Jul 31, 2017
Executives
Angel Santodomingo - EVP, CFO Andre Parisi - Head of IR
Analysts
Carlos Macedo - Goldman Sachs Mario Pierry - Bank of America Jorg Friedemann - Citibank
Operator
Good morning and thank you for waiting. Welcome to the conference call to discuss Banco Santander Brasil S.A.'
s Results. Present here are Mr.
Angel Santodomingo, Executive Vice President, Chief Financial Officer; and Mr. Andre Parisi, Head of Investor Relations.
All the participants will be on listen-only mode during the presentation. After which we will begin the question-and-answer session, when further instructions will be provided.
[Operator Instructions] The live webcast of this call is available at Banco Santander's Investor Relations website at www.santander.com.br/ir, where the presentation is also available for download. [Operator Instructions] Before proceeding, we wish to clarify that forward-looking statements may be made during the conference call relating to the business outlook of Banco Santander Brasil operating and financial projections and targets based on the beliefs and assumptions of the executive board as well as on information currently available.
Such forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and hence depend on circumstances that may or may not occur.
Investors must be aware that general economic conditions, industry conditions and other operational factors may affect the future performance of Banco Santander Brasil and may cause actual results to substantially differ from those in the forward-looking statements. I will now pass the word to Mr.
Andre Parisi. Please Mr.
Parisi, you may proceed.
Andre Parisi
Good morning, everyone. It's my pleasure to welcome you to Santander Brasil's second quarter 2017 earnings conference call.
This past quarter, we had several important achievements which will be presented by our CFO, Mr. Angel Santodomingo.
So let me turn you over to Mr. Santodomingo.
Angel Santodomingo
Thank you, Andre. Good morning everyone and welcome to the second Q results - Santander Brasil's second Q results.
I will address these results through five topics starting with key messages in the Santander Group's results. We have quick snapshot about the macroeconomic scenario, which will be followed by the highlights of this quarter of Santander Brasil’s quarter and finally to wrap it all up, I will go into conclusion.
So moving to Slide 4, on the commercial front, we continued to improve. As such, I would like to draw your attention to the strides we have made this past quarter.
Payroll loans, [indiscernible] brand has been an important element to our success, playing a significant role in our market share expansion process. At the time, our internal channel has also performed well.
Getnet, remains one of the main pillars of our commercial study, its revenues are growing at a fast pace. They will continue to grab the market share while profitability at healthy levels.
It is worth to remind that Getnet’s importance goes beyond its acquiring services. We consider it a crucial component of our plan to leverage the bank’s revenues.
Cards, once again we had a very good performance in both credit and debit cards. In fact, debit cards are growing actually 2% for example.
We are still optimistic about our prospects in these business as second Q ’17 marked the start of our actions as the sole issue of the American Advantage, American Airlines cards in the country. Agro business, as I’ve mentioned in the last few quarters, we are making strong efforts in this area.
The market share gain is a clear indication that we have adopted their wide strategy to expand our base of adding business clients. SMEs, what strengthens our position in this segment goes beyond our financial offerings, we provide a unique non-financial platform on our served program that helps in their business.
This landmark initiative helped us win an award for best banking award for small and medium sized enterprise. Superdigital, we have reached 1 million clients who are 100% digital.
GCB, our wholesale unit, we continue to hold leading positions on several different fronts, including ECM, including capital markets, project finance and products. And lastly, consumer finance our unique platform for card less revolution, the dynamics of the card financing industry in the county.
As a result, we have been capturing market share at a consistent and fast pace without jeopardizing asset quality. Before jumping into the next slide, I would like to highlight that we have entered into a purchase agreement to acquire a 70% of Ipanema Credit Management.
Ipanema is a market servicer offering a specialized platform for credit recovery management. The company has proven expertise in this field including a sophisticated system that always for daily monitoring and collections performance management, which should continue to a more efficient credit recovery process by Santander.
