BEHIND THE HEADLINES: Canada still banking on the Caribbean
Are Canadian banks in Barbados and its neighbours staying put? Should Barbados and the rest of the region worry about the future of their commercial banking system whose backbone consists of the vertebra of three of Canada’s largest commercial financial institutions?
These questions were asked across the Caribbean and in Canada after the Royal Bank of Canada decided to sell its business in Jamaica to Sagicor Group Jamaica Limited and may end up losing as much as CAN$37 million this year on that sale by the time the bank’s third quarter financial statements are released.
And as if that wasn’t enough, the Canadian Imperial Bank of Commerce, CIBC, Canada’s fifth largest commercial bank, which owns the Barbados-based First Caribbean Bank, swallowed more than CAN$100 million in loan losses and a much larger goodwill impairment charge. Hence the worry: will the Canadians consider pulling out of the area in whole or part?
The answer from CIBC, the Royal Bank of Canada and the Bank of Nova Scotia: we are staying put. We are in for the long haul. And to get the message to the region senior bank executives in Toronto met several weeks ago with the Caribbean’s top diplomats in Ottawa.
One such representative was Evelyn Greaves, who until recently was Barbados’ High Commissioner in Ottawa but who voluntarily stepped down from his diplomatic duties in the Canadian capital a few weeks ago. He told BARBADOS BUSINESS AUTHORITY the assurance was clear.
“The sense of the discussions we as High Commissioners from the Caribbean had with the senior Canadian banking executives who came from Toronto to meet with us was that the banks weren’t considering leaving,” Greaves explained.
“The directors who have responsibility for the Caribbean requested the meeting because there was a feeling based on what we were reading that the banks were having different thoughts on the Caribbean from what existed before.
“They had pulled out of Jamaica because of intense competition and they were making some changes in Trinidad and Tobago and Barbados.”
Yes, the executives conceded, the Caribbean wasn’t as profitable as before, but what was also true was that the area was an important business centre to which the Canadians were committed.
“That was the sense we got from the meeting,” Greaves said.
Now the banks are upping the ante. They told the Financial Post, a major business daily paper that’s considered the Wall Street Journal of Canada or the Financial Times of Ontario, that Barbados, Trinidad and Tobago, Guyana, the Bahamas and their neighbours are in their bank’s future.
“We remain committed to the Caribbean,” said Kirk Dudtschak, the president of Royal Bank’s Caribbean banking network.
“We believe we have turned the corner.”
As he saw it, “there are already signs in the tourism focused countries that numbers are beginning to turn. There are governments and countries that are taking their own restructuring seriously and that also is creating stability from an economic perspective.”
Dieter Jentsch, who heads Scotiabank’s international banking, gave a similar assurance.
“The Caribbean is an important source of earnings for us,” was the way he put it to the Post. “The growth trajectory isn’t what it was historically, but it does have a very reasonable return on shareholder equity. “
“We’re still proud to say we were profitable in the Caribbean,” Jentsch added.
“That in itself represents a collective win for the bank.”
But CIBC appeared a bit more cautious. “Unfortunately, it’s going to take us longer because the economic environment has not started to improve like we felt it would,” Richard Nesbitt of CIBC explained to the paper.
“And so, the process is going to take longer.”
Another somewhat sober assessment was articulated by John Aiken, an analyst with Barclays PLC.
“Given the difficulties that the region has faced and the growth that each of the three banks have had in other areas, the Caribbean has definitely declined in importance,” asserted Aiken. “I don’t believe that investors view the Caribbean operations as material to overall results.”
But if Barbados, Guyana, the Cayman Islands, Antigua, the British virgin islands, Dominica and others in the region are anxious about the future then they can find a measure of comfort in the analysis of Som Seif, chief executive officer of Purpose Investments Inc. in Toronto.
“The banks should be where they think they can make money and can build a good business,” he said. “I don’t look at the Caribbean as being riskier than Thailand or Brazil, or even the United States.”