6-K 1 EDGAR_3T20_IFRS2710.htm EDGAR_3T20_IFRS2710

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

For the month of September, 2020


 

Commission File Number: 001-34476

 

BANCO SANTANDER (BRASIL) S.A.

(Exact name of registrant as specified in its charter)

 

Avenida Presidente Juscelino Kubitschek, 2041 and 2235
Bloco A – Vila Olimpia
São Paulo, SP 04543-011
Federative Republic of Brazil

 

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F ___X___ Form 40-F _______

 Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): 

Yes _______ No ___X____

 Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): 

Yes _______ No ___X____

 Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: 

Yes _______ No ___X____

 If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):  N/A

 

 

Free Translation into English from the Original Previously Issued in Portuguese)

BANCO SANTANDER (BRASIL) S.A.

CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

 

 

TABLE OF CONTENTS

 

 

 

Page

 

Consolidated Balance Sheet 5

Consolidated Income Statements. 7

Consolidated Statements of Comprehensive Income. 7

Consolidated Statements of Changes in Stockholders' Equity. 9

Cash Flows Statements. 10

1.Introduction, presentation of consolidated condensed interim financial statements and other information. 12

2.Basis of consolidation. 14

3.Financial assets. 16

4.Non-current assets held for sale. 19

5.Investments in associates and joint ventures. 19

6.Tangible assets. 21

7.Intangible assets - Goodwill 22

8.Intangible assets - Other intangible assets. 23

9.Financial liabilities. 23

10.Provision for legal and administrative proceedings, commitments and other provisions. 25

11.Stockholders’ equity. 28

12.Income Tax. 30

13.Detailing of income accounts. 31

14.Employee Benefit Plan. 31

15.Operating segments. 33

16.Related party transactions. 34

17.Fair value of financial assets and liabilities. 41

18.Other disclosures. 45

19.Subsequent Events. 54

Performance Review.. 55

Composition of Management Bodies. 63

Declaration of directors on the financial statements. 65

Directors' Statement on Independent Auditors. 66

 

 

 

 

 

 

 

 

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Consolidated Balance Sheet

Note

9/30/2020

12/31/2019

Cash

18,330,955 

20,127,364 

Financial Assets Measured At Fair Value Through Profit Or Loss

3.a

42,820,533 

32,342,306 

Debt instruments

3,583,521 

3,735,076 

Trading derivatives

287,360 

Balances With The Brazilian Central Bank

38,949,652 

28,607,230 

Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading

3.a

81,480,147 

57,020,903 

Debt instruments

49,775,405 

34,885,631 

Equity instruments

1,429,119 

2,029,470 

Trading derivatives

18.a

30,275,623 

20,105,802 

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

3.a

368,036 

171,453 

Loans and advances to customers

26,479 

Equity instruments

341,557 

171,453 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

3.a

107,073,876 

96,120,233 

Debt instruments

107,007,749 

95,962,927 

Equity instruments

66,127 

157,306 

Financial Assets Measured At Amortized Cost

3.a

542,310,043 

474,680,904 

Loans and amounts due from credit institutions

116,677,178 

109,233,128 

Loans and advances to customers

375,928,235 

326,699,480 

Debt instruments

49,704,630 

38,748,296 

Hedging Derivatives

18.a

1,321,114 

339,932 

Non-Current Assets Held For Sale

1,187,804 

1,325,335 

Investments in Associates and Joint Ventures

1,135,488 

1,070,762 

Tax Assets

46,955,864 

33,599,178 

Current

6,103,331 

3,304,116 

Deferred

40,852,533 

30,295,062 

Other Assets

8,732,479 

5,061,337 

Tangible Assets

9,515,905 

9,781,957 

Intangible Assets

30,678,292 

30,595,788 

Goodwill

28,361,953 

28,375,004 

Other intangible assets

2,316,339 

2,220,784 

Total Assets

891,910,536 

762,237,452 

 


 

LIABILITIES AND STOCKHOLDERS' EQUITY

 Bank

Notes

9/30/2020

12/31/2019

Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading

9.a

68,458,455 

46,064,669 

Trading derivatives

9.a

35,744,711 

22,229,016 

Short positions

32,713,744 

23,835,653 

Financial Liabilities Measured At Fair Value Through Profit Or Loss

9.a

6,149,411 

5,319,416 

Other financial liabilities

6,149,411 

5,319,416 

Financial Liabilities Measured at Amortized Cost

9.a

675,137,211 

575,230,401 

Deposits from Brazilian Central Bank and deposits from credit institutions

87,015,664 

99,271,415 

Customer deposits

462,350,526 

336,514,597 

Marketable debt securities

60,227,261 

73,702,474 

Debt Instruments Eligible to Compose Capital

14,473,733 

10,175,961 

Other financial liabilities

51,070,027 

55,565,954 

Hedging Derivatives

18.a

232,285 

200,961 

Provisions

10 

14,510,605 

16,331,825 

 Provisions for pension funds and similar obligations

3,725,905 

4,960,620 

 Provisions for judicial and administrative proceedings, commitments and other provisions

10,784,700 

11,371,205 

Tax Liabilities

9,492,339 

10,960,075 

Current

5,020,528 

5,419,202 

Deferred

4,471,811 

5,540,873 

Other Liabilities

14,121,707 

10,920,944 

Total Liabilities

788,102,013 

665,028,291 

Stockholders' Equity

11 

104,407,684 

96,736,290 

Share Capital

57,000,000 

57,000,000 

Reserves

40,150,042 

34,877,493 

Treasury shares

(791,604) 

(681,135) 

Option for Acquisition of Equity Instrument

(67,000) 

Profit for the period attributable to the Parent

9,709,246 

16,406,932 

Less: Dividends and remuneration

(1,660,000) 

(10,800,000) 

Other Comprehensive Income

(912,321)

(85,710)

Stockholders' Equity Attributable to the Parent

103,495,363 

96,650,580 

Non - Controlling Interests

313,160 

558,581 

Total Stockholders' Equity

103,808,523 

97,209,161 

Total Liabilities and Stockholders' Equity

891,910,536 

762,237,452 

 


 

Consolidated Income Statements

Notes

7/01 to 9/30/2020

7/01 to 9/30/2019

01/01 to 09/30/2020

01/01 to 09/30/2019

Interest and similar income

14,732,550 

18,660,727 

47,995,173 

55,352,909 

Interest expense and similar charges

(3,615,934) 

(7,367,212) 

(14,749,195) 

(22,283,787) 

Net Interest Income

11,116,616 

11,293,515 

33,245,978 

33,069,122 

Income from equity instruments

5,473 

1,315 

24,075 

9,012 

Income from companies accounted by the equity method

5.a

30,964 

36,221 

80,383 

96,683 

Fee and commission income

5,080,146 

5,394,362 

15,010,993 

14,778,307 

Fee and commission expense

(1,053,579) 

(1,427,551) 

(3,215,606) 

(3,224,342) 

Gains (losses) on financial assets and liabilities (net)

711,685 

3,111,975 

14,178,134 

2,087,833 

Financial Assets Measured At Fair Value Through Profit Or Loss

135,335 

196,382 

938,618 

281,340 

Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading

(39,228) 

2,866,104 

12,790,436 

1,823,311 

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

16,381 

119,909 

119,909 

9,691 

   Financial instruments not measured at fair value through profit or loss

(25,425) 

(245,138) 

(245,138) 

(47,262) 

Other

624,622 

574,309 

574,309 

20,753 

Exchange differences (net)

(1,926,517) 

(5,779,981) 

(30,705,813) 

(3,960,374) 

Other operating expense

15,757 

(376,739) 

(422,747) 

(986,528) 

Total Income

13,980,545 

12,253,117 

28,195,397 

41,869,713 

Administrative expenses

(4,340,884) 

(4,212,194) 

(12,629,807) 

(12,433,254) 

Personnel expenses

13.a

(2,228,600) 

(2,339,695) 

(6,728,373) 

(6,929,684) 

Other administrative expenses

13.b

(2,112,284) 

(1,872,499) 

(5,901,434) 

(5,503,570) 

Depreciation and amortization

(665,287) 

(611,552) 

(1,912,200) 

(1,768,458) 

Tangible assets

6.a

(521,132) 

(477,795) 

(1,515,646) 

(1,376,681) 

Intangible assets

7.b

(144,155) 

(133,757) 

(396,554) 

(391,777) 

Provisions (net)

10 

(388,222) 

(632,120) 

(1,371,817) 

(1,904,111) 

Impairment losses on financial assets (net)

(3,835,808) 

(3,160,027) 

(13,912,998) 

(9,636,890) 

Financial Instruments Measured At Amortized Cost

 3.b.2

(3,835,808) 

(3,160,027) 

(13,912,998) 

(9,636,890) 

Gains (losses) due to derecognition of financial     assets measured at amortized cost

Impairment losses on other assets (net)

(4,737) 

4,407 

(17,006) 

(6,375) 

Other intangible assets

(677) 

(858) 

(20,477) 

(2,251) 

Other assets

(4,060) 

5,265 

3,471 

(4,124) 

Gains (losses) on disposal of assets not classified as non-current assets held for sale

706 

(8,447) 

219,622 

380 

Gains (losses) on non-current assets held for sale not classified as discontinued operations

8,768 

20,539 

36,559 

(111,091) 

Operating Income Before Tax

4,755,081 

3,653,723 

(1,392,250)

16,009,914 

Income taxes

12 

(951,086) 

308,415 

11,122,140 

(4,886,293) 

Consolidated Net income for the period

3,803,995 

3,962,138 

9,729,890 

11,123,621 

Profit attributable to the Parent

3,799,373 

3,908,035 

9,709,246 

10,953,661 

Profit attributable to non-controlling interests

4,622 

54,103 

20,644 

169,960 

Earnings Per Share (Brazilian Real)

Basic earnings per 1,000 shares (Brazilian Real)

Common shares

485.20 

498.86 

1,240.36 

1,397.86 

Preferred shares

533.72 

548.75 

1,364.40 

1,537.64 

Diluted earnings per 1,000 shares (Brazilian Real)

Common shares

485.20 

498.86 

1,240.36 

1,397.86 

Preferred shares

533.72 

548.75 

1,364.40 

1,537.64 

Net Profit attributable - Basic (Brazilian Real)

Common shares

1,843,683 

1,897,287 

4,713,669 

5,317,703 

Preferred shares

1,955,690 

2,010,748 

4,995,577 

5,635,958 

Net Profit attributable - Diluted (Brazilian Real)

Common shares

1,843,683 

1,897,287 

4,713,669 

5,317,703 

Preferred shares

1,955,690 

2,010,748 

4,995,577 

5,635,958 

Weighted average shares outstanding (in thousands) - basic

Common shares

3,799,830 

3,803,239 

3,800,235 

3,804,187 

Preferred shares

3,664,253 

3,664,253 

3,661,376 

3,665,328 

Weighted average shares outstanding (in thousands) - diluted

Common shares

3,799,830 

3,803,239 

3,800,235 

3,804,187 

Preferred shares

3,664,253 

3,664,253 

3,661,376 

3,665,328 

The accompanying notes from Management are an integral part of these consolidated condensed interim financial statements.

 

Consolidated Statements of Comprehensive Income

7/01 to
9/30/2020

7/01 to
9/30/2019

01/01 to 09/30/2020

01/01 to 09/30/2019

Consolidated Profit for the Period

3,803,995 

3,962,138 

9,729,890 

11,123,621 


Other Comprehensive Income that will be subsequently reclassified for profit or loss when specific conditions are met:

(769,347)

727,261 

(1,491,586)

1,662,035 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

(609,496)

628,426 

(1,621,635)

1,541,348 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

(1,181,766) 

1,128,179 

(3,055,427) 

2,775,737 

Income taxes

572,270 

(499,753) 

1,433,792 

(1,234,389) 

Cash flow hedges

(159,851)

98,835 

130,049 

120,687 

Valuation adjustments

(314,188) 

181,327 

213,976 

237,686 

Amounts transferred to income statement

(6,625) 

6,767 

Income taxes

154,337 

(75,867) 

(83,927) 

(123,766) 

Other Comprehensive Income that won't be reclassified for Net income:

(13,275)

(9,166)

664,974 

(813,265)

Defined Benefits plan

(13,275)

(9,166)

664,974 

(813,265)

Defined Benefits plan

(132) 

437 

1,275,717 

(1,305,499) 

Income taxes

(13,143) 

(9,603) 

(610,743) 

492,234 

Total Comprehensive Income

4,330,844 

4,680,233 

8,903,278 

11,972,391 

Attributable to the parent

4,326,222 

4,626,130 

8,882,634 

11,802,431 

Attributable to non-controlling interests

4,622 

54,103 

20,644 

169,960 

Total

4,330,844 

4,680,233 

8,903,278 

11,972,391 


 

 

Consolidated Statements of Changes in Stockholders' Equity

Stockholders´ Equity Attributable to the Parent

Note

Share
Capital

Reserves

Treasury shares

Option for Acquisition of Equity Instrument

Profit
Attributed
to the Parent

Dividends and
Remuneration

Stockholders´
Equity Attributable to the Parent

Financial Assets Measured At Fair Value Through Other Comprehensive Income

Defined Benefits plan

Translation adjustments investment abroad

Gains and losses - Cash flow hedge and Investment

Total

Non-controlling
Interests

Total Stockholders´
Equity

Balances at December 31, 2018

57,000,000 

30,377,693 

(461,432)

(1,017,000)

12,582,477 

(6,600,000)

91,881,738 

1,992,581 

(3,071,040)

859,370 

(659,774)

91,002,875 

592,585 

91,595,460 

Total comprehensive income

10,953,661 

10,953,661 

1,541,348 

(813,265)

120,687 

11,802,431 

169,960 

11,972,391 

Net profit

10,953,661 

10,953,661 

10,953,661 

169,960 

11,123,621 

Other comprehensive income

1,541,348 

(813,265) 

120,687 

848,770 

848,770 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

1,541,348 

1,541,348 

1,541,348 

Pension plans

(813,265) 

(813,265)

(813,265)

Gain and loss - Cash flow and investment hedge

120,687 

120,687 

120,687 

Appropriation of net income from prior years

12,582,477 

(12,582,477) 

Option for Acquisition of Equity Instrument

(950,000) 

950,000 

Dividends and interest on capital

(6,600,000) 

3,600,000 

(3,000,000)

(3,000,000)

(3,000,000)

Share based compensation

(31,067) 

(31,067)

(31,067)

(31,067)

Treasury shares

(178,240) 

(178,240)

(178,240)

(178,240)

Treasury shares income

4,221 

(1,527) 

2,694 

2,694 

2,694 

Other

(32,733) 

(32,733)

(32,733)

(106,973) 

(139,706)

Balances at September 30, 2019

57,000,000 

35,350,591 

(641,199)

(67,000)

10,953,661 

(3,000,000)

99,596,053 

3,533,929 

(3,884,305)

859,370 

(539,087)

99,565,960 

655,572 

100,221,532 

Balances at December 31, 2019

57,000,000 

34,877,492 

(681,135)

(67,000)

16,406,932 

(10,800,000)

96,736,289 

3,345,283 

(3,746,537)

859,370 

(543,825)

96,650,580 

558,581 

97,209,161 

Total comprehensive income

9,709,246 

9,709,246 

(1,621,635)

664,974 

130,048 

8,882,633 

8,882,633 

Net profit

9,709,246 

9,709,246 

9,709,246 

9,709,246 

Other comprehensive income

(1,621,635) 

664,974 

130,048 

(826,613)

(826,613)

Financial Assets Measured At Fair Value Through Other Comprehensive Income

(1,621,635) 

(1,621,635)

(1,621,635)

Pension plans

664,974 

664,974 

664,974 

Gain and loss - Cash flow and investment hedge

130,048 

130,048 

130,048 

Appropriation of net income from prior years

16,406,932 

(16,406,932) 

Option for Acquisition of Equity Instrument

(625,690) 

67,000 

(558,690)

(558,690)

(558,690)

Dividends and interest on capital

Share based compensation

Treasury shares

(110,469) 

(110,469)

(110,469)

(110,469)

Other

291,308 

291,308 

291,308 

(245,421) 

45,887 

Balances as of September 30, 2020

57,000,000 

40,150,042 

(791,604)

9,709,246 

(1,660,000)

104,407,684 

1,723,648 

(3,081,563)

859,370 

(413,777)

103,495,362 

313,160 

103,808,522 

 

 

 


 

 

Cash Flows Statements

Note

01/01 to 09/30/2020

01/01 to 09/30/2019

1. Cash Flows From Operating Activities

Consolidated Net income for the period

9,729,890 

11,123,621 

Adjustments to profit

(3,653,404)

10,559,543 

Depreciation of tangible assets

 6-a

1,515,646 

1,376,681 

Amortization of intangible assets

396,555 

391,777 

Impairment losses on other assets (net)

17,006 

6,375 

Provisions and Impairment losses on financial assets (net)

15,284,815 

11,541,001 

Net Gains (losses) on disposal of tangible assets, investments and non-current assets held for sale

(256,181) 

110,711 

Income from companies accounted by the equity method

 5-a

(80,383) 

(96,683) 

Deferred tax assets and liabilities

12 

(14,321,510) 

(708,905) 

Monetary Adjustment of Escrow Deposits

(219,447) 

(443,041) 

Recoverable Taxes

(120,220) 

(74,437) 

Effects of Changes in Foreign Exchange Rates on Cash and Cash Equivalents

2,295 

(507) 

Effects of Changes in Foreign Exchange Rates on Assets and Liabilities

(5,823,766) 

(1,622,643) 

Other

(48,214) 

79,214 

Net (increase) decrease in operating assets

(113,217,873)

(37,724,731)

Balance with the Brazilian Central Bank

(16,220,070) 

39,069 

Financial Assets Measured At Fair Value Through Profit Or Loss

(12,755,060) 

13,562,266 

Other financial assets measured at fair value through profit or loss

(24,459,244) 

5,100,476 

Financial Assets Measured at Fair Value in Results Retained for Trading

(196,583) 

630,866 

Financial Assets Measured at Fair Value through Other Comprehensive Income

(9,452,663) 

(4,295,618) 

Financial Assets Measured At Amortized Cost

(67,341,831) 

(52,313,508) 

Other assets

17,207,578 

(448,282) 

Net increase (decrease) in operating liabilities

146,340,483 

33,176,033 

Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading

22,393,786 

(6,132,848) 

Financial Liabilities Measured At Fair Value Through Profit Or Loss

627,466 

3,453,637 

Financial liabilities at amortized cost

123,203,540 

30,319,411 

Other liabilities

115,691 

5,535,833 

Tax paid

(784,097)

(4,733,342)

Total net cash flows from operating activities (1)

38,414,999 

12,401,124 

2. Cash Flows From Investing Activities

Investments

(1,889,434)

(3,299,922)

Acquisition of Minority Residual Interest in Subsidiary

(3,373) 

(1,298,630) 

Tangible assets

(1,414,874) 

(1,408,262) 

Intangible assets

(471,188) 

(547,805) 

Non-current assets held for sale

(45,245) 

Corporate Restructuring

20 

Disposal

774,333 

683,830 

Tangible assets

181,279 

80,801 

Non-Current Assets Held For Sale

447,036 

504,134 

Dividends and interest on capital received

146,018 

92,641 

Total net cash flows from investing activities (2)

(1,115,101)

(2,616,092)

3. Cash Flows From Financing Activities

Acquisition of own shares

(110,469) 

(178,240) 

Issuance of other long-term liabilities

47,640,769 

41,410,063 

Dividends and interest on capital paid

(8,429,908) 

(6,111,942) 

Payments of other long-term liabilities

(67,167,344) 

(43,268,103) 

Payments of Subordinated Debts

(9,924,747) 

Debt Instruments Eligible to Compose Capital - Payments

 

 

(458,645) 

 

(328,892) 

Net increase in non-controlling interests

(2,123) 

21,311 

Capital Increase in Subsidiaries, by Non-Controlling Interests

100,000 

Total net cash flows from financing activities (3)

(28,527,720)

(18,280,550)

Exchange variation on Cash and Cash Equivalents (4)

(2,295) 

507 

Net Increase in Cash and cash equivalents (1+2+3+4)

8,769,883 

(8,495,011)

Cash and cash equivalents at the beginning of the period

21,443,663 

25,285,160 

Cash and cash equivalents at the end of the period

30,213,546 

16,790,149 

 


 

 

 

 

Note

01/01 to 09/30/2020

01/01 to 09/30/2019

Cash and cash equivalents components

Cash

3,881,868 

14,968,079 

Loans and other

26,331,678 

1,822,070 

Total of cash and cash equivalents

30,213,546 

16,790,149 

Non-cash transactions

Foreclosure loans and other assets transferred to non-current assets held for sale

341,613 

600,251 

Dividends and interest on capital declared but not paid

1,000,000 

Supplemental information

Interest received

35,405,636 

54,637,661 

Interest paid

(13,973,268) 

(21,681,447) 

 


 


1.     Introduction, presentation of consolidated condensed interim financial statements and other information

a)   Introduction

Banco Santander (Brasil) S.A. (Banco Santander or Bank), directly and indirectly controlled by Banco Santander, S.A., headquartered in Spain (Banco Santander Spain), is the lead institution of the Financial and Prudential Conglomerates (Conglomerate Santander) before the Central Bank of Brazil (Bacen), established as a joint-stock corporation, with head office at Avenida Presidente Juscelino Kubitschek, 2041 and 2235 – Building A - Vila Olímpia, in the City of São Paulo, State of São Paulo. Banco Santander operates as a multiple service bank, conducting its operations by means of its commercial, investment, loans, mortgage loans, leasing and foreign exchange portfolios. Through its subsidiaries, also operates in the segments of payments, management of shares’ club, securities and insurance brokerage operations, capitalization plans, consumer finance, payroll loans, digital platforms, management and recovery of non-performing loans and private pension products. The operations are conducted within the context of a group of institutions that operates in the financial market on an lintegrated basis. The corresponding benefits and costs of providing services are absorbed between them and are conducted in the normal course of business and under commutative conditions.  

The Board of Directors authorized the issue of the Condensed Consolidated Financial Statements for the period ended on September 30, 2020 at the meeting held on October 26, 2020.

These Consolidated Condensed Interim Financial Statements and the accompanying documents were the subject of a recommendation for approval issued by the Company's Audit Committee and a favorable opinion of the Company's Fiscal Council.

b)   Basis of presentation of the consolidated condensed interim financial statements

The consolidated condensed interim financial statements have been prepared in accordance with the standards of the International Financial Reporting Standards (IFRS) issued by the Accountant Standards Board (IASB), and interpretations issued by the IFRS Interpretations Committee (current name International Financial Reporting Interpretations Committee - IFRIC). All relevant information specifically related to the financial statements of Banco Santander, and only in relation to these, are being evidenced, and correspond to the information used by Banco Santander in its management.

c)   Other information       

c.1) Adoption of new standards and interpretations               

As of the date of preparation of these consolidated condensed interim financial statements, the following accounting rules  have effective adoption date after January 1, 2020 and have not yet been adopted by the Bank are

·       Changes to IFRS 9, IFRS 7 e IAS 39 - Since September 2019, the IASB has made some changes to IFRS 9 and IAS 39 as well as the related disclosure standard, IFRS 7, with respect to some specific requirements on hedge accounting. These changes are part of the phases of the IBOR project (reference rates in Europe) and aim to provide certainty about the potential effects and prepare the standard for when the new reference rates referred to in the project, which are underway by the IASB, are effective. Despite these changes having an effective date, January 2020, the agency expects the new reference rates to become effective in 2021.

Banco Santander is monitoring the phases of the IBOR project and evaluating the possible impacts that will be generated when the new rates are implemented through a Global project, so, so far, there is nothing to talk about impacts on the records made.

·       Changes to IFRS 16 - In May 2020, the IASB published an amendment to IFRS 16 that is valid for annual reports beginning on or after June 1, 2020, adding a practical file that determines that changes in the consideration paid for lease that come from any concession made due to the COVID-19 pandemic, lease modifications are not characterized.

 

It is determined that the characteristics for this modification to be characterized as a change due to COVID-19 are:

- The changes result in lower payments than those previously established;

- Payments originally due on or before June 30, 2021; and

- There are no substantial changes to the other lease terms and conditions.

If the practical expedient is adopted, there must be identification and description in the financial statements. Until the publication of this report, no situations were identified in which this practical expedient could be applied.

 

 

·       IFRS 17

In May 2017, the IASB issued the IFRS for insurance contracts that aims to replace IFRS 4. IFRS 17 is due to be implemented on January 1, 2022. This standard is intended to demonstrate greater transparency and useful information in the financial statements , one of the main changes being the recognition of profits as the delivery of insurance services is made, in order to assess the performance of insurers over time. Banco Santander is evaluating the possible impacts when adopting the standard.

c.2) Estimates used           

The consolidated results and the calculation of consolidated equity are impacted by the accounting policies, assumptions, estimates and measurement methods used by the Bank's directors in the preparation of consolidated financial statements. The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities of future periods. All estimates and assumptions required, in accordance with IFRS, are the best estimates in accordance with the applicable standard.

In consolidated financial statements, estimates are made by management of the Bank and consolidated entities in order to quantify certain assets, liabilities, revenues and expenses and disclosures of explanatory notes.         

c.2.1) Critical estimates   

The critical estimates and assumptions that have the most significant impact on the accounting balances of certain assets, liabilities, revenues and expenses and in the disclosure of explanatory notes, are described below:

Resolution No. 4,797 was revoked, and replaced by Resolution No. 4820, which takes effect from May 29, 2020 and determines that financial institutions and other institutions authorized to operate by the Central Bank of Brazil are prevented from:

 

(i)             remunerate own capital, including in the form of prepayment, above:

(a)    amount equivalent to the minimum mandatory dividend, including in the form of interest on capital, in the case of institutions incorporated in the form of a joint stock company;

(b)    amount equivalent to the minimum profit distribution established in the articles of association in the case of institutions incorporated in the form of limited liability companies

(ii)            repurchase own shares (it will only be allowed if through stock exchanges or an organized over-the-counter market, up to the limit of 5% (five percent) of the shares issued, including the shares recorded in treasury at the entry into force of the Resolution);

(iii)           Reduce the social capital, except in cases that are mandatory, in accordance with the governing legislation or when approved by the Central Bank;

(iv)           increase any remuneration, fixed or variable, of directors and members of the board of directors, in the case of corporation, administrators, in the case of limited companies;

The amounts subject to the aforementioned prohibitions cannot be subject to a future disbursement obligation, and these prohibitions apply as of the publication date of Resolution No. 4,797 (on April 6, 2020) until December 31, 2020.

