AFTER recording its first net loss of $273.51 million in the 2020 financial year (FY), FirstCaribbean International Bank (FCIB) Jamaica Limited saw a rebound in its 2021 financial year as it recorded a net profit of $475.85 million.
FCIB Jamaica, like its parent FCIB, was impacted by larger than normal expected credit loss (ECL) provisions in 2020 due to the advent of COVID-19 and its resulting deterioration of economic activity in the region. Although it has decreased from $1.42 billion to $500.05 million, the provisions are still elevated from a historical five-year perspective which usually had reversals or expenses below $200 million.
When questioned about the size of the ECL's, Nigel Holness, managing director of FCIB Jamaica, explained that this was due to the weighting of economic outlook in the models done for the provisions.
“Using the Expected Credit Loss Model in accordance with International Financial Reporting Standards, economic outlook is one of the many inputs used in the calculation of expected credit losses on financial assets. While the economic outlook for Jamaica has improved since 2020 at the onset of the pandemic, the outlook is still below pre-pandemic levels. Additionally, certain sectors such as tourism and tourism-related activities were more adversely impacted by the pandemic than others,” said Holness. Holness has led FCIB Jamaica since October 2010.
Although its gross loan book has grown by seven per cent to $81.43 billion, the net loan and advances stand at $78.72 billion due to the reduction in personal loans and uptick in business and government loans. Most of the increase in business and government loans went to electricity, gas and water firms with other industries seeing a decline in disbursements or marginal uptick.
Due to this slowdown in loan growth, FCIB Jamaica's interest income remained flat at $5.86 billion. However, net interest income improved by three per cent to $4.93 billion arising from the reduction in interest expense to $930.95 million.
“The YoY increase in net interest income was driven by changes in market interest rates which saw net reductions in both interest paid on liabilities and interest earned on assets. This among a few other items factored in the reduction in the 2021 Interest Expense,” Holness added on the bank's net interest income.
Other operating income saw a 14 per cent rise to $3.50 billion which was largely influenced by the 464 per cent rise in other income to $788.70 million. This was due to the $655.45 million (US$4.43 million) gain on an early settlement of deposit liabilities with the National Housing Trust which resulted in a derecognition of $2.46 billion (US$16.49 million) in deposits payable at a fixed date. As a result, total operating income grew by seven per cent to $8.44 billion.
Operating expenses for the bank increased by four per cent to $7.01 billion due to the seven per cent rise in other expenses to $4.63 billion. Holness attributed this substantial rise to the bank's higher service costs from implementation of more technology such as ATM's and risk services.
“The bank's digital transformation strategy will continue into 2022 and as technology evolves, we endeavour to deliver convenient, quality, reliable and safe services to our clients. The bank's ongoing strategy is to continue to provide personalised, responsive and easy service to our customers at competitive rates, with a deliberate focus of remaining agile, continuing to be innovative and bringing value to all stakeholders,” stated Holness.
FCIB Jamaica recorded a profit before taxation of $923.40 million compared to a loss of $296.67 million in the prior year. Earnings per share (EPS) came up to $0.90 versus the loss per share of $0.52. This is far from the record $1.23 billion and $1.65 in EPS recorded in the 2018 FY.
Total assets improved by 19 per cent to $142.78 billion due to the growth in cash and bank balances with the central bank to $29.08 billion and $21.57 billion in due from other banks balance. Total liabilities rose by 20 per cent to $130.10 billon with customer deposits standing at $127.05 billion. Equity closed the period slightly higher at $12.68 billion.
With the Bank of Jamaica moving its policy rate from 0.50 to 2.50 per cent in the last quarter, Holness remains adamant that the bank will adapt to remain competitive.
“Markets do change, and to remain consistent with our core values, we will continue to innovate and ensure we deliver greater value to our clients and in so doing generate a reasonable return to our stakeholders. FCIB will continue to offer competitive pricing; taking into consideration prevailing market interest rates, while ensuring that we unlock value for our loyal customers.”
“The bank is not a static organisation, and change is constant. What we are proud of are the opportunities we create for our employees that allow them to grow within or outside the organisation. We consistently examine our service fees and charges to ensure they are aligned with the market and our core values, which includes alternative solutions that provide greater choice for our clients, enabling them to make informed decisions on how they conduct their banking activities. We will continue to remain transparent and personalise our banking services to meet each of our clients' needs through every interaction ie digital or face to face,” Holness closed.