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  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    PlanMaestro if you go to the 6K/A available through the link listed above or to the BSBR Investor Relations websites you can read all of their Qtrly Financial Reports, you will see that each states that goodwill is included in the tier 1 capital calculation.

    For example In the 2Q12 BR GAAP statement is states on page 19 under the item Basel II it states; 'Ratio Tier 1 (considering goodwill) 19.9%'. It states the same in the 1Q12 Financial State on page 19 as well. If you go to the BSBR IFRS Results 4Q11 which are available through the investor relations portal at the BSBR website http://bit.ly/Ojn4oT, you will find that on page 25 that it states tier 1 capital is 17.5% and a footnote underneath and which states "BIS Ratio, considering Banco Central do Brasil methodology, which means that includes goodwill."

    As a former risk manager in a global bank I am thoroughly aware of how the Basel accords, the AMA system and the BIS standards work including the calculation of capital adequacy. While they are relatively standardized calculations and measures, they do vary from country to country depending on how they have been interpreted and applied by that countries regulatory bodies.

    I don't have any problems with readers making comments, critiquing the article or asking questions even if they are negative. However, I do find your comment perjorative because you have blatantly set out to undermine the credibility of the article and analysis without knowing what you are talking about or having read the relevant documents and financial reports. Further to which you have assumed that I don't know what I am talking about or doing. You would know that I have written extensively on BSBR and its parent previously if you had done the minimum DD and checked my profile.

    If you believed that the article was materially incorrect or that there was an error all you had to do was message me and let me know or post a question pointing out the information in question rather than making a clear an unequivocal statement that the article is wrong and implying that the author is incompetent. As a fellow contributor I would have expected a far higher standard and more professional conduct, rather than your attempt to publicly undermine the article and my credibility.

    It is also obvious from this case that you don't understand how Brazilian banks are regulated nor how tier 1 capital is calculated or how the Basel requirements are applied and accepted into different regulatory systems. In the future if you require any assistance with analyzing a bank, reading its financial filings (and not only its regulatory filings) or examining financial regulatory frameworks, please let me know as I would be more than happy to assist.
    Aug 25 08:08 PM | 1 Like Like |Link to Comment
  • Bookmark this chart of iron ore prices, as it's becoming one of the more widely-followed global indicators. They've fallen another 1.9% today to just $100/ton, well below the line-in-the-sand price of $120 - the level at which Chinese producers would supposedly stop producing. [View news story]
    There has to be some value coming in at some point and the negative sentiment this will drive might just create some buying opportunities. I like Vale but I think it is going to go lower with high capex combined with the issues with its phosphate business, the unresolved tax case, rising political risk in Brazil and significant issues relating to effective execution of its growth strategy.
    Aug 25 03:31 AM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    If you go to the latest 6KA which is a copy of the Brazilian GAAP report http://1.usa.gov/PO3xg6 you will find the tier 1 ratios at the bottom of page 19. These financial filings are also available from the investor relations section of the BSBR website.
    Aug 24 09:30 PM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    To clarify the ROAE stated in the article of 11.5% at the end of 2Q12 is excluding goodwill.
    Aug 24 08:46 PM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    Bax thank you for the comments and feedback. I do like BBVA because of its diverse Latam operations, although it doesn't give investors exposure to Brazil. It has an extremely well run Argentine bank which as you point out is BFR, which is under KIrchner's watchful eye. While there is significant political risk in Argentina there are also considerable investment opportunities and BBVA provides investors with exposure while avoiding a direct investment there. BBVA also has operations in Venezuela, making for some interesting investment exposure.

    With regard to the Brazilian utilities I'll look at a series of articles across the sector and include EBR and CIG in that series. I think it will take multiple articles to do it justice given the tremendous size of the sector and the complexity of ownership and issues facing the Brazilian economy.
    Aug 24 07:24 PM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    anirudh thank you for the comment. I don't believe that it is overly bearish it is a realistic appraisal of where Brazil's growth prospects are at. It is easy to wheel out the usual catch-words about growth prospects but when you dig a little deeper you will see there are a number of issues that need to be dealt with in the short to medium-term for growth to resume.

    These include the dependence on the EU and China as export markets and thus the need for economic activity in those countries to increase. The structural problems within the manufacturing sector which are only growing as the government puts more protectionist measures in pace. This is now making that sector look like it will see another lost decade in manufacturing very similar to what happened in the 70s.

    A significant inequality in wealth and income and a low national average income. There are also factors affecting competitiveness and foreign investment which will slow the required inflows of capital and technology required to make the leap from a high middle income economy to a high income economy.
    Aug 24 07:16 PM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    PlanMaestro you might want to check the bank issued Financial Reports including their IFRS and Brazilian GAAP statements which are available here: http://bit.ly/OfLiAm .

    They state that goodwill has been factored into the tier one capital calculation. In addition, if you understood how tier 1 was calculated you would be questioning as to why it is so high at almost 20%, because it does not make sense for a bank to be carrying so much tier 1 capital because of the economic cost.

