Earnings call transcript: Banrisul's Q3 2025 shows strong earnings beat

Banco do Estado do Rio Grande do Sul SA Pref B, commonly known as Banrisul, reported robust financial results for the third quarter of 2025, significantly surpassing market expectations. The bank's earnings per share (EPS) stood at $0.724, exceeding the forecasted $0.5863 by 23.49%. Revenue reached 2.37 billion, also beating analysts' projections of 2.34 billion. Despite the positive earnings surprise, Banrisul's stock, trading under the symbol BRSR6, saw a slight decline of 0.84% in the market, closing at $14.22.

Key Takeaways

• Banrisul's EPS exceeded forecasts by 23.49%, showcasing strong financial performance.
• Revenue surpassed expectations, reaching 2.37 billion.
• The stock price fell by 0.84% despite the positive earnings report.
• Net profit increased by 50% compared to the same period last year.
• The bank's loan portfolio grew by 11.1% over the past year.

Company Performance

Banrisul demonstrated substantial growth in Q3 2025, with net profit reaching BRL $948 million, marking a 50% increase from the previous year. The bank's net income surged by 66.7%, while return on average equity (ROAE) climbed to 12.2%. This performance was driven by an 11% year-over-year rise in net interest income and an 11.1% expansion in its loan portfolio.

Financial Highlights

• Revenue: 2.37 billion, surpassing the forecast of 2.34 billion.
• Earnings per share: $0.724, beating the expected $0.5863.
• Net profit: BRL $948 million, up 50% from the previous year.
• Return on average equity (ROAE): 12.2%.

Earnings vs. Forecast

Banrisul outperformed market expectations with an EPS of $0.724, a 23.49% surprise over the forecast of $0.5863. Revenue also exceeded projections, reaching 2.37 billion compared to the anticipated 2.34 billion, reflecting a 1.28% surprise.

Market Reaction

Despite the strong earnings report, Banrisul's stock experienced a slight decline of 0.84%, closing at $14.22. This movement contrasts with the positive financial results and may reflect broader market trends or investor caution.

Outlook & Guidance

Looking ahead, Banrisul plans to expand its payroll portfolio in 2026 and focus on receivables and collateralized loans. The bank anticipates a potential drop in the SELIC interest rate below 15%, which could influence its financial strategies.

Executive Commentary

CEO Fernando Lemus emphasized diversification, stating, "We are not dependent on only one product or service. We want to multiply that." Director Gonzaga highlighted customer focus and cost management, noting, "If you don't take good care of our customers, they will look for other banks."

Risks and Challenges

• High interest rates remain a challenge despite controlled inflation.
• Economic stagnation in the broader macroeconomic environment.
• Potential market changes with the upcoming election year.
• Continued focus on cost-cutting amid rising personnel expenses.

Q&A

During the earnings call, analysts inquired about Banrisul's credit appetite and payroll portfolio strategy. The bank expressed a cautious approach to credit, focusing on receivables and exploring opportunities in the INSS and private payroll markets.

Full transcript - Banco do Estado do Rio Grande do Sul SA Pref B (BRSR6) Q3 2025:

Nathan, Moderator/Host, Banrisul: Good afternoon, everyone. Ladies and gentlemen, welcome to Baesul's video conference to discuss the results for the 2025. This video conference is being recorded, and the replay will be available directly at the IR website after our event. Please note that this presentation has simultaneous translation into English. If you wish to listen to the interpretation, please click on the interpretation button.

This event will be divided into three parts. We'll start with the first section of Mr. Fernando Lemus, our CEO, will address the initial context of our bank and results. And then Director Gonzaga will detail our performance for the '25 and the 2025. As usual, we will close this event with our traditional Q and A session.

This presentation will be available in the Zoom chat. It's already in our RI website available for download. So Mr. President, our CEO, please, the floor is yours. Thank you, Nathan.

Good afternoon, everyone, our directors, all the participants in the in this chat. It's an honor to be here with you today to talk about Brazil's results of this quarter and the first nine months of this year. Certainly, we have reached two years. I have reached three year as a CEO at this bank. So we have worked for the past two years and we are very satisfied with the results achieved in this past nine month period, which shows the potency of of of power of Mahisu, almost 1,000,000,000.

And it shows the strong work and the positive effect of this work, the teamwork by the treasury, the loans, portfolio, administrative control, recovery, all the range of new products developed by the bank, all the services, 215,000 new accounts opened by at our digital app, almost, 300,000 by the November, which showed the strength of this digital front to renewal our bases of customers. We are being digitalizing everything we can. I'm sorry. And it also shows how strength, how strong the economy of Rio Grande do Sul is. Two years ago, as you may know, there was a flood in Rio Grande do Sul, but the state has recovered very fast, very strongly, and it shows the intemp entrepreneurship spirit of, the state.

