Canadian banks have been navigating their way out of the English-speaking Caribbean since late 2018 in favour of stronger Spanish-speaking countries in the region which can provide greater returns to them in a rapidly evolving world. This has resulted in the Bank of Nova Scotia (Scotiabank), the Canadian Imperial Bank of Commerce (CIBC), and the Royal Bank of Canada (RBC) effectively exiting the Eastern Caribbean with some Northern Caribbean exposure left.
The English-speaking Caribbean states have not seen an explosion in population growth, but rather a heightened level of risk associated with maintaining compliance protocols and threat of natural disasters like hurricanes which have increased in frequency in the last decade. Thus, the cost of doing business has relatively outstripped the returns one could capture in a different market with a more robust economic framework across a diversified set of sectors. This has been further exasperated by de-risking due to the microscope placed on Caribbean banks along with anaemic growth in the economies compounded by high debt burdens.
As a result, BNS made the decision to sell nine of its operations in the Eastern Caribbean to Republic Financial Holdings Limited in October 2019. However, the Antigua and Barbuda sale was not completed until September 2021 as the initial deal fell through due to regulatory approval. Eastern Caribbean Amalgamated Bank acquired the assets of the Antiguan operation. BNS is still trying to exit Guyana to Trinidad’s First Citizens Bank which was announced in March 2021.
Though countries like Jamaica have a lower gross domestic product (GDP) per capita than other Caribbean states, it has the population of nearly three million people to back a viable business opportunity. This made the country more preferred than the rest of the Eastern Caribbean which has smaller populations, even for Guyana which is seeing a spike in GDP from its oil find, but only has about 790,000 people.
“Over the past few years, Scotiabank completed a strategic repositioning to focus our footprint on countries with strong demographic and macroeconomic fundamentals — young, dynamic, growing, and relatively unbanked populations and those that have a diversified economy. At the same time, we exited low-growth, high-risk markets that did not deliver sufficient returns or future growth prospects. The countries where we currently operate are those where we believe we have scale and can increase that scale as well as deliver the highest value for customers,” BNS said at a recent shareholder meeting.
BNS acquired a 97.44 per cent interest in Banco Dominicano del Progreso in the Dominican Republic for CA$440 million which resulted in it becoming the thrid-largest private bank in the country. The Dominican Republic has a population of about 11 million people. Even recently, BNS increased its position in Scotiabank Chile to 99.80 per cent from the Grupo Said at the end of Feburary. The exit from the non-core markets to reposition into the Pacific Alliance trading block of Peru, Mexico, Chile and Columbia has served the financial group well as the block makes up a quarter of revenue.
CIBC had attempted to dispose controlling interest in its Caribbean operations (FirstCaribbean International Bank) to GNB Financial Group for US$797 million in November 2019, but regional regulators struck down the sale in February 2021. As a result, CIBC has had to do strategic sales of various territories in order to progress with its portfolio rebalancing. The Aruba sale was completed on February 25 while it awaits details on St Vincent and the Grenadines, Grenada, St Kitts and Nevis plus Dominica.
RBC completed its successful exit from the Eastern Caribbean in April 2021 as it sold to a consortium of banks in the territories listed above plus St Lucia and Montserrat. Only Barbados remained from that section plus Aruba, The Bahamas, the Cayman Islands, Trinidad and Tobago, Turks and Caicos Islands plus the Dutch islands.