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Guyana Bank for Trade and Industry Ltd moving with the times

Thursday, November 15, 2012


The Guyana Bank for Trade and Industry Ltd (GBTI) traces its roots back to May 1836 when its predecessor, the Colonial Bank continued with the operations of Barclays Bank. In 1987 the local operations of Barclays were acquired by the Guyana government and renamed Guyana Bank for Trade and Industry. 
Then, in January 1990, GBTI merged with Republic Bank (Guyana) Ltd, formerly Chase Manhattan Bank NA. 
Following this, the bank was privatised in 1991. This development saw Secure International Finance Company, Inc become the majority shareholder with 61 per cent of the bank’s issued shares. Secure International Finance Company is a subsidiary of Edward B Beharry and Company Ltd; Beharry serves as the bank’s chairman. Of the bank’s nine directors, only two, Paul Cheong and Basil DR Mahadeo, own shares in their own name. 
Another of Beharry’s companies, North American Life Insurance Company Ltd, administers both a non-contributory defined contribution pension plan and a non-contributory group health plan and a group life and accidental death and dismemberment plan for employees of the bank. 
The bank provides services to its customers through nine branches strategically located through the country. Its principal associate is Guyana Americas Merchant Bank Inc, in which it has a 40 per cent shareholding, valued at $183.3 million. As at the end of 2011, GBTI represented 23 per cent of the total commercial bank assets in Guyana; up from 21 per cent in 2010. 
Against the background of strong economic growth in Guyana during 2011, GBTI reported a 15 per cent increase in its after-tax profits to $1.383 billion. In a similar vein, total assets advanced by almost 20 per cent to $75.1 billion. 
Reviewing the income statement, we see that total interest income rose to $3.69 billion from $3.43 billion in 2010, reflecting an increase of 7.6 per cent. Fuelling this increase was interest on loans and advances, which rose by almost 27 per cent to $2.52 billion. Increases were also observed from interest on foreign bank deposits and other interest income. Interest from both Treasury Bills and investments were lower than the amounts earned in 2010. 
Total interest expenses fell to $947 million from $1.02 billion recorded in 2010. The most significant decline was recorded in interest paid to savings depositors; this fell to $643 million from the $735 million recorded in 2010. The reduction in interest on foreign deposit was also significant, falling from $36.5 million in 2010 to a more modest figure of $8.8 million in 2011. 
In contrast, interest paid on term deposits increased to $253.7 million from the 2010 figure of $242.3 million. Other interest expense rose to $41.6 million from a much lower base of $5.2 million in 2010. 
Overall, net interest income improved by 13.5 per cent to $2.74 billion from $2.42 billion earned in 2010. 
Meanwhile “other income” declined by 9.0 per cent to just under $859 million from G944 million recorded in 2010. The bulk of this decline was concentrated in foreign exchange gains, which fell to $525 million from $639 million in the 2010 period. 
In total, non-interest expenses fell to $1.64 billion from $1.7 billion in 2010. While there was a momentous decline in other expenses from $609 million to $202 million, this advantage was significantly offset by increases in two major line items. 
he cost of salaries and staff benefits rose to $841 million from $710 million in 2010. Similarly, premises and equipment costs increased from $385 million to $597 million. 
After including the share of profit from its associated company of $3.9 million, the bank recorded a pre-tax profit of $1.965 million; this represented an improvement of 18.4 per cent over the 2010 result of $1.66 billion. After allowing for taxation of $582 million, the net profit came in at $1.383 billion; this represented an increase of 14.8 per cent over the $1.205 billion recorded for 2010. 
It should be noted that the effective tax rate in 2011 was 29.6 per cent while, for 2010, the effective tax bite was 27.4 per cent. Interestingly, the tax rate for 2010 was 45 per cent of profits while, for 2011, it was reduced to 40 per cent. Helping to lessen the tax burden in both periods was tax-free interest income; in 2010, this figure was $344 million while, for 2011, it was $306 million. Also of some interest was that the property tax increased from $50 million in 2010 to $55 million in 2011. 
(Perhaps, Trinidad taxpayers have already begun thinking about how a revised property tax regime might impact on their cash flows and profits in the coming year?) 
The bank’s net profit reflected earnings per share of $34.57, up from the 2010 figure of $30.11. On the basis of its improved performance, the total dividend increased to $11.00. 
Looking now at GBTI’s balance sheet, we see that its total assets of $75.1 billion are classified under four major segments: cash resources, loans and advances, investments and non-current assets. 
Cash resources total $34.2 billion, of which 46 per cent or $15.9 billion is lodged in Guyana Government Treasury bills. The next most significant element of this category is $9.8 billion in cash and due by banks. 
Of this total, balances with other banks total $8.4 billion while the remainder of $1.4 billion was cash. A further $8.2 billion is described as deposits with the Bank of Guyana and mostly comprises the statutory reserve of $1.9 billion together with an excess of $287 million, which is an excess reserve balance. The smallest item of cash is $360 million representing cheques and other items in transit. 
At $24.05 billion loans and advances comprise 32 per cent of the bank total assets of $75.1 billion. With an average interest rate of 10.76 per cent, the maturity profile shows that $11.1 billion is due within one year, $3.4 billion due after one year but before five years while the balance of $9.5 billion is due after five years. 
Of the bank’s total investment of $8.7 billion only $400 million is described as “held to maturity.” The balance of $8.3 billion is shown as “available for sale” and has a cost basis of $8.46 billion. 
The total of its non-current assets was $7.9 billion as at December 2011. The largest item relates to property and equipment, which was valued at $6.8 billion. Of this net amount land and buildings reflects a value of $5.9 billion, equipment was valued at $496 million and capital work in progress was $379 million. Other non-current assets total $921 million. The largest item in this sub-grouping was inter-bank balances of $455 million. The other significant line item was accrued interest and commissions of $176 million. 
The bank’s major liabilities were $66.6 billion in customer’s deposits. Of this total $17.2 billion were described as demand deposits on which no interest is paid. 
Savings deposits of $34.2 billion and term deposits of $15.2 billion were paid interest at rates ranging from 1.98 to 2.06 per cent; all savings and term deposits mature in less than twelve months. 
The most significant of the bank’s “other liabilities” totalled $831 million. Of this sum, the largest line item was an amount of $250 million representing unsecured European Commission Financing that is being used to improve the competitiveness of the Guyana rice industry. A further $230 million was allocated to help improve Guyana’s export competitiveness in the specific areas of beef livestock, aquaculture and fruits and vegetables. 
With total capital and reserves of $7.47 billion each of its 40,000,000 shares have a book value of $186.82. As at its December 2011 year-end these shares were priced on the Guyana Stock Exchange at $275.77, representing a multiple of 1.47 times their book value. 
More recently, at the end of October 2012, the price of GBTI’s shares was $500.00; this represented a price/earnings multiple of slightly over 14 times and a dividend yield of about 2.2 per cent. 
One significant feature of the bank’s equity position is that its statutory reserve is equal to its share capital; this means that there is no need for it to place additional funds into the statutory reserve account. 
In his review, the chairman stated that the International Finance Corporation conducted a full risk management diagnostic of their structure. Many of the resulting recommendations have been incorporated into the bank’s 2012 to 2016 Strategic Plan. 
As these plans are progressively implemented, the benefits would be seen by its customers, employees and its more than 1,800 shareholders. 
Dollar quoted are Guyana dollars 
(GYD$203.70: US$1) 


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