-non-performing loans dropped from $725m to $580m

Demerara Bank Limited (DBL) registered an after tax profit of $818m – 10% above last year’s figure – while loans and advances jumped by 29.85% over 2008.

DBL’s annual report said the 15-year-old Guyanese bank achieved its highest profit ever and saw deposits grow by 18% from $21.2b to $24.9b.

Bank Chairman Yesu Persaud’s report said that savings bank deposits climbed by 33% from $6.6b to $8.8b. Investments appreciated from $6.8b in 2008 to $7.3b last year – an increase of 7.35% – while income from these investments rose by 2.99% from $769m to $792m.

The total dividend payout for 2009 was $0.48 – the highest ever.

Referring to the surge in advances, Persaud said that with the lack of opportunities for new investments, the main focus of the bank’s operations should be advances.

He noted that the bank’s gross credit deposit ratio remained in excess of 36% during last year while the figure in the banking system is around 28%.

“The most notable feature of our bank’s performance was the management of non-performing assets,” Persaud said, adverting to an action plan which had been worked out for the reduction of these delinquencies going back to 2003. A

s a result, gross non-performing advances have dropped to $580m from $725m in 2008.

The bank’s provision for non-performing advances is $490m.

Persaud described the advances portfolio as diversified. Housing and household consumption advances accounted for 26% followed by agriculture at 19%, services at 15%, manufacturing at 12% and mining and quarrying at 1% which amounted to 73%. There was no explanation for the remainder of advances.

The bank’s total assets moved from $25b to $29b and the return on average assets during the period was 3.02% which Persaud said was “probably the best among all commercial banks in Guyana”.

Earnings per share rose from 1.6% to 1.82% while the return on shareholders’ funds was 23%, marginally lower than 2008. The bank’s capital adequacy ratio as of September 30, 2009 was 28.36% or 3.2 times the required level.

Persaud lauded the rolling out of new information technology which allows multiple software platforms to be run on a single machine. Persaud said that DBL is in the process of reviewing the design to extend its use at existing installations.

In his report, Chief Executive Officer Pravinchandra Dave noted that the interest income on advances increased from $810m to $943m or 16.41% while the interest expense rose by 16.25% from $783m to $910m.

There was a marginal rise in net interest income from $817m to $825m. Noting that nearly 56% of its total deposits are term deposits, Dave said “We are trying to improve our deposit mix by improving our Savings and Demand Deposits and reducing our reliance on Term Deposits”.

In terms of other income, there was a decline of $42m compared to the previous year.

The exchange gain slid from $354m to $300m.

Discussing non-performing advances, Dave said that by the end of this year DBL should be able to clear the entire portfolio of non-performing assets. He added, however, “There are enormous problems affecting the recovery of our dues from delinquent borrowers through our legal system. In spite of the efforts by the government, the legal system in Guyana remains very lengthy and expensive”.

Dave revealed that 75% of a line of credit from the Inter-American Investment Corporation has been disbursed. He said the rate of interest on the advance is linked to LIBOR and the bank was currently charging less than 5%.

He said the bank is expanding its ATM network and Internet Banking Services.

The bank’s commitments under acceptances, guarantees, letters of credit have been excluded from these financial statements because they do not meet the criteria for recognition.
At September 30, 2009, this figure amounted to $2.09b. In 2008, this figure was $1.76b.

The notes to the financial statements said “in the event of a call on these commitments, the bank has equal and offsetting claims against its customers”.

Referring to the global financial crisis, Persaud said banks in Guyana were not directly impacted but Guyana suffered through lower remittances, decreased availability of financing from banks and financial institutions abroad and the line of credit available from multilateral agencies shrunk considerably.

As of 2009, the bank had 109 employees. The figure was 96 in 2008.