Apr 2008 Financial News

Capital and Credit aims to more than quadruple profits by 2010

Apr 02, 2008

Capital and Credit Financial Group (CCFG) is projecting that it will more than quadruple its profit by 2010, raising its net profit to over $2 billion. In 2007, the group earned just under $450 million.

Executives at Capital & Credit Merchant Bank (CCMB) expect new loans and the fall in United States interest rates to drive profits to over $1 billion for the year ended December 31, 2008. "We have been telegraphing to the market that we are changing our business model to be less reliant on one-off securities trading to more stable interest income," said Curtis Martin, president of CCMB.

Martin made these comments at Monday's meeting held at the Terra Nova Hotel where 68 shareholders in attendance approved the new scheme of arrangement that would amalgamate all the financial entities of the Capital & Credit Financial Group under one holding company that would be listed on the Jamaica Stock Exchange.

As a result of the new scheme of arrangement, stockholders will receive six CCFG shares for every five CCMB ordinary shares held.

Additionally, for every 15 CCMB ordinary shares, investors will receive one CCMB preference share. Upon completion of the transactions, the CCMB ordinary shares will be delisted.

Martin was optimistic that new corporate structure would enable the group to turn around its fortunes. CCMB closed off its 2007 financial year with a 42 per cent decline in net profits from $772 million earned for the year ended December 31, 2006 to $446 million during the year that ended December 31, 2007.

However, in its scheme of arrangement, the company expects its profits after taxation to jump by 147 per cent to $1.1 billion for the year ended December 31, 2008. By 2009 year-end, CCMB projects its earnings to come in at $1.567 billion and by 2010 year-end, profits are forecasted to be a little over $2 billion.

According to the scheme of arrangement, the loan portfolio will be the main engine of growth. "The forecast growth for the three years ended December 21, 2010 of 113 per cent compares favourably with the growth of 141 per cent which has been achieved over the last two years. The group has specific strategies in place to achieve the growth in the forecast loan portfolio," Martin explained further. "We have doubled our loan portfolio in a year to $6.7 billion. There are a lot of opportunities in the market that we intend to take advantage of such as the manufacturing sector, the utilities sector and in personal loans."

Another boon to CCMB is the turmoil in the United States financial markets that have forced the US Central Bank to lower interest rates.

"With interest rates falling in the States, it has increased our spreads on our international portfolio," Martin added. "We had projected US interest rates to be 4.5 per cent but now our cost of funding is three per cent. That is a significant savings."

Martin said that the bank's financial performance was heavily influenced by the volatile nature of securities trading. For the 12 months ended December 31, 2006 the bank reported $881 million in gains from securities trading, but for the year under review, that figure fell 99 per cent to $443 million.

"That line has been giving us trouble," Martin admitted, "but we expect to reverse this trend."


Source:
Dennise Williams
williamsd@jamaicaobserver.com
The Jamaica Observer
Wednesday, April 02, 2008

http://www.jamaicaobserver.com/magazines/Business/html/20080401T220000-0500_134118_OBS_FOURFOLD_PROFIT_.asp