Banco Santander, S.A.

Good morning, everyone. Thank you for joining us for our fourth quarter 2025 earnings video conference call. We are live from our headquarters in São Paulo and we will divide this event into three parts. First, Mário Leão will address the main highlights of the quarter and the directions for growth in the coming periods. Gustavo Alejo will provide a detailed analysis of our performance. And finally, we'll have our Q&A session. I will now give you some instructions. We have three audio options on the screen. All the content in Portuguese, all the content in English, or the original audio. To choose your option, just click on the button in the bottom center of your screen to ask a question click the raise hand icon at the bottom of your screen the presentation we are about to give is now available for download on our ir website and now i'll turn the floor to mario to start the presentation good morning mario good morning camilla good morning everyone it's a great pleasure for me to be here to give you the wrap-up of 2025, because 26 is already in its second month. I would like to start by highlighting the main numbers. And as you can see, we deliver a sequential performance or net income of $4.1 billion. almost six percent year and year and 1.9 percent quarter on quarter so we maintain profitability at 17.6 meaning that with everything that i will tell you further on we will see that this is an intermediary step in our journey towards 20 plus of profitability and we can elaborate more on that further on and we do that with a growing customer base about 4.5 million clients we will tell you that it's 64 million, rounding it up. And the main thing that we will tell you about has to do with an NII that grows 0.8 in the quarter, and year on year is down due to the markets, and this is something that we've been telling you for quite some time. So market NII, as Gustavo will elaborate further, it's a bit more negative quarter on quarter, and this has a rationale behind it, and our overview for 26 is better, but in terms of clients there was a quarterly evolution that was up by 4.6 and there are further opportunities to improve even further our quarterly their delivery is 3.6 quite positive in an annual comparison slightly above and we will see 3.6 you know in details in some felines there are very key to what we are doing with our clients strategically speaking Our expense management in the quarter grew nominally, but quarter on quarter is impacted by the collective bargaining. Now we are three months ahead in addition to, you know, seasonality, marketing expenses, et cetera. So despite this nominal growth in the quarter year on year, the number was negative that means I mean and we've been talking a lot about you about how we are managing this line I mean certainly this is what we control even more I mean, efficiency ratio is up because of relationship amount markets, and we are earmarking our expenses, but we are in the right track. Macro expenses remain the same. We're not changing the strategy. We are... very disciplined in terms of managing our operation, very resilient. This is beyond just a quarter or a year. It's a mid-term journey, but we are moving quite well in this direction, and we are constantly moving ahead little by little. The management levers are the same, the golden rules that we often talk about. We will highlight some of them further on. But as you know, the core of the strategy is our, you know, transformation of customer journey and primary relationship. Customer centricity, I already talked about the total number. At this point, we have more than 74 million clients. Not only we are looking for, you know, looking to increase the number of customers, but we want them to be more active, to be more transactional, and this will allow us to be the primary bank of these clients. And so we are focusing on these two levers, and one being hyper-personalization, and the other one being AI. I mean, as for hyper-personalization, we highlight something quite positive, because in my view, 60% of all interactions we have with clients in the channels, all channels, not only digital, they are already hyper-personalized, meaning that I speak to a client knowing Name, last name, the way they like to be treated or spoken to. We know the context behind the relationship that we have with the client, access to market. And with all of that, I have a context-driven conversation. And I know what the client needs to be unique. so this is you know the issue of having a primary client we make important advances last year there is a new app also that i will talk about soon and there is also what we call the customer interaction platform because it is our new crm but something much broader than crm that allows us to to integrate all of the information about the client, market information, while at the same time we personalize campaigns. Between notifications, banners, and products, we are making important advances. Last year, not only we deployed all of that, but we conducted more than 1,400 campaigns that are hyper-personalized. Also, we are intensifying the use of AI. Certainly, AI has one side, that is what we call AIs for efficiency, the use of AI to make the bank more efficient, to improve processes, to reduce manual processes and operating costs. and we have ombudsman and fraud. In these two areas, volume is important. We have to be more efficient and to serve customers better. And there is also AI for growth, meaning how AI can help us to improve improve our business to enhance primary relationship with clients. And there are some examples, one being Peachmaker. That is