By Al Edwards, Business Co-ordinatorPAN CARIBBEAN Financial Services has put in a good performance for the financial year ended 2002. Net income increased by 148 per cent to $217 million, due in the main to interest rates trending downwards during the year.
Earnings per share grew from $0.38 to $0.85. Of particular significance is that return on equity increased by 27 per cent. The company's performance was reflected in its share price, which leapt 25 per cent from $4.55 to $5.70. Shareholders equity at $991 million is fast approaching the $1 billion mark. The directors have recommended that a final dividend for 2002 be declared in the amount of 9.5 cents per stock unit.
Assets grew by 15 per cent, with the total (including off balance sheet assets but excluding Trust and Custody) moving to $14.1 billion from last year's figure of $12.2 billion. Of those assets, 85 per cent comprised cash equivalents and government securities.
Pan Caribbean's lending operations experienced some contraction last year as a result of the testing business environment. In 2001, Pan Caribbean Financial Services made loans amounting to $205.3 million. Last year, that sum was considerably reduced to $136.4 million. Its loan portfolio declined from $1.36 billion to $1.26 billion. At year end, non-performing assets stood at $394 million, up from $301 million in 2001. Loss provisions were 81 per cent of non-performing assets ($321 million).
COMMERCIAL ENVIRONMENT
While there was growth in short-term working capital facilities, project finance transactions declined. According to the annual report, the overall commercial environment was weak for new loans in 2002 and most of the credit growth experienced by the banking industry were consumer or public sector related.
"The dearth of opportunities in the productive sector largely affected our development banking activities. Notwithstanding these challenges, we committed euro 3.85 million to co-finance an infrastructure project in western Jamaica, which will improve the water supply to Montego Bay and Negril," said the report.
The rise in non-performing loans has been attributed to credit to the two most fragile areas of the economy tourism and manufacturing. According to the annual report, "most of these non-performing assets have underlying collateral, principally real estate, and concentrated efforts have gone into rehabilitating the credit portfolio. We expect to see a marked improvement in our credit quality ratios in 2003. Notwithstanding our anticipated progress, conservatism in provisioning was deemed prudent."
SECURITIES PORTFOLIO
In 2002, Pan Caribbean's Capital Markets and Investment Services Division's off-balance sheet securities portfolio grew from $9.2 billion to $11.2 billion, contributing $155 million in revenues. This compares favourably to 2001's figure of $133 million. Foreign exchange commissions and translation gains contributed $79 million in 2002.
Last year saw some major changes for Pan Caribbean Financial Services. It moved its headquarters to 64 Knutsford Boulevard, New Kingston and established a trading floor. It also consolidated its fixed income and foreign exchange activities in the trading area and doubled the number of traders. FX Access was also introduced last year. This is a foreign exchange product that provides clients with the ability to buy, sell and deliver their foreign exchange requirements in any currency anywhere globally.
STRATEGIC PLAN
Speaking to Wednesday Business, President and CEO Donovan Perkins said: "We had a good year which saw profits up from $85 million to $217 million. Last year our Treasury Division generated about 70 per cent of the profits, with the other 30 per cent generated by our Corporate Banking and Trust Division. Looking at 2003 it has been tough on the treasury side and part of our strategic plan will be to diversify our revenue sources so that there is more balance between treasury and credit.
"Four or five years ago, I thought to survive you had to have $100 million as a banking institution. Two years ago, I revised that figure to $1 billion of capital. Well, we are there now and I'm thinking you have to double or triple that figure as a capital base to do all the things you have to do on the regulatory side as well as ensuring you have adequate resources to protect you in the event of a downturn in the market," said Mr. Perkins.
"I don't think we have turned our back on retail banking. Maybe somewhere down the line we will examine that avenue but at this point in time Kingston is a pretty huge market in terms of diversification. Maybe we will look at expanding our operations within Kingston but reaching out beyond Kingston is not in our immediate future," he said.
