TIDMCIHL
RNS Number : 2168A
Caribbean Investment Holdings Ltd
28 September 2020
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
CARIBBEAN INVESTMENT HOLDINGS LIMITED ANNOUNCES FINANCIAL
RESULTS FOR THE FISCAL YEARED MARCH 31, 2020
Road Town, Tortola, British Virgin Islands, 28 September 2020 --
Caribbean Investment Holdings Limited (London - AIM: CIHL; Bermuda
- CIHL) (the "Company" or "CIHL").
The Company and its subsidiaries (the "Group") produced a net
income before tax of $13.5 million in fiscal 2020 which represents
an 8% decrease from prior year's results due largely to an $11.2
million increase in credit impairment charges reflecting
management's estimation of an increase in credit losses as a result
of the adverse impact of the COVID-19 pandemic on the global
economy. This impairment charge was offset by a non-recurring item
of $7.2 million being the reversal of a provision that was
established for share options issued in 2008 but which expired in
August 2019.
While interest income decreased by 2%, the Group realized cost
savings from a reduction in interest costs and lowering of its
non-interest expenses. Operating losses from the Corporate segment
were reduced from $3.2 million to $2.3 million also as a result of
cost savings measures taken.
Net income per share for the year amounted to $0.09 in fiscal
2020 which represented an 18% decrease from fiscal 2019's earnings
per share of $0.11.
The Company's balance sheet remains strong with shareholders'
equity of $92.5 million at 31 March 2020 compared with $90.1
million last year.
On 22 June 2020, the Company announced its entry into an
agreement with The Bank of Nova Scotia and its regional subsidiary,
Scotiabank Caribbean Holdings Limited, to purchase 100% of the
issued share capital of its Belizean subsidiary Scotiabank (Belize)
Limited ("SBL"). The acquisition is subject to regulatory approval
and is expected to be completed before the end of fiscal 2021.
With the ongoing COVID-19 pandemic causing significant
uncertainty within global banking markets including the Caribbean
and Belize, the Company's Board has decided not to a pay a final
dividend for the year ended 31 March 2020. The Board will review
its dividend policy for the current fiscal year once banking
markets have returned to a more stable state.
The Company confirms that the annual report and accounts are now
available to view on the Company's website, www.cihltd.co and will
be posted to shareholders.
For further information contact:
Caribbean Investment Holdings Limited
UK +44 (0)207 248 6700
Belize +501 227 7178
Cenkos Securities plc
Nicholas Wells +44 (0)207 397 8920
Note: This and other press releases are available at the
Company's web site: http://www.cihltd.co.
Background Information
Caribbean Investment Holdings Limited ("CIHL") is a parent
holding company with no independent business operations or assets
other than its investments in its subsidiaries, intercompany
balances and holdings of cash and cash equivalents. CIHL's
businesses are conducted through its subsidiaries. The Belize Bank
Limited ("BBL") is incorporated and based in Belize and focuses on
the provision of financial services and lending to domestic
clients. Belize Bank International Limited is incorporated and
based in Belize and focuses on the provision of financial services
and lending to international clients. CIHL also owns an
international corporate services business based in Belize, which
operates as Belize Corporate Services Limited. Within Belize, BBL
is a full service commercial and retail banking operation with a
head office in Belize City and eleven branches extended into each
of the six districts of Belize. The principal operations of BBL are
commercial lending, consumer lending, deposit taking and related
banking activities.
Consolidated statement of comprehensive income
Expressed in millions of US dollars except where otherwise
stated
2020 2019
Year ended 31 March Notes $m $m
------------------------------------------------------------ ------ --------- ----------
Financial Services
Interest income 6 32.8 33.6
Interest expense 7 (4.9) (5.5)
------------------------------------------------------------ ------ --------- ----------
Net interest income 27.9 28.1
Credit impairment (charges) release (10.9) 0.3
------------------------------------------------------------ ------ --------- ----------
Net interest income after allowance for loan losses 17.0 28.4
Non-interest income 8 8.6 8.5
Non-interest expense 9 (17.0) (19.0)
------------------------------------------------------------ ------ --------- ----------
Operating income - Financial Services 8.6 17.9
------------------------------------------------------------ ------ --------- ----------
Corporate
Corporate income 1.0 1.1
Corporate expenses (3.3) (4.3)
------------------------------------------------------------ ------ --------- ----------
Operating loss - Corporate (2.3) (3.2)
------------------------------------------------------------ ------ --------- ----------
Net income before tax and non-recurring item 6.3 14.7
Reversal of share option provision 20 7.2 -
------------------------------------------------------------ ------ --------- ----------
Net income before tax and before other comprehensive income 13.5 14.7
Taxation 22 (4.1) (4.0)
------------------------------------------------------------ ------ --------- ----------
Net income after tax and before other comprehensive income 9.4 10.7
Other comprehensive income:
Net gain on financial assets at FVOCI - 0.1
------------------------------------------------------------ ------ --------- ----------
Total comprehensive income 9.4 10.8
Earnings per ordinary share (basic and diluted) 10 $ 0.09 $ 0.11
------------------------------------------------------------ ------ --------- ----------
See accompanying notes which are an integral part of these
consolidated financial statements.
