Banco Hipotecario SA Earnings Release - First Quarter 2008

Transcription

1 Banco Hipotecario SA Earnings Release - First Quarter 2008

2 Banco Hipotecario cordially invites you to participate in its First Quarter 2008 conference call Thursday, May 15, 2008, 11:00 ET If you would like to participate, please call: USA: (800) International: (480) PIN # Preferably 10 minutes before the call is due to begin. The conference will be in English. 2

3 U Contacts: Marcelo Icikson Tomás Godino Capital Markets Tel. (54-11) /5798 Fax (54-11) Buenos Aires, Argentina Gabriel Saidon Chief Financial Officer Tel. (54-11) /5212 Fax (54-11) /5113 Buenos Aires, Argentina Banco Hipotecario SA reports First Quarter 2008 results Highlights Executive Summary First quarter results were of Ps million. Adjusted for net losses of Ps million from swaps related to the market value of BH s shares, net income would have been of Ps million. Core business results continued the positive trend, financial income from loans grew 6% in the quarter and 57% from 1Q07. Net fees from services for the quarter were 14.5% higher than the previous quarter and 86.3% higher than 1Q07. Lending activity grew 5.0% in the quarter and 36.8% YoY. Sound equity ratio of 25%. Continued business expansion. The Bank opened 4 new branches in the quarter, totaling 93 points of sale (39 branches and 54 service agencies). BH ranks tenth in terms of assets, fourth in terms of household financing and third in terms of net worth in the local financial system. 3

4 Buenos Aires, May 9, 2008 First quarter results were of Ps million. Adjusted for net losses of Ps million from swaps related to the market value of BH s shares, net income would have been of Ps million. Core business results continued the positive trend, with improved financial margins, increased revenues from lending and fees, and a consistent expansion of our financial intermediation business. Quarter ended (in thousands of pesos) 03/31/ /31/ /31/2007 Financial income 253, , ,619 Interests on private sector loans 145, ,532 92,555 Trading and Position 86,519 62,784 81,010 Interests on public sector loans 3,802 3,721 5,996 Hedging transactions 17,387 18,277 86,058 Financial expenditures (188,163) (140,552) (109,610) Capital Markets expenses (90,388) (90,855) (82,259) Interests on deposits (35,437) (24,393) (9,653) Interests on other borrowings (10,502) (18,050) (11,391) Hedging transactions (40,527) - - Public sector assets adjustment (5,188) (1,888) (1,245) Taxes (6,121) (5,366) (5,062) Net financial margin 64,951 81, ,009 Provision for loan losses (36,469) (26,396) (13,397) Net income from services 45,155 39,423 24,240 Administrative expenses (88,268) (89,701) (62,724) Miscellaneous income, net 41,217 27,935 (26,867) Net income 26,586 33,023 77,261 Adjusted net income increased 92.3% and 16.8% in relation to 4Q07 and 1Q07, respectively. This increase is the result of the growth in net financial margins, loan volumes, fees and operating income (adjusted net income defined as net income minus net results from swaps related to the market value of BH s shares). Quarter ended (in thousands of pesos) 03/31/ /31/ /31/2007 Adjusted financial income 1 253, , ,790 Adjusted financial expenditures 2 (147,636) (140,552) (109,610) Adjusted net financial margin 3 105,478 79,629 88,180 Provision for loan losses (36,469) (26,396) (13,397) Net income from services 45,155 39,423 24,240 Administrative expenses (88,268) (89,701) (62,724) Adjusted miscellaneous income, net 4 24,864 23,442 7,207 Adjusted net income 5 50,760 26,397 43, Adjusted financial income defined as financial income minus net results from swaps related to the market value of BH s shares. 2. Adjusted financial expenditures defined as financial expenditures minus net results from swaps related to the market value of BH s shares. 3. Adjusted net financial margin defined as net financial margin minus net results from swaps related to the market value of BH s shares. 4. Adjusted miscellaneous income, net defined as miscellaneous income, net minus net results from swaps related to the market value of BH s shares. 5. Adjusted net income defined as net income minus net results from swaps related to the market value of BH s shares. Adjusted Net Financial Margin Adjusted net financial margin of Ps million was 32.5% and 19.7% higher than the Ps million and Ps.88.2 million recorded in the fourth and first quarter of 2007, respectively Q07 4Q07 1Q08 Adjusted net financial margin defined as net financial margin minus net results from swaps related to the market value of BH s shares. 4

