Home' Trinidad and Tobago Guardian : March 27th 2014 Contents MARCH 2014 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
NEWS | BG5
As of September 30, 2013, among the banks
operating in T&T, First Citizens commands
market share of around 20 per cent in terms
of loans and deposits, Moody s credit rating
agency said in a March 2014 company profile
of the state-owned, publicly-listed bank.
As of September 30, 2013, the end of First Citizens fiscal
year, the bank reported total consolidated assets of $36.3 billion.
As of February 2014, the bank operated mainly in T&T, through
26 full-service branches, a foreign exchange bureau, seven
operations centres as well as 47 onsite and 39 offsite ATMs.
First Citizens was established in 1993, following the restruc-
turing and merger of three failed government-owned banks:
Workers Bank Ltd, National Commercial Bank of T&T Ltd,
and Trinidad Co-operative Bank Ltd. The bank is a subsidiary
of First Citizens Holdings Ltd (77.2 per cent stake), a company
owned by the Government.
For the fiscal year ended September 30, 2013, the largest
contributor to the bank s total consolidated revenue was the
Retail Banking segment, with 37.5 per cent of the total amount,
Moody s noted.
As of September 30, 2013, retail banking reported total con-
solidated assets of $6.5 billion, Moody s reported. As of the
same period, corporate banking reported total consolidated
assets of $7.2 billion, and accounted for 21.3 per cent of the
bank s total revenue.
First Citizens operates mainly in T&T, but it also has oper-
ations in Barbados, Costa Rica, St Lucia and St Vincent and
the Grenadines. In Barbados alone, the bank had five branches,
one lending centre and eight ATMs; coupled with a repre-
sentative office in Costa Rica. Additionally, it provides services
through alternative delivery channels, including mobile, internet
and telephone banking.
"Over the past five years, First Citizens has grown both
organically and inorganically. In 2009, it acquired Caribbean
Money Market Brokers Ltd (renamed First Citizens Investment
Services Ltd), a full-service securities-trading company with
offices in T&T, Barbados, St Vincent and the Grenadines, and
St Lucia. In January 2012, the bank opened a representative
office in Costa Rica, marking its entry into the Central American
market. In August 2012, it acquired Barbados-based Butterfield
Bank (Barbados) Ltd (rebranded First Citizens Bank (Barbados)
Ltd)," Moody s said.
Moody s put First Citizens in a peer group with Banco del
Estado de Chile, Banco de Costa Rica, Banco Nacional de
Costa Rica, Banco de la Republica Oriental del Uruguay.
Non-performing loans increasing
Earlier in February this year, Moody s had assigned a stand
alone Bank Financial Strength Rating (BFSR) of C- and a Base-
line Credit Assessment (BCA) of baa1 to First Citizens Bank
Ltd (First Citizens), majority-owned by the Government of
T&T (also rated Baa1, with a stable outlook).
The stand-alone rating reflects the bank s solid fundamentals,
particularly its robust capitalisation and solid funding profile
from both retail customers and government-related entities.
The rating is also supported, Moody s said, by the bank s
established franchise as a corporate and commercial lender,
with a sizeable market share in its targeted business of financing
utilities, construction and real estate projects.
Moody s said "key constraints" facing First Citizens is its
sizeable private and public sector asset concentrations, as well
as an increasing exposure to consumer lending which expose
the bank to earnings and asset quality volatility, especially
amid modest economic growth.
"We also note the increasing trend in non-performing loans
since 2011 after impairments in construction loans, particularly
related to the hotel industry. Furthermore, tight competition
from domestic and foreign players challenges management to
revert the declining trend in profit margins," Moody s said.
Moody s said First Citizens has a "robust capital base, in
line with the bank s exposure to construction and real estate
lending; asset quality pressured by sizeable private and public
sector concentrations; stable funding structure based on ample
base of customer and public sector deposits; resilient earnings
generation, but margins are pressured by tight competition
from domestic and foreign banks.
Giving what could change the rating up, Moody s said upward
movement in the bank s local currency rating would depend
on similar movement in the BFSR, which would hinge on sus-
tained improvement of asset quality and expansion of core
profitability, as well as on a maintained capitalisation. An
upgrade of the country ceiling for foreign currency deposits
would result in an upgrade of the foreign currency deposit
Giving what could change the rating down, Moody s said:
"A continuous deterioration in asset quality, profitability or
capital, could exercise downward pressure on the bank s stand-
alone strength rating. A downgrade in the foreign currency
country ceiling for deposits would result in a downgrade of
the foreign currency deposit rating."
