NCB to increase interest rates | Loop Jamaica

The content originally appeared on: Jamaica News | Loop News

National Commercial Bank (NCB) Jamaica will be increasing interest rates for some of its loan customers effective July 19, 2022.

Loan rates will reportedly increase by an average of 1.14 per cent for customers with a variable rate loan contract.

NCB borrowers to be impacted include small and medium-sized enterprises, holders of secured and unsecured personal loans such as mortgages, home equity loans and car loans.

The interest rate increase among local financial institutions, like NCB, follows last month’s decision by the Bank of Jamaica (BOJ) to increase the policy interest rate by 50 basis points. The recent increase reflects a cumulative increase in the policy rate of 450 basis points since October 2021.

The central bank had said the measures are expected to cause interest rates on deposits and loans to rise further.

NCB, the leading commercial bank, early May, indicated that it was constantly assessing how the increase in policy interest rates could affect its net interest income.

“Obviously if we see, depending on the rate of increase, it may dampen demand for loans, and so we are managing that, and mortgages may be impacted. So new mortgages booked at higher rates and repricing of current mortgages could put pressure on debt servicing,” NCB Jamaica CEO Septimus ‘Bob’ Blake told the NCB Financial Group’s investor briefing on May 10.

Blake said the bank was constantly refining its understanding of the implications of the interest rate hike at the macro level and how it transmits to the bank’s balance sheet.

“We are constantly forecasting key balance sheet and income statement items such as revenues, expenses, loan losses and the associated provisions and profitability and we will continue to do that,” he told the briefing.

He, however, pointed out that dampened loan growth will weigh heavily on net interest margin and may pose a challenge in improving the bank’s return on equity.

“To counter that, we are placing [a] renewed focus on fee-based businesses, our service mode to reduce the cost to serve, the pricing models with a view to counter that compression,” Blake said adding that “the bank has a sufficiently diverse business model to adapt.”

NCB Jamaica, the commercial banking arm of the NCB Financial Group was one among the five business lines that contributed to the conglomerate’s positive earnings out-turn at the half-year ending March 31, 2022.

NCB Group reported unaudited consolidated net profit of $15.3 per cent for the half-year ended March 31, 2022, an increase of 65 per cent over the prior year.

The improved performance during the period resulted in operating income of $69.3 billion, an increase of $9.6 billion or 16 per cent over the prior year.

The net result from banking and investment activities of $53.4 billion represented a 15 per cent of $6.6 billion increase over the prior year. Net interest income improved to $32.4 billion, up to $5.3 billion or 19 per cent.