Banco Santander (Brasil) S.A. (BSBR) Q1 2014 Earnings Report, Transcript and Summary

Good afternoon, and thank you for waiting. Welcome to the conference call to discuss Banco Santander Brasil S.A.'s results of the first quarter of 2014. Present here are Mr. Carlos Galán, Vice President, Executive Officer, CFO; Oscar Rodriguez, Vice President Executive Officer, CRO; and Mr. Luiz Felipe Taunay, Head of Investor Relations. The live webcast of this call is available at Banco Santander's Investor Relations site, www.santander.com.br/ri, where the presentation is available for download. [Operator Instructions] Before proceeding, we wish to clarify that forward-looking statements may be made during the conference call relating to the business outlook of Banco Santander, operating and financial projections and targets based on the beliefs and such assumptions of the Executive board, as well on information currently available. Such forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions, as they refer to future events and hence, depend on circumstances that may or may not occur. Investors must be aware that general economic conditions, industry conditions and other operational factors may affect the future performance of Banco Santander and may cause actual results to substantially differ from those in the forward-looking statements. I would now like to pass the call to Mr. Carlos Galán, Vice President, Executive Officer, CFO. Mr. Galán, you may proceed. Carlos Alberto López Galán: Thank you. Good afternoon, and thank you for attending Santander Brasil First Quarter 2014 Results Conference Call. Before I start our regular earnings presentation, I would like to make a few comments about the material fact released a few hours ago by Santander Group and Santander Brasil. As you know, Santander Group announced a voluntary offer in Brazil and in United States to acquire the minority interest, approximately 25%, in Santander Brasil. In the offer, Santander Brasil shareholders will receive 0.70 Santander Group shares in exchange for each Santander Brasil share held, which implies a premium of around 20%. The offer is not conditioned on a minimum level of acceptance. Remaining Santander Brasil shares will continue trading on the São Paulo Stock Exchange at the traditional segment and not anymore at the Level 2 of Corporate Governance and the New York Stock Exchange subject only to New York Stock Exchange listing requirement. The offer is subject to require approvals, approvals of the regulators, approvals by Santander Brasil shareholders and Group Santander shareholders at the respected shareholder meetings. And also approvals for trading on the São Paulo Stock Exchange of Santander Group BDRs. The transaction is expected to be completed by the fourth quarter this year. You can see all the information in Santander's Group and Santander Brasil sites, and we'll be updating you every moment when a new event arise. Let us now move back to the earnings presentation. The table of contents summarizes the topics that will be covered: a quick view about macroeconomic scenario, the highlights regarding the first quarter 2014, the evolution of the first quarter performance. And I will then finish with final remarks. But first, I would like to mention that the quarter results were impacted by the implementation of the capital optimization of BRL 6 billion. One can find a detailed description of the impacts in the earnings release. The monthly impact of NII is approximately BRL 51 million and our net profit is BRL 22 million. Since the execution took place in the end of January, the impact on the quarter was BRL 102 million in net interest income and BRL 44 million in net profit. The first Q and the fourth Q 2013 information were not restated and thus, the quarter-over-quarter and year-over-year changes are impacted by this issue. On the next page, regarding the macroeconomic outlook, I would like to say that although the macro outlook continues to be challenging, it's not expected that any major economic adjustment will take place before elections. We do not see and we don't foresee major discontinuities and inflation will remain pressure in the next 2 years, hovering around the inflation target ceiling. And also GDP growth is likely to run below 2% in the next 2 years. 