So next slide, we have focused on delivering user experience improvements for our time base. Since we see customer satisfaction as a cornerstone of our strategy to keep growing in a consistent and sustainable manner as I have shared with you in past quarters.
Looking back at the progress we have made in this front, I would like to highlight the following. The Santander Way app continued to rack up impressive achievements which with more than 6.5 million downloads, mutuals and best-in-class rating for almost Five Star rating in the app stores.
And it has an NPS, our net promoter score around 80 points, which is extremely high. Our successful consumer finance digital platform expand into consumer groups and services, de-leveraging our proven knowhow and expertise in that field.
We unveiled a brand new digital mortgage platform allowing for a more user friendly experience for our clients with straight forward processes. We are implementing the net promoter score methodology in our retail network.
All this innovations through increased customer satisfaction help expanding our base of loyal digital and active clients translated obviously into higher transactionality and fast profitability. Key message of next slide is that we have made a step ahead, our policy established goals for December ’18, except obviously that I was referring to a number of times, we do right things to meet the objectives at the due time.
In first semester ‘17 we have also meet our efficiency ratio guidance reaching the best level in the past five years, our guided result of increased productivity and lean mindset. Profitability wise, we have maintained our return on equity above guidance throughout the first half of 2017 at 15.9% which is the evidence that Santander Brasil has accelerated to a new level of profitability.
As you all know, last Friday, Santander Group announced its earnings for the first semester, reporting a net profit of $3.6 billion or BRL13.2 billion. The results of the Brazilian unit are important for the Group as a whole.
In fact, Santander Brasil accounted for 26% of the group’s earnings in the semester. Going to the Brazil’s macro scenario, a simple message here is that we believe the economy is moving in the right direction.
Domestic inflation continued to trend lower creating room for aggressive interest rate cuts and therefore contributing to the de-leveraging process of business and individuals. Moreover, also we have gone through some volatility in this quarter, we expect to see an upward trending industrial activity given that we have already witnessed the following points, the end of inventory at different cycle and the stabilization of the real household income and monetary policy and improvement in terms of trade and a strong expansion in the agricultural, in the agro production.
All in all, we see GDP gradually gaining momentum during the next 18 months. Okay so, now going into the next part.
Let’s begin with some of the Santander Brasil’s second Q ’17 results as I mentioned in the Slide 12. To start things off, I would like to highlight our improvement in profitability during the first half of this year in line with our commitment to deliver consistent and sustainable earnings growth.
The achievement of this milestone was the result of our well established strategy reflected into improvement in our P&L operating leverage, meaning that we manage to maintain costs and provisions under control, while revenues has started to enjoy strong growth. On the [indiscernible] in the next slide, we bring you some details of our performance in the first half of this year.
Our recurrent growth rate is explained by a host of factors. But just to name a few, bigger customer loyalty resulted in higher transactionality and led to increased revenues underpinned by a solid liability management plan.
Asset quality provisions were kept under a strict control as has been during the past quarters and years. The efficiency ratio reached its best level in the past five years.
The loan portfolio show growth in both individual and consumer finance segments. And finally we maintained capital and liquidity at comfortable levels.
So next slide, as we have always said we strive to keep improving our bottom line every quarter, is the 13th out of 14 quarters in which we have delivered earnings growth. In the first half of the year compared to the same period of 2016, our net profit increased by 33% which confirms our view that we are on the right track to keep delivering sustainable and resilient results.
As I stated before, Santander Brasil’s net profit totaled 2.3 billion in second Q, 2.4 higher than the previous quarter and 29% above second Q. On [indiscernible] main lines of our results about which I will go into more detail later on.
On the revenue front, net interest income resisted a 2.6 rise over the first quarter of 2016 [ph] an almost 17% increase relative to the first half of 2016, highlighted by excellent performance from deposit NII, while market activities and credit NII also delivered solid figures. Reflecting higher transactionality, fees advanced in the quarter and experienced a stronger growth on a year-over-year basis, 21%, reflecting excellent numbers on current accounts, credit cards and insurance among others.
