervision by regulators globally. AML/CFT, antibribery, anticorruption and sanctions laws and regulations are increasingly complex and detailed. Key standard-setting and regulatory bodies continue to provide guidelines to strengthen the interaction and cooperation between prudential and AML/CFT supervisors. Compliance with these laws and regulations requires automated systems, sophisticated monitoring and skilled compliance personnel.
We maintain 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 (which were recently regulated by statute in Brazil) and innovative payment methods, could limit our ability to track the movement of funds and, therefore, present a risk to us. 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 ongoing changes to systems and operational activities. Financial crime is continually evolving and 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 have been, and may in the future continue to 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. While we expect relevant counterparties to maintain and apply their own appropriate compliance measures, procedures and internal policies, such measures 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 transactions) without our (or our relevant counterparties’) knowledge. 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, and if we are associated with, or even accused of being associated with, breaches of AML/CFT, antibribery and corruption or sanctions requirements, our reputation could suffer and/or we could become subject to fines, sanctions and/or legal enforcement (including being added to “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 have been, and may in the future be, subject to negative coverage in the media about us or our clients, including with respect to alleged conduct such as failure to detect and/or prevent any financial crime activities or comply with FCC regulations. Negative media coverage of this type about us, whether it has merit or not, could materially and adversely affect our reputation and perception among current and potential clients, investors, vendors, partners, regulators and other third parties, which in turn could have a material adverse effect on our operating results, financial condition and prospects as well as damage our customers’ and investors’ confidence and the market price of our securities.
The reputational damage to our business and global brand could be severe if we were found to have breached AML/CFT, antibribery, anticorruption or sanctions requirements. Our reputation could also suffer if we are unable to protect our customers’ data and bank products and services from being accessed or used for illegal or improper purposes. If we are unable to comply fully 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.
Additionally, we are required by Brazilian Central Bank regulations, which derive from resolutions from the UN Security Council, to comply with certain rules relating to the local enforcement of sanctions imposed by the UN Security Council. 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.
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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, confidential and personal data, including public and nonpublic 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, regulations and standards, and the legal and regulatory framework for privacy, data protection and cybersecurity is in considerable flux and evolving rapidly. As privacy, data protection and cybersecurity risks for banking organizations and the broader financial system have significantly increased in recent years, privacy, data protection and cybersecurity issues have become the subject of increasing legislative and regulatory focus. There has also been increasing regulatory scrutiny from the SEC with respect to adequately disclosing risks concerning cybersecurity and data privacy, which increases the risk of investigations into cybersecurity practices and related disclosures, of companies within its jurisdiction which, at a minimum, can result in distraction of management and diversion of resources for targeted businesses.
We are subject to regulations enacted by Brazilian authorities, which include the LGPD and data protection regulations issued by the Brazilian Data Protection Authority, or the “ANPD.” The LGPD came into effect in September 2020, with the exception of its articles 52, 53 and 54, which came into effect on August 1, 2021. The LGPD 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. In addition, we are subject to Regulation (EU) 2016/279 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”). Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the UK General Data Protection Regulation (“UK GDPR”) (i.e., a version of the GDPR as implemented into UK law). The GDPR and UK GDPR have also imposed significant fines and penalties for noncompliance of up to the higher of 4% of annual worldwide turnover or €20 million (or £17.5 million under the UK GDPR), and, for other specified infringements, fines and penalties of up to the higher of 2% of annual worldwide turnover or €10 million (or £8.7 million under the UK GDPR). European data protection authorities have already imposed fines for GDPR violations up to, in some cases, hundreds of millions of euros.
The implementation of the LGPD, the GDPR, the UK GDPR and other data protection regimes 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 our privacy, data protection and cybersecurity obligations, as the case may be, we could face significant civil administrative and monetary sanctions, as well as reputational damage, which could have a material adverse effect on our operating results, 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, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Data Protection Requirements.”
We utilize artificial intelligence, which could expose us to liability or adversely affect our business.
We utilize, and are continuing to explore further uses of, AI in connection with our business, products and services, including AI designated to enhance transaction monitoring and sanctions screening, improve customer experience and reduce operational risk. However, regulation of AI is rapidly evolving worldwide as legislators and regulators are increasingly focused on these powerful emerging technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property, privacy, data protection, cybersecurity, consumer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations. AI is the subject of ongoing review by various governmental and regulatory agencies around the world, and various jurisdictions are applying, or are considering applying, their platform moderation, cybersecurity and data protection laws and regulations to AI or are considering legal frameworks for AI.
In addition, AI regulation was approved by the Brazilian Senate in 2024 by means of the Bill of Law No. 2,338/23, which seeks to establish general national standards for the development, implementation, and responsible use of AI systems in Brazil. This bill, which is currently under discussion in the Brazilian House of Representatives and, if approved, will be submitted for presidential approval or veto, would seek to introduce potential compliance requirements, liability standards, or usage restrictions that could directly affect our operations. If approved by the Brazilian House of Representatives and thereafter enacted into law, Bill of Law No. 2,338/23 may impose additional compliance burdens, establish liability frameworks, or mandate specific transparency and accountability measures for our use of AI systems.
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We may not be able to anticipate how to respond to these rapidly evolving laws and regulations, and we may need to expend resources to adjust our offerings in certain jurisdictions if the legal and regulatory frameworks are inconsistent across jurisdictions. Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal or regulatory risks that may arise relating to the use of AI. If laws and regulations relating to AI are implemented, interpreted or applied in a manner inconsistent with our current practices or policies, such laws and regulations may adversely affect our use of AI and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes or result in increased compliance costs and potential increases in civil claims against us, any of which could adversely affect our operating results, financial condition and prospects.
Moreover, there are significant risks involved in utilizing AI and no assurance can be provided that our use will enhance our products or services or produce the intended results. For example, AI algorithms may be flawed, insufficient, of poor quality, reflect unwanted forms of bias or contain other errors or inadequacies, any of which may not be easily detectable; AI has been known to produce false inferences or outputs; AI may subject us to new or heightened legal, regulatory, ethical or other challenges; AI may involve inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion of AI, any of which could impair the acceptance of AI solutions, including those incorporated into our products and services. If the AI solutions that we create or use are deficient, inaccurate or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and financial results. Further, there can be no assurance that our use of AI will be successful in reducing our operational risk or increasing our operational efficiencies or otherwise result in our intended outcomes.
Additionally, if any of our employees, contractors, vendors or service providers use any third-party AI-powered solutions in connection with our business, it may lead to the inadvertent disclosure or incorporation of our proprietary, confidential, sensitive or personal information into publicly available or third-party training sets which may impact our ability to realize the benefit of our intellectual property or proprietary, confidential, sensitive or personal information, harming our competitive position and business. If we do not have sufficient rights to use the data or other material or content on which our AI solutions or other AI tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacy or other rights, or contracts to which we are a party.
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, 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 regulatory 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, privacy, data protection, cybersecurity, tax or climate-related 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, are in the early stages of investigation or discovery, or have common elements but require assessment of circumstances on a case-by-case basis, we cannot state with certainty what the eventual outcome of these pending matters will be. The amount of our reserves in respect to 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 highly uncertain matter may become material to our operating results.
As of December 31, 2024, we had provisions for taxes, other legal contingencies and other provisions of R$9,612 million (compared to R$8,930 million as of December 31, 2023). For more information, see 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.”
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We may face operational difficulties under the Brazilian instant payment scheme.
As a direct participant of the 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 implemented in July 2022 setting a limited amount of R$1,000 for PIX transactions carried out between 8:00 p.m. (or, at the user’s discretion, between 10:00 p.m.) and 6:00 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 if we fail to adequately comply with this rule. 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 and nonfinancial reporting may not prevent or detect all errors or acts of fraud.
Disclosure controls and procedures, including internal controls over financial and nonfinancial reporting, (including any climate-related 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 error or misconduct, and the precautions we take to prevent and detect this activity may not always be effective. Accordingly, because of the inherent limitations in our control systems, misstatements due to error or fraud may occur and not be detected.
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.
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 tax 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 tax 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. The interpretations of Brazilian tax authorities are unpredictable and frequently involve litigation, which introduces further uncertainty and risk as to tax expense.
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Changes in taxes and other fiscal assessments may have a negative effect on 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 tax 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 nonperforming credit portfolio.
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, the IOF rates have been frequently adjusted (both upwards and downwards) in recent years. Currently, the daily IOF tax rates applicable to local loans are approximately (i) 0.0082% for individuals and (ii) 0.0041% for legal entities. 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.
In the fourth quarter of 2023, the Brazilian Congress enacted Constitutional Amendment No. 132/2023, which is intended to pave the way for a significant reform of the Brazilian tax system. This reform will include the replacement of five taxes currently levied in Brazil: (i) the Social Integration Program (Programa de Integração Social), or “PIS”; (ii) the Social Security Financing Contribution (Contribuição para o Financiamento da Seguridade Social), or “COFINS”; and (iii) Tax on Industrialized Products (Imposto sobre Produtos Industrializados), or “IPI” – federal taxes; (iv) Circulation of Goods and Services Tax (Imposto sobre Circulação de Mercadorias e Serviços), or “ICMS” – a state tax; and (v) Tax on Services (Imposto Sobre Serviços), or “ISS” – a municipal tax. These taxes will be replaced by two value-added taxes: ICMS and ISS will be merged into a Tax on Goods and Services (Imposto Sobre Bens e Serviços), or “IBS,” managed by states and municipalities, and the Federal Government will be in charge of a Contribution on Goods and Services (Contribuição sobre Bens e Serviços), or “CBS,” which will merge the PIS, the COFINS, and the IPI. In the beginning of 2025, the President of Brazil sanctioned Supplementary Law No. 214/2025, which regulates the consumption tax reform, establishes the IBS and CBS and sets off the transition period until their entry into effect. We are currently reviewing the effects of such legislation on our expected tax burden.
Tax reforms or any change in laws and regulations affecting taxes or tax incentives may directly or indirectly adversely affect our business and our results of operations. 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-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. Prepayments would also require us 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 mortgages and other 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 could have a material adverse effect on our business, financial condition and results of operations. An increase in prepayments, in particular should the prevailing interest rates decrease from the rates in effect as of the date of this annual report, 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.
Risks arising from changes in credit quality and the recoverability of loans and amounts due from counterparties are inherent to a wide range of our businesses. Nonperforming or low credit quality loans can negatively impact our results of operations as the amount of our reported nonperforming 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 (the credit quality of which may turn out to be worse than we 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. In addition, the combined pressure of challenging macroeconomic conditions, high inflation and high interest rates may impact the ability of our customers to repay their debt. If we were unable to control the level of our credit impaired or poor credit quality loans, this could have a material adverse effect on us.
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Our provisions for impairment losses are based on our current assessment, as 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 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.
Since many of these factors are beyond our control and there is no infallible method for predicting loan and credit losses, there is no assurance that our current or future provisions for impairment losses will be sufficient to cover actual losses. If our assessment of and expectations concerning the above mentioned 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 nonperforming or poor credit quality loans, this could have a material adverse effect on us.
As of December 31, 2024, our credit risk exposure (which includes gross loans and advances to customers, guarantees and private securities (securities issued by nongovernmental entities) amounted to R$750,357 million (compared to R $719,881 million as of December 31, 2023). 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.”
Economic uncertainty may lead to a contraction in our loan portfolio.
Brazil has historically experienced slower GDP growth rate compared to other emerging markets. The relatively high average GDP growth rate of 3.6% per annum between 2021 and 2023 was driven partly by fiscal stimulus and expansion in the agribusiness sector. However, growth has since slowed, and the GDP growth rate for the period between 2022 and 2024 is estimated at 3.2% per annum. This deceleration, coupled with a slowdown in customer demand, increased market competition, regulatory changes, and recent hikes in the SELIC rate, has negatively impacted the growth of our loan portfolio in recent years. Persisting economic uncertainty could further harm the liquidity, businesses, and financial conditions of our customers, leading to reduced consumer spending, higher unemployment, and increased household indebtedness. These factors could, in turn, diminish demand for borrowing, materially and adversely affecting our business.
Liquidity and funding risks are inherent in our business, and since our main 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 sufficient financial resources available to meet our obligations as they fall due, or that we can only secure such financial resources at excessive cost. This risk is inherent in any retail and wholesale banking business and can be heightened by a number of enterprise-specific factors, including overreliance on a particular source of funding, changes in credit ratings or market-wide phenomena such as market dislocation, including as a result of the continuation or escalation of the wars in Ukraine and in the Middle East, high energy prices, inflation or other disruptive events. Constraints in the supply of liquidity, including in interbank lending, can 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.
Our cost of obtaining funds is directly influenced by prevailing interest rates and our credit spreads, and increases in these factors raise our funding costs. While certain global central banks began to lower interest rates in 2024, they remain elevated by historical standards. In Brazil, however, interest rates have risen significantly over the past year as the Brazilian Central Bank responded to persistent inflationary pressures. We cannot assure you that interest rates will not remain high or continue to increase throughout 2025. A return to periods of relatively high inflation are likely to result in higher operating costs, a decrease in the purchasing power of families with the consequent increase in delinquencies in our credit portfolios, and lower economic growth derived from the tightening of monetary and fiscal policies aimed at containing inflation, among other risks, any of which could have a material adverse effect on our operations, financial condition and prospects. In addition, credit 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.
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We rely primarily on deposits as our main source of funding. As of December 31, 2024, 87% of our customer deposits had remaining maturities of one year or less, or were payable on demand, while 48% of our assets had maturities of one year or more, resulting in a mismatch between the maturities of liabilities and the maturities of assets. The ongoing availability of this type of funding is sensitive to a variety of factors beyond our control, including general economic conditions, the confidence of retail depositors in the economy and in the financial services industry, the availability and extent of deposit guarantees, as well as competition for deposits between banks or with other products. Any of these factors could significantly increase the amount of retail deposit withdrawals in a short period of time, thereby reducing our ability to access retail deposit funding on economically appropriate and reasonable terms, or at all, in the future. If these circumstances arise, this could have a material adverse effect on our operating results, financial condition and prospects.
Difficulties or liquidity issues faced by certain financial entities could cause withdrawals of deposits from these entities and volatility in international markets. The spread or potential spread of these or other issues to the broader financial sector could have a material adverse effect on our operating results, financial condition and prospects.
Central banks around the world took extraordinary measures to increase liquidity in the financial markets as a response to the financial crisis and the COVID-19 pandemic. As a result of inflationary pressures beginning in 2021 and persisting through 2023, central banks have reduced or discontinued these measures. If any remaining credit facilities, which are progressively being reduced, were to be 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.”
We cannot assure 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 2024), Santander Brasil had an LCR of 171.85%, 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. Our NSFR, which must remain at a minimum of 100% beginning from October 1, 2018 according to CMN rules, was 109.9% as of December 31, 2024.
Our cost of funding is affected by our credit ratings, and any risks may have an adverse effect on both variables. Any downgrade in Brazil’s, our controlling shareholder’s or 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 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 shareholder. If Brazil’s sovereign debt or the debt of our controlling shareholder were to be downgraded, our credit rating would also likely be downgraded to a similar degree.
On December 19, 2023, S&P upgraded Brazil's sovereign rating from BB- to BB with a stable outlook. On July 27, 2024, Fitch affirmed Brazil’s sovereign rating at BB with a stable outlook. Finally, on October 1, 2024, Moody’s upgraded Brazil’s sovereign rating from Ba2 to Ba1 with a positive outlook. Nonetheless, any future downgrade of Brazil’s credit rating could negatively impact the trading price of our units and ADRs. Similarly, downgrades of major Brazilian companies could worsen the economic conditions in Brazil, particularly for companies reliant on foreign investment, potentially having a material adverse effect on our business, financial condition, results of operations, and the price of our securities.
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Downgrades in Brazil’s sovereign credit ratings, those of our controlling shareholder, or in our own ratings, would likely increase our borrowing costs. A rating downgrade could also limit our ability to sell or trade certain products, such as subordinated securities, engage in longer-term or derivative transactions, and retain customers who require a minimum rating threshold to invest. Furthermore, under certain derivative contracts and financial commitments, we may be required to maintain a minimum credit rating or post collateral to avoid termination of such contracts. These outcomes could reduce our liquidity and adversely affect our operations, financial condition, and results.
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 on numerous dynamic, complex and interrelated factors and assumptions, including market conditions at the time of any downgrade, whether the downgrade of our long-term credit rating indirectly downgrades 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 the credit rating agency 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-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.
Santander Spain’s long-term debt in foreign currency is currently rated investment grade by the major rating agencies: A2 positive outlook by Moody’s, A+ with a stable outlook by S&P and A with a stable outlook by Fitch. Santander Brasil’s long-term debt in foreign currency is currently rated BB with a stable outlook by S&P and Baa3 with a positive outlook by Moody’s and was affected as a result of the lowering of Brazil’s sovereign credit rating. Any further downgrade in our long-term debt in foreign currency, including as a result of adverse economic conditions in Brazil or globally (such as those caused by the ongoing war between Russia and Ukraine and the war in the Middle East), would likely increase our funding costs and adversely affect our interest margins and results of operations.
We cannot assure that the rating agencies will maintain their current ratings or outlooks. In general, the future evolution of our ratings will be linked, to a large extent, to the impact of the general macroeconomic outlook (including as a result of the continuation or escalation of the wars in Ukraine and the war in the Middle East), inflation and interest rates 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’ 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 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.
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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.
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 conduct with our clients, we consider several risk factors, including environmental issues (such as soil and groundwater contamination, deforestation, or lack of environmental permits), social issues (such as slavery-like working conditions or the impact of projects on indigenous people) and, more recently, climate issues, considering both physical and transition risks. Any failure or neglect on our part to identify and accurately assess these factors and potential risks before entering into proposed transactions with our customers could harm our image and reputation, and have a material adverse effect on our business, results of operations, and financial condition.
Moreover, we are also exposed to the risk that our assessment of a product or service we provide, or an investment we have made, as socially or environmentally responsible may be challenged by customers, regulators, or third parties. There has been an increase in regulatory and investor demand for sustainability-linked financial instruments. This growing interest in sustainability factors, along with increased demand for and scrutiny of sustainability-related disclosures by financial institutions, has heightened the risk that we could be perceived as, or accused of, making inaccurate or misleading statements regarding the investment strategies of our self-managed investment funds or our sustainability efforts and initiatives, commonly referred to as “greenwashing.” Such perceptions or accusations could damage our reputation, result in litigation or regulatory enforcement actions, and adversely affect our business.
Furthermore, the Brazilian Central Bank has recently updated regulations and standards applicable to financial institutions regarding the management and governance of social, environmental, and climate risks. These regulations cover risks arising from our products, services, and activities, as well as from the activities of our counterparties, controlled entities, suppliers, and outsourced service providers. Most of these regulations have been in effect since July 2022. Any failure or noncompliance by us in adequately identifying and assessing these risks could subject us to sanctions by the Brazilian Central Bank and 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 sustainability requirements applicable to Brazilian financial institutions, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Sustainability Requirements Applicable to Financial Institutions.”
The value of the collateral securing our loans may decline and become insufficient, 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 as a result of macroeconomic factors, especially those affecting Brazil. 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 applicable 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 88.1% of our total assets as of December 31, 2024. As of December 31, 2024, the notional value of derivatives in our books amounted to R$2,626 billion (with a market value of R$40,206 million of assets and R$39,410 million of liabilities).
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 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 the real or in interest rates and the real 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.
Failure to successfully implement and continue to improve our risk management policies, procedures and methods, including our credit risk management systems, could materially and adversely affect us, and we may be exposed to unidentified or unanticipated risks.
Risk management is a central part of our activities. We seek to manage and control our risk exposure through a forward-looking management model, based on governance and other tools, supported by our risk culture. While our management model uses a broad and diversified set of risk monitoring and mitigation techniques, such management model may not be fully effective at 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 on 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 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. Thus, our losses could be significantly higher than the historical measures indicate. In addition, our statistical models may not take all risks into account or measure emerging risks correctly.
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Our approach to managing risks could prove insufficient, exposing us to material unanticipated losses. We could face adverse consequences as a result of decisions, which may lead management, based on models that are poorly developed, implemented or used, or as a result of the modeled outcome, to misunderstand or misuse such information for purposes for which it was not designed or if the data and inputs of the models were incorrect or insufficient. In addition, if existing or potential customers or counterparties believe that our risk management is inadequate, they could take their business elsewhere or seek to limit their transactions with us. Any 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 of Directors 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 retail 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 to assess the particular risk profile of 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 our customers’ current or future credit risk behavior, our management models may not always be able to assign an accurate credit rating, which may result in a higher exposure to 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 or 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 monitor or continuously improve our credit risk management system may result in an increase in the level of nonperforming loans and a higher risk exposure for us, which could have a material adverse effect on us. In addition, failure to successfully execute any of our decisions and actions affecting or changing our practices, operations, priorities, strategies, policies, procedures, or frameworks, could have a material adverse effect on us.
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 face various cybersecurity risks, including but not limited to the intrusion into 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 our organization, ransomware affecting our services and end-user technology, social engineering and phishing attacks, information leaks and cyberattacks causing systems degradation or service unavailability that may result in business losses.
We may not be able to successfully protect our information technology systems and platforms against such threats. In recent years, we have seen increased targeting of the computer systems of companies and organizations, 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 cybercriminals, but also activists and rogue states. Cyberattacks, data breaches, data losses and other security incidents, including fraudulent withdrawal of money, can result from, among other things, inadequate personnel, inadequate or failed internal control processes and systems, or external events or actors that interrupt normal business operations and may include disruptions, failures, service outages, unauthorized access or misuse, software bugs, server malfunctions, software and hardware failure, defective software or hardware updates, malware and ransomware, social engineering and phishing attacks, denial-of-service attacks, misconduct, fraud and other events that could have a serious impact on us. Cyberattacks 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, cyberattacks could disrupt our electronic systems used to service our customers.
The professionalization of cybercriminals has produced a worsening threat landscape increasing the frequency and severity of cyberattacks that are impacting businesses, third parties, critical infrastructure and even governments. This situation has made cybersecurity a top risk concern for all industries, including the financial sector.
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Our greater reliance on digital systems also makes cybersecurity one of the main nonfinancial risks of the business. Our goal is to make Santander Brasil a cyber-resilient organization that can quickly prevent, detect and respond to cyberattacks by constantly improving our defenses. This aligns with the objectives of the European Union’s Digital Operational Resilience Act, which aims to strengthen the IT security of financial entities and ensure resilience in the event of severe operational disruptions.
If we fall victim to successful cyberattacks or experience cybersecurity, operational or data breaches and other security incidents, including the fraudulent withdrawal of money, in the future, we may incur substantial costs and 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 customers’ and investors’ confidence, as well as damages to our 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” and “Item 16K. 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, which in some cases have severe sanctions regimes, could also have a material adverse effect on us. If we fail to effectively manage our cybersecurity risk, 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 the loss of assets. Furthermore, upon a failure to comply with applicable law and regulations, 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 cyberattacks against critical infrastructure of Brazil. Our information technology systems are dependent on such critical infrastructure, and any cyberattack 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 cyberattack. See “Item 4. Information on the Company—B. Business Overview” and “Item 16K. Cybersecurity.”
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 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, clearinghouses 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 customers, as well as counterparties in various other industries. Defaults by, and even rumors or questions about the solvency of, certain of our counterparties, including financial institutions and the financial services industry generally, have led to market-wide liquidity problems and losses or defaults by other counterparties. 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.
We or certain of our counterparties may incur losses or defaults for a wide variety of reasons, including defaults by certain of our counterparties, by business with which our counterparties transact, rumors or questions about the solvency of our counterparties or significant market participants, as well as evidence or rumors of fraud or improper accounting practices among certain of our counterparties or significant market participants, including both financial and nonfinancial institutions. If any of these problems were to materialize, as they have in past among large Brazilian corporations, the otherwise routine transactions that we have entered into with our counterparties could have a material adverse effect on our business, financial condition and results of operations.
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If these risks give rise to losses, this could materially and adversely affect us. Our loan portfolio does not have any specific concentration exceeding 10% of our total loans. As of December 31, 2024, 1.2% of our loan portfolio is allocated to our largest debtor and 3.5% to our next 10 largest debtors. However, we cannot assure this will continue to be the case or that we will not incur significant losses from counterparty defaults despite the concentration levels described above. If these counterparty risks give or continue to give rise to losses, our business, financial condition and results of operations could materially and adversely be affected.
Our financial results are constantly exposed to market risk. We are subject to fluctuations in interest rates and other market variables, which may materially and adversely affect us and our profitability.
Our financial results are constantly exposed to market risk, including trading risks and structural risks. In 2024, 2023 and 2022, inflationary pressures, increases in the prices of energy, oil, gas and other commodities and the continuance or escalation of the wars in Ukraine and in the Middle East caused and could continue to cause high market volatility, which could materially and adversely affect us and our trading and banking book.
Market risk affects (i) our interest income/(charges), (ii) the market value of our assets and liabilities, in particular of our securities holdings, loans and deposits and derivatives transactions, and (iii) other areas of our business such as the volume of loans originated or credit spreads. Market risk could include unexpected or unpredictable risks related to periods in which the market does not calculate prices efficiently (for example, during market interruptions or shocks). Economic activities exposed to market risk include (a) transactions where risk is assumed as a consequence of potential changes in interest rates, inflation rates, exchange rates, stock prices, credit spreads, commodity prices, volatility and other market factors, (b) the liquidity risk from our products and markets; and (c) the balance sheet liquidity risk.
Interest rate risk arises from movements in interest rates that reduce the value of a financial instrument, a portfolio or Santander Brasil. It can affect loans, deposits, debt securities, most assets and liabilities held for trading, and derivatives. 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).
Increases in interest rates may reduce the volume of loans we originate. Sustained high interest rates have historically discouraged customers from borrowing and have resulted in increased or fluctuations in 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. Additionally, a shrinking yield premium between short-term and long-term market interest rates coupled with inflation could adversely affect our business and results of operations.
Conversely, a decrease in interest rates may reduce the rates on many of our interest-bearing deposit products. However, even with a possible reduction of the rates on our interest-bearing deposit products as a result of a decrease in the SELIC rate, the total impact on our interest margin will depend, among other factors, on the difference between medium and long-term interest rates compared to overnight rates. In particular, an inverted yield curve in a high interest rate environment may adversely impact our interest-bearing products, and if such a scenario were to persist, may adversely affect our results of operations.
Exchange rate risk, in turn, is the possibility of loss because the currency of a long or open position will depreciate against the base currency. We are 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.
Equity risk is the possibility of loss from open positions in securities if their market price or expected future dividends fall. It affects shares, stock market indices, convertible bonds and derivatives with shares as the underlying asset (put, call, equity swaps, etc.). We are exposed to equity price risk in our investments in equity securities in the banking book and in the trading portfolio.
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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.
We are also exposed to other more complex coverage market risks, such as correlation risk, market liquidity risk, prepayment or cancellation risk and subscription risk. In addition, we are exposed to balance sheet liquidity risk, which is the possibility of loss caused by forced disposal of assets or cash flow imbalance if the bank meets its payment obligations late or at excessive cost. It can cause losses by forced asset sales or impacts on margins due to the mismatch between expected cash inflows and outflows.
If any of these risks were to materialize, our net interest income or the market value of our assets and liabilities could suffer a material adverse impact.
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 wars in Ukraine and in the Middle East, high inflation (including high energy prices) and other disruptive events. 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, including as a result of more stringent climate change or reputation requirements. 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, judgments 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 a 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 the “Item 3. Key Information—D. Risk Factors” section of this annual report. We recognize the importance of this risk and the potential impacts that may affect our portfolio and results of operations.
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The financial problems faced by our customers could adversely affect us.
Potential market turmoil and economic recession could materially and adversely affect the liquidity, credit ratings, businesses and/or financial conditions of our customers, which could in turn increase our nonperforming loan ratios, impair our loan and other financial assets, and result in decreased demand for borrowings and deposits in general. We have credit exposure to borrowers that 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. 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-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, consulting, 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-length basis. Future conflicts of interests may arise between us and any of our affiliates, or among our affiliates, which may not be resolved in our favor. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions.”
Changes in accounting standards could impact reported earnings.
Accounting standard 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 or misstated, there could be a material effect on our results of operations and a corresponding effect on our funding requirements and capital ratios. For further information about our accounting estimates, see note 1 to our audited consolidated financial statements included elsewhere in this annual report, and for further information about our provisions for judicial and administrative proceedings, see note 22 to our audited consolidated financial statements included elsewhere in this annual report.
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.
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We do not operate all of our redundant systems on a real-time basis and cannot assure 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, conversion errors due to system upgrading, security breaches caused by unauthorized access to information or systems, or intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment. We have experienced interruptions in our information technology systems in the past and we cannot assure that we will not suffer any such interruptions in the future, or that we will be able to identify and rectify these within a window of time that prevents any disruption. Any such events or failures could disrupt 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-effective basis. We must continually make significant investments and improvements in our information technology infrastructure in order to remain competitive. We cannot assure 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 in an effective, timely and cost-effective manner, including in response to new or modified privacy, data protection and cybersecurity laws, rules, regulations and standards, could have a material adverse effect on us.
Failure to protect personal information could adversely affect us.
Like other financial institutions, in conducting our banking operations, we receive, manage, hold, transmit, maintain and store confidential personal information of our customers and counterparties, including, but not limited to, personally identifiable information and personal financial information. The sharing, use, disclosure and protection of this information are governed by various Brazilian and foreign laws and regulations.
Although we have procedures and controls in place to safeguard personal and other confidential or sensitive information in our possession, unauthorized access or disclosures 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. Furthermore, our business is exposed to risk from employees’ potential noncompliance with policies, misconduct, negligence or fraud, which could result in regulatory sanctions and serious reputational and financial harm. 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. Moreover, 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. In addition, we may be required to report events related to information 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 delivered to our customers with delays or errors, which could adversely affect our reputation, 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, during the heights of the COVID-19 pandemic, we permitted or required a majority of our employees to work remotely, which led to increased vulnerability of our systems and the risk of cyber-attacks. Though the majority of our employees are now working in person at our offices, work-from-home policies may lead to continued vulnerability to the extent certain of our employees elect to work away from our premises and access our networks remotely. This trend, combined with our customers’ increased reliance on digital banking products and other digital services, including mobile payment products, has increased the risk of cyberattacks, data breaches, data losses and other security incidents.
Furthermore, any failure or disruption of our operational processes or systems, or cyberattacks, data breaches, data losses 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. We prioritize early identification, monitoring and mitigation of risks (including those resulting from our interactions with third parties) in our goal to provide a resilient and secure operational environment. In this regard, although (i) we have policies, procedures and controls in place designed to safeguard proprietary, sensitive and confidential information, including personal information, (ii) we take protective technical measures and monitor and develop our systems and networks to protect our technology infrastructure, data and information from misappropriation or corruption, and (iii) 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 proprietary, sensitive and confidential information, including personal information, we, our third-party vendors or other third parties with which we do business have been and may continue to be subject to cyberattacks, data breaches, data losses and other security incidents. For example, on May 14, 2024, Santander Spain announced that they had become aware of an unauthorized access to a database that included certain customer and employee information hosted by a third-party provider.
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The implementation of our cybersecurity policies, procedures, controls and technical measures is designed to reduce the risk of such cyberattacks, data breaches, data losses and other security incidents but does not guarantee full protection or a risk-free environment. This is especially applicable in the current global environment, with the wars in Ukraine and in the Middle East resulting in an increased risk of cyberattacks, data breaches, data losses and other security incidents, and other disruptions in response to, or retaliation for, the sanctions and costs imposed on Russia and certain other countries directly or indirectly involved in these wars. While we generally perform cybersecurity due diligence on our key vendors, because we do not control our vendors and our ability to monitor their cybersecurity is limited, we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them. Due to applicable laws and regulations or contractual obligations, we may be held responsible for cyberattacks, data breaches, data losses and other incidents attributed to our vendors as they relate to the information we share with them.
We have seen in recent years the information technology systems and networks of companies and organizations being increasingly targeted, and the techniques used to obtain unauthorized, improper or illegal access to such information technology systems and networks have become increasingly complex and sophisticated, including through the use of AI. 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 organized crime, hackers, activists, terrorists, nation-states, nation-state supported actors and others, any of which may see their effectiveness enhanced by the use of AI. As attempted attacks continue to evolve in scope and sophistication, we may incur significant costs in order to modify or enhance our protective measures against such attacks, or to investigate or remediate any vulnerability or resulting breach, or in communicating cyberattacks, data breaches, data losses or other security incidents to our customers, affected individuals or regulators, as applicable.
If we cannot maintain effective and secure proprietary, confidential, sensitive and personal data, or if we or our third-party vendors fall victim to successful cyberattacks, penetrations, compromises, breaches or circumventions of our information technology systems or networks or experience other data breaches, data losses or other security incidents in the future, we may incur substantial costs and suffer other negative consequences, such as disruption to our operations, misappropriation of personal, proprietary, confidential or sensitive information, remediation costs (including liabilities for stolen assets or information and repairs of system damage, among others), increased cybersecurity protection costs, lost revenues arising from the unauthorized use of personal, proprietary, confidential or sensitive information or the failure to retain or attract our customers following an operational or security incident, litigation and legal risks (including claims from customers, employees or other third parties, regulatory action, reporting obligations, investigation, fines and penalties), increased insurance premiums, reputational damage affecting our customers’ and our investors’ confidence, as well as damages to our competitiveness, stock price and long-term shareholder value. In addition, our remediation efforts may not be successful, and we may not have adequate insurance to cover these losses. While we maintain insurance coverage, we cannot assure you that such coverage will be adequate or otherwise protect us from liabilities or damages with respect to claims alleging compromises of proprietary, confidential, sensitive or personal data or otherwise relating to privacy, data protection and cybersecurity matters. In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or at all, or that our insurers will not deny coverage to any future claim. Moreover, even when a failure of or interruption in our or our third-party vendors’ systems or facilities is resolved in a timely manner or an attempted cyberattack, data breach, data loss or other security incident is successfully avoided or thwarted, substantial resources and management attention are expended in doing so, and to successfully avoid or resolve any such incidents, we may be required to take actions that could adversely affect customer satisfaction or retention, as well as harm our reputation.
Any of such cyberattacks, data breaches, data losses and other security incidents described above could have a material adverse effect on our business, financial condition and results of operations. 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.”
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Damage to our reputation could cause harm to us.
Maintaining a robust risk management framework based on robust ethical principles and corporate values is critical to protect our reputation and our brand, attract and retain customers, investors and employees and conduct business transactions with counterparties. Damage to our reputation could materially and adversely affect our perception among current and potential clients, investors, vendors, partners, regulators and other third parties, which in turn could have a material adverse effect on our operating results, financial condition, and prospects as well as damage our customers’ and investors’ confidence and the market price of our securities. Harm to our reputation could arise from numerous sources, including, among others, employee misconduct, including the possibility of fraud perpetrated by our employees, litigation or regulatory enforcement, failure to deliver minimum standards of service and quality, negative perceptions regarding our ability to maintain the security of our technology systems and protect customer data (including as a result of a cyberattack, data breach, data loss or other security incidents), dealing with sectors that are not well perceived by the public (weapons industries or embargoed countries, for example), dealing with customers in sanctions lists, rating downgrades, significant variations in our share price throughout the year, compliance failures, unethical behavior, actual or alleged conduct in any number of activities, including lending practice, sales and marketing, corporate governance and corporate culture, and the activities of customers and counterparties, including activities that negatively affect the environment. Our reputation could also suffer if we are the subject of negative coverage in the media, whether it has merit or not.
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.
Additionally, we could suffer significant reputational harm that could affect our business, results of operations and prospects from any negative perceptions regarding topics related to environmental, social and corporate governance policies. There has been increased focus by customers, shareholders, investor advocacy groups, employees, regulators and other stakeholders on these topics, and our policies, practices and disclosures in these areas could come under scrutiny. Governments may implement new or additional regulations and standards or investors, customers and other stakeholders may impose new expectations or focus investments in ways that cause significant shifts in disclosure, consumption and behaviors that may have negative impacts on our reputation and business. If regulators or stakeholders consider our efforts to be ineffective, inadequate or unsatisfactory, whether real or perceived, it could harm our reputation, business and prospects and we could be subject to enforcement, other supervisory actions or other harm.
We could also suffer significant reputational harm if we fail to identify and manage potential conflicts of interest properly, including conflicts of interests involving our directors and executive officers. The failure, or perceived failure, to adequately address conflicts of interest could affect the willingness of customers to deal with us or give rise to litigation or enforcement actions against us, which could have an adverse effect on our operating results, financial condition and prospects.
We may be the subject of misinformation and misrepresentations deliberately propagated in media or social media to harm our reputation or for 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 contain false information that may be propagated regarding us, which could have an adverse effect on 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, or to execute successfully any of our strategic actions, which could have an adverse impact on us, including on 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, priorities, policies and targets, including for organic growth and to identify potential acquisitions, divestitures and areas for restructuring our businesses. The execution of these initiatives is subject not only to external factors but also to our own decisions, including those that alter or redefine our business practices, operational frameworks, strategic objectives, corporate priorities, internal policies, and procedural guidelines.
We cannot provide assurance that we will, in all cases, be able to deliver our strategic plans, priorities, policies and targets. Furthermore, in order to grow and remain competitive, we will need to adapt to changes to meet the demands and expectations of regulators, our clients, shareholders and other stakeholders, including in relation to matters of public policy, regardless of whether there is a legal requirement to do so. We cannot guarantee that we will be able to implement changes to any of our strategic plans, priorities, policies and targets, in a timely and appropriate manner, or that we will be able to accurately predict trends, initiatives and business practices of financial institutions. It is also possible that regulators, our clients, shareholders and other stakeholders might not be satisfied or even disagree with our strategic plans, priorities, policies and targets, or the speed of their adoption, implementation, evolution and consequences.
From time to time, we evaluate acquisition and partnership opportunities that can 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 and delivery and execution risks. We can give no assurances that our expectations with regards to integration and synergies will materialize. In addition, any acquisition or venture could result in inconsistencies in standards, controls, procedures and policies. Moreover, the success of any 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.
Challenges that may result from our strategic growth decisions include our ability to:
| • | managing efficiently the operations and employees of expanding businesses; |
| • | maintaining or growing our existing customer base; |
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| • | assessing the value, strengths and weaknesses of investment or acquisition candidates, including local regulation that can reduce or eliminate expected synergies; |
| • | financing strategic investments or acquisitions; |
| • | aligning our current information technology systems adequately with those of an enlarged group; |
| • | applying our risk management policy effectively to an enlarged group; |
| • | managing a growing number of entities without over-committing management or losing key personnel; and |
| • | meeting the expectations of regulators and our clients, shareholders and other stakeholders. |
Any failure to manage growth effectively, an inability to successfully adapt to changing conditions or to execute successfully any of our strategic actions, or any changes in our business practices, operational framework, strategic objectives, corporate priorities, internal policies and procedural guidelines could have a material adverse effect on our operating results, financial condition and prospects.
Termination of the Getnet Partnership Agreement could have a material adverse effect on our business.
We completed the spin-off of our merchant acquiring business, conducted through Getnet in October 2021. As part of this process, we entered into the Getnet Partnership Agreement on April 15, 2021, which outlines the framework for our ongoing relationship with Getnet. However, the Partnership Agreement may be terminated at will by either party upon one year’s prior written notice or immediately in the event of a default by the other party, including insolvency, bankruptcy, or loss of a material license, among other specified conditions.
If the Partnership Agreement is terminated or not renewed, our operations and financial condition could suffer a material adverse effect. The loss of this partnership could disrupt our business, limit access to essential services provided under the agreement, or result in increased operational and financial burdens. Furthermore, there is no assurance that we would be able to secure a favorable agreement with a new partner to replace Getnet, which could exacerbate the adverse impact on our business, results of operations, and shareholder value. For additional information, see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Partnership Agreement with Getnet.”
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, social and corporate governance policies and management, our profile in the markets in which we operate and the professional opportunities we offer.
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In addition, the financial industry is subject and may continue to be subject to more stringent regulations relating to 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, service outages and other disruptions or failures affecting such parties. We are also subject to risk with respect to security breaches, service outages and other disruptions or failures 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 arrangements 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.
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 to, among other factors, 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 admission (scoring and rating) and behavioral credit processes, for the definition of credit limits, and for the calculation of provisions, market risk, structural risk, and operational, compliance and liquidity risk. 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 and forecasts. 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. We manage model risk on a consolidated basis with the Santander Group, which includes internal model risk policies and a tiering mechanism to categorize the levels of importance of nonregulatory models and the intensity of model risk management, which is a function of the importance of each model. In addition, we have internal regulations that establish the principles, responsibilities and processes of the life cycle of the models, and which describe how they are organized, as well as the applicable governance, management and validation processes.
Nonetheless, 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 regulatory 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.
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Additionally, changes in economic and market drivers impact the performance of financial models, including credit loss and provisions models, capital models, traded risk models and models used in the asset/liability management process. This requires additional monitoring and adjustments to comply with the guidance and recommendations of standard setters, regulators and supervisors, particularly for credit loss models. It also results 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 has been and may continue to be impacted by the consequences of changes in economic and market drivers, such as geopolitical events, financial crises, social and political upheaval and other events. While it is too early to be entirely certain of the magnitude of change required for our models, it is likely that capital, credit risk and other models will need to be adjusted.
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.
Risks associated with climate change are gaining increasing social, regulatory, economic and political relevance, both in Brazil and globally. New regulations related to climate change may affect our operations and business strategy, leading us to incorporate financial costs resulting from the following risk drivers:
| • | Transitional risks associated with the move to a low-carbon economy, both at idiosyncratic and systemic levels, such as through policy, regulatory and technological changes and business and consumer preferences, which could increase our expenses and impact our strategies. We expect that financial services providers may undergo significant developments in terms of stakeholder, policy, legal and regulatory expectations relating to our lending activities and the value of our financial assets as regards the sustainability impact of our activities. As a result, we expect that we will face greater scrutiny with respect to our business and the customers we transact with. Our operational decision-making in certain industries or projects associated with causing or exacerbating climate change may be affected as we seek to adapt our practices to avoid reputational and client relationship harm, both of which may in turn impact customer demand for our products, returns on certain business activities and the value of certain assets and trading positions resulting in impairment changes. Recent developments that may have an effect on our operations and/or those of our customers include European Union Regulation 2023/1115 on deforestation-free products, which may have a significant impact on Brazilian agribusiness, and Law No. 15,042 of December 11, 2024, which established the Brazilian Greenhouse Gas Emissions Trading System (SBCE), regulating the carbon credit market, and which may lead to an increase in operating costs for customers. |
| • | Physical risks related to discrete events, such as flooding and wildfires, and extreme weather impacts and longer-term shifts in climate patterns, 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. For example, Brazil suffered extreme weather events in 2024, which is believed to be due to the El Niño weather phenomenon. 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. If we fail to adequately embed risks arising from climate change into our risk and operational frameworks to appropriately measure, manage and disclose the various financial and operational risks that may result from climate change, or if we fail to adapt our strategy and business model to a changing regulatory and market environment, we may face significant adverse impacts on our business growth rates, competitiveness, profitability, capital requirements, cost of funding and financial condition. |
These primary drivers could materialize, among others, in the following financial risks:
| • | Credit risks : Physical climate change could lower corporate revenues, increase operating costs and lead to increased credit exposure. Severe weather could also affect collateral value. Additionally, 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. |
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| • | 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, and lead to higher volatility. |
| • | Liquidity risks : Companies could face liquidity risks derived from cash outflows to improve their reputation in the market or solve climate-related problems. Extreme weather events could also affect the value of our high-quality liquid assets or cause sovereign debt to rise limiting our access to capital markets. |
| • | Operational risks : Severe weather events could damage assets and directly impact business continuity of both of our customers’ and our operations. Climate-related financial risks could also cause operational risk losses from litigation if, for example, we are perceived to misrepresent sustainability-related practices, achievements, metrics goals or targets. |
| • | Regulatory compliance risks : Increased regulatory compliance risk may result from the increasing focus, pace, breadth and depth of regulatory expectations requiring implementation in short timeframes across multiple jurisdictions and from changes in public policy, laws and regulations in connection with climate change and related environmental sustainability matters. |
| • | Reputational risks : Our reputation and client relationships may be damaged as a result of our practices, disclosures and decisions related to climate change and social and environmental issues, or to the practices or involvement of our clients, vendors or suppliers in certain industries or projects being associated with causing or exacerbating climate change. Furthermore, parties who may suffer losses from the effects of climate change may seek compensation from those they hold responsible such as state entities, regulators, investors and lenders. We could face conduct risks derived from misrepresentations in our sustainability-related disclosures, including our practices, achievements, metrics, goals and targets or the sustainability characteristics of our products or of our customers, investors or other stakeholders (greenwashing). |
| • | Strategic risks : Our strategy could be affected if we fail to achieve our net zero or other targets, including those related to the activities that we finance and those concerning our own operations. |
As a financial institution, we are already subject to certain regulatory sustainability requirements as detailed under “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Sustainability Requirements Applicable to Financial Institutions.” These requirements may increase going forward as a result of the increasing importance of sustainability matters. This and other changes in regulations in Brazil and international markets may expose us to increased compliance costs and 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; 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.
We periodically disclose information such as emissions and other climate-related performance data, statistics, metrics and/or targets. If we lack robust and high-quality climate-related procedures, controls and data, we may not be able to disclose reliable climate-related information. In addition, because the climate-related information is based on current expectations and future estimates about our and third parties’ operations and businesses and addresses matters that are uncertain to varying degrees, we may not be able to meet our estimates and targets or we may not be able to achieve them within the timelines we announce. Actual or perceived shortcomings with respect to these emissions and other climate-related initiatives and reporting could result in litigation or regulatory enforcement and impact our ability to hire and retain employees, increase our customer base, and attract and retain certain types of investors.
Our exposure to sectors most affected by climate factors—identified through market consensus and the materiality analysis we conduct—primarily involves corporate and investment banking portfolios. The management of these clients incorporates, where appropriate and permissible, climate considerations during initial analysis, credit granting, and the preparation and review of credit ratings. These ratings influence parameters used to calculate credit losses, such as probability of default. Consequently, if climate factors are significant, they are integrated with other analytical elements into credit loss calculations, informing capital and provisioning requirements.
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Any of the conditions described above, or our failure to identify other climate-related risks, could have a material adverse effect on our business, financial condition and results of operations.
The outbreak of highly contagious diseases or other public health emergencies could materially and adversely impact our business, financial condition, liquidity and results of operations.
Although the World Health Organization declared that COVID-19 no longer constitutes a public health emergency, the emergence of new COVID-19 waves, of variants resistant to existing or new vaccines, or of any other highly contagious diseases or other public health emergencies may force countries to readopt measures that restrict economic activity. Any such development may lead to a deterioration of the macroeconomic environment and adversely impact our business and results of operations, which could include, but are not limited to: (i) a continued decreased demand for our products and services; (ii) further material impairment of our loans and other assets including goodwill; (iii) a decline in the value of collateral; (iv) constraints on our liquidity due to market conditions, exchange rates and customer withdrawal of deposits and continued draws on lines of credit; and (v) downgrades of our credit ratings.
Moreover, our operations could be impacted by risks arising from remote work or bans on nonessential activities. If, in connection with any future public health emergencies, 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.
The resurgence of COVID-19 or other variants or strains, or any future outbreak of any other highly contagious diseases, or other public health emergencies may have adverse effects on our business, financial condition, liquidity and results of operations or cause other risks to us.
Any such events may have a material adverse effect on our business, financial condition, liquidity and results of operations or cause other risks to us.
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.
As of January 31, 2025, Santander Spain, our ultimate controlling shareholder, currently owns, directly and indirectly, approximately 89.53% of our total 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 Company and subsidiaries; |
| • | influence the appointment of our principal officers; |
| • | declare the payment of any dividends; |
| • | agree to sell or otherwise transfer its controlling stake in our Company; and |
| • | determine the outcome of substantially all actions requiring shareholder approval, including amendments of our bylaws, transactions with related parties, corporate reorganizations, acquisitions and dispositions of assets, and dividends. |
We operate as a standalone 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 shareholders’ ability to influence corporate matters. As a result, we may take actions that our other shareholders do not view as beneficial.
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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, 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; therefore, we currently use these exemptions and intend to continue using them. Accordingly, you will not have the same protections provided 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 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.
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, 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, 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 B3 is significantly less liquid than the NYSE or other major exchanges in the world. As of December 31, 2024, the aggregate market capitalization of the B3 was equivalent to approximately R$4.1 trillion (U.S.$0.7 trillion), and the top 10 stocks in terms of trading volume accounted for approximately 43% of all shares traded on B3 in the year ended December 31, 2024. In contrast, as of December 31, 2024, the aggregate market capitalization of the NYSE was approximately U.S.$37.0 trillion. Although any of the outstanding shares of a listed company may trade on the 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.
The uncertainties caused by the outbreak of COVID-19 had an adverse impact on the global economy, global capital markets, including in Brazil, and the prices of most securities traded on the NYSE and the B3, including the price of our securities, during the course of 2020 and 2021 and, to a lesser extent, in 2022. These effects were compounded in 2022 by the ongoing war between Russia and Ukraine, supply chain disruptions, high inflation (including elevated energy prices), and rising interest rates globally and in Brazil. In 2023 and 2024, additional volatility was driven by extreme weather events in Brazil, including droughts and floods linked to the El Niño phenomenon, which impacted key sectors of the economy, as well as renewed geopolitical tensions and the effects of persistent inflationary pressures. These factors, along with uncertainty surrounding Brazil’s fiscal policies and global monetary tightening cycles, have contributed to fluctuations in the prices of our securities traded on the NYSE and the B3. We cannot assure you that the price of our securities will not fall below the lowest levels at which they traded in the past as a result of these or other factors.
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 securities issued by other companies in our sector, the price and trading volume of our ADRs and/or our shares 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 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 stops 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.
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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 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 for the acquisition of up to all 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 B3 known as the Level 2 corporate governance segment (the “Level 2 Segment”). For more information, see “Item 9. The Offer and Listing—C. Markets—Corporate Governance Practices.” 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 in 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% of our annual net income as dividends or interest on stockholders’ equity, as calculated and adjusted under Brazilian Corporate Law, or “adjusted net income,” which may differ significantly from our net income as determined under IFRS. This adjusted net income may be used to increase capital or 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 availability. We paid R$6.0 billion, R$6.2 billion and R$8.1 billion (R$1.61, R$1.67 and R$2.17 per unit, respectively) as dividends and interest on stockholders’ equity (considering gross value) in 2024, 2023 and 2022, 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. In the future, we may also become subject to Brazilian banking regulations that may limit the payment of dividends or interest on stockholders’ equity, such as a temporary restriction in 2020 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. Although this restriction was not reinstated in the years that followed, we cannot assure you that this or other restrictions will not be reinstated in the future.
Holders of ADRs may find it difficult to exercise voting rights at our shareholders’ meetings.
Holders of ADRs are not our direct shareholders and are 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 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 shareholders’ meetings in specified newspapers in Brazil. Holders of our units will be able to exercise their voting rights by attending a shareholders’ meeting in person or voting by proxy. By contrast, holders of ADRs will receive notice of a shareholders’ meeting by mail from the ADRs depositary following our notice to the depositary requesting the depositary 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.
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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 nonresident to either a Brazilian resident or a nonresident 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 nonresident of Brazil to another nonresident 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 that 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 nonresidents 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 nonresident of Brazil to another nonresident 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 generally 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. 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.
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 the United States. In addition, all or a substantial portion of our assets and the assets of our directors and officers are located outside 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 U.S. court. As a result, it may not be possible for holders 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 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.
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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 (if installed) shall submit to arbitration any and all disputes or controversies that may arise among 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 than reais . Under Brazilian exchange control limitations and according to Brazilian laws, an obligation in Brazil to pay amounts denominated in a currency other than reais 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-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.
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.
Holders of ADRs 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 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.
Holders of ADRs who exchange ADRs for their underlying units may 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.”
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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 any 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, such 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 nonjury trial would be less favorable to the plaintiff(s) or otherwise less desirable.
ITEM 4. INFORMATION ON THE COMPANY
4A. History and Development of the Company
General
We are a publicly held corporation ( sociedade anônima ), 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, 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. Our telephone number is +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, and is not incorporated by reference in, this annual report and you should not rely on such information.
Our agent for service is Mercedes Pacheco, Managing Director – Senior Legal Counsel, Banco Santander, S.A., New York Branch, 45 E. 53rd Street New York, New York 10022.
History
We are currently the third largest privately owned bank in Brazil, and the only international bank that operates countrywide. We operate in both the retail and wholesale segments with high-added value offers, which allows us to provide our products and services to individuals, small and medium enterprises, and large corporate customers.
We are part of the Santander Group, a financial institution founded in Spain in 1857, and that has expanded globally through numerous acquisitions. Under the Santander Group’s business model, each major unit is autonomous and self-sufficient in terms of capital and liquidity. However, our relationship with the Santander 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; |
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| • | 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 Brazilian banking industry goes back to the 1970s and is summarized in the following figure:
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Santander Brasil Timeline
In 1957, the Santander Group 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 established its presence in Latin America, particularly in Brazil, by capitalizing on organic growth and pursuing an acquisition strategy, including the following most notable acquisitions:
| • | In November 2000, the Santander Group acquired Banespa, a bank owned by the State of São Paulo which 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 ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. and their respective consolidated subsidiaries in 2008, or “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 common and preferred shares have been listed and traded on B3 under the 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 Offer and Listing—A. Offering and Listing Details.”
Important Events
We have set forth below important recent events in the development of our business. For further information, please see note 11 (d) to our audited consolidated financial statements, included elsewhere in this annual report.
Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários S.A.
On September 29, 2020, Santander Brasil’s subsidiary, Santander Distribuidora de Títulos e Valores Mobiliários S.A., or “Santander 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 S.A., 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. Before the conclusion of the transaction Toro Controle was merged into Toro Corretora. We refer to Toro Controle, Toro Corretora and Toro Investimentos as “Toro.”
In addition, Santander DTVM and Toro Corretora combined their market experiences to develop a comprehensive platform of fixed and variable income products. This platform is based on shared expertise and technology and operates 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.
Following this transaction, on June 7, 2023, we entered into an agreement with the shareholders of Toro Participações S.A., or “Toro Participações,” for the acquisition of the remaining shares of Toro Participações. Once this transaction was completed, we became the indirect holder of all the share capital of Toro Corretora. and Toro Investimentos. After the conditions precedent established in the agreement were fulfilled, the transaction closed on January 3, 2024. Following this acquisition Toro Participações was merged into Toro Corretora on February 29, 2024.
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.
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On December 22, 2023, SHI entered into an agreement to acquire all of the outstanding shares of Apê11. As a result of this second transaction, SHI became the sole shareholder of 100% of Apê11 share capital. Following this acquisition Apê11 was merged into SHI on June 28, 2024.
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. Following closing on May 26, 2022, Santander Corretora holds a 20% interest in CSD BR.
Acquisition of interest in SX Tools Soluções e Serviços Compartilhados Ltda.
On September 26, 2022, we acquired the entire issued share capital of SX Tools Soluções e Serviços Compartilhados Ltda., or “SX Tools,’ becoming its sole shareholder. As part of the acquisition, we increased the share capital of SX Tools from R$1,000 to R$192 million. SX Tools will primarily provide us and our subsidiaries back-office services to improve the efficiency of our routines. On May 10, 2023, SX Tools changed its corporate name to Tools Soluções e Serviços Compartilhados Ltda.
Total spin-off of Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. to Return Capital S.A. and Liderança Serviços Especializados em Cobrança Ltda.
On October 31, 2022, Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., or “Atual,” was fully spun off and its assets were absorbed by both of its direct subsidiaries, Return Capital S.A., or “Return Capital,” and Liderança Serviços Especializados em Cobrança Ltda., or “Liderança,” in accordance with the proportions established in the transaction documents. With the implementation of the total spin-off, Return’s capital was increased by R$3,991 million and Liderança’s was increased by R$267 million, with both now being held directly by us, as the sole shareholder. Liderança changed its corporate name to EmDia Serviços Especializados em Cobrança Ltda., or “emDia,” on April 24, 2023.
Investment in Biomas – Serviços Ambientais, Restauração e Carbono S.A.
On November 9, 2022, our wholly owned subsidiary, Santander Corretora, entered into an investment agreement to acquire up to 20% of the share capital of Biomas – Serviços Ambientais, Restauração e Carbono S.A., or “Biomas.” Biomas provides biodiversity and ecosystem restoration and conversation services, which is aligned with our sustainability objectives. Following the closing of the transaction on March 21, 2023, Santander Corretora now holds 16.66% of the outstanding shares of Biomas.
Sale of equity stake in Banco PSA and Stellantis Corretora de Seguros
On November 29, 2022, we, through our subsidiaries, entered into an agreement to sell our 50% equity interest in each of Banco PSA Finance Brasil S.A., or “Banco PSA” (which we held through Aymoré), and Stellantis Corretora de Seguros e Serviços Ltda., or “Stellantis Corretora” (which we held through Santander Corretora), to Stellantis Financial Service, S.A. and Stellantis Services Ltd., respectively. Closing of the transaction occurred on August 31, 2023, and, as a result, we are no longer a shareholder of either of these entities.
Investment in Gestora de Informação de Crédito S.A.
On October 4, 2022, LexisNexis Serviços de Análise de Risco Ltda., or “Lexisnexis” (an entity in which we are not a shareholder), entered in an agreement to acquired newly issued shares of Gestora de Informação de Crédito S.A., or “GIC,” a company in which we hold an equity interest. GIC develops a database with the objective of aggregating, reconciling and processing registration and credit information of individuals and legal entities to support credit granting, pricing and marketing activities. The transaction closed on December 20, 2022, and we now hold a 15.6% equity interest in the share capital of GIC.
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Sale of a portion of Santander Corretora’s shareholding in Webmotors
On April 28, 2023, Santander Corretora sold a 40% stake in the share capital of Webmotors to Carsales.com Investments Pty Ltd., or “Carsales.” As a result, Santander Corretora now holds 30% of the share capital of Webmotors while Carsales holds the remaining 70%. Carsales is part of CAR Group Limited, an Australian multinational company.
Acquisition of Equity Interest and Investment in Fit Economia de Energia S.A.
On August 1, 2023, Santander Corretora entered into an investment agreement with HB Fit Participações Ltda. to acquire up to 65% of the share capital of Fit Economia de Energia S.A. After the conditions precedent established in the agreement were fulfilled, the closing of the transaction occurred on March 6, 2024.
Partnership with Sodexo Pass International and Sodexo Pass do Brasil Serviços de Inovação Ltda.
On July 24, 2023, we entered into a partnership agreement with Sodexo Pass International and Sodexo Pass do Brasil Serviços de Inovação Ltda. On June 27, 2024, after the conditions precedent established in the agreement were fulfilled, our partnership with the Pluxee Group (which was spun-off from Sodexo) became operational. As a result of the transaction, we and the Pluxee Group now hold 20% and 80% equity stakes, respectively, in the share capital of Pluxee Benefícios Brasil S.A.
Merger of Mob Soluções em Tecnologia Ltda. into Mobills Labs Soluções Em Tecnologia Ltda.
On October 31, 2023, the shareholders of Mob Soluções em Tecnologia Ltda., or “Mob,” and Mobills Labs Soluções Em Tecnologia Ltda., or “Mobills,” approved the merger of Mob into Mobills, its sole shareholder, as resolved by the meetings of its shareholders held on such date. As a result, Mob ceased to exist and was succeeded by Mobills. On June 30, 2024, Mobills was fully merged with and into, and its assets were absorbed by its direct parent company, Toro Investimentos .
Call Option and Issuance of Notes
In October and November 2023, Santander Brasil exercised our option to repurchase the Tier 2 debt instruments issued in 2018 in the amount of U.S.$1.25 billion. In their place to compose our Tier 2 regulatory capital, we issued financial bills ( letras financeiras ) with a subordination clause in the total amount of R$6.0 billion. These financial bills have a term of 10 years, and redemption and repurchase options in accordance with the applicable regulations.
Furthermore, on November 8, 2024, we also exercised our option to repurchase the Tier 1 debt instruments issued in 2018. In order to replace these as part of our Tier 1 regulatory capital, we issued financial bills with a subordination clause in the total amount of R$7.6 billion. These new financial bills have a repurchase clause exercisable from the date that is 10 years after their issuance date, in accordance with the applicable regulations.
Investment in América Gestão Serviços em Energia S.A.
On March 12, 2024, Santander Corretora entered into an agreement to acquire 70% of the share capital of América Gestão Serviços em Energia S.A. (“América Gestão”). After the conditions precedent established in the agreement were fulfilled, the closing of the transaction occurred on July 4, 2024. América Gestão is an energy management company with a diversified client portfolio and a large range of service offerings such as strategic and operational energy management for consumers and plants in the free and captive markets, and sustainability projects in line with environmental and social factors. The company has more than 20 years of experience in the power sector.
Reorganization of Return Capital
On May 17, 2024, Return Capital, a wholly owned subsidiary of Santander Brasil, entered into a share purchase and sale agreement with certain minority investors in Return Capital Gestão de Ativos e Participações S.A. (formerly known as Gira, Gestão Integrada de Recebíveis do Agronegócio S.A.), or “Return Gestão,” to acquire the remaining 20% of the share capital of Return Gestão. As a result, Santander Brasil became the owner of the entire issued share capital of Return Gestão. Following this acquisition, Return Capital was merged with and into Return Gestão on September 30, 2024. As a result of this merger, Return Capital ceased to exist and its activities were taken over by Return Gestão, of which Santander Brasil is the sole shareholder.
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Capital Expenditures and Divestitures
Our main capital expenditures include investments in our information technology platform. Our information technology platform focuses on our customers and supports our business model. In 2024, 2023 and 2022, total investments in information technology were R$1,832 million, R$2,259 million and R$1,885 million, respectively.
In 2024, 2023 and 2022, we continued to improve our technology platforms by investing in our digital applications, especially through the implementation of new solutions in the areas of artificial intelligence (e.g., machine learning, and AI for operations, or AIOPs), micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. We believe that the application of these new technologies improved our interaction with our customers and enabled us to provide solutions across credit, consortiums (“ consórcios ”), payroll loan, insurance, private banking, cards, payments, agribusiness and investments to better address client needs. We also continued to invest in our 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, see the item “—B. Business Overview—Technology and Infrastructure.”
Our ongoing capital expenditure consists primarily of investments in information technology. We expect to fund our ongoing capital expenditures principally from our cash flow from operations.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations.”
4B. Business Overview
Our Strategy
Our strategy is centered on pursuing profitable, diversified and sustainable operations.
We are focused on becoming the most present bank in our customers’ lives, striving to deliver the best-in-class experience to individuals and businesses alike. We believe that our use of technology leads improves our customers’ journeys by offering relevant, tailored products to enable us to meet our customers’ need when, how, and where they desire. We have strived to strengthen our customer service channels, particularly our digital platform and remote services. In addition, in our physical channels, we have a new store model that positions our stores as a convenient stopover integrated within our multichannel offering.
We are guided by our strategic pillars of (i) customer centrality, (ii) scaling up, through the expansion of the customer base and a comprehensive multichannel offering, (iii) revenue diversification, striving to grow in retail deposits and commissions, (iv) expertise in credit and efficiency, seeking to strengthen our portfolio and cost management for the benefit of our customers, and (v) leveraging our key enablers, which we believe are people and technology, the key components to support our business transformation. We are aiming to build an operation capable of generating consistent and long-term results.
We also focus on maintaining sound risk management, and work to continuously improve our internal models to maintain our credit risk indicators at levels consistent with our risk management policies. In terms of costs and efficiency, we continue to develop our productivity culture, seeking to improve our operational efficiency by simplifying and digitizing processes and implementing technologies. Additionally, we are focused on maintaining discipline in capital allocation, and seek to prioritize operations with higher profitability and good asset quality.
We recorded net income of R$13,414 million, R$9,499 million, and R$14,339 million in the years ended December 31, 2024, 2023 and 2022, respectively, representing a 41.2% change in the year ended December 31, 2024, compared to the year ended December 31, 2023. In the years ended December 31, 2024, 2023 and 2022, we achieved capital adequacy ratios of 14.3%, 14.5%, and 13.9%, respectively. In the years ended December 31, 2024, 2023 and 2022, we reached efficiency ratios of 27.7%, 29.7%, and 27.4%, respectively. In addition, we achieved a return on average stockholders’ equity of 11.2%, 8.5%, and 13.3% in 2024, 2023 and 2022, respectively, and an adjusted return on average stockholders’ equity of 14.6%, 11.3%, and 18.0% in 2024, 2023 and 2022, 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 that 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 business to diversify our offering of products and services:
| • | In 2022, we continued to pursue our commitment to becoming a leading client-oriented company in Brazil, underpinned by a culture of growth and a customer-centric strategy predicated on four strategic pillars: |
| ◦ | customer centricity: focus on maximizing the experience and satisfaction of our customers by providing simple, comprehensive and suitable solutions for each profile, concurrently with the development of our sales channels, the enhancement of self-service capabilities and our customer support; |
| ◦ | sales channels: building a fast and efficient sales platform, with channels that are more integrated and accessible to customers where, how and when they desire; |
| ◦ | innovation and profitability: we encourage innovation as we seek to fulfill the demands of our customers. We concentrate on advancing strategic businesses, expanding them into new markets and diversifying our portfolio offerings, in addition to accelerating our core operations; and |
| ◦ | culture: building a company in which all employees have both a business and a customer perspective, serving as brand influencers and promoters, with a horizontal and distinctive culture, where empowerment, meritocracy and diversity are the cornerstones. We believe that our sustainability culture is an integral part of our operations. |
| • | In 2023, we remained focused on being the bank of first choice for customers in their financial decisions, striving to put customers at the center of our business. Thus, we continued to make progress with our strategic priorities: |
| ◦ | Customer base profitability and loyalty: we increased our number of loyal customers (i.e., those who have purchased six or more of our products at the time of measurement) by 5.8% in the year ended December 31, 2023 compared to the year ended December 31, 2022, which we believe is directly correlated with improvements in satisfaction levels, particularly within our customer service channels. |
| ◦ | Strategic business expansion driving growth in: |
| ▪ | Companies, where we continuously strive to provide a leading product offering for companies in Brazil: (a) for corporate segment, we endeavor to offer sophisticated and tailored products and services as demonstrated by our prominent position across multiple business areas; and (b) for SMEs, where we have strengthened our customer service model and expanded our loan portfolio, laying the foundation for our ambition to grow this business over the medium term. |
| ▪ | Consumer Finance, where we forged strategic partnerships that further reinforced our market position. We also focused on increasing our rate of loan origination while maintaining quality by seeking to attract customers with higher-than-average credit ratings; |
| ◦ | Innovation and technology: we are constantly working to strengthen our culture of productivity and cost management, always focused on providing the best experience for our customers. |
| • | In 2024, we have focused on being our customers’ primary bank, striving to provide a highly personalized offering to our 69 million customers. We believe this can only be done with the intensive use of technology, which we believe improves the customer experience and reduces the cost incurred to serve our customers. We are prioritizing the primary relationship focusing on the following pillars: |
| ◦ | Transactionality: which we define as transactions our customers do through Santander Brasil, such as paying with credit cards or using PIX and wire transfers. We believe this is an essential part of our customer primacy strategy and a driver of our revenue diversification efforts; |
| ◦ | Investments: the fundamental lever of our retail funding expansion plan; and |
| ◦ | Credit: with relentless discipline in capital allocation, being a complementary element to the other pillars. |
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In 2024, we also began a new engagement approach with our customers by launching “Começa Agora” (which means “It Starts Here”) to foster closer connections with our customers. We introduced our “Santander Free” offering which is focused on low income customers. We also sought to strengthen our tailored offering of products to our “Santander Select” high income customers. We have also shifted our positioning in the SMEs segment, to be closer, more available and integrated into our customers’ businesses. Additionally, we have made progress in combining our Toro and other Santander Brasil offerings to develop a market-leading investment platform combining a digital experience with human relationships with scale and technological excellence, which we believe are key levers of our retail funding expansion plan.
Our Business
We provide a full range of products and services to our customers through the following business segments:
| • | Commercial Banking: provides services and products to individuals and companies (excluding global corporate customers, who are managed by our Global Wholesale Banking division). The revenue generated from this segment is derived from the banking and financial products and services offered to both account holders and non-account holders. |
| • | Global Wholesale Banking: offers a wide range of national and international tailor-made financial services and structured solutions for our global corporate customers, which are primarily local and multinational corporations. |
We outline below the business divisions pertaining to each of our operating segments:
| Commercial Banking | Global Wholesale Banking |
|
Retail Banking Individuals SMEs Consumer Finance Corporate |
Santander Corporate & Investment Banking (“SCIB”) |
In addition, provided below is a breakdown of our net interest income and operating income before tax by segment:
| For the Year Ended December 31, | |||||||||||
| Net interest income | Operating income before tax | ||||||||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | ||||||
| (in R$ millions) | |||||||||||
| Commercial Banking | 51,563 | 44,652 | 45,618 | 12,461 | 5,953 | 13,281 | |||||
| Global Wholesale Banking | 5,115 | 2,232 | 1,885 | 6,730 | 5,969 | 6,294 | |||||
| Total | 56,679 | 46,884 | 47,503 | 19,190 | 11,922 | 19,575 | |||||
The following table presents a managerial breakdown of our loans and advances by customer type as of the dates indicated:
| As of December 31, | Change between 2023 and 2024 | Change between 2022 and 2023 | |||||||
| 2024 | 2023 | 2022 | |||||||
| (in R$ millions) | |||||||||
| Individuals | 287,021 | 255,704 | 243,398 | 12.2 % | 5.1 % | ||||
| Consumer Finance | 75,119 | 62,501 | 58,823 | 20.2 % | 6.3 % | ||||
| SMEs | 73,274 | 64,970 | 62,917 | 12.8 % | 3.3 % | ||||
| Corporate(1) | 164,273 | 168,361 | 159,517 | (2.4) % | 5.5 % | ||||
| Total Credit Portfolio | 599,688 | 551,536 | 524,655 | 8.7 % | 5.1 % | ||||
| Guarantees and private securities | 150,669 | 168,345 | 139,882 | (10.5) % | 20.3 % | ||||
| Credit risk exposure (2) | 750,357 | 719,881 | 664,537 | 4.2 % | 8.3 % | ||||
| (1) | For loan portfolio purposes, “Corporate” refers to companies with annual gross revenues exceeding R$200 million, including our Global Corporate Banking customers. |
| (2) | 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), guarantees and private securities (securities issued by nongovernmental entities). 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.” |
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Commercial Banking
Retail – Individuals
Our strategy for individual customers revolves around five main pillars:
| • | Cost Optimization – Providing a more digital offering to increase the proportion of digital interactions with our customers relative to physical interactions, which we believe improves customer experience and lowers costs. |
| • | Credit – Capital optimization by shifting the portfolio mix to prioritize transactional and higher profitability products, focusing on credit cards in particular. |
| • | Engagement Model – The app as the main sales and engagement driver. Growth squads focused on e-commerce, in addition to personalization through extensive use of open finance. In terms of human contact, we strive to leverage every touchpoint to improve customer relationships. |
| • | Service Model – The app as the primary customer channel, migrating an extensive array of communications from the call center to the chatbot. Providing the customer with a conversational experience remotely, 90% through chats and 10% through voice conversations, while continuing to offer brick-and-mortar branches. |
| • | Offering – A simpler, digital bank focused one customer experience, featuring a free account and card offering (our “Santander Free” offering), unlimited withdrawals, and 10 days of interest-free overdraft to strengthen our “Santander” and “Santander Select” brands. |
As of December 31, 2024, we structured the individual customer service segment as follows:
| • | Private Banking – customers who have at least R$5.0 million in assets available for investment. Private banking provides a comprehensive and customized range of financial products and services, including investment advisory services, loans, and asset management, delivered by a dedicated investment and banking services manager. |
| • | Santander Select – customers with a monthly income starting from R$15,000, or at least R$100,000 in investments, or customers who choose to pay for this service category, regardless of their income or amount of investments. Within Santander Select, our goal is to understand our customers’ needs at each stage of their lives and provide them with financial advisory services through a multichannel solution in which they have the option of receiving human assistance across all channels, including financial products and services that support their wealth accumulation and investment goals. |
| • | Santander Van Gogh – customers with a monthly income ranging from R$4,000 to R$14,999, or customers who choose to pay for this service category. Within Santander Van Gogh, our goal is to understand our customers’ needs at each stage of their lives and provide them with financial advisory services through a multichannel solution in which they have the option of receiving human assistance across all channels, including financial products and services that support their financial goals. |
| • | Santander Especial – customers with a monthly income of up to R$3,999. Santander Especial offers simple and efficient solutions with a suitable cost-benefit ratio for our customers, primarily through digital channels. |
On January 13, 2025, we announced that the Santander Van Gogh segment would be discontinued. With this change, Santander Especial will comprise customers with a monthly income of up to R$6,999, and customers with higher monthly income will be allocated in the Santander Select segment. All other conditions remain unchanged, such as requiring customers to maintain at least R$100,000 in investments or otherwise pay a fee for this service category.
Repositioning of Santander Select
Recognizing the strategic importance of high-income customers in the Brazilian banking market, we launched a repositioning of our “Santander Select” brand in June 2024 with our “It Starts With You” initiative. This initiative offers customers a new service experience that includes an online chat with humans, a dedicated team, a team of investment specialists in our investment advisory service for high-net-worth individuals (which we call our AAA advisory service), exclusive cards, international services, and access to features distinct from those offered in our other brands.
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Santander Free
In 2024, we introduced our “Santander Free” offering which is focused on low income customers. It is a value proposition featuring unique differentiators to achieve customer principality (e.g., a 100% free account and card, unlimited withdrawals and 10 days of interest-free overdraft), along with new branding.
Retail – Small and Medium-Sized Enterprises (SMEs)
As of December 31, 2024, we served SMEs using the following customer service segmentation model:
| • | Companies 3 (“Empresas 3”) – responsible for companies with annual revenues between R$30 million and R$200 million. Our service model is based on dedicated relationship managers, a team of specialists for more complex demands, and credit managers specializing in risk management. We also provide customized services to multinational technology companies and other large corporations to meet their specific needs. |
| • | Companies 2 (“Empresas 2”) – responsible for companies with annual revenues ranging from R$3 million to R$30 million. We provide these clients with a wide array of products and services, supported by dedicated specialists in specialized hubs. |
| • | Companies 1 (“Empresas 1”) – responsible for companies with annual revenues of up to R$3 million. We offer these customers a streamlined banking solution through an integrated account that combines a business account with a point-of-sale, or “POS” terminal hosted by our former subsidiary and current affiliate Getnet. Through this arrangement, our customers receive benefits for utilizing the Getnet platform to handle their credit card sales, with their proceeds being directly deposited into a Santander Brasil checking account. |
| • | Empresas Mei – responsible for companies with an annual revenue of up to R$97,000 and registered as an Individual Microentrepreneur (microempreendedor individual), or “MEI,” with the Brazilian Federal Revenue Service ( Receita Federal do Brasil ). We offer these customers a streamlined and cost-effective solution through our Santander MEI account, a remote service, as well as digital solutions such as customer support via a virtual assistant. |
In January 2025, we announced a review in our SME segmentation. Companies 1 (“Empresas 1”) now comprises companies with annual revenues between R$300,000 and R$3 million. Additionally, the Empresas Mei segment was replaced with the Digital Companies segment, responsible for companies with a single owner, generating annual revenues of up to R$300,000 and registered as MEIs with the Brazilian Federal Revenue Service. We offer these clients a simplified and cost-effective solution through remote and digital solutions, including customer support via virtual and human assistants. Furthermore, we provide a digital solution for initiating relationships, including the opening of a checking account and acquisition of other financial products, with a streamlined and swift journey, which we believe provides the best experience for customers.
Consumer Finance
We provide consumer loans for financing vehicles, goods and services, directly or through intermediary agencies, dealers and partners. Santander Financiamentos is our primary service channel, and we also operate under other brands (SIM and associated companies).
The following table presents our market share in auto loans (a subset of our consumer finance business) as of the dates indicated:
| As of December 31, | Change between 2023 and 2024 | Change between 2022 and 2023 | |||||||
| 2024 | 2023 | 2022 | |||||||
| Market share in auto loans to individuals | 21.9 % | 21.1 % | 22.3 % | 0.8 p.p. | (1.2) p.p. | ||||
Source: Brazilian Central Bank.
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Corporate
Our corporate segment aims to be the main distribution channel of the Santander Group to Brazilian and foreign and/or multinational corporate customers. The product offering ranges from simple cash accounts to mergers and acquisitions advisory services. We serve companies with annual gross revenues in excess of R$200 million located across Brazil through physical and digital channels. Our corporate business has been constantly evolving as a business line relying on a disciplined analytical toolkit, consistent communication, and workforce upskilling.
Global Wholesale Banking
Santander Corporate & Investment Banking, or SCIB, is the global business unit that serves customers who, due to their size and complexity, require tailored services or high-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 customer portfolio comprises 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 the 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 integrated services.
Our Portfolio of Products and Services
Payments and Loyalty
Cards
We operate in the credit and debit card market, catering to both account holders and non-account holders. Most of our customers consist of individuals to whom we offer a range of cards to address each customer profile.
In 2024, we launched our “Santander Free” offering, featuring a free account and card aimed at attracting new customers, particularly among young people. We also introduced “Select Global,” our international account, which is already fully integrated with the rest of our digital offering to improve our customers ’ experience in international purchases.
We have also developed a sales channel using our partners ’ portal to drive sales and have also sought to continue offering new credit products to foster customer loyalty.
Furthermore, to attract new customers and boost the frequency of service usage, we rolled out promotions with offerings, such as (i) two editions of the “Bateu Ganhou” campaign, which set monthly spending goals for customers and rewarded them with points or cash back; and (ii) the “Santander Super Black” campaign, which encouraged card usage for shopping during the month of November 2024.
We believe that the e-commerce shopping experience needs improvement. Accordingly, in mid-2024 we launched “Click to Pay,” a tokenized digital payment solution designed to improve the online shopping experience by eliminating the need to type in data, thereby providing a simpler, faster and more secure experience than the traditional online shopping model. We also invested in enhancements to the online shopping experience for customers who prefer to use the debit function of their card.
In the SMEs segment, we offer customers the option to apply for a card through our app and continue to enhance our digital platform to enable: (i) businesses to autonomously manage their credit lines and contracts; and (ii) the possibility of issuing a physical card at the time of registration at our stores. We also have an offering in partnership with “Sem Parar” (an automatic vehicle identification system used for seamless payments at tolls, parking lots, gas stations, drive-throughs, and car washes) for our individual microentrepreneur customers, which we plan to expand to other customers.
The following table shows key financial and operational metrics of our credit card business as of the dates and for the periods indicated.
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| As of and for the Year Ended December 31, | Change between 2023 and 2024 | Change between 2022 and 2023 | |||||||
| 2024 | 2023 | 2022 | |||||||
| Individual credit card portfolio market share (1) | 9.4 % | 9.1 % | 9.5 % | 0.3 p.p. | (0.4) p.p. | ||||
| Credit card portfolio (in R$ billion) | 62.6 | 53.9 | 50.5 | 16.1 % | 6.7 % | ||||
| Total card turnover (in R$ billion) | 383.1 | 347.9 | 338.1 | 10.1 % | 2.9 % | ||||
| Credit card turnover (in R$ billion) | 274.4 | 238.3 | 226.5 | 15.1 % | 5.2 % | ||||
| Total card transactions (in millions) | 4,010.6 | 3,764.2 | 3,650.4 | 6.5 % | 3.1 % | ||||
| Credit card transactions (in millions) | 1,911.2 | 1,731.8 | 1,720.6 | 10.4 % | 0.7 % | ||||
| Credit card share in household consumption (debit only) – Market overview (2) (%) | 13.3 % | 14.5 % | 16.2 % | (1.2) p.p. | (1.7) p.p. | ||||
| Credit card share in household consumption (credit only) – Market overview (2) (%) | 36.1 % | 34.4 % | 34.1 % | 1.7 p.p. | 0.3 p.p. | ||||
| Credit card share in household consumption (total: debit, credit, and prepaid) – Market overview (2) (%) | 54.3 % | 53.4 % | 53.8 % | 0.9 p.p. | (0.4) p.p. | ||||
| (1) | Source : Brazilian Central Bank. |
| (2) | Source : ABECS – “Brand Monitor,” as of September 30, 2024. Data for the period ending December 31, 2024 was not available as of the date of this annual report. |
Santander Way
Santander Way is an app designed for our cardholders, allowing them to manage their Santander Brasil cards effortlessly, at any time and from anywhere. This comprehensive card management tool features numerous functionalities, such as the ability to make payments, add cards to digital wallets, and participate in promotional campaigns, among others. We are committed to regularly updating the app with new functionalities to further enrich the user experience.
Esfera
We continue to offer our loyalty program, Esfera, which we believe creates avenues to expand into new markets and leveraging cross-selling within our ecosystem.
Payroll Loans
We provide payroll loans to both account holders and non-account holders. Loan repayments are automatically deducted from customers’ monthly salaries by their employers and then transferred to Santander Brasil, significantly lowering our credit risk in comparison to other types of loans. Payroll loans are accessible to our customers through our digital platforms and physical branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts.
Our payroll loan business grew in 2024, driven by our multichannel offering and our offering of a fully digital, app-based registration and drawdown process.
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 2023 and 2024 | Change between 2022 and 2023 | |||||||
| 2024 | 2023 | 2022 | |||||||
| Market share of the portfolio (1) | 10.5 % | 10.8 % | 10.1 % | (0.3) p.p. | 0.7 p.p. | ||||
| Payroll loan portfolio (in R$ billions) | 70.5 | 67.3 | 59.4 | 4.7 % | 13.3 % | ||||
| (1) | Source: Brazilian Central Bank. |
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Real Estate Loans
We offer long-term financing to our customers for the purchase of real estate, with the property itself serving as collateral for the loan. For this reason, a real estate loan is a strategic product due to its lower risk and potential for increasing customer loyalty.
We provide real estate financing that adheres to regulatory standards for prime loans for this type of lending. This means: (i) capping the financing at a maximum of 80% of the property’s purchase price; (ii) requiring customers to have a minimum monthly income, verified by recent pay stubs and tax documents that confirm their employment status or other income sources, enabling us to assess their creditworthiness; and (iii) ensuring that any additional debt combined with the financing does not surpass 35% of the customer’s gross monthly income.
To streamline the property financing process for our customers, we have created an innovative digital platform, including digital signatures and electronic registration, ensuring a digital journey and structured data transmission directly to the property registry office.
The following table sets forth certain key financial and operating data regarding our real estate business as of the dates indicated:
| As of December 31, | Change between 2023 and 2024 | Change between 2022 and 2023 | |||||||
| 2024 | 2023 | 2022 | |||||||
| (in R$ billions, unless otherwise indicated) | |||||||||
| Real estate loan portfolio | 64.8 | 61.7 | 58.3 | 5.1 % | 5.8 % | ||||
| Individual real estate loan portfolio | 61.0 | 59.5 | 56.3 | 2.5 % | 5.7 % | ||||
|
Loan-to-value (1) – Origination (quarterly average %) |
55.4 % | 57.1 % | 60.8 % | (1.7) p.p. | (3.7) p.p. | ||||
| Loan-to-value – Portfolio (%) | 48.3 % | 49.3 % | 50.1 % | (1.0) p.p. | (0.8) p.p. | ||||
| (1) | Ratio between loans and the value of the collateral, excluding home equity. |
Home Equity
We offer a home equity financing solution named “UseCasa” for individuals and “UseImóvel” for businesses, where customers can secure a loan by using their property as collateral. We are the market leaders among private-sector banks in Brazil for this type of financing, holding a portfolio market share of 18% as of December 31, 2024, according to ABECIP.
Microfinance
The mission of “Prospera Santander Microfinanças,” our microfinance program, is to foster financial inclusion by providing access to credit and financial guidance to low-income micro and small entrepreneurs. The microcredit offer is made by our local specialists, through a fully digitized process, empowering microfinance loan recipients to expand their businesses. In addition to microcredit, we offer access to checking accounts and other banking services, products and financial education. We hope to positively impact the social and economic development of the local communities in which we operate.
The following table shows key financial and operating data from our microfinance operations as of the dates indicated.
| As of December 31, | Change between 2023 and 2024 | Change between 2022 and 2023 | |||||||
| 2024 | 2023 | 2022 | |||||||
| Active customers (million) | 1.15 | 1.10 | 0.95 | 4.5 % | 15.8 % | ||||
| Microfinance loan portfolio (in R$ billion) | 3.3 | 3.0 | 2.7 | 10.2 % | 11.1 % | ||||
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Consortiums ( “Consórcios” )
Consortiums operate on a collaborative financing model, where a group of individuals and/or companies come together to purchase a specific asset in an egalitarian and self-funded manner. Contributions are pooled into a common fund, which is dedicated to acquiring the asset agreed upon at the start. Throughout the duration of the agreement, members of the consortium group receive the asset through lotteries and competitive bidding. Typically, consortium groups are formed for the purchase of durable goods, such as real estate and vehicles.
We provide a consortium offering for our customers aligned with the prevailing interest rate and credit conditions in the market. In 2024, we broadened the distribution of the product through our “AAA Patrimonial” channel and external partners, through which we sought to establish partnerships with the goal of further expanding our product portfolio.
| As of December 31, | Change between 2023 and 2024 | Change between 2022 and 2023 | |||||||
| 2024 | 2023 | 2022 | |||||||
|
Total consortium origination (R$ million) |
17,780 | 15,997 | 14,662 | 11.1 % | 9.1 % | ||||
|
Real estate consortiums origination (R$ million) |
11,510 | 9,827 | 8,298 | 17.1 % | 18.4 % | ||||
|
Consortium loan portfolio (in R$ billion) |
40,189 | 38,600 | 32,208 | 4.1 % | 19.8 % | ||||
Agribusiness
Agribusiness constitutes a significant part of our portfolio, and we believe it will continue to be a significant part of our business. Our agribusiness portfolio (including credit, securities, and other products) amount to R$52.9 billion as of December 31, 2024 compared to R$53.7 billion as of December 31, 2023.
After an extended growth cycle in the sector, the 2023/2024 crop year has proven to be challenging, especially for grain producers (soybeans and corn). Climate events affected crops and hindered production, leading to a smaller harvest in Brazil. In contrast to what happened with the Brazilian harvest, other grain-producing countries, such as Argentina, for example, achieved record productivity in the same harvest. This had the effect of increasing global supply significantly and caused prices to drop considerably compared to the previous harvest. We understand that this low-price environment will persist for at least another crop year. In these circumstances, we have sought to be close to our customers and to assist them in seeking the best solutions for their businesses.
We maintain a commercial structure focused on assisting the agribusiness sector, featuring a sector-dedicated team that operates across Brazil, offering solutions that span from basic banking services to products tailored to the agribusiness sector.
The following table sets forth certain key financial and operating data regarding our agribusiness portfolio as of the dates indicated.
|
As of December 31, |
Change between 2023 and 2024 | Change between 2022 and 2023 | |||||||
| 2024 | 2023 | 2022 | |||||||
| (in R$ billions, except for percentages) | |||||||||
| Agribusiness portfolio (1) | 52.9 | 53.7 | 37.8 | (1.5) % | 42.1 % | ||||
| (1) | Including credit, securities and other products. |
Sim
Sim is part of our consumer finance offering. Its operations consist of: (i) goods and services financing, which offers installment plans, and consumer financing options under the “buy now, pay later” model; and (ii) sim.com, a digital platform for secured personal loans.
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emDia
emDia is a 24/7 omnichannel collection company offering its customers both call center and digital solutions. We have been investing in the use of technology, focusing on hyper-personalization and a multichannel journey.
Return Capital
Return Capital specializes in managing and securitizing nonperforming assets. We actively seek cross-selling opportunities within our ecosystem, leveraging the flow of customers and the extensive reach of our business.
Insurance Ecosystem
We offer our insurance products through Santander Corretora de Seguros, helpS, Auto Compara, and Santander Auto S.A., or “Santander Auto.” Our insurance business as a whole generated R$13.6 billion in premiums in the year ended December 31, 2024.
Santander Corretora de Seguros
Santander Corretora de Seguros provides a diverse range of products designed to meet the needs of every customer profile. We offer a comprehensive portfolio of insurance and protection services, delivering all-encompassing solutions. Our portfolio includes life and personal accident insurance, vehicle and property coverage, credit insurance, as well as insurance for travel and banking transactions, among other products.
According to the 2024 SUSEP report, we are positioned among the market leaders in personal insurance in Brazil (encompassing life, personal accident, and credit insurance), holding an 11.3% share of the market’s premiums as of October 31, 2024.
We are continually refining our insurance solutions to address the evolving needs of our customers, striving to deliver an enhanced experience from the first purchase to the policy renewal.
helpS
helpS is our assistance and convenience services business, providing 24/7 emergency solutions for homes, cars, motorcycles and pets. It also provides access to a 24/7 telemedicine platform, a network of discounts on consultations, exams, and pharmacies, bodywork and painting repairs, and streaming services. The benefits are linked to the individual ’ s taxpayer ID, rather than to a specific asset, thus allowing customers to request assistance whenever, wherever, and for however they want. Through “Santander+ Combos,” the customer can create a basket of services of their choice for a fixed monthly fee, which is designed to be lower than the cost of these same services when purchased separately.
Automotive Insurance Ecosystem
The Brazilian insurance market is characterized by: (i) a low level of insurance penetration relative to its GDP; (ii) outdated technology and dominated by companies with low innovation rates that prioritize financial results (due to a history of high interest rates); and (iii) a distribution network predominantly composed of retail brokers. Consequently, only approximately 30% of Brazilian vehicles were insured as of December 31, 2024, according to CNSeg ( Confederação Nacional das Seguradoras) . In this context, we provide the following automotive insurance solutions:
| • | Santander Auto: Santander Auto provides a fully digital vehicle insurance solution that uses data analytics to set prices and features a one-click purchase process, seamlessly integrated with vehicle financing options. Leveraging actuarial techniques and behavioral modeling, Santander Auto offers insurance quotes without requesting additional information from customers. This is possible with data that is already available to us. Our objective is to grow the business by capitalizing on our ecosystem and engaging a larger portion of our customer base. We believe this approach has been key to the development of Santander Auto. In January 2024, we started selling Santander Auto products through “Auto Compara,” a new channel described in more detail below. We are also planning to offer Santander Auto ’ s products through new channels. |
| • | Auto Compara : Auto Compara is a digital platform that brings together car, motorcycle, tracker, and assistance insurance alternatives. Our aim is to deliver a comprehensive online experience so that customers can obtain quotes and purchase insurance policies in a simple, fast, and secure manner. As of December 31, 2024, we featured products from 10 different insurance providers. |
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Consumer Finance
+Negócios | Santander Financiamentos
Our “+Negócios” platform enables credit simulations, processes credit approvals, and formalizes vehicle financing proposals, while also providing portfolio management reports.
Additionally, we offer the “+Fidelidade” program, a loyalty-building initiative aimed at providing incentives to banking correspondents based on their engagement with the entire Santander Brasil ecosystem. We centralize the business strategy in the program by implementing a loyalty journey for dealers and sellers.
Webmotors
Webmotors is a Brazilian technology company that operates an online marketplace specializing in car buying and selling solutions for dealerships, original equipment manufacturers, or “OEMs,” and private sellers. Moreover, it is the largest automotive ecosystem platform in Brazil, according to IPSOS Branding Tracking 2023.
On April 28, 2023, Santander Corretora de Seguros, Investimentos e Serviços S.A. completed the sale of a 40% equity stake in Webmotors S.A. to CAR Group Limited, an Australian multinational company. As a result, Santander Corretora now holds a 30% stake in Webmotors, while CAR Group Limited owns the remaining 70%. This strategic partnership combines the market-leading position of Santander Brasil in automotive financing in Brazil with the expertise of CAR Group Limited, a global leader in the automotive marketplace.
For more information, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events—Sale of a portion of Santander Corretora’s shareholding in Webmotors.”
Companies
Santander Corporate & Investment Banking (SCIB)
We offer our customers a full range of services and products. Thus, our portfolio includes offerings that range from basic to tailor-made and highly complex solutions across the following areas:
| • | Global Transaction Banking – responsible for the sale and management of local transactional banking products, including local loans, commercial financing options, funds from development banks, and cash management. This area is also responsible for the sale of global transactional products, financing for export and import (trade finance), guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks. |
| • | Global Debt Financing – responsible for providing funds and financial advisory services for infrastructure projects, origination, and distribution of fixed income instruments in capital markets (local and international debt capital markets), financing for acquisitions, and syndicated loans in both local and foreign currency. |
| • | Investment Banking – provides advisory services for mergers and acquisitions, as well as for equity transactions in capital markets. |
| • | Equities – this division provides brokerage services for corporate, institutional, and individual investors in stocks and listed derivatives, in addition to offering research services. |
| • | Treasury Customers (Sales) – responsible for structuring and offering foreign exchange products, derivatives, and investments to customers across our various segments, including institutional investors, corporate customers, and individuals. |
| • | Market Making – responsible for pricing operations (foreign exchange and derivatives) for customers originated from the sales efforts of our corporate, institutional, private banking, and retail units. This area is also responsible for managing our proprietary books. |
| • | Energy Trading – performs transactions with both qualified and end customers, in addition to acting as a hedge and market-making provider in energy markets. |
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We received numerous awards related to capital markets and financial advisory services over 2024. A few of our most notable accolades are listed in the table below.
| Company | Acknowledgments | |
| Dealogic |
December 2024 #4 Brazil M&A Deals by Advisor #7 Brazil M&A Total Fee by Advisor #3 Brazil ECM Deals by Advisor #6 Brazil ECM Volume by Advisor (Equal apportionment) #5 Brazil ECM Volume by Advisor (Full apportionment) |
|
| ANBIMA |
November 2024 #3 Brazil DCM Local Capital Markets Origination by Volume #3 Brazil DCM Local Capital Markets Origination by Deals #5 Brazil DCM Local Capital Markets Distribution by Volume |
|
| Bond Radar |
December 2024 #2 Brazil DCM International Capital Markets Origination by Volume #1 Brazil DCM International Capital Markets Origination by Deals |
|
| Institutional Investor |
Year 2024 #1 Best Analyst in Transportation Brazil #3 Best Analyst ESG Research Brazil #2 Best Analyst in Electric & Other Research Brazil #2 Best sector in Transportation Research Brazil #7 Research Team #5 Brazil Sales |
|
| SRP America Awards |
Best Performance Americas 2024 Best Distribution Brazil 2024 Best Performance Brazil 2024 |
|
| Brazilian Central Bank |
November 2024 #1 Total FX by Volume |
|
| B3 |
November 2024 #5 Brazil Commodities by volume #3 Brazil Structured Notes by volume #3 Brazil Derivatives by volume |
|
| Global Capital |
Latin America Derivatives House of the Year 2023 Most Impressive Bank for ESG Capital Markets in Latin America 2023 Most Impressive Local Bank for Latin America Bonds - Brazil |
|
| GTR | Best Trade Finance Bank for LatAm 2023 | |
| Global Finance |
Best Bank for Cash Management – Brazil & LatAm 2024 Best Bank for Treasury and Cash Management – Brazil 2024 |
|
| Best Bank for payments LatAm | ||
| ICC |
September 2024 #1 Brazil Local Trade Finance by volume |
|
| IFR | Latin American Bond of the Year 2023 | |
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| Company | Acknowledgments | |
| Latin Finance |
Infrastructure Bank of the Year 2024 Infrastructure Financing of the Year LatAm Oil & Gas financing of the year LatAm (FPSO Anna Nery (Yinson) Infrastructure Financing of the Year — Brazil and LatAm ( Projeto Aguas (Aegea) ) |
|
| Euromoney |
Best FX Bank 2024 — Brazil & LatAm Best International Bank 2004 — Brazil Best Bank for Financing 2024 — LatAm Best Bank for ESG — Brazil |
Cash Management
We provide online cash management solutions for corporate customers and SMEs through our internet banking and mobile banking platforms.
Our cash management service revenue streams encompass fees for providing the following offerings: (i) collections, where we assist customers in executing business transactions via printed or electronic payment slips; (ii) payments, facilitating the straightforward and automated handling of our customers’ accounts payable through individual transactions or batch processing via electronic file transfers; (iii) instant payments, enabling our customers to make and receive online payments with immediate account crediting or debiting (this service can be integrated with our collections, payments, or product acquisition offerings); (iv) payroll services, designed to streamline the distribution of wages and benefits to our customers’ employees using an online platform; and (v) custody services, through which we provide the custody, management, and deposit of predated checks until their respective clearing dates.
Moreover, we provide a variety of other revenue-generating products, each customized to suit our customers’ specific operational needs.
“Advance Program” (Programa Avançar)
In addition to our financial services offering, we also have the “Advance Program” (Programa Avançar), a free of charge, non-financial offering that caters to entrepreneurs, whether they are customers of Santander Brasil or not. This initiative, which we launched in 2015, allows SMEs to access a wealth of resources to support their business, including educational content, courses with certificates, and events designed to enhance management and innovation, facilitate internationalization, foster team development. We believe that the Advance Program is an important component of our offering to Brazilian entrepreneurs.
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, please refer to “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”
Investments – Funding Plan Progress
Our investment ecosystem comprises a comprehensive investment solution designed to provide expert guidance and support in reaching our customers’ financial goals, grounded in five fundamental pillars:
| • | Customer investment profile – We assess our customers’ circumstances to gauge their financial knowledge, investment horizons, liquidity needs, and the levels of risk they are willing to take on, among other considerations. This assessment is reviewed periodically to align with the client’s needs and applicable regulations. |
| • | Investment strategy – Our investment philosophy is focused on delivering long-term returns through a disciplined asset allocation process and mitigating market risks by diversifying across various asset classes. |
| • | Model portfolio – We craft strategic portfolios tailored to each customer’s profile and update our “Model Portfolio” on a monthly basis to align with prevailing market conditions and trends. This tactical approach is developed by our Asset Allocation Committee, which is comprised of a team of advisors and economists from our Economics department, the Santander Asset Management division, our Private Banking unit, and our brokerage firm (Santander Corretora). |
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| • | Execution and implementation – To ensure the successful execution of our investment strategy, we offer a comprehensive suite of financial products, including banking instruments, bonds, equities, structured notes, open-architecture mutual funds, selected investment providers, real estate funds, and exchange-traded funds, among other capital market instruments. Our partnerships with Zurich Santander and Toro complement this offering with a broad array of private pension plans and third-party investment opportunities, respectively. |
| • | Monitoring – Our advisory team conducts a thorough and regular review of our customers’ profiles, objectives, and performance with each client, ensuring that their investments adhere to the set parameters and recommendations provided by the model portfolio. |
AAA
Launched in June 2022, AAA offers a comprehensive range of products, complemented by a sophisticated digital experience and expert guidance to further strengthen our investment advisory services. AAA provides an exclusive investment advisory service for high-net-worth individuals. To incentivize our AAA investment advisors, their remuneration includes a substantial variable component that is contingent on the results they generate for our customers. As of December 31, 2024, AAA had 1,771 investment advisors and was present in 180 cities across Brazil.
Toro
Toro is one of the pioneering investment platforms authorized to operate in Brazil. The platform aims to fully meet the investment needs of its customers, offering expert advisors and a customer-centric journey that integrates everything from financial education to order execution. Toro’s diverse product portfolio includes an open platform for equities, real estate investment trusts, exchange-traded funds, international stocks (offered through Brazilian depositary receipts), fixed income securities, bonds, mutual funds, and derivatives. Additionally, Toro provides a suite of financial apps, featuring tools for budgeting and financial consolidation, as well as a marketplace for related financial products. The acquisition of the totality of Toro enables us to maximize the offerings of equity and fixed income products, financial education, and engagement in content generation in our investment ecosystem. We are integrating the Toro app with Santander Brasil ’ s systems, allowing our customers to access and invest in the products offered by Toro in a simple and fluid journey while allowing Toro customers to benefit from our services.
Customer Service Channels
We offer our financial services and products to customers through a multichannel distribution network, which includes: (i) physical channels, such as branches, mini branches, and ATMs; (ii) remote channels, such as call centers; (iii) external channels, consisting of banking correspondents and third-party vendors of our products and services; and (iv) digital channels, including online banking and mobile banking platforms.
The following table provides an overview of the weight of each key distribution channel in our overall distribution system.
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (%) | |||||
| Digital channel (1) | 97.6 | 96.9 | 95.3 | ||
| Physical Channel (2) | 1.6 | 2.1 | 3.0 | ||
| Remote Channel (3) | 0.8 | 1.0 | 1.7 | ||
| (1) | Includes Internet and mobile banking. |
| (2) | Includes ATMs and branches. |
| (3) | Includes interactive voice response and call centers. |
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Digital Channels
In 2024, we introduced a new work model featuring multidisciplinary teams focused on consistently meeting customer needs.
As a result, we achieved an NPS of 75 for our digital channels as of December 31, 2024. In addition, 98% of all of Santander Brasil’s transactions in 2024 were digital.
In the year ended December 31, 2024, we entered into 56.1 million agreements through digital channels, an increase of 41% compared to the prior year.
Our digital customers increased by 13.5% in the year ended December 31, 2024, compared to the prior year. The volume of digital transactions increased by 42% in the year ended December 31, 2024, compared to the prior year, with an average of 692 transactions per customer in the year ended December 31, 2024. We believe that these numbers demonstrate the importance of digital channels in enhancing customer experience and fostering sustainable business growth. In addition, we believe these numbers are evidence of the increased adoption of digital channels by customers and the efficiency of the digital model in addressing their needs.
The table below presents certain operating data for our digital channels as of the dates indicated.
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions) | |||||
| Number of digital customers(1) | 23.6 | 20.8 | 20.4 | ||
| Number of digital transactions(2) | 16,307 | 11,517 | 9,813 | ||
| (1) | We define digital customers as individuals who have utilized at least one of Santander Brasil’s digital channels, such as mobile or internet banking, within the 30 days prior to the end of the applicable year. |
| (2) | This figure refers to transactions conducted through internet banking, mobile banking, and other digital platforms. |
Remote Channel
Our remote channel consists of voice customer services and sales, interactive voice response, or “IVR,” and a chatbot with the option for human interaction in the chat.
We improved our efficiency and raised our first-call resolution rate from 95.7% in the year ended December 31, 2023, to 96.7% in the year ended December 31, 2024.
In 2024, we continued to focus on providing a unique experience for our customers by offering personalized services. We recorded an average of 4.1 million interactions per month in the year ended December 31, 2024. In addition, during the period from December 31, 2023 to December 31, 2024, we improved our NPS from 71 to 78.
