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Bancolombia's (NYSE: CIB) consolidated 350bn-peso (US$198mn) profit in 1Q11 came in slightly lower than analysts' expectations due to disappointing fees and expenses, as well as weaker FX and derivative gains from the appreciation of the Colombian peso.
The earnings figure was up 3% on 1Q10 as net interest income grew 9.3% due to loan growth and a funding strategy that allowed for lower deposit costs put in place to defend the net interest margin (NIM), which came in at 5.9% in 1Q11, Bancolombia said in an earnings release.
"While results were slightly below our expectations, 1Q results tend to be seasonally weaker. The bank has not yet seen the benefits of rising rates, which only started in late February and should boost NIM going forward," Deutsche Bank (NYSE: DB) said in a note to investors.
The quarterly earnings were 12% lower than local brokerage Bolsa y Renta's estimates, mainly due to weaker-than-expected other operating income, analyst David Peláez told BNamericas.
ROE fell to 18.2%, from 20.1% in 1Q10, showing that loan portfolio expansion came together with efficiency and profitability losses, financial services firmCelfin said in a report.
"In our view [the 1Q11 results were] not very encouraging considering that economic environments in 1Q10 were harder," the report reads.
Based on the bank's first quarter performance, Bogotá-based Corredores Asociados' head of variable income, Ángela Hernández, is expecting Bancolombia to increase 2011 profits by 22.3% compared with the previous year to 1.76tn pesos, backed by strong loan demand and higher interest rates.
As expected, Colombia's central bank increased the benchmark interest rate by 25 basis points to 3.75% on Friday (Apr 29).
Bancolombia's first quarter earnings did not include revenues from pension fund and insurance assets in El Salvador that were sold last year.
LENDING ON THE RISE
Net loans continued to gain pace thanks to increased demand, growing 22.1% as of end-March compared with the same time in 2010.
Asset quality remained stable, with provisions lower than expected at 80bn pesos and the coverage ratio staying high at 175%.
The bank's capital adequacy ratio was 14.2% at the end of the first quarter.
Bancolombia - the country's largest bank - had 71.2tn pesos in assets and 63.5tn pesos in liabilities as of end-March.