On Mon­day, the chair­man of Re­pub­lic Fi­nan­cial Hold­ings Ltd (Re­pub­lic Bank), Vin­cent Pereira, re­port­ed that the bank­ing group record­ed prof­it at­trib­ut­able to its share­hold­ers of $1.75 bil­lion for the year end­ed Sep­tem­ber 30, 2023. That was an in­crease of $223.0 mil­lion or 14.6 per cent over the 2022 re­port­ed prof­it of $1.53 bil­lion.

Mr Pereira al­so re­port­ed that Re­pub­lic Bank's board de­clared a fi­nal div­i­dend of $4.10 (2022: $3.45) per share to be paid on De­cem­ber 1, 2023 to all share­hold­ers on record on No­vem­ber 16, 2023. That $4.10 fi­nal div­i­dend brought the to­tal div­i­dend of the bank­ing group to $5.20 (2022: $4.50) per share for the fi­nan­cial year, an in­crease of 15.6 per cent or $0.70 over 2022.

On Sep­tem­ber 30, 2023, at the end of its 2023 fi­nan­cial year, Re­pub­lic Bank's share price closed at $121.02, which means its $5.20 to­tal div­i­dend for 2023 rep­re­sent­ed a div­i­dend yield of 4.30 per cent (2022: 3.21 per cent). The com­pa­ny will be mov­ing to a quar­ter­ly fre­quen­cy for div­i­dend pay­outs in its cur­rent fi­nan­cial 2024.

The fi­nal div­i­dend of $4.10 a share, with the to­tal num­ber of shares in is­sue be­ing 163,673,762, will re­sult in the thou­sands of the group's share­hold­ers re­ceiv­ing a to­tal of $671.06 mil­lion on De­cem­ber 1, 2023.

The in­ter­im div­i­dend of $1.10, for the first six months of the bank­ing group's fi­nan­cial year, re­sult­ed in $179.96 mil­lion be­ing dis­trib­uted among the bank's share­hold­ers.

By my cal­cu­la­tion, that means the com­pa­ny's share­hold­ers will re­ceive a to­tal of $851.02 mil­lion in div­i­dends from the bank for the 2023 fi­nan­cial year. If the bank de­clared prof­its at­trib­ut­able to its share­hold­ers of $1.75 bil­lion for its 2023 fi­nan­cial year, and will pay­out $851.02 mil­lion in div­i­dends, that means about 49 per cent of its prof­its are go­ing back to its share­hold­ers.

Con­firm­ing records

In an ear­ly yes­ter­day morn­ing re­sponse to ques­tions, RFHL pres­i­dent and CEO, Nigel Bap­tiste, con­firmed that the bank's $1.75 bil­lion in prof­its and its $5.20 in to­tal div­i­dends for 2023 are records for the bank.

The pre­vi­ous best year for the bank was in 2019 when it re­port­ed prof­it in the re­gion of $1.60 bil­lion and de­clared a div­i­dend of $4.50 a share.

I would have thought that Re­pub­lic would have want­ed to cel­e­brate the fact that it reached a new land­mark with its prof­its and its div­i­dends in its 2023 fi­nan­cial year.

Ap­par­ent­ly not.

On Mon­day af­ter­noon, short­ly af­ter read­ing the an­nounce­ment of the bank's per­for­mance, this colum­nist called RFHL's group mar­ket­ing and com­mu­ni­ca­tions de­part­ment re­quest­ing that they con­firm that their prof­its and div­i­dends for 2023 were records.

When en­quiries were made of an­oth­er em­ploy­ee of that de­part­ment on Tues­day, the re­sponse in writ­ing was: "All de­tails of RFHL's group per­for­mance for the cur­rent fis­cal year are at­tached for your in­for­ma­tion." The at­tached doc­u­ment was the same news re­lease that the bank is­sued on Mon­day, which in­formed the en­quiries in the first place. This was point­ed out to the em­ploy­ee, whose re­sponse was: "The bank prefers to com­mu­ni­cate on this mat­ter via our of­fi­cial re­leas­es. We ap­pre­ci­ate your in­ter­est in our per­for­mance, nonethe­less."

Why would an em­ploy­ee of a bank's com­mu­ni­ca­tions de­part­ment NOT want to con­firm and cel­e­brate the fact that its prof­its and div­i­dend pay­out for 2023 were the high­est ever?

Are some em­ploy­ees of our lo­cal com­mer­cial banks, and Re­pub­lic Bank in par­tic­u­lar, em­bar­rassed by their prof­itabil­i­ty?

