January 26, 2018
National Commercial Bank of Jamaica Limited (NCBJ), for the quarter ended December 31, 2017 reported an increase in Net Interest Income of 4.80%, relative to the corresponding period in 2016, to total $7.55 billion (2016: $7.20 billion). Interest income rose 10.31% year over year to $11.27 billion compared to $10.22 billion in 2016, while interest expense amounted to $3.72 billion relative to $3.01 billion for the corresponding period in 2016.
Net Fees and Commission Income amounted to $3.61 billion, an increase of 4.82% relative to 2016’s $3.44 billion. The bank also reported a gain on foreign currency and investment activities of $3.12 billion, a growth of 82.68% relative to $1.71 million in 2016. Premium income for the first quarter of 2017 declined 95.94% to $70.66 million (2016: $1.74 billion), while dividend income increased 3317.8% to a total of $2.11 billion (2016:$61.64 million).
Other Operating Income increased by 259.53% to $245.79 million (2016: $68.36 million). Consequently, total operating income increased 17.4% to a total of $16.70 billion (2016: $14.22 billion). According to NCBJ, “The main performance drivers were: Gains on foreign currency and investment activities resulting from the strengthening of the Jamaican dollar during the quarter, coupled with high levels of liquidity and a declining interest rate environment which created high demand for assets in the market.”
Total Operating Expenses for the period amounted to $13.16 billion, an increase of 30.14% versus the $10.14 billion reported for the first quarter of 2016. This was due to an increase in ‘Policyholders and annuitants benefits and reserves’ and ‘staff costs expenses’. Of these expenses: Staff costs increased 57.53% to $5.91 billion relative to $3.75 billion in 2016 and Policyholders and annuitants benefits and reserves which grew by 73%% to $1.78 billion (2016: $1.03 billion). Management indicated, “During the quarter, the Group incurred separation costs due to changes in our branch operating model. Staff costs were also impacted by negotiated increases in salaries, wages, allowances & benefits and benefits paid related to the prior year’s performance.”
Provision for credit losses fell 37.6% to $145.6 million (2016: $235.15 million), while depreciation and amortization grew by 23.10% to $666.01million (2016: $ 541.04 million). Other operating expenses increased by 2.24% to $4.66 billion relative to $4.56 billion for the prior year’s corresponding period. NCBJ noted, “For the quarter, execution of strategic programmes, operational streamlining and infrastructure improvements led to increased depreciation, maintenance, card rebates, licensing and transaction costs.”
Consequently, operating profit for the quarter decreased 13.97% to total $3.53 billion (2016: $4.11 billion). NCBFG’s performance was bolstered by a gain (negative goodwill) of $1.47 billion on the acquisition of Clarien Group Limited, its newest subsidiary. ‘Share of profit of associates’ contracted by 37.99% to total $509.12 million compared to $821.01 million in 2016. Consequently, profit before taxation increased 11.78% to $5.51 billion relative to $4.93 billion in 2016. Following taxation of $893.98 million (2016: $1.34 billion), net profit for the three months ended December 30, 2017 totaled $4.61 billion, an increase of 28.48% compared to $3.59 billion for the first quarter of 2016.
Earnings per share (EPS) for the first quarter ended December 30, 2017 totaled $1.88 relative to $1.46 for the first quarter of 2016. The trailing twelve month EPS amounted to $8.16. The number of shares used in our calculations amounted to 2,466,762,828 units. Notably, NCBFG stock price closed the trading period in January 25, 2018 at a price of $100.01.
NCBJ noted, “In December, we completed the acquisition of a 50.1% majority stake in Clarien Group Limited (Clarien), owner of Clarien Bank Limited based in Hamilton, Bermuda. We also launched an offer and take-over bid to all shareholders of Guardian Holdings Limited (GHL), a publicly-traded company incorporated in Trinidad and Tobago to acquire up to 74,230,750 ordinary shares. The offer, if successful, would result in NCBFG acquiring a controlling interest in GHL up to a maximum of 62% ownership. These strategic tenets have contributed to strong financial results for the start of the 2018 financial year.”
Balance Sheet at a glance:
Total Assets increased by 37.17% or $231.84 billion to $855.56 billion as at December 30, 2017 from $623.72 billion a year ago. This increase stemmed mainly from the growth in ‘Loans & Advances, Net of Provision for Credit Losses’ from $197.92 billion to $322.36 billion, a 62.88% increase. According to the company, “The growth was due to the consolidation of Clarien Group and increases in our retail portfolio.” Other notable contributors to the increase in the asset base was ‘Pledged Assets’ which rose 24.47% to $130.28 billion relative to $104.67 billion for the corresponding period in 2016.
Shareholder’s Equity as at December 30, 2017 stood at $124.18 billion relative to $102.10 billion a year ago. This resulted in book value per share of $50.34 (2016: $41.39).
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