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Features - July 2008



The Bahamas Investor

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People’s bank hits $1 billion

People’s bank hits $1 billion

100 per cent Bahamian-owned Commonwealth Bank boasts solid track record and impressive returns

The Bahamas Investor Magazine
July 3, 2008
July 3, 2008
Shonalee King Johnson

Commonwealth Bank brought banking to the people from the very start. Opening at the rear of a furniture store in Nassau in 1960, the bank assured easy access for customers. Today, 10 branches are strategically placed in urban and commercial districts throughout The Bahamas.

Dubbed the ‘financial partner’ for working-class Bahamians, Commonwealth Bank built a solid profit margin based primarily on consumer lending. In January 2007, bank assets topped $1 billion—the first Bahamian-owned bank to hit this milestone.

In 2000, a successful IPO offering three million shares at $6 per share grew the bank’s ownership base from just under 100 to more than 7,000. The new shareholders included a broad cross section of present and former staff members, Bahamian straw vendors, taxi drivers, attorneys and business owners. Many were Commonwealth Bank customers whose investments nearly tripled as share prices topped out at just above $16 in 2007.

For Timothy Baswell Donaldson, former governor of The Central Bank of The Bahamas and Commonwealth Bank’s current chairman, there “really is no secret to our success. We targeted a market that the banks before us [had not].

“[Bahamians] were intimidated by the foreign banks. A lot of Bahamians had no collateral. They came to Commonwealth Bank and we introduced the idea of taking a chattel mortgage over a loan.”

History is made
In 1960, Sir Roland Symonette, The Bahamas’ first premier, founded Commonwealth Industrial Bank with partner Peter Paul Saunders. At the time Saunders was at the helm of Laurentide Financial Corporation.

The new bank formed by Symonette and Saunders continued to operate as a subsidiary of Canadian-based Laurentide Financial Corporation Ltd. Management hand-picked Bahamian Earle Grey Sands to head the new venture.

In the early days, Sands operated from the accounts receivable department at a furniture store in the commercial district of Palmdale. When Sir Roland died in March 1980, the National Bank of Canada owned two-thirds of Commonwealth Industrial’s shares. The Symonettes owned the balance.

In 1983, Lady Symonette, the widow of the late Sir Roland, and her stepson businessman Robert H  ‘Bobby’ Symonette began the process to “Bahamianize” the bank. They were confident that a 100 per cent Bahamian-owned bank with local business as its primary market could thrive. The Symonettes pooled a group of 24 Bahamian investors and purchased 71 per cent of company shares in 1984, forming the new Commonwealth Bank.

The bank introduced the first Bahamian credit card, Sun Card, in 1986 and in 1990 it became a full-service clearing bank. Bobby Symonette served as bank president from 1984-1992, growing the fledgling Commonwealth Industrial Bank from $15 million in assets to $315 million. After he retired from the day-to-day operations, he assumed the role of bank chairman until 1998.

A financial partner
Access to simple financing for home furniture, vacations, educational loans and automobiles changed the standard of living for lower and middle income Bahamian families. Commonwealth Bank became known as the ‘financial partner’ for the working class and the bank soon developed a loyal customer base.

“These people who were not considered at the high-end of society, who couldn’t afford to go to other banks came to us. Now the benefit from that is they have stuck with us. Commonwealth Bank came in and said ‘[they] may be on the margin but they are decent, ordinary Bahamian people and they deserve to be able to have some of the things that they want’.”

Corporate executives at Commonwealth Bank relied on instincts and faith in the local economy. They also based business strategies on the knowledge of the socio-economic conditions that had an impact on the majority of Bahamians who fell into the targeted demographic. That strategy continues to pay off.

According to the chairman, that basic premise was: “The people who pay their bills are the very same people we are dealing with. The ordinary person in society is a decent human being and they believe in paying their bills. We are not in the business of taking people’s lives down; we want to help people [get] along.”

As its customer base and assets grew, the bank ventured into more traditional home mortgages and small business loans but its core market remains consumer and education loans. Investing in the local economy is a large part of the bank’s community-minded business approach. With full operations in The Bahamas, all of Commonwealth Bank’s profits remain in the local economy.

