Beats Q3 expectations but macro backdrop shades future performance
Grupo Financiero Valores (BYMA:VALO) reported a net income of ARS 761 million during 3Q 2019 (+58% q/q, +158% y/y), driven by short-term investment income. Results were above expectations.
Net interest income reached ARS 944.5 million (+11.4% q/q, +92.7% y/y) thanks to short-term investment income, boosted by Leliqs. By the end of the quarter, the company rotated its investment portfolio, reducing its exposure to Central Bank bills from 18% to 3% of total assets and positioning in repos. Fee income, net reached ARS 99.2 million (-16.1% q/q, +11.1% y/y), amid an abrupt drop in mutual funds industry’s total assets, together with a virtual freezing in new financial trusts and corporate debt issues. The adjusted operating result, which came in at ARS 689 million, increased 62% y/y, but remained virtually unchanged vs. 2Q 2019.
GF Valores maintains a sound liquidity level, with full coverage of dollar deposits. NPL level remains low at 0.7% for the quarter, while the company increased the allowance for bad debts in order to cover the total consumption and housing portfolio.
Despite the positive investment result, the current scenario of diminishing activity in the domestic capital markets and falling real interest rates does not contribute to the development of VALO's business lines. After a 96% increase in price during the 12 months, we update the rating to Market Underperformer.