Posted by: nastylittletruths | December 3, 2011

Stingy Bankers & CEOs

On a Saturday morning I may splurge and buy a newspaper (it will be the Guardian just to read Skews by Paolo Kernahan as a bonus), and I did that today. What caught my attention was not the Keith Rowley story ripping to shreds the whole assassination plot ‘hoax’, but the various financial and economic stories.

The first one was about Prestige Holdings buying out the local franchise for Subway. Now I’ve always liked Joe Esau ever since he was at BWIA because he’s a bright guy – one of Trinidad’s best, but the company he runs is reputed to be the cheapest when it comes to paying dividends. Now if you can bet on one stock in Trinidad, it’s Prestige Holdings because KFC outlets are always booming. But in a pre-emptive strike to any shareholders who may be looking for some dividend payout, read some the language  – even though the parent company is making 7.5% on a ‘loan’ while the seller offered an interest free loan of TT$45m…

“As soon as it is practicable, PHL will review the Group’s combined capital structure, to determine the optimal debt to equity ratio, and take appropriate action on its capitalisation.” Prestige Holdings said that the acquisition is estimated to provide an increase in earnings per share on a standalone basis, and improving as the restaurant holding company “implements synergies and takes advantage of the Subway Brand’s continued growth and development in Trinidad & Tobago.” It is estimated that the transaction would add approximately $170 million to the sales of Prestige Holdings, in the company’s financial year 2012 while adding $12.7 million to its net after tax profit, before factoring in interest cost on the acquisition financing.

“ Meanwhile, Prestige Holdings chairman Joseph Esau issued another statement in which he said that the company was in discussions with three possible purchasers of its 50 per cent stake in a HFC joint venture in the Dominican Republic. “The carrying value of this investment is $29.5 million, and we expect a significant impairment of our investment; as a result the Board agreed that an appropriate provision will be made in PHL’s financial statements for the year ending 30 November 2011”

http://www.guardian.co.tt/business/2011/12/03/subway-sold-110-mill

After all is said and done, he’s saying that all is not nice and rosy. But that’s shareholders, not Victor E Mouttet Limited…

Second story is Jwala Rambarran exhorting views that the banking sector has not been contributing enough to local economic development as Richard Young of Scotiabank has admitted to telling the Minister of Labour in a recent meeting that, “the banking sector was not responsible for the development of micro businesses…” (Unfortunately this story is not on the online edition to link to).

This has been a sore point about bankers in Trinidad for many years because for all intent, they are nothing more than parasites feeding off the growing organisms that we call businesses. And just as parasites will flee from a corpse, so too they leave struggling companies to fend for themselves. As a private and non-business customer of banks here I have a wry laugh when I get my statement every month where I earn TT$0.12 in interest, but they charge me TT$36.oo in ‘service’ charges. You have to pay to have an account at any TnT bank.

So while I get fractions of a percent for my money that they use (and charge me for the ‘service’of doing so) their spread in rates has been a source of comment throughout this hemisphere. This is a fact. Trinidad banks have the widest spread between rates in the entire western hemisphere. The logic of service charges paying for my online transactions also doesn’t make sense because the banks are saving money by not paying people to do things I do myself. It’s all electronic and paid for itself by now, unlike an employee you pay for 40 years…

Third story was also taken from the same conference Jwala was speaking at, but this time the banks were boasting (Richard Young again) that while they are criticised for not taking risks, their customers feel comfortable placing their savings at his bank. Really? Comfortable? For fractions of a percent? While I agree that a balance must be found between risk and reward, the evidence is overwhelming when it comes to our banks. They have no interest in being there at the beginning of a venture that could sustainable and beneficial to our economy (unless is a ‘pardner’ they are lending to), will approach you if success comes to suck some of the profit for themselves and will declare millions for themselves every year.

The strikes in England this week was instructive and the words of one guy rang true: the workers did not cause the problems the economy is faced with today, but their government is making them pay for it. It was time to stand up and say enough is enough. Public companies and banks in Trinidad want to make all the money for themselves without paying a reasonable return on the capital that they employ and that is plain wrong, or outright robbery.

But then again, we like to wine and wave for politicians who are supposed to protect us from these legal bandits…

 

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Responses

  1. Taking it up the nether hole. I agree with you all the way…


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