2015 growth will be impacted by economic policy adjustment. But again, we do not believe in overshooting in the interest rate or in the FX market. We continue to believe that Brazil will overcome the short-term economic challenges and the country continues to be a growth opportunity in the long run. On Page 6, going through the highlights of this quarter, I would like to share 6 points: first, net profit amounted to BRL 1,428 million on a quarterly basis but also, on an annual basis, profit before tax performed better than net profit, growing 2% in the quarter and 9% in the year. Secondly, expanded credit portfolio grew 7% year-on-year. Funding from clients continue to outgrow the trade portfolio, which improved the loan-to-deposit ratio in 800 basis points in the last year. Third, revenues. NII plus fees decreased 4% quarter-over-quarter and 6% year-over-year. However, overall revenues net of allowance for loan losses, continued to present a positive outcome. They grew 6% on a yearly basis. The fourth point, operating expenses, including depreciation and amortization, decreased 8% in the quarter and increased 2% over the first quarter of 2013, which is well below inflation in the period. Fifth, NPLs over 90 days improved 200 basis points in the year, with improvements in individuals and corporates. Allowance for loan losses decreased 4% in the quarter and 30% in 12 months. Sixth and finally, a strong balance sheet. The bank remains in a comfortable position in terms of coverage and capital levels. On Page 8, you'll see the quarterly net result evolutions. The first Q results amounted at, we say, BRL 1.4 billion, a growth of 1.3% against the previous quarter and a decrease of 6% over the same quarter last year. If one normalizes the impact of the capital optimization in the quarter, net profit would increase 4.4%. On Page 9, we see how the main lines in the income statement evolved. They were impacted not only by the quarter seasonality, but also by the execution of the capital plan and the full impact of the asset management sale. Bearing these in mind, let me run through the major lines. First, revenues affected by moderated credit growth, product mix change and the sluggish economic growth. NII decreased 3% in the quarter. Excluding the impact of the capital optimization, NII would decrease 1.5% in the quarter. Fees and commissions decreased 8% in the quarter and increased 2% over the same period last year. These evolutions were impacted not only by asset management sale, but also by a specific issue in the insurance. I will comment both later in this presentation. Excluding these events, fees would decrease 2% Q-over-Q and would increase 11% year-over-year. Secondly, lower allowance for loan losses. Allowance for loan losses totaled BRL 2.3 billion, a decrease of 4% in the quarter and 30% year-over-year. Cost of credit reduced 20 basis points in the quarter and 200 basis points on the annual terms. Third, general expenses and the control with annual growth well below inflation, reflecting our efforts to increase productivity and efficiency. Total expenses decreased 8% in 3 months and increased 2% in 12 months. As a result of previous dynamics, profit before taxes improved 2% or BRL 42 million in the quarter and 9% or 190 -- BRL 149 million in 12 months. The effective tax rate in the quarter increased to 15.4% from 13% in the 4Q and 2.4% in the first Q. We expected the effective tax rate for the full year should be ranged in between at 8% and 10%. In 2013, for the full year, the tax rate was 8%. With higher taxes in this period, the final outcome is a growth of 1.3% in the net profit evolution quarter-on-quarter. On the next page, I would like to comment 3 points. Net interest income came to BRL 7 billion, a reduction of 9% in 12 months. In the quarterly comparison, NII decreased 3% of more or less BRL 211 million. 55% of this quarterly drop is explained by a decrease of BRL 116 million in the line Others. Just have to recall the line Others reflects results from a structural interest rate mismatch and Treasury activities. The drop in the quarter in this line is basically explained by the impact of the capital optimization that amounted BRL 102 million, as I mentioned before. The third idea is the credit related NII decreased 1.4% in the quarter and 5.6% in 12 months. The quarterly evolution is explained mainly by the lower number of days in the period and the lower pace of commercial activity. The lower number of days in the period impacted the NII in BRL 133 million. On annual basis, the performance continues to be impacted by the mix change caused by the increase in the share of products with lower spreads and risks. On the other hand, the encouraging point of this quarter is that for the first time after 6 consecutive quarters, average loan portfolio spread showed a slight increase of 10 basis point in this period. This resulted, not only from a more muted base in changing mix, which is in line with the expectation that we shared with you, but also from some spread increase on our product basis. On Page 11, looking at the loan portfolio, the expanded loan portfolio reached BRL 275 billion, a decrease of 1.6% in the quarter and an increase of 7% in 12 months. The drivers for the quarterly revolutions were: first, the first quarter is always weaker due to seasonality; secondly, the fact that the real strengthened in the quarter