The Bank of St Vincent and the Grenadines Limited (BOSVG) is purchasing the local branch of CIBC FirstCaribbean, a transaction that is expected to touch the lives of many Vincentians.
Prime Minister Dr Ralph Gonsalves, who made a statement on the matter during today’s sitting of the House of Assembly said he anticipates the approvals will be consummated within a six-month period.
Gonsalves gave the assurance that once the transaction is completed, because of the extent of the BOSVG’s current equity, it’s in a position where it has sufficient buffer to allow for the increase of 585 million in assets from CIBC FCIB.
He said on the combination of the business, the Capital Adequacy Ratio is well above the minimum legal regulatory requirement. At the moment the Tier 1 Capital Ratios are in excess of 20 per cent with the Total Capital Adequacy Ratio over 25 per cent.
Giving a glimpse as to what the Bank of St Vincent and the Grenadines Limited would likely look like post-acquisition, with respect to loans and advances the Bank currently has a market share of 53 per cent but after the acquisition, the market share would be almost 67 per cent.
The prime minister said the current market share for deposits is 49 per cent and in the end would be about 72 per cent.
The total assets which are currently 51 per cent of the market share would amount to 68 per cent after the acquisition once all approvals are dealt with.
Gonsalves noted the total market estimates being used are as of August 21, 2021.
He also indicated that BOSVG’s total loans and advances should move from 676 million dollars to 832 million, deposits will move from 1.036 billion to 1.583 billion and its total assets will. move from 1.26 billion to 1.8 billion.
The Bank of St Vincent and the Grenadines has a portfolio of deposit customers of just over 40,000 persons while CIBC FCIB has around 15,000 to 20,000.
“Which means this transaction will touch the lives of practically every person in St Vincent and the Grenadines.”
The prime minister highlighted that BOSVG has an extensive branch and ATM network and assured prospective customers will enjoy the same in-branch and digital banking experience that they are accustomed to.
BOSVG has eight branches across SVG and 21 ATMs. The Vincentian PM said the digital banking experience will be ramped up further as BOSVG has invested tremendous sums of money in its information systems and staff.
He said the BOSVG will also be rolling out shortly iWallet and Dcash which is offered by the Eastern Caribbean Central Bank.
The prime minister said one could see the immediate potential benefits of such a transaction including, increased customer base leading to increased revenue growth and profitability, reduced concentration in deposit portfolio and the provision of access to other key resources.
He added the transaction also provides opportunities for further product diversification including the introduction of investment products, given the level of liquid assets being purchased.
The prime minister noted that anytime there is involvement in transactions like this kind, there are always potential risks.
He said the context in which the bank operates “we have to be mindful that any economic stagnation or decline, fall out from COVID-19 and lingering effects of La Soufriere volcanic eruptions may impact projected revenues and increase non-performing facilities exposure.”
In relation to workers, it is the intention of BOSVG to select employees on the basis of assessment and what is needed from the pool.
On October 12, FirstCaribbean International Bank Limited announced that its wholly-owned subsidiary, FirstCaribbean International Bank (Barbados) Limited (“FCIB Barbados”), agreed to sell its banking assets in St Vincent, Grenada, Dominica and St Kitts to:
- The Bank of St Vincent and the Grenadines Ltd
- Grenada Co-Operative Bank Limited
- National Bank of Dominica Ltd
- St Kitts Nevis Anguilla National Bank Ltd
Its wholly-owned subsidiary, FirstCaribbean International Bank (Cayman) Limited (“FCIB Cayman”), agreed to sell its banking assets in Aruba to Aruba Bank N.V.
It stated the transactions are all subject to regulatory approval, including from the Central Bank of Barbados, and are expected to be finalised in the coming months.
In Aruba, the purchaser is Aruba Bank, the largest commercial bank on the island. That transaction is subject to regulatory approval by the Central Bank of Aruba (CBA).
In announcing that the applications will be submitted shortly to the various regulatory bodies, CIBC FirstCaribbean’s Chief Executive Officer, Colette Delaney, noted that: “These transactions enable FirstCaribbean to optimise and simplify its business, further enhance efficiency and focus on core markets to accelerate growth.
She noted: “In each case we chose a partner that is an excellent fit in its respective market, given that its knowledge of the local markets match with our product offerings and client base and strong market positioning.
They each bring a depth of local knowledge to the market and the needs of our clients there, which we believe will serve them well in their positioning for the future.
We remain committed to executing on our long-term strategy and delivering the best outcome for clients, shareholders, employees and communities.”
The four OECS-based banks are market leaders in their respective territories, which offer the full spectrum of commercial banking services and electronic channels.
They are supervised by the Eastern Caribbean Central Bank and require its regulatory approval. Collectively, they have been serving the peoples of the ECCU for a combined period of over 200 years.
Their customer base includes consumers, small and middle-market businesses, large corporations, statutory bodies and central governments; and remain committed to helping their customers achieve success.
With total assets of over AWG 2.7 billion, Aruba Bank was established in 1925. Based on the State Ordinance on the Supervision of the Credit System, Aruba Bank is being supervised by the Central Bank of Aruba. Aruba Bank has a market leading position and is a full-fledged customer-oriented commercial bank. Their affiliation with the Orco Group ensures that they can offer customers a complete, global experience.
Aruba Bank’s Managing Director, Peter Staal, noted: “Our bank’s mission is to provide superior and innovative banking services tailored to meet the needs of our clients in a cost-effective way by utilising technology and the skills of a highly trained and motivated cadre of employees. The increased reach that this acquisition will give us will assist us in delivering on our mission.”
Managing Director of The Bank of St Vincent and the Grenadines Limited, Derry Williams, who led the negotiations on behalf of the four OECS banks stated: “This acquisition represents a significant development in the evolution of the Banking System of the ECCU. Once approved by the regulators, we are very confident that it will lay the basis for further enhanced value creation in these economies and greater prosperity for our society.”
In announcing the signing of the various agreements to CIBC FirstCaribbean’s staff across the region, Delaney noted that all sides are working diligently to ensure the transition will be seamless in the five countries.
These transactions are not expected to have a material impact on CIBC FirstCaribbean’s Tier I and Total Capital ratios.