Caribbean economies are still feeling the shockwaves from the global financial crisis and last year's earthquake in Haiti, but the region has shown its resilience, with plenty of bright spots in this year's ranking of the region's top 20 banks. 

At a first glance, not much has happened in banking terms in the Caribbean Community (Caricom) over the past year. The top three players of The Banker’s Caricom rankings have not changed and RBC Financial (Caribbean) maintains the lead with $2646.31m in Tier 1 capital, followed by FirstCaribbean International Bank Group with $1229m in Tier 1 capital and Republic Bank with $1006.74m for the same indicator.

However, if not much has changed at the top of the list, a livelier picture emerges when looking further down the rankings, starting with a high number of new entrants in the tables. One of them, the small Finance Corporation of Bahamas, in 17th place in the overall ranking, displays the highest pre-tax profits growth, at 298.68%.

Banking averages, Caricom

Bank of the Bahamas, another new arrival, is in second position in the profits increase list with a 32.46% growth, while in third place is Haiti’s Unibank, which achieved a 29.75% profits expansion. Unibank is the only Haitian bank in the Caricom rankings this year.

Sound investments

If profits growth is a good measure of banks’ performance, the return on capital ratio is more useful at assessing how good an investment those lenders are. National Commercial Bank Jamaica showed the highest return on capital, with a jaw-dropping 67.43% ratio. Such performance was achieved through new streamlined systems that improved the efficiency of operations.

In second place with an equally phenomenal 61.78% ratio is Jamaica’s largest lender by Tier 1 capital, Scotia Group Jamaica. The third place is occupied by the Bahamas’ Commonwealth Bank and its 33.21% ratio; a figure which is similar to the remaining top five banks in the list.

As a result of the international financial crisis, focus had been shifting from profits to capital and from returns to capital adequacy. Caribbean banks have suffered indirectly from the mayhem that dilapidated many of their peers in other jurisdictions, but its impact has been equally painful with withdrawals of capital from the region.

The global economic downturn has been felt in the Caribbean and resulted in flat hospitality and construction sectors, significant components of the local economies. It is also worth mentioning the impact that the Haiti earthquake of early 2010 has had. By the end of 2010, however, things seem to have improved for the region as a whole, at least with regards to capital expansions. Nine of the top 20 Caricom banks have seen Tier 1 capital percentage increases of more than 10%.

Most improved

Belize Bank Holdings has displayed the most improved Tier 1 capital, with a 40.02% increase since last year. The bank climbed up one place in the regional ranking to fifth position and occupies first position in the capital-to-asset ratios list, with a 33.94% ratio.

A stronger capital base is particularly reassuring for Belize Bank as the lender has the second highest loans-to-deposits (LTD) ratio in the region, at 145%, which indicates that its lending activity may be funded through less stable wholesale sources than deposits. The bank closed 2010 in profit, with a pre-tax profit of $25.9m, but closed 2011 (its reporting year ends at March 31) with a $7.3m loss due to the adverse economic climate in the bank's markets of Belize and the Turks and Caicos Islands, and a growing number of non-performing loans.

The bank with the second highest Tier 1 capital change is Jamaica’s First Global Bank, which enters the regional ranking in 19th position and closed 2010 in profit after the previous year’s loss. With a relatively low 66% LTD ratio, First Global has scope for a more active lending business.

The third and fourth position of the most improved Tier 1 capital ranking are occupied by the largest Caribbean lenders. The region’s strongest bank, RBC Financial, grew its Tier 1 capital by 21.72% while First Citizens Bank, the region’s fourth highest player, closed the year with a Tier 1 capital 20% higher than its 2010 figure.

Caricom profits, capital and assets by country

Aggressive lending

The amount of loans in relation to deposits is rather heterogeneous in the Caricom market. It ranges from the very low 25.29% LTD ratio of Haiti’s Unibank to the 155% of Scotiabank Saint Lucia, the highest in the region. The bank, however, has also the second highest capital-to-assets ratio, which indicates that the lender has adequate capital in proportion to its size, despite its more aggressive lending activities.

The general size of the Caricom banks has also increased last year. Unibank is the lender that has expanded its assets the most – a 29.37% rise to $1.03bn. Scotiabank Anguila is a close second with a 26.01% increase in assets while third place is occupied by RBC Financial, displaying 21.46% growth and a total of $11.68bn worth of assets for the group.

Trinidad and Tobago remains the country with the highest values for Tier 1 capital, assets and profits, originating 41.88% of the region’s banking income and representing more than half of the total capital and assets values. It has to be specified, however, that the country continues to benefit from the consolidation of Royal Bank of Canada’s (RBC) regional businesses under the holding based there. Similarly, FirstCaribbean’s operations are grouped under the Barbados’ holding, giving this jurisdiction a higher weighting on the total regional values.

The Bahamas is the market that has grown the most in contribution to the total regional Tier 1 capital, which now represents 4.41%; still small but twice that of last year’s percentage.

In the total assets breakdown, the top positions remain unchanged but, further down, Jamaica has gone from representing 14.05% of total assets last year to a mere 1.38% this year. The Cayman Islands did not make it in the top 20 Caricom ranking last year and now represent 5.49% of the region’s assets. Despite representing a much smaller slice of the assets pie, Jamaica still retained its second largest share in the pre-tax profits breakdown, providing 26.82% of the total.

Top 20 Caricom banks
Top 10 Caricom banks increase in profits
Top 10 Caricom Tier 1 capital increase

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