Any anticipation of the amounts mentioned in items "a" and "b" of item I must be carried out onservatively, consistent and compatible with the uncertainties of the current economic situation.

i. Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL), Social Integration Program (PIS) and Contribution for the Financing of Social Security

The income tax expense is obtained by adding the Income Tax, Social Contribution, PIS and Cofins. Current Income Tax and Social Contribution arise from the application of the respective tax rates on the real income, and the rates of PIS and Cofins applied on the respective calculation basis provided for in the specific legislation, together with the changes in deferred tax assets and liabilities recognized in the consolidated statement of income. The CSLL rate, for banks of any kind, was increased from 15% to 20% effective as of March 1, 2020, pursuant to article 32 of Constitutional Amendment 103, published on November 13, 2019.

Deferred tax assets and liabilities include temporary differences, identified as the amounts expected to be paid or recovered on the differences between the carrying amounts of the assets and liabilities and their respective bases of calculation, and accumulated tax credits and tax losses. These amounts are measured at the rates that are expected to be applied in the period in which the asset is realized or the liability is settled. Deferred tax assets are only recognized for temporary differences to the extent that it is considered probable that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets may be used and the deferred tax assets do not result from the initial recognition (except in one combination of business) of other assets and liabilities in an operation that does not affect either the taxable income or the taxable income. Other deferred tax assets (tax credits and accumulated tax losses) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable income for them to be used.

The deferred tax assets and liabilities recognized are revalued at the balance sheet date, and the appropriate adjustments are made based on the findings of the analyzes carried out. The expected realization of the Bank's deferred tax assets is based on projections of future results and based on a technical study.

For further details in note 2.a to the Consolidated Financial Statements of December 31, 2019.

ii. Valuation of the fair value of certain financial instruments

Financial instruments are initially recognized at fair value and those that are not measured at fair value through profit or loss are adjusted for transaction costs.

Financial assets and liabilities are subsequently measured at the end of each period using valuation techniques. This calculation is based on assumptions, which take into account the Management's judgment based on information and market conditions existing at the balance sheet date.

Banco Santander classifies the measurements at fair value using the hierarchy of fair value that reflects the model used in the measurement process, segregating the financial instruments between Levels I, II or III.

The notes 2.e and 47.c8 of the Consolidated Financial Statements of December 31, 2019, present the accounting practice and sensitivity analysis for the Financial Instruments, respectively.

iii. Provisions for pension funds

Defined benefit plans are recorded based on an actuarial study performed annually by a specialized company at the end of each year, effective for the subsequent period and are recognized in the consolidated statement of income under Interest and similar expenses and Provisions (net).

The present value of the defined benefit obligation is the present value without deduction of any plan assets from the expected future payments required to settle the obligation resulting from the employee's service in current and past periods.

Additional details are in note 2.x of the Consolidated Financial Statements of December 31, 2019.

iv. Provisions, assets and contingent liabilities

Provisions for judicial and administrative proceedings are constituted when the risk of loss of the judicial or administrative action is assessed as probable and the amounts involved are measurable with sufficient security, based on the nature, complexity and history of the actions and the opinion of the legal advisors internal and external.

The note 2.r to the Bank's consolidated financial statements for the year ended December 31, 2019, features information on provisions and contingent assets and liabilities. There were no significant changes in provisions and contingent assets and liabilities of the Bank between December 31, 2019 and March 31, 2020, the date of preparation of these consolidated financial statements.

v. Goodwill

The goodwill recorded is subject to the impairment test, at least once a year or in a shorter period, in the event of any indication of impairment of the asset.

The basis used for the recoverability test is the value in use and, for this purpose, the cash flow is estimated for a period of 5 years. Cash flow was prepared considering several factors, such as: (i) macroeconomic projections of interest rates, inflation, exchange rate and others; (ii) behavior and growth estimates of the national financial system; (iii) increased costs, returns, synergies and investment plan; (iv) customer behavior; and (v) growth rate and adjustments applied to flows in perpetuity. The adoption of these estimates involves the probability of future events occurring and the alteration of any of these factors could have a different result. The cash flow estimate is based on a valuation prepared by an independent expert annually or whenever there is evidence of a reduction in its recoverable amount, which is reviewed and approved by Management.

Further details are in note 7.

2.     Basis of consolidation

Below are highlighted as controlled, direct and indirect entities and investment funds included in Banco Santander Consolidated Condensed Interim Financial Statements. Similar information about companies accounted for by the Bank's equity method is provided in note 5.

Quantity of Shares or Quotas Owned (in Thousands)

Investments

Activity

Common Shares and Quotas

Preferred Shares

Direct Participation

Participation

Controlled by Banco Santander

Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing)

Leasing

85 

78.58% 

100.00% 

Santander Brasil Administradora de Consórcio Ltda. (Santander Brasil Consórcio)

Buying Club

238,886 

100.00% 

100.00% 

Banco Bandepe S.A.

Bank

3,589 

100.00% 

100.00% 

Aymoré Crédito, Financiamento e Investimento S.A. (Aymoré CFI)

Financial

2,877 

100.00% 

100.00% 

Santander CCVM

Broker

14,067,673 

14,067,673 

99.99% 

100.00% 

Santander Corretora de Seguros, Investimentos e Serviços S.A. (Santander Corretora de Seguros)

Other Activities

7,184 

100.00% 

100.00% 

Getnet S.A.

Payment Institution

69,565 

100.00% 

100.00% 

Sancap Investimentos e Participações S.A. (Sancap)

Holding

23,538,159 

100.00% 

100.00% 

Santander Brasil EFC

Financial

75 

100.00% 

100.00% 

Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.

Recovery of Defaulted Credits

1,464,627 

100.00% 

100.00% 

Santander Holding Imobiliária S.A.

Holding

481,196 

100.00% 

100.00% 

Santander Brasil Tecnologia S.A.

Tecnology

45,371 

100.00% 

100.00% 

Rojo Entretenimento S.A.

Other Activities

7,417 

94.60% 

94.60% 

BEN Benefícios e Serviços S.A.  (BEN Benefícios)

Other Activities

90,000 

100.00% 

100.00% 

Esfera Fidelidade S.A.

Other Activities

10,001 

100.00% 

100.00% 

Sanb Promotora de Vendas e Cobrança Ltda.

Other Activities

6,950 

100.00% 

100.00% 

Santander Tecnologia e Inovação Ltda.

Other Activities

5,045 

100.00% 

100.00% 

Toque Fale Serviços de Telemarketing Ltda. (Toque Fale)

Other Activities

75,050 

100.00% 

100.00% 

Controlled by Aymoré CFI

Banco PSA 

Bank

105 

50.00% 

Banco Hyundai Capital Brasil S.A.

Bank

150,000 

50.00% 

Controlled by Santander Leasing

PI Distribuidora de Títulos e Valores Mobiliários S.A.

Leasing

182 

100.00% 

Controlled by Sancap

Santander Capitalização S.A. (Santander Capitalização)

Capitalization

64,615 

100.00% 

Evidence Previdência S.A.

Private Pension

42,819,564 

100.00% 

Controlled by Santander Holding Imobiliária S.A.

Summer Empreendimentos Ltda.

Other Activities

17,084 

100,00% 

Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.

Return Capital Serviços de Recuperação de Créditos S.A.

Collection and Recover of Credit Management

200 

100.00% 

Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)

Return Gestão de Recursos S.A. (atual denominação social da Gestora de Investimentos Ipanema S.A.)

Resources Management

11 

100.00% 

Jointly Controlled Companies by Sancap

Santander Auto S.A.

Other Activities

22,452 

50.00% 

Controlled by Getnet S.A

Auttar HUT Processamento de Dados Ltda. (Auttar HUT)

Other Activities

3,865 

100.00% 

 

Consolidated Investment Funds

·         Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior (Santander FI Amazonas);

·         Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior (Santander FI Diamantina);

·         Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior (Santander FI Guarujá);

·         Santander Fundo de Investimento Unix Multimercado Crédito Privado (Santander FI Unix);

·         Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado (Santander FI SBAC);

·         Santander Paraty QIF PLC (Santander Paraty) (2);                                          

·         Prime 16 – Fundo de Investimento Imobiliário (atual denominação do BRL V - Fundo de Investimento Imobiliário - FII) (1);

·         Santander FI Hedge Strategies Fund (Santander FI Hedge Strategies) (2);                                                                

·         Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado (Fundo Investimento Ipanema NPL VI) (3);                                                                                                                                           

·         Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema V - Não Padronizado (Fundo Investimento Ipanema NPL V) (4);

·         Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos (5); and Fundo de Investimentos em Direitos Creditórios Atacado – Não Padronizado (6).

·         Atual - Multimarket Investment Fund Private Credit Investment Abroad (7)            

(1) Banco Santander was a creditor of certain overdue credit operations that had real estate as collateral. The operation for the recovery of these credits consists of the contribution of properties as collateral to the capital of the Real Estate Investment Fund and the consequent transfer of the Fund's quotas to Banco Santander, by means of a payment in payment of the aforementioned credit operations. At the Extraordinary General Meeting (AGE) held on October 30, 2018, the change of name from BRL V - Fundo de Investimento Imobiliário - FII to Prime 16 - Fundo de Investimento Imobiliário was approved.

(2) Banco Santander, through its subsidiaries, holds the risks and benefits of Santander Paraty and the Santander FI Hedge Strategies Sub-Fund, residing in Ireland, and both are fully consolidated in their Consolidated Condensed Financial Statements. In the Irish market, an investment fund cannot act directly and, for this reason, it was necessary to create another structure (a sub-fund), Santander FI Hedge Strategies. Santander Paraty does not have an equity position, and all records come from the financial position of Santander FI Hedge Strategies.

(3) This fund was created and started to be consolidated in September 2017. It refers to a structure in which Banco Santander sold certain credit operations, which had already been transferred to losses (operations overdue for more than 360 days) to this fund. Atual Serviços de Recuperação de Creditos e Meios Digitais S.A. (current corporate name of Atual Companhia Securitizadora de Creditos Financeiros) (Note 2.b.1), a company controlled by Banco Santander, holds 100% of the shares in this fund.

(4) This fund started to be consolidated in October 2017 and is indirectly controlled by Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.

(5) This fund was consolidated in November 2018 and is controlled through Banco Bandepe S.A.

(6) This fund started to be consolidated in June 2019 and is controlled through Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.

(7) This fund started to be consolidated in August 2020 and is controlled through Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.

 

Corporate movements were implemented in order to reorganize the entities' operations and activities in accordance with the Santander Conglomerate business plan.

a) Disposal of the equity interest held in Super Payments and Administration of Means of Electronic Media S.A

On February 28, 2020, a sale was made to a Superdigital Holding Company, SL company indirectly controlled by Banco Santander, SA, of the shares representing the share capital of Super Payments and Administração de Meios Eletrônico SA (“Superdigital”) for the amount of R$ 270 million. As a result, the Company is no longer called by Superdigital.

b) Put option of equity interest in Banco Olé Consignado S.A.

On March 14, 2019, the minority shareholder of Banco Olé Bonsucesso Consignado S.A. (Olé Consignado) formalized its interest to exercise the put option right provided in the Investment Agreement, executed on July 30, 2014, to sell its 40% equity interest in the capital stock of Olé Consignado to Banco Santander (Brazil) S.A. (“Banco Santander”).

On December 20, 2019, the parties entered into a binding agreement for the acquisition, by Banco Santander, of the all the shares issued by Bosan Participações S.A. (holding company whose only asset are shares representing 40% of the capital of Banco Olé), for the total amount of R$ 1.6 billion (“Operation”), to be paid on the closing date of the Operation.

On January 31, 2020, Santander Brasil and the shareholders of Bosan Participações S.A.  (holding company whose single asset are the shares representing 40% of the corporate capital of Banco Olé) have entered into the definitive agreements and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon transferring Bosan’s shares to Santander Brasil and the payment to the sellers of the total price of R$ 1,608,772,783.47. As a result, Santander Brasil became, directly and indirectly, the holder of all shares issued by Banco Olé.

c) Acquisition of direct equity interest in Toque Fale Serviços de Telemarketing LTDA.

On March 24, 2020, the Company acquired shares representing the total share capital of Toque Fale Serviços de Telemarketing LTDA (“Toque Fale”) for the amount of R$ 1,099,854.72, corresponding to the equity value of the quotas on February 29, 2020, previously held by Getnet Adquirência e Serviços para Means of Payment SA and Auttar HUT Processamento de Dados LTDA. As a result, the Company became a direct shareholder of Toque Fale and holder of 100% of its capital.

d) Acquisition of Summer Empreendimentos Ltda.

On May 14, 2019, Banco Santander (Brasil) S.A. and its wholly owned subsidiary Santander Holding Imobiliária S.A. (“SHI”) entered into a binding document with the partners of Summer Empreendimentos Ltda. (“Summer”) establishing the terms of the purchase and sale negotiation of quotas representing Summer's total share capital. The acquisition was approved by BACEN on September 16, 2019 and concluded on September 20, 2019, so that SHI now holds 99.999% and Banco Santander 0.001% of the shares representing Summer's share capital. Due to the Entity's sale plan in the term term, Summer was initially recorded as Non-Current Assets Held by the Sale, at its cost value. In June 2020, with the failure to execute the established plan, Summer became part of the scope of Banco Santander Consolidated Financial Statements.

e) Incorporations of Banco Olé Consignado and Bosan Participações S.A.

On August 31, 2020, the shareholders of Banco Santander (Brasil) SA (“Santander Brasil”) approved the merger, by Santander Brasil, of Banco Olé Consignado SA and Bosan Participações SA The mergers (i) did not result in an increase in the Santander Brasil's share capital; and (ii) are subject to approval by the Central Bank of Brazil.

3.     Financial assets

a)     Classification by nature and category

The classification by nature and category for the purpose of valuing the Bank's assets, except for the items related to “Cash and reserves at the Central Bank of Brazil” and “Derivatives used as Hedge”, on September 30, 2020 and December 31 2019 is shown below:

09/30/2020

Financial Assets Measured At Fair Value Through Profit Or Loss

Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

Financial Assets Measured At Fair Value Through Other Comprehensive Income

Financial Assets Measured At Amortized Cost

Total

Balances With The Brazilian Central Bank

38,949,652 

38,949,652 

 

Loans and amounts due from credit institutions (2)

116,677,178 

116,677,178 

 

 Of which:

   Loans and amounts due from credit institutions, gross

116,687,004 

116,687,004 

 

   Impairment losses (note 3-b.2)

(9,826) 

(9,826) 

Loans and advances to customers

26,479 

375,928,235 

375,954,714 

 Of which:

   Loans and advances to customers, gross (1)

26,479 

399,863,458 

399,889,937 

 

   Impairment losses (note 3-b.2)

(23,935,223) 

(23,935,223) 

Debt instruments

3,583,521 

49,775,405 

107,007,749 

49,704,630 

210,071,305 

 Of which:

    Debt instruments

3,583,521 

49,775,405 

107,007,749 

51,383,998 

211,750,673 

   Impairment losses (note 3-b.2)

(1,679,368) 

(1,679,368) 

Equity instruments

1,429,119 

341,557 

66,127 

1,836,803 

Trading derivatives

287,360 

30,275,623 

30,562,983 

Total

42,820,533 

81,480,147 

368,036 

107,073,876 

542,310,043 

774,052,635 


 

12/31/2019

Financial Assets Measured At Fair Value Through Profit Or Loss

Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

Financial Assets Measured At Fair Value Through Other Comprehensive Income

Financial Assets Measured At Amortized Cost

Total

Balances With The Brazilian Central Bank

28,607,230 

28,607,230 

Loans and amounts due from credit institutions (2)

109,233,128 

109,233,128 

 Of which:

   Loans and amounts due from credit institutions, gross

109,246,671 

109,246,671 

   Impairment losses (note 3-b.2)

(13,543) 

(13,543) 

Loans and advances to customers

326,699,480 

326,699,480 

 Of which:

   Loans and advances to customers, gross (1)

347,256,660 

347,256,660 

   Impairment losses (note 3-b.2)

(20,557,180) 

(20,557,180) 

Debt instruments

3,735,076 

34,885,631 

95,962,927 

38,748,296 

173,331,930 

 Of which:

    Debt instruments

3,735,076 

34,885,631 

95,962,927 

40,803,323 

175,386,957 

   Impairment losses (note 3-b.2)

(2,055,027) 

(2,055,027) 

Equity instruments

2,029,470 

171,453 

157,306 

2,358,229 

Trading derivatives

20,105,802 

20,105,802 

Total

32,342,306 

57,020,903 

171,453 

96,120,233 

474,680,904 

660,335,799 

(1)   As of September 30, 2020, the balance recorded under “Loans and advances to customers” referring to loan portfolio operations assigned is R$ 59,820 (12/31/2019 - R$ 76,028) and R$ 59,713 (12/31/2019 - R$ 75,500) of “Other financial liabilities - Financial liabilities associated with the transfer of assets”.

b) Valuation adjustments arising from impairment of financial assets

b.1) Financial assets measured at fair value through Other Comprehensive Income

As indicated in note 2 to the Bank's consolidated financial statements for the year ended December 31, 2019, changes in the carrying amount of financial assets and liabilities are recognized in the consolidated statement of income and except in the case of financial assets measured at value through other comprehensive income, in which changes in fair value are temporarily recognized in consolidated shareholders' equity, under “Other comprehensive income”.

The debits or credits in "Other comprehensive income" arising from changes in fair value, remain in the Bank's consolidated shareholders' equity until the respective assets are written off, when they are then recognized in the consolidated income statement. As part of the fair value measurement process, when there is evidence of impairment losses on these instruments, the amounts are no longer recognized in equity under the item "Financial assets measured at fair value through other comprehensive income" and are reclassified to the Consolidated Income Statement by the cumulative amount on that date.

On September 30, 2020, the Bank analyzed changes in the fair value of the various assets that make up this portfolio and concluded that, on that date, there were no significant differences whose origin could be considered as arising from impairment losses. Consequently, the total variations in the fair value of these assets are shown in "Other comprehensive income." Changes in the balance of other comprehensive income in the interim period are recognized in the consolidated statement of Other comprehensive income.

b.2) Financial assets measured at amortized cost - loans, other amounts with credit institutions and advances to customers

The changes in the provisions for impairment of assets included in “Financial assets measured at amortized cost - loans, other amounts with credit institutions and advances to customers” in the period ended on September 30, 2020 and 2019 were the following:

01/01 a
09/30/2020

01/01 a
09/30/2019

Balance at beginning of the period

22,625,750 

 . 

22,969,315 

Provision for losses on financial assets and recovery of loans written off for loss – Loans and receivables

14,400,650 

10,467,110 

Write-off of impaired balances against recorded impairment allowance

(11,401,982) 

(10,918,207) 

Balance at end of the period  (Note 3.a)

25,624,417 

 . 

22,518,218 

Provision for contingent liabilities (note 9.a)

705,235 

548,664 

Total balance of allowance for impairment losses, including provisions for contingent liabilities

26,329,651 

 . 

23,066,882 

Loans written-off recovery

540,455 

 . 

830,220 

Considering the amounts recognized in “Losses due to non-recovery against income” and “Recoveries of loans written off to loss”, “Losses on financial assets - Financial assets measured at amortized cost” (previously classified as Losses on loans and receivables) totaled R$ 13,912,998 and R$ 9,636,890 in the period ended on September 30, 2020 and 2019, respectively.

c) Non-recoverable assets

A financial asset is considered non-recoverable when there is objective evidence of the occurrence of events that: (i) cause an adverse impact on the estimated future cash flows on the date of the transaction, in the case of debt instruments (loans and debt securities); (ii) mean that their book value cannot be fully recovered, in the case of equity instruments; (iii) arising from the breach of loan clauses or terms, and (iv) during the bankruptcy process.

The details of changes in the balance of financial assets classified as “Loans and advances to customers” considered as non-recoverable due to credit risk in the period ended on September 30, 2020 and 2019 are as follows:

01/01 a
09/30/2020

01/01 a
09/30/2019

Balance at beginning of the period

23,426,076 

22,425,801 

Net additions

10,725,560 

11,009,495 

Write-off of impaired balances against recorded impairment allowance

(11,374,434) 

(10,918,207) 

Balance at end of the period

22,777,202 

22,517,089 

 

d) Provisions for contingent commitments

IFRS 9 requires that the provision for expected credit losses be recorded for financial guarantee contracts provided, which have not yet been honored. The provision expense that reflects the credit risk should be measured and accounted for when these guarantees are honored and the guaranteed client does not comply with its contractual obligations. Below is the movement of these provisions for the period ended on September 30, 2020 and 2019.

01/01 a
09/30/2020

01/01 a
09/30/2019

Balances at the beginning of the period

683,917 

626,267 

Constitution of provisions for contingent liabilities

21,318 

(77,603) 

Balances at the end of period (Note 3.b.2)

705,235 

548,664 

 

4.     Non-current assets held for sale

Non-current assets held for sale include assets not in use.

5.     Investments in associates and joint ventures

Joint control

Banco Santander considers investments classified as jointly controlled when they possess a shareholders' agreement, which sets that the strategic, financial and operating decisions requires the unanimous consent of all investors.

Significant Influence

Associates are entities over which the Bank is in a position to exercise significant influence (significant influence is the power to participate in the financial and operating decisions of the investee) but it does not control or has joint control over the investee.

a)   Breakdown

Participation %

Activity

Country

09/30/2020

12/31/2019

Jointly Controlled by Banco Santander

Banco RCI Brasil S.A.

Bank

Brazil

39.89% 

39.89% 

Norchem Participações e Consultoria S.A. (1)

Other Activities

Brazil

50.00% 

50.00% 

Cibrasec - Companhia Brasileira de Securitização(1)(2)(6)

Securitization

Brazil

0.00% 

0.00% 

Estruturadora Brasileira de Projetos S.A. - EBP (1)(2)

Other Activities

Brazil

11.11% 

11.11% 

Gestora de Inteligência de Crédito (1)

Credit Bureau

Brazil

20.00% 

20.00% 

Campo Grande Empreendimentos (5)

Other Activities

Brazil

25.32% 

25.32% 

Santander Auto S.A.

Other Activities

Brazil

50.00% 

50.00% 

Jointly Controlled by Santander Corretora de Seguros

Webmotors S.A. (3)

Other Activities

Brazil

70.00% 

70.00% 

Tecnologia Bancária S.A. - TECBAN (1)

Other Activities

Brazil

18.98% 

18.98% 

Hyundai Corretora de Seguros

 Insurance Broker

Brazil

50.00% 

50.00% 

PSA Corretora de Seguros e Serviços Ltda. (4)

 Insurance Broker

Brazil

50.00% 

50.00% 

Significant Influence of Banco Santander

Norchem Holding e Negócios S.A. (1)

Other Activities

Brazil

21.75% 

21.75% 

 

09/30/2020

12/31/2019

Assets

Liabilities

Profit (Loss)

Assets

Liabilities

Profit (Loss)

Jointly Controlled by Banco Santander

12,710,797 

11,057,987 

51,847 

14,121,618 

12,502,780 

206,482 

Banco RCI Brasil S.A.

11,430,530 

10,058,586 

99,951 

13,452,716 

12,174,504 

263,851 

Norchem Participações e Consultoria S.A.

70,475 

27,781 

534 

69,865 

27,709 

1,949 

Estruturadora Brasileira de Projetos S.A. - EBP

11,562 

39 

148 

35,314 

311 

1,790 

Gestora de Inteligência de Crédito

1,126,424 

933,115 

(45,410) 

527,362 

288,643 

(56,769) 

Santander Auto S.A.

71,807 

38,466 

(3,376) 

36,361 

11,613 

(4,339) 

Jointly Controlled by Santander Corretora de Seguros

2,975,525 

1,692,770 

68,469 

2,873,140 

1,628,364 

125,439 

Webmotors S.A.

512,687 

78,856 

21,529 

484,454 

60,734 

61,212 

Tecnologia Bancária S.A. - TECBAN

2,458,594 

1,612,822 

46,735 

2,382,907 

1,564,801 

63,046 

Hyundai Corretora de Seguros

2,076 

251 

(43) 

1,909 

41 

(132) 

PSA Corretora de Seguros e Serviços Ltda.

2,168 

841 

247 

3,870 

2,788 

1,313 

Significant Influence of Banco Santander

126,877 

29,391 

(225)

126,937 

29,226 

2,650 

Norchem Holding e Negócios S.A.

126,877 

29,391 

(225) 

126,937 

29,226 

2,650 

Total

15,813,199 

12,780,148 

120,091 

17,121,695 

14,160,370 

334,571 

Investments

Results

09/30/2020

12/31/2019

01/01 a 09/30/2020

01/01 a 09/30/2019

Jointly Controlled by Banco Santander

619,667 

595,230 

39,852 

54,626 

Banco RCI Brasil S.A.

547,281 

509,890 

55,441 

61,700 

Norchem Participações e Consultoria S.A.

20,872 

21,078 

333 

796 

Cibrasec - Companhia Brasileira de Securitização

75 

Estruturadora Brasileira de Projetos S.A. - EBP

1,280 

3,889 

16 

175 

Gestora de Inteligência de Crédito

34,161 

47,744 

(13,583) 

(7,873) 

Campo Grande Empreendimentos

255 

255 

Santander Auto S.A.

15,818 

12,374 

(2,355) 

(247) 

Jointly Controlled by Santander Corretora de Seguros

494,841 

454,280 

40,564 

41,614 

Webmotors S.A.

