NCB profit slumps again, falls to four-year low
Published:Sunday | November 14, 2021 | 8:26 AM
NCB Financial Group will not pay a dividend this quarter, having failed to grow its bottom line for a second year running.
Still at $20 billion in earnings, $14 billion or $6.25 per share of which was attributable to stockholders, the banking conglomerate still outclasses all others on the market in the sheer size of its profits.
Last year, the group, which is now $1.9 trillion in size and whose holdings include insurance powerhouse Guardian Group, made nearly $27 billion in net profit.
The year before that NCB Financial’s bottom line was even more flush with historic profits of $31 billion – which means the financial company has experienced a one-third erosion of earnings since the pandemic.
This year’s outcome is the lowest earnings reported by Jamaica’s largest bank since 2017, when it made a profit of $19 billion.
Pre-pandemic, NCB Financial was paying out dividends within a range of $1.2 billion to $2.4 billion per quarter, but that schedule has been put on hold since the coronavirus began taking its toll on Jamaica. This year, NCB has only distributed 50 cents per share to shareholders, or $1.2 billion in total for the entirety of FY2021.
The banking group’s adoption of a cautious dividend policy is meant to safeguard its cash holdings, in case of emergency, the size of which was reduced to $196 billion from $201 billion over the past year.
“This was an unusual year that tested individuals, institutions, and systems in addition to the ongoing challenges with the pandemic,” said Group President & CEO Patrick Hylton at NCB Financial’s quarterly investor briefing on Friday.
He said on the conference call that the Caribbean contended with challenges outside of the pandemic, including the volcanic eruptions in St Vincent & the Grenadines, an earthquake in Haiti, and tropical storms in the region.
“Many of our stakeholders, shareholders, customers, employees, suppliers did not make it or are struggling with loss or various disruptions,” he said.
NCB Financial grew revenue during the year to $121 billion from $109 billion a year earlier, which bodes well for the growth prospects of the group.
The group profit at $20.08 billion reflects one-third less earnings when compared to pre-pandemic levels when the group earned profit of $30 billion in 2019; also it made $27 billion in 2020. From a segment perspective, four of five banking and investment segments recorded growth over the prior year, while both of its insurance segments—life and general reflected declines, said deputy CEO Dennis Cohen in his remarks, adding that the wealth and treasury arm topped the segment performance.
The cash balance at the NCB Financial group remains largely flat year on year at $197 billion. This, however, hides the fact that cash flow from core operations generated much less year on year at $38 billion in 2021 from $170 billion in 2020. In other words, it signals that core operations of the bank and its other segments still have some way to go to return to pre-pandemic levels. There is, however, a positive trajectory when looking at the fourth quarter on its own, with profit at $6.2 billion or nearly on par with the $6.6 billion in the previous year.
NCB at the close of its record financial year in 2019 unveiled a five-year plan to grow the group’s core financial and insurance services across the region — a plan that is expected to leverage the reach of the Guardian Group, which operates in more than 20 markets.
The key performance metrics of the strategic plan were never revealed, but on Friday, Hylton said NCB Financial could still meet the targets.
“We are two years out from wrapping up our strategic goal,” he said. “We will be able to attain our strategic pillars that are financial performance and digital to the core.”
On the stock market Friday, NCBFG shares traded sideways, that is, within a stable range, as investors had already priced in expectations of the lacklustre full-year results. The NCBFG stock began the week at $125 and closed Friday at $119.33.
“We do not like seeing the stock price fall off, but it’s a reality of the pandemic. But we are starting to see a change in the environment and change in our fortunes as a lot of the challenges are behind us,” Hylton said.
The stock traded at a high of $230 in 2019, but has faltered during the pandemic, which spawned a recession.
“We give gratitude for the wins and for the lessons. We are optimistic for our company, country, and the Caribbean,” said Hylton.