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Mexico’s Compartamos 4Q Net Profit Flat As Expenses Rise

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FEBRUARY 23, 2011, 9:18 A.M. ET

By Anthony Harrup

Of DOW JONES NEWSWIRES

MEXICO CITY (Dow Jones)–Mexican microfinance lender Banco Compartamos said its net profit was practically flat in the fourth quarter as the company increased hiring to support growth in its customer base and loan portfolio.

Compartamos, which specializes in small loans to individuals and small businesses, reported Tuesday net profit of 515 million pesos ($41.6 million), or MXN1.20 per share, in the October-December period, compared with MXN516 million or MXN1.21 per share a year earlier. Full-year net profit rose 26% to MXN1.88 billion.

The bank’s customers rose 31% to 1.96 million in 2010, and its loan portfolio expanded 28% to MXN9.76 billion. Non-performing loans fell to 1.98% of the portfolio from 2.43%, and its capitalization ratio was 44.2% compared with 42.6%.

Net operating revenue in the quarter rose 25% to MXN1.51 billion, while net operating profit rose 2.3% to MXN676 million, limited by higher operating expenses.

Compartamos reported a 33% year-on-year increase in the number of employees to 9,773. “Operating expenses were mainly allocated towards employee-related expenses, such as salaries, productivity bonuses and training,” the company said.

Compartamos wrote off past-due loans for MXN65 million in the fourth quarter, compared with MXN59 million in the like period of 2009. Loan loss coverage was 146%, up from 141% a year earlier.

Chief Executive Fernando Alvarez said in a telephone interview that the company expects to surpass the 2 million customer mark in 2011, with growth between 19% and 23% in its client base. As market penetration increases, and client growth tends to slow, the bank sees more of its growth coming from new products and from expansion abroad.

New products include micro-insurance policies, home improvement loans, and the bank’s latest innovation, a pilot debit card program in the state of Veracruz where clients have their loans deposited in the card, and can also make deposits.

The eventual expansion of the card program, which is still being tested on a small scale, could lead to a change in the traditional way of interacting with customers, who receive their loans in cash and make their payments in cash, Alvarez said.

The other source of growth Compartamos is looking at is expansion abroad, either organically by opening up operations, or through acquisitions, Alvarez said.

In December, Banco Compartamos swapped its shares for shares in holding company Compartamos SAB (COMPARC.MX) with the aim of giving the company greater flexibility for expansion. The company is in the process of delisting the Banco Compartamos shares.

Compartamos SAB shares closed down 3% Tuesday on the Mexican stock exchange at MXN23.21.

-By Anthony Harrup, Dow Jones Newswires; (5255) 5980-5176, anthony.harrup@dowjones.com

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