Bad loans hurting bank's profits

The bad loans monetary authorities have been concerned about for several months now have hit a local commercial bank where it hurts — the bottom line.

FirstCaribbean International Bank Limited, which has its headquarters in Barbados, is blaming “higher loan loss expenses” for the $46.4 million profits drop it suffered during the nine month period that ended last month.

In consolidated financial statements released yesterday, Chairman Michael Mansoor said the financial institution’s net income over the past nine months was $95.2 million, down from $141.6 million in the same period last year. With customers evidently finding it hard to repay their loans, the official revealed that loan loss expenses over the most recent period of financial statements were a worrying $89 million.

“Loan loss expenses, which are the main contributor to the year over year decline, increased by US$44.5 million and are continuing to have a significant adverse effect on our results, reflecting the stressed economic environment in our region,” Mansoor said. “The bank continues to work closely with clients to seek solutions in the best interest of all parties involved.”

The problem of non-performing loans was raised in an updated financial stability report released this month by the Central Bank of Barbados, in partnership with the Financial Service Commission.

It showed that beyond a $4 million impairment of the outstanding amount on two tourism loans, the ration of non-performing loans to total loans of commercial banks increased from 6.8 per cent to 8.3 per cent between September 2011 and March 2012.

“Hotels, restaurants, construction firms and households together accounted for 86 per cent of the increase in non-performing loans,” the report said. With regards to other aspects of the organisation’s performance, the official noted that the bank’s operating expenses increased by $16 million, compared to 2011 and was driven mainly by corporate acquisitions.

“Revenues were up year on year by US$17.8 million due to increases in net interest income and operating income of US$12.9 million and US$4.9 million respectively,” he noted.

“The increase in net interest income was driven mainly by lower deposit rates, while the increase in operating income was primarily due to the acquisitions in September 2011 of CIBC Bank and Trust Company (Cayman) limited and CIBC Trust Company (Bahamas) LImited.”

Mansoor also said FCIB’s taxation expenses were $20 million less “due to lower earnings in taxable jurisdictions”. (SC)

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