Friday, October 31, 2008

H&L planning holiday blitz to rescue profits

Published: Friday October 31, 2008

Hardware and Lumber Limited is projecting that its markets will continue to soften into the high shopping season, but says it will ratchet up its marketing campaign to "stimulate consumer interest" over the Christmas and New Year holidays, traditionally one of its most lucrative seasons.

"We normally allocate a substantial amount of our advertising dollar around the last quarter of the year, as this is our high activity period," said Chief Executive Officer Anthony Holness.

"Approximately 40 per cent of the total advertising budget which is $70 million goes towards the forth quarter."

H&L, which is majority owned and controlled by conglomerate GraceKennedy Limited, has been experiencing slower sales since Hurricane Gustav in August and later as the economy continued to tighten locally and internationally, inflation ballooned, and disposable incomes eroded.

But the company, which owns the Rapid TrueValue chain of stores, says some of the pressure is from new competition.

Holness chose not to clarify who his new rivals were.

"While there were new players in the market, whose name I don't want to call, the main competition within the period came from existing players in the market who are scrambling to retain market share in a declining market," he told the Financial Gleaner.

But he also said that Tank-Weld which is entering the lumber market does represent new competition, but that their operation had no impact on H&L in the September quarter.

"We expect to see some effects in the future but only minimally," he added.

In the nine-month period just ended, H&L's revenues are up by more than $350 million to $5.15 billion, a seven per cent improvement, but the third quarter figures are where H&L's slowdown is manifested.

Decline in revenue

Revenue for the July-September quarter was $1.59 billion, a five per cent decline relative to the 2007 third quarter's $1.68 billion.

The quarter erased $23 million of the hardware company's after tax earnings, leaving H&L with just $5 million of profit in the nine-month period. A year ago, the company had reported profit of $61 million within nine months, 12 times the income Holness is reporting for the same period this year.

Growth in nine-month revenue was recorded in all three business segments, led by the agriculture division where turnover increased 23 per cent to $969 million, notwithstanding slowed sales of fertiliser and animal feeds; retail household was up two per cent to $3.13 billion; while hardware added 10 per cent year-on-year for sales of $1.05 billion, notwithstanding that the latter segment was said to be under pressure.

"Wholesale hardware revenues were further affected by increased competition from existing and new entrants into the marketplace," said Holness in a statement accompanying the September earnings report.

To ramp up business in the final quarter, Holness says the promotional blitzes will centre on 'dressing up' the home and projects, but the company will also focus, he said, on reining in operating costs and better deployment of working capital.

"We will also continue our focus on customer service training and periodic measurement of customer satisfaction in order to assess overall effectiveness of our efforts," Holness said.

Hardware and Lumber is a $2.5 billion business by assets. It's a profitable operation but experienced substantially depressed profits in 2005 and 2006 when the hardware and construction sectors were hit by the 'faulty cement' crisis when quality controls derailed at the Rockfort plant of monopoly cement producer Caribbean Cement Company.

H&L used the opportunity to restructure its systems, which included a replacement of its inventory and customer information system that would better track demand to ensure a better fit with customer needs and products on Rapid TrueValue store shelves.

In 2007, the company recovered to quadruple net profit from $30 million to $133 million. This year, the company reported profit of $28 million in the six-month period, but the dismal third quarter erased five-sixths of it.


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081031/business/business4.html

Junior stock market steers toward early 2009 roll-out

Published: Friday October 31, 2008

Marlene Street-Forrest, general manager of the Jamaica Stock Exchange (JSE), has been selected by Senator Don Wehby to head a steering committee tasked to implement a junior stock market, the Finance Ministry said Thursday.

The junior exchange, to be managed by the JSE, will open up to small and medium companies the opportunity to raise capital on the equities market through public offerings.

The market, Wehby has said, offers a new opportunity for SMEs to develop. Such companies, which are usually owner-operated, have long found it difficult to access debt financing for their companies, which is often scarce and expensive.

Street-Forrest said in a late September interview that at least 10 companies were expected to list on the junior exchange at start-up.

Big board

The JSE itself has 39 ordinary stocks on its big board, and 18 preference stocks.

Wehby, minister without portfolio in the Ministry of Finance, expects that the junior exchange will become functional within five months, by March 2009. Thecommittee will have its first meeting next Tuesday.

The steering committee he has named comprises nine members who straddle the government services, the accounting, securities and legal fields (see list).

Cabinet approved the junior exchange on September 29, signalling that the regulatory hurdles had been cleared after years of planning.

"We believe that the Government has now put their money where their mouth is in encouraging the growth of small and medium size businesses," said Marlene Street-Forrest in an interview after the Cabinet decision was announced.

"Many companies have shown an interest ... and we expect up to 10 companies at start-up," she said.

The junior exchange is for companies with a capital base of between $50 million and $500 million.

To list, the company must identify a 'mentor', which is not necessarily a JSE listed company but a corporate broker with the necessary experience to guide a younger or smaller operation.

Fit and proper

The mentor must be approved by the Financial Services Commission (FSC) under the 'fit and proper' criteria established with the Securities Act.

Initially, the plan was for the companies to have 'sponsors' but it was thrown out.

"A 'sponsor' would have included a FSC approved investment professional, but the sponsor regime typically involves formal confirmation of the junior market company's compliance to the JSE," according to the JSE junior market working document.

"It is unlikely that any FSC approved investment house in Jamaica would be willing to take the liability risk arising from acting as a formal sponsor. So the exchange proposes to impose a lesser 'mentoring' requirement instead."

The junior listed companies can look for mentors within the 'SME development' sector, such as the Private Sector Development Programme jointly sponsored by the Government of Jamaica and the European Union or its Corporate Finance Brokers Unit, which helps small companies tap financing.

The junior market is expected to be guided by a similar set of rules as the JSE companies, but it is also expected that some procedures will be simplified, such as the filing of a prospectus and tax exemptions.

Exemption

Among the tax concessions are: a full income tax holiday for half of the incentive period, which is up to 10 years from the date of listing; and a 50 per cent income tax holiday for the remaining period.

The junior company will also be given an exemption from tax on dividends, transfer tax and stamp duty on transfer of shares on the exchange.

The company may have no less than 25 minority shareholders. And minority partners may hold no less than 20 per cent of the company's issued share capital.

Its prospectus for a share issue may, unlike JSE companies, take the form of a submission to the exchange or an upload to the JSE's website.

But like the main exchange, annual and quarterly presentation of financial reports are required.

Wehby sees the junior exchange as a way to broaden the stock market while offering capital to 'stimulate the development' of small companies.

The junior market company will be periodically assessed as to whether it can be graduated to the main JSE board, a movement that will be triggered by its market capitalisation.


Source:
Sabrina Gordon
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081031/business/business6.html
sabrina.gordon@gleanerjm.com

J Wray&Nephew GM steps down

Published: Friday October 31, 2008

J Wray&Nephew's General Manager for Jamaican operations, Michael Benjamin has stepped down from that position after a year at the prestigious spirits company in what appears to be a management restructuring of the subsidiary of the conglomerate Lascelles deMercado.
Earlier this year Lascelles was acquired by Angostura, a subsidiary of Trinidadian powerhouse CL Financial for close to US$1 billion.

Speaking about the deal late last year, Executive Director of Angostura Holdings, Michael Carballo said: "What we want to do is merge all the Appleton and Wray&Nephew brands with the Angostura brands and list that new company on the Jamaica Stock Exchange (JSE). We are looking to create something like a Caribbean Diageo. The aim is to get to the point where something is not really rum unless it comes from the Caribbean, rather like Scotch whisky is only the real deal if it comes from Scotland."

Benjamin's role will now be assumed by J Wray&Nephew's managing director for Global Marketing, David McConnell. J Wray& Nephew has a complex management structure. The top boss is managing director of Lascelles de Mercado, William Mercado. Young David McConnell serves in the capacity as a joint CEO taking responsibility for the global marketing team, while Paul Henriques serves as managing director for production and agriculture. Three general managers report to David McConnell: a GM for local business, one for international and another global marketing. Roger Thompson, formerly of Red Stripe and Caribbean Broilers, has been recruited to help out with the international aspect.

Speaking with Caribbean Business Report last night, David McConnell said: "We felt there was a need to streamline our management structure given the uncertainty in the global financial markets. We have made one or two line managers redundant but there has been no widespread redundancies of our workers.

"We have to become leaner and I will be taking a more handson approach. I must take this opportunity to say that Michael Benjamin did a great job here and I thank him most sincerely."


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081031T000000-0500_141976_OBS_J_WRAY_NEPHEW_GM_STEPS_DOWN.asp

Lascelles sales boost Mayberry's profits

Published: Friday October 31, 2008

Local brokerage house, Mayberry Investments saw a huge jump in its net profit for the nine-month period ended September 30th, 2008, driven by net interest income and net trading gain on investment.

According to unaudited results for the period under review, Mayberry - headed by chairman Christopher Berry - posted a net profit of J$766 million reflecting a 310 per cent increase on the J$187 million posted for the corresponding period last year. For the third quarter of this year, Mayberry posted a net profit of J$96.1 million, a marginal increase on the J$94 million posted for the same period last year.

According to CEO Gary Peart's executive commentary on these financial results, this profit growth was due to an increase of Mayberry's total operating income to J$1.2 billion compared to J$560 million for 2007, an increase of 117 per cent. Peart attributes the diversification of the company's revenue streams for the uptick in operating income. Realised income has increased by J$970 million over 2007.

