May 2015 Financial News

Republic products for Ghana bank

May 21, 2015

Republic Bank intends to offer its investment products to Ghanaians, following the acquisition of a controlling stake in HFC Bank (Ghana) Ltd, T&T bank’s managing director David Dulal-Whiteway said in a Business Guardian interview.

Last week, Republic Bank announced that it acquired the controlling interest in HFC following its mandatory takeover offer to the shareholders of the Ghana bank. Republic now owns 57.11 per cent of HFC, paying the bank’s shareholders US$24.44 million to purchase an additional 17.25 per cent stake.

RBL’s T&T investment products would be offered to Ghana. Republic gained $2 billion in assets with the acquisition and has now become an employer of 500 people in Ghana.

On May 13, Dulal-Whiteway made the official announcement of the acquisition. The transaction means that the bank would now have its fifth banking subsidiary within the group.

Dulal-Whiteway spoke to Business Guardian last Thursday, about the strategic direction which the HFC Bank (Ghana) Ltd is heading in, during day two of the Banking on the Future Summit which was held at the Hyatt Recency hotel, Dock Road, Port-of-Spain.

“We have things here which have not been introduced over there as yet. It is really taking some of the things here, and introducing it over there. The basic banking products need to be worked on first,” said Dulal-Whiteway.

He said HFC only introduced debit cards this year, but had not as yet introduced credit cards.

The acquisition of a majority stake in HFC had encountered a stumbling block mid-May 2014, when officials from the Ghana bank accused Republic of breaching the collaborative theme they agreed to and not complying with legal and regulatory requirements under Ghana’s laws.

But RBL in a statement had said: “From our initial entry into Ghana in November 2012, Republic Bank has meticulously adhered to the rules and regulations laid down by the Bank of Ghana and the Ghana Securities and Exchange Commission (SEC) and where there has been ambiguity, we have sought clarification and guidance from our Ghana advisers and the regulatory authorities.”

RBL also said it followed the requirements of the Ghana SEC’s Code on Takeovers and Mergers and will continue to liaise regularly with that country’s authorities. Bank officials said they are committed to complying with all guidance and direction given to them.

Describing the size of the bank at the summit, Dulal-Whiteway said the bank is a “relatively” small bank and RBL would be “adding” things to ensure that it deepens its footprint in that market.

The Ghana banking market, he said, comprises 27 banks which means that competition is intense. The country has a population of 27 million and the economy is, growing at about seven to eight per cent per year.

Dulal-Whiteway also noted that there were many people moving into the middle class and that urbanisation was progressing quickly.

All of this means that “the opportunity is there for us to take advantage of that fast growth,” the local banking executive said.

RBL’s strategy for competing in the Ghana market would be to utilise its knowledge capabilities to provide “increased value” to its customers. Comparing the financial regulations of the two countries, Dulal-Whiteway said the regulatory framework is similar. He added there is a Central Bank of Ghana which regulates financial institutions similar to T&T’s Central Bank.

Dulal-Whiteway said even though HFC is “behind the curve” in some of the technological areas, this can be positive for the bank because when other banks who use updated technology make mistakes, Republic can learn from it.

“Sometimes you don’t want to be the leading edge because that’s where the mistakes can take place. Coming in afterwards you can put in the controls that are necessary in order to deal, for example, with some of the issues surrounding cybercrime.”

Asked whether cybercrime has been a big challenge for his bank, he said: “We haven’t had huge losses. The biggest has been credit cards and people skimming credit cards. It is something that you have to be concerned about and make sure that you create a safe environment for our customers.”

Technology and the safeguards which come with it cannot be eliminated because trends have shown that as people get more accustomed to the Internet, they get comfortable.

Like most banks, Dulal-Whiteway said RBL has had its challenges in providing a constant supply of US currency: “We are in business of selling foreign exchange but we can’t sell what we don’t have.

“What has been a good ease this year is that the Central Bank did step up to the plate a little further, by selling quite a bit of money early this year and that helped to deal with some of the backlog which we had from last year. We would get our share and leave it to satisfy our customer needs.”

Asked what the supply of US currency was like for the corporate community, Dulal-Whiteway said the supply was “getting tight” again.

“All of these things are a matter of timing. There are times when you have sufficient. There are times when it has tightened a bit and therefore, we have to just wait until the supply comes back in,” Dulal-Whiteway said.

Overall, he suggested that T&T has to find ways in which it can earn foreign exchange since dependence on oil and gas revenues would not be a prudent move.

“All of us can’t be depending on only one source of foreign exchange and that’s where we have to start focussing heavily on export growth again. Something which we did very well in the late 80s and early 90s.

“Today we talk more about just buying things (importing) and then selling (to the T&T market), who is going to pay for that eventually, you will have to find hard currency, US dollars.”

Unproductive savings of US$5 billion?

Commenting on the statement by Trade Minister Vasant Bharath that, in total, there was US$5 billion in unproductive savings in T&T, Dulal-Whiteway said the money is not being hoarded since saving in bank accounts with $US or $TT is one option which investors have available to them.

“For some of us to diversify our portfolio we keep savings in $US, I think that’s what our customers have done, over 20 years, when we removed the exchange controls.

“The issue then is we have these US dollars what do you do with it? It may seem to be unproductive. To the extent it is lent in US dollars, it means it is being put to productive use. The issue is if a company borrowed in US dollars it should have a $US float in which it could pay back the loan, because you can’t come back and pay the loan in TT dollars.

“We really as a country, need to start looking at how we earn US dollars.”

He suggested there was need for T&T to have further alternatives for earning US dollars rather than earning foreign exchange from the energy sector alone.

Regulation of the financial sector

Dulal-Whiteway supports any move to improve the legislative framework governing the financial sector because it assists in improving security in the system and improving confidence and trust.

He said he supports regulation of the players that operate outside of the regulatory framework.

“When you look at what is happening in technology you have new players who work outside of regulation, and that’s where focus has to be: to ensure that these new players who are not banks, (retail stores) are also regulated.

“When they are not, you will have a situation where you will increase riskiness in the system. You’ll have all these sales happening we have a blind eye to, and therefore it can cause problems later on.”

 

Source:
NADALEEN SINGH
nadaleen.singh@guardian.co.tt
Business Guardian, BG6 and BG7
Thursday May 21, 2015