Home' Trinidad and Tobago Guardian : May 11th 2014 Contents MAY 11 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG15
Three locally-listed banking
groups recently reported their
half-year results to March
2014; these are National Com-
mercial Bank Jamaica Ltd
(NCBJ), Republic Bank Ltd
(RBL) and First Citizens Bank Ltd (FIRST).
The table above highlights some headline data
for each company.
National Commercial Bank
Jamaica Ltd (NCBJ)
Despite generating a 29 per cent increase
in EPS, the share price has improved by only
J$0.09 to J$18.11 over the one-year period.
The 5.0 per cent increase in net interest
income was largely attributable to the increase
in net loans and advances, which expanded
by almost 17 per cent; this disproportionately
lower increase in interest income suggests that
interest rates on loans have declined.
Other income increased by a strong 40.8
In the 2013 period, losses on the debt
exchange programme amounted to J$1.5 billion;
in the current period, this expense was no
longer a factor. In addition, foreign currency
and investment activities increased by J$440
million to J$507.9 million in the current period
from a low base of J$67.6 million in the 2013
Another significant contributor to the
improvement in other income was the higher
level of premium income. This change was
due largely to the inclusion of Advantage Gen-
eral Insurance Company Ltd (AGIC), which
was acquired on February 19, 2013. Premium
income moved from J$1.77 billion in the 2013
half-year to J$3.54 billion in the six months
to March 2014. Growth in annuity and life
insurance premiums was also a positive fac-
tor.The AGIC acquisition also contributed to
increases in expenses. First, there was a 68
per cent increase in policyholders and annu-
itants benefits and reserves; this line item
jumped by J$891 million. Next, the larger
workforce inherited from the acquisition helped
push up staff costs by 8.0 per cent, which
translated into an additional J$470 million.
Other operating expenses rose by 11.3 per
cent from J$461 million to J$4.53 billion; in
the 2013 period this figure was J$4.07 billion.
A wide range of items contributed to this
result, including utilities, property, vehicle and
ABM maintenance; higher advertising and
marketing costs were also evident.
Non-performing loans increased marginally
to J$7.6 billion (2013: J$7.5 billion). On a positive
note, this sum now represents 4.9 per cent
of the total loan portfolio; in 2013, this figure
was 5.7 per cent of the loan book.
Customers deposits increased to J$198.4
billion; this figure was 15.9 per cent greater
than the J$171.2 billion as at March 2013. Sig-
nificantly, fixed deposits, at 38 per cent, reg-
istered the largest year-on-year increase. Sav-
ings and demand balances increased by only
12 per cent and 4.0 per cent, respectively.
Of the bank s seven operating segments,
three delivered noteworthy year-on-year
improvements in their profits. Not surprisingly,
the general insurance segment, buoyed by the
AGIC acquisition, saw operating profit improve
by 246 per cent. This segment s result came
in at J$594.3 million from 2013 s J$171.6 million,
representing an improvement of J$423 mil-
Next in line was treasury and correspondent
banking, which exhibited a 203 per cent
increase in its operating profit. From a 2013
base of J$519.4 million, this division delivered
a J$1.57 billion operating profit this year.
Growth in net interest income registered at
11.3 per cent to reach J$1.81 billion. However,
the biggest swing came within the foreign
currency and investment activities line; this
item moved from a negative J$865.8 million
in the 2013 period to a positive J$31.2 million.
This change was due to the absence of the
debt exchange costs in the current period.
Finally, the retail and SME segment delivered
a 90 per cent improvement in its operating
profits. This figure moved from J$342.3 million
in 2013 to J$649.8 million this year. A 5.0 per
cent increase in net interest income was the
prime driver for this segments improved result.
Dividend & future
During calendar 2013, NCBJ paid a total of
J$0.63 in dividends. Then, in February 2014,
a dividend of J$0.32 was paid. On May 22,
2014 NCBJ will pay another interim dividend
These 2014 payments suggest that, based
on improving levels of profitability, shareholders
will receive significantly higher returns in the
current period. This trend should help improve
its share price.
Republic Bank Ltd (RBL)
Over the last 12 months, RBL s share price
increased by 10.5 per cent to $120.33. Despite
this appreciation, the year-on-year EPS
improvement of $0.03 has been minimal.
In addition to an attractive dividend yield,
the price appreciation has also been driven by
the expectation that the bank would complete
its acquisition of HFC Bank Ghana Ltd; this
anticipation is now in the final phase of (it)
RBL s results for the six months to March
2014 were impacted by two significant actions.
First, goodwill with respect to its Barbados
operations was written down by $185 million.
This action partly accounts for the decline in
that territory s assets to $8.67 billion from last
March s $9.05 billion.
Of greater significance was the sale of its
shares in Visa Inc, on which it realised a profit
of $210 million.
This transaction helped improve the bank s
cash resources at a time when it expects to
expend more than US$100 million to complete
the HFC acquisition. (However, it is more likely
that foreign domiciled funds would be used
for that purpose.)
Interestingly, the pre-tax profit from Bar-
bados increased from $48.5 million in 2013 to
$73.2 million in the current period or by 51
per cent. This result is surprising, given the
chairman s comment and the challenges being
experienced in that market at this time.
Despite a 14 per cent improvement in oper-
ating income here in T&T, pre-tax profit
declined by a factor of 4.7 per cent. The profit
fell by $33.6 million, moving from $720.1 mil-
lion in 2013 to $686.5 million in the six months
to March 2014.
Subsidiaries located in Guyana, Cayman
and Eastern Caribbean exhibited a 19.2 per
cent improvement in pre-tax profit; this figure
moved from $102.4 million in 2013 to $122.1
million in the current period. The healthy con-
tribution from Guyana alone would have
masked deficiencies in the results from Eastern
Despite its original plans not to immediately
take full ownership of HFC Bank Ghana Ltd,
the now mandatory process of acquiring the
remaining 177.8 million shares at a 28 per cent
premium over the current market price, will
help define RBL s results for the remainder of
the current year and beyond.
First Citizens Bank (FIRST)
Net interest income for the half-year
declined marginally to $577 million from $579.2
million in the 2013 comparative period. On
the other hand, other income rose by 11.2 per
cent to $274.3 million from $246.6 million in
the six months to March 2013.
The profit to shareholders improved by 4.7
per cent to $320.8 million. This result was
helped by two factors. First, the share of profit
from associates and joint ventures rose to $8.2
million from $4.9 million in the 2013 period.
Also, the tax costs declined to $79.35 million
from $82.27 million in the 2013 half-year.
At the retail and corporate segment, pre-
tax profit improved by 3.3 per cent to $296
million from $287 million in the six months
to March 2013.
Dividends and future
Based on its results for the first six months,
FCB will pay an interim dividend of $0.57 on
May 29, 2014. The dividend as a percentage
of its EPS is slightly under 45 per cent and
is consistent with that used to pay the dividend
of $1.09 for 2013.
The recent publicity concerning the purchase
and sale of shares by one of its officers has
had a negative effect on many customers. As
this event passes into history and action is
taken to plug the loophole that facilitated its
execution, current and potential customers
will be reassured by the bank s commitment
to its core values.
Assuming that the government follows
through with its stated intention to divest
additional shares in this bank, it is likely that
future rapid share price appreciation would
Half-year 2014 results for:
• National Commercial Bank Jamaica
• Republic Bank
• First Citizens Bank Ltd
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