Bank seeking staff cutbacks
Guardian Business Editor
Published: Oct 02, 2013
CIBC First Caribbean has advised the government of plans to restructure operations in The Bahamas and the region, in a move which could lead to redundancies over the next 18 months.
The decision comes in light of concerns by the bank over heavy loan loss provisioning it has been forced to undergo in The Bahamas and Barbados in particular, Minister of State for Finance Michael Halkitis confirmed yesterday.
“They advised us of their plans to reorganize their operations in the region, including voluntary early retirement and voluntary separation, followed if necessary by redundancies,” said Halkitis of a meeting recently attended by CIBC FirstCaribbean executives, the prime minister and himself. There is no indication of how many staff may be impacted by the reorganization.
CIBC FirstCaribbean warned Bahamian staff of the development in an email sent late Monday.
Staff who spoke with this newspaper yesterday expressed anxiety over the “vague” announcement which they received, adding that it was unexpected.
“They were letting us know that something is in the works and they will be talking to the government and the union. They said that we’ll know more in three weeks,” said one staff member, who spoke on condition of anonymity.
In an emailed response to Guardian Business’ questions about the latest developments, the Canadian bank’s Barbados-based Corporate communications director, Debra King, said the bank is set to undertake a program of restructuring in an effort to “maintain its competitive advantage”, in light of rising costs and declining profits.
King said: “We can confirm that we have written to our employees indicating that we are embarking on a restructuring program for CIBC FirstCaribbean.
“We have outlined a plan of offering separation packages and early retirement to employees who qualify and who wish to exercise that option. We will assess any need for further action only after that program is completed.”
King said the decision to move towards staff reductions was not one taken lightly.
“It’s being driven by our operating environment and is one that must be taken to enhance the competitiveness and ability of CIBC FirstCaribbean to service its customers better and more efficiently, and ultimately to grow.
“We will provide support for any employees leaving CIBC FirstCaribbean and ensure that everyone affected by this process is treated fairly and with the utmost respect.”
Asked if the decision to restructure was impacted at all by the Bahamian government’s recent announcement that it would raise business license fees on the banking sector in The Bahamas, which several banking executives have complained could lead to efforts to cut costs, King said: “Several initiatives that we have undertaken to improve our efficiency and sales effectiveness have borne fruit; however our costs continue to rise and our profits continue to decline. We are therefore embarking on this exercise to further improve our efficiency and to ensure that we maintain our competitive advantage.”
In March 2013, Rik Parkhill, CIBC FirstCaribbean’s Chief Executive Officer, told The Nation newspaper in Barbados that the bank was being challenged by loan loss provisions.
According to management’s analysis in the Bank’s 2012 annual report, loan loss impairment increased by US$33 million or 37 per cent year on year due to higher specific allowances of US$23 million “driven by deterioration in collateral values, new non-performing loans and updates to key assumptions mainly affecting business and sovereign and personal loans.”
However, the ratio of non-performing loans to gross loans decreased to 12.4 per cent compared to 13.6 per cent at the end of 2011.
Chairman Michael Mansoor said in the report that the bank’s profit of US$72 million was relatively consistent with the prior year at US$74 million.
The CIBC FirstCaribbean announcement comes after FNM politicians recently warned that they believed that CIBC competitor Scotia Bank was set to engage in widespread layoffs in its Bahamian operation, and as several banking executives have sounded alarm bells over the potential for cost cutbacks across the sector as it faces rises in business license fees and the implementation of the Homeowners Protection Bill at a time when the sector is challenged by high levels of loans in arrears.
Scotia Bank Managing Director, Kevin Teslyk, denied in an interview with Guardian Business in early September that the bank had any plans to add to unemployment in the country, saying any shifts in Scotia Bank’s Bahamian operations would see employees accommodated in other areas of the bank.
Scotia Bank recently announced plans to fully outsource all of its customer service functions to Jamaica, after outsourcing 50 percent of its branch network’s customer service functions over the past 18 months.
Yesterday a CIBC FirstCaribbean employee, who spoke to this newspaper on condition of anonymity, said there is some concern that the bank was set to follow Scotia Bank’s “precedent” on outsourcing.
Bahamas Financial Services Union President, Theresa Mortimer, was not available for comment up to press time.