Net interest income proved to be a winner for Mayberry with the brokerage posting a figure of J$358.5 million for the nine-month period ended 30th September, 2008. This repre-sents an 84 per cent increase on the J$195.2 million posted for the corresponding period last year.

Fees and commissions registered mixed fortunes. For the third-quarter period this revenue stream declined, coming in at J$13.1 million as opposed to J$18.3 million for the same period last year. The nine-month period painted a rosier picture. Here, Mayberry netted J$131.6 million, a huge increase on the J$56.6 million registered for the same period last year.

The sale of Lascelles De Mercado to Trinidad & Tobago's Angostura served as a boon to Mayberry, helping to bolster its financial performance this year. Here, net trading gain on investment brought in J$719.2 million for the nine-month period under review. For the same period last year, the figure was just J$51 million. Fixed-income trading activities helped to propel this segment in the third quarter of this year where Mayberry registered J$164.4 million as opposed to a negative 19.6 million last year.

As far as net interest income and other operating income was concerned, it was again a case of Mayberry faring better over the nine-month period than in the third-quarter period. For the third quarter of 2008, the net interest income and other operating revenue fell to J$218.4 million when compared to the correspon-ding period last year which came in at J$242.8 million. Over the longer stretch, the nine-month period, this year Mayberry posted a whopping J$1.2 billion whereas last
year that number was just J$560 million.

Like most of its competitors, Mayberry saw its administrative expenses rise to J$370.2 million for the nine-month period under review compared to J$320.7 million for the same period last year. Increasing operational cost may well have been a big factor here, in addition to rising staff costs brought on by spiralling inflation.

For the third quarter, it
would appear that Mayberry was able to curtail administra-tive spending, recording a figure of J$126.6 million, an eight per cent increase on last year's J$117.4 million.

Total assets increased by J$5.8 billion to J$27.2 billion for the nine-month period under review. Mayberry's CEO attributes this to increases in cash resources, investments and promissory notes and loans and other receivables. The loan portfolio jumped to J$1.3 billion, a 48 per cent increase on the J$856.6 million posted for the nine-month period last year. Mayberry made a provision for loan impairment of J$20 million, bringing its total provision to J$35 million.

The global financial raises the question, what will the likely impact be on brokerages such as Mayberry Invest-ments? Anticipating that question, Peart wrote in his executive commentary, "Con-sequent on the crisis in the world financial markets, management has taken a conservative outlook on the market. We have not experienced any impairment arising from the crisis; our portfolio is well diversified and we continue to exercise strict risk management practices to ensure our portfolio remains shielded."


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081031T000000-0500_141974_OBS_LASCELLES_SALES_BOOST_MAYBERRY_S_PROFITS.asp

Capital & Credit records big jump in profits

Published: Friday October 31, 2008

The Capital & Credit Financial Group, headed by Ryland Campbell has, recorded un-audited after-tax profits of J$72 million for the quarter ended September 30, 2008 (third quarter), as opposed to J$33 million for the same period last year, thus representing a 118 per cent increase. This profit figure was generated from gross operating revenue of J$1.449 billion.

Its flagship subsidiary, Capital & Credit Merchant Bank also posted stellar net profits which came to J$72 million, a 191 per cent increase on the J$25 million recorded for the same period in 2007.

These results come against the background of a turbulent financial crisis gripping both the US and Europe which will have far-reaching consequences for the Jamaican financial landscape. Capital & Credit took steps to realign its revenue-generating activities and it seems to have paid off.

For the nine-month period the Group's profits increased to J$341.39 million compared to J$291.25 million for the same period last year. Executive chairman Ryland Campbell attributes the improvement in the group's bottom line to an increase in net interest income.

For the third quarter, the group's net interest income grew by 66 per cent to J$339 million contributing 79 per cent of total revenue. For the same period last year, net interest income contributed J$204 million. Commission and fee income jumped from J$28 million last year to J$40 million for the period under review . Capital & Credit staged a turnaround as far as foreign exchange trading was concerned, coming from a loss of J$19 million last year to generating J$25 million for the period under review. Year to date net income grew by 76 per cent to J$997.47 million, a significant increase on the J$567.41 million recorded for the same period in 2007.

Capital& Credit's total assets as at September 30, 2008 fell to J$49.83 billion from the J$57.83 billion recorded for the same period last year. It has made a concerted effort to expand its corporate and retail lines while acquiring higher-yield assets.

The merchant bank under the stewardship of CEO and president Curtis Martin also fared well, with year to date profits coming in at J$261 million, an increase of 20 per cent compared to the J$218 million for the corresponding period in 2007. The bank recorded gross operating revenue of J$625 million, a slight improvement on the J$616 million recorded for the same period last year.

For the nine-month period the merchant bank benefited from improved margins resulting in a 141 per cent growth in net interest income to J$628.40 million compared to J$260.98 million in 2007. Commissions and fees doubled this quarter to J$12.4 million from the J$6.8 million registered for the same quarter last year. Foreign exchange trading moved to J$19.8 million, a notable increase on the J$7.7 million bagged for the corresponding quarter of 2007.

With inflation on the rise it came as no surprise that staff costs at Capital & Credit Merchant Bank continue to trend upwards. For the period under review staff costs came in at J$83.4 million, a significant increase on the J$58.8 million posted for the three-month period last year. The bank's total assets as at September 30, 2008 stand at J$25.65 billion compared to J$32.28 billion in 2007. The bank's senior management puts this down to a focus away from low-yielding treasury activities and placing greater emphasis on corporate business lines.

Martin has chosen to look more to the bank's loan book portfolio and for the nine-month period under review, loan interest income registered a 29 per cent increase moving to J$757 million from the J$588 million posted for the same period last year.

For the third quarter of this year, the loan book portfolio saw a 19 per cent increase netting J$260 million compared with J$217 million for the same quarter last year.

Capital & Credit have turned things around and it is a far different story from a year ago. Speaking with The Business Observer last night, Capital& Credit Merchant Bank CEO and President, Curtis Martin said: "For more than a year now we have been shifting our business model from securities trading to net interest income and placing greater emphasis on core business. For the last two years 50 per cent of our revenue stream has been from securities trading. Recently there have been fewer opportunities in trading as prices continue to fall.

"Our foreign exchange trading department is now much better trained with greater focus and this has paid off for us. Our unit trust continues to do well bringing in about J$30 million a year."

Deputy Group President Andrew Cocking added: "Our remittance operation is running a little behind but we expect to break even or make a slight loss. You must remember we don't work with the likes of a Western Union although we have partnered with two Caribbean companies, namely ABI and Laparkan.

Capital & Credit International Inc, the Group's international broker, which handles US treasuries and such, is expected at the very minimum, to break even or should make a profit this year.

We have been focused on integrating the entire group and we have good momentum going into next year."


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081030T220000-0500_141962_OBS_CAPITAL___CREDIT_RECORDS_BIG_JUMP_IN_PROFITS.asp

Trinidad's Central Bank tightens credit

Published: Friday October 31, 2008

As the Trinidad & Tobago Central Bank continues to make it more expensive for commercial banks to lend money, there has been a slowdown in credit in the twin island republic.

And with loans more expensive now, a leading banker has suggested that Trinidadians are becoming more conservative in how they borrow money and spend on credit, but they may shortly have to pay even more for loans.

Private sector credit expansion by the financial system has been slowing within recent months because of tighter monetary policy measures, the Central Bank said in a statement.

"The 12-month increase in credit expansion was 13.7 per cent in August, compared to a rate of increase in excess of 20 per cent at the beginning of the year," the Bank stated.

"Consumer and business credit posted year-on-year increases of 11.6 per cent and 12.6 per cent respectively in August, while real estate mortgage loans rose to 18.4
per cent in the 12 months to August."

The real estate market in the country has slowed within recent months, as consumers found it difficult to repay monthly mortgages for million-dollar homes which were hundreds of thousands of dollars cheaper a couple of years ago.

Last Friday, the Central Bank announced that beginning November it will increase the cash reserve requirement for commercial banks to 17 per cent, up from 15 per cent, to dampen bank credit expansion and absorb excess cash in the financial system.

Commercial banks increased lending rates several times this year, as the Central Bank raised the reserve requirement the banks must deposit.

Banks recently announced increases in the prime lending rate to 13 per cent.

Richard Young, managing director of Scotiabank, acknowledged the slowdown in private sector credit expansion.

He said the latest increase in the cash reserve requirement suggested that the Central Bank believed it could suppress demand and this was the strategy it intended to pursue.

Young, in an interview on Monday, said that even as infrastructure projects and spending continued in the country, it was apparent that the public was adopting a "more conservative approach" toward taking credit.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081030T220000-0500_141957_OBS_TRINIDAD_S_CENTRAL_BANK_TIGHTENS_CREDIT.asp

Caribbean exports rise in spite of global crisis

Published: Friday October 31, 2008

The repercussions of the global financial crisis are taking its toll throughout the world, and Latin America and the Caribbean are no exception. However, in spite of the unfavourable prospects, exports from the region will continue to increase during 2008 at an estimated 23 per cent, according to the Economic Commission for Latin America and the Caribbean (ECLAC).

This is one of the conclusions of the report Latin America and the Caribbean in the World Economy. 2007 Edition: 2008 Trends, released Monday in Mexico City by ECLAC Executive Secretary Alicia Bárcena. The report estimates export volumes to rise two per cent this year, while the volume of imports will increase nine per cent. The value of imports will go up 22 per cent.

