Santander Brasil (BSBR) Q3 2026 Earnings Call Transcript

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DATE

Wed, Oct. 28, 2026

CALL PARTICIPANTS

• Chief Executive Officer-Gilson Finkelsztain
• Executive Vice President and Chief Financial Officer-Carlos Muñoz
• Investor Relations-Camila Toledo

TAKEAWAYS

• Recurring Net Income -- BRL 2.9 billion, representing a period impacted by high interest rates and increased household debt.
• Return on Equity (ROE) -- 11.9%, reflecting the bank's ongoing rebalancing process and portfolio shift toward higher-quality clients.
• Total Clients -- 76.9 million, growing 6% year over year as the bank prioritizes customer loyalty and primacy.
• Efficiency Ratio -- 38.8%, driven by expense growth remaining below the inflation rate and a 100-item reduction in the product lineup.
• Mortgage Loan Growth -- 10.3% year over year, serving as a key driver for increasing customer engagement and long-term loyalty.
• SME Loan Growth -- 8.5% year over year, with 25% of the portfolio supported by government programs such as Pronampe and FGO.
• Consumer Finance Growth -- 9.1% year over year, despite the impact of portfolio sales during the third quarter.
• EV and Hybrid Vehicle Financing -- 20% of total financed vehicles, increasing from 5% in the previous year.
• Transactional Deposits -- 10% growth over the past 12 months, reinforcing gains in consumer primacy and improving the funding mix.
• Wholesale Provisioning Impact -- BRL 500 million, resulting from specific one-off cases in the wholesale segment during the quarter.
• Santander Rewards Engagement -- 700,000 clients, with participants increasing their spending by more than 10% compared to non-participants.
• Net Interest Income (NII) Spread -- A decline of 33 basis points, influenced by the sale of consumer finance portfolios and lower funding income from a lower average CDI.
• Agribusiness NPL Impact -- 60 basis points, representing the primary driver for an increase in over 90-day delinquency for individual borrowers.
• Adjusted Over 90-day NPL -- Below 5% for individuals, when excluding the impact of the agricultural segment.
• Market NII Outlook -- Management expects a negative result for 2026, though results are projected to improve in 2027 through interest rate hedging.
• Credit Write-off Policy -- Nine months for clean lines such as cards and personal loans, while secured portfolios like consumer finance were extended to 21 months.

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RISKS

• Muñoz stated, "we continue to see pressure in the agribusiness segment and among low-income individuals and, more recently, middle-income individual clients, particularly in unsecured loans," noting these areas required higher provisioning.
• Finkelsztain noted that higher interest rates could put more pressure on small and mid-sized companies and the agribusiness sector in the coming quarters.
• Muñoz noted that lower revenue from inflation-indexed securities and calendar effects contributed to a slight decline in financial management results.

SUMMARY

Banco Santander (Brasil) S.A. (NYSE:BSBR) reported third-quarter results marked by a strategic transition toward higher-quality credit segments and a focus on operational efficiency. Management indicated that the bank is rotating capital into lower-risk areas, specifically high-net-worth individuals and large corporate structured finance, to build a more resilient franchise in a high-interest rate environment. This shift has resulted in short-term pressure on spreads and net interest income, but management emphasized that newer loan cohorts are demonstrating better risk-adjusted returns. The bank continues to simplify its operations by reducing its product offering and expanding digital sales channels, while using secured lending products like mortgages to drive customer primacy.

• Finkelsztain noted the bank is maintaining key pillars while accelerating value creation through strategic adjustments.
• CFO Muñoz stated, "The bank has already moved toward a portfolio with higher quality clients and a more balanced relationship between risk, return, and capital utilization."
• Toledo explained that short-term NPL indicators provide a clearer view of asset quality as they remain unaffected by accounting changes in write-off periods.
• Management noted that they have reduced sensitivity to interest rate variations by hedging prefixed securities and deposits.
• Finkelsztain noted that the bank will focus on transaction-linked credit rather than clean credit to drive relationships in the small and medium-sized enterprise segment.

