Giv­en the con­tin­u­ing con­cerns over re­gion­al banks los­ing their cor­re­spon­dent bank­ing re­la­tion­ships, last week’s com­men­tary in this space, which was head­lined “Is RBC plan­ning to ex­it the Caribbean?” would have at­tract­ed eye­balls through­out the re­gion and among the Cana­di­an banks that op­er­ate in Caribbean.

Most of the re­ac­tions to the com­men­tary sug­gest­ed that RBC Fi­nan­cial (Caribbean) Ltd was over­cap­i­talised—with a reg­u­la­to­ry cap­i­tal ra­tio that stood at 27.30 per cent as at Oc­to­ber 31, 2023, its most re­cent an­nu­al au­dit­ed fi­nan­cials—and that the Cana­di­an bank is seek­ing to re­de­ploy cap­i­tal ex­tract­ed from the re­gion to earn a high­er re­turn else­where.

On the tim­ing of the de­ci­sion to re­duce its cap­i­tal by US$200 mil­lion, it was al­so sug­gest­ed that RBC may be try­ing to avoid hav­ing trapped cap­i­tal in T&T, a ju­ris­dic­tion with an over-val­ued ex­change rate. (See be­low)

The an­nounce­ment that RBC had de­cid­ed to re­duce its cap­i­tal by US$200 mil­lion came in a no­tice to cred­i­tors. That no­tice stat­ed, “This no­tice is strict­ly a for­mal­i­ty re­quired un­der the Com­pa­nies Act. All cred­i­tors of the com­pa­ny will be paid.”

On RBC Fi­nan­cial Caribbean’s bal­ance sheet for the fi­nan­cial year end­ed Oc­to­ber 31, 2023, the com­pa­ny’s to­tal li­a­bil­i­ties were record­ed at $51.78 bil­lion. Of that amount, there is a line item of “oth­er li­a­bil­i­ties” to­talling $1.44 bil­lion that re­quires some at­ten­tion.

Ac­cord­ing to the note to the item, RBC Fi­nan­cial Caribbean’s “oth­er li­a­bil­i­ties” in­clude $533 mil­lion for “items in tran­sit” and $103 mil­lion record­ed as ‘oth­er,’ with no note of ex­pla­na­tion. In­ter­est­ing.

It is al­so in­ter­est­ing that there has been no re­sponse to last week’s pub­lished com­men­tary from any RBC spokesper­son. What does that lack of re­sponse mean?

Last week’s piece, as well, trig­gered some think­ing around which fi­nan­cial in­sti­tu­tion in the re­gion has gained the most from the de­ci­sion by Cana­di­an banks to re­duce their foot­print in the re­gion. It seems that Re­pub­lic Bank has grown, while RBTT Fi­nan­cial/RBC has de­clined.

As at March 31, 2008, its year end, the to­tal as­sets of RBTT Fi­nan­cial Hold­ings were $53.52 bil­lion and the prof­its at­trib­ut­able to its share­hold­ers to­talled $931.13 mil­lion.

As at the end of March 2008, RBTT Fi­nan­cial op­er­at­ed in T&T, Suri­name, Bar­ba­dos, An­tigua, St Lu­cia, St Vin­cent, St Kitts and Nevis, Grena­da, the Dutch Caribbean ter­ri­to­ries, in­clud­ing Aru­ba and the Nether­land An­tilles, and Ja­maica.

T&T con­tributed 61.87 per cent of T&T-head­quar­tered com­pa­ny’s prof­it be­fore tax.

As at Sep­tem­ber 30, 2008, the as­sets of Re­pub­lic Bank Ltd (RBL) to­talled $41.56 bil­lion and its prof­its at­trib­ut­able to its share­hold­ers amount­ed to $1.20 bil­lion.

At its 2008 year end, RBL op­er­at­ed in Bar­ba­dos, Grena­da, Guyana, Cay­man Is­lands, St Lu­cia and T&T, with this coun­try ac­count­ing for 84.67 per cent of the com­pa­ny’s core net in­come be­fore tax­a­tion.

