Santander Brasil
Santander Cards BusinessSantander Cards Business
May 12, 2010
2
This presentation was prepared by Banco Santander (Brasil) S.A. It is provided forp p p y ( ) pinformational purposes only and does not constitute an offer to sell or a solicitationto buy any security. It may contain forecasts about future events. Thesepredictions/estimates evidently involve risks and uncertainties, whether foreseen ornot by the Company. Therefore, the future results of the Company may differ fromy p y p y ycurrent expectations. Past performance and/or these predictions are not guaranteeof future performance. The Company is not obliged to update the presentation/suchforecasts in light of new events or circumstances.© 2010 by Banco Santander (Brasil) S.A.. All Rights Reserved.y ( ) g
3
Agenda
Overview of Brazilian Cards Industry
Santander Cards IssuerSantander Cards Issuer
Santander Cards Acquirer
4Overview of Brazilian Cards IndustryCards industry continues to show substantial growth rates, even considering the competitive scenario consolidation and recent regulation changes
600
Total industry debit + credit cards and spend
400
500
200
30018.8% a.a.
23.7% a.a.
0
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
# cards (MM) Total Spend (R$ bn)
Source: ABECS. Prepared by Ferrés Consultoria.
5Overview of Brazilian Cards IndustryCards transactions have been strongly replacing checks transactions last 10 years
In billions transactions (cards include debit + credit)
7
4
5
6
21% a.a.
2
3
4
‐8.1% a.a.
0
1
2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Cards Checks
Source: ABECS and BCB. Prepared by Ferrés Consultoria.
6Overview of Brazilian Cards IndustryLower income population’s tool as formal payment means and bank services inclusion
Total AB C DEEconomic classes
For classes D/E the ratio of card holder is higher than check account holders
Card holders (% of pop.)Cards 67% 81% 64% 36%Credit Cards 45% 61% 38% 20%Credit Cards 45% 61% 38% 20%Debit Cards 53% 70% 49% 19%
Check accounts holders (% of pop ) 67% 82% 64% 33%Check accounts holders (% of pop.) 67% 82% 64% 33%
Source: Researches Abecs. Survey on 11 metropolitan areas.
7Overview of Brazilian Cards IndustryThe relative lower participation as a mean of payment shows a relevant up side opportunity for Brazilian Cards Industry
(1)Higher utilization of cards in private consumption (1)
12.4% 14.0% 15.8% 17.1% 19.1% 21.4%
2003 2004 2005 2006 2007 2008
...but below developed countries (2)
2X
(1) Source : ABECS and IBGE
(2) Source: ABECS, Bank of International Settlements, United Nations, IBGE
8
Card penetration, average ticket and transactions per card are still low in BrazilOverview of Brazilian Cards Industry
628
Number of cards (MM)
~ 15 MM credit cards / year
104 124 136 153201 217 233 249147 173 196 225
453514 565
628
2007 2008 2009 2010 (e)
Spend (R$ Bn) Average Ticket (R$ per transaction)
Credit Debit Private Label Total
93 98 100 104
68 71 73 75215 256
309302375
444535
CAGR: 21.1% CAGR: 3.7%
48 51 53 5553 52 52 51
2007 2008 2009 2010 (e)
174 215
83 107 129 15845 53 60 68
2007 2008 2009 2010 (e)Credit Debit Private Label Total Credit Debit Private Label Total
Source: ABECS (Associação Brasileira das Empresas de Cartões de Crédito e Serviços)
99
Agenda
Overview of Brazilian Cards Industry
S t d C d ISantander Cards Issuer
Santander Cards Acquirerq
10Santander Cards Issuer – Role in the Value ChainSets rules for issuers and
Issues credit and
acquirers
Card Brands
Captures and processes transactions
Issues credit and debit cards
Issuers Acquirers
Use credit and debit cards
Merchants
cards
Clients
11Santander Cards Issuer – our approachTo be the world’s best integrated cards monoliner within a retail bank…
Retail BankMonoliner Retail Bank
Access to customers’ base
Product focus
Specialized
Monoliner
pcapabilities
Direct channels: Telemarketing / Mailings Brand
Traditional channels: branches / agents
Mailings
Global specialized systems
Economies of scale
Brand
… contributing to improving our local banks’ performance
