Banco Santander Brasil SA
BOVESPA:SANB3
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
11.93
15.27
|
| Price Target |
|
We'll email you a reminder when the closing price reaches BRL.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
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. [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 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 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. My name is Andre, and it's a pleasure to greet you to Santander Brasil's Second Q '18 Earnings Conference Call. We had another quarter of great results, which will be presented by our CFO, Mr. Angel Santodomingo. So let me turn you over to Santodomingo.
Good morning, everybody. Thank you for being here with us, another quarter in our second Q Santander Brasil results. The agenda, as you may see, will be basically 5 points: key messages, group results, Santander Group results, macroeconomic scenario, specifically the results highlights, and I will wrap it up with my final comments or remarks.
So -- well, we are glad to show that our ROE kept its improving trend and reached 19.5%, the highest level since the IPO was done. So that's almost 9 years. I will elaborate through the presentation the reasons why we keep on improving, but as a financial summary, I may say that taking advantage of our operational leverage has been key. This is revenues have been growing 3x where expenses have done, also leading to our best efficiency ratio ever, as you will see going forward.
Moving on to the next slide. Profitable growth comes in between all the initiatives through profitable market share increase on both loans and deposits. While we reached a 9.2% market share of loans, in deposits, we are now about 10%. We have been gaining market share consistently across products, as you may see, but let me underline just some key lines.
Vehicles. We kept being leaders on auto financing. As mentioned during the last 2 years, our digital platform has disrupted the auto loans market dynamic.
Cards, we continue to present a very good performance with differentiated products and an outstanding credit card app in the industry, Santander Way, as you may probably know. Both volume and credit card sales, 1.2 million credit cards sold in the quarter, continued to outperform.
Getnet, which remains one of the main pillars of our commercial strategy. Its revenues continue to grow, and we keep on driving market share while keeping profitability at healthy levels. It is worth bearing in mind that Getnet's importance goes beyond its acquiring services. We consider here a crucial component of our plan to leverage the bank's revenues and relationships with clients.
Payroll loans. A couple of years after we redesigned this product, thus starting almost from scratch, we are producing above 12% of the market.
SME. What strengthens our position in this segment goes beyond our financial offerings. We provide a unique loan financial platform, Avançar program, that helps entrepreneurs in their businesses. We have already reached 1 million clients in this segment.
And last but not least, Agro business. As I have mentioned already for some quarters, we are making strong efforts in this area. The market share gain is a clear indication that we have adopted the right story to expand our base of agribusiness clients. We have opened 16 Agro branches, and we will continue expanding.
On the next slide, you can see that we remain focused on delivering user experience improvements for our client base since we see customer satisfaction as the cornerstone of our strategy to keep growing in a consistent and sustainable manner.
The NPS, Net Promoter Score, is a clear methodology to measure how we are evolving here. I presented to you this number for the first time last quarter after talking about its implementations since the beginning of 2017. So it's already 1.5 years we have been speaking about this.
We keep our focus to include customers' experience and satisfaction by measuring this NPS on a daily basis in all our branches and channels. And in the quarter, this number increased to 51, as you may see. We know how difficult it is to move this indicator up, but we are achieving good results here.
I would also like to comment some of the innovative solutions launched in the past quarter. Meus Compromissos, a tool available in our app that easily shows the customer financial obligations in a consolidated view, making it easier to manage its monthly commitments. It enhances our transparency with our clients.
SuperGet, our acquiring business arm, focused on individuals and micro merchants, providing services designed to support its [ public main ] issues at competitive prices and with superior agility.
Select Direct, our platform to provide a better experience to our select customers, that's the mid and mid-up in our segmentation, and at the same time, boosting our popularity on this segment. And the [indiscernible] mini branch, for example, improving new payroll customers' onboarding experience.
Moving on to Santander Group results. Net profit for the first semester reached, as you probably have already seen, above EUR 4 billion, equivalent to BRL 18 billion. This quarter, Santander Brasil represented 26% of the group's earnings. So we have relevance of the Brazilian subsidiary results for the group.
