Canadian Imperial Bank of Commerce has declared that the net result of the merger of its West Indies retail banking operations with those of Barclays Bank PLC is a gain of $160 million.
The long publicized marriage of the institutions, which was delayed a few times, produced a new entity called FirstCaribbean International Bank Ltd. in a deal that closed October 11.
FirstCaribbean’s Director of Retail Banking in The Bahamas, Terry Hilts, wished not to comment on the profit.
But Bob Waite, a senior executive with CIBC in Toronto, Canada, told the Bahama Journal, however, that this gain has no real effect on the Bahamas or Bahamian shareholders, but more significance to the North American market.
A local financial analyst said the merger has produced “a very positive gain for CIBC.”
The deal was reportedly structured in a way that it gave CIBC “a very important gain,” he said. After tax, CIBC’s balance sheet in Canada is $160 million better off, the parent company has announced.
“It’s not super enormous, but it’s certainly very significant,” said the analyst, who was key in approving the necessary regulatory approvals to seal the deal. “CIBC is in pretty good shape.”
But the company’s announcement indicated that it will probably report a loss for the quarter, which ended Thursday.
The bank says it expects to take a hit of $525 million in pretax restructuring charges, the chunk of which is related to shutting down Amicus electronic banking unit, the bank’s cash-strapped U.S. operation.
Another local analyst said the merger was probably important for CIBC because it helped to “soften the blow” of all of the losses the company reported.
“If you add up what they’ve lost in comparison to what they’ve gained, they are obviously taking a big loss,” he said. “It appears that they have benefited from the merger, but they didn’t say how. But the losses they reported weren’t small losses at all.”
CIBC said in the final quarter, it expects to take $280 million in loan-loss provisions in the final quarter and it will likely incur approximately $200 million in losses on its merchant bank portfolio. The bank also expects to take about $160 million in writedowns on its portfolios of junk bonds and collateralised debt obligations.
“This is a loss of over $1 billion,” the analyst pointed out. “So if they talk about the little pittance they made from the merger with Barclays, it is no comfort to any shareholder in the bank. They’re going to make $160 million from the merger, but that still leaves them with an overall loss of about $1 billion.”
The analyst added that local shareholders should not feel like they are so far removed from the situation now being reported by CIBC.
“If I were a shareholder, I’d be extremely concerned, because if the parent is losing money like that, it’s only a matter of time before this begins to translate into the merged operations,” he said.
Concerning the merger, CIBC and Barclays officials have said that the new entity now offers consumers enhanced products and improved and extended access to banking services, establishing itself as a significant Caribbean presence.
A FirstCaribbean release said the boards of Barclays, CIBC, CIBC West Indies Holdings believe that its merger is the interests of their respective shareholders and will provide benefits and opportunities for customers, staff and the relevant businesses, which could be achieved either by operation or on a standalone basis.
By Candia Dames, The Bahama Journal