Higher commodity prices during the first semester of 2008, particularly of metals and fuel, led to a 25.5 per cent increase in export value, much higher than the 10 per cent rise during the same period last year. With this, the trade surplus is expected to reach US$51 billion.

However, the global slowdown will have negative effects on the region. The drop in commodity prices during the third quarter this year and falling demand for Latin American products, primarily from the United States, and to a lesser extent, from Japan and the European Union, have already impacted the region's economies during the second semester this year, and will lead to lower growth rates and less favourable trade balances in 2009.

According to ECLAC, the world scenario is forcing Latin America and the Caribbean to face short and long-term challenges. In the short run, and as a result of international financial and economic turbulence, governments will have to deal with less access to external financing, higher interest rates, hard-hit stock exchanges and a shift of capital to safer destinations and into less risky assets, as well as lower remittances and foreign direct investment. As a result, credit lines for exports and investment plans will be restricted, limiting growth.

To avoid contagion from industrialised economies, governments must ensure liquidity in the financial system and reinforce prudent supervision of the soundness of the banks and financial institutions with the most links to international financing and risky operations.

In order to deal with external shocks, says ECLAC, governments should strengthen their countercyclical macroeconomic policies, maintain sound fiscal accounts and monitor external account trends. In the medium term, governments of countries that maintain favourable terms of trade should improve the management and use of additional income from higher commodity prices by promoting activities that boost competitiveness, human resource development and export diversification.

The world economic slowdown may ease inflationary pressures, which will tend to decrease during the rest of 2008 and 2009. However, the aim of curbing inflation should not be neglected.

The report underscores that the current financial crisis and the menace of recession for 2009 pose an enormous challenge to the soundness of the economic reforms the region has implemented in recent decades. Thanks to these reforms, the region is relatively better prepared to face this adverse scenario.

These reforms must be maintained, particularly those contributing to fiscal responsibility and control of inflation, trade openness - especially intraregional trade - and market diversification, debt reduction and accumulation of international reserves. These assets will allow Latin America and the Caribbean to deal with a potential recession in the United States and the European Union on more solid ground.

It is difficult to fathom that the world economy could remain the same after 2008, says the report. Changes need to be made in terms of financial regulation, energy efficiency, the search for renewable energy sources and the provision of international funds to reduce hunger and increase food supply in the poorest countries. Moreover, if the world were to fall into recession next year, efforts to achieve the Millennium Goals could be seriously compromised.
Doha Round

The ECLAC report also analyses the failure of the last "mini-ministerial meeting" of the WTO Doha Round in July 2008. The uncertainty about the capacity of the protagonists of the negotiations to make the multilateral trade system more governable may serve as justification for regional policies and bilateral negotiations, weakening the positive complementarity between multilateralism and regionalism.

Once again, questions are being raised about the ability of WTO to handle the international agenda of the future. With this, the Doha Round and its pro-development agenda will be delayed until late 2009 or 2010 at the earliest.

It is in times of international crisis when the stabilising and orderly trade rules provided by the WTO - which have been seriously questioned in recent years - are most needed to prevent the real effects of the financial crisis from worsening and spreading. In this regard, reactivating the Doha Round negotiations and concluding them soon would be a very good sign to a world economy craving good news.

ECLAC assures that Latin America and the Caribbean could strengthen their internal consensus in order to play a more prominent role in the Doha Round, which could facilitate the negotiation of other trade talks, such as those with the European Union.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081030T210000-0500_141955_OBS_CARIBBEAN_EXPORTS_RISE_IN_SPITE_OF_GLOBAL_CRISIS.asp

Thursday, October 30, 2008

Fed cuts key rate to 1% - Extends US$30b credit line to foreign banks

Published: Thursday October 30, 2008

The Federal Reserve has slashed a key interest rate by half a percentage point as it seeks to revive an economy hit by a long list of maladies stemming from the most severe financial crisis in decades.

The central bank on Wednesday reduced its target for the federal funds rate, the interest banks charge on overnight loans, to one per cent, a low last seen in 2003-2004.

The funds rate has not been lower since 1958, when Dwight Eisenhower was president.

New lines of credit

The Federal Reserve also said Wednesday it will supply new lines of credit to the central banks of Brazil, Mexico, South Korea and Singapore to help those countries deal with the global credit crisis.

The Fed says it will provide up to US$30 billion to each of the central banks.

It is the latest in a series of "swap" arrangements where the Fed provides dollars in exchange for reserves of the other nations' currencies.

The Fed said Wednesday that the new credit lines, like those already established with other countries, were designed "to help improve liquidity conditions in global financial markets" by increasing the global availability of US dollars.

Second reduction

The rate cut marked the second half-point reduction in the funds rate this month.

The Fed slashed the rate by that amount in a coordinated move with foreign central banks on October 8.

In a brief statement explaining Wednesday's action, the Fed said the "intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and business to obtain credit".

The central bank said it had room to lower rates because the spreading economic weakness was lowering the risks that inflation would get out of control.

Dramatic declines

Indeed, the weakness has caused dramatic declines in the price of oil and other commodities.

While many economists believe the US has already fallen into a recession, they think the aggressive efforts by the Fed to cut rates and take other actions to unfreeze credit markets will keep the country from plunging into a prolonged and deep downturn.

The Fed's action was expected to be quickly followed by a reduction by commercial banks in their prime lending rate, the benchmark for millions of consumer and business loans, by a similar half-point.


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081030/business/business1.html

Firms urged: Take stock

Published: Thursday October 30, 2008

BARBADIANS NEED TO put aside their complacency, face the reality of the global financial crisis and plan for the worst.

This clarion call was made by chairman of the Barbados Private Sector Association, Ben Arrindell yesterday, as he painteda graphic and gloomy picture of what could happen to the economyif the Government, private sector and other stakeholders didn't take stock.

Addressing a full house of participants at the Public/Private Sector Consultation at the Lloyd Erskine Sandiford Centre yesterday, he said "some of you may regard the picture I have painted of the challenges that we face as extremely gloomy. If so, that was deliberate because I believe we need to put aside our complacency, face up to reality, and plan for the worst case scenario".

Arrindell said yesterday's talks not only needed to proactively examine the economic impact of the global crisis, but the social impactas well, particularlyas it related to the disadvantaged.

He said the United Nations Trade And Development Report 2008 had predicted the global financial crisis "could become even more difficult if large movements in the exchange rates of major currencies add to the turmoil in the financial market" – a risk that had increased in the first half of this year.

He said Barbados could, as a result, take its worst hits in construction, tourism and international business, with "a severe slowdown" expected in the construction industry next year because of the cancellation of several projects.

"This in turn could result in large job losses and a falloff in foreign currency earnings," he said.

He added that in tourism, Barbados was likely to experience a reduction in visitor arrivals, and although many visitors had already pre-paid and would come for the winter season,a major decline in bookings was expected for next year.

"I understand from the Barbados Hotel and Tourism Association that bookings for the coming season are currently down by 15 per cent to date and the expectation is that those will reduce to ten per cent per month for the rest of the season," he stated.

He added that those visitors who come would be likely to spend less, particularly those from the United Kingdom which is one of Barbados' main markets and which is being crushed by job losses, a credit squeeze, mortgage foreclosures, investment losses andthe falling value of the pound sterling.

"Being the major driver of the economy, a severe impact on tourism will have a knock-on effect on various other parts of the economy: retail and distribution, particularly for small businesses," he explained.

Arrindell also predicted challenges for international business, noting that this sector would be influenced by the possible election of Barack Obama as US president, and the announcement last week by 17 Organisation for Economic Cooperation and Development (OECD) countries that they would be calling on the OECD to reinvigorate part of its harmful tax intitiative.

Noting there was a lack of public awareness of the potential impact of the global crisis on Barbados, the private sector head called on Government to help the construction industry by accelerating its capital works project with the help of the private sector; and to consider a temporary relaxation of the exchange control policy in relation to the ability of local banks to lend to foreign investors who are investing in large projects here.

Noting that the UN report had advised co-operation among trade unions, employers, governments and central banks in order to prevent a wage inflation spiral, Arrindell described Barbados as "lucky to have the mechanism of the Social Partnership" through which to address these issues.

"I hope we can start to formulate plans for not only lessening the adverse impact of the current crisis on our society, but also to examine ways in which we can work together to create the kind of investment and social climate that will serve to continue to stimulate both foreign direct investment, greater levels of entrepreneurship, creativity and competitiveness within our local business community," he said, calling for high productivity, efficiency, fairness and trust.


Source: Nation Newspapers
http://www.nationnews.com/story/331862111488622.php

Wednesday, October 29, 2008

Exports could go up 30% should transportation cost drop 10%, says IDB

Published: Wednesday October 29, 2008

The Inter-American Development Bank (IDB) says that Jamaica, as part of the Latin American region, could increase exports up to 30 per cent if transportation costs were lowered by 10 per cent.

The IDB says that a shift away from only negotiating reduced tariffs to one focussing on reducing transportation costs will lead to greater exports.

"Politicians need to look at transportation costs, as we can see. that it is now more important than tariffs," said Juan Blyde Inter-American Development Bank trade economist to public and private sector workers at the National Productivity Conference 2008 in Jamaica yesterday.

Blyde was referring to an IDB report released last month entitled 'Unclogging the Arteries: A Report on the Impact of Transport Costs on Latin American and Caribbean Trade'.

