Barita Reports Decline in Q1 2023-24 Earnings

• A 45.4% (or $1.09Bn) deterioration in net operating revenue saw Barita Investments Ltd. (BIL) reporting net profit of $479.32Mn (EPS: $0.40) for its first quarter of the FY 2023-24 financial year, a 55.2% contraction relative to prior year.
• Reductions in net interest income (-33.4% or $73.6Mn), gain on investment activities (-78.0% or $1.15Bn), and foreign exchange trading losses (-$7.43Mn), all outweighed the +22.9% growth in fees and commission income resulting in the falloff in operating revenue.
• Amidst the background of the falloff in revenues, operating expenses were well contained, falling by 35.8% (or $387.06Mn), reflecting a reduction in administration costs (39.5%) and reversals of expected credit loss (ECL) charges. However, the results were moderated by a +22.8% increase in staff costs primarily due to one-off separation expenses related to restructuring.
• Despite the improvement in indirect costs during the period, the operating expenses margin rose by 7.86 percentage points to 52.6%, as the contraction in operating revenues (-45.4%) outpaced the improvement in operating expenses (-35.8%).
• Barita attributed the decline in earnings to the ongoing impact of higher central bank interest rates, which led to tight money market liquidity and increased market volatility. The company anticipates that a turnaround in the monetary policy environment beginning in 2024 into 2025 will result in more positive tailwinds for its performance over the next couple of quarters.
• BIL’s stock price fell by 24.2% in 2023 and has declined a further 3.6% since the start of the year, closing Tuesday’s trading session at $71.40. At this price, the stock currently trades at a P/E of 30.25x earnings, which is above the Main Market Financial Sector Average of 12.03x.

 (Sources: Company Financials and NCBCM Research)