Good morning and thank you for waiting. Welcome to the Conference Call to discuss Banco Santander Brasil SA'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 in a listen-only mode during the presentation, after which, we'll 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 Investors Relation website at www.santander.com.br/ri, 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 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 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 has 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 our earnings conference call. 2020 was a challenging year more than usual. And we also had important achievements, which will be present today by our CFO, Mr. Angel Santodomingo, as well more details on our fourth quarter and full year results. So now I turn it over to Mr. Angel.

[technical difficulty] 4Q results Santander Brasil's 4th Q results. We have divided the presentation in the four areas, basically in a Strategic Update, the Main Highlights of the Results, Santander Group results and the Final Remarks. Starting with the first part, what I would like to do is to speak a little bit, just a little bit of how we finalized 2020 as Andre said, it's not been in a normal year, let me say like that, and then we will probably speak more about forecasting and forward-looking ideas. So in the first slide, as you can see, we made a summary of what we have been achieving during the last few years, but specifically what we have been delivering during these four Qs in 2020. It is a fact that commercial activity and transactionality has started to rebound during the second Q, but it also I think it is important to notice or to underline, that in fourth Q, there were three key ideas, which do leverage us thinking in 2021. First one is that, production as you will see, improved and started to get the goodest speed and direction. The second point is that, even we - in that situation, the attendance - the quality of attendance, the NPS hit record high and we - I will present that further on. And the third one is that, as you will probably see, credit quality is absolutely controlled without a nice trend. So, moving to be a little more concrete in next slide, we have presented in terms of NII growth and cost evolution, good numbers, NII grew with 7% year-on-year, we have an efficiency ratio of 37% in 2020 in the year, closing the year in 39%. As you know, we have some seasonality in the fourth Q,…

Thank you. We're going to start the Q&A with the questions we received through the webcast. So the first one is from Eduardo Rosman, BTG Pactual. Regarding your future ROE at Santander Brasil first Investor Day at the end of '19, it was guided ROE of close to 21% for the end of '22. Due to COVID-19, the guidance was cancelled, but still - but you still report ROE of 20% in fourth quarter. Do you think it is possible to deliver ROEs close or slightly above the 20% mark in the next three years? And here we have another question with the same subject from Thiago Batista, UBS. Santander Spain provided a medium-term guidance for RoTE for South America over 19% to 21% and Brazil is the main business of the region. Do you believe this level of profitability is feasible for the Brazil operation?

[technical difficulty]

Ladies and gentlemen, please hold.

Sorry, are you hearing me? No, not. Okay, sorry. I think we were put on mute and we were having - I was elaborating on the equation and no, but the question, I think it was heard, Andre. And I'm sorry about this. I was speaking and we were on mute. Okay, so I'm going to repeat the answer I just gave without anybody hearing me. So, thank you, Eduardo and Thiago. Let me try to answer your question. You are right in terms of the return on equity, we discontinued the guidance, we do not have a guidance right now, the clearly objective of the bank is to maintain and utilizing the capital in the right way, and this is a continuous kind of discussion on a daily basis, on a weekly basis. So, profitability is going to continue to be the main kind of objective or one of the main objectives. We have already achieved the levels of that guidance that was discontinued, I already spoke about efficiency, we are better than that, we maintain profitability around the same levels, the 21%, 20% and we will continue to try to deliver on that sense. So that is no question now. We will - we are obviously discussing about the guidance, if we resume it or not and what is the best moment to do that and we will come to you as soon as that discussion is finalized. But the - we strive to continue delivering levels of profitability that the market will pay for. I'm sorry about the mute thing.

Okay, next question is from Victor Schabbel, Bradesco BBI. When does the bank see an NPL ratio peaking? How does it should affect provisioning trends ahead after declines seen in the fourth quarter?

