Sep 2007 Financial News

FCIB Releases Nine Month Results

Sep 11, 2007

Results for the Nine Months Ended July 31, 2007
All figures quoted in United States dollars unless otherwise stated

For the Nine Month period Ended July 31, 2007, FirstCaribbean International Bank (FCIB) reported Earnings Per Share (EPS) of 10.8 cents, up an outstanding 31.71 per cent or 2.6 cents on the 8.2 cents reported for the same period in FY06. Q307 on Q306, the Company’s EPS was up 7.41 per cent or 0.2 cents from 2.7 cents to 2.9 cents. According to the Chairman’s Review, these results were impacted by the following transactions which had a net positive impact of $12.3 million:

1. The Group changed its health benefit scheme which resulted in the recognition of a curtailment gain of $17.1 million.
2. The Group changed its estimate on the useful life of software which resulted in an increase in the depreciation charge for the year to date in the amount of $4.8 million.

Excluding the effect of these transactions, the growth in earnings year-on-year was 21 per cent.

NM07 on NM06, Interest Income rose a significant 24.08 per cent or $111.19 million to $572.92 million while Interest Expense was up by a larger margin of 41.24 per cent or $77.84 million to end NM07 at $266.58 million. As a result, Net Interest Income increased from $272.99 million (NM06) to $306.34 million (NM07), an increase of 12.22 per cent or $33.35 million. This growth in Net Interest Income was driven principally by increases in loan and investment volumes. Loan balances have grown by $0.59 billion or 10.84 per cent compared to the prior year and have now crossed the $6 billion mark.

For the period under review, Operating Income totaled $109.99 million compared to $96.41 million for NM06, an increase of 14.09 per cent or $13.59 million. Operating Expenses stood at $216.24 million, up by a minimal 0.94 per cent or $2.02 million when compared to the same period in FY06. Excluding the impact of the transactions previously mentioned, Operating Expenses would have increased 6.6 per cent or $14.3 million. Loan Loss Expense increased a considerable 53.12 per cent or $4.04 million to $11.63 million while Amortization of Intangible Assets amounted to $2.22 million for NM07.

Income Before Tax and Minority Interest for the Nine Month period amounted to $186.24 million, up a commendable 27.47 per cent or $40.14 million on the corresponding figure in FY06. The Effective Tax Rate for the period under review was 9.51 per cent compared to a Tax Rate of 11.36 per cent for the comparable period in FY06. As such, Net Income Attributable to Equity Holders of the Company increased from $125.26 million (NM06) to $164.10 million (NM07), up a substantial 31 per cent or $38.84 million. Q307 on Q306, this figure was up 5.65 per cent or $2.33 million to $43.59 million. The Chairman has stated that the third quarter’s Net Income was impacted by a reduction of revenues of approximately $4 million when compared to previous quarters as earnings on the Company’s investment portfolios were adversely impacted by the global widening of creditspreads.

FCIB is currently trading at a price of TT$11.00 on the local market. At the current price and our forecasted EPS of TT$0.90 (USD0.14) for FY07, this share is trading at a price to earnings multiple of 12.22 times. Additionally using a multiple of 15 times and the forecasted EPS of TT$0.90, this share has an expected return of approximately 23 per cent on the current price or a target price of TT$13.50. Given that FCIB usually trades between 15 to 16 times we continue to recommend a BUY on this share.

Nancy Chen
WISE Equity Research Team