The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister has voiced optimism that CIBC’s sale of majority control in its Bahamian and regional affiliate will be “positive” given the buyer’s reputation for innovation.

Peter Turnquest said that he also hoped Colombia’s GNB Financial Group would boost competition and services within the Bahamian commercial banking industry following its imminent entry to this market.

Speaking after CIBC FirstCaribbean and GNB formally confirmed that the latter is acquiring two-thirds majority control, Mr Turnquest said: “I think it is a positive.”

“As the release from CIBC said itself, it is a vote of confidence in The Bahamas that this group is interested in investing. CIBC is not exiting totally, which is also an important consideration. We’ll see, at the end of the day, how the due diligence works out, whether this is a good partner for us and go from there.”

He added: “The little bit that I’ve learned about the group is that they are innovative, so we’ll see. Competition is always good, and obviously we are continuing best practices and complying with the banking industry rules.

“Certainly, any group bringing innovation and a fresh look at the market has the potential to improve competition and bring a general improvement in services.”

GNB is to acquire a 66.73 percent equity stake in FirstCaribbean, taking majority control from CIBC to enable the Canadian bank to begin its long-awaited Caribbean exit. The latter will retain a 24.9 percent minority position in its former regional affiliate once all necessary regulatory approvals in The Bahamas and other jurisdictions are received.

Colette Delaney, CIBC FirstCaribbean’s chief executive, told employees in an internal e-mail confirming the deal that the bank will have to rebrand - likely through dropping the CIBC portion of its name at the very least.

Its reliance on its former Canadian parent for back office and technology systems support will also end, she added, with such services likely transitioning to independent services providers.

GNB’s plans for the business will only become fully known in time, yet it will be heavily reliant on The Bahamas and Turks & Caicos to produce the bulk of its profits - at least in the near-term.

While the Bahamian unit produced 32.3 percent, nearly one-third or just over $188m, of CIBC FirstCaribbean’s $581m top-line in 2018, its $85m in net income generated 84 percent of the bank’s regional $101m bottom line.

James Smith, the former finance minister and ex-Central Bank governor, told Tribune Business recently that GNB was entering the Caribbean and Bahamian market at “a challenging time” for commercial banking give the combination of regulatory pressures, low economic growth and high unemployment, and high debt.

Describing the economic environment as “at best, it’s sanguine, at worst, it’s dreadful”, Mr Smith questioned whether a GNB-controlled FirstCaribbean would find it as easy to maintain the correspondent banking relationships so vital to The Bahamas’ international economy as CIBC.

US and other risk-averse international banks have been exiting such ties on the basis that the perceived risks outweigh the rewards, and the former governor said: “They’re taking it at a time of increased regulatory challenges with correspondent banking, and increased oversight and regulation.

“The Canadian banks have been able to withstand the OECD because their parents are their correspondents and close to the international settlements system. I don’t know if by itself this Colombian group is an international clearer or is clearing through big banks like Citibank or JP Morgan.

“It has to convince those banks that the risk is no higher than when CIBC was doing it. The worst case scenario is if it is not clearer, or does not have strong correspondents, the problem for The Bahamas and region is another retail bank that has difficulty clearing US transaction. That’s not helpful to the economy.”

However, the Gilinski Group has banking operations in Colombia, Peru, Paraguay, Panama and the Cayman Islands with approximately $15bn in combined assets.

“FirstCaribbean will remain the strong entity it is today, committed to servicing its clients in the region,” said Jaime Gilinski, chairman of GNB Financial Group. “I have been impressed by the strength and stability of FirstCaribbean, and am excited about its prospects for the future.”

“FirstCaribbean is a strong, well-performing business that continues to grow across the region. FirstCaribbean remains laser focused on delivering on its strategy – providing its clients with first-class service through a modern, every day banking experience and providing its employees with the best possible work experience,” said Ms Delaney, its chief executive.