Home' Trinidad and Tobago Guardian : February 13th 2014 Contents FEBRUARY 2014 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG15
After much anticipa-
tion, the Government
eventually sold 20 per
cent of its shares in
First Citizens Bank
Ltd to the public last
July. This sale of 48,495,665 shares at
$22.00 each was heavily oversubscribed.
Under the original allocation formula,
15 per cent was reserved for employees;
this amounted to 7.28 million shares.
The final allocation of shares saw
employees being allocated only 7.8 per
cent of the total or 3.78 million shares.
One cannot be sure if this low partic-
ipation rate was due to a lack of interest,
confidence or means.
On the other hand, allocations to
individual investors soared from the
original 15 per cent to 26.5 per cent.
Consequently, individuals were allotted
12.85 million shares.
Both the National Insurance Board
and local companies and similar
investors received their full ten per cent
allocation. Meanwhile, the collective
allocation to mutual funds, including
the Unit Trust Corporation, came in
at 20.7 per cent of the issue or just over
ten million shares. This group was orig-
inally allocated 25 per cent.
Trading of the shares commenced
on September 16, 2013 and has mostly
been brisk and, for the most part, the
price has been in the ascendency, at
least until recently. Many individual
investors would have been happy to
exit at a respectable short-term profit.
This left room for institutional investors
to add to their holdings.
Let us now turn to the 2013 results.
Assets growth and profile
Total assets grew from the 2012 base
of $34 billion to $36.3 billion as at Sep-
tember 2013. Statutory deposits with
the Central Bank rose to $6.73 billion
from $4.45 billion in 2012. Much of
this change seems to be directly related
to the increase in customers deposits,
which advanced to $21 billion from
$18.9 billion previously.
Available for sale financial assets
declined by $604 million; this reflects
a movement from $9.22 billion in 2012
to $8.61 billion last year. Primarily, dis-
posals of $7.94 billion exceeded its addi-
tions of $7.32 billion. The bank s hold-
ings of government-related securities
declined from 63.3 per cent in 2012 to
54.6 per cent last year.
Total loans to customers advanced
by 11.5 per cent to $11.52 billion from
the previous year s $10.32 billion. Loans
to three sectors stand out: construction,
consumer and real estate mortgages.
Loans to consumers increased by
32.6 per cent to $1.99 billion from $1.50
billion in 2012. Construction loans expe-
rienced growth of 8.9 per cent or from
$3.26 billion in 2012 to $3.55 billion last
Surprisingly, real estate mortgage
loans contracted by a significant 16.3
per cent to $2.8 billion from the previous
year s $3.34 billion. This could suggest
the bank is not as competitive as its
rivals in helping to meet consumers
needs in this vital sector.
The current portion of the loans
portfolio increased from less than 35
per cent in 2012 to slightly more than
44 per cent as at the end of last year.
Since the greatest portion of interest
and fees are earned in the early years
of a loan, this change sets the stage for
First Citizens Bank Ltd 2013 results
a higher level of profitability in the
next fiscal period.
Liability and equity
Customers deposits increased
from $18.9 billion in 2012 to $21
billion last year. This increase of
$2.1 billion was concentrated in the
higher deposits from public insti-
tutions, which moved to $8.45 bil-
lion from $6.86 billion in 2012. This
represents more than 75 per cent
on the year s increase.
Deposits sourced from private
institutions increased by $191 mil-
lion to $6.61 billion. Meanwhile,
those from consumer sources rose
by $333.4 million to $5.95 billion.
The value of other funding
instruments declined to $4.63 bil-
lion from $6 billion as at year-end
2012. The principal component,
repurchase agreements, contracted
from $5.96 billion in 2012 to $4.55
billion last year. Costs also fell as
the highest interest rate declined
to 2 per cent from 2.75 per cent in
Shareholders equity increased
from $5.75 billion in 2012 to $6.18
billion last year. The major con-
tributor to this change was retained
earnings, which improved to $3.67
billion from $3.27 billion as at the
2012 year-end. The retained earn-
ings balance now comprises 59.4
per cent of total equity.
The income statement
FCB s net interest income rose
by 5.6 per cent to $1.16 billion from
the 2012 base of $1.1 billion. Interest
on loans to customers rose by 19.7
per cent to $824.6 million from
$689.1 million a year earlier.
Interest on financial assets fell
from $670.6 million in 2012 to
$637.3 million last year. Also,
exhibiting a decline was interest
on loan notes, which brought in
$109.2 million last year in contrast
to $132.7 million in 2012.
Interest on customers deposits
improved from $58.5 million in 2012
to $99.7 million last year or by 70.4
per cent. In line with lower rates
on repurchase agreements, interest
paid on other funding instruments
declined to $153.8 million from
$168.8 million in 2012.
In a similar vein, interest on
bonds payable moved from $168.9
million in 2012 to $159.9 million
Fees and commissions advanced
by a robust 32.6 per cent from
$267.1 million in 2012 to $354 mil-
lion last year. All components of
this line item exhibited strong
Credit related fees advanced from
$27.4 million in 2012 to $33 million
last year or by 20.6 per cent. Trans-
action service fees and commissions
rose a healthy 59.6 per cent to
$131.2 million from $82.2 million
in the prior year. Portfolio and other
management fees increased by 20.6
per cent to $189.3 million; in 2012,
this figure was $157.5 million.
Despite a decline in the gains on
sale of financial assets, total net
income came in at $1.63 billion;
this represents an improvement of
7.5 per cent over the $1.52 billion
earned in 2012.
A larger head-count of 1,684
(2012:1,640) helped push up
administrative expenses by 18 per
cent to $527 million from $445.8
million in 2012. After allowing for
all other expenses, operating profit
for last year came in at $730.8 mil-
lion, 4.4 per cent higher than the
previous year s $700 million.
Slightly lower profits from both
associate and joint ventures saw
pre-tax profit for 2013 register at
$742.2 million; this represents an
improvement of 3.9 per cent over
the 2012 result of $714.2 million.
In 2012, FCB s tax bill was dis-
torted by a one-off charge of $128.3
million, which related to the 2011
fiscal period. Now, in 2013, the
effective tax change came in at 18.3
per cent of pre-tax profits. This
rate was helped by having $95 mil-
lion in tax-exempt income, offset
by $44 million in non-deductible
Net profit for the year came in
at $606.5 million and represented
EPS of $2.41.
The FCB Group operates along
four profit-making lines: retail,
corporate, treasury and investment
and trustee and asset management.
The table illustrates these results
for both 2012 and 2013.
The most notable swing in
income was experienced by the
treasury and investment unit; here,
income contracted from its 2012
base of $1.232 billion to a more
modest $541 million last year. In
addition, after-tax profit at this
operating centre contracted from
the 2012 result of $954 million to
a mere $221 million in 2013.
Recent share price
As at the end of its fiscal year
in September 2013, the share price
of FCB closed at $35.01. Since then,
it has continued to move upward.
The share price attained its recent
peak of $42.99 on January 20,
2014. With a historical EPS of
$2.41, that price represented a P/E
multiple of 17.8 times.
Not surprisingly, the price has
since weakened. Investors will
await the release of FCB s first
quarter results, which is due short-
ly, to determine their next move
and gauge what is a reasonable
price to pay.
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