Santander wants to be less dependent on credit, CEO says
After several years of strong growth above the industry average, Mario Leão took the helm of Santander Brazil at the beginning of 2022, knowing that he would face a tougher period ahead. Both in terms of the cost of credit—that is delinquencies—and a slowdown that, although planned, would inevitably have an impact on the bank’s margin.In his first exclusive interview since taking the helm of the country’s third-largest private-sector bank, the executive said Santander is investing in revenue diversification to become less dependent on credit and increase the share of service revenues. In lending, it has been promoting an overhaul to proportionally reduce exposure to the low-income segment, although it is not considering leaving it. It has already relaunched the high-income program, which has exceeded targets, and may soon announce changes in the middle-income program, with a closer and more segmented service, and in the low-income segment, it is seeking answers to a loss-making operation.With all these strategies in place, Mr. Leão is optimistic about 2024, after the worst moment of delinquency, and with the expectation of a recovery among large companies. Read below the main excerpts of the interview.Valor: What is your evaluation of these first two years at the helm of the bank?Mario Leão: We knew that we were living in the post-cycle of strong growth that we had in the previous six, seven years. It was a super positive cycle, it gave us relevance in the country that we didn’t have, it was a super important structural build. That culminated in a post-peak acceleration of the pandemic in 2021, which had a final sprint. At that time, it was positive because we had a huge growth in customer base and results. However, 2022 and 2023 had a lot to do with taking care of the aftermath, what happened after that last phase of growth. As we moved from 2021 to 2022, it turned out that there were more challenges in the loan portfolio than we had anticipated when we accelerated. So, part of the work in those two years was to take care of contracts and customers, renegotiate, and give them the breathing space to restructure. Part of the containment that we had to do in the last two years was equally complex.Valor: How was this adjustment made in the credit operation?Mr. Leão: We’ve always had a very strong credit treadmill. It is not only the granting of credit but also the dialogue with the customer during the life of the credit, which includes renegotiation and restructuring. We used that treadmill at full strength in 2022 and 2023. And at the same time, we had to deal with the consequences of the right decision we took to slow down lending. We talked about this in the fourth-quarter 2021 earnings release, which would adjust the limits, which means I would be lending to much fewer people or at lower limits. I’ve known for almost two years that I would accept a reduction in the active customer base on the card, and therefore a reduction in the principal. And that means having less leverage to increase revenue. That’s part of it. Every post-credit acceleration cycle is similar, but in our case, it had a greater intensity because we had grown very fast...
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