GSB Credit Union plans to expand into Montego Bay and May Pen later this year, as well as refurbish its head branch to attract more clientele, general manager (GM), Garrett D'Aguilar, told shareholders at the cooperative's annual general meeting (AGM).
"We are still in exploration stages - before we had never launched out - but now we are negotiating with some government offices to see if they have extra office space which we could occupy," he said. "They'll be like outlets as all processing will be done in Kingston."
Adjusting to change
The cooperative decided to target these urban centres because of the high concentration of government workers in the towns; May Pen, for example, is the regional tax administration centre for central Jamaica.
The general manager argued that GSB has to continue its process of transformation if it hopes to survive in an increasingly competitive environment as well as in an industry that will have to adjust its operations with the pending BOJ regulations, particularly as they pertain to liquidity and capital requirements.
The theme of change was the common thread running through D'Aguilar's presentation at the AGM as he outlined four principal reasons for transformation -the changing profile of customers, increased competition, and keeping pace with technology changes, as well as the fact that poor quality affects the bottom line.
As part of its transformation process, the GM said the cooperative would have to get a handle on its costs, which last year sliced into the credit unions earnings.
Dip in net earnings
While GSB's gross profit increased by eight per cent, to $207 million, for its financial year to December 31, 2006, a 13 per cent hike in operating expenses - which climbed to $157 million - dragged down the year over year net profit by some six per cent, to $50 million.
Income from the cooperative's core business - interest income - rose by nine per cent to $261 million.
"One of my strategies is to work with management consultants to do a process reengineering [to identify inefficiencies]. We have some room for improvement in our operations," D'Aguilar admitted.
He pointed that a huge factor behind the credit union's dip in its net earnings had to do with the fact that, with declining returns on its investment portfolio because of the reducing interest rate regime, it switched its income from investments to loans which had expenses associated with that move as well as delayed start of its loan sales programme.
With this switch, its loan portfolio grew by 27 per cent, which caused a 16 per cent increase in interest income from loans. In 2005 interest income contributed almost 68 per cent to revenues, but climbed last year to 74 per cent.
One of the major push of the credit union this year will be to capture business from its high net worth individuals through our senior transformation account representatives (STAR) who will target clients for deposits and loans from $250,000 upwards.
"They will be responsible for the retention, expansion and servicing of assigned GSB portfolio, operate throughout the island expanding reach beyond the Kingston Metropolitan Region É they'll be personal bankers," said the general manager.
With an asset base of almost $1.8 billion - of which almost 70 per cent, or over $1.2 billion is concentrated in loans - the 60 year old GSB is the oldest operating credit union in the English-speaking Caribbean.
ashford.meikle@gleanerjm.com
