Mar 2007 Financial News

FCIB Releases First Quarter Results

Mar 15, 2007

Results for the First Quarter Ended January 31, 2007.
All Figures Quoted in United States Dollars Unless Otherwise Stated

FirstCaribbean International Bank (FCIB) reported growth in Earnings Per Share (EPS) of 46.83 per cent for the first quarter ended January 31, 2007 as its EPS rose from 2.8 cents to 4.1 cents. These results however were affected by two factors:

1. The impact of a change in accounting policy, which resulted in a one-time gain of $15.4 million (net of taxes)
2. The impact of a change in accounting estimate which resulted in an additional depreciation charge of $1.6 million.

According to the Chairman’s Statement, excluding these and other items, comparable earnings increased by 20 per cent over the first quarter 2007.

The Group had a strong top line performance as Net Interest Income increased 23.05 per cent to $103.784 million. This was driven by growth in Interest Income of 29.34 per cent to $191.575 million while Interest Expenses rose from $53.145 million to $87.791 million. The strong growth in Net Interest Income was driven principally from increases in loan balances as Loans & Advances to customers rose 18.25 per cent. Also driving Net Interest Income was the acquisition of the Curacao operations which was not included in the comparative period for 2006. This was however offset by reductions in other income mainly driven by lower investment returns.

Operating Income fell 8.02 per cent to $32.483 million while Operating Expenses fell 11.85 per cent to $60.009 million. Excluding the impact of the one-off gain Operating Expenses would have risen 13 per cent or by $9.1 million. This was on account of expenses from its Curacao operations which was not acquired until February 1, 2006.

Loan Loss Expenses increased 27.06 per cent to $3.789 million while there was an Intangibles Amortization charge of $0.740 million. The amortization charge was as a result of the customer relationship in relation to the ABN AMRO (Curacao) acquisition fair value exercise. This lead to the recognition of an intangible asset in the amount of $17 million to be amortized through the statement of income based on a useful life of six years.

Income before Tax and Minority Interest rose 47.59 per cent to $71.729 million while the Effective Tax Rate increased from 9.62 per cent (Q1-FY 2006) to 10.61 per cent (Q1-FY 2007). Ultimately Net Income to Equity Holders of the Company rose 42.52 per cent to $62.606 million.

FCIB has recently posted an Offer Notice to shareholders dated February 27, 2007 in which they have the option to tender their shares. The Offer Price is US$1.6335 per share and reflects the aggregate of US$1.62 plus US$0.0135 per share in respect of ordinary dividends. This is the same price the Offer in December 2006.

According to the Notice, the present Offer was made solely for the purpose of complying with the requirements of the Take-Over Bid Regulation, 2002, made under The Companies Act. This was as a result of CIBC Investments (Cayman) Limited (CICL) having acquired in excess of 25 per cent of the Company’s outstanding Common Shares from Barclays Bank PLC in a privately negotiated transaction.

FCIB has however made it clear that the tender of the Offer is by no means mandatory for shareholders as the Offer was made for regulatory purposes. The Company in fact wishes to remain a publicly traded company and there is no intention of de-listing its shares from the Exchanges in any of the four territories in which they are listed.

If shareholders wish to have CICL acquire their shares nevertheless, they are entitled to:

(a) elect to transfer the Shares to CICL in consideration for the Offer Price of US$1.6335 cash per Common Share
(b) notify CICL that they wish to have the fair value of the Common Shares fixed by the Court in accordance with By Laws 26 (4) and 26 (5) of the By-Laws

Based on these results we are adjusting our EPS upward from TT$0.80 to $TT0.85. At the current price of $11.40, FCIB is currently trading at 13 times earnings. Given that this share usually trades within a range of 15 to 18 times earnings this would suggest a buying opportunity.


Sreshtha Tewari
WISE Research Team