…But again, no dividend will be paid out
Durrant Pate/Contributor
Jamaica largest banking group, NCB Financial Group, has almost doubled its net profit this year, amounting to J$39.92 billion, up from J$20.07 billion or an increase of J$19.8 billion or 99 per cent over 2021.
For the financial year ended September 30, 2022, NCB is reporting consolidated net profit attributable to shareholders of J$27.3 billion, reflecting a J$13.1 billion or 92 per cent increase over the $14.2 billion booked in the previous financial year. The positive financial returns for 2022 is as a result of the gradual uptick in economic activity in most of NCB’s operating territories and many global economies.
However, the Patrick Hylton-led management team and Michael Lee-Chin-led board say they are “cognizant of the downside risks from the tightening financial conditions in most regions. The Group continues to focus on capitalising on emerging opportunities while mitigating the lingering risks”.
For the new financial year, NCB plans to continue investments in digital capabilities geared towards growing the business and increasing efficiency as we serve our customers.
In addition, the Caribbean banking conglomerate said it would continue to pursue its aspiration of becoming the region’s premier financial ecosystem, adding value to its customers, employees, shareholders and partners wherever it operates.
Demand for dividend payment
In spite of the good positive financial out-turn, the NCB board met on November 10 and decided not to pay an interim dividend. This has angered some shareholders, who are demanding the payment of an interim dividend.
One shareholder, Lanville Henry, in a contribution to Our Today this week, wrote that NCB might be the only financial institution in Jamaica which has not paid an interim dividend in the last three years, save only once. In the meantime, operating income for NCB jumped to J$149.6 billion, an increase of J$28.5 billion or 24 per cent year-over-year.
This improvement was led by insurance activities, primarily life and health, while banking and investment activities reflected commendable growth over the prior year as business and consumer activities increased during the year. This enhanced performance in operating income was however tempered by a 10 per cent increase in operating expenses.
The increased revenues contributed to a general improvement in some of NCB’s key performance indicators when compared to the prior year. Return on assets and return on equity improved to 2.00 per cent, up from 1.08 per cent and 17.57 per cent, up from 8.96 per cent, respectively.
The cost to income ratio also improved to 68.58 per cent, down from 76.19 per cent in the prior year, mainly due to revenue growth outpacing the growth in operating expenses.
Segment performance
The net revenues from banking and investment activities amounted to J$107.3 billion, representing a nine per cent or J$9.1 billion increase over 2021’s performance. A J$10.6 billion or 22 per cent improvement in net interest income and a J$3.6 billion or 16 per cent increase in net fee and commission income were the main drivers.
These increases were however offset by a J$6.3 billion or 27 per cent reduction in gains on foreign currency and investment activities. This decline was mainly as a result of unrealized fair value losses on financial instruments of J$2.9 billion, an adverse variance of J$5.9 billion from the prior year, coupled with reduced gains from the sale of debt securities of J$4.4 billion consequent on increased interest rates in the local and global markets, which resulted in lower bond prices.
This was partially offset by a J$5.4 billion increase in net foreign exchange income. Credit impairment losses reflected a J$662 million or 20 per cent reduction compared to the prior year due to the reversal of previously booked provisions.
This resulted from improved loan portfolio quality given further improvements in the macroeconomic outlook, the reopening of the economies in which we operate and the resultant gradual return to normalcy for various business sectors and consumer activities.
The net revenues from insurance activities totalled J$42.3 billion, an increase of J$19.4 billion or 84 per cent over the prior year. The Guardian Holdings subsidiary implemented a number of initiatives in its life, health and pensions (LHP) segment of our Trinidad and Jamaica operations.
The resultant operational synergies, cost savings and centers of excellence have produced long term cost savings which have the effect of creating favourable reserve movements contributing to the Group’s improved performance.
Other financial highlights
Operating expenses jumped marginally to J$104.5 billion, an increase of $9.6 billion or 10 per cent over the prior year. Staff costs of J$49.1 billion increased by J$4.6 billion or 10 per cent primarily due to the annual negotiated increases coupled with increased redundancy costs and incentive payments.
Technical consultancy and professional fees as well as infrastructure maintenance costs increased to support the Group’s digital agenda. Investments in technological capabilities continue as NCB enhances its ability to deliver digital solutions that will transform the customer experience and business
Loans and advances, net of credit impairment losses rose to J$581.0 billion, an increase of 11 per cent or J$57.5 billion over the prior year. Non-performing loans totalled J$25.9 billion as at September 30, 2022, a reduction of J$6.7 billion or 20 per cent from the prior year. This represents 4.4 per cent of gross loans, down from 6.1 per cent in the prior year.
Deposits totalled J$715.3 billion, an increase of 11 per cent or J$68.2 billion over the prior year, reflecting increases in all customer segments. This continues to be NCB’s largest source of funding.
READ: If NCB is the largest bank in Jamaica, why doesn’t it pay its shareholders regular dividends?
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