On the expense side, allowance for loan cost increased at controlled pace of 4.3% Q-on-Q, but decreased by 6% compared to first semester last year. General expenses going down 1.7% based on the previous quarter and even declined 6% year-over-year in first semester, we remain confident that different initiatives in this front should contribute and maintain expenses under control.
So all in all, we had our P&L growing nicely, on the revenue side we’ve controlled costs both operating and training quality thus improving our operational leverage. As a result, net profit totaled 4.6 billion in the first half of this year.
I will elaborate on each line in these following slides. Slide 16 shows the evolution of our evolution of our net interest income or NII, which came to 9.1 billion in second Q ’17, 16.5% higher than second Q ’16 and almost 3% better than first Q of this year.
I will highlight credit NII which went up 7% in the quarter reflecting wider spreads due to better pricing and a change in mix. As the individuals portfolio grew nicely, while the corporate & SME contracted in the period.
Revenues from funding, which suffered a slight decline in the quarter, but we still had a good performance when we consider the fact that the SELIC rate has been decreasing at a fast pace. In the year-over-year comparison, revenues from funding were 45% higher in first semester on the same period last year, clearly indicating that the liability management plan that I announced to you already one year and half ago approximately, couple of years is showing a positive impact on the P&L.
And finally, market activates under the others line had another solid quarter, reflecting the hedging capacity against lower SELIC rates. Next slide, we look into the loan portfolio.
Our expanded loan portfolio increased by 5.4% in the year and remained slightly stable in the quarter at BRL325 billion. It is important to note that also Brazil’s economic environment is undergoing a gradual recovery, we have already been witnessing positive growth rates involving the individuals and consumer finance portfolios this year.
The individuals portfolio continued to deliver a resilient performance expanding by 3.6% over the previous quarter and by more than 12% in 12 months. Payroll lending and personal loans were once again the main growth drivers.
Once more, this quarter we must highlight the performance of the consumer finance segment, which advanced by 3.4% Q-on-Q and 16% year-on-year, notable figures considering the still poor conditions in the auto segment. This improvement has been fueled by the implementation of our disruptive digital platform that I have mentioned in previous quarters, which has spurred significant activity gains for the business and about which I have said details already.
The SME portfolio remained stable in second Q ’17. We believe that our combination of commercial focus and more compelling offers and a better macro scenario helped pave the way for portfolio expansion.
And finally as I mentioned, the corporate portfolio decreased by 5% in second Q, partially reflecting the strength of capital markets. On the Slide 18, you can see how our funding has moved.
Positive growth in demand and saving deposits gained reflecting more engaged clients. During the quarter, time deposits increased by 30% while debentures showed 18% decline reflecting the impact of Brazilian [indiscernible] solution which went into effect in early May establishing the end of repose involving securities issued or guaranteed by related parties.
Additionally we have been proactively reducing the amount of financial builds related as finance, which serviced a better cost of funding going forward. We estimate this trend will continue.
The trend of lower amount of [indiscernible]. Finally, total funding reached 565 billion this past quarter, growing 2% Q-on-Q and 8.5% year-on-year.
Our next slide we had been saying since 2016, fee revenue growth is a consequence of more engaged customers. Very good pricing and improvement in the quality of our products and services, altogether culminating into increased transactionality.
Comparing the first half of this year to the same period over the previous one, total fee income jumped 21%. In the quarter, fee revenues declined 2% with good performances from current accounts and insurance services.
Fee products with a highest growth rate were current account, credit card and insurance. Now, let’s turn our attention to asset quality in the next slide.
As anticipated last quarter, short-term NPL fell by 70 basis points in second Q ’17 reflecting seasonality and positive trends in both individuals and corporate segments. NPL over 90 days remained stable in the quarter at 2.9%.
