Recommendation: have their existing presence in the Caribbean
Recommendation: CIBC and Barclays Bank PLC should merge their retail and corporate together in order to gain more economies of scale as well as to achieve more of an organic growth. Reasons to support recommendation: •Both financial institutions are operating in the banking industries. With this horizontal merger there is a high chance of growth potential due to the fact that there is a great synergy that exists between the companies since they are involved in the same line of business, with relatively same processes and policies.
Both institutions have their existing presence in the Caribbean market-CIBC since 1920s and Barclays since the colonial times. Barclays serves 14 Caribbean countries while CIBC only 8. With the help of the merger the companies will be able to have access to more countries and markets than before.
This is especially important for CIBC since they have less Caribbean presence. •Both companies have great values within their companies.The net income from operations for both banks was relatively the same – CIBC had a little bit less in income and total assets than Barclays.
Also, by looking at the financial statements for both banks it is notable to see that there is a growing trend in their incomes and as well as in customer deposits over the years. The combined value from the merger will create a greater customer base as well as shareholder value. Chances of success in those countries would be higher if the banks merge, rather than operate individually. Competition is intense, with the best performer being Royal Bank as well as other establishing local financial institutions.
•Inefficiencies and overlaps that might exist within the organizations of those banks would be reduced with the merging of the knowledge and processes of both institutions. •CIBC has low returns and credit risk management in Jamaica.If the merger takes place the credit sales in Jamaica would increase since Barclays’ IT has strong client relationship building system as well as gateways to MasterCard and VISA networks. •Benefits from the access of different technologies from both institutions.
CIBC has newest technology in the region, but does not reach full efficiency with the current operations. With the merger, there would be an expansion of the regional operations and the use of the technology would be used to the full capacity.