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Higher provisions drag Banco Davivienda's Q1 profit

Banco Davivienda SA's net profit for the first quarter slid 13.4% annually as provisions and operating expenses weighed down on the bank's results.

The Bogotá-based bank reported a net profit of 393 billion Colombian pesos for the first quarter of 2019, a 13.4% annual decrease from 454 billion pesos previously.

Interest income for the first three months of 2019 hit 2.647 trillion pesos, up 8.7% from 2.435 trillion pesos in the linked quarter and up 10.1% year over year from about 2.405 trillion pesos. The bank's net interest margin was at 6.56%, up from 6.49% in the previous quarter and 6.51% in the prior-year period.

The bank's gross financial margin income was up 12.1% year over year to 1.698 trillion pesos.

Operating expenses also grew by 10.0% to 868 billion pesos from 789 billion pesos a year ago. In particular, other expenses were up 40.1% annually to 166 billion pesos, from 118 billion pesos.

Provision expenses, net of recoveries saw a 25.4% increase to 582 billion pesos from 464 billion pesos in the year-ago period. "Gross provision expenses in Colombia and Central America grew 27.1% and 20.4% respectively, in response to the different risk situations identified during the year, and to the unusually low provision expense effect during the [first quarter of 2018], related to IFRS 9 adoption," according to the bank.

Gross loans grew 13.2% year on year to 88.748 trillion pesos from 78.381 trillion pesos, as loans from the commercial, consumer and mortgage sectors expanded. Loans 90 days past due represented 3.87% of Davivienda's consolidated portfolio, slightly lower from 3.93% in the linked quarter but higher than the 3.25% figure a year earlier, "mainly as a result of [deterioration] in the commercial and mortgage portfolios."

Return on average equity was 12.2% in the most recent quarter, 140 basis points lower than the 13.6% figure a year earlier. Return on average assets went down 16 basis points to 1.27% during the period.

As of May 23, US$1 was equivalent to 3,374.60 Colombian pesos.