Compartamos Banco Reports 2Q09 Results – Net Profit up 31%

MEXICO CITY (Dow Jones)--Mexican microfinance bank Banco Compartamos SA (COMPART.MX) said Tuesday that its second quarter net profit rose 31% due to a big increase in revenue from its lending operations.

Net profit was 327 million pesos ($24.7 million), or MXN0.76 per local O shares, up from MXN249 million, or MXN0.58 per share, in the second quarter of 2008, the bank said in a filing with the Mexican Stock Exchange.

“The challenging global macroeconomic environment has not materially affected client demand for the bank’s products; instead during 2Q09 the bank experienced significant demand for working capital loans from both existing as well as new clients,” Compartamos said.

Compartamos provides small working-capital loans to low-income individuals and business owners, such as crafts manufacturers and food vendors.

The bank has managed to post strong growth in loans and profit this year even as economists have downgraded their outlook for the Mexican economy. Gross domestic product is expected to shrink 6.3% in 2009, according to the most recent survey of private sector economists by the Bank of Mexico.

Analysts see the bank’s target market as largely recession proof given the basic nature of the business activities of its clients.

Net interest income surged 36% to MXN1.08 billion thanks to a big increase in loans, while operating income grew 29% to MXN440 million.

Compartamos’ loan portfolio grew 40% to MXN6.73 billion at the end of June, due to a 40% increase in clients, reaching nearly 1.32 million.

Provisions for loan losses jumped to MXN61 million from MXN9 million in the year ago period, while total allowances for loan losses rose 46% to MXN215 million.

The ratio of non-performing loans to total loans rose to 2.26% at the end of the quarter, from 1.38% a year earlier, but was still better than the overall banking system.

Compartamos relies on bond issuances and credit lines with other banks to fund its lending operations because its business model of operating through small offices and loan agents makes it very expensive or impractical to collect deposits from the public.

The bank sold MXN500 million in three-year bonds earlier this week, and it said in Tuesday’s earning release it’s in the process of establishing a MXN6-billion bond program to issue long-term debt over the next five years.

Compartamos was extremely liquid and well capitalized at the end of the quarter, with MXN1.08 billion in cash on its balance sheet and MXN3.19 billion in shareholders’ equity.

The company’s O shares were flat at MXN45.50 in early trading Tuesday.

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