And our bank keeps up with that. We still have faced, we still face some setbacks, of course, but we are effectively very pleased with everything we have done for to gain productivity and profitability of our bank in improvement of our performance among customers. We have over 80 robots, working in in the bank using AI with very high standards of productivity. So for those repetitive jobs or repetitive activities, we have replaced them with with digital services. And it also shows an expansion of our main networks of, services, the Vero network.

We have brought it definitely into, the bank business mix. It's not only it's not isolated anymore. Today, it's a formally integrated product to our bank, which allows us to advance the bank in the opening and acquiring new clients in the world, especially in the level of retail. In do Sul, today, the presence of Vero is, in the main stores, in the main points of sales in Rio Rio Grande Do Sul. And, also, we see the bank working very strongly on this side.

We have the expectation to continue to do that. In exchange, in foreign exchange, we have evolved. Rio Grande do Sul exports a lot. And we as we have said to our people, to our team, we have we have been saying that we are a complex bank, several lines of products, and we have everything in the digital, services. We are aligned with any other fintechs.

We are not below the competitors. So it has become a leverage for our customers, our individual accounts and also to work with payrolls systematically, getting to work with new companies, other companies' payrolls. So all of this work is the result of a focused strategy on the mix of our portfolio. We are not dependent on only one product on one service. We want to multiply that, and we have advanced in corporate loan.

We have now aligned with specialized we have been specializing in our managers to work with corporate, clients, and this has helped us leverage our results. It's a pleasure to welcome you here two years after I started working as the CEO. So these numbers show that we are on the positive side. Our ROAE has has reached two digits, and we hope to keep up doing that facing default, facing other setbacks that are normal. But we are very cautious regarding all of these fluctuations, and we are very rigorous in terms of the management of our portfolios.

The first thing operators do today is to look at the portfolios at the beginning of the day to check them and work profitably with them. So the floor is yours now, mister Gonzaga. Thank you all. Hello. Good afternoon.

So let's talk about our main highlights. In the nine month period, we've had a result of BRL $948,000,000, 50% above the same period of '24, with 66% in the third quarter in comparison to the 2024. 66.7% increase in net profit and net income. Our ROAE has stood out, especially in the year over year compared to '24 with 4.4 percentage points. And in the past 2025, million against the R328 million that we produced in the past quarter.

Till the September, we had a small decrease of 2.1 percentage points. And a net interest income in this third quarter of 1,600,000,000 with 11% increase in the past twelve months and in regarding last year 2024. And in the third quarter, the increase was $377,000,000 and now $328,000,000 So we have decrease of 2.1% in the net interest income. In our loan portfolio, we had 11.1% increase in the 12 past month. And in the past quarter, it was stagnated in line with the figures disclosed in the third quarter.

Cost of risk is in line with the past twelve months, 1.4%. It's under control in terms of cost of risk. And in the third quarter, it's the same. Of 1.4% in cost of risk in total. Our funding has always been a strong suit of the bank.

We have a very good performance, 14.6% in the twelve past month, billion in funding in all the services, in all the main products in funding. In our administrative expenses, they have been contained rigorously, especially those expenses which we can better control. Headcount has grown regarding the agreement. And according to the management work, we have contained these expenses, especially considering the collective wage agreement. So it's billion sorry.

In terms of profitability, we have 66.7% versus the 2025, moving on to 12.9%, getting to the Q3 twenty twenty five in the 2025 versus the '25. And in the year, in the nine months, as I told you before, we reached 50% of growth in the result, 48,000,000 versus $632,000,000 in the nine month period versus the nine month period of twenty five. Very good results, substantial result according to the work we have done in terms of containing expenses and increasing with the revenues from tariffs. This is the trajectory that formed this result. Our ROAE, 4.4 percentage points in the past year, we had in the Q3 twenty twenty four, 7.8% in the 2025, 14.3%.

And now in the third quarter, it's 12.2%. So it's a two digit ROAE. In the past quarter, there was this small decrease of 2.1 and which leads to an increase of 3.4 percentage points if you compare the nine month period of '24 to the nine month period of '25. In terms of net interest income, we've had 11%, third, '24 versus the '25 and two point one percent decrease regarding the '25 in comparison to the third quarter. In the nine month period of 2024 versus the nine month period of 2025, there was an increase of the net interest income of 10%, notably the best balance and pace in terms of revenue growth.

