Smallest
In a market of diverse ownership, Citizens Bank is one of three commercial banks that have majority Guyanese ownership. Its parent company is Banks DIH, a well-known and long standing local manufacturing company. Despite a growing asset base, Citizens Bank remains the smallest of the four banks that are part of the Guyana Stock Exchange and the Lucas Stock Index with a market value of over G$11 billion and assets just above G$40 billion. Within the last two years, Citizens Bank had average annual sales of G$2.5 billion. Like the other companies in the banking sector, it has been experiencing positive growth. It grew its deposit base by about 17 percent last year, its income-generating base by about 11 percent and added another location from which to serve customers. These are all indications of an enterprise that is determined to be one of the “leading financial service providers” of the industry as expressed by the Chairman of the company in the 2013 annual report. Yet, a review of two key profitability ratios raises questions about the business strategy that CBI hopes will take it to the top of the industry.
Distinguishable
Citizens Bank can be distinguished from its competitors in two ways. In the first instance, Citizens Bank has the highest loan-to-deposit ratio. The commercial banks have been very conservative with respect to the handling of customers’ deposits. The observation has been made periodically that the banks are not lending enough. According to the Bank of Guyana, only an average of 54 percent of the deposits of customers was being lent by the banks and there was significant variation between them. The making of loans does not merely depend on banks having excess deposits on hand. It depends also on business opportunity, the soundness of the planned investment and the creditworthiness of the borrower. A limiting factor of particular concern to CBI is the “limited lending and investment opportunities” that exist in Guyana, a concern expressed by the Chairman as he pondered the growth prospects of the company. But some way in this market of limited opportunity, CBI has managed to exceed the average loan-to-deposit ratio by a wide margin. With a loan-to-deposit ratio of 75.92 percent, CBI tops all the banks listed on the Guyana Stock Exchange and is in a statistical dead heat with Scotiabank.
Determined
It would appear that CBI understands that for money to be useful it must be spent and appears determined to make the deposits that it holds work for it. It is willing to take more risk than others in an industry with excess liquidity and falling interest rates. A key reflection of this posture is the loans-to-assets ratio and the second way in which CBI distinguishes itself from its