ESPAE-Burkenroad Report October 2007

Transcription

1 TABLE OF CONTENT 1. STOCK PRICE EVOLUTION...Error! Bookmark not defined. 2. COMPANY DESCRIPTION COMPANY S MANAGEMENT TEAM INDUSTRY ANALYSIS AND MARKET STRUCTURE OF THE BANKING SECTOR RISK ANALYSIS...Error! Bookmark not defined FINANCIAL RISK...Error! Bookmark not defined OPERATIONAL RISK...Error! Bookmark not defined ENVIRONMENT RISK...Error! Bookmark not defined. 6. PEER GROUP ANALYSIS...Error! Bookmark not defined. 7. FINANCIAL PROJECTION...Error! Bookmark not defined. 8. APPRAISAL OF BANCO DE GUAYAQUIL STOCK...Error! Bookmark not defined. 9. ANALYSIS OF DEBT AVERAGE COST SENSITIVITY...Error! Bookmark not defined. ANNEX 1. BALANCE SHEET ANNEX 2. PROFIT AND LOST STATEMENT ANNEX 3. CASH FLOWS ANNEX 4. FINANCIAL INDEXES ANNEX 5. DUPONT ANALYSIS

2 1. STOCK PRICE EVOLUTION Graph 1. Tendency of Banco de Guayaquil stock price BANCO DE GUAYAQUIL S.A. 4,00 3,00 2,00 1,00 0,00 27-Oct Ene May Jun Jun-05 7-Nov Ene-06 3/29/ Abr Jun Ago Oct Dic-06 Source: Banco de Guayaquil Since the first issue in October 2004, the price has increased about 78% going from $1.80 to $ COMPANY DESCRIPTION Banco de Guayaquil is an important company in the Ecuadorian financial market, with more than 80 year experience in financial solutions. The company starts its activities on December 20, 1923 under the name of Sociedad Anonima Banco Italiano, a foreign company of S/.2' of initial capital. Since its establishment, the bank has participated in the national economy development, granting loans to small and medium entrepreneurs. In the forties, during the Second World War, Italy becomes part of the Axis and tries to nationalize the bank that operated with Italian capital and managers-. On September 24, a new public instrument designates it Banco de Guayaquil, immediately following the purchase of all its stocks by Ecuadorian capitalists. By those days, the bank s capital is of S/.20' In the sixties and seventies of last century, the company started to expand all over the country, opening offices in the most developed cities of the rest of Ecuador, consolidating as a reliable and important company in the economic activity of the country, seizing on the economical growth that resulted from the petroleum boom of that time. On May 9, 1984, the stockholders of Financiera del Sur S.A., Finansur, purchase most of the stocks of Banco de Guayaquil. Economist Danilo Carrera Drouet, then board president of Finansur, is designated board president of Banco de Guayaquil; his replacement in the board presidenc y of Finansur is Mr. Guillermo Lasso Mendoza. From that date, the new management of Banco de Guayaquil S.A. applies a banking modern approach, purchases sophisticated computer equipment and creates four basic divisions to develop its services: corporative banking, personal banking, investment banking and Visa BG credit card. On March 29, 1995, Banco de Guayaquil S.A. board of shareholders approves to sign a responsibility agreement with the subsidiary companies: Guayaquil Bank, Administradora de 1 The Sucre (S/.) was the official currency of Ecuador until September 9, 2000, when was replaced by the dollar. In 1923 one dollar was equivalent to 3.20 sucres. 2 In 1940 the dollar was quoted in S/ for buying and S/ for sailing. 2

3 Fondos BG, Casa de Valores Multivalores BG and Río Guayas Cía. de Seguros y Reaseguros. This agreement compromises the operation support of such companies up to the value of their own assets, with the bank as the owner of the 100% of the stocks and with the right to vote in each one of the subsidiaries. Between 1997 and 1998, the banking system enters into a deep crisis due to the impact of the natural phenomenon El Niño in the productive sector, and to the cease of foreign capital influx. The level of the uncollectible accounts increased considerably and the authorities had to intervene several of the principal Banks of the country, while other received liquidity credits from the Central Bank or were merged to enhance their competitive position. In this crisis, in which 20 of the 40 banks that operated in the Ecuadorian financial system disappeared, Banco de Guayaquil also received a strong impact; precautions were taken for possible client losses, and also the three anchors of additional businesses (stock house, fund manager and insurance company) prepared the company to resist the financial debacle of the end of the nineties. The financial crisis and the dollarization diminished the financial margins to which the Ecuadorian Banks were used to, and forced them to create attractive business models to be able to survive. Banco de Guayaquil decided to develop itself as a payment method industry and to sustain this new approach with advanced technology equipment. The bank got off its internationalization to a good start, is getting ready to open a branch in Panama, and in the first months of 2007 inaugurated a branch in Madrid. Between October and November of 2006, Banco de Guayaquil obtained a loan for US$ 50 millions, which is directed to the financial of capital goods at a longer term, extend their loans to three years; and plan the increase of the amount of personal loans vehicles or housing, for example - and promote their credit cards, another business segment very important for the bank, with American Express credit card. In April 2007 Banco de Guayaquil placed in the stock market its fourth issue of obligations for eight million dollars. This issue constitutes a part of their patrimonial strengthening strategy. 3

