Despite challenging economic times, Banco Compartamos SA, a microfinance bank located in Mexico City, has reported strong results for third quarter of 2009. Compartamos reported a total loan portfolio of 7,071 million pesos or 548 million USD, or an increase of 40.2 percent from the previous year.[1, 2] The number of new clients reached 1.4 million active clients resulting from an increase of 36.1 percent of new clients over the past year.[1,2] Compartamos states that global macroeconomic environment has not negatively affected client demand.[2, pg.4] The average outstanding loan balance per client increased slightly by 3.1 percent to 4,968 pesos or 385 USD in third quarter of 2009.[2, pg.4] Compartamos’ core product called “Credito Mujer” (group loans) represents 74.2 percent of the total loan portfolio in third quarter of 2009.[2, pg.4] The Bank states that it “restructured the loan origination process in higher risk profile products, establishing stricter policies to avoid over indebting customers.”[2, pg. 4]
Compartamos reported an increase in net income of 31.0 percent from the prior year to 359 million pesos in third quarter of 2009 or 27.8 million USD.[2, pg.3] It also reported a 29.8 percent increase in net interest income (NII) after provisions to 1,133 million pesos or 87.8 million USD which was mainly a result of 40.2 percent growth in the total loan portfolio. [2, pg. 2] However, the increase in interest income was offset by an increase in interest expense of 72 million pesos or 5.6 million USD and a significant increase in loan losses to 79 million pesos or 6.1 million USD.[2] Write offs also increased from 18 million pesos or 1.4 million USD to 59 million pesos or 4.6 million USD.[2] This represents an 0.83 percent write off ratio against total loan portfolio.[2] Overall, the Bank maintains strong credit quality as its “Tier 1 Ratio remained strong at 41.3.”[1]
In an effort to minimize potential liquidity problems “due to current market volatility,” Compartamos significantly increased its liquidity position by 192.3 percent to 1,628 million pesos or 126.2 million USD. [2, pg. 3] This action resulted in an 69.6 percent increase in the Bank’s total liabilities which reached 5,237 million pesos or 405.9 million USD in third quarter of 2009.[2, pg.5] As previously reported by MicroCapital.org, these debt issuances have been viewed as pivotal in the Bank’s ability to mitigate risk through the challenging economic environment. [4]
With respect to its performance ratios and metrics, the Return on Average Equity (ROAE) measured in third quarter of 2009 was 42.6 percent which represents a slight improvement over the previous year and Return on Average Assets (ROAA) for third quarter 2009 was 17.2 percent as compared to 20.1 percent in the previous year.[1, 2 pg.6] The efficiency ratio measured by operating expenses/net operating revenue also improved slightly 55.0 percent over the past year.[2, pg.6] This increased efficiency includes adjustments made to the organization as a result of an influx of new employees by 27.2 percent.[2, pg.6]
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By Hio Kyeng Lee, Research Associate.
Bibliography:
[1] Reuters: “Compartamos Banco Reports 3Q09 Results,” October 20, 2009, located at http://www.reuters.com/article/pressRelease/idUS129615+20-Oct-2009+PRN20091020
[2] Banco Compartamos SA, Third Quarter 2009 Report, located at under “Investors Relations” in http://www.compartamos.com/wps/portal
[3] MixMarket.org: “Featured MFI: CompartamosBanco Banco Compartamos S.A. Institución de Banca Múltiple,” located at http://www.mixmarket.org/mfi/compartamosbanco, (data current through December 31, 2007).
Additional Resources:
[4] “MICROCAPITAL.ORG STORY: Banco Compartamos SA Applies for Banking License to Accept Deposits from Clients” by Stephanie Rubin, October 19, 2009, located at https://www.microcapital.org/microcapitalorg-story-banco-compartamos-sa-applies-for-banking-license-to-accept-deposits-from-clients/
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