LatinFinance - November/December 2013 - 56

BANK OF THE YEAR DOMINICAN
REPUBLIC

Banco Popular
Dominicano
Fiscal reform in the
republic has put pressure
on bank profitability

Source: Popularenlinea

Authorities in the Dominican Republic
are doing their best to revive a flagging
economy. But for the nation's banks, the
policy measures have not been without
their costs.
GDP growth dropped from 7.8% in 2010
to around 4% in 2012. The government
reformed the tax system in late 2012,
increasing value added tax among other
measures. At the same time, it cut spending
in the early part of 2013. The economy felt
the pinch: preliminary IMF data indicated
that GDP growth fell to 1.6% year on year in
the first half of 2013.
The economic slow-down, weaker
business confidence and lower domestic
consumption has hit banks, says Fitch. Yet
the ratings agency points to Banco Popular
Dominicano, the country's largest privatelyowned commercial bank, as weathering the
circumstances well.
Indeed, the bank reduced its rate of
bad loans to 1.15% - down more than a
point from three years earlier. It has also
improved its profitability while at the
same time growing its balance sheet. It is
those financial improvements that make it
LatinFinance's Bank of the Year Dominican
Republic.
The result is particularly noteworthy
given the economic backdrop.

IN AND OUT: Banco Popular Dominicano has weathered a local economic
slow-down well, says Fitch

56 LATINFINANCE.COM - November/December 2013

In a bid to increase economic activity,
and after holding rates for more than a
year, the central bank began cutting them
in May 2012. Over the following year it
reduced rates by 250 basis points, to 4.25%
- although it undid most of that with a 200
basis point rate rise in August 2013.
The importance of central bank rates for
profitability means the cuts may hit BPD's
performance, says Fitch. The bulk of the
bank's investment portfolio - 92% - is held
in central bank debt, a further 6% is in debt
sold by other local banks, and the last 2% is
in government bonds.
Still, with a granular loan book and
careful management of its balance sheet,
Fitch expects the bank to continue
outperforming the market average.
Banco Popular Dominicano has also
made moves to strengthen its balance
sheet, with the sale of subordinated capital
in the local market. The bank sold a 500
million Dominican peso ($125 million) bond
in October 2012. The subordinated note has
a 10 year maturity. LF

BANK OF THE YEAR TRINIDAD &
TOBAGO

Republic Bank
The island's biggest and
most profitable bank is
looking across the Atlantic
for growth
When you've spent 176 years in business,
chances are it means you've struck a
winning formula. So it is that Republic
Bank, which has been in the Englishspeaking Caribbean for that long, has
notched up another strong year.
The bank grew assets to 55 billion
Trinidad dollars ($8.7 billion) in June 2013,
up from 51 billion Trinidad dollars a year
earlier, and maintained an impressive
capital adequacy ratio of 30%. Similarly it
performed well. In the nine months to June
30 (Republic Bank's financial year ends in
September), it reported pre-tax profits of
1.1 billion Trinidad dollars, in line with the
same period the previous year.
Still, its profitability declined: Republic's
return on average assets fell to 2.48% from
2.51% while its return on average equity
stood at 15.8% from 16.0% in 2011.
"At the end of the day, we are a reflection

of the economies in which we operate,"
says Republic Bank managing director
David Dulal-Whiteway. Republic operates
in agriculture, commodities, and tourism
in Barbados, Grenada, Guyana and
Trinidad & Tobago. Performance in those
economies has been strained, with the
slowdown in Europe and the US hitting
trade and tourist arrivals, Dulal-Whiteway
says. However, he sees positive signs of
an economic turnaround in all areas. The
bank is optimistic about growth in Trinidad
& Tobago, Guyana and to a lesser extent
Barbados.
Republic has focused on customer
service, building long term relationships
and attracting a good client base. "We
know how to manage loans and deposits
and manage our book very closely," he
says. "We feel comfortable sticking to the
basics. We don't have fancy derivatives but
we focus on 'Banking 101'."
However, the bank is looking for
business outside its home market, and
has made steps into Africa. Republic Bank
bought an 8.9% stake in HFC Bank Ghana
in December worth $8 million. In June
2013 it increased its stake to 32%, making
it the largest single shareholder. It asked
the regulator for permission not to launch
a takeover bid, which normally would be
mandatory with such a shareholding.
Republic's mortgage portfolio stands at
over $600 million in Trinidad and Tobago
alone. It intends to use its expertise here to
enhance the mortgage offerings of HFC and
help grow the bank's base. LF

DAVID DULAL-WHITEWAY,
REPUBLIC BANK

"WE KNOW HOW TO
MANAGE LOANS AND
DEPOSITS AND MANAGE OUR BOOK VERY
CLOSELY. WE FEEL
COMFORTABLE STICKING TO THE BASICS.
WE DON'T HAVE
FANCY DERIVATIVES
BUT WE FOCUS ON
'BANKING 101'"
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LatinFinance - November/December 2013

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