Financiera Independencia Reports 2Q12 Results

MEXICO CITY, July 26, 2012 /PRNewswire/ --

  • Total loan portfolio reached Ps.7,372.1 million, a 9.3% year-over-year increase, driven by growth in Independencia's individual loans and Apoyo Economico Familiar
  • Independencia's individual new loan origination increased to Ps.1,184.3 million, up 18.9% YoY
  • Non-performing loans ratio increased to 10.4% in 2Q12 from 9.8% in 1Q12 and 9.8% in 2Q11
  • NIM after provisions including fees decreased to 42.3% in 2Q12 from 45.7% in 2Q11
  • Provisions for loan losses rose to 45.3% of financial margin in 2Q12, from 42.7% in 1Q12 and 34.0% in 2Q11
  • Funding cost decreased to 10.76% in 2Q12 from 10.82% in 2Q11 and 10.90% in 1Q12
  • Net loss of Ps.38.2 million for 2Q12 compared with Net income of Ps.57.0 million in 2Q11
  • Equity to total assets of 28.3% compared with 28.4% in 2Q11 and 28.6% in 1Q12
  • ROE in 2Q12 was negative 5.1%, compared with 7.6% in 2Q11.

Financiera Independencia, S.A.B. de C.V., SOFOM, E.N.R. (BMV: FINDEP; OTC: FNCRY), ("Findep" or the "Company") a leading Mexican microfinance lender of personal loans to lower income segment individuals and working capital loans through group lending microfinance, announced today results for the three- and six-month periods ended June 30, 2012. During 2Q12 the Company recorded a Net loss of Ps.38.2 million compared with Net income of Ps.57.0 million in 2Q11.

Financial & Operational Highlights







2Q12

2Q11

%


6M12

6M11

%

Income Statement Data








Net Interest Income after Provisions*

566.3

596.2

-5.0%


1,176.4

1,150.3

2.3%

Net Operating Income (Loss)*

(42.5)

90.9

NM


(0.3)

212.9

NM

Net Income (Loss)*

(38.2)

57.0

NM


(4.0)

147.0

NM

Total Shares Outstanding (million)

715.9

715.9

0.0%


715.9

715.9

0.0%

Earnings (Loss) Per Share

(0.0534)

0.0796

NM


(0.0057)

0.2053

NM

Profitability & Efficiency








NIM before Provisions Excl. Fees

53.3%

50.1%

3.2 pp


53.4%

48.2%

5.1 pp

NIM after Provisions Excl. Fees

29.2%

33.1%

-3.9 pp


29.9%

32.8%

-2.9 pp

NIM after Provisions Incl. Fees

42.3%

45.7%

-3.3 pp


42.9%

44.8%

-1.9 pp

ROA

(1.5%)

2.2%

NM


(0.1%)

3.1%

NM

ROE

(5.1%)

7.6%

NM


(0.3%)

9.9%

NM

Efficiency Ratio Incl. Provisions

105.2%

89.0%

16.2 pp


100.0%

86.4%

13.6 pp

Efficiency Ratio Excl. Provisions

67.0%

64.8%

2.2 pp


64.6%

64.3%

0.3 pp

Operating Efficiency

32.9%

28.6%

4.3 pp


31.4%

28.3%

3.1 pp

Fee Income

24.1%

23.5%

0.6 pp


24.2%

24.5%

-0.3 pp

Capitalization








Equity to Total Assets

28.3%

28.4%

-0.1 pp


28.3%

28.4%

-0.1 pp

Credit Quality Ratios








NPL Ratio

10.4%

9.8%

0.5 pp


10.4%

9.8%

0.5 pp

Coverage Ratio

80.2%

69.6%

10.6 pp


80.2%

69.6%

10.6 pp

Operational Data








Number of Clients

1,459,748

1,512,141

-3.5%


1,459,748

1,512,141

-3.5%

Number of Offices

526

478

10.0%


526

478

10.0%

Total Loan Portfolio* 

7,372.1

6,742.9

9.3%


7,372.1

6,742.9

9.3%

Average Balance (Ps.)