4 3. COMPANY S MANAGEMENT TEAM Danilo Carrera Drouet, Board president and economist. From 1970 to 1972 is designated first general manager of the Stock Market of Guayaquil. In 1975 he performs as Industry and Commerce minister and, due to his productive work and professional leadership of that Portfolio, in 1976 is designated as general manager of the Banco Central del Ecuador. During the period between , he performs the Board presidency of Finansur, he is later designated board president of Banco de Guayaquil until 1994, when he assumes the Board presidency of Banco de Guayaquil S.A. and, since 1995 until now he is the president of Grupo Financiero BG. Guillermo Lasso Mendoza, board president of Banco de Guayaquil. Between 1977 and 1980 he performs as manager of Procrédito S.A. Between 1980 and 1984 he performs the function of board vice-president of Finansur and, in 1984, he assumes the board presidency of that company, function that he performs until During this period of time he is also appointed as board president of the Asociación de Compañías Financieras del Ecuador. In 1989 he is designated board vice-president general manager of Banco de Guayaquil S.A. In 1993 assumes the board presidency of the Asociación de Bancos Privados del Ecuador. In 1994 he performs the function of member of the Junta Monetaria del Ecuador, representing the Ecuadorian private banks. He briefly incursions in politics when he is appointed governor of the Guayas province in the period of He is later appointed Minister of Economy. In 2003 he is designated Itinerant Ambassador of Ecuador, position that he performs until 2005 during that same period of time he fulfills as board member of the Corporación Andina de Fomento (CAF)-. PRINCIPAL EXECUTIVE Carmen Soriano de García. First executive Vice-president Víctor Alc ívar Álava. Executive Vice -president of Operations and Systems Ángelo Caputi Oyague. Executive Vice-president of the Commercial Division Julio Mackliff Elizalde. Financialexecutive Vice-president Carlos Hahn. Human Resources Vice-president Rocío Bohórque z. Auditing Vice-president Iván Correa Calderón. Credit Cards Vice-president Xavier Casal Weisson. Corporative Banking Vice-president Rodrigo Andrade Dessomes. Transactional Banking Vice-president 4

5 4. INDUSTRY ANALYSIS AND MARKET STRUCTURE OF THE BANKING SECTOR The Ecuadorian banking system consists of 24 banks, which are divided in consumption, commercial and foreign banks. All of them are subject to supervision by the Superintendencia de Bancos and classified, by their assets size, in four big banks (Pichincha, Guayaquil, Pacifico and Produbanco), nine medium and 11 small banks; 19 of them are part of the Asociación de Bancos Privados del Ecuador (ABPE). This information is obtained not taking into account Banco de los Andes, which declared itself under liquidation on December 7, 2006, and which case is isolated and does not reflect any banking crisis as per many economic analysts. In 2006, the banks accumulated $ 239,1 millions in gross profit, which represents an increase of approximately 50% with respect to 2005 (see Graph 2), explained especially by the increase of income for collected interests more than for increase of the income for commissions, continuing with the tendency of improvement of that sector after the financial crisis that took place in the country in Graph 2. Tendenc y of the Ecuadorian banking system profits Fuente: Superintendencia de Bancos The private banking institutions have experienced an annual increase of assets plus contingents, getting to ,7 million dollars, keeping an increase of 4.6% in the second quarter of From the four biggest banks, Banco de Guayaquil is the one that has experienced a greater growth in the last quarter of 2006, with a 7.4% with respect to the same period in In annual growth rate, the most dynamic sector is the credits for micro-company (51.99%), followed by consumption (33.37%), housing (22.24%) and commercial (17.5%); nevertheless, there is a clear deceleration of the banking placements, due to the fact that Ecuador is experiencing a command transition. The Ecuadorian banking sector shows a tendency to grow on the passive rate since 2004, while the active rate maintains a cyclic movement. On the second quarter of 2007, the referential interest rate was placed on 9.8% and the passive interest rate on 5.44%, obtaining a resulting margin of 4.54% (See Graph 3). Besides the income obtained by the margin between the active rate and the passive rate, the Ecuadorian banking system has a considerable income due to the collection of different services that it offers (Internet, teller machines, checks, consults, etc.) 5

6 Graph 3. Tendency of banking interest rate Source: Gestión Magazine The deepening of the financial marketing (see Graph 4), which corresponds to the bank deposits and credits value in relation to the PIB, maintains an increasing tendency, showing the progress of the banking sector with an approximate increase of almost 1% during the last year. In 2006, the deposits corresponded to the 23% of the PIB with a declination on the last quarter. Gráfica 4. Tendencia de profundización financiera Source: Gestión Magazine Considering offices, branches, automatic teller machines and agencies, the Ecuadorian banking has customer service points, from which Banco del Pacifico has 19%; Pichincha, 18%: and Internacional, 14% (see Graph 5). With respect to the banking system patrimony (not including profits), at the end of 2006 it gets to $997 millions, which constitutes an increase of 26. 4% with respect to

