The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Scotiabank (Bahamas) imminent restructuring was yesterday causing “further concerns” for unemployment and the commercial banking industry, amid suggestions the institution was reviewing the future of up to eight branches.

The bank’s top executives were tight-lipped on the downsizing specifics, and potential level of job losses, declining to divulge details when contacted by Tribune Business.

This newspaper understands that the Bahamian subsidiary is waiting for Scotiabank’s Caribbean regional headquarters, and Toronto head office, to give final approval for the restructuring plan it has submitted to them. This approval is expected imminently,

Tribune Business sources yesterday suggested the bank was assessing the futures of up to eight branches spread throughout the Bahamas, including three in New Providence.

“I heard they were planning on closing eight branches and letting go an unspecified number of staff members,” one source said.

They said that the New Providence branches set to be impacted were those at Caves Village, East Street South and Soldier Road, and the British Colonial Hilton.

However, another source described this number, and the branch names, as “not entirely accurate”.

Scotiabank was also said by some sources to be considering the future of several Family Island branches, including those in Eleuthera and Long Island, although others suggested any changes here might involve a reduction in staff working hours.

Scotiabank (Bahamas) top executives are unable to comment until the restructuring plan is finally approved, Tribune Business understands, and because there is an established process to follow.

They have to brief, and deal with, both the Government and regulators (chiefly the Central Bank), and also have to inform impacted staff before making any public announcement as per corporate protocol.

However, Scotiabank’s plans have raised further alarm over the commercial banking industry’s future, following significant staff lay-offs and retrenchments by its fellow Canadian-owned banks, Royal Bank of Canada and CIBC FirstCaribbean.

“Obviously, it’s a further concern for us in terms of the domestic banking industry and what all this contraction will mean in the end,” the FNM’s deputy leader, KP Turnquest, told Tribune Business.

“There’s a pool of qualified Bahamians that now find themselves displaced, and with all the contractions at the other banks, there is not a ready market for them to re-enter. We have to figure out ways and industries for them to be employed.”

A banking industry source, speaking on condition of anonymity, said of any potential Scotiabank lay-offs: “Those jobs are going to be lost for ever. They’re not coming back.”

And another observer familiar with the situation added: “The critical point is what is happening in our financial services sector to cause such a retrenchment. Why not sell those branches to Commonwealth Bank or Bank of the Bahamas? Those are not low payroll jobs, and those people are unlikely to find employment elsewhere.”

In truth, the writing has been on the wall for a Bahamian downsizing ever since Scotiabank’s global chief executive last year unveiled plans to close 120 branches, most of which were in the Caribbean and Mexico.

Some 35 of its 200 branches in the Caribbean were earmarked for closure, with 500 international jobs set to be lost, as Scotiabank sought $104.4 million in annual savings.

“In some of these (Caribbean) countries, we are just over-branched and we have to size it to the economic realities of these economies,” said Scotiabank chief executive officer, Brian Porter.

The FNM’s Mr Turnquest suggested yesterday that the Scotiabank restructuring was likely being driven by the bank’s need to improve efficiencies, and its competitiveness, by realigning its cost base.

Yet he also blamed it partly on the Christie administration, citing the increased regulations and taxes - particularly the 3 per cent Business Licence fee and Value-Added Tax (VAT) - that had been imposed on the sector since May 2012.

“As a jurisdiction, I don’t know it anything significant has changed in the model,” Mr Turnquest told Tribune Business. “In percentage terms, the Bahamas is still the biggest income producer for the Canadian banks, so I don’t see that as the rationale.

“It’s a combination of efficiency and innovation, and trying to rationalise the costs in this jurisdiction.”

The action being taken by Scotiabank, and previously by its fellow Canadian-owned banks, has been driven by the reduced revenues and profitability (including losses) stemming from the Bahamas’ pile of $1.2 billion non-performing loans - more than $1 out of every $5 lent.

Working their way out of this will likely take years, and in the meantime they have to contend with the Bahamas being a high-cost, inefficient economy.

A Toronto Globe & Mail article showed just how the Caribbean is dragging down the global results for CIBC, Royal Bank and Scotiabank.

According to the article, CIBC FirstCaribbean’s $835 million worth of gross impaired loans accounts for 58.4 per cent of the total $1.43 billion incurred by its Canadian parent.

As for Royal Bank, the region accounts for 40.4 per cent or $800 million of its $1.98 billion gross impaired loan book. Finally, Scotiabank’s bad Caribbean credit totals 35.2 per cent, or $1.5 billion, out of its $4.26 billion in gross impaired loans.

These statistics, and associated losses and reduced profits, explain why the three Canadian-owned banks have been desperate to consolidate and reduce costs in the Bahamas and elsewhere

One banking executive yesterday said staff costs were the “biggest element” in the Bahamian commercial banking industry’s operating expenses, accounting for between 40-60 per cent of branch costs.

This is also not the first consolidation exercise undertaken by Scotiabank (Bahamas). Last year, two units - its processing support centre and the centralised retail collections unit - were transferred to its Caribbean South Shared Services hub in Trinidad & Tobago. Staff affected then accepted voluntary redundancy packages.