Jan 2008 Financial News

RBTT Releases Nine Months Results (NM08)

Jan 30, 2008

Results for the Nine Months Ended December 31, 2007

Earnings Per Share
For the Nine Month period ended December 31, 2007, RBTT Financial Holdings Limited (RBTT) reported Earnings Per Share (EPS) of $1.95, down 1.52 per cent or 3 cents on the comparable EPS for fiscal 2007. The Chairman has stated that the Group’s EPS was affected by: a higher effective Tax Rate (from 21 per cent to 25 per cent) due to changes to the tax legislation in one jurisdiction; increased provisions for tax assessments and higher taxable income generated by the retail banking entities. However, without taking these taxation charges into account the Bank’s core pre tax performance was only up a small 5 per cent on the corresponding period last year. Also, when compared to the rest of the Banking sector RBTT’s growth year on year is below average.

Segmental Performance
The Retail Banking business performed strongly with earnings moving ahead of the previous year by 32 per cent. However the Investment Banking and Trust and Asset Management Business are down by 17 per cent and 19 per cent respectively, year over year. The Chairman has stated that the trend is expected to continue through the fourth quarter of fiscal 2008.

Financials
Net Interest Income was up 12.54 percent, NM08 on NM07, while Q308 on Q307 this figure was up 9.43 per cent. The Bank saw a large decline in Impairment Expense on Loans moving from $20.06 million for NM07 to $6.43 million for the Nine Months under review. Profit Before Taxation ended the period at $907.88 million compared to $863.32 million in the comparable period in the last financial year, an increase of 5.16 per cent, year on year. While Profit After Taxation was down a marginal 0.40 per cent from $680.92 million to $678.18 million

Pending Transaction
On October 2, 2007 RBTT and Royal Bank of Canada (RBC) reached an agreement to combine their Retail Banking operations. The deal is subject to shareholder and regulatory approval. The Bank has stated that the date for the Special Meeting of Shareholders will be announced shortly. The consideration offer is combination of cash and RBC shares which would be determined by an exchange ratio. Also, the number of RBC shares received by RBTT shareholders is subject to a plus or minus 10 per cent collar. RBC closed at a price of US$50.09 on January 29, 2008.

Recommendation
RBTT last closed at $34.95 on the local exchange. In light of these results we do not believe that RBTT will be able to meet our previous Forecasted EPS of $2.80 for fiscal 2008. Thus, we are revising this figure down to $2.70. At this forecast and the current price, this share is trading at a price to earnings multiple of approximately 13 times. Based on these fundamentals and the pending transaction with RBC, we are recommending a HOLD on this share.

Gia Singh
WISE Equity Research Team