the first tool that we launched in the midst of last year for our AAA and investment advisory system. And we also bring that to our select segment. In 30 seconds, in only 30 seconds, we can have a personalized pitch allowing experts to address clients in a much more direct manner instead of, you know, taking half an hour to recover emails and to look at the systems. But we can do that in only 30 seconds, meaning that the interaction level is much better. This is just an example. To give you some business highlights, I will talk about consumer finance, transactionality, payments, and then I will talk about investments and corporate. I mean, consumer finance, we are very proud of our franchise. Maybe this is one of the jewels of our crown. Last year, we posted a record year in our consumer finance because we grew the portfolio, we grew top line, bottom line. But more than that, and behind that, we are increasing and enhancing customer experience. I mean, our consumer finance is our oldest business. So this is a journey of 90. Of course, the consumer finance focuses on finance, of course, you know, granting credit. But we are growing the capability of granting loans. We also offer insurance, auto insurance. There are many new insurances that we launched. You know, in terms of insurance and fees, we were up 73% year on year from a base of 100. Therefore, the consumer finance posted continuous progress. Again, we had a very good year last year, and we trust the business, and we know what we have to do in 2026. The middle column talks about a very central topic that is part of our everyday operation, and it has to do with a customer journey, and this involves payment and transactionality together. This has been our focus for weeks. for quite some time. We've been investing here. We delivered new journeys last year. We are bringing here , bring money in open finance. This is a very simple journey that I would say that is one of the simplest in the market for, you know, corporate and SMEs. We talk to clients and what they have in other organizations, financial organizations. So we encourage them to bring that to us in a simple click. you know we give them you know additional overdraft cape overdraft capability we want to to to post progress in peaks all of the journeys related to picks you know puts us in the industry standard and with that we increase volume even in the low income segment we are you know advancing even if credit appetite is low for low income we are growing 26 in fees in two years cards we grew close to 20 17 but when we look to the right and look at investments i will start with what is the last topic in low income we are growing deposits So deposits grew by 24% in two years and in high income even more, 34%. What I would like to say is that in that journey that is pluriannual to improve the funding of the book and to close that in retail we reached an important landmark last year to reach 50-50 between corporate and individuals. It's not the end of the journey, probably the mid part of the journey. In 23 it was 27.43. We are interacting a bit more and this number was still higher in companies and lower in individuals. But now we are reaching a balance. But obviously this has to go on so we have to reach at least 60% in companies and, I mean, in individuals and companies, more, you know, small and large companies. Now, here, Santander empresas or companies, I already said that we have a mid- small and mid-sized companies that should double in a year. Of course, we have necessary capital, teams, and offerings. We will grow disproportionately, as it has been the case in the past few years, but we want to do more. It won't be linear. It will be in all segments. Macro is an important element, and we'll take that into account. But in terms of our directions, we want to grow a lot more here. To that end, we segmented things. We segmented all the groups of customers per income in a much more surgical way, much more dynamic. And with that, our offering and our model to serve will be even more earmarked and dedicated. For small companies, we no longer have an expertise. in the bank we have micro regions and that's when you look at the map of brazil this is an actual map when we have all of our micro regions as you as you can tell we are scattered around brazil and we had a com campaign last year where the bank went out of the bank we don't want a manager sitting at a desk with a dash desktop and waiting to talk to a client. I mean, the manager or the expert has to step out of the bank and call on customers, and these calls are more frequent. They bring more NPS, better business, and a better portfolio quality. On the right-hand side, we talk about the offerings. Get is playing a more important role. It's a combined offering. Get is a separate company. It is no longer part of Santander Brazil. But in terms of business, it is very much present in the bank. It is part of an integrated approach of an integrated solution. And we are certainly becoming stronger with this partnership. In addition to that, we are making progress with the channels. We are working in the you know company arm of that you know and very soon we'll be able to talk more about it we have a new brand positioning that's been around for about a year and a half we are making great progress with a major campaign and finally we're very much dedicated to what i mentioned before and that is the rewards journey, and we will tell you more about how we are trying to engage both companies and individuals in the journey. To conclude my part, and before I give the floor to Gustavo, this is just a zoom in into the subject. Since