The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The FNM’s deputy leader yesterday expressed fears that Royal Bank of Canada’s (RBC) decision to close four branches would drive more Family Island residents to use web shops and other ‘informal’ sources to conduct their banking business.

K P Turnquest told Tribune Business that he was particularly concerned about the communities of Bimini and Spanish Wells, where RBC’s impending pull-out will leave both islands without a physical commercial bank location.

RBC, studiously avoiding the word ‘closure’ in its statement on the branch closures yesterday, said the Bimini and Spanish Wells branches will be “merged” with the bank’s Freeport and Harbour Island branches, respectively, on May 26 and June 23.

This will mean that residents of these now-’unbanked’ communities will have to leave their islands if they need to access a physical branch location, forcing them to incur extra cost, time and inconvenience.

Mr Turnquest warned that many residents may turn to the web shops, and ‘underground’ financial providers, to enable them to conduct their financial business and fill the void left by RBC.

“It gives space for conducting illegal banking by the web shops,” Mr Turnquest told Tribune Business.

This was one of the primary reasons why the Government was so eager to legalise, regulate and tax the web shop industry, as the sector had effectively created a ‘parallel’ financial system through the provision of mortgage loans and other credit, while also acting as money transmission outlets.

RBC did its best yesterday to sent out an upbeat message over the branch closures, describing them as part of a reworking of its business model that will place more emphasis on electronic banking services and delivery.

Emphasising that physical locations were “a critical part of our strategy”, RBC told Tribune Business in response to this newspaper’s questions: “We have been looking at our branch footprint across the northern Caribbean to ensure we are positioned to effectively serve our clients now and in the future.

“We aim to make the branch part of a larger, integrated advice and service delivery model in the Bahamas.”

However, several sources suggested that the branch closures were part of a continued “cost cutting” strategy, as RBC sought to deliver greater profits and returns for its Canadian parent from a Bahamian economy yet to recover fully from the recession.

To achieve this, they said the bank - the main Bahamas-based provider of commercial banking services to the Government - is eliminating its more peripheral, less profitable branches as it searches for ways to cut overhead.

Many Bahamians, though, will likely be surprised - even outraged - by RBC’s latest consolidation, especially given that its 2016 financial statements revealed that net profits increased by 11.4 per cent to $61.558 million year-over-year.

That represents a more than $6 million increase over the prior year’s $55.253 million, with $26.742 million in dividends paid out to its Canadian shareholder.

However, one director of a Bahamian commercial bank, speaking on condition of anonymity, said the key was not RBC’s 2016 bottom line by itself, but the rate of return that represented as a percentage of its assets.

They pointed out that Commonwealth Bank’s 2016 net income was almost as high as RBC’s, standing at $57.4 million, yet this was achieved on an asset base that is two-thirds the size of its Canadian-owned counterpart.

RBC and other Bahamas-based commercial banks have been trying to drive Bahamians more to electronic and digital banking channels, such as the Internet and mobile apps, in a bid to eliminate long queues at their branches.

The bank’s statement yesterday indicated its expectation that such delivery platforms will compensate for the branch closures, but Mr Turnquest told Tribune Business this objective did “not face the reality of our customer base”.

“The reality is that if you’re only making a couple of hundred dollars a week, doing business online is simply not feasible,” he said. “If you get paid weekly on a Friday, you’re going into get the cheque cashed that same day to pay your bills.”

Mr Turnquest, himself an RBC customer, said previous branch consolidations, especially the amalgamation of FINCO locations with RBC ones, had already impacted the bank’s efficiency and customer service levels.

“Anybody who has to deal with RBC in Freeport will recognise it is a very congested bank where it is not uncommon to wait in line for an hour to an hour-and-a-half,” he added.

Mr Turnquest said RBC’s latest closures, which are focused mainly on smaller Family Island communities, carried echoes of Scotiabank’s 2015 consolidation, which saw the closures of branches in North Eleuthera and Long Island.

“The fact of the matter is that the Government has taken very lightly these closures, which have been occurring over the last five years, and done nothing to encourage these institutions to remain,” he told Tribune Business.

“We need to start asking the question in terms of these consolidations. Are they cost-cutting measures, or are they indications of an exit strategy? It seems they’ve been on this consolidation trend for a while, both RBC and Scotiabank. One has to ask the question.”

Tribune Business was told that RBC announced the branch closures to staff via an e-mail on Wednesday night, after hurriedly briefing government ministers and officials on its move late that afternoon.

“The communication they sent out deals with creating more of an electronic banking platform, increasing electronic banking and talking about their new app, and reduced need for branches,” one source familiar with RBC and its operations said.

“It’s also part of cost cutting as they try to grow the revenue side of the business; it’s all part of the same overall strategy of managing costs. If they’re able to provide electronic banking to offer service, they’re hoping that will offset some of the impact of the change.”

The source, though, acknowledged that the branch closures “will be disruptive for sure”, especially in Spanish Wells and Bimini, where there are no other banks. The island locations will also make it difficult for RBC staff to move, too.

RBC told Tribune Business that its branches remain “the foundation” for multiple ways that it will now deliver products and services to clients, including “leveraging digital channels, ATMs, private banking, a specialised/mobile sales force and business/corporate banking relationship managers that work together with the branch”.

The bank also pledged that there would be “a smooth, uninterrupted transfer” of customer accounts to their new branches.

Nathaniel Beneby, RBC’s managing director for the Bahamas and northern Caribbean, said in a statement: “We are expanding the ways that clients can interact with RBC in the Bahamas. Our strategy is designed to allow us to be closer to our clients - essentially being where they are, any time and anywhere.”

He added: “Change is both exciting and challenging, especially when people within our teams will be impacted. In keeping with our values, we remain committed to treating all employees with fairness and respect during this transition, and will work with them to ensure that they are supported throughout the process.

“I am excited about the bold steps we are taking to reimagine our bank, and I am confident that we will continue to be the bank our employees want, our clients deserve, and our communities expect.”