Royal Bank of Canada Agrees to Sell Jamaican BusinessDoug Alexander
Royal Bank of Canada, the nation’s second-largest lender by assets, agreed to sell its Jamaican banking operations to Sagicor Group Jamaica Ltd. after a six-year foray into the Caribbean country.
The transaction will result in an estimated loss of C$60 million ($53.7 million) in the fiscal first quarter ending Jan. 31, Toronto-based Royal Bank said today in a statement. Terms weren’t disclosed.
The lender, which has operated in the Caribbean for more than a century, has 550 employees at 13 branches in Jamaica, the firm said. Royal Bank gained the Jamaican business in 2008 as part of its $2.2 billion takeover of RBTT Financial Holdings Ltd., which doubled the Canadian company’s Caribbean branches.
“Sagicor is a well-established financial franchise in Jamaica with the size, scale and complimentary capabilities that RBC Jamaica does not currently possess,” Suresh Sookoo, chief executive officer of RBC Caribbean, said in the statement.
Royal Bank’s sale “will likely raise questions regarding the strategic implications for other regions in the Caribbean that it operates,” John Aiken, an analyst with Barclays Plc in Toronto, said in a note. “We would be surprised to see a wholesale exit by Royal, but do not deny that it could occur if it were to garner an appropriate value.”
Royal Bank “remains committed” to the Caribbean, David McKay, group head of personal and commercial banking, said in the statement.
“This transaction will allow us to successfully reposition our Caribbean business for the future and focus on regions where we have a significant market share,” said McKay, who is set to become CEO in August.
Royal Bank fell 1.1 percent to C$68.77 at 4:14 p.m. in Toronto. The stock climbed 10 percent in the past 12 months, outpacing the 9 percent gain for the Standard & Poor’s/TSX Commercial Banks index.
Royal Bank’s Caribbean banking business has struggled amid weak economic conditions in the region, posting a C$40 million restructuring cost in the fourth quarter.
“We do not have plans to divest any other assets in the Caribbean,” Wojtek Dabrowski, a company spokesman, said in an e-mailed statement. “Our current focus is to improve the performance, service and competitiveness of our business for the long term, and to focus on markets where we can operate as a sustainable leader.”