Banco Santander Brasil SA
BOVESPA:SANB3
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Good morning, and thank you for waiting. Welcome to the conference call to discuss Banco Santander (Brasil) S.A. Present here, Mr. Sergio Rial, Counsel Chairman; Mr. Angel Santodomingo, CFO, and Mr. Gustavo Sechin, 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/ri, where the presentation is also available for download. We would like to inform that the questions reached 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 executive part 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. Sergio Rial. Please, Mr. Rial, you may proceed.
Well, good morning to you all. Thanks for joining us in today's call. This is going to be my last call as CEO of the previous year 2021, so basically materialized in 6 years of a very interesting story. So without any further ado, let's go to Slide 4. So here, this slide shows -- is the slide with the headline, business evolution and transformation. I mean it's a little bit busy, but I think it's an important slide to show the evolution of the firm since its IPO. I remember when I joined as CEO back in 2016, there were a number of questions relative to Santander on a variety of issues.
I think the last 6 years, together with the team, this has nothing to do with me, but definitely the team that still continues in the company, we were able to redefine scale. There were a number of questions. We are still talking about the sale of HSBC, which at that time, we decided not to pursue. And we made a conscious decision that knowing that would be a lot harder we would go for organic growth. And we moved the company from a loan portfolio, which is only 1 data point of BRL 142 billion, as you can see, pretty much BRL 500 billion. And this hasn't happened in an easy macro environment.
We were able to basically perform at formidable speed of growth, yet keeping the environment of control, not just credit, which is an important one, but the entire environment of control each act. This was only possible because we absolutely were obsessed, among other things, to move the company to different levels of efficiency. I think we're probably, if not yet, but most likely the leading company from a cost efficiency point of view in the industry.
So with the cost income that I think is remarkably strong. And this is just another reflection of the culture that the management team was able to implement over the last 6 years. I think it is important that to also note that a number of trends, which are today being spoken, we initiated the trajectory of the agro -- investing the agroindustrial sector of Brazil a number of years ago. We have been involved in an ESG agenda for the last decade. I mean, this hasn't really happened for Santander in Brazil in the last couple of years. So this is something that I think is going on for a number of years and decades.
And we have not shied away from innovating, not only acquiring and we're going to talk about some of the subsidiaries, but also entering businesses, which traditionally Santander wasn't necessarily pleasant, one being energy trading, the other one being the commodity debt. Today, we have one of the most driving commodity debts in the financial market, pretty much not taking any directional risk, but assisting customers from a hedging strategy point of view.
So this is like it's a good picture of what has happened. If we move to the next slide, that's bringing more of a shareholder view, okay, if that is true, what has happened to the shareholder. And I think you have seen from the IPO was, at that time, a relatively robust ROE, when you would compare to the industry, we were still lagging behind back in 2009 to basically ending the era of the last 10 years as one of the leading firms in the financial industry from a profitability point of view. It's easier said than done.
And it wasn't necessarily perceived 6 years ago that, that was going to happen. We have been incredibly committed to our shareholders. As you can see, the dividend yield we will -- we have just announced another important dividend, and we're certainly posting this year a record dividend payment again. And as you can see, this has happened on the back of underlying profitability.
So we have -- we continue to strengthen the balance sheet of the bank. We have up to now the highest rating by Moody's, when compared to any other financial institution in Brazil, and that's very much underpinned by a net profit that moved from BRL 4.7 billion in 2009 to the number that we are printing today, BRL 16.3 billion with an ROE over 21%.
And if we continue on the next slide, on earnings distribution to shareholders, this slide is an attempt to compare what has happened in terms of Santander (Brasil) and its management commitment to our shareholders over the last couple of years. And as you can see, 2010 was an atypical year due to the cap that was imposed by the regulators on dividends to the entire industry. So I think the slide speaks for itself. It doesn't really require further explanation.
On the next slide, it's more addressing the underlying trend of the business. We have been incredibly focused on true client based growth. By true, I mean clients that are truly engaged in transacting with the bank far beyond the database or a point in a database. So we have reached 53.4 million total customers as of end of December '21. And when you see that only in the quarter, we have added almost 3 million new customers in the last quarter, 2.7 to be exact. And from this number, 52%, 5-2% are actually engaged with the bank in some sort of level, product and/or service. Just to give you an idea, besides numbers in itself, digital transformation that I think we've done through our channels, we moved from 15.6 million.