Well the reality is that both NPL and costs of risk quality in general terms as you have seen in the in the slides has performed positively, that is - that is a fact. So we are currently with rate - with ratios, both in terms of cost of risk and in terms of NPL, both the 15 to 90 days, really quite attractive you know. We are speaking of 2 - around 2% the over 90 and in 2.5% the cost of risk. Now, I think we have two discussions here. One is the short-term, the short-term, if we see how the economy may evolve, what their supporting measures, how their supporting measures and liquidity measures to the individuals are happening in the evolution of them and how we may see the next months and I'm speaking of months, we may see that the trend is marginally and slightly, let me underline the marginal and slightly, but with some deterioration. Are we seeing that as of today? The answer is no. But again, if I apply some rationality to the situation, I will say that those levels that I mentioned in NPL and cost of risk would probably turn upwards. We have not seen any leading indicator in that sense, we are not - as you know, we follow a kind of operations. Now, looking at a bit farther. So not only in the next months or what I would still see is that, if Brazil goes into a more stable in reform-wise country, where you will start to continue to have more collateralized loans as I have shown to you, you continue to have a more stable environment. My guess is that structurally cost of risk will be better. But that is a long-term view. Okay, so we probably go through a short-term is more deterioration, that could be happening, I don't know during - we are not seeing as of now. So I don't know if it's first Q, first semester, depending on how things evolve here in Brazil on a macroeconomics point of view, and then probably move into a more positive standpoint.

Okay, next question is from [indiscernible], Itau BBA. Fee revenues from current account were better than Resilient, up plus 3.5%, quarter-on-quarter. And you are one of the first the-fastest adopters of PIX. Can you elaborate on how you achieved these between volumes, pricing and what is fair to assume growth in line in final year '21 as well?

Okay, a couple of comments here. You're right, the insurance grew 22% on the quarter remember, I mentioned this during my presentation that we have seasonality here every fourth quarter. So that means that we have an income from an insurance premium that comes in the fourth quarter, which is a yearly premium, but it is paid on the fourth Q. So if we clean that 22% for that kind of seasonality, we are speaking of 3 - approx 3% growth on a quarterly basis, so annualized double-digit. We are quite positive on the insurance side. It is not as still the main fee line. But I would estimate that the trend would be in some time, not fully obviously for the first - from the next quarter, that it will be, if not the largest one of the largest, it's already the third as you can see in terms of concepts, but it will clearly improve going forward. The second part of the question was with regards to PIX. I gave some numbers with regard to PIX in terms of 15% market share, it is working pretty well. But let me say you - let me share with you something that is kind of significant, you know, I mean, we have - as everybody registered a lot of clients, we call it keys, et cetera. But we were doing on a monthly basis. Let me give you second semester, okay, from July, August, September. In between 37 million to 38 million transfers per month, okay. As you know, PIX started by mid November, I think it was 16th of November. And let me give you the numbers of December compared to what I just said. In December, we made 37.1 transfers. So, absolutely in line with the number of transfers we had made in July, August, September, October, November and we made also close to 30 million PIX transactions. So, what is the bottom line of what I'm saying that clearly, we are maintaining the dead end of the transfer operations, and at the same time, we are going into this new system with - which means at the end of the day, that the link, the loyal, the capacity to transact with linked clients is even higher, because we are doing what we almost more or less did and using much more the PIX' capacity. And this is pure linkage. This is clients being loyal in transacting more with the bank.

Okay, next question is from Mario Pierry, Bank of America. What level do you think is a minimum that you would like to operate with? And what payout ratio should we expect in '21?

