AS A BANKER, I am very pleased with the remarks on the published report of the third quarter results of CIBC FirstCaribbean Bank as referred to in the BUSINESS AUTHORITY of Monday, September 19. It is clear that the wicket had been well prepared by the activities of the Central Bank of Barbados. I say this because the Central Bank has given the bank the ability to dictate the terms of delivery of services to the public.
The commercial bank has taken advantage of the situation so as to improve its profit margins. For example, it has reduced its high risk dealings in that it has made sure that it has sailed clear of the small business areas of lending. This has allowed it to reduce any possible write-off that would impact on its profitability, as lending to small business constitutes its riskiest activity. At the same time, it has concentrated its efforts on the areas where it can command effective security and a wide margin of profits. These areas include the spread (margin) between lending interest and payment on savings. I am sure that the business of improving the number of credit cards has also featured in this area of profit as the interest rate and penalties here bring considerable return.
The increase of ubiquitous commissions such as penalties on savings accounts is a significant contributor to the declared profit. This the spokesman has mentioned.
The report is obviously good news for the minister of finance. He is probably congratulating the Central Bank for paving the wicket on which the bank has been batting. Indeed, he had anticipated the glowing results and declared an increase in asset tax. Now he can lick his chops on an increase in profitability tax. The saying “to whom much is given, much is expected” is “a propos”. That the tax “hurt the result” of the commercial bank then may not be considered by the majority of Barbadians as a bad hurt. Neither should it be considered a bad hurt by the bank if the bank is cognisant of the perilous position of the economy in which it operates. Maybe we should ask the bank whether or not it is complaining about its contribution to the economy or perhaps it is so overwhelmed by a reduction to the profitability to its head office that it is blinded to the needs of the very Barbadians who support it.
Maybe its spokesman should consider that: a) the working capital (savings) of the bank has been provided by Barbadians; b) the staff who have to live in Barbados are 95 per cent Barbadian; c) the people who support the bank are 90 per cent Barbadian; d) the commissions and sundry charges are paid by Barbadians; and e) the long lines and lengthy waiting periods are suffered by Barbadians. Maybe then it is unfortunate to say that the profitability has been “hurt” by the increase in taxes.
But there is another side to this report that is very worrying. Most of this profit will hurt the foreign exchange that at the moment is critical, as the profits have to be repatriated abroad to the shareholders who may not be concerned about the ills of the country. Quoad hoc (to this extent) Barbadian may feel that the “hurt” aspect of the remarks does not reflect well on the reporter.
Most managers are subject to targets by their head office (board of directors). The ‘hurt’ remark may have been indicative of such a situation and may indicate a subtle apology to shareholders.
The Barbados economy is highly dependent on foreign investment. However, foreign investment is a two-edged sword and the investor’s usual interest is for a return on the investment. The well-being of the local economy is not his main concern. Most times the investment represents a small part of the business structure. It is therefore incumbent on those who negotiate on behalf of Barbados to ensure that the country gets a worthwhile return on any investment that gains substantially from operating here.
Banks provide an essential service that we cannot do without. However, there are other investments that clearly have not been negotiated in the favour of the majority of Barbadians even if small tokens of appreciation are doled out from time to time.
The plans of the expanded Sandals hotel are elaborate and modernistic. Guests will benefit from seven eclectic, polytypic, epicurean, gourmet restaurants of tax-free ingredients whose fare cannot be equalled in Barbados. The guests will come and leave Barbados and will never leave the hotel.
• Harry Russell is a banker. Email: quijote70@gmail.com
