Nov 2012 Financial News

Republic: No new shares

Nov 26, 2012

Managing director and chief executive officer of Republic Bank Limited in Trinidad and Tobago, David Dulal Whiteway, was in Barbados over the weekend. He spoke to Business Editor Geralyn Edward about the institution’s controversial attempt to take 100 per cent control of its subsidiary Republic Bank Barbados – the former Barbados National Bank (BNB).

Why not accept a share swap as the National Insurance Scheme (NIS) chairman Dr Justin Robinson has suggested?

Dulal Whiteway: One of our visions is to get more of our shareholding outside of Trinidad and Tobago where we have ownership in the Caribbean region. So that the concept of a share swap or having the NIS as a major shareholder is not something that is foreign to us. It is something that we actually welcome. The issue is one of process. We are not issuing any new shares because Republic Bank is very well capitalized.

Under the Financial Institutions Act in Trinidad and Tobago, we need to maintain a minimum of eight per cent capital ratio and our ratio today is 30 per cent, so we are way above the minimum and therefore issuing new shares is not something we have to do.

For us, it is about finding sellers of Republic shares which is where the NIS can buy into. This would have to be a two-step approach, where we buy the NIS shares, they get the cash and then we work with certain institutional investors who might be interested in liquidating.

One specific one is the CLICO Investment Bank which has ownership of 19 per cent of Republic and that bank is under receivership right now. The receiver is the Deposit Insurance Corporation of Trinidad and Tobago and therefore at some point they will need to liquidate their shareholding and out of that I believe there are opportunities for the NIS to get back in as shareholders.

Do you really have influence to facilitate such a move?

Dulal Whiteway: We have been lobbying the group on that side through the Central Bank of Trinidad and Tobago to look at ways in which we can monetize the 19 per cent shareholding. If we can get them to agree, then we can say ‘NIS needs a certain amount of shares’. Even if we did a share swap today with the NIS, the equivalent represents about 0.8 per cent of Republic Bank and CLICO Investment Bank has 19 per cent.

There is lots of room for the NIS to get in coming from that perspective. They can get more – they can negotiate that, providing we can get the receiver of the CLICO Investment Bank to go along with our proposal.

Did Government make a mistake in not accepting your earlier offer which was higher than the current $5?

Dulal Whiteway: I think that the circumstances have changed quite a bit over the past few years. Nobody envisaged that the world economy would have been in the doldrums for such a long period of time. And nobody felt

that the problems in Europe would have been at such a sustained level.

The discussions were around $5.65 then. We felt it was adequate at the time in 2010. One of the issues here for us is that we were always happy with our 65 per cent. We really weren’t looking to get 100 per cent.

However, the Government indicated several times that they wanted to sell the shares – their 18 per cent – because they felt it was strategic and that they could use that money for other things at the national level.

It was felt that out of that, if the Government wants to sell, I don’t think that there are many people who will come in and buy the 18 per cent because then you would become a very quiet shareholder without much say.

Recognizing that the Government wanted to sell, we were the only natural buyer. Maybe $5.65 at the time, they thought was not good. But since then we have had some difficult years and you know hindsight is 20/20.

At the time, we felt they were making a mistake not accepting it. We felt it was a very reasonable offer. Similarly, we think today that $5 is a very reasonable offer compared to what has happened.

Since then, the profitability of the bank has continued to decline and in fact this year, we have had some uptick, but it has been mainly because our provisions have been lowered.

People say the [trading] price is $5.50, but when did that trade take place? That trade took place over a year ago. But if you look at what the bids and the asks were before our offer, you had people who were willing to sell their shares at $4 and people who were willing to buy as low as $3. So our $5 is $1 more than what persons were willing to sell their shares at.

So you are not taking advantage of a situation when Barbados is down and out and badly in need of foreign currency?

Dulal Whiteway: No, not at all, when compared to what the independent valuers have said the shares are worth.

When we bought into BNB, I can recall the share price was $1.80 and we paid about $3.42 per share back in 2004 and Government didn’t sell everything out. But between 2004 to now, the share price has appreciated significantly. So it is not as though there is any loss in the transaction. KMPG said that the range of values for the shares here is $4.35 to $4.81. So we are paying a price that is very attractive.

So what you are saying is that there was more an urgency on the part of Government to sell than an urgency on the part of Republic to buy?

Dulal Whiteway: Yes, that’s right.

I’m sure by now you have heard the concerns of Barbadians about the level of financial influence that Trinidad exerts in the island. Is there a reason for Bajans to feel concerned about the power you hold in the economy?

Dulal Whiteway: I can talk about Republic. When you look at what we have done over the last eight years, it has always been a case where we have created win/win situations. We see ourselves as long-term investors and players in this market. The success of Barbadian economy and society is very much in line with what we are concerned about and what our interests are. Because if this economy is successful, we are also very successful. When we came in in 2004, I know we had a lot of work to do to try to prove ourselves as being good corporate citizens to the people of Barbados.

What are the projections for the Trinidad economy?

Dulal Whiteway: [The year] 2012 might be flat; 2013, the finance minister is hoping he can get about a two per cent growth in the economy.

How do you feel about the Barbados market?

Dulal Whiteway: The economy here depends on what is happening in [Britain] and Europe because of the impact of tourism. The one thing I have always admired the Barbadian public for is that you have an ability to come together in hard times and work towards one common good. That discipline and that “put country first attitude” and philosophy is what will protect you for the long term and give one confidence that at the end of the day, this economy will survive, will go through the rough times and will come out stronger.

The good thing is that even though tourism is having some difficult times, I always say that Barbados sits on some of the best real estate in the world and because you have a quality product here, it means that when people are looking for places to stay, I think Barbados will always be seen as one of the top places to come to.

Be that as it may, you still have to look for ways to diversify the economy outside of tourism and look at some of the things that can be done in order to give more resilience going forward.


Source:
Nation News
Sunday November 25, 2012

http://www.nationnews.com/articles/view/republic-no-new-shares/