Just Speculating...

Astute financial watchers have been noticing a trend on the local market with one stock in particular whose trajectory is not in keeping with the existing flatlined market trends and is suggesting to them that something big may well be afoot. This movement is adding fuel to the fire as there are strong rumors making the rounds of an international financial consortium that may be about to make a move for control of Republic Bank Limited, and if the sudden and steady increase in the value of that bank's shares over the past couple of weeks are indicative of anything to go by, there may well be some truth to this.

Compounding this further, there is talk of a possible government agreement (through the Ministry of Finance) to divest its shareholding (the 53% of the total one hundred and sixty million Republic shares issued that it controls through CLICO/CL) at TT $100 per share, and if this is indeed so then this could be a deal worth roughly 8.5 billion TT dollars to the government's coffers at a very opportune time, with many in the know speculating that it is already a fait accompli with the deal set to occur over the next couple of weeks.

Now if this does in fact happen as suggested, what it could mean to the government in the immediate term is that it would find itself in a position where it could pay off all creditors/investors/policyholders/shareholders and any others who may have claim to the failed insurance giant through the sale of just one asset, leaving itself in full and complete control of the entire group debt free and cash strong.

 

Such a turnaround must seem almost magical in what it could mean for the government, as any and all development and divestment plans for the Company will now be theirs and theirs alone to make; the cost of ridding itself of the negative surrounding the debt burden will be surely considered as money well spent, and this one move could have the effect of buoying both the economy and the government's fortunes simultaneously. 

There are some in the financial sector who are not so sure and hot on the heels of the recent RBTT takeover, have expressed concerns over the return of foreign ownership to our banking sector specifically in a time of depressed values and global economic downturn. They point to the lack of controls where social planning and development of people policies are concerned, essential to stability during times of recession.

Others are more optimistic (even if cautiously so) that this could be a win win for the government and the people of Trinidad & Tobago if handled correctly. They point to the fact that State owned First Citizens Bank and the Unit Trust Corporation can be considered immensely strong and freed of the CLICO/CL burden at this time could be considered poised for growth; they suggest that instead of focusing on possible negatives they should in fact  be looking for ways to maximize these opportunities and safeguard the economy.

Business is business, and if the Government finds itself with the means to direct policy through social issues such as home ownership and small business development, then these two institutions should be utilized to control the home mortgage market through the introduction of low interest loans to first time first home owners, as well as soft loans to and lines of credit for start ups and established entrepreneurs.



As few things have the power to stimulate the economy and regulate the society positively the way home ownership can, this opportunity to lead from in front should not be squandered. At the end of the day, the people of this country needs strong decisive leadership to keep it out of the grips of recession, and this event, should it take place as rumored, will go a long way towards making that a reality.



As of this writing Republic Bank shares are priced around ninety four dollars, and while nothing in investing could ever be considered a sure thing, if the takeover is going to be announced at TT $100 as rumored, this could be a wonderful opportunity for serious investors and first time speculators alike.