Lizardo swaps finance ministry for Banreservas
New CEO stresses continuity in state bank’s evolution; further bank recapitalizing poses challenge to private sector.
The choice of Simon Lizardo, previously minister of finance for the Dominican Republic, as CEO of Banreservas is a clear demonstration that president Danilo Medina wants to continue to use the bank as a tool for macroeconomic policy.
After assuming power in 2012, Medina moved quickly to reinvigorate the state bank and add a competitive dynamic to the highly consolidated and profitable banking system. Medina hired Enrique Ramirez from Citi to be chief executive. Ramirez revolutionized the bank’s focus and improved its systems and customer service – both in retail and in the corporate segments – to provide capital for key exporting sectors.
Speaking to Euromoney at the Felaban conference in Buenos Aires in November, Lizardo is keen to emphasize that he will bring continuity to the bank leadership as CEO. He says he will expand its financial support of key industries that has seen the bank’s credit portfolio shift from 70% public sector to just 19% in March.
“We are going to maintain our policy of supporting any sector that is productive – including agriculture, tourism, trade and industry – that helps to generate jobs and keeps the virtuous circle going between consumption and internal production,” says Lizardo.
One of his first actions since becoming CEO has been to open a branch in Monte Plata, an area home to many of the bank’s targeted industries: livestock, dairy, sugar cane and other agricultural products. Even before opening the new branch Banreservas had grown its loan portfolio in this area by 140% to RD$991 million ($21 million) since September 2015.
Lizardo also highlights tourism as a vital sector and says the bank will help the industry grow to 10 million tourists a year by 2020. The country’s strong macroeconomic performance has helped the bank maintain good asset quality, despite the rapid proliferation of lending to the private sector. Also, the strong government finances – which have been particularly improved thanks to the lower cost of oil as the island nation imports nearly all its energy needs – have meant that Banreservas has been able to retain earnings and boost its capitalization levels.
As finance minister, Lizardo was chairman of the bank’s board for almost four years before becoming CEO. He says the board is an active one and he was personally involved in the decisions made during Ramirez’s time as CEO, for example in key personnel hires and the choice of software to reconfigure the bank’s IT platform. As such, he expects little disruption from the handover, which happened in August and was accompanied by the bank’s new branding.
“There will be a continuation of everything that is happening at Banreservas, but at the same time I have my own vision about what we need to do to make customer service better and what we need to do to make the bank more productive and efficient,” he says.
Lizardo is also keen to keep Banreservas’ momentum in developing capital markets expertise. As finance minister he was involved in putting the bank on the mandate for multiple international bond deals that the Medina government performed during his administration to take advantage of favourable pricing and demand conditions in the international capital markets. Lizardo was also responsible for the Petrocaribe transaction, which lowered the country’s debt-to-GDP ratio by three percentage points.
In June, following Medina’s re-election with 61% of the popular vote, the Dominican Republic was able to tighten yields on a re-tap of its 2026, showing the differentiation investors place on the Dominican Republic’s economic performance. The economy is expected to grow by nearly 5.5% this year, before returning to trend (5%) next year. Investors were also impressed with the lack of fiscal slippage that accompanied the 2016 election, according to a report by Fitch Ratings.
In November, the IMF published a glowing Article IV report on the country. “The Dominican Republic remains among the most dynamic economies in the region, benefiting from a strengthened macro-policy framework and external tailwinds,” it said. “It does not face any significant internal or external imbalances: inflation is low, fiscal deficits and debt is moderate and the external position is broadly in line with the fundamentals.” However, the report did point to the island’s perennial problems of electricity distribution and its financial system.
In his previous position, Lizardo was also close to the development of the new banking law that is expected to come into force in 2017. The law will go out to public consultation in the next couple of months. Lizardo declines to talk specifics or how the bank might be impacted.
“We are working with the government to improve aspects such as corporate governance and transparency within the banking sector,” he says. “We have also completed our initial capitalization programme in order to strengthen the base of the bank. This year we are going to have a strategy of using the [financial] results we obtained to continue the capitalization process to become an even stronger bank.”