Brazil’s BM&FBovespa exchange reported weaker than expected profit for the final quarter of 2011, continuing a disappointing run of earnings from companies in Latin America’s largest economy.

The Bovespa, the world’s third-largest exchange operator by market capitalisation, reported that net profit fell 26.9 per cent in the three months to the end of December to R$191.1m, compared with R$246.5m predicted by a Reuters poll.

After the Bovespa release, all eyes were on Vale, the São Paulo-listed miner, whose results were due to be released after the close of the market on Wednesday.

Brazilian companies have reported a weak fourth quarter after the economy staged a rapid slowdown in the second half of last year following rising interest rates and concerns over the eurozone.

Among the biggest disappointments, Petrobras reported a 52 per cent drop in fourth-quarter net profit after a decline in the value of Brazil’s currency, the real, against the dollar boosted the cost of foreign loans and fuel imports.

Itaú-Unibanco, the nation’s largest private bank, also missed forecasts on a decline in trading gains and rising defaults that required higher provisions.

There were some exceptions, with state-controlled Banco do Brasil, the nation’s biggest lender by assets, beating estimates albeit with a 25.7 per cent fall in net profit.

The Bovespa’s results were weighed down by one-off items, such as a R$92.3m expense related to the transfer of the management of a guarantee fund that reimburses investors for losses arising from improper actions by market intermediaries.

But average daily trading volumes in the Bovespa cash segment were also slightly lower as market capitalisation sank on the back of a negative outlook for the global economy.

“During the fourth quarter of 2011, net revenues were almost flat year over year. This reflected a decline in trading volumes which was offset by a 39.5 per cent increase in other revenues,” said BM&FBovespa in a statement.

However, stripping out one-off items, average daily volumes were showing signs of recovery, Credit Suisse said in a note.

“All in all, recurring net profit reached R$283m …slightly higher than our estimates,” said Credit Suisse.

The group said there were concerns over the long-term future of the market with new competitors, including BATS and Direct Edge, exploring opportunities to break the monopoly.

However, these companies were wrestling with near-term technical difficulties, such as how to get access to BM&FBovespa’s clearing system.

The market would be watching closely for a report being prepared for the market regulator, CVM, on how to enhance competition in the market.

“In the short term, positive news coming from the volumes’ side should prevail over concerns about competition, as it become[s] clearer that new players could need more time to launch their operations,” said the brokerage.

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