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“Banks in Trinidad and Tobago are blessed,” says Sekou Mark. It may be an intriguing statement, given the current global economic crisis to which some of the biggest banks have fallen victim. More intriguing perhaps is that the man making the statement is a banker himself. He is the General Manager of Corporate Banking at First Citizens Bank, the highest rated indigenous financial institution in the English-speaking Caribbean (BBB+ Standard & Poor’s) and winner of the World Finance Award for Best Bank, Trinidad and Tobago this year.

Brandishing a broad smile and exuding a youthful confidence that speaks to his younger-than-average age for a top banking executive, Mark is sitting in his office overlooking the beautifully lush and serene Queen’s Park Savannah at the bank’s headquarters in Port of Spain. “We are blessed with a lot of liquidity which, in the current climate, can be a good thing but at times we have trouble trying to find places to invest that liquidity,” he goes on to state. It’s evident from that far from bemoaning the present state of the international banking sector, Mark is instead excited by the prospects of new opportunities and grand new projects for First Citizens over the coming months.

But what about the fact that Trinidad and Tobago has experienced some effects, albeit delayed, of the economic downturn? Local energy companies have suffered from reduced demand and fluctuating gas and oil prices, which have directly impacted their bottom line and led to significant job cuts. Local manufacturers who export to the many tourism-based CARICOM nations have seen orders dry up as foreign arrivals have slowed. Those that export to the US and UK faced markets that were pre-occupied with ‘buying local’ in order to save their own economies.

As far as the local financial sector goes, things weren’t looking too bright either. The collapse – and subsequent bailout – of the CL Financial Group by the Trinidad and Tobago Government sent shock waves across the Caribbean Sea, not least because the conglomerate’s four largest financial institutions were responsible for assets valued at more than 25 percent of the country’s GDP. The group was considered a Caribbean success story and had developed into the region’s largest privately owned corporation with subsidiaries in over 32 countries.

In spite of the doom and gloom forecast by pundits around the globe, Mark and his colleagues at First Citizens seem surprisingly upbeat about potential new prospects throughout the Caribbean and Latin America. Trying to grow a business in new markets in the middle of a global recession is quite a daunting task. But if there is anyone who can spot a silver lining in what must be the largest and darkest raincloud in almost a century, Mark is that person: exuberant yet measured in his remarks, and completely driven towards the accomplishment of the institution’s vision.
 
An orange lining
The first bright spot to come out of the CL Financial collapse was the acquisition of CMMB (Caribbean Money Market Brokers). Established in 2000, CMMB has become the largest full-service brokerage house in the Caribbean, managing assets of over $1.1 billion and recording profits of $11.1 million in 2008.

With headquarters in Trinidad and offices in Barbados, St Lucia and St Vincent and the Grenadines, CMMB has single-handedly created a vibrant secondary equities market, and has stayed true to its mission to ‘create, develop, educate and nurture the capital markets of the region’. Its distinctive orange branding and unique, free-thinking culture have allowed the company to carve out its own niche and attract a very loyal group of investors and staff.
Mark is clearly excited about the acquisition. “CMMB presents a great opportunity for us at First Citizens and one in which we have been interested in for quite some time. They have a great business model, a robust research arm and are young, energetic and entrepreneurial in spirit.”

When the largest full service brokerage house joins the highest rated indigenous bank in the English-speaking Caribbean, the result is synergy in every sense of the word. Each party brings something different to the table, they complement each other and are both excellent at what they do.

As far as Mark is concerned, First Citizens is the key to helping the brokerage firm realise its full potential. “In order for CMMB to blossom, the organisation needs two things: a ready and cheap source of funding. We can provide this.” With a capital base of $4bn, a capital adequacy ratio in excess of 18 percent and recorded profits at the end of fiscal-year 2008 of about $80 million before tax, First Citizens is well positioned to provide support if needed. But what does the bank get out of this deal? A strong, stable, well-respected brand with a loyal investor base and, most importantly, a presence in other Caribbean territories.

Although First Citizens has recently been involved in a number of landmark projects across the region including Sandals Antigua, Jamaica Energy Producers and LUCELEC (the St Lucian energy provider), in addition to a number of ventures in Barbados, it has generally kept a low regional profile. For Mark and the Corporate Banking Unit, the strategic alliance with CMMB translates into a regional network that provides opportunities to leverage the presence, contacts and on-the-ground expertise in these locations in order to discover new sources of business for the Group, so that in time First Citizens will become top-of-mind for large scale corporate and capital markets transactions in the Caribbean.
 
