Oct 2009 Financial News

Risk system overhaul, expansion at First Global - Growth plans, new group compliance platform spurred by crisis

Oct 09, 2009

Executives of GraceKennedy's banking outfit, First Global Bank (FGB), insist that growth plans had always been on the table, but acknowledge that the recent US$19-million (J$1.6 billion) bond trading loss has jolted the bank into bringing forward a blueprint for the expansion of existing service-delivery points and the addition of at least five new branches over as many years.

At the same time, GraceKennedy Limited has accelerated a major overhaul of the risk management and compliance systems for all its financial services businesses.

Newly installed acting president of First Global Bank and boss of GK Investments (GKI) boss, Courtney Campbell, said this week that while the review and revamp of the internal controls have been under way since July it was accelerated after an internal review uncovered the irregular trading and losses in August.

More proactive

"The new system allows us to be more proactive and involves more people and better systems," Campbell told the Financial Gleaner on Wednesday.

The bank is still hunting heads for its Treasury and settlements functions even as it recently appointed retired banker Kerry O'Sullivan to lead back-office operations.

Campbell, while declining to divulge details of discussions with the Bank of Jamaica (BOJ) on the matter, dismissed suggestions that the recent injection of $900 million by parent GraceKennedy was done at the behest of the central bank.

"We calculated what was required and presented an action plan to the BOJ from early," Campbell said, maintaining that the issue was handled with utmost transparency.

He added that the bank was well capitalised and would require no additional money from GraceKennedy or minority partner, World Bank affiliate International Finance Corporation, whose officials, he said, have been kept abreast of the situation and have themselves visited the bank since the discovery.

But like his boss, Grace-Kennedy Chairman Douglas Orane, he was not yet ready to say precisely what systems broke down at the bank leading to the irregular trading activities having gone undetected, preferring instead to await the outcome of a detailed forensic audit.

The system changes are said to involve the roll-out of a new, more integrated information technology system that will place the group's money services companies on the same IT platform.

GraceKennedy's non-food busines-ses grouped under GKI include the bank; securities dealer and wealth manage-ment outfit, First Global Financial Services (FGFS); insurance brokerage Allied Insurance Brokers Limited; general insurer Jamaica International Insurance Company (JIIC); GK Money Services, GraceKennedy Remittance Services; and Hardware and Lumber Limited.

Overseas companies, investment bank, First Global Trinidad and Tobago; Barbados-based Signia Financial and Trident Insurance also fall under the GKI umbrella.

GK owns 40 per cent of Signia and 30 per cent of Trident.

Campbell, now a week in the job running the boutique bank, will be driving its expansion. The plans include, he says, going after a larger share of the market for mid-tier businesses and professionals, particularly in the faster-growing town centres.

First Global is spending $120 million to move into bigger quarters - to be called GraceKennedy Financial Services Centre - at Montego Bay's Fairview shopping complex, by February; and will also be relocating its Manor Park, St Andrew, branch, located inside Hi-Lo Food Stores, another GraceKennedy business.

The bank is fine-tuning plans for new outlets at undisclosed locations, a cost bank officials are keeping close to their chest.

For its Montego Bay expansion, four of the group's companies - FGB, FGFS, JIIC and Allied - will share the costs associated with the 8,140 square feet of space that is intended to ramp up the presence of all these businesses in the western city and offer a drive-thru facility that was not possible at its current Gloucester Avenue location.

"Downtown Kingston and Ocho Rios are possibilities in the long run," he said when asked of the locations being considered for the five new branches.

Suggesting that some amount of complacency had set in at the bank, Campbell said a major programme of front-line staff retraining is being planned to reposition the entity has a leader in providing creative banking solutions and top-quality customer service in the industry.

Consolidating base

First Global is ranked No. 5 of seven in the commercial banking market, with assets of $33 billion in a sector worth more than half a trillion dollars and dominated 70 per cent by its two largest players, National Commercial Bank and Scotiabank Jamaica.

Asked if the bank would be gunning to take customers from the bigger commercial banks, Campbell said: "We are mindful of the competition, but right now our focus is on the customers and we are aiming to ensure that our current branches make greater use of existing opportunities. Right now we are leaving revenue on the table," he said.

The day-to-day running of the bank is expecting to consume much of the Campbell's time and energy. He said his dual responsibilities for FGB and GKI were sustainable until current projects are advanced and a new head of the bank identified.

"In these roles I benefit from the teamwork culture of GraceKennedy and the entities within GKI have strong CEOs," Campbell said.


Source:
Huntley Medley, Contributing Editor - Business
huntley.medley@gleanerjm.com
Jamaica Gleaner
Friday October 9, 2009

http://www.jamaica-gleaner.com/gleaner/20091009/business/business1.html