NCBFG reports 11% decline in six months net profit

Date: April 25, 2019 

NCB Financial Group (NCBJ) for the six months ended March 31, 2019, Net Interest Income increased by 26%, relative to the corresponding period in 2018, to total $19.99 billion (2018: $15.91 billion). For the quarter, Net Interest Income improved 21% to close at $10.15 billion (2018: $8.36 billion).  Interest income rose 19% year over year for the six months to $28.99 billion compared to $24.28 billion in 2018, while interest expense amounted to $9 billion relative to $8.37 billion for the corresponding period in 2018.

Net Fees and Commission Income amounted to $8.31 billion, an increase of 8% versus 2018’s $7.72 billion. The bank also reported a gain on foreign currency and investment activities of $5.95 billion, a decline of 17% relative to $7.17 billion in 2018. Premium income for the period also declined 1% to $4.28 billion (2018: $4.31 billion), while dividend income increased 43% to a total of $297.21 million (2018: $207.37 million).

Other Operating Income fell by 73% to $113.03 million (2018: $422.44 million). Consequently, total operating income increased 9% to a total of $38.95 billion (2018: $35.73 billion). The Company noted, “The improvement in revenues was primarily driven by the 15% growth in our loan portfolio which boosted interest income. This was partially offset by a 17% decline in gain on foreign currency and investment activities due to lower gains from the sale of debt securities recorded in the current period.” Total operating income for the second quarter recorded a 4% decline to $18.22 billion (2018: $19.02 billion).

Total Operating Expenses for the period amounted to $28.31 billion, an increase of 14% compared to the $24.91 billion reported for the first six months of 2018. Expenses for the quarter rose 6% to close at $12.43 billion compared to $11.75 billion in 2018. According to NCBFG, “Our focus in the areas of digitisation and customer experience resulted in necessary upfront expenditure to enhance how customers access the services of the Group. For the current period, there was also amortisation of acquired intangibles following the acquisition of Clarien, with no comparable charge in the prior year.” Of these expenses:

    • Staff costs increased 17% to $13.01 billion relative to $11.12 billion in 2018
    • Policy holders and annuitants benefits and reverses declined 85% to total 473.54 million (2018:$3.23 billion)
    • Other operating expenses grew by 20% to $10.34 billion (2018: $8.59 billion).
    • Provision for credit loss increased from $432.48 million in 2018 to close at $1.90 billion in 2019.
    • Depreciation and amortization grew 69% to $2.61 billion relative to the $1.54 billion recorded in 2018.

Consequently, operating profit declined 2% to total $10.64 billion (2018: $10.82 billion). ‘Share of profit of associates’ 10% to total $1.63 billion compared to $1.48 billion in 2018. The bank also reported no ‘Negative goodwill on acquisition of subsidiary’ compared to $4.39 billion booked in 2018.

The Company noted, “The operating profit for three of our seven segments exceeded $3 billion for the current period compared to two segments in the prior year. Combined the three segments contributed 68% of operating income* which demonstrates the value of our diversified business model. The life insurance segment was the top contributor with operating profit of $3.9 billion, an improvement of 41% over the prior year. The increase was mainly due to reserve releases as a result of improving spread performance and changing mortality assumptions. Our corporate banking, payments services and general insurance segments also experienced commendable growth over the prior year, increasing by 71%, 17% and 155%, respectively. Corporate banking and payment services benefited from portfolio growth, while our general insurance business incurred lower claims expenses.”

Consequently, profit before taxation declined 7% to $15.56 billion relative to $16.69 billion in 2018. Following taxation of $3.15 billion (2018: $2.73 billion), net profit for the six months ended March 31, 2019 totaled $12.41 billion, a decline of 11% compared to $13.97 billion for the corresponding period of 2018. Net profit for the second quarter declined by 22% to close at $5.01 billion (2018: $6.41 billion). Net profit attributed to shareholders amounted to $12.46 billion (2018: $13.82 billion).

Earnings per share (EPS) for the six months ended March 31, 2019 totaled $5.05 relative to $5.60 booked for the comparable period of 2018. The EPS for the second quarter amounted to $2.03 (2018: $2.55). The trailing twelve month EPS amounted to $10.72. The number of shares used in our calculations amounted to 2,466,762,828 units. NCBFG stock price closed the trading period at a price of $144.73 on April 25, 2019.

Balance Sheet at a glance:

Total Assets increased by 9% or $76.49 billion to $970.83 billion as at March 31, 2019 from $894.34 billion a year ago.  This increase stemmed mainly from the growth in ‘Loans & Advances, Net of Provision for Credit Losses’ from $334.53 billion to $383.72 billion, a 15% increase. Another notable contributor to the increase in the asset base were ‘Pledged Assets’ which rose 38% to $185.44 billion.

Shareholder’s Equity as at March 31, 2019 stood at $136.62 billion relative to $122.15 billion a year ago. This resulted in book value per share of $55.38 (2018: $49.52).


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