Nov 2009 Financial News

Bank credit snuffing out listings

Nov 12, 2009

BCB Holdings CEO Lyndon Guiseppi believes the sparse listing of local companies on the Trinidad and Tobago Stock Exchange (TTSE) is primarily because bank credit is readily available and this crowds out equity investment.

“In other words, if it were more difficult to get money borrowed from the bank you would probably find more people looking to the equity market to raise financing but because bank debt is so readily available I think it is not pushing these companies to go and raise equity,” he said.

On October 28, BCB listed on the TTSE at trading under BCBTT, shares on the local market at $12.15.

Currently they are trading at $13.15 and the CEO expects the price to appreciate.

“We have listed all of our shares, we have listed 104 million shares and while there is a major share holder at least 25 percent of those shares should become available over time for trading,” he said.

BCB is also listed on the London Stock Exchange and Guiseppi said there was a disconnect in being listed in London and not anywhere in the Caribbean.

“The average person who was buying our shares in London they don’t see the bank everyday it is not something they interact with and therefore it might be difficult for them to properly evaluate the performance of this organisation and I felt therefore that to the extent that we are primarily a Caribbean based organisation we should therefore be listed on a Caribbean stock exchange,” he said.

He explained that by listing on the stock exchange, investors would begin to enquire more about the group which is based in Belize.

Gueseppi also believes that Trinidad and Tobago has the potential to become the top financial centre in the region and BCB’s listing supports this. In an interview at his office at Maritime Plaza last week, he said he was seeing efforts to diversify the economy from oil and gas to financial services

“TT is emerging as a regional financial centre, the banks in Trinidad tend to be extremely well capitalised and I see the banking sector and the financial services sector as critical and pivotal in terms of providing that balance to the oil and gas sector over the medium term,” he said.

Guiseppi admitted though that BCB has been affected both indirectly and directly by the global economic downturn.

“Our largest operation is in Belize and it is primarily a tourism and agriculture based economy. Tourism is dramatically down and agriculture as well and because of Belize’s proximity to the US,” he said, noting that economic recession has affected business in Belize including the banking sector

He pointed out that in Turks and Caicos they suffered even more with tourism in decline with some projects facing lending challenges.

He was asked about the impact of the recession on the banking sector in Belize. “We have not been affected to the extent that the US, UK or even some European banks have been affected because we did not invest in mortgage bank securities or deritive instruments,” he said.

He explained that in the Caribbean, economies that are largely based tourism and agriculture based have been affected by the crisis.

Guiseppi believes that the resources based economies like Trinidad have weathered the storm pretty well.

“If you look around Trinidad you don’t get a sense that there is a recession,” he said and predicts that is once the US begins to rebound, Trinidad would pick up momentum.

In its annual report 2009, chairman of BCB Lord Ashcroft said earnings from financial services amounted to US$35.5 million. In May 2009, as part of its strategy and to provide liquidity and capital to fund acquisitions and growth, BCBH acquired Cockleshell Limited, a company listed on the London Alternative Investment Market whose sole asset was US$52.4 million in cash.

“This was a strategic acquisition that provided liquidity in difficult financial markets,” he said.

Prior to joining BCB in July 2008, Guiseppi held the position of managing director of RBTT Merchant Bank. “RBTT provided me with opportunities that no other bank had provided me with. When I left, I left in the interest of my professional development, I didn’t leave with any acrimony,” he said when asked about his departure.

On the takeover of RBTT by RBC (Royal Bank of Canada) Guiseppi admitted it is becoming a trend where foreign banks are showing interest in gaining foothold in the Caribbean.

“There is an opportunity to increase their range of profits,” he said.

Aside from banking, BCB is also involved in a large palm oil company, Numar, in Costa Rica.

While it has a 25 percent stake in it, Numar made close to US$100 millions last year.


Source:
Darcel Choy
Trinidad Newsday
Thursday, November 12 2009

http://www.newsday.co.tt/businessday/0,110755.html