RBC bank leaving Ja sends strong message
M ANY KUDOS to Sagicor Bank for taking the positive and even courageous decision at this time to acquire the slimmed- down operations of RBC Royal Bank Jamaica.
Sagicor Group has been making significant real estate acquisitions – most recently in the hotel hospitality sector – and now this important acquisition in the financial sector in Jamaica.
These acquisitions are in line with the optimism and strategy of the president and CEO of the Sagicor Group, Richard Byles.
Obviously intrepid, the Sagicor Group accepts the widely held view of sage investors that when everyone is selling, looking to sell, or plain running away, it is a good time to enter the market as a buyer.
It is known as ‘bottom fishing’ in investment circles, and suggests that the bottom fisher sees opportunities where others fail to recognise them; or others having recognised them, lack the courage or cash to acquire the distressed or somewhat tarnished assets.
The opportunistic purchase would appear to make sense for Sagicor in the almost exact opposite manner to that of the strategic thinkers at the RBC in Canada, or the regional office, when they decided that it was time to leave the Jamaican market.
Given the very low to negligent growth rate of the Jamaican economy, the leaders at Sagicor Bank, which received its commercial banking licence in 2008 as the then Pan Caribbean Bank, would have realised that internal or organic growth will take them many decades in order to build commercial and financial muscle.
Acquisition became the only sensible option in order to achieve fast-track growth at the nascent bank.
When the RBC acquisition presented itself, it fitted neatly into Sagicor Bank’s publicly stated policy that it aimed to become the thirdlargest bank in Jamaica in 10 years.
Sagicor’s dominance in the insurance sector with about 500,000 customers also gives credence to the acquisition.
NO-CONFIDENCE VOTE
While the Sagicor Group with its special and extensive knowledge, and with its vast and growing investment in the country, sees Jamaica as an acceptable risk with a positive prospect, it is clear the RBC has the opposite view.
No matter what spin may be put on the top Canadian bank leaving Jamaica, it cannot be framed as a vote of confidence. RBC has been making bad loans and piling up losses on top of losses for about five years.
It has cut its number of branches and cut the size of its staff and other expenses, to no avail. Now it has decided enough is enough and is
about to sever its ties with Jamaica. RBC’s advertisements on local radio stations constantly repeated that it was awarded the accolade as being one of the top five banks in the world. Well, one of the ‘best five’ banks in the world is saying that the future it sees in Jamaica is very bleak.
The RBC decision is mainly about the future. The institution’s stature, and with its deep pockets and longterm view, can suffer a few years of losses – as RBC did in Jamaica – and stay the course if the future looks bright.
With our punishing and crippling debt burden, which will take two or more generations to clear at the current projections under the IMF agreement, and the dearth of local and foreign direct investment in the economy, RBC has clearly arrived at the conclusion that Jamaica’s prospects are too risky, too bleak and too potentially unprofitable, and that it is time to leave.
The absence of any well- designed and properly managed economic growth plan means that the economy will meander sideways, at best, or slip further into desperation, at worst.
Without an understandable and defined growth path, and the management of all Jamaica’s resources to engender economic growth, RBC knows that the economy will struggle and its loan book will worsen.
INCONVENIENT FOR JAMAICA
Key decisionmakers obviously made the choice to keep and build RBC’s business in Trinidad and Tobago and cut their losses in Jamaica now rather than later.
The timing is most inconvenient for Jamaica. While the Economic Programme Oversight Committee and government officials are encouraging – and sometimes almost berating – local investors to ‘step up to the plate and invest’, and while foreign investors may be tempted to take another look at Jamaica now that we have an IMF agreement in place, the RBC had decided to withdraw from the Jamaican economy.
So what do we do to try and counter this no-growth, no-early-turn-around perception, before another set of foreign or local investor pack up shop and leave?
First, we can channel those government purchases made overseas for items which can be made and supplied in Jamaica to local suppliers and contractors – uniforms, furniture and alternate local food supplies.
Second, quickly put the necessary legislation in place to require private developers and homeowners to install water catchment and renewable-energy systems that will put local people to work, reduce our fossil-fuel imports and reduce our energy bill.
Also, Minister Phillip Paulwell needs to find the enthusiasm he once had for net billing and wheeling when his party was in opposition, get legislation or regulation passed and implement the decision in order to help foster economic growth, cut the petroleum bill, and reduce the export of foreign currency – most of which we have to borrow.