Good morning and thank you for holding. Welcome to the conference call to discuss Banco Santander Brasil SA Results. Present here are Angel Santodomingo, Executive Vice President, Chief Financial Officer; and Mr. Andre Parisi, Head of Investor Relations. All the participants will be in listen-only mode during the presentation, after which we will begin the question-and-answer session and further instructions will be provided [Operator Instructions]. The live webcast of this call is available at Banco Santander's investor relations website at www.santander.com.br/ir, where the presentation is also available for download. We would like to inform that questions received via webcast will have answering priority [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 Brasil's 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 Brasil and may cause actual results to substantially differ from those in the forward-looking statements. I will now pass the word to Mr. Andre Parisi. Please, Mr. Parisi, you may proceed.

Good morning, everyone. It's my pleasure to welcome you to Santander Brasil 's earnings conference call. We had another solid quarter, which will be presented by our CFO, Mr. Angel Santodomingo. Before moving on to the quarter's highlights, I'd like to remind you that Santander Brasil will host our first Investor Day in October 8, when we celebrate 10 years as a listed company. It'll be a great opportunity to discuss with the top management about the strategy, threats and opportunities. We will provide further information in the coming months. Now I turn it over to Mr. Angel Santodomingo.

Hello, good morning, everyone. It's a pleasure being with you all of you this morning again. Today's agenda, as you may see, I will start with key messages, with a look at Santander Group's results which were presented this morning. Next, I'm going to provide a quick overview on macro outlook of Brazil, which will be followed by our quarter results, and to wrap it all up, I will finish with the presentation with some - the presentation with some concluding remarks on the main topics that we will be discussing today. So going to the next slide, first main idea is that our profitability remained solid. In first Q '19, we delivered a 21.1% return on equity, maintaining same high level as last quarter and being the highest level for our first Q since our IPO 10 years ago. In the following slide, I will elaborate on the results that sustain this positive performance. But in a nutshell, I will say that P&L operational leverage, coupled with tightly controlled provision expenses was key to our success this quarter. We have achieved top of class in both efficiency and recurrence ratios, as you may see in the slide. I would also like to draw your attention to the fact that we distributed BRL1 billion in dividends, interest and capital in the first Q of this year, which compares to BRL16 million in first Q '18 and close to BRL500 million in first Q '17. On the slide 6, we show that our good performance is a response to our efforts to continually improve the experience of our customers and the engagement level of our employees. As I've mentioned in past quarters customer satisfaction is a cornerstone of our study to keep growing in a consistent, sustainable and profitable manner. We…

Okay, now we're going to take questions we received in the first one has two parts, is from Tiago Batista from Itau BBA. What are you expecting for SME loans to the end of this year? Do you see the price competition in the acquired [ph] business impacting credit origination in this segment?

Thank you Thiago. As I mentioned, on top of the seasonality effect is what we see - what we saw in the quarter on the year with SME is that they have being gaining momentum throughout the different last quarters in terms of volumes. This probably goes with the economic activity and the need as we will go forward of new investment from the start of the - from this segment of the business. Now let me elaborate a little on spreads and because probably we'll have more questions here so I can address the spread issue. What do we - and the volume issue, what we see at the NII level? What we see is that volume keeps on coming in specifically more on the retail side and less as we move to large corporates and corporates, probably because these large ones they have alternative funding ways. But again volume is still is there. In terms of spreads, we seen pressure in this, by segment but specifically also as we move to corporates and large corporates. And there our policy is to keep on with the mindset focus on profitability. Specifically in SMEs it is true that we haven't seen a strong pressure in terms of spreads. I don't see too much of a contamination coming from the acquiring market, that is probably more a discussion in terms of discount of receivables MDR and rental rates. But the point here probably the capacity of each bank, and specifically for ourselves to position the product and the service with a wide range of offering for them. And SMEs at the end of the day depending on the size, because I mean SMEs are very kind of profound world, because you're speaking from the individual company, the new person company to company that may have close to BRL200 million of income of revenues. But I mean in general terms, they need a full range of products. It is not about funding, funding is there, depending on the profile et cetera, but funding is there. It is more about how did you position the bank with them, and this is where we are clearly putting the focus. We already reached, I mentioned last quarter more than 1 million clients here and we are trying to improve that part of the package of offers to offset potential churn, and/or the spread pressure in the future.

Second part regards Getnet, recently announced T plus 2 for some new low end clients. Is possible to see an upscaling to SME clients for this price scheme.

