June 23rd, 2022

Laura Rajcoomar
Investment Analyst
Laura_Rajcoomar@jmmb.com

FIRST CITIZENS GROUP FINANCIAL HOLDINGS LIMITED (FCGFH)

PLEASE SEE IMPORTANT DISCLOSURES & COPYRIGHT INFRINGEMENT IN THE APPENDIX

First Citizens Bank and its subsidiaries conducts a broad range of banking
TT$45.28 TT$55.35
and financial services activities including retail banking, corporate and
commercial banking, investment banking, trusteeship and asset and wealth
Undervalued Fairly valued Overvalued
management. The Bank, a publicly listed company on the Trinidad and
Tobago Stock Exchange (TTSE), is a subsidiary of First Citizens Holdings
Limited, a company which is beneficially owned by the Government of the
Republic of Trinidad and Tobago (GOTT). Company Facts
Symbol: FCGFH
Target Price: TT$50.31
Sector: Banking
Market Cap.: $12,567,678,100.00
Issued Capital: 251,353,562
Financial Year End: September 30th

Peer Comparison Ratios

ROE ROA Efficiency

Ratio

FCGFH 8.68% 1.42% 59.44%

RFHL 11.87% 1.35% 61.01%

SBTT 14.3% 2.2% 40.6%

FCI 11.59% 0.97% 69.68%

NCBFG 8.97% 0.76% 86.1%

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Table of Contents Company Overview & History

First Citizens Bank Limited (the Bank) and its subsidiaries

Company Snapshot…………….....1
Company Overview & History….2
Economic Overview………………3
Business Model……………………4
Financial Analysis………………...7
Recent Financial Performance.......12
Recent Developments.………........12
Industry Overview……………….13
Quantitative Valuation…………..16
DDM Insights……………16
Simple P/E Insights….....16
Simple P/B insights….....16
FIRST Risk Factors……………....17
Recommendation…………..…....17
Appendix……………………..….19
(the Group) provide retail, commercial and corporate
banking as well as investment banking services. The
Group operates primarily in Trinidad and Tobago and the
Eastern Caribbean region.
The Bank is a subsidiary of First Citizens Holdings
Limited (Holdings), a company owned by the
Government of the Republic of Trinidad and Tobago
(GORTT). First Citizens Holdings has 64.43% controlling
interest. The remainder of the shares are listed on the
Trinidad and Tobago Stock Exchange and are publicly
traded.
On September 12th 1993, the Workers’ Bank (1989)
Limited, National Commercial Bank of Trinidad and
Tobago Limited and Trinidad Co-operative Bank Limited
under and by virtue of vesting orders made by the
Minister of Finance under Section 49 of the Financial
Institutions Act, 1993, were transferred to and became
vested in the Bank. All entities which were transferred to,
or from which specific assets or liabilities were transferred
to the Bank, were wholly owned or controlled by the
GORTT.
On June 30th, 2021, the Bank’s shareholders approved the
corporate restructuring of the First Citizens Group to
establish a group holding company to directly hold all
subsidiaries including the Bank.
On October 18th, 2021, First Citizens Group Financial
Holdings Limited (FCGFH) replaced the Bank as the ‘de
facto’ holding company and listed entity for the Group
and the shareholders of the bank became the shareholders
of FCGFH. As a result, Bank is now a subsidiary of
FCGFH.

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Economic Overview

On April 19th, 2022, The International Monetary Fund (IMF) projected global growth to slow
from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. The downward forecast reflects
high food and energy prices amid the Russia -Ukraine crisis and supply shortages stemming
from the COVID-19 pandemic, which have added to inflationary pressures across many
economies. The rising inflationary environment has stimulated monetary policy rate
normalization in the United States, sparking concerns of a further deceleration in growth
over the medium term. However, recent high international energy prices have enhanced
public finances and external accounts, creating an opportunity for further adjustments to the
lingering effects of the pandemic.

According to the Central Bank of Trinidad and Tobago’s (CBTT) May 2022 Monetary Policy
Report, the global economy began 2022 in recovery mode alongside rising inflation. The
surge in energy and other commodity prices related to the war in Ukraine have already
impacted income and consumption across the world. The war has also resulted in renewed
supply shortages, including that of wheat, vegetable oils, metals and electronic components.

Furthermore, there has been considerable volatility in the stock markets, with prices
fluctuating tremendously on news around the war, interest rates and fears of a recession.
Simultaneously, rising COVID-19 inflections and associated lockdowns in China has added
to existing supply constraints, which is also an indication that the pandemic is not yet over.

