CIBC FirstCaribbean International Bank (Jamaica) has led the way with a number of innovations that are taking hold on the Jamaican banking landscape. It was the first to offer a Visa Debit Card and to lead the way with a mobile banking offering that allows its customers to monitor their accounts on their handsets.

The bank has not trumpeted its successes, opting to remain low key. Last year Nigel Holness took over from the esteemed Clovis Metcalfe as managing director. What are his thoughts on the last year as managing director and how does he regard the performance of the bank?

Speaking with Caribbean Business Report from the headquarters of CIBC FirstCaribbean (Jamaica) at Knutsford Boulevard, New Kingston, Holness said: “This last year has been one of excitement. Yes, there have been challenges, particularly with the global economy and the downturn here at home, but with the team that I have around me who are doing a great job of driving the customer experience, the sky is the limit. We are leading the way in Jamaica in introducing innovative products and services.”

Holness has taken over at a time when the bank has undergone a rebranding exercise. It has returned to its roots and has re-established a distinct connection to CIBC.

Holness explained: “We are connected to CIBC which is the fourth largest bank in the world. We are lifting the FirstCaribbean brand together with that of CIBC. Many people associate FirstCaribbean with CIBC, but the fact is the service remains the same. What is critical for us is customer loyalty.

“Recently we had an event for Peter McConnell who has now retired from our board of directors. His family has been banking with us from 1921 — that’s 90 years. At a reception we had for him he read some notes from his father’s journal about the first loan he got from us (back in 1921), and the manager’s response to that loan. That kind of service has not changed. Peter (McConnell) explained to us that he operated the first drive-in teller for CIBC which was an innovation we introduced to the Jamaican market.”

Holness concedes that the bank has been quiet in the marketplace and that is because it wants to make sure that it gets it right. He explained that the products are first rolled out to its staff as a test exercise before being presented to customers, and then the bank solicits feedback from them in an effort to maintain quality and standards. Great care is taken in how CIBC FirstCaribbean (Jamaica) pitches its products and services.

Visa Debit

It was the first banking entity to bring Visa Debit to Jamaica, and other banks are now jumping on the bandwagon. The intention here was to open the door to those persons who cannot access a credit card but were looking to use funds abroad.

“One can access cash abroad from their account using any of the over 17,000 ATMs across the world. This card opens doors for persons to shop online.

“Some people do not have the financial discipline to manage a credit card but the visa debit is the next best thing. It is an excellent product to manage one’s affairs. You can go away and know exactly what you can spend; it gives one flexibility. Visa provides access to 25 million merchants worldwide and there are 750,000 ATM locations that carry the Visa logo,” said Holness.

The managing director of CIBC FirstCaribbean (Jamaica) notes there has been considerable pickup of the card. Significantly, non-customers have besieged the bank, wanting the product. One of the benefits of the card is that there are no annual fees.

Mobile banking

There has been much discussion about mobile banking in Jamaica and many institutions are watching closely how the Bank of Jamaica and other regulatory bodies will address its implementation. Again here, CIBC FirstCaribbean was the first to launch the services among the major banks in Jamaica.

Holness explained: “We differentiate ourselves from the competition because ours is truly a mobile banking platform. Any customer with any type of phone — it doesn’t have to be a smart phone — can get access to their banking information from that phone. We use text messaging and encrypted messages once your phone is registered as a user to your accounts. So if you lose your phone, the person who finds it cannot have access to your funds.

“This means that our banking halls no longer have to be congested as a result of things like checking balances. With mobile banking there are alerts with minimum and maximum balances. One can also do transfers between accounts and with our mobile banking offering it can bring up one’s last five transactions on the phone. It’s a huge amount of information at your finger tips.

“If one decides not to go the mobile banking route and has a BlackBerry, then there is always Internet banking.”

As far as mobile banking is concerned, the Jamaican operation is still under Phase One. There will be a Phase Two but there still needs to be an overarching policy from the regulators. There is every effort being made to protect the public in this regard. Banks will have to meet the expectations and the requirements set by law as laid down by the regulators.

“Our customers can be confident that the regulators have approved what we have launched in the market. What I can tell you is that people are utilising the technology and our banking halls are a lot less crowded than they were seven years ago. We now have to continue to become innovative because the customer demand patterns are changing continuously. The idea is to get all of our customers onto mobile banking, We must now migrate our customers from the banking halls onto a mobile banking platform.

The bank has made a concerted effort to inculcate a cross-sell culture. It no longer relies on selling a savings account but is intent on making its customers aware that they can leave with a mortgage, a credit card and a debit card and a slew of other products and services.

Mortgages

On July 1, 2011, FirstCaribbean reduced its mortgage interest rates and announced that first-time mortgage applicants with an existing relationship with the bank or its building society will enjoy a mortgage rate of 10.4 per cent fixed for three years and variable thereafter.

For non-account holders, the Building Society reduced its rate by 2.15 per cent to 11.85 per cent. More recently it was announced that the housing stock was insufficient to meet demand, and furthermore, great swathes of the population are unable to both qualify and service these loans despite falling mortgage rates. So how does FirstCaribbean propose to address this situation?

