Ashford W. Meikle, Staff Reporter
TRACEY
DRIVEN BY sexy U.S. dollar product and an aggressive foray into the market, FirstCaribbean International is growing its mortgage business more than three times faster than its competitors, and says that it expects to maintain its approximately 80 per cent expansion in its home loans portfolio this financial year.
"When we annualise it for this year, based on what we are doing now, we project to grow at about 80 per cent this year," said Lenworth Tracey, the general manager of FirstCaribbean Internat-ional Building Society (FCIBS).
"For the past six months we have achieved a 37 per cent growth in new loans in terms of growth balance. If you project from that you are looking at a 70- plus per cent increase which is going to be better than last year [when] the foreign currency loans fully come on stream," he told the Financial Gleaner. "We would have moved, over the last two years, from two per cent to six per cent (share of the market). The question is, where do we go after six?"
Currently, FCIBS is the smallest of the island's building societies with a loan portfolio at the end of March, according to central bank figures, of $2.7 billion. However, that represented a growth of 79 per cent over the previous financial year, when the industry grew by 23 per cent.
The recently-released central bank data confirmed what the head of FirstCaribbean's operations in Jamaica boasted to shareholders at the banking group's annual shareholders' meet at the Knutsford Court Hotel in Kingston last week.
"We're growing faster than we thought," Brady said. "We have the fastest growing loan portfolio in the market. Our growth rate is three to four times the growth rate of our competitor's business."
Indeed, for the review period the country's largest building society, Jamaica National (JNBS), with a loan portfolio of $17.6 billion, grew its dollar value business by 26 per cent, which inched up its share of the $37.7 billion mortgage market market by one-and-half percentage points to 47 per cent.
DIP IN MARKET SHARE
At the same time Victoria Mutual Building Society (VMBS) reported a 15 per cent increase in loans to $13.6 billion, but saw a 2.6 percentage point slippage in its market share to 36 per cent, while FCIBS's nearest rival, ScotiaJamaica Building Society, increased its portfolio by $300 million, to $3.6 billion, for a one percentage point dip in its market share to 9.6 per cent.
FirstCaribbean's mortgage operation received a big boost last year when it introduced a U.S. dollars based lending scheme under which borrowers who have access to foreign currency or are willing to bear the exchange risks, can access loans. One of these is for Jamaicans living abroad or those who live here and may earning foreign exchange. Interest rates of these loans are benchmarked to the London Inter-Bank Offer Rate (LIBOR), plus three per cent.
This would mean a mortgage rate on the foreign exchange loan of around seven per cent, compared to Jamaican dollar rates in the market of around 16 per cent.
A portion of the financing came from a US$20 million (J$1.3 billion) capital injection by the bank's Barbados-based parent company into the Jamaica operation. Bank officials did not say how much of the cash went to the mortgage scheme, but industry sources estimated that it could be as much as a quarter.
REVENUE GROWTH
"We saw this as a way to increase our loan growth and our revenue growth and to be recognised as market leaders for this product," Brady told shareholders at last week's AGM. "We booked our first loan in February. We have a very aggressive target and there are strong deals in the pipelines. It is expected to grow at a very fast rate."
FCIBS as part of this strategy has partnered with developers of luxury units, such as Palmyra and Goldeneye, to provide mortgages for potential buyers.
In addition to the U.S. dollar mortgage facility, market sources say FCIBS has benefited from the fact that it allows the mortgage of a borrower to be up to 50 per cent of his total debt service ratio, as high as 17 percentage points higher than most competitors.
"Our total debt servicing ratio is 50 per cent compared to our competitions, which is 33 per cent to 40 per cent,' Tracey said. "We are not being reckless and saying that someone with a lower salary will get a loan. We look at other factors, such as disposable income, employment history, residency tenure (and) creditworthiness."
