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1 The Logo
2 CorporateObjectives
2 OurMission
2 CorporateInformation
3 NoticeofMeeting
4 ProxyForm
5 FinancialSummary
6 CorporateResponsibility
9 Dr.YesuPersaud,‘An Icon of Sterling Performance’
10 BoardofDirectors
12 ManagementTeam
14 Chairman’sReport
18 ChiefExecutiveOfficer’sReport
23 ReportoftheDirectors
25 Auditors’Report
26 StatementofFinancialPosition
28 StatementofComprehensiveIncome
30 StatementofChangesinEquity
31 StatementofCashFlows
32 NotestoFinancialStatements
59 CorrespondentBanks
60 OurServices
CONTENTS
“Come grow with us”
TheelementsoftheDemeraraBankLogodesignaredrawnfromtheverysourceoftheinspirationthatcreatedsuchanenterprise.
TherelentlessforceofthemightyDemeraraRiver,whichgivestheBankitsname,isdepictedinthesixgoldenstreamsthatflowfromastylishspringin
anupwardmotion.
TheSixstreamsorsixpeople,symbolisethediverserace,andculturesthatmovetogethertowardsacommonGuyanesedestiny.
ThecoloursgoldandgreenhavebeenchosenfortheiraffinitytotheGuyaneselandscapeandtherichesoftheabundantnaturalresourcesforwhichthecountryisfamous.TheDemeraraBankstandsproudandsecure,
reflectingitscommitmenttoGuyanaandconfidenceinthefuture.
The Logo
Tohelpbuildastronger,healthiermorediversebusinesssectorthroughprudentinvestment,attractivedepositplansand
innovativelendingpolicies.
Toprovidethefinancialsupportthatwilldemonstratethebank’scommitmenttobusinessdevelopmentandtoabetterGuyana.
ToprovideadiversifiedrangeofqualityfinancialservicesthroughitsworldwidenetworkofMajorCorrespondentBanks.
Toprovideemployeeswithexcellentopportunitiesforpersonalgrowthanddevelopment.
Toprovideinvestorswithandattractiverateofreturnontheirinvestment.
Tobearesponsiblecorporatecitizen.
DIRECTORSDrYesuPersaud(Chairman)MrPravinchandraDave(ChiefExecutiveOfficer)MrsChandraGajrajMrKomalSamarooDrLeslieChinMrsSheilaGeorgeMrWilliamBarrowMrHemrajKissoon
CORPORATE SECRETARYMrsChandraGajraj
AUDITORSNizam Ali & Company Chartered Accountants215‘C’CampStreet,NorthCummingsburg,Georgetown,Guyana
ATTORNEY AT LAWDe Caires, Fitzpatrick & Karran80CowanStreet,KingstonGeorgetown,Guyana
ATTORNEY AT LAWPersaud and Associates1CroalStreetGeorgetown,Guyana
ATTORNEY AT LAWLuckhoo & LuckhooLot1CroalStreet,Georgetown,Guyana
REGISTRAR & TRANSFER OFFICETrust Company (Guyana) Limited1stFloor,DemeraraBankBuilding230Camp&SouthStreetsGeorgetown,Guyana
REGISTERED OFFICE230Camp&SouthStreetsGeorgetown,GuyanaTelephone:+592-225-0610-9Cable:DEMBANK,GuyanaTelex:6738093(USA)Fax:+592-225-0601Email:[email protected]:www.demerarabank.com
“Toexcelinprovidinginnovativeandsuperiorbankingservicesthroughwelltrained,dedicatedandcourteousstaffintheinterestofourcustomersandshareholdersandtofulfilloursocialresponsibilitiestosocietythroughmeaningfulinvolvementincommunitydevelopment.”
Corporate Objectives
Our Mission
Corporate Information
2
DEMERARA BANK LIMITED
Notice of Meeting
NoticeisherebygiventhattheEighteenthAnnualGeneralMeetingofDemeraraBankLimitedwillbeheldonFriday,21stDecember,2012,at16.30hoursattheDiamondBranch,PlotDBL,Diamond,EastBankDemerarawhenthefollowingbusinesswillbetransacted:
1) ToreceiveandtoconsidertheReportoftheDirectorsandtheAuditedAccountsfortheyearended30thSeptember,2012.
2) Toapprovethedeclarationofadividend.
3) ToelectDirectorsintheplaceofthoseretiringbyrotation.
4) TofixtheremunerationoftheDirectors.
5) ToappointAuditorsandauthorisetheDirectorstofixtheirremuneration.
6) TotransactanyotherbusinessofanAnnualGeneralMeeting.
BYORDEROFTHEBOARD
......................................................
ChandraGajraj(Mrs.)CorporateSecretary
REGISTERED OFFICE230Camp&SouthStreetsGeorgetown,Guyana
November5,2012
PLEASE NOTE:
* OnlyShareholdersortheirdulyappointedproxiesmayattend.
* PleasebringthisnoticetogainentrytotheMeeting.
* Anymemberentitledtoattendandvoteisentitledtoappointaproxytoattendandvoteinsteadofhim/her.
* AproxyneednotbeamemberoftheBank.TheFormofProxymustbedepositedattheRegisteredOfficeoftheBanknotlessthan48hoursbeforethetimeforholdingthemeeting.
* Aproxyformisattachedforuse.
* AnyCorporationwhichisamemberoftheBankmay,byresolutionofitsDirectorsorothergoverningbody,authorisesuchpersonasitthinksfittoactasitsrepresentativeattheMeeting.
* Giftswillbedistributedonlytoshareholderspresentatthemeetingandnotanytimeandplacethereafter.
3
Annual Report 2012
Proxy Form
Demerara Bank Limited230CampandSouthStreetsGeorgetownGuyana
I/We..........................................................................................................................................
of...............................................................................................................................................
beingamember/membersofDEMERARABANKLIMITED,
herebyappoint..........................................................................................................................
of...............................................................................................................................................
orfailinghim/her....................................................................................................................
of...............................................................................................................................................
asmy/ourProxytovoteinmy/ourname(s)andonmy/ourbehalfuponanymatterattheEighteenthAnnualGeneralMeetingoftheBanktobeheldonFriday,21stDecember,2012oranyadjournmentthereofinsuchmannerassuchProxymaythinkproper.
Aswitnessmyhandthis.....................dayof.............................................2012
Signedbythesaid......................................................................................................................
(NameofMember(s))................................................................................................................
(SignatureofMember(s))...........................................................................................................
NOTE:Tobevalid,thisformmustbecompletedanddepositedwiththeSecretaryatleast48hoursbeforethetimeappointedforthemeetingoradjournedmeeting.
4
DEMERARA BANK LIMITED
Financial Summary
Deposits Profit after Taxation
Advances
Assets
Distribution of IncomeAssets
2008 $21 Billion
2008 $750 Million
2008 $7 Billion
2008 $25 Billion
2009 $25 Billion
2009 $818 Million
2009 $9 Billion
2009 $30 Billion
2008 2009 2010 2011 2012 $21.200 $24.893 $28.974 $30.169 $35.048
2008 2009 2010 2011 2012 $749.600 $818.271 $853.396 $983.987 $1043.424
2008 2009 2010 2011 2012 $6.730 $8.708 $9.917 $12.037 $15.392
2008 2009 2010 2011 2012 $25.139 $29.874 $34.464 $36.016 $42.114
2010 $29 Billion 2010
$853 Million
2010 $10 Billion
2010 $34 Billion
2011 $30 Billion
2011 $984 Million
2011 $12 Billion
2011 $36 Billion
2012 $35 Billion
2012 $1,043 Million
Interest Income2008
$1,601 Million
2009 $1,735 Million
2008 2009 2010 2011 2012 $1,601 $1,735 $1,946 $2,152 $2,430
2010 $1,946 Million
2011 $2,152 Million
2012 $2,430 Million
Interest Expense
2008 $784 Million
2009 $910 Million
2008 2009 2010 2011 2012 $784 $910 $1,010 $733 $574
2010 $1,010 Million
2011 $733 Million
2012 $574 Million
2012 $15 Billion
2012 $42 Billion
InterestExpenses 574 30.6%Premises&Equipment 26 1.4%PersonnelExpenses 368 19.6%AdministrativeExpenses 201 10.7%Taxation 456 24.3%Dividends 252 13.4% 1,877
Cash&ShortTermFunds 10,627 25.2%Investments 15,202 36.1%Premises&Equipment 851 2.0%Loans&Advances 15,392 36.6%OtherAssets 28 0.1% 42,100
(G$ Mln) (G$ Mln)
Investments $15,202 Million
Other Assets $28 Million
Premises & Equipment
$851 Million
Loans & Advances $15,392 Million
Cash & Short Term Funds $10,627 Million
Administrative Expenses $201 Million
Personnel Expenses $368 Million
Taxation $456 Million
Dividends $252 Million
Interest Expenses
$574 Million
Premises & Equipment $26 Million
5
Annual Report 2012
Corporate Responsibility
Presentation of Awards to the Branches for their outstanding performance
Corriverton Branch Rose Hall Branch Anna Regina Branch
Building Expo 2012
Demerara Bank Limited participated for the third year in the building exposition, organized and hosted by the Ministry of Housing and Water at the Guyana National Stadium.
Pictures depict a few staff members that were involved in the Expo along with potential credit customers.
Phagwah ( Anna Regina Branch)
Emancipation (Head Office)
Demerara Bank’s staff dressed in traditional outfits to celebrate the festivities
6
DEMERARA BANK LIMITED
Donation made by our Rose Hall Branch to Mayor and Town Council (Waste Management Department) - Rose Hall Town.
Presentation to winners of the “Christmas Cheer Promotion” – Rose Hall Branch.
Demerara Bank Limited launched banking facilities for the first time to the people of the East Coast Corridor.
Chairman, Dr Yesu Persaud, presenting plaque and cash award to top student, Sarah Hakh who topped the country and the Caribbean in CXC this year.
Opening of our Le Ressouvenir Branch in October 2011
Presentation of Gift Certificates to winners of the “Easter Cash Promotion” – Rose Hall Branch.
7
Annual Report 2012
Corporate ResponsibilityBEV Processors – Financing for export oriented Seafood processing plant
Amazon Caribbean – Processing of Heart of Palm in the North West and Berbice Regions for Export.
Housing – Our housing Drive continues
Car Loan – Assisting young professionals in owing their own Motor Vehicle
Dr. Balwant Singh’s Hospital – Modern State of the Art Hospital
Forestry – Contributing to the Development in Forestry Sector
8
DEMERARA BANK LIMITED
Dr. Yesu PersaudChairman, Demerara Bank Limited
Our Chairman Dr. Yesu Persaud was featured in the recent publication – ‘100 Influential Indians in the World’ in
which he was listed under the section of ‘Legends’. Publisher & Editor Mr. A.R. Giri PhD in an article on Dr. Persaud named him ‘An Icon of Sterling Performance’ in which he has dedicated himself towards reshaping the national economy with his pragmatic vision and humanistic consideration. What has made Yesu a rare luminary is his landmark success in providing a progressive direction to the economic development of the entire Caribbean region, besides transforming the economic destiny of the Companies under his control.
“Yesu has been the man behind the formation of the first indigenous Private Sector Bank in Guyana, Demerara Bank Limited.” On November 12, 1994, Yesu established Demerara Bank Limited. Though it was incorporated on January 20, 1992, it was granted a license in March 1994, building of the Bank commenced that very month and on November 12, 1994 it was declared opened by His Excellency, Dr. Cheddi B. Jagan, President of the Cooperative Republic of Guyana as also the first PIO to access this position in that country. On its launching ceremony, Dr. Jagan congratulated Yesu and called him “a dynamic businessman to have turned into gold everything he puts his hands on.”
Dr. Persaud also holds numerous positions of respect in several organizations all of which are working commendable under his esteem leadership. He serves as the Executive Chairman of the Demerara Distillers Limited Group of Companies, these includes:
• Demerara Distillers Limited.
• Demerara Shipping Company Limited
• Distribution Services Limited
• Tropical Orchards Products Company Limited
• Demerara Contractors and Engineers Ltd
• Demerara Distillers (Europe)
• Demerara Distillers (US) Inc.
• Demerara Distillers (St. Kitts) Limited
He is also the Chairman of the following companies/institutions:
• Institute of Private Enterprise Development (IPED)
• Trust Company (Guyana) Limited
• Guyana Unit Trust – A Mutual Fund Institution
• Guyana Youth Business Trust
• Consultative Association of Guyanese Industry Ltd. (CAGI)
After eighteen years Demerara Bank stands strong and has been moving from strength to strength with this year, 2012, being the first in the history of the bank to achieve a billion dollar profit. The bank has established a network of six branches with a branch in each of the county to ensure all class of people have access to suburb and customer friendly banking facilities.
Dr. Persaud remains a strong motivational force for our institution. We are inspired by his grand vision.
9
Annual Report 2012
Board of Directors
STANDING Left to Right:Mr Pravinchandra Dave (C.E.O),
Mr Komal Samaroo, Dr Leslie Chin
and Mr William Barrow
DEMERARA BANK LIMITED
SITTING Left to Right:Mr Hemraj Kissoon, Mrs Chandra Gajraj, Mrs Sheila George
and Dr Yesu Persaud (Chairman)
Annual Report 2012
BACK ROW, Left to RightDebroah A. Sugrim, Assistant Manager (Foreign Trade); John Lee, Manager (Management Information System);
Pravini Ramoutar, Manager, Human Resources & Administration.
FRONT ROW, Left to RightNavita Sahadeo, Chief Internal Auditor; David Ramdeholl, Assistant Manager (Credit Monitoring, Recovery & Legal);
Juanita A. Persico, Manager (Administration & Operations).
