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BGA's recent earnings announcement, provides some good information on Colombian banking at present.....
Thursday August 6, 8:51 pm Eastern Time
Company Press Release
SOURCE: Banco Ganadero
Banco Ganadero Announces Results
BOGOTA, Colombia, Aug. 6 /PRNewswire/ -- The following information was
released today by Banco Ganadero (NYSE: BGA BGAPR):
Economic And Financial Environment
Colombian economy has continued to be dominated by the pressure on the
Colombian peso/US dollar exchange rate during the second quarter of the
year. The Central Bank has kept its out-and-out defense of the Colombian
peso by means of a highly restrictive monetary policy which has set
interest rates at historic levels. As a matter of fact, the top limit of
this situation was reached last June, coinciding with the end of the
political election process and the appointment of Andres Pastrana as new
President of the country.
Protraction of the liquidity crisis accompanied by high interest rates
has ultimately, as foreseen, affected in a most negative manner, the
economic activity and, hence, most surely the main economic policy
objectives of the Government for 1998 shall no longer be attainable.
Thus, the GDP shall experience a yearly growth of only 3,2%, while the
unemployment rate shall continue to grow beyond the current indicator of
14,5%. On the other hand, the inflation rate, although expecting a
downward trend over the second half of the year, shall increase up to
18%, which is significantly above the established objective of 16%.
The above notwithstanding, a significant reduction of the pressure on
the peso/dollar exchange rate can already be perceived, which allows for
a less restrictive monetary policy and a moderate trend towards greater
stability and interest rate drop. The new Government's economic plan
provides for a progressive yet substantial reduction of public deficit
which, doubtless, shall contribute to keeping such trend over the next
few months. Thus, the main problem for the economy throughout this year
would be solved and, at the same time, the new Government's success
possibilities in the economic front would increase.
In the case of the financial sector, the non-liquidity situation and the
high interest rates in the overnight market have had serious
consequences on the income statement for the first half of the year.
Moderate growth, deterioration of the financial mediation margin and
increase of past-due loans have determined a material drop of net income
compared to last year, and a very large number of financial entities
have recorded loss over this period.
All factors seem to indicate that, from now onwards, no liquidity stress
situations shall be repeated, but the negative financial episodes of the
first half of the year, coming after the great difficulties of the two
previous years, have seriously damaged some entities of the sector.
Banco Ganadero During The First Half Of The Year
The economic and financial scenario described above has been certainly
difficult for all financial institutions, including our Bank which,
nonetheless, has successfully overcome this first half of the year, thus
improving its competitive position within the Colombian banking sector.
Customers' funds increased by 23% compared to the same month last year.
The excellent evolution of savings deposits, thanks to the success of
our financial product ''El Libreton,'' have offset the drop of checking
account deposits which has occurred at sector level over this period as
a result of the liquidity crisis. In turn, our loan portfolio recorded a
30% increase at the same time that the past-due loans level continued to
decrease and the coverage degree for difficult loans showed improvement.
The growth of our business with large clients has proved to be balanced,
always ensuring the necessary contributions of liquidity required due to
the tightness and high interest rates featured by the overnight market
throughout the first half of the year. This policy has allowed to
moderate the deterioration of the financial mediation margin, which is
the main problem for the sector, and therefore our Bank has been able to
record in the accounts net income for 29,019 million pesos after
committing more than 39,000 million pesos to restructure its loan
portfolio. These results hence compare very favorably to the generalized
loss situation recorded by the sector over this period.
Within the framework of the so-called Two-1,000 Program (Programa Dos
1000), our Bank has continued with its network technology and expansion
plan, so it already counts on 247 branch offices and 267 automatic
teller machines. Such an important distribution network shall be
complemented over the next few months with the incorporation of the
''Banco Nacional del Comercio'' ''BNC,'' after the merger agreement
adopted by the Boards of Directors of both Banks. ''BNC'' is a Bank
whose presence in both the individual and commercial economy segments is
significant, counting on a 37- branch office network. By means of such
merger operation, BBV-Banco Ganadero increases its market share by 100
basic points.
