Cayman National Corp. has posted profits of CI$10.1m for the year ending September 30, 2008.
It’s an achievement that president and CEO Stuart Dack attributes to fiscal conservatism practised by a home grown institution exercising island values.
Principally, the bank had not been seduced by the sub-prime mortgage frenzy that had destabilised many other financial institutions, said Mr. Dack.
And this cautious approach would be one that Cayman National would continue to adopt going forward, he said.
‘Given the low interest rates, we must focus on non-interest earnings,’ said Mr. Dack, who is prevented from making specific projections about the current financial year.
‘Interest rates are at an historic low which affects profitability,’ he continued, ‘in which case, we need to keep a solid grip of capital and cash within the business. That will have a huge impact on profitability but I am confident that it will be a year of sound profitability and growth.’
That said, the profits posted last financial year – CI$10.1m – were less than half of those recorded in 2006/07, CI$20.4m. Earnings per share also halved to 24 cents from 48 cents.
That means Cayman National, while out-performing other banks, must remain focused to stay in the black this year.
‘What we’ve learned from the financial fiasco is that we must have been doing something right,’ said Mr. Dack, ‘so we shall continue with the same strategy of tightly controlling expenses and looking for opportunities.’
That has meant that historically Cayman National has been bearish in its approach to investment but, in turn, hasn’t exposed itself to risk.
‘This bank is run along old-fashioned lines,’ said Mr. Dack. ‘We’ve never been tempted by the high returns or by exotic investments even if they appeared to be highly profitable in the short-term but we have a very strong balance sheet.’
Another factor that has distinguished Cayman National from other banks is its level of liquidity.
That is reflected in its moderate loan-to-deposit ratios of between 50 and 60 percent.
‘For most banks – particularly those going wrong – the level is 95% of money on loan,’ said Mr. Dack. ‘We only ever lend up to 65 cents on the dollar.’
Knowledge of the community and an organisation comprising a largely Caymanian workforce were cornerstones of the bank’s success, he said.
‘We’re the only local bank listed on the Cayman Islands Stock Exchange,’ said Mr. Dack, adding that the majority of the company’s 320 staff has Caymanian status.
‘We’re the only bank with branches on all three islands and we have a local connection that other banks – Butterfield being Bermudan and HSBC, British – just don’t have.’
This cautious approach to investment is something, inextricably linked to the Caymanian character, said Mr. Dack.
Asked whether the bank’s conservatism reflected the islands’ personality, he said: ‘Yes, the bank’s approach is definitely reflective of the Caymanian ethic.’
The banking institution – which this year celebrates 35 years in business – first published the results at its AGM on Thursday. It has 1,600 registered shareholders.