You don't see it here, but 15.6 million customers that were basically acquired through the digital channels to ending 18.3 million in December '21. We have put quite a bit of attention that Santander (Brasil), and I think that's one of the uniqueness of the company, has to be among other strengths on its distribution strength. So strengthening the distribution platform, creating a true omnichannel strategy where the customer really decides to serve itself through the channel that it fits best its own style.
It's something that I think we've been committed over the last couple of years. And we are seeing the results, both from a remote approach that we internally call FX channel or through -- directly through the digital channel, shortening cycle, making sure that the experience and there's enormous amount of room to improve it as easy and comfortable as possible to any customer of different tracts of society.
So as you can see here, we see a very rapid growth on the customer side, as already mentioned, but that has not happened without attention to quality, which the NPS is only 1 dimension. And again, a lot of work ahead of us. I mean there is no accolade that we have reached the peak of the mountain. But where we were to where we are, there have been significant improvement.
On the next slide, it's just another attempt to show that I think we are moving on the quality side. But I think here, there's still a lot of work to be done. I mean due to the multiproduct and multi-service nature of a platform of our science, quality is a permanent objective. So although, yes, it's true that the NPS is now around the 60 range, we have within Santander verticals that have already exceeded 70. So the portfolio still shows a number of detractors from a quality point of view. And this is where I'm sure the new CEO, Mario is going to pay attention. And the big opportunity, not the only one, but 1 of the biggest opportunities that we see is definitely around enterprises, small and midsized companies in Brazil that still need a level of customization and quality and practices that from our perspective, nor Santander neither the market is completely capable of doing it.
On the digital side, Slide 9, where I show we are digital and available is this attempt to show you here the omnichannel attempt that we are implementing as we speak. So we are less concerned about branches or remote coverage of digital. Those channels have to coexist in a way that from a customer perspective and experience is absolutely one. And more and more, this is going to be the reality. Customers still like to have the practicality of being able to see someone, if there is a need, for example, in Europe, it's very -- there's a very interesting political debate going on for those who are not digitally literate, if you will, banking has become a real challenge for a number of people, who have just not been part of the generation of being digital. This problem is less important for Brazil because it's a younger population, all the rest, but physical assets, the combination of being able to be present if there is a need, is not an immaterial asset that I think we will continue to leverage as part of this distribution platform strategy.
So the customer acquisition through the digital channels, and I think that's a remarkable number on the slide, has increased 185%. Of course, percentages are always a function of how low your base was. But what it shows is just the thrust that is behind the growth that we are experiencing over the last couple of years. And a very important data point here is the fact that we've been incredibly transparent to actually even post what is our fully allocated costs on this channel, cost of certain of BRL 26 a month, customers coming through the digital channel.
So any -- so the attempt of making this customer to become more loyal, more engaged, transacting the bank more than justifies profitability in the years to come. But that doesn't mean that we need to stop on the BRL 26 amount. I mean, the attempt, the continued sort of obsession of the company to remain up and guard from an efficiency point of view, will continue. It's very important you to note that product efficiency hasn't really just come from cultural or we were one of the first companies in the financial industry with the exception of those we have started over the last couple of years, to bring a company of this size to the cloud.
We have over 70% of all our systems in the cloud, which basically allows Santander (Brasil) to actually collapse or be less dependent on legacy systems. And particularly in our case, remember, we have been historically a result of a number of acquisitions. So the cloud strategy has absolutely helped us to deliver the level of digital growth that I think you have seen today.
On the next slide, it was also another part of our strategy, which was folks are paying too much attention to the number of branches as opposed to understand the demographics of branches. And one of the decisions that we made was to bring Santander to the interior of the country. And we have expanded and will continue to expand to cities that most of us are not necessarily familiar, but that's where future growth will continue to exist. Most of the cities have been served historically by public banks, more recently by co-ops. And private banks in general, with the exception of very few have never retaken a sort of a nationwide view of Brazil. So -- and we have done it. We believe it's a plural society. We believe Brazil is fundamentally an agroindustrial economy, and the urban centers have an incredible importance, but growth, and the future of Brazil resides in its interior.
