The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Scotiabank (Bahamas) executives will meet this week with the Ministry of Labour to formally present details of its restructuring plan, which will result in branch closures and lay-offs.

The move comes after Prime Minister Perry Christie confirmed that he met with the bank’s management on Thursday for a briefing on the retrenchment plans.

One source familiar with the situation told Tribune Business: “I gathered that they [Scotiabank] met with him, the Prime Minister, and the governor of the Central Bank. They’re supposed to meet with the Ministry of Labour on Monday [today].

“They are also making several trips to the islands [this week]. The story’s out there, but they’ve not been very forthcoming with the facts.

“They’re clearly trying to manage this, but my concern is the deep erosion in the financial services sector, and the way they’re handling it is causing more nervousness.”

Other Tribune Business sources said Scotiabank (Bahamas) management met at the British Colonial Hilton on Thursday for a briefing on the restructuring plans, the same day that senior executives met with Mr Christie.

Tribune Business reported last week that Scotiabank (Bahamas) was waiting for its Caribbean regional headquarters, and Toronto head office, to give final approval for the restructuring plan it has submitted to them. This approval was expected imminently.

This newspaper’s contacts suggested the bank was assessing the futures of up to eight branches spread throughout the Bahamas, including three in New Providence.

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

Another source described the branch names, as “not entirely accurate”, amid suggestions that it was the Wulff Road branch - rather than East Street - that has been earmarked for closure.

Scotiabank is also considering the future of several Family Island branches, including those in Eleuthera and Long Island. Sources suggested that, in total, up to 50 jobs may be at risk.

The bank is refusing to comment on its plans, Tribune Business understands, until they obtain head office approval, and the task of briefing the Government and regulators is completed. It also wants to inform all impacted staff before making any public statement, in accordance with established protocols.

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.

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, Brian Porter.

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.

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.