General Information about Intercommercial Bank Ltd.

Intercommercial Bank Ltd is located within the Trinidad and Tobago economical area and was established in 1998. The quick development was supported by establishing subsidiary (Intercommerical Trust and Merchant bank) in 2001: “In 2001, IBL established the Intercommercial Trust and Merchant Bank (ITMBL) to assist in executing more sophisticated financial transactions demanded by commercial clients with a regional scope. In February 2006 ITMBL was relocated to Trinidad’s capital, Port of Spain” (Keyland Carribean Jobs, 2009); and promoted strategic alliance with Jamaica Money Market Brokers. This alliance supported increasing international financial integration within the Caribbean area: “The strategic alliance of IBL and Jamaica Money Market Brokers (JMMB), together with a sharply focused business strategy allows the IBL Group to leverage on opportunities that now exist through this shareholder relationship. IBL’s Mission is “to passionately serve its customers, community, shareholders and team members with integrity, trust, transparency, love and respect”. We will achieve our desire to be the first choice for financial solutions in the region by offering an array of quality financial products and services through innovative delivery system, all made possible by a highly-trained, creative and well rewarded team of professionals working together to achieve the greatest values for our customers and stakeholders”. IBL reported a capital base of US$9.58million and assets in excess of US$95.2 million as at December 2005. As a Group, IBL accumulated US$10.32million in equity and US$99.09milion in assets. To date our current staff complement is 122 members” (Keyland Caribbean Jobs, 2009). The development of the bank in the increasing financial integration provided expansion on the whole Caribbean Area. The same time Intercommecrial Bank LTD is operating on personal and business levels: “Its solid client base comprises of retail clients as well as small and medium businesses engaged in the industrial, manufacturing, and commercial industries, whose needs it professionally meets on both a business as well as a personal level. By 2000, IBL expanded its distribution to Marabella, another fast-growing commercial centre” (Keyland Carribean Jobs, 2009).

General Characteristic of Economical Area of Trinidad and Tobago

The investigators define exclusive business opportunities for Trinidad and Tobago area: “Already there is much excitement in the air amongst the government and private sector with the two major conferences taking place in 2009 in Trinidad and Tobago, namely the OAS Summit of the Americas and the Commonwealth Heads of Government Meetings. The business opportunities that are created just by hosting those events are limitless. The large influx of business delegations that accompany the major heads of government to such conferences become major networking targets for Trinidad and Tobago’s business community” (Richard Lewis. 2009) It is essential that in such a facilities increasing of financial integration gives positive results for further development of the area and development of integration co-relation and banking development: “Also in 2009 there will be the launch of the International Finance Centre. By media reports, it has already attracted some big names in the global financial circles as prospective anchor tenants. It will be government’s main focus to become the Financial Centre of the Caribbean. The financial and business sectors bring with them high value added ”“ employees and consultants with global experience and reach” (Richard Lewis. 2009). It goes saying that such significant changes in the area would influence the policy and decision making of Intercommercial Bank Ltd. as the increasing of financial integration in the area involved all the aspects of business relation and banking is affected too. Noel A. Lyon as a group chairman of Intercommercial Bank Ltd. characterized the situation in the area as a following: “The domestic energy sector’s growth having experienced significant expansion over the past decade slowed to 0.4 percent in 2008 from 1.7 percent in 2007. Given the decline in crude oil and natural gas prices from US$145 and US$13 per mmbtu in July 2008 to US$48 and US$3.96 respectively in March 2009, the Trinidad and Tobago economy will likely show a decline in GDP to between 1 ”“ 2 percent as the recession in the rest of the world and regional economies contract. This economy, however, is expected to successfully withstand the slowdown of the global economy because of the diversified nature of the energy sector, and because of further diversification into plastics and aluminum, investments in oil and gas explorations Other areas of strength in the economy include the robust financial sector, the low level of external debt and the high level of national savings including the Heritage and Stabilization Fund. During 2008, price pressures persisted in Trinidad & Tobago and inflation measured 15.4 percent in October 2008.

Inflation, however, is projected to decline to an average of 7.6 percent in 2009 with the slowdown in the economy and the decline in headline inflation. The build-up of excess domestic liquidity has been aggressively managed through the Central Bank’s (CBTT) liquidity absorption activities, including efforts to curb consumer spending through the increase of the ”˜Repo’ rate which increased to a high of 8.75 percent during 2008, but has since abated to 8.00 percent (April 2009). The CBTT also increased the primary reserve requirements of banks from 11 percent to 17 percent over a ten month period ending October 2008. The resulting increase in prime interest rates to in excess of 13 percent has subsequently declined to 12.5 percent in early 2009, an indication of success thus far” (Noel A. Lyon, 2009).

