DESPITE one of the most difficult economic years in decades, Cayman National Corporation Ltd earned a profit of some $4 million in the financial year that ended 30 September.

The company’s president and CEO Stuart Dack said the results represented a good story not only for Cayman National, but for the Cayman Islands as well.

“The last year has been very, very difficult for people in financial services and, in fact, for anyone in the world in any industry,” he said. “If you’re in the banking industry and you’ve made a profit at the moment, you’ve done quite well.”

Dack explained why Cayman National Bank was able to turn a profit while so many other banks took losses in their last fiscal year.

“The reason we have come through this situation in good shape is we’re run incredibly conservatively,” he said. “We’re operated like a good old fashioned bank, for the lack of a better word.”

In addition to having conservative lending policies, Dack said Cayman National also had very conservative investment policies. The company primarily invests in cash, rather than the riskier products available.

“That has allowed us to avoid some of the pitfalls of such things as sub-prime investment vehicles and we have suffered no losses as a result of that kind of investment.”

Although Cayman National didn’t make the enormous profits that some other banks did a few years ago, it didn’t suffer the losses that most of those banks subsequently suffered as a result of their investment strategies.

“Our performance has been steady,” he said. “That’s where we come from and that’s where we will go in the future: steady and progressive growth.”

The US$4-million profit in the 2008/09 financial year is down from the $10-million profit in the 2007/08 financial year, when Cayman National had a $5.2 million windfall as a result of a specific investment, Dack said.

One big reason profits were down was that interest rates were down.

“Interest rates are at historically low levels,” Dack said. “As interest rates undoubtedly move up again, so will our profitability.”

In addition to making a profit in difficult times, there is other good news for Cayman National shareholders.

“Shares have gone up over the last two months by 50 per cent,” Dack said, adding that the price has gone from around $2.50 per share to $3.90 per share.

Dack said the majority of Cayman National shareholders are Caymanians, but that there was a good balance of foreign shareholders as well.

“People like investing in banks that are run in a good old fashioned way,” he said. “We have a good stream of dividends, which is something we want to continue.”

Another thing Dack said Cayman National is proud of is the company’s retention of employees and the number of Caymanians on staff. The bank only has one work permit holder and there are only seven work permit holders throughout the Cayman National group.

In a time when many companies in the financial services industry are laying off staff, Cayman National hasn’t had to do that.

“We had a staff meeting recently and we told everyone there would be no pay rises for the coming year, but that no one would be made redundant either,” Dack said, adding that the announcement was met with applause.

Looking toward next year, Dack said the company hopes to make some selective recruitment of new staff.

“The business is in great shape,” he said. “Business is coming in and in fact we’re busier now than at any time since I’ve been here.”

Windsor Village

One issue that Cayman National has had to deal with over the past year, both on a public relations and a cost basis, is the countersuit in relation to the Windsor Village post-Hurricane Ivan reconstruction project.

Cayman General Insurance, one of Cayman National’s former subsidiaries, was the insurer of Windsor Village. After controlling interest of Cayman General was sold to Sagicor General (Cayman) Limited, a lawsuit was filed by the insurer against several parties involved in the construction project.

That lawsuit was abandoned on the eve of trial last December, long after Cayman National had sold all of its interest in Cayman General. A countersuit against Sagicor was successful and could lead to a large damage award to the plaintiffs by counterclaim.

Dack said that as part of the contract for the sale of controlling interest of Cayman General, Cayman National agreed to give a warranty in the amount of $8 million to cover any outstanding issues relating to Hurricane Ivan claims. Some of that money has already been paid out toward other claims and the balance might have to be paid to Sagicor if the court awards the plaintiffs damages in the Windsor Village matter.

Should that happen, Dack said Cayman National had made sufficient provisions to cover the whole amount of the warranty.

He also confirmed that Cayman National did not make any other warranties with regard to liabilities when it transferred approximately 24 per cent of Cayman General’s shares to the Cayman Islands Government as part of the negotiated settlement of the latter’s Hurricane Ivan damage claims.

Dack said despite the issue, Cayman National remains “in great shape”.

“We don’t want the Windsor Village thing overshadowing what has been a good year,” he said.