Consolidated statement of changes in shareholders' equity
Expressed in millions of US dollars except where otherwise
stated
Additional
Share paid-in Treasury Statutory Retained
capital capital shares reserve earnings Total
$m $m $m $m $m $m
---------------------------------- --------- --------------- ------------- ------------- ------------ ----------
As at 01 April 2018 as previously
reported 0.5 52.8 (21.7) 7.0 36.9 75.5
Net impact of adopting IFRS 9 - - - - 3.8 3.8
---------------------------------- --------- --------------- ------------- ------------- ------------ ----------
Restated opening balance under
IFRS 9 0.5 52.8 (21.7) 7.0 40.7 79.3
Accumulated other comprehensive
income - - - - 0.1 0.1
Net income - - - - 10.7 10.7
---------------------------------- --------- --------------- ------------- ------------- ------------ ----------
As at 31 March 2019 0.5 52.8 (21.7) 7.0 51.5 90.1
Accumulated other comprehensive
income - - - - - -
Dividends - - - - (7.0) (7.0)
Transfer to statutory reserve - - - 0.3 (0.3) -
Net income - - - - 9.4 9.4
---------------------------------- --------- --------------- ------------- ------------- ------------ ----------
As at 31 March 2020 0.5 52.8 (21.7) 7.3 53.6 92.5
---------------------------------- --------- --------------- ------------- ------------- ------------ ----------
At 31 March 2020, The Belize Bank Limited maintained a
non-distributable statutory reserve of $7.0 million (31 March 2019
- $7.0 million). At 31 March 2020, Belize Bank International
limited maintained a non-distributable statutory reserve of $0.3
million (31 March 2019 - nil).
See accompanying notes which are an integral part of these
consolidated financial statements.
Consolidated statement of financial position
Expressed in millions of US dollars except where otherwise
stated
2020 2019
At March 31 Notes $m $m
-------------------------------------------------- ------ ------------------ ------------------
Assets
Financial Services
Cash and cash equivalents 11 12.9 11.3
Balances with the Central Bank of Belize 12 46.4 43.0
Due from banks (net of allowances) 13 34.9 43.9
Investment securities 14 119.8 132.9
Loans to customers (net of allowances) 15 233.7 236.9
Property, plant and equipment 16 18.4 19.4
Due from Government of Belize (net of allowance) 17 39.5 41.2
Other assets 2.9 6.7
Total Financial Services assets 508.5 535.3
-------------------------------------------------- ------ ------------------ ------------------
Corporate
Cash, cash equivalents, and due from banks 0.5 1.4
Other current assets 0.3 0.3
Total assets 509.3 537.0
-------------------------------------------------- ------ ------------------ ------------------
Liabilities and shareholders' equity
Financial Services
Customer accounts 18 408.9 430.4
Lease liability 0.3 -
Other liabilities 7.1 8.2
Total Financial Services liabilities 416.3 438.6
-------------------------------------------------- ------ ------------------ ------------------
Corporate
Current liabilities 0.5 8.3
Total liabilities 416.8 446.9
-------------------------------------------------- ------ ------------------ ------------------
Shareholders' equity:
Share capital (ordinary shares of no par value -
2020 (103,264,000) and 2019 (103,264,000) 20 0.5 0.5
Additional paid-in capital 52.8 52.8
Treasury shares 20 (21.7) (21.7)
Retained earnings 60.9 58.5
Total shareholders' equity 92.5 90.1
Total liabilities and shareholders' equity 509.3 537.0
-------------------------------------------------- ------ ------------------ ------------------
The financial statements were approved and authorised for issue
by the Board of Directors on 25 September 2020 and were signed on
its behalf by:
Lyndon Guiseppi Michael Coye
Chief Executive Officer Chief Financial Officer
See accompanying notes which are an integral part of these
consolidated financial statements.
Consolidated statement of cash flows
Expressed in millions of US dollars except where otherwise
stated
2020 2019
Year ended 31 March $m $m
-------------------------------------------------------------------- ------------------ ------------------
Cash flows from operating activities
Net income before tax 13.5 14.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2.6 2.4
Gain on disposal of property, plant and equipment (0.1) (0.1)
Credit impairment charges (release) 10.9 (0.3)
Changes in assets and liabilities:
Decrease in Government of Belize receivable 1.7 5.5
Decrease (increase) in other and current assets 3.8 (0.4)
Increase in lease liability 0.3 -
(Decrease) in other liabilities and current liabilities (8.9) (3.5)
Tax paid (4.1) (4.0)
Net cash generated by operating activities 19.7 14.3
-------------------------------------------------------------------- ------------------ ------------------
Cash flows from investing activities
Purchase of property, plant and equipment (net of disposals) (1.7) (2.0)
Proceeds from sale of property, plant and equipment 0.2 0.5
Decrease (increase) in investment securities 13.1 (37.8)
(Increase) decrease in loans (net of charge-offs) to customers (7.7) 5.0
Net cash generated by (used in) investing activities 3.9 (34.3)
-------------------------------------------------------------------- ------------------ ------------------
Cash flows from financing activities
Decrease in customer accounts (21.5) (4.6)
Dividends (7.0) -
Unrealized losses on securities - 0.1
Net cash used in financing activities (28.5) (4.5)
-------------------------------------------------------------------- ------------------ ------------------
Net change in cash, cash equivalents and due from banks (4.9) (24.5)
Cash, cash equivalents and due from banks at the beginning of year 99.6 124.1
Cash, cash equivalents and due from banks at the end of year 94.7 99.6
-------------------------------------------------------------------- ------------------ ------------------
Cash and cash equivalents - financial services 12.9 11.3
Balances with Central Bank of Belize - financial services 46.4 43.0
Due from banks (net of allowances) - financial services 34.9 43.9
Cash, cash equivalents and due from banks - corporate 0.5 1.4
94.7 99.6
-------------------------------------------------------------------- ------------------ ------------------
See accompanying notes which are an integral part of these
consolidated financial statements.
