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Chief Executive Officer's Report
2007 was a year of great sucess and achievment for GBTI as we have exceeded our goals in most finanical categories, including net income, revenue, earnings per share and credit quality.
Economic Review
Guyana ’s economic performance in 2007 is expected
to be better than recent years based on 5.8%
growth recorded at June 2007. Output of the major
commodities of sugar, rice, bauxite and gold is
expected to surpass the 2006 results, and with better
international prices for rice and gold, the prospects for
increased incomes are high.
The price of oil (which has seen an unprecedented
rise in the last few years) was almost US$82 as of September 2007 and has contributed to rising food prices resulting in a local inflation rate of 13.5 percent at September 2007 compared to 4.45 percent at September 2006.In looking to 2008, however, we expect that ongoing
national projects including the construction of the
Berbice and Takutu River Bridges and the Skeldon
Sugar Modernisation Project, in addition to other
investment activity in oil exploration, should redound
to the benefit of the economy in 2008.
Banking Sector Review for 2007
Deposits
Total Deposits of the banking sector rose by 12.5% at
October 2007 to reach $174B, compared to the 9.0%
increase recorded for the corresponding period in
2006. Private sector deposits, which account for some
75% of total deposits, grew by 12.8% at October 2007,
compared to the 12.3% recorded for the corresponding
period in 2006. Savings deposits grew by 15% to
$101.8B, while Term deposits increased by 7.7% to
$36.4B at the end of the period.Lending
Total Loans and Advances of the banking sector
increased by $5.8B to reach $51.8B at October 2007.
An analysis of the subgroups shows that $3.0B of
this growth occurred in the household sector mainly
for housing and other household purposes. Sugar
accounted for $1.8B, the distribution sub-sector
for $1.0B while the timber and sawmilling
sub-sector accounted for $300M of the total
growth. Credit decreases were recorded in
shrimp and other fishing -500M; entertainment
and catering - $375M; other construction &
engineering - $200M and rice milling - $150M.Liquidity
Excess liquidity continues to be a feature of the local
banking sector and at October 2007, the commercial
banking system held excess liquid assets of $24.8B or
68% above the required level.This is higher than the
excess of $22.3B at December 2006.The commercial
banks' cash surplus on the minimum reserve
requirement was $4.2B at October 2007, compared
to the $4.1B at December 2006. Commercial banks'
holdings of Government Treasury Bills decreased
from $36.6B at December 2006 to $33.3B at October
2007.The Interest Rate
The 91 days Treasury Bill rate, the benchmark for the
interest rate structure, decreased during the year from
4.16% at December 2006 to 3.90% at October 2007.
The commercial banks' small savings rate remained
stable at 3.19% during the year.This situation gives
rise to a negative differential for income since the after
tax earnings on the 91 days Treasury Bill investment is
2.1% compared to the 3.2% paid on savings deposits.Exchange Rate
The average market exchange rate per US dollar
reached G$ 203.25 at October 2007, from G$201.00
at December 2006. The Canadian dollar continued to
strengthen in the market, moving from an exchange
value of G$172.42 at December 2006 to G$208.59
at October 2007.Review of GBTI’s Performance
2007 was a year of great success and achievement
for GBTI as we have exceeded our goals in most
financial categories, including net income, revenue,
earnings per share and credit quality. Total revenues
for the year rose 16% to 3.2 billion, and this growth
produced significantly higher profits as profit after tax
rose by 57% to $796 million. Earnings per share rose
by 57% to $19.89 and our share price rose 28% during
the year.
These outstanding results continued the strong returns
we have posted over the past four years, and in fact,
from 2004 through 2007, our earnings per share has
grown at an annual rate of 40%, despite the many
challenges facing the economy and the activity of our
many competitors.Our strong profit growth provides us multiple
opportunities for the growth of the Bank and
expansion of our business and product lines, giving
better capabilities for our personal, commercial and
corporate clients. Our good results also enable us to
deliver excellent value to our shareholders, and at our
upcoming Annual General Meeting the Board will
recommend a dividend of $5.00 per share –up 25 %
compared to $4.00 per share in 2006.Our dividend has grown at an annual rate of 27% over
the past 5 years, from $2.00 in 2003 to $5.00 today,
while our dividend payout has averaged 35% over the
past 5 years, making GBTI an extremely solid and
strong investment.Return on Assets
The improvement in net profit for 2007 resulted in an increase
in the return on average assets from 1.50 percent in 2006
to 2.02 percent in 2007.Return on Equity and Earnings per Share
Return on average equity improved to 20.01 percent
for 2007 compared to the 14.56 percent in 2006,
while earnings per share rose to $19.89 in 2007 from
the $12.65 in 2006.The book value per share is now
$107.59 compared to $91.22 in 2006.Operations
The hard work and dedication of our employees,
the support of the communities in which we operate
and our long-standing commitment to providing
outstanding service to customers have allowed us to
achieve excellent results for 2007.
