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1、,Credit,GlobalMarketsResearch,EmergingMarkets,5.6%,2.0%,3Q12,Global Emerging Markets Brazil27 December 2012,Banco BMG SAWeak 3Q12;Maintain Buy onlong term positive prospectsAs expected,BMG reported weak 3Q12 results reflecting the banks accountingtransition to Resolution 3533.While BMG should contin
2、ue to report weak figuresin the next few quarters,we maintain our Buy recommendation based on our longterm positive view of the credit on the back of BMGs association with Itau(pleaserefer to page 2 for risks disclosures related to our recommendation).,Company UpdateResearch TeamNatalia CorfieldRese
3、arch Analyst(+1)212 Denis ParisienResearch Analyst(+1)212 250-Own credit portfolio breakdown10.1%0.8%6.4%,BMG reported another set of weak results in line with our expectationsAs expected,BMGs 3Q12 results have continued to be negatively impacted bythe introduction of Resolution 3533 as well as by n
4、on-recurrent losses derivedfrom the M-t-M of the banks hedge against interest mismatches.As a result,BMG reported a loss of nearly BRL152m(USD75m)in the quarter and ofBRL431m YTD(USD213m).In addition,during 3Q12,BMG also registered anincrease in provision levels of 20.8%reflecting higher NPLs-mainly
5、 on the banksauto financing and SME portfolios-which increased to 3.6%from 2.7%in 2Q12(overdue by more than 90 days).The banks total NPL ratio,nonetheless,remainedlow at 1.6%reflecting BMGs focus on payroll loans(payroll loans made up 89.4%of BMGs total loan portfolio on and off balance sheet in 3Q1
6、2).Also of note is thedrop of BMGs cash position,which should be reverted in 4Q12,and a decline ofthe banks capital adequacy ratio(CAR)to 12.7%from 13.1%in 2Q12 reflectingthe growth of the banks loan portfolio.Despite the weak results,some positive highlights in the quarter include:(1)BMGs on-balanc
7、e sheet loan portfolio grew 12.9%qoq to BRL16.2bn(USD8.0bn),helping to increase the banks earnings recurrence;(2)the offbalance-sheet loan portfolio decreased 15.9%qoq to BRL11.3bn(USD5.6bn)paving the way for BMGs full transition to Resolution 3533;(3)the banks loanorigination increased to BRL496m(U
8、SD245m)from BRL388m(USD191m)in2Q12.,PDLs PDL credi t ca rd Pers onal creditNPLs over 90 days2.0%1.7%12.911.2 11.13Q11 4Q11 1Q12Own credi t portfolio(BRLbn)Basel Index14.5%13.2%,77.0%CDC vehi cl es+l easing1.8%14.42Q12NPLs 90 days13.1%,Commerci a l1.6%16.2,2013 should be difficult,but the JV impact s
9、hould be more evident in 2H13For 4Q12,BMG should continue to report weak figures,but we expect modestimprovements of the banks NPL ratio due to the better vintage of its autofinancing portfolio,reduced provisions as well as a higher cash position.Accordingto managements guidance,total on-balance she
10、et portfolio is expected to reachBRL17.5bn(USD8.6bn)in 4Q12 and the banks CAR should be flat in relation to3Q12 as the recent capital injection of BRL150m(USD75m)should be offset bythe continuing expansion of BMGs lending activities.,12.6%3Q11,4Q11,1Q12Ba s el Index,2Q12,12.7%3Q12,For 2013,we expect
11、 a difficult first half of the year on the back of the continuingtransition to Resolution 3533,followed by gradual improvements in the secondhalf as the effects of the JV become more evident and BMG advances in theaccounting transition.We note that the JV should not generate profits in its firstoper
12、ational year,but its effects on BMGs funding,profitability and CAR shouldgradually materialize throughout 2013 as BMG utilizes Itaus BRL300m(USD148m)monthly credit line and transfers part of its cost structure to the JV.Deutsche Bank Securities Inc.DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED
