Analysts were incredulous at Santander's first quarter results this year. In fact, even with a profit within expectations, some balance sheet factors showed a significant deterioration and, consequently, not very encouraging signs for 2022. Taking this into account, other banks decided to cut the stock price target, as happened with Itaú BBA.
Thus, analysts Pedro Leduc, Mateus Raffaelli and William Barrajard say that these indicators suggest growing pressure on defaults in the second half of 2022, since “the bank is entering a period of more pronounced rise in NPLs (delinquency rate) and, consequently, an earlier-than-expected contraction of profits”, report.
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In addition, analysts forecast that “given the riskier product mix, Santander is likely to end the year with a consolidated NPL of 3.6%, above the pre-pandemic level of 3%”. Thus, the trio further emphasizes that weak earnings momentum and growing uncertainties will undoubtedly likely keep multiples compressed.
“Although Santander's management has shown great efficiency in controlling operating expenses and boosting the bank's ROE in recent years, years, we believe that the bank's current coverage level may not be able to withstand the worsening macro conditions in 2022", concluded the analysts.
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