Non-Consolidated Annual Report 2018

10 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | NON-CONSOLIDATED ANNUAL REPORT 2018 Non-performing loans during the year ended March 31, 2018 increased by $13.7 million or 23.6 percent. We will continue to work with our members who are experiencing financial challenges by o ering solutions geared at returning their accounts to a state of normalcy. Deposit interest rates in the market continue to trend downward and reached an average of 0.2 percent at March 2018. However, we at the BPWCCUL are proud to maintain some of the most competitive rates on deposits. This has resulted in deposit growth for the year of $99.7 million. The average rate of return on our deposits was 2.5 percent during the financial year. REVIEW OF FINANCIAL PERFORMANCE TOTAL INCOME AND NET INCOME Net income was reported at $16.6 million compared to $16.0 million in the prior year, an increase of $0.6 million or 3.6 percent. Total revenue increased from $85.3 million in 2017 to $90.9 million in 2018. This represented an increase of $5.6 million or 6.5 percent in revenue. The loan to asset ratio decreased in 2018 to 79.0 percent from 81.0 percent in the last financial year. As at March 2018, net loans grew by $57.6 million or 6.4 percent compared to $82.6 million for the year ended March 2017. NET INTEREST INCOME Net interest income grew by $6.2 million or 11.3 percent in 2018. Total interest income grew by $5.2 million or 6.4 percent while total interest expense decreased by $1.0 million or 3.9 percent. Interest income from loans increased by $5.5 million or 7.1 percent while interest from cash resources and financial investments decreased by $275.0 thousand or 8.0 percent during the financial year. OTHER INCOME Other income increased by $351.3 thousand or 8.9 percent during the financial year. The increase was mainly due to an increase of $753.1 thousand or 75.1 percent in the recoveries fee income. EFFICIENCY AND EXPENSE MANAGEMENT The Credit Union’s strategy during the financial year was one which focused heavily on value added member services which resulted in operating expenses increasing by $2.4 million or 12.4 percent compared to prior year. MANAGEMENT DISCUSSION AND ANALYSIS This section of the Annual Report provides a discussion and analysis of the financial position and performance of the Barbados Public Workers’ Co-operative Credit Union Limited (BPWCCUL) for the financial year ended March 31, 2018 as compared to the financial year ended March 31, 2017. ECONOMIC REVIEW At the end of 2017, the growth of the Barbados economy was estimated to increase by 1.7 percent. However, the most recent press release from the Central Bank of Barbados noted that the economy contracted by 0.7 percent during the first quarter of 2018. This performance reflects a decline in real output in the tourism sector, the slowing of construction activity, the late start of the annual sugar harvest and the slowdown of domestic demand arising from the Budgetary measures in the May 2017 Budget. The Central Bank has revised its growth projection for 2018 to range between -0.25 percent and 0.25 percent. The Governor of the Central Bank said in his presentation of the Central Bank’s review of Barbados’ economic performance in the first three months of 2018 that, “the ability to achieve this projected economic growth, depends on the speed of fiscal adjustment and the level of new investment”. He further outlined three areas of focus as priority, “Decisive stabilization measures that place the public finances on a sustainable path, alter the trajectory for the international reserves and create the conditions for strong durable growth are now needed.” The report further stated that the fiscal measures resulted in higher prices but the potential impact was mitigated by the exemptions from the hike in the National Social Responsibility Levy on a basket of consumer goods. Additionally, the upward trend in the international price of oil, particularly in the second half of 2017 caused domestic inflation to increase to 4.5 percent at January 2018 from 2.0 percent in 2017. The Financial Sector remained stable as reflected in the above- normal levels of capital adequacy and liquidity. It was noted that these trends were explained in part by the dampened growth in loans to the private sector, despite a relatively unchanged interest rate environment. The weighted average rates on deposits remained similar to the last reporting period. OVERVIEW Our member-centric approach has been the catalyst of our sustained growth. In 2018, we continued on a positive growth trend adding 5,184 new members. Consequently, deposits grew by $99.7 million or 10.4 percent while assets grew by $112.1 million or 10.1 percent. The key area of risk faced by the Credit Union sector relates mostly to credit quality, however, we have been able to manage our delinquency ratio which was reported at 7.4 percent. This was achieved by prudent management of our loan portfolio. We continue to o er payment solutions to our members including the recently introduced Interest Relief Amnesty and debt refinancing on various stages of delinquent loans. We’ve realized tremendous success in recoveries whilst improving our members’ credit rating and financial well-being.