Canadian Imperial Bank of Commerce announced that it has recorded a non-cash goodwill impairment charge of C$420 million on its investment in CIBC FirstCaribbean International Bank for the second quarter ending April 30.
The Canadian bank blamed “persistently challenging economic conditions” and the negative outlook in many Caribbean countries for the reduction in the carrying value of the goodwill related to CIBC FirstCaribbean.
CIBC also recorded C$123 million of incremental loan losses for CIBC FirstCaribbean based on revised expectations on the extent and timing of the economic recovery in the Caribbean region.
The goodwill impairment charge is a non-cash item and does not affect ongoing operations or capital ratios. The two items will be reflected in the second quarter results due to be released on May 28.
The announcement follows a net loss of US$199 million at FirstCaribbean International Bank during the first six months ending April 30.
In the second quarter, CIBC FirstCaribbean reported US$115 million of incremental loan losses and a goodwill impairment charge of US$116 million. The reduced the carrying value of the goodwill is primarily related to the bank’s operations in the Bahamas, the bank said.
CIBC FirstCaribbean International Bank is based in Barbados and has more than 3,400 staff in 69 branches, 22 banking centers and seven offices across 17 regional Caribbean markets.
The bank was formed in 2002 when Barclays Bank and CIBC combined their retail, corporate and offshore Caribbean banking operations under the name FirstCaribbean International Bank. CIBC became the majority shareholder in 2006 and now holds 91.5 percent of the bank’s shares.
CIBC is not the only Canadian bank that struggled in the Caribbean region. In January, Royal Bank of Canada sold its bank operations in Jamaica to Sagicor Group Jamaica, making a C$60 million loss on the transaction, partly because of a goodwill writedown.