Good morning and thank you for waiting. Welcome to the conference call to discuss Banco Santander Brasil S.A.’s results. Present here are Mr. Angel Santodomingo, Executive Vice President, Chief Financial Officer; and Mr. Andre Parisi, Head of Investor Relations. 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]. The live webcast of this call is available at Banco Santander's investor relations website at 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 call conference call. Once again we delivered another set of solid figures which will be presented with more details by our CFO Mr. Santodomingo. Before moving on the course highlights, I would like to remind you that Santander Brasil will host its first Investor Day on October 8th, when we celebrate 10 years as a listed company. So it will be a great opportunity to discuss with the top management about our strategy, threats and opportunities. So please confirm your participation and for more information, please reach our IR team and also our website. Now I turn it over to Mr. Santodomingo.

Thank you, Andre. Good morning everyone. It's a pleasure being again with you this morning on a new set of results. Starting with the agenda on key messages will be the first part followed by a small slide on Santander Group results because they have already been published, macroeconomic scenario and obviously we will focus on the result highlights and final remarks. So starting in the slide 6, I would say that our return on equity remained above the 21% level reaching another historic maximum on improving the quarter. We keep on generating more value to our shareholders with profitability materially higher than our cost of equity. In the next slides, you will have a better understanding of how we manage to deliver such performance, been our operational leverage and tightly controlled provision and expenses, two key elements to deliver those results. Last quarter, we presented the best efficiency and recurrence ratios in the financial Brazilian sector. Key contributors to our profitability. We have farther improved first Q levels in this quarter on both ratios. We will see if we maintain these best or top place within the sector. According to 2019 Euromoney Awards for Excellence, you have it in this slide on the right side of it. We were named the best bank in Brazil and in Latin America. We believe that this reflects current positioning of the bank. Finally, I call your attention to the BRL2 billion distributed in dividends, interest on capital in fact during the first semester of this year which compares with BRL1.2 billion that we distributed last year or BRL1 billion in 2017 for the same period. So doubling versus 2017 and something like 70%, 80% higher compared to last year. One of the banks and so next slide sorry. One of the bank's…

Thank you. We will now start the Q&A session for investors and analysts. [Operator Instructions]

Okay, first question is from Mario Pierry, Bank of America. Good morning and congratulations on the quarter. I'd like to hear your views about the sustainability of ROE considering a scenario where interest rates stay low for a longer period of time. And as we are seeing the increase of fee tax which one concerns you the most low rates or competition?

Thank you, Mario. I agree with you that we may be entering lower for longer periods here in Brazil. I think I have commented these for several quarters now but it is true that we have more stabilized in Brazil. I feel optimistic in that sense meaning that we controlled inflation now, we have controlled fundamentals. I mean very good balance of payments or very good external reserves et cetera and fiscal policy being kind of tackled by the government. So we may see that scenario in which we have lowered for longer. I think in those scenarios to your question of sustainability of return on equities et cetera what you normally have is two things. One is lower cost of equity and that may lead to lower profitability levels that may happen or not depending on the evolution of the strong wave of the economic. Normally, you tend also to have more competition because volume is available. If you see what has happened here in Brazil and I could also say with these idea with you several times, market share of public and private owned banks have behaved differently. No I mean in the good very growth in terms of years public banks reached high market share gain you need against private banks which bag before that positive economic cycle where deleted with close to 60% and now that is reverting, I mean now approx markets are 50:50 and I would bet that that kind of behavior will continue seen a majority of the markets are gained by private banks and probably public banks going below 50%. So that gives also available volume at the right prices and at the right profitability to the system. So you have both a positive economy and volume available from some competitors. So both things should lead to growth on the NII side. Now to finalize my answer on the competition in tax side. Well what I will say is that we have as you know, we have more than 500 in tax now in Brazil in different areas in terms of in the financial sector, in terms of services. I have shared with these with you in several occasions, I mean this is competition that wakes you and that keeps you on the awake on the competition side in terms of how we deliver both services and products to the clients. To some point, some of these competitors will have to go in to positive numbers at some point in what Santander Brasil will certainly not do will go into strange or competition affecting prices just for the sake of volume or for the sake of market share. So I will say that to wrap it up, we are in a good positive scenario that we should kind of take advantage of with spreads probably under pressure. So volume will tend to compensate spreads.

Next question is from Yuri Fernandes, JPMorgan. Interest rate and NII, can you share your sensitivity to reference rates or perhaps one-year interest rate curve specifically how 100 bps reduction in rates could impact your NII in the short term and in the long-term?

