Trinidad’s Republic Bank recorded profit attributable to shareholders of TT$1.17 billion for the year ended September 2013, an increase of only $11 million over 2012.

The performance reflects an operation that is highly influenced by the poor state of some of the economies the group operates in. While profit inched up in 2013, it is still below the $1.2 billion generated in 2008 and $1.34 in 2007 but well above $948 earned in 2009. Recovery has been slow as the main income generator, loans have been growing slowly. Things could pick up somewhat as its main market, Trinidad, has returned to positive growth but Barbados should continue to be tight with high fiscal constraints in place.

“Profit declined by $23.3 million or 29.6 percent in Barbados and a loss of $18.2 million was recorded in Grenada, mainly due to higher level of provisions for loans and investments and a general decline in business activities in both islands. In addition, a loss of $75.7 million was recorded on our investment in Eastern Caribbean Financial Holdings Limited. Improved performance in the commodity-exporting economies of Trinidad and Guyana off-set these declines.”

Republic saw losses for non-performing loan drop from $103 million to $57 million in the 2013. Net interest income barely moved ending at $2.18 billion up from $2.14 billion in 2012. Other income performed more robustly, moving from $1.1 billion to $1.26 billion in 2013. Operating expenses climbed 7.5 percent to $1.74 billion, a faster rate than revenues. The tax charge went up by 25 percent or $76 million to $383 million, well ahead of the pretax profit that increased by $46 million.

Based on the results, a final dividend of $3 per share and $1.25 interim dividend was paid for the year.

Investments | During the year, the remaining 34.86 percent minority shareholding in Republic Bank (Barbados) was acquired and a 40 percent shareholding was acquired in HFC Bank (Ghana). “Republic will continue to look at opportunities in the African continent that meet our risk profile as we seek to expand from this initial investment,” the company stated.

Financial Position | The Group’s total asset base stood at $57.6 billion with equity at $8.3 billion. Total liquid assets, which was fuelled by increase in deposits of $5.0 billion or 13.5 percent, stood at $19.8 billion at year end, an increase of $3.3 billion or 20.2 percent from 2012. Loans and advances grew by $1.9 billion or 8.2 percent to reach $25.2 billion following a growth of 6.6 percent in 2012. All territories achieves growth, led by Trinidad and Tobago with an increase of $1.6 billion or 10.2 percent, which accounted for 84.5 percent of the increase compared to the prior three years of flat growth.

Non-Performing Loans (NPLs) is at 1.4 percent for Trinidad and Tobago, the best in the Group and below the industry average in Trinidad and Tobago of 4.7 percent. However, Trinidad and Tobago which accounts for 68.9 percent of the Group’s net interest income, increased this category by 3.1 percent in 2013, after declining by 8.7 percent in 2012, primarily because of increase in loans and investments balances.

NPLs in Barbados at 11.7 percent and Grenada at 8.2 percent respectively are high and reflective of the poor economic conditions, leading to a higher overall Group NPLs of 3.7 percent.

Non-Performing Loans (NPLs) to gross loans stood at 3.7 percent. The NPL ratio rose by 4 basis points, mainly as a result of increased NPLs in Barbados and Grenada, but down from the 4.6 percent in 2009. Total specific provision as a percent of total NPLs is 37.2 percent, down from the 50 percent in 2012, mainly because of the higher level of collateral held for loans downgraded resulting in lower provisioning requirement.

Outlook | “We expect that economic conditions will be tough going forward. Nonetheless, barring any unforeseen event, we are confident that the current level of profitability will remain robust. The commodity exporting economies of Guyana and Trinidad are expected to drive our performance while tourism dependent economies of Barbados and the Eastern Caribbean are expected to face ongoing challenges with little or no growth. We remain cautiously optimistic that these economies will achieve growth in the near term as global economic conditions improve.” management concluded.

The group has much capacity for increased lending with only 60 percent of deposited funds lent out and is at the lowest level since 2003 when only 61 percent was lent and is well down from 72 percent lent out in 2008. Loan growth in the September quarter suggest that lending could increase around $3 billion for the current year. A faster pace than in 2013 and would help grow income at a level to beat the rise in costs. On the basis of the likely growth in loans, IC Insider is forecasting earnings of $9.50 cents per share for the 2013/14 fiscal year.

Republic Bank is an IC Insider Buy Rated stock

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