In line with this purpose, we focus on assisting vulnerable customers (i.e, individuals who, due to their personal conditions (whether temporary or permanent), demonstrate a reduced ability to understand and assess information for decision-making or to represent their own interests) through the IVR fast pass, enabling them to receive prompt service. This has enabled us to provide a more human interaction to these vulnerable customers: we went from approximately 17,000 calls in January 2024 to approximately 80,600 calls in December 2024.
External Channel
Our external channel consists of sales representatives and banking correspondents who distribute our products and services alongside our other channels. The channel focuses on the origination of four main products: payroll loans, consortiums (“ consórcios ”), credit insurance, and integrated accounts.
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Physical Network
Our distribution network provides integrated financial services and products to our customers. The table below presents our physical distribution network, all located within Brazil, as of the dates indicated.
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| Branches | 1,239 | 1,486 | 1,701 | ||
| Mini branches | 1,025 | 1,191 | 1,266 | ||
| Own ATMs | 7,615 | 9,406 | 11,527 | ||
| Shared ATMs | 24,214 | 24,169 | 24,374 | ||
Branch Network
Our branch network delivers our full range of products and services to customers. The following table shows the geographic distribution of our branches as of the dates indicated.
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| Northeast | 11.62 % | 10.80 % | 9.99 % | ||
| North and Midwest | 10.01 % | 9.00 % | 8.94 % | ||
| Southeast | 63.76 % | 65.50 % | 66.20 % | ||
| South | 14.61 % | 14.70 % | 14.87 % | ||
Mini branches (“PABs”)
We provide everyday banking services to our SME customers, as well as to corporate customers and their employees, through our mini branches (“PABs”). These exclusive service locations are strategically placed within our customers’ buildings, including hospitals and universities. The presence of PABs at our customers’ facilities bolsters our relationships and fosters loyalty, as they benefit from the convenience of conducting banking transactions on-site at their workplaces.
Automated teller machines (“ATMs”)
As of December 31, 2024, we operated a network of 7,615 ATMs, including those located in our branches and mini branches. Furthermore, our clients have access to the “Banco24Horas” network, which, as of December 31, 2024, consisted of 24,214 self-service terminals. Through this network, our customers can access their accounts, conduct banking transactions, and purchase most of the products and services available in our portfolio.
Technology and Infrastructure
In 2024, we sought to accelerate our technological transformation toward our goal of being a digital bank with physical branches, with a strong presence in our customers’ daily lives, while also combining human contact with a market-leading open and integrated digital platform for financial services.
We believe the launching of a new brand positioning and signature (“It Starts Here”) in April 2024 is a step toward our goal of being the primary bank of customers. To achieve this goal, we are striving to transform our business model through intensive use of technology to provide a continuous improvement in customer experience and expand the set of personalized financial products while relying on simple, safe and stable digital journeys to further develop our business.
Our technology and innovation structure (F1RST Digital Services) continues to play a key strategic role in enabling and sustaining businesses through the agile and efficient delivery of technological solutions by a large community of 5,686 employees, as of December 31, 2024, working in close partnership with business areas to improve customer experience and provide a stable offering of products and services. Our technological capabilities have also evolved on account of notable advances in the following domains:
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| • | Technology Teams merged with the business: We believe our functional structures for delivering technological solutions, the business and enterprise domains (of which we have 28 in total) have matured their capabilities of strategic alignment with the business, software development, operations support and monitoring. Teams have also begun to work more aligned with the global teams in the development and implementation of global platforms components across the Santander Group. |
| • | Innovation and Technical Excellence: We have sought to reinforce our team of senior experts in architecture and engineering, to strengthen our architecture, data, cybersecurity, antifraud and artificial intelligence practices, in addition to creating specialization groups (Chapters) to enhance the sharing of technical knowledge across the organization alongside our existing centers of excellence. Moreover, we have invested more resources for generative AI exploration to obtain efficiency and productivity gains. |
| • | Operations Stability and Resilience: We have taken steps to foster a culture aimed at ensuring the highest level of stability and resilience in our operations, which we call “Always On.” To accomplish this goal, we refined controls and processes, expanded governance forums, executed specific initiatives focused on operations reliability for critical channels and products (e.g., PIX, the Brazilian instant payments system). We have also invested in improvements in reliability engineering, quality, monitoring and deployment automation, systems obsolescence and vulnerabilities management. In addition, we continued to evolve our hybrid cloud architecture, whose resilience and scalability we believe are essential to absorb the exponential growth of customers transactions. |
| • | Talent Attraction and Training: We continue to seek out leading technology talent to work alongside the Business, and to foster a lifelong learning culture in which employees’ soft and hard skills are continuously developed. We expanded our offering of cloud computing courses and certifications through the AWS Training Partnership, and a new AI focused career path called prompt engineering was included in our internal data certification program, Data Masters. |
We believe these improvements enable our technology to keep supporting our growth and competitiveness. We highlight below other initiatives carried out throughout 2024:
| • | Investments: We launched the Santander Trader mobile app, which facilitates investments in stocks, real estate investment trusts (REITs), exchange-traded funds (ETFs) and other assets through a digital structure. We also sought to improve the investment journeys on our digital channels by providing better transparency on profitability charts and improvements in usability, along with a new feature allowing our customers to digitally transfer their pension funds from other financial institutions to Santander Brasil. In addition, we provided our customers the option of using certain of their investments (certificates of deposit, treasuries, structured notes, pension funds) as security for personal loans. Our financial advisors have also benefited from HUB, a new tool able to consolidate customer portfolios, analyze investments performance and automate portfolio relocations and balancing, which we believe enables them to provide a more personalized service for our customers. |
| • | Individual Bank Account (Digital Channels): We revised the PIX experience by adding a single field for contacts search and automatic transfer key type recognition (mobile number, social security number, e-mail or code), and a shortcut for recent contacts. Combined with a revamp of the presentation, we believe this has made PIX transactions more agile and intuitive. We also provided simpler and faster access to our mobile application, and we optimized the navigation by improving the search features for products and services. Moreover, we introduced product offers related to the new “Santander Free” account in our digital channels, in addition to customized products and services for our Santander Select members. |
| • | Corporate Bank Account (Digital Channels): We have sought to strengthen our role as a partner to businesses through several improvements to the digital experience. We introduced user login and password recovery self-services directly in our mobile and internet banking channels, along with facial biometrics authentication to enable the mobile device, increasing the efficiency of our security solutions. We also expanded our services offering, including a new feature that allows customers to upload an Excel file for barcode and PIX payments, thereby simplifying the management of large transactions for our customers. Furthermore, we simplified the usability of the mobile application, revamping the home screen and improving the effectiveness of the search features to help customers find the services they need. |
| • | Cards: We are taking advantage of our global presence to build a single card platform in the cloud for the whole Santander Group that we hope will improve our products and services offering. We expanded our digital offer of card services by providing the “Click to Pay” service, a solution allowing customers to shop online with a single click, removing the need to digit credit card data for each purchase, thereby ensuring a more practical and agile shopping experience. We also introduced a new feature to pay credit card bills in monthly installments, thereby optimizing the management of expenses for our customers. Moreover, we have launched “Select Global,” a digital international account for our high-income customers, which grants access to a debit card accepted in more than 200 countries. |
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| • | Customer Service: We continue to introduce innovative solutions and improvements across our interaction channels to ensure a more agile, efficient and personalized customer service through all contact points. We have sought to expand personalized contact with Santander Brasil specialists via WhatsApp (the most widely used messaging app in Brazil) to further cement our relations with our customers. We have also expanded our virtual assistant capabilities, tailoring interactions to new products and services (e.g., “Santander Free” account) and expanding self-service options such as on-screen password visualization to improve customer satisfaction. |
| • | Security: We launched “Immediate Block,” a simple and safe solution to protect from inappropriate accesses to a customer’s bank account or unauthorized card usage as a result of mobile device loss or theft. The solution consists of a fully digital platform which can be accessed on any computer or mobile device with Internet access, where the customer can view all the devices and cards affiliated with their account and select which apps or cards they wish to block instantly. The solution includes several layers of authentication to ensure that only the account or card holder can request the block. |
| • | Data: We have sought to foster our data-driven culture by expanding our data platform capabilities. We highlight the following advances: |
| – | We have sought to make our data platform scalable and efficient with the intensive use of cloud computing technologies, which has enabled us to use data more quickly than before and with greater confidence in the quality of the data. This allows us to focus on customer centricity, optimizing customer experience through customer relationship management, external data capture and open finance. In addition, our real-time architecture has helped us reshape our credit solutions pipeline, improving policies testing, customer campaigns and anti-fraud processes. |
| – | In the year ended December 31, 2024, the number of users on our data platform increased by 30% and the data internal domains available for business use expanded to 37, reinforcing our strategy of federated and scaled data adoption. |
| • | Generative Artificial Intelligence, or GenAI: We aim to leverage GenAI technologies to enhance operations and customer experience. Highlighted below are three domains where key AI-related initiatives have been carried out: |
| – | implementation of AI-powered virtual assistants to assist our customer service and investment advisor teams. We believe that these assistants can provide more accurate information on our products, processes and procedures, and help generate pitches for various products, increasing productivity and customer satisfaction and enabling more personalized customer interactions. |
| – | applying GenAI technology in our image recognition processes, particularly in the evaluation of legal documents. This has reduced operational costs related to manual document review and decreased our response time to judicial system requests, helping Santander Brasil avoid unnecessary fines due to missed deadlines; and |
| – | using GenAI tools to assist our developers at different stages of the software development life cycle, including design and coding. We have also implemented a solution to faster eliminate systems obsolescence by removing outdated code, reducing costs and vulnerabilities. |
We believe that these advances are evidence of our commitment to innovation and efficiency, and we intend to expand the use of GenAI in external virtual assistants to further enhance customer experience and broaden the scope of our process automation and software development initiatives. For an overview of certain risks associated with the use of AI in our business, please refer to “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—We utilize artificial intelligence, which could expose us to liability or adversely affect our business.”
| • | Hyper-Personalization: We are fostering a transformation in retail banking through hyper-personalization, supported by a robust and integrated data architecture that provides a 360º view of our customers from both within and outside the bank perspectives, allowing us to deeply understand their profile, behavior and individual needs to deliver contextualized and highly relevant interactions. This enables Santander Brasil to make unique and personalized offers, adjusting product prices and conditions to each person’s specific needs, thereby improving the customer experience and further cementing such customer’s long-term relationship with the bank, while generating value for both parties in an ethical and transparent way. |
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| • | Open Finance: We continue to develop our open finance platform through the following: |
| – | Comprehensive view of customers’ investment portfolios by collecting data from other financial institutions, allowing our financial advisors to build a tailored investment plan according to each customer’s objectives and risk profile and identify more profitable investment opportunities at Santander Brasil. |
| – | Simplification of financial management for corporate customers, by offering various services, such as: integrated account management, with reconciliation of payments and receipts from other banks, payments via PIX using balances from other bank accounts, identification of fees paid to competitors for cost reduction offers and assessment of customer’s financial profile to increase line of credit. These advances raised the number of customer requests to connect with our open finance platform, with over 78,000 corporate customers connecting their accounts from other banks to our channels during the year ended December 31, 2024. |
| – | Tailored assessment of customers’ financial profile through algorithms and risk models, using the registration data that customers accept to share with the open finance platform, which eliminates the need to collect additional documentation from our customers. |
| • | Service Quality: We are focused on providing stable products and services to our customers. Our consistent focus on secure development practices, automation and quality controls have contributed to an increase in software deployments (which increased by 42% in the year ended December 31, 2024 compared to the prior year), and a 21% decrease in the volume of relevant incidents (which we define as incidents which affect the availability of services) in the year ended December 31, 2024 compared to the prior year. We have also sought to refine our reliability engineering practices (CXRE – Customer Experience Reliability Engineering) by pushing our technical teams to be more proactive in the software development process to ensure end-to-end systems and platforms availability for our customers. We believe that it was these efforts which enabled us to become the Brazilian bank with the lowest number of service outage reports by customers in the year ended December 31, 2024, according to DownDetector, a global tool that measures digital stability of companies’ services based on user reports. Moreover, our infrastructure continued to display the ability to withstand increasing levels of transaction peaks, such as a peak of over 750 PIX transactions per second on December 20, 2024. |
| • | IT Solutions Delivery: We continue to mature our IT solutions delivery model to the business through the “Engineering Productivity” program, which encompassed many initiatives such as: enhancement and standardization of engineering practices within all teams, review of demand prioritization and solutions design processes, enhancing of centers of excellence, creation of technical communities (Chapters) to foster best practices within the organization, refinement of performance monitoring through key performance indicators and review of tech career paths, establishing specific training tracks for each domain of expertise. |
Communications and Marketing
We use a variety of tools to communicate with our employees and customers effectively. This includes not only traditional media, such as television, newspapers and print magazines, but also digital and innovative communication to make a difference in the lives of all those who are related, in some way, to Santander Brasil.
In 2024, we launched our new brand positioning, which we call “It Starts Here.” Under this new positioning, we rolled out three key campaigns. First, we introduced “Santander Free,” a fully digital platform offered at no charge to serve our customers. We centered this initiative on the concept of “free” because we believe it provides what our customers desire: a lighter, more digital, and fairer relationship with their bank. Second, we launched a campaign focused on the “Santander Select” brand, aiming to position ourselves as the leading premium financial services platform in Brazil. Third, we launched a campaign targeting our corporate customer segment, showcasing our commitment to Brazilian companies and entrepreneurs.
A few other highlights of our communications and marketing initiatives in 2024 include:
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| • | We brought SMUSIC, the international live music platform to Brazil. We also partnered with SMUSIC to launch a community on Instagram to connect with music lovers which had over 16 thousand members as of December 31, 2024. |
| • | We created SRUN, a community focused on street racing, with partnerships, discounts and tips related to the sport. |
| • | We continue with our monthly live event “Juntos com Mario Leão” (“ Together with Mario Leão ”) which is broadcast on the “Santander Now” app to our employees. In 2024, Santander Now had more than 100 thousand views, mainly as a result of the following campaigns: “It Starts Here” (portraying the beginnings published externally and internal brand positioning with a new look and feel), Pluxee (a new food and meal card benefit), direct connection (daily communication vehicle with our sales network), feedback (to incentivize participation), phishing awareness (focused on click recognition), “Eu Com Isso” podcast (focusing on the key events affecting our customers on our channels), diversity (Women, LGBTQIAP+, Race and disabled persons). |
In 2024, our communication actions resulted in more than 11 thousand mentions of Santander Brasil in the Brazilian national media (such as websites, newspapers, and magazines) and approximately 10.5 thousand mentions of Santander Brasil in Brazilian regional outlets.
Sustainability Initiatives
Our sustainability history started over 20 years ago. Throughout this period, we have refined our programs, businesses and governance relating to sustainability.
The key focus throughout this time has been on the assessment and mitigation of social, environmental, and climate risks when providing loans, assistance to businesses that support customers’ transition toward a low-carbon economy, and the building of a more inclusive society through actions in education, employability and entrepreneurship, in addition to financial and social inclusion. Many of these initiatives are accompanied by global goals in areas where we have the greatest potential impact, such as net zero emissions in our operations, financial inclusion, and diversity. To ensure proper governance of this process, we rely on internal policies and controls supported by our senior leadership.
Our sustainability efforts are carried out under our Social, Environmental and Climate Responsibility Policy, or “PRSAC,” which outlines social, environmental, and climate principles and directives for conducting business and engaging with the organization’s stakeholders. The PRSAC aims to prevent negative impacts and to maximize positive impacts arising from our financial operations and activities. The PRSAC meets the requirements of CMN Resolution No. 4,945.
We expanded our internal training course offerings on sustainability topics to some of our affiliates. We monitor specific sustainability goals, which are used to evaluate the performance of executives and other employees and directly impact their variable compensation.
In 2021, we announced our commitment to achieving net zero emissions in our operations, credit portfolios, and investments by 2050, through our adherence to the Net Zero Banking Alliance, or “NZBA.” We expect that customer engagement and support, through transition financing, will be the main paths to achieving our reduction targets.
We have been supporting the Brazilian government’s initiatives to transition toward a low-carbon economy, not only through our advocacy actions but also through active and direct participation. One example is the recently announced “Ecoinvest Program”: an auction organized by the Brazilian National Treasury aimed at attracting foreign capital to finance low-carbon economy transition projects through a blended finance mechanism. We participated in the auction and recently received feedback that our bid was successful. We are now in the internal structuring phase to raise international funds for the financing.
Our commitment to the NZBA requires the establishment of decarbonization plans for the most carbon-intensive sectors. The first step in this process is measuring the emissions of our portfolio.
Given the significance of agricultural production in Brazil, we focused our efforts on this sector. To start this journey, in 2022 we sought the specialized support of WayCarbon, a Brazilian company renowned for solutions aimed at decarbonizing the economy. Since then, we have been working together on the development of methodologies and metrics with scientific references, which we believe enable us to estimate the sector’s emissions and understand the production links with decarbonization potential.
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We also participate in the Banking for Impact on Climate in Agriculture (B4ICA) initiative, coordinated by the World Business Council for Sustainable Development in partnership with the United Nations Environment Programme Finance Initiative (UNEP FI), the Partnership for Carbon Accounting Financials (PCAF), and the Environmental Defense Fund (EDF), along with other banks. We report our emissions since 2009 and compensate the emissions from our own operations (scope 1 and 2) which we are unable to reduce. Regarding scope 3 emissions, our current focus is reducing them. We publicly disclosed our scope 2 goal to achieve 100% renewable energy by 2025, a target we reached in 2023. We published our Emissions Inventory in the Brazilian Public Emissions Registry, a platform for the supervision of greenhouse gas, or “GHG,” emissions from organizations participating in the Brazilian GHG Protocol Program.
Regarding sustainability frameworks, we continue to follow the guidelines of the Global Reporting Initiative, of the Task Force on Climate-Related Financial Disclosures, and of the principles of integrated reporting. We also connect our activities to the UN Sustainable Development Goals. Since 2023, we began considering the impact of the IFRS S1 and S2 standards, launched by the International Sustainability Standards Board, which will become mandatory for publicly listed companies in Brazil starting on January 1, 2026, in accordance with CMN Resolution No. 5,185/2024.
Our main achievements in 2024 include the following:
| • | We enabled R$32.2 billion in sustainable businesses (including both balance sheet financing and issuances of indebtedness or other financing which we have facilitated) including green bond issuances, clean energy financing, and dedicated product options. |
| • | We maintained market leadership in decarbonization credits ( créditos de descarbonização) , or CBIOs, with a 41% share of the CBIOs in Brazil in the year ended December 31, 2024 according to data from the B3. |
| • | With the aim of supporting our customers in the transition towards a low-carbon economy, we hosted the “Connections for Net Zero Agribusiness” event in partnership with WayCarbon to discuss challenges and solutions for the decarbonization of the Brazilian agribusiness supply chain. We also announced an initiative for Brazilian agricultural producers to invest in decarbonization tools. This initiative, developed in collaboration with Agro Carbon Alliance Brazil, aims to foster more productive and resilient farming. |
| • | In addition, we hosted the “SMEs and the low-carbon future” event, engaging our customers and discussing how data, key performance indicators and sustainability lead to better management and a positive economic impact, along with the role of innovation. |
| • | To reinforce our commitments to climate issues, we joined B20 Brazil’s Task Forces on energy transition, digital transformation, finance & infrastructure, and employment and education. |
| • | We established an important partnership with an automaker to provide app-based drivers with more favorable financing terms. |
| • | We have developed and approved a dedicated risk framework to support assessment and approval of transactions in emerging climate and nature tech and segments by our senior credit risk committee. These transactions rarely fit with existing risk frameworks due to their novel nature and therefore require a dedicated analysis process. |
| • | We issued our first “social bond” in the international market raising R$1.3 billion, which is intended to fund small and medium-sized enterprises in the North and Northeast regions of Brazil, as well as to support our microcredit program. |
| • | Prospera Microfinanças achieved a portfolio of R$3.3 billion (a 10% increase compared to December 31, 2023), serving 1.15 million customers and approximately 1,700 communities in Brazil. We rolled out the “Educate to Prosper” project, which trained approximately 8,595 Prospera Microfinanças supervisors to conduct financial education initiatives, reaching 228,686 people across Brazil. |
| • | For the past 25 years, we have invested in education through Santander Universidades, granting approximately 205,856 scholarships in 2024. We keep promoting access to education by repositioning the Open Academy platform to aid in the development of professional skills and boost the employability of the community, benefiting more than 207,634 people in 2024. |
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| • | We launched the Humanitarian Aid Fund, with the aim of supporting populations affected by crisis situations. Through campaigns, we mobilized R$7.5 million, in addition to collecting clothes and blankets. In 2024, the resources were used to support employees and communities affected by the floods in Rio Grande do Sul. Resources were allocated for the purchase of emergency items such as water, food, and mattresses. Actions were also supported for the reconstruction of houses and public schools. With these resources, micro-entrepreneurs in the region will also be supported. The fund also allocated resources to support the drought situation in the Amazon region, with the purchase of water filters and the training of people to act in fire situations and combat wildfires. |
| • | The pillars of our volunteering program are financial education, professional development and safeguarding the rights of children, teenagers and the elderly. We have provided financial education to teenagers and adults and mentoring for young people, as well as organized a winter clothing campaign, among other volunteering initiatives. |
| • | The Amigo de Valor program, dedicated to safeguarding the rights of children and adolescents in vulnerable situations, reached its 22nd edition. In a joint action between Santander Brasil, employees and customers, we enabled individuals and companies to allocate part of their income tax to municipal funds. We achieved a mobilization of R$25.2 million, with 42% from Santander Brasil itself, 29% from employees, and 29% from clients. This amount will support around 9,342 children and teenagers and their families in 64 municipalities. |
| • | We also have a program that uses a similar social technology: Parceiro do Idoso . The initiative is based on Brazil’s elderly statute which is intended to protect the rights of vulnerable elderly people. Last year, the action raised almost R$18.5 million to execute 47 projects across 19 Brazilian states throughout 2024, benefiting approximately 6,271 elderly people and their families. |
| • | We published our financial education policy. Through the provision of tools, communication processes in the customer journey and product journey, lectures, and courses, more than 228,686 people were impacted by some financial education action. Our financial education portal presents content, guides, and spreadsheets to support financial health. We also engage in community-oriented volunteer activities and various lectures. |
| • | We also have a diverse and independent board of directors, with 45% of members being women and 55% of members being independent as of December 31, 2024. |
In recognition of our environmental, social and governance efforts, we have been awarded “Best International Bank” and “Best Bank for ESG” by Euromoney magazine. We also received the “Best of ESG” award from Exame magazine and we are part of the ISE (Business Sustainability Index) portfolio and Idiversa indices of the B3, Brazil’s main stock exchange. We also were awarded an A- rating by the CDP, the largest database on corporate practices concerning climate change, emissions, water, and forests.
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial services industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal. Together, these financial institutions accounted for 68.2% of the credit and 66.7% of the deposits available in Brazil as of September 30, 2024, according to the Brazilian Central Bank and the interim financial statements of the aforementioned banks.
The following table shows the total loans and deposits of the five leading financial institutions in Brazil as of September 30, 2024:
| Santander Brasil | Bradesco |
Itaú Unibanco |
Banco do Brasil |
Caixa Econômica Federal | Financial System | ||||||
| (in billions of R$) | |||||||||||
| Total loans(1) | 536.0 | 688.4 | 753.9 | 1,050.0 | 1,208.9 | 6,216.2 | |||||
| Total deposits(1) | 490.4 | 612.5 | 984.5 | 595.7 | 594.7 | 4,915.1 | |||||
| (1) | According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 30, 2024). Data as of December 31, 2024 was not available as of the date of this annual report. |
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Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. Substantially all of our branches, affiliates and administrative buildings are insured against losses caused by fire, lightning, explosions and other risks. Such coverage provides for the reimbursement of the costs of asset replacement.
In addition, we also maintain the following insurance policies:
| • | policies against material and/or bodily damage caused to third parties for which we are held responsible; |
| • | policies against financial losses due to fraud or employee misconduct, among others; |
| • | directors’ and officers’ insurance policy for our management against third-party complaints regarding management acts. There are also insurance policies against crimes, employee dishonesty and damages arising out of public offerings; and |
| • | policies against hacker attacks and cybercrimes. |
Dependence 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 our business are registered or applied through the Brazilian Patent and Trademark Office ( 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 to use of the trademark in Brazil for a 10-year period that can be successively renewed for equal periods.
As of the date of this annual report, we own or have a license to use a total of 454 trademarks in Brazil, with Santander Brasil owning over 87 of these trademarks, while the remaining are owned by other companies of the Santander Group.
REGULATION AND SUPERVISION
The basic institutional framework of the Brazilian financial system was established by Law No 4,595/64, as amended from time to time, or the “Banking Reform Law.” The Banking Reform Law created the CMN, responsible for establishing the general guidelines of 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 composed of the president of the Brazilian Central Bank, the Minister of Planning, and the Minister of Finance, who also chairs the 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 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 CMN policies related to foreign currency and credit, the regulation of Brazilian financial institutions, particularly in regard to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out by financial institutions and their financial information. The Brazilian Central Bank addresses specific issues through the COPOM, a committee responsible for adopting measures to meet inflation targets defined by the CMN and establishing monetary policy guidelines. In order to meet inflation targets, the COPOM must set the target for the SELIC rate (the average rate for daily financing, backed by federal instruments, as assessed under the SELIC) and publish reports on the Brazilian economic and financial environment and projections for the inflation rate.
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CVM
The CVM is responsible for the implementation of CMN policies 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, as 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. These self-regulating entities include, among others, the ANBIMA, the ABECS, the FEBRABAN, the Brazilian Association of Publicly-Held Companies ( Associação Brasileira das Companhias Abertas – ABRASCA ) and the 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 administration of third-party funds and 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 Bank. In December 2017, the CMN enacted a new rule establishing that all such requests submitted to the Brazilian Central Bank must be approved within 12 months (subject to suspension of the term in some instances); |
| • | 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. The corporate purpose of such company shall be complementary or subsidiary to the activities carried out by the financial institution; |
| • | Brazilian financial institutions must submit for prior approval by the Brazilian Central Bank the corporate documents that govern their organization and operation, such as capital increases, transfer of headquarters, opening, transfer or closing of branches (whether in Brazil or abroad), election of the members of the statutory bodies and any corporate restructuring or alteration in the composition of their equity control. The requests for changes in control submitted to the Brazilian Central Bank must be approved within 12 months and requests for changes to organizational documents must be approved within three months (in both cases subject to suspension of the term in some instances); |
| • | Brazilian financial institutions must fulfill minimum capital and compulsory deposit requirements and must comply with certain operational limits; |
| • | 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 Bank; |
| • | Brazilian financial institutions must comply with the principles of selectivity, guarantee, liquidity and risk diversification; |
| • | A Brazilian financial institution belonging to the segment one, or “S1” (i.e., banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity), as is our case, cannot lend more than 25% of its Tier 1 regulatory capital ( patrimônio de referência ) to a single person or a group and the maximum exposure to concentrated individual customers or group of connected customers of such Segment 1 financial institution is 600% of its Tier 1 regulatory capital (a concentrated individual client would mean, for the purpose of the proposed rule, any one client to which exposure is equal to or higher than 10% of its Tier 1 regulatory capital); |
| • | According to the Banking Reform Law, a Brazilian financial institution cannot carry out credit transactions with (i) its controlling shareholders, directors and members of other statutory bodies (fiscal, advisory and other) and their respective spouses and relatives up to second degree, (ii) the individuals or legal entities that hold a qualified interest (15% of the capital stock) in their capital, (iii) the legal entities in which they have qualified interest (direct or indirect), (iv) the legal entities in which they have effective operational control or preponderance in the deliberations, regardless of the equity interest, and (v) the legal entities with common directors or members of the board of directors. Such prohibition does not apply, subject to limits and conditions established by the CMN through the enactment of Resolution No. 4,693 in October 2018, to (i) transactions with a counterparty that has an officer or director in common with the financial institution providing credit, provided that the officer or director is considered an independent member in both entities, (ii) transactions carried out under market-compatible conditions, without additional benefits or different benefits when compared to the operations deferred to the institution to other customers with the same profile, (iii) credit operations that have as counterparty a financial institution that is part of the institution prudential conglomerate, provided that they contain contractual clauses of subordination, except in the case of overnight and loan transactions with other financial institutions specified by the law, (iv) the interbank deposits, according to the law, (v) the obligations assumed by related parties under the compensation and settlement services authorized by the Brazilian Central Bank or by the CVM and their respective counterparties and (vi) other cases authorized by the CMN; |
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| • | The management of third-party assets must be segregated from other activities and must follow the regulations issued by the CVM; |
| • | The total amount of funds applied in permanent assets of the financial institutions cannot exceed 50% of their adjusted stockholders’ equity; |
| • | Brazilian financial institutions must comply with anti-money laundering, combating the financing of terrorism and anticorruption regulations; |
| • | 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 regulations; |
| • | Brazilian financial institutions must implement a policy for remuneration of board members and executive officers that is compatible with their risk management policies; and |
| • | The Banking Reform Law and specific regulations enacted by the CMN impose penalties on financial institutions in certain situations where applicable requirements, controls and requisites have not been observed. In addition, the Brazilian Central Bank may cancel the financial institution’s authorization to operate in certain situations. The cancellation of an authorization for operation of a financial institution may only occur upon the establishment and processing of the appropriate administrative proceeding by the Brazilian Central Bank. |
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, or “Basel Committee,” guidelines and other applicable regulations. For this purpose, banks provide the Brazilian Central Bank with any information that it deems useful in performing its supervisory functions, which includes supervising changes in solvency and capital adequacy of banks.
The main principle that guides the directives set forth in the Basel Committee 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 asset ratio. The parameters of this methodology resemble the international framework for minimum capital measurements adopted by Basel III.
Basel III
In 2010, the Basel Committee issued its Basel III framework, which was revised and republished in 2011. The Basel III framework increases minimum capital requirements, creates new conservation and countercyclical buffers, changes risk-based capital measures, and introduces a new leverage limit 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 of core capital and two additional tiers:
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Tier I capital will have to reach a minimum ratio of 6.0% (according to the schedule established by the Brazilian Central Bank), divided into two portions: (i) core capital consisting mainly of corporate capital and profit reserves (shares, units of ownership, reserves and earned income) of at least 4.5%, and (ii) Additional Tier I capital 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 Additional 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 subordinated debts 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.
In accordance with the Basel III standards, the Brazilian Central Bank created the additional core capital buffer (adicional de capital principal), which is composed of 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 buildup 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. 42,457/24). 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 the challenging macroeconomic environment resulting from the COVID-19 pandemic, the CMN issued Resolution No. 4,783 which established a phase-in percentage to be applied to the risk-weighted assets value for the purpose of calculating the capital conservation buffer. This percentage increased gradually until April 2022, when it reached 2.5%. Resolution No. 4,783 was subsequently replaced by Resolution No. 4,955 of October 21, 2021, which maintained the risk weighted asset percentage for the purpose of calculating the capital conservation buffer at 2.5%.
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The chart below shows the evolution of our core capital:
Financial Institutions in Brazil are subject to the capital rules set by CMN Resolutions No. 4,955/2021 and No. 4,958/2021. The Basel III rules also provide for the implementation of a leverage ratio calculated by dividing the Tier I capital by the 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. S1 financial institutions, as is our case, or segment 2, or “S2,” for purposes of the application of prudential rules, are required to maintain a minimum Leverage Ratio (Razão de Alavancagem, or “RA”) of 3% as from January 1, 2018.
In 2015, the CMN and the Brazilian Central Bank also issued a set of rules for the implementation 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 these rules, the largest Brazilian banks were required to maintain an LCR of at least 60% since October 2015. This ratio increased 10% annually until it reached 100% in 2019.
As mentioned above, the LCR is a short-term liquidity ratio for a 30-day stress scenario. It represents the ratio of high-quality liquidity assets to net outflows within the period. High Quality Liquidity Assets are composed mainly of Brazilian federal government bonds and reserve requirements. Net Outflows are mainly composed of losses on deposits, offset in part by Inflows, which are mainly credits.
In November 2017, the CMN also established a minimum limit for the Net Stable Funding Ratio (Índice de Liquidez de Longo Prazo, or “NSFR”) and the 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 the financial institution. The current regulatory minimum is 100%.
Regulation Concerning Credit, Market, and Operational Risk
On March 16, 2022, the Brazilian Central Bank introduced Resolution No. 229, which took effect in July 2023. Aligned with the Basel III framework, this new directive enforces the minimum standard set by the Basel Committee on Banking Supervision (BCBS) for computing the capital requirement associated with credit risk under the standardized approach (RWA CPAD ). This regulation supersedes Brazilian Central Bank Circular No. 3,644, issued on March 4, 2013, in line with the stipulations of the Basel III framework.
The directive introduces a finer granularity to the weights applied to exposures, introducing refinements in the differentiation of credit risk within the prudential framework. It specifically targets financial institutions categorized in Segments 1 (S1), such as us, to Segment 4 (S4) that presently adhere to the standardized approach for credit risk assessment.
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Other Applicable Laws and Regulations
Consolidated Enterprise Level (Conglomerado Prudencial)
Financial institutions must submit to the Brazilian Central Bank, monthly and semiannually, consolidated financial statements based on the “consolidated enterprise level” ( conglomerado prudencial ) of which the financial institution is a member. Such information serves as the basis for calculation of the required regulatory capital of the Brazilian institutions. The “consolidated enterprise level” includes data relative to the financial institutions and other institutions authorized to operate by the Brazilian Central Bank, consortium administrators, 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 S1, S2 or segment three, or “S3” financial institutions 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, Leasing Agreements and Accounting Standards
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.
CMN Resolution No. 4,966/2021 and Resolution No. 4,975/2021 came into effect on January 1, 2025, ensuring a transition period for the institutions subject to the changes.
Furthermore, on March 28, 2023, the Brazilian Central Bank issued Resolution No. 309 (superseded by Resolution No. 352 of November 23, 2023 which has substantially the same purpose of Resolution No. 309 and includes consortium administrators, payment institutions, securities brokers, foreign exchange brokers and securities distribution companies in its scope). Resolution No. 309 establishes accounting procedures to define the components of financial instruments, which constitute payments of principal and interest on the principal value for the purposes of classification of financial assets. It also establishes parameters to measure the expected loss associated with credit risk, including those for setting minimum levels of allowance for expected losses associated with credit risk, among other changes.
Meanwhile, on October 23, 2023, CVM issued Resolution No. 193, which provides that publicly listed companies in Brazil, such as us, investment funds and securitization companies must prepare and disclose, subject to certain requirements, financial information reports related to sustainability and climate in accordance with international standards (IFRS S1 and IFRS S2) issued by the International Sustainability Standards Board, or ISSB. The compliance with such standards will become mandatory as of the fiscal year beginning on January 1, 2026.
Furthermore, on November 21, 2024, the CMN issued Resolution No. 5,185, which established the obligation for financial institutions to disclose the financial information report related to sustainability within their annual consolidated financial statement, in accordance with the International Accounting Standards Board (IASB) and the Brazilian Sustainability Pronouncements Committee (CBPS).
Resolution No. 193 came into effect on November 1, 2023, Resolution No. 5,185 on January 1, 2025, and Resolution No. 352 will come into effect on January 1, 2027 regarding Hedge Accounting.
On December 23, 2024, the CMN and the Brazilian Central Bank issued CMN Resolution No. 5,199 and Central Bank Resolution No. 448, which respectively amend CMN Resolution No. 4,996 and Brazilian Central Bank Resolution No. 352 to establish a transition schedule to incorporate the impacts on regulatory capital due to the new provisioning model set forth under those rules and based on IFRS 9. This transition schedule aligns with the Basel Committee on Banking Supervision (BCBS) recommendations, which allow jurisdictions to phase in the effects on regulatory capital resulting from increased provisions following the adoption of IFRS 9. The rule partially restores regulatory capital that may have been reduced due to the shift to the new provisioning model. The transition will take place from 2025 to 2028 and will apply to all institutions authorized by the Brazilian Central Bank that calculate regulatory capital, including us. This adjustment aims to ensure that the metrics for risk exposure are sensitively managed.
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Segmentation for the Proportional Application of Prudential Regulation
In 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 financial institutions 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.
Furthermore, on June 29, 2023, the CMN issued Resolution No. 5,089, which introduces changes to risk management requirements applicable to financial institutions, such as us. Pursuant to the new rule, country and transfer risks will be considered autonomous risks. Under the new rule, country risk is defined as the possibility of losses associated or incurred due to events related to foreign jurisdictions and transfer risk as the possibility of occurrence of obstacles in the currency conversion of the funds required for the settlement of obligations towards the financial conglomerate if these funds are held in a jurisdiction other than that where the respective settlement will take place. The amendments introduced by Resolution No. 5,089 came into effect on January 1, 2024.
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. |
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Additionally, as from the issuing of Brazilian Central Bank Resolution No. 145 on September 24, 2021, collateral deposit for the new funding mechanism for financial institutions (called Linhas Financeiras de Liquidez ) can be used to deduct up to three percentage points of this type of reserve requirement.
| • | Demand Deposits . As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits. |
| • | Savings Deposit s. The Brazilian Central Bank imposes a reserve requirement of 20% in relation to general savings deposits and to rural savings deposits. |
New Rules Applicable to the Perfection and Enforcement of In Rem Collateral
On October 30, 2023, the President of Brazil approved Bill of Law No. 4,188/2021, leading to the enactment of Law No. 14,711. This legislation brings about significant alterations to the Brazilian legal landscape concerning collateral, with the objective of enhancing legal certainty, reducing interest rates on secured loans, and expanding credit accessibility for borrowers. Its primary objective is to address the existing issue of immobilized capital in the fiduciary sale of real estate, where, prior to this legislation, a property could not be utilized as collateral more than once. Consequently, Law No. 14,711 implements adjustments to Brazilian civil law to tackle this issue, including: (i) permitting a new fiduciary sale over the same property; (ii) extending an existing guarantee to a new debt; and (iii) introducing the figure of the collateral agent into the Brazilian legal framework. Additionally, the new law incorporates various enhancements concerning the perfection and extrajudicial enforcement of collateral, including the modification and repeal of outdated laws, alterations to collateral registration regulations, among other measures.
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% 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% 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 — including government 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.
“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, 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 July 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 Tier 1 regulatory capital. The rule also subjects financial institutions categorized as segment 2, segment 3 or segment 4 to less restrictive rules.
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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 No. 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.
Resolution No. 264/22 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. Resolution No. 264/22 came into effect on December 1, 2022.
Furthermore, on August 24, 2023, the CMN issued Resolution No. 5,094 and the Brazilian Central Bank issued Resolution No. 339, which establish changes related to the issuance, registration, centralized deposit and negotiation of book trade acceptance bills (duplicatas escriturais), such as the establishment of a new settlement system for book trade acceptance bills and the provision to establish a contestation procedure by the bookrunner companies, which must be uniform, documented and with a response period of three days, when referring to the services of the bookrunner companies themselves. In December 2024, a convention regarding the interoperability of the registration and bookkeeping systems applicable to book trade acceptance bills was signed by market participants.
Resolutions No. 5,094 and 339 came into effect on September 1, 2023.
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 de Pagamentos Brasileiro or the “SPB”). The Brazilian Central Bank and CVM (in relation to transactions with securities) have the power to regulate and supervise this 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, 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 Custódia ), 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 Brazilian 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 the year, the ecosystem has the potential to increase market competitiveness and efficiency; lower costs; and enhance customer experience.
On March 3, 2022, the Brazilian Central Bank issued Resolution No. 195/22, which regulates the SPI. Resolution No. 195/22 also approved the regulation with which the direct and indirect participants in the SPI must comply. Brazilian Central Bank Normative Ruling No. 243/22 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 291/22, in turn, establishes the procedures for the adherence to PIX.
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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 clearinghouses 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 hold 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. Resolution No. 195/22 came into effect on April 1, 2022.
On August 12, 2020, the Brazilian Central Bank issued Central Bank Resolution No. 1, or “Central Bank Resolution No. 1/2020,” establishing the PIX System payment arrangement and approving the regulation governing it, or (the “PIX Regulations”).
Pursuant to Central Bank Resolution No. 1/2020, participation in the PIX System is mandatory for financial institutions and payment institutions authorized to operate by the Brazilian 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 is optional for financial institutions and payment institutions that do not meet this threshold, as well as for the National Treasury Secretariat.
The PIX Regulation applies to all PIX System participants. According to the PIX Regulations, 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 clearinghouses, 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.
Brazilian Central Bank Resolution No. 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 customers 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 means of payment. In this case, the PIX transaction is executed for the total amount (purchase + cash withdrawal). The customer’s invoice will show the amount corresponding to the cash withdrawal and the purchase 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 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.
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Pursuant to Resolution No. 142, financial and payment institutions should have implemented, 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 entity’s audit and risk committees (if in place), internal audit unit, executive board and board of directors (if in place).
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. On September 26, 2023, the Brazilian Central Bank issued Resolution No. 342, which came into effect on September 28, 2023, and enhances rules mostly related to safety incidents involving PIX System. The rule mainly refers to communication to data subjects when any incidents involving personal data occurs, as well as the penalties that the institution participating in the PIX System are subject to in cases of noncompliance with technical and regulatory safety requirements.
On July 22, 2024, the Brazilian Central Bank issued Resolution Nos. 402 and 403, aimed at improving the overall security of the PIX payment system. Pursuant to Resolution No. 402, the Central Bank changed the launch date of the Automatic PIX to June 16, 2025. This rule introduced the paying customer’s consent (instead of previous authorization), a PIX rejection obligation in certain circumstances, and different application to the special mechanism for returning automatic PIX transactions. Furthermore, pursuant to Resolution No. 403, transactions can still be initiated from unregistered devices for amounts up to R$200, with a daily limit of R$1,000; however, for transactions that exceed these amounts, the device must be registered in advance by the customer. In addition, under the terms of Resolution No. 403, to further secure fund transactions, the Brazilian Central Bank mandates that PIX participants (such as us) implement a fraud risk management solution that uses security information from the Brazilian Central Bank to identify unusual transactions. In addition to the changes introduced by Resolution No. 403, PIX participants must also provide easily accessible information to customers about fraud prevention measures. Additionally, PIX participants are required to check every six months for fraud markings in the Brazilian Central Bank database, which will influence how they manage clients flagged for fraud risks. Both resolutions came into effect on November 1, 2024.
On December 7, 2023, the Brazilian Central Bank issued Resolution Nos. 361, which amends the PIX sanctions manual to include provisions related to automatic PIX transactions, a new solution within the PIX ecosystem that will permit PIX payments in automatic installments, which may be used, for instance, in online subscription payments.
Open Finance Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open finance. Open finance 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, through a phased-in approach and in a secure, prompt, accurate and convenient manner.
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, (i) financial institutions and prudential conglomerates belonging to the S1 or S2 segments, as is our case, are mandatorily required to fully participate in open finance; and (ii) institutions offering current or payment accounts or payment initiation services are required to mandatorily participate in open finance at least in regards to the sharing of data related to payment initiation services.
On October 29, 2020, the Brazilian Central Bank issued Central Bank Resolution No. 32/2020, which sets forth the technical and operational requirements to be observed by institutions which participate in the Brazilian Open Finance System.
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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 Finance, 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 Finance; (iv) services to be rendered by the Open Finance 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 Finance 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 Finance, to be further detailed by the Open Finance 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.
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.
Phase 4 of Open Finance introduced information sharing beyond traditional banking products and services, marking the beginning of the migration from Open Banking to Open Finance in Brazil.
On October 26, 2023, the CMN and the Brazilian Central Bank issued Joint Resolution No. 7, which came into effect on October 30, 2023, and simplifies the process of renewing consents for data sharing in Open Finance. In order to ease the process for clients, the new rule allows participating institutions, such as us, to offer longer terms than the current 12-month limit for data sharing, while maintaining the provision permitting clients to revoke their consent at any time.
On July 5, 2024, the Brazilian Central Bank and the CMN introduced new open finance regulations aimed at enhancing payment transactions via the PIX system. The regulations (Joint Resolution No. 10 and Brazilian Central Bank Resolutions Nos. 398, 399, and 400) simplify payment initiation processes and facilitate contactless payments. Key changes include a new framework for governance and adjustments to mandatory participation requirements for institutions in the open finance ecosystem. The significant changes include the following: (i) payment initiation service institutions may provide services without redirecting users to different platforms, streamlining contactless payments and improving user experience; (ii) from January 1 st , 2025 on, only institutions with over five million customers will be required to participate in data sharing within the open finance ecosystem, while smaller institutions will be able to opt in voluntarily; and (iii) for payment initiation services, participation will no longer be mandatory for all account-holding institutions; only payment initiation service providers and mandatory PIX participants (such as us) will need to be involved.
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 to test innovative financial and payment projects for a specified period.
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After receiving comments on such Public Consultation, the CMN and the Brazilian Central Bank issued, on November 26, 2020, CMN Resolution No. 4,865/20 and BCB Resolution No. 29/20, to regulate the Sandbox. These rules set forth the applicable conditions for the implementation of the Sandbox, among which are the specific rules for the first cycle of 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 lasted for one year and was extended for a second year through November 2023. As of the date of this annual report, a second cycle still has not commenced.
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. Pursuant to CMN Resolution No. 4,966, 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.
In accordance with the CMN Resolution No. 4,966, credit transactions 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 not scheduled to be reviewed every six months.
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.”
Regulation of the Transfer of Customer Data by Financial Institutions to Database Managers
Brazilian law regulates the formation and consultation of databases with information regarding performance, individuals or legal entities, for the formation of credit history, Resolution No. 4,737 determines that the history of the 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 persons that are part of the control group of the database manager.
Collection of Bank Fees
Bank 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 account 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.
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 customers agree to access and use their accounts by electronic means only (being authorized to charge fees for supplying essential services only when the customer voluntarily elects to obtain personal service at the banks’ branches or customer service locations).
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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 customers a “standardized package” of priority services, whose content is defined, as well as the 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 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.
It is worth pointing out: (i) the prohibition against charging fees in cases of adhesion contract amendments, except in the cases of asset replacement in leasing transactions, early liquidation or amortization, cancellation 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.
Changes to Rules Applicable to Agribusiness Receivables Certificates, Real Estate Receivables Certificates and Other Incentivized Instruments
On February 1, 2024, the CMN introduced changes to the eligible collateral for the issuance of agribusiness receivables certificates (certificados de recebíveis do agronegócio, or “CRA”) and real estate receivables certificates (certificados de recebíveis imobiliários, or “CRI”) through Resolution No. 5,118, dated February 1st, 2024. Similarly, through Resolution No. 5,119, also dated February 1st, 2024, the CMN made adjustments to eligible collateral and maturity periods for agribusiness credit letters (letras de crédito do agronegócio, or “LCA”), real estate credit letters (letras de crédito imobiliárias, or “LCI”), and guaranteed real estate letters (letras imobiliárias garantidas, or “LIG”).
In relation to CRIs and CRAs, Resolution No. 5,118 prohibits that these certificates be backed by debt securities issued by (i) publicly held companies or related parties of such companies, unless the company’s primary business activity is real estate (for CRI) or agribusiness (for CRA); and (ii) financial institutions or other institutions authorized by the Brazilian Central Bank, such as us. The following credit rights are also no longer eligible to back CRIs or CRAs: (i) transactions with related parties (e.g., lease agreements, sale & leaseback agreements within the same group); and (ii) credit rights arising from financial transactions used for expense reimbursement. These adjustments will apply to CRA and CRI issuances from the rule’s publication date onwards and will not affect existing contracts.
Regarding LCAs, starting from July 1, 2024, Resolution No. 5,119 prohibits the use of funds raised through this instrument for rural credit benefiting from Brazilian federal subsidies. Additionally, the CMN now restricts the use of certain credit instruments as collateral, gradually limiting the use of controlled rural credit transactions in LCA collateral until July 1, 2025. The minimum maturity period for LCAs has been extended from 90 days to nine months to encourage longer-term funding.
In terms of LCIs, Resolution No. 5,119 also establishes acceptable real estate credit types as collateral, with a focus on actual real estate transactions, and extends the minimum maturity period for these instruments from 90 days to 12 months, aligning the maturity period with eligible collateral transactions. Similarly, rules applicable to LCIs are extended to LIGs to avoid double tax benefits without new real estate credit origination. These adjustments will apply to LCI and LIG issuances from the CMN’s decision onwards, with existing contracts unaffected by the changes.
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Both resolutions came into effect on February 2, 2024, with the exception of the prohibition of the use of proceeds from LCA issuances for rural credit benefiting from Brazilian federal subsidies, which will apply as of July 1, 2024.
Late Payment Fees
The default payment fees charged by financial institutions, consumer credit companies ( financeiras ) and leasing companies are expressly limited to compensatory interest per day on the amount that is overdue, interest on arrears and fines on arrears.
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 customers.
Revolving credit for financings of credit card bills may only be extended to customers until the due date of the following credit card bill. After this term, financial institutions offer customers another product with conditions more favorable than the ones typically found in the credit card market. Banks are prohibited from offering this type of credit to customers who have already contracted one revolving credit for financing of credit card bills which were not repaid in a timely manner.
Furthermore, Law No. 14,690 was promulgated on October 3, 2023. This law limits the interest rates charged on revolving credit provided in connection with credit cards and other post-paid instrument invoices and ratifies the emergency program for renegotiation of debts of individuals in default depending on the debtor’s category, which in turn depends on the size of the debtor’s debt ( Desenrola Brasil ). In light of the changes introduced by this rule, the CMN and the Brazilian Central Bank issued Resolution No. 5,112 and Resolution No. 365, respectively, on December 21, 2023, establishing: (i) that from January 3, 2024, interest and other financial fees charged over the financing of the outstanding balance of credit card and other post-paid instrument invoices may not exceed the principal amount of the financed debt; (ii) rules related to the portability of credit transactions granted in the context of post-paid payment instrument financings (such as credit cards); and (iii) transparency and financial education measures to be adopted by financial and payment institutions.
Payment Agents and Payment Arrangements
The regulation issued by the Brazilian Central Bank, determines, among other aspects: (i) consumer protection, 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 postpaid 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.
On September 2, 2024, the Brazilian Central Bank launched Public Consultation No. 104 to develop regulations aimed at strengthening centralized risk management frameworks within SPB. The consultation proposes amendments to Brazilian Central Bank Resolution No. 150, of October 2021, focusing on enhancing and standardizing risk management practices across payment networks. In addition to risk management, the new regulations will address concerns related to money laundering, terrorist financing, and the proliferation of weapons of mass destruction. Key proposals in the public consultation include the implementation of centralized settlement systems for sub-acquirers by January 1, 2027, and mandatory risk management elements such as periodic assessments and regular sharing of risk-related information among participants. The Brazilian Central Bank has outlined measures for managing financial risks through stress tests and backtesting, as well as rules ensuring that authorized transactions are fully paid to the end users. Additional responsibilities are placed on acquirers regarding the risk management of transactions processed through sub-acquirers, and new regulations addressing fraud prevention, orderly exit plans, and chargeback liability will also be introduced. According to the proposed rule, payment scheme arrangers (card networks) will have 180 days post-regulation publication to seek authorization for necessary adjustments.
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Portability of Credit Transactions
Financial institutions’ customers can transfer their credit transactions from one institution to another. Such transfers must comply with the specific rules 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
Financial institutions and other institutions authorized to operate by the Brazilian Central Bank may keep in their records digital documents instead of physical documents, provided that certain requirements to ensure the documents’ authenticity and validity are 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 to participate in a group, association or office while being aware that its principal or secondary activities are directed toward the practice of such acts.
The Brazilian Anti-Money Laundering Law also created the Financial Activities Control Council ( Conselho de Controle de Atividades Financeira 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 Brazilian 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.
Financial institutions must 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$100,000.00 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; and (ii) the issuances of cashier’s checks, 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$100,000.00.
Financial institutions must maintain records of all transactions, 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.
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, or “KYC” 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 transactions and situations with indications of suspected money laundering or terrorist funding.
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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 KYC procedures. The CVM also issued CVM Resolution No. 50 on 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.
In 2023, the CMN and the Brazilian Central Bank issued Joint Resolution No. 6 and Resolution No. 343, which established the obligation for financial institutions such as us and other entities authorized by the Brazilian Central Bank to share among each other information about frauds occurred within the National Financial System, and the SPB, subject to the customer’s prior contractual consent. The rule aims to reduce the asymmetry of data and information faced by these institutions to support procedures and controls in their fraud prevention processes, as well as improve their practices. Both resolutions came into effect on November 1, 2023.
Brazilian Anticorruption Law
Law No. 12,846/13 of August 1, 2013, or the “Brazilian Anticorruption 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. The 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 Anticorruption 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 Anticorruption 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 (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.
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 |
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| • | 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 No. 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 governments of Brazil and the United States executed an agreement in 2007, by means of which these governments established rules for the exchange of information relating to tax, 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
Brazil
The LGPD ( Lei Geral de Proteção de Dados) was published in the Federal Official Gazette on August 15, 2018, and was amended by Law No. 13,853/19. The LGPD came into effect in September 2020, except for its 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 No. 8,771/2016).
The LGPD brought 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 data subjects 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. Additionally, the ANPD has also issued additional regulation on several subjects, such as security incident reporting, cross-border transfers and the data protection officer rule.
Violation of the LGPD or ANPD resolutions may result in administrative penalties (in addition to civil liabilities), including among others (i) warnings; (ii) fines up to 2% of the revenue of the company, group or conglomerate in Brazil in the last financial year, capped at R$50.0 million per offense, (iii) daily fines; (iv) disclosure of the offense; (v) blocking of the personal database to which the offense refers, until the processing activity is corrected; (vi) elimination of the personal data to which the offense refers; (vii) partial or total suspension of the operation of the database to which the offense refers for a maximum period of six months, extendable for the same period; (viii) suspension of the processing of personal data to which the infringement refers for a maximum period of six months, extendable for the same period; and (ix) partial or total prohibition of the performance of any activities relating to data processing. Any administrative sanctions will be applied in accordance with Resolution CD/ANPD No. 4/2023. Determining the applicable sanction will depend on: (i) the gravity of the infraction being classified as “light,” “medium” or “high”; and (ii) the ANPD’s understanding of the proportionality of the sanction in relation to the infraction committed.
In addition, other authorities in Brazil can apply the LGPD through administrative procedures or lawsuits. The Department of Consumer Protection and Defense (PROCON) or the Brazilian Public Federal Prosecutor’s Office ( Ministério Público Federal ) responsible for consumer rights, and individuals and nongovernmental or private associations, for example, could file complaints or bring lawsuits based on violations of the LGPD that have caused or may cause harm to individuals.
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Moreover, Law No. 13,853/2019 created the ANPD, which has 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 proceedings; (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.
The ANPD is a government agency subordinated to the Brazilian Ministry of Justice and Public Safety. It is composed of five commissioners, 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.
Other
In addition, we are subject to Regulation (EU) 2016/279 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”). 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. Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the UK General Data Protection Regulation (“UK GDPR”) (i.e., a version of the GDPR as implemented into UK law). While the UK GDPR currently imposes substantially the same obligations as the GDPR, the UK GDPR will not automatically incorporate changes to the GDPR going forward (which would need to be specifically incorporated by the United Kingdom government). Moreover, the United Kingdom government has publicly announced plans to reform the UK GDPR in ways that, if formalized, are likely to deviate from the GDPR, all of which creates a risk of divergent parallel regimes and related uncertainty, along with the potential for increased compliance costs and risks for affected businesses.
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” and “Item 16K. Cybersecurity.”
Auditing Requirements
The legislation and regulations issued by the CMN, CVM and B3 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 with the standards of the Public Company Accounting Oversight Board with regard to IFRS as issued by the IASB, as required by the SEC. For purposes of the financial statements prepared according to Brazilian GAAP, from 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. 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 and 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 legal 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 overseeing authorities.
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As determined by CMN Resolution No. 4,910 of May 27, 2021, independent auditors and the audit committee, 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:
| • | 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 officers of the financial institution must notify the independent auditor and the audit committee if any of the above situations occur. In addition, under the terms of CMN Resolution No. 4,910, the audit committee, when installed, the independent auditor and the internal audit must maintain an immediate communication routine with each other when the situations mentioned above are identified.
CMN Resolution No. 4,910 also requires financial institutions and institutions authorized to operate by the Brazilian Central Bank, which: (i) are registered as publicly-held companies (such as us); and/or (ii) are leaders of a prudential conglomerate or are classified in Segment 1 (S1), Segment 2 (S2) or Segment 3 (S3) (such as us) to create a corporate body designated as the “audit committee,” which we have created. For more information on our 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.
Sustainability 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 in conducting their businesses, their relationship with their customers and other users of their products and services. The responsibility 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 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).
Following Public Consultations Nos. 82, 85 and 86, initiated by the 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 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 ). 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.
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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 sustainability 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 ) 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 the “PRSA.” The new rule provides for the inclusion of a climate aspect to the PRSA, which we refer to as the 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 Climáticas , or the “GRSAC Report”) by financial institutions classified in S1 (such as us), S2, S3 or 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 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 us), S2, S3, or segment four, 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 climate 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 general provisions of CMN Resolution No. 4,945/21 came into effect on July 1, 2022, CMN Resolution No. 4,944/21, article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) and Central Bank Resolution No. 139/21 came into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 came 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.
On November 21, 2024, the CMN issued Resolution No. 5,185, which requires larger financial institutions to prepare and disclose, along with their financial statements, a report of financial information related to sustainability, in accordance with (i) the International Sustainability Standards Board’s IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) pronouncements and (ii) the Brazilian Sustainability Pronouncements Committee’s (CBPS) Technical Pronouncement 01 and 02, on the same matters. The preparation and disclosure of the report is mandatory for institutions that disclose consolidated annual financial statements following the international accounting standard of the International Accounting Standards Board (IASB), including publicly traded companies and leaders of prudential conglomerates in the S1, S2 or S3 segments, such as us. Thus, institutions that voluntarily publish consolidated financial statements must also disclose the sustainability report, which must be ensured by an independent auditor. Resolution No. 5,185 came into force on January 1, 2025 and the disclosure obligation begins in 2026 for institutions registered as a publicly held company or in the S1 or S2 segments, and in 2028 for institutions in the S3 segment and those that voluntarily publish consolidated financial statements, with early voluntary adoption allowed.
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Policy for Succession of Financial Institutions Managers
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. The 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. 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 board of directors and the regulation also assigns to the board the responsibility to ensure the following: adequate management of the compliance policy throughout the institution, its effectiveness and continued application, its communication to all employees and services providers, as well as the dissemination of the integrity and ethical standards as part of the institution’s culture. The board of directors is also responsible for ensuring the application of measures in case of noncompliance, and for providing the necessary means for the activities related to the compliance functions to be adequately conducted.
Consumer Protection
Relationships between consumers and financial institutions are governed by Law No 8,078, dated September 11, 1990, or the “Brazilian Consumer Protection 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 consumers’ rights, including through reverse burden of proof in their favor, and the 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:
| • | to timely provide the necessary information including rights, duties, responsibilities, costs or advantages, penalties and possible risks when carrying out a transaction or rendering a service to allow customers and users free choice and decision-making; |
| • | to timely provide, to the customer or user, agreements, receipts, statements, advice and other documents related to the transactions and services, as well as the possibility of timely cancellation of the agreements; |
| • | formalization of an adequate instrument setting forth the rights and obligations for opening, using and maintaining a postpaid payment account; |
| • | to forward a payment instrument to the customers’ or users’ residence or to enable the respective instrument only upon express request or authorization; and |
| • | 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. |
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Financial 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.
On July 27, 2022, the Brazilian federal government adopted Decree No. 11,150/22, or Decree No. 11,150, which seeks to prevent and foster the repayment and settlement of consumer over-indebtedness. The rule grants consumers certain basic rights, including the right to responsible credit practices, financial education and relief from over-indebtedness situations through debt review and renegotiation. To preserve a consumer’s “existential minimum,” Decree No. 11,150 creates an “existential minimum income” threshold for consumers, which is fixed at R$303.00, or one-quarter of the federal minimum wage that was in effect at the time the decree was adopted. However, the annual adjustment of the minimum wage will not lead to this amount being updated.
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 customers 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.
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 came into effect on March 1, 2022, and Central Bank Resolution No. 155 came into effect on October 10, 2022.
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On October 3, 2023, the President of Brazil approved Law No. 14,690, which ratifies the emergency program for renegotiation of debts of individuals in default depending on debtor category, which in turn depends on the amount of the debtor’s debt ( Desenrola Brasil ). Pursuant to this rule, the CMN and Central Bank issued Resolution No. 5,112 and Resolution No. 365, respectively, establishing other measures to prevent debtor default and consumer over-indebtedness, including rules related to the portability of credit transactions granted in the context of post-paid payment instrument (such as credit cards) financings and rules relating to transparency and disclosure of the total amount of interest and fees charged over post-paid payment instrument financing to consumers, among other matters. Resolution No. 5,112 came into effect on December 26, 2023. However, the provision relating to the limitation on interest rates will be applied to all new financings from January 3, 2024 onward and portability and transparency rules only came into force on July 1, 2024.
Furthermore, on December 26, 2023, the CMN and the Brazilian Central Bank published Joint Resolution No. 8, which requires the institutions authorized to operate by the Brazilian Central Bank to adopt financial literacy measures designed for their clients and natural person users, including individual entrepreneurs, by means of the publication of a financial literacy policy and the provision of financial literacy content and tools in an appropriate language, channel, and timing in order to suit them to the characteristics and needs of clients and users. This rule came into effect on July 1, 2024.
Policy for Relationship with Customers and Users of Financial Products and Services
Financial institutions and other institutions authorized to operate by the Brazilian Central Bank must have a policy governing the relationship with customers and users of financial products and services. 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.
Ombudsman
Financial institutions and other entities that are authorized to operate by the Brazilian Central Bank must have an ombudsman office. An ombudsman office has the following attributes according to the current 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 customer service assistance channel ( Serviço de Atendimento ao Consumidor ); and |
| • | to act as a communication channel between the financial institutions and their customers, including for dispute resolution. |
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. 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.
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 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.
Since August 29, 2019, securities brokers and dealers may loan their own securities to their customers as long as they use the funds as collateral for operations in which the institution itself intermediates. The loan transaction consists of the transfer of assets from the institution: (i) to the customer, in conjunction with the transfer of that asset to the 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 brokers and dealers must appoint a director responsible for the loan operations under consideration.
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Since November 27, 2020, securities brokers and dealers may issue electronic currency and maintain payment accounts.
Virtual Assets and Virtual Asset Service Providers
In Brazil, the virtual asset market is governed by Law No. 14,478/2022, which set the guidelines for the provision of virtual asset services and for the regulation of virtual asset service providers, or “VASPs.” Under Decree No. 11,563/2023, the Brazilian Central Bank is responsible for authorizing, regulating and supervising the entities qualifying as VASPs under Law No. 14,478/2022 – which excludes virtual assets qualifying as securities (among others). As of the date of this annual report, the Brazilian Central Bank has not issued regulations governing the licensing process and other topics involving VASPs in Brazil.
However, on December 14, 2023, the Brazilian Central Bank published Public Consultation No. 97 to gather input from the market for regulating the activities of VASPs, based on Law No. 14,478 of 2022. This questionnaire-style public consultation addresses mainly the following topics: asset segregation and risk management, use of virtual assets in cross-border payments and direct investments, consolidation of activities and virtual asset trading subcontracting of essential services, rules of governance and conduct, cybersecurity, disclosure and customer protection and transition rules.
On November 8, 2024, the Brazilian Central Bank launched Public Consultation Nos. 109 and 110, proposing a regulatory framework for virtual asset services, VASPs and the provision of virtual asset services by other institutions authorized by the Brazilian Central Bank (including multiservice banks and securities broker and dealer firms). Public Consultation 109 focuses on the incorporation and operation of VASPs and regulatory requirements applicable to the offering of virtual asset services by VASPs and other regulated entities, including asset segregation requirements, anti-money laundering rules, and the possibility of engaging foreign custodians. Public Consultation 110 addresses the authorization and licensing process for VASPs, foreign exchange brokerage firms and securities broker and dealer firms.
Furthermore, on November 29, 2024, the Brazilian Central Bank launched Public Consultation No. 111, which aims to regulate VASPs’ operations in the foreign exchange market. This draft rule allows for international payments and transfers using virtual assets as a means of settlement and without involving fiat currency conversions, subject to certain restrictions. The Brazilian Central Bank also sets limits on transactions and requires VASPs to verify the origin of virtual assets from non-resident self-custodied wallets.
The Brazilian Central Bank accepted contributions to the aforementioned public consultations until February 28, 2025.
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 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).
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, overhauls the rules applicable to the Brazilian 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.
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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 or abroad; (v) the exclusion from its scope of foreign currency purchase and sale operations of up to U.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 in which the prohibition of the private offset of credits between residents and nonresidents, as well as payments in foreign currency in Brazil, would not apply.
Law No. 14,286 came into effect on December 30, 2022.
In 2022, the CMN and the Brazilian Central Bank established new guidelines for transactions performed in the foreign exchange market, through the issuance of Resolutions Nos. 277 and 280, of December 31, 2022.
Such rules aim to regulate the New Foreign Exchange Law in respect to the inflow and outflow of Brazilian currency and foreign currency to and from Brazil, repealing and replacing several rules that previously regulated the topic, including Circulars Nos. 3,691 and 3,690 of December 16, 2013. The main changes brought forth by Resolution No. 277 include: (i) enabling authorized institutions, such as us, to carry out foreign exchange transactions in a free format while observing the guidelines established by the Brazilian Central Bank (as opposed to the former rules, which required that authorized institutions execute a standard agreement with clients); (ii) enabling authorized institutions to use their own criteria to request or waive supporting documentation prior to the execution of a foreign exchange transaction, considering the client’s internal risk profile within the institution and the characteristics of the transaction; and (iii) simplifying the process for the classification of foreign exchange transactions, considering that the New Foreign Exchange Law establishes that the purpose shall be made clear by the client (as opposed to the former rules, whereby the classification of the purpose of the transactions was the responsibility of the authorized institutions, which were liable for any inaccuracy). Likewise, Resolution No. 280 establishes the definitions of “resident” and “non-resident” to be applied to individuals and legal entities, which are now materially equivalent to that of a domestic current or payment account.
On December 3, 2024, the Brazilian Central Bank and the CVM issued Joint Resolution No. 13, which establishes a new regulatory framework for foreign investors in the financial and securities markets. The new rule aims to simplify and modernize procedures for non-resident operations in Brazil, enhancing efficiency and aligning with international best practices. The new regulation replaces previous resolutions, including CMN Resolution No. 4,373, of September 29, 2014. The Joint Resolution’s main changes include equalizing minimum registration requirements for resident and non-resident investors, eliminating the need for non-resident individual investors to appoint a representative in Brazil or register with the CVM for certain operations, and expanding the use of non-resident checking or payment accounts for financial investments. Additionally, it removes the requirement for mandatory simultaneous foreign exchange operations for investment conversions and the need to register such investments in the RDE-Portfolio system. These measures aim to provide greater clarity and security for investors, particularly regarding changes in residency. Joint Resolution No. 13 came into effect on January 1, 2025.
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 presidential decree. A presidential 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 nonvoting shares of Brazilian financial institutions traded on a stock exchange or securities depositary receipts offered abroad representing shares without specific authorization.
Following the enactment of Decree No. 10,029, the Brazilian Central 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 No. 10,029/19 being issued it does not affect its operations in Brazil.
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.
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Bank Correspondents
Financial institutions are allowed to provide specific services to 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 revoked 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 be 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 customers.
CMN Resolution No. 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.
On January 3, 2023, the Brazilian Central Bank published Normative Ruling No. 342, which amended Normative Ruling No. 299/22 and provides procedures, documents, terms and necessary information for requests related to the participation of financial institutions, such as us, on other companies’ corporate capital; and establishment of branches abroad. This new rule came into force on its publication date.
Cayman Islands Banking Regulation
We have a branch in the Cayman Islands with its own staff and representative officers, Banco Santander (Brasil) S.A. – Grand Cayman Branch 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 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 .
Our Grand Cayman 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 with Brazil. The results of the operations of the Grand Cayman Branch are consolidated in our consolidated financial statements.
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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, irrespective 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, 2024, CI$1 was equivalent to R$7.4831 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 April 5, 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 June 26, 2013 on prudential requirements for credit institutions and investment firms apply to it.
U.S. Financial Regulatory Reform
Santander Brasil is a subsidiary of Santander Spain, a foreign banking organization, or “FBO,” with operations in the United States. As a subsidiary of Santander Spain, Santander Brasil is subject to certain U.S. financial regulatory laws and rules. In addition to regulations, the U.S. financial regulatory agencies may issue policy statements, interpretive letters and similar written guidance.
Financial regulatory statutes and rules are continually under review by the U.S. Congress and U.S. financial regulatory agencies. Under the current U.S. administration, 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, including due to any changes to the U.S. administration resulting from the 2024 U.S. presidential election, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously.
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Volcker Rule
Owing to its status as a subsidiary of an FBO, Santander Brasil is subject to Section 13 of the U.S. Bank Holding Company Act and its implementing rules (collectively, the “Volcker Rule”). The Volcker Rule prohibits “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. The Group 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 contains exclusions and certain exemptions for, among others, market-making, hedging, underwriting, trading in U.S. government and agency obligations and 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. Santander Spain’s non-U.S. banking 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.
Santander Spain will continue to monitor Volcker Rule-related developments and assess their impact on its operations, including those of Santander Brasil, as necessary.
Other U.S. Financial Regulations
Santander Spain is subject to other U.S. financial regulatory regimes that do not directly apply to Santander Brasil based on the current scope of its operations. For example, Santander Spain, as a Category IV FBO, and Santander Holdings USA, Santander Spain’s U.S. intermediate holding company, or “IHC,” as a Category IV IHC, are subject to enhanced prudential standards imposed by the Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” on large banking organizations that exceed certain asset thresholds. Enhanced prudential standards include risk-based and leverage capital requirements, liquidity requirements, risk management and governance requirements, capital planning and stress testing requirements, resolution planning requirements, and risk management requirements. Category IV institutions are subject to the least exacting level of enhanced prudential standards.
In addition, Santander Spain is provisionally registered as a non-US swap dealer with the CFTC and is conditionally registered as a non-US security-based swap dealer with the SEC. As such, Santander Spain is subject to certain clearing, exchange trading, uncleared swap margin, business conduct, reporting and other requirements.
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 Exchange Act, is subject to the U.S. Foreign Corrupt Practices Act, 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 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, the Office of Foreign Assets Control, or “OFAC”), the UN Security Council, the European Union or His Majesty’s Treasury. OFAC is responsible for administering economic sanctions imposed against designated foreign countries, governments, individuals and entities pursuant to various Executive Orders, statutes and regulations.
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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 imposed various sanctions that prevent non-U.S. persons, including non-U.S. financial institutions from engaging in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”). If a non-U.S. financial institution were determined to have engaged in activities targeted by certain U.S. secondary 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.
Antitrust Regulation
According to the Brazilian antitrust law, actions that 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$60,000 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 No. 6,024 of March 13, 1974, or “Law No. 6,024,” which establishes the applicable provisions in the event of intervention or extrajudicial liquidation by the Brazilian Central Bank, as well as to bankruptcy proceedings.
Intervention and extrajudicial 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 |
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| • | 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 extrajudicial liquidation or bankruptcy of the entity is ordered.
Intervention may also be ordered upon the request of a financial institution’s management.
Extrajudicial Liquidation
Extrajudicial 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 place a financial institution in extrajudicial liquidation if:
| • | 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 90 days or, if initiated, the Brazilian Central Bank determines that the pace of the liquidation may harm the institution’s creditors. |
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 extrajudicial 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.
Extrajudicial 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 No. 6,024/74, which is a less severe form of the Brazilian Central Bank intervention in private and nonfederal public financial institutions that allows institutions to continue to operate normally. The RAET may be ordered in the case of an institution that:
| • | continually enters into recurrent operations that are against economic or financial policies set forth in federal law; |
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| • | 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.
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, spinoff, amalgamation or transfer of the controlling interest of the financial institution, (iii) decision by the Brazilian Central Bank, or (iv) declaration of extrajudicial liquidation of the financial institution.
Bankruptcy Law
Law No. 11,101, 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 extrajudicial liquidation regimes described above.
On December 24, 2020, Law No. 14,112, or “Law No. 14,112/20,” was passed. Law No. 14,112/20 overhauls the current Bankruptcy Law in several material aspects. Law No. 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 creditors 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 No. 14,112/20 replicates, with some adjustments, the provisions of the UNCITRAL Model Law on Cross-Border Insolvency. As a result, Law No. 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 No. 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 No. 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 extrajudicial liquidation or bankruptcy of a financial institution, creditors are paid pursuant to their priorities and privileges. Prepetition 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.
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Recovery Plans for Systematically Important Financial Institutions
Systemically important Brazilian financial institutions must implement a recovery plan ( plano de recuperação ), with the aim of reestablishing adequate levels of capital and liquidity and to preserve the viability of such institutions. The 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.
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.
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 whose 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 No. 13,506 of November 13, 2017 or “Law No. 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 No. 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.
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Issuance of Credit Instruments Electronically
Law No. 13,986/2020, 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.
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 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.
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 No. 4,771.
Taxation
Corporate Income Tax and Social Contribution Tax
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% for banks, 15.0% for other financial institutions except banks and 9.0% for most other Brazilian legal entities, after adjustments determined by the tax legislation.
Deferred tax assets and liabilities are measured 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.
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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.
IRPJ and CSLL on Foreign Exchange Variation of Hedges for Investments Held Abroad
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, as of 2022, 100% of the exchange rate variation will be considered as taxable.
Tax on Services
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 the company, to the municipality where the service renderer is located. The rates vary from 2% to 5% and depend on the nature of the service.
On December 30, 2016, Complementary Law No. 157/2016 was enacted. This legislation establishes a minimum rate of 2% for these types of taxes, no reductions or deductions being 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) consortiums (“ consórcios ”).
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 came into force.
On March 23, 2018, the Brazilian Supreme Court suspended the application of the 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 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.
In June 2023, the Brazilian Supreme Court declared the provisions of Complementary Law No. 157/2016 and Complementary Law No. 175/2020 unconstitutional, maintaining the payment of ISS at the service provider’s headquarters.
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 certain revenues net of certain 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, which is defined as the total revenues earned by the legal entity, net of certain expenses, such as funding costs.
Nonfinancial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to noncumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
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Financial income from nonfinancial companies is taxed at the rate of 0.65% and 4%, respectively, pursuant Decree No 8,426/2015.
Tax on Financial Transactions
The IOF tax is a tax levied on credit, currency exchange, insurance and securities transactions. It is imposed on the following transactions and at the following rates.
| Transaction (1) |
Maximum Legal Rate |
Current Rate | ||||
| Credit extended by financial institutions and nonfinancial entities | 1.5% or 3% | 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. | ||||
| 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 receivables (CRI/CRA). | ||||||
| 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 No. 8,731/2016). | ||||||
| 0% on the assignment of securities to permit the issuance of Depositary Receipts abroad. | ||||||
| Transactions relating to derivatives | 25% | Although the maximum rate is 25%, it has been reduced to 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). | ||||
| 3.38% on credit card transactions as from January 2, 2025 | ||||||
| 3.38% on withdrawals abroad using credit or debit cards as from January 2, 2025. | ||||||
| 3.38% on purchase of traveler’s checks or loading of international prepaid card as from January 2, 2025. | ||||||
| 0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings. | ||||||
| 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 equal or less than 180 days. | ||||||
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| Transaction (1) |
Maximum Legal Rate |
Current Rate | ||||
| 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 Brazilian Depositary Receipts (“BDRs”). | ||||||
| 0% for simultaneous exchange transactions, for the inflow of funds by foreign investors derived from the conversion of direct investments in Brazil made pursuant to Law 4,131/62 into investments in stock tradable in stock exchanges, as from May 2, 2016. | ||||||
| 0% for revenues related to the export of goods and services transactions. | ||||||
|
The applicable rate is 1.10% for acquisitions of foreign currency (Decree No. 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. |
Pursuant to Decree No. 10,997/2022, the Brazilian government will gradually reduce, each year, the IOF, levied on exchange operations, rates with the reduction to zero for all currency exchange operations form 01.01.2029. In addition, external loan and financing operations, including through the issuance of titles, had the rate reduced to zero, as of March 31, 2022, regardless of the term of the operation.
FATCA
The Foreign Account Tax Compliance Act, or “FATCA,” became law in the United States on March 18, 2010. The legislation requires foreign financial institutions, or “FFIs,” (such as Santander Brasil) to enter into an FFI agreement under which they agree to identify and provide the U.S. Internal Revenue Service, 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 accounts to the IRS.
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On September 23, 2014, Brazil and the United States announced that they entered into an intergovernmental agreement, or “IGA,” which became effective in Brazil by virtue of Decree No. 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. 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 Cooperation 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 the e-Financeira pursuant to Normative Ruling No. 1,571, dated July 2, 2016.
On the same date, the Normative Ruling No. 1681 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, 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.
Income Tax Levied on Capital Gains
Law No. 13,259, of March 16, 2016 or “Law No. 13,259/16” 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. Under Law No. 13,259/16, the income tax rates applicable to capital gains realized by these investors would be: (i) 15% for the portion of 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.
The provisions of Law No. 13,259/16 may apply to Non-Resident Holders pursuant to Joint Resolution No. 13, 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 Joint Resolution No. 13 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%.
Most transactions carried out by Non-Resident Holders pursuant to Joint Resolution No. 13 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.
Disclosure Pursuant to Section 219 of the Iran Threat 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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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 the Santander Group and its affiliates. During the period covered by this report:
| (a) | Santander UK holds 10 blocked accounts for seven 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, 2024 were negligible relative to the overall profits of Banco Santander S.A. |
| (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 United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by the Belgian branch on these accounts in the year ended December 31, 2024. |
| (c) | Santander Brasil holds three blocked accounts for three customers with domicile in Brazil designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander Brasil on these accounts in the year ended December 31, 2024 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 United States 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, 2024 which were negligible relative to the overall revenues and profits of Banco Santander, 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.
SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes 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 as of and for the years ended December 31, 2024, 2023 and 2022 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.”
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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—Net Interest 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 90 days past due. All our non-accrual loans are included in the table below under “—Other assets.”
| For the Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| 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 | 209,729 | 17,990 | 8.6 % | 163,324 | 13,808 | 8.5 % | 88,740 | 10,202 | 11.5 % | ||||||||
| Domestic | 189,265 | 16,235 | 8.6 % | 150,737 | 12,744 | 8.5 % | 76,131 | 8,752 | 11.5 % | ||||||||
| International | 20,464 | 1,755 | 8.6 % | 12,587 | 1,064 | 8.5 % | 12,609 | 1,450 | 11.5 % | ||||||||
| Loans and amounts due from credit institutions | 19,737 | 2,993 | 15.2 % | 31,968 | 2,235 | 7.0 % | 71,836 | 2,722 | 3.8 % | ||||||||
| Domestic | 11,141 | 1,689 | 15.2 % | 31,560 | 2,206 | 7.0 % | 71,329 | 2,703 | 3.8 % | ||||||||
| International | 8,596 | 1,303 | 15.2 % | 408 | 29 | 7.0 % | 507 | 19 | 3.7 % | ||||||||
| Of which: | |||||||||||||||||
| Reverse repurchase agreements | 3,122 | 1,403 | 44.9 % | 77,755 | 10,145 | 13.0 % | 49,357 | 7,198 | 14.6 % | ||||||||
| Domestic | 3,122 | 1,403 | 44.9 % | 77,755 | 10,145 | 13.0 % | 49,357 | 7,198 | 14.6 % | ||||||||
| International | — | — | — | — | — | — | — | — | — | ||||||||
| Loans and advances to customers | 575,095 | 75,859 | 13.2 % | 539,293 | 81,331 | 15.1 % | 503,548 | 73,596 | 14.6 % | ||||||||
| Domestic | 575,095 | 75,859 | 13.2 % | 539,293 | 81,331 | 15.1 % | 503,548 | 73,596 | 14.6 % | ||||||||
| International | — | — | — | — | — | — | — | — | — | ||||||||
| Debt instruments | 259,262 | 29,501 | 11.4 % | 225,184 | 24,195 | 10.7 % | 213,647 | 22,002 | 10.3 % | ||||||||
| Domestic | 259,262 | 29,501 | 11.4 % | 225,184 | 24,195 | 10.7 % | 213,647 | 22,002 | 10.3 % | ||||||||
| International | — | — | — | — | — | — | — | — | — | ||||||||
| Other interest–earning assets | — | 10,840 | — | — | 6,714 | — | — | 6,703 | — | ||||||||
| Total interest–earning assets | 1,063,823 | 137,183 | 12.9 % | 959,769 | 128,283 | 13.4 % | 877,771 | 115,225 | 13.1 % | ||||||||
| Equity instruments | 4,131 | 38 | 0.9 % | 7,319 | 22 | 0.3 % | 2,807 | 38 | 1.4 % | ||||||||
| Investments in associates | 6,452 | — | — | 1,702 | — | — | 1,593 | — | — | ||||||||
| Total earning assets | 1,074,406 | 137,221 | 12.8 % | 968,790 | 128,305 | 13.2 % | 882,171 | 115,263 | 13.1 % | ||||||||
| Cash and balances with the Brazilian Central Bank | 3,893 | — | — | 4,243 | — | — | 4,371 | — | — | ||||||||
| Loans and amounts due from credit institutions | 6,628 | — | — | (5,904) | — | — | (6,136) | — | — | ||||||||
| Impairment losses | (34,296) | — | — | (33,759) | — | — | (31,665) | — | — | ||||||||
| Other assets | 95,325 | — | — | 86,861 | — | — | 78,870 | — | — | ||||||||
| Tangible assets | 6,461 | — | — | 7,678 | — | — | 8,346 | — | — | ||||||||
| Intangible assets | 32,811 | — | — | 31,897 | — | — | 31,084 | — | — | ||||||||
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| For the Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | |||||||||
| (in millions of R$, except percentages) | |||||||||||||||||
| Average total assets | 1,185,228 | 137,221 | 11.6 % | 1,059,806 | 128,305 | 12.1 % | 967,041 | 115,263 | 11.9 % | ||||||||
| Liabilities and Interest Expense | |||||||||||||||||
| Deposits from the Brazilian Central Bank and Deposits from credit institutions | 144,018 | 8,905 | 6.2 % | 119,347 | 9,828 | 8.2 % | 120,512 | 6,737 | 5.6 % | ||||||||
| Domestic | 88,767 | 5,489 | 6.2 % | 112,384 | 9,257 | 8.2 % | 108,490 | 6,064 | 5.6 % | ||||||||
| International | 55,251 | 3,416 | 6.2 % | 6,963 | 571 | 8.2 % | 12,022 | 673 | 5.6 % | ||||||||
| Of which: | |||||||||||||||||
| Repurchase agreements | 48,507 | 6,622 | 13.7 % | 80,671 | 9,797 | 12.1 % | 87,567 | 11,197 | 12.8 % | ||||||||
| Domestic | 48,507 | 6,622 | 13.7 % | 80,671 | 9,797 | 12.1 % | 87,567 | 11,197 | 12.8 % | ||||||||
| International | — | — | — | — | — | — | — | — | — | ||||||||
| Customer deposits | 550,902 | 58,470 | 10.6 % | 491,140 | 48,544 | 9.9 % | 438,846 | 38,509 | 8.8 % | ||||||||
| Domestic | 533,277 | 56,599 | 10.6 % | 472,250 | 46,677 | 9.9 % | 430,942 | 37,815 | 8.8 % | ||||||||
| International | 17,625 | 1,871 | 10.6 % | 18,890 | 1,867 | 9.9 % | 7,904 | 694 | 8.8 % | ||||||||
| Of which: | |||||||||||||||||
| Repurchase agreements | 59,299 | — | — | 14,432 | — | — | 4,974 | — | — | ||||||||
| Marketable debt securities(1) | 131,876 | 3,778 | 2.9 % | 128,389 | 4,999 | 3.9 % | 94,612 | 6,952 | 7.3 % | ||||||||
| Domestic | 131,876 | 3,778 | 2.9 % | 128,389 | 4,999 | 3.9 % | 94,612 | 6,952 | 7.3 % | ||||||||
| International | — | — | — | — | — | — | — | — | — | ||||||||
| Subordinated debts | 22,503 | 2,523 | 11.2 % | 20,037 | 1,926 | 9.6 % | 19,086 | 1,676 | 8.8 % | ||||||||
| Domestic | 14,943 | 2,027 | 13.6 % | 8,259 | 1,146 | 13.9 % | 5,930 | 813 | 13.7 % | ||||||||
| International | 7,560 | 496 | 6.6 % | 11,778 | 780 | 6.6 % | 13,156 | 863 | 6.6 % | ||||||||
| Other interest-bearing liabilities | — | 6,828 | — | — | 16,102 | — | — | 14,661 | — | ||||||||
| Total interest-bearing liabilities | 849,299 | 80,504 | 9.5 % | 758,913 | 81,399 | 10.7 % | 673,056 | 68,535 | 10.2 % | ||||||||
| Noninterest bearing demand deposits | 32,575 | — | — | 32,184 | — | — | 34,524 | — | — | ||||||||
| Other liabilities | 182,885 | — | — | 156,002 | — | — | 151,417 | — | — | ||||||||
| Non-controlling interests | 607 | — | — | 458 | — | — | 431 | — | — | ||||||||
| Stockholders’ Equity | 119,862 | — | — | 112,249 | — | — | 107,613 | — | — | ||||||||
| Total average liabilities and equity | 1,185,228 | 80,504 | 6.8 % | 1,059,806 | 81,399 | 7.7 % | 967,041 | 68,535 | 7.1 % | ||||||||
| (1) | In the year ended December 31, 2023, we revised the definition of marketable debt securities to include the line items “Financial liabilities measured at fair value in income held for trading” and “Financial liabilities at amortized cost,” instead of only including “Financial liabilities at amortized cost.” The amounts presented as of December 31, 2024, 2023 and 2022 reflect this change. |
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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, 2024, compared to the year ended December 31, 2023, and for the year ended December 31, 2023 compared to the year ended December 31, 2022. 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 2024/2023 | For the Years Ended 2023/2022 | ||||||||||
| Increase (decrease) due to changes in | |||||||||||
| Volume | Rate | Net change | Volume | Rate | Net change | ||||||
| (in millions of R$) | |||||||||||
| Interest and Similar Income | |||||||||||
| Interest-earning assets | |||||||||||
| Cash and balances with the Brazilian Central Bank | 3,977 | 205 | 4,182 | 6,849 | (3,243) | 3,606 | |||||
| Domestic | 3,302 | 189 | 3,491 | 6,852 | (2,860) | 3,992 | |||||
| International | 675 | 16 | 691 | (3) | (383) | (386) | |||||
| Loans and amounts due from credit institutions | (1,102) | 1,860 | 758 | (2,017) | 1,530 | (487) | |||||
| Domestic | (2,307) | 1,790 | (517) | (2,013) | 1,516 | (497) | |||||
| International | 1,205 | 69 | 1,274 | (4) | 14 | 10 | |||||
| Loans and advances to customers | 5,165 | (10,637) | (5,472) | 5,339 | 2,396 | 7,735 | |||||
| Domestic | 5,165 | (10,637) | (5,472) | 5,339 | 2,396 | 7,735 | |||||
| International | — | — | — | — | — | — | |||||
| Debt instruments | 3,817 | 1,489 | 5,306 | 1,217 | 976 | 2,193 | |||||
| Domestic | 3,817 | 1,489 | 5,306 | 1,217 | 976 | 2,193 | |||||
| International | — | — | — | — | — | — | |||||
| Other interest-earning assets | 4,126 | — | 4,126 | 11 | — | 11 | |||||
| Total interest-earning assets | 15,983 | (7,083) | 8,900 | 11,399 | 1,659 | 13,058 | |||||
| Equity Instruments | (13) | 29 | 16 | 29 | (45) | (16) | |||||
| Total earning assets | 15,970 | (7,054) | 8,916 | 11,428 | 1,614 | 13,042 | |||||
| Interest Expense and Similar Charges | |||||||||||
| Interest-bearing liabilities | |||||||||||
| Deposits from the Brazilian Central Bank and Deposits from credit institutions | 1,297 | (2,220) | (923) | (66) | 3,157 | 3,091 | |||||
| Domestic | (1,725) | (2,043) | (3,768) | 280 | 2,913 | 3,193 | |||||
| International | 3,022 | (177) | 2,845 | (346) | 244 | (102) | |||||
| Customer deposits | 6,178 | 3,748 | 9,926 | 4,870 | 5,165 | 10,035 | |||||
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| For the Years Ended 2024/2023 | For the Years Ended 2023/2022 | ||||||||||
| Increase (decrease) due to changes in | |||||||||||
| Volume | Rate | Net change | Volume | Rate | Net change | ||||||
| (in millions of R$) | |||||||||||
| Domestic | 6,307 | 3,615 | 9,922 | 3,794 | 5,068 | 8,862 | |||||
| International | (129) | 133 | 4 | 1,076 | 97 | 1,173 | |||||
| Marketable debt securities(1) | 132 | (1,353) | (1,221) | 1,978 | (3,931) | (1,953) | |||||
| Domestic | 132 | (1,353) | (1,221) | 1,978 | (3,931) | (1,953) | |||||
| International | — | — | — | — | — | — | |||||
| Subordinated liabilities | 630 | (33) | 597 | 86 | 164 | 250 | |||||
| Domestic | 907 | (26) | 881 | 177 | 156 | 333 | |||||
| International | (277) | (7) | (284) | (91) | 8 | (83) | |||||
| Other interest-bearing liabilities | (9,274) | — | (9,274) | 1,441 | — | 1,441 | |||||
| Total interest-bearing liabilities | (1,037) | 142 | (895) | 8,309 | 4,555 | 12,864 | |||||
| (1) | In the year ended December 31, 2023, we revised the definition of marketable debt securities to include the line items “Financial liabilities measured at fair value in income held for trading” and “Financial liabilities at amortized cost,” instead of only including “Financial liabilities at amortized cost.” The amounts presented as of December 31, 2024, 2023 and 2022 reflect this change. |
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Assets
Earning Assets – Net Interest Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net interest margin and net interest spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$, except percentages) | |||||
| Average earning assets | 1,063,823 | 959,769 | 877,771 | ||
| Domestic | 1,034,763 | 946,774 | 864,655 | ||
| International | 29,060 | 12,995 | 13,116 | ||
| Interest and dividends on equity securities(1) | 137,221 | 128,305 | 115,263 | ||
| Domestic | 134,162 | 127,212 | 113,794 | ||
| International | 3,059 | 1,093 | 1,469 | ||
| Net interest income(2) | 56,717 | 46,906 | 46,728 | ||
| Domestic | 57,571 | 47,164 | 46,795 | ||
| International | (854) | (258) | (67) | ||
| Gross yield(3)(*) | 12.9 % | 13.4 % | 13.1 % | ||
| Domestic | 13.0 % | 13.4 % | 13.2 % | ||
| International | 10.5 % | 8.4 % | 11.2 % | ||
| Net interest margin(4)(*) | 5.3 % | 4.9 % | 5.3 % | ||
| Domestic | 5.6 % | 5.0 % | 5.4 % | ||
| International | (2.9) % | (2.0) % | (0.5) % | ||
| Net interest spread(5)(*) | 3.3 % | 2.5 % | 2.9 % | ||
| Domestic | 3.1 % | 2.5 % | 2.8 % | ||
| International | 4.3 % | 1.2 % | 5.1 % | ||
| (*) | 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) | Net interest income (Including equity instruments). |
| (3) | Gross yield is the amount of “Interest and dividends on equity securities” divided by “Average earning assets.” |
| (4) | Net interest margin is the amount of “Net interest income” divided by “Average earning assets.” |
| (5) | Net interest spread is the difference between the average rate of “Total earning asset” and the average rate of “Total interest-bearing liabilities.” |
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Return on Equity and Assets
The following table presents our selected financial ratios for the periods indicated.
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| ROA: Return on average total assets | 1.1 % | 0.9 % | 1.5 % | ||
| ROE: Return on average stockholders’ equity | 11.2 % | 8.5 % | 13.3 % | ||
| ROE (adjusted)(1) | 14.6 % | 11.3 % | 18.0 % | ||
| Average stockholders’ equity as a percentage of average total assets | 10.1 % | 10.6 % | 11.1 % | ||
| Payout(2) | 44.7 % | 65.3 % | 56.5% | ||
| (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 2008, Getnet and Super, both in 2014, and Banco Olé, 60%, and the remaining 40% in 2020. See “Item 3. Key Information—A. Selected Financial Data—Selected Consolidated Ratios” for a reconciliation of “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” to “Return on average stockholders’ equity.” |
| (2) | Dividend payout ratio (dividends declared per share divided by net income per 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, | |||||
| 2024 | 2023 | 2022 | |||
| Cash and balances with the Brazilian Central Bank | 19.7 % | 17.0 % | 10.1 % | ||
| Domestic | 17.8 % | 15.7 % | 8.7 % | ||
| International | 1.9 % | 1.3 % | 1.4 % | ||
| Loans and amounts due from credit institutions | 1.9 % | 3.3 % | 8.2 % | ||
| Domestic | 1.0 % | 3.3 % | 8.1 % | ||
| International | 0.8 % | — % | 0.1 % | ||
| Loans and advances to customers | 54.1 % | 56.2 % | 57.4 % | ||
| Domestic | 54.1 % | 56.2 % | 57.4 % | ||
| International | — | — | — | ||
| Debt instruments | 24.4 % | 23.5 % | 24.3 % | ||
| Domestic | 24.4 % | 23.5 % | 24.3 % | ||
| International | — | — | — | ||
| Total interest-earning assets | 100 % | 100 % | 100 % | ||
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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.
Investment Securities
As of December 31, 2024 and 2023, the book value of investment securities was R$287 billion and R$248 billion, respectively (representing 23.2% and 22.2%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$191 billion, or 66.4%, and R$149 billion, or 60.0% of our investment securities as of December 31, 2024 and 2023, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:
| As of December 31, 2024 | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$) | |||||
| Debt securities | |||||
| Government securities—Brazil | 190,643 | 148,750 | 142,749 | ||
| Debentures and promissory notes | 70,450 | 49,083 | 28,251 | ||
| Other debt securities | 23,080 | 46,581 | 31,913 | ||
| Total domestic/debt securities | 284,173 | 244,415 | 202,913 | ||
| Equity securities | |||||
| Shares of Brazilian companies | 2,048 | 1,956 | 1,459 | ||
| Shares of foreign companies | 55 | 99 | 60 | ||
| Investment fund units and shares | 886 | 1,383 | 1,120 | ||
| Total equity securities | 2,988 | 3,438 | 2,639 | ||
| Total investment securities | 287,162 | 247,853 | 205,551 | ||
As of December 31, 2024 and 2023, we held no securities of single issuers or related groups of companies whose aggregate book or market value exceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented 159.1% and 129.5%, respectively, of our stockholders’ equity. As of December 31, 2024 and 2023, the total value of our debt securities was approximately 237.2% and 212.8%, 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, 2024. 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 millions of R$) | |||||||||
| Debt securities: | |||||||||
| Government securities—Brazil (1) | — | — | — | 1,206 | 1,206 | ||||
| Other debt securities(2) | 34,605 | 33,455 | 11,679 | 3,585 | 83,324 | ||||
| Total debt investment securities | 34,605 | 33,455 | 11,679 | 4,791 | 84,529 | ||||
| (1) | Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and NTN-F). |
| (2) | Includes balances of debentures and promissory notes. |
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The average rate for debt investment securities is 10.74%.
Investment Portfolio – Yields
The following table shows the balances and weighted-average yields for our debt securities not carried at fair value through earnings, for each range of maturities, as of December 31, 2024. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2024. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
| Maturing within 1 year | Yield within 1 year | Maturing between 1 and 5 years | Yield between 1 and 5 years | Maturing between 5 and 10 years | Yield between 5 and 10 years | Maturing after 10 years | |||||||||
| (in millions of R$, except percentages) | |||||||||||||||
| % | % | % | % | ||||||||||||
| Weighted-average yields | |||||||||||||||
| Domestic: | |||||||||||||||
| Brazilian Government | 29,356 | 9.6 | 32,460 | 10.8 | 12,670 | 7.3 | 17,286 | 8.1 | |||||||
| Other fixed-income securities | 26,701 | 12.2 | 23,377 | 11.9 | 10,651 | 10.9 | 2,335 | 9.5 | |||||||
| Impaired financial assets | 12 | 12.2 | 861 | 11.9 | 266 | 10.9 | 538 | 9.5 | |||||||
| Impairment losses | — | — | — | — | — | — | — | — | |||||||
| Total domestic | 56,069 | 10.9 | 56,698 | 11.3 | 23,587 | 9.1 | 20,159 | 8.8 | |||||||
| International: | |||||||||||||||
| Foreign government | 2,071 | 11.3 | — | — | — | — | — | — | |||||||
| Other fixed-income securities | 9,371 | 11.5 | — | — | — | — | — | — | |||||||
| Impaired financial assets | — | — | — | — | — | — | — | — | |||||||
| Impairment losses | — | — | — | — | — | — | — | — | |||||||
| Total international | 11,442 | 11.4 | — | — | — | — | — | — | |||||||
| Total weighted-average yields | 11.1 | 11.3 | 9.1 | 8.8 | |||||||||||
Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.
| As of December 31, | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
| Domestic Currency | Foreign Currency | Domestic Currency | Foreign Currency | Domestic Currency | Foreign Currency | ||||||
| (in millions of R$) | |||||||||||
| Assets: | |||||||||||
| Cash and balances with the Brazilian Central Bank | 14,584 | 22,500 | 8,959 | 14,164 | 11,346 | 10,657 | |||||
| Debt instruments | 264,754 | 19,419 | 229,282 | 15,132 | 185,814 | 17,098 | |||||
| Loans and amounts due from credit institutions | 27,298 | 2,879 | 23,877 | 1,839 | 19,784 | 929 | |||||
| Loans and advances to customers | 482,117 | 83,973 | 444,022 | 73,955 | 416,127 | 74,503 | |||||
| Equity Instruments | 2,176 | 166 | 2,728 | 102 | 2,582 | 57 | |||||
| Total assets | 790,929 | 128,938 | 708,868 | 105,192 | 635,653 | 103,244 | |||||
| Liabilities: | |||||||||||
| Financial Liabilities at amortized cost: | |||||||||||
| Deposits from the Brazilian Central Bank and Deposits from credit institutions | 72,494 | 86,072 | 49,475 | 69,037 | 59,366 | 56,713 | |||||
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| As of December 31, | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
| Domestic Currency | Foreign Currency | Domestic Currency | Foreign Currency | Domestic Currency | Foreign Currency | ||||||
| (in millions of R$) | |||||||||||
| Customer deposits | 552,831 | 52,237 | 538,500 | 44,721 | 457,188 | 32,765 | |||||
| Marketable debt securities(1) | 117,332 | 18,301 | 110,935 | 13,463 | 92,638 | 14,483 | |||||
| Debt instruments eligible to compose capital | 23,138 | — | 19,627 | — | 19,538 | — | |||||
| Other financial liabilities | 78,805 | 372 | 64,680 | 114 | 71,371 | 143 | |||||
| Total liabilities | 844,600 | 156,981 | 783,217 | 127,335 | 700,101 | 104,104 | |||||
| (1) | In the year ended December 31, 2023, we revised the definition of marketable debt securities to include the line items “Financial liabilities measured at fair value in income held for trading” and “Financial liabilities at amortized cost,” instead of only including “Financial liabilities at amortized cost.” The amounts presented as of December 31, 2024, 2023 and 2022 reflect this change. |
Loan Portfolio
As of December 31, 2024, our gross loans and advances to customers totaled R$599.7 billion (48.4% of our total assets). Net impairment losses, loans and advances to customers totaled R$566.1 billion as of December 31, 2024 (45.7% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$205.3 billion, R$177.5 billion and R$158.7 billion, as of December 31, 2024, 2023 and 2022, respectively.
Types of Loans by Type of Customer
The majority of the loans we have outstanding are to borrowers domiciled in Brazil and are denominated in reais . For each loan category, we maintain specific risk management policies that are in line with the standards of the Santander Group, which in turn, are managed and monitored by our board of officers through the credit committee. The credit approval process for each loan category is structured primarily around our business segments. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk” for details on our credit approval policies for retail and wholesale lending.
Our loan portfolio does not have any specific concentration exceeding 10% of our total loans. As of December 31, 2024, 1.2% of our loan portfolio is allocated to our largest debtor and 3.5% to the next 10 largest debtors.
For further information about the breakdown of our Loans and Maturity see sections “a – Breakdown” and “b – Detail” of note “9 – Loans and advances to customers” to our audited consolidated financial statements included in this annual report.
Maturity
The following table sets forth an analysis by maturity of our loans, by type and status, as of December 31, 2024.
| As of December 31, 2024 | |||||||||||||||||||
| Less than 1 year |
% of total |
Between 1 and 5 years |
% of total |
Between 5 and 15 years |
% of total |
More than 15 years |
% of total |
Total |
% of total |
||||||||||
|
(in millions of R$) |
|||||||||||||||||||
| Debt Sector by Maturity | |||||||||||||||||||
| Commercial and industrial | 161,568 | 50.37 % | 75,023 | 37.55 % | 4,586 | 8.38 % | — | 0.00 % | 241,177 | 40.22 % | |||||||||
| Real estate | 5,426 | 1.69 % | 12,241 | 6.13 % | 23,086 | 42.20 % | 24,067 | 98.48 % | 64,820 | 10.81 % | |||||||||
| Installment loans to individuals | 152,202 | 47.45 % | 110,761 | 55.44 % | 27,013 | 49.38 % | 372 | 1.52 % | 290,347 | 48.42 % | |||||||||
| Lease financing | 1,578 | 0.49 % | 1,743 | 0.87 % | 22 | 0.04 % | — | 0.00 % | 3,343 | 0.56 % | |||||||||
| Loans and advances to customers, gross | 320,774 | 100.00 % | 199,768 | 100.00 % | 54,707 | 100.00 % | 24,438 | 100.00 % | 599,688 | 100.00 % | |||||||||
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Fixed and Variable Rate Loans
The following table sets forth a breakdown of our fixed and variable rate loans by type and status as of December 31, 2024.
| 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$, except percentages) | |||||||||||
| Fixed rate | |||||||||||
| Commercial and industrial | 100,397 | 46,273 | 2,094 | — | 48,366 | 148,764 | |||||
| Real estate | 33 | 107 | 116 | 96 | 319 | 352 | |||||
| Installment loans to individuals | 142,465 | 108,697 | 25,954 | 372 | 135,023 | 277,488 | |||||
| Lease financing | 432 | 710 | 8 | — | 718 | 1,150 | |||||
| Total Fixed rate | 243,327 | 155,787 | 28,172 | 467 | 184,427 | 427,754 | |||||
| Variable rate | |||||||||||
| Commercial and industrial | 61,171 | 28,750 | 2,493 | — | 31,242 | 92,414 | |||||
| Real estate | 5,393 | 12,134 | 22,970 | 23,971 | 59,075 | 64,468 | |||||
| Installment loans to individuals | 9,737 | 2,064 | 1,059 | — | 3,123 | 12,859 | |||||
| Lease financing | 1,146 | 1,033 | 14 | — | 1,047 | 2,193 | |||||
| Total Variable rate | 77,447 | 43,981 | 26,535 | 23,971 | 94,487 | 171,934 | |||||
| Total | 320,774 | 199,768 | 54,707 | 24,438 | 278,914 | 599,688 | |||||
Non-Current Assets Held for Sale
For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.
