IN what was already a difficult time for local commercial banks grappling with the fallout from the novel coronavirus pandemic, CIBC FirstCaribbean International Bank Jamaica posted its first known loss of $273.5 million, compared to a net profit of $598.8 million in the 2019 financial year (FY), as expected credit losses (ECL) dragged bottom lines across the sector.

The bank, which is a direct subsidiary of FCIB with its ultimate parent being Canadian Imperial Bank of Commerce (CIBC), saw its bottom line go red in what was a rare occurrence for any commercial bank in recent history. Even at the height of the 2008-2009 global financial crisis, FCIB’s net profit actually increased by two per cent to $769.7 million despite interest and similar income being flat along with ECLs rising by 253 per cent to $407.2 million.

Although ECLs are made for all loans on any bank’s books, a spike in ECLs reflects the increased risk of loans not being paid back, with ECLs reversed once the loans are paid in full.

Though net interest income increased by eight per cent to $4.77 billion with total operating income four per cent higher at $7.86 billion, a 412 per cent jump in ECL provisions to $1.42 billion from $278 million pushed net operating income 11 per cent lower to $6.43 billion. Due to operating expenses climbing by seven per cent to $6.73 billion, FCIB Jamaica ended up recording a $296.7-million loss before taxation. A taxation credit of $23.2 million resulted in the bank generating a loss per share of $0.52 versus the $1.13 in the 2019 FY.

Total assets increased by eight per cent to $120.27 billion, which was driven mainly by a sizeable increase in investment securities and loans to $13.8 billion and $74.05 billion, respectively. Cash and bank balances with the central bank declined by 17 per cent to $20 billion. Total liabilities grew by nine per cent to $108.1 billion mainly due to the 10 per cent growth in customer deposits, which totalled $104.87 billion.

Despite equity declining by only one per cent to $12.17 billion, retained earnings fell by 98 per cent to $29.9 million as the bank transferred $1.61 billion to reserves, with $196.81 million being released from the loan loss reserve to retained earnings. Reserves closed out the 2020 FY at $7.21 billion.

FCIB had a similarly difficult year as normalised net profits dropped by 91 per cent to US$15.9 million, with the US$174.6-million impairment of intangible assets pulling its net loss attributable to shareholders to US$159.1 million. Part of this large impairment originated with FCIB Bahamas, which recorded a BSD$72.75-million (US$72.77 million) impairment charge that also lead to a net loss of BSD$63.54 million (US$63.56 million). FCIB’s first quarter, which ended in January, saw the regional bank’s net profit attributable to shareholders decline by 40 per cent to US$30.1 million.

CIBC’s plan to reduce its stake in its Caribbean arm was unsuccessful as regional central banks blocked the transaction from occurring. The deal would have seen the GNB Financial Group acquire 66.73 per cent of CIBC’s stake for US$797 million. Royal Bank of Canada and Scotiabank recently completed their successful exit from some of its Caribbean holdings.

Profits Slide at Other Banks

National Commercial Bank Jamaica (NCBJ) also saw its consolidated net profit decline by 40 per cent to $15.02 billion for its 2020 FY as it disposed of its insurance portfolio from its NCB Insurance company subsidiary. NCBJ’s stand-alone net interest income grew by six per cent to $33.7 billion, while net fees and commission income declined by 15 per cent to $12.15 billion. Stand-alone net profit for the bank declined by 71 per cent to $7.14 billion as dividend income declined, ECLs spiked, and the gain on disposal from its 2019 FY was not repeated in the 2020 FY.

Scotiabank Jamaica’s stand-alone net profit declined by 49 per cent to $5.08 billion, mainly from the 121 per cent rise in ECLs to $5.8 billion and 58 per cent drop in other revenue to $1.71 billion.

Sagicor Bank’s 2020 net profit declined by 31 per cent to $2.46 billion due to the 207 per cent rise in ECLs to $1.06 billion. Total operating income grew slightly to $14.26 billion.

Although First Global Bank’s (FGB) stand-alone 2020 audited financials aren’t available as yet, GK’s banking and investments arm saw a nine per cent decline in profit before taxation (PBT) to $815.5 million. FGB produced a PBT of $666.1 million for its 2019 FY while the segment delivered a PBT of $898.1 million.

At JMMB Bank, despite results not being disaggregated from the overall JMMB Group Limited (JMMBGL), the banking and related services arm saw PBT decline by 13 per cent to $1.16 billion. JMMB Bank got a $1.2-billion capital injection from JMMBGL in January 2020.

Meanwhile, JN Bank and Citibank’s audited financials for their 2021 and 2020 FYs weren’t immediately available.