BM&FBovespa Profit Unexpectedly Rises as Crisis Boosts Trading

By Telma Marotto and Edgar Ortega

Nov. 12 (Bloomberg) -- BM&FBovespa SA, Latin America's largest exchange, reported an unexpected 15 percent increase in profit as Brazilian trading surged after investors cashed out during the worst quarter for stocks in seven years.

Net income rose to 235.6 million reais ($106.1 million), or 12 centavos a share, from 204.3 million reais a year earlier, the Sao Paulo-based company said. Earnings beat the 120.1 million reais average estimate of five analysts surveyed by Bloomberg. Profit was also boosted by an 86.2 million reais deferred-tax credit related to the merger that created the company in May.

Traders did more business on Brazil's equity and derivatives exchanges as markets tumbled worldwide. The nation's Bovespa stock index plunged 24 percent during the quarter, joining a global rout that erased $9 trillion.

``Investors were getting out of risky assets such as those in emerging markets and that had a direct impact on trading,'' Mario Pierry, a New York-based Deutsche Bank AG analyst who has a ``buy'' rating on the stock, said in a telephone interview before the earnings were released late yesterday.

The average number of daily trades at the firm's Bovespa unit jumped 58 percent to 16 million in the third quarter, spurring a 24 percent rise in commissions to 158.6 million reais.

BM&FBovespa, led by Chief Executive Officer Edemir Pinto, cut 395 workers during the quarter and is overhauling trading systems to reduce as much as 135 million reais in annual expenses by 2010. It was formed by the union of Bolsa de Mercadorias & Futuros-BM&F SA and Bovespa Holding SA.

Exchanges Tumble

BM&FBovespa has fallen 52 percent in Sao Paulo trading since the stock and derivatives bourses started trading as a single company in August, compared with the 33 percent retreat by the Bovespa index. The FTSE/Mondo Visione Exchanges Index, which tracks 17 publicly traded markets around the world, has lost 66 percent.

Other exchanges saw trading increase during the market's decline. The average number of daily transactions climbed 17 percent on NYSE Euronext's European exchanges and 16 percent on the U.S. markets, the company said in its third-quarter profit report. New York-based NYSE's profit slipped 33 percent during the period as it cut fees and derivatives trading slowed.

To contact the reporters on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net; Edgar Ortega in New York at ebarrales@bloomberg.net.