So moving forward, the economic recovery in Brazil hit a bump in the second quarter given the known part of the truckers' strike. Considering direct and indirect impacts, this strike alone cut our growth estimates by 70 basis points this year versus our previous expectation, impacting negatively also some market volumes. We believe such the dilution to be somehow temporary with some decompression expected in the near term. Obviously, elections next October will be key to understanding market and economic variables' evolution.
So let's now talk about Santander Brasil performance in the quarter. Net income amounted to BRL 3 billion, a little bit more than BRL 3 billion, BRL 3.02 billion, 6% higher than the previous quarter and 30%, 3-0, above second Q '17. The result of the first half of this year is 27% above the same period of last year.
We have been growing consistently our net profit on a Q-on-Q basis for more than 4 years now, and I have been sharing with you these results. This dynamic shows our capacity of delivering sustainable and resilient results.
On Slide 13, we present the main lines of our results. On the revenue front, net interest income increased by almost 15% relative to first semester of last year and almost 3% on a quarterly comparison, reflecting higher transactionality. Fees grew 12% year-on-year and more than 3% compared to last quarter. And on the expenses side, provisions grew almost 14% on a year-on-year basis, while they decreased close to 2% in the quarter. The loan portfolio growth dynamic is key to understand the year-on-year evolution.
General expenses increased 5% on the year in the semester and 1% Q-on-Q, but still at lower pace than revenues. I would elaborate on this further on and on the remaining concepts.
Slide 14 shows net interest income evolution, which amounted to BRL 10.5 billion in the second Q, 15% higher than the second Q of last year and 3% better compared to the previous first Q '18. The highlights of the quarter are: Loan NII went up 7% over last quarter. I repeat, 7% over last quarter, reflecting the strong loan portfolio growth as well as the mix shift effect. Revenues from funding resumed its expansion process and grew 12% Q-on-Q, even considering the maintenance of the Selic rate at its lowest level.
Others concept lost [ some strength ] compared to the [ favor ] presented in first Q but [ we still believe in good results ], reflecting favorable results from the 4 components: the prepayment of receivable businesses, capital remuneration, treasury and ALM portfolio. Underlying both NII and the spreads evolution, it is important to mention that the retail segment now represents 69% of our loan book compared to 65% 1 year ago or close to 60% before that.
Looking at the loan book in the next slide. We expanded our portfolio by 13% over the last year and 4% in the quarter, which we consider as a strong performance. We keep on growing our market share from a profitable perspective. Compared to the first Q '18, we have shown a better performance in all segments on a yearly basis. Individuals book kept accelerating and expanded by 23% in 12 months. Payroll, credit card and mortgages were the main growth drivers.
Consumer Finance performance continues to be outstanding, growing 4% Q-on-Q and almost 27% -- 23% year-on-year, reaping the benefits of our strategy of our digital platform and individual pricing model.
Our SME portfolio keeps accelerating, increasing 8% -- more than 8% over 1 year and almost 3% in the quarter. And lastly, the corporate book, which would [ have printed a negative evolution ] when adjusted by the ForEx impact in the quarter, but still, we have better performance than the 1% in the previous quarter.
On Slide 16, we can see how our funding has evolved. Funding from clients increased 2.5% on the Q and 8% year-on-year, a clear result from our intense effort to enhance customer engagement levels. Except from the most expensive instrument, financial bills, letras financeiras, all concepts presented a positive performance, reflecting client activity and loyalty. The highlights in the quarter are time and saving deposits, which grew well above the system over the last year. Total loan balance funding grew 13% year-on-year, similar to the 13% that the asset side achieved.
We have a clearer view that fee revenue performance is directly related to NPS, as you may see in the next slide. It comes as a result of a greater number of engaged and active customers, adequate pricing and improvements in the quality of our products and services, altogether culminating into increased transactionality. Comparing the first half of '18 to the same period of the previous year, total fee income increased double digits, as we have said, 12%, reflecting good performances on current accounts and credit cards in between others.
Now let's turn our attention to asset quality in the next slide. Total figures improved for both short-term and over 90 days overdue. The over 90 days NPL improved 10 basis points and reached its lowest ratio or its lowest level since the IPO. This performance was influenced by a good evolution of the corporate and SME segments. The short-term NPL also improved 10 basis points, reflecting 30 bps improvement in the Individuals segment. In our view, again, as I have been saying with you in the previous quarter, this is an undisputable evidence that our risk models continue to be highly trustable, giving us confidence to keep our growing business -- to keep on growing our business, sorry. To further corroborate this statement, the coverage ratio reached 219%, which, in our opinion, is a comfortable level.
