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Brazil's Caixa touts operational efficiency as Q1 profit more than doubles

Caixa Econômica Federal on May 24 posted a 114.5% jump in first-quarter net income as the state-run bank saw a continued improvement in operating income and increased revenues from financial intermediation and services.

The company's net profit grew to 3.2 billion Brazilian reais in the first three months of the year, up from 1.49 billion reais earned in the year-ago period.

Operating income rose 132.5% year over year to 4.4 billion reais which Caixa attributed to efforts in improving customer relationships and a stricter control of administrative expenses. Gross profit from financial intermediation jumped 21.9%.

Net interest income increased to 12.40 billion reais from 12.28 billion reais a year ago, while income from services and banking fees rose to 6.40 billion reais from 6.02 billion reais.

The bank's allowance for loan losses totaled 3.74 billion reais in the first quarter, down 27.7% from 5.17 billion reais a year earlier. Caixa's delinquency ratio was at 2.90% at March 31, a slight increase of 0.07 percentage point over the same period in 2017.

Other administrative expenses fell by 5.9% to 2.66 billion reais, while personnel expenses totaled 5.15 billion, down 12.5% year over year.

Return on average equity was 14.8% up from 7.6% a year earlier while return on average assets was 0.8%, from 0.4% previously.

At the end of March, Caixa's loan portfolio amounted to 700.2 billion reais, a 2.1% decline over 12 months as a result of the state-run bank's portfolio adjustment strategy in line with the adoption of Basel III rules.

That strategy "aims to optimize the company's capital allocation and strengthen other management pillars, such as expanding lower-risk portfolios, improving operational efficiency, expanding customer relationships, monetizing the current credit portfolio, and increasing service focus to increase nonfinancial revenues," Caixa said.

As a result, Caixa saw growth in housing and infrastructure loans and a reduction in its exposure to commercial portfolios, which in turn reduced loan loss provisions.

As of May 23, US$1 was equivalent to 3.64 Brazilian reais.