Home' Trinidad and Tobago Guardian : August 1st 2013 Contents AUGUST 2013 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG19
With most potential investors
awaiting Bourse s recommen-
dation, this week, we will be
taking a closer look at the
financials of First Citizens
(the bank) and providing our
valuation and analysis on the latest addition to the
stock market. The First Citizens Initial Public Offering
(IPO) of shares opened on July 15, and is scheduled to
close on August 12. The expected listing date is the
For the six months ending March 2013 (HY2013),
the bank s earnings per share fell 10.6 per cent from
$1.36 to $1.22 versus the previous period (HY2012).
Net Interest Income experienced a 6.6 per cent increase
while other income increased 14 per cent, leading to
an 8.7 per cent increase in total net income.
Operating expenses climbed 17 per cent but the bank
managed to reduce Loan Loss expense significantly,
from $56.4 million in HY2012 to $19.9 million. This
helped to shrink the bank s loan loss as a percentage
of advances ratio from 0.7 per cent to 0.2 per cent,
more consistent with industry standards (Exhibit 1).
The bank s HY2013 profit before tax grew by a com-
mendable 11.5 per cent, whereas profit after tax con-
tracted by 10.6 per cent. The substantial increase in
taxation was a result of the Bank s management re-
assessing its tax strategy in relation to the pursuit of
tax benefits resulting from derivative instruments used
to manage its foreign exchange exposure.
The balance sheet of the bank continues experienced
considerable growth, with total assets growing 14.9
per cent to $36 billion versus the comparable period.
In February 2009, First Citizens acquired Caribbean
Money Market Brokers (CMMB), helping propel the
bank s assets up 75 per cent from $15.8 billion at the
end of 2008 to $27.7 billion.
The bank s loans to customers increased 30.5 per
cent from HY 2012 figures (Exhibit 2) and 8.7 per cent
from September 2012 (FY 2012) to reach $11.2 billion
at the end of HY 2013. Customers deposits and other
This document has been prepared by Bourse
Securities Ltd, for information purposes only. Any
trade in securities recommended herein is done
subject to the fact that Bourse, its subsidiaries
and/or affiliates have or may have specific or
potential conflicts of interest in respect of the
security or the issuer of the security, including
those arising from (i) trading or dealing in certain
securities and acting as an investment advisor; (ii)
holding of securities of the issuer as beneficial
owner; (iii) having benefited, benefitting or to bene-
fit from compensation arrangements; (iv) acting as
underwriter in any distribution of securities of the
issuer in the three years immediately preceding
this document; or (v) having direct or indirect
financial or other interest in the security or the
issuer of the security. Investors are advised accord-
ingly. Neither Bourse nor any of its subsidiaries,
affiliates directors, officers, employees, representa-
tives or agents, accepts any liability whatsoever for
any direct, indirect or consequential losses arising
from the use of this document or its contents or
reliance on the information contained herein.
Bourse does not guarantee the accuracy or com-
pleteness of the information in this document,
which may have been obtained from or is based
upon trade and statistical services or other third
party sources. The information in this document is
not intended to predict actual results and no
assurances are given with respect thereto.
funding instruments rose by 16.5 per
cent from HY 2012 and 6.9 per cent
from FY 2012 to $26.6 billion. This paints
a picture of the strength of the bank and
its presence in the market compared to
its main competitors.
In its prospectus, the bank has pro-
vided financial projections for financial
year 2013 (FY 2013). Based on this, the
bank expects EPS to climb to $2.34 from
$1.78 for FY 2012 (Exhibit 3). Net interest
income is projected to grow 7.8 per cent
to $1.6 billion from the previous year.
Profit before tax is expected to increase
3 per cent while Profit after tax is esti-
mated to surge 31.8 per cent to $588.5
million. The bank anticipates an effective
tax rate of 20 per cent for 2013 compared
to the 37 per cent effective rate in 2012.
The 2012 taxation figure included a one-
off provision charge of $128 million.
Based on these projections and using
an offer price of $22, First Citizens is
expected to trade at a forward P/E of
9.4 times and a dividend yield of 4.8
per cent. This is an attractive valuation
when compared to the other banks listed
on the stock exchange (Table 1).
The bank s forward P/E is below the
weighted average market P/E of 16.4 and
below the 5-year average P/E for the
T&T Composite Index (TTCI) (Exhibit
Based on these valuations and the
strength and of the bank, Bourse rec-
ommends a BUY at the $22 offer price.
Weekly Market Review
valuation and analysis
Bourse Securities Ltd
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