Liabilities
Deposits
The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.
For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the maturity of time deposits (excluding inter-bank deposits) at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.
| As of December 31, 2024 | |||
| Domestic | International | ||
| (in millions of R$) | |||
| Under 3 months | 408,947 | 78,941 | |
| 3 to 6 months | 32,952 | 18,299 | |
| 6 to 12 months | 65,904 | 36,597 | |
| Over 12 months | 117,522 | 4,473 | |
| Total | 625,325 | 138,310 | |
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The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2024.
| Maturing | |||||||||
| As of December 31, 2024 | Three Months or Less | Over Three Months Through Six Months | Over Six Months Through 12 Months | Over 12 months | |||||
| (in millions of R$) | |||||||||
| Total uninsured deposits(1) | 321,522 | 129,817 | 42,309 | 62,273 | 87,123 |
| (1) | We define uninsured deposits as securities from credit institutions and customers that do not have collateral attached to them. |
Short-Term Borrowings
The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.
| As of December 31, 2024 | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
| Amount | Average Rate | Amount | Average Rate | Amount | Average Rate | ||||||
| (in millions of R$, except percentages) | |||||||||||
| Securities sold under agreements to repurchase: | |||||||||||
| As of December 31 | 150,478 | 9.90 % | 134,794 | 10.60 % | 109,761 | 11.64 % | |||||
| Average during the period (1) | 140,721 | 10.26 % | 118,433 | 12.10 % | 105,234 | 12.13 % | |||||
| Maximum month-end balance | 160,034 | 135,858 | 114,056 | ||||||||
| Total short-term borrowings at year end | 150,478 | 134,794 | 109,761 | ||||||||
| (1) | The average annual balance sheet data has been calculated based upon the average of the monthly balances at 12 dates: for each of the month-end balances of the applicable year. |
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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 information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2024 , 2023 and 2022—Results of Operations—Impairment Losses on Financial Assets (Net).”
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$) | |||||
| Balance at beginning of year | 35,152 | 35,212 | 29,723 | ||
| Impairment losses charged to income for the year | 25,974 | 26,544 | 23,801 | ||
| Write-off of impaired balances against recorded impairment allowance | (25,402) | (26,627) | (18,340) | ||
| Exchange variation | (55) | 24 | 28 | ||
| Balance at end of year | 35,669 | 35,152 | 35,212 | ||
| Of which: | |||||
| Loans and advances to customers | 33,598 | 33,559 | 34,025 | ||
| Loans and amounts due from credit institutions | 1 | 8 | 13 | ||
| Provision for debt instruments | 2,070 | 1,586 | 1,174 | ||
| Recoveries of loans previously written off(1) | 994 | 1,382 | 983 | ||
| (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. |
As of December 31, 2024, our allowance for impairment losses for the periods indicated amounted to R$35,669 million, an increase of R$516 million, or 1.5%, compared to R$35,152 million as of December 31, 2023, which was primarily due to growth in our retail portfolio, offset by the decrease in provisioning due to the restructuring of the indebtedness of a large customer in our wholesale segment.
As of December 31, 2023, our allowance for impairment losses for the periods indicated amounted to R$35,152 million, a decrease of R$58.6 million, or 0.2%, compared to R$35,212 million as of December 31, 2022, which was primarily due to a greater number of nonperforming loans among individual customers and an increase in provisions as a result of a specific case of a large customer in our wholesale segment, the latter of which resulted in: (i) an increase in our impaired assets in the commercial and industrial loans portfolio as of December 31, 2023 of 15.1%, from R$14.2 billion to R$16.3 billion, as compared to December 31, 2022; (ii) an increase in our default rate as of December 31, 2023 by 1.9 p.p., from 5.0% to 6.9%, as compared to December 31, 2022; and (iii) a decrease in our coverage ratio (i.e., our provisions for impairment losses as a percentage of impaired assets) as of December 31, 2023 by 20.6 p.p., from 110.4% to 89.8%, as compared to December 31, 2022.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations.”
| 129 |
Allowance by Type of Borrower
The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$) | |||||
| Recoveries of loans previously charged off(1) | 994 | 1,382 | 983 | ||
| Commercial and industrial | 396 | 946 | 597 | ||
| Real estate – construction | 50 | 96 | 36 | ||
| Installment loans to individuals | 543 | 338 | 346 | ||
| Lease finance | 5 | 2 | 4 | ||
| Impairment losses charged to income for the year(1) | 25,974 | 26,544 | 23,801 | ||
| Commercial and industrial | 6,030 | 6,809 | 8,854 | ||
| Real estate – construction | 248 | 344 | 244 | ||
| Installment loans to individuals | 19,681 | 19,389 | 14,686 | ||
| Lease finance | 15 | 2 | 16 | ||
| Write-off of impaired balances against recorded impairment allowance | (25,402) | (26,627) | (18,340) | ||
| Commercial and industrial | (7,448) | (7,137) | (4,920) | ||
| Real estate – construction | (77) | (209) | (115) | ||
| Installment loans to individuals | (17,875) | (19,276) | (13,295) | ||
| Lease finance | (2) | (4) | (11) | ||
| (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. |
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, | |||||||||||
| 2024 | % of Total Loans | 2023 | % of Total Loans | 2022 | % of Total Loans | ||||||
| (in millions of R$, except percentages) | |||||||||||
| Borrowers | |||||||||||
| Commercial and industrial | 10,513 | 29.5 | 11,931 | 33.9 | 12,259 | 34.8 | |||||
| Real estate | 590 | 1.7 | 418 | 1.2 | 284 | 0.8 | |||||
| Installment loans to individuals | 24,545 | 68.8 | 22,796 | 64.8 | 22,659 | 64.4 | |||||
| Lease financing | 21 | 0.1 | 8 | — | 10 | — | |||||
| Total | 35,669 | 100.0 | 35,153 | 100.0 | 35,212 | 100.0 | |||||
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Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$) | |||||
| Internal Risk Rating | |||||
| Low | 454,225 | 408,973 | 392,397 | ||
| Medium-low | 95,687 | 87,232 | 77,993 | ||
| Medium | 15,805 | 16,644 | 18,647 | ||
| Medium-high | 12,181 | 13,238 | 13,574 | ||
| High | 21,790 | 25,449 | 22,044 | ||
| Loans and advances to customers, gross | 599,688 | 551,536 | 524,655 | ||
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, 2024 amounted to R$27.9 billion, compared to R$30.8 billion for the same period in 2023, a decrease of R$3.0 billion or 9.7%. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The renegotiation portfolio for the year ended on December 31, 2023 amounted to R$30.8 billion, compared to R$34.4 billion for the same period in 2022, a decrease of R$3.5 billion or 10.3%. This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$, except percentages) | |||||
| Renegotiation Portfolio by type of customer | |||||
| Commercial and industrial | 6,821 | 7,107 | 7,639 | ||
| Installment loans to individuals | 21,019 | 23,731 | 26,722 | ||
| Financial leasing | 12 | 1 | 2 | ||
| Total | 27,851 | 30,839 | 34,364 | ||
| Allowances for impairment losses | 13,542 | 14,383 | 15,900 | ||
| Coverage ratio | 48.6 % | 46.6 % | 46.3 % | ||
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.
As established in our internal renegotiation policy, in order for renegotiated products to be classified as performing, the customer must be in compliance with the terms of the relevant product for at least 12 consecutive months. Renegotiated loans that are more than 60 days overdue are also accounted for as impaired.
We 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 of granting loans to persons with a low-risk profile and higher levels of collaterals and guarantees.
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Impaired Assets
The following table shows our impaired assets, excluding country risk.
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$, except percentages) | |||||
| Impaired assets | |||||
| Past due and other impaired assets(1) | 42,242 | 39,887 | 39,224 | ||
| Impaired assets as a percentage of total loans | 7.0 % | 7.2 % | 7.5 % | ||
| Net loan charge-offs as a percentage of total loans | 4.2 % | 4.8 % | 3.5 % | ||
| Net loan charge-offs as a percentage of average total loans | 4.4 % | 5.0 % | 3.7 % | ||
| (1) | Includes as of December 31, 2024, R$15,912 million of doubtful loans (R$15,753 million in 2023 and R$14,411 million in 2022) that were not past-due. Through the year ended December 31, 2023, we calculated doubtful loans by reference to loans that were not past due but were subject to a default at some point during their term. |
Evolution of Impaired Assets
Our impaired assets increased by 5.9%, or R$2,355 million, to R$42,242 million as of December 31, 2024, compared to R$39,887 million as of December 31, 2023. Provisions for impairment losses, including total recoveries of loans previously charged off, increased by 1.5% , or R$516 million, to R$35,669 million as of December 31, 2024, compared to R$35,153 million as of December 31, 2023. Offsetting these effects were recoveries of R$994 million on loans previously written off as of December 31, 2024, and R$1,382 million as of December 31, 2023.
We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2024.
The following table shows the changes in our impaired assets at the dates indicated:
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$) | |||||
| Balance at beginning of year | 39,887 | 39,224 | 26,923 | ||
| Net additions | 30,069 | 30,394 | 31,921 | ||
| Write-offs | (27,714) | (29,731) | (19,620) | ||
| Balance at end of year | 42,242 | 39,887 | 39,224 | ||
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. In 2024, the debt restructuring options were improved to maintain consistent levels of “net additions” and “write-offs.”
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Impaired Assets by Type of Customer
The following table shows the amount of our impaired assets by type of customers as of the dates indicated:
| As of December 31, | |||||||||
| 2024 | 2023 | 2022 | % Change 2024/2023 | % Change 2023/2022 | |||||
| (in millions of R$, except percentages) | |||||||||
| Commercial and industrial | 13,175 | 16,292 | 14,156 | (19.1) | 15.1 | ||||
| Real estate | 1,736 | 1,352 | 1,058 | 28.4 | 27.8 | ||||
| Installment loans to individuals | 27,284 | 22,239 | 23,999 | 22.7 | (7.3) | ||||
| Lease financing | 47 | 4 | 10 | 1,191.4 | (64.8) | ||||
| Total | 42,242 | 39,887 | 39,224 | 5.9 | 1.7 | ||||
Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$13,175 million as of December 31, 2024, a decrease of R$3,117 million, or 19.1%, compared to R$16,292 million as of December 31, 2023. This decrease was mainly due to the restructuring of the indebtedness of a large customer in our wholesale segment.
Impaired assets in the commercial and industrial loans portfolio amounted to R$16,292 million as of December 31, 2023, an increase of R$2,136 million, or 15.1% compared to R$14,156 million as of December 31, 2022. This increase was due to a specific case of a large customer in our wholesale segment.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$1,736 million on December 31, 2024, an increase of R$384 million, or 28.4%, compared to R$1,352 million as of December 31, 2023. This increase in impaired assets in this portfolio was primarily due to the growth of this portfolio and challenging macroeconomic conditions.
Impaired assets in the real estate lending portfolio totaled R$1,352 million on December 31, 2023, an increase of R$294 million, or 27.8%, compared to R$1,058 million as of December 31, 2022. The increase in impaired assets in this portfolio was primarily due to the maturity of loans granted prior to our tightening of our credit approval conditions starting from January 2022.
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$27,284 million as of December 31, 2024, with an increase of R$5,045 million, or 22.7%, compared to 2023. This increase in impaired assets in this portfolio was primarily due to the growth of this portfolio, changes in the methodology applied to determine whether a loan is non-performing and challenging macroeconomic conditions affecting certain products such as our financial products and services aimed at rural customers.
Impaired assets in the installment loans to individuals lending portfolio totaled R$22,239 million as of December 31, 2023, with a decrease of R$1,760 million, or 7.3%, compared to 2022. The decrease in impaired assets in this portfolio was primarily due to the tightening of our credit approval conditions with effect from January 2022, which has resulted in a better performance by loans granted after that date.
Lease Financing
Impaired assets in the lease financing lending portfolio totaled R$47 million on December 31, 2024, an increase of 1191.4% or R$43 million, compared to R$4 million as of December 31, 2023. This increase in impaired assets in this portfolio was concentrated in two specific clients.
Impaired assets in the lease financing lending portfolio totaled R$4 million on December 31, 2023, a decrease of 64.8%, or R$7 million, compared to R$10 million as of December 31, 2022. The decrease in impaired assets in this portfolio was primarily due to the tightening of our credit approval conditions with effect from January 2022, which has resulted in a better performance by loans granted after that date.
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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 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 will be unable to meet its obligations to pay the principal and / or interest. For IFRS 9 purposes, two types of PD are considered: |
| ◦ | PD - 12 months (Stage 1): The probability that the financial instrument will default within the next 12 months. |
| ◦ | PD – lifetime (Stages 2 and 3): The probability that the transaction will default between the balance sheet date and the residual maturity date of the transaction. |
The standard requires that relevant future information be considered when estimating these parameters.
| • | 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 mitigating factors 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.
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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:
| As of December 31, | |||||||
| 2024 | % of total | 2023 | % of total | ||||
| (in millions of R$, except percentages) | |||||||
| Commercial and industrial | 7,440 | 26.0 | 5,320 | 21.8 | |||
| Mortgage loans | 6,047 | 21.1 | 5,142 | 21.1 | |||
| Installment loans to individuals | 15,124 | 52.8 | 13,898 | 57.0 | |||
| Lease financing | 37 | 0.1 | 27 | 0.1 | |||
| Total (*) | 28,648 | 100.0 | 24,387 | 100.0 | |||
| (*) | Refers only to loans past due between 1 and 90 days. |
Impaired Asset Ratios
Our credit risk exposure portfolio totaled R$750.4 billion as of December 31, 2024, an increase of R$30.5 billion compared to R$719.9 billion as of December 31, 2023. Our impaired assets increased by R$2.4 billion in the same period, from R$39.9 billion to R$42.2 billion. The default rate increased by 0.1 p.p. in 2024 in comparison to 2023, as a result of changes in the methodology for non-performing loans.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$, except percentages) | |||||
| Loans and advances to customers, gross | 599,688 | 551,536 | 524,655 | ||
| Impaired assets | 42,242 | 39,887 | 39,224 | ||
| Provisions for impairment losses | 35,669 | 35,153 | 35,212 | ||
| Credit risk exposure Non-GAAP – customers(1) | 750,357 | 719,881 | 664,537 | ||
| Ratios | |||||
| Impaired assets to credit risk exposure | 5.6 % | 5.5 % | 5.9 % | ||
| Coverage ratio(2) | 84.4 % | 88.1 % | 89.8 % | ||
| Impairment losses | (28,484) | (28,008) | (24,829) | ||
| Impairment losses on financial assets (net)(3) | (28,484) | (28,008) | (24,829) | ||
| (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$750,357 million as of December 31, 2024, guarantees amounting to R$64,388 million as of December 31, 2024, and private securities (securities issued by nongovernmental entities) amounting to R$86,281 million as of December 31, 2024. 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) | As of December 31, 2024, 2023 and 2022, our total of impairment losses on financial instruments included R$2,070 million, R$1,586 million and R$1,174 million, respectively, relating to debt instruments. |
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The following chart shows our impaired assets to credit risk ratio from 2022 through 2024:
Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2024, 2023 and 2022.
The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$, except percentages) | |||||
| Allowance for credit losses to total loans outstanding | |||||
| Allowance for credit losses | 35,669 | 35,153 | 35,212 | ||
| Total loans outstanding | 599,688 | 551,536 | 524,655 | ||
| Credit ratio | 5.9 % | 6.4 % | 6.7 % | ||
| Nonaccrual loans to total loans outstanding | |||||
| Total nonaccrual loans outstanding | 42,242 | 39,887 | 39,224 | ||
| Total loans outstanding | 599,688 | 551,536 | 524,655 | ||
| Credit ratio | 7.0 % | 7.2 % | 7.5 % | ||
| Allowance for credit losses to nonaccrual loans | |||||
| Allowance for credit losses | 35,669 | 35,153 | 35,212 | ||
| Total nonaccrual loans outstanding | 42,242 | 39,887 | 39,224 | ||
| Credit ratio | 84.4 % | 88.1 % | 89.8 % | ||
| Net charge-offs during the period to average loans outstanding | |||||
| Net charge-offs during the period | (25,402) | (26,627) | (18,340) | ||
| Average amount outstanding | 572,454 | 533,650 | 490,976 | ||
| Credit ratio | 4.4 % | 5.0 % | 3.7 % | ||
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| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$, except percentages) | |||||
| Commercial and industrial: | |||||
| Net charge-offs during the period | (7,448) | (7,137) | (4,920) | ||
| Average amount outstanding | 261,276 | 256,043 | 219,950 | ||
| Credit ratio | 2.9 % | 2.8 % | 2.2 % | ||
| Real estate: | |||||
| Net charge-offs during the period | (77) | (209) | (115) | ||
| Average amount outstanding | 63,554 | 60,379 | 56,725 | ||
| Credit ratio | 0.1 % | 0.3 % | 0.2 % | ||
| Installment loans to individuals: | |||||
| Net charge-offs during the period | (17,875) | (19,276) | (13,295) | ||
| Average amount outstanding | 244,644 | 214,236 | 211,653 | ||
| Credit ratio | 7.3 % | 9.0 % | 6.3 % | ||
| Lease financing: | |||||
| Net charge-offs during the period | (2) | (4) | (11) | ||
| Average amount outstanding | 2,980 | 2,993 | 2,648 | ||
| Credit ratio | 0.1 % | 0.1 % | 0.4 % | ||
Allowance for credit losses to total loans outstanding
In 2024, our allowance for credit losses to total loans outstanding credit ratio decreased by 0.4 p.p., from 6.4% as of December 31, 2023 to 5.9% as of December 31, 2024. This was primarily due to the growth, and improvements in the composition, of our portfolio and the restructuring of the indebtedness of a large customer in our wholesale segment.
In 2023, our allowance for credit losses to total loans outstanding credit ratio decreased by 0.3 p.p., from 6.7% as of December 31, 2022 to 6.4% as of December 31, 2023. This was primarily due to the fact that loans originated after we tightened our credit approval conditions with effect from January 2022 have generally performed better than loans granted prior to that date.
Nonaccrual loans to total loans outstanding
In 2024, our nonaccrual loans to total loans outstanding credit ratio decrease by 0.2 p.p., from 7.2% as of December 31, 2023 to 7.0% as of December 31, 2024. This was primarily due to the growth of the retail portfolio and the restructuring of the indebtedness of a large customer in our wholesale segment.
In 2023, our nonaccrual loans to total loans outstanding credit ratio decreased by 0.2 p.p., from 7.5% as of December 31, 2022 to 7.2% as of December 31, 2023. This was primarily due to the fact that loans originated after we tightened our credit approval conditions with effect from January 2022 have generally performed better than loans granted prior to that date.
Allowance for credit losses to nonaccrual loans
In 2024, our allowance for credit losses to nonaccrual loans credit ratio decreased by 3.7 p.p., from 88.1% as of December 31, 2023 to 84.4% as of December 31, 2024. This was primarily due to the growth of the retail portfolio and the restructuring of the indebtedness of a large customer in our wholesale segment.
In 2023, our allowance for credit losses to nonaccrual loans credit ratio decreased by 1.6 p.p., from 89.8% as of December 31, 2022 to 88.1% as of December 31, 2023. This was primarily due to the write-off of older loans, which were granted before we tightened credit approval conditions with effect from January 2022.
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Net charge-offs during the period to average loans outstanding
In 2024, our net charge-offs during the period to average loans outstanding credit ratio decreased by 0.6 p.p., from 5.0% as of December 31, 2023 to 4.4% as of December 31, 2024. This was primarily due to the growth of the credit portfolio and a lower volume of loan write-offs.
In 2023, our net charge-offs during the period to average loans outstanding credit ratio increased by 1.3 p.p., from 3.7% as of December 31, 2022 to 5.0% as of December 31, 2023. This was primarily due to an increase of 45.2% in net charge-offs.
Commercial and Industrial Loans
In 2024, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans remained stable, from 2.8% as of December 31, 2023 to 2.9% as of December 31, 2024. This was primarily due to the restructuring of the indebtedness of a large customer in our wholesale segment.
In 2023, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans increased by 0.6 p.p., from 2.2% as of December 31, 2022 to 2.8% as of December 31, 2023. This was primarily due to an increase of 45.1% in net charge-offs.
Real Estate Loans
In 2024, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 0.2 p.p., from 0.3% as of December 31, 2023 to 0.1% as of December 31, 2024. This was primarily due to the lower volume of loan write-offs.
In 2023, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 0.1 p.p., from 0.2% as of December 31, 2022 to 0.3% as of December 31, 2023. This was primarily due to an increase of 82.6% increase in net charge-offs.
Installment Loans to Individuals
In 2024, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 1.7 p.p., from 9.0% as of December 31, 2023 to 7.3% as of December 31, 2024. This was primarily due to the growth of the retail portfolio and a lower volume of loan write-offs.
In 2023, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans increased by 2.7 p.p., from 6.3% as of December 31, 2022 to 9.0% as of December 31, 2023. This was primarily due to an increase of 45.0% in net charge-offs, due to the effect of loans granted before we tightened our credit approval conditions with effect from January 2022.
Lease Financing Loans
In 2024, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans remained virtually stable, from 0.1% as of December 31, 2023 to 0.1% as of December 31, 2024. The net charge-offs of this portfolio remained stable.
In 2023, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 0.3 p.p., from 0.4% as of December 31, 2022 to 0.1% as of December 31, 2023. This was primarily due to the better performance of the portfolio.
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 January 31, 2025, 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 as of December 31, 2024:
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| Activity | Country of Incorporation | Ownership Interest | |||
| Controlled by Banco Santander | |||||
| Aymoré Crédito, Financiamento e Investimento S.A. (“Aymoré CFI”) | Financial | Brazil | 100.00 % | ||
| Esfera Fidelidade S.A. | Services Provision | Brazil | 100.00 % | ||
| EmDia Serviços Especializados em Cobrança Ltda. | Debt Collection and Credit Recovery Management | Brazil | 100.00 % | ||
| Return Capital Gestão de Ativos e Participações S.A. | Debt Collection and Credit Recovery Management | Brazil | 100.00 % | ||
| Rojo Entretenimento S.A. | Services Provision | Brazil | 95.00 % | ||
| Sanb Promotora de Vendas e Cobrança Ltda. | Provision of Digital Media Services | Brazil | 100.00 % | ||
| Sancap Investimentos e Participações S.A. (“Sancap”) | Holding | Brazil | 100.00 % | ||
| Santander Brasil Administradora de Consórcio Ltda. | Consortium | Brazil | 100.00 % | ||
| Santander Corretora de Câmbio e Valores Mobiliários S.A. | Brokerage | Brazil | 100.00 % | ||
| Santander Corretora de Seguros, Investimentos e Serviços S.A. | Brokerage | Brazil | 100.00 % | ||
| Santander Holding Imobiliária S.A. | Holding | Brazil | 100.00 % | ||
| Santander Leasing S.A. Arrendamento Mercantil (“Santander Leasing”) | Leasing | Brazil | 100.00 % | ||
| F1RST Tecnologia e Inovação Ltda. | Provision of Technology Services | Brazil | 100.00 % | ||
| SX Negócios Ltda. | Provision of Call Center Services | Brazil | 100.00 % | ||
| Tools Soluções e Serviços Compartilhados Ltda. | Services Provision | Brazil | 100.00 % | ||
| Subsidiaries of Aymoré Credit, Financing and Investment S.A. | |||||
| Banco Hyundai Capital Brasil S.A. | Bank | Brazil | 50.00 % | ||
| Solution 4Fleet Consultoria Empresarial S.A. | Technology | Brazil | 100.00 % | ||
| Subsidiaries of Santander Leasing | |||||
| Banco Bandepe S.A. | Bank | Brazil | 100.00 % | ||
| Santander Distribuidora de Títulos e Valores Mobiliários S.A. | Securities Dealer | Brazil | 100.00 % | ||
| Subsidiaries of Sancap | |||||
| Santander Capitalização S.A. | Capitalization | Brazil | 100.00 % | ||
| Evidence Previdência S.A. | Pension | Brazil | 100.00 % | ||
| Subsidiary of Santander Corretora de Seguros | |||||
| América Gestão Serviços em Energia S.A. | Energy | Brazil | 70.00 % |
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| Activity | Country of Incorporation | Ownership Interest | |||
| Fit Economia de Energia S.A. | Energy Trading | Brazil | 65.00 % | ||
| Subsidiary of Santander Holding Imobiliária S.A. | |||||
| Summer Empreendimentos Ltda. | Real Estate | Brazil | 100.00 % | ||
| Subsidiaries of Santander Distribuidora de Títulos e Valores Mobiliários S.A. | |||||
| Toro Corretora de Títulos e de Valores Mobiliários Ltda. | Broker | Brazil | 59.64 % | ||
| Toro Investimentos S.A. | Investments | Brazil | 13.23 % | ||
| Subsidiary of Toro Corretora de Títulos e de Valores Mobiliários Ltda. | |||||
| Toro Investimentos S.A. | Investments | Brazil | 86.77 % | ||
| Jointly Controlled by Sancap | |||||
| Santander Auto S.A. | Technology | Brazil | 50.00 % | ||
| Direct Subsidiaries of Toro Investimentos S.A. | |||||
| Toro Asset Management S.A. | Investments | Brazil | 100.00 % | ||
| Consolidated Investment Funds | |||||
| Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) | ||
| Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior | Investment Fund | Brazil | (a) | ||
| Santander Fundo de Investimento Guarujá 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 Paraty QIF PLC | Investment Fund | Brazil | (a) | ||
| Prime 16 – Fundo de Investimento Imobiliário | Investment Fund | Brazil | (a) | ||
| Santander FI Hedge Strategies Fund | Real Estate Investment Fund | Brazil | (a) | ||
| Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI | Investment Fund | Brazil | (a) | ||
| Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos | Investment Fund | Brazil | (a) | ||
| Fundo de Investimentos em Direitos Creditórios Atacado | Investment Fund | Brazil | (a) | ||
| Atual—Fundo de Investimento Multimercado Crédito Privado Investimento no Exterior | Investment Fund | Brazil | (a) | ||
| Fundo de Investimentos em Direitos Creditórios – Getnet | Investment Fund | Brazil | (a) | ||
| Santander Flex Fundo de Investimento Direitos Creditórios | Investment Fund | Brazil | (a) |
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| Activity | Country of Incorporation | Ownership Interest | |||
| San Créditos Estruturado | Investment Fund | Brazil | (a) | ||
| D365 – Fundo De Investimento em Direitos Creditórios | Investment Fund | Brazil | (a) | ||
| Fundo de Investimento em Direitos Creditórios Tellus | Investment Fund | Brazil | (a) | ||
| Fundo de Investimento em Direitos Creditórios Precato IV | Investment Fund | Brazil | (a) | ||
| Santander Hera Renda Fixa Fundo Incentivado de Investimento em Infraestrutura Responsabilidade Limitada | Investment Fund | Brazil | (a) | ||
| Ararinha Fundo de Investimento em Renda Fixa Longo Prazo | Investment Fund | Brazil | (a) | ||
| Hyundai Fundo de Investimento em Direitos Creditórios | 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. |
4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, as of December 31, 2024, we owned 293 properties for the activities of our banking network and leased 1,142 properties for the same purpose. For further information about the location of our branches, see “—B. Business Overview—Customer Service Channels—Physical 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.
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, 2024, 2023 and 2022 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, 2024, 2023 and 2022, 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, 2024, 2023 and 2022 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.
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Principal Factors Affecting Our Financial Condition and Results of Operations
Brazilian Macroeconomic Environment
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil. While Brazilian GDP increased in 2024, driven by fiscal incentives granted by the Brazilian government, historically low unemployment levels and a strong performance in certain economic sectors, we cannot assure you that this trend will continue, especially given persistent fiscal challenges, elevated interest rates, global economic uncertainties, and inflationary pressures influenced by domestic and international factors.
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:
| As of and For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| GDP growth(1) | 3.5 % | 3.2 % | 3.0 % | ||
| CDI Rate | 10.9 % | 13.0 % | 12.4 % | ||
| TJLP | 7.6 % | 6.6 % | 7.2 % | ||
| SELIC rate | 12.25 % | 11.75 % | 13.75 % | ||
| Selling exchange rate (at period end) R$ per U.S.$1.00 | 6.1923 | 4.8413 | 5.2177 | ||
| Depreciation (appreciation) of the real against the U.S. dollar | 27.6 % | (7.2) % | (6.5) % | ||
| Average real to U.S. exchange rate per U.S.$1.00(2) | 5.3895 | 4.9953 | 5.1655 | ||
| Inflation (IGP-M) | 6.5 % | (3.2) % | 5.5 % | ||
| Inflation (IPCA) | 4.8 % | 4.7 % | 5.8 % | ||
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
| (1) | GDP growth for 2024 is based on Santander Brasil’s internal estimates. For 2023, the source is the IBGE’s revised series. |
| (2) | Average of the selling exchange rate for the business days during the period. |
Despite the approval of a new fiscal framework and some measures to increase tax revenues, prospects for public expenditures to continue growing over time and for the economy to slow down into the future have stoked fears in financial markets about Brazil’s already high public debt. This has resulted in a persistent risk premium, a limitation in the room for the Brazilian real to strengthen and volatility in financial asset prices. Brazil’s economy was also 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. In 2022, the relaxation of COVID-19 restrictions and continued fiscal incentives granted by Brazilian government supported Brazilian GDP growth, which reached 3.0% in 2022. In 2023, fiscal incentives continued to have an important effect, but the contribution of a record harvest of grains was key for the Brazilian GDP to have increased 3.2% in the period. In 2024, in response to the payment of a sizeable volume of delayed court-ordered debts in the first half of 2024, the maintenance of fiscal incentives, historically low unemployment levels and a strong performance in certain economic sectors, we estimate that the Brazilian economy grew 3.5%.
The macroeconomic outlook for 2025 is clouded by high inflation, elevated interest rates, a deteriorating global economic environment, and ongoing uncertainty surrounding the continuation or escalation of the wars in Ukraine and in the Middle East. Additionally, we believe Brazil is unlikely to see the same level of contribution from commodity-related sectors to overall economic growth as it did in 2023. Brazilian monetary policy is also expected to remain tight. As a result, we anticipate that Brazil’s GDP growth in 2025 will be lower than in 2024. Any slowdown in Brazil’s economic growth, changes in interest rates, unemployment levels, or general price stability could adversely affect our business, financial condition, and results of operations.
For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—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.”
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Wars in Ukraine and in the Middle East
The persistence of the war between Russia and Ukraine has continued to cause humanitarian problems in Europe as well as volatility in financial markets globally, heightened inflation, shortages and increases in the prices of energy, oil, gas and other commodities. In response to the Russian military action against Ukraine, several countries, including the United States, the European Union member states, the United Kingdom and other UN member states, continue to impose severe sanctions on Russia and Belarus. Furthermore, we believe that the risk of cyberattacks on companies and institutions has increased and could increase even further as a result of the above-mentioned conflicts and in response to the sanctions imposed, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures. The continuance or escalation of the war, including its extension to other countries in the region, could lead to further increases in energy, oil and gas prices (particularly if supplies to Europe are interrupted) and heightened inflationary pressures, which in turn could lead to the resumption of increases in interest rates and market volatility. In addition, the war continues to weigh on supply chain problems, particularly to those businesses most sensitive to rising energy prices. The war and its effects could exacerbate the current slowdown in the global economy and could negatively affect the payment capacity of some of our customers, especially those with more exposure to the Russian or Ukrainian markets.
The conflict between Israel and Hamas has also stoked fears about a broader war in the Middle East and the impact this could have on the global economy generally and oil markets in particular.
While we do not have a physical presence in Russia, Ukraine or in the Middle East, and our direct exposure to Russian, Ukrainian or Middle Eastern markets and assets is not material, the impact of the wars in Ukraine and in the Middle East, and the related sanctions imposed on global markets and institutions, the impact on macroeconomic conditions generally, and other potential future geopolitical tensions and consequences arising from the war remain uncertain and may exacerbate our operational risk. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic Conditions in Brazil and Globally—The continuance or escalation of the wars in Ukraine and in the Middle East could materially affect our financial position and increase our operational risk.”
Interest Rates
In 2021, the Brazilian Central Bank began a monetary tightening cycle in response to rising inflation, the depreciation of the real , and a perception of recovery in certain economic activities following the easing of COVID-19-related restrictions. The SELIC rate increased from 9.25% as of December 31, 2021, to 13.75% as of December 31, 2022 (the highest level since the end of 2016). In 2023, the Brazilian Central Bank initiated an easing cycle as inflationary pressures subsided, reducing the SELIC rate to 11.75% as of December 31, 2023. The easing continued into the first half of 2024, with the SELIC rate reaching 10.50% in May 2024. However, inflationary pressures resurfaced in mid-2024, driven by adverse climatic conditions affecting food and energy prices, a significant devaluation of the real following the U.S. presidential election, and persistent fiscal challenges in Brazil. In response, the Brazilian Central Bank resumed tightening monetary policy, increasing the SELIC rate to 11.25% in September 2024 and 12.25% in December 2024. These adjustments reflect the Brazilian Central Bank’s efforts to balance inflation control with economic stability amid elevated interest rates globally and domestic economic concerns. As of the date of this annual report, the SELIC rate is 13.25%.
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 2021, as reported by the Brazilian Central Bank:
| Low | High(1) | Average(2) | Period-End | ||||
| Year | |||||||
| 2021 | 2.00 | 9.25 | 4.57 | 9.25 | |||
| 2022 | 9.25 | 13.75 | 12.57 | 13.75 | |||
| 2023 | 11.75 | 13.75 | 13.29 | 11.75 | |||
| 2024 | 10.50 | 12.25 | 10.91 | 12.25 | |||
| 2025 (through January 31, 2025) | 12.15 | 13.25 | 13.25 | 13.25 |
| (1) | Highest month-end rate. |
| (2) | Average of month-end rates during the period. |
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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. For more information about our market risk, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk."
Credit Volume and Quality in Brazil
In 2022, despite the increase in the SELIC rate, outstanding credit increased 8.2% compared to 2021, the ratio of nonperforming loans to individuals reached 5.9% and the household debt burden reached 2% of household income. In 2023, outstanding credit increased at a slower rate than in 2022 as the SELIC rate continued moving higher in that period. However, the ratio of nonperforming loans to individuals managed to remain nearly unchanged as a result of an increase in the income stemming from tight labor market conditions and a government-sponsored initiative for banks to renegotiate part of the credit in arrears (5.6% in 2023 as compared to 5.9% in 2022). In 2024, in response to tight labor market conditions and the extension of fiscal incentives by the Brazilian federal government, outstanding credit expanded 10.9% as compared with the previous year, while the ratio of nonperforming loans to individuals fell to 3.5% (from 3.7% in December 2023). However, this combination did not prevent an increase in the household debt burden in the period (24.2% in 2024 as compared to 23.8% in 2023).
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in billions of R$) | |||||
| Total Credit Outstanding (1) | 6,427 | 5,794 | 5,358 | ||
| Earmarked credit | 2,681 | 2,408 | 2,151 | ||
| Non-earmarked based credit | 3,746 | 3,386 | 3,206 | ||
| of which: | |||||
| Corporate | 1,585 | 1,462 | 1,432 | ||
| Individuals (retail) | 2,161 | 1,924 | 1,775 | ||
| (1) | Some figures may be subject to revision by the Brazilian Central Bank. |
Source: Brazilian Central Bank.
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 2024, we recorded foreign exchange exposure of R$34.0 million, foreign exchange exposure of R$62.9 million in 2023, and foreign exchange exposure of R$83.5 million in 2022. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).” For further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2024, 2023 and 2022—Results of Operations—Gains (losses) on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.6175 to R$5.7042 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.2177 per U.S.$1.00. In 2023, the R$/U.S.$ exchange rate experienced another year of significant volatility as it fluctuated between R$4.7202 to R$5.4459 per U.S.$1.00. As of December 31, 2023 the exchange rate was R$4.8413 per U.S.$1.00. The exchange rate experienced another period of high volatility in 2024 driven by international factors (such as uncertainty about the conduct of monetary policies in advanced economies and the aggravation of geopolitical tensions) and domestic issues (such as investors’ frustration with the looseness of fiscal policy and delays in the approval of certain important bills in the Brazilian Congress), which caused the exchange rate to fluctuate between R$4.5293 and R$6.1991 per U.S.$1.00. In 2025, through the date of this annual report, the real appreciated against the U.S. dollar. As of January 31, 2025, the exchange rate was R$5.8301 per U.S.$1.00.
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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. In 2023, as inflationary pressures of 2022 decreased, the Brazilian Central Bank began to reduce the SELIC rate from 13.75% (the highest level seen since the end of 2016) to 10.50% in May 2024. Depreciation of the real due to international and domestic issues combined with inflationary pressures due to the effect of adverse climate events on food and energy supplies led the Brazilian Central Bank to resume a monetary tightening cycle in September 2024, which pushed the SELIC rate up to 12.25% by the end of 2024. 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 has oscillated around the CMN’s target, set annually by the CMN. However, recent inflationary shocks have pushed Brazil’s inflation rate above the target in the past few years. From 2005 to 2018, the target level was 4.5%, with a tolerance interval of 2.0 percentage points until 2016, when the tolerance band was narrowed to 1.5 percentage points. The CMN subsequently lowered the target to 4.25% in 2019, with 0.25 percentage point decreases implemented annually until it reaches 3.00%. In June 2023, the CMN made the 3.00% inflation target permanent for subsequent years.
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 increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real . Similarly to what happened in the beginning of 2018, the Brazilian Central Bank delivered a letter to the CMN explaining why it failed to meet the inflation target and what actions would be implemented to ensure that inflation would converge to target in coming years. In 2022, inflationary pressures escalated in Brazil, including as a result of the ongoing war between Ukraine and Russia, supply chain issues, the continued COVID-19 pandemic (particularly in China) and increases in energy prices. As a result, inflation peaked in 2022 at multiple-year highs of 12.1% in Brazil in April 2022 (as measured by the IPCA in year-over-year terms) and 9.1% in the United States in June 2022 (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. Accumulated inflation for the year ended December 31, 2022, was 5.79% in Brazil and 6.5% in the United States. This resulted in tighter monetary policy by the Brazilian Central Bank, which increased the SELIC rate from a low of 2.0% as of the end of 2020 to 13.75% as of August 2022, a level at which it remained until August 2023, when the Brazilian Central Bank decided to start loosening monetary policy as inflation began to improve as a result of favorable climatic conditions that lowered the prices of foodstuffs and the delayed effects of the Brazilian Central Bank’s tightening of monetary policy. Accumulated inflation for the year ended December 31, 2023, was 4.6% in Brazil, although it remained above the targeted level of 3.25% set by the CMN. In early 2024, inflation initially followed a downward trend and reached as low as 3.7% in April 2024. However, inflation increased again during 2024 as a result of droughts which disrupted food supplies, increases in energy prices rose, and the depreciation of the real due to both domestic factors, including fiscal challenges, and global factors such as U.S. monetary policy and trade tensions. As a result, inflation reached 4.8% by the end of 2024, above the 3.0% target set by the CMN.
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 2024, 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$798 million within a one-year period. 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.
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Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA, and the IGP-M. For example, considering the amounts in 2024, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$108 million and R$87 million, respectively.
Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows the requirements for reserves and credit to which we are subject for each financing category:
| Product |
As of December 31, 2024 |
As of December 31, 2023 |
Form of Required Reserve | Yield | ||||
| Demand deposits | ||||||||
| Rural credit loans(1) | 31.50 % | 31.50 % | Loans | Cap rate: 12.0% p.a. | ||||
| Microcredit loans(2) | 2.00 % | 2.00 % | Loans | Cap rate: 4.0% p.m. | ||||
| Reserve requirements(3) | 21.00 % | 21.00 % | Cash | Zero | ||||
| Additional reserve requirements | 0.00 % | 0.00 % | Cash | n/a | ||||
| Free funding(4) | 45.50 % | 45.50 % | ||||||
| Savings Accounts | ||||||||
| Mortgage loans | 65.00 % | 65.00 % | Loans | Cap rate (SFH): TR + 12.0% p.a. | ||||
| Reserve requirements(3) | 20.00 % | 20.00 % | Cash | TR + 6.17% or TR + 70.00% of the target SELIC | ||||
| Additional reserve requirements | 0.00 % | 0.00 % | Cash | n/a | ||||
| Free funding(4) | 15.00 % | 15.00 % | ||||||
| Time deposits | ||||||||
| Reserve requirements(3) | 20.00 % | 20.00 % | Cash | SELIC | ||||
| In cash or other instruments | 0.00 % | 0.00 % | Cash or other instruments | n/a | ||||
| In cash | 0.00 % | 0.00 % | Cash | n/a | ||||
| Additional reserve requirements | 0.00 % | 0.00 % | Cash | n/a | ||||
| Free funding(4) | 80.00 % | 80.00 % |
| (1) | Rural credits are credits granted to farmers in the amount of R$ 22.3 billion and R$ 22.3 billion as of December 31, 2024 and 2023, respectively. |
| (2) | Microcredit is a credit granted to very small businesses, with an open position of R$ 3.3 billion and R$ 3.0 billion as of December 31, 2024 and 2023, respectively. |
| (3) | Deductions can be applied on reserve requirements. The Brazilian Central Bank details the possibility of any deduction on its website (Resolutions No. 189/2022, 188/2022 and 145/2021). |
| (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.”
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 2024, 2023 and 2022, 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. 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.
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (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(1) | 4.5 % | 5.4 % | 5.1 % | ||
| Discount rate (2) | 13.6 % | 13.0 % | 12.9 % | ||
| Discount rate before tax (2) | 20.8 % | 20.3 % | 20.1 % | ||
| (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 discount rate is based on the capital asset pricing model. |
| (*) | A quantitative goodwill impairment test is performed annually. At the end of each exercise, an analysis is carried out on the existence of appearances of disability. For the years 2024, 2023 and 2022, there was no evidence of impairment. In the goodwill impairment test, carried out considering the December 2024 scenario, and whose discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows, it was found that these continue to indicate the absence of impairment. |
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.
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 other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
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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 nontrading 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. |
| • | 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. |
| • | 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. |
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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 nonperforming 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 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.
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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 procedures, 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 to 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.
Impairment loss is calculated using statistical models that consider the following factors:
| • | Exposure at Default or “EAD,” is the amount of risk exposure at the date of default by the counterparty. In accordance with IFRS, the exposure at default used for this calculation is also 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 an annual time horizon to quantify the probability of the borrower defaulting in the coming year. A loan is in default if either the principal or interest is past due by ninety days or more or the loan is current but there are doubts as to the solvency of the counterparty (subjective doubtful assets). |
| • | Loss 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 account the guarantees/collateral associated with the loans, the income and expenses associated with the recovery process and the timing of default. |
| • | Loss Identification Period, or “LIP,” is the time period between the occurrence of a loss event and the identification of an objective evidence of this loss. In other words, it represents the time horizon from the credit loss occurrence until the effective confirmation of such loss. |
Moreover, prior to loans be written-off (which is only done after the Bank has completed all recovery efforts and after about 360 days late), a fully registered provision (allowance for loan losses) of the loan’s remaining balance applies. As a result, this provision fully covers the losses. Thus, the Bank understands that its loan loss allowance methodology has been developed to meet 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:
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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 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 was identified in 2024, 2023 and 2022. 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, “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 property, plant and equipment in 2024, 2023 and 2022 (see notes 14, 13 and 12, respectively, to our audited consolidated financial statements included elsewhere in this annual report).
Post-employment Benefit Plan
The post-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 benefit plan for which we and our controlled entities as employers make pre-determined contributions to a separate entity and, in 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 services rendered in the current and prior periods.
These contributions are recognized as personnel expenses in the consolidated income statement.
Defined Benefit Plan
A defined benefit plan is the post-employment benefit plan as 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. 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).
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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 within “Interest expense and similar charges” and “Provisions (net).”
The defined benefit plans are recorded based on an actuarial study, and conducted by an external consultant, at the end of each year to therein be effective for the subsequent period.
New Accounting Standards
The new IFRS standards effective after January 1, 2025 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 2024 were applied in the preparation of such financial statements.
Results of Operations for the Years Ended December 31, 2024, 2023 and 2022
Executive Summary – Santander Brasil Results at a Glance
Total Income amounted to R$73,757 million in 2024, an increase of 12.0%, or R$7,893 million, in comparison with the year ended December 31, 2023, driven by an increase in net interest income and fee commissions
Consolidated Net Income totaled R$13,414 million in the year ended December 31, 2024, an increase of 41.2% compared to the year ended December 31, 2023, mainly due to (i) a 12.0% increase in total income, as described above, (ii) an increase in net fee income of 10.0%, (iii) costs in line with the growth of inflation, and (iv) a 1.7% increase in impairment losses on financial assets (net), lower than the growth of the credit portfolio.
Loan Portfolio to customers amounted to R$599,688 million as of December 31, 2024, an increase of 8.7% compared to December 31, 2023, mainly due to an increase in our loan portfolio for Consumer Finance, SMEs (especially working capital and offshore loan) and individuals (especially credit cards, auto loans and payroll).
Credit risk exposure amounted to R$750.4 billion as of December 31, 2024, an increase of 4.2% compared to December 31, 2023, mainly due to the increase in the aforementioned increase in our loan portfolio.
Credit Quality remain stable. The impaired assets to credit risk exposure ratio was 5.6% for the year ended December 31, 2024, a 0.1 p.p. increase compared to the previous year.
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Coverage ratio was 84.4% in the year ended December 31, 2024, a 3.7 p.p. decrease compared to the year ended December 31, 2023.
Our Basel Capital adequacy ratio was 14.3% in the year ended December 31, 2024, a decrease of 0.2 p.p. compared to the year ended December 31, 2023.
Deposits from customers and from the Brazilian Central Bank increased by 8.8% reaching R$764 billion in 2024, mainly due to time deposits (especially in personal loans), influenced by their greater attractiveness given current interest rate levels and coupled with our investment-focused strategy, highlighted by our AAA investment advisory offering. At Santander Corporate & Investment Banking, the increase is especially in products like offshore/time deposit. We continue to follow our funding plan based on optimizing the mix between individuals and wholesale banking.
Results of Operations
The following table presents our consolidated results of operations for the years ended December 31, 2024, 2023 and 2022:
| For the Year Ended December 31, | |||||||||
| 2024 | 2023 | 2022 | % Change 2024/2023 | % Change 2023/2022 | |||||
| (in millions of R$, except percentages) | |||||||||
| Net interest income | 56,679 | 46,884 | 47,503 | 20.9 | (1.3) | ||||
| Income from equity instruments | 84 | 22 | 38 | 277.1 | (41.7) | ||||
| Income from companies accounted for by the equity method | 313 | 239 | 199 | 30.8 | 20.1 | ||||
| Net fee and commission income (expense) | 17,205 | 15,640 | 14,876 | 10.0 | 5.1 | ||||
| Gains (losses) on financial assets and liabilities (net) and exchange differences (net) | 129 | 3,795 | 4,699 | (96.6) | (19.2) | ||||
| Other operating income (expenses) net | (652) | (716) | (841) | (8.9) | (14.9) | ||||
| Total income | 73,757 | 65,864 | 66,475 | 12.0 | (0.9) | ||||
| Administrative expenses | (20,417) | (19,563) | (18,240) | 4.4 | 7.3 | ||||
| Depreciation and amortization | (2,731) | (2,741) | (2,586) | (0.4) | 6.0 | ||||
| Provisions (net) | (4,595) | (4,424) | (1,215) | 3.9 | 264.0 | ||||
| Impairment losses on financial assets (net) | (28,484) | (28,008) | (24,829) | 1.7 | 12.8 | ||||
| Impairment losses on other assets (net) | (252) | (250) | (161) | 0.9 | 55.0 | ||||
| Other nonfinancial gains (losses) | 1,912 | 1,044 | 131 | 83.2 | 693.7 | ||||
| Operating income before tax | 19,190 | 11,922 | 19,575 | 61.0 | (39.1) | ||||
| Income tax | (5,776) | (2,423) | (5,235) | 138.4 | (53.7) | ||||
| Consolidated net income for the year | 13,414 | 9,499 | 14,339 | 41.2 | (33.8) | ||||
Consolidated Net Income for the Year
Our consolidated net income for the year ended December 31, 2024, was R$13,414 million, an increase of R$3,915 million, or 41.2%, as compared to our consolidated net income of R$9,499 million for the year ended December 31, 2023, primarily due to (i) an increase in net interest income of R$9,795 million, or 20.9%, to R$56,679 million in the year ended December 31, 2024 from R$46,884 million in the year ended December 31, 2023, driven by the increase in net interest income in credit operations and better performance in market operations, despite the volatile macroeconomic environment; (ii) an increase in net fee income of R$1,565 million, or 10.0%, to R$17,205 million in the year ended December 31, 2024 from R$15,640 million in the year ended December 31, 2023, driven by the higher results in capitalization, insurance and cash management.
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Our consolidated net income for the year ended December 31, 2023, was R$9,499 million, a decrease of R$4,841 million, or 33.8%, as compared to our consolidated net income of R$14,339 million for the year ended December 31, 2022, primarily due to (i) an increase in legal provisions of R$3,209 million, or 264.0%, to R$4,424 million in the year ended December 31, 2023 from R$1,215 million in the year ended December 31, 2022, driven by the increase in labor provisions in the period; (ii) an increase in impairment losses on financial assets of R$3,179 million, or 12.8%, to R$28,008 million in the year ended December 31, 2023 from R$24,829 million in the year ended December 31, 2022, driven by the deterioration of our credit portfolio which was impacted by an increase in provisions as a result of a specific case of a large customer in our wholesale segment, and (iii) a decrease in net interest income of R$619 million, which was driven by lower income in credit, attributable to a shift in our portfolio mix towards customers with a better risk profile and a focus on collateralized products, as well as a decrease in our performance in market operations.
Net Interest Income
Net interest income for the year ended December 31, 2024, was R$56,679 million, an increase of R$9,795 million, or 20.9%, from R$46,884 million for the year ended December 31, 2023. This increase was mainly due to an increase in income from: (i) credit products, especially in individuals and consumer finance, driven by growth in volume in products such as cards, payroll, auto loan and mortgage, and (ii) better performance in market operations. This was partially offset by lower interest spreads, attributable to a shift in our portfolio mix toward customers with a better risk profile and focus on collateralized products.
Average total earning assets in 2024 were R$1,063,823 million, an increase of 10.8% from R$959,769 million in 2023. The main driver of this change was an increase in the average amount of loans and advances to customers and financial assets measured at fair value (i.e., debt and equity instruments).
Net interest margin (net interest income divided by average earning assets) in 2024 was 5.3% compared to 4.9% in 2023, supported by the increase in the SELIC rate and a better credit products mix, following our strategy of increasing the share of individual segments.
Average total interest-bearing liabilities in 2024 were R$849,299 million, a increase of 11.9%, from R$758,913 million in 2023.
Finally, the net interest spread (the difference between interest on earning assets and the average cost of interest-bearing liabilities) was 3.3% in 2024, mainly due to a shift in our portfolio mix toward customers with a better risk profile.
Net interest income for the year ended December 31, 2023 was R$46,884 million, a 1.3% or R$619 million decrease from R$47,503 million for the year ended December 31, 2022. This decrease was mainly due to a decrease in credit income, impacted by lower interest spreads, attributable to a shift in our portfolio mix towards customers with a better risk profile and a focus on collateralized products. This was partially offset by volume growth, driven by the individuals, SMEs and corporate loan portfolios. We also recorded a lower performance in our market operations.
Average total earning assets in 2023 were R$959,769 million, an 9.3% increase from R$877,771 million in 2022. The main driver of this growth was an increase of 7.1% in the average amount of loans and advance to customers.
Net interest margin (net interest income divided by average earning assets) in 2023 was 4.9% and 5.3% in 2022, mainly due to a shift in our portfolio mix towards lower risk products, as explained above.
Average total interest-bearing liabilities in 2023 were R$758,913 million, a 12.8% or R$85,857 million increase from R$673,056 million in 2022. The main driver of this growth was an increase of R$52,294 million in customer deposits, as a result larger volumes of time deposits, given the greater appeal of fixed income investments amidst the prevailing high interest rate environment of 2023.
Finally, the net interest spread (the difference between interest on earning assets and the average cost of interest-bearing liabilities) was 2.5% in 2023, mainly due to a shift in our portfolio mix towards customers with a better risk profile.
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Income from equity instruments
Income from equity instruments for the year ended December 31, 2024 , totaled R$84 million, an increase of R$61 million from R$22 million for the year ended December 31, 2023 .
Income from equity instruments for the year ended December 31, 2023 totaled R$22 million, a R$16 million decrease from R$38 million for the year ended December 31, 2022, mainly due to lower dividend gains from an investment fund, Santander Fundo de Investimento Amazonas Multimercado Credito.
Income from Companies Accounted for by the Equity Method
Income from companies accounted for by the equity method for the year ended December 31, 2024 was R$313 million, an increase of R$74 million from R$239 million for the year ended December 31, 2023, mainly due to an increase of R$53 million in the results of Pluxee (which we acquired in 2024) and R$29 million in the results of Banco RCI.
Income from companies accounted for by the equity method for the year ended December 31, 2023 was R$239 million, a R$40 million increase from R$199 million for the year ended December 31, 2022.
Net fee and commission income
Net fee and commission income for the year ended December 31, 2024 was R$17,205 million, an increase of R$1,565 million, or 10.0%, compared to R$15,640 million for the year ended December 31, 2023. This increase was primarily attributable to: (i) credit and debit cards, mainly due to increases in our customer base, number of transactions and customer spending, (ii) insurance and capitalization, reflecting the improved performance in loans (especially in consumer), and (iii) asset management and pension funds.
Net fees and commissions from credit and debit cards totaled R$4,414 million for the year ended December 31, 2024, an increase of 24.2% compared to the year ended December 31, 2023.
Net fees and commissions from asset management and pension funds totaled R$2,199 million for the year ended December 31, 2024, an increase of 10.5% compared to the year ended December 31, 2023.
Net fees and commissions from insurance and capitalization totaled R$4,741 million for the year ended December 31, 2024, an increase of 10.2% compared to the year ended December 31, 2023.
Net fee and commission income for the year ended December 31, 2023 was R$15,640 million, a 5.1% or R$764 million increase compared to R$14,876 million for the year ended December 31, 2022. This increase was primarily attributable to: (i) asset management and pension funds business which recorded higher income driven by our consortiums (“ consórcios ”) products, (ii) card revenues, due to increases in the number of transactions and customer spending, and (iii) capital markets and trade finance, where we achieved higher revenues from intermediation and financial advisory services to companies.
Net fees and commissions from asset management and pension funds totaled R$1,990 million for the year ended December 31, 2023, an increase of 24.4% compared to the year ended December 31, 2022.
Net fees and commissions from trade finance totaled R$1,926 million for the year ended December 31, 2023, an increase of 5.5% compared to the year ended December 31, 2022.
Net fees and commissions from credit and debit cards totaled R$3,554 million for the year ended December 31, 2023, an increase of 12.8% compared to the year ended December 31, 2022, mainly due to the growth in the number of transactions and customer spending.
Net fees and commissions from capital markets totaled R$1,183 million for the year ended December 31, 2023, an increase of 6.4% compared to the year ended December 31, 2022. This increase was mainly driven by an increase in revenue from intermediation and financial advisory services to companies.
The following table reflects the breakdown of net fee and commission income for the years ended December 31, 2024, 2023 and 2022:
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| For the Year Ended December 31 | |||||||||
| 2024 | 2023 | 2022 | % Change 2024/2023 | % Change 2023/2022 | |||||
| (in millions of R$, except percentages) | |||||||||
| Current account services | 3,314 | 3,255 | 3,267 | 1.8 | (0.4) | ||||
| Collection and payment services | 1,738 | 1,801 | 1,790 | (3.5) | 0.6 | ||||
| Insurance and capitalization | 4,741 | 4,303 | 4,357 | 10.2 | (1.2) | ||||
| Asset Management and pension funds | 2,199 | 1,990 | 1,600 | 10.5 | 24.4 | ||||
| Credit and debit cards | 4,414 | 3,554 | 3,151 | 24.2 | 12.8 | ||||
| Capital markets | 1,178 | 1,183 | 1,112 | (0.4) | 6.4 | ||||
| Trade finance | 1,858 | 1,926 | 1,825 | (3.5) | 5.5 | ||||
| Tax on services | (855) | (758) | (687) | 12.8 | 10.3 | ||||
| Others | (1,382) | (1,613) | (1,538) | (14.3) | 4.9 | ||||
| Total | 17,205 | 15,641 | 14,877 | 10.0 | 5.1 | ||||
Gains (losses) on financial assets and liabilities (net) and exchange differences
Gains on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2024 amounted to R$129 million, a decrease of R$3,666 million compared to a gain of R$3,795 million for the year ended December 31, 2023 . This variation is mainly due to lower gains with financial assets measured at fair value through profit or loss, of R$3,441 million as of December 31, 2023 compared to a loss of R$ 641 million as of December 31, 2024 .
Gains on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2023 amounted to R$3,795 million, a decrease of R$905 million compared to a gain of R$4,699 million for the year ended December 31, 2022. This variation is mainly due to lower gains with financial assets measured at fair value through profit or loss, of R$4,801 million as of December 31, 2022 compared to R$3,441 million as of December 31, 2023. For further information, see notes 36 and 37 to our audited consolidated financial statements included elsewhere in this annual report.
Other Operating Income/Expenses
Other operating expenses for the year ended December 31, 2024, amounted to R$652 million, a decrease of R$64 million compared to expenses of R$716 million for the year ended December 31, 2023, mainly due to lower operational expenses.
Other operating expenses for the year ended December 31, 2023 amounted to R$716 million, a decrease of R$125 million compared to expenses of R$841 million for the year ended December 31, 2022, mainly due to greater expenses with FGC pensions plans given the increase in the overall balance of deposits.
Administrative Expenses
Administrative expenses for the year ended December 31, 2024 were R$20,417 million, an increase of R$854 million compared to expenses of R$19,563 million for the year ended December 31, 2023, mainly due to the increase in expenses with wages and salaries and related technology and systems, per diems and travel expenses, and other administrative expenses as a result of the increase in inflation in the period and the growth of our business.
Administrative expenses for the year ended December 31, 2023 were R$19,563 million, a R$1,323 million increase compared to expenses of R$18,240 million for the year ended December 31, 2022, mainly due to higher expenses with wages and salaries and specialized and technical services resulting from an increase in inflation in the period and investments in business expansion.
Personnel expenses increased by R$784 million for the year ended December 31, 2024, mainly due to higher employee wages and salaries deriving from our collective bargaining with employees in 2023, which impacted the first eight months of 2024, and our 2024 collective bargaining agreement, which impacted the final four months of the year.
Personnel expenses increased by R$917 million for the year ended December 31, 2023, mainly due to higher employee wages and salaries impacted by the 2022 collective bargaining agreement, which was applied to salaries starting in September 2022, as well as the 2023 collective bargaining agreement, which was applied to salaries starting in September 2023.
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The following table sets forth our personnel expenses for each of the periods indicated:
| For the Year Ended December 31, | |||||||||
| 2024 | 2023 | 2022 | % Change 2024/2023 | % Change 2023/2022 | |||||
| (in millions of R$, except percentages) | |||||||||
| Wages and salaries | 7,087 | 6,640 | 6,311 | 6.7 | 5.2 | ||||
| Social security costs | 1,692 | 1,654 | 1,431 | 2.3 | 15.6 | ||||
| Benefits | 1,753 | 1,659 | 1,603 | 5.7 | 3.5 | ||||
| Training | 68 | 62 | 60 | 10.3 | 3.1 | ||||
| Other personnel expenses | 997 | 799 | 492 | 24.8 | 62.3 | ||||
| Total | 11,598 | 10,814 | 9,897 | 7.3 | 9.3 | ||||
Other administrative expenses increased by R$70 million to R$8,819 million for the year ended December 31, 2024, from R$8,749 million for the year ended December 31, 2023, mainly as a result of greater expenses with technology and systems, per diems and travel expenses and other administrative expenses, resulting as a result of the increase in inflation in the period and the growth of our business.
Other administrative expenses increased R$406 million to R$8,749 million for the year ended December 31, 2023, from R$8,343 million for the year ended December 31, 2022, mainly as a result of greater expenses with specialized and technical services, resulting from the increase in inflation in the period and investments in business expansion.
The following table sets forth our other administrative expenses for each of the periods indicated:
| For the Year Ended December 31, | |||||||||
| 2024 | 2023 | 2022 | % Change 2024/2023 | % Change 2023/2022 | |||||
| (in millions of R$, except percentages) | |||||||||
| Specialized and technical services | 2,414 | 2,397 | 2,229 | 0.7 | 7.6 | ||||
| General maintenance expenses | 878 | 896 | 896 | (2.0) | 0.1 | ||||
| Technology and systems | 2,410 | 2,384 | 2,577 | 1.1 | (7.5) | ||||
| Advertising | 516 | 522 | 541 | (1.1) | (3.4) | ||||
| Communications | 351 | 502 | 422 | (30.0) | 19.0 | ||||
| Per diems and travel expenses | 201 | 163 | 73 | 23.4 | 124.5 | ||||
| Taxes other than income tax | 154 | 173 | 149 | (11.0) | 16.2 | ||||
| Surveillance and cash courier services | 474 | 525 | 549 | (9.6) | (4.4) | ||||
| Insurance premiums | 25 | 27 | 22 | (5.5) | 21.9 | ||||
| Other administrative expenses | 1,394 | 1,160 | 887 | 20.2 | 30.8 | ||||
| Total | 8,819 | 8,749 | 8,343 | 0.8 | 4.9 | ||||
The efficiency ratio, which we calculate as total administrative expenses divided by total income, decreased to 27.7% in the year ended December 31, 2024, as compared to 29.7% for the year ended December 31, 2023. This decrease of 2.0 p.p. in the ratio is primarily due to higher growth in net income (driven by net interest income and net fee income) and an increase in costs driven by inflation.
The efficiency ratio increased to 29.7% in the year ended December 31, 2023, as compared to 27.4% for the year ended December 31, 2022. This increase of 2.3 p.p. in the ratio is primarily due to a decrease in net income (as a result of our more selective credit approval strategy and lower performance in market operations) and an increase in administrative expenses.
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Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2024 was R$2,731 million, a decrease of R$10 million, or 0.4%, from R$2,741 million for the year ended December 31, 2023, primarily due to higher expenses with amortization of software items, resulting from investments made in this period.
Depreciation and amortization for the year ended December 31, 2023 was R$2,741 million, a 6.0% or R$155 million increase from R$2,586 million for the year ended December 31, 2022, primarily due to greater expenses with the amortization of hardware and software items, resulting from investments made in the year ended December 31, 2023.
Provisions (Net)
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$4,595 million for the year ended December 31, 2024, an increase of R$171 million, or 3.9%, compared to R$4,424 million for the year ended December 31, 2023, mainly due to an increase in labor and civil contingencies.
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$4,424 million for the year ended December 31, 2023, a 264.0% or R$3,209 million increase compared to R$1,215 million for the year ended December 31, 2022, mainly due to an increase in labor contingencies.
Impairment Losses on Financial Assets (Net)
Impairment loss es on financial assets (net) for the year ended December 31, 2024 were R$28,484 million, an increase of R$476 million compared to R$28,008 million for the year ended December 31, 2023, which was primarily due to growth in our retail portfolio, and the effects of challenging macroeconomic conditions on our SME portfolio.
Impairment losses on financial assets (net) for the year ended December 31, 2023 were R$28,008 million, an R$3,179 million increase compared to R$24,829 million for the year ended December 31, 2022, which was driven by an increase in provisions as a result of a specific case of a large customer in our wholesale segment.
Our credit risk exposure increased by R$30.5 billion to R$750.4 billion as of December 31, 2024, compared to R$719.9 billion as of December 31, 2023. Furthermore, our impaired assets increased by R$2.4 billion from R$39.9 billion as of December 31, 2023 to R$42.2 billion as of December 31, 2024.
Our credit risk exposure increased by R$55.3 billion to R$719.9 billion as of December 31, 2023 compared to R$664.5 billion as of December 31, 2022. Furthermore, our impaired assets increased R$0.7 billion from R$39.2 billion as of December 31, 2022 to R$39.9 billion for the year ended December 31, 2023.
See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Allowance for Loan Losses—Impaired Asset Ratios” for a table showing our ratio of impaired assets to total credit risk exposure and our coverage ratio as of December 31, 2024, 2023 and 2022.
Impaired Assets by Type of Loan
The following table shows our impaired assets by type of loan as of December 31, 2024, 2023 and 2022.
| For the Year Ended December 31, | |||||||||
| 2024 | 2023 | 2022 | % Change 2024/2023 | % Change 2023/2022 | |||||
| (in millions of R$, except percentages) | |||||||||
| Commercial and industrial | 13,175 | 16,292 | 14,156 | (19.1) | 15.1 | ||||
| Real estate | 1,736 | 1,352 | 1,058 | 28.4 | 27.8 | ||||
| Installment loans to individuals | 27,284 | 22,239 | 23,999 | 22.7 | (7.3) | ||||
| Lease financing | 47 | 4 | 10 | 1191.4 | (64.8) | ||||
| Total | 42,242 | 39,887 | 39,224 | 5.9 | 1.7 | ||||
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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—Allowance for Loan Losses—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—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$13,175 million as of December 31, 2024, a decrease of R$3,117 million, or 19.1%, compared to R$16,292 million as of December 31, 2023. This decrease was mainly due to the restructuring of the indebtedness of a large customer in our wholesale segment.
Impaired assets in the commercial and industrial loans portfolio amounted to R$16,292 million as of December 31, 2023, an increase of R$2,136 million, or 15.1%, compared to R$14,156 million as of December 31, 2022. This increase was mainly due to an increase in provisions as a result of a specific case of a large customer in our wholesale segment.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Allowance for Loan Losses—Methodology for Impairment Losses.”
Real Estate
Impaired assets in the real estate lending portfolio totaled R$1,736 million as of December 31, 2024, an increase of R$384 million, or 28.4%, compared to R$1,352 million as of December 31, 2023. This increase was primarily due to the growth of this portfolio and challenging macroeconomic conditions.
Impaired assets in the real estate lending portfolio totaled R$1,352 million on December 31, 2023, an increase of R$294 million, or 27.8%, compared to R$1,058 million as of December 31, 2022. The increase in impaired assets in this portfolio was primarily due to the maturity of loans granted before we tightened our credit approval conditions with effect from January 2022.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Allowance for Loan Losses—Methodology for Impairment Losses.”
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$27,284 million as of December 31, 2024, an increase of R$5,045 million, or 22.7%, compared to R$22,239 million as of December 31, 2023. This increase was primarily due to the high growth of this portfolio, changes in the methodology used to determine whether a loan is non-performing and challenging macroeconomic conditions affecting certain products such as rural.
Impaired assets in the installment loans to individuals lending portfolio totaled R$22,239 million as of December 31, 2023, with a decrease of R$1,760 million, or 7.3% compared to R$23,999 million as of December 31, 2022. The decrease in impaired assets in this portfolio was primarily a result of the fact that loans granted after we tightened our credit approval conditions with effect from January 2022 have generally performed better than loans granted prior to that date.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”
Lease Financing
Impaired assets in the lease financing lending portfolio totaled R$47 million as of December 31, 2024, an increase of R$43 million compared to R$4 million as of December 31, 2023. This increase in impaired assets was primarily concentrated in two specific clients.
Impaired assets in the lease financing lending portfolio totaled R$4 million on December 31, 2023, a decrease of R$7 million compared to R$10 million as of December 31, 2022. The decrease in impaired assets in this portfolio was primarily a result of better quality of newer credit origination.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”
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Impairment Losses on Other Assets (Net)
Impairment losses on other assets (net) for the year ended December 31, 2024, amounted to losses of R$252 million, an increase of R$2 million as compared to R$250 million for the year ended December 31, 2023.
Impairment losses on other assets (net) for the year ended December 31, 2023, amounted to losses of R$250 million,an increase of R$89 million as compared to R$161 million for the year ended December 31, 2022, mainly due to impairment losses on intangible assets.
Other Nonfinancial Gains
Other nonfinancial gains amounted to R$1,912 million during the year ended December 31, 2024,an increase of R$869 million compared to R$1,044 million during the year ended December 31, 2023, mainly due to the closing of the joint venture transaction with the Pluxee Group.
Other nonfinancial gains amounted to R$1,044 million during the year ended December 31, 2023, an increase of R$912 million compared to R$131 million during the year ended December 31, 2022, mainly due to the sale of 40% stake in the share capital of Webmotors.
Operating Income Before Tax
Operating income before tax for the year ended December 31, 2024 was R$19,190 million, an increase of R$7,269 million, or 61.0%, as compared to R$11,922 million for the year ended December 31, 2023.
Income Taxes
Income taxes expenses include income tax, social contribution, PIS and COFINS (which are social contributions due on certain income net of certain expenses).
Total income taxes amounted to R$5,776 million in the year ended December 31, 2024, an increase of R$3,354 million, or 138.4%, in relation to R$2,423 million in the year ended December 31, 2023. This expense increase was mainly attributed to: (i) an increase in operating income before tax to R$19,190 million in the year ended December 31, 2024, from R$11,922 million in the year ended December 31, 2023, which was primarily due to our operational performance throughout the year. The higher earnings resulted in a larger taxable base, leading to a proportional increase in tax expense. Additionally, the effects of specific events recognized directly in the tax line remained stable compared to the prior year, with no material additional impacts on the variation in tax expense.
Total income taxes amounted to R$2,423 million in the year ended December 31, 2023, a decrease of 53.7%, or R$2,812 million, in relation to R$5,235 million in the year ended December 31, 2022. This expense decrease was mainly attributed to: (i) a 39.1% or R$7,653 million decrease in operating income before tax to R$11,922 million in the year ended December 31, 2023 from R$19,575 million in the year ended December 31, 2022, which was primarily due an increase in net provisions of R$3,209 million, or 264.0%, to R$4,424 million in the year ended December 31, 2023 from R$1,215 million in the year ended December 31, 2022; and (ii) other events that reduced the amount of corporate taxes, such as increased interest on capital, which led to an increase of 12.63%, or R$298 million, to R$2,660 million in the year ended December 31, 2023 from R$2,362 million in the year ended December 31, 2022.
Results of Operations by Segment for the Years Ended December 31, 2024, 2023 and 2022
The following tables show our results of operations for the years ended December 31, 2024, 2023 and 2022, for each of our operating segments.
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Commercial Banking
| For the Year Ended December 31, | |||||||||
| 2024 | 2023 | 2022 | % Change 2024/2023 | % Change 2023/2022 | |||||
| (in millions of R$, except percentages) | |||||||||
| Net interest income | 51,563 | 44,652 | 45,618 | 15.5 | (2.1) | ||||
| Income from equity instruments | 5 | 4 | 11 | 45.4 | (68.7) | ||||
| Income from companies accounted for by the equity method | 259 | 185 | 148 | 40.3 | 25.2 | ||||
| Net fee and commission income | 14,944 | 13,270 | 12,539 | 12.6 | 5.8 | ||||
| Gains/losses on financial assets and liabilities (net) and exchange differences (net) | (1,488) | (1,125) | (360) | 32.2 | 212.3 | ||||
| Other operating income (expenses) | (480) | (596) | (718) | (19.5) | (17.0) | ||||
| Total income | 64,804 | 56,389 | 57,237 | 14.9 | (1.5) | ||||
| Personnel expenses | (10,534) | (9,754) | (8,986) | 8.0 | 8.5 | ||||
| Other administrative expenses | (7,836) | (7,867) | (7,571) | (0.4) | 3.9 | ||||
| Administrative expenses | (18,370) | (17,621) | (16,557) | 4.3 | 6.4 | ||||
| Depreciation and amortization | (2,599) | (2,621) | (2,480) | (0.8) | 5.7 | ||||
| Provisions (net) | (4,583) | (4,404) | (1,208) | 4.0 | 264.7 | ||||
| Impairment losses on financial assets (net) | (28,451) | (26,583) | (23,683) | 7.0 | 12.2 | ||||
| Impairment losses on other assets (net) | (253) | (250) | (160) | 1.0 | 55.8 | ||||
| Other nonfinancial gain (losses) | 1,912 | 1,044 | 131 | 83.2 | 693.7 | ||||
| Operating income before tax | 12,461 | 5,953 | 13,281 | 109.3 | (55.2) | ||||
2024 and 2023
Operating income before tax attributed to the Commercial Banking segment for the year ended December 31, 2024, was R$12,461 million, an increase of R$6,508 million from R$5,953 million for the year ended December 31, 2023.
This variation was mainly due to:
| • | an increase of R$6.9 billion in net interest income representing a 15.5% increase compared to the year ended December 31, 2023; and |
| • | an increase of R$1.6 billion in net fee income, representing a 12.6% increase compared to the year ended December 31, 2023. |
2023 and 2022
Operating income before tax attributed to the Commercial Banking segment for the year ended December 31, 2023, was R$5,953 million, a R$7,328 million decrease from R$13,281 million for the year ended December 31, 2022.
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This variation was mainly due to:
| • | an increase of R$3.2 billion in legal provisions, representing a 264.7% increase compared to the year ended December 31, 2022; |
| • | an increase of R$2.9 billion in impairment losses on financial assets (net), representing a 12.2% increase compared to the year ended December 31, 2022, mainly due to an increase in the credit portfolio driven by individual and consumer finance customer portfolios; and |
| • | a decrease in net interest income driven by our selective credit strategy in the year ended December 31, 2023 compared to the year ended December 31, 2022. |
Global Wholesale Banking
| For the Year Ended December 31, | |||||||||
| 2024 | 2023 | 2022 | % Change 2024/2023 | % Change 2023/2022 | |||||
| (in millions of R$, except percentages) | |||||||||
| Net interest income | 5,115 | 2,232 | 1,885 | 129.2 | 18.4 | ||||
| Income from equity instruments | 79 | 19 | 27 | 320.8 | (30.4) | ||||
| Income from companies accounted for by the equity method | 54 | 54 | 52 | (1.3) | 5.5 | ||||
| Net fee and commission income | 2,262 | 2,370 | 2,337 | (4.6) | 1.4 | ||||
| Gains/losses on financial assets and liabilities (net) and exchange differences (net) | 1,617 | 4,920 | 5,060 | (67.1) | (2.8) | ||||
| Other operating income (expenses) | (172) | (120) | (123) | 43.8 | (2.2) | ||||
| Total income | 8,954 | 9,476 | 9,238 | (5.5) | 2.6 | ||||
| Administrative expenses | (2,047) | (1,942) | (1,683) | 5.4 | 15.4 | ||||
| Personnel expenses | (1,064) | (1,060) | (911) | 0.4 | 16.3 | ||||
| Other administrative expenses | (983) | (882) | (772) | 11.4 | 14.3 | ||||
| Depreciation and amortization | (132) | (120) | (106) | 10.3 | 13.0 | ||||
| Provisions (net) | (12) | (20) | (8) | (37.6) | 151.3 | ||||
| Impairment losses on financial assets (net) | (33) | (1,425) | (1,146) | (97.7) | 24.4 | ||||
| Impairment losses on other assets (net) | — | — | (1) | (148.8) | (86.5) | ||||
| Operating income before tax | 6,730 | 5,969 | 6,294 | 12.7 | (5.2) | ||||
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2024 and 2023
Operating income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 2024, was R$6,730 million, an increase of R$761 million, or 12.7%, from R$5,969 million for the year ended December 31, 2023, which was primarily due to (i) a decrease in impairment losses on financial assets (net) mainly driven by a specific case of a large customer in our wholesale segment.
2023 and 2022
Operating income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 2023, was R$5,969 million, a 5.2% or R$325 million decrease from R$6,294 million for the year ended December 31, 2022, which was primarily due to (i) an increase in administrative expenses and (ii) an increase in impairment losses on financial assets (net) mainly driven by an increase in provisions as a result of a specific case of a large customer in our wholesale segment.
5B. Liquidity and 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 must 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 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 are sufficient for our present requirements.
See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information.”
Liquidity and Funding
In addition to a minimum liquidity 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.
Due to our stable and diversified funding sources, which include a large base of customer deposits as detailed below, we have historically had no liquidity deficiencies.
As part of our liquidity 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 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.
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The following tables present the composition of our consolidated funding at the dates indicated.
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$) | |||||
| Customer deposits | 605,068 | 583,221 | 489,953 | ||
| Current accounts | 41,297 | 36,599 | 26,607 | ||
| Savings accounts | 57,369 | 58,075 | 60,171 | ||
| Time deposits | 425,287 | 390,497 | 339,943 | ||
| Repurchase agreements | 81,115 | 98,049 | 63,232 | ||
| Backed operations with Private Securities(1) | 13,688 | 21,551 | 17,309 | ||
| Backed operations with Public Securities | 67,426 | 76,499 | 45,923 | ||
| Deposits from credit institutions | 158,565 | 118,512 | 116,079 | ||
| Deposits on demand | 859 | 5,100 | 3,521 | ||
| Time deposits(2) | 126,588 | 95,290 | 87,824 | ||
| Repurchase agreements | 31,119 | 18,122 | 24,734 | ||
| Backed operations with Private Securities(1) | 14 | 63 | 70 | ||
| Backed operations with Public Securities | 31,105 | 18,059 | 24,664 | ||
| Total deposits | 763,634 | 701,733 | 606,033 | ||
| Liabilities arising from securities(3) | 139,678 | 130,383 | 116,042 | ||
| Agribusiness Credit Notes | 32,447 | 36,423 | 24,045 | ||
| Treasury Bills | 24,516 | 22,729 | 33,713 | ||
| Real Estate Credit Notes | 62,864 | 57,619 | 43,776 | ||
| Bonds and other securities | 19,851 | 13,612 | 14,508 | ||
| Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital | 23,138 | 19,627 | 19,538 | ||
| Total Funding | 926,450 | 851,743 | 741,613 | ||
| (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. |
| (3) | In the year ended December 31, 2023, we revised the definition of marketable debt securities to include the line items “Financial liabilities measured at fair value in income held for trading” and “Financial liabilities at amortized cost,” instead of only including “Financial liabilities at amortized cost.” The amounts presented as of December 31, 2024, 2023 and 2022 reflect this change. |
Deposits
Customer Deposits
Our balance of customer deposits was R$605.1 billion on December 31, 2024, R$583.2 billion on December 31, 2023, and R$490.0 billion on December 31, 2022, representing 65.3%, 68.5% and 66.1% of our total funding, respectively.
Current Accounts
Our balance of current accounts was R$41.3 billion on December 31, 2024, R$36.6 billion on December 31, 2023 and R$26.6 billion on December 31, 2022, representing 5.4%, 5.2% and 4.4% of total deposits, respectively.
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Savings Accounts
Our balance of savings accounts was R$57.4 billion on December 31, 2024, R$58.1 billion on December 31, 2023, and R$60.2 billion on December 31, 2022, representing 7.5%, 8.3% and 9.9% of total deposits, respectively.
Customer Time Deposits
Our balance of customer time deposits was R$425.3 billion on December 31, 2024, R$390.5 billion on December 31, 2023, and R$339.9 billion on December 31, 2022, representing 55.7%, 55.6% and 56.1% of total deposits, respectively.
Customer 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 decreased to R$81.1 billion on December 31, 2024, from R$98.0 billion on December 31, 2023, and R$63.2 billion on December 31, 2022, representing 10.6%, 14.0% and 10.4% of total deposits, respectively.
Deposits from Credit Institutions
Our balance of deposits from credit institutions was R$158.6 billion on December 31, 2024, R$118.5 billion on December 31, 2023 and R$116.1 billion on December 31, 2022, representing 20.8%, 16.9% and 19.2% 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. |
| • | Domestic Onlendings. We lend from public institutions, mainly BNDES and FINAME, for which we act as a financial agent. Funding from these sources in Brazil represents a method of providing long-term loans with attractive average interest rates to certain sectors of the economy. Loans from these funds are allocated by BNDES through banks to specific sectors targeted for economic development. This type of lending is known as “repassing” or “onlending.” Because the repassed funds are generally matched and/or funded by loans from a federal government agency, we take no interest rate or maturity mismatch risk nor charge interest at a fixed margin over the cost of funds. We, however, retain the commercial credit risk of the borrower and therefore have discretion in the lending decision and application of the credit criteria. This type of funding is not affected by compulsory deposit requirements. The onlending is generally secured or guaranteed, although this is not required by the terms of the onlending. |
Other Funding
Liabilities arising from securities
Our balance of liabilities arising from securities was R$139.7 billion on December 31, 2024, R$130.4 billion on December 31, 2023, and R$116.0 billion on December 31, 2022, representing 15.1%, 15.3%, and 15.6% 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$32.4 billion on December 31, 2024, R$36.4 billion on December 31, 2023 and R$24.0 billion on December 31, 2022.
Treasury bills ( Letras Financeiras ) are a funding alternative available to banks that can be characterized as senior or eligible to compose the regulatory capital, pursuant to CMN Resolution No. 5,007, of March 24, 2022, with a minimum term of 24 months and minimum amounts of R$300,000 for subordinated transactions and R$50,000 for senior transactions. Our balance of treasury bills totaled R$24.5 billion on December 31, 2024, a 7.9% increase from R$22.7 billion on December 31, 2023.
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Real estate credit notes ( Letras de Crédito Imobiliário ) increased by 9.1%, from R$57.6 billion on December 31, 2023, to R$62.9 billion on December 31, 2024.
We undertake issuances of securities, including under our Global Medium Term Notes Program. Our balance of bonds and other securities was R$19.9 billion on December 31, 2024, and R$13.6 billion on December 31, 2023. This change was principally due to favorable market conditions.
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital
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.” Our Notes Offering was structured as follows: (i) U.S.$1.25 billion indexed 7.25% per year with no maturity (perpetual) and interest paid semiannually; and (ii) U.S.$1.25 billion indexed 6.125% per year maturing in November 2028 and interest paid semiannually. These issuances were made through our Cayman Islands branch and as a result they do not generate liability for income tax at source. 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.
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.
In October and November 2023, Santander Brasil exercised its option to repurchase the Tier 2 debt instruments issued in 2018 in the amount of U.S.$1.25 billion. In their place to compose our Tier 2 regulatory capital, Santander Brasil issued financial bills with a subordination clause in the total amount of R$6.0 billion. These new financial bills have a term of 10 years, and redemption and repurchase options in accordance with the applicable regulations.
Furthermore, on November 8, 2024, Santander Brasil also exercised its option to repurchase certain Tier 1 debt instruments issued in 2018 in the amount of U.S.$1.25 billion. In their place to comprise our Tier 1 regulatory capital, Santander Brasil issued subordinated financial bills in the total amount of R$7.6 billion. These new financial bills are perpetual with a repurchase clause exercisable as from five years of their issuance, in accordance with the applicable regulations.
As of December 31, 2024, the balance for both Tier 1 and Tier 2 debt instruments was R$23.1 billion compared to R$19.6 billion as of December 31, 2023.
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, including the recently enacted Resolution No. 229, which reformed the prudential rules applicable to capital requirements associated with credit risk under the standardized approach (RWACPAD). For additional information regarding minimum regulatory level and other Basel III requirements, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision— Capital Adequacy and 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 noncompliance with such additional requirements. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Principal Limitations and Obligations of Financial Institutions.”
Capital Expenditures
See “Item 4. Information on the Company—A. History and Development of the Company—Capital Expenditures and Divestitures.”
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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, 2024 are summarized as follows:
| As of December 31, 2024 | |||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||
| (in millions of R$) | |||||||||
| Contractual Obligations | |||||||||
| Customer deposits | 605,068 | 499,014 | 46,522 | 59,475 | 57 | ||||
| Marketable debt securities(1) | 139,678 | 27,023 | 42,216 | 55,261 | 15,177 | ||||
| Debt Instruments Eligible to Compose Capital(2) | 23,138 | — | — | — | 23,138 | ||||
| Deposits from credit institutions(3) | 158,565 | 142,625 | 12,939 | 2,038 | 963 | ||||
| Total | 926,450 | 668,662 | 101,677 | 116,774 | 39,336 | ||||
| (1) | In the year ended December 31, 2023, we revised the definition of marketable debt securities to include the line items “Financial liabilities measured at fair value in income held for trading” and “Financial liabilities at amortized cost,” instead of only including “Financial liabilities at amortized cost.” The amounts presented as of December 31, 2024, 2023 and 2022 reflect this change. |
| (2) | The table above excludes the notional and any interest payments relating to our perpetual Tier I bonds which interests are discretionary as described in “Item 5. Operating And Financial Review And Prospects—A. Operating Results.” |
| (3) | Calculated for all Deposits from credit institutions, Customer Deposits, Marketable debt securities, Subordinated liabilities and Debt Instruments Eligible to Compose Capital (Tier II) assuming a constant interest rate based on data as of December 31, 2024 over time for all maturities, and those obligations with maturities of more than five years have an average life of ten years. |
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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, 2024 reflected assets of R$796 million, compared to assets of R$4,354 million as of December 31, 2023.
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, 2024 was R$3,343 million. From this total, R$1,578 million matures in up to one year, R$1,743 million matures from one year to up to five years and R$22 million matures after five years. We have no contracts with indeterminate maturities.
5C. Research and Development, Patents and Licenses, etc.
We do not have any policy or significant project involving research and development, and we do not own patents or patents licenses, bearing in mind that we only have licenses involving trademarks.
5D. Trend Information
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:
| • | 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, 2023, 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 increase; |
| • | a global economic downturn as a result of pandemics, epidemics or outbreaks of infectious diseases, or instability or conflicts (including the ongoing war between Russia and Ukraine and the war in the Middle East, or the general economic and business conditions in Brazil, Latin America and globally), can have an adverse effect on the global market and economy, including Brazil. 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; |
| • | uncertainties regarding the political scenario for 2025, increased volatility in economic indicators and deceleration in growth rates may negatively affect our strategic plan, with impacts on our profitability, asset quality, portfolio expansion and financing conditions; |
| • | exposure to various types of inflation and interest rate risks, and the Brazilian government’s efforts to control inflation and interest rates; |
| • | continued market volatility and instability that could affect our revenues; |
| • | extensive regulation by the Brazilian government and the Brazilian Central Bank, among others, which could affect our margins and/or growth in lending activities; |
| • | regulatory capital changes toward more restrictive rules as a response to any potential financial crisis or general macroeconomic conditions; |
| • | decreased liquidity in domestic capital markets; |
| • | changes in taxes or other fiscal assessments that could decrease our profitability; |
| • | exchange rate volatility and exchange rate controls that could have an adverse impact on international investors; |
| • | our ability to protect ourselves against cybersecurity risks; |
| • | the effects of climate change, including transition risks, physical risks and other risks that could adversely affect us; and |
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| • | our dependence on the proper functioning of information technology systems. |
Conversely, a recovery in the Brazilian economy by means of economic reforms (e.g., an overhaul in the income tax structure) 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
Our 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 the most significant effect on the amounts recognized in the financial statements, see “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Critical Accounting Policies” and notes 1(c) and 2 to our audited consolidated financial statements included elsewhere in this annual report.
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 comprises a minimum of five members and a maximum of twelve members, of which at least 20.0% must be independent members. The board of directors has a chairman and a vice-chairman, each elected at the general shareholders’ meeting by majority vote.
Our board of executive officers comprises a minimum of two members and a maximum of 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 officers, executive officers and officers without specific designations. Some of our executive officers are also members of the boards of executive officers and/or boards of directors of our subsidiaries. Currently our Chief Risk Officer position is being filled in on an interim basis by one of our vice president executive officers pursuant to a decision of our board of directors at a meeting held on February 28, 2025.
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 | ||
| Deborah Stern Vieitas | Independent Chairwoman | August 21, 1957 | ||
| Javier Maldonado Trinchant | Vice Chairman | July 11, 1962 | ||
| Cristiana Almeida Pipponzi | Independent Member | December 22, 1974 | ||
| Deborah Patricia Wright | Independent Member | September 4, 1957 | ||
| Ede Ilson Viani | Member | September 5, 1967 | ||
| Cristina San Jose Brosa | Member | June 16, 1978 | ||
| José de Paiva Ferreira | Independent Member | March 1, 1959 | ||
| Marília Artimonte Rocca | Independent Member | January 31, 1973 | ||
| Mario Roberto Opice Leão | Member | July 21, 1975 | ||
| Pedro Augusto de Melo | Independent Member | November 4, 1961 | ||
| Vanessa de Souza Lobato Barbosa | Member | December 24, 1968 |
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Members of the Board of Executive Officers:
| Name | Position | Date of Birth | ||
| Mario Roberto Opice Leão | Chief Executive Officer | July 21, 1975 | ||
| Gustavo Alejo Viviani | Vice President Executive Officer and Investor Relations Officer | August 26, 1975 | ||
| Alessandro Tomao | Vice President Executive Officer | March 8, 1977 | ||
| Carlos José da Costa André | Vice President Executive Officer | August 9, 1963 | ||
| Ede Ilson Viani | Vice President Executive Officer | September 5, 1967 | ||
| Germanuela De Almeida De Abreu | Vice President Executive Officer | December 6, 1975 | ||
| Gilberto Duarte de Abreu Filho | Vice President Executive Officer | August 7, 1973 | ||
| Luis Guilherme Mattos de Oliem Bittencourt | Vice President Executive Officer | December 4, 1973 | ||
| Maria Teresa Mauricio da Rocha Pereira Leite | Vice President Executive Officer | June 21, 1967 | ||
| Maria Elena Lanciego Perez | Vice President Executive Officer | September 15, 1969 | ||
| Renato Ejnisman | Vice President Executive Officer | February 12, 1970 | ||
| Alessandro Chagas Farias | Officer | February 19, 1982 | ||
| Alexandre Guimarães Soares | Officer | August 27, 1969 | ||
| Alexandre Teixeira de Araujo | Officer | May 26, 1971 | ||
| Ana Paula Vitali Janes Vescovi | Officer | April 8, 1969 | ||
| André Juaçaba de Almeida | Officer | September 27, 1974 | ||
| Camila Stolf Toledo | Officer | July 23, 1979 | ||
| Carlos Aguiar Neto | Officer | March 5, 1971 | ||
| Celso Mateus de Queiroz | Officer | September 19, 1974 | ||
| Cezar Augusto Janikian | Officer | January 7, 1974 | ||
| Claudenice Lopes Duarte | Officer | July 25, 1972 | ||
| Claudia Chaves Sampaio | Officer | December 6, 1982 | ||
| Daniel Mendonça Pareto | Officer | July 4, 1978 | ||
| Eduardo Alvarez Garrido | Officer | July 6, 1973 |
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| Name | Position | Date of Birth | ||
| Eduardo Luis Sasaki | Officer | March 3, 1974 | ||
| Enrique César Suárez Fragata Lopes | Officer | September 20, 1983 | ||
| Franco Luigi Fasoli | Officer | September 18, 1975 | ||
| Geraldo José Rodrigues Alckmin Neto | Officer | September 8, 1981 | ||
| Gustavo de Sousa Santos | Officer | November 3, 1982 | ||
| Izabella Ferreira Costa Belisario | Officer | February 8, 1982 | ||
| Jean Paulo Kambourakis | Officer | May 9, 1980 | ||
| Leonardo Mendes Cabral | Officer | June 25, 1980 | ||
| Luciana de Aguiar Barros | Officer | January 3, 1980 | ||
| Marcelo Aleixo | Officer | January 30, 1967 | ||
| Marcos Jose Maia da Silva | Officer | March 29, 1971 | ||
| Mariana Cahen Margulies | Officer | October 18, 1980 | ||
| Marilize Ferrazza Santinoni | Officer | November 20, 1965 | ||
| Michele Soares Ishii | Officer | October 11, 1978 | ||
| Paulo César Ferreira de Lima Alves | Officer | October 18, 1968 | ||
| Paulo Fernando Alves Lima | Officer | April 5, 1976 | ||
| Paulo Sérgio Duailibi | Officer | September 28, 1966 | ||
| Rafael Abujamra Kappaz | Officer | October 12, 1980 | ||
| Ramon Sanchez Santiago | Officer | May 25, 1969 | ||
| Reginaldo Antonio Ribeiro | Officer | May 19, 1969 | ||
| Ricardo de Oliveira Contrucci | Officer | May 12, 1975 | ||
| Ricardo Olivare de Magalhães | Officer | January 26, 1979 | ||
| Richard Flavio Da Silva | Officer | June 3, 1976 | ||
| Robson de Souza Rezende | Officer | January 24, 1967 | ||
| Rudolf Gschliffner | Officer | September 20, 1983 | ||
| Sandro Kohler Marcondes | Officer | April 16, 1964 | ||
| Sandro Mazerino Sobral | Officer | February 24, 1975 | ||
| Thomaz Antonio Licarião Rocha | Officer | March 2, 1977 | ||
| Vanessa Alessi Manzi | Officer | May 12, 1975 | ||
| Vitor Ohtsuki | Officer | June 5, 1977 |
Below are the biographies of the members of our (i) Board of Directors, which were elected at the Shareholders’ Meetings held on April 28, 2023 (election of all members except Cristiana Almeida Pipponzi, Vanessa de Souza Lobato Barbosa and Javier Maldonado Trinchant), June 30, 2023 (election of Cristiana Almeida Pipponzi), April 26, 2024 (election of Vanessa de Souza Lobato Barbosa) and August 30, 2024 (election of Javier Maldonado Trinchant); and (ii) our Board of Executive Officers, as elected at the Board of Directors meetings held on May 12, 2023 (election of all members except Leonardo Mendes Cabral, Alessandro Chagas Farias, Alexandre Teixeira de Araujo, Cezar Augusto Janikian,Camila Stolf Toledo, Claudia Chaves Sampaio, Eduardo Alvarez Garrido, Eduardo Luis Sasaki, Enrique Cesar Suarez Fragata Lopes, Gustavo de Sousa Santos, Izabella Ferreira Costa Belisario, Rafael Abujamra Kappaz, Marcelo Aleixo, Marcos Jose Maia da Silva, Maria Elena Lanciego Perez, Mariana Cahen Margulies, Michele Soares Ishii,Ricardo de Oliveira Contrucci and Rudolf Gschliffner), July 3, 2023 (election of Leonardo Mendes Cabral), August 21, 2023 (change of position of Germanuela De Almeida De Abreu from the position of Officer to the position of Vice President Executive Officer), December 14, 2023 (change of position of Luis Guilherme Mattos de Oliem Bittencourt from the position of Officer to the position of Vice President Executive Officer), January 2, 2024 (election of Alessandro Chagas Farias, Alexandre Teixeira de Araujo, Cezar Augusto Janikian, Claudia Chaves Sampaio, Eduardo Alvarez Garrido, Eduardo Luis Sasaki, Enrique Cesar Suarez Fragata Lopes, Gustavo de Sousa Santos, Izabella Ferreira Costa Belisario and Rafael Abujamra Kappaz), March 6, 2024 (election of Maria Elena Lanciego) and January 2, 2025 (election of Camila Stolf Toledo, Marcelo Aleixo, Marcos Jose Maia da Silva, Mariana Cahen Margulies, Michele Soares Ishii,Ricardo de Oliveira Contrucci and Rudolf Gschliffner).
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Members of the Board of Directors:
Deborah Stern Vieitas . Ms. Vieitas is Brazilian and was born on August 21, 1957. She holds a degree in public administration from FGV-SP and a degree in journalism from the School of Communications and Arts of the University of São Paulo. She also holds a master’s degree in business from FGV-SP and in public administration from the École Nationale d’Administration. Currently, she is Chief Executive Officer of the American Chamber of Commerce of Brazil (Amcham Brasil). From 2015 to 2017, she was an independent member of the Board of Directors of AXA Seguros S.A. From 2008 to 2014, she was CEO and Director of Banco Caixa Geral-Brasil. From 2000 to 2008, as Executive Vice President of Banco BNP Paribas Brasil, Ms. Vieitas was responsible for Corporate Coverage and the Loan and Financing Portfolio. From 1998 to 2000, she was Executive Vice President of Banco CCF Brasil and responsible for Large Companies and Corporate Coverage, Capital Markets, Trade Finance and Foreign Exchange. Since 2022, she has been an Independent Member of the Board of Directors of BRF S.A., where she also is a member of the Audit Committee and People Committee. In April 2023, she joined the Iochpe Maxion Board of Directors as an independent member, where she is also a member of the Finance Committee. She is currently our Chairwoman of the Board of Directors and also coordinator of the Audit Committee of Santander Brasil, in addition to having already been a member of the Risk and Compliance Committee.
Cristina San Jose Brosa. Mrs. San Jose is Spanish and was born on June 16, 1978. She has a BA in Mathematics from the University of Zaragoza and an MBA in Finance from New York University. Mrs. San Jose joined the Santander Group in 2015 and currently has the role of Chief Data Officer of the Santander Group, where she leads the Data Management & Governance department and the Machine Learning Lab. Before joining the Santander Group, Mrs. San Jose was a leading partner at the McKinsey & Company Global Machine Learning Hub.
Cristiana Almeida Pipponzi . Ms. Pipponzi is Brazilian and has a degree in Business Administration from Faculdade de Economia e Administração at the Universidade of São Paulo, and an MBA from INSEAD in France. She has worked with e-commerce projects at E&Y and was Officer of Marketing, Institutional Communication and Sustainability at Droga Raia S.A. Ms. Pipponzi currently holds the position of board member at Droga Raia S.A. and is one of our independent directors.
Deborah Patricia Wright . Ms. Wright is Brazilian and was born on September 4, 1957. She holds a degree in Business Administration from the School of Business Administration in São Paulo (EAESP-FGV). Ms. Wright began her career in 1980 in the Marketing Department at Kibon, 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 Director of Marketing, becoming Vice President Commercial in 1994. In 1995, she became General Manager of Kraft Suchard Foods. In 1997, she took over as General Manager of Kibon. At ICI / Paints, she was General Manager of Tintas Coral Brasil from 1997 to 1999 and later Regional Manager of ICI. She was also General Manager of Parmalat Brasil in 1999, and Chief Executive Officer of the Internet Division of Grupo Pão de Açúcar from 2000 to 2001. From 2002 to 2007, she was Corporate Vice President / Commercial Vice President of Sales and Abril Group’s Corporate Marketing. From 2009 to 2010, she was Chief Executive Officer / Country Manager at Ipsos Brasil, a market research company. She has served as an Advisor since 2001. From 2001 to 2005 she served on the Board of Directors of Graded – The American School of São Paulo. From 2005 to 2006, she was a Counselor for CONAR (Brazilian National Council for Self-Regulation in Advertising). From 2008 to 2009, she was a member of the Board of Directors of Hospital Samaritano de São Paulo. From 2008 to 2014, she was a Director at Lojas Renner, a publicly traded Brazilian company specializing in clothing retail, as well as President of the Sustainability Committee from 2012 to 2014. From 2013 to 2016, she was a member of the Advisory Board of Eurofarma, the fourth largest Brazilian pharmaceutical company, still privately held and not listed on the stock exchange. Currently, she is associated with the following entities: she co-founded the Brazilian subsidiary of the WCD Group (Women Corporate Directors) in 2010; she is a coordinator of the IBGC Strategy Commission, where she leads a DEI (Diversity, Equity and Inclusion) working and study group; and she is an ambassador for the 30% Club and WOB (Women on Boards) and has been involved in gender diversity advocacy for over a decade. In addition, she is an independent member of the Board of Directors, a member of the nomination and governance committee and chair of the Compensation Committee of Santander Brasil.
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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 Officer. From 2014, he acted as the Officer responsible for Small & Middle, Government & Institution and Agribusiness and after that as Retail Banking Network Officer up to December 2019, when he was promoted and became Technology & Operations Vice President. Since June 2023, he has also been a member of the Board of Directors of Banco Santander (Brasil) S.A. Starting in 2024 he became responsible for the Retail & SMEs Banking area of Banco Santander (Brasil) S.A as one of our Vice Presidente Officers.
Javier Maldonado Trinchant . Mr. Maldonado is Spanish and was born on July 11, 1962. He has a law degree from UNED University and a master’s in law degree from Northwestern University. Mr. Maldonado joined the Santander Group in 1995 as head of the International Legal division of Banco Santander de Negocios, S.A. Currently, Mr. Maldonado is Global Head of Strategic Projects and Group Real Estate Assets at Banco Santander, S.A. Mr. Maldonado has held numerous management positions in the Santander Group, including Senior Executive Vice President, Global Head of Cost Control, Head of the General Directorate for Coordination and Control of Regulatory Projects in the Risk Divisions, and Executive Committee Director and Head of Internal Control and Corporate Development for Santander UK. Mr. Maldonado served on the Board of Alawwal Bank (formerly known as the Saudi Hollandi Bank Riyadh) from 2008 to 2019. He practiced corporate and international law for thirteen years and previously was an attorney with Baker & McKenzie and Corporate and International Law Department Head at J.Y. Hernandez- Canut Law Firm. On January 1, 2025, Mr. Maldonado became the Vice President of our Board of Directors.
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 Business Officer for Latin America, in the American Division of Santander Central Hispano. At the end of 2001, he returned to Brazil to work as Vice President Executive Officer of Banco Banespa, where he was responsible for Human Resources, 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 a member of Santander Brasil’s Board of Directors, and joined the Mitsubishi Corp Group based in Los Angeles, California, USA, where his main activities involved technological innovations. From July 2013 to December 2019, he returned to Santander Brasil and acted as Senior Vice President Executive Officer, responsible for Human Resources, Organization, Property, Proceedings, Operations, Technology and Costs. Additionally, he performed the following functions: Executive Director of Febraban (2014 to 2019), Chairman of the Febraban Self-Regulation Board (2016 to 2019), Chairman of the Board of 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 our Board of Directors and a member of our Risk and Compliance Committee.
Marília Artimonte Rocca . Ms. Rocca was CEO of Hinode Group, the largest Marketing Multilevel consumer goods company in Brazil, until December 2022, a position she had since November 2018. Previously, she was Ticket’s Managing Officer in Brazil, a food voucher company owned by Edenred Group company. She was also vice president at TOTVS, the sixth largest software company worldwide, based in São Paulo. From 2008 to 2012, Ms. 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 to 1998, Ms. Rocca worked for Walmart as one of the organization’s first female officers in Brazil. For 20 years Ms. Rocca has served as a board member at privately and publicly held companies in the Education, IT, Services and Consumer Goods industries. Ms. Rocca has a degree 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 the Aspen Institute and a member of the Aspen Global Leadership Network. Since October 2023, Ms. Rocca has been an independent member of the Board of Directors of Inspirali, the second largest player in medical education in Latin America. Furthermore, she is an independent member of the Board of Directors and coordinator of the Sustainability Committee of Santander Brasil.
