Good morning and thank you for waiting. Welcome to the conference call to discuss Banco Santander Brasil S.A.'s Results. Present here are Mr. Angel Santodomingo, Executive Vice President, Chief Financial Officer; and Mr. Andre Parisi, Head of Investor Relations. All the participants will be on listen-only mode during the presentation. After which we will begin the question-and-answer session, when further instructions will be provided. [Operator Instructions] The live webcast of this call is available at Banco Santander's Investor Relations website at www.santander.com.br/ir, where the presentation is also available for download. [Operator Instructions] Before proceeding, we wish to clarify that forward-looking statements may be made during the conference call relating to the business outlook of Banco Santander Brasil operating and financial projections and targets based on the beliefs and assumptions of the executive board as well as on information currently available. Such forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and hence depend on circumstances that may or may not occur. Investors must be aware that general economic conditions, industry conditions and other operational factors may affect the future performance of Banco Santander Brasil and may cause actual results to substantially differ from those in the forward-looking statements. I will now pass the word to Mr. Andre Parisi. Please Mr. Parisi, you may proceed.

Good morning, everyone. It's my pleasure to welcome you to Santander Brasil's second quarter 2017 earnings conference call. This past quarter, we had several important achievements which will be presented by our CFO, Mr. Angel Santodomingo. So let me turn you over to Mr. Santodomingo.

Thank you, Andre. Good morning everyone and welcome to the second Q results - Santander Brasil's second Q results. I will address these results through five topics starting with key messages in the Santander Group's results. We have quick snapshot about the macroeconomic scenario, which will be followed by the highlights of this quarter of Santander Brasil’s quarter and finally to wrap it all up, I will go into conclusion. So moving to Slide 4, on the commercial front, we continued to improve. As such, I would like to draw your attention to the strides we have made this past quarter. Payroll loans, [indiscernible] brand has been an important element to our success, playing a significant role in our market share expansion process. At the time, our internal channel has also performed well. Getnet, remains one of the main pillars of our commercial study, its revenues are growing at a fast pace. They will continue to grab the market share while profitability at healthy levels. It is worth to remind that Getnet’s importance goes beyond its acquiring services. We consider it a crucial component of our plan to leverage the bank’s revenues. Cards, once again we had a very good performance in both credit and debit cards. In fact, debit cards are growing actually 2% for example. We are still optimistic about our prospects in these business as second Q ’17 marked the start of our actions as the sole issue of the American Advantage, American Airlines cards in the country. Agro business, as I’ve mentioned in the last few quarters, we are making strong efforts in this area. The market share gain is a clear indication that we have adopted their wide strategy to expand our base of adding business clients. SMEs, what strengthens our position in this segment…

[Operator Instructions]

First question from Tito Labarta, Deutsche Bank was the sensitivity of net interest margin to interest rates. NIM has expanded even though rates have declined. At what point will lower interest rates have a negative impact on NIM?

Thank you, Tito. Well, I will say that the evolution of the NII, I have delivered our view with regards to this part of the P&L. Our sensitivity, we have shared in previous occasions, it’s around BRL300 million, like $100 million positive to 100 basis points decline in interest rates. Okay. So that’s one of the reasons why you see that other NII growing, which is the hedging capacity that we have for this trending lower SELIC that we have seen in the country. As I’ve always said, I mean, both speaking of NII and NIM, we have here different forces. The asset side, we’ve had a good quarter as you have seen, specifically more in price and volume, but okay in both of them, which is helping a nice earnings growth, and a nice increase on, even with lower SELICs. Now, on the liability side, it’s already like six quarters or seven quarters that I have been sharing with you, the liability management plan that we started one year half ago and it’s clearly given results, given results and we considered by not only the NIM, but also the amount of NII that we are generating, we are generating, it’s I think it’s like three fold, when we used to generate as a quarterly average three years ago. So it’s three times in a quarterly basis with SELIC that is clearly lower than NIM. So that shows the improvement we are doing on the liability side. And finally, what I said, the hedging capacity, I started my answer by giving you the numbers. So, we always depend on the evolution of interest rates going forward and the duration of that was, those decreases and where it stabilizes, but I don’t see pressure for the time being.

