Citizens Bank (Guyana) Inc made an after-tax profit of $152M in 2002, a 37% increase on the previous year, crowning a “very good” performance for the bank says Managing Director Alan Parris.
But the bank’s chairman, Clifford Reis, is concerned about the impact of the crime wave and political instability on the environment for investment and noted that business families are migrating to safe and stable environments.
“At the start of 2002, no one expected the year to end on such a troubling note for Guyana. In addition to the downturn in the economy which was partly a result of world events and partly because of the continued political instability in the country, the citizens’ basic need for security was shattered by a crime wave that has hit our nation, creating a state of fear and violence in which no individual or business can thrive,” Reis said to shareholders at the bank’s annual general meeting on Wednesday at the Georgetown Club.
He added that the private sector continued to express concern and uncertainty about the economic outlook for 2003, citing crime and instability as the issues most likely to impact on firms this year.
“The environment is not one which will attract sufficient investment, both domestic and foreign, of which Guyana is in dire need. Production and productivity are hampered. The unprecedented exodus of qualified and skilled staff via migration to foreign countries is having a severe impact on the operations of many companies. Some companies have closed and the owners and their families have migrated to what they consider safe and stable environment,” Reis stated.
He said Citizens Bank remained cautiously optimistic in terms of Guyana’s economic development but said the greatest risk to this was crime, political instability, the deteriorating relations between labour and the government and external and internal shocks which could undermine macroeconomic management, productive efforts and business and consumer confidence.
But whilst many businesses are registering declining profits, Citizens Bank has seen a positive outcome with after tax profits surpassing 2001 by $41M. This was in face of increased loan loss provisions of $26M, taking total provisions to $116M. This level of provisioning represented 2.6% of the bank’s loan portfolio.
The loans and advances portfolio yield declined from 16.84% in 2001 to 13.48% whilst the investment portfolio yield moved down from 13.50% to 10.71%. However, actual income associated with these portfolios increased resulting in an increase in net interest income of $462.7M, an increase of 26.9% over 2001. The bank’s other income before non-interest expenses also increased by 31.6% to reach $192M.
Citizens Bank’s loan portfolio stood at $4.5B at the end of September 30, 2002, despite the weak demand for credit, Parris said in his report to shareholders. The bank’s investments also increased by $217M as a result of foreign investments and local government bonds. Investment income accounted for 26.9% of the bank’s interest income compared with 27.5% in the previous year as a result of the lower yield.
On the other hand, non-interest expense for the bank went up by 20.5% mainly as a result of foreign exchange losses of $43.6M associated with the revaluation of the bank’s investments in Jamaican dollars.
The performance of the bank was reflected in an average return on equity of 18.42% as against 15.35% in 2001. This return is a measure of the efficiency with which banks manage shareholders’ funds.
Citizens Bank, with an asset base of $9.3B also saw its deposits increasing from $6.6B in 2001 to $8 billion in 2002, a 21.4% of increase. The bank paid an average interest rate of 4.88% on deposits, down from 5.30% the year before. Citizens Bank is the only bank in Guyana paying interest on current accounts, Parris said.