Management Team
DEMERARA BANK LIMITED
BACK ROW, Left to Right Mandrekar Khemraj, Branch Manager (Corriverton); Earlene Dawson, Branch Manager (Rose Hall);
Imran Badruddin, Branch Manager (Diamond);
FRONT ROW, Left to RightKhemraj Narine, System Administrator; Serojanie Singh, Branch Manager (Le Ressouvenir Branch).
Deyon D’Oliviera, Branch Manager (Anna Regina).
Annual Report 2012
Chairman’s Report
I extend a warm welcome to the shareholders and all Guyanese. It gives me pleasure in welcoming you to the 18th
Annual General Meeting of the Bank.
OUTLOOK OF ThE GLOBAL ECONOMY
The global economy is still struggling tofindsteadygroundsanddebtoverhanginseveraloftheEuropeancountriescloudstheoutlook.The global economic activities have becomeunevenacrosstheregionsandcountriesandconfidencelevelshaveplunged.Theongoingdebt issues in the European region and thepossiblespill-overeffectsintotheeconomywillaffecttheUnitedStates,emergingmarketsandothercountries. Theyear2012beganwithapositivenotecombined with a marked improvement inmonetaryeasingindevelopedanddevelopingcountries. The world economy is projectedto grow in 2012 by 3.3% and 3.6% in 2013.Thegrowth in theUnitedStates isprojectedat2.2%,whileEuropeanareasmayregisteranegativegrowthof0.4%.China’sGDPgrowthmaybearound7.8%whileIndiamaybeinthevicinityof4.9%to6%.
The outlook for the Caribbean economy isheavilydependentontheWesterneconomiesparticularly the United States and Europeancountries, which are the two major sourcemarketsfortourism,andCaribbeanregions.
TheCaribbeanisprojectedtogrowattherateof3.5%from4.3%in2011.TheslowergrowthintheCaribbeanregionisattributedtoweaker
“...the Bank has been able to achieve a landmark figure of G$1 billion, which is an outstanding achievement for the Bank”.
Dr. Yesu Persaud, Chairman
14
DEMERARA BANK LIMITED
globalexternalenvironment,highoilprices,capacityconstraints in selected economy and a decline incommoditypricesandtourism.
ThE GUYANA ECONOMY
The Guyana economy has been one of the mostresilient in the Caribbean region during the globalfinancialcrisisandeventualeconomicrecession. Infact,overthepastfiveyears,thecountryhasrecordedan average GDP rate of 4.4%. In 2011, Guyana’seconomyexpandedatarobustrateof5.4%,largelysupported by the services sector, followed by themanufacturing,agriculturalandminingsectors.
Theeconomyislikelytogrowatarateof3.8%to4%during2012.Guyana’sgoodperformancerelativetotheCaribbeanneighboursisonaccountofadiverseeconomy. It isprojectedthattheGuyanaeconomywillcontinuetogrowifGovernmentpaysundividedattention to the development of infrastructure,maintaining law and order situations and creatinginvestment-friendly environment for local andoverseasinvestors.
Caribbean countries need to increase their shareof market. Guyana and other countries shouldimplementregionalintegrationthroughtheCaricomSingleMarketandEconomy(CSME),harmonizationof regulations, reductionofbarriers to the regionalmovementoflabourandliberalizationofairtransportservices.
PERFORMANCE OF ThE BANK
It givesme pleasure to report to the shareholdersontheoutstandingperformanceoftheBankduring2011-2012.
The Bank has performed exceedingly well duringtheyear.WehaveachievedthehighestprofitinthehistoryoftheBank,recordingaNetProfitAfterTaxtothetuneofG$1.043billionagainstG$983millionintheprecedingyear,whichreflectsariseof6.1%overthepreviousyear.
Demerara Bank Limited is only eighteen years oldbuthasmaderapidstrides in the last tenyears. Itis remarkable that,within such a short period, the
BankhasbeenabletoachievealandmarkfigureofG$1billion,whichisanoutstandingachievementfortheBank. Duringtheyear,wehaveopenedtheLeRessouvenir,EastCoastDemeraraBranch.Atpresent,theBankishavinganetworkofsixBranches,includingHeadOfficelocationandwehaveplanstoexpandournetwork,includingaspaciousHeadOfficepremisesin2012-2013.
DEPOSITS
TotalDepositsoftheBankhaveincreasedfromG$30billion toG$35 billion,which shows an increase of16.7% over the previous year. Deposit growth inthe banking sector in Guyana increased by 13.3%for the period under review. The performance oftheBankindepositmobilizationareaissatisfactory.ItisnoteworthythattheBrancheshavesignificantlycontributed to the growth of deposits. We havebeen able to enhance our Savings Bank Depositsconsiderably.
Duringtheyear,thecostofourfundshasgonedownand theshareof institutionaldepositshas reducedsignificantly.TheBankwillcontinuetopayattentiontoimprovingtherangeofproductsandservicesfordepositorsinthecomingyears.
LOANS AND ADvANCES
OurLoansandAdvanceshaveincreasedfromG$12billiontoG$15billion,reflectinganincreaseof25%overthepreviousyear.ThecreditdepositratiooftheBankhasremainedinthevicinityof43%.Weplanto increase our Advances significantly during thenextthreetofouryearswiththemajorfocusonthedistribution,agriculture,miningandforestrysectors.WehaveawelldiversifiedAdvancesportfoliowhichcanbeseenfromthefollowingfigures:-
1. Agriculture 26.05%2. Mining&Quarrying 1.21%3. Manufacturing 9.59%4. Construction&Engineering 3.68%5. Commercial/Trading/Distribution18.64%6. RealEstate 16.14%7. Services 15.71%8. Consumption 8.98%
15
Annual Report 2012
The banks are flushed with funds and in Guyanathere are limited opportunities for investments,resulting in Advances remaining the major assetdeployment segment. We have a good networkofBranchesandourfocuswillbeonincreasingourAdvancesthroughtheBranches.Theprioritysectorforlendingwillbeagriculture,housingandconsumerloans at the Branches. We are creating a pool ofspecializedOfficerstoexplorethecreditpotentialofourbranches.
PROFITABILITY OF ThE BANK
TheNetAssetsof theBankhasmoved fromG$36billion to G$42 billion, registering a rise of 16.7%over the previous year. The Return on AverageAssets is2.67%comparedto2.81%inthepreviousyear. There was significant improvement in theShareholders’Fundsinthelastfiveyears.TheReturnonShareholders’Fundswas19.23%duringtheperiodunderreview.TheNetworthoftheBankhasimprovedfromG$4.4billiontoG$5.7billion,registeringariseof29.5%overthepreviousyear.Almost24%oftheBank’sassetsareinLiquidAssets,givinganexcellentliquiditypositionoftheBank.
EARNINGS PER ShARE
EarningsPerSharehasimprovedto2.32%pershare,whichreflectsariseof5.9%overthepreviousyear.TheBankhasbeenabletoachievecontinuousgrowthintheareasof improving itsprofitandprofitability.TheShareholdershavebeenamplyrewardedinthelasttenyearsnotonlybyhealthydividendsbutalsofromrisingmarketcapitalizationofourBank’sshares.The share of the Bank which was traded aroundG$1.00 toG$2.00at the inceptionof thebankhasgoneuptoG$25.00toG$30.00asattheendofthefinancialyear.
DIvIDENDS
The Bank has paid an interim dividend of 18%duringtheyear.TheBoardofDirectorsishappytorecommendafinaldividendof42%.Thefinaldividend
will be subject to approval of the shareholders attheAnnualGeneralMeeting. This brings the totaldividendofsharespaidbytheBanktoG$0.60onaG$1.00share.ThisreflectsthehighestdividendpaidinthehistoryoftheBank.
Inthelowinterestrateenvironment,wherereturnonfixeddepositsislow,theinvestmentinequitywiththeappreciationofcapitalisagoodoptionforthegeneralpublicandInstitutions.TheBankshalltrytoimproveourperformance in the future tomake investmentin our Bankmore rewarding for our shareholders.It isnoteworthythatmostoftheshareholderswhosubscribed inourBank’s shares to the InitialPublicOfferin1994haveremainedloyaltotheBank.WearegratefultotheshareholdersfortheirloyaltyandconfidencetotheBank.
INFORMATION TEChNOLOGY
ThisyearwasayearofconsolidationforInformationTechnology. TheperformanceofthenewsoftwarefortheATMandPOSsystemswasexaminedindetailwiththeintentionofcompletelyunderstandinghowthesystemsworksothatwecouldbeindependentof our overseas consultants for the resolution ofthe majority of issues. We have reviewed our ITsecurity systems and various improvements weremadethroughupgradesandtheimplementationofnewequipment. Alsoreviewed,wereourbusinessintelligence systems which assist Managers andSupervisorsintheirdecisionmakingprocesses.
MANAGEMENT AND STAFF
Our accomplishments in recent years would nothave been possible without the right people andmanagementinplacetoexecutetheplans.Talentisthebackdropofourstrategyandwestronglybelievethat,inaserviceindustrylikeourBank,wewillonlyexcelbyofferinginnovativeproductsandservicestoourcustomers.TheBankbelievesthatinachangingbanking environment, continuous introduction ofskillsistherequirementoftheday.Ourstaffhasdoneexceedinglywellinachievingoutstandingresultsfor
Chairman’s Report (cont’d)
16
DEMERARA BANK LIMITED
theBankduringthelasteighteenyears.
The Bank has a pool of talented, young staff. Weshallcontinuetoimprovetheirknowledge,skillsandaptitudeforbetterresultsinthefuture.Iwouldliketothankmanagementandstaffatalllevelsfortheirdedicationandperformancetowardstheirduties.
BOARD OF DIRECTORS
IwishtoplaceonrecordmysincereappreciationforthevaluableguidanceandcontributionmadebyallDirectorsduringtheyearthroughactiveparticipationnotonlyinmonthlyBoardMeetingsbutalsoLoans,Marketing,AuditandInvestmentMeetings.
PROSPECTS
The global world faces serious problems of debts,deficits,unemploymentandslowgrowth.Guyanaisboomingpartiallyonaccountofgoldminingandricemillingwhereassugarisstilllaggingbehind.
ThereareexcellentprospectsofdevelopmentintheminingandforestrysectorsinGuyana.Weneedtomaximize our value-added products and services.Thecompetentauthoritywillhavetoworkoutalongtermdevelopmentandstrategicplanfortherevivalof
thesugarindustrysothattheindustrycancontinueto
playadynamicroleintheeconomy.
Our knowledge of the customer and passion for
improvingourvaluableservicesatalllevelsofbanking
willcontinueintothefuture. Theexpansionofthe
Bank’s network and the focus on improving value-
added services and products, with our pragmatic
bankingapproach,willcarryustothenewheights.
Ourobjectivesfor2012aswellas2013aretocontinue
afinanciallysoundbankwithabusinessmoduleto
developcoreareasofbanking.TheBankwillcontinue
todevelopskillsinouremployeestomanagetherisks
inanappropriateandresponsiblemanner.
ACKNOWLEDGEMENT
The Bank has received continued support and
patronage from customers, shareholders and well-
wishersinGuyanaandabroad.Wearegratefulfor
the valuable support and guidance of the Bank of
Guyana and other Agencies. We are also thankful
forthecontinuedpartnershipandsupportofother
financial institutions and correspondent banks in
Guyanaandabroad.
Diamond Branch
17
Annual Report 2012
Chief Executive Officer’s Report I extend my greetings and best wishes to all shareholders and the Guyanese public.
Theyear2012hasbeenadifficultandchallengingyear, internationally and locally. The developedeconomiesof theworldhave remained sluggishafter the recession of 2008-2009. The impactof slowdown in the United States andWesterneconomy has affected developing countries ina negative way until the last quarter of 2011.The United States economy continues to faceproblemsofhighdebtandunsustainabledeficit.TheUnitedStatesfacesdangerofafiscalcliff inDecember, 2012. There is no definitive plan inEurope to solvedebt issuesofGreece, ItalyandSpain. In China, economic reforms have beenstalled. It is evident that growth in China andIndia isalsoslowingdown. Indiamayachieveagrowthof 4.9%andChina’s growthmay remainwithinthevicinityof7%to9%.
Caribbean economies continue to face an uphillbattle in the aftermath of the global recession,withmutedeconomicactivitiesin2011and2012.MajorCaribbeancountrieswiththeexceptionofGuyanaandTrinidad&Tobagoaredependentontourismandotherlimitedeconomicactivities.
GUYANA’S ECONOMY
Guyana’seconomicgrowthwas2.8%inthefirstsixmonthsof2012comparedto5.9%in2011.Thegrowth was mainly driven by mining, quarryingand services sectors. Bauxite and gold outputwasbetterwhile the sugarand forest industriesrecorded poor performance. There was amarginaldeclineinthemanufacturingsector.Theinflationwasinthevicinityof2%andwasmainlydrivenbyhighfuelandfoodprices.Theeconomyisprojectedtogrowby3.8%attheendof2012.
The agricultural sector is expected to reboundleadby sugar,fishingand livestock. Theminingsectorwillcontinuetobenefitfromhigheroutput
Mr. Pravinchandra S. Dave, CEO
18
DEMERARA BANK LIMITED
in gold production and better prices. Inflationmayremaininthevicinityof3%to5%.
BANKING TRENDS
Thedepositsofthecommercialbankscontinuetoexpand in linewith thegrowth in theeconomy.Depositsincreasedby6.5%inthefirsthalfof2012.Outof commercialbanks’deposits, around77%was private sector deposits. The net domesticcreditbythebankingsystemincreasedby15.2%in
thefirstsixmonthsof 2012. Bankingsector depositswere G$266.5billion at the endof September,2011, which hasincreased toG$301.9 billionas at the end ofSeptember, 2012;registering a riseof 13.3% duringthe period. TheAdvances topublic andprivatesectors by bankswere aroundG$12.5 billion asat September,2011, which hasgrown to G$15.1billion as at theendofSeptember,2012; registeringa rise of 20.8%
duringthetwelvemonths.Theliquiditypositionof Bank’s was very comfortable. The BanksmaintainedexcessfundswiththeBankofGuyana,reflectinganexcessliquidityposition.Duringtheyear, funds continued to flow in GovernmentTreasuryBills,whichwasreflectedbyahighlevelofexcessbiddinginGovernmentTreasuryBills.
