By Al Edwards, Business Co-ordinatorTHE PROPOSED merger between Dehring Bunting & Golding (DB&G) and Issa Trust & Merchant Bank (ITMB) has received "conditional approval" from the Bank Of Jamaica and the Ministry of Finance according to DB&G's President, Garfield Sinclair.
In July of last year, DBG signed an agreement with Issa Financial Services Limited (IFSL), the owner of ITMB, to acquire the issued share capital of Issa Trust. On completion of the agreement, Issa Trust will become a wholly owned subsidiary of DB&G, while IFSL will in exchange receive shares and a
debenture issued by DB&G. On successful completion of the due diligence exercise and the approval of the Bank of Jamaica, ITMB was expected to be amalgamated with DB&G Merchant Bank sometime in October of last year. When that date passed the DB&G looked to a December 19 deadline but still it did not get the green light from the Ministry of Finance.
Speaking to Wednesday Business yesterday Mr. Sinclair said: "We are now in an Asset Liability Committee meeting conducting a review and response to this condition approval which is now before us. The conditions laid down are not related to the fitness of either DBG or ITMB but rather relate to 'commercial terms' which are symptomatic of the prevailing financial and economic climate. We will expect this deal to be now completed by the end of the first quarter of this year at the very latest."
ITMB has a loan portfolio of approximately $440 million. On the deposit side its off balance sheet liabilities come to roughly $1.6 billion and on balance sheet $400 million. The bank has already recovered half of the original injection of $226 million by the House of Issa, to ensure its solvency.
In November of last year, DB&G reported a 35.7 per cent increase in net after tax profit for the quarter ended September 30, relative to the previous September quarter. The company earned $48.7 million in net profit for the quarter, the equivalent of 40 cents per share. There was a slight $1.7 million increase in gross operating revenue from $968.3 million in their first quarter to $970.1 million in the September quarter. But interest expenses increased even more. Interest expenses shot up $261 million to $815.4 million in the September quarter over the $554.4 million earned in the June quarter. The group managed to slash operating expenses by 12.3 million to $106 million in the September quarter over the June quarter. There was a 24 per cent increase in net interest revenue to $120.5 million for the six month period ended September 30. Total assets managed on behalf of clients, continued its upward trend, increasing by more than 32 per cent over the past year, to stand at $19.8 billion, and shareholder equity rose by 40 per cent to $607 million as at September 30,2002.
Mr. Sinclair declared that the new merged entity would have assets under management of $400 million and that the funds under management of ITMB will be hived into DB&G Investment Bank which should come to approximately $800 million. He added that as a growing financial institution the merger did not mean that DB&G are looking to make staff cuts rather it was seeking to recruit the best qualified personnel available.
" We have a couple of highly talented people here at DB&G capable of doing a fantastic job with the merged body. ITMB has submitted a list of competent professionals and we are considering those but we have not yet decided on the management cadre."
Earlier this year, Mr. Sinclair said that this merger will provide DB&G with a vehicle back into substantial lending both in Jamaican and United States dollars. The combined entity will have a capital base of $570 million with its operations conducted from ITMB's current premises located on St. Lucia Avenue, New Kingston.
ITMB's present managing director, Arthur Hudson will be taking a more active role with the House of Issa's hotel and motor vehicle interests as well as holding a seat on the new Board.
