Banco Santander (brasil) S.a. · BMFBOVESPA:SANB3
Banco Santander (brasil) — Investor Presentation (September 2023)
39 slides from Banco Santander (brasil)'s investor presentation, September 2023
Slide 1: Brazil Macro: Monetary Policy
«> Santander Brazil Macro | September 2023 Monetary Policy Henrique Danyi henrique.danyi@santander.com.br
Slide 2: Index
INDEX 1. Brief Overview 2. Activity 3. Fiscal Policy 4. Inflation 5. Rates 6. Monetary Policy Communication 7. Forecasts 2
Slide 3: Brief Overview
BRIEF OVERVIEW 01
Slide 4: Chartbook on monetary policy outlook and Scenario Review
• This chartbook brings details our Monetary Policy outlook, contemplated in our latest Scenario Review, released on September 15 – “Adjustments To Reflect Past Surprises; Same Trends Continuing Ahead” - available in: https://bit.ly/std-sce-review-Sep23 • The start of a new monetary easing cycle at
Slide 5: Activity
ACTIVITY 02
Slide 6: Labor market shows signs of resilience
o The labor market shows signs of resilience, as it remains in overheated territory. We see a tight job market until 2024. o The July results continued to indicate a strong increase in formal employment, but there was a tendency towards the historical mean in the latest figures. Unemployment Rate an
Slide 7: GDP growth and breakdown
o While the 1Q23 result benefited from a significant contribution from agriculture, 2Q23’s expansion was mainly concentrated in cyclical-sensitive sectors — despite still restrictive financial conditions. The outlook for negative GDP variations throughout 2H23 remains, as the surprise in 2Q23 has se
Slide 8: Key variables: real activity
ECONOMIC TOPIC LATEST DATA THIS MEETING LAST MEETING SECOND LAST Key Variables When? Sep-23 Aug-23 Jun-23 REAL ACTIVITY GDP forecasts (% p.a.) - BCB's Focus report Forecast for 2023 08-Sep-23 2.64 2.24 2.14 Forecast for 2024 08-Sep-23 1.47 1.30 1.20 Forecast for 2025 08-Sep-23 2.00 1.90 1.80 Forecas
Slide 9: Fiscal Policy
FISCAL POLICY 03
Slide 10: Expected primary balance shows deficits
o The expected primary balance average result for 2023-2025 shows deficits. o Up to date, economists did not expect a stabilizing debt for the coming years. Focus Expectations for Primary Balance (% GDP) Focus Expected Increase in Govt Debt Up to 2030 (p.p. of GDP) Sources: Brazilian Central Bank, S
Slide 11: Key variables: fiscal policy
ECONOMIC TOPIC LATEST DATA THIS MEETING LAST MEETING SECOND LAST Key Variables When? Sep-23 Aug-23 Jun-23 FISCAL POLICY Primary Fiscal Balance (% GDP) Actual level (12-month rolling) Jul-23 -0.8 -0.2 0.4 Forecast for 2023 08-Sep-23 -1.00 -1.00 -1.01 Forecast for 2024 08-Sep-23 -0.71 -0.80 -0.80 Fore
Slide 12: Inflation
INFLATION 04
Slide 13: Core inflation continues downward trend
o The main core figures followed by the BCB have continued their downward trend. IPCA Average of Cores* vs Target (%) IPCA EX3 Core vs Target (%) Sources: IBGE, Brazilian Central Bank, Santander. Sources: IBGE, Brazilian Central Bank, Santander. * EX0, EX3, P55, MS, and DP. 13
Slide 14: Positive surprise in services inflation
o There was a positive surprise in services inflation. o Considering services have been one of the most resilient segments in recent inflation dynamics, this surprise was a very welcome. IPCA Underlying Industrial Goods vs Target (%) IPCA Underlying Services vs Target (%) Sources: IBGE, Brazilian Ce
Slide 15: IPCA diffusion indexes
