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Big banks hike fees, Point clients online, but free Internet banking limited

Published:Sunday | February 7, 2010 | 12:00 AM

Avia Collinder, Business Writer

The one per cent rise in the rate of the general consumption tax (GCT) in January and what some banks say is an annual revision of their fees structure, are providing cover for the latest round of user-fee increases by commercial banks.

Leading the higher fee rollouts are the biggest two banks, National Commercial Bank (NCB) and Bank of Nova Scotia (BNS).

GCT, which is priced into bank fees, rose from 16.5 per cent to 17.5 per cent.

BNS has already produced its new fee schedule, which became effective January 1, two months after the usual November 1 publication of new fees, the bank said.

NCB is going beyond the tax hike in explaining its new charges, blaming other factors, such as the effect of higher electricity costs and petrol prices on its overall operations.

"NCB, like most other institutions, will see an increase in operational costs resulting from the new tax on additional services including electricity and gas. It will cost us more to provide some pro-ducts and services,"Belinda Williams, the bank's manager for corporate communications, told Sunday Business.

The banking group, which has the largest network of branches islandwide, reported only a week ago that total operating expenses shot up by $500 million in its last quarter to $4 billion, from $3.5 billion in September 2009, and $3.4 billion in December 2008.

Last year, NCB collected $5.9 billion in fees and commissions charged against customers' accounts for transactions with the bank, but spent only $1.2 billion on their collection.

Fees contributed almost half of the $10.2 billion in net profit made by NCB.

For every dollar of fee and commission income collected, the bank retained just under 80 cents as profit. Fees make up as much as 44 per cent of profits for the bank, which reached $10.2 billion after tax for the year ended September 2009.

With profits deflated last quarter by a mixture of large one-off payouts and lower income from segments such as insurance premiums, and the bank bracing for a huge drop in investment income consequent on the Government's debt-exchange programme, NCB chief executive Patrick Hylton is promising more aggressive income generation and cost cutting to preserve its nine-year profit surge.

While NCB said it was not in a position to say precisely which services would attract increased fees in the new round of escalation expected soon, the GCT rise will figure prominently in the calculations.

fees and charge rates

"The increase in GCT will unavoidably contribute to a move in our fees," Williams said, even as she maintained that NCB's fees had been found by an August 2009 survey by the Consumer Affairs Commission to be competitive compared with other commercial banks.

"Any resulting increase in fees will see us remaining competitively positioned in the market," she added.

In 2009, NCB's fee guide was a 13-page document detailing 89 fees and charge rates for credit cards alone. Other fees and charges numbered 208, among them a payroll fee of between $350 and $450 per employee account credited.

BNS has about 107 user fees on its schedule, including monthly account-ser-vicing charges, fees for cheque leaves, standing orders, money orders and loan applications.

point-of-sales transaction fees

A transfer or withdrawal from banking accounts costs regular savers $30.30 at BNS, and now when credit or debit cardholders use plastic for point-of-sales transactions, they will be billed $10 where no fee existed before.

And it now costs $12.10 for electronic payments of bills and funds transfers.

While the bank said that services which see a less than $1 increase when the additional GCT is applied would not attract a fee hike, the new list contains a raft of bumped-up charges.

These include a higher $355 monthly, or $55.55 per entry service charge for handling personal accounts, and a minimum $550 monthly, or $70 per entry for other accounts.

And, each online payment and transfer between accounts now costs $30.30. The first seven are free, but only if the account has a minimum of $25,000.

Last year, Scotiabank spent $1 billion to collect $4.86 billion in fees, retaining 78 cents on every dollar of fees as profit. Fees contributed 29 per cent of operating profit.

Fees for BNS amounted to almost a quarter of its more than $11 billion in net profit.

"Our annual adjustment in fees is not done in a vacuum, only after comparison with our competitors and in keeping with our commitment to deliver value for the service being offered," BNS told Sunday Business through a spokesperson.

While the two big banks have rolled out or signalled changes to a range of fees, smaller banks, including FirstCaribbean Jamaica and RBTT Bank, say only the GCT increase is being applied at this time, but the latter bank did not rule out higher fees later on.

The assurance from First-Caribbean came from managing director Clovis Metcalfe last week.

"All our fees have been increased by one per cent based on the adjustment made to the GCT rate," Karen Watson-Pink, assistant manager of corporate communications and brand at RBTT also reported.

"The impact of the various other taxes on our operating costs is currently being reviewed."

While user fees make a significant contribution to the bottom line of banks, several financial institutions say they have been pointing customers to ways of saving themselves these charges.

Bank officials stress that some of their services are available online at no cost. Basic services available online include transfers between accounts, account-balance checking and bill payment.

"We are ever mindful of the prevailing conditions our customers face and have recently launched our 'cut your banking fees' campaign at, to apprise our customers of ways in which they can reduce their banking fees and in some instances, eliminate banking fees altogether," said NCB's Williams.

Online banking, she said, is free for NCB customers who sign up for Midas Plus.

Last year, NCB said e-banking represented 46 per cent of all transactions.

BNS revealed last week that approximately 20 per cent of its customers utilised the bank's online services but admitted that not all services were available using this mode.

BNS' free online services include balance inquiry, funds transfer, bill payment, some standing orders, account history, and credit card online statements.

free service

RBTT's Watson-Pink also said online banking was a free service "offered by the bank at this time", as did FirstCaribbean Jamaica's Metcalfe.

"The retail unit offers an electronic banking product called 'direct banking', which is specifically designed to allow customers to avoid in-branch fees and charges," Metcalfe told Sunday Business.

"All electronic transactions are free of cost, but we have restrictions on in-branch activity."