“We are just refocusing on the markets with size and scale… (and) even after this transaction we will be servicing 90 per cent of the Caribbean,” said Stephen Bagnarol,
“We have made clear we are committed to the Caribbean; we have made the recent acquisition in the Dominican Republic and the investments we are making in these other countries. We are driving now digital alerts all across the Caribbean and these are big investments the bank continues to make in these markets.
Bagnarol told reporters yesterday at a news conference at the bank’s TT head office on Park Street, Port of Spain, that Republic was a “first rate institution,” and the right partner because they share the same core values.
“We value our customers and employees a lot. We decided to partner with Republic because they wanted the talent and they expressed a desire to grow. It’s a great win in these countries.”
He said there would be a smooth transition from Scotiabank to Republic Bank, so long as all regulatory approvals are given, a process which he said could take up to six months. The Trinidad-based Republic Financial Holdings Limited (RFHL) said Tuesday it had entered into an agreement to acquire Scotiabank's banking operations in nine Caribbean countries.
A RFHL statement said that the banks being acquired are located in Guyana, St Maarten, Anguilla, Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines.
It said that the purchase price is US$123 million, which represents US$25 million consideration for total shareholding of Scotiabank Anguilla Limited; and a premium of US$98 million over net asset value for operations in the remaining eight countries.
“These transactions… are still subject to regulatory approval and we will work with all the different governments and regulators to make sure there is a smooth transition,” said Bagnarol, who is also the managing director of Scotiabank Trinidad and Tobago Limited.
“We are very comfortable and confident that we are partnering up with a very strong partner, particularly in the nine countries we talked about. Republic is a strong regional player that has intentions to grow and there's no job loss, [and] we are taking on 100 per cent of the staff in these countries,” he added.
He told reporters that the Canadian-based bank was confident going forward, saying, “We are a regulated entity and we make sure we go through all the right channels and processes to make sure we do this by the law and by the regulations.”
The deal was not welcomed by at least two governments—Guyana and Antigua and Barbuda. The Antiguan government said the parties did not ask for permission, while the Guyana finance ministry said the transaction “raises concerns and is regretted.”
In a letter to the Eastern Caribbean Central bank (ECCB), Prime Minister Gaston Browne of Antigua said that “this matter has implications for the integrity of the banking system in Antigua and Barbuda and, indeed, for the stability of the Eastern Caribbean currency.
“In the circumstances, the Government of Antigua and Barbuda has concluded that the divestment announced by the Bank of Nova Scotia is not in the overall interest of our country and our people.”
Browne said, therefore, he was advising the ECCB that “until other options for divestment are explored, particularly providing a consortium of local banks the right of first refusal to acquire the Antigua and Barbuda operations, the Government of Antigua and Barbuda will not issue a vesting order”.
However, Bagnarol told reporters: “I cannot comment on speculation about what could or couldn’t happen. What I will say is we will work with all the regulators in each of the counties. We do believe this is the right thing for Scotiabank, Republic, and their staff and clients,” Bagnarol said.
"This is a process that would take four to six months and we will continue to work with them," he said.
“We do believe this is the right thing for Scotiabank, the right thing for Republic, the right thing for our customers in these markets.
“I cannot speak to the prime minister of Antigua, but what I can say is that I can look at the deal and the merits of the transaction and know that a transaction where there is no job loss and you are having a partner in there a first-rate partner that is going in and wanting to go grow the business — I think that's a good thing.”
Bagnarol said Scotiabank wants to grow and do so in “core” markets such as in Trinidad and Tobago, Jamaica, the Dominican Republic, adding, “You don't have to spread yourself out in so many markets so thinly, so you can concentrate on bigger markets of size and scale.
“For us as an international bank, these are the markets where we have size and scale,” he said, adding, “we are an international bank and we want to concentrate on these markets of size and scale. For Republic, this presents a great opportunity for them to expand in the Caribbean.”
Republic’s managing director Nigel Baptiste also attempted to assuage concerns, especially in Guyana, where the finance ministry feared the bank’s massive presence would influence market forces, since Republic’s share would grow from about 35 per cent to 51 per cent. “We believe that while the market share itself appears large if you disaggregate that market share and look at with respect to the various business sectors, government and private individuals, the picture would vary substantially. As such, we remain hopeful, if not confident, that once all of the issues are ventilated and addressed, there will be considerably less angst in the markets,” he said.
Baptiste also compared the difference of Scotiabank’s size and scale and Republic’s. “Scotia’s global asset base is US$752 billion, their annual revenue is US$21.85 billion and their annual profit is US$6.7 billion. Republic’s asset base is US$10.5 billion, our annual revenue is US$750 million and our annual profit is US$198 million. The scale of the two operations is therefore considerably different. US$2.5 billion in assets is 20 per cent of our total but less than 0.2 per cent of their total. We could do exactly the same thing that they do and the impact for us would be far greater than it would be for them,” he said.
Despite the scale-down, Bagnarol said Scotiabank was committed to the region and will still be present in 90 per cent of the region, serving 1.5 million clients with a 7,700-strong staff. For the overall group, he said, the Caribbean contributed US$600 million to the bottom line. The focus now, he said, will be focusing on larger-scale markets, and using resources to enhance service delivery to customers, through new products like digital branches and next-generation ATMs.
He said Scotiabank was also pleased to be entering into a partnership with the regional insurance company, Sagicor, to provide products to its clients.
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