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© Reuters. By Gabriel Codas
Investing.com – This Tuesday morning, on the São Paulo Stock Exchange, Santander Brasil (SA 🙂 shares operate with a strong appreciation in B3, above today’s earnings. Previously, the bank reported higher-than-expected net income for analysts during the first quarter, fueled by another period of rapid growth in the loan portfolio, but it has already shown the first signs of the crisis caused by the pandemic of coronavirus.
Thus, around 10:45 am, the shares rose 6.76% to R $ 26.07, while the Ibovespa registered an increase of 3.15% to 80,705 points.
Balance information
The bank’s recurring net income was in the first quarter, 9.2% higher than expected by analysts consulted by Refinitiv, and also 10.5% higher than the same quarter last year.
Santander Brazil reported that the number of closed contracts with customers at branches has fallen 26% since March 16, when the pandemic began to gain more momentum in Brazil.
The effect of the epidemic was also felt in service revenues, which fell 6.7% in relation to the previous quarter, to R $ 4,482 billion, partly due to the problems caused by the social isolation adopted as a way to stop the virus. , according to Santander Brazil.
The bank also emphasized that cost reduction will be critical at this time, but did not provide further details on the actions taken.
Santander Brasil’s loan portfolio ended in March at R $ 378.5 billion, an increase of 7.5% compared to December, mainly driven by loans to large companies, which sought more credit in the midst of the crisis.
The bank’s return on capital reached 22.3% in the first quarter, one percentage point above the previous quarter.
Analyst rating
For UBS, the numbers were much better than expected, resulting in a ROAE of 21.7% (vs. 20.8% in 4Q19). However, analysts note that the bank’s bad loan provisions covered only 71% of default formation, reducing the default coverage ratio (a clear indication that the bank has not reinforced its provisions).
The loan portfolio grew strongly, while rates were weak. Although the team believes that the tone of the conference call will be more important than the 1Q20 results, they expect a positive reaction from the market.
The bank has a target price of R $ 30 for the asset, although the valuation is not expensive in relation to its peers (2020E P / E at 7.6x). As a result, UBS maintains its preference for Bradesco (SA 🙂 and Itausa (SA :), followed by Itaú Unibanco.
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