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By Aluísio Alves and Guillermo Parra-Bernal
SAO PAULO, March 28 Caixa Econômica Federal
expects higher profit and other key improvements this year, as
efforts by Brazil's largest mortgage lender to stem loan
delinquencies and curb costs begin to pay off, Chief Executive
Officer Gilberto Occhi said on Tuesday.
At an event to discuss the state-controlled lender's
fourth-quarter results, Occhi said Caixa's steps to rein in
expenses and bolster efficiency have eliminated the need for a
capital injection from the National Treasury. It also has ruled
out listing any subsidiaries or selling assets this year.
Occhi and other Caixa executives said a voluntary worker
retirement plan slated for this year could lead to about 975
million reais ($311 million) in cost savings. Occhi expects
about 5,000 of Caixa's almost 95,000 employees to join the
"For years we focused on growth, now it's time to focus on
operational efficiency," Occhi said.
His remarks came after Brasilia-based Caixa posted a sharp
jump in its quarterly recurring profit, reflecting declining
loan-loss provisions as delinquencies dropped. Recurring net
income, a gauge of profit excluding one-off items, was 2.449
billion reais, up three-fold from the prior three months and the
highest level in at least seven years.
Since taking over the helm of the lender last year, Occhi
has focused on fine-tuning Caixa's credit risk assessment models
to weather surging defaults and bad loans, which are hovering
around the highest levels in four years.
Caixa had posted a net recurring loss of 322 million reais
in the last quarter of 2015.
Like most of its rivals, Caixa has begun to feel the impact
of declining domestic borrowing costs, which can weigh down
interest income but offer relief to risky or even delinquent
borrowers. Local interest rates remained at a decade-high
between 2015 and 2016, compounding the effect of Brazil's
harshest recession ever.
Loans in arrears for 90 days or more, a benchmark for
delinquencies, fell to the equivalent of 2.9 percent of Caixa's
outstanding loans in December, compared with 3.5 percent in the
third quarter and 3.6 percent in the fourth quarter of 2015.
Until last year, the lender's delinquencies fluctuated at
levels well below the average of Brazil's banking industry
because of the collateralized nature of its loan book. At the
end of last year, mortgages accounted for about 60 percent of
Caixa's 709.289 billion reais in loans.
Fee income, or revenue from financial services, rose 5.5
percent last quarter, while provisions receded 3 percent in the
wake of a 0.6 percentage points in the 90-day default ratio.
Provisions, or capital that banks set aside to cover bad loans,
came in at 4.937 billion reais last quarter - the lowest level
in a year.
Interest income fell 1 percent from the third quarter.
Non-interest expenses, which are comprised of payroll and
administrative expenses, rose to 8.803 billion reais in the
($1 = 3.1323 reais)
(Additional reporting by Bruno Federowski in São Paulo; Editing
by Chizu Nomiyama and Paul Simao)