CIBC FirstCaribbean expanding

CIBC FirstCaribbean expanding

Bank to spend US$2m on branches in MoBay, Santa Cruz

BY STEVEN JACKSON Business reporter

Tuesday, December 23, 2014

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CIBC FirstCaribbean Jamaica will spend upwards of US$2 million ($228 million) to build two new branches in Fairview in Montego Bay, and Santa Cruz in St Elizabeth, according to chief executive Rik Parkhill.

That development, he told the Jamaica Observer in an interview last week, would increase the bank's branch network to 15 when opened by summer 2015. The bank will also set up its wealth management arm in Jamaica, which follows steps taken recently in the Cayman Islands and The Bahamas. The new initiatives are aimed at expanding CIBC's retail and corporate customer base.

"I don't think I want to publicly announce all of our plans, but yes, you will see an expansion of the branch network in Jamaica. We are building a new branch in Montego Bay in Fairview and there are a number of other branch initiatives that are under way at around the same time," Parkhill said at the CIBC FirstCaribbean Jamaica head office in New Kingston.

Jamaica contributes 9.0 per cent of retail banking revenue for the group with The Bahamas contributing half, Barbados at 23 per cent, and Cayman at 17 per cent, according to CIBC's 2014 financial report.

CIBC FirstCaribbean, headquartered in Barbados, operates in 17 countries throughout the region.

Recently its competitor, Scotiabank, noted strong customer traffic flows at its $1 billion flagship branch in Fairview, which opened last month. A number of top businesses are relocating to what is now termed 'New MoBay', a planned section of Montego Bay that bypasses the decay of the old city. It's connected by a 40-kilometre highway linking modern facilities from Rosehall to Bogue.

CIBC FirstCaribbean has the fourth largest bank branch network in Jamaica after the enlarged Sagicor Bank, National Commercial Bank and Bank of Nova Scotia.

"We are not going to be a mass market bank like NCB or Scotia," he said, adding that CIBC's core customers include pan-regional companies and retail customers in the middle- and upper-income brackets.

"We actually don't think we have a large enough branch network right now. We are looking at various ways, whether it's partnerships with merchants or smaller bank branches, and expansion of our ATM network to make it easier for retail customers to bank with us," Parkhill said.

CIBC FirstCaribbean Jamaica will also start offering more portfolio management and investment services within its bank network. Jamaica contributes some 2.0 per cent of wealth management revenues for the group, with Cayman contributing half, Bahamas at 31 per cent and Barbados at 14 per cent, according to its 2014 financial report.

"The wealth management business is becoming increasingly important to us. We opened up our first two wealth management operations in Cayman and The Bahamas and there is a plan to bring those types of services to Jamaica as well," he said. "We do provide financial services in Jamaica, but it's not a formal stand-alone operation that would offer complex credit [and] discretionary portfolio management and investment services."

The Business Observer sought further clarity on whether the bank would set up a stand-alone office for wealth management.

"When I say stand-alone it would be a separate division of the bank, but everything is integrated," he said. "You will see cross-selling between what ...the platinum banking people and what our retail group do and our wealth management operation. So the whole idea is that we want to be your bank across all different product groups but also look at your business in its totality. We can offer better prices when we look at the customer that way and also add value over time."

The local developments come within the context of the Caribbean group posting a loss of US$151 million for its year ending October 2014. It's based largely on retail non-performing mortgages in The Bahamas and the bank's steps to limit its future impact.

As such, the bank made an impairment of US$206 million, its highest in at least five years, in addition to a one-off US$116 million loss of intangible assets. The Jamaica operations, however, are profitable and year-end results will be released later this month, Parkhill indicated.

"A large percentage of the incremental provision of the loan losses were done as a result of deterioration of residential mortgage portfolio in The Bahamas. More than 50 per cent of the non-performing residential mortgages are in The Bahamas," Parkhill explained, adding that the fourth quarter, when looked at alone, shows profit as the loan losses were put on the books in the second quarter. "But the Bahamas operations are now showing profit."

Parkhill remains cautiously optimistic about the prospects for growth in the region.

"There is evidence that private investment throughout the Caribbean is starting to experience a modest uptick; the big question would be the magnitude of the recovery and whether the governments trying to balance the books will create headwind in the restructuring activities," he said.

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