Jan 2013 Financial News

Republic Bank’s thirst for acquisitions still unquenched

Jan 17, 2013

Of the ten goals he set for himself when he first became managing director of Republic Bank Ltd in 1997, now chairman Ronald Harford remains with one unfulfilled: “a transformational acquisition.”

Harford told a freshly-minted cohort of masters of business administration (MBAs) that he still proudly has on his desk “a tattered piece of paper” with the ten goals he set for himself when he took the helm of the country’s only remaining local, independent, and privately held bank.

Speaking to reporters after the graduation of the 190 new MBAs from the University of the West Indies Arthur Lok Jack Graduate School of Business at the Hyatt Regency Trinidad hotel in Port-of-Spain on January 12, Harford said: “A transformational acquisition was always one of my goals and it has always eluded us, so one day we’ll make one: a transformational acquisition.”

He said the past acquisitions have been “really small.”

“Any one of the acquisitions we’ve made has been no bigger than ten per cent of the bank or 15 per cent of the bank, no bigger than that.”

On December 11, 2012, Republic announced it had acquired an 8.9 per cent stake in HFC Bank in Ghana, but Harford has his eyes set on a bigger acquisition. Asked for particulars, he would only say, “There are always things in the pot stirring, but I can’t tell you too much about that.”

On Ghana, he said: “Well, that is something big we want to do. We’re going into Africa (and) I would think that in five y’ time, I would like to see us as one of the top three or four banks in Ghana, so that would be one of the main objectives going forward. We just did a small acquisition, which is a pathway to control.”

On the Clico Investment Fund (CIF) performance, Harford said buying into the mutual fund now would be a great way to get a huge discount on Republic Bank Ltd (RBL) shares as RBL shares have been trading in the vicinity of $105, and the mutual fund units, four of which make up one RBL share, have sold for as low as $20.

Asked if he thought the bondholders who did not exchange their government settlement bonds for units in the mutual fund were waiting for RBL’s first quarter results, he said: “I don’t know why they should want to do that. You can be assured that we always do well, and we will do well. You don’t have to worry about Republic Bank, and we’ll pull everyone else along with us.”

Attempting to bring closure to the Clico collapse and government bailout, government had initially offered the holders of short term investment products issued by Clico and British American (Trinidad) Ltd, a settlement of a mix of cash and zero-coupon bonds with maturities of one-ten and 11-20 years to meet their liability of $12.1 billion.

Only 6,582 bondholders exchanged their bonds for units in the mutual fund during the initial offer period of November 1 to December 14, 2012. Jerry Hospedales, chairman of the Clico Trust Corporation Ltd, which is the trustee of the CIF, said on January 7, that the remaining 6,606 bondholders who did not, can still do so through any broker registered with the T&T Securities and Exchange Commission.

Outlook for 2013

Giving his outlook for 2013, RBL’s Harford said: “I’m encouraged by some signs I’m seeing. There are endless requests for proposals, or contracts, in the newspapers. These have a gestation period which can take six months to a year to get done but at least thing are moving, right? So I think we’re going to see some activity while people marshall themselves to take advantage of the opportunities that the requests for proposals offer. So I think that is encouraging.

“I think also (with regard to) the exploration in oil, for the first time, government realises that there is a lot of benefit to be derived from allowing land exploration by small companies. You know, the big companies don’t care about four million barrels or so. They want big amounts, so these (smaller) companies that are churning out 500 barrels, 1000 barrels, 200 barrels (of oil per day) make a big contribution in the end, and they make a big contribution to the employment situation in T&T.”

When asked if RBL would therefore be considering launching an energy fund to finance some of the smaller ventures, Harford said: “Well, we won’t be launching it as such, but there are a couple of our customers who are launching such funds and we’re looking at supporting them.”

Returning to the topic of the graduation of the class of 2012, Harford, who is also a member of the board of Lok Jack GSB, said he welcomed the new cohort.

“When you looked at the reports and accounts of the companies on the stock exchange 15 years ago, you didn’t see the quality of qualifications we have today, so all these people will be filling these operations; and it’s much, much better to speak to intelligent people than to speak to fools, because you never know where a fool is coming from, but an intelligent person you can reason with, even if you have disagreements, right? But fools, no way.

“So I think Trinidad is becoming a more educated society, a much more discerning society and, as a result of that, they will demand more of T&T, which they need to do. There’s too much nonsense going on. We need to demand more out of our leaders.”


Source:
ALEEM  KHAN
Trinidad Guardian
Thursday January 17, 2013

http://guardian.co.tt/business-guardian/2013-01-17/republic-bank%E2%80%99s-thirst-acquisitions-still-unquenched