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Banco Santander (BSBR)

Filed: 29 Jul 20, 6:56am

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

For the month of June, 2020


 

Commission File Number: 001-34476

 

BANCO SANTANDER (BRASIL) S.A.

(Exact name of registrant as specified in its charter)

 

Avenida Presidente Juscelino Kubitschek, 2041 and 2235
Bloco A – Vila Olimpia
São Paulo, SP 04543-011
Federative Republic of Brazil

 

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F ___X___ Form 40-F _______

 Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): 

Yes _______ No ___X____

 Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): 

Yes _______ No ___X____

 Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: 

Yes _______ No ___X____

 If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):  N/A



INDEX

 

 

 

Pág.

Performance Review.. 4

Balance Sheet 17

Income Statements. 21

Statements of Comprehensive Income. 22

Statements of Changes in Stockholders' Equity – Bank. 23

Statements of Changes in Stockholders' Equity – Consolidated. 25

Cash Flows Statements. 27

Statements of Value Added. 28

1.General Information. 29

2.Presentation of Financial Statements. 29

3.Significant Accounting Policies. 32

4.Cash and Cash Equivalents. 40

5.Interbank Investments. 40

6.Securities and Derivatives Financial Instruments. 42

7.Interbank Accounts. 53

8.Loan Portfolio and Allowance for Loan Losses. 53

9.Foreign Exchange Portfolio. 56

10.Securities Trading and Brokerage. 57

11.Tax Assets and Liabilities. 57

12.Other Receivables – Other 60

13.Dependences Information and Foreign Subsidiary. 61

14.Investments in Affiliates and Subsidiaries Subsidiary. 62

15.Fixed Assets. 62

16.Intangibles. 63

17.Funding. 63

18.Debt Instruments Eligible to Capital 65

19.Other Payables – Other 65

20.Provisions, Contingent Assets and Liabilities and Legal Obligations - Tax and Social Security. 66

21.Stockholders’ Equity. 70

22.Related Parties. 72

23.Income from Services Rendered and Banking Fees. 78

24.Personnel Expenses. 78

25.Other Administrative Expenses. 78

26.Other Operating Income. 78

27.Other Operating Expenses. 79

28.Non-Operating Income. 79

29.Employee Benefit Plans - Post-Employment Benefits. 79

30.Risk Management, Capital and Sensitivity Analysis. 86

31.Other information. 89

32.Subsequent Events. 90

Composition of Management Bodies. 91

Declaration of directors on the financial statements. 93

Directors' Statement on Independent Auditors. 94

Audit Committee Report 95

Fiscal Council's Opinion. 98


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Performance Review

Dear Stockholders:

We present the Management Report to Individual and Consolidated Financial Statements of Banco Santander (Brasil) S.A. (Banco Santander or Bank) related to the period ended June 30, 2020, prepared in accordance with accounting practices set by Brazilian Corporate Law, the standards of the National Monetary Council (CMN), the Central Bank of Brazil (Bacen) and document template provided by the Accounting National Financial System Institutions (Cosif) and the Brazilian Exchange Commission (CVM), that does not conflict with the rules issued by Bacen.

The Condensed Interim Financial Statements based on the international accounting standard issued by the International Accounting Standards Board (IASB) for the period ended June 30, 2020 will be simultaneously released at www.santander.com.br/ri.

1. Macroeconomic Environment

The Santander Bank ponders that the global economic scenario was marked by the advance of the COVID-19 pandemic, which has continued to hit most of economies in a strongly fashion and whose final damages are yet to be fully known. However, given a larger control of the contamination, especially in the countries that were hit earlier than other ones, the Bank witnessed the release of activity indicators pointing that the worst of the crisis lies behind. Additionally, the Bank judges that the sizeable grant of fiscal and monetary stimuli on both the international and domestic fronts has helped to support financial asset prices and to a reversal of the worsening registered in the first quarter of this year. For instance, the Bovespa index – which had declined to 73,019.8 points in March 2020 from 115,645.3 points in December 2019 – climbed back to a little higher than 90,000 points at the end of the second quarter.

In Brazil, the Santander Bank considers that the setbacks stemming from the COVID-19 have led lawmakers to focus on measures aiming at reducing the economic impact of the pandemic instead of deepening discussions about structural reforms. The efforts were directed towards debating measures to give support to the poorest part of the population and to companies that were strongly impacted by side effects of social distancing rules. In Santander’s view, these temporary measures indispensable to soothe the crisis impact, but they will raise public expenditures substantially during 2020 and, consequently, they will increase the Brazilian public debt. The Bank believes that this backdrop only reinforces the need to resume discussions about structural reforms once country overcomes the pandemic in order to prevent the public debt to follow an unsustainable path.

In view of the contractionary impact that the pandemic brought, the Bank considers that the general wave of downward revisions in the GDP projections for 2020 was not surprising, in view of the expectations of the first quarter. While the median projection indicated a 0.48% retraction for the Brazilian GDP at the end of March 2020, the median expectation is currently that the Brazilian economy will decline 6.10% this year. The Bank believes that such a prospect of a strong contraction in the Brazilian GDP is the reason for an important revision in the median inflation forecast for 2020 between the end of the first quarter and currently (from 2.94% to 1.72%) . This combination of prospects for economic contraction and low inflation is what Santander believes to have provided space for the Central Bank of Brazil to reduce the basic interest rate to the new historical minimum level in the country (2.25% pa) at the Copom meeting in June 2020.

However, in the Bank’s view, the combination of slow economic growth and high public debt is something that raises concerns among international investors, which has translated into a marginal improvement in its 5-year CDS spreads and FX rate. Regarding the former, after having climbed to 275.9 basis points in March 2020 from 99.5 in December 2019, the gage receded to only 260.9 basis points – notwithstanding it has hovered around 400 basis points during some time in the second quarter. Regarding the FX rate, the Bank saw a similar trajectory materializing, as the pair climbed to USD/BRL5.20 from USD/BRL4.03 between March 2020 and December 2019, respectively, only to end the second quarter at USD/BRL5.16.

Therefore,  in order for there to be a more acute improvement in the performance of these indicators, the Bank believes that measures will be necessary to signal changes both in the pace of economic growth and the reversal of the trajectory of the increase in public indebtedness. In the view of Santander, this will only be possible with the resumption of structural reforms.

2. Performance                 

2.1) Corporate Net Income

Consolidated Income Statements (R$ Millions)

1H20

1H19

annual changes%

2Q20

1Q20

quarter changes %

Financial Income

79,563.5 

39,591.0 

101.0 

27,871.6 

51,691.9 

(46.1) 

Financial Expenses

(79,909.1) 

(21,867.7) 

265.4 

(24,175.0) 

(55,734.1) 

(56.6) 

Gross Profit From Financial Operations (a)

(345.6)

17,723.3 

(102.0)

3,696.6 

(4,042.2)

(191.4)

Other Operating (Expenses) Income (b)

(6,120.7) 

(6,345.9) 

(3.5) 

(3,647.7) 

(2,473.0) 

47.5 

Operating Income

(6,466.3)

11,377.4 

(156.8)

48.9 

(6,515.2)

(100.7)

Non-Operating Income

236.6 

(111.4) 

(312.4) 

31.8 

204.8 

(84.5) 

Income Before Taxes on Income and Profit Sharing

(6,229.8)

11,266.0 

(155.3)

80.6 

(6,310.4)

(101.3)

Income Tax and Social Contribution (a)

13,065.9 

(3,336.4) 

(491.6) 

2,459.5 

10,606.4 

(76.8) 

Profit Sharing

(963.5) 

(925.3) 

4.1 

(484.4) 

(479.1) 

1.1 

 

 

 

 

Non-Controlling Interest

(73.0) 

(179.2) 

(59.2) 

(30.1) 

(42.9) 

(29.7) 

Consolidated Net Income

5,799.6 

6,825.2 

(15.0)

2,025.6 

3,774.0 

(46.3)

 

OPERATING RESULT BEFORE ADJUSTED TAXATION

1H20

1H19

annual variation%

2Q20

1Q20

quarter changes %

(R$ Million)

Result before Taxation on Profit and Participation

(6,229.8) 

11,266.0 

(155.3) 

80.6 

(6,310.4) 

(101.3) 

Foreign Exchange Hedge

15,447.4 

(368.0) 

(4,097.7) 

3,148.6 

12,298.8 

(74.4) 

Operating Income Before Adjusted Taxation

9,217.6 

10,898.0 

(15.4)

3,229.3 

5,988.4 

(46.1)

 

 

 

 

 

 

 

INCOME TAX

1H20

1H19

annual variation%

2Q20

1Q20

quarter changes %

(R$ Million)

Income tax and social contribution

13,065.9 

(3,336.4) 

(491.6) 

2,459.5 

10,606.4 

(76.8) 

Foreign Exchange Hedge

(15,447.4) 

368.0 

(4,297.7) 

(3,148.6) 

(12,298.8) 

(74.4) 

Adjusted Income Tax and Social Contribution

(2,381.5)

(2,968.4)

(19.8)

(689.1)

(1,692.4)

(59.3)

The Bank's rapid adaptation to different scenarios, supported by a solid balance sheet position and a well-defined business model, made it possible to capture important opportunities in the period, always prioritizing customer needs. Accordingly, we offer a plan to extend installments of various types of financing granted to customers in order to provide greater financial capacity. In this quarter, an extraordinary provision of R$3.2 billion was made, supported by assumptions based on stress scenarios. In addition, the Bank continued to evolve our risk models, which helped to maintain the quality of the credit portfolio at controlled levels. As a result of our actions in the period, we observed an increase in margins while reaching the best historical level of the efficiency index.

Managerial net income reached R$5,989 million, down 15.9% in twelve months and 44.6% in the quarter. Excluding the effect of the extraordinary provision expense, net income totaled R$7,749 million, an increase of 8.8% in twelve months and 1.1% in three months.

The return on average shareholders' equity (adjusted for goodwill, reached 17.1% in the first half, down 4.2 pp and 12.0% in three months. Excluding the extraordinary provision expense, ROAE was 22.1% in the first half, an increase of 0.8 pp in twelve months, and 0.4 pp less in three months.

a) Foreign Exchange Hedge of the Grand Cayman and Luxembourg Branches and the Subsidiary Santander Brasil EFC

Banco Santander operates branches in the Cayman Islands and Luxembourg and the subsidiary Santander Brasil Establecimiento Financiero de Credito, EFC, or “Santander Brasil EFC” which are used, mainly, to raise funds in the capital and financial foreign markets, providing credit lines that are extended to clients for trade-related financings and working capital. To protect the exposures to foreign exchange rate variations, the Bank uses derivatives. According to Brazilian tax rules, the gains or losses resulting from the impact of appreciation or depreciation of the local currency (Real) in foreign investments are nontaxable to PIS/Cofins/IR/CSLL, while gains or losses from derivatives used as hedges are taxable or deductible. The purpose of these derivatives is to protect the after-tax net income.

The different tax treatment of such foreign exchange rate differences results in a volatility on the operational earnings or losses and on the gross revenue tax expense  (PIS/Cofins) and income taxes (IR/CSLL), as demonstrated below:

Foreign Exchange Hedge of the Grand Cayman and Luxembourg Branchs
AND THE SUBSIDIARY SANTANDER BRASIL EFC
(R$ Million)

1H20

1H19

Exchange Variation - Profit From Financial Operations

19,283.08 

(554.5) 

Derivative Financial Instruments - Profit From Financial Operations

(35,436.18) 

967.1 

Income Tax and Social Contribution

15,447.39 

(367.7) 

PIS/Cofins - Tax Expenses

705.72 

(45.0) 

2.2) Assets and Liabilities

Consolidated Balance Sheets
(R$ Millions)

30/Jun/20

31/Dec/19

jun/20 vs. jun/19 changes  %

Current and Long-Term Assets

973,952.9 

844,294.7 

15.4 

Permanent Assets

13,726.0 

13,248.4 

3.6 

Total Assets

987,678.9 

857,543.1 

15.2 

Current and Long-Term Liabilities

911,647.0 

785,789.3 

16.0 

Deferred Income

475.9 

285.2 

66.9 

Non-Controlling Interest

1,103.3 

1,695.4 

(34.9) 

Stockholders' Equity

74,452.6 

69,773.2 

6.7 

Total Liabilities and Stockholders' Equity

987,678.9 

857,543.1 

15.2 

 

 

 

2.3) Stockholders’ Equity

As of June 30, 2020, Banco Santander 's consolidated shareholders' equity increased by 6,7% compared to December 31, 2019.

The change in shareholders' equity between June 30, 2020 and December 31, 2019, was mainly due to the net income for the semester in the amount of R$5,978,799 million and in an employee benefit plan in the amount of R$679,503 million (net of tax effects), due to the remeasurement of actuarial obligations due to the change in interest rates caused by the macroeconomic scenario observed in the first half of 2020.

For additional information, see explanatory note to financial statements nº21.

2.4) Basel Index

Bacen determines that financial institutions maintain a Reference Equity (PR), PR Level I and Principal Capital compatible with the risks of their activities, higher than the minimum requirement of the Required Reference Equity, represented by the sum of the credit risk, risk market risk and operational risk.

As established in CMN Resolution No. 4,193/2013, the requirement for PR in 2019 was 10.5%, comprising 8.0% of Minimum Equity of Reference plus 2.5% of Additional Capital Conservation. Considering this surcharge, PR Level I increased to 8.5% and Minimum Principal Capital to 7.0%.

For the base year 2020, the PR requirement remains at 11.5%, including 8.0% of Reference Equity Minimum, plus 2.5% of Capital Conservation Additional and 1.0% of Systemic Additional. PR Level I reaches 9.5% and Minimum Principal Capital 8.0%.

In view of the pandemic scenario, the Central Bank of Brazil has been monitoring the Brazilian market and has established a set of regulations to minimize the impacts of the pandemic. In the case of capital, it established the reduction of the Main Capital Conservation Additional from 2.5% to 1.25%, aiming at expanding the capacity to grant new credit operations.

The Basel ratio is calculated in accordance with the Financial Statements of the Prudential Conglomerate prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen, as shown below:

Basel Index%

Jun/20

Jun/19

Basel I Ratio

13.20 

15.1 

Basel Principal Capital

11.90 

14.0 

Basel Regulatory Capital

14.40 

16.2 

2.5) Main Subsidiaries

The table below shows the balances of total assets, shareholders' equity, net income and loan operations portfolio for the period ended June 30, 2020, of the main subsidiaries of Banco Santander:

Subsidiaries (R$ Millions)

Total Assets

Stockholde

rs' Equity

Net

Income

Loan

Portfolio (1)

Ownership/

Interest (%)

Aymoré Crédito, Financiamento e Investimento S.A.

47,224.5 

1,376.2 

400.7 

44,502.0 

100.00% 

Getnet Adquirência e Serviços para Meios de Pagamento S.A.

28,248.1 

2,778.5 

166.9 

0.0 

100.00% 

Banco Bandepe S.A.

28,844.8 

5,209.6 

35.1 

0.0 

100.00% 

Banco Olé Consignado

15,726.8 

2,778.5 

257.3 

15,662.7 

100.00% 

Banco RCI Brasil S.A.

11,831.6 

1,335.7 

99.9 

9,471.2 

39.89% 

Santander Leasing S.A. Arrendamento Mercantil

7,151.7 

5,847.1 

98.3 

2,066.9 

100.00% 

Santander Corretora de Seguros, Investimento e Serviços S.A.

5,313.5 

3,332.8 

311.8 

0.0 

100.00% 

Santander Brasil, Establecimiento Financiero de Credito, S.A.

5,522.5 

4,806.3 

141.0 

0.0 

100.00% 

Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.

1,611.8 

1,589.2 

33.6 

0.0 

100.00% 

Santander Corretora de Câmbio e Valores Mobiliários S.A.

1,052.9 

697.1 

51.8 

0.0 

100.00% 

(1) Includes balances referring to leasing portfolio and other credits.  

The financial statements of the Subsidiaries above were prepared in accordance with the accounting practices adopted in Brazil, established by the Brazilian Corporate Law, in conjunction with the CMN, Bacen rules and model of the document provided for in the Accounting Plan of Cosif Institutions, of CVM , in which they do not conflict with the rules issued by Bacen, without the elimination of transactions with related companies.

3. Corporate Restructuring

During the semester ended on June 30, 2020 and December 31, 2019, several corporate movements were implemented in order to reorganize the operations and activities of the entities in accordance with the business plan of Banco Santander.

For additional information, see explanatory note to financial statements nº2.

4. Strategy and Rating Agencies

 

 

 

For information regarding the Bank's strategy and rating at rating agencies, see the Results Report available at www.santander.com.br/ri.

5. Corporate Governance

Banco Santander's Board of Directors met and resolved:

On July 28, 2020, approve the Banco Santander Consolidated Financial Statements, prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen and the Banco Santander Interim Consolidated Financial Statements, prepared in accordance with the International Financial Reporting Standards (IFRS), both referring to the semester ended June 30, 2020.

On July 03, 2020, approve the election of Mr. João Marcos Pequeno De Biase as Executive Officer without specific designation of the Bank.

On June 29, 2020, approve (i) the departure of Mr. René Luiz Grande from the position of member of the Bank's Risk and Compliance Committee; and (ii) the election of Mr. René Luiz Grande to the position of member of the Bank's Audit Committee.

On June 12, 2020, approve the election of Ms. Virginie Genès-Petronilho as a member of the Bank's Risk and Compliance Committee.

On May 27, 2020, approve the amendment to the Internal Regulations of the Board of Directors, the Audit Committee and the Risks and Compliance Committee.

On May 21, 2020, approve the election of the members of the Bank's Audit Committee for a new term of officer: Ms. Deborah Stern Vieitas, Mr. Luiz Carlos Nannini and Ms. Maria Elena Cardoso Figueira.

On May 21, 2020, approve the new version of the Remuneration Policy, according to the positive recommendation of the Remuneration Committee, in compliance with of the CMN Resolution n° 3.921/2010.

On May 21, 2020, approve the local implementation of the versions presented for the Policies: (i) Social Responsibility; (ii) Social Investment, and (iii) Corporate Culture, according to the positive recommendation of the Sustainability Committee.

On April 28, 2020, approve the election of Mr. Pedro Augusto de Melo as a member and Coordinator of the Bank's Risk and Compliance Committee.

On April 27, 2020, approve the Individual and Consolidated Financial Statements of Banco Santander, prepared in accordance with the accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen and the consolidated Condensed Intermediate Financial Statements of Banco Santander, prepared in accordance with International Financial Reporting Standards (IFRS), both for the period ended March 31, 2020.

On April 23, 2020, (i) acknowledgment of the resignation presented by Mr. Celso Clemente Giacometti to the positions of member of the Board of Directors, Coordinator of the Nomination and Governance Committee and member of the Remuneration Committee of the Bank; (ii) approve the appointment of Mr. Álvaro Antonio Cardoso de Souza, current member of the Nomination and Governance Committee of the Bank, to the position of Coordinator of the referred Committee; (iii) approve the exoneration of Mr. Bernardo Parnes from the position of Coordinator of the Risk and Compliance Committee of the Bank; (iv) approve the appointment of Mr. Álvaro Antonio Cardoso de Souza, current member of the Risk and Compliance Committee of the Bank, to the position of Coordinator of the referred Committee; and (v) approve the exoneration of Mr. José Roberto Machado Filho, Executive Officer of the Bank.

On April 07, 2020, approve the election of Sr. Marcelo Augusto Dutra Labuto as Director with no specific designation.

On February 28, 2020, approve the resignation of Mr. Ulisses Gomes Guimarães, Director with no specific designation of the Bank; (ii) know the resignation of Mr. Gilberto Duarte de Abreu Filho, Director without a specific designation of the Bank; and (iii) approve the election of Mr. Sandro Rogério da Silva Gamba as an Officer without a specific designation of the Bank.

