Having failed to acquire Scotiabank’s assets in Guyana, state-owned First Citizens now says it is open to applying for banking licenses in both Guyana and Jamaica and opening brick and mortar banks there, as it tries to grow beyond T&T.
The bank’s chief executive officer Karen Darbasie held a presentation on Thursday for the business editors of the three daily newspapers in which she made the disclosure.
She was asked specifically if First Citizens was prepared to apply for a license and start from scratch a new bank in those countries .
Darbasie said, “Am I open to starting operations, applying for a license to build from scratch, and do both ? Yes! Am I open to do that across the jurisdictions ? Yes!”
She added, “What I can say categorically is that we are interested in diversification from the group perspective, product, customer and geography.”
First Citizens’ CEO said while the bank was disappointed in not being able to consummate the Scotiabank Guyana deal, it was still very interested in the South American country.
“We are still interested in Guyana, we are interested in lending to entities and projects in Guyana, we will do that… only with the requisite regulatory approvals from the bank of Guyana, and we continue to try to explore opportunities in Guyana.” Darbasie told the briefing.
She said First Citizens has customers from T&T who are engaging in projects in Guyana and would like to support its customers from T&T in their business opportunities.
Darbasie said the failure to extend to purchase agreement was based on the fact that there was no clear way forward and denied ever being told by the Guyana government or the Bank of Guyana that the transaction would not be approved.
“I think when the Scotia transaction came to an end we did put out a Q and A that stated we are interested in lending across the region, lending subject to regulatory approvals from T&T, we are still interested in lending to entities or projects in Guyana and we are interested in northern Caribbean as well. So we are interested...We are looking at what opportunities develop and based on what develops and if it makes sense we will progress it.”
She added, “When you enter into agreements such as these to purchase, these agreements normally have an expiration date, because they are entered into at a point in time with a price and it’s a clearly defined period.
“To be honest, COVID happened, nobody really thought COVID would have taken so long and the process stretched out and the agreement came to an end, it was never declined, the agreement came to an end before and consummation could happen.”
Darbasie was asked if the threat of Fintec meant that the best approach to moving into Jamaica or Guyana was a digital first approach, she said if it happens it would be a combination of both digital and brick and mortar. Promising to keep us updated if there were any announcements to be made.
“In T&T we are deploying brick and mortar in conjunction with a digital strategy. So we are maintaining our branch footprint and we are investing in new products and services and technology to really expand our digital product offerings.
“So we doing both in T&T. My personal view is that you need a brick and mortar presence in our state of development, where we are in the region, that it would be very difficult to have a full financial services group, which is what our ambition is without some degree of brick an mortar in that model.
“Percentage brick and mortar vs digital will vary according to the state of development of the country.” Darbasie explained.
On the issue of First Citizens future outlook and whether it is holding a lot of government debt as a state enterprise, Darbasie accepted that the bank had more government paper than its competitors but said it was only 35 per cent of the total balance sheet.
She argued, “Am I concerned in the current environment? Not really concerned in the current environment, because T&T is performing better in the current environment because a lot of the negatives that are impacting across the board is actually benefiting us from an energy price and taxes etc , unlike some countries.”
She noted that a significant part of the First Citizens balance sheet is actually in investment with more of the balance sheet in investment as opposed to loans.
Asked about the experience from taking a hit on sovereign paper from Barbados.
Se said, “We took the hit from the Barbados restructuring on the chin. We didn’t have a choice, they restructured, because the size of our operations in Barbados is so small, any hit is a material hit, but it was not a material hit that caused an issue with our earnings potential in that year.”
She was asked if in being exposed to the Barbados situation has chastened the bank’s approach to lending to governments she said, “ My philosophy on any asset is to look at the credit risk of the asset, relative to the return of the asset. So anything that we do, whether it is a loan, or an investment, whether it is a private sector or a sovereign we look at the risk reward ratio.”
On the issue of investing Darbasie defended the Barita share purchase saying it was a good investment that had made the bank and its shareholders’ money.
“Barita was an investment that was done because we saw a business opportunity. In early 2019 there was a Bloomberg article that said Jamaica was the best performing stock exchange in the world for 2018, even in that article Barita was identified as an entity that was one of the top performing stocks, we saw a business opportunity that we made in FCIS.
“The only collaboration between us and Barita has been the Massy cross listing where we worked together with Barita on Massy. Other than that we are a very small shareholder in Barita.”
Darbasie said First Citizens remained a great opportunity for investors, she said dividends remains steady, the loan delinquency ratio was low, it is well capitalised for growth and has shown constant growth in its balance sheet and capital appreciation for investors.