Interest rates of the commercial banks haveshownadownwardtrendwithsmallSavingsBankratedecliningfrom1.99%to1.75%asattheendofJune,2012,whileaverageSavingsBankratefor2012continuedtobeinthevicinityof1.56%.91-days’TreasuryBillsratecamedownfrom2.35%attheendofDecember,2011to1.82%asattheendof June, 2012. The lending rate of commercialbankswasinthevicinityof11%to12%,reflecting
comfortable spread for commercial banks.Guyana’sexchangeratehasremainedremarkablystableduring2011to2012inspiteoftheturmoilintheglobalcurrencymarket.
ThestableexchangeratewhichhasmovedaroundG$203toG$205isgreatlyhelpfulinmaintainingthe lower level of inflation and stability of foodprices. Guyana’seconomyisdifferentandmoreresilientcomparedtootherCaribbeaneconomies,whicharedependentononeortwosectors.Theprospects of oil exploration and continuationof high gold prices may result in higher grossdomesticproductforGuyanain2012-2013.
PERFORMANCE OF ThE BANK
Our Bank has shown excellent performanceduringtheyearandhighlightsofourperformanceareashereunder:-
3 DepositsoftheBankhaveincreasedfromG$30billiontoG$35billion,registeringariseof16.7%overthepreviousyear.
3 TheGross Profit of the BankwasG$1.4billion last year, which has increased toG$1.5 billion – a rise of 7.1% over thepreviousyear.
3 NetProfitoftheBankwasG$983millionwhich has increased to G$1.043 billion,registeringariseof6.1%overthepreviousyear.
3 TheBank’sAdvanceshaveimprovedfromG$12 billion to G$15 billion, showing ariseof25%overthepreviousyear.
3 Investments of the Bank were G$12.5billion as at September 30, 2011,whichhas increased toG$15.2 billion in 2012,showingariseof21.6%overthepreviousyear. Investment re-valuation reserveswere negative at G$246 million as atSeptember30,2011,whichhasimprovedtoapositiveG$283million.
3 Earnings Per Share has improved from2.19%to2.32%pershare,showingariseof5.9%overthepreviousyear.
3 ReturnonAverageAssetshasdecreasedslightly but is still above the industryaverage.
“The Net Profit of the Bank has improved from G$983 million to G$1.043 billion, showing a rise of 6.1% over the previous year. It is noteworthy that the Bank’s Profit was G$107 million in 2001, which has gone up above the G$1 billion mark in 2012”
19
Annual Report 2012
3 Return on Shareholders’ Funds was19.23%; a marginal decline over thepreviousyear.
3 TotalNetworthoftheBankhasimprovedfrom G$4.4 billion to G$5.7 billion,registering a rise of 29.5% over thepreviousyear.
DEPOSIT MOBILIzATION
OurDepositshaveincreasedfromG$30billiontoG$35billionduring the year. Themostnotablefeature of our deposit mobilization was theincrease in our Savings Bank Deposits. Duringtherecentpast,wehaveexpandedthenetworkof our branches to six. Our main objective isto increase the number of deposit holders byproviding excellent technology, good bankingproducts and competitive rates of interest ondeposits. Wehave introduced special incentiveschemesforourbranchestomobilizemaximumnumberofaccountduringtheyear.Incidentally,allourbrancheshadpromotionalactivitiesduringtheyearorganizing‘specialweeks’andrewardingcustomerswithprizesandincentives.
Our Bank was the first to initiate internetbanking in Guyana. Our deposit mix was notveryfavourableintheinitialyears,havingahighlevelofTermDeposits.WehavemadesustainedeffortstoreduceourTermDepositsandincreaseourshareofSavingsandDemandDeposits.
Atpresent,theshareofourSavingsBankDepositsand Demand Deposits is approximately 75% ofourtotalDeposits. Withthedecreasinginterestratescenario,interestonSavingsBankDepositsinGuyanahasshownadownwardtrend.WeshallintroducecustomersegmentspecificproductstofurtherenhanceourSavingsBankDeposits.
AdvAnces And non-Performing Assets
OurAdvances have increased fromG$12 billiontoG$15billionasatSeptember30,2012,whichshowsariseof25%overthepreviousyear.ItshouldbenotedthatthetotalbankingsectorAdvanceshasincreasedfromG$87billiontoG$108billionfromSeptember,2011toSeptember,2012.
InGuyana,theratioofcredittoGDPisverylow
comparedtoothercountries.Duringtheyear,thenationalaverageofthecreditdepositratiowasinthevicinityof29%to35%,whileourBank’screditdepositratiowas36%to44%duringtheyear.
InGuyana,thedemandforbankableprojectshasremained low, resulting in high liquidity for ourBankaswellasotherbanks.
The activities in the mining sector have growntremendously over the last three years. Thepriceofgoldcontinuedtoshowanupwardtrendduring the year. The number of Licences andMiningPermitshasincreasedinthelastyear.Theforestrysectorhasalsoexpandedduringtheyear.We are exploring the possibilities of extendingmore credit to themining and forestry sectors.The major area of concern in financing thesesectorsisthenon-availabilityofcollateralandtosomeextent,non-availabilityofauditedFinancialStatements.
We had obtained a Line of Credit from theInter-American Investment Corporation (IIC) forprovidinglongtermcredittoourexport-orientedentrepreneurs. The rate of interest on suchborrowingwasbelow5%.
OurNon-Performing Loans have increased fromG$372 million to G$1.1 billion during the year.This is amainareaof concern forus. We shalldevelopplansfortherecoveryofourduesfromNon-PerformingAccounts. OurNon-PerformingLoans are fully backed by assets and we haveadequate provision for providing for Losses inNon-PerformingLoans.Weshallcontinuetopayundividedattentiontothequalityofappraisalforadvancesinthecomingyears.
INvESTMENT
OurInvestmentwasG$12.5billionasonSeptember30,2011,whichhas increasedtoG$15.2billion,showinga riseof 21.6%over theprevious year.In Guyana, we do not have much Investmentoptions. The banking system is having highliquidityand lowcreditdeposit ratio. Hopefullyin the coming years, the Government will takesomestepsfortheestablishmentofmutualandmoneymarket funds. It is noteworthy thatourInvestment Re-valuation Reserve was negativeG$246 million as at September 30, 2011, has
Chief Executive Officer’s Report (cont’d)
20
DEMERARA BANK LIMITED
movedtoapositiveG$283millionduringtheyear.
INCOME AND ExPENSES
The Net Profit of the Bank has improved fromG$983million toG$1.043billion,showingariseof6.1%overthepreviousyear. It isnoteworthythattheBank’sProfitwasG$107millionin2001,which has gone up above the G$1 billionmarkin 2012. We have been able to achieve profitgrowthconsistentlyinthelastelevenyears.Thisisonaccountofourprudentassetsandliabilitiesmanagement. Interest IncomeonAdvanceshasincreased from G$1.2 billion to G$1.3 billion,showingariseof8.3%overthepreviousyear.
Our Interest Income on Investment was G$974millionlastyearwhichhasmovedtoG$1.1billionthisyear,showingariseof17.5%overthepreviousyear.Our Interest Expensehas gonedown fromG$732 million as at September 30, 2011 toG$574million, which is a remarkable reductionof interest expenses during the year in view ofthefactthatourdepositshavegoneupbynearly17%duringtheyear.OurNetInterestIncomewasG$1.4billionasatSeptember30,2011,whichhasincreasedtoG$1.9billion,showingariseof35.7%overthepreviousyear.TheimprovementofourNet Interest Income was partially due to theincreaseinourAdvancesandInvestmentIncomeandmainlydue to the reductionofour interestexpensesondeposits. Theexchange incomeofthe bank has increased from G$228 million in2011toG$354millionin2012,registeringariseof55.3%overthepreviousyear.
However,ourcommissionandotherincomehavegone down by nearly G$100 million during theyear. We shall examine the areas of improvingourprofitandprofitabilitytomaximizeourprofitsinthecomingyears. ThestaffcostsoftheBankhave increase from G$329 million to G$368million,showingariseof11.9%overthepreviousyear, while our non-staff administrative costshave increased from G$184 million to G$233million,whichshowsan increaseof26.6%. Ourexpanding network of branches has increasedthecostofconsumableitemsandourstaffcostshave increasedmainly on account of additionalmanpoweratthebranches.
We have appointed a Procurement Committeein the Bank to examine and analyze differentsegments of expenditure. The Committee willfocus on controllable expenses and improve
the procurement methodology and system toincrease our income and reduce our expenses.The independent working of a ProcurementCommittee facilitates transparency andaccountability.
RISK MANAGEMENT AND CAPITAL ADEqUACY
Risk is inherent in banking business which ismainly concerned with the mobilization anddeploymentofmoney.BanksinGuyanaoperatein a regulated but full operational autonomyand freedom to evolve their own policies andprocedures. Risks in commercial banks haveenhanced on account of rapid technologicaldevelopments and a general decline in publicmoral values. Wewill ensure that we are abletodefine,identifyandmeasurerisksinourbankandevolvesoundriskmanagementpracticesandpolicieswhich canprovideearlywarning signalsto initiateprompt, correctiveactions suitingourrequirements.Infuture,weshallsetupaseparateRiskManagementDepartmentwithqualifiedandexperienced staff. At present, risks are beingmonitoredbyanindividualdepartmentundertheoverallsupervisionoftheChiefExecutiveOfficerandtheBoardofDirectors.
Maintaining adequate capital as regulatorynormsandforfuturedevelopmentisverycriticalfor a commercial bank. Regulatory authoritiesin Guyana and international banks, after thefinancial crisis of 2008, have prescribed capitaltobeinlinewithBaslenorms.BanksinGuyanaarerequiredtomaintainaminimumcorecapitalof 8% of the total risk-weighted assets. UnderBasleIII,Banksneedtomaintainanexcesscapitalof 2.5%, in addition to 8%of base capital. OurBank’s capital adequacy ratio as at September30,2012was31.73%comparedto30.29%asatSeptember 30, 2011. The main improvementin the capital adequacy ratiowasonaccountofsignificant improvement in our mark-to-marketinvestmentvalue.Theexcellentcapitaladequacyratioprovidestheplatformforenhancedlendingandsoundnessofthebank.
STAFF TRAINING
Staff training is a continuous process. Wehavedevisedanelaboratetrainingplanforclassroomandon-the-job training for our employees. Wehave already started on-the-job training in thecreditareaforemployeesofourBerbiceandEastCoastBranches.TheBankplanstoimpartspecial
21
Annual Report 2012
training to its employees in the areas of credit,investmentandforeignexchange.
UPhOLDING vALUES AND SOCIAL WORK
As one of our core values, we are an equalopportunity employer. Our policies are non-discriminatory as we continue to strive to offerthebestservicestoallourcustomers,irrespectiveofethnicity, culturalbackgrounds,and religion /belief.TheBankcontinuestoplayaninstrumentalroleasacorporatecitizen.
In accordance with our Mission Statement,the Bank takes pride in fulfilling its socialresponsibilities throughmeaningful involvementincommunitydevelopment.TheBankhasbeenaproudsponsorofvarioussportingandeducationaleventsespeciallyinareaswhereourbranchesarelocated.
Duringourlastfinancialyear,thebankhasgivena number of donations to various organizationsand has supported several meaningful events.Wehaverewardedanumberofstudentsfortheiroutstanding performance in their examinationsalong with recognizing the country’s top CSEC2012 student, re-painted pedestrian crossingsin different areas in close proximity to schoolsas well as contributed to various constructionprojects such as the restoring and rebuilding ofthe St. JosephMercy Hospital and a shelter forvictimsofabuseinBerbice.
In addition, the Bank has on-going programmesfor food distribution, school supplies as wellas financial assistance to various organizationsincluding theHelp&Shelter, LifelineCounselingServices and Avon Community Help Fund forsupportingbreastcancereducation&awareness.
Webelieve thatour contributionshaveandwillcontinue to make positive impacts on the livesof the future generation in Guyana. We shallcontinuetoseeknewmeasurestohelpconservethe usageof our natural resources aswe try torestructure our policies and procedures with a“go-green”initiativeinmind.
ACKNOWLEDGEMENT
We have received good support from our
customers, shareholders and employees.Without the support of our customers, wewould not have achieved good financial results.We also acknowledge and place on record, ourappreciationforthecontributionofallemployeesandmembersofthemanagementteamwhohaveplayedasignificantroleinthesuccessoftheBank.
FUTURE PROSPECTS
The Guyana economy and major economies oftheworld,includingtheUnitedStatesarepassingthroughdifficulttimes.SlowdownoftheUnitedStates and the European economy will have amajor impact on developing countries. Politicalstability will be amajor precondition for futuregrowthandinvestmentinGuyana.
Ourmajorobjectivesinthecomingyearswouldbetoconsolidatefinancialgainsofthelastfewyearsand broaden the customer base by aggressivemarketing and pragmatic approach to problemsofourcustomers.
Weshallfocusonthereductionofnon-performingloansandcontrolourexpenditureandincreasingour non-fund based income to further improveprofitability. We have a committed pool ofhuman resources. Motivation and training willhelp to build a strong Institution. Improvingcustomers’satisfaction,employees’performanceand productivity are the basic requirements forlong-termgrowthandstability. Oursuccesswilldepend on our ability to adapt, engineer bothtechnical and non-technical solutions to ourgrowingcustomerdemandsandexpectations.
