Headed by our position in Safe Bulkers and Dryships the sector is responding to the slow realization that world economic growth – China in particular allows for rising rates. The bottom is in and we are taking advantage. of the trend . This will be years of recovery – and of solid profits.
ATHENS, GREECE — (Marketwired) — 08/21/13 — Safe Bulkers, Inc. (the “Company”) (NYSE: SB), an international provider of marine drybulk transportation services, announced today its unaudited financial results for the three- and six-months period ended June 30, 2013. The Company’s Board of Directors also declared a quarterly dividend of $0.05 per share of common stock for the second quarter of 2013.
Summary of Second Quarter 2013 Results
Net revenue for the second quarter of 2013 decreased by 12% to $41.4 million from$47.0 million during the same period in 2012.
Net income for the second quarter of 2013 increased by 14% to $24.6 million from $21.5 million, during the same period in 2012. Adjusted net income(1) for the second quarter of 2013 decreased by 36% to $15.1 million from $23.7 million, during the same period in 2012.
EBITDA(2) for the second quarter of 2013 increased by 14% to $36.1 million from $31.6 million during the same period in 2012. Adjusted EBITDA(1) for the second quarter of 2013 decreased by 21% to $26.6 million from $33.7 million during the same period in 2012.
Earnings per share (“EPS”) and Adjusted EPS(1) for the second quarter of 2013 of $0.32and $0.19 respectively, calculated on a weighted average number of shares of 76,679,328, compared to $0.28 and $0.31 in the second quarter 2012, calculated on a weighted average number of shares of 76,653,848.
The Company’s Board of Directors declared a dividend of $0.05 per share of common stock for the second quarter of 2013.
With more than $525 billion in assets, Bank of Montreal, together with its subsidiaries, provides a broad range of retail banking, wealth management and investment banking products and solutions in North America and internationally. BMO operates approximately 1,600 bank branches and employs approximately 46,000 full time employees globally.
All amounts in C$ unless otherwise noted.
WEAK QUARTER: MARGINS AND EXPENSES
BMO reported Q2/13 adjusted EPS of $1.46, below our estimate and consensus of $1.49. EPS was up 1% YoY. Excluding the $66 million after tax recovery on the impaired credit portfolio acquired from M&I, EPS would have been $1.36. Relative to our estimate, stronger capital markets revenues were offset by lower insurance results, higher expenses, and a higher tax rate.
The Basel III CET ratio increased to 9.7% from 9.4%, reflecting earnings in the quarter and model refinements which lowered RWA. The bank bought back 4 million shares in the quarter. We believe BMO’s strong Tier 1 ratio and weaker earnings growth supports building in more aggressive share repurchase activity for 2013 and 2014. Insofar as capital allocation is concerned, we believe BMO is leaning more toward buy backs than acquisitions.
U.S. P&C earnings were up 9% YoY reflecting lower PCLs and expenses offset by weak top line growth (loan growth offset by NIM pressure). The 3% YoY decline in expenses reflects M&I synergies. On a US$ basis, total loans were up 0.4% QoQ (the second consecutive quarter of growth) as commercial loans were up 1.9 % QoQ and personal loans were down 1.2%. We expect synergies and good commercial loan growth (offset by NIM pressure) to drive mid- to- high-single-digit earnings growth.
Domestic P&C earnings were down 0.7% YoY, reflecting -2.3% operating leverage and additional NIM pressure. Expense growth was elevated, but consistent with commentary regarding the desire to continue to invest in the franchise. BMO’s issue with operating leverage does not appear to be expense control but rather the very weak top line growth. We do not believe revenue growth will accelerate in the near term largely because we expect margins to remain under pressure.
We continue to believe that BMO’s more aggressive posture in mortgages, while leading to strong mortgage growth this quarter (discussed below) is hurting the bank’s margin. Our 12-month target price of C$69.00 (down from C$70.00) is based on the stock trading at 10.8x our 2013E EPS, a 6% discount to the group multiple of 11.5x. We continue to rate BMO a HOLD. Our outlook on the stock is constrained by an expectation of below group average EPS growth driven by: a) higher PCLs as recoveries decline, b) NIM pressure, and c) weak operating leverage in domestic retail. We also expect BMO’s dividend growth to lag its peers.
Scotiabank is one of North America’s premier financial institutions, and Canada’s most international bank. With over 80,000 employees, Scotiabank Group and its affiliates serve over 19 million customers in more than 55 countries around the world. Scotiabank offers a diverse range of products and services including personal, commercial, corporate and investment banking.
Q2/13 core cash EPS was $1.24 (up 6% YoY) versus our estimate of $1.25 and consensus of $1.26. At 6% YoY, BNS’ earnings growth is likely to be in line with the group average. Relative to our estimate, revenue was higher than expected, with capital markets revenue coming in better than expected. Slightly weaker than expected results relates to higher PCLs and higher expenses.
International earnings were up 5% YoY, reflecting good revenue growth offset by higher than expected investment spending and a 34% YoY increase in PCLs. Noninterest expense growth was 11% (5% QoQ), with half of the increase relating to acquisitions and the other half to investment spending. Operating leverage in the quarter was nil.
Given the investment spending in 2012, we expected BNS to deliver 2-3% operating leverage in the segment in 2013. In this respect, the expense growth in the quarter was surprisingly high. Higher PCLs reflect the expected normalization of credit losses in Colombia. We expect International
earnings growth to return to the low double-digits as early as next quarter.
Domestic P&C earnings were up 18.7% YoY on 15.1% YoY revenue growth and operating leverage of 2.4%. YoY, we were looking for earnings growth of 16.8%, revenue growth of 13.1%, and operating leverage of 1.1%. Earnings growth, excluding ING Direct, would have been 7.6%. Only Royal Bank is expected to deliver better organic earnings growth this quarter. With ING contributing $45 million in earnings last quarter and $51 million in Q2/13, the bank is already at the $190 million run rate discussed at the time of the deal.
Over the last five years, the bank’s better earnings stability and momentum has earned Scotia an average premium of 5-7%. On our estimates, the stock currently trades at a 5% premium to the group. For the reasons outlined below, we set our target price on BNS based on the stock trading at a 6% premium (consistent with RY).
Our target P/E premium drives a target P/E of 12.2x applied against our 2014E EPS and a target price of C$67.00 (down from C$69.00).