INDUSTRY GLOSSARY

• CDI: Certificado de Depósito Interbancário, the benchmark interbank interest rate in Brazil.
• CPR: Rural Product Note (Cédula de Produto Rural), a financial instrument used specifically for agribusiness financing.
• FGO/Pronampe: Brazilian government-backed credit guarantee programs designed to support small and medium-sized enterprises.
• NII: Net Interest Income, the difference between the interest income earned on assets and the interest expense paid on liabilities.
• NPL: Non-Performing Loan, a classification for loans that are in default or close to being in default.
• ROE: Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity.
• SELIC: The Brazilian central bank's system for performing open market operations and the name of its overnight rate.

Full Conference Call Transcript

Camila Toledo: Good morning, everyone, and thank you for joining us today to follow us on our earnings release presentation for the third quarter of 2026. We are here live from our headquarters in São Paulo, and we will split this event into three parts. First, our CEO, Gilson Finkelsztain, will talk about the main highlights of the quarter. Next, our CFO, Carlos Muñoz, will give us a detailed analysis of our performance. Finally, we will proceed to the Q&A session. It's then that you see that you will have three audio options on your screen, Portuguese, English, or original audio. To choose your option, just click in the icon in the bottom of your screen.

For questions, just click in the raise hand icon also in the bottom part of your screen. The presentation we are about to present is already available for download in our IR website. Now, with no further ado, I'll turn the floor over to Gilson to begin the presentation.

Gilson Finkelsztain: Thank you, Camila. Good morning, everyone. I will keep this opening session brief, so we will have more time at the end for the Q&A. Well, this quarter marks the start of a new management cycle at Santander Brazil. We are starting from a very clear strategic foundation and building on the significant process we already made. There is continuity in our key pillars, but continuity does not mean inertia. Our responsibility is to preserve what works, make the necessary adjustments, and accelerate value creation. Well, I will then begin with a summary of the key KPIs for the quarter. We ended the quarter with recurring net income of BRL 2.9 billion and ROE of 11.9%.

These figures are, of course, still below the profitability levels we are aiming for, and at the same time, they need to be viewed in the light of the macroeconomic environment and the bank's rebalancing process. The macro environment remains challenging, and what I mean by that is that we have high interest rates, increased household debt, putting pressure on revenues and the cost of risk. The quarter also included some one-off cases in the wholesale segment. On the expense side, growth remains well below inflation, and this discipline enhances our ability to invest in the initiatives that underpin Santander's transformation.

The bank has already moved toward a portfolio with higher quality clients and a more balanced relationship between risk, return, and capital utilization. This shift remains central to the bank's strategy. Customer primacy, transaction volume, and an improved balance sheet mix remain our pillars. The next step is obviously to translate this foundation into a gradual and sustainable recovery of profitability with consistent execution. Now, moving to the next slide. The client is at the center of our strategy, and the priority is to deepen client centricity, supported by a platform of global scale and the capabilities of the Santander Group. We ended the third quarter of 2026 with 76.9 million clients, a 6% increase over 12 months.

Growing the base matters, but our main goal is to enhance the quality of the relationship. More clients using Santander in their daily financial lives and choosing the bank as their primary financial institution. In this regard, Santander Rewards has been establishing itself as a key driver of engagement with a more relevant offering and a more intuitive experience. This platform has already reached around 700,000 clients and is having a positive impact on relationship metrics. Spending stands out as the key highlight. Participants increased their spending by more than 10% vis-à-vis other clients with a similar pattern in investments. These indicators show that a more assertive value proposition drives greater engagement and deepens the relationship.

The priority now is certainly to scale this proposition with a clear economic rationale for both the client and the bank. Our goal is not just to grow the base, but rather to make Santander more relevant in each client's financial life, strengthening its position as the primary bank in a long-term relationship. With these opening remarks, I will now turn the floor to Carlos Muñiz for a detailed presentation on the quarter's results, and at the end, the three of us will return for the Q&A session. Welcome, Carlos.

Carlos Muñoz: Good morning, Gilson, and good morning, everyone. We'll start with the performance of our loan portfolio. As we have highlighted in recent quarters, the portfolio's performance reflects the choices we have made to improve its mix and strengthen the risk-return portfolio. We continue to prioritize quality, pricing discipline, customer loyalty, and transaction volume. As a result, we are seeing different growth rates across products and segments. In the year-over-year comparison, I would like to highlight the 10.3% growth in mortgage loans and 8.5% growth in SMEs. Consumer finance grew 9.1%, even after the portfolio sale during the period.

