Bank fees rise faster than top-line income
F EES AND commissions at the three banking groups that have so far disclosed their financial performance for last year, have grown faster than interest income, which is core to banking operations.
National Commercial Bank Jamaica’s (NCB) banking fees grew 17 per cent year-on-year, or twice the pace of interest income, which rose by eight per cent.
At Scotia Group Jamaica, interest income was all but flat with a tiny spike of less than 0.2 per cent, whereas the bank collected close to 19 per cent more fees.
FirstCaribbean Jamaica recorded shrinkage of its interest income by close to 10 per cent, while net fees spiked by 8.5 per cent.
FirstCaribbean did not disclose the actual amount of fees collected, just the amounted netted after expenses. But even then, its fee haul still pales in comparison to the big two, NCB and Scotiabank. Its total net collections for services rendered in last year amounted to more than $691 million, up from $637 million in
2012. Comparatively, the big two each
grew fee revenue by more than a billion dollars. Scotiabank reported gross fee income of $8.9 billion last year, up from $7.5 billion; while NCB, which has the
largest banking network in Jamaica,
increased its haul from $8.3 billion to $9.7
billion. Together, the three banks reaped fees of $ 19 billion to $ 20 billion, reflecting healthy growth of close to 18 per cent for the year.
Net profit at NCB and Scotia alone also amounted to a combined $20 billion.
However, revenue from fee sources, even while narrowing the gap, significantly trails interest income, which flows from loan repayments as well as the banks’ investments. NCB made just under $33 billion from interest income, up from $30 billion; Scotia Group grossed $ 29.98 billion, barely changed from $29.93 billion, in a year when financial institutions were hit by a second debt restructuring by the Jamaican Government.
Scotia’s income from securities fell by more than a billion.
BAD YEAR FOR FIRSTCARIBBEAN
FirstCaribbean underperformed with $3.4 billion, down from $3.8 billion in 2012. The fall contributed to what was a really bad year for the bank, which made a loss of $1.3 billion and had to be rescued with a capital injection of $ 7 billion by Barbados- based parent FirstCaribbean International.
The three banks together earned interest revenue of $66 billion in 2013, a mere three per cent annual gain.
The ratio of fees to interest income for the big three was 29 per cent, up from 26 per cent in 2012.
The banks have said previously that fees are needed to defray operating costs.
They tend to update their fee structures annually, and last year they also added new fees.
Scotia introduced a cheque encashment fee of $140 for each of the bank’s cheques; as did FirstCaribbean Jamaica but its charge was cheaper at $ 120, according to the interim report on banking fees produced by the Bank of Jamaica ( BOJ) for Parliament. NCB also introduced a cheque transaction fee of $128.15 and a coin deposit fee of 2.5 per cent for values of more than $10,000, the BOJ said. RBC Royal Bank Jamaica introduced monthly service charges for certain types of chequeing and savings accounts, ranging from $150 to $500 where a prescribed minimum balance is not maintained, the report said. RBC also introduced debit transaction costs ranging from $80 to $ 500 on certain types of accounts if daily balance falls below a prescribed threshold or where a maximum number of debits is exceeded each month, and an internal processing fee of J$ 5,000 on approved loan applications.
Sagicor Bank Jamaica introduced a bearer fee of $400 per delivery and a cash handling fee of $ 2.15 per $ 1,000 on amounts deposited in excess of $1 million.
The BOJ said all commercial banks also reported instances of increases ranging from one per cent to 72 per cent in their schedule of fees between January and October last year.
Citibank Jamaica, for example, reported a 72 per cent increase from $145.63 to $250 for transfer between accounts for corporate customers, and RBC increased its minimum monthly service charge for corporate current accounts by 68 per cent to $500.
The banks also reported that some fees were cut, within a range of one to 68 per cent.
The BOJ report also covered the mortgage banks, which also added and adjusted fees in the period.
The central bank said its analysis would eventually include credit unions when outstanding fees and charges surveys for that sector are submitted.