RBC Fi­nan­cial (Caribbean) Ltd has re­port­ed a huge loss on its op­er­a­tions across the re­gion in its 2014 fi­nan­cial state­ment, even as a Wall Street Jour­nal re­port has hint­ed that there may be sig­nif­i­cant own­er­ship changes in the wind at RBC's wealth man­age­ment di­vi­sion across the Caribbean amidst claims of new prob­lems with mon­ey laun­der­ing with­in its Latin Amer­i­ca Wealth Man­age­ment Di­vi­sion.Those re­ports come against a back­drop of a sig­nif­i­cant loss at RBC Fi­nan­cial (Caribbean) Lim­it­ed.

In its con­sol­i­dat­ed fi­nan­cial state­ment for the 12-month pe­ri­od end­ing Oc­to­ber 31, 2014, RBC Fi­nan­cial post­ed a loss of $735.7 mil­lion, which was a huge in­crease from the $6.7 mil­lion loss in the pre­vi­ous year.The com­pa­ny's 2014 per­for­mance was dri­ven by the fact that it record­ed the sum of $999.5 mil­lion as im­pair­ment loss­es on loans and ad­vances, which was more than dou­ble the $491.5 mil­lion im­pair­ment loss­es it re­port­ed in 2013.

In terms of the im­pair­ment loss­es by sec­tor, RBC Caribbean re­port­ed $479.2 mil­lion in the com­mer­cial and cor­po­rate sec­tor, $405.5 mil­lion for mort­gage loans and $114.8 mil­lion for re­tail loans.In the chief ex­ec­u­tive re­port, pub­lished on Jan­u­ary 31, RBC Fi­nan­cial CEO, Robert John­ston, sought to put a brave face on the re­sults, point­ing to the growth of the re­gion­al bank­ing fran­chise's core busi­ness:

Over the fis­cal pe­ri­od end­ing Oc­to­ber 31, 2014, ex­clud­ing one-time items, we re­alised core earn­ings of $511 mil­lion com­pared to $448 mil­lion in 2013, as our core busi­ness con­tin­ues to im­prove and grow."We have pos­i­tive mo­men­tum in qual­i­ty loan growth in our key ar­eas of cor­po­rate and busi­ness bank­ing, which we will con­tin­ue to de­vel­op fur­ther."

John­ston al­so stat­ed:"Even as RBC Fi­nan­cial and its sub­sidiaries (the group) were im­pact­ed by chal­leng­ing eco­nom­ic con­di­tions across the re­gion, we main­tained our re­la­tion­ship with the Caribbean and con­tin­ue to reaf­firm our com­mit­ment to the re­gion."Mean­while, RBC's T&T sub­sidiary re­port­ed a loss of $189.5 mil­lion for the 12-month pe­ri­od end­ing Oc­to­ber 31, 2014, which was high­er than the $55.7 mil­lion it record­ed in 2013.

That loss was dri­ven by the com­pa­ny de­clar­ing $179.9 mil­lion in im­pair­ment loss­es on loans and ad­vances to cus­tomers. In 2013, RBC's T&T sub­sidiary re­port­ed $28.6 mil­lion in im­pair­ment loss­es.

In his man­ag­ing di­rec­tor's re­port, Dar­ryl White stat­ed: "Across the re­gion, the Caribbean par­ent im­ple­ment­ed cer­tain re­struc­tur­ing ini­tia­tives to ad­just the over­all cost struc­ture of the group in re­sponse to the chal­leng­ing eco­nom­ic con­di­tions across the re­gion. Costs re­lat­ing to this re­struc­tur­ing and the set­tle­ment of a long-out­stand­ing, post-re­tire­ment ben­e­fit is­sue, neg­a­tive­ly im­pact­ed the bank by $110 mil­lion (2013-$268 mil­lion) in 2014.

"The bank al­so strength­ened loan loss pro­vi­sions to re­flect the chal­lenges in col­lat­er­al re­al­i­sa­tion."Ac­cord­ing to the WSJ ar­ti­cle head­lined "Mon­ey-laun­der­ing fears fu­el an RBC re­treat" fi­nan­cial loss­es may not be the on­ly is­sue fac­ing the Cana­di­an bank in the re­gion.

On the is­sue of RBC's sale of some more of its Caribbean busi­ness­es, the opened by stat­ing: "Cana­da's largest bank, Roy­al Bank of Cana­da , is ex­it­ing from once-promis­ing busi­ness­es in Latin Amer­i­ca and the Caribbean af­ter be­ing swept up in the net of glob­al mon­ey-laun­der­ing probes."

Talk­ing about the sto­ry dur­ing an in­ter­view the same day it was pub­lished in the WSJ (Tues­day Feb­ru­ary 4) on the Cana­di­an Busi­ness News Net­work, Mac Don­ald said the probe in­to RBC's wealth man­age­ment busi­ness in Latin Amer­i­ca stemmed back in­to 2009, when Brazil­ian po­lice in­ves­ti­gat­ed the pos­si­bil­i­ty that laun­dered mon­ey from the Dutch Caribbean may have end­ed in an ac­count in their coun­try, touch­ing off probes Mac Don­ald said in two oth­er RBC Latin Amer­i­ca ar­eas, Uruguay an Ar­genti­na.

