23 June 2007

CIBC & Scotiabank in Belize

Financial Post, Duncan Mavin, 23 June 2007

The island of Ambergris Caye is a 30-kilometre-long slither of jungle 75 minutes by boat from Belize City. "La Isla Bonita" -- the island lent this second name to the title of a Madonna hit single -- is a fabulous place to relax with book and cocktail. But at first glance it seems an unlikely arena for two of Canada's big banks -- peddlers of some of the most advanced banking products on the planet -- to battle it out for market share.

First appearances suggest there is not much call for some of retail banking's biggest sellers -- home loans, small loans for cars and household goods, or wealth management products.

For instance, there are only three ways to get around once you are here -- golf cart, bicycle, or flip-flops. A brief network of roads, some paved, some dirt tracks, carve out a dusty checkerboard across the capital, San Pedro, which is the only town on the island. Housing for many of the 15,000 permanent inhabitants is rudimentary, and commerce revolves around a handful of luxury hotels, scuba dive shops, rum punch and tourist trinkets.

Yet tucked between stores selling "Down in Belize" shot glasses and guava ice cream you will find branches of FirstCaribbean Bank -- owned by Canadian Imperial Bank of Commerce -- and Bank of Nova Scotia.

"We see this as a tremendous opportunity for both retail banking and small business and commercial banking," says Pat Minicucci, Scotiabank's senior vice-president for the Caribbean, without a moment's hesitation.

Ambergris Caye represents a realistic growth engine fuelled largely by tourism, says Mr. Minicucci, who was speaking by cellphone from the mainland as he wheeled south on one of Belize's bumpy highways en route to the opening of the bank's tenth branch in the country, in the town of Punta Gorda.

The number of tourists visiting Belize grew by about 20% from 196,000 to 237,000 between 2001 and 2005, the latest year for which the country's tourist ministry has released data.

"We saw that there was a need for us to join hands with the tourism sector here in Belize and its really served us well," says Scotiabank's managing director in Belize, Patrick Andrews.

The San Pedro branch finances small hotels and has about 4,000 deposit accounts, but it also has a thriving line of business servicing foreigners on vacation and some who want to stay longer.

"Especially lately," says Mr. Andrews, "we've seen some Canadians who come down and they find out a bit about Belize and investing here. Slowly they begin to consider investment opportunities in Belize, buying investment properties and so on. The Scotiabank name is very recognizable and they feel comfortable coming to us."

Crazy Canucks, a wooden hut that opens on to the beach a few feet from the ocean, is one of a handful of bars and hotels that sport their Canadian connections with pride. The number of Canadian tourists to Belize is increasing by about 23% a year.

But Scotiabank doesn't have things all its own way. Belize represents a tiny fraction of the Canadian bank's bottom line -- Belizean operations made about $4-million for Scotiabank last year -- but competition to cash in on the growing tourism trade is heating up, says Mr. Andrews.

On Ambergris Caye, for instance, First-Caribbean landed just last year.

"The opening of this bank in our community gives its residents and tourists a choice when it comes to banking," said Mayor Elsa Paz at the opening ceremony of the branch in January, 2006.

FirstCaribbean, which has four branches in Belize, is the bank formed when CIBC and Barclays Bank PLC of the U.K. merged their Caribbean operations in 2002. Last year, CIBC announced it was buying out Barclays and has raised its stake in First-Caribbean to 91.5% from 49.5% for a total cost of $1.1-billion.

The Caribbean bank contributed about $38-million to CIBC's second-quarter results. Some analysts believe CIBC is on the prowl for other banks in the region to expand its operations there. Caribbean-based media reports persist that the Canadian bank is a possible bidder for Royal Bank of Trinidad and Tobago.

Back in Belize, Mr. Andrews says the best way to deal with the competition is to offer better customer service. At the San Pedro branch -- he flies in to visit at least once a month -- the Scotiabank chief oversaw a recent expansion of the branch's hours, including opening on Saturdays.

"In Belize there are four or five banks including ourselves," Mr. Andrews says. "The largest bank is Belize Bank which way back when was once the Royal Bank of Canada. We are always competing for market share. At Scotiabank we have about 23% of market share after Belize Bank but we are closing in quite nicely."