dented 40 basis points in the quarterly growth; third, we have specific challenges for payroll lending and SMEs that impacted the overall growth. Just to put in perspective, excluding the impact of payrolls, the growth that Santander showed for individual was 1.6% in the quarter and 11% in 12 months. The fourth element. I would like to say a few words about the specific challenges. Regarding payrolls, as discussed previously, we have reengineered our internal origination channel for the product that will explain more than 50% of activity in the product. The bank set up more than 100 offices, which were opened close to the main branches, from December up to February. Although the overall volumes in the quarter were weak, they showed an improvement over the course of the quarter. We expect that origination volumes will continue to accelerate in this channel in the months to come. The relation with the external origination channel, as also mentioned previously, where the bank has decided to operate in this channel in a much more timid way until a more structured solution is in place for it. Regarding SMEs, we are not satisfied with the performance. Part of the weakness is due to delays, the impact of the new origination standards implemented last year and the negative seasonality. In the quarter, the bank reorganized the team and increased the amount of resources deployed to the segment. We expect a change in the trend and a positive growth year-over-year by the end of 2014. I would like to reinforce that we perceive this segment as a key, as an opportunity. With all these caveats, I should mention that the evolution was weaker than aimed by the bank and I suspect that the overall growth will accelerate over time. In terms of asset quality indicators on Page 12, when we look at the early delinquency from 15 to 90 days, this ratio reached 5.3%, an increase of 60 basis points in the quarter and 33 basis points over March 2013. This assessed that the bulk of the movement is seasonal and was also impacted by a combination of lower number of working days, which impacted the dynamics of recoveries, renegotiations. Looking at the NPL over 90 days, this ratio reached 3.8% of the total credit portfolio, up 10 basis point in the quarter and down 200 basis point in 12 months. For individuals, delinquency stood at 5.1%, flat in the quarter and an improvement of 290 basis point year-over-year. Corporate delinquency decreased 120 basis point year-over-year to a 2.6% level. It has to be said that going forward, the room for further improvements based solely on asset quality improvements on our product segment basis is limited. The importance of change in mix will be explaining improvements in the next coming quarters. On the next page, as a consequence of the asset quality improvement, the allowance for loan losses totaled BRL 2.3 billion in the first quarter, a decrease of 4% in the quarter and 30% in 12 months. It is the fourth consecutive quarter that we have observed a reduction in the allowance for loan losses, which is now approximately BRL 1 billion below the first Q 2013 level. The credit cost decreases 200 basis point year-over-year. Combining the credit cost improvement with a long book spread increase led to an improvement in the spreads, net of loan losses provisions in this period. In the next page, we can see how fees have evolved. Total fees and commissions income in the first quarter of 2014 reached BRL 2.6 billion, a decrease of 8% over the last quarter and an increase of 2% in 12 months. Besides typical seasonality, we had 2 events related to insurance fees and the sale of Santander Asset Management. Regarding the first one, insurance fees. The insurance fee presented a reduction of 20% in 12 months and 18% in the quarter. Both variations are mainly impacted by the seasonal effect of policies renewals, which were concentrated in the beginning of the year. And from 2013 on, are recognized in December. Those impacts were previously discussed in our calls meetings. Excluding this effect, both from the first and the fourth quarter 2013, insurance fees would grow by 12% in 12 months and 9% in the quarter. Regarding asset management, the evolution in the quarter was impacted by the execution in the 4Q of the asset management sale. Adjusting for this sale, asset management fees would grow 1% Q-over-Q and 10% in an annual basis. And as I mentioned before, adjusting both events, the underlying fee evolution would be a reduction of 2% Q-over-Q and an increase of 11% in annual terms. On Page 15, regarding cost, total expenses, excluding depreciation and amortization, decreased 9% in 3 months and increased 3% in 12 months. Including depreciation and amortization, it reduced 8% over the last quarter and it increased 2% in the year, well below half of the inflation. As we discussed in previous quarters, the