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Jamaican banking region’s worst
— says World Bank report
STEVEN JACKSON Business Observer writer jacksons@jamaicaobserver.com
Wednesday, September 22, 2010
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COMMERICAL banks in Jamaica ranked the worst for lending and saving amongst Caribbean nations surveyed in a new World Bank report on access to financing.
When compared with 11 regional counterparts, the Jamaica institutions had the lowest lending and saving portfolios for its population size whilst Anguilla topped the list. The report -- entitled Financial Access 2010, the State of Financial Inclusion Through the Crisis — compiled data on over 100 countries, including Caribbean nations. Barbados and Trinidad & Tobago were notably absent, but larger Hispanic neighbours were included. The report was done by the World Bank group in conjunction with Consultative Group to Assist the Poor (CGAP).
The methodology to measure financial access included comparing deposits and loans with the size of the adult population; the GDP and per capita income. The World Bank data when ranked by the Business Observer found that banks operating in Jamaica were lowest in five of the six categories.
* The number of loan accounts per 1,000 adults was lowest in Jamaica at 201.7. This is below Dominica at 219.4, the Dominican Republic at 245.1, Monsterrat at 246.5, St Vincent and the Grenadines at 256.8, Grenada at 355.9, St Lucia at 373.3, Antigua at 579.8, St Kitts at 663.7, and Anguilla at 790.8.
* Loans as a value of GDP was also lowest in Jamaica at 19.4 per cent. This is below the Dominican Republic at 19.5 per cent , Puerto Rico at 69.2 per cent, St Vincent and the Grenadines at 75.7 per cent, Dominica at 78.7 per cent, Antigua at 95.2 per cent, Grenada at 112.7 per cent, St Lucia at 143.4 per cent, and St Kitts at 158 per cent.
* Average loans as a percentage of per capita income was lowest in the Dominican Republic at 116.9 per cent, followed by Jamaica at 137 per cent, St Kitts at 224 per cent, St Vincent and the Grenadines at 395.7 per cent, Grenada at 405.2 per cent, Dominica at 440.9 per cent, and St Lucia at 524 per cent.
* The number of bank deposits per 1,000 adults was lowest in Jamaica at 1150, followed by Puerto Rico at 1,300, St Vincent at 1,691, St Lucia at 2,505, Grenada at 2,556, Antigua at 2,972, Monsterrat at 3,680, St Kitts at 4,367 and Anguilla at 4,427.
* Deposits as a percentage of GDP was lowest in Jamaica at 27 per cent, followed by Dominica Republic at 28 per cent, St Vincent and the Grenadines at 88 per cent, Antigua at 104.2 per cent, St Lucia at 122 per cent, Dominica at 130.2 per cent, Grenada at 135 per cent, and St Kitts at 204.2 per cent.
* Deposits as a percentage of per capita income was lowest in Jamaica at 33.5 per cent, followed by Antigua at 47.9 per cent, St Lucia at 66.6 per cent, St Vincent and the Grenadines at 71.9 per cent, Grenada at 73.7 per cent, St Kitts at 77.7 per cent, and Dominica at 107.2 per cent.
The World Bank report coincides with comments made by finance minister Audley Shaw last week that banks operating in Jamaica made one of the highest returns on equity worldwide up to 22 per cent. He was speaking interestingly at the World Bank's Americas Conference held at the Biltmore Hotel in Miami, USA. The Business Observer sent a written query to the president of the Jamaica Bankers Association for comment, but no response came up to press time.
Earlier this month, Shaw suggested that more banks, preferably international ones, should be allowed to compete in Jamaica and that this would raise standards, create more competitive products and services, and put an end to monopolistic practices. The Jamaica Debt Exchange (JDX) has resulted in banks returning to core lending activity as they are unable to gorge on government paper which supported profits for some 20 years. As a result, many have resorted to increasing fees and charges to make up for lost revenue.
Jamaican banks' return on equity far exceeds that of some of Europe's major banks, according to an article in Caribbean Business Report. Last month, Barclays said that it expects its global retail banking operations to deliver an average return on equity in the period 2010 through 2013 of 13 per cent to 15 per cent. The UK bank also said in a statement that it is targeting its retail division to post a five per cent growth in income within a year in that period, report broadly stable net interest margins, and control costs.
