Apr 2004 Financial News

Caribbean Commercial Bank (CCB) was sold to RBTT

Apr 14, 2004

Barbados’ banking sector officially completed an era last week, when Caribbean Commercial Bank (CCB) was sold to RBTT Holdings Limited, a Trinidad and Tobago-headquartered financial institution with a regional vision.

Some Barbadians bemoaned the closing of this final chapter of the locally-grown commercial banks, but many hailed the development as evidence of the Caribbean’s financial institutions readying themselves for the expanding market space that is becoming a feature of the modern business climate.

Commenting on the development, Governor of the Central Bank of Barbados, Dr Marion Williams, said Barbados’ banking history from 1834 had changed tremendously, moving from the British, to the Canadian, to the American.

Later the trend featured local brands and was inspired by the mood of nationalisation.

But today’s shift to bigger entities, Williams said, was “predicated on the view that we will be able to benefit from economies of scale and position ourselves for the future, for the CSME (CARICOM Single Market and Economy) and the FTAA (Free Trade Area of America).

“There are other benefits which we have to recognise and those are the possibility of increased market power, increased profitability and rationalisation of capacity and lower unit cost because we are expecting cost will be lower with the kind of economies of scale which will result.”

Finding partners or businesses to acquire in order to achieve this aim has been less difficult than previously.

Knowing that size matters, organisations with commercial banks of challenging size seemed more likely to put these on the market.

The Mutual Bank was such a case. It was profitable when Sagicor Financial Corporation got rid of it. President and chief executive officer Dodridge Miller explained that given the increasing international expansion of the Sagicor Group and The Mutual Bank having offices only in Barbados, it became less strategic to the group’s business strategy.

The deal between Bank of Butterfield of Bermuda and Sagicor presented a similar scenerio.

The Mutual Bank’s assets were $253 million (US$126.5 million) at December 31, 2002.

With the change to the Bank of Butterfield, it has the potential to be a fierce competitor here. One advantage, as noted by the Mutual’s former chief executive officer, Clennell Goodman, was the ability to offer significantly larger loans.

The trend is also giving birth to regional banks worthy of contending with their counterparts, especially the extra-regional headquartered entities. In addition, the development is not necessarily signalling the end of local individuals’ involvement in the ownership of these banks.

Many of the new owners are listed on stock exchanges, thereby allowing Caribbean people access to shares.

RBTT Holdings of Trinidad and Tobago will have a presence in Barbados as a result of its recent transactions with Clico Holdings Limited, which led to the purchase of CCB.

CCB can no longer be considered as a small player given its backing of an institution with total assets of US$4.98 billion (at December 31, 2003).

In addition, according to its website, the RBTT Group is the “largest network of financial institutions and licensed commercial banks in the hemisphere,” and comprises 32 companies including nine commercial banks with 79 branches located throughout the English-speaking Caribbean, Suriname, Aruba and the Netherlands Antilles.

In comparison, the 18-year-old CCB was tiny, with assets reaching $314 million (US$157 million) and operating four branches on the island.

The RBTT element will add some interest to the local market, which will see up front its competition with Republic Bank of Trinidad and Tobago, which incidentally, owns a six per cent stake in FirstCaribbean International Bank.

Do these changes suggest that the small banks will be no more?

Chief executive officer of FirstCaribbean International Bank, Charles Pink, predicted that small financial institutions would operate only in niché markets.

“Generally, small banks will tend to be gobbled up by larger banks and financial institutions,” he said.

Pink heads what is the result of a recent merger of the Caribbean operations of Barclays Bank PLC and CIBC Caribbean Limited, a fusion which created one of the region’s largest banks, having over US$8 billion in assets and branches in 15 countries.

The CEO said the banking industry, like other industries required big investment in new schemes and in brand, it was therefore hard to be small and meet this need.

Noting that banking was a customer-driven industry, Pink added that the increased internationality of the customer base, persons and corporations, meant that customers demanded banks operating across multiple borders.

“I think small banks will only exist in very niché areas specialising on a particular product or in a particular sub-market but generally indigenous banks will tend to be absorbed into bigger banks,” he said.

What we are seeing in Barbados may not be the end of the cycle.

“Even the bigger banks will probably merge over time. We will end with five or six large groups dominating across the Caribbean,” Pink said. “Some of them, I sincerely hope, operating out of the Caribbean, others headquartered in Canada or the UK (Britain) or the US (United States). That is the future as I see it.”

Source: Nation (Barbados)
http://www.nationnews.com/StoryView.cfm?Record=48369&Section=Business&Current=2004-03-22%2000%3A00%3A00