“As we grow we think that the community which has supported the bank should also profit from what we are doing and that’s basic to our philosophy. We wanted to get our customer base in on the 2000 IPO so they could now share in the profitability of the bank,” says Donaldson.

In 2007, Commonwealth Bank invested $20-40 million in small business loans, a risky venture geared towards growing the local business community. Corporate sponsorship and donations to civic groups and educational endowments shapes Commonwealth Bank’s image as the bank for Bahamians, by Bahamians.

Growth spurt
Donaldson assumed the role of chairman after Symonette’s death in 1998. Under Donaldson, bank president and CEO William B Sands Jr and their management team, Commonwealth Bank’s stellar growth rate in the past decade has moved the bank from assets near $350 million to solid earnings over the billion-dollar mark. Third quarter earnings in 2007 reported a net income of $36.4 million, marking a 25.4 per cent increase over the same period in 2006.

By late 2007, the bank’s billion-dollar figure grew by 11 per cent. Current assets stand steadily at $1.2 billion. During a strong third quarter in 2007, Commonwealth Bank directors voted for a 3-1 stock split. This move to triple holdings was overwhelmingly approved by shareholders at the company’s general meeting in October 2007. Increased profitability rewards the bank, its shareholders and loyal customers.

For Donaldson, balancing fiduciary responsibility with social responsibility is key to any bank’s success. “When you take a national resource like people’s savings it should be spread as widely as you can among the community and the community should profit from it. A bank is really just an honest broker.”

Continued expansion
Commonwealth Bank continues to expand, placing branches outside of the city centre to meet the needs of more than 50,000 customers. Their latest addition is in the Golden Gates Shopping Center in the growing commercial district of southern New Providence. Commonwealth Bank is the first commercial bank to venture into this part of the island.

Donaldson commented: “We are not in any traditional places. You’ve got to take the bank where your customers are. [Golden Gates] is a growing part of the island and our view is that they deserve the best.”

What started with three employees working out of a small office in a furniture store has grown into more than 400 staff members in New Providence, Grand Bahama and Abaco. Commonwealth Bank prides itself on outstanding customer service and a congenial banking environment.

Extensive training has been a benchmark of the bank’s modern management team. “Training is ongoing and we realize that. You can’t have people working in an industry where they are not trained. It leaves them exposed,” says Donaldson, an original director behind the Bahamas Institute of Bankers, a training resource for financial service industry professionals.

Commonwealth Bank’s management team leads by example. President William B Sands, Jr and other members of executive management participated in executive development training at the University of Western Ontario’s Richard Ivey School of Business.

School dean, Carol Stephenson is impressed by Commonwealth Bank’s commitment to leadership development. “[We have] had the opportunity to work with future leaders from Commonwealth Bank over the past ten years,” she says. “These men and women have shown great personal commitment to develop their management and leadership skills.”

With bank assets and customer base on the rise, Donaldson is optimistic when looking at Commonwealth Bank’s next 50 years. And even though the bank operates entirely within The Bahamas, it continues to compete with international banks, some of which have had operations in The Bahamas for more than 100 years. With a 50-year head start it’s easy to see why management is pushing for a global mindset within the organization.

“We live in a globalized world,” says Donaldson. “We cannot only think of The Bahamas. We are competing with lots of developed countries so we cannot afford to have third world banking. There is no such thing. Banking is first world, no matter where you go.”

Lifetime achievement award
At the end of 2007, T Baswell Donaldson, CBE, received the Financial Services Industry Lifetime Achievement Award in recognition of his sustained, outstanding contribution to the growth and development of the Bahamian financial services industry. The award was presented during the seventh Annual Financial Services Excellence Awards banquet in October.

Wendy Warren, Bahamas Financial Services Board (BFSB) CEO and executive director, commented that “the BFSB is pleased to salute an industry pioneer whose decades-long career has influenced every aspect of financial services in The Bahamas.”

The BFSB also awarded the 2007 Financial Services Development & Promotion Award to Commonwealth Bank Ltd for its commitment to Bahamians and the ongoing development of the local community.

Donaldson has also been named as head of the Bahamas Telecommunications Company’s privatization committee, which is charged with advising the government on the public entity’s privatization process.

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