GNB, FirstCaribbean deal not approved by regulators

CIBC FirstCaribbean International Bank’s regulators have not approved GNB Financial Group Limited’s purchase of a majority stake in the bank, after GNB made a bid more than a year and a half ago for control of the bank, valued at $2 billion.

CIBC, which owns a majority share of FirstCaribbean, made the announcement in a press statement yesterday. CIBC FirstCaribbean Chief Executive Officer Colette Delaney said in the statement that the transaction would have 

supported the bank’s long-term growth, but explained that is it not the only option for the bank.

“It is only one way of supporting growth for our bank going forward,” Delaney said.

“CIBC has held a majority ownership stake in FirstCaribbean for a number of years and there exists an excellent working relationship with a shared focus on meeting the needs of our clients.”

Delaney said FirstCaribbean continues to be well-positioned to recover in the midst of the economic challenges caused by the COVID-19 pandemic.

“We remain laser-focused on delivering on our strategy – providing our clients with first-class service through a modern, everyday banking experience and providing our employees with the best possible work experience,” she said.

According to the statement, CIBC FirstCaribbean carries $12 billion in assets and has a market capitalization of US$2 billion.

In November 2019, GNB reached an agreement with CIBC to purchase 66.73 percent of CIBC FirstCaribbean’s shares, while CIBC would continue to hold 24.9 percent stake of its Caribbean arm.

GNB’s Colombian owner Jaime Gilinski Bacal was eyeing the purchase of CIBC FirstCaribbean. Bacal said in a press release in 2019 that his company intends on keeping CIBC FirstCaribbean the strong financial institution it is today.

“I have been impressed by the strength and stability of CIBC FirstCaribbean and I am excited about its prospects for the future,” Bacal said.

The statement did not explain the reasoning behind the regulators’ denial of the transaction.

GNB is wholly owned by Starmites Corporation S.ar.L, the financial holding company of the Gilinski Group.

“The Gilinski Group has banking operations in Colombia, Peru, Paraguay, Panama and the Cayman Islands, with approximately US$15 billion in combined assets,” the 2019 release noted.

A Reuters article published in December 2017 explained CIBC’s divestment of its majority shareholding in FirstCaribbean was a result of earnings growth in the Caribbean being slow and the bank no longer considering the Caribbean a core asset.

CIBC, via its Caribbean subsidiary, has been one of the three big Canadian commercial banks operating in The Bahamas. Over the past two years, those commercial banks have been scaling back their businesses to compete in the difficult Bahamian economy.

Bad loans and high operating costs have caused the banks to close branches and decrease their workforce over the years. The financial crisis of 2008 was a catalyst for the extreme rightsizing actions of Canadian banks in the region.

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