Revenues
Revenues for 2007 amounted to $3,198M, an increase of 16.5% over that for 2006. Our revenue stream is shown below:
Revenue Items Loans and Advances Investments Foreign Bank Deposits Other Total ($000) Expenses
Total expenditure for the year was $2,222M compared to
$1,960M in 2006. Interest expense accounted for $877M an increase of 17.2% over 2006. Non-interest expense increased by 11%, caused mainly by higher staff costs.The amount charged against profit for the year as provision for bad and doubtful debts of 440M compared to the $510M charged in 2006. Management remains committed to maintaining expense discipline and operational efficiency in all business activities.
Total Assets
The Bank's asset base, net of contra items, has grown by $7.2B or 20.2% for the year, compared to the increase of $4.8B or 15.6% in 2006. Our share of commercial banks assets has grown from 19.8% at December 2006 to 20.1% at October 2007. Our mix of assets at the end of the year was 40.7% Cash Resources; 29.6% Government-backed and other Primary Securities; 22.7% Loans and Advances and 7% Fixed and Other Assets. Our prudent approach to risk will ensure that we maintain a strong and stable portfolio of assets and liabilities, and a level of liquidity conducive to efficient operations.Deposits
The Bank's deposit base grew by $6.1B or 19.4% for the year to $37.4B. This growth rate exceeds the 12.5% recorded in the banking sector at October 2007. Our savings deposit category continues to record strong growth ($2.9 B in 2007 versus $2.3B in 2006), given our rates of interest paid to customers. Our share of total commercial banks deposits has increased from 20.2% at December 2006 to 20.4% at October 2007.The Bank offers a full range of deposit products, including our Early Savers and Prime Life Accounts that cater to children up to age 17 and adults 55 years and older, respectively.
Investments
Total investments have declined by $642M for the year.
Our local investments continue to be concentrated
in Government Treasury Bills, the market for which
remains extremely competitive given the high
liquidity in the commercial banking system.We
continue to maintain a portfolio of foreign securities
and cash deposits as part of our objective to establish
a flexible and stable financial structure by considering
risk returns and yield differentials. Our investment in
securities is guided by the investment policy under the
guidance of an Investment Committee.Loans and Advances
The Bank’s loan portfolio at the end of the year stood
at $11.2B, reflecting a net growth of $1.4B (14.5%)
over Dec. 2006. New loans for the year totaled in
excess of $3B with facilities over $100M being
granted to customers in the pharmaceuticals, hotel,
fishing and distribution sectors. A review at year end
shows performing accounts amounting to $9.7B or
87% of the portfolio.Total non-performing accounts
at December 2007 stood at $1.5B and were 13% of
total loans compared to 13% at the end of 2006.
A sectoral analysis of the portfolio shows that the
distribution sub-sector accounts for $2.9B (26%),
the rice sector for $1.6B (14%) and the housing and
construction sectors each with $1.0B (9%). The major
area of decline in the portfolio over 2006 occurred
in the timber and sawmilling sector by $200M. The
Bank ’s share of total commercial bank lending has
remained unchanged at 22% over the past twelve
months.
The lending strategy for the Bank continues to be
based on our GBTI Quality Lifestyle and Commercial
Loan Plans, which offer sound lending options for the
personal and commercial sectors.