Corporate NPL remained under control while the individual segment delivered NPL improvement and the slide at low one, for the fifth consecutive quarter. In our view, these views are inevitable evidence that our asset quality remains controlled, sound, and at comfortable levels.
This plan continues to reflect the strength of our risk modeling and concerns that the actions taken in recent quarters were appropriate to preserve the quality of our assets. To further corrugate this statement, it should be noted that our coverage ratio is still stable at 229%, which in our opinion is quite a healthy level.
In the next slide, you will see that loan loss provision net of recoveries totaled 2.8 billion in the second Q representing a 4% Q-on-Q increase and 6% lower on the same period of 2016. It is worth noting that the lower income from credit recovery was partially offset by a decrease in allowance for loan losses indicating a high quality of our portfolio.
Also the cost of fee growth by 10 basis points to 3.2%, we still consider it controlled and comfortable level. On Slide 22, we analyze how expenses had moved.
As we had been stating continually Santander Brasil continues to focus on cost discipline and lean mindset. In line with these, our total expenses dropped by 2% in the quarter.
In the first half of this year, expenses grew 6% year-on-year mainly explained by an increase in personal expenses. Let me remember that wages show an 8% rise in third Q last year due to the collective bargain agreement which we have managed to address to 5.8% in first semester.
Looking ahead, we expect cost growth to be around inflation. The next slide brings our performance issues into the spotlight.
This metric also saw great progress. Efficiency ratio continued to improve reaching 44% in the first semester, a remarkable achievement and improving almost 5 percentage points from third semester last year.
In the quarter, the ratio continued to improve and reach the best level in the past five years. Our recurrence ratio rose to 81, almost 82% in the first semester versus almost 10 percentage foreign less in first Q ’16, 71.7%, fast bringing more predictability and resilience to our results.
In the first second Q this year, the recurrence its upward trend and reached 83%, thanks to these advances, return on equity remained healthy and above our 2018 guidance throughout the first semester despite the challenging macro scenario in the country. In the quarter, the profitability level remained literally flat compared to first Q ’17 but still at higher levels and good levels compared to the past.
We reiterate our commitment to continuously enhance our profitability. On Slide 24, you will notice that our liquidity and capital remain at sound levels with stable funding sources.
The loan to portfolio ratio stood at comfortable 85% in second Q, while the BIS ratio increased to 16.5%. Capital ratios remained solid with core equity 1 level of 14.5% in tier 1 as you see in the slide, up 15.4%.
So we’ll move on to the final slide and as we wrap things up, I would like to bring your attention to the highlights of this first semester. The return on equity of 15.9% in the first half of 2017 showing a substantial improvement in mid-year and remaining above our -- the guidance for 2018.
Strong revenues reflecting higher activity and effectiveness of our liability management plan. Asset quality under control.
Everyone has seen our excellence in risk modeling. Greater productivity remains at the top of our priority list as our efficiency ratio has reached lowest level in five years.
Commitment to delivering improvement in customer satisfaction and user experience coupled with private and partnership innovations allow us to continue growing net interest income, NII and fees. The goals we set out to achieving this under 18 are being accomplished on an [indiscernible] and we remain well positioned to deliver sustainable return on equity improvements powered by our well-defined businesses starting organic growth and disciplined capital deployment.
Thank you for your attention and I think we’re now ready to answer your questions.
Operator
[Operator Instructions]
Andre Parisi
First question from Tito Labarta, Deutsche Bank was the sensitivity of net interest margin to interest rates. NIM has expanded even though rates have declined.
At what point will lower interest rates have a negative impact on NIM?
Angel Santodomingo
Thank you, Tito. Well, I will say that the evolution of the NII, I have delivered our view with regards to this part of the P&L.
Our sensitivity, we have shared in previous occasions, it’s around BRL300 million, like $100 million positive to 100 basis points decline in interest rates. Okay.
So that’s one of the reasons why you see that other NII growing, which is the hedging capacity that we have for this trending lower SELIC that we have seen in the country. As I’ve always said, I mean, both speaking of NII and NIM, we have here different forces.
