Chairman of Commonwealth Bank T. Baswell Donaldson said branching out would not now be in the best interest of the bank’s shareholders.
“We have so many offshore banks here that the question is how are you going to attract clients,” Mr. Donaldson said in an interview with the Bahama Journal. “The second problem is expense and the third is what do you do with the U.S. deposits after you get it.”
Domestic banks are already involved in international banking business in addition to their domestic banking business.
Those banks presently take U.S. dollar deposits from non-Bahamians.
But there are some financial experts who believe there is much more these domestic banks can do to have an international presence.
Pointing to Bermuda’s duopoly banking model, Richard Coulson – former Wall Street attorney and CEO of RC Capital Markets Consultants Ltd., – said he believes it is possible for the three locally owned and operated banks to gain more recognition in the international financial sector.
“The Bermuda model has kept the entire banking system within local ownership and control so that, unlike The Bahamas, Bermuda has not had to close down banks that proved to be undesirable and is not subject to the sudden and arbitrary decisions of foreign banks to terminate their offices, events which here have damaged both employment and our image as a stable financial centre,” Mr. Coulson said.
Mr. Coulson was speaking recently at a College of The Bahamas forum organized to observe The Bahamas’ 30th anniversary of independence.
Shayne Davis, an investment advisor, agreed that there is clearly an opportunity for domestic banks – Commonwealth, Bank of the Bahamas and British American Bank – to diversify their services.
“Some of the international banks may be pulling out of The Bahamas and there is clearly the opportunity for the locally owned institutions to fill the gap that is being created,” Mr. Davis said
The difficulty, he said, is that it requires a high level of capital commitment to move into areas like private banking and trust services.
“There is the question of whether or not the domestic institutions in fact are able to do that alone,” Mr. Davis added. “Quite frankly, I think that the answer would probably be for them to partner with other international institutions where you can create the synergies between the local and international banking activities in one shop.”
Mr. Davis noted that Bermuda’s success did not come over night.
Presently, Bermuda has two banks that serve the domestic economy – the Bank of Bermuda and the Bank of Butterfield.
With an international network of 13 foreign offices, Bank of Bermuda has reached total assets of $11 billion and market capitalization of $105 billion, trading both on the Bermuda Stock Exchange and on NASDAQ.
The combined earnings of the two banks in 2002 were reportedly $160 million, compared to barely $40 million for the three Bahamian controlled banks.
But Mr. Donaldson believes the comparison is like “comparing apples with oranges” as the two Bermuda banks have been at it for a very long time and the raw figures do not tell which portion of those earnings is attributable to international banking services.
A former senior banker with more than 30 years’ experience in the business believes it would be beneficial to many clients if domestic banks offered more international services beyond the limited services they offer now.
“What if tomorrow the Royal Bank of Canada decided to close down its operations? You will not get that from the Bank of the Bahamas or Commonwealth Bank,” he pointed out.
“Foreign owned institutions take their net profits back to the home base. When profit remains in the country – as is the case in locally owned banks – you have more national development and a larger asset base.”
But President of British American Bank Peter Thompson said what is being suggested is not going to happen any time soon.
“At the present time we are not looking to do that,” Mr. Thompson said.
“Fidelity International Bank and Trust which owns 70 or 68 percent of us, they offer that type of service so there is really no need for us to do that at this present time.”
By Tosheena Blair, The Bahama Journal
