Republic Bank Limited’s (RBL) pursuit of Scotiabank was to increase its economies of scale and become more competitive but notwithstanding the unsuccessful takeover bid, the Trinidad-headquartered bank is gearing to ramp up services to the oil and gas sector.
“For us, we saw the expansion as an opportunity to secure more economies of scale and become more efficient. That would make us more competitive and drive the banking and financial system to become more competitive as well. We saw this as a good thing for the clients of the sector. With size, we could invest even more in upgrading our technology…and this would benefit everyone,” President and CEO of Republic Financial Holdings Limited (RFHL), Nigel Baptiste told the Sunday Stabroek in an interview last week. RFHL is the parent company of Republic Bank.
Stabroek News reported on Wednesday that the Bank of Guyana (BoG) had rejected RBL’s application for the acquisition of Scotiabank while citing a number of concerns.
In the interview, Baptiste, while reiterating the company’s disappointment, said that it had not yet discussed with Scotiabank the rejection of the takeover bid. He disclosed that options on the way forward are being explored. RBL’s immediate focus is to improve services here while closing the pending acquisition of Scotiabank branches in nine other territories, he added.
“We would have been disappointed by the response from the Bank of Guyana. You know, Republic Bank as an organisation…we always keep forward looking in our approach so we don’t intend to dwell on that disappointment. We have a good and vibrant operation in Guyana. Our focus continues to [be] on how we can grow. We have an excellent relationship with the Bank of Guyana and the Governor of the Bank of Guyana, and notwithstanding the response, we don’t see that interfering with those very good relationships,” he said.
Asked if the bank plans to challenge the decision, Baptiste said that no decision has been made as RBL only received the letter on Tuesday. He also pointed out that discussions with Scotiabank on the Guyana takeover have not yet been done.
“We are still exploring what other options, you know, are available to us…we haven’t reached there. When I said options, I meant generally in terms of how we can contribute to the Guyanese economy,” he said.
“Guyana is one of nine countries [where we sought acquisition] so we have seven others we need to close. We also did not get approval for Antigua, so that is the primary focus for us right now. We are in constant contact with Scotia. But if you mean specially discussing the Guyana matter, the answer is not yet. Like I said before, we got the response from the Bank of Guyana on Tuesday 24th [Septem-ber], but because we have these seven territories, we are trying to close those. Tuesday was a holiday in Trinidad, so…all the focus was on those other seven between Scotia and ourselves. I haven’t had a chance to say specifically with them ‘this is the response…’” he added.
Republic Bank, Baptiste said, had anticipated that there would be a delay with Guyana because the BoG had indicated that it would need some additional time to deliberate. “However, I anticipate that before the week is out, we will have that discussion about Guyana. We didn’t have time to dwell on it so to speak. I might be the only one to be able to sit back and chart a path forward [regarding] Guyana,” he said.
Not distracted
In terms of its other acquisitions, Republic Bank, so far, has obtained approvals from the Eastern Caribbean Central Bank and the Central Bank of Curacao and St Maarten and “it is just really the mechanics now” as it forges ahead, said Baptiste, who added that they will not be “distracted by anything else.”
Subsequent to the BoG’s rejection of RBL’s takeover of Scotiabank, Minister of Finance Winston Jordan had told Stabroek News that Cabinet was alerted to letters that BoG Governor Dr Gobind Ganga would have dispatched to Republic Bank and Scotiabank “and also the letter that was written to me, indicating that having done their examination and taking all the circumstances into consideration that they [BoG] could not approve the application.”
“This was discussed at Cabinet…and Cabinet concurred with the governor’s pronouncement and they agreed that the reasons given were important reasons and the critical one being concentration, the risks involved and so on, AML/CFT [Anti-Money Laundering and Combatting the Financing of Terrorism] considerations, the lack of supervisory capacity by the bank itself; they are now building that capacity and so on. So when you take all of that into consideration, we did not feel that this application would be in Guyana’s best interest,” he added.
Ganga told this newspaper that the decision was “not an overnight one” but based on a months-long evaluative process, involving not only the BoG but information from other agencies. He emphasised that the decision, also, had nothing to do with the performance of either of the two banks as the BoG believes that they are both doing exceedingly well here.
“In the letter to them, we told them about the good job they are doing. It isn’t that the bank wasn’t doing well,” Ganga said. “We believe that both banks are well capitalised, safe, sound and profitable and have been providing very, very good services. We would love to have them both here,” he added.