productivity and efficiency improvement are multiyear goals. We have been working in a special program which comprises various initiatives such as commercial processes review at the point-of-sale, number of capital [ph] quarters building optimization, improvement of branch commercial distribution, call centers integration and general processes simplifications. Looking at the performance ratios, efficiency ratio reached 49.3%, an improvement of 180 basis points over the fourth quarter of 2013 and an increase of 500 basis points over the same period last year. This is basically explained by the top line pressure we previously presented. Recurrence ratio reached 66.3% in the first quarter, an improvement of 30 basis points in 3 months and a decrease of 20 basis points in 12 months. Return on equity reached 11.2%, an improvement of 70 basis point against the previous quarter and a decrease of 80 basis point in the year. About 50% of the improvement in this period is related to the capital optimization impact. On Page 17, assets totaled BRL 486 billion, an increase of 2% in the quarter and 11% over March 2013. Equity, excluding goodwill, amounted to BRL 49 billion, a decrease of 9% over December 2013. Considering the goodwill, equity totaled 56 -- BRL 57 billion. The equity reduction in the quarter is mainly explained by the impact of the capital plan through the restitution of equity to the shareholders in the amount of BRL 6 million. On the next page, coverage ratio over 90 days reached 177%, in line with the previous quarter and an increase of 52 percentage points over March 2013. This ratio continues to be at comfortable levels. As we have indicated, the bank doesn't have a target for coverage ratio. Looking at the BIS ratio, this reached 18.3%, the highest among large Brazilian banks. 90 basis point lower than the previous quarter, and it's basically composed of Tier 1 capital. The reduction of the BIS ratio in this quarter is due to -- 36 basis points is explained by the impact of new Basel III rules for goodwill. Given the fact that goodwill is amortized in Brazil, it works as a kind of forced retained earnings over time. These dividends are paid on profits considering the goodwill amortization. Also, since most of the goodwill will be fully amortized in the next 2.5 years, one can argue that this impact has a temporary nature. 18 basis point by the implementation of Basel III regarding DTA's, loss carryforwards and other intangibles. Finally, based on Santander's balance as of March 2014, the additional impact that we expect for Basel III implementation on a fully load basis is about 30 basis additional impact. On Page 19, you can observe the evolution of deposit activities, which reflects our strong focus on our clients and on the linkage with them. Total funding from clients amounted to BRL 223 billion, an increase of BRL 28 billion in 12 months, which is higher than the increase in the total credit portfolio of BRL 12 billion in the same period, improving the loan-to-deposit ratio about 800 basis points in the last 12 months and reaching basically 100%. We would like to highlight the good performance and resilience in our car deposits. Demand and saving deposits, which increased 22% on annual basis. Total funding plus assets under management amounted BRL 391 billion, growth of 1% in the quarter and an increase of BRL 32 billion or 9% in 12 months. Assets under management reached BRL 149 billion, up 3% over December 2013, and an increase of 6% in 12 months. In summary, the first quarter results continue to show the adjustment process that the bank is undergoing given the structural changes that had taken place in the Brazilian financial system. After various quarters of a spread compression, the slight loan book spread increase in the quarter reinforces our perception that we are not going to face the sort of spread compression that we saw not long ago. Even though one expects a better spread evolution, 2014 continues to be another year with top line pressure. Asset quality has improved substantially with a more resilient business mix. Grade-related NII after loan loss provisions increases for the fourth consecutive quarter, and we believe we will continue with a positive trend in the coming quarters. Results continue to appear as a result of the bank's effort to increase productivity and efficiency. And in terms of activity, we are satisfied with deposits and funding evolution while the pace of credit growth is below our expectations and we are working to solve the constraints. But again, the most important point is to continue with the focus to transform the bank into a client-led bank by continuing the efforts to increase customer loyalty, to increase the transactionality with them and to ensure the right offer of products and services for each customer cluster. Thank you very much.