Domestically, the improved energy sector’s performance coupled with the relaxation of
lockdown measures support strong recovery given that the expectations for commodity
prices to remain elevated over the year. In the non-energy sector, economic activity will
continue to recover as lockdown restrictions are lifted and reopening continue.

However, the rising inflationary environment has cut into the value of real incomes,
adversely affecting consumption activity. For the first time since 2018, the U.S. Federal
Reserve raised interest rates in an attempt to contain inflation. As pandemic conditions
relaxed and business activity re-emerged, business credit recovered and real estate mortgage
lending continued to support credit growth. This auger well for financial institutions like
FCGFH as a higher interest rate environment can subsequently lead to increased earnings
and profitability as credit growth rebounds.

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Business Model
The company’s principal business activity is providing a broad range of banking and
financial services activities including retail banking, corporate and commercial banking,
investment banking, trusteeship and asset management.

The following outlines the business activity for each of FCGFH’s entities: -

Chart 1
Principal business activities of FCGFH’s entities

Source: FCGFH Annual Report

By Segment:

Retail Banking
FCGFH’s Retail Banking Segment provides loans and mortgages, deposits, foreign exchange
transactions, credit & debit cards and card merchant acquiring business for retail and
commercial customers.

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Chart 2
Retail Banking Segment’s Net Income and Net Revenue for the period 2017-2021

Source: FCGFH Annual Report

In FY2021, this segment recorded a 29.5% and a 6.1% decline in net income and net revenues
respectively when compared to the prior year (Chart 2).

Corporate Banking
FCGFH’s corporate banking segment provides loans and credit facilities and deposits and
current accounts for corporate and institutional customers.

Chart 3
Corporate Banking Segment’s Net Income and Net Revenue for the period
2017-2021

Source: FCGFH Annual Report

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 In FY2021, this segment recorded a 34.7% and a 4.0% increase in net income and net revenues
from FY2020 (Chart 3).

Despite an increase in this segment, FCGFH’s loan portfolio decreased within five (5) major
sectors led by finance and insurance, petroleum, manufacturing, consumers and distribution
as at September 30th, 2021.

Treasury Management and Investment Banking

FCGFH’s Treasury Management and Investment Banking segment provides liquidity
management and investment banking services including corporate finance, and specialized
financial trading.

Chart 4
Treasury Management and Investment Banking Segment’s Net Income and Net Revenue
for the period 2017-2021

Source: FCGFH Annual Report

In FY2021, this segment recorded a 17.1% increase in net income. This improvement was
driven by a 32.1% increase in net fees and commissions. However, net revenues declined by
3.2% for the period. This decline was driven by a 276.5% and 23.9% increase in depreciation
and amortization expenses and other operating expenses respectively (Chart 4).

Trustee & Asset Management

FCGFH’s asset management segment provides investment products and services to
institutional investors and intermediaries.

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Chart 5
Trustee & Asset Management Segment’s Net Income and Net Revenue
for the period 2017-2021

Source: FCGFH Annual Report

In FY2021, this segment recorded a 33.3% and a 21.8% decrease in net income and net
revenues respectively (Chart 5).

Financial Analysis
As at September 30th, 2021, total assets fell 1.8% to $46.6 billion from $47.4 billion. This decline
was driven by decreases in loans to customers (↓5.0%), investments (↓4.6%) and statutory
deposits with CBTT (↓6.8%). Additionally, total liabilities fell 3.4% to $38.7 billion from $40.0
billion. This decline was driven by a 6.2% fall in other funding instruments (Chart 6).

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Chart 6
Total Assets and Total Liabilities for the period 2017-2021

Source: FCGFH Annual Report

Chart 7
Total Loans for the period 2017-2021

Source: FCGFH Annual Report

As at September 30th, 2021, loans to customers stood at $18.1 billion from $19.0 billion (Chart
7). This accounted for 38.8% of total assets from 40% in FY2020. Loans increased within three
major sectors led by other business services (↑15.7%), transport, storage and communications
(↑13.1%) and construction (↑3.5%). However, these increases were offset by a decrease in
agriculture (↓39.7%), manufacturing (↓31.9%), petroleum (↓26.0%), personal services
(↓14.5%), finance, insurance and real estate (↓11.6%), distribution (↓10.8%), hotel and guests
(↓4.1%), consumer (↓3.4%) and real estate mortgage (↓0.5%) – (Chart 8).

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Chart 8
Loans by Sector

Source: FCGFH Annual Report

FCGFH continues to hold a strong capital adequacy position of 18.0%, above the 10%
minimum requirement (Chart 9).

