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Banco Daycoval's Q4'17 profit falls 19.7% as provisions bite

Banco Daycoval SA's profit for the fourth quarter of 2017 declined 19.7% from a year earlier, a fall the bank attributed primarily to higher loan-loss provisions.

The São Paulo-based lender booked net income of about 130.0 million Brazilian reais for the three-month period, down from 161.8 million reais a year earlier.

In the quarter, the bank registered a positive mark-to-market impact of 15.6 million reais on its external hedge funding and a positive impact of 4.8 million reais from exchange variation. Adjusted for those items, the company's recurring net income totaled 109.7 million reais, down 29.4% from 155.3 million reais in the fourth quarter of 2016.

The lender's annualized net interest margin came in at 14.7%, compared to 11.2% in the linked quarter and 12.4% a year ago.

Daycoval's gross profit from financial intermediation improved 37.9% year over year to reach 505.1 million reais, although income from lending operations fell 5.0% to 697.0 million reais while income from leasing operations dropped 9.7% to 82.9 million reais.

The bank registered 147.0 million reais in provisions for loan losses, up 21.4% from 121.0 million reais a year ago. Other operating expenses, meanwhile, more than doubled to 269.7 million reais from 101.1 million reais.

Banco Daycoval's total loan portfolio held 15.16 billion reais at the close of 2017, expanding 9.6% from 13.84 billion reais at the end of 2016. This was driven by annual growth of 19.6% in loans to companies. Loans more than 90 days past due represented 1.1% of total loans, compared to 1.3% in the linked quarter and 0.7% in the year-ago period.

Return on average equity fell to 17.3% in the fourth quarter from 19.9% in the linked quarter and 24.7% a year earlier.

The fourth-quarter results brought the bank's full-year 2017 net income to 521.5 million reais, up 28.2% from 406.9 million reais in 2016.

The bank noted that "2018 will be marked by the dichotomy between the very positive macroeconomic scenario and the quite delicate political and fiscal situations."

As of Feb. 21, US$1 was equivalent to 3.26 Brazilian reais.