Yes, Yuri thank you. Yes, I think we have shared with you this number, we have a sensitivity of around 300, 250, 300 depending on the quarter -- million reais to 100 bps move in the Q.

Next question from [indiscernible] Citi. We see that your book decelerated in the quarter and we acknowledge that it's due to the fact that you implemented an aggressive credit strategy over two years ago. Why if and when the pension reforms approved during the third Q, do you expect to change your appetite for loan concession in any of your loan book segments?

Well I think that our book, our loan book performance reflects a little bit what is happening in the country. No I mean you we keep on seeing good growth or positive growth on the individual part of the portfolio. SMEs have been gaining momentum as we speak during the last four, five quarters or six quarters while corporate and large corporates still are either flattish or negative due to several facts I will say. Due to first that you have the capital markets alternative, second spreads are under pressure and we will not enter into operations that we think at least on our numbers do not have a certain level of profitability and probably a steel investment plans coming from manufacturing companies are not there waiting for the economy to pick up and also using the spare capacity that you have available on the economy today both through unemployment and through industrial capacity not being used. So that is how we see the performance of our portfolio. If you see we have seen an a strong change of mix during the last two years in our balance sheet, what used to be retail close to 60 today is above 70 of the total loan book reflecting what I just said. Going forward I already elaborated in my first answer but what I would say is that the normal trends would be to see those two parts of the book to stabilize in similar trends of growth and not have such a difference in between retail and wholesale. That's really the trend looking forward.

Next question from [indiscernible] Credit Suisse. Thanks for, sorry. Congratulations on the results. I want to have a little more color on the spreads. We saw the credit spreads continue to edge higher in the quarter but most likely has a mix effect, do you see any pressure on product by product basis, any segment that competition has been more aggressive driving spreads down?

Yes. What I would say I briefly mentioned this in my previous answer. As spreads are under pressure and are under more pressure as you move from retail to corporate and large corporate, okay. So I will say that there is more pressure on corporates and logical corporates. On the retail side, I would say little bit less depends a lot on the products, depends a lot of the moment, depends a lot of the certain campaign from our competitors or from ourselves at Santander, you have all the acquiring world that I think is well known by everybody that has been under pressure for some time but I will say that this press in that cycle that I was mentioning and describing before will tend to be under pressure. So what I would wait or I'm sorry what I would expect is NIM probably on the asset side with some pressure given that volume will grow when spreads will tend to be flattish or with some pressure while NIM on the liability side and fees will tend to offset the profitability formula on that side. But I will say that in general terms, what you see as a flat spread or even improving in our case for the whole bank in the quarter, you are totally right is because of the mix effect I mentioned before.

Next question is from [indiscernible]. Question on asset quality. Can you provide more details on the increase in yearly NPLs? Do you see any risk of systemic deterioration or is this a normal behavior of the portfolio?

I mentioned it on my speech, I don't see any -- we don’t see any worrying trends. We speak of settlement by settlement in terms of credit quality behavior. As you know the early arrears is a ratio that tends to be volatile. If you seen the quarter, I think it raised if I remember well 10 basis points reaching the same level that we had one year ago or the same level that we had by year-end 2018. It's been ranging in between 4, 4.2 continuously. You have some seasonality, sometimes in the end of the year or first Q But I wouldn't say that there is -- there is that trend in early indicators will not show that. Again two comments, two important comments here. First one is the change of mix I mentioned to you. Okay, so we remember that considering that retail has been growing in the 20s and corporate companies in general terms have been growing closer to zero or low single digit. That change of mix during the last two years has could have and has its impact on the provision level. That's one point. The second point which is a little bit more structural one is that in the Brazilian world that we just mentioned before, our cost of risk in a positive economy, in a positive cycle with all the caveats that I mentioned before should not be a point where we should have a negative evolution. And so I would say flattish or even positive. But again with the caveat and the hypotheses that we have positive country looking forward.

Okay, next question from [indiscernible] Goldman Sachs. You mentioned release one-off effect in cards, in acquiring fees in the first Q. What was that related to? Do you expect this fees to continue declining?

Tito, yes. No, I want to say, I don't know if I use the words one-off but I would say that what we -- you have these typical FX depending on your volume and depending on your commercial activity on some quarters that even I mean if you exclude it, we will be on the positive -- on positive growth. So it's not an extraordinary, not these type of things, it’s purely commercial driven that we had on the first Q that have given some volumes and some activity, you do have that kind of volatility in between quarters. Excluding that as I mentioned, we are on the positive territory, so I wouldn't at all think that credit cards or card business will have to will present negative evolutions in the future, it’s just a ponytail issue that I wanted to underline on my speech. So that you all knew about it.

