By Al Edwards, Business Co-ordinatorONE of the country's leading indigenous financial institutions Dehring, Bunting & Golding (DBG), has taken the decision to steer its business more toward individual investors and bolster its share capital.
At an Annual General Meeting (AGM) held last Wednesday at its corporate headquarters located at 7 Holborn Road, Kingston, a resolution to increase the share capital from $25.1 million to $120.1 million by the creation of 950 million new ordinary shares of $0.10 each was approved. The objective here said DB&G partner Mark Golding is to have ample capital for potential deals and possible mergers and acquisitions, and to also take advantage of the price right now. A bonus share issue for shareholders on record as of December 10, 2003 was also approved. Executive chairman and chief executive officer Peter Bunting, in a statement to shareholders declared, "In light of the realities of the market, DB&G's strategic growth was grounded in expanding the reach of our financial solutions to individual investors. Indeed, we took the decision to shift the business base of the company from an over-reliance on corporate clients to an expanding concentration of individual clients.
"Our experience has been that individual customers tend to provide a more predictable and reliable client base, largely because of their longer term investment objectives and stronger loyalties. Over the past few years, we have successfully reduced this reliance from 70:30 corporate to individual clients, to 43:57 at present. We intend to pursue this initiative until individuals make up 75 per cent of our business base, which should further boost our profitability and enhance the stability of our business."
DB&G now has assets under management of $22 billion. This is impressive when one bears in mind that in 1998 it had assets under management of $5.4 billion and has recorded a growth in net revenue of 23 percent for the six month period to September ($443 million). Net profits also grew by 32 per cent for the six months to September, recording a figure of $173.2 million. Return on equity remained at 40 per cent, the same as the previous year's figure. A very important point to note when focusing upon DB&G's operations is that back in 2000, 60 per cent of its business was dependent on Net Interest Income (NII). Today NII represents only 38 per cent of DB&G's net revenues.
SHAREHOLDER VALUE
Mr. Bunting took the opportunity to outline the Group's objectives with the primary one being to improve shareholder value.
He said the Group was now aiming to:
1. Achieve and maintain a return on average equity of at least 29 per cent.
2. Continued improvement in profitability.
3. Alignment of DB&G's trading multiples with the industry.
He stressed that emphasis will be best in providing customer intimacy, an area where it is more than capable of taking on its bigger competitors. To this end DB&G will be introducing new products and services such as US$ mutual funds, its "A" accounts and Internet banking.
The Group will be looking to external markets, more notably the region. Contrary to media reports, the Group will not be looking to list on the Trinidad &Tobago any time soon. Rather, the chairman made it clear that DB&G would launch products with regional companies in order to gain a presence in those countries. As to listing, he made it clear that that was a subject that would be considered somewhere down the road with the emphasis to be placed on registration of unit trust products in Trinidad.
Returning to its local operations, DB&G will be undertaking a renovation exercise of most of its branches. Over the financial year, two new branches were opened in May Pen, Clarendon, and Portmore, St. Catherine respectively. During this year DB&G Merchant Bank and Issa Trust and Merchant Bank gained BoJ approval to merge and now has $1 billion in assets. Its primary focus is making loans and taking deposits. Mr. Bunting said at the AGM that the intention here is to concentrate on growth and that the Merchant Bank with 11 employees will be aggressively looking to gain greater market share.
BANKING SYSTEM
The implementation of new technology sees DB&G spending US$300 million on a banking system called Bank Master with the core system taking care of investments and foreign exchange. Bank Master Plus which sits on top of the main engine will take care of unit trusts, stockbroking and the teller module. To put this system in place from scratch would have cost the group approximately cost US$1.2 million.
