Capital & Credit Merchant Bank (CCMB) and its subsidiaries made $658.9 million in net profit attributable to shareholders for the first nine months of 2006 or earnings per share of $1.03 cents, almost 30 per cent below the $936.4 million they earned in the first nine months of 2005.

Third quarter earnings were $180.8 million or 28 cents per share.

While not as strong as the first quarter, this was better than the second quarter's earnings per share of 21 cents which had been dragged down by lower trading gains.

CCMB's 20 per cent decline in net interest income for the third quarter to $200.6 million was below second quarter net interest income of $252.8 million - which was itself only marginally up on the first quarter - implying that the quality of the earnings is lower.

The improved earnings performance mainly reflects $183.5 million in trading gains, or more than double the $79.8 million in net trading gains in the preceding second quarter.

Third quarter net interest income for 2006 was also below last year's $261.4 million, whilst net interest income of $722.8 million for the first nine months of 2006 were below, by 11.2 per cent, the $814.3 million the year prior.

Fall

Other revenue fell 28.7 per cent from $1.01 b to $718.2 million, driven by a fall in net trading income on securities, from $908.9 million to $588.9 million.

Total assets of $52.8 billion as at end September 2006 were slightly below the $52.95 billion of assets of their audited year end in December 2005.

"From mid 2005, the group took a strategic decision to constrain the overall size of the balance sheet, at the time selling off low - yielding assets and selectively acquiring higher yielding assets," said Capital and Credit.

CCMB has revised downwards its projection of its earnings per share for the full year in 2006 to $1.30, which implies the last quarter will be marginally below the current quarter in terms of profits.

"We anticipate that with the cessation of the increases of interest rates in the United States, the prospects of improving net income going forward is significantly improved," the firm said.

This appears to be a reference to their large holdings of "U.S. Government agencies and other securities" which according to its 2005 annual report, amounted to slightly over J$22 billion, which would be financed at a spread to U.S. interest rates.

business@gleanerjm.com
Taken from the Financial Gleaner, Friday, November 3, 2006