FCIB profits crash as credit losses spike

Bank remains confident in its ability to stand strong

REGIONAL bank First Caribbean International Bank (FCIB) suffered its worst performance in its modern history as its adjusted net profit for the financial year (FY) fell by 91 per cent to US $15.9 million ($2.3 billion) due to expected credit losses jumping by 4,316 per cent to US $160.5 million. An impairment provision of US $174.6 million related to the COVID-19 impact was made on its financial assets.

As the pandemic’s macroeconomic effects become more pronounced, regional banks have been making greater credit provisions on their loans and advances to account for the possible event of increased non-performing loans. This has been no different for FCIB which has had to substantially increase these provisions on its US$6.4 billion loan portfolio which in the prior FY only required a Us$3.6-million provision. When combined with the impairment on intangible assets, FCIB had a consolidated net loss of US $158.7 million compared to the US$150.7 million in net profit generated last year.

Total revenue also saw a 7 per cent decline to US$571.9 million due to a lessening in interest income from lowered US interest rates and a drop in non-interest income related to transaction volume. Even with a focus to cut expenses during the period, FCIB was only able to reduce expenses by 1 per cent to US$396.2 million. These results coupled with greater uncertainty saw the board of directors choose not to pay a dividend which meant that only two dividends were paid for the FY compared to the typical quarterly payments.

Despite the impact to its general financials, FCIB’S tier 1 and total capital ratios stood at 12.3 and 14.5 per cent, respectively, which was above the required regulatory standards. Total assets for the bank grew by 5 per cent to US $12.2 billion ($1.76 trillion) which was underpinned by the 18 per cent growth in securities to US $3.02 billion. However, equity attributable to shareholders fell by 20 per cent to US $979.1 million as retained earnings became a deficit of US $80.4 million and dividends rising by 25 per cent to US $128.6 million for the FY.

In spite of the unknown future for the region, Group Chief Executive Officer Colette Delaney remains confident about the bank’s ability to stand strong in the Caribbean environment.

“Our franchise remains strong and we will continue to build on the 100 years of banking experience which CIBC has in the region. As we look towards a new year with optimism, I wish to express our sincerest gratitude to our clients, employees, shareholders and directors for their ongoing support and commitment during the challenges of 2020,”she said.

The major acquisition of Canadian Imperial Bank of Commerce’s 91.73 per cent stake by the GNB Financial Group still remains under regulatory processing as the Colombian entity seeks to acquire 66.73 per cent of FCIB for US $797 million ($115.3 billion).