New Scotia Group Jamaica President Bruce Bowen.

Scotiabank Jamaica's new boss, Bruce Bowen, has put in place a new credit policy that sets new limits on how much the bank lends to individuals as well as the number of clients deemed risky but qualify as exemptions.

And, he has added new agents to track down borrowers who are late with payments.

Bowen's more intractable stance follows the continued growth of non-performing loans to $3.55 billion at January 31 - an increase, the bank said, of $1.4 billion year on year, and $580 million over the October quarter.

At Scotia Group Jamaica's annual general meeting Tuesday in Kingston, Bowen, the president and CEO, told shareholders that while it was expected that defaults would occur in a recession - Jamaica's economy has contracted 0.4 per cent for the year - the bank had to find ways to cauterise its growing loan losses.

A more conservative stance

The new credit policy will affect the size of the loan a typical borrower can access, but also sees the bank adopting an even more conservative stance on the risk it takes on.

"We typically only lend to the point where the person's loan payment represents a certain percentage of income. That percentage we have adjusted downward," said Bowen.

"The other thing that we have done is that whenever we set a policy, we always allow exceptions to it and whereas we might have allowed a 15 per cent of loans booked to be exceptions to that policy, today we have reduced it to five per cent."

While the specific loan types in which the company was experiencing the delinquencies were not disclosed, Bowen noted in his report that the troubled portfolios were retail loan and credit cards.

Scotia's non-performing loans now represent 3.96 per cent of total loans and 1.21 per cent of total assets, more than doubling the position a year ago when bad loans were 1.75 per cent of the portfolio and 0.65 per cent of assets.

The impairments on the loan portfolio, for the first time in recent memory, saw the bank reporting a reduced loan portfolio, which slid about a billion dollars from $89.7 billion at October 31, 2008, to $88.7 billion on January 31, 2009.

Its impaired loss on loans amounted to $758.7 million, an increase of 44.27 per cent when compared with the previous period.

"We are working closely with clients who have a temporary reduction in cash flow to restructure loans," said Bowen at the AGM held at The Jamaica Pegasus hotel in New Kingston.

"We have increased significantly the resources in contact customer service personnel to reduce the percentage of problem loans. So we have moved from say 40 to 65, for example, the number of persons we have making calls when loan payment is late to find out the reason, among other things."

And, though Bowen did not mention it at the AGM, the bank is also targeting those it considers its 'A-list' customers, and prodding them to take out new or bigger loans.

Restructuring activities

According to the banking group's notes to the financial statement, the restructuring activities of loans included extended payment arrangement, approved external management plans and modification or deferral of payments.

"Following restructuring, a previously overdue customer account may be reset to the normal status and managed together with similar accounts after careful analysis and the demonstration to maintain the scheduled payment over a prolonged period," the financial notes stated.

Still, even with non-performing loans on the rise, Bowen said it was still business as usual with the company open to all areas of business.

"We are still booking now (and) seeing $1 billion in new personal loans per month," said the Scotiabank president.

He acknowledged, however, that demand for loans has fallen, saying credit applications were averaging $1.5 billion per month a year ago.

Fewer loans

"Fewer persons are looking for loans; more persons are now nervous about buying a new car given lower cash flow," he said.

"Likewise, commercial and corporate loans are fewer as companies are not comfortable investing in new equipment and machinery because of the recession."

For the first quarter, total shareholders equity grew by approximately $3 billion to now at $14 billion.

At its financial year end, October 31, the bank made net profit of $9.6 billion and paid out dividends totalling $4 billion.

For the January quarter, net profit rose 14 per cent to $2.5 billion or 78 cents per share.

Deposits also grew to $149 billion, increasing by $4.7 billion or 5.2 per cent.

sabrina.gordon@gleanerjm.com

Scotia Group Jamaica's new board

The board has been reduced from 17 to 15 members. The directors not re-elected were William 'Bill' Clarke who resigned as president October 31, 2008, and Chief Financial Officer Stacie William.

The new board comprises:

Robert Pitfield (chairman)

Mayer Matalon

Barbara Alexander

Anthony Chang

Jean Dixon

Mark Golding

Muna Issa

Jeffrey Hall

Charles Johnston

Warren McDonlad

Pasquale Minniccuci

Herbert Thompson

Stephen Vasciannie

Richard Waugh

Bruce Bowen