Last but not least here, it's just an attempt to show you that the physical brand -- or the physical channel, the stores or the branches like more commonly known, we have launched what we call nothing more than what we call bank to go, which is the capacity of one of our employees to be able to serve the transit that goes throughout each and every day through our ATMs. So this concept 59% of the stores, so you can actually go to a customer in ATM and serve that customer besides the need for cash withdrawal, so that customer can actually do transactions without necessarily having to go into the branch, sit down, be on a desk and eventually spend 20 or more minutes when you don't have the time. We have today approximately 15 million -- 1-5 customers circulating per month through our physical infrastructure. So we believe there is quite a bit of opportunity for us to optimize sales, engagement and dialogue with our customers.
And that is very much shown by the next slide, Slide 12, in which you see the commercial activity of the company. In terms of cards, we had a record year in terms of invoicing, so reaching BRL 306 billion, that's a 26% increase year-on-year. And again, in a year of pandemic, so 1 can explain that some of that was absolutely linked to the fact that people have to use cards more often than before, but this is a record number and it's a record number because it also shows that we have seen a significant growth in terms of acquisitions of new customers. So our ambition in cards is to be able to get Santander (Brasil) to a market share of 20%.
It's not guidance. but it's an internal ambition that drives us into that direction as we headed for GAAP, which was able to end the year with 16% market share coming from single-digit market share in the years past. And the rest, I think one of the things that I'd like to note is the insurance fees on the upper side of the table. We have launched Santander Auto today, one of the highest growth in surtax -- in the marketplace, and that will continue to grow very fast, Angel can give you, if that becomes an interesting -- it becomes a question to one of you, more data around the growth of Santander Auto.
So 2021, we have issued 6 million cards to a variety of customers of different segments under the brand, SX, as we have launched years ago. Next 1 is the whole piece around the cultural transformation. Santander was not even part of the -- Great Place to Work. We ended 2021 as one of the best 10 companies to work for in the country. It's 1 data point. But it's a data point that shows that a lot of attention has been put in place, not only just to culture, with to the dynamic and the fabric of the organization. So we are -- I think the numbers speak for themselves. I will not make comments, but very few companies can say that they have the level of ambition that we have for December 25 in terms of true leadership position of different extracts of our society. So again, the slide speaks for itself.
With that, I pass the word to our CFO, who will get into now more specificity around the numbers. Thank you.
Thank you, Sergio. Good morning to you all. I will now go into the results into the presentation, which we can detail a little bit more in our Q&A session. So in the first slide, where you can see the full P&L account for the full year, as you may see, we delivered record net profit of BRL 16.3 billion, which is a 7% increase. We closed fourth Q -- 4Q '21 with a net profit of BRL 3.9 billion, representing a 10% decrease relative to the first Q and stable when compared to the same period last year. The quarterly decrease can be explained by a weaker market result and expenses with pressure from inflation, which will highly explain further on in the next slides. Let me highlight the following figures here in this slide. On the revenue front, NII rose by almost 9% in the year, given higher customer NII, important detail here on the customer NII. Fees increased by 14%, almost 14% over the year. Here, again, the customer base growth and higher activity boosted different items such as cards or insurance revenues.
And on the expense side, provisions grew 10% in 2021, which is consistent with our credit growth and mix. General expenses increased due to the collective bargaining agreement back in September, inflation and foreign currency fluctuations, but remained clearly below inflation in the year. Efficiency ratio as a consequence of this, came in at 35%, improving by 90 basis points in 12 months, again, probably the best in the country. And return on equity remain at the 20% level in the fourth Q and reached 20 -- above 21%, 21.2% for the full year.
The next slide illustrates the evolution of our NII, highlighted by, as I said, customer NII, which advanced almost 3%, 2.6% in the quarter and almost 10% in the year in 2021, with product NII benefiting from positive volume dynamics and mix. Despite a strong pressure in funding costs, spreads increased by 10 basis points, that was 10.3% to 10.4%, reflecting a better mix and good price management. Market volatility during the year contributed to positive results on market NII also in this Q, we saw weaker market activity returning to a more normalized levels from an extraordinary third Q. Advancing to the next slide, we can see that our loan portfolio grew almost 3% in the quarter and above 12% year-on-year to BRL 462 billion, largely driven by retail, which continued to outperform with mortgage and credit card explaining part of the growth. It is important to note that almost 70% -- 67% of the individuals' loan portfolio is collateralized. SME remained virtually stable in the quarter, growing 1% -- 0.9% but performed well in the year, expanding 13%, thanks to the recovery in demand.
