Recently as minority shareholders in the now Trinidadian majority owned Barbados National Bank (BNB) Barbadians were happy to hear the Managing Director Mr. Robert Le Hunte comment on the success of the BNB since assuming the reign. BU like many Barbadians have seen the spurt in banking activity albeit in increasing volume more so than improving product range with the arrival of the Trinidadians in the banking arena.
Here is a quote taken from the Nation newspaper:
at a Press conference at BNB Fairchild Street, Bridgetown offices to announce half-year profits of $25.44 million for the period ending March 31, 2007. This was up from $24.40 million for the same period in 2006.
The last time we checked the Trinidadian majority owned bank Republic Bank Limited (RBL) owned 65% with the Barbados government and National Insurance 20% and 15% respectively. The rapid growth in profits and assets since the Barbados government’s divestiture means that it has been the beneficiary of increasing revenues as a result of the healthy dividends paid over the last 2-3 years as well as the share holding of both government and National Insurance Scheme has now appreciated significantly. Certainly on paper the decision to sell-out to RBL appears to have been well constructed by the Arthur government. BU recognize the argument that the BNB was a national symbol which reflected the hopes and dreams of Barbadians given the grass root support it had garnered over the years. The fact that it was not efficiently managed over the years did not seem to resonate with a populace which has become increasingly concerned at the degree Trinidad entities especially have been swallowing Barbadian concerns in recent years. BU wish to remind all that the Arthur administration literally begged the credit unions and other indigenous entities to buy in to BNB before the sale to RBL was consumated but to little avail.
BU have been also observing the level of contracts the BNB has been fed by the Arthur administration. The top three which come to mind are the Flyover Project, Apes Hill Development and the BWA project. These three contracts alone are worth over 300 million dollars. BU sources continue to report that some very important people in the financial fraternity are not happy given the volume of business which BNB continues to attract from government. This is significant when we factor that BNB has had to come to the market and offer very high deposit interest rates to fund the deals. This has obviously put the other banks under considerable pressure to manage their respective portfolios. Perhaps there is a story here down the road!
The BU preamble certainly paints a rosy picture of the BNB. However over the past two years BU have become very dissatisfied at the performance of its family of Mutual Funds . Our concern heightened when we read of the appointment of Tessa Puckering to the post of General Manager of Investments which signaled the departure of Ryan Proudfoot. Mr. Proudfoot’s departure is very interesting because he was the man responsible for setting up the investment division at BNB and was considered to be the “blue eye boy” of investment banking in Barbados. In fact in raw terms “he was the man”. It also concerns us that it was Mr. Proudfoot who assured Barbadian last year that 2007 would be a better performing year for the BNB funds. BU therefore must ask what does his departure mean? Can BNB confirm that Mr. Proudfoot was pushed? Under his stewardship investors in the three BNB Mutual Funds have seen their investment depreciate significantly over the last two years. This is made all the more alarming when compared to Fortress, a very high performing funds management program headed by Roger Cave. The passive way in which Barbadian investors have responded to the performance of the BNB family of Mutual Funds clearly show that they use the funds to reduce taxable income and they are prepared to accept depreciation in capital investment given the offset in the tax benefit. BU will not bore readers with any tedious analysis, the numbers are clear on the analysis provided.
This passive acceptance by Barbadian investors regarding the management of the BNB mutual funds must change. Barbadians must start to behave like the intelligent and literate people they are touted to be by questioning anything and everything. BU ask that the BNB management review its strategy of investing heavily in companies that they owned and which operate in the same market. A review of the BNB Capital Growth Fund as at March 2007 shows that of the 10 holdings of the BNB fund pool, BNB and RBL-BNB’s parent company – ranked #8 and #10, and of the 10 holdings seven operated in the Trinidad market or had significant interest. A quick conclusion is that if the T&T financial market go south the lack of diversification in the BNB fund management will have an even more negative effect on the value of the fund. Of course there are other factors to consider some of which we know apply here.
It is our firm belief at BU that the over 2.3 billion dollar asset size of BNB gives it an obligation to staff the Funds Unit with the breath of experience and knowledge that would ensure that more astute investment decisions can be taken. Perhaps more importantly to know is to what extent the minority shareholder – government of Barbados – influences the strategic direction of the company that would ensure that Barbadian investors in BNB mutual funds are protected.
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As one who bought BNB mutual funds some time back, with just a few questions.
Please correct if this is wrong: BNB mutual fund bought RBTT shares from Trinidad in a not totally arms length transaction, and then they tanked. Last year these shares went up and some individuals made a good profit. Did BNB sell theirs when they rocketed?
My small investment in BNB mutual fund has depreciated over the last years, and I resolved to buy any other fund than BNB with my bonus.
We all read that they claim that they will do better.
We are waiting. In the meantime there won’t be any cash forthcoming from my bank account to BNB.
Prove it!
The problem with that analysis is that the high P/E ratio of RBTT is driven largely by speculation, as opposed to growth. The fact that this Mutual Fund has a high concentration in one market is a cause for concern for investors. The issue here for me is, If the fund is adequately diversified, in my opinion it is not.
One of the reasons for the success of Fortress’ success is its strategy of investing across markets, thereby reducing risk without giving up any return, with an emphasis on low correlation markets. It is a fundamentally strong strategy given the heterogeneity of markets, especially across emerging markets.
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funny stuff. check the nation link quoting lehunt “I think our mutua funds are holding their own compred to other mutual funds”, then check the market analysis of funds link above.