5 Adjusted financial income of Ps million reflects the Bank s continued revenue growth resulting primarily from higher loan origination volumes and increased average loan balances during the last twelve months. Adjusted Financial Income & Adjusted Financial Expenditures Q07 4Q07 1Q08 Adjusted financial income Adjusted financial expenditures -Adjusted financial income defined as financial income minus net results from swaps related to the market value of BH s shares. -Adjusted financial expenditures defined as financial expenditures minus net results from swaps related to the market value of BH s shares. Core bank revenues (interest on private sector loans and net income from services) had a strong increase during the last twelve months, principally driven by loan portfolio growth, higher yields and more services provided to our customers. Financial income on lending to the private sector grew 6% in the quarter and is 57% higher than revenues from interests from one year ago. Also the structure of this income has changed during last quarters, with a greater participation from non-mortgage loans (from 55% of interests from private sector loans one year ago to a current 62%) Income from Interest on private sector loans % 56% % % 62% 45% 44% 41% 40% 38% 1Q07 2Q07 3Q07 4Q07 1Q08 Mortgages Non-mortgages Net income from services continued to expand at a healthy pace driven by our client base increase. Net fees were 14.5% higher than 4Q07 and 86.3% than a year ago. Coverage ratio of net income from services over administrative expenses shows a consistent improvement, financing a growing portion of administrative expenses, that include up-front costs associated to our lending and client base expansion (Ps million). Coverage ratio went from 38.6% in 1Q07 to 51.2% in 1Q08. Net income from services over administrative expenses (as a percentage) 51.2% 47.6% 43.9% 38.6% 36.1% 1Q07 2Q07 3Q07 4Q07 1Q08 5

6 Lending activity continued at a good pace during the quarter, accumulating a 36.8% growth with respect to the comparable quarter of 2007, and 5.0% in the quarter. Increased Lending Volumes Private Sector Loans 127 4,397 (1) ,215 (1) +36.8% Private sector loans as of Mortgages Personal Credit Cards Others Private sector loans as of (1) Total loans to the private sector, net of reserves and including the stock of securitizations at the end of each quarter. Private sector loan growth has provided for a balanced credit portfolio, with 53% of private sector loans consisting of mortgage loans and the remaining 47% principally of personal loans, credit card financing and corporate lending. This mix is providing increasing higher yield and a comfortable average life of the loan portfolio. The current yield of our peso loan portfolio is of 21.3%, a 142bps increase during the quarter and 378bps over the year. Private Sector Loans Diversification 3, , , , , % 77% 59% 55% 53% Q08 Mortgages Personal Credit Card Overdraft Others Private loans as of March 31, 2008 are composed of 85% of retail financing and housing loans and 15% corporate loans, providing, on average, for a diversified, low leveraged and highly secured portfolio (53% of credit exposure to the private sector is secured with mortgages with loan to values averaging 50%). Consumer and Housing 85.0% Composition of Loan Portfolio Non-financial private sector loans Corporate 15.0% 6

7 The loan portfolio increase was the result of the growing offer of financial products and the increased volumes of our credit card business. Credit Card Financing (stock in millions of pesos) 112.5% Credit Cards Monthly Consumption % Mar 2007 Mar 2008 Mar 2007 Mar Number of Credit Cards Personal Loans (stock in millions of pesos) 65.9% Q07 2Q07 3Q07 4Q07 1Q08 Mar 2007 Mar 2008 Liabilities continued to expand with the stable growth of our deposit base, and was 126.9% higher than one year ago, a result of strengthened penetration and of the new branches in place. Evolution of Deposits % 1, , , Q07 2Q07 3Q07 4Q07 1Q08 Regarding our asset and liability management, since the third quarter of last year we focused on reducing our values exposed to market risk, increasing our liquidity in anticipation of volatile capital markets and providing for additional safeguards to minimize the refinancing risks of our debt outstanding in the capital markets maturing in the next five years. For that purpose we increased our investments in fixed income assets and liquid assets with average maturities shorter than 5 years and funded with our liquidity the partial cancellation of our debt maturing 2010 and 2013, and continued with a liquidity build up that permitted a stable financial intermediation business providing for our planned loan growth. We also reduced our foreign currency exposures. On February 27, 2008 the Bank concluded a Tender Offer to purchase for cash a portion of its USD and EURO denominated notes due As a result of this transaction the Bank received and accepted aggregate tenders for a total of USD equivalent principal amount of 61.1 million. 7

8 We will procure to maintain the healthy and well balanced asset and liability structure that has characterized Banco Hipotecario, (high solvency levels of 25%, and assets and liabilities matched in tenors). Rate Maturity Rate Maturity USD EUR AR$ CER AR$ Provisions Equity 4, % 2.2 4,560 1, % 3.2 1, % 3.1 3, % 6.0% 8.5% , % 3.9 2,669 Assets Equity + Liabilities Activity indices show our successful growth levels; our different business lines kept their expansion and our client base has continued growing, as well as our nationwide distribution network. Over the last twelve months we incorporated approximately new credit clients. 1Q07 2Q07 3Q07 4Q07 1Q08 Branches Agencies Total Asset quality remains stable with NPL ratio at 5.3% slightly higher than the 4.7% of last quarter and 4.9% recorded at same quarter of last year. Provisions charged to income increased 38.2% compared to last quarter on the back of the strong growth, in particular the increase in credit card and personal loans. Recoveries on delinquent portfolio were of Ps million, 41.8% higher with respect to 1Q07. The Bank s portfolio of non-performing loans is provisioned to 81.4% and provisions recorded over minimum provisions required by the Argentine Central Bank reached 140.6%. Approximately 38.9% of non-performing loans are secured by mortgages with average loan to value ratios of 50%. Non-performing loans (in millions of pesos and as a percentage of total loans) % 14.0% % More than 180 days (left axis) Up to 180 days (left axis) NPL as % of total loans (right axis) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 8