Why not First Citizens?
“We have the capabilities to compete on a global scale. We have a strong balance sheet, the liquidity we mentioned earlier, and a nose for credit – our delinquency ratio is consistently less than one percent compared to an industry average of three percent. We have proven ourselves in the local market and it is incumbent on us to grow the bank beyond the shores of T&T,” he retorts.

As he continues to speak, the justification for Mark’s confidence becomes apparent. “There are a lot of opportunities coming out of the recent global crisis that we are prepared to seize. Quite a number of very solid companies have lost access to good financing and have had their lines of credit pulled… good companies with positive cash flows and strong management that have become ‘victims’ of the downturn. We can provide what they need. If there ever was a time to make an impact and gain a foothold in a new market, this is it.”

Entering new markets is a bold move, but one which is not alien to First Citizens, which pioneered ATM and e-commerce in the Caribbean. It is countered by a measured approach to assessing clients and projects. “We have to be comfortable with the people we are working with, their track record, the regulatory and legal framework, the nature of the project, its viability and the social and economic impact.

“At the end of the day, yes, we look at the numbers but we also look at the people. Businesses will have ups and downs but at the heart of good relationships are good people. There is very little difference among the products that many banks offer. But there can be great differentiation and we set ourselves apart by the importance we place on human connections and our commitment to building strong relationships. Whether it is retail or corporate banking, a fixed deposit of $2,000 or a $200 million syndicated loan, it is the knowledge of our clients and mutual trust we enjoy that pay dividends over time, and which lead to success.”

This is the more culturally acceptable approach to conducting business in Latin America. Prior to joining the First Citizens Group in September 2008, Mark worked in Latin American and Caribbean markets during his tenure at the Inter-American Development Bank. There he was responsible for assessing the feasibility of and financing major infrastructure projects in the region.

With years of experience, a passion for the culture and a Blackberry full of contacts eager to do business with a progressive bank such as First Citizens, it’s no wonder that Mark chose Costa Rica as his point of entry into Latin America. Spurred on by the stable economy, the government’s progressive environmental outlook and the solid guarantees associated with financing major infrastructural projects – from power plants to toll roads and beyond – Mark considers it an ideal environment for First Citizens to establish a foothold in Latin America.

It is apparent that First Citizens embodies the resilient, ambitious spirit of Trinidad and Tobago. This spirit motivated the island to host the fifth Summit of the Americas this year, and to host the Commonwealth Heads of Government Meeting in October. Whilst many other organisations have become stagnant or retreated, this bank is moving ahead with purpose into new worlds, full of possibility.

For further information tel: +868 624 3178;
email: sekou.mark@firstcitizenstt.com;
www.firstcitizenstt.com

Size, says Margrit Schmid, is not the only criterion for success. But it does help indicate just how well a company is doing in its chosen marketplace. “In terms of premium volume, we are the leading global employee benefits network,” she says. “While size is not everything, our size does reflect how many multinational companies entrust their employee benefit solutions to us.”

Clients looking for answers to their employee benefit problems do not come to Swiss Life Network just because it is big, of course. Among the important pillars for Swiss Life Network’s success, Schmid says, are its totally customer-oriented and experienced multilingual employee benefit experts, and its modular system of solutions, which allows companies to determine the best plan to match their needs and risk appetite. “We offer best-in-class employee benefit solutions, which also include administration,” she says. “Our solutions include managing pension funds for multinational companies and providing large companies with captive solutions. Every client has a single point of contact within our organisation, which coordinates and organises all their benefit needs around the globe. Naturally, this is in close co-operation with our local network partners, each of which is a leading life and pension provider in their market. In every case, optimal and efficient administration is part of our solution.”

This network of local partners is an essential part of Swiss Life’s ability to offer companies global employee benefit schemes. “We work closely with our local partners who, like us, use state-of-the-art technological support to ensure the highest quality service,” Schmid says.

Beyond borders
In a world where state medical provision, state pensions, and state benefits vary so greatly between countries, inevitably national differences affect benefit plans across borders among an international corporation’s workforce, an issue that particularly affects expatriate workers. Companies need to ensure that they are fair to both expatriates and the local employees they work with. Here, Swiss Life Network can help. “Even within the EU we have 25 different social and labour laws,” Schmid says. “We base our solutions on best-in-class local solutions that are fully compliant with local laws, and attractive and competitive in the local environment. We then group these into a global solution that provides corporate headquarters with transparency and information. This includes regular reporting, and allows cost optimisation of risk coverages through multinational pooling.”

On the global level, a degree of equality in employee benefits across countries can still be achieved. However, this is through providing employees worldwide with the same categories of benefits, and not necessarily with the same level of benefits.

