Covering all bases

Trinidad and Tobago is over-banked. Within the last two months, two of the biggest commercial banks in TT and indeed the region have spent big bucks — and made three different acquisitions across the Caribbean. Suresh Sookoo Managing Director and CEO, RBTT offers a simple explanation for all these acquisitions. “We are definitely over-banked in TT,” he says matter-of-factly. He said the local financial sector is relatively crowded because competition has now brought other players into the market. Outside of the financial sector, TT has a very robust credit union and non-financial sectors, he noted. Additionally, he said there are new players in the industry like Island Finance and the emergence of mutual funds. He also noted that more insurance companies are now selling investment-type products that are competing with the banks. “So you have a fairly sophisticated financial market in TT with banks aggressively competing with each other. So part of the strategy by expanding outside of TT is to leverage your existing resource base to better make use of those resources you already have to generate incremental profitability.” RBTT started its acquisition strategy in the late 80s. In those days, Sookoo said the strategy would have been to acquire relatively small banks. “We basically went out into the Eastern Caribbean and we bought banks and concurrent to that we got into the Dutch Caribbean also with fairly small banks.”

He said the major impetus would have really taken off in 2000 when RBTT got into Jamaica and acquired the former Union Bank. He noted that subsequent to that, they had an opportunity to acquire ABM Amro operations in the Dutch Caribbean. However, in order for RBTT to acquire that operation, they first had to purchase one of the bank’s subsidiaries in Suriname. “It was a strategic decision to get into Suriname first, knowing that we would have had the option for the Aruba, St Maarten and Curacao operation of ABM Amro which were bigger markets,” he explained. RBTT’s most recent acquisition was in Barbados. Sookoo said the bank did not have a presence in that country and the acquisition of Ernst and Young Trust Corporation will give it an offshore dimension, which it already had to some extent in the Dutch Caribbean. He said while this is a very small acquisition, they hope to leverage their capability across the Caribbean. “This is a strategic move in the realm of trust and asset management that we look to expand on.”

RBTT has a presence in St Lucia, Suriname, St Vincent and the Grenadines, St Kitts and Nevis, Grenada, Curacao, Aruba and Jamaica. He said when a bank makes an acquisition in another country, it is really diversifying its dependence on one economy for its revenue stream. Sookoo said the RBTT is able to separate itself from the competition because it has a very successful merchant bank. He explained that by having a physical presence in which they have jurisdictions, the merchant bank has found it easier to win business. With expansion comes increasing costs, he said, noting that one of the challenges of any company in an expansion mode is that you need to have an internal capacity to absorb, turnaround and begin to build that common footprint. He said the challenge for any company, including RBTT,  is the rate at which it can absorb and integrate the expansion without losing sight of their core business.

Larry Howai CEO, First Citizens Bank (FCB) said they have not yet extended their reach into the Caribbean. However, he said he would like to see the bank develop into a regional franchise. “Not just for TT, but eventually having a reach that is out into the wider Caribbean area. I see the bank being at the forefront of information technology and being able to use that technology to provide convenience and flexibility for our customers while at the same time keeping the cost of providing that service as low as possible.” He also sees FCB playing a more important role in the corporate and commercial sectors of the economy and in one of the leading financial institutions in TT. However, before expanding its reach, he said they will be paying close attention to the effects of the Free Trade Area of the Americas (FTAA).

“While we have a vision of going into the wider Caricom area, we want to be careful that we do so in a way that adds value and does not create undue risk for the institution.” Simone Penco Manager, Commercial, Scotiabank said that with operations in 25 countries, including more than 250 branches and over 500 ABMs across the Caribbean and Central America, “we already have the largest presence of any bank in the region.”
However, she said they continue to see their operations in the Caribbean and Central America as a key growth area and an important part of Scotiabank Group’s international strategy.

On July 8, 2003 Scotiabank announced plans to more than double their size in the DR, a country in which they have operated for more than 83 years.
Sookoo said RBTT has stayed within the English speaking Caribbean, but added that they are always looking for opportunities. “We have not really been able to get into retail banking in  Barbados and the reason for that is because that country has a relatively over-banked market and you cannot go there greenfield. You have to go there and acquire something.” He said the bank has its “tentacles” up for anything that is on the cards that might make sense to them. He said Barbados remains a prime target because of the strength of their economy and Central and South America. He said they also have an interest in the DR, the Bahamas and the Cayman Islands.