Mon | Jul 13, 2020

FirstCaribbean reports big loss due to COVID

Published:Wednesday | June 3, 2020 | 12:05 AM
A branch of CIBC FirstCaribbean International Bank in Kingston, Jamaica.
A branch of CIBC FirstCaribbean International Bank in Kingston, Jamaica.

CIBC FirstCaribbean International Bank, which operates in Jamaica and throughout the region, recorded a net loss of US$110 million for the April second quarter, due to the impact of COVID-19 on its operations.

It’s the first big bank with Canadian connections to post a net loss. Scotiabank Caribbean made a profit of CDN$46 million for the quarter down, from CDN$171 million a year earlier; and RBC Bank also recorded a profit for its Caribbean segment, which also included its US operations.

“The quarter’s financial results were negatively affected by items of note, including US$100 million of provision for credit losses, a non-cash goodwill impairment charge of US $51 million and income tax credits of US$7.6 million,” FirstCaribbean CEO Colette Delaney said in a statement released with the financial report.

The bank explained that the incremental provision for credit losses and the reduction in the carrying value of goodwill reflected its revised forward-looking views for probability of defaults and losses, and given macroeconomic forecasts driven by the extent and timing of the anticipated impact from COVID-19

CIBC FirstCaribbean describes itself as the largest chain of banks in the anglophone and Dutch-speaking Caribbean, with more than US$1.1 billion in equity and US$11.9 billion in total assets up to April 2020.

The regional banking group had signalled to the market in its first quarter ending January that COVID-19 was affecting its operations, but as the virus subsequently began to spread in the Caribbean, conditions worsened for the bank in the second quarter.

“Since reporting our first-quarter results in March 2020, the COVID-19 pandemic has dramatically changed the outlook for the global economy and for the economies in the territories where our bank operates,” FirstCaribbean said. “Against this backdrop, the bank reported a net loss of US$110 million for the quarter ended April 30, 2020 as compared to net income of US$51 million for the same period in the prior year.”

The International Monetary Fund, in its April published World Economic Outlook, projected a 3.0 per cent contraction in global output this year, measured as gross domestic product or GDP. FirstCaribbean, however, indicated that the majority of the markets it serves in the region are predicting GDP declines that range from negative 4.5 per cent to 13.7 per cent.

“The bank’s performance was adversely affected by lower revenues due to significant declines in US interest rates and reduced transaction related non-interest income,” FirstCaribbean said.

The bank, which operates 57 branches, 22 banking centres and seven offices in 16 regional markets, is majority owned by Canadian Imperial Bank of Commerce, CIBC. Last year, CIBC struck a deal to sell two-thirds of FirstCaribbean to the The Gilinski Group, which is controlled by Colombian/UK businessman Jaime Gilinski.

The deal worth US$787 million is expected to close this year. Following the close of the transaction, GNB Financial Group will hold 66.73 per cent of FirstCaribbean, and CIBC 24.9 per cent.

The bank suffered losses in the region throughout the last decade due to bad loans, but had regained profitability in recent years. FirstCaribbean offers corporate banking, retail banking, wealth management, credit cards, treasury sales and trading, and investment banking services.

steven.jackson@gleanerjm.com