First Citizens halts IDB transaction
First Citizens Group headquarters in Trinidad and Tobago.

FIRST Citizens Group Financial Holdings Limited (FCG) has decided to discontinue its loan application process for US$175 million (TT$1.19 billion) in senior unsecured financing from IDB Invest, the private sector arm of the Inter-American Development Bank (IDB).

Negotiations for the transaction was approved on June 27 by FCG's board with the tenure for the financing set to be up to seven years. The purpose of the financing was to support First Citizens' strategy to grow its low- and middle-income household mortgage portfolio, implement digital transformation and investment in digital and electronic products and services and expand their lending capacity to small and medium-sized enterprises (SMEs).

FCG had also entered into an agreement for technical advisory services with IDB Invest for the development of a comprehensive sustainable finance strategy to fund environmental, social and governance (ESG) initiatives.

On September 26, FCG's board agreed to discontinue the process due to a rising interest rate environment in the United States of America and other global financial markets along with the group having sufficient USD liquidity to fund its initiatives within the short to medium term. The development of the finance strategy for ESG goals will continue.

The decision came on the same day that IDB President Mauricio Claver-Carone was ousted after accusations on abuse of power by the 48-member board of governors chaired by Jamaican Finance Minister Dr Nigel Clarke.

The United States Federal Reserve has hiked its fed rate five times this year with the last three hikes being consecutive amounts of 75 basis points (0.75 per cent). This has resulted in the fed rate being 3.00 – 3.25 per cent after its September 21 hike. When the original IDB Invest announcement was made in June, the Fed had just increased rates to 1.50 – 1.75 per cent.

The Central Bank of Trinidad and Tobago (CBTT) has maintained its repurchase (repo) rate at 3.50 per cent at its September 30 meeting. This has been the same repo rate since March 2020 when it reduced it by 150 basis points in response to the novel coronavirus pandemic. The Monetary Policy Committee took note of the uncertainty on the global front and inflationary pressures that were spilling over into Trinidad and Tobago but was motivated by the encouraging signs of a revival in credit support of domestic business expansion. The CBTT will continue to monitor international and domestic developments and will take further actions as necessary ahead of its final meeting set for December 30.

FCG's loan portfolio has marginally grown to TT$18.46 billion (JMD$415.98 billion) over the nine-month period up to June 30. However, its total assets have declined TT$46.61 billion to TT$45.73 billion (JMD$1.03 trillion) as its investments and cash and statutory deposits declined over the period. Its shareholder's equity has marginally declined to TT$7.82 billion. FCG's consolidated net interest income declined by four per cent to TT$1.09 billion, but the group's net profit increased by six per cent to TT$518.57 million as it recorded a write back of credit impairment provisions on its financial assets. FCG's stock price is down 20 per cent year to date to TT$50, leaving it with a market capitalisation of TT$12.57 billion.

FCG was formed after shareholders approved the restructuring of First Citizens Bank Limited (FCB) at a June 2021 annual general meeting. FCG is currently the ultimate parent of FCB which controls various subsidiaries. Phase two of FCG's vesting is scheduled to be completed this month where the rest of FCB's subsidiaries will become direct subsidiaries under FCG except for First Citizens Costa Rica SA which will be a wholly owned subsidiary of FCB.

At its special meeting held on September 28, Chairman Anthony Isidore Smart, Courtenay Braemar Williams, Savitree Seepersad, Idrees Omardeen, Troy Garcia and Jayselle McFarlane were re-elected directors of FCG. Colin BWharfe was elected as a director of FCG while PricewaterhouseCoopers was appointed auditors of the company.

According to a Guardian article, FCG's Chief Executive Officer Karen Darbasie said she was open to applying for banking licences in Jamaica and Guyana along with opening brick and mortar locations as it tries to grow beyond Trinidad and Tobago. Darbasie visited Jamaica in February and met with Minister of Investment, Industry and Commerce Aubyn Hill along with the Barita Investments Limited board members and executives. FCB's attempt to acquire Scotiabank Guyana fell through in June with the Bank of Guyana saying that it was never informed about FCB's decision to buy the bank when it was announced in 2021.

FCG is a subsidiary of First Citizens Holdings Limited (FCH) which is owned by the Government of the Republic of Trinidad and Tobago (GORTT). FCH had its second additional public offering (APO) in FCG which closed after a month on July 28. The APO received 6,698 applications for 16,865,007 shares valued at TT$843,250,350. This was above the 10,869,565 shares on offer at TT$50 per share for a consideration of TT$543.48 million.

As a result of the oversubscription, the Employee Share Ownership Plan (ESOP), individual investors, registered mutual funds, pension funds and credit unions and cooperatives received their applications in full. These groups represented 85 per cent of the shares on offer. The National Investment Board of Trinidad and Tobago and other companies only received 60.39 and 37.25 per cent of their applications. The shares were transferred to investor accounts on August 30 with FCH's direct stake decreasing from 64.43 per cent to 60.11 per cent.

This APO was more successful than the April 2017 APO which was undersubscribed as investors only took up 32 million shares on offer at TT$32 per share relative to the 48.5 million shares FCH was selling. FCB's 2013 initial public offering was oversubscribed 3.12 times relative to the 48,495,665 shares on offer at TT$22 each.

BY DAVID ROSE davidr@jamaicaobserver.com

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