According to the report, "A 10 per cent reduction in freight costs in nine Latin American nations - including Brazil, Argentina, Chile, Colombia and Bolivia - would allow exports to the United States to soar 39 per cent on average, the study said. In contrast, exports to the United States from those countries would rise less than two per cent on average if import tariffs were reduced 10 per cent".

The statistics focus mainly on latin America, but Blyde said the findings apply to Jamaica. Essentially that the region is not taking full advantage of its logistical proximity to US.

The IDB cites as reasons: Poorly maintained roads; congested airports and ports; and inefficient custom services which increase shipping time and costs.

Over the decade, countries like China and India have reduced their transport costs in shifting from primary to secondary products. "One dollar of iron is going to be cheaper to transport than $1 of semiconductors because it weighs less," argued Blyde.

He also stated customs in Jamaica takes too long to clear products which affects productivity and adds to cost: "In Jamaica, it takes 21 days for products to be exported and 22 days for products to be imported which does not include the time to ship it."

Said the IDB: "The emergence of China and India as leading exporters in the world economy coupled with the growing fragmentation of production and time-sensitiveness of trade, has reshaped Latin America's comparative advantages and has given investments in the transport infrastructure an unprecedented strategic importance to the region. This new reality imposes heavy penalties for Latin American economies with high transport costs."


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081029T010000-0500_141907_OBS_EXPORTS_COULD_GO_UP_____SHOULD_TRANSPORTATION_COST_DROP______SAYS_IDB.asp

Johnston to be inducted in PSOJ hall of fame

Published: Wednesday October 29, 2008

Charles Johnston, chairman of Jamaica Fruit and Shipping Company and of the Jamaica Producers Group, will be officially inducted into the Private Sector Organisation of Jamaica (PSOJ) Hall of Fame tomorrow evening, making the 15th inductee since inception.

The Private Sector Hall of Fame was established by the PSOJ to honour Jamaican businesspersons who have made significant contributions to the development of the private sector and the country, and has been in place since 1992. Nominees should have served in Jamaica's private sector for at least 25 years. Awards are made annually and made only to individuals.

Johnston has been at the helm of Jamaica Fruit and Shipping Company Ltd since 1976 and has successfully steered the company into the 21st century with a course steadily set for the future. He has proved himself as a pioneer in the local shipping industry, expanding the Jamaica Producers Group into the UK market and acquiring a Dutch juice company recently.

A graduate of the Wharton School of Finance, he has led the diversification of JPG into a Global food trading company, and aims to develop new marketing opportunities outside the UK.

Johnston was honoured with the presentation of the Order of Distinction, Commander Class, by Governor General Professor Kenneth Hall in 2006; this for his contribution to agriculture and specifically to the banana Industry.

The Jamaica Freight & Shipping of the 1980s represented three companies -Jamaica Producers Shipping Company among them. The Group now represents many more lines, contributing to approximately 60 per cent of the cargo passing through Kingston Wharves terminal, and owns Shipping Services Stevedoring.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081029T000000-0500_141902_OBS_JOHNSTON_TO_BE_INDUCTED_IN_PSOJ_HALL_OF_FAME.asp

Big problems needs big solution

Published: October 29, 2008

Until early September the international financial crisis had had only limited impact on the emerging debt markets, despite the very sharp falls in the emerging stock markets.
As a consequence, and partly due to good timing, over the past year since the election, Jamaica had been able to borrow money twice from the international capital market, a major achievement considering its low rating.

Since the collapse of Lehman Brothers in mid-September however, the full force of the international financial crisis has begun hitting the Jamaican economy, in common with other hitherto unscathed emerging markets. The international capital market is now essentially closed for virtually all emerging market issuers, even for the better credits.

Last week Thursday US-based Trinidadian broker Mark Scott noted with respect to emerging markets "Panic is in the air. EM Mutual funds and hedge funds are facing massive redemptions, which is forcing selling into a market with no bid. Everything is getting thrown over the side."

The depth of the fall in broader emerging debt prices is best captured by Brazil. As late as the end of last month, President Lula appeared to believe the crisis was a US phenomenon that would not affect Brazil. Commenting specifically on the Brazilian 7.125 per cent coupon bonds due in 2037 bonds last Thursday, Scott noted these benchmark bonds were above 110 (well above their issue price) all year up to September, and were still 103 at the beginning of this month.
Over the last two day, however, (up to last Thursday) they had fallen 17 points to 68, and traded as low as 66 on Thursday morning. He noted that the yield at the time was over 10.5 per cent, for a total price drop this month of 35 points.

Jamaica's internationally traded debt has seen similar falls over the same period. Commenting on the current situation yesterday, Oppenheimer's Greg Fisher notes:

"My gut tells me that we are finally seeing some sort of bottoming process here with respect to the GOJ curve in general." Fisher bases his assessment on the fact that "the shorts have all covered and the curve is now left with local buying with not too much selling abroad".

Fisher believes that the key as to whether this is a price bottom is "How much is actually left out there in non-Jamaican hands?" and guesses that the only Jamaican US dollar Eurobonds not mainly held by the Jamaicans are the 2019s and 2039s.

Despite this externally driven bond market volatility, the Jamaican currency has so far been relatively stable, neither seeing the falls the pound and Euro have seen against the dollar over the past few months, nor having suffered from the major currency/debt crisis driven falls seen in a number of emerging market countries eg Hungary and Pakistan.

There is no room for complacency, however. The huge external economic shock from the massive rise in food and energy prices over the past 12 months since the election has led to a sharp reduction in consumer purchasing power, and an emerging squeeze on the profitability of many businesses.

Over the past six months, this external shock has been compounded by the internal shock of the demise of the Ponzi schemes. The immense financial strain that the business sector is currently under from falling consumer spending has now been compounded by financing stresses from a reduction in working capital eg overseas supplier credit, whilst local banks are also becoming more reluctant to lend as their non performing loans eg credit cards, are rising sharply.

Some importers are already unable to finance the increased working capital now required, and may be forced to liquidate their inventories to meet increased rent, electricity and other costs, destroying their chances of staying in business, and paying taxes. The current high level of duties means that many goods are now beyond the reach of hard-pressed Jamaican consumers, a situation likely to be worsened by any further weakening of the Jamaican dollar.

Reduced consumer purchasing power also means that September will probably mark the end of the out performance of local tax revenues against budget, even without the expiry of the tax amnesty in October. The next six to twelve months will instead be one of the most difficult periods in Jamaica's recent financial history, where businesses will have to choose between paying tax penalties, the light or wage bill, and closing.

In the light of the success of the tax amnesty in bringing in 4,000 new taxpayers, and the extraordinarily difficult economic conditions now emerging, the government may be well advised to extend the period of the amnesty to the next budget.

Jamaica is of course not the only country to have faced tough times. Last week former Trinidad Finance Minister Wendell Mottley, now managing director of investment banking for the region at Credit Suisse, noted that Jamaica has "a big problem so you must have a big solution". Mottley, who was minister of finance in the early 1990's, has just written a very timely book entitled "Trinidad and Tobago Industrial Policy 1959 - 2008". Mottley is widely seen as the minister of finance who put Trinidad on the path to its current economic success through a combination of taking extremely tough and courageous decisions on spending and public sector employment, combined with an innovative and far sighted industrial policy. He also presided over the liberalisation of Trinidad's exchange controls, which occurred a little under two years after Jamaica abolished exchange controls, but unlike Jamaica did not involve any fall in the value of the Trinidad dollar.

In a short interview for the Business Observer after his presentation at NCB's function last week, Mottley noted that he believed "Governments have a critical role far beyond just creating the right macro-environment".

In addition to their responsibility for creating macroeconomic stability, Mottley's own experience suggests governments must focus on promoting foreign investment, including the need for "some kind of picking" of the key areas to push, which in Trinidad's case was clearly energy.

To ensure the success of their investment promotion efforts, the Trinidad Government appointed one man for foreign investors to deal with. This investment "Czar" was "operating in a structured fashion", supported at the Cabinet subcommittee level by an "interlocking directorate" with the ability to straighten out the road blocks faced by foreign investors in areas such as water, electricity, and the ports.

The third critical attribute was a sense of urgency. In the Trinidad of the early 1990s, 80 cents out of every budget dollar was going to pay debt service and public sector wages, leaving very little for everything else. In order to create the fiscal space for needed infrastructure and other investments, Mottley successfully negotiated with the Paris Club to restructure Trinidad's debt. Mottley described Jamaica today as "being in pretty much the same pickle" as Trinidad was at the time. In his view, our Government needs to actively engage in getting things done, focusing on implementation so things actually happen.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081028T230000-0500_141876_OBS_BIG_PROBLEMS_NEEDS_BIG_SOLUTION_.asp

Barbados says it could be hurt by America's woes

Published: Wednesday October 29, 2008

The Central Bank of Barbados has warned that the growing likelihood of a recession in the United Sates poses danger to the island's economy.

"As the US economy slows or goes into recession as it copes with these difficulties, the result could be a slowdown in the growth of the Barbados economy going forward," central bank governor Dr Marion Williams said Wednesday.

The problem would be compounded by a recession in the United Kingdom and some European economies , impacting negatively on Barbados' tourism prospects and investment inflows.

Loss in value realised

"However, the Barbados financial system should remain sound, although there may be some loss in value realised and unrealised on US dollar fixed income securities held by financial institutions, including the central bank, as securities prices in the US markets tumble," the central bank boss said.

Williams noted that efforts by the US government to provide a US$700 billion bailout to the troubled businesses could also affect the island in the longer term.

President George Bush, who says the massive government intervention is needed to stave off economic catastrophe, planned to address Americans Wednesday night about how the crisis affects them, said White House press secretary Dana Perino.

