Wednesday, April 17, 2024

WILD COOT: Bank comparisons

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In February 2009 in the article Cogent Questions I said: “Another question! All of a sudden and out of the blue we in Barbados see full-page colour advertisements from First Citizens Bank of Trinidad. The significance of this cannot be ignored.”
“First Citizens Bank is the commercial bank arm of the government, commissioned with the responsibility of sorting out the rescue of CLICO Investment Bank and providing comfort for the investors of CMMB both in Trinidad and Barbados.
“And so if First Citizens wants a presence in Barbados, it already has. It now holds 55 per cent [of the] shares in Republic Bank and therefore 60 per cent of BNB shares besides investors of CMMB in Barbados.”
It is Trinidad’s National Bank!
It is therefore no surprise that First Citizens may be prepared to pay top price for Bank of Butterfield. That gives it a serious competitive position in the banking sector of Barbados. Central Bank, please note.
Before he died, I suggested to former Prime Minister David Thompson that he could rectify the sale of Barbados National Bank by approaching Butterfield.
I believe that the present administration has lost a golden opportunity to put right an error of the last regime. With problems mainly in finance, health, tourism and education, there is no one to think of an essential national bank.
Citibank picked up and left; Bank of America tried a thing and eventually sold out to BNB. They were big banks with large resources; but they did not see the wisdom of continuing in Barbados. What does First Citizens see?
The really profitable element of a bank is dictated by its savings. With a sound portfolio, it can then position other aspects of its bank to its advantage. That is why Barclays’ leaving surprised me. With a large pool of savings and free money on current accounts, a bank is permitted to afford loans and set market prices on loans and other services.
The large overseas banks mentioned above were unable to penetrate the savings portfolios of Barbados; they had to take serious risks with loans so as to make a profit – therein lay their downfall.
BNB, on the other hand, started of as Barbados Savings Bank with a large pool of savings garnered locally and in London. These savings had no imposition of bad loans to undermine them as they were invested in Treasury Bills and debentures.
First Citizens bank, despite its ownership by the government of Trinidad, has to make its mark with the savings market in Barbados – a more than difficult task. To make a profit it has to depend on loans. Will it eventually see what made Butterfield and others depart?
This perpetuates a risk that Barbados may be seeing in the cause of the departure of Butterfield.
It would not have suited the credit unions to pay over the top for Butterfield. It may then take a long time to even out the balance sheet. A similar situation existed when the government of Jamaica bought Barclays Bank. It took a few years of hard work to put the bank on an even keel.
One is eagerly waiting to see how First Citizens will fare even though it has its close links with Republic Bank in Trinidad and hence with BNB in Barbados.
I still say that Trinidad is putting its hand deeper and deeper in Barbados’ pocket, and that is not healthy. The problem in my opinion is that their philosophy of life, their ethos, is different.
Do you think that we have the same level of bobolism, or is it that our bobolism is getting worse? There is need for Barbadians to retrieve our country.

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