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March 26, 2008 is a day that thou­sands of T&T res­i­dent and cit­i­zens will re­mem­ber. That was the day on which the share­hold­ers of RBTT Fi­nan­cial Hold­ings vot­ed in favour of the pro­posed amal­ga­ma­tion of RBTT with a Caribbean sub­sidiary of Roy­al Bank of Cana­da (RBC). The de­ci­sion was tak­en to­day at a spe­cial meet­ing of the RBTT share­hold­ers held at the Hilton Trinidad and Con­fer­ence Cen­tre, with the amal­ga­ma­tion res­o­lu­tion re­ceiv­ing the ap­proval of 98.18 per cent of the votes cast by hold­ers of or­di­nary shares, which ex­ceed­ed the re­quired 75 per cent ap­proval.

RBTT and RBC had an­nounced an agree­ment on Oc­to­ber 2, 2007, for RBC to ac­quire RBTT for a to­tal pur­chase price of ap­prox­i­mate­ly TT$13.8 bil­lion (ap­prox­i­mate­ly US$2.2 bil­lion at ex­change rates as of Sep­tem­ber 28, 2007).

RBTT Group Chair­man Pe­ter Ju­ly said, “This is an his­toric de­ci­sion, which will ben­e­fit all stake­hold­ers. We now move to sat­is­fy the req­ui­site reg­u­la­to­ry re­quire­ments to en­sure that we can close this trans­ac­tion with­in the short­est pos­si­ble time­frame.”

“This is a trans­for­ma­tion­al ac­qui­si­tion for RBC in the Caribbean, one that ex­tends our reach in­to many im­por­tant mar­kets, no­tably Trinidad and To­ba­go, Ja­maica, and the Dutch Caribbean,” said Pe­ter Ar­me­nio, then RBC’s head of US and In­ter­na­tion­al Bank­ing.

“RBTT pro­vides RBC with ex­ten­sive lo­cal in­sight and lead­er­ship in mar­kets where we have lit­tle or no pres­ence while sig­nif­i­cant­ly ad­vanc­ing our strat­e­gy to grow out­side Cana­da. RBTT is a per­fect com­ple­ment to RBC’s cur­rent foot­print. We both share a his­to­ry of serv­ing cus­tomers through­out the Caribbean and have al­most no over­lap of our re­spec­tive branch net­works,” Ar­me­nio added.

Fol­low­ing the com­ple­tion of the amal­ga­ma­tion, RBTT Fi­nan­cial Hold­ings Lim­it­ed and RBC Hold­ings (Trinidad & To­ba­go) Lim­it­ed, a sub­sidiary of RBC, amal­ga­mat­ed and con­tin­ued as a whol­ly owned in­di­rect sub­sidiary of RBC.

While RBC saw the ac­qui­si­tion of RBTT as the “per­fect com­ple­ment” to its then foot­print and as con­tribut­ing to its strat­e­gy to grow out­side of its home ter­ri­to­ry, the Cana­di­an bank’s op­er­a­tions in the Caribbean to­day are a shad­ow of what they were in 2007/2008.

Up­on ac­qui­si­tion, in the fourth quar­ter of 2007, the amal­ga­mat­ed bank’s as­sets were put at US$13.7 bil­lion. As at Oc­to­ber 31, 2023, the date of its last au­dit­ed fi­nan­cials, its as­sets to­talled US$9.75 bil­lion, a de­cline of 28.8 per cent in 15 years.

The RBTT share­hold­ers re­ceived to­tal per share con­sid­er­a­tion of ap­prox­i­mate­ly $40, which was payable in a com­bi­na­tion of cash (about 60 per cent) and RBC com­mon shares (about 40 per cent). The share­hold­ers had the op­tion of tak­ing the $24 per share cash por­tion of the con­sid­er­a­tion in ei­ther TT or US dol­lars. Many of those with US-dol­lar ac­counts opt­ed for the US-dol­lar op­tion.

When the trans­ac­tion was an­nounced on Oc­to­ber 2, 2007, the $40 per share sale price rep­re­sent­ed an 18 per cent pre­mi­um on the clos­ing price of RBTT shares on Sep­tem­ber 28, 2007, and a 27 per cent pre­mi­um to the av­er­age share price of $31.44 over the pre­vi­ous 12 months.

