OVERVIEW The
period 1 January to 31 December, 1999 was an unusually dynamic one.
Though filled with many challenges, hard work, sacrifices and
disappointments, it was also a period of exceptional achievement. Most
of the year was dedicated to planning the financial and operational merger
of Eagle Commercial Bank Limited, Island Victoria Bank Limited and a
portfolio of business from Workers Savings and Loan Bank into Citizens
Bank Limited. The end result
was the creation of the “new” Union Bank of Jamaica Limited. The
merger was instituted by FINSAC Limited, the entity established by the
Jamaican Government to manage and resolve problems that had led to a
significant fall-out of many of the country’s financial services
institutions. FINSAC controls
approximately 99% of the shareholdings of Union Bank of Jamaica Limited. Playing
a lead role in the merger process was Transamerica Financial Services (TFS),
a US based consultancy firm that was hired by FINSAC to manage the merger
process. Specifically, TFS
was given the mandate to establish control and oversight of the merger of
the four banks, based on guidelines established by FINSAC, in order to
accomplish the following:
(i) An
evaluation of the bank’s operational and financial conditions;
(ii) Preparation
and implementation of a strategic plan for Union Bank;
(iii) To ensure that
Union Bank was able to meet its fiduciary responsibilities. Launch Union
Bank was officially launched to the public with the unveiling of the
Bank’s logo on 8 November 1999. The
launch function was held at the Bank’s Dominica Drive Head Office and
saw the Minister of Finance & Planning, several diplomats, other
government officials and eminent private sector leaders in attendance. RETROSPECTIVE Banking
Services The
process to align the operations of all four (4) commercial banks included
ensuring that they used the same information systems, policies and
procedures. This phase of activities climaxed in September 1999 with the
conversion of Citizens Bank Limited, the last of the institutions to be
converted, to the selected application. Transition
to the ‘one-system‘ mode was carefully planned and executed to ensure
minimum dislocation to customers. The appointment of Regional Managers to
initiate and co-ordinate activities within the branches was pivotal to the
meeting of this objective, and helped the new Union Bank achieve the
desired levels of efficiency and rationalization, while also positively
impacting its overall market positioning. Among
other major rationalization strategies were the following:
The number of branch locations was reduced from 41 to 24. This
consolidation was designed
to create an infrastructure that would facilitate:
The
Bank’s personnel was reduced to approximately 814, with 430 of these
dedicated to the branch network. Credit Union
Bank’s Loan Portfolio as at 31 December, 1999 stood at $1,649,208,000
after an allowance for loan loss of $518,177,000. Despite
an injection of capital, the Bank still maintains strict lending
guidelines, even as it seeks to satisfy the changing needs of its “blue
chip” customers. During
the period under review, adequate loan loss provisions were made in
keeping with Central Bank Standards. Financials In
the financial statements, the results for 1998 reflect those of Citizens
Bank Limited and its subsidiaries. The figure as at 31 December, 1999
cover all merged institutions, which today make up Union Bank of Jamaica,
and therefore direct comparison would be misleading. Union
Bank recorded a net loss of $1,050,885,000 for the financial year ended 31
December, 1999, with a net interest income of $1,510,660,000 and other
revenue amounting to $307,833,000.
Loss form operations stood at $1,032,252,000.
Net interest income and other revenues, after loan loss provisions totaled
$1,131,698,000. The loan
portfolio as at 31 December, 1999 stood at $1,649,208,000, after allowance
for loan loss of $518,177,000. Non-recurring
expenses, including system integration, redundancies and organizational
merger expenses contributed to the loss. It
should be noted that, as a consequence of the merger, unaudited results
for the first five months of year 2000 are much improved, with the Bank
showing a net profit of $17.3 Million. Technology Technology
enhancements played a major role in Union Bank’s preparation to convert
the systems of four discrete entities into a single, efficient entity.
Included among such changes was the re-tooling of the Bank’s Information
System, an action which resulted in the establishment of one of the better
banking platforms being utilized locally. Automatic
Banking Machines were also re-configured and re-introduced in specific
branch locations. The process
also saw the conversion of the credit card system of Workers Bank and
Citizens Bank into Island Victoria’s Cardman System. The
Y2K Challenge The
year ending 31 December, 1999 saw intense preparation for the threats
posed by the Millennium Bug. Immediately
following the final branch merger in September, the Bank set about the
task of re-organizing, planning and implementing events management
procedures that integrated its Information Technology plans with those of
operations. Designed to mitigate possible system failures caused by the
millennium date change, the preparation involved not only system checks,
but also providing internal and external customer education and alert.
With the incorporation of financial provisions and contingency
systems at the end of the year, the entire Bank was ‘Ready And
Waiting’ as our Y2K advertised slogan proclaimed. The year change over
was a success for the Bank. LOOKING
FORWARD RBTT
Financial Holdings Limited, a regional financial conglomerate, is seeking
to acquire all the shares of Union Bank of Jamaica Limited. To this end,
potential the investor has signed a Memorandum of Understanding with
FINSAC, dated 30th day of June 2000, regarding the acquisition of the
shares owned by FINSAC. Anticipated completion date for the acquisition of
the FINSAC shares in Union Bank is 31 August 2000. The
restructured Union Bank is poised to become one of the most efficient and
competitive commercial banks locally - boasting knowledgeable personnel, a
new operational system, the latest Information Technology platform and a
vision to provide the best financial leadership with quality customer
service. This is enhanced by
the innovative and convenient banking products and services the Bank is
now able to offer its new and existing customer base. The
staff of Union Bank of Jamaica Limited must be commended for the
sacrifices made and their invaluable contribution and hard work towards
ensuring that the “unthinkable” target of merging all four entities in
nine months could be made reality. In
reviewing the mandate issued at inception, while appraising the present
and with eyes to the future, Union Bank of Jamaica Limited can declare,
with pride, “Mission Accomplished.” C.
DENNIS MORRISON, Q.C.
CHAIRMAN
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