322,850 

296,216 

26,635 

32,382 

Tecnologia Bancária S.A. - TECBAN

170,298 

156,589 

13,709 

8,853 

Hyundai Corretora de Seguros

979 

934 

46 

PSA Corretora de Seguros e Serviços Ltda.

714 

541 

174 

373 

Significant Influence of Banco Santander

20,980 

21,252 

(33)

443 

Norchem Holding e Negócios S.A.

20,980 

21,252 

(33) 

443 

Total

1,135,488 

1,070,762 

80,383 

96,683 

(1) Companies with a one-month discount to calculate equity income. For accounting of equity in earnings, used on 09/30/2020 in position 08/30/2020.

(2) Although the participation is less than 20%, the Bank exercises control jointly with entities with the largest shareholders, through the shareholders' agreement where no business decision can be taken by a single shareholder.

(3) Although the participation is greater than 50%, in accordance with the shareholders' agreement, control is shared by Santander Corretora de Seguros and Carsales.com Investments PTY LTD. (Car sales).

(4) In accordance with the shareholders' agreement, control is shared by Santander Corretora de Seguros and PSA Services LTD.

(5) Participation arising from credit recovery of Banco Comercial e de Investimentos Sudameris S.A., merged in 2009 by Banco ABN AMRO Real S.A., which was not the same created by Banco Santander (Brasil) S.A., one of the Company's partners. The partners are conducting the procedures for the extinction of the company, which depends on the sale of a property. Once sold, proceed with the liquidation of the company and each partner receives his share of the equity.

 

(*) The Bank has no guarantees granted to companies with joint control and significant influence.

(**) The Bank does not have contingent liabilities with a risk of loss that can be related to investments for companies with joint control and significant influence.


 

 

b)   Changes

Below are the changes in the balance of this item in the period ended on September 30, 2020 and 2019:

01/01 a 09/30/2020

01/01 a 09/30/2019

Joint Control

Significant Influence

Joint Control

Significant Influence

Balance at beginning of period

1,049,510 

21,252 

1,032,382 

20,933 


Change in scope of consolidation

Adjustment to market value

(18,050) 

(16,153) 

Add / Lower

(2,625) 

(57,327) 

Equity in earnings of subsidiaries

80,416 

(33) 

96,240 

443 

Dividends proposed / received

(741) 

(239) 

(19,367) 

(257) 

Jointly Controlled Capital Increase

5,998 

7,000 

Others

(941) 

Balance at end of period

1,114,508 

20,980 

1,041,834 

21,119 

Total Investments

1,135,488 

1,062,954 

c)   Impairment losses

No impairment losses were recognized on investments in associates and joint ventures in September 30, 2020, and December 31, 2019.

d)   Other information

Details of the principal jointly controlled entities:

Banco RCI Brasil S.A.: A company incorporated in the form of a joint stock company with headquarters in Paraná, aims to the main practice of investment, leasing, credit, financing and investment operations, with a view to sustain the growth of the automotive brands Renault and Nissan in the Brazilian market, with operations focused on, mainly to financing and leasing to the final consumer. It is a financial institution that is part of the RCI Group Banque and Santander Conglomerate, their operations being conducted in the context of a set of institutions that operate in the financial market. According to the Shareholders' Agreement, the main decisions that impact this company is taken jointly between Banco Santander and other controlling shareholders.

Webmotors S.A.: A company incorporated in the form of a privately held company with headquarters in São Paulo and has as its object development, implementation and / or availability of electronic catalogs, space, product, services or means for the sale of products and / or services related to the automobile industry, on the Internet through the "website" www.webmotors.com.br (owned by Webmotors) or other means related to electronic commerce activities and other uses or applications of the Internet, as well as participation in the capital of other companies and the management of related businesses and ventures. It is a member of the Santander Economic-Financial Conglomerate (Conglomerado Santander) and Carsales.com Investments PTY LTD (Carsales), with its operations conducted in the context of a set of institutions that act in an integrated manner. According to the Shareholders' Agreement, the main decisions that impact this company are taken jointly between Banco Santander and other controllers.

6.     Tangible assets

Tangible assets of the Bank relate to property, plant and equipment for the its own use. The Bank does not have tangible assets held as investment property nor leased out under operating leases. The Bank is also not a part of any financial lease contracts as of and during the periods ended September 30, 2020 and 2019.

a)   Breakdown   

The detail, by class of asset, of the tangible assets in the consolidated balance sheets is as follows:   

 

 

Land and buildings


Data Processing Systems

Furniture and equipment of use and vehicles


Property Lease

Works in progress and others

Total

Balance as of December 31, 2019

1,997,033 

1,307,110 

3,948,795 

2,526,965 

2,053 

9,781,956 

Addition

54,930 

342,816 

556,985 

442,788 

1,397,519 

Write-off

(11,092) 

17,355 

(55,987) 

(114,200) 

(163,924)

Depreciation of the period

(67,740) 

(389,652) 

(627,378) 

(430,876) 

(1,515,646)

Impairment / Reversal in the period

9,733 

9,733 

Transfers

(5,401) 

177,287 

(164,814) 

(805) 

6,267 

Balance as of September 30, 2020

1,967,730 

1,454,916 

3,667,334 

2,424,677 

1,248 

9,515,905 

Balance as of December 31, 2018

2,004,335 

913,613 

3,669,344 

1,683 

6,588,975 

Initial Adoption IFRS 16 (Note 1.b)

2,465,750 

2,465,750 

Balances as of Januray 1, 2019

2,004,335 

913,613 

3,669,344 

2,465,750 

1,683 

9,054,725 

Addition

85,279 

588,374 

734,236 

504,603 

373 

1,912,865 

Write-off

(1,271) 

(6,269) 

(73,261) 

(47,817) 

(128,618)

Depreciation of the period

(69,634) 

(353,244) 

(536,097) 

(417,706) 

(1,376,681)

Impairment / Reversal in the period

86 

14,402 

14,488 

Transfers

4,055 

4,003 

26,057 

34,115 

Balance as of September 30, 2019

2,022,850 

1,146,477 

3,834,681 

2,504,830 

2,056 

9,510,894 

 

The depreciation expenses has been included in the heading “Depreciation and amortization” in the income statement.

 

b)   Losses due to non-recovery

In the period ended September 30, 2020, there was no impact of an impairment expense (09/30/2019 - impairment expense of R$ 14.4 million).

c)    Tangible asset purchase commitments 

In the period ended September 30, 2020, the Bank has R$78.9 million in contractual commitments for the acquisition of tangible assets (12/31/2019 - R$ 0).

7.     Intangible assets - Goodwill

Goodwill is the difference between the acquisition cost and the Bank's participation in the net fair value of assets, liabilities and contingent liabilities of the acquired company. When the difference is negative (negative goodwill), it is recognized immediately through income statement. In accordance with IFRS 3 Business Combinations, goodwill is stated at cost and is not amortized but tested annually for impairment or whenever there is an evidence of reduction on the recoverable value of the cash generating unit to which the goodwill was allocated. Goodwill is recognized at cost considering the accumulated  impairment losses. Impairment losses related to goodwill are not reversible. Gains and losses related to the sale of an entity include the carrying amount of goodwill relating to the entity sold.            

The goodwill recorded is subject to impairment test (note 1.v) and has been allocated according to the operating segments (note 15).

Based on the assumptions described above, no impairment of goodwill was identified as of December 31, 2019. During the period ended quarter of 2020, no indications of impairment of goodwill were identified.

09/30/2020

12/31/2019

Breakdown

Banco ABN Amro Real S.A. (Banco Real)

27,217,565 

27,217,565 

Olé Consignado

62,800 

62,800 

Super Pagamentos

13,050 

Banco PSA Finance Brasil S.A.

1,557 

1,557 

Getnet S.A.

1,039,304 

1,039,304 

Return Capital Serviços e Recuperação de Créditos S.A.

24,346 

24,346 

Santander Brasil Tecnologia S.A.

16,381 

16,382 

Total

28,361,953 

28,375,004 

 

 

 

Commercial Bank

12/31/2019

Key assumptions:

Basis for determining the recoverable amount

Period of the projections of cash flows (1)

5 years

Perpetual growth rate

4.8% 

Discount rate (2)

12.5% 

(1) The projections of cash flow are prepared using Management´s growth plans and internal budget, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.                                                                                                                             

(2) The discount rate is calculated based on the capital asset pricing model (CAPM). The discount rate before tax on December 31, 2019 was 17.78%.

 

The impairment test was carried out during the second half of 2019. Goodwill is tested for impairment at the end of each year or whenever there is any indication of impairment. In the period ended March 31, 2020, there was no evidence of impairment that would lead to the need to update the test carried out in 2019 before its regular performance.

In the goodwill impairment test, discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows. With a variation of +0.25% or -0.25% in these rates, the value of future cash flows discounted to present value continues to indicate the absence of impairment.

In January 2020, Banco Santander acquired the remaining stake in Banco Olé Consignado, in the amount of R$ 1,608 million, generating goodwill of R$ 982 million. In June 2020, the goodwill allocation PPA was concluded, in which two intangible assets were identified, in the total amount of R$ 371 million.

8.     Intangible assets - Other intangible assets

The movement of other intangible assets in the period ended September 30, 2020 and 2019, was as follows:

Movement of:

12/31/2019 to 09/30/2020

12/31/2018 to 09/30/2019

IT developments

Other assets

Total

IT developments

Other assets

Total

Opening Balance

2,178,691 

42,093 

2,220,784 

1,556,870 

83,830 

1,640,700 

Addition

575,779 

4,232 

580,010 

726,088 

4,191 

730,279 

Write-off

(100,248) 

(8,575) 

(108,823) 

(182,352) 

(122) 

(182,474) 

Transfers

37,147 

4,252 

41,399 

222,985 

222,985 

Amortization

(392,530) 

(4,025) 

(396,554) 

(377,236) 

(14,541) 

(391,777) 

Impairment (1)

(20,477) 

(20,477) 

(2,251) 

(2,251) 

Final balance

2,278,361 

37,978 

2,316,339 

1,944,104 

73,358 

2,017,462 

Estimated Useful Life

5 years

Until 5 years

5 years

Until 5 years

(1) In 2020 and 2019, it refers to the impairment of assets in the acquisition and development of software. The loss on the acquisition and development of software was recorded due to the obsolescence and discontinuity of the referred systems.

Amortization expenses were included in the item "Depreciation and amortization" in the income statement.

9.     Financial liabilities

a)   Classification by nature and category

The classification, by nature and category for the purposes of valuation, of the Bank's financial liabilities other than those included in “Derivatives used as hedges”, on September 30, 2020 and December 31, 2019:

09/30/2020

Financial Liabilities Measured At Fair Value Through Profit Or Loss Held for Trading

Financial Liabilities Measured At Fair Value Through Profit Or Loss

Financial Liabilities Measured at Amortized Cost

Total

Deposits from Brazilian Central Bank and deposits from credit institutions

87,015,664 

87,015,664 

Customer deposits

462,350,526 

462,350,526 

Marketable debt securities

60,227,261 

60,227,261 

Trading derivatives

35,744,711 

35,744,711 

Short positions

32,713,744 

32,713,744 

Debt Instruments Eligible to Compose Capital

14,473,733 

14,473,733 

Other financial liabilities

6,149,411 

51,070,027 

57,219,438 

Total

68,458,455 

6,149,411 

675,137,211 

749,745,077 

12/31/2019

Financial Liabilities Measured At Fair Value Through Profit Or Loss Held for Trading

Financial Liabilities Measured At Fair Value Through Profit Or Loss

Financial Liabilities Measured at Amortized Cost

Total

Deposits from Brazilian Central Bank and deposits from credit institutions

99,271,415 

99,271,415 

Customer deposits

336,514,597 

336,514,597 

Marketable debt securities

73,702,474 

73,702,474 

Trading derivatives

22,229,016 

22,229,016 

Short positions

23,835,653 

23,835,653 

Debt Instruments Eligible to Compose Capital

10,175,961 

10,175,961 

Other financial liabilities

5,319,416 

55,565,954 

60,885,370 

Total

46,064,669 

5,319,416 

575,230,401 

626,614,486 

b)   Breakdown and details

b.1) Deposits from the Brazilian Central Bank and Deposits from credit institutions     

09/30/2020

12/31/2019

Demand deposits (1)

344,650 

685,026 

Time deposits (2)

68,611,356 

56,602,470 

Repurchase agreements

18,059,657 

41,983,919 

Of which:

      Backed operations with Private Securities (3)

9,887,557 

9,506,255 

      Backed operations with Government Securities

8,172,100 

32,477,663 

Total

87,015,663 

99,271,415 

(1) Non-interest bearing accounts.                                                                                                                                                                        

(2) Includes operations with credit institutions resulting from export and import financing lines, transfers from the country (BNDES and Finame) and abroad, and other credit lines abroad.

(3) Refers primarily to repurchase agreements backed by own-issued debentures.

b.2) Client deposits

09/30/2020

12/31/2019

Demand deposits

108,641,937 

77,271,336 

Current accounts (1)

49,059,438 

28,231,479 

Savings accounts

59,582,499 

49,039,857 

Time deposits

281,583,603 

200,739,544 

Repurchase agreements

72,124,985 

58,503,717 

Of which:

      Backed operations with Private Securities (2)

9,506,255 

      Backed operations with Government Securities

72,124,985 

48,997,462 

Total

462,350,525 

336,514,597 

(1) Non-interest bearing accounts.                                                                                                                                                                       

(2) Refers primarily to repurchase agreements backed by own-issued debentures.

 

b.3) Bonds and securities

 

09/30/2020

12/31/2019

Real Estate Credit Notes - LCI (1)

19,945,960 

21,266,079 

Eurobonds

9,353,807 

8,715,382 

Treasury Bills (2)

14,572,032 

27,587,340 

Agribusiness Credit Notes - LCA (3)

15,062,524 

14,776,877 

Guaranteed Real Estate Bill - LIG (3)

1,292,938 

1,356,796 

Total

60,227,261 

73,702,474 

(1) Letters of real estate credit are fixed income securities backed by real estate credits and guaranteed by mortgage or fiduciary alienation of real estate. As of Setptember 31, 2020, they have a maturity between 2020 and 2025 (12/31/2019 - with a maturity between 2020 and 2026).

(2) The main characteristics of the financial bills are a minimum term of two years, a minimum face value of R$ 50 and an early redemption permit of only 5% of the amount issued. As of September 30, 2020, they have a maturity between 2020 and 2025 (12/31/2019 - with a maturity between 2020 and 2025). 

(3) Guaranteed Real Estate Bills are fixed income securities backed by real estate credits guaranteed by the issuer and a pool of real estate credits apart from the other assets of the issuer. As of September 30, 2020, they have a maturity between 2021 and 2023 (12/31/2019 - with a maturity between 2021 and 2022).

 

The changes in the balance of "Bonds and securities" in the period ended September 30, 2020 and 2019 were as follows:

 

 01/01 a 09/30/2020

 01/01 a 03/31/2019

Balance at beginning of the period

73,702,474 

74,626,232 

Issues

47,640,769 

41,410,063 

Payments

(67,167,344) 

(43,268,103) 

Interest

3,057,033 

3,844,668 

Exchange differences and other

2,994,329 

273,903 

Balance at end of the period

60,227,261 

76,886,763 

 

The composition of Eurobonds and other securities is as follows:

 

09/30/2020

12/31/2019

Issuance

Maturity

Currency

Interest Rate (p.a.)

Total

Total

Eurobonds

2017 

2020 

BRL

4.4% 

8,196 

929,042 

Eurobonds

2017 

2021 

BRL

4.4% 

15,778 

63,181 

Eurobonds

2017 

2024 

USD

2,4% to 10,0%

914,651 

664,996 

Eurobonds

2018 

2020 

USD

For 3,5%

37,476 

Eurobonds

2018 

2020 

USD

Above 3,5%

35,438 

Eurobonds

2018 

2024 

USD

6,6% to 6,7%

1,734,184 

1,260,099 

Eurobonds

2018 

2025 

USD

For 9%

1,848,437 

1,427,601 

Eurobonds

2019 

2020 

USD

0% to 4,4%

3,493,714 

3,556,724 

Eurobonds

2019 

2027 

USD

CDI + 6,4%

1,338,846 

727,118 

Others

13,707 

Total

9,353,806 

8,715,382 

 

b.4) Debt Instruments Eligible to Capital

 

The details of the balance of the item "Debt Instruments Eligible to Capital" referring to the issuance of equity instruments to compose the level I and level II of the reference equity due to the Reference Equity Optimization Plan, are as follows:

Issuance

Maturity

Issuance Value

Interest Rate (p.a.) (2)

09/30/2020

12/31/2019

Tier I (1)

nov-18

No Maturity (Perpetual)

$1.250 

7.3% 

7,221,222 

5,092,153 

Tier II (1)

nov-18

nov-28

$1.250 

6.1% 

7,252,511 

5,083,808 

Total

14,473,733 

10,175,961 

(1) Interest paid semi-annually, as of May 8, 2019.

 

These instruments were acquired in their issuance, substantially, by Banco Santander Espanha (Note 16.d).

The variations in the balance of "Debt Instruments Eligible to Capital" in period ended September 30, 2020 and 2019 were as follows:

01/01 a 09/30/2020

01/01 a 03/31/2019

Balance at beginning of the period

10,175,961 

9,779,943 

Interest payment Tier I (1)

392,105 

282,001 

Interest payment Tier II (1)

305,360 

238,243 

Foreign exchange variation

4,058,951 

713,575 

Payments of interest - Tier I

(248,611) 

(178,278) 

Payments of interest - Tier II

(210,034) 

(150,614) 

Balance at end of the period

14,473,733 

10,684,870 

(1)   Interest remuneration related to the Level I and II Eligible Debt Instrument was recorded against the income for the period as "Interest and Similar Expenses"

10.   Provision for legal and administrative proceedings, commitments and other provisions

a)   Breakdown

The breakdown of the balance of “Provisions” is as follows:

09/30/2020

12/31/2019

Provisions for pension funds and similar obligations

3,725,905 

4,960,620 

Provisions for judicial and administrative proceedings, commitments and other provisions

10,784,700 

11,371,205 

 Judicial and administrative proceedings under the responsibility of former controlling stockholders

103,829 

103,272 

 Judicial and administrative proceedings

8,909,587 

9,226,735 

 Of which:

Civil

3,411,624 

3,201,061 

Labor

3,187,892 

3,504,296 

Tax and Social Security

2,310,071 

2,521,378 

Provision for contingent liabilities (Note 3 b.2)

705,234 

683,918 

Other provisions

1,066,050 

1,357,280 

Total

14,510,605 

16,331,825 

 

b)   Tax, Social Security, Labor and Civil Provisions

Banco Santander and its subsidiaries are involved in lawsuits and administrative proceedings related to tax, labor, social security and civil arising in the normal course of its activities.                                           

The provisions were constituted based on the nature, complexity, lawsuits historic and company´s assessment of lawsuit losses based on the opinions of internal and external legal advisors. The Santander has the policy to constitute provision of full amount of lawsuits who’s the result of loss assessment is probable. The legal obligation of tax and social security were fully recognized in the financial statements.

 

b.1) Lawsuits and Administrative Proceedings – related to Tax and Social Security                                                      

The main legal obligations and administrative proceedings, recorded at the line of “Tax Liabilities – Current”, recorded integrality as an obligation are described as follows:                 

PIS and Cofins - R$3,806,791 (12/31/2019 - R$3,755,556): Banco Santander and its subsidiaries filed lawsuits seeking to eliminate the application of Law 9,718/1998, which modified the calculation basis for PIS and Cofins to cover all revenues of legal entities and not only those arising from the provision of services and sale of goods. Regarding the Banco Santander Process, on April 23, 2015, a STF decision was issued admitting the Extraordinary Appeal filed by the Federal Government regarding PIS and denying the follow-up to the Extraordinary Appeal of the Federal Public Prosecutor regarding Cofins. Both appealed this decision, without any success, so that the suit relating to Cofins is defined, ruling the judgment of the Federal Regional Court of the 4th Region of August 2007, favorable to Banco Santander. Pursuant to the STF, Banco Santander’s PIS and the PIS and Cofins of other subsidiaries are pending final judgment.                                                               

Main lawsuits and administrative proceedings with probable loss risk

Banco Santander and its subsidiaries are parties in lawsuits and administrative proceedings related to tax and social security matters, which their risk of loss are classified as probable, based on the opinion of legal counsel.

Those are the main themes of the proceedings:            

Provisional Contribution on Financial Transactions (CPMF) on Customer Operations - R$923,958 (12/31/2019 - R$906,355): in May 2003, the Federal Revenue Service issued a tax assessment against Santander Distribuidora de Títulos e Valores Mobiliários Ltda. (Santander DTVM) and another tax assessment against Banco Santander Brasil S.A. The tax assessments refer to the collection of CPMF tax on transactions conducted by Santander DTVM in the cash management of its customers’ funds and clearing services provided by Banco to Santander DTVM in 2000, 2001 and 2002. Based on the risk assessment of legal counsel, the tax treatment was accurate. Santander DTVM had a favorable decision at the Board of Tax Appeals (CARF). Banco Santander had a unfavorable decision and was considered responsible for the collection of the CPMF tax. Both decisions were appealed by the respective losing party to the highest jurisdiction of CARF. In June 2015, Bank and DTVM had obtained a non favorable decision at CARF. On July 3, 2015, Banco and Santander Brasil Tecnologia S.A. (current name of Produban Serviços de Informática S.A. and Santander DTVM) filed a lawsuit seeking to cancel both tax debts. This lawsuit was ruled groundless and is currently awaiting judgment by the Regional Federal Court (TRF 3). Based on the legal advisors' assessment, a provision was set up to cover the loss considered probable in the lawsuit.                                                                                                                                                                    

Social Security Contribution (INSS) - R$37,279 (12/31/2019 - R$282,053): Banco Santander and its subsidiaries are involved in administrative and judicial proceedings regarding the collection of income tax on social security and education allowance contributions over several funds that, according to the evaluation of legal advisors, do not have nature of salary.                  

Tax on Services (ISS) - Financial Institutions - R$240,209 (12/31/2019 - R$224.631): Banco Santander and its subsidiaries discuss administrative and legal requirements, by several municipalities, of the payment of ISS on various revenues arising  from operations that are usually not classified as services.       

b.2) Lawsuits and Administrative Proceedings of Labor                                                                                                        

These are lawsuits filed by labor Unions, Associations, Public Prosecutors and former employees claiming labor rights they believe are due, especially payment for overtime and other labor rights, including retirement benefit lawsuits.

For claims considered to be similar and usual, provisions are recognized based on the payments and successes historic. Claims that do not fit the previous criteria have their provisions constituted according to individual assessment performed, and provisions being constituted based on the risk of loss as probable, the law and jurisprudence according to the assessment of loss made by legal counsel.

Banespa employees. Action distributed in 1998 by the Banespa Retired Association (AFABESP) requiring the payment of a semiannual bonus provided for in the Banespa regulations, according to which the payment will be made in the event that the Bank makes a profit and the distribution of this profit is approved by the board of directors. management or, alternatively, PLR, to retired employees of the extinct Banco do Estado de São Paulo SA - Banespa, hired until May 22, 1975. The bonus was not paid in 1994 and 1995 because the bank did not make a profit during these years. Partial payments were made between 1996 and 2000 as approved by the board of directors. The aforementioned clause was excluded from the regulation in 2001. The lawsuit was upheld by the Superior Labor Court. The Bank filed the appropriate funds with the STF, which, due to a monocratic decision, rejected the appeal. A rescissory action was brought to dismiss the decision of the main action and suspend execution. There is a preliminary injunction in force that authorizes the execution of necessary enforcement acts to proceed with the execution until the attachment, however, any acts of seizure of assets or blocking of cash are prohibited until the judgment of the rescission action. As of March 31, 2020, the case is classified as a probable loss and the provision was recorded based on the estimated loss.            

b.3) Lawsuits and Administrative Proceedings of Civil                                                                                                           

These contingencies are generally caused by: (1) Lawsuits with a request for revision of contractual terms and conditions or requests for monetary adjustments, including supposed effects of the implementation of various government economic plans, (2) lawsuits deriving of financing agreements, (3) lawsuits of execution; and (4) lawsuits of indemnity by loss and damage. For civil lawsuits considered common and similar in nature, provisions are recorded based on the average of cases closed. Claims that do not fit the previous criteria are provisioned according to individual assessment performed, and provisions are based on the risk of loss as probable, the law and jurisprudence according to the assessment of loss made by legal counsel.                                        

The main processes with the classification of risk of loss as probable are described below:                                                  

Lawsuits for Indemnity - seeking indemnity for material and emotional damage, regarding the consumer relationship on matters related to credit cards, consumer credit, bank accounts, collection and loans and other operations. In the civil lawsuits considered to be similar and usual, provisions are recorded based on the average of cases closed. Civil lawsuits that do not fit into the previous criteria are provisioned according to the individual assessment made, being the provisions recognized based on the risk of loss as probable, the law and jurisprudence according to the assessment of loss made by legal counsel.                                        

Economic Plans – they referred to lawsuits filed by savings accountholders, related to supposed inflation purge arising from the Economic Plans (Bresser, Verão, Collor I and II), based on the understanding that such plans violated acquired rights relating to the application of inflation indexes on Saving Accounts, Lawsuits Deposits and Time Deposits (CDB). Provisions arising from such lawsuits are recorded based on the individual evaluation of loss made by external legal consultants.                               