13、IN APPENDIX 1.MICA(P)072/04/2012.,27 December 2012,Financials Banco BMG SA,Positive management change might have been prompted by the Mensalao scandalBMG announced at the end of November that Mr.Alcides Tapias and Mr.Antonio Hermanassumed the positions of President of Board of Directors and CEO repl
14、acing Mr.FlavioGuimaraes and his son Ricardo Guimaraes,respectively.This marks a shift from a family runmanagement style to a more professional one and is largely positive in our view.We believethe recent indictment of Mr.Flavio Guimaraes and Mr.Ricardo Guimaraes due to theMensalao scandal might hav
15、e been the main catalyst for the management change as BMGseeks to secure business continuity in case the final outcome is negative for the Guimaraesfamily.Both Mr.Tapias and Mr.Herman are seasoned professionals with many years ofexperience in Brazils banking industry.Delayed downgrade by Moodys shou
16、ld not trigger more rating actions at this stageBMGs one notch downgrade by Moodys on December 14 took us by surprise as presentlyour expectations are more for positive rather than negative rating actions.That said,takinginto account that Moodys still rated BMG in the Ba category,we believe the rati
17、ng agencysmove simply reflected a late adjustment to the B category in line with peers Fitch and S&P.As such,we do not expect more negative rating actions following Moodys downgrade andbelieve any other move by rating agencies should only materialize after 1H13 unless there isa significant deteriora
18、tion of BMGs results prior to that and/or Moodys decides for anotheradjustment since the rating agencys ratings remain one notch higher than Fitch and S&P.We maintain our Buy recommendation despite the possibility of more volatilityBMGs notes have underperformed the market in the past month on the b
19、ack of headlinesrelated to the Mensalao scandal,the markets misinterpretation of the management changeas well as the general negative sentiment towards mid-sized banks in Brazil following twocases of fraud in less than two years.Given that the banks results will remain weak for themost part of 2013
20、and that the negative sentiment towards mid-sized banks might persist,we anticipate more volatility,but maintain our Buy recommendation based on our long termpositive view of the credit on the back of BMGs association with Itau.Figure 1:Banco BMG outstanding issues table,IssueBCOBMG 6.5%14BCOBMG 9.1
21、5%16BCOBMG 9.625%17BCOBMG 8%18BCOBMG 9.95%19BCOBMG 8.875%20,Maturity201420162017201820192020,Amount O/SUSD300mUSD240mUSD150mUSD300mUSD300mUSD250m,Mdys/S&P/FitchB1/NA/NAB1/B/NAB1/NA/NAB1/B/NAB2/NA/CCCB2/NA/CCC,Mid Price96.1298.3895.7588.8883.5076.50,Mid Yield9.96%10.34%10.88%11.35%13.73%13.98%,Z Spre
22、ad9609891020106212601273,Source:Deutsche BankRisks to our recommendation include(but are not limited to):Execution risks related to the JVwith Itau;further headlines related to the Mensalao scandal;negative headlines related to themid-sized banking industry in general,and deterioration of BMGs resul
23、ts beyond ourexpectations,Page 2,Deutsche Bank Securities Inc.,27 December 2012,Financials Banco BMG SA,Figure 2:Liquid assets evolution(BRLbn),Figure 3:Credit portfolio evolution(BRLbn),6.7%,26.3,29.1,28.8,27.8,27.5,3.8%,4.3%,4.3%,16.7,18.0,15.9,13.4,11.3,1.2,0.6,0.9,0.9,1.8%0.4,9.6,11.1,12.9,14.4,