In the next slide, you will notice that loan loss provisions net of recoveries decreased 2% Q-on-Q and total BRL 2.6 billion. Let me remember that our loan book at the same time on a Q-on-Q basis grew almost 4%. This has allowed us to improve the cost of credit to 3.2%, which we consider a healthy level.
On Slide 20, we analyze how expenses have evolved. Santander Brasil continues to focus on cost discipline and lean mindset as it [ couldn't be another ] direction. We keep industrializing our processes, as I have commented in the past here. In line with this, total expenses grew only 1% Q-on-Q with special good performance in personnel expenses. In the first half of '18, expenses grew 5 -- more than 5%. This is 1/5 of the rate at which revenues are growing, as I mentioned before. Again, our operating leverage is key to understand and, obviously, the weight of variable expenses, and here explains part of the evolution. Looking ahead, we expect costs to be somewhere around inflation. Also, the level of commercial intensity on the bank will continue to put pressure here, specifically on the variable costs, as I mentioned.
The next slide summarizes our performance ratios. All in all, these metrics have shown a positive evolution. As a result of what I just mentioned in the previous slide, our efficiency ratio is at a historic best level, reaching lower -- a lower level of 40%, 39.6%. The recurrence ratio rose to 18 -- almost 88% in second Q '18 versus 83% 1 year ago; again, bringing more predictability and resilience to our results. As I mentioned before, thanks to all these advances, return on equity achieved 19.5%, the highest level ever.
Moving to capital and liquidity side, we continue to present solid numbers. On funding sources, the funding sources is fairly stable with a loan-to-deposit ratio of 18 -- 89% at the end of the semester. Santander Brasil BIS ratio is almost at 15%, 14.8%, while our core equity Tier 1 fully loaded stayed at 12.4%, a healthy level.
During this quarter, we declared a dividend payment of BRL 600 million, aligned with our policy of quarterly payments. This is the second quarterly payment for us this year. We already declared BRL 1.2 billion in dividends and interest on capital.
So going to my final remarks, I will conclude the presentation with the main highlights. Net profit growing 27% year-on-year compared to first semester last year, represented -- representing the solid and sustainable value added for our shareholders. Revenue is growing 14% versus last year first semester, echoing our customer-oriented strategy. Asset quality control, control costs, leading to our best efficiency ratio ever presented, first time below 40%. And lastly but importantly, our return on equity reaching the highest level ever, 19.5%.
We remain well positioned to deliver sustainable results as [ has been improved ] during the last 18 quarters, powered by a well-defined business strategy, organic growth and disciplined capital employment. Let me remember you that we have offered a continuous growth Q-on-Q and net profit for 18 quarters, with exception of 1.
I would like to thank everyone for the attention on this presentation. And before we move to the Q&A, I'm passing the word to our Head of Investor Relations, Andre Parisi. Please, Andre.
Before we start our Q&A session, I'd like to inform you that we have postponed the date of our Investor Day. The event will no longer take place on October 31 and was moved to first Q '19. This is a consequence of the announcement made by Santander Group today for postponing the -- its Investor Day for early 2019. So as soon as we have the new date, we will inform you.
Now we can start the Q&A session.
[Operator Instructions]
The first question is from Lucas Lopes, Crédit Suisse. Could you please elaborate on your strategy for SuperGet? Are you [ consider ] to introduce mass marketing towards an [indiscernible] cash as solutions such as prepaid cards?
What I was saying is that I have been saying with you in previous quarters, I mean, that we have the -- what we call the [indiscernible], the little POS, already being offered through our agencies, et cetera. So SuperGet is -- we are going to dedicate a specific business line using Getnet to these more POS machines with different formats and different ways of both acquiring or obtaining the usage of the POS, trying to increase our presence on that market. We already started this. I think I first recommended that -- this like 1 year ago. And what we are doing is we are enforcing that presence on that segment of the market with this specific allocated business line. We think -- that's about it. We will have a strong presence on the digital side, et cetera, but that is part of the execution that you would be able to see as we move forward.