Well, what we announced and what probably triggered part of what we are seeing today in the sector is what we have been discussing, that could happen in the acquiring system, on the acquiring sector for a long time now for years. And I have been sharing with you during the last quarters, which is more competition and more trying to be more aggressive in terms of positioning each of the different products and services. Let me show you what we did some weeks ago, is what we offered the possibility for the long tail for the segments that are close to the mass market, closer to the mass market, a D plus 2 capacity with a rate of 2%, both on credit and debit. It is the lowest offer today. It is profitable for us, it is clearly profitable. We have been obviously making the marks [ph] to make it profitable and it is profitable for the client. So we saw that there was a clear opportunity there and that is why we have gone into that. We're selling more than double what we use to sell, in terms of POS and we're clearly linking much more the clients. And what I would also like to underline here is that it is a transparent offer. What this means is that what we are offering to our clients is exactly what is being said in the offer. I saw I think it was yesterday by Unxt [ph] which is the association of a small companies an assessment by which how the different kind of marketing companies were being perceived and the one from Santander Brasil was clearly marked as transparent for the client. So this is the offer. And what we are trying here is to position ourselves, and you'll…

Okay, next question is from Jorg Friedemann, Citi. Cost of risk at the lowest level in four years, with NPL creation reducing 10% in Q-on-Q. How sustainable you think these trends are.. Could we continue seeing additional improvement on cost of risk and asset quality trends considering that retail represents more than 60% of the loan book?

Okay. Cost of risk and what is I think - I mean, this goes back I mean, it goes back like five years already, but I think we have shown a strong capability in terms of risk models. I think this is a fact already, this is not something to come, this is not a compromise or it's always something that is being delivered. I mean, we continue to focus on risk models risk understanding, risk behavior, et cetera. But I think we can today say that we have a strong good risk modeling capacity. So the cost of risk has gone down. And this has been at the same time, that as you mentioned in your question, George, at the same time that the mix has been moving towards more retail, which is even stronger in terms of the capacity of the cost of risk being controlled and with a NPL formation that keeps on - depending on the quarter at around 1% 1.2%, 1.3%, 1.9%, around one point something percent. So it's not about NPL formation, it's not about trying to lower the cost of risk. It's just that we have understood - or we think we are understanding the way risk works. Now looking forward, obviously, the mix continues to change. We had some pressure there, but it has to do with mix. I don't see in each of the segments, a kind of iteration that I will have to underline to that. You can get it up and down, you have different behaviors depending on the amount, depending on the kind of offers that you make, depending on the quarter, depending even geography. I mean you have all these kinds of behaviors that are difficult to understand if we - meaning in a nutshell, in two minutes explanation or trying to answer your question. But again NPL formation controlled, costs of risk, controlled by segment probably going forward. Why not, depending on the mix, if you asked me this question 12 months ago probably I would have said the same thing, because it is true that the mix is puts pressure here but we been able to deal with that. And answer [ph] also to this is the country going into a lower cost of risk going forward. Well that would clearly depend on the economic behavior, on these structural reforms agenda, if they are achieved, how they are achieved and how they impact confidence and quality. For us, there is a clear valuable, that is much more - I mean that we have to watch closely which is confidence, in the world that confidence recovers or regains a positive trend. I will say that we will have volume expansion and good cost of credit.

Next question from [indiscernible]. Thank you for presentation. Your loan mix has changed substantially with individuals growing 20% year-on-year, consumer finance 18% year-on-year, while corporate is shrinking 4%. When do you think you will try to expand. This quarter your NII graph is still running below credit graph, can you comment on that please?

Well I addressed a little bit on the spread side. What I see, I see means on the asset side with some pressure because of the spreads, and at the same time it will go into volume growth more variable go into that direction that we put pressure on means. So again I don't want to repeat myself in terms of segments. I already elaborated on the different segments how they are evolving. In terms of NIM I see more stability or even positive evolution on the retail side while I see the contrary as we move to large corporates. But again all segments will be different with a different pressure, with different behavior but with some pressure here on terms. How do we go compensate that? We will try to compensate, as I always say with NII coming from the deposit side from the liabilities. It's still not there but we are working on that and obviously profitability coming from fees. So it is still at the mix I mentioned that with quality, mix has changed. If we go back not only one year as you mentioned, you go back two, three years 60% of our balance sheet in terms of credit was retail and today is 72%. So in terms of sustainable change of mix, that, as I said before, we have been able to go through with a stable cost of risk or a low cost of risk. But I would say going forward I see these forces stabilizing, agreeing with some difference in the coming quarters, but at some point, with economy let me put this hypothesis on the table, with economy growing and with the capacity that today is available, both in terms of unemployment and industrial capacity that is still below average. I think the total capacity is 76% compared to 80% plus that we have had in the past. When we close those gaps in the following, I don't quarters or [indiscernible] plus we'll probably start to see investments coming back and then we'll see volume coming back again and probably time of balancing or stabilization the difference in between retail and the corporate world.

