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We believe that every member of Republic Bank has a stake
in our success. As we interweave our individual contributions,
we seek out the most effective means of unlocking
the true potential of our people, our country and our region.
Each of us contributes to the evolution of our resources,
enhancement of customer service and the improvement
of the quality of life in the communities with which we share our future.
Over the course of almost 175 years, Republic Bank has formed
an interconnected Group, dedicated to local and regional progress.
Together with our employees, our customers and our shareholders,
we embrace a vision of building successful societies,
wherever the business of banking and fi nancial services may take us.
2
VisionBarbados National Bank,
the Financial Institution of Choice in Barbados
for our Staff, Customers and Shareholders.
We set the Standard of Excellence
in Customer Satisfaction,
Employee Engagement, Social Responsibility
and Shareholder Value,
while building successful societies.
MissionOur mission is to provide Personalised,
Effi cient and Competitively-priced
Financial Services
and to implement Sound Policies
which will redound to the benefi t
of our Customers, Staff, Shareholders
and the communities we serve.
ValuesCustomer Focus,
Integrity,
Respect for the Individual,
Professionalism and
Results Orientation.
The BNB wayEnsuring every customer interaction
results in a truly exceptional customer service
experience by consistently demonstrating
a desired set of behaviours
which are governed by our Core Values
3
Table of ContentsTable of Contents
Notice of Meeting 4
Corporate Information 5
Bank Profi le 6
Consolidated Financial Summary 8
Consolidated Financial Highlights 9
Board of Directors 10
Directors’ Report 12
Chairman’s Review 14
Managing Director’s Discussion and Analysis 16
Executive Management Team 19
Management 20
Power to Make a Difference 22
Corporate Governance 24
Management’s Responsibilty for Financial Reporting 26
FINANCIAL
Independent Auditors’ Report 28
Consolidated Statement of Financial Position 29
Consolidated Statement of Income 30
Consolidated Statement of Comprehensive Income 31
Consolidated Statement of Changes in Equity 32
Consolidated Statement of Cash Flows 33
Notes to the Consolidated Financial Statements 34
4
Notice of Meeting
Company No. 26464
NOTICE OF ANNUAL MEETING
Notice is hereby given that the Twelfth Annual meeting of the
shareholders of Barbados National Bank Inc. (“the Company”) will
be held at the Lloyd Erskine Sandiford Centre, Two Mile Hill, St.
Michael, Barbados on Friday 9, December 2011 at 5:15 p.m. for
the following purposes:
1. To receive and consider the Financial Statements and the
Reports of Directors, Management and the Auditors for the
year ended September 30, 2011.
2. To take note of the Dividends paid for the twelve-month
period ended September 30, 2011.
3. To elect Directors.
4. To appoint Auditors for the ensuing year and to authorize
the Board of Directors to fi x their remuneration.
5. To consider a resolution pursuant to section 197 (a) of the
Companies Act, Chapter 308 of the laws of Barbados that
Article 1 of the Articles of Reincorporation be amended to
change the name of the Company from Barbados National
Bank Inc. to Republic Bank (Barbados) Limited.
6. To transact any other business which may properly, come
before an annual meeting of shareholders.
By order of the Board
SASHA C. SHILLINGFORD
Corporate Secretary
November 3, 2011
NOTES:
Persons Entitled To Notice
In accordance with Section 106 (2) of the Companies Act, Cap.
308, the Directors of the Company have fi xed November 14, 2011
as the Record Date for the determination of shareholders who are
entitled to receive notice of the Annual Meeting. A list of such
shareholders will be available for examination by shareholders at
the Registered Offi ce of the Company during usual business hours.
Proxies
We request that shareholders who are unable to attend the
meeting in person complete and return the enclosed Form of Proxy
to Barbados National Bank Inc. Executive Offi ces, Independence
Square, Bridgetown at least 48 hours before the time appointed
for attending the meeting or adjourned meeting.
Dividend
A fi nal dividend of $0.07 declared for the fi nal year ended
September 30, 2011 will be payable on December 9, 2011 to
shareholders of record at the close of business on November 17,
2011.
Documents Available for Inspection
There are no service contracts granted by the company or its
subsidiaries to any Director of the Company.
5
Corporate Information
DIRECTORS
Chairman
RONALD F. deC. HARFORD, CM, FCIB, FIBAF, FCABFI
Managing Director and Chief Executive Offi cer
DERWIN M. HOWELL, BSc (Elec. Eng.), MSc (Telecom.), EMBA, C.ENG, MIET, MIEEE
DAVID DULAL-WHITEWAY BSc. (Mgmt Studies), MBA, CGA
JACQUELINE H. C. QUAMINA, LLB, MA, MBA
PETER G. SYMMONDS QC, LLB, (UWI), LLM (Lond), JP
G. ANTHONY KING, BSc. (Hons) CITP
JOSEPH N. GODDARD, MA, FCA, JP
IAN ST. C. CARRINGTON, FCGA, MPA
ROBERT A. CARTER, CA
WILLIAM deC. LAYNE, BA, CMA, ACIS, FCA
RALPH S. deC. WILLIAMS, GCM, BSc. (Electrical Eng.) MABAPE
CORPORATE SECRETARY
SASHA C. SHILLINGFORD, LLB, MBA
REGISTERED OFFICE
Independence Square
Bridgetown
Barbados, West Indies
GROUP HEAD OFFICE
Republic Bank Limited
Republic House
9-17 Park Street, Port of Spain
Trinidad and Tobago, West Indies
Swift: RBNKTTPX
E-mail: [email protected]
Internet: http://www.bnbbarbados.com
REGISTRAR
Barbados Central Securities Depository Inc.
8th Avenue Belleville
St. Michael
Barbados, West Indies
CONSULTING COUNSEL
Sir Henry H. De B. Forde, QC
Juris Chambers
Parker House
Wildey Business Park
Wildey, St. Michael
Barbados, West Indies
ATTORNEYS-AT-LAW
Clarke, Gittens, Farmer
Parker House
Wildey Business Park
Wildey, St. Michael
Barbados, West Indies
Lex Caribbean Law Offi ces
Worthing Corporate Centre
Worthing, Christ Church
Barbados, West Indies
AUDITORS
Ernst & Young
Worthing Corporate Centre
Worthing, Christ Church
Barbados, West Indies
6
Bank Profi le
SUBSIDARIESBarbados Mortgage Finance Company Limited 100%
BNB Finance & Trust Corporation Incorporated 100%
• BNB Funds Incorporated 100%
EXECUTIVE OFFICESIndependence Square
Bridgetown
Barbados, West Indies
Tel: (246) 431-5700
Fax: (246) 228-3287
Swift: BNBABBBB
E-mail: [email protected]
Internet: http://www.bnbbarbados.com
EXECUTIVE MANAGEMENTManaging Director and Chief Executive Offi cer DERWIN M. HOWELL, BSc (Elec Eng.), MSc (Telecom.), EMBA, C.ENG, MIET, MIEEE
Corporate Secretary/General Counsel SASHA C. SHILLINGFORD, LLB, MBA
Corporate Controller PARASRAM V. SALICKRAM, CA, FCCA
General Manager, Retail Banking
E. MARGARET PILE, BA (Hons.), MSc
General Manager, Corporate and Commercial CreditSEAN HUSAIN, BSc, MSc
MANAGEMENT
Manager, AccountingWAYNE PILGRIM, CGA
Manager, Human ResourcesDONNA HARPER-NICHOLLS, BSc, MBA
Assistant Manager, Human ResourcesBEVERLEY BEST, Cert. in Public Admin., AICB, Dip. (Mgmt.)
Manager, Security and PremisesMORRIS SPRINGER, BA, MA, MSc, LLB
Manager, Business Systems and Process ImprovementMICHELLE POUNDER, BSc (Hons.), ACCA
Senior Manager, Administration and OperationsJUTA THORPE, EDM
Senior Manager, Retail Delivery and Centralised SecuritiesSAVITRI KOWLESSAR
Manager, Information TechnologyC. PETER MILLINGTON, BSc, MBA
Manager, Information Technology Eastern Caribbean
CLIFFORD BAILEY, BSc, MSc
Manager, Marketing and Corporate CommunicationsDEBORAH P. STOUTE, BA, Cert. Strat. Mgmt.
Assistant Manager, Marketing and Corporate Communications SOLANGE BRUCE, BSc, MBA
Manager, Customer Contact CentreBRIAN CHARLES, BA, Dip. Business Admin.
Manager, Centralised Securities UnitCHARMAINE STOREY, BA
Manager, Operational RiskJULIET MARSHALL, BSc (Hons.), CISA
Manager, TreasuryCHANELLE MAXWELL, BSc, (Hons.), IMBA
DELIVERY NETWORK
CORPORATE AND COMMERCIAL CREDIT
Relationship ManagerANDRE CROSBY, EMBA
Relationship ManagerSHANE HEWITT, BBA (Major Accounts & Finance)
Relationship ManagerSTACEY HEM LEE, BSc (Mgmt.) (Hons.)
Manager, Centralised Securities UnitCHARMAINE STOREY, BA
Senior Manager, Retail Risk and Special Credit CARLOS BRATHWAITE, BSc, MA
Manager, Retail Credit Risk and CollectionsLUCY CRICHLOW
Manager, Credit RecoveriesBEVERLEY SKEETE, BSc
7Relationship Offi cer, Special Retail Credit UnitGLADWIN WILLIAMS, BSc (Econ.), MA (Banking & Finance)
Manager, Card ServicesSONIA HALL HUNTE, MBA
BRANCHES
BROAD STREETManager, Retail ServicesSHARON ZEPHIRIN, BSc (Hons.), EMBA
Assistant Manager OperationsJUDY SPRINGER
GRANTLEY ADAMS INTERNATIONAL AIRPORT
INDEPENDENCE SQUARE
Manager, Retail ServicesSTEVEN JORDAN, BSc (Acct.), CGA
Senior Operations Offi cerBEVERLEY MCCLEAN
SIX ROADSManager Retail ServicesLAVERE THOMPSON, EDM
SPEIGHTSTOWNManager Retail ServicesSONIA COZIER-DEVONISH, Dip. (Pub. Admin.)
Operations Offi cerANGELA ROCHESTER
WARRENS
PREMIUM BANKING CENTRE
Customer Service ManagerDarrell Wilson BSc (Hons.), MSc
Senior Operations Offi cerSTEPHEN HEADLEY
WILDEY
Customer Service ManagerTRUDY HOWARD, EDM
Senior Operations Offi cerNELLIE BRATHWAITE
WORTHING SUB-BRANCH
Customer Service ManagerSANDRA REIFER-WALLERSON, BA
Operations Offi cerLORRAINE SEALY
LIMEGROVE
Customer Service ManagerADAM CRAIGG WATERMAN, BSc
Operations Offi cerHEATHER BOWEN
SUBSIDIARES
BARBADOS MORTGAGE FINANCE COMPANY LIMITEDCorner 6th Avenue Belleville and Pine Road,
St. Michael
Barbados, West Indies
Senior ManagerWAVNEY NICHOLLS, BA, MBA, Dip. Admin., J.P.
ManagerLORNA CUMBERBATCH, BBA, MBA, ACIS,
Senior AccountantDESMOND SMITH, BSc, CGA
BNB FINANCE & TRUST CORPORATIONBroad Street, Bridgetown
St. Michael
Barbados, West Indies
Manager (Ag.)ERIC SCOTT, BA (Hons.), CCP (CAIB)
Investment Offi cer/Accountant
MARGARET STEVENSON, CGA
88
Consolidated Financial SummaryAll fi gures are expressed in thousands of Barbados dollars ($’000)
2011 2010 2009 2008 2007
Cash Resources 453,936 364,585 320,229 515,705 324,261
Investment Securities 271,763 317,511 340,111 351,205 369,134
Advances 1,394,685 1,452,582 1,577,811 1,626,082 1,603,252
Total Assets 2,276,696 2,298,195 2,390,257 2,626,599 2,433,361
Total Deposits 1,656,040 1,714,453 1,816,559 2,020,062 1,848,563
Shareholders’ Equity 345,144 338,597 322,858 293,120 251,686
Net Profi t after Taxation 15,124 36,039 49,418 54,789 53,141
Earnings Per Share $0.16 $0.38 $0.51 $0.57 $0.55
Return on Average Assets 0.66% 1.54% 1.97% 2.17% 2.29%
Return on Average Equity 4.42% 10.90% 16.05% 20.11% 22.46%
8
99
Group Financial HighlightsAll fi gures are expressed in thousands of Barbados dollars ($’000)
9 2011 2010 Change % change
Income Statement
Interest and non-interest income 173,523 186,353 (12,830) (6.88)
Interest and non-interest expense 155,707 141,492 14,215 10.05
Net income before taxation 17,816 44,861 (27,045) (60.29)
Taxation charge (2,692) (-8,822) 6,130 (69.49)
Net income after taxation 15,124 36,039 (20,915) (58.03)
Balance Sheet
Net advances 1,394,685 1,452,582 (57,897) (3.99)
Total assets 2,276,696 2,298,195 (21,499) (0.94)
Deposits 1,656,040 1,714,453 (58,413) (3.41)
Stated capital 48,000 48,000 0.00 0.00
Shareholders equity 345,144 338,597 6,547 1.93
Share Information
Earnings per share 0.16 0.38 (0.22) (58.05)
Dividends based on results for the fi nancial year 0.07 0.18 (0.11) (61.11)
Number of shares 96,000 96,000 0.00 0.00
Other Statistics
Number of shareholders 1614 1612 2.00 0.12
Number of branches 9 9 0.00 0.00
Number of employees 518 549 (31) (5.65)
10 1 RONALD F. deC. HARFORD
CM, FCIB, FIBAF, FCABFI
Chairman,
Republic Bank Limited
4 IAN ST. C. CARRINGTON
FCGA, MPA
Chief Executive Offi cer,
Financial Services Commission
7 RALPH S. deC. WILLIAMS
GCM, BSc (Elec. Engineering), MABAPE
Coporate Executive and
Chairman,
Williams Industries Inc.
10 G. ANTHONY KING
BSc (Hon.), CITP
Chief Executive Offi cer
and Managing Director,
Barbados Shipping and Trading
Group
2 DERWIN M. HOWELL
BSc (Hons.)(Elec. Eng.), MSc (Telecom.),
EMBA, MIET, MIEEE, C. Eng.
Managing Director /
Chief Executive Offi cer,
Barbados National Bank Inc.
5 ROBERT A. CARTER
CA
Business and Financial
Consultant
8 JOSEPH N. GODDARD
MA, FCA, JP
Non-Executive Chairman,
Goddard Enterprises Limited
11 JACQUELINE H. C. QUAMINA
LLB, MA, MBA
Group General Counsel /
Corporate Secretary,
Republic Bank Limited
3 DAVID DULAL-WHITEWAY
BSc (Mgmt. Studies), MBA, CGA
Managing Director,
Republic Bank Limited
6 WILLIAM deC. LAYNE
BA, CMA, ACIS, FCA
Consultant
9 KENNETH HEWITT
CBE, B. Comm, CA
Consultant
(Retired from the Board on
September 19, 2011 after
10 years of service as a director
of the Bank.)
12 PETER G. SYMMONDS
QC, LLB (UWI) LLM (Hon.), JP
Attorney-at-Law
Board of Directors
11
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7
10
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12
Directors’ Report
Your Directors are pleased to submit their report for the year ended September 30, 2011.