Okay. Next question is from Mario Pierry, Bank of America Merrill Lynch. Your CET 1 ratio has been declining steadily and has reached 12.4%, down from 14.3% 1 year ago. Can you comment on how this can impact your loan growth or dividend payment going forward?
Mario, thank you. I think this is a question that comes from [ Mario George Santiago ]. Okay. I have always said that we wanted to have comfortable levels in terms of capital, okay? Let me remember the history here. This is a bond that comes from a position with excess capital from the IPO long time ago, and that excess capital existed or cohabited with the -- during certain amount of years. We started a strategy of adjusting that level of capital obviously during the last -- probably 5 years ago, 4 years ago, 4 years ago. And our idea was to be always in a fully loaded ratio terms in the region of 12%, 12.5%, even 13%. And this is where we are moving. If you look at the previous quarter, we were at 13%. The previous one, I think, if I remember where we were, at 12.6% or 12.7%, somewhere around there. So we are moving always in that arena. We think that, that range of fully loaded, I insist fully loaded, that range of fully loaded is where a bank like us in a country like Brazil should be. Fully loaded, what I mean fully loaded is fully loaded. I mean, with all the deductions, no compensations, no things being added that we are going to offset during next years, et cetera. This is a fully loaded capital ratio. So answering your question, no, I mean, we announced and the board approved as announced a BRL 600 million of dividend, which is 20% more than what was paid in the same quarter last year. The same amount was paid in first Q. So I think we are giving a message to the market that we should be able to keep on offering a good dividend yield as has been the case during the last years.
Next question from Mario Pierry, Bank of America. Can you comment on how the market volatility and the movement of the yield curve in particular impacted other interest income this quarter?
Okay. As always, remember that in this part of the P&L, even in others, we have 4 components: the capital remuneration, we have the receivables, discount activities from Getnet, we have ALM and we have the treasury. Now how the volatility has impacted, it has impacted for the good of [indiscernible] on the treasury part, which is a minor part. The movement of the yield curve, let me remember to all of you that this is a mark-to-market impact on capital, okay? So whatever happens to the Q. Another thing is that the accrual of ALM obviously goes through this line of the P&L. But we do not say -- I have said this for several times, we do not do trading on the ALM. The ALM is for a number of things. The ALM is to match and to hedge the balance sheet in a safe way. So answering to your question, treasury or [indiscernible] is a minor part of it, but it has its volatility, even the volatility of the market and the other goes, if it has to go through capital.
Next question is from Thiago Kapulskis, BTG Pactual. Top line remains doing very well and beating expectations. Do you see room to keep growing the loan book at this pace for the rest of the year? Which lines show the bank opportunities, particularly in the [indiscernible] segment? And number two, the second is asset quality remains under control despite the very good loan growth in the past few quarters. Do you believe that provisions will remain at the current level going forward? Or is there a room for a decrease, particularly if economy posts some recovery, helping corporate SMEs?
