C&WJCCU eyes second merger, strengthens asset base ahead of new regulatory regime
Published:Sunday | January 2, 2011 | 12:00 AM
Sabrina Gordon, Business Reporter
The recent trend of mergers and acquisitions in the credit union movement seems set to continue into next year, with members of Communications and other Workers of Jamaica Co-operative Credit Union Limited (C&WJCCU) to be asked next week to approve the entity's second acquisition in as many months.
C&WJCCU is seeking to take over Clarendon Co-operative Credit Union, following its acquisition in October this year of Marine & Allied Credit Union, which brought onboard another $200 million in assets and swelled membership by 2,000 members.
"We are confident that it will go through because the move is a good one," Barry Whyte, C&WJCCU general manager told Sunday Business ahead of the January 6 general meeting, at which members will vote on the acquisition plan.
"We already had some consultations and we have never gone to members with a proposal and it is rejected, so with the benefits outline, members will respond favourably to the future growth and development of its cooperative," he said.
Following approval by members, Whyte said C&WJCCU would move to have all the administrative changes and information technology integration completed before April, when C&WJCCU celebrates its 50th anniversary.
Assets
The acquisition of the Clarendon credit union, if approved, will add close to $1 billion in assets and little less than 40,000 members to C&WJCCU's operation.
With Clarendon, C&WJCCU would become the island's third-largest credit union with assets of approximately J$4.3 billion and a branch network of 10.
Whyte said the amalgamation represents an opportunity for his agency to spread its risk while reducing overheads.
"It represents a better value proposition for members, help to reduce overheads spread over a wider membership base, and more income," he said.
"The risk is now diversified with a broader range of industry from which members are drawn, thus less dependence on one group."
Members of the Clarendon credit union have already voted in favour of the merger-acquisition, Whyte said.
The credit union is looking to bulk up membership, business and assets and strengthen its bottom line ahead of regulatory changes that will impose, among other things, a minimum capital requirement of six per cent of assets on those financial institutions.
Whyte said the move will enable his credit union to meet the regulatory requirements more comfortably, once the Bank of Jamaica (BOJ), which is to be the supervisory agent for credit unions, imposes its new licensing regime for the community-based lenders.
"Mergers and acquisitions are the credit unions' growth strategy now, and with BOJ as regulator there will be a number of requirements to be satisfied; so (C&WJ), with Clarendon, will be in a better position to deal with those issues," the credit union manager said.
The company's earlier merger with Marine and Allied took effect on November 1, 2010.
Last year, Kingston-based COK acquired Sodality, to create a J$7.7 billion operation by assets. Even before then, four years ago St Ann Co-operative Credit Union and St Mary Co-operative Credit Union Limited were amalgamated to create First Regional Co-operative Credit Union.
The draft legislation to bring credit unions within a new regulatory framework is being considered by Cabinet.
In addition to the capital requirement under the regulations being proposed, credit unions' unsecured loans are expected to be capped at no more than 10 per cent of the institutions' loan portfolios. Cash and liquidity reserve ratios are also to be imposed.
Originally established by employees of the now defunct Jamaica Telephone Company in 1961, C&WJCCU changed its name from Cable and Wireless Co-operative Credit Union with the entry of new players in the telecommunications market.
The entity now serves approximately 17,000 members made up primarily of employees of LIME and its predecessor companies, corporate subscribers to various telecommunication services, and their relatives.
Whyte noted that the issue of possible job losses has not been contemplated as Clarendon's branch structure is expected to be maintained. At the same time, he is not forecasting any major changes from the merger.
Along with its head office in May Pen in the parish, Clarendon Co-operative Credit Union currently has a branch at the Jamalco plant at Halse Hall, one at Lionel Town and another Kellits.