24、16.2,3Q11,4Q11,1Q12,2Q12,3Q12,3Q11,4Q11,1Q12,2Q12,3Q12,Li qui d assets(BRLbn),Li qui d a ssets/Total assets(%),Own l oan portfolio(BRLbn),Credi t as signments(BRLbn),Source:Deutsche Bank,Company DataFigure 4:Funding structure evolution(BRLbn),Source:Deutsche Bank,Company DataFigure 5:NII(BRLbn)and N
25、IM(%)evolution,29.14.0,29.64.4,30.24.4,29.85.1,28.95.0,26.0%,26.3%,16.7%,16.5%11.7%,15.6,16.7,17.0,16.2,16.3,584.4,659.2,411.7,449.5,9.5,8.6,8.8,8.5,7.6,241.1,3Q11,4Q11,1Q12,2Q12,3Q12,3Q11,4Q11,1Q12,2Q12,3Q12,Deposits(BRLbn),Credi t a s signment(BRLbn),Other(BRLbn),Net i nterest income(BRLm),Net i n
26、terest margin,Source:Deutsche Bank,Company DataDeutsche Bank Securities Inc.,Source:Deutsche Bank,Company Data,Page 3,Dec-11,Aug-12,May-12,Mar-12,Nov-12,Dec-12,Feb-12,Apr-12,Sep-12,Oct-12,Jan-12,Jun-12,Jul-12,Nov-12,Dec-12,Sep-12,Oct-12,Feb-12,Apr-12,Dec-11,Mar-12,Sep-12,Jun-12,Jul-12,Aug-12,May-12,
27、Nov-12,Dec-12,Oct-12,Jan-12,Sep-12,Nov-12,Dec-12,Oct-12,27 December 2012,Financials Banco BMG SAValuation Trends,Figure 6:BMG Sr.notes 1yr yield evolution30252015105,Figure 7:BMG Sr.notes 3m yield evolution1211109876,BMG 9.15%16,BMG 8%18,BMG 6.5%14,BMG 9.625%17,BMG 9.15%16,BMG 8%18,BMG 6.5%14,BMG 9.
28、625%17,Source:Deutsche BankFigure 8:BMG Sub.notes 1yr yield evolution21,Source:Deutsche BankFigure 9:BMG Sub.notes 3m yield evolution15,141713,139,121110,BMG 9.95%19,BMG 8.875%20,BMG 9.95%19,BMG 8.875%20,Source:Deutsche BankPage 4,Source:Deutsche Bank,Deutsche Bank Securities Inc.,Sep-12,Nov-12,Dec-
29、12,Oct-12,Sep-12,Nov-12,Dec-12,Oct-12,Yield,Yield,6,8,4,6,27 December 2012,Financials Banco BMG SA,Figure 10:BMG Sr.notes and peers 3m yield evolution1210864,Figure 11:BMG Sub.notes and peers 3m yield evolution15131197,25,BMG 9.15%16,BMG 8%18,BMG 6.5%14,BMG 9.95%19,BMG 8.875%20,ABC 7.875%20,BMG 9.62
30、5%17,BCOPAN 5.5%15,BIC 5.25%15,Daycov 6.25%16,Daycov 6.5%15,BIC 8.5%20,BCOPAN 8.5%20,BMEBMZ 9.625%20,Source:Deutsche BankFigure 12:BMG Sr.notes and peers yield vs duration12BMG 8%18,Source:Deutsche BankFigure 13:BMG Sub.notes and peers yield vs duration16,10,BMG 9.15%16BMG 6.5%14,BMG 9.625%17,14,BMG
31、 9.95%19,BMG 8.875%20,128,BIC 5.25%15,10,BMEBMZ 9.625%20,BIC 8.5%20,2,Daycov 6.5%15,BCOPAN 5.5%15,Daycov 6.25%16,4,ABC 7.875%20BCOPAN 8.5%20,1,1.5,2,2.5,3,3.5,4.4,4.6,4.8,5,5.2,5.4,5.6,Source:Deutsche BankDeutsche Bank Securities Inc.,Duration,Source:Deutsche Bank,Duration,Page 5,27 December 2012,Fi
32、nancials Banco BMG SA,Summary FinancialsFigure 14:Banco BMG summary financials(BRLm),Income Statement(BRLm)Net interest incomeNet non-interest incomeOperating expensePre-provision operating income(PPI)Loan Loss Provisions Expenses(LLPE)-incl.Loan write-offsNet IncomeBalance Sheet(BRLm)Cash&equivalen
33、tInterbank assetsSecurities portfolioGross Loans w Loan assignmentsLoans to customers(LP)Other assetsTotal Assets(TA)Bank borrowingsSecurities issuedCustomer depositsOther borrowingsTotal liabilities(TL)Shareholders EquityProfitability AnalysisReported Return on Average AssetsReported Return on Aver
34、age EquityReported Net Interest MarginCost/Income ratioLoan portfolio qualityProblem Loans(%)Gross LoansProb.Loans(%)Net incomeLoan Loss Prov.(%)Prob.loansLoan loss provisions(%)PPICapitalizationEquity(%)TATotal CAR(BIS,per company filings)Statutory total capital adequacy minLiquidityRatiosGross Loa
35、ns(%)Cust.Dep.Liquid Assets(%)TA,3Q11584.438.8(617.6)163.8(158.2)(95.4)392.63Q1117.1544.22.528,438.710,437.25,433.017,887.39.10.09,138.72,028.314,283.63,603.63Q1110.8%64.0%26.0%79.0%3Q112.0%42.1%340.2%96.6%3Q1120.1%12.6%11.0%3Q11122.4%6.7%,4Q11659.251.4(732.3)144.0(165.7)(129.8)169.24Q1134.1875.4(0.