In terms of loan portfolio, 4.1% versus 57.7% in September 24. So it's a very stable figure in the loan portfolio. There was a slight decrease in annualized portfolios. And we've had commercial loans in corporate portfolio increase, 9.2% increase in physical or individuals. And corporate accounts has grown more, and we have worked on this area in this in the margin established by the market of Hagrondo Sou.

So we have penetrated more in this market, notably small and medium sized companies. For individuals, we have collateralized individuals portfolio of 70.1% as of September 25. And according to our idea, we have foreign exchange initiative with an increase of 45.8%. As of September '8. Our state exports in a great deal and we have worked very strongly to make this foreign exchange initiative grow.

And we have worked to decrease our default ratio to make it get to zero. Our in terms of our asset quality, point six, 2.8, depending on the individual versus corporate accounts. Per stage, we have 95 I mean, 92 in the past quarter, September 30, 92.9 in stay tier 15.9% Tier three. According to Tier two portfolio, 27% has to do with Tier three, but it's a healthy portfolio, no default. And we have actively worked to recover these assets, which is part of our strategy.

In terms of cost of credit and collective wage agreement is around it's in the order of 5.68%, 191,000,000 of collective wage agreement in this past period, which contributed to the final collective performance of the bank. And we have these quarters and nine month periods in comparison. In service fee, we had an increase of 1.3 in the past nine months, 5.8%, which is the collective age wage agreement in the total is 3.4% growth. But if you separate the expenses of with headcount, human resources and administrative expenses to 3.4, but administrative expenses outside of human resource was 1% against the IPCA of over 5%. So we have managed to contain costs, and we have worked to do that, pacifying the rents and removing all the costs that we can cut as our CEO says, we want to do that and we want to follow this strategy to cut costs and we have focused on that.

This is one of the axis that contributes to the bank performance. And we have personnel expenses, 5.7% and other administrative expenses in the order of 0.6%. And we all have, we have the lines of expenses that, account for 3.4% and BRL 3,400,000,000.0 in the nine month period of '24. And we have BRL 3,500,000,000.0 in the nine month '25. Some expenses are necessary like marketing and expenses with, sales of products to market our new products when we launch new products.

So marketing and media are part of the business. In terms of service fee, we grew 1.3% in the past nine month period. If we compare this nine month period of '24 and nine month twenty five. We grew 0.4 comparing Q3 twenty twenty four to Q2 twenty twenty five and one point three percent comparing the Q2 'twenty five to Q3 'twenty five. The Central Bank controls the expenses with some of our products, so we have to work with the products that provide us more freedom to do that.

Specifically, Vero, we have mobility of price, but the competition is high and strong. So we have to work with a feasible price for the market and also, have exchange services. We have some degree of freedom, but we have to control this to retain your clients. So end users have to find this appeal, have to find this useful in foreign exchange. In funding, in spite of the good growth in funding, we have maintained the cost of funding.

The CDB 8382% I mean, 3.3% versus Celiq with 85% of cost of credit. So our funding is very good in terms of costs. We have managed to maintain a good cost. We had a performance of 3%, but there was an operation of BRL 1,000,000,000 of financial letters that we have captured, which is within this balance of BRL 107.2 with a growth of 14.6% annualized result in the first nine months of 2024 versus the first nine months of twenty five, fourteen point six. We have worked for the LM of the bank.

This the rate risk is nearly zero. Our prefixed funding is constant to give funding to our prefixed assets. Savings has remained stable. It doesn't grow. I mean, this portfolio doesn't grow so much.

It has been stable. So if you don't make it grow, we will lose capacity to provide loans, but that's the market. And in terms of savings market, We've had a good performance in our administrative portfolios, billion against BRL18 billion in the 2024 I mean, in the 2024 versus this quarter. With the prefixed portfolio, we have CDB, our account. The residual accounts.

We also have specific lines with prefixed CDB paying market price and financial letters, financial bills, which are also prefixed. We have managed to make this offset, this balance without investing in derivatives for the capture or to manage liabilities in our assets. So we have worked in these accounts. Today, we will reach the end of the year, we'll have an offset between liabilities and assets in terms of indexation of interest rates. And we want to maintain the cost of risk at this level that we have managed to do.

In terms of capital, base of ratio of 17.9%, there was a change here due to financial letters emission of BRL1 billion. They are subordinated financial letters. This is what leads to these results. So we have this LFSN in the order of 1,000,000,000 with a ten year maturity date, maturity term according to the Brazilian market. We prefer to do this operation instead of an operation in dollars.