Next question is from Mario Pierry of Bank of America Merrill Lynch. It seems that economic recovery the year is losing some momentum. At the same time your asset quality is improving. How does that change your risk appetite? What kind of loan growth can we expect for the year? How do you describe the competitive environment in Brazil today and are there any concerns about fintechs becoming more active?

Thank you Mario. Okay economic environment and asset quality, I mean I mentioned in my script, it is clear that the expectations of growth that the market has three, four or even two quarters ago and they have been reduced. I mean what the market was probably thinking in 2% plus, 2.5% GDP growth and today we're more in the 1.5% area, which means that probably volumes compared to what was thought these three to six months ago will probably be below that. Here you have two things, I would say. You have first, the reality. I mean in nominal terms GDP will be growing, I don't know somewhere around 6% plus, which means that volumes at the country level could grow above that, but still to be seen. But it was second point that I was mentioning is breakdown of that average. And the breakdown of that average is as you probably feel yourself, private banks clearly growing more than public banks. Public banks losing market share while private banks gaining market share. We are about to be 50:50 in the market set of both public and private, compared to 57:43 that was just some time ago. And I wouldn't be surprised if those lines cross over with private banks being more - having more market share. So yes, I mean volumes are going to be growing probably a little bit less than what everybody expected months or quarters ago. The opportunity for private banks is still there. Is that affect appetite and asset quality? Well again, I go back to my previous words. I mean we are not - we are confident with our risk models. I mean as you see we have been growing as strongly in terms of risks segment. So let me say like that…

Okay, now. We're going to take questions by phone.

Thank you. The floor is now open for questions [Operator Instructions]. We have first question from [indiscernible], would like to make a question.

Hi, good morning all. My question is relates to fees, especially on the credit card fees, a very impressive 20% growth year-on-year and if we - I assume that acquiring business is probably growing less than that, it means that the insurance business is growing even stronger than that. So if you could elaborate a little bit on what's happening here in fact? And in addition to this while I look for the commission expenses relates to cards that you book on other expenses, it grew 50% year-over-year. So I would like to just understand a little bit what's going on the credit card business on the insurance side, what the strategic year and how do you see this evolve. Thank you.

Okay. Thank you Rafael. Well, credit card business. Well, the answer, first and the obvious answer is yes, we have been growing strongly not this quarter for some time now. I think we have, I have said we use our - this year for some time in both current account and non-current account holders. On the non-current account holders, we were basically, I wouldn't say out of the business, but we were not intense. And we have clearly moved that and changed that in the last couple of years. I mentioned in my speech we have, I think what I think not this is, comes from the Apple and the Android store. We have the best credit card app in Santander, in Brazil today, the Santander Way. Feedback and usage of that app is enormous. So it all leads - we have different very good agreements like American Airlines, like all the white label agreements. So I mean, it all leads to a position in which we been able to strengthen. And we are selling more than 400,000 credit cards per month. So I mean, the activity and the evolution is strong, and we think we can keep on with that. Again, with completion with what am I mentioning, but I think we are positive in terms of how this kind of evolve in the future. And specifically because it's a very good opportunity to not only speak of non-current account holders, but to transform them. I don't know anything to current account holders or into other products. So the cross selling opportunity that I also mentioned in one of my slides is also there. And a second part of your question has to do with our royalty area. I mean the - I think the investor relations team can give you more return, but it is a very simple movement in between lines in the P&L, nothing really to underline. That is a technical issue that Investor Relations will give you the details.

Mr. Jorg Friedemann from Citibank would like to make a question.

Thank you very much. Just to try to understand a bit further the dynamics on provisions. And considering that you are part of a Spanish group, I understand that you already incorporate full IFRS to report to the parent. I was comparing the releases of IFRS and BR GAAP and noted that provisions under IFRS imply your 17% to 20% higher levels versus the provisions under BR GAAP. It is already contemplating IFRS and by enhanced discussions just for me to understand in case this is something good for IFRS 9 the potential impacts that things could have Thank you very much.

