Consolidated Annual Report 2020

BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 10 segments of the economy functioning by facilitating remote working arrangements across the private and public sectors. Private Sector Response – Financial Services The financial sector remained stable, with the banking system still well capitalized during the second half of the fiscal year. Excess liquidity or the cash ratio for banks rose from 18.5 percent to 20.1 percent. There was a reported modest increase in non-performing loans and increased provisions in the event of a worsening of credit quality, post the moratoria period which had a projected end date of September 2020. Macro-economic Outlook Overall, the global outlook remains highly uncertain with the IMF’s forecast for global growth declining to -4.9% as at June 2020. This, along with the depressed demand for global travel introduces significant downside risks to rapid recovery in our tourism sector, our primary engine of growth. With the reopening of our borders and the restarting of businesses and some private sector investment projects, we remain hopeful that there will be some slowing of the economic decline and a firming up of the foundation for recovery in 2021. This should be bolstered by steady resumption of tourism and other tourism dependent sectors. Group Overview We are a financial services group offering a wide variety of services ranging from routine deposits and lending to brokerage and insurance services. Born out of the cooperative spirit, our members and customers have been the driving force and catalyst behind our many achievements including our growth and transformation over the past five decades. As we enter into our fiftieth year as a Credit Union and tenth as a Group, we acknowledge and laud the foresight and vision of our founding members, and the support of our existing members and customers without whom, this journey would not have been possible. The COVID-19 pandemic arrival to Barbados in March 2020 coincided with the end of our reporting period and as a result did not significantly impact the Group’s performance. Adoption of New Accounting Standard International Financial Reporting Standard 16-Leases (IFRS 16) The adoption of International Financial Reporting Standard 16 relating to Leases (IFRS 16) resulted in changes in the presentation of rental properties used for Group’s varying operations. IFRS 16 requires lessees to recognized most leases on their balance sheets and to provide enhanced disclosures of the appropriate Lease Liability and Right-of-Use (ROU) Asset. As a result, the Group recorded a Right-of-Use Asset in its Property Plant and Equipment (PPE) of $5.3 million as per (Note 14) of the consolidated financial statements. The associated lease liability of $5.5 million represents the present value of the cumulative lease payments remaining over the term of the contract. Usual rental charges for the year were therefore split $305 thousand as a finance costs (Note 3) and the depreciable MANAGEMENT DISCUSSION AND ANALYSIS This section of the Barbados Public Workers’ Co-operative Credit Union Ltd. Group’s Annual Report provides a discussion and analysis of the financial position and performance of the consolidated operations of the Barbados Public Workers’ Cooperative Credit Union Limited and its subsidiaries (“the Group”) for the financial year ended March 31, 2020. The MD&A should be read in conjunction with the audited financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The Group includes the parent, Barbados Public Workers’ Cooperative Credit Union Limited, its subsidiary BPW Financial Holdings Inc., holding company for the CAPITA Group that includes subsidiaries CAPITA Financial Services Inc. (“CAPITA”) and CAPITA Insurance Brokers Limited (“CIB”). Economic Outlook COVID-19 Impact The impact of the COVID-19 pandemic on the local economy was materially significant as it disrupted business cycles, resulted in the cessation of activity in the tourism sector, caused business closures across other sectors and ultimately led to a series of national curfews. It was against this background that preliminary data, published for the first six months of 2020 by the Central Bank of Barbados in their “Review of the Barbados’ Economic Performance: January-June 2020” report, revealed economic output had declined by almost 15 percent. Public Sector Response As anticipated, reduced economic activity affected the public finances during the first quarter of the fiscal year 2020/2021. The primary balance which is the difference between Government’s revenue and non-interest expenditure, fell by just over $100 million relative to previous year. However, on the upside, it outperformed the target agreed with the International Monetary Fund (IMF). The Barbados Optional Savings Scheme (BOSS) was established by Government in July 2020 to help generate economic activity by diverting a portion of public workers’ salaries to fund capital works. In July 2020, $4.6 million were issued which $1.2 million was taken up by public servants and the remainder $3.4 million being sold to the secondary market to individuals and institutions. Private Sector Response – Non Financial Services Unemployment claims between March and June surged to over 33,000 with a dollar value exceeding $70 million due to the layoffs in the tourism, restaurants and related industries as well as job losses in other sectors. In an effort to minimize the impact of the reduction of customer spend and cash flows, businesses adopted various practices to reduce operating expenses including reduced working hours and temporary employment. These cost management strategies were widespread and played a significant role in softening the overall impact on unemployment levels. To cushion the impact and the effects of unemployment and reduced disposable income, lending institutions offered their clients moratoria on existing loans. Technology also kept

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