BUSINESSES CLOSE BUT REPUBLIC BANK’S PROFIT SOARS

IN a country in which businesses are collapsing and people are losing their homes and cars, the country’s largest bank has announced a 33 per cent increase in profit. 

The $1.036 billion nine-month profit of Republic Bank flies in the face of the weak state of the national economy and of citizens’ personal finances. 

Republic’s profit is 33.3 per cent higher than the $774.3 million of the corresponding previous period. 

What gives? 

The increased profit was attributable to several factors, said Chairman Vincent Pereira, including “lower provisions for loan losses…” 

So, the bank saw fewer non-performing loans in a period when business enterprises were shut down and workers lost their jobs as a result of Covid-19? 

Is this a sleight of hand? 

Well, the Trinidad and Tobago Government did not introduce strict policies for banks to grant moratoriums, renegotiate loans, lower interest rates and offer other critical support to financially struggling customers. 

This was in sharp contrast to many countries, which implemented specific measures. 

For example, the Bank of England – that country’s Central Bank – set out incentives that financial institutions must provide to clients, especially to affected small and medium enterprises and householders. 

Small businesses were required to keep workers on the payroll for a stipulated period. 

The Bank of England provided guarantees for small loans. 

Banks were made to reduce interest rates. 

In turn, the Bank of England cut the amount of capital that banks are mandated to hold in support of their lending. 

Major banks in England and certain other countries announced that they would suspend the payment of dividends and bonuses to shareholders for a period of time. 

The banks offered larger overdrafts and other support measures. 

The chancellor of the Bank of England warned financial institutions not to profiteer off the pandemic. 

Parliaments in some countries debated the relevant financial policies. 

In Trinidad and Tobago, the authorities merely sought to use persuasion with banks, and then left the institutions to treat with their clients in whatever way they choose. 

The government reduced the reserve requirement and repo rate, and then asked the Central Bank “to provide stability to the financial system,” according to Finance Minister Colm Imbert. 

The result was that banks responded in individual manner to each client, based on their own circumstances and their financial requests. 

Some banks lowered credit card interest rates and granted other provisions for a specified period. 

There were no far-reaching government-ordered policies, as obtained in other countries. 

The arbitrariness in the local system led to many bank clients complaining about onerous conditions and their inability to service their debts while the economy was essentially shutdown. 

That hastened the closure of many small businesses and the inability of retrenched workers to repay home and car loans, and to meet other commitments. 

It is generally agreed that the private sector is in its weakest state in many years. 

Many longstanding entrepreneurs have gone out of business. 

Pereira made no mention of shareholders giving up their dividends and bonuses during this period, which means investors would smile all the way to Republic Bank. 

The billion-dollar nine-month profit would provide significant returns to those investors. 

The bank’s chairman said that Republic would “maintain many of the concessions granted to our customers at the inception of the pandemic.” 

But from the evidence, are those concessions enough from the country’s largest bank at a time of national crisis? 

Are Republic and other banks responding adequately to the national financial emergency? 

There have been repeated anguished calls for the government to intervene in order to save businesses and jobs. 

Whatever the government’s belated intervention, the fact is that Republic Bank has made a record profit at a time when customers are facing financial ruin.