We have vision and the infrastructure todevelop a common corporate language forour employees to build a stronger and viablefinancial institution in service of the Guyanesepeople. During challenging times, DemeraraBank has demonstrated exceptional strength.We are entering into a phase of bankingwhichischaracterizedbyhighliquidityandlowinterestrates,with tough competition. We shall alwaysendeavour to offer valuable contribution tothe progress and prosperity of our clients,shareholders, employees and the society as awhole.
Chief Executive Officer’s Report (cont’d)
22
DEMERARA BANK LIMITED
Report of the DirectorsTheDirectorshavepleasureinsubmittingthisReportandAuditedFinancialStatementsfortheyearendedSeptember30,2012.
PRINCIPAL ACTIvITIES:
TheBankprovidesacomprehensiverangeofbankingservicesoutofourmainofficeatCamp&SouthStreets,GeorgetownandBranchesinRoseHall&Corriverton,Berbice,AnnaRegina,Essequibo,Diamond,EastBankDemeraraandLeRessouvenir,EastCoastDemerara.
FINANCIAL RESULTS: (In Thousands of Guyana Dollars)
TheresultsfortheyearendedSeptember30,2012areasfollows:
2012 2011ProfitBeforeTax $1,499,178 $1,389,852Taxation $455,754 $405,865ProfitAfterTax $1,043,424 $983,987
APPROPRIATIONSDividendsPaid $252,000 $230,647RetainedEarnings $791,424 $753,340
DIvIDEND:
TheDirectorsrecommendadividendof$0.60pershare,including$0.18interimpaidinMay2012.
RESERvES AND RETAINED EARNINGS:
TheBankhas reached its statutory reserve limit andno furtherprovision is required. Thebalanceof$791,424 isplacedonRetainedEarningswhichnowstandsat$4,523,425. Theproposeddividendof$189MwillbepaidoutofRetainedEarnings.
DIRECTORS:
InaccordancewithArticle97oftheBank’sArticlesofAssociation,theDirectorsretiringforthetimebeingareMr.KomalR.Samaroo,Mrs.ChandraGajraj,Mrs.SheilaGeorgeandMr.WilliamH.Barrow,andbeingeligible,offerthemselvesforre-election.
AUDITORS:
TheAuditorsNizamAli&Company,beingeligible,offerthemselvesforre-appointment.
DIRECTORS’ EMOLUMENTS:
Dr.YesuPersaud 1,800,000Mr.HemrajKissoon 1,020,000Mr.KomalR.Samaroo 1,020,000Mr.WilliamH.Barrow 1,020,000Mrs.SheilaGeorge 1,020,000Dr.LeslieChin 1,020,000Mrs.ChandraGajraj 1,020,000Mr.PravinchandraDave 360,000
23
Annual Report 2012
DIRECTORS’ INTERESTS:
Beneficial interest Associate’s interestDr.YesuPersaud(Chairman) $22,410,000 NilMr.HemrajKissoon 1,107,000 15,920,000Mr.KomalR.Samaroo Nil 22,410,000 Mr.WilliamH.Barrow 1,000,000 NilMrs.SheilaGeorge 100,000 NilDr.LeslieChin(heldjointlywithassociate) 390,000 390,000Mrs.ChandraGajraj 1,000,000 NilMr.PravinchandraDave(CEO/Director) 250,000 250,000
SERvICE CONTRACTS:
TherearenoservicecontractsbetweentheBankandanyofitsDirectors.
SUBSTANTIAL ShAREhOLDING:
Therearenosubstantialshareholders.(whoseinterestsexceed5%)
CORPORATE GOvERNANCE
TheBankiscommittedtothehigheststandardsofcorporategovernanceandinthisregardemployssuchmeasuresthatarenecessarytogiveeffecttothispolicy.Constantevaluationisalsobeingdonetoensurethatthequalityofcorporategovernanceismaintained.
The Board of Directors comprises eminent and respected professionals from diversified fields. TheircombinedknowledgeandexperiencearebroughttobearintheexecutionoftheirdutiesforthebenefitoftheBank.TheBoardmeetsonamonthlybasisandevaluatestheperformanceofthebankwithbudgetedlevels.
ThefollowingcommitteescomprisingmembersoftheBoardandheadedbynon-executiveDirectorsarealsoinplace:
AUDITCOMMITTEELOANSCOMMITTEEASSET&LIABILITYCOMMITTEEREMUNERATIONCOMMITTEEHUMANRESOURCECOMMITTEE
The Bank is a reporting issuer under the Securities Industry Act. We recognize the importance oftransparency and disclosure ofmaterial information in our operations and are in compliancewith allpertinent regulations including the provision of information on Related Party transactions, Loans andAdvancesandremunerationpaidtokeyemployeesoftheBank.
BYORDEROFTHEBOARD
....................................................CHANDRAGAJRAJ(Mrs.)CORPORATESECRETARY
Report of the Director’s (cont’d)
24
DEMERARA BANK LIMITED
AUDITORS’ REPORT To the Shareholders of Demerara Bank Limited
We have audited the accompanying financial statements of Demerara Bank Limited; which comprise the statement of financial position as at September 30, 2012 and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as of September 30, 2012 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the requirements of the Financial Institutions Act 1995 and Companies Act 1991.
Chartered Accountants Georgetown, Guyana October 17, 2012
Nizam Ali & CompanyChartered Accountants215 ‘C’ Camp StreetNorth CummingsburgGeorgetown
Tel: (592) 227-8825Tel/Fax: (592) 225-7085E-mail: [email protected]
Partners: Nizam Ali - FCCA, CTA; Leslie Verasammy - FCCA
25
STATEMENT OF FINANCIAL POSITION AS AT SEPTEMBER 30, 2012
WithcomparativefiguresforSeptember30,2011(Expressed in Guyana Dollars)
“Theaccompanyingnotesformanintegralpartofthesefinancialstatements”
2011$ 000
6,807,0533,784,666
10,591,719
12,527,888
15,000
12,037,206
808,81835,493
844,311
36,016,124
ASSETS Cash and Short Term Funds Cashandcashequivalents StatutorydepositwithBankofGuyana Investments Availableforsale Assets classified as held for sale Loans and Advances Other Property,plantandequipment Otherassets
ThesefinancialstatementswereapprovedbytheBoardofDirectorsonOctober17,2012andsignedonitsbehalfby:
….............………………….....……Mr. Pravinchandra S. Dave
ChiefExecutiveOfficer/Director
….............………………….....……Mr. hemraj Kissoon
Director
Notes
7
8
14
9
1112
2012$ 000
6,452,3644,174,352
10,626,716
15,202,281
15,000
15,391,920
850,51327,747
878,260
42,114,177
26
DEMERARA BANK LIMITED
WithcomparativefiguresforSeptember30,2011(Expressed in Guyana Dollars)
STATEMENT OF FINANCIAL POSITION AsatSeptember30,2012
“Theaccompanyingnotesformanintegralpartofthesefinancialstatements”
2011$ 000
3,689,470
16,682,5469,796,978
30,168,994
1,461,756
450,000450,000
(246,627)3,732,0014,385,374
36,016,124
Liabilities and shareholders’ equity DepositsDemand Savings Term
other Liabilities shareholders’ equity Sharecapital Statutoryreserve Investmentrevaluationreserve Retainedearnings
Notes
10
13
1516 (i)
16 (ii)
2012$ 000
3,782,579
22,398,6188,867,158
35,048,355
1,359,193
450,000450,000283,204
4,523,4255,706,629
42,114,177
27
Annual Report 2012
STATEMENT OF COMPREhENSIvE INCOME FOR ThE YEAR ENDED SEPTEMBER 30, 2012
WithcomparativefiguresforSeptember30,2011(Expressed in Guyana Dollars)
2011$ 000
1,177,625 974,235 2,151,860
333,419 389,893 9,572 732,884
1,418,976(40,400)
1,378,576 523,755
1,902,331
512,479
1,389,852
405,865 983,987
2.19
Interest incomeLoansandadvancesInvestments Interest expense Savingsdeposits Termdeposits Others Net interest income Loanlossesnetofrecoveries Netinterestincomeafterloan Lossesnetofrecoveries Otherincome Net interest and other income Non-interest expenses Incomebeforetaxation Taxation net income for the year Earnings per share in dollars
Notes
9
21
18
2017
22
2012$ 000
1,285,993 1,144,481 2,430,474 315,325 250,497 7,750 573,572 1,856,902
(240,000) 1,616,902 482,814 2,099,716 600,538 1,499,178 455,754 1,043,424 2.32
“Theaccompanyingnotesformanintegralpartofthesefinancialstatements”
28
DEMERARA BANK LIMITED
STATEMENT OF COMPREhENSIvE INCOME FOR ThE YEAR ENDED SEPTEMBER 30, 2012
WithcomparativefiguresforSeptember30,2011(Expressed in Guyana Dollars)
2011$ 000
983,987
(492,100)
(208,317)
(700,417)
283,570
net income for the year Other Comprehensive Income
Netchangeinfairvalueofavailable-for-salefinancialassets.
Netchangeinfairvalueofavailable-for-salefinancialassetstransferredtoincomestatement.
Totalothercomprehensiveincome(loss)fortheperiod. Totalcomprehensiveincomefortheyear.
2012$ 000
1,043,424
490,781
39,050
529,831
1,573,255
“Theaccompanyingnotesformanintegralpartofthesefinancialstatements”
29
Annual Report 2012
“Theaccompanyingnotesformanintegralpartofthesefinancialstatements”
STATEMENT OF ChANGES IN EqUITY FOR ThE YEAR ENDED SEPTEMBER 30, 2012
WithcomparativefiguresforSeptember30,2011(Expressed in Guyana Dollars)
Total
$’000
4,332,451
983,987
(230,647)
(700,417)
4,385,374
1,043,424
(252,000)
529,831
5,706,629
Statutoryreserves
$’000
450,000 - -
-
450,000
-
-
-
450,000
Retainedearnings
$’000
2,978,661
983,987
(230,647)
-
3,732,001
1,043,424
(252,000)
-
4,523,425
Sharecapital
$’000
450,000
-
-
-
450,000
-
-
-
450,000
Balance at October 1, 2010 ProfitfortheyearSeptember30,2011 Dividend(note23) Netchangeinfairvalueofavailableforsaleinvestment Balance at September 30, 2011 ProfitfortheyearSeptember30,2012 Dividend(note23) Netchangeinfairvalueofavailableforsaleinvestment Balance at September 30, 2012
Investment revaluation
reserve$’000
453,790
-
-
(700,417)
(246,627)
-
-
529,831
283,204
30
DEMERARA BANK LIMITED
STATEMENT OF CASh FLOWS FOR ThE YEAR ENDED SEPTEMBER 30, 2012
WithcomparativefiguresforSeptember30,2011(Expressed in Guyana Dollars)
2011$ 000
1,389,852(2,151,860)
732,885
34,464 - 2,152,985
(877,141)(146,274)
3,801 1,338,933 336,508
(437,725) 2,376,428
(2,615,936)
(700,417)(2,122,828)
-(235,384)
(5,674,565)
(230,647)(230,647)
(3,528,784) 10,335,837
6,807,053
cash flows from operating activities
Netincomebeforetaxation Interestincome Interestexpense Adjustmentsfor: DepreciationLossondisposalofplantandequipmentInterestreceived Interestpaid IncreaseinstatutorydepositwithBankofGuyanaDecreaseinprepaymentsandothers Increaseindeposits Decreaseinotherliabilities TaxespaidNet cash from operating activities cash flows from investing activities Increaseininvestments Netchangeinfairvalueofavailableforsaleinvestmentrecogniseddirectlyinequity IncreaseinloansandadvancesProceedsfromsaleofpropertyplantandequipmentPurchaseofproperty,plantandequipmentNet cash used in investing activities cash flows from financing activities DividendsNet cash used in financing activities net decrease in cash and cash equivalents cash and cash equivalents, beginning of year Cashandcashequivalents,endofyear(note7)
2012$ 000
1,499,178(2,430,474)
573,572
55,744 3,330 2,299,387
(632,573) (389,686)
7,747 4,938,362
(95,298) (463,018)
5,366,271
(2,616,467) 529,831 (3,281,554) 2,710
(103,480) (5,468,960)
(252,000) (252,000)
(354,689) 6,807,053
6,452,364
“Theaccompanyingnotesformanintegralpartofthesefinancialstatements”
31
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
1. incorporation and Business Activities
DemeraraBankLimitedwasincorporatedonJanuary20,1992asaprivatelimitedliabilitycompanyundertheprovisionsoftheCompaniesAct,Chapter89:01andwaslicensedtocarryonthebusinessofBankingonOctober31,1994.TheBankobtainedCertificateofContinuanceonApril2,1997inaccordancewiththeCompaniesAct1991.
TheBankoffersacompleterangeofbankingandfinancialservicesandoperatesundertheprovisionsoftheFinancialInstitutionsAct(Act1of1995).
TheBankwasregisteredasareportingissuerundertheSecuritiesIndustriesAct1998onSeptember02,2003.OnSeptember02,2003theBankwasdesignatedanapprovedmortgagefinancecompanybytheMinisterofFinanceinaccordancewithsection15oftheIncomeTaxAct.Theincomeearnedfrommortgagesgrantedbyanapprovedmortgagefinancecompanyisexemptfromthepaymentofcorporationtaxes,providedthatthesemortgagescomplywiththestipulatedregulations.
2. new standards and interpretations not yet adopted
Current year Revised standardsand interpretationswhichbecameeffectiveduring the current yearandwere
adopteddidnothaveanyimpactontheaccountingpolicies,financialperformanceorpositionoftheBank.
not yet effective Anumberofnewstandards,amendments to standardsand interpretationsarenotyeteffective
for theyearendedSeptember30,2012,andhavenotbeenapplied inpreparing thesefinancialstatements.Discussedbelowarethosestandardsthatwillhaveanimpactonthefinancialstatementsofthebank.
