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JNBS embraces technology, diaspora to reinvigorate sluggish growth

Published:Friday | October 12, 2012 | 12:00 AM
Earl Jarrett, general manager of JNBS. - File

Sabrina Gordon, Business Reporter

Plans to refile commercial banking application

Jamaica National Building Society's (JNBS) longstanding relationships with Jamaicans resident overseas is paying off for the mortgage group which said Tuesday that the diaspora now accounts for half of its savings portfolio.

With new credit-card services and sights set on mobile commerce, JNBS plans to leverage even more business from its overseas clientele at the same time that it continues executing plans to further diversify the group.

The society has been trying since 2009 to obtain a commercial banking licence and is not giving up on those ambitions.

Its plan to enter the life insurance market appears a lot closer, with just one hurdle left, according to Earl Jarrett, JNBS general manager.

The mortgage company will also be filing a revised commercial banking licence application with the central bank.

"We are well advanced in the preparation of that submission to the regulators. We are hoping that by early next year we will be putting that in and, hopefully, it will be processed favourably," Jarrett told the Financial Gleaner on the margins of JNBS' 138th annual general meeting on Tuesday in New Kingston.

"The other thing is our life insurance company; we have made the final submission to the FSC for approval of our products and we are expecting any time now to get the approval to begin operation of that entity this year," he said.

JN Life Insurance Company has already been incorporated and it plans to offer as one of its first products a policy called Creditor Life, which will provide coverage to JNBS mortgagors.

Both the banking and life insurance initiatives have been in the making for three years.

JNBS, like other businesses, faces constraints from the depressed local economy and sees the overseas community as an opportunity to build market share.

Jarrett believes JNBS can leverage both its brand and new technology to grow business.

"We represent great value to Jamaica and the community and we want to continue to pursue that. We are one of the strongest brands from the Caribbean to the world now and we want to leverage that going forward," said Jarrett.

"Jamaica's population is approximately 2.7 million, but when you expand that to the diaspora you could be looking at five million persons. What we are looking at doing is to do business with all members in that area, and we expect good expansion within that market."

JNBS is trying to roll out products and services that will be attractive to the diaspora members, among them a Visa-branded credit card to be launched by yearend.

Already 50 per cent of JNBS's savings base is attributed to the diaspora market, Jarrett told the AGM.

The JN group has a deposit base of J$73 billion, J$69 billion of which is saved in the society, and a customer base of about 600,000.

"We looked at the broader Jamaica and the diaspora represents a lot of wealth in that market, so we are aggressively pursuing it," said Jarrett.

In addition to its 23 Jamaican branches, JNBS also operates subsidiaries in the United Kingdom, United States, Canada and the Cayman Islands.

For the financial year ended March 2012, the group posted net profit of J$2.1 billion, substantial improve-ment on the J$1.3 billion in the previous year despite falling gross revenue from investments and interest income.

The gain came through ruthless efficiency, amounting to a J$1-billion squeeze on the cost of business, and a J$1.1-billion gain on other income that was only partially offset by higher operating expenses.

The group's loan portfolio, comprising some 36,580 accounts, climbed by just J$1.3 billion or three per cent to J$46.9 billion.

An increasing portion of the portfolio is in default — amounting to J$6 billion at year ending March 2012 or 14.18 per cent of the portfolio, up from J$J$5.6 billion or 13.84 per cent of the portfolio at YE2011.

"We have a fairly stubborn chunk of mortgages in arrears here and in Cayman, and we are going to have to be innovative in moving those along," said Jarrett.

In the Cayman Island where JNBS has a 96.7 per cent ownership of mortgage and wealth management service provider National Building Society of Cayman (NBSC), the group was forced to sell off properties supporting defaulted mortgages.

NBSC, which is run by Dunbar McFarlane, recorded losses of CI$1.4 million at YE2012, worsening the loss of CI$291,065 the previous year.

With the sale of assets, the company has turned around, according to Jarrett.

"Today, those losses have turned around back into profitability by virtue of the fact that we have been able to sell a number of loans, but we are looking at restructuring that entity to focus a lot more on the wealth management side and a little less on mortgage lending," he said.

"Cayman Islands is particularly challenged as the entire Cayman economy is underperforming and so we want to reframe the business for growth."

Despite is strong profit performance, JN barely shifted the needle last year on loans, its asset base and savings fund while revenue underperformed. Loans grew close to J$5 billion annually between 2008 and 2011 but gained J$1.3 billion in the past year.

Assets climbed more than J$10 billion per annum in the same four-year span, but was up by less than J$4 billion last year.

In response to the slowdown, the building society has turned to technology to boost efficiency. JN enhanced its online banking platform LIVE by JN and has launched a money-transfer card, supported by its E-money platform, to allow members to collect funds at any JN location, ATM or point-of-sale location.

It will continue to leverage investment in new technology to enhance service delivery, Jarrett said.

"Our electronic channels are very strong; we offer a range of services now that are unique to our organisation, so I am very optimistic about the future in the context of a challenging Jamaica; and we expect to grow," he asserted.

Jarrett reported that at the end of July this year, more than J$147 million worth of transactions were conducted online a, representing some 22,676 transactions.

JNBS is also heavily involved in the development of a mobile facility to allow real-time banking via mobile phones, expanding the alternate banking channels especially to the non-banked.

JN's latest innovation is a personalised debit card to be rolled out shortly, which will allow account holders to customise images on their cards.