Extracts from the notes to consolidated financial statements
Note 6 - Interest income
2020 2019
Year ended 31 March $m $m
------------------------------------------- -------- -------
Interest on loans to customers 27.2 28.0
Interest on securities 3.0 3.0
Interest on due from Government of Belize 2.4 2.5
Interest on deposits with banks 0.2 0.1
Total interest income 32.8 33.6
------------------------------------------- -------- -------
Note 7 - Interest expense
2020 2019
Year ended 31 March $m $m
------------------------------- -------- -------
Interest on customer accounts 4.8 5.5
Interest on lease liabilities 0.1 -
Total interest expense 4.9 5.5
------------------------------- -------- -------
Note 8 - Non-interest income
2020 2019
Year ended 31 March $m $m
-------------------------------------------- ------- -------
Foreign exchange income and commissions 3.6 3.5
Customer service and letter of credit fees 2.2 1.9
Credit card fees 1.7 1.8
Other financial and related services 0.8 1.0
Other income 0.3 0.3
Total non-interest income 8.6 8.5
-------------------------------------------- ------- -------
Note 9 - Non-interest expense
2020 2019
Year ended 31 March $m $m
---------------------------- -------- -------
Salaries and benefits 9.1 9.6
Depreciation expense 2.6 2.4
Premises and equipment 2.4 2.4
Other expenses 2.9 4.6
Total non-interest expense 17.0 19.0
---------------------------- -------- -------
Note 10 - Earnings per ordinary share
Basic and diluted earnings per ordinary share have been
calculated on the net income attributable to ordinary shareholders
and the weighted average number of ordinary shares in issue in each
year.
2020 2019
Year ended 31 March $m $m
------------------------------------------------------- -------------------- -------------------
Net income 9.4 10.7
------------------------------------------------------- -------------------- -------------------
Weighted average number of shares (basic and diluted) 98,967,443 99,520,017
------------------------------------------------------- -------------------- -------------------
Basic and diluted earnings per ordinary share $ 0.09 $ 0.11
------------------------------------------------------- -------------------- -------------------
During the year ended 31 March 2020 and 2019 the weighted
average effect of share options has been excluded from the
calculation of diluted earnings per ordinary share, since they were
anti-dilutive under the treasury stock method of earnings per share
calculation (Note 20).
Note 11 - Cash and cash equivalents
2020 2019
At 31 March $m $m
------------------------------------- --------- ---------
Cash in hand 12.4 9.5
Amounts in the course of collection 0.5 1.8
Total cash and cash equivalents 12.9 11.3
------------------------------------- --------- ---------
Currency, liquidity, and interest rates risks analyses of cash
and cash equivalents are disclosed in Note 26.
Note 12 - Balances with the Central Bank of Belize
2020 2019
At 31 March $m $m
------------------------------------------------ -------- ---------
Statutory reserve balances 33.9 34.7
Operating balance 12.5 8.3
Total balances with the Central Bank of Belize 46.4 43.0
------------------------------------------------ -------- ---------
BBL is required to maintain an average minimum
non-interest-bearing deposit balance with the CBB equal to 8.5
percent of the average deposit liabilities of BBL. At 31 March
2020, the actual amount was 12.5 percent (31 March 2019 - 10.4
percent). In addition, BBL must maintain an average aggregate of
approved liquid assets (which include the average minimum
non-interest bearing deposit balance maintained with the CBB) equal
to 23 percent of the average deposit liabilities of BBL. At 31
March 2020, the actual amount was 32.8 percent (31 March 2019- 36.0
percent). The statutory reserve balances are not readily available
to finance the day to day operations of the banks.
Note 13 - Due from banks (net of allowances)
2020 2019
At 31 March $m $m
---------------------------------------------- ---------- ---------
Due from banks 34.9 44.1
Less: impairment allowance on due from banks - (0.2)
---------- ---------
Total due from banks (net of allowances) 34.9 43.9
---------------------------------------------- ---------- ---------
The portfolio of balances held by both BBL and BBIL represents
instruments of short-term placements of temporary available cash in
other banks.
As at 31 March 2020, all interbank loans and deposits placed in
other banks were current and not impaired. As at 31 March 2019, the
balance held with Worldclear Limited had a related impairment
allowance of $0.2 million. The balance held with Worldclear Limited
was written off during the fiscal year ended 31 March 2020.
Movements in impairment allowance on due from banks were as
follows:
2020 2019
At 31 March $m $m
------------------------------ ---------- ----------
At the beginning of the year (0.2) (0.2)
Written off during the year 0.2 -
---------- ----------
- (0.2)
------------------------------ ---------- ----------
Currency, liquidity, and interest rate risk analyses of cash and
cash equivalents are disclosed in Note 26.
As at 31 March 2020, BBL has utilised $4.3 million (31 March
2019 - $4.2 million) of its balances held with other financial
institutions to be held as collateral for certain credit lines and
as required by the card brands. These particular financial assets
are pledged as collateral under terms that are usual and customary
for such transactions.
Note 14 - Investment securities
2020 2019
At 31 March $m $m
--------------------------------------------------- ----------- ----------
Securities - at amortised cost 116.8 128.6
Securities - at FVOCI 2.8 4.3
Securities - at fair value through profit or loss 0.4 -
Less: impairment allowance (0.2) -
Total investment securities 119.8 132.9
--------------------------------------------------- ----------- ----------
The following table details the impairment allowance by stage
and the investment securities by type.