“For Jamaicans the goal has always been to own your own home and we at the bank must help them realise that dream. We have begun to tailor our mortgage products every step of the way. Our new 10.4 per cent rate is very competitive as far as first time-home owners are concerned. We don’t have a lot of fluff about people qualifying for this rate but obviously you will have to be banking with us. For clients who are not customers of the bank the rates are a little higher but they are still very reasonable. For the next tier of customers like those looking to acquire a second home, we offer 7.8 per cent. It’s all about whether customers’cash flow can meet those monthly obligations.

“We were the first to introduce the international US mortgage product in the market and it has proved successful. As the global economy rebounds we expect to see renewed interest in this product. Yes, the pickup has fallen off over the last three years but this product has tremendous potential,” said Holness.

FirstCaribbean is looking to beef up its wealth division and is preparing to launch a number of new products, subject to regulatory approval. It will be enhancing its offer on long-term savings and will be targeting the young, getting them to begin saving as early as possible while at the same time demystifying the bond market and the equities market. Holness points to the traction garnered with its derivative products and its ability to go to corporate clients and help them to better manage risk, particularly with commodities. He adds that the bank has made a lot of headway with its energy derivative. He believes there is a component in energy bills that can be hedged and his team has done the correlation between that component and oil prices and said to corporates, this is one way of protecting against future increases in oil.

FirstCaribbean has also introduced interest rate swaps and options calls. Holness does not believe that banks in Jamaica have done a good enough job of exposing corporates to these products and explaining to them sufficiently what they can accomplish and how best to employ them.

Improved operating income

Total operating income improved by nine per cent year on year, primarily due to higher non-interest income, while loan loss impairment fell by 32 per cent, but this was fully offset by an increase in non-interest expenses year on year. Net interest income and non-interest income rose over prior year by four per cent and 29 per cent respectively. Higher non-interest income was driven mainly by securities gains. Non-interest expenses increased by 22 per cent over the comparative prior year period, due primarily to increased staff costs. Stockholders’ equity stood at J$8 billion as at July 31, 2011, and represented a risk-based capital ratio of 21 per cent which exceeds the minimum requirement of 10 per cent stipulated by the Bank of Jamaica.

For the nine months ended July 31, 2011, net income amounted to J$324 million, compared to J$379 million for the comparative period last year. Total assets came to J$51.2 billion, a marginal increase on last year. Retail banking fared better than last year, raking in J$1.98 billion as opposed to J$1.63 billion for the same period last year. Corporate Investment Banking’s total revenue registered at J$853.1 million for the period under review, a notable fall against the J$1 billion posted for the nine-month period of 2010.

“If you look at our balance sheet compared to a year ago we have not grown significantly. That’s because we have been very purposeful in what we are doing. Our policies and procedures are geared toward going after new business. We have to set the platform right and that way we measure what is going on with the economy. In an economy that is turning down we have to be very careful. A business plan may look good and cash flows strong, but things can turn the other way. We have done a lot of work with our corporate clients and in many instances we have been looking at their balance sheets and ways in which we can refinance their existing debt. We have been very focused in this regard and been very principled in our approach. We are not going after everything that goes by, but rather we are being very selective and prudent in the corporate sphere.

Governed from Barbados?

One of the criticisms levelled at FirstCaribbean is that it lacks real autonomy and that it has to constantly dance to the tune played by its masters in Barbados. If one wants a loan, the application has to be assessed and processed in Barbados which has no understanding of the local landscape or customers of the local entity.

Holness refutes this and took time to correct this perception.

“Yes, our regional office is in Barbados. NCB’s head office is in Kingston but it has its branches all over the island where data flows to and through. We have approached things differently. We have a centralised treasury operation in Jamaica and our centralised risk assessment team in Barbados. The fact is it is one team. Irrespective of where they are, our customers should not see any difference in our overall service. That in itself answers the question about us being Barbados centric. We are Jamaica-focused and have concentrated on the domestic market with a local team. Our professionals have the necessary authority to make decisions on the ground. Yes, our credit risk adjudicators are in Barbados but similarly a branch manager at NCB has to send a credit assessment into his regional office for adjudication. It’s the same process.

“What we have been doing is improving the turnaround time to ensure our customers are hearing from us expeditiously. So the quality of service is improving in that regard. We continue to challenge ourselves and raise the bar on each occasion so that we can improve on delivering to our customers on a timely manner.”

FirstCaribbean is beset by stiff competition from all sides. It has to contend with a resurgent NCB which reported net profits of J$12 billion last year. Scotiabank continues to maintain its dominant position and Royal Bank of Canada has made it clear that it intends to be market leader in a short space of time. JMMB has acquired Capital & Credit and will now have a merchant banking licence. Despite all this competition CIBC has remained a constant on Jamaica’s banking landscape, but where does it fit in now?

“We continue to remain the consummate banker. We have not to date had any ripples and as you know we were unscathed by the FINSAC debacle. Right now we are preparing for what is ahead of us. We are seeing the economy stabilising and the signals are moving in the right direction. The products and services at FirstCaribbean are in place to address the uptick in the economy and we have geared ourselves to go into the market and carve out that niche for ourselves. We are not fazed by what the competition can do. I am not threatened by the larger new players coming onto the scene because we know what we have to do and we have the support of our regional management team and also the entire CIBC machinery behind us. That makes us a winning proposition in Jamaica.”