March 28, 2017 / 11:38 AM / a year ago

Brazil's Caixa profit rises as provisions, expenses fall

SAO PAULO, March 28 (Reuters) - State-controlled Caixa Econômica Federal, Brazil’s largest mortgage lender, posted a sharp jump in fourth-quarter profit on Tuesday, reflecting declining loan-loss provisions in light of a drop in delinquencies.

Brasilia-based Caixa posted recurring net income of 2.449 billion reais ($783.40 million) last quarter, up three-fold from the prior three months and the highest in at least a year. In the same period a year earlier, Caixa had posted a net loss before one-off items of 322 million reais.

In a statement, Caixa cited a robust increase in fee income - or revenue from financial services - and a drop in provisions triggered by a sharp decline of 0.6 percentage points in the 90-day default ratio to 2.9 percent. Provisions, or capital that banks set aside to cover bad loans, fell 3.3 percent to 4.937 billion reais last quarter.

Management plans to discuss results at an event in São Paulo later in the day.

Since taking over in the middle of last year, Chief Executive Officer Gilberto Occhi has focused on fine-tuning Caixa’s credit risk assessment models to drive down a surge in defaults and in bad loans, which last year touched all-time highs in some segments. Until last year, delinquencies at Caixa came in well below the average of Brazil’s banking industry, since more than 60 percent of its loan book is earmarked for secured, collateralized mortgage lending.

Interest income fell 1 percent from the third quarter, while fee income climbed 5.5 percent in the same period, the statement said. Non-interest expenses, which are comprised of payroll and administrative expenses, rose to 8.803 billion reais in the quarter, while Caixa’s loan book rose 4.4 percent last year to 709.289 billion reais. ($1 = 3.1261 reais) (Reporting by Guillermo Parra-Bernal; Editing by Chizu Nomiyama)

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