2020 2019
At 31 March $m $m
----------------------------- ----------- ----------
Equity securities 0.4 -
Debt securities 119.6 132.9
Stage 1: 12 Month ECL - -
Stage 2: Lifetime ECL - -
Stage 3: Lifetime ECL (0.2) -
Total investment securities 119.8 132.9
----------------------------- ----------- ----------
Note 15 - Loans to customers (net of allowances)
At 31 March 2020 2019
------------------------------------------------------------------------- ----------------------- ------------------
Loans
Residential mortgage: 38.5 37.9
Credit card 10.1 9.2
Other consumer 57.6 54.6
Commercial - real estate 46.7 45.8
Commercial - other 99.5 98.7
------------------------------------------------------------------------- ----------------------- ------------------
252.4 246.2
------------------------------------------------------------------------- ----------------------- ------------------
Impairment allowance for expected credit losses for loans to customers:
Residential mortgage (0.7) (0.8)
Credit card (0.3) (0.3)
Other consumer (2.2) (2.3)
Commercial - real estate (2.4) (0.9)
Commercial - other (13.1) (5.0)
(18.7) (9.3)
------------------------------------------------------------------------- ----------------------- ------------------
Loans (net of impairment allowance for expected credit losses):
Residential mortgage 37.8 37.1
Credit card 9.8 8.9
Other consumer 55.4 52.3
Commercial - real estate 44.3 44.9
Commercial - other 86.4 93.7
------------------------------------------------------------------------- ----------------------- ------------------
Loans (net of impairment allowance for expected credit losses): 233.7 236.9
------------------------------------------------------------------------- ----------------------- ------------------
The table below shows the staging of the loans to customers and
the related ECL's:
At 31 March 2020 2019
----------------------- --------- ---------
Gross loans 252.4 246.2
Stage 1: 12 Month ECL (11.7) (2.9)
Stage 2: Lifetime ECL (3.5) (1.0)
Stage 3: Lifetime ECL (3.5) (5.4)
233.7 236.9
----------------------- --------- ---------
The table below shows the movement in the impairment allowance
for expected credit losses by stage:
Impairment allowance
Stage 1 Stage 2 Stage 3 Total
$m $m $m $m
--------------------------------------------------------------------- ----------- ----------- ----------- -------
Impairment allowance for expected credit losses as at 01 April 2019 2.9 1.0 5.4 9.3
ECL on new instruments issued
during the year 0.3 0.6 0.2 1.1
Other credit loss movements,
repayments, and transfers 8.5 2.0 0.2 10.7
Charge offs and write offs - (0.1) (2.3) (2.4)
Impairment allowance for expected credit losses as at 31 March 2020 11.7 3.5 3.5 18.7
--------------------------------------------------------------------- ----------- ----------- ----------- -------
The table below reflects outstanding loans by industry
classifications.
2020 2019
At 31 March Amount % Amount %
--------------------------- ------------ ------- ---------------- -------
Other consumer loans 67.7 26.8% 63.9 26.0%
Real estate 60.5 24.0% 60.4 24.5%
Building and construction 32.1 12.7% 29.0 11.8%
Tourism 20.0 7.9% 11.1 4.5%
Distribution 18.9 7.5% 19.8 8.0%
Transportation 14.2 5.6% 14.8 6.0%
Agriculture 13.2 5.2% 17.0 6.9%
Manufacturing 9.7 3.9% 12.0 4.9%
Utilities 6.6 2.6% 5.6 2.3%
Marine Products 5.7 2.3% 6.3 2.6%
Professional services 3.3 1.3% 5.3 2.2%
Government 0.1 0.1% 0.7 0.3%
Entertainment 0.2 0.1% 0.1 0.0%
Mining and exploration 0.1 0.0% 0.1 0.0%
Forestry 0.1 0.0% 0.1 0.0%
Total loans 252.4 100.0% 246.2 100.0%
--------------------------- ------------ ------- ---------------- -------
At 31 March 2020, the Group had total loans outstanding to
certain officers and employees of $11.7 million (31 March 2019 -
$10.4 million) at preferential rates of interest varying between
0.0 percent and 12.0 percent per annum, repayable over varying
periods not exceeding 25 years. The transfer value loss on these
loans had not been considered material and therefore had not been
included in these consolidated financial statements.
Note 16 - Property, plant and equipment
Property, plant and equipment of the Group as at 31 March 2020
and 2019 comprised the following:
Furniture, Right
fixtures, Computer of
and other and office Motor Work use
Land Premises equipment equipment vehicles in progress assets Total
-------------- ------- ---------------- ------------------ ------------------ --------------- ------------- ---------- ------------
Cost
As at 31
March 2019 1.6 15.3 6.8 10.2 2.3 0.1 - 36.3
Effective of
changes
in
accounting
policies - - - - - - 0.5 0.5
-------------- ------- ---------------- ------------------ ------------------ --------------- ------------- ---------- ------------
As at 1 April
2019 1.6 15.3 6.8 10.2 2.3 0.1 0.5 36.8
Additions - 0.1 0.1 0.5 0.3 0.2 - 1.2
Disposals (0.1) - (0.2) (0.3) (0.4) - - (1.0)
As at 31
March 2020 1.5 15.4 6.7 10.4 2.2 0.3 0.5 37.0
-------------- ------- ---------------- ------------------ ------------------ --------------- ------------- ---------- ------------
Depreciation
As at 31
March 2019 - (5.4) (4.3) (5.9) (1.3) - - (16.9)
Charge for
the period - (0.5) (0.6) (1.0) (0.4) - (0.1) (2.6)
Eliminated on
disposals - - 0.2 0.3 0.4 - - 0.9
As at 31
March 2020 - (5.9) (4.7) (6.6) (1.3) - (0.1) (18.6)
-------------- ------- ---------------- ------------------ ------------------ --------------- ------------- ---------- ------------
Net book
value
As at 31
March 2020 1.5 9.5 2.0 3.8 0.9 0.3 0.4 18.4
-------------- ------- ---------------- ------------------ ------------------ --------------- ------------- ---------- ------------
As at 31
March 2019 1.6 9.9 2.5 4.3 1.0 0.1 - 19.4
-------------- ------- ---------------- ------------------ ------------------ --------------- ------------- ---------- ------------
Total capital expenditures for the year ended 31 March 2020 was
$1.7 million (31 March 2019 - $2.0 million). Total depreciation
expense for the year ended 31 March 2020 was $2.6 million (31 March
2019 - $2.4 million).
As at 31 March 2020 the Group's buildings, vehicles, ATMs and
other equipment were insured for $18.5 million. (31 March 2019 -
$22.1 million)
As at 31 March 2020 historical cost of fully depreciated fixed
assets amounted to $7.5 million (31 March 2019 - $7.2 million).
Note 17 - Due from Government of Belize (net of allowance)
2020 2019
At 31 March $m $m
--------------------------------- --------- ---------
Amounts receivable from the GOB 40.3 42.0
Less: impairment allowance (0.8) (0.8)
Total due from the GOB 39.5 41.2
--------------------------------- --------- ---------
Movements in impairment allowance on due from GOB.