DIRECTORS’ INTERESTS
Below are the names of the Directors with an interest in the Company at September 30, 2011, together with particulars of their
shareholdings:
Name Benefi cal Interest Non-Benefi cial Interest
Ronald F. deC. Harford Nil Nil
Derwin M. Howell Nil Nil
David Dulal-Whiteway Nil Nil
William deC. Layne 10,300 Nil
Joseph N. Goddard (held INO Neptune Investments Limited) 23,636 Nil
Peter G. Symmonds 5,800 Nil
G. Anthony King 9,000 Nil
Jacqueline H. C. Quamina Nil Nil
Ian St. C. Carrington Nil Nil
Ralph S. deC. Williams Nil Nil
Robert A. Carter Nil Nil
There were no changes to the Directors’ interests between the end of the Company’s year and one month prior to the date convening
the Annual Meeting.
Interest of persons, other than the Directors, holding more than 5% of the Issued shares at September 30, 2011:
Name No of Shares %
Republic Bank Limited 62,529,647 65.13
Government of Barbados 17,445,881 18.17
National Insurance Board 9,600,000 10.00
FINANCIAL RESULTS AND DIVIDENDS
The Bank’s profi t after taxation for the year ended September 30, 2011 amounted to $15.124 million.
The Directors have declared a fi nal dividend of $0.07 per share payable on December 9, 2011, to all shareholders of record on
November 17, 2011 for the year ended September 30, 2011.
No interim dividend was paid for the half year ended March 31, 2011. The total dividend for the fi nancial year ended September 30,
2011 amounted to $0.07 per share (2010: $0.18).
DIRECTORS
In accordance with By-Law No. 1, Paragraph 4.7, Peter G. Symmonds and Ralph S. deC. Williams retire from the Board by rotation and
being eligible offer themselves for re-election for a term expiring at the close of the third annual meeting following this appointment.
Derwin M. Howell was appointed a Director on January 1, 2011, to fi ll the vacancy created by the resignation of Robert Le Hunte.
On October 28, 2011, Martin Cox was appointed a Director to fi ll the casual vacancy created by the retirement of Kenneth Hewitt on
September 19, 2011. In accordance with By-law No. 1, Paragraph 4.7 Derwin M. Howell and Martin Cox, having been appointed at the
January and October 2011, meetings of the Board respectively, retire from the Board and being eligible, offer themselves for re-election
for a term expiring at the close of the third annual meeting following this appointment.
13AUDITORS
The retiring Auditors, Ernst & Young, have expressed their willingness to be reappointed and a resolution to reappointment them for the
ensuing year will be proposed at this Annual Meeting.
By order of the Board
SASHA C. SHILLINGFORD
Corporate Secretary
Music is a gift you can give a child that will last their entire lives. It is a vehicle of
expression; it trains the brain for higher forms of thinking and permanently wires the
young mind for enhanced performance. Music affects the growth of a child’s brain
academically, emotionally, physically and spiritually. According to Plato, music is a
more potent instrument than any other form of education. With this in mind, the
Bank continued support of the Deacon’s Primary School music education programme
providing the opportunity for more than 60 students to learn how to play the violin.
14
Chairman’s Review
RONALD F. deC. HARFORD
IT HAS BEEN A CHALLENGING YEAR FOR THE BARBADOS
economy and indeed for the developed world. The much
anticipated recovery from the global recession did not materialise,
and world economies continue to operate under tremendous
strain. Barbados has not escaped the harsh economic conditions
and economic activity on the island has declined. Under these
tough conditions, the Barbados National Bank Group delivered
modest after tax profi ts of $15.12 million, a decrease of 58.05%
when compared to the $36.04 million posted in 2010.
Based on this performance, the Board of Directors has declared
a fi nal dividend of $0.07 per share (2010: $0.18) payable on
December 9, 2011 to all shareholders on record at November 17,
2011.
GLOBAL CONDITIONS
A number of headwinds challenged economic progress in 2011.
As a result, global conditions at the end of the year are markedly
different from those at the beginning. After moderate growth in
the early part of the year the devastating earthquake and tsunami
in Japan and political unrest in some Middle East countries,
thwarted global growth over the short-term. Also, the worsening
sovereign debt crises in Europe and the USA dented both investor
and consumer confi dence alike.
The International Monetary Fund (IMF) in its September World
Economic Outlook Report lowered its projections for global GDP
growth to 4.0% for both 2011 and 2012 compared to the 5.1%
rate registered in 2010. The US 2011 economic growth forecast
was lowered to 1.5% from 2.5%, in the June report. Growth of
1.5% is anticipated for 2012. Though the UK’s economy is only
expected to grow by 1.1% in 2011, a stronger expansion of 1.6%
is forecast for the following year. The IMF anticipates growth in
the Caribbean (excluding Guyana and Suriname) at 3.3% for
2011 and 4.3% for 2012.
BARBADOS ECONOMY
The Barbados Central Bank reports that the economy grew by just
1% in the January to September period less than half of what was
anticipated. The non-traded sector saw modest growth with the
construction and wholesale and retail sectors expanding by 3%
and 2% respectively. The tourism sector saw increased activity
in the form of higher arrivals but its earnings actually declined
marginally.
The increase in visitor arrivals in the fi rst half of the year,
continued through July and August, even accelerating in these
latter months. A total of 397,073 stay-over visitors were recorded
from January to August 2011 representing an 8.7% increase over
the 2010 period. Solid growth was recorded in the key markets
U.S.A (7.8%) and U.K (10.2%) while there were jumps in arrivals
of 30.7% and 26.9% from the smaller source markets of Germany
and Trinidad and Tobago respectively. Canada was the only region
with reduced arrivals (-2.3%). The tourism sector, which accounts
for 12% of the economy, recorded GDP to September of $97
million, 1.2% lower than the previous year’s fi gure.
The fi nancial system liquidity remained high with the liquid
asset to deposit ratio reaching 19.7% in September this year up
from 15.9% a year earlier. In this environment, interest rates
softened with average loan rates declining up to July. Despite
this, overall commercial bank lending was fl at. While loan
delinquency continues to be high, data to July 2011 showed the
non-performing loans ratio for all banks at 10.3% down from
the 10.8% of the previous December. BNB’s non-performing
loans ratio to September 2011 was 8.11% (2010: 8.36%).
Barbados remains an attractive off-shore business destination,
with a 4% increase in the number of international business
companies operating on the island, taking the total to 3,126
companies in May.
Corporate tax receipts however for April and May 2011
were less than half that of the 2010 period, suggesting that
some locally domiciled businesses were facing challenges with
profi ts. Unemployment is estimated to have risen to 11% by
September 2011. The pick-up in infl ation rates that began
early in the year, continued with a 7% point-to-point (year-on-
year) infl ation rate in July. A key contributor to these increases;
high oil and commodity prices; also factored in the widening
of Barbados’ current account defi cit. The island’s debt position
remained unchanged with the debt to GDP ratio for September
at 96.2%, just 0.1% lower than the corresponding 2010
15fi gure. In June 2011, Barbados’s domestic currency sovereign
rating was downgraded to Baa3 by Moody’s with the rating
service cited its increasing concerns about the capacity of the
domestic market to continue to absorb the elevated levels of
government debt issuance as a key reason for the downgrade.
PROSPECTS
All indications are that the Barbados economy is likely to register
marginal or fl at growth in 2011. The good news being that stay-
over visitor numbers have shown solid growth over the comparable
2010 period.
However, the deteriorating conditions in the US, UK and Europe
in the latter half of 2011 are expected to lead to a fall-off in tourist
arrivals early in the new year. The lacklustre tourism performance
could continue through to the third quarter of 2012, as without
the benefi t of an England cricket tour to the West Indies next year,
and with the London 2012 Olympics likely to become an alluring
alternative for UK travelers, Barbados may actually see a decline
from its largest source market in 2012.
Global growth is likely to remain tepid in the fi rst half of 2012,
food and energy prices should be lower than they were in 2011.
This should provide some relief to the island’s current account
defi cit as import costs are likely to be lower. However, with tax
receipts unlikely to be signifi cantly improved, and the prospect of
reduced revenue from tourism, Barbados’s diffi cult fi scal position is
expected to continue well into 2012. The IMF has recommended
that the government reduce expenditure to avoid worsening
its already worrying debt position. This may be even more
challenging in 2012 as the country approaches general elections,
constitutionally due by early 2013. With little upward pressure
anticipated, commercial bank interest rates are likely to soften
further. All told, it is expected that the fortunes of the Barbados
economy in 2012 will mirror that of its 2011 performance.
This year the group has considerably strengthened its balance
sheet through the extensive provisioning it has undertaken. A
new state of the art computer system has been installed and
our branches are continuously being upgraded to better serve
our customers. Moreover with excellent capital ratios, talented
professional staff and adequate liquidity to fund future needs, a
strong platform is being laid for the challenges of the future.
ACKNOWLEDGEMENTS
I wish to extend my heartfelt appreciation to the management
and staff for their hard work and dedication; without which the
Group’s continued success would not be possible. I also wish to
acknowledge the Board of Directors for their sound guidance and
advice and make special mention of the contributions of Director
Kenneth Hewitt who retired from the Board on September 19,
2011. Hewitt was a former Chairman (2001-2003) and served on
the Board for 10 years. We shall miss his sagacious counsel at the
Board. I take the opportunity as well to welcome Martin Cox to
the Board. Finally, I wish to thank our loyal customers for their
support during this harsh economic period and look forward to
the continued opportunity to be of service in the future.
16
INTRODUCTION
Economies across the world continue to struggle in the face of a
prolonged global recession. Its far-reaching and domino-like effect
has had a debilitating impact on small island states like Barbados
that rely heavily on imports and whose fortunes are hinged on
tourism. With the likelihood of full recovery being pushed further
into the distance, the Bank’s performance refl ected the challenges
of the environment in which it operated and the market segments
it services.
In 2011 the banking environment was typifi ed by low demand
for credit and high levels of liquidity. Competition among
commercial banks and other fi nancial institutions was high as each
entity sought to retain market share in all spheres of activity. The
prevailing circumstances challenged Team BNB to attain targets set
and manage costs while seeking avenues to enhance revenue and
improve customer service delivery.
Having put the challenges of our recent core system upgrade
behind us, we engaged in a concerted effort to expand our market
through targeted retail, credit card, investment and mortgage
campaigns. Upgrades and expansion of our ABM network were
carried out and a new channel, Internet Banking RepublicOnline,
introduced. These efforts were buttressed by consistent public
relations activities and charitable and community donations.
Moreover the introduction of programmes designed to assist
corporate clients in the successful management and operation
of their businesses expanded the positive image the Bank
maintains.
A strong human resource development programme was
pursued to ensure that our team received the professional
development that would equip them with the skills and
knowledge required.
SUMMARY RESULTS OF OPERATIONS
Recovery of the local economy remains restrained by the
uncertainty surrounding growth prospects for the United States,
United Kingdom and other advanced countries. Economic growth
this year now projected to be not much better than 1%.
Financial system liquidity remained high with the liquid asset to
deposit ratio reaching 19.7% in September up from 15.9% a year
earlier. Interest rates softened with average loan rates declining
up to July. Consequently overall commercial bank lending was fl at
and loan delinquency continuing to be high.
In the period under review, the Central Bank of Barbados
narrowed the spread on the buy and sell rates for foreign
exchange and introduced a requirement for banks to surrender
5% of gross foreign exchange purchases. The changes have
negatively impacted the profi tability of the foreign exchange
trading operations of all commercial banks.
SUBSIDIARY PERFORMANCE
Barbados Mortgage Finance Company Limited, (BMFC) met and
exceeded its targets in its key results areas. Its mortgage portfolio
of $419.1 million at the end of 2011 compared with $379.1 million
at the end of 2010 is a clear indicator of the quality performance
which enabled BMFC to maintain its market share in this highly
competitive area of the local fi nancial sector. BMFC continues to
be the mortgage provider of choice for lower to middle income
earners in Barbados and is distinguished by its high standard of
service delivery. Its increase in lending limit to $600,000 in 2010
has expanded the profi le of its traditional customer base
BNB Finance & Trust Corporation (BFTC) experienced a
challenging 2011 recording an after tax profi t of $0.56 million
compared to $2.34 million in fi scal 2010. Total assets stood at
$60.93 million compared to $67.65 million for the corresponding
period last year. Major contributors to this decline were provisions
and lower than anticipated commission income from bond and
brokerage activities. Despite dramatic declines in local, regional
and international stock exchanges, Assets Under Management
decreased only by 0.84% from $109.85 million in 2010 to
$108.93 million in 2011.
During the year BFTC structured, arranged and acted as Paying
Agent/Registrar for the Barbados Agricultural Management
Corporation (BAMC) $161 million Bond and the Transport Board
$35 million Bond. It is expected that Capital Market activity will
be curtailed in future. A review of the company’s business model
will be undertaken to reposition the organization in the changed
environment.
Managing Director’sDiscussion and Analysis
DERWIN M. HOWELL
17
Profi tability
The BNB Group recorded net profi t after taxation of $15.12
million, a decrease of $20.92 million or 58.05% from the $36.04
million achieved in 2010. The Group’s Return on Assets and
Return on Equity declined to 0.66% and 4.42% respectively. The
decline in profi tability is due mainly to signifi cantly higher levels
of loan losses, increased operating expenses and reduction in net
interest income.
Net Interest Income
The Group recorded net interest income of $98.94 million, $11.04
million less than the $109.98 million registered in 2010. Interest
income was below last year by $13.79 million or 8.99% due to
the reduction in Advances and Investments of $103.65 million or
5.86%. The demand for credit was subdued during the year and
suitable investment opportunities were scarce.
On the expense side, interest paid declined to $40.55 million
which represented an improvement of 6.35% over the 2010
fi gure of $43.3 million.
Return on Assets (%)
3.00
2.00
1.00
0
2.17
1.97
1.54
0.66
2.29
Return on Equity (%)
25.00
20.00
15.00
10.00
5.00
0
20.1
1
16.0
5
10.9
0
4.42
22.4
6
GROUP PERFORMANCE
SUMMARY OF BARBADOS NATIONAL BANK INC. LIMITED OPERATIONS
In millions of dollars 2011 2010 Change % Change
Profi tability
Core profi t before tax and loan losses 44.53 58.66 (14.13) (24.09)
Provision for loan losses 26.71 13.80 12.91 93.55
Profi t before taxation 17.82 44.86 (27.04) (60.28)
Profi t after taxation 15.12 36.04 (20.92) (58.05)
Balance Sheet
Total assets 2,276.70 2,298.19 (21.49) (0.94)
Total advances 1,394.69 1,452.58 (57.89) (3.99)
Total deposits 1,656.04 1,714.45 (58.41) (3.41)
Shareholders’ equity 345.14 338.60 6.54 1.93
18
Managing Director’s Discussion and Analysis
Sources of Revenue (%)
1 68% Loans & Advances
2 13% Fees and commissions
3 12% Investment securities
4 5% Exchange earnings
5 2% Other income
1
Non-Interest Income
The Group’s non-interest income consists primarily of income
generated through fees, commissions and foreign exchange. For
the year in review, non-interest income stood at $34.03 million,
2.90% or $0.96 million more than the $33.08 million achieved
last year. This increase achieved was due to increases in the areas
of Commissions and Credit Card income, while earnings from
foreign exchange remained stable year on year.
Non-Interest Expense
For the year ending September 2011, the Group recorded
$115.16 million in total non-interest expense, $16.97 million
more than the $98.19 million recorded in 2010. This increase can
be attributed to the $12.91 million increase in provision for loan
losses and operational write-offs arising from challenges during
the implementation of the new core system.