o The 3mma diffusion index continues to be below its 2017-2018 average, indicating a deceleration not concentrated in a few items, ranging over different groups. An incipient improvement, but still requiring caution considering its Ex-Food equivalent. IPCA Diffusion Indexes (3-month average) 15 Sour
Slide 16: IPCA forecasts
o Services’ resilience still limits disinflation, but recent positive surprises have pointed towards a better inflation outlook ahead. o For IPCA 2024 we reduced our projection to 3.8% (from 3.9%). IPCA forecasts (%) IPCA forecasts (%) 2017-2019 2020 2021 2022 2023e 2024e IPCA YoY IPCA YoY Fcst. Ser
Slide 17: BCB inflation forecasts
o There was a marginal deterioration of BCB’s inflation expectations across the board, since almost all the inputs for the BCB’s inflation forecasting model worsened since the last meeting. Divergence from consensus continues to be from free market prices. o In the BCB’s view, convergence to mid-tar
Slide 18: Median IPCA and Selic Focus expectations
o Contrasting to the BCB’s IPCA expectations for longer horizons, median consensus expectations have only partially re-anchored. o This might point towards a perception by market economists of a lower relative weight to the inflation gap in a BCB reaction function. An alternative view can be of an i
Slide 19: Inflation expectations gap at 18 months
o Considering the BCB’s rule-of-thumb for the policy-relevant horizon (18m), the inflation expectations gap sits now at above 75 bps. We read this data combined with the start of the easing cycle as indicative of the BCB attributing more relative weight to current conditions than to expectations. Da
Slide 20: Key variables: inflation expectations
ECONOMIC TOPIC LATEST DATA THIS MEETING LAST MEETING SECOND LAST Key Variables When? Sep-23 Aug-23 Jun-23 INFLATION Forecasts (% p.a.) - BCB's Focus report Calendar-Weighted Forecast (~18 months) 08-Sep-23 3.79 3.79 4.00 Calendar-Weighted Target (~18 months) 08-Sep-23 3.00 3.00 3.00 Calendar-Weighte
Slide 21: Key variables: actual CPI data
ECONOMIC TOPIC LATEST DATA THIS MEETING LAST MEETING SECOND LAST Key Variables When? Sep-23 Aug-23 Jun-23 INFLATION Actual CPI data Headline (% YoY) Aug-23 4.6 3.2 3.9 Headline (% QoQ, saar) Aug-23 3.9 5.2 6.1 Core IPCA EX3 (% YoY) Aug-23 5.9 7.4 8.0 Core IPCA EX3 (% QoQ, saar) Aug-23 3.2 6.1 5.9 Co
Slide 22: Rates
RATES 05
Slide 23: Key variables: external sector
ECONOMIC TOPIC LATEST DATA THIS MEETING LAST MEETING SECOND LAST Key Variables When? Sep-23 Aug-23 Jun-23 EXTERNAL SECTOR FX rate (USD/BRL) Current level 08-Sep-23 4.99 4.73 4.76 Actual: 5-day average (previous week) 08-Sep-23 4.96 4.74 4.84 USD/BRL (to be) used in simulations 16-Jun-23 4.75 4.75 4.
Slide 24: Key variables: asset prices
ECONOMIC TOPIC LATEST DATA THIS MEETING LAST MEETING SECOND LAST Key Variables When? Sep-23 Aug-23 Jun-23 ASSET PRICES Santander Brasil's financial conditions index* Aug-23 0.89 0.64 0.68 IC-Br (% YoY) Aug-23 -19.9 -19.9 -20.1 CRB Commodity Index (Futures, USD terms) 08-Sep-23 284.5 280.5 270.6 CRB
Slide 25: Key variables: monetary policy
ECONOMIC TOPIC LATEST DATA THIS MEETING LAST MEETING SECOND LAST Key Variables When? Sep-23 Aug-23 Jun-23 MONETARY POLICY Selic rate (% p.a.) Current level Aug-23 13.25 13.75 13.75 Forecast for 2023 08-Sep-23 11.75 12.00 12.25 Forecast for 2024 08-Sep-23 9.00 9.25 9.50 Forecast for 2025 08-Sep-23 8.