[Operator Instructions] The first question comes from Tito Labarta with Deutsche Bank.

A couple of questions. Just first, do you expect any changes to your dividend policy with this tender offer from the Santander in Spain? Just wondering if we can expect any changes on that. And then the second question, just in terms of asset quality, saw a little bit of deterioration in the quarter, yet your provision charges did fall. So just want to get a sense of how you expect asset quality to evolve for the rest of the year? And then how you see your provision charges evolving with that? Carlos Alberto López Galán: Thank you, Tito, for your questions. Regarding the first one, the dividend policy, there is no change policy in the coming quarters. As you know, the target that we have defined is to build 50% of the IFRS result, which is more or less equivalent to 90% of the Brazilian GAAP result. And this is more or less the target that we have for 2014 and can tell you that we are going to follow-up for the quarters to come. Regarding the second question about the asset quality, I would transfer the voice to Oscar, our Chief Risk Officer.

Tito, thank you for your question. In terms of asset quality, it is -- just, we've seen in the first quarter a slight deterioration in the indicators over 90 and a little bit stronger or more stronger in the 15 to 90 days. Well you have to consider -- our analysis shows that this operation has been strongly impacted by the characteristics of the first quarter that has some seasonal component. And it is also -- it has been also impacted by the lower production in the collections area due to the less number of working days. We believe that there are no significant changes in terms of the level of delinquency. And in terms of -- you mentioned also, you wanted to know about how do we see the year 2014. We'll continue to -- or we maintain what we said in our previous conference calls regarding last year in which the vantages continue to show a stability in general. And therefore, we maintain our view that the delinquencies should remain in comfortable levels. And this will continue to evolve with the credit growth and the evolution of the mix.

The next question comes from Saul Martinez of JPMorgan. Saul Martinez - JP Morgan Chase & Co, Research Division: I have maybe a little bit of an uncomfortable question. But a number of investors I've communicated with have been upset or bothered by the transaction, feeling that value's been destroyed since the IPO, and now they're being asked to be bought out at what amounts to fairly depressed levels in their minds. And one of the common notions that is being -- that has been thrown out there, at least to most people I've spoken to, is that maybe Santander hasn't have the right incentive to produce results or to improve results in Brazil in light of the transaction. I'm curious how you would respond to that sentiment. Carlos Alberto López Galán: Thank you, Saul, for your question. There are different obsticalities [ph] from one transaction. We've seen that view compared with when we made the IPO, the timing and the moment it was completely different. Bear in mind that when we made the IPO, for instance the BOVESPA index was about 70,000 -- about 70,000 level. And the multiples for all the industry, they were above, for instance be [ph] 13%. So now the reality is different at the moment for Brazil and for the multiples for the industry and for the equity is different and based on this reality that this proposal made. Now I think that you have to consider in the reality and the environment, and nowadays we have with Brazil, with a franchise and with their financial industry. I think that the incentives for the Santander Brasil to deploy capital to improve as much as possible, they are going to maintain before and after this transaction. And I think that there are -- the view that everybody has to see is that the time company, it's confident with the long-term positive perspective in Brazil and with a real value that Santander Brasil has. And this is more or less the support on the early line of all the transactions. Saul Martinez - JP Morgan Chase & Co, Research Division: Okay. Fair enough. How do you -- just a follow-up, Carlos, assuming the deal goes through -- or the offering goes through and the liquidity in the free flow meaningfully get reduced, how do you plan to operate as a complete [ph] company just logistically? In terms of disclosure, engagement to the market, how, if at all, is that expected to change? Carlos Alberto López Galán: Well, of course, we are going to have an impact in the liquidity. Bear in mind that the offering is not a squeezed-out offering, first of all. So the idea is to maintain the Santander Brasil listed in the local markets and in the New York Stock