5
12
4
3
Revenue Distribution (%)
1 23% Interest expense
2 21% Staff cost
3 18% General administration expenses
4 15% Provision
5 7% Other expenses
6 5% Depreciation
7 5% Retained profi ts
8 4% Shareholders
9 2% Taxes
Assets
The Group’s total assets stood at $2.27 billion at September 2011,
a slight decline of 0.94% from 2010. However, the composition
of the balance sheet changed signifi cantly with Treasury bills
increasing by $141.40 million or 180% while advances declined
by $57.89 million or 3.99% and investments by $45.75 million
or 14.41%. The high concentration in Treasury bills was mainly
due to the lack of bankable credit and other corporate investment
opportunities.
As the pressure of market conditions continued to bear down
on the industry, signifi cant emphasis was placed on controlling our
levels of delinquency. In so doing, the Group’s non-performing
loans to total loans ratio decreased from the 8.36% recorded in
2010 to 8.11% for the fi nancial year under review.
Liabilities
Total liabilities as at September 2011 declined by $28.05 million
or 1.43%, to $1.93 billion. While our core deposit base remained
stable, there was a drop in deposits of $58.41 million or 3.41%;
our other fund raising instruments however increased by $31.87
million to $218.05 million from the $186.18 recorded in 2010.
This increase in other fund raising instruments was driven primarily
by our support to BMFC to fund its steady expansion of its
mortgage portfolio.
Regulatory Capital
The Group’s capital base remains very secure, and is well in excess
of the minimum requirement of the Central Bank of Barbados.
The Bank’s capital adequacy ratio as at September 2011 was
19.79% of which 18.12% represents Tier 1 capital. The regulatory
requirement is for a minimum of approximately 8% of total risk
weighted assets as capital, with at least 4% in the form of Tier
1 capital. Moving forward the Bank’s capital adequacy will more
than satisfy the new Basel 3 requirement.
OUTLOOK
In 2012 we shall be taking to the Shareholders a resolution for
the adoption of the Republic Bank brand in Barbados, which
will allow the Bank to realise the benefi ts of standardisation of
products as well as marketing and communication activities across
the Republic Group along with attendant business benefi ts.
When compared to years past, this year’s performance is
indeed modest. However, it must be viewed in context. The
circumstances of the economic downturn have affected all sectors
of the economy and every resident of this country at a very
personal and tangible level.
The Bank remains committed to the future success of Barbados.
Team BNB, through its able staff and management and with the
support and sagacious guidance of a dedicated Board of Directors,
has continued to achieve profi tability in a most trying time.
In this my fi rst year, I thank you for the warmth of your
welcome and for your support over this most challenging year and
I remain committed to serving you in the years ahead. Thank you
all, staff, customers and stakeholders for your continued loyalty
and contributions to this institution.
2
3
4
6
5
17
8 9
19
2 3
1
4
1 DERWIN M. HOWELL
Managing Director
and Chief Executive Offi cer
4 PARASRAM V. SALICKRAM
Corporate Controller
2 SEAN HUSAIN
General Manager,
Corporate and Commercial Credit
3 E. MARGARET PILE
General Manager,
Retail Banking
Executive Management
20
3 DONNA HARPER-NICHOLLS
Manager,
Human Resources
6 SASHA C. SHILLINGFORD
Corporate Secretary /
General Counsel
1 CLIFFORD BAILEY
Manager,
Information Technology,
Eastern Caribbean
4 C. PETER MILLINGTON
Manager,
Information Technology
7 DEBORAH P. STOUTE
Manager,
Marketing and
Corporate Communications
2 CARLOS BRATHWAITE
Senior Manager,
Retail Risk and Special Credit Unit
5 WAVNEY NICHOLLS
Senior Manager,
Barbados Mortgage Finance
Company Limited
8 JUTA THORPE
Senior Manager,
Administration and Operations
Management
21
3
6
1
4
7
2
5
8
22
23
The Power to Make a Difference
In 2011, the fourth year since the launch of the Power to Make a
Difference programme, Barbados National Bank continues to build
on the rich tradition of youth empowerment and championing the
rights of the differently-abled to help both groups move closer to
the highest success.
Since the programme’s inception in 2007, together with Non-
Governmental Organisations (NGOs) and Community-Based
Organisations (CBOs), we have changed the shape and scope of
corporate social responsibility locally. We have done this, steered
by the belief that if we give the Nation’s young, elderly and socially
disadvantaged the hope, vision and wherewithal to achieve, we
would have truly fulfi lled our mandate to be our brother’s keeper.
Over the years we have directed our resources in a variety of ways
as we challenge communities to aim for better and strive for more.
The recent economic challenges have not diminished our zeal, as
we continue to heed humanity’s call for help.
Power to Make A Difference –
Year Four – Advocacy of the Differently-abled
Through our partnership with government, statutory organisations
and the private sector we have gained a clearer appreciation of
their uphill struggles, particularly those struggles related to persons
with physical and mental challenges.
While our support embraces the wider interest of the differently-
abled, including persons with visible or physical disabilities, the
area of hidden disabilities also got some much deserved attention
and support. These disabilities such as dyslexia and to a lesser
extent autism go undetected, with dire consequences in the long
run. In 2011 the Caribbean Dyslexia Association saw us entering
into yet another three year covenant agreement. Continued
collaboration with the Learning Centre saw us being able to
assist in preparing young adults who are mentally or physically
challenged for the world of work. Project Barbados Association
for Supported Education (BASE) as it is called ensures these special
teens are trained in career areas such as cosmetology, barbering,
aesthetics, cooking, baking and farming – both animal husbandry
and fruit and vegetable production.
Physically challenged adults also benefi tted through our
support of the National Disabilities Unit as well as the Paralympic
Association with both of which we have covenant agreements.
Staff volunteerism has not yet been fully exploited with
the Power to Make a Difference Programme. However, some
members of staff have given of their time and energy to serve
some charitable organisations. Some of these organisations that
have benefi tted are the Young Women Christian Association
(YWCA) Breakfast Club and the Kiwanis Club of Bridgetown Silver
Dollars for Children charity drive. Staff has also partnered with the
Ministry of Social Transformation to assist with the rebuilding and
sprucing up of homes for the elderly in society.
Youth Programmes
Empowering young people continues to be an important focus of
the Power to make a Difference programme. This overarching vision
of youth empowerment continues to extend into programmes
specifi cally conceptualized and designed to extract, develop and
showcase the potential and talents of young people from all walks
of life. This is evident in our continued support of a number of
sporting organisations but including the Professional Road Tennis
Association’s annual tournament called “BNB Racquets of Fire”,
St. Cathrine’s Sports and Social Club, the Barbados Volleyball
Association and On Court Tennis Tournament .
In February 2011, BNB Launched the RightStart Primary School
Speech contest which was designed to improve the language
skills and the art of public speaking amongst children between
ages nine and eleven. This contest attracted signifi cant media
attention as six children were able to showcase their oratorical
skills on a wide range of topics during the public staging of the
fi nals. Staff from all areas of the Bank assisted with execution of
this programme and devoted time after work and on weekends
working with schools, teachers and children to ensure its success.
BNB also supported the development of leadership skills in young
females through the Canadian Brescia College’s Girls Lead Summer
Camp programme for girls proceeding to Secondary School.
The Bank continued its support for other youth programmes
in the area of cultural development through its relationship with
the National Cultural Foundation’s National Youth Orchestra, and
the Deacon’s Primary Music Programme through which the Bank
provides violins and the Suzuki Music Programme where children
from all social strata are taught the violin.
BNB remains committed to building successful societies and is
confi dent that these objectives can be achieved through deeper
engagement with the various communities that we serve.
24
Corporate Governance
Good corporate governance is essential to the effective, effi cient
and prudent operation of the Bank’s business.
Barbados National Bank Inc. is committed to maintaining the
highest standard of corporate governance. We continuously
monitor and update, as necessary, our internal systems in order
to ensure our standards refl ect best international practice while
tailored to the specifi c needs of the Bank.
The Board of Directors exercises leadership, enterprise, integrity
and good judgement in directing the Bank to achieve continuing
prosperity. It acts in the best interest of the Bank, guided by a
philosophy that is based on transparency, accountability and
responsibility.
The Board provides entrepreneurial leadership to the Bank
within a framework of prudent and effective controls which
enables risk to be assessed and managed. It sets the Bank’s
strategic aims, ensuring that the necessary fi nancial and human
resources are in place for it to meet its objectives and review
management performance. The Bank’s values and standards
are set to ensure that obligations to its shareholders and other
stakeholders are met.
The Board is responsible for:
• oversight of the Bank including its control and accountability
systems;
• appointing and removing the Managing Director and
members of senior management;
• formulation of policy;
• input into and fi nal approval of management’s development
of corporate strategy and performance objectives;
• reviewing and ratifying systems of risk management and
internal compliance and control, codes of conduct and legal
compliance;
• monitoring senior management’s performance and
implementation of strategy and ensuring appropriate
resources are available;
• approving and monitoring the progress of major capital
expenditure and capital management;
• approving and monitoring fi nancial and other reporting;
• approving fi nancial facilities.
The Board of Directors is currently made up of eleven (11) directors,
ten of whom are non-executive directors and one (1) executive
director.
The non-executive Directors include:
• The Chairman, Ronald F. deC. Harford who is also Chairman
of Republic Bank Limited and a seasoned banker;
• David Dulal-Whiteway, Managing Director of Republic Bank
Limited and Jacqueline H. C. Quamina, Group General Counsel
whose presence ensures that Barbados National Bank Inc
benefi ts from the synergies of belonging to the Republic
Bank Group; and
• a diverse and highly qualifi ed group of representatives from the
business community, who are independent, highly respected
with a wealth of experience in their respective fi elds.
The Managing Director Derwin M. Howell, a banker with over
fourteen (14) years’ experience, is committed to ensuring that at
board meetings, directors have access to the best possible banking,
management and fi nancial advice during its deliberations, thus
ensuring that the Board has a clear perspective on all matters on
which decisions are made.
The Board of Directors meets formally every month while
special Board meetings are called as the need arises. The
Managing Director has explicit authorities and responsibilities that
are documented and approved by the Board and reviewed as and
when necessary.
At the Annual Meeting, one-third of the Directors retire and
may offer themselves for re-election. At the upcoming Annual
Meeting Peter G. Symmonds and Ralph S. deC. Williams retire
from the Board by rotation and being eligible have offered
themselves for re-election.
On January 1, 2011, Derwin M. Howell fi lled the vacancy
created by the resignation of Robert LeHunte; and on October
28, 2011, Martin Cox fi lled the vacancy created by the retirement
of Kenneth Hewitt. In accordance with the Company’s By-law,
Derwin M. Howell and Martin Cox will also retire from the Board
and being eligible, have offered themselves for re-election.
The Board of Directors has access to the advice of the General
Counsel as well as the Bank’s external counsel, including advice on
any matter concerning their role as Directors.
The Bank’s strategies, policies, agreed management-
performance criteria and business plans are defi ned and
measurable in a manner which is precise and tangible both
to the Board and management. The Bank’s affairs are subject
to comprehensive assessment against accurate and relevant
information, both fi nancial and non-fi nancial as appropriate,
obtainable from the Bank’s internal reporting systems as well as
external sources so that informed assessment can be made of
issues facing the Board.
To this end the following committees have been established:
AUDIT COMMITTEE
This Committee meets quarterly to review the fi nancial reporting
process, the system of internal control, management of fi nancial
risks, the audit process and the Bank’s process for monitoring
compliance with laws and regulations and its own code of
25business. Five meetings were held to deal with these matters.
The Committee comprises:
ROBERT A. CARTER
DAVID DULAL-WHITEWAY
JOSEPH N. GODDARD
WILLIAM deC. LAYNE
CREDIT COMMITTEE
This Committee meets once monthly, or as necessary, to review and
approve all loans over the discretionary limit of the Management
Credit Committee and on the classifi cation of accounts. Eleven
(11) meetings were held during the fi scal year.
The Committee consists of no less than three non-executive
directors chosen by rotation. The position of Chairman is rotated
from time to time among the Directors as considered appropriate.
Members of the Committee are chosen from:
ROBERT A. CARTER
JOSEPH N. GODDARD
IAN ST. C. CARRINGTON
G. ANTHONY KING
PETER G. SYMMONDS
WILLIAM deC. LAYNE
RALPH S. deC. WILLIAMS
GOVERNANCE, NOMINATION AND COMPENSATION
COMMITTEE (Re-named from ‘Remuneration Committee’)
This committee meets at least twice a year. It reviews the
compensation policy for all staff. It is also responsible for
governance matters including making recommendations for the
selection of Directors, advising Directors of their obligations and
reviewing their performance.
Two meetings were held during the fi scal year.
The Committee comprises:
RONALD F. deC. HARFORD, Chairman
JOSEPH N. GODDARD
IAN ST. C. CARRINGTON
PETER G. SYMMONDS
OTHER RISKS COMMITTEE
This Committee was established in September 2010 and examines
all risks to the Bank, other than credit risk. These risks include IT,
Operations, Legal, Trust and Asset Management and Credit Card.
Meetings are held quarterly. Three meetings were held during
the fi scal year.
The Committee consists of two Executive Directors and four
Non-Executive Directors.
Members of the Committee are:
JACQUELINE H.C. QUAMINA
RALPH WILLIAMS
PETER G. SYMMONDS
IAN ST. C. CARRINGTON
JOSEPH N. GODDARD
DERWIN M. HOWELL
Signed on behalf of the Board
Ronald F. de C. Harford
Chairman
November 3, 2011
26
Management’s Responsibilty for Financial Reporting
The Directors of Barbados National Bank Inc. are responsible for
the preparation and fair presentation of the fi nancial statements
and other fi nancial information contained in this Annual Report.
The accompanying fi nancial statements have been prepared
in conformity with International Financial Reporting Standards.
Where amounts are based on estimates and judgements, these
present the best estimate and judgement of the directors.
General responsibilities include:
• Establishing and maintaining effective internal controls and
procedures for fi nancial reporting;
• Safeguarding of assets; and
• Prevention and detection of fraud and other irregularities.
The fi nancial information appearing throughout this Annual Report
is consistent with that in the fi nancial statements. Directors have a
responsibility for ensuring that the Bank keeps accounting records
which disclose with reasonable accuracy its fi nancial position.
The Directors have always recognised the importance of the
Bank maintaining and reinforcing the highest possible standards
of conduct in all of its actions, including the preparation and
dissemination of statements presenting fairly the fi nancial condition
of the Bank. In this regard the Directors have developed and
maintained a system of accounting and reporting which provides
the necessary internal controls to ensure that transactions are
properly authorised and recorded; assets are safeguarded against
unauthorised use or disposition and liabilities are recognised. The
system is augmented by written policies and procedures, the
careful selection and training of qualifi ed staff, the establishment
of an organisational structure that provides an appropriate and
well-defi ned division of responsibility and the communication of
policies and guidelines of business conduct throughout the Bank.
The system of internal control is further supported by a
professional staff of internal auditors who conduct periodic audits
of all the Bank’s operations. External auditors have full and free
access to, and meet periodically with the Audit Committee to discuss
their audit and fi ndings as to the integrity of the Bank’s accounting
and fi nancial reporting and the adequacy of the system of internal
controls.
Signed on behalf of the Board
Ronald F. de C. Harford
Chairman
November 3, 2011
The joy of giving is no more profoundly felt than during the celebration of Christmas.
Since 2007, BNB has provided needed assistance to the Welfare Department and Child
Care Board of Barbados in their efforts to spread the joy of the season to children in
care, the elderly, children in impoverished circumstances and children with disabilities
across Barbados. It truly is better to give than to receive.