We wanted to work with the local market, good price. It's we have good price of funding, acceptable interest rate. So for a better income, more comfortable position. And LFSN has this indexation that is good for us. So in June 25, this ratio achieved 13.3% and in September 25, 13.6% as of now.

So these are the main macro figures of our bank. And now we will, after go to our q and a session. Thank you very much, our director Gonzaga, and our CEO for your presentation. So before opening the floor for q and a, just let me, give you some announcements. If you want to ask a question, please, choose the raise your hand button.

And if your question is answered, you can leave the queue by clicking and lower your hand. So let's start our q and a session. And the first question comes from Antonio Huetto from Bank of America. Hello, Antonio. Can you hear us?

Hello, everyone. Can you hear me? Yes. We can hear you. Thank you.

Please go ahead. I cannot listen. Sorry. Technical problem. I'm sorry?

I'm sorry, Antonio. There's something, with your microphone. We could not we cannot hear you properly. Is it better now? Yes.

It looks like it's much better. Thank you. Well, can you help me? We have I have two questions. First, in terms of risk appetite, cost of risk, we are approaching a year of election.

We have some incumbents discussing that we cannot think about credit portfolio acceleration. How do you see that the macro macroeconomic outlook or scenario? I would like to know about your coverage. You in terms of capital, you are doing well. And how do you face these perspectives?

And considering the agro business, maybe it will improve next year. And my second question has to do with, assets and liabilities. Mr. Gonzaga was talking about that today, it's much more about the indexing, the indexing figures of these liabilities and, assets, they are much closer, which is the potential the potential, benefit of interest rate drop. Thank you very much, Antonio.

In terms of credit appetite or credit increase. Microphone is off. Microphone is off. I believe it your microphone is off. I'm sorry.

Let's let's change the mic. Okay. Can you hear me? Yes. Thank you.

Good morning, Antonio. Good morning, everyone. Regarding credit appetite, credit growth, we will continue this strategy focused on operations with receivables, cash flow, small sized companies. And we have a portfolio of 2,400,000,000.0 in this portfolio, which is the single account, the. And in terms of digital, we have $270,000,000.

And we are we have been collateralizing the operations with credit cards flow, making business, evolving, Vero. And so we have accounts receivable and accounts payables within the bank. Regarding individual accounts, we will focus more, I mean, from next year on when these payroll and payroll portfolios become more stable and more informatized. We will start working more with payroll portfolio. We understand this market share is interesting for us.

Regarding the agro business, the banker strategy is to help make the cash flow of rural producers viable. We've been focusing on the financing of their costs, and we've been avoiding funding operations with a strategy to help and to support, give them the necessary conditions so rural producers can make their productions viable and feasible without removing the flow of working capital of their harvest, 2526 harvest production. That's the bank strategy. As the market has seen, we are aligned with the market. Our appetite is not so big in terms of, operations without collaterals.

And we've been watching the market. We've been watching the economic the the economic, macroeconomic environment is stagnated. Inflation is under control, but interest rate is is high. Companies have not demanded a high working capital, and they are rethinking when it comes to look for loans with banks. Thank you.

Second question has to do mismatch with interest rate. Well, in the past quarter, we've had reduced, performance in terms of credit. Regarding liabilities and assets operations under index, first, we have a balance. We have achieved a balance between liabilities and assets that is very good for years now. It's the best in years, what we have applied in assets and treasury.

What we hope for is that Selic interest rate will not go up or will not go higher than what we have. But we have a specification margin for operations that are prefixed operations with fixed rates, which are not based on CDI. But we always work with a certain margin, 15. We always place a quiff, smallest coefficient to pricify our assets to be on the safe side. So given the scenarios, given the outlooks for this the quarters of 2026, I hope the SELIC interest rate reaches 14% or is decreased slightly.

We don't know how the economic agents will behave. It it will have elections next year. We have different factors that will affect the macroeconomics outlook. But we hope that we this select interest rate will be below 15%. Everything that is below 15% will be better for us, will be a profit for us because we have worked with this 15% idea.

So we hope we can take advantage of this decrease in the interest rate that is expected and improve the spread we have today. And maybe to help us with some level of default that may always happen. So we have this margin. We have very good control over default, however. So we hope that this drop in the interest rate will turn into benefit for us.

If you allow me just for a follow-up regarding credit and loans, In terms of Selic, when we see your company, growing, c in double digits, CMI growing, and we have seen several cases and suffering several companies suffering with the interest rate. And I would like to know if you want to make your corporate portfolio grow. Well, we've been focused on small and medium sized companies. This was a market that the bank was not adhering to, was not penetrating so well. And we have designed a good strategy to look for these companies, making the best choices in the market with receivables, collaterals and bringing accounts payables within the bank with payroll services to make to grow in terms of individual accounts too.