Okay. On the loan discussion, obviously, this goes -- this has 2 sides of -- 2 points to do -- to underline. The first one is how the economy and how, in general terms, the financial system is able to grow. I keep on believing that we are in a country in which growth of high single digits should be easily achievable, okay? Another discussion is how private and public funds perform, et cetera. But I mean, as a financial sector, I would say that considering a nominal GDP in the region of, I don't know, 6%, 7%, being conservative, I mean, thinking of the next 3 to 5 years, okay? Somewhere in that region, 1, 2 or 3, including 4 percentage points are both that nominal GDP growth for -- considering the loan growth should be achievable. In our case, I always have said with you my intention -- or our intention is to keep on growing market share, always in a profitable way. So it is not that we want to be larger or the largest. We do not have an objective in terms of size. We will always capture market share if that profitability is clear. So as it is today, that is happening, that profitability is available given our costs and our capacity of execution, and that is why we are grabbing market share across provinces and settlements as you saw when I presented. I would think to maintain the same message in terms of loan growth going forward. So probably growing our EBIT, both the country level and maintaining capital market share gains if they continue to be profitable. And we do have [ AUs ]. I mean, I have spoken about the Agro business. I have spoken about the SME business. I have spoken about [indiscernible]. I have spoken about mortgages or the real estate side. So there are problems in which we feel our profitability could clearly evolve positively. On your second question, asset quality and how we could evolve. I fully agree with you. I mean, we are in the -- we are about to see what happens on elections and the political situation, et cetera. But I mean, we -- if Brazil goes in the right direction in terms of evolution macro economically speaking, et cetera, I do believe that structurally, there is a potential decrease in cost of risk. And that is, I mean structurally, I don't mean in one player or another. I mean, the country should lead to lower cost of risk. But that is a hypothesis today because we have still to see how that economic evolution evolves. If we eliminate that from the discussion, I would say -- I would expect the kind of similar levels going forward. I mean, we are going strongly, as you have seen the loan book. We are -- I mean, the risk department is doing a tremendous good job in terms of -- they're not today, obviously, because it's the job that they have done during the last 4 years. But I mean, the evolution and the consequence of that job is what you see today, that we are being able to maintain total provisions and fast lower cost of risk. But I would state it to be somehow in around the levels you are seeing today. And sorry, too, and my answer, the mix effect also has an impact and could have an impact going forward. If we continue moving more on the pure retail side from large corporates or midsized corporates in terms of relative growth, okay, obviously, that will impact the cost of risk.
Next question is from Eduardo Nishio, Brasil Plural. Congratulations for the results, in particular, congrats for the strong recovery and profitability reaching 19.5% ROE this quarter. Any estimate on how much higher we can go?
As Andre said, as you know, we had an Investor Day scheduled for next October that is being postponed due to the group's -- Santander Group's also postponing the -- its Investor Day from October to somewhere in February. So that's where we expected to give clear guidance and hopefully some guidances looking forward. Now having said that, and given that we are postponing 2 or 3 months the Investor Day, what I would say is that what I have said before. I mean, we do want to maintain current profitability. Obviously, past experiences cannot be extrapolated, so I wouldn't count on hundreds of basis points increase in return on equity as we have done in the last 2, 3 years or quarters. But our -- we keep on -- we have total focus on capital, capital usage. On everything, the profit, on everything in those segment, we follow economic capital --- sorry, economic profit, the difference between return on equity and cost of equity, on a continuous basis for every segment, for every unit, et cetera. And actually, that's the way to manage this. So I mean, this is not going to change. I wouldn't be surprised if we see some volatility on this ratio going forward, obviously, because as I said continuously, every single quarter at some point, we may both on the ratio or on other variables because we are hitting record highs on a lot of them, and at some point, you may have 1 quarter [indiscernible]. But I would say that the intention of profitability and the capital management way that we have been doing during the last 4 years is a clear must, and we and I will continue putting focus on that.
Next question is from Carlos Macedo, Goldman Sachs. As a [indiscernible] for consumer loans weakened sequentially, despite much of the growth being driven by payroll loans. Can you comment on the transfer asset quality in the consumer portfolio? Should we be concerned given the bulk of market growth the bank has been delivering?
Carlos, I do not see that deterioration that you are mentioning. I don't know exactly what you mean by consumer loans. If we see our -- for example, our car finance unit, we don't see -- because we -- obviously, you do see volatility and we fine-tune the decisions, both from the risk side and from the commercial side continuously, but that is [ about ] totally business as usual. This is not something that -- I don't see kind of leading indicators or vintages or over -- whatever, over 30, over 60 different analyses that we make. I don't see red signs out there. So I mean, you do have some [ healing ] in terms of the different segments, but I wouldn't -- I mean, we are not -- we keep -- as I say, we keep a continuous eye on this, but moving that continuous eye to a worrisome position, we are not in that position today.
Next question is from Jorg Friedemann, Citibank. The bank had been positioned to balance it from lower interest rates in Brazil. What actions were taken in the quarter during the significant market volatility? And what is the new sensitivity of NII to interest rates?
