The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former finance minister yesterday voiced optimism that The Bahamas is “too profitable” for Royal Bank (RBC) and its Canadian rivals to abandon following their eastern Caribbean exit.

James Smith, also an ex-Central Bank governor, told Tribune Business that RBC and Scotiabank were unlikely to leave this nation and the other major regional territories given the greater earnings, product ranges and business activities on offer.

Speaking after RBC yesterday confirmed it was following the latter’s lead by selling its business operations in seven smaller Caribbean nations to a consortium of local banks, Mr Smith suggested none of the three Canadian-owned banks (CIBC FirstCaribbean retains that status for the moment) are likely to depart “any time soon”.

“They have no interest in leaving The Bahamas,” he argued. “I say this because The Bahamas has always been rather profitable for them, and the range of business activity is wider. I doubt very seriously that in the eastern Caribbean there was much private banking, wealth management and trust business.

“I think the range of products, profitability and activities is much wider in The Bahamas and the Cayman Islands, and it’s not warranted leaving this area at this time..... It’s unlikely, and it doesn’t seem to be in the outlook of the major Canadian banks to exit any time soon. We’re still an offshore centre, and there are things that still can be done more efficiently offshore than onshore.”

RBC yesterday unveiled its exit from Antigua and Barbuda; Dominica; Grenada; Montserrat; St. Kitts and Nevis; St. Lucia; and St. Vincent and the Grenadines by selling its operations in these territories to locally-owned institutions.

It retains a presence in The Bahamas, as well as Trinidad & Tobago, Barbados, the Cayman Islands and Turks & Caicos, all of which are larger, higher income markets. RBC has given no signs of an impending exit from this nation, and recently unveiled its digital branch prototype at Old Fort Bay.

“Consistent with our strategy of being a competitive leader in the markets where we operate, RBC is always evaluating opportunities for our business. Earlier this year we were approached by a consortium of indigenous banks with their proposal to acquire all RBC Eastern Caribbean operations,” said Rob Johnston, head of RBC Caribbean banking.

“After a review of our operations and strategy, we determined this opportunity was a good decision for the long-term future success of RBC Caribbean, and also, that it aligned with our vision to help our clients thrive and communities prosper.”

He added: “RBC has operated in the Caribbean for more 100 years – longer than we have been in many parts of Canada. We remain committed to the future of the Caribbean and to a vision of digital innovation that transcends traditional services.

“This transaction will allow us to realign and focus our strategy on Caribbean markets where we can achieve that vision most successfully. Self-determination is the highest level of empowerment, and the indigenous banks acquiring this business will now have an increased opportunity to influence the development of their communities.”

Mr Smith yesterday suggested that increased compliance costs, stemming from international regulatory initiatives, may have also influenced RBC’s move in what has become a general trend of Canadian banking pull-back from a region where institutions have suffered high non-performing loan levels since the 2008-2009 recession,

RBC’s decision also comes on the heels of CIBC’s decision to sell a majority two-thirds ownership interest in FirstCaribbean to Colombia’s GNB Financial Group - a deal that is expected to close next year.

GNB is to acquire a 66.73 percent equity stake in FirstCaribbean, taking majority control from CIBC to enable the Canadian bank to begin its long-awaited Caribbean exit. The latter will retain a 24.9 percent minority position in its former regional affiliate once all necessary regulatory approvals in The Bahamas and other jurisdictions are received.