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Belize’s BCB Holdings Ltd: Is it turning the corner?
Thursday, November 8, 2012
In April 1987, a group of Belizean investors bought the assets of Royal Bank of Canada in Belize and renamed the company The Belize Bank Ltd. This bank, together with Belize Bank International Ltd (formerly, British Caribbean Bank International Ltd), are now the two major subsidiaries of BCB Holdings Ltd (BCBH).
The Belize Bank is the largest bank in Belize. With a total of 12 branches it enjoys a 41 per cent market share of loans and 37 per cent share of total deposits. In descending order according to asset size, the other major competitors in that market are Scotiabank, Atlantic Bank Ltd, FCIB and Heritage Bank Ltd.
(Its operating currency is the Belizean dollar, which is equivalent to US$0.50. The reporting currency of the parent company, BCBH, is the US dollar.)
Prior to October 26, 2011, this group included non-Belizean subsidiaries, which were hived off into a new company, Waterloo Investments Holdings Ltd (WIHL). As a result of this demerger, qualifying shareholders of BCBH were issued shares in WIHL.
The major assets of WIHL included British Caribbean Bank Ltd, which is based in the Turks and Caicos Islands. Also included under the WIHL umbrella was a portfolio of loans related to tourism, property and infrastructure. The final part of the WIHL group included interests in two associated companies, based in Costa Rica, that have interests in palm seed and edible oil processing and distribution.
BCBH’s annual report seems to have several important omissions. These include a chairman’s report or review, operations or managing-director’s report and a list of its ten major shareholders and the shareholding interest of each director. These pieces of information are present in almost all locally listed companies.
For the financial year ended March 2012, BCBH reported total income of US$53.8 million and incurred a net loss of US$15.1 million. A major component of this loss was due to the provision for loan losses amounting to US$19.1 million. With 100,007,864 shares outstanding, (excluding treasury shares and warrants), the result reflected a loss per share of US$0.15.
The group’s balance sheet showed total assets of US$675.2 million. The major component of this figure was net loans of US$375.7 million.
The distribution of its loans portfolio shows a gross amount of US$102.4 million outstanding from real estate customers, US$72 million located in the tourism industry, US$51.2 million lent to the building and construction sector and US$44.3 million loaned to the agricultural sector.
The second largest asset item comprises cash, cash equivalents and due from banks totalling US$146.7 million. Of this total, balances with the Central Bank of Belize make up US$39.6 million; this sum was comfortably higher than the minimum amounts required to be held with the central bank. The next item totalling US$96.7 million was classified as cash being held with other financial institutions.
The heading “other assets” records a total value of US$78.4 million. Of this total, US$10.7 million is made up of short term investments. The sum of US$35.1 million comprises the value of Cay Chapel, which is a private island in Belize, which is an asset held for sale. Amounts totalling US$31.3 million represent monies recoverable from the government of Belize and are subject to court decisions.
The group’s principal liability is represented by customers’ deposits totalling US$545.6 million. These deposits are categorised under three headings: certificates of deposits, demand deposits and savings deposits.
Certificates of deposits were represented by balances of US$299 million, while demand deposits comprise sums totalling US$171 million. The remainder of US$75.6 million is classified as savings deposits.
In the case of the certificates of deposits, sums totalling US$229.1 million have maturities up to 12 months while the balance of US$69.9 million mature after one year. A further categorisation for the certificates of deposits was that US$55.5 million were denominated in US dollars and a further value of US$1.1 million was denominated in UK pounds sterling.
In a similar vein, demand deposits valued at US$102.9 million were denominated in US dollars and demand deposits totalling US$2.4 million were denominated in UK pound sterling.
With total shareholders’ equity of US$108 million, each of the company’s shares has a book value of US1.08 or TT$6.91. On the local exchange, this stock does not attract much attention as it was last traded on December 29, 2011, at TT$11.90.
On the Bermudian Stock Exchange, it was recently quoted at US (or BD) $0.19 (TT$1.22) while on the London Stock Exchange AIM, it was quoted on October 31, 2012, at 16.50 British pence (TT$1.73).
What factors might account for such a wide disparity in share prices? This extreme divergence in share prices may explain why local trading has been so sporadic. After all, if one can buy a share at a discount of more than TT$10.00 per unit, why bother to buy on the local exchange?
The results for the first quarter, which ended on June 30, 2012, showed BCBH deliver a much improved performance. Interest income declined to US$9.4 million from US$11.6 million in the 2011 comparative period.
In a similar vein, interest expense fell to US$3.8 million from last period’s US$6 million. The net effect was that net interest income, at US$5.6 million, was the same for both periods.
Next, non-interest expenses fell marginally to US$2.5 million from US$2.6 million last year. However, what made the most impact on its current period’s results was the dramatic drop in provision for bad debts; this item moved from US$3.1 million last year to a more modest figure of US$0.4 million in the current period. This healthy decline allowed the company to report a current period operating income of US$2.7 million; this was a huge improvement from the loss of US$0.1 million for the comparative period in 2011.
After allowing for reduced corporate expenses of US$0.9 million, which were down from last period’s US$1.2 million, net income came in at US$1.8 million. This was a welcome improvement from the US$1.3 million loss (before discontinued operations) recorded in the 2011 first quarter. This out-turns translated to earnings per share figure of US$0.02. The previous period showed a loss of US$0.01 per share (before discontinued operations).
The company’s balance sheet showed a marginal decline in total assets, moving from the year-end March 2012 figure of US$675.2 million to a new balance of US$674.5 million. One significant change was the increase in cash balances from US$146.7 million at the end of March to US$160.2 million at the end of June 2012.
On the other hand, net loan balances declined to US$370.3 million from US$375.7 million as at the March year-end. Also, declining was interest-bearing deposits with correspondent banks; this figure fell to US$24.6 million from the year-end balance of US$31 million. On the liability side, customers’ deposits edged up to US$545.9 million from US$545.6 million previously.
BCBH still has a long way to go to achieve consistent profitability and earn investors’ confidence. Perhaps, the results shown for its first quarter may indicate the start of a serious and sustained recovery for this group? Investors, no doubt, are looking forward to the release of its half-year report to September 2012, which should become available before the end of the year.