RBC takes a licking and retreats
Cogle to assist with ownership transition
R
OYAL BANK of Canada has agreed to lend its top man at RBC Jamaica, Roger Cogle, to Sagicor Group during the transition of ownership, once the deal closes.
Cogle has worked with RBC Royal Bank Jamaica since March 2012 and at first was just one prong of the three-tiered leadership model practised by the bank, until last year when he was ensconced as group managing director.
“Roger remains the MD until the transaction is closed,” said Donovan Perkins, president and CEO of Sagicor Investments, a subsidiary of Sagicor Group Jamaica, which was once the direct parent of Sagicor Bank before the group restructured.
“At this time, we have a binding agreement subject to regulatory approval. We have asked and RBC has agreed to allow for Roger, who is an excellent executive, to stay for a short period, post-closing of the deal,” Perkins told the Financial Gleaner.
Sagicor Group said it paid Royal Bank J$9.5 billion for the assets of RBC Jamaica and subsidiary RBTT Securities Limited, which converts to CDN$97 million. The operation was acquired debt- free. RBTT Securities maintains its licence as a dealership but is a non- trading entity.
Closure of the transaction with Sagicor is pending regulatory approval.
Royal Bank of Canada said Wednesday that it would book a loss of CDN$ 60 million ( J$ 5.9 billion) on the deal struck with Sagicor Group on January 29, but said the losses “largely related to an estimated writedown for the proportionate share of RBC Jamaica goodwill and other intangibles” acquired with the RBTT Financial Group in 2008.
The Canadian bank will update the estimate in its first- quarter earnings report. It confirmed that the deal meant a total pull-out of Jamaica.
Cogle, at promotion, was focused on a turnaround plan for the lossmaking bank, whose deficits had accumulated to about $ 7 billion, some due to a series of bad loans.
Sagicor said Royal Bank sold the non- performing loans of RBC Jamaica ahead of the deal. The size of the bad-debt portfolio was not disclosed, nor the buyer, but sources say it was sold to a Caribbean operation. RBC Canada said the sale of the portfolio was “a separate matter, which is not being disclosed.”
Sagicor Group President and CEO Richard Byles said that the $9.5 billion paid for the operation reflected its book value, and that Sagicor expected to book a gain from the transaction.
The Bank of Jamaica last estimated RBC’s banking assets at $56 billion and Sagicor Bank’s at $21 billion.
The acquisition covers a network of 13 branches and 42 automated teller machines and a staff of 550, but Sagicor has signalled that it will likely cut some branches and consolidate function.
INTENTION TO REBRAND
The financial conglomerate will merge RBC Jamaica with its own commercial banking operation, Sagicor Bank, which operates a small network of six branches.
“We intend to rebrand very quickly,” said Perkins, but said he could not respond to queries on the cost of the merger of the two networks, nor what would become of the RBC headquarters on Dominca Drive in New Kingston.
“Integration, once approval is received, will be an ongoing process. We can’t attempt to manage too many projects simultaneously,” he said.
“These activities will be logically sequenced with the emphasis being on areas that will impact customers the most, along with efficiency activities. We have to maintain our high customer-service standards in the transition.”
Immediately at announcement of the RBC deal on Wednesday, new talk emerged that Sagicor was also assessing FirstCaribbean Jamaica as a potential acquisition target.
Perkins said the group was always on the lookout for opportunities, but that in line with company policy he would not speak to the talk on FirstCaribbean.
“Organic and inorganic growth is in the corporate DNA of both the insurance and banking arms of Sagicor. We will remain opportunistic in our outlook as always,” he told the Financial Gleaner.
“Regarding FCIB, it is our general policy to avoid commenting
at all – affirmative or negative – on whether or not we are in any discussions, or contemplating discussions with any party on any transaction, in any of our business lines.”
The merger of the commercial banks is expected to position Sagicor Bank as No. 3 by assets.
Byles says the acquisition is unlikely to affect group profit as the new business will add new revenue streams, including earnings from credit card products. It also acquired RBC’s portfolio of 8,000 loans, and 120,000 clients.
Discussions with RBC extended over three months, starting November 2013 and ending in the wee hours of the morning of January 29, said Byles.
There were, he said, other contenders for the bank, but that Sagicor was chosen as the best fit.
Royal Bank Canada itself acknowledged Sagicor’s brand recognition as a plus for the group.
“Consistent with our strategy of being a competitive leader in the markets where we operate, we determined after a careful and thorough review that the best decision for the long-term future success of RBC Jamaica was to sell it to Sagicor,” said Suresh Sookoo, CEO of RBC Caribbean, in a company release. RBC described Sagicor as “a well-established financial franchise in Jamaica with the size, scale and complementary capabilities that RBC Jamaica does not currently possess.” RBC will be pulling out of Jamaica but says its plans to strengthen and reposition its other Caribbean businesses to focus on countries where it already has significant market share.