PanCaribbean Profits Grow, But So Does Its Non-Performing Loans

IN A banking environment where debt defaults have been spiralling, PanCaribbean Financial Services says said it will be focusing on maintaining the quality of its portfolio as its non-performing loans climbs.

In its just-released first-quarter results for the period ending March 2011, the group, which includes a commercial banking subsidiary, reported that loans accounted for J$8.7 billion, or about 11 per cent of assets, which stood at J$76 billion.

PanCaribbean's loan portfolio has shed J$1.8 billion of value since December when it was valued at J$9.48 billion.

The company also reported that at the end of the March quarter, a deterioration was reflected in its non-performing loans, with the ratio increasing to 4.7 per cent compared to 3.9 per cent at the end of December.

"We are keeping a watchful eye on the portfolio and taking the necessary measures to contain and improve the situation," said Donovan Perkins, president and chief executive officer of PanCaribbean, in a company statement.

"We want to restore our asset quality ratio to its target level of three per cent or less, in this operating environment." he said.

The investment company, however, pointed out that its position was better than the industry average, which it said was 6.5 per cent.

Its non-performing loans and leases were reported at J$407 million at the end of the quarter.

While no details were provided about the strategies to contain loan losses, a provision of J$5.2 million has been set aside in the company's accounts.

No provision for credit losses were made in the corresponding period last year.

PanCaribbean's net profits showed robust growth, increasing by 27 per cent to J$503 million in the quarter, or 92 cents per share, compared to J$397 million, or 72 cents per share, for the same period last year.

The stronger bottom line flowed from gains in revenue. Net interest income increased by nine per cent to J$756 million, up from J$692 million in the first quarter of 2010, while non-interest income grew by 62 per cent to J$304 million, as fixed-income trading, asset-management fees and foreign-exchange activities reflected improved results.

Operating income rose 21 per cent overall, PanCaribbean said, more than enough to cover the eight per cent increase in expenses.

The group spent more on salaries, saying 'team member' costs rose 10 per cent to J$242 million because of salary adjustments, while rental costs rose eight per cent to J$23 million.

The group closed the quarter with improved capital of J$11.2 billion from J$10.6 billion in December, resulting in a capital to assets ratio of 14.7 per cent.

PanCaribbean said J$407 million of the J$600 million of improved value was "directly related to the rally in GOJ, US dollar, and Jamaican dollar-denominated bond prices", reflected in its fair value reserves.

PanCaribbean's stock last traded at J$21, placing the company's stock market value at J$20.9 billion.