The Barbados Central Bank governor said that given the high cost of that rescue, it was expected there would be larger US fiscal deficits, a possible further depreciation in the US dollar and a likelihood of a longer US recession than anticipated.

Global slowdown

"The likelihood of a global slowdown will also become greater in those circumstances. However, given the healthy level of Barbados' foreign exchange reserves, this is unlikely to be significant for Barbados given the level of official borrowing at this time, but foreign investors into Barbados, who were depending on borrowing on the international markets may be put on pause," she said.

Williams suggested that Barbadian investors holding direct deposits with commercial banks in the US could take comfort from the fact that the Federal Reserve Bank appears to be taking a protective stance and is unlikely to allow any large US commercial bank to fail.

The central bank governor said the one positive outcome of the financial situation was that if there is a global slowdown as expected and, therefore, a lower demand for oil, prices for that commodity should drop.


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081029/business/business6.html

IMF expects St Lucia to grow again

Published: Wednesday October 29, 2008

The International Monetary Fund (IMF) says although economic activity was 'flat' in St Lucia in 2007, growth is likely to accelerate over the next two years.

The IMF says agriculture, the tourism sector and related support activities would spur the economic growth in 2008 and 2009.

The Washington-based financial institution noted, however, that while medium-term growth prospects are favourable, risks were "tilted to the downside given the uncertainties in the external environment, in particular with regard to the effect of energy price increases on tourist arrivals".

It said that it had considered that the reforms envisaged by the authorities, aimed at strengthening the tourism infrastructure, improving the investment climate and diversifying exports would broaden the bases of economic growth and reduce exposure to external shocks.

The IMF said it welcomed the recent improvement in fiscal performance and stressed the need to maintain a primary surplus to ensure debt sustainability, and to help dampen inflationary pressures.

Call for broader tax base

The financial institution has called for a broadening of the tax base, along with stepped up preparations for the introduction of the Value Added Tax (VAT), and has urged the Stephenson King administration to follow through on commitments to introduce a "more flexible retail fuel-pricing mechanism to achieve greater pass-through of world oil price increases, as well as market valuation-based property taxation".

The IMF said that achieving fiscal and debt sustainability would also require greater prioritisation of capital spending, limiting the civil service wage bill and enhancing debt management, noting that the acceleration in inflation appears to be due largely to the high prices of imported food and fuel and the ongoing depreciation of the US dollar.

Given the negative impact of inflation and the erosion of trade preferences on the purchasing power of the poorest segment of society, the IMF welcomed the government's plan to sharpen its poverty-reduction programmes and commended the authorities' efforts to strengthen social safety nets.


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081029/business/business7.html

New insurance product for disabled credit union borrowers - Cuna Mutual will pay up to $1.2 million on debt

Published: Wednesday October 29, 2008

Cuna Mutual Group, which specialises in insurance coverage for Jamaican credit unions and cooperatives, has launched a new product that will provide a cushion to borrowers who become temporarily disabled and can't meet their payments while helping to protect the portfolios of lenders.

"It reduces delinquency ratios and costs associated with delinquent accounts," said Nicola Johnson Young, Cuna Mutual's account relations managers in touting the policy at its launch last week.

There are 46 registered credit unions in Jamaica with approximately 932,000 members and over $38 billion savings and $33 billion in loans insured under various loan protection and savings insurance contracts. The default rate on credit loans around five per cent.

The new Cuna Mutual policy will prevent institutions having to transfer to the bad debt and columns loans that would hitherto not be serviced because borrowers become temporarily incapacitated and without incomes.

Cuna, under the programme, provides credit unions and co-ops with a master policy into which borrowers are enrolled. To be eligible, a borrower must be no older than 65, with a loan that is to be repaid in no less than six months but a maximum of 10 years and should not be in delinquency for more than three months.

In exchange for this coverage, the insured borrower pays a premium of $2.75 for every $100 of loan cover. In the event of the borrower becoming disabled, Cuna Mutual undertakes to repay the loan at up to $50,000 a month for a maximum of two years. In other words, Cuna Mutual would pay out over a 24-month period a total $1.2 million.

Protection from delinquency

"It offers protection from the likelihood of delinquency in the event a member should become temporarily disabled," said David Wan, Cuna Mutual's country manager.

Prior to the launch of the product a pilot run was done among eight of the 46 credit unions in Jamaica. Six of the pilot group have already signed contracts to take a master policy. Wan said that credit unions will be given an administrative reimbursement of between eight and 10 per cent of the accumulated monthly premium to administrate the policy.

He projected that 3,700 credit union members would enrol in the first year.

"From our research, 37,500 accidents happen every year translating into 102 per day requiring hospital visits," Wan said. "From this we have estimated that we can get at least 10 per cent, which is 3,700 enrolling in the first year of operation."

Cuna Mutual brought in just a little over $600 million in revenue last year and has projected revenue to climb to $800 million at the end of this year.

Life saving plan

"The payment protector further augments the coverage offered under the loan protection and life saving plan," Wan said.

The Family Indemnity plan (FIP) and the Golden Harvest savings plan are two of Cuna Mutual's most noted products offered to the societies.

But without giving specific data Wan said that the Golden Harvest has not build up to the level of the FIP. His projections for the end of this year put FIP to $600 million and Golden harvest to $50 million.

To date over $207 million in claims has been settled under the FIP. Overall, Cuna Mutual Insurance Society has total sum insured of $86 billion.


Source:
Sabrina Gordon
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081029/business/business3.html
sabrina.gordon@gleanerjm.com

Group slams PM's decision to sign Economic Partnership Agreement

Published: Wednesday October 29, 2008

The Civil Society Network of St Lucia (CSNS) has criticised the decision of Prime Minister Stephenson King to sign the controversial Economic Partnership Agreement (EPA) with Europe.

CSNS President Flavia Cherry said she had hoped that the government would have had more consultation with the public about the accord that had been negotiated on behalf of the Caribbean forum (CARIFORUM) countries by the Barbados-based Caribbean Regional Negotiating Machinery (CRNM).

Last week regional leaders, including King, met in Barbados to discuss the initiative and, with the exception of Guyana, agreed to sign the accord before the October 31 deadline.

St Lucia was among a handful of Caribbean Community states that had previously raised concerns about the agreement, but King later told reporters that those issues, including the future of the vital banana industry, had been addressed.

Government blamed

But Cherry said that the agreement which would have a significant impact on the lives of St Lucians should have been discussed more and blamed the government for refusing to "consult with constituents on the ground, and say this is what is being proposed, what do you think or how do we best engage with the EPA.

"I think it is a shame what is happening to us, that people should feel so empowered to sign something on the people's behalf, yet also feel that they do not have to even explain what is it that they intend to sign," she added.

But Cherry said that she was still optimistic that the government would listen to arguments from other sectors before signing the accord.

"I think the fact that the governments have indicated their intention to sign, that does not preclude civil society and concerned citizens from saying to our leaders what we think about the EPA agreement, including what we think of them who are prepared to sign us over under such an agreement with a refusal to consult with those who have shown some interest in that agreement.

"It's a real sad day for us, but I believe that the fact that the agreement is not yet signed still leaves a window of opportunity for us to continue hammering on the issue in the hope that the government can again change its position on signing the agreement," Cherry added.


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081029/business/business8.html

Cable and Wireless eyes Nov 15 for launch of 3G network

Published: Wednesday October 29, 2008

Cable and Wireless Jamaica (C&WJ) is to roll out its cutting edge 3G cellular network on November 15, according to a top executive at the one-time monopoly telecoms.

Speaking at the Private Sector Organisation of Jamaica's Job Creation Awards ceremony at the Terra Nova hotel in St Andrew yesterday, C&WJ's senior vice-president of business sales, Leroy Reid, announced the rollout, but did not provide details of the launch that will be done on a phased basis, starting with the Corporate Area, St Catherine and St Thomas.

Errol Miller, C&WJ's vice-president for corporate communication and corporate affairs, confirmed that the new service would be launched next month when contacted yesterday.

"That, at this time, is our planned launch date, (but it will be) before the end of November," he told Wednesday Business.

C&WJ's launch of its 3G network, which provides mobile users with cutting edge features, such as video conferencing calls, multimedia emails, faster transfer of files and TV streaming, among other features, is expected to come out near or around the same time as América Móvil's - the new com-pany that acquired the Miphone network.

C&WJ is spending US$30 million ($2.1 billion) to upgrade its network to 3G which it contracted Ericsson to do.

President and CEO Phil Green had said the company would take three years to build out the techno-logy first in Kingston and St Andrew, St Catherine and St Thomas, then to Montego Bay and the northcoast, thereafter the remaining parishes.

High-speed transmission

The 3G network operates much like broadband Internet, offering high-speed transmission up to 14 megabytes per second.

With the new technology, the once-monopoly player is expecting to slice off as much as 15 per cent more market share in two years. It currently has about 660,000 mobile customers, compared to archrival Digicel, which controls the lion's share with 1.9 million customers.

C&W is also expected to change its name to LIME, but that has not yet been confirmed by the company.

"We have been having some consultations with our staff and as soon as we are ready, we will go public," Miller said yesterday.

But with the entrance of América Móvil in the Jamaican market, it could prove even more difficult for C&WJ to achieve its target. América Móvil, operating as Claro is looking to shake up the market when it launches its 3G network next month. It has promised to slash mobile rates by as much as 50 per cent as well as offer exclusive handsets such as the popular Apple iPhone.