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Mario Roberto Opice Leão . Mr. Opice Leão is Brazilian and was born on July 21, 1975. He holds a degree in production engineering from the Escola Politécnica of the Universidade 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 Corporate and SMEs and a member of our Executive Committee. Since January 2022 he has acted as Chief Executive Officer of Santander Brasil. Before joining Santander Brasil, he was a Managing Officer in Capital Markets at Morgan Stanley from 2008 to 2015, worked for Goldman Sachs from 2006 to 2008 and worked for Citibank from 1996 to 2006.
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 Universidade de Ciências Contábeis in São Paulo. On March 2, 2020 he was appointed as CEO of the IBGC. In July 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. 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 Chairman of the Board of Directors of IBRACON – Brazilian Institute of Independent Auditors between 2009 and 2010. He was also a member of the Governance Committee of Amcham Brasil and executive of the Union of Accounting Companies – SESCON. He was CEO of the IBGC from 2020 to 2023. Currently, Mr. de Melo is an independent member of the Board of Directors, and coordinator of the Audit Committee, in addition to having previously been coordinator of the Risk and Compliance Committee, and member of the Nomination, Governance and Remuneration Committees of Santander Brasil.
Vanessa de Souza Lobato Barbosa . Mrs. Lobato 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 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 head office in Belo Horizonte, covering the states of Minas Gerais, Goiás, as well as Brasília, and the states of the Northeast region of Brazil. 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 2022, she served as Executive Vice President of the Company in the vice presidency of human resources, and from 2022 to 2024 as responsible for the vice presidency of Retail. In April 2024, she was elected as a member of our Board of Directors.
Members of the Board of Executive Officers:
Mario Roberto Opice Leão . See “—Members of the Board of Directors.”
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 Institute 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 Equities and Fixed Income at Citibank (Brasil). He has served at Santander Brasil since 2000, where he has been Credit Consultant, Trader, Senior Relationship Manager, Executive Officer of Corporate and Investment Banking, Managing Officer of our Corporate and Investment Banking Division and the Officer responsible for the Credit and Recovery Division in the Wholesale Bank. For the last 3 years until March 2023, He was our Retail Chief Financial Officer and responsible for the Retail Collections Division. Since March 2023, as Executive Vice President, He serves as our Chief Financial Officer and Investor Relations Officer.
Alessandro Tomao . Mr. Tomao is Brazilian and was born on March 8, 1977. He holds a bachelor’s degree in law from 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 February 2018, he was the head of the 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. Since January 2020, he has been Executive Director of FEBRABAN. He is also member of the Board of Directors at CACEIS as of 2019.
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Carlos José da Costa André. Mr. da Costa André is Brazilian and was born on August 9, 1963. He holds a degree in production engineering from the Federal University of Rio de Janeiro and an MBA in finance from IBMEC/RJ. Before joining Santander Brasil in 2021, Mr. da Costa André held positions in the management area at Banco do Brasil, occupying the position of Vice President of Finance and Investor Relations at Banco do Brasil S.A. between 2020 and 2021. Mr da Costa André is the President of the National Association of Financial and Capital Markets Entities (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais — ANBIMA) since May 2022. As one of our Executive Vice Presidents, Mr. da Costa André is responsible for the Wealth Management area.
Ede Ilson Viani . See “—Members of the Board of Directors.”
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, responsible for the strategy of Performance Management, Career, Compensation, Benefits and Budget and Expenditure Management for the Bank and, in 2018, she was elected Officer HR. Since 2023 she is the Vice President of People & Ombudsman area of Banco Santander (Brasil) S.A.
Gilberto Duarte de Abreu Filho . Mr. Abreu is Brazilian and was born on August 7, 1973. He holds a degree in Industrial Engineering from the University of São Paulo and an MBA from the Massachusetts Institute of Technology in Cambridge, MA. Before joining Santander Brasil, Mr. Abreu was a senior manager at McKinsey & Company, managing projects in the financial and retail areas. He is currently our Vice-President Executive Officer responsible for the Corporate segment, in addition to being also the chief executive officer of Sancap Investimentos e Participações S.A. and an executive officer of Banco Bandepe S.A.
Luis Guilherme Mattos de Oliem Bittencourt . Mr. Mattos de Oliem Bittencourt holds a degree in Computer Engineering from Unicamp, a specialization degree in business administration from FGV/SP and a master of science in Management of Technology (MOT) from MIT Sloan. He began his career as a trainee in technology at Banco Itaú in 1997 where he stayed until 2010, working with CRM, digital channels and intelligence, and worked at the retail unit of HSBC in Brazil as head of digital channels, CRM and strategic intelligence until 2012. At Santander Brasil since 2013, he worked in retail for eight years, leading CRM, digital channels, commercial intelligence, customer service, CFO and trade marketing areas. In the technology area since 2021 as CIO. Since 2024 Mr. Bittencourt is the Executive Vice-President responsible for the Technology and Operations Area.
Maria Elena Lanciego Perez . Mrs. Lanciego is Spanish and was born on September 15, 1969. She graduated from the University of Salamanca in Economics and Business Management – Financial Audit and Consulting. She completed a number of courses in management, as well as post-graduate studies at Stanford and Helsinki universities. She holds an MBA from DEUSTO Business School and Adolfo Ibañez School of Management. Her entire professional carrier has been with the Santander Group, which she joined in 1993. Her vast professional experience has been gained in six Global Divisions of Santander Group: internal audit, international private banking, asset management & insurance, global corporate and investment banking, commercial division, consumer banking, strategy and corporate development. She has performed both control functions (risk management, compliance, financial control) and business roles (in segments such as Select, Affluent, Private Banking, Commercial Banking and Corporate and Investment Banking) and well as functions related to strategic planning and transformation. At Santander Brasil she serves as Executive Vice President responsible for the Finance and Strategy departments.
Maria Teresa Mauricio da Rocha Pereira Leite . Ms. Leite is Brazilian, born on June 21, 1967. She graduated in Business Administration from Fundação Armando Alvares Penteado, with subsequent specializations from Fundação Dom Cabral, Kellogg School of Management, and INSEAD. With extensive experience in global financial institutions in Brazil and the United Kingdom, she has over 20 years in leadership positions, having been the CEO of Deutsche Bank in Brazil before joining Santander in 2021 as a statutory officer in the Commercial Bank. Since 2022, she has been the Executive Vice President of Institutional Affairs and is a member of the Executive Committee.
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Renato Ejnisman . Mr. Ejnisman is Brazilian and was born on February 12, 1970. He holds a degree in physics from the University of São Paulo and a master’s degree and PhD in physics from the University of São Paulo and the University of Rochester, respectively. Before joining Santander Brasil, Mr. Ejnisman held management positions at Banco Bradesco, being a part of its executive committee and being responsible for various areas, reaching the position of CEO of Next. As one of our Executive Vice Presidents, Mr. Ejnisman is responsible for the Corporate and Investment Banking area.
Alessandro Chagas Farias . Mr. Chagas is Brazilian, born on 19 February 1982. He has a bachelor’s degree in business management from the Federal University of Rio de Janeiro, an MBA from Fundação Getulio Vargas and a Master’s in Advanced Finance from IE Business School. He started his career at Santander in 2011 in Sales and Trading (SCIB) where he was responsible for the structuring and product desks. In 2020, he moved to Technology and Operations to lead the digital transformation in Santander Investments, Insurance and Markets landscape. Since January 2024, he has been leading the investment business across the bank in the Wealth Management division.
Alexandre Guimarães Soares . Mr. Soares is Brazilian, born on August 27, 1969. He has a degree in engineering from Escola Mauá de Engenharia and an extension degree in economics from the Faculdade de Economia e Administração / USP and a postgraduate degree in marketing from Escola Superior de Propaganda and Marketing. Before joining Santander Brasil, Mr. Soares held management positions at Banco Safra, BankBoston Banco Múltiplo S.A and Banco Real S.A. He is a member of Nuclea’s risk and compliance committee, alternate member of Nuclea’s deliberative board and full member of the board of TECBAN – Banking Technology. As one of our officers, Mr. Soares is responsible for Manufacturing in the Vice Presidency of Technology & Operations and CEO of TOOLS Digital Services, a wholly owned subsidiary of Banco Santander Brasil, responsible for shared service centers for the Bank and other group companies in Brazil.
Alexandre Teixeira de Araujo . Mr. Araujo is Brazilian and was born on May 26, 1971. He has a degree in management from ESPM and a specialization in risk management from INSPER. He has worked at Banco Real since 1986 and has been with the Santander Group since 2009. Previously, he was Executive Superintendent of Risks responsible for managing Credit Risks for Small and Medium-Sized Companies, Governments, Institutions & Universities and Agribusinesses at Santander Brasil.
Ana Paula Vitali Janes Vescovi . Mrs. Vescovi is Brazilian and was born on April 8, 1969. She graduated in Economics from Universidade Federal do Espírito Santo, received a Master in Public Administration from the Brazilian School of Public Administration at Fundação Getúlio Vargas in Rio de Janeiro, a Master in Public Sector Economics from Universidade de Brasilia and a postgraduate in Public Policies and Government Management from the National School of Public Administration. 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 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.
André Juaçaba de Almeida . Mr. Almeida is Brazilian, born on September 27, 1974. He holds a degree in economic sciences from Universidade Candido Mendes. Prior to joining Santander Brasil, Mr. Almeida held positions in structured transactions at Citibank and at Goldman Sachs in the commercial area of Foreign Exchange Derivatives, Interest and Commodities. As one of our officers, Mr. Almeida is responsible for the relationships with large corporates – Banking, within the Corporate & Investment Banking division.
Camila Stolf Toledo . Mrs. Toledo is Brazilian and was born on July 23, 1979. She has a degree in administration from Fundação Getúlio Vargas. Working at Santander Brasil since 2018, she held the position of statutory officer at Santander Corretora de Câmbio e Valores Mobiliários S.A. and since 2023 she has served as Head of Investor Relations and Market Intelligence at the Bank.
Carlos Aguiar Neto . Mr. Aguiar is Brazilian and was born on March 5, 1971. He holds a degree in Electrical Engineering from Fundação Armando Alvares Penteado with specialization in Business Administration from Fundação Getúlio Vargas. From 1996 to 2007, he worked as Treasurer of Cargill Agrícola S.A., officer of Cargill Previdência and Executive Officer of Banco Cargill 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 an Executive Officer of ABAG (Associação Brasileira do Agronegócio), a member of COSAG (Conselho Superior do Agronegócio da Fiesp) and a member 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 an Executive Officer of Banco Bandepe S.A.
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Celso Mateus de Queiroz . Mr. Queiroz is Brazilian, 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, Mr. Queiroz held management positions at Banco Real S.A. As one of our officers, Mr. Queiroz is responsible for the group’s subsidiary, SANB Promotora de Vendas e Cobrança.
Cezar Augusto Janikian . Mr. Janikian is Brazilian, born on January 7, 1974. He graduated in Economics from Universidade Mackenzie and has a postgraduate degree in Business Administration from Fundação Getulio Vargas in São Paulo. He began his career at ABN Real S.A., moving to the Santander conglomerate in August 2009. He was CEO of Banco Hyundai Capital Brasil between 2019 and January 2022. He currently serves as a member of the Board of Directors of Banco Hyundai Capital Brasil S.A., CAR10 Tecnologia e Informação S.A., Loop Gestão de Pátios S.A., Santander Auto S.A. and Webmotors S.A., and acts as a member of the Board of Directors and also Executive Officer of Banco RCI Brasil S.A. and Solution 4Fleet Consultoria Empresarial S.A.
Claudenice Lopes Duarte . Ms. 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 executive officers, she is currently responsible for Internal and External Communications at Santander Brasil.
Claudia Chaves Sampaio . Ms. Sampaio is Brazilian and was born on December 6, 1982. She has a degree in management from FIEO and an MBA in finance from Fundação Getúlio Vargas. She has been at Santander Brasil since 2007, working in business areas such as Consumer Finance, Retail and Cards. She was a Manager at Santander Consórcios between 2022 and 2024. Currently, Ms. Sampaio is responsible for multichannel management for the Bank.
Daniel Mendonça Pareto . Mr. Pareto is Brazilian and was born on July 4, 1978. He graduated in Law from the Federal University of Rio de Janeiro. Between 2001 and 2006 he was a lawyer at Companhia Distribuidora de Gás do Rio de Janeiro – CEG and between 2008 and 2015 he was part of the legal department of SulAmérica S.A. occupying the positions of Corporate Governance Consultant, Manager and later Legal Superintendent, responsible for Corporate Legal, Legal M&A and Corporate Governance, as well as Head of Compliance between 2013 and 2015. At Santander Brasil since 2015, he has been a member of Santander Brasil’s Board of Officers since 2023, being responsible for Corporate Legal (Contracts, Consulting, Corporate and Governance). Between 2021 and 2022 he was president of the Board of Directors of Toro CTVM. Since December 2023, he has been a member of the Board of Directors of CSD BR – Registradora.
Eduardo Alvarez Garrido . Mr. Garrido is Spanish and was born on July 6, 1973. He earned a double degree in law and business administration from the Universidad Pontificia Comillas in Madrid. He worked as a strategy consultant and as an executive of private equity funds. During his first tenure at Santander Brasil (2007-2014), he was Head of the Consumer Finance unit and later senior head in the Retail Banking unit. After returning to Santander Brasil in 2022, he became senior head of strategy. Currently, as one of our executive officers, he is responsible for the Subsidiaries, Innovation and NPS area.
Eduardo Luis Sasaki . Mr. Sasaki is Brazilian and was born on March 3, 1974. He has a degree in Production Engineering from FEI and a postgraduate degree in Business Administration from Fundação Getúlio Vargas. At Santander Brasil since 2018 he was Executive Superintendent of the Data & Analytics area, responsible for accelerating the intensive use of the Bank’s data environment by the business areas.
Enrique César Suárez Fragata Lopes . Mr. Lopes is Brazilian, born on September 20, 1983. He holds a degree in Computer Science from the Federal University of São Carlos, an MBA from Fundação Getúlio Vargas and a full-time MBA from New York University - Leonard N. Stern School of Business. At Santander Brasil since 2019, he has been Executive Superintendent responsible for the construction of the Remote Channel (and SX Negócios) and is currently the Retail CFO responsible for FP&A, Incentives, Pricing, and Expenses, in addition to SHI (Santander Holding Imobiliária), and a member of the board of directors of Santander Auto.
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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 as Senior Manager of Products and Marketing. He worked for 13 years in Argentina, Italy and Spain, being 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 the Small & Medium Companies.
Geraldo José Rodrigues Alckmin Neto . Mr. Rodrigues is Brazilian and was born on September 8, 1981 in Pindamonhangaba in the State of São Paulo. He holds a degree in business administration from the Pontifícia Universidade Católica of São Paulo. At Santander Brasil, he has served as executive superintendent since 2013, having been responsible for the Bank’s Insurance business in Brazil, for the individuals Segment area and later for the Bank’s retail operation in the countryside of the State of São Paulo, and in his last responsibility as executive superintendent he led the Digital Business area. Between 2008 and 2013, he was Executive Superintendent of Insurance at Banco Santander Mexico, participating in the “Future Leaders” program. From 2004 to 2008, he served as relationship manager and foreign trade specialist at Santander Brasil. As one of our officers since 2020, he is currently responsible for the Bank’s Individual business and Esfera, Santander's Loyalty company. Prior to that, he was responsible for Retail Investment Distribution and Santander Select.
Gustavo de Sousa Santos . Mr. Santos is Brazilian and was born on November 3, 1982. He has a degree in business administration from Fundação Armando Álvares Penteado and a postgraduate degree in finance from INSPER and an Executive MBA from Fundação Dom Cabral. He began his career at Banco Real, working in the areas of Controllership, Strategy and Finance. At Santander Brasil since 2008, he worked in several areas in Finance, where he was statutory director of Aymoré CFI S.A., and in Retail, as executive superintendent of the areas of Individuals, Digital Business, Remote Channel and CRM. As one of our executive officers, he is currently responsible for the Mass segment. In the Santander Group he also served as a member of the Board of Directors of Webmotors, Banco RCI, Loop and Santander Auto between 2018 and 2020. Currently, Mr. Santos is our officer responsible for the area of Cards and Digital Payments.
Izabella Ferreira Costa Belisario . Ms. Ferreira Costa Belisario is Brazilian and was born on February 8, 1982. She has a degree in management from the Federal University of Minas Gerais and a postgraduate degree in finance management from INSPER and an MBA in information technology management from FIAP. At Santander Brasil since 2006, she was Executive Superintendent of the Channels Platform area, responsible for the customer experience on digital channels, and, more recently, Executive Superintendent of the Consumer Solutions Platform area, responsible for managing the entire individual customer products operation.
Jean Paulo Kambourakis . Mr. Kambourakis is Brazilian and was born on May 9, 1980. He has a degree in electrical engineering from the Polytechnic School of the University of São Paulo and in business administration from Fundação Getúlio Vargas. In the financial sector, he began his career at Banco Real, where between 2004 and 2006 he worked on transformation projects. He has been at Santander since 2006, where he also led transformation projects, and dedicated nine years (2011 to 2019) in Expenses and Efficiency, the last four as leader of this topic in the organization. From 2020 to 2023 he was responsible for the Securitization area, developing important results in NPL investments. Since April 2023 he has been the executive officer responsible for the retail bank’s Recoveries and Collections business. Currently, Mr. Kambourakis is responsible for the management control and financing platform.
Leonardo Mendes Cabral. Mr. Cabral is Brazilian and has a bachelor’s degree in engineering from the Brazilian Military Institute of Engineering, and holds an MBA from Stanford University. He has served as director of M&A operations for Banco Credit Suisse and AMBEV. He was an officer of the BNDES’ privatization area. He recently held the position of investments and capital markets officer at Credit Suisse. As one of our executive officers, he is responsible for the Corporate and Investment Banking area.
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 executive officers, Ms. de Aguiar Barros is currently responsible for the Payroll Loans area.
Marcelo Aleixo. Mr. Aleixo is Brazilian and was born on January 30, 1967. He has a degree in administration from Faculdade Integrada Campos Salles and a postgraduate degree in Finance and a master’s degree in Administration from Fundação Getúlio Vargas. At Grupo Santander since 2008, he has worked in several areas of the Bank, and most recently was CEO of Ben Benefícios from 2018 until 2024. He is currently responsible for the Bank’s consortia and capitalization area and also participates on the Board of Directors of Pluxee Brasil.
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Marcos Jose Maia da Silva. Mr. Maia is Brazilian and was born on March 29, 1971. He holds a degree in business administration from Faculdade Santanense and an MBA in Finance from the University of São Paulo. With over 30 years at the Santander Group, he has built a career with experience across various areas of the Bank. Most recently, he was the superintendent responsible for Santander Brasil’s call center and has served as CEO of SX Negócios since 2021.
Mariana Cahen Margulies. Mrs. Cahen is Brazilian and was born on October 18, 1980. She has an undergraduate degree in administration from EAESP - Fundação Getúlio Vargas and an MBA from Insead (France). At Grupo Santander since 2008, she has worked in various areas of the Bank, most recently as Executive Superintendent of Equities Brasil, responsible for the business with institutional clients and with responsibility for the equity research area.
Marilize Ferrazza Santinoni . Ms. Santinoni is Brazilian and was born on November 20, 1965. She holds a degree in Business Administration from the Universidade de Ijui in Rio Grande do Sul and an MBA in business management from Fundação Getúlio Vargas, Passo Fund, Rio Grande do Sul. She has been an employee of Santander Brasil 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 executive officers, she is responsible for the banking network of Paraná and the northern region of Santa Catarina for Santander Brasil.
Michele Soares Ishii. Mrs. Ishii is Brazilian and was born on October 11, 1978. She has a degree in pedagogy from the University of São Paulo and has been at Santander Brasil since 2015, working in the human resources area. She is currently responsible for development, implementation and management of remuneration, performance and people analytics in the People & Culture vice-presidency of Santander Brasil.
Paulo César Ferreira de Lima Alves . Mr. Alves is Brazilian, born on October 18, 1968. He holds a degree in economics from the Universidade de Fortaleza – UNIFOR and a postgraduate degree in Financial Management and Controllership from the Fundação Getúlio Vargas. Prior to joining Santander Brasil, Mr. Alves held management positions at Banco ABN AMRO Real S.A. As one of our officers, he is currently responsible for our banking network in the northeast of Brazil.
Paulo Fernando Alves Lima. Mr. Lima is Brazilian and was born on April 5, 1976. He holds a degree in management from Fundação Getúlio Vargas in São Paulo. At Santander Brasil since 2006, he was responsible for the areas of operations with the infrastructure sector and more recently as responsible for the recovery area of corporate portfolios. As one of our executive officers, Mr. Lima is responsible for Wholesale risk management.
Paulo Sérgio Duailibi . Mr. Duailibi is Brazilian, born on September 28, 1966. He holds a degree in business administration from the Federal University of Minas Gerais and a master's degree in business administration from Fundação Getúlio Vargas. Before joining Santander Brasil, Mr. Duailibi held management positions at Banco J. Safra S.A., BankBoston Banco Múltiplo S.A and Citibank N.A. He was Vice-President of the Board of Directors and Effective Member of the Deliberative Council of the Associação Brasileira das Empresas de Crédito Imobiliário e Poupança. As one of our officers, Mr. Duailibi is responsible for Products for Legal Entities, such as Cash Management, Loans, Current Accounts, Services and Guarantees, and the Real Estate Business area. He is also Executive Officer of Santander Holding Imobiliária since 2020 and Chief Executive Officer of Santander Leasing S.A Arrendamento Mercantil since April 2024. He is also a member of the Board of Directors of Webmotors S.A, deputy member of Banco RCI Brasil S.A since August 2024 and deputy member of Tecban since April 2024.
Rafael Abujamra Kappaz . Mr. Kappaz is Brazilian, born on October 12, 1980, and has a degree in Civil Engineering from Escola de Engenharia Mauá and a master's degree in Finance from Fundação Getúlio Vargas for Finance and Capital Markets. In a 22-year career at Grupo Santander, he held various positions, including in Madrid and London. At Santander Brasil, he worked in several areas of the bank, such as Asset Management, Banking and Custody and for 10 years he has worked in the Markets department. In 2024, he was appointed as Markets head and treasurer of Santander Brasil.
Ramon Sanchez Santiago . Mr. 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.
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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 for Arthur Andersen Consultoria Fiscal Financeira S/C Ltda. from 1990 to 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 accounting processes. He also serves as Administrator of Santander Brasil Administradora de Consórcio Ltda. and Summer Empreendimentos Ltda., as Executive Officer of Aymoré Crédito, Financiamento e Investimento S.A., Banco Bandepe S.A., Sancap Investimentos e Participações S.A., Santander Leasing S.A. Arrendamento Mercantil and Santander Global Cards & Digital Solutions Brasil S.A., and as Vice President Officer of Santander Corretora de Seguros, Investimentos e Serviços S.A.
Ricardo de Oliveira Contrucci . Mr. Contrucci is Brazilian and was born on May 12, 1975. He is a Computer Engineer graduated from the Pontifícia Universidade Católica of Paraná. With over 27 years of experience in IT and Internet applications, he has worked at Accenture, Everis, Microsoft, Groupon, ClickBus, and AWS, always in leadership positions. Since 2022, he has been with the Santander Group, where he is responsible for Enterprise Architecture, Technology Strategy, and Culture of Innovation in the VP of Technology & Operations.
Ricardo Olivare de Magalhães . Mr. Olivare is Brazilian and was born on January 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. Has been an employee of Banco Santander (Brasil) S.A. since 2001 and held several positions in the Santander Brasil’s credit area. In 2008 he was CRM Deputy Officer at Banco Santander México and as Officer 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 Aymoré Crédito, Financiamento e Investimento S.A. He currently holds a position as officer at Aymoré Crédito, Financiamento e Investimento S.A. and Webmotors S.A. and also is a deputy member of the Board of Directors of Banco RCI Brasil S.A. As one of our executive officers, he is responsible for the credit risk analysis area for the retail segment.
Richard Flavio da Silva . Mr. da Silva is Brazilian and was born on June 3, 1976. He holds a degree in computer science from USP, a postgraduate degree in business administration from Fundação Getúlio Vargas in São Paulo and a master’s degree in information security from USP. At Santander Brasil since 2016, he was Executive Superintendent of the Technology area responsible for the strategy and transformation of IT and Santander Brasil’s Cyber Security operation. As one of our executive officers Mr. da Silva is responsible for Santander Brasil’s Cyber Security and currently is our CIO.
Robson de Souza Rezende . Mr. Rezende is Brazilian and was born on January 24, 1967. He holds a degree in Statistics from Associação – Salgado de Oliveira de Educação e Cultura in Niteroi in the state of Rio de Janeiro and an MBA in Marketing from ESPM-SP. He began his career at Unibanco, where he worked between 1985 and 1999 in the Management of Agencies and later in the Human Resources Area working in Training and Development with a focus on the Agencies of Unibanco. Mr. Rezende joined Santander Brasil in 1999. From 1999 to 2003, he served as a Superintendent of Human Resources. From 2003 to 2008, he served as Regional Superintendent. From 2008 to 2010, he worked as Superintendent of Commercial Models, during which time he participated in the integration 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 executive officers, he is currently responsible for the Commercial Retail Network.
Rudolf Gschliffner. Mr. Gschliffner is Brazilian and was born on September 20, 1983. He has a degree in administration from Fundação Armando Alves Penteado and a postgraduate degree in economics from Fundação Getúlio Vargas. At Grupo Santander since 2006, he has worked in various roles related to resource management and private banking. He is currently also the CEO of Santander Brasil Gestora de Recursos.
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’s 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 in New York. Currently he is the Officer responsible for Global Debt Financing structure, managing the activities of Debt Capital Markets.
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Sandro Mazerino Sobral . Mr. Sobral 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 our capital markets and trading area, being responsible for managing the portfolios of fixed income, inflation, volatility, FX and equities. Since 2017, he has been responsible for the trading desks, including all market portfolios in fixed Income, equities, and foreign exchange. From July 2024, he became the Officer responsible for ALM financial management.
Thomaz Antonio Licarião Rocha . Mr. Licarião Rocha is Brazilian, born on March 2, 1977. He has a degree in advertising and marketing from the Escola Superior de Propaganda e Marketing. He has been at the Santander Group since 2000, having several roles related to the commercial area of the Bank. As one of our officers, he is currently responsible for Assets and Risks Platform and for the Retail Distribution team.
Vanessa Alessi Manzi . Mrs. Manzi is Brazilian and was born on May 12, 1975. She is a lawyer with a Master’s Degree in Law from Insper and has more than 25 years of experience in the national and international financial market and banking industry in the areas of Compliance, Legal, Internal Controls and Risk Management of which 10 years have been in regional positions (Latin America). She was the Compliance Officer and Legal Officer at Banco Cetelem from 2010 to 2021 and served as Vice President of Compliance at Nubank between 2021 and 2023. As one of our Officers, she is responsible for our Compliance department.
Vitor Ohtsuki . Mr. Ohtsuki is Brazilian and was born on June 5, 1977. He graduated in Production Engineering from Universidade de São Paulo. He has an MBA in Marketing from Universidade de São Paulo and a Master’s Degree in Global Management from Stanford University. At Santander Brasil since 2004, he has served as Private Banking Head, Executive Superintendent of Wealth Management, Private Banking Superintendent, Executive Manager and General Manager. Also, he served as Marketing Manager at Banco Citibank S.A. from 2000 to 2004. Currently, he is the Officer responsible for Private Banking.
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.
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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 consistent with the interests of our shareholders, long-term value creation and 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 Directors and Officers at the annual shareholders’ meeting. The compensation of the members of our Audit Committee is established by our Board of 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:
Board of Directors
All members of our Board of Directors are entitled to fixed compensation composed of monthly payments and benefits within the limit approved at our annual general shareholders’ meeting. In exceptional cases, the Chairman of our Board of Directors may also receive an annual variable compensation for his or her duties, as determined by the Compensation Committee and the Board of Directors, within the annual limit set forth at the annual 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 and/or clawback clauses with the possibility of reducing and/or returning up to 100% of the value of the variable compensation.
In the event that a member of the Board of Directors is also a member of our audit committee, pursuant to the applicable regulations and the internal rules of the audit committee, such member must choose to receive the compensation package of either the board of directors or the audit committee.
Board of Executive Officers
Our executive officers are entitled to fixed compensation composed of monthly payments, benefits, pensions and variable compensation, always within the overall limit of annual compensation, 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 observing the malus 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.
For expatriate executive officers, we may offer expatriation benefits such as housing allowance, school assistance, among others. The benefits aim to attract and retain professionals with the skills and experience required for the position.
Audit Committee
The members of our audit committee are entitled to fixed compensation consisting of monthly fees, as established by the Board of Directors. However, according to the applicable regulations and internal rules of the committee itself, if a member of the Board of Directors is also a member of the audit committee, such member should elect to receive compensation in relation to their functions for either the Board of Directors or the audit committee.
Fiscal Council
Our Fiscal Council is a non-permanent body. Members of our fiscal council elected at the general shareholders’ meeting held on April 29, 2022 were entitled to fixed compensation composed of monthly fees in the amount approved on that date, payable until April 28, 2023, the date of our 2023 general shareholders’ meeting and the final date of their term. At this meeting, we did not receive sufficient votes to reelect or maintain the Fiscal Council.
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 Board of Executive Officers are entitled to this compensation.
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Compensation Plan Overview
At the general shareholders meeting held on April 26, 2024, the compensation limit was set up to R$500.0 million for our Directors and Executive Officers and R$4.0 million for our Audit Committee for the 12-month period starting on January 1, 2024, as proposed by the Board of Directors at the meeting held on March 20, 2024. Our Fiscal Council is a non-permanent body and was not reinstalled at the general shareholders’ meeting held on April 26, 2024. For the year ended December 31, 2024, members of our Board of Directors and Executive Officers received a total of approximately R$473.0 million and members of our audit committee received a total of approximately R$3.9 million. The total amount of contributions for pension plans of our Board of Directors and Executive Officers in 2024 was R$94.8 million.
Under 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 the years ended December 31, 2024, 2023 and 2022:
| Board of Executive Officers | Board of Directors | Fiscal Council | |||||||||||||||
| As of and For the Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |||||||||
| Nº of members | 58.00 | 48.00 | 50.00 | 11.00 | 11.00 | 10.00 | — | 0.00 | 6.00 | ||||||||
| Nº of paid members | 51.75 | 50.75 | 50.25 | 7.67 | 6.67 | 5.00 | — | 2.17 | 3.00 | ||||||||
| Value of highest compensation ( reais ) | 37,258,198.61 | 30,554,700.67 | 21,122,291.48 | 2,875,920.00 | 3,744,600.14 | 11,559,693.20 | — | 71,910.00 | 176,179.50 | ||||||||
| Value of lowest compensation ( reais )(1) | 3,731,101.03 | 2,651,048.90 | 2,407,487.32 | 1,095,000.00 | 1,020,000.00 | 805,000.00 | — | N/A | 176,179.50 | ||||||||
| Average value of compensation ( reais ) | 8,510,292.07 | 7,095,869.80 | 6,080,294.50 | 1,342,946.56 | 1,747,885.05 | 3,014,657.47 | — | 66,747.23 | 176,179.50 | ||||||||
| (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 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 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 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.
Deferral Program
Our deferral program is available to our Statutory Officers, Officers in positions of management and certain other eligible employees. As part of the deferral program, 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. The 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.
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Pursuant to Brazilian law, variable 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 three years. These rules became effective as from January 1, 2012. The following table summarizes the rules of payment of variable compensation taking as an example the exercise ended on December 31, 2024.
| 2025 | 2026 | 2027 | 2028 | 2029 |
| At the time of the award | Deferred | |||
| 30% in cash | Remaining 20% in cash | |||
| Payment calculated on 1/4 cash awarded | Payment calculated on 1/4 cash awarded | Payment calculated on 1/4 cash awarded | Payment calculated on 1/4 cash awarded | |
| 30% in share-based instruments (with one year lockup) | Remaining 20% in share-based instruments (with one year lockup) | |||
| Payment calculated on 1/4 instruments awarded | Payment calculated on 1/4 instruments awarded | Payment calculated on 1/4 instruments awarded | Payment calculated on 1/4 instruments awarded | |
The deferral percentage will also depend on the level of variable compensation received in the year and function held within Santander Brasil, with the abovementioned criteria applied as minimum. For our senior leadership, the deferral period can reach up to five years.
In addition, pursuant to Brazilian law, all deferral plans are subject to the application of malus/clawback, which means that our board of directors, upon the recommendation of the Compensation Committee and after the evaluation of the Malus/Clawback Committee (which is responsible for advising our compensation committee on the application of the malus/clawback to compensation, among other matters), may reduce in up to 100% the amount due to each participant in certain cases previously approved by our internal governance bodies.
On November 29, 2023, our board of directors approved our clawback policy, an English translation of which is attached to this annual report as Exhibit 97.1. This policy includes rules relating to the clawback of incentive-based compensation to subject executives, in the event of a restatement of our financial statements as a result of material failure to comply with financial reporting requirements under applicable U.S. federal securities laws. This policy is intended to comply with the requirements of Section 10D of the Exchange Act and New York Stock Exchange rules.
On September 19, 2024, a new version of our compensation policy was approved by our board of directors. Among other changes, this version includes: (i) information that there is a global limit on the annual remuneration for senior management, approved at the annual general meeting; (ii) the inclusion of the new pension program, Santander Sócios, which replaces Santander Plus and has similar characteristics; (iii) an update to the matching table, adding a line for those with six full years in the plan; and (iv) mention of qualitative and risk management indicators in the program for measuring individual performance.
We renew and update our deferral program every year. As of December 31, 2024, we had six plans outstanding: one for each fiscal year: 2019, 2020, 2021, 2022, 2023 and 2024. As of December 31, 2024, we recorded total expenses of R$252 million in connection with our deferral program, as compared to total expenses of R$210 million in the year ended December 31, 2023.
2019-2021 Deferral Programs
Since 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 (ticker: SANB11).
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2022 Deferral Program
Since 2022, our deferral program was revised as follows:
| • | Collective Identified : Applicable to statutory officers and executives who oversee 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 Rate, 50% in units (ticker: SANB11). |
| • | Other Employees : Individuals with variable compensation above a minimum established value are eligible to receive such compensation according to a specific deferral model, to be paid 50% in cash, indexed to 100% of the CDI Rate, and 50% in units (ticker: SANB11). |
2023 Deferral Program
Since 2023, our deferral programs were revised and remain as follows:
| • | Collective Identified : Applicable to statutory officers and executives who oversee 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 Rate, 50% in share-based instruments. |
| • | Other Employees : Individuals with variable compensation above a minimum established value are eligible to receive such compensation according to a specific deferral model, to be paid 50% in cash, indexed to 100% of the CDI Rate, and 50% in share-based instruments. |
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 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 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, which last three years, and foster our executive officers and executives’ commitment to our long-term results. Members of the Board of Directors can only participate if they are Executive Officers.
Our long-term programs are divided into local and global plans. Each plan has specific performance indicators and conditions to best maintain the participant’s employment relationship until the payment date in order to be entitled to the receipt. Payments are calculated based on the percentage of achievement of the indicators applied on the reference value (target).
Local Long-Term Incentive Program
We have retention plans for key positions and payments of these plans can be made in cash or in units (ticker: SANB11), 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.
Until 2022, the settlement value of units
was calculated based the average price of the last 15 trading sessions immediately prior to the month of payment of the plan. This criteria
was changed from 2023 onwards to the average price of the last 50 trading sessions immediately prior to the month of payment. 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 noncompliance with internal rules and
exposure to excessive risks.
For the year ended December 31, 2024, we incurred expenses of R$4.3 million, with respect to our local long-term incentive program, compared to total expenses of R$16.4 million in the year ended December 31, 2023.
Global Long-Term Incentive Program
We currently have three global plans
launched in 2019, 2020, 2021, 2022 and 2023. Eligible executives had an incentive target set in
reais
. Payments according to the
achievement of performance indicators are made in shares and options after a minimum deferral period of three years, with equivalent
settlement in
reais
.
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For the year ended December 31, 2024, we incurred expenses of R$5.1 million in connection with our global long-term incentive program, compared to total expenses of R$5.6 million in 2023.
Contract Termination
Employment contracts are entered into for an undefined term. The termination of the employment relationship for nonfulfillment 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, SBPrev, while they are affiliated with Santander Brasil.
In 2024, we adopted the Santander Sócios pension plan, exclusive to Santander Brasil members. This pension plan has rules similar to the Santander Plus plan, which was discontinued. For further information, please see “—D. Employees.”
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6C. Board Practices
Our shareholders elect members of our Board of Directors at the annual general shareholders’ meeting for two-year terms (members may be reelected). The Board of Directors appoints our executive officers for two-year terms (members may be reelected).
The current members of the Board of Directors were elected at the ordinary shareholders’ meeting held on April 28, 2023, at the extraordinary shareholders’ meeting held on June 30, 2023 and at the extraordinary shareholders’ meeting held on August 30, 2024, to serve until the ordinary shareholders’ meeting to be held in 2025. The current Executive Officers were elected at Board of Directors meetings held on May 12, 2023, July 3, 2023, December 26, 2023, January 2, 2024 and March 6, 2024 for terms of office until the first Board of Directors meeting that occurs after the ordinary shareholders’ meeting of 2025. The Board of Directors usually meets nine times a year, but meetings may be held more frequently as the discretion of the Chairman of the Board of Directors. The Executive Officers meet as often as required by the Chief Executive Officer, or a designated person.
On May 27, 2020, our Board of Directors approved its regulations, which can be accessed by shareholders on the website www.santander.com.br/ri, in the section entitled “Corporate 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, as a publicly held company, is voluntary. Our By-Laws provide for a nonpermanent fiscal council, which can be installed at the request of shareholders, representing at least one percent of the voting shares or two percent of the nonvoting shares. The fiscal council was not installed at any of our shareholders’ meeting held during 2024.
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.
Board Advisory Committees
Audit Committee
Under 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.”
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).
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Our audit committee has as its main functions:
| • | to advise the board of directors on the engagement or replacement of the independent auditor; |
| • | to review, prior to publication, the interim financial statements, including the notes, the management report and the opinion of the independent auditor; |
| • | 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 independent or internal auditors; |
| • | to prepare, at the end of the six-month period ended on June 30 and December 31 of each year, the report of the audit committee, meeting the applicable legal and regulatory provisions; and |
| • | to receive and review the reports required by the regulatory bodies concerning the activities of the ombudsman, on each June 30 and December 31 or when a material event is identified. |
The current members of the audit committee are Pedro Augusto de Melo, who acts as coordinator, Maria Elena Cardoso Figueira, who acts as financial expert, Andrea Maria Ramos Leonel, Luiz Carlos Nannini, and René Luiz Grande. Our audit committee meets ordinarily once a month. The current members of the audit committee were appointed on May 2, 2024 to serve for a one-year term.
Set forth below are the biographies of the members of our audit committee:
Pedro Augusto de Melo . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Maria Elena Cardoso Figueira . Mrs. Figueira is Brazilian, born on November 29, 1965. She graduated in economics by the Pontifícia Universidade Católica of Rio de Janeiro. Mrs. Figueira is a board member, tax advisor and member of an audit committee certified by the IBGC (Brazilian Institute of Corporate Governance) and partner at Figueira Consultoria, her individual consultancy company. Mrs. Figueira participated in training programs in Brazil (through ISE, FAAP, KPMG, Gonew and IBGC) and abroad (through IESE, IE and the IBGC – Jornada Técnica Israel, Canada and China) and has extensive professional experience in the financial and tax area, including Arthur Andersen, Banco Bilbao Vizcaya, KPMG, Santander (in Brazil, as associated officer in charge of tax planning and, in Spain, from April 2012 to May 2014, where she worked in the Tax Department Financial Regulation and Accounting Standards with a focus on capital allocation). Mrs. Figueira served as a member of audit and risk committees and advisory and fiscal councils of: Santander Brasil; HSBC Brasil S.A. - Investment Bank; Banco HSBC Brasil S.A. - Banco Múltiplo; Br Properties S.A.; B3 S.A. and Lojas Americanas S.A. Mrs. Figueira is an associate member and participant of the Independent Appeals Board and coordinator of the IBGC Audit Committee Course, member of the Womens Corporate Directors – WCD - Brazil chapter. Currently, in addition to Santander Brasil S.A., she is a member of the Audit and Risk Committee of Hospital Sírio Libanês, Hob Eventos, Treinamentos e Publicações and Fiscal Advisor to Camil Alimentos S.A. and CEBDS – Brazilian Business Council for Sustainable Development.
Andrea Maria Ramos Leonel . Ms. Leonel is Brazilian, born on February 2, 1965. She has a degree in economics from Fundação Armando Penteado and a postgraduate degree from Fundação Getúlio Vargas, with several professional development and improvement courses in local and international institutions and an Independent Counselor certificate from the IBGC. She is currently an Independent Advisor to Nuclea/CRT4 (CIP S.A – banking technology company that provides regulatory services to the financial market), BDMG Banco de Desenvolvimento de Minas Gerais, Coordinator of the Independent Committee (Advisory Board) of iFood Pago, as well as a member of the Audit Committee at Santander Brasil. She is also an alternate member of the Fiscal Council of Natura & Co. She serves on the Advisory Committees (People and Risk) of the boards of directors of which she is a member. She recently coordinated the Related Party Transactions Committee at Nuclea, was a member of the Advisory Board at Tarjab Incorporadora Ltda and President of the Board of Directors of Banco da Amazônia BASA. She has been a financial market executive for 30 years in international and global institutions, such as Banco JP Morgan, Deutsche and Citibank, having worked regionally (Latin America) as a Managing Director, including in statutory positions. She was Senior Consultant for Latin America, with the World Bank IFC, focusing on financial development projects in Latin America. She participates, pro-bono, in non-profit organizations and is an activist for gender equity in the corporate world and the participation of women in leadership positions, which she does through her work at Andrea Leonel Consultoria Ltda.
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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. Furthermore, Mr. Nannini has significant experience in audit committees and fiscal councils of publicly held Brazilian companies. He is a member of our Audit Committee.
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 Analyst from 1975 to 1978; Technical Assistant from 1978 to 1989; Inspection Supervisor from 1989 to 1999; Head of the Banking Supervisory and Technical Department from 1999 to 2003; and Deputy 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 Head of Human Resources with the Companhia Brasileira de Embalagens Metálicas BRASILATA from 1973 to 1975. At Banco Santander (Brasil) S.A., Mr. Grande was Coordinator of the audit committee between the years 2012 and 2017, a member of the Risks and Compliance Committee between January 2018 and June 2020, and is currently a member of the Audit Committee.
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, 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 competent and independent judgment regarding our internal compensation policy and the repercussions of this internal compensation policy on 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 management and make proposals to our board of directors regarding policies for variable and fixed compensation, benefits, and special programs for recruiting and terminations; |
| • | to supervise the implementation and coming into operation of the compensation policy for our management; |
| • | to propose to the board of directors the aggregate compensation of our management to be submitted to the general meeting, pursuant to Article 152 of Brazilian Corporate Law; |
| • | to analyze our internal officer and board compensation policies and procedures in comparison with market practice, and recommend changes to align our policies with market practice if significant differences from market practice are identified; |
| • | to prepare annually, within 90 days as from December 31 of each year, the compensation committee report, in accordance with applicable statutory and regulatory provisions; and |
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| • | to ensure that the management compensation policy is compatible with our risk management policy, the goals and current and expected financial condition, as well as with the provisions set forth in applicable regulatory provisions and regulations published by the Brazilian Central Bank. |
The current members of the compensation committee are Deborah Patricia Wright, who acts as coordinator, Deborah Stern Vieitas, Luiz Fernando Sanzogo Giorgi and Vanessa de Souza Lobato Barbosa. The current members of the compensation committee were appointed on May 25, 2023 to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2025.
Set forth below are the biographies of the members of our compensation committee:
Deborah Patricia Wright . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Deborah Stern Vieitas . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Luiz Fernando Sanzogo Giorgi . Mr. Giorgi is Brazilian, born on September 3, 1964. He holds a degree in business administration from Fundação Armando Álvares Penteado (FAAP), with more than 30 years of experience in management and leadership. He began 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 1996 he worked as a consultant and officer of the Hay Group and from 1996 to 2003 as President of Hay Group Brasil and also a partner in the global group. From 2003 to 2005 he worked for the Suzano Group, as Vice-President of Suzano Holding. Mr. Giorgi was a member of the Administration Committee of the Board of Directors of Suzano Papel e Celulose, CEO of Suzano Petroquímica and full member of the Board of Directors of Petroflex. In September 2005 he founded LFG – Business Management and Leadership Advisory. From 2007 to 2015, Mr. Giorgi served as a member of the Board of Directors of Santher S.A.; from 2007 to 2011 he served as a full member of the Board of Directors of J. Macedo Alimentos S.A.; in 2008 from Vix Logística S.A.; from 2008 to 2016 as a member of the Boards of Directors of Vonpar S.A and Empresas Concremat; from 2016 to 2019 as a member of the Advisory Board of Heads Agência de Propaganda; from 2016 to 2020 as member of the Board of Directors of Arezzo&Co S.A.; and from 2018 to 2020 as a member of the Advisory Board of Portocred S.A. From 2007 to 2008 he served as a member of the Human Resources Committee of Grupo Libra S.A.; in 2013 at Itautec S.A.; from 2013 to 2022 as a member of the Human Resources Committee of Sul América de Seguros S.A.; from 2014 to 2017 at Lojas Marisa S.A.; from 2016 to 2020 as a member of the People, Culture and Governance Committee AREZZO&CO S.A; from 2021 to 2022 as a member of the Remuneration Committee of Klabin S.A. Currently, Mr. Giorgi is a member of the Board of Directors of Teadit S.A., Be8 S.A. and NK Store. Mr. Giorgi also holds the position of member of the Remuneration and Sustainability Committee of TIGRE S.A.; People and Governance Committee of Martins Atacadista S.A., People Committee of Grupo Rodobens S.A.; People, Culture and ESG Committee of GRUPO GLOBO S.A.; and People, Governance and Sustainability Committee of Be8 S.A. and also member of the Remuneration Committees of Santander Brasil.
Vanessa de Souza Lobato Barbosa . See “—A. Board of Directors and Board of Executive Officers—Members of the
Board of Directors.”
Risk and Compliance Committee
The Risk and Compliance Committee is a consultative body, which is responsible for advising our Board of Directors on subjects related to the policies, operational directions and methodologies of capital allocation, risk management and exposure edges, according to applicable regulations, as well as advising on compliance practices that enhance our management regarding transparency and monitoring of compliance functions of the institution. For more details about risk management, see the information under note 46, Risk Management of the financial statements.
The Risk and Compliance Committee is composed of three to six 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 the executive level. The term of office of each of the committee’s members is of two years, reelection 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.
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The current members of the risk and compliance committee are José de Paiva Ferreira (who acts as coordinator), José Mauricio Pereira Coelho, Jaime Leôncio Singer and Deborah Stern Vieitas. The current members of the risk and compliance committee were appointed on May 25, 2023 and May 2, 2024, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2025.
José de Paiva Ferreira . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
José Mauricio Pereira Coelho . Mr. Coelho has a bachelor’s degree in accounting from Unigranrio University, holds an MBA in finance and capital markets from Fundação Getulio Vargas in Rio de Janeiro, and received a specialization in corporate governance from Fundação Getulio Vargas in São Paulo. He currently is a member of the Board of Directors of Ultrapar since April 2015 and, since 2019, he has served as a member of the Audit and Risks Committee. He served as Chairman of the Board of Directors of Vale S.A from 2019 to 2021, CEO of Caixa de Previdência dos Funcionários do Banco do Brasil (Previ) from 2018 to 2021, and Chairman of the Deliberative Council of the Brazilian Association of Closed Complementary Pension Fund Entities ( Associação Brasileira das Entidades Fechadas de Previdência Complementar (ABRAPP)) from 2018 to 2021. Mr. Coelho was also a member of the Board of Directors of the Reinsurance Institute of Brazil ( Instituto Brasileiro de Resseguros ) from 2017 to 2019 and, between 2017 and 2018, he was a member of the Board of the National Confederation of Insurance Companies ( Confederação Nacional das Empresas de Seguros Gerais ), of Mapfre BB SH2 Participações S.A., of BB Mapfre SH1 Participações S.A. and of Brasilprev Seguros e Previdência S.A.
Jaime Leôncio Singer. Mr. Singer, a Brazilian citizen, was born on January 3, 1966. He has a master’s degree in Business Administration from Harvard Business School and a Bachelor’s degree in Economic Sciences from the Federal University of Rio de Janeiro. He has served as a member of various boards of directors (as an advisor certified by the IBGC) and advisory boards, as well as advisory committees to boards. He is also an ANBIMA-Certified Manager ( Certificação de Gestores ANBIMA ). Mr. Singer is an independent consultant with over 28 years of experience advising clients in the areas of corporate finance (M&A, capital market operations (debt and equity - IPOs and follow-ons) restructuring of financial liabilities and commercial partnerships), strategic planning and development corporate/new business in Brazil and in internationalization projects. He has had a long career in Brazilian and international financial institutions, having been responsible for the investment banking area of a European financial conglomerate in Brazil. Most recently, he held “C-level” positions at publicly traded companies. He has sectoral knowledge covers the industries of (i) Transport/Urban Mobility, (ii) Infrastructure, Logistics and Distribution of oil and gas, (iii) sanitation, (iv) electricity transmission, (v) agribusiness in general (highlighting animal protein, fertilizers and retail of agricultural products), (vi) banks/financial market, (vii) data analytics/big data and (vii) payments/acquiring with professional experience in small, medium and large companies, with family control, diffuse control (Brazilian corporations and multinational groups) and state control. Mr. Singer is currently a member of the Risk and Compliance Committee of Santander Brasil.
Deborah Stern Vieitas . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of
Directors.”
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 seven members, the majority of which must be independent and, preferably also members of the board of directors. The term of office is two years, reelection 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 Deborah Stern Vieitas (who acts as coordinator), Deborah Patricia Wright, Cristiana Almeida Pipponzi and Javier Maldonado Trinchant. The current members of the Nomination and Governance Committee were appointed on May 25, 2023, July 24, 2023 and January 2, 2025 to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2025.
Deborah Stern Vieitas . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Deborah Patricia Wright . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
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Cristiana Almeida Pipponzi . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Javier Maldonado Trinchant . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
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 comprises three to five members, and at least one of these members must be independent. The term of office is of two years, reelection 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 Marília Artimonte Rocca (who also acts as coordinator), Cristiana Almeida Pipponzi, Vivianne Naigeborin and Tasso Rezende de Azevedo. The current members of the sustainability committee were appointed on May 25, 2023, July 7, 2023 and January 2, 2025 to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2025.
Marília Artimonte Rocca . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Cristiana Almeida Pipponzi . See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Vivianne Naigeborin . Ms. Naigeborin is Brazilian and was born in 1964. She has a degree in dentistry from Universidade de São Paulo – USP and participated in the Yale World Fellows Program from Yale University. She actively participates in several fronts relating to the creation and development of productive inclusion initiatives, social entrepreneurship and impact businesses. In 2014 she was the only Brazilian elected Yale World Fellow by Yale University (USA) network of global leaders engaged in generating positive social changes in the world.
Tasso Rezende de Azevedo . Mr. Azevedo is Brazilian, born in 1972. He graduated as a forestry engineer from the Luiz de Queiroz School of Agriculture at the University of São Paulo. He is a socio-environmental entrepreneur and consultant in forestry, climate change and sustainability. Tasso is MAPBIOMAS Project, a platform that maps and monitors changes in land cover and use in Brazil and 13 other countries through a multi-institutional collaboration. He also coordinates the Conexão Povos da Floresta Network and was the co-creator and general coordinator of the Greenhouse Gas Emissions and Removal Estimation System (SEEG). He also serves as a visiting scholar at Princeton University and as a board member of several organizations, including the Rainforest Alliance, NEPCon, Imaflora, and the Energy and Environment Institute. Currently, Mr. Azevedo is a member of the Sustainability Committee of Santander Brasil.
Executive Committee
Our Executive Committee is made up of our Chief Executive Officer, Senior Vice President Executive Officers and Vice President Executive Officers. The Executive Committee is responsible for examining policies relating to business management, operational support, human resources and capital allocation. The Executive Committee also reviews our primary technological, infrastructure and services projects.
Contract Termination
Our employment agreements with members of our management are entered into for an unspecified term. The termination of these employment agreements voluntarily by members of our management, or as a result of their failure to comply with their obligations thereunder, does not entitle our managers to any financial compensation.
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6D. Employees
As of December 31, 2024, we had 55,646 full-time, permanent employees. The following table presents the breakdown of our full-time, permanent employees (in accordance with local criteria) at the dates indicated.
| As of December 31, | |||||
| 2024 | 2023 | 2022 | |||
| Administrative employees | 22,871 | 22,313 | 11,130 | ||
| Commercial areas employees | 32,775 | 33,298 | 41,473 | ||
| Total | 55,646 | 55,611 | 52,603 | ||
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, | |||||
| 2024 | 2023 | 2022 | |||
| Region | |||||
| Midwest | 1,633 | 1,584 | 1,526 | ||
| Northeast | 4,954 | 4,904 | 4,880 | ||
| North | 866 | 877 | 857 | ||
| Southeast | 35,535 | 36,383 | 29,076 | ||
| South | 12,502 | 11,863 | 3,392 | ||
| Other | 156 | — | 12,872 | ||
| Total | 55,646 | 55,611 | 52,603 | ||
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 based 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 a defined contribution pension plan that allows employees to contribute a portion of their wages, with the option for us to make contributions on their behalf. This plan provides retirement, disability, and death benefits, self-sponsorship, deferred proportional benefit, portability, and redemption, all governed by the plan’s regulations:
| • | Santander Previ —the Santander Previ pension plan has been closed to new enrollments since July 2018. As of December 31, 2024, the plan had 22,028 participants, with total assets under management of approximately R$5.17 billion. |
| • | SBPrev — in January 2018, the SBPrev pension plan, administered by Zurich Santander Brasil Seguros e Previdência, was introduced for new employees and members. As of December 31, 2024, the SBPrev plan had 8,595 registered participants, with total assets under management of R$290.6 million. |
| • | Santander Sócios —in January 2024, we launched the Santander Sócios Program, which provides a supplementary pension benefit for the senior management of Santander Brasil, covering retirement, disability, and death benefits. |
For further details about our pension plans, see note 21 to our audited consolidated financial statements included elsewhere in this annual report.
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The Brazilian Banking Employees’ Union represents most of our employees in the event of a potential conflict with our banking employees and/or the banking union, and negotiations are conducted by the FENABAN. Every 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 related to wages and salaries for the period 2024-2026 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.
6E. Share Ownership
The following table provides the names of our directors and executive officers who owned shares of Santander Brasil as of January 31, 2025.
| Principal Shareholders |
Common Shares |
Percentage of Outstanding Common Shares | Preferred Shares | Percentage of Outstanding Preferred Shares | Percentage of Total Share Capital | |||||
| Alessandro Chagas Farias | 15,227 | (*) | 15,227 | (*) | (*) | |||||
| Alessandro Tomao | 51,689 | (*) | 51,689 | (*) | (*) | |||||
| Alexandre Guimarães Soares | 23,862 | (*) | 23,862 | (*) | (*) | |||||
| Alexandre Teixeira De Araujo | 14,455 | (*) | 14,456 | (*) | (*) | |||||
| Ana Paula Vitali Janes Vescovi | 88,111 | (*) | 88,111 | (*) | (*) | |||||
| André Juaçaba De Almeida | 27,147 | (*) | 27,147 | (*) | (*) | |||||
| Camila Stolf Toledo | 49,789 | (*) | 49,789 | (*) | (*) | |||||
| Carlos Aguiar Neto | 36,174 | (*) | 36,174 | (*) | (*) | |||||
| Carlos José Da Costa André | 39,721 | (*) | 39,721 | (*) | (*) | |||||
| Celso Mateus De Queiroz | 51,858 | (*) | 51,858 | (*) | (*) | |||||
| Cezar Augusto Janikian | 14,623 | (*) | 14,623 | (*) | (*) | |||||
| Claudenice Lopes Duarte | 18,741 | (*) | 18,741 | (*) | (*) | |||||
| Claudia Chaves Sampaio | 13,129 | (*) | 13,130 | (*) | (*) | |||||
| Cristiana Almeida Pipponzi | 0 | (*) | 0 | (*) | (*) | |||||
| Daniel Mendonça Pareto | 15,379 | (*) | 15,379 | (*) | (*) | |||||
| Deborah Patricia Wright | 0 | (*) | 0 | (*) | (*) | |||||
| Deborah Stern Vieitas | 0 | (*) | 0 | (*) | (*) | |||||
| Ede Ilson Viani | 168,028 | (*) | 168,028 | (*) | (*) | |||||
| Eduardo Alvarez Garrido | 3 | (*) | 3 | (*) | (*) | |||||
| Eduardo Luis Sasaki | 29,363 | (*) | 29,363 | (*) | (*) | |||||
| Enrique Cesar Suarez Fragata Lopes | 25,433 | (*) | 25,433 | (*) | (*) | |||||
| Franco Luigi Fasoli | 34,057 | (*) | 34,057 | (*) | (*) | |||||
| Geraldo José Rodrigues Alckmin Neto | 67,683 | (*) | 67,683 | (*) | (*) | |||||
| Germanuela De Almeida De Abreu | 35,525 | (*) | 35,525 | (*) | (*) | |||||
| Gilberto Duarte De Abreu Filho | 123,733 | (*) | 123,733 | (*) | (*) | |||||
| Gustavo Alejo Viviani | 246,586 | (*) | 246,586 | (*) | (*) | |||||
| Gustavo De Sousa Santos | 51,552 | (*) | 51,552 | (*) | (*) | |||||
| Izabella Ferreira Costa Belisario | 4,733 | (*) | 4,733 | (*) | (*) |
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| Principal Shareholders |
Common Shares |
Percentage of Outstanding Common Shares | Preferred Shares | Percentage of Outstanding Preferred Shares | Percentage of Total Share Capital | |||||
| Javier Maldonado Trinchant | 0 | (*) | 0 | (*) | (*) | |||||
| Jean Paulo Kambourakis | 20,862 | (*) | 20,862 | (*) | (*) | |||||
| José De Paiva Ferreira | 17,677 | (*) | 17,676 | (*) | (*) | |||||
| Leonardo Mendes Cabral | 79,370 | (*) | 79,370 | (*) | (*) | |||||
| Luciana De Aguiar Barros | 39,868 | (*) | 39,869 | (*) | (*) | |||||
| Luis Guilherme Mattoso De Oliem Bittencourt | 38,886 | (*) | 38,886 | (*) | (*) | |||||
| Marcelo Aleixo | 20,788 | (*) | 20,788 | (*) | (*) | |||||
| Marcos Jose Maia Da Silva | 10,240 | (*) | 10,240 | (*) | (*) | |||||
| Maria Helena Lanciego Perez | 0 | (*) | 0 | (*) | (*) | |||||
| Maria Teresa Mauricio Da Rocha Pereira Leite | 28,078 | (*) | 28,078 | (*) | (*) | |||||
| Mariana Cahen Margulies | 58,460 | (*) | 58,460 | (*) | (*) | |||||
| Marília Artimonte Rocca | 0 | (*) | 0 | (*) | (*) | |||||
| Marilize Ferrazza Santinoni | 29,899 | (*) | 29,899 | (*) | (*) | |||||
| Mario Roberto Opice Leão | 490,199 | (*) | 490,199 | (*) | (*) | |||||
| Michele Soares Ishii | 8,299 | (*) | 8,299 | (*) | (*) | |||||
| Paulo César Ferreira De Lima Alves | 16,671 | (*) | 16,671 | (*) | (*) | |||||
| Paulo Fernando Alves Lima | 28,036 | (*) | 28,036 | (*) | (*) | |||||
| Paulo Sérgio Duailibi | 29,777 | (*) | 29,777 | (*) | (*) | |||||
| Pedro Augusto De Melo | 0 | (*) | 0 | (*) | (*) | |||||
| Rafael Abujamra Kappaz | 46,492 | (*) | 46,492 | (*) | (*) | |||||
| Ramon Sanchez Santiago | 39,466 | (*) | 39,466 | (*) | (*) | |||||
| Reginaldo Antonio Ribeiro | 54,135 | (*) | 54,135 | (*) | (*) | |||||
| Renato Ejnisman | 61,604 | (*) | 61,604 | (*) | (*) | |||||
| Ricardo De Oliveira Contrucci | 1,668 | (*) | 1,668 | (*) | (*) | |||||
| Ricardo Olivare De Magalhães | 42,144 | (*) | 42,144 | (*) | (*) | |||||
| Richard Flavio Da Silva | 76,033 | (*) | 76,033 | (*) | (*) | |||||
| Robson De Souza Rezende | 30,252 | (*) | 30,252 | (*) | (*) | |||||
| Rudolf Gschliffner | 47,685 | (*) | 47,685 | (*) | (*) | |||||
| Sandro Kohler Marcondes | 133,492 | (*) | 133,492 | (*) | (*) | |||||
| Sandro Mazerino Sobral | 98,485 | (*) | 98,485 | (*) | (*) | |||||
| Thomaz Antonio Licariao Rocha | 49,519 | (*) | 49,519 | (*) | (*) | |||||
| Vanessa Alessi Manzi | 6,752 | (*) | 6,752 | (*) | (*) | |||||
| Vanessa De Souza Lobato Barbosa | 140,747 | (*) | 140,747 | (*) | (*) | |||||
| Vítor Ohtsuki | 23,368 | (*) | 23,368 | (*) | (*) | |||||
| Total | 3,015,553 | 0.08 % | 3,015,555 | 0.08 % | 0.08 % |
| (*) | Owns less than 0.01%. |
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Shares held by members of our Board of Directors, our officers and members of our Fiscal 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 “––B. Compensation.”
6F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7A. Major Shareholders
As of January 31, 2025, Santander Spain directly and indirectly through its subsidiaries, Grupo Empresarial Santander, S.L. and Sterrebeeck B.V. owned approximately 89.53% of our total capital stock.
The following table presents the beneficial ownership of our common and preferred shares as of January 31, 2025.
| Principal Shareholders | Common Shares | Percentage of Outstanding Common Shares | Preferred Shares | Percentage of Outstanding Preferred Shares | Total Shares (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 % | — | 0.00 % | 2,696,163 | 0.04 % | ||||||
| Treasury Shares | 19,440,372 | 0.51 % | 19,440,372 | 0.53 % | 38,880,744 | 0.52 % | ||||||
| Administrators/Executives(2) | 3,015,553 | 0.08 % | 3,015,555 | 0.08 % | 6,031,108 | 0.08 % | ||||||
| Other minority shareholders | 356,068,594 | 9.32 % | 383,873,004 | 10.43 % | 739,941,598 | 9.87 % | ||||||
| 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” and notes 27(a) and 45(c) of our audited consolidated financial statements included elsewhere in this annual report.
The total of ADRs held by U.S. investors as of January 31, 2025 is 1,264,986,570. The total number of Units held by U.S. investors as of January 31, 2025 is 41,065,173 (excluding Units held by The Bank of New York Mellon as depositary).
Significant Changes in Percentage Ownership of Principal Shareholders
On December 31, 2022, we held 62,323,214 shares in treasury, of which 31,161,607 were common shares and 31,161,607 were preferred shares.
On December 31, 2023, we held 54,385,394 shares in treasury, of which 27,192,697 were common shares and 27,192,697 were preferred shares.
On December 31, 2024, we held 38,903,124 shares in treasury, of which 19,451,562 were common shares and 19,451,562 were preferred shares.
On January 31, 2025, we held 38,880,744 shares in treasury, of which 19,440,372 were common shares and 19,440,372 were preferred shares.
Voting Rights of Principal Shareholders
Our principal shareholders do not have voting rights distinct from those of our other shareholders. See “Item 10. Additional Information—B. By-Laws—Rights of Common Shares and Preferred Shares.”
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7B. Related Party Transactions
We have a related party transactions policy, which is intended to ensure that all transactions covered by the policy are conducted in 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, 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 as resting with the board of directors. Additionally, related party transactions are 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. As of December 31, 2024, borrowings and deposits from the Santander Group did not account for any 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 consulting, advisory and advertising services. Such transactions are conducted on 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.
Information Technology Platform
We have entered into agreements with some affiliates of the Santander Group for the outsourcing of certain products and services relating to our information technology platform, including software development and maintenance, infrastructure and cybersecurity.
We believe these services are provided on an arm’s-length basis with terms substantially similar to those available from other providers in the market. For further information see “Item 4. Information on the Company—B. Business Overview—Technology and Infrastructure.”
Procurement Services
We have entered into agreements with Aquanima Brasil Ltda., or “Aquanima,” an affiliate within the Santander Group, which provides procurement services to Santander Brasil and its affiliates. We procure solutions in trade negotiations, tactical and strategic purchasing, online procurement, supplier management, outsourcing, consulting, and vendor risk assessment from Aquanima. Our relationship with Aquanima include the joint purchases of materials and services between different customers and other economic groups, which we believe allow for greater efficiency in price negotiations and rationalization of services, as well as the engagement of real estate management services in 2021. We paid Aquanima R$36 million in 2024, R$42 million in 2023 and R$45 million in 2022 for the services rendered in those years.
Partnership Agreement with Getnet
On April 15, 2021, we entered into the Getnet Partnership Agreement with Getnet, which provides a framework for our relationship with Getnet following our spin-off of Getnet to our controlling shareholder, Santander Spain, which was completed on October 26, 2021. 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.
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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 customers, Santander Brasil has agreed to reimburse Getnet for the full amount of the discounts granted to such customers.
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 certain caps set forth in the Partnership Agreement.
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.
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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
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 Ltda. (collectively, “Paytec”) for the acquisition of the entirety of Paytec’s issued share capital. Paytec is a logistics operator with Brazil-wide coverage that focuses on the payments market. The transaction closed on March 12, 2021. On May 26, 2022, we sold Paytec to Getnet, a subsidiary of Santander Spain and an affiliate of ours, for an amount of R$38.7 million (including cash and the assumption of certain obligations). For further information, see note 45 to our audited consolidated financial statements included elsewhere in this annual report.
7C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
8A. Consolidated Statements and Other Financial Information
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 relation to credit cards, checking accounts and loan disputes; |
| • | lawsuits involving disputes related to contracts and instruments to which we are a party, including claims related to breach of contracts; |
| • | 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; |
| • | 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 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. 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 aggregate, will not have a material adverse effect on our financial condition or results of operations.
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As of December 31, 2024, our judicial and administrative proceedings classified as probable loss risk (tax, labor and civil) and legal obligation amounted to approximately R$11,416.7 million and have been 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. As of December 31, 2024, our judicial and administrative proceedings classified as possible loss risk (tax, labor and civil) amounted to approximately R$39,541.7 million.
Tax Litigation
We are a party to several tax-related lawsuits and judicial and administrative proceedings.
As of December 31, 2024, our tax proceedings with a probable risk of loss amounted to approximately R$5,486.1 million, which was fully provisioned, and our tax proceedings with a possible risk of loss amounted to approximately R$35,834.0 million.
Our primary legal and administrative proceedings classified with a probable loss risk assessment are as follows:
| • | ISS Litigation : Certain municipalities levy ISS on certain revenues derived from transactions not usually classified as the rendering of services. We have filed suit against the payment of such taxes. As of December 31, 2024, the total amount involved in these proceedings totaled R$365.8 million, which was fully provisioned. |
| • | Social Security Litigation : We are involved in administrative and judicial proceedings relating to the collection of income tax on social security and education allowance contributions, as we believe that these benefits do not constitute taxable wages. As of December 31, 2024, amounts related to these proceedings totaled R$141.9 million, which are fully provisioned. |
| • | Banking Transactions Tax Litigation : In May 2003, the Brazilian Federal Revenue Service issued a tax assessment against Santander Distribuidora de Títulos e Valores Mobiliários Ltda., or “Santander DTVM” and another tax assessment against Santander Brasil. The tax assessments refer to the collection of the compulsory contribution over financial transaction ( Contribuição Provisória sobre Movimentação Financeira ), or the “CPMF,” on transactions conducted by Santander DTVM in the cash management of its customers’ funds and clearance services provided by Santander Brasil to Santander DTVM in 2000, 2001 and 2002. Based on our tax advisors’ opinion, the procedures adopted by Santander DTVM were correct. The administrative discussion ended unfavorably for both companies. On July 3, 2015, Santander Brasil and F1rst Tecnologia e Inovação Ltda. (the current name of Santander DTVM) filed a lawsuit requesting the cancellation of both tax assessments. The lawsuit was rejected. We appealed this decision. On December 8, 2020, our appeals were rejected. We filed an appeal for clarification against this decision, which was rejected. As a result, new appeals to the superior courts, including to the Brazilian High Court of Justice ( Superior Tribunal de Justiça ), or “STJ,” and the STF have been filed. The amount under discussion in these proceedings as of December 31, 2024 totaled R$2,013.5 million. Based on the assessment of legal counsel, a provision of R$1,166.5 million was made to cover the probable risk of loss in these proceedings. |
Contingent liabilities classified as having a possible risk of loss refer to judicial and administrative proceedings involving tax matters which were deemed by our management, based on the advice of our legal counsel, as having a possible risk of loss, and were not recognized as liabilities. Such main lawsuits include:
| • | PIS/COFINS Litigation : We and our subsidiaries filed lawsuits seeking to invalidate the provisions of Law No. 9,718/1998, according to which PIS and COFINS must be levied on all revenues of legal entities. Prior to the said rule being in force, which had already been overruled in numerous recent decisions by the Brazilian Federal Supreme Court (Supremo Tribunal Federal), or the “STF,” in relation to nonfinancial corporations, PIS and COFINS were levied only on revenues related to the sale of goods. On April 23, 2015, the STF issued a decision applicable only to Santander Brasil, accepting jurisdiction over the appeal relating to PIS and rejecting jurisdiction over the appeal relating to COFINS. The tax authorities appealed the decision of the STF regarding COFINS, which was rejected on August 19, 2015. Regarding COFINS, the case is closed, with a decision in favor of Santander Brasil. The Federal Supreme Court issued a decision, recognizing the general repercussion of the issue being discussed, in which it partially granted the Brazilian federal government’s appeal, giving support to the argument that PIS/COFINS are levied on operating revenues arising from the typical activities of financial institutions. With the publication of the ruling, we filed a new appeal in relation to PIS, and are awaiting its analysis. Based on the assessment of our legal advisors, the prognosis of the risk was classified as a possible loss. As of December 31, 2024, such claims amounted to R$5,119.4 million, of which R$2,894.6 million were established for the respective obligations. |
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| • | Losses on loans : We have challenged tax assessments issued by the Brazilian Federal Revenue Service claiming that our deduction of losses on loans from IRPJ and CSLL bases did not meet the relevant requirements under applicable law. As of December 31, 2024, the amount related to this challenge was approximately R$1,091.8 million. |
| • | Social Security Contribution – Profit Sharing Payments (Participação nos Lucros e Resultados), or “PLR” : We are involved in administrative and judicial proceedings arising from a 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 these assessments, as we consider our tax treatment to be appropriate based on the applicable law and the nature of the payments. As of December 31, 2024, amounts related to these proceedings totaled approximately R$9,803.6 million. |
| • | IRPJ and CSLL on Capital Gains Litigation : The Brazilian Federal Revenue Service issued a tax assessment against Santander Seguros S.A. (the legal successor of ABN AMRO Brasil Dois Participações S.A., or “AAB Dois Par”) charging income tax and social contribution related to the 2005 fiscal year. The Brazilian Federal Revenue Service claims that the capital gain on the sale of Real Seguros S.A. and Real Vida e Previdência S.A. by AAB Dois Par should be paid at a 34.0% tax rate instead of 15.0%. The assessment was appealed at the administrative level based on our understanding that the tax treatment adopted in the transaction was in compliance with the applicable tax laws and the capital gain was properly taxed. The administrative discussion ended unfavorably. We filed a lawsuit requesting the cancellation of tax assessments. We are responsible for any adverse outcome in this proceeding as the former controlling shareholder of Zurich Santander Brasil Seguros e Previdência S.A. As of December 31, 2024, the amount related to this proceeding was approximately R$573.0 million. |
| • | Goodwill amortization of the acquisition of Banco Sudameris : In December 2012, we received a tax assessment of R$196 million related to the deduction of goodwill amortization relating to the acquisition of Banco Sudameris. In November 2014, we received a similar tax assessment in the amount of R$239 million relating to the fiscal years encompassing May 2009 to July 2012. We have appealed both cases to the Board of Tax Appeals ( Conselho Administrativo de Recursos Fiscais ), or “CARF.” The first tax assessment is currently pending judgment at CARF. CARF issued a partially favorable decision regarding the second tax assessment, leading to a separate proceeding to determine the payable amount. We have requested the withdrawal of the appeal to benefit from Law No. 14,689/2023, which provides for reduced fines in cases previously decided by casting votes (i.e., when the chairperson of the CARF panel, representing the tax authorities, casts the deciding vote to break a tie). We consider our risk of loss in this case as possible. As of December 31, 2024, the amount related to this proceeding was approximately R$836.7 million. |
| • | Unrecognized Compensation Litigation : 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, 2024, the amount related to these proceedings was approximately R$6,523.7 million. The risk of loss is classified as possible. |
| • | ISS on Financial Institutions Litigation : 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, 2024, the amounts related to these proceedings totaled approximately R$3,635.2 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 for the periods of 2009 and 2019. 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, 2024, the amount related to these assessments was R$2,522.2 million. |
| • | IRRF - Payment for services provided abroad : We filed a judicial measure to avoid the imposition of Income Tax – IRRF on payments derived from the provision of technology services by companies headquartered abroad, due to the existence of international treaties to avoid double taxation between Brazil and Chile, Brazil and Mexico, and Brazil and Spain. A favorable decision was handed down and an appeal was filed by the tax authority with the Federal Regional Court, where it awaits judgment. The risk of loss is classified as possible. As of December 31, 2024, the amount related to these assessments was R$1,109.1 million. |
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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 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 Superior 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 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, 2024, our labor proceedings with a probable risk of loss amounted to R$2,864.0 million, which has been provisioned. Our labor proceedings with a possible risk of loss amounted to R$458.5 million.
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 the submission of 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 compensation 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 that decision. However, we were unsuccessful in our appeal, and the judgment reinstated the lower court ruling with respect to compliance with the targets. We filed an appeal for review and a stay was granted by the appeals court, which imposed a restriction on the defense, annulled the lower court decision and ordered that the case be tried again. The prior decision was reaffirmed in this new trial, following which we filed another appeal for review which is pending as of the date of this annual report. The preliminary injunction granted in the appeal for review remains in force, so we will only have to comply with the first instance judgment when it becomes final and unappealable. We estimate the risk of loss as possible.
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: (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, 2024, our probable loss risk in connection with civil proceedings amounted to R$3,066.6 million, which has been fully provisioned, and our possible loss risk in connection with civil proceedings amounted to R$3,249.2 million. For civil lawsuits considered to be common and similar in nature, provisions are recorded based on statistically averaged previous payments and on 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 and 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 STJ set the statute of limitation for these class actions at five years, as claimed by the banks, rather than 20 years, as sought by the claimants. There are no new claims in connection with this matter due to the statute of limitations. The decisions issued to date have been adverse for the banks, although some proceedings have been brought to the STJ and the STF, where it is expected that they will be definitively settled. In August 2010, the STJ handed down a decision finding for the plaintiffs as to the merits, but excluding one of the plans from the claim, thereby reducing the amount of the award and once again confirming the five-year statute of limitations. Shortly thereafter, the STF issued an injunctive relief order whereby the proceedings in progress are stayed until the court issues a final decision. Although the 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.
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, 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. On appeal, the court reversed the decision of the lower court as a result of which the case will be retried following the expert phase. We estimate the risk of loss as possible.
Similar 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 result 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. The status of these and other legal proceedings in which losses incurred by the Fund are being discussed are as follows:
| • | TC U Proceedings: in 2021, the TCU handed down a favorable decision to Santander Brasil. There was an appeal, but the decision was upheld and the case was closed for Santander Brasil. |
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| • | CVM Proceedings: Santander Brasil presented its defense, but in May 2022, Santander Brasil was ordered to pay R$0.45 million, which was the subject of an appeal in August 2022. The appeal was partially granted and the sentence was reduced to R$0.1 million. |
| • | Misconduct Proceedings : initially, a single misconduct proceeding was filed against Santander Brasil and its former manager. The proceeding was dismembered with respect to each party and, as of the date of this annual report, both parties presented their defense and the proceedings are pending. |
| • | Popular Action Proceedings (Ação Popular) (class action) : Santander Brasil presented its defense, and the proceedings are now pending. |
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 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 protected area, given that the financing agreement with the property owner had no connection with the production of seeds. Even though IBAMA failed to present any new evidence with respect to this matter within the three-year limitations period, it has decided to maintain the fine, as a result of which the administrative proceedings have concluded. In January 2023, we filed a judicial complaint against IBAMA to annul these administrative proceedings. We believe that the risk of loss in these judicial proceedings is remote.
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, privacy, data protection, cybersecurity, tax or climate 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, involve a large number of parties, are in the early stages of discovery, or have common elements but require assessment of circumstances on a case-by-case basis, 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 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 counsel that have not 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, a 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 the fine, and the 2002 fiscal year, which was already subject to the statute of limitation. As a result, the assessment was reduced to R$1.8 billion. An annulment action was filed to dispute the unfavorable part of this decision. There has not yet been a decision in the first instance, but an injunction was granted to suspend the enforceability of the debt. 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, we were 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, 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. We challenged this tax assessment and was granted a favorable decision by the trial court. The tax authority has appealed the decision and this was accepted. After being denied by the CARF, the discussion on the merits was closed, but the case returned for analysis of the other issues, and we requested that the appeal be withdrawn in order to apply the benefits granted by Law No. 14,689/2023. This law offers a reduction in fines for taxpayers involved in cases previously decided by casting votes (i.e., when the chairperson of the CARF panel, representing the tax authorities, casts the deciding vote to break a tie). A lawsuit was filed and is awaiting judgment. 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, in June 2013, the Brazilian tax authorities issued an infraction notice against us as the local 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 a merger (incorporação de ações) transaction carried out in August 2008. Through this transaction, we acquired all the shares of Banco Real and AAB Dois Par by providing the shareholders of these entities’ newly 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. obtained a gain subject to tax in Brazil consisting of the difference between the issuance value of our the shares that were received and the acquisition cost of the shares delivered in the exchange. Although Sterrebeeck B.V., as the final beneficiary of the transaction, is also the responsible for any costs arising from this litigation, we are handling the lawsuit as the local tax responsible party. A new appeal was filed with the CARF, which is awaiting judgment. This appeal was partially allowed, and we filed an injunction challenging the unfavorable portion. The case is currently awaiting judgment. Separately, we appealed the infraction notice before CARF, which was dismissed in March 2018 by a casting vote (i.e., when the chairperson of the CARF panel, representing the tax authorities, casts the deciding vote to break a tie). A subsequent administrative appeal was filed; however, in August 2024, we opted to withdraw this appeal to take advantage of the benefits provided by Law No. 14,689/2023. This law offers a reduction in fines for taxpayers involved in cases previously decided by casting votes. With the administrative appeal withdrawn, the judicial phase of the dispute can now proceed. Based on advice from our external legal counsel, we believe the Brazilian tax authorities’ position is incorrect and that there are strong grounds for appeal against the infraction notice. Consequently, the risk of loss is considered remote. Consequently, considering that any financial impacts arising from this lawsuit will be the responsibility of Sterrebeeck B.V. or its successors, we have not made any provisions in connection with these proceedings.
On December 8, 2016, the general superintendent of the CADE began an investigation into alleged anticompetitive conduct in the real onshore 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. On January 8, 2018, we filed an administrative defense stating our understandings that there is no evidence that we were involved in the alleged conduct. We expect that these investigations will not have a significant financial impact on us.
Former Employees of Banco do Estado de São Paulo S. A. Litigation
A claim was filed in 1998 by the association of retired Banespa employees, the “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 was approved by the board of directors of Banespa. 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 of Banespa. The relevant clause in the bylaws was repealed in 2001. The 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 an appeal has been filed but has not yet been the subject of a decision as of the date of this annual report.
A decision of the Regional Labor Court in July 2021 determined that the execution should be individualized and in the corresponding courts of the residence each person represented by AFABESP. Due to this decision, 7,444 individual enforcement actions of the collective judgment were filed. Since the judgments adopted different positions for each case, a procedure to resolve these inconsistent demands was instituted before the Regional Labor Court ( Tribunal Regional do Trabalho ) with the purpose of establishing objective criteria with respect to these claims, mainly the statute of limitations and limitation of payments until December 2006 (Plan V). On March 11, 2024, it was determined that all cases filed in the city of São Paulo should remain suspended. Finally, due to the diverging interpretations of the Brazilian federal constitution, an action for allegation of non-compliance with a fundamental precept was also filed, so that the Federal Supreme Court ( Supremo Tribunal Federal ) settles the issue and indicates the correct statute of limitations to be used in the individual cases filed. On June 27, 2024, an agreement was signed between the parties which includes an exhaustive list of 7,299 retirees who, according to the criteria presented by Santander Brasil, are entitled to payment of the amounts related to half-yearly bonuses. The total value of the agreement is R$2.7 billion. However, whether such agreement would be binding upon any given plaintiff was contingent on the individual and voluntary adherence of such plaintiff by August 15, 2024, while the deadline for judicial approvals was October 15, 2024. After the end of the voluntary adherence period and of the judicial approvals, payments were or will be made in five installments for living retirees (the first installment falling due on October 20, 2024, and the other four installments in the months of December 2024, May 2025, December 2025 and May 2026) and in a single installment for deceased people (October 31, 2024). As of December 31, 2024, 6,500 agreements (98%) were recorded, totaling R$2,473.0 million. Payments will follow the agreed dates depending on whether the retirees are alive or deceased.
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IGP-DI Litigation
In 2002, AFABESP filed a lawsuit in the Federal Court of Brazil on behalf of its associates, requesting the readjustment of certain social security supplements to which individuals admitted to the respective retirement plan before May 22, 1975 were entitled, according to the General Price Index for Internal Availability in Brazil (General Price Index – Internal Availability), or the “IGP-DI,” inflation index. The lower court decision was favorable to the plaintiffs and determined that the readjustment should be made, but only for periods of time when no other form of readjustment was applied. Santander Brasil and Banesprev appealed against this decision, but both appeals were denied. We are currently awaiting judgment of the special and extraordinary appeals filed by Santander Brasil and BANESPREV. At the same time, AFABESP requested provisional compliance with the judgment at first instance and, in response, we filed a petition for some members of AFABESP to be excluded from the list of beneficiaries of this decision, since these members were already plaintiffs in other lawsuits related to these issues. The special appeal filed by Santander Brasil was accepted and granted to reverse the decision. AFABESP filed a motion for clarification that is still pending judgment. Due to the dismissal of the main claim, we await the termination of the provisional execution that is suspended until the final judgment. Based on the assessment of our legal advisors, the risk of loss is possible, which is why no provision was recorded.
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, the allocation of the net profits of 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 semiannual 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 semiannual balance sheet. Any payment of interim dividends or interest on shareholders’ equity may be set off against the mandatory dividends relating to the net income earned in the year in which the interim dividends were paid.
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 our shareholders to suspend dividends distribution if our board of directors reports at our annual shareholders’ meeting that the distribution would not be advisable given our financial condition. Our fiscal council, if 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.
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Current and Future Dividend Policy
Our board of directors currently recommends 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, regulatory provisions .and such other factors as we may deem relevant at the time.
Payment of Dividends
Any shareholder as of the record date 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 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 being 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. in Brazil, acting as the custodian and agent for the depositary for our ADRs.
Payments of cash dividends and distributions, if any, are made in reais 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 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 changes in the 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 on a consolidated basis. The reconciliation of net income under Brazilian GAAP to net income under IFRS is presented in Appendix I of our audited consolidated financial statements for the years ended December 31, 2024, 2023 and 2022:
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$) | |||||
| Net Income under Brazilian GAAP | 13,477 | 8,974 | 12,570 | ||
| (-) Legal Reserve | 674 | 449 | 629 | ||
| (=) Amounts Available for distribution | 12,804 | 8,525 | 11,941 | ||
| Mandatory Dividends – 25.0% | 3,201 | 2,131 | 2,985 | ||
| Interest on Shareholder’s Equity | 5,800 | 5,820 | 5,280 | ||
| Dividends | 200 | 380 | 2,820 | ||
| Total (Interest on Shareholder’s Equity and Dividends) | 6,000 | 6,200 | 8,100 | ||
| Dividends distributed in excess of the Mandatory Dividend | 2,799 | 4,069 | 5,115 | ||
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History of Payment of Dividends and Interest Attributable to Shareholders’ Equity
In the year ended December 31, 2024, we declared dividends and interest on shareholders’ equity in the gross amount of R$6,000 million, which consisted of R$5,800 million of interest on shareholders’ equity (R$1,500 million was paid in February 2024, R$1,500 million in May 2024, R$1,500 million in August 2024, and R$1,300 million in November 2024) and R$200 million of dividends, which was paid in November 2024.
| For the Year Ended December 31, | |||||
| 2024 | 2023 | 2022 | |||
| (in millions of R$, except per share figures) | |||||
| Dividends | 200 | 380 | 2,820 | ||
| Interest attributable to shareholders’ equity | 5,800 | 5,820 | 5,280 | ||
| Total | 6,000 | 6,200 | 8,100 | ||
| Dividends and interest on capital per 1,000 shares | |||||
| Common shares | 766.8 | 794.10 | 1,035.69 | ||
| Preferred shares | 853.5 | 873.51 | 1,139.27 | ||
8B. Significant Changes
There has been no significant change since the date of our last audited financial statements.
ITEM 9. THE OFFER AND LISTING
9A. Offering and Listing Details
Market Price and Volume Information
On September 18, 2009, our Board of Directors approved the implementation of a global 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. 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 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 B3 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, or the Exchange Offers, 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 Brazilian depositary receipts or ADRs representative of Santander Spain’s common shares. On October 30, 2014, such exchange offers were concluded. As a result, the Santander Group’s shareholding increased to 88.3% of our total share capital. Further, as a result of the offer in Brazil, our units were delisted from the Level 2 Segment and are now traded on the basic listing segment of the B3.
The price of our units and ADSs may experience volatility, which could negatively impact holders of our units and ADSs.
The following table shows our outstanding publicly traded common shares and preferred shares as of January 31, 2025:
| Free Float | B3 | NYSE | |||
| Common shares | 207,160,850 | 148,907,744 | |||
| Preferred shares | 234,965,260 | 148,907,744 | |||
| Total | 442,126,110 | 297,815,488 | |||
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Units, Common Shares and Preferred Shares Traded on the B3
The table below sets forth the high, low and last daily sales prices in reais for our common shares on the B3 for the periods indicated.
| Reais per share – SANB3 (Common Shares) | |||||
| High | Low | Last | |||
| 2022 Annual | 17.43 | 12.02 | 13.30 | ||
| 1st Quarter | 17.85 | 13.98 | 17.44 | ||
| 2nd Quarter | 17.93 | 13.80 | 13.85 | ||
| 3rd Quarter | 15.02 | 12.73 | 14.27 | ||
| 4th Quarter | 15.33 | 12.02 | 13.30 | ||
| 2023 Annual | 15.40 | 11.76 | 15.20 | ||
| 1st Quarter | 14.94 | 11.76 | 12.53 | ||
| 2nd Quarter | 14.61 | 12.00 | 14.45 | ||
| 3rd Quarter | 14.97 | 12.06 | 12.27 | ||
| 4th Quarter | 15.40 | 12.10 | 15.20 | ||
| 2024 Annual | 15.02 | 11.10 | 11.30 | ||
| 1st Quarter | 14.41 | 12.49 | 12.81 | ||
| 2nd Quarter | 14.00 | 11.93 | 12.77 | ||
| 3rd Quarter | 15.02 | 12.03 | 13.33 | ||
| 4th Quarter | 14.05 | 11.10 | 11.30 | ||
| 2025 Annual(*) | 12.39 | 10.67 | 12.39 | ||
| 1st Quarter(*) | 12.39 | 10.67 | 12.39 | ||
| * | Through January 31, 2025. |
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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 | |||
| 2022 Annual | 18.86 | 13.55 | 14.94 | ||
| 1st Quarter | 19.39 | 15.42 | 18.85 | ||
| 2nd Quarter | 19.40 | 15.01 | 15.14 | ||
| 3rd Quarter | 16.67 | 13.92 | 16.05 | ||
| 4th Quarter | 17.35 | 13.55 | 14.94 | ||
| 2023 Annual | 17.01 | 13.52 | 17.00 | ||
| 1st Quarter | 16.59 | 13.60 | 14.33 | ||
| 2nd Quarter | 16.83 | 13.87 | 16.21 | ||
| 3rd Quarter | 16.93 | 13.52 | 13.82 | ||
| 4th Quarter | 17.01 | 13.55 | 17.00 | ||
| 2024 Annual | 16.53 | 12.27 | 12.56 | ||
| 1st Quarter | 16.11 | 14.19 | 14.40 | ||
| 2nd Quarter | 15.76 | 13.48 | 14.03 | ||
| 3rd Quarter | 16.53 | 13.58 | 14.65 | ||
| 4th Quarter | 15.48 | 12.27 | 12.56 | ||
| 2025 Annual(*) | 13.56 | 12.10 | 13.56 | ||
| 1st Quarter(*) | 13.56 | 12.10 | 13.56 | ||
| * | Through January 31, 2025. |
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The table below sets forth the high, low and last daily sales prices in reais for our units on the B3 for the periods indicated.
| Reais per share – SANB11 (Units) | |||||
| High | Low | Last | |||
| 2022 Annual | 36.32 | 25.52 | 28.19 | ||
| 1st Quarter | 37.36 | 29.26 | 36.25 | ||
| 2nd Quarter | 37.36 | 28.71 | 28.81 | ||
| 3rd Quarter | 31.73 | 26.56 | 30.14 | ||
| 4th Quarter | 32.52 | 25.52 | 28.19 | ||
| 2023 Annual | 32.48 | 25.27 | 32.30 | ||
| 1st Quarter | 31.59 | 25.27 | 26.80 | ||
| 2nd Quarter | 31.45 | 25.91 | 30.63 | ||
| 3rd Quarter | 31.95 | 25.56 | 26.05 | ||
| 4th Quarter | 32.48 | 25.60 | 32.30 | ||
| 2024 Annual | 31.53 | 23.28 | 23.82 | ||
| 1st Quarter | 30.57 | 26.80 | 27.32 | ||
| 2nd Quarter | 29.83 | 25.37 | 26.70 | ||
| 3rd Quarter | 31.53 | 25.58 | 27.99 | ||
| 4th Quarter | 29.39 | 23.28 | 23.82 | ||
| 2025 Annual(*) | 25.99 | 25.66 | 25.96 | ||
| 1st Quarter(*) | 25.99 | 25.66 | 25.96 | ||
| * | Through January 31, 2025. |
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 Traded 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.”
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.
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| ADRs – BSBR | |||||
| High | Low | Last | |||
| U.S.$ per ADR | |||||
| 2022 Annual | 7.98 | 4.80 | 5.39 | ||
| 1st Quarter | 7.85 | 5.33 | 7.70 | ||
| 2nd Quarter | 7.98 | 5.42 | 5.49 | ||
| 3rd Quarter | 6.21 | 4.87 | 5.61 | ||
| 4th Quarter | 6.29 | 4.80 | 5.39 | ||
| 2023 Annual | 6.66 | 4.76 | 6.55 | ||
| 1st Quarter | 6.11 | 4.76 | 5.31 | ||
| 2nd Quarter | 6.59 | 5.14 | 6.36 | ||
| 3rd Quarter | 6.64 | 5.01 | 5.13 | ||
| 4th Quarter | 6.66 | 4.93 | 6.55 | ||
| 2024 Annual | 6.60 | 3.75 | 3.91 | ||
| 1st Quarter | 6.60 | 5.57 | 5.72 | ||
| 2nd Quarter | 6.01 | 4.90 | 4.94 | ||
| 3rd Quarter | 5.77 | 4.78 | 5.26 | ||
| 4th Quarter | 5.39 | 3.75 | 3.91 | ||
| 2025 Annual(*) | 4.52 | 3.75 | 3.75 | ||
| 1st Quarter(*) | 4.52 | 3.75 | 3.75 | ||
| * | Through January 31, 2025. |
9B. Plan of Distribution
Not applicable.
9C. Markets
Our units and common and preferred shares are traded on the B3. The regulation of Brazilian securities markets which affects these securities is discussed below. In addition, we also have ADRs which have been listed and traded on the NYSE since October 7, 2009. For further information, see “—A. Offering and Listing Details.”
Regulation of Brazilian Securities Markets
The Brazilian securities market is regulated by the CVM, as provided for in Brazilian Law No. 6,385/76, as amended, and by the Brazilian Corporate Law, as well as the CMN and the Brazilian Central Bank.
Under Brazilian Corporate Law, a corporation is either publicly held ( companhia aberta ) or privately held ( companhia fechada ) and unlisted. All publicly 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 publicly held company may also be traded privately.
In 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-counter markets, in which the transactions are not 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 B3, a company must apply for registration with the CVM and the B3.
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Trading on the B3
The B3 currently facilitates 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. This after-market trading is subject to regulatory limits on price volatility of securities traded by investors operating on the internet.
The trading of securities on the B3 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 B3 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 B3.
In addition, in order to maintain control over the fluctuation of the B3 index, the B3 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 B3, whenever the B3 index falls below 10.0%, 15.0% or 20.0%, respectively, in relation to the value of closing index of the previous trading session.
When investors trade shares on the B3, the trade is settled two 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 second 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 B3, which handles the multilateral settlement of both financial obligations and transactions involving securities. According to the regulations of the 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 B3 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 Issuers Regulations ( Regulamento de Emissores ), 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 Issuers Regulations became effective as of August 19, 2023.
Corporate Governance Practices
In 2000, the B3 introduced three special listing segments, Levels 1 and 2 of Corporate Governance and Novo Mercado, which were aimed at fostering a secondary market for securities issued by Brazilian companies that voluntarily abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law.
Our units were initially listed on the Level 2 Segment. However, as a result of the Exchange Offers and 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 on the basic listing segment of the B3. For more information, see “Item 9. The Offer and Listing—A. Offering and Listing Details—Market Price and Volume Information.”
Within the B3, we are a part of one sustainability index: the 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 of 78 companies from 36 sectors (ISE 2024), the company’s performance is 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 ). It sets forth corporate governance principles, guidelines and actions applicable for publicly held companies and establishes a “comply or explain” enforcement model. On June 8, 2017, following a public consultation on the implications of the 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 the Governance Code. These changes were incorporated to CVM Resolution No. 80, issued on March 29, 2022, which repealed CVM Normative Ruling No. 586.
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The rules initially established by Normative Ruling No. 586 and incorporated to Resolution No. 80 apply to companies (i) which are registered as category “A” issuers with the CVM, (ii) which have securities admitted for trading in the stock market by an authorized stock exchange ( entidade administradora de mercado organizado ), and (iii) which has issued and outstanding shares or units not held by controlling shareholder, any affiliates of the controlling shareholder or by the relevant company´s directors or officers. We fulfill all three of these criteria and are therefore subject to these 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 the New Foreign Exchange Law, 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 the investor’s legal tax representative in Brazil.
Since January 1, 2025, portfolio investments are regulated by Joint Resolution No. 13, enacted on December 3, 2024, or “Joint Resolution No. 3,” which superseded CMN Resolution No. 4,373, which had been in force for about 10 years.
The main purpose of Joint Resolution No. 13 is to facilitate the entry of foreign investors in the Brazilian financial and capital markets. Joint Resolution No. 13 introduces the possibility for foreign investors to make investments in local currency with funds held in their foreign bank accounts, or with bills of payment denominated in reais but issued abroad, without the need of converting these availabilities into portfolio investments by means of the execution of a simultaneous and symbolic foreign exchange transaction, which was previously required under CMN Resolution No. 4,373, as well as the possibility of the foreign investor making an investment directly from a nonresident checking or payment account in Brazilian reais opened with a local financial or payment institution. Reporting and local representation requirements applicable to this type of investment were also simplified.
With certain limited exceptions, Joint Resolution No. 13 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, except if previously and expressly authorized by the CVM. Investments and remittances outside Brazil for gains, dividends, profits or other payments under our units are made through the foreign exchange market, either through foreign exchange transactions or through the use of a nonresident checking or payment account opened by the foreign investor with a local financial or payment institution.
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.”
Foreign direct investors under the New Foreign Exchange Law 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.”
Joint Resolution No. 13 also deals with investments of foreign capital in Brazil through Depositary Receipts, or “DRs.”
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 B3 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 Joint Resolution No. 13 (without the need of executing a simultaneous and symbolic foreign exchange transaction for this purpose), or (iii) convert its investment into a foreign direct investment under the New Foreign Exchange Law (without the need of executing a simultaneous and symbolic foreign exchange transaction for this purpose). 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 Joint Resolution No. 13 or a foreign direct investment under the New Foreign Exchange Law, 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 units (assuming registration is required pursuant to the conditions and thresholds set forth in Joint Resolution No. 13 and the Brazilian Central Bank regulations governing foreign direct investments under the New Foreign Exchange Law).
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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 the New Foreign Exchange Law, the conversion will be carried out by the Brazilian Central Bank after receipt of an electronic request from the custodian with details of the transaction. This may also require the units to be converted into shares.
If a foreign direct investor under the New Foreign Exchange Law 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 carried 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 nonvoting shares of Brazilian financial institutions traded on a stock exchange or depositary receipts offered abroad representing nonvoting 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.”
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
Below 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 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), (ii) carry out foreign exchange transactions; (iii) manage investment portfolios; (iv) any other transaction that would be allowed by law and regulations in force; and (v) participate, as shareholder or quotaholder, in other companies.
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Directors’ and Executive Officers’ Role and Conflict of Interests
Brazilian Corporate Law imposes on the members of the Board of Directors and Officers the duty of diligence during the performance of their functions, as well as the duty of loyalty to the company, besides prohibiting members of the Board of Directors and the Officers 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.
As a financial institution, we are subject to certain limitations set forth by the Banking Reform Law, as amended, Law No. 13,506/17, as well as related regulations. For more information in relation to such limitations, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Principal Limitations and Obligations of Financial Institutions” and “Item 4. Information on the Company—B. Business Overview—Regulation and 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 members of the Board of Directors and Officers are forbidden to be involved in the analysis, approval or settlement of business deals or loans relating to a company where they (i) hold more than 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 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.
Rights of Common Shares and Preferred Shares
Each common share gives its holder the right to a vote at general 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. |
Regarding the election of members of the Board of Directors, the Brazilian Corporate Law sets forth that, when members of the Board of Directors are elected, the following parties have the right to elect one member of our Board of 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 who 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 Resolution No. 70 of March 22, 2022, 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; |
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| • | participation on equal terms with the common shareholders, 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.
According to our By-Laws, the dividends that are not claimed by shareholders within three years, from the beginning of their payment, shall be retained by us to our benefit.
Under the Brazilian Corporate Law, any change in the preferences or changes which would have an adverse financial effect on the rights of holders of 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.
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 linked to the units, and their ownership can only be transferred by means of 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, S3 Caceis 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. The transfer of ownership is effected by debiting the seller’s unit custody account and crediting the buyer’s unit custody account according to a written transfer order issued by the seller or a court authorization or transfer order delivered to the custodian, all of which are retained by the 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.
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The custodian shall provide unit holders with a statement of account at the end of each month in which there is movement and, when 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.
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 prerogatives conferred on our shareholders by the shares represented by the units; |
| • | 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 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 issuance of shares that may be converted into new units, unit holders may exercise the preemptive 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. 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 preemptive rights in the issue of securities other than 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 general meetings, our shareholders are authorized to make resolutions on matters relating to our activities and to make decisions deemed to be in our best interests.
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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 Board of Directors and Fiscal 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, 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 consolidation, 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 voting shares 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 two-thirds of the voting shares and, at the second call, any number of holders of 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 the 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-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 consolidation; (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.
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.
Call Notice of Our Shareholders’ General Meetings
The Brazilian Corporate Law requires all general meetings to be called by a minimum of three entries in a periodical of mass circulation in São Paulo, where the B3 is located. Our call notices for meetings are currently published 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 Our Shareholders’ General Meetings
Our shareholders’ meetings are held at our headquarters 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. 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 Board of Directors 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 Board of Directors fails to call a meeting intended to install a Fiscal Council, within eight days of the request being made; and (iv) the Fiscal Council (if already installed), if our Board of Directors fails to call the annual general meeting; and (v) the Fiscal Council (if installed), whenever there are serious or urgent reasons.
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Conditions for Admission to 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 Resolution No. 81, of March 29, 2022, 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 held company, as ours is, a financial institution, Investment funds may be represented by their respective administrators.
Remote Voting
The CVM establishes rules for remote participation and voting in general meetings of publicly held companies.
Accordingly, we 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 (who will be responsible for transferring the voting pronouncements to us), pursuant to the terms of the applicable regulations.
Policy on Trading in Our Own Securities
The objective of our Policy on Trading in Our Own Securities, prepared in accordance with CVM Resolution No. 44 of August 23, 2021, or “CVM Resolution No. 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. Our trading policy establishes blackout periods for trading our shares by ourselves, our controlling shareholders (direct or indirect), members of the Board of Directors, Executive Officers and members of our Fiscal 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 by us.
Among other matters, persons subject to our policy shall refrain from buying or selling, by themselves through 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, 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 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 re-organization; 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 Board of Directors, members of our Fiscal 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 managing the risk arising out of our activities as market maker of certain funds 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. 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 three general indexes 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 10 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. 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.
Preemptive 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 options (provided the share call option is granted by us in accordance with our By-Laws). In addition, our Board of Directors 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 Board of Directors to approve the purchase of our own shares. In any of the following circumstances, the decision will only become effective upon prior approval at 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 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, 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, forfeited shares, or 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 held company. We may also purchase or issue put or call options on our shares.
On February 2, 2021, our Board of Directors approved the unit buyback program to cover the acquisition, by us or our branch in the Cayman Islands, 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. This specific repurchase program ended on August 2, 2022.
On August 2, 2022, our Board of Directors approved the unit buyback program to cover the acquisition, by us or our branch in the Cayman Islands, of up to 36,986,424 units or ADRs, representing 36,986,424 common shares and 36,986,424 preferred shares, corresponding to approximately 1% of the totality of our corporate capital. This specific repurchase program ended on February 5, 2024.
