MICROCAPITAL STORY: Compartamos Announces 2008 Fourth Quarter Earnings Over Webcast

The Mexican microfinance bank, Banco Compartamos, announced its audited financial results for the fourth quarter of 2008 (4Q08) in a conference call. The figures were announced in pesos and have been converted here to US dollars. The figures adhere to the requirements of the Comision Nacional Bancaria y de Valores (CNBV), the Mexican banking and securities regulator. Compartamos underwent an Initial Public Offering (IPO) in April 2007, and has since been publicly traded on the Mexican Stock Exchange. The webcast is archived and can be accessed through this link. The 4Q08 Financial Statement is available for download here.

The conference call began as Chief Executive Officer (CEO) Carlos Danel announced that in 2008 Compartamos surpassed the one-millionth-client mark, and reached nationwide coverage – a feat that he claimed Compartamos is the only Mexican bank to have achieved. For more information on Compartamos surpassing the one-millionth-client mark, please see this pertaining MicroCapital article.

Due to the larger client base, Compartamos’ total loan portfolio rose 37 percent over in 2008, reaching over USD 372 million. The CEO stressed that the bank’s asset quality remained strong, with non-performing loans (NPL) totaling USD 6.4 million and comprising 1.71 percent of the total portfolio.

Compartamos’ net income grew 27 percent in 2008 to USD 73 million, the highest growth in company history. The bank had a 43 percent return on equity (ROE) and a 20 percent return on assets (ROA). To compare Compartamos 2008 earnings with those of 2007, please refer to this MicroCapital article.

The CEO concluded, “We are aware of the global economic challenges that we will face in 2009, however, we expect that Compartamos will experience yet another year of growth.”

Mr. Danel then handed the call over to Compartamos’ Chief Financial Officer (CFO) Fernando Alvarez to breakdown the Financial Statement.

During the 4Q08, Compartamos’ net operating income before taxes was USD 25 million, a 20.7 percent increase against the fourth quarter of 2007 (4Q07) earnings. The bank’s 4Q08 net operating revenue was USD 58.5 million, up 36.5 percent from the 4Q07. Its operating expenses rose to USD 32.9 million, due largely to the banks rapid expansion involving opening new offices, marketing campaigns, and hiring new personnel. Mr. Alvarez stressed that salaries and employee benefits represented over 55 percent of The bank’s net expenses and rose 68 percent. Employee profit sharing for the 4Q08 was USD 756 thousand, 36.5 percent higher that of the 4Q07.

Compartamos increased its cash and investment in securities 145 percent to USD 58.2 million. Mr. Alvarez explained that this was a conservative measure to weather unstable markets, as a strong capital base is needed secure the funding necessary to maintain growth in 2009.

Compartamos’ total liabilities at the end of 4Q08 amounted to USD 339 million, 87.2 percent higher than liabilities at the end of 2007. The CFO stressed that the liabilities are totally peso denominated, and therefore the bank had no foreign currency exposure.

Stockholder equity grew USD 37.2 million to USD 182 million in 2008, up 25 percent from the USD 143 million reported in 4Q07. At the end of the 4Q08, the bank had 12 million shareholders. Compartamos’ stocks closed on March 2 at a value of 24.62 pesos (USD 1.60), down from the USD 1.85 value reported by MicroCapital on February 19 before the conference call.

Compartamos (“let’s share” in Spanish) was established as a faith-based NGO in 1990. In 1997, it transitioned to a commercialized MFI. Compartamos received much publicity in April 2007 after undergoing a controversial Initial Public Offering (IPO) on the New York and Mexican Stock Exchanges. The IPO raised eyebrows due to the large profits it generated in an industry with a perceived social agenda (USD 458 million for early investors). For more information on Compartamos’ IPO, please refer to this MicroCapital story.