27
Contents
Independent Auditors’ Report 28
Consolidated Statement of Financial Position 29
Consolidated Statement of Income 30
Consolidated Statement of Comprehensive Income 31
Consolidated Statement of Changes in Equity 32
Consolidated Statement of Cash Flows 33
Notes to the Consolidated Financial Statements 34
1 Corporate Information 34
2 Signifi cant accounting policies 34
a Basis of preparation 34
b Basis of consolidation 34
c Changes in accounting policies 35
d Cash and cash equivalents 37
e Deposits with Central Bank 37
f Financial instruments 37
g Impairment of fi nancial assets 38
h Finance leases 39
i Employee benefi ts 39
j Premises and equipment 40
k Investment property 40
l Taxation 41
m Statutory reserve 41
n Earnings per share 41
o Foreign currency translation 41
p Interest income and expense 41
q Fee and commission income 41
3 Signifi cant accounting judgements and estimates
in applying the Group’s accounting policies 42
4 Deposits with Central Bank 42
5 Advances 43
6 Investment securities 45
7 Premises and equipment 46
8 Investment property 47
9 Deferred tax assets and liabilities 48
10 Other assets 49
11 Customers’ deposits 49
12 Other fund raising instruments 49
13 Employee benefi ts 50
14 Other liabilities 53
15 Stated capital 54
16 Operating profi t 54
17 Taxation expense 55
18 Earnings per share 56
19 Related parties 56
20 Risk management 57
21 Capital management 69
22 Fair value 69
23 Maturity analysis of assets and liabilities 71
24 Dividends 72
25 General contingency reserve 72
26 Contingent liabilities 72
2828
AUDITORS’ REPORT
28 To the Shareholders of Barbados National Bank Inc.
We have audited the accompanying consolidated fi nancial statements of Barbados National Bank Inc. which comprise the consolidated
statement of fi nancial position as at September 30, 2011 and the consolidated statement of income, consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash fl ows for the year then ended
and a summary of signifi cant accounting policies and other explanatory notes.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated fi nancial statements in accordance with
International Financial Reporting Standards and for such internal control as management determines is necessary to enable the
preparation of consolidated fi nancial statements that are free from material misstatement whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated fi nancial 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 about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement
of the consolidated fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the consolidated fi nancial 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 consolidated fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated fi nancial statements present fairly, in all material respects, the fi nancial position of Barbados National
Bank Inc. as at September 30, 2011 and its fi nancial performance and cash fl ows for the year then ended in accordance with International
Financial Reporting Standards.
CHARTERED ACCOUNTANTS
BARBADOS
October 28, 2011
2929
Consolidated Statement of Financial Positionas at September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
29
Notes 2011 2010
ASSETS
Cash 27,279 35,513
Deposits with Central Bank 4 125,079 190,183
Due from banks 81,602 60,308
Treasury bills 219,976 78,581
Investment interest receivable 2,023 2,907
Advances 5 1,394,685 1,452,582
Investment securities 6 271,763 317,511
Premises and equipment 7 130,721 134,036
Investment property 8 7,300 7,920
Deferred tax assets 9 3,885 4,678
Other assets 10 12,383 13,976
TOTAL ASSETS 2,276,696 2,298,195
LIABILITIES AND EQUITY
LIABILITIES
Due to banks 4,066 3,236
Customers’ deposits 11 1,656,040 1,714,453
Other fund raising instruments 12 218,047 186,176
Employee benefi ts 13 7,712 8,373
Taxation payable 198 1,242
Deferred tax liabilities 9 5,142 5,491
Accrued interest payable 8,479 10,228
Other liabilities 14 31,868 30,399
TOTAL LIABILITIES 1,931,552 1,959,598
EQUITY
Stated capital 15 48,000 48,000
Net unrealised losses (8,140) (10,123)
Statutory reserve 51,438 50,399
Revaluation reserve 17,379 17,379
General contingency reserve 25 84,014 89,037
Retained earnings 152,453 143,905
TOTAL EQUITY 345,144 338,597
TOTAL LIABILITIES AND EQUITY 2,276,696 2,298,195
The accompanying notes form an integral part of these fi nancial statements
These fi nancial statements were approved for issue by the Board of Directors on October 28, 2011 and signed on its behalf by:
RONALD F. deC HARFORD ROBERT A. CARTER DERWIN M. HOWELL
Chairman Director Director
303030
Consolidated Statement of Incomefor the year ended September 30, 2011(All fi gures are in thousands of Barbados Dollars except for earnings per share)
Notes 2011 2010
Interest income 16 (a) 139,489 153,276
Interest expense 16 (b) (40,549) (43,299)
Net interest income 98,940 109,977
Non-interest income 16 (c) 34,034 33,077
Net interest and non-interest income 132,974 143,054
Operating expenses 16 (d) (115,158) (98,193)
Profi t before taxation 17,816 44,861
Taxation expense 17 (2,692) (8,822)
Net profi t after taxation 15,124 36,039
Basic and diluted earnings per share (cents) 18 16 38
The accompanying notes form an integral part of these fi nancial statements.
3131
Consolidated Statement of Comprehensive Incomefor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
2011 2010
Net profi t after taxation 15,124 36,039
Other comprehensive income:
Gain on revaluation of available-for-sale investment securities 2,644 3,653
Tax effect (661) (913)
Other comprehensive income for the year, net of tax 1,983 2,740
Total comprehensive income for the year, net of tax 17,107 38,779
The accompanying notes form an integral part of these fi nancial statements.
3232
Consolidated Statement of Changes in Equityfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
Net General Unrealised Statutory contingency Stated gains/ Reserve Revaluation reserve Retained capital (losses) Note 2(m) reserve Note 25 earnings Total
Balance at October 1, 2009 48,000 (12,863) 50,399 17,379 70,780 149,163 322,858
Total comprehensive income, net of tax - 2,740 - - - 36,039 38,779
Transfer to general contingency reserve - - - - 18,257 (18,257) -
Dividends paid (note 24) - - - - - (23,040) (23,040)
Balance at September 30, 2010 48,000 (10,123) 50,399 17,379 89,037 143,905 338,597
Balance at October 1, 2010 48,000 (10,123) 50,399 17,379 89,037 143,905 338,597
Total comprehensive income, net of tax - 1,983 - - - 15,124 17,107
Transfer from general contingency reserve - - - - (5,023) 5,023 -
Transfer to statutory reserve - - 1,039 - - (1,039) -
Dividends paid (note 24) - - - - - (10,560) (10,560)
Balance at September 30, 2011 48,000 (8,140) 51,438 17,379 84,014 152,453 345,144
The accompanying notes form an integral part of these fi nancial statements.
3333
Consolidated Statement of Cash Flowsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
2011 2010
Operating activities
Profi t before taxation 17,816 44,861
Adjustments for:
Depreciation 8,526 7,686
Advance impairment expense 26,710 13,797
Employee benefi ts (661) 2,200
Net change from fair value adjustment for investment property 620 (110)
53,011 68,434
Changes in operating assets and liabilities
Decrease in advances 31,187 111,432
Decrease/(increase) in other assets and investment interest receivable 2,468 (1,931)
Decrease in other liabilities and accrued interest payable (271) (8,855)
Decrease in customers’ deposits (58,413) (102,106)
Decrease in mandatory reserve deposits with Central Bank 745 9,584
Corporation taxes paid (4,135) (10,271)
Cash provided by operating activities 24,592 66,287
Investing activities
Purchase of premises and equipment (5,211) (17,372)
Decrease in investment securities 48,574 25,523
Cash provided by investing activities 43,363 8,151
Financing activities
Increase/(decrease) in due to banks 830 (126)
Increase in other fund raising instruments 31,871 2,668
Dividends paid (10,560) (23,040)
Cash provided by/(used in) fi nancing activities 22,141 (20,498)
Net increase in cash and cash equivalents for the year 90,096 53,940
Cash and cash equivalents at the beginning of year 283,670 229,730
Cash and cash equivalents at the end of year 373,766 283,670
Cash and cash equivalents at end of year is made up as follows:
Cash 27,279 35,513
Balance with Central Bank other than mandatory reserve deposits 44,909 109,268
Due from banks 81,602 60,308
Treasury bills - original maturities of three months or less 219,976 78,581
Total 373,766 283,670
The accompanying notes form an integral part of these fi nancial statements.
3434
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
1. CORPORATE INFORMATION
Barbados National Bank was established on March 20, 1978 by an Act of Barbados Parliament and subsequently reincorporated on
November 14, 2000 as Barbados National Bank Inc., a limited liability company under the Companies Act. On December 28, 2005
the Bank legally amalgamated with Broad Street Properties Inc., a related party, and the amalgamated entity company No. 26464
continued as Barbados National Bank Inc. The Bank’s parent company is Republic Bank Limited, a company incorporated in Trinidad
and Tobago. The ultimate parent company is CL Financial Group which holds through its various subsidiaries 51.5% of the shares
of Republic Bank Limited.
The Bank operates under the Financial Institutions Act and other Laws of Barbados. The Bank operates solely in Barbados and
is organised primarily as a commercial bank.
On January 31, 2009, the Central Bank of Trinidad & Tobago (CBTT) issued a Notifi cation pursuant to sections 44D and 44E
of the Central Bank Act, Chap. 79:02 that the CBTT assumed control of the affairs of CLICO Investment Bank Limited (CIB). On
February 13, 2009, the CBTT issued a Notifi cation pursuant to sections 44D and 44E of the Central Bank Act, Chap. 79:02 that the
CBTT assumed control of the affairs of Colonial Life Insurance Company (Trinidad) Limited (CLICO). These two companies are part
of the CL Financial Group.
In accordance with the provisions of both Notifi cations, the CBTT has the power to deal with the assets of the Companies,
including the Republic Bank Limited shares. The CBTT will not receive any benefi t fi nancial or otherwise from the exercise of its
powers under the Central Bank Act. As at September 30, 2011, the combined shareholding of Republic Bank Limited for CLICO
and CIB is 51.2%.
For the purpose of these consolidated fi nancial statements, the related party note has not been amended to refl ect the Central
Bank’s control and has been prepared in a manner consistent with previous publications.
2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated fi nancial statements are set out below. These
policies have been consistently applied across the Group.
a) Basis of preparation
The fi nancial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) and
are stated in Barbados Dollars which is also the Group’s functional currency. These fi nancial statements have been prepared
under the historical cost basis, except for measurement at fair value of investment securities classifi ed as available-for-sale,
investment property and certain items of premises and equipment.
These standards require management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the fi nancial statements and the reported revenues
and expenses during the year. Actual results may differ from these estimates.
b) Basis of consolidation
The consolidated fi nancial statements include the fi nancial statements of the Bank for the year ended September 30, 2011
and its two wholly owned subsidiaries, BNB Finance & Trust Corporation and Barbados Mortgage Finance Company Limited.
The fi nancial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent
accounting policies. Both subsidiaries are incorporated in Barbados.
All intra-group balances, transactions, income and expenses and profi ts and losses resulting from intra-group transactions
are eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred to the Bank. Control is achieved where the
Bank has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. They
are de-consolidated from the date control ceases.
35352. SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Changes in accounting policies
i) New accounting policies adopted
The accounting policies adopted in the preparation of the consolidated fi nancial statements are consistent with those
followed in the preparation of the annual fi nancial statements for the year ended September 30, 2010 except for the
adoption of new standards and interpretations noted below:
IFRS 2 - Share-based payment: Group Cash-settled Share-based Payment Transactions (effective January 1, 2010)
IFRS 2 has been amended to clarify the accounting for group cash-settled share-based payment transactions, where a
subsidiary receives goods or services from employees or suppliers but the parent or another entity in the group pays for
those goods or services. The amendments clarify that the scope of IFRS 2 includes such transactions. This amendment is
applied retrospectively, in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors in respect
of changes in accounting policy. For group reporting and consolidated fi nancial statements, the amendment clarifi es that if
an entity receives goods or services that are cash settled by shareholders not within the group, they are outside the scope
of IFRS 2. The adoption of this amendment did not have any impact on the fi nancial position of the Group.
IAS 32 - Financial Instruments: Presentation - Classifi cation of Rights Issues (effective February 1, 2010)
The amendment to IAS 32 amended the defi nition of a fi nancial liability in order to classify rights issues (and certain options
or warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same
class of an entity’s non-derivative equity instruments, or to acquire a fi xed number of the entity’s own equity instruments
for a fi xed amount in any currency. This amendment will have no impact on the Group after initial application.
IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments (effective July 1, 2010)
The interpretation clarifi es that equity instruments issued to a creditor to extinguish a fi nancial liability qualify as
consideration paid. The equity instruments issued are measured at their fair value. In case this cannot be reliably measured,
they are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profi t or loss.
The adoption of this interpretation had no effect on the fi nancial position or performance of the Group.
IAS 1 - Presentation of Financial Statements (effective January 1, 2010)
The terms of a liability that could at anytime result in its settlement by the issuance of equity instruments at the option of
the counterparty do not affect its classifi cation. The adoption of this standard had no effect on the fi nancial position or
performance of the Group.
IAS 7 - Statement of Cash Flows (effective January 1, 2010)
Only expenditure that results in a recognized asset can be classifi ed as a cash fl ow from investing activities. The adoption
of this standard had no effect on the fi nancial position or performance of the Group.
IAS 17 - Leases (effective January 1, 2010)
The specifi c guidance on classifying land as a lease has been removed so that only the general guidance remains. The
adoption of this standard had no effect on the fi nancial position or performance of the Group.
3636
Notes to the Consolidated Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Changes in accounting policies (continued)
i) New accounting policies adopted (continued)
IAS 36 - Impairment of Assets (effective January 1, 2010)
The largest unit permitted for allocating goodwill acquired in a business combination is the operating segment defi ned in
IFRS 8 before aggregation for reporting purposes. The adoption of this standard had no effect on the fi nancial position or
performance of the Group.
IAS 39 - Financial Instruments: Recognition and Measurement (effective January 1, 2010)
Assessment of loan prepayment penalties as embedded derivatives: A prepayment option is considered closely related to
the host contract when the exercise price reimburses the lender up to the approximate present value of lost interest for the
remaining term of the host contract. The adoption of this standard had no effect on the fi nancial position or performance
of the Group.
Scope exemption for business combination contract: The scope exemption for contracts between an acquirer and a
vendor in a business combination to buy or sell an acquiree at a future date applies only to binding forward contracts, not
derivative contracts where further actions are still to be taken. This is effective prospectively to all unexpired contracts for
annual periods beginning on or after January 1, 2010. The adoption of this standard had no effect on the fi nancial position
or performance of the Group.
Cash fl ow hedge accounting: Gains or losses on cash fl ow hedges of a forecast transaction that subsequently
results in the recognition of a fi nancial instrument or on cash fl ow hedges or recognised fi nancial instruments should
be reclassifi ed in the period that the hedged forecast cash fl ows affect profi t or loss. This is effective prospectively to all
unexpired contracts for annual periods beginning on or after January 1, 2010. The adoption of this standard had no effect
on the fi nancial position or performance of the Group.
IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations (effective January 1, 2010)
This amendment clarifi es that the disclosures required in respect of non-current assets (or disposal groups) classifi ed as
held for sale or discontinued operations are only those set out in IFRS 5. The adoption of this standard had no effect on
the fi nancial position or performance of the Group.
