Bank of Baroda selling its operations in Guyana - Local authorities caught off-guard

Bank of Baroda selling its operations in Guyana – Local authorities caught off-guard

Dec 07, 2018 News

By Leonard Gildarie

Weeks after a shock announcement that the Canadian-controlled Bank of Nova Scotia is in talks with Republic Bank to sell its local operations, there is more worrisome news again for the financial sector. Bank of Baroda has signaled intentions to sell-off its local operations.

Bank of Baroda’s headquarters has announced that it is selling its operations here

Local banking authorities were caught off-guard by the news yesterday and were said to be studying the developments.
According to a Request for Proposal (RFP), the Mumbai, India-headquartered bank said that it was seeking investment bankers for the sale/disinvestment of Bank of Baroda’s entire 100 percent stake in the Bank of Baroda (Guyana) Inc.(BOBGI) operations.
Things are expected to move quickly, as the documents said that the last date and time for submission of the Technical and Financial Proposal is by December 27th. The proposals will be opened the same day in India.
According to the bid documents, “The Bank wished to invite proposals from interested empanelled “Investment Bankers” for the purpose of finding buyers for Bank of Baroda’s 100 % stake in BOBGI. This will be based on and subject to the conditions included in this document, the Non-Disclosure Agreement, and any other related documents to be issued/signed off by the bank in this regard.
(See link https://www.bankofbaroda.com/writereaddata/Portal/Tender/1357_1/1_RFP-Guyana.pdf) .
The move to sellout will stagger the administration, which recently said it is mystified by Scotiabank’s move to sell to Trinidad-owned Republic Bank, especially in light of the emerging oil and gas sector.
Guyana is expected to begin production in early 2020 with significant cash inflows expected.
Bank of Baroda (BoB) has two branches in Guyana – one located on the Avenue of the Republic in Georgetown, and Mon Repos, East Coast Demerara.
Bank of Baroda controls about three percent of the banking market shares in Guyana.
In all, the bank has 5,500 branches worldwide with 69 million customers.
Bank of Baroda, according to reports, wants to focus on four overseas territories — the US, the UK, the United Arab Emirates (UAE) and Singapore.
PS Jayakumar, Managing Director and Chief Executive Officer, BoB, has also spoken of tapping into some prominent Asian markets. “The bank is trying to look east a little bit. We have done some kind of an alliance with a leading Korean bank,” he had said in July. “They are all new markets that we need to look at, such as Korea and Japan, where there is a large amount of business going through.”

Bank of Guyana’s Governor, Dr. Gobind Ganga

That might signal a gradual move out of the bank’s six subsidiaries in Africa, one in Trinidad and Tobago and another in New Zealand.
In February, the bank decided to move out of South Africa in the wake of allegations that it facilitated money laundering by a non-resident Indian family in the country.
Meanwhile, contacted yesterday, Central Bank’s Governor, Dr. Gobind Ganga, disclosed that Bank of Baroda has not officially notified the Government.
He said that a statement is likely to be issued by authorities as early as today.
The Guyana subsidiary’s total business stood at $14.56B at the end of September 2018, down from $20.576B at the end of March 2017 and $21.09B at the end of March 2016.
The sale is part of a strategy to exit relatively less remunerative international markets by BoB, which continues to call itself ‘India’s international bank’.
Local banks have been complaining that tougher anti-money laundering laws have been placing significant burden on them, with high costs associated with the intense reports that have to be produced for regulators.
According to the Bank on its justification of the sale, part of the impact was a result of a regulatory restriction on issuance of Letters of Undertaking (LoUs), which shrunk the international portfolio of the bank to `19,000 crore from `38,000 crore over the April-June quarter of Financial Year (FY) 2019.