Home' Trinidad and Tobago Guardian : February 9th 2017 Contents BG6 | NEWS
BUSINESS GUARDIAN guardian.co.tt FEBRUARY 9 • 2017
Comparing T&T's main banks
Often seen as bellweathers of
domestic economic activity,
the performance of banking
institutions in 2016 shows
the effects of the economic
slowdown may be starting
to manifest itself among these organisations.
Analysis of T&T's four largest banking
groups (Republic Financial Holdings Ltd, First
Citizens Group, RBC Financial (Caribbean) Ltd
and Scotiabank T&T) shows that in spite of
reasonable levels of growth in profitability, in-
creases in non-performing loans and declining
returns on asset positions prove that---like all
other businesses---financial institutions feel
the effects of an economic downturn just as
Moving beyond profit after-tax figures, a
broad look at other financial metrics paint
a much clearer picture of the state of play in
these financial institutions.
For its financial year ended September 30,
2016, RFHL registered a decline in after tax
profitability. It is the bank's first decline in
over four years.
The decline in after-tax profit (moving from
$1.22 billion in 2015 to $946.3 million in 2016)
was attributed to a goodwill impairment of
$107.3 million recognised on the T&T bank's
investment in HFC Bank (Ghana) Ltd, a loss of
$117.8 million recorded by HFC, of which RF-
HL's 57.11 per cent share was $67.8 million and
a $61.8 million impairment charge of RFHL's
19.3 per cent stake in East Caribbean Financial
Holdings Ltd (ECFH).
The bank also saw an increase in its non-per-
forming loans (as a percentage of its total loan
portfolio) moving from 3.7 per cent in 2015, to
5.1 per cent in 2016.
According to the bank's annual report, the
increases in non-performing loans "resulted
from increased NPL's in Ghana where NPL's
to gross loans increased from 14.3 per cent in
2015 to 31.3 per cent in 2016."
In contrast to an increase in its non-per-
forming loans, the banks annual gross loan
portfolio grew by roughly 4.6 per cent, moving
from $33.6 billion in 2015, to $35.2 billion in
On an asset performance basis, the bank's
return on assets, which gives an idea of how
efficient management is at using its assets to
generate earnings, fell from 1.97 per cent in
2015, to 1.42 per cent in 2016.
The banks' loans to deposit ratio however
was more favourable than the previous year
with loans as percentage of deposits standing
at 69.1 per cent in 2016 versus 66.4 per cent
RFHL also recorded an increase in its
non-interest expense (also known as operating
expense) for 2016, moving from $2.12 billion
in 2015 to $2.6 billion in 2016 (an increase of
roughly 22.6 per cent).
An increase in staff costs of approximately
$186.6 million from 2015 to 2016 accounted
for the steep increase in non-interest expense
for RFHL's year ended 2016.
First Citizen's Group
The First Citizen's Group reported a mild
increase in its profit after tax position, moving
from $630.4 million in 2015 to $637.2 million in
2016 or an increase of 1.1 per cent year on year.
FCG also experienced an increase in its
non-performing loan portfolio moving from
3.39 per cent in 2015 to 3.89 per cent in 2016.
The bank's total loans also registered a 3.61
per cent decrease in 2016, falling from $13.8
billion in 2015 to $13.3 billion in 2016.
FCG witnessed a fall in its return on assets
as well, with this metric declining from 1.74
per cent in 2015 to 1.67 per cent in 2016. The
bank's loans to deposits ratio also declined,
largely as a result of an over $4 billion dollar
increase in customers' deposits at the bank.
The loans to deposit ratio moved from 65.88
per cent in 2015 to 53.28 per cent in 2016.
Accompanying a decrease in loans to depos-
its was an increase in year-on-year, non-in-
terest expense of roughly 12.5 per cent, moving
from $984 million in 2015 to $1.107 billion in
Again, the driving factor behind the increase
in non-interest expense was a roughly $88 mil-
lion increase in staff costs from 2015 to 2016.
RBCFCL experienced a solid year in its var-
ious performance indicators, relative to the
other financial institutions, and in the broad
context of local and regional economic activity.
The bank's profit after tax jumped by 48.2
per cent, moving from $645.5 million in 2015
to $956.6 million in 2016; the largest year on
year increase of all the banks analysed.
The bank also experienced a decline in its
non-performing debts portfolio (defined for
this purpose as "impaired loans and advanc-
es"), moving from 8.29 per cent of total loans
in 2015, to 6.76 per cent in 2016.
The group's gross loan portfolio declined
by 0.97 per cent, however, moving from $38.7
billion in 2015, to 38.4 billion in 2016. On an
asset level, the group's return on assets ticked
up slightly, moving from 0.78 per cent in 2015,
to 1.12 per cent in 2016.
The group's loan to deposit ratio fell as well,
moving from 63.7 per cent in 2015 to 61.2 per
cent in 2016. The declining loan to deposits
position is the consequence of an increase in
customer deposits (moving from $60.8 billion
in 2015 to $62.7 billion in 2016) and a declining
gross loan and advances position (moving from
$38.7 billion in 2015 to $38.3 billion in 2016)
On the expense side, the group witnessed a
jump in its non-interest expense, moving from
$2.86 billion in 2015 to $3.06 billion in 2016, or
an increase of approximately seven per cent.
Scotiabank T&T Ltd
In line with the growth in profit of all the fi-
nancial groups, SBTT registered a year-on-year
increase in its profit after tax position. SBTT
profit after tax increased by roughly 10.4 per
cent moving from $566.1 million in 2015 to
$625.2 billion in 2016.
The bank's non-performing loans jumped
year on year as well, moving from 1.75 per cent
in 2015, to 2.12 per cent in 2016. The bank's
gross loan portfolio also increased year on year,
moving from $13.1 billion in 2015 to $13.3 billion
in 2016 or roughly 1.63 per cent.
The bank was able to increase its return on
assets for 2016 with a return of 2.76 per cent
versus 2.64 in 2015.
Loans as per cent of deposit also fell slightly,
moving from 77.75 per cent in 2015 to 75.55 per
cent in 2016.
Like all other financial institutions, SBTT's
non-interest expense also jumped, moving from
$656 million in 2015, to $691 million in 2016.
A look ahead
For certain, T&T's banking institutions re-
main well capitalised and profitable.
In spite of their profitability (which has been
growing at slower rates in the recent past),
banks have been facing increasing operational
These expenses have largely been as a result
of increases in staff costs across all institutions.
Additionally, T&T banks are coping with in-
creases in their non-performing loan portfolios
which could possibly be attributed to downturn
in economic activity and the consequent job
losses that accompany such a downturn.
Three of the four institutions also saw a fall
in their loans to deposits which could suggest
a slowdown in loan demand, or a build up in
customer deposits as a result of declining loan
In the main, robust financial institutions
with strong capital positions tend to be more
beneficial to future economic growth than to
be a hindrance of it.
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