Royal Bank of Canada To Exit Jamaica Market
Royal Bank of Canada (TSE:RY, Market cap 99.38B, P/E 12.43, Dividend/yield 0.67/3.89, EPS 5.54, Shares outstanding 1.44B) has decided to divest of its Jamaica-based business to a rival financial firm in a transaction that will mark its exit from a market where it has found it challenging to compete (given their small footprint in this market.)
Toronto-based RBC, Canada’s second-biggest bank by assets, said it would sell RBC Royal Bank (Jamaica) Ltd and RBTT Securities Jamaica Ltd to Sagicor Group Jamaica Ltd in a move expected to ensure the long-term success of the business. The sale to Sagicor is the most reasonable decision in view of the buyer’s “size, scale and complementary capabilities” that RBC Jamaica doesn’t have at present, according to the Canadian lender. Nevertheless, it will remain committed to the Caribbean region and concentrate on countries where it has larger market share, RBC added.
RBC did not disclose the size of the deal, saying only that it would be equal to the book value of the business. The lender expects to record a $60 million after-tax loss on the divestment, mainly as a result of a goodwill write-down and other intangibles acquired when it bought the units in 2008.
With the sale, RBC joins a string of Canadian banks doing business in the Caribbean that have taken steps to overhaul their operations in the market, including Canadian Imperial Bank of Commerce and Bank of Nova Scotia. All three banks expressed concerns about the currently unfavourable state of the market when reporting their results for the most recent quarter.
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