5,050.3

4,459.2

13.3%


5,050.3

4,459.2

13.3%

* Figures in millions of Mexican Pesos.






Commenting on the results, Noel Gonzalez, Executive Vice President and Group CEO, said, "This has been a challenging quarter in terms of profitability. We are pleased to see, however, ongoing growth in our top line as the strategies put in place to strengthen our operations continue to deliver positive results."

Looking forward, we remain focused on improving asset quality to reduce provisions for loan losses and thus improve the profitability of our business."

In line with this, the recent appointment of Mr. Mauricio Galan as CEO of Financiera Independencia, will contribute to better positioning the Company in a more challenging competitive environment, as we continue to expand our business and improve efficiencies. In addition to strengthening our management team, this allows me the flexibility to focus on fulfilling a more strategic role in our group of companies." concluded Mr. Gonzalez.

All financial figures discussed in this announcement are unaudited and are prepared in accordance with Mexican Banking Accounting Principles unless stated otherwise. Figures for 2011 and 2012 are expressed in nominal pesos. Tables state figures in millions of pesos, unless otherwise noted. Independencia: refers to operations excluding the acquisitions of Finsol, AEF and AFI.   NM: Not Meaningful

2Q12 CONSOLIDATED RESULTS

Unaudited results for 2Q12 include the effect of the consolidation of the following acquisitions: Apoyo Economico Familiar ("AEF"), one of the largest unsecured personal lending institutions in Mexico, on March 15, 2011; Apoyo Financiero Inc. ("AFI"), a microfinance company primarily serving the unbanked Hispanic community in San Francisco, California, on February 28, 2011; and Financiera Finsol, one of the largest group lending microfinance institutions in Mexico, and Instituto Finsol Brazil (collectively, "Finsol") on February 19, 2010.

Financial Margin after Provision for Loan Losses

Financial margin after provision for loan losses for 2Q12 decreased 5.0% year-on-year to Ps.566.3 million. This is principally explained by the following:

Interest Income

Interest income for the quarter increased 12.0% year-on-year to Ps.1,223.8 million, mainly as a result of the Ps.130.1 million, or 11.9%, increase in interest income on loans. The total loan portfolio increased 9.3% during the period. Growth was driven by a 13.3% increase in the average balance per client, particularly the considerably higher average balance per client at AEF and AFI's larger share of the total loan portfolio. Furthermore, during the quarter, the Company terminated 125,851 clients' revolving lines of credit, which had zero balance and had remained inactive for the previous six months.

The average balance per client increased to Ps.5,050 in 2Q12 from Ps.4,459 in 2Q11. The average lending rate1 of the total loan portfolio rose to 66.4% in 2Q12 from 65.7% in 2Q11, but decreased from 68.5% in 1Q12. The year-on-year increase was mainly driven by AEF's higher share of the total loan portfolio and by an increase in the average lending rate in Independencia's individual loan portfolio from 60.4% in 2Q11 to 62.5% in 2Q12.

Findep's total informal sector loans increased 13.3% year-on-year to Ps.3,777.1 million in 2Q12, representing 51.2% of the loan portfolio. Growth reflects increases of 13.1% in Finsol Mexico group loans and 21.3% in AEF's informal sector loan portfolio. Independencia's individual loans to the informal sector rose by Ps.249.9 million, or 15.4% year-on-year, driven by growth of 21.2% in the CrediPopular product. The share of non-Independencia loans to the informal sector increased to 25.9% of Findep's total loans in 2Q12 from 25.5% in 2Q11, reflecting the growth of Finsol and AEF which have contributed to further diversify the Company's business.

