CIBC FirstCaribbean Bank is in unfamiliar territory, with its management reporting the company’s first loss since its formation 11 years ago.
Chief executive officer Rik Parkhill, noting that the financial institution, based in Barbados, was in the middle of a major restructuring exercise, said it recorded a $27.5 million net loss for the fiscal year ended October 31, 2013.
Were it not for “several items of note” including US$37.6 million for “restructuring-related expenses” and a US$25 million increase in the collective allowance for loan losses, the bank established in 2002 would have earned US$29.6 million in profits, which would still have been a decline over last year’s US$72 million.
FirstCaribbean’s profits have been steadily declining over the past five years amid a protracted economic downturn in Barbados and other regional territories in which it operates.
In its first year of operation the bank earned a net profit of US$223 million, followed by net income of US$105.8 million (2003), US$102.5 million (2004), US$257.9 million (2005), US$170 million (2006), US$255.7 million (2007), US$180 million (2008), US$175 million (2009), US$157 million (2010), US$74 million (2011), US$72 million (2012).
In a fourth quarter statement, Parkhill said his organization’s bottom line continued to be challenged by factors outside of its control, including depressed Caribbean economies and some clients struggling to pay their loans.
“Many of the economies in which we operate rely heavily on tourism and foreign direct investments. The overhang from the economic crisis continues to impede growth and by extension has negatively affected our results. Loan loss provisions this quarter were higher than normal and include an increase in the collective allowance,” he said.
“The bank is focused on pursuing risk-controlled growth and has taken considerable steps during the year towards the goal of becoming a lower-risk bank. While never easy in these difficult times, we have also taken the decision to right size the organization, to redefine how we operate and to address our cost structure.
The restructuring we are undertaking will position us for future cost savings and give us the ability to serve our customers better.”
By the time its financial year concluded at the end of October FirstCaribbean had “generated US$530 million in revenue and maintained strong capital levels with a total capital ratio of 24 per cent, which is well in excess of regulatory requirements”.
While noting that the bank’s capital levels “provide us with the strength to endure challenging times as well as to invest in the future”, Parkhill said some “significant successes” had been recorded as the bank continued to pursue its strategic priorities.
“We have introduced new and relevant products to better serve our clients and continue to leverage the capabilities of our parent and majority shareholder, CIBC. Our focus on addressing operational and administrative concerns has also led to improvements in the client experience,” he said. (SC)