Source:
Dionne Rose
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081029/business/business2.html
dionne.rose@gleanerjm.com

Mortgage interest rates to be cut

Published: Wednesday October 29, 2008

MORTGAGE interest rates are soon coming down.

Central Bank Governor Dr Marion Williams announced yesterday that commercial banks had agreed to drop all lending rates including interest on home construction loans by 0.5 per cent.

The interest rate reduction will also be applied to credit cards and personal loans, she said.

At a Press conference at the Tom Adams Financial Centre to review the economy's January-September performance, Williams said however that people with fixed rate mortgage contracts may have to wait some time see a reduction.

The Governor also disclosed that the last minimum deposit interest reduction which usually leads to a drop in interest on loans, was imposed because borrowers were showing signs of "stress".

The island's lead economist said, "Borrowers are experiencing some stress in meeting their obligations and the reduction in interest rates will help to prevent some of the defaults that are possible.

"We have indications that banks are doing more provisioning [for bad dept] and this is usually an indication that there may be an increase in late payments and so on. We want to stop that from happening."


Source: Nation Newspapers
http://www.nationnews.com/story/312026458266127.php

Harder to borrow

Published: Wednesday October 29, 2008

As the Central Bank continues to make it more expensive for commercial banks to lend money, there has been a slowdown in credit in Trinidad and Tobago.

And with loans more expensive now, a leading banker has suggested that Trinidadians are becoming more conservative in how they borrow money and spend on credit, but they may shortly have to pay even more for loans.

Private sector credit expansion by the financial system has been slowing within recent months because of tighter monetary policy measures, the Central Bank said in a statement.

"The 12-month increase in credit expansion was 13.7 per cent in August compared to a rate of increase in excess of 20 per cent at the beginning of the year," the Bank stated.

"Consumer and business credit posted year-on-year increases of 11.6 per cent and 12.6 per cent respectively in August, while real estate mortgage loans rose to 18.4 per cent in the 12 months to August."

The real estate market in the country has slowed within recent months, as consumers found it difficult to repay monthly mortgages for million-dollar homes which were hundreds of thousands of dollars cheaper a couple of years ago.

Last Friday, the Central Bank announced that from November, it will increase the cash reserve requirement for commercial banks to 17 per cent, up from 15 per cent, to dampen bank credit expansion and absorb excess cash in the financial system.

Commercial banks increased lending rates several times this year, as the Central Bank raised the reserve requirement the banks must deposit.

Banks recently announced increases in the prime lending rate to 13 per cent.

Richard Young, managing director of Scotiabank, acknowledged the slowdown in private sector credit expansion.

He said the latest increase in the cash reserve requirement suggested that the Central Bank believed it could suppress demand and this was strategy it intended to pursue.

Young told the Express in a phone interview on Monday that even as infrastructure projects and spending continued in the country, it was apparent that the public was adopting a "more conservative approach" toward taking credit.


Source: Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business?id=161394140

Tuesday, October 28, 2008

T&T Stock Exchange implements rule change

Published: Tuesday October 28, 2008

The T&T Stock Exchange yesterday implemented a rule change to prevent small transactions from affecting the prices of stocks.

The change to Rule 207 will set volume thresholds at which price changes can take place.

For some time there had been consternation in the investing community over the ability of small transactions to cause big changes in the price of a stock.

The transaction which triggered the rule change happened four Mondays ago on October 6, when three trades in shares of Republic Bank Limited amounting to 365 stock units caused the price of the bank’s stock to fall by $9.20 cents (9 per cent), wiping out $1.5 billion of the bank’s market capitalisation.

In a statement, the TTSE said those kinds of price movements were “a phenomenon common to most small illiquid markets,” but “There is little doubt that such transactions erode public confidence in the exchange and the market.”

Under the new system the price of a stock costing up to $4.00 can only be changed up or down on a volume of at least 5,000 shares of that stock. The price of a stock costing between $4.01 and $10.00 can only be changed after 3,000 stocks are traded; for a stock priced between $10.01 and $20, the volume which would trigger a price change would be 2,000; for a stock priced between $20.01 and $50.00, there must be trades of 1,000 stocks before the price can change and in the case of a stock priced at $50.01 and above, 500 shares must change hands before a price change is registered.

This system is called the “board lot” and the exchange said it will not affect how shares are traded, only the closing price of the stock. It said a broker can still trade as little as one share, if necessary, but that such a trade will not be able to change the closing price of the stock.


Source: Trinidad Guardian Newspapers
http://www.guardian.co.tt/business2.html

Watch out for higher interest rates, says analyst

Published: Tuesday October 28, 2008

General manager of Caribbean Money Market Brokers Securities and Asset Management Limited (CMMB), Brent Salvary, said yesterday that the Central Bank of T&T’s recent attempt to absorb excess liquidity in the local economy will not neutralise the effects of government spending.

Salvary made the comment in an interview with the T&T Guardian at his office at CMMB, Richmond Street, Port of Spain.

He was commenting on last Friday’s “Repo” rate announcement by the Central Bank in which the bank increased the reserves which commercial banks are required to hold at the Central Bank from 15 per cent to 17 per cent of prescribed liabilities with effect from November 5.

In making the announcement, the Central Bank said that the country’s inflation rate rose to 14.8 per cent at the end of September, up from 13.5 per cent at the end of August.

Salvary said that net fiscal injections into the domestic economy needed to be curbed in order to reduce the level of inflation.

He added that Friday’s Central Bank action to tighten monetary policy should see further increases in the prime lending rate.

“Basically what the Central Bank is trying to do, they are using one of their tools from their monetary policy kit to control inflation and we have seen the last inflation numbers coming out at 14.8 per cent.

“This is Central Bank’s reaction to trying to curb that (inflation). Of course, one of the big problems is that one of the drivers of inflation in the local economy is government (spending) and this would not affect their spending,” Salvary said.

“What this move is intended to have an impact on is credit, since banks would have less funds to lend, given that the reserve requirement has been increased from 15 per cent to 17 per cent.

“Credit expansion, which has been very significant over the past three to four years would probably tend to be lower.

“It will affect the consumer and companies. Basically what they will have is an increase in interest rates, in borrowing rates, because since you are raising the reserve requirement, banks would lend less, therefore what you do is create a shortage of dollars to be lent and therefore increase the cost of borrowing,” Salvary said.

“I mean it (the prime lending rate) has been increased several times over the last couple of months and it probably might increase.

“The prime lending rate is probably one of the things that you have to look out for as a result of this, although, prime has been increasing over the past few months. “But generally it should increase interest rates to discourage people from borrowing and limit the amount of demand that we have seen in some parts that has driven up prices and inflation as a result.”

Salvary added that the Central Bank action was “intended to save the economy.”

He said, “What you want to do, you want to control inflation, you want to control price increases which have gone through the roof.


Source: Trinidad Guardian Newspapers
http://www.guardian.co.tt/business1.html

Pound, Canadian $ fall; US $ stays firm

Published: Tuesday October 28, 2008

It is a good time to buy Canadian dollars and British pounds.

The TT dollar yesterday appreciated against the Canadian dollar, which sold at local commercial banks for as low as TT$5 for one Canadian dollar.

Customers also paid less for pounds sterling at local banks.

First Citizens sold sterling at TT$9.89 to one pound, while Republic Bank's rate was TT$9.88.

Sterling currency has slipped from a high of almost TT$13 to one pound in recent months, while Canadian dollars recently almost levelled the US dollar in trading both in Trinidad and Tobago and around the world.

The 15-nation euro currency also lost ground both against the US greenback and the TT dollar yesterday.

Customers bought euros for fewer TT dollars at commercial banks, paying TT$8.02 for one euro.

The euro has traded at more than TT$9 within recent months.

During this time, the US dollar has held firmly, trading at around TT$6.28 to TT$6.30, as the country continued to manage the floating currency.

Scotiabank's managing director Richard Young said yesterday it might have been expected that the US dollar would have weakened amid the ongoing financial crisis in the United States, but instead the currency seemed to have held steady.

International financial experts have suggested that the US dollar may have regained its status as a safe-haven asset, even as the euro lost ground and the pound was battered.

Young told the Express in a phone interview that the Canadian dollar seemed to be losing ground because it was pegged to natural resources like oil, and with lower demand for crude, the currency seemed to have lost some ground.

The pound has also taken a hammering amid the ongoing financial turmoil in Great Britain.

Young suggested there was a psychological "comfort level" with the US dollar and this, in addition to the rate being managed, kept the greenback high while other currencies were stricken by fears of a global recession.

He said. however, that the lower rates might help importers obtain goods at lower prices from mainland Europe and England and consumers might see lower prices.


Source: Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business?id=161393699

Monday, October 27, 2008

Govt moves to improve tax collection

Published: Monday October 27, 2008

Government is moving to set up a Revenue Authority to improve efficiency in the collection of income tax.

The announcement was made by Trade Minister Dr Lenny Saith during a PNM meeting to explain details of the 2009 budget. The meeting was one of 41 held in various constituencies on Thursday night.

Saith, who spoke in the San Fernando West constituency, said too many people had been engaged in corruption by trying to avoid tax payments.

He said a lot of the corruption in T&T started at the Licensing Office where people were able to obtain fake drivers’ permits.

He said, “The failure of the system is part of deficiencies in public administration. Part of the problem of society is the way some people are willing to pay money to get ahead. Some people believe that the only way to make money is to take advantage of people. That is why we have to improve the way we do business.”

