ROBERT?LE?HUNTE, managing director and chief executive officer of BNB,?will be leaving the country this week to return to the Trinidad and Tobago parent company, Republic Bank, after seven years. He recently spoke with BARBADOS BUSINESS AUTHORITY about his years in Barbados at the helm of the former state-owned bank.
Q:?How would you describe your tenure here in Barbados and at BNB over the past seven years?
Le Hunte: The last seven years have been exciting, challenging, rewarding. When I came to the bank in 2003, I came at a point in time when I felt that the relationship between Barbados and Trinidad was at its lowest because it was at the height of the fishing controversy. In addition to that, you were coming to an environment in which you had talk about the jewels being sold and not everyone was in favour of the sale.
It was an environment that required a certain degree of managing. I was also managing an institution that basically moved from public sector to private sector and, of course, the normal challenges associated with that.
Of course I was dealing with staff and their expectations and they were using comparisons of staff layoffs in other takeovers – so I was dealing with a very skeptic staff.
We had all of that plus expectations from Republic Bank itself. For them, it was really their first purchase in probably 15 years. It was a long time since they made their last acquisition.
Q: What stands out for you?
Le Hunte: We’ve basically moved to overcome all those challenges and reached a point where we have the staff excited and motivated about working.
Over the seven years our average profitability was around $45 million and when we bought the bank it was $24 million. We satisfied the shareholders’ side and from the customers’ prospective, I think we were able to fulfil their needs and bring real competition into the market.
I remember when we came here, the Central Bank and Government were always complaining that they couldn’t get mortgage rates down. If you look at the average mortgage rates, they were averaging about eight per cent. Now you have mortgage interest rates dropping.
Because of the aggression we brought to the market, particularly with our Loans To Go campaign, we broadened the base of customers who were accessing bank loans. Today, instead of paying 20 and 30 per cent on hire purchase, you can get a bank loan and pay much less.
From a corporate prospective, Almost 90 per cent of the projects on the South Coast were financed by BNB, from Palm Beach, The Crane, Ocean 1 and Ocean 2 to Saffire.
We were also able to enhance the profit-sharing scheme for staff so that they shared a much bigger part of the bank’s profits, and the number of people employed in the bank has also increased significantly.
Q: As an outsider, what are your impressions of Barbados’ business environment?
Le Hunte: The challenges facing Barbados now definitely centre around managment of the debt. Unfortunately, the country entered the recession with a high level of debt – not only in Barbados – but most of the Caribbean. The recession hit them with a high level of debt and you had a situation where Governments were able to borrow to help.
The country’s fiscal deficit is also high because Government has put up structures to finance an economy that is now smaller than it was before and therefore it is now faced with a lot of expenses that it needs to manage carefully.
One of the beauties of Barbados and the thing that impresses me most is the social partnership. Barbados’ success has been driven by the cohesiveness among the people and the major economic players. The one time that the social partnership needs to work is now, because if it doesn’t, Barbados could end up on a slippery slope.
Another thing that has impressed me about Barbados is the level of national pride and level of focus. Often in the Caribbean, what happens is that politics drives the economics and it usually works against those countries.
To a larger extent, in Barbados, what has kept it on track is the unified position of the political parties as to what needs to be done for the betterment of Barbados. People here play politics within the guidelines of what is best for Barbados economically.
The level of education of the people and the absence of racial tension has allowed citizens to unite more easily and that unity really is the country’s strength.
Those are the factors – the unity, homogeneity, the commonness about religion, the fact that people understand the issues and therefore are not easily fooled.
Q: As you prepare to leave the country, are there any areas of particular concern?
Le Hunte: One of the areas of disappointment to me was my inability and by extension the bank’s to be able to broaden the small business sector and the impact that the bank has had on this sector.
I think we came up with a number of good programmes but for some reason we were not able to get the sector to be responsive enough to the programmes. The small business sector has complained that banks have done little to reach out, but the small business sector has not always responded how I felt they should have.
At the end of the day, a bank is not about giving handouts. A bank is about taking customers’ money and it has a fiduciary responsiblity to their depositors. Therefore, any small business should understand that if they want money from a bank, they need to spend the time doing the necessary research on their project.
This idea of 100 per cent financing to all small businesses is not something I support. You have to have a stake in the business.
Q: Have you felt stung by some of the criticism levelled at bankers in Barbados?
Le Hunte: As to Minister Chris Sinckler’s statement about banks during the Budget about interest rates, I can say that banking in Barbados is one of the most competitive in the region.
The reality about banks in Barbados is that the spread and the profitability is not unrealistic. Nobody would support a bank that is not profitable. Nobody wants you to encourage banks to compete so aggressively that they do things that are reckless.
Bank failures normally occur when banks start to do things that are reckless. And the day a bank fails, it’s going to be a burden on the population. You can ask Jamaicans about that.
There is a standard level of profitability that banks are supposed to maintain for their long-term survival. When a bank is making more than what is considered standard – I agree that people need to be brought in line, but if you are making what is standard, then I think people need to step away a little.
You don’t want your banks to be falling below international standards. The international standard for return on assets is about two per cent to 2.5 per cent. You do have banks in Barbados that are making less than that in return on assets and you also have to understand that whatever structure you set up, there’s a price to pay for it.
We have chosen here to have a minimum savings rate. In a situation with a high savings rate and high liquidity, it will mean that banks are going to be carrying high levels of interest expense, with limited opportunities to lend money.
The ability to reduce interest rates on the lending side will be limited because borrowers are basically subsidising the minimum savings rate.