On February 26, 2020, approve Banco Santander Form 20-F for the year ended December 31, 2019.

On February 26, 2020, approve Banco Santander 's Consolidated Financial Statements for the year ended December 31, 2019, prepared in accordance with International Accounting Standards (IFRS).

On February 3, 2020, approve the election of Sres. Sandro Kohler Marcondes, Vítor Ohtsuki and Geraldo José Rodrigues Alckmin Neto as Directors with no specific designation.

On January 28, 2020, approve Banco Santander Individual and Consolidated Financial Statements, prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen for the year ended December 31, 2019.

 

 

 

There was no change in corporate governance decided by the Bank for the base date of March 31, 2020. These decisions are described in the Management Report of the Individual and Consolidated Financial Statements of December 31, 2019.

6. Risk Management        

On February 23, 2017, Bacen published CMN Resolution No. 4,557, which provides for the structure of risk and capital management (GIRC), effective from the same year. The resolution highlights the need to implement an integrated risk and capital management structure, define an integrated stress test program and declare the Risk Appetite Statement (RAS - Risk Appetite Statement), set up a Risk Committee, define a disclosure policy of published information, appointment of director for risk management, director of capital and director responsible for information disclosure policy. Banco Santander develops necessary actions on a continuous and progressive basis, aiming at adhering to the resolution. No relevant impacts were identified as a result of this standard.

For more information, see note 30 to this publication.

Capital Management Structure

Banco Santander 's capital management structure has robust governance, which supports the processes related to this topic and establishes the responsibilities of each of the teams involved. In addition, there is a clear definition of the guidelines that must be adopted for effective capital management. Further details can be found in the Risk and Capital Management Structure, available on the Investor Relations website.

Internal Audit                     

The Internal Audit reports directly to the Board of Directors, with the Audit Committee responsible for its supervision.

Internal Audit is a permanent function and independent from any other function or unit, whose mission is to provide the Board of Directors and senior management with independent assurance on the quality and effectiveness of internal control and risk management systems (current or emerging) and government, thus contributing to the protection of the organization's value, solvency and reputation. The Internal Audit has a quality certificate issued by the Institute of Internal Auditors (IIA).

In order to fulfill its functions and coverage risks inherent in Banco Santander activity, Internal Audit has a set of tools developed internally and updated when necessary. Among them, the risk matrix stands out, used as a planning tool, prioritizing the risk level of the auditable universe considering, among others, its inherent risks, the latest audit rating, the degree of compliance with the recommendations and its dimension. The work programs, which describe the audit tests to be carried out, are periodically reviewed.

The Audit Committee and the Board of Directors have favorably analyzed and approved the Internal Audit work plan for 2020.

7. People

People are an essential element in the Organization. After all, they are the ones who think, design, develop, interact and build what Banco Santander wants to be. This is why the Bank invests in each of the 47,192 employees here in Brazil.

For the development of these people, the Corporate Academy - Academia Santander, works for a strong, transversal culture, providing that everyone, online and in person, can improve what they already know and explore new possibilities.

Banco Santander supports leaders and managers so that they are close and available. This performance is based on three pillars: Feedback, Open Chat and Personalized Recognition, making sure there is alignment between everyone through recurring and frank conversations, career direction and special moments to reward the growth of the teams.

Banco Santander values ​​a diverse environment, where each competence and each difference is valued. An example is the Affinity Group, created to promote diversity and inclusion based on the 5 pillars: Female Leadership; Racial Equity; Disabled people; Diversity of Formations, Experiences and Generations and the LGBT + pillar. Another good example is the Talent Show. In it, Banco Santander opens space to get to know the most different performances and explore the universe of skills that exist in the Bank, allowing interaction and fraternization among colleagues.

The result of all these actions is the high level of engagement, proven through two surveys that are carried out annually and that bring excellent indicators. One of them points out that at least 91% of employees say they want to stay at Banco Santander for a long time. It is believed that this satisfaction reflects positively on interactions with Customers, generating greater loyalty, sustainable growth and investments in Society, which leads Banco Santander to be the best Bank for all stakeholders.

Due to the COVID-19 pandemic, the payment of the 13th salary of 100% of employees was anticipated and the possibility of converting the meal voucher into food vouchers was offered. In addition, an isolation protocol for high-risk groups was implemented and a Telemedicine program was launched with 24-hour service for employees and their dependents. During this period, 80% of our employees, except employees from the branch network, work in the home office.

8. Sustainable Development         

 

 

 

Santander Brasil's Sustainability strategy is based on three pillars: (i) Strategic and efficient use of Environmental Resources, (ii) Development of Potentials and (iii) Resilient and Inclusive Economy. The Bank's vision, through these pillars, is to contribute to a better, more prosperous and fair society, maintaining excellence and responsibility in internal management, with ethical values as the basis and technology at the service of people and businesses.

In relation to the Social and Environmental Businesses, Santander: i) structured the first ESG Linked Loan in Brazil, with FS Bioenergia. Interest rates are variable according to the achievement of environmental goals; ii) coordinated the first decarbonization credit transaction (Cbios) in the country, regulated by the RenovaBio Program; iii) established a partnership with Coopercitrus, which will offer lines for the acquisition of solar panels and irrigation equipment to members, bringing scale to renewable energy in agribusiness; and iv) was one of the coordinators of the first Green Bond issued by a Brazilian company in the transport and logistics sector in the international market, with the global Climate Bond Initiative certification.

As a result of the global health crisis scenario, Banco Santander has promoted actions to support customers and society. One of these actions includes supporting five institutions that are working on the front line in combating Covid-19. More than R$7 million was collected, half of the amounts donated by employees and the other half, doubled by the Bank. Others actions can be seen on the Santander's website, through the link https://www.santander.com.br/campanhas/cuidar.

9. Independent Audit

The policy of Banco Santander, including its subsidiaries, in contracting services not related to the auditing of the Financial Statements by its independent auditors, is based on Brazilian and international auditing standards, which preserve the auditor's independence. This reasoning provides for the following: (i) the auditor must not audit his own work, (ii) the auditor must not exercise managerial functions in his client, (iii) the auditor must not promote his client's interests, and (iv ) the need for approval of any services by the Bank's Audit Committee.

In compliance with the Securities and Exchange Commission Instruction 381/2003, Banco Santander informs that in the half ended June 30, 2020, PricewaterhouseCoopers did not provide services not related to the independent auditing of the Financial Statements of Banco Santander and controlled companies over 5% of the total fees related to independent audit services.

In addition, the Bank confirms that PricewaterhouseCoopers has procedures, policies and controls in place to ensure its independence, which include assessing the work performed, covering any service other than an independent audit of the Financial Statements of Banco Santander and its subsidiaries. This assessment is based on the applicable regulations and accepted principles that preserve the auditor's independence. The acceptance and provision of professional services not related to the audit of the Financial Statements by its independent auditors during the semester ended on June 30, 2020, did not affect the independence and objectivity in conducting the external audit exams carried out at Banco Santander and other entities of the Group, since the above principles were observed.

The Board od Directors

The Executive Board

 

(Authorized at the Board of Directors' Meeting of 07/28/2020).


 

 

 

 


Balance Sheet

Bank

Consolidated

Notes

6/30/2020

12/31/2019

6/30/2020

12/31/2019

Current Assets

598,567,150 

496,060,072 

600,484,078 

514,863,901 

Cash

20,790,248 

9,543,649 

22,654,686 

9,924,644 

Interbank Investments

103,337,496 

82,235,455 

48,624,468 

42,571,395 

Money Market Investments

41,012,769 

28,703,365 

41,016,944 

28,703,365 

Interbank Deposits

59,024,261 

43,230,118 

4,306,208 

3,565,203 

Foreign Currency Investments

3,300,466 

10,301,972 

3,301,316 

10,302,827 

Securities and Derivative Financial Instruments

100,756,360 

61,649,371 

111,261,974 

72,160,634 

Own Portfolio

55,817,865 

27,746,398 

65,887,953 

34,097,174 

Subject to Repurchase Commitments

16,969,347 

26,824,877 

16,959,121 

21,338,877 

Derivative Financial Instruments

23,526,080 

2,653,751 

22,040,810 

8,894,341 

Deposited in the Central Bank

5,654 

5,654 

Securities Associate to Privatization

568 

512 

568 

512 

Pledged in Guarantees

1,976,359 

456,012 

3,907,381 

3,861,909 

Securities Under Resale Agreements with Free Movement

2,460,487 

3,967,821 

2,460,487 

3,967,821 

Interbank Accounts

70,842,064 

78,178,662 

80,027,263 

88,952,546 

Payments and Receipts Pending Settlement

13,938,973 

9,027,921 

22,882,715 

19,267,302 

Restricted Deposits:

56,883,779 

69,121,251 

57,131,770 

69,663,608 

Central Bank Deposits

56,883,776 

69,121,095 

57,131,767 

69,663,452 

National Housing System (SFH)

156 

156 

Interbank Transfers

6,534 

7,854 

Correspondents

12,778 

21,636 

12,778 

21,636 

Receipts and Payments Pending Settlement

63,527 

63,527 

Receipts and Payments Pending Settlement

63,527 

63,527 

Lending Operations

104,973,917 

83,319,998 

131,344,397 

112,150,045 

Public Sector

77,587 

153,586 

77,587 

153,586 

Private Sector

109,974,253 

86,455,503 

137,612,177 

116,405,810 

(Allowance for Loan Losses)

8.e

(5,077,923) 

(3,289,091) 

(6,345,367) 

(4,409,351) 

Leasing Operations

1,001,734 

1,202,645 

Private Sector

1,017,482 

1,216,238 

(Allowance for Lease Losses)

8.e

(15,748) 

(13,593) 

Other Receivables

195,976,273 

179,592,907 

203,324,822 

185,981,022 

Credits for Avals and Sureties Honored

79,204 

23,283 

576,534 

377,915 

Foreign Exchange Portfolio

142,188,280 

123,396,135 

142,188,280 

123,396,135 

Income Receivable

1,967,288 

2,226,778 

1,882,818 

2,025,186 

Trading Account

10 

3,955,710 

2,325,866 

5,996,485 

3,912,093 

Others

12 

48,543,518 

52,071,971 

53,490,221 

56,713,037 

(Allowance for Other Receivables Losses)

8.e

(757,727) 

(451,126) 

(809,516) 

(443,344) 

Other Assets

1,827,265 

1,540,030 

2,181,207 

1,920,970 

Other Assets

1,209,837 

1,195,777 

1,516,170 

1,524,102 

(Allowance for Valuation)

(105,161) 

(115,705) 

(234,665) 

(254,950) 

Prepaid Expenses

722,589 

459,958 

899,702 

651,818 

 


 

 

 

 

 Bank

 Consolidated

Notes

6/30/2020

12/31/2019

6/30/2020

12/31/2019

Long-Term Assets

352,898,764 

305,377,691 

373,468,823 

329,430,790 

Interbank Investments

32,847,463 

33,694,075 

647,728 

796,099 

Interbank Deposits

32,847,463 

33,694,075 

647,728 

796,099 

Securities and Derivative Financial Instruments

137,534,226 

112,305,951 

140,923,101 

121,294,033 

Own Portfolio

28,926,474 

23,603,436 

26,308,357 

28,228,324 

Subject to Repurchase Commitments

70,847,245 

71,638,459 

70,847,245 

71,617,304 

Derivative Financial Instruments

16,579,788 

8,532,484 

16,579,788 

8,546,799 

Deposited with the Central Bank

2,273,094 

2,273,094 

Securities Associate to Privatization

100 

370 

100 

370 

Pledged in Guarantees

15,303,617 

8,028,432 

21,310,609 

12,398,466 

Securities Under Resale Agreements with Free Movement

3,603,908 

502,770 

3,603,908 

502,770 

Interbank Accounts

317,321 

312,411 

317,321 

312,411 

Restricted Deposits:

317,321 

312,411 

317,321 

312,411 

National Housing System (SFH)

317,321 

312,411 

317,321 

312,411 

Lending Operations

124,544,743 

110,094,019 

165,164,957 

148,292,513 

Public Sector

1,007,720 

964,378 

1,009,055 

965,758 

Private Sector

139,598,854 

123,678,363 

181,759,755 

163,374,180 

(Allowance for Loan Losses)

8.e

(16,061,831) 

(14,548,722) 

(17,603,853) 

(16,047,425) 

Leasing Operations

1,557,903 

1,564,446 

Public Sector

1,119 

Private Sector

1,583,426 

1,583,641 

(Allowance for Lease Losses)

8.e

(25,523) 

(20,314) 

Other Receivables

57,327,726 

48,661,212 

64,415,098 

56,678,875 

Receivables for Guarantees Honored

508,794 

298,195 

11,464 

298,195 

Foreign Exchange Portfolio

1,438,288 

1,108,978 

1,438,288 

1,108,978 

Income Receivable

161,971 

156,939 

161,971 

156,939 

Trading and Intermediation of Values

10 

562,425 

Deferred Taxes

11 

42,284,487 

28,074,411 

46,365,041 

31,904,371 

Others

12 

13,453,218 

19,395,717 

17,032,717 

23,122,032 

(Allowance for Other Receivables Losses)

8.e

(519,032) 

(373,028) 

(594,383) 

(474,065) 

Other Assets

327,285 

310,023 

442,715 

492,413 

Transitory Assets

1,444 

1,622 

1,450 

56,875 

(Allowance for Losses)

(1,444) 

(1,622) 

(1,450) 

(1,630) 

Prepaid Expenses

327,285 

310,023 

442,715 

437,168 

Permanent Assets

41,553,772 

37,097,964 

13,725,956 

13,248,376 

Investments

31,080,361 

26,831,540 

358,794 

354,490 

Investments in Affiliates and Subsidiaries:

14 

31,059,484 

26,810,793 

337,846 

333,674 

Domestic

26,253,213 

23,263,738 

337,846 

333,674 

Foreign

4,806,271 

3,547,055 

Other Investments

45,194 

45,064 

50,470 

50,344 

(Allowance for Losses)

(24,317) 

(24,317) 

(29,522) 

(29,528) 

Fixed Assets

15 

6,137,788 

6,214,168 

7,037,476 

7,181,088 

Real Estate in Use

2,461,079 

2,467,216 

2,765,241 

2,753,149 

Others Fixed Assets

12,228,097 

13,818,040 

13,900,083 

15,483,559 

(Accumulated Depreciation)

(8,551,388) 

(10,071,088) 

(9,627,848) 

(11,055,620) 

Intangible Assets

16 

4,335,623 

4,052,256 

6,329,686 

5,712,798 

Goodwill

26,481,816 

26,496,592 

29,489,764 

29,050,911 

Others Intangible Assets

9,201,411 

8,485,328 

9,901,248 

9,196,813 

(Accumulated Amortization)

(31,347,604) 

(30,929,664) 

(33,061,326) 

(32,534,926) 

Total Assets

993,019,686 

838,535,727 

987,678,857 

857,543,067 


 

 

 

 

 Bank

 Consolidated

Notes

6/30/2020

12/31/2019

6/30/2020

12/31/2019

Current Liabilities

685,806,649 

594,642,669 

680,199,524 

598,591,332 

Deposits

17 

278,555,138 

214,983,542 

275,418,198 

212,838,421 

Demand Deposits

39,646,518 

29,392,188 

39,496,679 

29,107,534 

Savings Deposits

55,755,637 

49,039,857 

55,755,637 

49,039,857 

Interbank Deposits

6,282,455 

4,573,086 

5,319,382 

3,457,996 

Time Deposits

176,870,526 

131,978,411 

174,846,498 

131,096,194 

Other Deposits

136,840 

Money Market Funding

17 

108,462,579 

111,939,869 

102,495,422 

106,248,412 

Own Portfolio

86,773,116 

97,227,938 

82,805,958 

91,536,480 

Third Parties

17,287,541 

8,743,348 

15,287,542 

8,743,348 

Linked to Trading Portfolio Operations

4,401,922 

5,968,583 

4,401,922 

5,968,584 

Funds from Acceptance and Issuance of Securities

17 

49,584,347 

60,517,226 

41,260,980 

51,265,094 

Exchange Acceptances

100,194 

347,778 

34,240 

Real Estate Credit Notes, Mortgage Notes, Credit and Similar Notes

33,041,584 

42,445,229 

33,691,987 

43,567,117 

Funding by Structured Operations Certificates

13,877,906 

16,295,922 

4,656,552 

5,887,662 

Interbank Accounts

2,564,663 

1,776,075 

2,564,663 

1,776,075 

Receipts and Payments Pending Settlement

1,780,786 

41,756 

2,040,311 

369,578 

Interbank Transfers

1,668,214 

1,927,739 

327,822 

Interbank Accounts

112,572 

41,756 

112,572 

41,756 

Third-Party Funds in Transit

3,995,936 

4,019,119 

3,995,936 

4,019,119 

Internal Transfers of Assets

3,995,936 

4,002,824 

3,995,936 

4,002,824 

Borrowings

16,295 

16,295 

Local Borrowings - Other Institutions

17 

55,174,437 

43,870,657 

52,120,751 

41,322,712 

Foreign Borrowings

22,414 

33,585 

Domestic Onlendings - Official Institutions

55,174,437 

43,870,657 

52,098,337 

41,289,127 

National Economic and Social Development Bank (BNDES)

17 

4,205,356 

3,697,638 

4,205,356 

3,697,638 

Federal Savings and Loan Bank (CEF)

2,133,852 

1,355,447 

2,133,852 

1,355,447 

National Equipment Financing Authority (FINAME)

90,799 

94,725 

90,799 

94,725 

Other Institutions

1,666,261 

1,755,646 

1,666,261 

1,755,646 

Derivative Financial Instruments

314,444 

491,820 

314,444 

491,820 

Derivative Financial Instruments

21,404,512 

3,774,395 

20,697,183 

10,112,463 

Derivative Financial Instruments

21,404,512 

3,774,395 

20,697,183 

10,112,463 

Other Payables

162,643,558 

151,798,467 

177,965,387 

168,717,895 

Collected Taxes and Other

1,948,194 

96,928 

1,951,298 

131,179 

Foreign Exchange Portfolio

136,487,834 

116,991,021 

136,487,834 

116,991,021 

Social and Statutory

479,694 

8,188,762 

531,034 

8,376,961 

Tax and Social Security

11 

2,469,331 

2,854,815 

3,766,279 

4,092,434 

Trading Account

10 

302,616 

1,063,403 

2,652,730 

3,149,991 

Debt Instruments Eligible to Compose Capital

18 

232,218 

170,939 

232,218 

170,939 

Others

19 

20,723,671 

22,432,599 

32,343,994 

35,805,370 

 

 Bank

 Consolidated

Notes

6/30/2020

12/31/2019

6/30/2020

12/31/2019

Long-Term Liabilities

232,470,998 

173,943,594 

231,447,522 

187,197,923 

Deposits

17 

82,702,988 

59,228,624 

82,643,110 

60,089,570 

Interbank Deposits

203,091 

100,686 

624,018 

841,294 

Time Deposits

82,499,897 

59,127,938 

82,019,092 

59,248,276 

Money Market Funding

17 

22,424,799 

17,692,578 

22,424,799 

17,692,578 

Own Portfolio

271,173 

159,745 

271,173 

159,745 

Linked to Trading Portfolio Operations

22,153,626 

17,532,833 

22,153,626 

17,532,833 

Funds from Acceptance and Issuance of Securities

17 

49,982,008 

31,062,142 

40,569,621 

34,697,521 

Exchange Acceptances

748,542 

1,557,513 

Real Estate Credit Notes, Mortgage Notes,  Credit and Similar Notes

29,741,048 

26,271,049 

32,564,158 

28,644,786 

Securities Issued Abroad

19,209,416 

3,123,591 

6,225,377 

2,827,720 

Funding by Structured Operations Certificates

1,031,544 

1,667,502 

1,031,544 

1,667,502 

Borrowings

17 

1,260,306 

1,788,469 

1,292,033 

1,802,272 

Local Borrowings - Other Institutions

31,727 

13,803 

Foreign Borrowings

1,260,306 

1,788,469 

1,260,306 

1,788,469 

Domestic Onlendings - Official Institutions

17 

7,861,961 

8,056,939 

7,861,961 

8,056,939 

National Economic and Social Development Bank (BNDES)

4,856,316 

4,897,785 

4,856,316 

4,897,785 

Federal Savings and Loan Bank (CEF)

64,254 

68,325 

64,254 

68,325 

National Equipment Financing Authority (FINAME)

2,931,638 

3,063,173 

2,931,638 

3,063,173 

Other Institutions

9,753 

27,656 

9,753 

27,656 

Derivative Financial Instruments

20,763,794 

10,208,817 

20,941,672 

10,510,899 

Derivative Financial Instruments

20,763,794 

10,208,817 

20,941,672 

10,510,899 

 

 

 

 

Other Payables

47,475,142 

45,906,025 

55,714,326 

54,348,144 

Foreign Exchange Portfolio

1,488,983 

1,004,861 

1,488,983 

1,004,861 

Tax and Social Security

11 

3,885,076 

3,659,656 

4,387,254 

4,199,423 

Trading Account

10 

557,370 

Debt Instruments Eligible to Compose Capital

18 

13,590,024 

10,005,022 

13,590,024 

10,005,022 

Others

19 

28,511,059 

31,236,486 

36,248,065 

38,581,468 

Deferred Income

229,856 

261,741 

475,885 

285,219 

Deferred Income

229,856 

261,741 

475,885 

285,219 

Stockholders' Equity

21 

74,512,183 

69,687,723 

74,452,581 

69,773,232 

Capital:

57,000,000 

57,000,000 

57,000,000 

57,000,000 

Brazilian Residents

4,808,186 

4,808,186 

4,808,186 

4,808,186 

Foreign Residents

52,191,814 

52,191,814 

52,191,814 

52,191,814 

Capital Reserves

197,961 

197,369 

196,337 

194,115 

Profit Reserves

17,962,614 

12,909,736 

17,898,028 

12,986,778 

Adjustment to Fair Value

144,116 

261,753 

150,724 

273,474 

(-) Treasury Shares

(792,508) 

(681,135) 

(792,508) 

(681,135) 

Non Controlling Interest

21.e

1,103,345 

1,695,361 

Total Stockholders' Equity

74,512,183 

69,687,723 

75,555,926 

71,468,593 

Total Liabilities

993,019,686 

838,535,727 

987,678,857 

857,543,067 

The accompanying notes from Management are an integral part of these financial statements.


