Sep 2008 Financial News

FirstCaribbean (Jamaica) navigates challenging times

Sep 19, 2008

With the demise of unregulated financial organisations (UFOs), growing bad loan portfolios on the rise, not to mention the calamitous state of the United States' capital markets, Jamaican commercial banks are facing challenging times that will no doubt affect their bottom lines.

For the nine-month period ended July 31, 2008:

FirstCaribbean International Bank (Jamaica) reported total revenues of J$2.64 billion compared to J$2.51 billion for the corresponding period last year. Net interest income for the period under review came to J$2.24 billion, an increase of J$367 million or 19.5 per cent over the same period last year.

FirstCaribbean, with its headquarters located on Knutsford Boulevard, New Kingston, posted total assets of J$48.5 billion a jump on last year's figure of J$40.5 billion. This was due in part to an increase in loans and advances to customers which came to a little over J$32 billion, an 11 per cent increase on the prior year.

FirstCaribbean's US dollar mortgages are proving to be hits with customers and indicate that with Milton Brady at the helm, the bank is looking to be customer-centric. Another good indicator and a sign of the confidence reposed in the bank is the fact that customer deposits have jumped by over 21 per cent on last year to J$39.4 billion. While market leaders Scotiabank and NCB appear to be encountering problems with their loan portfolios, FirstCaribbean's chairman Michael Mansoor proclaims in his Chairman's Review: "We are satisfied with the quality of our loan portfolio."

The bank saw a fall in its net income after tax, recording J$636 million for the nine-month period ended July31, 2008. Last year proved slightly better, with FirstCaribbean posting J$649 million, but then there was a one-time gain of J$82 million in relation to changes in health policy benefits.

FirstCaribbean did have a spot of bother with the Group unable to claim hedge accounting for certain interest rate hedges and the related loss in this nine-month period was J$127 million. This is merely an accounting procedure and should not unduly hamper profitabilility going forward.

The jewel in the crown for FirstCaribbean continues to be corporate banking which for the period under review posted total revenues of J$2 billion, which produced a segment result of J$1.33 billion. Last year this arm of the business brought in J$1.57 in total revenues generating a segment result of J$955 million.
Retail banking experienced a slight dip in total revenues for the nine-month period ended July 31, 2008. Here total revenues came to J$1.52 billion generating a segment result of J$199.5 million.

Last year painted a rosier picture with total revenues of J$1.54 billion producing a segment result of J$265 million.Earlier this year, Debra Lopez came on board as head of the Wealth Management Division, which in effect means she will go head to head with her old boss at NCB Capital Markets, Christopher Williams.

Though a relatively new business arm, it nevertheless played its part in contributing to the total revenues of J$1.12 billion in a segment which was once classified as Premier Banking which was part of the Retail Segment. The segment result here came to J$131 million, a significant fall off from the J$247 million posted for the same period last year.

Speaking with Caribbean Business Report last night, FirstCaribbean's managing director, Milton Brady said:" This has been a year of consolidation for us, but we recorded positive growth in spite of rising interest rates. We have managed to contain costs at single-digit growth. Our loan growth was steady but not as high as in times in the past.

There has been a heavy reliance on cash transactions in Jamaica, but we have tightened up on the credit side which means we perhaps lost a little on the retail side. However, the corporate side did very well and we are pleased with that.Our credit loss numbers are pretty flat compared to last year and our non-performing loans are the lowest in the industry."This year is proving to be a tough one but we will get through it. We will be launching some exciting new products in the last quarter of this year."


Source:
Al Edwards
The Jamaica Observer
Friday September 19, 2008
http://www.jamaicaobserver.com/magazines/Business/html/20080919T0000000500_140322_OBS_FIRSTCARIBBEAN__JAMAICA__NAVIGATES_CHALLENGING_TIMES.asp