Okay. Next question comes from Tito again. Fees continue to grow in double digits for how long, what did drive the growth?

Well, fees, you are right. At the end of the day, our guidance was to grow double digit, which means above 10%. Obviously, 20%, 24% is double digit, that is stronger than what we normally understand as double digit. This is a clear consequence of linked clients. I mean, this is the study, I have shared with you several times that, I mean, the message of having engaged clients, satisfied clients, linked clients is kind of an established message, let me say like that. But it is our key strategy focus and that means different things in the P&L and probably one of the clearest are fees. When we analyze fees, I mean, what are the fees that are increasing or strongly increasing within all these, the breakdown of the fees, it’s a clear reflection of what I’m saying, I’m speaking of current accounts, I’m speaking of credit cards, I’m speaking of insurance, I’m speaking of all of our NIMs, transactionality. So, obviously we’re going to maintain our view that double digit is going to be there, but as we maintain the capacity of having our clients improve in how they see the bank and how they use the bank, this is a line that should reflect that effort. The guidance continues to be the same, double-digit, and I’m not going to change that now. But I think that the results speak for themselves.

Mr. Carlos Macedo from Goldman Sachs would like to pose a question.

On the back of that question on margins, I have a question on your credit spread. 9.4%, a big increase over the first quarter, maybe some seasonal factors in there, but more importantly about as high as it’s been. Where do you think that goes going forward? Is that still the repricing of the back book? Is there still room for that to expand or will that start trending downwards now with rates coming down and putting pressure and spreads in the industry? Thanks.

Thank you, Carlos. It’s a good question. I mean, you’re right. The expansion in the quarter was strong and it was basically explained by pricing obviously, but also by the change of mix. If you go to the amount, how the amounts are varying, both annually and specifically in the quarter, what you have seen is that we have good growth and good growth means above 3% in the quarter, which is double digit annually. Good growth in all areas, both as well as in service growing in, what we call here payrolls or growing in the GruDo [ph], in the agro business I mean and also in auto launch. But at the same time that grows nicely, SMEs are flat, but big companies, large companies, very large companies have 5% decrease on the quarter. So the mix, how it is changes. That mix is one of the main reasons of that spread increase along with pricing obviously. We are obviously managing pricing. The good thing here to underline is not only this NIM expansion in the spread, et cetera, the good thing here is the credit quality is controlled. If you see cost of credit, it is totally controlled or even improving in some cases if you see the last quarters, which means that we are changing the mix or the mix is being changed because -- the mix is being changed because the large corporate service, they have capital markets open, et cetera with the control cost of fees. So the NIM, net of risk is clearly improving, which is the value we say with you that we should also follow. Going forward, I would not expect such big changes in the space, basically because what I would expect or see in the future is that companies in general terms, not only SMEs, but also going to the larger company should pick up volume, also recover part of that space lost in terms of volume and that would offset a little bit this spread expansion that I am mentioning. But the discussion around NIM going forward is a good discussion. Thank you, Carlos.

[Operator Instructions] Mr. Mario Pierry from Bank of America would like to pose a question.

Let me ask you two questions. The first one is related to loan growth. We continue to see Santander gaining market share, even though the macroeconomic environment for Brail remains very uncertain. So again you show that asset quality is stable and the control, but what makes you comfortable to be gaining market share, given all the uncertainty in Brazil. The second question is related to your current account fees growing at a very rapid pace, almost 40% year-on-year. We understand here, as you’ve been increasing loyalty of your client base, but can you explain to us also how much of this growth is related to price increases if you have been able to increase prices and how much does it have to do with an increase in the client base? Thank you.

Mario, thank you for your second question, for your two questions. Sorry, can you repeat the second one? I didn’t get it quite right.

The second question is related to the growth in current account fees growing 35% year-on-year. How much of that is related to prices and increase in number of clients?

