HIGHLIGHTS

RFHL HY2024

• Earnings: Diluted Earnings Per Share improved 27.4% to $6.13 from $4.81 

• Performance Drivers:
  • Higher Operating Income
  • Lower Credit Loss Expense
• Outlook:
  • Geographical Diversification

• Rating: Maintained at OVERWEIGHT

 

FCGFH HY2024 

• Earnings:  Earnings Per Share increased 19.3% from $1.45 to $1.73 

• Performance Drivers:
  • Increased Net Interest Income
  • Credit Impairment Loss

• Outlook:
  • Increased Economic Activity

• Rating: Maintained at MARKETWEIGHT

This week, we at Bourse review the performance of two key and homegrown members of the local Banking Sector, Republic Financial Holdings Limited (RFHL) and First Citizens Group Financial Holdings Limited (FCGFH) for their respective six-month periods (HY2024) ended March 31^st, 2024. Both RFHL and FCGFH reported positive earnings growth, supported by a higher interest rate environment. Can both banks’ performances be maintained in the coming quarters?  We discuss below.

Republic Financial Holdings Limited (RFHL)

RFHL reported a Diluted Earnings Per Share (EPS) of $6.13 for the six months ended 31^st March 2024 (HY2024), a 27.4% increase when compared to the EPS of $4.81 recorded in the previous comparable period. Net Interest Income grew 10.9% to $2.50B from the previous $2.26B, on account of increase credit advances.  Other Income fell 9.8% and stood at $971M in HY2024, relative to $1.08B in HY2023. Consequently, Operating Income increased to $3.47B, an improvement of 4.2%. Operating Expenses grew by 3% from $1.82B in HY2023 to $1.88B in HY2024. Resultantly, RFHL’s Operating Profit for the period amounted to $1.60B relative to $1.51B in HY2023, up 5.7%. Credit Loss Expense decreased 62.4% from $306M in HY2023 to $115M in HY2024. Profit Before Taxation (PBT) climbed to $1.46B in HY2024, 20.8% higher than $1.21B in the previous fiscal year (HY2023). Taxation Expense was 4.4% lower, with the effective taxation rate moving from 28% in HY2023 to 22% in HY2024. Overall, RFHL’s Net Profit attributable to Equity Holders amounted to $1.0B, 27.3% higher than $178M reported in the prior comparable period.

Revenue Growth Continues

RFHL’s Operating Income rose 4.2% in HY2024, continuing the trend of growth that has been observed over the previous five (5) similar reporting periods. This was led by improved geographical performances year-on-year in Trinidad and Tobago (↑23.5%), Barbados (↑15.2%), Suriname (↑17.3%), Eastern Caribbean (↑4.8%), Guyana (↑18%), Ghana (↑10.4%) and B.V.I (↑4.8%) operations.

Net Interest Income (72% of Operating Income) expanded by 10.8% from $2.26B to $2.50B, on account of strong consumer demand for loans evidenced by a 9.4% increase in Loans and advances ($63.9B). Conversely, Other Income (28% of Operating Income) dropped 9.8%, from a prior $1.08B to $971M.

PBT Expands

RFHL’s PBT expanded in seven out of its eight major operating jurisdictions in the six months ending March 31^st, 2024, up 20.8% year-on-year (including eliminations and other Adjustments). Trinidad and Tobago, the Group’s largest operating jurisdiction expanded 35.6% YoY to $1.99B from $1.47B in the previous comparable period.  Guyana recorded an increase of 37.2% from $129M to $177M. Suriname climbed 10.6% year-on-year, moving from $47M to $52M in the current reporting period.  British Virgin Islands (BVI) gained 7.3% YoY to $44M (HY2024).

Barbados advanced 1.5% in the period under review from $134M to $136M.  Notably, Ghana swung from a prior loss of $28M to a gain of $78M (+136%). The Eastern Caribbean fell 1.4% YoY to $138M in HY2024, from $140M in the prior comparable period.

The Group’s total assets improved by $3.4B or 3% YoY, led by enhanced performance across operational jurisdictions. According to the Group, this performance was supported by an increase in total loan portfolio by $5.5B or 9.4%, as well as higher interest rate environment which resulted in strong performance on the Group’s investment portfolio.

The Bourse View

At a current price of $117.97, RFHL trades at a trailing P/E of 9.8 times, below the Banking Sector average of 12.1 times. The stock offers investors a trailing dividend yield of 4.5%, above the sector average of 4.1%. The company announced an interim dividend of $0.60 payable on May 29^th, 2024, to shareholders on record by May 10^th, 2024.

RFHL’s combination of earnings, dividends, and current price continue to offer relatively compelling value proposition for investors from both a capital growth and income perspective. On the basis of geographical diversification of operations, improved earnings and attractive valuations, Bourse maintains an OVERWEIGHT rating on RFHL.

First Citizens Financial Group Holdings Limited (FCGFH)

First Citizens Group Financial Holdings Limited (FCGFH) recorded Earnings per Share (EPS) of $1.73 for the six months ended 31st March 2024 (HY2024), up 19.3%, relative to $1.45 reported in the prior comparable period (HY2023).

Net Interest Income advanced 16.1% from $867.4M in HY2023 to $1.01B in the current period, underpinned by growth in its Loans to Customers Portfolio. Other income increased 10.1%, amounting to $333.1M. Overall, Total Net Revenue was 14.5% higher, standing at $1.34B in HY2024, relative to $1.17B in the previous period. Expenses amounted to $748.3M, $77.1M or 11.5% higher year-on-year. Operating Profit increased 17.7%, moving from $499.8M to $588.5M in HY2024. Share of Profit from Associates and Joint Ventures grew 33.1% to $13.8M in the period under review. Profit Before Taxation climbed 18.1% to $602.3M from a prior $510.2M. Taxation expense stood at $166.4M in HY2024, 14.1% higher than $145.9M in HY2023. Overall, Profit After Taxation advanced 19.6% from $364.3M in the prior period to $435.8M.

Major Segments Moderate

FCGFH Profit Before Tax (PBT) increased 18.1% year-on-year, with Retail & Corporate Banking continuing to be the dominant contributor to PBT, accounting for 62.1% before eliminations. This segment increased 8.0% from $484M in HY2023 to $523M in HY2024, supported by an 8.1% improvement in loans to customers. Trustee & Asset Management advanced 17.6% in HY2024. Meanwhile, Treasury & Investment Banking, declined 26.9% to $290M in HY2024 from $396 in HY2023.

Trailing Price-to-Earnings (P/E) multiples across the banking sector currently range from 5.9 times to 17.9 times, with FCGFH (14.2x) currently trading just above the sector average (12.1x). FCGFH’s trailing dividend yield (4.5%) remains in line with its industry peers (excluding NCBFG).

The Bourse View

FCGFH is currently priced at $47.84 trades at a P/E ratio of 14.2 times, above the Banking Sector average of 12.1 times. The Group declared an interim dividend payment of $0.47 per share, to be paid to shareholders on 29th May 2024. The stock offers a dividend yield of 4.5%, above the Banking sector average of 4.1%.

FCGFH’s quarterly payouts should be appealing to income-oriented investors, even as the Group’s earnings continue to trend positively. The Group remains among the best capitalized banking franchises in T&T, accompanied by continued investments into digital and physical channels to meet the needs of its diverse client demographics. On the basis of earnings growth and relatively attractive dividends, tempered by fair valuations and credit impairment loss, Bourse maintains a MARKETWEIGHT rating on FCGFH.

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