Share analysis: GB Group – financial Services

The Company

GB Group is a publicly traded holding company, listed on the Panama Stock Exchange (Bolsa de Valores de Panamá, BVP) under the ticker symbol GBGR. The company owns a 100% stake in Global Bank Corporation – which is the second-largest non-government-owned Panamanian bank in the country. Founded in 1994 as a universal model bank, Global Bank Corporation’s assets reached the billion-dollar mark in 2006 and now stand at around $5.1bn. The company currently has $4bn in loans, $2.9bn in deposits and regulatory capital of $486m. In addition, it has an international investment-grade credit rating of “BBB-” from both Fitch and Standard & Poor’s.

Among its other operations, Global Bank Corporation controls a factoring entity (Factor Global), an offshore bank (Global Bank Overseas), a brokerage firm (Global Valores), an insurance company ( Aseguradora Global), a trust administration entity ( Global Financial Funds Corporation), a corporate finance and corporate consulting business (Global Capital Corporation) and a pension fund administrator ( Progreso Administradora Nacional de Inversiones, Fondos de Jubilación y Cesantías).

Market Leadership

Global Bank Corporation has a 5.6% market share based on the total assets of Panama’s national banking system. The bank also has a well-diversified loan portfolio totalling $4bn, for a 7.3% market share. Its loan portfolio consists of 67.9% corporate loans and 32.1% consumer loans. Global Bank also has leading market shares in the agribusiness, construction, commercial, industrial and automobile loan segments.

As the fourth-largest bank in Panama in terms of its branch network, with 33 branches, 11 drive-through banks and 104 ATMs across the country, Global Bank also benefits from its modern and efficient online banking system.

This platform allows the bank’s customers to perform banking transactions and make payments online.

For the six-month period ending December 2014, Global Bank Corporation posted $40m in net income, for an increase of 24.9%, or $8m, over the same period in 2013. This growth was primarily driven by a $22.8m, or 17.5%, increase in net interest and commission income as a result of higher loan volume.

Balance Sheet

For several years, Global Bank Corporation has been pursuing a strategy aimed at diversifying its funding. At present, its funding base is anchored by deposits (64.6% of total liabilities) with growing involvement in medium-term financings (32.7% of total liabilities), which benefits the bank’s credit profile by reducing its funding gaps.

Global Bank Corporation’s growth has been achieved through disciplined and conservative risk policies, resulting in good portfolio quality, with a nonperforming loan ratio of just 0.9% and reserve coverage at 103.7% as of December 2014.

Furthermore, the bank had an annualised return on assets of 1.7% and an annualised return on average equity of 20.5%, with a capitalisation ratio of 13.45% – well above the 8% minimum regulatory capitalisation, as of December 2014.

In September 2014 Global Bank Corporation acquired 100% of the pension fund administrator, Progreso Administradora Nacional de Inversiones, Fondos de Jubilación y Cesantías. Progreso is one of two pension fund administrators in Panama and had approximately $655.5m in assets under management as of December 2014.

Group Performance

GB Group had a market capitalisation of $735.2m as of December 2014, trading at a share price of $47. The company had a total of $418m in shareholder equity, a 13.2% increase over the same period in 2013.

At the time of writing the group’s stock was trading at a price-to-book ratio of 1.8x and a price-to-earnings ratio of 9.9x for the last 12 months.

The stock was trading close to its 12-month low, and it was outperformed by the BVP index by 11.2%.