The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

CIBC FirstCaribbean’s Bahamian unit enjoyed its “best performance for 11 years” after 2018 profits rose nearly 11 percent due to improved loan book performance and rising US rates.

Marie Rodland-Allen, the BISX-listed bank’s managing director, told shareholders in its just-published annual report that it managed to shrug off ongoing economic challenge to deliver an $8.3m year-over-year increase in net income.

“Notwithstanding a challenging economic and operating climate, the bank had a successful year with reported net income of $85m compared to $77m in the prior year,” she wrote. “Our results were largely impacted by earnings from performing loans and rising US rates.

“We are pleased to report that this has been our best performance since 2007. The bank has preserved strong capital levels, with both Tier I and total capital ratios of 25 percent, which are both well above the minimum regulatory requirements.”

CIBC FirstCaribbean, which is more than 95 percent owned by its Barbados parent, paid out some $105m in dividends during its 2018 financial year - although only around $5m will have gone to Bahamian investors. The bank remains the largest stock on BISX by market capitalisation.

Net interest income rose by $9.2m or seven percent for the year to end-October 2018, driven by both the rising US interest rates and improved loan book outcomes, together with “increased cash placement volumes”.

This was offset slightly by a $4m decrease in so-called “other income” due to increased securities losses, which cut operating income by $1.4m or 3 percent year-over-year to $31.522m. Total operating expenses, though, largely remained flat at $90.977m.

Loan loss expenses were also consistent with 2017 figures, although that associated with impaired loans increased due to a change in accounting standards that impacted all Bahamas-based commercial banks.

Loss expenses associated with non-impaired loans dropped by $8m due to the same accounting treatment change, and CIBC FirstCaribbean added: “The ratio of credit loan allowances to gross loans was 0.4 percent compared with 0.6 percent at the end of 2017. Non-performing loans to gross loans declined to 5.2 percent at the end of 2018 compared to 6.8 percent at the end of 2017.”

Breaking its business down by segments, CIBC FirstCaribbean said net income generated by its retail and business banking unit jumped by one-third year-over-year, growing from $24m to $32m. Total revenues rose by the same margin, growing from $82m to $89m.

“Total revenues increased year-on-year by $7m primarily due to higher performing loan revenue, fees and commissions. Net income for the year increased year-on-year by $8 million, driven by higher revenues and lower operating expenses and credit loss expenses,” the bank said.

The Bahamian operation’s corporate and investment banking division also boasted improved margins, with net income rising 14.7 percent from $34m to $39m. This was despite revenues remaining flat at $68m.

“Total revenue remained flat year-on-year as higher loan earnings were offset by lower internal revenue and fee income,” CIBC FirstCaribbean said. “Net income increased $5m year-on-year as the flat revenue was accompanied by lower credit loss expense and allocated indirect expenses.”

CIBC FirstCaribbean’s wealth management unit generated its first profit for three years, reversing the $1m loss in 2017 into a $500,000 profit. Revenues rose by $3m to $14m.

“Total revenue increased year-on-year as a result of higher internal revenue and fees and commissions,” the bank added. “Net income increased year-on-year by $1.5m, driven by the higher total revenue, and lower operating and indirect expenses.”

Turning to the balance sheet, CIBC FirstCaribbean said: “Total assets decreased by $23m (1 percent) primarily due to higher cash and balances with banks, net of a decrease in loans and advances to customers. Total liabilities increased by $18m (1 percent) predominantly due to normal core deposit movements.

“Equity has decreased year-on-year by $41m (6 percent) due mainly to net income for the year of $85m, other comprehensive loss of $6m and dividends of $105m, and adjustment to opening retained earnings for adoption” of new accounting standards.