Jun 2016 Financial News

Growth slows for financial sector. But commercial banks improve market share.

Jun 27, 2016

Growth overall among deposit-taking institutions (DTIs) occurred at a slower pace during the year ended, the Bank of Jamaica reports in its annual review of the sector.

Their combined asset base increased by 9.5 per cent or $103.2 billion to $1,194.1 billion, moderating from growth of 11.6 per cent or $113.0 billion during 2014.

The slower growth, the BOJ said, was due to the reduced impact of revaluation.

Meanwhile, the central bank also reported that commercial banks improved their market share nearer to the 80 per cent mark in 2015 at the expense of other supervised deposit takers and also the credit union sector.

Notably, however, more banks than usual participated in this surge.

In the assessment of the year’s outturn provided in its recently tabled annual report, the central bank said that the island’s six commercial banks grew assets by 10.5 per cent or $87.3 billion to $916.9 billion compared to the 12 per cent improvement at $88.7 billion seen in 2014.

Market share for the six banks inched up to 76.8 per cent from 76.0 per cent, but market leaders, NCB and BNS, collectively commanded a smaller share of the market of 72.8 per cent at end 2015, relative to 74.2 per cent at end 2014.

The BOJ said overall DTI gains on the foreign currency portfolio reflected a slower pace of depreciation in the Jamaican dollar relative to 2014, affecting asset growth.

Otherwise, the BOJ said core growth was evident in loans (10 per cent or $48.6 billion year over year), investment securities (8.1 per cent or $26.1 billion) and sundry assets (26.1 per cent or $19.6 billion).

Asset growth was funded primarily by deposit inflows (11.9 per cent or $82.1 billion) and shareholders’ equity (10 per cent or $16.1 billion), the central bank said.

The credit union sector grew assets to $89 billion in 2015, an increase of $6.7 billion or 8.1 per cent above the $82.3 billion reported at end 2014.

However, there were softer outturns including reduced net profit margin and return on average asset ratios of 9.0 per cent and 1.2 per cent respectively (12.7 per cent and 1.7 per cent for 2014), the BOJ said.

The credit union sector accounted for a somewhat lower 6.9 per cent (2014: 7.1 per cent) of the $1,282.9 billion in assets held by the combined deposit-taking sector at end of 2015.

For building societies, growth in assets slowed to 7.2 per cent from 8.9 per cent reported at end of 2014, resulting in a smaller share of system assets at 20.7 per cent relative to 21.1 per cent at end 2014, the central bank indicated.

All building societies recorded asset growth during the year, although the two largest institutions – Victoria Mutual Building Society and Jamaica National Building Society, accounted for a reduced 90.1 per cent share of the sub-sector’s assets relative to 90.3 per cent at end 2014.

Meanwhile, merchant banking assets also contracted by 2.1 per cent in contrast to growth of 22.2 per cent in 2014, resulting in a reduction in the share of the market to 2.5 per cent from 2.8 per cent in 2014.

BOJ said that all DTIs were compliant with reserve requirements during 2015 although some of them were penalised for crediting their reserve accounts late during some periods.

Non-performing loans (NPLs) for the deposit-taking sector were cut by 11.6 per cent or $2.9 billion to $22.1 billion during 2015 in contrast to the slight uptick of 0.2 per cent or $0.04 billion during 2014.

The DTIs achieved this through a mix of repayments, write-offs and sales of NPLs primarily in the construction sector, the BOJ reported.

As a result, the central bank said, asset quality, as represented by the ratio of NPLs to total loans, improved to 4.1 per cent, from 5.0 per cent at end 2014.

In total, regulatory capital and provisions among DTIs provided increased coverage of NPLs at 686.7 per cent, up from 574.0 per cent for 2014, the central bank reported.

 

Source:
BY AVIA COLLINDER
collindera@jamaicaobserver.com
Business reporter 
Jamaica Observer
Sunday June 26, 2016

http://www.jamaicaobserver.com/business/Growth-slows-for-financial-sector_64641