The Canadian Imperial Bank of Commerce’s efforts to close a $797 million sale that would see it unload FirstCaribbean banks in the Virgin Islands and 15 other Caribbean locations was abruptly scuttled last week after regional regulators stopped the proceeding, CIBC announced.
The regulators were not identified, but the Barbados-based subsidiary’s website states that it adheres to all regulatory requirements issued by its “lead central bank regulator, the Central Bank of Barbados, the Barbados Financial Services Commission and the Barbados Stock Exchange, as well as the legal and regulatory requirements, guidelines and recommendations of other central banks and regulators in the region.”
CIBC had announced in November 2019 that it would sell a two-thirds stake in FirstCaribbean to GNB, a company owned by Colombian billionaire Jaime Gilinski.
GNB is wholly owned by Starmites Corporation S.ar.L, the financial holding company of the Gilinski Group, an estimated $30 billion conglomerate with banking operations in Colombia, Peru, Paraguay, Panama and the Cayman Islands.
GNB had been slated to pay $200 million in cash and use financing provided by CIBC for the remainder of the deal.
Value
At the time the sale was announced in 2019, FirstCaribbean was valued at about $1.2 billion, less than half of its $2.8 billion value when it was acquired by CIBC in 2002 and combined its operations in the region with British bank Barclay’s.
Four years later, CIBC purchased Barclay’s 44 percent stake for $988.7 million.
In a statement issued last week, Harry Culham — the CIBC group head of capital markets, who also oversees FirstCaribbean — downplayed the blocked sale.
“While this transaction would have supported First-Caribbean’s long-term growth prospects, it is only one way of creating value for stakeholders,” he said. “FirstCaribbean is focused on building deep, long-lasting client relationships in the Caribbean, optimising our business and enhancing efficiency over time. We remain committed to executing on our long-term strategy and deliver- ing the best outcome for clients, shareholders, team members and communities.”
CIBC, which has offered banking services in the Caribbean since 1920, didn’t state the reasons for the regulators rejecting the deal. The bank has been trying to extricate itself from the region after suffering losses in recent years, but its 2018 plan to list FirstCaribbean on the New York Stock Exchange was also abandoned, with bank officials blaming “market conditions” at the time.
Like other North American banks in recent years, CIBC has sought to scale back its Caribbean holdings as the region undergoes the controversial process of de-risking, with customers in danger of losing their correspondent banking relationships with North American banks and thus ready access to funding.
The process has already affected the banking landscape in the VI, with Scotiabank last year selling branches in the VI and seven other Caribbean countries and territories to the Trinidad-based Republic Bank.
Meanwhile, a similar deal announced in 2019 by the Royal Bank of Canada to sell off its operations in five eastern Caribbean countries and territories to a consortium of Caribbean-owned banks is also awaiting approval from regulators.
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