The Banco Santander is also party in public class lawsuits on the same matter filed by consumer rights organizations, Public Prosecutor’s Offices and Public Defender’s Offices. The provision is made for the lawsuits with the classification of risk as probable, based on the individual execution orders. The STF is still analyzing the subject and has already ordered the suspension of all the procedures except those that were not already decided in courts or in phase of definitive execution. There are decisions favorable to banks at the STF with regard to the economic phenomenon similar to the savings accounts, as in the case of monetary restatement of time deposits - CDB and agreements (present value table).                                                                                                            

However, the Supreme Court´s jurisprudence has not come to a conclusion regarding the constitutionality of the norms that changed Brazil’s monetary standard. On April 14, 2010, the STJ was recently decided that the deadline for the filing of civil lawsuits that argue the government's purge is five years, but this decision has not been handed down on the lawsuits yet. Thus, with this decision, a majority lawsuits, as they were filed after the period of five years is likely to be rejected, reducing the values involved. Still, the STF decided that the deadline for individual savers to become party on the public civil litigations, is also five years, counted from the final unappealable sentence. Banco Santander believes in the success of the arguments defended in these courts based on their content and the legal basis.                                                                                                                                                                     

At the end of 2017, the General Union Law (AGU), Bacen, Institute of Consumer Protection (Idec), the Brazilian Front of the Money savers (Febrapo), the Brazilian Banks Federation (Febraban) have signed an agreement with the purpose to close all lawsuits related to Economic Plans.                                                                                                                                                                  

The discussions focused on the definition of the amount that would be paid to each person according to the outstanding balance in the saving account. The total amount of the payments will depend on the number of the additional clients, and also on the number of money savers that approved in the courts the existance of their account and balance in the birthday date of the indexes changes. The term of agreement negotiated between the parties was submitted to the STF, which approved the terms of the agreement.        

The STF ordered the suspension of all economic plan (in the country), for two years considering the judicial homologation.

On March 11, 2020, the agreement was extended by means of an amendment, with the inclusion of actions that involve only the discussion of the Collor I Plan. Such extension has a term of 5 years. The approval of the terms of the additive occurred on June 3, 2020.

The Management considers that the provisions set up are sufficient to cover the risks involved with the economic plans, considering the approved agreement.

b.4) Civil, Labor, Tax, and Security Social Liabilities Contingent Classified with Loss Risk as Possible:                                      

Refer to lawsuits and administrative proceedings involving tax, labor and civil matters classified by legal counsels with loss risk as possible, which they were not recorded.                                                                                                                                         

The tax lawsuits classification with loss risk as possible totaled R$26.254 million, being the main lawsuits as follow:      

INSS on Profits or Results (PLR) - Bank and the subsidiaries have several lawsuits and administrative proceedings arising from questioning tax authorities in connection with the taxation for social security purposes of certain items which are not considered to be employee remuneration. As of September 30, 2020, the amounts related to these proceedings totaled approximately R$4,366 million.

• Tax on Services (ISS) - Financial Institutions - Banco Santander and its subsidiaries discuss administrative and legal requirements, by several municipalities, of the payment of ISS on various revenues arising from operations that are usually not classified as services. On September 30, 2020, the amounts related to these proceedings totaled approximately R$3,479 million.    

Unapproved Compensation - The Bank and its affiliates discuss administrative and legal proceedings with the Federal Revenue, Office to grant tax relief with credits arising from overpayments. On September 30, 2020, the amounts related to these proceedings totaled approximately R$4,707 million.

Goodwill Amortization of Banco Real - the Federal Tax Office of Brazil issued infraction notices against the Bank to require the income tax and social payments, including late charges, for the period of 2009. The Tax Authorities considered that the goodwill related to acquisition of Banco Real, amortized for accounting purposes prior to the merger, could not be deduced by Banco Santander for tax purposes. The infraction notice was contested. On July 14, 2015, the Police Judging RFB decided favorably to Banco Santander, fully canceling the tax debt. On November 10, 2016, the appeal was filed, prompting the Bank to lodge an appeal with CARF, which is awaiting judgment. On September 30, 2020, the balance was approximately R$1,436 million.

Credit Losses - Bank and its subsidiaries challenged the tax assessments issued by the Federal Revenue Services claiming the deduction for credit losses because they fail to meet the relevant requirements under applicable law. As of September 30, 2020 the amount related to this claim is approximately R$613 million.     

Use of CSLL Tax and Negative Tax Loss - Tax assessments issued by the Federal Revenue Service in 2009 for alleged undue compensation of tax loss carryforwards and negative basis of CSLL, as a consequence of tax assessments drawn up in previous periods. Judgment is pending at the administrative level. As of September 30, 2020, the amount was R$1,069 million.

Goodwill Amortization of Banco Sudameris – the Tax Authorities have issued infraction notices to require the income tax and social contribution payments, including late charges, relating to tax deduction of amortization of goodwill from the acquisition of Banco Sudameris, related to the period of 2007 to 2012.  Banco Santander timely presented its appeals, which are pending. On September 30, 2020, the amounts related to these proceedings totaled approximately R$644 million.

IRPJ and CSLL - Capital Gain - the Federal Tax Office of Brazil issued infraction notices against Santander Seguros, successor company of ABN AMRO Brasil  Dois Participações S.A. (AAB Dois Par), charging income Tax and Social Contribution to related base year 2005. The Federal Tax Office of Brazil claims that capital gain in sales of shares from Real Seguros S.A and Real Vida Previdência  S.A. by AAB Dois Par should be taxed by the rate of 34% instead 15%. The assessment was contested administratively based on understanding that tax treatment adopted at the transaction was in compliance with tax laws and capital gain was taxed properly. The administrative ended unfavorably. On July, 2020, the company filed a lawsuit seeking to cancel tax debts. This lawsuit is currently awaiting judgment. The Banco Santander is responsible for any adverse outcome in this lawsuit as former Zurich Santander Brasil Seguros e Previdência S.A. stockholder. As of September 30, 2020, the amount related to this lawsuit is approximately R$487 million.

The labor claims with classification of loss risk as possible totaled R$210 million, excluding the lawsuits below:                              

Readjustment of Banesprev retirement complements by the IGPDI - lawsuit filed in 2002 in Federal Court by the Association of Retired Employees of the Banco do Estado de São Paulo S.A. - Banespa, requesting the readjustment of the retirement supplementation by the IGPDI for Banespa retirees who have been admitted until May 22, 1975. The judgment granted the correction but only in the periods in which no other form of adjustment could be applied. The Bank and Banesprev have appealed this decision and although the appeals have not yet been judged, the Bank's success rate in this matter in the High Courts is around 90%. In Provisional Execution, calculations were presented by the Bank and Banesprev with "zero" result due to the exclusion of participants who, among other reasons, are listed as authors in other lawsuits or have already had some type of adjustment. The amount related to this claim is not disclosed due to the current stage of the lawsuit and such disclosure may impact the progress of the claim.   

The liabilities related to civil lawsuits with classification of loss risk as possible totaled R$1,665 million, being the main lawsuits as follow:

Indemnity Lawsuit Related to Custody Services - provided by Banco Santander at an early stage which was not handed down yet.

Lawsuit Arising from a Contractual Dispute - the acquisition of Banco Geral do Comércio S.A. on appeal to the Court of the State of São Paulo (TJSP - Tribunal de Justiça do Estado de São Paulo).

b.5)  Other Lawsuits Under the Responsibility of Former Controlling Stockholders                                       

Refer to tax, labor and civil lawsuits in the amounts of R$102,977, R$213 and R$639 (12/31/2019 - R$102,482, R$213 and R$578), respectively, which the responsible people were the former controlling stockholders of the Bank and acquired companies. Based on the agreement signed, these lawsuits have guaranteed reimbursement from part of the former controllers, whose respective duties were recorded in other receivables – others.

11.   Stockholders’ equity

a)   Capital

According to the by-laws, Banco Santander's capital stock may be increased up to the limit of its authorized capital, regardless of statutory reform, by resolution of the Board of Directors and through the issuance of up to 9,090,909,090 (nine billion, ninety million, nine hundred and nine thousand and ninety) shares, subject to the established legal limits on the number of preferred shares. Any capital increase that exceeds this limit will require stockholders' approval.

The capital stock, fully subscribed and paid, is divided into registered book-entry shares with no par value.

Thousands of Shares

09/30/2020

12/31/2019

Common

Preferred

Total

Common

Preferred

Total

Brazilian Residents

117,247 

142,822 

260,069 

90,069 

115,785 

205,854 

Foreign Residents

3,701,448 

3,537,014 

7,238,462 

3,728,626 

3,564,051 

7,292,677 

Total

3,818,695 

3,679,836 

7,498,531 

3,818,695 

3,679,836 

7,498,531 

(-) Treasury Shares

(18,838) 

(18,838) 

(37,676) 

(16,702) 

(16,702) 

(33,404) 

Total Outstanding

3,799,857 

3,660,998 

7,460,855 

3,801,993 

3,663,134 

7,465,127 

 

b)   Dividends and Interest on Capital

According to the Bank’s bylaws, stockholders are entitled to a minimum dividend equivalent to 25% of net income for the year, adjusted according to legislation. Preferred shares are nonvoting and nonconvertible, but have the same rights and advantages granted to common shares, in addition to priority in the payment of dividends at a rate that is 10% higher than those paid on common shares, and in the capital reimbursement, without premium, in the event of liquidation of the Bank.

Dividends were calculated and paid in accordance with Brazilian Corporate Law.

Prior to the Annual Shareholders' Meeting, the Board of Directors may resolve on the declaration and payment of dividends on earned profits, based on: (i) balance sheets or profit reserves existing in the last balance sheet or (ii) balance sheets issued in periods of less than six months, provided that the total dividends paid in each semester of the fiscal year does not exceed the amount of capital reserves. These dividends are fully charged to the mandatory dividend.

CMN Resolution nº 4,820, of May 29, 2020, prohibits the institutions authorized to operate by the Central Bank of Brazil to pay interest on own capital and dividends above the mandatory minimum established in the bylaws, including in advance, until December 31 December 2020. The rule also prohibits the reduction of share capital, except in specific situations and the increase in the remuneration of its officers, administrators and members of the Board of Directors and the Fiscal Council.

The following distribution of dividends and interest on capital made on September 30, 2020 and December 31, 2019.

09/30/2020

In Thousands

Brazilian Real per Thousand Shares/Units

of Brazilian Real

Gross

Net

Common

Preferred

Unit

Common

Preferred

Unit

Interest on Capital (1)(3)

890,000 

113.7129 

125.0842 

238.7972 

96.6560 

106.3216 

202.9776 

Interest on Capital (2)(3)

770,000 

98.3793 

108.2172 

206.5965 

83.6224 

91.9846 

175.6070 

Total

1,660,000 

(1) Deliberated by the Board of Directors on April 27, 2020, paid on June 24, 2020, without any monetary restatement.

(2) Deliberated by the Board of Directors on July 28, 2020, paid on September 25, 2020, without any monetary restatement.

(3) They were fully imputed to the minimum mandatory dividends to be distributed by the Bank for the fiscal year 2020.

 

12/31/2019

In Thousands

Brazilian Real per Thousand Shares/Units

of Brazilian Real

Gross

Net

Interest on Capital (1) (6)

1,000,000 

127.5853 

140.3438 

267.9291 

108.4475 

119.2922 

227.7397 

Interest on Capital (2) (6)

1,000,000 

127.6399 

140.4039 

268.0438 

108.4939 

119.3433 

227.8372 

Interest on Capital (3) (6)

1,000,000 

127.6610 

140.4271 

268.0881 

108.5119 

119.3631 

227.8750 

Interest on Capital (4) (6)

1,010,000 

128.9673 

141.8641 

270.8314 

109.6222 

120.5844 

230.2066 

Interim Dividends (5) (6)

6,790,000 

867.0180 

953.7197 

1,820.7377 

Total

10,800,000 

(1) Deliberated by the Board of Directors on March 29, 2019, paid on May 28, 2019, without any monetary restatement.

(2) Deliberated by the Board of Directors on June 28, 2019, paid on July 31, 2019, without any monetary restatement.

(3) Deliberated by the Board of Directors on September 30, 2019, paid on October 30, 2019, without any monetary restatement.

(4) Deliberated by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any monetary restatement.

(5) Deliberated by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any monetary restatement.

(6) The amount of interest on own capital and interim dividends was fully imputed to the minimum mandatory dividends distributed by the Bank for the year 2019.

 

c)   Reserves

The reserves are allocated as follows after the deductions and statutory provisions, from the net income:

Legal reserve

In accordance with Brazilian Corporate Law, 5% is transferred to the legal reserve, until it reaches 20% of the share capital. This reserve is designed to ensure the integrity of the capital and can only be used to offset losses or increase capital.

Capital reserve

The Bank´s capital reserve consists of: goodwill reserve for subscription of shares and other capital reserves, and can only be used to absorb losses that exceed retained earnings and profit reserves, redemption, reimbursement or acquisition of shares for the Bank´s own issue; capital increase, or payment of dividends to preferred shares under certain circumstances.

Reserve for equalization dividend

After the allocation of dividends, the remaining balance if any, may, upon proposal of the Executive Board and approved by the Board of Directors, be allocated to reserve for equalization of dividends, which will be limited to 50% of the capital. This reserve aims to ensure funds for the payment of dividends, including as interest on own capital, or any interim payment to maintain the flow of shareholders remuneration.

d)   Treasury shares

In the meeting held on November 1, 2019, the Bank’s Board of Directors approved, in continuation of the buyback program that expired on November 5, 2019, the buyback program of its Units and ADRs, by the Bank or its agency in Cayman, to be held in treasury or subsequently sold.

The Buyback Program will cover the acquisition up to 37,256,072 Units, representing 37,256,072 common shares and 37,256,072 preferred shares, which, on December 31, 2019, corresponded to approximately 1% of the Bank’s share capital. On December 31, 2019, the Bank held 15,843,587 common shares and 15,843,587 preferred shares being traded.

The Buyback has the purpose to (1) maximize the value creation to stockholders by means of an efficient capital structure management; and (2) enable the payment of officers, management level employees and others Bank’s employees and companies under its control, according to the Long Term Incentive Plans. The term of the Buyback Program is 12 months counted from November 5, 2019, and will expire on November 4, 2020.

Bank/Consolidated

Shares in Thousands

09/30/2020

12/31/2019

Quantity

Quantity

Units

Units

Treasury Shares at Beginning of the Period

16,702 

13,317 

Shares Acquisitions

5,052 

6,465 

Payment - Share-Based Compensation

(2,916) 

(3,080) 

Treasury Shares at Beginning of the Period

18,838 

16,702 

Subtotal - Treasury Shares in Thousands of Reais

789,832.34 

$679,364 

Issuance Cost in Thousands of Reais

1,771.30 

$1,771 

Balance of Treasury Shares in Thousands of Reais

791,603 

$681,135 

Cost/Share Price

Units

Units

Minimum Cost

7.55 

$7.55 

Weighted Average Cost

33.24 

$32.10 

Maximum Cost

49.55 

$49.55 

Share Price

29,89 

$42.60 

 

12.   Income Tax

The total income tax for the three-months period can be reconciled to the accounting profit as follows:

01/01 a
09/30/2020

01/01 a
09/30/2019

Operating Income before Tax

(1,392,250)

16,009,914 

Tax (25% of Income Tax and 15% of Social Contribution)

626,513 

(6,403,966)

PIS and COFINS (net of income tax and social contribution) (1)

(848,010)

(1,379,334)

Non - Taxable/Indeductible :

Equity instruments

45,086 

38,673 

Goodwill

(139,227) 

(100,331) 

Exchange variation - foreign operations (2)

9,032,479 

1,410,372 

Interest on capital

733,500 

Net Indeductible Expenses of Non-Taxable Income (3)

46,432 

1,391,636 

Adjustments:

IR/CS Constitution on temporary differences

544,467 

176,984 

CSLL Tax rate differential effect (4)

294,962 

91,455 

Others Adjustments

785,938 

(111,782) 

Income tax and Social contribution

11,122,140 

(4,886,293)

 Of which:

  Current taxes

(3,199,370) 

(4,177,388) 

  Deferred taxes

14,321,510 

(708,905) 

Taxes paid in the period

(4,733,342) 

(1) PIS and COFINS are considered as components of the profit base (net of certain revenues and expenses); therefore, and in accordance with IAS 12, are accounted for as

income taxes.

(2) Permanent differences related to the investment in subsidiaries abroad are considered as non-taxable / deductible (see details below).

(3) Includes, mainly, the tax effect on revenues with judicial deposit updates and other income and expenses that do not fall as temporary differences.

(4) Effect of the rate differential for other non-financial corporations, with a social contribution rate of 9%.

 

Exchange Hedge of Grand Cayman, branch in Luxembourg and of Santander Brasil EFC                                                            

Banco Santander operates an agency in the Cayman Islands, a branch in Luxembourg, and a subsidiary called Santander Brasil Establecimiento Financiero de Credito, EFC, or "Santander Brasil EFC" (an independent subsidiary in Spain), which are used primarily to raise funds in the capital and financial markets to provide the Bank with credit lines that are extended to its clients for foreign trade and working capital financing.

To hedge the exposure to exchange rate variations, the Bank uses derivatives and funding (economic hedge). In accordance with Brazilian tax rules, gains or losses arising from the impact of the appreciation or depreciation of the Real on foreign investments are not taxable or deductible for PIS / Cofins / IR / CSLL purposes, while the gains or losses of the derivatives used as hedges are taxable or deductible. The purpose of these derivatives is to protect net income after taxes.

The different tax treatment of these exchange differences results in volatility in "Operating income before taxation" and in the "Income tax" account. After following the effects of the operations carried out, as well as the total effect of the foreign exchange hedge for the period ended on September 30, 2020 and 2019.

 

01/01 a
09/30/2020

01/01 a
09/30/2019

Exchange differences (net)

Result generated by the exchange rate variations on the Bank's investment in the Cayman, Luxemburg and EFC Branch

21,807,261 

3,525,929 

Gains (losses) on financial assets and liabilities

Result generated by derivative contracts used as hedge

(40,098,666) 

(5,994,824) 

Income Taxes

Tax effect of derivative contracts used as hedge - PIS / COFINS

772,189 

57,168 

Tax effect of derivative contracts used as hedge - IR / CS

17,519,216 

2,411,727 

 

13.   Detailing of income accounts

a)   Personnel expenses

01/07 a
30/09/2020

01/01 a
09/30/2020

01/07 a 09/30/2019

01/01 a 09/30/2019

Salary

1,457,924 

4,409,288 

1,506,825 

4,476,051 

Social security costs

319,283 

980,942 

333,633 

936,160 

Benefits

338,207 

1,043,675 

391,193 

1,117,780 

Defined benefit pension plans

2,666 

7,366 

2,984 

8,029 

Contributions to defined contribution pension funds

29,973 

97,467 

29,681 

106,187 

Share-based payment costs

6,358 

15,180 

(5,192) 

(1,455) 

Training

7,612 

32,213 

14,242 

41,898 

Other personnel expenses

66,577 

142,242 

66,329 

245,034 

Total

2,228,600 

6,728,373 

2,339,695 

6,929,684 

 

b)   Other Administrative Expenses

01/07 a
30/09/2020

01/01 a
09/30/2020

01/07 a 09/30/2019

01/01 a 09/30/2019

Property, fixtures and supplies

175,587 

568,520 

180,872 

545,906 

Technology and systems

561,807 

1,631,717 

471,107 

1,596,315 

Advertising

138,801 

406,679 

143,697 

426,791 

Communications

116,943 

345,319 

120,714 

355,455 

Subsistence allowance and travel expenses

16,474 

62,037 

34,776 

101,536 

Taxes other than income tax

5,017 

40,918 

29,177 

84,211 

Surveillance and cash courier services

150,741 

459,222 

152,335 

476,616 

Insurance premiums

4,455 

11,726 

9,118 

25,602 

Specialized and technical services

611,453 

1,725,683 

565,024 

1,554,344 

Other administrative expenses

331,006 

649,613 

165,679 

336,794 

Total

2,112,284 

5,901,434 

1,872,499 

5,503,570 

 

14.   Employee Benefit Plan

a)   Share-based compensation

Banco Santander has long-term compensation programs linked to the performance of the market price of its shares. The members of Banco Santander 's Executive Board are eligible for these plans, in addition to the participants that were determined by the Board of Directors, whose choice will take into account seniority in the group. The members of the Board of Directors only participate in these plans when they hold positions in the Executive Board.

a.1) Local and Global Programs

Below are the long-term compensation programs and their characteristics.            

Program

Plan

Liquidity Type

Vesting Period

Period of Exercise/Settlement

Local

Long-Term Incentive Plan - Private Ultra High (1)

Money

Dec/2017 to Dec/19

In March/2020 and March/2021

 

Local

Long-Term Incentive Plan – Technology

Santander Brasil Bank Shares

Jul/2019 to Jun/2022

In July/2022

Local

Long-Term Incentive Plan – Pi Investments

Santander Brasil Bank Shares

Jan/2019 to Dec/2021

In March/2022 and March/2023

 

Local

Long-Term Incentive Plan – Ben'

Santander Brasil Bank Shares

Jan/2019 to Dec/2021

In March/2022 and March/2023

Local

Long-Term Incentive Plan – Sim

Ações Banco Santander Brasil

Jan/2020 a Dec/2022

In March/2023 and March/2024

Local

Long-Term Incentive Plan – High Performance

Ações Banco Santander Brasil

Sep/2020 a Aug/2023

In September/2023

 

Global

Long-Term Incentive Plan – DTA

2019 a 2022

From March/2023 to March/2030

(1) The number of Units to be exercised by the participants was determined according to the result of the measurement of a Bank performance parameter: Total Return to the Shareholder (RTA) and adjusted by the Return on Assets weighted by Risk (RoRWA) indicator, comparison between realized and budgeted in each financial year. The final achievement of the plan was 89.61%.

(2) It aims at the growth and profitability of the Private business and the recognition of the Participant's contribution.

(3) Subject to the achievement of the Santander Group's RTA performance indicator, comparing the Group's evolution in this indicator with that of the main global competitors.

 

 

 

 

a.1.a) Fair Value and Performance Parameters for Current Plans

i. Private Ultra High

Each participant had a reference value defined in Reais, if the indicators were reached, the percentage of achievement would be applied over the reference value, with the payment of the first installment in March 2020 and the second in March 2021.

After the performance parameter monitoring period ended in December 2019, the plan was terminated without payment of the intended remuneration.

ii. ILP Tecnologia

It is a retention plan for key positions launched in July/2019 where the participant must remain in employment until the payment date to be entitled to receive it.

Each executive had a reference value defined in Reais, which was converted into shares of Santander Brasil (SANB11) at a price of R$ 44,66, which will be delivered in July 2022, with a restriction of 1 year.

Payment is subject to the application of the Malus / Clawback clauses, which may reduce or cancel the shares to be delivered in cases of non-compliance with internal rules and exposure to excessive risks.

Number of

Grant

Group of

Exercise

Exercise

Shares

Year

Employees

Start Date

End Date

ILP Tecnologia

123,158 

2019 

Executives

jul/2019

jun/2022

Balance of Plans on March 31, 2020

123,158 

*In 2020, there were no shares delivered or canceled in the plan.

iii. ILP Pi Investimentos

It is a retention plan for key positions launched in May / 2019, where the participant must remain in employment until the payment date.

The agreed ILP values for each participant will be obtained from the determination of the achievement of indicators in two moments: 2020 and 2021.

Payment will be made in SANB11 shares, 50% in March 2022 and 50% in March 2023, with a restriction of 1 year after each payment and is subject to the application of the Malus / Clawback clauses, which may reduce or cancel the shares to be delivered in cases of non-compliance with internal rules and exposure to excessive risks.

2020 Indicators

2021 Indicators

Active Customers - customers with average monthly balance

Active Customers - customers with average monthly balance

Portfolio (AuM) - volume distributed including account balance

Portfolio (AUM) - volume distributed including account balance

Revenue 2020

Revenue 2021

BAI (Profit before tax indicator)

 

iv. ILP Ben

It is a retention plan for key positions launched in May/2019, where the participant must remain in employment until the payment date.

The agreed ILP values for each participant will be obtained from the determination of the achievement of indicators in two moments: 2020 and 2021.

Payment will be made in SANB11 shares, 50% in March 2022 and 50% in March 2023, with a restriction of 1 year after each payment and is subject to the application of the Malus / Clawback clauses, which may reduce or cancel the shares to be delivered in cases of non-compliance with internal rules and exposure to excessive risks.

Indicators

Number of PJ Clients

Number of PF Customers

Number of Accredited Establishments

Revenues

BAI

 

v. ILP DTA

This is an incentive plan to promote the digital transformation of Santander, launched in September / 2019, in which the participant must remain in employment until payment.

The eligible executives had a target defined in Reais and the payment will be calculated based on the measurement of performance indicators in two moments: first period for measurement the fulfilment of key objectives (2019) and the second period for determining the payment amount (2020, 2021 and 2022).

If the objectives of the plan are met, the payment will be made in March 2023.

ILP DTA will be measured based on the performance of the following global initiatives:

·         Global Trade Service Platform (GTS)

·         Global Merchant Services Platform (GMS)

·         OpenBank (OB)

·         SuperDigital (SD)

 

Additional Objectives

·         Digital Assets

·         Centers of Digital Excellence

 

a.2) Variable Remuneration Referenced to Shares

In the long-term incentive plan (deferral), the requirements for payment of future deferred installments of variable remuneration are determined, considering the long-term sustainable financial bases, including the possibility of applying reductions or cancellations depending on the risks assumed and fluctuations of the cost of capital.

The variable remuneration plan with payment referenced in Banco Santander shares is divided into 2 programs: (i) Identified Collective and (ii) Other Employees. The impacts on the result are recorded in the Personnel Expenses item, as follows:

Program

Participant

Liquidity Type

01/01 a 09/30/2020

01/01 a 09/30/2019

01/01 a 09/30/2020

01/01 a 09/30/2019

Collective Identified

Members of the Executive Committee, Statutory Officers and other executives who assume significant and responsible risks of control areas

50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11)

Unidentified Collective

Management-level employees and employees who are benefited by the Deferral Plan

50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11)

 

15.   Operating segments

According to IFRS 8, an operating segment is a component of an entity:

(a) That operates in activities from which it may earn income and incur expenses (including income and expenses related to operations with other components of the same entity);

(b) Whose operating results are regularly reviewed by the entity's main responsible for operating decisions related to the allocation of resources to the segment and the assessment of its performance, and

(c) For which separate financial information is available.

