Mon | Oct 21, 2019

First Global looks to home buyers for loan growth

Published:Wednesday | September 4, 2019 | 12:05 AMAvia Collinder/Business Reporter

Small commercial bank First Global, FGB, is hunting market share in the home loans segment and hopes to grow new business by at least 20 per cent within a year.

The GraceKennedy-owned bank has a promotional offer of 7.25 per cent interest, 95 per cent mortgage financing with up to 30 years to repay and has waived the industry requirement of 18 months of savings – all to entice business.

However, some of its rivals are also offering promotions at lower rates and with 100 per cent financing towards the same goal of growing their loan portfolios.

The value of First Global’s mortgage loan portfolio is unknown, but its total loan book was valued at $25 billion up to March.

FGB is Jamaica’s second-smallest bank, with assets of $55.7 billion, but it is within striking distance of closest rival JMMB Bank, which has assets of $56.7 billion. JMMB Bank, however, has a much larger loan portfolio of nearly $34 billion, and it, too, has indicated plans to go after business in the mortgage and SME arenas.

Planning Institute of Jamaica, PIOJ, data indicates that for the April-June quarter, the value of mortgages grew in the private market but declined for the state-owned housing agency. Life insurance companies grew by 5.2 per cent to $85.1 million and building societies and commercial banks rose 24.3 per cent to $6.26 billion, but for the National Housing Trust, NHT, mortgage balances slid 39.6 per cent to $6.64 billion.

Consequently, there was an overall decline in the market by 19.4 per cent to $12.99 billion relative to the 2018 period.

Incomplete data

The PIOJ indicated, however, that the data provided to the Financial Gleaner for the quarter was incomplete, saying it did not include the business done by credit unions, Scotiabank, and First Global.

The number of mortgage loans issued also declined across the major categories: NHT slid by 111 loans to 1,598 loans, and building societies and commercial banks fell by 168 to 519 loans. However, the life insurance segment added one loan in the period, bringing its disbursements to nine loans.

Overall, the total number of mortgages disbursed decreased by 278 to 2,126 loans for the period ending June.

Within the commercial banking market, First Global has a 3.46 per cent share. Its mortgage initiative and campaign dubbed ‘The Next Move is Yours’ are meant to move the needle for the boutique bank.

FGB told the Financial Gleaner that it wants to grow its mortgage loans by 20 per cent within a year.

“Our primary growth strategy is market penetration, leveraging a promotional interest rate of 7.25 per cent, as well as increased promotion of the mortgage product …., “ the bank said through its communications unit.

First Global’s marketing officer, Shanelle Bethune, is otherwise quoted in a company release as saying that Jamaicans still approach homeownership as “a big, audacious goal, which many persons find unattainable before the age of 40” and that the bank aims to change that.

“Whilst some financial institutions offer comparatively lower interest rates, they usually require a savings commitment of a minimum of 18 months at a minimum threshold as a prerequisite to accessing financing at their special rate,” said Bethune. “First Global Bank allows any customer to access mortgage financing as soon as they are financially ready,” she said.

The bank’s estimated turnaround time on the approval of mortgage applications is 30-45 days, assuming the required documentation has been submitted, whereas the industry average is 90 days, First Global said.

avia.collinder@gleanerjm.com