Darryl White

RBC Financial Caribbean CEO Darryl White.

DRIVEN by the impact of the Covid-19 pandemic, RBC Financial (Caribbean) declared an after-tax loss of $1.84 billion for its financial year ending October 31, 2020, which was mainly caused by goodwill impairment expense of $1.91 billion and provisioning for credit losses on loans and securities of $486.96 million.

RBC Financial reported an after-tax profit of $765.57 million in 2019.

In his CEO’s report on the 2020 financials, RBC Financial’s Darryl White stated: “With the onset of the Covid-19 pandemic, there have been adverse impacts to several revenue-generating flows along with increases in the level of provisions for credit losses to cater for potential losses on the loans and securities portfolios.

“There was also a recording of an impairment on the goodwill balance of the company stemming directly from pandemic-related reductions to future cash flows.”

For its 2020 financial year, RBC Financial, whose parent company is the Royal Bank of Canada, recorded net interest income that declined by 16.3 per cent to $1.51 billion. RBC’s Caribbean banking operations also reported a 13 per cent decline in its total revenue for its 2020 financial year.

Including the expense for goodwill impairment and the provision for credit losses on loans and securities, the commercial bank’s total non-interest expenses more than doubled from $1.91 billion in 2019 to $4.23 billion in 2020.

On the issue of the impairment of goodwill, the notes to the financial statement state that goodwill on assets acuired was assessed to determine the need for an impairment loss as at the year end, in accordance with IAS 36- Impairment of assets.

“Based on the results of the annual assessment performed as at August 1, 2020, a goodwill impairment of $1.91 billion was observed as at October 31, 2020 (2019-nil) as the carrying amount of the assets exceeded its recoverable amount which were lowered by the impact of the pandemic,” according to the notes. The assessment used the fair value less costs of disposal method.

...T&T profits plunge

RBC’s T&T operations reported net income after taxation of $57.86 million for the 12 months ended October 31, 2020. That’s a decline of 75.9 per cent from the $240.24 million the bank generated in 2019, according to the separate accounts for the T&T subsidiary.

RBC Royal Bank T&T saw its provisions for credit losses on loans increase from $54.1 million in 2019 to $134.1 million for the 2020 financial year.

Its net interest income declined by 10 per cent to $789.6 million in 2020 from $879.4 million in 2019

“A major factor in the sharp decline in results year-over-year was the onset of the novel coronavirus pandemic and the resulting downturn in economic activities across the region,” said Gretchen Camacho-Mohammed, the managing director of RBC’s local operation.

“The negative impacts of Covid-19 on the interest rate environment, and the restrictions on business activity arising from prolonged lockdowns across the region, contributed to lower revenue levels year-over-year with both net interest income and fee income adversely impacted,” she added.

Ms Camacho-Mohammed noted that provisions for credit losses at the T&T operations increased significantly “driven by the assessment of coverage required for future potential losses on the loans and securities portfolio.”

The total assets of RBC Financial Caribbean at the end of 2020 were $61.58 billion. RBC Royal Bank (T&T Ltd) contributed $26.27 billion.

Green light for sale of EC banks

RBC Financial’s audited financials for 2020 also reported that the banking group received approval from the Eastern Caribbean Central Bank on December 22, 2020 to proceed with the sale of its banking operations in the region to a consortium of indigenous banks. The five financial entities making the acquisitions are First National Bank of St Lucia, Antigua Commercial Bank Ltd, National Bank of Dominica Ltd, the Bank of Montserrat and Bank of Nevis Ltd.

The sale comprised the branches of Royal Bank of Canada in Antigua, Dominica, Montserrat, St Lucia, and St Kitts and Nevis, as well as regional businesses operating under RBC Royal Bank Holdings (EC) in Nevis, Grenada and St Vincent and the Grenadines.

At the time of the announcement of the sale, Rob Johnston, Head, RBC Caribbean banking said: “Consistent with our strategy of being a competitive leader in the markets where we operate, RBC is always evaluating opportunities for our business. Earlier this year, we were approached by a consortium of indigenous banks with their proposal to acquire all RBC Eastern Caribbean operations.

“After a review of our operations and strategy, we determined this opportunity was a good decision for the long-term future success of RBC Caribbean, and also, that it aligned with our vision to help our clients thrive and communities prosper,” he said.

When the sale of the Eastern Caribbean operations is concluded, RBC Financial (Caribbean) would be left with operations in Aruba, Curacao, Barbados and T&T.

In June 2008, just before the onset of the Global Financial Crisis, the Royal Bank of Canada announced the completion of its acquisition of the RBTT Financial

Group (RBTT) for a purchase price of approximately TT$13.7 billion (US$2.2 billion).

The shareholders of T&T-based RBTT received about US$6.33 per share, payable in a combination of 60 per cent cash and 40 per cent Royal Bank of Canada common shares. The offer represented an 18 per cent premium to RBTT’s closing price on September 28, before a local news report over the weekend pegged RBC as the buyer.

The acquisition marked the return of RBC to T&T, where it had maintained operations from 1902 to 1987.

Retired RBTT group chairman, Peter July, said of the transaction in June 2008: “The combination of these two organisations is all about growth and expansion, which creates new opportunities for our stakeholders. It has brought enhanced value to our shareholders who, in addition to receiving a premium for their RBTT shares, can now invest in one of the most stable and successful banking entities in the world.”

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