Nov 2015 Financial News

S&P says, First Citizens ‘stable’

Nov 13, 2015

STANDARD and Poor’s (S&P) on November 9 affirmed First Citizens’ ‘BBB+/A-2’ issuer credit rating, and says the bank has a “stable” outlook for the next 12 to 18 months.

“At the same time, we affirmed the ‘BBB+’ issue- level ratings on its senior unsecured debt.

The outlook on all ratings is stable,” S&P stated.

According to the United States-based financial services company, the bank has “continued to reinforce its position as one of the top banks in Trinidad and Tobago (TT) by maintaining its diversified banking product offerings.” S&P also said First Citizens’ stable outlook “reflects its very strong capitalization levels and adequate asset quality metrics.” Explaining its rationale, S&P said the bank’s ratings “continue to reflect our opinion of the bank’s “adequate” business position, supported by its market share in terms of total loans and deposits, as one of the largest banks in TT.” First Citizens’ capital and earnings are viewed by S&P as “very strong” based on the company’s forecasted risk adjusted capital (RAC) ratio of 15.6 percent for the next 18 months. The bank’s risk position was described as “adequate”, considering improvement in its asset quality metrics as a result of its conservative underwriting standards and traditional banking structure.

“The ratings also incorporate our view of its funding as ‘average’ and its liquidity as “adequate”, considering the level of deposits and liquidity in the country,” S&P said. The company noted that First Citizens has maintained its position as one of the largest banks in TT where its market share in terms of loans was 23 percent, and 20 percent in terms of deposits, as of June, 2015.

“We believe that the broad range of banking and non-banking products and services will bolster its market share.

Its geographic diversification could benefit its revenue diversification, but participation in weaker economies may pose additional risk.

However, we expect that management will address the bank’s business opportunities prudently.

We do not expect significant changes in its business position over the next 12 to 24 months,” S&P stated. Looking at the bank’s credit risk, S&P said First Citizens has maintained moderate credit risk concentrations and a loan allocation strategy through a diverse set of asset classes. As of June 2015, First Citizens’ total loan portfolio was TT $12.6 billion — up 12 percent from the same period last year. Its top 20 single- name exposures represented 42 percent of the total loan portfolio.

“Its portfolio is mainly in three sectors: consumer (18.6 percent), construction (19.8 percent) and real estate mortgage (17.8 percent) and we do not expect this concentration to change in the next couple of years. The expected moderate growth of its loan portfolio for the next 18 months is in line with the industry forecast. In addition, we expect First Citizens’ portfolio exposures to remain in the commercial, corporate, and mortgages sectors,” S&P said.

First Citizens’ liquidity rating remains “adequate”, mirroring the high liquidity in the local financial system. S&P also expects liquidity to remain adequate given bank’s refinancing risk profile. First Citizens’ total market debt, as of June 30, 2015, represented only 6.5 percent of its funding base, with a manageable maturity profile in 2022 through 2024. “Given its prudent liquidity management, we expect its liquidity position to remain adequate.,” S&P stated.

Source:
Sasha Harrinanan
Newsday
Friday November 13, 2015

http://www.newsday.co.tt/business/0,219882.html