Oct 2006 Financial News

Republic Bank Limited Releases Audited Year End Results

Oct 27, 2006

Republic Bank Limited (RBL) reported Earnings Per Share (EPS) of $4.01 for the year ended September 30, 2006. This was a disappointing 25.67 per cent less than 2005’s EPS of $5.04.

The Group’s core operations however recorded an 18.34 per cent increase in profit to $1,139.355 million up from $962.745 million in 2005. Profit Before Tax was affected by an Unrealized Loss of $175.428 million on the value of the Group’s holding in First Caribbean International Bank (FCIB) shares. The share price of FCIB actually fell 19.57 per cent for this period. The corresponding period for the prior year however had seen an Unrealized Gain of $236.301 million as FCIB climbed 42.00 per cent from $9.50 to $13.49.

In addition, in 2005, the Group also had to contend with two non-recurring charges; A Goodwill write-off of $124.119 million from its operations in the Dominican Republic and an Impairment of Grenada Government Debt of $70.184 million.

The Chairman commented that the decline in the FCIB share price for the period under review was driven by the impending sale by Barclays to Canadian Imperial Bank of Commerce (CIBC) of its FCIB shareholding. He further noted that CIBC has indicated its intention to make the mandatory purchase offer to the remaining FCIB shareholders. Should the Group accept this offer, it would result in a significant realized gain to the Group and shareholders in the coming year.

In actuality, Profit Before Tax was down 4.06 per cent to $963.927 million while Profit After Tax fell 14.37 per cent to $736.661 million.

The Board of Directors has declared a final dividend of $1.73, bringing the total dividend for FY 2006 to $2.50. The final dividend will be paid on December 1, 2006.

Given these results we are forecasting an EPS of $4.50 for FY 2007. At this forecast and the current price of $85.35, RBL is trading at a price/earnings ratio of 18.97. This multiple is considered high for this Company and as such we recommend a SELL on this share.

Sreshtha Tewari
WISE Research Team