“Adequate solutions for expatriates are a special challenge. It is important for expats to ensure they have a solution that bridges any gaps resulting from working in different locations and not always qualifying for local solutions or vesting rights. Our expat solutions provide both risk cover and pension solutions, and help ensure that expats have decent risk and retirement benefits both during and after retirement, comparable to an employee with a similar career pattern, but always in the same country. In some cases, this can mean that in some countries an expat may receive more from the employer in terms of benefit contributions than a pure local employee, since social security and other state provisions must be considered differently.”

There is room in the system for expat workers to help themselves, however. “It is important that expats ensure they have a solution to cover any gaps resulting from working in different locations and not always qualifying for local solutions or vesting rights. As we work with modular solutions, we can ensure that every time an expat changes from one country to another, the modules – risk, health and savings – can be adjusted to the new environment,” she says.
All the same, the existence of, for example, “fringe benefit” taxes in certain jurisdictions, for example Australia, and the tax applied to benefits in countries such as the UK, mean efforts at complete equality are unlikely to succeed. “Given the different systems of social and labour law, as well as tax law and general living conditions, it is unrealistic to aim at absolutely equal treatment for employees across borders,” Schmid says. “What can be aimed at is comparable treatment taking into account the environment.”

“Legislation within the EU has ensured that there are no penalties if you move between countries, even if in the first country benefit contributions are tax efficient, that is, tax deductible, while in the second benefits are tax efficient. Tax optimisation is always a complex area. We provide transparency and information, but detailed tax planning has to be in the hands of the employer or the employees themselves.”

It is not always obvious from a Eurocentric viewpoint, but cultural differences – such as the expectation in South Asian countries and elsewhere that children will take care of their parents in old age – make a difference to the employee benefit solutions workers expect, something that Swiss Life Network has to tailor in. One problem, however, is that what parents expect today is not necessarily what children will want to be doing when they grow up, and pension provision and saving for old age, while far less important still in many cultures than they are in the West, are likely to move rapidly up the agenda in developing countries. “As we group best-in-class local solutions into one global solution, local customs are automatically considered in our plans,” Schmid says. “But we are certainly experiencing significant changes worldwide in relation to the expectation that children will take care of their parents and act as their pension solution. While the expectation is still there, ongoing globalisation and urbanisation, as well as the demographic revolution, are making it clear that this expectation cannot be met.

“Every individual needs a pension solution independent of their family and the next generation. In the West also, social security systems based on the so-called inter-generation contract [the expectation that today’s workers pay the taxes that cover the pensions of yesterday’s workers] are experiencing strong financial pressures.”

There does not seem to be a lot of evidence that, outside the obvious areas of differences in local health care provision and old age provision, employees around the world see benefits differently in different jurisdictions. “The importance of employee benefit solutions for employees depends on the level and extent of social security, the tax incentives available in relation to employee benefits, and last but not least, the economic environment and degree of development of the economy,” Schmid agrees. “People generally care most about daily needs and consumption, and only then look at protection against the financial consequences of death, disability and old age.”

Meeting demands
“In the current environment, however, we are seeing increased awareness of the issues and more interest in employee benefits and old age pensions. We listen very carefully to our customers across the globe, and constantly adjust our solutions to meet their needs. We also take an active part in discussions shaping the employee benefit industry.”
All the same, whether employees and employers prefer benefits in terms of rewards and incentives, for example extra holiday allowances for longer service, bonuses for good service, or they prefer basic “inalienable” benefits, such as pensions, medical cover, and so on, “depends on the country and its economic situation,” Schmid says. This is another challenge for global employers: discovering whether the people who work for them in a particular jurisdiction would like more cash or holidays, or whether they look for employee benefits covering death and disability, and a decent income after retirement. “From an employer standpoint, there is also the question of social responsibility,” Schmid says. “Firms need to make sure that employees are aware of the pension situation, and can participate in a second pillar pension scheme.”

Employers also need to look to the future, when the world comes out of the current recession, and skilled, committed workers start to get scarce again as employment picks up. “Employee benefit solutions are an important tool to attract and retain talented employees, and studies show that these can also have a direct positive impact on company performance,” Schmid says. For these reasons, “employers have a real interest in providing appropriate employee benefit solutions, and not just cash or longer holidays.”

For further information www.swisslife-network.com

When did your banker last recommend against an execution or transaction for which they are being remunerated?” This leading question awaits prospective clients browsing the website of Ondra Partners, one of a new breed of independent boutique offering “unbiased” advice to companies raising equity, debt or making acquisitions.
Senior bankers at established underwriting banks get angry at any implication they do not always work in a client’s interest and in turn question whether firms offering advisory services have the experience and knowledge to be of help to companies.

