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First Citizens commands 20% loans and deposits

As of 30 September 2013, among the banks operating in T&T, First Citizens commands market share of around 20 per cent in terms of loans and deposits, Moody's credit rating agency said in a March 2014 Company Profile of the state-owned, publicly-listed bank.

As of 30 September 2013, the end of First Citizens’ fiscal year, the bank reported total consolidated assets of $36.3 billion. As of February 2014, the bank operated mainly in T&T, through 26 full-service branches, a foreign exchange bureau, seven operations centres as well as 47 onsite and 39 offsite ATMs.

First Citizens was established in 1993, following the restructuring and merger of three failed government-owned banks – Workers’ Bank Limited, National Commercial Bank of Trinidad and Tobago Limited, and Trinidad Co-operative Bank Limited. The bank is a subsidiary of First Citizens Holdings Limited (77.2 per cent stake), a company owned by government.

For the fiscal year ended 30 September 2013, the largest contributor to the bank’s total consolidated revenue was the Retail Banking segment, with 37.5% of the total amount, Moody's noted.

As of 30 September 2013, retail banking reported total consolidated assets of $6.5 billion, Moody's reported. As of 30 September 2013, corporate banking reported total consolidated assets of $7.2 billion, and accounted for 21.3 per cent of the bank’s total revenue.

First Citizens operates mainly in Trinidad and Tobago, but it also has operations in Barbados, Costa Rica, St. Lucia, and St. Vincent and the Grenadines. As of February 2014, the bank distributed its products within Trinidad and Tobago through 26 full-service branches, a foreign exchange bureau, 7 operations centres as well as 47 onsite and 39 offsite ATMs. In addition, the bank had five branches, one lending centre and eight ATMs in Barbados; coupled with a representative office in Costa Rica. Additionally, it provides services through alternative delivery channels, including mobile, internet and telephone banking.

"Over the past five years, First Citizens has grown both organically and inorganically. In 2009, it acquired Caribbean Money Market Brokers Limited (renamed First Citizens Investment Services Limited), a full-service securities-trading company with offices in T&T, Barbados, St Vincent and the Grenadines, and St Lucia. In January 2012, the bank opened a representative office in Costa Rica, marking its entry into the Central American market. In August 2012, it acquired Barbados-based Butterfield Bank (Barbados) Limited (rebranded First Citizens Bank (Barbados) Limited)," Moody's said.

Moody's put First Citizens in a peer group with Banco del Estado de Chile, Banco de Costa Rica, Banco Nacional de Costa Rica, Banco de la Republica Oriental del Uruguay.


Earlier in February this year, Moody's had assigned a standalone Bank Financial Strength Rating (BFSR) of C- and a Baseline Credit Assessment (BCA) of baa1 to First Citizens Bank Limited (First Citizens), majority-owned by the government of T&T (also rated Baa1, with a stable outlook). The standalone rating reflects the bank's solid fundamentals, particularly its robust capitalization and solid funding profile from both retail customers and government-related entities. The rating is also supported, Moody's said, by the bank's established franchise as a corporate and commercial lender, with a sizable market share in its targeted business of financing utilities, construction and real estate projects.

Moody's said "key constraints" facing First Citizens is its sizeable private and public sector asset concentrations, as well as an increasing exposure to consumer lending which expose the bank to earnings and asset quality volatility, especially amid modest economic growth.

"We also note the increasing trend in nonperforming loans since 2011 after impairments in construction loans, particularly related to the hotel industry. Furthermore, tight competition from domestic and foreign players challenges management to revert the declining trend in profit margins," Moody's said.

Moody's said First Citizens has a "robust capital base, in line with the bank's exposure to construction and real estate lending; asset quality pressured by sizeable private and public sector concentrations; stable funding structure based on ample base of customer and public sector deposits; resilient earnings generation, but margins are pressured by tight competition from domestic and foreign banks

Giving what could change the rating up, Moody's said upward movement in the bank's local currency rating would depend on similar movement in the BFSR, which would hinge on sustained improvement of asset quality and expansion of core profitability, as well as on a maintained capitalization. An upgrade of the country ceiling for foreign currency deposits would result in an upgrade of the foreign currency deposit ratings.

Giving what could change the rating down, Moody's said: "A continuous deterioration in asset quality, profitability or capital, could exercise downward pressure on the bank's standalone strength rating. A downgrade in the foreign currency country ceiling for deposits would result in a downgrade of the foreign currency deposit rating."