Exchange, always complying with their requirements and that the systems forced. And this is the first idea. The second one is that there, as you know, the parent company is going to work into list the Santander Group stock here in BOVESPA. And the third idea is that as a result of this offering, what we expect it's going to depend on the volume of the minority shareholders that they are going to tender the offer. But that they in any case, what we expect is that we are going to change the Level of Governance. You know that in order to have Level of Governance 2 in Brazil, you are supposed to have about 25% free float. And clearly, we are not going to have that. That's why the local governance, even though the bank doesn't plan to change the governance there in formal terms or in legal terms, it will be with governance level first, as it's the Itaús cases and Bradesco cases. But in terms of liquidity, as you -- in order to finish the answer, the idea is to maintain the liquidity in -- or maintain listed stocks of Santander Brasil here in the local market and New York Stock Exchange. And... Saul Martinez - JP Morgan Chase & Co, Research Division: But I guess, my question is more do you still plan on having this good IR team do you plan on having quarterly conference calls? Do you a plan on going to conferences or does that ultimately depend on the results of the transaction? Carlos Alberto López Galán: [indiscernible] I'm sorry but in order to give you an idea, I mean, previous to the IPO, in order to give you -- it's a number, I don't know if it's going to give you more color. Previous the IPO, the Santander Brasil was listed with lower liquidity, but 1.5%, 1.6% of the equity was in a free float. So I don't know if the volume, once again, that is going to be tendered in this offer. But something about this figure, we were expecting to maintain this figure sometimes because even they are unknown. The minority shareholders or sometimes they have legal issues, et cetera, et cetera. But in order to give you an idea, 1.5% or 1.6% previous the IPO was already in a free float in Santander Brasil stock. So something about -- around this number, we expect something around this number to maintain after the offer.

[Operator Instructions] The next question comes from Jose Barria with Bank of America.

I just have a question or, I guess, more clarification with regards to the value of the transaction that was announced. It says here in the release that investors will receive 70 -- 0.70 shares of the Group, the Spanish group for each share or ADR or the local or basically the equivalent of BRL 15.3 per share on the local. I'm just curious between now and closing what happens in terms of the value of the shares of the Santander Spain move. In essence, what's fixed here, the 0.70 or the 15.3, it just wasn't clear. And second, what exchange rate will you be using for the conversion of the ADRs? Is it the exchange rate that was as of today at the announcement or the completion of the close? Carlos Alberto López Galán: Well, thank you, Jose. In order to be more accurate I would prefer to ask those questions to the parent company. But they are -- I'm going to try to give you the view that we have about this transaction. First, the 0.7% Santander Group stock is there. The equation has changed for Santander Brasil. And secondly, they are -- all this pro-sale [ph] is subject to legal requirements and legal approvals. As I mentioned, it's going to take -- our expectation is to execute at the end of September or October, so it means that in the 4Q. And basically, they are -- that we are expect approvals from the shareholder meetings in either Santander Brasil and Santander Group in Spain. They are a defined calendar that is shown in the site and you can review. And once again, the exchange rate conversion is defined. It's already defined. And it's based on the prices quoted yesterday with the exchange rate quoted in euro [ph] reals closed yesterday. So it's already defined, and it's already defined til the execution of this transaction.

I see. Okay. And then following up on a question that was made earlier. We -- can you just give us an indication of more or less what the expected dividend payments, as per the usual policy, would be from now until October in terms of dividends per share? Carlos Alberto López Galán: Well, as I mentioned, before, there is no change in the dividend policy and it's going to follow the same pattern that we have seen until now. Nothing is going to change. And the idea, as I mentioned, is to distribute 50% of IFRS results, which is more or less equivalent to 90% of the Brazilian results. This event or this offer is not going to change the policy, and we are going to maintain the same volume and the same criteria in the quarters to come.