Given liquidity conditions of companies since the beginning of the pandemic, corporate lending remained stable in the quarter and grew by 2.5% in the year. On the funding side, our funding also had a positive performance. Financial bills increased quarterly targeting a diversified funding base and continue to hover around the lowest level in history relative to total funding. At the end of the quarter, capital stood at comfortable levels. Our core equity Tier 1 reached 11.6%, decreasing 34 points due to higher earnings distribution, as Sergio mentioned to shareholders in the period, and our BIS ratio was almost 15% given recent capital operations.
Next slide, moving on to fees. We had another strong performance supported by customer base growth and a stronger loyalty. The best performance in the quarter and the year were credit cards and insurance the latter following our traditional seasonality in fourth Q. Current account fees increased by only 4%, 3.9% during 2021. This lower growth compared with previous years is basically explained by this rapid payment system here in Brazil implementation.
Looking at expenses in the fourth Q, we had the full impact of the collective bargaining agreement, as I mentioned before, and also important to mention higher commercial activity, which puts pressure on variable costs. In the year, we saw expenses rise by 4%, which continues to be well below inflation. We have conducted and will continue to conduct a thorough review of efficiency given our commitment to productivity.
As I mentioned in the beginning of my presentation, our efficiency ratio improved year-on-year to 13 -- sorry, 35.3% that at this level, it may be possible, as I said, that we remain as it has been for a long series now the best in the industry.
On the next slide, we can see how our asset quality has evolved. It remained at a well-controlled level in the quarter with an adequate coverage ratio reflecting our solid risk management. Short-term delinquency remains healthy, while 90-day NPL increased by 30 basis points to 2.7%, both and still under control and below pre-pandemic levels, as you may see in 4Q '19. You can also see that our loan loss provisions remained reasonable within reasonable levels consistent with our cost of risk for the full year of 2.7%. This performance is a direct result of our diligent lending practices. As you probably have seen in our numbers, we released BRL 1.2 billion of our generic provision due to risk modeling updates. Recovery continues to post a good performance that red bar that you can see in the columns reaching BRL 80 -- sorry, BRL 800 million in the quarter, driven by both the continuation of good management as well as the sale of written down portfolios.
And in the year, the full year, recoveries grew almost 23%, representing, as I have mentioned to you in previous quarters and a strong focus on that activity. So finalizing the main takeaways, Six main areas: consistency, sustainable growth and profitable given a long-term focus and top return on equity in the industry. Second, a robust and comprehensive financial platform resulted in an all-time high level of new customer acquisition, as Sergio mentioned. The stronger loyalty and transactionality will support our growth going forward. The macro environment will likely present some challenges. We acknowledge that, which we showed to be able to manage successfully in past cycles and for example, in 2015 or 2016. The availability and integration of channels will unlock greater business opportunities. And last but not least, our corporate culture deeply committed to growth, results and society.
So that's about the last part of the presentation. I think we open the floor now for Q&A. Thank you.
[Operator Instructions]
I will now pass the word to Mr. Gustavo Sechin, Please, Mr. Sechin, you may proceed to making the questions turned via webcast.
Good morning, everyone. Let's start our Q&A session. We have a couple of questions here. The first group of questions comes from Thiago Batista from UBS. So can you comment your expectation of asset quality dynamics for 2022? Do you see NPL ratio of Santander (Brasil) during this credit cycle higher than the pre-COVID levels? Another question of Thiago relates to the profitability, the bank ended 2021 with an ROE of 21% or 20% in the fourth Q, it is feasible to maintain the ROE at these levels going forward. So Angel and Sergio?
Can I?
I will take the first part. I think, Thiago, it's Sergio here. One of the things that I have experienced over the last couple of years and rightly so as a CEO, is the whole discussion around cost of credit and NPLs in Brazil. Remember back in '16 as we were growing, the suspicious level that we would definitely have significant increases in cost of credit. Fortunately, it did not happen. And it wasn't by luck. We have, over the last couple of years, created a portfolio that is incredibly well collateralized. That's 1 point. Second point, when you think, for example, on the vehicle market, the auto market, where we have expanded our consumer finance businesses over the last couple of years, tripling its size and yet keeping the cost of credit in check.
