CIBC calls off FirstCaribbean sale after snub from regional bank regulators
Published:Friday | February 5, 2021 | 12:13 AM
Central banks in the Caribbean, including the Bank of Jamaica, are silent, so far, on a statement this week by Canadian Imperial Bank of Commerce, CIBC, that the regional regulators have opposed its bid to sell two-thirds of its stake in subsidiary CIBC FirstCaribbean International Bank.
CIBC, Canada’s fifth-largest bank, issued a statement on its website on Wednesday announcing the pullback of its earlier plan announced in November 2019 to offload 66.73 per cent of its shares in FirstCaribbean for US$797 million to GNB Financial Group Limited, owned by Colombian billionaire Jaime Gilinski.
“The previously announced transaction to sell a significant portion of its majority stake in CIBC FirstCaribbean to GNB Financial Group Limited did not receive approval from FirstCaribbean’s regulators,” the CIBC statement said.
“While this transaction would have supported FirstCaribbean’s long-term growth prospects, it is only one way of creating value for stakeholders,” Harry Culham, CIBC’s group head for capital markets, who also oversees FirstCaribbean, was quoted as saying.
Bank of Jamaica did not respond to requests for comment up to press time.
The development is being interpreted in financial markets as another setback in the quest by Canadian banks to reduce their exposure to risks in the Caribbean region. CIBC had earlier abandoned a plan to list FirstCaribbean on the New York Stock Exchange in 2018 but pulled back, citing existing “market conditions” at the time.
The governments of Antigua & Barbuda and Guyana had also objected to a 2018 bid by Scotiabank to sell its operations in those two countries. In Antigua & Barbuda, the deal was delayed and the assets eventually sold to a different buyer.
Following the announcement this week, CIBC, which trades on the Toronto and New York stock exchanges, saw moderate appreciation in its stock prices in both markets. It was up by just less than a dollar on the Canadian index to CDN$112.82 and gained 46 cents to US$87.92 on the NYSE.
CIBC has a long banking history, having been founded in 1867, and recounts its relationship in the Caribbean as spanning 100 years. The bank lists its customer base at 10 million, with 44,000 employees at 1,022 locations.
GNB is wholly owned by Starmites Corporation which, in turn, is the financial holding company of the Gilinski Group, which has banking operations in Colombia, Peru, Paraguay, Panama, and Cayman Islands.
At the time of the announcement of the proposed sale, GNB was slated to pay US$200 million in cash, and use financing provided by CIBC for the remainder of the deal. The agreement was expected to be completed in 2020.
FirstCaribbean was expected to continue to operate under the leadership of its existing senior executive team, and CIBC had intended to retain ownership of 24.9 per cent of the regional bank, while the rest would be held by minority shareholders. The deal had valued FirstCaribbean at US$1.195 billion.
The regional bank has suffered losses in its operations in the English- and Dutch-speaking Caribbean region throughout the last decade due to bad loans, but regained profitability in recent years.
For the year ending October 31, 2020, FirstCaribbean posted a net loss of US$158.7 million, after a goodwill impairment of US$174.6 million, but for which it would have seen net income at US$15.9 million. In 2019, its earnings topped US$17o million. Revenue declined form US$616 million to US$571 million.
The bank also shed equity last year, which fell from US$1.2 billion to US$1 billion; however, its asset base increased from US$11.56 billion to US$12.17 billion.
FirstCaribbean has some 57 branches in 16 regional markets, including Jamaica, and offers a full range of banking services, including corporate and retail banking, wealth management, credit cards, treasury sales and trading, and investment banking.