Jor­dan sees op­por­tu­ni­ties for lo­cal banks fol­low­ing Sco­tia, Bar­oda exit

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The planned de­par­ture of In­dia’s Bank of Bar­oda and Canada’s Bank of Nova Sco­tia only months be­fore first oil here opens op­por­tu­ni­ties for lo­cal banks to ex­pand their op­er­a­tions and pull in new for­eign in­vestors, ac­cord­ing to Minister of Fi­nance Win­ston Jor­dan.

Jor­dan yesterday dis­puted re­ports that gov­ern­ment was not aware that the Bank of Bar­oda would be ceas­ing op­er­a­tions here as he said it had no­ti­fied gov­ern­ment since April of its scal­ing-down of op­er­a­tions world­wide.

“We knew about Bank of Bar­oda since April. No. No. No. We knew since April that they were pulling out. We tried to do what­ever to keep them but the lo­cal branch is not in­flu­en­tial, rel­a­tive to their head of­fice. It is not as if you can just go and say, ‘Man, hold back.’ Once they made that de­ci­sion, they will go through with it,” Jor­dan told Stabroek News on the side­lines of yesterday’s sit­ting of the Na­tional Assem­bly.

“In terms of what they had in­di­cated to us, also, is that this area here is thin, so they said they are con­cen­trat­ing on the East— Mid­dle East and Asia. So, they are go­ing to be pulling out of all other ar­eas, in­clud­ing New Zealand. They have al­ready pulled out of the Ba­hamas you know, they are pulling out of Trinidad…and they are go­ing to Dubai and Ja­pan and Sin­ga­pore. So, it is a trend, it is not no lit­tle Guyana. Yes, they are pulling out of Guyana but it is not only about Guyana; this is big­ger than us, re­ally,” he added.

On Thurs­day, the Bank of Bar­oda sought bids from in­vest­ment bankers to carry out the sale of its Guyana-based sub­sidiary.

Ac­cord­ing to the Fi­nan­cial Ex­press, the bank said in a bid doc­u­ment that “The ob­jec­tive of this as­sign­ment is to sell/dis­in­vest Bank of Bar­oda’s en­tire 100% stake in its sub­sidiary BOBGI (Bank of Bar­oda Guyana Inc) through in­vest­ment bankers.”

The re­port said that Bar­oda’s Guyana sub­sidiary’s to­tal busi­ness stood at GYD 14,560 mil­lion (nearly US$70 mil­lion) at the end of Septem­ber, 2018, down from GYD 20,576.5 mil­lion at the end of March, 2017 and GYD 21,092 mil­lion at the end of March, 2016.

The re­port said the sale is part of a strat­egy to exit rel­a­tively less re­mu­ner­a­tive in­ter­na­tional mar­kets by Bar­oda, which con­tin­ues to call it­self ‘In­dia’s in­ter­na­tional bank.’

The Fi­nan­cial Ex­press said that the de­ci­sion was partly driven by a reg­u­la­tory re­stric­tion on is­suance of Let­ters of Un­der­tak­ing (LoUs), which weak­ened the in­ter­na­tional port­fo­lio of the bank to `19,000 crore from `38,000 crore over the April-June quar­ter of FY19. The con­tri­bu­tion of in­ter­na­tional busi­ness to the bank’s bal­ance sheet dropped to 23% from 27%. In Fe­bru­ary, the bank had de­cided to move out of South Africa in the wake of al­le­ga­tions that it fa­cil­i­tated money laun­der­ing by a non-res­i­dent In­dian fam­ily in the coun­try.

As a strate­gic move, the re­port said that Bar­oda has an­nounced plans to fo­cus on four over­seas ter­ri­to­ries — the US, the UK, the United Arab Emi­rates (UAE) and Sin­ga­pore.

PS Jayaku­mar, man­ag­ing di­rec­tor and chief ex­ec­u­tive of­fi­cer of Bar­oda was quoted as say­ing: “The bank is try­ing to look east a lit­tle bit. We have done some kind of an al­liance with a lead­ing Korean bank.” He added that “they are all new mar­kets that we need to look at, such as Korea and Ja­pan, where there is a large amount of busi­ness go­ing through.”

The re­port said that might sig­nal a grad­ual move out of the bank’s six sub­sidiaries in Africa, one in Trinidad and Tobago and an­other in New Zealand.

Ac­cord­ing to the Eco­nomic Times, In­dia’s Fi­nance Min­istry pro­posed to merge the three state-run banks, Vi­jaya Bank, Bank of Bar­oda and Dena Bank, into a sin­gle bank, which would be­come the third big­gest bank in In­dia, with a to­tal busi­ness of more

than US$210 bil­lion. The boards of the three banks were to meet to con­sider the pro­posal. The agenda be­hind the merger of the banks is re­port­edly to lower non­per­form­ing as­sets.

‘Op­por­tu­nity to Grow’

The Bank of Bar­oda branch here has not made any state­ment on the mat­ter and the de­vel­op­ment comes days af­ter it was an­nounced that Canada’s Bank of Nova Sco­tia had struck a deal to sell a string of its Caribbean branches, in­clud­ing Guyana’s, to Repub­lic Bank of Trinidad.

The Minister of Fi­nance said that with the emer­gence of the oil and gas sec­tor and first oil ex­pected by 2020, he does not an­tic­i­pate the de­ci­sions of the bank to hurt the lo­cal econ­omy but is an op­por­tu­nity for lo­cal banks to grow.

“For ev­ery chal­lenge, there is op­por­tu­nity. So, there is op­por­tu­nity for other banks or owners to own these banks and grow them. We are talk­ing now about an econ­omy that has the op­por­tu­nity for five bil­lion bar­rels of oil. [They can now] step up or widen their base to get new clients, new play­ers com­ing into the mar­ket…you have five bil­lion bar­rels of oil,” he said.

“I mean think about that—Amer­i­can Air­lines is here, now you are hear­ing that United Air­lines want to come also and so on. It is not as if pulling out of Guyana is the end…,” he added.

And fol­low­ing gov­ern­ment’s ex­pres­sion of con­cern to Repub­lic Bank about the im­pli­ca­tions of the ac­qui­si­tion of Sco­tia, Repub­lic Bank ex­ec­u­tives have asked for a meet­ing.

The Min­istry of Fi­nance has noted that the agree­ment be­tween Repub­lic Bank and Sco­tia­bank raises a num­ber of is­sues for the lo­cal bank­ing sec­tor and for the pub­lic, which the Min­istry, the Bank of Guyana and gov­ern­ment will need to care­fully con­sider. These is­sues in­clude Repub­lic Bank hold­ing 51 per cent of bank­ing as­sets and de­posits.

“I be­lieve [there is] an in­vi­ta­tion by Mr Nigel Bap­tiste [Man­ag­ing Di­rec­tor of Repub­lic Bank], who wants to come and talk to us but we don’t have the time right now be­cause of the bud­get de­bates. I will speak with him. You would not want not to speak with him. We will lis­ten, we are rea­son­able peo­ple, we will lis­ten but we have our own con­cerns. I am not sure how he will al­lay those con­cerns. I am not sure how that will turn out be­cause we have our laws about con­cen­tra­tion and so on. I am not sure how he will get around those but we will lis­ten,” he said.

Bank of Bar­oda’s Av­enue of the Repub­lic branch

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