IFRS 8 - Operating Segments (effective January 1, 2010)
Segment assets and liabilities need only be reported when those assets and liabilities are included in measures used by the
chief operating decision maker. The adoption of this standard had no effect on the fi nancial position or performance of
the Group.
ii) New accounting policies not adopted
The Group has not adopted the following new and revised IFRSs and IFRIC Interpretations that have been issued as these
standards/interpretations do not apply to the activities of the Group:
IFRS 1 First-time Adoption of International Financial Reporting Standards - Additional Exemptions for
First-time Adopters (Amendments) (effective January 1, 2010)
IFRS 1 First-time Adoption of International Financial Reporting Standards - Limited Exemption from
Comparative IFRS 7 Disclosures for First-time Adopters (effective July 1, 2010)
for the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
37372. SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Changes in accounting policies (continued)
iii) Standards in issue not yet effective The following is a list of standards and interpretations issued that are not yet effective up to the date of issuance of the Group’s fi nancial statements. The Group reasonably expects these standards and interpretations to be applicable at a future date and intends to adopt those standards and interpretations when they become effective. IAS 12 Income Taxes - Recovery of Underlying Assets (effective January 1, 2012)
IAS 24 Related Party Disclosures (effective January 1, 2011)
IFRS 1 First-time Adoption of International Financial Reporting Standards (Amendment) - Severe Hyperinfl ation and Removal of Fixed Dates for First-time Adopters (effective July 1, 2011) IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements (effective July 1, 2011) IFRS 9 Financial Instruments: Classifi cation and Measurement (effective January 1, 2013) IFRIC 14 Prepayments of a minimum funding requirement (effective January 1, 2011)
In May 2010, the International Accounting Standards Board issued “Improvements to IFRSs”, which is part of its annual improvements project, and a vehicle for making non-urgent but necessary amendments to various IFRSs. These amendments primarily become effective for annual periods beginning on or after July 1, 2010 or January 1, 2011. The following shows the IFRSs and topics addressed by these amendments:
IAS 1 Presentation of Financial Statements IAS 27 Consolidated and Separate Financial Statements
IAS 34 Interim Financial Reporting IFRS 1 First-time Adoption of International Financial Reporting Standards IFRS 3 Financial Instruments: Disclosures IFRIC 13 Customer Loyalty Programmes
d) Cash and cash equivalents For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents consist of highly liquid investments,
cash at hand and at bank, Treasury bills and bankers’ acceptances with original maturities of three months or less.
e) Deposits with Central Bank In accordance with statutory provisions, the Group is required to maintain reserves in the form of cash resources and
Government of Barbados securities.
f) Financial instruments The Group’s fi nancial assets and fi nancial liabilities are recognised in the Statement of Financial Position when it becomes party
to the contractual obligation of the instrument. A fi nancial asset is derecognised when the rights to receive the cash fl ows from the asset have expired or where the Group has transferred all the risks and rewards of ownership of the asset. A fi nancial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. All ‘regular way’ purchases and sales are recognised at settlement date.
i) Advances Advances are fi nancial assets with fi xed or determinable payments and fi xed maturities that are not quoted in an active
market. They are not entered into with the intention of immediate or short-term resale and are not classifi ed as ‘Financial assets held for trading’, designated as ‘Financial investment - available-for-sale’ or ‘Financial assets designated at fair value through profi t or loss.’ After initial measurement, advances are subsequently measured at amortised cost using the effective interest rate method, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the effective interest rate. The amortisation is included in ‘interest income’ in the Statement of Comprehensive Income. The losses arising from impairment are recognised in the Statement of Comprehensive Income.
3838
Notes to the Consolidated Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
f) Financial Instruments (continued)
ii) Investment securities
- At fair value through profi t or loss
Financial assets are classifi ed in this category if they are either acquired for the purpose of selling in the short term or if so
designated by management. Securities held as fi nancial assets at fair value through profi t or loss are initially recognised
at fair value plus transaction costs and are continuously measured at fair value based on quoted market prices where
available, or discounted cash fl ow models. All gains and losses realised and unrealised from trading securities and those
designated at fair value through profi t or loss are reported in non-interest income. Interest and dividends earned whilst
holding trading securities and those designated at fair value through profi t or loss are reported in interest income.
- Available-for-sale securities
Available-for-sale investments are securities intended to be held for an indefi nite period of time, but may be sold in response
to needs for liquidity or changes in interest rates, exchange rates or equity prices. Available-for-sale securities are initially
recognised at fair value plus transaction costs and are continuously remeasured at fair value based on quoted market
prices where available or discounted cash fl ow models. Fair values for unquoted equity instruments or unlisted securities
are estimated using applicable price/earnings or price/cash fl ow ratios refi ned to refl ect the specifi c circumstances of the
issuer. Unrealised gains and losses arising from changes in the fair value of securities classifi ed as available-for-sale are
recognised in equity net of applicable deferred tax. When the securities are disposed of, the related accumulated fair value
adjustments are included in non-interest income. When securities become impaired, the related accumulated fair value
adjustments previously recognised in equity are included in the Statement of Comprehensive Income as an impairment
expense on investment securities.
- Held to maturity
Held to maturity investments are fi nancial assets with fi xed or determinable payments and fi xed maturities that the
Group’s management has the positive intention and ability to hold to maturity. Held to maturity investments are carried at
amortised cost less any provision for impairment.
At the Statement of Financial Position date the Group had no investments classifi ed as “at fair value through profi t
or loss” or “held to maturity.”
iii) Debt securities and other fund raising instruments
Debt securities and other fund raising instruments are recognised initially at fair value net of transaction costs, and
subsequently measured at amortised cost using the effective interest rate method.
g) Impairment of fi nancial assets
The Group assesses at each Statement of Financial Position date whether there is any objective evidence that a fi nancial asset
or group of fi nancial assets is impaired. A fi nancial asset or group of fi nancial assets is impaired when the carrying value is
greater than the recoverable amount and there is objective evidence of impairment. The recoverable amount is the present
value of the future cash fl ows.
i) Advances
All non-performing and individually signifi cant advances are individually reviewed and specifi c provisions made for the
impaired portion based on the realisable value of the collateral and discounted by the original effective interest rate of the
advance. The provision made is the difference between the advance balance and the discounted value of the collateral.
for the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
39392. SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Impairment of fi nancial assets (continued)
i) Advances (continued)
Individually insignifi cant advances with similar characteristics are assessed for impairment on a group basis. When all
efforts have been exhausted to recover a non-performing advance, that advance is deemed uncollectible and written-off
against the related allowance for impairment losses.
Inherent provisions on advances are calculated on an estimate of impairment incurred but not reported, existing in
assets as at the Statement of Financial Position date. Estimated impairment incurred is determined by applying against
performing advance balances, the average advance default rates and adjusting this balance for current economic factors
that affect advance performance. An anticipated recovery rate (determined from historical average) is then applied to
determine the value that is recoverable. This calculation is computed by product type.
Regulatory and other impairment loss on advances that exceed these amounts are dealt with in the general
contingency reserve as an appropriation of retained earnings.
ii) Investment securities
The Group individually assesses each investment security for objective evidence of impairment. If an impaired instrument
has been renegotiated, interest continues to be accrued at the original effective interest rate on the reduced carrying
amount of the asset and is recorded in interest income. If the fair value of the instrument increases in a subsequent year,
the impairment loss is reversed through the Statement of Comprehensive Income.
If there is objective evidence that the cost of an available-for-sale equity security may not be recovered, the security is
considered to be impaired. Objective evidence that the cost may not be recovered includes qualitative impairment criteria
as well as a signifi cant or prolonged decline in the fair value below cost. The Group’s policy considers a signifi cant decline
to be one in which the fair value is below the weighted-average cost by more that 30% and a prolonged decline to be one
in which fair value is below the weighted-average cost for greater than one year. This policy is applied by all subsidiaries at
the individual security level.
If an available-for-sale equity security is impaired based upon the Group’s qualitative or quantitative impairment
criteria, any further declines in the fair value at subsequent reporting dates are recognised as impairments. Therefore, at
each reporting period, for an equity security that is determined to be impaired based upon the Group’s impairment criteria,
an impairment is recognised for the difference between the fair value and the original cost basis, less any previously
recognised impairments.
h) Finance leases
Finance charges on leased assets are taken into income using the effective interest rate method. This basis refl ects a constant
periodic rate of return on the lessor’s net investment in the fi nance lease.
i) Employee benefi ts
i) Pension obligations
The Group operates a defi ned benefi t pension plan. The pension plan is funded by payments from the Group taking
account of the recommendations of independent qualifi ed actuaries. The assets of the plan are held independently of the
Group’s assets in a separate trustee administered fund.
For the defi ned benefi t plan, the pension accounting costs are assessed using the projected unit credit method.
Under this method, the cost of providing pensions is charged to the Statement of Comprehensive Income so as to spread
regular costs over the service lives of employees in accordance with the advice of qualifi ed actuaries.
4040
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
i) Employee benefi ts (continued)
i) Pension obligations (continued)
Actuarial gains and losses are recognised as income or expenses when the cumulative unrecognised actuarial gains or
losses exceed 10% of the defi ned benefi t obligation and the fair value of plan assets. These gains or losses are recognised
by amortising them over the average remaining working lifetime of employees.
ii) Other post-retirement obligations
The Group provides post-retirement medical benefi ts to its retirees. The entitlement to these benefi ts is usually based on
the employee remaining in service up to retirement age and the completion of a minimum service period. The expected
costs of these benefi ts are accrued over the period of employment, using a methodology similar to that for defi ned benefi t
pension plans. Independent qualifi ed actuaries carry out a valuation of these obligations.
j) Premises and equipment
Land and buildings are shown at cost or at fair value based on valuations by external independent valuers, less subsequent
depreciation for buildings. Plant and equipment is stated at historical cost less depreciation.
Increases in the carrying amount arising on revaluation of land and buildings are credited to the revaluation reserve in the
Statement of Changes in Equity. Gains and losses on disposals are determined by comparing proceeds with carrying amounts
and are included in the Statement of Comprehensive Income. When revalued assets are sold, the amounts included in the
revaluation reserve are transferred to retained earnings.
Repairs and maintenance are charged to the Statement of Comprehensive Income during the fi nancial period in which
they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future
economic benefi ts in excess of the originally assessed standard of performance of the existing asset will fl ow to the Group.
Major renovations are depreciated over the remaining useful life of the related asset.
Depreciation is computed at rates considered adequate to write-off the cost of depreciable property, plant and equipment,
less salvage value, over the estimated useful lives of the respective assets on a straight-line basis. Leasehold improvements are
amortised on a straight-line basis under the terms of the related lease.
The following annual depreciation rates are applicable for the respective asset categories:
Rate or average amortisation period
Buildings 2%
Furniture and equipment 10-33%
Leasehold premises 2-50 %
Vehicles 20%
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its
recoverable amount.
k) Investment property
Investment property, principally comprising offi ce buildings, is held for long-term rental yields and is not occupied by the
Group. Investment property is treated as a long-term investment and is carried at fair value, representing open market value
determined annually. Changes in fair value are recorded in the Statement of Comprehensive Income.
41412. SIGNIFICANT ACCOUNTING POLICIES (continued)
l) Taxation
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the fi nancial statements. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted at the Statement of Financial Position date and are expected to
apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised where it is probable that future taxable profi t will be available against which the
temporary differences can be utilised.
Income tax payable on profi ts is recognised as an expense in the period in which profi ts arise. The tax effects of income
tax losses available for carry forward are recognised as an asset when it is probable that future taxable profi ts will be available
against which these losses can be utilised.
m) Statutory reserve
The Financial Institutions Act requires that a minimum of 25% of the net income in each year be transferred to a reserve
account until the balance on this reserve is not less than the Stated Capital.
n) Earnings per share
The earnings per share is computed by dividing the net profi t attributable to ordinary shareholders, by the weighted average
number of ordinary shares in issue during the year.
o) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into Barbados dollars at rates of exchange
prevailing at the date of the fi nancial statements and non-monetary assets and liabilities are translated at historical rates.
Revenue and expenses denominated in foreign currencies are translated into Barbados dollars using prevailing monthly
exchange rates. Realised gains and losses on foreign currency positions are reported in non-interest income.
p) Interest income and expense
Interest income and expense are recognised in the Statement of Comprehensive Income for all interest-bearing instruments
on an accrual basis using the effective interest method. Interest income includes coupons earned on fi xed income investments
and trading securities and accrued discount and premium on Treasury bills and other discounted instruments.
q) Fee and commission income
Unless included in the effective interest calculation, fees and commissions are recognised on an accruals basis as the service
is provided. Fees and commissions not integral to effective interest and arising from negotiating, or participating in the
negotiation of a transaction from a third party are recognised on completion of the underlying transaction. Portfolio and other
management advisory and service fees are recognised based on the applicable service contracts. Asset management fees
related to investment funds are recognised over the period the service is provided.
4242
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES IN APPLYING THE GROUP’S ACCOUNTING POLICIES
Management has made the following judgements in its application of the Group’s accounting policies which have had the most
signifi cant effect on the amounts reported in the fi nancial statements:
i) Impairment of fi nancial assets
Management makes judgements at each Statement of Financial Position date to determine whether fi nancial assets
are impaired. Financial assets are impaired when the carrying value is greater than the recoverable amount and there is
objective evidence of impairment. The recoverable amount is the present value of the future cash fl ows.
Inherent provisions on advances are calculated on an estimate of impairment incurred but not reported, existing in
assets as at the Statement of Financial Position date. Estimated impairment incurred is determined by applying against
performing advance balances, the average advance default rates and adjusting this balance for current economic factors
that affect advance performance. An anticipated recovery rate (determined from historical average) is then applied to
determine the value that is recoverable. This calculation is computed by product type.
ii) Valuation of investments
The Group has applied IAS 39 in its classifi cation of investment securities which requires measurement of securities at fair
value. For unquoted equity instruments and unlisted securities, fair values are estimated using price/earnings or price/cash
fl ow ratios which have been refi ned to accommodate the specifi c circumstances of the issuer.
iii) Employee benefi ts
In conducting valuation exercises to measure the effect of all employee benefi t plans throughout the Group, the independent
actuaries use judgement and assumptions in determining discount rates, salary increases, NIS ceiling increases, pension
increases, and future medical claims and the rate of return on the assets of the Plans.
iv) Deferred taxes
In calculating the provision for deferred taxation, management uses judgement to determine the probability that future
taxable profi ts will be available to facilitate utilisation of temporary tax differences which may arise.
v) Premises and equipment
Management exercises judgement in determining whether costs incurred can accrue suffi cient future economic benefi ts
to the Group to enable the value to be treated as a capital expense. Further judgement is used upon annual review of the
residual values and useful lives of all capital items to determine any necessary adjustments to carrying value.
4. DEPOSITS WITH CENTRAL BANK
2011 2010
Mandatory reserve deposits with Central Bank 80,170 80,915
Balance with Central Bank other than mandatory reserve deposits 44,909 109,268
Total 125,079 190,183
Cash and deposits with the Central Bank are non-interest bearing. Mandatory reserve deposits with Central Bank are not available
for use in the Group’s day to day operations.
