Churches eyes bigger share of funds management pie
Published:Sunday | March 6, 2011 | 12:00 AM
Churches Cooperative Credit Union is investing in a number of new business lines which the institution expects to use to boost its earnings by up to J$500,000 million this year.
The lion's share of those revenues is expected to come from a new subsidiary, CCU Investments Limited, in which the parent company has invested J$50 million, but for which it is awaiting the approval of the Financial Services Commission (FSC).
Increased earnings are also expected from the institution's recent additions of an individual retirement scheme and micro-lending centres primarily for agriculture and agri-business.
Addressing issues surrounding the new investments, Churches Chief Executive Officer Basil Naar, in an interview with Sunday Business, said that following the Government's debt exchange last year, interest rates on loans were slashed and "we kept margins tight in the interest of members".
"We have 127,000 members with $3.5 billion on deposit here and who have $750 million in money-market entities," Naar said, stating that the company is expected to capture one-third of this business by December 2011.
Marketing push
The new subsidiary, he said, is expected to grow funds under management by 150 per cent to J$250 million by year end.
Churches has budgeted J$25 million in marketing spend to push this and other fairly new products, which include an individual retirement scheme with 3,200 members, and J$100 million in funds under management.
The aim, Naar said, is to double membership in the scheme and increase the fund to J$250 million, or 150 per cent, by year end 2011.
The fund company investment is part of Churches' growth strategy.
On January 11, the credit union opened a new branch in Lawrence Tavern, St Andrew. Before that it launched four micro and small business loan centres in Kingston; May Pen, Clarendon; Mandeville, Manchester, and Montego Bay, St James, targeting farmers and agro-processors for loans ranging from J$50,000 to J$200,000.
Naar said the plan is to grow these loan centres to 14 by December 2012.
With each loan centre costing between J$4 million and $5 million to establish, investment will total between J$40 and J$50 million for the remaining centres.
Expansion will be funded out of cash flow from all loan centres.
For this segment, the current loan portfolio of J$80 million is expected to grow to J$140 million by year end, he said. The total loan portfolio stands at J$3.1 billion.
Naar said the portfolio grew 13 per cent in 2010, and total assets improved by 12 per cent compared to 2009.
Delinquencies in 2010 were less than two per cent of loans, coming out at J$32 million, or 56 per cent, of the budgeted provisions for bad debts.
This, the CEO said, was less than J$51 million in delinquencies for 2009.
While he did not state total income data, Naar said that in 2010, revenue was flat, with total interest income falling by J$15 million as interest rates were reduced post-JDX. Of that amount, the debt exchange cost J$6 million.
Net surplus rose 31 per cent over 2009, he said.
Established in 1971, Churches holds second place among 44 credit unions locally in size, falling below COK Sodality in membership and assets.
Churches offers financial services, including savings and investment accounts, loans, pension-funds management, and insurance-agency services.