Bahamas - FirstCaribbean International Bank

Our first year of ownership by CIBC has produced another extremely strong
year’s performance with profits crossing the $200 million threshold for the
first time. Net Income After Tax (NIAT) and minority interest at US$255.7
million was a 60.7% increase over our 2006 result. A one-off gain on the
restructuring of VISA contributed $52.4 million to this total. Nevertheless,
excluding this one-off gain, underlying NIAT of $203.3 million still
represented a strong 28% gain on 2006’s results. Given the dislocation in
world credit markets as the sub-prime crisis broke, I view this as an especially
robust year’s result.
Group Financial Performance
Profit growth was again driven by loan growth, combined with tight control
of costs and risk. Loan balances increased by 8% and passed the $6 billion
mark for the first time. Fee and commission income growth was also strong
at 10%.
Deposit balances increased by 1%. Our Bahamas, Jamaica and Trinidad
businesses have all suffered from tight liquidity in local currency in 2007
and wholesale funding was launched successfully in all three jurisdictions
during the year. Growing our deposit balances to match lending growth
remains a focus. Costs were tightly controlled, rising only 2%. Changes in
our policy on health benefits, in particular retirement health benefits, made
a significant contribution with the IAS 19 release of US$18.1 million to
the P&L. This was offset by a change in accounting policy on software
depreciation, increasing depreciation cost by $6.4 million.
Cost Income ratio (excluding the VISA gain) as a result was 54.4%, and is
now within sight of our objective of 50%. The “jaws” between Revenue
growth and Costs growth remains a key focus and was again in positive
territory at 10% excluding the VISA gain.
Provisions for credit losses picked up to $17.0 million (2006 - $10.3
million) 28bps of Loan book (2006 – 18bps). The increase reflects a
worsening economic environment but generally our loan book remains
very conservatively positioned. With the above, Earnings per Share (EPS)
improved by 28% excluding the VISA gain (24% in 2006).
Business Units and Strategy
Eleven of the 12 SBUs had record years. The exception this year was Retail
where rising deposit costs in Barbados and The Bahamas, coupled with
competitive conditions restraining loan pricing, led to a squeeze on margins.
These pressures are alleviating and we expect Retail to return to profitable
growth in 2008. The Group is currently renewing its five-year strategy and
we are thinking deeply and widely about “where next” for our businesses.
Control
2007 has been a very major year for our Control agenda. We have switched
over to the CIBC Governance structure, with control being operated primarily
through the revised Board. The switchover has been smooth.
CIBC ownership also brought the need to comply with the provisions of
“SOX”, and significant and successful effort was focused on delivering
compliance by the year end. I believe that the rigour and discipline of ”SOX”
has further benefited our control processes and will do so going forward.
Similarly, our new parent brought a transition of Auditors with a successful
transition to Ernst & Young.
More generally we have continued to upgrade our control processes with
major investments in Internal Audit, Compliance, Market Risk and Operational
Risk during the year. As the economic environment turns downward we
expect these investments to pay particular dividends.
Customer
We challenged ourselves and our customers in 2007 with three major IT
platform conversions for our Cards business, our Treasury business and our
Wealth business. The inevitable disruption did impact customer service and I
thank our customers for their understanding, and indeed our staff for bravely
voyaging into new territory. The Helpful Partner Programme has delivered a
set of universal standards for how we serve our customers. Our focus is now
on embedding this new culture.
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