Now one of the facts, for example, that perhaps the sell side is not necessarily observing is that the embedded equity today in used vehicles. So if I would take a fair market value, of Santander car finance portfolio, and I would do a mark-to-market in terms of embedded equity just because the price of used cars have doubled, you have a loan-to-value that has improved incredibly. But your question is related to any 2.
So I have said in the past that there were a number of factors that would make me pause to think that the cost of credit for the system in Brazil will increase. One has been definitely the pandemic in unemployment. One of the things we've seen is that the government-sponsored programs had actually alleviated a big, big part and thankfully, so indebtedness level of a number of Brazilians. So a lot of finance that's gone into people rightly so paying down debt. But now we have had new factors coming in.
One is inflation; second, interest rate; third, open finance, which will create a level of competitiveness perhaps in terms of willingness of new players to grant credit that we haven't necessarily seen over the last couple of years. So we have taken cautionary measures in the third quarter of 2021 so that we could navigate '22 with absolutely acceptable levels. Where do I see '22? I see '22, most likely coming back to levels of '19. Again, it's not guidance. It's just -- I think we're going to see structurally the cost of credit of 2020 and '21 was very much helped by government-sponsored programs, as I mentioned, those were significant amounts of money injected in the economy. So we should be same levels closer to '18 and '19 pre-pandemic, nothing that we are concerned, but we are certainly attentive and paying attention to growth, where you have to be more sensitive is on cars, absolutely under control, absolutely in a controlled phenomena of good quality growth, vehicles absolutely under control, and I mentioned the fact of the court of the portfolio. So nothing today that would put me at an uneasy position.
Yes. I would -- I mean I mentioned in my speech that collateral as power that Sergio was mentioning, we are speaking of around 70%, 67% of the retail individuals portfolio is collateralized. And that collateralized, although guarantees, as mentioned, are improving in price in several products. So that's 1 part. Putting numbers to what Sergio said, this -- I mean, Santander (Brasil) has been with a cost of risk in between 3.3%, 3.2%, 3.5%, 3.6% in 2014, '15, '16, '17.
So the structural kind of way of looking at this and probably that coming back that Sergio was mentioning is that the 2.7% that you are seeing as cost of risk is a level in which is clearly positively affected by the liquidity that we have been having in the performance and the programs that we are mentioning. So I would say that, yes, we do expect a deterioration of quality in a gradual manner, not something to really think as an explosion or as something that will be intense. That would be my adding words. The return on equity, Sergio, do you want to address that? Or.
I leave it up to the CFO because it's '22, and I will not be behind the wheel. So...
Okay. The return on equity, as we have been mentioning to you in the past, I mean, we have been striving to deliver a return on equity in the levels that you see the 20%, 21%, 22%, and that is where the bank has been moving in the last some years now. Obviously, you have seen also the payout remuneration and how we have been dealing with the capital in the last quarter. So if we put all that in the same kind of discussion, we would be waiting. I mean, I would be expecting a growth of risk-weighted assets in the region of high single digit, low double, which means that -- to maintain that -- to have that role and to maintain those levels of capital of around 11%, 11.5% of Core Equity Tier 1, we would be targeting a payout of around 50%. So all that works in the same formula which means trying to deliver similar profitability during the year at the same time that we maintain a nice remuneration to our shareholders.
So our next question is from Gustavo Schroden from Banco Bradesco. On The increase in the NPLs, which lines were responsible for that cards, auto, et cetera? And also, did the bank sell loan portfolio in the quarter? If yes, what was the amount? And what was the net impact in the quarter?
I'll go here, Angel. I think -- we do sales from time to time. So nothing that I would necessarily characterize. So we did sell in the fourth quarter. But I think if I remember correctly, we also sold back in the second quarter. So nothing is just part of what I would call business as usual. On the asset quality, I think I already addressed in the previous discussion from UBS. So we -- I think the credit card portfolio was the 1 that could have brought surprise and we're incredibly comfortable with our credit card portfolio because of the measures we have taken, cautionary measures we've taken right from the beginning of 2021. So nothing else I could add here.
On the credit card side, just starting 90%. Remember that we have mentioned this in the past, 90% of our cards being sold are sold to current customers that we know about them. and it's a card to whatever relative they wanted to. So that's -- the risk control that Sergio is mentioning can be seen in that number.