In this business, a large portion of profitability is generated at time of origination and therefore is not affected by the subsequent sale of the portfolio. Consumer finance remains relevant, supported by a higher quality mix and a greater share of new hybrid and electric vehicles. Over the past 12 months, we increased the share of hybrid and electric vehicles in the total number of financed vehicles from 5%-20%. In the large corporate segment, we maintain positive growth concentrated in the expanded portfolio. Overall, this trend reflects our active portfolio management and also ongoing focus on risk-adjusted returns. On the funding side, we continue to increase retail share of our funding. This strategy strengthens customer loyalty and transactionality.

Transactional deposits grew 10% over the past 12 months. This progress reinforces our gains in consumer primacy and improves our funding mix. Next, the client NII declined during the quarter, primarily due to four different factors. Firstly, lower funding income resulting from a lower average CDI. Secondly, a greater impact from deferral of banking correspondent expenses. Thirdly, the sale of the bank's consumer finance portfolio, which reduced revenue for the period. And finally, selective approach to loan origination, as we discussed on the previous slide. Taken together, these effects more than offset the greater number of days in the quarter and the slight increase in volume.

NII also reflects the shift in portfolio mix toward companies with a better risk-return profile and high net worth clients. Because these segments have structurally lower spreads, the increased share puts downward pressure on this metric in the short term, but this is consistent with the portfolio rebalancing we are carrying out. As for market NII, we saw a slight decline in financial management results resulting calendar effect and lower revenue from inflation index securities, partially offset by improved performance in market making. In fees, we saw a more positive trend during the period, despite the effects of stricter credit selectivity and the decline in capital markets.

In brokerage and securities placement, as we expected, there was a sequential decline due to the slower pace of capital market activity during the quarter. Nevertheless, we maintained strong performance in cards and insurance, both quarter-over-quarter and year-over-year. In lending-related activities, performance continues to be shaped by selective origination and by the increased share of new vehicles in consumer finance. In cards, we continue to grow within our existing client base, driven by an increase in transaction volume, especially among higher income clients. Turning to the quality of our assets and provisions, as in the previous period, the quarter was impacted by specific cases in the wholesale segment, which totaled approximately BRL 500 million.

Excluding the one-off effects in these two quarters, we observed stability in recurring expenses. We also continue to see pressure in the agribusiness segment and among low-income individuals and, more recently, middle-income individual clients, particularly in unsecured loans. This environment has required a higher level of provisioning. Part of this trend also stems from the more restrictive stance we have adopted for renegotiations. We have been requiring additional collateral or upfront cash deposits to formalize agreements. This discipline may put pressure on asset quality indicators, but it improves the quality of renegotiated loans. Speaking about delinquency, we observed a favorable trend in the short term for the second consecutive quarter. Long-term NPL indicator boasted an increase for individual borrowers.

When adjusted for the impact of the agricultural segment, however, it would have remained stable. For corporate loans, we saw an improvement in the SME segment. We continue to monitor these portfolios closely, carefully, and with discipline. On the next slide, we present the evolution of expenses. During the quarter, even with the partial impact of the new 4.6% collective bargaining agreement, personnel expenses continued to perform favorably. Likewise, administrative expenses remained under control. Overall, expenses grew well below inflation, reflecting our discipline in cost management and contributing to an improvement in the efficiency ratio, which ended the period at 38.8%. We continue to make progress on spending discipline and our simplification agenda.

In 2026, we reduced our product lineup by more than 100 items, expanded the digitization of our portfolio, and increased sales through digital channels, thereby enhancing the operations efficiency. To conclude, I present our income statement. We ended the quarter with recurring net income of close to BRL 2.9 billion and ROE of 11.9%. The macroeconomic environment and the portfolio rebalancing we are undertaking continue to have short-term impacts. This quarter, this was reflected in lower profitability against the backdrop of higher household debt. Revenues grew at a slower pace while the cost of risk remained under pressure, partially due to one-time effects. Even so, our disciplined approach to capital allocation leaves us better prepared to weather periods of volatility.

To sustain a more solid growth and profitability trajectory over the medium and long term, we continue to make progress in client primacy, portfolio mix, funding, efficiency, and technology. We're building an increasingly balanced and resilient franchise. Well then, thank you very much. Now we will move to the question-and-answer session with Gilson and Camila.

Camila Toledo: We will now begin the question and answer session. As a reminder, just click on the hand raise icon at the bottom of your screen. We'll answer the questions in the language they're asked in. We kindly ask that each analyst asks only one question so that everyone can participate.