On January 24, 2024, our Board of Directors approved the unit buyback program to cover the acquisition, by us or our branch in the Cayman Islands, of up to 36,205,005 units or ADRs, representing 36,205,005 common shares and 36,205,005 preferred shares, corresponding to approximately 1% of the totality of our corporate capital. The term of the buyback program is 18 months counted from February 6, 2024, expiring on August 6, 2025.
Cancellation of Registration as a Publicly Held Company
We may cancel our registration as a publicly 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.
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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 a condition precedent or a resolutory condition that the acquirer makes a public offer to acquire all the shares held by our other shareholders, both common and preferred. This is also compliant with the conditions and deadlines required by applicable law, ensuring that minority shareholders receive equal treatment with respect to the controlling shareholder in the disposal of control.
This public offer is also 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 controlling power over us.
The disposal of control will also be subject to the prior authorization of the Brazilian Central Bank, pursuant to the terms and conditions of Central Bank Resolution No. 4,970/22. For additional information, please refer to “Item 4. Information on the Company—4B. Business Overview—Regulation and Supervision.”
Requirement for Disclosure of Information
As a publicly 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 held companies issued by the CVM, including CVM Resolution No. 44, provide that we must disclose both 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 Resolution No. 80, of March 29, 2022, as amended, the reference form 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 (formulário de referência) 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 seven business days of the respective change. This document contains complete information regarding us and, in general, includes the matters addressed in this annual report.
CVM Resolution No. 155, of July 23, 2022, as amended, or “CVM Resolution No. 155,” provides that we are also subject to the disclosure of our consolidated financial statements based on IFRS within four months of the end of each reporting period. The financial statements mentioned by CVM Resolution No. 155 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 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, members of our Board of 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, 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 required to send such information to CVM and B3 under CVM Resolution No. 44 within 10 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). We are also required to provide the CVM and B3 within the same time period the information related to the securities traded by us, our entities and affiliated companies.
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Disclosure of Information about Our Shareholders with Relevant Interest
CVM Resolution No. 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 sent to the CVM.
The resolution 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 ( Cadastro de Pessoas Físicas ), or “CPF,” or in the National Register of Legal Entities ( Cadastro Nacional de Pessoas Jurídicas ), or “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 CPF or CNPJ of its agent or legal representative in Brazil for the purposes of article 119 of the Brazilian Corporate Law.
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 Officer is responsible for sending this information to the CVM and to the B3 as soon as received.
Disclosure of Material Facts
The Brazilian Securities Market Law and CVM Resolution No. 44 set forth that we must disclose any decision made by a controlling shareholder, by the general shareholders’ meeting or by 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 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 investment in Brazil is regulated by the New Foreign Exchange Law. A foreign direct investor under the New Foreign Exchange Law must:
| • | report his/her condition as a foreign direct investor with the Brazilian Central Bank; |
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| • | 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 in amounts (per transaction) exceeding R$100 thousand must be reported to the Brazilian Central Bank through the Foreign Capital Information Reporting System – Foreign Direct Investment, or the “ Sistema de Prestação de Informações de Capital Estrangeiro – Investimento Estrangeiro Direto ,” within 30 days of the flow of funds into Brazil in accordance with the New Foreign Exchange Law. The reporting of foreign capital (in amounts per transaction exceeding R$100 thousand) is required for the remittance of profits abroad, the repatriation of capital and the formalization of reinvestments. Investments will always be reported in the foreign currency in which they are made, or in Brazilian currency, if the funds are derived from a non-resident account properly held in Brazil.
Other than such reporting obligations, 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 January 1, 2025, portfolio investments have been regulated by Joint Resolution No. 13, which revoked the former rule (CMN Resolution No. 4,373, of March 30, 2015) which had been in force for about 10 years.
The main purpose of Joint Resolution No. 13 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 in reais but issued abroad, without the need of converting these availabilities into portfolio investments by means of the execution of a simultaneous and symbolic foreign exchange transaction, which was previously required under CMN Resolution No. 4,373, as well as the possibility of the foreign investor making an investment directly from a nonresident checking or payment account in Brazilian reais opened with a local financial or payment institution. Reporting and local representation requirements applicable to this type of investment were also simplified.
With certain limited exceptions, under Joint Resolution No. 13 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 (assuming registration is required pursuant to the conditions and thresholds set forth in Joint Resolution No. 13 and the Brazilian Central Bank regulations governing foreign direct investments under the New Foreign Exchange Law).
Under Joint Resolution No. 13, the investment made by individuals or legal entities that are not resident in the financial market and in the securities market must comply with the following parameters:
| • | investments must be made using the same financial instruments and modalities available to investors residing in Brazil; |
| • | non-resident investors will be subject to the same registration requirements and operational limits applicable to residents; |
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| • | it will be necessary to respect any restrictions applicable to the trading environment, as well as other provisions expressly provided for in the current regulations; |
| • | the non-resident investor must constitute a representative in Brazil for Brazilian Central Bank and CVM purposes, except if the investment observes the following conditions, which exempt the investor from constituting said representative: (a) investments by non-resident natural persons (a.i) in financial assets, in any amount, when made from a nonresident checking or payment account denominated in Brazilian reais opened with a Brazilian financial or payment institution; (a.ii) in securities, in any amount, when made from a nonresident checking or payment account denominated in Brazilian reais opened with a Brazilian financial or payment institution; (a.iii) in financial assets, in up to R$2 million, when made from overseas remittances through the execution of a foreign exchange transaction; and (a.iv) in securities, in any amount, when made from overseas remittances through the execution of a foreign exchange transaction; and (b) investments by legal entities in financial assets, in any amount, when made from a nonresident checking or payment account denominated in Brazilian reais opened with a Brazilian financial or payment institution; |
| • | non-resident investors (other than those who are natural persons, except in the cases when the natural person invests over R$2 million in financial assets from overseas remittances through the execution of a foreign exchange transaction) must obtain registration as a non-resident investor with the CVM; |
| • | the non-resident investor must appoint a tax representative in Brazil; and |
| • | the non-resident investor must 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, according to their nature: (i) be booked by a financial institution or by an entity authorized to carry out the bookkeeping of financial assets or securities, duly accredited by the Brazilian Central Bank or the CVM, subject to the respective regulatory spheres of authority; (ii) be in the custody of a financial institution or entity authorized to provide such service, in accordance with the provisions of the Brazilian Central Bank or the CVM, according to their respective spheres of authority; (iii) be registered in a registration system operated by an entity authorized by the Brazilian Central Bank or the CVM for the purposes of carrying out the activity of registration of financial assets or securities, in accordance with the provisions of the Brazilian Central Bank or the CVM, according to their respective spheres of authority; (iv) be deposited in a centralized deposit system, managed by a central depositary authorized to carry out this activity, under the terms established by the Brazilian Central Bank and the CVM, according to their respective spheres of authority; and (v) be held in a deposit or prepaid payment account, in a financial or payment institution authorized by the Brazilian Central Bank, or in a registration account, as provided for in article 12 of CMN Resolution No. 5,008, of March 24, 2022.
CVM Resolution No. 13, of November 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.
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The tax consequences described below do not consider 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. 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.
Transfer Price
On December 12, 2022, Provisional Measure No. 1152/2022 was published. This measure amended the law relating to IRPJ and CSLL to address transfer pricing rules, thereby aligning Brazil with the guidelines principles of the Organization for Economic Co-operation and Development (OECD).
On June 15, 2023, Law No. 14,596/2023 was published, which was the result of this measure being converted into a law.
Among the matters addressed in this law, we highlight: (i) the formalization and the effects of opting to apply these rules; (ii) the definition of certain terms, such as “arm’s length principle,” “spontaneous adjustments,” “compensatory adjustments” and “primary adjustment”; (iii) adjustments to the calculation bases of the IRPJ and CSLL; and (iv) rules on deductions of royalties, technical, scientific, administrative or any similar assistance. Law No. 14,596/2023 came into effect on January 1, 2024, as regulated by Brazilian Federal Revenue Service Normative Instructions no. 2,132/2023 and 2,161/2023.
Pillar 2
On October 3, 2024, the Brazilian government published Provisional Measure No. 1,262 (“Provisional Measure No. 1,262/24”), which incorporates the model rules established by the OECD to promote a global corporate income tax reform. This measure introduces an additional 15% CSLL rate for companies that are part of multinational groups with annual revenues exceeding 750 million euros, subject to a minimum effective tax rate on profits earned in Brazil. On the same day, the RFB issued Normative Ruling No. 2,228 (“IN 2,228/24”), providing further regulations on Provisional Measure No. 1,262/24.
This proposal aligns with OECD’s Qualified Domestic Minimum Top-up Tax, which prioritizes the jurisdiction where the profits were originated when imposing a minimum income tax. If the minimum tax is not collected in Brazil, other jurisdictions may claim it on profits generated in the country. Provisional Measure No. 1,262/24 follows the OECD model to ensure that the additional CSLL paid in Brazil can be offset against the top-up tax that may be imposed by other jurisdictions. All entities whose results are consolidated into the financial statements of multinational groups, i.e., groups operating in more than one jurisdiction with annual revenues exceeding 750 million euros in two of the past four consecutive fiscal years, will be subject to the additional CSLL. This additional tax only applies to “excess” profits, defined as profits calculated according to Brazilian accounting standards (with certain adjustments) minus the so-called substance-based profits. The exclusion of substance-based profits aims to reduce the tax burden on results generated from operations intensive in tangible assets and labor.
The rules of Provisional Measure No. 1,262/24 have later been included in Law No. 15,079, of December 27, 2024, or “Law 15,079/24,” which was approved by the Brazilian National Congress and is currently in force.
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 Rate ( Taxa de Longo Prazo – TLP ), as determined by the Brazilian Central Bank from time to time, and the amount of this deductible expense may not exceed the greater of:
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| • | 50% of the net income (after the deduction of social contribution on net profit but before taking into account allowances for income tax and the interest attributable to shareholders’ equity) for the period in respect of which the payment is made; and |
| • | 50% of our accumulated profits. |
Payment of interest on shareholders’ equity to a Non-Resident Holder is subject to withholding income tax at the rate of 15%, or 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 17%, following the issuance of Law No. 14,596/2023, 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.
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 No. 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, a progressive tax rate will be applied as provided for in Law No. 13,259/16, as follows: (i) at a rate of 15% for the portion of the gain up to R$5 million, (ii) at a rate of 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) at a rate of 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; and |
| • | If the Non-Resident Holder is located in a Tax Haven, the tax rate will be 25%. |
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 Joint Resolution No. 13, or “Registered Holder,” and (ii) is not a Tax Haven resident are exempt from income tax; and
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 15%. In this case, withholding income tax of 0.005% will be levied by the intermediary institution (that is, a broker) that receives the order directly from the Non-Resident Holder, which can be later offset against the 15% income tax due on the capital gain, which will be paid by the Non-Resident Holder’s tax representative in Brazil.
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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 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.
| (iii) | Capital Reduction |
In 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 following progressive rates: (i) 15% for the portion of 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% for a Non-Resident Holder located in a Tax Haven.
Although subject to interpretation, in the case of Non-Resident Holders carrying out investments pursuant to Joint Resolution No. 13, it is possible to sustain that the income tax should not apply at progressive rates under Law No. 13,259/16, 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%.
Sale of ADRs
Pursuant to Section 26 of Law No. 10,833/2003, 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 No. 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 Exchange of ADRs for 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 Joint Resolution No. 13, 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 the New Foreign Exchange Law, 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 Exchange of Units 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 the following progressive rates: (i) 15% for the portion of 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), or 25.0% for Tax Haven residents. If a Non-Resident Holder that is a foreign direct investor under the New Foreign Exchange Law 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 aforementioned progressive rates or, in the case of a Tax Haven resident, 25%.
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The progressive rates of Law No. 13,259/16 to capital gains obtained by Non-Resident Holders not located in a Tax Haven will be applicable and for Non-Resident Holders (whether they are considered to be Non-Resident Holders as a result of Joint Resolution No. 13 or otherwise) located in a Tax Haven are subject to a specific tax regulation and remain taxed to a tax rate of 25%.
However, in certain circumstances, there may be arguments to sustain the position that such taxation is not applicable to Joint Resolution No. 13 Holders that invest in Brazil observing the conditions of Joint Resolution No. 13 and 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.
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. Please note, however, that the RFB already took the position that the deposit of Shares in exchange for ADRs should be viewed as a taxable transaction in Brazil, following Cosit Tax Ruling No. 292, of December 17, 2024.
Tax on Foreign Exchange Transactions (IOF/Exchange)
The IOF on Exchange Transactions, 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, foreign exchange transactions carried out in connection with investments made by Non-Resident Holders in the Brazilian financial and capital markets under Joint Resolution No. 13 are generally subject to the IOF/Exchange at a rate of zero. The Brazilian government may increase any of these rates at any time, up to 25%. However, any increase in rates would only apply to future transactions.
Tax on Transactions Involving Bonds and Securities and Derivatives
Brazilian law imposes IOF tax on Transactions Involving Bonds and Securities, or “IOF/Bonds.” 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, or the “IOF/Derivatives” tax, was established by Decree No. 7,563 dated September 16, 2011, with the original levy of 1% on the notional value of the adjusted purchase sale or maturity of financial derivative contract in Brazil that individually results in an increased foreign exchange exposure on a short position. However, under Decree No. 8,027 of June 12, 2013 the tax rate was reduced to zero.
Other Brazilian Taxes
The inheritance and gift tax (Imposto sobre Transmissão Causa Mortis e Doação de Quaisquer Bens ou Direitos), 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 resident 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 minimum rate of 2% and 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; |
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| 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; |
| 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 shares by vote or value; |
| x. | persons holding ADRs or units in connection with a trade or business conducted outside the United States; and |
| xi. | 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, 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, or 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, 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. |
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. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADRs for the underlying units represented by those ADRs.
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 the reais received, 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 any reais 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 of reais 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) 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. 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, a U.S. Holder might be entitled to a credit against its U.S. federal income tax liability for Brazilian income taxes withheld from dividends on ADRs or units. On December 28, 2021, certain Treasury Regulations pertaining to foreign tax credits (the “Final Treasury Regulations”) were released that impose significant new limitations on the non-U.S. taxes (including withholding taxes) for which a foreign tax credit can be claimed. Corrections with respect to the Final Treasury Regulations were published on July 27, 2022. However, the IRS has released a notice that indicates that the U.S. Treasury Department and the IRS are considering amendments to the Final Treasury Regulations and provides relief from certain provisions of the Final Treasury Regulations for taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). We have not determined whether these limitations will prevent a U.S. Holder from claiming a foreign tax credit with respect to any withholding tax imposed on dividends on ADRs or units. U.S. Holders should therefore consult their tax advisors as to the availability of foreign tax credits for any amounts withheld with respect to 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.
In addition, the Final Treasury Regulations generally will preclude U.S. Holders from claiming a foreign tax credit with respect to any tax imposed on gains from the disposition of shares by a jurisdiction, such as Brazil, that does not have an applicable income tax treaty with the United States, although such taxes may be applied to reduce the amount realized by the U.S. Holder on the disposition. Consequently, a U.S. Holder currently is not expected to be able to claim a foreign tax credit for any Brazilian tax imposed on any gains from the sale or exchange of ADRs or units. However, a U.S. Holder may, at its election, deduct such 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 purchase of units and the IOF/Bonds Tax on the deposit 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.
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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 (and on which taxpayers may currently rely pending finalization), we believe we were not a passive foreign investment company (a “PFIC”) for our taxable year ended December 31, 2024. 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.
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. Further, the portion of any distribution in respect of ADRs or units that is in excess of 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, 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. Holder held units or ADRs, a U.S. Holder 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 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, 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 internet website that contains reports and other information about issuers, like us, that file electronically with the CVM. The address of that website is http://www.cvm.gov.br. We also file consolidated financial statements and other periodic information with the B3. The address of the B3 website is http://www.b3.com.br.
10I. Subsidiary Information
Not applicable.
10J. Annual Report to Security Holders
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Overview
In 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, including financial, credit, market, operational and compliance risk, to ensure a consistent approach worldwide.
In addition, committees led by senior management are responsible for controlling risks by overseeing credit approval and compliance with the 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 to senior 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 such information to senior management is designed to enhance the understanding and management of risks for the Santander Group’s administrative bodies and branches. The type of information and highlights in each report varies depending on the intended audiences within senior management, such as the Santander Group, its financial entities, or its foreign branches. Information can be transmitted to senior management through our intranet risk reporting tool, by e-mail or through live presentations.
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Information, analyses and decisions are also disseminated through the channels described below, fostering communication among all areas of the 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; |
| v. | video and teleconferences with Santander Spain; and |
| vi. | risk committees, including the executive risk committee for Brazil and the risk control committee. |
Information is prepared with the goal of improving risk management and is classified into two groups:
| i. | Standard information: this information is generated on a regular basis and with fixed content, subject to revision, made available to senior management for select target areas, depending on the type of information included in the report. The reports are used to facilitate knowledge about the risk for which the Risk Management department is responsible, including credit use, instrument valuation and results, as well as the analyses needed to manage these risks and optimize capital. |
| ii. | Non-standard information: this includes presentations and information not included in the reports above prepared for our senior management on an ad hoc basis or upon specific request. When the request for certain information becomes more regular, such reporting is integrated into automated “Standard information.” |
| iii. | Each report varied by the nature of the information and its frequency. The nature of the information provided is either quantitative or qualitative. |
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 primarily addressed the liquidity and market risk (trading and banking 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.
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 known 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 depends on the information provided, as follows:
Daily information:
i. liquidity and market risk: includes data on treasury limits (VaR, positions, sensitivity of linear and nonlinear econometric models) and the principal changes in the treasury portfolio. Also includes short-term liquidity and liquidity buffer calculation.
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 |
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| iii. | is drawn from our risk management framework and policies globally and is validated by local market risk areas. |
Monthly information:
| i. | liquidity and market risk: facilitate the analysis of the current activity, including structural and interest rate risks; it also includes a detailed analysis of alternative measures, stress scenarios and short, long and concentration liquidity metrics. |
Monthly information is generally more detailed than weekly information.
Risk Management Committees
The following table describes the main risk committees in Brazil (which are responsible for credit decisions and for ongoing control of credit risk matters), including their responsibilities, members and frequency of meetings.
| Committee | Main Responsibilities | Members | Meeting Frequency | ||||
| Executive Risk Committee | • Enable the application, at the local level, of the Santander Group’s risk culture, aligning the Santander Brasil’s strategy, predisposition and risk tolerance level (“Main Guide”) to the mission and objective of its business areas | • CEO | Weekly | ||||
| • Approves the risk appetite secondary metrics that will be proposed to the board of directors of Santander Brasil; | • Vice President Executive Officer (Chief Risk Officer) | ||||||
| • Manage exposures from different customers, economic sectors and types of risks, including, among others, the following functions: | • Vice President Executive Officer of Legal Affairs | ||||||
| • Approve risk proposals for credit and market operations, including, among others, underwriting operations of fixed and variable income, customer limits for Treasury products, ALCO (Assets and Liabilities Committee) limits, debt restructuring proposals and payment arrangements; |
• Director of Wholesale’s Credit Risk • Senior Head of Legal Affairs |
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| • Handle general issues related to market risk, cross-border limits, country risk, global banking operations, and market risk approvals; | • Vice President Executive Officer of Corporate and Investment Banking | ||||||
| • Adopt and, if necessary, validate, portfolio sales or individual asset-credits; | • Vice President Executive Officer of Corporate Banking | ||||||
| • Approve predefined internal risk regulations and monitor the Strategic Business Plan main indicators; | • Vice President Executive Officer of Wealth Management | ||||||
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| Committee | Main Responsibilities | Members | Meeting Frequency | ||||
| • Authorize management tools, improvement initiatives, follow up on projects and any other relevant activities related to risk management; | |||||||
| • Approve the policy and standards of methodological models and validate their effectiveness; | |||||||
| • Be aware of and take the necessary measures regarding risk to comply with the recommendations and directions issued by supervisory authorities in the exercise of its functions and the internal audit of the Bank; | |||||||
| • Provide information to our board of directors and to our Executive Committee and assistance, if needed, in order to execute the tasks assigned to risk management by applicable law, the by-laws, the board of directors´ rules of procedure and the regulation of the Risk Executive Committee; and | |||||||
| • Approve the creation, modification and termination of other committees or decision bodies and their regulations and delegate to those committees or people empowerment on decision-making and risk management, | |||||||
| Risk Control Committee | • Oversee the Risk Profile and Assessment (RPA); | • Chief Financial Officer | Biweekly | ||||
| • Conduct a full segment and regular follow up of all risks, including Conduct Risk, checking if the risk profile is set in accordance with the risk appetite, the commercial and strategic plan and the budget approved by the board of directors; |
• Chief Risk Officer • Vice President Executive Officer of Finance and Strategy |
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| • Conduct an independent and periodic control report on risk management activities, which includes: | • Senior Head of Enterprise Risk Management | ||||||
| • Full risk profile view of the different businesses, including among others, benchmarking of the main competitors of the Bank and monitoring of key strategic projects; | • Senior Head of GIR and Relationship with Supervisors | ||||||
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| Committee | Main Responsibilities | Members | Meeting Frequency | ||||
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• Monitor the observance of appetite and risk policies, advising our Risk and Compliance Committee on these issues; • 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 |
• Chief Compliance Officer • Vice President Executive Officer of Legal Affairs • Chief Information Security Officer • Vice President Executive Officer of Internal Audit • Senior Head of Operational Risk and Internal Controls. |
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| • Support and assist the board in carrying out stress tests, in particular by evaluating the scenarios and assumptions to be used in these tests, valuing the results and analyzing the measures proposed by the risk function as a consequence of the results; | |||||||
| • Validate the information on risks that must be submitted to the board of directors when so required and without prejudice to the direct access to the person responsible for the risk function (Chief Risk Officer) to the board; | |||||||
| • Comprehensive and periodic monitoring of relevant risks related to the companies in the prudential conglomerate; | |||||||
| • Monitoring critical outsourcing contracts approved by the relevant forums; | |||||||
| • Monitoring the Risk Culture Plan; |
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| Committee | Main Responsibilities | Members | Meeting Frequency | ||||
| • Supervise measures taken regarding risks to comply with the recommendations and directions issued by the supervisory authorities in the exercise of its function and Santander Brasil’s audit; | |||||||
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• Provide the board of directors, through our Risk and Compliance Committee, and our 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 board of directors´ rules of procedure and the regulation of the Risk Control Committee; 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. |
The 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 other members of the Executive Committee. The main responsibilities of the Executive 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. They also raise any matters to our board of directors that exceed the authority of the committee. Each of our risk management committees has certain authority 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.
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Credit Risk
Santander Group’s risk management model is based on a prudent management, driven by the risk appetite defined by the unit and approved by the headquarters. We operate within the limits of the Santander Group’s risk management guidelines and Brazilian Central Bank regulations, 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, providing sufficient autonomy for proper risk management. Another important characteristic of our risk management is the direct involvement of senior management in the decision-making process through credit committees. Our credit risk management process, especially new loan approval and risk monitoring, is structured according to our customer and product classifications, and is divided into retail and wholesale lending.
Retail Lending
In retail banking, credit requests made by individuals are analyzed by a credit approval system, which 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.
These requests can come from one of our many service channels, including branches, internet banking, mobile applications and ATMs.
We use two distinct scoring models depending on the phase in which the customer is in with respect to their interaction with us (the “application” phase and the “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 (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 businesses), the method used to evaluate if approval should be granted is based on internally developed credit risk approval limits, as well as the customer´s creditworthiness. These approval methods include system automation, or manual individual analysis, which 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, as well as collateral granted in connection therewith, is also taken into account in the approval process.
Pre-approved limits on lines of credit for both individuals and SMEs are granted based on creditworthiness, as determined by our scoring criteria. Credit limits are managed based on the performance of the customers, considering each customer’s risk profile.
Credit authorization limits are established and these are automatically applied to all credit requests. When an automatic credit decision results in the customer’s needs, the commercial area has the authority to submit a request for manual approval. Such approvals are subjected to review by analysts or committees, depending on the value of the loan sought.
There is also a more robust model called Rating Plus which is addressed to mid-size companies a few other retail customers. This model combines the customers’ 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 customers are usually made manually through specific proposals or limits.
Wholesale Lending
In wholesale banking, each customer is analyzed on an individual basis, Commercial and risk areas analyze the client’s needs and indicators, analyzing profitability, creditworthiness and adequacy to the 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 Central Bank), and the expectations of the commercial area. Individual and sectoral portfolio concentrations are monitored to mitigate the risk of the portfolio.
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Credit Monitoring
Credit lines to retail banking SME customers are reviewed weekly, whereas individual customers are systematically reviewed daily, based on the client’s credit rating. This process allows improvements in credit exposure to customers who present good credit quality. Additional specific early warnings are automatically generated when deterioration of a customer’s credit quality is identified. When this occurs, a process to reduce credit risk and prevent default is implemented. For SMEs, this includes monthly monitoring of their financial performance, the financial situation of each enterprise is discussed by specific committees in the presence of the commercial area. These processes are implemented, with the goal of continuously improving the quality of our loan portfolio.
Credit lines to wholesale customers and related credit quality are reviewed on an annual basis. When any specific concern the credit quality of a certain customer, we use a customer monitoring system known as SCAN (Santander Customer Assessment Note), which allows possible actions to be taken under the following categories: “monitoring,” “intensive monitoring,” “proactive monitoring” or “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. 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.
For a breakdown of our portfolio by internal risk rating, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Allowance for Loan Losses—Internal Risk Rating.”
Recovery
Our business recovery area is responsible for all nonperforming portfolios. This area uses statistical tools to study the behavior of customers and then defines, implements and monitors strategies related to these portfolios, seeking to ensure maximum recovery subject to applicable Brazilian law and regulation.
Customers with greater probability of payment are classified as low-risk customers and those with a low probability are classified as high risk. The aforementioned risk classification determines the intensity of collection efforts expended.
The channels of operation are defined as “ 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, digital channels, inclusion of defaulting customers 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:
| • | Internal teams specialized in restructuring and debt recovery work directly with defaulting customers with loans of higher values and/or are overdue more than 60 days. |
| • | 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. |
The digital channels have been increasing in importance and have made it easier for customers to renegotiate debts.
Once we have exhausted all of the credit recovery resources available to us, we conduct sales of any remaining nonperforming loans. These sales are held periodically through an auction process, with the aim of obtaining optimal prices in the markets and thereby reducing 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 guidelines and procedures established by the Santander Group. Members of the committee include our Chief Executive Officer, Chief Risk Officer, Vice President Executive Officer – Finance and Strategy, Vice President Executive Officer – CFO, Director – Financial Management (ALM) and the Chief Economist. The assets and liabilities committee establishes strategies, policies and procedures with the objective of managing our balance sheet and risk structure.
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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 due 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 Santander Group as a whole.
Exchange rate risk
Exchange rate risk arises due to the sensitivity of a foreign currency position in relation to a base currency 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 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 the real within established limits.
Equity price risk
Equity price risk arises due to the sensitivity 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).
Commodities price risk
Commodities price risk relates to the potential negative effect of changes in commodity prices. Our exposure to this risk is mostly concentrated in derivative operations involving commodities for customers.
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 a portfolio to volatility in a number of risk factors, including interest rates, exchange rates and equity 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 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).
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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 participants or institutional investors, the execution of large volumes of operations, market instability or 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.
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 received as a result of the prepayment will be reinvested at a potentially lower interest rate. This mainly affects loans or mortgage.
Underwriting risk
Underwriting risk occurs 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 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.
Activities subject to market risk
Our market risk area is responsible for measuring, controlling and monitoring risk, in respect to the 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 outlines the main source of risk for which we are exposed:
Trading
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, equity, commodities and foreign exchange products, we are exposed to their respective market risks. We are also exposed to volatility when non-linear derivatives are used and credit spreads.
Non-trading book (banking/structural)
The non-trading book consists 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. |
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| ii. | Structural exchange rate risk/hedging of results and offshore investments. Exchange rate risk occurs when the currency in which the investment is made is different from the real in companies or branches that are consolidated and those that are not (structural exchange rate). In addition, exchange rate hedging of future results generated in currencies other than the real (hedging of results). |
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 invest in and maintain. Our Risk and Compliance Committee monitors our overall performance in relation 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, as well as through specific exposure 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 are 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 information. |
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; |
| viii. | Information consolidation; and |
| ix. | Contingency plans and technical capability. |
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; |
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| 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 our Risk and Compliance 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. 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 and Stress VaR limits; |
| ii. | limits of equivalent positions and/or nominal; |
| iii. | sensitivity limits to interest rates; |
| iv. | vega and gamma limits; and |
| v. | limits aimed at reducing the volume of effective losses or protecting results already generated during the period: |
| • | loss trigger; and |
| • | stop loss. |
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 for short, long and concentration metrics and considering BAU and Stress scenario. |
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 the simulated PnL distribution. The first VaR figure gives the same weight to all observed values, and the second one applies an exponential declining factor to give a higher weight for the most recent observations. This methodology makes our VaR numbers react very quickly to changes in current volatility, significantly reducing the likelihood of back testing exceptions. We use VaR estimates to alert senior management whenever the statistically estimated losses in our portfolios exceed prudent levels. |
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| 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 260 days, instead of 520 days for the VaR; (ii) unlike when calculating the VaR the higher of the percentile uniformly weighted and the one exponentially weighted is not applied. Instead, only the uniformly weighted percentile is used. All the other aspects regarding the methodology and the inputs for calculating the stressed VaR are the same as those for the VaR. To determine the period of observation the market risk area has analyzed the history of the main market risk factors, which were chosen on the basis of expert criteria, and taking into account the most significant positions of our portfolio. |
| • | Stress Test: this is a simulation technique, which consists of estimating the potential impact on results by applying different stress scenarios to 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 scenarios. These results are analyzed at least monthly and, along with the VaR provide a fuller spectrum of the risk profile. |
| • | Sensitivities: our market risk sensitivity measures gauge the change (or sensitivity) of the market value of an instrument or portfolio to changes in each of the risk factors. The sensitivity of the value 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. |
Non-trading Activities
| • | Interest rate gap of assets and liabilities: focuses on lags or mismatches between changes in the value of assets, liabilities and off-balance sheet items. Gap analysis provides a basic representation of the balance sheet structure and allows for the detection of interest rate risk by concentration of maturities. It is also a useful tool for estimating the impact of future interest rate movements on NIM or equity. All on- and off-balance sheet items must be broken down by their flows and analyzed in terms of re-pricing and maturity. |
In the case of those items that do not have a contractual maturity, an internal model of analysis is used and estimates are made of their duration and sensitivity.
| • | NIM sensitivity: measures the change in the short- and medium-term in the accruals expected over a 12-month horizon, in response to a shift in the yield curve. The yield curve is calculated by simulating the NIM, with a shift in the yield curve, as well as for the current scenario. The sensitivity is the difference between the calculation of the two margins. |
| • | 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 portfolios. |
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| • | Analysis of results arising from the interest rate scenarios established by Circular No. 3,876 of the Brazilian Central Bank: there are six shock scenarios for MVE sensitivity and two for NIM sensitivity. |
| • | Liquidity risk: our ability to finance our commitments at reasonable market prices, as well as to carry out our business plans with stable sources of funding. We permanently monitor maximum gap profiles. The measures used to control liquidity risk are the liquidity gap, stress scenarios and contingency plans. |
| • | Liquidity gap: provides information on contractual and expected cash inflows and outflows for a certain period of time, for each of the currencies in which we operate. The gap measures the net need or excess of funds at a specific date and reflects the level of liquidity maintained under normal market conditions. |
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.
Quantitative analysis
Trading activity
Quantitative analysis of daily VaR in 2024
Our risk performance with regard to trading activity in financial markets between 2022 and 2024, measured by daily VaR (measured at a 99% of confidence level, over a one day time frame), is shown in the following graph.
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During 2024, VaR fluctuated between R$14.7 million and R$83.0 million, with an average of R$42.8 million. The histogram below shows the distribution of average risk in terms of VaR in 2024, where the accumulation of days with VaR levels between R$20 million and R$70 million can be observed in 93.3% of the distribution.
VaR by Risk Factor
The minimum, maximum, average and year-end 2024 VaR values by risk factor were as follows:
| 2023 | 2024 | |||||||||
| Period End | Low | Average | High | Period End | ||||||
| (in millions of R$) | ||||||||||
| Trading VaR | 30.8 | 14.7 | 42.8 | 83.0 | 45.4 | |||||
| Diversification Effect | (25.1) | (3.7) | (22.8) | (75.8) | (9.8) | |||||
| 2023 | 2024 | |||||||||
| Period End | Low | Average | High | Period End | ||||||
| (in millions of R$) | ||||||||||
| Interest Rate VaR | 23.9 | 16.1 | 41.4 | 72.9 | 33.7 | |||||
| Equity VaR | 12.9 | 0.4 | 7.3 | 27.9 | 13.5 | |||||
| Foreign Exchange VaR | 15.9 | 1.5 | 14.7 | 41.0 | 7.0 | |||||
| Commodity VaR | 3.1 | 0.3 | 2.4 | 17.0 | 0.9 | |||||
The average VaR for 2024 was R$42.8 million, with most of the risk due to interest rate positions, and Santander Brasil was relatively conservative in equity and commodities trading activity in line with the approach taken over the last few years.
The average VaR of the four main risk factors, interest rates, equity prices, exchange rates, and commodities, were R$41.4 million, R$7.3 million, R$14.7 million, and R$2.4 million respectively, with a negative average diversification effect of R$22.8 million. The chart below shows the evolution of the VaR for interest rates (IR), exchange rates (FX), equity prices (EQ), and commodities (CM), at a 99% confidence level, over a day time frame and a 15-day moving average.
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Risk Management of Structured Derivatives
Our structured derivatives activity is mainly focused on designing investment products and managing hedging risks for 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.
The chart below shows the VaR Vega performance of our structured derivatives business in 2024, 2023 and 2022. In the most recent year, this figure fluctuated around an average of R$9.35 million. In general, the periods with higher VaR Vega levels are related to episodes of significant increases in market volatility.
Scenario analysis
Different stress test scenarios were analyzed during 2024. A correlation break scenario generated the results presented below.
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Worst Case Scenario
The table below shows the maximum daily losses for each risk factor (fixed-income, equities and currencies) as of December 31, 2024, in a scenario that uses historical volatilities and simulates variations of the risk factors for +/-3 and +/-6 standard deviations on a daily basis. From this group of scenarios, we generate a table of stress test results, which identifies the largest loss per risk factor. The sum of the largest losses of each risk factor is the result of the Worst-Case Scenario, which considers the break of correlation between risk factors.
| Worst Case Stress Test | Exchange Rate | Fixed Income | Equity | Total | ||||
| (in millions of R$) | ||||||||
| Total trading | (16.0) | (203.8) | (8.3) | (228.2) | ||||
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$228.2 million as of December 31, 2024.
Non-trading Activity
Quantitative Analysis of Interest Rate Risk in 2024
Convertible Currencies
As of December 31, 2024, the sensitivity of net interest income at one year, to a parallel rise of 100 basis points in the local currency yield curve was R$798 million.
In addition, at the end of 2024, the sensitivity of MVE to parallel rises of 100 basis points in the yield curves was R$2,643 million in the local currency yield curve.
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Structural Gap
The following table shows the managerial gaps between the re-pricing dates of our assets and liabilities as of December 31, 2024 in millions of reais .
| Gap | Total |
0-1 Month |
1-3 Months |
3-6 Months |
6-12 Months |
1-3 Years |
3-5 Years |
> 5 Years |
Not Sensitive | ||||||||||
| (in millions of R$) | |||||||||||||||||||
| Money Market | 141,663 | 102,596 | 516 | 834 | 3,146 | 1,749 | 1,766 | 6,025 | 25,033 | ||||||||||
| Bonds | 294,979 | 60,423 | 160 | 575 | 9,270 | 8,567 | 14,971 | 20,294 | 180,718 | ||||||||||
| Loans | 556,063 | 160,107 | 72,761 | 66,189 | 65,802 | 74,170 | 65,642 | 64,770 | (13,377) | ||||||||||
| Permanent | 24,579 | — | — | — | — | — | — | — | 24,579 | ||||||||||
| Other | 352,502 | 58,627 | — | — | — | — | — | — | 293,874 | ||||||||||
| Total Assets | 1,369,786 | 381,753 | 73,438 | 67,598 | 78,218 | 84,485 | 82,378 | 91,089 | 510,826 | ||||||||||
| Money Market | (5,850) | (3,864) | (858) | (518) | (301) | (242) | (68) | — | — | ||||||||||
| Deposits | (663,222) | (443,524) | (8,839) | (12,218) | (11,920) | (17,371) | (18,646) | (83,559) | (67,144) | ||||||||||
| Loans Liability | (23,819) | (2,801) | (1,986) | (1,721) | (3,838) | (5,097) | (3,113) | (6,140) | 878 | ||||||||||
| Issues | (151,543) | (128,679) | (550) | (2,881) | (5,752) | (7,875) | (3,410) | (2,397) | — | ||||||||||
| Equity and Other | (525,352) | (78,400) | (18,788) | (27,855) | (38,659) | (8,287) | (1,499) | — | (351,863) | ||||||||||
| Total Liabilities | (1,369,786) | (657,268) | (31,022) | (45,193) | (60,469) | (38,871) | (26,738) | (92,096) | (418,129) | ||||||||||
| Balance Gap | — | (275,515) | 42,416 | 22,405 | 17,749 | 45,614 | 55,641 | (1,007) | 92,698 | ||||||||||
| Off-Balance Gap | 36,135 | 20,158 | 3,769 | (6,385) | (10,706) | 8,133 | (14,805) | (3,408) | 39,379 | ||||||||||
| Total Structural Gap | 36,135 | (255,357) | 46,185 | 16,020 | 7,043 | 53,747 | 40,835 | (4,415) | 132,076 | ||||||||||
| Accumulated Gap | 36,135 | (255,357) | (209,171) | (193,151) | (186,108) | (132,361) | (91,526) | (95,941) | 36,135 | ||||||||||
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, increased R$65 million during 2024, reaching a maximum of R$798 million in December 2024. The sensitivity of the market value increased R$767 million in the year ended December 31, 2024, reaching a maximum of R$2,643 million in December 2024. The main factors in 2024 that influenced the sensitivity were the volatility of the interest curve, updating of methodologies and the effects of strategies in the business areas.
Interest Rate Risk Profile as of December 31, 2024
The currency gap tables below show the managerial distribution of risk by maturity and currency in Brazil as of December 31, 2024 in millions of reais .
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| Total |
0-1 month |
1-3 months | 3-6 months | 6-12 months |
1-3 years |
3-5 years |
> 5 years |
Not Sensitive | ||||||||||
| (in millions of R$) | ||||||||||||||||||
| Local Currency Gap | ||||||||||||||||||
| Money Market | 108,134 | 82,063 | 516 | 834 | 3,146 | 1,749 | 1,766 | 6,025 | 12,036 | |||||||||
| Bonds | 274,977 | 50,654 | 133 | 180 | 6,089 | 7,307 | 14,730 | 14,631 | 181,255 | |||||||||
| Loans | 444,535 | 110,085 | 49,666 | 47,024 | 51,369 | 71,016 | 65,308 | 61,829 | (11,764) | |||||||||
| Permanent | 24,578 | — | — | — | — | — | — | — | 24,578 | |||||||||
| Other | 210,062 | 28,446 | — | — | — | — | — | — | 181,616 | |||||||||
| Total Assets | 1,062,286 | 271,248 | 50,315 | 48,037 | 60,604 | 80,072 | 81,804 | 82,485 | 387,721 | |||||||||
| Money Market | (5,850) | (3,864) | (858) | (518) | (301) | (242) | (68) | — | — | |||||||||
| Deposits | (619,426) | (425,104) | (4,128) | (8,051) | (10,660) | (15,595) | (18,011) | (83,559) | (54,319) | |||||||||
| Loan Liabilities | (9,797) | (1,223) | (322) | (627) | (1,310) | (1,725) | (2,166) | (3,302) | 878 | |||||||||
| Issues | (151,543) | (128,679) | (550) | (2,881) | (5,752) | (7,875) | (3,410) | (2,397) | — | |||||||||
| Equity and Other | (288,442) | (24,590) | — | — | — | — | — | — | (263,852) | |||||||||
| Total Liabilities | (1,075,057) | (583,459) | (5,857) | (12,076) | (18,023) | (25,436) | (23,655) | (89,258) | (317,292) | |||||||||
| Balance Gap | (12,772) | (312,211) | 44,458 | 35,961 | 42,581 | 54,635 | 58,149 | (6,773) | 70,429 | |||||||||
| Off-Balance Gap | 32,454 | 20,274 | (1,741) | (5,966) | (9,147) | 7,875 | (14,805) | (3,414) | 39,379 | |||||||||
| Total Structural Gap | 19,682 | (291,938) | 42,717 | 29,995 | 33,434 | 62,510 | 43,343 | (10,187) | 109,807 | |||||||||
| Accumulated Gap | 19,682 | (291,938) | (249,221) | (219,226) | (185,792) | (123,282) | (79,938) | (90,125) | 19,682 | |||||||||
| 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$) | ||||||||||||||||||
| Foreign Currency Gap | ||||||||||||||||||
| Money Market | 33,529 | 20,532 | — | — | — | — | — | — | 12,997 | |||||||||
| Bonds | 20,002 | 9,769 | 28 | 395 | 3,182 | 1,260 | 241 | 5,664 | (537) | |||||||||
| Loans | 111,528 | 50,022 | 23,095 | 19,165 | 14,433 | 3,154 | 333 | 2,940 | (1,614) | |||||||||
| Permanent | — | — | — | — | — | — | — | — | — | |||||||||
| Other | 142,440 | 30,182 | — | — | — | — | — | 112,258 | ||||||||||
| Total Assets | 307,500 | 110,505 | 23,122 | 19,560 | 17,614 | 4,414 | 574 | 8,604 | 123,105 | |||||||||
| Money Market | — | — | — | — | — | — | — | — | — | |||||||||
| Deposits | (43,796) | (18,420) | (4,711) | (4,167) | (1,259) | (1,777) | (636) | — | (12,825) | |||||||||
| Loan Liabilities | (14,022) | (1,578) | (1,664) | (1,094) | (2,528) | (3,372) | (947) | (2,838) | — | |||||||||
| Issues | — | — | — | — | — | — | — | — | — | |||||||||
| Equity and Other | (236,910) | (53,810) | (18,788) | (27,855) | (38,659) | (8,287) | (1,499) | — | (88,011) | |||||||||
| Total Liabilities | (294,728) | (73,809) | (25,164) | (33,117) | (42,446) | (13,435) | (3,083) | (2,838) | (100,836) | |||||||||
| Balance Gap | 12,772 | 36,697 | (2,042) | (13,557) | (24,832) | (9,021) | (2,508) | 5,766 | 22,269 | |||||||||
| Off-Balance Gap | 3,681 | (116) | 5,510 | (418) | (1,559) | 258 | — | 6 | — | |||||||||
| Total Structural Gap | 16,453 | 36,581 | 3,468 | (13,975) | (26,391) | (8,763) | (2,508) | 5,772 | 22,269 | |||||||||
| Accumulated Gap | 16,453 | 36,581 | 40,049 | 26,075 | (317) | (9,080) | (11,588) | (5,816) | 16,453 | |||||||||
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Market Risk: VaR Consolidated Analysis
Our total daily VaR as of December 31, 2024 and 2023 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.
| 2024 | 2023 | |||||||||
| Low | Average | High | Period End | Period End | ||||||
| (in millions of R$) | ||||||||||
| Trading | 14.7 | 42.8 | 83.0 | 45.4 | 30.8 | |||||
| Total | 14.7 | 42.8 | 83.0 | 45.4 | 30.8 | |||||
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
| 2024 | 2023 | |||||||||
| Low | Average | High | Period End | Period End | ||||||
| (in millions of R$) | ||||||||||
| Interest rate risk | ||||||||||
| Trading | 16.1 | 41.4 | 72.9 | 33.7 | 23.9 | |||||
| Total | 16.1 | 41.4 | 72.9 | 33.7 | 23.9 | |||||
Note: VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.
Foreign Exchange Rate Risk
| 2024 | 2023 | |||||||||
| Low | Average | High | Period End | Period End | ||||||
| (in millions of R$) | ||||||||||
| Exchange rate risk | ||||||||||
| Trading | 1.5 | 14.7 | 41.0 | 7.0 | 15.9 | |||||
| Total | 1.5 | 14.7 | 41.0 | 7.0 | 15.9 | |||||
Note: VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.
Equity Price Risk
| 2024 | 2023 | |||||||||
| Low | Average | High | Period End | Period End | ||||||
| (in millions of R$) | ||||||||||
| Equity price risk | ||||||||||
| Trading | 0.4 | 7.3 | 27.9 | 13.5 | 12.9 | |||||
| Total | 0.4 | 7.3 | 27.9 | 13.5 | 12.9 | |||||
Note: VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.
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Commodity Price Risk
| At December 31, | ||||||||||
| 2024 | 2023 | |||||||||
| Low | Average | High | Period End | Period End | ||||||
| (in millions of R$) | ||||||||||
| Commodity price risk | ||||||||||
| Trading | 0.3 | 2.4 | 17.0 | 0.9 | 3.1 | |||||
| Total | 0.3 | 2.4 | 17.0 | 0.9 | 3.1 | |||||
Our daily VaR estimates by activity were as set forth below:
| 2024 | 2023 | |||||||||
| Low | Average | High | Period End | Period End | ||||||
| (in millions of R$) | ||||||||||
| Trading | ||||||||||
| Interest rate risk | 16.1 | 41.4 | 72.9 | 33.7 | 23.9 | |||||
| Exchange rate risk | 1.5 | 14.7 | 41.0 | 7.0 | 15.9 | |||||
| Equity price risk | 0.4 | 7.3 | 27.9 | 13.5 | 12.9 | |||||
| Commodity price risk | 0.3 | 2.4 | 17.0 | 0.9 | 3.1 | |||||
| Total Trading | 14.7 | 42.8 | 83.0 | 45.4 | 30.8 | |||||
| Non-trading | ||||||||||
| Interest rate risk | 2,224.1 | 2,949.9 | 4,527.0 | 4,527.0 | 2,010.8 | |||||
| Exchange rate risk | — | — | — | — | — | |||||
| Equity price risk | — | — | — | — | — | |||||
| Commodity price risk | — | — | — | — | — | |||||
| Total Non-Trading | 2,224.1 | 2,949.9 | 4,527.0 | 4,527.0 | 2,010.8 | |||||
| Total (Trading + Non-Trading) | 2,238.8 | 2,992.7 | 4,610.0 | 4,572.4 | 2,041.6 | |||||
| Interest rate risk | 2,240.2 | 2,991.3 | 4,599.9 | 4,560.7 | 2,034.7 | |||||
| Exchange rate risk | 1.5 | 14.7 | 41.0 | 7.0 | 15.9 | |||||
| Equity price risk | 0.4 | 7.3 | 27.9 | 13.5 | 12.9 | |||||
| Commodity price risk | 0.3 | 2.4 | 17.0 | 0.9 | 3.1 |
Note: VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.
Non-trading VAR is calculated using a 21-day timing gap instead of on a daily basis.
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Operational Risk
We have adopted the definition of the Basel Committee and Brazilian Central Bank for operational risk, which defines operational risk as the possibility of losses resulting from inadequate processes, people and systems, failures, or from external events. This definition includes legal risk associated with the inadequacy or deficiency in executed agreements, as well as penalties for noncompliance with legal provisions and damages for third parties resulting from our activities. This definition does not include strategic risk. Operational risk events might result in financial losses, adverse effects on the continuity of our business, and negative effects on public image and customer experience.
To accomplish our operational risk objectives, we have established a risk model based on three lines, aimed at continuously improving and developing our management and control of operational risks. The three lines are:
| • | First line : all business and support areas within Santander Brasil are responsible for identifying, managing, mitigating and reporting operational risks related to its activities; |
| • | Second line : the operational risk and internal control departments is responsible for monitoring and ensuring control over operational and technological risk management practices throughout the organization. It is also responsible for implementing and communicating our operational risk culture, defining methodologies, policies, tools, training, applicable procedures and requirements for the effective management of operational risk; |
| • | Third line : the Internal Audit department is responsible for undertaking independent reviews of the risk management activities carried out by the first and second lines, and for promoting continuous improvements in both lines. |
The objectives of the 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, and nonfinancial impacts; |
| • | to provide support to decision-makers within Santander Brasil; |
| • | to ensure there is sufficient coverage to cover the possible impacts of operational risk on an ongoing basis; and |
| • | to maintain control of operational risk in a manner which is consistent with business strategy. |
The following bodies are involved in the implementation of risk management 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 ): a committee which aims to perform a holistic and periodic monitoring of the risks to which Santander Brasil is exposed and to exercise independent control on the risk management activities; |
| • | Senior Forum of Internal Control and Operational Risk ( Fórum Sênior de Controle Interno e Risco Operacional “FSCIRO” ): a senior forum aimed at ensuring and fostering the adequate monitoring, control and mitigation of operational risks; |
| • | Operational Risk Meeting ( Reunião de Riscos Operacionais ): an independent forum, responsible for implementing and disseminating cultural norms, methodologies, standards, policies, tools, training and procedures applicable and required for the effective and efficient management and control of operational risk. |
Our risk management model assists managers in achieving their strategic objectives by contributing to the decision-making process and by seeking to reduce operational risk exposure and losses. It is compliant with the applicable regulatory requirements.
Cybersecurity Risk
We are exposed to cybersecurity risk as part of our day-to-day operations. We rely on our technological infrastructure, detection tools, protection, event containment measures, technical team training programs, employee training and awareness initiatives, and alignment of our processes with recognized business continuity management practices to manage cybersecurity risk. For more information on our cybersecurity risks and policies, please see “Item 16K. Cybersecurity.”
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Social and Environmental Risk
Since 2002, we have been at the forefront of social, environmental, and climate risk analysis in Brazil, and it has become part of our culture. We consider social, environmental and climate risks when deciding whether to maintain or extend credit. Our Social, Environmental and Climate Responsibility Policy, or “PRSAC,” complies with National Monetary Council Resolution No. 4,945/2021 and the SARB 14 self-regulation issued by FEBRABAN. Our PRSAC establishes guidelines for social-environmental practices applicable to business and stakeholder relations, such as relations with suppliers. These practices include social, environmental and climate risk assessment in granting or using credit, which complies with National Monetary Council Resolution No. 4,943/2021. This is carried out through the analysis of the socio-environmental practices of wholesale and core companies ( empresas núcleo ) SME customers, which have limits or credit risk greater than R$7 million and belong to one of 14 social, environmental and climate priorities sectors, based on their risk level.
We have been 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 in 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 consider climate change issues in the credit assessment of wholesale clients. In 2020, we started to use a water stress calculator in our socio-environmental assessments and we considered the concept of resilience for our clients in relation to physical and transition risks. 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 changes in legislation or consumer preferences.
In March 2023, FEBRABAN approved a protocol (Normativo SARB No. 26/2023) that set the standards for managing the risk of illegal deforestation in the bovine meat chain and defined guidelines to be adopted by its signatories, including Santander Brasil. We believe this is a major step forward as it is the first sector-wide environmental protocol for financing beef processing. Since it will apply to every major bank in Brazil, it is considered a highly effective way of sustainable change and addressing deforestation. By signing the protocol, we have aligned our commitment with that of the Brazilian financial industry to require beef processing clients with slaughterhouses in the Brazilian Amazon region to end illegal deforestation by December 2025. This applies to direct suppliers of cattle and Tier 1 indirect suppliers (supplier of the direct supplier). Under this requirement, suppliers must meet mid-term milestones, which consist of having a traceability and monitoring system, and continuously disclosing KPIs to demonstrate they are meeting their commitments. In 2021, well before the publication of the FEBRABAN protocol, we began engaging with more than a dozen beef processing clients about ending deforestation in their supply chain by 2025. This engagement led to several of them declaring commitments online in 2022 and developing plans to check on Tier 1 indirect suppliers and, under Plano Amazônia , led Santander Brasil to work with other banks to come up with the FEBRABAN protocol.
We believe that assessing the socio-environmental risk in our operations, also enables us to mitigate issues of operational, capital, credit, and reputational risk. Between January 1, 2024 and December 31, 2024, we screened 1,009 wholesale corporate customers, 681 Empresas Núcleo (Core Companies) customers, and 58 major new projects (including both those that are and that are not subject to the Equator Principles). Furthermore, wholesale segment customers are screened for environmental, social and climate related concerns by the new customer acceptance department 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.”
Other Information
Volatile market conditions arising from the continuation or escalation of the wars in Ukraine and in the Middle East, and the recent escalation of U.S.-China trade tensions following the U.S. presidential election, coupled with global supply chain disruptions and persistently high inflation, may result in significant changes in macroeconomic conditions, foreign exchange rates, interest rates, and the prices of our securities. Additionally, in Brazil, these global challenges are compounded by domestic factors such as a significant devaluation of the real and increasing interest rates due to heightened fiscal concerns. All of these factors could further exacerbate market volatility and adversely affect us. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally.”
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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.
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 240 Greenwich Street, New York, New York 10286, United States.
Fees and Expenses
BNYM, as depositary, may charge the following fees and expenses, among other things, to the ADS holders, any party depositing or withdrawing units or any party surrendering ADSs or to whom ADSs are issued (including, without limitation, any issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADSs or any units deposited or deemed to be deposited or any distributions of ADSs in connection with a dividend or otherwise), or by owners of ADSs, as applicable, pursuant to the terms of the amended and restated deposit agreement (the “Deposit Agreement”) dated as of October 20, 2015 among us, BNYM and the owners and holders of the ADSs:
| • | a fee of U.S.$5.00 or less for each 100 ADSs (or portion thereof) issued by, delivered by or surrendered to, as the case may be, the depositary; |
| • | a fee of U.S.$0.05 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement; |
| • | a fee of U.S.$0.05 or less per ADS (or portion thereof) per annum for depositary services; |
| • | fees related to certain distributions of securities or rights to purchase additional units (where the depositary will not exercise or sell those rights on behalf of the owners), such fee being in an amount equal to the fee for the execution and delivery of ADSs 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 owners of the ADRs; |
| • | such registration fees as may from time to time be in effect for the registration of transfers of units generally on the applicable 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 cable and facsimile transmission fees and expenses; |
| • | such expenses as are incurred by the depositary in the conversion of foreign currency; |
| • | taxes and other governmental charges; and |
| • | any other charges payable by the depositary or the custodian appointed by 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 owners 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 owners for those charges or by deducting those charges from one or more cash dividends or other cash distributions). |
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We will only pay the fees described above to the extent we are a depositor of Units or the owners of ADS. 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 owners 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.
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, 2024, such reimbursements amounted to U.S. $6.9 million.
PART II
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, 2024, with the supervision and participation of our management, including our Chief Executive Officer (CEO) and Chief Financial 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). As 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 CEO and CFO 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 CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.
In addition, as required by the Brazilian Central Bank through CMN Resolution No. 4,968/21 and Resolution No. 130/21, the report related to the quality and adequacy of the internal 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 14, 2025.
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 designed by, or under the supervision of, our principal executive and financial officers and incorporates supervision from effected by our Board of Directors, management and other 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.
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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 |
| • | 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 statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projected effectiveness of controls in future periods is 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 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, or “COSO,” in its Internal Control – Integrated Framework 2013. These guidelines have been extended and implemented for the 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 sets development guidelines and supervises execution at the unit level.
The general framework is consistent, as it assigns specific responsibilities to management 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.
With the supervision and participation of management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the framework set by the COSO Integrated Framework 2013.
Based on this assessment, which was carried out through February 28, 2025, our management concluded that as of December 31, 2024, 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, 2024, 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.”
15C. Attestation Report of the Registered Public Accounting Firm
For the report, dated February 28, 2025, from PricewaterhouseCoopers Auditores Independentes Ltda., our registered public accounting firm, on the effectiveness of our internal control over financial reporting as of December 31, 2024, 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 16. [RESERVED]
16A. Audit Committee Financial Expert
The Board of Directors has determined that one of the members of our audit committee, Ms. Maria Elena Cardoso Figueira is an “Audit Committee Financial Expert” and meets the requirements set forth by the SEC and NYSE. She 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.
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For more details about the audit committee, refer to “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”
16B. Code of Ethics
The Code of Ethical Conduct, the central element the Governance Compliance, is applicable to the members of the Boards of Directors, 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 promote it, by championing and striving for its enforcement, and also have the obligation to attend and participate in all assigned training activities 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 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 to 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 customers.
A copy of our Code of Ethical Conduct is filed as Exhibit 11.1 to this annual report.
16C. Principal Accountant Fees and Services
The balance of “Other general administrative expenses—Technical reports” includes the fees billed by the consolidated companies (detailed in the accompanying Appendix I of the consolidated financial statements included elsewhere in this annual report) to PricewaterhouseCoopers Auditores Independentes Ltda. for the fiscal years ended December 31, 2024 and 2023, as follows:
| For the year ended December 31, | |||
| 2024 | 2023 | ||
| (in millions of R$) | |||
| Audit of the annual financial statements of the companies audited (constant scope of consolidation) | 30.0 | 27.1 | |
| Audit related | 0.6 | 0.3 | |
| Tax services | 0.1 | 0.2 | |
| Others | 2.0 | 2.9 | |
| Total | 32.7 | 30.5 | |
The approximate value of withholding taxes in respect of the audit fees for the year ended December 31, 2024, according to applicable law totaled R$5.7 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 must be pre-approved by the audit committee.
Our Audit Committee pre-approves all audit and non-audit services to be performed by our registered public accounting firm.
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16D. 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 Board of 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 Board of Directors of an American company, which we refer to as our “Audit Committee.”
Our Audit 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 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.
16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table reflects purchases of our units, including units represented by ADRs, by us or our affiliates in 2024.
| Calendar Months | Total Number of Units Purchased(1) | Average Price Paid per Unit in R$ | Total Number of Units Purchased as Part of Publicly Announced Plans or Programs(2)(3) | Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs(2)(3) | ||||
| January 2024 | 1,180,000 | 28.57 | 1,180,000 | — | ||||
| February 2024 | — | — | — | — | ||||
| March 2024 | — | — | — | — | ||||
| April 2024 | — | — | — | — | ||||
| May 2024 | 1,150,700 | 28.29 | 1,150,700 | — | ||||
| June 2024 | — | — | — | — | ||||
| July 2024 | — | — | — | — | ||||
| August 2024 | — | — | — | — | ||||
| September 2024 | 14,401 | 28.56 | 14,401 | — | ||||
| October 2024 | 168,500 | 27.40 | 168,500 | — | ||||
| November 2024 | 270,800 | 26.77 | 270,800 | — | ||||
| December 2024 | — | — | — | — | ||||
| Total | 2,784,401 | 28.21 | 2,784,401 | 36,205,005 |
| (1) | In the year ended December 31, 2024, no units, including units represented by ADRs, were purchased other than through a publicly announced plan or program by us. |
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| (2) | On August 2, 2022, our board of directors approved, as a replacement for our previous buyback program, which expired on the same date, 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 36,986,424 units or ADRs, representing a combination of 36,986,424 common and 36,986,424 preferred shares, corresponding to approximately 1% of our share capital. The term of the buyback program is up to 18 months beginning on August 3, 2022 and expiring on February 5, 2024. On January 24, 2024, our Board of Directors approved the unit repurchase buyback program to cover the acquisition, by us or our branch in the Cayman Islands, of up to 36,205,005 units or ADRs, representing 36,205,005 common shares and 36,205,005 preferred shares, corresponding to approximately 1% of the totality of our corporate capital. The term of the buyback program is 18 months counted from February 6, 2024, expiring on August 6, 2025. |
| (3) | The number entered in the “Total” row of 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. |
16F. Change in Registrant’s Certifying Accountant
Not applicable.
16G. 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 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.
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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 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 noncompliance 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 practices 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.
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 Board of Directors 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. Currently, six members of our Board of Directors are deemed independent (representing 55% of the composition of our Board of 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, 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 two years.
Executive Sessions
NYSE rules require that independent directors must meet at regularly scheduled executive sessions without management present. Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one-third of the members of the Board of Directors can be elected from management members. Our Chief Executive Officer, Mario Roberto Opice Leão, is a member of our Board of Directors. There is no requirement that our independent directors meet regularly without management. As a result, our independent directors on our board do not typically meet in executive session.
Committees
NYSE rules require that listed companies have a nominating/corporate governance committee and a compensation committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. Because we are a controlled company, we are not required to comply with this rule. The responsibilities of the nominating/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 compensation 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 compensation and equity-based plans.
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In February 2017, our Board of Directors approved the terms for the establishment of our Nomination and Governance Committee. The Nomination and Governance Committee also oversees corporate governance at Santander Brasil. In addition, CMN rules require us to have a Compensation Committee composed of at least three members. We have created the Compensation Committee whose function is to advise our Board of Directors on matters in connection with, but not limited to (i) fixed and variable compensation 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.
CMN rules require us to have an audit committee of at least three independent members, of which one must be an independent director. The audit committee is elected by the Board of 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 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. 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. 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 the practices of corporate governance guidelines, on September 22, 2010, our Board of Directors approved a policy that regulates related party transactions, which was last revised on January 27, 2023. 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, Directors and Executive Officers of Santander Brasil.
Issuances of Shares
NYSE rules require shareholder approval prior to the issuance of shares, or securities convertible into or exercisable for shares, if (1) the shares have, or will have upon issuance, equal or an excess of 20% of the voting power outstanding before the issuance of such shares; or (2) the number of shares to be issued is, or will be upon issuance be equal to or in excess of 20% of the number of shares outstanding before the transaction.
Pursuant to the Brazilian Corporate Law, the by-laws of companies may permit increases in capital stock without amendments to the by-laws. Such a permission may specify (i) the limit of the capital increase in terms of total amount or number of shares, the type and classes of the shares that may be issued; (ii) whether the issuance of new shares is to be approved by the general shareholders’ meeting or the board of directors; (iii) any conditions to which the issuance of new shares may be subject; and (iv) the circumstances under which shareholders are to benefit from preemptive rights to subscribe for shares. Pursuant to our By-Laws, our board of directors is authorized to approve capital increases involving the issuance of up to 9,090,909,090 shares. Any capital increase is subject to the applicable disclosure requirements set forth in the regulations issued by the CVM regulation, including but not limited to the disclosure of a material fact disclosing the capital increase and the publication of the minutes of the relevant corporate body’s meeting which approved the matter.
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Code of Ethical Conduct
NYSE rules require that listed companies adopt and disclose a code of conduct and ethics for Directors, Officers and employees, and promptly disclose any waivers of the code for Directors or Executive Officers. Applicable Brazilian law does not have a similar requirement. We adopted a Code of Ethical Conduct on February 27, 2009, last revised on June 21, 2023, 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 Ethical 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 controls.
CMN rules also require us to have an internal audit function, and our internal audit department works independently to conduct structured examinations, analyses, surveys and fact-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 Board of Directors analyzed and approved the adoption of a series of corporate frameworks to matters such as: (i) internal audit; (ii) accounting and disclosure of financial information; (iii) risk control; (iv) communication and branding; (v) human resources; (vi) information technology; and (vii) money-laundering protection. Currently, we have a total of 16 frameworks ( Marcos Corporativos ) in force. We believe that these frameworks 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 any website directly or indirectly linked to these websites is not part, of and is not incorporated by reference in, this annual report.
16H. Mine Safety Disclosure
Not applicable.
16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
16J. Insider Trading Policies
We have
16K. Cybersecurity
Introduction and Overview
| 265 |
Risk Management Model
Our operational risk management and control model is based on a continuous process of identifying, evaluating and mitigating sources of risk, regardless of whether they have materialized or not. Throughout the application of this process, risk management priorities are established, and internal controls are defined and executed to manage and mitigate the risk across the organization.
Our operational risk model establishes the items needed to manage and control operational risk properly according to regulatory standards and best management practices. Its phases are: (i) strategic planning; (ii) identification and assessment of risks and internal controls; (iii) ongoing monitoring of the operational risk profile; (iv) implementation of actions to manage the risks, including mitigation measures; and (v) disclosure, reporting and escalation of relevant matters. “Heracles,” which is our internal management and reporting system for operational risk, supports the operational risk program and tools with a Governance, Risk and Compliance (“GRC”) approach. It provides information for management and reporting throughout Santander Brasil. Heracles also facilitates better operational risk management decisions by using a common set of taxonomies and methodological standards to allow information consolidation, duplication prevention and reporting simplification.
Risk Management Process and Tools
Risk Control Self-Assessment (“RCSA”)
is a
Other instruments are used to analyze and manage operational risk, such as: (i) metrics, (ii) risk scenarios, (iii) the assessment of new products and services, and transformation initiatives; (iv) business continuity plans (BCP); (v) review of cyber corporate insurance; (vi) review of the management perimeter; (vii) recommendations from internal and external auditors, consultants and supervisors; and (viii) the quality assurance process.
Business Continuity and Crisis Management
Our business continuity management model takes into consideration both local (e.g., Brazilian Central Bank) and international guidelines (e.g., European Central Bank guidelines, CIMA – Cayman Islands Monetary Authority guidelines) for cybersecurity risks and includes plans to deal with severe events. We review the impact these events may have on day-to-day operations and endeavor to mitigate such threats. Our crisis governance mechanisms include our senior management as well as committees formed by previously defined and approved members. We also have mechanisms to trigger business continuity plans in case of cyber, operational and financial crises which involve the departments necessary to act and support our operations in the preparation and implementation of strategies to contain these types of crises.
Training & Awareness (Secure UX)
We also perform cyber awareness campaigns for our employees and customers, including annual and mandatory training for all employees, an annual event for our executive personnel (called Cyber Defenders), security campaigns for our customers and society at large with influencers on social media and increasing information on how to use our products in a safer way. Furthermore, we cooperate and exchange information and experience relating to cybersecurity with local and international security communities, such as local telecommunications companies and other financial institutions and as a member of the Financial Services – Information Sharing and Analysis Center community.
| 266 |
Cybersecurity Team, CISO and Oversight
Our local
Cybersecurity Committees
Senior management’s participation in incident management is documented using a model with three levels of committees—bronze, silver and gold. Each level is based on an incident’s severity, such that members of our management have different roles and responsibilities after our crisis management director disclosures that we are undergoing a special cybersecurity event.
In 2024, we continued to strengthen our cybersecurity and fraud ecosystems, proposing strategies to respond to a constantly changing threat environment, while supporting commercial value and improving the safety environment for clients. In 2025, we will prioritize monitoring the implementation of the technology and operations transformation model, as well as our positioning in cybersecurity, especially to continue maturing, improving, and evolving the cybersecurity defenses, with a special focus on emerging threats.
Cybersecurity Certifications
Third-Party Risk Management
Santander Brasil’s external suppliers, who are engaged by Santander Brasil’s various business areas, are subject to our third-party risk management process, aiming to certify and assess the vendor processes, giving us a broader visibility on their safety and improvements needed. To do so, we work together with several departments building a transversal view of risks across the cybersecurity, privacy and data protection and business continuity management functions. The objective is to provide a 360º view of third-party gaps and to support decision-makers in supplier engagement and risk management, improving the quality of the service these suppliers provide to the customers.
| 267 |
Cybersecurity Threats and Incidents
In 2024, we have continued evolving our cyber defenses in line with our cybersecurity strategy and key strategic initiatives. New controls were developed and implemented following a cyber-threat-led approach, covering current areas of risk and new attack methods, notably around supply chain, backup and recovery and fraud prevention measures reinforced by leveraging behavioral biometric solutions and machine learning technology.
To strengthen our response, streamline operations and maximize resources, we continue to operate the Santander Fusion Center, which enables closer collaboration between our various teams involved in cybersecurity. The Fusion Center operates 24 hours a day, 7 days a week, providing services to Santander Brasil and all its subsidiaries, detecting, monitoring, and responding to operational failures and cybersecurity events.
In parallel, we are preparing for the new requirements of upcoming regulations on cybersecurity matters, while assessing the pros and cons derived from emerging technologies, such as AI. Santander Brasil is implementing a Responsible AI framework that involves different areas (Legal, Risks, Chief Privacy Officer, Cyber Security, Architecture, Engineering) to evaluate each use case implementation and mitigate risks.
During the year ended December 31, 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced any undetected cybersecurity incident or that we will not experience cybersecurity incidents in the future.
See also “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.”
| 268 |
PART III
ITEM 17. FINANCIAL STATEMENTS
We have responded to Item 18 in lieu of this item.
ITEM 18. FINANCIAL STATEMENTS
Consolidated Financial Statements are filed as part of this annual report, starting on page F-1.
ITEM 19. EXHIBITS
| (a) | Index to Consolidated Financial Statements |
| Page | |
|
Independent Auditor’s Report (PCAOB ID:
|
F-3 |
| Consolidated Balance Sheets as of December 31, 2024 and 2023 | F-7 |
| Consolidated Statement of Income for the years ended December 31, 2024, 2023 and 2022 | F-9 |
| Consolidated Statement of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 | F-10 |
| Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022 | F-11 |
| Consolidated Statement of Cash Flows for the years ended December 31, 2024, 2023 and 2022 | F-14 |
| Notes to the Consolidated Financial Statements for the years ended December 31, 2024, 2023 and 2022 | F-15 |
(b) List of Exhibits
We are filing the following documents as part of this annual report on Form 20-F:
| 269 |
| 270 |
| Exhibit Number | Description | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | 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. |
| 271 |
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.
Date: February 28, 2025
| BANCO SANTANDER (BRASIL) S.A. | ||
| By: | /s/ Mario Roberto Opice Leão | |
| Name: Mario Roberto Opice Leão | ||
| Title: Chief Executive Officer | ||
| 272 |
|
Consolidated Financial Statements | December 31, 2024 | F - 1 |
| BANCO SANTANDER (BRASIL) S.A. | |||||
| CONSOLIDATED FINANCIAL STATEMENTS | |||||
| INDEX | |||||
|
|
Consolidated Financial Statements | December 31, 2024 | F - 2 |
Report of independent registered
public accounting firm
To the Board of Directors and Stockholders
Banco Santander (Brasil) S.A.
Opinions on the financial statements and
internal control over financial reporting
We have audited the accompanying consolidated balance sheets of Banco Santander (Brasil) S.A. and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 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, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for opinions
The Company'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 Item 15B - "Management's Annual Report on Internal Control over Financial Reporting". Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits 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 Auditores Independentes Ltda., Avenida Brigadeiro Faria Lima, 3732, Edifício B32, 16 o ,
São Paulo, SP, Brasil, 04538-132
T: +55 (11) 4004-8000, www.pwc.com.br
|
|
Consolidated Financial Statements | December 31, 2024 | F - 3 |
Banco Santander (Brasil) S.A.
Our audits 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 regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Supplemental information
The reconciliation of stockholders' equity and net income as of and for the years ended December 31, 2024, 2023 and 2022 and the statements of value added for the years ended December 31, 2024, 2023 and 2022, included in Appendix I and II, respectively, have been subjected to audit procedures performed in conjunction with the audit of the Company's consolidated financial statements. This supplemental information is the responsibility of the Company'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 performing procedures to test the completeness and accuracy of the information presented in the supplemental information. For the purposes of forming our opinion, we evaluated whether the Appendix I is reconciled with the financial statements and accounting records, as applicable, as well as performed procedures to test the completeness and accuracy of the information presented in the supplemental information. Additionally, in forming our opinion on the statements of value added, we evaluated whether this Appendix II, including its form and content, is reconciled with the financial statements and accounting records, as applicable, and presented in conformity with Brazilian Corporate Law. In our opinion, the reconciliation of stockholders' equity and net income as of and for the years ended December 31, 2024, 2023 and 2022 and the statements of value added for the years ended December 31, 2024, 2023 and 2022 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
A company'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'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's assets that could have a material effect on the financial statements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 4 |
Banco Santander (Brasil) S.A.
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.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to 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 any way our opinion on the consolidated financial statements, taken as a 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.3.1(ii)), 2(h), 9 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, 2024, the impairment losses on loans and receivables was BRL 33,597,930 thousand on total loans and receivables at amortized cost was BRL 594,776,041 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 ECL measurement is based on management's estimate of the present value of future cash flows 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 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 measurement of expected credit losses is a critical audit matter are (i) there was significant judgment used by management in determining the expected credit losses, in particular the assumptions used in determining the PD and LGD, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained relating to these assumptions; and (ii) the audit effort involved use of professionals with specialized skills and knowledge to assist in evaluating those assumptions.
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 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 skills 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; and (iii) analysis over management's disclosures in the financial statements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 5 |
Banco Santander (Brasil) S.A.
Provisions for judicial and administrative
proceedings
As described in Notes 1(c.3.1(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. As of December 31, 2024, the Company has recorded provisions for judicial and administrative proceedings of BRL 9,065,853 thousand. The Company also discloses a contingency in circumstances where management concludes no loss is probable or reasonably estimable, but it is reasonably possible that a loss may be incurred.
The principal considerations for our determination that performing procedures relating to provisions for judicial and administrative proceedings is a critical audit matter are (i) there was significant judgment by management when assessing the likelihood of a loss being incurred; and (ii) 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 of 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. We performed confirmation procedures with the law firms responsible for administrative and legal proceedings to confirm the existence of active processes and the completeness of the information. Additionally, with the assistance of our professionals with specialized skills and knowledge, we evaluated the reasonableness of management's assessment for a sample of proceedings taking into consideration the individual progress of similar proceedings.
/s/
Auditores Independentes Ltda.
February 28, 2025
We have served as the Company's auditor since 2016
|
|
Consolidated Financial Statements | December 31, 2024 | F - 6 |
|
*Values expressed in thousands, except when indicated |
Consolidated Balance Sheet
| Assets | Note | 2024 | 2023 |
| Cash | 4 |
|
|
| Financial Assets Measured at Fair Value Through Profit or Loss |
|
|
|
| Debt instruments | 6 |
|
|
| Equity instruments | 7 |
|
|
| Derivatives | 8.a |
|
|
| Loans and advances to customers | 9 |
|
|
| Compulsory deposits with the Brazilian Central Bank |
|
|
|
| Financial Assets Measured At Fair Value Through Other Comprehensive Income |
|
|
|
| Debt instruments | 6 |
|
|
| Equity instruments | 7 |
|
|
| Financial Assets Measured At Amortized Cost |
|
|
|
| Loans and other receivables from credit institutions | 5 |
|
|
| Loans and advances to customers | 9 |
|
|
| Debt instruments | 6 |
|
|
| Compulsory deposits with the Brazilian Central Bank |
|
|
|
| Derivatives Used as Hedge Accounting | 8.a |
|
|
| Non-Current Assets Held For Sale | 10 |
|
|
| Investments in Associates and Joint Ventures | 11 |
|
|
| Tax Assets |
|
|
|
| Current |
|
|
|
| Deferred | 23.d |
|
|
| Other Assets | 15 |
|
|
| Permanent Assets | 12 |
|
|
| Intangible Assets |
|
|
|
| Goodwill | 13 |
|
|
| Other intangible assets | 14 |
|
|
| Total Assets |
|
|
The notes are an integral part of these consolidated financial
statements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 7 |
|
*Values expressed in thousands, except when indicated |
| Liabilities and Shareholders’ Equity | Note | 2024 | 2023 |
| Financial Liabilities Measured At Fair Value Through Profit or Loss |
|
|
|
| Derivatives | 8.a |
|
|
| Short positions | 8.b |
|
|
| Liabilities arising from securities | 18 |
|
|
| Financial Liabilities at Amortized Cost |
|
|
|
| Credit institution deposits | 16 |
|
|
| Customer deposits | 17 |
|
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| Liabilities arising from securities | 18 |
|
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| Debt instruments eligible as capital | 19 |
|
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| Other financial liabilities | 20 |
|
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| Derivatives Used as Hedge Accounting | 8.a |
|
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| Provisions |
|
|
|
| Obligations for pension funds and similar liabilities | 22 |
|
|
| Provisions for judicial and administrative proceedings, commitments, and other provisions | 22 |
|
|
| Tax Liabilities |
|
|
|
| Current |
|
|
|
| Deferred | 23.d |
|
|
| Other Liabilities | 24 |
|
|
| Total Liabilities |
|
|
|
| Shareholders’ Equity | 27 |
|
|
| Share capital | 27.a |
|
|
| Capital reserve |
|
|
|
| Treasury shares | 27.d |
(
|
(
|
| Profit Reserve |
|
|
|
| Other Comprehensive Income |
(
|
(
|
|
| Shareholders’ Equity Attributable to the Parent |
|
|
|
| Non - Controlling interests | 26 |
|
|
| Total Shareholders’ Equity |
|
|
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| Total Liabilities and Shareholders’ Equity |
|
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The accompanying Notes are an integral part of these consolidated financial statements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 8 |
|
*Values expressed in thousands, except when indicated |
Consolidated Statement of Income
| Note | 2024 | 2023 | 2022 | |
| Interest and similar income | 31 |
|
|
|
| Interest and similar expenses | 32 |
(
|
(
|
(
|
| Net Interest Income |
|
|
|
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| Equity instrument income | 33 |
|
|
|
| Equity method income (loss) | 11.a |
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|
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| Fee and commission income | 34 |
|
|
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| Fee and commission expense | 35 |
(
|
(
|
(
|
| Gains (losses) on financial assets and liabilities (net) | 36 |
(
|
|
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| Financial assets measured at fair value through profit or loss |
(
|
|
|
|
| Financial instruments not measured at fair value through profit or loss |
(
|
(
|
(
|
|
| Other |
(
|
(
|
(
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| Foreign exchange fluctuations (net) | 37 |
|
|
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| Other operating expense (net) | 38 |
(
|
(
|
(
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| Total Income |
|
|
|
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| Administrative expenses |
(
|
(
|
(
|
|
| Personnel expenses | 39.a |
(
|
(
|
(
|
| Other administrative expenses | 40.a |
(
|
(
|
(
|
| Depreciation and amortization |
(
|
(
|
(
|
|
| Permanent assets | 12.a |
(
|
(
|
(
|
| Intangible assets | 14 |
(
|
(
|
(
|
| Provisions (net) | 22 |
(
|
(
|
(
|
| Impairment losses on financial assets (net) | 9.c |
(
|
(
|
(
|
| Financial assets measured at amortized cost |
(
|
(
|
(
|
|
| Impairment losses on other assets (net) |
(
|
(
|
(
|
|
| Other intangible assets | 14 |
(
|
(
|
(
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| Other assets |
(
|
(
|
(
|
|
| Gains (losses) on disposal of assets not classified as non-current assets held for sale | 41 |
|
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| Gains (losses) on disposal and expenses on non-current assets held for sale not classified as discontinued operations | 42 |
|
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| Operating Income Before Tax |
|
|
|
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| Income taxes | 23 |
(
|
(
|
(
|
| Consolidated Net Income for the Fiscal Year |
|
|
|
|
| Profit attributable to the Parent Company |
|
|
|
|
| Profit attributable to non-controlling interests | 26 |
|
|
|
The accompanying Notes are an integral part of these consolidated financial statements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 9 |
|
*Values expressed in thousands, except when indicated |
Consolidated Statement of Comprehensive Income
| 2024 | 2023 | 2022 | ||
| Consolidated Net Income for the Fiscal Year |
|
|
|
|
| Other Comprehensive Income that will be subsequently reclassified to profit or loss when specific conditions are met: |
(
|
|
(
|
|
| Financial Assets measured at fair value through Other Comprehensive Income |
(
|
|
(
|
|
| Financial assets measured at fair value through other comprehensive income |
(
|
|
(
|
|
| Taxes |
|
(
|
|
|
| Cash flow hedges |
|
|
(
|
|
| Fair value adjustment |
|
|
(
|
|
| Taxes |
(
|
(
|
|
|
| Other Comprehensive Income that will not be Reclassified to Net Profit: |
(
|
(
|
|
|
| Defined Benefits Plan |
(
|
(
|
|
|
| Defined benefits plan |
(
|
(
|
|
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| Taxes |
|
|
(
|
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| Others |
(
|
(
|
||
| Pension Contracts - IFRS 17 |
|
(
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||
| Goodwill |
(
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|||
| Others |
(
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| Taxes |
(
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| Total Comprehensive Income |
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|
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| Attributable to the parent company |
|
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|
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| Attributable to non-controlling interests |
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| Total |
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|
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The Notes are an integral part of these consolidated financial statements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 10 |
|
*Values expressed in thousands, except when indicated |
Consolidated Statement of Changes in Stockholders’ Equity
| Stockholders´ Equity Attributable to the Parent | |||||||||||||||
| Note |
Share Capital |
Capital Reserve | Profit Reserve |
Treasury Shares |
Retained earnings | Financial Assets Measured At Fair Value Through Other Comprehensive Income | Defined Benefits plan | Translation adjustments investment abroad | Gains and losses - Cash flow hedge and Investment | Total |
Non-controlling Interests |
Total Stockholders' Equity |
|||
| Balance on December 31, 2021 |
|
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(
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(
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(
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(
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| Total comprehensive income |
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(
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(
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||||||||
| Net Profit Attributable to the Parent Company |
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|||||||||||
| Other Comprehensive Income |
(
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(
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(
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(
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||||||||||
| Financial assets measured at fair value through Other Comprehensive Income |
(
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(
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(
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| Employee Benefits Plan |
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| Gain and loss - Cash flow and investment hedge |
(
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(
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(
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||||||||||||
| Dividends and interest on equity from the previous fiscal year | 27.b |
(
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(
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(
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|||||||||||
| Treasury shares | 27.d |
(
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(
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(
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|||||||||||
| Share-based compensation |
|
|
|
||||||||||||
| Other |
(
|
(
|
|
(
|
|||||||||||
| Destinations: | |||||||||||||||
| Legal reserve |
|
(
|
|||||||||||||
| Dividend equalization reserve |
|
(
|
|||||||||||||
| Balance on December 31, 2022 |
|
|
|
(
|
(
|
(
|
|
(
|
|
|
|
||||
|
|
Consolidated Financial Statements | December 31, 2024 | F - 11 |
|
*Values expressed in thousands, except when indicated |
| Stockholders´ Equity Attributable to the Parent |
| Note |
Share Capital |
Capital Reserve |
Profit Reserve |
Treasury Shares |
Retained earnings | Financial Assets Measured At Fair Value Through Other Comprehensive Income | Defined Benefits plan | Translation adjustments investment abroad | Pension Contracts - IFRS 17 | Gains and losses - Cash flow hedge and Investment | Total |
Non-controlling Interests |
Total Stockholders' Equity |
|
| Balance on December 31, 2022 |
|
|
|
(
|
(
|
(
|
|
(
|
|
|
|
|||
| Total comprehensive income |
|
|
(
|
(
|
|
|
|
|
||||||
| Net profit attributable to the Parent Company |
|
|
|
|
||||||||||
| Other comprehensive income |
|
(
|
(
|
|
|
|
||||||||
| Financial assets measured at fair value through other comprehensive income |
|
|
|
|||||||||||
| Employee Benefits Plan |
(
|
(
|
(
|
|||||||||||
| Pension Contracts - IFRS 17 |
(
|
(
|
(
|
|||||||||||
| Gain and loss - Cash flow and investment hedge |
|
|
|
|||||||||||
| Dividends and interest on capital | 27.b |
(
|
(
|
(
|
||||||||||
| Share-based compensation | 39.b |
|
|
|
||||||||||
| Treasury shares | 27.d |
|
|
|
||||||||||
| Prescribed dividends |
|
|
|
|||||||||||
| Unrealized profit |
|
|
|
|||||||||||
| Other |
(
|
(
|
||||||||||||
| Destinations: | ||||||||||||||
| Legal reserve |
|
(
|
||||||||||||
| Dividend equalization reserve |
|
(
|
||||||||||||
| Balance on December 31, 2023 |
|
|
|
(
|
(
|
(
|
|
(
|
(
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 12 |
|
*Values expressed in thousands, except when indicated |
| Stockholders´ Equity Attributable to the Parent | |||||||||||||||
| Note |
Share Capital |
Capital Reserve |
Profit Reserve |
Treasury Shares |
Retained earnings | Financial Assets Measured At Fair Value Through Other Comprehensive Income | Defined Benefits plan | Translation adjustments investment abroad | Pension Contracts - IFRS 17 | Other Equity Valuation Adjustments | Gains and losses - Cash flow hedge and Investment | Total |
Non-controlling Interests |
Total Stockholders' Equity |
|
| Balance on December 31, 2023 |
|
|
|
(
|
(
|
(
|
|
(
|
(
|
|
|
|
|||
| Total comprehensive income |
|
(
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(
|
|
(
|
|
|
|
|
||||||
| Net profit attributable to the Parent Company |
|
|
|
|
|||||||||||
| Other comprehensive income |
(
|
(
|
|
(
|
|
(
|
(
|
||||||||
| Financial assets measured at fair value through other comprehensive income |
(
|
(
|
(
|
||||||||||||
| Employee Benefits Plan (1) |
(
|
(
|
(
|
||||||||||||
| Pension Contracts - IFRS 17 |
|
|
|
||||||||||||
| Gain and loss - Cash flow and investment hedge |
|
|
|
||||||||||||
| Other Equity Valuation Adjustments – goodwill on acquisitions of subsidiaries |
(
|
(
|
(
|
||||||||||||
| Other Equity Valuation Adjustments – Other |
(
|
(
|
(
|
||||||||||||
| Dividends and interest on capital | 27.b |
(
|
(
|
(
|
|||||||||||
| Share-based compensation |
|
|
|
||||||||||||
| Treasury shares | 27.d |
|
|
|
|||||||||||
| Prescribed dividends |
|
|
|
||||||||||||
| Unrealized profit |
|
|
|
|
|||||||||||
| Capital increase |
|
(
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|||||||||||||
| Other |
|
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(
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(
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| Sale / Merger / Acquisition |
(
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(
|
|||||||||||||
| Other |
|
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(
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|||||||||||
| Destinations: | |||||||||||||||
| Legal reserve |
|
(
|
|||||||||||||
| Dividend equalization reserve |
|
(
|
|||||||||||||
| Balance on December 31, 2024 |
|
|
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(
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(
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(
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(
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(
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(
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|
||
| (1) | Includes the effects of the obligation created as a result of the transaction signed between Banco Santander, BANESPREV, AFABESP and legal advisors on June 27, 2024. See details in note 18, item d.2. |
The accompanying Notes are an integral part of these consolidated financial statements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 13 |
|
*Values expressed in thousands, except when indicated |
Consolidated Statement of Cash Flows
| Note | 2024 | 2023 | 2022 | |
| 1. Cash Flows from Operating Activities | ||||
| Consolidated Net Income for the Fiscal Year |
|
|
|
|
| Profit Adjustments |
|
|
|
|
| Depreciation of Tangible Assets | 12.a |
|
|
|
| Amortization of Intangible Assets | 14 |
|
|
|
| Impairment Losses on Other Assets (Net) |
|
|
|
|
| Provisions (Net) |
|
|
|
|
| Losses on Financial Assets (Net) |
|
|
|
|
| Net gains on disposal of permanent assets, investments, and non-current assets held for sale |
(
|
(
|
(
|
|
| Income (Loss) Share under the Equity Method | 11.a |
(
|
(
|
(
|
| Change in Deferred Tax Assets and Liabilities | 23.d |
(
|
(
|
|
| Judicial Deposits Adjustment |
(
|
(
|
(
|
|
| Recoverable Taxes Adjustment |
(
|
(
|
(
|
|
| Effects of Exchange Rate Fluctuations on Assets and Liabilities |
(
|
(
|
|
|
| Other |
(
|
(
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|
|
| Net (Increase) Decrease in Operating Assets |
(
|
(
|
(
|
|
| Financial Assets Measured at Fair Value through Profit or Loss |
(
|
(
|
(
|
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| Financial Assets Measured at Fair Value Through Other Comprehensive Income |
(
|
(
|
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| Financial Assets Measured at Amortized Cost |
(
|
(
|
(
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| Other Assets |
(
|
|
(
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| Net Increase (Decrease) in Operating Liabilities |
|
|
|
|
| Financial Liabilities Measured at Fair Value Through Profit or Loss |
|
(
|
|
|
| Financial Liabilities Measured at Amortized Cost |
|
|
|
|
| Other Liabilities |
(
|
|
|
|
| Tax Paid | 23.a |
(
|
(
|
(
|
| Total Net Cash Flow from Operating Activities (1) |
(
|
|
|
|
| 2. Cash Flows From Investing Activities | ||||
| Investments |
(
|
(
|
(
|
|
| Subsidiary acquisition, minus net cash upon acquisition |
(
|
(
|
(
|
|
| Tangible Assets | 12.a |
(
|
(
|
(
|
| Intangible Assets |
(
|
(
|
(
|
|
| Non-current Assets Held for Sale |
(
|
(
|
(
|
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| Disposal |
|
|
|
|
| Tangible Assets | 12.a |
|
|
|
| Intangible Assets |
|
|
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|
| Non-current Assets Held for Sale |
|
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|
| Dividends and Interest on Equity Received |
|
|
|
|
| Total Net Cash Flow from Investing Activities (2) |
(
|
(
|
(
|
|
| 3. Cash Flows from Financing Activities | ||||
| Acquisition (Disposal) of Own Shares | 27.d |
|
|
(
|
| Issuance (Repurchase) of Debt Instruments Eligible as Capital | 19 |
|
||
| Issuance of Other Long-term Financial Liabilities | 18 |
|
|
|
| Dividends Paid and Interest on Equity |
(
|
(
|
(
|
|
| Payments of Other Long-term Financial Liabilities | 18 |
(
|
(
|
(
|
| Interest Payments on Debt Instruments Eligible as Capital | 19 |
(
|
(
|
(
|
| Increase (Decrease) in Non-controlling Interests | 26.b |
(
|
(
|
|
| Capital Increase in Subsidiaries Through Non-controlling Interests | 26.b |
|
||
| Total Net Cash Flow from Financing Activities (3) |
|
|
|
|
| Net Increase (Decrease) in Cash and Cash Equivalents (1+2+3) |
(
|
|
|
|
| Cash and Cash Equivalents at the Beginning of the Fiscal Year | 4 |
|
|
|
| Cash and Cash Equivalents at the End of the Fiscal Year | 4 |
|
|
|
The accompanying Notes are an integral part of these consolidated financial statements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 14 |
|
*Values expressed in thousands, except when indicated |
| 1. | Operating context, presentation of consolidated financial statements and other information |
| a) | Operating context |
Banco Santander (Brasil) S.A. (Banco Santander or Bank), directly and indirectly controlled by Banco Santander, S.A., headquartered in Spain (Banco Santander Spain), is the leading institution of the Financial and Prudential Conglomerates before the Brazilian Central Bank (Bacen), established as a joint-stock company with its headquarters located at Avenida Presidente Juscelino Kubitschek, 2041 and 2235 - Block A - Vila Olímpia - São Paulo - SP. Banco Santander operates as a universal bank and conducts its operations through commercial, investment, credit, financing and investment, real estate credit, leasing, and foreign exchange portfolios. Additionally, through its subsidiaries, it also operates in the markets of payment institutions, "consórcios" management, securities and insurance brokerage, consumer lending, digital platforms, benefits management, non-performing credit management and recovery, capitalization, private pensions, as well as provision and management of food, meal, and other vouchers. These operations are conducted within a framework of institutions that do business in an integrated manner in the financial market. The corresponding benefits and costs associated with the rendered services are distributed among these entities and are realized in the ordinary course of business on a reciprocal basis.
The Board of Directors authorized the issuance of the Consolidated Financial Statements for the year ended December 31, 2024, at the meeting held on February 27, 2025.
The referenced Financial Statements have been subject to a recommendation for approval issued by the Audit Committee of Banco Santander and received an unqualified opinion from the Independent Auditors.
| b) | Basis for the presentation of the consolidated financial statements (prepared in accordance with IAS 1) |
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS®) issued by the International Accounting Standards Board (IASB®) (currently referred to by the IFRS® Foundation as “IFRS® accounting standards”) and the interpretations issued by the IFRS® Interpretations Committee (current name of the International Financial Reporting Interpretations Committee – IFRIC®).
All relevant information specifically related to Banco Santander's financial statements, and only in relation to these, is being highlighted, and corresponds to the information used by Banco Santander in its management.
c) Other information
c.1) Adoption of new standards and interpretations.
• Amendments to IAS 1 – Presentation of Financial Statements: – The amendments are intended to specify the requirements for classifying liabilities as current or non-current. The amendments clarify what is meant by a right to defer settlement; that the right to defer must exist at the end of the reporting period; that the classification is not affected by the likelihood that the entity will exercise its right to defer; and that only if a derivative embedded in a convertible liability is itself an equity instrument, the terms of a liability will not affect its classification. The amendments to IAS 1 were effective from January 1, 2024 and have not had a material impact.
• Amendment to IAS 7 – Statement of Cash Flows and IFRS 7 – Financial Instruments: Disclosure: requires entities to provide additional disclosures about their supplier financing arrangements. The IASB issued these new requirements to provide users of financial statements with information that enables them to assess how supplier financing arrangements affect an entity’s obligations and cash flows, and to understand the effect of supplier financing arrangements on an entity’s exposure to liquidity risk and how the entity might be affected if the arrangements were no longer available to it. The amendments to IAS 7 and IFRS 7 were effective from January 1, 2024 and have not had a material impact.
• Amendment to IFRS 16 – Leases: Clarifies the requirements that a seller-lessee uses in measuring the lease liability arising from a sale and leaseback transaction, in order to ensure that the seller-lessee does not recognize any amount of gain or loss that relates to the right of use that it retains. The amendments to IFRS 16 were effective from January 1, 2024 and did not have a material impact.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 15 |
|
*Values expressed in thousands, except when indicated |
c.2) New standards and interpretations in force in future years
| • | Amendment to IAS 21 - Effects of exchange rate changes and translation of Financial Statements : In instances where a currency is non-convertible, it can be difficult to ascertain an appropriate exchange rate. While uncommon, non-convertibility may arise when a government enforces currency controls that forbid currency exchange or restrict the amount of foreign currency transactions. The amendment to IAS 21 provides guidance on how entities should assess whether a currency is readily convertible and how to determine a spot exchange rate for currencies with limited exchangeability, as well as requires the disclosure of information that enables Financial Statement users to understand the impacts of a non-convertible currency. These changes are effective as of January 1, 2025. Santander does not foresee any material impacts. |
| • | Amendments to IFRS 9 and IFRS 7 - Amendments to the Classification and Measurement of Financial Instruments: The requirements for applying IFRS 9 are amended to include contracts to purchase and receive electricity, in addition to allowing the use of these contracts in hedge accounting. It also includes disclosure requirements on these contracts in IFRS 7. In addition, it clarifies that a financial liability is derecognized on the "settlement date" and introduces an accounting policy election to derecognize financial liabilities settled using an electronic payment system before the settlement date. Other clarifications include the classification of financial assets with ESG-linked characteristics through additional guidance on the assessment of contingent characteristics. Additional disclosures are introduced for financial instruments with contingent characteristics and equity instruments classified at fair value through other comprehensive income. The amendments are effective for reporting periods beginning on or after January 1, 2026. Santander is assessing the impacts of this change. |
| • | Annual Improvements to IFRS Accounting Standards - Volume 11: Includes clarifications, simplifications, corrections and amendments designed to improve the consistency of several IFRS Accounting Standards. The amended standards are: IFRS 1 - First-time adoption of International Financial Reporting Standards; IFRS 7 - Financial Instruments: Disclosures and accompanying guidance on the implementation of IFRS 7; IFRS 9 - Financial Instruments; IFRS 10 - Consolidated Financial Statements; and IAS 7 - Statement of Cash Flows. The amendments are effective for annual periods beginning on or after January 1, 2026, with earlier application permitted. Santander is assessing the impacts of this change. |
| • | IFRS 18 – Presentation and Disclosure in Financial Statements: Replaces IAS 1 – Presentation of Financial Statements. IFRS 18 introduces new subtotals and three categories for income and expenses (operating, investing and financing) in the income statement structure. It also requires companies to disclose explanations of management-defined performance measures related to the income statement. | |
|
These changes are effective for fiscal years beginning January 1, 2027. Santander is evaluating the impacts of this change. |
| • | IFRS 19 – Non-publicly-accountable subsidiaries: Disclosures: that allows a subsidiary to provide reduced disclosures when applying IFRS Accounting Standards in its financial statements. IFRS 19 is optional for eligible subsidiaries and establishes the disclosure requirements for subsidiaries that choose to apply it. The new standard is effective for reporting periods beginning on or after January 1, 2027, with earlier application permitted. Santander is assessing the impacts of this change. |
c.3) Estimates used
The consolidated results and the determination of the consolidated equity are impacted by accounting policies, assumptions, estimates, and measurement methods used by the Bank's management in the preparation of the financial statements. The Bank makes estimates and assumptions that affect the reported values of assets and liabilities for future periods. All required estimates and assumptions, in accordance with IFRSs, represent management's best estimate pursuant to the applicable standard.
In the consolidated financial statements, estimates are made by the Bank’s and the consolidated entities’ Management to quantify certain assets, liabilities, income, and expenses, as well as to disclose notes to the financial statements.
c.3.1) Estimated credit losses
The estimates and critical assumptions that present the most significant impact on the accounting balances of certain assets, liabilities, income, and expenses, as well as on note disclosures, are described below:
| i. | Assessment of the fair value of certain financial instruments |
Financial instruments are initially recognized at fair value, and those 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 predicated on assumptions that take into account Management’s judgment based on information and prevailing market conditions on the balance sheet date.
Banco Santander classifies fair value measurements using the fair value hierarchy that reflects the model employed in the measurement process, segregating financial instruments into Tiers I, II, or III.
Notes 2.e and 46.c.8 detail the accounting treatment and sensitivity analysis pertaining to Financial Instruments, respectively.
| ii. | Provisions for losses on credits due to impairment |
The carrying value of non-recoverable financial assets is adjusted by recording a provision for loss under “Losses on financial assets (Net) – Financial Assets Measured at Amortized Cost” in the consolidated income statement. Reversals of previously recognized losses are recorded in the consolidated income statement in the period when the impairment decreases, provided there is an objectively verifiable recovery event.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 16 |
|
*Values expressed in thousands, except when indicated |
When measuring the impairment loss on individually assessed loans, the Bank takes into account a range of factors related to the counterparty's condition, such as their economic and financial situation, indebtedness level, income-generating capacity, cash flow, management, corporate governance, and quality of internal controls, payment history, industry experience, contingencies, and credit limits, as well as asset characteristics, such as their nature and purpose, type, liquidity level sufficiency, and guarantees of total credit value, and also drawing on historical impairment experience and other circumstances known at the time of assessment.
To measure the impairment loss on loans assessed collectively for impairment, the Bank segregates financial assets into groups considering their credit risk characteristics and similarities, that is, according to the segment, type of assets, collateral, and other factors associated with historical impairment experience and other circumstances known at the time of assessment.
Notes 2.h and 46.b.2 detail the accounting treatment and credit risk assessment methods, respectively.
| iii. | Provisions for pension funds |
Defined benefit plans are recorded following an actuarial analysis, performed annually by a specialized firm at the end of each fiscal year with applicability for the subsequent period, and are recognized in the consolidated statement of income under the lines of Interest and Similar Expenses and Provisions (net).
The present value of the defined benefit liability is the current value before deducting any plan assets, of the anticipated future payments required to settle the liability arising from the employee’s service in current and past periods.
Additional details are provided in note 2.w .
| iv. | Provisions, contingent assets and liabilities |
Provisions for legal and administrative proceedings are set up when the risk of loss in the legal or administrative action is assessed as probable and the amounts involved can be measured with sufficient certainty, based on their nature.
Explanatory note 2.q presents information and any significant changes to the provisions and contingent assets and liabilities of the Bank between December 31, 2024 and December 31, 2023.
| v. | Goodwill |
The goodwill recognized must undergo an impairment test at least once a year or over a shorter period, should there be any indication of impairment of the asset.
The basis used for the impairment test is the value in use, and accordingly, cash flows are projected for a period of x years. The cash flow projection takes into account several factors, including: (i) macroeconomic forecasts for interest rates, inflation, exchange rates, and others; (ii) behavior and growth estimates for Brazil's national financial system; (iii) increased costs, returns, synergies, and investment plan; (iv) customer behavior; and (v) growth rate and adjustments applied to the cash flows in perpetuity. The adoption of these estimates involves the likelihood of future events occurring, and changes in any of these factors could lead to different results. The cash flow estimate is based on an assessment prepared by an independent specialized company, annually or whenever there are indications of impairment, which is reviewed and approved by Management.
Further details can be found in note 13 .
| vi. | Expectation of tax credit realization IR and CS |
Deferred tax assets and liabilities include temporary differences, identified as the amounts expected to be recovered or paid on differences between the carrying amounts of assets and liabilities and their respective calculation bases, and accumulated tax loss carryforwards and the negative basis of CSLL. These amounts are measured at the rates expected to apply in the period in 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 used.
Other deferred tax assets (accumulated tax loss carryforwards) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable profits so that they can be used. The recognized deferred tax assets and liabilities are reviewed at each balance sheet date, with the appropriate adjustments being made based on the findings of the analyses performed. The expectation of realization of the Bank's deferred tax assets is based on projections of future results and grounded in a technical study.
| 2. | Accounting policies and determination criteria |
The accounting policies and calculation criteria used in preparing the consolidated financial statements were as follows:
|
|
Consolidated Financial Statements | December 31, 2024 | F - 17 |
|
*Values expressed in thousands, except when indicated |
a) Functional and presentation currency
Banco Santander's consolidated financial statements are presented in Reais, the functional currency of the entities and the presentation currency of these statements.
For each subsidiary, foreign entity and investment in an unconsolidated company, Banco Santander has defined the functional currency. The assets and liabilities of these entities are translated as follows:
- assets and liabilities are translated at the exchange rate on the balance sheet date.
- revenues and expenses are translated at the average monthly exchange rate.
- translation gains and losses on net investment are recorded in the statement of comprehensive income, under the "exchange rate variation on investees located abroad" line.
b) Basis for consolidation
i. Subsidiaries
The term "Subsidiaries" refers to entities that are under the Bank's control. This control is based on the Bank's: i) power over the invested entity; ii) exposure or entitlement to variable returns deriving from its relationship with the invested entity, and iii) ability to use its power to influence the level of returns, as established by legal, statutory, or contractual provisions.
Subsidiary consolidation takes place when the Bank secures control over the subsidiary and ends upon the loss of control. Notably, the income and expenses of a subsidiary that is either acquired or divested during the fiscal year are incorporated in the income statement and Other Comprehensive Income from the date on which the Bank acquires control to the point when it no longer exercises control over the subsidiary.
