HIGHLIGHTS
NCBFG 9M2024
- Earnings: EPS advance 56.5% from TT$0.16 to TT$0.25
- Performance Drivers:
- Increased Net Result from insurance activities
- Higher Net Operating Income
- Outlook:
- Increased growth opportunities
- Rating: Maintained at OVERWEIGHT.
GHL HY2024
- Earnings: EPS climbed 6.1% from $1.63 to $1.73
- Performance Drivers:
- Higher Insurance Service Result
- Lower Finance / Operating Expenses
- Outlook:
- Economic Normalization
- Rating: Maintained at MARKETWEIGHT.
This week, we at Bourse review the performance of NCB Financial Group Limited (NCBFG) and Guardian Holdings Limited (GHL), parent and subsidiary for their respective nine months ended June 30th,2024 (9M2024) and six months ended June 30th, 2024 (HY2024). NCBFG’s performance was supported by stronger insurance results. Similarly, GHL benefitted from strong insurance revenue and lower finance expenses. We discuss below.
NCB Financial Group Limited (NCBFG)
For the nine-month period ended June 30, 2024 (9M 2024), NCB Financial Group Limited (NCBFG) reported an Earnings Per Share (EPS) of TT$0.25, an increase of 56.5% compared to the previous comparable period.
Interest Income grew 12.4% from TT$2.56B to TT$2.88B. Interest Expense climbed 29.1% to TT$1.32B, which resulted in improved Net Interest Income by 1.3% to TT$1.56B. Net Fee and Commission Income rose 8.6% from TT$757.5M to TT$822.4M. Gain on Foreign Exchange and Investment Activities dipped by 23.9%, from a prior TT$445.1M to TT$338.73M. Resultantly, Net Result from Banking and Investment Activities amounted to TT$2.50B, 3.8% lower compared to TT$2.60B in 9M2023. Net Result from Insurance Activities stood at TT$1.61B relative to TT$1.08B in the previous comparable period (+49.6%). Net Operating Income increased by 11.8% from TT$3.67B to TT$4.11B. Operating Expenses increased by 1.2% to TT$3.01B, leading to an increase in Operating Profit by 56.9%, from a prior TT$697.9M. Profit Before Tax surged by 57.5% to settled at TT$1.11B. Overall, Net Profit Attributable to Equity Holders for the Period amounted to TT$596.1M in 9M 2024, up 60.8% from TT$370.8M in the prior period.
Operating Profit by Activity
For the nine-month reporting period, Operating Profit by segment rose by 57.5% Year-on-Year (YoY) to TT$1.5B. Life and Health Insurance & Pension Fund Management amounted to TT$935M relative to TT$404M in the comparable period (+131.6%). Treasury and Correspondent Banking, rose by 35.5% year over year to settled at $422M. Wealth, Asset Management and Investment Banking contracted by 62.9% to $105M from a prior $282M. The Group’s Corporate and Commercial Banking was 15.8% lower to $189M, relative to $224M a year earlier. Notably, Payment Services grew considerably by 120.8% from a prior TT$38M. General Insurance performance dropped by 18% from TT$285M to TT$233M. Consumer and SME Banking Wealth contributed the least to Operating Profit, amounted to TT$45M from a deficit of $16M (+386.3%).
NCBFG’s book value per share rose to TT$2.72, TT$0.15 better than TT$2.57 in the prior period. The P/B ratio remained relatively constant when compared to the prior period, currently at 1.0 times.
The Bourse View
NCBFG currently trades at a price of $2.70 at a trailing P/E ratio of 11.6 times, relative to the Banking Sector average of 10.8 times. The stock offers investors a trailing dividend yield of 3.2%, below the sector average of 4.8%. The Group announced an interim dividend of TT$0.022 to be paid to registered shareholders on September 16th, 2024.
NCBFG continues to place emphasis on optimizing efficiency and costs, while strengthening its competitive position. On the basis of improved earnings and relatively attractive valuation multiples (both P/E and P/B), Bourse maintains an OVERWEIGHT rating on NCBFG.
Guardian Holdings Limited (GHL)
Guardian Holdings Limited (GHL) reported Earnings per Share of $1.73 for its second quarter ended June 30th, 2024 (HY2024) up 6.1% from $1.63 in the prior comparable period.
Insurance Service Result expanded 27.2% from $315.9M in the prior period to $401.9M in HY2024. Net Income from Investing Activities decreased 9.1% to $936.0M. Net Insurance finance expense amounted to $418.1M. Consequently, Net Insurance and Investment Result amounted to $919.8M compared to $923.9M in HY2023, 0.5% lower. Fee and commission income from brokerage activities advanced by $6.2M or 7.3% year-on-year. Net Income from all activities had a minimal gain of 0.2% to $1.0B in the period under review. Other operating expenses fell 1.9% YoY as a result of effective cost management. Operating Profit advanced 1.0% from $505.7M in HY2023 to $510.6M in HY2024. Share of after-tax profits of associated companies grew 44.7% to $9.9M. Profit Before Taxation amounted to $520.5M, 1.6% greater than the $512.5M in the prior period. Taxation dropped from $131.4M to $115.5M in HY2024, with the effective taxation rate contracting from 25.6% to 22.2%. Profit for the Period stood at $404.9M, rising 6.3% from the equivalent prior period (IFRS 17) comparative of $381.1M. Overall, Profit Attributable to Equity Holders of the Company increased to $401.0M, (6.0% higher) compared to the profit of $378.3M in HY2023.
LHP Segment Advances
Operating Profit for the period came in at $510.6M during the six -month period, expanding 1.0% from the prior comparable period.
The Life, Health and Pension (LHP) segment (90.7% of Operating Profit) marginally increased 0.4% year-on-year from $461.6M to $463.2M, driven by increased insurance revenue. The Property and Casualty Segment (25.4% of Operating Profit) dropped 9.4% to $129.7M in HY2024. Insurance Brokerage‘s operational profit climbed 36.2% to $47.9M as a result of higher income from activities in the Netherlands, Dutch Caribbean, and Cayman Islands. Asset Management increased by 50.3% from $21.0M in HY2023 to $31.6M in HY2024, driven by higher net investment income and decreased operational expenses. According to GHL, it continues to concentrate on increasing this area through third-party business, advanced development, and trade operations.
From a value perspective, GHL’s book value per share advanced from $14.88 in HY2023 to $18.04 in the current period under review. The concurrent decline in GHL’s price has led to its price to book ratio decreasing from 1.16 times in HY2023 to 0.75 times, suggesting that investors are currently paying less on a per-share basis to own net assets of the company.
The Bourse View
GHL is currently priced at $13.50 and trades at a price to earnings ratio of 4.4 times, significantly below the Non-Banking Financial Sector average of 11.9 times. The stock currently offers investors a trailing dividend yield of 5.6% in line with the sector average of 5.8%. The Group announced an interim dividend of $0.23 to be paid to shareholders on September 16th, 2024.
On the basis of higher insurance revenue, reduced finance expenses and attractive valuations but tempered by the potential financial impact arising from Hurricane Beryl in Q3 2024 results, Bourse maintains a MARKETWEIGHT rating on GHL.
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