Home' Trinidad and Tobago Guardian : January 23rd 2014 Contents JANUARY 2014 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG13
For the year ended
September 30, 2013,
Republic Bank Ltd
delivered basic EPS
of $7.30. This meas-
ure represents a
small but welcome improvement
over the $7.27 recorded for the 2012
Stellar earnings of $7.51 were last
achieved in 2008, just prior to the
CL Financial debacle, which also
coincided with the start of diffi-
culties in the world s major
After recording a steep fall to
$5.91 in 2009, this banking group
has delivered increasing levels of
profitability to its shareholders.
With a huge block of its shares
now in friendlier hands, via the
Clico Investment Trust, the board
can focus on growing the company
both locally and in selected foreign
Assets growth and profile
Total assets grew from the 2012
base of $51.6 billion to $57.6 billion
as at the 2013 year-end, exhibiting
growth of 11.6 per cent. The most
prominent component of this figure
was advances to customers, which
rose by 8.2 per cent to $25.2 billion
from $23.3 billion as at year-end
A break-out of this figure reveals
that the strongest growth was
exhibited in mortgage loans; this
category advanced by more than
$1 billion to reach $9.56 billion from
the earlier balance of $8.56 billion,
a gain of 11.7 per cent.
Also exhibiting some growth was
commercial and corporate lending.
In this case, growth of 4.5 per cent
was registered, as the year-end fig-
ures moved from $10.5 billion in
2012 to $11 billion in 2013. It is
noteworthy that this category has
the highest level (62.6 per cent) of
non-performing loans and the
greatest allocation for impairment
losses (60 per cent of the total).
Advances to retail lenders
improved by 10.5 per cent to $4.66
billion from $4.22 billion as at the
end of 2012.
Investment securities grew to
$8.13 billion from $7.79 billion as
at year-end 2012. The biggest
increase of $385 million was record-
ed in the bank s holdings of cor-
porate bonds and debentures. In
addition, its holdings of equities
and mutual funds rose by $58 mil-
lion. The bank s holding of gov-
ernment related paper and bankers
acceptances fell marginally.
The sums due from other com-
mercial banks rose by a huge 27.9
per cent in 2013; this represented
an increase of more than $2 billion,
with the balances moving from
$7.2 billon as at the end of 2012 to
$9.2 billion as at September 2013.
In line with an increase in cus-
tomers deposits, the statutory
deposits with central banks rose to $4.33
billion from $3.97 billion in 2012.
Reflecting higher levels of liquidity,
RBL s holding of treasury bills increased
by 19.1 per cent to $5.72 billion from
$4.81 billion in the 2012 period.
Liability and equity movements
Customers deposit balances rose by
slightly more than $5 billion or 13.5 per
cent to reach $42.1 billion from $37.1
billion as at September 2012.
Interestingly, the percentage of
deposits attributable to state entities
increased from 12.5 per cent ($4.62 bil-
lion) in 2012 to 15.9 per cent in 2013
($6.68 billion) in 2013. This change con-
trasts with a decline in the percentage
of total deposits held by individuals; in
this case, the percentage moved from
58.8 per cent ($21.8 billion) in 2012 to
55.8 per cent in 2013 ($23.5 billion).
Other fund raising instruments
increased from $2.69 billion as at year-
end 2012 to $3.4 billion as at the end
of 2013. This change was primarily
attributable to an increase from other
The sum attributable to equity holders
improved from $7.89 billion as at Sep-
tember 2012 to $8.3 billion as at year-
Primarily due to the acquisition of
minority shares in its Barbados sub-
sidiary, the equity attributable to non-
controlling interests declined to $292.4
million from $663.6 million in the 2012
period. Consequently, total equity rose
marginally to $8.6 billion as at year-
end 2013 from $8.55 billion a year ear-
RBL s total interest income rose mar-
ginally by less than 1 per cent to reach
$2.52 billion from $2.49 billion in 2012.
