Jamaica to merge DBJ and EXIM banks
The government looks set to merge two state-run development finance institutions in what sources say is a shake-up of entities within the investment and commerce portfolio under which they fall, by the responsible minister, Aubyn Hill. Talks are...
The government looks set to merge two state-run development finance institutions in what sources say is a shake-up of entities within the investment and commerce portfolio under which they fall, by the responsible minister, Aubyn Hill.
Talks are under way for the operations of the National Export-Import Bank of Jamaica, EXIM Bank, to be rolled into the Development Bank of Jamaica, DBJ.
Hill, the industry, investment and commerce minister, declined to comment on the matter, referring queries raised with him by the Financial Gleaner on the margins of the World Free Zones conference in Montego Bay, earlier this week, to his permanent secretary, Sancia Bennett Templer. Bennett Templer also attended the conference, the three-day sessions of which ended n Wednesday afternoon, with business-to-business engagements running until today.
“That is an operational matter. The permanent secretary deals with operational matters. I deal with policy issues to grow exports and create jobs,” Hill said.
Bennett Templer confirmed that the merger is under consideration, but said she was not in a position to divulge details of the plan. As such, its timeline, expected cost savings, impact on loan portfolios, or management and staff implications are not yet known.
“Consideration is being given to possibly merging the two entities, given their similarities of focus, operations and mandate. However, the detailed analysis has not yet been done, so I cannot say much about it at this stage,” Bennett Templer told the Financial Gleaner.
Considered to be part of the legacy of Edward Seaga, former prime minister and ex-leader of the Jamaica Labour Party, JLP, who died three years ago, the EXIM Bank was created in 1986 as part of the government’s thrust to boost the capacity of local firms to gain a foothold in the export trade, and to finance the importation of raw materials and other inputs for their businesses.
A decade ago, the JLP floated, as part of its political manifesto, plans to merge the operations of Jampro, DBJ and EXIM, a so-called supermerger that got the thumbs up from the business community at the time. However, nothing concrete emerged from it.
Led by CEO Lisa Bell since 2010, EXIM Bank provides a range of short- and medium-term financing instruments in both Jamaican and United States currencies at what it describes as ‘competitive’ interest rates for the productive sector. The institution focuses on financing small and medium enterprises, SMEs, in sectors such as tourism, manufacturing, agro-processing, mining, information and communications technology, and the creative industries.
Last year, EXIM Bank saw the departure of leading businessman Gary ‘Butch’ Hendrickson, the CEO of National Baking Company, who resigned as its chairman. Hendrickson, who is also on the board of the Bank of Jamaica, told the Financial Gleaner that he resigned to focus on his business, other board commitments, and to allow a younger generation of Jamaicans to lead statutory boards.
The current EXIM Bank board chairman is Deveta McLaren, sales and marketing manager at Access Financial Services Limited and former special projects coordinator in the Office of the Prime Minister.
In the most recent audited financials available on its website for the first COVID-19 pandemic year 2020, the EXIM Bank reported total assets of approximately $7.8 billion, roughly the same as for pre-pandemic 2019. However, it made a net loss of $288 million at March 31 that year, compared to a net profit of $123 million for 2019.
For the year, EXIM Bank wrote $400 million in loans, much less than the $637 million it did in 2019. Its net interest income earned nearly halved to $280 million, compared to $495.5 million the year before, on a total loan book of $5.8 billion. At the time, about $2.3 billion of its loans were classified as non-performing, being over 90 days in arrears, with the bank providing for almost $340 million in credit losses.
The DBJ is the government’s wholesaler of credit to the productive sector through a network of approved financial institutions and micro credit agencies that typically earn a markup on low-interest DBJ funds. The development bank also provides assistance to small and medium-sized businesses, or SMEs, through instruments such as loan guarantees, grant funding, private equity support and venture partner matching.
It was created by former prime minister P.J. Patterson during the administration of the People’s National Party in a bid to boost lending, especially to SMEs. The DBJ was itself the product of the merger of the former National Development Bank of Jamaica and the Agricultural Credit Bank of Jamaica. The operations of the National Investment Bank of Jamaica were added to it in 2006.
DBJ’s board is led by businessman Paul ‘PB’ Scott, head of the powerful Musson Jamaica conglomerate, but the bank recently changed its leader with the retirement of Milverton Reynolds, who had been managing director since 2000, and the appointment of management consultant and chartered accountant Michael Shaw, effective April 1. Reynolds remains with DBJ as consulting director on a transitional engagement until June 30.
The most recent audited financial statements available on the bank’s website is for 2018. It then made a profit of $1.2 billion from total operating income of $2.2 billion.
Its total assets at March 2018 were valued at $32 billion, inclusive of a loan book of $19.4 billion. At the time, $1 billion of the loans were impaired.