Consolidated Annual Report 2018

BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2018 11 OUTLOOK The financial sustainability of our members and customers continues to be our primary concern. As a Group we have seen how the current economic environment has impacted their disposable incomes, their ability to access new loan facilities and to service existing commitments. The above has created challenges for the Group in terms of how the deterioration in credit quality is managed, thus leading to the need for on-going reassessment of capital levels, identifying stress points and mitigating risk exposures. The Group, having grounded itself deeply in the values of being committed to serving its members, customers and communities has embarked on various strategies in response to the challenges. This taken together with our sound financial position will ensure that the Group remains a beacon of strength and a trusted financial partner for our members and customers well into the future. Another challenge which the Group encountered during the year was the combination of excess liquidity due to deposit growth and lower than expected loan growth. To manage this situation, various actions including lowering the interest rates on savings and deposits were taken so as to control the cost of funding and protect the interest rate spread. Going forward, the Group plans to seek options in which it could utilize excess liquidity through diversification thus creating new revenue streams and the leveraging of our membership and customer base. ECONOMIC REVIEW: According to recent Central Bank economic reports, the Barbados economy is estimated to have contracted by 0.7 percent during the first quarter of 2018. The financial system remains stable and is characterized by weak private sector credit demand that continues to contribute to a banking system marked by high levels of excess liquidity and historically low interest rates on savings and deposits. ECONOMIC OUTLOOK: The Central Bank has revised its growth projection for 2018 to a range between -0.25% and 0.25%. The economy continues to encounter significant macroeconomic challenges stemming from declining international reserves, weak public finances and the absence of measures that can stimulate sustainable growth over the medium term. Numerous corrective actions are needed in the economy and the Group will continue to monitor the economy and respond in ways that provides assistance to our members and customers. CONSOLIDATED FINANCIAL STATEMENT HIGHLIGHTS REVENUES: For the financial year ended March 31, 2018 the Group earned total interest revenue of $101.1 million, up from $95.2 million for the previous year. This represented an increase of $5.8 million or 6.1 percent for the year and is attributable to the steady growth in both consumer and mortgage loans across the Group. Income generated from non-interest sources increased by $525.2 thousand or 9.4 percent over prior year, primarily as a result of bad debt recoveries. NET INTEREST INCOME: The strategic lowering of the savings and deposits interest rate during the year along with prudent management of the interest spread resulted in consistent growth in net interest income during the year. Net interest income moved from $61.8 million in 2017 to $68.9 million at March 31, 2018. This represents a $7.0 million or 11.4 percent increase. This was positively impacted by the full year interest revenue from last year’s record loan growth and a reduction in funding costs on deposits and external debt. NET INCOME: The Group earned a consolidated net income before levies and taxes of $18.3 million for the year ended March 31, 2018 compared to $16.8 million for the previous year. This represented an increase of approximately $1.5 million or 8.9 percent above the prior year. OPERATING EXPENSES: Total operating expenses, inclusive of taxes, increased from $46.5 million in 2017 to $50.7 million in 2018. This was principally driven by the establishment of another branch, launch of our Mobile Financial Centre, repairs and maintenance, staff costs, publicity and promotion, membership security, staff and members’ training, rent and utilities. During the year, there was a marginal increase in staff costs of $300.6 thousand mainly due to increments and staff hired for the new branches. The growth in deposits and loans in the Group resulted in the increase of membership security expense from $2.7 million in 2017 to $2.9 million in 2018. ASSETS: Total assets of the Group stood at $1.4 billion at March 31, 2018. This represented an increase of $130.5 million or 9.9 percent over the previous year. At March 31, 2018, the Group’s consolidated net loans and advances stood at approximately $1.2 billion, as compared to $1.1 billion at the end of March 31, 2017. MANAGEMENT DISCUSSION AND ANALYSIS 0 200000 400000 600000 800000 1000000 1200000 1400000 1600000 2014 2015 2016 2017 2018 1,017,049 1,090,678 1,216,098 1,315,363 1,445,888 In BD$'000 Total assets 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 2014 2015 2016 2017 2018 11,127 9,642 13,182 15,953 17,367 In BD$'000 Net Income