IFRS 9 - Financial Instruments IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial
Instruments: Recognition and Measurementtobesubsequentlymeasuredatamortisedcostorfairvalue.Specifically,debt investments thatareheldwithinabusinessmodelwhoseobjective is tocollectthecontractualcashflows,andthathavecontractualcashflowsthataresolelypaymentsofprincipalandinterestontheprincipaloutstandingaregenerallymeasuredatamortisedcostattheendofsubsequentaccountingperiods.Allotherdebtinvestmentsandequityinvestmentsaremeasuredattheirfairvaluesattheendofsubsequentaccountingperiods.
IFRS9iseffectiveforannualperiodsbeginningonorafter1January2013,withearlierapplicationpermitted.
IFRS 13 - Fair value Measurement IFRS13establishesasinglesourceofguidanceforfairvaluemeasurementsanddisclosuresabout
fairvaluemeasurements.TheStandarddefinesfairvalue,establishesaframeworkformeasuringfairvalue,andrequiresdisclosuresaboutfairvaluemeasurements.ThescopeofIFRS13isbroad;itappliestobothfinancialinstrumentitemsandnon-financialinstrumentitemsforwhichotherIFRSsrequireorpermitfairvaluemeasurementsanddisclosuresaboutfairvaluemeasurements,exceptin
32
DEMERARA BANK LIMITED
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
2. new standards and interpretations not yet adopted (cont’d) IFRS 13 - Fair value Measurement (cont’d)
specifiedcircumstances.Ingeneral,thedisclosurerequirementsinIFRS13aremoreextensivethanthoserequiredinthecurrentstandards.Forexample,quantitativeandqualitativedisclosuresbasedonthethree-levelfairvaluehierarchycurrentlyrequiredforfinancialinstrumentsonlyunderIFRS7FinancialInstruments:DisclosureswillbeextendedbyIFRS13tocoverallassetsandliabilitieswithinitsscope.
IFRS13iseffectiveforannualperiodsbeginningonorafter1January2013,withearlierapplication
permitted.
Amendments to iAs 1- Presentation of items of other comprehensive income
The amendments to IAS 1 retain the option to present profit or loss and other comprehensiveincomeineitherasinglestatementorintwoseparatebutconsecutivestatements.However,theamendmentstoIAS1requireadditionaldisclosurestobemadeintheothercomprehensiveincomesectionsuchthatitemsofothercomprehensiveincomearegroupedintotwocategories:(a)itemsthatwill notbe reclassified subsequently toprofitor loss; and (b) items thatwill be reclassifiedsubsequently to profit or loss when specific conditions are met. Income tax on items of othercomprehensiveincomeisrequiredtobeallocatedonthesamebasis.
TheamendmentstoIAS1areeffectiveforannualperiodsbeginningonorafter1July2012.
3. summary of significant Accounting Policies
Theprincipalaccountingpoliciesappliedinthepreparationofthesefinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtothepreviousyear. 3.1 Basis of preparation
3.1.1 statement of compliance ThefinancialstatementsarepreparedinGuyanaDollarsinaccordancewithInternational
Financial Reporting Standards. They have been prepared under the historical costconventionasmodifiedbythevaluationoffinancialassetsavailableforsaleandfinancialassetsatfairvaluethroughtheprofitorloss.
The preparation of these financial statements in conformity with IFRS requiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountofassets,liabilities,contingentassetsandcontingentliabilitiesatthedateofthefinancialstatementsandincomeandexpensesduringtheperiod.Actualresultscoulddifferfromtheseestimates.Theareas involvingahigherdegreeof judgementor complexity,orareaswhereassumptionsandestimatesaresignificanttothefinancialstatementsaredisclosedinnote5.
ThefinancialstatementswereauthorisedforissuebytheBoardofDirectorsonOctober
17,2012.
33
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
3.2 foreign currency translation (a) functional and presentation currency
Items included in the financial statements are measured using the currency of the
primaryeconomicenvironmentinwhichtheentityoperates.ThefinancialstatementsarepresentedinGuyanaDollarswhichisthefunctionalandpresentationcurrency.
(b) transactions and balances
Transactions inforeigncurrenciesaretranslatedattherateofexchangerulingatthetransactiondate.Foreigncurrencymonetaryassetsandliabilitiesaretranslatedattherateofexchangerulingatthestatementoffinancialpositiondate,exceptasotherwisestated. Foreign exchange positions are valued daily at prevailing rates. Resultingtranslationdifferencesandprofitsandlossesfromtradingactivitiesareincludedinthestatementofcomprehensiveincome.
3.3 Property, plant and equipment
Property,plantandequipmentarestatedgenerallyathistoricalcost,exceptforthosemeasuredatfairvalue,whentheyaretestedforimpairment.Historicalcostincludesexpendituredirectlyattributabletotheacquisitionoftheitems.
Property,plantandequipmentistestedforimpairmentwheneverthereisobjectiveevidencethat the carrying amount of the asset may exceed its recoverable amount. Any resultingimpairmentlossisrecognisedimmediatelyinthestatementofcomprehensiveincome.
Subsequentcostsareincludedintheasset’scarryingvalueorrecognisedasaseparateasset,asappropriate,onlywhen it isprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheBankandthecostof the itemcanbemeasuredreliably.Thecarryingamountofthereplacedpartisderecognised.Alltheirrepairsandmaintenancearechargedto the statement of comprehensive income during the financial period in which they areincurred.
Depreciation of property, plant and equipment excluding land, is provided for, over the
estimatedusefullivesoftherespectiveassetsusingthestraight-linemethod.
Thefollowingannualdepreciationratesareapplicablefortherespectiveassetcategories.
Building 2% Furnitureandequipment 10% Motorvehicles 20% Thegainorlossarisingondisposalorretirementofanitemofproperty,plantandequipment
isdeterminedasthedifferencebetweenthesalesproceedsandthecarryingamountoftheassetandisrecognisedinthestatementofcomprehensiveincome.
3.4 non- current assets held for sale
Anon-currentassetisclassifiedasheldforsalewhen:itscarryingamountwillberecovered
3. summary of significant Accounting Policies (cont’d)
34
DEMERARA BANK LIMITED
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
principallythroughasaletransaction;theassetisavailableforimmediatesaleinitspresentcondition;anditssaleishighlyprobable.Assetsclassifiedasheldforsalearenotdepreciatedoramortisedandarecarriedatthelowerofcarryingamountandfairvaluelesscoststosell.
3.5 financial assets and liabilities
3.5.1 classification
The Bank classifies its financial assets in the following categories: financial assets,at fair value throughprofitor loss, loans and receivables andavailable for sale. Theclassification depends on the purpose forwhich the financial assetswere acquired.Financial liabilitiesareclassified in thefollowingcategories:financial liabilitiesat fairvaluethroughprofitorlossandotherfinancialliabilities.Managementdeterminestheclassificationofitsfinancialassetsandliabilitiesatinitialrecognition.
(a) financial assets at fair value through profit or loss
Financialassetsatfairvaluethroughprofitorlossarefinancialassetsheldfortrading.Afinancialassetisclassifiedinthiscategoryifacquiredprincipallyforthepurposeofsellingintheshortterm.
(b) Available for sale financial assets
Available-for-saleassetsarefinancialassets thatarenotfinancialassetsat fairvalue
throughprofitandlossorloansandreceivablesoriginatedbytheBank.Available-for-saleinstrumentsincludecertaindebtandequityinvestments.
(c) Loans and receivables Loans and receivables are financial assetswith determinable payments that are not
quotedinanactivemarket.
3.5.2 recognition The Bank recognises financial assets on the date it commits to purchasing the assets or
ondisbursement of loans and advances.All other financial assets or liabilities are initiallyrecognisedonsettlementdate.
3.5.3 Measurement Oninitialrecognition,financialassetsandliabilitiesaremeasuredatfairvalueplus,incase
ofafinancialassetorliabilitynotatfairvaluethroughprofitorloss,transactioncostthataredirectlyattributabletotheacquisitionorissueofthefinancialassetorliability.
Subsequentto initial recognitionallfinancialassetsat fairvaluethroughprofitor lossandavailable-for-saleassetsaremeasuredatfairvalue.Wheretheseassetsaretradedonanactivemarket,thequotedmarketpriceisusedtomeasurefairvalue.Wheretheseinstrumentsare
3. summary of significant Accounting Policies (cont’d)
3.4 non- current assets held for sale (cont’d)
35
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
3. summary of significant Accounting Policies (cont’d)
3.5.3 Measurement (cont’d)
notquotedonanactivemarketfairvalueisdeterminedusingdiscountedcashflowanalysis.Estimated future cash flows are based onmanagement’s best estimates and the discountrateisamarketrelatedrateatthestatementoffinancialpositiondateforaninstrumentwithsimilartermsandconditions.
Anyavailable-for-saleassetthatdoesnothaveaquotedmarketpriceinanactivemarketand
wherefairvaluecannotbereliablymeasured,isstatedatcost,includingtransactioncost,lessimpairmentloss.
Gainsand lossesarising fromthechange in the fairvalueofavailable-for-sale investments
subsequenttoinitialrecognitionareaccountedforinthestatementofcomprehensiveincomeasotherrecognisedgains.
Gainsandlosses,bothrealisedandunrealised,arisingfromthechangeinthefinancialassets
andliabilitiesatfairvaluethroughprofitorlossarereportedinotherincome.
All non-trading financial liabilities, loans and receivables and held-to-maturity assets aremeasured at amortised cost less impairment losses. Amortised cost is calculated on theeffectiveinterestratemethod.
3.6 Loans and advances LoansandadvancestocustomerscompriseofloansandadvancesoriginatedbytheBankand
areclassifiedasfinancialassetsatamortisedcost.
All loans and advances are recognised when cash is advanced to borrowers and arederecognisedwhenborrowersrepaytheirobligationorwhentheloaniswrittenoff.Loansarewrittenoffafterallnecessarylegalprocedureshavebeencompletedandtheamountofthelossisfinallydetermined.
Uponclassificationofaloantonon-accrualstatus,interestceasetoaccrueandallpreviouslyaccruedandunpaidinterestisreversedinthecurrentperiod.Interestisonlyrecognisedinsubsequentperiods,totheextentthatpaymentofsuchinterestarereceived.
Loansandadvancesaregenerally returned toaccrual statuswhenthetimelycollectionofboth principal and interest is reasonably assured and all delinquent principal and interestpaymentsarebroughtcurrent.
Impairment TheBankcarriesoutadetailedreviewofitsloanportfoliotwiceyearly.
Specificprovisionsareestablishedasaresultofthesedetailedreviewsofindividualloansand
advancesandreflectanamountwhichinmanagement’sjudgement,providesadequatelyforestimatedlosses.Factorsconsideredinsuchanalysesinclude:
(i) Delinquencyincontractualpaymentsofprincipalorinterest
36
DEMERARA BANK LIMITED
3. summary of significant Accounting Policies (cont’d)
3.6 Loans and advances (cont’d)
Impairment (cont’d)
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
(ii) Cashflowdifficultiesexperiencedbytheborrower (iii)Breachofloancovenantsorconditions (iv) Initiationofbankruptcyproceedings (v) Deteriorationinthevalueofcollateral
TheBank’spolicyforprovisioningconformwiththerequirementoftheFinancialInstitutionsAct(FIA)1995.
UndertheprovisioningrequirementoftheFIA1995,uponreviewoftheloanportfolio,loans
areclassifiedinoneoffivecategories:pass,specialmention,sub-standard,doubtfulandloss.Provisionsarethenmadebasedonclassificationoftheloan.
GeneralprovisionisestablishedwhereprudentassessmentbytheBankofpastexperienceandexistingeconomicandportfolioconditions indicatethat it isprobablethat losseshaveoccurred,butwheresuchlossescannotbedeterminedonanitem-by-itembasis.
Doubtfulloansarewrittenoffafterallnecessarylegalprocedureshavebeencompletedandtheamountofthelossisfinallydetermined.
Theprovisionfortheyear,lessrecoveriesofamountspreviouslywrittenoffandthereversalofprovisionnolongerrequired,isdisclosedinthestatementofcomprehensiveincomeasloanlossesnetofrecovery.
3.7 Provisions Provisions are recognisedwhen theBankhas a present legal or constructiveobligation as
aresultofpastevents, it isprobablethatanoutflowembodyingeconomicbenefitswillberequiredtosettletheobligation,andareliableestimateoftheamountoftheobligationcanbemade.
3.8 Dividend on ordinary shares
Dividend that are proposed and declared during the period are accounted for as an
appropriationofretainedearningsinthestatementofchangesinequity.
Dividendthatareproposedanddeclaredafterthestatementoffinancialpositiondatearenotshownasaliabilityonthestatementoffinancialpositionbutaredisclosedasanotetothefinancialstatements.
3.9 revenue recognition
Loans and investments Interestincomeisaccountedforontheaccrualbasisforinvestmentsandforallloans
other than non-accrual loans using the effective interest ratemethod.When a loanis classified as non- accrual, any previously accrued but unpaid interest thereon isreversedagainstincomeofthecurrentperiod.Thereafter,interestincomeisrecognised
37
Annual Report 2012
3. summary of significant Accounting Policies (cont’d)
3.9 revenue recognition (cont’d)
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
onlyaftertheloanrevertstoperformingstatus.
Fees and commission income Feesandcommissionarenotincludedinthecalculationofeffectiveinterestrate.These
feesarerecognisedinincomewhenabindingobligationhasbeenestablished.Wheresuchobligationsarecontinuing,incomeisrecognisedoverthedurationofthefacility.
3.10 Pension TheBankparticipatesinamulti-employerplanwithcertainothercompanies,theassetsof
whichareheld intrustee-administeredfundswhichareseparatefromtheBank’sfinances.Theplan is generally fundedby payments fromparticipating companies taking account ofrecommendationsofindependentqualifiedactuaries.