The Company's total formal sector loans represented 48.8% of the total loan portfolio and increased by 5.5% to Ps.3,595.0 million in 2Q12, from Ps.3,408.7 million in 2Q11. This was mainly driven by the CrediInmediato loan product. Growth in AEF and AFI formal loans also contributed to the year-on-year increase. The CrediInmediato loan portfolio, rose year-on-year by Ps.87.9 million, or 3.0%, to Ps.2,971.5 million. However, this product represented a lower share of Findep's total loan portfolio, accounting for 40.3% of total loans in 2Q12, from 42.8% in 2Q11 and 40.6% in 1Q12.  On a sequential basis, the number of CrediInmediato clients decreased 18.1% reflecting the termination of 125,851 revolving lines as described above. CrediInmediato's average balance per contract was Ps.5,097 in 2Q12, up 24.3% year-on-year and 21.1% quarter-on-quarter.  

Finsol's total loans reached Ps.1,429.9 million in 2Q12, a 8.2% increase from 2Q11, but a 2.6% decrease from the Ps.1,467.5 million reported in 1Q12. During 2Q12, a total of Ps.1,113.5 million loans were originated at Finsol Mexico and Ps.310.0 million at Finsol Brazil, representing sequential growth of 0.6% and 8.2%, respectively. Starting in 1Q12, and to improve asset quality in a more challenging competitive environment, the Company implemented more restrictive policies in the group loan origination process which has slowed down loan growth in this segment. As of 2Q12, Finsol loans represented 19.4% of the total loan portfolio, down from the 19.9% reported in 1Q12 and the 19.6% posted in 2Q11.

Apoyo Economico Familiar total loan portfolio was Ps.1,032.9 million in 2Q12, a 4.8% sequential increase and up 16.7% from the Ps.885.0 million in 2Q11.  Apoyo Financiero Inc.'s total loan portfolio was Ps.70.0 million in 2Q12, a 98.7% increase from Ps.35.2 million in 2Q11. Approximately 35% of the annual increase, or Ps.12.1 million, was driven by the two additional branches opened by this subsidiary in 1Q12. As of June 2012, AFI's loan portfolio represented 0.9% of the total consolidated portfolio.

Table 1: Financial Margin*









2Q12

1Q12

2Q11

QoQ %

YoY %

6M12

6M11

%


Interest Income

1,223.8

1,260.3

1,092.7

-2.9%

12.0%

2,484.1

2,042.5

21.6%



Interest on Loans

1,219.4

1,254.9

1,089.3

-2.8%

11.9%

2,474.3

2,029.2

21.9%



Interest from Investment in Securities

4.4

5.4

3.4

-18.3%

28.3%

9.8

13.3

-26.7%


Interest Expense

188.4

194.9

188.7

-3.3%

-0.2%

383.2

351.2

9.1%


Financial Margin

1,035.4

1,065.4

904.0

-2.8%

14.5%

2,100.8

1,691.3

24.2%


Provision for Loan Losses

469.1

455.3

307.8

3.0%

52.4%

924.4

541.0

70.9%


Financial Margin After Provision for Loan Losses

566.3

610.1

596.2

-7.2%

-5.0%

1,176.4

1,150.3

2.3%













* Figures in millions of Mexican Pesos


















Table 2: Loan Portfolio, Number of Clients & Average Balance







2Q12

1Q12

2Q11

QoQ %

YoY %


Loan Portfolio (million Ps.)

7,372.1

7,367.8

6,742.9

0.1%

9.3%


Number of Clients

1,459,748

1,613,681

1,512,141

-9.5%

-3.5%


Average Balance (Ps.)

