Pan Caribbean Financial Services (PCFS) drew attention to its ninth consecutive year of growth in profits at its AGM held on Wednesday at the Sagicor Auditorium located on Knutsford Boulevard in New Kingston. For the financial year 2009 the group saw staff costs increasing while fee related activities declined.

President and CEO Donovan Perkins explained that the transfer of activities of the subsidiary Pan Caribbean Asset Management (PCAM) were discontinued and its unit trust portfolio transferred to PCFS, in order to reduce the J$1.5 million in audit fees the operations had attracted.

“We’ve actually transferred the activities from PCAM to PCFS, in doing so we’ve eliminated the cost of an annual audit. We are actually on an efficiency drive,” declared Perkins.

Net profit for the Group grew 7 per cent over the prior year to $1.478 billion even while operating expenses rose by 11 per cent partly reflecting an increase in staff costs of 4.9 per cent as permanent staff levels and annual salaries increased. Perkins said that the Group had to take on more space and maintenance charges including rent, electricity and management fees, which also contributed to the growth in expenses overall. Cash flows from operating activities declined 73.6 per cent year on year.

PCFS holds significant US dollar denominated instruments which improved yields as the FX stability took hold. Higher yields on local currency bonds during 2009 resulted in improved net interest margins of 4.51 per cent compared to the 3.71 per cent recorded in 2008.

“BOJ initiated five rate cuts in the second half of 2009, and intervened in the currency market to maintain stability and confidence. These rate cuts influenced the faster repricing of liabilities and helped to improve interest margins in the second half of 2009,” read a statement to shareholders.

Perkins also noted that steps have been taken to lower the impact of the Jamaica Debt Exchange on its operations, which included J$22.5 billion and US$ 98.8 million worth of Government of Jamaica (GOJ) debt instruments by delving further into its commercial banking activities “to attract interest-bearing accounts that enjoy more flexibility and JDIC (Jamaica Deposit Insurance Company) insurance, but carry lower funding rates”. The JDX saw the government replace its high interest domestic debt instruments with new instruments that have lower yields and longer maturities.

Perkins said that balances on both commercial and retail businesses had already started to increase following efforts at expanding its commercial banking activities.

“I get this report every month that shows me the actual number of accounts and the actual balances that are in those accounts. What we are seeing is growth in those accounts and growth in actual balances. What drives an institution is the liability side of the business, I hear people asking me about loans, but you can’t make a loan if you don’t have the funds,” he said.

Perkins said the bank has been trying to deepen relationships with both corporate and retail customers with a view to growing not just bank balances but market share.

“The challenge that we have is that in a shrinking economy, the only way to grow is to take market share,” he said. “Everybody wants to grow 10, 15, 20 per cent a year. The pie is shrinking, the institutions are still there. I think it is inevitable and what you will probably see in the next few years is more contraction and consolidation”.

Earnings per share grew seven per cent to $2.70 this year. Total dividends paid out during 2009 was $685 million, up 4 per cent over that distributed in 2008.