Angel Santodomingo Martell - EVP and CFO Luiz Felipe Taunay Ferreira - Officer and Member of the Board of Executive Officers

Good morning, and thank you for waiting. Welcome to the conference call to discuss Banco Santander Brasil S.A.’s results of the first quarter of 2015. Present here are Mr. Angel Santodomingo, Executive Vice President and Chief Financial Officer; 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. All the participants will be on listen-only mode during the presentation, after which, we will begin the question-and-answer session and further instructions will be provided. [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 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 will now pass the word to Mr. Angel Santodomingo, Executive Vice President and CFO. Mr. Santodomingo, you may proceed.

Few highlights results and are ready to share with you some of our final remarks. In Page 4, we will start with the macro side. As you know, we present the consensus expected in the dynamics will remain variables. [Indiscernible] let me share with you some fronts. At we see that [ph] the Brazilian economy is going through an adjustment process in this environment, the amount of measures implemented or announced by the government is considerable in a wide [ph] direction. There has been a pronounced adjustment in relative prices in the Brazilian economy. Not only intervening prices have been altered, but also exchange rate differentiation has taken place. Both changes have an impact on the different variables, productivity between them and of course, in current year inflation that, as you may see, is expected to close even above 8%. The fiscal motions that, as I mentioned, are even implemented or announced indicate an even [ph] change in the course of macroeconomic policies. Without it [ph], we believe that Banco [ph] measures will be delivered and will structurally impact in a positive way the economy. The key issue is not whether the quantitative targets will be met but, specifically, that change of direction. As a result of those measures and uncertainties, the fiscal [ph] risks in the Brazilian economy have been reduced within the last weeks in a significant way. It is true that there are extreme uncertainties and we believe the country is in the right track and we maintain our positive view with the country. Since readjustments have started [ph], the economy will be impacted. In 2015, as you also may see, current destinations formed though a contraction [ph] of GDP of even further than a negative 1%, probably setting grounds for a better 2016 and even more…

We will start the Q&A session. I have put together the questions that all relate to the same subject. And so some of the people that posed questions will see their questions answered in different segments. So starting with long portfolio, a question from Saul Martinez. How quickly can we begin to grow and pay rolls with a bunch of [indiscernible] partnership and the adoption of the SME platform advance.

The first thing I would say around most especially [ph] those from the starting now as part of Santander [indiscernible] in February. As you know, we hold 60% of that JV. This is a key player with that - with key experience. So the process basically now concentrated. They are constantly [indiscernible] all the activities on the commercial side, expressive growth. And on the operational side, we are integrating, as you can imagine on the portfolio and that of course, we will steam fifth translation of portfolios in the second Q that are still under the Santander Brazil umbrella. And we agreed to have under successful umbrella. We have had good news [indiscernible] potential lows that may improve even further with capacity of [indiscernible] ratio of aligning and offering the products that they share. That’s 1 point. And the second point is of the strategy of [indiscernible]. Instead of trying to operate through every single correspondent that you will find in the country, to concentrate activities in higher but more efficient, more profitable and more sizeable correspondence. And that covering also as we speak. So our execution and the message once official are positive. We are very happy with the management team [indiscernible] as we said, we are quite experienced people with a long experience. We are speaking of in between to almost 30 years of experience in this business or related businesses, not only the top management also the commercial [indiscernible] recurrent [ph] networks. In terms of the SME, well, I don’t see that the platform advance [indiscernible] but it is just the same concept. I would say that, as you know the aim of this platform was to offer a full range of products and services. And [indiscernible] which maintain process which is something [indiscernible] so that we…