5,050.3

4,565.9

4,459.2

10.6%

13.3%


























Table 3: Number of Clients by Product Type







2Q12

% of

Total

1Q12

% of

Total

2Q11

% of

Total

QoQ % Change

YoY % Change













Financiera Independencia Loans










 -Formal Sector Loans

583,039

39.9%

711,717

44.1%

703,180

46.5%

-18.1%

-17.1%


   - CrediInmediato**

583,039

39.9%

711,717

44.1%

703,180

46.5%

-18.1%

-17.1%


 -Informal Sector Loans

458,606

31.4%

481,208

29.8%

431,717

28.6%

-4.7%

6.2%


   - CrediPopular

384,548

26.3%

399,357

24.7%

340,187

22.5%

-3.7%

13.0%


   - CrediMama


47,391

3.2%

53,192

3.3%

50,644

3.3%

-10.9%

-6.4%


   - CrediConstruye

26,667

1.8%

28,659

1.8%

40,886

2.7%

-7.0%

-34.8%


Finsol Loans


282,006

19.3%

289,524

17.9%

257,161

17.0%

-2.6%

9.7%


 - Finsol Mexico


227,293

15.6%

235,548

14.6%

210,290

13.9%

-3.5%

8.1%


 - Finsol Brazil


54,713

3.7%

53,976

3.3%

46,871

3.1%

1.4%

16.7%


Apoyo Economico Familiar Loans

134,245

9.2%

129,803

8.0%

118,995

7.9%

3.4%

12.8%


Apoyo Financiero Inc Loans

1,852

0.1%

1,429

0.1%

1,088

0.1%

29.6%

70.2%


Total Number of Loans

1,459,748

100.0%

1,613,681

100.0%

1,512,141

100.0%

-9.5%

-3.5%













*Includes  3,278 clients of payroll lending product





 

Table 4: Total Loan Portfolio by Product Type*






2Q12

% of

 Total

1Q12

% of

 Total

2Q11

% of

Total

QoQ %

 Change

YoY %

 Change













Financiera Independencia Loans










 -Formal Sector Loan Portoflio

2,971.5

40.3%

2,994.3

40.6%

2,883.6

42.8%

-0.8%

3.0%


   - CrediInmediato**

2,971.5

40.3%

2,994.3

40.6%

2,883.6

42.8%

-0.8%

3.0%


 -Informal Sector Loan Portfolio

1,867.8

25.3%

1,870.7

25.4%

1,617.9

24.0%

-0.2%

15.4%


   - CrediPopular

1,578.4

21.4%

1,576.9

21.4%

1,302.0

19.3%

0.1%

21.2%


   - CrediMama


160.1

2.2%

168.1

2.3%

158.9

2.4%

-4.7%

0.7%


   - CrediConstruye

129.3

1.8%

125.7

1.7%

156.9

2.3%

2.8%

-17.6%


Finsol Loans


1,429.9

19.4%

1,467.5

19.9%

1,321.2

19.6%

-2.6%

8.2%


  - Finsol Mexico

977.6

13.3%

999.8

13.6%

864.0

12.8%

-2.2%

13.1%


  - Finsol Brazil


452.4

6.1%

467.7

6.3%

457.2

6.8%

-3.3%

-1.1%


Apoyo Economico Familiar Loans

1,032.9

14.0%

985.3

13.4%

885.0

13.1%

4.8%

16.7%


Apoyo Financiero Inc Loans

70.0

0.9%

50.0

0.7%

35.2

0.5%

39.9%

98.7%


Total Loan Portfolio

7,372.1

100.0%

7,367.8

100.0%

6,742.9

100.0%

0.1%

9.3%













* Figures in millions of Mexican Pesos.





**Includes Ps.38.2 million of payroll lending product.




 

 

Table 5: Total Loan Portfolio by Segment*






2Q12

% of

 Total

1Q12

% of

 Total

2Q11

% of

Total

QoQ %

 Change

YoY %

 Change


Formal Sector Loan Portfolio

3,595.0

48.8%

3,577.0

48.5%

3,408.7

50.6%

0.5%

5.5%


 - Independencia (CrediInmediato)

2,971.5

40.3%

2,994.3

40.6%

2,883.6

42.8%

-0.8%

3.0%


 - AEF Formal

553.5

7.5%

532.7

7.2%

489.9

7.3%

3.9%

13.0%


 - AFI


70.0

0.9%

50.0

0.7%

35.2

0.5%

39.9%

98.7%


Informal Sector Loan Portfolio

3,777.1

51.2%

3,790.8

51.5%

3,334.2

49.4%

-0.4%

13.3%


 - Independencia

1,867.8

25.3%

1,870.7

25.4%

1,617.9

24.0%

-0.2%

15.4%


 - Finsol Mexico

977.6

13.3%

999.8

13.6%

864.0

12.8%

-2.2%

13.1%


 - Finsol Brazil

452.4

6.1%

467.7

6.3%

457.2

6.8%

-3.3%

-1.1%


 - AEF Informal

479.4

6.5%

452.6

6.1%

395.1

5.9%

5.9%

21.3%


Total Loan Portfolio

7,372.1

100.0%

7,367.8

100.0%

6,742.9

100.0%

0.1%

9.3%













* Figures in millions of Mexican Pesos.