He pointed to services provided to Guyana’s emerging oil and gas sector by Republic Bank observing that he would have lauded the bank for their works on that front. Notwithstanding, he said, the decision to deny the takeover bid was based on what is best for Guyana at this time.
‘Broad footprint’
The oil and gas sector, Baptiste indicated in the Sunday Stabroek interview, is one that RBL has kept an eye on and the bank is looking ahead to ramp up its provision of services.
“The Republic Group has a very broad footprint with a large network of correspondents. We have no issue with our correspondent banking relationships and would be one of the flagship brands in the region. We also have significant experience in financing the oil and gas sector in Trinidad. With or without this transaction, we will be bringing that experience to bear in Guyana,” he said.
“In Trinidad and Suriname, Republic Bank is the main financer for most of the support companies in the sector. The principal companies, like Exxon and others, they have their own financing. But the other entities, those targeted to provide the local content, companies involved in the onshore bases, providing food or accommodation, pipes and other material, lumber if needed, those companies need finance and we are very experienced in that and provide a lot more of that financing in Trinidad than Scotia does. Scotia has been predominantly retail in their outlook; we are commercial and retail. We like to support the drivers of the economies in which we operate,” he added.
Baptiste said that RBL understood that Guyana is trying to roll out its local content policies right and emphasised that those involved will require financing. “In Trinidad, we are the principal [bank] for that financing. In Guyana right now, we are providing this service and we will continue to do so,” the RBFL head said.
He further pointed out that investors and other business persons have already expressed interest to the bank about Guyana’s possibilities and that is why RBL facilitated a trade mission here earlier this year.
“Some months ago, Republic Bank facilitated a trade mission where we brought down people with [a] broad range of expertise and interests. Individuals from Suriname, Trinidad, anywhere that the group operated, were invited to participate…What we did was try to open to all the business community. People who are looking to invest, some looking at support services, and you may not know but Guyana is hot when it comes to property prices right now, so some developers are among those who attended that [trade mission]. The Republic Group has a vested interest in the success of Guyana,” he added.
‘Defined rules and regulations’
Meanwhile, Baptiste also addressed the Government of Guyana’s concerns that his bank, which currently holds 35.4 per cent of the banking systems assets and 36.8 per cent of deposits, with the acquisition of Scotiabank’s operations here would have raised this to 51 per cent of both assets and deposits.
The Ministry of Finance had said that this raises concerns about an over-concentration of banking services, market domination and ‘too big to fail’ risks. It had warned that any such acquisition would have to comply with the Financial Institutions Act and receive the blessings of the BoG.
Republic Bank had previously denied the claim, saying that “the combined Republic and Scotia entity would not account for much more than 33% of the financial system assets in Guyana.”
Baptiste echoed these statements, adding that persons who evaluated the proposed takeover did not seem to look at the issue in its entirety while also keeping in mind that banks have to abide by stringent global regulatory practices.
“I have seen the reference to the 51 per cent. The combination would result in 51 per cent of the banking section but the Guyana financial system is more than the banking sector. We had sought to show them that the financial system has a number of non-banking players and they are very influential in Guyana. Take, for example, the New Building Society and the small business organisation IPED [Institute of Private Enterprise Development] and others…they are very stiff competitors. The combination, when actually worked out, would have only been about 31 per cent of the financial system,” he claimed.
“Banking, unlike many other industries and sectors, is highly regulated; all banks have to operate in a certain regulatory way. So whether you have 5 or 50 [per cent], the highly regulated banking sector makes sure that you operate within defined rules. You cannot, for example, charge a different rate or fee in Anna Regina than what you are charging in Corriverton. You don’t have the same kind of room the other sectors have. Besides the regulators, you also have the competitors. So if Republic Bank thought because of its size it could charge more than others for a loan, for example, a car loan, another bank would snap it up because theirs was lower. For deposits, same thing, so it was not an opportunity that we saw arising out of this acquisition,” he added.
Baptiste said that they saw the expansion as an opportunity to secure more economies of scale and become more efficient and ultimately make the sector more competitive.
He indicated that Republic Bank holds firm to its views but it respects the rights of others to have different opinions. “We clearly had a different view and still feel the merged entity would have brought more benefits to Guyana than negatives. Nonetheless, we still respect the rights of others to have different opinions,” Baptiste said.
“Bottom line is, notwithstanding the [rejection of the takeover bid], we will continue to do what we need to do to ensure Guyana remains a vibrant economy. There is a very bright future for Republic Bank and Guyana and one hiccup along the way does not change that. I am very excited about what the future promises,” he added.
