GBTI’s minority Shareholders (39%) should demand forensic audit in the interest of all other stakeholders

Dec 07, 2018 Letters

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Dear Editor,

Permit me space in your letter column to thank Mr. Rustum Bulkan for having referenced my analysis of GBTI’s 2017 Financials in a letter carried by this publication on June 19, 2018. Mr. Bulkan, in his letter carried on November 29, 2018, echoed the very concerns that I had highlighted in my writings in which it was explicitly concluded with the burning question, who is representing the interest of the minority shareholders?
Without regurgitating much of the analysis previously done, that institution, we have established, is obviously financially weak and is very vulnerable to further exacerbated deterioration of its financial soundness especially in the absence of sound, professional and competent leadership.
With regard to the financial analysis, another interesting point that should be highlighted which was not mentioned in the earlier analysis, is that, the Bank of Guyana Supervision Guideline No.5 Section 15 states, “An account shall be written-off three months after being classified as a loss unless it shows a definite and significant improvement, which indicates recovery within the next six months. A record of bad debts written-off shall be maintained in a memorandum account for monitoring purposes.”
That being said, if one were to scrutinise and audit the bad-debt portfolio of GBTI, which is in excess of some $11 billion, it is almost certain to find billions of non-performing loans that are still reported on the balance sheet, that should have been written off in keeping with the statutory requirements.
To this, GBTI may want to respond saying that these loans have been renegotiated, or in fact, this is what they have been doing; renegotiating many bad loans only to revert to being bad, and this is a shrewd and skilful way to avoid having them written off, because writing off these loans, would mean that the bank’s balance sheet would be weakened even further.
It would have to come from their reserves, bearing in mind that the loan-provisioning is already under-provided for by over $4 billion, so this would mean less real profit for the bank and less dividend paid to shareholders.
So, from almost every dimension, GBTI, a once financially sound and healthy bank, is being destroyed by its careless and irresponsible Board of Directors – viz-a-viz, reckless financial management and questionable governance philosophies.
Now, to wrap this up, and to further complement and build on Mr. Bulkan’s contentions, hereunder stated are a number of crucial factors of concern to which, it becomes imperative that GBTI issues a public statement to answer these questions in the interest of all stakeholders, particularly the minority shareholders:
• From looking at the 2017 balance sheet under investments, GBTI has $7.8 billion in securities issued by foreign governments (including CARICOM countries), and $7 billion in corporate bonds giving rise to a total of $14.8 billion.
In the interest of transparency, how much of this investment is concentrated in the Barbados Government Securities and how much is concentrated in Petrotrin Trinidad &Tobago? Both of these institutions have undergone massive restructuring of its debt owing to the structural reforms of the Barbados economy and the closure of Petrotrin Trinidad, respectively.
This means, if GBTI has billions of dollars in these investments, they are bound to incur massive losses amounting to billions of dollars, noting that these are not collateralised securities.
And, they do have sizable amount of exposures (investments) in these securities, so they need to issue a statement on this to its minority shareholders.
• Insider sources confirmed that, the discredited Larry Nath who was appointed CEO and was proven to be unfit and improper for the job, is still running the bank from Trinidad as a consultant. The question is why. Why have an ex banker whom has questionable, and compromised his professional integrity, still engaged in this manner with the bank?
• Why is it that DIDCO all of a sudden went into receivership and then the majority shareholders subsequently acquired the franchise of KFC? Is this not breach of good corporate governance practices and akin to insider trading? Is this not criminal? And enough to remove the entire Board of Directors?
• How did the majority shareholder acquire the property that now houses KFC on Vlissingen Road that was once owned by GBTI property holdings, a subsidiary of GBTI? By carefully studying the balance sheet, GBTI property holding made a loss of $600 million at some point, how is this possible? It means that the property was sold to the majority shareholders, who sits on the Board of GBTI, way below the price it was valued for and acquired by GBTI property holdings, is this not fraud?
• Now, to be politically correct, GBTI needs to justify from a prudential accounting standpoint why was Property Holding established as a subsidiary? Why are they engaged in the business of buying and selling gold? Are they not competing with their customers, which is unethical and why is this even allowed?
The bank is already not being managed prudently, why shift focus into businesses that are not aligned to that of core banking services? Is it a case where Property holding was set up to aid the process in valuation fraud in favour of its majority shareholders by inflating values of properties and selling to them at undervalued prices? These are questions that warrant answers and clarity from the bank.
• The bank is also in breach of strict governance control embodied within the Financial Institutions Act–that is, it has been operating without a substantive CEO for over one year now. When will the Board of Directors appoint a new CEO?
Editor, in the spirit of this missive, the minority shareholders are encouraged, like Mr. Bulkan suggested, that they must seek the services of a professional and independent accountant and demand the regulator to engage a forensic audit of GBTI.
If the bank continues on this trajectory, it will certainly not be healthy for its long-term viability and sustainability. This is at minimum, worrying at this point.
Yours sincerely,
Banking & Economic Analyst.
Name & Address Supplied

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