Milton Brady, managing director of FirstCaribbean International Bank Jamaica. FCIBJ will float a $1.5 billion bond next week, sources say. - File Ashford W Meikle, Business Reporter
FirstCaribbean International Bank (Jamaica) (FCIBJ) is to approach the local capital markets next week to raise $1.5 billion via a variable bond issue, Wednesday Business has learned from a reliable source.
It is understood that FCIBJ will use the funds to expand its growing loan and mortgage portfolios.
The five-year bond, which has a minimum take-up block of $50 million per subcriber to the issue, will close the end of this month. Its price or coupon rate will be linked to the Treasury Bill rate plus a 1.65 per cent reset, with interest to be paid semi-annually.
The benchmark six-month T-bill yielded 11.65 per cent at the last issue on March 20.
According to the source, the debt instrument is already generatingsubstantial interest among institutional investors.
"It hasn't even opened yet and they have got commitments for over $300 million, mostly from pension funds managers, money market companies and unit trust companies."
Wednesday Business was unable to get a comment from FCIBJ's managing director, Milton Brady, who was said to be on vacation leave.
The bank - which is also the lead arranger - has not given a reason for the corporate debt issue.
"In this business, companies are always looking for opportunities, so, really, they have no obligation to tell us what they are doing with the money [but] in more developed markets people would ask the question and get answers too. Maybe they will make an announcement after the deal has been closed. In any event, it is clear they are raising the capital to continue to fund their growth," said the well-placed source.
In fact, in a recent interview with this paper, the bank's boss admitted as much.
No slowing down
Said Brady: "The increase in our loan portfolio [in 2006 followed] a similar trend the year before, when it grew by some 60 per cent - and we see very little signs of it slowing down."
Noted an analyst, who asked not to be identified: "The bank has had exceptional growth over the last couple years and it seems they are making sure that they stay ahead of the game. There is no reason to believe that they are not on track to achieve that high level of growth."
Over the past four years, FirstCaribbean has seen a 700 per cent growth in its mortgage portfolio, which, up to the end of its October 2006 financial year stood at just under $4 billion, compared to $492 million in 2002.
In the same period, the bank's business loans grew by almost 350 per cent, to $15.3 billion, compared to $3.4 billion four years earlier. Consumer loans also experienced triple-digit growth of 250 per cent jumping $1.3 billion, to $4.7 billion.
The figures are just as impressive when assessed in comparison with the rest of the commercial banking market.
Last year, FCIBJ was responsible for about half, or $10 billion, of the total extension made by the banking sector.
Combined, the other banks - Scotiabank, National Commercial Bank, RBTT and First Global - were responsible for the remaining $10.5 billion in loans advanced.
In fact, some 72 per cent of FCIBJ's $33 billion asset base is concentrated in loans, compared to the industry average of 33 per cent.
But it is unclear why FCIBJ chose to raise financing on the open market rather that approach its parent company, FirstCaribbean International Bank, especially since the latter had pumped in about $1.2 billion two years ago to fund the local bank's expansion, including its international and foreign currency mortgage.
"The parent company is already very much heavily invested in the local operations through equity and third-party loans," said the analyst. "Jamaican dollar debt is actually cheaper than U.S. dollar debt."
ashford.meikle@gleanerjm.com