?~we should not blame LeHunte because his job as CEO should not be to bring attention to the mediocre performance of his BNB mutual funds. The analysts who are loudly silent should be out there letting Barbadians know what is good and bad about the investments available.
Then again that would not be kosher in the Barbados market. If we take away Jepter Ince who else is there?
Arthur’s policy is sound by allowing foreign competition to enter the banking sector. It has been used successfully in Brazil and Argentine to good effect. The international banks now coexist with local and private banks and it has made the financial sector stronger. Although I think Arthur’s policy is sound where I have misgivings is in the current mix of banks because none of them are local. Barbados cannot benefit from a bank which can add a local value added to the banking product. Whether the regional Trindadian banks are adequate substitutes only time will tell.
BU must certainly do its research on the BNB.
First of all credit unions and other local institutions are the ones who built the BNB to the stage where it became a force to be reckoned with in the local banking industry.
The share structure prior to the sale to the Trinis was so complicated that no one dared invest in that entity.
Government held all the say AND IN ORDER FOR THE TRINIS TO BUY IT ARTHUR AND HIS BAND OF MERRY MEN TOOK THE ISSUE TO PARLIAMENT WHERE THE SHARE STRUCTURE WAS CHANGED TO A MORE FAVOURABLE ONE TO BUYERS.
The credit unions then became interested and was told that Government was looking for a STRATEGIC PARTNER and they were rejected.
Hence the entrance by the Trinis.
THE BNB WAS GIVEN AWAY AND BARBADIANS WERE THE ONES WHO WERE ROBBED.
If you want a story BU investigate the actual sale, the influx of Trinis in middle management, the offering of packages to the middle management locals to get them to go, the refunding of income tax in lumpsums to the TRINIS, the exploitation of some managers by this new team, the high loan default ratio that is being kept secret and it goes on. THE WORST MISTAKE ARTHUR AND HIS BAND HAS MADE IS THE SALE OF THE BNB AND THE CONSTANT MOUTHINGS OF MR. LEHUNT JUST RUBS SALT IN THE WOUNDS. MR. ARTHUR MUST ACCOUNT FOR THIS . HIS DAY WILL COME.
Carbourne~a very interesting comment. We are not sure that we agree with the point that the credit unions built the BNB and we hope that you can expand. The laws of Barbados at the time forced the credit unions to operate their deposit accounts at BNB and that is all that we know. Is this what you mean?
From our recollection the class structure prevented the Credit Unions from holding directorships on the Board of Directors and from this perspective BU agree with you that it made the offer unattractive. However the point needs to be made that if the Credit Unions felt strongly about the deal their best bet would have been to negotiate with government backed by a vigorous PR campaign.
The high loan default ratio is news to us and if it were the case should be identified by the external auditors and the Central Bank of Barbados as a point of concern. We hope that you can bring more information to back-up your point!
BU agree that the sale of BNB has left a bad taste but Arthur seems to be in love with his open door policy. Maybe he will be shown to be a visionary.
Totally agree with carbourne.
I have been hearing about the goings – on at Bnb – with these new Trini managers, and how they treating the bajan staff and it ain’t pretty.
Robert Le Hunte doesnot impress me – he was just sent here as a front man – to give a certain impression – but I believe the true picture is yet to be revealed – maybe time will tell.
That’s why that BS&T sale to Neal and Massy is critical – they are all intertwined.
Barbados is in deep sh**#t and most bajans can sense it but are getting desperate because they don’t know what to do,or who to turn to.
There is no visionary leader around,no non-governmental organisation,no trade union boss,no informed,interested student group,no radical church leader – that bajans can to turn to.
In a true national crisis – bajans can only turn to God – maybe that’s why he has set it up so now .
Anyway,from all I have heard,the true goings -on at BNB need to be told,and I’, sure there are persons with indepth knowledge (something I don’t have),who can blow the whistle.
Robert Le Hunte I’m told is part of the money giving circle – like COW and the others.
We understand that even if the credit unions wanted to buy the shares they would not be liquid enough. Most credit unions in Barbados are heavily lent, in other words they lend back out most of the money deposited.
So the credit union argument is a red herring.
I am not impressed with the level of coomment from our social commentators and financial analysts regading the hostile, marauding efforts of our neighbors to the south to take over the financial entities in Barbados.
Mr. Muuuurl spoke of the benefits accruing but from one side of his mouth. If he and the government is smiling about the meagre 20% profits now received then the Trinis must be laughing at the 80% of the profits that now is repatriated. And for what? The management style is not bajan but certainly we did not need the Trinis to do that. Nothing extraordiary was bought to the table. Is that hard to see??
The credit unions were well poised to assume ownership of a portion of the BNB and can still do so. Credit unions are required to have at least 10% of their assets in liquid reserves in addition to 25% of surpluses earned over the years should also remain liquid. In addition the network that has developed within the credit union movement certainly can garner support for additional investment by members if the intention was fully exposed and carefully planned so it is possible to have raised some capital. The mechnism was not hard to develop so MAXINE come again.
carbourne you are losing me. What is the purpose of the credit union reserves? Is it a regulatory requirement? Would they have had to get permissions from respective regulatory agencies to use surpluses to engage in speculative investments? Are the reserves not required as a safety net to protect depositors?
After buying into the BNB Growth Fund a couple years ago I have seen the value drop from par, to 1.17 based on their last statement. A capital loss of 20% since I bought them. Le Hute should talk about that.
BU family can use this topic to sound off about the BNB’s mutual funds.
Now what?
CL/Clico goes broke. Republic Bank share (Arthur) right of first refusal for BNB shares expired. Now who will control BNB.