“Restructuring Operations To Enhance Long Term Competitiveness For What Matters”

Market/Stock Exchange: Barbados Stock Exchange

Company: CIBC First Caribbean International Bank

2014 Rank: #6

Chairman: Michael Mansoor
(Retired as the Bank’s Executive Chairman and Chairman of the Bank’s charitable foundation at the end of Fiscal Year.)

Chief Executive Officer: Rik Parkhill

Address: Warrens, Saint Michael Barbados
Website: www.cibcfcib.com

Company Profile:
CIBC First Caribbean International Bank (FCIB)is a relationship bank offering a full range of market-leading financial services through its wholesale banking, retail & business banking and wealth management segments. CIBC/FCIB is located in seventeen (17) countries around the Caribbean, providing the banking services that matter to our customers through approximately 3,400 employees, in one hundred and two (102) branches, banking centres and offices. This bank is one of the largest regionally-listed financial services institutions in the English and Dutch speaking Caribbean, with over US$11.4 billion in assets and market capitalization of US$1.8 billion.
The face of banking is changing throughout the world and CIBC FCIB intends to lead these changes with the expertise, integrity and knowledge of banking that almost 250 years of combined experience in the Caribbean brings.

The following edited extract was taken from the company’s 2013 Annual Report to shareholders.

For the fiscal year ended October 31, 2013 the Bank generated $529.9 million in revenue and maintained strong capital levels with a Total Capital Ratio of 24%, which is well in excess of regulatory requirements. Our capital levels provide us with the strength to endure challenging times as well as to invest in the future.

Results were affected by several items of note including $37.6 million ($35.5 million after-tax) of restructuring related expenses and an increase in the collective allowance for loan losses of $25.0 million ($21.6 million after-tax). This resulted in a reported net loss for the year of $27.5 million. Excluding these items, the Bank generated $29.6 million of net income for the year compared with $71.9 million in the prior year.

During 2013 the Group approved and announced a plan to restructure its operations with the aim of enhancing its long term competitiveness through reductions in costs, duplication and complexity in the years ahead. Implementation will achieve operational efficiencies and annual savings. The plan is estimated to cost $37.6 million before taxes and has been included in operating expenses for this year.

Operating expenses increased year on year by $55 million (16%) primarily due to restructuring expenses and increased business taxes of $9 million. The costs of restructuring include severance benefits, curtailment gains and losses on retirement benefit and obligations and accelerated depreciation. The restructuring costs were the main driver of the increase to remuneration and benefits, property & equipment expenses and depreciation. The increase to business tax is caused by tax assessments and increased value added taxes on services to non-residents. Other expenses increased largely due to an increase in non-credit losses.

Further contributing to the loss this year was the increase in loan loss impairment, declining net interest income and increased other operating expenses, the collective impact of which was partially offset by increased operating income. The region continues to face significant economic challenges and this is reflected in the protracted slowdown in business activity and increased rates of loan delinquency.

The results for both periods were affected by certain significant items as follows:

2013
• $55 million increase in operating expenses which includes $37.6 million related to restructuring expenses

• $31 million increase in loan loss impairment reflecting further deterioration of collateral and updates to key assumptions

• $24 million decrease in net interest income largely due to sustained downward pressure on loan volumes and margins in key markets

• $11 million increase in operating income driven by foreign exchange and securities gains

2012
• $33 million increase in loan loss impairment due to deterioration in collateral values, new non-performing loans and updates to key assumptions/input in arriving at the allowance.

• $11 million increase in net income from the acquisition of CIBC Bank and Trust entities in Cayman and Bahamas.

• $19 million decrease in interest expenses related to lower cost of funds and interest rate swap volumes

Total revenue is down year on year by $13 million, due to lower net interest income of $24 million partially offset by increased operating income of $11 million.

Total expenses increased year over year by $86 million due to increased operating expenses of $55 million and increase loan loss impairment of $31 million.

We announced a final dividend for the year of $0.015 per share, bringing the total dividend to $0.030 for the year. Our dividend remains unchanged and reinforces our view that the future continues to be promising for our franchise and our commitment to the Caribbean region is resolute.BM
Michael Mansoor, LLD, Retired Chairman