Republic Bank Limited
30
ManagingDirector’sDiscussionandAnalysis
2
Executive
LoansandAdvances
All figures are in TT$ Millions
2011
2012
2013
2014
2015
Performing Loans
21,477
22,928
24,640
26,513
32,370
Non-performing Loans (NPL’s)
732
778
948
974
1,250
Gross loans
22,209
23,707
25,589
27,487
33,619
Loan Provision
(343)
(390)
(353)
(391)
(611)
Net Loans
21,866
23,317
25,236
27,095
33,008
Contingency Reserve
455
453
654
642
642
Non-performing Loans to Gross Loans
3.3%
3.3%
3.7%
3.5%
3.7%
Loan provision as a % of NPL’s
46.8%
50.0% 37.2%
40.2%
48.9%
Provision and Contingency Reserves
as a % of NPL’s
109.0% 108.2% 106.2% 106.1%
100.3%
TOTAL LIABILITIES
50,625,193
49,096,331
43,115,940
Loansandadvances
Through sound risk management practices, we were able to keep
the non-performing loans (NPL’s) to gross loans ratio at 3.7% at
September 30, 2015 – a slight increase of 20 basis points over the
3.5% recorded in 2014. This deterioration was primarily due to
our subsidiary in Ghana for which we increased the level of NPL’s
after acquisition to bring in line with the Group’s stricter policy for
recognition of NPL’s. Ghana’s NPL’s/ Gross loans stood at 14.3% at
September 30, 2015 – up from the 10.43% at December 31, 2014.
The Group’s loan provisions coverage ratio increased to 48.9%, up
from the 40.2% reported in 2014, reflecting the higher levels of
loan provisions being booked.
The Group seeks to achieve at least 100% provision for non-
performing loans through specific and inherent risk provisions,
which are booked through the statement of income and through
a general contingency reserve, which is booked directly through
equity. As at September 30, 2015, the combination of specific and
general provisions represents 100.3% of NPL’s, slightly above the
target of 100%.
IncomeStatement
The 2.5% growth in profits was driven by a $235 million or 10.6%
increase in net interest income, arising from a $5.9 billion or 21.8%
growth in the loan portfolio and the recovery of $123.4 million after
tax on a non-performing facility. This was offset by an increase in
operating expenses of $212.4 million and impairment expenses of
$108.8 million. The increase in operating expenses is attributable
mainly to the consolidation of HFC Bank (Ghana) Limited (HFC) and
Republic Bank (Suriname) N.V. which amounted to $89.4 million.
Impairment expenses of $52.1 million (net of minority interest)
was recorded by HFC to bring its loan provisions in line with Group
policy and $56.7 million was booked by Republic Bank (Cayman)
Limited relating to loans and goodwill impairment.
While profits grew by 2.5%, average assets grew at a faster rate
of 7.2%, resulting in a decline in the Return on Assets (ROA) from
2.10% in 2014 to 1.97% in 2015. Total assets of $5.5 billion were
added from the acquisition of subsidiaries in Ghana and Suriname,
but the full extent of the profitability of these entities is not reflected
in the Group’s results as they were done close to the end of the
fiscal.
Likewise, a 4.3% growth in average equity also outpaced growth
in profits, resulting in a decrease in the Return on Equity (ROE) from
14.33% in 2014 to 14.09% in 2015.