The distribution of our portfolio at December 2007 is
as follows:
Sector Agriculture Construction and Engineering Household Manufacturing Mining and Quarrying Services Total Rice Sub-Sector
The Bank recognises the importance of this sector to the national economy, and will continue to be the leading Bank in providing support to the sector. In August 2006, the Bank won the bid to manage a European Union 6.5 million Euros (G$1.6B) financial facility to increase the efficiency and the sustainability of the country's rice industry and in January, the Bank began the disbursal of funds. At the end of the year, the Bank had received a total of G$825M and had lent the sum of $631M.Loan Loss Provision
Loans and advances that are not serviced in accordance
with the guidelines of the Financial Institutions Act are
classified as non-performing.Total non-performing
loans at the end of 2007 were $1503M, up from
the $1,126M at December 2006. Write-offs for the year amounted to $20M. In 2007, the Bank set aside $440 million or 14% of total income to the reserve for loan losses, down from $510 million in 2006. Our accumulated provision for doubtful accounts stands at $1,450 million and is 96% of non-performing loans.
The Bank makes every effort to ensure asset quality
and takes active measures towards controlling its non-
performing exposure. We strenuously analyse market
conditions, and avoid the desire to increase returns by
taking substantially more credit risk. Over the years,
we have taken a conservative and responsible stance
in lending, and while this has cost us some business
and market share, we feel that it has contributed to the
strength of our asset quality and has positioned us well
for success in the future.Capital Adequacy
The Commercial Banks are subject to the risk-based
capital adequacy guidelines issued by the Bank of
Guyana in keeping with the Basel Convention. The
guidelines evaluate capital adequacy based upon the
perceived risk associated with balance sheet assets
as well as certain off balance sheet exposures, and
stipulate a minimum ratio of qualifying capital (Tier
I and Tier II) to risk-weighted assets of 8%. GBTI
remains well capitalised with the Bank ’s Tier 1 capital
adequacy ratio, which is regarded as a measure of the
quality of capital for financial institutions, standing at
18.67 % at December 2007. Total Tier I and Tier II
capital was 18.75% of risk-adjusted assets at December
2007,compared to 22.75 % at December 2006. This
level is well over the internationally established ratio,
and makes our institution one of the highly capitalised
banks in the local industry.
Risk Management and Internal Control
Risk management has always been a top priority for
the Bank, and in 2007 we continued to develop our
approaches to analyzing and managing both financial
and non-financial risks. Our risk management
processes are integrated within our daily operations,
which enable us to manage the overall portfolio in a
prudent manner.
Credit risk is controlled from the application stage
through a detailed approval and review process,
while regular portfolio analysis is performed to
monitor sector concentrations. Specific quantitative
tools and reporting mechanisms are employed for
the daily management of liquidity and market risks.
Operational risks are monitored through ongoing
review of procedures and constant staff training.
The Bank ’s internal control system is monitored and
managed by an Inspection Division that reports directly
to the Audit Committee of the Board of Directors. The
Division ’s Annual Work Programme focuses on the key
operating procedures and system of financial controls
that are designed specifically to address the risks to
which the Bank is exposed. The Division periodically
reviews the effectiveness of the internal control process
and makes appropriate recommendations for revisions
to the Audit Committee.Customer Service
Collaboration with our customers continued to be
central to our success, along with our commitment to
quality service. During the year we have significantly
expanded the products and services that we provide
to our customers and continued to make significant
gains in customer satisfaction across our branches and
customer segments in the ongoing process of meeting
our customers ’ needs.
We continued to invest in technology infrastructure and
capability in order to improve customer service and
during the year we concluded the process of choosing
a new core banking system that will significantly
enhance the efficiency, speed and accountability of
management decision making, allowing for substantial
potential cost savings. This new system will be
implemented by the end of the third quarter of the
New Year.
Our branch network, ATM /POS and telephone banking
resources give our customers the flexibility to access
their funds when and where they find most convenient.
During the year the Bank opened a new Branch on the
ground floor of the Buddy ’s International Hotel at
Providence. This Providence Branch is the first bank
in the community and will provide banking services to
the people of East Bank of Demerara. GBTI remains
committed to taking banking services to communities
across Guyana in order to improve the welfare of
residents and support the country ’s overall economic
development.
In November the Bank launched a menu of credit card
products in four categories: Visa Gold, Visa Classic,
GBTI Gold and GBTI Classic. The Visa Credit Cards
are issued in US dollars with limits of US$10,000 and
US$5,000, while the GBTI Credit Cards are issued in
Guyana dollars with limits of $1,000,000 and $500,000.
The issuance of the Visa Credit Cards follows one
year on our launch of the Visa Travel Classic Prepaid
Card and represents a fulfilment of our goal to make
available the widest range of international products to
our customers.Human Resources
We recognize that our employees are our most
valuable asset as the Bank ’s successes come through
the collective efforts of all employees. Consequently
our personnel policies and reward systems are
designed to provide maximum motivation to all of our
employees through competitive employment terms
and excellent opportunities for ongoing training and
career development.
