able to reduce its staff cost by 3

Sir Errol Allen Chairman

CHAIRMAN’S REPORT

A LegAcy of PLAnning

A Future of Growth fuelled by Positive Performance

The consistent and modest performance of the bank remains rooted in the Group’s strategic focus of a “Safe and Sound/Cautious Profitable Growth”

PERFORMANCE OVERVIEw

The Bank of St. Vincent and the Grenadines Ltd. ended the year in a relatively strong position with modest profitability, adequate capital and high levels of liquidity. This performance is highly commendable in the context of the ongoing economic challenges where overall economic growth is still very much subdued and the recovery process is still stuttering amidst global financial and political uncertainties.

Profit before tax was $7.635M, a slight reduction of $0.430M from the prior year’s result. Net interest income was impacted positively by the reduction in the minimum savings rate to 2%. The profit after tax however, recorded a significant reduction from $5.859M to $4.936M primarily as a result of the increased levels of provisioning which were $2.552M higher than the previous year. The more aggressive provisioning adopted in 2016 was commensurate with the rise in nonperforming loans in 2016 and a slight deterioration in the asset quality with the non-performing loans (NPL) ratio increasing from 6.36% to 7.78%. This level of capitalization is critical as the Bank prepares for the inevitable adoption of the new and more rigorous international accounting standards – the International Financial Reporting Standard 9 (IFRS 9) to be introduced in January 2018.

Interest expense continued its downward trend in 2016 declining by 9.1% (from $19.4M to $17.6M). This was attributed largely to the effective treasury management practices by the finance and investment arm of the Bank.

Operating expenses remained relatively flat for the period at $30.9M although it was worthy of note that the Bank was able to reduce its staff cost by 3.6%.

The consistent and modest performance of the bank remains rooted in the Group’s strategic focus of a “Safe and Sound/ Cautious Profitable Growth” which is realistically aligned with the economic realities of St. Vincent and the Grenadines and by extension the other territories of the Currency Union.

Total assets grew from $899.2M in 2015 to $971.3M in 2016, representing an increase of 8.02% over the period stemming mainly from increased customers deposits ($59.9M). The growth in deposit was mainly fueled by the introduction of punitive measures adopted by some foreign commercial banks which led to a significant migration of savings deposits from these institutions to the indigenous banking and nonbanking sectors.

The Bank’s capital position remained strong and ended the period with a Capital Adequacy Ratio (CAR) of 20.51% which is comfortably above the regulatory requirement of 8%. The 2016 performance was also heavily impacted by the Bank’s prudent enterprise-wide risk management practices in credit underwriting and administration; operational risks containment practices and increased vigilance and observance of regulatory/compliance issues. With the growing menace and increased threats posed by the practitioners of money-laundering and international financial crimes – who continue to ply their trade with increasing sophistry - the Bank has maintained the appropriate internal controls to minimize these control environment risks. Suffice to say that the Bank did not record any material compliance or regulatory infractions over the review period.

Bank Of St. Vincent and the GrenadineS Ltd

Annual Report 2016

A LegAcy of PLAnning

A Future of Growth fuelled by Positive Performance

During the year, the Bank continued to give high priority to the development of its human resources as a critical component of its customer service delivery and the execution of its continuous learning and developmental programme for the Bank’s staff. The key objective was to continue to build the requisite competencies and capacities in the various areas of banking to enable staff to become more responsive to the increasingly volatile financial services sector. recognition has inspired more young people to continue to strive for excellence.

In 2016 over 25 employees received training in the different operational areas of the Bank. An amount of $0.195M was spent on training and development as we continued to seek synergies and cost effective solutions jointly within the ECFH Group. The training activities were primarily directed at the critical areas of banking, including audit and accounting, credit underwriting and management; compliance risk management and information technology.

Reimbursements were granted to three (3) employees on completion of their diploma programs in diversified academic disciplines. The Bank also continued to support persons who voluntarily embarked on educational and professional careers – that were considered relevant and aligned to the Bank’s mission and goals. This was achieved by offering concessionary rates on loans and bursaries for costs incurred by graduates. The Bank also continues to recognize and reward those employees who have performed above average in their respective job functions. For most of the year, the Bank expended a lot of its time and energies in pursuit of the Group’s new strategic initiative to forge ahead with the closer integration of its constituent subsidiaries with Bank of St. Lucia Ltd (BOSL), EC Global Investments Ltd. and Bank of St. Vincent and the Grenadines Ltd. (BOSVG). It was out of this initiative that the Group sought to rationalize its management structure by appointing Country Managers for both BOSL and BOSVG. Two of the Bank’s senior executives, Mr. Derry Williams and Mr. Bennie Stapleton were transferred to BOSL, as Country Manager and Group’s Chief Financial Officer respectively.

The idea behind the creation of one-amalgamated Bank was driven by the urgent imperative of creating a common shield to protect small indigenous banks against external adversities and shocks posed through derisking by international correspondent banks; the introduction of rigorous IFRS reporting standards and the tightening of regulatory and compliance rules. It was also seen as the most pragmatic approach towards the longer term sustainability and enhanced competitiveness of stand-alone indigenous banks in the sub-region. Unfortunately, this amalgamation initiative floundered towards the end of the financial period. The excellent performance of the Bank could not have been possible without the commitment and selfless efforts of the Directors of the Board as they continued to jealously guard their fiduciary and governance responsibilities to the depositors and shareholders of the Bank. The Bank benefitted immensely from the sharing of their professional experiences and contributions in helping to shape the policy direction of the Bank. We extend a special thank you to past Director/Chairman of the ECFH Board Mr. Lisle Chase whose leadership direction proved invaluable in helping to chart the course towards the further integration of the Group. I wish also to specially recognize the contribution of Director Andre Iton for his skillful and technical leadership role in the Inter-Governance Committee (IGC) created to coordinate the work of the integration process and for fashioning a road map for the amalgamation of the two indigenous banks.

I wish also to express on behalf of the Board of Directors our sincere appreciation and thanks to our shareholders, stakeholders and staff of the bank for the confidence that they continue to place in us and for their role in helping to shape and keep alive the vision of BOSVG.

Over the period the Bank continued to observe and honour its corporate social responsibility by extending financial assistance amounting to $0.333M to over eighty five (85) organizations/individuals in almost every conceivable social sector and sporting discipline. We continue to focus and encourage youth development activities and initiatives recognizing their vulnerability and the pivotal role they play in helping to shape our economic, social and moral landscapes. Our promotional theme – The Promise of a Brighter Tomorrow – featuring young talented Vincentians as role models continues to resonate positively within the communities that we serve. We continue to receive excellent reviews of the progress and performances of those persons who were previously showcased in our calendars. It is my humble opinion based on feed-back received that this Although the Bank continues on its path of stable growth performance over the past six years, there are growing concerns that its future sustainability as a stand-alone indigenous commercial bank is under increasing threat. As the dark clouds of derisking and heightened correspondent banking risks beckon on the horizons, the bank has very little choice but to continue to vigorously pursue alternative modes of strategic alliances and partnerships with stronger regional financial institutions in the very near term if it is to remain viable and competitive.

Notwithstanding the unfortunate set back of the BOSVG/ ECFH amalgamation process, I remain cautiously optimistic that the Bank will be able to fashion a new strategic direction in fulfilling its mission to its shareholders. I am forever reminded by my own banking experience that every set back is pregnant with opportunities for advancement since stagnation is not an option in this highly volatile and dynamic financial environment.