 

Interest Expense

Interest expense during 2Q12 slightly decreased by Ps.0.3 million, or 0.2%, year-on-year, to Ps.188.4 million. This was principally the result of a 0.6% decrease in the average interest rate paid2 to 10.76% in 2Q12 from 10.82% in 2Q11. The average TIIE decreased to 4.76% in 2Q12 compared with 4.85% in 2Q11. Although the loan portfolio grew 9.3% during the period, the daily average balance of interest bearing liabilities remained practically unchanged, from Ps.6,906 million in 2Q11 to Ps.6,925 million in 2Q12.

Provision for Loan Losses

Provisions for loan losses increased year-on-year by 52.4%, or Ps.161.4 million, to Ps.469.1 million in 2Q12, reflecting the increase in default probabilities in Independencia's loan portfolio and higher write-offs during the period. Excluding AEF and AFI, provisions for loan losses rose by 53.2% year-on-year, or Ps.151.4 million. Write-offs in 2Q12 increased 70.9%, or by Ps.177.9 million, to Ps.429.0 million from Ps.251.1 million in 2Q11. Excluding AEF and AFI, write-offs increased by 74.3% to Ps.397.2 million in 2Q12. Total non-performing loans reached Ps.763.7million, up 15.2% from Ps.662.9 million on 2Q11, and 6.3% from the Ps.718.6 million posted in 1Q12. 

Market Related Income

During 2Q12, the Company reported a Ps.7.6 million gain, principally as a result of foreign exchange operations of Financiera Independencia, Finsol Brazil and AFI. As previously disclosed, since 3Q10 the mark-to-market impact of the cross currency swap to hedge the US dollar bond issuance has been reported in the Stockholders Equity line of the Balance Sheet.

Net Operating Revenue

The new Accounting Standards for Credit Institutions published in the Official Gazette of the Federation (DOF) starting Fiscal Year 2011, established changes in the presentation of the Income Statement. Financiera Independencia adopted those changes starting 4Q11. As a result, the line item "Other Income (expenses), which previously was presented below the Net Operating Income, is now included within "Other Operating Income (Expenses)".  The most relevant items under "Other Operating Income (Expenses)" now include:  recovery and sale of written-off loans, income from the sale of micro-insurance, fees from receiving payment of third-party services at branches, fees from commercial correspondents and sale of fixed assets, among others. For comparison purposes, figures for fiscal year 2011 were reclassified under these new accounting standards.

Net operating revenue fell year-on-year by Ps.1.4 million, or 0.2%, to Ps.822.0 million in 2Q12 due to the reasons outlined before as well as an increase in other operating income and higher commissions and fees collected. Other operating income increased to Ps.50.0 million in 2Q12 from Ps.33.3 million in 2Q11. This was mainly driven by a Ps.13.0 million increase from the sale of written-off loans and by a Ps.6.7 million increase from the sale of micro-insurance. Commissions and fees collected increased to Ps.216.2 million in 2Q12 from Ps.208.5 million in 2Q11. The increase was driven by higher collection fees in Independencia's traditional business.

Net Operating Income (Loss)

During 2Q12, the Company reported a Net operating loss of Ps.42.5 million, compared with Net operating income of Ps.90.9 million in 2Q11 and Ps.42.2 million in 1Q12.

Non-interest expense rose by Ps.132.0 million, or 18.0%, year-on-year. The increase was driven by higher personnel expenses and operational expenses in connection with the expansion strategy of Finsol Mexico and AEF. Personnel expenses increased by Ps.111.4 million, or 23.4%, as a result of the higher number of Independencia collection agents during the quarter and the increase in Finsol Mexico and AEF's staff following the opening of 21 and 24 new branches, respectively, since 2Q11.