this is a topic that we've been delivering quite well, and we will certainly be focused on doing the same thing throughout this year, and I'm referring to our efficiency journey. In two years, and again, if you go a little bit further, Now, down that journey, in two years, we grew revenue by 17%. In the same period, our expenses grew by 5%. If we were to eliminate inflation, we'll be minus 4%. But let's talk about, I mean, let's leave actual evolution on the side by now. Growing 70% against 5% growth in expenses, this is quite positive, and this gives the bank some operating gains. But the way we invested the 5%, it's even more important, in my view. We grow in expansion and technology 16% over the past few years. That means where the bank has to grow and where the bank has to transform itself and engage customers even more. So we are growing 17%. And this is funded by with quote-unquote you know while the entire rest of the bank is at zero so we have an aggregated view of five which is quite good plus a very healthy mix in my view and the mindset to look for a bank that converts that that has a mindset of nominal uh gain of a minimum nominal expenses of zero i mean quarter and quarter or annually you know it was negative and now i have two things that stem from them is that our cost to serve was down both for high income because they don't need as much because of the income and mass income, which is crucial. I've been referring to our mass income or low income segment. We need a much better cost equation to be feasible. Of course, the portfolio or the credit mix has to be very healthy and we are working in both directions. but we see a 43% reduction in two years, but obviously we can do more. Productivity also increased. And on the right-hand side, I mentioned a few pillars. I mean, the list could be much longer, but I talked about the technological spectrum that allows us to do that. So we are working together with the Central Bank on the gravity project, and we will talk more about it, but this is a much more modern and efficient way to process the bank. I mean, we are leaving the mainframe and going towards a lower platform model that consumes much less and is much more dynamic in terms of management. We do that in many other large geographies. Brazil is one of the largest and very complex. Plard is our credit card platform. It's already fully implemented for credit. And so this is a major step towards, you know, enhancing our efficiency. And OneApp. makes us proud we have more than 50 million customers that migrated to one app and it's a very active platform and now in 2026 we will deploy new versions within the same the same core plan and with that we will grow We will enhance engagement in this new app that has been totally refurbished and remodeled that was launched early this year. And with that, I'll ask Gustavo to come and comment on the numbers, and I'll come back for the Q&A.

Thank you. Thank you, Mário. Good morning, everyone.

In line with what we have presented in previous quarters, we continue to make consistent progress across all lines and businesses, reflecting our dynamic portfolio management and ongoing focus on increasing risk-adjusted profitability in our operations. We remain cautious in grant credit, which translates into selective growth of our products, always prioritizing greater client loyalty and transactionality. I highlight the positive evolution of the main portfolios in the year-over-year comparison, with cards growing 13.4%. Also, another highlight is consumer finance, up 13% and small and medium-sized enterprises also growing 13% year-on-year. With these increases, the relative shares of small and medium-sized enterprises consumer finance and high-income individuals increased in the bank's local portfolio. That's very important in the mix. In retail banking, the focus remains on product mix and segmentation. We continue to make consistent progress in lines with higher profitability and continue to reduce exposure to higher risk profiles, as we have been saying in prior quarters. We still see room to accelerate growth in the high-income segment, and we continue to work to capture this growth. In large corporates, we continue to evolve positively, but always maintaining price discipline. On the funding side, its composition remains aligned with the strategy shown by Mario and the evolution we have seen, i.e., increasing retail share of funding. strengthening customer loyalty and transactionality. So what does that mean? The funding mix plan is evolving satisfactorily. In time deposits from individuals, we had a very favorable performance with an annual growth of close to 20%, which reinforces the evolution of our customer primacy. In turn, in demand deposits, we observed a reduction because there was a natural migration to time deposits. Client NII grew 1.6% in the quarter, and this increase was mainly explained by higher average volume of credit, which offset the lower number of business days in the period. In the annual comparison, NII growth was higher compared to credit volume, which demonstrates our discipline in pricing and the continuous optimization of the mix of assets and liabilities. With this more favorable mix together with CVI increase, spreads increased in 12 months, as you can see. However, the quarter was impacted by fewer business days, a larger share of the non-interest-bearing card portfolio, and an increase in deferred expenses of banking correspondents, an effect that has been gaining relevance over time. These three facts combined account for more than 80% spread variation in the quarter, as we can see. In terms of market