By Brazil Stock Guide — Santander Brasil reported recurring net income of R$2.89 billion in the third quarter of 2026, down 28% from a year earlier and 4.3% from the previous quarter, as deteriorating credit quality and narrower lending margins continued to weigh on profitability. The Brazilian subsidiary of Spain’s Banco Santander posted an annualized recurring return on equity (ROAE) of 11.9%, compared with 17.5% a year earlier.
Asset quality remained a key source of pressure. The ratio of loans overdue by more than 90 days rose to 3.4%, from 2.8% in the third quarter of 2025. Among individual borrowers, the delinquency rate reached 5.5%, reflecting continued stress among lower-income customers and agricultural borrowers. Credit-loss provisions totaled R$7.46 billion, up 14.4% year over year, although they declined 2.5% from the previous quarter. The bank’s annualized cost of credit stood at 3.89%.
Net interest income fell 2.5% quarter over quarter and 1.6% year over year to R$14.96 billion. Interest income from customers declined 4.2% from a year earlier to R$15.85 billion, reflecting a shift away from higher-risk, higher-yielding lending. The average product spread narrowed to 9.70% annually, from 10.63% a year earlier. Market-related interest income remained negative at R$895 million, compared with a R$718 million loss in the second quarter.
Despite weaker profitability, Santander’s expanded credit portfolio grew 4.7% over the past year to R$721.3 billion. Lending and other credit exposures to large corporations increased 7.8% to R$265.7 billion, while the small and medium-sized enterprise portfolio expanded 8.5%. By contrast, the individual lending portfolio contracted 0.9%, reflecting the bank’s strategy of reducing exposure to riskier mass-market borrowers. Credit card and mortgage portfolios continued to expand, rising 9.8% and 10.3%, respectively, over the year.
Fee and commission income reached R$5.42 billion, up 1.6% from the second quarter but down 2.4% year over year. Insurance fees rose 11.8% sequentially, while card-related revenue increased 3.5%. These gains were partly offset by a 43.9% decline in brokerage and securities placement fees, reflecting weaker capital markets activity.
Cost discipline provided some relief. Operating expenses declined 3% from the previous quarter to R$6.38 billion and were 0.6% lower than a year earlier. Santander ended September with 45,782 employees, nearly 6,000 fewer than a year earlier, while its branch network shrank from 961 to 827 locations. Nevertheless, the cost-to-income ratio rose to 38.8% from 37.5% a year earlier, indicating that weaker revenue generation more than offset the benefits of expense reductions.
Customer funding increased 6.3% year over year to R$701.3 billion, while the bank’s common equity Tier 1 capital ratio fell to 10.9%, from 11.7% a year earlier. Reported net income, under Brazilian accounting standards, totaled R$2.83 billion, down 28.2% year over year but up 6.2% from the second quarter.
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