Speaker 3: Hello and good morning. I want to ask about something you haven't commented, which is the reduction in your physical footprint and your number of employees. We calculate this about 12% year-on-year. Is that process complete, or do you expect to continue with it in the current economic environment? Thank you. Thank you.

Camila Toledo: Back to Portuguese. Question from Daniel Vaz with Safra. How are you, Vaz?

Daniel Vaz: Everything is great, Camila. Good morning, Gilson, Carlos, and thank you for taking my question. Welcome, Gilson. I wish you a lot of success in your new role. I'd like to ask about your mandate and the legacy you intend to leave for Santander. As you said, there are some opportunities. Continuity is not necessarily inertia, and the group wants to get to a sustainable ROE above 20%, so there are opportunities in the P&L and in capital. In this quarter, we see Santander with a portfolio assignment of BRL 5 billion [Non-English content], showing that there is room to touch capital and also the recovery in the P&L.

So what can you do more in terms of capital to increase efficiency? Where do you see the greatest opportunity to recover the P&L, in retail or in wholesale?

Gilson Finkelsztain: Thank you, Vaz. I think that the recovery of the franchise, like I said, is a common point, a common target that the bank has been pursuing for a while. The strategy was very well designed so that we can put more effort and more capital in lower risk segments. I think that this is costing us a little, but in the long run, it will be a winning strategy. In detriment of the short term, where we have a reduction in spread and more transaction activity, more proximity with the client will come in the future. Recovering market share is among our goals in these segments that we call segments that we will dedicate more capital to.

We are talking about high net worth individuals and in corporates or large corporates, and what we call CIB. This means allocating more capital to these segments. I think that there are innovations that we included, as you said. This does not mean not allocating capital to other segments. It means using our market share and the positioning of the bank in some businesses so that we can increase our market share, but with an asset rotation intelligence. I think that this is what is going to be dictating our action in the coming quarters.

We want to have market share, yes, across the segments that the bank serves, but we want to make asset rotation more dynamic in some areas where we operate. To answer your question more directly, will we focus on individuals or legal entities? I think they are both, but with more adjusted approaches. On the corporate side, large corporates, more structured with a direct capital allocation. In smaller legal entities, a capital allocation with more transactional approach. Looking at our customer centrality and the several services we provide with credit supporting the relationship. In individuals portfolio, more secured loans and balance sheet.

Camila Toledo: Thank you, Vaz. The next question is from Arnon Shirazi with Citibank.

Gilson Finkelsztain: Good morning and welcome.

Arnon Shirazi: [Non-English content] Oh, good morning. Thank you Camila, Gilson, and Carlos. My question relates to provisioning. This quarter, we saw an increase coming from the wholesale side in provisioning. In the fourth quarter, do you think we should expect the same thing? Given the recent changes to your risk model, I just want to know whether you should expect some additional pressure in this sense going into the fourth quarter.

Carlos Muñoz: As I said, the main indicator is that once we removed extraordinary effects from the second and third quarters, the provision volume remains stable, and then we see this stability given this very challenging macro environment. I cannot tell you whether we will have any additional names, especially in the wholesale universe, that could impact our numbers in the fourth quarter. But we talked about NPL indicators, and now we see that the behavior is much better than we had in the past in these portfolios.

Arnon Shirazi: Thank you. Thank you very much.

Camila Toledo: Thank you, Arnon. Now, next question is from Ricardo Buchpiguel with BTG.

Gilson Finkelsztain: Good morning, Ricardo.

Ricardo Buchpiguel: Good morning, and thank you for taking my question. First of all, Gilson, welcome. I have a question addressed to you. Since you arrived at the bank, what are the main challenges that you identified, and what surprised you the most about the Santander franchise, and what problems seem to be more difficult to solve when compared to what you originally thought?

Gilson Finkelsztain: Well, Ricardo, I am returning to Santander after being absent for 15 years, and I was surprised because this is a more global and more multinational bank, and it has more clarity in terms of what we call one single Santander. To succeed in the banking universe, we have to have a bank with a cost-to-income ratio lower, with more digital services, and maybe a lower credit leverage, especially when it comes to individuals in Brazil for the reasons that we already know. I think this is what I found.

