Santander Brasil Beats Santander Mexico as Loan Growth Diverges

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The Brazilian unit of Banco Santander SA rallied to a seven-month high while the Mexico subsidiary slumped to the lowest since January after first-quarter results showed opposite trends for loan growth in the two countries.

Banco Santander Brasil SA climbed 5.4 percent to 16 reais at the close of trading in Sao Paulo, its highest price since Sept. 26. Shares of Grupo Financiero Santander Mexico SAB de CV sank 4.8 percent to 31.86 pesos, the lowest since Jan. 30. Adjusted net income at the Brazilian unit rose 13 percent to 1.61 billion reais ($550 million) in the three months through March and profit at the Mexican bank fell 1.4 percent to 3.2 billion pesos ($210 million) in the same period.

While Santander Brasil benefited from increased corporate lending and a partnership with a smaller bank that boosted payroll loans, the pace of growth for Santander Mexico’s loans decelerated as it lent less to the government, according to Goldman Sachs Group Inc.

Earnings at the Brazilian bank were “slightly stronger than expected,” analysts at Goldman Sachs lead by Carlos Macedo wrote in a note to clients today. In Mexico, profit levels and revenue growth were “generally uninspiring,” the same analysts wrote in a separate report.

Santander Brasil boosted total lending by 5.1 percent in the first quarter from the end of last year, compared with an increase of 2 percent for the Mexican bank.

An increase in costs hurt Santander Mexico’s results, according to Enrique Mendoza, an analyst with Grupo Financiero Interacciones SAB.

“The market was discounting much better results and that didn’t happen,,” Mendoza, who has a hold recommendation on the shares, said in an interview from Mexico City. Brazil’s benchmark interest rate of 13.25 percent, compared with 3 percent in Mexico, gives Santander Brasil “an opportunity to have higher margins.”

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