The Tribune

• Fidelity parent completes market exit

• ‘No impact’ to BISX-listed subsidiary

• Local bank’s 2021 profits over $20m

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian financial institution’s shareholders have received a $32m boost this week after completing the final step in exiting the Cayman Islands market.

The two hotel pension funds are among the investors set to benefit after Fidelity Bank & Trust International closed the sale of its Fidelity Bank (Cayman) subsidiary to Proven Investments, a publicly-traded Jamaican entity, and disposed of its last interest in the southern Caribbean territory.

Proven, in a statement to the Jamaica Stock Exchange (JSE), confirmed that the deal - which was signed almost a year ago on March 16, 2021 - had now closed after receiving all necessary approvals from the Cayman Islands Monetary Authority (CIMA), the banking industry regulator.

“CIMA having approved the acquisition of the shares, the acquisition was completed on February 1, 2022, on the transfer of the shares to Proven Bank Holding Ltd, a wholly-owned subsidiary of Proven Investments, which was incorporated in the Cayman Islands,” Proven said.

“The purchase price for the shares was $31.8356m, subject to adjustment within 45 days of completion in accordance with the terms of the share purchase agreement.

The Cayman deal represents a further break-up of Fidelity Bank & Trust International’s financial empire, which was created in the mid-1990s through its management-led buyout from Dawood Rawat’s British American interests, leaving it with just BISX-listed Fidelity Bank (Bahamas) - in which it holds a majority 75 percent stake - as its sole asset.

The group’s Bahamian investment banking arm, the former RoyalFidelity Merchant Bank & Trust, has been renamed RF Bank & Trust following a own management buyout in 2020. RF Holdings also acquired its former parent’s Cayman-based pension business, while RoyalStar Assurance teamed with Trinidad’s Guardian Holdings to purchase the Fidelity Insurance (Cayman) brokerage business.

A well-placed Tribune Business source, speaking on condition of anonymity, last night said Fidelity Bank & Trust International’s Bahamian and Bahamas-based shareholders had gained “close to $60m” from exiting the Cayman Islands via the sale of the three businesses.

Besides the hotel industry’s line staff and managerial pension funds, the group’s diverse shareholders include Anwer Sunderji, the architect of the mid-1990s buyout, who has been ill for some time. Other executives who played a role in the group’s founding, including Alfred Stewart and Gregory Bethel, also hold equity stakes as well as executive management members.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that the completion of the Cayman Islands exit would not mean any major changes for the BISX-listed bank, its staff and shareholders.

With the bank targeting a consistent 20-25 percent return on equity (ROE), and a policy of paying out 70 percent of profits as dividends if there were no capital expansion possibilities, Mr Bowe indicated there were no plans for the parent to sell-off its majority stake.

“For us it was a good result,” Mr Bowe said of the parent’s Cayman exit. “We’ve been able to recover our investment and accumulated profits in it, and make a shareholder return. It has no impact, but as part of this transaction the Bahamian entity has agreed to continue to provide support services for the next 18-24 months. It’s up to 24 months, and a minimum of 18.”

These services include information technology (IT) and human resources, and Fidelity Bank (Bahamas) will provide them to its former Cayman affiliate in the manner it has become accustomed to - but this time as a third-party service provider rather than a “shared resource”.

“We have to be on top of our game, and have to ensure the service levels are at peak at all times,” Mr Bowe said. “We will no longer have the forgiveness we did when we were part of the same group. I have no doubt that if we do not meet the standard Proven will shout, because we are paying for it.”

The Fidelity Bank (Bahamas) chief reassured that no redundancies will occur when the back office support agreement with Proven Investments comes to an end. “Our management team is focused on growing The Bahamas entity to the point where that doesn’t matter,” he added.

“We’ll be so much larger that the resources used to support Cayman will be required in The Bahamas. We expect absolutely no staff attrition as a result of it. We expect staff expansion. We will need additional resources in any event as because The Bahamas will continue to climb back following the pandemic.

“We didn’t have a headcount reduction; COVID just slowed growth. We are looking to accelerate that growth as quickly as the economy will allow.” Mr Bowe said the bank was “back on track” to achieve its 20-25 percent return on equity target.

“It’s not only an income asset or a cash generating asset,” Mr Bowe said of the commercial bank. “We have a dividend policy of paying out 70 percent of profits if there is no need for capital for expansion, and we don’t need any because the loan portfolio growth has just stalled because of the economic environment we’re operating in.

“We’re running to stand still, but we’re keeping the portfolio’s size and not seen the portfolio contract like others in the market have. We’ve done a good job of retaining existing customers and replacing those who have departed.”

With Fidelity Bank (Bahamas) due to release its 2021 full-year and fourth quarter results imminently, Mr Bowe declined to provide figures, but said: “As I said to you when we released the third quarter’s, I am confident we will exceed $20m” in profits.

Describing the Cayman Islands exit as “bittersweet”, he denied it had been a distraction but said it would “free up a bit more management time to focus on The Bahamas”.

Mr Bowe last year emphasised that Fidelity Bank & Trust International was not a forced seller in any of its Cayman transactions. He explained that the deals had been driven by the fact that several of the group’s key shareholders were approaching retirement age, and are seeking to maximise the value of their holdings as they seek to “redirect their investment priorities” to less risky areas.

He added that the group’s Cayman businesses were “more valuable to suitors” as individual units rather than as part of a group, with Fidelity Insurance (Cayman), in particular, a good strategic for RoyalStar Assurance/Guardian Holdings as it wrote a significant amount of business for them and provided a key distribution channel.

Proven Investments is part of a financial services group that was founded by now-Jamaican opposition leader, Mark Goulding, and his former Cabinet colleague, Peter Bunting. Another key player is former Bahamas Telecommunications Company (BTC) chief executive, Garfield “Garry” Sinclair.