Moreover, our Bank is now entering into the second half of the year with
an ambitious task and cost rationalizing project (''Practyco'') which
shall allow it to position itself as one of the most efficient Banks at
international level in front of the threshold of the year 2000.
BBV - BANCO GANADERO HIGHLIGHTS(1)
Billions of pesos JUNE % Change
1997 1998
BALANCE SHEET
Total assets 3,968.6 4,907.8 23.7
Total loans 2,488.6 3,223.2 29.5
Customers' deposits 2,006.6 2,471.5 23.2
Shareholders' equity 827.4 941.7 13.8
INCOME STATEMENT
Net interest margin 220.2 247.5 12.4
Operating income 128.8 126.5 (1.8)
Net income before
inflation accounting 80.2 78.6 (2.0)
Net income 35.4 29.0 (18.0)
CAPITALIZATION
Technical equity (current) 676.9 771.5 14.0
Technical equity (required) 290.2 408.6 40.8
Technical equity surplus 386.7 362.9 (6.2)
Solvency ratio
(9% legal minimum required) 21.0 17.0 ---
DATA PER SHARE (pesos)
Book value 228.4 260.0 13.8
Price on Bogota Stock Exchange* 392.0 457.0 16.6
ADDITIONAL INFORMATION
Number of employees 5,963 5,868 (1.6)
Number of offices 206 247 19.9
*Common shares as of June 30
(1) This report is based on Banco Ganadero's non-consolidated financial
statements, which are subject to revision by the Banking
Superintendency.
Balance Sheet
The Banks' total assets at 6/30/98 reached 4,907.8 billion pesos, 24%
higher than those recorded at the same date last year and 7% higher than
the corresponding balance at December, despite the limited growth the
banking sector underwent this first half of the year. It is worth
highlighting during this period the higher growth rate of the loan
portfolio and customers' funds, along with the increase of fixed assets
related to the expansion and technology investment process that our Bank
has been recently developing.
BALANCE SHEET
(millions of pesos)
Jun. 97 Dec. 97 Jun. 98 % change
Cash & due from banks
and Central Bank 354,466 449,328 397,245 12.1
Financial investments
and repos 624,462 443,098 505,243 (19.1)
Net loan portfolio 2,396,533 2,938,217 3,111,307 29.8
Fixed assets 272,583 299,883 378,155 38.7
Permanent
investments 122,323 191,627 211,735 73.1
Other assets 198,211 248,812 304,096 53.4
Total assets 3,968,578 4,570,965 4,907,781 23.7
Banks and repos 333,333 561,099 664,724 99.4
Rediscounts 415,322 386,577 371,395 (10.6)
Customers' deposits 2,006,588 2,302,577 2,471,511 23.2
Local bonds 97,500 97,500 70,400 (27.8)
Euro medium-term notes 131,506 152,471 153,482 16.7
Shareholders' equity 827,409 892,019 941,741 13.8
Other liabilities 156,920 178,722 234,528 49.5
Total liabilities
and shareholders'
equity 3,968,578 4,570,965 4,907,781 23.7
Complementary
information:
Assets f/c* 786,615 956,515 1,075,176 36.7
Liabilities f/c 769,092 943,285 1,053,603 37.0
*f/c: foreign currency
Customers' Funds
Just as in the sector as a whole, the evolution of our Bank's deposits
has followed a similar trend to that of the first quarter of the year
and it has been quite determined by the serious monetary crisis of this
period. The dramatic rise of interest rates has resulted in a continuous
and intense displacement of deposits towards higher interest-yielding
alternatives. Therefore, CDs have grown to a greater extent and checking
account balances, especially those held by the institutional sector,
have clearly diminished. But our Bank has managed to moderate structural
deterioration thanks to the excellent evolution of its savings deposits,
the balance of which is already 60% higher than the existing one at the
same date last year and 9% higher than the one recorded last December.
The consolidation of ''El Libreton'' as the leading product of the
financial market has proved to be the determining factor to such
evolution, reaching at 6/30/98 a balance for more than 278,000 million
pesos and counting on more than 700,000 customers.
