Republic Bank acquires Scotiabank Guyana

…several other Caribbean branches for US$123 million

Republic Financial Holdings Limited (RFHL) announced that it has entered into an agreement to acquire Scotiabank’s banking operations in Guyana, St. Maarten and the Eastern Caribbean territories, including Anguilla, Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.

Scotiabank says proud to work with the Republic Group

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 (8) countries, the Trinidad-headquartered bank said in a release.

This price does not include any amounts required to capitalise the branches post-closing, Republic Bank said. According to Republic Bank the agreement, executed on November 27, 2018 signalled the commencement of a transaction that is subject to all regulatory and other customary approvals and conditions.

In making the announcement, Ronald F de C. Harford, Chairman of RFHL, said “This acquisition represents another major milestone for the Republic Group.  As we grow and acquire significant positions in our existing markets, it is important that we continue to broaden our footprint, regionally and internationally.”

Ronald F de C. Harford, Chairman of RFHL

He added: ”This agreement, which is subject to all regulatory approvals, affords us the opportunity to reach more clients in the Eastern Caribbean and Guyana, two markets we are familiar with, and build new relationships in St. Maarten. We are confident that our expanded presence or entrance in those markets will redound to the benefit of Scotiabank’s clients and employees as well as Republic’s existing stakeholders. I would like to thank Scotiabank for the confidence expressed in our ability to look after their valuable clients, and we are pleased that all impacted employees of Scotiabank in the 9 countries will join the Republic Group.”

According to Republic Bank, its Group’s total asset base as at September 30, 2018 stood at US$10.5 billion, with equity at US$1.5 billion and profits attributable to shareholders for the year ended September 30, 2018 of US$198 million. This acquisition will increase the Group’s asset size by approximately US$2.5 billion and will be accretive to the earnings of the Group by approximately US$ 0.20 per share. Citigroup Global Markets Inc. is advising RFHL on this transaction.

“Scotiabank is proud to work with the Republic Group – a leader in financial services in the Caribbean who is well positioned to invest and grow the business, and to provide customers across the region with leading financial solutions that meet their needs,” said Ignacio (Nacho) Deschamps, Group Head, International Banking at Scotiabank.

Ignacio (Nacho) Deschamps, Group Head, International Banking at Scotiabank

Harford explained that RFHL’s focus on seeking out expansion opportunities in the Caribbean is a testament to the Group’s confidence in and commitment to the Caribbean region. He added, “We have a proven track record of adding value to the markets we enter, and we look forward to partnering with the teams in these territories to deliver excellence in customer satisfaction, employee engagement and social responsibility.”

Closing operations

Since in 2014 Canada’s Scotiabank had announced plans to shut or shrink 120 branches, largely in Mexico and the Caribbean, in a bid to save CAN$120 million (One Canadian dollar =US$0.87 cents) annually. The bank said then it would close down 35 of its 200 branches in the Caribbean and would sever 1, 500 full-time employees, including 500 from its international operations.

“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 then Scotiabank chief executive officer, Brian Porter.

Porter said that the bank’s revenue growth has been encouraging outside Canada, but profit has not jumped as much he would like.   “The frustration for us across the international footprint is we’ve had very solid asset growth over the last three or four years, and not all of that has dropped to the bottom line,” he said, adding that the bank still has plans to grow in the region.  Scotiabank said the closure of the Caribbean branches were due “to the prolonged economic recovery and continued uncertain outlook” and that it had started restructuring initiatives “in order to improve the speed and quality of service it provides its customers, to reduce costs in a sustainable manner, and to achieve greater operational efficiencies.

“The bank intends to record a restructuring provision of approximately CAN$148 million in the fourth quarter. The majority of the restructuring provision relates to employee severance charges in the bank’s Canadian banking and international banking divisions and will affect people at all levels of the organisation.” The statement said “in international banking, the charges are primarily for closing or downsizing approximately 120 branches, which will allow us to focus on high-growth markets, minimise branch overlap, and realise synergies resulting from recent acquisitions.” Scotiabank made a record CAN$6.7-billion net income in 2013.

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