And we do not have any concerns now regarding a possible RJ in this next period because we have been working with this small and medium sized companies. We do have some big companies here in Rio Grande do Sul and in Santa Catarina, but these are operations that bring within themselves a percentage of collaterals and guarantees because of or due to these working flows of these, big companies. In terms of interest rates with Contagunica single account and the monthly installments there are being amortized in these credit Thank you, Antonio. Now another question from Matteis Hafaeli from Itau BBA. Hello, Matteis.

Can you hear us? Hello? Can you hear me? Yes. We hear you properly.

Thank you. I would like to explore with you the dynamics for payroll services. The The portfolio is not so is not in your focus in this year. According to the dynamics showed by several banks, there was the problem with the INSS. But we have seen some banks retaking in the uptake of INSS and checking or solving their problems with biometrics.

What about your bank? What about the INSS? And if you want to make this payroll REPRESENTATIVE:] portfolio grow next year, if you reconsider private payroll and INSS? Thank you, Matias, for your question. So regarding payroll, our portfolio today has a significant proportion of the state public payroll, Contestualizing to explain this to you, this portfolio, we operate one hundred and twenty, one hundred and fifty months going up to 45% some months ago.

So the state prefix this in 38% in eighty four months. So we will readapt to it because we need to work with the amortization of the significant amount for clients come up with that. When this portfolio was created, we had the SELIC interest rate varying from 8% to 10%. So today in the precipitation, it's above this level. So you have an CLT payroll and private companies payroll, we have adapted our platform, and we are waiting for Dataprep strategy.

And next year, we hope to have a better development in this portfolio. Of course, we're not going to work in the long run. We know some banks are working with one hundred and hundred and twenty months, but we will work with a smaller period, a shorter period because this needs to be a certain turnover in the short run-in a more, adequate way so client can feel the liquidity of this, the and reinvest as they need more resources. Thank you very much. Thank you, Matteos.

Let me read one question from Joao Vitor, our analyst from Warren. So Doctor. Ivanor, he was talking about that. Can you comment on the performance of private payroll, portfolio and your appetite for this product in the coming quarters? I believe you have already answered that.

And the second question has to do with Banhisul's payroll or any change in the VA, VR card rules, you know, even more. We have decreased the payroll for eighty four months, but the state has implemented a change. The margin today removes I mean, the margin is 35% over, 6,000, for example. So 3035% on average of the debt was removed. This is very good because the portfolio that are coming are very will be very strong and healthy portfolios.

I mean, these portfolios will be related to what, employees are able to pay or spend. We, according to the state, we, have till the end of the year, December 31, to decide to buy. We are working with audit companies for the compliance services. We have to work with the members of the board and to deal with the operation. We have some more audits to run to pressify the portfolio and another audit service that will work in compliance with that price to check if the price is compliant with the market price.

And we'll be negotiating with the state of Rio Grande do Sul. Our idea is in the five or ten year period to let's wait to see how this operation goes. The federal is paying $1.00 3 on the liquid amount. So if if it's 10,000 in the payroll, thousand is are discounted and the federal government pays 103% over the net amount. This is a parameter of negotiation we can take into a negotiation with the state.

PMT is paid overtime and then we can check how things go. We will try to find the best price possible considering the market for the payroll portfolio. We have to take into consideration the major change that has happened in this payroll market, which is the freedom to portability. So employees now have a freedom to take their portfolios wherever they want. And they want they the resources, they can have access to their resources in twenty four hours if they want to get that payroll.

But all of these factors are taking into consideration. Capacity to charge for fees from employees also is also a factor. We didn't have that in 2016 when we bought this payroll service. There is a table of interest rate for overdraft that we didn't have in the past. We have a price for credit cards.

So there is a series of variables that this market is now very limited, very restricted in terms of profitability we can achieve. This is good for the end consumer. This is good for the consumer. More and more consumers will have a better idea on how much they can spend, and we will be better able to provide services to our clients. So everyone has to be very smart about personalized and customized service we provide to our customers.

So if you don't take good care of our customers or clients, they will look for other banks. Yes. We have several variables to consider in this negotiation. So it will depend. We'll give our price and see how much they can pay for this service.

Thank you very much, directors and CEO. This was the final question in this call. I'd like to thank you all for your participation. Thank you, everyone, for taking part in this video conference. See you next quarter.

Take care.

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