Also, I found a senior team, a team that is very knowledgeable and has several initiatives that will allow us to deliver to our strategy, and this came as a positive point to me. There hasn't been any drastic change in the directions, but all we have to do is to continue pursuing this capital allocation strategy where we should have a higher market share. This still remains our mantra. The goal is certainly to have a very competitive global bank, and Brazil is part of this global landscape. Now we will be after increasing the footprint of our franchise in Brazil.

Camila Toledo: Next, a question from Matheus Guimarães with XP.

Matheus Guimarães: Good day, Camila, Gilson, and Muñiz. Thank you for taking my question. My question has to do with market NII. This was another quarter with NII under pressure. I think that in the last days, we saw a significant change in the interest level looking forward. If you could comment on what should we expect more than Q4, but looking at 2027. Can anything be changed in terms of the bank's policy? Anything you're revisiting? If you could give us more color on that, it would be very helpful. Thank you.

Carlos Muñoz: Good morning. I think that we spoke about this in Q2, our expectation is that things will improve in 2027. We have observed that the quarter was a little more challenging because of a calendar effect, and because of our inflation-indexed securities, but our outlook for next year is more positive, but still with a negative result in the agribusiness portfolio, but better than what we had in 2026.

Gilson Finkelsztain: Let me add to that, Matheus, since the end of 2024, we have been saying that we are reducing our sensitivity to interest rates. If we look at a portfolio which is prefixed and deposits which are post-fixed in Brazil, what we are doing is hedging it so that we are reducing our exposure. Sometime in the past, we were criticized because people claimed that interest rates could decline faster, and we wouldn't have that benefit. But as Carlos mentioned, we are not going to have as significant an impact, even if we're having increasing interest rate.

We have prefixed securities, hedged securities that we carry in our portfolio, and that's why we're still having a negative result next year, but this result is independent of variations. It's hedged. It's going to be negative, but it will be significantly less than the loss that we posted in the first 9 months, and that will impact the result for the full 2026.

Matheus Guimarães: It's very clear. Thank you very much.

Camila Toledo: We have a question from Eduardo Nishio with Genial Investimentos.

Eduardo Nishio: Good morning, Camila, Gilson, and Carlos. Gilson, good to see you again, now in a new role. I'd like to explore asset quality and the quality of your assets, which has been deteriorating. You're seeing that net of specific provisions would have remained stable, so I'd like to understand this moving. How do you see provisions, and what is deteriorating in your NPL for individuals? Delinquency was a little more marked this quarter. What are you seeing? In this environment of perhaps a higher Selic rate, do you continue to expect a worsening in legal entities, in companies? Do you expect a continuation of court reorganizations with supervised reorgs?

Carlos Muñoz: I think we continue to see deterioration mainly in the agribusiness, A1, and in low-income cards. More recently, some deterioration in middle-income cards. In my mind, these are the main concerns. For high-net-worth clients and large corporates, the behavior is reasonably good. Consumer finance, this reflects the choice we're making. Focusing on, it's a deterioration in used cars and low-income segments and better results in electric vehicles and hybrids. We had to make some adjustments for model cycles in the consumer finance. But after these effects, I think that the behavior of the latest cohorts is much better. Like I said before, loan losses remain stable, the LLP.

What we see is that if interests remain higher for longer, most likely, the choice we made of getting away from riskier segments will benefit the bank in the future, will give us an opportunity to go back to the market with better positions.

Camila Toledo: Nishio, let me add, when we look at provision, the cost of risk, which is the point that Carlos highlighted, we still see some effects from prior movements. But when we look at newer cohort or vintages, we can see 15 to 90 NPL much more under control, even compared to the rest of the financial system using Brazilian Central Bank data. We have improvements in SMEs, individuals. In over 90-day NPL, there was some increase, some big increase in individuals, as you mentioned, but this is the agribusiness segment. If we exclude CPR, the part of agribusiness linked to individuals, this would be below 5%, a relevant impact of almost 60 basis points in the quarter.

Gilson Finkelsztain: So in fact, this is a one-off situation. We have to live with that. When we look at it, the choices that Carlos mentioned of being more selective, focusing on more resilient customers, and reducing the appetite for some clients already shows the cohorts more in line with what we want to build in regards to portfolio quality. Just to add, Nishio, we do have a concern that higher interest rates could also have, as a consequence, put more pressure on small and mid-sized companies and on the agribusiness side as well. This is what reinstates that visibility that somehow we should have lower interest rates to bring about a relief to the financial aspect.

