As stated in the Bank's Financial Highlights for the 9 months ending March 31, 1998, it continues to adopt an increasingly conservative approach to rebuilding loan loss provisions. In addition, the Bank has also decided to write-off in the current financial year ending June 30, 1998 a number of items -- which include systems costs and reconciliation issues relating to its Bermuda based operations and outstanding goodwill -- and adopt a proposed accounting standard issued by the Canadian Institute of Chartered Accountants (the Bank follows Canadian GAAP) covering post-retiree benefits. This standard requires all post-retiree benefits to be recorded on an accrual basis, whereas currently the Bank accounts for its post-retiree benefits on a pay-as-you-go basis.
Management estimates that, subject to final computation, audit, and Board of Directors approval, the impact of all of the above will result in the Bank's earnings for the year ending June 30, 1998 being in the order of some $5m and that brought forward retained earnings will be adjusted downwards by approximately $30m as a result of the accounting change for post-retiree benefits.
Management has stated its disappointment that the strong success this year of its core businesses, which would have enabled the Bank to report record net earnings, has been overshadowed by past strategic miscues. Nevertheless, it believes the actions being taken now are decisive and will ensure that the Bank will be stronger and profitable longer-term.