12Santander Cards Issuer – our model Is based on managing all levers along the product lifecycle …
PORTFOLIO MANAGEMENTACQUISITION
Acquisition Activation RetentionSpending OutstandingsProduct innovation and…
Activation RetentionSpending
r rel
atio
nshi
p Outstandings
PlatinumUnlimited
h of
cus
tom
er
VALUE
Cancellation
Light
FreeReward
Mini Card
Time
Dep
th VALUELight
Flex
Mini Card
Launch strategies
Multichannel management
Specialized risk managementTime
Profitability
… supported by an end-to-end view of RISKS and TECHNOLOGY
13Santander Cards Issuer – our model The Business expansion will be held in two dimensions: Customer Base and Profitability per Account
Increase the profitability by using Card Accountsprofitability by using
the card’s platforms as a distribution channel
for other banking products and services 1Q10
e
Card Accounts
per A
ccou
nt
S i
Personal Loan
Insurance
1Q09
7%
Net
inco
me
Δ P
rofit
abilit
y
Payment Services
Savings Insurance
1Q09 1Q10
10%
Continuous product innovation as a growth
lever
(1) Source: Internal data
lever
14Santander Cards – market positionIn Brazil, where our model is already well established, our market share has improved significantly
Other Banks BANK “A”
Market Share end of 1Q10 increases to
Rev
BANK A
BANK “D”
increases to 9.9%25.30
15 107.10
23.40
3.6 9.4
volving Ba
BANK “C”
BANK “B”
15.10
19.70
9.4
3.52.3
3.6 9.4 alance %
2005 Organic Growth
Santander
Banco Real
Acquisition
Current Dec/2009
%
Note 1: Competitor data as of December, 09, source Competitor Quarter Reports, BCB and internal analysis. Santander´s current Market Share as of December, 09
Note 2: Include non interest bearing due to unpaid balances
15Santander Cards Issuer – continuous growthThe Credit market continues to show substantial growth rates, even considering the competitive scenario consolidation and recent regulation changes
C d (MM) Market SantanderCAGR (06 09)Cards (MM)
Key Observations
~80% of the Cards Market is
Market
136124104
826853
+21%+18%
(04~09)
SantanderCAGR (06~09)
Total Spend (R$ Bi)
~80% of the Cards Market is concentrated at the top 4 Banks (Banco do Brasil, Itaú, Bradesco and Santander)
10875
20090807060504
256
+22%
There is an important opportunity for cards revolving growth
R l t l ti h
256215
17414211595
33261914
+22%+22%
33%
(04~09)
Revolving Balance (R$ Bi)
Relevant regulation changes are being implemented, representing significant opportunities for issuers and
261914
0504 2009080706
25.722 1
+33%
new acquiring business players
22.117.2
13.411.38.22.42.11.71.2
+27% +24%
+26%
(04~09)
Note 1: Source Banco Central do Brasil, including +360 days balance
Note 2: Source ABECs – Brazilian Cards Association
20090807060504
16Santander Cards Issuer – 1Q10 performanceThe business growth is leveraged by Cards Accounts expansion…
Cards Accounts (MM) Key NotesCards (MM)
Cards Accounts has presented sustainable growth,
+13%
+16%
10 0427 890
+20%
+14%
year over year
Cards Accounts growth rate has continuously
9.7458.67410.0427.8907.5426.916
continuously increased quarter over last quarter, reflecting our strategy
1Q104Q091Q091Q104Q091Q09
strategy
YoY growth
Quarter annualized growth
17Santander Cards Issuer – 1Q10 performance… generating relevant revenue increase
Net Fee (R$ MM)
213+25% 213
171
+25%
1Q101Q09
Source: Santander Income Statement 1Q10
181818
Agenda
Overview of Brazilian Cards Industry
Santander Cards Issuer
Santander Cards AcquirerSantander Cards Acquirer
19Santander as Issuer and AcquirerSets rules for issuers and
Issues credit and
acquirers
Captures and processesCard Brand
Issues credit and debit cards
Captures and processes transactions
Issuers Acquirers
Uses credit and debit cards
Merchant
debit cards
Clients
20Santander’s Experience in Other Countries
Sovereign
Puerto RicoUK
Mexico
Colombia
Totta
S i
SantanderArgentina
SpainPortugal
Santander + Acquiring Partners
21New Model: Santander (Acquiring + Financial Services)
rs
Innovative value offerProducts and Services + Acquiring +
Acq
uire
r
Other POS Capturing Services
ACQUIRERSERVICES
FINANCIALSERVICESSERVICES SERVICES
Banks