One senior banker at a London-based firm said: “These firms have very little to offer as they don’t have the day-to-day experience of the primary equity markets that you need to make the type of judgments they say they can offer. Frankly, they simply add another level of complexity and expense that is certainly not in the best interests of the client.”

In spite of complaints, there are signs companies in need of raising equity to strengthen their balance sheets and wary of getting it wrong, are frequently seeking independent advice.

Investment advisers Lazard and Rothschild have so far been the main beneficiaries of this, working on some of the largest European equity issues of the year, such as Italian utility Enel’s €8 billion deal as well as some of the more complex capital restructurings such as the £1bn equity offering by UK building supplier Wolseley.

These banks say there has also been a resurgence of demand from private equity sponsors wanting to float portfolio companies and from companies and investors considering ways to monetise their equity holdings.

Advisers must tread delicately so their involvement adds to the smooth running of their clients’ deals, rather than creating tensions with corporate brokers and equity capital markets bankers.

David Landman, a partner and chief operating officer for Europe at advisory boutique Perella Weinberg Partners, said: “An adviser should be an advocate for a company and its shareholders during an equity offering, not an adversary of the underwriting banks.”

One of the main jobs of independent advisers on the recent spate of rights issues has been to offer guidance on the structure of equity syndicates and the level of underwriting fees, in part because companies have been keen to make underwriters and bookrunners more accountable.

Underwriter input
Advisers have been asked to draw up underwriting contracts that restrict the banks’ ability to hedge their positions and to push for greater transparency about banks’ intentions to involve sub-underwriters. Some companies have wanted to take the opportunity to reward supportive shareholders via sub-underwriting fees and have also been keen to include creditors on equity syndicates.

Paul Gismondi, head of capital markets advisory in London at Lazard, said: “Equity offers are relationship building opportunities that don’t come about every week. Some companies have needed or wanted to include lending banks in an equity syndicate given that debt is a scarce commodity.”

The risks associated with higher equity market volatility and the weakened balance sheets of many investment banks have made fees a hot topic.

Advisers say there has been a lot of brinkmanship by banks attempting to drive up fees, while some have not been willing or able to commit to hard underwrite deals themselves.

Adam Young, joint global head of equity advisors at Rothschild, said: “The risk appetite of underwriters has varied considerably during the first half of this year and companies have wanted advice on the right line-up of banks to cover the naked risk in case a deal was not fully sub-underwritten.”

There has also been a trend for more unbundling of fees into a base fee plus incentive and discretionary elements and this has led to advisers being asked for their view on how the banks have performed when fees are allocated.

This quality control is important given that the banks with the greatest underwriting capacity might be over-stretched. One head of European equity underwriting said some of the strongest banks are having to leave relatively junior bankers in charge of smaller rights issues because their top bankers are in such demand.

Equity advisers also claim to have been playing a more strategic role at an earlier stage, advising on timing, alternative structures such as a rights issue versus equity placing and the right message about how the proceeds will be used on complex deals involving balance sheet restructuring.

They say preparation, particularly on deals that were not “plain vanilla” equity raisings, have helped get deals done faster with the best chance of success and less chance of leaks.

Gismondi said: “It is a market of windows so it is important that a company is not exposed to the market until it is absolutely certain that it wants to launch a deal. Independent advisers can begin the documentation process before brokers and other banks are brought on board.”

However, bankers at large underwriting firms say preparatory work done by advisers can sometimes be substandard and create more work for bookrunners.

One head of corporate finance based in London said: “We often find this when advisers have been given responsibility for preparing the equity story ahead of a deal. We’ll be brought in two weeks before launch and find ourselves with a plan that hasn’t been properly market tested and will have to spend a lot of time rewriting the proposal.”

The increased profile of independent boutiques clearly rankles with many equity bankers, who object to the implication that their views might be tainted by self interest, claiming many “independent” advisers are just investment bankers trying to make money from the recapitalisation process while there are no mergers and acquisition fees.

Nick Reid, co-head of UK investment banking at UBS, said: “Companies with strong and trusted relationships with their corporate brokers and investment banking advisers tend not to need support from anyone else.”
He said UBS’ corporate broking team offers a market view based on experience and relationships with shareholders, the advisory team comprises bankers who complement the broking relationship, undertake financial analysis and help brokers build the equity story, while the ECM team provides institutional relationships and execution expertise.

ECM bankers are also adamant their advice on equity offerings is the best because they are in the “flows” of the market day in, day out, speaking to institutional investors, gleaning information on trading activity and doing deals.
One head of ECM at a US bank said: “Equity advisory firms are only valuable as job creation schemes at a time of dislocation in the market. If you want culinary advice, you ask the chef who’s been tasting the food in the kitchen, not the person sitting in the dining room waiting for the meal to be served up.”