It could be that one of the rea­sons for the ret­i­cence by the RFHL's com­mu­ni­ca­tions de­part­ment to con­firm the bank's record-break­ing prof­itabil­i­ty and div­i­dends is be­cause there are many peo­ple in this coun­try who be­lieve that our lo­cal com­mer­cial banks are too prof­itable.

There are many peo­ple in this coun­try who be­lieve that lo­cal com­mer­cial bank should not charge fees for their ser­vices to cus­tomers or that those fees are too high.

There are al­so many peo­ple in this coun­try who be­lieve that lo­cal com­mer­cial banks' spread–which is the dif­fer­ence be­tween the in­ter­est rate banks pay on their de­posits and the in­ter­est rate they re­ceive on the loans they make–is too high.

There are peo­ple, as well, who ac­cuse lo­cal com­mer­cial banks of be­ing risk averse and of be­ing re­luc­tant to lend mon­ey to SMEs in the ab­sence of the pro­vi­sion of full col­lat­er­al.

This com­men­ta­tor is NOT among the peo­ple who have a prob­lem with prof­its in gen­er­al and the prof­its of lo­cal com­mer­cial banks in par­tic­u­lar. This col­umn has nev­er had a prob­lem with prof­itable banks or with the prof­its gen­er­at­ed by any com­pa­ny in this coun­try.

Bank prof­its en­sure the sus­tain­abil­i­ty of the com­pa­ny and al­low it to rein­vest in im­prov­ing its ser­vices to cus­tomers and adding new, more con­ve­nient ser­vices. One ex­am­ple on the rein­vest­ment by lo­cal com­mer­cial banks to im­prove ser­vices to their cus­tomers is the whole is­sue of mo­bile bank­ing. The fact that thou­sands of cus­tomers in this coun­try, from the com­fort of their homes, can now pay all of their bills, move mon­ey from one ac­count to an­oth­er and even open new ac­counts is a func­tion of the prof­itabil­i­ty of lo­cal banks. Put an­oth­er way, the mo­bile bank­ing im­prove­ments, which have re­duced the need for peo­ple to queue at banks, would not have been pos­si­ble if our lo­cal com­mer­cial banks did not have the prof­its to rein­vest in the hard­ware, sys­tems and process­es that make at-home bank­ing pos­si­ble.

To use an­oth­er ex­am­ple based on a cur­rent is­sue, lo­cal banks would not have been able to fund the on­go­ing in­vest­ments in cy­ber­se­cu­ri­ty, if they were not prof­itable.

An ex­am­ple of how RFHL us­es the funds it gen­er­ates can be found in its 2022 an­nu­al re­port:

The com­pa­ny gen­er­at­ed $6.10 bil­lion in to­tal in­come, com­pris­ing $4.13 bil­lion in net in­ter­est in­come and $1.96 bil­lion in oth­er in­come. Some $1.35 bil­lion of its oth­er in­come came from fees and com­mis­sions from trust and oth­er fidu­cia­ry ser­vices, cred­it card fees and com­mis­sion and oth­er fees and com­mis­sion in­come.

Of the $6.10 bil­lion the bank gen­er­at­ed in in­come, $3.55 bil­lion was spent on op­er­at­ing ex­pens­es, the li­on's share, some $1.45 bil­lion, was spent on staff costs, with an­oth­er ma­jor con­tri­bu­tion, some $1.18 bil­lion, be­ing gen­er­al ad­min­is­tra­tive ex­pens­es. Those ad­min­is­tra­tive ex­pens­es would have in­clude the cost of up­grades to lega­cy bank­ing sys­tems, one imag­ines.

The bank's in­come mi­nus its ex­pens­es left it with op­er­at­ing prof­it of $2.55 bil­lion and prof­it be­fore tax­a­tion of $2.33 bil­lion.

Re­pub­lic Bank paid $651.21 mil­lion in tax­es in 2022, which was 27.8 per cent of its pre-tax prof­it. The bank pays a 35 per cent tax on its T&T in­come.

Of the af­ter-tax prof­it at­trib­ut­able to share­hold­ers of $1.53 bil­lion in 2022, $735.77 mil­lion went to pay div­i­dends. That is about 48 per cent of its af­ter-tax prof­it.

So banks pay:

* Tax­es;

* Div­i­dends; and

* The mon­ey that banks gen­er­ate af­ter ex­pens­es, tax­es and div­i­dends goes in­to their re­tained earn­ings and as re­serves, which are con­sid­ered part of their cap­i­tal. Banks with larg­er cap­i­tal buffers can lend more and can bet­ter sur­vive eco­nom­ic down­turns, such as the COVID-19 pan­dem­ic.

T&T's banks need to do a bet­ter job ex­plain­ing to the pub­lic why it is bet­ter for coun­tries like ours to have banks whose prof­its are in­creas­ing rather than de­clin­ing.