CITIZENS Bank Guyana on Tuesday held its 22nd Annual General Meeting where it was revealed that the company recorded an after-tax profit of $500M for 2016, a reduction of over $400M when compared to 2015.

The announcement was made by Chairman of the Board of Directors, Clifford Reis, who said

that the financial institution’s profit before tax was $800M, and $500M after tax. This is compared to an after-tax profit of $906M and $989M in 2015 and 2014 respectively.
On the other hand, the bank increased its total assets from $43B to $50B in 2016.

According to Reis, the bank’s poor performance last year is merely a reflection of a “slowdown in the economy” due to underperformance in many of the major productive sectors, with many burrowers encountering difficulties in meeting their obligations to financial institutions with a resultant increase in non-performing assets.

He said that while the bank’s loan portfolio remains relatively sound, difficulties experienced by its customers because of a decline in business activities during the review period has impacted the overall performance of its portfolio. The financial audit was done by Jack A. Alli, Sons and Co.
Reis revealed than in-performing loans at September 30, 2016 represented 15.5 per cent of the bank’s total loan portfolio compared to 10.5 per cent in 2015.

MAJOR CONTRIBUTORS
The major contributors to this level of non-performing loans were said to be borrowers within the forestry and housing, and construction sub-sectors.
The Bank of Guyana, in its half-year report last year, also stated that there were production declines in forestry and manufacturing value-added products as well as lesser activities in the wholesale & retail trade and construction industries. These sub-sectors were said to have recorded negative growth, which was largely attributable to low commodity prices, severe weather and fragile market conditions.

However, the bank’s report highlights that while Guyana’s economy is expected to grow some 3.8% in 2017, key sectors such as mining and construction will show improvement due to increased output and renewed government focus, with increased spending on infrastructure projects.
The Chairman also disclosed that during the year, total revenue amounted to $3.3B, with growth recorded for investments, deposits and total assets of 116%, 21% and 16% respectively. The return on average assets was 1%, while the return on shareholders’ equity was 6.5%.

But the weight reducing this bank’s profitability was said to have been doing the same to other local banks. The experience is also one being shared globally, with the European Banks recording similar trends.
According to the European Central Bank, reduction in profits in 2016 were blamed on prolonged period of low interest rates and the legacy assets on banks’ balance sheets; and sluggish economic growth, tougher competition and structural changes such as digitalisation.

A DIFFERENT ENVIRONMENT
The central bank writes in its report that Banks have to accept that they are now operating in a different environment, and that further structural changes are ahead. They said that to preserve their profitability and take advantage of the change, banks must adjust today, not tomorrow.

And according to Reis, that is exactly what Citizens Bank will be doing.
“Our success in the future will require us to be creative, and to make appropriate initiatives which address those components of our operation that we anticipate will ensure sustainability,” he told shareholders.

The Chairman said that risk management remains critical to achieving sustainable results, thus the bank intends to place greater emphasis on measures that will improve and strengthen its assessment and management of risk. He added that improved operational efficiencies and customer care remain key to their competing within the sector.

Reis also told shareholders that Citizens Bank will continue in its effort to improve its Human Resources Management capability to ensure that its most valuable assets, its employees, remain motivated and well equipped to meet the ever changing requirements of the bank’s clients.

Just last week, the bank opened its new corporate headquarters and main office at a cost of $2.5B. The state-of-the-art facility is located at lot 231-233 Camp Street and South Road.