RBTT Fi­nan­cial Hold­ings be­came RBC Fi­nan­cial (Caribbean) Ltd on June 16, 2008, when the Cana­di­an bank, RBC (Roy­al Bank of Cana­da) com­plet­ed the pur­chase of the T&T fi­nan­cial in­sti­tu­tion by pay­ing US$2.2 bil­lion to the RBTT share­hold­ers. Six­ty per cent of the con­sid­er­a­tion was in cash and 40 per cent in RBC shares.

RBL be­came Re­pub­lic Fi­nan­cial Hold­ings Ltd (RFHL) on De­cem­ber 16, 2015, cre­at­ing an um­brel­la com­pa­ny for all of its main bank­ing sub­sidiaries.

By Oc­to­ber 31, 2023, RBC Caribbean’s to­tal as­sets grew to $66.06 bil­lion, from $53.52 bil­lion by March 2008, while RFHL’s to­tal as­sets as at Sep­tem­ber 30, 2023, amount­ed to $112.92 bil­lion, from $41.56 bil­lion as at Sep­tem­ber 30, 2008.

This means RBC’s to­tal as­sets in the Caribbean in­creased by 23.43 per cent be­tween 2008 and 2023, while RFHL’s to­tal as­sets grew by 171 per cent in the same 15-year pe­ri­od.

It is note­wor­thy, I think, that in 2008, RBTT Fi­nan­cial was larg­er than RBL by as­sets, but 15 years lat­er, RFHL was sig­nif­i­cant­ly larg­er than the Cana­di­an-owned bank, us­ing the same met­ric.

A sig­nif­i­cant con­trib­u­tor to dif­fer­ence in as­sets in 2023, of course, is that be­tween 2008 and 2023, RFHL in­creased the num­ber of coun­tries it op­er­at­ed in, while RBC’s foot­print in the re­gion de­clined sub­stan­tial­ly.

As in­di­cat­ed last week, RBC Fi­nan­cial (Caribbean) sold its op­er­a­tions in Suri­name to Re­pub­lic Bank in Ju­ly 2015.

On Oc­to­ber 31, 2019, RFHL closed its ac­qui­si­tion of sev­en Sco­tia­bank op­er­a­tions in the Caribbean, by ac­quir­ing the Cana­di­an bank’s busi­ness in An­guil­la, Do­mini­ca, Grena­da, St Kitts & Nevis, St Lu­cia, St Maarten and St Vin­cent & the Grenadines.

The ac­qui­si­tion of the bank­ing op­er­a­tions in those sev­en coun­tries added US$1.5 bil­lion to the RFHL’s to­tal as­set size and US$20 mil­lion to its net prof­its.

When the an­nounce­ment of this trans­ac­tion was first made in No­vem­ber 2018, the deal in­clud­ed Guyana and An­tigua/Bar­bu­da, but RFHL had con­cen­tra­tion is­sues in Guyana and op­po­si­tion from the An­tiguan gov­ern­ment.

RFHL com­plet­ed its ac­qui­si­tion of Sco­tia­bank’s op­er­a­tions in the British Vir­gin Is­lands, ef­fec­tive May 31, 2020. At the end of Oc­to­ber 2019, the BVI op­er­a­tion re­port­ed to­tal as­sets of US$568.5 Mil­lion and prof­its of US$14.6 mil­lion.

But it al­so note­wor­thy that while RBL/RFHL as­sets grew by 171 per cent in the 15-year pe­ri­od 2008 to 2023, the bank’s growth in prof­its has not been as ro­bust. By my cal­cu­la­tion, the bank’s prof­it at­trib­ut­able to its share­hold­ers in­creased by 45.83 per cent in the 15-year pe­ri­od, ris­ing from $1.20 bil­lion in 2008 to $1.75 bil­lion in 2023.

RBTT Fi­nan­cial’s prof­it at­trib­ut­able to its share­hold­ers at the end of March 2008 was $931 mil­lion, while on Oc­to­ber 31, 2023 RBC Fi­nan­cial’s net in­come af­ter tax­a­tion was $1.07 bil­lion, an in­crease of 15.3 per cent over the 15-year pe­ri­od.