First Citizens Bank (FIRST)
At the mid-point in its current fiscal year, FCB reported a marginal increase in net interest income to $577.6 million from $576 million in the comparative period in 2014. Most of this increase was generated in the second quarter, when the overall increase exceeded $7 million; in the first quarter to December 2014, the bank reported a decline of $5.5 million in this line item.
Other income advanced to $293.7 million from $274.3 million, reflecting an improvement of 7.1 per cent. In the absence of details, one is unsure if this includes any "one-off" transaction.
Total net income rose by a modest 2.5 per cent to end at $871.3 million from the earlier period's $850.3 million.
Net impairment expenses rose from $18.5 million in 2014 to $21.8 million in the current half- year. No reason was offered for this increase, although it is likely to be similar to that advanced by Scotiabank T&T (economic uncertainty).
Expenses rose by 1.9 per cent to reach $448.2 million from the previous level of $439.8 million.
These changes allowed FIRST to report an operating profit of $401.3 million; this reflects a 2.4 per cent improvement over the $391.9 million for the 2014 half-year.
The share of profits from associates and joint ventures fell to $6.4 million from $8.2 million in the previous half-year.
This contribution saw pre-tax income register at $407.7 million (2014: $400.1 million).
At the after-tax level, its profit was $325.6 million versus $320.8 million for the comparative 2014 period; this reflects an increase of 1.5 per cent.
This result translated into EPS of $1.30 versus $1.28 for the 2014 half-year.
Changes in financial position
Total assets increased by 2.7 per cent, moving from $34.9 billion last September to $35.8 billion as at March 2015.
Investment balances rose to $12.55 billion from $11.71 billion, or by 7.2 per cent. Also increasing was loans to customers, which climbed by 15.8 per cent to $12.9 billion from $11.2 billion.
The major decline was noted with cash and statutory deposits, which fell by 20.3 per cent to $6.6 billion from last September's $8.3 billion. The increase in loan disbursements and the payment of last year's final dividend were major contributors to this contraction.
Total liabilities rose to $29.5 million from $28.6 million or by 2.9 per cent.
The major component, customers' deposits and other funding instruments, rose by 3.8 per cent to $26.7 billion from the September 2014 figure of $25.7 billion. Last September, other funding instruments comprised $4.8 billion while customers' deposits were $20.9 billion.
Equity movements
Stockholders' equity advanced marginally to $6.36 billion from the previous level of $6.24 billion. Both negative comprehensive income ($50.9 million) and dividend payments ($156.3 million) restrained the increase.
With 251,353,562 shares outstanding, each share has a book value of $25.30 (September 2014: $24.83)
Segment performance
After contributing mildly to the first quarter's results, the treasury and investment bank segment made an explosive contribution to both net income and pre-tax profit for the half-year. Even so, its identifiable assets fell by about $1 billion.
The retail and corporate banking segment was on par with its performance in 2014. No doubt, the increases in loans would help its results in the latter half of the year.
The trust and asset management segment delivered a 20.4 per cent increase in net income and a 23 per cent improvement in pre-tax profit.
Dividends, share price & future
FIRST paid an interim dividend of $0.58, which is a slight increase from last half-year's $0.57.
On September 30, 2014, FIRST's share price was $36.44. This rose to $37.07 on January 5, 2015. The share price was quoted as low as $35.21 on March 13, 2015 and ended last Wednesday at $35.74.
Using a running EPS of $2.51, that price reflects a P/E multiple of 14.24. If we project an annual dividend of $1.20, the yield would be 3.36 per cent.
(Based on recent history, unfortunately, after the September elections, we are likely to see some disruption to the board as new party loyalists replace many of the incumbents.)
Republic Bank Ltd (RBL)
Net interest income rose by 3.8 per cent to $1.17 billion from $1.13 billion for the half-year to March 2014. On the other hand, other income declined, moving from 2014's $793 million to $606.6 million in the current half-year. The entire decline was recorded in the second quarter as the figures fell from $497.4 million down to $296.7 million.
In sum, total operating income came in at $1.78 billion; this represented a decline of 7.5 per cent from 2014's $1.92 billion.
Despite higher compliance costs, operating expenses fell by $119.8 million or 10.6 per cent to $1.005 billion from the previous level of $1.125 billion. In addition, the share of profits from associated companies declined to $16 million from the previous half-year's $21 million. Consequently, the operating profit for the current period registered at $790.6 million; this is $28.9 million or 3.5 per cent lower than the $819.5 million earned in the 2014 half-year.
Fortunately, loan impairment expense registered at $23.2 million (2014: $53.4 million). In addition, taxation, at $177 million, was $6.4 million lower than the previous period's $183.4 million.
These changes helped RBL report an after-tax profit of $590.4 million. After excluding minority interests, the profit attributable to shareholders registered at $572.7 million; this was 2.1 per higher than the $560.8 million recorded for the same period in 2014.
This result translated into EPS of $3.55 versus $3.49 in 2014.
Changes in financial position
Total assets rose marginally to $59.7 billion from $59.4 billion as at September 2014.
Loans and advances increased to $27.6 billion from $27.1 billion, reflecting a rise of 1.8 per cent. In addition, investment securities rose by 7.2 per cent to $8.86 billion from the September year-end figure of $8.26 billion.
Conversely, cash resources fell by $657 million or 3.3 per cent to $18.99 billion from the previous level of $19.65 billion. Increases in investments ($634 million), addition to fixed assets ($153.5 million) and dividends to shareholders ($483.6 million) were among the major consumers of cash.
Total liabilities improved modestly to $50.95 billion from $50.63 billion. The major component, customers' deposits and other funding instruments moved from $47.1 billion to $47.3 billion. As at September 2014, customers' deposits comprised $43.77 billion while other funding instruments were valued at $3.36 billion.
Equity movements
Shareholders' equity was essentially static at $8.43 billion since the end of September 2014.
Retained earnings were marginally higher at $5.85 billion from $5.79 billion. The other reserves component fell to $642 million from $744.4 million; negative comprehensive income ($112 million) and the purchase of shares for the profit sharing scheme ($60 million) were the main contributors to this reduction.
With 161,052,000 shares outstanding, each share has a book value of $52.36 (September 2014: $52.39).
Segment performance
With only a marginal increase in operating income, profits at its local operations soared by 21 per cent. The results in Barbados and the Eastern Caribbean were adversely affected by economic challenges in those territories.
Dividends and share price
RBL maintained its half-year dividend at $1.25.
On September 30, 2014, RBL's share price closed at $121.61. Since then, the price has mostly been on a steady downhill slide. It closed on December 31, 2014 at $119.74. On April 9, 2015, it experienced its steepest fall, moving to $116.00 from the previous day's close of $117.79. Last Wednesday, the share price closed at $114.93.
Perhaps, one reason for the steady price decline might be the government's announced intention to sell Clico's shares in RBL to other institutional investors.
The future
At the start of its third quarter, RBL signed an agreement to acquire the operations of RBC Royal Bank in Suriname for US$39.8 million. Also, by mid-May 2015, it was partially successful in increasing its shareholding in HFC Bank (Ghana) Ltd to 57.11 per cent. The cost of acquiring the additional 17.25 per cent of HFC's shares was US$26.23 million (about TT$166.5 million).
Last Friday, shareholders were expected to approve the formation of Republic Financial Holdings Ltd, which, effective October 1, 2015, would become the new parent company for the RBL Group.