Carlos Gomez

Carlos Gomez asked about the declining payroll loan portfolio and the bank's view on the agricultural portfolio. He also inquired about the government's intention to be tougher on deferred tax assets (DTAs) and its potential impact on Santander and the broader banking industry.

Answer

CEO Mario Leão explained that the payroll loan portfolio's decline is due to disciplined capital allocation. Origination in INSS (retirees) decreased significantly due to government-imposed interest rate caps making net spreads unattractive, especially through correspondent channels. Private payroll loans are expected to grow selectively within a larger market pie. Regarding DTAs, Leão confirmed that starting next year, the entire system will begin amortizing legacy DTAs through the P&L over 10 years, in addition to current marginal provisions. This will create pressure on the taxable income for all banks, likely challenging the effective tax paid. He emphasized proactive management to absorb these DTAs efficiently.

Carlos Gomez asked about the double-digit decline in the payroll portfolio and the bank's view on the agricultural portfolio. He also inquired about the government's intention to be tougher on the use of deferred tax assets (DTAs) and its potential impact on Santander and the broader banking industry.

Answer

CEO Mario Leão explained that the payroll loan portfolio's decline was due to macro factors and government-imposed interest rate caps on INSS (retirees) loans, making them less profitable. Origination in correspondent channels was significantly reduced, with focus shifting to more profitable bank-owned channels and private payroll loans where the bank expects growth as a selective niche player. He stated that the agricultural portfolio is not large for the bank. Regarding DTAs, he confirmed that starting next year, the entire system will begin amortizing legacy DTAs through the P&L, in addition to current marginal provisions. This will create pressure on the taxable income of all banks, likely affecting the effective tax paid, and the bank is proactively managing this anticipated flow.

The analyst asked about the timeline and terms of the Itau acquisition and sought confirmation on the bank's confidence in its full-year ROE guidance, considering political and economic uncertainties.

Answer

The CFO expects the Itau deal to receive regulatory approval before the end of 2023, but acknowledges potential delays due to elections. He reaffirmed the ~20% real ROE guidance for 2023, noting that Q3 performance is strong but Q4's outlook is uncertain due to the election, which is why the forecast is cautious.

Asked about the bank's strategic positioning for the end of the year regarding liquidity, risk appetite, and hedging against inflation and currency movements. Also questioned the sustainability of the strong Q2 results and the factors driving them.

Answer

The outlook is highly uncertain due to macroeconomic and political volatility, with year-end inflation projected between 175-200%. The bank is focused on protecting its balance sheet from inflation, maintaining good liquidity, and improving efficiency. The strong Q2 results were primarily driven by the increase in the monetary policy rate and the bank's significant exposure to public sector assets like CER and LELIQ.

Carlos Gomez from HSBC followed up on the MXN2 billion loss from debt reprofiling, asking if the bank would consider legal recourse. He also inquired about the expected income tax rate for 2020.

Answer

Pablo Firvida, Institutional Relations Manager, responded that taking legal action regarding the reprofiling was not discussed, as it was viewed as a very short-term payment postponement. He confirmed that the income tax rate for the following year (2020) is expected to be 25% on inflation-adjusted earnings.