Mergers

We still have not been told why the Eastern Caribbean Central Bank is suggesting that the National Bank of Anguilla needs to merge with the Caribbean Commercial Bank.  In frustration at the lack of published information I have been doing a little digging.  Someone suggested I have a look at C Hoare & Co.  Hoare’s, like the National Bank, is a small bank.  Neither deals in derivatives.  Both provide private banking, financial planning and investment services that include loans, mortgages, savings accounts and investment advisory services. 

Hoare’s 2008/2009 accounts have been published.  So have NBA's accounts.  Hoare’s has just ₤1 billion in assets.  NBA has just EC$1 billion in assets.  The international recession started in December 2007, and hit both banks simultaneously.  Hoare’s profits show a decrease from 2007 to 2008.  Profits went down from ₤17 million the previous year to ₤15 million.  NBA’s went down from EC$19 million to EC$17 million.  The ratio of fall in profits is astonishingly similar.

Hoare’s was founded in 1672, some 20 years before the Bank of England (founded 1694).  Hoare’s is the oldest private bank in the UK.  It is considered a very successful bank.  Yet, it is tiny by comparison with other British banks.  It has survived one financial crisis after another, while the banking behemoths around the world were failing. 

It does not matter how small a local bank is.  All that matters is how carefully it is managed.  If it is not carefully managed it does not matter how big it is, it will still fail.

So long as any small local bank is taking two-thirds of the profits each year and putting them into reserves, it will do well.

This assumes that it is not making too many dodgy loans.

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