A JN Money Shop on Knutsford Boulevard, New Kingston. The Jamaica National Building Society has raised selected deposit rates on 'premium' accounts. - File

Jamaica National Building Society is offering increased returns to special savers, as much as 1.35 per cent more, saying this week that the move to bump up deposit rates was influenced by the actions of the central bank.

The Bank of Jamaica hiked rates by one point across all its market instruments on January 9 to tease investor funds away from foreign exchange-denominated investments to domestic issues.

JNBS said the move had resulted in "bouyancy in the local savings market", prompting its own decision two weeks later to bump rates.

"As it relates to the real estate sector, there has been a high proliferation of cash transactions for real estate purchases," said Leesa Kow, acting executive in charge of marketing, sales and promotions.

"Despite that, loan applications and disbursements have continued to increase at JNBS. During 2007, we had double-digit growth in our mortgage portfolio and even more significant growth in savings."

Deposit-taking institutions normally offset the cost of paying returns to savers with higher loan rates.

Upward trajectory

But on Monday, the society sidestepped comment on whether a hike was pending on the price of its mortgages - its rates start at 12.99 per cent - notwithstanding continued signs that interest rates remain on an upward trajectory.

Indeed, the Bank of Jamaica hiked rates again this week after the dollar hit a new low of $71.80 against the United States dollar.

Still JNBS, Jamaica's largest private mortgage institution with 24 branches and four Money Shops islandwide, is not giving the benefit of the increased returns to all its savers, only its 'premium club' members, a long-term savings portfolio created only last year.

Effective January 16, rates on its platinum account moved from 11.5 per cent to 12.75 per cent - a 1.25 per cent increase; from 11.25 per cent to 12.60 per cent on its gold account - up 1.35 per cent; and from 11 per cent to 12.3 per cent on the silver, or a 1.3 per cent bump.

"The rates of increase outweigh the 1.0 per cent adjustment by the Bank of Jamaica," said the JNBS in a company release.

Interest on the accounts is paid twice per year.

"This is a move to ensure that our members continue to reap maximum returns on their savings and investments," said general manager Earl Jarrett.

BoJ's rates on offer to banks and primary dealers are now within a band of 13.5 per cent to 15 per cent. Money market rates tend to track the direction of the central bank's signal rates, though not in the same proportions.

It's likely, therefore, that short- term rates to investors will creep up this week.

By increasing its own rates, JNBS suggests it is making a pre-emptive move , and has signalled that it is prepared to compete for business outside of its core sector.

"Passbook savings products compete with money market instruments, which offer the flexibility of easy access to funds, in addition to competitive rates," said Jarrett.

"It is, therefore, critical that the Society maintains its competitiveness in this segment of the market by offering attractive savings and investment options to its members."

Kow said the BoJ's second interest rate hike has prompted another review of deposit rates, saying "further changes are expected."

Regular accounts

JNBS' regular accounts attract interest of 0.5 per cent to 12.75 per cent, depending on the currency and amount saved.

The society had a $55 billion asset base as at March 2007, and a capital base of $14 billion.

In fact, JN recorded improvements in key indicators: a $8 billion jump in its savings portfolio to $43 billion; an addition of 50,000 new accounts during the financial year ended March 2007; a $5 billion increase in its loan portfolio to $24 billion; while the number of loans climbed by nearly 5,000 to 33,106.

Revenues also grew 12 per cent to $10.6 billion while its net surplus rose 19 per cent to $2 billion.

business@gleanerjm.com