What level of capital? Okay. I would - we have always given the guidance of around 12%, I think something between 11.5% to 12%, you know that last year, the payout was limited here in Brazil to 30%. I think we - with the announcement we made yesterday, I think we are in 28%, 29%. So close to the - in between the range, you have a minimum of 25%, a maximum of 30%. So we are in a - in the range, in the upper part of the range last year. And that has meant that we have accumulated a little bit more of capital. I would say that the level of capital here between 11.5% to 12% or around 12% is, I wouldn't move my previous statements around capital, obviously a gain, as the country stabilizes this level of capital is more comfortable you know. Which leads to the second part of your question, Mario, which is payout. Payout, I always say the same thing, you know, I mean as you see we are at 20% plus with the 21.5% return on equity. Risk weighted assets are growing at around and will be growing in my estimation or our estimation is that we'll be growing in somewhere around low double-digit, 10%, 11%, 12% which leads to an approx 50% payout you know. So those are the levels which as a reference for you with which we are working, obviously we will adapt depending on the situation, the regulations that we had last year, et cetera.

Okay, next question is from Gustavo Schroden, Goldman Sachs. What is the bank's view regarding potential increase in SELIC rate and what are the impacts on NIM? Should we expect a positive impact on the bank's NIM?

Okay, thank you, Gustavo. In terms of the SELIC, we have our macroeconomic department has an estimation that which is, I think, quite in line with the consensus that SELIC will start to go up sometime this year from the current 2%. So, we will start to see movements the next meeting I think is March and then - and the other one is in May, and I think that all the market has positioned itself with increases to kind of compensate the - or to try to adapt to also to the inflation levels, et cetera. The NIM sensitivity we have already communicated these several times. We are speaking of around 100 million - 100 basis points movements. It's around I think is 200 million something like that in terms of sensitivity to the movement of interest rates. Now, this is sensitivity to a yield curve parallel move in the full yield curve. So the fact that the SELIC goes up or goes down, if the Q doesn't move, it doesn't move my sensitivity. Okay, I think that is important for you to understand. So, for me, it's more important how the yield curve moves at the end of the day, as you know, we have been lending - we have increased significantly the lending about one year in the last year. So the collateralized movement also aligns with more duration in our balance sheet, improving or - not improving, increasing significantly, which also means that you have more exposure not to the very short-term, but also to the medium part of the Q, okay.

Okay, next question is from HSBC, Carlos Gomez. Looking at the different segments' individual lending out to mortgage, payroll, credit cards, where are you seeing the most competition? Are you still targeting credit cards as an area of market share growth?

Well, I will say that we see competition across the Board. I mean, speaking here, if you have more or less competition, that I always have said I mean, the Brazilian market is absolutely competitive. I mean, you are - you mentioned auto, in auto, we have very strong competitors and they are continuously - on a weekly basis, they are continuously adapting in price, in offers. We are the leaders there, we have a very strong positioning and we are increasing market share also there. But competition I mean is, but I will say that we - you will see growth in two parts of the balance sheet or more growth not growth, more growth in two parts of the balance sheet. One is the, all the collateralized part, I mean, the mortgages, agro, the different I mean the auto lending, the different parts in which you see guarantees, payroll, et cetera, that is a part in which we have been growing and we will continue to grow, probably even linked with not - call it non-collateralized like consumer finance, if the country moves from the strong positive territory that is one part. The second part probably will be outside the individuals on the SME arena, you know, corporate and corporate I am a little bit more conservative, because specifically obviously capital markets will play its share and its - also its competition. In credit cards, you mentioned - you were asking about credit cards, yes, we are growing in credit cards as you know we stopped that growth a couple of years ago. We didn't like the environment. We lose market share on purpose and we are back on growth on that part of the - and you saw their numbers you know, I mean we - I mentioned we sold - a little bit more than two months, 1 million credit cards from the SX on the PIX offer you know.

Okay, next question is from Otavio Tanganelli, Credit Suisse. Cost of risk is running below 2019 levels, will there be a need for additional provisions in the future?

Okay, Otavio, thank you. Well, the extraordinary provision we made in second Q, I have continually said that we think it's enough. So we are not foreseeing for the time being, obviously things may change, the country may change et cetera. But if we continue with how we foresee the future today and with the environment that we have today, we do not foresee additional extraordinary provisions as the one we made in second Q. In terms of cost of risk evolution, et cetera, I already gave my areas there.

