…gov’t concerned about loss of jobs, market domination by Republic Bank
…promises to act in best interest of Guyanese

THE Government of Guyana on Tuesday said the sale of Scotiabank to Republic Bank is regretted and raises concerns about an over-concentration of banking services, market domination and the ‘too big to fail’ risks, with the Trinidad-headquartered bank now in possession of 51 per cent of both assets and deposits of the banking systems.

Bank of Nova Scotia (BNS.TO) on Tuesday reported fourth-quarter earnings which were marginally below expectations and said it planned to exit nine countries in the Caribbean as part of a shake-up of that business. The bank, which has operated in the Caribbean since 1889, said that it would refocus its business in the region by selling its insurance operations in Jamaica and Trinidad & Tobago to Sagicor Financial Corporation, with whom it will partner to sell insurance products in those countries.

Scotiabank said it planned to sell its banking operations in Anguilla, Antigua, Dominica, Grenada, Guyana, St Kitts & Nevis, St Lucia, St Maarten, St Vincent & the Grenadines to Republic Financial Holdings.

In a statement of its own on Tuesday the Ministry of Finance said Republic Bank currently holds 35.4 per cent of the banking systems assets and 36.8per cent of deposits in Guyana and the acquisition of Scotiabank will up this to 51 per cent of both assets and deposits.
This too will have an impact on competition and the potential for Republic Bank to have too much influence on pricing of banking products and rates. The sale will also have an impact on issues related to correspondent banking options and the loss of jobs with Republic Bank likely to consolidate branches.

The finance ministry said the decision is made when Guyana’s economy is on the cusp of financial transformation with the onset of massive new oil and gas sector raises concerns and is regretted.

Meanwhile, emphasising that the move is not Guyana-specific and is part of a region-wide refocusing by Scotiabank, the Ministry of Finance said it notes the statement by Republic Bank that the agreement is “subject to all regulatory approvals”. According to the ministry, the Financial Institutions Act (FIA) has clear stipulations regarding ‘acquisition of control’ and requires approval of the Bank of Guyana following the submission of an application and due diligence being conducted. Further, the FIA addresses as well the issue of ‘fundamental changes’ as it relates to mergers and transfer of assets or liabilities.

“The agreement raises a number of issues for the banking sector in Guyana and for the public which the Ministry of Finance, the Bank of Guyana and the Government of Guyana will need to carefully consider,” the finance ministry said. “The Ministry of Finance wishes to assure that it will continue to stay abreast of this matter, will act in the best interest of the Guyanese people and will issue subsequent updates as necessary,” the statement concluded.

According to a Reuters report, the transactions are not material to Scotiabank, but will result in its core tier one capital ratio, a key measure of its financial strength, increasing by 10 basis points when the deals, which are subject to regulatory approvals, close. The bank reported adjusted earnings per share of C$1.77 in the quarter ended Oct. 31, up eight percent but marginally below the average forecast by analysts of C$1.79 per share, according to IBES data from Refinitiv.

Excluding one-off costs, net income rose by 13 per cent to C$2.35 billion ($1.77 billion), compared with the average estimate by analysts of C$2.24 billion, according to IBES data. For the full year, Scotiabank reported a 7 per cent increase in earnings at its Canadian business to C$4.4 billion, helped by improved margins as it benefited from five Bank of Canada rate hikes since last summer and growth in customer deposits.

The bank’s international business increased earnings by 18 per cent during the year, driven by growth in the Pacific Alliance trading bloc which comprises Peru, Mexico, Chile and Colombia and accounts for around a quarter of its revenues. Scotiabank is the first of Canada’s major banks to report fourth-quarter earnings. Royal Bank of Canada (RY.TO) and Toronto-Dominion Bank (TD.TO) will report later this week.