Oct 2008 Financial News

Pan Caribbean sees 13 per cent revenue increase, but trading income falls

Oct 22, 2008

Pan Caribbean Financial Services' (PCFS') financial results for the nine-month period ending September 2008 was one of mixed fortunes as the global financial crisis continues to take hold. PCFS reported 13 per cent growth in revenues to J$5.06 billion compared to last year's J$4.49 billion.

At the end of the third quarter, the group's net interest income grew by 17 per cent to J$1.45 billion, up from J$1.24 billion over the same period last year. However, its non-interest income declined by 14 per cent to J$587 million compared to J$679 million in 2007. Non-interest income comprises its trading activities in fixed income, foreign exchange and stocks, and includes asset management fees from its top-performing Sigma funds, as well as banking-related fees for transactions.

Speaking with the Business Observer last night Deputy CEO of PCFS Phillip Armstrong said: "The growth in our balance sheet year over year is coming from just under J$50 billion to just under J$58 billion. This was due in part to growth in our net interest income and tighter expense management.The company reported that its non-interest income was overall adversely impacted by difficult trading conditions.

President and CEO of Pan Caribbean Donovan Perkins explained that while its foreign exchange unit and equities-related activities had performed well year-to-date, they were offset by a decline in fixed income trading as a result of an unfavourable market and rising interest rates.Looking at PCFS' trading activities, its fixed income business has been a drag on this revenue strean while both FX and equities have performed above target, added Armstrong.The decision to launch commercial banking operations earlier this year saw PCFS' non-interest rise as a result of its related project-costs.

Personnel costs rose 35 per cent, influenced primarily by a 15 per cent increase in staff levels for its new commercial banking operation (PCFS employed an additional 30 persons for its commercial banking operations) and the 2008 salary adjustments reflecting the prevailing inflationary environment. The commercial bank will have its official launch in the first week in November this year and PCFS has said that it has reconciled all technology issues there. Overall, non-interest expenses increased by 27 per cent to J$852 million compared to J$670 million for the prior year.

Despite the prediction that there may be a global recession, Perkins said his company is ready to face it. "Jamaican businesses and its consumers will face some challenges. However, I think our team is well seasoned and we have experience in managing and thriving during difficult times by protecting and helping our customers," he said.The group's balance sheet grew by 16 per cent to J$57.7 billion in assets compared to J$49.8 billion at December 2007, supported by their J$1.26-billion preference share issue in the first quarter of 2008. Stockholders' equity closed the quarter at J$7.4 billion after dividends amounting to J$658 million (J$1.20 per stock unit). In addition, Pan Caribbean's securities portfolio grew by 15 per cent during the period to J$46.1 billion while loan and leases increased by three per cent to J$7.4 billion since December 2007.

Pan Caribbean is a member of the Sagicor Group and was recently rated jmA+ by CariCRIS, the regional rating agency."We are proud of the fact that during this present tough environment we have managed the group conservatively and we should come out of this unscathed. We had no exposure to the institutions mentioned in the US financial crisis and we have no financial instability issues," said Armstrong.


Source:
Al Edwards
The Jamaica Observer
Wednesday October 22, 2008
http://www.jamaicaobserver.com/magazines/Business/html/20081022T0000000500_141608_OBS_PAN_CARIBBEAN_SEES_____PER_CENT_REVENUE_INCREASE__BUT_TRADING_INCOME_FALLS_.asp