Okay, so now we're going to receive your questions from the - from phone calls.

Okay.

The Q&A session via telephone is open now. [Operator Instructions] Our first question comes from Thiago Batista, UBS.

Yeah, thanks guys for the opportunities. I have one question about the collection or the credit recovery process. We saw a big increase in the recovery during 2020. I know that did some changes in this process. So, if you can elaborate a little bit more on how - what the bank did to really increase these recovery process, and if the bank believes that these level should continue high in the next quarters? And a very small follow-up or a very small question. On the taxes for next year, do you have any indication on how tax should be in 2021?

Okay, thank you, Thiago. Yes, I mentioned through my presentation, the recovery positioning that we have been performing better and better and we have a clear view that is one of the important parts we had already some time ago and we have been building as you saw in the slide, that is one of the important parts of on the provisioning part. What are we doing there? What we are doing is that, I showed in the slide that we have been evolving throughout the time in terms of how we do things on the recovery side. We are focusing what we do is, we look - we do have a recovery area obviously, but it really focuses in each of the areas, in each of the segments or products to really try to optimize both the level of knowledge, the data center, et cetera, that we have and the digital capacity, you know. I mentioned that I mean, recovery traditionally was made physically as you remember, then we started with a little bit of information. Now, we are clearly on the digital side, you know, which is, it means, digitalization, it means very important to integrate the distribution channels. So, they have to be part of the recovery. I mentioned you know that we have 70% of the digital channels that are participating already on the regionalization. And we have also kind of innovated here. Let me remember for you, for example, the troca com troco, you know, that which is on the auto side, if you have a car that is financed and you want to change it for a car that is of a lower level, and in the exchange, even obtain money, we put on the market that product, we sign an agreement with our 15,000 car dealers, and they have moved that recovery product to be one of its products, each car dealer is often is, as it will be his or her product, which means that we are moving our recovery capacities outside the organization making partnership with those car dealers, which is a new way of kind of recovering provisioning levels. Let me give you a number, 90% 90% of the provision that has been saved through troca com troco, through that system in which we subscribe with them the process is new, we wouldn't have done it with a traditional recovery capacity and that is very important, okay.

Our next question comes from Jorg Friedemann, Citibank.

Yeah, thank you very much for the opportunity that to talk from microphone here. Thank you very much for the opportunity. I have one question and just a very quick follow-up possibly. The question comes on the Getnet actually, the whole card strategy, I noted that no cards in acquiring even though growing 40% quarter-over-quarter, they grew only 4% year-over-year, and as a matter of fact, it's reduced 8% you know for the last 12 months. So, at the same time, turnover has been quiet, you know substantially growing both in you know, in insurance and also in the acquiring side. So just to understand, is this an effect of a mix of clients or it's an effect on paper rates? If you could elaborate a bit more, it could be helpful. And you know a quick follow-up on the numbers. I noted that this quarter we had a very significant increase in the contingencies and procedurally labor and tax litigations, 120% quarter-over-quarter. Just if you could give us some color there and whether these are not required? Thank you.

Okay, let me - I didn't answer the tax question from the - from Thiago I think he was before. So Andre, can you elaborate on that? And then I will elaborate on both Getnet and contingency. I'm sorry, I forgot about you.

Okay, sure. So going to the question regarding taxes for '21. When you look our I mean, estimates, initial estimates and considering that we had already an impact on 10 months last year, in income tax, increasing from 40% to 45% and also considering the results and all we can see by now, we are spending something close in the tax rate to '21 from what you saw already in '20. What is my level? I would say I mean, it'd be, I mean a big chance to be really close, okay. So, this is what we have. Thank you.

