Jamaica Mortgage Bank divestment set for fiscal year end

GOJ to retain partial stake

BY AVIA COLLINDER Business reporter collindera@jamaicaobserver.com

Tuesday, August 09, 2016

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Courtney Wynter, General Manager of the Jamaica Mortgage Bank (JMB), said divestment of the bank is expected to be concluded before fiscal year end, with consummation of the new arrangement expected latest April 2017.

The Government of Jamaica is seeking to convert the Bank to a commercial entity with equity financing under a public/private arrangement.

According to Wynter, this means privatising the Bank with the Government still having a stake.

The General Manager told the Jamaica Observer that several entities have expressed interest in acquiring a stake in the mortgage lender, but their names cannot be disclosed at this point.

Selling points in the coming transaction, the CEO said, is the extensive (over 45 years) experience in construction financing and project management "that can be of significant value to any lending institutions engaged in risk-based interim construction financing".

Wynter said a three-year plan to return the mortgage provider to profitability has been delivering results.

The plan was implemented in 2014, with the following primary areas of focus: growing the loan portfolio and introducing new services, finding more innovative ways to fund its primary market business post-NDX, while containing overall cost and aggressively pursuing collections on its non-performing loans.

Since implementation of the plan, the Bank has experienced two consecutive years of operational improvements, resulting in a net reduction in bad debt, increased income and profitability, Wynter outlines.

Additionally, "the Bank’s promotion of its 97 per cent mortgage has resulted in financial institutions (FIs) now offering 95 per cent and 97 per cent mortgages, at as low as 8.45 per cent interest rates" he told the Business Observer.

Although the Bank’s annual report is not yet tabled, the general manager said highlights of the year ended March 2016 include total income for JMB of $259 million, which was 18.6 per cent higher than 2014/2015.

Likewise, interest income from construction loans was 21.5 per cent higher than the previous year.

Gross operating profit for 2015/2016 of $93M was 140 per cent higher than the previous period.

For the year just ended, the mortgage bank delivered net profit of $78 million – 203 per cent higher than the previous period, Wynter said.

In relation to loan book growth, the general manager said the 2015/2016 active construction loan book was $1.5 billion compared to $1.6 billion in 2014/2015.

That outcome, he noted, was slightly lower due to higher than expected repayments.

Meanwhile, the agency head said the mortgage bank has also made inroads in the area of bad debt collection.

The bad debt principal loan portfolio was reduced by more than $200 million year over year to $814 million at year end March 2016.

"The Bank recovered close to half billion dollars over the last two years, including foreclosure on Adventure Plaza in Portmore," Wynter noted.

He disclosed that, as at the end of fiscal 2015/2016, with the exception of $31 million aged within one year, all non- performing loans (NPLs) at March 31, 2016 were "legacy bad debt loans, with two projects responsible for over 50 per cent of the total".

For the 2016/17 fiscal year, the bank recovered $98 million of its targeted $387 million in the first quarter of this fiscal year, Wynter said.

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