Top 50 Caricom Banks ranking: small lenders lead the growth story
While the Caribbean's largest banks have held steady in The Banker's Top 50 rankings, smaller banks further down the table have displayed the most impressive growth, writes Silvia Pavoni.
Though it has now emerged from a devastating recession, many countries in the Caribbean are still struggling to keep a steady hand on their respective economies. Its gross domestic product contracted by 0.9% last year, according to the Caribbean Development Bank, after expanding slightly in 2015.
The Caribbean Community (Caricom) is an association that aims to foster deeper economic integration among member states. Its 15 members – which comprise a smaller subset of the Caribbean islands (excluding economic outlier the Dominican Republic) plus Central America’s Belize and South America’s Suriname and Guyana – find themselves in a similar situation.
International organisations such as the World Bank have long argued for economic diversification, protection against climate-related events and better management of public finances. One way to achieve these goals would be to maintaining a healthy banking sector.
Leading the way
Across the Caricom area, Trinidad and Tobago is the largest banking market, led by RBC Financial Caribbean with $2.55bn in Tier 1 capital, which makes it the number one bank in the region by this measure. Royal Bank of Canada has its Caribbean headquarters in Port of Spain, from where it serves 16 other countries in the region.
Second placed CIBC FirstCaribbean, based in Barbados, also serves as a regional hub for its Canadian parent, which holds a total of $1.23bn in Tier 1 capital in the Caribbean.
Although the top 10 places in the ranking are mostly unchanged from last year, all lenders bar two saw their capital levels receding in 2016. On the other hand, assets have not diminished quite as much, leaving banks in weaker capital positions in relation to their size.
At the top of the ranking, the most notable reductions in capital and assets were by HSBC Bank Bermuda, which dropped by 16.69% and 18.64%, respectively. The lender has been gradually withdrawing from the wider Latin American and Caribbean region but remains the third largest in the Caricom group.
Growth is more prevalent among the ranking’s smaller players. Belize’s Heritage Bank, in 45th place, is the most improved after expanding its Tier 1 capital by almost one-third and nearly doubling its assets. At 41st in the regional ranking, MMG Bank and Trust, from the Bahamas, is the second most improved by Tier 1 capital, and 34th ECAB, in Antigua and Barbuda, the second most improved by assets.
Small but profitable
Looking at profitability, other smaller names come to the fore. Ranking 20th in the overall table, Haiti’s Unibank has the largest return on assets and return on capital among Caricom members, with more than 8% and nearly 112%, respectively. It is followed by Scotiabank Guyana in the returns on assets table, and by National Commercial Bank Jamaica in the return on capital table.
Jamaica, the second largest Caricom economy after Trinidad and Tobago, scores less well as its peer in terms of the size of its banking sector. While Trinidad and Tobago has four lenders in the ranking – and all within the first eight places – Jamaica’s highest scoring name is Scotiabank, in ninth position. Its other five lenders are to be found scattered from 11th to 48th.
In absolute terms, the bank with the highest pre-tax profits is Republic Bank with $198m. Based in Port of Spain, Republic Bank’s results consolidate the group’s operations in Trinidad and Tobago, Bahamas, Guyana and Grenada. The bank most improved in profitability is Cayman National Bank, which went from just over $1m in pre-tax profits in 2015, after a continuous decline in previous years, to $13m in 2016.