3.11 cash and cash equivalents Cashandcashequivalentscompriseofcashonhandandshorttermhighlyliquidinvestments
thatarebothreadilyconvertible intoknownamountsofcashandsoneartomaturitythattheypresentinsignificantriskofchangesinvalueduetochanginginterestrates.
3.12 Acceptances, guarantees and letters of credit
The Bank’s commitments under acceptances, guarantees and letters of credit have beenexcluded from these financial statements because they do not meet the criteria forrecognition. These commitments as at September 30, 2012 amounted to $1,293,663,417(2011-$1,009,386,459).Intheeventofacallonthesecommitments,theBankhasequalandoffsettingclaimsagainstitscustomers.
3.13 taxation Tax expense for the period comprises current and deferred tax. Tax is recognised in the
statementofcomprehensiveincome,excepttotheextentthatitrelatestoitemsrecogniseddirectlyinequity.Inthiscasethetaxisalsorecognisedinequity.
Current tax Thecurrentincometaxiscalculatedonthebasisofthetaxlawsenactedatthestatementof
financialpositiondate.Managementperiodicallyevaluatespositionstakenintaxreturnswithrespecttosituationsinwhichapplicabletaxregulationissubjecttointerpretation.
Deferred tax Deferredincometaxisrecognised,usingtheliabilitymethod,ontemporarydifferencesarising
between the tax base of assets and liabilities and their carrying amounts in the financialstatements.
Thetaxbaseofassetsandliabilitiesarenotmateriallydifferentfromtheircarryingamounts,
consequently,noprovisionisrecognisedinthesefinancialstatementsfordeferredtaxassetorliability.
38
DEMERARA BANK LIMITED
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
3.14 Leases Leaseinwhichasignificantportionoftherisksandrewardsofownershipareretainedbythe
lessorareclassifiedasoperatingleases.Paymentsmadeunderoperatingleasesarechargedtothestatementofcomprehensiveincomeonastraight-linebasisovertheperiodofthelease.AllleasingarrangementstowhichtheBankisapartyareconsideredoperatinglease.
3.15 segment reporting Abusiness segment isa componentofanentity that isengaged inprovidingproductsor
servicesthataresubjecttorisksandreturnsthataredifferentfromthoseofotherbusinesssegments. A geographical segment is engaged in providing products or serviceswithin aparticulareconomicenvironmentthataresubjecttorisksandreturnsthataredifferentfromthoseofsegmentsoperatinginothereconomicenvironments.
3.16 comparatives Certaincomparativeswererestatedtoconformwiththepresentationofthecurrentyear.
4. Financial risk management
TheBank’sactivitiesexposeittoavarietyoffinancialrisks:marketrisk(includingpricerisk,interestrateriskandcurrencyrisk),liquidityriskandcreditrisk.TheBank’soverallriskmanagementprogramfocusesontheunpredictabilityoffinancialmarketsandseekstominimisepotentialadverseeffectsontheBank’sperformance.
TheBoardofDirectorsisresponsiblefortheoverallriskmanagementapproachandforapprovingtheriskstrategiesandprinciples.
TheBank’smanagementmonitor’sandmanagesthefinancialrisksrelatingtotheoperationsoftheBankthroughinternalriskreportswhichanalyseexposuresbydegreeandmagnitudeofrisks.
TheBank’srisksaremeasuredusingmethodswhichreflecttheexpectedlosslikelytoariseinnormalcircumstances.
Monitoringandcontrolling risks isprimarilyperformedbasedon limitsestablishedby theBank.
TheselimitsreflectthebusinessstrategyandmarketenvironmentoftheBankaswellasthelevelofriskthattheBankiswillingtoaccept.
TheBankactivelyusescollateraltorescueitscreditrisks. (a) Market risk TheBank’sactivitiesexposeittofinancialrisksofchangesinforeigncurrencyexchangerates
andinterestrates.TheBankusesgapanalysis,interestratesensitivityandexposurelimitstofinancialinstrumentstomanageitsexposuretointerestandforeigncurrencyrisk.
3. summary of significant Accounting Policies (cont’d)
39
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
4. Financial risk management (cont’d)
(a) Market risk (cont’d)
i) Price Risk
Priceriskistheriskthatthevalueoffinancialinstrumentswillfluctuateasaresultofchangesinmarketpriceswhetherthosechangesarecausedbyfactorsspecifictotheindividualsecurityofits issuerorfactorsaffectingallsecuritiestradedinthemarket.Managementcontinuallyidentifiestheriskanddiversifiestheportfoliotominimisetherisk.
TheBankdoesnotactivelytradeinequityinstruments.TheBank’sexposuretoequity
pricerisksarisingfromequityinvestmentsisnotmaterialtothefinancialstatements.
(ii) Interest rate risk TheBankisexposedtointerestrateriskbuttheBank’ssensitivitytointerestisimmaterial
asitsfinancialinstrumentsaresubstantiallyatfixedrates.TheBanksexposuretointerestrateriskonfinancialassetsandfinancialliabilitiesaredisclosedonpages40and41.
Total
$’000
10,626,71615,391,92015,202,281
893,26042,114,177
35,048,3551,359,1935,706,629
42,114,177
-
Over 5 years
$’000
-4,166,609
14,354,021-
18,520,630
----
18,520,630
1-5 years
$’000
-3,764,562754,516
-4,519,078
8,867,158--
8,867,158
(4,348,080)
Within 1year
$’000
6,349,0886,321,741
93,744-
12,764,573
22,396,943142,270
-22,539,213
(9,774,640)
Average Interest
rate
%
1.2511.027.80
2.002.25
Maturing 2012
Assets CashresourcesNetloanstocustomersInvestmentsOthers Liabilities and shareholders’ equity CustomersdepositsOtherliabilitiesShareholders’equity interest sensitivity gap
Non- interestbearing$’000
4,277,628
1,139,008-
893,2606,309,896
3,784,2541,216,9235,706,629
10,707,806
(4,397,910)
40
DEMERARA BANK LIMITED
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
Total
$’000
10,591,71912,037,20612,527,888
859,31136,016,124
30,168,9941,461,7564,385,374
36,016,124
-
Over 5 years
$’000
-3,232,5447,619,716
-10,852,260
---
10,852,260
1-5 years
$’000
-2,738,086
20,149-
2,758,235
9,796,978141,576
-9,938,554
(7,180,319)
Within 1year
$’000
5,628,9915,693,7464,888,023
16,210,760
16,686,56181,600
-16,768,161
(557,401)
Average Interest
rate
%
1.2510.417.96
2.462.25
Maturing 2011
Assets CashresourcesNetloanstocustomersInvestmentsOthers Liabilities and shareholders’ equity CustomersdepositsOtherliabilitiesShareholders’equity interest sensitivity gap
Non- interestbearing$’000
4,962,728 372,830 - 859,311 6,194,869
3,685,455 1,238,580 4,385,374 9,309,409
(3,114,539)
4. Financial risk management (cont’d)
(a) Market risk (cont’d)
(ii) Interest rate risk (cont’d)
41
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
4. Financial risk management (cont’d)
(a) Market risk (cont’d)
(iii) Currency risk
TheBankhas assets and liabilities that aredenominated in various currenciesotherthanthereportingcurrency.Managementdoesnotbelievethat thenetexposuretoforeigncurrencyriskcanresultinmateriallosstotheBank.
TheaggregateGuyanadollarsequivalentamountofassetsandliabilitiesdenominatedincurrenciesotherthanthereportingcurrencyareasfollows:
Total
$’000
6,298,03913,940,165
100,17920,338,383
5,881,094139,330
6,020,424
14,317,959
CDNDollar$’000
43,321--
43,321
6,387
-6,387
36,934
Euro
$’000
485 - - 485
36,088 - 36,088 (35,603)
PoundSterling$’000
6141,464,870 -1,465,484
906(2,940)(2,034)
1,467,518
US Dollar$’000
6,253,61912,475,295
100,17918,829,093
5,837,713142,270
5,979,983
12,849,110
2012
Assets CashresourcesInvestmentsLoansandadvances Liabilities DepositsOthers Net
Others
$’000
----
---
-
Total
$’000
5,595,26117,756,113
172,50023,523,874
3,941,834223,176
4,165,010
19,358,864
CDNDollar$’000
3,064 32 - 3,096
8,975 - 8,975
(5,879)
Euro
$’000
32,993277,334
-310,327
16,839-
16,839
293,488
PoundSterling$’000
57,9402,369,692
-2,427,632
2,523-
2,523
2,425,109
US Dollar$’000
5,500,98915,109,055
172,50020,782,544
3,913,497223,176
4,136,673
16,645,871
2011
Assets CashresourcesInvestmentsLoansandadvances Liabilities DepositsOthers Net
Others
$’000
275--
275
---
275
42
DEMERARA BANK LIMITED
4. Financial risk management (cont’d)
(a) Market risk (cont’d)
(iii) Currency risk (cont’d)
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
ThefollowingtabledemonstratesthesensitivitytoreasonablepossiblemovementsofselectcurrenciesagainsttheGuyanaDollartowhichtheBankhadsignificantexposureinrespectofitsfinancialassetsandliabilitiesholdingallothervariableconstant:
ThefollowingtabledemonstratesthesensitivitytoreasonablepossiblemovementsofselectcurrenciesagainsttheGuyanaDollartowhichtheBankhadsignificantexposureinrespectofitsfinancialassetsandliabilitiesholdingallothervariableconstant:
effect on profit
before tax
$’000
256,982 29,350
(712) 739
286,359
(256,982)(29,350)
712(739)
(286,359)
effect on profit
before tax
$’000
332,917 48,502 5,870
(118)
387,171
(332,917)(48,502)(5,870)
118
(387,171)
Change inexchange
rates
%
2%2%2%2%
2%2%2%2%
Change inexchange
rates
%
2%2%2%2%
2%2%2%2%
Year ended September 30, 2012 Increase in exchange rates USD GBP EURO CAD Decrease in exchange rates USD GBP EURO CAD
Year ended September 30, 2011 Increase in exchange rates USD GBP EURO CAD Decrease in exchange rates USD GBP EURO CAD
effect on other
Components of equity
$’000
- - - -
-
- - - -
-
effect on other
Components of equity
$’000
- - - -
-
- - - -
-
43
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
4. Financial risk management (cont’d)
(b) Liquidity risk Liquidity riskarises fromfluctuations in cashflows.The liquidity riskmanagementprocess
ensurestheBankisabletohonourallofitsfinancialcommitmentsastheyfalldue.TheBank’sliquiditystrategyincludesmeasuringandforecastingcashcommitments,buildingalargeandstablebaseofcoredepositsforretailandcommercialcustomers,ensuringsufficientcashandmarketableinstrumentssuchastreasurybillsandgovernmentsecuritiesareavailabletomeetshort-termrequirements,diversifyingfundingsourcesandmaintainingtheabilitytosecuritisebankassets.Fallbacktechniques includeaccessto local interbankandinstitutionalmarketsandstand-bylinesofcreditwithexternalparties.
Thetablebelowshowsthematuritiesoffinancialinstruments:
Total
$’000
10,626,716 15,391,92015,202,281
893,26042,114,177
35,048,3551,359,1935,706,629
42,114,177
-
-
1 to 5years
$’000
-3,764,562
--
3,764,562
8,866,938--
8,866,938
(5,102,376)
(19,659,638)
Due3-12 mths
$’000
-1,254
754,516-
755,770
----
755,770
(14,557,262)
Due in 3 mths
$’000
-338,439
--
338,439
1,143--
1,143
337,296
(15,313,032)
On Demand
$’000
10,626,7165,982,048
93,744893,260
17,595,768
26,180,2741,359,1935,706,629
33,246,096
(15,650,328)
(15,650,328)
Average Interest
rate%
1.2510.417.96
2.462.25
Maturing 2012
AssetsCashresourcesLoanstocustomersInvestmentsOthers
Liabilities andshareholders’ equityCustomersdepositsOtherliabilitiesShareholders’equity
Net gap
cumulative gap
Over 5 years
$’000
-5,305,617
14,354,021-
19,659,638
----
19,659,638
-
Within 1 year
44
DEMERARA BANK LIMITED
Total
$’000
10,591,71912,037,20612,527,888
859,31136,016,124
30,168,9941,461,7564,385,374
36,016,124
-
-
1 to 5years
$’000
-2,738,086
20,149-
2,758,235
632,231141,576
-773,807
1,984,428
(11,225,090)
Due3-12 mths
$’000
-941,882100,000
-1,041,882
5,044,18161,200
-5,105,381
(4,063,499)
(13,209,518)
Due in 3 mths
$’000
-507,028
--
507,028
4,116,55020,400
-4,136,950
(3,629,922)
(9,146,019)
On Demand
$’000
10,591,7194,244,8364,788,023859,311
20,483,889
20,376,0321,238,5804,385,374
25,999,986
(5,516,097)
(5,516,097)
Average Interest
rate%
1.2510.417.96
2.462.25
Maturing 2011
AssetsCashresourcesLoanstocustomersInvestmentsOthers
Liabilities andshareholders’ equityCustomersdepositsOtherliabilitiesShareholders’equity
Net gap
cumulative gap
Over 5 years
$’000
-3,605,3747,619,716
-11,225,090
----
11,225,090
-
Within 1 year
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
4. Financial risk management (cont’d)
(b) Liquidity risk (cont’d)
(c) Credit Risk CreditriskistheriskthattheBankwillincuralossbecauseitscustomers,clientorcounterparties
failedtodischargetheircontractualobligations.TheBankmanagesandcontrolscreditriskbysettinglimitsontheamountsorriskitiswillingtoacceptforindividualcounterpartiesandforgeographicaland industryconcentrations,andbymonitoringexposures in relation tosuchlimits.
