Home' Trinidad and Tobago Guardian : January 18th 2015 Contents JANUARY 18 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
First Citizens Bank (FCB) has
had a rocky ride during its
first full year as a publicly
listed company. These events
1. A substantial number of its board of direc-
tors has been changed;
2. Its CEO resigned last December and the
board is now in the process of selecting a new
person for that post;
3. Despite the initial success of its heavily
over-subscribed IPO, a final report on the
weaknesses of the allocation process and related
matters has not yet been concluded (or, if con-
cluded, it is not yet in the public domain).
Notwithstanding these multiple challenges,
the bank was able to report improved results
for its fiscal period ended September 30, 2014.
Changes in asset profiles
Total assets declined from the restated 2013
figure of $36.1 billion to $34.9 billion as at
September 2014; this reflects a fall of 3.4 per
All descriptions of loan assets experienced
declines. In addition, statutory deposits with
Central Banks also fell to $5.41 billion from
the previous level of $6.74 billion.
Financial assets, the majority classified as
available-for-sale ($8.65 billion) and the minor-
ity described as held-to-maturity ($1.79 billion),
experienced nominal growth. In the case of
the latter, approximately 45.3 per cent or $811.5
million are listed investments.
Net loans to customers closed 2014 at $11.15
billion; this reflected a decline of 3.14 per cent
from the 2013 balance of $11.52 billion. Before
allowances for loan losses, these figures were
$11.46 billion in 2014 and $11.84 billion in
Referring to the gross values, the bank s
largest exposure in 2014 was to the construc-
tion sector with a year-end balance of $2.9
billion; at the end of 2013, its exposure to this
sector was $3.55 billion.
These figures are before consolidation and
Real estate mortgage balances fell to $2.65
billion from 2013 s $2.8 billion. Similarly, cus-
tomers in the transport, storage and commu-
nication sector had only $487 million in out-
standing loans; this was a huge (42.6 per cent)
drop from the $850.6 million as at September
Among its larger exposures, consumer loans
increased to $2.13 billion from 2013 s $1.99
billion, reflecting a rise of 6.75 per cent. Another
major category, loans to finance, insurance
and real estate entities, grew by almost 26 per
cent or $234.6 million to $1.14 billion from
the 2013 balance of $906.2 million.
Interestingly, loans for personal services
jumped to $143.4 million from the previous
year s level of only $13.7 million.
Movements in liabilities
Total liabilities contracted by $1.5 billion or
5.0 per cent to $28.62 billion from 2013 s $30.12
billion. The largest decline was in the amounts
due to the parent company; this was the $1.045
billion due as a result of the funds received
from the IPO.
The value of bonds payable fell to $1.95 bil-
lion from $2.45 billion a year earlier. The largest
component was a US$175 million bond with
a year-end value of TT$1.039 billion (2013:
$1.045 billion), which is unsecured and carries
a fixed interest rate of 4.903 per cent.
In February 2014, one $500 million bond
was repaid at maturity. In that same month,
another $500 million bond was also repaid.
In this case, a penalty of $5 million was incurred
due to its early settlement.
In August 2014, two new bonds were issued.
One bond for $400 million carries a tenor of
seven years and a fixed rate of interest of 3.10
per cent. The second bond for $100 million
has an interest rate of 3.25 per cent and a tenor
of ten years.
Other funding instruments, principally
repurchase agreements, increased to $4.81 bil-
lion from 2013 s $4.63 billion.
The value of customers deposits declined
marginally to $20.89 billion from $21 billion
as at year-end 2013. Deposits sourced from
consumers increased to $7.32 billion from the
previous year s $5.95 billion.
In contrast, funds sourced from both public
and private institutions fell. In the case of
public institutions, the decline was down to
$7.89 billion from $8.45 billion in the earlier
session. Private institutions deposits contracted
from $6.61 billion in 2013 down to $5.68 billion
as at September 2014.
Increases in equity
A strong $203 million increase in retained
earnings to $3.6 billion helped shareholders
equity improve to $6.24 billion as at September
2014 from $5.97 billion as at year-end 2013.