43435 . ADVANCES
a) Net advances
2011
Corporate Retail and Commercial Mortgages Total
Performing advances 144,539 584,253 568,662 1,297,454
Non-performing advances 18,707 55,382 40,441 114,530
163,246 639,635 609,103 1,411,984
Accrued interest 5,354 7,111 5,266 17,731
168,600 646,746 614,369 1,429,715
Allowance for impairment losses (9,845) (20,154) (5,031) (35,030)
Total net advances 158,755 626,592 609,338 1,394,685
2010 Corporate Retail and Commercial Mortgages Total
Performing advances 167,725 646,347 537,631 1,351,703
Non-performing advances 34,422 55,898 33,061 123,381
202,147 702,245 570,692 1,475,084
Accrued interest 1,668 10,206 3,505 15,379
203,815 712,451 574,197 1,490,463
Allowance for impairment losses (25,365) (9,529) (2,987) (37,881)
Total net advances 178,450 702,922 571,210 1,452,582
4444
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
5. ADVANCES (continued)
b) Reconciliation of the allowance for impairment losses for advances by class:
2011
Corporate Retail and Commercial Mortgages Total
Balance brought forward 25,365 9,529 2,987 37,881
Charge-offs (note 16 (d)) (23,142) (7,261) (164) (30,567)
Advance impairment expense 7,622 17,886 2,208 27,716
Balance carried forward 9,845 20,154 5,031 35,030
Individual impairment 6,591 19,109 4,817 30,517
Collective impairment 3,254 1,045 214 4,513
Total impairment 9,845 20,154 5,031 35,030
Gross amount of advances individually determined
to be impaired, before deducting any allowance 18,707 55,382 40,441 114,530
2010
Corporate Retail and Commercial Mortgages Total
Balance brought forward 17,074 7,783 557 25,414
Charge-offs (note 16 (d)) (1,889) 41 - (1,848)
Advance impairment expense 10,180 1,705 2,430 14,315
Balance carried forward 25,365 9,529 2,987 37,881
Individual impairment 23,792 7,996 2,556 34,344
Collective impairment 1,573 1,533 431 3,537
Total impairment 25,365 9,529 2,987 37,881
Gross amount of advances individually determined
to be impaired, before deducting any allowance 34,422 55,898 33,061 123,381
45455. ADVANCES (continued)
c) Collateral held
The undiscounted fair value of collateral that the Group holds relating to advances individually determined to be impaired
at September 30, 2011 amounted to $131.26 million (2010: $108.20 million). The collateral consists of cash, securities and
properties.
d) Collateral repossessed
During the year, the Group took possession of properties with an estimated value of $7.87 million (2010: $4.39 million), which
the Group has sold or is in the process of selling.
6. INVESTMENT SECURITIES
2011 2010
Available-for-sale
Issued or guaranteed by the Government of Barbados
Debentures 34,201 34,622
Treasury notes 85,120 85,651
Government bonds 101,656 110,554
220,977 230,827
Corporate bonds 35,793 73,550
Other Government issued bonds 6,738 5,214
42,531 78,764
Quoted equity securities 7,774 7,403
Unquoted equity securities 481 517
Total investment securities 271,763 317,511
The Group has unencumbered title to all its investment securities. In accordance with statutory provisions the Bank is required
to maintain reserves in the form of government securities in addition to the cash reserve. At September 30, 2011, the
government securities reserve requirement amounted to $154.43 million (2010: $162.45 million). The actual investment
securities that qualify as reserve requirement at September 30, 2011 stood at $443.91 million (2010: $307.51 million).
4646
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
7. PREMISES AND EQUIPMENT
Capital Land Furniture Work in and and Leasehold 2011 Progress Buildings Equipment Premises Vehicles Total
Cost or Valuation
Balance at October 1, 2010 127 103,655 70,381 6,684 972 181,819
Additions - 1,166 3,982 63 - 5,211
Balance at September 30, 2011 127 104,821 74,363 6,747 972 187,030
Accumulated Depreciation
Balance at October 1, 2010 - 7,617 36,591 2,678 897 47,783
Charge for the year - 1,780 6,558 188 - 8,526
Balance at September 30, 2011 - 9,397 43,149 2,866 897 56,309
Net Book Value
September 30, 2011 127 95,424 31,214 3,881 75 130,721
Capital Land Furniture Work in and and Leasehold 2010 Progress Buildings Equipment Premises Vehicles Total
Cost or Valuation
Balance at October 1, 2009 37,368 81,718 37,705 6,684 972 164,447
Additions 12,244 1,173 3,955 - - 17,372
Transfers (49,485) 20,764 28,721 - - -
Balance at September 30, 2010 127 103,655 70,381 6,684 972 181,819
Accumulated Depreciation
Balance at October 1, 2009 - 6,070 31,019 2,111 897 40,097
Charge for the year - 1,547 5,572 567 - 7,686
Balance at September 30, 2010 - 7,617 36,591 2,678 897 47,783
Net Book Value
September 30, 2010 127 96,038 33,790 4,006 75 134,036
47477. PREMISES AND EQUIPMENT (continued)
Capital commitments
2011 2010
Contracts for capital expenditure not provided for in
the fi nancial statements 2,997 5,183
Other capital expenditure authorised by the Directors
but not yet contracted for 8,146 7,260
On August 29, 2005, the Bank’s property at 1 Broad Street was revalued at $28.25 million. On September 8, 2006 the Bank’s
properties at Independence Square and Speightstown were revalued at $14.65 million and $9.86 million respectively. The surpluses
resulting from these independent valuations were taken to revaluation reserve in those years.
8. INVESTMENT PROPERTY
2011 2010
Balance at October 1, 7,920 7,810
Net change from fair value adjustment (620) 110
Balance at September 30, 7,300 7,920
Included in the Statement of Income are the following amounts
relating to investment property:
Expenses 18 19
Investment property represents land and building located at 11 James Street, Bridgetown and is recorded at its fair value of
$7.3 million (2010: $7.92 million) based on a valuation performed by an independent valuer.
4848
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
9. DEFERRED TAX ASSETS AND LIABILITIES
a) Deferred tax asset Deferred tax assets and liabilities and the deferred tax charge in the Statement of Income are attributed to the following:
2011 2010
Net unrealised losses on available-for-sale investment securities 10,868 13,543
Deferred fee income 1,219 1,539
Accelerated depreciation (186) (190)
Employee benefi ts 875 930
Other 2,764 2,890
15,540 18,712
Deferred tax assets at current rates 3,885 4,678
b) Deferred tax liabilities
Advance impairment expense 976 -
Tax losses 1,550 -
Accelerated depreciation (29,949) (30,465)
Employee benefi ts 6,837 7,433
Other 20 1,068
(20,566) (21,964)
Deferred tax liabilities at current rates 5,142 5,491
494910. OTHER ASSETS
Other assets comprised the following:
2011 2010
Prepayments 5,903 3,398
Other 6,480 10,578
12,383 13,976
11. CUSTOMERS’ DEPOSITS
Customers’ deposits comprised the following:
2011 2010
Republic Bank Limited 717 47,487
State and state related bodies 507,462 466,178
Corporate and commercial 202,665 219,345
Personal 728,275 742,868
Other fi nancial institutions 166,666 161,515
Other 50,255 77,060
1,656,040 1,714,453
12. OTHER FUND RAISING INSTRUMENTS
Other fund raising instruments comprised the following:
2011 2010
Housing Credit Fund 84,774 91,018
Insurance Corporation of Barbados Limited 17,897 17,897
National Insurance Board 115,376 77,261
218,047 186,176
The other fund raising instruments bear interest at rates ranging from 2.5% to 6.0% (2010: 2.5% to 3.85%) per annum.
5050
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
13. EMPLOYEE BENEFITS a) The amounts recognised on the Statement of Financial Position comprised the following:
Defi ned benefi t Post-retirement medical pension plan plan
2011 2010 2011 2010
Fair value of plan assets 62,277 59,309 - -
Present value of defi ned benefi t obligation (75,082) (71,460) (719) (703)
(12,805) (12,151) (719) (703)
Unrecognised net actuarial loss/(gain) 7,433 6,227 (1,621) (1,746)
Liability recognised on the Statement of
Financial Position (5,372) (5,924) (2,340) (2,449)
b) Changes in the fair value of plan assets are as follows:
Defi ned benefi t Post-retirement medical
pension plan plan
2011 2010 2011 2010
Opening fair value of plan assets 59,309 57,658 - -
Expected return on plan assets 4,599 4,313 - -
Contributions by employer 4,119 3,655 43 48
Benefi ts paid (4,050) (3,967) (43) (48)
Actuarial loss on plan assets (1,700) (2,350) - -
Closing fair value of plan assets 62,277 59,309 - -
c) Changes in the present value of the defi ned benefi t obligation are as follows:
Defi ned benefi t Post-retirement medical pension plan plan
2011 2010 2011 2010
Opening defi ned benefi t obligation 71,460 86,196 (703) 1,380
Interest cost 5,467 6,418 53 106
Current service cost 2,213 2,719 18 53
Benefi ts paid (4,058) (3,967) (43) -
Actuarial (gain)/loss on obligation - (19,906) 8 (2,242)
Closing defi ned benefi t obligation 75,082 71,460 (667) (703)
515113. EMPLOYEE BENEFITS (continued) d) The amounts recognised in the Statement of Income during the year comprised the following:
Defi ned benefi t Post-retirement medical pension plan plan
2011 2010 2011 2010
Current service cost 2,213 2,719 18 53
Interest cost 5,467 6,418 53 106
Expected return on plan assets (4,599) (4,313) - -
Net actuarial losses (gains) recognised in the year 494 955 (137) (49)
Total, included in employee benefi t costs 3,575 5,779 (66) 110
e) Movement in the net liability recognised on the Statement of Financial Position:
Defi ned benefi t Post-retirement medical pension plan plan
2011 2010 2011 2010
Balance, beginning of year (5,924) (3,799) 2,449 2,374
Total expense (3,575) (5,779) (66) 110
Contributions paid 4,127 3,654 (43) (35)
Balance, end of year (5,372) (5,924) 2,340 2,449
f) The principal actuarial assumptions used were:
Defi ned benefi t Post-retirement medical pension plan plan
2011 % 2010 % 2011 % 2010 %
Discount rate 7.75 7.75 7.75 7.75
Expected return on plan assets 7.75 7.75 - -
Future promotional salary increases 2.50 2.50 - -
Future infl ationary salary increases 4.25 4.25 - -
Future pension increases 0.00 0.00 - -
Proportion of employees opting for early retirement 5.00 5.00 - -
Future changes in NIS ceiling 4.25 4.25 - -
Future medical claims/premium infl ation - - 5.00 5.00
5252
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
13. EMPLOYEE BENEFITS (continued)
g) Experience history
Defi ned benefi t pension plan
2011 2010 2009 2008 2007
Defi ned benefi t obligation (75,082) (71,460) (86,196) (84,771) (71,178)
Plan assets 62,277 59,309 57,658 63,905 56,535
Defi cit (12,805) (12,151) (28,538) (20,866) (14,643)
Experience adjustments on plan liabilities 7,433 6,227 24,739 17,782 11,458
Experience adjustments (5,372) (5,924) (3,799) (3,084) (3,185)
Post-retirement medical benefi ts
2011 2010 2009
Defi ned benefi t obligation (719) (682) (1,380)
Plan assets - - -
Defi cit (719) (682) (1,380)
Experience adjustments on plan liabilities (1,621) (1,767) (994)
Experience adjustments (2,340) (2,449) (2,374)
h) Actual return on plan assets
2011 2010
Expected return on plan assets 4,599 4,313
Actuarial loss on plan assets (1,700) (2,350)
Actual return on plan assets 2,899 1,963
535313. EMPLOYEE BENEFITS (continued)
i) Plan asset allocation as at September 30
2011 % 2010 %
Fixed income securities 52 49
Equities 39 38
Mutual funds 7 7
Money market instruments/cash 2 6
Total 100 100
j) Effect of one percentage point change in medical expense increase assumption
Current Year-end service and Defi ned benefi t Interest costs Obligation
Medical expense increase by 1% p.a. 788 749
Medical expense decrease by 1% pa 659 624
k) The Group is expected to contribute $4.05 million to the plan in the 2012 fi nancial year.
14. OTHER LIABILITIES
Other liabilities comprised the following:
2011 2010
Managers’ cheques outstanding 3,007 5,552
Deposit insurance 668 960
Deferred loan commitment fees 1,219 1,539
Other payables 26,974 22,348
31,868 30,399
5454
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
15. STATED CAPITAL
a) Authorised
The Bank is authorised to issue an unlimited number of ordinary shares at no par value.
2011 2010
b) Issued and fully paid up
96,000,000 ordinary shares 48,000 48,000
16. OPERATING PROFIT
a) Interest income
2011 2010
Advances 117,981 129,401
Investment securities 16,286 20,033
Liquid assets 5,222 3,842
139,489 153,276
b) Interest expense
2011 2010
Customers’ deposits 31,780 35,260
Other fund raising instruments 8,769 8,039
40,549 43,299
c) Non-interest income 2011 2010
Fees and commissions from trust and other fi duciary activities 1,945 1,913
Other fees and commission income 21,033 19,766
Net trading income 9,065 9,029
Dividends 237 37
Other operating income 1,754 2,332
34,034 33,077
555516. OPERATING PROFIT (continued)
(d) Operating expenses
2011 2010
Advance impairment expense 27,716
Less recoveries (1,006)
Provision net of recoveries 26,710 13,797
Staff costs 36,755 36,539
General administrative expenses 30,561 25,765
Employee benefi ts 3,509 5,889
Depreciation 8,526 7,686
Bank occupancy expenses 7,418 7,129
Net change from fair value adjustment for investment property 620 110
Deposit insurance 668 960
Directors’ fees 391 318 115,158 98,193
17. TAXATION EXPENSE
The Bank and BNB Finance & Trust Corporation are subject to corporation tax at the rate of 25%. Barbados Mortgage Finance
Company Limited is taxed at a rate of 12.5% under section 16(1) of the Mortgage Insurance Act.
2011 2010
Current taxation 3,160 3,331
Deferred taxation (468) 5,491
Total 2,692 8,822
The tax on the Group’s profi t before taxation differs from the theoretical amount that would arise using the applicable tax rates
as follows:
2011 2010
Profi t before taxation 17,816 44,861
Tax calculated at the statutory rate of 25% (2010 – 25%) 4,454 11,215
Expenses not deductible for tax purposes 604 450
Effect of subsidiary income taxed at 12.5% (1,722) (1,395)
Effect of tax allowances (341) (183)
Effect of income not subject to tax - (60)
Effect of interest income taxed at 12.5% (800) (885)
Under/(over) provision of taxes 497 (320)
2,692 8,822
5656
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
18. EARNINGS PER SHARE
Earnings per share are calculated by dividing the net profi t attributable to the shareholders by the weighted average number of
shares in issue during the year.
2011 2010
Net profi t attributable to shareholders 15,124 36,039
Weighted average number of shares in issue 96,000 96,000
Basic and diluted earnings per share (cents) 16 38
19. RELATED PARTIES
Parties are considered to be related if one party has the ability to control the other party or exercise signifi cant infl uence over the
other party in making fi nancial or operating decisions. A number of banking transactions are entered into with related parties in
the normal course of business. These transactions were carried out on commercial terms and conditions and at market rates.
2011 2010
a) Advances
CL Financial Group 20,065 25,968
Associates 8,268 2,210
Directors and key management personnel 872 859
29,205 29,037
Provision for amounts due from related parties 1,559 -
b) Deposits and other liabilities
CL Financial Group 3,139 4,301
Republic Bank Limited 717 47,487
Associates 856 7
Directors and key management personnel 1,891 1,935
6,603 53,730
c) Interest and other expenses
CL Financial Group 2,077 2,922
Associates - -
Directors and key management personnel 58 65
2,135 2,987
575719. RELATED PARTIES (continued)
2011 2010
d) Interest and other expenses
CL Financial Group 37 129
Republic Bank Limited 1,377 2,459
Associates - -
Directors and key management personnel 587 414
2,001 3,002
e) Key management compensation Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Bank. 2011 2010
Short term benefi ts 2,361 2,511
2,361 2,511
20. RISK MANAGEMENT
20.1 IntroductionThe Group’s prudent banking practices are founded on solid risk management. In an effort to keep apace with its dynamic environment, the Group has established a comprehensive framework for managing risks, which is continually evolving as the Group’s business activities change in response to market, credit, product and other developments. The basic principles of risk management followed by the Group include: - managing risk within parameters approved by the Board of Directors and Executives; - assessing risk initially and then consistently monitoring those risks through their life cycle; - applying high and consistent ethical standards to our relationships with all customers, employees and other stakeholders; and- undertaking activities in accordance with fundamental control standards. These controls include the disciplines of planning, monitoring, segregation, authorisation and approval, recording, safeguarding, reconciliation and valuation.