Employee training during the year was intensified
in certain specialties to further improve the staff ’s
knowledge and proficiency. Further, the Bank
continued to support staff seeking to develop their
own expertise through academic studies in relevant
areas by offering study grants, interest free loans and
time off to attend classes.
The Staff Recreational Centre continues to provide the
appropriate environment for staff activities, which are
held on a regular basis.Community Relations
Our strong connection with our customers and local
communities remains at the core of our community
banking strategy. The Bank is committed to the ideal
of a strong corporate social responsibility and this was
evident in our several community activities.Within
each community where a GBTI branch is located, our
goal is to align our business with community needs so
as to strengthen the bond between the Bank and the
community. We are conscious of the fact that if our
customers and local communities are successful, and
we are relevant to them, our own success will follow.
Donations to charitable organisations and other
institutions remain an integral part of the Bank ’s
community support programme, and during the
year we made donations to several charities to aid
their programmes for assisting the disadvantaged in
society.
The branches continued their various community
activities during the year which included sponsorship
of sporting, educational and cultural activities,
career guidance talks, hosting of school students and
repainting of pedestrian crossings.
The Regent Street Branch launched their Signature
Activity during the year – an Annual Inter-Secondary
School Impromptu Speech Competition.The
inaugural competition involved Fourth Formers from
sixteen secondary schools and saw keen competition
among the students.The victorious team in this year ’s
competition was President ’s College.
The Lethem and Providence branches, our two newest
branches, have begun to impact significantly on their
respective communities. The Lethem Branch hosted
a booth at the Rupununi Expo held in November to
showcase local produce and services offered in the
community. The booth was visited by approximately
500 persons who received information from the staff
on the various services offered at the Branch. The
branch also joined with the community in the activities
to observe Amerindian Heritage Month 2007, observed
in September. The Providence branch held a “New
Account” Promotion over the period May to July, 2007.
Residents who opened accounts during the period won
prizes of household items from the Branch.
In December, the Bank held its usual Launching of the
Almanac. The theme for the 2008 is “The Beauty of
My Native Land ”, an essay competition for children
that encouraged them to identify places of interest
around the country that are relatively unknown as
tourist destinations. This year ’s response was again
overwhelming, with in excess of one hundred (100)
entries being submitted, out of which six (6) were
selected to feature in the 2008 Almanac, while the
next best twelve (12) are on display at the Water Street
office.
Our involvement in these activities underscores our
dedication to building strong relationships with our
customers and the communities within which we
operate.
Future Outlook
Looking forward to 2008, we are fully prepared to face
new challenges and capitalize on every opportunity
our local market has to offer. The outlook for our
principal lines of business, including corporate and
retail banking services, remains favourable owing to
the improving economic performance our country is
experiencing.
We aim to meet every challenge and seize every
opportunity with the same energy, enthusiasm and
intensity that led to our success in 2007, and drive
toward ever-higher growth goals throughout 2008.
The Bank is developing the skills and tools that
enable us to grow by our risk and reward management
philosophy and culture of shared responsibility,
which is important in helping us manage the broad
range of risks, including market risks and operational
risks related to technology, systems, events, or legal,
compliance and reputation issues.
To improve our services and increase awareness among
potential clients, we will launch several important
initiatives this year, which will consist of, among other
things, a significant boost in our marketing campaign
and more intense and targeted advertising and public
relations activities.
The construction our new Head Office will commence
during the first half of the year.We are very excited
about this project and its ability to solidify the Bank ’s
presence on the local financial services market and add
greater value to the service we offer our customers.
All of this gives us confidence that, if the business
environment remains stable, we can maintain our
profitable growth momentum. We look forward to
continuing to serve the interests of our shareholders,
our clients, our employees and the communities in
which we operate, in 2008 and beyond.
Acknowledgements
In closing, I would like to express my appreciation
to our customers for their continued support and
confidence, and to our employees for their commitment
and dedication to the Bank.
I would also like to thank all the members of Board of
Directors for their support and guidance during what
has been a year of great progress and success for the
Bank.Mr. Radhakrishna Sharma
CEO
Downloadable copy of CEO's Report (12.31MB PDF)
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