First Citizens has a track record of reporting robust cap-
italisation ratios, which are suitable given the bank s sizeable
exposure to riskier construction and residential mortgage lend-
ing. In addition, the bank s equity is of high quality, 75 per
cent composed of Tier 1 capital. The thick risk-weighted capital
ratios reported, however, reflect the bank s under-leveraged
balance sheet in terms of loans and the significant exposure
to government securities and loans, which are not risk-weighted
per local regulations.
First Citizens stays robust "despite a hefty dividend policy
of between 45 per cent to 55 per cent," Moody s said.
Ample customer base
First Citizen s funding and liquidity profile has been stable.
As a Government-owned bank, First Citizens benefits from
access to core retail deposits and government-related sources
of funding. The bank is largely funded by customer deposits
(70 per cent of total liabilities), split between demand deposits
(60 per cent), saving accounts (25 per cent) and time deposits
(15 per cent). Deposits are balanced among government sources
(40 per cent), corporates (31 per cent) and individuals (29 per
cent). The remaining portion of funding is composed by repos
(15 per cent) and senior debt (8 per cent).
As of September 2013, 55 per cent of loans were due in
more than one year, Moody s said. Funding has also been
extended via the issuance of four senior bonds totalling $2.5
billion, with maturities of up to seven years. About $500
million matured in January 2014.
The bank also reports a large position of liquid assets on
its balance sheet, consisting of its trading and held-to-maturity
book, which is primarily (60 per cent) comprised of the
domestic government securities, as well as cash instruments
and deposits with the Central Bank partly reflecting relatively
high reserve requirements.
Liquid assets accounted for 50 per cent of total assets as
of September 2013.
Core earnings have expanded over the past several years
reflecting steady loan and fee growth. Quality of earnings has
also improved as income and gains from securities comprised
47 per cent of net revenue as of September 2013, from 68 per
cent in September 2010. Net fees grew 33 per cent or twice
the pace of 2012, comprising 22 per cent of net revenue, up
from 18 per cent. Fees are chiefly sourced from portfolio man-
agement (53 per cent) and transaction services (37 per cent).
More profit expected
Moody s said: "We expect earnings to continue to increase
as loan demand picks-up hand in hand with economic recovery.
As of September 2013, net income raised by 36 per cent in
TT$ terms to $607 million, largely due to lower taxes paid,
up from $446 million as of September 30 2012."
Pre-tax income grew by a more moderate four per cent in
2013, similar to 2012 and 2011. The reported return on average
assets and equity stood at 1.7 per cent and 10.1 per cent as
of September 2013, up from 1.4 per cent and 8.1 per cent the
year before, helped by a seven per cent contraction in pro-
"Margins continued to decline, however, due to the low
(interest) rate environment and tight competition. The net
interest margin (NIM) slid to 3.4 per cent as of September
2013 from 3.6 per cent and 3.8 per cent in 2012 and 2011,
respectively. Higher and diversifying business volumes should
help offset a further narrowing of the NIM due to competition
in the corporate segment and to funding cost pressure from
the anticipated tightening of US monetary policy," Moody s
The sustainability of First Citizens franchise derives from
a well established brand, supported by high market shares in
commercial banking, treasury, asset management and trans-
action services, Moody s said. The bank had loans and deposit
market shares of 25 per cent and 30 per cent as of September
2013. However, there is considerable competition by the other
well-established commercial banks, which include Republic
Bank Ltd, RBC Royal Bank Ltd and Scotiabank T&T Ltd. Iron-
ically, since the company s IPO, Republic and RBC are major
shareholders in First Citizens.
These strong retail competitors, together with Citibank,
First Caribbean and Intercommercial Bank on the corporate
side, pose a significant challenge to the bank s mission to
compete for a larger share of private sector lending, Moody s
"In the local market, management is seeking to leverage the
bank s franchise through the cross selling of loans, mortgages,
credit cards, corporate finance, and asset management products.
The lynchpin of that strategy is to expand its reach and increase
efficiency through its electronic products and distribution,
such as the E-First brand and Internet Banking. Management
has been successful in diversifying the bank s operations within
the private sector during the past several years, significantly
enhancing its lending and fee-based activities with corporations
and individual customers," Moody s reported.
Moody s noted that "government actions during past crises
are indicative of the its high focus on financial system stability.
During Trinidad s financial crisis of the early 1990s, the Gov-
ernment acted purposefully to contain the potential contagion
effects of troubled institutions in the market. In February
2009, the Government took control of three local financial
institutions owned by CL Financial Ltd, the country s largest
conglomerate, to help stem funding pressures at that com-
Moody's: First Citizens commands
20% loans and deposits
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