Capital G 2011 Earnings: $3.2 Million

March 15, 2012

Capital G Bank Limited today [Mar.15] announced earnings of $3.2 million for the year ended December 31, 2011, down 7% from $3.4 million recorded for the same period last year. The Bank’s net operating income before loan loss provisions climbed to $58.4 million, equivalent to a 28% improvement from $45.8 million in 2010.

Ian Truran, the Bank’s President & Chief Executive Officer, said, “As a result of the successful amalgamation with First Bermuda Group (FBG) and sustainable growth experienced in 2011, our loan book has increased substantially this year to $968 million, up $171 million from $797 million in 2010. Similarly, customer deposit levels remained robust, increasing in excess of 10% year-over-year to $1,207 million in 2011”.

Net interest income (NII) before loan loss provisions increased by $10.5 million, or 28%, to $47.9 million, with FBG contributing $7.2 million in 2011. The increase in NII helped to offset the increase in operating expenses which grew to $48.5 million from $40.8 million.

Mr. Truran stated, “Capital G continues to invest in technology to secure future operational efficiencies and expand the Bank’s services and product offerings.

“It was particularly pleasing to note that the diversification of our businesses, including our increased focus on integrated wealth management and business banking, helped to raise the Bank’s net fee and commission income from $6.2 million in 2010 to $8.5 million in 2011, an increase of $2.3 million, or 38%.”

Mr. Truran continued by saying, “Net Income has remained comparatively flat yearover-year, in large part due to the challenging economic environment still facing us.

“Our 2011 results have been particularly impacted by a continuing decline in residential property prices, affecting our collateral valuations and management’s estimation of loan loss provisions, which we have increased by $5.2 million to $6.7 million in the current year.”

Capital G’s focus continues to be on sustainable growth combined with strategic amalgamations and acquisitions as evidenced over the past few years with KAST Investment Management, Orion and First Bermuda Group. The diversification of revenue, either through the entry into new business lines or by prudent pricing and the generation of new fee revenue has been successful.

“We are very grateful to have such a highly committed workforce and loyal client base and thank both particularly during the recent mergers and acquisitions for their commitment and dedication to delivering the highest levels of service to our new family of clients.”

Mr. David Carrick, the Bank’s new Chief Financial Officer, stated, “Although the Bank continued to operate in a historically low interest rate environment, strict adherence to prudent balance sheet management, as well as the addition of FBG, contributed to an improved net interest margin of 3.68% in 2011, up from 3.50% in 2010.

“Over 98% of our investment portfolio is now in AAA or AA rated bonds and while we had some exposure to Northern European countries at December 31, 2011, subsequent to year-end we disposed of our European corporate investments with immaterial income statement impact.”

Mr. Carrick continued, “While we did add to our loan provisions, for both specific and collective provisions, in anticipation of potential future losses on a number of loans, our traditionally conservative approach to lending continues to prove beneficial and no losses or impairments have been taken on our commercial loan portfolio.

“Total impaired loans are $21 million at the end of 2011, representing 2.15% of our gross loan portfolio, compared to $5.6 million in 2010, which equated to 0.70% of gross loans at that time. In addition, the Bank’s capital ratios remain strong with a Tier 1 ratio of 14.09%, well above the Tier 1 regulatory minimum of 8%, although down from last year’s 16.88% due to the growth in our balance sheet. Similarly, the Bank’s tangible equity ratio increased to 6.87% from 6.75% in the prior year.”

Mr. Truran concluded, “Overall we are very pleased with the Bank’s performance in 2011. The weak economy posed significant challenges, especially in respect of loan portfolio quality and appropriate provision levels. First Bermuda Group operations have been successfully and smoothly integrated with those of the Bank and we now offer banking services at two locations in Hamilton under the Capital G brand.

“We have grown net interest income and fee income substantially this year, further developed our business banking services and more fully integrated our private banking and wealth management solutions. In addition, we continue to support the community through our Giving Back donations fund, emphasizing contributions to social services, youth development and education, including scholarship awards and bursaries for deserving students.”

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Comments (4)

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  1. Truth is killing' me... says:

    These figures make Butterfield Bank look pretty good right now considering they posted a better profit. What I don’t like about these numbers is the “Total impaired loans are $21 million at the end of 2011.” This means that if an average price of a house in Bermuda is 1 million then there are 21 families on this island that went delinquent on their house payments and lost their houses. Correct me if I’m wrong.

    • LLB says:

      You are accurate. That is quite concerning; I picked out the delinquency figure, as well. If the averages have come down, as reported in the media, the number of families is even higher.


    • Mad Dawg says:

      The amount represents the amount of outstanding loans, not the full value of the house. Therefore this could easily represent 50 impaired mortgages.

      I am not sure the word “impaired” necessarily means foreclosure has happened. It means the scheduled repayments are seriously delinquent.

  2. so-n-so says:

    correct. plus it increased it loan loss provisions to $6.7 million. this is setting aside money for loans that you think you might not recover. so that is a total of about $26 million BMD worth of real estate mortgages that have gone bad.