Saith said Government planned to deal with inefficiencies in both revenue collection and expenditure.

“Our system of collection, in particular our income tax collection system, needs to be reviewed,” Saith said.

Saying that everyone would be cross referenced, Saith said the new authority would ensure that taxpayers’ dollars were well spent.

He said much of the corruption in society was caused by people who wanted to “beat the system” by paying money to “jump the line.”

He said two women recently visited his office to complain that they were evicted from a house by the Housing Development Corporation (HDC).

He said investigations revealed that one of the women had paid an official to get a house.

Meanwhile, a member of the audience, Satanan Maharaj, called on Saith to deal with white collar crime.

He called on Government to deal with the lawyers who were not VAT-registered and were not declaring their true income and were constructing huge buildings in San Fernando.


Source: Trinidad Guardian Newspapers
http://www.guardian.co.tt/business2.html

JMMB disposes of stake in CMMB

Published: Monday October 27, 2008

Jamaica Money Market Brokers

Jamaica Money Market Brokers (JMMB) has announced that it has sold its 45 per cent stake in its Trinidad affiliate Caribbean Money Market Brokers (CMMB) to majority partner CL Financial for US$41.37M or JA$3B, following discussions for about a year and a half.

This sale effectively injects liquidity into the brokerage firm at a time when many international financial institutions are experiencing capital and liquidity problems. JMMB indicated that the cash will be used to boost its balance sheet by increasing its capital base. The Group CEO expressed the view that the additional capital during this time of uncertainty in the financial markets is important in order to give shareholders a level of confidence. The regulator, The Financial Services Commission has assured investors that JMMB and the securities industry are fundamentally sound.

The sale comes at a time when the brokerage firm is in the process of building its business to enter into commercial banking at home. If the Jamaican Central Bank signs off on its plans for a commercial bank, it would cost JMMB at minimum JA$1B in start up costs. The Group CEO also indicated that JMMB will still have a presence in Trinidad through Intercommerical Bank Limited (IBL) in which it has 50 per cent ownership. The CEO went on to say that the sale proceeds will also support the expansion of the commercial bank IBL, as well as the build-out of JMMB Dominicana, its 2005 acquisition in the Dominican Republic.

Share of Profits of Associated Companies, which comprised CMMB and its securities subsidiary, accounted for approximately 19 per cent of Pre-tax profits of JMMB at the end of the 2008 financial year (See Exhibit 1). At the current price of $0.76, shares of JMMB are trading at a forward P/E multiple of 9.3 times on projected earnings. BOURSE maintains a HOLD recommendation at this time.

Local Market Update

The international financial meltdown and the fallout of the international capital markets have rapidly become a hot topic among investors and even the non-investing public. While no one is immune to the immediate and long term effects of this international crisis, the extent of these effects varies and are unique to every country.

On the local arena, some of the local and cross listed companies have publicised minimal exposure to some of the failed international investment banks. Among them include Sagicor Financial Corporation (SFC), who in a recent statement from its Barbados headquarters said that its exposure to financially distressed companies such as Bear Stearns, Lehman Brothers and Washington Mutual was limited, and that any potential loss would be immaterial to the performance of the Group. SFC has already accounted for a loss of US$2.4M and has estimated potential further losses of US$3.3M. This represents 0.14 per cent of its total assets.

In a letter to shareholders of Guardian Holdings Limited (GHL), the Group CEO pointed out that while its foreign investments are not immune to the volatility of the world markets, in total they represent less than 2 per cent of the Group's investments. Jamaica Money Market Brokers (JMMB) indicated that the exposure of its own account investment portfolio to the collapse of the international financial sector was approximately 3 per cent. Despite the relatively insignificant exposure outlined by these companies, investor reactions were much more adverse, with SFC, GHL and JMMB share prices falling 21 per cent, 22 per cent and 22 per cent respectively.

Domestic GDP growth was recently revised downward in the Annual Budget presentation to 3.5 per cent by fiscal year end 2008, with a 5.5 per cent growth rate projected by fiscal year end 2009. Whether or not this kind of economic growth is achievable with falling world oil prices remains questionable. Even in a situation where economic growth flattens out, our local economy still remains relatively robust when compared to other Caribbean countries and the United States. Other macroeconomic indicators point to our ability to withstand the global financial instability. According to the Finance Minister of T&T, our import cover stands at 11 months, while we have experienced a decline in external debt from 41 per cent in 1994 to 6 per cent at the end of 2007. The country's external current account surplus is approximately 26 per cent of total GDP. It must be said that certain sectors such as Manufacturing may experience slower growth as trading partners such as North America and Caricom suffer from sluggish economic growth.

In spite of these market and macroeconomic factors, our local capital market has continued on a downward spiral over the last two to three months. International events and the extreme volatility of international capital markets have had a psychological effect on local investors, instilling fear and uncertainty.

Thin volumes coupled with large price declines suggest many investors are panic selling. On October 6, shares of Republic Bank Limited fell almost 10 per cent in that one day on just 3 trades totaling 365 shares. To prevent very small trade volumes from moving share prices up or down materially, the Securities and Exchange Commission has approved a rule which sets volume thresholds based on price intervals for a share price to change on the Trinidad and Tobago Stock Exchange (TTSE).

The decline in share prices over the past few months has had a negative effect on valuations. Low investor demand and the lack in investor confidence is expected to continue as long as uncertainty and volatility persists in the international financial landscape. As long as low investor confidence in the market endures and supply outstrips demand, further declines can be expected.

These declining valuations present an opportunity for local investors to come back into the market. However, the circumstances surrounding the current market and economic environment are unique. Although similarities may exist between the current situation and past periods, investors must realise that we are in uncharted territory with no precise indication of where the market is headed, both locally and internationally. Investors are advised to keep a cautious eye out for valuable buying opportunities in the local equity market.


Source: Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business?id=161393260

Friday, October 24, 2008

IDB launches liquidity facilities for Caribbean

Published: Friday October 24, 2008

The Inter-American Development Bank (IDB) plans to approve a record volume of loans in 2009 and is setting up a new fast-disbursing US$6-billion liquidity facility to help Latin American and Caribbean economies sustain growth in the face of the global financial crisis.

In addition, the Andean Development Corporation (CAF) has announced a liquidity facility of US$1.5 billion and the Latin American Fund of Reserves (FLAR) has offered US$1.8 billion as part of its liquidity arrangements.

"We are rallying to respond to our clients' needs," said IDB President Luis Alberto Moreno. "The origin of the crisis is outside of the region but can have potentially serious repercussions in Latin America and the Caribbean. Our countries have made strides in recent years to promote growth and reduce poverty. Those gains need to be protected, and that is why the IDB and its sister institutions are moving quickly."

The IDB's US$6 billion Liquidity Programme for Growth Sustainability will be provided to member governments. The aim is for the funds to be made available to domestic firms via commercial banks that may face transitory difficulties in accessing foreign and inter-bank credit lines as a result of the financial crisis in the United States and Europe.
Countries eligible to borrow from the bank's ordinary capital can tap the fund. The loan amounts would be determined by the IDB on a case-by-case analysis.

In addition, the IDB said it is prepared to accelerate loans to finance projects and enhance social programmes and approve up to a record US$12 billion in 2009, up from about US$10 billion this year.

If the liquidity facility is fully utilised, the resulting flow of committed funds to Latin America and the Caribbean would amount to about US$18 billion in the course of 2009, an exceptional effort by the IDB prompted by the international financial circumstances. This would be an almost 80 per cent increase in lending to the region and would be the largest and most rapid mobilisation of resources in the IDB's 49-year history.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081023T220000-0500_141679_OBS_IDB_LAUNCHES_LIQUIDITY_FACILITIES_FOR_CARIBBEAN.asp

IMF says financial crisis in the US will impact tourism in the Caribbean

Published: Friday October 24, 2008

The International Monetary Fund (IMF) has indicated that the financial crisis in the United States and elsewhere should be expected to impact the tourism sector in the Caribbean and overall.

Given the importance of the tourism sector to the economies of most Caribbean islands, IMF Division Chiefs for the Caribbean stressed the need to develop effective policy responses.

The Antigua Sun reported that Antigua's finance minister, Dr Errol Cort was on hand at the series of IMF/World Bank meetings held in Washington DC to participate in the bilateral and multilateral discussions concerning issues of importance to Antigua and Barbuda.

Among the topics discussed were the ongoing international financial crisis, debt strategy and economic infrastructural development.

When the financial crisis was discussed, it was stressed that although the Eastern Caribbean Currency Union (ECCU) did not appear to have significant exposure to the institutions at the heart of the crisis, some indirect effects may show up in the "real sector".

In the light of this, according to the Antigua Sun report, the IMF indicated its readiness to work with countries of the region to provide "policy, technical and financial support to minimise any negative impact".

It was emphasised that the impact felt by countries in the Caribbean would differ based on a number of factors including the level of economic growth and productivity.

With regard to reducing debt in the Caribbean, representatives of the region focused on the need for the IMF and the World Bank to work with the region in order to develop more innovative approaches to dealing with the issues of debt.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081023T210000-0500_141665_OBS_IMF_SAYS_FINANCIAL_CRISIS_IN_THE_US_WILL_IMPACT_TOURISM_IN_THE_CARIBBEAN.asp

Trinidad can withstand global slowdown - finance minister

Published: Friday October 24, 2008

Trinidad and Tobago's economy, which has enjoyed over 10 successive years of positive economic growth, is in a better position to withstand a global slowdown, the country's finance minister, Karen Nunez-Tesheira said this week.