Ob­vi­ous­ly, a ma­jor­i­ty of the RBTT share­hold­ers were hap­py to ac­cept the of­fer.

Re­duc­ing cap­i­tal

Last Sat­ur­day, the T&T Guardian pub­lished a sto­ry on page 15 that RBC Fi­nan­cial (Caribbean) Ltd, the par­ent com­pa­ny of RBC Roy­al Bank (Trinidad and To­ba­go), had re­duced its cap­i­tal by US$200 (TT$1.36 bil­lion).

That news, which im­me­di­ate­ly struck me as be­ing ma­te­r­i­al in­for­ma­tion, was com­mu­ni­cat­ed in a no­tice to cred­i­tors, dat­ed Ju­ly 25, 2024. In that no­tice, RBC Fi­nan­cial ex­plained that at a meet­ing of the com­pa­ny’s board of di­rec­tors on June 25, 2024, it was rec­om­mend­ed that a res­o­lu­tion of the sole share­hold­er of the bank be passed to re­duce the stat­ed cap­i­tal of the com­pa­ny.

On Ju­ly 12, 2024, the sole share­hold­er of RBC Fi­nan­cial ap­proved the re­duc­tion of the bank’s stat­ed cap­i­tal by the TT-dol­lar equiv­a­lent of US$200 mil­lion “for the pur­pose of mak­ing a dis­tri­b­u­tion to the hold­ers of the or­di­nary shares of RBC Fi­nan­cial on record on the date the cap­i­tal re­duc­tion oc­cured.”

RBC Fi­nan­cial is in­cor­po­rat­ed in T&T, but is a whol­ly owned sub­sidiary of RBC Hold­ings (Bar­ba­dos). The T&T com­pa­ny’s ul­ti­mate par­ent com­pa­ny is the Roy­al Bank of Cana­da.

So, on its face, the no­tice to cred­i­tors could be viewed as a means by which US$200 mil­lion could be re­turned to RBC Fi­nan­cial (Caribbean) Ltd’s par­ent com­pa­ny in Cana­da.

In its au­dit­ed, con­sol­i­dat­ed fi­nan­cial state­ments for 2023, RBC Fi­nan­cial (Caribbean) dis­closed that its stat­ed cap­i­tal, for the 12-month pe­ri­od end­ed Oc­to­ber 31, 2023, was $12.065 bil­lion (US$1.77 bil­lion).

In the RBC Fi­nan­cial Caribbean chief ex­ec­u­tive of­fi­cer’s re­port, which was dat­ed Jan­u­ary 25, 2024, Dar­ryl White said, “...our reg­u­la­to­ry cap­i­tal ra­tio at year end stood at 27.30 per cent, which is well above reg­u­la­to­ry thresh­olds.”

One the­o­ry is that RBC Fi­nan­cial Caribbean is over-cap­i­talised and wants to re­turn US$200 mil­lion to Toron­to be­cause that could be re­de­ployed to earn more mon­ey for the group than sit­ting on the bal­ance sheet of the T&T based com­pa­ny.

This is linked to the sup­po­si­tion that the bank sees lim­it­ed op­por­tu­ni­ties to make large, in­cre­men­tal loans to its cus­tomers be­cause of its per­cep­tion of the risks of lend­ing across its Caribbean fran­chise.

On Mon­day, re­spond­ing to a ques­tion of why would a lo­cal­ly reg­is­tered bank be look­ing to re­duce its cap­i­tal, the Fi­nan­cial In­sti­tu­tions Su­per­vi­sion De­part­ment of the Cen­tral Bank of T&T said, “Fi­nan­cial in­sti­tu­tions may re­duce stat­ed cap­i­tal for a num­ber of rea­sons. Some rea­sons in­clude re­turn­ing sur­plus cap­i­tal back to share­hold­ers, sim­pli­fy­ing their cap­i­tal struc­ture to be­come more ef­fi­cient, re­duc­ing or elim­i­nat­ing paid-up or un­paid shares, clean­ing up its bal­ance sheet, and cor­po­rate re­struc­tur­ing.

