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JAM | Nov 26, 2023

Why Chris Berry is both right and wrong about NCB’s APO

Al Edwards

Al Edwards / Our Today

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Chris Berry, chairman of Mayberry Investments. (Photo: Contributed)

NCB’s upcoming additional public offering (APO) has drawn plenty of debate.

Is it needed or will it help to dilute the stock?

NCB chairman Michael Lee-Chin has made it clear that the purpose of the APO is not to pay dividends nor to be used to compensate former top executives Patrick Hylton and Dennis Cohen.

The number of shares sought to be issued by way of APO is expected to be up to 300,000,000. NCB is looking to raise around J$21 billion.

NCB has been specific about what the proceeds of the APO will be used for. An issued statement read: “The proceeds will be used to reduce debt and interest expenses and bolster capital. The proceeds will not be used to pay dividends. Dividends are paid from the profits of the company. As highlighted at its investor briefing, NCBFG has seized and initiated action on annualised savings in excess of J$8 billion which translates to J$3.24 per share.”

Mayberry boss Chris Berry took to X writing: “NCBFG should cancel the APO. It serves no purpose in the grand scheme of things and would take pressure off the stock.”

Berry is a champion of Jamaican equities and his prognostications have been more insightful than the many neophytes that have recently come onto the scene.

As a major investor, Berry is looking for value and so he should. He is patently aware that in June 2019, NCB’s stock price was at an all time high of J$200. Today, it is languishing at J$69, losing more than half its value in less than four years.

The last thing he wants to see is a dilution and further erosion of the stock price. Lee-Chin has assured that there will be minimal dilution. Berry is to be convinced as to why the country’s leading financial institution needs to go to the market with an APO given the investor climate and anaemic performances from a number of local companies.

NCB remains strident in its commitment to bolster its financial strength as it looks to become a strong regional player able to meet the challenges it will face with the implementation of Basel III.

NCB Group CEO Robert Almeida addressed this, declaring, “ NCBFG remains a strong diversified regional franchise with a strong track record of performance and value creation. With our capital and cost optimisation strategies well underway our shareholders can trust our commitment to both rewarding them and maintaining strong fiscal responsibility. The APO is one among a set of initiatives underway to achieve these goals and build NCBFG’s position as a financial fortress.”

Robert Almeida, interim group CEO of the NBC Financial Group, addressing journalists at its Q3 investor briefing at the NCB Atrium in New Kingston on August 9, 2023. (OUR TODAY photo)

The APO will be litmus test as to how investors view the recent transformational changes at NCB. Chairman Lee-Chin has said his hands are on the wheel now and he has led the charge with a number of initiatives particularly changing out CEO Patrick Hylton and CFO Dennis Cohen.

He wants to see a focus on governance, efficiency, and customer service, cognizant that recently there have been many complaints about NCB’s operations and how it interfaces with customers. He promised the payment of a dividend before the year is out. That promise will be kept.

Will investors be enthused by all this? Will the APO signal a ringing endorsement of this new look NCB? This APO will say a lot more than just a move to boost value.

Berry and other NCB investors would have noticed NCB’s recently released end of year and quarterly results.

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.

Chairman Michael Lee-Chin of the NBC Financial Group, share some lens time with interim group CEO, Robert Almeida, during its Q3 investor briefing at the NCB Atrium in New Kingston on August 9, 2023. (OUR TODAY photo)

NCB Group CEO Robert Almeida speaking with Our Today from NCB’s Atrium HQ on Kingston, Jamaica’s Trafalgar Road, 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.

Will they see this as a temporary aberration and acknowledge efforts made to correct the course of the good ship NCB? 

It’s an issue of time and faith.

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