Newspaper article The Canadian Press

Bank CEOs Say Their Caribbean Operations Stand to Benefit from Cheaper Oil

Newspaper article The Canadian Press

Bank CEOs Say Their Caribbean Operations Stand to Benefit from Cheaper Oil

Article excerpt

Cheap oil will benefit Caribbean: Bank CEOs

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TORONTO - A combination of lower oil prices and cost-cutting is poised to help improve the Caribbean operations of some of Canada's biggest banks, a region where they have struggled for years.

While they brace for loan losses and lower revenues in Western Canada due the plunge in oil, the big banks say the Caribbean is set to benefit from the decline.

"They're one of the biggest beneficiaries of cheaper oil, so there are some positives finally starting to creep in to the economic outlook of the region from that perspective," Royal Bank of Canada chief executive David McKay said during a banking conference last week.

The Caribbean economy has been in a slump since the global financial crisis caused a slowdown in the region's vital tourism industry. That has hurt the profits of several Canadian banks that have operations in the region.

The Royal Bank (TSX:RY) announced last year it is exiting its Caribbean wealth management business, after selling its Jamaican operations at a loss.

Meanwhile, CIBC (TSX:CM) took a $420-million charge on its Caribbean operations in the second quarter of last year, plus an additional $123 million in loan losses.

The Bank of Nova Scotia (TSX:BNS) has been operating in the Caribbean for more than a century and, of the three lenders, has the largest customer base in the region. The lender plans to close some of the roughly 370 branches it operates in the Caribbean -- "to be congruent with the economic reality," chief executive Brian Porter told the banking conference.

Last year Scotiabank took $83 million in loan loss provisions related to its Caribbean hospitality portfolio. But with oil prices declining, Porter says Scotiabank's Caribbean operations are about to turn a corner.

The region is a net importer of oil, so cheaper prices will allow it to save on energy costs. Meanwhile, a stronger U.S. economy could boost travel to the region, especially if cheaper oil trickles down to consumers via lower air fares. …

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