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Santander Brasil, Bonsucesso target 10% of payroll loans market with new JV

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Santander Brasil, Bonsucesso target 10% of payroll loans market with new JV

and plan to obtain10% of the national payroll market over the next five years through their jointventure Olé Consignado, formerly known as BancoBonsucesso Consignado SA, ValorEconomico reported.

Currently,Olé Consignado has a payroll loan portfolio of 5 billion Brazilian reais, equivalentto 1.8% of the market, and 1.4 million customers.

Restrictionson personal credit in Brazil have expanded demand for payroll loans, which explainswhy this portfolio has continued to grow despite the economic recession, Olé ConsignadoCEO Frederico Penido reportedly said.

Giventhe annual increase in the minimum wage adjusted for inflation, the potential marketfor payrolls loans is growing around 8% a year, he said.

BancoBonsucesso Consignado was created in February 2015 with an initial investment of600 million reais, of which Santander Brasil, as the controller, provided 60% whileBonsucesso contributed the remainder.

The jointventure's average interest rate on payroll loans is 2.17% per month and, accordingto Penido, this should increase slightly to 2.20% by the end of the year in linewith portfolio growth.

Separately,Santander Brasil CEO Sergio Rial told journalists that the bank's growth in revenuefrom commissions and fees in the first quarter was due to customer loyalty ratherthan higher commissions, according to Valor.

SantanderBrasil posted 3.09 billion reais in revenue from commissions and fees in the firstquarter, up 9.3% from the same period a year ago. However, Rial expects it willbe difficult for the bank to maintain the same growth in the next few quarters.

In termsof loans, Santander Brasil expects its portfolio to grow in the "low singledigits" in 2016, although growth should pick up in 2017, the bank's executivevice president and CFO, Angel Santodomingo, reportedly said in a conference callwith analysts.

Althoughthe quality of the bank's assets is expected to worsen in the coming months dueto the country's economic woes, this deterioration should be gradual and controlled,Santodomingo said.

The executivepointed out that the increase of the spreads seen in the first quarter has beenable to compensate for the change in the mix of the bank's credit to modalitiesof lower risk and, therefore, lower margin.

SantanderBrasil reported a first-quartermanagerial net profit of about 1.66 billion reais, up 1.7% compared to the year-agoperiod.

As of April 27, US$1 was worth3.54 Brazilian reais.