Jan 2007 Financial News

RBTT Releases Nine Months Results

Jan 30, 2007

RBTT Financial Holdings Limited (RBTT) reported Earnings Per Share (EPS) of $1.98 for the Nine Months ended December 31, 2006. This was an increase of 8 cents or 4.21 per cent on the corresponding period in 2005. For the third quarter (Q3 2007), the EPS stood at 64 cents which was up by 4 cents or 6.67 per cent on the comparable EPS of Q3 2006. However, Q3 2007 on Q2 2007 showed a negative growth of 7 cents or 9.86 per cent.

Net Interest Income for the Nine Months amounted to $1.36 billion compared to $1.34 billion in 2005, thus this figure showed a small growth of 1.57 per cent or $21.08 million. However, Q3 2007 on Q3 2006, this figure increased by $37.68 million or 8.51 per cent. Other Income also showed positive growth as the Group realized an increase of 6.83 per cent or $54.63 million to end the Nine Month period at $853.88 million. Q3 2007 on Q3 2006, Other Income grew by an outstanding 35.00 per cent or $73.88 million. Thus, Total Net Income for the period amounted to $2.21 billion up by 3.54 per cent on the corresponding Nine Months of 2005.

RBTT’s Operating Profit for the period under review was $852.36 million and this was up by 6.73 per cent on the comparable period in 2005. However, the Group continues to struggle with Operating Expenses, mainly due to high costs associated with the rolling out of the Recast Program. Nine Months on Nine Months, this figure rose by 10 per cent. It has resulted in the Efficiency Ratio moving in the wrong direction from 57.3 per cent for the Nine Months ended December 31, 2005 to 60.6 per cent for the Nine Months ended December 31, 2006. On a better note, the ratio of Non-Productive Loans to Total Loans has improved from 3.9 per cent to 2.8 per cent (nine months on nine months).

The Bank’s Income Before Taxation, which includes- Share of Profits from Associate Companies and Joint Ventures, stood at $863.32 million, up by 7.35 per cent on the Nine Month period ended December 31, 2005.

The Chairman has noted that the Retail and Commercial Segments of the Bank continue to produce strong growth and earnings across all the markets. This unit of the Bank saw an increase in Income Before Tax of 21 per cent, led by strong performances in Trinidad and Tobago and the BES (Barbados, Eastern Caribbean and Suriname) region. He also noted that the earnings from the Investment Banking Segment were up on the previous year. At an analyst meeting, this was confirmed to be a 19 per cent increase on Before Tax Profits. While the Trust and Asset Management division saw a 32 per cent fall in Income Before Tax, mainly as a result of declines in equity prices, which adversely affected asset management fees and brokerage activity. This segment was also affected by reduced sales of mutual funds and spread compression of interest rates.

The Effective Tax Rate for the Nine Month period was 21.13 per cent compared to a tax rate of 19.38 per cent in the corresponding period in 2005. As a result, the Income After Taxation figure totaled $680.92 million and was up by 5.01 per cent on the comparable period of 2005. Profit Attributable to Shareholders grew by 4.24 per cent to end the period at $218.32 million.

The Chairman has stated in his report that the Group expects to sustain the trend of improved earnings in the final quarter. Currently, the shares of RBTT are trading at a price of $35.89. Based on the current results, we have revised our forecasted EPS to $2.80. At the current price and the revised forecasted EPS, these shares are trading at a price to earnings multiple of approximately 13 times. RBTT usually trades in the band of 10 to 15 times and as such we recommend a HOLD at this time.


Gia Singh
WISE Research Team