Bad debts climb, Q1 profit falls at NCB
Published:Sunday | January 29, 2012 | 12:00 AM
McPherse Thompson, Assistant Editor - Business
National Commercial Bank Jamaica (NCB) saw its non-performing loan portfolio increased by almost 125 per cent for the quarter ended December 2011 driven by a large debt which became non-performing in March 2011.
Its first quarter profits fell resulting from a decline in net interest income.
Non-performing loans totalled J$7.4 billion at December, J$4 billion higher than the J$3.4 billion recorded at the end of December 2010 and represented 7.2 per cent of the gross loans, compared with 3.8 per cent the previous year.
NCB Deputy Managing Director Dennis Cohen, answering a question at an investors forum Friday on the release of the bank's first quarter results, would only say that the bad loan related to the construction sector, but not the tourist industry.
The bank and other creditors last year put the Palmyra condominiums in receivership - a beachfront development still under construction.
NCB reported net profit of J$2.8 billion for the quarter, a decrease of J$237 million or 7.9 per cent over the corresponding period in 2010.
Operating income decreased by J$135 million, a marginal 1.6 per cent decline for the quarter, mainly as a result of insurance premium income which decreased by J$558 million or 66 per cent due to lower levels of annuities being booked when compared with the previous year.
Net interest down
It was also impacted by a decrease in net interest income which decreased by J$66 million or 1.2 per cent mainly due to lower yields earned on investment securities and loan portfolios.
However, Yvonne Clarke, chief financial officer who presented highlights of the bank's performance, pointed out that the decrease in operating income was partially offset by gains on foreign currency and investment activities, which increased by J$274 million or 37.5 per cent.
It was also offset by net fee and commission income, which increased by $195 million or 12.2 per cent mainly due to increased fees arising from growth in the retail, small and medium enterprises and corporate banking loan portfolios.
Operating expenses up
Operating expenses increased by J$268 million or 5.6 per cent for the quarter, attributed mainly to staff costs which increased by J$434 million or 19 per cent due to the negotiated salary increases for the 2011-12 financial year.
In addition, to staff costs, there was an increased in consulting fees associated with the implementation of a number of revenue and efficiency-related projects across the group.
NCB's customer deposits grew by J$13 billion or 9.1 per cent during the review period to $155.3 billion. It quoted Bank of Jamaica statistics which show that NCB had the largest market share in loans at 36.9 per cent, as well as deposits at 39.1 per cent in the commercial banking sector.
Earnings per stock unit of $1.12 represented a decline of 10 cents or 7.9 per cent, while total assets of J$360.5 billion increased by 5.6 per cent or J$19.1 billion. Net loans of J$101.2 billion grew by 14.3 per cent or J$12.7 billion.
The bank's wealth segment contributed operating profits of J$1.2 billion for the quarter, an increase of $121 million or 11.4 per cent over the December 2010 quarter.
Combined operating profits of $2.2 billion was reported for the retail and SME, payments services, corporate banking and treasury and correspondent banking segments which comprise the commercial banking activities.
NCB has declared an interim dividend of 38 cents per ordinary stock unit, amounting to J$937.37 million, to be paid on February 24.