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Chart 9
Capital Adequacy Ratio for the period 2017-2021

Source: FCGFH Annual Report

FCGFH has consistently held a healthy capital adequacy ratio of banks operating in Trinidad
and Tobago. In FY2021, FCGFH ranked 2nd in the banking industry by capital adequacy ratio
(Chart 10).

Chart 10
Peer Comparison Capital Adequacy Ratio for the period 2017-2021

Source: FCGFH Annual Report

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 FCGFH’s NPL to Gross Loans ratio has averaged 3.2% over the 5-year period. FCGFH has
the second lowest ratio in the sector (Chart 11).

Chart 11
Peer Comparison of NPLs to Gross Loans for the period 2017-2021

Source: FCGFH Annual Report

In FY2021, ROE improved marginally to 8.68% from 8.33% in 2020. This was mainly due to
an increase in profit margin to 31.2% from 27.2% in 2020 (Chart 12).

Chart 12
Key Performance Indicators for the period 2017-2021
2017 2018 2019 2020 2021
Return on Equity 9.56% 10.08% 10.92% 8.33% 8.68%
Return on Assets 1.65% 1.66% 1.76% 1.34% 1.42%
Total Assets 38,958 42,045 43,382 47,446 46,606
Shareholders’ Equity 6,752 6,622 7,152 7,421 7,945
Profit Before Taxation 876 1,010 1,063 832 902
Profit After Taxation 642 674 752 607 667
Source: FCGFH Annual Report

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Recent Financial Performance

Chart 13
FCGFH’s Summary Financial Performance
for the 3-Month Period Ended March 2022 and March 2021
Mar-22 Mar-21 Variance
Net Interest Income 361,623 375,101 ↓ 3.6%
Other Income 162,534 167,777 ↓ 3.1%
Total Income 524,157 542,787 ↓ 3.4%
Total Assets 46,258,801 47,417,854 ↓ 2.4%
Total Liabilities 38,404,075 39,838,439 ↓ 3.6%
Total Equity 7,854,726 7,579,415 ↑3.6%
Profit before Tax 220,941 207,777 ↑ 6.3%
Profit after Tax 153,646 134,389 ↑ 14.3%
Source: FCGFH Quarterly Financials

For the quarter ended March 31st, 2022, First Citizens Group Financial Holdings (FCGFH)
recorded a 14.3% increase in profit after tax to $153.6 million from $134.4 million in the
corresponding prior period (Chart 13). However, Net Interest Income (NII) fell by 3.6%,
driven by a fall in loans to customers (↓3.5%) and loan notes (↓66.7%) respectively.
Furthermore, other income fell by 3.1%. However, impairment expenses net recoveries
improved, falling by 63.4% to $11.7 million from $31.9 million. Additionally, expenses also
improved, falling by 4.4% respectively.

Recent Developments
On June 6th, 2022, at a meeting of the Board of Directors of FCGFH, the additional sale of
10,869,565 shares in FCGFH were approved. On June 27th, 2022, the APO offer price of $50
per share was announced, this price is in line with the closing market price of FCGFH’s share
on the TTSE. The proposed sale of the 10,869,565 shares in the APO would reduce the
shareholding of the GOTT to 60% of the bank’s issued shares. The net proceeds will be
approximately $0.5 billion after the deduction of transaction expenses and the APO will open
on June 28th, 2022 and will close at 4:00 pm on July 22nd, 2022.

Furthermore, on June 27th, 2022, the Board of FCGFH approved a transaction to be negotiated
with IDB Invest for senior unsecured financing of up to US$175 million with a tenor up to 7
years. The proceeds of this financing will be used to (i) grow FCGFH’s low and middle
income household mortgage portfolio; (ii) implement digital transformation and investments
in digital and electronic products and services and (iii) expand lending capacity to Small and
Medium Enterprises (SMEs).

In March 2021, Scotiabank announced that it had reached an agreement for the sale of its
banking operations in Guyana to FCGFH, subject to regulatory approval and customary
All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 closing conditions. However, just over one year later on June 10th, 2022, Scotiabank
announced that this sale has been mutually terminated as the Purchase and Sale Agreement
for the sale expired. As such, this led to a decrease in FCGFH’s intrinsic value based on a
lower than expected increase in earnings in the near future for FCGFH as consumer lending
still remains muted along with the termination for the purchase of Scotiabank's Guyana
operations.

