Another record year for NCB
Published:Friday | November 5, 2010 | 12:00 AM
National Commercial Bank Jamaica Limited (NCB) has posted another record year of profit, even as it comes under pressure to relieve customers of some of the massive fees that it and other commercial banks have levied on clients.
But even while the bank is making money for its shareholders, it is faltering in its key activity, the business of loans, with a contracted portfolio of J$86 billion.
On Thursday, the bank disclosed an J$827-million, or eight per cent, hike in net profit to a new high of J$11 billion, or earnings per share of J$4.50, for the Patrick Hylton-led, Michael Lee-Chin-owned institution.
With those results, it has assumed the title of profit king among listed Jamaican companies, overtaking Scotiabank for now.
Riding high on the results, NCB this week declared dividend of 45 cents per share, which means it will be paying out J$1.11 billion to shareholders on December 1. Lee-Chin and his companies will share 63 per cent, or about J$700 million, of the total distribution, based on the last disclosures of his connected interests in the bank.
At acquisition less than a decade ago, he owned 75 per cent of NCB.
The banking group's new year of increased profit flowed from improvements in net interest income, which rose from J$18.9 billion to J$20.6 billion. The gain, as indicated by the numbers, was secured only because Hylton was able to splice the cost of writing business by close to J$4 billion.
The reduced cost of doing business offset the six per cent erosion of top-line income, which fell from J$35.5 billion in 2009 to J$33.3 billion at September 2010.
The bank also pulled in increased fees and commissions, from which it netted revenue of J$5.8 billion, up from J$4.96 billion; but made less from foreign-exchange translations - the dollar having appreciated from J$89 to J$85/85 earlier this year.
Hylton's razor focus on costs, which he announced during the year, did not yield lower staff costs - salaries actually climbed by $1.3 billion to J$9.25 billion - nor did it affect total expenses, which rose by J$2 billion overall to J$16 billion.
The cost to income ratio also grew from 48 per cent to 51 per cent.
"It has been a difficult environment, even with a very good financial performance,'' said Hyltonon Thursday.
His only success in tamping down on expenses came in lower provisions for credit losses, and even that was only marginally lower at J$948 million, down from J$1.03 billion.
The result was unimpressive movement in operating profit from J$13.17 billion to J$13.3 billion. The bank, however, had a lower tax bill this year of J$2.4 billion (2009: J$2.9b), which, in turn, added to the record J$11.07 billion of net income (2009: J$10.25b).
The segmented report showed mixed fortunes, with income from retail banking, the most cost-sensitive area, dropping by some J$911 million.
Wealth-management subsidiary NCB Capital Markets, run by Dennis Cohen, contributed net profit of J$2.5 billion to group results; and NCB Insurance, J$1.7 billion.
NCB is Jamaica's largest bank by assets. It has improved its position with a J$20-billion gain over the past year to J$335 billion. Its book value also improved, with a weightier capital base of J$48.8 billion, up from J$41 billion.
The banking group's capital adequacy ratio also climbed higher, from 14.6 per cent to 16.5 per cent.
"We have been managing our balance sheet skilfully with a lot of opportunities which we were able to extract during the year," said Yvonne Clarke, group chief financial officer.
Most of the asset gains were realised from a growing investment portfolio now valued at J$199 billion, up from J$167 billion. Its loan portfolio, however, dipped 2.5 per cent from J$88 billion to J$86 billion.
Savings also grew from J$130 billion to J$144 billion, a near 11 per cent improvement in deposits.
"It's a pretty good performance in spite of several challenges, but efficiency measures is what it all comes down to at the end of the day, and we will continue to keep that on our radar," said Cohen, who is also deputy group managing director.
Last year, NCB closed five of its nine agencies or sub-branches and consolidated operation into its larger nearby branches, a process Cohen said was expected to continue.
Further consolidation is also expected within its branch network, with its Manor Centre and Manor Park branches to be merged into one operation at a Constant Spring location.
Its customer care operation and information technology service centres are also to be consolidated.
NCB has already rationalised its credit-card portfolio, replacing two Visa cards with one.
The bank reported that loan losses now amount to approximately $1 billion year over year, and that it has seen an 80 per cent improvement in fraud expense during the year, which was reduced to just under J$100 million.