The Gleaner - June 30, 1999

FINSAC pumps $2.2b more into Union Bank

THE FINANCIAL Sector Adjustment Company (FINSAC) has pumped in another $2.2 billion to shore up the capital base of the new Union Bank of Jamaica, the merger of four failed local banks.

Union chairman Dennis Morrison, Q.C., said yesterday the new capital, in the form of more FINSAC bonds, should be enough to recapitalise the new bank and meet stricter Bank of Jamaica (BoJ) regulations.

Yesterday marked the last hurdle in the introduction of the new bank when Citizens Bank shareholders, several reluctantly, agreed to change the name of the first Jamaican-owned bank to Union Bank of Jamaica Limited at the Citizens Bank Annual General Meeting (AGM).

The accounts for 1997 and 1998 were also presented at the AGM. The operations of Workers, Island Victoria and Eagle Commercial Bank have already been transferred to Citizens which, as of yesterday, officially became Union Bank.

The news of more FINSAC aid to help restructure the combined operations was expected as the cost of combining four ailing operations and meeting BoJ regulations became clearer.

At yesterday's meeting shareholders agreed to issue FINSAC another 1.485 billion ordinary shares at $1.90 per share. Although more than $2.8 billion in new shares were authorised for FINSAC, the Government restructuring company will only take up $2.2 billion at present with the remaining shares left unauthorised.

In May 1997, FINSAC acquired 60.2 per cent of the ordinary shares of Citizens from Life of Jamaica. This had risen to a controlling interest of 84.2 per cent at the end of December 1998. The latest increase in authorised share capital pushes FINSAC's holding in the newly-named Union Bank to 99 per cent.

As part of the assistance to Citizens, which has subsumed a range of other operations including the failed Horizon Group, FINSAC has given the bank almost $6.4 billion of bonds as at the end of December 1998. Much of this quasi-government paper was in return for taking on board the liabilities of the Horizon Group and others. FINSAC also owes Citizens Bank interest on the bonds of about $1.4 billion.

Two weeks ago, the Financial Gleaner revealed the total amount of securities outstanding by FINSAC stood at almost $93 million at the end of May 1999. A week before it reported Citizens had posted a $986 million net loss in 1998, after provisions totalling $488 million. Citizens also chalked up a $132 million net loss in the first three months to the end of March 1999.

At yesterday's AGM, auditor PriceWaterhouseCoopers was also replaced by Deloitte & Touche as FINSAC moved to reconcile the production of accounts of the entities under its control.

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