Okay, Philip, thank you. So, well, I think I mentioned in my words and it is true that the 15 to 19 NPL ratio goes up really more than 20 basis points. But I would underline a little bit of position [ph] on the fact [ph] of the first Q. As I mentioned last year, this same indicator went up more than double of that amount. If I remember well, it went up 56 basis points. So we are delayed on [ph] half of what happened 12 months ago. But when we average our EBITDA [ph], even the comments on the quality side, however, what is seen [ph] under position in terms of what we - and usually, we are very attentive. The group numbers we are showing to you which, as I mentioned, are a clear reflection of what we have been doing in the last years. So we say, in terms of implementation of these models of using them in the risk part of some portfolios, all that things that were done some time ago that - when we say that nobody was asking for that because the environment was not what we have today in the country, obviously do have an impact. Does that mean that we are in safe harbor [ph] and - no, no. It means that obviously, as I mentioned, we are expressively [ph] attentive, we are following all the things that are happening in the country. We follow the metrics, both leading and non-leading indicators. And that obviously we will continue the same direction. But I would like to underline to stress that when the network is learning [ph] in a long time, well you have some positive impacts. We are not in a position of disbelieving that the situation here is more having [ph] an impact or is not what has the common integration [ph] in the general sense. But that as I mentioned in my words, for the time being, we maintain our view about cost of fees, et cetera. Before we move to the next topic, someone pointed out that I forgot to mention the figure BRL158 million is grew out [ph] of the gross amount and not the net amount.

So regarding effective tax rate, the next topic is effective tax rate. Philip Finch from UBS asks, we have seen some volatility on this front in recent quarters. Going forward, what do you think is a normalized level of tax rate?

Well, Philip, thank you. Remember that the volatility of the last Q has to do with [indiscernible] which are the dividends paid on capital that have a fiscal treatment that provoke this volatility. I would say that if we exclude that, more or less maintain the same levels of previous quarters. So I would say going forward, about more of the same. Anyway, we are also going through [ph] significant changes of tax and rates on - this is our usual way of analyzing it and we will be adjusting for these types of dividend ratings, et cetera.

The next topic is BIS. The question was told by David Hengov [ph] from JP Morgan. Can you please explain the drop of 160 basis points quarter-on-quarter on the QT1 [ph] and the Basel III?

Okay, thank you, David. I think I already explained in my - also in my speech the impacts in capital. At the end of the day, what you have is an increase due to credit and to operational. Credit only is because of the loan growth. And operational due to this, what I mentioned before, the introduction of borrower [ph] perimeter has to do with the total perimeter that is included under the operational risk following the buffing [ph] - Brazilian Central Bank measures. That’s one part of the story. The other part has to do, I mentioned, with ETAs [ph] and with the impact of what it is - the forex change generates a fiscal loss which generates those ETAs [ph] that if it is reverted as we are seeing now, you revert and that impact. And I think I mentioned that more than 50% is already ongoing [ph] as we speak even though we will depend - all this will depend on the level of forex. And then you have your [indiscernible]. Remember that we grow from 20% to 40%. I mean, you go into different - into that phase in process. The market normally concentrates on the fully loaded number that when we speak of the phasing, you go - every single year, you have these impacts that also affect that ratio.

We’ll just proceed some more new questions. Some of them regarding topics that we have already addressed. So starting from Marcello Telles from Credit Suisse, could you comment on your expansion strategy result? Would you grow organically or would you consider potential acquisitions? Two, do you see potential for the duration in the large corporate book? What is Santander exposures to Petrobras supply chain?

Okay. Expansion strategy in Brazil. Well, I would say that we are 100% focused on organic growth. These are the way of functioning, the way of deciding and strategies and the way of acting. The organization is not at all distracted from - or this business as usual. Having said that, I already mentioned in the previous quarters, two things that I would like to underline again. First, there are businesses in which we share a below market presence and in which also the strategies to continue to grow organically, obviously, we’ll analyze any potential activity. And secondly, and most important, which is in May 1, that includes in the previous one I mentioned, is that we think the figures are resulting [ph] of analyzing anything that maybe or least proposed to us to try to understand if that would add value or create value to our shareholders. The question is, is that what we are looking for? I think no. But having a 99.9% organization focused on organic and business as usual growth strategies, [indiscernible] because of that future [indiscernible]. Do you see potential degradation of Petrobras, et cetera issue [ph]? Well, I think we’ve mentioned that our [indiscernible] quality on the economy and [indiscernible]. So I’m going repeat, those were [indiscernible] already we are totally conscious of the country servicing the [indiscernible] I mentioned in my words towards ’16 and ’17 and so forth [ph]. And the year is going to be a difficult year. For the Brasil [ph] Petrobras, the only - we had two issues. I think we’re going to be disclosing the numbers [indiscernible] exposure. When we said that in terms of oil and gas, we should not lose [ph] 4% of our book. That’s the total exposure to the total [indiscernible], okay? So in the [indiscernible] the premium suppliers of Petrobras in terms of exposure to them, we are speaking of less than 1%. So I think that we are in comfortable and reasonable levels to both the sector and specifically that set of group that was set publicly and explicitly by Petrobras.

