How Does the Selic Rate Affect the Profits of BBDC4 and SANB11?
According to calculations by UBS BB, Bradesco (BBDC4) stands to gain an extra R$ 2.2 billion in profits if the Selic, Brazil's benchmark interest rate, remains at elevated levels. Meanwhile, Santander Brasil (SANB11) is heading in the opposite direction, potentially seeing a R$ 2.6 billion contraction in its bottom line under the same restrictive interest rate scenario.
This finding debunks one of the most common myths among retail investors: that every major Brazilian bank automatically generates more profit when interest rates rise. Although conventional financial market wisdom often associates high benchmark rates with automatic gains across the entire banking sector, the internal balance sheet structure of each institution determines who actually captures value and who faces an operational squeeze.
In a study conducted by the UBS BB research team, the sensitivity of each financial institution's assets and liabilities was put to the test. The survey showed that rate-passthrough dynamics, loan portfolio composition, and funding costs create massive asymmetries among competitors listed on the B3.
Why Does Bradesco Profit While Santander Loses on High Interest Rates?
The technical explanation for this divergence in results lies in the sensitivity of each bank's net interest margin—specifically, the speed at which the interest charged to clients adjusts compared to the rising cost of the money the bank borrows in the market.
Bradesco positions itself as a net beneficiary because its balance sheet features a strong presence of floating-rate and post-fixed assets, alongside a massive base of deposits at rates below the commercial CDI. When the benchmark interest rate rises or remains frozen at elevated levels for an extended period, the profitability of treasury investments and floating-rate credit operations expands quickly.
On the other hand, Santander Brasil's business model exposes it to greater vulnerability when money gets more expensive. The institution has a higher relative exposure to longer-term financing lines or contractually fixed rates with retail and consumer credit clients, while its funding structure relies on instruments that immediately become more expensive as the Selic rises.
The practical effect of this asymmetry is that Santander sees its funding costs rise immediately to pay depositors and investors in bank certificates of deposit (CDBs), while its loan revenue takes much longer to reprice. Bradesco, meanwhile, maintains low-cost deposits while reaping the direct rewards of higher interest rates on its cash investments and post-fixed loans.
UBS BB highlights that this asset-liability mismatch is the engine driving Bradesco toward an estimated R$ 2.2 billion gain, while subtracting R$ 2.6 billion from Santander's operational projections.
How Do High Interest Rates Impact Other Stocks on the Exchange?
The UBS BB study went beyond the duel between BBDC4 and SANB11 to analyze how prolonged monetary tightening redistributes cash flow among various companies listed on the Brazilian stock exchange.
For the capital markets as a whole, high interest rates act as a watershed between cash-rich companies and leveraged businesses:
- Companies with net cash: Businesses maintaining hefty financial reserves and low debt turn the CDI into a direct source of financial revenue, generating additional profits without needing to expand working capital.
- Indebted and growth companies: Conversely, companies in the discretionary consumption, retail, and construction sectors suffer a double hit. They face heavier interest burdens to roll over existing debt and a drop in demand as customers prioritize saving.
- The banking sector overall: Even within the financial sector, banks that rely less on fixed-rate lines and maintain conservative treasury operations navigate with wider margins than intermediaries focused on long-term personal credit.
A high Selic rate does not penalize all stocks equally. Investment theses on the stock exchange must clearly distinguish between companies that use high rates to inflate their financial revenue and those consuming operating profit just to cover loan expenses.
What Should BBDC4 and SANB11 Investors Watch Now?
For anyone holding shares of Bradesco or Santander in their portfolio, the UBS BB report serves as a priority map for analyzing upcoming quarterly reports and conference calls with market analysts.
For Bradesco, the key metric to monitor is the confirmation that this projected R$ 2.2 billion gain is actually converting into net income and shareholder distributions, without a parallel deterioration in retail loan default rates.
For Santander, attention shifts to the executive team's efforts to accelerate cost pass-throughs and reprice its financing portfolio. SANB11 investors need to check whether the R$ 2.6 billion contraction calculated by the Swiss bank will continue to pressure return on equity or if the institution can adjust its funding sources to defend its dividend in upcoming cycles.
Rico aos Poucos Verdict
The UBS BB analysis shows that investing in bank stocks requires looking at balance sheet structures beyond conventional wisdom. Bradesco and Santander sit on opposite sides of interest rate sensitivity: while high rates boost BBDC4's revenues, they squeeze SANB11's spreads and final results. Compare net interest margin compositions before deciding where to allocate your capital.