CUSTOMER'S DEPOSITS
(millions of pesos)
Jun. 97 Dec. 97 Jun. 98 % change
Checking accounts 906,681 937,948 837,793 (7.6)
Saving deposits 523,090 772,395 837,710 60.1
Term deposit
certificates 384,876 409,253 631,173 64.0
Other deposits and
payables 191,941 182,981 164,835 (14.1)
Total customers'
deposits 2,006,588 2,302,577 2,471,511 23.2
Complementary
information:
deposits l/c* 1,740,412 2,019,627 2,132,488 22.5
deposits f/c* 266,176 282,951 339,023 27.4
Investment funds 212,927 205,338 182,821 (14.1)
Total customers funds
under management 2,219,515 2,507,915 2,654,332 19.6
*l/c: local currency
*f/c: foreign currency
LOAN PORTFOLIO
Credit growth within the system as a whole has been moderate and has
followed a trend towards stagnation as a consequence of the monetary
policy imposed by the Central Bank. Our Bank, however, thanks to the
favorable evolution of its customers' deposits and the liquidity rate
with which it opened this year, has been able to successfully satisfy
credit demand from its customers. At the same time, the Bank has
maintained its individual economies' segment penetration strategy, and
that is why consumption and mortgage-guaranteed loans have so strongly
grown. At 6/30/98, gross loan portfolio reached 3,223.2 billion pesos, a
figure that is 6% higher than that recorded at last period's closing and
which exceeds by 29% the one obtained at the same month last year.
LOAN PORTFOLIO
(millions of pesos)
YTY
Jun. 97 Dec. 97 Jun. 98 % change
Gross Loan portfolio 2,488,602 3,044,788 3,223,219 29.5
Commercial 1,966,687 2,427,029 2,509,818 27.5
Consumer 320,709 397,074 450,926 40.6
Mortgage 199,206 220,685 262,475 31.8
Loan-loss provisions 92,069 106,571 111,912 21.6
Net Loan portfolio 2,396,533 2,938,217 3,111,307 29.8
Complementary
information:
Loans f/c 651,919 763,285 820,854 25.9
Loans with admissible
collateral 1,668,221 1,850,332 1,917,249 14.9
Loans with other
collateral 820,381 1,194,456 1,305,971 59.2
Quality Of Loan Portfolio
The liquidity crisis has also negatively affected the evolution of the
sector's past-due loan portfolio during this first half of the year.
Although the rate of very short-term past-due loans has also increased
in our Bank, loans past-due over 3 and 4 months, that is, the portion of
the loan portfolio representing difficult loans, has continued
decreasing as it can be observed on the following chart. At 6/30/98, the
percentage that such loans represent over total loans is set at 5.5%,
which is much lower than that for last year and likewise lower than 6%,
corresponding to last period's closing, and which compares very
favorably to the respective indicator of the sector as a whole. The
improvement of the Bank's loan portfolio quality that can be
progressively observed is further accompanied by a significant increase
in its degree of coverage which, in the same manner, is much higher than
that of the sector as a whole. At 6/30/98, provisions for past-due loans
over 3 and 4 months (including interest) reached 148,219 million pesos,
mining a coverage degree of 83.1%, which is higher than the 77.2%
corresponding to last period's closing.
PAST-DUE LOANS AND COVERAGE
(millions of pesos)
Jun. 97 Dec. 97 Jun. 98
Past-due loans 197,196 192,132 217,188
Past-due over 3 & 4 months
(principal + interest) 173,576 185,293 178,365
Provisions
(principal + interest) (129,310) (143,066) (148,219)
Past-due loans ratio (%)
Total past-due loans 7.9 6.3 6.7
Past-due over 3 & 4
months (principal + interest) 6.9 6.0 5.5
Coverage ratios (%)
Total past-due loans 46.7 55.5 51.5
Past-due over 3&4 months
(principal + interest) 74.5 77.2 83.1
Including real collateral 131.4 133.6 140.3
Income Statement
The Bank's income figures compare very favorably to those of the sector
as a whole as well as those of the main entities of the sector over this
first half of the year. Net income reached 29,019 million pesos, and
78,640 million pesos without considering inflation adjustments, which
imply a direct contribution to equity charged to the period's income.
