Home' Trinidad and Tobago Guardian : February 8th 2018 Contents stocks BG11
Thursday, February 8, 2018
Despite challenges, FIRST increases its dividend
ven with improve-
ments in loans and
First Citizens Bank
Ltd’s (FIRST) net
Let us now review FIRST’s re-
sults to September 30, 2017.
Total assets grew marginally to
$38.96 billion from $38.85 billion.
Loans to customers improved by
8.3 per cent to $14.43 billion from
$13.33 billion. Real estate mort-
gages were little changed at $3.4
billion for both periods; this sug-
gests that its share of the total mar-
ket may have fallen. In contrast,
loans to the finance, insurance
and real estate sector doubled to
$3.4 billion from $1.7 billion.
In line with a generally weaker
economy, loans to the construc-
tion sector contracted to $1.53
billion from $2.44 billion. Some-
what counteracting this, advances
to consumers improved by al-
most 10 per cent to $2.84 billion
from $2.59 billion. Overall, both
non-performing loans and allow-
ances for those losses declined.
This suggests greater emphasis on
Total investments grew by 4.9
per cent to $13.60 billion from
$12.97 billion. The largest in-
creases were shown under the
available-for-sale category, which
expanded to $12.47 billion from
$11.48 billion; here, at the gross
level, all components registered
GORTT securities moved from
$6.73 billion to $7.0 billion while
listed investments closed at $1.9
billion from $1.6 billion and un-
listed investments ended at $3.59
billion from $3.14 billion.
In the case of fair value invest-
ments via profit or loss, this ele-
ment contracted to $0.7 million
from $240 million and reflected
the sales of substantially all of its
equity investments within this cat-
Statutory deposits with central
banks fell to $3.39 billion from
$3.97 billion; as indicated below,
this is directly related to the de-
cline in total deposits.
Cash and due from banks de-
clined to $3.69 billion from $4.71
billion. This is consistent with its
more challenging cash flows. In
particular, customers’ deposits
weakened severely from net in-
flows of $4.03 billion in 2016 to net
outflows of $1.05 billion in 2017.
The cash and bank balances
component contracted to $1.9 bil-
lion from $2.8 billion. However,
the short-term investment com-
ponents, on which a modest 1 per
cent interest is earned, closed at
$1.8 billion from $1.9 billion.
Even so, $2.69 billion of its total
cash is denominated in US dollars.
It also has a comfortable surplus
of assets over liabilities that are
denominated in both US dollars
($5.37 billion) and other foreign
currencies ($1.69 billion).
Similar to its assets, total liabil-
ities were barely higher at $32.20
billion from $32.17 billion.
Customers’ deposits weakened
to $23.98 billion from $25.02 bil-
lion or by 4.2 per cent. This de-
cline was concentrated under
deposits sourced from public in-
stitutions, which contracted to
$7.53 billion from $8.4 billion; this
probably mirrors the weaker state
of government finances. Deposits
from private institutions also fell
to $8.28 billion from $8.44 bil-
lion while those from individuals
closed at $8.17 billion from $8.18
Other funding instruments de-
clined to $4.33 billion from $4.49
billion. The largest component, re-
purchase agreements, fell to $4.05
billion from $4.20 billion. We also
see a significant shift as total funds
from private institutions rose to
$2.05 billion from $1.69 billion
while those from public institu-
tions declined to $1.33 billion from
Consistent with its weaker cash
flows, sums due to other banks
swelled to $1.5 billion from $0.46
billion. Similarly, creditors and
accrued expenses increased to
$542.7 million from $452.7 million;
within this total, other liabilities
expanded to $267 million from
Finally, bonds payable were un-
changed at $1.4 billion.
Total shareholders’ equity edged
up marginally from $6.68 billion
to $6.75 billion.
Stated capital fell from $643.5
million to $458.5 million. This
reduction reflected the purchase
of treasury shares totalling $185
million for the ESOP. Statutory re-
serves benefitted from the trans-
fer of $201.6 million from retained
earnings and closed at $879.3 mil-
lion from $677.7 million.
Other reserves were little
changed declining marginally to
$1.11 billion from $1.15 billion.
Retained earnings advanced
from $4.2 billion to $4.3 billion.
This movement benefitted from
the current year’s profit of $641.9
million. This figure was then re-
duced by dividends of $340.8
million and the transfer of $201.6
million to the statutory reserve.
The weighted average num-
ber of shares was unchanged at
251,353,562; consequently, the
book value of each stock unit ad-
vanced to $28.86 from $26.57.
Net interest income improved to
$1.42 billion from $1.28 billion.
The interest income component
advanced to $1.69 billion from
Higher loans contributed to an
increase in interest earned on
loans to customers, which rose to
$956 million from $882 million.
