1/19 3Q10 Earnings Release Focused on Corporate Lending São Paulo, November 11, 2010 – Banco Indusval S.A., financial institution with activities primarily focused on middle market lending, operating in the Brazilian market for over 40 years, listed at the Stock, Commodities and Futures Exchange - BM&FBOVESPA under tickers IDVL3 and IDVL4, announces its financial results for the third quarter 2010 (3Q10). Highlights The loan portfolio, including guarantees and letters of credit, closed 3Q10 at R$ 1.8 billion, up 5.0% from 3Q09. Allowance for loan losses totaled R$ 112 million, covering 6.6% of the loan portfolio and around 180% of Non-Performing Loans (more than 60 days overdue). Total funding remained at around R$ 1.9 billion, with longer tenors and cash free of current obligations of R$ 679 million, equivalent to 46% of total deposits. Net profit of R$ 7.5 million in the quarter and R$ 23 million in the first nine months, with a significant increase in recurring revenues. Banco Indusval Multistock is ranked 3rd among Latin America’s most sustainable midsized banks in 2010, according to the Spanish consultancy firm Management & Excellence, in partnership with Latin Finance. IDVL4: R$ 8.00 per share Closing: 11/11/2010 Total Shares: 41,212,984 Market Cap: R$ 329.7 MM Conference Call/ Webcasts: Nov. 12/2010 In English Webcast At: 12 pm (US EST)/ 3 pm (Brasília) Webcast will be available on: www.indusval.com.br/ir In Portuguese Conference Call and Webcast At: 11 am (US EST) / 2 pm (Brasília) Phone: (55 11) 4688-6361 Code: Banco Indusval Website: www.indusval.com.br/ir
São Paulo, November 11, 2010 – Banco Indusval S.A., financial institution with activities primarily focused on middle market lending, operating in the Brazilian market for over 40 years, listed at the Stock, Commodities and Futures Exchange - BM&FBOVESPA under tickers IDVL3 and IDVL4, announces its financial results for the third quarter 2010 (3Q10).
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1/19
3Q10 Earnings Release
Focused on Corporate Lending
São Paulo, November 11, 2010 – Banco Indusval S.A., financial institution with activities
primarily focused on middle market lending, operating in the Brazilian market for over 40 years,
listed at the Stock, Commodities and Futures Exchange - BM&FBOVESPA under tickers IDVL3 and
IDVL4, announces its financial results for the third quarter 2010 (3Q10).
Highlights
� The loan portfolio, including guarantees and letters of
credit, closed 3Q10 at R$ 1.8 billion, up 5.0% from
3Q09.
� Allowance for loan losses totaled R$ 112 million,
covering 6.6% of the loan portfolio and around 180%
of Non-Performing Loans (more than 60 days
overdue).
� Total funding remained at around R$ 1.9 billion, with
longer tenors and cash free of current obligations of R$
679 million, equivalent to 46% of total deposits.
� Net profit of R$ 7.5 million in the quarter and R$ 23
million in the first nine months, with a significant
increase in recurring revenues.
� Banco Indusval Multistock is ranked 3rd among Latin
America’s most sustainable midsized banks in 2010,
according to the Spanish consultancy firm
Management & Excellence, in partnership with Latin
Finance.
IDVL4: R$ 8.00 per share
Closing: 11/11/2010
Total Shares: 41,212,984
Market Cap: R$ 329.7 MM
Conference Call/ Webcasts:
Nov. 12/2010
In English
Webcast
At: 12 pm (US EST)/ 3 pm (Brasília) Webcast will be available on:
www.indusval.com.br/ir
In Portuguese
Conference Call and Webcast
At: 11 am (US EST) / 2 pm (Brasília)
Phone: (55 11) 4688-6361
Code: Banco Indusval
Website: www.indusval.com.br/ir
2/19
The financial and operating information presented in this report are based on consolidated financials prepared in local currency
Number of Clients - Corporate Borrowers 703 694 643
Number of Employees 354 349 345
Banco Indusval Multistock (BIM) is a commercial bank with 43 years of experience in the financial markets, focusing on local and foreign currency corporate loan products. Operating with agility and quality in its services, BIM has a wide range of products designed to meet the specific needs of this market, including structured deals. To guarantee such a level of service, the Bank relies on a network of 11 branches strategically located in economically relevant Brazilian regions, including an offshore branch, and its subsidiary Indusval Multistock Corretora de Valores, the brokerage arm that operates at the São Paulo Stock, Commodities and Futures Exchange - BM&FBOVESPA. The Bank is a publicly-held financial institution listed at Level 1 Corporate Governance of the BM&FBOVESPA since July 2007 and voluntarily adopts additional practices specific to companies listed in the Novo Mercado special trading segment.