NII, we observed a slight improvement in asset management, combined with a with a deterioration in market-making quarter on quarter. Fees performed more positively in the quarter, reflecting, of course, the seasonality, but with cards and insurers standing out. In cards, we had another positive quarter, driven by increased customer transactionality. Insurers. In addition to the seasonal renewal of a significant policy that we had, we saw an improved performance. also due to the strong commercial focus of our sales force and new products. In securities, brokerage and placement, despite a slight decline in the quarter, we posted significant growth in the second half of the year, supported by improved performance in debt issues. Now moving on to provisions. We observed improved performance quarter on quarter, mainly reflecting two things. lower write-offs of losses, which I will discuss in a minute, and the absence of significant one-off effects, such as specific cases in wholesale. As mentioned in the second quarter, we anticipate write-offs of losses in operations with lower expectations of being recovered. Comparatively, in the first half of 2025, the volume of write-offs was 55% higher than in the second half. What does this mean? This has an effect on NPL over 90 days in Q3 and Q4 of the year, more precisely in the fourth quarter. 25 basis points of the increase are explained by this effect. The other part of the increase in the over 90-day NPR relates to lower-income segments, agribusiness, as well as operations guaranteed by government funds, which impact the delinquency rates for SMEs. These operations structurally have lower levels of provisioning. Therefore, there is an increase in volume of the portfolio in stage 2, but with lower coverage in the quarter, due to the better quality of the migrated credits. Despite the increased pressure observed in over 90 day NPL, we continue to see more well-behaved short-term delinquencies and a slight improvement in NPL formation. We recorded lower contribution from loan recoveries in the period due to increased activity of portfolio sales throughout the year. We continue to take a restrictive stance on renegotiations. The increase observed in the renegotiated portfolio in the quarter is mainly due to the inclusion of transactions renegotiated before 30 days of delay. So, there has been no change in the renegotiation policy. Even after adjustments to underperforming portfolios, there may still be some additional pressure on quality indicators throughout the first half of 2026. Still, we believe that this dynamic is consistent with the current stage of the cycle, and it is being addressed in an active and disciplined manner. The next slide shows the evolution of expenses. During the quarter, we saw the full effect of the new collective bargaining agreement in addition to the typical seasonality of the period. Even so, we ended the year with expense growth below inflation as a result of our effective cost management. High expenses associated with business expansion and investment in technology were more than offset by reductions in recurring expenses. Over the last few years, we have demonstrated a truly solid management in terms of expense management and resource allocation. The one-off increase in expenses in Q4 impacted the efficiency ratio, but this is a seasonal effect, as I mentioned, rather than a structural effect, comparing 2025 with 2024. We see an improvement of 140 basis points in this indicator. To conclude, I present our income statement. We ended the year with a 12.6% growth in profit and ROE of 17.6% in Q4, reflecting consistent revenue growth and controlled expenses. CTE1 ended the year at 11.6%. Our loan book shows an increasingly better combination of risk and return, supported by well-balanced funding, as we've shown, in terms of instruments, customers, and prices. And this performance, even in a more challenging macroeconomic scenario, reinforces the discipline with which we have managed our balance sheet in recent years. It leaves us in a better position or leaves us better prepared to face short-term volatility and sustains our trajectory of solid and sustainable profitability in the mid to long term. We will begin the Q&A session. Thank you. Thank you. Thank you. Thank you, Mario and Gustavo. We will now start the Q&A session. As a reminder, to participate, you need to click on the hand icon at the bottom of the screen. We will answer the questions in the language in which they are asked. We ask that each analyst asks only one question, please, so that everyone has an opportunity to participate. First question from Yuri Fernandes with JP Morgan. Yuri, good morning. Good morning, Camila. Good morning, Mário and Gustavo. I think that Gustavo will stay one more quarter with us. I'd like to thank you for the partnership and wish you a lot of luck, Gustavo. I have a number of questions also related to other expenses, but let's focus on the linguacy. has amazed delinquency. I think that there was some worsening in the delinquency ratio. I think that Gustavo actually mentioned that there was additional pressure. Mário mentioned that the cost of risk was not what he would like. It's not normalized. They should improve. Perhaps not in 2026. So my question is, what's happening with the small and mid-sized enterprises? Santander stepped on the brakes before the others. You were more cautious. Is there a specific industry or level of company? I understand that high interest rates do not help. But this worsening drew my attention, both in short term and 90-day NPL. So any call you can give us would be more than welcome. Thank you.