NCB grows profit to $8.7 billion - Despite write-down of $1.2b by subsidiary

Published: Wednesday November 5, 2008

National Commercial Bank (NCB) Jamaica Limited has reported a strong year-end performance, chalking up a 32 per cent increase in profits, in the face of a challenging financial environment that company executives say is likely to remain within the short to medium term.

"The year has been mixed," said group managing director Patrick Hylton, "but we have taken opportunities to guard against the risks."

$2b more than last year

NCB this week reported net profit of $8.7 billion, some two billion more than last year's $6.7 billion. It will be a dividend of 40 cents per share, totalling $987 milion, on December 1.

But the bank's results would have been even better were it not for the financial meltdown in the United States, which forced the group to take more than a billion in write-downs on investments.

Revenues were up by 20 per cent to $24.7 billion, of which net interest income accounted for $15.8 billion - an increase of 23 per cent over the $12.8 billion generated in the prior year.

Fees and commission

NCB also amassed $4.9 billion in fees and commission income due, the company said, to increased point-of-sales transactions and ABM usage.

The bank's loan portfolio also reflected robust growth, moving from $56.5 billion at the end of September 2007 to $82.2 billion.

"The retail growth is reflective of the kind of focus that we have been placing on that area," said Yvonne Clarke, group chief financial officer.

According to Clarke, strategies to grow loans and deposit accounts include meeting customer needs more efficiently so that they don't have a need to go other institutions, thus a keen focus on customer retention.

Also, in the area of corporate banking, Clarke said the bank has been able to structure some new deals.

NCB Capital Markets, the group's wealth and funds management arm, contributed $855 million in operating profits, notwithstanding a $1.23 billion write-down in the fourth quarter relating to investments held with bankrupted international investment bank Lehman Brothers.

"Recovery seemed unlikely, so we have decided to make a 100 per cent provision for the Lehman Brothers impairment," said Clarke.

Pledge assets

"Under repurchase agreements with Lehman, GOJ bonds with a value of US$44.88 million were pledged as security for a liability of US$27.92 million with Lehman Brothers. Full recovery of the excess of the value of the pledge assets is considered doubtful and accordingly, a full provision for this amount has been made."

Consequently, NCB Capital Markets had a 50.5 per cent decline in net profit to $776 million when compared with the similar period last year.

The insurance segment of the operation contributed approximately $766 million to the group, an increase of 38 per cent, compared with the previous year.

NCB Insurance Company was the major contributor, which according to the company, reflects impact of the recent restructuring as the company positions itself for greater focus on 'bancassurance', that is insurance provided through a bank as well as pension and investment management services.


Source:
Sabrina Gordon
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081105/business/business3.html
sabrina.gordon@gleanerjm.com