RBC to sell Suriname unit with an expected loss of $23-million

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Royal Bank of Canada is selling its subsidiary in Suriname, marking another step in the bank's continuing effort to its refocus its operations amid challenging conditions in the Caribbean region.

RBC did not disclose financial terms in the sale, but said that it would result in an estimated loss of $23-million, related to a writedown in goodwill and other intangibles acquired when the bank entered the market in 2008.

"We want to make sure we're operating in markets where we can be a leading competitor in the market and where we see opportunities for growth," said Kirk Dudtschak, head of RBC Caribbean Banking, in an interview.

RBC unloaded its Jamaican operations in 2014, taking a $100-million hit, and shuttered its wealth management division in the Caribbean.

More broadly, Bank of Nova Scotia and Canadian Imperial Bank of Commerce, also big players in the region, have taken large writedowns related to residential mortgages as the Caribbean economy struggles to adapt to a weak tourism industry and lower commodity prices.

According to The World Bank, Suriname's resource sectors account for 30 per cent of the country's gross domestic product. Gold and oil are among the most important resources, but both commodities have fallen sharply from recent highs.

Mr. Dudtschak called the Caribbean economy "very challenging" and said this environment is driving RBC's efforts to restructure its operations there so that they remain profitable.

But he added the economy is not driving the bank's overall strategy, noting that RBC remains active in Barbados and the Eastern Caribbean, even though the region is one of the most affected by the economic downturn.

RBC said its exit from Suriname is part of a strategy designed to concentrate on markets where it believes it can dominate, especially in corporate banking.

These regions include Bahamas, the Cayman Islands, Trinidad and Tobago, and Dutch Caribbean countries, such as Aruba and Curacao, where restructuring over the past two years has entailed consolidating branches and streamlining back-offices to improve efficiencies and credit writing standards and manage distressed assets.

There are no plans to leave other markets in the region, he said. "Our main focus is to reposition the business for the long term, and ultimately ensure that we establish a leadership position in the countries that we're in."

As for expansion into Cuba, RBC said there were no immediate plans to enter the market after normalized relations with the United States opened up business opportunities there.

"It is a market we are watching closely, at a minimum to understand the impact it could have on other Caribbean countries – obviously more tourism-dependent countries," Mr. Dudtschak said.