HIGHLIGHTS
RFHL 9M2024
- Earnings: Diluted Earnings Per Share improved 16.9% to $9.06 from $7.75
- Performance Drivers:
- Revenue Growth
- Lower Credit Loss Expense
- Outlook:
- Increased economic activity across operating jurisdictions
- Rating: Maintained as OVERWEIGHT
FCGFH 9M2024
- Earnings: Earnings Per Share increased 14.8% to $2.71 from $2.36
- Performance Drivers:
- Increased Net Interest Income
- Credit Impairment Loss
- Outlook:
- Increased Economic Activity
- Rating: Upgraded to OVERWEIGHT
This week, we at Bourse review the performance of two key players of the Banking Sector, Republic Financial Holdings Limited (RFHL) and First Citizens Group Financial Holdings Limited (FCGFH) for their respective nine-month periods (9M2024) ended June 30th, 2024. Both RFHL and FCGFH reported positive earnings growth. Can both banks’ performances continue to trend positively in the upcoming months? We discuss below.
Republic Financial Holdings Limited (RFHL)
RFHL reported a Diluted Earnings Per Share (EPS) of $9.06 for the nine months ended 30th June 2024 (9M2024), up 16.9% relative to the $7.75 reported in the prior comparable period.
Net Interest Income increased 9.5% to $3.8B from $3.4B in 9M2023. On the contrary, Other Income dipped 6.2% to $1.5B in 9M2024, relative to $1.6B in 9M2023. Operating Income improved by 4.5% to $5.2B. Operating Expenses also increased 4.5% from $2.8B in 9M 2023 to $2.9B in 9M 2024. Operating Profit for the period stood at $2.4B relative to $2.3B in 9M2023, up 4.7%. Credit Loss Expense decreased 51.8% from $336.0M in 9M2023 to $162.0M in 9M2024. Profit Before Taxation (PBT) stood at $2.2B in 9M2024, 12.6% higher than $1.9B in the prior comparable period. Overall, Profit Attributable to Equity Holders of the parent rose to $1.5B, a 16.9% increase.
Operating Income Grows
RFHL’s operating income continued to grow by 4.5% in 9M2024, continuing its positive trend over the past four (4) comparable reporting periods. Net Interest Income (71.8% of Operating Income) increased 9.5% from $3.4B to $3.8B, with loans and advances increasing from $60B to $65.6B (9.2%) over the prior comparable period. On the other hand, Other Income (28.2% of Operating Income) fell 6.2%.
Overall, RFHL was able to improve income across its revenue streams, with Operating Income rising from $5.0B to $5.2B in the period under review. Geographically, results broadly improved, supported by an increase in Operating Income in Guyana (↑23.5%), Suriname (↑11.0%), Trinidad and Tobago (↑8.6%), Eastern Caribbean (↑8.2%) and British Virgin Island (↑7.4%) operations year-on-year.
PBT Expands
RFHL recorded an expansion in its operations in five out of its eight major operating jurisdictions for the nine months ending June 30, 2024, with Profit Before Tax (PBT) advancing to $2.16B.
Trinidad and Tobago, the Group’s largest operating jurisdiction (66.7% of PBT) grew 9.8% YoY to $2.57B in 9M2024 from $2.34B in the prior comparable period. Guyana (7.2% of PBT) advanced 35.1% in the period under review from $205M to $277M. The Eastern Caribbean (5.6% of PBT) climbed 8.6% year-on-year, moving from $198M to $215M in the current reporting period. Ghana (2.6% of PBT) recorded an increase from $4M to $101M for the reporting period. British Virgin Islands (BVI) (1.7% of PBT) expanded 10.2% YoY to $65M.
PBT from Cayman Islands, the second largest contributor of PBT (9.5% of PBT) fell marginally by 0.3% YoY to $365M from $366M in the previous comparable period. PBT from Barbados fell 71.0%, to $192M from $661M. Suriname (1.7% of PBT) contracted 19.0%, to $64M from the previous $79M.
The Bourse View
At a current price of $112.38, RFHL trades at a trailing P/E of 9.3 times, below the Banking Sector average of 10.8 times. The Group declared an interim dividend of $1.00 per share payable on August 30th, 2024, to shareholders on record by August 16th, 2024. The stock offers investors a trailing 12M dividend yield of 5.6%, above the sector average of 4.8%.
