NCB Group nets $2.5 billion in APO that sought $5 billion, earnings to fill gap
Published:Friday | June 7, 2024 | 7:26 PM
The NCB Financial Group says it has received applications for $2.5 billion in its recently completed additional public offer (APO), which it undertook to cut debt and boost capital reserves.
The company said while it sought to raise approximately $5 billion, it considers the $2.5 billion "significant within the context of the prevailing monetary policy environment and the challenges it poses for equity capital markets".
An APO is the sale of shares of a company that has already made an initial public offering.
"The APO proceeds are intended to reduce debt and strengthen capital flexibility at the financial holding company. Our key operating businesses: National Commercial Bank, Guardian Insurance and Clarien Bank are all performing well and combined are contributing 30 – 40% of consolidated earnings to the holding company," said Robert Almeida, group chief executive officer.
He added: "At current run rates, the shortfall in the raise should be generated from earnings over 4 – 6 months and is not expected to significantly impact our plans for the coming year".
The company, one of the largest financial entities in the region, said the APO is just one of several strategies it is pursuing to recalibrate its business.
"Under the banner of efficiency, governance and customer experience, the company has over the past seven months eliminated $8 billion in recurrent annual expenses, reallocated $15 billion of surplus capital within the group and has divested its non-core banking business in the Cayman Islands, the sale of which is currently undergoing review by regulators," it said in a statement on Friday.
"The success of these initiatives is evidenced by the group's financial results for the quarter ended March 31, 2024, where Consolidated Net Profit (attributable to stockholders of the parent) increased by 74 per cent year over year to $5.6 billion."
Angus Young, chief executive officer of NCB Capital Markets Limited, the lead broker and arranger of the APO, said over 3,000 applications have been submitted.
He said there was an over-subscription of the employee reserve pool.
"We are further encouraged by the overwhelming support from the broker community in Jamaica who participated as selling agents and shared their independent valuations of the company – all of which ascribed intrinsic valuations in the mid to high $70's per share. This demonstrates strong market confidence in NCBFG's strategic direction and future prospects," he said.
The extended deadline for applications was June 3.
The NCB group says it has an asset base of $2.2 trillion.
The group issued 78.5 million new ordinary shares at $65 with the option to upsize that to 117.75 million units. Also, within that quantum were 785,000 employee-reserved shares at $58.50.
Since the start of the COVID-19 pandemic, NCB's debt levels moved from double its capital to triple its capital.
As context, banks and other institutions prefer clients to have debt levels not exceeding their capital. Thus the APO is an attempt to reduce its relative debt load.
Specifically, the group's debt, excluding customer deposits, stands at $591 billion or three times its consolidated capital at $196 billion to December 2023.
Contrast that with December 2019, when NCB's debt stood at $388 billion or nearly twice its capital at $190 billion.
Last year, the company, chaired by billionaire Michael Lee-Chin, went through a series of executive leadership changes.
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