By Lavern Clarke, Staff ReporterTHE market for consumer loans has opened up in a big way, with three of the largest commercial banks jockeying for share.
Bank of Nova Scotia dropped almost four percentage points off its add-on rates Monday, moving from 17.5 to 13.75 per cent; while its annualised rate dropped from 29.84 to 24 per cent.
Banking sources say it was a direct response to RBTT, whose loans are now sold at 13.1 per cent add-on and 23 per cent annualised. But BNS disagreed, saying it recognised that banking customers tend to maintain several relationships with their bank, while noting that the move was more a response to the needs of its own market.
In making the point, Marie Powell, general manager for credit sales, reminded the Financial Gleaner that BNS remained the market leader for loans. In 2000, it had $21.5b in loans on its books, but triple that in deposits of $60.4b. National Commercial Bank (NCB) was not prepared to release those figures ahead of its annual report which is due out in another week, said marketing manager, Garret D'Aguilar.
However, the BNS' full page advertisement in the Sunday Gleaner announcing its new rates, while naming several areas in which it accepts loan applications, also incorporated a luxury motor vehicle - suggesting a subliminal appeal to car loan seekers that both RBTT and NCB are appealing to directly.
Additionally, both NCB and RBTT (formerly Union Bank) are recent re-entrants into the market, and would not have the same share as BNS which remained a lender during the period that its competitors were attempting to streamline their operations.
RBTT, which acquired Union Bank earlier this year, had announced its presence in the market at the end of July, coming into the market with aggressive announcements of slimmer rates on personal loans.
Marketing manager, Richard Kildare, said the strategy stemmed from a perceived need in the market for more consumer loans which RBTT quickly moved to fill. But commercial banks make their earnings mainly from loans, and the bank's objective was also to increase its loan portfolio, Mr. Kildare said.
In August, NCB handed back autonomy to its branches to decide on consumer loans, following its successful raising of US$125m on the open markets.
The bank, which had ceased lending except for "maintenance loans" to customers already on the books, following the bailout it got from Government, found that it was facing a liquidity problem and had to get back into the market if it was to start earning income. The timing, according to D'Aguilar, was coincidental to the moves by RBTT.
D'Aguilar said Wednesday that NCB was the first to enter the market with automobile loans in October. He adds that other strategic alliances are in the making, but held back on details in order not to alert the competition.
The bank, once Jamaica's largest in terms of its asset base, is now lending at 16.5 to 19.5 per cent add-on, or 26 to 29 per cent annualised. Cash secured loans are offered at a prime rate of 22 per cent.
The 15 per cent add-on or 26.62 per cent annualised rate advertised is a specific package applicable to automobile loans only.
According to Kildaire, activity at the bank's branches indicate that customers are taking up loans, but it was too early to say whether they were being hurt by the lower rates in the market.
Neither of the two banks was willing to say immediately how much business they had amassed. RBTT, which has had three products on the market, said its latest offer ends December 31, and will do its analyses then, said Kildare; while D'Aguilar said NCB was expecting its branch reports to come in within two weeks.
Selected rates on personal loans
Add-on Annualised (%) (%)
BNS 13.75 24.00
NCB 16.50- 26.00-
19.50 29.00
RBTT 13.10 23.00
