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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