May 2014 Financial News

First Global profit up 38% as loans spike

May 07, 2014

First Global Bank Limited (FGB), owned by the GraceKennedy group, says its 38 per cent improvement in earnings last year were not due in any significant way to higher fees and interest rates charged, but to improvement in the volume of business.

The bank's profit rose from $386.75 million to $533.48 million.

President Maureen Hayden-Cater cited the three main drivers of performance, "in no particular order", to an increase in net interest income due to growth in the bank's loan portfolio; continued margin and expense management; and gains from securities and foreign-currency transactions.

First Global's loan book increased in value by more than $2 billion to $15.8 billion at yearend December 2013. Net interest income earned that year rose by $200 million to $2.7 billion.

First Global is Jamaica's No. 5 of seven commercial banks by assets. It holds a 4.4 per cent share of the loan market, according to industry data published by the central bank.

The composition of the market will change once the acquisition and subsequent merger of RBC Royal Bank Jamaica with Sagicor Bank Jamaica is finalised. If the central bank approves the deal, FGB will become No. 5 of six banks.

Hayden-Cater said First Global's expanded loan portfolio, up 17 per cent, reflected organic growth, that is, new business.

"As is customary, interest rates are reviewed and adjusted periodically in keeping with changing market conditions and trends. The year 2013 did not reflect any significant changes in this practice," she told Wednesday Business.

The bank president said the trend is expected to continue this year.

"The loan market continues to be very dynamic. The bank remains open to consider any and all types of loans, once they meet the bank's overall risk requirements," Hayden-Cater said.

Cash reserves down

The bank closed the year with much thinner cash reserves - down from $2.23 billion to $824 million - which GK group CEO Don Wehby had previously indicated was related to higher lending activity.

The bank's asset base expanded from $31 billion to $34 billion, while customer deposits climbed 16 per cent from $18.5 billion in $21.5 billion - accounting for six per cent of the market.

Hayden-Cater observed that the National Debt Exchange (NDX), which involved a cut in coupons on GOJ bonds and a reduction in general market interest rates, should have resulted in a contraction in profits, all things being equal.

"However, the growth in the loan portfolio, and non-interest income, along with effective expense management served to provide an offset to the negative NDX impact during 2013," she said.

Still, within its investment portfolio, the bank has made risk-related adjustments, though Hayden-Cater said this is a normal activity.

"The bank, on an ongoing basis, reviews its investment portfolio, and earning assets in general, by assessing and making adjustments to the relative risk-reward trade-offs, and portfolio concentration. The actions taken during 2013 were consistent with this practice and resulted in a healthier, more stable balance sheet, consistent with the company's risk appetite," she said.

"The bank envisages that repos from other financial institutions will continue to form part of its funding mix, albeit at a reduced level," she adds.

In the year ahead, First Global aims to build on its financial performance through smart use of its electronic banking platform 'Global Access 2.0', good customer service, as well as competitive products targeted, for example, at the productive sector, Hayden-Cater indicated.


Source:
Avia Collinder, Business Reporter
avia.collinder@gleanerjm.com
Jamaica Gleaner
Wednesday May 7, 2014

http://jamaica-gleaner.com/gleaner/20140507/business/business8.html