Jul 2013 Financial News

No-interest stock loans for First Citizens junior staff

Jul 16, 2013

Employees of First Citizens are not only able to buy shares in the state-owned bank at a ten per cent discount, most of them will qualify for unsecured, zero interest rate loans to acquire the shares, bank officials said yesterday. The Government yesterday began offering for sale to T&T nationals and institutions 48,495,665 shares in the bank, 85 per cent of which will be sold at $22 a share. First Citizens employees have been allocated 7,274,349 shares—15 per cent of the shares on offer—and each of them will receive a 10 per cent discount on the acquisition of up to 5,000 shares. In addition to the ten per cent discount, those employees with at least one year of continuous service at the bank would qualify for the unsecured, zero interest rate loans, according to First Citizens staffers speaking at a briefing for stockbrokers at the bank’s Wainwright Road, St Clair offices.

The concessionary loan is only available for junior staff as the management of the bank will not qualify for the unsecured, zero interest rate loans, a senior official of the bank said yesterday, citing new Central Bank regulations limiting related-party loans at financial institutions. The Bank plans to use normal lending and credit criteria for unsecured lending in determining the amount to lend to a particular employee, First Citizens indicated yesterday. As of March 31, 2013 First Citizens and its subsidiaries employed 1,664 permanent employees. At yesterday’s meeting, First Citizens officials had indicated that First Citizens retirees would qualify to participate in the employee bucket. However, a later communication, which cited the IPO steering committee, stated that retirees would not qualify to participate in the employee bucket but as individuals.

In the prospectus, First Citizens predicts that it will earn an after-tax profit of $588.49 million for the 12-month period ending September 30, 2013, a stockbroker told the Guardian on Saturday.
Given that the total number of First Citizens ordinary shares in issue is 251,353,562, the stockbroker said based on the bank’s estimated earnings for its 2013 financial year of $588.49 million, the earnings per share would be around $2.34. This translates into a price/earnings (PE) multiple of about 9.4 at the initial offer price. The two other commercial banks that are trading on the local stock exchange are Republic Bank and Scotiabank. Republic is currently trading at a trailing PE multiple of 15.01, while Scotiabank trades at a trailing multiple of 22.5. This means, according to the stockbroker, that the initial offer of shares in First Citizens will be at a significant discount to comparable entities on the local stock market. This means the shares in the state-owned bank have considerable upside capital gains potential. At $22 a share, First Citizens is expected to deliver to shareholders a dividend yield of 4.75 per cent, as the bank has said that it expects to pay out between 45 and 55 per cent of its net profits in dividends on an annual basis. The bank expects to pay dividends twice a year.


Source:
Trinidad Guardian
Tuesday July 16, 2013

http://guardian.co.tt/business/2013-07-15/no-interest-stock-loans-first-citizens-junior-staff