However, the slowing down of growth in their major trading partners, including North America and the CARICOM region, has implications for the domestic manufacturing sector.

"In particular, a slowing of growth in the North American and European economies may negatively impact receipts from tourism and remittances in many countries of the region.

"However, the situation at present remains unchanged and we are closely monitoring developments with a view to proactively countering any negative movements that may materialise," the finance minister said during a wide-ranging statement to the Senate.

Performing remarkably

She said the current global financial instability comes at a time when the economy of Trinidad and Tobago is performing remarkably well and that the macroeconomic indicators place Trinidad and Tobago as well positioned to withstand the effects of the crisis.

Trinidad and Tobago, she said, has enjoyed more than 10 successive years of overall balance of payments surpluses, driven primarily by strong performance of the merchandise trade account, and high oil and gas prices.

The external current account remains in surplus and the stock of foreign reserves stand at US$8.5 billion which provides the country with more than 11 full months of import cover of goods and services.

She added that the country's foreign reserves will help to bolster the banking sector, should liquidity become strained and would help to service international debt.

The country's external debt has declined from 41 per cent of gross domestic product (GDP) in 1994 to approximately 6.0 per cent at the end of 2007.

In 1996, the fiscal balance was -0.2 per cent of GDP compared to 7.6 per cent at the end of 2007.

Nunez-Tesheira said the country's external reserves of US$8.5 billion have not been affected by the financial turmoil in the United States.

Varying risk profile

As part of its approach to risk management, the Central Bank of Trinidad and Tobago allocates reserves among three tranches of varying risk profile. In addition, highly reputable money managers, including the World Bank, are responsible for managing 32 per cent of the total official reserves.

"The composition of the investment portfolio for international reserves has provided significant insulation from any loss," she added.

Nunez-Tesheira also reassured that there was very little immediate risk facing Trinidad and Tobago's banking system, which she described as well capitalised with a capital asset ratio of about 18 per cent, a low level of non-performing loans and a high liquidity position.

"The commercial banks have limited direct exposure abroad withforeign assets representing only 18 per cent of total assets. The impact of the credit crunch is also muted by the commercial banks' limited reliance on foreign borrowing reflected in the fact that foreign liabilities amounted to a mere eight per cent of total commercial bank liabilities as at end of May 2008," she said.

No undue risks

The normal flow of dividends from subsidiaries to parent bank also does not create any undue risks for the domestic banking system.

In the unlikely event that there is a demand for uploading of payment between the domestic subsidiary and parent, Nunez-Tesheira said the central bank has the authority to intervene to protect the domestic banking system.

The finance minister also told the Senate that the US$2.8 billion Heritage and Stablisation Fund (HSF) reserves have not suffered any capital loss and are at no undue risk.

"A few months ago, the HSF board approved a strategic asset allocation policy, however, whilst the procurement of services of external managers is proceeding, the board took a decision that, in the interim, 95 per cent of HSF funds would be invested in short-term money market instruments and five per cent in US treasuries.

The holdings are subject to the same prudential guidelines. Consequently, these reserves have suffered no capital loss and are at no undue risk.

"The growing financial contagion, however, has impeded a more aggressive approach to investing HSF resources, and we are currently monitoring with a view to preserving value for future generations," according to the finance minister.

Won't resort to hsf

Government also does not plan to resort to the Heritage and Stablisation Fund in the event of oil prices falling below budgeted target, although the legislation provides for withdrawal in such cases.

The fund generates savings for future generations and helps to insulate fiscal policy from fluctuations in revenue from the energy sector.

In response to calls for the government to review its budget which was based on oil prices remaining at US$70 a barrel on average, the finance minister said the price was determined on the basis of an established process and on information available at that time.

In arriving at the oil and gas prices for the budget, the Ministry of Finance set as its ceiling the 11-year moving average for oil and gas prices based on IMF data taken from its World Economic Outlook publication.

Medium-term projection

It also took into consideration information from the medium-term projection for oil and gas prices of the Organisation of Petroleum Exporting Countries (OPEC), and the planning prices being utilised by major companies operating in the Trinidad and Tobago jurisdiction.

"While the consensus on oil price trends remains uncertain, there is general agreement that high volatility will continue to be a feature of oil prices which will continue into the medium term. For oil exporting countries such as Trinidad and Tobago, an immediate challenge is to ensure that such volatility does not impact government's planned infrastructure programmes, " she said.

While the country grapples with issues related to its traditional trade channels, the government official said it must embrace new opportunities.

The global financial turmoil, she said, also makes the establishment of the Trinidad and Tobago International Financial Centre even more of an imperative.

Moving to leverage dynamism

Government is also moving ahead to leverage the growing dynamism of the domestic financial sector, by providing the requisite infrastructure and deliberate policy direction leading to the creation of the offshore centre.

"The TTIFC will be an intense concentration of a range of international financial businesses and other transactions, specifically tailored and sufficiently marketed to attract financial business from around the globe.

In going forward, bearing in mind the lessons learned from this international crisis, we are strengthening the design of the TTIFC in respect of effective risk management and governance," she added.

Nunez-Tesheira insists there is nothing complacent about Government's approach to the international crisis and to the impending conditions that are expected to feature in the global economy over the next two years and more.

The Ministry of Finance, she said, is currently undertaking the research and analysis that will form the basis of informed judgements regarding the policy responses that will best serve the interest of the country.


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081024/business/business8.html

Haggling begins on C&W pension properties

Published: Friday October 24, 2008

Handlers working on the sale of four prime properties put on the market by Cable & Wireless Pension Fund trustees are in negotiations with two potential buyers arising from bids that closed off at the end of September, the Financial Gleaner has learned.

The Towers, New Kingston Shopping Centre and the former drive-in cinema, all on Dominica Drive in New Kingston, as well as the Fair View Shopping Centre in Montego Bay, were advertised for sale in July.

The Financial Gleaner estimated the value on the properties at no less than $2 billion, but WIHCON, one of the firms handling the sale, has said the values were understated.

Derrick Jones, chairman of the Cable & Wireless Pension Fund, would not comment on the status of the negotiations.

"The process is ongoing and where we are in that process, would not be appropriate for public discussion at this time," he said Tuesday.

However, the Financial Gleaner was otherwise advised that more than five bids were received, both from local and overseas interests on all four properties, that "full-fledged negotiations" were under way with at least two bidders, and that a year end deadline had been set to offload the properties.

Built sometime in 1985, The Towers have become something of a landmark in New Kingston. Its twin structure - one 10 storeys and the other 12 - has a combined area of 112,850 square feet which sit on 73,976 square feet of land.

The cinema land, which sits opposite The Towers, is a 7.58 acre property which accommodates a theatre, a parking lot and an automobile showroom.

Property experts say that land in this area would value between J$5,500 and J$6,000 per square foot.

Adjacent to the defunct cinemas is the New Kingston Shopping Centre, a 175,848 square-foot shop and office complex which is situated on 2.26 acres of land.

Fair View Shopping Centre, in Montego Bay, on the northwest coast, comprises a series of buildings on a combined 101,000 square feet on 5.96 acres.


Source:
Dionne Rose
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081024/business/business6.html
dionne.rose@gleanerjm.com

PanCaribbean profits flattened by new bank

Published: Friday October 24, 2008

Brought down by disappointing profits in the third quarter, a bigger wage bill and other expenses year to date, Pan Caribbean Financial Services recorded flat profits of $901 million or earnings per share of $1.64, in its newly released nine-month earnings report.

Pan Caribbean at the end of September had paid out half a billion dollars in salary - up 35 per cent year-on-year - its biggest spend inside total expenses of $851 million, which were up 27 per cent.

The expanded cost of running PanCaribbean undercut the 13 per cent improvement in revenue which rose from $4.5 billion to $5.1 billion, and sliced four million or half a point off net profits.

Pan Caribbean said its staff cost rose because of additional personnel taken on for its new commercial banking operations launched in July, but also included adjustments for inflation.

"Our commercial bank has completed its first full quarter," said chairman Richard Byles and Chief Executive Donovan Perkins jointly in a statement appended to the accounts.

"This investment will enhance the future profitability of the group and give us the capability to better compete entering 2009."

Smallest commercial bank

PanCaribbean Bank Limited is Jamaica's seventh and smallest commercial bank with assets below $10 billion.

The group's net interest income, a measure of the core strength of brokerages and other financial sector firms, was a near 17 per cent improved at $1.45 billion, "influenced by balance sheet growth," the company said.

Balance sheet assets grew by $8 billion to $58 billion because of an expanded securities portfolio, but the company also saw a depletion in the value of its bonds which forced a write-down of $273 million. Shareholder equity was disturbed as a result but not substantially, falling to $7.4 billion from $7.5 billion within the nine-month period.

Capital to assets ratio

Pan Caribbean also stressed its capital to assets ratio, saying that at 15.6 per cent, the company was well capitalised.

"Pan Caribbean's balance sheet consists of cash equivalents, high-quality loans, Bank of Jamaica instruments and Government of Jamaica bonds," said its statement.

"Our capital to assets ratio at 15.6 per cent is amongst the highest not just in Jamaica, but within the Caribbean region. In addition to being well capitalised, we maintain conservative levels of liquidity and our franchise is supported by strong and diversified business lines that protect our profitability."

The company said if the global downturn descended into recession, it would impact equity and bond markets, but sought to assure shareholders that its team was capable of steering investors, depositors and borrowers through the period.


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081024/business/business7.html