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Central Bank divests entire stake in HMB
The Central Bank has sold its entire 15 per cent stake in the Home Mortgage Bank (HMB) to the National Insurance Board (NIB), effective August 14, but neither the seller nor the buyer have revealed the price paid for the 2.4 million shares. Disclosure of the transaction was made in a small advertisement in last Thursday’s Guardian, that was put out by Patricia Ilkhtchoui, the corporate secretary of the HMB.
The HMB, which provides mortgages and sells mortgage securities, was identified in the 2013 budget by Finance Minister Larry Howai as being one part of the creation of a new institution called the Trinidad and Tobago Mortgage Bank, which was to be formed following a proposed merger between T&T Mortgage Finance (TTMF) and the HMB.
In the 2013 budget, delivered on October 1, 2012, Howai proposed that shares in T&T Mortgage Bank would be sold to the local public in an Initial Public Offering that was meant to follow the First Citizens IPO. In the 2014 budget, which was delivered in September 2013, Howai said: “As soon as the technical work on the restructuring of the HMB and the T&T Mortgage Finance is completed, we will make an initial public offering for the T&T Mortgage Bank.”
The Minister of Finance has not provided an update on the merger and IPO since last year’s budget presentation. Last week’s notice stated that the transaction had taken the NIB’s stake in the HMB to 66.25 per cent. The NIB also owns 51 per cent of TTMF The Central Bank’s divestment of its stake in HMB leaves the institution with four other investors: Republic Bank with 24 per cent, Scotiabank with six per cent, Tatil Life with 3.1 per cent and British American Insurance Company with 0.6 per cent.
Questioned on Thursday on why its stake in HMB had been sold, an official of the Central Bank said: “HMB has been identified as one of five systemically important financial institutions (SIFIs) to be regulated and supervised by the Central Bank. To avoid perceived or actual conflict of interest both as a regulator and a shareholder, the Central Bank took the decision to sell its shareholding in HMB.”
Asked whether the Central Bank will dispose of shares in other SIFIs, the spokesperson said: “The Central Bank does not hold shares in other SIFIs.” The SIFIs identified by the Central Bank last year were the Unit Trust Corporation, Agricultural Development Bank, NIB, TTMF and HMB. The Central Bank was one of the initial capital contributors to the Unit Trust Corporation.
Questioned on how much the HMB shares were sold for and the valuation metric used by the parties, the Central Bank said that it was “constrained to reveal the specific details of the transaction but advises that an independent valuation of HMB shares was conducted by a reputable, international accounting firm.” The HMB declared profit after taxation of $80.3 million in 2013, a 53 per cent increase over its profitability in 2012, when the bank made $52.4 million.
At the end of 2013, HMB’s assets stood totalled $1.968 billion, up from $1.747 billion and its shareholder’s equity has increased by 39 per cent to $918 million up from $660 million in 2012. Its earnings per share increased by 53 per cent to $5.02 from $3.27 in the prior year, with the HMB paying out $0.55 in dividends in November 2013, based on its 2012 results.
In a chairman’s report, HMB’s chair Joshey Mahabir stated: “During 2013, the Bank realised the benefits of the strategic decision taken previously to refinance its funding liabilities, which enabled the Bank to achieve a more competitive cost of funding. As a result of this new funding strategy, the Bank was able to compete in the mortgage market to acquire over $100 million in new mortgage business.”