The Internal Audit function of the Group with support from the parent company audits Risk Management processes throughout the Group by examining both the adequacy of the procedures and the Group’s compliance with these procedures. Internal Audit discusses the results of all assessments with management and reports its fi ndings and recommendations to the Audit Committee of the Group. The Group’s activities are primarily related to the use of fi nancial instruments. The Group accepts funds from customers and seeks to earn above average interest margins by investing in high quality assets such as government and corporate securities and seeks to increase these margins while maintaining suffi cient liquidity to meet all claims that might fall due. The main risks arising from the Group’s fi nancial instruments are credit risk, liquidity risk, market risk, interest rate risk, foreign currency risk and operational risk. The Group reviews and agrees policies for managing each of these risks as follows:
5858
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
20. RISK MANAGEMENT (continued)
20.2 Credit risk
Credit risk is the potential that a borrower or counterparty will fail to meet its stated obligations in accordance with agreed
terms. The objective of the Group’s credit risk management function is to maximise the Group’s risk-adjusted rate of return
by maintaining credit risk exposure within acceptable parameters. The effective management of credit risk is a key element
of a comprehensive approach to risk management and is considered essential to the long-term success of the Group.
The Group’s credit risk management process operates on the basis of a hierarchy of discretionary authorities. A Board
Credit Committee, which includes non-executive directors, is in place with the authority to exercise the powers of the Board
on all Risk Management decisions. Exposures above a certain limit are fi rst reviewed by Risk Management department of
the parent company.
The Group uses a risk rating system which groups corporate and commercial accounts into various risk categories
to facilitate the management of risk on both an individual account and portfolio basis. Trend indicators are also used to
evaluate risk as improving, static or deteriorating. The evaluation of the risk and trend inform the credit decision and
determines the intensity of the monitoring process.
The Group’s credit control processes emphasise early detection of deterioration and prompt implementation of remedial
action and where it is considered that recovery of the outstanding liability may be doubtful or unduly delayed, such accounts
are transferred from performing to non-performing status.
Provision for advances are set aside to cover any potential loss in respect of debts that are not performing satisfactorily.
A review of these provisions is conducted quarterly in accordance with established guidelines and recommended provisions
arising out of this review are submitted to the Board for approval. Non-performing debts recommended for write-off are
also reviewed annually and action taken in accordance with prescribed guidelines.
The Group avoids exposure to undue concentrations of risk by placing limits on the amount of risk accepted from a
number of borrowers engaged in similar business activities, or activities with similar economic features that would cause
their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.
Such risks are controlled and monitored on a revolving basis and are subject to an annual or more frequent review.
595920. RISK MANAGEMENT (continued)
20.2 Credit risk (continued)
20.2.1 Maximum exposure to credit risk without taking account of any collateral and other credit enhancements
The table below shows the Group’s maximum exposure to credit risk:
Gross maximum exposure2011 2010
Deposits with Central Bank 125,079 190,183
Due from banks 81,602 60,308
Treasury bills 219,976 78,581
Investment interest receivable 2,023 2,907
Advances 1,394,685 1,452,582
Investment securities 263,508 309,592
Sub-total 2,086,873 2,094,153
Undrawn commitments 231,901 116,674
Guarantees and indemnities 5,947 10,935
Letters of credit 11,347 13,488
Sub-total 249,195 141,097
Total credit risk exposure 2,336,068 2,235,250
Where fi nancial instruments are recorded at fair value, the amounts shown above represent the current credit risk
exposure but not the maximum risk exposure that could arise in the future as a result of changes in values.
Collateral and other credit enhancements
The Group maintains credit risk exposure within acceptable parameters through the use of collateral as a risk-
mitigation tool. The amount and type of collateral required depends on an assessment of the credit risk of
the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation
parameters.
The main types of collateral obtained are cash or securities, charges over real estate properties,
inventory and trade receivables and mortgages over residential properties and chattels.
Management monitors the market value of collateral, requests additional collateral in accordance with
the underlying agreement, and monitors the market value of collateral obtained during its review of the
adequacy of the allowance for impairment losses.
It is the Group’s policy to dispose of repossessed properties or other assets in an orderly fashion. The
proceeds are used to repay the outstanding claim. In general, the Group does not occupy repossessed
properties for business use.
6060
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
20. RISK MANAGEMENT (continued)
20.2 Credit risk (continued)
20.2.2 Risk concentrations of the maximum exposure to credit risk
a) Geographical sectors
The Group’s maximum credit exposure, after taking account of credit loss provisions established but before
taking into account any collateral held or other credit enhancements, can be analysed by the following
geographical regions based on the country of domicile of our counterparties:
2011 2010
Barbados 2,250,076 2,170,066
Trinidad and Tobago 7,518 2,210
Eastern Caribbean 6,958 6,665
United States 43,920 27,529
Canada 26,315 26,564
Other countries 1,281 2,216
Total credit risk exposure 2,336,068 2,235,250
b) Industry sectors
The following table breaks down the Group’s maximum credit exposure as categorized by the industry
sectors of our counterparties:
2011 2010
Government and Government Bodies 706,225 636,314
Financial sector 133,534 89,860
Energy and mining 10,399 9,960
Agriculture 4,071 4,116
Electricity and water 101,937 104,609
Transport, storage and communication 2,506 42,197
Distribution 27,227 27,164
Real estate 277,023 255,215
Manufacturing 17,575 15,984
Construction 243,675 233,215
Hotel and restaurant 159,407 162,470
Personal 637,533 611,500
Other services 14,956 42,646
Total credit risk exposure 2,336,068 2,235,250
616120. RISK MANAGEMENT (continued)
20.2 Credit risk (continued)
20.2.3 Credit quality per category of fi nancial assets
The Group has determined that credit risk exposure arises from the following Statement of Financial Position lines:
- Treasury bills and deposits with Central Bank
- Due from banks
- Advances, including undrawn commitments
- Financial investments - debt securities
Treasury bills and deposits with Central Banks
These funds are placed with the Central Bank of Barbados and management therefore considers the risk of default
to be very low. These fi nancial assets have therefore been rated as ‘Superior’.
Balances due from banks
The credit quality of balances due from other banks is assessed by the Group according to the level of
creditworthiness of the institution in relation to other institutions in the region. The credit quality of these balances
has been analysed into the following categories:
Superior: These institutions have been accorded the highest rating, indicating that the institution’s capacity
to meet its fi nancial commitment on the obligation is extremely strong.
Desirable: These institutions have been accorded the second highest rating, indicating that the institution’s
capacity to meet its fi nancial commitment on the obligation is very strong.
Acceptable: These institutions have been accorded the third highest rating, indicating that the institution’s
capacity to meet its fi nancial commitment is adequate.
The table below illustrates the credit quality for balances due from banks as at September 30:
Superior Desirable Acceptable Total
2011 70,764 10,838 - 81,602
2010 56,409 3,899 - 60,308
Corporate and Commercial advances
The credit quality of corporate and commercial advances is internally determined from an assessment of
the counterparty based on a combination of factors. These include the level and strength of experience of
management, the track record and level of supervision required for existing facilities of the company, the fi nancial
and leverage position of the borrowing company, the estimated continued profi tability of the company and the
ability of that company to service its debts, the stability of the industry within which the company operates and
the competitive advantage held by that company in the market. The overall level of risk thus assessed is assigned a
credit score which indicates the overall quality of the corporate / commercial borrowing account. The related scores
for corporate and commercial advances are defi ned as follows:
6262
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
20. RISK MANAGEMENT (continued)
20.2 Credit risk (continued)
20.2.3 Credit quality per category of fi nancial assets (continued)
Superior: These counterparties have strong fi nancial position. Facilities are well secured, and business has
proven track record.
Desirable: These counterparties have good fi nancial position. Facilities are reasonably secured and underlying
business is performing well.
Acceptable: These counterparties are of average risk with a fair fi nancial position. Business may be new or
industry may be subject to more volatility, and facilities typically have lower levels of security.
Sub-standard: Past due or individually impaired.
The table below illustrates the credit quality of corporate and commercial advances as at September 30:
Superior Desirable Acceptable Sub-standard Total
2011 - 250,605 271,242 104,745 626,592
2010 80 160,686 474,812 67,344 702,922
The following is an aging of facilities classed as sub-standard:
Less than 31 to 61 to
30 days 60 days 90 days Impaired Total
2011 166 33,009 35,297 36,273 104,745
2010 9,467 9,894 - 47,983 67,344
Retail loans and mortgages
The following is an aging analysis of retail loans and mortgages:
Less than 31 to 61 to More than
2011 Current 30 days 60 days 90 days 91days Impaired Total
619,826 27,061 32,660 17,264 23,542 47,740 768,093
Less than 31 to 61 to More than
2010 Current 30 days 60 days 90 days 91days Impaired Total
605,685 17,174 38,078 19,838 27,750 41,135 749,660
636320. RISK MANAGEMENT (continued)
20.2 Credit risk (continued)
20.2.3 Credit quality per category of fi nancial assets (continued)
Investment securities
The debt securities within the Group’s portfolio of investments is exposed to credit risk. The credit quality of each
individual security is internally assessed based on the fi nancial strength, reputation and market position of the
issuing company and the ability of that company to service the debt. The level of credit risk thus assessed and
associated with the security is assigned a risk premium. These premiums are defi ned as follows:
Superior: Government and Government Guaranteed securities and securities secured by a Letter of Comfort
from the Government. These securities are considered risk free.
Desirable: Corporate securities that are current and being serviced in accordance with the terms and
conditions of the underlying agreements. Issuing company has good fi nancial strength and
reputation.
Acceptable: Corporate securities that are current and being serviced in accordance with the terms and conditions
of the underlying agreements. Issuing company has fair fi nancial strength and reputation.
Sub-standard: These securities are either greater than 90 days in arrears but are not considered to be impaired,
or have been restructured in the past fi nancial year.
Investment securities - available-for-sale
Superior Desirable Acceptable Sub-standard Total
2011 234,138 24,632 - 4,738 263,508
2010 243,193 55,470 10,929 - 309,592
20.2.4 Carrying amount per class of fi nancial assets that would otherwise be past due or impaired but whose
terms have been renegotiated.
2011 2010
Investment securities - -
Advances
- Retail 2,292 98
- Corporate and commercial 2,495 74,432
- Mortgages 2,999 2,385
Total renegotiated fi nancial assets 7,786 76,915
6464
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
20. RISK MANAGEMENT (continued)
20.3 Liquidity risk
Liquidity risk is defi ned as the risk that the Group either does not have suffi cient fi nancial resources available to meet all its
obligations and commitments as they fall due, or can access these only at excessive cost.
Liquidity management is therefore primarily designed to ensure that funding requirements can be met, including the
replacement of existing funds as they mature or are withdrawn, or to satisfy the demands of customers for additional
borrowings. Liquidity management focuses on ensuring that the Group has suffi cient funds to meet all of its obligations.
Three primary sources of funds are used to provide liquidity – retail deposits, wholesale deposits and the capital market.
A substantial portion of the Group is funded with “core deposits”. The Group maintains a core base of retail and wholesale
funds, which can be drawn on to meet ongoing liquidity needs. The capital markets are accessed for medium to long-term
funds as required, providing diverse funding sources to the Group. Facilities are also established with correspondent banks,
which can provide additional liquidity as conditions demand.
The Asset/Liability Committee (ALCO) sets targets for daily fl oat, allowable liquid assets and funding diversifi cation in
line with system liquidity trends. While the primary asset used for short-term liquidity management is the Treasury bill, the
Group also holds signifi cant investments in other Government securities, which can be used for liquidity support. The Group
continually balances the need for short-term assets, which have lower yields, with the need for higher asset returns.
20.3.1 Analysis of fi nancial liabilities by remaining contractual maturities
The table below summarises the maturity profi le of the Group’s fi nancial liabilities at September 30, based on
contractual undiscounted repayment obligations.
Financial liabilities - on On Up to one 1 to 5 Over 5 Statement of Financial Position demand year years years Total
As at September 30, 2011
Customers’ deposits 1,348,253 334,531 199 - 1,682,983
Other fund raising instruments - 108,088 83,053 72,910 264,051
Due to banks 4,066 - - - 4,066
Other liabilities 10,620 - - - 10,620
Total undiscounted fi nancial liabilities 1,362,939 442,619 83,252 72,910 1,961,720
As at September 30, 2010
Customers’ deposits 1,346,820 397,579 719 - 1,745,118
Other fund raising instruments - 109,531 38,370 74,801 222,702
Due to banks 3,236 - - - 3,236
Other liabilities 22,858 - - - 22,858
Total undiscounted fi nancial liabilities 1,372,914 507,110 39,089 74,801 1,993,914
656520. RISK MANAGEMENT (continued)
20.3 Liquidity risk (continued)
20.3.1 Analysis of fi nancial liabilities by remaining contractual maturities (continued)
Financial liabilities - off On Up to one 1 to 5 Over 5 Statement of Financial Position demand year years years Total
As at September 30, 2011
Guarantees and indemnities 4,979 968 - - 5,947
Letters of credit 3,740 7,607 - - 11,347
Total 8,719 8,575 - - 17,294
As at September 30, 2010
Guarantees and indemnities 10,870 50 15 - 10,935
Letters of credit 6,176 7,312 - - 13,488
Total 17,046 7,362 15 - 24,423
20.4 Market risk Market risk is the risk that the fair value or future cash fl ows of fi nancial instruments will fl uctuate due to changes in market
variables such as interest rates, foreign exchange rates, and equity prices.
20.4.1 Interest rate risk The Group is exposed to various risks associated with the effects of fl uctuations in the prevailing levels of
market interest rates on its fi nancial position and cash fl ows. The Group uses an Asset/Liability Committee
to continually review and manage these risks. The Committee employs a number of tools including gap
analysis and interest rate sensitivity analysis to monitor these risks and establish appropriate strategies to
limit exposure.
An interest rate sensitivity analysis was performed to determine the impact on net profi t and equity of a
reasonable possible change in the interest rates prevailing as at September 30, with all other variables held
constant. The impact on net profi t is the effect of changes in interest rates on the fl oating interest rates of
fi nancial assets and liabilities. The impact on equity is the effect of changes in interest rates on the fair value
of available-for-sale fi nancial assets. This impact is illustrated on the following table.