2020 2019
At 31 March $m $m
-------------------------- --------- ---------
At beginning of the year (0.8) (0.1)
Charge during the year - (0.7)
At the end of the year (0.8) (0.8)
-------------------------- --------- ---------
On 23 March 2007, a loan note was issued to BBL by the
Government of Belize ("GOB") under the terms of a settlement deed
entered into by the Bank and the GOB on the same date (the "2007
Loan Note"). The 2007 Loan Note had been entered into by the GOB in
order to satisfy the GOB's liability under a 2004 guarantee for
debts and liabilities owed to BBL by Universal Health Services.
BBL commenced arbitration proceedings (the "Arbitration") under
the London Court of International Arbitration (the "LCIA") in order
to recover the sums due under the 2007 Loan Note. On 15 January
2013, the arbitral tribunal made its Final Award in the Arbitration
in favour of BBL. It declared that the 2007 Loan Note was valid and
binding and ordered the GOB to pay BBL the sum of BZD 36,895,509
plus interest and costs.
The LCIA Final Award confirmed that the 2007 Loan Note was valid
and binding on the basis of a judgement given by the Privy Council,
in The Belize Bank Limited v The Association of Concerned Belizeans
and Others (which was at that time Belize's highest court of
appeal). In this judgement, the Privy Council rejected a challenge
to the Loan Note that it did not comply with the Belize Finance and
Audit (Reform) Act.
In order to increase its enforcement options, BBL applied to the
English High Court for an order that the Final Award be enforceable
in the same manner as a judgement or order of an English Court to
the same effect. That order was granted on 20 February 2013 and was
served on the GOB on 15 May 2013 (the "English Judgement").
Award Enforcement proceedings were also commenced against GOB in
the Belize Supreme Court in 2013. On 17 February 2015, the Belize
Supreme Court refused to enforce the Final Award on the grounds
that enforcement would be contrary to public policy. BBL appealed
this decision to the Belize Court of Appeal and on 24 March 2017,
the Court of Appeal upheld the decision of the Belize Supreme
Court.
BBL appealed the Court of Appeal's decision to the Caribbean
Court of Justice (the "CCJ") and on 22 November 2017, the CCJ
reversed the Court of Appeal's decision and found in favour of BBL.
The CCJ's Order granted permission to BBL to enforce the LCIA Award
in the same manner as a judgement or order of the Supreme Court to
the same effect (the "Belize Judgement"). Twenty-one days after the
CCJ granted permission, BBL applied to the CCJ under section 25 of
the Crown Proceedings Act for a certificate certifying the amounts
payable to BBL by the Government. On 3 January 2018, the CCJ issued
the Certificate certifying the amount payable to BBL by the
Government under the LCIA Award and the Certificate was served on
the Attorney General, the Minister of Finance and the Financial
Secretary on 04 January 2018. The CCJ held that the effect of the
Certificate is to convert the CCJ Order into a Judgement Debt.
On 4 January 2018, BBL applied for a further order from the CCJ
directing the Minister of Finance to pay the amount due under the
Judgement. On 1 June 2018 the CCJ decided that BBL's application
was premature but stated in its decision that if the Government
failed to enact the necessary legislation to satisfy the judgement,
then BBL should apply to the Belize Supreme Court for a declaration
that the Minister of Finance has failed to comply with his
obligations under section 25 of the Crown Proceedings Act and an
order that the Minister of Finance pay the amount due under the
judgement.
On 26 June 2018, BBL filed an application pursuant to Part 56 of
the Supreme Court (Civil Procedure) Rules, 2005 for an order
granting permission to BBL to apply for Judicial Review of: (i) the
decision of the Minister of Finance not to comply with his
mandatory duty within section 25(3) of the Crown Proceedings Act to
pay the sum certified as payable to BBL by the Certificate of Order
dated 3 January 2018 issued by the Registrar of the Caribbean Court
of Justice, and (ii) the decision of the Minister of Finance not to
satisfy the Judgement Debt with interest accruing at the rate of 6%
per annum.
On 9 July 2018 the Chief Justice granted permission to BBL to
apply for Judicial Review. BBL filed a fixed date claim form
applying for Judicial Review on 23 July 2018. The first hearing
took place on 17 September, 2018 and the Court granted BBL's
application for the trial of certain preliminary issues namely: (i)
whether the Minister of Finance failed to comply with his statutory
duty imposed by section 25(3) of the Crown Proceedings Act Cap 167
of the Laws of Belize; and (ii) whether an Order ought to be made
directing the Minister of Finance to pay the sum due under the
Certificate Order or Judgement Debt (less amounts set-off as
Business Tax) within ten days of the Order. The trial of certain
preliminary issues took place in December 2018 and on 10 January,
2020 the Hon. Chief Justice ruled that the Government had not
failed to comply with its statutory duty imposed by section 25 of
the Crown Proceedings Act Cap 167 of the Laws of Belize and refused
the Order directing the Minister of Finance to pay the sum due
under the Certificate Order or Judgment Debt (less amounts set-off
as Business Tax for the 1st and 2nd Quarters of 2018) within 10
days. BBL appealed the decision of the learned Chief Justice on
these preliminary issues pursuant to leave granted by the Hon.
Chief Justice on the 10 February 2020 (the "Mandamus Appeal"). No
date has been fixed for the hearing of the Mandamus Appeal although
a hearing date is expected in the next sitting of the Belize Court
of Appeal presently scheduled for October 2020.
