Ashford W Meikle, Business Reporter

Although he declined to give a specific date, citing regulatory disclosure requirements, general manager of Pan Caribbean Merchant Bank, Henry Pratt, says that he expects the financial institution to fully complete its conversion to a commercial bank before the end of the year.

"We are working towards it," Pratt said in a recent interview with the Financial Gleaner.

The second largest of the mer chant banks, with an asset base of almost $8 billion, Pan Caribbean was granted regulatory approval last year by the Bank of Jamaica to convert its licence to a commercial banking entity.

In the past the bank's top executives have argued that the conversion to the commercial bank will allow Pan Caribbean to provide new services to its clients on both sides of the balance sheet as it competes in an increasingly competitive finance industry.

For example, on the asset side it will mean that it will be able to offer overdraft facilities and lines of credit while on the liability side it will be able to offer chequing and deposit account facilities.

"There are constraints when you operate as a merchant bank. Deposit products, for example, are not as attractive as in a commercial bank. In a merchant, for example, we can't offer demand deposit products once a customer deposit funds, it has to be held for a minimum of fourteen days by law," noted Pratt.

"Once we become a commercial bank, it will allow us to offer more attractive products and on the lending side we will be able to offer overdraft facilities so we will grow our credit business from that side as well."

Indeed, growing its loan portfolio will beimportant to the bank, which counts among its clients Rainforest Seafood, Margueritaville, and International Aircraft Management (which recently built the private jet terminal at Sangsters International Airport) if it is to carve out its own niche in the $150 billion loan pie of the commercial banking industry.

Once it converts its licence PanCaribbean will become Jamaica's seventh commercial bank, and based on current asset base, will enter the industry - which has a total asset base of $438 billion - as the smallest of the lot.

Citibank, currently the smallest, has total assets of $14.5 billion while the country's largest, National Commercial Bank, has an asset base of $168 billion.

However, PanCaribbean's advantage lies in the fact currently almost half of its assets is concentrated in its $3.7 billion loan portfolio (compared to a Capital and Credit which lends out less than 20 per cent of its asset base). If it carries over this mix as a commercial bank, it will better the industry average of 35 per cent and well ahead of its peers such as NCB, Citibank, Scotiabank and FirstGlobal.

Still, concerns have been raised that PanCaribbean is entering an industry that is crowded, a view Pratt dismisses as he offers an insight into the type of operations he will be running.

"I think in Jamaica people are constrained by the image of a commercial bank and asking themselves, 'one more; what is one more going to do?' Well we are not looking to compete with BNS or NCB [and] we are not looking to replicate them. We are certainly going to be differentiating ourselves and one of the reasons why we have taken so much time to come to the market is that we are designing a bank that is going to be different. Certainly we would not be doing it if we felt that it would not allow for us to increase our customer base or offer value to our existing customers and new clients as well."

All five of the current merchant bank offices islandwide will be converted to commercial bank outlets including its Knutsford Boulevard head office.

"Substantial changes to the physical layout of the those branches [have been done] and as part of the transition we will be investing in infrastructure .... we took over some additional spaces in the PCFS building in New Kingston," noted Pratt.

Pratt, who is expected to head the commercial bank, admitted that personnel changes have had to be done to ensure a smooth transition to commercial bank operations. "We have been training our staff ... and over the last two and half year we have been hiring people with commercial bank e from vice president right down."

But, he declined to say how much the operations would cost the PanCaribbean group, which is seeking to raise capital later this year by way of an issuance of some 15 million preference shares once the resolution is approved by shareholders at PCFS' annual general meeting next month.

ashford.meikle@gleanerjm.com