6666
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
20. RISK MANAGEMENT (continued)
20.4 Market risk (continued)
20.4.1 Interest rate risk (continued)
2011
Impact on net profi t of: Impact on equity of:
Increase/decrease Increase in Decrease in Increase in Decrease in in basis points basis points basis points basis points basis points
US$ instruments +/- 50 214 (214) (227) 239
EC$ instruments +/- 25 - - - -
BB$ instruments +/- 50 (787) 787 (4,926) 5,122
Other instruments +/- 50 134 (134) - -
2010
Impact on net profi t of: Impact on equity of:
Increase/decrease Increase in Decrease in Increase in Decrease in in basis points basis points basis points basis points basis points
US$ Instruments +/- 50 74 (74) (181) 190
EC$ Instruments +/- 25 3 (3) - -
BB$ Instruments +/- 50 963 (963) (5,725) 5,973
Other instruments +/- 50 144 (144) - -
676720. RISK MANAGEMENT (continued)
20.4 Market risk (continued)
20.4.2 Currency risk The tables below indicate the currencies to which the Group had signifi cant exposure at September 30, on
its non-trading monetary assets and liabilities and its forecasted cash fl ows.
2011 CDN GBP BBD USD TTD Others Total
Financial assets
Cash 340 560 24,196 1,548 - 635 27,279
Deposits with Central Bank - - 125,079 - - - 125,079
Due from banks 26,315 461 2,475 51,342 95 914 81,602
Treasury bills - - 219,976 - - - 219,976
Investment interest receivable - - 1,891 132 - - 2,023
Advances - - 1,393,385 1,300 - - 1,394,685
Investment securities - - 260,811 10,952 - - 271,763
Total fi nancial assets 26,655 1,021 2,027,813 65,274 95 1,549 2,122,407
Financial liabilities
Customers’ deposits 29,391 - 1,570,024 54,511 - 2,114 1,656,040
Other fund raising instruments - - 218,047 - - - 218,047
Due to banks - - 4,066 - - - 4,066
Interest payable - - 8,479 - - - 8,479
Total fi nancial liabilities 29,391 - 1,800,616 54,511 - 2,114 1,886,632
Net currency exposure (2,736) 1,021 227,197 10,763 95 (565) 235,775
6868
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
20. RISK MANAGEMENT (continued)
20.4 Market risk (continued)
20.4.2 Currency risk (continued)
2010 CDN GBP BBD USD TTD Others Total
Financial assets
Cash 257 476 32,672 1,423 - 685 35,513
Deposits with Central Bank - - 190,183 - - - 190,183
Due from banks 26,564 2,205 359 27,529 2,210 1,441 60,308
Treasury bills - - 78,581 - - - 78,581
Investment interest receivable - 21 2,886 - - - 2,907
Advances - - 1,451,129 1,453 - - 1,452,582
Investment securities - - 308,633 8,878 - - 317,511
Total fi nancial assets 26,821 2,702 2,064,443 39,283 2,210 2,126 2,137,585
Financial liabilities
Customers’ deposits 29,740 - 1,595,139 43,363 - 46,211 1,714,453
Other fund raising instruments - - 186,176 - - - 186,176
Due to banks - - 3,236 - - - 3,236
Interest payable - - 10,228 - - - 10,228
Total fi nancial liabilities 29,740 - 1,794,779 43,363 - 46,211 1,914,093
Net currency exposure (2,919) 2,702 269,664 (4,080) 2,210 (44,085) 223,492
20.5 Operational risk
The growing sophistication of the banking industry has made the Group’s operational risk profi le more complex. Operational
risk is inherent to all business activities and is the potential for fi nancial or reputational loss arising from inadequate or
failed internal controls, operational processes or the systems that support them. It includes errors, omissions, disasters and
deliberate acts such as fraud.
The Group recognises that such risk can never be entirely eliminated and manages the risk through a combination of
systems and procedures to monitor and document transactions. The Group’s Operational Risk department oversees this and
where appropriate, risk is transferred by the placement of adequate insurance coverage.
The Group has developed contingency arrangements and established facilities to support operations in the event of
disasters. Independent checks on operational risk issues are also undertaken by the internal audit function.
696921. CAPITAL MANAGEMENT
The Group’s policy is to diversify its sources of capital, to allocate capital within the Group effi ciently and to maintain a
prudent relationship between capital resources and the risk of its underlying business. Shareholders’ equity increased by
$6.55 million to $345.14 million over the year under review. The dividend policy of the Bank is to distribute 40% to 50% of
net profi t to shareholders.
Capital adequacy is monitored by each member of the Group, employing techniques based on the guidelines developed
by the Basel Committee on Banking Regulations and Supervisory Practice (the Basel Committee), as implemented by the
respective Central Banks for supervisory purposes. The risk-based capital guidelines require a minimum ratio of core capital
(Tier 1) to risk-weighted assets of 4%, with a minimum total qualifying capital (Tier 2) ratio of 8%. Core (Tier 1) capital
comprises mainly shareholders’ equity.
22. FAIR VALUE
In accordance with International Financial Reporting Standard No. 7 “Financial Instruments: Disclosures”, the Group calculates the
estimated fair value of all fi nancial instruments at the Statement of Financial Position date and separately discloses this information
where these fair values are different from net book values.
The Group’s available-for-sale investments are not actively traded in organised fi nancial markets, and fair value is determined
using discounted cash fl ow analysis, which requires considerable judgement in interpreting market data and developing estimates.
Accordingly estimates contained herein are not necessarily indicative of the amounts that the Group could realise in a current
market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated
fair values. The fair value information for available-for-sale investments is based on information available to management as of the
dates presented. Management is not aware of any factors that would signifi cantly affect the estimated fair value amounts.
Financial instruments where carrying value is equal to fair value: Due to their short-term maturity, the carrying value of certain
fi nancial instruments is assumed to approximate their fair values. These include cash and cash equivalents, investment interest
receivable, customers’ deposit accounts, other fund raising instruments, other assets and other liabilities. The Group is required to
maintain with the Central Bank of Barbados, statutory reserve balances in relation to deposit liabilities and the carrying value of
these reserves is assumed to equal fair value.
Advances are net of specifi c and other provisions for impairment. The carrying value for performing advances is not signifi cantly
different from the estimated fair value as the inherent rates of interest in the portfolio approximate market conditions.
The fair values of the fl oating rate debt securities in issue is based on quoted market prices where available and where not
available is based on a current yield curve appropriate for the remaining term to maturity. For balances due to banks, where the
maturity period is less than one year, the fair value is assumed to equal carrying value. Where the maturity period is in excess of one
year, these are primarily fl oating rate instruments, the interest rates of which reset with market rates therefore the carrying values
are assumed to equal fair values.
7070
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
22. FAIR VALUE (continued)
22.2 Fair value and fair value hierarchies
22.2.1 Determination of fair value and fair value hierarchies The Group uses the following hierarchy for determining and disclosing the fair value of fi nancial instruments
by valuation techniques:
Level 1
Included in the Level 1 category are fi nancial assets and liabilities that are measured in whole or in part by
reference to published quotes in an active market. A fi nancial instrument is regarded as quoted in an active
market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group,
pricing service or regulatory agency and those prices represent actual and regularly occurring market
transactions on an arm’s length basis.
Level 2
Included in the Level 2 category are fi nancial assets and liabilities that are measured using a valuation
technique based on assumptions that are supported by prices from observable current market transactions
and for which pricing is obtained via pricing services, but where prices have not been determined in an
active market. This includes fi nancial assets with fair values based on broker quotes, investments in private
equity funds with fair values obtained via fund managers and assets that are valued using the Group’s own
models whereby the majority of assumptions are market observable.
Level 3
Included in the Level 3 category are fi nancial assets and liabilities that are not quoted as there are no active
markets to determine a price. These fi nancial instruments are held at cost, being the fair value of the
consideration paid for the acquisition of the investment, and are regularly assessed for impairment.
Level 1 Level 2 Level 3 Total
Financial assets
Financial investments -available-for-sale 14,511 257,252 - 271,763
14,511 257,252 - 271,763
22.2.2 Transfers between Level 1 and 2 For the year ended September 30, 2011, no assets were transferred between Level 1 and Level 2.
22.2.3 Reconciliation of movements in Level 3 fi nancial instruments measured at fair value. For the year ended September 30, 2011, there was no movement in Level 3 fi nancial instruments.
717123. MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below analyses the assets and liabilities of the Group based on the remaining period at September 30 to the contractual
maturity date.
On Up to One to Over fi ve Total
2011 Demand one year fi ve years years
Assets
Cash - 27,279 - - 27,279
Deposits with Central Bank - 125,079 - - 125,079
Due from banks - 81,602 - - 81,602
Treasury bills - 219,976 - - 219,976
Investment securities - 7,258 150,811 113,694 271,763
Advances - 203,615 247,877 943,193 1,394,685
Other assets - 14,437 7,105 134,770 156,312
Total assets - 679,246 405,793 1,191,657 2,276,696
LIABILITIES
Customers’ deposits 1,328,137 327,475 428 - 1,656,040
Other fund raising instruments - 99,141 61,070 57,836 218,047
Due to banks 4,066 - - - 4,066
Other liabilities - 38,446 1,380 13,573 53,399
Total liabilities 1,332,203 465,062 62,878 71,409 1,931,552
2010
Assets
Cash - 35,513 - - 35,513
Deposits with Central Bank - 190,183 - - 190,183
Due from banks - 60,308 - - 60,308
Treasury bills - 78,581 - - 78,581
Investment securities - 35,895 144,060 137,556 317,511
Advances - 275,676 192,925 983,981 1,452,582
Other assets - 19,309 10,172 134,036 163,517
Total assets - 695,465 347,157 1,255,573 2,298,195
LIABILITIES
Customers’ deposits 1,343,982 370,471 - - 1,714,453
Other fund raising instruments - 36,540 51,485 98,151 186,176
Due to banks 3,236 - - - 3,236
Other liabilities - 46,028 7,256 2,449 55,733
Total liabilities 1,347,218 453,039 58,741 100,600 1,959,598
7272
Notes to the Consolidated Financial Statementsfor the year ended September 30, 2011Expressed in thousands of Barbados Dollars ($’000)
24. DIVIDENDS
At the Directors’ meeting of October 28, 2011, a fi nal dividend in respect of 2011 of $0.07 per share and amounting to $6.72
million was approved. These fi nancial statements do not refl ect this dividend payable, which will be accounted for in Statement of
Changes in Equity as an appropriation from retained earnings in the next fi nancial year.
During 2011, the Group paid a fi nal dividend of $0.11 per share totaling $10.56 million for 2010. No interim dividend was paid
for 2011.
25. GENERAL CONTINGENCY RESERVE
The general contingency reserve is an appropriation from retained earnings. This reserve is set aside to cover the difference between
the value of non-performing advances and the specifi c provisions recorded against them. During the year an amount of $5.02
million (2010: $18.26 million) was transferred from the general contingency reserve to retained earnings.
26. CONTINGENT LIABILITIES
a) Litigation
As at September 30, 2011 there were certain legal proceedings outstanding against the Group. No provision has been
made as professional advice indicates that it is unlikely that any signifi cant loss will arise or that it would be premature at this
stage of the action to determine that eventuality.
b) Customers’ liability under acceptances, guarantees, indemnities and letters of credit
These represent the Group’s potential liability, for which there are equal and offsetting claims against its customer in the
event of a call on these commitments.
2011 2010
Guarantees and indemnities 5,947 10,935
Letters of credit 11,347 13,488
17,294 24,423
Sectoral information
State 105 7,306
Corporate and commercial 15,125 7,903
Other fi nancial institutions 2,064 9,214
17,294 24,423
7373
74
DATE NAME AND TITLE SIGNATURE
November 3, 2011 SASHA C. SHILLINGFORD
Corporate Secretary
Barbados National Bank Inc.
Barbados
The Companies Act Cap. 308 (Section 136) Company No: 26464
1 NAME OF COMPANY:
Barbados National Bank Inc.
2 PARTICULARS OF MEETING:
Twelfth Annual Meeting of the Shareholders of the Company to be held at the Lloyd Erskine Sandiford Centre, Two Mile Hill,
St. Michael on Friday December 9, 2011 at 5:15 p.m.
3 SOLICITATION:
It is intended to vote the Proxy hereby solicited by the Management of the Company (unless the Shareholder directs otherwise)
in favour of all resolutions specifi ed in the Proxy Form sent to the Shareholders with this Circular and in the absence of a
specifi c direction, in the discretion of the Proxy Holder in respect of any other resolution.
4 ANY DIRECTOR’S STATEMENT SUBMITTED PURSUANT TO SECTION 71 (2):
No statement has been received from any Director pursuant to Section 71 (2) of the Companies Act, Cap. 308.
5 ANY AUDITOR’S STATEMENT SUBMITTED PURSUANT TO SECTION 163 (1):
No statement has been received from the Auditors of the Company pursuant to Section 163 (1) of the Companies Act, Cap. 308.
6 ANY SHAREHOLDER’S PROPOSAL SUBMITTED PURSUANT TO SECTION 112 (a) AND 113 (2):
No proposal has been received from any Shareholder pursuant to Section 112 (a) and 113 (2) of the Companies Act, Cap. 308.
Management Proxy Circular
75
(Block Letters)
RESOLUTIONS FOR AGAINST
(Block Letters)
Form of Proxy
The Companies Act, Cap. 308 (Section 136) Company No: 26464
NAME OF COMPANY: Barbados National Bank Inc.
PARTICULARS OF MEETING:
Twelfth Annual Meeting of the Shareholders of the Company to be held at the Lloyd Erskine Sandiford Centre, Two Mile Hill, St.
Michael, on Friday December 9, 2011 at 5:15p.m.
I/We, being shareholder(s) of Barbados National Bank Inc., hereby appoint or
of
as my/our proxy to vote for me/us on our behalf at the above meeting and at any adjournment thereof in the same manner, to the
same extent and with the same powers as if I/we were present at the said meeting or such adjournments thereof.
Dated this day of 2011
Name Signature
Name Signature
Please indicate with an “X” in the spaces below how you wish your proxy to vote on the Resolutions referred to. If no such indication
is given, the proxy will exercise his discretion as to how he votes or whether he abstains from voting.
IT IS RESOLVED THAT:
1 The Audited Financial Statements of the Company for the year ended September 30, 2011 and Report of the Directors, and Auditors, be and are hereby received.
2 a) Derwin M.Howell be and is re-elected a Director for a term expiring at the close of the third annual meeting following this appointment.
b) Martin Cox be and is re-elected a Director for a term expiring at the close of the third annual meeting following this appointment.
c) The Directors to be elected at this meeting be elected en bloc. d) Peter G. Symmonds and Ralph S. deC. Williams be and are hereby re-elected
for a term of three years expiring at the close of the third annual meeting following this appointment.
3 The Auditors Ernst & Young be re-appointed and the Directors be authorised to fi x their remuneration.
4 Pursuant to section 197 (a) of the Companies Act, Chapter 308 of the Laws of Barbados Article 1 of the Articles of Reincorporation be amended to change the name of the Company from Barbados National Bank Inc. to Republic Bank (Barbados) Limited.
Notes:
1 If it is desired to appoint a proxy other than the named Directors, the necessary deletions must be made and initialed and the
name inserted in the space provided.
2 In the case of joint holders, the signature of any holder is suffi cient but the names of all joint holders should be stated.
3 If the appointor is a Corporation, this form must be under its Common Seal or under the name of an offi cer of the Corporation
duly authorized in this behalf.
4 Forms of Proxy are required to be deposited at the offi ce of the company not later than 5:00 p.m. Wednesday December 7,
2011.
5 Envelopes containing the form of proxy must be addressed to the Corporate Secretary, Barbados National Bank Inc., Executive
Offi ce, Independence Square, Bridgetown, Barbados and must be received at the designated offi ce of the Bank no later than
the time specifi ed in 4 above.
RETURN TO: The Corporate Secretary
Barbados National Bank Inc.,
Executive Offi ce, Independence Square,
Bridgetown, Barbados
FOLD HERE
FOLD HERE
- - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
78