According to Reuter's Steve Slater, European banks' average (ROE) was 18-23 per cent between 2003 and 2007, compared to 12-15 per cent in the mid 90s. Returns are expected to go back to around 10 to 15 per cent this year. The leverage that drove returns higher for a decade is now being reversed as banks take fewer risks, added to by the impact of higher capital and depressed margins in a low interest rate environment.
UBS predicts European banks' ROE will average 9.4 per cent this year, 11.5 per cent in 2011 and 12.9 in 2012. CreditSights analysts say Europe's banks must get used to ROE of under 10 per cent, adding: "We are not sure if the equity market has yet to come to terms with this".
However, in terms of ROE, Europe's banks lag rivals everywhere except the United States and Japan. Average ROE next year for banks will be 18.8 per cent in Asia (ex-Japan), 18 per cent in Canada, 21.8 per cent in Latin America and just eight per cent in the United States, UBS estimates.
The largest banking entity operating in the English-speaking Caribbean is Scotiabank, whose parent is based in Canada. Addressing Scotiabank's AGM held in St John's, Newfoundland in April of this year, executive vice-president and chief financial officer, Luc Vanneste said: "Clearly, the global economy slowed in 2009, and we were not immune. However, we have been very successful at managing through this challenging environment. We delivered a strong return-on-equity of 16.7 per cent".
Closer to home, the President and CEO of Scotia Group Jamaica, Bruce Bowen has ventured an explanation for the current situation in Jamaica. He said that with continuing loan losses, the cost of running the business, 2,200 employees, together with equipment that provides services and products, these costs need to be recovered. He added that personnel was Scotiabank's biggest cost, running at 45 per cent of non-interest expenses.
Then comes premises, technology and communication. "The question confronting all banks in Jamaica is, how do you get the network infrastructure more efficient in order to reduce spreads?" said Bowen.
— says World Bank report
STEVEN JACKSON Business Observer writer jacksons@jamaicaobserver.com
Wednesday, September 22, 2010
var addthis_pub="jamaicaobserver";
COMMERICAL banks in Jamaica ranked the worst for lending and saving amongst Caribbean nations surveyed in a new World Bank report on access to financing.
When compared with 11 regional counterparts, the Jamaica institutions had the lowest lending and saving portfolios for its population size whilst Anguilla topped the list. The report -- entitled Financial Access 2010, the State of Financial Inclusion Through the Crisis — compiled data on over 100 countries, including Caribbean nations. Barbados and Trinidad & Tobago were notably absent, but larger Hispanic neighbours were included. The report was done by the World Bank group in conjunction with Consultative Group to Assist the Poor (CGAP).
The methodology to measure financial access included comparing deposits and loans with the size of the adult population; the GDP and per capita income. The World Bank data when ranked by the Business Observer found that banks operating in Jamaica were lowest in five of the six categories.
* The number of loan accounts per 1,000 adults was lowest in Jamaica at 201.7. This is below Dominica at 219.4, the Dominican Republic at 245.1, Monsterrat at 246.5, St Vincent and the Grenadines at 256.8, Grenada at 355.9, St Lucia at 373.3, Antigua at 579.8, St Kitts at 663.7, and Anguilla at 790.8.
* Loans as a value of GDP was also lowest in Jamaica at 19.4 per cent. This is below the Dominican Republic at 19.5 per cent , Puerto Rico at 69.2 per cent, St Vincent and the Grenadines at 75.7 per cent, Dominica at 78.7 per cent, Antigua at 95.2 per cent, Grenada at 112.7 per cent, St Lucia at 143.4 per cent, and St Kitts at 158 per cent.
* Average loans as a percentage of per capita income was lowest in the Dominican Republic at 116.9 per cent, followed by Jamaica at 137 per cent, St Kitts at 224 per cent, St Vincent and the Grenadines at 395.7 per cent, Grenada at 405.2 per cent, Dominica at 440.9 per cent, and St Lucia at 524 per cent.