The asset side, we’ve had a good quarter as you have seen, specifically more in price and volume, but okay in both of them, which is helping a nice earnings growth, and a nice increase on, even with lower SELICs. Now, on the liability side, it’s already like six quarters or seven quarters that I have been sharing with you, the liability management plan that we started one year half ago and it’s clearly given results, given results and we considered by not only the NIM, but also the amount of NII that we are generating, we are generating, it’s I think it’s like three fold, when we used to generate as a quarterly average three years ago.
So it’s three times in a quarterly basis with SELIC that is clearly lower than NIM. So that shows the improvement we are doing on the liability side.
And finally, what I said, the hedging capacity, I started my answer by giving you the numbers. So, we always depend on the evolution of interest rates going forward and the duration of that was, those decreases and where it stabilizes, but I don’t see pressure for the time being.
Andre Parisi
Okay. Next question comes from Tito again.
Fees continue to grow in double digits for how long, what did drive the growth?
Angel Santodomingo
Well, fees, you are right. At the end of the day, our guidance was to grow double digit, which means above 10%.
Obviously, 20%, 24% is double digit, that is stronger than what we normally understand as double digit. This is a clear consequence of linked clients.
I mean, this is the study, I have shared with you several times that, I mean, the message of having engaged clients, satisfied clients, linked clients is kind of an established message, let me say like that. But it is our key strategy focus and that means different things in the P&L and probably one of the clearest are fees.
When we analyze fees, I mean, what are the fees that are increasing or strongly increasing within all these, the breakdown of the fees, it’s a clear reflection of what I’m saying, I’m speaking of current accounts, I’m speaking of credit cards, I’m speaking of insurance, I’m speaking of all of our NIMs, transactionality. So, obviously we’re going to maintain our view that double digit is going to be there, but as we maintain the capacity of having our clients improve in how they see the bank and how they use the bank, this is a line that should reflect that effort.
The guidance continues to be the same, double-digit, and I’m not going to change that now. But I think that the results speak for themselves.
Operator
Mr. Carlos Macedo from Goldman Sachs would like to pose a question.
Carlos Macedo
On the back of that question on margins, I have a question on your credit spread. 9.4%, a big increase over the first quarter, maybe some seasonal factors in there, but more importantly about as high as it’s been.
Where do you think that goes going forward? Is that still the repricing of the back book?
Is there still room for that to expand or will that start trending downwards now with rates coming down and putting pressure and spreads in the industry? Thanks.
Angel Santodomingo
Thank you, Carlos. It’s a good question.
I mean, you’re right. The expansion in the quarter was strong and it was basically explained by pricing obviously, but also by the change of mix.
If you go to the amount, how the amounts are varying, both annually and specifically in the quarter, what you have seen is that we have good growth and good growth means above 3% in the quarter, which is double digit annually. Good growth in all areas, both as well as in service growing in, what we call here payrolls or growing in the GruDo [ph], in the agro business I mean and also in auto launch.
But at the same time that grows nicely, SMEs are flat, but big companies, large companies, very large companies have 5% decrease on the quarter. So the mix, how it is changes.
That mix is one of the main reasons of that spread increase along with pricing obviously. We are obviously managing pricing.
The good thing here to underline is not only this NIM expansion in the spread, et cetera, the good thing here is the credit quality is controlled. If you see cost of credit, it is totally controlled or even improving in some cases if you see the last quarters, which means that we are changing the mix or the mix is being changed because -- the mix is being changed because the large corporate service, they have capital markets open, et cetera with the control cost of fees.
So the NIM, net of risk is clearly improving, which is the value we say with you that we should also follow. Going forward, I would not expect such big changes in the space, basically because what I would expect or see in the future is that companies in general terms, not only SMEs, but also going to the larger company should pick up volume, also recover part of that space lost in terms of volume and that would offset a little bit this spread expansion that I am mentioning.