Comparison of International and Local Factors in the Increasing Financial Integration towards the Intercommercial Bank Ltd.

Exploring the significance of international correlation of international and local economical policies of Intercommercial Bank Ltd. it will be essential to note that the increasing of financial integration in the region has not significantly changed the course undertaken earlier.

Last year bank celebrated its tenth anniversary, which characterized successful operating in complicated financial situations and world crisis as well: “The past year proved to be one of accomplishments for Intercommercial Bank Limited and its wholly owned subsidiary Intercommercial Trust and Merchant Limited (the Group), as the Group celebrated its tenth anniversary and successfully expanded its branch operations. Despite the highly challenging global and regional economic environment, the Group continued on its path of consecutive years of profitability by closing the year ended March 31st 2009 with a profit before tax (PBT) of TT$9.7 million. This year’s PBT represented a 34 percent increase over the comparative twelve month performance after adjusting for extraordinary items. Although the Group continues to be challenged with excessive liquidity and a declining credit demand environment, Net Interest Income represented 52 percent of operating income and closed marginally higher than the prior comparative period by 3 percent. Operating expenses continued to be effectively managed within a 9 percent increase arising out of expenditure related to continued infrastructure build out at existing locations as well as at its newest location in the capital city of Port of Spain. Despite the decline in credit demand and a highly liquid market, the Group’s gross loans and advances portfolio increased year-on-year to TT$424 million from TT$417 million. Total assets closed at TT$968 million declining marginally from prior balance sheet date which resulted from the planned curtailment of short term investment activities” (Hugh Duncan, 2009). It is essential that in the international facilities are rapidly changing that also cause changing of strategic decisions and inner and outer policy of the bank. Still Intercommerical Bank Ltd. according to the annual report provides expansion policy in the area (according to statistical data this policy is observed from the very beginning ”“ establishment of Intercommercial Bank Ltd.). It could be noted from the report that the most significant event of the year is considered: “”¦the opening of our Signature branch at the Waterfront in the capital city of Port of Spain. This branch houses the Retail, Commercial and Corporate Banking divisions as well as the relocated Intercommercial Trust and Merchant Bank Limited (ITMBL). Getting in touch with target group bank expansion policy is connected with self promotion within the region. Financial strategies are directed on increasing of client base and improvement of service quality. It is essential that the main idea is to spread the influence of the bank within the Caribbean area: “In keeping abreast with market developments and changes, the Group continues to upgrade its Information technology platform and architecture following from our previous year systems availability recorded averages that were consistent with industry benchmarks. To further complement the customers’ experience, our Operational support services continue to keep focused on improving processes and procedures that contribute towards overall efficiency. We continue to focus our attention on the reviews and enhancement of our Compliance and Enterprise Risk Management framework and architecture in accordance with international best practice. The review and upgrade of several guiding policies and procedures throughout the Group are continuously undertaken in an effort to proactively mitigate against adverse economic challenges and ensure the sustainability of the business into the long run.” (Hugh Duncan, 2009).

The increased financial integration produced certain influence on the International Bank Ltd. The effectiveness of the bank operation is signified in financial performance report provided every year. According to the analysis of the bank specialist the fiscal year 2008-2009 was extremely successful despite the scrutinized international effects which touched Trinidad and Tobago area too: “Despite the unprecedented external economic challenges, fiscal 2008 ”“ 2009 proved to be one of success for the IBL Group, continuing on its path of quality asset growth and profitability. Total assets of the Group closed at $968 million, a marginal decline from prior year following the curtailment of specific investing activities whilst Profit before tax (PBT) closed at $9.76 million a 34% increase over the comparative period after adjusting for extraordinary income of $4.1 million. Return of Average Equity closed at 8.60% (6.9% – 2008 adjusted to reflect core profits) and a sustained Return on Average Assets” (Hugh Duncan, 2009). The following graphs illustrate Core profit of the bank before tax and group operating income. Statistical data perfectly illustrates the effectiveness of the Intercommercial Bank Ltd. Group to the increased financial Integration

GRAPH #1

The risk managerial group operating co-operating with other infrastructures of the bank could improve its positions according to 2007-2008 fiscal year: “The year ended March 2009 was a particularly challenging one for the global economy which was faced with unprecedented challenges. Despite the challenges of excessive liquidity, rising inflation, decline in credit demand and increased Central Bank monetary policy, the IBL Group continued on its path of profitability and quality asset growth. Apart from the financial achievements, the Bank also sought to fulfill its strategic objective towards becoming a national bank with the establishment of a signature branch in the capital city of Port of Spain. The IBL Group is committed to growth both in terms of quality assets and profitability whilst ensuring sound risk management, provision of coaching and development of all team members and full compliance with statutory and regulatory requirements” (Hugh Duncan, 2009)