Slide 26: International stance remains very tight
o The international stance continues to be very tight. o High real rates in Emerging and Developed Market Economies limit the local easing cycle. LatAm: Normalized Ex Ante Real Rates (%) DM: Normalized Ex Ante Real Rates (%) Sources: Brazilian Central Bank, Santander. Sources: Brazilian Central Bank
Slide 27: Surge in natural rates since mid-2020
o In our view, there was a surge in natural rates since mid-2020. o Considering the real rate gap, there is room for cuts, yet the higher current levels of the natural rate also serve as a restriction to the terminal level of the policy rate. Natural Rate of Interest (%) Ex Ante Real Rate Gap (%) So
Slide 28: Selic rate and Taylor rule implied values
o We estimated the TR from the Small Scale Model from the 4Q21 Inflation Report and compared the fitted results to both the actual Selic rate and the fitted values from the same equation using the BCB’s results. o Despite considering only inflation expectations and lagged values of the rate, it pred
Slide 29: Monetary Policy Communication
MONETARY POLICY COMMUNICATION 06
Slide 30: BCB's forecasts and balance of risks
BCB’s FORECASTS AND BALANCE OF RISKS • There was a marginal deterioration of BCB’s inflation expectations across the board, since almost all the drivers used as inputs for the BCB’s inflation forecasting model have worsened since the last meeting (oil prices are up, the BRL has depreciated, the outp
Slide 31: Signals about the next policy steps
THE SIGNALS ABOUT THE NEXT POLICY STEPS • The BCB continued its attempt to anchor expectations regarding the next policy steps, unanimously signaling a "cruise-speed" pace of cuts of 50 bps for the next meetings. • In the minutes from the August meeting, the Copom listed 3 “substantial positive surp
Slide 32: In our view
IN OUR VIEW… • Our scenario is in line with the BCB’s signals, as we forecast the pace of cuts being maintained at -50 bps, with the Selic rate reaching 11.75% at YE2023. For now, looking at 2024, we continue to expect 50 bps cuts at the first four meetings, with a last 25 bps cut, leaving the YE202
Slide 33: Forecasts
FORECASTS 07
Slide 34: Santander projection of Selic rate
o Our forecast is in line with the BCB’s communication and predicts a restrictive stance until YE2024. Our forecast remains above the consensus for up to next year, but we recognize the risks are skewed to the downside. We cannot discard a faster pace until the end of the year or in the beginning of
Slide 35: Macroeconomic variables: previous vs current forecasts
M acroeconomic Variables Previous Current 2023E 1.9 2.5 GDP (%) 2024E 1.0 1.0 2025E 1.5 1.5 2023E 4.9 4.7 IPCA (%) 2024E 3.9 3.8 2025E 4.5 4.5 2023E 11.75 11.75 Selic Rate (% end of period) 2024E 10.00 9.50 2025E 7.50 7.50 2023E 5.20 5.10 FX Rate - USDBRL (end of period) 2024E 5.35 5.25 2025E 5.40 5
Slide 36: Global Macro Scenario
Global Macro Scenario 2018 2019 2020 2021 2022 2023E 2024E 2025E Global GDP (%) 3.5 2.8 -3.5 5.9 3.4 2.4 2.2 2.8 China GDP (%) 6.7 6.0 2.3 8.1 3.0 5.2 5.1 5.0 US GDP (%) 3.0 2.2 -3.5 5.7 2.1 2.1 0.1 1.8 US Inflation (Core PCE, %) 2.1 1.6 1.5 4.9 5.0 4.0 2.5 2.0 US Interest Rate (FFR, %) 2.50 1.75 0.
Slide 37: Thank you. Brazil Macroeconomic Research Team
Brazil Macroeconomic Research Team Thank you. Ana Paula Vescovi Chief Economist anavescovi@santander.com.br Gilmar Lima Economist – Modeling gilmar.lima@santander.com.br +55 (11) 3553-8567 +55 (11) 3553-6327 Adriano Valladao Henrique Danyi Economist – Inflation Economist - Credit adriano.ribeiro@san
Slide 38: Disclaimer
Disclaimer
Slide 39: Disclaimer
This report has been prepared by Santander Investment Securities Inc. ("SIS"; SIS is a subsidiary of Santander Holdings USA, Inc. which is wholly owned by Banco Santander, S.A. "Santander"), on behalf of itself and its affiliates (collectively, Grupo Santander) and is provided for information purpos
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