 

 

 

 

Income Statements

Bank

Consolidated

Notes

01/01 to 06/30/2020

01/01 to 06/30/2019

01/01 to 06/30/2020

01/01 to 06/30/2019

Income Related to Financial Operations

73,967,441 

34,986,088 

79,563,473 

39,590,982 

Loan Operations

28,009,033 

20,073,183 

34,491,929 

26,270,470 

Leasing Operations

156,260 

171,076 

Securities Transactions

6.a

50,573,998 

13,165,460 

49,202,392 

11,572,815 

Derivatives Transactions

518,129 

(3,026,391) 

711,669 

(3,290,429) 

Foreign Exchange Operations

(6,145,592) 

2,758,692 

(6,017,339) 

2,838,703 

Compulsory Deposits

1,011,873 

2,015,144 

1,018,562 

2,028,347 

Expenses on Financial Operations

(77,610,921)

(20,825,972)

(79,909,105)

(21,867,716)

Funding Operations Market

17.b

(40,619,135) 

(14,124,656) 

(41,193,858) 

(14,050,577) 

Borrowings and Onlendings Operations

(27,328,721) 

(1,481,904) 

(27,347,015) 

(1,426,854) 

Operations of Sale or Transfer of Financial Assets

(1,005,682) 

(17,383) 

(1,005,631) 

(31,691) 

Allowance for Loan Losses

8.e

(8,657,383) 

(5,202,029) 

(10,362,601) 

(6,358,594) 

Gross Income Related to Financial Operations

(3,643,480)

14,160,116 

(345,632)

17,723,266 

Other Operating Revenues (Expenses)

(3,782,437)

(4,017,667)

(6,120,713)

(6,345,880)

Banking Service Fees

23 

4,494,803 

5,041,572 

6,127,134 

6,667,723 

Income Related to Bank Charges

23 

2,162,490 

2,169,623 

2,457,211 

2,483,927 

Personnel Expenses

24 

(3,142,349) 

(3,285,744) 

(3,621,626) 

(3,737,443) 

Other Administrative Expenses

25 

(5,279,853) 

(4,942,522) 

(6,133,482) 

(5,818,051) 

Tax Expenses

11.d

(719,006) 

(1,592,902) 

(1,294,924) 

(2,326,059) 

Investments in Affiliates and Subsidiaries

14 

1,822,223 

1,609,047 

9,548 

21,720 

Other Operating Revenues

26 

2,333,231 

1,224,982 

3,178,973 

1,625,997 

Other Operating Expenses

27 

(5,453,976) 

(4,241,723) 

(6,843,547) 

(5,263,694) 

Operating Income

(7,425,917)

10,142,449 

(6,466,345)

11,377,386 

Non-Operating Income

28 

230,830 

14,596 

236,583 

(111,382)

Income Before Taxes on Income and Profit Sharing

(7,195,087)

10,157,045 

(6,229,762)

11,266,004 

Income Tax and Social Contribution

11 

14,018,215 

(2,443,720)

13,065,872 

(3,336,392)

Provision for Income Tax

(373,844) 

(1,279,541) 

(1,126,484) 

(2,115,525) 

Provision for Social Contribution Tax

(327,040) 

(769,665) 

(744,220) 

(1,151,350) 

Deferred Tax Credits

14,719,099 

(394,514) 

14,936,576 

(69,517) 

Profit Sharing

(880,250)

(841,678)

(963,508)

(925,262)

Non Controlling Interest

21.e

(73,040) 

(179,178) 

Net Income

5,942,878 

6,871,647 

5,799,562 

6,825,172 

Number of Shares (Thousands)

21.a

7,498,531 

7,468,079 

$)

792.54 

920.14 

 


 

 

 

 

Statements of Comprehensive Income

Bank

Consolidated

01/01 to 06/30/2020

01/01 to 06/30/2019

01/01 to 06/30/2020

01/01 to 06/30/2019

Profit for the Period

5,942,878 

6,871,647 

5,799,562 

6,825,172 

Other Comprehensive Income that will be subsequently reclassified for profit or loss when specific conditions are met:

(797,140)

1,424,503 

(802,253)

1,428,372 

Available-for-sale financial assets

(658,290) 

1,548,437 

(663,403) 

1,552,306 

Available-for-sale financial assets

(1,536,565) 

2,592,818 

(1,541,918) 

2,596,687 

Income taxes

878,275 

(1,044,381) 

878,515 

(1,044,381) 

Cash flow hedges

(138,850) 

(123,934) 

(138,850) 

(123,934) 

Cash flow hedges

99,414 

(76,035) 

99,414 

(78,116) 

Income taxes

(238,264) 

(47,899) 

(238,264) 

(45,818) 

Other Comprehensive Income that won't be reclassified for Net income:

679,503 

(801,684)

679,503 

(801,684)

Defined Benefits plan

679,503 

(801,684) 

679,503 

(801,684) 

Defined Benefits plan

1,278,431 

(1,305,655) 

1,278,431 

(1,305,655) 

Income taxes

(598,928) 

503,971 

(598,928) 

503,971 

Comprehensive Income for the Period

5,825,241 

7,494,466 

5,676,812 

7,451,860 

The accompanying notes from Management are an integral part of these financial statements.

 

 


Statements of Changes in Stockholders' Equity – Bank

Profit Reserves

Adjustment to Fair Value

Notes

Capital

Capital Reserves

Legal Reserve

Reserve for Dividend Equalization

Own Position

Affiliates and Subsidiaries

Others Adjustment to Fair Value

Retained  Earnings Retained

(-)Treasury Shares

Total

Balances as of December 31, 2018

57,000,000 

140,707 

3,113,605 

6,506,949 

1,885,972 

114,491 

(3,071,043)

(461,432)

65,229,249 

Employee Benefit Plans

(801,683) 

(801,683) 

Treasury Shares

(151,848) 

(151,848) 

Result of Treasury Shares

3,898 

3,898 

Reservations for Share - Based Payment

  

(35,126) 

(35,126) 

Adjustment to Fair Value - Securities and Derivative Financial Instruments

  

1,445,346 

(20,843) 

1,424,503 

Emission Costs of Treasury Shares

(1,528) 

(1,528) 

Net Income

6,871,647 

6,871,647 

Allocations:

Legal Reserve

 21.c

343,582 

(343,582) 

Interest on Capital

 21.b

(2,000,000) 

(2,000,000) 

Reserve for Dividend Equalization

 21.c

4,528,755 

(4,528,755) 

Others

 21.c

690 

690 

Balances as of June 30, 2019

57,000,000 

109,479 

3,457,187 

11,035,704 

3,331,318 

93,648 

(3,872,726)

(614,808)

70,539,802 

Changes in the Period

(31,228)

343,582 

4,528,755 

1,445,346 

(20,843)

(801,683)

(153,376)

5,310,553 

Balances as of December 31, 2019

  

57,000,000 

197,369 

3,818,064 

9,091,672 

3,920,714 

91,380 

(3,750,341)

(681,135)

69,687,723 

Employee Benefit Plans

679,503 

679,503 

Treasury Shares

(111,373) 

(111,373) 

Result of Treasury Shares

 

(16,746) 

(16,746) 

Reservations for Share - Based Payment

  

17,338 

17,338 

Adjustment to Fair Value - Securities and Derivative Financial Instruments

  

(830,970) 

33,830 

(797,140) 

Net Income

5,942,878 

5,942,878 

Allocations:

Legal Reserve

 21.c

297,144 

(297,144) 

Interest on Capital

 21.b

(890,000) 

(890,000) 

Reserve for Dividend Equalization

 21.c

4,755,734 

(4,755,734) 

Balances as of June 30, 2020

57,000,000 

197,961 

4,115,208 

13,847,406 

3,089,744 

125,210 

(3,070,838)

(792,508)

74,512,183 

Changes in the Period

592 

297,144 

4,755,734 

(830,970)

33,830 

679,503 

(111,373)

4,824,460 

 

 

 

 


 


Statements of Changes in Stockholders' Equity – Consolidated

Reservas de Lucros

 Ajustes de Avaliação Patrimonial

Notes

Capital

Capital Reserves

Legal Reserve

Reserve for Dividend Equalization

Own Position

Affiliates and Subsidiaries

Others Adjustment to Fair Value

Retained  Earnings Retained

(-)Treasury Shares

Stockholders' Equity

Minority  Interest

Total Stockholders' Equity

Balances as of December 31, 2018

57,000,000 

142,414 

3,113,606 

6,509,735 

1,885,972 

114,491 

(3,071,043)

(461,432)

65,233,743 

2,069,929 

67,303,672 

Employee Benefit Plans

(801,683) 

(801,683) 

(801,683) 

Treasury Shares

(151,848) 

(151,848) 

(151,848) 

Result of Treasury Shares

3,898 

3,898 

3,898 

Reservations for Share - Based Payment

  

(35,277) 

(35,277) 

(35,277) 

Fair Value Adjustment - Securities and Derivative Financial Instruments

1,445,346 

(20,843) 

1,424,503 

1,424,503 

Capital Restructuring

Emission Costs of Treasury Shares

(1,528) 

(1,528) 

(1,528) 

Net Income

6,825,172 

6,825,172 

6,825,172 

Allocations:

Legal Reserve

 21.c

343,582 

(343,582) 

Provision of Interest on Capital

 21.b

(2,000,000) 

(2,000,000) 

(2,000,000) 

Reserve for Dividend Equalization

 21.c

4,528,755 

(4,528,755) 

Unrealized Profit

(46,244) 

3,868 

46,483 

4,107 

4,107 

Non Controlling Interest Results

 21.e

181,163 

181,163 

Others

682 

682 

(490,969) 

(490,287) 

Balances as of June 30, 2019

57,000,000 

111,035 

3,457,188 

10,992,246 

3,331,318 

97,516 

(3,872,726)

(614,808)

70,501,769 

1,760,123 

72,261,892 

Changes in the Period

(31,379)

343,582 

4,482,511 

1,445,346 

(16,975)

(801,683)

(153,376)

5,268,026 

(309,806)

4,958,220 

 


 

 

 

 

Reservas de Lucros

 Ajustes de Avaliação Patrimonial

Notes

Capital

Capital Reserves

Legal Reserve

Reserve for Dividend Equalization

Own Position

Affiliates and Subsidiaries

Others Adjustment to Fair Value

Retained  Earnings Retained

(-)Treasury Shares

Stockholders' Equity

Minority  Interest

Total Stockholders' Equity

Balances as of December 31, 2019

  

57,000,000 

194,115 

3,818,065 

9,168,713 

3,932,436 

91,380 

(3,750,342)

(681,135)

69,773,232 

1,695,361 

71,468,593 

Employee Benefit Plans

679,503 

679,503 

679,503 

Treasury Shares

(16,746) 

(111,373) 

(128,119) 

(128,119) 

Reservations for Share - Based Payment

  

18,968 

18,968 

18,968 

Adjustment to Fair Value - Securities and Derivative Financial Instruments

(836,083) 

33,830 

(802,253) 

(802,253) 

Net Income

5,799,562 

5,799,562 

5,799,562 

Allocations:

Legal Reserve

 21.c

297,144 

(297,144) 

Interest on Capital

 21.b

(890,000) 

(890,000) 

(890,000) 

Reserve for Dividend Equalization

 21.c

4,755,734 

(4,755,734) 

Unrealized Profit

(141,628) 

141,628 

Non-Controlling Interest

 21.e

(73,040) 

(73,040) 

Others

1,688 

1,688 

(518,976) 

(517,288) 

Balances as of June 30, 2020

57,000,000 

196,337 

4,115,209 

13,782,819 

3,096,353 

125,210 

(3,070,839)

(792,508)

74,452,581 

1,103,345 

75,555,926 

Changes in the Period

2,222 

297,144 

4,614,106 

(836,083)

33,830 

679,503 

(111,373)

4,679,349 

(592,016)

4,087,333 

 

 

 

 


Cash Flows Statements

Bank

Consolidated

01/01 to 06/30/2020

01/01 to 12/31/2019

01/01 to 06/30/2020

01/01 to 12/31/2019

Notes

Operational Activities

Net Income

5,942,878 

6,871,647 

5,799,562 

6,825,172 

Adjustment to Net Income

2,662,402 

4,741,423 

6,292,704 

7,830,085 

Allowance for Loan Losses

8.e

8,657,383 

5,202,029 

10,362,601 

6,358,594 

Provision for Legal Proceedings and Administrative and Legal Obligations

20.c

693,936 

885,513 

788,593 

989,409 

Monetary Adjustment of Provision for Legal Proceedings and Administrative and Legal Obligations

20.c

198,219 

249,482 

229,162 

304,253 

Deferred Tax Credits and Liabilities

11.a & b

(13,232,363) 

(67,736) 

(13,391,622) 

(329,233) 

Equity in Affiliates and Subsidiaries

14 

(1,822,223) 

(1,609,047) 

(9,548) 

(21,720) 

Depreciation and Amortization

25 

1,257,520 

1,078,880 

1,512,014 

1,351,054 

Recognition (Reversal) Allowance for Other Assets Losses

28 

(10,660) 

1,714 

(20,408) 

119,930 

Gain (Loss) on Sale of Other Assets

28 

(30,607) 

(6,573) 

(21,150) 

(1,111) 

Gain (Loss) on Impairment of Assets

28 

135 

135 

Gain (Loss) on Sale of Investments

28 

(168,588) 

(168,588) 

(4,369) 

Provision for Financial Guarantees

27 

22,140 

(25,482) 

22,140 

(25,482) 

Monetary Adjustment of Escrow Deposits

26 

(194,100) 

(287,940) 

(222,440) 

(330,032) 

Recoverable Taxes

26 

(104,250) 

(34,525) 

(121,134) 

(52,685) 

Effects of Changes in Foreign Exchange Rates on Cash and Cash Equivalents

2,432 

7,952 

2,432 

7,952 

Effects of Changes in Foreign Exchange Rates on Assets and Liabilities

7,437,463 

(704,062) 

7,437,463 

(704,062) 

Others

(43,900) 

51,083 

(106,811) 

167,452 

Changes on Assets and Liabilities

21,026,605 

(2,720,863)

29,549,008 

(5,026,894)

Decrease (Increase) in Interbank Investments

(15,026,083) 

8,808,901 

(686,774) 

10,614,238 

Decrease (Increase) in Securities and Derivative Financial Instruments

(35,949,907) 

(2,580,253) 

(37,638,082) 

(2,929,688) 

Decrease (Increase) in Lending and Leasing Operations

(44,489,416) 

(14,563,468) 

(45,910,563) 

(19,078,046) 

Decrease (Increase) in Deposits on Central Bank of Brazil

12,237,319 

(4,738,229) 

12,531,685 

(4,754,793) 

Decrease (Increase) in Other Receivables

(50,393,080) 

(18,111,539) 

(48,195,538) 

(21,752,667) 

Decrease (Increase) in Other Assets

(279,893) 

166,065 

(253,431) 

158,640 

Net Change on Other Interbank and Interbranch Accounts

(3,253,311) 

244,404 

(2,027,289) 

3,874,250 

Increase (Decrease) in Deposits

87,045,960 

12,924,073 

85,133,317 

16,183,275 

Increase (Decrease) in Money Market Funding

1,254,931 

(29,573,142) 

979,231 

(29,303,735) 

Increase (Decrease) in Borrowings

7,057,076 

15,689,628 

6,569,259 

14,997,468 

Increase (Decrease) in Other Liabilities

62,854,894 

29,782,927 

60,036,725 

28,857,765 

Increase (Decrease) in Change in Deferred Income

(31,885) 

(32,327) 

190,666 

(57,264) 

Income Tax Recovered/(Paid)

(737,903) 

(1,180,198) 

(1,836,337) 

Net Cash Provided by (Used in) Operational Activities

29,631,885 

8,892,207 

41,641,274 

9,628,363 

Investing Activities

Increase in Equity at Affiliates and Subsidiaries

14 

(385,100) 

(705,999) 

(6,000) 

Purchase of Investment

(130) 

(130) 

Purchase of Fixed Assets

(506,672) 

(670,106) 

(596,703) 

(943,473) 

Purchase of Intangible Assets

(474,226) 

(563,077) 

(804,719) 

(641,861) 

Net Cash Received on Sale/Reduction of Investments

266,100 

171,220 

4,800 

Acquisition of Minority Residual Interest in Subsidiary

2.c

(1,600,000) 

(1,291,630) 

(1,600,000) 

(1,291,630) 

Proceeds from Assets not in Use

255,038 

284,554 

270,325 

296,277 

Proceeds from Property for Own Use

56,190 

14,288 

60,114 

22,143 

Dividends and Interest on Capital Received

289,524 

1,136,676 

152,761 

52,807 

Net Cash Provided by (Used in) Investing Activities

(2,099,276)

(1,795,294)

(2,353,132)

(2,500,937)

Financing Activities

Purchase of Own Share

21.d

(111,373) 

(151,848) 

(111,373) 

(151,848) 