On 28 June 2018 BBL filed a claim against the Commissioner of
Income and Business Tax and the Attorney General of Belize (both
being representatives of the GOB) in light of the Commissioner's
refusal to set-off the Business Tax owed to the Government by BBL
notwithstanding being duly authorised by BBL to satisfy the taxes
due by way of set-off against the Judgement Debt. The trial of
BBL's claim took place on 22 January 2019 at the Supreme Court of
Belize. The Court had difficulty accepting the Government's
arguments and found in favour of BBL. The Court ordered: (i) a
Declaration that the decision of the Commissioner; refusing to
set-off BBL's tax liability against the Judgement Debt is
unreasonable, disproportionate, unlawful and therefore inequitable;
(ii) a Declaration that the decision of the Commissioner not to
consider garnishing BBL's tax debt from the Judgement Debt is
unlawful; (iii) an Order restraining the Commissioner whether by
herself, her servants and her agents from seeking to enforce the
tax liability against BBL, and (iv) the Government to pay BBL its
cost to be agreed or assessed. The decision of the court was orally
delivered on 22 January 2019 and the written judgement handed down
on 8 February 2019. The decision of the Supreme Court of Belize
legally endorsed BBL's right to authorise the Government to set-off
all Business Tax owed to the Government by BBL against the
Judgement Debt. The Government has since appealed the decision of
the Supreme Court to the Belize Court of Appeal but no stay of the
effect of this decision has been granted to the Government (the
"Tax Appeal"). No date has been fixed for the hearing of the Tax
Appeal although a hearing date is expected in the next sitting of
the Belize Court of Appeal presently scheduled for October
2020.
BBL has sought the permission of the Court of Appeal to have
both the Mandamus Appeal and the Tax Appeal heard on the same
occasion at the next sitting of the Belize Court of Appeal
presently scheduled for October 2020.
In order to further increase its enforcement options, BBL filed
a petition to enforce the Final Award in federal court in the
United States on 18 April 2014. The GOB filed a motion to dismiss
and a response to the petition to confirm the Final Award on 8
August 2014. The GOB applied for a stay pending the outcome of
similar litigation. However, the stay was denied on 9 January 2016.
On 8 June 2016 the US District Court confirmed the Final Award and
entered judgement in favour of BBL against the GOB for the monetary
portion of the Award; to be converted to US dollars, applying the
conversion rate as of the date the Award was issued plus interest
at the annual rate of 17.0% compounded annually between 8 September
2012 and 8 June 2016. On 12 July 2016, the United States District
Court ordered that judgement be entered in favour of BBL against
the GOB in the amount of $19,086,210 plus $16,099,216 in
pre-judgement interest, totalling $35,185,427 (the "US
Judgement").
The GOB appealed the decision of the US District Court to the US
Court of Appeals, D.C. Circuit. A hearing in the US Court of
Appeals took place on 9 February 2017. On 31 March 2017, the US
Court of Appeals, D.C. Circuit upheld the decision of the US
District Court and rejected all of the GOB's arguments on
appeal.
On 28 April 2017, the GOB filed a petition for an 'en banc'
review of the US Court of Appeal's decision in essence asking the
court to reconsider its decision. On 7 June 2017, the petition by
the GOB for an 'en banc' rehearing was denied by the US Court of
Appeal and its earlier judgement was confirmed.
The GOB then sought review by the United States Supreme Court.
On 13 November 2017, the United States Supreme Court denied the
GOB's petition for certiorari, rendering the US Judgement final and
not subject to further judicial review.
On 16 November 2017, BBL filed a motion in the United States
District Court for the District of Columbia pursuant to 28 U.S.C.
--1610(c) seeking judicial authorisation to seek enforcement of the
US Judgement against the GOB. On 12 March 2018, the United States
District Court ordered that BBL may now seek attachment or
execution of GOB property to satisfy the Court's judgement pursuant
to 28 U.S.C. -- 1610(a)-(b) in the jurisdictions where such
attachment or execution is appropriate.
The Award underlying the English Judgement, the US Judgement,
and the Belize Judgement has been recognised and declared
enforceable against GOB by the highest Belize and US Courts, and by
the English Courts.
Note 18 - Customer accounts
2020 2019
At 31 March $m $m
------------------------- ------------- --------------
Term deposits 151.5 184.2
Current/demand deposits 167.6 160.6
Savings deposits 89.8 85.6
Total customer accounts 408.9 430.4
------------------------- ------------- --------------
Included in term deposits at 31 March 2020 were $5.2 million (31
March 2019 - $8.0 million) of term deposits denominated in US
dollars and nil (31 March 2019 - nil) denominated in UK pounds
sterling. Included in demand deposits at 31 March 2020 were $17.5
million (31 March 2019 - $16.7 million) of demand deposits
denominated in US dollars and $0.2 million (31 March 2019 - $0.2
million) denominated in UK pounds sterling.
As at 31 March 2020, $6.3 million of customer account balances
(31 March 2019 - $8.6 million) is held as collateral for banking
operations.
The twenty largest deposit customers account for 29.8% of total
deposits (31 March 2019 - 31.0%).
Note 19 -- Commitments, contingencies and regulatory matters
(i) The Group is a party to financial instruments with
off-balance-sheet risks in the normal course of business to meet
the financing needs of its customers. These financial instruments
include commitments to extend credit, standby letters of credit and
financial guarantees. The Group grants short-term credit facilities
to customers for periods of up to twelve months generally to meet
customers' working capital requirements. These facilities are
repayable on demand and are subject to review at any time. In
practice, such reviews are carried out at periodic intervals agreed
with the customer.
Outstanding commitments to extend credit at 31 March 2020
amounted to $24.3 million (31 March 2019 - $23.8 million).
Since many of the commitments are expected to expire without
being drawn upon in full, and because of the fluctuating aspect of
the facilities, the total commitment amounts do not necessarily
represent future cash requirements. The Group evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral required by the Group for the extension of credit is
based on the Group's credit evaluation of the counterparty.
Collateral held varies, but may include accounts receivable,
inventory, property, plant and equipment, and income-producing
commercial properties and assets.
Standby letters of credit and financial guarantees written are
conditional commitments issued by the Group to guarantee the
performance of a customer to a third party. The terms of such
guarantees do not normally exceed more than one year.
The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities
to customers. The Group holds similar collateral to that held for
the short-term facilities described above and such commitments are
generally fully secured. Outstanding standby letters of credit and
financial guarantees written at 31 March 2020 amounted to $5.4
million (31 March 2019 - $7.3 million).