Also helping the balance was an increase
in other reserves to $1.32 billion from the earlier
period s $1.25 billion; the major contributor
to this was the re-measurement of the defined
benefit pension plan.
With 251,353,562 ordinary shares outstand-
ing, each share now has a book value of $24.83.
Income and profits
Similar with many other banks, FCB s net
interest margin declined slightly to $1.157 billion
from 2013 s $1.158 billion. Compensating for
this shortfall, income from other sources
Fees and commissions advanced to $359.8
million from the previous year s $354 million.
In this segment, transaction service fees and
commissions rose to $135.7 million from $131.2
Similarly, portfolio and other management
fees increased to $192.9 million from $189.8
million. Only credit related fees fell to $31.2
million from 2013 s $33 million.
Net foreign exchange gains increased from
2013 s $68.9 million to $76.4 million.
In the other income category, income
advanced strongly to $88.3 million from 2013 s
$53 million. The major contributor was the
gain on the sale of available-for-sale assets,
which jumped to $65.5 million from the pre-
vious year s level of $21.2 million. Meanwhile,
other income fell to $22.8 million from 2013 s
These changes allowed FCB to report total
net income of $1.68 billion, which was mar-
ginally greater than the 2013 level of $1.63 bil-
The net impairment loss on loans improved
from $35.17 million in 2013 to $12.87 million
in 2014. Conversely, the net impairment on
other financial assets declined from a write-
back of $16.9 million in 2013 to $11 million
Administrative expenses declined marginally
to $522.4 million from the previous year s
$524.4 million. Here, the major change was
a decline in wages and salaries.
Meanwhile, other operating expenses rose
from the previous level of $357.7 million to
$390.7 million in the current period. In this
case, all categories, including property and
These movements saw operating profit for
2014 register at $755.15 million versus $733.4
million in 2013.
Both joint ventures (Infolink and Interbank
Payment Systems) and its associate, St Lucia
Electricity Services Limited, delivered better
profits. The inclusion of those results helped
boost pre-tax profit to $772.58 million from
2013 s $744.75 million.
The bank s effective tax rate increased from
18.2 per cent in 2013 to 18.9 per cent this year.
One reason for this increase was the lower
level of tax exempt income; this item was $95
million in 2013, declining to $69.4 million last
FCB s after-tax profit improved to $626.56
million from the previous level of $609.13 mil-
lion, representing an increase of 2.9 per cent.
This result translated into EPS of $2.49 versus
FCB segments its operations along five major
lines: retail banking, corporate banking, treasury
and investments banking, trustee and asset
management and group functions. This seg-
mentation corresponds to what is commonly
referred to as management accounts. The total
of these figures are then consolidated and
appropriate adjustments made to produce the
Treasury and investments recorded the
greatest increase in pre-tax profit for 2014.
Despite having large loan impairment costs,
the retail banking unit managed an improved
result in the current period.
At the corporate banking unit, total income
fell by $30.5 million; however, expenses declined
by only $27.1 million. Thus, the current period s
pre-tax profit was less than for the previous
Dividends and share price
Total dividends for 2014 were $1.18 versus
$1.09 for 2013. At the recent share price of
$36.60, this share gives investors a yield of
3.2 per cent.
Over the past year or so, FCB s share price
peaked at $42.99 on January 21, 2014 and was
quoted as low as $34.00 on April 7, 2014.
One of its heritage companies, Workers
Bank, was well-known for the quality of its
annual reports; perhaps, FCB will continue
this tradition when the 2014 report is released?
With a more experienced board in place,
shareholders are anticipating the appointment
of a new CEO in the next few months. After
this is done, there could be a reasonable expec-
tation of a more robust improvement in its
It is conceivable that, if the government
reduces its stake in FCB below 50 per cent,
that it could own a more valuable and mar-
ketable asset; however, despite current eco-
nomic challenges, executing this, requires a
different mind-set. Possibly, one that may
evolve in 20 years time!
First Citizens Bank results for 2014
Total dividends for 2014
were $1.18 versus $1.09 for
2013. At the recent share
price of $36.60, this share
gives investors a yield of
3.2 per cent.
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