Bahamas - FirstCaribbean International Bank

Management’s Discussion and Analysis
Of Operating Results and Financial Condition for the Fiscal Year Ended October 31, 2007
Other Operating Income
Other operating income consists of all revenues not classified as interest income.
Revenues in this category increased $14.3 million, or 80% over the previous
year. Driving the improved result was the significant improvement in financial
performance of interest rate instruments. The losses for the current year were
$5.5 million, compared to $13.7 million recorded for the previous year. Similarly,
gains from investment securities were $4.5 million in fiscal 2007 compared to a
loss of $0.180 million in the prior year. The improvement in operating income
reflects a change in the Bank’s strategy to shift from interest-bearing assets to
other types of investments such as mutual funds (outsourced portfolios), where
financial performance is reflected in other operating income as opposed to NII.
This shift in strategy explains the uneven rate of change in interest expenses
relative to that of total interest income.
Gains on foreign exchange transactions were $13.0 million, versus $13.2 million
in the previous year.
Operating Expenses
Operating expenses for this fiscal year were $57.1 million, a decrease of $8.8
million, or 13%, from the previous year. The primary drivers were staff costs,
occupancy and maintenance and other operating expenses. Staff costs had a net
decrease of $8.3 million from the prior year, due mainly to a significant reduction
in “other post retirement benefits”. The company realised an $8.7 million
curtailment gain that had the effect of reducing the overall benefit costs. This
gain was offset by higher pension costs mandated by International Accounting
Standard (IAS) 19—Pension Accruals.
Occupancy and maintenance expenses increased $1.3 million over last year.
Operating Expenses
($ thousands)
Revenues, Net Interest Income and Net Income
($ thousands)
The Bank’s efficiency ratio is the ratio of operating expenses to total revenues. This
statistic improved from 38.3% in fiscal 2006 to 31.8% in fiscal 2007. Excluding
the impact of the one-off curtailment gain, the efficiency ratio was 36.7%, still
exhibiting an improvement over the previous fiscal year.
2004 2005 2006 2007
Total Revenue Net Interest Income Net Income
Efficiency Ratio 48.6% 37.7% 38.3% 31.8%
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