Ja­maica’s Bari­ta In­vest­ments Lim­it­ed wants to be­come a ma­jor fi­nan­cial play­er in the re­gion and is pre­pared to do so by lever­ag­ing strate­gic re­la­tion­ships sim­i­lar to the one it has been build­ing with T&T’s in­dige­nous bank, First Cit­i­zens.

In re­sponse to ques­tions from the Busi­ness Guardian (BG) the com­pa­ny said this strat­e­gy is in keep­ing with what it dis­closed in its prospec­tus that ac­com­pa­nied two Ad­di­tion­al Pub­lic Of­fer­ings, done in 2020 and 2021.

“Bari­ta in­tends to fur­ther ex­pand its reach in­to the re­gion. In the ini­tial in­stance this strat­e­gy is in­tend­ed to be fo­cused on ful­ly lever­ag­ing mu­tu­al­ly ben­e­fi­cial part­ner­ships with es­tab­lished play­ers across the re­gion. The com­pa­ny is open to pur­su­ing op­por­tu­ni­ties that would see us es­tab­lish­ing or ac­quir­ing sub­sidiaries domi­ciled in oth­er re­gion­al ter­ri­to­ries sub­ject to align­ment of these op­por­tu­ni­ties with our risk ap­petite and long-term strate­gic ob­jec­tives,” Bari­ta told the BG.

It added, “We are of the firm be­lief that close re­gion­al col­lab­o­ra­tions across the coun­tries of the Caribbean re­gion, both from the pri­vate sec­tor via strate­gic part­ner­ships among busi­ness­es and the pub­lic sec­tor via ef­fec­tive mul­ti-lat­er­al co­op­er­a­tion and points of eco­nom­ic in­te­gra­tion by gov­ern­ments of the re­gion in ac­cor­dance with the rai­son d’être of the Caribbean Sin­gle Mar­ket & Econ­o­my (CSME). Strate­gic al­liances es­pe­cial­ly in fi­nan­cial ser­vices be­tween pri­vate sec­tor firms in Ja­maica and Trinidad & To­ba­go, the two largest economies of the Eng­lish-speak­ing Caribbean, are par­tic­u­lar­ly piv­otal to­wards the full lever­ag­ing of the rel­a­tive com­pet­i­tive ad­van­tages and fac­tors of pro­duc­tion of these coun­tries with the ul­ti­mate ob­jec­tive be­ing achiev­ing much high­er lev­els of sus­tain­able GDP growth for our Caribbean peo­ple.”

One of the things that have at­tract­ed First Cit­i­zens, through its whol­ly owned sub­sidiary First Cit­i­zens In­vest­ments Ser­vices (FCIS) to Bari­ta, is the Ja­maican com­pa­ny’s ac­cess to a bank­ing li­cense.

It is no se­cret that First Cit­i­zens wants to ex­pand its op­er­a­tions through­out the Caribbean as it tries to grow out­side of T&T.

Bari­ta was asked by the BG the fol­low­ing ques­tion, “Can Bari­ta say if it is in­ter­est­ed in hav­ing a bank in Ja­maica or part­ner­ing with First Cit­i­zens, re a bank­ing li­cense, in Ja­maica?”

It ad­mit­ted to be­ing open to what it called part­ner­ships but did not specif­i­cal­ly re­spond to the First Cit­i­zens ques­tion as its strate­gic part­ner.

It said, “Cor­ner­stone Unit­ed Hold­ings Ja­maica Ltd (CUHJ) owns a mer­chant bank in Ja­maica. Cor­ner­stone Fi­nan­cial Hold­ings Ltd (CFHL), an af­fil­i­ate of CUHJ, is the par­ent com­pa­ny of Bari­ta In­vest­ments Ltd. CUHJ and CFHL, which have the same share­hold­ers and share­hold­ings, are look­ing to or­gan­ise them­selves in­to a fi­nan­cial hold­ing group sub­ject to ap­proval by our reg­u­la­tors.

Giv­en Cor­ner­stone’s ul­ti­mate ob­jec­tive which is to pos­i­tive­ly im­pact the lives of the av­er­age Ja­maican and Caribbean na­tion­al, it is our in­ten­tion to ful­ly lever­age the scope of our bank­ing li­cense in fur­ther­ance of achiev­ing that ob­jec­tive. We are in­tend­ing to build our ca­pa­bil­i­ties in bank­ing and fi­nan­cial ser­vices in gen­er­al over the long term which in­cludes an open­ness to val­ue-added part­ner­ships.”

Bari­ta In­vest­ments Ltd is a ma­jor play­er in the Ja­maica Fi­nan­cial Sec­tor. It has seen ma­jor growth since be­ing ac­quired by its ma­jor­i­ty share­hold­ers Cor­ner­stone In­vest­ments.

