Scotiabank cuts low rates
Published:Friday | May 14, 2010 | 12:00 AM
Scotiabank Jamaica has spliced more than two percentage points off its base lending rate, pushing the cost of its credit to a five-year low, the bank said Thursday.
The move to cut the interest rate to 17.75 per cent on retail credit, which takes effect June 1, comes a day behind strong signals from the central bank that it was bullish on the economy post the International Monetary Fund (IMF) agreement, and that for now the financial sector was weathering the effects of the Jamaica Debt Exchange (JDX) (see story on Page 2).
The yield on the April Treasury bill auction, too, for the first time in decades, fell below 10 per cent, at 9.99 per cent on the benchmark six-month issue and 9.97 per cent for the three-month bill.
"This will be the bank's lowest base lending rate in five years, as well as the lowest lending rate among the major commercial banks locally," said Scotiabank in a statement announcing the adjustment.
no special for businesses
The price of personal loans averaged 23.99 per cent at December 2009 across the commercial-banking sector, while commercial loans were weighted at 12.67 per cent.
Despite pressure from businesses and the Government to cut commercial rates, Scotiabank had no special offers for the business sector this time around, choosing instead to trumpet its two most current loan sales launched within the past six months - the J$100-million Farm Loan Fund priced at 9.95 per cent and backed by the Ministry of Agriculture and Fisheries; and the J$500-million Productive Sector Growth Fund, similarly priced, which comes to an end on June 30.
The bank said there was still some J$156 million in the latter fund available for lending.
supporting private sector
Bruce Bowen, president and chief executive officer of Scotia Group Jamaica, still tried to sell the current adjustment as support for Jamaica's private sector, saying it offered access to affordable loans to stimulate economic recovery in all sectors.
"Following Jamaica's signing of the IMF standby facility and completion of the JDX in February, foreign-exchange markets and security markets have stabilised, allowing for commercial lending rates to start reducing," said Bowen.
"As the country's largest and most successful financial services group, we are once again taking the lead in lowering rates and making loans more affordable to our customers."
Jamaica Manufacturers' Association President Omar Azan, the chief spokesman in the lobby for lower commercial rates, said the rate cut was the right move, but still not enough.
"It's a step in the right direction, but still not where we want to be," Azan told the Financial Gleaner.
He urged the bank not to increase fees to compensate for the lower interest revenue, but seek instead to reclaim revenue by growing the volume of loans sold.
The bank first amended base rates last summer after the Bank of Jamaica demonstrated that it was serious about a policy shift to a low interest-rate environment with a series of cuts to its policy rates that began in July 2009.
In August, Scotiabank led the commercial-banking sector with a one-point rate cut to 20.5 per cent, and three months later another adjustment to 19.875 per cent.
The new cut reduces that rate by 2.125 percentage points, or 10.7 per cent.
The bank said that in the past 11 years, from September 1998 to April 2010, it has put on the market 17 concessionary loans worth J$5.7 billion.