The next question comes from Felipe Solomon [ph] of Morgan Stanley. You mentioned that the non-bulk [ph] ex the tax depreciation and the tax of the JV with a bunch of [indiscernible] would have increased 1.8% quarter-on-quarter. If we do the same adjustment for the NII, how much it would have increased on a quarterly basis? If we just adjust the NII for the tax of the JV with Bonsucesso, how it would have increased in the quarter vis-à-vis the 2.2% growth report in the quarter? I’ll take this one. Felipe [ph], those impacts are very minimal in terms of the NII evolution for two reasons. First, you know that the tax book - basically, we are talking about big corporates. And the prices [ph] of big corporates is not that substantial. Regarding Bonsucesso, the incorporation of Banco Bonsucesso took place in the end of February. So effectively, the quarter in terms of NII, we had the effect of just one month and not the full quarter. Then, back to the asset quality questions. We have three more questions regarding asset quality. The first one comes from Marcelo Cintra from Goldman Sachs. Our goals [ph] of 90-day NPLs improved in the first year, the early NPL situated in both consumer and corporate portfolios. Furthermore, NPL creation is slightly deteriorated in the quarter as [indiscernible] increased significantly. Considering this trend, how management sees the evolution of asset quality and cost of credit going forward.

Well, Marcelo, again, I think on the quality side, I already said our opinion and how we see it. I mentioned in my words that probably we are thinking how cost of risk in the region, when we speak about the region and underline the region cost, obviously it is difficult question. But how we see the changes, et cetera in the region of what we should see in the region plus I’ve mentioned, specifically in my words on the [indiscernible] presentation. So again, I’m not going to repeat myself too many times because we are saying the same thing. We are attentive and we see how things are evolving. I think we made our homework. And we will see that evolution in the next quarters.

Sorry. The next question comes from Carlos Daltozo from Banco do Brasil. The first one regards income from the cover of written off loans. And the question is, income from the cover of written off was just 30% in the first Q. Do you believe that this income can return to the previous levels in the coming quarters?

Well, it is still not that recovery from region [ph] office [indiscernible]. This has always been shared always [indiscernible] volatility we see in quarters, okay? So I would say that our recovery activities are quite active. I would say that we are working a lot in the last quarters in the early delinquencies, in the recovery plans before in the first half of the client goes into NPL. I mean our loans activities have been intensely fine, not as we speak or this quarter but first quarter, but it is always sometimes, we’re speaking of quarters and years. So this as you may imagine are communicating glasses [ph], at the end of the day, if you improve on one side, you end up with [indiscernible]. But having said that, yes, you do have some volatility. And I would say that, why not [indiscernible] to those levels.

And the second question from Carlos Baldovo is there is no room to improve the quality of assets in the coming quarters?

I actually [indiscernible] I’ll mention, Carlos, my opinions on the credit side.

We have no more questions that we received, so --

Thank you. The Q&A is over. And we still handover to Mr. Angel Santodomingo for his concluding remarks.

Okay. Thank you very much again for being there on the quarterly results. I think on the quarter has been a quarter that expands [ph] to show the impact of what the things that have been done by Santander Brasil. But it’s still a long way in the process into next quarters. Thank you for your presence. And we are of your disposal here in Santander Brasil. Good morning.

That concludes that today’s conference call has come to an end. We thank you for your participation. Have a nice day. Thank you.