The Group remains focused on improving revenue generation and efficiency ratio. On the basis of geographical diversification of operations, improved earnings and attractive dividends, Bourse maintains an OVERWEIGHT rating on RFHL.
First Citizens Group Financial Holdings Limited (FCGFH)
First Citizens Group Financial Holdings Limited (FCGFH) reported Earnings per Share (EPS) of $2.71 for the nine months ended June 30th, 2024 (9M2024), up 14.8%, relative to $2.36 reported in the prior comparable period (9M2023).
Net Interest Income grew 11.9% from $1.36B in 9M2023 to $1.52B in 9M2024. Other Income expanded 15.7% from $447.3M to $517.6M. Consequently, Total Net Revenue amounted to $2.04B, up 12.8% from a previous $1.81B. Credit Impairment Losses amounted to $23.9M relative to a reversal of $9.31M in 9M2023. Non-Interest Expenses grew by 9.6%, from $1.01B in 9M2023 to $1.11B in 9M2024, with an overall 12.5% increase in Operating Profit (from $808.9M to $910.2M).
The Group’s Share of Profit in Associates and Joint Ventures amounted to $23.0M, up 44.8% from a prior $15.9M. Profit Before Taxation settled at $933.2M, up 13.1% year on year. Taxation Expense grew 7.2% to $248.7M, with the Group’s effective tax rate remaining roughly around 26.7% in 9M2024, contributing to an increase of 15.5% in overall Profit after Taxation (from $592.7M to $684.5M).
PBT Segment Performance Higher
FCGFH reported a year-on-year increase in Profit Before taxation of 34.6% (before eliminations). Retail & Corporate Banking, the leading contributor to PBT, accounted for 51.6% (before eliminations) grew marginally by 0.8%, from $763M to $769M. Treasury & Investment Banking, the second largest contributor to PBT (31.8% before eliminations) fell 8.5% year-on-year to $475M. Trustee & Asset Management performance contributed the least to PBT (2.9% before eliminations) advancing 13.9% to $43M.
Credit Impairment Losses
For the past four (4) reporting periods, FCGFH’s Loans to Customers have progressively increased, from $18.3B in 9M2021 to $21.2B in this current period. Notably, the Group maintained focus on achieving loan growth, resulting in its Loans to Customers growing 6% year-on-year from $19.9B to $21.2B. Credit impairment losses amounted to $23.9M (with a Net Impairment loss as 0.11% of Total Loans), which illustrates resilience in credit conditions and stability of their loan portfolio’s estimated credit quality.
FCGFH’S total assets have improved by 4% year on year, from TT$43.5B in 9M2023 to $45.2B in the current period. Loan to Customers amounted to $21.2B, up 6.4% from the prior period. Investments, which accounted for 28.3% of Total assets amounted to $12.8B, 0.6% lower than the prior period. Total cash (accounted for 23.2% of total assets) improved by 5.3% to $10.5B. Looking at balance sheet trends, FCGFH has been focusing asset acquisitions within its loan portfolios, while reducing its investment portfolio.
Trailing Price-to-Earnings (P/E) multiples across the banking sector currently range from 5.9 times to 15.3 times, with FCGFH (12.7x) currently trading above the sector average (10.8x). FCGFH’s trailing dividend yield 5.0% is currently above the sector average 4.6%. Objectively, banking sector stocks appear to be trading at attractive multiples relative to recent history.
The Bourse View
FCGFH is currently priced at $43.50 and trades at a P/E ratio of 12.7 times, above the Banking Sector average of 10.8 times but below its own 5-year average of 17 times. The Group declared an interim dividend of $0.52 per share payable on August 30th, 2024, to shareholders on record by August 15th, 2024. The stock offers a dividend yield of 5.0%, above the sector average of 4.8%.
FCGFH continues to provide quarterly dividends which may appeal to income-oriented investors, whilst remaining focus on the Group’s broader objective of building on its credit portfolio. On the basis of improving earnings and an attractive dividend yield, Bourse assigns an OVERWEIGHT rating on FCGFH.
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