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Sagicor tipped to buy RBC Jamaica - Deal would vault Sagicor Bank to No. 3

Published:Wednesday | January 29, 2014 | 12:00 AM
A branch of RBC Royal Bank Jamaica. - File

Royal Bank of Canada is said to be cutting its losses in Jamaica and selling its banking assets to Sagicor Group Jamaica, according to different sources, one of whom said that lawyers were still poring over the final details last night ahead of the deal's announcement.

But the parties have studiously avoided calls for comment even as staff at RBC Jamaica have been voicing concerns about the ongoing reports and the prospects for their jobs.

Sagicor Jamaica held a general meeting yesterday, and advised staff that a transaction was pending but did not disclose the asset being acquired, said persons working there.

Sources say RBC Royal Bank Jamaica, formerly RBTT Bank Jamaica, will cease to operate, marking a pullout of Jamaica. The existing RBC Royal Bank branches will eventually rebrand as Sagicor Bank, Wednesday Business was told.

A sale to Sagicor would nearly quadruple the assets of Sagicor Bank Jamaica Limited from $21 billion to around $78 billion and grow its small network of six branches to 19.

Sagicor Bank is currently the second-smallest of seven in Jamaica's commercial banking arena, with three per cent of industry assets.

Third-largest bank

Acquisition of RBC Jamaica assets would make Sagicor Bank the third-largest of six banks - ahead of FirstCaribbean Jamaica but behind NCB and BNS - in a market that the central bank last valued at $732 billion by assets. It would then control 11 per cent of assets, and about 12 per cent of the loan market, assuming full acquisition of RBC's banking assets and loan book.

Initial reports to Wednesday Business were that RBC and Sagicor were expected to sign off on the deal late Monday and face the media the next day at a joint press conference, but the parties failed to tie up all loose ends and had to put off the announcement.

At the same time, there was talk that another Jamaican financial institution was also in contention for RBC Jamaica, but that, too, is unconfirmed.

The sale of RBC Jamaica would rid Royal Bank Canada of a lossmaker, which up to last year had accumulated deficits of $6.9 billion (C$69 million).

To manage its losses, the bank shuttered four branches last year, leaving 13 in operation. It then had about 44 automated teller machines in its network.

The bank has also been trying to shed bad loans and rebalance its non-performing loan portfolio. RBC's total provisioning for loan losses at last disclosure of industry data by the central bank was $5.87 billion.

Two of the more high-profile underperforming loans were made to the hotel/resort sector: one for the purchase of the former Wyndham Kingston, and the other as co-financing for the Palmyra condominium development in Montego Bay.

Both properties were placed in receivership and are the subject of legal challenges. RBC Jamaica has struggled to sell the former Wyndham hotel, which was put up for auction and then withdrawn from the block last year.

Royal Bank Canada owns the Jamaican operation through regional subsidiary RBC Caribbean.

Called for comment, RBC Caribbean CEO Suresh Sookoo was said to be out of office. Managing director of RBC Jamaica, Roger Cogle, was also unavailable, while Sagicor Jamaica president and CEO, Richard Byles, declined to speak.

Royal Bank re-entered the regional commercial banking sector in 2008 when it acquired the operations of RBTT Financial Group for US$2.2 billion in one of the largest deals to be recorded in the Caribbean.

The RBTT banking network was subsequently rebranded to RBC Royal Bank, including Jamaica's network, in 2012.