The result and each component of Other Comprehensive Income are attributed to the controllers of the Bank and to the non-controlling interests even if the effect is assigned to the non-controlling interests. The total comprehensive income of the subsidiaries is attributed to the owners of the Bank and to the non-controlling interests, even if this results in a negative balance for the non-controlling interests. All transactions, balances, income, and expenses between the companies of the Santander Conglomerate are fully eliminated in the consolidated financial statements.
Any changes to Santander Conglomerate's stakes in controlled entities that do not result in a loss of control over the subsidiaries are recorded as equity transactions. The difference between the value at which the non-controlling interests are adjusted and the fair value of the considerations paid or received is recorded directly in equity and attributed to the owners of the Company.
When the Bank loses control of a subsidiary, the gain or loss is recognized in the income statement and is determined by the difference between: (i) the sum of the fair value of the considerations received and the fair value of the residual interest; and (ii) the previous balance of the subsidiary's assets (including goodwill) and liabilities, and non-controlling interests, if any. All values previously recognized in "Other Comprehensive Income" related to the subsidiary are accounted for as if the Bank had directly disposed of the corresponding assets or liabilities of the subsidiary (i.e., reclassified to profit or loss or transferred to another shareholders' equity account, as required or permitted by the applicable IFRSs). The fair value of any investment held in the former subsidiary at the date of loss of control is considered as the fair value upon initial recognition for subsequent accounting under IFRS 9 Financial Instruments or, where applicable, the cost upon initial recognition of an investment in an associate or joint venture.
ii. Interests in joint ventures (entities under joint control) and associates
Joint ventures are equity interests in entities that are not subsidiaries, yet are jointly controlled by two or more unrelated entities. This joint control is manifested in contractual arrangements in which two or more entities ("venturers") acquire interests in entities ("jointly controlled entities") or own operations or hold assets, such that the strategic financial and operational decisions affecting the joint venture are contingent upon the unanimous decision of the venturers.
Associates are those entities over which the Bank has the ability to exert significant influence (significant influence is the power to partake in the decision-making regarding the financial and operational policies of the invested entity) but lacks control or joint control.
In the consolidated financial statements, the interests in jointly-controlled entities and investments in associates are accounted for using the equity method, that is, the Bank's share in the net assets of the invested entity, taking into account dividends received from the eliminations of capital and other derivatives. Pertinent details regarding the entities accounted for using the equity method by the Bank are disclosed in note 11 .
|
|
Consolidated Financial Statements | December 31, 2024 | F - 18 |
|
*Values expressed in thousands, except when indicated |
iii. Mergers, acquisitions, and company disposals
A business combination refers to the amalgamation of two or more separate entities or economic units into a single entity or a group of entities, accounted for in accordance with IFRS 3 – “Business Combinations”.
Business combinations are carried out in such a way that the Bank gains control of an entity and are accounted for as follows:
| • | The Bank calculates the cost of the business combination, defined as the fair value of the assets offered, the liabilities incurred, and the equity instruments issued, if applicable. |
| • | The fair values of the assets, liabilities, and contingent liabilities of the acquired entity or business, including intangible assets not recognized by the acquired entity, are estimated on the acquisition date and recognized in the consolidated balance sheet. |
| • | The surplus of the acquisition cost over the fair value of the identifiable net asset acquired is recognized as goodwill ( note 13 ). The surplus of the fair value of the identifiable net assets over the acquisition costs is regarded as an advantageous purchase and is recognized in the income statement on the acquisition date. |
Note 3 outlines the most significant transactions that took place in 2024 and 2023.
iv. Investment Funds
This encompasses the Investment Funds in which the Bank and its subsidiaries hold a substantial stake or the entirety of their shares, and over which the Bank and its subsidiaries are exposed, or have the right to variable returns and have the ability to influence these returns through decision-making power, in accordance with IFRS 10 – Consolidated Financial Statements, and are therefore consolidated in these Consolidated Financial Statements.
c) Definitions and classification of financial instruments
i. Definitions
“Financial instrument” is defined as any agreement that creates a financial asset in one entity and concurrently a financial liability or equity interest in a different entity.
“Equity instruments” are any contracts representing a residual equity interest in the assets of the issuing entity after all its liabilities have been deducted.
"Derivative" is a financial instrument whose value changes in response to fluctuations in an observable market variable (such as interest rates, currency exchange rates, financial instrument prices, market indices, or credit ratings), where the initial investment is considerably lower relative to other financial instruments that react comparably to shifts in market factors, and is typically settled at a future date.
"Hybrid financial instruments" are agreements that simultaneously encompass a non-derivative main contract and a derivative, termed an embedded derivative, which is non-transferable on its own and has the effect of causing part of the cash flows from the hybrid contract to fluctuate in a manner similar to that of a standalone derivative.
The following transactions are not treated for accounting purposes as financial instruments:
• Investments in subsidiaries, jointly-controlled entities, and associates ( notes 3 and 11 ).
• Rights and obligations arising from employee benefit plans ( note 21 ).
ii. Classification of financial assets for measurement purposes
Financial assets are initially classified into various categories for management and measurement purposes, except when it is mandatory to report them as "Non-current assets held for sale," or in cases pertaining to "Cash and cash equivalents," "Derivatives used as hedging instruments," and "Investments in associates," all of which are accounted for separately.
Financial assets are, for measurement purposes, included in one of the following categories:
• Financial assets measured at fair value through profit or loss: this category includes financial assets acquired with the intention of generating short-term profit from their price fluctuations and financial derivatives not classified as hedging instruments, where the Bank's primary business model is to engage in frequent trading, financial assets that did not meet the criteria established in the SPPI Test (principal and interest payments only) and financial assets for which the Fair Value Option was made at the time of initial designation.
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Consolidated Financial Statements | December 31, 2024 | F - 19 |
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*Values expressed in thousands, except when indicated |
• Financial assets measured at fair value in Other Comprehensive Income: are financial assets that meet the SPPI criteria, the objective of which is to maintain the assets to receive contractual cash flows and also for sale.
Results arising from changes in fair value are recognized in the market value adjustment item in equity, with the exception of losses due to impairment, which are recognized in profit or loss. When a financial asset is disposed of or shows signs of a decline in fair value due to non-recovery, the result previously accumulated in the fair value adjustment account in equity is reclassified to profit or loss.
• Financial assets measured at amortized cost: this category includes financing granted to third parties, based on their nature, regardless of the type of borrower and the form of financing, including financial leasing transactions in which the entities included in the consolidation act as lessors. The entities included in the consolidation generally have a business model of holding the loans and credits they grant until their final maturity, which are therefore presented in the consolidated balance sheet at amortized cost (which includes the necessary adjustments to reflect estimated impairment losses).
iii. Classification of financial assets for presentation purposes
Financial assets are classified by nature under the following line items of the consolidated balance sheet:
| • | “Cash and Cash Equivalents” and “Compulsory deposits with the Brazilian Central Bank”: cash balances and demand deposit credit balances with Brazilian Central Bank (Bacen). |
| • | "Financial assets measured at amortized cost": this includes loans granted by the Bank, as well as financial leasing credits and other outstanding balances of financial nature owed to the Bank, such as checks drawn on financial institutions, credit balances with clearing houses and settlement agencies for stock exchange and organized market transactions, bonuses paid in cash, capital calls, fees and commissions receivables for financial guarantees, and outstanding balances resulting from transactions not originated through banking operations and services, such as rent collections and similar items. |
| • | “Loans and other receivables from credit institutions”: credits of any kind in the name of financial institutions. |
| • | “Loans and advances to customers”: this includes outstanding balances of all other credits and loans granted by the Bank, including transactions conducted in the open market through centralized counterparties. |
| • | “Debt instruments”: bonds and other securities that constitute a debt obligation for the issuer, yield interest, and are issued in either physical or book-entry form. |
| • | "Equity instruments": financial instruments issued by other entities, such as shares, which are of an equity nature for the issuer, excluding investments in subsidiaries, jointly-controlled entities, or associates. |
| • | “Derivatives”: this includes the fair value in favor of the Bank from derivatives that are not categorized as hedging instruments. |
| • | “Derivatives used as hedging instruments”: this includes the fair value in favor of the Bank from derivatives assigned as hedging instruments. |
| • | “Investments in associates and joint ventures”: this includes investments in jointly-controlled entities or associates. |
iv. Classification of financial liabilities for measurement purposes
Financial liabilities are classified, for measurement purposes, into one of the following categories:
• Financial Liabilities Measured at Fair Value through Profit or Loss: this category includes financial liabilities issued to generate short-term profit from their price fluctuations, financial derivatives not considered as hedge accounting, and financial liabilities arising from the direct sale of financial assets acquired under repurchase agreements or borrowed ("Short positions").
• Other financial liabilities at fair value through profit or loss: financial liabilities are included in this category when more relevant information is obtained, either by eliminating or significantly reducing recognition or measurement inconsistencies (“accounting differences”) arising from the measurement of assets or liabilities or from the recognition of gains or losses on them on different bases, or because there is a group of financial liabilities or financial assets and liabilities that is managed and whose performance is assessed based on fair value, in accordance with a documented risk management or investment strategy, and information about the Bank is provided to the Bank's key management professionals on the same basis.
• Financial liability at amortized cost: financial liabilities, regardless of their form and maturity, not included in any of the previous categories and arising from financing activities undertaken by financial institutions.
v. Classification of financial liabilities for presentation purposes
Financial liabilities are classified by nature under the following line items in the consolidated balance sheet:
• “Deposits from credit institutions”: deposits of any kind, including liabilities from loans and on-lending as well as funding raised in the open market, received from credit institutions.
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Consolidated Financial Statements | December 31, 2024 | F - 20 |
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*Values expressed in thousands, except when indicated |
• “Customer deposits”: this includes deposits of any kind such as demand, savings, and time deposits, as well as open market transactions, received from customers.
• “Liabilities arising from securities”: this includes the value of bonds and other debt represented by tradable securities, except for subordinated liabilities.
• “Derivatives”: this includes the negative fair value balance of the Bank’s derivatives that are not part of hedge accounting.
• “Short positions”: this includes the value of financial liabilities arising from the direct sale of financial assets acquired under repurchase agreements or borrowed.
• "Capital-eligible debt instruments": the value of financing received which, in terms of payment priority, rank below ordinary debt. This category also encompasses financial instruments issued by the Bank which, despite being shares for legal purposes, do not satisfy the criteria to be categorized as equity.
• "Other financial liabilities": this includes the value of payment obligations characterized as financial liabilities not accounted for under other line items and liabilities subject to financial guarantee agreements, excluding those classified as questionable settlement.
• “Derivatives used as hedging instruments”: this includes the fair value of the Bank’s liabilities from derivatives assigned as hedging instruments.
• “Equity instruments”: financial instruments issued by other entities, such as shares, which are equity instruments for the issuer, except investments in subsidiaries, jointly controlled entities or associates.
d) Funding, issuances, and other liabilities
Funding instruments are initially recorded at their fair value, which is essentially regarded as the transaction price. They are subsequently measured at amortized cost (on an accrual basis) with its inherent expenses recognized as a financial cost.
Within the initial liability recognition criteria, attention should be given to composite instruments, which are classified as such because they comprise both a debt instrument (liability) and an embedded shareholders' equity component (derivative).
The registration of a composite instrument involves the combination of (i) a main instrument, which is recognized as a genuine liability of the entity (debt), and (ii) an equity component (derivative convertible into ordinary shares).
The issuance of "Notes" must be recorded in a specific liability account and adjusted based on the contracted rates, and recalibrated due to the impact of exchange rate variation, when issued in a foreign currency. All remunerations related to these instruments, such as interest and currency fluctuations (difference between the functional currency and the currency in which the instrument was denominated), must be recognized as expenses for the period, in accordance with the accrual basis of accounting.
Pertinent information regarding the issuance of these capital-eligible debt instruments is described in note 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 is deemed equivalent, until proven otherwise, to the transaction price. Financial instruments 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 as follows:
i. Measurement of financial assets
Financial assets are measured at fair value, without deduction for estimated transaction costs that might be incurred upon their disposal, except for financial assets measured at amortized cost, equity instruments whose fair value cannot be determined in a sufficiently objective manner, and financial derivatives that have equity instruments of this kind as their underlying and are settled by delivering such instruments.
The “fair value” of a financial instrument on a given date is the price that would be received from the sale of an asset or would be paid for the transfer of a liability in a voluntary exchange among market participants on the measurement date. The most objective and common benchmark for the fair value of a financial instrument is the price that would be paid for it in an active, transparent, and significant market (“quoted price” or “market price”).
In the absence of a market price for a particular financial instrument, its fair value is estimated based on the valuation techniques commonly adopted by the international financial community, taking into account the specific characteristics of the instrument to be measured and, most importantly, the various types of risks associated with it.
All derivatives are recognized on the balance sheet at fair value from the transaction date. When the fair value is positive, they are recognized as assets; when negative, as liabilities. Changes in the fair value of derivatives since the transaction date are recognized in the "Gains (losses) on financial assets and liabilities" line item of the consolidated income statement. Specifically, the fair value of standard financial derivatives included in the portfolios of financial assets or liabilities measured at fair value through profit or loss is deemed equivalent to their daily quoted price; if, under exceptional circumstances, should it be unfeasible to ascertain the quoted price on a specific date, these derivatives are measured using methods similar to those employed for valuing derivatives traded in the over-the-counter market.
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Consolidated Financial Statements | December 31, 2024 | F - 21 |
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*Values expressed in thousands, except when indicated |
The fair value of over-the-counter traded derivatives is deemed to be the aggregate of the instrument's future cash flows, discounted to their present value on the measurement date (referred to as "present value" or "theoretical close"), employing commonly used financial market valuation techniques such as Net Present Value (NPV), option pricing models, and other methods.
"Financial assets measured at amortized cost" are measured at amortized cost utilizing the effective interest method. The "amortized cost" is the acquisition cost of a financial asset or liability, either increased or decreased, as applicable, by the principal repayments and cumulative amortization (included in the income statement) of the difference between the initial cost and the maturity value. In the case of financial assets, the amortized cost also includes any reductions for impairment or inability to collect. For financial assets measured at amortized cost that are subject to fair value hedging, the fair value changes of these assets associated with the hedged risk(s) are recognized.
The "Effective interest rate" is the discount rate that exactly matches the initial value of the financial instrument when compared to the projected cash flows from various sources throughout its residual useful life. In the case of fixed-income financial instruments, the effective interest rate coincides with the contractual interest rate stipulated on the contract date, plus, as applicable, fees and transaction costs which, given their nature, are part of their financial yield. For equity financial instruments, the effective interest rate coincides with the prevailing return rate on all commitments until the following interest adjustment reference date.
Equity instruments for which fair value cannot be measured in a sufficiently objective manner are measured at acquisition cost, adjusted, as appropriate, for impairment losses related thereto.
The values at which financial assets are recognized correspond, in all material respects, to the Bank's maximum credit risk exposure as of the date of each financial statement. Furthermore, the Bank has secured guarantees and additional credit support to mitigate its exposure to credit risk, predominantly comprising mortgages, cash collateral, equity instruments, sureties, assets leased under leasing and rental agreements, assets acquired under repurchase agreements, securities lending, and derivatives.
ii. Measurement of financial liabilities
In general, financial liabilities are measured at amortized cost, as previously defined, except for those included under the line items "Financial liabilities measured at fair value through profit or loss" and "Other financial liabilities measured at fair value through profit or loss," as well as financial liabilities designated as hedging instruments, which are measured at fair value.
iii. Recognition of fair value changes
As a general rule, changes in the book value of financial assets and liabilities are recognized in the consolidated income statement. These are distinguished between those arising from the interest provisioning and similar gains - recognized under the line item "Interest and Similar Income" or "Interest and Similar Expenses," as applicable - and those derived from other factors, recognized at their net value under the line item "Gains (Losses) on Financial Assets and Liabilities (Net).
Adjustments due to fair value changes related to financial assets measured at fair value through Other Comprehensive Income are temporarily recognized in equity under the line item "Other Comprehensive Income." Items debited or credited to this account remain in the Bank's consolidated shareholders' equity until the respective assets are written off, at which point they are debited to the consolidated income statement.
iv. Hedging transactions
The consolidated entities make use of financial derivatives for the following purposes: (i) to provide these instruments to clients who request them for managing their market and credit risks; (ii) to employ them in the risk management of their own positions and the assets and liabilities of the Bank's entities (Derivatives used as hedging instruments); and (iii) to achieve gains from price fluctuations of these derivatives (Derivative financial instruments).
Financial derivatives that do not qualify for hedge accounting are treated, for accounting purposes, as trading derivatives.
A derivative qualifies for hedge accounting if all the following conditions are met:
1. The derivative instrument provides protection against one of the three types of exposure listed below:
a. Changes in the fair value of assets and liabilities as a result of fluctuations, among others, in interest rates and/or the exchange rate to which the position or balance being hedged is subject (fair value hedge);
b. Changes in the projected cash flow stemming from financial assets and liabilities, commitments, and anticipated transactions that are highly likely (cash flow hedging);
c. Net investment in an overseas venture (hedging of a net investment in an overseas operation).
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Consolidated Financial Statements | December 31, 2024 | F - 22 |
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*Values expressed in thousands, except when indicated |
2. When it is effective in offsetting the inherent exposure associated with the item or protected position over the entire anticipated duration of the hedge, that is:
a. On the date of the agreement, the hedge is expected to be highly effective under normal circumstances (prospective effectiveness).
b. There is sufficient evidence that the hedge remained effective throughout the entire period for which the hedge or hedged item was designated (retrospective effectiveness).
3. There must be adequate documentation proving the specific designation of the financial derivative for the hedging of certain balances or transactions, and the manner in which this effective protection was expected to be achieved and measured, contingent upon its conformity with the Bank's own risk management practices.
Changes in the value of financial instruments eligible for hedge accounting are recognized as follows:
a. For fair value hedging, both gains and losses on the hedge instruments and the hedged items (attributable to the type of risk being hedged) are recognized directly in the consolidated statement of income.
b. For cash flow hedging, the effective portion of the change in the value of the hedging instrument is temporarily recognized in equity under the line item "Other Comprehensive Income - Cash Flow Hedging" until the forecasted transactions occur, at which point this portion is then recorded in the consolidated income statement, unless the forecasted transactions lead to the recognition of non-financial assets or liabilities, in which case this portion will be included in the cost of the non-financial asset or liability. The ineffective portion of the change in the value of foreign exchange hedging derivatives is recognized directly in the consolidated income statement.
c. The ineffective portion of gains and losses on hedge instruments related to cash flow hedging and hedges of a net investment in an overseas operation is recognized directly in "Gains (losses) on financial assets and liabilities (net)" in the consolidated income statement.
If a derivative designated as a hedging instrument ceases to meet the previously described requirements as a result of expiration, ineffectiveness, or for any other reason, such derivative will be reclassified as a derivative measured at fair value through profit or loss.
Upon discontinuation of fair value hedge accounting (whether due to revocation, expiration, sale, or failure to continue meeting accounting hedge criteria), the previously recognized adjustments to the hedged item are transferred to the profit and loss account, using the recalculated effective interest rate at the date of the hedge's termination. The adjustments must be fully amortized by the maturity date.
When cash flow hedging operations are discontinued, any cumulative gain or loss on the hedge instrument recognized in equity under the line item "Other Comprehensive Income" (from the time the hedge was established and deemed effective) is immediately recognized in the profit and loss account.
For the accounting and disclosure of hedge accounting structures on December 31, 2024, the Bank used the option of IFRS 9 to maintain the practices determined by IAS 39.
f) Write-off of financial assets and liabilities
Financial Asset Write-Off
The Bank writes off 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 substantially all risks and rewards associated with the financial asset's ownership are transferred, or in which the Bank neither transfers nor retains substantially all the risks and rewards of the financial asset's ownership and does not maintain control over the financial asset.
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” is recorded in profit or loss.
Any gains/losses accumulated and recognized in "Other Comprehensive Income" related to equity instruments measured at fair value through Other Comprehensive Income are not recorded in the profit and loss statement upon the disposal of these securities.
The Bank engages in transactions in which it transfers assets recognized on its balance sheet, but retains all or substantially all the risks and rewards of the transferred assets or a portion thereof. In these cases, the transferred assets are not written off. Examples of such transactions include the assignment of loan portfolios with joint liability. In transactions where the Bank neither retains nor substantially transfers all the risks and rewards of ownership of a financial asset and retains control of the asset, the Bank continues to recognize the asset based on the degree of its ongoing engagement, determined by the extent to which it is exposed to changes in the value of the transferred asset.
Financial asset write-off due to credit assignment
The accounting treatment for the transfer of financial assets depends on the extent to which the risks and rewards associated with the transferred assets have been transferred to third parties:
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Consolidated Financial Statements | December 31, 2024 | F - 23 |
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*Values expressed in thousands, except when indicated |
If the Bank transfers substantially all the risks and rewards to third parties, execute an unconditional sale of financial assets, engage in the sale of financial assets under an agreement stipulating their repurchase at fair value on the repurchase date, conduct the sale of financial assets with a call option purchase or a put option sale that is significantly out of the money, or securitization of assets in which the transferor does not retain a subordinated debt or provide credit enhancement to the new holders, and other similar cases, the transferred financial asset is written off, and any rights or obligations retained or created in the transfer are recognized simultaneously.
If the Bank retains substantially all the risks and rewards associated with the transferred financial asset, such as financial asset sales under an agreement stipulating their repurchase at a fixed price or at the sale price plus interest, a securities lending agreement in which the borrower pledges to return the same assets or similar assets, and other similar situations, the transferred financial asset is not written off and continues to be measured using the same criteria as before the transfer. However, the following items are recognized:
A corresponding financial liability, for an amount equal to the consideration received; this liability is thereafter measured at amortized cost.
The revenue from the transferred financial asset not written down and any expense incurred with the new financial liability.
If the Bank does not transfer or substantially retain all the risks and rewards associated with the transferred financial asset - such as the sale of financial assets with a purchased call option or a written put option that is not significantly out of the money, securitization of assets in which the assignor retains a subordinated debt or another type of credit enhancement related to a portion of the transferred asset, and other similar scenarios - a distinction is then drawn as follows:
If the assignor does not retain control of the transferred financial asset, the asset is written off, and any rights or obligations retained or created in the transfer are recognized.
If the assignor retains control, it continues to recognize the transferred financial asset at a value equivalent to its exposure to value fluctuations and recognizes a financial liability associated with the transferred financial asset. The net carrying amount of the transferred asset and the corresponding liability is the amortized cost of the retained rights and obligations if the transferred asset is measured at amortized cost, or the fair value of the retained rights and obligations if the transferred asset is measured at fair value.
Financial Liabilities Write-Off
The Bank writes off a financial liability when its contractual obligations are extinguished, annulled, or reach their maturity.
g) Offsetting of assets and liabilities
Financial assets and liabilities are offset, that is, recorded in the balance sheet at their net value, only if the Bank and its subsidiaries currently have a legally enforceable right to offset the recognized amounts and intend to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Offsetting and Settlement Agreements for Obligations – IFRS 07 – Derivative Instruments (Disclosure) - Banco Santander has netting and settlement agreements for obligations within the National Financial System ("SFN"), signed with both natural and legal persons, whether part of the SFN or not, resulting in increased financial settlement assurance with the parties that have such agreements. These agreements stipulate that, in the event of counterparty default, the payment obligations to Banco Santander arising from credit and derivative transactions will be offset by Banco Santander's payment obligations to the counterparty.
The table below provides details of the financial assets and liabilities subject to offsetting as of December 31, 2024 and 2023:
| Thousand of Reais | 2024 | ||
| Assets: | Financial assets, gross |
Financial assets
offset in the balance sheet |
Financial assets, net |
| Derivatives |
|
(
|
|
| Liabilities: | Financial liabilities, gross |
Financial liabilities
offset in the balance sheet |
Financial liabilities, net |
| Derivatives |
|
(
|
|
| Thousand of Reais | 2023 | ||
| Assets: | Financial assets, gross |
Financial assets
offset in the balance sheet |
Financial assets, net |
| Derivatives |
|
(
|
|
| Liabilities: | Financial liabilities, gross |
Financial liabilities
offset in the balance sheet |
Financial liabilities, net |
| Derivatives |
|
(
|
|
|
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Consolidated Financial Statements | December 31, 2024 | F - 24 |
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*Values expressed in thousands, except when indicated |
h) Non-recoverable financial assetsrment of financial assets
i. Definition
A financial asset is deemed non-recoverable when objective evidence exists of events that:
• Cause an adverse impact on estimated future cash flows at the date of the transaction, in the case of debt instruments (loans and debt securities).
• Indicate that their book value cannot be fully recovered, in the case of equity instruments.
• Arise from the breach of loan agreement clauses or terms, and
• In the event of bankruptcy proceedings.
As a general rule, whenever the aforementioned events are observed, the carrying amount of non-recoverable financial assets is adjusted by recording a provision for loss as a debit to the expense under "Impairment losses on financial assets (net)" in the consolidated income statement. The reversal of previously recorded losses is recognized in the consolidated income statement in the period in which the impairment decreases and can be objectively associated with a recovery event.
ii. Debt instruments recorded at amortized cost
The value of a loss for the determination of the recoverable amount of a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its projected future cash flows (excluding future credit losses not yet incurred), discounted at the financial asset's original effective interest rate (i.e., the effective interest rate calculated at initial recognition), presented as a reduction in the asset's balance and recognized in the income statement.
When projecting future cash flows for debt instruments, the following factors are taken into consideration:
• All values expected to be obtained over the residual life of the instrument, including, where applicable, the guarantees provided. The loss due to non-recovery further considers the likelihood of collecting provisioned interest receivables;
• The various types of risks to which each instrument is subject; and
• The circumstances under which collections are expected to be executed.
These cash flows are then discounted at the effective interest rate of the transaction.
Specifically regarding the adjustment in the recoverable amount resulting from the materialization of the insolvency risk of counterparties (credit risk), a debt instrument is deemed non-recoverable due to insolvency when there is evidence of a deterioration in the counterparty's payment capacity, whether due to being overdue or for other reasons.
The Bank, through its risk management division, implements policies, methods, and procedures to mitigate its exposure to credit risk arising from insolvency attributable to counterparties.
These policies, methods, and procedures are applied in the issuance, examination, and documentation of debt instruments, contingent liabilities, and other commitments, in the identification of recoverable value, and in the calculation of the amounts needed to cover the respective credit risk.
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Consolidated Financial Statements | December 31, 2024 | F - 25 |
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*Values expressed in thousands, except when indicated |
The procedures applied in the identification, measurement, control, and mitigation of credit risk exposure are based on an individual level or grouped by similarity.
• Customers under individualized management: Wholesale clients, financial institutions, and certain companies. Risk management is performed through an analysis enhanced by decision-support tools that rely on internal risk assessment models.
• Customers under standardized management: this category includes individuals and entities not classified as individualized customers. The approach to risk management employs automated models for decision-making and assessing internal risk. These models are supplemented by specialized analyst teams in instances where the model's comprehensiveness or accuracy falls short. Loans associated with standardized customers are generally classified as non-recoverable when there is a historical record of losses and are overdue by more than 90 days.
With regard to the provision for credit risk impairment losses, the Bank assesses all loans. Loans are either assessed individually for impairment or assessed collectively for impairment. Loans recorded at amortized cost that are not assessed individually for impairment are assessed collectively for impairment and are grouped together considering similarity of risk. Loans assessed individually for impairment are not included in balances assessed collectively for impairment.
In assessing impairment losses on loans on an individual basis, the Bank takes into account the borrower's conditions, including their economic and financial status, level of indebtedness, capacity for income generation, cash flow, management, corporate governance, and the quality of internal controls, payment history, industry experience, contingencies, and credit limits, as well as other relevant characteristics pertaining to assets, including their nature and purpose, type, adequacy, and liquidity level guarantees, as well as the total credit value, and also based on historical experiences of impairment losses and other known circumstances at the time of assessment.
To calculate the impairment loss on loans collectively assessed for impairment, the Bank categorizes financial assets into groups based on their credit risk characteristics and similarities. This classification considers various factors, including the segment, type of assets, collateral, and other elements associated with the historical experience of impairment losses and other known circumstances at the time of assessment.
In certain instances, the observable data required to estimate the loss amount due to an impairment of a financial asset may be limited or may no longer be entirely relevant to the current circumstances.
In these instances, the entity employs its judgment-based experience to estimate the value of any impairment losses. Similarly, the entity utilizes its judgment-based experience to adjust the observable data for a group of financial assets to accurately reflect the current circumstances.
The impairment loss is calculated using statistical models that consider the following factors:
• Exposure at Default (EAD) - this is the amount of risk exposure on the date the borrower defaults. The duration of the default is incorporated into the calculation of the "Probability of Default" (PD).
• In accordance with IFRS, the exposure level used for this calculation is the actual exposure as disclosed in the balance sheet.
• Probability of Default (PD) - this is the likelihood that the borrower will not meet their obligations for principal and/or interest payments.
The Probability of Default is determined using a one-year time horizon for transactions classified under stage 1, as well as over the lifetime of the asset (stages 2 and 3); that is, it quantifies the probability of the borrower defaulting. A loan is considered to be in default if either the principal or interest is overdue by ninety days or more, or if the loan is outstanding and there are significant doubts regarding the counterparty's solvency (subjective doubtful assets).
• Loss Given Default (LGD) - this refers to the loss incurred upon default.
The LGD calculation is based on the net write-offs of non-performing loans, factoring in the collateral associated with the loans, the income and expenses related to the recovery process, and the point in time when the default occurs.
• Loss Identification Period (LIP) - this refers to the interval between the occurrence of a loss event and the identification of evidence substantiating that loss. In other words, it delineates the time span from when a credit loss event occurs to when such loss is conclusively confirmed.
Furthermore, before writing off non-performing loans (which is done only after the Bank has exhausted all recovery efforts), a full provision is made for the remaining outstanding amount of the loan so that the loan loss provision fully covers the losses. Accordingly, the Bank understands that its loan loss provision methodology was developed to match its risk metrics and capture loans that could potentially show impairment.
iii. Debt instruments or equity instruments classified as financial assets measured at fair value through Other Comprehensive Income
The difference between the amortized cost and the fair value of debt instruments or equity instruments classified as financial assets measured at fair value through Other Comprehensive Income is recognized in equity, under the identically titled line item.
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Consolidated Financial Statements | December 31, 2024 | F - 26 |
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*Values expressed in thousands, except when indicated |
When there is objective evidence indicating that the previously mentioned differences are attributable to an impairment loss recognized due to a decline in fair value from non-recovery, these are no longer recognized in equity and are reclassified to the consolidated statement of profit or loss at the cumulative amount as of that date. Losses deemed permanent on an investment in equity instruments are not reversed in subsequent periods.
i) Repurchase agreements
Purchases (sales) of financial assets under a non-optional repurchase (repo) agreement at a fixed price are recognized in the consolidated balance sheet as investments (funding) in repurchase agreements, depending on the nature of the debtor (creditor), classified under the line items "Cash and Cash Equivalents and compulsory deposits with the Brazilian Central Bank," "Loans and other receivables from credit institutions," or "Loans and advances to customers", (“Deposits from credit institutions” or “Customer deposits”).
Differences between purchase and sale prices are recognized as interest income over the contract period.
j) Lease Accounting – IFRS 16
I. Lease Identification
Upon adopting IFRS 16, the Bank recognizes lease liabilities in accordance with the principles of IFRS 16 - Leases.
The following exemptions from recognition are also being applied:
• Accounting for leases with a remaining lease term of less than 12 months as short-term leases;
• The accounting for leases of low-value underlying assets.
The Bank enters into leases for properties and equipment. Predominantly, the assets covered by these lease agreements are real estate properties associated with the branches.
Banco Santander does not hold any right-of-use assets that fall under the definition of investment properties.
II. Lease term
Lease agreements are formalized, analyzed, and renegotiated on an individual basis, encompassing a broad range of distinct terms and conditions. The Bank assesses the lease term, as well as its intention to continue occupying the properties. Consequently, lease term estimates may vary in accordance with contractual conditions, considering extension options and legal provisions.
The Bank considers that penalties for early termination of contracts charged before the maturity date do not represent a significant component.
Lease agreements do not contain restrictive clauses, but leased assets cannot be used as collateral for loans.
III. Initial Measurement
Upon 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 asset to be recognized is measured at its cost, counterbalanced by the lease liability, which represents the present value of the lease payments not yet made as of the date. Lease payments are discounted using the lessee's incremental borrowing rate. There are no onerous contracts that required an adjustment to the right-of-use assets to be recognized at the date of initial adoption.
The right-of-use assets are measured at amortized cost as per the following:
• The initial measurement value of the lease liability;
• Any lease payment made on or before the start date, net of any incentives received;
• Any initial costs directly attributable; and
• Restoration costs, if the criteria of IAS 37 are fulfilled for the recognition of Provisions, Contingent Liabilities, and Contingent Assets.
The Santander Group adopts as the incremental borrowing rate the interest rate it would incur to borrow the necessary funds to obtain an asset of similar value to the leased asset, under equivalent terms, collateral, and economic conditions. This rate is represented within Santander Brasil by the funding cost curve of a free asset, applied on an individual basis to each lease agreement in accordance with the projected lease term estimates.
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Consolidated Financial Statements | December 31, 2024 | F - 27 |
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*Values expressed in thousands, except when indicated |
Lease liabilities include the net present value of the following lease payments:
• Fixed payments net of any incentive;
• Variable payments based on a rate or index;
• Payments expected to be made by the lessee, based on the residual value of guarantees;
• The exercise price of a call option, if the lessee has reasonable assurance about the option's exercise; and
• Penalty payments for lease termination if the lease term reflects the exercise of the option by the lessee.
Lease liabilities are primarily adjusted for inflation (IGP-M), with the estimated projections as of the base date of December 31, 2024 detailed below:
| IGP-M forecast | |
| Up to 3 months |
|
| From 3 to 12 months |
|
| From 1 year to 3 years |
|
| From 3 years to 5 years |
|
| Over 5 years |
|
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 liability, where applicable.
The lease liability initially recorded is updated 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 remeasured, in the event of changes in the lease term or contract value, the amount resulting from the new determination of the lease liability is recorded as a contra entry to the corresponding right-of-use asset.
Use rights are subject to an impairment test.
k) Non-current assets held for sale
Non-current assets held for sale comprise the carrying amount of individual items, or groups of assets designated for disposal, or items that are part of a business unit targeted for disposal ("Discontinued operations"), where the sale in their current condition is highly probable and expected to take place within one year. Real estate or other non-current assets acquired by the consolidated entities in full or partial settlement of their debtors' payment obligations are classified as non-current assets held for sale through auctions, which typically take place within one year.
Non-current assets held for sale are measured at whichever is lower between the fair value minus selling costs and the carrying amount at the date they are classified in this category. These assets are not subject to depreciation.
Impairment losses of an asset or disposal group due to a reduction in their carrying amount to fair value (minus selling costs) are recognized in "Gain/(Loss) on Disposal and Expenses for Non-Current Assets Held for Sale Not Classified as Discontinued Operations" in the consolidated statement of profit or loss. Gains from a non-current asset held for sale, arising from subsequent increases in fair value (minus selling costs), increase its carrying amount and are recognized in the consolidated statement of profit or loss up to the amount equivalent to the previously recognized impairment losses.
I) Residual maturity periods and average interest rates
The analysis of the maturities of the balances of certain items in the consolidated balance sheets at the end of the years 2024 and 2023 is reported in note 43-d .
|
|
Consolidated Financial Statements | December 31, 2024 | F - 28 |
|
*Values expressed in thousands, except when indicated |
m) Tangible asset
Tangible asset comprise the value of buildings, land, furniture, vehicles, computer hardware, and other equipment owned by the Bank. This category also includes tangible assets received by the Bank in full or partial settlement of financial assets representing receivables from third parties, which are intended for sustained use, as well as tangible assets acquired under finance leases, which are presented at their acquisition cost, minus their respective accumulated depreciation and any impairment losses (net book value exceeding the recoverable amount).
Depreciation is calculated using the straight-line method, based on the acquisition cost of the assets minus their residual value. Land on which buildings and other structures are situated has an indefinite useful life and, therefore, is not subject to depreciation.
The depreciation expense for tangible assets is recognized in the consolidated statement of income and is calculated primarily by applying the following depreciation rates (based on the average estimated useful life of the various assets):
| Annual Rate | ||||||
| Buildings for own use |
|
|||||
| Furniture |
|
|||||
| Fixtures |
|
|||||
| Office and IT equipment |
|
|||||
| Improvements on third-party properties |
|
At the end of each reporting period, the Bank assesses whether there are any indications that its tangible assets may be subject to impairment, that is, when an asset's carrying amount exceeds its recoverable amount, whether through use or sale.
Once a reduction in the recoverable amount of the tangible asset is identified, it is adjusted to its recoverable amount by recognizing an accounting loss for the reduction in its recoverable amount, recorded under 'Impairment losses on other assets (net).' Furthermore, the depreciation value of said asset is recalculated to adjust the value of the asset's useful life.
In cases where there is evidence or indication of a recovery in the value of a tangible asset, the Bank recognizes the reversal of the impairment loss previously recorded and must adjust future depreciation expenses in line with the asset's remaining useful life. Under no circumstances may the reversal of an impairment loss on an asset increase its carrying amount beyond what it would have been had no impairment loss been recognized in prior periods.
Maintenance and preservation expenses for self-used fixed assets are recognized as expenses in the period in which they are incurred.
n) Intangible assets
Intangible assets are identifiable non-monetary assets (separable from other assets) without physical substance, arising from business combinations or internally developed software, with either a finite or indefinite useful life. Recognition is limited to those assets whose acquisition cost can be reliably measured and for which the consolidated entities deem it probable that future economic benefits will be generated.
Intangible assets are initially recognized at their acquisition or production cost and are subsequently measured net of any accumulated amortization and any impairment losses.
I. Goodwill
In the acquisition of an investment in a subsidiary, any difference between the investment cost and the investor's share in the net fair value of the identifiable assets, liabilities, and contingent liabilities of the invested entity (whether a subsidiary or an associate) is recognized in accordance with IFRS 3, 'Business Combinations'.
Goodwill is recognized only when the amount of the consideration acquired from the investee exceeds the fair value at the date of acquisition, and therefore represents a payment made by the acquirer in anticipation of future economic benefits from assets of the acquired entity that cannot be individually identified and separately recognized.
Annually or whenever there is any indication of loss to recoverable value, goodwill is tested for impairment (recoverability test) and if any loss exists, goodwill is written off and recognized as Losses on other assets (net) - Other intangible assets in the Consolidated Statement of Income.
Adjustments to the net fair value of identifiable assets, liabilities, and contingent liabilities of the invested entity in comparison to their carrying amount are individually allocated to the acquired identifiable assets and the assumed liabilities based on their respective fair values at the acquisition date.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 29 |
|
*Values expressed in thousands, except when indicated |
In instances of business combinations executed in stages, the previously held equity interest in the acquired entity is remeasured at its fair value on the acquisition date at which control of said acquired entity is secured.
II. Other intangible assets
This represents an identifiable, non-monetary asset that lacks physical substance. It primarily originates from software development and the acquisition of rights capable of generating economic benefits for the Bank. These assets may possess either a finite or indefinite useful life.
Other intangible assets are classified as having an indefinite useful life when, following a comprehensive analysis of all relevant factors, it is determined that there is no foreseeable limit to the period during which the asset is expected to generate cash inflows for the Bank. In all other instances, these assets are considered to have a finite useful life.
Intangible assets with an indefinite useful life are not amortized: at the end of each reporting period, the entity reviews the classification as having an indefinite useful life. If this classification is maintained, these assets are subject to annual impairment tests to determine their recoverable amount (IAS36).
Intangible assets with a defined useful life are amortized over their useful life using methods similar to those applied for depreciating tangible assets. The amortization expense is recognized under the line item "Depreciation and Amortization" in the consolidated statement of income.
At the end of each reporting period, the Bank assesses whether there are any indications that intangible asset items may have suffered an impairment, that is, an asset whose carrying amount exceeds its recoverable amount. Should any impairment be identified, the asset is adjusted to its recoverable amount.
The measurement of the recoverable amount of other intangible assets - such as software - is conducted based on their value in use, as well as an analysis of the asset's discontinuation in relation to the Bank's operations.
Software acquisition and development costs are amortized over a maximum period of 5 years.
o) Other assets
This includes the balance of all advances and provisioned income (excluding provisioned interest), relationships with acquired customers, the net value of the difference between pension plan obligations and the plan assets' value when this balance is in favor of the entity, provided that the net value is to be disclosed on the consolidated balance sheet, and the value of any other amounts and assets not categorized under other items.
The Bank employs the value in use of customer relationships as the basis for measuring the recoverable amount, as it is not reasonably possible to determine the net sales value, given the absence of a reliable basis for estimating the value to be realized from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. The value in use of customer relationships acquired through the purchase of "payrolls" is determined on an individual basis. An analysis is conducted by the business areas with the aim of demonstrating the expected generation of future economic benefits and the present value of the expected cash flows. These analyses are reviewed quarterly, based on the actual cash flows of each business (value in use), which are then compared with the carrying amount to assess whether an impairment loss needs to be recognized.
p) Insurance contracts
Insurance contracts recognized by the Bank are considered onerous, in accordance with the provisions established by IFRS 17. An insurance contract is deemed onerous at the date of initial recognition if the cash flows allocated for fulfillment, any previously recognized acquisition cash flows, and any cash flows arising from the contract at the date of initial recognition collectively result in a net outflow. A loss is recognized in profit or loss for the net outflow associated with the group of onerous contracts, which leads to the carrying amount of the liability for the group being equal to the fulfillment cash flows, and the contractual service margin of the group being zero.
q) Provisions for judicial and administrative proceedings, commitments, and other provisions
Banco Santander and its subsidiaries are engaged in judicial and administrative proceedings related to tax, labor, and civil matters, stemming from the ordinary course of their operations.
Provisions are reassessed at each balance sheet date to reflect the most accurate current estimate and may be fully or partially reversed or reduced when it becomes improbable that resource outflows and related obligations will occur. This includes situations such as the expiration of legal deadlines, the issuance of final judgments in legal proceedings, among others.
Judicial and administrative provisions are recognized when the risk of loss from judicial or administrative proceedings is assessed as probable, and the amounts involved can be estimated with sufficient certainty based on the nature, complexity, and historical outcomes of the proceedings, as well as the opinions of both internal and external legal advisors and the best available information. For cases where the risk of loss is considered possible, provisions are not recognized, but the relevant information is disclosed in the notes to the financial statements. For cases where the risk of loss is deemed remote, disclosure is not required.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 30 |
|
*Values expressed in thousands, except when indicated |
Contingent assets are not recognized in the accounting records, except in instances where there are tangible guarantees or favorable judicial rulings, with no possibility for further appeals, thereby rendering the gain as virtually certain. Contingent assets that have a probable likelihood of success, if any, are solely disclosed in the financial statements.
In cases of final judgments rendered in favor of Santander, the counterparty is entitled, upon fulfilling specific legal criteria, to initiate a rescission action within a timeframe prescribed by the legislation in effect. Rescission actions are treated as new legal proceedings and will be assessed for contingent liabilities if, and when, they are filed.
r) Other liabilities
Other liabilities include the balance of all accrued expenses and deferred income, excluding accrued interest, and the value of any other liabilities not classified under other categories.
The Bank has established long-term compensation plans with specific vesting conditions. These vesting conditions include: (i) service conditions, requiring that the participant remains employed throughout the vesting period; (ii) performance conditions, where the number of shares to be allocated to each participant is determined based on the evaluation of a performance metric of the Bank: the comparison of the Total Shareholder Return (TSR) of the Santander Conglomerate with the TSR of the Bank's main global competitors; and (iii) market conditions, as certain parameters are linked to the fair value of the Bank's shares. The Bank determines the fair value of the services provided by referencing the fair value of the equity instruments granted on the date of grant, taking into account the market conditions for each plan when estimating fair value.
Stock Settlement
The Bank measures the fair value of the services provided by referencing the fair value of the equity instruments granted on the grant date, factoring in market conditions for each plan when estimating fair value. To recognize personnel expenses against capital reserves over the vesting period, as services are received, the Bank considers the treatment of service conditions and recognizes the amount for services received during the vesting period, based on the most accurate estimate of the number of equity instruments expected to be granted.
Cash Settlement
For cash-settled share-based payments (in the form of share appreciation), the Bank measures the services provided and the corresponding liability incurred at fair value. This process captures the share appreciation from the grant date to the settlement date. The Bank reassesses the fair value of the liability at the end of each reporting period, and any changes in this amount are recognized in the period's results. To recognize personnel expenses against provisions for "salaries payable" throughout the vesting period, reflecting the receipt of services, the Bank records the total liability representing the best estimate of the number of share appreciation rights expected to be granted at the end of the vesting period and recognizes the value of services received during the vesting period, based on the best available estimate. The Bank periodically reviews its estimate of the number of share appreciation rights that will be granted at the end of the vesting period.
t) Recognition of income and expenses
The key criteria employed by the Bank for the recognition of its income and expenses are summarized below:
i. Interest and similar income and expenses
Interest and similar income and expenses are generally recognized on an accrual basis, using the effective interest rate method.
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 ( notes 34 and 35 ). The key criteria are as follows:
|
|
Consolidated Financial Statements | December 31, 2024 | F - 31 |
|
*Values expressed in thousands, except when indicated |
• Fee and commission income and expenses, associated with financial assets and financial liabilities measured at fair value through profit or loss, are recognized upon payment;
• Those arising from transactions or services provided over a period of time are recognized over the duration of these transactions or services; and
• Those related to services provided in a single transaction are recognized at the time the transaction is executed.
iii. Non-financial income and expenses
For accounting purposes, they are recognized on an accrual basis.
iv. Deferred collections and payments
Recognized for accounting purposes at the carrying amount derived from discounting expected cash flows at market rates.
v. Loan arrangement fees
Loan arrangement fees, including application and origination fees, are accrued and recognized in the income statement over the term of the loan. Specifically, for origination fees, the portion attributable to direct costs incurred in the loan contract is immediately recognized in the consolidated income statement.
u) Guarantees
u.1) Financial Guarantees
Financial guarantees are defined as contracts whereby an entity commits to making specific payments on behalf of a third party should that party fail to do so, irrespective of the various legal forms they may assume, including but not limited to guarantees, irrevocable documentary credits issued or confirmed by the entity, among others.
The Bank initially recognizes the fees associated with financial guarantees as liabilities on the consolidated balance sheet at fair value. This fair value is typically the present value of the fees, commissions, or interest expected to be received from these contracts over their term.
Financial guarantees, irrespective of the guarantor, the instrument, or any other circumstances, are subject to periodic reviews to assess the credit risk exposure and, where necessary, to determine the need for a provision. Credit risk is evaluated by employing criteria similar to those used for quantifying impairment losses on debt instruments measured at amortized cost.
The provisions established for these transactions are recognized under the line item "Provisions for Judicial and Administrative Proceedings, Commitments, and Other Provisions" in the consolidated balance sheet ( note 22 ).
If a specific provision is required for financial guarantees, the corresponding commissions to be allocated are recognized under the line item "Financial liabilities at amortized cost - Other financial liabilities" in the consolidated balance sheet and are reclassified to the appropriate provision.
u.2) Guarantees and Credit Risk Mitigation Policy
Banco Santander performs credit risk management by utilizing guarantees in its operations. Each business unit is responsible for managing credit risk and formalizes the use of collateral in its credit policies.
Banco Santander employs guarantees to enhance its recovery capabilities in operations exposed to credit risk. The types of guarantees utilized include surety, property, legal structures with mitigation power, and offsetting agreements. Each year, the Bank conducts a review of its guarantee policies to reflect changes in the market, the characteristics of the assets pledged as collateral, and the conditions of these assets. These are examples of the technical parameters subject to review.
Credit limits are continuously monitored and adjusted in response to customer behavior. Consequently, potential loss amounts constitute a fraction of total available funds.
v) Assets under management, including 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 financial statements. Management fees are included in “Fee and commission income” in the consolidated income statement. Note 43-b contains information on the third-party assets managed by the Bank.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 32 |
|
*Values expressed in thousands, except when indicated |
The investment funds and pension funds managed by the consolidated entities are not recorded in the consolidated financial 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 in the heading “Fee and commission income” in the consolidated income statement.
w) Post-employment benefits
The post-employment benefit plans include the commitments made by the Bank to: (i) supplement the benefits of the public pension system; and (ii) provide medical assistance in the event of retirement, permanent disability, or death to eligible employees and their direct beneficiaries.
Defined contribution plans
The defined contribution plan is a post-employment benefit plan under which the Bank and its subsidiaries, as the sponsoring entities, contribute fixed amounts to a pension fund. There is no legal or constructive obligation for the sponsoring entities to make additional contributions if the fund lacks sufficient assets to fulfill all benefits associated with services rendered in the current and prior periods.
The contributions made in this regard are recognized as "Interest and Similar Expenses" in the income statement.
Defined benefit plans
The defined benefit plan is a post-employment benefit plan that is not a Defined Contribution Plan, as detailed in note 21 . Under this plan, the sponsoring entity has the obligation to deliver the agreed-upon benefits to employees, bearing the potential actuarial risk that the benefits may cost more than anticipated.
For defined benefit plans, the most recent update to IAS 19 - Employee Benefits has introduced significant changes in the accounting and disclosure of post-employment benefits, including the elimination of the corridor mechanism in the recognition of plan obligations, as well as modifications in the criteria for recognizing interest income on plan assets (valuation based on the actuarial obligation discount rate).
Additionally, full recognition is made in the liability account for actuarial losses (actuarial deficit) that have not been previously recognized, with a corresponding entry in the equity account under "Other Comprehensive Income".
Main Definitions
| - | The present value of a defined benefit obligation represents the present value, excluding any deduction of plan assets, of the expected future payments required to settle the obligation arising from the employee's service in both the current and prior periods. |
| - | Deficit or surplus represents: (a) the present value of the defined benefit obligation; minus (b) the fair value of the plan's assets. |
| - | The sponsoring entity may recognize the plan's assets on the balance sheet when they exhibit the following characteristics: (i) the fund's assets are sufficient to cover all obligations related to employee benefits of the plan or the sponsoring entity; or (ii) the assets are returned to the sponsoring entity with the objective of reimbursing it for benefits already disbursed to employees. |
| - | Actuarial gains and losses are changes in the present value of the defined benefit obligation stemming from: (a) experience adjustments (impacts of differences between the actuarial assumptions adopted and the actual outcomes); and (b) the effects of changes in actuarial assumptions. |
| - | The current service cost refers to the increase in the present value of the defined benefit obligation attributable to the employee's service during the current period. |
| - | The past service cost corresponds to the change in the present value of the defined benefit obligation for services provided by employees in prior periods, resulting from amendments to the plan or a reduction in the number of employees covered. |
Post-employment benefits are recognized in the income statement under Interest Expenses and Similar Expenses and Provisions (Net).
Defined benefit plans are recognized based on an actuarial study, conducted annually by an external consulting firm at the end of each financial year, and are effective for the subsequent period.
x) Other long-term employee benefits
Other long-term employee benefits, defined as obligations to early retirement beneficiaries - those who have ceased to render services to an entity but, without being legally retired, continue to hold economic rights with respect to the entity until they achieve legal retirement status - time-based bonuses for accounting purposes, as applicable, in accordance with the approach previously established for defined benefit post-employment plans, with the exception that all past service costs and actuarial gains and losses are recognized immediately ( note 21 ).
|
|
Consolidated Financial Statements | December 31, 2024 | F - 33 |
|
*Values expressed in thousands, except when indicated |
y) Termination benefits
Termination benefits are recognized when a detailed formal plan, identifying the fundamental changes to be implemented, is in place. Recognition occurs provided that the implementation of the plan has commenced, its key features have been publicly announced, or objective facts concerning its implementation have been disclosed.
z) Corporate Income Tax (IRPJ), Social Contribution on Net Profit (CSLL), Social Integration Program (PIS), and Contribution for the Financing of Social Security (COFINS)
The income tax expense is derived from the sum of Income Tax, Social Contribution, PIS, and COFINS. The current Income Tax and Social Contribution are determined by applying their respective rates to taxable income, while the rates for PIS and COFINS are applied to their specific calculation bases as defined in the relevant legislation. This calculation also includes adjustments for changes in deferred tax assets and liabilities as recognized in the consolidated income statement. For income tax expenses resulting from transactions directly recognized in equity, the corresponding tax effect is likewise recognized in equity.
The Corporate Income Tax (IRPJ) liability
is calculated at a rate of
The Social Contribution on Net Income (CSLL)
rate for all banks, financial institutions, private insurance companies, and capitalization entities (businesses operating within the
financial sector) was increased by
The Social Integration Program (PIS) and the Contribution for the Financing of Social Security (COFINS) are calculated at a combined rate of 4.65% on certain gross revenues and expenses. Financial institutions are allowed to deduct specific financial expenses when calculating the tax base for PIS and COFINS. PIS and COFINS are recognized as components of profit (net of certain income and expenses); thus, in accordance with IAS 12, they are accounted for as income tax.
Tax Assets and Liabilities (excluding provisions for taxes) classified as "Current" are tax amounts to be recovered and tax amounts payable over the coming 12 months.
Deferred tax assets and liabilities of IR and CS comprise temporary differences, identified as the amounts expected to be paid or recovered arising from differences between the carrying amounts of assets and liabilities and their respective tax bases, as well as accumulated tax credits and losses. These amounts are measured at the tax rates expected to be applied in the period when the asset is realized or the liability is settled, and are reassessed at each balance sheet date.
Deferred tax assets are recognized only to the extent that it is probable that the consolidated entities will generate sufficient future taxable profits against which these deferred tax assets can be utilized. Furthermore, deferred tax assets must not arise from the initial recognition (except in the context of a business combination) of other assets and liabilities in transactions that do not impact either the actual profit or the accounting profit. Other deferred tax assets, such as tax credits and accumulated tax losses, are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable profits against which they can be utilized.
Income and expenses directly recognized in equity are accounted for as temporary differences.
The Bank's expectation for the realization of deferred tax assets is based on future results projections and underpinned by a technical study, as detailed in note 23 .
aa) Consolidated statement of cash flows
The terms outlined below are employed in the Consolidated Statement of Cash Flows with the respective meanings:
• Cash flows: inflows and outflows of cash and cash equivalents, which are highly liquid financial investments subject to an insignificant risk of value changes and typically have a maturity of approximately three months or less from the original acquisition date.
• Operating activities: the principal activities that generate revenue for financial institutions and other activities that are not related to financing or investment activities.
• Investing activities: the acquisition and sale of long-term assets and other investments not included in cash and cash equivalents.
• Financing activities: activities that result in changes in the amount and composition of equity and liabilities that are not operating activities.
When preparing the consolidated statement of cash flows, highly liquid financial investments with insignificant risk of changes in their values were classified as “Cash and cash equivalents”. The Bank classifies as cash and cash equivalents the balances recorded in the items "Cash and reserves at the Central Bank of Brazil" and "Loans and other amounts with credit institutions" in the consolidated balance sheet, except for resources for restricted use and long-term operations term.
Interest paid and received corresponds to Banco Santander's operating activities.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 34 |
|
*Values expressed in thousands, except when indicated |
| 3. | Basis for consolidation |
Highlighted below are both the direct and indirect subsidiaries, as well as investment funds included in the Consolidated Financial Statements of Banco Santander. Similar information regarding entities accounted for using the equity method by the Bank is provided in note 11 .
| Number of Shares or Units Held (in Thousands) | 12/31/2024 | ||||
| Investments | Business Segment | Ordinary Shares and Quotas | Preferred Shares | Equity interest of Banco Santander | Ownership Interest |
| Controlled by Banco Santander | |||||
| Aymoré Crédito, Financiamento e Investimento S.A. |
|
|
— |
|
|
| Esfera Fidelidade S.A. |
|
|
— |
|
|
|
Return Capital Gestão de Ativos e Participações S.A. (New name for Gira, Gestão Integrada de Recebíveis do Agronegócio S.A.)
|
|
|
— |
|
|
| Em Dia Serviços Especializados em Cobrança Ltda |
|
|
— |
|
|
| Rojo Entretenimento S.A. |
|
|
— |
|
|
| Sanb Promotora de Vendas e Cobrança Ltda. |
|
|
— |
|
|
| Sancap Investimentos e Participações S.A. (Sancap) |
|
|
— |
|
|
| Santander Brasil Administradora de Consórcio Ltda. (Santander Brasil Consórcio) |
|
|
— |
|
|
| Santander Corretora de Câmbio e Valores Mobiliários S.A. |
|
|
|
|
|
| Santander Corretora de Seguros, Investimentos e Serviços S.A. |
|
|
— |
|
|
| Santander Holding Imobiliária S.A. |
|
|
— |
|
|
| Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing) |
|
|
— |
|
|
| F1RST Tecnologia e Inovação Ltda. |
|
|
— |
|
|
| SX Negócios Ltda. |
|
|
— |
|
|
| Tools Soluções e Serviços Compartilhados LTDA |
|
|
— |
|
|
| Subsidiaries of Aymoré Credit, Financing and Investment S.A. | |||||
| Banco Hyundai Capital Brasil S.A. |
|
|
— |
|
|
| Solution 4Fleet Consultoria Empresarial S.A. |
|
|
— |
|
|
| Subsidiary of Santander Leasing | |||||
| Banco Bandepe S.A. |
|
|
— |
|
|
| Santander Distribuidora de Títulos e Valores Mobiliários S.A. |
|
|
— |
|
|
| Subsidiaries of Sancap | |||||
| Santander Capitalização S.A. |
|
|
— |
|
|
| Evidence Previdência S.A. |
|
|
— |
|
|
| Subsidiary of Santander Corretora de Seguros | |||||
| América Gestão Serviços em Energia S.A. |
|
|
— |
|
|
| Fit Economia de Energia S.A. |
|
|
— |
|
|
| Subsidiary of Santander Holding Imobiliária S.A. | |||||
| Summer Empreendimentos Ltda. |
|
|
— |
|
|
| Subsidiary of Santander Distribuidora de Títulos e Valores Mobiliários S.A. | |||||
| Toro Corretora de Títulos e de Valores Mobiliários Ltda. |
|
|
— |
|
|
| Toro Investimentos S.A. |
|
|
— |
|
|
| Subsidiary of Toro Corretora de Títulos e de Valores Mobiliários Ltda. | |||||
| Toro Investimentos S.A. |
|
|
— |
|
|
| Jointly Controlled by Sancap | |||||
| Santander Auto S.A. |
|
|
— |
|
|
| Subsidiary of Toro Investimentos S.A. | |||||
| Toro Asset Management S.A. |
|
|
— |
|
|
Consolidated Investment Funds
| • | Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior (Santander FI Amazonas); |
| • | 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); |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 35 |
|
*Values expressed in thousands, except when indicated |
| • | Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado (Santander FI SBAC); |
| • | Santander Paraty QIF PLC (Santander Paraty) (2); |
| • | Prime 16 – Fundo de Investimento Imobiliário (current name of BRL V - Fundo de Investimento Imobiliário - FII) (1); |
| • | 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; |
| • | Fundo de Investimentos em Direitos Creditórios Atacado – Não Padronizado (3); |
| • | Atual - Fundo de Investimento Multimercado Crédito Privado Investimento no Exterior; |
| • | Fundo de Investimentos em Direitos Creditórios – Getnet; |
| • | Agro Flex Fundo de Investimento em Direitos Creditórios (3); |
| • | San Créditos Estruturados – Fundo de Investimento em Direitos Creditórios Não Padronizado (3); |
| • | D365 – Fundo De Investimento em Direitos Creditórios (3); |
| • | Fundo de Investimento em Direitos Creditórios Tellus (3); |
| • | Fundo de Investimento em Direitos Creditórios Precato IV (3); |
| • | Santander Hera Renda Fixa Fundo Incentivado de Investimento em Infraestrutura Responsabilidade Limitada; |
| • | Ararinha Fundo de Investimento em Renda Fixa Longo Prazo; and |
| • | Hyundai Fundo de Investimento em Direitos Creditórios. |
| (1) | Banco Santander was listed as a creditor in certain overdue credit transactions that had real estate as collateral. The operation to recover these credits consisted of contributing the real estate as collateral to the capital of the Real Estate Investment Fund and subsequently transferring the Fund's shares to Banco Santander, through payment in kind for the aforementioned credit transactions. |
| (2) | Banco Santander, through its subsidiaries, holds the risks and benefits of Santander Paraty and its exclusive fund Santander FI Hedge Strategies, resident in Ireland, and both are fully consolidated in its Consolidated Financial Statements. Santander Paraty does not have its own equity position, and all records originate from the financial position of Santander FI Hedge Strategies. |
| (3) | Fund controlled by Return Capital Gestão de Ativos e Participações S.A. |
Corporate actions have been undertaken to reorganize the operations and activities of the entities in accordance with the business plan of the Santander Conglomerate.
| a) | Incorporation of Return Capital S.A. by Return Capital Gestão de Ativos e Participações S.A. |
On September 30, 2024, Return Capital S.A. (“Return Capital”) was fully incorporated by Return Capital Gestão de Ativos e Participações S.A. (new name of Gira, Gestão Integrada de Recebíveis do Agronegócio S.A.) (“Return Participações”). The incorporation resulted in an increase in the share capital of Return Participações, in the amount of R$ .72 (eight billion, five hundred and forty million, nine hundred and forty-two thousand, three hundred and sixty-six reais and seventy-two centavos), through the issuance of (four hundred and thirty-nine million, two hundred and twenty-four thousand, three hundred and fifty-nine) new common shares. As a result of the incorporation, Return Capital was extinguished by operation of law, being succeeded by Return Participações in all its rights and obligations.
| b) | Incorporation of Mobills Labs Soluções Em Tecnologia Ltda by Toro Investimentos S.A. |
On June 30, 2024, Mobills Labs Soluções em Tecnologia Ltda. (“Mobills Labs”) was fully incorporated and its equity was absorbed by its direct parent company, Toro Investimentos S.A. (“Toro Investimentos”), in accordance with the conditions established in the Protocol and Justification of the transaction. The implementation of the full incorporation of Mobills Labs did not imply an increase in the share capital of Toro Investimentos, since all of the shares issued by Mobills Labs were held by Toro Investimentos and, therefore, already reflected in the investment account by equivalence.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 36 |
|
*Values expressed in thousands, except when indicated |
| c) | Incorporation of Apê11 Tecnologia e Negócios Imobiliários S.A. by Santander Holding Imobiliária S.A |
On June 28, 2024, Apê11 Tecnologia e Negócios Imobiliários S.A. (“Apê11”) was fully incorporated, with its assets absorbed by its direct parent company, Santander Holding Imobiliária S.A. (“SHI”), in accordance with the conditions established in the Protocol and Justification of the transaction. The implementation of the full incorporation of Apê11 did not imply an increase in SHI’s share capital, since all of Apê11’s shares were held by SHI and, therefore, were already reflected in its equity investment account.
On December 22, 2023, Santander Holding Imobiliária S.A. (“SHI”), a wholly-owned subsidiary of Banco Santander (Brasil) S.A., entered into, together with the shareholders of Apê11 Tecnologia e Negócios Imobiliários S.A. (“Apê11”), a certain Share Purchase and Sale Agreement to acquire the remaining 10% of the share capital of Apê11 (“Transaction”). As a result of the Transaction, SHI now holds 100% of the share capital of Apê11.
| d) | Partnership between Banco Santander (Brasil) S.A. and Pluxee International and Pluxee Pay Brasil Ltda. |
On June 27, 2024, following the completion of the conditions precedent of the transaction announced on July 24, 2023, Banco Santander (Brasil) S.A. concluded the establishment of a partnership with the Pluxee Group (previously called Sodexo).
The economic rationale of the transaction is essentially based on: (i) the synergies arising from the combination of the businesses of Pluxee Instituição de Pagamento Brasil S.A. (current name of “Ben Benefícios e Serviços Instituição de Pagamentos S.A”) with the Pluxee Group in Brazil and (ii) the company's ability to explore Santander's customer base to offer its products and services (i.e. the capillarity of Santander's counter).
For the formation of the partnership,
Banco Santander contributed the amount equivalent to R$
As a result of the transaction, Banco Santander and Grupo Pluxee now hold 20% and 80% stakes, respectively, in the share capital of Pluxee Benefícios Brasil S.A. (“Pluxee”), the partnership investment vehicle.
| e) | Incorporation of Mobills Corretora de Seguros Ltda. by Toro Asset Management S.A. |
On May 31, 2024, Mobills Corretora de Seguros Ltda. (“Mobills Corretora”) was fully incorporated and its equity was absorbed by its direct parent company, Toro Asset Management S.A. (“Toro Asset”), in accordance with the conditions established in the Protocol and Justification of the transaction. The implementation of the full incorporation of Mobills Corretora did not imply an increase in Toro Asset’s share capital, since all of Mobills Corretra’s shares were held by Toro Asset and, therefore, already reflected in an investment account by equivalence.
| f) | Acquisition of the remaining portion of Return Capital Gestão de Ativos e Participações S.A. (new name of Gira, Gestão Integrada de Recebíveis do Agronegócio S.A.) by Return Capital S.A. |
On May 17, 2024, Return Capital S.A. (“Return”), a wholly-owned subsidiary of Banco Santander (Brasil) S.A., entered into a Share Purchase and Sale Agreement with the minority shareholders of Return Capital Gestão de Ativos e Participações S.A. (new name of Gira, Gestão Integrada de Recebíveis do Agronegócio S.A.) (“Gira”) to acquire the 20% of Gira’s share capital held by the minority shareholders (“Transaction”). As a result of the Transaction, Banco Santander (Brasil) S.A. indirectly held 100% of Gira’s share capital.
| g) | Acquisition of stake and investment in América Gestão Serviços em Energia S.A. |
On March 12, 2024, Santander Corretora de Seguros, Investimentos e Serviços S.A. (“Santander Corretora”) formalized, together with the shareholders of América Gestão Serviços em Energia S.A. (“América Energia”), a Share Purchase and Sale Agreement and Other Covenants with a view to acquiring 70% of the total and voting share capital of América Energia (“Transaction”). The completion of the Transaction was subject to the fulfillment of certain usual suspensive conditions in similar transactions, including obtaining the relevant regulatory authorizations. On July 4, 2024, with the completion of the Transaction, Santander Corretora came to hold 70% of the share capital of América Energia.
| h) | Acquisition of stake and investment in Fit Economia de Energia S.A. |
On March 6, 2024, Santander Corretora de Seguros, Investimentos e Serviços S.A. concluded, in compliance with the applicable precedent conditions, the transaction for acquisition and investment in Fit Economia de Energia S.A. (“Company”), so that it now holds 65% of the Company's share capital (“Transaction”).
| i) | Acquisition of the entire shareholding in Toro Participações S.A. and incorporation by Toro Corretora de Títulos e Valores Mobiliários S.A. |
On January 3, 2024, after fulfilling the conditions precedent, Banco Santander concluded the transaction to acquire all of the shares of Toro Participações, so that it indirectly hold 100% of the share capital of Toro Corretora de Títulos e Valores Mobiliários S.A. and Toro Investimentos S.A. On February 29, 2024, the incorporation of Toro Participações S.A. by Toro Corretora de Títulos e Valores Mobiliários S.A. was approved.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 37 |
|
*Values expressed in thousands, except when indicated |
| j) | Total incorporation of Mob Soluções em Tecnologia Ltda. by Mobills Labs Soluções em Tecnologia Ltda. |
On October 31, 2023, Mob Soluções em Tecnologia Ltda. (“Mob”) was fully incorporated and its equity was absorbed by its direct parent company, Mobills Labs Soluções em Tecnologia Ltda. (“Mobills”), in accordance with the conditions established in the Protocol and Justification of the transaction. The implementation of the full incorporation of Mob did not imply an increase in Mobills share capital, since all of Mob’s shares were held by Mobills and, therefore, already reflected in the equity investment account.
| k) | Sale of the entire stake held in Banco PSA Finance Brasil S.A. and Stellantis Corretora de Seguros e Serviços Ltda. |
On August 31, 2023, Aymoré Crédito, Financiamento e Investimento S.A. (“Aymoré”) and Santander Corretora de Seguros, Investimentos e Serviços S.A. (“Santander Corretora de Seguros”) concluded the transaction for the sale of equity interests held (a) by Aymoré, representing 50% (fifty percent) of the share capital of Banco PSA Finance Brasil S.A. (“Banco PSA”), to Stellantis Financial Service, S.A. and (b) by Santander Corretora de Seguros, representing 50% (fifty percent) of the share capital of Stellantis Corretora de Seguros e Serviços Ltda. (“Stellantis Corretora”), to Stellantis Services Ltda. (“Transaction”).
With the conclusion of the Transaction, Aymoré ceased to hold an equity interest in Banco PSA and Santander Corretora de Seguros ceased to hold an equity interest in Stellantis Corretora.
| l) | Safe of a portion of Santander Corretora in Webmotors S.A. to Carsales.com Investments PTY LTD. |
On April 28, 2023, Santander Corretora de Seguros, Investimentos e Serviços S.A. (“Santander Corretora”) concluded the sale of shares representing 40% of the share capital of Webmotors S.A. (“Webmotors”) to Carsales.com Investments PTY LTD (“Carsales”) (“Transaction”). With the conclusion of the Transaction, Santander Corretora became the holder of 30% and Carsales of 70% of the share capital of Webmotors.
| 4. | Cash and cash equivalents |
| Thousand of Reais | 2024 | 2023 | 2022 |
| Cash |
|
|
|
| Cash and Cash Equivalents and Investments in Foreign Currency Overseas |
|
|
|
| Repurchase Agreements |
|
|
|
| Investments in Interbank Deposit Certificates (CDI) |
|
|
|
| Total |
|
|
|
Information related to December 31, 2022, are presented to inform the composition of the opening balances of Cash and Cash Equivalents presented in the Consolidated Statement of Cash Flows.
| 5. | Loans and other receivables from credit institutions |
The breakdown, by classification, type, and currency, of the balances under the "Loans and Other Receivables from Credit Institutions" line item in the consolidated balance sheets is as follows:
| Thousand of Reais | 2024 | 2023 |
| Classification: | ||
| Financial assets measured at amortized cost |
|
|
| Comprising: | ||
| Loans and other receivables from credit institutions at amortized cost |
|
|
| Provision for impairment losses (note 9.c) |
(
|
(
|
| Loans and other receivables from credit institutions, net |
|
|
| Loans and other receivables from credit institutions, gross |
|
|
| Type: | ||
| Time deposit investments |
|
|
| Repurchase agreements (1) |
|
|
| Judicial deposits |
|
|
| Other accounts |
|
|
| Total |
|
|
| (1) | Secured by debt instruments |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 38 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2024 | 2023 |
| Currency: | ||
| Brazilian Real |
|
|
| U.S. Dollar |
|
|
| Euro |
|
|
| Total |
|
|
Note 43-d provides details on the residual maturity periods of financial assets measured at amortized cost.
| 6. | Debt instruments |
The breakdown, by classification, type, and currency, of the balances within the “Debt Instruments” line item is as follows:
| Thousand of Reais | 2024 | 2023 |
| Classification: | ||
| Financial Assets Measured at Fair Value Through Profit or Loss |
|
|
| Financial Assets Measured at Fair Value through Other Comprehensive Income |
|
|
| Financial Assets Measured at Amortized Cost |
|
|
| Comprising: | ||
| Debt instruments at Amortized Cost |
|
|
| Provision for impairment losses (note 9.c) |
(
|
(
|
| Total |
|
|
| Type: | ||
| Government securities - Brazil (1) |
|
|
| Debentures and promissory notes |
|
|
| Other debt securities |
|
|
| Total |
|
|
| (1) | These primarily refer to National Treasury Bills (LTN), Treasury Financial Bills (LFT), and National Treasury Notes (NTN-A, NTN-B, NTN-C, and NTN-F). |
The Debt Instruments primarily consist of:
| Thousand of Reais | 2024 | 2023 |
| Currency: | ||
| Brazilian Real |
|
|
| U.S. Dollar |
|
|
| Mexican Peso |
|
|
| Total |
|
|
| Thousand of Reais | 2024 | 2023 |
| Debt Instruments linked to: | ||
| Repurchase Agreements |
|
|
| Operations guarantees in B3 S.A. - Brasil, Bolsa, Balcão (B3 S.A.) |
|
|
| Linked to judicial deposits and other guarantees |
|
|
| Total |
|
|
Note 43-d provides details on the residual maturity periods of financial assets measured at fair value through Other Comprehensive Income and financial assets measured at amortized cost.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 39 |
|
*Values expressed in thousands, except when indicated |
| 7. | Equity instruments |
a) Breakdown
The breakdown, by classification and type, of the balances in the "Equity Instruments" line item is as follows:
| Thousand of Reais | 2024 | 2023 |
| Classification: | ||
| Financial Assets Measured at Fair Value Through Profit or Loss |
|
|
| Financial Assets Measured at Fair Value Through Other Comprehensive Income |
|
|
| Total |
|
|
| Type: | ||
| Shares of domestic companies |
|
|
| Shares of foreign companies |
|
|
| Investment funds (1) |
|
|
| Total |
|
|
| (1) | Primarily composed of investments in fixed income assets and both government and private securities. |
b) Changes
The changes in the balances of the line item "Equity Instruments - Financial Assets Measured at Fair Value through Profit or Loss" were as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Balance at the beginning of the fiscal year |
|
|
|
| Additions/Disposals (Net) |
(
|
|
|
| Balance at the end of the fiscal year |
|
|
|
The changes in the balances of the line item "Equity Instruments - Financial Assets Measured at Fair Value through Other Comprehensive Income" were as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Balance at the beginning of the fiscal year |
|
|
|
| Additions/Disposals (Net) |
|
(
|
|
| Balance at the end of the fiscal year |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 40 |
|
*Values expressed in thousands, except when indicated |
| 8. | Derivative financial instruments |
The primary risk factors associated with the derivative instruments undertaken relate to exchange rates, interest rates, and equity income. In managing these and other market risk factors, the Bank employs practices that encompass the measurement and monitoring of the utilization of limits previously established by internal committees, the portfolios' value at risk, sensitivities to interest rate fluctuations, foreign exchange exposure, liquidity gaps, among other practices that enable the control and monitoring of risks, which could potentially impact Banco Santander's positions across the various markets in which it operates. Based on this management model, the Bank has been able to optimize the risk-reward ratio, even amidst conditions of significant volatility, through the use of operations involving derivative instruments.
The fair value of derivative financial instruments is determined using market price quotations when available. The fair value of swaps is calculated through discounted cash flow modeling techniques, reflecting appropriate risk factors. The fair value of forward and futures contracts is also determined based on market price quotations for exchange-traded derivatives or employing methodologies similar to those used for swaps. The fair value of options is calculated using mathematical models, such as the Black-Scholes model, implied volatilities, and the fair value of the corresponding asset. Current market prices are utilized to determine volatilities. For derivatives that do not have prices directly disclosed by exchanges, the fair value is ascertained through pricing models that leverage market information, inferred from the disclosed prices of more liquid assets. This process involves extracting interest rate curves and market volatilities from these prices, which are then used as input data for the models.
a) Derivative Financial Instruments
a.1) Derivative Financial Instruments Recorded in the Off-Balance Sheet and Equity Accounts.
Overview of Trading and Hedging Derivatives Portfolio
| 2024 | 2023 | |
| Assets | ||
| Swap Differential Receivables |
|
|
| Premiums on Unexercised Options |
|
|
| Forward Contracts and Others |
|
|
| Total |
|
|
| Liabilities | ||
| Swap Differential Payables |
|
|
| Premiums on Issued Options |
|
|
| Forward Contracts and Others |
|
|
| Total |
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 41 |
|
*Values expressed in thousands, except when indicated |
| Breakdown by Category | ||||||
| Trading | 2024 | 2023 | ||||
|
Notional Value (1) |
Curve Value | Fair Value |
Notional Value(1) |
Curve Value | Fair Value | |
| Swap |
|
(
|
(
|
|
(
|
(
|
| Assets |
|
|
|
|
|
|
| Interest Rate |
|
|
|
|
|
|
| Foreign Currency |
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
| Liabilities |
|
(
|
(
|
|
(
|
(
|
| Interest Rates |
|
(
|
(
|
|
(
|
(
|
| Foreign Currency |
|
(
|
(
|
|
(
|
(
|
| Others |
|
(
|
(
|
|
(
|
(
|
| Options |
|
(
|
|
|
(
|
(
|
| Purchase Commitments |
|
|
|
|
|
|
| Foreign Currency Call Options |
|
|
|
|
|
|
| Foreign Currency Put Options |
|
|
|
|
|
|
| Other Call Options |
|
|
|
|
|
|
| Interbank Market |
|
|
|
|
|
|
| Others (2) |
|
|
|
|
|
|
| Put Option - Other |
|
|
|
|
|
|
| Interbank Market |
|
|
|
|
|
|
| Other (2) |
|
|
|
|
|
|
| Sale Commitments |
|
(
|
(
|
|
(
|
(
|
| Foreign Currency Call Options |
|
(
|
(
|
|
(
|
(
|
| Foreign Currency Put Options |
|
(
|
(
|
|
(
|
(
|
| Other Call Options |
|
(
|
(
|
|
(
|
(
|
| Interbank Market |
|
(
|
(
|
|
(
|
(
|
| Other (2) |
|
(
|
(
|
|
(
|
(
|
| Other Put Options |
|
(
|
(
|
|
(
|
(
|
| Interbank Market |
|
(
|
(
|
|
(
|
(
|
| Other (2) |
|
(
|
(
|
|
(
|
(
|
| Futures Contracts |
|
|
||||
| Long Position |
|
- |
|
- | ||
| Exchange Coupon (DDI) |
|
|
||||
| Interest Rates (DI1 and DIA) |
|
|
||||
| Foreign Currency |
|
|
||||
| Indexes (3) |
|
- | - |
|
- | - |
| Others |
|
- | - |
|
- | - |
| Short Position |
|
- | - |
|
- | - |
| Exchange Coupon (DDI) |
|
- | - |
|
- | - |
| Interest Rate (DI1 and DIA) |
|
- | - |
|
- | - |
| Foreign Currency |
|
- | - |
|
- | - |
| Index (3) |
|
- | - |
|
- | - |
| Treasury Bonds/Notes |
|
- | - |
|
- | - |
| Forward Contracts and Others |
|
|
|
|
|
|
| Purchase Commitments |
|
|
|
|
|
|
| Currencies |
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
| Sale Commitments |
|
(
|
(
|
|
(
|
(
|
| Currencies |
|
(
|
(
|
|
(
|
(
|
| Other |
|
(
|
(
|
|
(
|
(
|
| (1) | Adjusted nominal value of the contracts minal value of updated contracts. |
| (2) | Includes index options, primarily options related to U.S. Treasury, stocks, and stock indices. |
| (3) | Includes Bovespa and S&P indices. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 42 |
|
*Values expressed in thousands, except when indicated |
a.2) Derivatives Financial Instruments by Counterparty
| Notional | 2024 | |||
| Related | Financial | |||
| Customers | Parties | Institutions (1) | Total | |
| Swap |
|
|
|
|
| Options |
|
|
|
|
| Futures Contracts |
|
|
|
|
| Forward Contracts and Others |
|
|
|
|
| (1) |
Includes transactions that have as counterparty B3 S.A. - Brasil, Bolsa, Balcão (B3) and other stock and commodities exchanges. |
| Notional | 2023 | |||
| Related | Financial | |||
| Customers | Parties | Institutions (1) | Total | |
| Swap |
|
|
|
|
| Options |
|
|
|
|
| Futures Contracts |
|
|
|
|
| Forward Contracts and Others |
|
|
|
|
| (1) | Includes transactions that have as counterparty B3 S.A. - Brasil, Bolsa, Balcão (B3) and other stock and commodities exchanges. |
a.3) Derivatives Financial Instruments by Maturity
| Notional | 2024 | |||
| Up to | From 3 to | Over | ||
| 3 Months | 12 Months | 12 Months | Total | |
| Swap |
|
|
|
|
| Options |
|
|
|
|
| Futures Contracts |
|
|
|
|
| Forward Contracts and Others |
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 43 |
|
*Values expressed in thousands, except when indicated |
| Notional | 2023 | |||
| Up to | From 3 to | Over | ||
| 3 Months | 12 Months | 12 Months | Total | |
| Swap |
|
|
|
|
| Options |
|
|
|
|
| Futures Contracts |
|
|
|
|
| Forward Contracts and Others |
|
|
|
|
a.4) Derivative Financial Instruments by Trading Market
| Notional | Stock Exchanges (1) | Over-the-Counter Market | 2024 |
| Total | |||
| Swap |
|
|
|
| Options |
|
|
|
| Futures Contracts |
|
|
|
| Forward Contracts and Others |
|
|
|
| (1) | Includes trades with B3 S.A. |
| Notional | Stock Exchanges (1) | Over-the-Counter Market | 2023 |
| Total | |||
| Swap |
|
|
|
| Options |
|
|
|
| Futures Contracts |
|
|
|
| Forward Contracts and Others |
|
|
|
| (1) | Includes trades with B3 S.A. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 44 |
|
*Values expressed in thousands, except when indicated |
a.5) Information on Credit Derivatives
Banco Santander uses credit derivatives with the objectives of performing counterparty risk management and meeting its customers' demands, performing protection purchase and sale transactions through credit default swaps and total return swaps, primarily related to Brazilian sovereign risk securities.
Total Return Swaps – TRS
These are credit derivatives in which the return from the reference obligation is exchanged for a cash flow, and where upon the occurrence of a credit event, the protection buyer typically has the right to receive from the protection seller the equivalent of the difference between the updated value and the fair value (fair value) of the benchmark obligation at the contract's settlement date.
Credit Default Swaps – CDS
These are credit derivatives where, upon the occurrence of a credit event, the protection buyer is entitled to receive from the protection seller an amount equal to the difference between the face value of the CDS contract and the fair value (fair value) of the benchmark obligation at the settlement date of the contract. In exchange, the seller receives a fee for providing the protection.
Below, the composition of the Credit Derivatives portfolio shown by its reference value.
| 2024 | 2023 | |||
| Nominal Value | Nominal Value | Nominal Value | Nominal Value | |
| Retained Risk | Transferred Risk - | Retained Risk | Transferred Risk - | |
| Total Return Swap Rate | Credit Swap | Total Return Swap Rate | Credit Swap | |
| Credit Swaps |
|
|
|
|
| Total |
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 45 |
|
*Values expressed in thousands, except when indicated |
During the period, there were no credit events associated with the precipitating factors specified in the contracts.
| 2024 | 2023 | |||
| Over | Over | |||
| Maximum Potential for Future Payments - Gross | 12 Months | Total | 12 Months | Total |
| Per Instrument | ||||
| CDS |
|
|
|
|
| Total |
|
|
|
|
| By Risk Rating | ||||
| Below Investment Grade |
|
|
|
|
| Total |
|
|
|
|
| By Reference Entity | ||||
| Brazilian Government |
|
|
|
|
| Total |
|
|
|
|
a.6) Accounting Hedge
There are three types of hedge accounting: Fair Value Hedge, Cash Flow Hedge and Foreing Currency Investments Hedge.
The derivatives used as hedging instruments are represented as follows:
a.6.I ) Fair Value Hedge
The Bank's fair value hedging strategy involves mitigating exposure to fair value fluctuations, specifically regarding interest receipts and payments on recognized assets and liabilities.
The fair value management methodology adopted by the Bank segregates transactions based on risk factors (e.g., BRL/USD exchange rate risk, fixed interest rate risk in BRL, USD exchange rate coupon risk, inflation risk, interest risk, etc.). The transactions generate exposures that are consolidated by risk factor and compared with pre-established internal thresholds.
To mitigate fluctuations in fair value associated with the receipt and payment of interest, the Bank employs interest rate swap contracts concerning fixed-rate assets and liabilities.
The Bank utilizes fair value hedge in the following manner:
• Designates Foreign Currency Swaps + Coupon versus % CDI and Fixed BRL Interest Rate or contracts USD Futures (DOL, DDI/DI) as a derivative instrument in Hedge Accounting structures, with foreign currency loan operations as the hedged item.
• The Bank maintains an active loan portfolio originated in fixed-rate U.S. Dollars at Santander EFC, whose transactions are recorded in Euros. To manage this currency mismatch, the Bank designates a Foreign Currency Swap, exchanging Floating Euros for Fixed U.S. Dollars, as a hedge against market risk for the corresponding loans.
• The Bank is subject to a pre-fixed interest rate risk stemming from Government Securities (NTN-F and LTN) held within its Financial Assets portfolio, which are measured through Other Comprehensive Income. To manage this risk mismatch, the Bank enters into DI futures contracts on the exchange or engages in interest rate swaps, designating these as derivative instruments within a Hedge Accounting structure.
• The Bank is exposed to IPCA (broad consumer price index) risk stemming from debentures within its available-for-sale securities portfolio. To manage this exposure, the Bank enters into IPCA futures contracts ("DAP") on the exchange and designates them as derivative instruments within a Hedge Accounting structure.
To assess the effectiveness and measure the ineffectiveness of hedging strategies, the Bank adheres to IAS 39, which mandates that an effectiveness test be conducted at the inception (prospective test) of the hedge arrangement, and be periodically repeated (prospective and retrospective tests) to demonstrate that the hedge relationship remains effective.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 46 |
|
*Values expressed in thousands, except when indicated |
a) Prospective test: in accordance with the standard, the prospective test is required at the inception date and quarterly thereafter to demonstrate that the expectation of the hedge relationship's effectiveness is high.
a.1) The initial prospective test (at inception) : this is limited to a qualitative review of the critical terms and conditions of both the hedging instrument and the hedged item, with the aim of concluding that changes in the fair value of the two instruments are expected to completely offset one another.
a.2) The prospective periodic test: the sensitivity of the present value of the hedged item and the hedging instrument to a parallel shift of 10 basis points in the interest rate curve will be periodically assessed. For the purpose of assessing hedge effectiveness, the ratio of these two sensitivities must fall within the range of 80% to 125%.
b) Retrospective test: the retrospective effectiveness test will be conducted by comparing the mark-to-market (mtm) fluctuation of the hedging instrument from the inception date with the mtm variation of the hedged item from the same date.
In fair value hedges, both gains and losses on hedging instruments and on the hedged items (attributable to the type of risk being hedged) are recognized directly in the consolidated statement of profit or loss.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 47 |
|
*Values expressed in thousands, except when indicated |
| 12/31/2024 | ||||||
| Hedged | ||||||
| Hedge Instruments | Items | |||||
| Curve | Accounting | Curve | Accounting | |||
| Strategies | Value | Fair value | Value | Value | Fair value | Value |
| Swap Contracts |
|
|
|
|
|
|
| Loan Operations Hedge |
|
|
|
|
|
|
| Futures Contracts |
|
|
|
(
|
|
|
| Loan Operations Hedge |
|
|
|
(
|
|
|
| Securities Hedge |
(
|
|
|
|
|
|
| Funding Hedge |
|
|
|
(
|
|
|
| 12/31/2023 | ||||||
| Hedged | ||||||
| Hedge Instruments | Items | |||||
| Curve | Accounting | Curve | Accounting | |||
| Strategies | Value | Fair value | Value | Value | Fair value | Value |
| Swap Contracts |
|
|
|
|
|
|
| Loan Operations Hedge |
|
|
|
|
|
|
| Future Contracts |
|
|
|
(
|
|
|
| Loan Operations Hedge |
|
|
|
(
|
|
|
| Securities Hedge |
(
|
|
|
|
|
|
| Funding Hedge |
(
|
|
|
(
|
|
|
| (*) | The Bank employs market risk hedging strategies, the targets of which are assets in its portfolio, which is why we present the liabilities side of the respective instruments. For structures that have futures as instruments, we provide the balance of the daily adjustment calculated, recorded in the off-balance sheet account. |
a.6.II) Cash Flow Hedge
The Bank's cash flow hedging strategies consist of hedging against exposure to fluctuations in cash flows, interest payments, and currency exchange rates, which are attributable to changes in interest rates affecting recognized assets and liabilities, as well as exchange rate fluctuations impacting unrecognized assets and liabilities.
The Bank utilizes cash flow hedge in the following manner:
• The Bank engages in active swaps indexed to fixed US Dollars and liabilities in foreign currency, designating these as hedging instruments within a Cash Flow Hedge structure, where the hedged items are foreign currency loans negotiated with third parties via its offshore branches and Brazilian external debt securities measured at amortized cost.
• The Bank enters into Dollar Futures or DDI + DI Futures (Synthetic Dollar Futures) contracts and designates them as hedging instruments within a Cash Flow Hedge structure, where the hedged items are the Bank's portfolio of Dollar-denominated loans and Promissory Notes in the available-for-sale securities portfolio measured at Fair Value Through Other Comprehensive Income.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 48 |
|
*Values expressed in thousands, except when indicated |
• The Bank maintains a portfolio of assets indexed to the Euro and traded in offshore branches. In the transaction, the value of the asset in Euros will be converted to Dollars at the exchange rate specified in the foreign exchange contract for the transaction. After this conversion, the principal amount of the transaction, now denominated in Dollars, will be adjusted by either a floating or a fixed rate. The assets will be hedged with a Cross-Currency Swap to transfer the Euro risk to LIBOR + Coupon.
In March 2022, the U.S. Congress passed the Adjustable Interest Rate Act (LIBOR) ("the LIBOR Act"). This legislation establishes a uniform, nationwide process for replacing LIBOR in existing contracts that lack fallback clauses, automatically substituting LIBOR, on the LIBOR replacement date (expected to be the first London banking business day after June 30, 2023), with the "Board-selected Benchmark Replacement". In December 16, 2022, the Federal Reserve Board adopted a final rule implementing the LIBOR Act and identifying these benchmark replacements, which vary across different contracts but are all based on SOFR.
Our focus has been and remains on implementing all necessary contractual, commercial, operational, and technological adjustments to meet the relevant pending milestones.
As of December 31, 2021, our exposure to LIBOR-linked contracts was limited and exclusively related to USD LIBOR. In 2021, we adopted the SOFR (Secured Overnight Finance Rate) and CME TERM SOFR as replacements for USD LIBOR for new contracts. Since January 1, 2022, we have ceased initiating new USD LIBOR transactions, with the exception of those authorized by international regulatory authorities (market-making activity). We are actively engaging with our clients to update existing agreements to incorporate appropriate fallback provisions for when the USD LIBOR is no longer published.
To assess the effectiveness and measure the ineffectiveness of these strategies, Santander Bank adheres to IAS 39. This standard mandates that the effectiveness test be conducted at the inception of the hedge structure (prospective test) and be repeated periodically (prospective and retrospective tests) to demonstrate that the hedge ratio expectation continues to be effective (between 80% and 125%).
In this hedging strategy, the effectiveness tests (prospective/retrospective) are conducted by comparing two proxies, one for the hedged item and another for the hedging instrument.
The hedged item proxy is a "conceptual" swap, where the passive leg mimics the part of the Stable Portion intended for protection, and the active pre-fixed leg mirrors the set of futures designated as the hedge, consistent with the market rates on the hedge designation day. The hedge instrument proxy is a "conceptual" swap, in which the active leg consists of the number of futures contracts designated as the hedge, and the passive pre-fixed leg represents the rate negotiated at the acquisition of these contracts. The proxy remains stable throughout the strategy as the contracts are held to maturity.
Any ineffectiveness is recognized in the income statement under the line item "Gains (losses) on financial assets and liabilities (net)."
a) Prospective Test: in line with regulations, the prospective test must be conducted at the inception date and quarterly thereafter to demonstrate that the expectation of the hedge relationship's effectiveness is high. However, for proactive and more efficient monitoring of projections and to ensure better maintenance of the related testing routines, these tests are performed monthly.
a.1) Periodic Prospective Test: Market Risk conducts projections for three scenarios for the tests, which include: 1º 10bps on the curve; 2º 50bps on the curve, and 3º 100bps on the curve. Utilizing the validated estimates, prospective tests are performed by valuing the two variable legs of the transaction at fair value.
a.2) Initial Prospective Test: the methodology of the periodic prospective test must also be applied at the start date of each new strategy.
b) Retrospective Test: this must be conducted monthly using historical data to cumulatively demonstrate the hedge's effectiveness, in line with the previously outlined methodology. Any ineffectiveness is recognized in the statement of profit or loss.
The Ineffective Portion is measured through the prospective hedge test and, if identified, it is recognized in the income statement under the line item Gains (losses) on financial assets and liabilities (net).
Effectiveness must range between 80% and 125%.
In cash flow hedges, the effective portion of the change in the fair value of the hedging instrument is temporarily recognized in equity under the line item "Other Comprehensive Income - Cash Flow Hedges" ( note 25 ) until the projected transactions take place. At that point, this portion is recognized in the consolidated statements of income, except if the projected transactions result in the recognition of non-financial assets or liabilities, in which case this portion will be included in the cost of the financial asset or liability. The ineffective portion of the change in the value of foreign exchange hedging derivatives is recognized directly in the consolidated statements of income. Furthermore, the ineffective portion of gains and losses on cash flow hedge instruments in a foreign operation is directly recognized in "Gains (losses) on financial assets and liabilities (net)" in the consolidated income statements.
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|
Consolidated Financial Statements | December 31, 2024 | F - 49 |
|
*Values expressed in thousands, except when indicated |
| 2024 | 2023 | |||
| Hedge Structure | Effective Portion Accumulated | Portion Ineffective | Effective Portion Accumulated | Portion Ineffective |
| Cash Flow Hedge | ||||
| CDB |
|
(
|
||
| Total |
|
(
|
||
|
Consolidated |
||||||
| 12/31/2024 | ||||||
| Hedge Instruments | Hedge Object | |||||
| Curve | Adjustment to | Curve | Accounting | |||
| Strategies | Value | Fair value | Fair value | Value | Fair value | Value |
| Future Contracts |
(
|
|
|
(
|
|
|
| Credit Operations Hedge |
(
|
|
|
|
|
|
| Hedge of Securities |
(
|
|
|
|
|
|
| Funding Hedge |
|
|
|
(
|
|
|
| Consolidated | ||||||
| 12/31/2023 | ||||||
| Hedge Instruments | Hedge Object | |||||
| Curve | Accounting | Adjustment to | Curve | Market | Accounting | |
| Strategies | Value | Value - liability | Fair value | Value | Value | Value |
| Swap Contracts |
(
|
|
|
(
|
|
|
| Hedge of Securities |
(
|
|
|
(
|
|
|
| Future Contracts |
|
|
|
(
|
|
|
| Credit Operations Hedge |
|
|
|
(
|
|
|
| Hedge of Securities |
|
|
|
|
|
|
| Funding Hedge |
|
|
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 50 |
|
*Values expressed in thousands, except when indicated |
a.6) Derivative Financial Instruments - Margins Pledged as Guarantee
The margin provided as collateral for trading at B3 S.A. involving proprietary and third-party derivative financial instruments is composed of federal government securities.
| Reference Value | 2024 | 2023 |
| Financial Treasury Bills - LFT |
|
|
| National Treasury Bills - LTN |
|
|
| National Treasury Notes - NTN |
|
|
| Total |
|
|
b) Short Positions
On December 31, 2024, the balance of short
positions totaled R$
|
|
Consolidated Financial Statements | December 31, 2024 | F - 51 |
|
*Values expressed in thousands, except when indicated |
| 9. | Loans and advances to clients |
a) Breakdown
The breakdown of the balances under the "Loans and Advances to Customers" line item in the consolidated balance sheets is as follows:
| Thousand of Reais | 2024 | 2023 |
| Classification: | ||
| Financial assets measured at fair value through profit or loss |
|
|
| Financial assets measured at amortized cost |
|
|
| Comprising: | ||
| Loans and advances to customers at amortized cost |
|
|
| Allowance for loan losses due to impairment |
(
|
(
|
| Loans and advances to customers, net |
|
|
| Loans and advances to customers, gross |
|
|
| Thousand of Reais | 2024 | 2023 |
| Type: | ||
| Loan operations (1) |
|
|
| Leasing operations |
|
|
| Other receivables (2) |
|
|
| Total |
|
|
| (1) | Includes loans, financings, and other forms of credit with credit characteristics. |
| (2) | These operations primarily relate to Foreign Exchange Transactions and Other Receivables with credit granting characteristics. |
Note 43-d provides details on the residual maturity periods of financial assets measured at amortized cost. There are no significant loans and advances to customers lacking fixed maturity dates.
b) Detail
The following are the details, by condition and type of credit, borrower segment, and interest rate formula, of the loans and advances to customers, which reflect the Bank's exposure to credit risk in its core activity, gross of impairment losses:
| Thousand of Reais | 2024 | 2023 |
| Loan borrower sector: | ||
| Commercial, and industrial |
|
|
| Real Estate Credit - Construction |
|
|
| Loans to Individuals |
|
|
| Leasing |
|
|
| Total |
|
|
| Thousand of Reais | 2024 | 2023 |
| Interest Rate Formula: | ||
| Fixed interest rate |
|
|
| Floating interest rate |
|
|
| Total |
|
|
| 2024 | ||||||||||
| Borrower Segment 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 |
|
|
|
|
|
|
|
|
||
| Real Estate Credit |
|
|
|
|
|
|
|
|
||
| Loans to Individuals |
|
|
|
|
|
|
|
|
||
| Leasing |
|
|
|
|
|
|
|
|
||
| Loans and advances to customers, gross |
|
|
|
|
|
|
|
|
||
| 2023 | ||||||||||
| Borrower Segment 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 |
|
|
|
|
|
|
|
|
||
| Real Estate Credit |
|
|
|
|
|
|
|
|
||
| Loans to Individuals |
|
|
|
|
|
|
|
|
||
| Leasing |
|
|
|
|
|
|
|
|
||
| Loans and advances to customers, gross |
|
|
|
|
|
|
|
|
||
|
|
Consolidated Financial Statements | December 31, 2024 | F - 52 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2024 | 2023 |
| By Maturity | ||
| Under 1 year |
|
|
| From 1 and 5 years |
|
|
| Over 5 years |
|
|
| Loans and advances to customers, gross |
|
|
| By Internal risk classification | ||
| Low |
|
|
| Medium-low |
|
|
| Medium |
|
|
| Medium - high |
|
|
| High |
|
|
| Loans and advances to customers, gross |
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 53 |
|
*Values expressed in thousands, except when indicated |
c) Impairment losses
The tables below present the reconciliations of the opening and closing balances of the provision for losses, segmented by financial instrument category. The terms "expected loan losses in 12 months," "expected loan losses over the useful life," and "impairment losses" are clarified in the note on accounting practices.
The changes in provisions for impairment losses in the balances of the item "Financial assets measured at amortized cost" are as follows:
| Thousand of Reais | 2024 | |||
| Stage 1 | Stage 2 | Stage 3 | ||
| Expected loan losses in 12 months | Expected loan losses over the useful life not subject to impairment | Expected loan losses over the useful life subject to impairment | Total | |
| Balance at the beginning of the fiscal year |
|
|
|
|
| Impairment losses recognized in profit or loss |
|
|
|
|
| Transfers between stages |
(
|
|
|
|
| Changes during the period |
|
|
|
|
| Comprising: | ||||
| Commercial and Industrial |
|
|
|
|
| Real Estate Credit - Construction |
(
|
|
|
|
| Loans to Individuals |
|
|
|
|
| Leasing |
|
|
|
|
| Changes by Stage |
(
|
(
|
|
|
| Write-off of impaired balances recognized in loss provisions |
(
|
(
|
||
| Comprising: | ||||
| Commercial and Industrial |
(
|
(
|
||
| Real Estate Credit - Construction |
(
|
(
|
||
| Loans to Individuals |
(
|
(
|
||
| Leasing |
(
|
(
|
||
| Foreign Exchange Fluctuation |
(
|
(
|
(
|
(
|
| Balance at the end of the fiscal year |
|
|
|
|
| Comprising: | ||||
| Loans and advances to Customers |
|
|
|
|
| Loans and other receivables from credit institutions (Note 5) |
|
|
||
| Provision for debt instruments (Note 6) |
|
|
|
|
| Recoveries of previously written-off loans |
|
|
||
| Comprising: | ||||
| Commercial and Industrial |
|
|
||
| Real Estate Credit - Construction |
|
|
||
| Loans to Individuals |
|
|
||
| Leasing |
|
|
||
| Discount Granted |
(
|
(
|
| Thousand of Reais | 2023 | |||
| Stage 1 | Stage 2 | Stage 3 | ||
| Expected loan losses in 12 months | Expected loan losses over the useful life not subject to impairment | Expected loan losses over the useful life subject to impairment | Total | |
| Balance at the beginning of the fiscal year |
|
|
|
|
| Impairment losses recognized in profit or loss |
|
|
|
|
| Transfers between stages |
(
|
|
|
|
| Changes during the period |
|
|
|
|
| Comprising: | ||||
| Commercial and Industrial |
|
|
|
|
| Real Estate Credit - Construction |
(
|
(
|
|
|
| Loans to Individuals |
|
|
|
|
| Leasing |
|
(
|
(
|
|
| Changes by Stage |
|
|
|
|
| Write-off of impaired balances recognized in loss provisions |
(
|
(
|
||
| Comprising: | ||||
| Commercial and Industrial |
(
|
(
|
||
| Real Estate Credit - Construction |
(
|
(
|
||
| Loans to Individuals |
(
|
(
|
||
| Leasing |
(
|
(
|
||
| Foreign Exchange Fluctuation |
|
|
|
|
| Balance at the end of the fiscal year |
|
|
|
|
| Comprising: | ||||
| Loans and advances to Customers |
|
|
|
|
| Loans and other receivables from credit institutions (Note 5) |
|
|
||
| Provision for debt instruments (Note 6) |
|
|
|
|
| Recoveries of previously written-off loans |
|
|
||
| Comprising: | ||||
| Commercial and Industrial |
|
|
||
| Real Estate Credit - Construction |
|
|
||
| Loans to Individuals |
|
|
||
| Leasing |
|
|
||
| Discount Granted |
(
|
(
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 54 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2024 | 2023 |
| Balance at the beginning of the fiscal year |
|
|
| Impairment losses recognized in profit or loss |
|
|
| Comprising: | ||
| Commercial and Industrial |
|
|
| Real Estate Credit - Construction |
|
|
| Loans to Individuals |
|
|
| Leasing |
|
|
| Write-off of impaired balances recognized in loss provisions |
(
|
(
|
| Comprising: | ||
| Commercial and Industrial |
(
|
(
|
| Real Estate Credit - Construction |
(
|
(
|
| Loans to Individuals |
(
|
(
|
| Leasing |
(
|
(
|
| Foreign Exchange Fluctuation |
(
|
|
| Balance at the end of the fiscal year |
|
|
| Comprising: | ||
| Loans and advances to Customers |
|
|
| Loans and other receivables from credit institutions (Note 5) |
|
|
| Provision for debt instruments (Note 6) |
|
|
| Recoveries of previously written-off loans |
|
|
| Comprising: | ||
| Commercial and Industrial |
|
|
| Real Estate Credit - Construction |
|
|
| Loans to Individuals |
|
|
| Leasing |
|
|
Considering the amounts recognized in "Impairment losses recognized in profit or loss," "Recoveries
of previously written-off loans," and "Discount Granted," the "Impairment Losses on Financial Assets - Financial Assets
Measured at Amortized Cost" totaled on December 31, 2024, R$
The balances of the provisions for impairment losses by borrower segment are as follows:
| Thousand of Reais | 2024 | 2023 |
| Commercial and industrial |
|
|
| Real estate - Construction |
|
|
| Installment loans to individuals |
|
|
| Lease financing |
|
|
| Total |
|
|
d) Impaired assets
The details of the changes in the balance of financial assets classified as "Financial assets measured at amortized cost - Loans and advances to customers" and "Debt Instrument", which are recognized at amortized cost and identified as non-recoverable (as defined in note 1.h ) due to credit risk, are as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Balance at the start of the period |
|
|
|
| Net Additions |
|
|
|
| Written-off Assets |
(
|
(
|
(
|
| Balance at the end of the fiscal year |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 55 |
|
*Values expressed in thousands, except when indicated |
Below are the details of impaired financial assets, classified by maturity date:
| Thousand of Reais | 2024 | 2023 |
| With balances not yet due or maturing within 3 Months |
|
|
| With outstanding balances of: | ||
| 3 to 6 Months |
|
|
| 6 to 12 Months |
|
|
| 12 to 18 Months |
|
|
| 18 to 24 Months |
|
|
| More than 24 Months |
|
|
| Total |
|
|
| Thousand of Reais | 2024 | 2023 |
| By borrower segment: | ||
| Commercial and Industrial |
|
|
| Real Estate Credit - Construction |
|
|
| Loans to Individuals |
|
|
| Leasing |
|
|
| Total |
|
|
e) Loans overdue for less than 90 days and not classified as impaired on the specified dates
| Thousand of Reais | 2024 | % of total loans overdue for less than 90 days | 2023 | % of total loans overdue for less than 90 days |
| Commercial, Financial and Industrial |
|
|
|
|
| Real Estate Credit - Construction |
|
|
|
|
| Installment Loans to Individuals |
|
|
|
|
| Financial Leasing |
|
|
|
|
| Total (1) |
|
|
|
|
| (1) | Refers exclusively to loans between 1 and 90 days. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 56 |
|
*Values expressed in thousands, except when indicated |
f) Leasing
Breakdown by maturity
Gross investment in lease transactions
| Thousand of Reais | 2024 | 2023 |
| Overdue |
|
|
| Due: | ||
| Within 1 year |
|
|
| In 1 to 5 years |
|
|
| In over 5 years |
|
|
| Total |
|
|
g) Transfer of financial assets with retention of risks and benefits
On December 31, 2024, the balance recorded
in "Loans and Advances to Customers" pertaining to assigned operations was R$
The assignment transaction was executed with a joint obligation clause, mandating compulsory repurchase in the following circumstances:
| - | contracts in default for a period exceeding 90 consecutive days; |
| - | contracts subject to renegotiation; |
| - | contracts subject to portability, in accordance with Resolution No. 3,401 of Brazil's National Monetary Council ("CMN"); |
| - | contracts subject to intervention. |
| 10. | Non-current assets held for sale |
On December 31, 2024, 2023 and 2022, the total value of non-current assets held for sale included assets not in use and other tangible assets. The change in the line item "Non-current assets held for sale" is as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Balance at the beginning of the fiscal year |
|
|
|
| Loan enforcements - repossession of assets |
|
|
|
| Capital Increase in Entities Held for Sale |
|
|
|
| Disposals |
(
|
(
|
(
|
| Balance at the end of the fiscal year, gross |
|
|
|
| Provision for impairment losses (1) |
(
|
(
|
(
|
| Provision as a percentage of enforced assets |
|
|
|
| Balance at the end of the fiscal year |
|
|
|
| (1) | In 2024, it includes the amount of R$47,381 (2023 – R$76,321 and 2022 – R$196,649) from the reversal of provisions for depreciation on properties, established based on appraisal reports prepared by a specialized external consultancy, accounted for as provision for impairment losses. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 57 |
|
*Values expressed in thousands, except when indicated |
| 11. | Investments in associates and joint ventures |
Jointly-controlled entities
Banco Santander and its subsidiaries classify investments as joint control when they have shareholder agreements that require strategic, financial, and operational decisions to receive unanimous consent from all investors.