* The number of bank deposits per 1,000 adults was lowest in Jamaica at 1150, followed by Puerto Rico at 1,300, St Vincent at 1,691, St Lucia at 2,505, Grenada at 2,556, Antigua at 2,972, Monsterrat at 3,680, St Kitts at 4,367 and Anguilla at 4,427.
* Deposits as a percentage of GDP was lowest in Jamaica at 27 per cent, followed by Dominica Republic at 28 per cent, St Vincent and the Grenadines at 88 per cent, Antigua at 104.2 per cent, St Lucia at 122 per cent, Dominica at 130.2 per cent, Grenada at 135 per cent, and St Kitts at 204.2 per cent.
* Deposits as a percentage of per capita income was lowest in Jamaica at 33.5 per cent, followed by Antigua at 47.9 per cent, St Lucia at 66.6 per cent, St Vincent and the Grenadines at 71.9 per cent, Grenada at 73.7 per cent, St Kitts at 77.7 per cent, and Dominica at 107.2 per cent.
The World Bank report coincides with comments made by finance minister Audley Shaw last week that banks operating in Jamaica made one of the highest returns on equity worldwide up to 22 per cent. He was speaking interestingly at the World Bank's Americas Conference held at the Biltmore Hotel in Miami, USA. The Business Observer sent a written query to the president of the Jamaica Bankers Association for comment, but no response came up to press time.
Earlier this month, Shaw suggested that more banks, preferably international ones, should be allowed to compete in Jamaica and that this would raise standards, create more competitive products and services, and put an end to monopolistic practices. The Jamaica Debt Exchange (JDX) has resulted in banks returning to core lending activity as they are unable to gorge on government paper which supported profits for some 20 years. As a result, many have resorted to increasing fees and charges to make up for lost revenue.
Jamaican banks' return on equity far exceeds that of some of Europe's major banks, according to an article in Caribbean Business Report. Last month, Barclays said that it expects its global retail banking operations to deliver an average return on equity in the period 2010 through 2013 of 13 per cent to 15 per cent. The UK bank also said in a statement that it is targeting its retail division to post a five per cent growth in income within a year in that period, report broadly stable net interest margins, and control costs.
According to Reuter's Steve Slater, European banks' average (ROE) was 18-23 per cent between 2003 and 2007, compared to 12-15 per cent in the mid 90s. Returns are expected to go back to around 10 to 15 per cent this year. The leverage that drove returns higher for a decade is now being reversed as banks take fewer risks, added to by the impact of higher capital and depressed margins in a low interest rate environment.
UBS predicts European banks' ROE will average 9.4 per cent this year, 11.5 per cent in 2011 and 12.9 in 2012. CreditSights analysts say Europe's banks must get used to ROE of under 10 per cent, adding: "We are not sure if the equity market has yet to come to terms with this".
However, in terms of ROE, Europe's banks lag rivals everywhere except the United States and Japan. Average ROE next year for banks will be 18.8 per cent in Asia (ex-Japan), 18 per cent in Canada, 21.8 per cent in Latin America and just eight per cent in the United States, UBS estimates.
The largest banking entity operating in the English-speaking Caribbean is Scotiabank, whose parent is based in Canada. Addressing Scotiabank's AGM held in St John's, Newfoundland in April of this year, executive vice-president and chief financial officer, Luc Vanneste said: "Clearly, the global economy slowed in 2009, and we were not immune. However, we have been very successful at managing through this challenging environment. We delivered a strong return-on-equity of 16.7 per cent".
Closer to home, the President and CEO of Scotia Group Jamaica, Bruce Bowen has ventured an explanation for the current situation in Jamaica. He said that with continuing loan losses, the cost of running the business, 2,200 employees, together with equipment that provides services and products, these costs need to be recovered. He added that personnel was Scotiabank's biggest cost, running at 45 per cent of non-interest expenses.
Then comes premises, technology and communication. "The question confronting all banks in Jamaica is, how do you get the network infrastructure more efficient in order to reduce spreads?" said Bowen.
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