Increasing of financial integration also touched the subsidiary establishment Intercommerical Trust and Merchant bank. The financial performance of the 2008-2009 fiscal year illustrates that subsidiary goes hand by hand with Intercommercial Bank Ltd. providing good results for this year and supposing for increasing financial stability for the following year: “As at March 31st 2009 ITMBL recorded Operating Income of $9.63 million versus the prior year Operating Income of $7.52 million, translating into a 28% increase over prior financial year. Profit before tax for the current financial year was the strongest recorded for ITMBL to date at $5.05 million versus the previous year PBT of $2.22 million representing a 127% increase. Asset growth moderated with an increase of approximately 9.5% closing at $70 million up from $64 million in the previous year with no Non-Productive Assets being recorded. During the year the Bank’s primary focus was on changing its portfolio mix given the rapidly changing economic and industry environments, while continuing to build the asset base of the institution in order to ensure stable revenue generation and profitability going forward. Expense management also played a critical part in ITMBL being able to record profitability growth for the financial year despite the second half of the financial year being an extremely challenging one. We anticipate that the environment will remain challenging in the coming financial year but we are optimistic about the expected performance of the Bank given our product and customer focuses in addition to continued cost consciousness” (Duane Hinkson, 2009).

Areas for Further Improvement

Intercommercial bank is an active participant of social and business life in the area providing qualified service for their customers and supporting different social activities in Trinidad and Tobago: “Year 2008 marks the 7th year that Intercommercial Bank has participated as the major sponsor in the National Primary School Mental Mathematics Marathon. This event was realised through the efforts of the Mental Mathematics Committee of the Curriculum Planning and Development Division of the Ministry of Education” (Anna Metivier, 2009); “Intercommercial Bank Limited represented with a large contingent of team members and supporters at the GDF Suez Energy Sunday 1 Lap Savannah Race and Mini Dualthon. The Bank seeks to continue to promote wellness and team building efforts as an extension of our values-based initiatives as well as to join with the nation in endorsing a healthy lifestyle” (Intercommercial Team Members, 2009); “The Sir Frank Worrell Memorial Committee (SFWMC) in conjunction with the local Blood Bank, Friends of the Blood Bank and the University of the West Indies (UWI) launched a Blood Donation Drive to commemorate the life of the late Sir Frank Worrell. Following this, regional institutions have also initiated such annual program to recognise Sir Frank’s humanitarian assistance. Intercommercial Bank is honoured to join others in supporting this program which promotes such a positive attribute in creating the upliftment in the lives of others” (Allyson Best, 2009) and many others. Co-operating with Jamaica Money Market Brokers it is rapidly moving towards the international participation in the region and becoming an active participator of business life in the region. The establishment counts only ten years but it reached really great success in the region during this time. According to the annual report and statistical data provided by the bank, the most problem areas are risk management development. If we look at the graph #1 we see the significance overfall between 2008 and 2009 years in the core profit scale in the graph. It shows that risk management of the bank should undergo certain changes. International financial integration of the bank started since it has become a part of Jamaica Money Market Brokers and still needs certain accommodation as an institution. Profitable work and team of professional will certainly help further promotion. Perfect potential of the area (it is quite popular resort) attract financial investments in the development and it is essential that in such facilities Intercommercial Bank Ltd (as a representative of local banks) should participate on the equal level with international banks. Personally I think that rapid development of Risk Management will help to overcome many financial difficulties. The corporate government also strengthen the position of the bank as it have well developed structure andrapid promotion and upgrading to the demands of international market will provide a serious support to IBL Group as an independent financial structure: “The IBL Group has confidence in its internal controls and systems, risk management framework and strong Governance  structure.   We  strive  to  maintain  the highest  industry  standards  for  the  operation  and conduct of  the business of  the Group with a view  to maximizing  shareholder  value,  market  confidence and customer loyalty” (Corporate Government Report, 2009).

Conclusion

In the end I would like to note that Caribbean economical area has perfect perspectives for business and financial development. That is why it the increased financial integration in this area has become a typical factor. It is really significant factor for all financial structures of the area and it would be essential that local and international policy of financial establishments of the area undergo certain changes.

Intercommercial Bank Ltd. is so called young group that is why assimilating to the certain facilities would not be a real problem for the establishment. I even think that these changes would rather have positive effects on the structure and operating of the bank. The increased financial integration would probably be a good chance for the bank to enter not only Caribbean area as an international market but make it more wide and significant.