Sep 2016 Financial News

JMMB joins commercial banking club

Sep 30, 2016

Jamaica's commercial banking market will soon swell by two players, now that JMMB Group has hurdled the rigorous review of the central bank to attain its longstanding ambition of securing a licence.

The approval comes at least eight years after JMMB’s first attempt at joining the banking club.

The real surprise of the day was an announcement Thursday, which turned out to be incorrect, that MF&G Trust and Finance Limited too had secured a commercial banking licence. But Finance Minister Audley Shaw, who had been the source of the disclosure, last night corrected those comments.

Instead, Shaw said the sale of MF&G Trust had been approved. No other details were forthcoming. MF&G Trust executives, who had declined to comment on the earlier incorrect announcement, were unreachable last night for details of the sale.

JMMB Merchant Bank will join Jamaica National Building Society in the commercial banking arena, the latter having secured approval from last year and is working through its transition plans.

On Thursday, JNBS said it received court approval for the reorganisation of the group structure on September 22, and would soon hold a vote with members for their approval to transition from a society to a commercial bank.

Sensitation sessions with members in Jamaica and overseas will precede the convening of a special meeting for the vote.

JN will separate its non-financial and financial businesses into “two sub-holding companies”, which will both be owned by a mutual holding company.

“In the final analysis, JN at 142 years old, will become a more flexible and modern, fully Jamaican-owned financial institution. These changes will position its operations to achieve growth for Jamaicans here and in the diaspora,” said JNBS General Manager Earl Jarrett in a statement from the building society.

Shaw, who spoke about the new banking licences at a forum on Thursday, said he is trying to drive competition in the market, particularly as it relates to interest rates.

Pushing for competition

“I want to say to the commercial banks, look out because I am pushing for competition,” the finance minister said at the annual pension seminar co-hosted by Prime Asset Management and the Private Sector Organisation of Jamaica.

“The Bank of Jamaica has now approved three new commercial bank licences. This will mean more competition and, therefore, lower rates,” Shaw said. He later corrected the number to two.

The new bank licence approvals will virtually wipe out the merchant banking market in which only JMMB Merchant Bank and MF&G Trust currently operate. JMMB Merchant carried $32 billion of the value of that market, while MF&G Trust, a boutique outfit, is valued at a mere $1.8 billion by assets.

The commercial banking sector will grow from six to eight players, and based on the current value of the assets as published by the Bank of Jamaica, will be worth a combined $1.19 trillion.

The building society sector will lose its largest player, leaving only Victoria Mutual and Scotia Jamaica, and reduce that market to $122 billion, down from $264 billion, based on the most recent industry estimates of their assets.

Merchant banks, commercial banks and building societies are all categorised as deposit-taking intuitions. The DTI sector was valued by assets at $1.3 trillion at June 2016 and assuming MF&G remains in the merchant banking market under its new ownership will still comprise 11 players overall.

BOJ approval will see JMMB Merchant Bank upgrading its existing licence to a commercial banking licence.

“Operating as a commercial bank, we will maintain our ability to provide a refreshing client experience alternative in Jamaica’s current banking landscape. We will also be in a position to offer even more products and services, to better meet the needs of our clients,” said Jerome Smalling, CEO of JMMB Merchant Bank.

“While we are currently not in a position to give concrete timelines regarding the completion of the transition process from merchant bank to commercial bank, immediate next steps include the implementation of the processes required to bring us to the point of readiness for commercial banking operations,” he said.

In 2012, JMMB Group acquired the Capital & Credit Financial Group (CCFG) in Jamaica, which allowed the financial conglomerate to offer clients merchant banking, as well as remittances and unit trust products and services.

That acquisition, which included Jamaica’s largest merchant banking unit, helped to form the foundation for its current milestone at landing the commercial banking licence.

“We are excited, humbled and honoured at the opportunity to provide a full suite of banking services, which will now be integrated into our financial partnership culture of having our clients’ best interest at heart,” said JMMB Group chief executive officer Keith Duncan in a release.

JMMB Group is owned 29 per cent by NCB Capital Markets, a subsidiary of Jamaica’s largest commercial banking group, National Commercial Bank Jamaica. Last night JMMB said the stake held by NCB Cap had no bearing on its business even as the two remain competitors.

JMMB failed to secure a banking licence in 2008, but tried again last year, this time, successfully. The group is already invested in commercial banking through subsidiary Intercommercial Bank, a boutique outfit in Trinidad & Tobago.

With the new approvals, the line-up of the eight firms that will make up the commercial banking market, from largest to smallest, are: National Commercial Bank Jamaica, Scotia Group Jamaica, JN Group, Sagicor Bank Jamaica, FirstCaribbean Bank International Jamaica, First Global Bank, JMMB and Citibank NA.

Within that trillion-dollar sector, the size disparities of the largest and smallest players is stark, with NCB’s banking operations sporting assets of $428 billion and Citibank Jamaica $17 billion.

 

Source:
Business Reporters Steven Jackson and Neville Graham contributed to this story.
steven.jackson@gleanerjm.com
neville.graham@glanerjm.com
Jamaica Gleaner
Friday September 30, 2016

http://jamaica-gleaner.com/article/business/20160930/jmmb-joins-commercial-banking-club