Significant Influence
Associates are entities over which the Bank has the ability to exert significant influence (significant influence is the power to participate in the decision-making regarding the financial and operational policies of the invested entity) but does not have control or joint control.
a) Breakdown
| Equity interest in % | ||||
| Activity | Country | 2024 | 2023 | |
| Jointly Controlled by Banco Santander | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Jointly controlled companies of Santander Corretora de Seguros | ||||
|
|
|
|
|
|
| Subsidiary of Webmotors S.A. | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| Subsidiary of Car10 Tecnologia e Informação S.A. | ||||
|
|
|
|
|
|
| Subsidiary of Tecnologia Bancária S.A. | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| Subsidiary of Tbnet | ||||
|
|
|
|
|
|
| Significant Influence of Banco Santander | ||||
|
|
|
|
|
|
|
|
|
|
|
—% |
|
|
|
|
|
|
| Significant Influence of Santander Corretora de Seguros | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 58 |
|
*Values expressed in thousands, except when indicated |
| Investments | ||
| 2024 | 2023 | |
| Jointly Controlled by Banco Santander |
|
|
| Banco RCI Brasil S.A. |
|
|
| Estruturadora Brasileira de Projetos S.A. - EBP |
|
|
| Gestora de Inteligência de Crédito |
|
|
| Jointly Controlled by Santander Corretora de Seguros |
|
|
| Hyundai Corretora de Seguros |
|
|
| Significant Influence of Banco Santander |
|
|
| Núclea S.A. |
|
|
| Pluxee Benefícios Brasil S.A. (3) |
|
|
| Santander Auto S.A. |
|
|
| Significant Influence of Santander Corretora de Seguros |
|
|
| Tecnologia Bancária S.A. - TECBAN (1) |
|
|
| CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A |
|
|
| BIOMAS – Serviços Ambientais, Restauração e Carbono S.A. |
|
|
| Webmotors S.A. |
|
|
| Total |
|
|
| (1) | Entities with a one-month lag in equity method accounting. For the recognition of equity method income, the financial position as of 12/31/2024 was utilized on 11/30/2024. |
| (2) | Despite holding a stake of less than 20%, the Bank exercises joint control over the entity with the other majority shareholders, through a shareholders' agreement that stipulates no business decision can be made by a single shareholder, that is, decisions require the unanimous consent of the parties sharing control.” |
| (3) | The balance of the transaction for the acquisition of a stake in Pluxee includes its investment in its benefits subsidiary, Pluxee Instituição de Pagamento S.A. (Current name of “Ben Benefícios e Serviços Instituição de Pagamentos S.A”) and goodwill generated by expected future profitability, as per terms described in Note 3.d. |
| Equity method results | |||
| 2024 | 2023 | 2022 | |
| Jointly Controlled by Banco Santander |
|
|
|
| Banco RCI Brasil S.A. |
|
|
|
| Núclea S.A. |
|
||
| Estruturadora Brasileira de Projetos S.A. - EBP |
(
|
|
|
| Gestora de Inteligência de Crédito |
(
|
(
|
(
|
| Equity method results | |||
| 2024 | 2023 | 2022 | |
| Jointly Controlled by Santander Corretora de Seguros |
|
|
|
| Webmotors S.A. |
|
||
| Hyundai Corretora de Seguros |
|
|
(
|
| Significant Influence of Banco Santander |
|
|
|
| Núclea S.A. |
|
|
|
| Pluxee Benefícios Brasil S.A. |
|
||
| Santander Auto S.A |
|
|
|
| Significant Influence of Santander Corretora de Seguros |
|
|
|
| Tecnologia Bancária S.A. - TECBAN |
|
|
|
| PSA Corretora de Seguros e Serviços Ltda. |
|
|
|
| CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A |
(
|
|
|
| BIOMAS – Serviços Ambientais, Restauração e Carbono S.A. |
(
|
(
|
|
| Webmotors S.A. |
|
|
|
| Total |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 59 |
|
*Values expressed in thousands, except when indicated |
| 2024 | |||
| Total assets | Total liabilities | Total Income | |
| Jointly Controlled by Banco Santander |
|
|
|
| Banco RCI Brasil S.A. |
|
|
|
| Estruturadora Brasileira de Projetos S.A. - EBP |
|
|
|
| Gestora de Inteligência de Crédito |
|
|
(
|
| Jointly Controlled by Santander Corretora de Seguros |
|
|
(
|
| Tecnologia Bancária S.A. - TECBAN |
|
|
(
|
| Hyundai Corretora de Seguros Ltda. |
|
|
|
| CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A |
|
|
|
| BIOMAS – Serviços Ambientais, Restauração e Carbono S.A. |
|
|
(
|
| Significant Influence of Banco Santander |
|
|
|
| Núclea S.A. |
|
|
|
| Pluxee Benefícios Brasil S.A. |
|
|
|
| Santander Auto S.A. |
|
|
|
| Significant Influence of Santander Corretora de Seguros |
|
|
|
| Webmotors S.A. |
|
|
|
| Total |
|
|
|
| 2023 | |||
| Total assets | Total liabilities | Total Income | |
| Jointly Controlled by Banco Santander |
|
|
|
| Banco RCI Brasil S.A. |
|
|
|
| Estruturadora Brasileira de Projetos S.A. - EBP |
|
|
|
| Gestora de Inteligência de Crédito |
|
|
(
|
| Jointly Controlled by Santander Corretora de Seguros |
|
|
|
| Tecnologia Bancária S.A. - TECBAN |
|
|
|
| Hyundai Corretora de Seguros Ltda. |
|
|
|
| CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A |
|
|
|
| BIOMAS – Serviços Ambientais, Restauração e Carbono S.A. |
|
|
(
|
| Significant Influence of Banco Santander |
|
|
|
| Núclea S.A. |
|
|
|
| Santander Auto S.A. |
|
|
|
| Significant Influence of Santander Corretora de Seguros |
|
|
|
| Webmotors S.A. |
|
|
|
| Total |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 60 |
|
*Values expressed in thousands, except when indicated |
The Bank does not have guarantees granted to companies with joint control and significant influence.
The Bank does not have contingent liabilities with significant possible risk of loss related to investments for companies with joint control and significant influence.
b) Changes
The changes in the balance of this item in the years ended December 31, 2024 and 2023 were:
| 2024 | 2023 | |
| Jointly Controlled by Banco Santander | ||
| Balance at the beginning of the fiscal year |
|
|
| Change in corporate participation |
(
|
|
| Addition/(disposal) |
|
|
| Capital decreases/reduction |
(
|
|
| Equity method results |
|
|
| Dividends |
(
|
(
|
| Adjustment to fair value |
|
(
|
| Balance at the end of the fiscal year |
|
|
| Significant Influence of Banco Santander | ||
| Balance at beginning of year |
|
|
| Change in corporate participation |
|
|
| Equity method results |
|
|
| Dividends |
(
|
(
|
| Addition/(disposal) (1) |
|
|
| Capital decreases/reduction |
(
|
(
|
| Adjustment to fair value |
|
|
| Balance at the end of the fiscal year |
|
|
| (1) Transaction for the acquisition of a stake in Pluxee Benefícios Brasil S.A. |
c) Impairment losses
No impairment losses were recognized for the non-recovery of investments in associates and joint ventures in 2024 and 2023.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 61 |
|
*Values expressed in thousands, except when indicated |
d) Other information
Details on the main jointly-controlled entities:
| • | Banco RCI Brasil S.A.: Incorporated as a joint-stock company and headquartered in the state of Paraná, its main objective is to engage in investment, leasing, credit, financing, and investment activities, aimed at fostering the growth of automakers Renault and Nissan in the Brazilian market, with a primary focus on financing and leasing to end consumers. It is a financial institution that is part of the RCI Banque Group and the Santander Conglomerate, with its operations being executed within a framework of institutions that operate in an integrated manner in the financial market. In accordance with the Shareholders' Agreement, the key decisions affecting this company are made jointly by Banco Santander and other controlling shareholders. |
| 2024 | 2023 | |
| Banco RCI Brasil | Banco RCI Brasil | |
| Assets |
|
|
| Liabilities |
|
|
| Cash and Cash Equivalents |
|
|
| Depreciation and amortization |
(
|
(
|
| Income |
|
|
| Interest income |
|
|
| Interest expenses |
(
|
(
|
| Income / (Expense) from Income Tax |
(
|
(
|
| Current Liabilities (excluding Trading, Other Liabilities, and Provisions) |
|
|
| Non-Current Liabilities (excluding Trading, Other Liabilities, and Provisions) |
|
|
| 12. | Tangible assets |
The Bank's tangible assets consist of fixed assets for its own use. The Bank does not hold any tangible assets as investment property nor are any assets leased under operating lease arrangements.
a) Breakdown
The detail, by class of asset, of the tangible assets in the consolidated balance sheets is as follows:
| Thousand of Reais | |||||||
| Cost | Land and buildings | Furniture, Equipment, and Vehicles | Leased Fixed Assets | Facilities | Improvements to third party properties | Fixed Assets in Progress | Total |
| Balance on December 31, 2023 |
|
|
|
|
|
|
|
| Additions |
|
|
|
|
|
|
|
| Write-off |
(
|
(
|
(
|
(
|
(
|
(
|
|
| Cancellation of lease agreements |
(
|
(
|
|||||
| Transfers |
|
|
|
(
|
|||
| Balance on December 31, 2024 |
|
|
|
|
|
|
|
| Accumulated depreciation | Land and buildings | Furniture, Equipment, and Vehicles | Leased Fixed Assets | Facilities | Improvements to third party properties | Fixed Assets in Progress | Total |
| Balance on December 31, 2023 |
(
|
(
|
(
|
(
|
(
|
(
|
|
| Additions |
(
|
(
|
(
|
(
|
(
|
(
|
|
| Write-off |
|
|
|
|
|
|
|
| Balance on December 31, 2024 |
(
|
(
|
(
|
(
|
(
|
(
|
|
| Impairment losses: | |||||||
| Impacts on results |
(
|
(
|
(
|
||||
| Balance on December 31, 2023 |
(
|
(
|
|||||
| Impacts on results |
|
|
|||||
| Balance on December 31, 2024 |
(
|
(
|
|||||
| Book Value | |||||||
| Balance on December 31, 2023 |
|
|
|
|
|
|
|
| Balance on December 31, 2024 |
|
|
|
|
|
|
|
Depreciation expenses were recorded under the “Depreciation and Amortization” line item in the income statement.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 62 |
|
*Values expressed in thousands, except when indicated |
b) Impairment losses
For the period ended December 31, 2024,
an impairment expense of R$
c) Commitment to purchase tangible assets
As of December 31, 2024, the Bank had no contractual commitments for the acquisition of tangible assets.
| 13. | Intangible assets - Goodwill |
Goodwill represents the surplus between the acquisition cost and the Bank's share in the net fair value of the acquired entity's assets, liabilities, and contingent liabilities. When this excess is negative (negative goodwill), it is immediately recognized in the income statement. In accordance with IAS 36, goodwill is tested annually for impairment or whenever there are indications of impairment to the cash-generating unit to which it has been allocated. Goodwill is recorded at its cost minus accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses from the disposal of an entity include the carrying amount of the goodwill associated with the entity sold.
The recorded goodwill is subject to impairment testing ( note 2.n.i ). The Bank's main goodwill, as shown in the table below, is due to the acquisition of Banco Real and has been allocated according to the operating segment ( note 44 ).
For the year 2024, we present the assumptions used and results obtained in the recoverability tests of the Group's main goodwill.
| Banco Real | ||
| 2024 | 2023 | |
| Main assumptions: | ||
| Criteria for determining the recoverable amount |
|
|
| Period of cash flow projections (1) |
|
|
| Perpetual growth rate (1) |
|
|
| Pre-tax discount rate (2) |
|
|
| Discount rate (2) |
|
|
| Em dia | Toro Corretora | |
| 2024 | 2024 | |
| Main assumptions: | ||
| Criteria for determining the recoverable amount |
|
|
| Period of cash flow projections (1) |
|
|
| Perpetual growth rate (1) |
|
|
| Discount rate (2) |
|
|
| (1) | Cash flow projections are based on the internal budget and management’s growth plans, taking into account historical data, expectations, and market conditions, including industry growth, interest rates, and inflation rates. |
| (2) | The discount rate is determined based on the Capital Asset Pricing Model (CAPM). |
| Thousand of Reais | 2024 | 2023 |
| Breakdown | ||
| Banco ABN Amro Real S.A. (Banco Real) |
|
|
| Toro Corretora de Títulos e Valores Mobiliários Ltda. |
|
|
| Em Dia Serviços Especializados em Cobranças Ltda. |
|
|
| Olé Consignado (Current name of Banco Bonsucesso Consignado) |
|
|
| Solution 4Fleet Consultoria Empresarial S.A. |
|
|
| Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) |
|
|
| Santander Brasil Tecnologia S.A. |
|
|
| Return Capital Gestão de Ativos e Participações S.A. (current name of Gira, Gestão Integrada de Recebíveis do Agronegócio S.A.) |
|
|
| Apê11 Tecnologia e Negocios Imobiliarios S.A. |
|
|
| Monetus Investimentos S.A. |
|
|
| Mobills Labs Soluções em Tecnologia LTDA |
|
|
| CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A. |
|
|
| FIT Economia de Energia S.A. |
|
|
| América Gestão Serviços em Energia S.A |
|
|
| Total |
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 63 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2024 | 2023 |
| Balance at the beginning of the fiscal year |
|
|
| Acquisitions (write-offs): | ||
| Em Dia Serviços Especializados em Cobranças Ltda. |
(
|
|
| Return Capital Gestão de Ativos e Participações S.A. (current name of Gira, Gestão Integrada de Recebíveis do Agronegócio S.A.) |
(
|
|
| Banco PSA Finance Brasil S.A. |
(
|
|
| FIT Economia de Energia S.A. |
|
|
| América Gestão Serviços em Energia S.A |
|
|
| Others |
(
|
|
| Banco ABN Amro Real S.A. (Banco Real) |
|
|
| Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) |
(
|
|
| Balance at the end of the fiscal year |
|
|
A quantitative goodwill impairment test is conducted annually.
In the goodwill impairment test, conducted based on the December 2024 scenario, and where the discount and perpetuity growth rates are identified as the most sensitive assumptions for the calculation of the present value (value in use) of future discounted cash flows, it was determined that there is no evidence of impairment.
Based on the tests carried out, no loss of recoverable value of goodwill was identified on December 31, 2024 and 2023.
| 14. | Intangible assets - Other intangible assets |
The breakdown, by asset category, of other intangible assets in the consolidated balance sheets is as follows:
| Cost | Information Technology Development | Other assets | Total |
| Balance on December 31, 2021 |
|
|
|
| Additions |
|
|
|
| Write-off |
(
|
(
|
(
|
| Transfers |
|
(
|
|
| Balance on December 31, 2022 |
|
|
|
| Additions |
|
|
|
| Write-off |
(
|
(
|
(
|
| Transfers |
|
|
|
| Balance on December 31, 2023 |
|
|
|
| Additions |
|
|
|
| Write-off |
(
|
(
|
(
|
| Balance on December 31, 2024 |
|
|
|
| Accumulated amortization | |||
| Balance on December 31, 2021 |
(
|
(
|
(
|
| Additions |
(
|
(
|
(
|
| Write-off |
|
|
|
| Balance on December 31, 2022 |
(
|
(
|
(
|
| Additions |
(
|
(
|
(
|
| Write-off |
|
|
|
| Balance on December 31, 2023 |
(
|
(
|
(
|
| Additions |
(
|
(
|
(
|
| Write-off |
|
|
|
| Transfers | |||
| Balance on December 31, 2024 |
(
|
(
|
(
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 64 |
|
*Values expressed in thousands, except when indicated |
| Impairment loss - IT | Information Technology Development | Other assets | Total |
| Balance on December 31, 2021 |
(
|
(
|
(
|
| Impact on net profit (1) |
(
|
(
|
(
|
| Balance on December 31, 2022 |
(
|
(
|
(
|
| Impact on net profit (1) |
(
|
(
|
(
|
| Balance on December 31, 2023 |
(
|
(
|
(
|
| Impact on net profit (1) |
(
|
(
|
|
| Balance on December 31, 2024 |
(
|
(
|
(
|
| Book Value | |||
| Balance on December 31, 2022 |
|
|
|
| Balance on December 31, 2023 |
|
|
|
| Balance on December 31, 2024 |
|
|
|
| (1) | Refers to impairment losses on assets in the acquisition and development of software. The impairment loss on the acquisition and development of software was recognized due to obsolescence and discontinuation of the respective systems. |
Amortization expenses were recorded under the “Depreciation and Amortization” line item in the income statement.
| 15. | Other assets |
The breakdown of “Other assets” is as follows:
| Thousand of Reais | 2024 | 2023 |
| Other amounts receivable from customers |
|
|
| Prepaid expenses |
|
|
| Contractual Guarantees from Former Controlling Shareholders |
|
|
| Actuarial asset (Note 21) |
|
|
| Other receivables (1) |
|
|
| Total |
|
|
| (1) | Mainly represents the payment of premiums from the portfolio of payroll loans. |
| 16. | Deposits from credit institutions |
The breakdown, by classification, type and currency, of the balances of these items is as follows:
| Thousand of Reais | 2024 | 2023 |
| Classification: | ||
| Financial liabilities at amortized cost |
|
|
| Total |
|
|
| Type: | ||
| Demand deposits (1) |
|
|
| Time deposits (2) |
|
|
| Repurchase agreements |
|
|
| Comprising: | ||
| Operations Backed by Private Securities (3) |
|
|
| Backed operations with Government Securities |
|
|
| Total |
|
|
| (1) | Non-remunerated accounts. |
| (2) | Includes transactions with credit institutions arising from export and import financing lines, domestic transfers (BNDES and Finame), foreign transfers, and other overseas credit lines. |
| (3) | These primarily relate to repurchase agreements secured by debentures issued by the Bank itself . |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 65 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2024 | 2023 |
| Currency: | ||
| Real |
|
|
| Euro |
|
|
| U.S. dollar |
|
|
| Other currencies |
|
|
| Total |
|
|
| 17. | Customer deposits |
The breakdown, by classification and type, of “Customer deposits” is as follows:
| Thousand of Reais | 2024 | 2023 |
| Classification: | ||
| Financial liabilities at amortized cost |
|
|
| Total |
|
|
| Type: | ||
| Demand deposits | ||
| Current accounts (1) |
|
|
| Savings accounts |
|
|
| Time deposits |
|
|
| Repurchase agreements |
|
|
| Comprising: | ||
| Backed operations with Private Securities (2) |
|
|
| Backed operations with Government Securities |
|
|
| Total |
|
|
(1) Non-remunerated accounts.
(2) Referem-se, basicamente, a operações compromissadas com lastro em debêntures de emissão própria.
Note 43-d contains a detail of the residual maturity periods of financial liabilities at amortized cost.
| 18. | Liabilities arising from securities |
The breakdown, by classification and type, of “Liabilities arising from securities” is as follows:
| Thousand of Reais | 2024 | 2023 |
| Classification: | ||
| Financial Liabilities Measured at Fair Value in Income Held for Trading |
|
|
| Financial liabilities at amortized cost |
|
|
| Total |
|
|
| Type: | ||
| Real estate credit notes - LCI (1) |
|
|
| Eurobonds |
|
|
| Financial Bills (2) |
|
|
| Agribusiness credit notes - LCA |
|
|
| Secured Real Estate Notes (3) |
|
|
| Total |
|
|
| (1) | Real estate credit notes ("LCI") are fixed income securities backed by real estate loans and secured by either mortgage or fiduciary transfer of properties. As of December 31, 2024, their maturity dates ranged from 2025 to 2034 (2023 - with maturity dates from 2024 to 2030). |
| (2) | The key attributes of financial bills include a minimum term of two years, a minimum nominal value of R$50, and the permission for early redemption of only 5% of the issued amount. As of December 31, 2024, their maturity dates ranged from 2025 to 2034 (2023 - with maturity dates from 2024 to 2033). |
| (3) | Secured real estate notes are fixed-income securities backed by real estate loans collateralized by the issuer and by a pool of real estate loans segregated from the issuer's other assets. As of December 31, 2024, their maturity dates ranged from 2025 to 2035 (12/31/2023), with maturity dates from 2024 to 2035)." |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 66 |
|
*Values expressed in thousands, except when indicated |
| Indexing Units: | Domestic Currency | Foreign Currency |
| Financial Bills |
|
— |
|
|
— | |
|
|
— | |
| Real estate credit notes - LCI |
|
— |
|
|
— | |
| Agribusiness credit notes - LCA |
|
— |
|
|
— | |
| Secured Real Estate Notes - LIG |
|
— |
| Eurobonds | — |
|
| — |
|
The currency breakdown of the balance for this item is as follows:
| Thousand of Reais | ||
| Currency: | 2024 | 2023 |
| Real |
|
|
| U.S. dollar |
|
|
| Total |
|
|
| Average interest rate (%) | ||
| Currency: | 2024 | 2023 |
| Real |
|
|
| U.S. dollar |
|
|
| Total |
|
|
The changes in “Liabilities arising from securities” were as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Balance at the beginning of the fiscal year |
|
|
|
| Issuances |
|
|
|
| Payments |
(
|
(
|
(
|
| Interest |
|
|
|
| Exchange differences and Others |
(
|
(
|
|
| Balance at the end of the fiscal year |
|
|
|
As of December 31, 2024, 2023 none of these instruments had been converted into shares of the Bank nor had they obtained privileges or rights that, under certain circumstances, would render them convertible into shares.
Note 43-d provides details on the residual maturity periods of the financial liabilities at amortized cost for each fiscal year.
The breakdown of “Eurobonds and other securities” is as follows:
| Issuance | Maturity by | Interest Rate (p.a.) | 2024 | 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
| Total |
|
|
| (1) Includes SOFR fee |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 67 |
|
*Values expressed in thousands, except when indicated |
| 19. | Debt Instruments Eligible as Capital |
The details of the balance for “Debt Instruments Eligible as Capital,” associated with the issuance of instruments to constitute Tier 1 and Tier 2 of the regulatory capital as part of the Capital Optimization Plan, are as follows:
| Thousand of Reais | Issuance | Maturity | Value (in millions) | Interest Rate (p.a.) | 2024 | 2023 |
| Tier I (1) |
|
|
US$
|
|
- |
|
| Financial Bills - Tier II (2) |
|
|
R$
|
|
|
|
| Financial Bills - Tier II (2) |
|
|
R$
|
|
|
|
| Financial Bills - Tier II (2) |
|
|
R$
|
|
|
|
| Financial Bills - Tier I (3) |
|
|
R$
|
|
|
- |
| Total |
|
|
| (1) | The issuances were conducted through the Cayman Branch and are not subject to withholding tax, with interest paid semi-annually, beginning from May 8, 2019. |
| (2) | Financial Bills issued in 2021 and 2023 include a redemption and repurchase option |
| (3) | Financial Letters issued in September 2024 have redemption and repurchase options, and interest is paid semi-annually, starting on March 5, 2025. |
| 2024 | 2023 | 2022 | |
| Balances at the beginning of the fiscal year |
|
|
|
| Issuance |
|
|
|
| Interest payment Tier I (1) |
|
|
|
| Interest payment Tier II (1) |
|
|
|
| Exchange differences / Others |
|
(
|
(
|
| Payments of interest - Tier I |
(
|
(
|
(
|
| Payments of interest - Tier II |
(
|
(
|
|
| Repurchase |
(
|
(
|
|
| Balance at the end of the fiscal year |
|
|
|
| (1) | Interest remuneration related to Tier 1 and Tier 2 Debt Instruments Eligible as Capital was recorded in the period’s results as “Interest and Similar Expenses” (Note 32 ). |
The Notes possess the following characteristics in common:
(a) Unit value of no less than US$150 thousand and in whole multiples of US$1 thousand for any amount exceeding this minimum value;
(b) The Notes may be repurchased or redeemed by Banco Santander after the 5th (fifth) anniversary of their issuance date, at the sole discretion of the Bank or due to changes in the tax legislation applicable to the Notes; or at any time, due to the occurrence of certain regulatory events.
| 20. | Other financial liabilities |
The breakdown of the balances for this item is as follows:
| Thousand of Reais | 2024 | 2023 |
| Credit cards |
|
|
| Transactions pending settlement (1) |
|
|
| Dividends and Interest on Equity Payable |
|
|
| Tax collection accounts - Tax payables |
|
|
| Liabilities associated with the transfer of assets (Note 9.g) |
|
|
| Other financial liabilities |
|
|
| Total |
|
|
| (1) | Includes transactions pending settlement with B3 S.A. and foreign currency payment orders. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 68 |
|
*Values expressed in thousands, except when indicated |
| 21. | Obligations for pension and similar liabilities |
As of December 31, 2024, the balance of
provisions for pension funds and similar liabilities amounted to R$
I. Supplementary pension plan
Banco Santander and its subsidiaries sponsor closed supplementary pension entities and welfare funds, with the purpose of granting retirement and pensions complementary to those granted by Social Security, as defined in the basic regulations of each plan.
• Banesprev - Banespa Social Security Fund (Banesprev))
Benesprev manages the following defined and variable benefit plans: Plan I, Plan II, Plan III, Plan IV, Plan V, Retirement and Pension Supplement Plan – Pre 75, Sanprev Plan I, Sanprev Plan II, Sanprev Plan III, DCA, DAB and CACIBAN. All plans are closed to new subscriptions.
• Former Banespa Employees
The class action lawsuit filed by AFABESP (an association of retired and former employees of Banespa), seeking payment of a semi-annual bonus provided for in the old BANESPA bylaws, resulted in a final decision unfavorable to Banco Santander. As a result, each beneficiary of the decision may file an individual lawsuit to receive the amount due.
As the judgments adopted different positions for each case, a procedure called Incident of Resolution of Repetitive Demands (IRDR) was instituted before the Regional Labor Court (TRT) with the objective of establishing objective criteria regarding the theses defended by the Bank, mainly the prescriptive term and payment limitations until December 2006 (regarding the establishment of Plan V). On March 11, 2024, the IRDR incident was admitted for future judgment and the suspension of all lawsuits that are in the second instance (TRT) and filed in São Paulo (Capital) and other cities that are part of the jurisdiction of the TRT of São Paulo was determined.
Finally, due to the divergence in interpretation of the labor statute of limitations provided for in the Federal Constitution, an Action for Allegation of Non-Compliance with a Fundamental Precept (ADPF) was also filed, so that the Federal Supreme Court (STF) can resolve the issue and indicate the correct term to be used in the individual cases filed.
On June 27, 2024, a transaction was signed between Banco Santander, BANESPREV, AFABESP and legal advisors establishing criteria and conditions for the settlement of individual lawsuits. By August 23, 2024 (end of the adhesion period), approximately 90% of eligible beneficiaries had formalized their adhesions to said transaction, which were subsequently approved by court decision, and the respective individual lawsuits will be extinguished. Banco Santander registered an obligation related to the amounts effectively due for payment of the transaction. The amounts due for the installments settled to date, equivalent to R$2,187 million, were contributed by Banco Santander to the respective plans administered by Banesprev, responsible for administering the supplementary pension plans and for paying the transaction to the respective beneficiaries. The remaining installments will be contributed to Banesprev until May 2026 (note 24), updated in accordance with the criteria and the benefit adjustment index provided for in the regulations of the plans to which each holder is linked.
The other individual processes, whose beneficiaries did not adhere to the aforementioned transaction, are pending a final decision regarding the controversial legal issues, which will be resolved when the IRDR and ADPF are judged.
| • | Sanprev – Santander Pension Association (Sanprev) |
Closed supplementary pension entity that managed three benefit plans, two in the Defined Benefit modality and one in the Variable Contribution modality, whose management transfer process for these plans to Banesprev took place in January 2017. According to PREVIC Ordinance 389, of May 8, 2018, the termination of Sanprev's operating authorization was approved.
| • | Bandeprev - Bandepe Social Security (Bandeprev) |
Defined benefit plan sponsored by Banco Bandepe S.A. and Banco Santander, administered by Bandeprev. The plans are divided into a basic plan and a special supplementary retirement plan, with differences in eligibility, contributions and benefits for subgroups of participants. The plans have been closed to new members since 1999 for employees of Banco Bandepe S.A. and for all others since 2011.
SantanderPrevi - Private Pension Entity (SantanderPrevi): is a closed supplementary pension entity, whose objective is to establish and implement pension benefit plans, complementary to the general social security system, in accordance with current legislation.
SantanderPrevi's Retirement Plan is structured
in the Defined Contribution modality and has been closed to new members since July 2018, as approved by PREVIC, with contributions shared
between the sponsoring companies and the plan participants. The amounts appropriated by the sponsors for the fiscal year ended December
31, 2024 were R$
There are 10 cases of benefits granted with lifetime income from a previous plan.
SBPREV - Santander Brasil Open Pension: As of January 2, 2018, Santander began offering this new optional supplementary pension program for newly hired employees and for employees who are not enrolled in any other pension plan administered by the Closed Supplementary Pension Entities of the Santander Brasil Conglomerate. This new program includes the PGBL- Free Benefits Generating Plan and VGBL-Free Benefits Generating Life modalities administered by Zurich Santander Brasil Seguros e Previdência S.A, an Open Supplementary Pension Entity, open to new members, with their contributions shared between the founding/stipulating-endorsing companies and the plan participants. The amounts appropriated by the sponsors in the fiscal year ended December 31, 2024 were R$32,505 (2023 – R$29,348 and 2022 – R$22,068 ).
|
|
Consolidated Financial Statements | December 31, 2024 | F - 69 |
|
*Values expressed in thousands, except when indicated |
II. Health and Dental Care Plan
Cabesp - São Paulo State Bank Employees' Charitable Fund:
Entity focused on covering medical and dental expenses of employees hired before the privatization of Banespa in 2000, as defined in the entity's Bylaws. The plans administered by the entity are:
| • | Retirees by HolandaPrevi (previous name of SantanderPrevi); |
| • | Former Employees of Banco Real (Retirees by Circulars). |
Retirees from Bandeprev:
A health care plan granted to retirees from Banco do Estado de Pernambuco; it is a lifetime benefit. Banco Santander subsidizes 50% of the plan value for those who retired before November 27, 1998. For those who retired after this date, the subsidy is 30%.
Health Officers:
Directors, Executive Directors, Vice Presidents and Chief Executive Officers may, at their own discretion, opt for lifetime membership
in the health insurance plan in the event of termination of employment with Banco Santander or companies in its conglomerate without just
cause; provided that they meet the following requirements: have contributed to the health insurance plan for at least 3 (three) years;
have served as a director at Banco Santander or companies in its conglomerate for at least 3 (three) years; be 55 years of age or older.
The plan will be maintained under the same terms as the director enjoyed at the time of his/her termination, including the payment of
his/her share, which must be made by means of a payment slip. Dependents who were active at the time of termination will remain on the
same plan as the director, and the inclusion of new dependents will not be permitted under any circumstances.
Life Insurance for Retirees (Life Insurances):
Granted to Retirees by Circulars: compensation in cases of Natural Death, Disability due to Illness, Accidental Death. The subsidy is 45% of the premium value. This is a closed mass.
Life Insurance Assistance Funds (Life Insurance):
In December of 2018, life insurance coverage was included in the insurance for retirees from the DCA, DAB, and CACIBAN plans. This insurance was extended to retirees from the former Banco Meridional, with coverage according to the retiree's selection upon enrollment in the benefit. The Bank provides a subsidy of 50% of the premium for the policyholder, and some retirees have a spouse clause, contributing 100% towards the cost. This is a closed pool.
Sudameris Foundation Medical Assistance:
A free lifetime clinical assistance plan is offered to retirees who have contributed to the Sudameris Foundation for at least 25 years. This plan includes an upgrade option if the beneficiary opts for a private room, although the default offering is in a standard ward setting. In such cases, the cost is 100% of the Sudameris Foundation.
In addition, retired employees are entitled to continue as beneficiaries of the Bank's health plan, provided they meet specific legal criteria and fully cover their respective contributions. Santander provides the same level of healthcare coverage to retirees as they enjoyed during the tenure of their employment contracts. Banco Santander's obligations towards retirees are assessed using actuarial calculations based on the present value of current costs.
III. Actuarial Techniques
The value of the defined benefit obligations was determined by independent actuaries employing the following actuarial techniques:
| • | Valuation method |
Projected unit credit method, which views each year of service resulting in an additional unit of benefit entitlement
and measures each unit separately.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 70 |
|
*Values expressed in thousands, except when indicated |
| 2024 | 2023 | 2022 | ||||
| Actuarial Assumptions Adopted in the Calculations | Retirement | Health | Retirement | Health | Retirement | Health |
| Nominal Discount Rate for Actuarial Liability |
|
|
|
|
|
|
| Rate for Determining Interest on Assets for the Following Fiscal Year |
|
|
|
|
|
|
| Projected Long-Term Inflation Rate |
|
|
|
|
|
|
| Projected Nominal Wage Growth Rate |
|
N/A |
|
N/A |
|
N/A |
| General Mortality Table |
|
|
|
|
|
|
(1) Banesprev Plans II, V and Pré75
(2) Cabesp
Changes in the present value of liabilities accrued as defined benefits and the breakdown of actuarial gains (losses) arising from experience, financial assumptions, and demographic assumptions of 2024 and the last 2 years are as follows:
| Post-Employment Plans | Other Similar Obligations | |||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |
| Present value of liabilities at the beginning of the fiscal period (Note 39) |
|
|
|
|
|
|
| Costs of current services (Note 39) |
|
(
|
|
|
|
|
| Interest cost |
|
|
|
|
|
|
| Paid benefits |
(
|
(
|
(
|
(
|
(
|
(
|
| Actuarial losses (gains) |
(
|
|
(
|
(
|
|
(
|
| Others |
|
|
|
- | - | - |
| Present value of liabilities at the end of the fiscal period |
|
|
|
|
|
|
| Any less: | ||||||
| Fair value of plan assets (1) |
|
|
|
|
|
|
| Unrecognized assets (1) |
(
|
(
|
(
|
(
|
(
|
(
|
| Provisions - net |
|
|
|
|
|
|
| Total provisions for pension plans, net |
|
|
|
|||
| Of which: | ||||||
| Actuarial provisions |
|
|
|
|||
| Actuarial assets (note 15) (1) |
|
|
|
|||
| Experience-Based Adjustments in Net Assets |
(
|
(
|
(
|
(
|
|
(
|
| Plan Experience |
(
|
(
|
(
|
(
|
(
|
(
|
| Changes in Financial Assumptions |
|
(
|
|
|
(
|
|
| Changes in Demographic Assumptions | - |
(
|
(
|
|
|
|
| Actuarial Gain (Loss) - Obligation |
|
(
|
|
|
(
|
|
| Return on Investments Different from the Return Implicit in the Discount Rate |
(
|
(
|
(
|
(
|
|
(
|
| Actuarial Gain (Loss) - Asset |
(
|
(
|
(
|
(
|
|
(
|
| Change in Surplus/Irrecoverable Deficit |
(
|
|
(
|
|
(
|
(
|
| (1) | Refers to the surplus plans Banesprev I and III, Sanprev I, II and III and Bandeprev. Refers to the surplus plans Banesprev I and III, Sanprev I, II and III and Bandeprev. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 71 |
|
*Values expressed in thousands, except when indicated |
The amounts recognized in the consolidated statement of income relating to the previously mentioned defined benefit liabilities are as follows:
| Post-Employment Plans | Other Similar Obligations | |||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |
| Income | ||||||
| Personnel expenses - Costs of current services (note 39) |
|
(
|
|
|
|
|
| Interest and similar income and expenses - Interest cost (net) (notes 31 and 32) |
(
|
(
|
|
(
|
(
|
|
| Interest and similar income and expenses - Interest on unrecognized assets (notes 31 and 32) |
|
|
(
|
|
|
(
|
| Other movements - Extraordinary Charges |
(
|
(
|
|
- |
(
|
|
| Total |
|
|
|
|
|
|
The fluctuations in the fair value of the plan’s assets were as follows:
| Post-Employment Plans | Other Similar Obligations | |||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |
| Fair value of plan assets at the beginning of the year |
|
|
|
|
|
|
| Interest Income (Expenses) |
|
|
|
|
|
|
| Remeasurement – Real gain (loss) on actuarial assets excluding interest expenses (net) |
(
|
(
|
(
|
(
|
|
(
|
| Contributions |
|
|
|
|
|
|
| Being: | ||||||
| By the Bank |
|
|
|
|
|
|
| By plan participants |
|
|
|
- | - | - |
| Paid benefits |
(
|
(
|
(
|
(
|
(
|
(
|
| Exchange rate variations and other items | - | - |
(
|
- | - | - |
| Fair value of plan assets at the end of the year |
|
|
|
|
|
|
The assumptions concerning healthcare cost rates have a significant impact on the amounts recognized in the financial statements. A one percentage point change in healthcare cost rates would have the following effects:
| Sensitivity | ||||||
| 2024 | 2023 | 2022 | ||||
| Current Service Cost and Interest | Present Value of Liabilities | Current Service Cost and Interest | Present Value of Liabilities | Current Service Cost and Interest | Present Value of Liabilities | |
| Interest rate | ||||||
| (+)0.5% |
(
|
(
|
(
|
(
|
(
|
(
|
| (-)0.5% |
|
|
|
|
|
|
| General Mortality Table | ||||||
| Applied (+) 2 years |
(
|
(
|
(
|
(
|
(
|
(
|
| Applied (-) 2 years |
|
|
|
|
|
|
| Cost of Medical Care | ||||||
| (+)0.5% |
|
|
|
|
|
|
| (-)0.5% |
(
|
(
|
(
|
(
|
(
|
(
|
The following table presents the duration of actuarial liabilities of the plans sponsored by Banco Santander:
|
|
Consolidated Financial Statements | December 31, 2024 | F - 72 |
|
*Values expressed in thousands, except when indicated |
| Post-Employment Plans | Other Similar Obligations | |||
| Plans | Duration (Average in Years) | Plans | Duration (Average in Years) | |
| Banesprev |
|
Cabesp |
|
|
| Sanprev |
|
Bandepe |
|
|
| Bandeprev |
|
Clínica Grátis |
|
|
| SantanderPrevi |
|
Diretores Vitalícios |
|
|
| CACIBAN / DAB / DCA |
|
Diretores Saúde |
|
|
| Circulares |
|
|||
| Seguro de Vida |
|
|||
| 22. | Provisions for judicial and administrative proceedings, commitments and other provisions |
a) Breakdown
The breakdown of “Obligation and Provisions” is as follows:
| Thousand of Reais | 2024 | 2023 |
| Provisions for pension funds and similar liabilities (Note 21) |
|
|
| Provisions for judicial and administrative proceedings, commitments, and other provisions |
|
|
| Judicial and Administrative Proceedings for Liabilities of Former Controlling Shareholders (Note 15) |
|
|
| Judicial and administrative proceedings |
|
|
| Comprising: | - | |
| Civil |
|
|
| Labor |
|
|
| Tax and Social Security |
|
|
| Provisions for contingent liabilities (Note 22.b.1) |
|
|
| Miscellaneous provisions |
|
|
| Total |
|
|
b) Changes
The changes in “Obligation and Provisions” were as follows:
| Thousand of Reais | 2024 | ||
| Pension Funds (1) | Other Provisions | Total | |
| Balance at the beginning of the fiscal year |
|
|
|
| Additions charged to income: | |||
| Interest expense and similar charges |
|
- |
|
| Personnel Expenses (Note 39) |
|
- |
|
| Establishment / Reversals and Adjustments of Provisions |
(
|
|
|
| Other Comprehensive Income |
|
- |
|
| Establishment / Reversal of provisions for contingent commitments | - |
|
|
| Payments to external funds |
(
|
- |
(
|
| Amount paid | - |
(
|
(
|
| Transfer to other assets - actuarial assets (Note 15) |
|
- |
|
| Transfers, foreign exchange fluctuations, and other variations |
|
- |
|
| Balance at the end of the fiscal year |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 73 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2023 | ||
| Pension Funds (1) | Other Provisions | Total | |
| Balance at the beginning of the fiscal year |
|
|
|
| Additions charged to profit or loss: | |||
| Interest and Similar Income and Expenses |
|
- |
|
| Personnel Expenses (Note 39) |
|
- |
|
| Establishment / Reversals and Adjustments of Provisions |
(
|
|
|
| Other Comprehensive Income |
|
- |
|
| Establishment / Reversal of provisions for contingent commitments | - |
(
|
(
|
| Payments to external funds |
(
|
- |
(
|
| Amount paid | - |
(
|
(
|
| Transfer to other assets - actuarial assets (Note 15) |
|
- |
|
| Transfers, foreign exchange fluctuations, and other variations | - | - | - |
| Balance at the end of the fiscal year |
|
|
|
| Thousand of Reais | 2022 | ||
| Pension Funds (1) | Other Provisions | Total | |
| Balance at the beginning of the fiscal year |
|
|
|
| Additions charged to profit or loss: | |||
| Interest and Similar Income and Expenses |
|
- |
|
| Personnel Expenses (Note 39) |
|
- |
|
| Establishment / Reversals and Adjustments of Provisions |
|
|
|
| Other Comprehensive Income |
(
|
- |
(
|
| Establishment / Reversal of provisions for contingent commitments | - |
(
|
(
|
| Payments to external funds |
(
|
- |
(
|
| Amount paid | - |
(
|
(
|
| Transfer to other assets - actuarial assets (Note 15) |
|
- |
|
| Transfers, foreign exchange fluctuations, and other variations | - |
|
|
| Balance at the end of the fiscal year |
|
|
|
| (1) | For further information, please refer to note 21. Provisions for pension funds and similar liabilities |
b.1) Provisions for contingent payments
As stated in note 1.iv , IFRS 9 mandates the recognition of a provision for expected loan losses on financial guarantee contracts that have not yet been honored. This provision expense, reflecting the credit risk, must be measured and recognized when such guarantees are honored and the guaranteed customer fails to meet their contractual obligations. Changes in these provisions during the fiscal years of 2024, 2023 and 2022 are detailed below.
| Thousand of Reais | 2024 | 2023 | 2022 |
| Balance at the beginning of the period |
|
|
|
| Establishment / Reversal of provisions for contingent commitments |
|
(
|
(
|
| Balance at end of year |
|
|
|
c) Provisions for Tax and Social Security, Labor and Civil Matters
Banco Santander and its subsidiaries are involved in judicial and administrative proceedings related to tax, social security, labor, and civil matters, arising from their regular business operations.
Provisions have been established based on the nature, complexity, and historical context of the legal proceedings, as well as on the assessment of loss in the companies' proceedings, informed by the opinions of both internal and external legal advisors. It is Banco Santander's policy to fully provision the value at risk for proceedings deemed to have a probable loss.
Management understands that the provisions made are sufficient to meet legal obligations and potential losses arising from judicial and administrative proceedings as follows:
c.1) Judicial and Administrative Proceedings Pertaining to Tax and Social Security Matters
Main judicial and administrative proceedings with probable loss risk
|
|
Consolidated Financial Statements | December 31, 2024 | F - 74 |
|
*Values expressed in thousands, except when indicated |
Banco Santander and its subsidiaries are involved in judicial and administrative proceedings related to tax and social security disputes, which are classified based on the opinion of legal advisors as having a probable loss risk.
Provisional Contribution on Financial
Transactions (CPMF) in Client Operations
- R$
National Institute of Social Security
(INSS)
- R$
Service Tax (ISS) - Financial Institutions
– R$
c.2) Judicial and Administrative Proceedings Pertaining to Labor Matters
These are legal actions initiated by Labor Unions, Associations, the Labor Public Prosecutor's Office, and former employees, claiming labor rights they believe are due, particularly regarding the payment of "overtime" and other labor rights, including proceedings related to retirement benefits.
For claims regarded as routine and alike in nature, provisions are recorded based on the historical average of settled cases. Claims that do not meet this criterion are provisioned based on an individual assessment, with provisions established according to the probable risk of loss, in compliance with the law and jurisprudence, as determined by the loss assessment conducted by legal advisors.
c.3) Judicial and Administrative Proceedings Pertaining to Civil Matters
These provisions typically arise from: (i) claims requesting a review of contractual terms and conditions or monetary adjustment requests, including alleged impacts from the implementation of various government economic plans, (ii) claims related to financing contracts, (iii) enforcement actions, and (iv) claims for compensation for losses and damages. For civil claims deemed routine and alike in nature, provisions are recorded based on the historical average of settled cases. Claims that do not meet this criterion are provisioned based on an individual assessment, with provisions established according to the probable risk of loss, in compliance with the law and jurisprudence, as determined by the loss assessment conducted by legal advisors.
The main proceedings classified as probable loss risk are detailed below:
Compensatory Actions - These relate to compensation for material and/or moral damages arising from consumer relationships, primarily involving issues related to credit cards, consumer loans, current accounts, collections, loans, and other matters. For claims concerning causes deemed alike and routine for the business, within the normal course of the Bank's operations, provisions are established based on the historical average of settled cases. Claims that do not meet this criterion are provisioned based on an individual assessment, with provisions set according to the probable risk of loss, in compliance with the law and jurisprudence, as determined by the loss assessment conducted by legal advisors.
Economic Plans - These relate to judicial proceedings that claim alleged inflationary adjustments arising from Economic Plans (Bresser, Verão, Collor I and II), on the basis that such plans infringed upon vested rights associated with the application of purportedly owed inflationary indices to Savings Accounts, Judicial Deposits, and Time Deposits ("CDBs"). The provisions for these lawsuits are based on the individualized assessment of loss conducted by legal advisors.
Banco Santander is also a party to public civil actions related to the same subject matter, initiated by consumer protection entities, the Public Prosecutor's Office, or Public Defenders. Provisions are recognized only for cases with a probable loss risk, based on individual enforcement requests. The issue is currently under review by the STF. There is existing jurisprudence in the STF that is favorable to banks concerning economic phenomena similar to that of savings accounts, such as in the case of inflation adjustments to time deposits ("CDBs") and adjustments applied to contracts ("tablita").
However, the jurisprudence of the STF regarding the constitutionality of the regulations that amended Brazil's monetary standard has not yet been established. On April 14, 2010, the Superior Court of Justice ("STJ") ruled that the deadline for initiating public civil actions related to the inflation adjustments is 5 years from the date of the plans, but this ruling has not yet become final and conclusive. Accordingly, with this decision, a significant number of the claims, as filed after the x-year deadline, are expected to be declared unfounded, thereby reducing the amounts involved. The STJ also ruled that the deadline for individual savers to register for Public Civil Actions is x years, counted from the date of the final judgment of the respective case. Banco Santander is confident in the success of the positions it has advocated before these courts, due to their substance and rationale.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 75 |
|
*Values expressed in thousands, except when indicated |
Towards the end of 2017, the Attorney General's Office ("AGU"), the Brazilian Central Bank ("Bacen"), the Consumer Defense Institute ("Idec"), the Brazilian Savers Front ("Febrapo"), and the Brazilian Federation of Banks ("Febraban") entered into an agreement with the objective of resolving the legal disputes related to the Economic Plans.
The discussions were centered on determining the amount to be paid to each claimant, based on the balance in the savings account as of the plan's date. The total amount of the payments will depend on the number of participants, as well as the number of savers who have successfully demonstrated in court the existence of the account and the balance on the anniversary date of the index adjustment. The settlement agreement negotiated between the parties was ratified by the STF.
In a ruling by the STF, a nationwide suspension of all legal proceedings concerning the issue was ordered for the duration of the agreement, except for cases where judgments are being definitively enforced.
On March 11, 2020, the agreement was extended through an addendum, incorporating lawsuits exclusively pertaining to the discussion of the Collor Plan I. This extension is for a term of 5 years, and the ratification of the addendum's terms took place on June 03, 2020.
Management believes that the provisions made are adequate to cover the risks associated with the economic plans, in light of the ratified agreement.
c.4) Contingent Liabilities in Tax, Social Security, Labor, and Civil Matters Classified as Possible Loss Risk
These are judicial and administrative proceedings related to tax, social security, labor, and civil matters, classified, based on the opinion of legal advisors, as carrying a risk of possible loss, therefore, not provisioned.
Tax lawsuits with a possible loss classification
totaled R$
PIS and COFINS - Lawsuits filed by Banco Santander (Brasil) S.A. and other entities of the Group to prevent the application of Law No. 9,718/98, which changes the calculation basis of the Social Integration Program (PIS) and the Contribution for Social Security Financing (COFINS), extending it to all revenues of the entities, and not only to revenues arising from the provision of services. Regarding the Banco Santander (Brasil) S.A. case, in 2015 the Brazilian Supreme Court (STF) admitted the extraordinary appeal filed by the Federal Government regarding PIS and denied the extraordinary appeal filed by the Federal Public Prosecutor's Office regarding the contribution to COFINS, confirming the decision of the Federal Regional Court in favor of Banco Santander (Brasil) S.A. in August 2007. The STF decided, by means of General Repercussion, Theme 372 and partially accepted the Federal Government's appeal, establishing the thesis that PIS/COFINS is levied on operating revenues arising from the typical activities of financial institutions. With the publication of the judgment, the Bank filed a new appeal regarding PIS, which is awaiting analysis. Based on the assessment of legal advisors, the risk prognosis was classified as a possible loss, with an appeal not being probable. As of December 31, 2024, the amount involved is R$2.225 million. For the other legal actions, the respective PIS and COFINS obligations were established.
INSS on Profit Sharing or Results (PLR)
- The Bank and its subsidiaries are subject to legal and administrative proceedings arising from questions from tax authorities regarding
the collection of social security contributions on payments made as profit sharing. On December 31, 2024, the amount was approximately
R$
Service Tax (ISS) - Financial institutions
- Banco Santander and its subsidiaries are contesting both administratively and judicially the imposition by several municipalities of
the ISS on various income derived from operations not typically recognized as service provision. As of December 31, 2024, the value was
approximately R$
Non-Ratified Tax Offsetting
- The
Bank and its subsidiaries are engaged in both administrative and legal disputes with the Federal Revenue Service over the non-ratification
of tax offsets involving credits from overpayments or undue payments. As of December 31, 2024, the total amount was approximately R$
Losses in Credit Operations
-The
Bank and its subsidiaries contested the tax assessments issued by the Brazilian Federal Revenue Service, alleging the undue deduction
of losses on credit transactions from the IRPJ and CSLL calculation bases for allegedly not meeting the requirements of the applicable
laws. On December 31, 2024, the amount was approximately R$
Use of CSLL Tax Loss and Negative Base
- Notices of infraction issued by the Brazilian Federal Revenue for the fiscal years 2009 and 2019, concerning alleged improper offsetting
of tax losses and negative CSLL base, following tax assessments from previous periods. A decision in the administrative court is pending.
As of December 31, 2024, the value was approximately R$
Amortization of Goodwill from Banco
Sudameris Acquisition
- The tax authorities issued notices of violation to demand payment of IRPJ and CSLL, including late payment
charges, related to the tax deduction of the amortization of the goodwill paid in the acquisition of Banco Sudameris, for the base period
from 2007 to 2012. Banco Santander presented the respective administrative defenses. The first period assessed is awaiting analysis of
an appeal at CARF. Regarding the period from 2009 to 2012, a lawsuit was filed to discuss the IRPJ portion, due to the unfavorable conclusion
in the administrative process. For the CSLL portion of this same period, we request the withdrawal of the Special Appeal filed, aiming
to take advantage of the benefits established by Law No. 14,689/2023 (quality vote). A lawsuit will be filed for the remaining portion.
On December 31, 2024, the amount was approximately R$
IRPJ and CSLL Capital Gains
-
The Brazilian Federal Revenue Service issued a tax assessment notice against Santander Seguros (legal successor of ABN AMRO Brasil Dois
Participações S.A. (AAB Dois Par) charging income tax and social contribution related to the fiscal year 2005. The Brazilian
Federal Revenue Service claims that the capital gain on the sale of shares of Real Seguros S.A. and Real Vida e Previdência S.A.
by AAB Dois Par should be taxed at a rate of 34.0% instead of 15.0%. The assessment was administratively challenged based on the understanding
that the tax treatment adopted in the transaction was in accordance with the current tax legislation and the capital gain was duly taxed.
The administrative proceeding ended unfavorably to the Company. In July 2020, the Company filed a lawsuit seeking to cancel the debt.
The lawsuit is awaiting judgment. Banco Santander is responsible for any adverse outcome in this proceeding as the former controlling
shareholder of Zurich Santander Brasil Seguros e Previdência S.A. On December 31, 2024, the value was approximately R$
|
|
Consolidated Financial Statements | December 31, 2024 | F - 76 |
|
*Values expressed in thousands, except when indicated |
IRRF – Overseas Remittance
- The Company filed a lawsuit seeking to eliminate the taxation of Income Tax Withheld at Source – IRRF, on payments derived from
the provision of technology services by companies headquartered abroad, due to the existence of International Treaties signed between
Brazil-Chile; Brazil-Mexico and Brazil-Spain, thus avoiding double taxation. A favorable judgment was handed down and the National Treasury
appealed to the Regional Federal Court of the 3rd Region, where it awaits judgment. On December 31, 2024, the amount was approximately
R$
Labor lawsuits with a possible loss classification
totaled R$
Adjustment of Banesprev Retirement Supplements through IGPDI - Class action filed by Afabesp requesting a change in the adjustment index for social security benefits for retirees and former employees of Banespa, hired before 1975. Initially, the action was ruled unfavorably to Banco Santander, which appealed this initial decision and on August 23, 2024, it was ruled in favor of Banco Santander. Against this new decision, on August 30, 2024, AFABESP filed an Embargo for Clarification, which is pending judgment.
Liabilities related to civil lawsuits with
a possible risk of loss totaled R$
Indemnity lawsuit related to custody services provided by Banco Santander. The lawsuit is in the expert assessment phase and has not yet been sentenced.
| 23. | Tax assets and liabilities |
a) Income tax and social contribution
The total charges for the period can be reconciled with the accounting profit as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Operating Profit Before Tax |
|
|
|
| Tax Rate (25% income tax and 20% social contribution tax) (3) |
(
|
(
|
(
|
| PIS and COFINS (net of income and social contribution taxes) (1) |
(
|
(
|
(
|
| Non-taxable/Non-deductible: | |||
| Equity method |
|
|
|
| Non-Deductible Expenses Net from Non-Taxable Income (2) |
|
|
|
| Adjustments: | |||
| Recognition (Reversal) of Income/Social Contribution Taxes on Temporary Differences |
(
|
|
|
| Interest on Equity |
|
|
|
| Effect of CSLL (Social Contribution on Net Profit) Rate Difference (3) |
|
|
|
| Other adjustments |
|
|
|
| Income taxes |
(
|
(
|
(
|
| Comprising: | |||
| Current taxes |
(
|
(
|
(
|
| Deferred taxes |
|
|
(
|
| Taxes paid during the fiscal year |
(
|
(
|
(
|
| (1) | PIS and COFINS are considered as components of the profit base (net base of certain income and expenses); therefore, in accordance with IAS 12, they are recorded as income taxes. |
| (2) | It mainly includes the tax effect on income from updates to judicial deposits and other income and expenses that are permanent differences. |
| (3) | In the Consolidated Financial Statements, we account for the difference in CSLL (Social Contribution on Net Profit) tax rates of 9% (non-financial companies), 15% (financial companies), and 20% (banks). |
Foreign Exchange Hedge of the Grand Cayman Branch, Luxembourg Branches
Banco Santander operates branches in the Cayman Islands and Luxembourg, primarily for the purpose of securing funding in the international capital and financial markets. These funds are used to provide the Bank with lines of credit, which are extended to its clients for the financing of foreign trade and working capital.
To hedge the exposure to foreign exchange fluctuations, the Bank employs derivatives and funding mechanisms. In accordance with Brazilian tax legislation, gains or losses arising from the appreciation or depreciation of the Brazilian Real on foreign investments were not taxable. However, starting in January of 2021, these have become taxable or deductible for the purposes of Income Tax (IR) and Social Contribution on Net Profit (CSLL), whereas gains or losses from derivatives used as hedging instruments are taxable or deductible. The purpose of these derivatives is to protect the net income after taxes.
Law No. 14,031, dated July 28, 2020, stipulates that from January 2021, 50% of the foreign exchange fluctuation on investments abroad must be included in the determination of actual profit and in the tax calculation base for the Social Contribution on Net Profit (CSLL) of the investing legal entity domiciled in the country. From 2022 onwards, the foreign exchange fluctuation will be fully accounted for in the taxable bases of the IRPJ and CSLL.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 77 |
|
*Values expressed in thousands, except when indicated |
The distinct tax treatment for PIS and COFINS taxes from these foreign exchange differences induces volatility in "Operating Income Before Tax" and the "Income Taxes" line items. Below are detailed the effects of the operations executed, as well as the aggregate impact of the foreign exchange hedge for the fiscal years ending on December 31, 2024, 2023 and 2022:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Foreign exchange fluctuations (net) | |||
| Gains (losses) arising from exchange rate fluctuations on the Bank’s investments in the Cayman, Luxembourg, and EFC Branches |
|
(
|
(
|
| Gains (losses) on financial assets and liabilities | |||
| Income generated from the use of derivative contracts as foreign exchange hedge |
(
|
|
|
| Income Taxes | |||
| Tax effect of derivative contracts used as hedge - PIS/COFINS |
|
(
|
(
|
| Tax effect of derivative contracts used as hedge - Income/Social Contribution Taxes | - | - | - |
b) Effective tax rate calculation
The effective tax rates are:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Operating Income Before Tax |
|
|
|
| Income Tax |
(
|
(
|
(
|
| Effective tax rate |
|
|
|
c) Tax recognized in equity
In addition to the income tax recognized in the consolidated income statement, the Bank has recorded the following amounts directly in equity:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Tax credits recognized in equity |
|
|
|
| Measurement of securities at fair value through other comprehensive income |
|
|
|
| Measurement of cash flow hedge |
|
|
|
| Measurement of investment hedge |
|
|
|
| Measurement of defined benefit plan |
|
|
|
| Tax expenses recognized in equity |
(
|
(
|
(
|
| Measurement of securities at fair value through other comprehensive income |
(
|
(
|
(
|
| Measurement of cash flow hedge |
(
|
(
|
- |
| Measurement of investment hedge |
(
|
(
|
- |
| Measurement of defined benefit plan |
(
|
(
|
(
|
| Total |
(
|
(
|
|
This pertains to deferred tax liabilities recognized in equity, arising from temporary differences accounted for in equity.
d) Deferred taxes
The balances of “Deferred Tax Assets” and “Deferred Tax Liabilities” are presented as follows:
| Thousand of Reais | 2024 | 2023 |
| Deferred Tax Assets |
|
|
| Comprising: | ||
| Temporary differences (1) |
|
|
| Tax loss |
|
|
| CSLL 18% | - |
|
| Total deferred tax assets |
|
|
| Deferred tax liabilities |
|
|
| Comprising: | ||
| Excess depreciation of leased assets |
|
|
| Fair value adjustment of trading securities and derivatives |
|
|
| Total deferred tax liabilities |
|
|
| (1) | Temporary differences primarily related to impairment losses on loans and receivables, provisions for judicial and administrative proceedings, and the effect of the fair value on financial instruments. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 78 |
|
*Values expressed in thousands, except when indicated |
The changes in the balances of “Deferred Tax Assets” and “Deferred Tax Liabilities” over the last three fiscal years were the following:
| Thousand of Reais | Balances at December 31, 2023 |
Adjustment to Income |
Fair value adjustments (1) | Other (2) | Balance on December 31, 2024 |
| Deferred Tax Assets |
|
|
|
(
|
|
| Temporary differences |
|
|
|
(
|
|
| Tax loss |
|
(
|
- | - |
|
| CSLL 18% |
|
(
|
- | - | - |
| Deferred Tax Liabilities: |
|
|
|
(
|
|
| Temporary differences |
|
|
|
(
|
|
| Total |
|
|
|
|
|
| Thousand of Reais | Balances at December 31, 2022 |
Adjustment to Income |
Adjustments to fair value (1) | Other (2) | Balance on December 31, 2023 |
| Deferred Tax Assets |
|
|
(
|
|
|
| Temporary differences |
|
|
(
|
|
|
| Tax loss |
|
|
- | - |
|
| CSLL 18% | - |
|
- | - |
|
| Deferred Tax Liabilities: |
|
|
(
|
|
|
| Temporary differences |
|
|
(
|
|
|
| Total |
|
|
(
|
|
|
| (1) | Refers to the tax recognized in equity. |
| (2) | In 2024, it refers mainly to the net of deferred taxes in the amount of R$39,248 (2023 – R$63,753 and 2022 – R$297,323), which have the same counterparty and realization period. |
e) Expected realization of deferred tax assets
| Deferred Tax Assets | Deferred Tax Liabilities | |||||
| Year | Temporary differences | Tax losses | CSLL 18% | Total | Temporary differences | Total |
| 2025 |
|
|
- |
|
|
|
| 2026 |
|
|
- |
|
|
|
| 2027 |
|
|
- |
|
|
|
| 2028 |
|
|
- |
|
|
|
| 2029 |
|
|
- |
|
|
|
| 2030 to 2034 |
|
|
- |
|
|
|
| After 2035 | - |
|
- |
|
|
|
| Total |
|
|
- |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 79 |
|
*Values expressed in thousands, except when indicated |
| 24. | Other liabilities |
Next, the breakdown of the balance of the line “Other Liabilities” line item:
| Thousand of Reais | 2024 | 2023 |
| Provisioned expenses and deferred income (1) (4) |
|
|
| Ongoing transactions (3) |
|
|
| Provision for stock-based compensation |
|
|
| Insurance contract liabilities |
|
|
| Other (2) |
|
|
| Total |
|
|
| (1) | Primarily relates to outstanding payments for personnel expenses |
| (2) | Includes Credits for Funds to be Disbursed, such as Administrative Fees, and Payables from Related Parties and Suppliers. |
| (3) | Mainly includes amounts to be transferred to credit card networks (funds in transit) and amounts to be disbursed for real estate loan operations. |
| (4) | The amount includes the effects of the obligation created as a result of the transaction signed between Banco Santander, BANESPREV, AFABESP and legal advisors on June 27, 2024. See details in note 21. |
| 25. | Other Comprehensive Income |
The "Other Comprehensive Income" line balances comprise the amounts, net of the corresponding tax effects, of adjustments to assets and liabilities temporarily recognized in equity, as presented in the Statement of Changes in Shareholders' Equity and Consolidated Statements of Comprehensive Income until they are extinguished or realized, at which point they are definitively recognized in the Consolidated Statement of Income. The values arising from subsidiaries, interest in associates, and joint ventures are presented, line by line, in the appropriate line items according to their nature.
It is important to note that the consolidated statements of comprehensive income include changes in the "Other Comprehensive Income" line item, as follows:
| - | Adjustment to fair value - Gains/(Losses): this includes the net income amount, after deducting expenses incurred during the year, recognized directly in equity. The amounts recognized in equity for the year remain in this line item, even if they are transferred to the income statement or to the initial carrying amount of assets or liabilities, or reclassified to another line item within the same year. |
| - | Amounts transferred to the income statement: these include the revaluation gains and losses previously recognized in equity, even if within the same fiscal year, which are recognized in the income statement. |
| - | Amounts transferred to the initial carrying amount of the hedged item: these include the revaluation gains and losses previously recognized in equity, even if within the same fiscal year, which are recognized in the initial carrying amount of assets or liabilities as a result of cash flow hedges. |
| - | Other reclassifications: these include the value of transfers made during the year among various fair value adjustment items. |
In the consolidated statements of comprehensive income, "Other Comprehensive Income" is recognized on a gross basis, including amounts related to non-controlling interests, and the corresponding tax effect is presented in a separate line item, except for entities that apply the equity method of accounting, whose amounts are presented net of the tax effect.
a) Financial Assets Affecting Equity
a.1) Financial Assets Measured at Fair Value through Other Comprehensive Income
Other Comprehensive Income – 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 measured at Fair Value through Other Comprehensive Income ( note 6 ), net of taxes.
The breakdown, by type of instrument and the issuer's geographical origin, of adjustments in Other Comprehensive Income – Financial Assets Measured at Fair Value through Other Comprehensive Income (IFRS 9) as of December 31, 2024, is as follows:
|
|
Consolidated Financial Statements | December 31, 2024 | F - 80 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2024 | |||
| Revaluation gains | Revaluation losses | Net recognized gains/losses | Fair value | |
| Debt Instruments | ||||
| Government securities |
|
(
|
(
|
|
| Private securities |
|
(
|
|
|
| Total |
|
(
|
(
|
|
| Thousand of Reais | 2023 | |||
| Revaluation gains | Revaluation losses | Net recognized gains/losses | Fair value | |
| Debt Instruments | ||||
| Government securities |
|
(
|
|
|
| Private securities |
|
(
|
(
|
|
| Total |
|
(
|
|
|
| Thousand of Reais | 2022 | |||
| Revaluation gains | Revaluation losses | Net recognized gains/losses | Fair value | |
| Debt Instruments | ||||
| Government securities |
|
(
|
(
|
|
| Private securities |
|
(
|
|
|
| Total |
|
(
|
(
|
|
At each market disclosure, Banco Santander assesses whether there is any objective evidence that the instruments classified as Financial Assets at Fair Value through Other Comprehensive Income (debt securities) present signs of impairment due to non-recovery.
b) Cash Flow Hedge
Other Comprehensive Income - Cash Flow Hedge includes gains or losses attributable to hedging instruments that qualify as effective hedges. These amounts will remain under this line item until they are recognized in the consolidated statements of comprehensive income for the periods affected by this hedge ( note 8 ).
c) Foreign investment hedge and Foreign Investment translation adjustments
Other Comprehensive Income - Net investment in foreign operations hedges includes the net amount of changes in the value of instruments designated as hedges for net investments in foreign operations. In 2022, this hedge was discontinued ( note 8.a.5 ).
Foreign investment translation adjustments include the net amount of differences arising from translating the balances of consolidated entities whose functional currency is not the Brazilian Real into Brazilian Reais ( note 2.a ).
| 26. | Non-controlling interests |
Non-controlling interests refer to the net value of the equity equivalence of the portion of profit or loss attributable to equity instruments that do not belong, directly or indirectly, to the Bank, including the portion of annual profit attributed to subsidiaries.
a) Composition
The balance of the "Non-controlling Interests" line item is detailed below:
|
|
Consolidated Financial Statements | December 31, 2024 | F - 81 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2024 | 2023 |
| Total |
|
|
| Rojo Entretenimento S.A. |
|
|
| Banco Hyundai Capital |
|
|
| Return Capital Gestão de Ativos e Participações S.A. |
(
|
|
| Toro Corretora de Títulos e valores Mobiliários Ltda. |
|
|
| Toro Investimentos S.A. |
|
|
| Solution 4fleet Consultoria Empresarial S.A. |
|
|
| Apê11 Tecnologia e Negócios Imobiliários S.A. (Apê11) |
|
|
| Fit Economia de Energia S.A. |
(
|
|
| América Gestão Serviços em Energia S.A. |
|
| Thousand of Reais | 2024 | 2023 |
| Profit attributable to non-controlling interests |
|
|
| Comprising: | ||
| Banco PSA Finance Brasil S.A. |
|
|
| Rojo Entretenimento S.A. |
|
|
| Banco Hyundai Capital |
|
|
| Return Capital Gestão de Ativos e Participações S.A. |
(
|
(
|
| Toro Corretora de Títulos e Valores Mobiliários Ltda. |
(
|
|
| Toro Investimentos S.A. |
|
|
| Solution 4Fleet Consultoria Empresarial S.A. |
|
(
|
| Apê11 Tecnologia e Negócios Imobiliários S.A. (Apê11) |
(
|
|
| Fit Economia de Energia S.A. |
(
|
|
| América Gestão Serviços em Energia S.A. |
(
|
b) Changes
The changes in the balance of "Non-controlling interests" are summarized in the table below:
| 2024 | 2023 | 2022 | |
| Thousand of Reais | |||
| Balance at the beginning of the fiscal year |
|
|
|
| Incorporation / Acquisition |
(
|
(
|
|
| Dividends paid / Interest on Capital |
(
|
(
|
|
| Capital increase |
|
||
| Profit attributable to non-controlling interests |
|
|
|
| Others |
(
|
(
|
|
| Balance at the end of the fiscal year |
|
|
|
| 27. | Shareholders’ equity |
a) Share capital
In accordance with the Bylaws, Banco Santander's Capital may be increased up to the limit of the authorized capital, regardless of statutory reform, upon deliberation by the Board of Directors and through the issuance of up to (nine billion, ninety million, nine hundred and nine thousand and ninety) shares, observing the legal limits established regarding the number of preferred shares. Any capital increase exceeding this limit will require shareholder approval.
At the Ordinary General Meeting held on April 26, 2024, the increase in share capital in the amount of R$ .00 (ten billion reais) was approved, without the issuance of new shares, through the capitalization of part of the balance of the statutory profit reserve. In this way, the share capital of Banco Santander Brasil becomes R$ .00 (sixty-five billion reais).
The share capital, fully subscribed and paid up, is divided into registered, book-entry shares with no nominal value.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 82 |
|
*Values expressed in thousands, except when indicated |
| Thousand of shares | ||||||
| 2024 | 2023 | |||||
| Common | Preferred | Total | Common | Preferred | Total | |
| Brazilian residents |
|
|
|
|
|
|
| Foreign residents |
|
|
|
|
|
|
| Total shares |
|
|
|
|
|
|
| (-) Treasury shares |
(
|
(
|
(
|
(
|
(
|
(
|
| Total outstanding |
|
|
|
|
|
|
b) Dividends and interest on equity
The Company's bylaws ensure that shareholders receive a minimum dividend of 25% of their net profit for each fiscal year, adjusted in accordance with the law. Preferred shares do not have voting rights and cannot be converted into common shares, but they have the same rights and benefits granted to common shares, in addition to priority in the distribution of dividends and an additional 10% on dividends paid to common shares, and in the reimbursement of capital, without premium, in the event of the Bank's dissolution.
The dividends were calculated and paid in accordance with Brazilian Corporation Law.
Before the Annual General Meeting of Shareholders, the Board of Directors may resolve to declare and pay dividends from the profits earned, based on: (i) balance sheets or retained earnings reported in the most recent balance sheet, or (ii) balance sheets prepared for periods shorter than six months, provided that the total dividends paid in each half of the fiscal year do not exceed the value of the capital reserves. These dividends are fully attributed to the mandatory dividends.
Below, we present the distribution of Dividends and Interest on Equity made on December 31, 2024 and December 31, 2023.
| 2024 | |||||||
| Real per Thousand Shares / Units | |||||||
| Thousand of Reais | Gross | Net | |||||
| Common | Preferred | Units | Common | Preferred | Units | ||
| Interest on Capital (1)(5) |
|
|
|
|
|
|
|
| Interest on Capital (2)(5) |
|
|
|
|
|
|
|
| Interest on Capital (3)(5) |
|
|
|
|
|
|
|
| Interest on Capital (4)(5) |
|
|
|
|
|
|
|
| Dividends (4)(5) |
|
|
|
|
|
|
|
| Total |
|
||||||
| (1) | Deliberated by the Board of Directors on January 11, 2024, paid on February 8, 2024, without any remuneration as monetary adjustment. |
| (2) | Deliberated by the Board of Directors on April 10, 2024, paid on May 15, 2024, without any remuneration as monetary adjustment. |
| (3) | Deliberated by the Board of Directors on July 10, 2024, paid on August 9, 2024, without any remuneration as monetary adjustment. |
| (4) | Deliberated by the Board of Directors on October 10, 2024, paid on November 8, 2024, without any remuneration as monetary adjustment. |
| (5) | They were fully attributed to the mandatory minimum dividends distributed by the Bank for the 2024 financial year. |
| 2023 | |||||||
| Real per Thousand Shares / Units | |||||||
| Thousand of Reais | Gross | Net | |||||
| Common | Preferred | Units | Common | Preferred | Units | ||
| Interest on Capital (1)(5) |
|
|
|
|
|
|
|
| Interest on Capital (2)(5) |
|
|
|
|
|
|
|
| Interest on Capital (3)(5) |
|
|
|
|
|
|
|
| Interest on Capital (4)(5) |
|
|
|
|
|
|
|
| Dividends (4)(5) |
|
|
|
|
|
|
|
| Total |
|
||||||
| (1) | Approved by the Board of Directors on January 19, 2023, paid on March 6, 2023, without any remuneration as monetary adjustment. |
| (2) | Approved by the Board of Directors on April 13, 2023, paid on May 15, 2023, without any remuneration as monetary adjustment. |
| (3) | Approved by the Board of Directors on July 13, 2023, paid on August 16, 2023, without any remuneration as monetary adjustment. |
| (4) | Approved by the Board of Directors on October 10, 2023, paid on November 10, 2023, without any remuneration as monetary adjustment. |
| (5) | They were fully attributed to the mandatory minimum dividends distributed by the Bank for the 2023 financial year. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 83 |
|
*Values expressed in thousands, except when indicated |
c) Reserves
The net income, after deductions and legal provisions, will be allocated as follows:
Legal reserve
In accordance with Brazilian corporate legislation, 5% towards the legal reserve until it reaches 20% of the capital. This reserve is established to protect the integrity of the share capital and may only be utilized to offset losses or to increase the capital.
Capital reserve
The Bank's capital reserve comprises: goodwill reserves from the subscription of shares and other capital reserves, and may only be used to absorb losses that exceed retained earnings and profit reserves; redemption, repurchase, or acquisition of the Bank's own shares; addition to the share capital; or payment of dividends to preferred shares under specific circumstances.
Dividend equalization reserve
After the distribution of dividends, any remaining balance, upon a proposal by the Executive Board and approval by the Board of Directors, may be allocated to the establishment of a reserve for dividend equalization, limited to 50% of the Share Capital. This reserve is designed to secure funds for dividend payments, including in the form of Interest on Equity, or their advances, with the objective of maintaining the payout flow to shareholders.
d) Treasury shares
At a meeting held on January 24, 2024, the Board of Directors approved, in continuation of the Repurchase Program that expired on the same date, a new Repurchase Program for Units and ADRs issued by Banco Santander, directly or through its branch in Cayman, for maintenance in treasury or subsequent sale.
The purpose of the buyback is to (1) maximize value generation for shareholders through efficient management of the capital structure; and (2) enable the payment of directors, management-level employees and other employees of the Bank and companies under its control, under the terms of the Long-Term Incentive Plans. The term of the Buyback Program is up to 18 months from February 6, 2024, ending on August 6, 2025.
| 2024 | 2023 | |
| Quantity | Quantity | |
| Units | Units | |
| Treasury shares at beginning of the period |
|
|
| Shares Acquisitions |
|
|
| Payment - Share-based compensation |
(
|
(
|
| Treasury shares at end of the period |
|
|
| Balance of Treasury Shares in thousand of Reais |
R$
|
R$
|
|
Emission Costs in thousands of Reais |
R$
|
R$
|
| Balance of Treasury Shares in thousands of Reais |
R$
|
R$
|
| Cost/Share Price | Units | Units |
| Minimum cost (*) |
|
|
| Weighted average cost (*) |
|
|
| Maximum cost (*) |
|
|
| Share Price |
|
|
| (*) | Since the beginning of trading on the stock exchange. |
Additionally, for the fiscal year ended December 31, 2024, trading of treasury shares resulted in a gain of R$ (2023 – gain of R$ ), which was directly recognized in equity under capital reserves.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 84 |
|
*Values expressed in thousands, except when indicated |
| 28. | Earnings per share |
a) Basic earnings per share
Basic earnings per share are calculated by dividing the net profit attributable to the Parent Company by the weighted average number of shares outstanding during the year, excluding the average number of treasury shares held over the same period.
| 2024 | 2023 | 2022 | |
| Profit attributable to the Parent |
|
|
|
| Earnings per share (in Reais BRL) | |||
| Basic Profit per 1,000 shares (in Reais - BRL) | |||
| Common shares |
|
|
|
| Preferred shares |
|
|
|
| Net Profit attributable - Basic (in Reais BRL) | |||
| Common shares |
|
|
|
| Preferred shares |
|
|
|
| Weighted average shares outstanding (in thousands) - Basic | |||
| Common shares |
|
|
|
| Preferred shares |
|
|
|
b) Diluted earning per share
Diluted earnings per share is calculated by dividing the net profit attributable to the Parent Company by the weighted average number of shares outstanding during the year, excluding the average number of treasury shares held over the same period, and including the potential dilutive effect of long-term compensation programs.
| 2024 | 2023 | 2022 | |
| Profit attributable to the Parent |
|
|
|
| Earnings per share (in Reais - BRL) | |||
| Diluted earnings per 1,000 shares (in Reais - BRL) (1) | |||
| Common shares |
|
|
|
| Preferred shares |
|
|
|
| Net Profit attributable - Basic (in Reais - BRL) (1) | |||
| Common shares |
|
|
|
| Preferred shares |
|
|
|
| Weighted average shares outstanding (in thousand) - Diluted | |||
| Common shares |
|
|
|
| Preferred shares |
|
|
|
| (1) | Since the exercise price of the benefit programs presents an average, in the periods presented, are higher than the average market price of the shares, its its dilutive effect are not computed. |
| 29. | Fair value of financial assets and liabilities |
According to IFRS 13, the measurement of fair value using a fair value hierarchy that reflects the model used in the measurement process must comply with the following hierarchical levels:
Level 1: Determined based on unadjusted public price quotations in active markets for identical assets and liabilities, including public debt securities, equities, and listed derivatives.
Level 2: Represents derivatives of data other than the quoted prices included in Level 1, which are observable for the asset or liability, either directly (such as prices) or indirectly (derived from prices).
Level 3: Derived from valuation techniques that incorporate data for assets or liabilities not based on observable market variables (non-observable data).
Financial Assets and Liabilities Measured at Fair Value through Profit or Loss or through Other Comprehensive Income
Level 1: Securities and financial assets characterized by high liquidity and observable prices in an active market are classified within level 1. This level includes most Brazilian Government Securities (notably LTN, LFT, NTN-B, and NTN-F), stocks listed on the stock exchange, and other securities traded in the active market.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 85 |
|
*Values expressed in thousands, except when indicated |
Level 2: When price quotes are not observable, Management, utilizing its own internal models, makes its best estimate of the price that would be established by the market. These models rely on data based on observable market parameters as a key reference. The most reliable evidence of the fair value of a financial instrument at initial recognition is the transaction price, unless the fair value can be derived from other market transactions involving the same or similar instruments, or can be determined using a valuation technique where the variables used include only observable market data, particularly interest rates. These securities are classified at level X of the fair value hierarchy and primarily consist of Government Securities (NTN-A), repurchase agreements, cancellable LCI, and are in a market that is less liquid than those classified at level 1.
Level 3: In cases where information is not based on observable market data, Banco Santander employs internally developed models to accurately measure the fair value of these instruments. Instruments with low liquidity are primarily classified at level 3.
Derivatives
Level 1: Derivatives traded on stock exchanges are classified within level 1 of the hierarchy.
Level 2: Derivatives traded over-the-counter, in the valuation of financial instruments (mainly swaps and options), observable market data such as exchange rates, interest rates, volatility, correlations between indices, and market liquidity are typically utilized.
In pricing the referenced financial instruments, the Black-Scholes model methodology (exchange rate options, interest rate index options, caps, and floors) and the present value method (discounting future values based on market curves) are employed.
Level 3: Non-exchange traded derivatives, for which there is no observable information in an active market, have been classified as level 3, encompassing 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 table below provides a summary of the fair values of financial assets and liabilities for the fiscal years ended on December 31, 2024 and 2023, classified according to the various measurement methods the Bank has adopted to determine their fair value.
| 12/31/2024 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Financial Assets Measured At Fair Value Through Profit Or Loss |
|
|
|
|
| Debt instruments |
|
|
|
|
| Equity instruments |
|
|
|
|
| Derivatives | - |
|
|
|
| Loans and advances to customers | - |
|
|
|
| Reserves at the Central Bank of Brazil | - |
|
- |
|
| Financial Assets Measured At Fair Value Through Other Comprehensive Income |
|
- |
|
|
| Debt instruments |
|
- |
|
|
| Equity instruments |
|
- |
|
|
| Hedging derivatives (assets) | - |
|
- |
|
| Financial Liabilities Measured At Fair Value Through Profit Or Loss | - |
|
|
|
| Derivatives | - |
|
|
|
| Short positions | - |
|
- |
|
| Bonds and securities obligations | - |
|
- |
|
| Hedging derivatives (liabilities) | - |
|
- |
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 86 |
|
*Values expressed in thousands, except when indicated |
| 12/31/2023 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Financial Assets Measured At Fair Value Through Profit Or Loss |
|
|
|
|
| Debt instruments |
|
|
|
|
| Equity instruments |
|
|
|
|
| Derivatives | - |
|
|
|
| Loans and advances to customers | - |
|
|
|
| Reserves at the Central Bank of Brazil | - |
|
- |
|
| Financial Assets Measured At Fair Value Through Other Comprehensive Income |
|
|
|
|
| Debt instruments |
|
|
|
|
| Equity instruments |
|
- |
|
|
| Hedging derivatives (assets) | - |
|
- |
|
| Financial Liabilities Measured At Fair Value Through Profit Or Loss | - |
|
|
|
| Derivatives | - |
|
|
|
| Short positions | - |
|
- |
|
| Bonds and securities obligations | - |
|
- |
|
| Hedging derivatives (liabilities) | - |
|
- |
|
Level 3 Fair Value Changes
The tables below detail the transactions that occurred during the year 2024 and 2023 assets and liabilities classified as Level 3 in the fair value hierarchy:
| Fair Value | Gains/ losses (Realized/Not Realized) | Transfers to Level 3 | Additions / Low | Fair value | |
| 12/31/2023 | 12/31/2024 | ||||
| Financial Assets Measured At Fair Value Through Profit Or Loss |
|
(
|
(
|
|
|
| Financial Assets Measured At Fair Value Through Other Comprehensive Income |
|
(
|
(
|
|
|
| Financial Liabilities Measured At Fair Value In Profit Or Loss Held For Trading |
|
(
|
(
|
|
|
| Fair Value | Gains/ losses (Realized/Not Realized) | Transfers to Level 3 | Additions / Low | Fair value | |
| 12/31/2022 | 12/31/2023 | ||||
| Financial Assets Measured At Fair Value Through Profit Or Loss |
|
(
|
|
|
|
| Financial Assets Measured At Fair Value Through Other Comprehensive Income |
|
|
|
(
|
|
| Financial Liabilities Measured At Fair Value In Profit Or Loss Held For Trading |
|
(
|
|
|
|
Fair Value Changes Linked to Credit Risk
Fair value changes attributable to credit risk are determined based on fluctuations in credit default swap prices relative to similar obligations of the same debtor, when such prices are observable, as credit default swaps more accurately reflect the market's assessment of credit risks for a specific financial asset. When these prices are not observable, the fair value changes attributable to credit risk are calculated as the total of fair value changes not attributable to shifts in the benchmark interest rate or other observable market rates. In the absence of specific observable data, this approach provides a reasonable approximation of the changes attributable to credit risk, estimating margin changes over the benchmark value that the market may demand for the financial asset.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 87 |
|
*Values expressed in thousands, except when indicated |
Financial assets and liabilities not measured at fair value
The Bank's financial assets are measured at fair value in the consolidated balance sheet, except for financial assets measured at amortized cost.
Similarly, the Bank's financial liabilities, excluding those held for trading and those measured at fair value, are measured at amortized cost in the consolidated balance sheet.
i) Financial assets measured at a value other than fair value
Below, we present a comparison between the carrying amounts of the Bank's financial assets measured at values other than their fair values and their respective fair values as of December 31, 2024, 2023 and 2022:
| 12/31/2024 | |||||
| Assets | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 |
| Open market investments |
|
|
|
- | - |
| Financial Assets Measured At Amortized Cost: | |||||
| Loans and amounts due from credit institutions |
|
|
- |
|
|
| Loans and advances to customers |
|
|
- | - |
|
| Debt instruments |
|
|
|
- |
|
| Reserves at the Central Bank of Brazil |
|
|
- |
|
- |
| Total |
|
|
|
|
|
| 12/31/2023 | |||||
| Assets | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 |
| Open market investments |
|
|
|
- | - |
| Financial Assets Measured At Amortized Cost | |||||
| Loans and amounts due from credit institutions |
|
|
- |
|
|
| Loans and advances to customers |
|
|
- | - |
|
| Debt instruments |
|
|
|
|
|
| Reserves at the Central Bank of Brazil |
|
|
- |
|
- |
| Total |
|
|
|
|
|
ii) Financial liabilities measured at a value other than fair value
Below, we present a comparison between the carrying amounts of the Bank's financial liabilities measured at values other than their fair values and their respective fair values as of December 31, 2024, and 2023:
| 12/31/2024 | |||||
| Liabilities | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 |
| Financial Liabilities at Measured Amortized Cost: | |||||
| Deposits of credit institutions |
|
|
- |
|
|
| Customer deposits |
|
|
- |
|
|
| Marketable debt securities |
|
|
- | - |
|
| Debt instruments Eligible Capital |
|
|
- | - |
|
| Other financial liabilities |
|
|
- | - |
|
| Other financial liabilities |
|
|
- |
|
|
| 12/31/2023 | |||||
| Liabilities | Accounting Value | Fair Value | Level 1 | Level 2 | Level 3 |
| Financial Liabilities at Measured Amortized Cost: | |||||
| Deposits of credit institutions |
|
|
- |
|
|
| Customer deposits |
|
|
- |
|
|
| Marketable debt securities |
|
|
- | - |
|
| Debt instruments Eligible Capital |
|
|
- | - |
|
| Other financial liabilities |
|
|
- | - |
|
| Other financial liabilities |
|
|
- |
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 88 |
|
*Values expressed in thousands, except when indicated |
The methodologies and assumptions applied in estimating fair value are outlined below:
Loans and other receivables from credit institutions and customers - The fair value is estimated for groups of similar credit transactions. The fair value of loans is determined by discounting future cash flows using the interest rates of new contracts. In other words, the future cash flow of the current loan portfolio is projected based on contractual rates, and then, spreads derived from new loans are incorporated into the risk-free interest rate curve to calculate the fair value of the loan portfolio. Regarding behavioral assumptions, it is important to underscore that the prepayment rate is applied to the loan portfolio, thereby enabling a more realistic projection of future cash flows.
Deposits from credit institutions and customers - The fair value of the deposits was calculated by discounting the difference between the cash flows under contractual conditions and the current market rates for instruments with similar maturities. The fair value of variable-rate time deposits was considered to be close to their carrying amount.
Liabilities arising from securities - The fair values of these items were estimated by calculating the discounted cash flows, using the market interest rates for liabilities with similar terms and maturities.
Debt Instruments Eligible as Capital – these refer to the transaction fully executed with a related party, within the context of the Capital Optimization Plan, whose carrying amount is similar to the fair value.
The valuation techniques employed for estimating each level are detailed in note 2.e .
Management reviewed the criteria for classifying the fair value level of assets and liabilities measured at amortized cost, which are presented exclusively for disclosure purposes, and concluded that they are more appropriately classified as level 3, given the observable market data.
| 30. | Operational Ratios |
The Brazilian Central Bank requires financial institutions to maintain a Regulatory Capital (RC), Tier 1 Capital, and Common Equity Tier 1 Capital (CET1) that are compatible with the risks inherent in their activities, exceeding the minimum Required Regulatory Capital, represented by aggregating the credit risk, market risk, and operational risk components.
As established in CMN Resolution No. 4,958/2021, the Regulatory Capital requirement is set at 11.50%%, comprising 8.00% of Minimum Regulatory Capital, 2.50% of Capital Conservation Buffer, and 1.00% of Systemic Risk Buffer. The Tier 1 Capital Ratio stands at 9.50%, and the Minimum Common Equity Tier 1 Capital is 8.00%. Continuing with the implementation of the rules set forth by CMN Resolution No. 4,955/2021, the calculation of capital adequacy ratios is conducted on a consolidated basis, utilizing data from the Prudential Conglomerate, as established by CMN Resolution No. 4,950/2021, demonstrated below:
| Thousand of Reais | 2024 | 2023 |
| Tier I Regulatory Capital |
|
|
| Principal Capital |
|
|
| Supplementary capital |
|
|
| Tier II Regulatory Capital |
|
|
| Regulatory Capital (Tier I and II) |
|
|
| Credit Risk (1) |
|
|
| Market Risk (2) |
|
|
| Operational Risk |
|
|
| Total RWA (3) |
|
|
| Basel I Ratio |
|
|
| Basel Principal Capital |
|
|
| Basel Regulatory Capital |
|
|
| (1) | Credit risk exposures subject to capital requirement calculations under the standardized approach (RWACPAD) are based on the procedures established by BCB Resolution No. 229, dated May 12, 2022. |
| (2) | Includes the portions for market risk exposures subject to variations in interest rates (RWAjur1), foreign currency coupons (RWAjur2), price indexes (RWAjur3), and interest rate coupons (RWAjur4), the price of commodities (RWAcom), the price of shares classified in the trading portfolio (RWAacs), portions for exposure to gold, foreign currency and operations subject to exchange rate variation (RWAcam), and adjustment for derivatives arising from variation in the counterparty's credit quality (RWAcva).. Risk Weighted Assets or risk weighted assets. |
| (3) | Risk Weighted Assets or risk weighted assets. |
Banco Santander discloses its Risk Management Report on a quarterly basis, which includes information on risk management, a concise description of the Recovery Plan, capital management, RC, and RWA. The report, providing more detailed insights into the assumptions, framework, and methodologies, is available at www.santander.com.br/ri.
Financial institutions are required to maintain the allocation of funds to fixed assets in alignment with the adjusted Regulatory Capital level. The funds allocated to fixed assets, determined on a consolidated basis, are limited to 50% of the value of the adjusted Regulatory Capital, as per current regulations. Banco Santander is in compliance with the established requirements.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 89 |
|
*Values expressed in thousands, except when indicated |
| 31. | Interest and similar income |
Interest and similar income in the consolidated income statement comprise interest accrued during the year on all financial assets with either an implicit or explicit return, calculated by applying the effective interest method, irrespective of the fair value measurement, and adjustments to income as a result of hedge accounting. Interest is recognized on a gross basis, without the deduction of withholding taxes.
The breakdown of the main items of interest and similar income earned in 2024, 2023 and 2022 is presented below:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Cash and balances with the Brazilian Central Bank |
|
|
|
| Loans and advances - Credit institutions |
|
|
|
| Loans and advances - Customers |
|
|
|
| Debt instruments |
|
|
|
| Pension Plans (note 21) |
|
|
|
| Other interest |
|
|
|
| Total |
|
|
|
| 32. | Interest and similar expenses |
Interest and similar expenses" in the consolidated income statement consist of interest accrued in the year on all financial liabilities with implicit or explicit return, including remuneration in kind, calculated using the effective interest method, regardless of the measurement of the fair value, cost adjustments as a result of hedge accounting and interest costs attributed to pension funds.
The breakdown of the main items of interest and similar charges accrued in 2024, 2023 and 2022 is as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Deposits from credit institutions |
|
|
|
| Customer deposits |
|
|
|
| Marketable debt securities and subordinated liabilities: | |||
| Marketable debt securities (note 18) |
|
|
|
| Debt Instruments Eligible to Compose Capital (note 19) |
|
|
|
| Pension Plans (note 21) |
|
|
|
| Other interest (1) |
|
|
|
| Total |
|
|
|
| (1) | It is mainly composed of Expenses with Interest on Repo Agreements |
| 33. | Equity instrument income |
The "Equity Instrument Income" line item encompasses dividends and payments received as well as the profits generated by invested entities after the acquisition of equity instruments.
The breakdown of the balance for this line item is presented below:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Equity instruments classified as: | |||
| Financial Assets Measured At Fair Value Through Profit Or Loss |
|
|
|
| Financial Assets Measured At Fair Value Through Other Comprehensive Income |
|
|
|
| Total |
|
|
|
| 34. | Fee and commission income |
The "Fee and Commission Income" line item includes all fees and commissions accrued to the Bank's benefit during the year, excluding those that are incorporated into the effective interest rate on financial instruments.
The breakdown of the balance for this line item is presented below:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Collection and payment services: | |||
| Bills |
|
|
|
| Demand accounts |
|
|
|
| Cards (Credit and Debit) and Acquiring Services |
|
|
|
| Checks and other |
|
|
|
| Orders |
|
|
|
| Total |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 90 |
|
*Values expressed in thousands, except when indicated |
| Marketing of non-Banking financial products: | |||
| Investment funds |
|
|
|
| Insurance and brokerage commissions |
|
|
|
| Capitalization plans |
|
|
|
| Total |
|
|
|
| Securities services: | |||
| Securities underwriting and placement |
|
|
|
| Securities trading |
|
|
|
| Administration and custody |
|
|
|
| Asset management |
|
|
|
| Total |
|
|
|
| Other: | |||
| Foreign exchange |
|
|
|
| Financial guarantees |
|
|
|
| Other fees and commissions |
|
|
|
| Total |
|
|
|
| Total |
|
|
|
| 35. | Fee and commission expenses |
The "Fee and Commission Expenses" line item reflects the total amount of fees and commissions paid or payable during the year, excluding those that are incorporated into the effective interest rate on financial instruments.
The breakdown of the balance for this line item is presented below:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Commissions assigned to third parties (1) |
|
|
|
| Other fees and commissions |
|
|
|
| Total |
|
|
|
| (1) | Primarily consisting of credit cards. |
| 36. | Gains (losses) on financial assets and liabilities (net) |
Gains (losses) on financial assets and liabilities comprise the fair value adjustments of financial instruments, excluding those related to accrued interest from applying the effective interest method and provisions, as well as the gains or losses incurred from buying or selling financial instruments.
The breakdown of the balance for this line item, categorized by type of instrument, is presented below:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Financial Assets Measured At Fair Value Through Profit Or Loss (1) |
(
|
|
|
| Financial Assets Not Measured At Fair Value Through Profit Or Loss |
(
|
(
|
(
|
| Of which: Financial assets at fair value through other comprehensive income | |||
| Debt instruments |
(
|
(
|
(
|
| Equity instruments |
(
|
(
|
(
|
| Of which: Financial Assets Measured At Fair Value Through Other Comprehensive Income | |||
| Gains or losses from hedge accounting, net |
(
|
(
|
(
|
| Total |
(
|
|
|
| (1) | Includes the foreign exchange hedge of the Bank’s position in Cayman (note 23). |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 91 |
|
*Values expressed in thousands, except when indicated |
| 37. | Foreign exchange fluctuations (net) |
Foreign exchange fluctuations reflect the gains or losses on currency transactions, the changes resulting from the conversion of monetary items from a foreign currency to the functional currency, and the gains or losses recognized on non-monetary foreign currency assets at the time of disposal.
| Thousand of Reais | 2024 | 2023 | 2022 |
| Revenue with Exchange Variations |
|
|
|
| Expenses with Exchange Variations |
(
|
(
|
(
|
| Total |
|
|
|
| 38. | Other Operating Expenses (Net) |
The breakdown of the "Other Operating Income (Expenses)" line item is presented below:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Other operating income |
|
|
|
| Other operating expense |
(
|
(
|
(
|
| Contributions to fund guarantee of credit - FGC |
(
|
(
|
(
|
| Total |
(
|
(
|
(
|
| 39. | Personnel expenses |
a) Breakdown
The breakdown of the “Personnel Expenses” line item is presented below:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Wages and salaries |
|
|
|
| Social security costs |
|
|
|
| Benefits |
|
|
|
| Defined benefit pension plans (note 21) |
|
|
|
| Contributions to defined contribution pension plans |
|
|
|
| Share-based compensation |
|
|
|
| Training |
|
|
|
| Other personnel expenses |
|
|
|
| Total |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 92 |
|
*Values expressed in thousands, except when indicated |
b) Stock-based compensation
Banco Santander has long-term compensation programs linked to the market price performance of its instruments (Local and Global shares/options). The members of Banco Santander's Executive Board are eligible for these plans, in addition to participants who have been determined by the Board of Directors, whose selection takes into account seniority in the group. Members of the Board of Directors only participate in these plans when they hold positions on the Executive Board.
b.1) Local and Global Program
| 01/01 to | 01/01 to | 01/01 to | ||||||||||
| Program | Liquidity Type | Vesting Period | Period of Exercise | 12/31/2024 | 12/31/2023 | 12/31/2022 | ||||||
| R$ | (1) | R$ | — | (1) | R$ | — | (1) | |||||
| SANB11 | SANB11 | — | SANB11 | |||||||||
| R$ | (1) | R$ | (1) | R$ | — | (1) | ||||||
| SANB11 | SANB11 | SANB11 | ||||||||||
| R$ | — | (4) | R$ | — | (4) | R$ | (4) | |||||
| R$ | — | (1) | R$ | (1) | R$ | (1) | ||||||
| Santander Brasil Bank Shares | — | SANB11 | — | SANB11 | SANB11 | |||||||
| Local | — | SANB11 | SANB11 (2) | SANB11 (2) | ||||||||
| R$ | — | (2) | R$ | — | (2) | R$ | (2) | |||||
| — | SANB11 | — | SANB11 | SANB11 | ||||||||
| — | SANB11 | — | SANB11 | SANB11 | ||||||||
| — | SANB11 | — | SANB11 | SANB11 | ||||||||
| — | SANB11 | SANB11 (2) | SANB11 (2) | |||||||||
| R$ | — | (3) | R$ | — | (3) | R$ | (3) | |||||
| — | SAN (3) | SAN (3) | SAN (3) | |||||||||
| Op. SAN Shares (3) | Op. SAN Shares (3) | Op. SAN Shares (3) | ||||||||||
| SAN (4) | SAN (4) | SAN (4) | ||||||||||
| Op. SAN Shares (4) | Op. SAN Shares (4) | Op. SAN Shares (4) | ||||||||||
| Global | Santander Spain Shares and Options | SAN (4) | SAN (4) | SAN (4) | ||||||||
| Op. SAN Shares (4) | Op. SAN Shares (4) | Op. SAN Shares (4) | ||||||||||
| SAN (4) | SAN (4) | SAN (4) | ||||||||||
| Op. SAN Shares (4) | Op. SAN Shares (4) | Op. SAN Shares (4) | ||||||||||
| SAN (4) | SAN (4) | — | SAN (4) | |||||||||
| Op. SAN Shares (4) | — | Op. SAN Shares (4) | — | Op. SAN Shares (4) | ||||||||
| SAN (4) | — | SAN (4) | — | SAN (4) | ||||||||
| Op. SAN Shares (4) | — | Op. SAN Shares (4) | — | Op. SAN Shares (4) | ||||||||
| SANB11 | — | SANB11 | — | SANB11 | ||||||||
|
|
Consolidated Financial Statements | December 31, 2024 | F - 93 |
|
*Values expressed in thousands, except when indicated |
| SANB11 | — | SANB11 | — | SANB11 | ||||||||
| R$ |
|
(1) | R$ |
|
(1) | R$ |
|
(1) | ||||
| Balance of Plans on December 31, 2024 |
R$
|
Op. Ações SAN (4) | ||||||||||
|
|
SANB11 |
|
SANB11 |
|
SANB11 | |||||||
|
|
Op. Ações SAN (4) | |||||||||||
|
|
SAN (3) (4) |
|
SAN (3) (4) |
|
SAN (3) (4) | |||||||
|
|
SAN (3) (4) |
|
SAN (3) (4) |
|
SAN (3) (4) | |||||||
| (1) | Plan target in Reais, paid in SANB11 shares according to the achievement of the plan's performance indicators at the end of the vesting period, based on the price of the last 15 trading sessions of the month immediately prior to payment. |
Throughout 2024, 551,572 gross shares were paid and the amount of R$1,820,000 was canceled due to non-achievement of the contracts' performance indicators.
| (2) | Long-Term Incentive Plans finalized, with 486,502 shares paid and 23,326 shares canceled throughout 2024. |
| (3) | Plan completed with 100% achievement. The portion equivalent to 80,412 shares was paid in cash in Mar/2024 (after the lockup) and 78,841 shares were canceled. The options may be exercised until the end of the period for exercise in 2030, and in the period we had the cancellation of 412,175 options. |
| (4) | Target of the plan in shares and options on Global shares, 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 and global plans, with specific performance indicators and rules in the event of dismissal to be entitled to receive.