Based on these guidelines, the Bank identified the following reportable operating segments:

• Commercial Bank

• Global Wholesale Bank

The Bank has two segments, the commercial segment which includes individuals and legal entities (except for global corporate clients, which are treated in the Global Wholesale Bank segment) and the Global Wholesale Bank segment, which includes Investment Banking and Markets, including treasury and stock business departments.

The Bank operates in Brazil and abroad, through the Cayman and Luxembourg branch and its subsidiary in Spain, with Brazilian customers and, therefore, does not present geographic segmentation.

The Income Statements and other significant data are as follows:

 

 

01/07 to 09/30/2020

01/07 to 09/30/2019

(Condensed) Income Statemen

Commercial Banking

Global Wholesale
Banking

Total

Commercial Banking

Global Wholesale
Banking

Total

NET INTEREST INCOME

10,313,064 

803,552 

11,116,616 

10,743,281 

550,234 

11,293,515 

Income from equity instruments

812 

4,661 

5,473 

1,477 

(162) 

1,315 

Income from companies accounted for by the equity method

23,396 

7,568 

30,964 

36,221 

36,221 

Net fee and commission income

3,463,826 

562,741 

4,026,567 

3,477,719 

489,092 

3,966,811 

Gains (losses) on financial assets and liabilities and exchange differences  (1)

(1,582,826) 

367,994 

(1,214,832) 

(2,961,819) 

293,813 

(2,668,006) 

Other operating income/(expenses)

42,215 

(26,458) 

15,757 

(365,425) 

(11,314) 

(376,739) 

TOTAL INCOME

12,260,487 

1,720,058 

13,980,545 

10,931,454 

1,321,663 

12,253,117 

Personnel expenses

(2,049,186) 

(179,414) 

(2,228,600) 

(2,141,037) 

(198,658) 

(2,339,695) 

Other administrative expenses

(1,940,678) 

(171,606) 

(2,112,284) 

(1,762,744) 

(109,755) 

(1,872,499) 

Depreciation and amortization

(641,956) 

(23,331) 

(665,287) 

(587,364) 

(24,188) 

(611,552) 

Provisions (net)

(383,099) 

(5,123) 

(388,222) 

(627,204) 

(4,916) 

(632,120) 

Net impairment losses on financial assets

(3,841,392) 

5,584 

(3,835,808) 

(3,237,914) 

77,887 

(3,160,027) 

Net impairment losses on other financial assets

8,256 

(12,993) 

(4,737) 

14,249 

(9,842) 

4,407 

Other financial gains/(losses)

9,474 

9,474 

12,092 

12,092 

OPERATING INCOME BEFORE TAX (1)

3,421,906 

1,333,175 

4,755,081 

2,601,532 

1,052,191 

3,653,723 

Hedge Cambial (1)

1,366,110 

1,366,110 

2,881,500 

2,881,500 

OPERATING INCOME BEFORE TAX (1)

4,788,016 

1,333,175 

6,121,191 

5,483,032 

1,052,191 

6,535,223 

 

01/01 to 09/30/2020

01/01 to 09/30/2019

(Condensed) Income Statemen

Commercial Banking

Global Wholesale
Banking

Total

Commercial Banking

Global Wholesale
Banking

Total

NET INTEREST INCOME

31,203,762 

2,042,216 

33,245,978 

31,378,511 

1,690,611 

33,069,122 

Income from equity instruments

2,711 

21,364 

24,075 

3,545 

5,467 

9,012 

Income from companies accounted for by the equity method

58,419 

21,964 

80,383 

96,683 

96,683 

Net fee and commission income

10,378,516 

1,416,871 

11,795,387 

10,209,463 

1,344,502 

11,553,965 

Gains (losses) on financial assets and liabilities and exchange differences  (1)

(18,194,266) 

1,666,587 

(16,527,679) 

(2,751,539) 

878,998 

(1,872,541) 

Other operating income/(expenses)

(335,071) 

(87,676) 

(422,747) 

(960,277) 

(26,251) 

(986,528) 

TOTAL INCOME

23,114,071 

5,081,326 

28,195,397 

37,976,386 

3,893,327 

41,869,713 

Personnel expenses

(6,181,615) 

(546,758) 

(6,728,373) 

(6,361,940) 

(567,744) 

(6,929,684) 

Other administrative expenses

(5,471,808) 

(429,626) 

(5,901,434) 

(5,140,576) 

(362,994) 

(5,503,570) 

Depreciation and amortization

(1,845,562) 

(66,638) 

(1,912,200) 

(1,698,718) 

(69,740) 

(1,768,458) 

Provisions (net)

(1,358,331) 

(13,486) 

(1,371,817) 

(1,892,589) 

(11,522) 

(1,904,111) 

Net impairment losses on financial assets

(13,932,016) 

19,018 

(13,912,998) 

(9,755,410) 

118,520 

(9,636,890) 

Net impairment losses on other financial assets

23,990 

(40,996) 

(17,006) 

31,841 

(38,216) 

(6,375) 

Other financial gains/(losses)

256,181 

256,181 

(110,711) 

(110,711) 

OPERATING INCOME BEFORE TAX (1)

(5,395,089)

4,002,839 

(1,392,250)

13,048,283 

2,961,631 

16,009,914 

Hedge Cambial (1)

17,519,216 

17,519,216 

2,468,895 

2,468,895 

OPERATING INCOME BEFORE TAX (1)

12,124,127 

4,002,839 

16,126,966 

15,517,178 

2,961,631 

18,478,809 

(1) Includes, at Banco Comercial, the foreign exchange hedge of the dollar investment (a strategy to mitigate the tax effects and exchange rate variation of offshore investments on net income), the result of which is recorded in “Gains (losses) on financial assets and liabilities ”fully offset in the Tax line.

 

9/30/2020

12/31/2019

Other aggregates:

Commercial Banking

Global Wholesale
Banking

Total

Commercial Banking

Global Wholesale
Banking

Total

Total assets

793,501,272 

98,409,264 

891,910,536 

677,139,468 

85,097,984 

762,237,452 

Loans and advances to customers

298,015,115 

77,939,599 

375,954,714 

259,644,994 

67,054,486 

326,699,480 

Customer deposits

337,357,780 

124,992,746 

462,350,526 

253,313,187 

83,201,410 

336,514,597 

 

 

16.   Related party transactions

The parties related to the Bank are deemed to include, in addition to its subsidiaries, associates and jointly controlled entities, the Bank’s key management personnel and the entities over which the key management personnel may exercise significant influence or control.               

Banco Santander has the Policy on Related Party Transactions approved by the Board of Directors, which aim to ensure that all transactions are made on the policy typified in view the interests of Banco Santander and its stockholders'. The policy defines powers to approve certain transactions by the Board of Directors. The rules laid down are also applied to all employees and directors of Banco Santander and its subsidiaries.          

The transactions and remuneration of services with related parties are carried out in the ordinary course of business and under commutative conditions, including interest rates, terms and guarantees, and do not involve risks greater than normal collection or present other disadvantages.

a)   Key-person management compensation

The Board of Directors' meeting, held on March 26, 2020  approved, in accordance with the Compensation Committee the maximum global compensation proposal for the directors (Board of Directors and Executive Officers) overall amounting to R$400,000 for the 2019 financial year, covering fixed remuneration, variable and equity-based and other benefits. The proposal was approved by the extraordinary stockholders' meeting (ESM) held on April 30, 2020.

i) Long-term benefits

The Banco Santander as well as Banco Santander Spain, as other subsidiaries of Santander Group, have long-term compensation programs tied to their share's performance, based on the achievement of goals.

ii) Short-term benefits

The following table shows the Board of Directors’ and Executive Board’s:

07/01 to
09/30/2020

01/01 to
09/30/2020

07/01 to
09/30/2019

01/01 to
09/30/2019

Fixed Compensation

22,410 

66,305 

24,080 

67,664 

Variable Compensation - in cash

11,719 

71,710 

16,202 

61,139 

Variable Compensation - in shares

19,379 

67,953 

(1,763) 

57,113 

Others

12,680 

34,657 

13,770 

32,391 

Total Short-Term Benefits

66,188 

240,625 

52,288 

218,308 

Variable Compensation - in cash

8,950 

86,933 

11,705 

79,274 

Variable Compensation - in shares

28,277 

84,422 

294 

77,169 

Total Long-Term Benefits

37,227 

171,355 

11,999 

156,443 

Total

103,415 

411,980 

64,286 

374,751 

(1) In the first half of 2019, Banco Santander Management chose to provision and settle the determined benefit in advance, which was practiced by the liberalization of the bank.

(2) See the amount recognized as an expense not exercised on December 31, 2019 and the difference from previous years, by Banco Santander and its subsidiaries by their managers and cargoes that they occupy at Banco Santander and other companies of the Santander Conglomerate. The amounts related to the Variable and Share-Based Compensation will be paid in the subsequent periods.

 

Additionally, in the period ended September 30, 2020, charges were paid on management compensation in the amount of R$20,687 (09/30/2019 - R$ 25,989).

 

iii) Termination of the contract

The termination of the employment relationship with the administrators, in the event of breach of obligations or by the contractor's own will, does not give the right to any financial compensation and its benefits will be discontinued.

b)   Credit operations

The Bank and its subsidiaries may carry out transactions with related parties, in line with the legislation in force as set forth in articles 6 and 7 of CMN Resolution nº 4,693/18, article 34 of Law 6,404/76 "Law of Corporations" and the Policy for Transactions with Related Parties of Santander published on the Investor Relations website, being considered related parties:

(1)            its controllers, natural or legal persons, under the terms of art. 116 of the Law of Corporations;

(2)            its directors and members of statutory or contractual bodies;

(3)            in relation to the persons mentioned in items (i) and (ii), their spouse, companion and relatives, consanguineous or the like, up to the second degree;

(4)            natural persons with qualified equity interest in their capital;

(5)            corporate entities with qualified equity interest in their capital;

(6)            legal entities in whose capital, directly or indirectly, a Santander Financial Institution has a qualified shareholding;

(7)            legal entities in which a Santander Financial Institution has effective operational control or preponderance in the deliberations, regardless of the equity interest; and

(8)            legal entities that have a director or member of the Board of Directors in common with a Santander Financial Institution.

 

c)   Shareholding

The following table shows the direct shareholding (common and preferred shares) on September 30, 2020 and December 31, 2019:

Shares in Thousands

09/30/2020

Stockholders

Common Shares

Common Shares (%)

Preferred Shares

Preferred Shares (%)

Total Shares

Total Shares (%)

Sterrebeeck B.V. (1)

1,809,583 

47.4% 

1,733,644 

47.1% 

3,543,227 

47.3% 

Grupo Empresarial Santander, S.L. (GES) (1)

1,107,673 

29.0% 

1,019,645 

27.7% 

2,127,318 

28.4% 

Banco Santander, S.A. (1)

521,964 

13.7% 

519,268 

14.1% 

1,041,232 

13.9% 

Employees

2,579 

0.1% 

2,589 

0.1% 

5,168 

0.1% 

Directors (*)

4,968 

0.1% 

4,968 

0.1% 

9,936 

0.1% 

Others

353,090 

9.2% 

380,884 

10.4% 

733,974 

9.8% 

Total Outstanding

3,799,857 

99.5% 

3,660,998 

99.5% 

7,460,855 

99.5% 

Treasury Shares

18,838 

0.5% 

18,838 

0.5% 

37,676 

0.5% 

Total

3,818,695 

100.0% 

3,679,836 

100.0% 

7,498,531 

100.0% 

Free Float (2)

355,669 

9.3% 

383,473 

10.4% 

739,142 

9.9% 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares in Thousands

12/31/2019

Stockholders

Common Shares

Common Shares (%)

Preferred Shares

Preferred Shares (%)

Total Shares

Total Shares (%)

Sterrebeeck B.V. (1)

1,809,583 

47.4% 

1,733,644 

47.1% 

3,543,227 

47.3% 

GES (1)

1,107,673 

29.0% 

1,019,645 

27.7% 

2,127,318 

28.4% 

Banco Santander, S.A. (1)

521,964 

13.7% 

519,268 

14.1% 

1,041,232 

13.9% 

Employees

2,526 

0.1% 

2,533 

0.1% 

5,059 

0.1% 

Directors (*)

4,525 

0.1% 

4,525 

0.1% 

9,050 

0.1% 

Others

355,722 

9.3% 

383,519 

10.4% 

739,241 

9.9% 

Total Outstanding

3,801,993 

99.6% 

3,663,134 

99.4% 

7,465,127 

99.6% 

Treasury Shares

16,702 

0.4% 

16,702 

0.6% 

33,404 

0.4% 

Total

3,818,695 

100.0% 

3,679,836 

100.0% 

7,498,531 

100.0% 

Free Float (2)

358,248 

9.4% 

386,053 

10.5% 

744,301 

9.9% 

(1) Companies of the Santander Spain Group.

(2) Composed of Employees and Others.

(*) None of the members of the Board of Directors and Executive Board holds 1.0% or more of any class of shares.

 


d)      Related-Party Transactions

Santander has a Policy for Related Party Transactions approved by the Board of Directors, which aims to ensure that all transactions typified by the policy to take effect  in view of the interests of Banco Santander and its stockholders. The policy defines the power to approve certain transactions by the Board of Directors. The planned rules also apply to all employees and officers of Banco Santander and its subsidiaries.

Operations and charges for services with related parties are carried out in the ordinary course of business and under reciprocal conditions, including interest rates, terms and guarantees, and do not entail greater risk than the normal collection or have other disadvantages.             

 09/30/2020

 12/31/2019

 Parent (1)

 Joint-controlled companies

 Other Related-Party (2)

 Parent (1)

 Joint-controlled companies

 Other Related-Party (2)

Assets

2,418,878 

3,553,308 

(1,697,760)

5,294,152 

4,387,013 

874,668 

Derivatives  Measured At Fair Value Through Profit Or Loss, Net

(2,886,368)

(2,732,281)

(763,547)

(113,931)

Banco Santander, S.A. - Espanha

(2,886,368) 

(763,547) 

Super Pagamentos e Administração de Meios Eletrônicos S.A.

(192,353) 

Real Fundo de Investimento Multimercado Santillana Credito Privado (2)

(2,539,928) 

(113,931) 

Loans and amounts due from credit institutions

5,261,796 

3,550,324 

76,537 

5,896,120 

4,365,518 

70,453 

Banco Santander, S.A. - Espanha (3)(4)

5,261,796 

5,896,120 

Banco Santander Totta, S.A. (2)

7,394 

7,921 

Bank Zachodni (2)

94 

Santander UK plc

66,644 

16,701 

Banco Santander, S.A. – México (2)

1,702 

45,545 

Banco RCI Brasil S.A.

3,550,324 

4,365,518 

Webmotors S.A.

19 

Integry Tecnologia e Serviços A.H.U Ltda.

50 

Super Pagamentos e Administração de Meios Eletrônicos S.A

532 

Santander Global Technology, S.L., SOCI

192 

192 

Loans and other values ​​with customers

918,094 

87,550 

20,367 

884,696 

Zurich Santander Brasil Seguros e Previdência S.A. (5)

777,665 

814,320 

Zurich Santander Brasil Seguros S.A.

69,711 

58,778 

Banco Santander, S.A. - Espanha (1)

245 

87,550 

Isban Mexico, S.A. de C.V.

122 

122 

Gesban Servicios Administrativos Globales, S.L.

23 

23 

Santander Brasil Gestão de Recursos Ltda

169 

169 

Webmotors S.A.

14 

20,367 

Gestora de Inteligência de Crédito

38,038 

Loop Gestão de Patios S.A.

13,439 

Key Management Personnel  (6)

18,668 

11,284 

Other Assets

43,450 

2,984 

31,159 

74,029 

1,128 

28,476 

Banco Santander, S.A. - Espanha

43,450 

74,029 

Banco RCI Brasil S.A.

2,984 

1,128 

Zurich Santander Brasil Seguros e Previdência S.A. (5)

31,159 

28,476 

Liabilities

(23,169,912)

(190,000)

(1,724,027)

(17,105,753)

(169,103)

(1,529,828)

Deposits from credit institutions

(8,521,887)

(190,000)

(23,438)

(42,060)

(167,017)

(20,571)

Banco Santander, S.A. - Espanha

(8,521,887) 

(42,060) 

Real Fundo de Investimento Multimercado Santillana Credito Privado (2)

(20,571) 

Super Pagamentos e Administração de Meios Eletrônicos S.A.

(7,468) 

Loop Gestão de Pátios S.A.

(4,466) 

Banco Santander (México), S.A.

(11,504) 

Banco RCI Brasil S.A.

(190,000) 

(167,017) 

Securities

(101,794)

(89,074)

Key Management Personnel

(101,794) 

(89,074) 

Customer deposits

(926,013)

(2,086)

(1,008,416)

Zurich Santander Brasil Seguros e Previdência S.A. (1) (5)

(263,877) 

(199,934) 

Santander Brasil Gestão de Recursos Ltda

(79) 

(332,916) 

Webmotors S.A.

(471) 

(2,082) 

Santander Securities Services Brasil DTVM S.A.

(540,292) 

(404,427) 

Santander Brasil Asset (2)

(290) 

(16,762) 

GESTORA DE INTELIGÊNCIA DE CRÉDITO

(48,742) 

Key Management Personnel

(32,963) 

(36,104) 

Others

(39,299) 

(4) 

(18,273) 

Other Liabilities - Dividends and Interest on Capital Payable

(6,874,602)

(12,226)

Banco Santander, S.A. - Espanha

(1,067,623) 

Grupo Empresarial Santander, S.L. (1)

(2,177,207) 

Sterrebeeck B.V. (1)

(3,629,772) 

Banco Madesant

(1,948) 

Key Management Personnel

(10,278) 

Other Liabilities

(174,292)

(672,782)

(13,130)

(399,541)

Banco Santander, S.A. - Espanha

(174,292) 

(13,130) 

Santander Brasil Asset (2)

(7,203) 

(7,203) 

Santander Securities Services Brasil DTVM S.A.

(8,769) 

(5,066) 

Zurich Santander Brasil Seguros e Previdência S.A. (5)

(19,954) 

(21,219) 

Key Management Personnel

(423,001) 

(357,249) 

Others

(213,855) 

(8,804) 

Debt Instruments Eligible for Capital

(14,473,733)

(10,175,961)

Banco Santander, S.A. - Espanha

(14,473,733) 

(10,175,961) 

(*) All loans and other amounts with related parties were made in the ordinary course of business and on sustainable basis, including interest rates and collateral and did not involve more than the normal risk of collectability or present other unfavorable features.

(1) Banco Santander (Brasil) S.A. is indirectly controlled by Banco Santander Spain (note 1-a), through its subsidiary Grupo Empresarial Santander, S.L. and Sterrebeeck B.V.

(2) Refers to the Company's subsidiaries (Banco Santander Spain).

(3) On September 30, 2020, refers to the cash of R$2.092.283 (12/31/2019 - R$1,089,578).

(4) Significant influence of Banco Santander Espanha.

(5) The balance with key management personnel refers to operations contracted before the term of the mandates.

 01/01 a 03/31/2020

 01/01 a 03/31/2019

 Parent (1)

 Joint-controlled companies

 Other Related-Party (2)

 Parent (1)

 Joint-controlled companies

 Other Related-Party (2)

Income

(1,805,465)

151,900 

1,071,622 

(1,270,851)

172,462 

1,614,106 

Interest and similar income - Loans and amounts due from credit institutions

12,876 

147,441 

1,020 

84,631 

157,823 

404 

Banco Santander, S.A. - Espanha

12,876 

84,631 

Banco RCI Brasil S.A.

147,441 

157,823 

Key Management Personnel

1,020 

404 

Warranties and Limits

42 

Key Management Personnel

42 

Interest expense and similar charges

(516,794)

(4,987)

(26,876)

(1,441)

(103,239)

Santander Brasil Gestão de Recursos Ltda

(3,757) 

(12,061) 

Gestora de Inteligência de Crédito

(449) 

(3,274) 

Webmotors S.A.

(2) 

(20) 

Others

(621) 

(24) 

Key Management Personnel

(3,536) 

(6,234) 

Banco Santander, S.A. - Espanha

(516,794) 

Banco RCI Brasil S.A.

(4,987) 

(1,421) 

Santander Securities Services Brasil DTVM S.A.

(11,962) 

(22,450) 

SAM Brasil Participações

(1) 

(30) 

Real Fundo de Investimento Multimercado Santillana Credito Privado

(58,239) 

Santander Securities Services Brasil Participações S.A. (2)

Super Pagamentos e Administração de Meios Eletrônicos S.A.

(6,164) 

Santander Asset Management, S.A. SGIIC.

(384) 

(927) 

Fee and commission income (expense)

(2,002)

9,446 

2,311,981 

(516,727)

15,973 

1,922,258 

Banco Santander, S.A. - Espanha

(2,002) 

(516,727) 

Banco RCI Brasil S.A.

9,446 

15,812 

Banco Santander International

34,227 

26,515 

Webmotors S.A.

167 

161 

Zurich Santander Brasil Seguros  S.A.

232,584 

175,983 

Zurich Santander Brasil Seguros e Previdência S.A.

2,028,772 

1,711,495 

Key Management Personnel

186 

263 

Others

16,045 

8,002 

Gains (losses) on financial assets and liabilities and exchange differences (net)

(510,883)

(366,296)

(838,755)

107 

748,091 

Banco Santander, S.A. - Espanha

(510,883) 

(838,755) 

Real Fundo de Investimento Multimercado Santillana Credito Privado

(401,062) 

714,263 

Santander Securities Services Brasil DTVM S.A.

(3,418) 

(1,609) 

Zurich Santander Brasil Seguros e Previdência S.A.

32,893 

32,883 

Others

5,166 

107 

82 

Key Management Personnel

125 

2,472 

Administrative expenses and amortization

(154,120)

(1,003,277)

(939,120)

Banco Santander, S.A. - Espanha

(154,120) 

ISBAN Chile S.A.

(18) 

(20) 

Aquanima Brasil Ltda.

(26,585) 

(23,094) 

TECBAN - Tecnologia Bancaria Brasil

(274,477) 

(255,452) 

Santander Securities Services Brasil DTVM S.A.

(35,234) 

(36,457) 

Santander Global Technology, S.L., SOCI

(234,158) 

(226,488) 

Key Management Personnel

(411,980) 

(392,693) 

Others

(20,825) 

(4,916) 

Result on the sale of assets not classified as non-current assets held for sale

168,588 

Super Pagamentos e Administração de Meios Eletrônicos S.A

168,588 

Debt Instruments Eligible for Capital

(634,542)

Banco Santander, S.A. - Espanha

(634,542) 

Other Administrative expenses - Donation

(13,560)

(14,288)

Fundação Santander

(1,160) 

(1,050) 

Fundação Cultural

(1,038) 

Fundação Sudameris

(12,400) 

(12,200) 

(1) Banco Santander (Brasil) S.A. is indirectly controlled by Banco Santander Spain, through its subsidiary Grupo Empresarial Santander, S.L. and Sterrebeeck B.V.

(2) Refers to the Company's subsidiaries Banco Santander Spain.

 

 

 


17.   Fair value of financial assets and liabilities

Under IFRS 13, the fair value measurement uses a fair value hierarchy that reflects the model used in the measurement process which should be in accordance with the following hierarchical levels:

Level 1: Determined on the basis of public (unadjusted) quoted prices in highly active markets for identical assets and liabilities, these include public debt securities, stocks, derivatives listed.

Level 2: They are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3: They are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Trading Financial Assets, Other financial assets at fair value on through income statement, Available-for-sale financial assets and Financial liabilities held for trading.

Level 1: The securities with high liquidity and quoted prices in active market are classified as level 1. At this level there were classified most of the Brazilian Government Securities (mainly LTN, LFT, NTN-B, NTN-C and NTN-F), shares in stock exchange and other securities traded in the active market.

Level 2: When quoted price cannot be observed, the Management, using its own internal models, make its best estimate of the price that would be set by the market. These models use data based on observable market parameters as an important reference. Various techniques are used to make these estimates, including the extrapolation of observable market data and extrapolation techniques. The best evidence of fair value of a financial instrument on initial recognition is the transaction price, unless the fair value of the instrument can be obtained from other market transactions carried out with the same instrument or similar instruments or can be measured using a valuation technique in which the variables used include only data from observable market, especially interest rates. These securities are classified at level 2 of the fair and compound securities hierarchy, mainly by Government Bonds (mainly NTN-A), committed and Cancelable LCI and in a less liquid market than those classified at level 1.

Level 3: When there is information that is not based on observable market data, Banco Santander uses internally developed models, from curves generated according to the internal model. Level 3 comprises mainly unlisted shares.

Derivatives

Level 1: Derivatives traded on stock exchanges are classified in Level 1 of the hierarchy.

Level 2: For derivatives traded over the counter, the valuation (primarily swaps and options) usually uses observable market data, such as: exchange rates, interest rates, volatility, correlation between indexes and market liquidity.

When pricing the financial instruments aforementioned, it is used the Black-Scholes Model (exchange rate options, interest rate options; caps and floors) and the present value method (discount of future values by market curves).

Level 3: Derivatives not traded in the stock exchange and that do not have an observable data in an active market were classified as Level 3, and these are composed by exotic derivatives.