Okay. And just lastly, following up to you on the first answer, you said the fixed portion of the offer was the 0.7% group's -- shares of the group per share of the local. Is there any circumstance under which that would change given the many potential material change in the value of the Santander Spain shares or -- I mean, what are your thoughts on that? Carlos Alberto López Galán: I am not the best person here to answer that question but we will or would, of course. We don't see any material event. But as this singular processes always that you have to comply every single step legal, internally and from regulators. But we don't see in the near horizon a material event in order to suspend or to change the offer. But when again, I would prefer that this answer should be answered by the parent company. Once again, something that's important to mention is that this offer is voluntary. It's not, I would say, constrained to a minimum acceptance. And so basically, it will depend on the number of minority shareholders that they are going to tender the volume of the transaction. But as I mentioned, there are not restrictions and it's open a voluntary for the minority shareholders.

The next question comes from Bruno Chemmer with Bradesco. Carlos Firetti - Bradesco S.A. Corretora de Títulos e Valores Mobiliários, Research Division: This is Carlos Firetti actually. I have a question regarding the process for the offer. You said there is no minimum participation in the offer. But before the offer, actually this view must be approved by the Shareholders Meeting with minimum votes from minority shareholders or not? Carlos Alberto López Galán: Well, in order to give you more clarity from Santander Brasil perspective, what we are going to do is their independent board members, they are going to ask for a independent appraisal. There is one appraisal with the exchange and they can call or they can suggest to have a new appraisal. After that, they are going to call for the Shareholders Meeting and there is not a constraint or restriction about the number of acceptance or the quorum of the Shareholders Meeting in order to accept the transaction. I don't know if I answered your question. Carlos Firetti - Bradesco S.A. Corretora de Títulos e Valores Mobiliários, Research Division: Yes, basically, Santander can vote to approve the offer or only the minority shareholders will vote on it? Carlos Alberto López Galán: Well, Carlos, if you prefer in order to confirm that, I prefer to check with our legal department to confirm that, and I can clarify to everyone this issue. Carlos Firetti - Bradesco S.A. Corretora de Títulos e Valores Mobiliários, Research Division: Okay. Because on my understanding, you guys are listed on the Level 2 Corporate Governance from BOVESPA, and I was looking through the rules. And actually, there are rules that say the offer must be approved by Shareholders Meeting. It's not clear for me if there is a minimum acceptance or minimum floating level on this meeting but it, for me, seems strange that Santander can -- could vote on it, but that's on... Carlos Alberto López Galán: Yes. You're right. You're right. As I mentioned, with the board members that only independent, they are going to face and work on this transaction to suggest to the Shareholders Meeting. They're suggesting the final suggestion in the Shareholders Meeting. I understand as well that the minority -- but what I'm not clear if there is a minimum acceptance. As far as I know, it's not a limit of acceptance. And yes, I've seen that the minority, they are only the one that they can vote in the Shareholder Meeting. But once again, I would prefer to confirm once that the legal -- with the support of our Legal Department.

