11 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 charge associated with the ROU assets was $1.3 million (Note 14) to bring the total impact to $1.6 million comparable with a rental expense. International Financial Reporting Standard 9 (IFRS 9) The Group adopted IFRS9 accounting standard in 2019 which requires the consideration of current and future events which could adversely affect the loan and investment qualities, and to estimate and record its likely impact. As a result of this forward-looking analysis, the Group accrued or added an additional $4.1 million in expecting credit losses in the coming fiscal as non-performing loans are projected to increase to 12.36 percent in the next 12 months, up from 10.0 percent at year end March 2020. This amount is included in note 6, as a portion of the total expected credit losses. Snapshot of Credit Union’s Performance: In 2020, we continued our positive performance of prior years in the areas in net income, deposits and membership growth. Despite challenging economic conditions, we achieved substantial growth and once again saw more persons, approximately 5,700, selecting the Barbados Public Workers’ Co-operative Credit Union Limited as their financial institution of choice. This represented a 6 percent overall increase in membership year-over-year. With our success anchored to the quality of service we deliver, staff continued to focus their efforts on transforming the member experience, as evidenced by the 96.0 percent service rating on the annual customer satisfaction survey. The increase in membership resulted in the Credit Union’s deposits growing by $105.0 million (2019 - $119.2 million) or 9.0 percent. The Credit Union pro-actively lowered interest rates on the mortgage and vehicle portfolios during the year to ensure members were afforded solutions that were highly competitive comparable to the market. Mortgage rates were lowered to 4.95 percent compared to 6.95 percent, while motor vehicle loan rates were as low as 5 percent for new vehicles and 7 percent for used vehicles. This resulted in growth of $25.1 million in transport loans, while mortgages grew by $21.8 million or 6.8 percent. Overall loan growth for the Credit Union was recorded at $48.5 million or 4.9 percent. Along with this growth, the Credit Union’s Statement of Financial Position and Income Statement remained robust and performed in line with expectations in most major areas: • Overall cash resources was $294.9 million (2019 - $233.6 million) • Total interest income was recorded at $89.9 million which was relatively consistent with prior year, interest expense was reported at $23.5 million (2019 - $26.1 million). • Non-interest income grewby $740 thousand or 19.6 percent. • Expected credit losses increased by $2.3 million over prior year to reach $6.1 million. • Total operating expenses reached $22.5 million (2019 - $21.5 million) at the end of the fiscal. Notable increases were reported in membership security which grew by 1.1 million or 35.5 percent. This represents the cost to provide insurance coverage on loans and deposits to membership. The cost during the year increased to $0.40 per thousand as compared to $0.30 per thousand in the prior year. Snapshot of CAPITA’s performance As it transitions into its 10th year of operation, CAPITA continues to realize steady growth, increasing assets by $ 26.5 million or 9.4 percent over the prior year to reach $ 307 million at March 31, 2020. Income before de-recognition of Government securities, levies and taxation at March 31, 2020 was approximately $2.5 million (2019 - $1.9 million) and net income after tax was $1.6 million for the 2020 fiscal period versus $734 thousand at March 2019. In an environment where technology continues to shape the future of the financial services sector, CAPITA also started to evolve by entering the digital payment space to offer products and services. As part of its planned income diversification strategy, it continues to work with the Co-operative and Credit Union Leagues in Barbados and St. Lucia to deploy a number of services including ATM, Debit Card and Credit Card services. In December 2019, CAPITA in conjunction with the St. Lucia League created a historic milestone by launching the first ATM Network for Credit Unions on the island. For the first time ever, members of participating Credit Unions are now afforded the benefit of having debit cards that can be used at any of the local ATMs in the Credit Union network to access their accounts. Similarly, in Barbados, an international Debit Card Project is underway that will allow participating Credit Unions to be able to issue international debit cards to members to replace their existing local only cards. On completion of this project an international credit card project is also to be introduced to the local Credit Union sector, providing services to those members who previously may not have been able to gain access. Group Performance Summary: The Group rebounded strongly from a previous financial yearend that was marred by two exceptional expenses to end with a net income before levies and taxation position of $19.4 million as compared to $11.5 million for the prior year period ended March 31, 2019. These two exceptional expenses, a loss on Government of Barbados Securities of $4.0 million and a $2.9 million write down on goodwill, together accounted for $6.9 million out of the total variance of $7.9 million. 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 2016 2017 2018 2019 2020 1,001,430 1,099,233 1,174,576 1,235,760 1,311,851 In BD$'000 Loans and advances 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2016 2017 2018 2019 2020 1,037,172 1,138,486 1,259,922 1,400,074 1,527,678 In BD$'000 Deposits
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