Issuance of Long - Term Emissions

46,892,014 

29,246,867 

36,662,956 

30,590,223 

Long - Term Payments

(49,038,353) 

(26,234,584) 

(49,038,353) 

(27,402,237) 

Subordinated Debts – Payments

(9,924,747) 

(9,924,747) 

Debt Instruments Eligible to Compose Capital - Payments

(436,407) 

(328,892) 

(436,407) 

(328,892) 

Dividends and Interest on Capital Paid

(8,360,113) 

(5,188,878) 

(8,425,919) 

(5,317,302) 

Increase (decrease) in Minority Interest

(277,510) 

Capital Increase in Controlled Companies Held by Minority Interest

14 

100,000 

Net Cash Provided by (Used in) Financing Activities

(11,054,232)

(12,582,082)

(21,349,096)

(12,712,313)

Exchange Variation on Cash and Cash Equivalents

(2,432)

(7,952)

(2,432)

(7,952)

Increase (Decrease) in Cash and Cash Equivalents

16,475,945 

(5,493,121)

17,936,614 

(5,592,839)

Cash and Cash Equivalents at the Beginning of Semester

21,421,432 

25,854,948 

21,443,663 

25,285,982 

Cash and Cash Equivalents at the End of Semester

37,897,377 

20,361,827 

39,380,277 

19,693,143 


Statements of Value Added

Bank

Consolidated

01/01 to 06/30/2020

01/01 to 06/30/2019

01/01 to 06/30/2020

01/01 to 06/30/2019

Notes

Income Related to Financial Operations

73,967,441 

34,986,088 

79,563,473 

39,590,982 

Income Related to Bank Charges and Banking Service Fees

23 

6,657,293 

7,211,195 

8,584,345 

9,151,650 

Allowance for Loans Losses

8.f

(8,657,383) 

(5,202,029) 

(10,362,601) 

(6,358,594) 

Other Revenues and Expenses

11,127,747 

(3,002,145) 

10,741,886 

(3,755,859) 

Financial Expenses

(68,953,538) 

(15,623,943) 

(69,546,504) 

(15,509,122) 

Third-party Input

(3,627,068) 

(3,484,391) 

(4,217,331) 

(4,073,502) 

Materials, Energy and Others

(139,471) 

(129,815) 

(146,489) 

(134,506) 

Third-Party Services

25 

(883,218) 

(920,319) 

(1,171,919) 

(1,161,527) 

Others

(2,604,379) 

(2,434,257) 

(2,898,923) 

(2,777,469) 

Gross Added Value

10,514,492 

14,884,775 

14,763,268 

19,045,555 

Retentions

Depreciation and Amortization

25 

(1,257,520) 

(1,078,880) 

(1,512,014) 

(1,351,054) 

Added Value Produced Net

9,256,972 

13,805,895 

13,251,254 

17,694,501 

Added Value Received from Transfer Investments in Affiliates and Subsidiaries

14 

1,822,223 

1,609,047 

9,548 

21,720 

Added Value to Distribute

11,079,195 

15,414,942 

13,260,802 

17,716,221 

Added Value Distribution

Employee

3,614,803 

32.6% 

3,792,723 

24.6% 

4,105,649 

31.0% 

4,265,082 

24.1% 

Compensation

24 

1,826,713 

1,912,978 

2,066,652 

2,159,757 

Benefits

24 

631,309 

664,550 

724,363 

750,843 

Government Severance Indemnity Funds for Employees - FGTS

144,814 

245,484 

175,481 

212,713 

Others

1,011,967 

969,711 

1,139,153 

1,141,769 

Taxes and Contributions

1,126,249 

10.2% 

4,371,321 

28.4% 

2,859,499 

21.6% 

6,053,294 

34.2% 

Federal

798,860 

4,031,373 

2,449,589 

5,432,736 

State

166 

258 

235 

299 

Municipal

327,223 

339,690 

409,675 

620,259 

Compensation of Third-Party Capital - Rental

25 

395,265 

3.6% 

379,251 

2.5% 

404,137 

3.0% 

393,495 

2.2% 

Remuneration of Interest on Capital

5,942,878 

53.6% 

6,871,647 

44.5% 

5,891,517 

44.4% 

7,004,350 

39.5% 

Dividends

21.b

Interest on Equity

21.b

890,000 

2,000,000 

890,000 

1,000,000 

Profit Reinvestment

5,052,878 

4,871,647 

5,074,557 

6,183,528 

Participation Results of Non-Controlling Stockholders

21.f

(73,040) 

(179,178) 

Total

11,079,195 

100.0% 

15,414,942 

100.0% 

13,260,802 

100.0% 

17,716,221 

100.0% 

 

 

 


1.     General Information

Banco Santander (Brasil) S.A. (Banco Santander or Bank), directly and indirectly controlled by Banco Santander, S.A., based in Spain (Banco Santander Spain), is the lead institution of the Financial and Prudential Conglomerate (Conglomerate Santander) under the authority of the Brazilian Central Bank (Bacen), established as a corporation, with head headquarters at Avenida Presidente Juscelino Kubitschek, 2041 and 2235 - A Block - Vila Olímpia – São Paulo - SP. Banco Santander operates as a multiple service bank, conducting its operations by means of portfolios such as commercial, investment, loans and advances, mortgage loans, leasing and foreign exchange. Through its subsidiaries, the Bank also operates on the segments of payment industry, shares club management, securities and insurance brokerage operations, consumer finance, payroll-deductible loans, digital platforms, management and recovery of non-performing loans, capitalization and pension plan. The Bank's activities are conducted within the context of a group of institutions that operate on an integrated basis in the financial market. The corresponding benefits and costs of providing services are absorbed between them and are conducted in the normal course of business and under commutative conditions.

2.     Presentation of Financial Statements

a)     Presentation

The individual and condensed consolidated interim financial statements of Banco Santander (Brasil) S.A., which include its dependence abroad (Bank) and the consolidated statements (Consolidated), were prepared in accordance with accounting practices adopted in Brazil, established by the Brazilian Corporation Law, National Monetary System (CMN), Central Bank of Brazil (Bacen) and the model of the document provided for in the Accounting Plan of the Institutions of the National Financial System (COSIF) of the Brazilian Securities and Exchange Commission (CVM), in which they do not conflict with the standards issued by the Central Bank and show all information relevant to the financial statements, which are consistent with those used by management in its management.

CMN Resolution No. 4,720/2019 and Circular Bacen No. 3,959/2019 established general criteria and procedures for the preparation and disclosure of the Financial Statements effective from January/2020, including: the presentation of the Statement of Comprehensive Income and the presentation of Statements Interim Financial Statements and in a condensed form for the quarters ended on March 31 and September 30. The standard also provides that the Balance Sheet is now presented in comparison to the equity position at the end of the immediately preceding fiscal year.

The consolidated financial statements include the Bank and its subsidiaries indicated in Note 2.b.1 and investment funds in Note 2.b.2, where Santander Conglomerate companies are the main beneficiaries or holders of the main obligations. The portfolios of these investment funds are classified by type of operation and are distributed in the same categories in which they were originally allocated.

In the preparation of the consolidated financial statements, equity interests, relevant balances receivable and payable, income and expenses arising from transactions between branches in the country, foreign branches and subsidiaries, unrealized results between these companies were eliminated and the participation minority shareholders' equity and income.

All the relevant information related to Banco Santander's financial statements, and only them, are being evidenced, and correspond to those used by Banco Santander´s management.

During the preparation of the consolidated financial statements the information regarding equity in subsidiaries, significant receivable and payable balances, revenues and expenses arising from transactions between domestic branches, foreign branches and subsidiaries, unrealized profits between these entities and non-controlling stockholders participation are stated separately in stockholders’ equity and in the income  statements.

Leasing operations have been reclassified in order to reflect its financial position according to the financial method.

The preparation of financial statements requires Management estimates that affect the reported amounts of assets and liabilities, disclosure of provision and contingent liabilities and the reported amounts of revenues and expenses for the reporting periods. Since Management’s judgment involves making estimates concerning the probability of future events, actual amounts could differ from those estimates. The main estimates are provision of allowance for loan losses, realization of the tax credit, contingent liabilities, pension plan and the fair value of financial assets.

The Board of Directors authorized the issuance of the Financial Statements of the semester ended June 30, 2020 at the meeting held on July 28, 2020.

The consolidated interim financial statements based on international accounting standards issued by the International Accounting Standards Board (IASB) for the semester ended on June 30, 2020 will be disclosed in a legal term, at the website www.santander.com.br/ri.

b)    Affiliates, Subsidiaries and Jointly Controlled Entities

b.1) Affiliates and Subsidiaries - Scope of Consolidation

Quantity of Shares or Quotas Owned (in Thousands)

Investments

Activity

Common Shares and Quotas

Preferred Shares

Direct Participation

Participation

Controlled by Banco Santander

Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing)

Leasing

85 

78.58% 

100.00% 

Santander Brasil Administradora de Consórcio Ltda. (Santander Brasil Consórcio)

Buying Club

238,886 

100.00% 

100.00% 

Banco Bandepe S.A.

Bank

3,589 

100.00% 

100.00% 

Banco RCI Brasil S.A.

Bank

81 

81 

39.89% 

39.89% 

Aymoré Crédito, Financiamento e Investimento S.A. (Aymoré CFI)

Financial

2,877 

100.00% 

100.00% 

Santander CCVM

Broker

14,067,640 

14,067,673 

99.99% 

100.00% 

Santander Corretora de Seguros, Investimentos e Serviços S.A. (Santander Corretora de Seguros)

Other Activities

7,184 

100.00% 

100.00% 

Getnet S.A.

Payment Institution

69,565 

100.00% 

100.00% 

Sancap Investimentos e Participações S.A. (Sancap)

Holding

23,538,159 

100.00% 

100.00% 

Santander Brasil EFC

Financial

75 

100.00% 

100.00% 

Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.

Recovery of Defaulted Credits

1,365,787 

100.00% 

100.00% 

Santander Holding Imobiliária S.A.

Holding

354,645 

100.00% 

100.00% 

Santander Brasil Tecnologia S.A.

Tecnology

45,371 

100.00% 

100.00% 

Rojo Entretenimento S.A.

Other Activities

7,417 

94.60% 

94.60% 

BEN Benefícios e Serviços S.A.  (BEN Benefícios)

Other Activities

90,000 

100.00% 

100.00% 

Esfera Fidelidade S.A.

Other Activities

10,001 

100.00% 

100.00% 

Super Pagamentos e Administração de Meios Eletrônicos S.A. (Super Pagamentos)

Payment Institution

Banco Olé Bonsucesso Consignado S.A. (Olé Consignado)

Bank

435,599 

60.00% 

100.00% 

Bosan Participações S.A.

Other Activities

303,056 

93,718 

100.00% 

100.00% 

Toque Fale Serviços de Telemarketing Ltda. (Toque Fale)

Other Activities

75,050 

100.00% 

100.00% 

Controlled by Aymoré CFI

Banco PSA 

Bank

105 

50.00% 

Banco Hyundai Capital Brasil S.A.

Bank

150,000 

50.00% 

Controlled by Santander Leasing

PI Distribuidora de Títulos e Valores Mobiliários S.A.

Leasing

182 

100.00% 

Controlled by Sancap

Santander Capitalização S.A. (Santander Capitalização)

Capitalization

64,615 

100.00% 

Evidence Previdência S.A.

Private Pension

42,819,564 

100.00% 

Controlled by Santander Holding Imobiliária S.A.

Summer Empreendimentos Ltda.

Other Activities

17,084 

100.00% 

Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.

Return Capital Serviços de Recuperação de Créditos S.A.

Collection and Recover of Credit Management

200 

100.00% 

Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)

Return Gestão de Recursos S.A. (atual denominação social da Gestora de Investimentos Ipanema S.A.)

Resources Management

11 

100.00% 

Jointly Controlled Companies by Sancap

Santander Auto S.A.

Other Activities

14,400 

50.00% 

Controlled by Getnet S.A

Auttar HUT Processamento de Dados Ltda. (Auttar HUT)

Other Activities

3,865 

100.00% 

 


b.2) Jointly Controlled - Equity Method

Quantity of Shares or Quotas Owned (in Thousands)

Investments

Activity

Common Shares and Quotas

Preferred Shares

Direct Participation

Participation

Jointly Controlled Companies by Banco Santander

Norchem Participações e Consultoria S.A. (Norchem Participações)

Other Activities

950 

50.00% 

50.00% 

Estruturadora Brasileira de Projetos S.A. - EBP (EBP)

Other Activities

3,859 

2,953 

11.11% 

11.11% 

Gestora de Inteligência de Crédito S.A. (Gestora de Crédito)

Credit Bureau

3,560 

3,560 

20.00% 

20.00% 

Campo Grande Empreendimentos Ltda.

Other Activities

255 

25.32% 

25.32% 

Jointly Controlled Companies by Santander Corretora de Seguros

Webmotors S.A.

Other Activities

366,182,676 

70.00% 

TecBan - Tecnologia Bancária S.A. (TecBan)

Other Activities

743,944 

68,771 

18.98% 

PSA Corretora de Seguros e Serviços Ltda. (PSA Corretora de Seguros)

Insurance Broker

450 

50.00% 

Hyundai Corretora de Seguros Ltda.

Insurance Broker

1,000 

50.00% 

Controlled by Webmotors S.A.

Loop Gestão de Pátios S.A. (Loop)

Other Activities

23,243 

51.00% 

Controlled by TecBan

Tbnet Comércio, Locação e Administração Ltda. (Tbnet)

Other Activities

532,426 

18.98% 

Controlled by Tebnet

Tbforte Segurança e Transporte de Valores Ltda. (Tbforte)

Other Activities

517,505 

18.98% 

Controlled by Olé Consignado

Crediperto Promotora de Vendas e Cobrança Ltda.

Other Activities

6,950 

100.00% 

Olé Tecnologia Ltda.

Other Activities

450 

100.00% 

Affiliate of Banco Santander

Norchem Holdings e Negócios S.A. (Norchem Holdings)

Other Activities

1,679 

21.75% 

21.75% 

b.3) Investment Funds Consolidated

·         Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior (Santander FI Amazonas);

·         Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior (Santander FI Diamantina);

·         Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior (Santander FI Guarujá);

·         Santander Fundo de Investimento Unix Multimercado Crédito Privado (Santander FI Unix);

·         Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado (Santander FI SBAC);

·         Santander Paraty QIF PLC (Santander Paraty) (4);                                       

·         Venda de Veículos Fundo de Investimento em Direitos Creditórios (Venda de Veículos FIDC) (1);   

·         Fundo de Investimento em Direitos Creditórios RN Brasil - Financiamento de Veículos (FI RN Brasil - Financiamento de Veículos) (2);

·         Prime 16 – Fundo de Investimento Imobiliário (atual denominação do BRL V - Fundo de Investimento Imobiliário - FII) (3);

·         Santander FI Hedge Strategies Fund (Santander FI Hedge Strategies) (4);                                                                            

·         Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado (Fundo Investimento Ipanema NPL VI) (5);                                                                                                                                        

·         Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema V - Não Padronizado (Fundo Investimento Ipanema NPL V);

·         Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos; and

·         Fundo de Investimentos em Direitos Creditórios Atacado – Não Padronizado (6).

(1)     The carmaker Renault (not belonging to the Conglomerate Santander) sells its trade receivables to the Fund. This Fund buys only trade receivables from Renault carmaker. In turn, the Banco RCI Brasil S.A. (Note 14) owns 100% of its subordinated shares.

(2)     Banco RCI Brasil S.A. sold receivables (CDC portfolio) to FI RN Brasil – Financiamento de Veículos. The senior shares will have only one investor. Banco RCI Brasil S.A. holds 100% of subordinated shares.

(3)     Banco Santander was a creditor for certain overdue credit operations that had real estate as collateral. The operation for the recovery of these credits consists of the contribution of properties as collateral to the capital of the Real Estate Investment Fund and the consequent transfer of the Fund's quotas to Banco Santander, by means of a payment in payment of the aforementioned credit operations.

(4)     Banco Santander, through its subsidiaries, holds the risks and benefits of Santander Paraty and the Santander FI Hedge Strategies Subfund, resident in Ireland, and both are fully consolidated in its Consolidated Financial Statements. In the Irish market, an investment fund can not act directly and, for that reason, it was necessary to create another structure (a sub-fund), Santander FI Hedge Strategies. Santander Paraty does not have a financial position, and all position is derived from the financial position of Santander FI Hedge Strategies.

(5)     Refers to a structure in which Banco Santander sold certain credit operations, which had already been transferred to losses (operations overdue for more than 360 days) to this fund. Atual Serviços de Recuperação de Creditos e Meios Digitais S.A. (current corporate name of Atual Companhia Securitizadora de Creditos Financeiros) (Note 2.b.1), a company controlled by Banco Santander, holds 100% of the shares in this fund.

(6)     This fund started to be consolidated in June 201 and is indirectly controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.

Corporate Restructuring

Several social movements were implemented in order to reorganize the operations and activities of entities according to the business plan of the Conglomerate Santander.

a) Disposal of the equity interest held in Super Payments and Administration of Means of Electronic Media S.A.

On February 28, 2020, the sale to Superdigital Holding Company, SL of a company indirectly controlled by Banco Santander, SA, of the shares representing the entire share capital of Super Payments and Administração de Meios Eletrônico SA (“Superdigital”) for the amount R$270 million. As a result, the Company is no longer a shareholder of Superdigital.

b) Put option of equity interest in Banco Olé Bonsucesso Consignado S.A.

On March 14, 2019, the minority shareholder of Banco Olé Bonsucesso Consignado S.A. (Olé Consignado) formalized its interest to exercise the put option right provided in the Investment Agreement, executed on July 30, 2014, to sell its 40% equity interest in the capital stock of Olé Consignado to Banco Santander (Brazil) S.A. (“Banco Santander”).

On December 20, 2019, the parties entered into a binding agreement for the acquisition, by Banco Santander, of the all the shares issued by Bosan Participações S.A. (holding company whose only asset are shares representing 40% of the capital of Banco Olé), for the total amount of R$1,600,000 (“Operation”), to be paid on the closing date of the Operation.

On January 31, 2020, the Company and the shareholders of Bosan Participações SA (“Bosan”) concluded the definitive agreement and signed the purchase and sale agreement for 100% of the shares issued by Bosan, through the transfer of Bosan's shares to Company and payment to sellers in the total amount of R$1,608,772. As a result, Banco Santander became, directly and indirectly, the holder of 100% of Banco Olé's shares.

c) Acquisition of direct equity interest in Toque Fale Serviços de Telemarketing LTDA.

On March 24, 2020, the Company acquired shares representing the total share capital of Toque Fale Serviços de Telemarketing LTDA (“Toque Fale”) for the amount of R$1,099,854.72, corresponding to the equity value of the quotas on February 29, 2020, previously held by Getnet Adquirência e Serviços para Means of Payment SA and Auttar HUT Processamento de Dados LTDA. As a result, the Company became a direct shareholder of Toque Fale and holder of 100% of its capital.

d) Acquisition of residual equity interest in Return Capital Serviços e Recuperação de Crédito S.A.

On November 1, 2019, Atual Serviços de Recuperação de Creditos e Meios Digitais SA (“Atual”), wholly owned subsidiary of Banco Santander, and the minority shareholders of Return Capital Serviços e Recuperação de Crédito SA (“Return Capital”) celebrated Return Capital Stock Purchase and Sale Agreement, in which Atual acquired all the shares of minority shareholders, corresponding to 30% of Return Capital's share capital. The acquisition was completed on November 1, 2019, so Atual now holds 100% of the shares representing Return Capital's share capital.

e) Acquisition of Summer Empreendimentos Ltda.