The Bank structures the level of credit it undertakes by placing limits on the amount of
riskaccepted in relation tooneborrower,orgroupofborrowers,and togeographicalandindustrysegments.Suchrisksaremonitoredonarevolvingbasisandsubjecttoanannualormorefrequentreview,whenconsiderednecessary.LimitsonlevelofcreditriskbyproductisapprovedbytheBoardofDirectors.
Collateral TheBankemploysarangeofpoliciesandpracticestomitigatecreditrisks.Themosttraditional
of these is the taking of security for funds advanced. TheBank implements guidelines ontheacceptabilityofspecificclassofcollateralorcreditriskmitigation.ThePrincipalcollateraltypesforloansandadvancestocustomersare:
- Mortgagesoverresidentialproperties
- Chargesoverbusinessassetssuchaspremises,inventoryandaccountsreceivable;
- Chargesoverfinancialinstrumentssuchasdebtsecuritiesandequities.
Managementmonitors themarket value of collateral and requests additional collateral inaccordancewiththeunderlyingagreement.
45
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
4. Financial risk management (cont’d)
(c) Credit Risk (cont’d)
Impairment and provisioning
ImpairmentprovisionsarerecognisedforfinancialreportingpurposesinaccordancewiththerequirementoftheFinancialInstitutionsAct1995orwherethereareotherobjectiveevidenceofimpairment.
TheBank’sPolicyrequiresthereviewofindividualfinancialassetsatleasttwiceannuallyor
moreregularlywhenindividualcircumstancesrequire.Impairmentallowancesonindividualasset accounts are determined by an evaluation of the incurred loss at the statement offinancialpositiondateonacase-by-casebasis.
Theassessmentnormallyencompassescollateralheldandtheanticipatedreceiptsforthatindividualaccount.
concentration of risk of financial assets with credit risk exposure by industry sectors
ThefollowingtablebreaksdowntheBank’smaincreditexposureoftheircarryingamounts,as
categorisedbyindustrysectors:2011
$ 000
3,635,2944,723,9231,224,6802,623,833
77,166
12,284,896
Total
$’000
6,349,088
356,08114,156,603
293,74321,155,515
11,296,5972,546,8281,932,680
15,776,105
36,931,620
Loans and advances Agriculture Services Manufacturing Household Miningandquarrying credit Quality by class of financial assets
As at September 30, 2012
due from banks and short term investments investment securities Available for sale: Government Corporate Others Loans to customers: Commercial Mortgages Others Total
Forthoseexposuresthatareneitherpastduenorimpaired,theyareratedbetweenpassandspecialmentioned.
2012$ 000
4,109,2185,417,6872,094,6313,963,812
190,757
15,776,105
Impaired
$’000
-
----
1,145,037-
4,3931,149,430
1,149,430
Pass due butnot impaired
$’000
-
----
146,606-
74,472221,078
221,078
Neither Pass due
nor impaired$’000
6,349,088
356,08114,156,603
293,74321,155,515
10,004,9542,546,8281,853,815
14,405,597
35,561,112
46
DEMERARA BANK LIMITED
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
Total
$’000
5,628,991
98,18012,156,737
(57,682)17,826,226
9,276,062 1,630,950 1,377,88512,284,897
30,111,123
As at September 30, 2011
due from banks and short term investments investment securities Available for sale: Government Corporate Others Loans to customers: Commercial Mortgages Others Total
Forthoseexposuresthatareneitherpastduenorimpaired,theyareratedbetweenpastandspecialmention.
Impaired
$’000
-
----
360,990-
11,839372,829
372,829
Pass due butnot impaired
$’000
-
----
231,309-
54,213285,522
285,522
Neither Pass due
nor impaired$’000
5,628,991
98,180 12,156,737
(57,682) 17,826,226
8,683,763 1,630,950 1,311,833 11,626,546
29,452,772
4. Financial risk management (cont’d)
(c) Credit Risk (cont’d)
(d) Capital management TheBank’sobjectivewhenmanagingcapital,which isabroaderconcept than the ‘equity’
onthefaceofthestatementoffinancialpositionare:
- Tocomplywiththecapitalrequirementsetbytheregulators.
- TosafeguardtheBank’sabilitytocontinueasagoingconcernsothatitcancontinueto providereturnsforshareholdersandotherbenefitsforstakeholders;and
- Tomaintainastrongcapitalbasetosupportthedevelopmentofitsbusiness.
Capital adequacy and the use of regulatory capital are monitored daily by the Bank’smanagement, employing techniques based on the guidelines developed by the BaselCommitteeonBanking Supervision as implemented by theBank ofGuyana. The requiredinformationisfiledwiththeauthoritiesonamonthlybasis.
47
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
4. Financial risk management (cont’d)
(d) Capital management (cont’d)
TheTablebelowsummarisesthecompositionofregulatorycapitalandtheratiosoftheBankfortheyearsendedSeptember30,2012and2011.DuringthosetwoyearstheBankcompliedwiththeexternallyimposedcapitalrequirementstowhichtheyaresubject.
2011$ 000
450,000450,000
3,732,001
4,632,001
(246,627)
4,385,374
13,946,651533,610
14,480,261
30.29
Tier I Capital Sharecapital Statutoryreserve Retainedearnings Tier II Capital Securitiesrevaluationreserves Totalregulatorycapital Riskweightedassets: On-balancesheet Off-balancesheet Totalriskweightedassets Totalregulatorycapitaltoriskweightedassets%
2012$ 000
450,000450,000
4,523,425
5,423,425
283,204
5,706,629
17,329,281655,573
17,984,854
31.73
5. fair value of financial assets and liabilities
Thefairvalueoffinancialinstrumentsthatarerecognisedonthestatementoffinancialpositionandthefairvalueoffinancialinstrumentsthatarenotrecognisedonthestatementoffinancialpositionarebasedonthevaluationmethodandassumptionssetoutinthesignificantaccountingpoliciesnote3.5.
Fairvaluerepresentstheamountatwhichafinancial instrumentcouldbeexchangedinanarm’s
length transactionbetweenwillingpartiesunderno compulsion to act and is best evidencedbyaquotedmarketprice.Ifnoquotedmarketpricesareavailable,thefairvaluespresentestimatesderivedusingpresentvalueorothervaluationtechniquesandmaynotbeindicativeofnetrealisablevalue.
TheBankmeasuresfairvalueusingthefollowingfairvaluehierarchythatreflectsthesignificanceof
theinputsusedinmakingthemeasurements: Level 1 -Quotedmarketprice(adjusted)inanactivemarketforanidenticalinstrument.
48
DEMERARA BANK LIMITED
Financial assets Cashonhandandintransit Duefrombank StatutorydepositwithBankofGuyana Netloanstocustomers Availableforsaleinvestment Otherfinancialasset total financial assets financial liabilities Deposits Otherfinancialliabilities total financial liabilities
5. fair value of financial assets and liabilities (cont’d)
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
Level 2 -Valuationtechniquesbasedonobservable inputs,eitherdirectly (i.easprices)orindirectly(i.ederivedfromprices).Thiscategoryincludesinstrumentsvaluedusing:quotedmarketpricesinactivemarketsforsimilarinstruments;quotedpricesforidenticalorsimilarinstrumentsinmarketsthatareconsideredlessactive;orothervaluationtechniqueswhereallsignificantinputsaredirectlyorindirectlyobservablefrommarketdata.
Level 3 -Valuationtechniquesusingsignificantunobservable inputs.Thiscategory includesallinstrumentswherethevaluationtechniqueincludedinputsnotbasedonobservabledataand the unobservable inputs have a significant effect on the instrument’s valuation. Thiscategoryincludesinstrumentsthatarebasedonquotedpricesforsimilarinstrumentswheresignificantobservableadjustmentsorassumptionsarerequiredtoreflectdifferencesbetweeninstruments.
Duetojudgementusedinapplyingawiderangeofacceptablevaluationtechniquesandestimations
inthecalculationoffairvalueamounts,fairvaluesarenotnecessarilycomparableamongfinancialinstitutions.Thecalculationofestimatedfairvaluesisbaseduponmarketconditionsataspecificpointintimeandmaynotbereflectiveoffuturefairvalues.
ThefollowingtablesummarisesthecarryingamountandfairvaluesoftheBank’sfinancialassetsandliabilities:
2011$ 000
138,956
5,553,190
3,784,666
12,037,205
12,527,888
35,493
34,077,398
30,168,994
1,461,756
31,630,750
2012$ 000
179,537
6,272,827
4,174,352
15,391,920
15,202,281
42,747
41,263,664
35,048,355
1,359,193
36,407,548
2011$ 000
138,956
5,553,190
3,784,666
12,037,205
12,812,546
35,493
34,362,056
30,168,994
1,461,756
31,630,750
2012$ 000
179,537
6,272,827
4,174,352
15,391,920
14,530,497
42,747
40,591,880
35,048,355
1,359,193
36,407,548
Fair valueCarrying value
49
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
6. critical accounting estimates and judgments in applying accounting policies
TheBankmakesestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitieswithinthenextfinancialyear.Estimatesandjudgmentsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.
impairment of financial assets
The Bank reviews its loan and investment portfolio to assess impairment on a regular basis. Indetermining whether an impairment should be recorded in the statement of comprehensiveincome,theBankmakesjudgmentastowhetherthereisanyobservabledataindicatingthatthereisameasureabledecreaseintheestimatedfuturecashflowsfromaportfolioofassetsbeforethedecreasecanbeidentifiedwithanindividualassetinthatportfolio.Thisevidencemayincludedataindicatingthattherehasbeenadversechangeinpaymentstatusofborrowersinagroup,ornationaloreconomicconditionthatcorrelateswithdefaultsonassets.Managementusesestimatesbasedonhistorical lossexperience forassetswithcredit risk characteristicsandobjectiveevidenceofimpairmentsimilartothoseintheportfoliowhenschedulingitsfuturecashflows.Themethodologyandassumptionsusedforestimatingboththeamountandtimingoffuturecashflowsarereviewedregularlytoreduceanydifferencesbetweenlossestimatesandactuallossexperienced.
held- to- maturity investments
TheBank follows theguidanceof IAS39on classifyingnon-derivativefinancial assetswithfixedor determinable payments and fixed maturity as held-to-maturity. This classification requiressignificantjudgment.Inmakingthisjudgment,theBankevaluatesitsintentionandabilitytoholdsuchinvestmentstomaturity.
7. cash and short term funds
Cashandcashequivalentsincludedinthestatementofcashflowscomprisethefollowingstatementoffinancialpositionamounts.
2011$ 000
138,9561,114,9064,687,503865,688
6,807,053
3,784,666
10,591,719
2011$’000
93,41898,180
11,985,48820,148
12,197,234330,654
12,527,888
Cash BalancewithBankofGuyanaotherthanstatutorydepositsMoneymarket BalancewithcorrespondentBanks cash and cash equivalents StatutorydepositheldwithBankofGuyana Total
8. Investments Available-for-sale Shares GovernmentofGuyanaTreasuryBills CorporateBonds ShortTermDeposits AccruedInterest
2012$ 000
179,537 -
3,516,314 2,756,513
6,452,364
4,174,352
10,626,716
2012$’000
93,744 356,081
12,881,734 1,482,142
14,813,701388,580
15,202,281
50
DEMERARA BANK LIMITED
9. Loans and advances
Loansandadvances Less:Allowanceforloanlosses Interestreceivable Included in the above are non-accrual loans totaling
Themovementintheallowanceforloanlossesduringtheyearwasasfollows:
Balance,beginningofyear Write-offs Additionalprovisions Balance,endofyear 10. Deposits Demand Savings Principal Accruedinterest Term Principal Accruedinterest
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
2011$ 000
12,284,897(308,220)
11,976,677 60,529 12,037,206
372,829
2012$ 000
15,776,105(517,875)
15,258,230 133,690 15,391,920
1,149,431
2011$ 000
268,422(602)
40,400
308,220
2011$’000
3,689,470
16,588,88293,664
16,682,546
9,597,044199,934
9,796,978
30,168,994
2012$ 000
308,220(30,345)
240,000
517,875
2012G$’000
3,782,579
22,298,074100,544
22,398,618
8,733,106134,052
8,867,158
35,048,355
51
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
11. Property, plant and equipment
Cost AtOctober1,2011
Additions Transfers Write-offs Reclassification
Disposal AtSeptember30,2012
Accumulated depreciation
AtOctober1,2011 Chargefortheyear Writebackondisposal AtSeptember30,2012
Net Book values AtSeptember30,2012
AtSeptember30,2011
12. Other assets
Corporationtaxrecoverable Prepaidexpenses Others
13. other Liabilities
Cashmarginoncredit,guarantees&indemnities
Billspayable Provisionfortaxation Inter-AmericanInvestmentCorporation(unsecured)-notei
Others Note i
ThisamountrepresentsaloanfortwomillionUnitedStatesDollars.TheloanisrepayableinsixteenquarterlyinstallmentsofonehundredthousandUnitedStatesDollarsandafinalinstallmentoffourhundredthousandUnitedStatesdollarscommencingonJuly13,2009.Interestischargedontheoutstandingamountattherateof2.5%aboveLIBOR.
