By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
CIBC FirstCaribbean’s regional chief executive is “certainly more optimistic” about the Bahamas’ immediate recovery prospects compared to many of its local rivals, describing the Caribbean economy as having reached “a tipping point”.
Rik Parkhill told Tribune Business that the bank’s loan commitment pipeline was “at the highest level we’ve seen for many years”, indicating a willingness by both individuals and businesses to undertake investment/expansion projects.
The CIBC chief indicated, though, that confidence remained fragile, as “a level of skittishness” among potential borrowers held back ‘draw downs’ on these approved credit facilities in the bank’s first quarter.
Mr Parkhill said he expected both CIBC FirstCaribbean, and the region’s economies, to see the benefits from this loan ‘pipeline’ as its 2015 financial year progressed.
And he reaffirmed the bank’s determination for its Bahamian subsidiary to “as rapidly as possible” return to a position where it was a key driver of its overall results, following a $147.823 million net loss in 2014.
With the $3.5 billion Baha Mar project set to open its doors later this month, and other investments by the likes of Albany and the British Colonial Hilton’s owners set to gather pace, Mr Parkhill said the Bahamas had better prospects for a faster recovery than many of its Caribbean counterparts.
“I would say I’m certainly more optimistic about the recovery prospects for the Bahamian economy at an earlier stage than some of the other places we operate in,” Mr Parkhill told Tribune Business.
“The Bahamas is more tied to the US economy, and the US continues to be one of the stronger economies in the world.
“The impact of the Baha Mar project on unemployment and income levels could be quite substantial,” he added. “There are also some other projects underway that create momentum.”
Mr Parkhill’s optimism about the Bahamas’ better recovery prospects relative to its Caribbean counterparts will be a boost to the Christie administration, as it supports the ‘rose tinted’ outlook given by the Prime Minister in closing the mid-year Budget debate.
However, the CIBC regional chief also warned that the Bahamas - and wider Caribbean - were “extremely unlikely” to return to the annual 5-6 per cent gross domestic product (GDP) enjoyed before the 2008-2009 recession.
“I think it’s extremely unlikely we’ll get back to the 5-6 per cent GDP growth levels in the past,” Mr Parkhill told this newspaper. “We’ll see a two-step recovery - 1-2 per cent GDP growth, and in 2016 we’ll get back to 2-3 per cent growth.”
His tempered optimism is relevant in the context of International Monetary Fund (IMF) projections that the Bahamas needed to generate 5.5 per cent average annual GDP growth for the five years up to 2018, if it was to both halve existing 15.7 per cent unemployment and absorb all school leavers into the workforce.
This is the backdrop against which the Prime Minister’s estimate of 7,500-8,000 new jobs created in 2015 must be assessed. While welcome news, much of this will be generated by Baha Mar’s 5,000 permanent hirings, and it will only make a significant dent in the Bahamas’ long-term, structural unemployment problem if repeated for several years.
Still, there was little disguising Mr Parkhill’s upbeat assessment of economic revival in both the Bahamas and wider Caribbean.
“We’re sort of at a tipping point in terms of higher growth in the region,” he told Tribune Business. “If you look at the [loan] pipeline on the retail and corporate side, they’re at the highest level we’ve seen for many years.”
CIBC FirstCaribbean’s Bahamian subsidiary had $179.512 million worth of undrawn loan commitments on its books at its October 31, 2014, year-end, a figure slightly down from the prior period’s $192.028 million.
Mr Parkhill acknowledged there was “a level of skittishness in drawing down those facilities”, due to continued uncertainty over the recovery’s strength.
However, he said it showed increased willingness by both individuals and businesses to contemplate investment projects, ranging from renovating and purchasing homes to corporate expansions and acquisitions.
And, while CIBC FirstCaribbean “didn’t benefit a great deal from people drawing down credit” in the three months to end-January 2015, Mr Parkhill said he expected this to come through during the rest of its financial year - to the benefit of the bank and regional economies.
The bank, whose Bahamian subsidiary is listed on BISX, spent 2014 performing significant ‘clean up’ work, adjusting its loan loss provisions to reflect the economic reality while writing down the ‘goodwill’ that had remained on its balance sheet since the 2002 Barclays Bank merger and ultimate acquisition.
What was effectively ‘a one-time hit’ appears to have left CIBC FirstCaribbean well-positioned to move forward again, with Mr Parkhill telling Tribune Business the bank’s performance is strong whenever the Bahamas is driving it.
“It’s one of our larger markets, if not the largest market, in the 17 islands where we do have a presence,” he said of the Bahamas. “It’s extremely important in terms of driving the financial performance, and also strategcially. You’re going to see that in the first quarter results....
“We’re quite determined. When this bank has done well financially, the Bahamas has been a significant driver of the performance, and we’d like to get back to that situation as rapidly as possible.”
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