Home' Trinidad and Tobago Guardian : March 13th 2014 Contents MARCH 2014 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
NEWS | BG7
T&T's banks' exposure to Caricom totals $4.2
billion, the Central Bank of T&T has said.
"The commercial banking sector in T&T has
direct exposure to the region in the form of loans,
investments and equity holdings. At the end of
September 2013, the aggregate exposure to Cari-
com amounted to $4.2 billion, which was equiv-
alent to 3.4 per cent of total commercial banks'
assets and 24.5 per cent of total capital," the
bank's January Economic Bulletin released March
In the aftermath of the global financial crisis,
a number of Caricom countries has faced numer-
ous challenges, including rising fiscal debt, declin-
ing exports and tourism revenues, increasing
unemployment and infrastructural setbacks arising
from the December 2013 natural disaster in the
Eastern Caribbean, the bulletin said.
"These challenges have negatively impacted
economic growth in the region and increased
financial sector risks. Trade and financial sector
linkages between the T&T economy and those
of the Caricom region suggest there may be some
implications for local manufacturers and other
local firms that have exposure to the region.
"Regional challenges are likely to reduce Cari-
com's demand for domestically-produced goods.
The latest data showed that T&T exports approx-
imately 20 per cent of its manufactured goods
to Caricom, indicating the importance of the
Caricom market to local manufacturers.
The bank said it conducted a "stress testing
exercise" in June 2013. A regional disaster will
adversely impact T&T exports, which, in turn,
will lead to a decline in economic activity, ceteris
paribus, and also an increase in unemployment,
the bank said. In contrast, the direct financial
exposure (loans, investments and equities) of the
commercial banks in T&T would be reduced in
the event of a regional disaster.
"The results from the stress tests showed that
the commercial banking system in T&T is
resilient," the Central Bank said. ALEEM KHAN
Different from its peers in the region,
Canadian multinational bank of Nova Scotia
(Scotiabank) reported in its March 4 earnings
call with analysts that it is seeing better
times in the Caribbean with "new money"
and "new interest" and "a reduction in loan
However, growth in the Caribbean was
modest, said Brian Porter, president and
CEO of the Bank of Nova Scotia.
"Turning to international banking, we
have strong volume growth in our loan and
deposit portfolios and a modest improve-
ment in margins compared to last quarter.
From a regional perspective, we had strong
double-digit loan growth in Latin America
and Asia this quarter. Growth in the
Caribbean and Central America was more
modest. However, expenses are up this quar-
ter due to foreign exchange, inflation, busi-
ness growth and the integration of Crédito
Familiar in Mexico, which was completed
in December," Porter said.
"Quarter-over-quarter international retail
provisions increased as higher provisions in
Mexico were partly offset by lower provisions
in the Caribbean and Central American
region. International commercial provisions
declined from last quarter with the previ-
ously advised higher provisions in Columbia,
partly offsetting lower commercial provisions
in the other countries.
"We expect provisioning in Columbia to
remain elevated for another quarter. In global
banking and markets, credit quality remains
strong with low provisions for credit losses
of $3 million this quarter, compared to a
reversals (indiscernible) in the prior quarter,"
said Stephen Hart, chief risk officer of Sco-
In response to a question from analyst
Michael Goldberg of Desjardins Securities
on stress credit quality in the Caribbean,
Dieter Jentsch, Scotia's group head of inter-
national banking, said: "The Caribbean had
a reduction in our loan losses this quarter
and it's from moving our allowances of his-
torical. We actually have a very solid position
in our retail portfolios in the Caribbean."
Stephen Hart, chief risk officer at Scotia,
added: "The commercial portfolio in the
Caribbean has actually stabilised and we're
continuing to see new interest, new money,
coming in to the region. So most of that
was showing up for international retail."
Asked again by Goldberg, "So, nothing
really serious for you in the Caribbean?"
Hart responded: "Definitely not, no."
Goldberg then asked: "Okay. And can you
just comment about credit quality? Because
it seems like some of your peers are showing
more negative trends in credit quality in the
To this Jentsch responded: "I would go
back to this. We've actually seen, Goldberg,
some increased international interest in the
Caribbean, money falling back into the
Caribbean. We've taken conservative posi-
tions over a period of time in the Caribbean
and, quite frankly, as I mentioned earlier,
we're actually seeing our delinquency num-
bers and our loan ratio fall in the Caribbean.
And our experience in the Caribbean is play-
ing out the way we anticipated."
markets we serve increasing taxes to address
fiscal imbalances, the bank took the difficult
decision to restructure the organisation to
align it with the market realities of this new
"The restructuring required a charge of
US$37.6 million and brought total operating
expenses for the year to US$402.9m. This
action is intended to put the bank on a tra-
jectory path to return to profitability."
Looking at profitability, according to the
2013 highlights, the bank reported a loss.
Overall, growth can only occur if there is
improvement in the external environment in
which the bank operates, Parkhill stated.
"To grow, countries must have a strong
infrastructure, and the countries we serve have
ongoing infrastructure needs.
"Many of the economies in which we operate
rely heavily on tourism and foreign direct
investments. The overhang from the economic
crisis continues to impede growth and, by
extension, has negatively affected our results."
Though the services provided by First-
Caribbean are many, the aspect of the business
associated with customers is broken down
into three main components, "retail and busi-
ness banking, wholesale banking, which is
really corporate clientele, then you have wealth
"Wealth management has many compo-
nents, which comprise of mainly international
banking, which is really serving a mixture of
our personal, non-resident, non-national client
and corporate non-resident, non-national
client that are using the jurisdiction to achieve
whatever objectives that they may have."
• Asset management is another aspect of
the bank's operations
• Private wealth management
"The international banking portfolio is con-
centrated among six of our 17 jurisdictions.
What we have seen in terms of our volume
on our asset side (the loans side of the busi-
ness), what we are seeing is some strain.
"We do have a large international mortgage
portfolio that is not driven because of the
domicile economy. That has been driven by
the individual home of origin (the United King-
dom and the United States)."
"On the international business side, which
really represents a lot of deposit transaction
and moving money for our international busi-
ness clients, we have seen that portfolio holding
confidently and that is quite pleasing.
"The level of transaction has not been at
the same level of volume. That is not because
of the declining economies in the region. That
is because from a world scale, there is a sig-
nificant reduction in the level of overall trade
in the world economy. Basically, what we are
seeing in our international portfolio is a reduc-
tion of international trade across the world,
so multinationationals are not expanding as
Trend of financial results US($m)
'Slow growth in international portfolio'
From Page 6
Scotia: New interest, new money
coming into the Caribbean
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