Sabrina N. Gordon, Business Reporter

The Peoples' Cooperative Bank (PC Bank) says heavy losses on the business - upwards of 40 per cent - forced it to end a long-standing arrangement with GraceKennedy to deliver the conglomerate's money transfer and bills payment services.

GraceKennedy has the Caribbean franchise for Western Union, the American company that is one of the world's largest and most visible cash remittance outfits. Grace also owns Bill Express, a company through which Jamaicans can pay a raft of utility and other bills. For more than a decade Western Union had operated in 26 of the PC Bank's 36 branches across rural Jamaica, but on February 26 these were cut. A similar cut in the Bill Express service happened a month earlier.

"An analysis was done by the accounting department which showed that the bank was making a net loss on the Western Union facilities," the PC Bank's new general manager Dennis Wilmot, told Wednesday Business. "When the cost of providing the services in terms of human resources, bank services and charges, as well as security was looked at the operation amounted to a net loss."

The PC's Bank's core business is retailing low-cost government-backed loans mainly to farmers and other rural people. It also services rural savers. But with ventures like the one with GraceKennedy, the PC Bank had hoped to generate additional income.

Earnings

However, Wilmot said, the arrangement - there were separate contracts for the money transfer and the bill payments services at each of the outlets - did not quite work that way.

For instance, the bank, according to Wilmot, in 2006 earned $36.4 million on the Western Union business, but it cost $16 million more, or a total of over $52 million to deliver the service.

Last year earnings from the Western Union operations were over $37 million, while while the Bill Express service grossed $3.3 million for the bank - but it still lost significantly on the business.

Noel Greeland, the VP for marketing at GraceKennedy Remittance Services, the subsidiary under which the Western Union and Bill Express operations fall, said that group would not comment on Wilmot's analysis. Greenland said that GraceKennedy was already scouting new locations to replace those lost in the PC Banks.

While Wilmot has not ruled out a similar, but more advantageous alliance with GraceKennedy or any other company in the future, he said that shift will allow the PC Bank to focus on its core activities.

"With the human resources concentrated on the core banking services offered we can mobilise the small savings and loans services in an effort to strive for viability," he said.

The bank has a staff of 203.

sabrina.gordon@gleanerjm.com