By Alison Lowe
Nassau Guardian Business Editor
NASSAU, Bahamas -- Confirming plans to reduce regional employee costs by ten percent, based on a workforce of 3,500, CIBC FirstCaribbean International Bank (FCIB) said on Wednesday that it received a “reasonable response” to its voluntary separation offer Caribbean-wide and is now looking to make a decision on how many redundancies may have to follow in order to achieve cost reduction targets.
In an emailed response to Guardian Business, Debra King, director, corporate communications for FCIB, said the bank will be looking first at “redundant positions that have come about due to consolidation, automation, process re-engineering and improvement” as it looks to further trim its workforce.
Her comments represent the first time the bank has detailed the extent of cost cutbacks it is hoping to achieve through restructuring. What is not clear to date is what portion of the overall cost reductions sought will be achieved in The Bahamas.
At the beginning of October 2013, Guardian Business exclusively revealed plans by CIBC FirstCaribbean to restructure its operations throughout the Caribbean, driven by a trend of rising costs and declining profitability.
The bank has suffered significant losses in The Bahamas and Barbados in particular, in light of high levels of loan arrears.
Theresa Mortimer, president of the Bahamas Financial Services Union (BFSU), said on Wednesday that the union has been “quite pleased” with how the cost reduction effort has been progressing in The Bahamas, telling Guardian Business that more people applied for voluntary separation packages than were ultimately accepted to receive them.
She said the of the line staff represented by her union, 12 workers had been approved to leave the bank to date.
The BFSU is now set to meet with FCIB Chief Executive Officer (CEO) Rik Parkhill in February in a meeting which Mortimer said she expects to provide more clarity about the bank’s plans with respect to staff redundancies.
“In February we’ll know how things are going,” said Mortimer.
In her statement to Guardian Business on Wednesday, King said that the restructuring exercise is “aimed at addressing the negative impact of the global recession on our profitability which resulted in increased loan losses and fewer revenue generating opportunities, and an increase in our operating costs”.
“The restructuring exercise is designed to achieve a reduction of employee costs of ten percent. We started the exercise with 3,500 employees and the first step was the non-renewal of contracts of those workers who were on contract with the bank, and where projects came to their natural end. In addition, we offered a voluntary early retirement program for eligible employees and a voluntary separation program for those employees who may wish to leave, but are not eligible for early retirement. The voluntary programs have received a reasonable response and we are currently engaged in a robust organizational redesign, manpower and transition planning exercise to ensure our ability to deliver continually improving customer service.
Looking ahead to redundancies, King said that there are “essential steps in this process which involve regulatory, union and other relevant stakeholder consultation, which we must observe”.
“In keeping with our practice, we will abide by the established protocols and refrain from public statements during that process,” King added.
The bank reported annual losses of US$27.5 million at year end October 2013.
The losses last year were linked to restructuring expenses of US$37.6 million and an increase in the collective allowance for loan losses of US$25 million.
In his report to shareholders accompanying the financials for the fiscal year ending October 31, 2013, Parkhill said: “Many of the economies in which we operate rely heavily on tourism and foreign direct investments. The overhang from the economic crisis continues to impede growth and by extension has negatively affected our results. Loan loss provisions this quarter were higher than normal and include an increase in the collective allowance. The bank is focused on pursuing risk-controlled growth and has taken considerable steps during the year toward the goal of becoming a lower risk bank.
“While never easy in these difficult times, we have also taken the decision to rightsize the organization, to redefine how we operate and to address our cost structure. The restructuring we are undertaking will position us for future cost savings and give us the ability to serve our customers better.”
Parkhill added that the bank had “strengthened our capability to service our wealth management clients with the integration into our bank of the CIBC Bank & Trust business, located in the Cayman Islands and The Bahamas, further widening the scope of clients we can assist and the range of services we can provide”.
Republished with permission of the Nassau Guardian