7 Graph 5. Participation of customer service points per bank Oficinas, sucursales, Sucursales, cajeros Cajeros de de la la banca Banca privada Privada ecuatoriana Ecuatoriana Guayaquil 6% Otros 19% Pacífico 19% Bolivariano 8% Austro 7% Produbanco 9% Internacional 14% Pichincha 18% Source : Asociación de Bancos Privados del Ecuador (ABPE) The total deposits increased in a 20.63% with respect to year 2005 (January through December) getting to 9.231,6 millions (See deposit evolution in Graph 6), the contribution to such performance was of a 32% by the monetary deposits, 31% by saving deposits and 37% by fixed-term deposits. Graph 6. Participation of customer service points per bank Depósitos de monetarios Depósitos a plazo Depósitos de ahorro Source: Gestion magazine To December 2006, the 60% of the public resources total was captured by four banks (See Graph 7). Banco Pichincha leads ($2,369 mill ions) that capts the 25.7 % of the deposits, followed by Banco de Guayaquil ($1,221 millions) with 13.2%, Pacífico ($1,049 millions) with 11.4 % and Produbanco ($899 millions) with 9.7 %. 7

8 Graph 7. Bank sharing in the market Total Deposits Other 21% Pichincha 26% Austro 4% Internacional 7% Bolivariano 8% Produbanco Guayaq 13% Source: Asociación de Bancos Privados del Ecuador (ABPE) With respect to the credits destination (See Graph 8), until September % of them were assigned to the commercial sector, which includes productive, industrial and commercial activities; 29% corresponds to a consumer credit, 12% to housing credit and 7% to micro-company. As we can see in the graph, the levels of money assigned to credit continue growing since Graph 8. Banking sector credits Sep.04' Nov.04' Ene.04' Mar.05' May 05' Jul.05' Sep.05' Nov.05' Ene.06' Mar.06' May.06' Jul. 06' Sep.06' Source: Gestion magazine The delinquent level in the banking sector keeps a tendency to drop since the dollarization (See Graph 9), getting to a 4.6% of the total portfolio to June 2006, being the micro-company credits the ones with a higher delinquent level, followed by consumer credits. The banks with a higher delinquent level are : Unibanco (12.9 %), Centromundo (12.3 %) and Cofiec (9.3 %). 8

9 Graph 9. Banking sector uncollectible accounts Sep.04' Nov.04' Ene.04' Mar.05' May 05' Jul.05' Sep.05' Nov.05' Ene.06' Mar.06' May.06' Jul. 06' Sep.06' Source: Gestion magazine (a) (b) With respect to liquidity 3, there is a clear increasing tendency (See Graph 10). 39% of the deposits is within the country, while the 61% of the total available funds is abroad. There is a belief that these levels will remain during this year, as the banking is not willing to increase its country risk. Graph 10. Banking sector liquidity Source: Gestion magazine In general, there is a tendency to improve in all the banking indicators, keeping a steady growth and adequate profitability has been considered a record year in regards to profits; in the fourth quarter of 2007 a decrease in credits and expense policies is expected, due to the possibility to create new regulatory measures. The competition level may be considered of medium level, as 55% of the banking market is concentrated in four large banks. 3 Liquidity is constituted by working capital and quasicash, bills, saving deposits and fixed-term deposits. 9

10 5. RISK ANALYSIS Banco de Guayaquil, due to its financial constitution, is exposed to a series of factors, both internal and external, that generate a variety of risks of the operational, financial, and macro economical types, which can affect its behavior. 5.1 FINANCIAL RISK A test made by a qualifier agency is the best tool available to qualify a bank. The qualification for Banco de Guayaquil is AAA- 4 (to September 30, 2006), that constitutes the highest qualification that a national bank has (Citibank and Lloyds have the same qualification) (See Graph 11). Graph 11. Evaluation worksheet of risk qualification of the Ecuadorian banking sector Calificación Jul Development: Statistical Management of the Superintendecia de Bancos Source: Risk Management of the Superintendencia. de Bancos Note: The deposits include current deposits and fixed-term deposits Another framework to analyze the individual financial institutions health is the one that focuses in following five components: capital (C), assets quality (A), management (M), profits (E) and liquidity (L) that, evaluated in conjunction, are able to reflect the situation inside a bank. CAMEL model characterizes financial institutions conditions in a given time. Because it is one of the newest methods currently used worldw ide, examining and applying them is consistent with subjects involved within economical research areas, especially in the financial economy area. To explain the reason to select these variables, its individual importance is justified next. Grouping these variables turns into an integral indicator to measure the vulnerability of a given bank. Análisis Semanal publication, of Spurrier Group, performed the CAMEL qualification of the banks bearing more than 2% of the system s total assets and the results are detailed in the following chart. 4 AAA.- The situation of the financial institution is very strong and has a satisfactory trajectory of profitability, which is reflected in an excellent reputation, very good access to its natural money markets and clear stability perspectives. 10

