By Al Edwards, Financial EditorTHE JAMAICA National Group, the parent company of the country's largest and most profitable building society, Jamaica National Building Society (JNBS) had another good year posting a net surplus of $2.1 billion for the financial year 2003/2004. This represents a 48 per cent increase over 2002/2003's $1.4 billion. The Group's total assets came in at $46.8 billion an increase of 10 per cent on the previous year.
Speaking at the Group's annual general meeting (AGM) which took place at the Group's Kingston headquarters on Wednesday, Jamaica National's chairman Oliver Clarke pointed to the fact that on the basis of results published by the Bank of Jamaica (BoJ) for local banks, building societies and licensees under the Financial Institutions Act at December 31, 2003, JNBS with assets of $33 billion, savings totalling $23 billion and a capital base of $7 billion is now ranked fourth in terms of assets and ranked third in terms of deposits and capital base.
Jamaica National's general manager Earl Jarrett took shareholders through a presentation of the Group's financial results which revealed the outcome of its operations for the financial year 2003/2004 as Jamaica National, an amalgamation of regional building societies celebrates its 130th anniversary. "Back in 1877, The Westmoreland Building Society held £516 in its cash accounts. At our 125th anniversary we had $16.6 billion in assets with the savings fund holding $14.2 billion. Today as we celebrate our 130th anniversary we have an asset base of $35.5 billion with our savings fund now standing at $25.7 billion. For this current year the Society recorded a growth in its assets of some 25 per cent.
"How do we rank with our competitors? Our building society is the leading organisation in Jamaica with some 50.15 per cent of the total assets of building societies in Jamaica with Victoria Mutual Building Society (VMBS) coming in second at 40.7 per cent. Scotiabank's building society's arm holds 7.7 per cent while FirstCarribbean has 1.4 per cent. In terms of saving funds, again JN leads the way with some $23 billion with our nearest competitor at $22.6 billion. Scotia has $3.2 billion while FirstCaribbean has $501 million. Our savings funds have increased by $3.8 billion for the period under review representing a 17.5 per cent increase. Three quarters of our Society's liabilities are in our saving funds while our net local savings by branch is some $403 million and our converted savings from overseas inflows for the year amounts to $1 billion. This tells us that our overseas savers are a critically important part of our operations and contribute significantly to the savings funds of JN."
Mr. Jarrett noted that back in 1999 witholding tax was introduced on interest on savings accounts in building societies. For years after that there was a discernible decline on savings on the domestic side but last year saw a turnaround and Jamaicans are beginning to save again.
MORTGAGES
As at December 2003 JN accounts for 52 per cent of some loans disbursed for mortgages and 51 per cent of the $2.8 billion value of mortgages on the island. The government agency NHT is the largest provider of mortgages but as far as building societies are concerned, JNBS has the largest share of the market. JNBS competes with the NHT who offers rates of between two to nine per cent and fares well doing so. It is a testament to JNBS' management that it can produce enough mortgages in that environment. It now has 12,014 mortgages valued at $11.2 billion. For the coming financial year Mr. Jarrett said that a concerted effort will be made to increase the number of mortgages on its books and with the reduction in interest rates there should be an increase in demand for mortgages. For the year under review JNBS added 1563 new loans representing a five per cent increase.
SAVERS
A profile of the savers shows that many of them are very young. Thirty one per cent of JNBS savers are in fact children which means that the value of thrift is being passed on to the children of Jamaica. JNBS made a conscious effort to build up the savings funds by going to the colleges throughout the island to spread the word on the value of saving and also ensure young people recognise the JN brand from a very young age.
Overseas savers account for 38 per cent of JNBS's savings portfolio. As of December 31, 2003, 51 per cent of JNBS' savers are women. The average saving figure per local customer is $28,500 per year. While the overseas saver averages $114,500.
BAD DEBT
During the year JN bad debt performance has improved somewhat, with a reduction in the bad debt provision coming from $674 million in 2003 to $546 million in 2004. This is a result of the significance that has been placed on reducing arrears said Mr. Jarrett. JN has now outsourced its debt collection process to another unit that is exclusively dealing with this.
Mr. Jarrett reported that JN had experienced some growth in money transfers this year and the introduction of its money transfer card is going well. To date it has issued 14,000 cards, with some 7,000 transactions up to July 31, 2004 with the value of those transactions standing at just over $108 million.
INTEREST RATES
With interest rates generally trending down in Jamaica will JN reduce its rates?
"If you look at risk free rates, Treasury bills and so forth the lowest rates on the books is 14 per cent. We have always been below the risk free rates which in any normal economy should really be the reverse. We have been reducing interest rates on the investment side to match what we have been getting from our investment outflows. As regard to mortgages we think ours are competitively priced."
Dorothy Pine-McLarty , John Small and deputy chairman, George Magnus were re-elected to the Board of Directors. Shareholders also voted to increase the total sum of directors' fees from $3.2 million to a fixed sum of $7.5 million.
JN Group chairman, Oliver Clarke said: "What is important is that JN doesn't forget what it is about. What it is about is providing security for people that save here. It is about trying to give people an opportunity to get a mortgage at an affordable rate and it is here to provide extremely good customer service. If it fails on those things, it fails on far more important matters than the level of profits it makes."