On May 14, 2019, Banco Santander (Brasil) S.A. and its wholly owned subsidiary Santander Holding Imobiliária S.A. (“SHI”) entered into a binding document with the partners of Summer Empreendimentos Ltda. (“Summer”) establishing the terms of the purchase and sale negotiation of quotas representing Summer's total share capital. The acquisition was approved by BACEN on September 16, 2019 and concluded on September 20, 2019, so that SHI now holds 99.999% and Banco Santander 0.001% of the shares representing Summer's share capital. Due to the Entity's sale plan in the term term, Summer was initially recorded as Non-Current Assets Held by the Sale, at its cost value. In June 2020, with the failure to execute the established plan, Summer became part of the scope of Banco Santander Consolidated Financial Statements.

3.     Significant Accounting Policies

a) Income Statement

The income statement accounting method is determined based on the accrual method and include income, charges, monetary adjustment and exchange rate changes, calculated at official rates and rates, pro rata on assets and liabilities adjusted up to the balance sheet date.

b) Functional Currency

Functional Currency and Presentation Currency

CMN Resolution nº 4,524 of September 29, 2016, with prospective application as of January 1, 2017, established accounting procedures for recognition by financial institutions and other institutions authorized to operate by the Central Bank that hold investments abroad: I - effects of exchange rate variations resulting from the conversion of transactions carried out in foreign currency by investees abroad to the respective functional currencies; II - the effects of exchange rate variations resulting from the translation of the balances of the financial statements of investees abroad of the respective functional currencies into the national currency; and III - of operations for hedge purposes of foreign exchange variation of investments abroad. These changes did not impact the financial statements Banco Santander in the year 2019. The functional currency is considered the currency of the main economic environment in which the entity operates.

The financial statements are presented in Brazilian Real (R$), which is the functional and presentation currency of Banco Santander and its subsidiaries, including its overseas subsidiary and branch.

Assets and liabilities of foreign branchs and subsidiary are converted in real as follows:

·         Assets and liabilities are converted at the exchange rate on the balance sheet date; and                  

·         Revenues and expenses are converted at the monthly average exchange rates.   


c) Current and Long-Term Assets and Liabilities

They are stated at their realizable and/or settlement amounts and they include income, charges, monetary adjustments or changes in exchange rates earned or incurred through the end of the reporting period, calculated on a daily pro rata basis and, when applicable, the effect of adjustments to decrease the cost of assets at their market values (fair value) or realization.

Receivables and payables up to 12 months are classified in current assets and liabilities, respectively. Trading securities that, regardless of their maturity date, are classified in current asset, according to the Bacen rule Circular 3,068/2001.

Resolution nº. 4,803 of April 9, 2020, which came into force as of its publication date and allows operations renegotiated in the period from March 1 to September 30, 2020 to be reclassified to the level at which they were classified on the day February 29, 2020, except for operations that on February 29, 2020 had a delay equal to or greater than fifteen days in the payment of the installment of principal or charges and operations that show evidence that they will not be honored in the new conditions.

d) Cash and Cash Equivalents

For the cash flows statement purposes, cash and cash equivalents correspond to the balances of cash and interbank investments immediately convertible into cash, with insignificant risk of change in its value or with original maturity equal to ninety days or less.

e) Interbank Investments and Credits Related to Bacen

They are stated at their settlement amounts and include income, charges, monetary adjustments or changes in exchange rates earned or incurred through the end of the reporting period, calculated on a daily pro rata basis.

e.1) Repurchase Agreement

Repurchase Agreement (Repo)

The bank’s own fixed income securities used as ballast in the repurchasing agreement are highlighted in specific accounts of the asset (linked securities), on transaction date, by the updated accounting average, by type and maturity of the security. The difference between the repurchase value and the sale is the expense of the operation.

To perform sales transactions with repurchase agreements the Bank also uses third-party securities as ballast. Those operations are registered as funded position in the balance sheet.

Reverse Repurchase Agreement (Reverse Repo)

The financing granted by ballast with fixed-income securities (third-parties) are recorded on the financed position at liquidation value. The difference between the resale value and the purchase is recognized as the income of the operation. The securities acquired in a reverse repurchase agreement are transferred to the funded status when used as ballast for the sale transactions with repurchase agreements.

Repurchasing Performed With Free Movement Agreements

For the operations with free movement agreements, at the moment of the definitive sale of the securities acquired with resale agreement, the liability account referred to this operation must be evaluated by the securities' market value.

f) Securities

According to the Bacen rule Circular 3,068, securities are stated and classified into the following categories and accounting evaluation:

     I.   Trading securities;

    II.   Available-for-sale securities; and

   III.   Held-to-maturity securities.

Trading securities include securities purchased for the purpose of being actively and frequently traded while held-to-maturity securities include those for which the Bank has intention and financial capacity to hold to maturity. Available-for-sale securities include those which cannot be classified in categories I (trading) and III (held-to-maturity). Securities classified into categories I and II are stated at acquisition cost plus income earned through the balance sheet date, calculated on a daily pro rata basis, and adjusted to fair value, with gains or losses on such adjustment being recorded against:

(1)    The corresponding income or expense account, net of tax effects, in income statement for the period, when relating to securities classified into the trading category; and

(2)    A separated account in stockholders’ equity, net of taxes effects, when related to securities classified into the available-for-sale category. The adjustments to market value recorded on sale of these securities are transferred to the income statement for the period.

Securities classified into the held-to-maturity category are stated at acquisition cost plus income earned through the balance sheet, calculated on a daily pro rata basis.

Any permanent losses recorded on the sale value of securities classified into available-for-sale and held-to-maturity are recognized in the income statement of the period.

g) Derivatives Financial Instruments

According to the Bacen rule Circular 3,082 derivatives are classified according to Management's intent to use them for hedging purposes or not. Transactions made by customers' request, as self-employed, or that are not qualify as hedge accounting, especially derivatives used to manage the global risk exposure, are recorded at market value, with realized and unrealized gains and losses recorded in the income statement for the period.

Derivative financial instruments designated as part of a framework of protection against risks (hedge) can be classified as:

  I.   Fair value hedge; and

II.    Cash flow hedge.

Derivatives designated as hedge and the respective hedged items are adjusted to market value, considering the following:

(1) For those classified in category I, the valuation or devaluation is recorded as a contra entry to the appropriate income or expense account, net of tax effects, in the income for the period; and

(2) For those classified in category II, the increase or decrease in their amount of the effective portion is recorded against a separated account in stockholders’ equity, net of tax effects.

Some hybrid financial instruments contain both derivative financial instrument and non-derivative asset or liability. In these cases, the derivative financial instrument represents an embedded derivative. Embedded derivatives are recorded separately from the host contracts.

We don’t have net investment hedge in foreign operations as defined by the resolution CMN nº 4,524.

h) Minimum Requirements in the Process of Financial Instruments Valuation (Securities and Derivatives Financial Instruments)

The CMN Resolution nº 4,277 of October 31, 2013 (required since June 30, 2015) provides the minimum requirements to be observed in the process of financial instruments valuation measured at market value and on the adoption of prudential adjustments by financial institutions. The financial instruments mentioned in the Resolution includes:

a)     Securities classified as trading and available-for-sale, according to the Central Bank´s Circular 3,068 of November 8, 2001;

b)     Derivatives Financial Instruments, according to the Central Bank Letter 3,082; of January 30, 2002; and

c)     Other financial instruments at fair value, regardless of their classification in the trading portfolio, established in CMN nº 3,464 of June 26, 2007.             

According to this resolution, the Bank has established procedures to assess the need for adjustments in the value of financial instruments mentioned above, observing the prudential, relevance and reliability criteria. This review includes, among other factors, the credit risk spread in the registration of the market value of these instruments.

Financial instruments are initially recognized at fair value and those that are not measured at fair value through profit or loss are adjusted for transaction costs, financial assets and liabilities are subsequently measured at the end of each period using valuation techniques. This calculation is based on assumptions, which take into account the Management's judgment based on information and market conditions existing at the balance sheet date.

Banco Santander classifies the measurements at fair value using the hierarchy of fair value that reflects the model used in the measurement process, and is in accordance with the following hierarchical levels:

Level 1: Determined on the basis of public (unadjusted) quoted prices in highly active markets for identical assets and liabilities, these include public debt securities, stocks, derivatives listed.

Level 2: They are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3: They are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1: The securities with high liquidity and quoted prices in active market are classified as level 1. At this level there were classified most of the Brazilian Government Securities (mainly LTN, LFT, NTN-B, NTN-C and NTN-F), shares in stock exchange and other securities traded in the active market. Derivatives traded on stock exchanges are classified at level 1 of the hierarchy.

Level 2: When quoted price cannot be observed, the Management, using its own internal models, make its best estimate of the price that would be set by the market. These models use data based on observable market parameters as an important reference. Various techniques are used to make these estimates, including the extrapolation of observable market data and extrapolation techniques. The best evidence of fair value of a financial instrument on initial recognition is the transaction price, unless the fair value of the instrument can be obtained from other market transactions carried out with the same instrument or similar instruments or can be measured using a valuation technique in which the variables used include only data from observable market, especially interest rates. These securities are classified at level 2 of the fair and compound securities hierarchy, mainly by Government Bonds (mainly NTN-A), committed and Cancelable LCI and in a less liquid market than those classified at level 1. For derivatives traded over the counter, for the valuation of financial instruments (basically swaps and options), observable market data such as exchange rates, interest rates, volatility, correlation between indices and market liquidity are normally used. In the pricing of the mentioned financial instruments, the Black-Scholes model methodology (exchange rate options, interest rate index options, caps and floors) and the present value method (discounting future values ​​by market curves).

Level 3: When there is information that is not based on observable market data, Banco Santander uses internally developed models, from curves generated according to the internal model. At level 3, low liquidity instruments are classified. Derivatives that are not traded on the stock exchange and that do not have observable information in an active market were classified as level 3, and are composed, including exotic derivatives.

The Bank's financial instruments measured and recorded at their fair value are substantially priced based on public prices quoted in active markets and for identical instruments (level 1) or have their pricing derived from observable inputs as an important reference (level 2). For financial instruments not measured at fair value, there are no significant differences between this and the book value at which they are recorded.

i) Credit portfolio and provision for losses

The credit portfolio includes credit operations, leasing operations, advances on foreign exchange contracts and other credits with credit granting characteristics. It is stated at present value, considering the indexes, interest rates and agreed charges, calculated pro rata day until the balance sheet date. For operations overdue from 60 days, the recognition in revenue will only occur when it is actually received.

Normally, the Bank writes off credits for losses when they are overdue for more than 360 days. In the case of long-term credit operations (over 3 years), they are written off when they are 540 days overdue. The credit operation written off for loss is recorded in a memorandum account for a minimum period of 5 years and while all collection procedures have not been exhausted.

Credit assignments without risk retention result in the write-off of the financial assets subject to the transaction, which are now kept in a memorandum account. The result of the assignment is fully recognized when it is realized.

As of January 2012, as determined by CMN Resolution No. 3,533/2008 and CMN Resolution No. 3,895/2010, all credit assignments with substantial risk retention will have their results recognized for the remaining terms of the operations, and financial assets assignment objects remain recorded as credit operations and the amount received as obligations for sale or transfer of financial assets.

Provisions for credit operations are based on the analysis of outstanding credit operations (past due and falling due), past experience, future expectations and specific risks of the portfolios and the risk assessment policy of Management in setting up provisions, as established by CMN Resolution No. 2,682/1999.

i.1) Credit Operation Restructuring

Resolution No. 4,782 of March 16, 2020, subsequently amended by Resolution No. 4,791 of March 26, 2020, which came into force as of its publication date, determines that in cases of restructuring of credit operations carried out up to September 30, 2020, the restructuring is no longer an indicator for considering problematic assets. In case this classification has already been made considering exclusively the restructuring characteristic, the risk exposure as a problematic asset can be reversed. The Resolution determines that this rule does not apply to operations that were already classified as problematic on the date of publication of the Resolution and operations that present evidence that they will not be honored in the new conditions.

j) Non-Current Assets Held for Sale and Other Assets

Non-current assets held for sale includes the carrying amount of individual items, disposal groups, or items forming part of a business unit earmarked for disposal (“discontinued operations”), whose sale in their present condition is highly probable and is expected to occur within one year.

Other assets refer mainly to assets not for own use, being composed basically of properties and vehicles received as payment.

Non-current assets held for sale and assets not for own use are generally recorded at the lower amount between the fair value less sale costs and their carrying amount at the date of classification in this category, and they are not depreciated.

k) Prepaid Expenses

Funds used in advance payments, whose benefits or services will be provided in future years, are allocated to profit in accordance to the terms of the related agreements.                                                                                            

k.1) Commissions Paid to Banking Correspondents

In accordance with CMN Resolution nº 4,294 and Central Bank Circular 3,693 issued in December 2013, from January 2015 the commissions paid to intermediate agents responsible for origination of new credit operations are limited to maximum percentages of: (i) 6% of the value of new credit operation originated and (ii) 3% of the transferred value (portability).

Such commissions must be fully recognized as expenses when they are incurred.

l) Permanent Assets

They are stated at acquisition cost, are tested for impairment annually or more frequently if the conditions or circumstances indicate that assets may be impaired, and evaluated considering the following aspects:

l.1) Investments

Adjustments to investments in affiliates and subsidiaries are measured by equity method of accounting and recorded as investments results in affiliates and subsidiaries. Other investments are stated at cost, method reduced to their recoverable value, when applicable.

Change in Scope of Consolidation - Consists of the disposal, acquisition or change of control of an investment.

l.2) Fixed Assets

The depreciation of fixed assets is determined under the straight-line method, based on the following annual rates: buildings - 4%, facilities, furniture, equipment in use, security systems and communications  - 10%, data processing systems and vehicles - 20%, and leasehold improvements - 10% or through the maturity of the rental contracts.

l.3) Intangible Assets       

Goodwill on acquisition of subsidiaries is amortized until 10 years, based on expected future earnings and it is tested for impairment annually or more frequently if conditions or circumstances indicate that the asset may be impaired.

The rights over the acquisition of payroll services are registered by the amount paid. Those services are related to payroll processing and payroll loans, maintenance of collection portfolio, supplier payment services and other banking services. The amount paid is allocated to income statement according to the terms of the respective agreements.

Software acquisition and development expenses are amortized over a maximum of 5 years.

m) Technical Reserves Related to the Activities of Pensions and Capitalization

Technical reserves are recognized and calculated in accordance with the provisions and criteria established in the National Council of Private Insurance (CNSP) and Superintendence of Private Insurance (Susep).        

Technical Reserves to Pensions

Technical provisions are mainly recognized in accordance with the criteria below:

• Mathematical Provisions for Benefits to Grant and Granted (PMBaC and PMBC)

The PMBaC are estimated based on the contributions collected through the financial regime of capitalization. The PMBC represents obligations taken in the form of continued income plans, being constituted based on the actuarial calculations for traditionals types of plans.

• Complementary Coverage Provision (PCC)

The PCC shall be estimated when the insufficiency is detected in the technical provisions due to the Test of Adequacy of Liabilities (TAP).

Technical Provisions for Capitalization

Technical provisions are elaborated according to the following criteria:

·       Mathematical provisions for redemption results from the accumulation of percentages applicable on payments made, capitalized with the interest rate predicted in the plan and updated through the basic yield rate of savings account - Basic Reference Rate (TR);

·       Provision for redemption of anticipated securities is estimated from the cancellation for non-payment or redemption request, based on the value of the mathematical provision of redemption estimated at the time of securities cancellation and the provision for redemption of the matured securities is estimated after the end of the securities validity;

·       Provision for raffles to be held is estimated based on a percentage of the installment paid and it aims to cover the raffles which the securities will compete, but that they have not been carried out yet. The provision of raffles payable is estimated for the securities raffled, but which have not been paid yet; and

·       Administrative expenses provision aims to reflect the present value of future expenses of capitalization securities whose duration extends from the date of its constitution.

n) Employees Benefit Plans                                                                                                                                         

Post-employment benefit plans include the following commitments taken by the Bank: (i) addition to the benefits of public pension plan; and (ii) medical assistance in case of retirement, permanent disability or death of eligible employees, and their direct beneficiaries.

Defined Contribution Plans

Defined benefit plans is the post-employment benefit plan which the Bank and its subsidiaries, as the sponsoring entity pays fixed contributions to a pension fund during the duration of the beneficiary's employment contract, not having a legal or constructive obligation to pay additional contributions if the fund does not hold sufficient assets to pay all benefits relating to services provided in the current and in previous periods.

The contributions made in this connection are recognized under personnel expenses in the income statement.

Defined Benefit Plans

Defined benefit plan is the post-employment benefit plan which is not a defined contribution plan and is showed in Note 34. For this type of plan, the sponsoring entity's obligation is to provide the employees with the agreed benefits, assuming the potential actuarial risk that benefits might cost more than estimated.

Since January 2013, Banco Santander applies the CPC 33 (R1) which establishes the full recognition in a liability account when actuarial losses not recognized (actuarial deficit) will occur, with the counterpart in a equity´s account (other valuation adjustments).

Main Definitions

-      The present value of the defined benefit obligation is the present value of expected future payments required to settle the obligation resulting from employee´s service in the current and past periods, without deducting any plan´s assets.

-      Deficit or surplus is: (a) the present value of the defined benefit obligation, minus (b) the fair value of plan´s assets.

-      The sponsoring entity may recognize the plan's assets in the balance sheet when they meet the following characteristics: (i) the assets of the fund are sufficient to pay all benefits for plan´s employees or a sponsoring entity´s obligations; or (ii) the assets are returned to the sponsoring entity in order to reimburse it for employee benefits already paid.

-      Actuarial gains and losses are changes in present value of defined benefit obligation resulting from: (a) adjustments by experience (the effects of differences between the actuarial assumptions adopted and what has actually occurred); and (b) effects of changes in actuarial assumptions.

-      Current service cost is the increase in the present value of the defined benefit obligation resulting from employee service in the current period.

-      The past service cost is the change in present value of defined benefit obligation for employee service in prior periods resulting from a change in the plan or reductions in the number of employees covered.

Post-employment benefits are allocated to the income statement in the lines of other operating expenses - actuarial losses - retirement plans (Note 31) and personnel expenses (Note 27).    

The defined benefit plans are recorded based on an actuarial study, conducted annually by an external specialized consulting entity and approved by Management at the end of each year to be effective for the subsequent period.

o) Share Based Compensation

The Bank has compensation plans with long-term conditions for acquisition. The main conditions for acquisition are: (1) conditions of service, provided if the participant remains employed during the period of the Plan to acquire a position to exercise their rights; (2) performance conditions, the amount of investment in Certificates of Deposit Shares (Units) exercisable by the participants will be determined according to the result of a performance measurement parameter of the Bank: Total Shareholder Return (TSR) and it may be reduced, if it does not achieve the goals of the Return on Risk Weighted Assets (RoRWA) modifier, comparison between realized and budgeted in each year, as determined by the Board of Directors and (3) market conditions, since some parameters are conditioned to the value of the shares of the Bank. The Bank measures the fair value of the services rendered by reference to the fair value of the equity instruments granted at the grant date, taking into consideration the market conditions for each plan when the fair value is estimated.

Settlement in Share

The fair value of services is measured by reference to the fair value of the equity instruments granted at the grant date, taking into consideration the market conditions for each plan when the fair value is estimated. In order to recognize the staff costs in contrast with the capital reserves during the period covered, as the services are received, it is considered the treatment of conditions of service and the amount recognized for services received over the period of assessment based on the best estimative for the number of equity instruments expected to grant.