Okay, on Getnet, what you were mentioning, well I gave the numbers depending how you take all these numbers and how you do the calculations. We will be obviously, we as you know, we made a relevant fund yesterday by which management will be - will have a positive opinion on the operation given to the Board in the next weeks. So, that will also open when whenever if the Board approves, it will open probably for much more information about your new question. But what I would say to you, I don't know if I'm answering what you mentioned, but I mean, client is growing 16%, POS are growing 38% which means that, we are penetrating much more our database and turnover is growing 32% not enough with that, the anticipatory series and the receivables business is growing close to 40%. So those numbers and this is on a year-on-year basis. On a quarter-on-quarter basis, it depends a lot to your question. It depends a lot on the type of client, I mean, for example, if you incorporate a wholesale client, which is large enough, that quarter, you may dilute a little bit numbers. In this quarter in four Q we are very active on Black Friday, I think I put the numbers, we were leaders in the Black Friday with an amount of activity that was historic you know. So, the kind of volatility in between quarters, it's - I would really look at the year-on-year numbers. If you divide also by credit and debit for example, in terms of also turnover, we are growing in credit 15% and in debit, 11%. So all in all, the turnover is what I said, 32% and transactions grow 13%, which shows what I said to you, it's depending on the…

Our next question comes from Marcelo Telles, Credit Suisse.

Hello, Angel, Hello, Andre and thanks for the time. Most of my questions have been answered just have a follow-up on Getnet. You know you've been - you know you've reached like a market share of 15% clearly in the past years, you know, your market share has increased and where do we go from here? Do you still see room for Getnet to continue to gain market share you know given you know, despite the fact that you know, you guys already achieved you know a very high market share number, 15%? And where would that growth come from?

Okay, thank you, Marcelo. I would answer to you in the direction that I also answered probably the same question when we were at 5%, 6%, 7% or even 8%, and there was a strong opinion in the market in this period saying okay, we would reach our natural market share and that was about it, because it was going to be impossible given the acquiring business to have more than our natural market share. We are clearly above that one and why, because we have moved the company in the direction of as you know, the mix is more retail, two-thirds of retail depending on the moment, but around 60% retail and 40% wholesale, first. Second, the cost per transaction that I said et cetera, so that has made us competitive and we have delivered or developed during the last, I would say two, three years already, additional products to the traditional-only POS as last credit business. So 50% we are there. It will depend again on the same matters that I mentioned to you, you know, I mean, would it be profitable? Would it make sense? Does - do we have a space to grow? I think that the long tail that very small part of the business market, is a small micro kind of entrepreneur is, we do have a space there, clearly. We should be able to also on the next kind of layer on this SME on the small SME, okay. And then, as you know, we are a bank, which is quite strong in corporates, bringing in payrolls, and when you - you're not only bringing the payroll, you bring the full or we try to bring the full range of products and that also means acquiring you know, those probably are the main growth areas. But again, it will depend on profitability. But yes, I mean, the idea of being a clearly a growth company going forward is what we are clearly seeing, it has very good competitive advantage and it has been proved, this is a fact, this is not an estimation. So we are absolutely prepared to continue on that direction, if it makes sense and the offering in terms of products or services is kind of a winning tool. So just, and if you aren't the potential operation that we announced and that we are now recommending and the Board will discuss in the next weeks or months or whatever it is, well, I mean the capacity that Getnet should have, both because of size, both on this - on the cost side and because of new products and revenues should even improve that you know, you don't have kind of a global player in the acquiring business you know. Thank you.

So, okay. And we see, I mean, that was the last question. So now I give the word to Mr. Angel to further closing remarks. And thank you very much for joining us in the call. Also apologize for not taking all the questions at these time. So I mean, a big number of questions. We can obviously attend to you anytime from the IR team. Thank you.

Okay, thank you very much. As Andre said, if there is anything that has not been covered, please do revert to us and we will clearly answer the questions that is - that is a clear objective of not leaving anything unanswered in this session. Thank you very much and looking forward to seeing you in the next occasion.

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