Thursday 21st December 2006


First Citizens sees $341 million in profits

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First Citizens’ CEO Larry Howai.

Photo: Karla Ramoo

CEO Larry Howai credits restrictions on lending limits, margins


First Citizens’ non-performing loans is 0.8 per cent.

Its efficiency rate is 43 per cent. In the banking sector, the lower the efficiency percentage—determined by the least amount of money spent to generate $1 in revenue—the better.

And its 2006 after tax profit was $341 million, $50 million more than last year.

Those are figures First Citizens’ CEO Larry Howai is very pleased about.

“The percentage increase would have been about 17 per cent. We actually exceeded our projections. We were originally expecting to come in at about $300 million after tax,” Howai said.

He was speaking in an interview held last Wednesday at First Citizens Corporate Centre, Queen’s Park East, Port-of-Spain.

Howai said First Citizens’ non-performing loans rate is the lowest in the banking sector.

Two measures were stringently applied to achieve that rating.

Firstly, lending limits were restrained.

We’ve tightened a number of areas. For one thing, we are not very generous with limits for managers to lend. A lot of decisions have to come back in to be viewed by someone centrally, and then say, yes.”

By having it come back in, it slows down the process a bit. What it does is it allows you to have a more balanced look at it.

All banks do it, but the levels at which we’ve pushed it down to is probably a little more aggressive than maybe some of our competitors do,” Howai said.

Secondly, state-owned First Citizens’ scrupulously re-examined how it margins its assets.


We’ve tightened a number of areas. For one thing, we are not very generous with limits for managers to lend. A lot of decisions have to come back in to be viewed by someone centrally, and then say, yesFirst Citizens’ CEO Larry Howai


“For example, if you are a business and you gave us a debenture, we would probably consider that that is 25 per cent of the value of what you tell us it is worth,” Howai said.

He said if a business owner approached First Citizens and said his company was worth $1 million, the bank would probably only lend him or her only $250,000 against that.

In Howai’s words, “We shrink values a lot more aggressively than we used to do before.”

The bank also keeps tight control over the monitoring of loans within one day of it going “bad.”

“So that from the time a loan goes one day delinquent, you have people who are immediately looking at it after six days,” Howai said. “It’s transferred to another unit for that unit to commence work.”

Howai was asked to comment on line minister Christine Sahadeo stating in an article published by the Institute of Chartered Accountants of T&T (Icatt) that First Citizens grants some loans other banks would not consider.

‘We’re the tightest run operation’

Rebranding a bank

Most people know it as First Citizens Bank.

Of late, though, the name has been shortened to First Citizens.

CEO Larry Howai explained: “First Citizens is the common denominator with everything. People tend to say FCB, but securities trading say we are not FCB, we’re First Citizens Securities Trading. Where is the ‘B’ in us? First Citizens St Lucia says we are FCSL, so who is FCB for them?”

Howai said the bank is becoming increasingly smaller in proportion to the rest of the group.

We went back to take a look at what could possibly have given rise to such a comment.

Certainly, we feel comfortable and satisfied that the loans we would have given would not have been loans that any particular bank would have turned down and which would have been an unacceptable risk for us.”

He said a First Citizens customer who chooses to approach another bank for a facility but is turned down, can return to his bank for consideration.

“There are instances we know where our customers may have gone to other institutions. They gave the loan and we came and took it over. That goes on on an ongoing basis,” Howai said.

I think the information is there in the numbers to support the fact where our delinquencies are, our non-performing portfolio and so on.”

It is by far the tightest run operation as far as delinquency is concerned within the banking industry.”

Howai said divestment of First Citizens has not been an active issue since attempts to do so five years ago, but he’s all for it.

I think what the Government would look for in the process of privatisations is what additional benefits can accrue to the system as a result of someone maybe acquiring a share of the bank or the bank putting shares on the stock market.”

There’s a lot of value in divesting First Citizens, by Howai’s reasoning.

It would give us flexibility in terms of compensation for our managers. It would also allow us the flexibility that if you need to raise capital from time to time to do anything, you have the possibility of just calling an agent quickly and going back into the market as opposed to the current arrangements which, in a sense, locks you in to one shareholder,” said Howai, who’s been CEO since 1996.

He said the Government, as corporate sole, is looking at a number of options to the extent that First Citizens assists in achieving its overall objectives of developing, deepening, widening, broadening the financial sector.”

I think they would look at privatisation in that context as opposed to how much money you can get out of a privatisation.”

First Citizens partial to Govt?

Government business that comes to First Citizens is treated on a competitive basis, said CEO Larry Howai.

“It’s tendered out. We get it on an open tender basis. A lot of people think that we get a lot of government business. That is not so at all.”

Howai said because the international lending agencies have rated T&T ‘A,’ local and foreign banks are anxious to lend government money, so it’s not tied into any single financial institution to access funds.

“It has lots and lots of options. The Government go for where they can get it cheapest.”

He said in 2004, First Citizens had bid the same rate for a particular transaction, but its fee was slightly higher than another bidder and it lost out on the business.

“We called 0.35 on the fee and somebody else quoted 0.3 and they got it.”

“It’s happened where we lost on a fraction of a per cent on the fee. Once they open the tender, that’s it.”


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