Settlement in Cash

For share-based payments settled in cash (in the form of share appreciation), the Bank measures the services rendered and the corresponding liabilities incurred in the fair value appreciation of the shares at grant date and until the liability is settled. The fair value of liability is revaluated at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in the income statement. In order to recognize the staff costs with the counterparty on the wages payable provisions throughout the validity period, reflecting how the services are rendered, the Bank registers the total liability measurement based on the best estimative of the right of the shares appreciation that will be acquired at the end of the validity period and recognizes the value of the services rendered during the validity period based on the best available estimative. Periodically, the Bank evaluates its estimative over the number of stock appreciation rights to be acquired at the end of the grace period.

Variable Compensation Referenced in Shares         

In addition to managers, all employees in position of risk takers receive at least 40% of their variable compensation deferred by at least three years and 50% of the total variable compensation in shares (SANB11), conditioned to their permanence in the Group throughout the duration of the plan.

The plan is subject to Malus and Clawbackclauses application, according to which deferred installment of variable compensation may be reduced or canceled in the event of non-compliance internal rules and exposure to excessive risks.

The fair value of the shares is calculated by the average of the final daily quotation of the shares in the last 15 (fifteen) trading sessions immediately preceding the first business day of the granting month.

p) Funding, Notes Issued and Other Liabilities

Financial liabilities instruments are recognized initially at fair value, considered as the trade price. They are subsequently measured at amortized cost with expenses recognized as a financial cost (Note 17.d).

Among the liabilities initial recognition methods, it is important to emphasize those compound financial instruments which are recognized as such due to the fact that they contain both a debt instrument (liability), and an equity component (embedded derivative).

The recognition of a compound instrument consists in a combination of (i) a main instrument, which is recognized as an entity’s genuine liability (debt) and (ii) an equity component (derivative convertible into common shares).

In accordance to the COSIF, the hybrid capital and debt instruments represents obligations of issuers (financial institutions) and should be recorded in specific accounts of the liabilities adjusted according for the effect of exchange rate variation, when denominated in foreign currency. All the yield related to these instruments, such as interest and exchange variation (difference between the functional currency and the currency in which the instrument was denominated) shall be accounted as expenses of the period, in compliance with the accrual basis method.

Related to the stockholders' equity component, your registration occurs at the initial moment based in its fair value, if it is different from zero.

The relevant details of the nature of these compound instruments issued are described in Note 20.

q) Provisions, Contingent Assets and Liabilities and Legal Obligations - Tax and Social Security  

Banco Santander and its subsidiaries are involved in judicial and administrative lawsuits related to tax, labor and civil, in the normal course of their activities.

The provisions include legal obligations, judicial and administrative lawsuits related to tax and social security obligations, whose matter is to challenge their legality or constitutionality where, regardless the assessment of their loss probability, the amounts are fully recognized in the financial statements.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate and may be fully or partially reversed or reduced when the financial outflows and obligations relevant to the process are no longer probable, including decay of legal deadlines, among others.

Judicial and administrative provisions are constituted when the risk of loss of the judicial or administrative action is assessed as probable and the amounts involved are measurable with sufficient security, based on the nature, complexity, and history of the actions and the opinion of the internal legal counsel and the best information available. For lawsuits for which the risk of loss is possible, provisions are not recorded and the information is disclosed in the notes to the financial statements (Note 22.h) and for proceedings for which the risk of loss is remote, no disclosure is made.

Contingent assets are not recognized, except when there are guarantees or favorable judicial decisions in lawsuits from the past with the same matter, when no further claims are applicable, characterizing the success in such litigation. Contingent assets with the risk of success as probable, if any, are only disclosed in the financial statements.

In lawsuits with favorable decisions to Santander, the counterparty has the right, in the event of specific legal requirements attended, to file a rescission action within a period determined by current legislation. Rescission actions are considered new lawsuits and will they be evaluated for contingent liability purposes if and when they are filed.

r) Social Integration Program (PIS) and Contribution for the Financing of Social Security (Cofins)

The PIS (0.65%) and COFINS (4.00%) are calculated on the gross revenue related to the main activity of the legal entity. The financial institutions may deduct funding expenses in the establishment of the amount base for calculation. PIS and COFINS expenses are recorded in tax expenses. For non-financial companies the rates are 1.65% for PIS and 7.6% for COFINS.

s) Income Tax (IRPJ) and Social Contribution on Net Income (CSLL)

IRPJ is calculated at the rate of 15% plus a surtax of 10% applied on profit, after adjustments determined by tax legislation. The Social Contribution Tax on Net Profit (CSLL) is calculated at the rate of 15% for financial institutions, insurance and capitalization companies and 9% for other companies, applied on profit, after adjustments required by tax legislation. The rate of Social Contribution Tax on Net Profit (CSLL), for banks of any kind, was increased from 15% to 20% effective as of March 1, 2020, pursuant to article 32 of Constitutional Amendment 103, published on November 13, 2019.

Deferred tax credits and liabilities are basically calculated on the temporary differences between the accounting and taxable income, tax losses, negative basis of social contribution and adjustments to market value of securities and derivative financial instruments. The recognition of deferred tax credits and liabilities is made at the rates applicable to the period in which the asset is realized and/or the liability is settled.

According to the current regulation, the tax credits are recognized to the extent that it is probable its recovery with the base of future taxable income generation. The expected realization of the tax credits according to Note 11.b is based on the projections of future earnings supported by a technical study.

t) Interest on shareholders' equity

Published on December 19, 2018, effective as of January 1, 2019, the CMN Resolution nº 4,706 has prospective application and determines procedures for the accounting of capital remuneration. The Resolution decides that Interest on Shareholders 'Equity should be recognized as soon as they are declared or proposed and thus constitute a present obligation at the balance sheet date and, in compliance with this determination, this capital remuneration must be recorded in a specific account in Shareholders' Equity.

u) Impairment of Assets

The financial and non-financial assets are valued at the end of each period in order to identify evidence of impairment in its accounting value. If there is any indication, the entity shall estimate the recoverable amount of the asset and that loss shall be recognized immediately in the income statement. The recoverable amount of an asset is defined as the highest amount between its fair value net of selling expenses and its value in use.

v) Results-based Payments and Advances

Resolution No. 4,797 was revoked, and replaced by Resolution No. 4820, which takes effect from May 29, 2020 and determines that financial institutions and other institutions authorized to operate by the Central Bank of Brazil are prevented from:

(i)             remunerate own capital, including in the form of prepayment, above:

(a)    amount equivalent to the minimum mandatory dividend, including in the form of interest on capital, in the case of institutions incorporated in the form of a joint stock company;

(b)    amount equivalent to the minimum profit distribution established in the articles of association in the case of institutions incorporated in the form of limited liability companies

(ii)            repurchase own shares (it will only be allowed if through stock exchanges or an organized over-the-counter market, up to the limit of 5% (five percent) of the shares issued, including the shares recorded in treasury at the entry into force of this Resolution);

(iii)           Reduce the social capital, except in cases that are mandatory, in accordance with the governing legislation or when approved by the Central Bank;

(iv)           increase any remuneration, fixed or variable, of directors and members of the board of directors, in the case of corporation, administrators, in the case of limited companies;

The amounts subject to the aforementioned prohibitions cannot be subject to a future disbursement obligation, and these prohibitions apply as of the publication date of Resolution No. 4,797 (on April 6, 2020) and December 31, 2020 and must be observed regardless of the maintenance of funds in an amount higher than the Additional Principal Capital (ACP), which are dealt with in Resolutions No. 4,193, of March 1, 2013, and 4,783, of March 16, 2020.

Any anticipation of the amounts mentioned in items "a" and "b" of item I must be carried out onservatively, consistent and compatible with the uncertainties of the current economic situation.

w) Deferred Income

It refers to income received before the maturity of the underlying obligation and include non-refundable income, primarily related to guarantees provided and credit card annual fees. The allocation to income statement is made ​​in accordance with the terms of the agreements.

x) Non-Controlling Interest

The non-controlling interests (minority interests) is recorded in a separate equity account of the controlling entity in the consolidated financial statements.

y) Financial Guarantees

CMN Resolution nº 4,512 of July 28, 2016 and Circular Letter Bacen 3,782 of September 19, 2016 established accounting procedures to be applied, determining on the constitution of a provision to cover losses associated with financial guarantees provided in any form, applied prospectively as from January 1, 2017. Losses associated with the likelihood of future disbursements linked to financial guarantees provided are measured in accordance with recognized credit risk management models and practices and based on consistent information and criteria, verifiable. The provision should be sufficient to cover probable losses over the term of the guarantee provided and are evaluated periodically.

4.     Cash and Cash Equivalents

Bank

6/30/2020

12/31/2019

12/31/2018

Cash

20,790,248 

9,543,649 

11,358,459 

Interbank Investments

17,107,129 

11,877,783 

14,496,489 

Money Market Investments

12,744,453 

110,746 

4,925,769 

Interbank Deposits

1,062,210 

1,465,065 

1,702,653 

Foreign Currency Investments

3,300,466 

10,301,972 

7,868,067 

Total

37,897,377 

21,421,432 

25,854,948 

Consolidated

6/30/2020

12/31/2019

12/31/2018

Cash

22,654,686 

9,924,644 

11,629,112 

Interbank Investments

16,725,591 

11,519,019 

13,656,870 

Money Market Investments

12,744,453 

110,746 

4,925,769 

Interbank Deposits

679,822 

1,105,446 

862,449 

Foreign Currency Investments

3,301,316 

10,302,827 

7,868,652 

Total

39,380,277 

21,443,663 

25,285,982 

5.     Interbank Investments

Bank

6/30/2020

12/31/2019

Up to 3 Months

From 3 to 12 Months

Over 12 Months

Total

Total

Money Market Investments

24,726,697 

16,286,072 

41,012,769 

28,703,365 

Own Portfolio

3,639,593 

3,639,593 

821,425 

Financial Treasury Bills - LFT

14,930 

14,930 

10,500 

National Treasury Bills - LTN

1,805,192 

1,805,192 

National Treasury Notes - NTN

1,819,471 

1,819,471 

810,925 

Third-party Portfolio

11,480,987 

5,850,231 

17,331,218 

9,011,703 

National Treasury Bills - LTN

1,069,321 

1,463,384 

2,532,705 

457,427 

National Treasury Notes - NTN

10,411,666 

4,386,847 

14,798,513 

8,554,276 

Sold Position

9,606,117 

10,435,841 

20,041,958 

18,870,237 

National Treasury Bills - LTN

115,913 

2,314,246 

2,430,159 

2,906,634 

National Treasury Notes - NTN

9,490,204 

8,121,595 

17,611,799 

15,963,603 

Interbank Deposits

13,053,643 

45,970,618 

32,847,463 

91,871,724 

76,924,193 

Foreign Currency Investments

3,300,466 

3,300,466 

10,301,972 

Total

41,080,806 

62,256,690 

32,847,463 

136,184,959 

115,929,530 

 

Consolidated

6/30/2020

12/31/2019

Up to 3 Months

From 3 to 12 Months

Over 12 Months

Total

Total

Money Market Investments

24,730,872 

16,286,072 

41,016,944 

28,703,365 

Own Portfolio

3,643,768 

3,643,768 

821,425 

Financial Treasury Bills - LFT

19,105 

19,105 

10,500 

National Treasury Bills - LTN

1,531,523 

1,531,523 

National Treasury Notes - NTN

2,093,140 

2,093,140 

810,925 

Third-party Portfolio

11,480,987 

5,850,231 

17,331,218 

9,011,703 

National Treasury Bills – LTN

1,069,321 

1,463,384 

2,532,705 

457,427 

National Treasury Notes – NTN

10,411,666 

4,386,847 

14,798,513 

8,554,276 

Sold Position

9,606,117 

10,435,841 

20,041,958 

18,870,237 

National Treasury Bills – LTN

115,913 

2,314,246 

2,430,159 

2,906,634 

National Treasury Notes – NTN

9,490,204 

8,121,595 

17,611,799 

15,963,603 

Interbank Deposits

1,013,576 

3,292,632 

647,728 

4,953,936 

4,361,302 

Foreign Currency Investments

3,301,316 

3,301,316 

10,302,827 

Total

29,045,764 

19,578,704 

647,728 

49,272,196 

43,367,494 


6.     Securities and Derivatives Financial Instruments

a)     Securities

I) By Category

Bank

Consolidated

06/30/2020

12/31/2019

06/30/2020

12/31/2019

Effect of Adjustment to Fair Value on:

Effect of Adjustment to Fair Value on:

Amortized Cost

Income

Equity

Carrying Amount

Carrying Amount

Amortized Cost

Income

Equity

Carrying Amount

Carrying Amount

Trading Securities

46,099,410 

523,469 

46,622,879 

32,557,896 

56,490,486 

269,258 

56,759,744 

35,977,471 

Government Securities

45,653,023 

517,245 

46,170,268 

30,755,634 

52,841,961 

263,034 

53,104,995 

33,158,573 

Private Securities

446,387 

6,224 

452,611 

1,802,262 

3,648,525 

6,224 

3,654,749 

2,818,898 

Available-for-Sale Securities

128,755,989 

1,840,984 

5,206,390 

135,803,363 

118,508,274 

134,136,751 

1,840,984 

5,068,522 

141,046,257 

128,296,445 

Government Securities

98,894,890 

1,800,629 

4,657,448 

105,352,967 

89,526,633 

105,734,614 

1,800,629 

4,519,466 

112,054,709 

98,943,695 

Private Securities

29,861,099 

40,355 

548,942 

30,450,396 

28,981,641 

28,402,137 

40,355 

549,056 

28,991,548 

29,352,750 

Held-to-Maturity Securities

15,758,476 

15,758,476 

11,739,597 

15,758,476 

15,758,476 

11,739,597 

Government Securities

15,352,363 

15,352,363 

11,275,488 

15,352,363 

15,352,363 

11,275,488 

Private Securities

406,113 

406,113 

464,109 

406,113 

406,113 

464,109 

Total Securities

190,613,875 

2,364,453 

5,206,390 

198,184,718 

162,805,767 

206,385,713 

2,110,242 

5,068,522 

213,564,477 

176,013,513 

II) Trading Securities

Bank

06/30/2020

12/31/2019

By Maturity

06/30/2020

Trading Securities

Amortized Cost

Adjustment to Fair Value -  Income

Carrying Amount

Carrying Amount

Without Maturity

Up to 3 Months

From 3 to 12 Months

From 1 to 3 Years

Over 3 Years

Total

Government Securities

45,653,023 

517,245 

46,170,268 

30,755,634 

6,886,852 

8,660,729 

9,833,919 

20,788,768 

46,170,268 

Financial Treasury Bills - LFT

2,020,695 

520 

2,021,215 

3,158,889 

795,650 

613,577 

413,452 

198,536 

2,021,215 

National Treasury Bills – LTN

13,711,213 

60,109 

13,771,322 

6,838,515 

2,096,655 

3,424,389 

3,333,079 

4,917,199 

13,771,322 

National Treasury Notes - NTN

29,211,095 

441,800 

29,652,895 

20,687,308 

3,658,744 

4,265,822 

6,072,458 

15,655,871 

29,652,895 

Agricultural Debt Securities – TODA

54,380 

4,675 

59,055 

70,922 

5,157 

24,274 

14,386 

15,238 

59,055 

Brazilian Foreign Debt Notes

653,714 

10,140 

663,854 

330,526 

332,667 

252 

409 

663,854 

Debentures

1,926 

1,927 

120 

292 

1,515 

1,927 

Private Securities

446,387 

6,224 

452,611 

1,802,262 

203,001 

7,099 

10,900 

26,609 

205,002 

452,611 

Investment Fund Shares

198,755 

4,246 

203,001 

834,063 

203,001 

203,001 

Debentures

210,519 

2,108 

212,627 

439,819 

6,698 

10,753 

19,980 

175,196 

212,627 

Eurobonds

492,774 

Certificates of Real Estate Receivables - CRI

13,396 

(138) 

13,258 

22,869 

(3) 

3,015 

10,246 

13,258 

Certificates of Agribusiness Receivables - CRA

23,717 

23,725 

12,737 

401 

150 

3,614 

19,560 

23,725 

Total

46,099,410 

523,469 

46,622,879 

32,557,896 

203,001 

6,893,951 

8,671,629 

9,860,528 

20,993,770 

46,622,879 

 

Consolidated

06/30/2020

12/31/2019

By Maturity

06/30/2020

Trading Securities

Amortized Cost

Adjustment to Fair Value -  Income

Carrying Amount

Carrying Amount

Without Maturity

Up to 3 Months

From 3 to 12 Months

From 1 to 3 Years

Over 3 Years

Total

Government Securities

52,841,961 

263,034 

53,104,995 

33,158,573 

6,991,957 

12,858,225 

10,186,009 

23,068,804 

53,104,995 

Financial Treasury Bills - LFT

6,839,340 

754 

6,840,094 

3,530,356 

900,755 

4,811,072 

613,772 

514,495 

6,840,094 

National Treasury Bills – LTN

13,711,213 

60,109 

13,771,322 

6,838,515 

2,096,655 

3,424,390 

3,333,078 

4,917,199 

13,771,322 

National Treasury Notes - NTN

31,581,388 

187,355 

31,768,743 

22,718,780 

3,658,744 

4,265,822 

6,224,229 

17,619,948 

31,768,743 

Agricultural Debt Securities – TODA

54,380 

4,675 

59,055 

70,922 

5,157 

24,274 

14,386 

15,238 

59,055 

Brazilian Foreign Debt Notes

653,714 

10,140 

663,854 

330,526 

332,667 

252 

409 

663,854 

Debentures

1,926 

1,927 

120 

292 

1,515 

1,927 

Private Securities

3,648,525 

6,224 

3,654,749 

2,818,898 

2,161,602 

7,098 

1,254,438 

26,609 

205,002 

3,654,749 

Shares

1,093,370 

1,093,370 

665,075 

1,093,370 

1,093,370 

Investment Fund Real Estate

1,063,986 

4,246 

1,068,232 

1,068,068 

1,068,232 

1,068,232 

Investment Fund Shares

36,067 

Debentures

1,421,757 

2,108 

1,423,865 

439,819 

6,697 

1,221,992 

19,980 

175,196 

1,423,865 

Eurobonds

492,774 

Certificates of Real Estate Receivables - CRI

13,396 

(138) 

13,258 

22,869 

(3) 

3,015 

10,246 

13,258 

Certificates of Agribusiness Receivables - CRA

23,717 

23,725 

12,737 

401 

150 

3,614 

19,560 

23,725 

Bill of Exchange

32,299 

32,299 

81,489 

32,299 

32,299 

Total

56,490,486 

269,258 

56,759,744 

35,977,471 

2,161,602 

6,999,055 

14,112,663 

10,212,618 

23,273,806 

56,759,744 

 

III) Available-for-Sale Securities

Bank

Bank

 

06/30/2020

12/31/2019

By Maturity

06/30/2020

 

Effect of Adjustment to Fair Value on:

 

Available-for-Sale Securities

Amortized Cost

Income

Equity

Carrying Amount

Carrying Amount

Without Maturity

Up to 3 Months

From 3 to 12 Months

From 1 to 3 Years

Over 3 Years

Total

 

Government Securities

98,894,890 

1,800,629 

4,657,448 

105,352,967 

 

89,526,633 

10,032,878 

7,942,246 

30,707,521 

56,670,322 

105,352,967 

 

Treasury Certificates – CFT

1,070 

166 

1,236 

 

1,165 

1,236 

1,236 

 

Securitized Credit

632 

36 

668 

 

136 

432 

100 

668 

 

Financial Treasury Bills – LFT

20,514,534 

150 

20,514,684 

 

11,151,613 

11,402 

3,167,758 

6,941,865 

10,393,659 

20,514,684 

 

National Treasury Bills - LTN

32,606,879 

443,041 

680,413 

33,730,333 

 

30,984,931 

8,665,354 

14,559,685 

10,505,294 

33,730,333 

 

