May 2015 Financial News

Bank fees continued to increase in 2014 (Jamaica)

May 06, 2015

JAMAICANS making withdrawals and late credit card payments received the bulk of higher bank fees in 2014, according to just-released data.

Commercial banks mostly kept fees stable year-over-year -- but those that increased usually ranged between 10 and 33 per cent. However, some odd fees jumped well beyond 100 per cent, according to the spreadsheet entitled, "The Commercial Banks Schedule of Fees and Charges as at 31 December 2014." It was published this month by the Bank of Jamaica (BOJ), which regulates the sector.

Richard Byles, president of Sagicor Group Jamaica, which operates the island's third largest commercial bank, Sagicor Bank Jamaica (SBJ), told the Jamaica Observer that fees in general seek to recover costs at banks which are among the most taxed companies in the island.

"Many of the banks and securities dealers are taxed at forty-odd per cent. So they are looking at ways to recoup that," Byles reasoned, explaining that banks pay 33 per cent tax compared to 25 per cent for non-regulated entities, and also an asset tax.

"The return on equity (ROE) of banks is pretty low," he said of some local banks which operate an ROE under10 per cent in comparison to entities in "New York and Toronto" with an ROE at 16 per cent and better. "The banks and securities dealers are taxed more aggressively than anyone else."

Byles added that a good ROE target would be somewhere around 18 per cent for SBJ. Last month, the management of National Commercial Bank of Jamaica (NCB), the island's largest bank, announced that it made its highest quarterly profit ever for its March 2015 second quarter at $3.2 billion after-tax. That equated to an ROE of 13 per cent.

The BOJ spreadsheet identified fee movements and avoided any analysis of the fees as a percentage of revenue or cost as done in its report on bank fees released two years ago.

First Global Bank (FGB) --a subsidiary of food conglomerate Grace Kennedy -- offered the most fee reductions among commercial banks with more than 10 instances of reduced fees over the period. It was led by removing the cost of an 'interim statement' from about $2,000 on average to nil. However, FGB also offered a number of fee increases. The data indicated that it was actually cheaper for FGB customers to use other ABM machines to withdraw money at $30 than to use the bank's own branded machines which received a 58 per cent fee increase to $47.50. FGB increased its credit card membership fees between 20-100 per cent depending on the credit card. FGB also fluctuated its fees for deposit wallets from a reduction of 23 per cent to an increase of 97 per cent depending on the specific transaction.

NCB, the island's most profitable bank increased the transfer fees between accounts by 46 per cent to $364. It also increased the payment or cancellation order on foreign cheques by 15 per cent to US$45.80. meanwhile, its Keycard credit card fees increased between zero to 69 per cent or between $1,500 and $5,900.

The bulk of the fees at Bank of Nova Scotia (BNS) -- the island's second most profitable bank -- remained unchanged. However, BNS notably increased the late payment charges on credit cards between 13 to 33 per cent in order to get all its core credit cards to a flat late fee level of $2,600. It corroborates with statements made last year by Scotia president Jackie Sharp that the bank would seek to keep fees largely stable.

CIBC FirstCaribbean International Bank increased in-branch withdrawal transaction fees from 25 to 45 per cent to $215. It increased its minimum balance fees up from zero to 33 per cent. It increased its withdrawal from ABM up 61 per cent to $32, but its Visa debit remains free, the spreadsheet stated. Its standing order fees fluctuated from a reduction of 50 per cent to an increase of 255 per cent, which equates to $710.78 for local transfers and $200.00 plus draft/wire fee for international transfers.

The only commercial bank to offer free withdrawals at its ABM network was SBJ. However, SBJ customers are charged $54.77 when using other ABM machines. This figure remains unchanged year-on-year. SBJ increased the foreign cheque charges between zero and 350 per cent from US$4.66 to US$20.97 plus other charges. SBJ also introduced a fee for personal and corporate in-branch withdrawal transactions -- free for the first three transactions per month, but then the bank charges $233 for additional withdrawals.

Most data for Citibank, mainly a corporate bank, was not available in the spreadsheet. The Jamaica Bankers, Association did not respond to Business Observer queries up to print.

The spreadsheet followed an earlier report by the BOJ commissioned after Member of Parliament Fitz Jackson, in 2013, called for bank fees to be fully investigated. The BOJ in its interim report showed that roughly 23 cents from every dollar earned by local commercial banks were earned from fees, which totalled an estimated $18.5 billion in 2013, according to the survey. It added that these fees increased 12.6 per cent year-on-year amid profits dipping by one-third at these institutions. The Jamaica Bankers' Association said on its website that fees are necessary to recover some of the operational costs associated with providing their services, which include staff, location, security, technology, and back-office processing.

Source:
BY STEVEN JACKSON
jacksons@jamaicaobserver.com
Business reporter
Jamaica Observer
Wednesday May 6, 2015

http://www.jamaicaobserver.com/business/Bank-fees-continued-to-increase-in-2014_18885657