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In a year when credit growth galloped ahead at a near record pace, Peru's Intergroup Financial Services (IFS) finished 2010 with earnings down 1.6% from the previous year, a result that management blamed on one-time losses and a tightening net interest margin.
The financial services group earned 498mn soles (US$180mn) in 2010 on a difficult fourth quarter in which earnings dropped 36% year-on-year, to 102mn soles.
The decline in earnings pushed ROAE for the quarter down to 20.3%, from 29.1% in 3Q10 and 36.8% in 2Q10. The group finished 2010 with an ROE of 26.2%, down from 2009's 32.1%.
In a conference call on the results, management pointed to a 33.3% increase in taxes during the year - to 230mn soles - and a 32.8% rise in depreciation costs - to 98.4mn soles.
But just as significant, in a year when lending from the group's flagship bank expanded by 22.4%, IFS' financial income in 2010 expanded by only 8.6%, compared with 41.2% annual growth in 2009.
The bank's net interest margin dropped to 8.4% through the end of the fourth quarter, down 140 basis points from a year ago, a decline that is in line with a similar trend in the broader banking sector.
In the conference call, executives said they expected lending in 2011 to expand at roughly the same pace as 2010, with ROE remaining around 25%.