Banco Santander, S.A. (NYSE:SAN) Q4 2022 Earnings Call Transcript

Ana Botin: So we’re very comfortable with our provisions in Brazil. Let me remind you that provisions are now forward-looking. We’ve made a macro overlay, for the whole group, that a lot of our portfolio in Brazil is secured and is actually really resilient. We’ve seen the deterioration already, and 80% is more than enough. Again, we follow IFRS, which are now very much forward-looking provisions. So the provision doesn’t mean that, that is the cost of risk. Provisions is the expected cost of risk. We had a big discussion if we should not change the cost of risk to expected cost of risk because of the way the accounting now is very forward looking. So we are very comfortable with our provisions in Brazil for the existing risk.

Let me also say that our cost of risk in Brazil has been between 4% and 5% over the last 7 years. That includes 3 years with almost 10% decrease in GDP. Today, Brazil, we’re expecting growth in the GDP next year, employment to be very resilient. So we’re actually quite confident that both Brazil and Mexico would grow more. You’ve seen it in the recent IMF, and employment levels in both countries have been very resilient. Again, that’s one of the main factors in the final loss of the cost of risk. In FX, we cover — José or Héctor?

Jose Garcia-Cantera: Yes. As you know, we have basically the following strategy. So we hedge the capital ratio. The 12% of using group risk-weighted asset and CRR calculation. So what is — at 12%, we don’t hedge. The hedge is done at forward rates. So for TNAV impact, which is what I guess you’re asking the question, Sofie, is indifferent how much we hedge because for TNAV impact — to predict a TNAV impact, you just take the equity invested in non-euro countries and apply forward rates on a yearly basis. And by doing that, you can estimate the impact on TNAV because, again, we hedge the excess over 12% at forward rates. And obviously, we have tactically hedges for our P&L, but those flow through P&L. So when we hedge expected profits, those hedges come through the P&L.

Begona Morenes: Thank you very much. We’re going to have time for 1 last question. Don’t worry. We can see that there are 3 pending that IR will take care of after this call. Can we have the next question from Britta, please?

Operator: The next one we have from Britta? Okay, from Britta Schmidt from Autonomous Research.

Begona Morenes: We’ll try and contact her after this call. There are no more questions, Ana.

Ana Botin: So thank you, everybody, for joining us. As you’ve heard, we are very confident that we’ve built a very, very solid base for delivering future growth and profitability for all our stakeholders, including increasing shareholder remuneration. We look forward to seeing you at Investor Day. We’ll provide more details as to how we’re going to be delivering over the next 3-year plan. Thanks again for joining us and see you soon.