National Treasury Notes - NTN (2)

43,073,580 

1,357,588 

3,934,217 

48,365,385 

 

47,388,924 

1,355,986 

2,815,872 

9,204,635 

34,988,892 

48,365,385 

 

Mexican Foreign Debt Bonds

1,915,718 

 

42,466 

1,958,184 

 

1,958,184 

1,958,184 

 

C-bonds

782,477 

 

782,477 

 

782,477 

782,477 

 

Private Securities

29,861,099 

40,355 

 

548,942 

30,450,396 

 

28,981,641 

2,283,140 

1,347,430 

6,634,352 

8,969,130 

11,216,344 

30,450,396 

 

Shares

320 

(268) 

 

52 

 

60 

52 

52 

 

Investment Funds

2,212,533 

 

2,212,533 

 

3,963,540 

2,212,533 

2,212,533 

 

Debentures (1)

12,277,516 

40,623 

 

370,403 

12,688,542 

 

11,915,052 

307,540 

1,032,696 

4,437,509 

6,910,797��

12,688,542 

 

Promissory Notes - NP

5,455,232 

 

58,183 

5,513,415 

 

4,696,855 

205,946 

2,699,886 

2,445,706 

161,877 

5,513,415 

 

Financial Bills – LF

452,672 

 

8,022 

460,694 

 

192,804 

196,214 

264,480 

460,694 

 

Certificates of Real Estate Receivables - CRI

20,400 

 

226 

20,626 

 

36,680 

16,875 

3,751 

20,626 

 

Certificates of Agribusiness Receivables – CRA

33,246 

 

(2,056) 

31,190 

 

36,680 

31,190 

31,190 

 

Brazilian Foreign Debt Bonds (Global Bonds)

3,339,028 

 

70,938 

3,409,966 

 

3,311,195 

3,409,966 

3,409,966 

 

Rural Product Note – CPR

6,070,152 

43,226 

6,113,378 

4,828,775 

70,555 

637,730 

2,884,895 

1,821,435 

698,763 

6,113,378 

 

Total

128,755,989 

1,840,984 

5,206,390 

135,803,363 

118,508,274 

2,283,140 

11,380,308 

14,576,598 

39,676,651 

67,886,666 

135,803,363 

 

 

Consolidated

06/30/2020

12/31/2019

By Maturity

06/30/2020

Effect of Adjustment to Fair Value on:

Available-for-Sale Securities

Amortized Cost

Income

Equity

Carrying Amount

Carrying Amount

Without Maturity

Up to 3 Months

From 3 to 12 Months

From 1 to 3 Years

Over 3 Years

Total

Government Securities

105,734,614 

1,800,629 

4,519,466 

112,054,709 

98,943,695 

10,391,875 

10,903,435 

33,190,109 

57,569,290 

112,054,709 

Treasury Certificates - CFT

1,070 

166 

1,236 

1,165 

1,236 

1,236 

Securitized Credit

632 

36 

668 

136 

432 

100 

668 

Financial Treasury Bills - LFT

22,582,218 

419 

22,582,637 

16,547,365 

370,399 

4,089,654 

7,557,107 

10,565,477 

22,582,637 

National Treasury Bills - LTN

34,504,825 

443,041 

592,249 

35,540,115 

32,500,648 

8,665,354 

237,441 

16,132,025 

10,505,295 

35,540,115 

National Treasury Notes - NTN (2)

45,947,674 

1,357,588 

3,884,130 

51,189,392 

49,894,517 

1,355,986 

4,617,724 

9,499,641 

35,716,041 

51,189,392 

Mexican Foreign Debt Bonds

1,915,718 

42,466 

1,958,184 

1,958,184 

1,958,184 

Spanish Foreign Debt Bonds

782,477 

782,477 

782,477 

782,477 

Private Securities

28,402,137 

40,355 

549,056 

28,991,548 

29,352,750 

1,113,372 

1,347,433 

6,337,950 

8,976,449 

11,216,344 

28,991,548 

Investment Fund Shares in Participation - FIP

66,032 

(268) 

65,764 

82,387 

65,764 

65,764 

Investment Fund Shares

938,531 

938,531 

3,082,832 

933,090 

5,441 

938,531 

Investment Fund Real Estate

43,850 

114 

43,964 

57,531 

43,964 

43,964 

Debentures (1)

11,981,024 

40,623 

370,403 

12,392,050 

13,063,691 

307,541 

736,203 

4,437,509 

6,910,797 

12,392,050 

Eurobonds

3,339,028 

70,938 

3,409,966 

3,311,195 

3,409,966 

3,409,966 

Promissory Notes - NP

5,455,230 

58,183 

5,513,413 

4,696,855 

205,947 

2,699,886 

2,445,703 

161,877 

5,513,413 

Financial Bills - LF

452,672 

8,022 

460,694 

192,804 

196,214 

264,480 

460,694 

Certificates of Real Estate Receivables - CRI

20,400 

226 

20,626 

36,680 

16,875 

3,751 

20,626 

Certificates of Agribusiness Receivables - CRA

33,246 

(2,056) 

31,190 

31,190 

31,190 

Certificates of Time Deposits - CDB

1,972 

(2,056) 

31,190 

31,190 

31,190 

Rural Product Note - CPR

6,070,152 

1,972 

91 

1,881 

1,972 

Total

134,136,751 

1,840,984 

5,068,522 

141,046,257 

128,296,445 

1,113,372 

11,739,308 

17,241,385 

42,166,558 

68,785,634 

141,046,257 

(1) In the Bank and Consolidated, includes securities issued by a mixed capital company and R$247,604 (12/31/2019 - R$ 262,027) in securities available for sale.

(2) As of June 30, 2020, the amount of 1,040,000 in the amount of R$1,710 (12/31/2019 - 1,140,000 in the amount of R$ 1,229,297) of National Treasury Notes - NTN, is linked to the obligation assumed by Banco Santander to cover the reserves to be amortized under Plan V of the Social Security Fund (Banesprev).

 

IV) Held-to-Maturity Securities

Bank/Consolidated

By Maturity

06/30/2020

Amortized Cost

From 3 to 12 Months

From 1 to 3 Years

Over 3 Years

Held-to-Maturity Securities (1)

06/30/2020

12/31/2019

Total

Government Securities

15,352,363 

11,275,488 

1,795,666 

641,109 

12,750,012 

15,352,363 

National Treasury Notes - NTN

4,635,059 

3,414,897 

11,561 

4,623,498 

4,635,059 

Brazilian Foreign Debt Bonds

10,717,304 

7,860,591 

1,784,105 

641,109 

8,126,514 

10,717,304 

Private Securities

406,113 

464,109 

406,113 

406,113 

Certificates of Agribusiness Receivables - CRA

406,113 

464,109 

406,113 

406,113 

Total

15,758,476 

11,739,597 

2,201,779 

641,109 

12,750,012 

15,758,476 

(1) The market value of held to maturity securities is R$16,390,467 (12/31/2019 - R$12,514,855).

For the semester ended June 30, 2020, there were no disposals of federal government securities and other securities classified in the category of securities held to maturity.

Given the provisions of Article 5 of Circular Bacen 3,068/2001, Banco Santander has the financial capacity and intention to hold to maturity securities classified as held-to-maturity.        

The market value of securities is estimated based on the average quotation on organized markets and their estimated cash flows, discounted to present value using the applicable interest rate curves, considered as representative of market conditions at the end of balance.

For the semester ended June 30, 2020, there was a reclassification of securities available for sale to securities under negotiation for the Investment Fund Quotas of the company Banco Hyundai S.A. in the Santander Group investment fund SBAC Referenced DI Private Credit, due to the revision of the Administration's intention regarding this application. Said reclassification does not change the asset's pricing.

V) Financial Income - Securities Transactions

Bank

Consolidated

 01/01 to 06/30/2020

 01/01 to 06/30/2019

 01/01 to 06/30/2020

 01/01 to 06/30/2019

Income From Fixed-Income Securities (1)

50,164,662 

8,967,151 

50,476,005 

9,640,374 

Income From Interbank Investments

3,800,263 

3,984,717 

1,982,369 

1,725,392 

Income From Variable-Income Securities

(57,969) 

62,482 

(27,381) 

5,297 

Financial Income of Pension and Capitalization 

87,236 

66,601 

Provision for Impairment Losses (2)

(159,678) 

26,614 

(159,678) 

26,614 

Others (3)

(3,173,280) 

124,496 

(3,156,159) 

108,537 

Total

50,573,998 

13,165,460 

49,202,392 

11,572,815 

(1) Includes exchange variation revenue in the amount of R$35,300,291 in the Bank and in the Consolidated (2019 - revenue of R$473,791 in the Bank and in the Consolidated).

(2) Corresponds to the permanent loss record, referring to securities classified as available for sale.

(3) Includes the net valuation of investment fund shares and interest and exchange variation expenses in the amount of R$171,433 in the Bank and in the Consolidated (2019 - expense of R$144,262 in the Bank and in the Consolidated).

b) Derivatives Financial Instruments

The main risk factors associated to derivatives contracted are related to exchange rates, interest rates and stocks. To manage these and other market risk factors the Bank uses practices which include the measurement and follow up of the limit´s usage previously defined on internal committees, as well as the daily follow up of the portfolios values in risk, sensitivities and changes in the interest rate and exchange exposure, liquidity gaps, among other practices which allow the control and follow up on the main risk metrics that can affect the Bank´s position in the several markets which it acts. Based on this management model, the Bank has accomplished its goal, using operations with derivatives, in optimize the relation risk/benefits even in situation with great volatility.

The derivatives fair value is determined through quotation of market prices. The swaps contracts fair value is determined using discounted cash flow modeling techniques, reflecting suitable risk factors. The fair value of NDF and Future contracts are also determined based on the quotation of market prices for derivatives traded in specific chamber or using the same methodology applied for swap contracts. The fair value of options derivatives is determined based on the mathematical models, such as Black & Scholes, using yield rates, implied volatilities and the fair value of the corresponding asset. The current market prices are used to price the volatilities. For the derivatives which do not have prices directly disclosed by specific chamber, their fair values are obtained through pricing models which use market information, based on disclosed prices of more liquid assets. Interest rate curves and market volatilities are extracted from theses prices to be used as first input in these models.

I)              Summary of Derivative Financial Instruments

For better presentation, as of the Financial Statements of 30 June 2020, swap operations will be presented showing the balances of the differentials receivable and payable separately, without compensation. The reference values ​​are now presented without the addition of the updated equity position of the referred contracts, the disclosure of the previous period was modified for comparison purposes.

Below, the composition of the Derivative Financial Instruments portfolio (Assets and Liabilities) by type of instrument, demonstrated by their market value:

Bank

Consolidated

06/30/2020

12/31/2019

06/30/2020

12/31/2019

Assets

Liabilities

Assets

Liabilities

Assets

Liabilities

Assets

Liabilities

Swap - Differential Receivable

18,469,130 

21,286,994 

8,620,854 

10,167,632 

16,670,092 

20,511,582 

14,625,238 

16,701,678 

Options to Exercise Awards

4,064,815 

3,755,628 

886,927 

1,593,625 

4,333,238 

4,001,589 

1,065,752 

1,699,729 

Term Contract and Other Contracts

17,571,923 

17,125,684 

1,678,454 

2,221,955 

17,617,268 

17,125,684 

1,750,150 

2,221,955 

Total

40,105,868 

42,168,306 

11,186,235 

13,983,212 

38,620,598 

41,638,855 

17,441,140 

20,623,362 

 

II) Derivatives Recorded in Memorandum Accounts and Balance Sheets

Bank

06/30/2020

12/31/2019

Trading

Notional (1)

Cost

Fair Value

Notional (1)

Cost

Fair Value

Swap

(3,697,691)

(2,817,864)

(1,941,477)

(1,546,779)

Assets

317,252,715 

13,222,891 

18,469,130 

265,269,199 

2,910,364 

8,620,854 

CDI (Interbank Deposit Rates)

51,756,098 

5,266,907 

946,719 

41,137,936 

209,224 

199,018 

Fixed Interest Rate - Real

61,616,483 

4,364,213 

9,207,345 

39,637,946 

1,900,884 

6,792,917 

Indexed to Price and Interest Rates

4,848,346 

1,217,284 

1,411,807 

2,954,640 

218,540 

301,476 

Foreign Currency

199,031,788 

2,374,487 

6,903,259 

181,538,677 

581,716 

1,327,443 

Others

Liabilities

317,252,715 

(16,920,582)

(21,286,994)

265,269,199 

(4,851,841)

(10,167,632)

CDI (Interbank Deposit Rates)

45,125,255 

(13,753,555) 

(15,054,892) 

33,151,770 

(3,025,371) 

(94,260) 

Fixed Interest Rate - Real

65,923,196 

(2,927,068) 

(4,076,832) 

53,487,374 

(990,820) 

(7,410,825) 

Indexed to Price and Interest Rates

71,241,806 

(3,620) 

(44,668) 

125,014,868 

(11,658) 

(851,739) 

Foreign Currency

133,843,853 

(232,516) 

(2,105,497) 

52,431,130 

(816,100) 

(1,685,199) 

Others

1,118,605 

(3,823) 

(5,105) 

1,184,057 

(7,892) 

(125,609) 

Options

1,259,185,031 

(256,110)

309,187 

1,446,691,032 

(713,535)

(706,698)

Purchased Position

609,995,618 

1,339,024 

4,064,815 

678,193,198 

641,222 

886,927 

Call Option - Foreign Currency

1,823,658 

22,864 

16,596 

223,477 

1,318 

34 

Put Option - Foreign Currency

1,105,448 

42,451 

57,193 

1,508,663 

473 

4,865 

Call Option - Other

55,146,515 

261,779 

931,511 

98,154,363 

295,668 

136,084 

Interbank Market

55,146,515 

261,779 

931,511 

98,154,363 

295,668 

136,174 

Others (2)

(90) 

Put Option - Other

551,919,997 

1,011,930 

3,059,515 

578,306,695 

343,763 

745,944 

Interbank Market

1,671,056 

490 

43,915 

578,306,695 

343,763 

746,006 

Others (2)

550,248,941 

1,011,440 

3,015,600 

(62) 

Sold Position

649,189,413 

(1,595,134)

(3,755,628)

768,497,834 

(1,354,757)

(1,593,625)

Call Option - Foreign Currency

1,479,491 

(43,089) 

(38,538) 

254,944 

(3,102) 

(1,471) 

Put Option - Foreign Currency

1,692,538 

(79,726) 

(137,866) 

315,601 

(1,528) 

(4,340) 

Call Option - Other

66,980,315 

(222,951) 

(10,275) 

174,166,801 

(562,827) 

(428,690) 

Interbank Market

1,731,059 

(56,473) 

(10,275) 

174,166,801 

(562,827) 

(428,617) 

Others (2)

65,249,256 

(166,478) 

(73) 

Put Option - Other

579,037,069 

(1,249,368) 

(3,568,949) 

593,760,488 

(787,300) 

(1,159,124) 

Interbank Market

579,037,069 

(1,249,368) 

(3,568,949) 

593,760,488 

(787,300) 

(1,159,037) 

Others (2)

(87) 

Futures Contracts

259,465,161 

432,564,396 

Purchased Position

118,131,232 

72,332,139 

Exchange Coupon (DDI)

15,478,695 

7,105,006 

Interest Rates (DI1 and DIA)

101,504,008 

55,430,519 

Foreign Currency

9,781,856 

Indexes (3)

1,098,993 

Treasury Bonds/Notes

49,536 

14,758 

Sold Position

141,333,929 

360,232,257 

Exchange Coupon (DDI)

44,462,389 

145,668,039 

Interest Rates (DI1 and DIA)

74,084,637 

196,170,105 

Foreign Currency

20,474,263 

17,208,599 

Indexes (3)

290,254 

Treasury Bonds/Notes

2,312,640 

895,261 

Forward Contracts and Others

136,357,073 

1,794,359 

446,239 

99,514,896 

(900,818)

(543,501)

Purchased Commitment

79,023,024 

3,605,118 

17,571,923 

50,216,458 

(269,708)

1,678,454 

Currencies

72,497,383 

3,605,118 

17,541,869 

50,215,375 

(269,708) 

1,677,364 

Others

6,525,641 

30,054 

1,083 

1,090 

Sell Commitment

57,334,049 

(1,810,759)

(17,125,684)

49,298,438 

(631,110)

(2,221,955)

Currencies

54,312,921 

(1,810,759) 

(17,125,638) 

49,294,662 

(631,085) 

(2,221,955) 

Others

3,021,128 

(46) 

3,776 

(25) 

 

Consolidated

06/30/2020

12/31/2019

Trading

Notional (1)

Cost

Fair Value

Notional (1)

Cost

Fair Value

Swap

(3,697,691)

(3,841,490)

(1,941,477)

(2,076,440)

Assets

292,627,687 

13,222,891 

16,670,092 

279,253,821 

2,910,364 

14,625,238 

CDI (Interbank Deposit Rates)

46,684,906 

5,266,907 

4,219,016 

40,341,402 

209,224 

6,231,769 

Fixed Interest Rate - Real

67,511,912 

4,364,213 

9,207,345 

45,240,041 

1,900,884 

6,792,920 

Indexed to Price and Interest Rates

3,961,645 

1,217,284 

1,411,806 

2,169,578 

218,540 

301,476 

Foreign Currency

174,469,224 

2,374,487 

1,831,925 

191,502,800 

581,716 

1,299,073 

Others

Liabilities

291,389,274 

(16,920,582)

(20,511,582)

279,197,765 

(4,851,841)

(16,701,678)

CDI (Interbank Deposit Rates)

30,507,028 

(13,753,555) 

(15,054,891) 

24,273,545 

(3,025,371) 

(94,260) 

Fixed Interest Rate - Real

46,511,641 

(2,927,068) 

(4,076,832) 

69,561,856 

(990,820) 

(13,061,820) 

Indexed to Price and Interest Rates

71,241,806 

(3,620) 

730,744 

125,014,868 

(11,658) 

(1,681,390) 

Foreign Currency

142,010,194 

(232,516) 

(2,105,497) 

59,163,439 

(816,100) 

(1,685,199) 

Others

1,118,605 

(3,823) 

(5,106) 

1,184,057 

(7,892) 

(179,009) 

Options

1,289,215,390 

(256,110)

331,649 

1,446,536,131 

(713,535)

(633,977)

Purchased Position

614,545,145 

1,339,024 

4,333,238 

678,089,905 

641,140 

1,065,752 

Call Option - Foreign Currency

1,823,658 

22,864 

16,595 

171,871 

1,318 

(280) 

Put Option - Foreign Currency

1,105,448 

42,451 

(136,539) 

1,456,975 

391 

184,002 

Call Option - Other

58,236,830 

261,779 

931,511 

98,154,363 

295,668 

136,086 

Interbank Market

55,146,515 

261,779 

931,511 

98,154,363 

295,668 

136,177 

Others (2)

3,090,315 

(91) 

Put Option - Other

553,379,209 

1,011,930 

3,521,671 

578,306,695 

343,763 

745,944 

Interbank Market

1,671,056 

490 

43,915 

578,306,695 

343,763 

746,006 

Others (2)

551,708,153 

1,011,440 

3,477,756 

(62) 

Sold Position

674,670,245 

(1,595,134)

(4,001,589)

768,446,227 

(1,354,674)

(1,699,729)

Call Option - Foreign Currency

1,479,491 

(43,089) 

(38,538) 

254,944 

(3,102) 

(1,471) 

Put Option - Foreign Currency

1,692,538 

(79,726) 

(137,866) 

263,994 

(1,445) 

(2,841) 

Call Option - Other

74,968,178 

(222,951) 

(101,728) 

174,166,801 

(562,827) 

(428,393) 

Interbank Market

1,731,059 

(56,473) 

(10,275) 

174,166,801 

(562,827) 

(428,620) 

Others (2)

73,237,119 

(166,478) 

(91,453) 

227 

Put Option - Other

596,530,038 

(1,249,368) 

(3,723,457) 

593,760,488 

(787,300) 

(1,267,024) 

Interbank Market

579,037,069 

(1,249,368) 

(3,568,949) 

593,760,488 

(787,300) 

(1,159,037) 

Others (2)

17,492,969 

(154,508) 

(107,987) 

Futures Contracts

260,108,657 

432,564,399 

Purchased Position

118,209,428 

71,603,247 

Exchange Coupon (DDI)

15,478,695 

7,105,006 

Interest Rates (DI1 and DIA)

101,582,204 

54,701,627 

Foreign Currency

9,781,856 

Indexes (3)

1,098,993 

Treasury Bonds/Notes

49,536 

14,758 

Sold Position

141,899,229 

360,961,152 

Exchange Coupon (DDI)

44,462,389 

146,032,485 

Interest Rates (DI1 and DIA)

74,238,051 

196,170,106 

Foreign Currency

20,474,263 

17,305,604 

Indexes (3)

411,886 

290,254 

Treasury Bonds/Notes

2,312,640 

1,162,703 

Forward Contracts and Others

136,357,073 

1,794,359 

491,584 

99,514,898 

(900,818)

(471,805)

Purchased Commitment

79,023,024 

3,605,118 

17,617,268 

50,216,459 

(269,708)

1,750,150 

Currencies

72,497,383 

3,605,118 

17,541,868 

50,215,376 

(269,708) 

1,677,365 

Others

6,525,641 

75,400 

1,083 

72,785 

Sell Commitment

57,334,049 

(1,810,759)

(17,125,684)

49,298,439 

(631,110)

(2,221,955)

Currencies

54,312,921 

(1,810,759) 

(17,125,638) 

49,294,662 

(631,085) 

(2,221,955) 

Others

3,021,128 

(46) 

3,777 

(25) 

(1) Includes options of indexes, mainly being options involving US treasury, shares and stock indexes.

