Jan 2007 Financial News

CIBC to consider acquisitions in C'bean

Jan 19, 2007

Canadian Imperial Bank of Commerce (CIBC), the parent of Barbados-based FirstCaribbean International Bank (FCIB), is looking to make further acquisitions in the Caribbean.

Earlier this week, CIBC's CEO Gerry McCaughey said: "Amid a "challenging" marketplace for good acquisition opportunities, CIBC is interested in further expansion in the Caribbean."

CIBC recently took a majority stake in (FCIB), snapping up Barclays' stake in the Caribbean's largest banking entity.

McCaughey told an investor conference that FCIB has a history of making smaller acquisitions. This may be due to the fact that the Caribbean bank is relatively new, taking almost five years to find its feet and grow in confidence.

Although FCIB deals were not large, they added to earnings and expanded FirstCaribbean's footprint in the region, "From a FirstCaribbean viewpoint, we will continue to look at opportunities within the region, and we think growing within the region is of interest," McCaughey said at a financial services conference organised by RBC Capital Markets.

For the financial year November 2005 to October 2006, FirstCaribbean recorded a net income of US$170.6 million, an increase of 24 per cent over the previous year. FCIB was able to increase its revenue by 18 per cent, mostly due to an increase in interest income, as a result of improved earnings from its loans. Most significantly, FCIB's overall loans for the year came in at US$5.7 billion, an increase on the previous year by a US$1 billion. The ratio of costs to revenue now stands at 58.5 per cent.

Speculation is rife that with excess liquidity, FCIB is contemplating a move on Guardian Holdings' 13.5 per cent share in Trinidadian powerhouse RBTT. RBTT is a big player within the Caribbean banking sector and its assets would add to FirstCaribbean's critical mass.

With Guardian Holdings taking a beating in 2006 due to the poor performance of Caribbean stock markets, it may be propitious to sell non-core assets, thereby mitigating the write down of tanking equities.

Caribbean Business Report spoke with FCIB (Jamaica) Managing Director Milton Brady on whether his parent company would be acquiring Guardian Holdings' stake in RBTT or for that matter the Trinidadian bank entity lock, stock and barrel.

"It would be inappropriate of me to comment on this matter. Perhaps your queries should be directed at our head office in Barbados. We generally don't comment on acquisitions we are about to make, or are considering for that matter."

CIBC and other Canadian banks are scouting for acquisitions because they are sitting on vast amounts of excess capital.

Over the next three to five years, CIBC will have more excess capital to reinvest than potential acquisition opportunities that lie within the Caribbean region, McCaughey noted.

"The reinvestment of capital is the greatest long-term challenge in terms of value creation," he said.

"Suitable (acquisition) targets are difficult to find, and by suitable I mean hitting our criteria, at the right value point, and having some strategic rationale."

McCaughey said CIBC had looked at possible acquisitions in the United States for several years.

"We have visited many institutions in the US, many of them are interesting and well-run, but the three criteria that I mentioned are difficult to find," he said.

Al Edwards
The Jamaica Observer
Friday, January 19, 2007
http://www.jamaicaobserver.com/magazines/Business/html/20070118T230000-0500_118056_OBS_CIBC_TO_CONSIDER_ACQUISITIONS_IN_C_BEAN.asp