Clarien Reports Financials & $12.6M Investment

April 18, 2016

Clarien Bank Limited, a wholly-owned subsidiary of Clarien Group Limited [CGL] announced that it has continued to make significant investments in expanding its product offerings, technology, risk and operational infrastructures.

Clarien said that “despite the continued economic challenges on-island” they “remained focused on its ongoing long-term goal of building a first class financial institution in Bermuda.”

The company added, “During 2015, Clarien successfully launched a new debit card platform and Clarien iTrade, a client-directed online brokerage service, and finalised work on two major projects which launched in Q1 2016 – a new suite of VISA Credit Cards with improved security features and an enhanced rewards programme, and Clarien iBank, a completely new online banking platform that will provide personal and commercial users improved control, security and payment convenience.

“Additionally, Clarien is pleased to announce that following months of intensive planning and due diligence, Clarien Group Limited, owner of Clarien Bank Limited, announced today that its current sole shareholder, Edmund Gibbons Limited along with a new investor, Portland Private Equity is to invest a further $12.6 million into the Bank.

“The additional injection of capital positions Clarien for substantial growth opportunities and sustained profitability in the future as it looks to leverage the broad PPE and Edmund Gibbons Limited networks.

Results Overview:

Clarien said, “For the year ended 31 December 2015, Clarien Bank reported a net profit of $0.5m, a similar figure to the previous 12 months.

“Over the past 12 months we have seen a trend in clients using cash to pay down mortgages in order to avoid continued debt. The loan portfolio reduced $66.8m from $876.5m at December 31, 2014 to $809.7m at December 31, 2015.

“As a result, interest income on loans, mortgages and credit cards was down 7% in 2015 to $54.4m from the previous year’s figure of $58.5m. Our asset management book produced lower non-interest income as a result of lower market values over the year.

“Underlying earnings were supported by a $4.5m reduction in operating expenses to $47.6m, which was 9% lower than the previous year’s figures of $51.1m. The reductions were achieved through substantial savings on professional fees, improved office efficiencies, disciplined budgeting and a $1.9m reduction in salaries and benefits.

“Non-performing loans, being loans past due by 90 days or more, plus impaired loans, represented 14% of the total loan portfolio at 31 December 2015, of which 8%, or $71.2 million, were impaired, up from 7% a year ago. Specific provisions on balance sheet against impaired loans increased from $18.0 million in 2014 to $20.7 million in 2015.”

Ian Truran, Chief Executive Officer, commented, “During 2015, Clarien Bank continued its ongoing commitment to improved efficiency throughout the organisation. We continue to work on managing our expenses and successfully achieved a substantial reduction in our operating expenses without compromising our overriding goal of focused and superior customer service.

“While we are encouraged by indicators in the property market that the Bermuda economy is showing signs of recovery, many of our clients still face challenges in servicing debt payments. There was less borrowing activity during the year, and we decreased our net provisions on loan losses by 7% from $9.8 million in 2014 to $9.2 million in 2015.

“We continue to invest in automated solutions as customers seek more mobile, personalised and remote access banking options. We are excited about the recent launch of our new suite of Clarien VISA credit cards and Clarien iBank, our new electronic banking platform.

“These products are built on market-leading security features, functionality and 24-7 support that customers demand and deserve, and demonstrate our ongoing commitment to developing and delivering first-class products for our clients.”

“Additionally, increased activity in the first quarter of 2016 represent greater quality lending opportunities, a sign that Bermuda’s economy has “bottomed-out” and is on the road to recovery as individuals and entities reinvest. The timing and nature of the EGL and PPE partnership in CGL will enable Clarien Bank to leverage mutually beneficial opportunities in the future”.

Investment by Edmund Gibbons Limited and Portland Private Equity

In addition, CGL, owner of Clarien Bank Limited, announced that its current sole shareholder, Edmund Gibbons Limited [EGL] along with a new investor, Portland Private Equity [PPE] is to invest a further $12.6 million into the Bank.

James Gibbons, Director of EGL, CGL and Clarien Bank Limited [“Clarien”], commented: “This transaction is a significant development for Clarien in terms of capital and strategic growth.

“In addition to exceeding regulatory capital requirements under Basel III, it will enable us to not only invest further in world-class financial products and services but also to access Portland’s wealth management capabilities and expand our offerings into regional and global markets.”

“It is an important investment in Bermuda that reflects the quality and sophistication of the services we continue to provide as one of the world’s premier financial jurisdictions. EGL and PPE both share similar business values in that they both take a long-term view in all of their investments.

“Building partnerships such as these create stronger organizations with diverse and deeper intellectual property, more efficiencies, broader capabilities and extensive global reach to new markets and client segments.”

“PPE is a successful and respected institutional private equity fund manager focused on investments in the Caribbean, Central America and Andes regions. PPE’s investors include several large and prominent global institutional investors,” Clarien said.

“The firm grew out of the family office of its Chairman, Mr. Michael Lee-Chin, a Jamaican Canadian billionaire, which has been an active investor in the Caribbean since 2002. PPE’s core investment sectors are financial services, energy and telecommunications.

“It has been responsible for building regional billion dollar platform companies in these sectors [National Commercial Bank [Jamaica] Limited [“NCB”]; InterEnergy Holdings Inc.; and Columbus International Inc. respectively].

“Its inaugural 2007 vintage institutional fund, AIC Caribbean Fund, according to fund performance consultant Preqin, is a top quartile performer in the global PE category for its vintage.

“PPE has launched a 2014 vintage successor fund, Portland Caribbean Fund II, and has continued its emphasis on the financial services, energy [including renewables], and telecommunications sectors. Limited partners in PPE’s funds include US State pensions, US and Caribbean corporate pensions, insurance companies, multilateral institutions, and the general partner team.

“PPE’s head offices are in Burlington, Ontario, Canada with regional offices in Kingston, Jamaica and Bridgetown, Barbados. As a result of the transaction, it is expected that Clarien and Portland connected entities will forge mutually beneficial commercial ties.”

Mr. Lee-Chin, Chairman of Portland Holdings, PPE and NCB, commented: “Our investment in Clarien and Bermuda continues the strategic expansion of our regional interests. This transaction follows NCB’s intended acquisition of a 29.9% stake in Guardian Holdings Limited, the Caribbean’s leading insurance company, announced in November 2015.”

“We are excited by our partnership with Clarien and we look forward to working with their management team to develop opportunities and growth both within the Caribbean region and beyond.”

Mr. Lee-Chin, who was awarded the Order of Jamaica in 2008 for his significant contributions to business and philanthropy, built Canada’s largest privately held mutual fund business from assets under management of less than $1 million to well over $15 billion.

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