FCGFH’s S&P Credit Rating

On December 16th, 2021, S&P Global Ratings reaffirmed a BBB-/Negative/A-3 rating on
FCGFH. S&P indicated that the rating was issued on the following basis:

Strengths Weaknesses

Sound market position in corporate
banking and the second-largest bank in
Trinidad and Tobago.
(T&T;BBB-/Negative/A-3)
Risk adjusted capital ratio is expected to
remain strong in 2022-2023.
Single name concentration that could make
asset quality metrics volatile.
The sovereign’s impact on the Bank’s credit
profile given its large exposure to the
country in the form of loans and
investments.

Stable funding base and good liquidity.

Industry Overview

The banking sector in Trinidad & Tobago is the largest sector trading on the Trinidad and
Tobago Stock Exchange (56%) in terms of market capitalization. It comprises of five (5) banks,
namely, (i) FirstCaribbean International Limited (FCI), (ii) First Citizens Group Financial
Holdings Limited (FCGFH), (iii) NCB Financial Group Limited (NCBFG), (iv) Republic
Financial Holdings Limited (RFHL) and (v) Scotiabank Trinidad & Tobago Limited (SBTT).
RFHL is the largest bank by market capitalization (32.9%), followed by SBTT (19.4%), NCBFG
(18.5%), FCGFH (18.0%) and FCI (11.3%) – (Chart 14).

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Chart 14
Peer Comparison by Market Capitalization

Source: Trinidad and Tobago Stock Exchange (TTSE)

The banking sector is currently trading at an average P/E multiple of 20 times, which is above
the T&T Composite P/E multiple of 13.3 times. FCGFH is currently trading at a trailing P/E
multiple of 18.20 times which is in line with the industry average but above the T&T
Composite Multiple (Chart 15). The average sector dividend yield stands at 2.7%, above the
T&T Composite average of 2.55%. FCGFH has a dividend yield of 3.12% at its’ current market
price which is above the industry dividend yield as well as the T&T Composite dividend
yield.

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 Chart 15
Banking Sector Metrics

Source: JMMBITT Research

FCGFH is the second largest locally domiciled bank in the Trinidad and Tobago financial
system, with a market share of 18% and 22% in terms of loans and deposits respectively
(Chart 16). The largest locally domiciled bank in Trinidad and Tobago is RFHL by both
metrics.

Chart 16
Market Share by Loans

Source: JMMBITT Research

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 In FY2020 and 2021, domestic economic activity contracted amid the COVID-19 pandemic.
As a result, monetary and financial conditions were geared towards preserving macro-
financial stability against the effects of the pandemic. This led to the CBTT lowering the repo
rate to 3.5% from 5.0% and the commercial banking sector reserve requirement to 14% from
17% in March 2020. These measures were influential in boosting liquidity and reducing
interest rates. However, the consolidated financial system credit growth weakened in 2020
to approximately 2.5% from 3.4% in 2019. Additionally, business credit contracted as a result
of closures and downsizing of establishments dampening borrowing activity in this sector.
Furthermore, consumer lending also declined driven by a slowdown in home improvement,
debt consolidation and real estate-related borrowing activity.

At the end of 2020, credit risk in the banking sector heightened slightly, demonstrated by
increases in non-performing loans (NPLs). However, increases in provisioning and the
granting of moratoriums by commercial banks’ as a recognition of the severe economic
impact of the pandemic on borrowers enabled the banking sector to remain resilient, retain
strong capital adequacy and liquidity ratios.

Valuation
Three valuation models were utilized to obtain an estimated intrinsic value range for
FCGFH. Firstly, a dividend discount model (DDM) was utilized. Two relative valuation
models were also applied; a simple P/E method and a simple P/B method using the average
multiple over the last 5 years.

DDM Model
Our three stage DDM assumes FCGFH will be able to maintain its payout ratio and grow its
EPS (and hence dividends) at the firm’s current fundamental growth rate for the next 5 years
then transition to the implied payout ratio given a stable growth assumption over the
following 5 years. Intrinsic valuation on the DDM shows a share price of TT$51.36 vs. a
market price of TT$50.00.

Simple P/E Insights

This model is a simple yet powerful measure of value that relies on historical market
sentiment of the growth prospects of the stock. It uses the market implied multiple for
FCGFH for the past 5 years and forecasts the firm’s EPS to arrive at the firm’s ‘fair value’.
The analysis gives FCGFH a valuation of TT$44.71 which is TT$5.29 below its current market
value.

Simple P/B Insights

Simple P/B multiple, has a similar methodology to the simple P/E. It uses the average P/B
multiple for the past 5 years then determines a fair value by projecting book value per share
(BVPS). The forecasted BVPS is simply beginning BVPS increased by the firm’s current
All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 fundamental growth rate; so, it implicitly assumes the same retention ratio. The analysis
gives the stock a fair value of TT$47.57 which is TT$2.43 below its current market value.