The following table shows a summary of the fair values of financial assets and liabilities for the period ended September 30, 2020, and December 31, 2019, classified based on several measurement methods adopted by the Bank to determine their fair value:

09/30/2020


Level 1(1)

Level 2

Level 3

Total

Financial Assets Measured At Fair Value Through Profit Or Loss

548,770 

39,237,012 

3,034,751 

42,820,533 

Debt instruments

548,770 

3,034,751 

3,583,521 

Derivatives

287,360 

287,360 

Balances with The Brazilian Central Bank

38,949,652 

38,949,652 

Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading

49,192,158 

29,205,390 

3,082,599 

81,480,147 

Debt instruments

48,051,207 

1,635,126 

89,072 

49,775,405 

Equity instruments

1,140,951 

288,168 

1,429,119 

Derivatives

27,282,096 

2,993,527 

30,275,623 

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

105,490 

236,067 

341,557 

Equity instruments

105,490 

236,067 

341,557 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

103,977,239 

2,176,865 

919,772 

107,073,876 

Debt instruments

103,969,808 

2,149,503 

888,438 

107,007,749 

Equity instruments

7,431 

27,362 

31,334 

66,127 

Hedging derivatives (assets)

1,321,114 

1,321,114 

Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading

65,699,527 

2,758,928 

68,458,455 

Trading derivatives

32,985,783 

2,758,928 

35,744,711 

Short positions

32,713,744 

32,713,744 

Financial Liabilities Measured At Fair Value Through Profit Or Loss

6,149,411 

6,149,411 

Other financial liabilities

6,149,411 

6,149,411 

Hedging derivatives (liabilities)

232,285 

232,285 

12/31/2019

Level 1(1)

Level 2

Level 3

Total

Financial Assets Measured At Fair Value Through Profit Or Loss

975,393 

28,739,507 

2,627,405 

32,342,305 

Debt instruments

975,393 

132,277 

2,627,405 

3,735,075 

Balances with The Brazilian Central Bank

28,607,230 

28,607,230 

Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading

35,057,803 

21,247,552 

715,548 

57,020,903 

Debt instruments

33,028,333 

1,726,441 

130,857 

34,885,631 

Equity instruments

2,029,470 

2,029,470 

Derivatives

19,521,111 

584,691 

20,105,802 

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

143,077 

627 

27,749 

171,453 

Equity instruments

143,077 

627 

27,749 

171,453 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

93,555,527 

1,612,741 

951,966 

96,120,234 

Debt instruments

93,531,617 

1,612,741 

818,569 

95,962,927 

Equity instruments

23,910 

133,397 

157,307 

Hedging derivatives (assets)

339,932 

339,932 

Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading

45,499,913 

564,757 

46,064,670 

Trading derivatives

21,664,260 

564,757 

22,229,017 

Short positions

23,835,653 

23,835,653 

Financial Liabilities Measured At Fair Value Through Profit Or Loss

3,719,416 

1,600,000 

5,319,416 

Hedging derivatives (liabilities)

200,961 

200,961 

 

Movements in fair value of Level 3

The following tables demonstrate the movements during the period ended September 30, 2020, and 2019, for the financial assets and liabilities classified as Level 3 in the fair value hierarchy:

Fair Value
12/31/2019

Gains/ losses (Realized/Not Realized)

Transfers to Level 3

Additions / Low

Fair value 09/30/2020

Financial Assets Measured At Fair Value Through Profit Or Loss

2,627,405 

100,304 

(239,512) 

546,554 

3,034,752 

Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading

715,548 

443,259 

1,988,209 

(64,416) 

3,082,600 

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

27,749 

80,035 

128,282 

236,066 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

951,966 

(47,552) 

(198,378) 

213,737 

919,773 

Financial Liabilities Measured At Fair Value Through Profit Or Loss

564,757 

273,229 

1,854,713 

66,229 

2,758,928 

Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading

1,600,000 

(1,600,000) 


 

Fair Value
12/31/2018

Gains/ losses (Realized/Not Realized)

Transfers to Level 3

Additions / Low

Fair value 09/30/2019

Financial Assets Measured At Fair Value Through Profit Or Loss

510,887 

304,956 

1,701,930 

125,246 

2,643,019 

Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading

1,370,270 

(232,465) 

(575,510) 

130,276 

692,571 

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

154,947 

(5,691) 

149,256 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

709,956 

112,554 

25,100 

9,621 

857,231 

Financial Liabilities Measured At Fair Value Through Profit Or Loss

1,946,056 

(1,426,613) 

519,443 

Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading

641,458 

86,854 

(349,971) 

168,178 

546,519 

 

Fair value movements linked to credit risk

Changes in fair value attributable to changes in credit risk are determined on the basis of changes in the prices of credit default swaps compared to similar obligations of the same obligor when such prices are observable, since these credit swaps better reflect the market risk assessment for a specific financial asset. When such prices are not observable, changes in fair value attributable to changes in credit risk are determined as the total value of changes in fair value not attributable to changes in the underlying interest rate or other observed market rates. In the absence of specific observable data, this approach provides a reasonable approximation of changes attributable to credit risk, as it estimates the margin change above the reference value that the market may require for the financial asset.

Financial assets and liabilities not measured at fair value

The financial assets owned by the Bank are measured at fair value in the accompanying consolidated balance sheets, except for loans and receivables.

Similarly, the Bank’s financial liabilities except for financial liabilities held for trading and those measured at fair value - are measured at amortized cost in the consolidated balance sheets.

i) Financial assets measured at other than fair value

Below is a comparison of the carrying amounts of financial assets of the Bank measured by a value other than the fair value and their respective fair values onSeptember 30, 2020, and 2019:

09/30/2020

Assets

Accounting Value

Fair Value

Level 1

Level 2

Level 3

Open market investments - Central Bank of Brazil

18,330,955 

18,330,955 

18,330,955 

Financial Assets Measured At Amortized Cost

Loans and amounts due from credit institutions

116,677,178 

116,810,620 

7,660,712 

109,149,908 

Loans and advances to customers

375,928,235 

379,169,126 

3,197,437 

375,971,689 

Debt instruments

49,704,630 

51,121,154 

14,307,319 

6,730,293 

30,083,542 

Total

560,640,998 

565,431,855 

32,638,274 

17,588,442 

515,205,139 

12/31/2019

Assets

Accounting Value

Fair Value

Level 1

Level 2

Level 3

Open market investments - Central Bank of Brazil

15,249,515 

15,249,515 

15,249,515 

Financial Assets Measured At Amortized Cost

Loans and amounts due from credit institutions

109,233,128 

109,233,128 

109,233,128 

Loans and advances to customers

326,699,480 

327,278,243 

327,278,243 

Debt instruments

38,748,296 

39,678,192 

5,378,791 

7,858,612 

26,440,789 

Total

489,930,419 

491,439,078 

5,378,791 

132,341,255 

353,719,032 

 

ii) Financial liabilities measured at other than fair value

Following is a comparison of the carrying amounts of Bank´s financial liabilities measured by a value other than fair value and their respective fair values on September 30, 2020, and 2019:

09/30/2020

Liabilities

Accounting Value

Fair Value

Level 1

Level 2

Level 3

Financial Liabilities at Measured Amortized Cost:

Deposits of Brazil's Central Bank and deposits of credit institutions

87,015,664 

86,998,060 

18,111,473 

68,886,587 

Customer deposits

462,350,526 

462,458,834 

72,065,273 

390,393,561 

Marketable debt securities

60,227,261 

60,273,894 

60,273,894 

Subordinated Debt

14,473,733 

14,473,733 

14,473,733 

Other financial liabilities

51,070,027 

51,070,027 

51,070,027 

Total financial liabilities

675,137,211 

675,274,548 

90.176.746 

585,097,802 

12/31/2019

Liabilities

Accounting Value

Fair Value

Level 1

Level 2

Level 3

Financial Liabilities at Measured Amortized Cost:

Deposits of Brazil's Central Bank and deposits of credit institutions

98,586,389 

98,605,373 

98,605,373 

Customer deposits

336,514,597 

336,593,455 

336,593,455 

Marketable debt securities

73,702,474 

73,889,348 

10,205,065 

63,684,284 

Subordinated Debt

10,175,961 

10,175,961 

10,175,961 

Other financial liabilities

60,885,370 

60,885,370 

60,885,370 

Total financial liabilities

579,864,791 

580,149,506 

455,579,854 

124,569,654 

 

The methods and assumptions used to estimate the fair value are made in accordance with internal policy and cover the most important factors of pricing are defined below:

Loans and amounts due from credit institutions and from clients – Fair value are estimated for groups of loans with similar characteristics.  The fair value was measured by discounting estimated cash flow using the average interest rate of new contracts. That is, the future cash flow of the current loan portfolio is estimated using the contractual rates, and then the new loans spread over the risk free interest rate are incorporated to the risk free yield curve in order to calculate the loan portfolio fair value. In terms of behavior assumptions, it is important to highlight that a prepayment rate is applied to the loan portfolio, thus a more realistic future cash flow is achieved.

Deposits from Bacen and credit institutions and Client deposits – The fair value of deposits was calculated by discounting the difference between the cash flows on a contractual basis and current market rates for instruments with similar maturities. For variable-rate deposits, the carrying amount was considered to approximates fair value.      

Debt and Subordinated Securities – The fair value of long-term loans were estimated by cash flow discounted at the interest rate offered on the market with similar terms and maturities.

Debt Instruments Eligible to Capital – refer to the transaction fully agreed with a related party, in the context of the Capital Optimization Plan, whose book value is similar to the fair value.

Other financial liabilities  –  according to the explanatory note, substantially include amounts to be transferred as a result of credit card operations, transactions pending settlement and dividends and interest on equity payable, whose book value is similar to its fair value.

The valuation techniques used to estimate each level are defined in note 1.c.ii.

Management revisited the criteria assigned to classify the fair value level of assets and liabilities measured at amortized cost, presented exclusively for purposes of disclosure and concluded that they best fit as level 3 in view of observable market data.


18.   Other disclosures

a) Trading and hedging derivatives

The main risk factors associated to derivatives contracted are related to exchange rates, interest rates and stocks. To manage these and other market risk factors the Bank uses practices which include the measurement and follow up of the limit´s usage previously defined on internal committees, as well as the daily follow up of the portfolios values in risk, sensitivities and changes in the interest rate and exchange exposure, liquidity gaps, among other practices which allow the control and follow up on the main risk metrics that can affect the Bank´s position in the several markets which it acts. Based on this management model the Bank has accomplished its goal, using operations with derivatives, in optimize the relation risk/benefits even in situation with great volatility.

The derivatives fair value is determined through quotation of market prices. The swaps contracts fair value is determined using discounted cash flow modeling techniques, reflecting suitable risk factors. The fair value of NDF and Future contracts are also determined based on the quotation of market prices for derivatives traded in specific chamber (i.e.. stock Exchange for example) or using the same methodology applied for swap contracts. The fair value of options derivatives (call and put) is determined based on the mathematical models, such as Black & Scholes, using yield rates, implied volatilities and the fair value of the corresponding asset. The current market prices are used to price the volatilities. For the derivatives which do not have prices directly disclosed by specific chamber, their fair values are obtained through pricing models which use market information, based on disclosed prices of more liquid assets. Interest rate curves and market volatilities are extracted from theses prices to be used as first input in these models.

I) Summary of Derivative Financial Instruments

Below, the composition of the portfolio of Derivative Financial Instruments (Assets and Liabilities) by type of instrument, demonstrated by their market value:

09/30/2020

12/31/2019

Assets

Liabilities

Assets

Liabilities

Swap

15,555,846 

18,769,485 

14,634,863 

16,458,397 

Option Premiums

4,240,962 

4,030,634 

1,065,753 

1,699,729 

Forward Contracts and Other

11,799,929 

13,176,877 

4,745,101 

4,271,852 

Total

31,956,737 

35,976,996 

20,445,717 

22,429,978 

 


 

II) Derivative Financial Instruments Recorded in Offsetting and Equity Accounts

09/30/2020

12/31/2019

Trading

Notional (1)

Curve Value

Fair Value

Notional (1)

Curve Value

Fair Value

Swap

529,073,142 

(3,958,208)

(3,187,251)

554,205,586 

(1,941,477)

(1,823,534)

Asset

283,763,358 

8,015,544 

15,555,846 

279,253,821 

2,910,364 

14,634,863 

CDI (Interbank Deposit Rates)

40,138,397 

61,332 

4,044,877 

40,341,402 

209,224 

6,542,873 

Fixed Interest Rate - Real

51,821,036 

4,617,195 

7,963,801 

45,240,041 

1,900,884 

6,792,917 

Indexed to Price and Interest Rates

4,366,348 

2,169,578 

218,540 

Indexed to Foreign Currency

187,000,805 

1,336,112 

2,190,310 

191,502,800 

581,716 

1,299,073 

Other

436,772 

2,000,905 

1,356,958 

Liabilities

245,309,784 

(11,973,751)

(18,769,485)

274,951,765 

(4,851,841)

(16,458,397)

CDI (Interbank Deposit Rates)

43,889,319 

(9,041,755) 

(14,126,257) 

24,273,545 

(3,025,371) 

Indexed Interest Rate Fixed - Real

38,880,478 

(2,931,879) 

(4,049,780) 

65,315,856 

(990,820) 

(14,597,999) 

Indexed to Price and Interest Rates

44,170,819 

1,244,073 

125,014,868 

(816,100) 

(1,681,392) 

Indexed to Foreign Currency

116,800,594 

(117) 

(1,685,542) 

59,163,439 

(11,658) 

Other

1,568,574 

(151,981) 

1,184,057 

(7,892) 

(179,006) 

Options

1,276,475,310 

(291,986)

210,328 

1,446,536,131 

(713,534)

(633,976)

Purchased Position

619,054,531 

1,448,462 

4,240,962 

678,089,904 

641,223 

1,065,753 

Call Option - Foreign Currency

1,221,465 

37,898 

38,324 

171,871 

1,318 

(280) 

Put Option - Foreign Currency

1,971,678 

69,019 

64,950 

1,456,975 

473 

184,005 

Call Option - Other

82,245,573 

305,340 

1,077,121 

98,154,363 

295,668 

136,084 

Interbank Market

79,013,628 

305,340 

847,277 

98,154,363 

295,668 

136,174 

Other (2)

3,231,945 

229,844 

(90) 

Put Option - Other

533,615,815 

1,036,205 

3,060,567 

578,306,695 

343,763 

745,944 

Interbank Market

531,547,208 

1,036,205 

3,047,999 

578,306,695 

343,763 

746,006 

Other (2)

2,068,607 

12,568 

(62) 

Sold Position

657,420,780 

(1,740,448)

(4,030,634)

768,446,227 

(1,354,757)

(1,699,729)

Call Option - US Dollar

1,306,075 

(70,051) 

(75,540) 

254,944 

(3,102) 

(1,471) 

Put Option - US Dollar

1,954,756 

(127,061) 

(181,927) 

263,994 

(1,528) 

(2,844) 

Call Option - Other

102,049,339 

(282,775) 

(588,637) 

174,166,801 

(562,827) 

(428,390) 

Interbank Market

1,671,057 

(49,974) 

(513,344) 

174,166,801 

(562,827) 

(428,617) 

Other (2)

100,378,283 

(232,801) 

(75,293) 

227 

Put Option - Other

552,110,609 

(1,260,560) 

(3,184,529)

593,760,488 

(787,300) 

(1,267,024) 

Interbank Market

546,800,401 

(1,260,560) 

(3,014,055) 

593,760,488 

(787,300) 

(1,159,037) 

Other (2)

5,310,209 

(170,474) 

(107,987) 

Futures Contracts

286,054,267 

432,564,397 

Purchased Position

116,047,229 

71,603,247 

Exchange Coupon (DDI)

15,238,695 

7,105,006 

Interest Rates (DI1 and DIA)

100,808,534 

54,701,627 

Foreign Currency

9,781,856 

Indexes (3)

Treasury Bonds/Notes

14,758 

Sold Position

170,007,038 

360,961,150 

Exchange Coupon (DDI)

79,114,014 

146,032,485 

Interest Rates (DI1 and DIA)

69,815,923 

196,170,105 

Foreign Currency

20,760,841 

17,305,604 

Indexes (3)

316,261 

290,254 

Treasury Bonds/Notes

1,162,702 

Forward Contracts and Other

188,016,889 

1,773,017 

(1,376,948)

169,401,316 

(900,818)

473,249 

Purchased Position

101,408,121 

3,855,775 

11,799,929 

79,970,842 

(269,708)

4,745,101 

Currencies

95,401,635 

3,855,775 

11,758,642 

79,969,759 

(269,708) 

4,672,316 

Other

6,006,486 

41,287 

1,083 

72,785 

Sold Position

86,608,768 

(2,082,758)

(13,176,877)

89,430,474 

(631,110)

(4,271,852)

Currencies

82,141,744 

(2,082,758) 

(13,176,650) 

89,426,698 

(631,085) 

(4,271,852) 

Other

4,467,024 

(227) 

3,776 

(25) 

(1) Nominal value of updated contracts.

(2) Includes options for indices, being mainly options involving US Treasury, shares and stock indices.

(3) Includes Bovespa and S&P indices.

 


 

III) Derivative Financial Instruments by Counterparty, Opening by Maturity and Trading Market

Notional

By Counterparty

By Maturity

By Market Trading

09/30/2020

12/31/2019

09/30/2020

09/30/2020

Related

Financial

Up to

From 3 to

Over

Stock exchange (2)

Over the counter (3)

Customers

Parties

Institutions (1)

Total

Total

3 Months

12 Months

12 Months

Swap

38,882,917 

126,261,978 

118,618,462 

283,763,358 

279,253,821 

42,423,224 

128,265,621 

113,074,513 

85,725,921 

198,037,437 

Options

22,706,946 

676,884 

1,253,091,480 

1,276,475,310 

1,446,536,131 

75,690,009 

1,197,998,885 

2,786,416 

1,235,352,037 

41,123,273 

Futures Contracts

3,198,239 

282,856,028 

286,054,267 

432,564,397 

181,561,992 

53,122,939 

51,369,336 

286,054,267 

Forward Contracts and Other

63,812,057 

72,930,347 

51,274,485 

188,016,889 

169,401,316 

103,569,874 

60,309,148 

24,137,866 

29,364,622 

158,652,266 

(1) Includes operations with B3 S.A. - Brazil, Bolsa, Balcão (B3) and other stock and commodity exchanges as counterparty.

(2) Includes values ​​traded at B3.

(3) It consists of transactions that are included in registration chambers, in accordance with Bacen regulations.

 

IV) Accounting Hedge

The effectiveness calculated for the hedge portfolio is in accordance with that established in Circular Bacen No. 3,082 / 2002. The following accounting hedge structures were established:

IV.I) Market Risk Hedge

The Bank's market risk hedge strategies consist of structures to protect against changes in market risk, in receipts and interest payments related to recognized assets and liabilities.

The market risk hedge management methodology adopted by the Bank segregates transactions by the risk factor (eg, Real / Dollar exchange rate risk, interest rate fixed in Reais, Dollar exchange rate risk, inflation, interest rate risk, etc.). The transactions generate exposures that are consolidated by risk factor and compared with pre-established internal limits.

To protect the variation of market risk in the receipt and payment of interest, the Bank uses swap contracts and interest rate futures contracts related to fixed-rate assets and liabilities.

The Bank applies the market risk hedge as follows:

• Designates Foreign Currency + Coupon swaps versus% CDI and Pre-Real Interest Rate or contracts Dollar futures (DOL, DDI / DI) as a derivative instrument in Hedge Accounting structures, with foreign currency loan operations as the object item.

• The Bank has an active loan portfolio originating in US dollars at a fixed rate at Santander EFC, whose operations are recorded in Euro. As a way to manage this mismatch, the Bank designates Euro Floating Foreign Currency versus Fixed Dollar swaps as the corresponding credit protection instrument.

• The Bank has a portfolio of assets indexed to the Euro and traded at the Offshore branch. In the transaction, the value of the asset in Euro will be converted to Dollar at the rate of the transaction's foreign exchange contract. Upon conversion, the principal amount of the operation, already expressed in dollars, will be adjusted by a floating or fixed rate. The assets will be hedged with Swap Cross Currency in order to transfer the risk in Euro to LIBOR + Coupon.

• The Bank has a pre-fixed interest rate risk generated by government securities (NTN-F and LTN) in the financial assets portfolio available for sale. To manage this mismatch, the entity contracts DI futures on the stock exchange and designates them as a Hedge Accounting instrument.

• The Bank has a risk to the IPCA index generated by debentures in the portfolio of bonds available for sale. To manage this mismatch, the Bank contracts IPCA futures (DAP) on the Stock Exchange and designates them as a hedge accounting instrument.

• Santander Leasing has a pre-fixed interest rate risk generated by government bonds (NTN-F) in the securities portfolio available for sale. To manage this mismatch, the entity contracts interest swaps and designates them as a protection instrument in a Hedge Accounting structure.

In market risk hedges, the results, both on hedge instruments and on objects (attributable to the type of risk being protected) are recognized directly in the income statement.

IV.II) Cash Flow Hedge

The Bank's cash flow hedge strategies consist of hedging exposure to changes in cash flows, interest payments and exchange rate exposure, which are attributable to changes in interest rates on recognized assets and liabilities and changes exchange rates for unrecognized assets and liabilities.

The Bank applies the cash flow hedge as follows:

• It contracts fixed-rate asset swaps and foreign currency liabilities and designates them as a hedge instrument in a Cash Flow Hedge structure, with the object of foreign currency loan operations negotiated with third parties through offshore agencies and securities Brazilian foreign debt held to maturity.

• It contracts Dollar futures or DDI + DI (Synthetic Dollar Futures) futures and designates them as a protection instrument in a Cash Flow Hedge structure, having as object item the Bank's credit portfolio in Dollars and Promissory Notes in portfolio of bonds and securities available for sale.

• The Bank has a post-fixed interest rate risk arising from the treasury bills classified as available for sale, which present expected cash flows subject to Selic variations over their duration. To manage these fluctuations, the Bank contracts DI futures and designates them as a hedging instrument in a Cash Flow Hedge structure.

• Banco RCI Brasil SA has hedge operations whose purpose is to raise funds with operations of financial bills (LF), bills of exchange (LC) and Interbank deposit certificates (CDI) indexed to CDI and uses interest rate swaps to make pre-fixed funding and predicting future cash flows.

In cash flow hedge, the effective portion of the variation in the value of the hedge instrument is temporarily recognized in equity under the caption equity valuation adjustments until the forecasted transactions occur, when that portion is recognized in the income statement. The ineffective portion of the variation in the value of foreign exchange hedge derivatives is recognized directly in the income statement. As of September 30, 2020 and December 31, 2019, no result was recorded for the ineffective portion.

09/30/2020

12/31/2019

Hedge Structure

 Effective Portion Accumulated

 Ineffective Portion 

 Effective Portion Accumulated

 Ineffective Portion 

Fair Value Hedge

Treasury bonds (LTN, NTN-F)

(834,949) 

(2,853,807) 

Treasury bonds LEA

(26,010) 

(61,761) 

Resolution 2770

(128) 

(94) 

Trade Finance Off

(5,476) 

(4,015) 

Total

(866,562)

(2,919,677)

Cash Flow Hedge

Eurobonds

7,576 

(6,074) 

Trade Finance Off

6,492 

139,852 

Treasury bonds (LFT)

822,978 

503,665 

Total

837,047 

637,443 

 

09/30/2020

12/31/2019

Strategies

Adjustment to Value Market

Market Value

Notional

Adjustment to Value Market

Market Value

Notional

Fair Value Hedge

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

Swap Agreements

48,271 

(39,487)

4,559,368 

5,516,479 

5,185,954 

123,791 

602,634 

1,283,074 

3,208,464 

4,227,057 

1,703,734 

1,398,524 

Hegde of Credit Operations

(753,752) 

(24,109) 

199,487 

168,147 

1,637,032 

118,123 

56,887 

585,670 

2,021,557 

1,398,121 

1,162,872 

859,426 

Hedge of Securities

802,023 

(15,378) 

4,359,881 

5,348,332 

3,548,922 

5,668 

545,747 

697,404 

1,186,907 

2,828,936 

540,862 

539,098 

Futures Contracts

2,385,793 

50,350,239 

54,928,412 

47,171,371 

3,000,490 

36,569,735 

48,427,614 

45,854,445 

Hegde of Securities

2,385,793 

50,350,239 

54,928,412 

47,171,371 

3,000,490 

36,569,735 

48,427,614 

45,854,445 

Cash Flow Hedge

Swap Agreements

176,643 

7,728,501 

6,744,097 

6,166,485 

118,123 

35,110 

2,179,200 

2,375,752 

885,653 

1,498,154 

Hegde of Credit Operations

1,525,866 

1,550,064 

1,171,860 

118,123 

(3,494) 

977,622 

1,058,007 

687,239 

390,518 

Hedge of Securities

176,643 

6,202,634 

5,194,033 

4,994,625 

38,604 

1,201,578 

1,317,745 

198,415 

1,107,636 

Futures Contracts

46,529,881 

40,082,944 

43,203,957 

17,726,566 

18,680,868 

17,721,366 

Hegde of Credit Operations (2)

25,543,341 

21,020,406 

22,859,369 

14,506,878 

15,195,149 

14,501,800 

Hegde of Securities

20,986,540 

19,062,538 

20,344,589 

3,219,688 

3,485,719 

3,219,566 

 


 

03/31/2020

12/31/2019

Up to

From 3 to

Above

Strategies

 3 Month

 12 Months

 12 Months

Total

Total

Fair Value Hedge

Swap Agreements

177,537 

5,263,551 

114,877 

5,555,965 

4,227,057 

Hegde of Credit Operations

64,129 

13,250 

114,877 

192,255 

1,398,121 

Hedge of Securities

113,408 

5,250,301 

5,363,710 

2,828,936 

Futures Contracts

9,025,400 

15,852,495 

30,050,517 

54,928,412 

36,569,735 

Hegde of Securities

9,025,400 

15,852,495 

30,050,517 

54,928,412 

36,569,735 

Cash Flow Hedge

Swap Agreements

1,550,064 

1,550,064 

2,375,753 

Hegde of Credit Operations

1,058,007 

Hedge of Securities

1,550,064 

1,550,064 

1,317,745 

Futures Contracts

597,463 

39,485,481 

40,082,944 

18,680,868 

Hegde of Credit Operations (2)

21,020,406 

21,020,406 

15,195,149 

Hegde of Securities

597,463 

18,465,075 

19,062,538 

3,485,719 

(*) The Bank has cash flow hedge strategies, the objects of which are assets in its portfolio, which is why we have shown the liability side of the respective instruments. For structures whose instruments are futures, we show the notional's balance, recorded in a memorandum account.