11 Chart 1. Banco de Guayaquil CAMEL analysis Indicator Qualification obtained by BG (1=best, 5=worse) Capital 4 Assets 4 Management 3 Profits 4 Liquidity 2 Source: Análisis Semanal Remarks It is defined as the owners right over the company s assets and it is considered as a basic variable into the analysis of the commercial banks operation. Enables to evaluate institution s soundness and its possible capacity to face external crashes and to withstand non expected losses. The assets constitute the economical resources an Enterprise counts with, and are expected to benefit the future operations. Consequently, the evaluation of its composition and quality become fundamental to detect any anomaly. The permanence of the institutions inside the sector depends mainly in the way they have been directed and in the politics that have been implemented through time. The administration becomes in the fundamental axis that, if done correctly, permits reaching greater efficiency levels, sustainabilit y and growth. It is the main objective of any financial institution. The profits reflect the efficiency of the institution and provide resources to increase the capital allowing its continuous growth. In the contrary, the losses, insufficient profits or the excessive profits generated by an instable source constitute a threat to the Enterprise. Besides being one of the main objectives in any enterprise, in the case of the financial institution this variable takes a higher importance due to the constant cash demands of their clients. The need for liquidity of the depositors usually increases before crisis times, creating bank runs that debilitate them, sometimes taking them to bankruptcy. As it can be seen, the strength of BG is the liquidity, which substantially reduces the financial risk. However, it does not have a good grade in capital, assets and profits and has a regular grade in administration. From the 12 banks that belong to the banks that have more than 2% in total Assets, BG is positioned in fourth place. 11

12 5.2 OPERATIONAL RISK All the critical processes in a bank have a risk. The addition of the risk of all processes represents the operational risk of the financial institution. For an external observer it is hard to evaluate the operational risk of a bank, however it is important to say that in 2006, Banco de Guayaquil implemented a system for the Management of operational risks, with the help of a specialized software, such as the ARIS Process Risk Scout tool, that permits the decision making for the definition of mitigation of operational risk plans. Other activities that were performed to introduce an effective operational risk Management were: Modeling, analysis and diagnosis of the actual processes defined as critic by the bank. Identification of associated operational risks. Publication of the process diagrams in the bank s intranet. Project management and organization. Staff training in the use of the ARIS tool. Knowledge transfer for the Business processes Management. Custom made reports. 5.3 ENVIRONMENT RISK To the date of preparation of this report, the political situation in Ecuador has constant attention of the bank institutions. The recently elected government of Economist Rafael Correa has stated several times their discontent with the excessive charge of interest rates and commissions made by the financial institutions. The deposits that the private Banks have abroad are also frowned upon by the financial authorities of this government. President Correa in his tenth radio broadcast, made from Quininde (March 24, 2007), when referring to the productive reactivation Law Project made in the Congress of the then President León Febres Cordero, stated: (Febres Cordero) made this law to allow certain banks and bankers that are not well, like Banco de Guayaquil, to cover up that venom that characterizes them. The bank institutions have responded cautiously to these statements, making clear that their activities are inside the law, and are in a waiting position to eventual regulatory measures. 12

13 6 PEER GROUP ANALYSIS As mentioned before, the bank system in Ecuador is formed by 24 consumption, commercial and foreign banks, all subject to the supervision of the Supertintendencia de Bancos, four of which are considered big (Pichincha, Guayaquil, Pacífico y Produbanco), nine are catalogued as medium and 12 small. Banco de Guayaquil is, according to the last ranking of América Economía magazine, the best of the big banks, because of its interesting profitability, high reliability, efficiency, solvency and higher liquidity of the segment. Nowadays, BG also counts with 500 ATMs Nationwide. Among the main services this bank provides are: Corporative banking: financing to exports/imports. Personal banking: Autofácil, casafácil (easycar, easyhouse). Private banking: Accumulation policies. Credit Cards: American Express, Visa and MasterCard. To February 2007, Banco de Guayaquil maintains an important position in the national banking system: it is placed second in market participation (Total assets plus contingents) with 15.14% (See Graph 12). Graph 12. Banco de Guayaquil s participation in the market MARKET SHARE TOTAL OF ASSETS PLUS CONTINGENTS DE MERCADO- TOTAL ACTIVOS MÁS CONTINGENTES OTHER; 10,77% PICHINCHA; 24,61% INTERNACIONAL; 7,23% BOLIVARIANO; 7,73% PACÍFICO; 10,06% PRODUBANCO; 10,27% GUAYAQUIL; 15,14% Source: Superintendencia de Bancos y Seguros Analyzing the total deposits in the financial system, Banco Pichincha is located first with 25.36%, followed by Banco de Guayaquil with 17.30%. Then we have Pacífico, Produbanco, Bolivariano and Internacional (See Graph 13). 13

14 Graph 13. Banco de Guayaquil participation in deposits MARKET SHARE-TOTAL DEPOSITS INTERNACIONAL; 7,76% OTHER; 11,17% PICHINCHA; 25,36% BOLIVARIANO; 7,94% PRODUBANCO; 9,46% PACÍFICO; 11,13% GUAYAQUIL; 13,70% Source: Superintendencia de Bancos and Seguros (February 2007) Taking into account the patrimony, Banco de Guayaquil is placed in third place with 9.54%. Pichincha is first with 28.63% and Pacífico second with 12.52%. (See graph 14). Graph 14. Banco de Guayaquil patrimony participation MARKET SHARE- TOTAL PATRIMONY INTERNACIONAL; 7,93% BOLIVARIANO; 5,82% PICHINCHA; 28,63% PRODUBANCO; 9,43% GUAYAQUIL; 9,54% PACÍFICO; 12,52% Source: Superintendencia de Bancos y Seguros (February 2007) Finally we can say that the liquidity is Banco de Guayaquil s main advantage, the liquidity makes possible the depositors to trust in a solid bank. Pichincha is second in this item, while Pacifico has an excellent performance in patrimony and Produbanco outstands in its assets investment indica tor. 14