Of this total, interest on advances
improved by 2.9 per cent to $2.1 billion
from $1.04 billion in 2012. On the down
side, interest on investment securities
contracted by 12 per cent to $337.4 mil-
lion from $383.3 million in the prior
Starting from a small base, interest
on liquid assets improved to $77.8 mil-
lion from $69.6 million in 2012.
The bank s interest expenses declined
by $18.4 million or 5.2 per cent to reach
$336.5 million; in 2012, this figure was
$354.9 million. This decline was exhib-
ited across all deposit accounts, debt
securities in issue and other fund raising
The line item which exhibited the
greatest improvement was other income.
This measure moved from $1.1 billion
in 2012 to $1.25 billion in 2013. In 2012,
other income (primarily fees) accounted
for 34 per cent of the bank s total
income. Now, in 2013, it accounts for
36.6 per cent of the total. Consequently,
it is not surprising that RBL was able
to report improved revenues.
The major categories of other income
include fees and commission from trust
and fiduciary activities as well as other
fees and commission income. The for-
mer contributed $272.7 million in 2013
(2012: $223 million) while the latter gen-
erated $538.3 million in 2013 (2012:
Net exchange trading income pro-
vided a useful $226.4 million to the
2013 result while gains on the disposal
of available-for-sale investments con-
tributed $25.6 million in 2013.
The net effect of these changes saw
RBL report total 2013 income of $3.437
billion; this was $193.8 million or 5.98
per cent more than the $3.243 billion
earned in 2012.
The two largest components of oper-
ating expenses are staff costs and general
administrative expenses. Both line items
exhibited increases in 2013. Staff costs
advanced by 2¼ per cent to reach
$652.8 million; in the prior year, this
figure was $638.3 million. More signif-
icantly, general administrative expenses
increased by 9.7 per cent to $551 million
from its 2012 base of $502.3 million.
These changes saw total operating
expenses expanding to $1.74 billion from
$1.62 billion in the prior period.
A huge swing occurred in the com-
pany s share of results from its asso-
ciated companies. This measure moved
from a positive $12.2 million in 2012 to
a negative figure of $60.3 million in the
current session. The major contributor
to this change was the loss of $75.7 mil-
lion recorded by the Bank of St. Lucia.
In addition, its majority-owned
Grenadian subsidiary suffered a loss of
$9.3 million; this result was primarily
due to impairment expenses of $53 mil-
lion on Government of Grenada debt.
These changes resulted in an oper-
ating profit for 2013 of $1.637 billion;
this figure was marginally lower than
the $1.638 billion reported for 2012.
Reduced impairment costs in 2013
helped RBL report a slightly higher pre-
Loan impairment costs net of recov-
eries of $103.6 million in 2012 fell to
$57 million in 2013. Consequently, the
pre-tax result improved from $1.53 bil-
lion to $1.58 billion, or by 3 per cent.
Greater profitability and higher taxes
locally combined with reduced allowable
expenses of more than $56 million con-
tributed to an increase in tax expenses
of almost $76 million. This figure moved
from $307.5 million in 2012 to $383.4
million in 2013. The effective tax rate
increased from 20 per cent in 2012 to
24.26 per cent in 2013.
RBL reported an after-tax result of
$1.197 billion for 2013; this was 2.4 per
cent lower than the $1.227 billion report-
ed for 2012. However, the results that
were attributable to equity holders
improved by less than 1 per cent, moving
from $1.16 billion last year to $1.17 billion
Although subsidiaries in the Eastern
Caribbean may need some measure of
intensive care, much stronger results
can be expected from its subsidiaries
in Trinidad, Guyana and Ghana. Con-
sequently, it is not unreasonable to proj-
ect a full-year EPS of $8.00 or higher.
On that basis and using a realistic P/E
multiple of 16, the share price seems
likely to cross $128.00 before the end
of September 2014.
Let us see what tone is set when its
first quarter results are released.
Republic Bank Ltd 2013 results...
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