First Citizens Bank intends to grow its market share rather than increase fees to compensate for the five percent increase in corporation tax which all banks must pay from next year.
In his 2017 - 2018 budget presentation, Finance Minister, Colm Imbert announced that "consistent with the need to spread the burden of adjustment across all sectors, including wealthy corporations, I propose to introduce a new tax bracket of 35 percent for commercial banks. This new tax bracket on chargeable profits for commercial banks will take effect from January 1, 2018."
Asked to comment on this yesterday, Chief Executive Officer (CEO) of First Citizens Group, Karen D'arbasie, noted that Imbert and Prime Minister, Dr Keith Rowley, have both spoken of the need for the country as a whole to share the current economic burden.
As such, "the increase in corporation tax for the banks is something we're going to have to live with."
D'arbasie reminded that, "contrary to popular belief, First Citizens does have minority shareholders and we do need to look after the interests of those shareholders."
Hence the bank's focus on "improving our efficiency, keeping our cost structure down and improving our revenues".
D'arbasie was responding to a question about the five percent increase in corporation tax on banks; from 30 percent to 35 percent, while speaking with reporters following the formal rebranding of the Carlton Savannah hotel as The BRIX, a member of Marriott's Autograph Collection hotels.
Some have expressed concern that banks will pass on the tax hike to their customers via increased fees and charges. D'arbasie said "corporation tax is only one of the cost factors" which banks take into consideration when making decisions about fees and charges.
She noted that First Citizens has not increased its fees and charges "for a number of years". "We understand the nature of our customers and we are going to work to see how we can continue to work with our customers in a most efficient manner possible."
Pressed about the possibility that this could mean a fee adjustment in 2018, D'arbasie said, "We haven't made a decision yet."
She then reiterated that First Citizens continues to focus on its efficiency "in order to impact our bottom line."
Regarding the tax rate possibly leading to a lower dividend payment to shareholders, the CEO said, "The tax hike will, by force, mean a lower dividend if we don't do what we plan to do - increase our revenues and make ourselves more efficient."
"If you look at what we've been publishing on a quarter on quarter, our efficiency has actually been improving. That is something we will continue to focus on."
Asked how the bank intends to increase its revenues if not by increasing the margin or fees, D'arabsie replied, "By taking (market) share. That is our focus."
"We are in a market that is restricted; from a size perspective, and we are being very competitive. We are, as you would have seen from our ads...we've launched our campaign for Christmas and we are very carefully focused on increasing our market share where we can," D'arbasie said.