Caribbean lenders seem to be finally emerging from a difficult few years, with both aggregate Tier 1 capital and assets rising. Profitability remains largely unchanged, however, with some banks making significant gains while others remain in the red. 

RBC Financial Caribbean once again leads The Banker’s Caribbean community (Caricom) ranking with more than twice the Tier 1 capital of second placed FirstCaribbean International Bank. Trinidad and Tobago-based regional bank RBC closed the financial year with $2.68bn of Tier 1 capital, compared with the $1.3bn recorded by Barbados-based FirstCaribbean.

Growth stories

Trinidadian banks are among the largest in the region, with the country’s banking sector accounting for nearly half of the total Tier 1 capital and pre-tax profits in Caricom, and more than 40% of assets. Trinidadian lenders Republic Bank, First Citizens Bank and RBC occupy three of the top five places in the rankings while, further down, Scotiabank Trinidad and Tobago sits in seventh place.

After Trinidad, Barbados-based banks account for the second largest share of capital and assets. Jamaica-based lenders generated the second largest aggregate pre-tax profits. Jamaican banks lead the way when it comes to returns. Scotiabank Jamaica has the highest return on capital (ROC) among Caribbean lenders, an impressive 76.02% – nearly twice the ratio recorded by runner-up Cayman Islands-based Atlantic Security Bank, which recorded a 38.78% ROC. The Jamaican bank also tops the table by return on assets (ROA), with 4.18%. National Commercial Bank Jamaica recorded the third largest ROC, at 37.49%, and the eighth largest ROA, at 2.46%.

The lenders that have most improved their capital position are from the Bahamas. Commonwealth Bank and Bank of the Bahamas have grown their Tier 1 capital by 34.95% and 29.58%, respectively.

Caricom bank top 10 assets

Weathered the storm

While the aggregate pre-tax profits of the top 25 Caricom banks is almost unchanged from last year’s ranking, Tier 1 capital and assets have both grown, suggesting that the worst of the Caribbean economic downturn is over, in some countries at least.

Total Tier 1 capital stands at $9.8bn, about 5% higher than in the 2012 ranking. Assets total $74.63bn, an increase of 8% from a year earlier. The economy that looks in the best shape is Trinidad and Tobago, where the oil and gas sector, the main driver of the local economy, is operating at full capacity after the completion of key maintenance works. The country’s central bank expects gross domestic product to grow by 2.5% this year, compared with 1.5% in 2013. Private sector banks are another significant source of growth in the country.

Losing out

In other countries in the region, however, banks are still facing challenges. The improved macroeconomic picture in Belize – which is attributable to a restructuring that eased the weight of external debt on public finances as well as relatively recent oil discoveries – has failed to ignite the banking sector.

Local banks recorded an aggregate loss in 2013, for the second consecutive year. BCB Holdings closed the financial year with a loss of $21.6m; its profits down by more than 40% on the previous year. Scotiabank Belize’s pre-tax profits slimmed to $14.34m, a reduction of nearly 4%. Scotiabank Belize and BCB sit in the lower half of the ranking, in 20th and 22nd place, respectively.

More worrying still is the loss recorded by Barbados’s FirstCaribbean, which at $24.5m is the largest in the Caricom top 25 ranking. Barbados is approaching unsustainable fiscal deficit and debt-to-GDP levels. After a three-notch credit downgrade from ratings agency Moody’s earlier this year, the country is very likely to seek the International Monetary Fund’s help, according to some analysts. 

The Banker's Top Caricom banks ranking, 2014 originally appeared in the August 2014 issue of the magazine. The full results of the ranking are available on The Banker Database. Find out more about the database, register for a free trial or subscribe today.

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