“In this in­stance, the com­pa­ny has stat­ed its rea­son as be­ing for the pur­pose of mak­ing a dis­tri­b­u­tion to its share­hold­ers. In gen­er­al, the Cen­tral Bank would not take is­sue with a re­duc­tion of stat­ed cap­i­tal where the fi­nan­cial in­sti­tu­tion is not im­pact­ed neg­a­tive­ly.”

So, it seems, even the fi­nan­cial su­per­vi­sors at the Cen­tral Bank ac­knowl­edge that a cor­po­rate re­struc­tur­ing may be one of the rea­sons for a bank re­duc­ing its cap­i­tal.

The pos­si­bil­i­ty that the re­duc­tion in RBC Fi­nan­cial’s cap­i­tal by the TT-dol­lar equiv­a­lent of US$200 mil­lon may be linked to some kind of cor­po­rate re­struc­tur­ing is borne out by the no­tice to cred­i­tors, which al­so states that the cap­i­tal re­duc­tion no­tice is strict­ly a for­mal­i­ty re­quired un­der the Com­pa­nies Act and that “all cred­i­tors of the com­pa­ny will be paid.”

Would a bank make ref­er­ence to “all cred­i­tors of the com­pa­ny will be paid,” if it planned to be op­er­at­ing on an on­go­ing ba­sis?

RBC Fi­nan­cial’s no­tice to cred­i­tors con­tin­ued, “This cap­i­tal re­duc­tion does not af­fect the op­er­a­tions of RBCF­CL and we re­main com­mit­ted to main­tain­ing strong re­la­tions with our clients, em­ploy­ees and com­mu­ni­ties across the Caribbean.”

Is the as­sur­ance of be­ing “com­mit­ted to main­tain­ing strong re­la­tions with our clients, em­ploy­ees and com­mu­ni­ties across the Caribbean,” per­sua­sive, when RBC has pulled out of the Caribbean be­fore in 1987?

And what is one to make of the re­sponse of An­drew Knowles, se­nior man­ag­er, cor­po­rate com­mu­ni­ca­tions, Caribbean, to 11 ques­tions last Fri­day. He wrote in an emal, “We ap­pre­ci­ate your in­ter­est, but are un­able pro­vide any com­ments at this time.”

One of the 11 ques­tions was, does RBC Fi­nan­cial Caribbean’s re­duc­tion in cap­i­tal fore­shad­ow its de­par­ture from the Caribbean?

Four ad­di­tion­al ques­tions were sent to Mr Knowles on Mon­day, in­clud­ing, “The no­tice refers to the dis­tri­b­u­tion of the TT-dol­lar equiv­a­lent of US$200 mil­lion from the re­duc­tion in cap­i­tal. Will the TT$1.36 bil­lion be con­vert­ed in­to US dol­lars, at some lat­er date, and repa­tri­at­ed to Cana­da, or would the TT$1.36 bil­lion be used to pay cred­i­tors of the com­pa­ny.”

His re­sponse was, “Our po­si­tion re­mains that we are un­able to com­ment at this time.”

What does it mean that RBC is un­able to com­ment “at this time” on leg­ti­mate ques­tions from a le­git­i­mate me­dia house in the Caribbean

De­risk­ing the Caribbean

From my cal­cu­la­tions, RBC has sold its op­er­a­tions in nine coun­tries in the re­gion:

* On June 27, 2014, RBC an­nounced that it had con­clud­ed the sale of RBC Roy­al Bank (Ja­maica) and RBTT Se­cu­ri­ties Ja­maica to Sagi­cor Group Ja­maica. Sagi­cor Ja­maica agreed to pay JA$9 bil­lion to the RBC for RBC Ja­maica. At an ex­change rate of JA$107.19 for US$1, the sale was con­sum­mat­ed for ap­prox­i­mate­ly US$84 mil­lion.