As Camila and Carlos said, we are conducting adjustments to our portfolio, and this is translated into lower losses, certainly with lower spread, but lower losses at the margin, as Carlos said, in some vintages that we are adding to our portfolio. But there is a concern in regards to higher interest rates, especially for SMEs and agribusiness in the coming quarters.

Eduardo Nishio: Thank you very much.

Camila Toledo: Thank you, Nishio. Now we have a question from Yuri Fernandes with JPMorgan.

Gilson Finkelsztain: Good morning, Yuri.

Yuri Fernandes: Good morning, Camila. Good morning, Gilson. First of all, good luck, and good morning, Carlos. Your Portuguese is much better. We understand you loud and clear. My question is about NII, client NII, and market NII. But at client NII, what drew my attention was that drop of 30 BPS. It was more significant in the third quarter, and I think Carlos mentioned the risk, and Camila also mentioned that. But I would like to hear from you your view about trends, maybe that de-risking could continue, and whether it would make sense for us to expect further NIM drops. I would just like to hear from you what is this trend concerning client NIM.

Gilson Finkelsztain: Carlos, would you like to start? Okay. If you look at the quarter, there was a drop of 33 BPS in this spread, and this is due to FIDC impact in the consumer finance. There was also the impact of a lower CDI and high interest rates, which also accounts for another 3 BPS. There is that impact related to banking agents, about 30 million BPS. This is not so much as a trend, but one-off effects from the quarter. Depending on the behavior of interest rates, this funding margin may go up with time.

The de-risking side of the portfolio would still put some pressure because in our last release, we said that when we are more focused on high-income clients when compared to low income, the spread on average is much lower. It's almost half. Select customers when compared to mass clients, it's almost half. Considering our most recent adjustments, what we reduced the most were the revolving lines. The same thing goes if we look at SMEs. B1, mentioned by Carlos, which are smaller companies up to 7 million-8 million of revenue, is a little bit of the spread of the B2.

Of course, that we're also looking at this significant move in terms of interest rates and lower competitiveness in some segments. This may allow us to take advantage of a few opportunities. But the portfolio de-risking is something that we will continue to deal with. I would even say that we do more secured loans rather than unsecured loans, because they put pressure on the spreads. But you have to remember that we had a portfolio. We had a portfolio, or we have a portfolio that had very high spreads. The new ones, the spreads are better than the ones before. We see good growth opportunities, but the market as a whole is under pressure. Payroll loans.

Now, there is a limit in terms of interest rates, so payroll loans for individuals is something that now we are exploiting, but we are very careful because we do not want to make any mistakes. But we would rather be more cautious. We have control placement because we do not want to put that bill in the future. So I am very optimistic in terms of NII growth in 2027. I do not want to share any numbers, but we still have something to do in terms of the changes going forward.

Yuri Fernandes: Thank you.

Camila Toledo: Carlos still mentioned that when we mentioned the portfolio, but mortgage loans is an important way to increase customer loyalty, and it is an important growth driver. The spreads are lower, but all in all, we see a good chance to increase loyalty and engagement and to increase primacy. So we are looking at profitability as a whole. In the short and mid-range, there may be some more pressure on spreads.

But on the immediate long range, I think the equation will be much more in line in terms of the behavior of cost of risk and the quality of the portfolio, which would be much more resilient rather than attacking the higher spread lines, which the consequence could be tougher.

Yuri Fernandes: Thank you, Camila.

Camila Toledo: Now we are moving to our last question from Marcelo Mizrahi with Bradesco BBI.

Gilson Finkelsztain: Good morning, Marcelo.

Marcelo Mizrahi: Good morning, everyone. Gilson, good luck in your new challenge. I wish you a lot of success. This will be an interesting journey, and I think you have everything to create a lot of value for Santander. So a lot of success. Carlos, your Portuguese is getting much better. My questions are about two topics, actually. First, there was a consolidated view of important growth coming from small and medium-sized enterprises. Santander always talked about this. Last year, SMEs portfolio grew more than 20%, and you were talking about perhaps doubling the size of the portfolio in five years. But we saw SMEs growing way below 10% in the market.

