JN Bank Inks Pact With Teachers - Targets Indebted Public Workers For New Business

Publication Date: 
Monday, March 4, 2019

Jamaica National Group is going after new business from the public sector and is making its approach through the bodies that represent them.

JN’s banking subsidiary has already signed a memorandum of understanding with the Jamaica Teachers’ Association, which represents approximately 20,000 educators, notwithstanding that the group has its own credit union, which also offers financial services.

JN Bank, which is the third largest of Jamaica’s commercial banks, is looking for a channel through which to grow its loan book beyond its large mortgage portfolio. Based on the most recent central bank industry data, JN Bank’s loan portfolio was estimated last September at $84 billion or 12 per cent of a market that was valued at $682 billion.

The JTA Cooperative Credit Union, JTACCU, with which JN Bank will be competing, has assets of $13 billion, inclusive of a $9-billion loan book and deposits of $10 billion, representing the savings of teachers. The JTACCU’s membership was estimated at 27,948 at the end of 2017.

JN Bank is an old institution but only entered the commercial banking arena two years ago and is seeking avenues to grow.

“One of the first areas we decided to look at is public-sector workers,” said JN’s chief for business banking and public sector engagement, Ryan Parkes. “The JTA is one such entity ... . We have been able to execute a partnership agreement with them that would be able to cater to their needs holistically.”

President of the JTA Garth Anderson confirmed on Friday that an agreement was signed with JN Bank for an offer of products and services under which the JTA would promote the bank’s offerings to members. He also said that the JTA credit union was not involved in the initiative.

One of the immediate services that JN Bank is offering is refinancing of debt already acquired from ‘alternative’ lenders, an apparent reference to microfinancing companies.

“What we have recognised over the last few years is that the alternative lenders’ loan facilities are priced at significantly higher rates than those offered within the formal banking sector. When you examine their [workers’] pay slips, the alternative lenders are eating away significantly at their net pay – in some instanced in excess of 40 per cent per annum,” said Parkes.

“Anecdotally, a lot of those lenders thrive because of the relative ease of access to funding,” he said.

JN Group, through subsidiary JN Small Business Loans, is also in the microfinancing business, with loans that are priced at 52 per cent per annum.

Asked whether the refinancing strategy would end up cannibalising business in which JN itself is already engaged, Parkes said “not necessarily” as the plan is for the sister operations to “collaborate and complement each other” under the initiative.

JN Small Business’ loan cap is typically around $10 million or $15 million, depending on the borrower, while the bank would lend above those limits, he said.

“It is important to note that given the fact that we are a group of companies, JN Bank, from time to time, routes transactions to JN Small Business, given the ticket size of the loan requested, and at the same time, JN Small Business refers transactions to the bank,” Parkes said.

“What you find is that the bank is able to offer additional products to complement the offerings from JN Small business. These include chequeing accounts, credit cards, overdrafts, etc.”

Other services to be offered to teachers and other public-sector workers would include loan facilities for education, debt consolidation, as well as a pitch for mortgage loans to finance property acquisitions, including the JN Mortgage Plus product that lends up to 110 per cent of the value of the property.

The public-sector outreach is expected to lead to an upsized portfolio of unsecured loans, but JN would not say how much more business it is targeting in this regard. Parkes said that the associated risks would be managed by using credit bureaus to track payment history, among other measures.

“In the future, the bank will also be looking at risk-based pricing to mirror the risk associated with a particular borrower,” he said.

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