(1) Credit amounts refer to lending operations and lending operations to passive operations.

(2) The updated value of the instruments on September 30, 2020 is R$8,293,988 (12/31/2019 - R$ 8,425,386).

 

At the Bank and Consolidated, the mark-to-market effect of swap and future asset contracts corresponds to a credit in the amount of R$11,518 (12/31/2019 - R$11,063) and is recorded in shareholders' equity, net of tax effects, of which R$6,340 will be realized against revenue in the next twelve months.

V) Information on Credit Derivatives

Banco Santander uses credit derivatives with the objectives of performing counterparty risk management and meeting its customers' demands, performing protection purchase and sale transactions through credit default swaps and total return swaps, primarily related to Brazilian sovereign risk securities.

Total Return Swaps – TRS

Credit derivatives are where the exchange of the return of the reference obligation occurs through a cash flow and where, in the event of a credit event, the protection buyer is usually entitled to receive from the protection seller the equivalent of the difference between the and the fair value (market value) of the reference obligation on the settlement date of the contract.

Credit Default Swaps – CDS

These are credit derivatives where, in the event of a credit event, the protection buyer is entitled to receive from the protection seller the equivalent of the difference between the face value of the CDS agreement and the fair value (market value) of the reference obligation on the settlement date of the contract. In return, the seller receives compensation for the sale of the protection.

Below, the composition of the Credit Derivatives portfolio shown by its reference value and effect in the calculation of Required Stockholders' Equity.

 

Notional

09/30/2020

12/31/2019

Retained Risk - Total Rate of Return Swap

Transferred Risk - Credit Swap

Retained Risk - Total Rate of Return Swap

Transferred Risk - Credit Swap

Credit Swaps

3,408,853 

2,435,880 

633,600 

Total

3,408,853 

2,435,880 

633,600 

 

The effect on the PLE of the risk received was R$11,611 (12/31/2019 - R$3,286).

During the period, there was no credit event related to taxable events provided for in the contracts.

09/30/2020

12/31/2019

Maximum Potential for Future Payments - Gross

Over 12 Months

Total

Over 12 Months

Total

Per Instrument: CDS

3,408,853 

2,435,880 

2,435,880 

Per Risk Classification: Below Investment Grade

3,408,853 

2,435,880 

2,435,880 

Per Reference Entity: Brazilian Government

3,408,853 

2,435,880 

2,435,880 

 

VI) Derivative Financial Instruments - Margins Pledged as Guarantee

The margin given in guarantee for transactions traded at B3 with own and third party derivative financial instruments is composed of federal public securities.

09/30/2020

12/31/2019

Financial Treasury Bill - LFT

1,029,143 

5,342,992 

National Treasury Bill - LTN

7,433,795 

1,086,556 

National Treasury Notes - NTN

2,669,168 

660,918 

Total

11,132,106 

7,090,466 


 


 

 

b) Financial instruments - Sensitivity analysis

The risk management is focused on portfolios and risk factors pursuant to the requirements of regulators and good international practices.

Financial instruments are segregated into trading and Banking portfolios, as in the management of market risk exposure, according to the best market practices and the transaction classification and capital management criteria of the New Standardized Approach of regulators. The trading portfolio consists of all transactions with financial instruments and products, including derivatives, held for trading, and the Banking portfolio consists of core business transactions arising from the different Banco Santander business lines and their possible hedges. Accordingly, based on the nature of Banco Santander’s activities, the sensitivity analysis was presented for trading and Banking portfolios.

Banco Santander performs the sensitivity analysis of the financial instruments in accordance with requirements of regulatory bodies and international best practices, considering the market information and scenarios that would adversely affect the positions and the income of the Bank.

The table below summarizes the stress amounts generated by Banco Santander’s corporate systems, related to the Banking and trading portfolio, for each one of the portfolio scenarios as of September 30, 2020.

Trading Portfolio

Consolidated

Risk Factor

Description

Scenario 1

Scenario 2

Scenario 3

Interest Rate - Real

 Exposures subject to Changes in Interest Fixed Rate

(15,858) 

(236,768) 

(473,535) 

Coupon Interest Rate

 Exposures subject to Changes in Coupon Rate of Interest Rate

(1,047) 

(11,105) 

(22,209) 

Coupon - US Dollar

 Exposures subject to Changes in Coupon US Dollar Rate

(33,905) 

(247,690) 

(495,381) 

Coupon - Other Currencies

 Exposures subject to Changes in Coupon Foreign Currency Rate

(1,623) 

(3,116) 

(6,232) 

Foreign Currency

 Exposures subject to Foreign Exchange

(33) 

(5,507) 

(11,014) 

Eurobond/Treasury/Global

 
Exposures subject to Interest Rate Variation on Papers Traded on the International Market

(4,455) 

(111,386) 

(222,773) 

Inflation

 Exposures subject to Change in Coupon Rates of Price Indexes

(653) 

(234) 

(467) 

Shares and Indexes

 Exposures subject to Change in Shares Price

(413) 

(10,322) 

(20,643) 

Commodities

 Exposures subject to Change in Commodity Price

(2) 

(42) 

(85) 

Total (1)

(57,989)

(626,169)

(1,252,339)

(1) Amounts net of tax effects.

Scenario 1: shock of +10 bps and -10 bps in the interest curves and 1% for price changes (currencies and shares), considering the largest losses by risk factor.

Scenario 2: shock of + 25% and -25% in all risk factors, considering the largest losses by risk factor.

Scenario 3: shock of + 50% and -50% in all risk factors, considering the largest losses by risk factor.

Banking Portfolio

Consolidated

Risk Factor

Description

Scenario 1

Scenario 2

Scenario 3

Interest Rate - Real

 Exposures subject to Changes in Interest Fixed Rate

(46,362) 

(55,229) 

(145,354) 

TR and Long-Term Interest Rate - (TJLP)

 Exposures subject to Change in Exchange TR and TJLP
 

(29,044) 

(246,198) 

(380,095) 

 

Inflation

 Exposures subject to Change in Coupon Rates of Price Indexes

(31,938) 

(163,836) 

(344,781) 

Coupon - US Dollar

 Exposures subject to Changes in Coupon US Dollar Rate

(4,022) 

(105,208) 

(202,884) 

Coupon - Other Currencies

 Exposures subject to Changes in Coupon Foreign Currency Rate

(8,293) 

(87,874) 

(126,687) 

Interest Rate Markets International

 Exposures subject to Changes in Interest Rate Negotiated Roles in International Market

(15,805) 

87,394 

264,837 

 

Foreign Currency

 Exposures subject to Foreign Exchange

(40) 

(1,004) 

(2,009) 

Total (1)

(135,504)

(571,955)

(936,973)

(1) Values ​​calculated based on the consolidated information of the institutions.

(2) Amounts net of tax effects.

Scenario 1: shock of +10 bps and -10 bps in the interest curves and 1% for price changes (currencies and shares), considering the largest losses by risk factor.

Scenario 2: shock of + 25% and -25% in all risk factors, considering the largest losses by risk factor.

Scenario 3: shock of + 50% and -50% in all risk factors, considering the largest losses by risk factor.

c) Off-balance funds under management

Banco Santander has under its management investment funds for which it does not hold any substantial participation interests and does not act as principal over the funds, and it does not own any shares of such funds. Based on the contractual relationship governing the management of such funds, third parties who hold the participation interests in such funds are those who are exposed to, or have

 

 

rights, to variable returns and have the ability to affect those returns through power over the fund. Moreover, though Santander Brasil acts as fund manager, in analyzing the fund manager’s remuneration regime, the remuneration regime is proportionate to the service rendered, and therefore does not create exposure of such importance to indicate that the fund manager is acting as the principal.

The funds managed by Banco Santander not recorded in the balance sheet are as follows:

 09/30/2020

 12/31/2019

Funds under management

2,755,952 

2,034,999 

Managed funds

201,874,075 

230,199,261 

Total

204,630,027 

232,234,260 

d) Third-party securities held in custody

As of September 30, 2020 and December 31, 2019, the Bank held third party debt securities and securities in custody totaling R$33,874,845 and R$27,283,548, respectively.

e) Pandemic Effects - CODIV-19

The Bank monitors the effects of this pandemic that affect its operations and that may adversely affect its results. Since the beginning of the pandemic in Brazil, Committees have been set up to monitor the effects of the spread and its impacts, in addition to government actions to mitigate the effects of COVID-19.

The Bank maintains its operational activities, observing the protocols of the Ministry of Health and other Authorities. Among the actions taken, we highlight (a) the dismissal of employees from the risk group and intensification of work in the home office, (b) the definition of a follow-up protocol, with health professionals, for employees and family members who have the symptoms of Covid-19 and (c) increased communication about preventive measures and remote means of care.

The Federal Government through the National Monetary Council and the Central Bank of Brazil has adopted measures to mitigate the impacts caused by COVID-19, specifically on credit operations, fundraising, reduction of reserve requirements and aspects related to capital, such as ( a) measures to facilitate the renegotiation of credit operations without an increase in provisions, (b) a reduction in capital requirements, in order to expand the credit system's ability to grant credit and (c) a reduction in reserve requirements. , to improve liquidity conditions.

As of the date of this disclosure, the Bank has identified (a) increase in loan and financing operations, especially for companies; (b) increase in requests for renegotiation and extension of terms for credit operations; (c) impacts on the allowance for loan losses and (d) increase in funds raised.

Future impacts related to the pandemic, which have a certain degree of uncertainty as to their duration and severity and which, therefore, cannot be accurately measured at this time, will continue to be monitored by Management.

19.Subsequent Events

Determination of Interest on Equity

The Board of Directors, in a meeting held on October 26, 2020, approved the Executive Board's proposal, ad referendum of the Ordinary General Meeting to be held until April 30, 2021, for the distribution of Interest on Equity, in the gross amount of R$ 1,000 million , which, after deducting the amount related to income tax withheld at source, in accordance with current legislation, imports a net amount of R$ 850 million, with the exception of immune and / or exempt shareholders. Shareholders who are registered in the Company's records at the end of November 4, 2020 (inclusive) will be entitled to Interest on Equity. Accordingly, as of November 5, 2020 (inclusive), the Company's shares will be traded “Ex-Interest on Equity”. The amount of Interest on Equity will be paid as of December 23, 2020 and fully charged to the mandatory dividends to be distributed by the Company for the year 2020, without any monetary restatement. The decision was approved by the Fiscal Council, according to a meeting held on the same date, and is in compliance with the provisions of CMN Resolution No. 4,820 / 2020.

Disposal of Investments in Norchem Participações e Consultoria S.A. (NPC) and Norchm Holdings e Negócios S.A. (NHN)

On October 8, 2020, Banco Santander (Brasil) SA sold its stake in Norchem Participações e Consultoria SA (50% stake) and Norchem Holdings e Negócios SA (22% stake), through a capital reduction and consequent cancellation of the shares held by Banco Santander (Brasil) SA, for which the Bank will receive an amount of approximately R$ 42 million.


 

APPENDIX I - STATEMENTS OF VALUE ADDED

01/01 to 09/30/2020

01/01 to 09/30/2019

Interest and similar income

47,995,173 

55,352,909 

Fee and commission income (net)

11,795,387 

11,553,965 

Impairment losses on financial assets (net)

(13,912,998) 

(9,636,890) 

Other income and expense

(3,720,478) 

(5,573,784) 

Interest expense and similar charges

(14,749,195) 

(22,283,787) 

Third-party input

(5,807,829) 

(5,360,056) 

Materials, energy and other

(498,827) 

(480,228) 

Third-party services

(4,568,620) 

(4,409,521) 

Impairment of assets

(17,006) 

(6,375) 

Other

(723,376) 

(463,932) 

Gross added value

21,600,060 

24,052,357 

Retention

Depreciation and amortization

(1,912,200) 

(1,768,458) 

Added value produced

19,687,860 

22,283,899 

Investments in affiliates and subsidiaries

80,383 

96,683 

Added value to distribute

19,768,243 

22,380,582 

Added value distribution

Employee

6,020,274 

30.5% 

6,289,047 

28.1% 

Compensation

4,422,522 

4,472,458 

Benefits

1,150,454 

1,234,134 

Government severance indemnity funds for employees - FGTS

334,216 

358,393 

Other

113,082 

224,062 

Taxes

3,948,386 

20.0% 

4,902,236 

21.9% 

Federal

3,318,174 

4,104,186 

State

67,237 

39 

Municipal

562,975 

798,011 

Compensation of third-party capital - rental

69,693 

0.4% 

65,678 

0.3% 

Remuneration of interest on capital

9,729,890 

49.2% 

11,123,621 

49.7% 

Dividends and interest on capital

120,000 

3,000,000 

Profit Reinvestment

9,589,246 

7,953,661 

Profit (loss) attributable to non-controlling interests

20,644 

169,960 

Total

19,768,243 

100.0% 

22,380,582 

100.0% 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Performance Review

Dear Stockholders:

We present the Management Report to Individual and Consolidated Financial Statements of Banco Santander (Brasil) S.A. (Banco Santander or Bank) related to the period ended September 30, 2020, prepared in accordance with the rules of the International Financial Reporting Standards (IFRS) issued by the Accountant Standards Board (IASB), and interpretations issued by the IFRS Interpretations Committee (current name of the International Financial Reporting Interpretations Committee - IFRIC).

1. Macroeconomic Environment

On top of the release of activity indicators across the great majority of economies signaling that fiscal and monetary stimulus packages could have addressed the worst of pandemic’s effect in the last quarter, Santander’s Bank estimates the COVID-19 pandemic developments were the main theme for the third quarter of 2020. Furthermore, Santander estimates that fiscal and monetary stimuli helped to support financial assets prices and to reverse the worsening registered in the first quarter of the year. As an example, the S&P500 index, which dropped from 3.2 thousand to 2.5 thousand points between December 2019 and march 2020, rose 3.1 thousand points in late June, ending the third quarter at approximately 3.4 thousand points (a rise of 8.5% in the period).

In Brazil, Santander considers that the misfortunes generated by COVID-19 shifted the focus from discussions on structural reforms to debates on measures to fight the economic impacts caused by the pandemic, mainly regarding actions directed at the poorest sections of the population and the business segments most exposed to the misfortunes caused by social distancing policies. In Santander’s view, such temporary measures were essential to mitigate the impact of the crisis, but will result in a substantial increase in public expenditure throughout 2020 and, therefore, will cause a significant increase in the level of indebtedness of the Brazilian government. This situation, the Bank evaluates, only reinforces the need to resume discussions on structural reforms after overcoming the pandemic to prevent the trajectory of Brazilian public debt from becoming unsustainable.

After a widespread initial wave of downward revisions to GDP projections in 2020 in the first quarter, the Bank observed that the incentives granted provoked a strong recovery in some segments of the Brazilian economy - notably, in retail trade. This more intense reaction than many had previously imagined led economic agents to start considering less intense falls for the Brazilian GDP this year. While the median projection indicated a 6.6% retraction for the Brazilian GDP at the end of the second quarter of 2020, the median expectation at the end of the third quarter indicated that the Brazilian economy is expected to decline 5.02% this year. The Bank believes that, although less intense, the prospect of a strong contraction in the Brazilian GDP continued to justify the general perception that the IPCA variation should end the year below the target set for 2020 - the median inflation forecast for the year ended the third 2.06%, while the target is 4.0% for 2020. The combination of an expected economic contraction and low inflation is what Santander considers to have given the Brazilian Central Bank room to reduce the base interest rate to its new historical low (2.00% p.a.) in the Copom meeting held in August 2020, in addition to signaling that the Selic rate will remain at this level for an extended period of time.

However, in the Bank's opinion, the scenario of slow growth and high public debt is something that has driven international investors away, which is reflected both in the behavior recorded by the Brazilian 5-year CDS spread as well as in the trajectory of its exchange rate. In the first case, the Brazilian government's instrument of protection against insolvency problems closed the third quarter close to the level recorded in the second quarter (250 basis points and 254 basis points, respectively), although it fluctuated below the level of 200 points during the period. As for the exchange rate, the Bank saw a similar process with the parity against the dollar jumping from USDBRL5.48in the end of June 2020 to USDBRL5.64in the end of the third quarter of this year, even though it was traded close to USDBRL5.11 over the period. In both cases, Santander estimates that the trigger for the worsening recorded in relation to the minimum levels observed in the third quarter is related to the intensification of doubts about the Brazilian fiscal dynamics in the coming years.

Therefore, in order to have an improvement in the performance of these indicators, the Bank believes that measures to signal greater commitment by the Brazilian government with the reversal of the upward trajectory of public spending expected for the years ahead will be necessary. In Santander’s viewpoint, this will only be possible with the resumption of structural reforms.
2. Performance                  

2.1) Corporate Net Income (prepared in accordance with International Financial Reporting Standards (IFRS)

 

Consolidated Income Statements (R$ Millions)

9M20

9M19

annual changes%

3Q20

2Q20

quarter changes %

Interest Net Income

33,246.0 

33,069.1 

0.5 

11,116,6 

10,692.6 

4.0 

Income from equity instruments

24.1 

9.0 

167.1 

5,5 

16.2 

(66.2) 

Income from companies accounted for by the equity method

80.4 

96.7 

(16.9) 

31,0 

19.3 

60.4 

Fees and Comission (net)

11,795.4 

11,554.0 

2.1 

4,026,6 

3,523.8 

14.3 

Gains (losses) on financial assets and liabilities (net) + Exchange
   differences (net)

(16,527.7) 

(1,872.5) 

782.6 

(1,214,8) 

(2,222.6) 

(45.3) 

Other operating expense (net)

(422.7) 

(986.5) 

(57.1) 

15,8 

(184.8) 

(108.5) 

Total Income

28,195.4 

41,869.7 

(32.7)

13,980,5 

11,844.5 

18.0 

Administrative expenses

(12,629.8) 

(12,433.3) 

1.6 

(4,340,9) 

(4,100.5) 

5.9 

Depreciation and amortization

(1,912.2) 

(1,768.5) 

8.1 

(665,3) 

(628.1) 

5.9 

Provisions (net)

(1,371.8) 

(1,904.1) 

(28.0) 

(388,2) 

(353.8) 

9.7 

Impairment losses on financial assets and other assets (net)

(13,930.0) 

(9,643.3) 

44.5 

(3,840,5) 

(6,613.0) 

(41.9) 

Gains (losses) on disposal of assets not classified as non-current
   assets held for sale

219.6 

0.4 

57,695.3 

0,7 

14.5 

(95.1) 

Gains (losses) on non-current assets held for sale not classified
   as discontinued operations

36.6 

(111.1) 

(132.9) 

8,8 

14.8 

(40.8) 

Operating Profit Before Tax (1)

(1,392.3)

16,009.9 

(108.7)

4,755,1 

178.4 

2,565.4 

Income taxes

11,122.1 

(4,886.3) 

(327.6) 

(951,1) 

1,881.2 

(150.6) 

Consolidated Net Income

9,729.9 

11,123.6 

(12.5)

3,804,0 

2,059.6 

84.7 

 

 


OPERATING RESULT BEFORE ADJUSTED TAXATION

9M20

9M19

annual
variation%

3Q20

2Q20

annual
variation%

 

(R$ Million)

 

Result before Taxation on Profit and Participation

(1,392.3) 

16,009.9 

(108.7) 

4,755.1 

178.4 

2,565.4 

 

Foreign Exchange Hedge

17,519.2 

2,411.7 

626.4 

2,071.8 

3,145.2 

(34.1) 

 

Operating Income Before Adjusted Taxation

16,126.9 

18,421.6 

(12.5)

6,826.9 

3,323.6 

105.4 

 

 

INCOME TAX

9M20

9M19

annual
variation%

3Q20

2Q20

annual
variation%

 

(R$ Million)

 

Income tax and social contribution

11,122.1 

(4,886.3) 

327.6 

(951,1) 

1,881.2 

(150.6) 

 

Foreign Exchange Hedge

(17,519.2) 

(2,411.7) 

626.4 

(2,071.8) 

(3,145.2) 

(34.1) 

 

Adjusted Income Tax and Social Contribution

(6,397.1)

(7,298.0)

(12.3)

(3,022.9)

(1,264.0)

139.2 

 

 

The Bank's rapid adaptation to different scenarios, supported by a solid balance sheet position and a well-defined business model, made it possible to capture important opportunities in the period, always prioritizing customer needs. Accordingly, we offer a plan to extend installments of various types of financing granted to customers in order to provide greater financial capacity. In this quarter, an extraordinary provision of R$3.2 billion was made, supported by assumptions based on stress scenarios. In addition, the Bank continued to evolve our risk models, which helped to maintain the quality of the credit portfolio at controlled levels. As a result of our actions in the period, we observed an increase in margins while reaching the best historical level of the efficiency index.

Managerial net income reached R$5,989 million, down 15.9% in twelve months and 44.6% in the quarter. Excluding the effect of the extraordinary provision expense, net income totaled R$7,749 million, an increase of 8.8% in twelve months and 1.1% in three months.

The return on average shareholders' equity (adjusted for goodwill, reached 17.1% in the first half, down 4.2 pp and 12.0% in three months. Excluding the extraordinary provision expense, ROAE was 22.1% in the first half, an increase of 0.8 pp in twelve months, and 0.4 pp less in three months.

a) Foreign Exchange Hedge of the Grand Cayman and Luxembourg Branches and the Subsidiary Santander Brasil EFC

Banco Santander operates branches in the Cayman Islands and Luxembourg and the subsidiary Santander Brasil Establecimiento Financiero de Credito, EFC, or “Santander Brasil EFC” which are used, mainly, to raise funds in the capital and financial foreign markets, providing credit lines that are extended to clients for trade-related financings and working capital. To protect the exposures to foreign exchange rate variations, the Bank uses derivatives. According to Brazilian tax rules, the gains or losses resulting from the impact of appreciation or depreciation of the local currency (Real) in foreign investments are nontaxable to PIS/Cofins/IR/CSLL, while gains or losses from derivatives used as hedges are taxable or deductible. The purpose of these derivatives is to protect the after-tax net income.

The different tax treatment of such foreign exchange rate differences results in a volatility on the operational earnings or losses and on the gross revenue tax expense  (PIS/Cofins) and income taxes (IR/CSLL), as demonstrated below:

Foreign Exchange Hedge of the Grand Cayman and Luxembourg Branchs and the subsidiary Santander Brasil EFC
(R$ Million)

9M20

9M19

annual changes%

3Q20

2Q20

quarter changes %

Exchange Variation - Profit From Financial Operations

21,807.26 

3,525.9 

518.49 

2,449.38 

697.0 

251.40 

Derivative Financial Instruments - Profit From Financial Operations

(40,098.66) 

(5,994.8) 

568.89 

(4,587.68) 

(4,024.5) 

13.99 

Income Tax and Social Contribution

17,519.22 

2,411.7 

626.42 

2,071.83 

3,145.2 

(34.13) 

PIS/Cofins - Tax Expenses

772.19 

57.2 

1,249.98 

66.47 

178.8 

(62.83) 

 

2.2) Assets and Liabilities

Consolidated Balance Sheet (R$ Million)

Sep/20

Dec/19

annual changes %

Cash and Balances with the Brazilian Central Bank

18,331.0 

20,127.4 

(8.9) 

Financial Assets Measured At Fair Value Through Profit Or Loss

42,820.5 

32,342.3 

32.4 

Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading

81,480.1 

57,020.9 

42.9 

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss

368.0 

171.5 

114.7 

Financial Assets Measured At Fair Value Through Other Comprehensive Income

107,073.9 

96,120.2 

11.4 

Financial Assets Measured At Amortized Cost

542,310.0 

474,680.9 

14.2 

Hedging Derivatives

1,321.1 

339.9 

288.6 

Non-Current Assets Held For Sale

1,187.8 

1,325.3 

(10.4) 

Investments in Associates and Joint Ventures

1,135.5 

1,070.8 

6.0 

Tax Assets

46,955.9 

33,599.2 

39.8 

Other Assets

8,732.5 

5,061.3 

72.5 

Tangible Asset

9,515.9 

9,782.0 

(2.7) 

Intangible Asset

30,678.3 

30,595.8 

0.3 

TOTAL ASSETS

891,910.5 

762,237.5 

17.0 

Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading

68,458.5 

46,064.7 

48.6 

Financial Liabilities Measured At Fair Value Through Profit Or Loss

6,149.4 

5,319.4 

15.6 

Financial Liabilities at Amortized Cost

675,137.2 

575,230.4 

17.4 

Hedge Derivatives

232.3 

201.0 

15.6 

Provisions

14,510.6 

16,331.8 

(11.2) 

Tax Liabilities

9,492.3 

10,960.1 

(13.4) 

Other Liabilities

14,121.7 

10,920.9 

29.3 

TOTAL LIABILITIES

788,102.0 

665,028.3 

18.5 

Shareholders' Equity Attributable to the Controller

103,495.4 

96,650.6 

7.1 

Non-controlling interests

313.2 

558.6 

(43.9) 

Total Equity

103,808.5 

97,209.2 

6.8 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

891,910.5 

762,237.5 

17.0 

2.3) Stockholders’ Equity

On September 30, 2020, Banco Santander consolidated Stockholders’ Equity increased by 3.6% compared to December 31, 2019.

The change in Shareholders' Equity between September 30, 2020 and December 31, 2019, was mainly due to the positive equity valuation adjustment in employee benefit plans in the amount of R$664,974 and Cash flow hedge gains and losses and investment in the amount of R$130,049 and net income for the period in the amount of R$9,729,890.

For additional information, see note 11 to financial statements.

 

2.4) Basel Index

Bacen determines that financial institutions maintain a Reference Equity (PR), PR Level I and Principal Capital compatible with the risks of their activities, higher than the minimum requirement of the Required Reference Equity, represented by the sum of the credit risk, risk market risk and operational risk.

