The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

CIBC FirstCaribbean International Bank (Bahamas) managed to cut projected lay-offs by 30 per cent through switching employees to other posts, as one-off charges forced into a record $147.8 million net loss for its 2014 financial year.

Marie Rodland-Allen, the BISX-listed institution’s managing director, writing in its newly-released annual report, said the level of redundancies was not as bad as had been expected.

“Despite initial projections, the bank was able to secure roles for 30 per cent of the affected persons by matching their skill sets and past experiences to emerging vacant roles within the organisation,” she told the bank’s Bahamian shareholders, who hold less than 5 per cent of its total equity.

CIBC FirstCaribbean last February revealed that 66 Bahamian employees would lose their jobs as a result of outsourcing/consolidating transactions processing and operations centre functions to Jamaica, where labour costs are relatively cheaper.

Based on Mrs Rodland-Allen’s comments, it appears that around 22 jobs were saved by switching impacted employees to new posts, thus reducing the total redundancies to around 44.

The CIBC FirstCaribbean managing director said the redundancies were part of an 18-24 month plan to “simplify our organisational structure and consolidate our operations”.

They followed efforts to achieve the desired headcount reduction via early retirement and voluntary separation initiatives.

As previously reported by Tribune Business, CIBC FirstCaribbean saw its net loss for the 12 months to end-October 2014 increase year-over-year more than 10-fold, from $14.2 million to $147.8 million.

This was driven by a $115 million write-down of the goodwill retained on the bank’s books from 2002 as a result of the Barclays merger, as the Canadian-owned institution moved to account for “challenging economic conditions and financial projections”.

CIBC FirstCaribbean was also forced into $75 million worth of loan loss provisioning, due largely to non-performing mortgage loans, plus reduced collateral values backing this credit and delayed economic recovery expectations.

“Excluding these items of note, the bank generated net income of $42.2 million, an improvement versus normalised net income of $38.6 million in the prior year (reported net loss of $17.9 million),” Mr Rodland-Allen said.

She added that CIBC FirstCaribbean’s Bahamian revenues were up by $8.3 million year-over-year, while its Tier 1 and Total Capital ratios, at 28 per cent and 29 per cent, were well above local regulatory requirements.

Still, the Bahamian subsidiary’s loan loss impairment expenses were up by $36.3 million or 46.9 per cent year-over-year, as specific allowances rose by $33.8 million due to lower collateral values.

“The ratio of loan loss impairment (LLE) to gross loans was 5.2 per cent, compared to 3.7 per cent at the end of 2013,” CIBC FirstCaribbean said.

“However, non-performing loans to gross loans declined to 15.6 per cent at the end of 2014 compared to 6.1 per cent at the end of 2013. The coverage ratio increased from 31.8 per cent to 56.1 per cent in 2014.”

The bank’s total equity (the part owned by its shareholders) fell by $174.4 million or 23.9 per cent to $554.265 million, due to the net loss and decision to pay $31.3 million worth of dividends to investors from its retained earnings.

Illustrating how the Bahamian capital markets fail to trade on fundamentals, CIBC FirstCaribbean’s share price on the Bahamas International Securities Exchange (BISX) closed 2014 up at $8.05 per share, compared to the previous year’s $7.25 close. And this was despite the 10-fold increase in net losses.

Other key indicators, though, moved in the right direction.

CIBC FirstCaribbean’s operating expenses, according to the annual report, fell by $9.5 million or 9 per cent, due largely to an $11.4 million drop “in salaries and benefits related to the restructuring programme commenced in 2013”.

The bank’s net interest income grew by $2.2 million (1.7 per cent) year-over-year as a result of improved margins, with lower deposit rates offset by “sustained downward pressure on loan volumes in key markets”.

And a $6 million, or 18.4 per cent, gain in ‘other operating income’ came from higher gains on securities sales and greater fee/commission income.

Breaking its business down into segments, CIBC FirstCaribbean said revenues from its retail banking business grew by $6 million or 6.9 per cent year-over-year to hit $92 million, aided by card and deposit service income increases.

Yet loan loss provisions saw its bottom line contribution fall by $26.2 million compared to 2013,.

The bank’s corporate and investment banking unit managed to grow its revenues by $3.7 million or 7.3 per cent to $54 million, and it was the one segment to increase its bottom line contribution - by $16.4 million.

CIBC FirstCaribbean’s wealth management unit enjoyed flat revenues of $7 million, while its contribution to the bottom line declined by $4 million.