Results
Balance Sheet Resultados Trimestrais
Key Indicators – R$ MM
Performance
Other Information
3/19
In the third quarter of 2010, the Brazilian economy proved its consistent behavior and showed that
the political developments had little influence on its performance. However, Banco Indusval
maintained the approach it adopted at the end of 2009, when it decided to review its medium- and
long-term business strategies. In other words, we are overcoming the recent past setbacks and are
reinforcing our structure to expand our businesses. Though the market demands immediate results,
for the sake of consistency and sustainability, this process is not developed overnight.
The first step in this direction was the strategic alliance established at the brokerage firm in June
2009, which, though still in the investment phase, is already operating on a new technological
platform with products tailored to the profile of the existing and the target clients. Also with an
improved expertise that is compatible with market demand. As second step, with the decision to
broaden the focus of operations to include the ‘upper middle’ companies, we segmented the client
service platform into Middle Market, targeted at companies with annual revenue of up to R$ 400
million, and the one denominated ‘Large Companies’, targeted at companies with annual revenue of
over R$ 400 million. This new service platform was created in July and should deliver more
consistent results in around 12 months. The objective of this segmentation is to increase the
competitiveness in meeting the specific demands of each segment, given that for upper-middle
companies our competitive advantage rests on structured operations with customized solutions.
Thus, our numbers transparently reflect this period of work towards the expansion and perpetuity of
Banco Indusval in a consistent and sustainable manner.
The economies of developed countries are expanding modestly, with no inflation pressures,
resulting in low interest rates. The combination of low interest rates and available liquidity
encourages the flow of funds to emerging economies, which present the highest growth rates and
demand for investments. This trend has led to a strong appreciation of their currencies against the
U.S. dollar, since the recovery of the U.S. economy is slower than of European countries.
In 3Q10, the Brazilian economy stands to benefit from this scenario, registering low inflation and
little pressure on interest rates, which enable longer-term funding and reasonable costs in virtually
all sectors. This expansion potential of the economy attracts investments both in the means of
production and in financial assets, despite measures to curb the exaggerated appreciation of the
Brazilian real. This situation points to strong economic growth, with increased investments, income
and consumption, and lower unemployment rates. This growth should reach levels that are
sustainable in the long run, in 2011, allowing inflation and interest rates to remain stable and, in
the backdrop of the global scenario, point to an attractive environment for investments, credit and
Note that the above table shows that the allowance for loan losses on September 30, 2010,
corresponded to 6.6% of the loan portfolio, versus 6.4% in 2Q10.
It is worth mentioning that the carry-forward of corporate loans overdue during 2009 impacts the
maintenance of the default ratios which, according to the Central Bank data presented in the
beginning of this report, have practically remained stable at around 3.6% for loans overdue more
than 90 days.
In the quarter, the total balance of agreements in the loan portfolio of the Bank with installments
overdue more than 90 days, and therefore comparable to the Central Bank data, corresponded to
2.5% of the portfolio. The Management believes that the allowances constituted provide sufficient
coverage for the overdue loans.
In 3Q10, loans amounting to R$ 7.0 million (R$ 15.6 million in 2Q10), classified as H for 180 days,
hence 100% provisioned, were written off, bringing total write-offs in 9M10 to R$ 56.7 million.
Recovery of overdue loans, though still slower than desired, totaled R$ 1.0 million in 3Q10 (R$ 1.4
million in 2Q10) and R$ 4.9 million in 9M10.
Default by Segment – R$ MM
12/19
Funding balances increased 1.2% from the previous quarter to reach R$ 1.9 million, out of which
83% of total funding in reais and 17% in foreign currency.