Global ILP (Long Term Incentive) Plans)
We currently have 5 global plans launched in 2019, 2020, 2021, 2022 and 2023. Eligible executives have target incentives in global shares and options, with payment after a minimum deferral period of three years and settlement of the sale value of the Assets in reais.
Pricing Model
The pricing model is based on the Local Volatility model or Dupire model, which allows simultaneous calibration of all quoted European options. In addition to this model, there is an extension to deal with uncertainty in dividends, where part of the dividend value is considered confirmed, and the rest is linked to the performance of the underlying. This extended model is integrated into a PDE engine, which numerically solves the corresponding stochastic differential equation to calculate the expected value of the product.
Data and assumptions used in the pricing model, including the weighted average share price, exercise price, expected volatility, option life, expected dividends and the risk-free interest rate
| • | The weighted average share price (and exercise price) is €3.104 based on the 15-day weighted average between 01/07/2022 and 01/27/2022 |
| • | The expected volatility used was 33.80 |
| • | Options expire on 02/01/2033 |
| • | Expected dividends range from approximately 6.6 cents in the short term (2022) to approximately 5.75 cents per share per year in the long term (2030) |
| • | The discount curve used gives a discount of 0.96 for 2030 |
The exercise price, in all cycles and if the objectives established in the regulations are achieved, will be the market price on the exercise date.
Local ILP Plans (Long-Term Incentive)
Long-term incentive plans may be granted in accordance with the strategy of new companies in the group or specific businesses, generally with a vesting period of 3 years.
Each plan will have a specific contract and its calculation and payment must be approved by the established governance, observing local and global regulatory resolutions.
The reference value of each participant will be converted into SANB11 shares, normally at the price of the last 15 trading sessions of the month immediately preceding the payment of the plan.
At the end of the vesting period, payment of either the resulting shares in the case of local plans or the value equivalent to the shares/options of global plans are made with a 1-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 regulations and exposure to excessive risks and in cases of material failure to comply with financial reporting requirements, in accordance with Section 10D, of the Exchange Act (SEC) , applicable to companies with shares listed on the NYSE.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 94 |
|
*Values expressed in thousands, except when indicated |
Impact on Results
The impacts on results are recognized in the Personnel Expenses line item, as detailed below:
| Consolidated | ||||
| 01/01 to | 01/01 to | 01/01 to | ||
| 12/31/2024 | 12/31/2023 | 12/31/2022 | ||
| Program | Settlement Type | |||
| Local | Santander Actions (Brazil) |
|
|
|
| Global | Santander Spain shares and stock options |
|
|
|
b.2) Stock-Based Variable Compensation
The long-term incentive plan (deferral) sets forth the criteria for the disbursement of future deferred portions of variable compensation, taking into account sustainable financial foundations over the long term. This includes the possibility of applying reductions or cancellations in response to the risks undertaken and the fluctuations in the cost of capital.
The variable compensation plan, which is linked to Banco Santander shares, is divided into 2 programs: (i) Identified Group and (ii) Other Employees. The impacts on results are recognized in the Personnel Expenses line item, as detailed below:
| 01/01 to | 01/01 to | 01/01 to | |||
| Program | Participant | Liquidity Type | 12/31/2024 | 12/31/2023 | 12/31/2022 |
| Collective Identified |
|
|
|
|
|
| Unidentified Collective |
|
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 95 |
|
*Values expressed in thousands, except when indicated |
| 40. | Other Administrative Expenses |
a) Breakdown
The breakdown of the balance for this line item is as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| General maintenance expenses |
|
|
|
| Technology maintenance expenses |
|
|
|
| Advertising |
|
|
|
| Communications |
|
|
|
| Per diems and travel expenses |
|
|
|
| Taxes other than income tax |
|
|
|
| Surveillance and cash courier services |
|
|
|
| Insurance premiums |
|
|
|
| Specialized and technical services |
|
|
|
| Technical reports |
|
|
|
| Others specialized and technical services |
|
|
|
| Other administrative expenses (1) |
|
|
|
| Total |
|
|
|
| (1) | As of December 31, 2024, this is predominantly comprised of Business Formalization Expenses of R$1,001,084 (2023 – R$949,009 and 2022 - R$926,119), Data Processing Expenses of R$263,719 (2023 – R$157,010 and 2022 - R$155,326), Service Expenses of R$250,192 (2023 - income of R$152,065 and 2022 - R$52,165), and Recovery of Charges and Expenses of R$558,296 (2023– R$304,025 and 2022 – R$435,717) |
b) Other Information
The “Technical Reports” line item encompasses the fees paid by the various entities within the Consolidated Group to their respective auditors, broken down as follows:
| Thousand of Reais | 2024 | 2023 |
| Independent audit of the financial statements of the companies included in the consolidation scope |
|
|
| Audit Related |
|
|
| Tax Services |
|
|
| Others |
|
|
| Total |
|
|
The approximate tax amount, as per Law No. 12,741/2012
was R$
| 41. | Gains (losses) on disposal of assets not classified as non-current assets held for sale |
The breakdown of the balance for this line item is as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Gains |
|
|
|
| Tangible and intangible assets |
|
|
|
| Investments (1) |
|
|
|
| Losses |
(
|
(
|
(
|
| Tangible and intangible assets |
(
|
(
|
(
|
| Investments |
(
|
||
| Total |
|
|
|
| (1) |
In 2024, this refers to the Partnership operation between Banco Santander (Brasil) S.A. and Pluxee International, as per the terms described in Note 3.d . In 2023, results from the sale of 40% of Webmotors, as per Note 3.l . |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 96 |
|
*Values expressed in thousands, except when indicated |
| 42. | Gains (losses) on disposal and expenses on non-current assets held for sale not classified as discontinued operations |
The breakdown of the balance of this item is as follows:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Composition | |||
| Net constitution of reversal of provision of non-financial assets |
|
|
|
| Result on the Sale of non-financial assets |
|
|
|
| Operating expenses of non-financial assets |
(
|
(
|
(
|
| Total |
|
|
|
| 43. | Other disclosures |
a) Guarantees and commitments
The Bank offers a range of guarantees to help its clients improve their credit standing and enable them to compete effectively. The table below details all the guarantees as of December 31, 2024 and 2023.
As required, the "Maximum potential value of future payments" represents the notional amounts that could be regarded as a loss in the event of a total default by the guaranteed parties, without taking into account possible recoveries from guarantees held or pledged, or recoveries on appeal. There is no correlation between these values and the probable losses on these guarantees. In fact, the "Maximum potential value of future payments" significantly exceeds the inherent losses.
| Thousand of Reais | 2024 | 2023 |
| Maximum potential amount of future payments | ||
| Contingent liabilities | ||
| Guarantees and other sureties |
|
|
| Financial guarantees |
|
|
| Performance guarantees |
|
|
| Financial letters of credit |
|
|
| Other |
|
|
| Other contingent exposures |
|
|
| Documentary Credits |
|
|
| Total Contingent Liabilities |
|
|
| Commitments | ||
| Loan commitments drawable by third parties (1) |
|
|
| Total Commitments |
|
|
| Total |
|
|
| (1) | Includes approved and unutilized limits for overdrafts, credit cards, and other similar facilities. |
The Bank provides its clients with financial guarantees in commitments with third parties. The Bank retains the right to seek reimbursement from clients for any amounts it is required to pay under these guarantees. Additionally, cash or other forms of high liquidity collateral may be held against these commitments. These contracts are subject to the same credit assessment process as that applied to loans.
The Bank expects that these guarantees will expire without the need for any cash advances. Therefore, in the normal course of operations, the Bank anticipates that these transactions will have virtually no impact on its liquidity.
Performance guarantees are issued to secure clients' commitments, such as contractually specified investments, and to provide specified products, basic goods, or maintenance or warranty services to third parties, ensuring project completion in accordance with contractual terms, among other obligations. Included within standby letters of credit are guarantees for loan repayment, credit lines, promissory notes, and commercial acceptances. The Bank invariably requires collateral to issue this type of financial guarantee. In documentary credits, the Bank acts as a payment intermediary between commercial entities across different countries (import/export operations). In these transactions, the parties involved handle documents rather than the actual goods these documents represent. Typically, the basic goods traded serve as collateral for the transaction, and the Bank may extend certain credit lines. Commitments for loans redeemable by third parties primarily encompass most credit card lines and commercial commitments. Credit card lines may be unilaterally terminated by the issuer. Commercial commitments are generally one-year lines, contingent upon the client providing requisite information.
The risk criteria for issuing all types of guarantees, standby letters of credit, documentary credits, and all signature risks are generally the same as those used for other credit risk products and, therefore, are subject to the same admission and monitoring standards. Guarantees provided on behalf of clients undergo the same credit quality review process as any other credit risk product. Regularly, at least once a year, the solvency of clients is assessed, as well as the likelihood of these guarantees being executed. Should there be any doubt regarding a client's solvency, provisions are recognized in net profit for the amount of inherent losses, even if no legal proceedings have been initiated against the Bank.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 97 |
|
*Values expressed in thousands, except when indicated |
The recognition of provisions for impairment losses related to guarantees and other sureties ( note 9.c ) is recorded under the line item Impairment losses on financial assets (net) in the consolidated statement of income, and the methodology for its calculation is detailed in note 2.i .
Furthermore, the liability recognized as
deferred income for the premium received for providing these guarantees is being amortized over the life of the related guarantees and
totals R$
b) Managed funds not recognized on the balance sheet
Banco Santander manages funds in which it does not hold a significant stake, does not act as a "principal," and has no equity interest. Based on the contractual relationship that governs the management of these funds, other equity holders are exposed to, or have rights to variable returns and are able to influence these returns through their decision-making authority. Additionally, the Bank act as manager of these funds by analyzing the remuneration regime, which is proportional to the services rendered. Therefore, there is no indication that the fund is "principal" (note 2.w ).
Following are the funds managed by Banco Santander not recognized on its balance sheet:
| Thousand of Reais | 2024 | 2023 |
| Funds under investment management (1) |
|
|
| Administered Funds |
|
|
| Total |
|
|
(1) In 2024, fund management was transferred to Santander Asset.
c) Third-party securities held in custody
As of December 31, 2024, the Bank held
in custody third-party debt securities and securities totaling R$
d) Residual maturity
The breakdown, by maturity, of the balances of Financial Assets and Financial Liabilities in the consolidated balance sheet is as follows:
| 2024 | |||||||
|
On Demand |
Up to 3 Months |
3 to 12 Months |
1 to 3 Years |
3 to 5 Years |
After 5 Years |
Total | |
| Assets: | |||||||
| Cash |
|
|
|
||||
| Debt instruments |
|
|
|
|
|
|
|
| Equity instruments |
|
|
|
|
|
||
| Loans and amounts due from credit institutions |
|
|
|
|
|
|
|
| Loans and advances to customer |
|
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
|
| Balances with the Brazilian Central Bank |
|
|
|||||
| Total |
|
|
|
|
|
|
|
| Liabilities: | |||||||
| Financial liabilities at amortized cost: | |||||||
| Deposits from credit institutions (1) |
|
|
|
|
|
|
|
| Customer deposits (1) |
|
|
|
|
|
|
|
| Marketable debt securities (1) |
|
|
|
|
|
|
|
| Debt Instruments Eligible to Compose Capital |
|
|
|||||
| Other financial liabilities |
|
|
|
|
|
|
|
| Short positions |
|
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
| Difference (assets less liabilities) |
(
|
(
|
(
|
|
(
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 98 |
|
*Values expressed in thousands, except when indicated |
| 2023 | |||||||
|
On
Demand |
Up to
3 Months |
3 to
12 Months |
1 to
3 Years |
3 to
5 Years |
After 5
Years |
Total | |
| Assets: | |||||||
| Cash |
|
|
|
||||
| Debt instruments |
|
|
|
|
|
|
|
| Equity instruments |
|
|
|
|
|
||
| Loans and amounts due from credit institutions |
|
|
|
|
|
|
|
| Loans and advances to customer |
|
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
|
| Balances with the Brazilian Central Bank |
|
|
|||||
| Total |
|
|
|
|
|
|
|
| Liabilities: | |||||||
| Financial liabilities at amortized cost: | |||||||
| Deposits from credit institutions (1) |
|
|
|
|
|
|
|
| Customer deposits (1) |
|
|
|
|
|
|
|
| Marketable debt securities (1) |
|
|
|
|
|
|
|
| Debt Instruments Eligible to Compose Capital |
|
|
|
|
|
|
|
| Other financial liabilities |
|
|
|
|
|
|
|
| Short positions |
|
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
| Difference (assets less liabilities) |
|
(
|
(
|
|
|
|
|
| (1) | Includes liabilities that may be subject to early settlement, comprising: demand and time deposits, repurchase agreements with clients, Real Estate Credit Notes (LCI), and Agribusiness Credit Notes (LCA). |
e) Equivalent value of assets and liabilities in BRL
The main foreign currency balances recorded in the consolidated balance sheet, based on the nature of the respective items, are as follows:
| Equivalent Value in Thousand of Reais | 2024 | 2023 | ||
| Assets | Liabilities | Assets | Liabilities | |
| Cash |
|
|
||
| Financial ssets/liabilities measured at fair value through profit or loss held for trading |
|
|
|
|
| Financial assets measured at fair value through other comprehensive income |
|
|||
| Financial assets/liabilities measured at amortized cost |
|
|
|
|
| Total |
|
|
|
|
| f) | Other Commitments |
Banco Santander leases properties, primarily for use as branches, under a standard lease agreement that it may terminate at its discretion. This agreement includes a renewal option and adjustment clauses, falling within the concept of operational leasing.
The total of future minimum lease payments under non-cancellable operational leases is presented below:
| 2024 | 2023 | |
| Up to 1 Year |
|
|
| Between 1 to 5 Years |
|
|
| More than 5 Years |
|
|
| Total |
|
|
Additionally, Banco Santander holds indefinite-term
contracts, amounting to R$
Lease agreements will be adjusted annually in accordance with prevailing legislation, where the maximum adjustment is based on the fluctuation of the General Market Price Index ("IGPM"). The lessee is granted the right to unilaterally terminate these agreements at any time, pursuant to contractual clauses and current legislation.
g) Contingent assets
As of December 31,2024 and 2023, contingent assets were not recognized in the accounting records.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 99 |
|
*Values expressed in thousands, except when indicated |
| 44. | Business segment reporting |
In accordance with IFRS 8, an operating segment is defined as a component of an entity:
| (a) | That engages in activities from which it can generate income and incur expenses (including income and expenses arising from transactions with other components of the same entity); |
| (b) | Whose operational results are regularly reviewed by the entity’s chief decision-maker responsible for operational decisions regarding the allocation of resources to the segment and assessment of its performance; and |
| (c) | For which separate financial information is available. |
Based on these guidelines, the Bank has identified the following reportable operating segments:
• Commercial Bank
• Global Wholesale Bank (SCIB)
The Bank operates across two segments: the Commercial Segment, catering to both individual and corporate clients (excluding global corporate clients, who are served in the Global Wholesale Banking Segment), and the Global Wholesale Banking Segment, which encompasses Investment Banking and Markets operations, including the Treasury and Equity Business Departments.
The Bank operates both in Brazil and internationally through its branches in Cayman and Luxembourg, as well as its subsidiary in Spain, serving Brazilian clients. Accordingly, it does not present geographical segmentation.
The Income Statements and other relevant data are as follows:
| Thousand of Reais | 2024 | ||
| (Condensed) Income Statement | Commercial Banking | Global Wholesale Banking | Total |
| NET INTEREST INCOME |
|
|
|
| Equity instrument income |
|
|
|
| Income from companies accounted for by the equity method |
|
|
|
| Net fee and commission income |
|
|
|
| Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) |
(
|
|
|
| Other operating expense (net) |
(
|
(
|
(
|
| TOTAL INCOME |
|
|
|
| Personnel expenses |
(
|
(
|
(
|
| Other administrative expenses |
(
|
(
|
(
|
| Depreciation and amortization |
(
|
(
|
(
|
| Provisions (net) |
(
|
(
|
(
|
| Impairment losses on financial assets (net) |
(
|
(
|
(
|
| Impairment losses on non-financial assets (net) |
(
|
|
(
|
| Other non-financial gains (losses) |
|
|
|
| OPERATING PROFIT BEFORE TAX (1) |
|
|
|
| Currency Hedge(1) |
|
|
|
| ADJUSTED OPERATING INCOME BEFORE TAX (1) |
|
|
|
| Thousand of Reais | |||
| 2023 | |||
| (Condensed) Income Statement | Commercial Banking | Global Wholesale Banking | Total |
| NET INTEREST INCOME |
|
|
|
| Equity instrument income |
|
|
|
| Income from companies accounted for by the equity method |
|
|
|
| Net fee and commission income |
|
|
|
| Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) |
(
|
|
|
| Other operating expense (net) |
(
|
(
|
(
|
| TOTAL INCOME |
|
|
|
| Personnel expenses |
(
|
(
|
(
|
| Other administrative expenses |
(
|
(
|
(
|
| Depreciation and amortization |
(
|
(
|
(
|
| Provisions (net) |
(
|
(
|
(
|
| Impairment losses on financial assets (net) |
(
|
(
|
(
|
| Impairment losses on non-financial assets (net) |
(
|
(
|
(
|
| Other non-financial gains (losses) |
|
|
|
| OPERATING PROFIT BEFORE TAX (1) |
|
|
|
| Currency Hedge (1) |
(
|
(
|
|
| ADJUSTED OPERATING INCOME BEFORE TAX (1) |
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 100 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2022 | ||
| (Condensed) Income Statement | Commercial Banking | Global Wholesale Banking | Total |
| NET INTEREST INCOME |
|
|
|
| Equity instrument income |
|
|
|
| Income from companies accounted for by the equity method |
|
|
|
| Net fee and commission income |
|
|
|
| Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) |
(
|
|
|
| Other operating expense (net) |
(
|
(
|
(
|
| TOTAL INCOME |
|
|
|
| Personnel expenses |
(
|
(
|
(
|
| Other administrative expenses |
(
|
(
|
(
|
| Depreciation and amortization |
(
|
(
|
(
|
| Provisions (net) |
(
|
(
|
(
|
| Impairment losses on financial assets (net) |
(
|
(
|
(
|
| Impairment losses on non-financial assets (net) |
(
|
(
|
(
|
| Other non-financial gains (losses) |
|
|
|
| OPERATING PROFIT BEFORE TAX (1) |
|
|
|
| Currency Hedge (1) |
(
|
(
|
|
| ADJUSTED OPERATING INCOME BEFORE TAX (1) |
|
|
|
| (1) | Includes, within the Commercial Bank, the foreign exchange hedge of the dollar investment (a strategy to mitigate the tax effects and exchange rate fluctuations of offshore investments on net income), with its result recorded in 'Gains (losses) on financial assets and liabilities,' fully offset in the Tax line. |
| 2024 | |||
| Other aggregates: | Commercial Banking | Global Wholesale Banking | Total |
| Total assets |
|
|
|
| Loans and advances to customers |
|
|
|
| Customer deposits |
|
|
|
| 2023 | |||
| Other aggregates: | Commercial Banking | Global Wholesale Banking | Total |
| Total assets |
|
|
|
| Loans and advances to customers |
|
|
|
| Customer deposits |
|
|
|
| 45. | Related party transactions |
The Bank's related parties include, in addition to its subsidiaries, affiliates, and jointly-controlled entities, the key management personnel of the Bank and entities over which such key management personnel may exert significant influence.
Santander has a Related-Party Transactions Policy approved by the Board of Directors, designed to ensure that all transactions covered by the policy are conducted in the best interests of Banco Santander and its shareholders. This policy grants the Board of Directors the authority to approve certain transactions. Additionally, the established rules apply to all employees and administrators of Banco Santander and its subsidiaries.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 101 |
|
*Values expressed in thousands, except when indicated |
Transactions and compensation for services involving related parties are conducted in the ordinary course of business and on arm's length terms, encompassing interest rates, terms, and guarantees, without entailing higher collection risks than usual or presenting any additional disadvantages.
a) Compensation of Key Management Personnel
For the period from January to December
of 2024, management proposed a total remuneration for the administrators (Board of Directors and Executive Board) of up to R$
i) Long and short-term benefits
The Bank, in line with Banco Santander Spain and other subsidiaries globally within the Santander Group, maintains long-term compensation programs that are tied to the market performance of its share price, contingent upon the achievement of specified targets.
The table below presents the Salaries and Fees of the Board of Directors and Executive Management:
| Thousand of Reais | 2024 | 2023 | 2022 |
| Fixed Compensation |
|
|
|
| Variable Compensation - in cash |
|
|
|
| Variable Compensation - in shares |
|
|
|
| Others |
|
|
|
| Total Short-Term Benefits |
|
|
|
| Variable Compensation - in cash |
|
|
|
| Variable Compensation - in shares |
|
|
|
| Total Long-Term Benefits |
|
|
|
| Total |
|
|
|
Additionally, in the fiscal year ended December
31, 2024, charges were collected on management remuneration in the amount of R$
ii) Contract termination
The termination of the employment agreement with Administrators, due to non-compliance with obligations or at the initiative of the contracted party, does not confer any right to financial compensation, and their accrued benefits will be discontinued.
b) Loan operations
In accordance with current legislation, no loans or advances are granted when involving the following:
I - Officers, Board of Directors and Audit Committee members, as well as their respective spouses and second-degree relatives;
II - Individuals or legal entities holding an interest in Banco Santander's capital exceeding 10%;
III - Legal entities in which Banco Santander holds a capital interest exceeding 10%; and
IV - Legal entities, whose capital is held by more than 10%, any of the directors, members of the Board of Directors and the Audit Committee or administrators of the financial institution itself, as well as their spouses and respective relatives, up to the second degree.
c) Ownership interest
The table below presents the direct equity interests (ordinary and preference shares) as of December 31, 2024, December 2023 and 2022.
| 2024 | ||||||
| Common | Preferred | Total | ||||
| Shares | Common | Shares | Preferred | Shares | Total | |
| Stockholders' | (thousand) | Shares (%) | (thousand) | Shares (%) | (thousand) | Shares (%) |
| Sterrebeeck B.V. (1) |
|
% |
|
% |
|
% |
| Grupo Empresarial Santander, S.L. (GES) (1) |
|
% |
|
% |
|
% |
| Banco Santander, S.A. (1) |
|
% | % |
|
% | |
| Directors (*) |
|
% |
|
% |
|
% |
| Others |
|
% |
|
% |
|
% |
| Total |
|
% |
|
% |
|
% |
| Treasury shares |
|
% |
|
% |
|
% |
| Total |
|
% |
|
% |
|
% |
| Free Float (2) |
|
% |
|
% |
|
% |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 102 |
|
*Values expressed in thousands, except when indicated |
| 2023 | ||||||
| Common | Preferred | Total | ||||
| Shares | Common | Shares | Preferred | Shares | Total | |
| Stockholders' | (thousand) | Shares (%) | (thousand) | Shares (%) | (thousand) | Shares (%) |
| Sterrebeeck B.V. (1) |
|
% |
|
% |
|
% |
| Grupo Empresarial Santander, S.L. (GES) (1) |
|
% |
|
% |
|
% |
| Banco Santander, S.A. (1) |
|
% | % |
|
% | |
| Directors (*) |
|
% |
|
% |
|
% |
| Others |
|
% |
|
% |
|
% |
| Total |
|
% |
|
% |
|
% |
| Treasury shares |
|
% |
|
% |
|
% |
| Total |
|
% |
|
% |
|
% |
| Free Float (2) |
|
% |
|
% |
|
% |
| 2022 | ||||||
| Common | Preferred | Total | ||||
| Shares | Common | Shares | Preferred | Shares | Total | |
| Stockholders' | (thousand) | Shares (%) | (thousand) | Shares (%) | (thousand) | Shares (%) |
| Sterrebeeck B.V. (1) |
|
% |
|
% |
|
% |
| Grupo Empresarial Santander, S.L. (GES) (1) |
|
% |
|
% |
|
% |
| Banco Santander, S.A. (1) |
|
% | — | % |
|
% |
| Administrators (*) |
|
% |
|
% |
|
% |
| Others |
|
% |
|
% |
|
% |
| Total |
|
% |
|
% |
|
% |
| Treasury shares |
|
% |
|
% |
|
% |
| Total |
|
% |
|
% |
|
% |
| Free Float (2) |
|
% |
|
% |
|
% |
| (1) | Companies of the Santander Spain Group. |
| (2) | Comprised of Employees and Others. |
| (*) | None of the members of the Board of Directors and Executive Board holds 1.0% or more of any class of shares. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 103 |
|
*Values expressed in thousands, except when indicated |
d) Related-party transactions
The following table presents the transactions that occurred between the group's companies:
| Parent (1) (4) | Joint-controlled companies and Other Related Party (2) (4) | Key Management Personnel (3) | Total | |||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| Assets |
|
|
|
|
|
|
|
|
| Derivatives Measured At Fair Value Through Profit Or Loss, Net |
(
|
|
(
|
|
||||
| Debt Instruments |
|
|
|
|
||||
| Loans and other amounts with credit institutions - Availability and Applications in Foreign Currency (Overnight Applications) |
|
|
|
|
|
|
||
| Loans and other values with customers |
|
|
|
|
|
|
||
| Other Assets |
|
|
|
|
|
|
||
| Warranties and Limits |
|
|
|
|
||||
| Liabilities |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
| Deposits from credit institutions |
(
|
(
|
(
|
(
|
(
|
(
|
||
| Securities |
(
|
(
|
(
|
(
|
(
|
(
|
||
| Customer deposits |
(
|
(
|
(
|
(
|
(
|
(
|
||
| Other financial liabilities - Dividends and interest on equity payable |
(
|
(
|
(
|
(
|
||||
| Other Liabilities |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
| Debt Instruments Eligible for Capital |
(
|
(
|
||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| Income |
(
|
|
|
|
(
|
(
|
(
|
|
| Interest and similar income - Loans and amounts due from credit institutions |
|
|
|
|
|
|
|
|
| Warranties and Limits |
|
|
|
|
||||
| Interest expense and similar charges |
(
|
(
|
(
|
(
|
(
|
(
|
(
|
(
|
| Fee and commission income (expense) |
(
|
(
|
|
|
|
|
|
|
| Gains (losses) on financial assets and liabilities and exchange differences (net) |
(
|
|
(
|
(
|
|
|
(
|
|
| Other operating income (expenses) |
|
|
|
|
||||
| Administrative expenses and amortization |
(
|
(
|
(
|
(
|
(
|
(
|
||
| Profit from disposal of assets not classified as non-current assets held for sale |
(
|
(
|
(
|
(
|
||||
| (1) | Parent - Banco Santander is indirectly controlled by Banco Santander Spain ( note 1 ) through its subsidiaries GES and Sterrebeeck B.V. |
| (2) | Related entities as disclosed in note 11. |
| (3) | Refers to the recording in clearing accounts of Guarantees and Limits on credit operations, Provisions and Result of variable remuneration with Key Management Personnel. |
| (4) | To improve the presentation of certain transactions with related parties, some balances in the comparison as of December 31, 2023 were remeasured. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 104 |
|
*Values expressed in thousands, except when indicated |
| 46. | Risk management |
Risk management at Banco Santander is based on the following principles:
| A. | Risk function independence from the commercial department. |
| B. | Senior Management involvement in decision-making. |
| C. | Consensus between the Risk and Commercial departments on lending decisions. |
| D. | Collective decisions, involving the branch network, aimed at fostering diversity of opinions and preventing the assignment of individual decisions. |
| E. | Use of statistical forecasting tools for default prediction, including internal ratings, credit scoring, behavior scoring, RORAC (Risk-Adjusted Return on Capital), VaR (Value at Risk), economic capital, and scenario analysis, among other methods. |
| F. | Global perspective, integrating the management of risk factors across business units and employing economic capital as a uniform metric for assessing assumed risk and evaluating management performance. |
| G. | Common management instruments |
| H. | Organizational structure |
| I. | Scopes and responsibilities |
| J. | Risk limitation |
| K. | Recognition |
| L. | Efficient information channels |
| M. | Maintaining a medium-low risk profile and low volatility through: |
| • | Portfolio diversification, by limiting concentrations in clients, groups, sectors, products, or geographies; reducing the complexity of market operations; analyzing the social and environmental risks of businesses and projects financed by the Bank; and continuous monitoring to prevent portfolio deterioration. |
| • | Establishment of policies and procedures that constitute the Normative Risk Model, governing risk-related activities and processes in compliance with directives from the Board of Directors, Brazilian Central Bank regulations, as well as international best practices, aiming to safeguard capital and ensure the profitability of business operations. |
At Santander Brasil, the risk control and management process was determined based on the Framework set forth at the corporate level, outlined according to the following phases:
| I. | Adaptation of risk management structures and policies in alignment with Banco Santander's risk management principles. |
The Corporate Risk Management Framework, approved by Senior Management (Risks), is designed to establish the principles and standards for risk management and control at Banco Santander. It is based on corporate organizational models and complies with the requisite regulatory standards for credit management.
The organizational model consists of the management map, which delineates the responsibilities of each area by risk type, the risk governance function, and the regulatory framework itself.
| II. | Risk identification through continuous review and monitoring of exposures, assessment of new products and business ventures, and specific analysis of unique transactions. |
| III. | Risk measurement using periodically tested methods and models. |
| IV. | Preparation and distribution of a comprehensive set of reports, which undergo daily review by the Executive Board of Banco Santander. |
| V. | Implementation of a risk control system that assesses, on a daily basis, the extent to which the Bank's risk profile conforms to approved policies and established limits. The most significant tools and techniques (previously mentioned), currently employed by Banco Santander, are at various stages of maturity regarding their implementation and application within the Bank. For the wholesale segment, these techniques are aligned with corporate-level development. For other segments, models based on internal classifications and score systems, VaR analysis, market risk scenario analysis, and stress testing have already been integrated into the risk management routine, while the integration of expected loss, economic capital, and RORAC into risk management is underway. |
| VI. | Models based on internal classifications and score systems, which, by assessing the various qualitative and quantitative risk components for each client and transaction, enable the estimation of the probability of default initially, and subsequently, the loss based on LGD estimates. |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 105 |
|
*Values expressed in thousands, except when indicated |
| VII. | Economic capital, as a consistent measure of assumed risk and a basis for evaluating management performance. |
| VIII. | RORAC,utilized both as a pricing tool in wholesale operations, particularly within global relationship companies (employing a bottom-up approach), and in the analysis of portfolios and business units (using a top-down approach). |
| IX. | VaR, utilized to control and set market risk limits for the treasury's various portfolios. |
| X. | Scenario analysis and stress testing to complement market and credit risk assessments in order to evaluate the impact of alternative scenarios, including on provisions and capital. |
a) Corporate Governance of the Risk Function
The structure of Banco Santander's Risk Committees is defined in line with a prudent risk management standard, always in compliance with the local regulatory and normative environment. Its primary responsibilities are the following:
| A. | Integrate and adapt the Bank's risk culture to the local context, in addition to the risk management strategy, tolerance level, and risk appetite, previously approved by the Executive Committee and the Board of Directors, all in alignment with the corporate standards of Banco Santander Spain; |
| B. | Assess and approve proposals, operations, and limits, whether related to credit or market, for clients and portfolios; |
| C. | Conduct periodic monitoring of all inherent business risks, ensuring that the risk profile is aligned with the established risk appetite; |
| D. | Authorize the use of management tools, local risk models, and understand the results of their internal validation; |
| E. | Remain informed, assess, and comply with any observations and recommendations that may periodically be issued by supervisory authorities in the execution of their duties; |
The credit risk management structure comprises departments operating from a portfolio management perspective and units dedicated to the individualized analysis and decision-making on loans for Individual, Business, and Wholesale clients. A specific area is tasked with consolidating the portfolios and their respective risks, providing support to management, as well as to the Group's headquarters in Spain, offering an integrated risk view.
The credit risk management structure comprises departments operating from a retail and wholesale portfolio management perspective. A specific area is tasked with consolidating the portfolios and their respective risks, providing support to management, as well as to the Group's headquarters in Spain, offering an integrated risk view.
A designated structure is responsible for attending to regulators, supervisors, as well as internal and external auditors.
It has a core called ERM-Enterprise Risk Management, integrated by a set of functions, transversal to all risks, necessary for their adequate management. This structure includes the areas of Methodology (development and parameterization of models); Credit Risk Control; Integrated Management and Relationship with Supervisors and Stress Test. In addition, the Strategy Risk Management department is the team responsible for managing and monitoring the Risk Culture.
b) Credit Risk
b.1) Introduction to credit risk management
Credit Risk Management supports the formulation of strategies in alignment with risk appetite, while also setting limits that include the analysis of exposure and trends, as well as assessing the effectiveness of the credit policy. The objective is to sustain a risk profile and sufficient minimum profitability to offset the anticipated default, for both individual clients and the overall portfolio, as determined by the Executive Committee and the Board of Directors. Moreover, it is tasked with overseeing the risk management systems and their implementation in the identification, measurement, control, and mitigation of risk exposure in either individual or similarly grouped operations.
Risk Management is specialized according to client characteristics, distinguishing between individualized clients (monitored by dedicated analysts) and clients with similar characteristics (standardized).
| • | Individualized management – Conducted by a designated risk analyst, who is responsible for the preparation of analyses, submission to the Risk Committee, and ongoing monitoring of the client's progress. It applies to clients from the Global Wholesale Banking segment (Corporate and Santander Corporate & Investment Banking - SCIB) and Commercial Banking (Portfolio clients, Companies 3, as well as GIU-Governments, Institutions, and Universities). |
| • | Standardized management – Targeted at individuals and companies not classified as individualized clients. It relies on automated decision-making models and internal risk assessment frameworks, supplemented by commercial units and specialized analyst teams to address exceptions. |
Macroeconomic factors and market conditions, as well as sector-wise and geographical concentrations, alongside the profiles of clients and economic forecasts, are also evaluated and considered for a proper assessment of credit risk.
b.2) Measures and evaluation tools
Rating tools
The Bank employs its proprietary rating models to assess the credit quality of a client or transaction. Each rating is linked to a probability of default or non-payment, determined based on the Bank's historical experience, to predict default. These scores/ratings are utilized in the credit risk approval and monitoring process.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 106 |
|
*Values expressed in thousands, except when indicated |
The classification of credit exposures into distinct categories is conducted based on an analysis of the client's financial and economic circumstances, as well as other registration information that is regularly updated. New types of operations are subjected to a credit risk assessment and must be verified for compliance with the controls adopted by the Bank.
The ratings assigned to clients are periodically reviewed, incorporating the latest financial information and insights gained from the banking relationship. The frequency of these reassessments is heightened for clients who reach specific thresholds in automated alert systems, as well as for those designated for special monitoring. The rating tools are also continually reviewed and refined to ensure the accuracy of the ratings they assign is continually improved.
Credit risk parameters
We assess all loans with regard to the provision for impairment losses on credit risk. Loans are individually assessed for impairment or collectively assessed through grouping by similar risk characteristics. Loans that are individually evaluated for impairment losses are not assessed collectively.
To measure the impairment loss of loans assessed individually for impairment, we consider the conditions of the borrowers, including their economic and financial status, level of indebtedness, cash flow generation capacity, management quality, corporate governance, internal controls quality, payment history, industry experience, contingencies, and credit limits. Additionally, we evaluate asset characteristics, such as their nature and purpose, type, adequacy, and liquidity of collateral, drawing on historical impairment experience and other known circumstances at the time of assessment.
To measure the impairment loss on loans assessed collectively for impairment, we segregate financial assets into groups based on their credit risk characteristics and similarities. In other words, according to the segment, type of assets, collateral, and other factors related to historical impairment losses and other known circumstances at the time of assessment. The impairment loss is calculated using statistical models that incorporate the following factors:
Exposure At Default (EAD): refers to the amount of a transaction exposed to credit risk, including the proportion of the current exposure of the outstanding balance that could be realized in the event of default. The developed models incorporate assumptions to account for potential changes in the payment schedule.
Probability of Default (PD): denotes the likelihood of a counterparty failing to fulfill its obligation to repay the principal and/or interest. Within the framework of IFRS 9, this encompasses both the PD-12 months, which is the probability of the financial instrument defaulting within the next 12 months, and the lifetime PD, which is the probability of the transaction defaulting over its remaining term. The estimation of these parameters requires the consideration of relevant future information, as per the standard.
Loss Given Default (LGD): represents the loss incurred upon default. In other words, it quantifies the percentage of exposure that was not recoverable following a default event. The determination of LGD is primarily influenced by the collateral, which serves as a mitigator of the credit risk associated with each financial asset, and the expected future cash flows to be recovered. In accordance with the standard, forward-looking information must be considered in the estimation process.
Discount Rate: the rate applied to the estimated future cash flows over the expected lifespan of the asset, which corresponds to the net present value of the financial instrument relative to its carrying amount.
To estimate the aforementioned parameters, the Bank leveraged its expertise in developing internal models for the calculation of parameters for both regulatory and management purposes.
The table presented in note 9.b outlines the portfolio according to internal risk rating levels and their probability of default.
The expected loan losses, measured using sufficient and available historical data, are detailed below.
| Thousand of Reais | 2024 | 2023 |
| By maturity | ||
| Less than 1 Year |
|
|
| Between 1 and 5 years |
|
|
| More than 5 years |
|
|
| Loans and advances to customers, gross |
|
|
| By internal classification of risk | ||
| Low |
|
|
| Medium-low |
|
|
| Medium |
|
|
| Medium-High |
|
|
| High |
|
|
| Loans and advances to customers, gross |
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 107 |
|
*Values expressed in thousands, except when indicated |
| 2024 | |||
| Probability of default | Default loss | ||
| Exposure | |||
| Commercial and industrial |
|
|
|
| Real Estate Credit - construction |
|
|
|
| Individual loans |
|
|
|
| Leasing |
|
|
|
| 2023 | |||
| Exposure | Probability of default | Default loss | |
| Commercial and industrial |
|
|
|
| Real Estate Credit - construction |
|
|
|
| Individual loans |
|
|
|
| Leasing |
|
|
|
b.3) Observed losses: credit cost measures
Each month, the Bank estimates the losses associated with credit risk and subsequently compares these estimates with the actual losses incurred during the month. Periodic analyses are conducted to monitor and maintain control over credit risk.
To complement the use of admission and rating models, Banco Santander employs additional measures to support the prudent and effective management of credit risk, based on observed losses.
The cost of credit is calculated by adding the loan losses incurred over the fiscal year to the average loan portfolio for the same period.
b.4) Credit risk cycle
Banco Santander has a global perspective of its loan portfolio across all stages of the risk cycle, with a level of granularity that enables the assessment of the current risk situation and potential movements. This mapping is overseen by the Board of Directors and the Executive Committee of the bank, which are responsible for setting risk management policies and procedures, limits, and delegating authority, in addition to approving and supervising the department's operations.
The credit risk management process involves the identification, measurement, analysis, control, negotiation, mitigation, and decision-making on the risks incurred in the operations of the Bank and its affiliated entities within the Conglomerate. The credit cycle comprises three distinct stages:
| • | Pre-sales: encompasses the planning activities, goal setting, assessment of Banco Santander's risk appetite, approval of new products, risk analysis, credit rating procedures, and definition of limits; |
| • | Sales: this involves the decision-making process for pre-classified and specific operations; and |
| • | After-sales: this includes the processes of monitoring, measurement, and control, as well as the management of the recovery process. |
Planning and setting risk limits
This process identifies the Bank's risk appetite by evaluating business proposals and assessing its risk position.
It is determined based on the risk appetite approved by the Bank's Management and its units.
In the context of individualized risks, the client constitutes the foundational level, for whom specific limits are set.
For SCIB clients, a pre-classification model is utilized, which is based on a system for measuring and monitoring economic capital. With respect to the Corporate segment, the operational limit model is applied, utilizing maximum nominal credit values.
For clients under standardized risk management, portfolio limits are established through loan management programs (LMP), a document that is pre-agreed upon by the business and risk departments, and approved by the Executive Committee. This document specifies the expected outcomes for the business in terms of risk and return, as well as the limits to which both the activity and risk management are subject. This client segment receives a more automated Risk treatment.
Risk analysis and rating process
Risk analysis is a prerequisite for the Bank's credit approval for clients. This analysis involves examining the counterparty's ability to fulfill its contractual obligations to the Bank, which includes assessing the client's credit quality, risk operations, solvency, and the intended return in light of the assumed risk.
This risk assessment is conducted at least annually, and may be revised more frequently if warranted by the client's risk profile (due to centralized alert systems or visits from the manager or credit analyst), or if there are specific transactions outside of the pre-classification.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 108 |
|
*Values expressed in thousands, except when indicated |
Decision-making on operations
The decision-making process for operations is designed to analyze and implement measures in accordance with pre-established policies, factoring in the risk appetite and any significant elements of the operation for the purpose of assessing risk and return.
The Bank employs, among other methodologies, the RORAC (Risk-Adjusted Return on Capital) approach for analysis and pricing in its decision-making process concerning operations and business activities.
Risk monitoring and control
In the retail banking segment for individual customers, clients are systematically assessed through a daily credit scoring process.
This process enables the reassessment of credit exposure, allowing for increases in exposure for clients exhibiting good credit quality. In the event of detecting a deterioration in risk level, it automatically triggers actions for credit risk containment and the implementation of preventive measures.
In instances of individualized management, the preemptive detection of credit quality deterioration within an operation falls under the joint responsibility of the commercial manager and the risk analyst. Furthermore, risk monitoring is conducted through a continuous observation process, aimed at the early identification of incidents that may occur in the evolution of operations, clients, and their environment.
This monitoring may lead to the client's classification under SCAN (a system designed to differentiate management levels and dictate the appropriate actions on a case-by-case basis).
Risk control function
The control function is executed by assessing risks from various complementary perspectives, with the main pillars being control by location, business area, management model, product, and process. This approach facilitates the identification of specific situations necessitating decision-making. The objective is to gain a comprehensive understanding of the Bank's loan portfolio across all stages of the credit cycle, with a degree of detail enabling the evaluation of the current risk situation and potential changes.
Shifts in the Bank's exposure to credit risk are continuously and systematically monitored. The effects of these changes on future exogenous situations, as well as those stemming from strategic decisions, are assessed with the aim of implementing measures that restore the loan portfolio's profile and value back to the parameters set by the Executive Committee.
b.5) Credit Recovery
Operational strategies and channels are determined based on the number of days past due and the respective amounts, resulting in a Responsibilities Map and always prioritizing, as the primary option, the customer's recovery.
Behavioral scoring tools are utilized to assess the collection performance of specific groups, aiming to reduce costs and enhance recovery efforts. These models are designed to estimate the likelihood of customer default by optimizing collection strategies, so that customers with a lower probability of recovery are targeted with timely interventions. In instances where there is a higher likelihood of repayment, the emphasis is placed on maintaining a healthy relationship with customers. All customers facing significantly overdue payments or those with restructured loans are subjected to internal restrictions.
Clients with higher volumes at Risk are assigned a portfolio-based recovery model, with commercial oversight and a recovery specialist.
b.6) Credit risk from other perspectives
Certain areas and/or specific perspectives on credit risk warrant the attention of specialists, in addition to the management of overall risk.
Concentration risk
Concentration risk is a critical factor in credit risk management. The Bank continuously monitors the concentration of credit risk within its portfolios, by economic sector, geographical location/country, customer groups, and product types.
The Risk Committee establishes risk policies and assesses the necessary exposure limits for the effective management of credit risk concentration within the portfolio. From a sector-wise perspective, the distribution of the corporate client portfolio is appropriately diversified.
The Risk Executive Vice Presidency at the Bank works in conjunction with the Strategic Finance Executive Vice Presidency in the management of loan portfolios. This involves reducing the concentration of exposures through various techniques, including maintaining guarantees to mitigate corporate risk, deploying derivatives for hedging purposes, and executing securitization transactions to optimize the portfolio's overall risk/return ratio.
Credit risk from financial market operations
This topic encompasses the credit risk associated with treasury operations conducted with clients, particularly credit institutions. These operations are carried out through financing products in the money market involving various financial institutions and by employing instruments held for the purpose of serving clients.
Risk management is conducted with the support of an integrated real-time system, enabling the Bank to ascertain, at any moment, the unused exposure limit with respect to any counterparty, any product, and any maturity across all units of the Bank.
Credit risk is measured at its current fair value and its potential value (the value of exposure, considering future shifts in relevant market factors). Consequently, the Equivalent Credit Risk (ECR) is defined as the sum of the net replacement value plus the future maximum potential value of the contracts.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 109 |
|
*Values expressed in thousands, except when indicated |
Social and Environmental Risk
In order to promote a more controlled and safe scenario for our operations and also foster the development of businesses that adopt sustainable practices, Banco Santander permanently manages the risks involved in our activities and that may have an impact on the Organization, shareholders, customers, society and the environment.
In this sense, Banco Santander has a Social, Environmental and Climate Responsibility Policy (PRSAC), which establishes guidelines and consolidates specific policies for social, environmental and climate practices in business and in relationships with stakeholders. These practices include the analysis of social, environmental and climate risks, which is guided by the Social, Environmental and Climate Risk Policy (PORSAC), for granting credit to Wholesale customers and the Retail Companies 3 segment (one of the Bank's Legal Entity segments), which have credit limits or risk above R$7 million. These customers, both Wholesale and Retail, are classified into 14 service sectors, segregated into two risk levels: medium and high risk subsectors. This analysis also covers agricultural operations (including individual clients), real estate credit, projects, guarantees, acceptance and retention of clients, and mergers and acquisitions. The purpose of the Socio-environmental and Climate Risk analysis is to support and mitigate issues of operational risk, capital risk, credit risk, and reputational risk, always with an integrated risk perspective.
Since 2009, Santander has been a signatory to the Equator Principles, which are a set of guidelines used to analyze Socio-environmental and Climate Risks in the financing of large infrastructure and energy projects. The same set of socio-environmental criteria is applied to projects that do not fall within these principles. The aforementioned management structure is aligned with compliance with CMN resolutions no. 4,943/2021 and no. 4,945/2021, determining that organizations take a closer look at managing risks associated with social, environmental and climate issues, in addition to a Social, Environmental and Climate Responsibility Policy (PRSAC) and Social, Environmental and Climate Risk Policy (PORSAC)..
b.7) Credit Management - Main changes
The trends observed in 2024 were consistent with those of 2023, during which we observed a challenging economic environment. The Bank succeeded in maintaining the high quality of its business, evidenced by an improvement in the non-performing loan ratio, primarily due to the enhanced quality observed in the new vintages, coupled with the write-off of older vintages. As of December 2024, this ratio stood at 7.03% compared to 7.23% in December 31, 2023 and 7.5% in December 31, 2022.
Below is a table illustrating the evolution of the main credit indicators.
| 2024 | 2023 | |
| Credit risk exposure - customers (Thousand of Reais) |
|
|
| Loans and advances to customers, gross (note 9) |
|
|
| Contingent Liabilities - Guarantees and other sureties (note 43.a) |
|
|
| Private securities |
|
|
| Non-performing loans ratio (%) |
|
|
| Impairment coverage ratio (%) |
|
|
| Specific credit loss provisions, net of RAWO (*) (Thousand of Reais) |
|
|
Data prepared based on management criteria and accounting criteria of the controlling unit.
| (*) | RAWO = Recoveries of Assets Written Off at Loss |
The Bank incorporates forward-looking information in both its assessment of whether the credit risk of a financial instrument has substantially increased since its initial recognition and in its measurement of expected loan losses. Drawing on guidance from its internal committees and economic experts, and taking into account a range of actual and forecasted external information, the Bank develops a base scenario as well as other possible scenarios. This process involves projecting two or more additional economic scenarios and assessing the respective probabilities of each outcome. External information includes economic data and forecasts published by government agencies, monetary authorities, and selected analysts from the private sector and academia.
The base case represents the most probable outcome and aligns with the information the Bank uses for other purposes, including strategic planning and budget formulation. The alternative scenarios depict outcomes that are either more optimistic or more pessimistic. Periodically, the Bank conducts stress tests on more extreme shocks to refine its assessment of these alternative scenarios.
c) Market Risk
Market risk represents exposure to risk factors such as interest rates, exchange rates, commodity prices, stock market prices, and other financial instruments, contingent upon the product type, transaction volume, duration, contractual terms, and underlying volatility.
The Bank operates in accordance with global policies, framed within its risk tolerance perspective and aligned with its objectives in Brazil and internationally. To achieve this, it has developed its own Risk Management model, adhering to the following principles:
| • | Functional independence; |
| • | Executive capability sustained by knowledge and close customer relationships; |
| • | Global reach of the function (diverse risk types); |
| • | Collective decision-making that evaluates all possible scenarios without compromising outcomes with individual decisions, including the Executive Risk Committee for Brazil, which establishes limits and approves operations, and the Executive Committee for Assets and Liabilities, responsible for the management of capital and structural risks, encompassing country risk, liquidity, and interest rates; |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 110 |
|
*Values expressed in thousands, except when indicated |
| • | Management and optimization of the risk/return equation; and |
| • | Risk management methodologies, such as Value At Risk - VaR (historical simulation over 521 days, with a confidence level of 99% and a one-day time horizon), scenarios, sensitivity of net interest income, sensitivity of fair value of equity, and contingency planning. |
The Market Risk structure is part of the Risk Vice Presidency, an independent unit that implements risk policies in accordance with the directives from the Board of Directors and the Risk Division of the Santander Group Spain.
c.1) Activities subject to market risk
The measurement, control, and monitoring of market risk encompass all operations where asset risk is assumed. This risk arises from fluctuations in risk factors - including interest rates, exchange rates, equities, commodity prices, and the volatility of these factors - as well as from solvency and liquidity risks associated with the various products and markets in which the Bank operates.
The activities are segmented by type of risk, as follows:
| I. | Financial intermediation: this item encompasses financial services provided to clients, financial intermediation operations and positioning, particularly in fixed-income securities, foreign exchange, and equities. |
| II. | Balance sheet management: the objective of balance sheet risk management is to stabilize the net interest income of the commercial area and the economic value of the Bank, so as to maintain adequate liquidity and solvency levels. Risk is assessed based on the balance sheet's exposure to interest rate movements and liquidity levels. |
| III. | Structural Risks: |
| • | Structural foreign exchange risk/earnings hedge: exchange rate risk arising from the currency in which investments in consolidated and non-consolidated entities are made (structural exchange rate). This item also includes positions taken to hedge against the foreign exchange risk in future earnings generated in currencies other than the Brazilian Real (earnings hedge). |
| • | Structural equity risk: this item includes equity interests in both financial and non-financial and non-consolidated entities that may present an equity risk. |
The Financial Management area is responsible for centrally managing balance sheet and structural risks by applying standardized methodologies tailored to the specific conditions of each market in which the Bank operates. In the Convertible Currencies segment, Financial Management directly oversees the risks at the Headquarters and coordinates the risk management of other units operating in these currencies. Decisions impacting the management of these risks are made by the ALCO (Asset Liability Committee) in the respective countries.
The purpose of the Financial Management area is to ensure the stability and recurring nature of both the net interest margin arising from commercial activities and the Bank's economic value, while maintaining adequate levels of solvency and liquidity.
Each of these activities is measured and analyzed using various tools to accurately reflect their risk profiles as precisely as possible.
Interest Rate Risk
The table below consolidates, by product, the cash flows from operations within our group of companies that earn interest income. These operations are reported at their book balance as of the closing dates for the years 2024 and 2023. It is not associated with the management of risks related to changes in interest rates or the mismatching of indices, which is conducted through the monitoring of market metrics. However, it facilitates the assessment of concentrations of maturities and potential risks. Below this, the balances of the same products are presented at their redemption value at maturity, with the exception of the line concerning receivables and liabilities from derivative contracts.
| 2024 | ||||||
| In millions of Reais | ||||||
| Position of accounts subject to interest rate risk | On Demand |
Up to 3 Months |
3 to 12 Months | 1 to 5 years | Above 5 years | Total |
| Interest-earning assets: | ||||||
| Financial assets measured at fair value in income | - | - |
|
|
- |
|
| Debt instruments | - | - |
|
|
- |
|
| Financial assets measured at fair value in profit or loss |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Equity instruments | - |
|
- |
|
- |
|
| Derivatives | - |
|
|
|
|
|
| Financial assets not intended for trading Mandatory measured at the fair value of the result | - | - | - | - |
|
|
| Debt instruments | - | - | - |
|
|
|
| Financial assets measured at fair value in other comprehensive income |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Financial Assets Measured at Amortized Cost |
|
|
|
|
|
|
| Loans and Other Amounts with Credit institutions |
|
|
|
|
- |
|
| Loans and advances to customers |
|
|
|
|
|
|
| Debt Instruments |
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
| Remunerated Liabilities: | ||||||
| Financial Liabilities Measured at Fair Value in income Held for Trading |
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
| Short Positions |
|
|
||||
| Financial liabilities at amortized cost |
|
|
|
|
|
|
| Deposits from credit institutions |
|
|
|
|
|
|
| Customer deposits |
|
|
|
|
|
|
| Bonds and securities |
|
|
|
|
|
|
| Debt Instruments Eligible to Capital |
|
|
||||
| Total |
|
|
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 111 |
|
*Values expressed in thousands, except when indicated |
| 2023 | ||||||
| In millions of Reais | ||||||
| Position of accounts subject to interest rate risk | On Demand |
Up to 3 Months |
3 to 12 Months | 1 to 5 years | Above 5 years | Total |
| Interest-earning assets: | ||||||
| Financial assets measured at fair value in income | - | - | - | - |
|
|
| Debt instruments | - | - | - | - |
|
|
| Financial assets measured at fair value in profit or loss |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Equity instruments |
|
|
|
|
- |
|
| Derivatives |
|
|
|
|
|
|
| Financial assets not intended for trading Mandatory measured at the fair value of the result | - | - | - | - |
|
|
| Debt instruments | - | - | - | - |
|
|
| Financial assets measured at fair value in other comprehensive income |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Financial Assets Measured at Amortized Cost |
|
|
|
|
|
|
| Loans and Other Amounts with Credit institutions |
|
|
|
|
- |
|
| Loans and advances to customers |
|
|
|
|
|
|
| Debt Instruments |
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
| Interest-bearing liabilities: | ||||||
| Financial Liabilities Measured at Fair Value in income Held for Trading |
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
| Short Positions |
|
|
||||
| Financial liabilities at amortized cost |
|
|
|
|
|
|
| Deposits from credit institutions |
|
|
|
|
|
|
| Customer deposits |
|
|
|
|
|
|
| Bonds and securities |
|
|
|
|
|
|
| Debt Instruments Eligible to Capital |
|
|
||||
| Total |
|
|
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 112 |
|
*Values expressed in thousands, except when indicated |
| Currency Risk | ||||
| 2024 | ||||
| In millions of Reais | ||||
| Asset: | Dollar | Euro | Others | Total |
| Cash/Applications/Debt Instruments |
|
|
|
|
| Loans and advances to customers |
|
|
|
|
| Derivatives |
|
|
|
|
| Others |
|
|
||
| Total |
|
|
|
|
| Liabilities: | Dollar | Euro | Others | Total |
| Funding in foreign currency |
|
|
|
|
| Derivatives |
|
|
|
|
| Others |
|
|
|
|
| Total |
|
|
|
|
| 2023 | ||||
| In millions of Reais | ||||
| Asset: | Dollar | Euro | Others | Total |
| Cash/Applications/Debt Instruments |
|
|
|
|
| Loans and advances to customers |
|
|
|
|
| Derivatives |
|
|
|
|
| Others |
|
|
||
| Total |
|
|
|
|
| Liabilities: | Dollar | Euro | Others | Total |
| Funding in foreign currency |
|
|
|
|
| Derivatives |
|
|
|
|
| Others |
|
|
|
|
| Total |
|
|
|
|
c.2) Methodologies
Financial Intermediation
Banco Santander has been calculating the minimum capital requirement for market risks using an internal model since its approval by the Brazilian Central Bank in May of 2018.
The standard methodology for measuring and controlling market risks in financial intermediation activities conducted by Banco Santander in 2024 and 2023 was Value at Risk (VaR), which quantifies the maximum expected loss at a specified confidence level over a given period. This methodology employs a standard historical simulation with a confidence level of 99% and a one-day horizon. Statistical adjustments were made to efficiently incorporate the most recent events impacting the level of risk assumed.
Specifically, the Bank employs a two-year time window or 521 daily data points collected retrospectively from the reference date of the VaR calculation. Each day, two values are computed: one utilizing an exponential decay factor that assigns lesser weight to observations more distant from the current term, and another with uniform weights for all observations. The reported VaR will be the higher of these two values.
VaR is not the only metric available for assessing the risk exposure of an institution. It is favored for its simplicity in calculation and effectiveness as a benchmark for the level of risk faced by the Bank. Nevertheless, the Bank employs additional metrics and methodologies to enhance its control over risk across all markets in which it operates.
Among these measures, scenario analysis is particularly noteworthy. It entails defining behavioral scenarios for various financial variables and assessing their impact on results by applying them to the Bank's operations. These scenarios may either replicate past events (such as crises, for example), or establish plausible scenarios that are not based on past events. A minimum of three types of scenarios—plausible, severe, and extreme—are established. Together with VaR, these scenarios enable a much more comprehensive assessment of the risk profile.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 113 |
|
*Values expressed in thousands, except when indicated |
The positions are tracked daily through comprehensive oversight of portfolio fluctuations, with the purpose of identifying potential incidents and immediately rectifying them.
A daily profit and loss statement is an excellent indicator of risk, as it enables the monitoring and detection of the impact of changes in financial variables on portfolios.
Finally, in managing credit activities (actively traded credits - trading portfolio) and derivatives, given their unique characteristics, specific measures are assessed. For derivatives, these measures include sensitivities to fluctuations in the underlying asset's price (delta and gamma), volatility (vega), and time (theta). In the case of credit management activities (actively traded) within trading portfolios, the controlled measures encompass sensitivity to spread, jump-to-default risk, and position concentration by rating level.
c.3) Balance sheet management
Interest rate risk
The Bank assesses the sensitivity of the net interest margin (financial margin) and fair value of equity to interest rate fluctuations. This sensitivity arises from the mismatch between the maturity and interest rate revision dates of the various balance sheet items.
Based on the balance sheet's interest rate position and taking into account the market's current situation and future outlook, financial measures are implemented to align this position with the Bank's desired stance. These measures may range from taking market positions to defining the interest rate characteristics of commercial products.
The measures employed by the Bank to manage risk, or exposure to interest rates in these activities, include the interest rate gap, which assesses the sensitivity of the net interest margin (NIM) and fair value of equity (MVE) to fluctuations in interest rate levels, the duration of equity, Value at Risk (VaR), Earnings at Risk (EaR), and scenario analysis.
Interest Rate Gap between Assets and Liabilities
The interest rate gap analysis focuses on the mismatches between the revaluation periods of balance sheet items (assets and liabilities) and off-balance sheet items. This analysis provides a basic representation of the balance sheet structure and enables the identification of interest rate risk concentrations across various maturities. Furthermore, it serves as a useful tool for estimating the potential impact of fluctuations in interest rates on the net interest margin and the institution's equity value.
All items, whether on the balance sheet or off the balance sheet, must be classified according to flows and reorganized based on the point of price revaluation and their maturities. In instances where a maturity date is not specified by contract, an internal model for analyzing and estimating its duration and sensitivity will be utilized.
Sensitivity of Net Interest Margin (NIM)
The sensitivity of net interest margin measures the change in expected receivables for a specific period (12 months) in response to a shift in the interest rate curve.
The calculation of the net interest margin sensitivity is performed by simulating the margin in scenarios of changes in interest rate curves and comparing it with the current scenario. Sensitivity is the difference between the two calculated margins.
Sensitivity of Fair value of Equity (MVE)
The sensitivity of fair value of equity is a supplementary measure to the sensitivity of net interest margin.
It assesses the implicit interest rate risk in equity, based on the impact of interest rate fluctuations on the present values of financial assets and liabilities.
Value at Risk (VaR) and Earnings at Risk (EaR)
It is determined at the 99% percentile of the MVE's loss distribution function, calculated by considering the current fair value of positions, based on the returns obtained in the last two years, and with a degree of statistical certainty (confidence level) for a specified time horizon.
A similar methodology is also applied to calculate the maximum loss in NII (EaR), aiming to assess the interest rate risk in terms of its impact on both economic value and net interest margin.
The unit combines the VAR return vectors with the EaR return vectors, resulting in the total return vector. This combination is executed by incorporating into the EaR metric the losses in financial margin that occur between the reference date and the holding period of the non-trading portfolio. Losses in economic value account for the impact on positions maturing after the holding period.
c.4) Liquidity risk
Liquidity risk relates to the Bank's ability to fund commitments undertaken at reasonable market prices and to execute its business plans with stable funding sources.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 114 |
|
*Values expressed in thousands, except when indicated |
Liquidity management of Banco Santander
For liquidity management and control, Banco Santander employs both short-term and long-term metrics, as well as metrics for stress scenarios, which are capable of measuring a robust liquidity buffer, ensuring the Bank can comfortably meet its obligations to the market and shareholders. Accordingly, in this regard, we note:
Short-term metrics and liquidity stress:
a. LCR
Banco Santander employs the "Liquidity Coverage Ratio" (LCR) in its liquidity risk management strategy. The LCR is a short-term liquidity measure for a stress scenario spanning 30 days, calculated as the ratio of high-quality liquid assets to net cash outflows over 30 days.
The total High Quality Liquidity Assets - HQLA (Liquid Assets) primarily consist of Brazilian federal government securities and compulsory reserve yields. Net outflows are mainly due to deposit losses, partially offset by inflows, predominantly loans.
b. Liquidity stress scenarios
Liquidity management entails the analysis of financial scenarios to assess potential liquidity issues, which demands the development and examination of scenarios in crisis conditions. The Stress Test is the model employed for this analysis.
The Stress Test evaluates the financial structure of the institution and its capacity to withstand and respond to more extreme scenarios.
The purpose of the Liquidity Stress Test is to allow for the simulation of adverse market conditions, thereby enabling the assessment of their impacts on the institution's liquidity and payment capacity. Consequently, it aims to preemptively identify solutions or avoid positions that could significantly compromise liquidity in volatile scenarios.
Scenarios are defined based on the analysis of market behavior during previous crises. Four crisis scenarios are formulated, each with varying levels of intensity.
Following the analysis of stress models, the concept of minimum liquidity was established as the amount sufficient to cover liquidity losses over a specified horizon of days, across all simulated crisis scenarios.
Long-term metric:
Its purpose is to assess the stability of funding sources relative to committed assets. The Net Stable Funding Ratio (NSFR), a metric developed by the Bank for International Settlements (BIS) and adapted by the local regulator, aims to determine, through specified percentages, whether the institution maintains a stable funding source to support its assets. This metric applies varying weightings based on term, customer segment, and product type. It is calculated on a monthly basis by the institution.
c. Liquidity ratios
To support management, certain liquidity ratios, including counterparty concentration ratios and segment concentration ratios, are calculated on a monthly basis.
Funding from Customers
Banco Santander has diverse sources of
funding, both in terms of products and customer mix, with a healthy distribution across segments. Total customer funding currently stands
at R$
| In millions of Reais | ||||||
| Customers Funding | 2024 | 2023 | ||||
| 0 a 30 days | Total | % | 0 a 30 days | Total | % | |
| Demand deposits |
|
|
|
|
|
|
| Savings accounts |
|
|
|
|
|
|
| Time deposits |
|
|
|
|
|
|
| Interbank deposit |
|
|
|
|
|
|
| Funds from acceptances and issuance of securities |
|
|
|
|
|
|
| Borrowings and Onlendings |
|
|
|
|
|
|
| Subordinated Debts / Debt Instruments Eligible to Compose Capital |
|
|
|
|
||
| Total |
|
|
|
|
|
|
Assets and liabilities, classified by their remaining contractual maturities and considering the undiscounted cash flows, are as follows:
|
|
Consolidated Financial Statements | December 31, 2024 | F - 115 |
|
*Values expressed in thousands, except when indicated |
| 2024 | ||||||
| In millions of Reais | ||||||
| Future Cash Flows Except for Derivatives | On Demand |
Up to 3 Months |
3 to 12 Months | 1 to 5 years | Above 5 years | Total |
| Interest-earning assets: | ||||||
| Financial assets measured at fair value in income |
|
|
|
|||
| Debt instruments |
|
|
|
|||
| Financial assets measured at fair value in profit or loss |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Equity Instruments |
|
|
|
|||
| Derivatives |
|
|
|
|
|
|
| Financial assets measured at fair value in other comprehensive income |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Financial assets measured at amortized cost |
|
|
|
|
|
|
|
Loans and Other Amounts with Credit Institutions |
|
|
|
|
|
|
| Loans and advances to customers |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
| Remunerated Liabilities: | ||||||
|
Financial Liabilities Measured at Fair Value in Income Held for Trading |
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
| Short positions |
|
|
||||
| Financial liabilities at amortized cost |
|
|
|
|
|
|
|
Deposits from credit institutions |
|
|
|
|
|
|
| Customer deposits |
|
|
|
|
|
|
| Bonds and securities |
|
|
|
|
|
|
| Debt Instruments Eligible to Capital |
|
|
||||
| Total |
|
|
|
|
|
|
| 2023 | ||||||
| In millions of Reais | ||||||
| Non-Discounted Future Flows Except Derivatives | On Demand |
Up to 3 Months |
3 to 12 Months | 1 to 5 years | Above 5 years | Total |
| Interest-earning assets: | ||||||
| Financial assets measured at fair value in income | - |
|
|
|||
| Debt instruments |
|
|
||||
| Financial assets measured at fair value in profit or loss |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Equity Instruments |
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
| Financial assets measured at fair value in other comprehensive income |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Equity Instruments |
|
|
||||
| Financial assets measured at amortized cost |
|
|
|
|
|
|
|
Loans and Other Amounts with Credit Institutions |
|
|
|
|
|
|
| Loans and advances to customers |
|
|
|
|
|
|
| Debt instruments |
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
Consolidated Financial Statements | December 31, 2024 | F - 116 |
|
*Values expressed in thousands, except when indicated |
| Remunerated Liabilities: | ||||||
|
Financial Liabilities Measured at Fair Value in Income Held for Trading |
|
|
|
|
|
|
| Derivatives |
|
|
|
|
|
|
| Short positions |
|
|
||||
| Financial liabilities at amortized cost |
|
|
|
|
|
|
|
Deposits from credit institutions |
|
|
|
|
|
|
| Customer deposits |
|
|
|
|
|
|
| Bonds and securities |
|
|
|
|
|
|
| Debt Instruments Eligible to Capital |
|
|
||||
| Total |
|
|
|
|
|
|
|
|
Scenario analysis/contingency plan
Based on the results of the Stress Test, the Bank formulates its Liquidity Contingency Plan, comprising a formal set of preventive and corrective actions to be deployed in the event of a liquidity crisis. The activation of the Plan is contingent upon the monitoring of internal parameters that reflect the Bank's market and liquidity conditions. These parameters are used to identify different levels of crisis severity, thereby determining whether there is a need to initiate the activation process.
Following the identification of a crisis, clear communication is established among the internal departments capable of executing corrective actions to mitigate the arising issues. These corrective actions, aimed at generating liquidity to resolve or alleviate the effects of the crisis, are selected based on their complexities, implementation timelines, and impact on liquidity.
The parameters and measures of this Plan are subject to review whenever necessary, with a minimum review period of one year.
c.5) Structural foreign exchange risk/earnings hedge/structural equity risk
These activities are monitored by measuring positions, VaR, and results.
c.5.1) Complementary measures
Testing and calibration measures
Back-testing consists of a comparative analysis between Value at Risk (VaR) estimates and daily "clean" results (portfolio profits or losses at the end of the previous day, valued at the next day's prices) and "dirty" results (managerial income incorporating costs, intraday results, and carry). The purpose of these tests is to verify and provide a measure of the accuracy of the models used in the VaR calculation.
The back-testing analyses conducted by Banco Santander are in compliance, at a minimum, with the BIS recommendations concerning the verification of internal systems used in the measurement and management of financial risks. The Bank also engages in hypothesis testing, including tests for outliers, normality tests, Spearman correlation, and measures of average excess, among others. The assessment models are regularly calibrated and tested by a specialized unit.
c.6) Control system
Limit setting
The limit-setting process is conducted in conjunction with budgeting activities and serves as a mechanism to determine the assets and liabilities available for each business activity. This process is dynamic, adjusting to the level of risk deemed acceptable by Management. The framework for setting limits entails devising a process that takes into account, among other factors, the following aspects:
Efficiently and comprehensively identify and delineate the principal types of financial risks generated, ensuring alignment with business management and the defined strategy.
Quantify and communicate to the business divisions the levels and profiles of risk deemed acceptable by Management, in order to prevent undesired risks.
Provide business areas with the flexibility to undertake financial risks efficiently and timely, in response to market changes and business strategy adjustments, always within the risk thresholds deemed acceptable by the institution.
Enable business generators to assume risks at a volume that is both prudent and adequate to achieve the budgeted results.
Specify the range of products and underlyings that each Treasury unit is authorized to operate with, taking into account factors such as valuation models and systems, and the liquidity of the instruments involved.
c.7) Risks and results in 2024
Financial Intermediation Activities
In 2024, he Bank's trading portfolio's average VaR was R$4,527 million. The dynamic management of this profile allows the Bank to adjust its strategy to capitalize on opportunities presented by an uncertain environment.
c.7.1) Balance sheet management
|
|
Consolidated Financial Statements | December 31, 2024 | F - 117 |
|
*Values expressed in thousands, except when indicated |
Interest risk
Convertible currencies
At the end of 2024, the interest rate risk, as measured by the one-year sensitivity of the net interest margin to a parallel increase of 100 basis points across Banco Santander's portfolios, was primarily concentrated in the Brazilian Real interest rate curve, resulting in a positive impact of R$798 million.
Additionally, at the close of 2024, the interest rate risk, as measured in terms of the company's fair value sensitivity to a parallel increase of 100 basis points applied to Banco Santander on the Brazilian Real interest rate curve, resulted in a negative impact of R$2,643 million.
Quantitative risk analysis
The interest rate risk in balance sheet management portfolios, as measured by the sensitivity of the net interest margin, over a one-year period with a parallel increase of 100 basis points in the interest rate curve, decreased by R$31 million from 2024 to 2023, reaching a peak of R$972 million in April of 2024. The sensitivity of value decreased by R$691 million during the year of 2024, achieving a maximum level of R$2,663 million in April of 2024. The key factors that occurred in the year 2024 and influenced the sensitivities were the slope/decrease of the interest rate curve (convexity effect), portfolio decay, and the refinement of implicit methodologies applied to cash flows of Banco Santander's products.
| Million of Reais | 2024 | 2023 | 2022 |
| Sensibilities | |||
| Net Interest Margin |
|
|
|
| Fair value of Equity |
|
|
|
| Value at Risk - Balance | |||
| VaR |
|
|
|
c.8) Sensitivity analysis
Risk management is concentrated on portfolios and risk factors, in accordance with Brazilian Central Bank regulations and international best practices.
Financial instruments are classified into trading books (Trading Book) and banking books (Banking Book), as performed in the management of market risk exposure, in line with market best practices and the Brazilian Central Bank's criteria for operation classification and capital management. The trading book encompasses all transactions involving financial instruments and commodities, including derivatives, held for trading purposes. The banking book includes structural operations stemming from the various business lines of Banco Santander and their corresponding hedges, if any. Consequently, in accordance with the nature of Banco Santander's activities, the sensitivity analysis has been split between the trading and banking portfolios.
Banco Santander conducts sensitivity analysis of its financial instruments in accordance with IFRS 7, taking into account market information and scenarios that could adversely affect the Bank's positions.
The summary tables presented below encapsulate sensitivity values generated by Banco Santander's corporate systems, relating to the trading book and the banking book, for each portfolio scenario on December, 31, 2024.
| Thousand of Reais | 2024 | |||
| Trading Book | ||||
| Risk Factor | Description | Scenario 1 | Scenario 2 | Scenario 3 |
| Interest Rate - Reais |
|
(
|
(
|
(
|
| Coupon Interest Rate |
|
(
|
(
|
(
|
| Inflation |
|
(
|
(
|
(
|
| Coupon - US Dollar |
|
(
|
(
|
(
|
| Coupon - Other Currencies |
|
(
|
(
|
(
|
| Foreign currency |
|
(
|
(
|
(
|
| Eurobond/Treasury/Global |
|
(
|
(
|
(
|
| Shares and Indexes |
(
|
(
|
(
|
|
| Commodities |
|
(
|
(
|
(
|
| Total (1) |
(
|
(
|
(
|
|
(1) Net amounts after tax effects
Scenario 1: shock of +10bps and -10bps in interest rate curves and 1% for price fluctuations (currencies and equities), considering the largest losses by risk factor.
Scenario 2: shock of +25% and -25% across all risk factors, considering the largest losses by risk factor.
Scenario 3: shock of +50% and -50% across all risk factors, considering the largest losses by risk factor
|
|
Consolidated Financial Statements | December 31, 2024 | F - 118 |
|
*Values expressed in thousands, except when indicated |
| Thousand of Reais | 2024 | |||
| Banking Book | ||||
| Risk Factor | Description | Scenario 1 | Scenario 2 | Scenario 3 |
| Interest Rate - Reais |
|
(
|
(
|
(
|
| TR and Long-Term Interest Rate (TJLP) |
|
(
|
(
|
(
|
| Inflation |
|
(
|
(
|
(
|
| Coupon - US Dollar |
|
(
|
(
|
(
|
| Coupon - Other Currencies |
|
(
|
(
|
(
|
| International Market Interest Rate |
|
(
|
(
|
(
|
| Foreign currency |
|
|
|
|
| Total (1) |
(
|
(
|
(
|
|
(1) Net amounts after tax effects.
Scenario 1: shock of +10bps and -10bps in interest rate curves and 1% for price fluctuations (currencies and equities), considering the largest losses by risk factor.
Scenario 2: shock of +25% and -25% across all risk factors, considering the largest losses by risk factor.
Scenario 3: shock of +50% and -50% across all risk factors, considering the largest losses by risk factor.
d) The Bank's operations are highly dependent on the proper functioning of its information technology systems
The Bank's operations are significantly dependent on the accurate and efficient processing of a large volume of transactions, executed by its information technology systems, along with its reliance on digital technologies, computing services, email, software, and networks, as well as the secure processing, storage, and transmission of confidential and other information within computer and network systems.
The proper functioning of the Bank's financial control, risk management, accounting, customer service, and other data processing systems is critical for its operations and its ability to compete effectively.
e) Independent Structure
The Operational Risk & Internal Control area, subordinate to the Executive Vice-Presidency of Risks, acts independently as a second line, supporting and challenging the first line. It has guidelines, policies and processes to ensure the conduct and adequacy of the Operational Risk Control and Management Model.
The area adopts the definition of the Basel Committee, the Central Bank of Brazil and other locally applicable Corporate instructions for Operational Risk as the possibility of losses resulting from inadequacy or failure of processes, operations, systems, or events. This definition covers the legal risk associated with inadequacy or deficiency in contracts signed by the Institution, as well as sanctions due to non-compliance with legal provisions and compensation for damages to third parties resulting from the activities developed by the Institution, excluding strategic and reputational Risk.
e.1) Operational Risks & Internal Controls
The Operational Risk & Internal Control area's mission within Banco Santander is to support the fulfillment of strategic objectives and the decision-making process, in adapting and meeting mandatory requirements, in maintaining solidity, reliability, reducing and mitigating losses due to operational risks, in addition to implementing and disseminating the Operational Risk culture.
Additionally, the Operational Risk & Internal Control area works to prevent Operational Risks and supports the continuous strengthening of the Internal Controls system, meeting the requirements of Regulatory Agencies, the Basel Accord, resolutions of the National Monetary Council (CMN) and Applicable Regulators. This Model also follows the guidelines established by Banco Santander Spain based on COSO – Committee of Sponsoring Organizations of the Treadway Commission – Internal Control – Integrated Framework 2013.
Control and Management Model
Santander Brasil implemented the Model based on three lines that aims at the continuous improvement and development of the management and control of operational risks, ensuring that the structures can assess, monitor, control, mitigate, report and reduce the risks and losses to which they are exposed.
The attributions of this model encompass conducting activities for the identification, assessment, monitoring, control, mitigation, and reporting of Operational Risk. Accordingly, diverse analyses and monitoring efforts are undertaken and reported. Below are the key instruments that constitute the Operational Risk Management and Control Model:
| • | Definition of Operational Risk appetite; |
| • | Capture and assessment of loss events (both internal and external); |
| • | Training, Communication, and Culture; |
| • | Evaluation of products and services; |
| • | Operational risk self-assessment; |
|
|
Consolidated Financial Statements | December 31, 2024 | F - 119 |
|
*Values expressed in thousands, except when indicated |
| • | Scenario Analysis; |
| • | Risk and Control Indicators; |
| • | Internal Controls. |
Model Governance
The Model is approved by the Executive Risk Committee and the Board of Directors, integrating the Organization's Corporate Governance responsibility into the structure. Relevant Operational Risk matters are periodically communicated to Senior Management for their knowledge and deliberation.
As part of the Risk Governance system, the Senior Forum for Internal Controls and Operational Risks (FSCIRO) has also been implemented, with the objective of deliberating for the Risk Pro Officers (RPO), on the front line, the policies, processes, procedures, strategy and decisions on the topics to be applied in the business units, and it is held monthly, except in the event of calendar/schedule conflicts of the members, and may be replaced by the Operational Risk Meeting.
To ensure a structured approach to the dissemination of the culture of management and control of Operational Risks, relevant topics are addressed in specific Committees and Forums.
e.2) Attributions of the Operational Risk and Internal Controls division
The Operational Risk & Internal Control area acts as the second line in the Banco Santander model and aims to maintain compliance, alignment and conformity with the corporate guidelines of the Santander Group, the Basel Accords, Resolutions of the National Monetary Council (CMN) and Applicable Regulators. It exercises control and challenges the activities performed by the first line, contributing to its strengthening, envisioning an integrated approach to risk management. The main responsibilities are presented below:
| • | Propagate a culture oriented to the management of Operational Risks and Internal Controls, converging towards the prevention and reduction of events and losses attributable to Operational Risk, thereby mitigating financial, legal, and reputational impacts. |
| • | Refine risk analysis to reduce, consolidate, and prioritize mitigation actions. |
| • | Maintain the dynamics and control of operational risk exposure in alignment with the risk appetite. |
| • | Set out roles and responsibilities, with oversight in conjunction with the responsible parties across the defense lines. |
| • | Ensure business continuity and strengthen the Internal Control environment. |
| • | Provide an adequate level of coverage throughout the business units. |
| • | Offer support for the Organization's strategic decision-making, grounded in an integrated Operational Risk profile and emerging trends. |
| • | Implement best practices for managing and controlling operational risks in the 1st and 2nd Line of Defense. |
| • | Identify the Organization's Operational Risk Profile. |
| • | Enable continuous improvement of existing methodologies and the deepening of the culture of accountability for Operational Risks and Internal Controls. |
e.3) Differentiating factor
The Operational Risk & Internal Control area invests in the development, training and updating of its professionals to respond to changes identified in the business environment and provides training to other professionals through courses on the Intranet, in-person and virtual in real time. For in-person and virtual in real time, we prioritize the provision of training aimed at fostering the culture of Operational Risk management, Internal Controls, training to capture operational losses, among others.
These achievements contribute significantly to Banco Santander Brasil achieving its strategic and operational objectives in a consistent manner, with knowledge regarding the exposure to operational risks assumed and a controlled environment, maintaining the bank's low-risk profile and ensuring the sustainable development of its operations. The Bank highlights:
| • | Mandatory training for all Banco Santander employees, through the Santander Academy, on Operational Risks and Internal Controls. |
| • | Creation, dissemination and maintenance of Instruction Manuals, allowing corporate dissemination for everyone's commitment. |
| • | Coordination of the annual process for the preparation of operational risk loss forecasts and definition of action plans to mitigate these losses. |
| • | Development of key indicators for the purpose of monitoring the main operational risks. |
| • | Composition of governance lines with the “ORM - Operational Risk management” Networks: “RPO-Risk Pro Officer”, whose role is to report to the executive the monitoring of Operational Risk issues at the strategic level of the Executive Board, the “RPA-Risk Pro Agent” who is responsible for the VPE regarding the Operational Risk Management and Control Model and “Operational Risk Assistant” covering the RO perimeter and “Specialists” for cases where the operational risk is transversal to the organization. |
e.4) Communication
The Operational Risk & Internal Control area is part of Banco Santander's Governance structure and maintains a periodic communication and reporting process for Management through the Senior Forum on Internal Controls and Operational Risks (FSCIRO) and the RO Meeting. This process includes the presentation of materialized events, main risks, corrective action plans and information on the Internal Controls environment, ensuring transparency and knowledge to the governance forums. Additionally, the main risks (materialized and emerging) are reported and escalated, when applicable, to the Risk Control Committee and the Audit Committee and the Risk and Compliance Committee of the Board.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 120 |
|
*Values expressed in thousands, except when indicated |
f) Reputation Risk
f.1) Reputation Risk
Reputation risk is defined as the risk of a negative economic impact, either current or potential, derived from an unfavorable perception of the Bank by employees, customers, shareholders/investors, and society at large.
Reputational risk may emerge from a variety of sources and, frequently, results from other risk events. Typically, these sources are associated with the business and other support activities undertaken by Santander, as well as the economic, social, or political landscape, or even incidents triggered by competitors that could impact the Bank.
f.2) Compliance
It is defined as legal risk, the risk of regulatory sanctions, financial loss, or reputational damage that an institution may face due to failure in complying with laws, regulations, codes of ethics and conduct, and best banking practices. Compliance risk management is preventive in nature and includes monitoring, educational initiatives, advisory, risk assessment, and corporate communication related to the rules and legislation applicable to each business area.
f.3) Operating guidelines
a. Compliance Principles - Ethics and conduct in the securities markets
Ethical principles and standards are encapsulated in internal policies, which are made available and communicated to everyone. The Code of Ethics applies to all employees of the Organization, while the Code of Conduct in Securities Markets garners adherence from all individuals closely associated with the Securities Markets. Channels for clarification and reporting are established, alongside the implementation of monitoring and control measures designed to ensure compliance with the rules by all employees.
b. Anti-Money Laundering and Counter-Terrorism Financing
The Anti-Money Laundering and Counter-Terrorist Financing Policy is predicated on the knowledge and stringent criteria applied to the onboarding of our clients, further reinforced by the continuous surveillance of all transactions the Bank engages in. The concern with this issue is reflected in the active involvement of our management through the Anti-Money Laundering Operational Committee and the Ethics and Compliance Committee, which convene monthly to deliberate on issues pertinent to this matter. The committee plays a direct role in the client onboarding process and in addressing reports of suspicious activities.
c. New products and services and suitability
All new products and services undergo an internal evaluation by different technical departments to ensure a multidisciplinary risk assessment, followed by approval from the Local Commercialization Committee (LCC), which is composed of Santander executives. After this analysis and approval process, the new products and services are subject to ongoing monitoring and testing to mitigate any potential conduct risks during their sales.
g) Compliance with the Prudential Regulatory Framework
Santander Brasil maintains an integrated risk and capital management framework for its decision-making process, in compliance with BCB Resolution No. 4.557. This approach contributes to the optimal and efficient allocation of capital in its operations, aligned with the Institution's objectives regarding capital ratios and shareholder returns.
Brazil's participation in the Basel Committee on Banking Supervision (BCBS) promotes the timely adoption of international prudential standards within the Brazilian regulatory framework.
Consistent with this perspective, Santander Brasil invests in the continuous refinement of its capital management processes and practices, adhering to international market benchmarks, as well as regulatory and supervisory standards.
The Institution's capital management consists of an ongoing process encompassing planning, assessment, control, and monitoring of the capital required to mitigate the significant risks of the Conglomerate. This process includes evaluating the capital needed to support Pillar 1 risks (credit, market, and operational); developing methodologies for quantifying additional capital for Pillar 2 risks; implementing the Internal Capital Adequacy Assessment Process (ICAAP); projection and monitoring of capital ratios; preparation of the capital plan, preparation of contingency plans, preparation of the recovery plan; preparation of the organized exit plan; stress tests; and preparation of the quarterly risk and capital management report – Pillar 3.
g.1) Internal validation of risk models
|
|
Consolidated Financial Statements | December 31, 2024 | F - 121 |
|
*Values expressed in thousands, except when indicated |
Internal validation is a critical phase in the life cycle of a model, as well as a prerequisite for the validation process by supervisory authorities. A specialized team within the Bank, endowed with sufficient independence, provides a technical assessment on the adequacy of internal models for the intended internal and regulatory objectives, concluding on their effectiveness and utility. The team is also required to evaluate whether the risk management and control procedures are commensurate with the Bank's strategy and risk profile.
Moreover, the Internal Validation division provides critical support to the risk committees and the Bank's management by offering a qualified and independent perspective. This enables the decision-making bodies to deliberate on the authorization for the use of models, whether for management or regulatory purposes.
Internal Validation at Banco Santander primarily covers models related to Credit Risk, Operational Compliance, Market, ALM, Pricing, Provisions, Economic Capital, and other models pertinent to the ICAAP exercise. The validation scope encompasses both theoretical and methodological aspects, as well as technological architecture, data quality, and all significant facets of advanced risk management (controls, reporting, usage, management engagement, etc.). Thus, the purpose of internal validation is to examine the quantitative, qualitative, technological, and corporate governance dimensions associated with regulatory processes and risk management.
Key responsibilities of the Internal Model Validation area include the following:
| i. | Establish the general principles of validation, conducting an independent assessment process that includes (i) data quality, (ii) methodological foundations, (iii) technological environment, (iv) performance, and (v) use and governance; |
| ii. | Issue a technical opinion on the adequacy of internal models for the intended internal and regulatory purposes, concluding on their usefulness and effectiveness. |
| iii. | Provide essential support to the risk committees and the Bank's management by delivering a qualified and independent opinion, enabling the responsible parties to make informed decisions on the authorization of model usage (for both management and regulatory purposes). |
It is important to note that Banco Santander's internal validation function is entirely in line with the independent validation criteria for the advanced approach as prescribed by the Basel Committee, the European supervisory 'home regulator' (Bank of Spain and European Central Bank), and the Brazilian Central Bank. In this regard, the Bank enforces a clear separation of responsibilities between Internal Validation and Internal Audit, with the latter constituting the final layer of the Bank's control validation framework.
The Internal Audit is responsible for assessing and revising the methodology and internal validation work, issuing opinions with an effective level of autonomy. As the ultimate control mechanism within the Group, the Internal Audit (third line of defense) is required to (i) periodically assess the adequacy of policies, methods, and procedures, and (ii) confirm their effective implementation in management.
g.2) Capital Management
Capital management takes into account both regulatory and economic factors, with the purpose of achieving a capital structure that is both cost-efficient and compliant, while meeting the requirements set forth by regulatory authorities and contributing to the attainment of classification targets established by rating agencies, as well as fulfilling investors' expectations.
h) Economic Capital
h.1) Main objectives
The development of economic capital models in the financial world seeks to address a fundamental challenge of regulatory capital: Risk Sensitivity.
In this context, economic capital models are specifically crafted to produce risk-sensitive estimates, facilitating enhanced precision in risk management, as well as more effective allocation of economic capital across Banco Santander's business units.
Banco Santander has concentrated its efforts on developing a robust economic capital model that is seamlessly integrated with business management. The primary objectives of Banco Santander's economic capital framework are the following:
1 - Consolidate Pillar I and other risks impacting the business into a single quantitative model, while also determining capital estimates by establishing correlations among various risks.
2 - Quantify and monitor fluctuations across distinct risk types.
3 - Distribute capital consumption among the main portfolios and manage the efficiency of Return on Risk-Adjusted Capital (RORAC).
4 - Estimate the Economic Value Added for each business unit. Economic profit must exceed the Bank's cost of capital.
5 – Compliance with regulatory standards in the locations where the Bank operates during the Pillar II review process conducted by supervisory authorities.
h.2) Economic Capital Model
In the determination of economic capital, it is the Bank's duty to specify the level of loss to be covered. Accordingly, a requisite confidence interval is applied to ensure the continuity of operations.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 122 |
|
*Values expressed in thousands, except when indicated |
The risk profile in Brazil is distributed among Credit, Market, ALM, Business, Operational and Material Assets risks. However, in order to anticipate the changes proposed in Basel III, new risks were incorporated into the model: Intangibles, Pension Funds (defined benefit) and Deferred Tax Assets, which allow the Bank to adopt an even more conservative and prudent position.
| % Capital | 2024 | 2023 |
| Risk Type | ||
| Credit |
|
|
| Market |
|
|
| ALM |
|
|
| Business |
|
|
| Operational |
|
|
| Fixed Assets |
|
|
| Intangible Assets |
|
|
| Pension Funds |
|
|
| Deferred Tax Assets |
|
|
| TOTAL |
|
|
However, as a commercial bank, Credit is Banco Santander's main source of risk and the evolution of its portfolio is one of the main factors for its fluctuation.
RoRAC
Banco Santander Brasil has been using RORAC, with the following objectives:
- Analyze and establish a minimum price for operations (admissions) and customers (monitoring).
- Estimate the capital consumption for each client, economic group, portfolio, or business segment to optimize the allocation of economic capital, thereby maximizing the Bank's efficiency.
- Measure and track the performance of the business.
- To assess the operations of global clients, the calculation of economic capital incorporates specific variables employed in determining expected and unexpected losses. These variables include:
- Counterparty rating.
- Maturity.
- Guarantees.
- Nature of financing.
Economic value added is determined by the cost of capital. To generate value for shareholders, the minimum return from operations must exceed Banco Santander's cost of capital.
|
|
Consolidated Financial Statements | December 31, 2024 | F - 123 |
|
*Values expressed in thousands, except when indicated |
| 47. | Subsequent Events |
| a) | Deliberation on Interest on Equity |
The Board of Directors of Banco Santander,
at a meeting held on January 10, 2025, approved the proposal of the Company's Executive Board, ad referendum of the Ordinary General Meetings
to be held by April 30, 2025, for the distribution of Interest on Equity, in the amount of R$
|
|
Consolidated Financial Statements | December 31, 2024 | F - 124 |
|
*Values expressed in thousands, except when indicated |
APPENDIX I – RECONCILIATION OF SHAREHOLDERS’ EQUITY AND NET INCOME
Below are the tables reconciling shareholders' equity and net profit attributable to the Parent Company between the accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS), accompanied by a conceptual description of the main adjustments.
| Thousand of Reais | Note | 2024 | 2023 | 2022 |
| Stockholders' equity attributed under to the Parent Brazilian GAAP |
|
|
|
|
| IFRS adjustments, net of taxes, when applicable: | ||||
| Reclassification of financial instruments at fair value through profit or loss | h |
(
|
(
|
(
|
| Reclassification of fair value through other comprehensive income | i |
|
|
(
|
| Impairment of financial assets measured at amortized cost | a |
(
|
|
(
|
| Category transfers - IFRS 9 | b |
(
|
(
|
(
|
| Deferral of financial fees, commissions and inherent costs under effective interest rate method | c |
|
|
|
| Reversal of goodwill amortization | d |
|
|
|
| Realization on purchase price adjustments | e |
|
|
|
| Adjustment referring to the difference between Book Value vs. the fair on Carsale's entry into Webmotors |
|
|
||
| Option for Acquisition of Equity Instrument | f |
|
|
(
|
| Santander Serviços goodwill (Santusa) | g |
(
|
(
|
(
|
| Reversal of Provision PIS Law 9,718 | j |
|
||
| Others |
(
|
|
|
|
| Stockholders' equity attributed to the parent under IFRS |
|
|
|
|
| Non-controlling interest under IFRS |
|
|
|
|
| Stockholders' equity (including non-controlling interest) under IFRS |
|
|
|
|
| Thousand of Reais | Note | 2024 | 2023 | 2022 |
| Net income attributed to the Parent under Brazilian GAAP |
|
|
|
|
| IFRS adjustments, net of taxes, when applicable: | ||||
| Reclassification of financial instruments at fair value through profit or loss | h |
(
|
(
|
(
|
| Reclassification of fair value through other comprehensive income | i |
|
(
|
(
|
| Impairment of financial assets measured at amortized cost | a |
(
|
|
|
| Category transfers - IFRS 9 | b |
(
|
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| Deferral of financial fees, commissions and inherent costs under effective interest rate method | c |
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| Reversal of goodwill amortization | d |
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| Realization on purchase price adjustments | e |
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| Option to Acquire Own Equity Instrument | f |
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| Reversal of Provision PIS Law 9,718 | j |
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| Others |
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| Net income attributed to the parent under IFRS |
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| Non-controlling interest under IFRS |
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| Net income (including non-controlling interest) under IFRS |
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a) Impairment of loans and receivables and financial assets measured at amortized cost
This adjustment relates to the estimated expected losses on the portfolio of assets subject to impairment, commitments for loan disbursements, and financial guarantee contracts, determined based on the criteria outlined in the accounting practices note and in accordance with IFRS 9 (in 2017, it refers to the adjustment for estimated incurred losses in accordance with IAS 39, the regulatory standard in effect at the time). These criteria differ in certain respects from those adopted under BRGAAP, which follows the regulatory thresholds established by the Brazilian Central Bank (Bacen). Moreover, the scope of the loss calculation base under IFRS is broader, including assets beyond those specified by Bacen.
b) Financial asset categories
As outlined in the note on accounting practices, IFRS 9 mandates the identification of business models associated with each portfolio, as well as the execution of the SPPI test to ascertain whether the cash flows from an asset consist exclusively of payments for principal and interest, for the purpose of classifying the asset within the appropriate financial asset categories. In contrast, BRGAAP allows for certain differences in the categorization of these financial assets and also considers Management's intention as a criterion for classification. Additionally, the criteria for reclassification across categories differ between the two accounting standards.
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Consolidated Financial Statements | December 31, 2024 | F - 125 |
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*Values expressed in thousands, except when indicated |
c) Deferral of banking fees, commissions, and other financial costs using the effective interest rate method
Under IFRS, bank fees, commissions, and related financial costs, which are included in the effective interest rate of financial instruments measured at amortized cost, are recognized in the income statement over the validity period of the respective contracts. In contrast, under BRGAAP, these fees and expenses are recognized directly in the income statement upon receipt or payment.
d) Reversal of goodwill amortization
Under BRGAAP, goodwill is systematically amortized over a period of up to 10 years, subject to impairment testing at least once a year, or more frequently if additional evidence arises. Under IFRS, as per IAS 38 “Intangible Assets”, goodwill is not amortized but is tested for impairment to ascertain its recoverable amount at least annually, and whenever there is an indication of a potential reduction in its recoverable value. The tax amortization of Banco Real's goodwill represents a permanent and definitive difference between the accounting and tax bases, as the possibility of utilizing future funds to settle a tax liability is considered remote by Management, a position supported by the opinion of specialized external advisors. Consequently, the tax amortization of goodwill is permanent and definitive, and thus, the recognition of a deferred tax liability does not apply as per IAS 12 – Income Taxes, with respect to temporary differences.
e) Recognition of purchase price adjustments
As part of the purchase price allocation for acquisitions of entities, notably in the acquisition of Banco Real, in accordance with IFRS 3 "Business Combinations" standards, the Bank reassessed the acquired assets and liabilities at fair value, including identifiable intangible assets with defined useful lives. In contrast, according to BRGAAP, in a business combination, assets and liabilities are recorded at their book value. The adjustments to the purchase price allocation primarily relate to the valuation of assets in the loan portfolio. The initial recording of the loan values at fair value resulted in an adjustment to the yield curve of the portfolio compared to its nominal value, which is recognized over the respective average realization period.
f) Option to Acquire Equity Instrument
In the context of the transaction, Banco Santander granted the shareholders of Getnet S.A. and Banco Olé Consignado a put option for all the shares issued by Getnet S.A. and Banco Olé Consignado that they held. In accordance with IAS 32, a financial liability was recognized for the commitment made, offset against a specific equity account, in the amounts of R$950 million and R$67 million, respectively. The options were subsequently updated, with their effects recognized in the income statement. On December 19, 2018, Banco Santander and the Minority Shareholders of Getnet S.A. signed an amendment to the Share Purchase and Sale Agreement and Other Covenants of Getnet S.A., whereby Banco Santander committed to acquiring all the shares from the Minority Shareholders, representing 11.5% of the share capital of Getnet S.A., for the amount of R$1,431,000. The acquisition was approved by Brazilian Central Bank on February 18, 2019 and completed on February 25 2019, resulting in Banco Santander holding 100% of the shares representing the share capital of Getnet S.A. On March 14, 2019 the minority shareholder of Banco Olé Bonsucesso Consignado S.A. expressed their intention to exercise the put option stipulated in the Investment Agreement, signed on July 30, 2014, to sell their 40% stake in the share capital of Olé Consignado to Banco Santander (Brasil) S.A. 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 S.A., for a total value of R$1.6 billion, payable on the closing date of the transaction. On January 30, 2020, the name of Banco Olé Bonsucesso Consignado S.A. was changed to Banco Olé Consignado S.A. On January 31, 2020, the Bank and the shareholders of Bosan Participações S.A. finalized the definitive agreement and signed the share purchase and sale agreement for 100% of the shares issued by Bosan, through the transfer of Bosan's shares to the Bank and payment to the sellers in the total amount of R$1,608,773 As a result, the Bank has become, both directly and indirectly, the holder of 100% of the shares in Banco Olé.
g) Santander Serviços (Santusa) acquisition goodwill
Under IFRS 3 "Business Combinations", when a parent company acquires additional shares or other equity instruments of an entity it already controls, this amount must be recognized as a reduction in its equity. Under BRGAAP, this amount must be recorded on the balance sheet as goodwill or as a bargain purchase in the acquisition of the investment, which represents the difference between the acquisition cost and the equity value of the shares.
h) Reclassification of financial instruments at fair value through profit or loss
Under BRGAAP, all loans, financings, and deposits are accounted for at amortized cost. Under IFRS, as per IFRS 9 "Financial Instruments: Recognition and Measurement," financial assets may be measured at fair value and included in the category "Other financial assets at fair value through profit or loss." This approach aims to eliminate or significantly reduce the accounting mismatch in recognition or measurement arising from the valuation of assets or liabilities or the recognition of gains or losses on these assets/liabilities on different bases, which are managed and their performance evaluated based on fair value. Consequently, the Bank has classified loans, financings, and deposits that meet these criteria as "fair value through profit or loss," as well as certain debt instruments classified as "available for sale" under BRGAAP. The Bank has adopted this classification basis under IFRS, as it effectively eliminates an accounting mismatch in the recognition of income and expenses.
i) Reclassification of financial instruments to financial assets measured through other comprehensive income
Under BRGAAP, the Bank accounts for certain investments, such as debt securities initially measured at amortized cost and equity securities at cost. At the time of preparing this balance sheet, management reviewed its investment management strategy and, in accordance with the provisions of Circular No. 3.068/2001 by the Brazilian Central Bank, reclassified the debt securities to the "trading" category, recording their fair value through profit or loss. In line with IFRS, the Bank has classified these investments as financial assets measured at fair value through other comprehensive income, measuring them at fair value with the effects of this valuation being recognized in the "Consolidated Statements of Comprehensive Income", in compliance with IFRS 9 "Financial Instruments", which prohibits the reclassification of any financial instrument to the fair value through profit or loss category after initial recognition.
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Consolidated Financial Statements | December 31, 2024 | F - 126 |
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*Values expressed in thousands, except when indicated |
j) Provision Reversal PIS Law No. 9.718
In December 2022, the adjustment relates to the reversal of the provision for the PIS lawsuit (Law No. 9.718), as detailed in note 21 c.4, following the adoption of Circular Letter No. 3.429/2010. This Circular Letter introduces specific rules for BRGAAP regarding the accounting treatment of tax obligations under judicial review. The total comprises R$160,806 in taxes and R$819,406 in interest and similar income, resulting in a net tax effect of R$980,212.
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Consolidated Financial Statements | December 31, 2024 | F - 127 |
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*Values expressed in thousands, except when indicated |
APPENDIX II – STATEMENT OF VALUE ADDED
The Statement of Value Added presented below is not a requirement under IFRS; however, it is provided as supplementary information in accordance with Brazilian corporate legislation for publicly traded companies. It has been derived from the Bank's Consolidated Financial Statements and prepared in conformity with IFRS.
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| Interest and similar income |
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| Net fee and commission income |
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| Impairment losses on financial assets (net) |
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| Other income and expense |
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| Interest expense and similar charges |
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| Third-party input |
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| Materials, energy and others |
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| Third-party services |
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| Impairment of assets |
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| Other |
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| Gross added value |
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| Retention | ||||||
| Depreciation and amortization |
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| Added value produced |
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| Investments in affiliates and subsidiaries |
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| Added value to distribute |
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| Added value distribution | ||||||
| Employee |
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| Compensation |
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| Benefits |
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| Government severance indemnity funds for employees - FGTS |
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| Other |
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| Taxes |
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| Federal |
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| State |
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| Compensation of third-party capital - rental |
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| Remuneration of interest on capital |
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| Dividends and interest on capital |
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| Profit Reinvestment |
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| Profit (loss) attributable to non-controlling interests |
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| Total |
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Consolidated Financial Statements | December 31, 2024 | F - 128 |