Good morning and thank you for waiting. Welcome to the conference call to discuss Banco Santander (Brasil) S.A's. Result. Present here are Mr. Sergio Rial, Chief Executive Officer; Mr. Angel Santodomingo, Executive Vice President, Chief Financial Officer; and Mr. Andre Parisi, Head of Investor Relations. All the participants will be in listen-only mode during the presentation. After which we will begin the question-and-answer session and 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. We would like to inform that questions received via webcast will have answering priority. [Operator Instructions] Before proceeding, we wish to clarify the 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 belief and assumptions of the executive board as well 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 2018 earnings conference call. In the past year we carried out meaningful achievements, which will be now presented by our CEO, Mr. Sergio Rial. Then our CFO. Mr. Angel Santodomingo, will provide the figures of our fourth quarter and full year results. Now let me turn it over to Mr. Sergio Rial.

Very good. It’s Sergio Rial here. So it's my pleasure being with all of you this morning. So we will go and start with our presentation, so we kindly ask you to turn to the first slide. I have it on Page 4 if that reflects also on your page. So what it shows here is a third year of story that have characterized itself for being a growth-led company, but being attention to capital deployment, but also focusing on the gradual at the same time structural increase of our ROE, so we are really pleased to see that we have been able to reach in the fourth quarter 21.1, which more important than the number itself is the trajectory of the company that have systematically over the last couple of quarters showed increased structural changes in its performance. We are also proud of reaching 40.5 on deficiency ratio. It sounds sometimes we look at the number but the efforts behind that number have been incredible and has also been a signal of a company that has become a lot better in managing processes and reflecting those processes in better customer experience as we’re going to see later on, on our NPL. This is also the reflection of a company that is managing itself better horizontally. Big companies do struggle and being able to be smartly connected and I think Santander (Brasil) has been trying to be a good example of scale not being an obstacle much the contrary being actually a leverage that we have been able to use. All in all a solid growth in terms of profit relative to 2017 and I certainly believe more to come. The next slide I think is the foundational piece of the change in the company, which is our human capital.…

Good morning. It's a pleasure being here again with you presenting the 2018 results. I will start with the image of the groups Santander Group's result, which had been already presented today. So I won’t elaborate too much. But as you have already probably seen net profit by the group was almost EUR 8 billion, and Santander represented 26% overall earnings, so in the relevance of the Brazilian subsidiary results for the group. Moving to the macro side part of the game, I will not elaborate too much here, but let me share with you a couple of ideas. The current market view of economics the former is I would say positive. On the back of an improving economy along with a sound balance of payments and favorable inflation dynamics, Selic rate may remain probably at current historical low levels. We have all sorts of confidence indices on the rise rates reaching not only pre-crisis levels, but even those of early 2009 when the prior positive cycle began. This should strengthen growth through consumption investment leading to a faster trade expansion in the future. Finally, the digital process that Brazil has gone through both in household and companies, opens another opportunity looking to the next cycle. All in all, we have an optimistic view on how the economy will perform, potentially boosted by structural reforms actually created by the new government. Now moving to what are our specific results on the next slide, we bring to you some details of our net income for the year. In 2018, it reached BRL 12.4 billion, increasing 25% as Sergio mentioned in the year and almost doubling if we compare to 2015 when we reached BRL 6.6 billion. So it means that net profit has doubled in almost three years. This performance is…

Thank you. We will now start the Q&A session for investors and analysts.

I would like to call your attention regarding the Santander's Investor Day that will take place this year on October 8, where all of you have opportunity to meet our top management and discuss our growth strategy regarding the current businesses opportunities, optimization of our cross-sell, launching new businesses coupled with efficiency plan, reducing cost per unit. So, once again, all of you come with us on October 8. And now we're going to open the Q&A session. First question is from Mario Pierry, Bank of America Merrill Lynch.

On an improving macroeconomic scenario, what's the outlook for loan growth in 2019? When would the Corporate segment demand lowers again?

