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Despite higher provisions, Daycoval's Q1 profit sees 35.2% increase

Banco Daycoval SA's net income for the first quarter rose 35.2% as a rise in the bank's gross profit from financial intermediation offset higher loan-loss provisions and personnel expenses.

The Brazilian lender booked net income of 165.4 million reais during the quarter, compared to the 122.3 million reais earned a year ago.

During the three-month period, the bank posted a mark-to-market impact of 1.9 million reais on its external hedge funding and a positive impact of about 600,000 reais from exchange variation. Adjusted for these items, recurring net income for the quarter was at 164.1 million reais, 42.0% higher than the 115.6 million reais in the year-ago period.

The bank's net interest margin hit 12.4% during the quarter, slightly lower than the 12.8% in the linked quarter but higher than the 11.0% in the year-ago period.

Daycoval's gross profit from financial intermediation was at 416.9 million reais, up 69.1% from the 246.5 million reais in the prior-year period. Income from financial intermediation inched 4.9% higher to 910.9 million reais from 868.4 million reais in the first quarter of 2017. Expenses from financial intermediation saw a 20.6% drop to 494.0 million reais.

However, the bank's loan-loss provisions registered a 20.3% increase, as they soared to around 162.0 million reais in the three-month period from about 134.7 million reais in the same period last year.

The lender held about 15.00 billion reais in its loan portfolio for the quarter, up 16.6% from about 13.00 billion reais in the year-ago period. The expansion was driven by an increase of 26.6% in loans to companies and 5.2% in auto loans.

Loans 90 days past due represented 1.8% of the bank's loans in the first quarter, higher than the 1.1% in the linked quarter and 1.2% in the prior-year period.

Return on average equity hit 21.8% in the quarter compared to 18.3% in the year-ago period. Return on average assets was at 2.8% in the period, higher than the 2.2% recorded during the previous year.

As of May 9, US$1 was equivalent to 3.60 Brazilian reais.