By NEIL HARTNELL
Tribune Business Editor
CIBC’s regional chief is hoping a “precipitous drop” in early 2015 retail delinquencies develops into a trend that erodes its non-performing mortgage pile, 50 per cent of which are concentrated in the Bahamas.
Reiterating that the bank appeared to have “a particular problem” in the Bahamas when it came to bad mortgage loans, Rik Parkhill expressed optimism that this nation’s stronger US ties would cause it to recover “earlier and faster” than the 17 other Caribbean territories it operates in.
Disclosing that CIBC FirstCaribbean’s non-performing loan coverage ratio was 46 cents out of every dollar, Mr Parkhill said it was adequately provisioned, and expressed optimism that it would be able to write back (recover) some of these expenses as the Bahamian and regional economies rebounded.
And, while the Bahamas’ dominance of CIBC FirstCaribbean’s non-performing mortgage loans was relatively unchanged, the bank’s regional chief executive expressed hope that early recovery signs could develop into a sustainable trend.
“Over the last two months, we’ve noticed the percentage of delinquencies in the mortgage and retail area has dropped precipitously,” Mr Parkhill said, “but whether or not that’s a trend, it’s too early to say.”
Confirming the Bahamas’ prominence among the bank’s ‘bad mortgages’, he suggested this might have stemmed from the country’s closer links to the US economy when compared to other Caribbean nations.
While this often proves a ‘blessing’ for the Bahamas, during the 2008-2009 recession it became a ‘curse’, as the ‘credit crisis’ and subsequent recession hit this nation harder because of its US reliance.
“I think it got hit first,” Mr Parkhill said of the Bahamas. “Non-performing mortgages are a problem region-wide, but because of the close.. integration with the US economy, I think the Bahamas felt the impact of that more than any of the other Caribbean nations did.”
He was backed by Marie Rodland-Allen, CIBC FirstCaribbean’s Bahamian managing director, who said an International Monetary Fund (IMF) study had shown the Bahamas had a “slightly more elevated” non-performing loan level than its Caribbean counterparts just prior to the recession.
And, apart from having a ‘head start’, Mrs Rodland-Allen said the Bahamas’ current 15.7 per cent unemployment rate was “significantly higher than a lot of our regional peers”.
Mr Parkhill added: “The default rate on loans in the Bahamas is higher, but not significantly higher.
“What we’re hoping is that because of the integration with the US economy, things will recover earlier and faster in the Bahamas.”
He emphasised that CIBC First Caribbean would continue to target all lending segments, and would not withdraw from certain categories, as other Bahamas-based commercial banks have done with respect to business loans.
“Rather than abandoning certain sectors of lending, we’re looking at things like loan to value ratios and security that goes along with lending to structure it better and protect the bank and its depositors, so that in the event of a loss we can recover it,” Mr Parkhill said.
“We’re going full throttle and trying to do more business in each of the areas. If you look at the places that have hurt us, it’s not been any particular sector.
“We’re a universal relationship bank in the Bahamas, and intend to stay that way.”
Conceding that the bank, and others, had perhaps employed a “damn the torpedoes” lending strategy in the past, Mr Parkhill said CIBC FirstCaribbean would adopt a more prudent approach to the lending opportunities it embraced moving forward.
CIBC FirstCaribbean is understood to have seen significant customer shifts towards the use of alternative banking channels, such as electronic and Internet banking.
It has seen a 20 per cent increase in usage of these channels in the Bahamas and region-wide, while there has also been a 40 per cent rise in clients paying with debit and credit cards, as opposed to cash.
The bank is seeking to do more business with its established customers, and Mr Parkhill identified its Platinum Banking services and credit cards as “success stories”.
Acknowledging that GDP growth rates were likely to be lower than in previous economic recoveries, Mr Parkhill said he was “more focused” on a steady recovery by CIBC FirstCaribbean, and delivering stable, sustainable returns to shareholders than “hitting historical highs”.
The bank’s annual net income peaked at around $110 million pre-recession, and Mr Parkhill said that while it would “certainly not be impossible, and we will strive to do it”, his priorities lay elsewhere.
As for a recent Toronto Globe & Mail article, which showed that CIBC FirstCaribbean’s $835 million worth of gross impaired loans accounts for 58.4 per cent of the total $1.43 billion incurred by its Canadian parent, Mr Parkhill said its appearance was four-five years too late.
Emphasising that it was a personal view, he added that it was “a sign that things are about to turn around”.
Mr Parkhill said: “We have a lot of confidence that the region is going to recover, and the bank will do well in the context of that recovery.
“We’ve been in the Caribbean for over 100 years, and my expectation is that despite some difficulties in the past couple of years, we will be here 100 years from now.”