Okay. Thank you, Mario. As I mentioned in the presentation, I mean, both are concerns in our view and I think the inner view on the country is a positive one in terms of growth, confidence and consumption also being boosted by investment. So what I will say is that the current average of the country as you know is close to 4% leaving traditionally [ph] in which private banks are growing more than public banks in general once it's kind of the reverse of what happened in the previous, I don't know 10 years or something like that. So the trend, I would say, would be that, that continues, at an average of the county that could increase to somewhere in the single-digit, high single-digit. You would have nominal GDP growing around 7%, an inflation of 4% plus 2.53%, of real GDP growth, that 7% given the low leverage economy has today or the deleverage that the country has gone through the last three years growing at nominal or even higher than nominal rates, I wouldn't say it's an unreal prediction. To that extent, in our case, we will try to keep on growing at the average or above the average, but always with the same principle, which is profitability. We will keep on gaining market share if it is because of profitable kind of standpoint point of view and it improves our situation of profitability, which I’ve indicated as you have seen in the last year. So we do not out the target size as mentioned in previous calls. We target profitability being a universal bank, €1 billion universal bank we don’t want to. And the second part was with regards to the Corporate segment. I think these go with the cycle. I mean remember we have capacity available in the economy both through unemployment and through industrial capacity. Unemployment is being reduced and that is also kind of generating consumption. On the investment side, on the capacity – investment capacity side, we will start to see as economy peaks up these new investment plans and we will start probably to see kind of more loan demand from the corporate site, offset to some extent by market – Capital Market, which is always the game in the positive bond on the site.

The next question is from Thiago Batista of Itau BBA. And Sergio, you’ve achieved an earnings growth of 25% 2018 versus an expansion of 36% in 2017, is it possible to maintain the EPS growing at high teens or low 20s level in 2019?

Hi Thiago, it’s Sergio Rial. First of all, thanks for the question. I, of course, we don’t provide guidance. Somehow we doesn’t embedded each year what way expect, but I’ll tell you what I expect and one of the challenge I think is always being when you look at our story again Santander Brasil keep growing in the last three years without necessarily impacting cost of credit. I think we have proven without any sense of arrogance because we’re learning each and every day that we are able to do it. And then the other question in this scenario can Santander Brasil continue to grow as I think we have strongly done in a market that it’s a lot more competitive than I think you have been. So I mean I wish I could give you an undivided answer, but what I can tell you is that I still believe I’m talking out revenue, not necessary on our earnings can be in different points of the profit and loss accounts for it. From a revenue point of view, I do believe we’re going to be a story of a double-digit. I really do. Now and then you say on the back of what, while on the back of a number of things that I think we’ve been able to build, on the back of, for example what I would call corporate demand has been pretty much reviewed in Brazil. I mean if you look at our wholesale portfolio and growth has being neutral for diminishing part of it demand, part of it almost intended strategy to make sure that we will have proper capital deployment, large corporate stake sometimes more capital than you actually seen some of the return with the bank in the meantime have built and continues to…

The next question from Thiago with Itaú BBA the banking results line and others continue very strong. Is it strong result likely to continue during the 2019? The net has been able to maintain an outstanding expansion roughly 30% in the turnover in the last year, even considered a strong competition in the segment. In the strong expansion is expect to continue going forward and the next question is the bank both very low level of tax line in the quarter. The material drop was only caused by the interest on capital or there is any other relevant factors that explained the maturity client taxes? Would the level of taxes the banks you expect for 2019.

Okay, thank you, Thiago. This is Angel. Let me answer the three questions. The first one in terms on the NII orders, so we think if leverage in decent past with number of concepts inside that line, which are capital remuneration receivables anticipation ALM and our treasury activities on the – coming from the wholesale banking unit. So with that, as always – as I always it does gave some volatility depending on one of the four concepts you mentioned to you have less or more volatility or less or more quantity. No obviously with a leak the level, which is the remuneration of capital is lower and that’s scenario as well, but treasury, for example, things really volatile. When we have achieved this year, as I mentioned in my speech, it’s an average where we are playing to these – the concept coming from the ALM, we’ll tend to the lower obviously, but in terms of high volatility unless quarters volatile on the treasury side on the prop activity coming from our wholesale banking, the rest would be a little bit more trendy. But that’s about what I had been saying in the last quarters. So there is no big news here. I remember you that trying to rephrase it clearly please the top treasury activity from the ALM, ALM activity is not a trading book at all. It is just there to with – Okay. So let’s trying to differentiating. So on the GetNet question, you are right. I mean, GetNet is expanding. It’s turnover to view like 32% and transactions like 35%. If you break down that, you can see how the activity has a much more stronger than the current activity being the 20% to 25% in the transactions and 30% to 33%. So that gives…

Next question is from Philip Finch, UBS. Can you talk about the outlook for asset quality please? We have started to a pickup in NPLs in 4Q 2018. Are you expecting these to continue in 2019? What sort of risk can we assume for the coming year?