15 To summarize, Banco de Guayaquil is placed first in liquidity, fourth in assets investment performance, fifth in uncollectible accounts, and fifth in its patrimony performance. (See chart 2). BANKS Chart 2. Analysis of Banco de Guayaquil s financial indicators Liquidity Total (Available Uncollectible funds.) Position Assets Inv. Position Accounts Position ROE Position Guayaquil 21,85% 1 20,48% 4 1,25% 5 24,43% 5 Pichincha 21,03% 2 15,07% 5 2,63% 6 24,20% 6 Bolivariano 14,17% 3 10,14% 8 0,96% 4 29,54% 3 Pacífico 7,82% 4 26,53% 3 4,84% 8 32,98% 1 Internacional 6,85% 5 10,47% 7 0,73% 2 31,76% 2 Produbanco 5,52% 6 32,80% 2 0,84% 3 29,04% 4 Austro 3,54% 7 12,65% 6 5,40% 9 22,57% 7 Machala 2,61% 8 7,12% 9 2,88% 7 16,13% 8 Solidario 2,26% 9 1,33% 10 5,91% 10 0,87% 10 Citibank 1,10% 10 59,11% 1 0,25% 1 9,41% 9 Source: Superintendencia de Bancos and Seguros 15

16 7 FINANCIAL PROJECTIONS To value Banco de Guayaquil, it was considered the cas h flow deducted from the patrimony method which considers only the patrimony cash flow and deducts it only from the own capital cost (CAPM), for this the main variables that affect the financial system were projected. Cautiously, the obligations with the public were projected, and the credits portfolio considering the historical growth average and the strategic approach of the company for the next five years. The free cash flows were obtained and the period was projected considering the following macro economical premises: Chart 3. Premises for the discount rate calculation Industry average beta 1,11 Market premium 4,5% Market rate 18,7% Risk free rate (Libor 90 days) 5,4% Tax settlement 36,3% Country risk (Ecuador) 6,8% Source: Banco Central de Ecuador Notes (May 2007) The Capital weighted average cost, which was calculated based in the capital cost and the debt average cost, considering the before mentioned premises. The capital cost is showed in the following chart: Chart 4. Capital cost calculation Capital cost calculation Risk free rate Ecuador Libor Rate 90 days 5,4% Country Risk (Ecuador) 6,8% 12,2% Beta 1,11 Market Prime 4,5% Source: authors We assume that the banking sector, different to other enterprises, is exposed to the country risk entirely. To calculate the beta, it was made an average of the performances over capital (ROE) of Banco de Guayaquil from the last 12 months. Also the average in the same period- of the Ecuadorian banking system s ROE, data obtained from de Banco Central del Ecuador. The beta is the rate between the average Banco de Guayaquil ROE and the average bank system ROE. 16

17 The libor rate (90 days) was obtained from the London Bank to May The market prime is the difference between the passive rate and the active rate of the market, data obtained from Banco Central del Ecuador to May The average debt cost is showed in the following chart: Debt Cost Chart 5. Debt cost calculation Taxes adjustments 15,0% Employees 25,0% Taxes 36,25% Compound adjustment Debt average cost 18,70% Taxes adjustments 6,78% Debt average cost 11,92% Source: authors The capital s w eighted average cost is showed in the following chart: Chart 6. Calculation of weighted average cost of capital (WACC) Capital's origin Structure Cost Weighted average cost Shareholders' patrimony 8% 17,22% 1,4% Third party financing 92% 11,92% 11,0% Source: authors WACC 12,35% Attached charts show the financial states projected to five years, also the free cash flows and indicators during the projection period (Attachments 1-4) 8 APPRAISAL OF BANCO DE GUAYAQUIL STOCK For the appraisal, the cash flows were deducted at present value, considering a WACC of 12.53% and the remaining value of the company was calculated through a perpetuity of the N+1 value from the free cash flow to a bank growth rate, after the projection period of 4.5%, which was obtained from the banking sector participation reports from the Ecuador PIB (Source: Banco Central del Ecuador), calculating from the average growth from 2000 to Chart 7. Values for Banco de Guayaquil appraisal Capital cost 17,22% WACC 12,35% Remaining values (Perpetuity) $ ,58 Source: Authors 17

18 The free cash flow, together with the remaining value of the company, when deducted to the present value with the capital cost, allows us to know then annual net value (VAN) of Banco de Guayaquil. Cash Flow (Million dollars) Chart 8. Banco de Guayaquil VAN calculation $ 27, $ 20, $ 23, $ 25, $ 430, VAN $ ,86 Source: authors Banco de Guayaquil s VAN, divided to the number of shares, allows us to know the value per share of the company as shown following: Value per share Banco de Guayaquil Chart 9. Calculation of the value per share of Banco de Guayaquil Number of shares in circulation ,000 Value per share $ 3,26 Source: authors 9 ANALYSIS OF DEBT AVERAGE COST SENSITIVITY For the following analysis, a sensitivity was made about the rate that reflects the debt cost. This rate, together with the projected growth rate for the subsequent explicit horizon value period, has an impact in the remaining value, and consequently, in the action s calculated value. Chart 10. Debt average cost sensitivity Sensitivity Analysis Debt average cost Growth Remaining value (Thousands of US$) Share value US$ 6.38% 7.19% 30,029, % 6.02% 31,922, % 5.44% 32,960, % 4.85% 34,069, Source: authors 18