During the last twelve months, the Company added a net total of 48 branches to its network, ten of which were added during the quarter. Out of the ten additional branches, five were opened by AEF and another five by Finsol Mexico. In 2Q12, Independencia closed one branch, bringing the total network to 526 units.

 

Table 6: Net Operating Income*

Change







2Q12

1Q12

2Q11

QoQ %

YoY %

6M12

6M11

% Change


Financial Margin

1,035.4

1,065.4

904.0

-2.8%

14.5%

2,100.8

1,691.3

24.2%


Provision for Loan Losses

469.1

455.3

307.8

3.0%

52.4%

924.4

541.0

70.9%


Financial Margin After Provision for Loan Losses

566.3

610.1

596.2

-7.2%

-5.0%

1,176.4

1,150.3

2.3%


Non-Interest Income, net

198.2

210.6

193.9

-5.9%

2.2%

408.8

384.8

6.2%


 - Commissions and Fees Collected


216.2

226.7

208.5

-4.7%

3.7%

442.9

411.9

7.5%


 - Commissions and Fees Paid


18.0

16.2

14.7

11.1%

22.5%

34.1

27.1

25.8%


Market Related Income 

7.6

-5.1

0.1

-247.5%

10288.1%

2.4

-14.9

-116.4%


Other Operating Income (expense)

50.0

50.0

33.3

-0.1%

50.1%

100.0

49.9

100.4%


Net Operating Revenue

822.0

865.6

823.5

-5.0%

-0.2%

1,687.6

1,570.1

7.5%


Non-Interest Expense

864.5

823.3

732.6

5.0%

18.0%

1,687.9

1,357.2

24.4%


 - Other Administrative & Operational Expenses

276.8

262.0

256.2

5.6%

8.0%

538.8

457.9

17.7%


 - Salaries & Employee Benefits

587.7

561.3

476.4

4.7%

23.4%

1,149.1

899.3

27.8%


Net Operating Income (Loss)

(42.5)

42.2

90.9

NM

NM

(0.3)

212.9

NM













Operational Data










Number of Offices

526

517

478

1.7%

10.0%

526

478

10.0%


 - Financiera Independencia

203

204

207

-0.5%

-1.9%

203

207

-1.9%


 - Finsol 

196

191

170

2.6%

15.3%

196

170

15.3%


 - Apoyo Economico Familiar

123

118

99

4.2%

24.2%

123

99

24.2%


 - Apoyo Financiero Inc

4

4

2

0.0%

100.0%

4

2

100.0%


Total Labor Force

12,790

12,290

10,734

4.1%

19.2%

12,790

10,734

19.2%


 - Financiera Independencia

8,714

8,470

7,488

2.9%

16.4%

8,714

7,488

16.4%


 - Finsol 

2,291

2,110

1,732

8.6%

32.3%

2,291

1,732

32.3%


 - Apoyo Economico Familiar

1,764

1,693

1,506

4.2%

17.1%

1,764

1,506

17.1%


 - Apoyo Financiero Inc

21

17

8

23.5%

162.5%

21

8

162.5%













* Financial data in millions of Mexican Pesos.






 

Net Income (Loss)

As a result of the factors discussed above, and after income tax, during 2Q12 the Company reported a Net loss of Ps.38.2 million, compared with Net income of Ps.57.0 million in 2Q11 and of Ps.34.2 in 1Q12.

Earnings per share (EPS) for the quarter were negative Ps.0.0534 compared with Ps.0.0796 for the same period last year.

Apoyo Financiero Inc. Contribution

During 2Q12, AFI generated financial margin after provisions of Ps.3.9 million, or 0.7% of consolidated results. Additionally, AFI contributed with Ps.6.8 million of non-Interest expense, or 0.8% of consolidated results.

FINANCIAL POSITION

Total Loan Portfolio