* Net income misses poll estimate but rises 23 pct
* CFO Gomes expects gradual improvement in revenue
* Cetip’s liens unit grappling with weak car loans (Adds details, comments from CFO, poll estimates throughout)
By Guillermo Parra-Bernal
SAO PAULO, March 7 (Reuters) - Cetip SA Mercados Organizados , Latin America’s largest clearinghouse, is betting on a “gradual recovery” in revenue from its financing unit this year as conditions in the domestic credit and capital markets improve, Chief Financial Officer Francisco Carlos Gomes said on Thursday.
Revenue from auto loans liens, which last year hurt profit after banks cut disbursements in the segment, will “rise in small doses” as credit resumes, Gomes said in an interview to discuss earnings.
Cetip earned 77.4 million reais ($39.5 million) in fourth-quarter profit, missing the 78.5 million reais estimate in a Thomson Reuters poll of six analysts.
Net income at the São Paulo-based company rose 23 percent from the prior quarter and 19 percent on an annual basis. Investors tend to follow Cetip’s sequential data more closely than year-on-year numbers because the former helps them see operational and sales performance trends.
Gomes pointed to improving revenue trends and a more promising outlook for business as the company expects to start selling liens for mortgage loans in May. Cetip shares have fallen 26 percent in the past year on concerns over potential competition with bourse BM&FBovespa SA and the impact of sluggish growth in auto loans on Cetip’s liens unit.
“Don’t expect a jump in activity. Any recovery will come in gradually, bit by bit,” Gomes said. “Last year the resilience of the company to a challenging business environment was tested.”
Still, investors will remain focused on the extent to which flagging economic activity will keep weighing on registrations of car loans. Cetip’s higher exposure to custody, which seldom feels the pinch of economic downturns, and the ongoing pass-through of faster inflation into some fees should help boost revenue this year, Gomes added.
Signs of a recovery in activity in bank lending and domestic bond markets - where Cetip accounts for 97 percent of all depositary and registration activity - are arising, with companies selling debt and private-sector lenders resuming disbursements in a prudent manner.
Net revenue rose 2.3 percent from the third quarter to 203.6 million reais, missing the average estimate of 205.5 million reais in the poll. Cetip has seen quarterly revenue grow steadily since the start of 2010.
Revenue from the securities unit, which provides custody, trading and depositary services to banks and investors, rose 5.4 percent to 155.2 million reais, in line with estimates. Custody and transaction fees rose as some banks undertook changes in their trading habits, which allowed Cetip to charge more for services.
Discounts, which for several quarters went up and weighed on revenue in the securities unit, rose more than expected and were to blame for the miss in profit and revenue estimates. Gomes said the surge in discounts reflected “Cetip’s decision to share scale gains with market participants.”
Revenue from the so-called financing unit, which sells liens on auto loans, fell 2.2 percent to 83.7 million reais, in line with the poll’s estimate.
Boosting the company’s bottom line was a 50 percent tumble in financial expenses after lower wholesale inflation pushed down the cost of servicing Cetip’s inflation-linked notes. Sales, general and administrative expenses remained stable on a quarter-on-quarter basis.
Earnings before interest, tax, depreciation and amortization rose 2 percent to a higher-than-expected 146.9 million reais from the third quarter.
$1 = 1.96 Brazilian reais Reporting by Guillermo Parra-Bernal; Additional reporting by Aluísio Alves; Editing by Tim Dobbyn