BOSVG in consortium to acquire CIBC FCIB

The Bank of St Vincent and the Grenadines (BOSVG) will increase its asset base by more than half a billion dollars in the coming months, once its acquisition of the CIBC FirstCaribbean branch in this country is complete.

A consortium of banks in the Eastern Caribbean Currency Union (ECCU) announced on Tuesday that it had entered into a definitive agreement to acquire the branches and banking operations of CIBC FirstCaribbean in Dominica, Grenada, St Kitts and Nevis, and St Vincent and the Grenadines.

The four members of the Consortium are the National Bank of Dominica Limited; Grenada Co-operative Bank Limited; St. Kitts-Nevis-Anguilla National Bank Limited; and the Bank of St. Vincent and the Grenadines Limited(BOSVG), which is also the agent of the consortium.

The agreement, which was executed on October 12 2021, is subject to regulatory approval and customary closing conditions.

“I want to begin first of all by congratulating the board in the management of the bank of St Vincent and the Grenadines Limited for being the lead bank in this consortium; in other words, our team here led the discussion with First Caribbean,” Prime Minister Dr Ralph Gonsalves said in Parliament on Wednesday as he commented on the acquisition.

“And for this matter to have reached the stage that yesterday (October 12) we had the announcement of the sale, which we anticipate that everything, all the approvals, everything else will be consummated within a six-month period.”

Derry Williams, the Managing Director of BOSVG is quoted in the consortium’s release on Tuesday, as saying that the acquisition by the four banks represent a significant development in the evolution of the Banking system of the ECCU.

“Once approved by the regulators, we are very confident that it will lay the basis for further enhanced value creation in these  economies and greater prosperity for our society,” Williams said.

The CIBC FirstCaribbean Bank also issued a release on the matter this week, in which Chief Executive Officer Colette Delaney, noted that these transactions will enable FirstCaribbean to optimise and simplify its business, further enhance efficiency and focus on core markets to accelerate growth.

Delaney said, “In each case,  we chose a partner that is an excellent fit in its respective market, given that its knowledge of the local markets match with our product offerings and client base and strong market positioning”.

“They each bring a depth of local knowledge to the market and the needs of our clients there, which we believe will serve them well in their positioning for the future. We remain committed to executing on our long-term strategy and delivering the best outcome for clients, shareholders, employees and communities,” the CEO added.

In an effort to give an indication of what the BOSVG will look like once the acquisition is complete, Gonsalves noted that the Bank currently has a market share of 52 per cent in respect of loans and advances.

After the acquisition, this is likely to increase to almost 67 per cent.

The prime minister said the market share for deposits is currently about 47 per cent. This is likely to increase by about 23 percentage points, to 72 per cent.

“And the current assets, which [is]currently 51 per cent of the market share, will amount to 68 per cent after…all approvals and the transitional acquisition issues are dealt with,” he said, adding that the total market assets estimate being used is as of August 31, 2021.

Gonsalves added that the BOSVG’s total loans and advances will move from approximately $676 million to $832 million.

And deposits will move from $1.036 billion to $1.583 billion, and the total assets will move from $1.26 billion to $1.8 billion.

“The Bank of St Vincent and the Grenadines has a portfolio of deposit customers of just over 40,000 persons, 40,000 accounts, deposit customers.The CIBC/FCIB has a number somewhere between 15 and 20,000,” the prime minister said.

“It means there will be an estimated number of deposit customers somewhere between 55 and 60,000 which means that this transaction will touch the lives of practically every person in St Vincent and the Grenadines which will be quite an amazing feat.”

Gonsalves believes that the digital banking experience will “be even ramped up further” as the bank has invested heavily in that regard.

He also noted BOSVG’s intention to roll out in short order, the I-Wallet, as well as being in the final stages of implementing D-Cash, which is offered by the Eastern Caribbean Central Bank (ECCB).

“Of course, one can see clearly the immediate potential benefit of such a transaction: increased customer base, leading to increased revenue growth and profitability, reduced concentration in deposit portfolio, the provision of access to other key resources including personnel and facilities,” he told lawmakers.

“The transaction provides opportunities for further product diversification, including the introduction of new investment products, given the level of liquid assets being purchased, the opportunity to leverage the larger balance sheet and customer base to further advance the value of the BOSVG branch in the local market.”

The prime minister added that “anytime you have an acquisition, there are always potential risks and there are — and the potential risks among them would mean that you don’t, in this particular transitional period, you don’t get all the nuts and bolts correct, but there are a series of risk mitigation measures which I don’t have to go into here”.

“And of course, the context in which the bank operates, we have to be mindful that any economic stagnation or decline, fallout from COVID-19 and the lingering effects of the La Soufriere volcanic eruption, may impact non performing revenues and increase non performing facilities exposures. So the banks don’t exist in a vacuum…”