(ii) In the ordinary course of business, the Group is subject to
pending and threatened legal actions and proceedings. As litigation
develop that may have a material effect, the Group, in conjunction
with outside counsel, evaluates the matter on an ongoing basis in
light of potentially relevant factual and legal developments. These
may include settlement discussions and rulings by courts,
arbitrators or others.
(iii) As explained in Note 17, BBL is engaged in legal
proceedings in which it is vigorously pursuing a claim against the
GOB. Having received the advice of external advisers, the Company
expects BBL to fully recover amounts recorded as due from GOB in
Note 17. Legal costs are expensed as incurred.
(iv) In the ordinary course of business, the Company's
subsidiaries are subject to regulatory examinations, information
gathering requests, enquiries, and investigations. As a regulatory
matter develops that may have a material effect, the Company and
the relevant subsidiaries, in conjunction with outside counsel,
evaluate the matter on an ongoing basis in light of potentially
relevant factual and legal developments. These may include
settlement discussions and rulings by courts, arbitrators or
others. Based on current knowledge and discussions with independent
legal counsel, Management does not believe that the outcome of any
regulatory matter that is unresolved at 31 March 2020 would have a
material adverse effect on the financial position or liquidity of
the Company or its subsidiaries as of 31 March 2020.
(v) BBL and BBIL, as fully authorised banking entities, are
subject to detailed regulatory requirements in Belize. These
requirements are principally set by the CBB. As of 31 March 2020
and 2019, and for the years then ended, BBL and BBIL substantially
met all of its obligations and requirements under such regulations.
These regulations may, in the future, change or be amended. At such
time, BBL and BBIL will make all endeavours to follow, as soon as
reasonably practicable, all such revised regulations.
(vi) The Labour Act of Belize states that where an employee has
been continuously employed for a period of five to ten years and
his employment is terminated by the employer, the employee is
entitled to be paid a severance pay for each complete year of
service. However, if the employee resigns, is terminated due to
gross misconduct, or dies prior to the completion of ten years,
then the Group is not liable to pay severance. The Group has
estimated the contingent liability related to such severance
payment for employees with more than five but less than ten years
to be $0.2 million (31 March 2019 - $0.2 million).
Note 20 - Share capital
2020 2019
At 31 March $m $m
----------------------------------------- ---------------- ---------------
Authorised
Ordinary shares:
200,000,000 shares of no par value 2.0 2.0
Preference shares:
14,000,000 shares of $1.00 each 14.0 14.0
Total authorised 16.0 16.0
----------------------------------------- ---------------- ---------------
Issued and outstanding
Ordinary shares:
103,264,000 shares of no par
value (31 March 2019 - 103,264,000) 0.5 0.5
----------------------------------------- ---------------- ---------------
Treasury Shares
During the two years ended 31 March 2020 and 2019 there has been
no movement in treasury shares.
Number $m
------------------ ----------- --------------
At 31 March 2019 4,297,228 21.7
------------------ ----------- --------------
At 31 March 2020 4,296,557 21.7
------------------ ----------- --------------
On 13 September 2018, the Board of Directors agreed to the
cancellation of all existing Treasury Shares. In August 2020,
2,296,557 of the Treasury Shares were cancelled with the remaining
2,000,000 Treasury Shares in the process of being cancelled.
Share Options
The Company had granted employee share options which are issued
under its share option plan which reserves ordinary shares for
issuance to the Company's executives, officers and key employees.
The options had been granted under the Long-Term Incentive Plans
(the "Incentive Plans"). The Incentive Plans are administrated by a
committee of the board of directors of the Company. Options are
generally granted to purchase the Company's ordinary shares at
prices which equate to or are above the market price of the
ordinary shares on the date the option is granted. Conditions of
vesting are determined at the time of grant but options are
generally vested and become exercisable for a period of between
three and ten years from the date of grant and all have a maximum
term of ten years.
Weighted
Number average
of share exercise
options price
------------------------------- ------------ ---------
Outstanding at March 31, 2019 7,249,997 $1.95
------------------------------- ------------ ---------
Outstanding at March 31, 2020 250,000 $1.95
------------------------------- ------------ ---------
During the year ended 31 March 2020, no outstanding options were
exercised.
In August 2008, the Company granted options over 6,999,997
ordinary shares at an exercise price of $6.50 per share which vest
and are exercisable in three equal instalments on 01 August 2012,
01 August 2013 and 01 August 2014. The term of these options
extended to 01 August 2019; they have now expired.
In May 2009, the Company granted options over a further 250,000
ordinary shares at the exercise price of $6.50 per share which vest
and are exercisable in three instalments on 01 June 2013, 01 June
2014 and 01 June 2015. The term of these options extends to 01 June
2020; they have now expired.
The exercise price of all options was adjusted to $1.95
following the demerger of Waterloo Investment Holdings Limited from
the Group in 2011.
The Group measures compensation cost in connection with share
option plans and schemes using a fair value based method. Using the
fair value based method, the Group took a charge of nil in the
consolidated statement of comprehensive income during the year
ended 31 March 2020 (31 March 2019 - nil).
The fair value of each option grant in 2008 and 2009 was
estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average
assumptions:
Expected stock price volatility 30 percent
-------------------------------- ------------
Risk free interest rate 3.7 percent
-------------------------------- ------------
Expected dividend yield Nil percent
-------------------------------- ------------
Expected life of the option 7.0 years
-------------------------------- ------------
Note 21 - Dividends Paid
The Company declared and paid $7.0 million in dividends in the
year ended 31 March 2020 (31 March 2019 - nil).