Thank you Jorg. Yeah, you are right I mean, we do present IFRS 9 in the - what we call as Spanish criterias [ph] or in the group numbers. And we do not follow BR GAAP here. Believe me that IFRS 9 is a little bit more complicated than a simple one minute answer. But I will try to little - I mean to you to understand. As you know you have three stages in IFRS 9. The more you grow, the more you provision upfront, but it converges with time. Okay, that's basically the main idea I want to show with you. So if you go all out you will have kind of upfront provisions happening and that will lead to less provisions happening in the future. That's basically the main - the main idea and the main difference. We have been working in IFRS 9 as I said already for three years now. We expect Brazil to implement IFRS 9 in the next, I don't know quarters or years. We will welcome that. And we are now fully prepared in terms of know-how and knowledge. I mean this is - we used to when we started with this we used to run in parallel for a several quarters so that it could be addressed in the right way. So far this is the situation. When you compare criteria in terms of local and IFRS et cetera, taking the net numbers, it's a little bit tricky, okay because you do have other impacts, a little long to explain here now but you have other impacts that are not as simple as just making the difference. And that will be my main comments here. I mean it's a short answer, that is the alternative is really long answer.

[Operator Instructions] Mr. [indiscernible] from Credit Suisse would like to make a question.

Hi good morning. Thanks for taking my question. I have a question regarding the other NII. We saw very resilient performance of this line roughly around $2.5 billion this quarter repeating the performance in previous quarter. How do you expect this to continue going forward? Should we expect a decline of this line going further throughout the year? Thanks.

Thanks. Well I have addressed this in last quarter also. I anticipated to you that I didn't - I mean this depends on some volatility, depending on the drop in treasury activities from our investment banking unit that I remember to you this is separate from the ALF, from the capital remuneration and from the other revenues that we have in that area that have hit [ph] during the past. But it comes to - in the region - this is the last say three or four quarters it has been somehow explained because of the offsetting of the different trends. It has to do with an acceptable position that we actually follow this with you also in the past. We sort of moved that. So difficult to estimate. I understand always the concept of the sign of rise a kind of a rite to some part of the analyst but for us it's part of the business as I have already argumented in the past. So stability is how we have been showing this in the past, and to have eventually a strong movement. There are already volatility, yes there will be volatility because it has some volatility elements within the line, but that's all I can say with the slide. I have nothing new although there were some doubts in the past, nothing new that I can say that is happening now and that will happen in the future.

Thank you. The Q&A section is over and I wish to hand over to Mr. Angel Santodomingo for his closing remarks.

I think that you are saying to me that we have the last question? Is that right?

Mr. Carlos [indiscernible] would like to make a question.

Hi, thank you very much for taking my last question. Actually two questions, first as you mentioned your strategic interest on capital is higher than in the past. You are paying a BRL1 billion. Are you giving any indication for what your payout should be this year? And second I'm not seeing any presentation goodwill is for the minorities of the net? Thank you.

Yes that was minorities net there. Hey Carlos thank you, On interest on capital you're right I mean I remember in 2017 we moved from paying almost once per year, we paid an dividend in August and the bulk of it in December to our quarterly payment. That was a move we wanted to make with the market. We started paying BRL500 million per quarter in 2017. That was moved to BRL600 million per quarter in 2018 and the Board has approved BRL1 billion this year as the first Q. Theoretically and this is up to the board I am not going to anticipate what they will be either discussing nor of course deciding but theoretically we follow buttons from last year's issued, kind of keep on the same quality by quarter. Now payout well, we can work around 50% payout. That's will be probably our idea today which means we will maintain a return on equity where they are and growth of risk-weighted assets of around, I don't know close to 10%. That gives us an idea an idea of 50% payout ratio to keep on with the same capital ratio. So around there probably is a good guideline and minorities operating net I didn't understand the second question but I mean they have been bought. We executed the - we announced the 11% acquisition, so we have 100%. I think we are expecting still some small authorization. I'm not sure if it has a 100% approval or not but this is a pure regulatory process. So it's nothing it's already agreed and we are there. Okay. End of Q&A:

Well, I think with that we end the Q&A session. Thank you for your questions. Thank you for your participation. I am quite happy to serve with you another set of results, another strong set of results and profitability. And I look forward to speaking with you next quarter results in next quarters. Thank you.

Banco Santander Brasil's Conference Call has come to the end. We thank you for your participation. Have a nice day.