36、3)29,087.110,260.15,002.117,190.60.50.08,805.41,601.313,555.33,635.34Q114.0%20.8%26.3%83.6%4Q112.0%37.9%375.9%115.1%4Q1121.1%14.5%11.0%4Q11126.0%3.8%,1Q12411.753.3(568.2)(104.9)1.790.8(69.2)1Q1233.71,251.60.128,772.512,203.25,139.419,730.84.20.18,807.04,237.016,297.63,433.21Q12-1.5%-7.6%11.7%122.6%1
37、Q121.7%46.6%323.0%1.6%1Q1217.4%13.2%11.0%1Q12146.6%4.3%,2Q12241.128.3(620.9)(150.5)(201.0)(300.0)(210.0)2Q1265.1367.40.027,781.613,585.96,501.121,652.03.50.28,522.16,136.218,446.83,205.22Q12-4.0%-23.0%16.7%132.0%2Q121.8%89.5%303.3%-133.6%2Q1214.8%13.1%11.0%2Q12168.4%4.3%,3Q12449.572.6(762.5)2.4(242.
38、8)(191.7)(151.6)3Q1236.7815.40.127,424.515,366.05,905.823,325.36.10.07,656.48,746.720,267.43,057.93Q12-2.7%-18.2%16.5%99.7%3Q121.6%-99.4%324.6%10206.0%3Q1213.1%12.7%11.0%3Q12211.7%1.8%,qoq86.4%156.6%22.8%-101.6%20.8%-36.1%-27.8%qoq-43.7%122.0%126.4%-1.3%13.1%-9.2%7.7%75.0%-90.5%-10.2%42.5%9.9%-4.6%q
39、oq bps130480-20-3230qoq bps-16-1888621351033955qoq bps-169-400qoq bps4330-249,yoy-23.1%87.2%23.5%-98.5%53.5%100.9%-138.6%yoy114.8%49.8%-97.6%-3.6%47.2%8.7%30.4%-33.0%-61.3%-16.2%331.2%41.9%-15.1%yoy bps-1350-8220-9502065yoy bps-36-14153-15521010939yoy bps-704100yoy bps8933-491,20102,564.275.9(1,638.
40、1)1,466.1(464.0)(484.4)605.7201085.6361.0(0.1)24,494.57,731.42,382.511,212.21.1(0.5)5,238.71,648.98,966.12,246.120105.7%27.7%32.6%52.8%20101.3%17.7%413.6%31.6%201020.0%15.6%11.0%2010156.1%8.8%,20111,837.2132.0(1,930.7)581.8(543.3)(407.3)583.5201134.1875.40.629,078.010,260.15,002.117,190.60.50.78,805
41、.41,601.313,555.33,635.320114.2%21.3%20.4%76.8%20112.0%37.9%375.9%93.4%201121.1%14.5%11.0%2011126.0%3.8%,LTM1,761.5205.6(2,683.9)(109.0)(607.8)(530.6)(261.7)LTM36.7815.40.127,424.515,366.05,905.823,325.36.10.07,656.48,746.720,267.43,057.9LTM-2.7%-18.2%16.5%104.2%LTM1.6%-99.4%324.6%-557.7%LTM13.1%12.