The next question comes from Regina Sanchez with Itaú. Regina Longo Sanchez - Itaú Corretora de Valores S.A., Research Division: I also have 2 questions. I mean, the first one is related to this offer, meaning that Santander I mean have confidence in its Brazilian subsidiary and its long-term growth potential. I mean, do you think it also includes this sort of approach of some of the parts considering maybe hidden values that there are in the Brazil operations, especially the one's related to credit card business, the acquiring business, the means of payment, considering the recent acquisition of GetNet? Do you think that, that might also have been motivated? And maybe do you see opportunity of unlock this value after the offer for Santander Brasil minorities? And then I have a second question. Carlos Alberto López Galán: Thank you, Regina. I would say that it's not just one part of the bank. The offer looks at the franchise as a whole. And part of the offer is because the parent company understands that the franchise worth much more at this price today in the markets. So to unlock these values is that basically the rationale behind this offer. And, of course, when you see a different parts of the bank, there are some of them that they have more value than other. But the most important thing is that the entire institution, the entire franchise, that clearly, the parent company understands that it is undervalued. And that's why the offering has a 24% premium or above the stock price closed yesterday. Regina Longo Sanchez - Itaú Corretora de Valores S.A., Research Division: Okay. And my second question is when -- you were also internally analyzing what -- where was the minimal return on risk-adjusted capital. I mean, internally and how do you think, I mean, even the controlling shareholders, Spain, were looking at investing in Brazil. What was sort of a hurdle? I mean, I'm trying to understand what was the cost of equity that was maybe implying in the decision to make this offer. But I would think that it also suggests what was the minimal return that was expected when taking risk and doing transactions in Brazil as well. There was sort of a minimum return that the controlling shareholder also wanted in Brazil. Because I think from investors perspective, maybe when they were trading standalone Santander Brasil, they were looking at certain level of returns, both the cost of capital and maybe Spain. And the controlling shareholder was looking at a different perspective. Do you have any comments on that? Carlos Alberto López Galán: Thank you, Regina. Again, well, the shareholder has the same view as the market. To give you an idea, the cost of equity that internally, it's managing the parent companies similar to the one that did fixed by several analysts and between 15% and 16%. And this is the level that, internally, we measure their return or their target in order to achieve. For it to say that part of their profitability, the level of profitability that we have it's because we have excess of capital. According to our internal estimates, I mean, there is a part of -- the bank is more or less -- part of the bank is running in this level of 15%, but there is an excess of capital that is not deployed at the same level of profitability. And this is part of the gap that we have in terms of profitability with our peers. Due to this reason, we made there a capital optimization plan in order to improve or to leverage how the balance sheet closer to our peers. In order to give an idea, our leverage ratio is between 20% and 30% lower than our peers. And this is part of the opportunity that we have and the opportunity to improve the profitability and it comes -- in the coming quarters. So clearly, there is an excess of capital, which explained their lower profitability. Earlier, there are some -- I was always proud that they have to improve the profitability. And as I was mentioning, the cost of equity that we manage in order to -- as a cost of equity it's between 15% and 16%. Regina Longo Sanchez - Itaú Corretora de Valores S.A., Research Division: Okay, perfect. Just a follow-up on this part of the capital ratio. I mean, just more of a question -- maybe more importance for all the other banks that are not going through an offer. But do you have any discussion of what might be the level of capital requirements regarding -- should you just consider domestic systemically important the DC discussion? I mean, when you have conversations with the regulator in Brazil, is there an expectation for that? I appreciate any comments. Carlos Alberto López Galán: Well, we've seen that the first thought it's we have to play in our level playfield, so everybody has to stay in the same framework in order to deliver the adequate profitability and in order to have the adequate risk appetite. As you know, Brazil, it's behind schedule in this line. I mean, they are working about to define a systemic -- local systemic institutions. What I can tell you is that Santander it's considered a systemic, so you can imagine the other peers that they can be considered a systemic. But later, what is behind is that once that is considered a systemic, which one is the level -- at the minimum level of capital defined by the Central Bank. This is something that we don't know exactly what Central Bank is thinking about. And this is something that I think is under discussions and is not already defined. But what I think is that we are going to see a level playing field for all the big retail banks and with a Basel III adoption and with the adoption of systemic institutions in Brazil.

[Operator Instructions] As we have no further questions, the Q&A session is over, and I wish to hand over to Mr. Carlos Galán for his concluding remarks. Carlos Alberto López Galán: Once again, thank you for your attendance and for your time. As I mentioned, the pending answers will be delivered to all of you. If you have further questions, we'll be glad to support you and to help you through our Investor Relations department. Thank you, anyway, and we will contact you as soon as you want. Thank you.

Banco Santander's conference call has come to an end. We thank you for your participation. Have a nice day. Thank you.