When we discussed this portfolio shift, I cannot imagine why next year would be very different. I have two questions. First, looking at portfolio adjustments, can we start thinking in 2027 that credit growth will find it hard to be greater than in 2026 for the consolidated portfolio? For SMEs, what is your flight plan? Does the SME segment require adjustments, perhaps linked modeling incentives and so on and so forth, so that you can continue or go back to posting relevant growth? Do you have a more cautious appetite that should be driving this? If you get the recent dynamics of SMEs, most likely 2027 is not going to be a year with expected growth above 10%.

Two points, the portfolio next year and the specific dynamics of the SME segment.

Camila Toledo: You received compliments, you start.

Carlos Muñoz: I will start, and then Camila will complement. It is what we have mentioned before. We have a very clear itinerary of where we want to grow in terms of client profile and risk profile. We have a good demand in terms of price, return, and risk, we are most likely going to grow. What we see in the SMEs world, we see NIM under pressure and B2 portfolio is under control. The government programs are helping. FGI, FGO have about 25% of the portfolio with Pronampe and FGO support and collateral, and the rest requires more caution. High interest rates do not help us have more confidence. We have to work close to our clients.

We like these clients, they are core to Santander, and we see an opportunity there. It is one of the segments in which we want to grow.

Marcelo Mizrahi: If I can add, what perhaps will anchor credit in B1, B2 segment will be transactional credit.

Camila Toledo: The more services we provide, the transactions, cash, receivables, acquiring, the more comfort we will have to expand this portfolio. The driver of relationship in B1, B2 will definitely not be clean credit. It will be transaction-linked credit and services-linked credit. As we are successful in this strategy, we intend to expand this portfolio. Of course, this will depend on the environment. The environment remains very uncertain, and it will depend on the interest rates.

Marcelo Mizrahi: Since I am the last person to ask, may I ask another question, Camila? We have discussed in our Brazilian Central Bank reports the divergence between 90-day NPL and 15-90-day NPL. Santander in the last quarter made an adjustment in write-offs in some of the portfolios of the bank. Because of the difference in the indicators, I do not think that all adjustments have been made. We see 15-0-day NPL indicators posting good results improvement, and then+90-day NPL we see a worsening, particularly in individuals. You spoke about agribusiness and some individual firms. I would like to understand, do you have any sensitivity? If it were not for the write-offs, what would have been the behavior of the 90-day NPL?

What about the write-offs of portfolios that are not made in 360 days? Are we talking about two, three years?

Camila Toledo: I will start, and Carlos and Gilson can add. What we had was a slight increase in the over 90 indicator for SMEs because we had a more relevant write-off in Q2. What we are doing in general for the portfolio is we started adopting for 4966, 360 days, uniform for the whole portfolio, with the exception of mortgage, which had a longer term, 455 days. During 2026, we have been refining this, discussing with the regulators and the auditors what our real expectation was of recoveries so that we could have accuracy and more assertiveness considering the profile of our portfolio. For secured loan portfolios, we extended the term.

An example is consumer finance, 18 increasing to 21 months, depending on the good which is funded or financed. In those portfolios where we see delay is reducing a lot our chances of recovery, we wrote off. These are clean lines for both individuals and legal entities, and we are writing it off eight, nine months. This had an effect in the first half, the first quarter, and in the second quarter. Cards, clean personal loans, revolving credit are being written off nine months. The total term increased marginally, but that is not so representative. Throughout the year, you are right.

When you look at over 90 NPL, sometimes it is benefiting, sometimes it is being negatively impacted because some lines that you were writing off faster, you are taking longer to write off, and this tends to normalize throughout 2027. That is why we are focusing on talking about short-term NPL, because they do not have this effect. These indicators are not polluted by changes in the write-off because it is just the loans that are past due.

Gilson Finkelsztain: Camila, there is the impact of the negotiations. Our teams are being more demanding than we were in the past, the conditions to accept and the conditions that we require to renegotiate. We think that this will improve recoveries in our operation. If not, we intend to remain strict. The bank is making an effort to grow a portfolio, but we are growing way below some of our peers, but we want to maintain our delinquency levels low when the portfolio is not growing as fast as the others. I think that this is proof of our discipline in terms of credit assignment.

Marcelo Mizrahi: Thank you very much for all the clarification.

Camila Toledo: Thank you. I would like to thank all of you for joining us this morning. Immediately after this video conference, I and the entire Santander Brazil Investor Relations team will be available to answer any further questions you may have. Thank you very much. Have a great day, and I will see you next time. I will see you in the next call. Thank you.

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