9 Quarter ended Year ended (in thousands of pesos) Quarter ended 03/31/ /31/ /31/2007 Financial income 253, , ,619 Interests on private sector loans 145, ,962 92,555 Trading and Position 86, ,277 81,010 Interests on public sector loans 3,802 16,500 5,996 Hedging transactions 17,387 64,273 86,058 Financial expenditures (188,163) (502,507) (109,610) Capital Markets expenses (90,388) (343,259) (82,259) Interests on deposits (35,437) (57,614) (9,653) Interests on other borrowings (10,502) (62,383) (11,391) Hedging transactions (40,527) - - Public sector assets adjustment (5,188) (19,165) (1,245) Taxes (6,121) (20,086) (5,062) Net financial margin 64, , ,009 Provision for loan losses (36,469) (82,207) (13,397) Net income from services 45, ,680 24,240 Administrative expenses (88,268) (307,841) (62,724) Miscellaneous income. net 41,217 72,633 (26,867) Net income 26,586 80,770 77,261 For the period ended (in thousands of pesos) 03/31/ /31/ /31/2007 Cash and due from banks 552, , ,309 Government and private securities 1,367,764 1,438,388 2,108,279 Loans 4,207,985 4,031,828 3,048,977 Non-financial public sector 103, , ,368 Financial sector 28,953 70,782 58,787 Non-financial private sector 4,272,412 4,036,085 2,996,593 Advances 205, , ,666 Mortgage loans 1 2,237,950 2,208,757 1,751,160 Documents 63,142 52,347 52,881 Pledge loans ,936 Personal loans 1 751, , ,992 Credit cards 649, , ,756 Other 307, , ,537 Interest accrued on uncollected loans 56,260 50,232 42,665 Reserve for loan losses (197,036) (183,059) (165,771) Other receivables from financial operations 3,783,873 3,749,930 3,182,132 Miscellaneous assets 775, , ,780 Total assets 10,687,789 10,551,045 9,290,477 Deposits 1,678,344 1,348, ,739 Other liabilities from financial operations 6,053,001 6,260,624 5,567,608 Miscellaneous liabilities 287, , ,413 Total liabilities 8,018,980 7,908,822 6,651,760 Shareholders equity 2,668,809 2,642,223 2,638,717 1 Includes loans pending for securitization 9

10 03/31/ /31/ /31/2007 Profitability ROAA (Return on average assets) 1 1.0% 0.8% 3.3% ROAE (Return on average shareholders equity)¹ 4.0% 3.1% 11.8% Net financial margin 2.4% 2.8% 6.7% Efficiency % 73.8% 33.0% Capital Total shareholders equity / total assets 25.0% 25.0% 28.4% Funding / total shareholders equity Liquidity Current assets / deposits 114.4% 148.9% 338.4% Loans / deposits 243.9% 294.4% 404.2% Asset Quality Non-performing loans / total loans 5.3% 4.7% 4.9% Reserves for loan losses / total non-performing loans 81.4% 88.0% 97.8% Non-performing loans, net of reserves / shareholders equity 1.7% 0.9% 0.1% Assets and liabilities denominated in foreign currency as of March 31, 2008 were converted to pesos at the exchange rate of Ps /USD1.00 and Ps /EUR1.00, which was the reference exchange rate published by the Central Bank on such date. Unless otherwise indicated, all figures are stated in thousands of pesos. Disclaimer Any comment made in this release in relation to future events is subject to many conditions and risks detailed and described in our Offering Memorandums and financial statements available at our website ( / Institutional / Financial Information and Bonds). The words believe, may, will, aim, estimate, continue, anticipate, intend, expect and similar words are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. This release is a summary analysis of Banco Hipotecario's financial condition and results of operations as of and for the period indicated. For a correct interpretation, this release must be read in conjunction with all other material periodically filed with the Comisión Nacional de Valores and the Bolsa de Comercio de Buenos Aires ( In addition, the Central Bank ( may publish information related to Banco Hipotecario as of a date subsequent to the last date for which the Bank has published information. 1 Based on annualized results. 2 Administrative expenses (excluding severance payments and bonuses) over net financial income and net income from services. 10