Nov 2009 Financial News

We've only just begun

Nov 19, 2009

When ANSA Merchant Bank Ltd last Thursday announced after-tax profits that soared 82 per cent to $152.4 million for the nine-month period, those results came after the disappointing results recorded by two financial institutions. Although ANSA Merchant Bank’s managing director Chip Sa Gomes is diplomatic enough not to harp on that point, he describes his company’s performance as a “milestone in the context of local financial institutions reporting poor results recently.” He says the ANSA Merchant Bank’s third quarter results should give a boost to local confidence in financial institutions that has been hurt by the “uncertainty and skepticism” brought on by the global financial meltdown. The meltdown, and the recent changes to accounting rules, meant that the merchant bank took a hit to its bottomline as its investment portfolio had to be marked-to-market. This meant that the company had some unrealized losses on its balance sheet last year which affected its performance.

“But those investments have mostly come back,” said Sa Gomes, at an interview on Thursday at his Maraval Road, Port-of-Spain office at which Varun Maharaj, ANSA Merchant Bank’s executive director of investment services, sat in. Sa Gomes says ANSA Merchant Banks strength comes from the fact that it is 85 per cent owned by ANSA McAL—the locally-domiciled conglomerate with in excess of $10 billion in assets and a track record of producing higher profits for its shareholders every year. But ANSA Merchant Bank’s strength also comes from the fact that its portfolio of services is so diverse. With assets under management of $4.5 billion, the company combines a merchant bank, a life insurance company and a general insurance company. In June 2004, ANSA Finance & Merchant Bank acquired Tatil and Tatil Life Insurance from the ANSA McAL Group of Companies. This means the company offers short-term insurance, long-term insurance, pension services, foreign exchange trading, mutual funds, asset financing as well as its investment banking services.

ANSA Merchant Bank’s 82 per cent jump in its net profits came about even though the downturn in the local economy has had an impact on two of its major lines of business. Sa Gomes says asset financing, which mostly involves loans and leases for car purchases, has suffered because of the decline in the economy that has led to slower vehicle sales. This decline has been mitigated, however, by the fact that the company is positioned to offer an all-in-one service for vehicle purchasers with lease or loan financing bundled with car insurance and the actual cars, which can be purchased from sister companies in the ANSA McAL group. The company’s foreign exchange trading has also seen less volume as this, as well, has been affected by the “macro-economic realities.” Sa Gomes says the company’s profit before tax is almost equally divided into thirds among Tatil, Tatil Life and the investment bank.

“We have been able to manage the diversity to provide both stability and growth,” he says. In terms of its $4.5 billion in assets, Sa Gomes says $2.5 billion are divided between Tatil and Tatil Life, while the company has $1 billion in asset financing and merchant bank loans and $1 billion in investments. He says between 33 and 40 per cent of Tatil and Tatil Life’s portfolio is in fixed income investments and 35 to 40 per cent in equities both local and foreign. He noted that the company was able to achieve a 15 per cent return on its foreign asset portfolio. Asked to compare the performance of ANSA Merchant Bank with similar local institutions, Sa Gomes points to the diversity of products as well as the company’s strong capital base. “Before acquiring Tatil and Tatil Life, the capital base of the company was less than $100 million. But today it is about $900 million. We have a larger balance sheet than all of the other non-banks.” Speaking about the future of the company, Sa Gomes points to Tuesday’s launch of the ANSA Euro Fund and some other mutual fund offerings that the company is looking to roll out in the future.

He also pointed to the success of the investment banking arm in capturing some deals to raise money for local clients. “The investment bank has brought five deal to market this year,” he says. He also says ANSA Merchant Bank “would love to have a commercial banking licence.” But the company is not basing its future prospects on getting a bank licence as, according to Sa Gomes, there is a great deal of potential for organic growth in the company. “We feel there is a lot of room for us to take up market share in some of the services and products that we offer. In certain parts of the business, we could triple our market share and still fly under the radar.” And Sa Gomes concludes by saying that ANSA Merchant Bank “has only just begun to develop the potential of what we have.”


Source:
Trinidad Guardian
Thursday November 19, 2009

http://guardian.co.tt/business/business-guardian/2009/11/19/weve-only-just-begun