Total
$’000
1,049,694 103,480 -
(4,553) -
(8,631)
1,139,990
240,876 55,744
(7,143) 289,477
850,513
808,818
Furnitureand
equipment$’000
288,656 47,603 100,915 - 8,833
(181)
445,826
150,487 36,424
(103) 186,808
259,018
138,169
constructionwork
in progress $’000
476,928 52,328
(477,843)(2,453)
- -
48,960
- - - -
48,960
476,928
Leasehold Premises
$’000
8,539424
2,431---
11,394
3,77058-
3,828
7,566
4,769
FreeholdLand andBuilding
$’000
229,729 3,125 374,497
(2,100)(8,833)
-
596,418
62,738 11,134 - 73,872
522,546
166,992
Motorvehicles
$’000
45,842 - - - -(8,450)
37,392
23,881 8,128(7,040)
24,969
12,423
21,961
2011$ 0005,447
24,1105,936
35,493
2011$’000
86,609880,871185,269223,17685,831
1,461,756
2012$ 000
5,44722,300
- 27,747
2012$’000
146,461862,450178,004142,270
30,0081,359,193
52
DEMERARA BANK LIMITED
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
14. Assets classified as held for sale
ThisrepresentsassetsforeclosedthatwerepreviouslyheldassecurityforloansandadvancestocustomersandpurchasedbytheBankthroughpublicauction.TheBankisactivelypursuingthesaleoftheseassets.
15. Share Capital
Authorised 450,000,000ordinarysharesofnoparvalue Issuedandfullypaid 450,000,000ordinarysharesstatedvalue
16. (i) Statutory reserves ThisfundismaintainedinaccordancewiththeprovisionsofSection20(1)oftheFinancialInstitutions
Act1995,whichrequiresthataminimumof15%ofnetprofitasdefinedbytheAct,betransferredtotheReserveFunduntiltheamountoftheFundisequaltothepaidupcapitaloftheBank.
(ii) investment revaluation reserve
ThisamountrepresentsthenetmovementbetweenthefairvalueatSeptember30,2012andthecarryingamountofavailableforsalefinancialassets.
17 Net income net income after taxation: Aftercharging ·Auditors’remuneration ·Directors’remuneration(notei) ·Depreciation
(i) Directorsannualemolumentsareasfollows;eachnon-executivedirectorisentitledtoafeeof$1,020,000,eachexecutivedirectorafeeof$360,000andthechairmanafeeof$1,800,000.
2011$ 000
-
450,000
2011$ 000
983,987
1,9266,060
34,464
2012$ 000
-
450,000
2012$ 000
1,043,424
3,0008,280
55,744
53
Annual Report 2012
18 Non- interest expenses
Staffcosts(seenote) Subscribtionanddonations Propertyandequipmentexpenses Rentals Depreciation Stationery Electricity Licence Advertising Computerexpense Others Note: Theaveragenumberofemployeesduring2012was164(2011-135).
19 Pension plan ThepensionplanwhichtheBankparticipatesinisamultiemployeecontributoryplanandisafinal
salarydefinedbenefitplan.
Theplanisvaluedbyindependentactuarieseverythreeyearsusingtheprojectedunitcreditmethod.ThelastactuarialvaluationwhichwasdoneasatDecember31,2011revealedapastservicesurplusofonebilliontwentyfourmillioneighthundredthousanddollars($1,024,800,000).
Theactuarialvaluationdidnotpresentsufficientinformationrelatingtoeachparticipatingcompanyin theplan toenableadeterminationof theportionof theBank’s shareof thesurplus,definedbenefitobligation,planassetsandcostassociatedwiththeplan.
TheBank’stotalcontributiontothepensionschemefortheyearamountedto$19,912,200(2011-$17,040,896).Thisamountwasrecognisedinthestatementofcomprehensiveincome.
20 taxation
Corporationtax Property tax
Thetaxontheoperatingprofitdiffersfromtheoretical amountthatwouldariseusingthebasictaxrateasfollows:
Profitbeforetax Taxcalculatedatarateof40%(2011-40%) Incomeexemptedfromtax Expensesnotdeductiblefortaxpurposes Differenceinaccountingdepreciationversustaxdepreciation
Priorperiodadjustment
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
2011$ 000
328,83812,04918,17314,24434,46429,21728,9684,2595,712
19,50417,051
512,479
2012$ 000
367,867
5,58826,21121,09155,74426,05833,344
5,8117,052
33,20818,564
600,538
2011$ 000
371,36534,500
405,865
2011$ 000
1,389,852
555,941(190,507)
1,882 4,049 - 371,365
2012$ 000
411,39644,358
455,754
2012$ 000
1,499,178
599,671(185,636)
1,358(3,185)
(812) 411,396
54
DEMERARA BANK LIMITED
21 Other Income
Exchangegain Commissionsreceived (Loss)gainondisposalofinvestment Others
22 Earnings Per Share
Calculatedasfollows: Netincomeaftertax$’000 Numberofshares‘000(seenote15) Earningspershareindollars 23 Dividends
Dividendsaccountedforasanappropriationofretainedearnings:
Finaldividendfor2011$0.38pershare(2010-$0.34) Interimdividendfor2012$0.18pershare(2011-$0.17)
Thefinancialstatementsdonotreflectafinaldividendof$0.42pershareproposedbythedirectors.Thisamountwillbeaccountedforasanappropriationofretainedearningsinthesubsequentyear.
24 related Parties
(a) identity of related parties
TheBankconsiderskeymanagementpersonnelandpersonsandentitiesaffiliatedwithkeymanagementpersonnelasrelatedparties.
Key management personnel
Sixteen individuals are considered as keymanagement personnel. These comprise of theDirectors,ChiefExecutiveOfficerandManagers.Theremunerationpaidtokeymanagementpersonnelfortheyearwasasfollows:
Short-termemployeebenefits
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
2011$ 000
227,90397,917
190,4947,441
523,755
2011$’000
983,987450,000
2.19
2011$’000
154,14776,500
230,647
2012$ 000
354,186 144,125
(15,158)(339)
482,814
2012$’000
1,043,424450,000
2.32
2012$’000
171,00081,000
252,000
2011$ 000
127,179
2012$ 000
127,580
55
Annual Report 2012
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
24 related Parties (cont’d)
(b) related parties loans and advances
Heldbyenterpriseswithwhichdirectorsareaffiliated Heldbyotherkeymanagementpersonnel Total
TheaccountsheldbyrelatedpartieswiththeBankrepresentnormalbankingrelationship.Transactions during the year are carried out at arms length except for loans held by keymanagementpersonnelotherthandirectors,whereinterestratesarechargedatratesvaryingbetween4-7%.
(c) related parties deposits
Heldpersonallybydirectors Heldbyenterpriseswithwhichdirectorsareaffiliated Heldbyotherkeymanagementpersonnel Total
(d) interest paid to and received from related parties
Interestpaidondeposits Interestearnedonloansandadvances
2011$ 000
1,095,43798,038
1,193,475
2012$ 000
1,670,466
120,706
1,791,172
2011$ 000
102,162990,87731,589
1,124,628
2012$ 000
63,621
1,109,12340,483
1,213,227
2011$ 000
19,968
124,726
2012$ 000
23,964
149,076
56
DEMERARA BANK LIMITED
25 contingent liability
(i) customers liabilities under acceptances, guarantees and Letters of credit
Commercialsector Personalsector
(ii) IntheordinarycourseofbusinesstheBankhasbroughtlegalproceedingsagainstdefaultingcustomers.TheBankisalsodefendantincertainlitigation.ManagementdoesnotbelievethattheoutcomeoftheseproceedingswillhavematerialadverseeffectontheBank’sresultofoperationsandaccordinglynoprovisionforcontingenciesisnecessary.
26 segment information
TheoperationsoftheBankareconcentratedwithinGuyana.TheBank’soperationsaremanagedbystrategicbusinessunitswhichofferdifferentfinancialproductsandservicestovariousmarketsegments.Themanagementfunctionofthevariousbusinessunitsreviewinternalreportsatleastmonthly.
ThefollowingsummarydescribestheoperationsofeachoftheBank’sreportablesegments:
- CorporateandCommercial - Includestheprovisionof loansandotherfinancialservicesto
businessandindividuals.
- Investment-Localandforeigninvestment
- Depositbusiness-Demand,savingsandtimedeposits
- Other-Foreigntrade,andothernoncorebusiness.
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
Total
$’000
953,20056,186
3 to 12months
$’000
783,02439,882
Under 3 mths$’000
57,83314,704
Total
$’000
1,226,86666,797
Over 12 months
$’000
69,9161,600
3 to 12months$’000
1,139,46765,197
Under 3 mths$’000
17,483 -
Over 12 months
$’000
112,3431,600
2012 2011
57
Annual Report 2012
26. segment information (cont’d)
Theresultsofthevariousoperatingsegmentsaresetoutbelow.Performanceismeasuredbasedonsegmentprofitsbeforetaxasincludedintheinternalmanagementreportsreviewedbyseniormanagement.Segmentprofitabilityisusedbymanagementtoassessproduct,pricing,productivityandhence,theallocationofresourcestothevariousoperatingsegments.
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012
(Expressed in Guyana Dollars)
Interestincome Interestexpense Otherincome Loanimpairment Operatingexpense
Profitbeforetax Segmentassets Segmentliabilities
Total
$’000
2,430,474
(573,572)
482,814
(240,000)
(600,538)
1,499,178
42,114,177
36,407,548
Other
$’000
-
-
482,814
-
-
482,814
-
-
Deposit
$’000 -
(573,572)
-
-
-
(573,572)
-
35,048,355
Foreign
$’000
1,122,644
-
-
-
-
1,122,644
14,552,456
-
InvestmentLocal
$’000
21,837
-
-
-
-
21,837
649,825
-
Corporate & Commercial
Banking$’000
1,285,993
-
-
(240,000)
-
1,045,993
15,391,919
-
2012
Unallocated
$’000 -
-
-
-
(600,538)
(600,538)
11,519,977
1,359,193
Interestincome Interestexpense Otherincome Loanimpairment Operatingexpense
Profitbeforetax Segmentassets Segmentliabilities
Total
$’000
2,151,860
(732,884)
523,755
(40,400)
(512,479)
1,389,852
36,016,124
31,630,750
Other
$’000
-
-
321,116
-
-
321,116
-
-
Deposit
$’000 -
(732,884)
-
-
-
(732,884)
-
30,168,994
Foreign
$’000
949,065
-
190,494
-
-
1,139,559
12,202,732
-
InvestmentLocal
$’000
25,170
-
-
-
-
25,170
325,156
-
Corporate & Commercial
Banking$’000
1,177,625
-
12,145
(40,400)
-
1,149,370
12,037,205
-
2011
Unallocated
$’000 -
-
-
-
(512,479)
(512,479)
11,451,030
1,461,756
58
DEMERARA BANK LIMITED
Correspondent Banks
USA
Bank of America int’l,NewYork
Bank of new York,Mellon,NewYork
CITIBANK,NewYork
CANADA
canadian imperial Bank of commerce,Toronto
ThE CARIBBEAN
R.B.C. Merchant Bank (Caribbean) Ltd.,PortofSpain,Trinidad
CITIBANK,PortofSpain,Trinidad
De Surinaamsche Bank N.v.,Paramaribo,Suriname
59
Annual Report 2012
Our Services
AUTOMATIC TELLER MAChINE MONEY MASTER CARD • 24hourbanking• Withdrawals• Convenienceatitsbest• Deposits• BalanceEnquiries• Telebanking
MONEY MASTER DEBIT CARD • Convenienceandsecurity• Acceptanceatstores,supermarkets,restaurants,
hotelsandgasstations• Immediate,directaccesstothetotalbalanceon
youraccount
AMERICAN ExPRESS REPRESENTATIvE • WithDemeraraBankyoucanjointheselect
groupofAmericanExpresscardmembers
PAYMENT OF UTILITY BILLS • GT&T/GPLbillspaymentaccepted• Customers’convenience
ExPRESS DEPOSIT CENTRE • Convenientdrop-indeposit• Fireproofandanti-tamperdesign• Receiptvalidatedinstantly
E-BANKING • ViewBalances• Viewactivityuptothelast45days• PayGT&T,DigicelandGPLBills• RequestBankDrafts• Inter-AccountTransfers• RequestCertifiedStatements• OrderCheques• RequestAddresschange• MakeStopPaymentRequests
SAFETY DEPOSIT BOxES • Infoursizes,dualkeylockingmechanismlocated
inhighsecurityvault
NIGhT DEPOSITS • Securitybagsfordeposits• Tamperproofdepositchute• Highlysecured&convenientlylocated
MONEY MARKET ACCOUNT • Competitiverates• Interestpaidmonthly• MinimumbalanceG$1,000.000.00
SAvING ACCOUNT • PassbookSavings• Transactionrecordedinaconvenientpocketsized
passbook• MinimumbalanceG$5,OOO.OO• Cashondemand/Noservicecharge
STATEMENT SAvINGS • Statementsavailableperiodicallyoronrequest• MinimumbalanceG$2,OOO.OO• ATMready• Cashondemand
FOREIGN TRADE • Issuing&cashingoftraveller’scheques• Foreigncurrencytransactionsandaccounts• Telextransfers• Billsforcollection• Lettersofcredit• Negotiationdrafts• Tradefinancing• Competitivecambio DEPOSITS ACCOUNTS/TERM DEPOSITS • Available3,6and12mths.• Renewedautomaticallyorfundsdisposedatyour
request• Highlycompetitiveinterestrates• MinimumbalanceG$100,000.00
PREMIUM MONEY MARKET ACCOUNT • Competitiverates• Interestaccruedmonthlyandpaidquarterly• MinimumbalanceG$1,000,000.00
PERSONAL ChEqUING ACCOUNT • Personalisedchequebooks• Statementsavailableperiodicallyoronrequest• EasyaccesstofundswithyourMoneyMaster
Card
CORPORATE ChEqUING • Overdraftfacility• Nightdepositfacility• Statementsavailableperiodicallyoronrequest• FirstFacts
LOANS AND ADvANCES • Shortandmediumtermfinancing• Consumercredit• Workingcapitalrequirements• Flexiblerepaymentplans• LowincomeMortgagefinancing
60
DEMERARA BANK LIMITED
230Camp&SouthStreets,Georgetown,GuyanaTelephone:+592-225-0610-9.Fax:+592-225-0601
Email:[email protected]:www.demerarabank.com