Sagicor Group Jamaica targeting double-digit growth
For the last 16 years, President and CEO Richard Byles has delivered consistent growth in profit for the Sagicor Group.
But he’s not resting on his laurels. Now Byles says he plans to deliver double-digit growth, year over year, for the medium term. Some of that will come from acquisitions, he told The Gleaner.
Last year, Sagicor Group Jamaica made $9.79 billion of net profit, around half of which ($4.78 billion) came from the flagship life insurance business. His growth push will focus on the insurance operation, as well as other areas of the group, said the Sagicor Group CEO, who sees a lot of promise in the financial conglomerate’s banking arm.
At Sagicor Group’s annual general meeting on Tuesday, Byles highlighted the performance of Sagicor Bank Jamaica (SBJ), which delivered $1.32 billion of profit to group in 2015. It’s a massive turnaround for the bank, led by Donovan Perkins, which made a loss of $500 million in 2014, the year in which the newly acquired operations of RBC Royal Bank was merged with Sagicor Bank, creating the third largest commercial banking group in the process.
Byles said the near US$100 million investment in RBC’s acquisition was a big bet that Sagicor also wants to pay-off big for the group. At the AGM, he urged the banking team “to drive towards executing our strategy” but did not say what that entailed.
Speaking to The Gleaner later, Byles still declined to reveal the components of the strategy but spoke instead of targeting areas where the competition was weak.
“We can’t give the details of the strategy, but generally we want to be more aggressive where the other banks are not strong, that is, in the service area. We want to build that out and be the bank that is more personable and easy to deal with,” he said.
The bank’s US$8 million investment in a new banking platform, called netTeller, is part of that positioning.
“We have but in a brand new software platform, with new credit card technology going in there. So it’s not just the buying of the bank, it is not just the merging it’s not just the building of the efficiencies by taking out redundancies of whatever kind — be they branches or people — it’s also just renewing completely all of the technology in there,” Byles said.
Pressed on the expected payback period for the RBC acquisition, Byles was imprecise, saying that atop the $1.3 billion made last year, Sagicor Bank is expected to deliver “more in 2016 and more in 2017 as it builds itself up to what is an acceptable rate of return.” He also insisted that the focus was not so much on recouping the investment but rather on building value.
“If I look at it from the point of view of say $1.3 billion then $2 billion then $2.75 billion, it will take me five or seven years to make back that US$100 million, but at the same time I am building residual value in the assets of the bank.” Byles reasoned.
He said SBJ has been quite successful in building out its corporate banking business, in that a lot of their loan portfolio growth is from corporate customers, and that netTeller offers the platform through which to deliver service to retail and business clients.
The next step is for SBJ to make its presence felt in the market.
“That foundation is laid. We are already reaping the benefits of loan growth in the corporate and retail sectors, but I believe there is more for us and it all boils down to us being more assertive in our marketing and going out to our customers,” Byles said.
To meet his commitment to shareholders for double-digit growth, Sagicor will have to rely on more than product innovations.
“The organic growth by itself would struggle to give you the double-digits growth. You need some acquisitions or new investment that can help to power you across that double-digit line,” Byles said.
While Byles was non-committal on investment targets, its subsidiary Sagicor Real Estate X Fund has previously announced that it would be entering the business process outsourcing market, and Sagicor is also reported to be in the process of acquiring the incomplete condominium complex Palmyra in Montego Bay.
“We need to be efficient in the business that we currently have in that we need to conserve it, we have to keep selling as we are good at doing but we also need to acquire or to make new investments; to make that step-change to really ensure that we have double-digit growth,” Byles said.