Okay. Loan growth and markets, et cetera. Yeah. You’re right. I mean we are grabbing market share. The strategy here is very clear. Profitable market share. That’s the first thing I would like to share with you. So the bank does not have an objective by itself in terms of size, in terms of grabbing market share. This is not the idea. We will also gain market share, if that means increased profitability. And as you mentioned, that is what is happening. Probably we have to go a little bit into the retail, because [indiscernible] we are growing either because we are filling gaps in which we’re underpenetrated and that is for example agro or SMEs, two good examples. In the agro business in the corporate side, we gain almost 400 basis points of market share in the last year, but I mean, as you remember and as you know, we have been very, quite below our natural market share in this business. Our market share has been like 3% for a long time. So I mentioned to you that we are starting an agro, new department or strengthened department and the strategy to clearly grow there, that was announced like one year, one year and a half ago and you’re starting us, starting to see the first consequences of that kind of a strategy. The bank has traditionally tried to do this, but now, it is clearly yielding results. In SMEs for example, I mentioned we have an offer that is not only financial and this is important to understand. What we offer today to an SME are several things. First, if duration is very small, we offer the, there is more POS, and if it is larger, we offer them the acquiring full service, getting the full service.…

[Operator Instructions] Mr. Jorg Friedemann from Citibank would like to pose a question.

So the first one, your approach in the end of the goodwill amortization following the acquisition of ABN AMRO years ago. So with that, it is natural to expect a pickup in effective tax rate. So could you comment on your expectations for this rate going forward and how higher payment of interest or non-GAAP to all the activation of tax credits could mitigate a significant increase of the tax rate in the second half of ’17 and 2018. This is the first question. And second question, I noted a number of maybe one-off in this results that has negative impact, although we did not label those as one-offs. So could you please comment in how you see the progression of some of these line items? I know you have mentioned some of those. First, I noted that in the second, in the last two quarters, your non-operating results increased substantially, probably due to accounting revelation for closured assets. I also noted that you changed their methodology of booking provisions for labor and seasonal contingencies and finally, in this past quarter, I saw significant drop of recoveries of one of – 30%, I think it is the lowest level of recoveries in the last two years. So how you see the progression of earnings once you normalize some of these line items? Thank you very much.

I will try to address both questions. On the tax rate, you are right. I mean, we are finalizing the goodwill amortization of Banco Real, which is basically the goodwill here. Also, we have a little bit of all things in sometime during the 1Q. Now, that linked to what would the tax rate look like going forward, you have seen during the first quarters, we are already with a higher tax rate. I would assume that the tax rate should be somewhere around the 25% to the 30%, somewhere around that. Please do not consider this as an exact guidance, because obviously these things vary. You are right that interest and capital play a key role and we will obviously try to optimize going into the end of the year. As you know, the board has approved a second quarter dividend of 500 million. So we did -- the board did in the first Q, announcing 500 million and another 500 million had been announced in the second Q. So it looks like the board is going towards a quarterly dividend payment, interest on capital. So again, trying to optimize the tax situation, but in terms of I think, we haven’t looked too much from this sustainment in the last couple of years. We should trend to the levels I mentioned. Other results, other non-operational results. Yes. You do have a little bit of everything there. You mentioned quite good the different points. I would underline there some things. First, you do have things accounted there that are linked to the activity. And I mentioned and there are things like credit card costs in different parts of the Bank’s, what we call here the MasterCard or whatever it is. You also have there costs linked to beta launch [indiscernible].…

[Operator Instructions] Thank you. The Q&A session is over and now, I wish to hand over to Mr. Angel Santodomingo for his closing remarks.

Okay. Thank you so much. I will just like to say that if there is any question that has been not addressed, we are open, investor relations team and myself, obviously to try to answer it. Thank you for being there and I look forward to seeing you all in the, during the next Q results. Thank you.

Banco Santander Brasil’s conference call has come to an end. We thank you for your participation. Have a nice day.