Okay. So our next question comes from Flavio Yoshida from Bank of America. Given that additional provision decrease in BRL 1.1 billion in the quarter and NPL trended up, is there any change in the credit concession or risk policies? Should we expect a lower loan book growth or provisions growing at a faster pace than the loan book?
Angel, with you.
Yes, as I mentioned, we did use that generic provision that responds to modeling basically. Obviously, we already addressed all the NPLs and the provision discussion, so I'm not going to repeat it. But the fact is that we did both in IFRS and in BR GAAP, the -- as we do, as [indiscernible], as we always do, the modeling of the need of generic provision of the overlay, and that led us to a total amount remaining of around BRL 1.82 billion, and that's why we did that. In terms of growth of portfolio and credit portfolio, what I would expect is accounted growing in nominal terms in GDP, somewhere around the 6%, 7%, I mean, with an inflation of 5%, 6%, and some GDP real in terms of 0% to 1%, that means that credit portfolios could grow in the high single, as I mentioned before, in related assets so, high single digit or even low double. So this is our expected kind of performance for this year. And I already mentioned, cost of risk should accompany that.
Thank you, Angel. Our next question comes from Eduardo from BTG Pactual. As we saw in the third quarter, the other operating expense line waiting up on the fourth quarter due to higher credit cards and customer acquisition expense. These investments should reflect in higher customer base and thus a boost in the main revenue lines, correct? -- as we impacted these investments to continue on the following quarter? .
Yes, I will go there. I think Mario, as the new CEO, I think that's an important -- very much committed to growth and very much committed to profitable growth. And I think we've seen -- in his own way, I mean he's going to certainly be refining, improving doing things that, at that time, we're not ready to. One is certainly continue to grow profitably the credit card business. I do expect the revenue line in terms of growth to be still an important North Star for the new CEO. So the answer would be yes. And that has to happen in an environment where costs will continue to be under control.
Remember, I mean, we were able to post a significant, I would say, measure in terms of cost despite what we have seen in terms of employee increases on the back of the union agreement of almost 11%, which already hit the numbers, third, fourth quarter last year, And expenses have been pretty much under control in the neighborhood of 5% -- 4% to 5%. So I think that commitment towards efficiency will still be there. But that will not be at the expense of good variable costs that are basically fueling good growth.
So then I would like to also that we haven't really asked the question, but I think it's worth noting, for example, under commissions, the significant increase that we have seen on capital markets and the position that the bank has been able to achieve on investment banking. So we have done a very large number of either IPOs or follow-on. These were 28 last year. And Santander has really moved up in the quality of transactions, the 1 of [indiscernible] in hearing, which was very much led by the current CEO, Mario Leao. And all the transactions that we are still very much pursuing. So the whole capital market investment banking has also had a phenomenal performance last year, not necessarily seen because we're not necessarily disclosing.
And in terms of some of subsidiaries, I would like to mention return, which is our asset securitization company, we have also made last year an important acquisition, which was a company called Liderança Cobranças, which is continue to focus on collection. One of the things that has -- that explains Santander good performance in terms of risk management. It's not just the model, it's not just the people, it is also what I would call state-of-the-art collection strategy. And last year, we strengthened that with the acquisition of Liderança Cobranças.
And to add to that, on the specific line of expenses that you mentioned, remember that we do have some seasonality. Normally, the fourth Q is more intense, you do have some variable costs like the 1 you said, the credit cards or the banking correspondents, you do have some impact also from the currency from the currency exchange rate. But it tends to be aligned, which is more intense in the fourth Q, which explains also part of the profit evolution, okay?
Yes, that's true. There is another question to stop, and maybe I help you here, from Mario, from Bank of America, which is a good job in the last 5 years. So thank you, Mario, for that. Recognized by the strong appreciation of the stock. That's true. Not enough yet, but that's true. But the question is, what are the main challenges for the bank over the next 5 years? I mean one of the very important questions is the whole succession process. I mean, Santander has created a succession that was noiseless that was basically done with one of the best candidates that we have. I have absolutely looked as a group as part of the governance together with the Board, local Board and groups for external candidates. And I'm completely convinced that Mario was the best choice. He has been -- I hired him.