3Q10 2Q10 3Q09 3Q10/ 2Q10 3Q10/ 3Q09
Total Deposits 1.471.2 1.373.3 1.215.9 7.1% 21.0%
Time Deposits (CDB) 753.1 749.2 592.4 0.5% 27.1%
Time Deposits with Special Guarantee (DPGE)* 543.1 525.4 500.3 3.4% 8.5%
Agribusiness Letters of Credit (ALC) 69.6 16.2 9.0 330.0% 670.4%
Interbank Deposits 67.7 45.7 65.3 48.2% 3.7%
Demand Deposits and Other 37.7 36.8 48.8 2.4% -22.8%
Domestic Onlending 108.0 93.1 182.9 16.0% -41.0%
Foreign Borrowings 323.5 414.2 333.2 -21.9% -2.9%
Trade Finance 286.0 304.4 219.9 -6.0% 30.1%
IFC A/B Loan 37.5 109.8 113.3 -65.9% -66.9%
TOTAL 1.902.7 1.880.6 1.732.0 1.2% 9.9%
* Time Deposits bearing the Guarantee of the Credit Insurance Fund
Funding in reais mainly consists of deposits, which account for 77% of total funding, mainly through
the issue of Bank Deposit Certificates (CDBs) (39.6%) and Time Deposits with Special Guarantee
(DPGE) (28.5%). The average term for deposits was 757 days from issue and 526 days as of the
closing of the quarter, as follows:
Type of Deposit Average term from issuance Average term to maturity
CDB 551 361
Interbank 160 74
DPGE 1.186 853
LCA 184 167
Portfolio of Deposits 757 526
Deposits
By Type By Investor By Maturity
Time Deposits (CDBs)51%
Time Deposits
(DPGEs)37%
Interbank4%
ALC5%
Demand3%
Financial Inst. 6%
Enterprises 23%
Individuals 17%
Other3%
Institutional
51%
181 to 360 21%
91 to 180 7%
+360 days 45%
up to 90 days27%
The share of foreign borrowings in total funding declined to 17%, due both to the appreciation of
the real and the payment of the principal amount of the B Loan from the IFC in the amount of US$
32.4 million and Euro 7.1 million, totaling R$ 72.0 million on September 27, 2010. As announced,
this operation is fully hedged against variations in foreign currency and interest rates since its
disbursement in October 2008. Note that the funds raised through Trade Finance lines from foreign
correspondent banks is offset by the Trade Finance loan portfolio, which has grown in U.S. dollar
terms, as explained in the section on Trade Finance.
Total Funding – R$ MM
Funding
13/19
Free Cash – R$ MM Assets and Liabilities Management (GAPS) – R$ MM
On September 30, 2010, Cash totaled R$ 1,458.5 million and, excluding Money Market Funding (R$ 739.0 million) and Derivatives (R$ 39.8 million), resulted in free cash of R$ 679.7 million, equivalent to 46% of total deposits and 157% of shareholders’ equity, demonstrating a healthy liquidity to meet the obligations and the loan portfolio growth.
Assets and liabilities are managed in order to guarantee a comfortable level of liquidity and stability
to the Bank, with a longer profile of liabilities, considering that the current maturity profile of the
loan portfolio is concentrated in operations maturing in up to 360 days (70%).
The Basel Accord requires banks to maintain a minimum percentage of capital weighted by the risk in
their operations. The Central Bank of Brazil has stipulated that banks operating in the country should
maintain a minimum percentage of 11.0%, calculated according to the Basel Accord regulations,
which provides greater security to Brazil’s financial system against oscillations in economic conditions.
The following table shows Banco Indusval Multistock position in relation to the minimum capital
requirements of the Central Bank:
3Q10 2Q10 3Q09 3Q10/ 2Q10 3Q10/ 3Q09
Total Capital 432.4 429.7 439.3 0.6% -1.6%
Required Capital 238.6 232.5 223.4 2.6% 6.8%
Margin over Required Capital 193.8 197.1 215.9 -1.7% -10.3%
Basel Index 19.9% 20.3% 21.6% -0.4 p.p. -1.7 p.p.
Agency Ratings Observation Last Report Financial
Date as of
Standard & Poors
B+ / Positive / B
B+ / Positive / B
brBBB+/ Positive /brA-3
Global Scale: Foreign Currency
Global Scale: Local Currency
Local Scale - Brazil
Nov. 03. 2009 June 30. 2009
FitchRatings BBB/ Stable/ F3 National Scale - Brazil Aug 19. 2010 June 30. 2010
RiskBank 10.50
Ranking: 41
RiskBank Index
Low risk for Short Term Oct. 14. 2010 June 30. 2010
Capital Adequacy
Liquidity
Risk Ratings
Capital Adequacy– R$ MM
679.7695.5707.1
3Q09 2Q10 3Q10
645,3
339,6238,5
536,3552,7
227,9
372,0
729,9
90 180 360 > 360 days
Assets Liabilities
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Total Shares
On September 30, 2010, Banco Indusval S.A. had a total of 41,212,984 shares, of which
27,000,000 were common shares (IDVL3) and 14,212,984 were preferred shares (IDVL4).
The cancellation, with no capital reduction, of 1,262,117 preferred shares held in treasury until
August 10, 2010, when it was approved by the Board of Directors, will be submitted to the
Extraordinary Shareholders’ Meeting to be held on November 18, 2010, together with the proposal
to amend the lead paragraph of article 5 of the Company’s Bylaws to reflect said cancellation.
Share Buyback Program
The 4th Share Buyback Program for the acquisition of up to 1,301.536 preferred shares, approved
by the Board of Directors on August 10, 2010, is effective till August 9, 2011. Indusval S.A. CTVM is
the intermediary for this program, through which a total of 700,598 preferred shares (IDVL4) had
been acquired till October 30, 2010.
Free Float
Number of Shares as of Oct. 30. 2010
Type Paid-up Capital Controlling Group Management Treasury Free Float (%)
Common 27,000,000 (17,116,173) (2,574,369) - 7,309,458 27.1%