CIBC/First Caribbean International Bank Ltd (FCIB)
FCIB half-year results were broadly in line with market conditions and investor expectations. Total assets grew from the October 2012 year-end level of US$11.5 billion to US$11.7 billion as at the April 2013. Three areas exhibited significantly higher balances when compared to the 2012 year-end figures. These were cash and similar balances, investment securities and customer deposits.
Cash, balances with Central Bank and due from banks increased from US$2.38 billion as at October 2012 to US$2.71 billion as at the end of April 2013.
To some extent, this reflects lower demands for loans. This surplus liquidity would have allowed it to increase its holding of investment assets; this balance grew to US$1.82 billion from the US$1.70 billion it held as at year-end 2012.
In keeping with customers' continuing trust and confidence in banking institutions, deposits and other borrowed funds rose from the year-end balance of US$9.64 billion to US$9.84 billion as at the April 2013 half-year.
Very predictably, as demand for loans slowed and customers' willingness to repay and even accelerate their payments improved, the bank's loan assets declined; these fell to US$6.47 billion as at the end of April 2013 from US$6.83 billion last October.
Income and profitability changes
These changes were largely reflected in the composition of FCIB's income statement. Interest income declined to US$233.3 million from US$250 million in the comparative period in 2012. Similarly, interest expenses also declined from US$52.3 million for the six months ended April 2012 to US$47.4 million for the current six-month period. In total, net interest income for the six months ended April 2013 was US$185.9 million or six per cent lower than the US$197.8 million reported for the comparative period in 2012.
Operating income exhibited growth of 8.4 per cent to reach U$77.4 million from the 2012 result of US$71.4 million. On that basis, total income closed 2013 at US$263.3 million. This was US$5.9 million (2.2 per cent) lower than the US$269.2 million recorded for the first six months of 2012.
Higher business taxes and non-credit losses pushed up operating expenses by US$9.9 million. Thus, the current period's figure closed at US$178.1 million (2012: US$168.2 million.) On the positive side, loan loss impairment declined to US$48.6 million from the prior period's US$71 million. This reduction was attributed to lower specific provisions.
Also, contributing to lower expenses was the elimination of the cost of amortising intangible assets; in the prior period this consumed US$0.7 million. Consequently, total expenses fell to US$226.8 million from US$239.9 million for the first six months of 2012.
The net effect of these changes saw pre-tax income close at US$36.6 million. This represented an improvement of 24.8 per cent over the U$28.3 million reported for the half-year to April 2012.
In the 2012 period, there was a useful tax credit of US$125k, which pushed up after tax income to US$29.5 million. In the current period, there was a tax charge of almost US$2.6 million, which pulled down the after tax result to U$34 million. Thus, on an after-tax basis, the improvement was less dramatic; 15.5 per cent, instead of the almost 25 per cent on a pre-tax basis.
When we compare the profit attributable to shareholders, we see a further improvement. This measure rose from US$28 million in the 2012 period to US$33.6 million in the current period, or by 19.9 per cent.
When the parent company acquires all of the shares of the Jamaican subsidiary and it becomes fully delisted, there will not be any minority interest. On a per share basis, this reflects current EPS of 2.1 US cents versus 1.8 US cents for the 2012 period. The bank maintained its interim dividend payment of 1.5 US cents, which was paid at the end of June 2013.
Segment results
FCIB operates under three distinct segments, retail banking (RB), corporate lending and investment banking (CLIB) and wealth management (WM); the administration (Admin) segment includes earnings on economic capital and capital changes for treasury and the offset from the other segments.
For the six months ending in April 2013, retail banking had slightly lower external revenues of US$88.3 million (2012: US$90.8 million). Pre-tax segment results moved from last year's profit of US$2.8 million to a current period loss of US$13.8 million.
Also experiencing declining revenues was the CLIB segment. In this case, external revenues moved from the 2012 figure of US$123.4 million to US$106.2 million. Despite this decline, segment losses improved from US$18.4 million in the 2012 period to a more modest loss of US$0.9 million in the current period.
Wealth management continues to deliver strong and consistent results. External revenues were only modestly higher. (2013: US$24.9 million; 2012: US$24.1 million)
Even so, segment profit rose from the 2012 result of US$17.7 million to US$22.5 million, or by 27.6 per cent.