He did not necessarily have a broader experience in retail or a portfolio of this size. -- phenomenal quality banker has spent a number of years in Citibank, Morgan Stanley and Goldman Sachs. You're going to have a chance to meet him in the first quarter. But more importantly, over the last couple of years, he basically took -- I gave him the most challenging job, which was the turnaround of the SME business. Not only he did that but he also show levels of leadership and desire to lead the company to a whole -- to a new phase. Again, he's been part of the Executive Committee over the last 6 years. So no big changes conceptually, but still a big generational change.
He's 47 years old and 61. So he will see the world differently. He will certainly bring his own flavor to a number of aspects, but I'm absolutely convinced that not only succession was done in a very nice way. I mean we didn't have anybody leaving the company abruptly. The entire management team remained because everyone believes in the story. And everyone sees Santander as one of the most challenging opportunities, platforms in the country. I mean if you look at the number of subsidiaries that we have opened from start. We launched the company a benefit Bank, which last year already had 0.5 million active cards and increasing over 330,000 merchants being a credit to be able to use bank cards all done from scratch. So there is a culture of being able to be builders. And so I think succession is a good point to mark.
Thank you, Sergio. So our next question comes from Tito from Goldman Sachs. The CET ratio is now below 12%. What level do you feel comfortable operating with? And what does that imply for dividends?
I mentioned a little bit before the levels of core equity and BIS ratio linked to the risk-weighted assets growth and payout, et cetera. What we feel comfortable is a core equity of around -- between -- what I always said in between 11% to 11.5%, 12%, we are going to be in that range in the full year. We will probably be also well above the 14% in the BIS ratio between 14.5% and 15%. As you probably remember, we did an issuance of a Tier 2 subordinated debt in November. And with those ratios and to maintain those ratios given what I mentioned before, the return on equity, and given the risk-weighted assets growth, probably payout will be in the region of 50%. But the main objective will be to maintain those levels of capital that I said. Okay.
So our next question also comes from Tito from Goldman. Do you expect further pressure on trading results from rising rates? .
Well, this is a good question. I did address a little bit throughout my speech, but probably it's worth mentioning. So we -- the first thing is, as you saw in the fourth Q, the NII had a decline because the NII from markets had a decline, but had a decline from an extraordinary third Q and second Q, Putting numbers to this, I think the last Q was like BRL 2.5 billion, BRL 2.6 billion, and we have -- this was extraordinary, as I said, in first Q. Fourth Q, we went down back to a normalized or average number, which is in the region of BRL 1.7 billion, BRL 1.8 billion, BRL 1.5 billion. which explains fully the decrease of NII because NII from clients had a strong performance. .
Going forward, and given the movements that we have seen in interest rates in the deal curve [indiscernible], which, as you know, is strongly steepened during this year and then with negative slope in the following years, I would expect that the NII from markets will have a weaker result during this year. We do have and a strong, as you know, treasury department, which is overperforming, and that should continue to -- during 2022. But at the ALCO side that you always question in this part of the questions of the Q&A will obviously perform in a weaker way compared to 2021. So I would expect an NII from markets weaker in '22 compared to '21, yes.
Thank you, Angel. So our next question comes from Pedro Leduc from Itaú Corretora. Renegotiations, Santander has launched a nationwide BIS individual program, proactively calling retail clients to renegotiate their credits. Can you discuss more of this program? Is there a rule of thumb for how much your provision for retail corporate renegotiation? .
Yes. I'll take that one, Pedro. Thanks for the question. Thanks for your work. I've been following your work, so outstanding quality. So well done overall, not necessarily Santander. Pedro, we -- Mario and I, and the rest of the team as we have -- as we were pretty much attentive that I think the duration was going to happen was already happening in '21 in terms of credit quality. We wanted to start the year ready. And we were very fortunate in doing a couple of things, not only the campaign, but also the marketing content behind it, which was the notion of, you have the launch of Big Broader Brazil, which is still very popular in our country.
And we were created to bring former winners of the same reality show, which despite the price they had won, all of them had financial problems. And we wanted to make a point that the fact that you earn money, that doesn't mean that you get rid of financial problems. You need more than that. So we came with the program. This program has yielded in terms of new renegotiations over BRL 700 million. We normally run -- I'm not going to give you the exact number, but somewhere between BRL 1.8 billion to BRL 2.8 billion a month in terms of renegotiations -- so BRL 700 million is a very significant number for 1 specific campaign.
