…allays fears of customers, says deal is the best

By Gabriella Chapman
Scotiabank has sought to allay the fears of customers who have already started making a run on the bank following the announcement that it has sold its operations to Republic Bank. It also disclosed that all of its impacted staff will join the Republic Bank as per the agreement.

In a newspaper notice the Canadian-headquartered bank said until regulatory approval is obtained and closing conditions are met and the transaction closes, “all Scotiabank operations in these countries will continue as usual.” The Bank added: “Customers do not need to make any changes to their accounts, loans or other banking services at this time.”

The bank said in its statement that “we are proud to have entered into this agreement with Republic-a leading financial institution with operations across the Caribbean that is committed to investing in the business and delivering enhanced financial products and services that best serve customers’ need.” The bank said it is confident that the agreement “provides the best long-term solution for our customers. We will work closely with Republic to provide as smooth a transition as possible for all customers and employees and as part of the transaction, all impacted employees will join Republic.”

On Tuesday 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.

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, 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.”

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 nine 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.

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.”

Guyana assessing
Meanwhile, Minister of State, Joseph Harmon told a news conference on Friday the move by Scotiabank to sell its operations to Republic Bank is being assessed by the government. Asked about the government’s position at his post-Cabinet press briefing, he reminded that Finance Minister, Winston Jordan recently issued a comprehensive statement on the issue. Referring the move by Antigua, Minister Harmon noted that a similar move would not be granted permission. He said that each country has its own peculiarities. “While Scotiabank is in all these countries, the situation in Guyana is not the same…

What Minister Jordan has said is that the proposal, which has come out, is for Republic Bank, in buying out the ownership of Scotiabank in Guyana, to actually own 51 percent or 53 percent of the banking services in this country and that is unacceptable.” The Minister of State said that the government will determine what is in Guyana’s best interest. “I believe the statement made by the Prime Minister of Antigua and Barbuda is a good statement. It deals with his situation. Our Minister of Finance has made a statement also, on the matter here, and I believe we are going to assess the situation and we will make a determination as to how it affects us here.”

Concerns raised
Minister Jordan, in a statement on Tuesday last, said the agreement which sees Republic Bank taking ownership of Scotiabank, raises a number of issues for the banking sector in Guyana and for the public which the Finance Ministry, the Bank of Guyana and the Government of Guyana will need to carefully consider.

It noted that Republic Bank currently holds 35.4 per cent of the banking systems assets and 36.8 per cent of deposits and the acquisition will up this to 51 per cent of both assets and deposits. This raises concerns about an over-concentration of banking services, market domination and the ‘too big to fail’ risks. The statement also noted that “The Scotiabank 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. Among other concerns is the effect on competition and the potential for Republic Bank to have too much influence on the pricing of banking products and rates, issues related to correspondent banking options and loss of jobs as a result of Republic Bank consolidating branches were other concerns.”

The ministry has pointed to the Financial Institutions Act (FIA), which has clear stipulations regarding ‘acquisition of control’ and requires approval by the Bank of Guyana following the submission of an application and due diligence being conducted. The FIA also addresses the issue of ‘fundamental changes’ as it relates to mergers and transfer of assets or liabilities. The Finance Ministry emphasised that the announcement is not Guyana-specific but is part of a region-wide refocusing by Scotiabank. The public is being assured that the ministry will continue to stay abreast with the matter and will act in the best interest of the citizenry and issue updates as necessary.