First Citizens has a track record of reporting robust capitalization ratios, which are suitable given the bank's sizeable exposure to riskier construction and residential mortgage lending. In addition, the bank's equity is of high quality, 75 per cent composed of Tier 1 capital. The thick risk-weighted capital ratios reported however reflect the bank's under-leveraged balance sheet in terms of loans and the significant exposure to government securities and loans, which are not risk-weighted per local regulations.

First Citizens stays robust "despite a hefty dividend policy of between 45 per cent to 55 per cent," Moody's said.


First Citizen's funding and liquidity profile has been stable. As a government owned bank, First Citizens benefits from access to core retail deposits and government-related sources of funding. The bank is largely funded by customer deposits (70 per cent of total liabilities), split between demand deposits (60 per cent), saving accounts (25 per cent) and time deposits (15 per cent). Deposits are balanced among government sources (40 per cent), corporates (31 per cent) and individuals (29 per cent). The remaining portion of funding is composed by repos (15 per cent) and senior debt (8 per cent).

As of September 2013, 55 per cent of loans were due in more than one year, Moody's said. Funding has also been extended via the issuance of four senior bonds totaling $2.5 billion, with maturities of up to 7 years. About $500 million matured in January 2014.

The bank also reports a large position of liquid assets on its balance sheet, consisting of its trading and held-to-maturity book, which is primarily (60 per cent) comprised of the domestic government securities, as well as cash instruments and deposits with the Central Bank partly reflecting relatively high reserve requirements.

Liquid assets accounted for 50 per cent of total assets as of September 2013.

Core earnings have expanded over the past several years reflecting steady loan and fee growth. Quality of earnings has also improved as income and gains from securities comprised 47 per cent of net revenue as of September 2013, from 68 per cent in September 2010. Net fees grew 33 per cent or twice the pace of 2012, comprising 22 per cent of net revenue, up from 18 per cent. Fees are chiefly sourced from portfolio management (53 per cent) and transaction services (37 per cent).


Moody's said: "We expect earnings to continue to increase as loan demand picks-up hand in hand with economic recovery. As of September 2013, net income raised by 36 per cent in TT$ terms to $607 million, largely due to lower taxes paid, up from $446 million as of September 30 2012."

Pre-tax income grew by a more moderate 4 per cent in 2013, similar to 2012 and 2011. The reported return on average assets and equity stood at 1.7 per cent and 10.1 per cent as of September 2013, up from 1.4 per cent and 8.1 per cent the year before, helped by a 7 per cent contraction in provisions.

"Margins continued to decline, however, due to the low (interest) rate environment and tight competition. The net interest margin (NIM) slid to 3.4 per cent as of September 2013 from 3.6 per cent and 3.8 per cent in 2012 and 2011, respectively. Higher and diversifying business volumes should help offset a further narrowing of the NIM due to competition in the corporate segment and to funding cost pressure from the anticipated tightening of US monetary policy," Moody's said.

The sustainability of First Citizens' franchise derives from a well established brand, supported by high market shares in commercial banking, treasury, asset management and transaction services, Moody's said. The bank had loans and deposit market shares of 25 per cent and 30 per cent as of September 2013. However, there is considerable competition by the other well-established commercial banks, which include Republic Bank Limited, RBC Royal Bank Limited and Scotiabank T&T Limited. Ironically, since the company's IPO, Republic and RBC are major shareholders in First Citizens.

These strong retail competitors, together with Citibank, First Caribbean and Intercommercial Bank on the corporate side, pose a significant challenge to the bank's mission to compete for a larger share of private sector lending, Moody's said.

"In the local market, management is seeking to leverage the bank's franchise through the cross selling of loans, mortgages, credit cards, corporate finance, and asset management products. The lynchpin of that strategy is to expand its reach and increase efficiency through its electronic products and distribution, such as the E-First brand and Internet Banking. Management has been successful in diversifying the bank's operations within the private sector during the past several years, significantly enhancing its lending and fee-based activities with corporations and individual customers," Moody's reported.

Moody's noted that "government actions during past crises are indicative of the its high focus on financial system stability. During Trinidad's financial crisis of the early 1990s, the government acted purposefully to contain the potential contagion effects of troubled institutions in the market. In February 2009, the government took control of three local financial institutions owned by CL Financial Limited, the country's largest conglomerate, to help stem funding pressures at that company."

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