In a lat­er sto­ry on WSJ, writ­ten on Fri­day, Feb­ru­ary 6, Mac Don­ald said the RBC was in talks "with sev­er­al bid­ders for parts of the Caribbean wealth-man­age­ment busi­ness that it is ex­it­ing as part of a pull­back in the Caribbean and Latin Amer­i­ca".Last No­vem­ber, af­ter ini­tial re­ports of clo­sures in sev­er­al Latin Amer­i­can coun­tries, a Busi­ness Guardian re­port quot­ed a me­dia re­lease form the bank say­ing that this was un­like­ly to af­fect T&T or the rest of the re­gion.

"We re­main com­mit­ted to strength­en­ing our over­all busi­ness per­for­mance and fo­cused on mar­kets where we can be a lead­ing com­peti­tor over the long term."

But Mac Don­ald has re­port­ed that two peo­ple fa­mil­iar with the mat­ter have said that "among the bid­ders for some of the Caribbean as­sets is Toron­to-based Cidel Fi­nan­cial Group Inc." RBC is al­so said to be ad­vised in the process by Ernst & Young. Mac Don­ald al­so said that "RBC is cur­rent­ly in talks to sell its Caribbean-based trust busi­ness, which helps the ul­tra­wealthy plan tax and own­er­ship is­sues in in­her­i­tance" but that this sale would not in­clude a sale of RBC's Caribbean bro­ker­age busi­ness.

The WSJ re­port con­tin­ues: "RBC is pulling out of the Caribbean and Latin Amer­i­ca be­cause the risks as­so­ci­at­ed with po­ten­tial mon­ey-laun­der­ing didn't jus­ti­fy the prof­its the bank was mak­ing there." It adds a 'spokes­woman' said "the busi­ness had un­der­per­formed for sev­er­al years and said the bank had a strong record on reg­u­la­to­ry com­pli­ance, in­clud­ing an­ti-mon­ey-laun­der­ing."

Ac­cord­ing to the CEO's re­port, RBC Fi­nan­cial's re­sult were af­fect­ed by sev­er­al "one-time" items, in­clud­ing steel­ing long­stand­ing pen­sion is­sues to the tune of $222 mil­lion and a $577 mil­lion dol­lar charge re­lat­ed to the sale of the group's Ja­maica op­er­a­tion.

Ac­cord­ing to its fi­nan­cial state­ments, RBC Fi­nan­cial's re­sults were down when com­pared to 2013 in its In­ter­est In­come, ($3,122,522 in 2014 to $3,498,572 in 2013) and non in­ter­est in­come ($1,473,398 in 2014 to $1593,651 in 2013)The Sun­day BG con­tact­ed Na­tal­ie Man­soor, Head As­set Man­age­ment, RBC In­vest­ment Man­age­ment (Caribbean) Lim­it­ed for a com­ment on the WSJ re­port send­ing her links to the ma­te­r­i­al.

She said that she was out of the coun­try but gave a com­mit­ment to re­view the sto­ry and then pro­vide a re­sponse.Roy­al Bank of Cana­da an­nounced in Oc­to­ber 2007 that it would ac­quire the RBTT Fi­nan­cial Group for a to­tal of about US$2.2 bil­lion, as it sought to re-en­ter the re­gion build­ing on the Cana­di­an bank's mod­est pres­ence in the re­gion.

Share­hold­ers of Trinidad and To­ba­go-based RBTT re­ceived about US$6.33 per share, payable in a com­bi­na­tion of 60 per cent cash and 40 per cent Roy­al Bank of Cana­da com­mon shares. The of­fer rep­re­sent­ed an 18 per cent pre­mi­um to RBTT's clos­ing price on Sep­tem­ber 28, be­fore the Busi­ness Guardian pegged RBC as the buy­er.

The trans­ac­tion closed in June 2008 just be­fore the on­set of the glob­al fi­nan­cial cri­sis, which has meant that the Cana­di­an par­ent has had chal­lenges gen­er­at­ing a re­turn on its US$2.2 bil­lion in­vest­ment.In Oc­to­ber 2007, Pe­ter Ar­me­nio, RBC's head of US and in­ter­na­tion­al bank­ing said on a con­fer­ence call: "This fran­chise cre­ates a base for fu­ture ex­pan­sion down the road" not on­ly in the Caribbean, but pos­si­bly in Cen­tral Amer­i­ca and South Amer­i­ca, .

RBC said the deal, which is ex­pect­ed to close by the mid­dle of next year, will "mild­ly" in­crease its earn­ings per share in 2008.But the com­bi­na­tion will be "trans­for­ma­tion­al" for RBC in the Caribbean, as the new en­ti­ty will be­come the fourth largest bank by as­sets in the re­gion, Ar­me­nio said.