Oct 2007 Financial News

RBTT Releases Half Year Results

Oct 29, 2007

RBTT Financial Holdings Limited (RBTT)
WISE is a subsidiary of RBTT Financial Holdings Limited

Results for the Half Year Ended September 30, 2007

Earnings Per Share
For the Half Year Ended September 30, 2007, RBTT Financial Holdings Limited (RBTT) reported Earnings Per Share (EPS) of $1.33, down 0.75 per cent or $0.01 on the comparable EPS for FY07. Q208 on Q207, the EPS was down 5.63 per cent or $0.04 from $0.71 to $0.67. The Chairman has attributed the fall in earnings to a significant increase in taxation expense, due primarily to an increase in taxable income and a decline in tax exempt investment income.

Financials
Net Interest Income for the Half Year under review amounted to $1 billion, up 14.23 per cent on the same figure for HY07. This was primarily the result of a strong performance from the Group’s Retail Business across all markets, with a 33 per cent increase in pre-tax earnings year over year. Q208 on Q207, Net Interest Income was up a healthy 18.13 per cent from $437.99 million to $517.38 million. However, Other Income for HY08 was down 5.42 per cent or $30.81 million from $568.87 million to $538.06 million. Q208 on Q207, this figure was down a substantial 16.03 per cent or $52.50 million. Thus, Total Net Income ended the Half Year period at $1.54 billion, up 6.51 per cent or $94.37 million on the corresponding period in fiscal 2007.

While the Retail Business continued to perform strongly, the Chairman also noted that the Trust and Asset Management Business continued to under-perform as the local stock market activity remained depressed. Additionally, the Investment Banking Business did not achieve the deal targets set for the period.

In Q208, the Group experienced an Impairment Expense on loans and advances and investment securities of $18.56 million. As a result most of the Impairment Credit in Q108 of $20.99 million was wiped off and the Bank ended the Half Year Period with a credit of $2.43 million. Operating Expenses for HY08 amounted to $952.20 million, up 9.51 per cent or $82.67 million on the comparable figure for HY07. Q208 on Q207, this figure was up by 6.17 per cent from $442.19 million to $469.47 million. As a result, Operating Profit for the Half Year under review totaled $593.07 million, an increase of 4.01 per cent or $22.84 million on the same period in fiscal 2007.

Share of Profits of Associated Companies and Joint Venture Before Taxation amounted to $6.55 million for HY08 compared to $9.69 million for HY07, a considerable decline of 32.34 per cent. Consequently, Profit Before Taxation for HY08 stood at $599.62 million, up a minimal 3.40 per cent or $19.71 million from $579.92 million in the corresponding period in FY07.

The Effective Tax Rate for the Half Year period under review was 22.73 per cent compared to a Tax Rate of 20.50 per cent for the same period in FY07. Thus, Profit After Taxation amounted to $463.35 million up a marginal 0.51 per cent on HY07. Q208 on Q207, this Profit After Taxation was down 3.33 per cent or $8.12 million.

After deducting Minority Interests of $5.11 million, the Profit Attributable to Shareholders of the Company was $458.24 million for HY08. This figure was down a marginal 0.76 per cent on the same figure for HY07.

Dividends
The Board of Directors declared an Interim Dividend of 60 cents per share (60 cents- FY07) to be paid on November 22, 2007 to shareholders on record as at November 8, 2007.

Pending Transactions
On October 02, 2007, the RBTT Board of Directors executed an agreement with Royal Bank of Canada (RBC) to combine the Caribbean Retail Banking Operations of the two banks through the acquisition by RBC of 100 per cent of the share capital of RBTT for a purchase price of $13.8 billion. Under the agreement, RBTT shareholders will receive a consideration of $40.00 per share payable in a combination of cash (60 per cent) and RBC common shares (40 per cent). The transaction is subject to the approval of RBTT shareholders and other closing conditions.

Recommendation
RBTT last closed at a price of $35.00 on the TTSE. In light of the current results we are revising our Forecasted EPS downwards to $2.80. At the current price and revised Forecasted EPS, this share is trading at a price to earnings multiple of 12.5 times. Given that this share usually trades between 11 to 13 times in addition to the fact that there is a transaction pending, we recommend a HOLD at this time.


Gia Singh
WISE Equity Research Team