The actions that we -- as I mentioned before, I mean, the strategy -- if you are referring to the ALM portfolio -- because as always, I mean, we have a little bit of misunderstanding here. I mean, the ALM portfolio is stable. It does not trade in -- on a continuous way, that doesn't generate results continuously. As I said, it by accrual goes into the NII, so it's a position that is there to hedge the risk of the balance sheet. And again, it is something that has a lower relative weight. So our sensitivity today is a little bit above BRL 200 million, BRL 200 million and above -- BRL 210 million, I think it is, to 100 basis points decrease, which is around where we have been in the last quarter. So again, my main concern with this portfolio is to have the balance sheet fixed, not to be on a P&L-orientated mood.
Next question is from Thiago Batista, Itaú BBA. The credit margin showed a strong performance, expanding another 20 bps quarter-on-quarter. In our view, this expansion was only caused by the mix change? Or do you have an explanation for the expansion in the credit margins? Do you expect further improvement going forward?
Thiago, I mentioned in my presentation on the NII evolution, you do have the impact of the mix change. That is clear. On top of that, obviously, you have the volume impact. And the other 2 variables here, volume and price. In price, generalized by segment, the spreads remain stable with some pressure depending on the segment, depending on the case. If you analyze the volume, volume is -- you saw it, is clearly slowing on the retail side, less strong on the SME side and still a little bit negative without the ForEx impact on large corps. So I would say volume and mix, which is explaining what we -- what you have seen. The good thing here is that if you analyze that net of risk, we are evolving positively. And I would recommend to -- also to analyze that part.
Okay, now we are going to open the session for calls from -- for questions from phone calls.
Mr. Marcelo Telles from Crédit Suisse would like to pose a question.
I mean, a lot of my questions have been answered, but I want to follow up on the big improvement in your efficiency ratio in the quarter. That was quite remarkable, below 40%. How should we think about efficiency ratio down the road? I mean, on one hand, I mean, you mentioned -- you seem optimistic about the evolution of NII, net interest income, going forward. And you've also been -- have been doing a very good job on costs. I mean, do you think it's -- is it possible to think that your efficiency ratio can actually improve further down the road? And because we've seen you are growing your loan portfolio well above your level of operating expenses, right? That also explains quite a bit of your efficiency ratio improvement. So is that sustainable?
Okay. Well, yes, I mentioned this that we are at a historical meaning when in terms of cost income. Very sure, below 40%. Why is this happening? I mean, because at the end of the -- what it means is that we are growing 3x in revenues compared to costs. So we internalize a little bit both things, revenues and costs. In revenues, I think -- I wouldn't really lose too much time in NII, in NII credit, in NII loans, in fees. The bank is growing 25% in linked clients. The bank has grown 1.2 million clients -- digital clients in the last 12 months. The bank is opening an important amount of current account in the digital world. The bank is selling more than 100,000 credit cards in the digital world per month, 400,000 total credit cards. So the bank is expanding in terms of clients. The NPS is improving, et cetera. And that means that the revenue capacity of the bank remains what you are seeing. So here, the issue with revenue is to continue being able to doing that, that we continually keep on its 37 months that we have grown our client base. 37, one after the other. So if the bank continues to position itself where we are and we keep on having a very good app on credit cards, a very good service on the auto loans, payroll is growing market share, Agro business growing strongly because we put the good team on there and we are operating Agro shops, et cetera, et cetera, et cetera, we should be able to continue growing revenue. It will depend on us, obviously, on the [indiscernible] it will depend on us. And then on the cost discussion, what you have is both fixed and variable. On the variable side, variable costs, we tend to grow them less than the business, but obviously, you have a linkage there. And then what we put is a lot of effort on the fixed part. And on the cost discussion, I said with you in the past, our -- what we define our new structure on operations. That was done -- so it would be 3 quarters now. It was announced, I think it was like September last year, more or less. And that is analyzing all processes end-to-end, analyzing the unit costs of each single thing, so an industrialized way of analyzing operations, analyzing processes, analyzing the overall concept of the back office, which doesn't exist anymore. But here today, that continues to think and speak about back office and front office is out of the trend that we should see going forward. So understanding operations as part -- as a key part of the commercial way of doing business is key. So analyzing the 2 things, I would say, well, we should be able to deliver good performance here. Now if the ratio is going to improve or not, you can understand we are at a historical base level if ever, so I have to be a little bit more conservative here in my comments.
Our next question comes from Domingos Falavina from JPMorgan.