Thank you, Philip. Angel, again. Well, I also elaborated a little bit about quality and provisions. The first main area one do not see kind of deterioration or worrisome leading indicators, et cetera. This has to do with basically two things in the evaluation you saw in fourth Q. Fourth Q tends to have a little bit of seasonality. In this sense, it is a normal seasonality. I remember for example to you, fourth Q of 2017, I think if I remember well, I'm not – I'm speaking out of memory here, but in the quarter like 9% or 10%. So we are also growing in the quarter more or less or a little bit more, but more or less compared to the fourth Q 2017 in the same levels if I mentioned so. Cost of risk is around 3.5%, which is again the same level as 4Q last year. We remain fairly positive that means flat is improving in the next quarters given the outlook for the economy, given what the bank is moving – where the bank is moving towards in our position, I don't see any negative comment here to be on the run. And the last element here is clearly change of mix, okay. So remember – I remember two years ago, we had 60% 40% on the balance sheet in terms of loans on the loan portfolio being 60% retail, 40% wholesale, that 60-40, today is 73-77. So there is a clear change of mix that from time to time will be reflected on the provisions side, but no underlying worries from our side here.

Next question is from Jorg Friedemann, Citi. Some traditional investors ask about potential impacts on the local subsidiary from raising concerns about Santander Spain's capital position to be bit more than 50% these banks in and an interest on capital during 2018. Could you raise the 2019 right of the CET1 up 0.5%?

Sergio here. Thank you, Jorg. I'll go straight. So I think the rising concern about Santander's Groups capital position was a relative discussion over the last four years. I think we have posted 11.2% well above I think what the group had indicated in 2015. And I think what has proven is that the group on average has been able to generate capital organically over the last three years. We can always question the speed. We certainly cannot question now the direction. And I think the group has been very, very clear and straightforward relative to its desire to continue to strengthen its core Tier 1. Having said that, looking from a subsidiary point of view, we certainly look at the capital of the group as anybody does, but our management and obligations to look at our own capital, one, to be able to sustain and back our growth ambition. I think we have been a formidable growth ambition and hopefully that's not going to change. So are we well positioned from a capital point of view to continue to grow? Yes. So the answer is yes. And the 12.5% or somewhere between 12 and 13 is for Tier 1 should be guiding us for the future. That doesn’t mean that we have that as a target. I mean, our target is capital to sustain growth, one; relative position with peers, two; and third is to have a capital structure locally in the subsidiary as efficiently as possible. So those will be the three elements that would guide our decision.

Okay. Next question is from Eduardo Nishio, Brasil Plural. Mr. Sergio, if you were to select the most important reason only one item to justify the ROE turnaround, what will it be? And one for many years in your view Santander were running at very low levels of profitability around 10%?

Well, I mean – I’ll try to summarize. First is, I think definitely it’s the turnaround in retail, which tends to be a very complex, I mean, turning retail businesses around whether in banking, in clothing, in anything just the fact of being retail, it’s always a challenge. So I would say retail turnaround, which has happened on the back of a number of things, but I could just mention a couple things. One is definitely leadership, I think, at the end of result or a function of leadership. So leadership that is certainly not mine only far from it. Second, I would say, aligning incentives with profitable growth. So I think we today have a policy at retail that people can actually generate variable, if you’re able to generate profitable growth having that alignment, but that can only happen once people at the very forefront of what we doing from the retail have the data and information to manage what they do. So we have at the lines the P&L of retail to the lowest possible denominator, so a branch manager or channels would know what their P&L is. So giving people the possibility doing that what they do to the group’s, I mean, Santander Brasil’s results. So I think it’s just very deep knowledge of ownership. And I could go on and on. I mean, this is a long answer. But I think, it’s the last one that I would make is probably the brand. I would say, Santander Brasil’s brand, Santander brand today relative to its history or even through its peers has strengthened to a way of being more contemporary, a little bit of a lateral thinker, a customer advocacy. So I think we have perceived more and more as a bank that do think and act on behalf of customers. And again a lot to do, so no arrogance here. I mean, we’re still in the early days of becoming a real activist from a consumer point of view. So that will be the ambition. Become an activist from a consumer point of view.