But the discussion around NIM going forward is a good discussion. Thank you, Carlos.
Operator
[Operator Instructions] Mr. Mario Pierry from Bank of America would like to pose a question.
Mario Pierry
Let me ask you two questions. The first one is related to loan growth.
We continue to see Santander gaining market share, even though the macroeconomic environment for Brail remains very uncertain. So again you show that asset quality is stable and the control, but what makes you comfortable to be gaining market share, given all the uncertainty in Brazil.
The second question is related to your current account fees growing at a very rapid pace, almost 40% year-on-year. We understand here, as you’ve been increasing loyalty of your client base, but can you explain to us also how much of this growth is related to price increases if you have been able to increase prices and how much does it have to do with an increase in the client base?
Thank you.
Angel Santodomingo
Mario, thank you for your second question, for your two questions. Sorry, can you repeat the second one?
I didn’t get it quite right.
Mario Pierry
The second question is related to the growth in current account fees growing 35% year-on-year. How much of that is related to prices and increase in number of clients?
Angel Santodomingo
Okay. Loan growth and markets, et cetera.
Yeah. You’re right.
I mean we are grabbing market share. The strategy here is very clear.
Profitable market share. That’s the first thing I would like to share with you.
So the bank does not have an objective by itself in terms of size, in terms of grabbing market share. This is not the idea.
We will also gain market share, if that means increased profitability. And as you mentioned, that is what is happening.
Probably we have to go a little bit into the retail, because [indiscernible] we are growing either because we are filling gaps in which we’re underpenetrated and that is for example agro or SMEs, two good examples. In the agro business in the corporate side, we gain almost 400 basis points of market share in the last year, but I mean, as you remember and as you know, we have been very, quite below our natural market share in this business.
Our market share has been like 3% for a long time. So I mentioned to you that we are starting an agro, new department or strengthened department and the strategy to clearly grow there, that was announced like one year, one year and a half ago and you’re starting us, starting to see the first consequences of that kind of a strategy.
The bank has traditionally tried to do this, but now, it is clearly yielding results. In SMEs for example, I mentioned we have an offer that is not only financial and this is important to understand.
What we offer today to an SME are several things. First, if duration is very small, we offer the, there is more POS, and if it is larger, we offer them the acquiring full service, getting the full service.
But on top of that and of course all the financial products and services you can imagine, we offer also to them all the qualitative services like job searching capacities, training, export/import, export/import from the side of knowing what to do and knowing how to do it, bureaucracy simplification processes. So, I mean, we are trying to position the bank as [indiscernible].
Credit cards, for example, both in the current account and non-current account client, we are growing in the debit side, 22%, 22% on the debit side. This is clearly another way of seeing that we are improving the number of linked clients, the transactionality.
The client that does debit is the client that, I mean the bank who, with which it has debit is the bank with which it has the liabilities, it has the relationship, it has the transactionality. Clearly, it is growing much more obviously, but it’s important to underline that, no.
I mean, we have been – we’re out of the business. As you remember, because it was obviously non-profitable, we re-engineered it through internal and external channels and today, we’re already at a market [indiscernible].
So why is loan growing? Because of all what I’m saying to you and we expect we have certainly given and we expect low numbers in terms of credit loan portfolio, credit offer for this year.
But we expect to continue enlarging and capturing market size, because of our policy, not because we want to be larger or arguments of this kind. In terms of current account, your second question, I would say it’s clearly, again the same argument.
Obviously, you always do fine tuning, you have pricing gaps in some parts of it, where you have groups that were not placed, et cetera, but I mean I would say that the answer to, because I cannot say 100% obviously, but [indiscernible] is clearly usage of the bank. It’s not another type of policy.
Operator
[Operator Instructions] Mr. Jorg Friedemann from Citibank would like to pose a question.
Jorg Friedemann
So the first one, your approach in the end of the goodwill amortization following the acquisition of ABN AMRO years ago. So with that, it is natural to expect a pickup in effective tax rate.
