By Jonathan Kent, Business Editor From Royal Gazette

Clarien Bank is to receive a cash injection of $12.6 million from its sole shareholder Edmund Gibbons Ltd and a Canadian private-equity firm.

The investment will enable Clarien to exceed the tougher capital regulatory requirements of the Basel III standard being adopted by Bermuda and will help to fuel growth, according to a statement from the bank late today.

The new investor is Portland Private Equity, which is headquartered in Burlington, Ontario and has branch offices in Barbados and Jamaica.

The bank also announced it made a profit of $500,000 last year, in line with 2014. However, non-performing and impaired loans made up 14 per cent of Clarien’s bank portfolio, illustrating the difficulties many of its borrowers continue to have in making repayments. Revenue slumped by 8 per cent, while operating expenses fell by 9 per cent.

Ian Truran, Clarien’s chief executive officer, said the bank had seen greater economic activity and lending opportunities in the first three months of this year, a sign that Bermuda’s economy had “bottomed out”.

The bank has been through a tumultuous recent past. Last April it announced that the Gibbons family, through Edmund Gibbons Ltd, had reassumed 100 per cent ownership just 15 months after selling a four-fifths stake to a group of investors behind the Bermuda exempted company CWH Ltd.

In March 2009, in the wake of the global financial crisis, EGL invested $20 million into the bank, then known as Capital G, to boost its capital buffer as banks around the world came under severe stress.

James Gibbons, a director of EGL and Clarien Bank, said of the new investment: “This transaction is a significant development for Clarien in terms of capital and strategic growth. In addition to exceeding regulatory capital requirements under Basel III, it will enable us to not only invest further in world-class financial products and services but also to access Portland’s wealth-management capabilities and expand our offerings into regional and global markets.

“It is an important investment in Bermuda that reflects the quality and sophistication of the services we continue to provide as one of the world’s premier financial jurisdictions.

“EGL and PPE both share similar business values in that they both take a long-term view in all of their investments. Building partnerships such as these create stronger organisations with diverse and deeper intellectual property, more efficiencies, broader capabilities and extensive global reach to new markets and client segments.”

PPE is a private-equity fund manager focused on investments in the Caribbean, Central America and Andes regions.

The firm grew out of the family office of its chairman Michael Lee-Chin, a Jamaican-Canadian billionaire. It has been an active investor in the Caribbean since 2002, specialising in the financial-services, energy and telecommunications sectors.

Its major investments include National Commercial Bank (Jamaica) Ltd, InterEnergy Holdings and Columbus International Inc. Limited partners in PPE’s funds include US state pensions, US and Caribbean corporate pensions, insurance companies, multilateral institutions, and the general partner team.

Clarien added: “As a result of the transaction, it is expected that Clarien and Portland connected entities will forge mutually beneficial commercial ties.”

Mr Lee-Chin, chairman of Portland Holdings, PPE and National Commercial Bank, said: “Our investment in Clarien and Bermuda continues the strategic expansion of our regional interests. This transaction follows NCB’s intended acquisition of a 29.9 per cent stake in Guardian Holdings Ltd, the Caribbean’s leading insurance company, announced in November 2015.

“We are excited by our partnership with Clarien and we look forward to working with their management team to develop opportunities and growth both within the Caribbean region and beyond.”

Mr Lee-Chin, who was awarded the Order of Jamaica in 2008 for his significant contributions to business and philanthropy, built Canada’s largest privately held mutual fund business from assets under management of less than $1 million to well over $15 billion.

In its earnings statement, Clarien said its loan portfolio had shrunk by $66.8 million in 2015 to $809.7 million by the end of the year. This was attributed to a trend of borrowers paying down mortgage debt.

The bank said non-performing loans, described as past due by 90 days or more, plus impaired loans, made up 14 per cent of the total loan book. Impaired loans were 8 per cent of total loans, or $71.2 million.

Clarien said specific provisions on its balance sheet against impaired loans increased from $18 million in 2014 to $20.7 million in 2015.

Mr Truran said: “While we are encouraged by indicators in the property market that the Bermuda economy is showing signs of recovery, many of our clients still face challenges in servicing debt payments. There was less borrowing activity during the year, and we decreased our net provisions on loan losses by 7 per cent from $9.8 million in 2014 to $9.2 million in 2015.”

The bank saw interest income fall 7 per cent last year to $54.4 million, while non-interest income from Clarien’s asset management business also fell. Total revenue before loan loss provisions fell by $5.9 million to $56.8 million.

Clarien did manage to slash operating expenses by 9 per cent to $47.6 million, as it paid out $1.9 million less in salaries and benefits and also saved on professional fees and improved office efficiencies.

Mr Truran said: “We continue to work on managing our expenses and successfully achieved a substantial reduction in our operating expenses without compromising our overriding goal of focused and superior customer service.”

Last year Clarien launched a new debit card platform and Clarien iTrade, a client-directed online brokerage service. In the first quarter of 2016, it launched a new suite of Visa credit cards with improved security features and an enhanced rewards programme, and Clarien iBank, a new online banking platform.

Mr Truran said: “We continue to invest in automated solutions as customers seek more mobile, personalised and remote-access banking options.”

He added: “Additionally, increased activity in the first quarter of 2016 represent greater quality lending opportunities, a sign that Bermuda’s economy has ‘bottomed out’ and is on the road to recovery as individuals and entities reinvest.

“The timing and nature of the EGL and PPE partnership in CGL will enable Clarien Bank to leverage mutually beneficial opportunities in the future.”

IMAGE: Cash injection: Edmund Gibbons Ltd and a private-equity firm have invested $12.6 million in Clarien Bank

For more on this story go to: http://www.royalgazette.com/local-business/article/20160418/clarien-bank-receives-126m-cash-injection