Financial income, including dividends obtained from affiliated companies
and others in which the Bank holds stake, reached 247,497 million pesos
with an increase of 12,4% compared to the same period last year. The
structure and stability of our customers' funds have been a determining
factor to restrain costs and increase interest income during such a
period characterized by the rise of interest rates. On the other hand,
income from banking services commissions have followed their sustained
growth trend, reflecting the material increase of our customers base and
product range, as well as the increasing distribution capacity of the
Bank's branch office network.
Operating costs recorded a 31% increase compared to last year, as a
result of the strong increase of the Bank's investments in technology
and expansion of its branch office and automatic teller machine network,
which have specially influenced the first half of the year. But, surely,
its growth rate shall moderate more and more over the rest of the year,
and it shall decisively contribute to the deployment of the new task and
cost rationalization project that our Bank started up last June.
Loan quality improvement has meant a reduction of net loan provisions
compared to last year, as it can be observed on the following chart. In
spite of the above, 39,282 million pesos have been committed as
provisions for loans and other balance sheet assets, a very high figure
which has allowed the Bank to continue increasing its degree of
difficult loan coverage, according to the Bank's apropos policy.
The monetary correction debit transaction, which constitutes a
contribution to equity, reached 54,139 million pesos and increased 11%
compared to last year, as a result of the rise of the inflation rate
over the first half of the year and our Bank's high and increasing
equity volume which, by such means, continues rapidly capitalizing.
Therefore, our Bank's income statement figures are very positive
compared to those of the sector as a whole, particularly when taking
into account the difficulties posed by the environment as well as the
influence that the Bank's material strategic investments have exerted on
its short-term exploitation costs.
ACCUMULATED INCOME STATEMENT
(million of pesos)
June
1997 1998 % Change
Interest income and other
assimilated income 403,912 475,803 17.8
Interest expenses 183,686 228,305 24.3
Net interest margin 220,226 247,497 12.4
Net commissions 24,646 31,317 27.1
Ordinary margin 244,872 278,814 13.9
Operating expenses 116,056 152,265 31.2
Labor costs 66,982 82,507 23.2
Sundry 41,118 57,125 38.9
Depreciation and amortization
charges 7,956 12,633 58.8
Net operating income 128,817 126,549 (1.8)
Foreign exchange income 5,717 6,194 8.3
Net provisions for loans and
other assets 48,219 39,282 (18.5)
Goodwill amortization 0 2,483 ---
Other income and costs (net) 8,437 (1,638) ---
Net income before monetary
correction 94,751 89,341 (5.7)
Monetary correction 48,774 54,139 11.0
Net income before tax 45,977 35,202 (23.4)
Income tax provision (10,593) 6,183 (41.6)
Net income 35,384 29,019 (18.0)
Complementary information:
Net income before inflation
adjustments 80,236 78,640 (2.0)
Stock Market
The Bogota Stock Exchange has been affected by the hard economic crisis
underwent by the country during the first half of the year and,
especially, by the historic rise of interest rates. All of the above had
determined the reduction of overall contracted volumes and the
generalized drop of quotations. Banco Ganadero's stock quotation ending
in June was 457 pesos per common share, which represents a 19% decrease
compared to last December. The evolution of our quotation, however,
ought to be positively compared to the financial sector's index, which
has diminished by 28%, and to the stock exchange's general index, which
fell 22%.
BANCO GANADERO'S SHARES*
(pesos)
June-97 Dec.-97 June-98 % change
Book value 228.4 246.2 260.0 13.8
Price on Bogota Stock
Exchange, Common Share 392.0 565.0 457.0 16.6
Price on Bogota Stock
Exchange, Preferred Share 290.0 330.0 228.0 (21.4)
Market capitalization
(billion pesos) 1,371.1 1,934.0 1,545.7 12.7
*Prices and book value correspond to the closing day of the respective
month.
SOURCE: Banco Ganadero
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