The lev­el of growth and the high pay­ments of div­i­dends have raised eye­brows but the com­pa­ny has said its as­tro­nom­i­cal suc­cess is based on sound fi­nan­cial man­age­ment and ag­gres­sive growth poli­cies and that its re­la­tion­ship with First Cit­i­zens is above board.

Re­cent­ly, Ja­son Cham­bers, the Chief In­vest­ment Of­fi­cer of Cor­ner­stone and Ra­mon Small-Fer­gu­son, the Ex­ec­u­tive Vice Pres­i­dent, As­set Man­age­ment & Re­search, Bari­ta In­vest­ments Ltd spoke with the Busi­ness Guardian as they tried to ex­plain many of the is­sues that have been raised in the pub­lic do­main about Bari­ta, Cor­ner­stone and First Cit­i­zens.

Cham­bers ex­plained that Bari­ta’s in­ter­est in be­com­ing a re­gion­al busi­ness is in keep­ing with Cor­ner­stone’s re­gion­al am­bi­tions.

Cham­bers said: “The ob­jec­tive of Cor­ner­stone is to bring full ser­vice fi­nan­cial so­lu­tions to the peo­ple of the Caribbean… all the way to the grass­roots. In Ja­maica, Bari­ta is wide­ly known as the ‘peo­ple’s bro­ker’. To ef­fec­tive­ly serve the mar­kets out­side of Ja­maica we need to have strong part­ners on the ground in dif­fer­ent ar­eas of the re­gion. Trinidad & Ja­maica are the largest Eng­lish-speak­ing coun­tries in the re­gion and we be­lieve both coun­tries need to col­lab­o­rate more ef­fec­tive­ly look­ing at what their re­spec­tive en­dow­ments are in or­der pur­sue high­er sus­tain­able eco­nom­ic growth and bet­ter achieve the vi­sion of a liv­ing and breath­ing Caribbean Sin­gle Mar­ket & Econ­o­my (“CSME”).

To put the is­sue in to per­spec­tive Cor­ner­stone in 2017 took con­trol­ling in­ter­est of Bari­ta In­vest­ments Ltd. At the time Bari­ta was a rel­a­tive­ly small play­er in the Ja­maica fi­nan­cial mar­kets.

Ac­cord­ing to Bari­ta part of its fi­nan­cial suc­cess over the last two year is its abil­i­ty to en­ter new busi­ness lines and to deep­en its pres­ence in the Ja­maican fi­nan­cial ser­vices.

Small-Fer­gu­son told the BG: “Post-ac­qui­si­tion by Cor­ner­stone, Bari­ta has es­tab­lished new busi­ness lines such as in­vest­ment bank­ing (cor­po­rate fi­nance) which has earned more than US$10 mil­lion in rev­enue be­tween Dec 2018 and June 2020. Our Cam­bio/For­eign Ex­change Busi­ness has moved from a mar­ket po­si­tion of 6th in 2018 to 3rd in 2020/2021. Our Eq­ui­ty Bro­ker­age busi­ness has al­so moved from 6th in 2018 to 2nd in 2020/21. We have grown our head­count fo­cused on sales and ser­vice by more than 10 times (x) dur­ing the post-ac­qui­si­tion pe­ri­od which has fu­elled cus­tomer ac­qui­si­tion.”

But what of the sev­er­al APOs and oth­er cap­i­tal rais­es we have seen the com­pa­ny un­der­take. Is this an at­tempt to in­crease prof­its and get the mon­ey out through div­i­dend pay­ments?

Not so ex­plained Cham­bers and he posit­ed that it is about putting cap­i­tal to work.

“One of the oth­er things we are do­ing dif­fer­ent­ly is that we are not just in­vest­ing in Gov­ern­ment se­cu­ri­ties but we are go­ing in­to pri­vate eq­ui­ty, pri­vate cred­it, and re­al es­tate with the ob­jec­tive of putting our cap­i­tal to work in the pro­duc­tive sec­tors of the econ­o­my to spur eco­nom­ic growth. A lot of these in­vest­ments re­quire long term pa­tient cap­i­tal which is why Bari­ta has been rais­ing eq­ui­ty,” Cham­bers ex­plained.

He al­so point­ed out that due dili­gence done on Bari­ta can bear out his state­ments on the rais­ing of the cap­i­tal.

Cham­bers told the BG, “Over Bari­ta’s re­cent cap­i­tal rais­ing cy­cle which has spanned the past three years, by virtue of its two Rights Is­sues and two Ad­di­tion­al Pub­lic Of­fer­ings (APOs) sev­er­al in­de­pen­dent bro­ker­age hous­es in Ja­maica through re­peat­ed due dili­gence ex­er­cis­es on the com­pa­ny have award­ed the stock a buy rat­ing. These firms in­clude: a. Sco­tia In­vest­ments Ja­maica Lim­it­ed b. JMMB In­vest­ments Lim­it­ed c. JN Fund Man­agers Lim­it­ed d. VM Wealth Man­age­ment Lim­it­ed e. Proven Wealth Lim­it­ed f. Sagi­cor In­vest­ments Lim­it­ed g. GK Cap­i­tal. These firms have es­ti­mat­ed Bari­ta’s fair val­ue to be as high as J$117.00 per share.”

