By McPherse Thompson, Assistant News EditorTHE BUSINESS sector has been demanding fewer bank loans because of very high interest rates, which has made it increasingly difficult for them to make sufficient and sustainable profits, according to Aubyn Hill, managing director of the National Commercial Bank (NCB).
He said that was especially so in view of a possible trending down of consumer demand because of recent increases in taxes, including broadening of the General Consumption Tax (GCT) base, which would push up costs.
"As we deal with the volatile present and the uncertain future, there is a bunch of economic and business conditions that present themselves as an acute set of challenges to your bank," Mr. Hill told shareholders at the annual general meeting at the Pegasus Hotel in New Kingston on Monday.
LOWER LOAN DEMAND
He said "the difficult condition of the country plays on the minds of investors and businessmen alike and will tend to manifest itself as lower loan demand in banks."
Mr. Hill, who later acknowledged a shareholder's observation that NCB was one of the biggest traders in the foreign exchange market, also said "the slide of the Jamaican dollar against most foreign currencies, which resulted from the uncertainty surrounding the fiscal condition of the country ... will affect business sentiments and behaviour."
Such heightened uncertainty, he said, tended to increase the risk of business practitioners. "Many business houses will seek to throttle down their activities, and your bank will have to be extremely judicious about the booking of creditworthy business transactions as we go forward," he added.
Mr. Hill said that in view of the low private sector loan demand and the economic risks that would impinge on the successes of businesses, NCB's board has decided to take a very careful approach to the lending of money at this time, but they still expected to grow.
Every effort was being made, he said, to grow the liability side of the bank's balance sheet by rearranging its deposit book and, over time, move away from a significant dependence on short-term fixed deposits.
DEPOSIT BASE
As part of the efforts to grow its deposit base, he said, the "NCB Savings Bonanza" was launched a few weeks ago. According to Mr. Hill, the new product has found acceptance among many of the bank's existing customers, as well as brought many new customers.
NCB was seeking to grow the credit card side of the business, as well as cash management, a new product created as a service to its corporate customers. It was also seeking to expand its remittances business, which was recently launched under the name 'Zip Cash' in the Cayman Islands and which, the bank said, it would also be promoting in England, Canada and the United States very soon.
The managing director said they were taking steps to reduce the bank's high cost to income ratio, which stood at 75 per cent, as part of the effort to increase efficiency. This later led one shareholder to question a $37.5 million compensation to a former manager of NCB for loss of office.
However, Mr. Hill said "the settlement was done at the level of the office I now occupy and whenever this happens, this is the normal costs that would apply." Chairman Michael Lee-Chin added that NCB, which he acquired from the Government in March, last year, negotiated with the person in question and arrived at that settlement "in the best interest of the bank."
ACCOUNTABILITY
Mr. Hill also said the bank recently restructured its management "into clear and discreet functional areas" to ensure that individual and divisional accountability became normal occurrence in everyday business.
He also disclosed that NCB was changing its staff assessment format to make it a more quantitative and empirical base measure to ensure that bias and subjectivity were removed from the evaluation process.
In terms of NCB's social contributions, Mr. Hill said the bank recently agreed to donate $15 million to Kingston City Centre Improvement Company, which he serves as finance director. The bank has also pledged $3.5 million to the expansion of the Tony Thwaites Wing at the University Hospital of the West Indies.