Okay. Now we’re going to take question via phone calls.

[Operator Instructions] Mr. Eduardo from Brasil Plural would like to make a question.

And 14 points above 2017, but as far as I understand the numbers came out a bit short of your internal growth, right. So, I wanted to understand if you can share with us what were your internal goals and what are your internal goals for 2019? And also if you can give us a little bit more details how relevant is this max on the management compensation? How relevant is this metric for the bank today and where do you rank against your competitors? Of course, we don’t want you to give the numbers for each competitor individually, but just to if you can give us more details on how well length you are against the main peers? Thank you very much.

Hi, could you repeat the first part of the question please.

Yes. Actually the first part of the question was pretty much talking about the NPS which 56, 57, which is still growing to 14 points against 2017. But I was trying to understand what were your internal goals for the year as far as I understand the ratio improved a lot, but little bit short of what you expected. So, I want to know what are your goals for 2019, right. And how relevant is this metric today for the top management and why you rank in this macro against your competitors?

It’s Sergio. So thanks for being on the call. So you’re absolutely right. So we had an ambition from an NPS point of view of 60. Now and we were at 57. And I think one of the things you’re going to see from our culture is, we always have an ambition that it’s not only difficult, but it’s also an aspirational. And I think what I feel proud is that we certainly moved from 43 to 57. Now, I can tell you that we have a number of challenges, a number of challenges for NPS. Let me start giving you some. One, with smaller companies our NPS is around the 30 as opposed to the 57. So we’ve got to do quite a bit of work around corporate general and that’s the function just different profile. I always say people were not very familiar with the NPS. For example, if Starbucks NPS is in the north of 70. One of the differences between Starbucks and us, there are many. The one, big one, is that when you go to Starbucks, you made a decision to buy coffee. And necessarily when you think about a bank, not necessarily thought about going to a bank either through an application or physically, you have to go to a bank. So it is the need as opposed to a desire, which gives certainties around numbers. So numbers around 60 in the financial banking industry when you compared to many peers is pretty strong, pretty strong. I mean, European banks are in the low double-digit so they’re between 15 and 25. You have a few Australian examples above 60. You have U.S. bank in U.S. above 65, 75, but there are very few examples, there are around 60. So, I hope also and I…

Next Carlos Macedo from Goldman Sachs would like to make a question.

Thanks you. Andre, thanks for taking time, good morning. A couple of questions. One, if you could comment a little bit on your credit card business not the GetNet part of the credit card business, a lot of growth not only in the portfolio, but overtime I mean volumes this year have outpaced competition everybody else by a wide margin, part of it is NPS of course they were talking about just now, but part of it is there must be some initiatives that you carried out there. Can you talk a little about that? It seems just to see if it's sustainable and what you have done. Second question, going back to GetNet now. You just recently, I think, Stone filed a complaint in the Cardiff against GetNet, and similar to what Stone had filed in the past against Radiance Yellow and the Cardiff found in favor of Stone's complaint and curtailed, but the ability that those two companies had to crosssell. We know that of all the companies in the market probably GetNet is the one that has the best cross-selling of products to its clients. Would you expect to come out of that? And if the decision is similar to what happened to Bradesco and – sorry to Cielo and with Bradesco from Brasil and what would that mean anything for GetNet’s ability to gain and maintain market share.

