Dec 2006 Financial News

FCIB Releases Audited Year End Results

Dec 15, 2006

Results for the Year Ended October 31, 2006

All figures quoted in United States dollars

FirstCaribbean International Bank Limited (FCIB) reported Earnings Per Share (EPS) of 11.2 cents for the year ended October 31, 2006. This was a decrease of 32.93 per cent from 2005’s EPS of 16.7 cents. The previous year’s EPS however included a one time gain of $117 million which contributed approximately 7 cents to the year end EPS. Excluding this gain, the Bank would have registered growth in EPS of approximately 19 per cent.

Net Interest Income rose 20.92 per cent to $375.772 million driven by Interest Income which rose 33.01 per cent to $637.685 million. This was due mainly to increases in loan balances as well as the acquisition of its Curacao operations. Interest expenses however rose significantly by 55.29 per cent to $263.913 million.

Operating Income dropped 44.78 per cent to $128.390 million. The 2005 figure would have however included the one off gain mentioned before. Without this gain, Operating Income would have been up approximately 11 per cent.

Operating Expenses rose 12.47 per cent to $294.864 million. According to the Chairman, this was largely as a result to FCIB’s acquisition in Curacao, one-off transaction related costs and increased depreciation charges associated with the Bank’s continuing efforts to improve the efficiency and product offering to customers. The Bank’s efficiency ratio (ratio of costs to revenues) was 58.5 per cent, a marked improvement over the prior year of 61.6 per cent. The Chairman also pointed out that this reflected the Bank’s continuing efforts to improve productivity and manage growth in an effective and efficient manner. Loan Loss Expense rose 41.89 per cent to $10.369 million.

Income Before Tax fell 28.15 per cent to $196.710 million. Without the one of gain this item would have risen approximately 25 per cent. The Effective Tax Rate rose from 4.93 per cent in 2005 to 10.37 per cent in 2006. The smaller rate in 2005 is most likely partly due to the one-off gain. Ultimately, Net Income was down 32.26 per cent to $176.320 million.

The Bank expects the sale by Barclays of its 43.7 per cent interest in FCIB to proceed before December 31, 2006. Shortly afterwards shareholders should receive an Offer Circular from Canadian Imperial Bank of Commerce (CIBC) to purchase their shares. The Offer will be made however, solely to satisfy legal requirements as CIBC has publicly stated that it is strategically important that FirstCaribbean maintains a strong minority shareholding.

The Directors have approved the payment of a final dividend of 3 cents which will be payable to shareholders on record on December 30, 2006. This dividend brings the total dividends paid for FY 2006 to 5.25 cents which is 23.52 per cent more than 2005.

FCIB has performed in accordance with WISE’s expectations and we believe it should continue to show favourable growth in its core operations. At this point in time we are forecasting FY 2007 EPS of TT$0.80. At this forecasted EPS and the current price of TT$11.31, FCIB is currently trading at a price/earnings ratio of 14.13 times. Given that the shares of FCIB traditionally trade at a premium to the market and for the current year has traded in a band of 18 to 20 times earnings, we recommend a BUY.

Sreshtha Tewari
WISE Research Team