In the ~3 years post the ac­qui­si­tion of Bari­ta by Cor­ner­stone Bari­ta has de­clared and paid ~J$7.2 bil­lion in div­i­dends against ~J$8.5 bil­lion in Net Prof­its (with Q4 2021 prof­its not yet be­ing in­clud­ed) which is a ~85% Div­i­dend Pay­out Ra­tio. Over the same pe­ri­od, Bari­ta has raised J$34.5 bil­lion in eq­ui­ty cap­i­tal, 4.8X the div­i­dends paid out over the pe­ri­od.

Cham­bers had told BG, “ Cor­ner­stone Fi­nan­cial Hold­ings Lim­it­ed has in­vest­ed over US$170 mil­lion in Bari­ta post its ac­qui­si­tion of the com­pa­ny in Au­gust 2018, demon­strat­ing its firm and un­wa­ver­ing com­mit­ment to the growth of Bari­ta In­vest­ments Lim­it­ed. The share­hold­ers of Cor­ner­stone cou­pled with re­gion­al and lo­cal com­mer­cial and in­vest­ment bank­ing part­ners have since in­cep­tion sup­port­ed the growth of the busi­ness and by ex­ten­sion fund­ed Cor­ner­stone with over US$203 mil­lion. This is com­prised of:US$97 mil­lion in eq­ui­ty fund­ing by the share­hold­ers of Cor­ner­stone;US$106 mil­lion in debt fund­ing by the bankers and oth­er in­vestors of Cor­ner­stone; and the share­hold­ers have fund­ed their in­vest­ment in Bari­ta from per­son­al wealth ac­cu­mu­lat­ed from their re­spec­tive busi­ness­es, the op­er­a­tions of which would have long pre-dat­ed Cor­ner­stone’s es­tab­lish­ment. The fore­go­ing has been sup­ple­ment­ed by cap­i­tal rais­es suc­cess­ful­ly com­plet­ed at the Cor­ner­stone share­hold­er lev­el. Over the 3 years to date, Cor­ner­stone has made a re­turn of 3.4X on its in­vest­ment in Bari­ta (from a cap­i­tal gain per­spec­tive) and not the 20 times quot­ed pub­licly.”

But there re­mains the ques­tion of the re­la­tion­ship among Bari­ta, Cor­ner­stone, its prin­ci­pals, their oth­er pri­vate com­pa­nies and oth­er re­la­tion­ships that could be­come prob­lem­at­ic. Cham­bers de­nied that there is any con­flict of in­ter­est hap­pen­ing. He in­sist­ed that Bari­ta was In­de­pen­dent of Cor­ner­stone.

He said, “While Cor­ner­stone Fi­nan­cial Hold­ings Lim­it­ed is the 75% par­ent of Bari­ta In­vest­ments Lim­it­ed the ma­jor­i­ty of the Bari­ta’s Board of Di­rec­tors is com­prised of In­de­pen­dent Non-Ex­ec­u­tive Di­rec­tors; all of whom are promi­nent and long-stand­ing mem­bers of the busi­ness com­mu­ni­ty in Ja­maica. The key Board Com­mit­tees – Au­dit & Risk Com­mit­tee, and the Cor­po­rate Gov­er­nance Com­mit­tee – are chaired by re­spect­ed and well-re­gard­ed pro­fes­sion­als in the Ja­maican and Caribbean com­mu­ni­ty who are in­de­pen­dent of both Bari­ta and Cor­ner­stone. The com­pa­ny is ex­ter­nal­ly au­dit­ed by the glob­al ac­count­ing firm BDO. BDO is a glob­al ac­count­ing firm with over US$10 Bil­lion in Rev­enue, prac­tis­ing in 167 coun­tries with 91,000 em­ploy­ees. BDO is the fifth largest ac­count­ing firm in the world. The ap­point­ed In­ter­nal Au­di­tor is Ernst and Young and KP­MG acts as an Ad­vi­sor for the Poli­cies & Pro­ce­dures De­vel­op­ment & Re­view.”

For Small-Fer­gu­son brand aware­ness has al­so been a cru­cial strat­e­gy as the com­pa­ny tried to be­come a house­hold name in Ja­maica.

“Dur­ing the post-ac­qui­si­tion pe­ri­od, Bari­ta’s fo­cus on brand aware­ness and cus­tomer ac­qui­si­tion cul­mi­nat­ed in it be­ing named the top brand in 2020. “ Small-Fer­gu­son told the BG.