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Banco Daycoval posts higher Q2 profit, says economic recovery 'impending'

Brazil's Banco Daycoval SA on Aug. 9 posted an 81.4% jump in second-quarter profit as the company's derivatives and foreign exchange operations helped to more than double its total income from financial intermediation.

The bank showed net income of 125.6 million Brazilian reais for the three months to June 30, up from 69.2 million reais in the year-ago period. The company noted that during the quarter, it saw a 13.5 million reais positive mark-to-market impact of its foreign funding hedge, as well as a positive variation in the branch foreign exchange result. On an adjusted basis, Daycoval said its quarterly profit rose 22.9% year over year to 107.9 million reais.

"Despite the slowdown from the first to the second quarter, there are signs that the economic recovery is impending and should strengthen over the remainder of the year," the bank said in reporting its results.

"Unlike in recent years, despite the short-term fiscal and political situation, 2017 and 2018 will be characterized by lower inflation and interest rates, offering conditions that are more favorable to economic growth and possible portfolio growth," it added. "We continue to work to take advantage of the opportunities without changing the cautious stance we have taken in the past few years."

Second-quarter income from financial intermediation soared 108.3% year over year to 1.16 billion reais. The improvement came partially on some 159.4 million reais in derivative income and 45.9 million reais in income from foreign exchange operations; Daycoval posted respective losses of 379.3 million reais and 15.1 million reais from those business lines in the year-ago quarter.

On an adjusted basis, Daycoval said its financial intermediation income was up 17.2% year over year.

Income from its lending operations slipped 3.7% year over year to 686.7 million reais, while those from its leasing and securities operations rose by 14.5% and 10.6% to 75.5 million reais and 188.4 million reais, respectively. The net interest margin for the quarter came to 11.6%, up from 11.0% in the linked quarter and unchanged from the year-ago period.

The company's provision for loan losses totaled 180.1 million reais, up 33.7% from the prior quarter and 2.8% from the year-ago period. Overdue loans more than 90 days past due ticked to 156.9 million reais, or 1.2% of total loans, as of June 30, which compares to 146.9 million reais, or 1.1%, in the prior quarter and 230.4 million reais, or 1.8%, a year ago.

Banco Daycoval's BIS Index III ratio stood at 16.5% as of June 30, compared to 17.1% three months earlier and 17.7% a year ago.

As of Aug. 8, US$1 was equivalent to 3.13 Brazilian reais.