As established in CMN Resolution No. 4,193 / 2013, the requirement for PR in 2019 was 10.5%, comprising 8.0% of Minimum Equity of Reference plus 2.5% of Additional Capital Conservation. Considering this surcharge, PR Level I increased to 8.5% and Minimum Principal Capital to 7.0%.

For the base year 2020, the PR requirement remains at 10.25%, including 8.0% of Reference Equity Minimum, plus 1.25% of Capital Conservation Additional and 1.0% of Systemic Additional. PR Level I reaches 8.25% and Minimum Principal Capital 6.75%.

In view of the pandemic scenario, the Central Bank of Brazil has been monitoring the Brazilian market and has established a set of regulations to minimize the impacts of the pandemic. In the case of capital, it established the reduction of the Main Capital Conservation Additional from 2.5% to 1.25%, aiming at expanding the capacity to grant new credit operations.

The Basel ratio is calculated in accordance with the Financial Statements of the Prudential Conglomerate prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen, as shown below:

Basel Index%

Sep/20

Dec/19

Basel I Ratio

13.58 

13.97 

Basel Principal Capital

12.28 

12.90 

Basel Regulatory Capital

14.86 

15.04 

 

2.5) Main Subsidiaries

The table below shows the balances of total assets, shareholders' equity, net income and loan operations portfolio prepared in accordance with accounting practices adopted in Brazil applicable to entities authorized to operate by Bacen, for the period ended September  30, 2020 , of the main subsidiaries of Banco Santander:

Subsidiaries (R$ Millions)

Total Assets

Stockholders' Equity

Net
Income

Loan
Portfolio (1)

Ownership/Interest (%)

Aymoré Crédito, Financiamento e Investimento S.A.

48,310.1 

1,304.4 

328.9 

46,083.40 

100.00% 

Getnet Adquirência e Serviços para Meios de Pagamento S.A.

33,909.1 

2,019.6 

209.9 

100.00% 

Banco Bandepe S.A.

29,137.5 

5,348.7 

74.5 

100.00% 

Santander Leasing S.A. Arrendamento Mercantil

7,146.9 

5,878.9 

138.9 

2,001.20 

100.00% 

Santander Corretora de Seguros, Investimento e Serviços S.A.

6,030.2 

3,468.5 

447.7 

100.00% 

Santander Brasil, Establecimiento Financiero de Credito, S.A.

5,396.3 

4,984.3 

1.9 

100.00% 

Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.

1,760.7 

1,728.9 

58.3 

100.00% 

Santander Corretora de Câmbio e Valores Mobiliários S.A.

1,245.9 

715.4 

71.3 

100.00% 

(1) Includes balances referring to leasing portfolio and other credits.    

The financial statements of the Subsidiaries above were prepared in accordance with the accounting practices adopted in Brazil, established by the Brazilian Corporate Law, in conjunction with the CMN, Bacen rules and model of the document provided for in the Accounting Plan of Cosif Institutions, of CVM , in which they do not conflict with the rules issued by Bacen, without the elimination of transactions with related companies.

3. Corporate Restructuring

During the period ended September 30, 2020 and the year ended December 31, 2019, several corporate movements were implemented in order to reorganize the operations and activities of the entities in accordance with the business plan of Banco Santander.

For additional information, see explanatory note to financial statements nº2.

4. Strategy and Rating Agencies

For information regarding the Bank's strategy and rating at rating agencies, see the Results Report available at www.santander.com.br/ri.

5. Corporate Governance

Banco Santander's Board of Directors met and resolved:

On October 26, 2020, to approve the Consolidated Financial Statements of Banco Santander, prepared in accordance with the accounting practices adopted in Brazil, applicable to the institutions authorized to operate by Bacen and the related Interim Consolidated Financial Statements of Banco Santander, prepared in accordance with the International Financial Reporting Standards (IFRS), both referring to the period ended September 30, 2020.

On September 1st, 2020, to re-ratify the resolutions at the Company’s Board of Directors’ Meeting held on May 21, 2020, which dealt with the election of the members of the Company’s Audit Committee for a new term.

On August 28, 2020, to know the resignation of Mr. Rafael Bello Noya, Officer without specific designation of the Company.

On July 29,2020, approve (i) the proposal for the merger of Bosan Participações S.A. by the Company; (ii) the proposal for the merger of Banco Olé Consignado S.A. by the Company; and (iii) the call of an Extraordinary General Meeting of the Company to be held on August 31, 2020, at 3 p.m., to resolve on the following Agenda: (a) to ratify the hiring of PricewaterhouseCoopers Auditores Independentes, a specialized company responsible for preparing the corresponding appraisal reports of the Merged Companies; (b) to approve the Appraisal Reports; (c) to approve the Protocol and Justification of Bosan; (d) to approve the merger of Bosan by the Company; (e) to approve the Protocol and Justification of Banco Olé; (f) to approve the merger of Banco Olé by the Company; and (g) to authorize the managers of the Company to perform all necessary and/or convenient acts for the implementation of the Mergers.

On July 28, 2020, approve the Banco Santander Consolidated Financial Statements, prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen and the Banco Santander Interim Consolidated Financial Statements, prepared in accordance with the International Financial Reporting Standards (IFRS), both referring to the semester ended June 30, 2020.

On July 28, 2020, to approve the proposal for declaration and payment of interest on equity, in the gross amount of R$ 770 million, for payment as of September 25, 2020, without any indexation.

On July 3, 2020, approve the election of Mr. João Marcos Pequeno De Biase as an Officer without a specific designation of the Bank.

On June 29, 2020, approve (i) the dismissal of Mr. René Luiz Grande from the position of member of the Bank's Risk and Compliance Committee; and (ii) the election of Mr. René Luiz Grande to the position of member of the Bank's Audit Committee.

On June 12, 2020, approve the election of Ms. Virginie Genès-Petronilho as a member of the Bank's Risk and Compliance Committee.

On May 27, 2020, approve the amendment to the Internal Regulations of the Board of Directors, the Audit Committee and the Risks and Compliance Committee.

On May 21, 2020, to approve the election of the members of the Company's Audit Committee for a new term, they are: Ms. Deborah Stern Vieitas, Mr. Luiz Carlos Nannini and Ms. Maria Elena Cardoso Figueira.

On May 21, 2020, approve the new version of the Remuneration Policy, in accordance with the positive recommendation of the Remuneration Committee, in compliance with the provisions of CMN Resolution No. 3,921 / 2010.

On May 21, 2020, approve the local implementation of the versions presented for the Policies of: (i) Social Responsibility; (ii) Social Investment, and (iii) Corporate Culture, according to a positive recommendation from the Sustainability Committee.

On April 28, 2020, approve the election of Mr. Pedro Augusto de Melo as a member and Coordinator of the Bank's Risk and Compliance Committee.

On April 27, 2020, approve Banco Santander Individual and Consolidated Financial Statements, prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen and the Banco Santander Consolidated Intermediate Condensed Financial Statements, prepared in accordance with International Financial Reporting Standards (IFRS), both referring to the semester ended March 31, 2020.

On April 23, 2020, learn about the resignation presented by Mr. Celso Clemente Giacometti to the positions of member of the Board of Directors, Coordinator of the Nomination and Governance Committee and member of the Compensation Committee of the Bank; (ii) to approve the appointment of Mr. Álvaro Antonio Cardoso de Souza, current member of the Bank's Nomination and Governance Committee, to serve as the Coordinator of the Committee; (iii) approve the dismissal of Mr. Bernardo Parnes from the position of Coordinator of the Risks and Compliance Committee of the Bank; (iv) to approve the appointment of Mr. Álvaro Antonio Cardoso de Souza, current member of the Risks and Compliance Committee of the Bank, for the function of Coordinator of said Committee; and (v) approve the dismissal of Mr. José Roberto Machado Filho, Executive Officer of the Bank.

On April 7, 2020, approve the election of Mr. Marcelo Augusto Dutra Labuto as an Officer with no specific designation of the Bank.

On February 28, 2020, approve the resignation of Mr. Ulisses Gomes Guimarães, Director with no specific designation of the Bank; (ii) know the resignation of Mr. Gilberto Duarte de Abreu Filho, Director without a specific designation of the Bank; and (iii) approve the election of Mr. Sandro Rogério da Silva Gamba as an Officer without a specific designation of the Bank.

On February 26, 2020, approve Banco Santander Form 20-F for the year ended December 31, 2019.

On February 26, 2020, approve the Banco Santander Consolidated Financial Statements for the year ended December 31, 2019, prepared in accordance with International Accounting Standards (IFRS).

On February 3, 2020, approve the election of Messrs. Sandro Kohler Marcondes, Vítor Ohtsuki and Geraldo José Rodrigues Alckmin Neto as Directors with no specific designation.

On January 28, 2020, approve Banco Santander Individual and Consolidated Financial Statements, prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen for the year ended December 31, 2019.

The resolutions of the Board of Directors for the year 2019 are described in the Management Report of the Individual and Consolidated Financial Statements of December 31, 2019.

6. Risk Management         

The resolution highlights the need to implement an integrated risk and capital management structure, define an integrated stress test program and declare the Risk Appetite Statement (RAS - Risk Appetite Statement), set up a Risk Committee, define a disclosure policy of published information, appointment of director for risk management, director of capital and director responsible for information disclosure policy. Banco Santander develops necessary actions on a continuous and progressive basis, aiming at adhering to the resolution. No relevant impacts were identified as a result of this standard.

For more information, see note 36 to this publication.

Capital Management Structure

Banco Santander 's capital management structure has robust governance, which supports the processes related to this topic and establishes the responsibilities of each of the teams involved. In addition, there is a clear definition of the guidelines that must be adopted for effective capital management. Further details can be found in the Risk and Capital Management Structure, available on the Investor Relations website.

Internal Audit                     

The Internal Audit reports directly to the Board of Directors, with the Audit Committee responsible for its supervision.

Internal Audit is a permanent function and independent from any other function or unit, whose mission is to provide the Board of Directors and senior management with independent assurance on the quality and effectiveness of internal control and risk management systems (current or emerging) and government, thus contributing to the protection of the organization's value, solvency and reputation. The Internal Audit has a quality certificate issued by the Institute of Internal Auditors (IIA).

In order to fulfill its functions and coverage risks inherent in Banco Santander activity, Internal Audit has a set of tools developed internally and updated when necessary. Among them, the risk matrix stands out, used as a planning tool, prioritizing the risk level of the auditable universe considering, among others, its inherent risks, the latest audit rating, the degree of compliance with the recommendations and its dimension. The work programs, which describe the audit tests to be carried out, are periodically reviewed.

The Audit Committee and the Board of Directors have favorably analyzed and approved the Internal Audit work plan for 2020.

7. People

People are an essential element in the Organization. After all, they are the ones who think, design, develop, interact and build what Banco Santander wants to be. This is why the Bank invests in each of the 45,147 employees here in Brazil.

For the development of these people, the Corporate Academy - Academia Santander, works for a strong, transversal culture, providing that everyone, online and in person, can improve what they already know and explore new possibilities.

Banco Santander supports leaders and managers so that they are close and available. This performance is based on three pillars: Feedback, Open Chat and Personalized Recognition, making sure there is alignment between everyone through recurring and frank conversations, career direction and special moments to reward the growth of the teams.

Banco Santander values ​​a diverse environment, where each competence and each difference is valued. An example is the Affinity Group, created to promote diversity and inclusion based on the 5 pillars: Female Leadership; Racial Equity; Disabled people; Diversity of Formations, Experiences and Generations and the LGBT + pillar. Another good example is the Talent Show. In it, Banco Santander opens space to get to know the most different performances and explore the universe of skills that exist in the Bank, allowing interaction and fraternization among colleagues.

The result of all these actions is the high level of engagement, proven through two surveys that are carried out annually and that bring excellent indicators. One of them points out that at least 91% of employees say they want to stay at Banco Santander for a long time. It is believed that this satisfaction reflects positively on interactions with Customers, generating greater loyalty, sustainable growth and investments in Society, which leads Banco Santander to be the best Bank for all stakeholders.

Since 2007, the bank has held Santander Week, a week that aims to celebrate institutional culture and connect with the community, through initiatives that mobilize more than 45 thousand employees. In the 2020 edition, the challenges imposed by the pandemic, motivated the institution to go beyond the borders of branches and corporate buildings, inviting the entire society to participate, multiplying the effect of the annual campaign. The whole joint effort was reverted to the project “Mothers of Favela ”, of the Central Única das Favelas (CUFA), which supports mothers who are heads of families of more than 5,000 favelas across Brazil to take care of their homes and their communities. And an unprecedented action marked the end: “O Canal é Seu”, a 12-hour turnaround on more than 20 TVs, radio and portals, which took turns every 30 minutes to show a special program with artists and influencers who invited viewers to participate in the initiative.

In addition to the collection of R$ 7,226 million that will be distributed to the Mothers of the Favela in the form of a digital basic basket, days of Santander Week, part of the executive committee visited four of the institutions supported by the Bank since the beginning of the pandemic, having the opportunity to get to know more closely the impact caused by the action taken with the employees and the Heróis Usam program Masks. Bank leaders also went to CUFA branches in different regions of the country to get to know the great work done by the organization, and, once again, assumed functions in relevant areas of daily life, such as reception, cleaning, among others. 2020 was the dissemination of #efeitosantander throughout Brazil!

8. Sustainable Development          

Santander Brasil's Sustainability strategy is based on three pillars: (i) Strategic and efficient use of Environmental Resources, (ii) Development of Potentials and (iii) Resilient and Inclusive Economy. The Bank's vision, through these pillars, is to contribute to a better, more prosperous and fair society, maintaining excellence and responsibility in internal management, with ethical values as the basis and technology at the service of people and businesses.

In relation to Social and Environmental Business, Santander in the third quarter: i) participated in the issuance of the Sustainable Linked-Bond of Suzano's debt of $ 750 million. This was the second operation carried out in the world of Sustainable Linked-Bond, which is a new international debt instrument in which a company raises funds linked to the achievement of environmental goals; ii) launched a line of R$ 5 billion to support water supply, sewage collection and treatment and drainage initiatives pluvial; iii) acted as bookkeeper and intermediary for Oleoplan's CBios, which is one of the first biodiesel companies to sell decarbonization credits; and iv) in partnership with two other private pairs, presented an integrated plan with the objective of contribute effectively to the sustainable development of the Amazon.

In 2020, Santander Brasil received updates on its performance in the rating of ESG Agencies (environmental, social and governance). It remains in Vigeo Eiris' ranking of 'Best Emerging Market Performers'; received improvements in its score in the analysis of FTSE4Good, being above the sector average (Banks), industry (financial) and also the average of Brazilian companies; is on in relation to MSCI, it remains AA (on a AAA-CCC scale), being above the industry average in almost all dimensions.

As a result of the global health crisis scenario, Banco Santander has promoted actions to support customers and society. One of these actions includes supporting five institutions that are working on the front line in combating Covid-19. More than R$7 million was collected, half of the amounts donated by employees and the other half, doubled by the Bank. Others actions can be seen on the Santander's website, through the link https://www.santander.com.br/campanhas/cuidar.

9. Independent Audit

The policy of Banco Santander, including its subsidiaries, in contracting services not related to the auditing of the Financial Statements by its independent auditors, is based on Brazilian and international auditing standards, which preserve the auditor's independence. This reasoning provides for the following: (i) the auditor must not audit his own work, (ii) the auditor must not exercise managerial functions in his client, (iii) the auditor must not promote his client's interests, and (iv ) the need for approval of any services by the Bank's Audit Committee.

In compliance with CVM Instruction 381/2003, Banco Santander informs that in the period ended September 30, 2020, PricewaterhouseCoopers did not provide services unrelated to the independent auditing of the Financial Statements of Banco Santander and controlled companies over 5% of the total fees related to independent audit services.

In addition, the Bank confirms that PricewaterhouseCoopers represents your administration that has procedures, policies and controls in place to ensure its independence, which include assessing the work performed, covering any service other than an independent audit of the Financial Statements of Banco Santander and its subsidiaries. This assessment is based on the applicable regulations and accepted principles that preserve the auditor's independence. The acceptance and provision of professional services not related to the auditing of the Financial Statements by its independent auditors during the period ended September 30, 2020, did not affect the independence and objectivity in conducting the external audit exams carried out at Banco Santander and other entities of the Group, since the above principles were observed.

The Board od Directors

The Executive Board

(Authorized at the Board of Directors' Meeting of 10/26/2020).


 


 

 

Composition of Management Bodies

Board of Directors

Álvaro Antônio Cardoso de Souza – President

Sérgio Agapito Lires Rial - Vice-President

Deborah Patricia Wright - Counselor (independent)

Deborah Stern Vieitas - Counselor (independent)

Jose Antonio Alvarez Alvarez – Counselor

José de Paiva Ferreira – Counselor

José Maria Nus Badía – Counselor

Marília Artimonte Rocca - Counselor (independent)

Pedro Augusto de Melo - Counselor (independent)

 

Audit Committee

Deborah Stern Vieitas - Coordinator

Luiz Carlos Nannini - Qualified Technical Member

Maria Elena Cardoso Figueira - Member

René Luiz Grande – Member

Risk and Compliance Committee

Pedro Augusto de Melo – Coordinator

Álvaro Antonio Cardoso de Souza - Member

José de Paiva Ferreira - Member

Virginie Genès-Petronilho - Member

Sustainability Committee

Marilia Artimonte Rocca - Coordinator

Carlos Aguiar Neto - Member

Carlos Rey de Vicente - Member

Mario Roberto Opice Leão - Member

Tarcila Reis Corrêa Ursini - Member

Nomination and Governance Committee

Álvaro Antonio Cardoso de Souza - Coordinator

Deborah Patricia Wright - Member

Luiz Fernando Sanzogo Giogi - Member

Compensation Committee

Deborah Patricia Wright - Coordinator

Álvaro Antonio Cardoso de Souza- Member

Luiz Fernando Sanzogo Giogi - Member

Fiscal Council *

João Guilherme de Andrade So Consiglio - Effective Member (President)

Antonio Melchiades Baldisera - Effective member

Louise Barsi - Effective Member

Manoel Marcos Madureira - Substitute

Luciano Faleiros Paolucci - Substitute

Valmir Pedro Rossi – Substitute

 

* The Fiscal Council was installed at the Annual and Extraordinary Shareholders' Meetings held on April 30, 2020, and the members were approved by the Central Bank of Brazil on July 10, 2020, the date on which they took office in their respective positions, with a mandate until the 2021 Annual General Meeting.


 

 

 

Executive Board

 

Chief Executive Officer                         

Sérgio Agapito Lires Rial

 

Vice-President Executive Officer and Investor Relations Officer                      

Angel Santodomingo Martell 

 

Vice-President Executive Officers                        

Alberto Monteiro de Queiroz Netto

Alessandro Tomao 

Antonio Pardo de Santayana Montes     

Carlos Rey de Vicente

Ede Ilson Viani       

Jean Pierre Dupui   

Juan Sebastian Moreno Blanco                              

Mário Roberto Opice Leão

Patrícia Souto Audi

Vanessa de Souza Lobato Barbosa

 

Officers without specific designation                                 

Amancio Acúrcio Gouveia

Ana Paula Vitali Janes Vescovi

André de Carvalho Novaes

Carlos Aguiar Neto  

Cassio Schmitt         

Claudenice Lopes Duarte

Daniel Fantoni Assa

Elita Vechin Pastorelo Ariaz     

Franco Luigi Fasoli

Geraldo José Rodrigues Alckmin Neto

Germanuela de Almeida de Abreu

Gustavo Alejo Viviani               

Igor Mario Puga

Jean Paulo Kambourakis 

João Marcos Pequeno de Biase

José Teixeira de Vasconcelos Neto 

Luis Guilherme Mattos de Oliem Bittencourt

Luiz Masagão Ribeiro Filho 

Marcelo Augusto Dutra Labuto

Marino Alexandre Calheiros Aguiar

Ramón Sanchez Díez

Ramon Sanchez Santiago        

Reginaldo Antonio Ribeiro

Roberto Alexandre Borges Fischetti

Robson de Souza Rezende

Sandro Kohler Marcondes

Sandro Rogério da Silva Gamba            

Thomas Gregor Ilg   

Vítor Ohtsuki

 

Public Accountant

Gilberto Cabeleira Alves – CRC Nº PR040031/ O-7


 

 

 

Declaration of directors on the financial statements

 

For purposes of compliance with Article 25, § 1, VI, CVM Instruction 480, of December 7, 2009, the Executives' of Banco Santander (Brasil) S.A. (Banco Santander) state that they have discussed, reviewed and agreed with the Banco Santander's Financial Statements for the semester ended June 30, 2020, prepared in accordance with International Financial Reporting Standards (IFRS) and the documents that comprise it, being: Management Reports, consolidated balance sheets, consolidated income statements, consolidated statements of comprehensive income, consolidated cash flow statements, consolidated statements of changes in equity and notes to the consolidated financial statements, prepared according IFRS issued by the International Accounting Standards Board (IASB). These financial statements and the documents that comprise it, have been the object of an unqualified review report of the Independent Auditors and the recommendation for approval issued by the Bank’s Audit Committee to the Board of Directors and favorable opinion from the Bank’s Fiscal Council.

Members of the Executive Board of Banco Santander on September 30, 2020:

Chief Executive Officer                         

Sérgio Agapito Lires Rial

Vice-President Executive Officer and Investor Relations Officer                      

Angel Santodomingo Martell 

Vice-President Executive Officers                        

Alberto Monteiro de Queiroz Netto

Alessandro Tomao 

Antonio Pardo de Santayana Montes     

Carlos Rey de Vicente

Ede Ilson Viani       

Jean Pierre Dupui   

Juan Sebastian Moreno Blanco                              

Mário Roberto Opice Leão

Patrícia Souto Audi

Vanessa de Souza Lobato Barbosa

 

Officers without specific designation                                 

Amancio Acúrcio Gouveia

Ana Paula Vitali Janes Vescovi

André de Carvalho Novaes

Carlos Aguiar Neto

Cassio Schmitt

Claudenice Lopes Duarte

Daniel Fantoni Assa

Elita Vechin Pastorelo Ariaz

Franco Luigi Fasoli

Geraldo José Rodrigues Alckmin Neto

Germanuela de Almeida de Abreu

Gustavo Alejo Viviani             

Igor Mario Puga

Jean Paulo Kambourakis

João Marcos Pequeno de Biase

José Teixeira de Vasconcelos Neto

Luis Guilherme Mattos de Oliem Bittencourt

Luiz Masagão Ribeiro Filho

Marcelo Augusto Dutra Labuto

Marino Alexandre Calheiros Aguiar

Ramón Sanchez Díez

Ramon Sanchez Santiago

Reginaldo Antonio Ribeiro

Roberto Alexandre Borges Fischetti

Robson de Souza Rezende

Sandro Kohler Marcondes

Sandro Rogério da Silva Gamba            

Thomas Gregor Ilg

Vítor Ohtsuki

 

 

 

 

 

Directors' Statement on Independent Auditors

 

For purposes of compliance with Article 25,§ 1, V,CVM Instruction 480, of December 7, 2009, the Executives of Banco Santander (Brasil) S.A. (Banco Santander) state that they have discussed, reviewed and agreed with Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS) of Banco Santander which includes the Independent Auditors' Report for the semester ended June 30, 2020, prepared in accordance with International Financial Reporting Standards (IFRS) and the documents that comprise it, being: Management Reports, consolidated balance sheets, consolidated income statements, consolidated statements of comprehensive income, consolidated cash flow statements, consolidated statements of changes in equity and notes to the consolidated financial statements, prepared according IFRS issued by the International Accounting Standards Board (IASB). These financial statements and the documents that comprise it, have been the object of an unqualified review report of the Independent Auditors and the recommendation for approval issued by Bank’s Audit Committee to the Board of Directors and favorable opinion from the Bank’s Fiscal Council.

Members of the Executive Board of Banco Santander on September 30, 2020:

 

Chief Executive Officer                         

Sérgio Agapito Lires Rial

 

Vice-President Executive Officer and Investor Relations Officer                      

Angel Santodomingo Martell 

 

Vice-President Executive Officers                        

Alberto Monteiro de Queiroz Netto

Alessandro Tomao 

Antonio Pardo de Santayana Montes     

Carlos Rey de Vicente

Ede Ilson Viani       

Jean Pierre Dupui   

Juan Sebastian Moreno Blanco                              

Mário Roberto Opice Leão

Patrícia Souto Audi

Vanessa de Souza Lobato Barbosa

 

Officers without specific designation                                 

Amancio Acúrcio Gouveia

Ana Paula Vitali Janes Vescovi

André de Carvalho Novaes

Carlos Aguiar Neto  

Cassio Schmitt         

Claudenice Lopes Duarte

Daniel Fantoni Assa

Elita Vechin Pastorelo Ariaz     

Franco Luigi Fasoli

Geraldo José Rodrigues Alckmin Neto

Germanuela de Almeida de Abreu

Gustavo Alejo Viviani               

Igor Mario Puga

Jean Paulo Kambourakis 

João Marcos Pequeno de Biase

José Teixeira de Vasconcelos Neto 

Luis Guilherme Mattos de Oliem Bittencourt

Luiz Masagão Ribeiro Filho 

Marcelo Augusto Dutra Labuto

Marino Alexandre Calheiros Aguiar

Ramón Sanchez Díez

Ramon Sanchez Santiago        

Reginaldo Antonio Ribeiro

Roberto Alexandre Borges Fischetti

Robson de Souza Rezende

Sandro Kohler Marcondes

Sandro Rogério da Silva Gamba            

Thomas Gregor Ilg   

Vítor Ohtsuki


 

 

SIGNATURE

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

Date: October 26, 2020

 

Banco Santander (Brasil) S.A.

By:

/SAmancio Acurcio Gouveia 


 

Amancio Acurcio Gouveia
Officer Without Specific Designation

 

 

By:

/SCarlos Rey de Vicente


 

Carlos Rey de Vicente
Vice - President Executive Officer