• JDX expected to take toll on revenue streams

The negative impact of the much vaunted Jamaica debt exchange initiative (JDX) is forcing the National Commercial Bank of Jamaica Group Limited (NCBJ) to fire between 150 and 200 of its over 2,400 workers despite posting over $10.2 billion in profits last year.

Speaking at a shareholders meeting last week, Patrick Hylton, managing director of the group stressed that the JDX would have an adverse impact on its revenue streams, while stressing that it would be trying to expand its loan portfolio, while compressing costs, particularly staff cost, in order to drive, revenue growth and profitability.

The impact of the JDX on the group’s revenues going forward has already forced it to close and amalgamate certain agencies, while collapsing its Harbour View branch into its Windward Road branch.

Sources say that the redundancies are currently being discussed with the National Workers Union (NWU), which represents the workers, and the Ministry of Labour, in order to ensure that the terms and conditions of the Labour Relations and Industrial Disputes and Employment Termination and Redundancy Payments Acts are fully adhered to.

The group will not be replacing Christopher Williams as managing director of NCB Capital Markets Limited and his responsibilities will be taken over by deputy managing director, Dennis Cohen, while Jennifer Dewdney Kelly’s work as legal and company secretary will be taken over by Dave Garcia.

The same sources say that the group is expected to make an announcement about the redundancies later this week, as it embarks on a strategy, which includes greater use of technology, an increase in its fee-based income and administrative efficiency, as well as the expansion of its loan portfolio, in order drive profitability in a lower interest rates environment.

This environment will make it difficult for financial institutions to continue to make big bucks from investments in government securities. The bank will therefore have to significantly improve its loan to assets ratio from the 28 per cent, which existed last year by providing more funding to the real sectors of the economy.

These include loans to micro, small and medium sized enterprises in agriculture, agri business, tourism, manufacturing, arts and craft, medical tourism, information technology and entertainment, sports and culture.

Hylton conceded that lower interest rates would not automatically lead to an increase in loan demand because this is also dependent on investors expectations about the future, capacity constrains, changes in the rate of consumption, a reduction in the level of crime and indiscipline, as well as anti-social behaviour in the country.

The JDX is a coercive move by the government to reduce interest cost on the budget by a net amount of $30.5 billion by lengthening the maturity profile, while arbitrarily reducing interest rates below the inflation rate.

Inflation jumped to 12.20 per cent on a point-to-point basis in January 2010, compared with January 2009 and the rate is projected to zip to about 15 per cent by the end of this fiscal year, compared with the rate of 11.5 to 13.5 per cent projected for by the beleaguered Bruce Golding administration. ­