It has been a tough time for the NCB Group.

Unaudited accounts for the 6 months ended March 31, 2023, reveals operating income fell by 12 per cent to J$61.2 billion when compared to the same period last year ($69.3 billion), spelling a $8.1 billion drop. This was due in the main to its LHP insurance segment and in particular the effects of a one-off actuarial adjustment.

Consolidated net profit attributable to stockholders totalled J$4.2 billion, a decrease of J$6.2 billion or 59 per cent from the same period in the prior year.

“When compared to the prior year, the reduced revenues resettled in a fall in profitability, which adversely impacted certain of our key performance indicators. Return on Assets (ROA) and Return on Equity (ROE) (annualised) declined to 0.60 per cent down from 1.54 per cent and 5.19 per cent down from 13.13 per cent respectively,” read NCB’s report to the JSE.

It was not all doom and gloom. Net revenues from banking and investment activities of $53.5 billion marginally increased by $98 million over the prior year’s result of $53.4 billion.

There was a 6 per cent or $2.0 billion rise in net interest income coupled with a 6 per cent or $785 million increase in net fee and commission income resulting from the growth in NCB’s loans and investment portfolios and increased transaction volumes.

Of particular concern for NCB is the net revenues from its insurance activities declined by $7.7 billion or $8.2 billion less than the same period last year.

NCB managed to contain its operating expenses which fell by $342 million to total $51.4 billion. Staff costs marginally increased to $27.2  billion compared to the 24.6 billion posted for the same period in 2022.

NCB still has the highest assets in the financial sector which at March 2023 stood at $214 trillion, an increase of 4 per cent or $76.1 billion over the prior year. The growth in the asset base was primarily due to increased loans and investment securities.

The Michael Lee Chin led institution can take heart that its banking customers’ continued confidence in the Group is demonstrated by a 1 per cent or $7.9 billion increase in deposits to $714.5 billion which is its main source of funding.

The Group’s loans and advances, net of credit impairment losses, totalled $596 billion, an increase of 7 per cent or $40.1 billion over the prior year. Non-performing loans totalled $24.6 billion as at March 31, 2023, declining by $6.5 billion or 21 per cent from the prior year. The reduction in non-performing loans led to an impairment in NCB’s non-performing loan ratio, decreasing to 4.1 per cent from 5.5 per cent in the prior year.

NCB is being cautious as the economy is still impacted by inflation, high-interest rates and the war in Ukraine. 

So how will NCB look to take on the second half of the year and what obstacles await?

“Recession concerns have arisen, even as worries about stubbornly high inflation persist. There is also a risk that the recent banking system turbulence in the U.S. could result in a sharper and more persistent tightening of global financial conditions, which would contribute to a further deterioration in business and consumer confidence. An escalation of geopolitical tensions could adversely impact the economic performance of our operating markets and by extension business activity. The softening of global natural prices is also a risk for the Trinidad & Tobago economy.

“Despite the risks, our operating territories are expected to experience growth this year, with continued recovery in key sectors. Given higher interest rates, the banking sector is expected to benefit from higher net interest income and fee and commissions. However, loan demand may soften further if economic conditions deteriorate more than we expect. The elevated interest rate environment should reduce life insurers’ assets and liabilities, but the net effect is expected to be positive as the impact on the value of liabilities is expected to be greater.

“With interest rates still elevated trading gains could remain below historical highs for securities dealers and the primary debt market should remain subdued. However, the demand for new alternative investments and structured products should drive fee and commission income. For the second half of the financial year the Group will continue to take advantage of emerging opportunities while trying to mitigate the existing and emerging risks,” read an assessment by NCB of what lies ahead.

The decision to continue not to pay dividends has many all a stir. But with growing uncertainty and the prospect of a looming recession in the United States, it is prudent to bolster retain earnings to counter what could be a financial abyss.