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Grupo Banamex Q1 profit jumps 19% YOY on higher lending, better asset quality

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Grupo Banamex Q1 profit jumps 19% YOY on higher lending, better asset quality

Mexico'sGrupo Financiero Banamex SA deCV posted a net profit of 5.77 billion Mexican pesos for the firstquarter of 2016, up 19% from the same period a year earlier, mainly due tohigher net interest income and lower loan provisions, partially offset byhigher claims in its insurance business and lower income from commissions andfees, the group said April 29.

Thegroup's banking unit, BancoNacional de México SA, or Banamex, reported a net profit of 4.17billion pesos for the period, up 28% from a year ago.

GrupoFinanciero Banamex's net interest income rose 6.7% year over year to 18.19billion pesos in the first quarter.

Pretaxincome also jumped 29.8% in the period to 8.80 billion pesos, partly due tolower loan provisions as the quality of the group's loan portfolio improved, aswell as higher income from financial intermediation due to improved marketconditions in the first quarter.

Lowerincome from commissions and fees in the quarter, which was partly due to higherpayments to intermediaries and lower fees for certain services, was partiallycompensated by a higher volume of client transactions, the group noted.

Overall,the group's return on average assets, or ROA, rose to 1.8% from 1.6% in thefirst quarter of 2015, while its return on equity, or ROE, improved to 12.9%compared to 11.3% a year ago. However, its net interest margin dropped to 5.9%from 6.5%.

Themain reason for the group's higher net interest income was continued growth inits loan portfolio, which reached 545 billion pesos at the end of March, up 12%year over year. This includes loans to families, which grew 3% to 250 billionpesos.

Commercialloans rose 22% to 295 billion pesos in the same period, representing anincrease of 54 billion pesos, including 27% growth in loans to small andmicro-sized businesses.

Yetdespite higher lending, the group has also managed to slightly improve thequality of its loan book. The ratio of overdue loans to total loans was 1.5%,down from 1.6% in December, which is one of the lowest ratios in the Mexicanbanking system, with its reserves covering 2.8x the value of this portfolio,the group said.

Asof end-March 2016, the group managed 1.70 trillion pesos on behalf of itsclients, the company said.

GrupoFinanciero Banamex is a subsidiary of Citigroup Inc.

As of May 2, US$1 was worth17.23 Mexican pesos.