FINANCIAL SERVICES + ACQUIRING - packaged in a suitable value offer to corporate clients
22Partnership Santander & GetNet
Creation of a Partnership leveraged by GetNet’s p g ytechnological expertise and POS network
Brand
MASTERCARDLicense
Investment in Capturing Network and
License
Integrated value offer – Acquiring and Banking
Business
gProcessing Platform
Other POS Capturing Ser ices
Partnership
Business
Commercial Model –Distribution/Pricing
Communication and
Services
165 POS (Capturing Terminals - 2009)Communication and
Media
Terminals 2009)“Time To Market”
23GetNet Tecnologia
Entrance in the Acquirer industry through a technologicalpartner - GetNet Tecnologia
Technological Platform for capturing, authorizing and the processing of
GETNET TECNOLOGIACampo Bom – RS
CORREA DA SILVA GROUP
transactions
165 thousand POS
Services at Capturing Terminals:
Domestic Capital
N&SP – Network and Service Provider
Customized solutions for capturing, authorization and processing of transactions and information Services at Capturing Terminals:
- Mobile Recharge- “Vale Transporte” (transportation ticket)Recharge - “PAT Alimentação e Refeição” (meal ticket)
transactions and information
Main Clients: Goodcard, Banco BNG, Serasa, Microsoft, Base Card, Wal-Mart, Brasil Telecom, Claro, Tim, Vivo, Telefonica, Oi, Embratel, CTBC, Amazonia Celular, Banco Matone, etc.
PAT Alimentação e Refeição (meal ticket)- “Cartão Convênio” / Private Label / CobrandOver 800 employees
Annual turnover of R$ 2,29 Bn (2009)
24Santander Conta Integrada: Innovative value proposeSantander (Acquiring + Financial Services) & Getnet = Capillarity Synergy and corporate client base + technological knowledge
SECUNDARY BENEFITS:A “Win-win” Relationship: the bank recognizes the
financial volume of the client in transactions made with
Synergy and corporate client base + technological knowledge
Competitive rates for prepayment of receivables
Prepayment of receivables through
financial volume of the client in transactions made with MASTERCARD brand credit card:
Reduction of up to 100% of checking account fee for financial transaction volume over R$ 3 Prepayment of receivables through
POS (pioneer in the market)
Call center support to merchants24hours / 7 days
thousand/month in each POS
5 days without interest rate charge by using overdraft
24hours / 7 days
Mobile Recharge
Guarateed Account or Working Capital limits based on financial transaction volume multiples
negotiated in the POS
SERASA / RECHEQUE* consultancy
Regional cards capture
Corporate current account with integrated bank domicile
POS connection using both dial-up and/or broadband.
* Credit Bureau
25Santander Conta Integrada: products offering engine for companies
Besides seizing the value of a high profitability business, it also provides:
Higher transaction financial volume from corporate clients.p
Loan portfolio growth mitigating the risks.
Increase of corporate client base and improvement of the competitive market position.
Improvement on the relationship with corporate customers and, consequently, increase
of number of products and services per clientof number of products and services per client.
Be the first bank of our corporate client.
GOALS FOR 2012150,000 new current accounts originated via the acquiring business
300,000 new affiliated merchants
A share of 10% in the financial transaction volume of the card market
26Conclusion
S t d i th i i l hi thi i i d l iSantander is the pioneer in launching this acquiring model in Brazil
fThe partnership provides the bank access to a network of more than 160,000 merchants and to GetNet’s know how
The credit card industry is expected to grow around ~20% p.y. and double its size in 4 years
This strategy focuses on strengthening the relationship with SME clients – main competitors are banks
Santander Conta Integrada – “Win-Win” relationship between the bank and small and middle market companies (SMEs)
Investor RelationsJuscelino Kubitschek Avenue 2,235 10th floor
São Paulo | SP | Brazil | 04543-011T l ( 11) 3 3 3300Tel. (55 11) 3553-3300
e-mail: [email protected]