Citizens Bank Guyana Inc’s profit before tax for last year of $247.1 million was affected by its acceptance of the terms of government’s settlement for the Guyana Mining Enterprise (Guymine) US$20 million bonds.
Because of this settlement, the bank incurred a non-recurring loss of $257.9 million.
Chairman of Citizens Bank Clifford Reis said during the annual general meeting yesterday: “If adjusted for the aforementioned non-recurring loss, the bank would have recorded an increase in its profit before taxation of 28 per cent over the 2006 figure of $392.7 million.”
Profit after taxation was $263.4 million for 2007 compared to $342 million for the previous year.
The bonds had been issued in 1994 to a number of big and small creditors following restructuring of the bauxite industry. These creditors included Green Mining, Esso Standard Oil, Guybulk Shipping and Boskalis. Government had defaulted on the bonds, leaving investors livid.
A large quantity of these bonds was subsequently bought by Citizens Bank at a discount and through sub-participation agreements around 20-25 institutional investors including several pension funds held the bonds.
According to the 2007 annual report, Citizens Bank entered into an agreement with the Government of Guyana on February 27, last year, to settle the redemption of the bonds, which matured on May 17, 2006 but remained unredeemed at the time of the previous annual general meeting.
The report said the terms of the settlement were for the redemption of 90 per cent of the face value of bonds together with tax-free interest at five per cent per annum for the period January 1 2006 to January 31, 2007, all being expressed in Guyana dollars.
The report said the company received $1,011,250 in cash, of which $556,313 was disbursed to sub-participants and $454,937 was retained by the company, and a three-year debenture for $3,968,988, of which $2,183,435 was allocated to sub-participants and $1,785,553 was retained by the company. The debenture earns interest at variable rates equivalent to the average of the discount rate of the 364-day government treasury bill.
Meanwhile, Reis said yesterday that during 2007, the bank recorded “double digit” growth in loans and deposits and revenue. According to Reis, net income for the year ended September 30, 2007 was $1.1 billion, compared with the previous year’s $900 million; a 28.1 per cent increase.
The annualised return on average assets and average equity were 1.5 per cent and 13.5 per cent respectively, compared with 2.1 per cent 20 per cent in 2006. “The quality of the bank’s earning assets continues to exceptional. Non-performing assets at September 30, 2007 amounted to 5.4 per cent of our loan portfolio and compared favourably with the rest of our banking sector. The reserve for loan losses of $124.7M was 1.5 per cent of the total loans,” Reis said.
He said that the bank’s focus is to strengthen and build on existing relationships with customers and the utilisation of new technology. “Our continued investment in technology enables us real time access to valuable information on customer data and coupled with our investment in human resources we undoubtedly will continue to provide consistent quality service to our customers,” Reis said.