Two quick questions. The first one is if you could shed a little bit of light on the effective tax rate. [ Seems again at 35%, we're working with 30%. ] And the second question is on the payroll. I was very surprised by the 40% growth in payroll. If you could explain that. Have you bought portfolio on there? Or what exactly are you doing? And how you're boosting the growth of this portfolio so much?
Okay. I will pass on the tax rate question to Andre that can elaborate a little bit more. But on the payrolls, let me position a little bit what we have been doing. If you go back 4 years, that's 3 years, 4 years, I think it is, we had unprofitable -- and when I mean unprofitable, it's not from the economic profit point of view, it's that we were in losses on the payroll business, okay? We were [ distributed ] through what we call correspondent bankers, so it's kind of a third-party network in which we were -- we didn't know how to do it, basically, okay? So -- and [ through branches ] was the same case. Now a couple of years ago or 3.5 years ago, we said that this joint venture with Bonsucesso or to Olé, which is an industrial partner, and we started to do all these external correspondent bankers distribution in the right way. This has been extremely successful. With total risk control criteria, we are growing there significantly. And taking advantage of that, our internal -- internal meaning of our branches, okay? Our internal distribution network has started to perform in the right direction with our clients, [ through branches ]. So you have to have both things. Today, we are provisioning our BRL 2 billion term loans of -- [ consisting ] of payroll loans, which is what you saw there, 12% markets in production, probably on the back book, on the stock, on [ inventory ], we have like macro to 9% of market share. But the alignment of both things working by themselves and starting also to play on the [indiscernible], et cetera, all of that happening together is why the payrolls are performing so well.
Regarding the tax rates, we have 2 components here. First, the net profit being higher. We have capital efficiency from the goodwill amortization, which is much, much smaller than our past. And the second point is that during the quarter, we declared dividends. And in the first quarter, we declared an interest on capital. So this is the main difference between the quarters regarding the tax rates, okay?
Our next question comes from Carlos Macedo from Goldman Sachs.
Question -- going back to Jorg's question on the webcast part on margins. So in the past, we had spoke about -- we talked about the impact that the ALM was having on your NII, and you mentioned BRL 210 million now. Obviously, there's an accumulated effect. And we talked about how part of that ALM would run until the third quarter this year and then that effect would change. Is that still the case now that we're closer? Are you still going to continue to benefit from the ALM after the third quarter? Or is that still going to weigh down on your NII? And if it does, what do you expect the impact to be?
Well, I think I have -- as you said, I have been elaborating this in the last quarters continuously. It's always something to come from part of the market, and it doesn't happen. I mean, at the end of the day, as I mentioned, the others is not by far only ALM. I wouldn't concentrate the message there at all. The ALM depends on the monetary policy, obviously. And I already mentioned the sensibility that we have toward decreasing 100 basis points. And it goes throughout the time. I wouldn't put it on the third Q because it continuously -- what will happen is that it continuously re-hedges the balances, obviously, at different levels and at different prices. And it depends how you hedge that balance sheet, the impact in terms of turn. But again, in terms of NII others, the volatility comes more from the treasury activity, which is in the wholesale banking part of the business. It's not -- nothing to do with the ALM. And so that volatility will come from there. And the lasting effect of the ALM, we will -- it will depend again on how we see interest rates moving, how we produce on the asset side and the type of rates that we take. But I wouldn't point in terms of third Q or fourth Q, I mean, that you are going to see any strong surprise upward or downwards. Eliminating what I said, the productivity on the treasury activities.
Our next question comes from Rafael Frade from Bradesco.
So just a follow-up on this point that you mentioned about the ALM or how we should read this other results. I would like just to clarify if the other operation, we already talked about this in the past, but I would like to reconfirm that the other credit operations, like Selic, CRIs and other lines, they are in this other line and not in the [indiscernible] for credit. So this is explained a book of these results. So just would like to clarify this. And the second question related to -- mentioned about the growth in clients that you had. I would like to understand that looking for your intangible, I see that -- I believe that you spent a little bit more than BRL 1 billion in exclusive agreements in the last 12 months. So I would like to understand a little bit the strategy, especially in the moment that it's easier to transfer payroll accounts from one thing to another. So I would like to understand a little bit how do you see this strategy to pay for exclusive agreements going forward?
