CIBC FirstCaribbean suffers 85 percent quarterly profit fall
Guardian Business Editor
Published: Oct 10, 2013
“Strained” economic conditions have been blamed by CIBC FirstCaribbean for an 85 percent net earnings fall suffered by the bank for the three months leading up to July 31, with profits sliding from $12.7 million to $1.87 million, results released yesterday have shown.
The results come after the bank recently revealed plans to seek staffing cutbacks throughout the region in light of the need for heavy loan loss provisioning in Barbados and The Bahamas in particular.
The unaudited statement shows the bank saw a 36
percent rise in its loan loss provisions for the nine months leading up to July 31, 2013 compared with the previous year’s results, with provisions for loans in arrears rising from $82.424 million to $112.106 million, and an 18 percent rise over the quarter in question.
Net earnings fell by 74 percent over the nine month period compared with the same period in 2012, from $46.1 million to $11.75 million. Managing Director for CIBC FirstCaribbean Marie Rodland-Allen did not respond to messages seeking comment on the results yesterday, however they provide some insight into what may have driven the bank’s decision to seek cost reductions in the form of staff cutbacks.
Yesterday, the latest Quarterly Review of the Central Bank of The Bahamas said that bank profitability sector-wide contracted during the first quarter of 2013 – the latest available data – by 20.2 percent ($8.3 million) to $32.7 million, following a 38.5 percent ($25.6 million) fall-off in the year’s earlier period.
The slide “reflected increased provisions for bad debts and broad-based declines in core revenues,” said the Central Bank.
CIBC FirstCaribbean recently advised the government that it would go to its employees to seek voluntary staff reductions in light of the impact of heavy loan loss provisioning.
The provisioning comes as banks throughout the sector have experienced extended and elevated high levels of loans in arrears.
An email was sent out to staff on October 1 indicating that the bank was set to undertake a period of restructuring.
Minister of State for Finance Michael Halkitis said the bank met with the government to advise them of its plans prior to communicating with staff.
“They advised us of their plans to reorganize their operations throughout the region, including voluntary retirement and voluntary separations, followed, if necessary, by redundancies.”
He said the bank indicated these decisions would be made over the next 18 months.
In a statement issued with the results yesterday, Chairman Michael Mansoor said: “Operating expenses, loan loss impairment expenses and non-credit losses increased compared with the corresponding nine month period in the prior year. Strained economic conditions continue to have an adverse impact on the financial results.”
He noted that assets stood at $3.3 billion at July 31, 2013, and tier I and total capital ratios “remain strong” at 28 and 29 percent respectively, “well in excess of the minimum regulatory requirements”.
Financial results show that “loans and advances” outstanding dipped by four percent over the nine months up to July 31, compared with the previous year, with from $2.272 billion to $2.178 billion.
Net interest income slid from $105.7 million in the nine months leading up to July 31, 2012, to $99 million for the same period this year.
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