HIGHLIGHTS

RFHL Q12024

• Earnings: Diluted Earnings Per Share up 25.7% to $3.08 from $2.45

• Performance Drivers:
  • Increased Net Interest Income
• Outlook:
  • Continued economic activity across operating jurisdictions
• Rating: Maintained at OVERWEIGHT

FCGFH Q12024

• Earnings:  Earnings Per Share increased 19% from $0.79 to $0.94

• Performance Drivers:
  • Increased Revenue Growth
• Outlook:
  • Increased Economic Activity

• Rating: Maintained at MARKETWEIGHT

This week, we at Bourse review the performance of two key members of the local Banking Sector, Republic Financial Holdings Limited (RFHL) and First Citizens Group Financial Holdings Limited (FCGFH) for the three-month period (Q12024) ended December 31^st, 2023. Both RFHL and FCGFH reported positive earnings growth, reflecting generally improving conditions. Can both banks’ performances be maintained in the coming quarters?  We discuss below.

Republic Financial Holdings Limited (RFHL)

RFHL reported Diluted Earnings Per Share (EPS) of $3.08 for the three months ending December 31, 2023 (Q1 2024), a 25.7% increase relative to the $2.45 recorded in the previous comparable period.

Net Interest Income grew by $132M or 11.9% year-on-year (YoY) to $1.24B. Other Income decreased 2.6% to $524M in Q12024, compared to $538M in Q12023. Operating income increased by 7.2% to $1.8B. Operating expenses increased 5.1% throughout the period, from $909M in Q12023 to $955M in Q12024. Operating profit for the period was $811M, up from $738M in Q12023, a 9.9% increase. Profit before tax (PBT) stood at $714M, up 25.0% from $571M in the prior period. Taxation Expense decreased 11.6%, with the Effective Taxation Rate falling from 28.7% in Q12023 to 20.3% in Q12024. Ultimately, Net Profit Attributable to Equity Holders increased by $103M, or 25.8% to $503M in Q12024.

Revenues Higher

RFHL’s Operating Income continued its upward momentum, advancing 7.2% in Q12024. This marked the 3^rd consecutive Q1 increase in quarterly income by the Group, anchored by growth in Net Interest Income. Net Interest Income (70.3% of Operating Income) advanced 11.9% from $1.11B to $1.24B, reflecting increasing demand for loans and investments and an increase in customer deposits. The Group also profited from an elevated interest rate environment for its US dollar-denominated businesses. Other Income (29.7% of Operating Income) slipped 2.6%.

PBT Climbs

RFHL Profit Before Tax advanced 25.0% to $714M in the period under review with two out of the eight operating territories achieving positive growth (T&T and Guyana). PBT from Trinidad and Tobago, RFHL’s primary operating jurisdiction (159.9% of PBT) gained 3.7% year-on-year to $1.14B from a previous $1.10B. The Cayman Islands, which represents the second largest contributor to PBT (17.2%) declined 3.1% to $123M. The Eastern Caribbean (8.5% of PBT) decreased 32.2% to $61M. Guyana recorded an increase in PBT of 37.7% from $61M to $84M in Q12024. Ghana recorded a gain of $36M in Q12024 from a prior loss of $114M. Suriname declined 16.7% YoY with PBT moving from $24M to $20M in the current reporting period and British Virgin Islands (BVI) fell 9.1% to $20M.

The Bourse View

RFHL currently trades at a market price of $120.67, with a Price-to-Earnings (P/E) ratio of 10.6 times, below the Banking Sector average of 13.7 times.  The Group moved to quarterly dividend payments, declaring its first quarterly dividend of $0.55 per share payable on payable on February 29^th, 2024, to all shareholders on record by February 15^th, 2024. The stock offers investors a trailing 12-month dividend yield of 4.8%, above the sector average of 3.7%.

On the basis of continued geographical diversification, a generally positive economic outlook in its operating jurisdictions and relatively attractive valuations, 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 $0.94 for the three months ended December 31^st, 2023 (Q12024), up 19.0%, relative to $0.79 reported in the prior comparable period (Q12023).

Net Interest Income grew 22.9% from $$416.8M in Q12023 to $512.2M in Q12024. Other Income expanded 6.2% from $153.6M to $163.1M. Consequently, Total Net Revenue expanded to $675.3M, up 18.4% from a previous $570.4M. Credit Impairment Losses amounted to $0.5M relative to a reversal of $8.7M in Q12023. Non-Interest Expenses rose 15.4%, from $309.6M in Q12023 to $357.3M in Q12024, resulting in a 17.8% increase in Operating Profit (from $269.5M to $317.4M). 

The Group’s Share of Profit in Associates and Joint Ventures amounted to $7.9M, up 36.6% from a prior $5.8M. Profit Before Taxation settled at $325.3M. Taxation Expense grew 16.4% to $88.3M, with the Group’s effective tax rate reducing somewhat from 27.5% in Q12023 to 27.1% in Q12024, contributing to an increase of 18.8% in overall Profit after Taxation (from $199.5M to $237.1M).

Segment Performance Lower

FCGFH reported a year-on-year decrease in Profit Before taxation of 15% (before eliminations).  Retail & Corporate Banking, the leading contributor to PBT, accounted for 62% (before eliminations) contracted from $249.6M to $271.8M, up 8.9%. Treasury & Investment Banking, the second largest contributor to PBT (35% before eliminations) fell 40.2% year-on-year to $154M.  The Trustee & Asset Management segment contributed the least to PBT (3.1% before eliminations), climbing 7.3% to $13.8M.

Credit Impairment Losses

FCGFH’s Loans to Customers have grown from $18.6B in Q12021 to $20.7B in the most recently concluded period.  The Group grew Loans to Customers by 7% year-on-year from $19.3B to $20.7B, while credit impairment losses net of recoveries amounted to $0.5M (near 0% of Total Loans), reflecting generally sound lending practices and a relatively comfortable credit environment.

Price-to-Earnings multiples across the banking sector currently range from 6.3 times to 18.6 times, with FCGFH (15.4x) currently trading just above the sector average (13.7x). FCGFH’s trailing dividend yield (4.2%) remains in line with its industry peers (excluding NCBFG).

The Bourse View

FCGFH is currently priced at $49.83 and trades at a P/E ratio of 15.4 times, above the Banking Sector average of 13.7 times. The Group declared an interim dividend of $0.50 per share payable on March 1^st, 2024, to shareholders on record by February 16^th, 2024. The stock offers a dividend yield of 4.2%, above the sector average of 3.7%.

FCGFH continues to provide quarterly dividends that align with the Group’s policy, which may appeal to income-oriented investors.  Additionally, the Group remains focus on expanding its credit portfolio to achieve its broader strategic objectives.   On the basis of improving earnings growth and relatively attractive dividends, tempered by fair valuations, Bourse maintains a MARKETWEIGHT rating on FCGFH. 

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