Chief executive officer of RBC Financial (Caribbean) Limited, Rob Johnston, is urging stakeholders to speak “prudently” a bout the current economic conditions facing Trinidad and Tobago.
In an interview about the bank’s Consolidated Financial Statements for 2015, released last week, Johnston was asked how the low and declining energy prices, combined with the recession and appeals for people to cut back on spending would impact on the bank’s loan portfolio and ultimately its profit in its next reporting period.
He responded that consumer confidence is a really important part of any economy. “If a client doesn’t feel that they can buy that new car, invest in the addition to their home, when people hold onto their savings, it has ripple effects through clients and businesses and taxes and so it can become quite a significant factor in the performance of the economy and I think that it’s important that Governments and businesses and the media all speak prudently about this.” Johnston noted that Trinidad and Tobago is in a very strong position.
“There’s a lot of liquidity in the market with families, with individuals with businesses, and the Government still does have capacity that I think allows the Trinidad economy to weather this downturn, whether it’s a year or even a bit longer, there’s no reason why we can’t continue to do well through these challenging times.” He added, “We don’t want to be alarmist because that would just cause people to behave in ways they wouldn’t normally, which then causes unintended consequences.” He said that RBC operates in 39 countries around the world and every one of them have gone through tough times at one point or another. “We as a learning organisation are able to share and learn from those experiences.” Darryl White, managing director of RBC Royal Bank Trinidad and Tobago Limited, agreed with Johnston. He pointed out that while Trinidad and Tobago is facing depressed energy prices, the country must figure out how to adapt and adjust to it. He said, “Banks are built for this. This is why we have a rigour and a discipline around how we deal with the assets of the bank, how we deal with loans, how we deal with the balance sheet.
We construct ourselves to be able to come through tough times like this for our clients because this is when our clients need us most. And when I say ‘at times like this,’ recessions are a reality, all economies have cycles.
What we do have in our favour in Trinidad, and Trinidad is still a very key market for us, but what we do have in our favour in Trinidad is the reality that if we look at (the country) in terms of the savings at the institutional level, at the household level and there are savings as well at the State level. So you look at all stratas and there is a fair amount of savings that allows for a buffer during difficult times.” He said the bank had seen savings growing at the household level.
“You look at investments in the institutions, whether you look at our own mutual funds, which are institutional investments that are all around the world, some of the best assets that you will find. If you look at the National Insurance Scheme we have lots of savings within (that) and if you look at the Government, we do have a Heritage and Stabilisation Fund. I wish there were more, but US$5 million for 1.3 million people is not an unsubstantial amount and we are much better off than many of our neighbours stepping into this period of time. It is about how we use those savings and how we unlock that potential and I think that as an organisation that’s what we see and that’s how we want to position ourselves in 2016.” Johnston said that RBC Financial Caribbean operates in 17 countries in the region and, with the exception of two or three, they were all facing economic headwinds.
“And it’s requiring our clients, our governments and ourselves to do things differently to make our way through these challenging times.
Despite the headwinds, I think clients are finding a way to thrive, we’re finding a way to help governments make their way through the challenges and I think as you look at our 2015 results its demonstrated our ability to facilitate a turnaround in a very difficult timeframe and our expectations are that in 2016 we will continue to see improvement in the financial performance. We have an aggressive business plan and we have every expectation that we are going to achieve it.” The Consolidated Financial Statements for 2015 showed that the Group had core earnings of TT$792 million for the fiscal year ending October 31, 2015, compared to TT$511 million for the same period in 2014.
Johnston said the management of the bank was not surprised by the turnaround. “It was the result of a series of management actions that we took beginning in 2013 through to 2015, which set the foundation for the turnaround whether it was through the sale of countries that just didn’t fit with our long term strategy – not a simple thing to do – to restructuring of our distribution footprint to investing in technology, investing in products.
“It was a very thoughtful approach to how you get from challenging period to one in which we could have a sustainable business going forward,” he said. The Group last year sold its operations in Suriname and Johnston said it was a very difficult decision to withdraw from that market. “You don’t enter into those things lightly because it impacts communities, clients, staff. But when you look at our strategic ambitions in the Caribbean we knew that the world had changed from when we originally bought Royal Bank of Trinidad and Tobago.
We were not going to use Suriname as a launch pad into further acquisitions in South America so it was sort of off the table and it gave us pause to say ‘Well, if our core footprint is going to be the Caribbean which we are in, how do we want to organise ourselves for the future… Suriname was an asset that we had two interested buyers for and we proceeded down that path.” Johnston said the bank had introduced private banking for its high net worth clients and had also introduced private banking in Trinidad and Tobago, Bahamas, Cayman Islands, and Barbados, all in a bid “to serve that part of the market better than we have been able to in the past.” “We’re growing out our mobile banking capability so that we can serve clients where they chose to be served not in a branch which has traditional banking hours. So we’re being flexible and innovative with our investments, particularly around distribution. We can be impactful in the market without being a bricks and mortar 8 am – 2 pm financial institution.” White said that although RBC Royal Bank Trinidad and Tobago Limited had only 24 branches, it had approximately 50 distribution points through which the bank was able to meet client needs.
He added that customers and the public could look for more such developments in the future. These would include new products such as ‘Easy Pay’ which would allow the bank’s clients to swipe their card from their mobile phone, a great benefit to small businesses and especially taxi drivers, as he said it would reduce their risk of falling victim to criminals. He said ‘Easy Pay’ would give them an opportunity to be more secure, to expand commerce.
Extended banking hours was another direction in which the bank was heading, along with Saturday banking.
Asked about recent reports of skimming White said such illegal activity is not new, but was part of the operational risk for a bank. He noted that affected clients were refunded what was taken from their account. While declining to say how much the bank spent in compensating customers, White said banks are built to deal with situations like these. “We have to ensure and we always say that the first line of defence is our clients,” he said.
He said that in order to make it harder and harder for the scammers the bank keeps building its fences and continues to be vigilant. “We continue to put in more secure ways to do business because we need to ensure that people will continue to be confident to use those channels. I certainly won’t stop using it.” Retail mortgages was another key area mentioned in Johnston’s report as one the bank intended to develop further. He said he believed RBC had a “decent” share of the market but believed it could take a larger share as well. So much so that the bank has adopted the tagline for its mortgage business, “We’ll meet you almost anywhere.” He said it is a promise the bank is taking very seriously. “So what we’ve done is that we’ve taken the service to our clients and our mortgage specialists are mobile. No longer do we want people necessarily to come into the bank for a mortgage. We want to go out there and have the conversation with you, go see the property, see which way the sun comes up so you know you could build it in the right direction, be there when you open the door and you have the key and then have conversations about how are you going to get that property developed.” Johnston said the bank’s plan for 2016 is very challenging, adding that RBC is moving away from trying to win every client in the Caribbean. “We want to try to be the very best to that group of clients while still doing a very good job for all the clients who need us for the challenges that they face in their life and all the day-to-day banking that goes with that.