May 2006 Financial News

CCMB Releases Unaudited First Quarter Results

May 09, 2006

All Figures Quoted in Jamaica Dollars

Capital & Credit Merchant Bank (CCMB) reported Earnings Per Share of 54 cents amidst a challenging economic environment for the First Quarter ended March 31, 2006 down 12.90 per cent from 62 cents in 2005. The Group continued to face declining yields in Jamaica and rising interest rates in the United States. They are however still pursuing their strategy of building Non-proprietary Income streams.

The Company’s Net Interest Income fell 12.82 per cent as Interest on investments was down 6.17 per cent while Interest on Loans was up by 12.45 per cent and Interest Expense was down by 2.38 per cent.

Other Revenue was down 5.08 per cent as its major component, Net gains on securities trading fell 15.10 per cent. In addition to this, Dividend Income was down 87.06 per cent while Other Income fell 37.69 percent. With this being said, Net Gains on Securities Trading still formed over 81.94 per cent of Other Revenue. CCMB’s Commission and Fee Income grew 1.60 per cent while Foreign Exchange & Trading grew 62.55 per cent.

Expenses were however contained as Non Interest Expenses fell 14.20 per cent to $230.152 million despite an 8.56 per cent increase in Staff Costs. The drop in Non Interest Expenses was due to a decrease in Loan Loss Expense to nil in addition to reductions in Information technology costs, Marketing Costs and Professional fees. The reduction in Loan Loss Expense was due to the fact that according to International Financial Reporting Standards the Loan Loss Provision was applied to a non-distributable Loan Loss Reserve in the equity component of the Balance Sheet.

Profit After Tax was ultimately down 4.58 per cent to $346.319 million. At the current running earnings per share TT$0.18, CCMB is trading at a price/earnings ratio of 7.49. Over the past 52 weeks, this share has traded as low as TT$1.35 in Trinidad and as low as $15.80 in Jamaica (TT$1.46). In Jamaica, it is currently trading at $15.30 (TT$1.48). Given, that we are projecting basically flat results for this year, we currently recommend this share as a HOLD.

Sreshtha Tewari
WISE Research Team