-$170m provision had to be made for impaired Stanford, CLICO investments
Despite its net income being higher in 2009, Citizens Bank Guyana Inc saw its profit fall to $390m from 437m in 2008 because of a $170m provision for impaired investments with the collapsed Stanford and CLICO groups.
The bank’s annual report revealed that interest income rose from $1.34b to $1.4b – up by 16.5% – and the net income was $903m for 2009 compared to $814m in 2008. However, there had to be a net $170m charge against this income resulting from impaired investments in CLICO (Trinidad) and Stanford International Bank. Citizens was one of several local institutions which had investments in subsidiaries of CL Financial which had to be bailed out by the Trinidadian government last January. As a result, investments in several of CL Financial’s subsidiaries were wiped out. The Guyana Commissioner of Insurance eventually took control of CLICO (Guyana) Ltd and there is a pending application in the court for its liquidation. The CL Financial shockwave was followed by the collapse of the Stanford group and the levelling of Ponzi charges by the US again its owner Allen Stanford.
As a result of the provision for the impaired investment, profit before taxation was $542m in 2009 compared to $580.5m in the previous year. The return on average assets was 1.88 compared to 2.22 the previous year while the return on average equity was 15.12 compared to 19.54 in the previous period. The earnings per share was 6.57 in 2009 ranged against 7.36 last year.
Loans and advances for Citizens grew from $9.3b to $10.4b while total deposits fell slightly from $17.986b to $17.917b. Investments dropped from $6.5b to $5.2b. Deposit accounts rose from 28,640 to 30, 135.
Chairman Clifford Reis’s report said that the bank’s loan portfolio remained strong during the year. As of September 30, 2009 non-performing loans represented 4.3% compared to 3.8% in the previous year. Reis said this ratio compares favourably with the banking sector ratio of 9.4%.
A final dividend of $1.20 per share is recommended for consideration at its Annual General Meeting on January 19. If approved the total payout would be $71.4m.
In his report, Managing Director, Eton Chester noted that in relation to loans and advances, “significant growth” was recorded in the real estate and construction sectors which grew by 20.1% and 37% respectively. This he said “bears testimony to the bank’s continuing support of the ongoing drive to ensure Guyanese can own their own homes through mortgages at affordable rates”.
His report revealed that the bank adjusted its business model in response to market conditions and this was reflected in the constancy of deposits. “Our renewed focus on growing core deposits at the expense of volatile and rate sensitive term deposits is reflected in the growth in our savings deposits which now represents 47.9% of our deposit base compared to 38.5% in 2008 while term deposits now represent 25.4% of our total deposits compared to 37.4% in 2008”.
Chester’s report added that the effective control of non-interest expenses is a key element of the bank’s management strategy. He noted that during last year, non-interest expenses rose by 10.7% to $551.4m due to the customary inflationary increases in goods and services utilized by the bank and a hike in employee benefits. In 2009, the bank had 77 employees while in the previous year the figure was 73. Wages and salaries rose from $129m in 2008 to $149m last year.
Citizens Bank Guyana Inc was incorporated here on November 2, 1993. The substantial shareholders are Banks DIH – 51%, Continental Agency Ltd – 16.7%, Hand-in-Hand Group – 8.7% and Hand-in-Hand Pension Scheme – 7.8%.