(2) Includes Bovespa and S&P indexes.

 

III) Derivative Financial Instruments by Counterparty, Opening by Maturity and Trading Market

Bank

Notional

By Counterparty

By Maturity

Trading Market

06/30/2020

12/31/2019

06/30/2020

06/30/2020

Related

Financial

Up to

From 3 to

Over

Over the Counter (3)

Customers

 Parties

Institutions (1)

Total

Total

 3 Months

12 Months

12 Months

Exchange (2)

Swap

31,993,296 

103,954,605 

181,304,814 

317,252,715 

265,269,199 

42,786,000 

93,547,540 

180,919,176 

123,508,734 

193,743,982 

Options

21,892,330 

273,800 

1,237,018,901 

1,259,185,031 

1,446,691,032 

355,547,226 

836,304,360 

67,333,451 

1,237,456,127 

21,728,910 

Futures Contracts

2,262,268 

257,202,893 

259,465,161 

432,564,396 

111,069,816 

69,557,549 

78,837,799 

259,465,165 

Forward Contracts and Others

64,821,288 

51,740,446 

19,795,339 

136,357,073 

99,514,896 

68,545,042 

39,555,229 

28,256,803 

2,960,264 

133,396,810 

 

Consolidated

Notional

By Counterparty

By Maturity

Trading Market

06/30/2020

12/31/2019

06/30/2020

06/30/2020

Related

Financial

Up to

From 3 to

Over

Over the Counter (3)

Customers

 Parties

Institutions (1)

Total

Total

 3 Months

12 Months

12 Months

Exchange (2)

Swap

31,993,296 

110,040,504 

150,593,887 

292,627,687 

279,253,821 

43,314,668 

127,830,848 

121,482,171 

123,508,734 

169,118,953 

Options

21,892,330 

273,800 

1,267,049,260 

1,289,215,390 

1,446,536,131 

378,165,867 

843,704,371 

67,345,158 

1,237,456,127 

51,759,269 

Futures Contracts

2,262,268 

257,846,389 

260,108,657 

432,564,399 

111,533,299 

69,689,069 

78,886,292 

260,108,660 

Forward Contracts and Others

64,821,288 

51,740,447 

19,795,338 

136,357,073 

99,514,898 

68,545,042 

39,555,229 

28,256,803 

2,960,264 

133,396,810 

(1) Includes operations with B3 S.A. - Brazil, Bolsa, Balcão (B3) and other stock and commodity exchanges as counterparty.

(2) It consists of operations that are included in registration chambers, according to Bacen regulations.

 

IV) Hedge Accounting

The effectiveness determined for the hedge portfolio is in accordance with Bacen Circular 3,082/2002 and the following hedge accounting structures were established:

IV.I) Market Risk Hedge

The Bank's market risk hedging strategies consist of a hedge of exposure to variation in market risk, in receipts and interest payments related to assets and liabilities recognized.

The Bank's market risk hedging methodology segregates transactions by risk factor (eg, real/dollar exchange rate risk, fixed interest rate risk in reais, dollar exchange rate risk, inflation, interest rate risk, etc.). Transactions generate exposures that are consolidated by risk factor and compared to pre-established internal limits.

To protect the market risk variation in the receipt and payment of interest, the Bank uses swap contracts and interest rate futures contracts relating to fixed assets and liabilities.

The Bank applies the market risk hedge as follows:

• Designates Foreign Currency + Coupon versus %CDI and Pre - Real Interest Rate or contracts dollar futures (DOL, DDI/DI) as derivatives instruments in Hedge Accounting structures, with foreign currency loan operations being the object of such transactions.

• The Bank has an active loan portfolio originating in Dollar at a fixed rate at Santander EFC, whose operations are recorded in Euro. As a way of managing this mismatch, the Bank designates each Euro Floating Foreign Currency swap versus Fixed Dollar corresponding credit protection instrument.

• The Bank has a portfolio of assets indexed to the Euro and traded at offshore branches. In the transaction, the value of the asset in Euro will be converted to the Dollar by the rate of the exchange contract of the transaction. As from the conversion, the principal amount of the funding, already expressed in US dollars, will be adjusted by a floating or fixed rate. The assets will be covered with Swap Cross Currency in order to cross the risk in Euro for LIBOR + Coupon.

• The Bank has a pre-fixed interest rate risk generated by government securities (NTN-F and LTN) in the Financial Assets portfolio available for sale. To manage this mismatch, the entity contracts DI futures on the Stock Exchange and designates them as a hedging instrument in a hedge accounting structure.

• The Bank has a risk to the IPCA index generated by debentures in the portfolio of securities available for sale. To manage this mismatch, the Bank contracts IPCA (DAP) futures on the Stock Exchange and designates them as a hedging instrument in a Hedge Accounting structure.

• Santander Leasing has a pre-fixed interest rate risk generated by government securities (NTN-F) in the portfolio of available-for-sale securities. To manage this mismatch, the Entity contracts interest swaps and designates them as a hedging instrument in a hedge accounting structure.

In market risk hedging, the results, both on hedging instruments and on the objects (attributable to the type of risk being hedged) are recognized directly in the income statement.

IV.II) Cash Flow Hedge

The Bank's cash flow hedging strategies consist of a hedge of exposure to changes in cash flows, interest payments and exchange rate exposure, which are attributable to changes in interest rates on recognized assets and liabilities and changes of unrecognized assets and liabilities.

The Bank applies the cash flow hedge as follows:

• It contracts fixed dollar swaps versus foreign exchange and designates them as a hedging instrument in a Cash Flow Hedge structure, with the purpose of protecting foreign exchange loans and negotiated with third parties through agency in offshore branches and securities held to maturity of Brazilian foreign debt securities.

• Contracts USD Futures or DDI + DI Futures (Synthetic Dollar Futures) and designates them as a derivative instrument in a Cash Flow Hedge structure, the object of which in this relation is part of the Bank's credit portfolio in Dollars and Promissory Notes in the portfolio of securities available for sale.

• The Bank has post-fixed interest rate risk generated by public securities (LFT) in the portfolio of available-for-sale securities, which present expected cash flows subject to Selic variations over their duration. To manage these oscillations, it contracts DI futures on the Stock Exchange and designates them as a derivative instrument in a Hedge Accounting structure.

• Banco RCI Brasil S.A. has operations CDI indexed whose purpose is funding with financial letters (LF), bills of exchange (LC) and Interbank Deposit Certificates (CDI) and designates interest rate swaps as instruments.

In cash flow hedge, the effective portion of the variation in the value of the hedge instrument is temporarily recognized in equity under the caption equity valuation adjustments until the forecasted transactions occur, when that portion is recognized in the income statement. The non-effective portion of the variation in the value of foreign exchange hedge derivatives is recognized directly in the income statement. As of June 30, 2020 and December 31, 2019, no results were recorded for the ineffective portion.

Bank

06/30/2020

12/31/2019

Strategies

Adjustment to Fair Value

Accounting Value

Notional

Adjustment to Fair Value

Accounting Value

Notional

Market Risk Hedge

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

Swap Contracts

(821,612)

(251,684)

6,182,580 

5,812,935 

8,309,486 

5,668 

601,119 

1,447,179 

2,336,460 

2,867,523 

1,735,340 

1,420,344 

Credit Operations Hedge

(1,177,432) 

(246,101) 

168,025 

212,574 

1,554,496 

60,414 

575,714 

1,254,893 

1,146,503 

1,194,479 

876,548 

Securities Hedge

355,820 

(5,583) 

6,014,555 

5,600,361 

6,754,990 

5,668 

540,705 

551,594 

1,081,567 

1,095,391 

540,862 

543,796 

Futures Contracts

75,504,986 

75,682,850 

75,298,558 

3,000,490 

48,427,614 

36,569,735 

45,854,445 

Securities Hedge

75,504,986 

75,682,850 

75,298,558 

3,000,490 

48,427,614 

36,569,735 

45,854,445 

 

Cash Flow Hedge

Swap Contracts

1,882,123 

1,504,805 

1,704,156 

1,504,805 

602,634 

504,512 

1,888,817 

2,056,007 

1,735,340 

Credit Operations Hedge

56,887 

294,403 

687,239 

738,262 

1,194,479 

Securities Hedge

1,882,123 

1,504,805 

1,704,156 

1,504,805 

545,747 

210,109 

1,201,578 

1,317,745 

540,862 

Futures Contracts

48,156,172 

51,067,813 

46,536,529 

17,726,566 

18,680,868 

3,219,566 

789,631 

Credit Operations Hedge (2)

24,478,506 

26,143,520 

22,859,369 

14,506,878 

15,195,149 

Securities Hedge

23,677,667 

24,924,293 

23,677,160 

3,219,688 

3,485,719 

3,219,566 

789,631 

 

Consolidated

06/30/2020

12/31/2019

Strategies

Adjustment to Fair Value

Accounting Value

Notional

Adjustment to Fair Value

Accounting Value

Notional

Market Risk Hedge

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

 Objects (1)

 Instruments (1)

Swap Contracts

(821,612)

(251,684)

6,182,580 

5,981,341 

8,309,486 

5,668 

602,633 

1,283,074 

3,208,463 

4,227,057 

2,605,830 

3,249,742 

Credit Operations Hedge

(1,177,432) 

(246,101) 

168,025 

212,574 

1,554,496 

56,887 

585,670 

2,021,557 

1,398,121 

1,964,670 

1,118,210 

Securities Hedge

355,820 

(5,583) 

6,014,555 

5,768,767 

6,754,990 

5,668 

545,747 

697,404 

1,186,907 

2,828,936 

641,160 

2,131,532 

Futures Contracts

474,589 

75,504,986 

75,682,850 

75,298,558 

3,000,490 

48,427,614 

36,569,735 

45,427,125 

789,631 

Securities Hedge

474,589 

75,504,986 

75,682,850 

75,298,558 

3,000,490 

48,427,614 

36,569,735 

45,427,125 

789,631 

Cash Flow Hedge

Swap Contracts

244,171 

6,432,541 

6,819,427 

1,704,156 

5,163,218 

7,123,121 

7,460,859 

5,499,281 

5,624,154 

Credit Operations Hedge

3,494 

977,621 

1,058,007 

687,239 

90,518 

Securities Hedge

1,882,123 

1,504,805 

1,704,156 

210,109 

1,201,578 

1,317,745 

198,415 

1,107,636 

Funding Hedge

244,171 

4,550,417 

5,314,622 

4,949,615 

4,943,922 

5,085,106 

4,613,628 

4,426,000 

Futures Contracts

48,156,172 

51,067,813 

46,536,529 

17,726,566 

18,680,868 

54,194,819 

4,501,878 

Credit Operations Hedge (2)

24,478,506 

26,143,520 

22,859,369 

14,506,878 

15,195,149 

50,975,253 

4,501,878 

Securities Hedge

23,677,667 

24,924,293 

23,677,160 

3,219,688 

3,485,719 

3,219,566 

(*) The Bank operates some Cash Flow Hedge strategies, hedging assets from its portfolio (object), regards that, the table is presented showing the liability amounts from the respective instruments. For structures whose objects are futures, the table is presented showing the balance of the daily adjustment, registered in the suspense accounts.

(1) Credit amounts refer to active operations and operations owed to passive operations.

(2) Updated value of the instruments on June 30, 2020 is R$8,764,922 (12/31/2019 - R$8,425,386).

 

At the Bank and Consolidated, the mark-to-market effect of swap and future asset contracts corresponds to a credit in the amount of R$18,423  (12/31/2019 - R$11,063) and is recorded in shareholders' equity, net of tax effects, of which R$6,343 will be realized against revenue in the next twelve months.

V) Credit Derivatives Information

Banco Santander uses credit derivatives with the objectives of performing counterparty risk management and meeting its customers' demands, performing protection purchase and sale transactions through credit default swaps and total return swaps, primarily related to Brazilian sovereign risk securities.

Total Return Swaps – TRS

Credit derivatives refer to the exchange of the return of the reference obligation by a cash flow and in which, in the event of a credit event, the protection buyer is usually entitled to receive from the protection seller the equivalent of the difference between the restated amount and the fair value (market value) of the reference obligation on the settlement date of the agreement.

Credit Default Swaps – CDS

These are credit derivatives where, in the event of a credit event, the protection buyer is entitled to receive from the protection seller the equivalent of the difference between the face value of the CDS agreement and the fair value (market value) of the reference obligation on the settlement date of the contract. In return, the seller receives compensation for the sale of the protection.

Below, the composition of the Credit Derivatives portfolio shown by its reference value and effect in the calculation of Required Stockholders' Equity.

Bank/Consolidated

Valor Nominal

06/30/2020

12/31/2019

Retained Risk - Total Rate of Return Swap

Transferred Risk - Credit Swap

Retained Risk - Total Rate of Return Swap

Transferred Risk - Credit Swap

Credit Swaps

3,309,320 

2,435,880 

Total

3,309,320 

2,435,880 

Amount related to the premium paid on CDS for use as guarantee (risk transfer) in the amount of R$0 (12/31/2019 - R$0).

The effect on the PLE of the risk received was R$12,258 (12/31/2019 - R$5,257).

During the period there was no occurrence of a credit event related to taxable events provided for in the contracts.

06/30/2020

12/31/2019

Maximum Potential for Future Payments - Gross

Over 12 Months

Total

Over 12 Months

Total

Per Instrument: CDS

3,309,320 

3,309,320 

2,435,880 

2,435,880 

Per Risk Classification: Below Investment Grade

3,309,320 

3,309,320 

2,435,880 

2,435,880 

Per Reference Entity: Brazilian Government

3,309,320 

3,309,320 

2,435,880 

2,435,880 

 

VI) Derivative Financial Instruments - Margin Given in Guarantee                                                                  

The margin given as collateral for transactions traded on B3 with its own and third party derivative financial instruments is composed of federal government securities.

 Bank

 Consolidated

06/30/2020

12/31/2019

06/30/2020

12/31/2019

Financial Literature of the Treasury - LFT

6,003,523 

5,342,992 

6,622,399 

5,950,561 

National Treasury Bills – LTN

4,697,049 

1,086,556 

4,697,049 

1,086,556 


National Treasury Notes – NTN

4,168,246 

660,918 

4,356,198 

841,790 

Total

14,868,818 

7,090,465 

15,675,646 

7,878,907 


7.     Interbank Accounts

The amount of interbank accounts is composed of restricted deposits with the Bacen to meet compulsory obligations for demand deposits, savings deposits and time deposits, and payments and receipts pending settlement, represented by checks and other documents sent to clearinghouses payment transactions (assets and liabilities position).

8.     Loan Portfolio and Allowance for Loan Losses

a) Loan Portfolio

Bank

Consolidated

06/30/2020

12/31/2019

06/30/2020

12/31/2019

Lending Operations

250,658,414 

211,251,830 

320,458,574 

280,899,334 

Loans and Discounted Titles

149,845,645 

116,282,045 

165,084,507 

130,994,834 

Financing

47,273,415 

42,287,183 

101,834,713 

97,221,898 

Rural and Agroindustrial - Financing

12,797,791 

12,940,784 

12,797,791 

12,940,784 

Real Estate Financing

40,741,563 

39,741,818 

40,741,563 

39,741,818 

Leasing Operations

2,600,908 

2,800,998 

Advances on Foreign Exchange Contracts (1)

8,246,303 

6,054,424 

8,246,303 

6,054,424 

Other Receivables

48,788,075 

58,912,075 

51,534,453 

62,281,242 

  

Credits for Honored Sureties and Guarantees

587,998.00 

321,478.00 

587,998.00 

676,110.00 

  

Income Receivable from Advances Granted

162,774.00 

97,756.00 

162,774.00 

97,756.00 

Other Receivables Several

48,037,303 

58,492,841 

50,783,681 

61,507,376 

Total

307,692,792 

276,218,329 

382,840,238 

352,035,998 

(1) Advance on foreign exchange contracts are classified as a reduction of other obligations.

Sale or Transfer Operations of Financial Assets

(i) With Substantial Transfer of Risks and Benefits

During the second quarter of 2020, credit assignment operations were carried out without recourse in the amount of R$569,192 thousand (with corresponding provision amount of R$233,969 thousand), which were represented mainly by discounted loans and securities. The sale value was R$405,891 thousand and a consequent positive impact on the result of R$70,688 thousand. Of the aforementioned operations, R$108,160 thousand of the assignments were carried out between Group companies.

Credit assignments were also made at a loss, fully provisioned, without recourse, in the amount of R$319,555 thousand, of which R$150,289 thousand with group companies, with sales value and consequent impact on the result of R$19,919 thousand.

(ii) With Substantial Retention of Risks and Benefits

In December 2011, the Bank assigned credits with recourse to real estate financing in the amount of R$688,821, maturing in October 2041. On June 30, 2020, the present value of the assigned operations is R$134,748 (12/31/2019 - R$75,833).

These assignment transactions were carried out with a co-obligation clause, and compulsory repurchase is expected in the following situations:

- Contracts in default for a period exceeding 90 consecutive days;

- Contracts subject to renegotiation;

- Contracts subject to portability, pursuant to CMN Resolution No. 3,401/2006; and

- Contracts subject to intervention.

The amount of compulsory repurchase will be calculated by the credit balance due duly updated on the date of the respective repurchase.

From the date of the assignment, the cash flows from the assigned operations will be paid directly to the assignee.

b) Loan Portfolio by Maturity

Bank

Consolidated

06/30/2020

12/31/2019

06/30/2020

12/31/2019

Overdue

2,036,133 

7,684,024 

2,611,942 

8,585,560 

Due to:

Up to 3 Months

83,550,599 

76,147,368 

92,758,244 

87,843,597 

From 3 to 12 Months

85,912,141 

69,667,171