NCB has had what the late Queen Elizabeth II once called an “ annus horribilus”.
Customer service issues, technology malfunctions, disputes with top executives, no dividends, lack-lustre financial performances…the litany of woes went on and on.
Chairman Michael Lee-Chin had to come in, roll up his sleeves, change out the management team and institute both operational and structural changes.
For the year ended September 30, 2023, NCB Financial Group posted net operating income of J$137.2 Billion, down on the J$145.3 Billion posted the year before.
Net profit declined to $7.6 Billion, a fall of $16.3 Billion or 68 per cent from the prior year.
Specifically for the quarter ended September 30, 2023, NCB registered a net loss of $2.1 Billion, $7.6 Billion lower than the previous quarter.
Total assets rose to $2.23 trillion, an increase of seven per cent on the previous year. The growth in the asset base was due in the main to increased loans and investment securities that were primarily funded by repurchase agreements, deposits and liabilities under annuity and insurance contracts and other borrowed funds.
Stockholders equity of $223.7 Billion increased by 16 per cent or $30.5 Billion. Equity attributable to stockholders of the parent totalled $170.4 Billion, up 17 per cent over the prior year.
Net revenues from banking and investment activities totalled $113 Billion, an increase of $5.7 Billion on last year. The main contributors to the increase were net interest income and gain on foreign currency and investment activities.
Net revenues from insurance activities came to $24.2 Billion, a 36 per cent drop from the restated prior year.
Group CEO Robert Almeida wrote: “The net result was impacted by significant non -recurring events primarily related to strategic restructuring activities. NCBFG remains firmly committed to sustainable growth. The Group begins the new fiscal year in a strong position given the actions taken in the fourth quarter which will result in significantly reduced operating expenses, improved operational efficiency and effectiveness as well as a stronger more efficient capital position.”
NCB’s operating expenses expectedly increased, totalling $118 Billion, $12 Billion more than the previous year. With the decision taken and implemented to clear out a lot of the management team, staff costs related to separation and restructuring were heightened.
Earlier this year former CEO Patrick Hylton and CFO Dennis Cohen claimed they were owed J$13.8 billion in compensation. This week it was announced that they settled for $7 billion.
The reduced revenues together with rising operating expenses put a significant dent in NCB’s performance. Chairman Michael Lee-Chin and Group CEO Robert Almeida have vowed to change all that.
For the financial year under review Return on Assets (ROA) and Return on Equity (ROE) fell to 0.71 per cent from 17.6 and 4.80 per cent from 15.53 respectively. The cost to income ratio increased to 82.54 per cent up from 71.40 per cent for financial year 2022.
Thankfully, the Group’s deposits did not decline and in fact totalled $748 Billion,$33 Billion more than last year. This is NCB’s largest source of funding.
Speaking with Our Today from NCB’s Atrium HQ on Kingston, Jamaica’s Trafalgar Road, NCB Group CEO Robert Almeida said : “The quarter was really messy. The analogy used was we were renovating a 747 jet while it was still flying. Basically we had all of the expenses in the past in this quarter including the cost of the renovation and none of the benefits. It’s an ugly quarter.
“We have to take the year that was and add back the costs of the renovations because they don’t recur, then add in all the benefits of the renovations which are all the cost reductions. So looking ahead we are saying, take our year from 2023 which is around $8 Billion and add in what would be the non-recurring which gets you to a $20 Billion adjusted number. That’s our jump-off point that we are going into the new year with. We will be creating further improvements.”
CEO of NCB Jamaica, Bruce Bowen added: “ To me the strength to where we are now, is all the changes that were made. Obviously it has been a lot of work for the team to get so much done in just three months. Yes there was confusion and uncertainty in the market but now we have a clear platform. You’ve seen the low hanging fruit but now we have started the journey to getting efficiency happening.
“If you look at the deterioration of our cost to income ratio, we’ve seen our margin cut in half from about 40 per cent to 20 per cent and now it’s for us to get it back to a 40 per cent to 60 per cent income ratio even with no further growth, that would result in a doubling of the bottom line. Then you add on the opportunities to get better synergies within NCB J , Clarien, Guardian Holdings… we should be able to see a faster than market rise in revenue.
“ I think it’s going to be an exciting quarter next year. It will be a challenge for us as market leaders, to come out of a period of a lot of uncertainty and get the team focused around these priorities that are going to determine the speed at which we accelerate.
“If there’s one thing our chairman does brilliantly is get people pumped up, see the vision and understand where we are going. His messaging resonates with staff and customers. I have competitors who say to me, we are looking to take customers from you in all this turmoil that NCB is going through. I have said to them, you will be surprised at how quickly we bounce back.”
With NCB paying a dividend next month, putting its new management team in place and effecting new strategies, products and services, it may very well see a migration to its brand further bolstering its position as Jamaica’s leading financial institution.
Bruce Bowen continued. “One thing NCB Group has is the deepest leadership bench strength of any institution and that’s to the credit of the Board and previous leadership. With the leaders we have recently brought in, I don’t think there’s anyone that catch match the skill we have.
As far as NCBJ is concerned we have the largest deposit base, the largest capital base, the most assets, the most customers, we are the leading merchant acquirer, we are the leading credit card issuer, we have closed the most investment banking deals across the region. Now you add all the fire power of our executive team, add the recent stability, the lower expense base, the synergetic opportunities that are there- I think we are absolutely unbeatable.”