Bank of the Year 2018 -- Trinidad and Tobago: Republic Bank
November 8, 2018
Acquisitions have contributed profits as the bank becomes a major player in the Caribbean
Trinidad and Tobago staved off an economic calamity over the past year, thanks in part to an uptick in crude oil prices, and the islands appear poised to start growing again in 2018. After two years of a shrinking economy, the IMF now projects that Trinidad’s GDP will grow 1% in 2018, and the government predicts almost twice that rate at 1.9% growth.
But Republic Bank’s profits from its home market have flatlined this year, due to higher tax rates. Fortuitously, increased earnings from overseas subsidiaries added to the bottom line. The bank recorded net profits of 362 million Trinidadian dollars ($53.6 million) in the third quarter of the fiscal year, up from TTD348 million in the same period last year.
As Republic Bank faces anemic growth at home, it has used an M&A strategy to position itself as one of the leading lenders in the Caribbean. The bank still does around 70% of its business on its home islands, but Republic Bank has branches in Guyana, Grenada, Barbados and Suriname in the Caribbean, along with a subsidiary in Ghana.
And it is not finished with its outreach policies. Republic Bank said in October that it had agreed to buy 54.2% of Cayman National for $143 million, or $6.25 per share, 75 cents above the going rate on the stock exchange. It then extended the offer to increase its stake in the Cayman Islands bank to 75%.
Republic Bank promised to keep the name through 2023 and not make any major changes to Cayman National. But the deal could have an immediate impact on Republic Bank’s bottom line, adding as much as seven cents per share as soon as it goes through, CEO Nigel Baptiste told the local press in early October.
The bank followed a similar path last year, when it acquired an additional 24% stake in its subsidiary in Grenada to take on 75% ownership.
But becoming a cross-border investor comes with challenges. Republic Bank found itself in a tricky situation when the Barbados government announced in June that it would stop making payments on foreign debt and roll over the balance on local debt. Republic Bank has since joined other creditors in restructuring discussions with Barbados. LF