FCGFH’s Risk Factors

 Macro-environmental factors - As with all firms FCGFH is exposed to various risk
factors from the external environment. Although data shows that the financial sector
in Trinidad is more resilient during economic downturns than other sectors,
management must still be mindful of the risk associated by deteriorating economic
conditions such as increased NPLs and reduced borrowing activity. This has placed
a major strain of FCGFH’s main income driver (NII) as consumer lending remains
muted. Furthermore, FCGFH can see an increase in NPLs as unemployment levels
increase, disposable incomes fall and cost of living increases in the territories which
FCGFH operates.
 Interest rate risk is always significant when discussing financial institutions as their
revenue is heavily dependent on where interest rates are. As at September 30th, 2021,
FCGFH experienced a decline in its investment portfolio and investment income
yields.
 Concentration Risk – FCGFH has approximately 28% credit exposure to the
Government of Trinidad & Tobago. Asset quality could be affected during economic
downturns.

Recommendation

Intrinsic/ Overvalued
Model Weighting
Fair Price (Undervalued) by
Multistage DDM $ 51.36 (1.36) 80.0%
Simple P/E Trailing
$ 44.71 5.29 10.0%
Valuation
Simple P/B Trailing
$ 47.57 2.43 10.0%
Valuation
Weighted average
$50.31
Intrinsic Value
10% Above Average $55.35
10% Below Average $45.28

Our models give a range of values from $44.71 to $51.36, each with its own margin of error.
The DDM model is weighted at 80% while the Simple P/E valuation and the Simple P/B
valuation are weighted at 10% each.
This is because we see the DDM as the most suitable model, given that investors in Trinidad
and Tobago tend to see more value in dividend stocks. A 10% margin of error was applied
to the weighted price to give a fair value range of $45.28 - $55.35.
This is compared to the current market price of $50.00. We project EPS for 2022 will be $2.84.
All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 As such, JMMB Research Department recommends a MARKETPERFORM rating on
FCGFH.
This rating is given on the following basis:
 On June 8th, 2022 the share price of FCGFH closed at $54.99. On June 10th, 2022 as the
announcement of the APO came, the share price of FCGFH fell by 9.0% to $50.02. At this
price, the value of FCGFH is within our fair value range.
 FCGFH continues to grow its revenue and they continue to show strong loan growth in
their corporate segment.
 FCGFH has made significant investments in technology which will make the Group more
efficient as well as more attractive to prospective clients.
 FCGFH remains focused on strengthening its loan portfolio and enhancing its digital
capabilities. These initiatives are expected to enhance market share and profitability in
the future.
 Given that the GOTT is the majority shareholder of FCGFH, there is a strong likelihood
for financial support from the GOTT to FCGFH to meet its debt commitments, if needed.
Tempering this rating are:
 Since FCGFH’s loan portfolio is highly concentrated in Trinidad and Tobago, the lack of
geographical diversification exposes the Group to downside risks as weak economic
conditions persists. Based on this, along with the recent collapse for the purchase of
Scotiabank Guyana, resulted in lower earnings expectations and intrinsic value for
FCGFH in the near future.

 FCGFH has a high concentration of credit exposure to the Government of Trinidad and
Tobago hence, asset quality will be impacted by economic events in Trinidad and Tobago.

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.
 APPENDIX

IMPORTANT DISCLOSURES

Abstract— as a part of our new portfolio strategy we are recommending strict adherence to
the following portfolio allocation definitions/recommendations.

PLEASE NOTE THAT NO INDIVIDUAL ASSET IN YOUR PORTFOLIO SHOULD HAVE

A WEIGHTING GREATER THAN 10% UNLESS OTHERWISE RECOMMENDED BY YOUR
PORTFOLIO MANAGER/ INVESTMENT ADVISOR OR A SPECIFIC JMMB RESEARCH
REPORT. CONSEQUENTLY, THE FOLLOWING DEFINITIONS ARE PROVIDED FOR
CLARITY.

OUTPERFORM - up to 10% of your portfolio

MARKETPERFORM - 5% of your portfolio

UNDERPERFORM - 2.5% to 4.9% of your portfolio

STRONGLY UNDERPERFORM - less than 2.5% of your portfolio

SELL - 0% of your portfolio

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Thank you for respecting our intellectual property rights.”

The investments referred to in this report may not be suitable for you should consult your licensed
investment advisor. Nothing in this report constitutes investment, legal, accounting or tax advice or
a representation that any investment or strategy is suitable to your individual circumstances or
otherwise constitutes a personal recommendation to you.

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable.
All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and
completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM
WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.