19 10 FINANCIAL ANALYSIS Banco de Guayaquil has had in the last five years a sustained growth tendency, both in the total assets and in the gross credit account. During the last year it maintained an average patrimony performance of 27.67%, in contrast to the banking system average that grew in a 25.59%; while the average assets performance of Banco de Guayaquil continues in 1.84% and the banking system 2.57%, this is because the bank continues in a 17.19% average in unproductive assets, while the banking system is 13%. In the following graph it is evident how the total assets of Banco de Guayaquil have grown compared to the obligations with the public growth, historically from year 2002 to (See graph 15). Graph 15. Total assets tendency and obligation with customers Historic Planned Source: Banco de Guayaquil (www. bancoguayaquil.com) and own projections Banco de Guayaquil s credit account maintains, since 2002, a growing tendency in an 18.5% average, behavior that the bank directors wish to maintain; for this, strategic decisions have been made for the attraction of obligations inside and outside the country. (See graph 16). Graph 16. Tendency of credits account del Banco de Guayaquil Historic Planned Source: Banco de Guayaquil ( and own projections 19

20 Through the Dupont Analysis (Attachment 5) we have determined the tendency for the net financial margin of Banco de Guayaquil (Net utility/total income), which presents a fall in 2003 and 2004, but maintaining since that year a growing behavior and a projected stability since 2007 to (See graph 17). Graph 17. Banco de Guayaquil financial margin tendency Historic Planned Source: Banco de Guayaquil ( and own projections The financial levering multiplier (Total asset + total patrimony)/total patrimony, since the year 2003 stays over 12, which means that Banco de Guayaquil is very well levered, normal in bank companies (See Graph 18). Graph 18. Financial levering multiplier of Banco de Guayaquil Historic Planned Source: Banco de Guayaquil ( and own projections One of the strengths of Banco de Guayaquil, the liquidity index (Available funds/total short term deposits) has an average of 44.72% the last year, while the average of the system is 29.33%, which confirms its leadership in the market and soundness in the liquidity aspect, policy that is maintained in the projections made. 20

21 11 INVESTMENT THESIS The asset s value obtained with the applied model indicates that the asset is a little undervalued and its purchase is recommended. The recommendation for this instrument s purchase must take into account other variables such as checking the writing and the payment of dividends per asset. It must also consider the political uncertainty that is taking place in Ecuador at this time. It is recommended to monitor the financial institution as it counts with good growing plans not only in a local level but projecting itself to cover International markets such as Panama and Spain. The asset acquisition is recommended in order to take advantage of the benefits of the interesting projected growth, and its strength in liquidity that can permit a better valorization of Banco de Guayaquil s assets. 12 CONCLUSIONS AND RECOMMENDATIONS The value of the financial institutions in markets like the Ecuadorian market, implicate the exposition to a series of factors, both internal and external, that do not allow the clear prediction of the possible effects in the institution, because of this, the information in which the valorization is made, may be incomplete. When analyzing the asset s price that was obtained in the valorization, we can conclude that the market perceives the asset s real value; being the Banco de Guayaquil s asset the one with the better valorization and growth in the Ecuadorian banks. This is due to the strength in liquidity and soundness, and to its aggressive expansion plans that would allow increasing in a sustained way its attractions average. The bank maintains an acceptance in the Ecuadorian market, a proof of this is that in April 2007 the bank placed its fourth obligations emissions in the stock market for an amount of US$8 million. This emission constitutes a part of the patrimonial strength strategy. The value of the asset makes us conclude that the market is valorizing the enterprise correctly, and that if the bank s expansion projections are carried out, it would be expected that the asset s price keeps a rising tendency in the following years. 21

22 BIBLIOGRAPHY COPELAND, Tom; KOLLER, Tim. Valuation Measuring and Managing the Value of Companies. McKinsey & Company, Inc., Nueva York DAMODARAN, Aswath. Investment Valuation. John Wiley & Sons, Inc., Nueva York SPURRIER, Walter. Análisis Semanal magazine. Spurrier Group. Guayaquil Superintendencia de Compañías (Office for the Control of Business Organizations) web page. Banco de Guayaquil web page. Bolsa de Valores (Stock Market) of Guayaquil web page. 22

23 ESPAE-Burkenroad Reports Octubre del 2007 ANEXO 1. BALANCE GENERAL ANEXO 1 BALANCE GENERAL (Miles de dólares) Escenario base Proyección ACTIVO Fondos disponibles Operaciones interbancarias Inversiones Cartera de créditos Deudores por aceptaciones Cuentas por cobrar Bienes realz. adjud. pago de arren Propiedades y equipo Otros activos TOTAL ACTIVOS PASIVO Obligaciones con el público Depósitos a la vista Operaciones de reporto Depósitos a plazo Depósitos de garantía Operaciones interbancarias Obligaciones inmediatas Aceptaciones en circulación Cuentas por pagar Obligaciones financieras Valores en circulación Obligaciones conver. acciones Otros pasivos TOTAL PASIVOS PATRIMONIO Capital social Prima o desct. coloc. de acciones Reservas Otros aprt. patrimoniales Superávit por valuaciones Resultados del ejercicio Utilidades acumuladas TOTAL DEL PATRIMONIO TOTAL PASIVO Y PATRIMONIO