Regarding net, next question is from Yuri Fernandes, JPMorgan. Competition is getting tougher in payments industry which is one of Santander Brasil in parent key areas, that volumes decelerated from 30% in 2018 to 16% first Q and only 6% now, is this below industry growth for the period implying the market share lost for the first time in years. How to address it, would get more aggressive in pricing or is it about better service?

Thank you, Yuri. It is about better service. That's the kind of policy in a strategy that we have been using, not only with a net but specifically with all the products and services of the bank. As you know for the long tail, we launched an offer a couple of months ago, a profitable offer and being profitable because we had been working strongly in cost of unit cost of each operation getting it for some years now and being profitable, it’s also the lowest in terms of discount of receivables for our retail clients. So you can achieve profitable again underlying profitable, profitable offers with being competitive if you do your work at home in terms of unit cost et cetera. In terms of GetNet, you mentioned little bit percentages. Again with the same environment, speaking of volumes may be tricky sometimes. Okay, and we will not go and I have repeated these for several times both again in GetNet and outside GetNet, we will not go for volume for the sake of volume or for the sake of market share. If you see number of transactions just in this quarter and you analyzed those number of transactions that we are dealing with, we are in double-digit. I think somewhere in the 12% or 13% growth. So we keep on with good activity, obviously selecting or avoiding volume that is unprofitable. And to your answer also, the bank will not follow the idea of trying to be bigger or larger for the sake of having a larger market share. We will grow in markets. We think we will grow but through a profitable scheme.

The next question on the asset quality from Gabrion. Could you comment with us why you increase provisions in the quarter, if your NPLs reduced and NPL formation grew below the growth rate of your book and coverage remains high. Is there something that you are seeing your loan book which could be to where you -- to begin to where you’re sorry? I don't know, if I understood it. Could you comment with us why you increased provisions in the quarter if your NPLs.

Well, I mean one thing is the balance sheet the ratio the 90 days over ratio and the other thing is the provisioning with the provisioning, you have both a calendar, a criteria, a ranking of the different companies in parts of the portfolio. So one thing obviously talks with the other but they are not immediate in the same quarter both because of what I said and because of the different policies look at both from the regulatory point of view and from our own criteria which sometimes is more conservative than the regulatory levels. The coverage remains high as you said, NPL formation is still on the low 1%, 1.1%, 1.2% depending on the quarter. So as I said before, we don't see an issue on the credit quality front as we continuously present to you.

Our next question comes from Eduardo Altamirano from HSBC. Mr. Eduardo, you may proceed. Mr. Eduardo, your line is open.

Yes.

Hi, it is Carlos Gomez from HSBC. I had a question regarding the tax rate which was 29% this quarter. Any particular reason why it's bit lower than in other quarters. And do you expect the increasing 5% proposals through the reform to go through? Thank you.

Thank you, Carlos. Well, you’re right. The tax rate was 29%, we normally yes this is a little bit volatile as you can perfectly understand. We expect the tax rate to be in the 30, 30 plus, okay. But with that kind of I understand that you analyze on the exact number but it does have these kind of small variations throughout quarters. What on the 5% that increase that was included on the pension reform. Well, we are waiting to see where how these evolves. If it goes through, you will have a positive impact on the short term and negative impact on the medium and long-term not probably in three, four years you tend to have said one with the other. But I cannot say to you much more, I mean it's under the political process or the government and Congress process then we will see how it goes finally out when it is approved as you know parallel to that, you also have the tax reform. So we have a lot of things on the table to consider. And the best now is wait and see and see how it evolves.

Okay. And for the quarter, so 29% was also related to your -- given the big payment of interest on capital. Do you expect to pay less in the second half of the year?

No, has less interest on capital or less tax rate?

Interest on capital.

No, I mean you know that there is a revolution with regards to interest on capital. We paid one being the first few interest on capital and we have paid another one being the second Q also interest on capital. So this is up to the board. But the normal estimation would be that that 1B is repeated and first Q and we will adjust numbers in fourth Q, that will also lead to a little bit less volatility and an easier stance for you because if you remember what happened in previous quarters, in previous years was that we had some volatility on the tax rate on the fourth Q given that lumpsum or increasing value in interest on capital. So the idea is to stabilize a little bit more in between the range of impact that you normally have on the tax rate but to try to establish a little bit more, the tax rate across quarters. So I would expect a stability in both interest on capital and tax rate. Is there any other question.

I’m sorry.

No, no, go on, go on. I was going to ask you if there is anything else.

[Operator Instructions]

Not having any additional questions. I thank you for being there and hearing to us. And I look forward to following quarters. Thank you.

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