Note 22 - Taxation
At 31 March 2020 2019
------------------------ ------- -------
Business tax 4.1 3.9
Corporate income tax - 0.1
Total taxation expense 4.1 4.0
------------------------ ------- -------
The computation of business tax is provided in the table
below:
At 31 March 2020 2019
-------------------------------------- -------- --------
Net interest income 25.9 25.3
Other income 15.9 12.0
Less:
Exempted income (7.3) (4.5)
Donations - -
Profit subject to tax for the period 34.5 32.8
-------------------------------------- -------- --------
Total business tax charged at 12.0% 4.1 3.9
-------------------------------------- -------- --------
Report of the Chief Executive Officer
Caribbean Investment Holdings Limited and its subsidiaries (the
"Group") produced net income before tax of $13.5 million in fiscal
2020 which represents an 8% decrease from prior year's results due
largely to an $11.2 million increase in credit impairment charges
reflecting management's estimation of an increase in credit losses
as a result of the adverse impact of the COVID-19 pandemic on the
global economy. This impairment charge was offset by a
non-recurring item of $7.2 million being the reversal of a
provision that was established for share options issued in 2008 but
which expired in August 2019.
While interest income decreased by 2%, the Group realized cost
savings from a reduction in interest costs and lowering of its
non-interest expenses. Operating losses from the Corporate segment
were reduced from $3.2 million to $2.3 million also as a result of
cost savings measures taken.
Net income per share for the year amounted to $0.09 in fiscal
2020 which represented an 18% decrease from fiscal 2019's earnings
per share of $0.11.
The Group's balance sheet remains strong with shareholders'
equity of $92.5 million at 31 March 2020 compared with $90.1
million last year.
Milestones
During the course of fiscal 2019-2020 the Group achieved a
number of important milestones.
In keeping with our strategy of placing the Group on an
international footing, The Belize Bank Limited (BBL), the major
subsidiary of the Group, approached Caribbean Information and
Credit Risk Limited (CARIcris) during the last quarter in 2019 to
undertake a rating of its operations. In December 2019, CARIcris
assigned a Corporate Credit rating of CariBBB- (foreign and local
currency) on its regional rating scale and bzAA+ on the national
scale to BBL.
CARIcris also assigned a stable outlook on the ratings. The
stable outlook was based on the expectation that BBL's performance
will continue to be strong over the ensuing 12 to 15 months as BBL
continued its conservative strategy of growing its loan portfolio
with high-quality assets.
The rating of BBL also reflected its strong presence in the
commercial banking industry, its robust risk management framework
and strong asset quality characterized by a reducing non-performing
loan ratio.
BBL is currently the only bank in Belize which has an Investment
Grade rating from a regional rating agency.
On 5 June 2020, Caribbean Investment Holdings Limited entered
into an agreement to merge with Normandy Limited - a company listed
on the Bermuda Stock Exchange. At the time of the merger, Normandy
Limited was an exempted company, limited by shares and incorporated
in Bermuda and its sole assets comprised interest-bearing cash
deposits with banks amounting to approximately GBP 13.5
million.
Later that month on 22 June 2020, Caribbean Investment Holdings
Limited announced its entry into an agreement with The Bank of Nova
Scotia and its regional subsidiary, Scotiabank Caribbean Holdings
Limited to purchase 100% of the issued share capital of its
Belizean subsidiary Scotiabank (Belize) Limited (SBL). The
acquisition is subject to regulatory approval and is expected to be
completed before the end of fiscal 2021.
This acquisition once completed will form an integral part of
the Group's strategy to develop a strong banking franchise in
Belize which will ultimately serve as a platform for the
establishment of a Pan-Caribbean banking group. The acquisition of
SBL and subsequent merger with BBL will create a combined entity
with just over $0.5 billion in loans, $0.4 billion in total
deposits and $100 million in capital.
The Group believes that the purchase of SBL is an opportunity to
expand its existing banking operations in Belize and to capitalize
on the significant synergies between the Group's current banking
operations and the operations of SBL.
The acquisition will also allow for improved earnings and
provide the opportunity to leverage BBL's recently installed core
banking system over a wider deposit and loan product base. This
will ultimately lead to improved levels of efficiency and an
overall improvement in the combined entity efficiency ratio.
COVID-19
COVID-19 has had a far-reaching and deep impact on the Belizean
economy. With only a few establishments unaffected by the COVID-19
crisis, almost all businesses were forced to respond to the changed
environment. All major sectors including tourism, agriculture, and
manufacturing services were adversely affected. In the long term
and as the crisis normalizes, the agricultural and industrial
sectors are expected to recover faster as their customers are
expected to make up for the lost demand by replacing orders in
bulk. Tourism is also expected to gradually improve in the medium
to long term, while essential services including government
services, supermarkets, retail outlets, delivery services, banking
and financial services are expected to respond faster due to fewer
logistical issues involved.
The pandemic has caused the banking sector to take steps to
decrease the physical presence of branch visits by customers. This
fundamental shift in customer behaviour is expected to continue in
the banking sector, as customers will be encouraged to use digital
banking channels. This will require the allocation of resources to
convert more of those digital experiences into positive stories for
long-term digital adoption.
Facing immediate financing requirements and uncertain future
cash flows, consumers and small and medium size enterprises are
expected to increase their dependency on banks for sound financial
advice and increased financial assistance, including existing loans
and mortgages refinancing.
From a regulatory standpoint, on 17 March 2020, the Central Bank
of Belize issued amendments to the existing Practice Directions as
a part of its monetary and macro-prudential policy responses in
consideration of the hardships being experienced by businesses and
households in specific sectors adversely affected by COVID-19.
These amendments have allowed financial institutions to grant their
customers in the targeted sectors extended repayment periods for
credit facilities.
With the ongoing COVID-19 pandemic causing significant
uncertainty within global banking markets including the Caribbean
and Belize, the Company's Board has decided not to a pay a final
dividend for the year ended 31 March 2020. The Board will review
its dividend policy for the current fiscal year once banking
markets have returned to a more stable state.
Outlook
Over the medium term, the prospect for meaningful growth, from
new customer acquisitions will be contained if not fully
restrained. Consequently, while there may be some opportunity for
profitable growth, based on economic forecast, our strategy will be
one of contained organic growth, through the expansion of existing
relationships. Focus on operational efficiency and exceeding
customer servicing expectations will also be critical.
Lyndon Guiseppi
Chief Executive Officer
25 September 2020
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END
FR SESFMWESSEFU
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September 28, 2020 02:00 ET (06:00 GMT)
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