Jun 2015 Financial News
CIBC FirstCaribbean boss: We’ll be here in 100 years
Jun 22, 2015
MONTEGO BAY: CIBC FirstCaribbean “has turned the corner” in terms of its financial performance and expects to be operating in the Caribbean for the next hundred years, the bank’s outgoing chief executive Rik Parkhill told journalists on the margins of last week’s infrastructure conference, sponsored by the bank and held at the Hyatt Ziva in Montego Bay Jamaica.
Majority Canadian-owned CIBC FirstCaribbean declared a loss of US$151 million in its financial year ending October 31, 2014, after reporting an incremental loan loss expense of US$115 million and taking a goodwill impairment charge of US$116 million. (See Table 1)
| Table 1 |
| FCIB’s 5-year financial highlights (in US$ million) |
| Year |
Net Income |
Revenue |
Efficiency Ratio |
| 2010 |
$157 |
$563 |
56.3% |
| 2011 |
$74 |
$507 |
66.7% |
| 2012 |
$77 |
$543 |
63.2% |
| 2013 |
($22) |
$530 |
74.9% |
| 2014 |
($151) |
$528 |
66.3% |
Those measures reflected the bank’s revised expectations for the extent and time of the recovery in the region and the impact of those expectations on collateral values and the value of the premium over book value paid for past acquisitions.
Parkhill said the evidence that CIBC FirstCaribbean has turned the corner could be seen in the last four quarters of its financial results that have been “highly profitable” for the bank. (See Table 2)
| Table 2 |
| FCIB’s financials between April 2014 and April 2015 |
| Quarter ending |
Loan loss expenses |
Impairment |
Net (loss)/income |
| April 30,2014 |
US$139m |
US$116m |
(US$214m) |
| July 31, 2014 |
US$23.4m |
US$0m |
US$23m |
| Jan 31, 2015 |
US$15.7m |
US$0m |
US$26.6m |
| April 30,2015 |
US$11.6m |
US$0m |
US$25.6m |
“I think we have stemmed the tide in terms of turning around our non-performing loan portfolio, which is starting to decline.
“We are reporting much lower loan-loss expenses, which has been a consistent trend.
“Our operating expenses have dropped and we are now profitable in a lower-growth environment, as we have adjusted our business model.
“And our revenue is starting to pick up as well, as we are focusing on our clients in a way that we were not able to do, given some of the backdrop of problems that needed to be solved.
“I think the best days of this bank are ahead of it.”
Given the sharp reversal in the fortunes of the Caribbean operations of all three of the Canadian banks operating in the region (CIBC, Scotiabank and RBC), there has been widespread speculation, locally and international,
about whether they will stay.
Asked whether he sees CIBC FirstCaribbean remaining in the region, Parkhill said: “I know that that is a question you have asked in your newspaper columns already, Mr Wilson.
“My expectation is that just given the amount of work that has been done and the level of investment, that you are going to see CIBC in the Caribbean for a much longer period.
“They have been here for 100 years and I think that 100 years from now they will still be here.”
Third infrastructure conference
CIBC opened its first branch in the Caribbean in 1836 and currently operates 69 branches, 22 banking centres, and seven offices across 17 countries in the English and Dutchspeaking Caribbean, offering a full range of
financial services in corporate banking, retail banking, wealth management, credit cards, treasury sales and trading and investment banking.
Given the bank’s regional footprint, Parkhill said: “My observation in terms of the timing and speed of the recovery is that it is more evident in the northern tier of the Caribbean just because of the tighter linkages of those economies to the US and the quicker recovery of the US economy.
“But I also think there are signs of recovery in the southern Caribbean, particularly Barbados, which tends to be more linked to the UK and Europe, which have recovered later than the US.”
Parkhill said FCIB’s net income in Jamaica for the first six months of the year had increased because of lower loan loss expenses, lower operating expenses and higher revenue.
“There is evidence across the region, but particularly in Jamaica, that our revenue is starting to increase.
“That’s been driven by higher retail lending volumes in Jamaica.
Last week’s conference was the third consecutive infrastructure forum that the bank has held in and for the region. The first two were held in The Bahamas and at the Hyatt in Port-of-Spain.
Of CIBC FirstCaribbean’s hosting of the conferences, which focus on the Public Private Partnership concept, Parkhill said: “These meetings are designed to be a catalyst for increased infrastructure development in the
Caribbean. That’s important because it increases the productivity and efficiencies of the economies in the Caribbean. It provides employment while the infrastructure is being built and after it has been constructed whether we are talking about highways, hotel developments, cruise ports, airports or various types of utilities.”
He said it is in everyone’s interest that the region has state-of-the-art infrastructure in all areas, whether it is tourism or in infrastructure.
Parkhill said: “Investments in infrastructure can lower the cost of living for people and make people’s lives better.
“As a financial institution, we like to be involved in that business because it makes economies stronger.”
He said there are many projects in the region that have been on the drawing board for a number of years that are being dusted off “as there is some evidence that Caribbean economies have bottomed and are starting to experience a modest recovery, largely based on private sector investment.”
CIBC FirstCaribbean alone has a diversified project portfolio pipeline of over US$1 billion.
“These opportunities range from hotel developments, tourism-related projects to energy efficiency, infrastructure-related and light manufacturing projects,” said Parkhill, adding, “These opportunities are all over the region, but there is a large pipeline in Jamaica, in the Bahamas and in the Cayman Islands.
“Trinidad has been one of our healthiest markets and the Dutch Caribbean has been a growth market for us as well. It’s becoming widespread and diversified.
“The area that may be lagging is the southern tier and some of the Eastern Caribbean countries.”
He said Jamaica, T&T and the Dutch Caribbean represented growth opportunities for the bank as these were countries in which it was under-represented.
Why resign now
The resignation of the CIBC FirstCaribbean CEO was announced in a material change notice published on the T&T Stock Exchange on June 6. The notice said the bank’s board of directors had accepted Parkhill’s resignation, effective December 31, 2014 and that he would remain as CEO and leading the bank until yearend.
Asked about the timing of his resignation, Parkhill said that question would be better directed to the CIBC FirstCaribbean board and the bank’s major shareholder, CIBC, which owns a 91-per cent stake in the publicly listed company.
He added: “I think there is a tradition at CIBC FirstCaribbean that every three to four years, there is a new CEO. In September, I would have been CEO for four years. Many of the things that were problems at the bank
have been fixed and there is a time to stay and a time to move on. This is an opportune time to move on, given the backdrop of improving results.”
Source:
ANTHONY WILSON
anthony.wilson@guardian.co.tt
Sunday Business Guardian
Sunday June 21, 2015
