NCBFG reports 2% decline in first quarter net profit

Date: January 25, 2019

Net interest income for the three months ended December 31, 2018 increased by 30%, relative to 2017, to total $9.85 billion (2017: $7.55 billion). The Group stated that, “The increase was fuelled by a 22% growth in National Commercial Bank Jamaica Limited’s (NCBJ’s) loan portfolio which resulted in a 16% rise in interest income from loans for that entity.”

Net fees and commission income amounted to $4.34 billion, an increase of 20% on 2017’s $3.61 billion. NCBFG stated that, “this was stemming from the consolidation of Clarien, increased credit related and e-commerce fees.”

The Bank also reported a gain on foreign currency and investment activities of $4.17 billion, a growth of 34% relative to $3.12 billion in 2017. Management highlighted that, “this was primarily due to higher exchange income resulting from the 5% appreciation of the Jamaican currency against the US dollar.” Insurance premium income for the first quarter increased grossly by 161% to close the period at $184.16 million versus $70.66 million in the prior corresponding period. While, dividend income went up slightly by 2% to $2.14 billion (2017: $2.11 billion).

Other operating income fell by 81% to $47.82 million relative to $245.79 million in the previous comparative quarter. Total operating income for the three months period recorded a 24% growth to $20.73 billion (2017: $16.70 billion).

Total operating expenses for the three months period amounted to $15.88 billion, an increase of 21% compared to the $13.16 billion reported for the previous corresponding quarter. Management noted, “The consolidation of Clarien accounted for $1.7 billion of this increase.” Of total operating expenses:

Staff costs increased 15% to $6.78 billion relative to $5.91 billion in 2017.

Other operating expenses grew by 29% to $6.03 billion (2017: $4.66 billion).

Provision for credit losses increased 601% to $1.02 billion (2017: $145.86 million), while depreciation and amortization grew by 95% to $1.30 billion (2017: $666.01 million). The Group indicated that, “this was related to digital investments and amortization of acquired intangibles following acquisition of Clarien.” Policyholders’ and annuitants’ benefits and reserves fell by 65% to $617.33 million relative to $1.78 billion for the prior corresponding quarter. Impairment losses on securities amounted to $132.12 million relative to nil in 2017.

Consequently, operating profit increased 37% to total $4.85 billion (2017: $3.53 billion). ‘Share of profit of associates’ climbed 61% to close the period at $818.86 million compared to $509.12 million in the prior comparable quarter.

Gain on disposal of associate amounted to $3.29 billion (2017: nil). It was noted that, “The net profit includes a gain of $3.3 billion from the disposal of equity investment in JMMB Group Limited (JMMB).

Consequently, profit before taxation increased 6% to $8.96 billion relative to $8.43 billion in 2017. After taxation of $1.56 billion (2017: $893.98 million), Net profit for the first quarter totalled $7.40 billion, a decline of 2% compared to $7.54 billion in 2017. Net profit attributable to shareholders closed at $7.45 billion relative to $7.54 billion.

Earnings per share (EPS) for the three months period totalled $3.02 relative to $3.06 booked in 2017. The trailing twelve-month EPS amounted to $11.04.  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 $144.99 on January 24, 2019.

Balance Sheet at a glance:

Total Assets increased by 10% to $940.91 billion as at December 31, 2018 from $859.24 billion a year ago. This increase stemmed mainly from the growth in ‘Loans & Advances, Net of Provision for Credit Losses’ which moved from $322.59 billion to $373.49 billion, a 16% increase. Other notable contributors to the increase in the asset base were ‘Pledged Assets which rose from $130.97 billion as at December 31, 2017 to $179.69 billion as at December 31, 2018. ‘Cash in Hand and Balances at Central Banks’ and ‘Investment Securities as fair value through profit or loss (FVTPL)’ which closed the period at $58.54 billion (2017: $55.29 billion) and $9.40 billion (2017: $3.51 billion), respectively.

Shareholders’ Equity as at December 31, 2018 closed at $140.64 billion relative to $130.02 billion a year ago. This resulted in a book value per share of $57.01 (2017: $52.71).


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