Dennise Williams, Staff Reporter
RBTT Half-Way Tree branch.
FIVE YEARS after the Trinidad-based banking group RBTT entered the Jamaican market with its purchase of a clutch of failed banks, the company has signalled that it is in an acquisitive mood, seeking rapid expansion through purchases rather than organic growth.
"If you know of any financial institutions for sale, please contact us," quipped Rodney Prasad, the CEO of RBTT Jamaica at an investor briefing at the Pegasus hotel in Kingston on Monday.
While Prasad's remark at first appeared a mere off-the-cuff, throw away line, investors took notice when he repeated it at least twice and seemed to grow more serious with each iteration.
RBTT Financial Holdings Limited (RBTTFHL) bought its Jamaica operation in March 2001 when it acquired the government's Union Bank, the institution that had been cobbled together from the failed Workers Bank, Citizens Bank, Eagle Commercial, Island Victoria Bank and Horizon Merchant Bank -- all of which were victims of the financial sector collapse of the late 1990s.
For the financial year to the end of March 2006, RBTT Jamaica reported pre tax earnings of $1.36 billion, an increase of 33 per cent over 2005. The bank's assets moved from $46.1 billion in 2004 to $55.3 billion in 2005.
But while the performance of RBTT Jamaica, whose assets at the end of December stood at $43 billion, is considered credible, it is in size significantly out-ranked by the market giants, Scotiabank Jamaica, whose assets reached $139 billion and NCB with $135 billion. BNS had deposits of $104 billion and NCB $85 billion while RBTT was a distant third with $23 billion.
GROW THE BUSINESS
RBTT officials stressed that a substantial part of their strategy will be to grow the business, but made clear that if a good opportunity arose to buy, it would be gobbled up.
"RBTT is out there looking for acquisitions," said Prasad. "But we haven't found anything reasonable."
Prasad did not say exactly what kind of assets RBTT Jamaica was looking for, but financial analysts yesterday suggested that either a mutual fund management company or a brokerage house would be a good fit.
One analyst pointed out for instance that with the finance ministry, having placed a cap on the issuance of unit trust licences, it was unlikely that RBTT could apply for and win one. "No more are on the market," he said.
The next best thing, this broker suggested, would be for RBTT to find a willing seller in a sector of the market where its operation is limited.
Vernon James, the head of the stockbroking division of the merchant banking conglomerate, Dehring Bunting & Golding, suggests that a stockbroking house with an extended product line, including unit trust management, would be a good buy for the bank.
"In my view, one of the smaller security dealers would give them a big jump because their own brand is just starting out," James said.
This is likely to be a position that has been well-considered. RBTT Jamaica's investment arm, the year-old RBTT Securities, does not have a brokerage licence and so can't trade stocks on the Kingston exchange. The bank has developed a partnership with DB&G, which conducts trades on behalf of RBTT's customers for a share of commissions. In its year of operation RBTT Securities Limited, headed by Ian Kelly, contributed $200 million to the group's pre-tax policy, the kind of profit gain the bank would like to replicate and enhance.
"Specifically, they would want to buy a (brokerage) company with a good branch network, plus other product lines like unit trust, stockbroking, a seat on the JSE and brand equity," said DB&G's James.
However, Prasad stressed that despite its other ambitions, the bank would also be paying attention to its core business -- making loans and earning interest from this business.
Last year it had growth in loans of 29.3 per cent to $18.3 billion based on very aggressive marketing campaigns tied with winning prizes, which, in percentage terms, were the largest in the market.
"We are looking to increase our loan growth to offset declining interest yields as we think interest rates will continue to be compressed in the future," Prasad said. At the same time RBTT is looking for a cheaper source of money. Deposits during the last financial year rose by 9.7 per cent.
"We want to reduce our dependence on the more expensive repurchase agreements by the commercial banks and replace them with deposits, " the CEO said. "... It is a challenging task to grow the deposit base. We purchased a bank under stress in 2001 and so deposits migrated to safer havens. We are working to re-establish trust and attract savers to RBTT."
Part of that responsibility, establishing trust and wooing depositors, falls to Judith Forth-Blake, the former head of marketing at Courts Jamaica who recently joined RBTT as part of its strategy to pump-up business.
But even as it drives business, Prasad made it clear that RBTT would be keenly watching costs, especially non-interest expenses including staff costs, which grew 12.8 per cent in the last financial year. "Our expenses grew by the rate of inflation, but we would like to get this figure down."
