Santander defies weak Brazil economy with strong loan growth

Santander Brasil, the Brazilian unit of Spanish banking giant Banco Santander, saw its loan portfolio grow at a double digit pace in the 12 months through June despite the sluggish nature of Brazil's economy.

Lending expanded 13.3% to 368bn reais (US$98.7bn) at the end of June, with loans to individuals jumping 23% while loans to companies only grew 0.2%.

"I see no reason for a change in the performance of our loan portfolio during the second half," Santander Brasil president Sergio Rial said at a press conference for the Q2 results.

Rial expects continued strong loan demand from individuals while demand from companies will being to pick up after the October 7 presidential elections when political risk is set to diminish.

The bank's non-performing loan ratio improved to 2.8% at the end of the first half from 2.9% a year ago.

The strong increase in lending helped Santander Brasil post a 27.5% increase in Q2 net profits to 5.88bn reais and also help offset an increase of 13.7% in expenses related to loan loss provisions (5.25bn reais).

MARKET REACTION

"We reinforce our view that Santander Brasil has passed through the turbulent period of the Brazilian economy with no scratches, growing its credit portfolio, gaining market share, and with a better asset quality, in a completely different cycle when compared with its peers," said the team of banking analysts at local brokerage BB Investimentos.

BB Investimentos raised its recommendation on the Santander Brasil shares to outperform from market perform.