Secretary Byron Ward (left) addressing members of the Jamaica National Building Society at its annual general meeting in Kingston November 19. Seated from left are Deputy Chairman Dr Dhiru Tanna and General Manger Earl Jarrett. - Peta-Gaye Clachar/Staff Photographer
Jamaica National Building Society recorded one of its best financial years for period ending March 2008, helped substantially by its cashing in on shares held in Lascelles de Mercado and Company.
Indeed, the group's $3.9 billion gain from the disposal of investments accounted for most of its $4.9 billion profit, which tripled that of the previous year.
But as the mutual declared itself sound to deal with the challenges thrown up by the global financial crisis, its bosses told members last week that it has also begun to fix concerns raised by regulators - including writing off $1.9 billion of debts by subsidiaries.
JN's general manager Earl Jarrett explained that formally, buildings societies are allowed to lend up to 40 per cent of capital to subsidiaries, or twice the level of commercial banks.
JN was close to the formal legal limit, but the regulator, the Bank of Jamaica, during a long-term trend analysis of the building society called for a roll-back of the intra-group exposure.
"What the BOJ has suggested is that we bring that down to 20 per cent," Jarrett told the Financial Gleaner.
Jamaica National was now close to that benchmark at "a little over 20 per cent", he said.
At the organisation's annual general meeting last week, Jarrett said that among the other issues regulators had raised in their trend analysis was the sharp rise in the group's overhead costs, a slippage in gross revenues and a loss on the building society's core business activity.
While he did not give specifics, Jarrett said that JN had begun to address the issues by revising its governance structure, including re-establishing a risk-management unit, sharpening its internal auditing efforts and ramping up training on regulatory and compliance issues.
"We are engaged in several internal projects which are aimed at improving our internal processes and to meet external regulatory requirements as well as internal operating structures," he said.
But the demand for some re-engineering notwithstanding, JN broadly, remained a healthy operation, with its book value at the end of review period, jumping 26 per cent, to $17.7 billion.
During the review period, the building society approved 1,767 new loans, valued at $7.7 billion lifting its loan balance by 28 per cent, to $31.3 billion.
Last year's writing of new loanswas 10 per cent below JN's target. While it retained its position as the island's biggest mortgage lender with 45 per cent, the figure represented a slippage from the previous year.
Central bank figures indicate that a year ago, March 2007, the building society had a 47 per cent share of the mortgage loan market.
Net savings income or NSI also fell well below the JN's aggressive target of $15 billion, but the $5.7 billion booked was 71 per cent above the NSI flows at year end March 2007.
The group - whose holdings range across mortgage and real estate, insurance, small business financing, information technology, money transfer/remittances and fund management - reported revenues of $11.5 billion, a 19 per cent improvement on the $9.6 billion, on the previous year.
Within the 2007/08 year, the company grew assets by 22 per cent to $90 billion, ramped up its loan portfolio to $31.3 billion from $24.4 billion, and added $10 billion to its now $53 billion savings fund.
JN was successful at ramping up business, not by trying new strategies, but, as Jarrett told the society's annual general meeting on Thursday at JN's corporate offices in Kingston, just by being better at delivering good old-fashioned customer service. "JNBS continues to offer value for membership by providing benefits for members not given by other financial institutions," he said.
The company has a 97 per cent customer satisfaction rating, and was fourth of 12 corporations in customer satisfaction in a poll done in December 2007 by pollster Bill Johnson.
JN's pretax earnings grew almost threefold, from $2 billion to $5.4 billion, while net surplus, after a near half a billion of taxes, was $4.9 billion, compared to $1.68 billion made in 2007.
Still, the group's bottom line looked that fat only because of the $3.9 billion gain from the liquidated investment in Lascelles. In 2007, it reported a similar gain from disposal of investments, but only $867 million.
Additionally, the society - which is the main subsidiary within the group representing 90 per cent of the business - had a $1.9 billion bill for restructuring.
The notes to the accounts, however, said briefly that the restructuring costs "relate to advances in subsidiaries written off to meet regulatory requirements."
The only operation within the group known to have ceased operation is JN Real Estate Company Limited.
JN group also advises it is in the process of merging the depositors in its 100 per cent owned Jamaican subsidiary, First Metropolitan Building Society, into the operations of the society, but says the merger is subject to the approval of the Ministry of Finance.
JN's mid-line income in the period just ended gives a clearer indication of how well the group performed.
At $1.35 billion, operating surplus was up by 34.5 per cent on the $1 billion made a year ago.
The company's report to shareholders comes two months into the turbulence that has rocked Jamaica and the world market, but Jarrett has given his assurance that JN would "continue to offer its members security and stability."
High finance is often not understood even by the experts.
"We are engaged in several internal projects which are aimed at improving our internal processes and to meet external regulatory requirements as well as internal operating structures,"