At US$28.8 million, the administration segment's result was 5.5 per cent more than the US$27.3 million recorded for the 2012 half-year.
Scotiabank T&T Ltd (SBTT)
For the first six months of the current year, Scotiabank's total assets increased by almost four per cent to $18.4 billion from $17.7 billion as at October 2012. Both deposit and loan balances recorded increases. In addition, balances in treasury bills, investment securities and policyholders' funds were higher than those as at year-end October 2012.
Treasury bills balances increased from $1.82 billion as at October 2012 to $2.07 billion as at April 2013. Similarly, investment securities rose to $1.3 billion from $1.1 billion as at last October.
Another line item that showed an increase was customers' deposits; this rose to $13.46 billion from the year-end balance of $12.93 billion. The common influencing factors for these three items were probably the continuing high levels of liquidity in the local economy accompanied by low (though improving) levels of economic activity.
Probably helped by increasing levels of mortgage applications, the bank's loan balances improved slightly to $10.12 billion from $9.96 billion at last October. Since homeowners tend to need more insurance than other borrowers, this may be related to the rise in policyholders' funds; this item improved to $683.5 million from $631 million as at its October year-end.
Income and profitability changes
Not surprisingly, net interest income for the six months to April 2013 declined to $443.1 million from the $462 million recorded for the comparative period in 2012. Most likely, both interest income and interest expense would have contracted.
Where the greatest improvement was shown was in other income. This item includes fees, commissions, and net premium income and foreign exchange earnings. Given that the insurance services and retail banking segments showed very healthy increases in fee and commission income, it is not surprising that this item showed a robust 30.4 per cent increase to reach $224.5 million from last period's $172.1 million.
These changes allowed SBTT to record net interest and other income of $667.6 million; this was a 5.3 per cent improvement over the $634.1 million recorded for the six months to April 2012.
Other expenses include employee compensation, premises and technology, communications and marketing; these costs increased from $279.8 million in 2012 to $306.1 million in the current half-year, or by 9.4 per cent. Mitigating this somewhat was the decline in loan loss expense, which fell to $7.96 million from $10.54 million in the earlier period.
These changes allowed Scotiabank to report a pre-tax profit of $353.6 million; this is 2.9 per cent more than the $343.7 million recorded for the 2012 half-year. This gain was eroded due to a marginally higher tax allocation (2013: 23.25 per cent; 2012: 21.8 per cent of profit). Thus, the after-tax result of $271.3 million was less than one per cent greater than the $268.7 million recorded for the comparable period in 2012.
Segment results
The bank operates along three major segments, that is, corporate, commercial and merchant banking (CCM), retail banking (RB) and insurance services (IS). Another segment, "other", includes the functions of a centralised treasury unit and other centralised services.
One outstanding feature of the half-year results to April 2013 is that the insurance services segment is the only division to record an increase in its contribution to pre-tax profits. For 2013, this profit was $57.9 million, representing an increase of 24.3 per cent over the $46.6 million recorded for the 2012 half-year.
Currently, this figure represents 16.4 per cent of total pre-tax income. Perhaps, in three to five years' time, and if this growth rate persists (or accelerates) this contribution might grow to as much as fifty per cent?
Fees and commissions for the insurance segment grew from $30.5 million in the April 2012 half-year to $38.8 million in the current half-year, or by 27.5 per cent. Less robustly, net interest income rose by 12.8 per cent to $30.7 million from $27.2 million in the last period.
Total revenues for the retail banking segment rose by 2.4 per cent to $391.9 million from last period's $382.7 million. Despite this increase, pre-tax profits declined to $151.6 million from last period's $153.5 million.
Meanwhile, revenues at CCM banking contracted from the 2012 figure of $162.9 million to $148.8 million in the current period, or by 8.6 per cent. However, the drop in segment profit was 10.2 per cent; this figure moved from the 2012 result of $144.2 million to the current profit of $129.4 million.
The other (that is, treasury and centralised services) division swung from a loss of $4.675 million in 2012 to a profit of $3.53 million in the half-year to April 2013.
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