Also, interest on financial assets
improved to $685.5 million from
$609.5 million; this reflected
higher returns on these instru-
Total interest expense edged
up to $271.8 million from $267.8
million. Although deposits were
lower, interest on same increased
to $86.8 million from $79.2 mil-
lion; was it likely that loyal depos-
itors were given marginally higher
rates to help stem outflows?
Interest on other funding instru-
ments increased from $108.7 mil-
lion to $121 million.
The major decline was shown
under interest on bonds payable,
which fell to $54.6 million from
$60 million. Fees and commis-
sions contracted to $390 million
from $430.7 million. In particular,
portfolio and other management
fees weakened to $177 million from
$222.7 million; this was probably
related to the lower asset gains
and/or performance of these col-
lective investment schemes.
In addition, credit related fees
fell to $38.5 million from $45.3 mil-
lion. However, transaction service
fees improved to $174.7 million
from $162.7 million.
Gains from investment securi-
ties fell to $20 million from $36.5
Meanwhile, other income nar-
rowed to $158.2 million from
$244.1 million. Net foreign ex-
change translation gains tightened
to $7.4 million from $85.1 million
while net foreign exchange trans-
action gains closed at $131.5 mil-
lion from $141.2 million.
These changes saw net income
close at $1.986 million from $1.995
Following better collections
efforts and higher recoveries,
net loan impairment charges im-
proved to $44.8 million from $87
million. However, the write-off of
goodwill ($18 million) and impair-
ment allowances ($11.3 million)
saw impairment loss on other
financial assets register at $30.9
million from a writeback of $0.75
million in 2016.
Administrative expenses im-
proved from $700.5 million down
to $659.4 million. Although head
count increased from 1,757 to
1,803, staff and pension expenses
declined by a total of $46.7 mil-
Other operating expenses also
fell, moving from $407 million
down to $396.7 million; this reduc-
tion was helped by lower alloca-
tions to property, advertising and
technical and professional fees.
These movements resulted in an
operating profit of $854.8 million
(2016: $801.5 million). The share of
profit from its associate, St. Lucia
Electricity Services Ltd, improved
to $18.4 million from $11.7 million.
In contrast, profits at its joint ven-
tures, Infolink and Inter-Bank Pay-
ment System, declined to a total of
$3.2 million from $4.2 million.
These changes saw pre-tax
profit close at $876.4 million from
2016’s $817.4 million.
The effective tax rate increased
from 22 to 26.8 per cent. Conse-
quently, taxation rose to $234.5
million from $180.2 million. This
surge was influenced by the higher
local tax rate and larger expenses
not deductible for tax purposes.
Therefore, the net profit closed
at $641.9 million from $637.2 mil-
lion; that result translated to EPS
of $2.54 from $2.52.
Helped by higher net interest
income, fee and commission in-
come and foreign exchange gains,
the retail banking segment reg-
istered an 11.6 per cent increase
in total income accompanied by
almost no increase in expenses;
those changes helped it deliver a
42 per cent improvement in pre-
At corporate banking, the com-
bination of lower expenses and
higher net interest income helped
produce an eight per cent im-
provement in pre-tax profit.
Treasury and investment bank-
ing exhibited a strong increase in
net interest income. However, this
division recorded a 50 per cent
plunge in foreign exchange gains
to $89.9 million from $178.7 mil-
lion; consequently, total income
declined by $84.1 million. Helped
by lower expenses, the pre-tax
contribution fell by less than $20
The trustee and asset manage-
ment division recorded both lower
income and weaker profit contri-
bution. Restricting the income
contribution was $45 million less
fees and commissions. The asset
management company’s profit fell
to $111.1 million from $147.7 million
while the trustee company’s profit
edged up to $26.3 million from
Over its fiscal year, FIRST’s share
price declined by $3.00, moving
from $35.00 on September 30,
2016 down to $32.00 last Sep-
tember; since then, it has mostly
traded at about that same price.
Despite an anaemic improvement
in EPS, dividends rose from $1.33
The $32.00 price reflects a P/E
multiple of 12.6 and provides a
dividend yield of 4.4 per cent. It
also exhibits a modest premium
of 11 per cent over its book value
Last week’s release of strong
Q1 results along with a change to
quarterly dividends should help
lift its share price.
Despite the 2018 corporation
tax increase to 35 per cent, most
companies apply specialised skills
to help mitigate this cost.
In the next article, we will review the
2017 results of Scotiabank T&T Ltd.
Over its fiscal year,
FIRST’s share price
declined by $3.00,
moving from $35.00
on September 30, 2016
down to $32.00 last
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