Galicia's net profits jump 269% in 4Q10, beating DB estimates handily

Thursday, February 17, 2011

Argentina's Banco Galicia saw 4Q10 net income surge 269% over 4Q09, due to a significant increase in the volume of business with the private sector and helped by a reduction in its public sector exposure, as well as a decrease in its foreign debt obligations.

Banco Galicia, the main asset of Grupo Financiero Galicia (Nasdaq: GGAL), reported net income of 198mn pesos (US$49.2mn) in the fourth quarter, according to its latest earnings release.

Assets from business with the private sector - which includes lending, leasing and corporate securities, among other activities - grew 45.9% in the 12 months to end-December, reaching 25.9bn pesos. Public sector exposure was reduced by 33.5% to 3.86bn pesos in the same comparison.

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The results were well above Deutsche Bank's (NYSE: DB) estimate of 74mn pesos, on the back of "solid loan growth, in line with peers, and improved asset quality," analysts Tito Labarta and Mario Pierry wrote in a research note. DB maintained its hold rating on Galicia's stock.

Loans rose 58.5% to 21.3bn pesos in 4Q10, driven largely by an expansion in the consumer segment, which was up 76.9% to 12.6bn pesos in the quarter. Banco Galicia's non-performing loan (NPL) ratio was 4.38% at end-4Q10, compared with 4.77% in 4Q09.

Deutsche Bank noted that Grupo Financiero Galicia expects to receive a cash dividend of 94.8mn pesos from the bank's operations, and the board will propose a cash dividend of 24.8mn pesos at the upcoming annual shareholders meeting. Even though the amount is small (0.3% dividend yield), "it represents the first dividend paid by Galicia since the Argentine crisis of 2001."

To read the full earnings release in English, go to this link

To read the full earnings release in Spanish, go to this link