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ANSA Merchant Bank Limited plans for long term Barbados Investment

Mr. Gregory N. Hill – Managing Director of ANSA Merchant Bank (Trinidad).

Article written by Sasha Harrinanan of Business Day, Trinidad.

Earlier this month the Central Bank of Barbados reported that the Barbados economy grew by two percent for the first three months of 2017, which was above the average first quarter performance of the past 5 years. However, some financial experts believe this means that the country has only just started on the road to recovery.

International reserves increased by $24.3MM, versus the $19MM 5 year average, but others have called on the Freundel Stuart administration to do more to, among other things, get reserves back to the required 12-week benchmark from the current 10.7 week level, so that people doing business in Barbados would have greater confidence that their transactions would be fulfilled.

While this has led some companies/investors to adopt a wait-and-see approach, Trinidad-based ANSA Merchant Bank Limited (AMBL) has taken a long-term view of that economy – on October 4, 2016 the bank acquired Consolidated Finance Company Limited (CFC) from its sister company, ANSA McAL (Barbados) Limited.

AMBL’s Managing Director, Gregory N. Hill, talks about how Consolidated Finance fits into the Bank’s plans.

“The Barbados economy has been under immense economic pressure, but the general view is that the worst has passed. The economy is driven largely by tourism, offshore financial services and construction activity. Speaking about Construction which is a very tangible and real economic driver, there are about US $500 million worth of projects that are ready to come on stream; such as the US $200 million renovation of Sam Lord’s Castle by Wyndham Hotel and plans to build a Hyatt Centric hotel in downtown Bridgetown. These projects will assist with increasing economic activity in the real sector and will have a direct impact on the economic health of the population and business in general. This is the fillip that has been missing, construction activity for luxury homes and other property development projects, which has always been a driver of real economic activity on the ground. Finally, we are seeing some activity, as first quarter numbers have already shown a 2% growth in construction activity.”

“In addition,” Hill said, “their tourism sector has also assisted the economy somewhat, seen in the positive first quarter performance which was driven by a 3% growth in tourism, as long stay arrivals were up 4.4% and cruise passengers by 9%. Arrivals and visitor spend have also been improving recently over the last few years.

There has been strong opposition by some to the Hyatt hotel being built on Carlisle Bay, led by attorney and social activist, David Comissiong, who in early April 2017 returned to the High Court of Barbados to file a second motion to halt construction. Commissiong and others have argued that while there would be economic benefits to having a hotel there, it would come at a huge price – disruption of the open recreational space that the beach at Carlisle Bay has become to the public as well as likely adding to traffic congestion in the area.

If and when the Hyatt Centric goes ahead, Hill said this and the other shovel-ready hotel projects would have a positive impact on the economy.

Mr. Gregory N. Hill – Managing Director of ANSA Merchant Bank (Trinidad) and the late Dr. Anthony N. Sabga at an ANSA Merchant Bank Annual General Meeting.

“I think the timeliness of our CFC amalgamation is very opportune as the Barbados economy is at the cusp of a resurgence. Now, this may not happen within three years, but we are taking a long-term view. CFC was not amalgamated into AMBL for today, it was for the long term. So, if we look at the last ten-years in Barbados, this is probably the right time to invest, to (benefit from) the recovery over the next decade as Barbados becomes better able to deal with the fiscal adjustments and encourage investments in avenues to grow and diversify its revenue base. Remember, they felt the full backlash of the global financial crisis which affected their Tourism numbers and especially one of their main stay markets which was the UK market. However, based on current economic data, we are starting to see some positive performance numbers, as Capital expenditure was $36 million lower than for the same period in 2015, and the overall fiscal deficit, estimated at $665 million, was $5 million smaller than for 2015. Likewise, the central government’s interest payments declined from 27.2% of net revenue in 2015, to 25.9% of net revenue in 2016. For us, the major concern remains the debt stock of Barbados and we are watching this very closely. However at the end of December 2016, the total debt owed to private individuals and companies by the Government and all Public Entities, Net of Assets, was $4.9 billion, or 53 percent of GDP, compared to 68.6 percent as at the end of 2015. So we are seeing a few early signs that things should improve over the medium term.

The late Anthony Norman Sabga served as ABML’s Chairman from its inception until his sad passing on May 3 2017. Hill shared that it was “Dr Sabga’s vision for the Bank to have a regional presence. Therefore he encouraged us to acquire the operations of CFC from the ANSA McAl Barbados Group and to integrate it into the bank.”

In his last statement as Chairman, which was published in AMBL’s 2016 Annual Report, the late Sabga recalled that, “In the 1980s, during the depths of the recession, we chose to make bold acquisitions at discounted prices. Acquisitions that helped transform the ANSA McAl Group into becoming one of the largest conglomerates in the region.”

“More recently, our company completed its acquisition of CFC of Barbados in 2016, despite the negative predictions for the Barbadian economy that prevail in the market. We strongly believe that this investment too, will create long-term value for shareholders to enjoy for years to come.”
In that same annual report, Hill stated that acquiring CFC was “one of several new opportunities that we are building on at this time and represents the first step toward deepening our regional footprint.”

“Our Balance Sheet is managed on a prudent, risk-based approach, in line with our growth strategy. Assets increased over the 2015 level by TT $670.5 million to $7.4 billion as at 31 December, 2016. The CFC acquisition provided a net increase in total assets of $715.2 million and has resulted in a more diversified composition of assets,” Hill stated in the publication.

More recently, in the May 9 2017 report on the bank’s results for the first quarter (Q1) of 2017, AMBL and its subsidiaries delivered profit before tax of TT $82.8 million, which was $42.8 million higher than the result for Q1 of 2016. Earnings per share for this three month period was $0.80 (2016: $0.33). Hill expanded ‘the Bank Group is currently being driven by a steady banking performance, good investment results, as well as a very good underwriting profit from our general insurance company TATIL. This insurance performance was mainly due to an increase in premiums in addition to a lower claims experience. Tatil Life also continues to perform well operationally by delivering premium income YTD $20.6 million (177%) above the prior year. Overall the Bank Group delivered revenue of $279.6 million for YTD March 2017 which was 9.1% above prior year and we are poised to deliver another positive year in 2017.”

Apart from acquisitions, AMBL is also seeking to grow organically through the addition of a Wealth Management service to its Investment Services division. “In March of this year we had a soft launch of our Wealth Management service. It’s part of our plan for organic growth from new products and services.” Hill stated.

“We’ve been able to provide investment products and service at the wholesale level to institutions, which include asset management of pension plans. We also provide investment products from the Investment Banking department to institutional investors such banks, insurance companies, credit unions. Through our four mutual funds we serve both retail and institutional clients.”

Hill said that management together with the direction of the Board determined that wealth management “would enhance our product and service suite. We now offer this service to individual clients and families, while we deepen our asset management business to include savings plans and pension fund management. We have a full investment services team charged with the mandate to grow the assets under management, while providing exceptional client service. Our goal is to expand our clientele in both retail and institutional markets through greater focus on our asset management capabilities,” Hill stated.

Taken from: Business Day, Trinidad
Story by: Sasha Harrinanan
Date: Monday 29th May, 2017

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