Rafael, I'm going to try to answer both questions. We didn't understand it very well, to be quite honest. If I do not do it, please refer to the Investor Relations to be more clear on the question. Let me clarify again what it is included in ALM others. It is capital remuneration, receivables discounts from our acquiring business, third -- and not by order of importance. Third, treasury; fourth, ALM. That is what is included in others. The rest from the credit activities in credit and the rest from the liability activity using liability of funding margin. On the intangibles, I didn't get -- we, because we are here, but we didn't get very well the question. The only thing I can think about on intangibles is that when we acquire things, for example, like payrolls, because you can acquire payrolls paying or nonpaying. You arrive to an agreement with a company. You don't pay, you go to an official institution like a state government and they auction the payroll. When we do that, that goes into intangibles and we depreciate it throughout the time. But I don't know if I am answering exactly the question. If not, please address the Investor Relations Department, and they would clarify exactly what you want to know about the numbers.
Our next question comes from Neha Agarwala from HSBC.
This is Neha Agarwala from HSBC. I understand about the ALM. One quick question on the loans that -- we see that over the past year, the loan spreads have increased, as you mentioned, from 9.4% to 10.2%, and this is with rates going down. I understand that a part of this is because your loan mix has changed from market as you make more profitable segments now. But has that change in loan mix, are they being reflected in the higher spreads? Or do you see more benefit of the change in loan mix coming in the spreads? And where do you see the loan spreads in the coming quarters?
Okay. Thank you, Neha. You're right. I mean, the main impact on the loan evolution you saw -- I mean, we increased loan spreads by 20 basis points on the quarter. I think it was from 10 to 20, and that's the average, obviously. It has to do with the mix, okay. So going forward, if the mix continues to go in the direction we see today, and it depends a lot on how large corporates and corporates evolve, I mentioned that large corporates have stayed on the negative a little bit here. Obviously, they have had in the past [ covered ] on markets as an alternative funding tools, and there has been at some time some pressure in the spreads. So if large corporates and corporates come back, that will equilibrate or that will eliminate that mix change we have seen in the past. And I will say spreads will tend to be stable or even with some pressure, also depending on the economic momentum that we see. If we go into a strong positive cycle, obviously, I would assume that there will be some spread pressure. If that is not the case, the pressure would be lower. But it has to do with the mix. And going forward, I would totally link it to that mix in a situation of the Brazil that we know today, which is basically growth but not in a hitting mode, if I may say it like that.
Our last question comes from Thiago Batista from Itaú BBA.
I have just one question about additional provisions. If I'm not wrong, you increased your additional provision by about BRL 200 million this quarter. So I want to confirm if this expense, they pass through the bank's recurring earnings. I believe you have, but I want to confirm. And why the bank reinforced its additional provisions? There is any specific corporate case? Do you actually see some maturation ahead? Why did this [indiscernible] increase in the additional provision this quarter?
Thiago, yes, it does go through the P&L, answering your question. This doesn't -- I already elaborated on the risks side and the quality side, so I'm not going to say again that we do not see any worrisome going forward in this type of action response. I mean, [indiscernible] unique answer here. I mean, they respond to our risk department way of doing things in which we have our inside analysis in all segments, and that ends up with different movements. I would underline also that it is not in [indiscernible], but in this Spanish criteria, we are developing a group knowledge on IFRS 9, and that also always leads to our outstanding performance in terms of expected losses. So -- but it does -- has nothing to do if we see better or worse as an area going forward. It's pure one-by-one, segment-by-segment, problem by segment -- problem-by-problem. You've got in mind into the detail that this goes down, and that moves in between quarters and between years. But I mean, the outcome is what you saw. I mean, lowest ratio in terms of NPLs, good performance and maintenance of the provisions levels.
The Q&A session is over, and I wish to hand it over to Mr. Angel Santodomingo for his closing remarks.
Okay. Thank you all for being there in this results call. Again, a pleasure presenting to you our second Q results of Santander Brasil and looking forward to seeing you in following quarters. Thank you.
Banco Santander (Brasil)'s conference call has come to an end. We thank you for your participation. Have a nice day.