Contextually, there are six commercial banks in Guyana: Republic Bank (Guyana) Limited, Guyana Bank for Trade and Industry Limited (GBTI), Bank of Nova Scotia, Bank of Baroda (Guyana) Incorporated, Citizens Bank Guyana Incorporated, and Demerara Bank Limited.
Of the lot, Republic Bank (Guyana) Limited has one of the larger local market shares with 12 locations across Guyana. It is a subsidiary of the parent company, Republic Bank Financial Holdings Limited (RFHL).
According to its unaudited half-year financial statements, published in the daily newspapers in April, the company netted an after-tax profit of $1.7 billion. Comparatively, this sum was $248 million, or 12.7 per cent, less than the $1.96 billion recorded for the corresponding period, in the previous year.
The Chairman of the bank, in his accompanying remarks, attributed the reduction in profits to certain constraints, including the overall reductions in net interests and other income of the bank, due to lower levels of economic activity and an increase in loan loss provisioning.
From the start of the fiscal year on October 1 to the half-year ending on March 31, the bank was able to earn a net interest income of $4.18 billion. This figure was, similarly, lower than the sum earned in the corresponding period of the previous year; in 2020, $4.3 billion was earned.
There was also a significantly larger credit loss expense incurred by the bank; at the end of March 31, 2021, the expense was $252 million. In the year before, that figure was only $42 million.
Contrastingly, the RFHL parent company recorded a profit of US$102.9 million during the first half of the financial year, which represented an increase of US $21.6 million, or 26.5 per cent, when calculated against the corresponding period of the previous year.
Though the parent company faced the challenges the local subsidiary grappled with, the company, via a statement, related that the acquisition of Scotiabank in the British Virgin Island and the overall growth in customer deposits across most subsidiaries facilitated increased performance.
The World Bank in its recently released Global Economic Prospects report acknowledged that downturns or depressions were faced by economies in all countries but exacerbated in developing countries that are increasingly vulnerable to the disproportionate impact of COVID-19.
Therefore, the common challenge local establishments, such as these banks, faced was the COVID-19 pandemic. The ramifications of the COVID-19 pandemic, however, are well-ventilated. The restrictions imposed, according to the International Monetary Fund (IMF) in its January 2021 World Economic Outlook, resulted in significant business slowdowns and disruptions. This led to an overall decrease in productivity.
Beyond COVID-19 but unique to Guyana was a protracted electoral process which, according to statements issued by the Private Sector Commission (PSC), resulted in substantial uneasiness in the business sector. The effects of the protracted process are, however, difficult to quantify due to limited empirical data and challenges in separating the effects of the pandemic.
Despite these challenges, two other commercial banks: Demerara Bank Limited and Citizens Bank recorded similar after-tax profits at the end of the half-year. These profits at these two local banks were, however, greater than the profits recorded in the corresponding period of the year before.
According to the bank’s interim financial report, which was made available in May, an after-tax profit of $478.4 million was recorded at the end of March 31, 2021. Unlike the decrease recorded by Republic Bank (Guyana), Citizens Bank’s profits were an increase of $26.3 million, or 6 percent, when compared to the half-year period of 2020.
Citizens Bank recorded a reduction in operating expenses from $827.2 million in 2020 (at half-year) to $818.7 million in the recent period. Additionally, the bank recorded a net interest income of $1.4 billion, following the deduction of its net interest expense of $174.5 million.
At Demerara Bank, an increase in after-tax profits, from the previous year, was recorded too. In the unaudited financial statements published in the local newspapers in May 2021, the establishment said that it registered after-tax profits of $1.31 billion. The amount earned during the year before was $871 million.
The statement indicated that the interest income for the half-year was less than in 2020 since that figure was $1.604 billion compared to the $1.603 billion in 2021. Nevertheless, there was a significant increase in income from investments with the figures increasing from $837 million in 2020 to $1.017 billion in 2021.
In each of these local commercial banks, their financial statements illustrated the dynamism of the private finance sector. By the end of the financial year, on September 30, the ability of the banks to rebound or succumb to the enduring COVID-19 pandemic and now, nationwide flooding, will be illustrated.