RBC said that while fi­nan­cial terms of the trans­ac­tion were not dis­closed, the pur­chase price ap­prox­i­mate­ly re­flects the book val­ue of RBC Ja­maica. RBC ex­pect­ed the trans­ac­tion to re­sult in an es­ti­mat­ed loss of C$60 mil­lion (be­fore and af­ter-tax) as a re­sult of In­ter­na­tion­al Fi­nan­cial Re­port­ing Stan­dards, large­ly re­lat­ed to an es­ti­mat­ed write­down for the pro­por­tion­ate share of RBC Ja­maica good­will and oth­er in­tan­gi­bles ac­quired by RBC in con­nec­tion with its ac­qui­si­tion of RBTT Fi­nan­cial Group in 2008;

* On Ju­ly 31, 2015, RBC an­nounced that it com­plet­ed the pre­vi­ous­ly an­nounced sale of RBC Roy­al Bank (Suri­name) N.V. to Re­pub­lic Bank Ltd (RBL).

The T&T-based bank ac­quired RBC’s Suri­name op­er­a­tions, in­clud­ing a six-branch net­work with as­sets of ap­prox­i­mate­ly US$525 mil­lion at an es­ti­mat­ed cost of US$39.8 mil­lion;

* On April 1, 2021, April 1, 2021, RBC re­ceived the re­quired ap­provals from lo­cal gov­ern­ments and from the East­ern Caribbean Cen­tral Bank for the sale of its East­ern Caribbean bank­ing op­er­a­tions to a con­sor­tium of re­gion­al banks com­prised of 1st Na­tion­al Bank of St. Lu­cia, An­tigua Com­mer­cial Bank, Bank of Do­mini­ca, Bank of Montser­rat, and The Bank of Nevis.

The sale in­cludes RBC’s 11 branch­es in An­tigua and Bar­bu­da, Do­mini­ca, Grena­da, Montser­rat, St. Kitts and Nevis, St. Lu­cia, and St. Vin­cent and the Grenadines.

“This trans­ac­tion will al­low RBC to align in­vest­ments and re­sources in­to mar­kets where our vi­sion for be­ing the Caribbean’s dig­i­tal­ly-en­abled re­la­tion­ship bank can be ex­e­cut­ed most-suc­cess­ful­ly,” said Rob John­ston, Head of Caribbean Bank­ing.

“The sale of our East­ern Caribbean bank­ing op­er­a­tions to in­dige­nous banks is al­so a crit­i­cal step for­ward in strength­en­ing the do­mes­tic fi­nan­cial ser­vices sec­tors in each of the coun­tries and ter­ri­to­ries in­volved. This will help cre­ate a stronger cli­mate for fur­ther growth, de­vel­op­ment, and pros­per­i­ty,” said John­son.

The two oth­er Cana­di­an banks in the re­gion, Sco­tia­bank and CIBC, have al­so sold off some of their op­er­a­tions across the re­gion.

In Sep­tem­ber 2019, the East­ern Caribbean Cen­tral ap­proved the ap­pli­ca­tion for the trans­fer of the as­sets and li­a­bil­i­ties of the Bank of No­va Sco­tia (BNS) to Re­pub­lic Fi­nan­cial Hold­ings Ltd in An­guil­la, Do­mini­ca, Grena­da, St Kitts and Nevis, Saint Lu­cia and St Vin­cent and the Grenadines.

CIBC Caribbean main­tains busi­ness­es in 10 Caribbean coun­tries, in­clud­ing Trinidad & To­ba­go, but it an­nounced the sale of its Caribbean bank’s busi­ness in five coun­tries – Aru­ba, St. Vin­cent, Grena­da and St.Kitts & Nevis & Do­mini­ca in Oc­to­ber2021. The Aru­ba sale was com­plet­ed in 2022.

In Ju­ly 2022, CIBC said it would be­gin the process of trans­fer­ring its clients to the Bank of St. Vin­cent & Grenadines Lim­it­ed in St. Vin­cent and the St. Kitts, Nevis, An­guil­la Na­tion­al Bank in St. Kitts.

CIBC said the sale of its as­sets in Do­mini­ca to the Na­tion­al Bank of Do­mini­ca would not pro­ceed, as NBD an­nounced a change in its strate­gic di­rec­tion.

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