FirstCaribbean hiking interest rates
FirstCaribbean International Bank (Jamaica) Limited (FCIB) will be hiking the interest rate on existing variable rate loans by 50 basis points or 0.50 per cent on November 1 as the Bank of Jamaica (BOJ) continues to hike its policy rate amid high inflation.
The rate hike will only be applied to small business loans and mortgages along with personal and small and medium-sized enterprise (SME) clients. FCIB Jamaica has retail and business banking as one segment of its operations and corporate and investment banking as the other segment. This action by FCIB Jamaica leaves the Bank of Nova Scotia (Jamaica) Limited, The Scotia Jamaica Building Society and Citibank NA – Jamaica as the only deposit-taking institutions which have not announced a broad rate hike on variable rate loans for all of its customers or a specific segment.
“Clients are being advised of this adjustment via direct mail, notices in our branches and our online banking platform. The decision to increase rates at this time was not taken lightly. However, over the past several months the Bank of Jamaica has significantly increased its policy rates, in response to rising inflation. Although our rates will be increasing, we pride ourselves for being among the lowest and one of the last FIs [financial institutions] to adjust its rates,” said FCIB Jamaica Managing Director Nigel Holness in an e-mail to the Jamaica Observer.
The BOJ’s policy rate had remained at 0.50 per cent from August 2019 to 2021 which was a historic low in modern-day Jamaica. However, based on the expectation that inflation would continue to breach its target range of four to six per cent, the BOJ initiated a series of rate hikes to combat inflation along with tightening its accommodation stance. Eight rate hikes later and the policy rate stands at 6.00 per cent as of August 19 with the BOJ’s next Monetary Policy Committee meeting set for September 29.
Point-to-point inflation peaked at 11.8 per cent for April but has since trended down to 10.2 per cent as of August. While this trend might appear to be welcoming, the point-to-point mark remained unchanged from July with May and June at 10.9 per cent. This remains well outside of the BOJ’s range as it continues to act as an independent central bank. The BOJ acted in the foreign exchange market last Thursday and Friday with US$30 million on each day with its BOJ Foreign Exchange Intervention & Trading Tool (B-FXITT).
JMMB Bank (Jamaica) Limited, Sagicor Bank Jamaica Limited, The Victoria Mutual Building Society and Cornerstone Trust and Merchant Bank Limited all announced this year that they were increasing their variable interest rate loans up to a maximum of 150 basis points (1.50 per cent). JN Bank Limited hikes rates by 0.25 to 0.50 per cent while National Commercial Bank Jamaica Limited personal and small and medium-sized enterprise (SME) clients faced an average hike of 1.14 per cent with the range from one per cent to 1.75 per cent. First Global Bank Limited raised interest rates in July on variable rate loans and recently e-mailed its customers that it would be raising the interest rate on its Visa Classic Credit card by 0.50 per cent from 48.85 per cent to 49.35 per cent on October 1.
All eyes will be on the United States Federal Reserve’s open market committee on Tuesday and Wednesday as it decides on the action to deal with multi-decade high inflation. The Fed has done four rate hikes so far this year including two 75 basis points hikes in June and July. Fed Chair Jerome Powell’s eight-minute speech at Jackson Hole, Wyoming, sent US and global financial markets tumbling on August 26. The stock markets in the USA have been down last week after inflation data came out at 8.3 per cent compared to the 8.1 per cent consensus estimate by many analysts. The target inflation level in the USA is two per cent.
FCIB Jamaica’s total assets were $140.22 billion as of June including $72.63 billion in loans and advances with deposits at $97.61 billion. Loans in the commercial banking sector stood at $1.05 trillion with total assets at $1.75 trillion. FCIB’s parent company saw an eight per cent rise in total revenue to US$432.87 million with net profit attributable to shareholders up 40 per cent to US$122.55 million. FCIB’s total assets were US$13.60 billion with US$6.58 billion in loans as of July 31.
“We continue to experience a steady increase in demand for credit facilities since the reopening of the economy, which suggests that clients’ financial circumstances have been improving. This is expected to positively impact the quality of loan applications as we go forward,” Holness closed.