24 ANEXO 2. ESTADO DE PÉRDIDAS Y GANANCIA ESPAE-Burkenroad Reports Octubre del 2007 ANEXO 2 ESTADO DE PÉRDIDAS Y GANANCIAS (Miles de dólares) Escenario base Proyección TOTAL INGRESOS Intereses y descuentos ganados Intereses causados MARGEN NETO INTERESES Comisiones ganadas Ingresos por servicios Comisiones causadas Utilidades financieras Pérdidas financieras Total ingresos no intereses MARGEN BRUTO FINANCIERO Provisiones MARGEN NETO FINANCIERO Gastos de operación Depreciación Amortización MARGEN DE INTERMEDIACIÓN Otros ingresos operacionales Otros pérdidas operacionales MARGEN OPERACIONAL Otros ingresos Otros gastos y pérdidas GANANCIA O PÉRDIDA ANTES DE IMPUESTOS Impuestos y participación a empleados GANANCIA O PÉRDIDA DEL EJERCICIO

25 ESPAE-Burkenroad Reports Octubre del 2007 ANEXO 3. FLUJOS DE CAJA ANEXO 3 FLUJOS DE CAJA (Miles de dólares) Escenario base Proyección Ingreso neto por intereses Ingreso neto no intereses Provisiones Ingreso netos antes de ítems exepcionales ítems excepcionales Ingreso antes de impuestos Impuestos y participación de empleados Depreciación y amortización Flujo de caja operacional Incremento en activos Incremento en pasivos Flujo de caja de los accionistas