So could you comment on your expectations for this rate going forward and how higher payment of interest or non-GAAP to all the activation of tax credits could mitigate a significant increase of the tax rate in the second half of ’17 and 2018. This is the first question.
And second question, I noted a number of maybe one-off in this results that has negative impact, although we did not label those as one-offs. So could you please comment in how you see the progression of some of these line items?
I know you have mentioned some of those. First, I noted that in the second, in the last two quarters, your non-operating results increased substantially, probably due to accounting revelation for closured assets.
I also noted that you changed their methodology of booking provisions for labor and seasonal contingencies and finally, in this past quarter, I saw significant drop of recoveries of one of – 30%, I think it is the lowest level of recoveries in the last two years. So how you see the progression of earnings once you normalize some of these line items?
Thank you very much.
Angel Santodomingo
I will try to address both questions. On the tax rate, you are right.
I mean, we are finalizing the goodwill amortization of Banco Real, which is basically the goodwill here. Also, we have a little bit of all things in sometime during the 1Q.
Now, that linked to what would the tax rate look like going forward, you have seen during the first quarters, we are already with a higher tax rate. I would assume that the tax rate should be somewhere around the 25% to the 30%, somewhere around that.
Please do not consider this as an exact guidance, because obviously these things vary. You are right that interest and capital play a key role and we will obviously try to optimize going into the end of the year.
As you know, the board has approved a second quarter dividend of 500 million. So we did -- the board did in the first Q, announcing 500 million and another 500 million had been announced in the second Q.
So it looks like the board is going towards a quarterly dividend payment, interest on capital. So again, trying to optimize the tax situation, but in terms of I think, we haven’t looked too much from this sustainment in the last couple of years.
We should trend to the levels I mentioned. Other results, other non-operational results.
Yes. You do have a little bit of everything there.
You mentioned quite good the different points. I would underline there some things.
First, you do have things accounted there that are linked to the activity. And I mentioned and there are things like credit card costs in different parts of the Bank’s, what we call here the MasterCard or whatever it is.
You also have there costs linked to beta launch [indiscernible]. So as we are growing our lot in all those parts, you also have some growing part, even the evolution of the business.
So accounting wise, they are included in that line, also as I say, they are linked with the operation itself and with the activity of the business. Now secondly, you mentioned also transactionality.
Yes. I don’t think this is a kind of a significant one, but I mean this follows Central Bank criterias et cetera.
So we adjust criterias toward authorities kind of direct. Third point, you mentioned, assets, real estate assets and the like.
We have made a provision there this quarter, one-off, which is linked to the amount of time that the assets are expected to be sold. This amount of time has lengthened and this, also when you lengthen the amount of time, the present value is lower and you have to provision.
We do it annually, so big issue here. We do not expect to do a significant amount going forward.
It’s just this annual analysis that we make. And finally, you mentioned also recoveries.
Yeah. It’s true that in this quarter, we have a lower amount of recoveries.
As you know, this is also linked to the amount of portfolios that are sold throughout the quarter. You have quarters more intensive, quarters less intensive.
This was one of the less intensive ones. This is not a business in itself in terms of trying to achieve certain objectives, but obviously we continuously optimize the amount of portfolios that we want to sell.
So it’s a long answer to a short question, but this is the typical line in the business that I prefer you to understand and to have very good transparency so that you can understand it.
Operator
[Operator Instructions] Thank you. The Q&A session is over and now, I wish to hand over to Mr.
Angel Santodomingo for his closing remarks.
Angel Santodomingo
Okay. Thank you so much.
I will just like to say that if there is any question that has been not addressed, we are open, investor relations team and myself, obviously to try to answer it. Thank you for being there and I look forward to seeing you all in the, during the next Q results.
Thank you.
Operator
Banco Santander Brasil’s conference call has come to an end. We thank you for your participation.
Have a nice day.