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Davivienda's quarterly profit rises 4%, but asset quality deteriorates

Banco Davivienda SA's fourth-quarter 2018 profit ticked 4.0% higher from a year earlier as loan income grew and provision expenses remained almost unchanged.

The Bogotá-based bank registered a net profit of 374 billion Colombian pesos for the last three months of 2018, up from 360 billion pesos in the prior-year period.

The company's interest income improved 4.7% year over year to about 2.435 trillion pesos from 2.325 trillion pesos, with loan income rising 5.3% to 2.270 trillion pesos from 2.156 trillion pesos.

The higher loan income pushed Davivienda's annualized net interest margin to 6.39% in the fourth quarter, up from 6.24% in the linked quarter and 6.33% in the year-ago period.

Financial expenses, meanwhile, declined 0.9% to 911 billion pesos, which helped boost the bank's gross financial margin income by 8.4% to 1.524 trillion pesos. The lender also posted a gain of 56 billion pesos from exchange and derivatives, up from 8 billion pesos a year earlier, due partly to the 8.9% devaluation of the Colombian peso against the U.S. dollar.

Davivienda booked 513 billion pesos in provision expenses during the fourth quarter, nearly unchanged from 512 billion pesos in the year-ago period. The bank attributed the slight increase to certain "loan collection strategies." It also said it started using the expected-losses model to make provisions in 2018, changing from the previous incurred-losses model.

The bank posted operating expenses of 919 billion pesos in the fourth quarter, up 5.7% from 870 billion pesos a year ago.

The company's consolidated gross loan portfolio held 87.822 trillion pesos at the close of 2018, expanding 12.3% from 78.220 trillion pesos at the end of the previous year. The growth was driven mainly by the bank's commercial and mortgage portfolios, which increased 12.7% and 16.4%, respectively.

The bank's consolidated 90-day nonperforming loan ratio was 3.93%, compared to 3.96% in the linked quarter and 2.76% a year earlier. Davivienda said the annual deterioration was primarily due to higher delinquencies in commercial and mortgage loans. The past-due loan ratio in the bank's commercial portfolio rose 207 basis points through the course of 2018 "because of certain situations with specific customers in the transport, energy, and infrastructure sectors, as well as customer deteriorations in diverse sectors of the Colombian economy."

Davivienda's annualized return on average equity fell to 13.4% from 13.5% in the fourth quarter of 2017, while its annualized return on average assets declined to 1.39% from 1.44%.

The fourth-quarter results brought the bank's full-year 2018 profit to 1.399 trillion pesos, up 9.0% from 1.283 trillion pesos in 2017.

As of March 13, US$1 was equivalent to 3,152.10 Colombian pesos.