Last year, the shrinking credit union movement fell further, to 26 institutions, and the Bank of Jamaica is saying there’s still more contraction to come.
It’s not that operators are going out of business, but rather there have been a series of mergers as the small community banks buffer their capital base to ready themselves for central bank oversight.
The sector now expects the transition to happen by July.
Last year, the credit unions as a block generated surpluses of $2.1 billion, reflecting an uptick year-on-year of nearly 12 per cent, or about $200 million. In the previous year, profits climbed 48 per cent.
BOJ said in its newly released annual report that the slower profit growth resulted from higher expenses, especially staff costs.
But even though profit growth was anaemic, the central bank said the surplus for the year resulted in an improvement in profitability indicators. The sector’s net profit margin increased to 15.4 per cent from 14.27 per cent; return on assets increased to 1.90 per cent from 1.86 per cent; and return on equity ticked up to 10.28 per cent from 10 per cent.
Six to seven years ago, the credit union movement had more than 40 operators. Last year, the number of credit unions contracted by another two, from 28 to 26, and the BOJ says it expects an even smaller sector in the medium term, having noted that “there are strong indications that the trend of consolidation in the sector will continue”.
The umbrella organisation for the group and de facto regulator since 1977, JCCUL, agrees with the central bank’s assessment. But while JCCUL General Manager Robin Levy said Wednesday that more mergers are on the way, he declined to indicate where the deals would emerge.
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