So it proved to be the right thing to do. And again, we are not yet completely -- we just don't know how the BRL 400 million, the new government subsidized systems program is going to influence debt repayment. So that's still in a known now. If we look at the last 2 years, it's been very positive and favorable, but we don't know how consumers are going to behave, especially on the back of the inflation that is eroding the capacity of people to buy more critical stuff like food, energy bills and so forth.
[Operator Instructions]
Our first question comes from Marcelo Telles with Credit Suisse.
Sergio, I'd really like to start here just thanking you for all the work you've done at Santander and in leading this incredible trust formation, which I'm pretty sure will be part of case studies on how to transform a bank. And I know there was a lot of hard work, and I want to wish you all the best in your new role. So congratulations again. I -- my question is regarding the competitive environment. Of course, all this year, there's always like some ongoing concern right, about potential -- new players potentially bringing down credit spreads. And at least the latest data that we're looking, we're not seeing that. So if you could comment a little bit on how you're seeing competition and the impact on credit spreads going forward, especially coming from the digital banks. How do you see Banco Santander vis-à-vis the digital banks.
Marcelo, nice to hear you. I thought you were not on the call. So it's really nice to hear you. I appreciate the words. But I would also like to give back the words to you because you're probably one of the very few who truly believe that what happened could have happened. So thanks for believing. I would say, Marcelo, a couple of things. I think on the wholesale side, on the corporate investment banking side, I think you're going to see quite a bit of pressure on spreads. -- because by definition, there's going to -- there's not going to be a lot of demand for credit. I don't see it.
I don't see significant investments happening in the private sector as of today, particularly the large companies in Brazil who have done a phenomenal job in improving their balance sheet over the last couple of years. So I don't see companies borrowing necessary. So corporate investment banking side pressure on spreads. On the retail side, consumer side, not necessarily. I don't see it. I think credit is going to remain scarce. The banks have done a phenomenal job during the pandemic. But if delinquency levels increase, there is going to be naturally, in the system, a higher level of attention and care. So I don't see the pressure on spread on the consumer side necessarily.
But I do see on companies in general, particularly those who have strengthened their balance sheet. I don't see credit demand from large corporates in the coming quarters. That's how we see. Now the digital banks, I think that's a broader discussion. I can't speak about them. But I think my reflection is we are getting into a world that if indeed the Fed increases rates by more than 6x, where people are already even discussing that 7x can still be possible. I think there will be important implications to the rest of the world, as we all know, and it's not very clear all the different correlations to the financial system, in particular, to the value of liquidity.
I think the value of liquidity will fundamentally change those who are a little bit older like me, have seen that in the past. And these will have been a little bit older than me, remember, the U.S. and not in any way suggesting that but with rates in double digits back in -- so inflation seems to have arrived and that's just part of the knock-on effect of trillions of quantitative easing over the last 2 decades since 2008. So this is going on for a number of years, and some of the consequences are going to come and we're going to have to leave them for the coming years.
Thank you. I would like to thank everybody for the interest in our call. We have a couple of more questions, but do the time -- we would like to give you, Sergio, the word of our final remarks.
Thank you. First of all, let me correct, just to be accurate, Mario is 46, not 47. So I still want to keep him as a friend. So he's 46 years old. And I think -- I don't know if Mario my has joined us, but I think he probably joined us now in the room, I'm knocking Sao Paulo today in London. So I'd like to ask each and every 1 of you to give Mario the level of challenge, trust, doubt, confidence -- total lack of confidence that you have given to me over the last couple of years. And I'll be as close as Mario wants me to be as a Chairman, I am in Santander. I will ensure that everything that I have learned I'll be putting for him to bear and for him to make his own decision as the CEO. So Mario, maybe you want to say a few words, and I'm sure you're going to meet them in the first quarter.
Thank you very much, Sergio. I just wanted to say it will be a pleasure to get to know each one of you. We're going to have discussions with investors, discussions -- bilateral discussions, group discussions, Sergio has given me the opportunity to lead this great company, and we will definitely continue the transformation has began 6 years ago. We have a great team, which goes well beyond myself as it used to be with Sergio as well, and I'll be very happy to lead the executive committee, our 50,000 [indiscernible] as we call, towards a new cycle of continuous growth and continuous transformation as well. And it will be a pleasure to get to know each of you. Thank you very much.
Banco Santander (Brasil) conference call has come to an end. We thank you for your participation, and have a nice day.