    Obviously there is a contradiction between the statement made in the 20F http://1.usa.gov/T6cAHP and the bank issued statements.
    Aug 24 07:05 PM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    Steve thank for the feedback. Will be starting on CPL shortly. As I mentioned in an earlier comment utilities are not my field but will see what I can come up with on CPL.
    Aug 24 07:00 PM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    Plan Maestro are you referring to BSBR's 10K or SAN's? All of the BSBR issued quarterly, half yearly and full year reports that I have reviewed calculate tier 1 in consideration of goodwill. This also includes their IFRS and Brazilian GAAP statements. It also is the only reason why a bank would be carrying tier 1 at anything over 15%. The economic cost on tier 1 is particularly high and as a bank you want to minimize it as much as possible.
    Aug 24 10:59 AM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    Jarco thank you for the feedback. I would also be interested in local managements view, though I think gfms comments may reflect their view. As for Group I would very interested to get a feel for their view. If you look at memo's comments he is pretty close to the money and as always adds some very interesting on the ground commentary. I am also going to keep hunting for media releases and analysts interviews but to date I haven't found anything and I don't think they normally do them other than the usual spin.
    Aug 24 10:45 AM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    gcmagone nicely picked up. I think SAN and BBVA give investors the best of both world's Latam and European exposure with a touch of U.S banking as well. I think the problem is that there was a lot of hype surrounding BSBR's IPO and that attracted a lot of investors including myself though in the end I didn't take the plunge. But BSBR has a lot of potential on paper, it is just not translating into business growth and returns for shareholders.
    Aug 24 08:38 AM | Likes Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    Memo no need to apologize for meddling, it is an open forum and all views and opinions are appreciated. It is always good to see both sides of the story particularly when it is coming from people such as yourself and gfm who are a lot closer to the action than me.

    Overall I find it difficult to fathom how delinquencies can continue to climb and the bank's liquidity can continue to fall in the current environment. It would appear that risk management standards have been lowered in order to generate new business because the bank is having a hard time cracking the ITUB/BBD private bank duopoly combined with increasing market pressure from the state owned banks that don't have the same profit pressures as the privately owned banks.

    I am also certain that Rousseff's pressure on private bank's to make credit cheaper and easier to obtain is not helping the situation. Plus you only need to look at Santander's experience in Colombia to see how difficult it is to access these markets with established local competitors.

    However, I could also be wrong and that is why I appreciate the comments. Overall my goal is to try and assist investors with seeing beyond the corporate puff and seeing what is actually going on. But there have been times where I have gotten it wrong in the past and will do so in the future. 
    Aug 24 07:58 AM | Likes Like |Link to Comment
  • Fortescue Stays Confident On China As H2 Profit Rises [View instapost]
    It will be interesting to see what happens over the next few months with iron ore currently at $104 per metric ton. While the outlook is not particularly positive I do lean towards the views of Rio's CEO Albanese which were in an article in today's SMH http://bit.ly/NKkvgY .
    Aug 24 07:27 AM | 1 Like Like |Link to Comment
  • Banco Santander Brasil: Declining Asset Quality And Growing Headwinds Hamper Profitability [View article]
    gfm you have raised some interesting points but I am somewhat perplexed by what you are trying to get at. In response I will add the following points. I find the link between NIM being able to support NPLs tenuous at best, because any increase in NPLs leads to increased provisions which come with an economic cost that will place a pressure on revenue and therefore NIM. Given rising funding costs, BSBR's over reliance on wholesale funding combined with a falling official rate places BSBR's NIM under further pressure which will see it compressed.

    I also don't see your purported linkage between usury laws, NPLs and NIM. Unless of course BSBR is able to charge a rate that significantly exceeds the official rate and is well outside of the rate that its competitors charge. This it obviously can't do as it would be unable to generate new business.

    I spent a considerable amount of time wrestling with the issues relating to tier one capital and ROAE and the inclusion/exclusion of good will and intangibles. With regard to tier 1 capital why does management factor in goodwill when the standards for its calculation require its exclusion and its peers also exclude it? To a more suspicious person this may indicate that the bank is having issues with meeting its tier 1 capital requirements.

    Overall the ROAE no matter how you slice and dice it is average at best and I would argue is poor. Much of this is a reflection of the poor asset quality, margin compression and rising economic cost from provisions, which is obviously declining as the economy worsens.

    The increase in provisions and the liquidity issues are of significant concern. The see a bank experience a 23% increase in a quarter in loan loss provisions indicates that credit risk management is not what it should be and that credit standards have been allowed to slip in pursuit of new business. You would hope that given that both NPLs and provisions have been on an upward trajectory since at least Mar 11 that this matter would have been dealt with by now.

    I am fully aware of the Brazilian macro view and I believe that the growth prospects have been over-hyped based at best. All of the economic evidence to date suggests that Brazil has essentially hit an economic brick wall and will not see the level of economic growth previously experienced until there are significant structural changes made to the economy. This is even more pronounced in its manufacturing industry which is starting to look for and more like it did after the oil shocks in the 70s which essentially saw it enter a lost decade.

    Finally, I am certain that these issues are currently being managed at group level but this was not a report written for the benefit of Santander management. It was written to bring these issues to the attention of investors so they can make an informed decision on whether it represents a worthwhile investment. As an independent analyst my obligation is to the investing public and that obligation is to provide an informed opinion based on facts to my readers. Thank you for taking the time to comment and I look further comments and discussions in the future.
    Aug 24 03:55 AM | Likes Like |Link to Comment
  • Latin America's China Addiction (Part 1): China's Soft Landing Impacting Regional Growth [View article]
    Jorge thank you for the comment and additional information, it is appreciated. Peru and Colombia will more than likely whether the current headwinds better than the majority of the other economies in Latin America, though each comes with its own specific risks. I would be quite interested on your opinion and views regarding the recent mining protests in Peru and the resurgence of the Shining Path.
    Aug 24 12:59 AM | Likes Like |Link to Comment
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