42、7%11.0%LTM211.7%1.8%,Profitability Indicators,Loans by sector,3Q12,Funding 3Q12,75%60%45%30%,Personal CreditLoans to individualsCDC-VehiclesCommercial portfolio,78.2%0.0%3.8%5.8%,ExternalFunding8%,Subordinated Debt4%,Other0%,Deposits26%,15%0%,LeasingAssigned credit operations,0.2%12.1%,-15%-30%,3Q11
43、,4Q11,1Q12,2Q12,3Q12,CreditAssignment,FIDCS5%,NIM,ROAA,ROAE,57%,Source:Deutsche Bank,Company Data,Page 6,Deutsche Bank Securities Inc.,27 December 2012,Financials Banco BMG SA,Figure 15:Banco BMG summary financials(USDm),Income Statement(USDm)Net interest incomeNet non-interest incomeOperating expen
44、sePre-provision operating income(PPI)Loan Loss Provisions Expenses(LLPE)-incl.Loan write-offsNet IncomeBalance Sheet(USDm)Cash&equivalentInterbank assetsSecurities portfolioGross Loans w Loan assignmentsLoans to customers(LP)Other assetsTotal Assets(TA)Bank borrowingsSecurities issuedCustomer deposi
45、tsOther borrowingsTotal liabilities(TL)Shareholders EquityProfitability AnalysisReported Return on Average AssetsReported Return on Average EquityReported Net Interest MarginCost/Income ratioLoan portfolio qualityProblem Loans(%)Gross LoansProb.Loans(%)Net incomeLoan Loss Prov.(%)Prob.loansLoan loss
46、 provisions(%)PPICapitalizationEquity(%)TATotal CAR(BIS,per company filings)Statutory total capital adequacy minLiquidityRatiosGross Loans(%)Cust.Dep.Liquid Assets(%)TA,3Q11357.323.7(377.6)100.2(96.7)(58.3)240.13Q119.1289.6774.715,131.85,553.52,890.89,517.64.91,060.04,862.61,079.27,600.11,917.43Q111
47、0.8%64.0%26.0%79.0%3Q112.0%37.1%340.2%96.6%3Q1120.1%12.6%11.0%3Q11122.4%6.7%,4Q11365.828.5(406.4)79.9(92.0)(72.0)93.94Q1118.3468.9545.815,581.35,496.12,679.59,208.60.31,083.24,716.8857.87,261.31,947.34Q114.0%20.8%26.3%83.6%4Q112.0%34.2%375.9%115.1%4Q1121.1%14.5%11.0%4Q11126.0%3.8%,1Q12232.830.1(321.
48、2)(59.3)1.051.3(39.1)1Q1218.4685.1603.815,750.26,680.12,813.310,800.72.31,190.44,821.02,319.48,921.41,879.31Q12-1.5%-7.6%11.7%122.6%1Q121.7%42.7%323.0%1.6%1Q1217.4%13.2%11.0%1Q12146.6%4.3%,2Q12122.714.4(315.8)(76.5)(102.2)(152.6)(106.8)2Q1232.4182.8563.613,825.86,761.23,235.310,775.41.71,290.44,241.
49、13,053.79,180.31,595.12Q12-4.0%-23.0%16.7%132.0%2Q121.8%66.9%303.3%-133.6%2Q1214.8%13.1%11.0%2Q12168.4%4.3%,3Q12221.635.8(376.0)1.2(119.7)(94.5)(74.7)3Q1218.1402.4592.913,533.67,582.92,914.411,510.73.01,302.93,778.34,316.410,001.71,509.03Q12-2.7%-18.2%16.5%99.7%3Q121.6%-101.2%324.6%10206.0%3Q1213.1%
50、12.7%11.0%3Q12211.7%1.8%,qoq80.7%148.7%19.1%-101.5%17.1%-38.1%-30.0%qoq-44.1%120.1%5.2%-2.1%12.2%-9.9%6.8%73.5%1.0%-10.9%41.3%8.9%-5.4%qoq bps130480-20-3230qoq bps-16-1681021351033955qoq bps-169-400qoq bps4330-249,yoy-38.0%50.9%-0.4%-98.8%23.8%62.0%-131.1%yoy99.2%39.0%-23.5%-10.6%36.5%0.8%20.9%-37.9