Okay, Carlos. It's Sergio. I'll start with the last one. I mean, it's just part of a normal process we are guided the antitrust agencies here, just request comment from different players in the segment. So I don't think, I could at this point in time speculate of anything. I think it's a legitimate process, I mean, they have voiced their concerns, they also have to explain their own growth story and their own valuation. So it doesn't look like it being impeded from growth. Much to the contrary, I think, they have shown so far like other capacity to grow. They are very large number of players today be in this segment so I think you used the word cartels, which I don’t think it applies to the segment or to any segment of respect. but in particular that this segment as you see the proliferation of new players and entrants, which we see as very good. For example, Getnet, which we haven’t really explored during this call hasn’t really deepened its presence what I would call the individual dimension. So, we’ve been primarily accompanied for corporate, but not necessarily for individuals. So we hope to see some traction with Getnet on individual dimension. On the first part of your question on cards, I think there is an enormous space for us to grow cards in Brasil. We always do not only on the back of penetration, but also on the back of reliability characteristics of the card focusing on different segment and not being the last piece, but an important one, which I would call intelligence around customer data and what actually customers need. I’ll give you an interesting data just to signal what I just said. We have been very successful in marketing special events if I would call it. We were probably the first bank to take Black Friday as an opportunity for the financial industry. After we did it first time, all the banks followed, which we see that is really, really good. But this last year in our Black Friday positioning just in one day, payment volumes through Getnet – payment volumes through our card about BRL 1.1 billion. We normally have on average around 400 to 500. And if I look at the debit card, we were around $350 million as opposed to $175 million a day. So – and this is due to relatively low level in terms of volume relative to the size of the portfolio. So I think there’s a few and enormous amount and also it’s all the back of becoming more focused. For example, we eliminated last year over 150 cards. So the risk of cards is far too much customization, you’re not really focused on have running it fair industrial-led organization from a cost point of view with terms of marketing and CRM intelligence to differentiate ourselves from competition. that’s a little bit sort of a summary.

We’ll move to Jorg Friedemann from Citibank would like to make a question.

Hello, thank you for the opportunity. Just two additional points from the question that we’ve already answered. The first point, in terms of your loan book, we observed that even though SMEs are performing nicely over the year, the line working capital came down approximately 2% year-over-year. So just wondering where is this competition coming from or is there is a changing strategy or is this just for sort of competition also in the prepayment acquiring business? This is the first question. And the second question, we observed the needs continue to improve with the clients in terms of the provisions for contingencies that you had year-over-year, probably most of it’s related as labor contingencies, but the number now seems to have stabilized at least the quarterly figure demonstrates that. Just wondering if you see additional role to capture improvement in this particular line or as its other banks already indicated they will leave that seasonal contingencies increasing, might offset additional gains on labor contingencies. Thank you very much.

Thank you George, Angel here speaking. On the loan book, I mentioned on my previous words. We do have as you said SMEs that had been gaining momentum during the last quarters. If I go back three or four quarters in that territory and they had been improving slightly quarter-after-quarter to those levels you mentioned in terms of growth. So and again this growth with the cycle it's a normal process where you stand to see the retail deal when consumption starts to pickup and then the other kind of followed by SMEs and potentially after that corporates and large companies. On the large corporate side, you were mentioning the negative value. If you look at the little bit of OpEx sorry, Forex effect there, but in any case we are kind of flattish. Let me say like that or slightly like that, which is probably a reflection of two things I would say what I mentioned in terms of available capacity, which is today the mean that the investment clients grow in the country as the cycle continues to two out of four. And capital markets in different parts of the year, specifically the first part of the year, we didn’t have capital markets at all and we see that's a good sign. I mean the large companies should have whole market and capital in ourselves are kind of providers of funding, but again that with the cycles should keep on gaining momentum and at some point what we would call the company's side SMEs, corporates and large corporates. The company's side I will say will turn to minimal compared to the individual side. On the provisions side in terms of legal provisions et cetera, as you know, one year ago, one year and two months ago, the new labor reform was approved. These has gradual and specifically medium-term effects obviously so I would say to you that this trend will be the one you say, but you will not see strong kind of changes within quarters or because it's going to be big rather. Remember that all employees that were hired before the reform are obviously going to be in another direction, you will only have the previous kind of rights. So as we move into time that will happen in that line. The trends will be the one that you said.

Okay, thank you.

Thank you. The Q&A section is over, and I wish to hand over to Mr. Sergio Rial for his closing remarks.

Okay, thank you very much for attending. Thank you very much for following us and thank you very much for all your comments and constructive questioning which I think it really helps the management. I would say, we will remain committed to the same story you have seen over the three last years, stay tuned, more to come and hopefully you will make us all better company and we will remain committed to really create the best bank from a customer point of view in this country. So stay tuned and thank you very much.

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