26 ESPAE-Burkenroad Reports Octubre del 2007 ANEXO 4. INDICADORES FINANCIEROS Jun.06' Jul.06' Ago.06' Sep.06' Oct.06' Nov.06' Dic.06' Ene.07' Feb.07' Mar.07' Abr.07' May.07' Jun.07' PROMEDIO DEL BANCO DE GUAYQUIL TOTAL BANCOS GRANDES TOTAL SISTEMA SUFICIENCIA O COBERTURA PATRIMONIAL 83,54% 213,28% 187,56% (PATRIMONIO + RESULTADOS / ACTIVOS INMOVILIZADOS) 69,97% 70,26% 67,88% 68,71% 76,79% 76,55% 80,86% 74,93% 76,10% 79,72% 79,49% 82,50% 83,54% 82,27% 213,28% 187,56% ACTIVOS IMPRODUCTIVOS BRUTOS/TOTAL ACTIVOS 18,11% 16,92% 18,85% 17,43% 18,44% 16,72% 17,09% 15,95% 16,66% 16,79% 17,15% 16,74% 16,45% 18,61% 19,07% 18,30% ACTIVOS PRODUCTIVOS/TOTAL ACTIVOS 83,15% 84,37% 82,48% 84,01% 82,98% 84,59% 84,18% 85,30% 84,63% 84,54% 84,23% 84,61% 84,71% 91,15% 86,87% 86,52% ÍNDICES DE MOROSIDAD MOROSIDAD DE LA CARTERA DE CRÉDITOS COMERCIALES 2,05% 2,22% 1,97% 1,90% 1,98% 1,91% 1,55% 1,74% 1,88% 1,90% 2,19% 2,00% 1,71% 2,08% 3,43% 3,15% MOROSIDAD DE LA CARTERA DE CRÉDITOS DE CONSUMO 1,48% 1,81% 1,43% 1,44% 1,59% 1,24% 1,26% 1,52% 1,67% 1,72% 1,76% 1,43% 1,20% 1,63% 3,43% 4,84% MOROSIDAD DE LA CARTERA DE CRÉDITOS DE VIVIENDA 2,47% 3,24% 2,61% 2,93% 2,73% 3,05% 1,82% 2,33% 2,19% 1,96% 1,96% 1,95% 1,52% 2,56% 1,52% 1,71% MOROSIDAD DE LA CARTERA DE CRÉDITOS PARA LA MICROEMPR 11,13% 12,19% 11,84% 13,82% 15,17% 10,19% 11,62% 11,31% 12,90% 12,03% 14,13% 16,01% 12,77% 13,76% 3,79% 5,05% MOROSIDAD DE LA CARTERA DE CRÉDITOS 1,83% 2,12% 1,78% 1,78% 1,88% 1,65% 1,46% 1,70% 1,83% 1,85% 1,98% 1,73% 1,43% 1,92% 3,20% 3,61% COBERTURA DE PROVISIONES PARA CARTERA IMPRODUCTIVA COBERTURA DE LA CARTERA COMERCIAL 173,27% 160,33% 178,83% 218,52% 211,09% 205,80% 204,11% 179,34% 177,41% 161,65% 155,99% 170,75% 191,53% 199,05% 317,87% 248,18% COBERTURA DE LA CARTERA DE CONSUMO 117,84% 83,68% 113,94% 136,27% 118,61% 120,24% 131,31% 97,66% 81,30% 107,18% 102,20% 117,42% 126,44% 121,17% 129,29% 93,90% COBERTURA DE LA CARTERA DE VIVIENDA 56,20% 37,83% 57,81% 54,90% 57,59% 54,33% 83,38% 63,45% 72,85% 84,96% 83,11% 80,35% 97,34% 73,67% 236,25% 155,52% COBERTURA DE LA CARTERA DE MICROEMPRESA 42,78% 30,53% 53,05% 53,86% 48,67% 45,68% 52,16% 58,69% 57,99% 68,90% 63,07% 66,69% 30,82% 56,07% 172,29% 112,98% COBERTURA DE LA CARTERA PROBLEMÁTICA 137,04% 119,84% 145,26% 161,62% 150,75% 151,14% 158,51% 129,57% 121,71% 127,69% 122,99% 136,72% 151,20% 151,17% 233,29% 166,22% EFICIENCIA MICROECONÓMICA GASTOS DE OPERACIÓN /MARGEN FINANCIERO 109,03% 110,27% 112,33% 113,63% 109,48% 107,18% 100,19% 98,51% 104,77% 98,99% 102,05% 101,33% 99,32% 113,92% 81,11% 80,45% RENTABILIDAD 59,97% 68,06% 72,40% 81,11% 98,41% 113,37% 95,45% 8,71% 14,49% 36,07% 44,82% 55,64% 79,12% 68,97% 59,70% 59,05% RESULTADOS DEL EJERCICIO/PATRIMONIO PROMEDIO 14,99% 17,01% 18,10% 20,28% 24,60% 28,34% 23,86% 26,14% 21,73% 36,07% 33,61% 33,38% 33,91% 27,67% 25,59% 25,31% RESULTADOS DEL EJERCICIO/ACTIVO PROMEDIO 1,00% 1,12% 1,18% 1,30% 1,56% 1,78% 1,52% 1,82% 1,50% 2,47% 2,30% 2,28% 2,29% 1,84% 2,57% 2,53% RENDIMIENTO DE LA CARTERA CARTERAS DE CRÉDITOS REESTRUCTURADAS 126% 135% 146% 159% 170% 183% 196% 2329% 2578% 2861% 3001% 3035% 3084% 1500% 13% 12% CARTERA POR VENCER TOTAL 11,48% 11,47% 11,40% 11,39% 11,42% 11,41% 11,42% 11,67% 10,87% 11,08% 11,19% 11,40% 11,68% 12,32% 10,40% 10,88% OTROS INGRESOS OPERACIONALES COMISIONES GANADAS CARTERA DE CRÉDITOS/ CARTERA POR V 0,84% 0,84% 0,83% 0,81% 0,80% 1,05% 1,26% 1,02% 0,99% 0,98% 0,94% 0,85% 0,76% 1,00% 1,23% 2,33% INGRESOS POR SERVICIOS /CARTERA BRUTA PROMEDIO 3,60% 3,61% 3,66% 3,68% 3,74% 3,74% 3,70% 3,39% 3,27% 3,33% 3,33% 3,39% 3,43% 3,82% 3,06% 3,19% INGRESOS POR SERVICIOS /DEPÓSITOS PROMEDIO 2,07% 2,06% 2,09% 2,11% 2,14% 2,15% 2,13% 2,04% 1,98% 2,03% 2,03% 2,07% 2,11% 2,25% 2,26% 2,48% (COMISIONES CARTERA E INGRESOS POR SERVICIOS ) /CARTERA 4,52% 4,53% 4,57% 4,58% 4,63% 4,88% 5,04% 4,46% 4,31% 4,36% 4,33% 4,31% 4,25% 4,90% 4,39% 5,64% LIQUIDEZ FONDOS DISPONIBLES / TOTAL DEPÓSITOS A CORTO PLAZO 39,15% 39,27% 38,68% 41,97% 43,48% 42,27% 44,66% 43,98% 41,01% 44,56% 42,15% 39,10% 36,29% 44,72% 26,37% 29,33% COBERTURA 25 MAYORES DEPOSITANTES 156,48% 156,45% 153,17% 160,79% 156,78% 153,17% 172,04% 167,48% 147,30% 144,80% 138,39% 137,00% 122,56% 163,87% 149,53% 122,21% COBERTURA 100 MAYORES DEPOSITANTES 101,56% 99,76% 99,13% 106,42% 108,75% 105,15% 113,09% 106,86% 99,25% 95,97% 91,60% 91,76% 81,25% 108,38% 104,06% 89,56% 26

27 ESPAE-Burkenroad Reports Octubre del 2007 ANEXO 5. ANÁLISIS DUPONT ANEXO 5 ANÁLISIS DUPONT AÑO Utilidad neta (1) Ingresos totales (2) Total activos (3) Margen financiero neto MFN(1),(2) Rotación de activos totales RAT (2),(3) Retorno sobre activos MFN X RAT Total pasivos (4) Total patrimonio (5) Multiplicador de apalancamiento financiero (4)+(5),(5) ,59% 0,11 1,28% , ,19% 0,11 1,11% , ,82% 0,11 1,06% , ,36% 0,11 1,20% , ,13% 0,10 1,34% , ,87% 0,09 0,74% , ,72% 0,10 0,79% , ,60% 0,11 0,83% , ,49% 0,12 0,86% , ,40% 0,12 0,90% ,82 27