NCBFG reports 33% decrease in first quarter net profit attributable to shareholders

February 04, 2022

For three months ended December 31, 2021, NCB Financial Group Limited (NCBFG) net interest income increased by 18%, relative to 2020, to total $16.28 billion (2020: $13.82 billion).  Interest income for the first three months closed at $22.11 billion, 6% above the $20.84 billion reported corresponding period ended December 31, 2020. Interest expense year over year rose 17% to close at $5.83 billion (2020: $7.03 billion).

Net fees and commission income amounted to $6.43 billion, an 8% increase when compared to 2020’s $5.87 billion.  Of this, ‘Fee and commission income’ totalled $8.39 billon (2020: $6.99 billion), while ‘Fee and commission expense’ amounted to $1.96 billion (2020: $1.11 billion). Dividend income increased by 64% to a total of $944.25 million (2020: $576.80 million). Other Operating Income increased 86% to $1.27 billion (2020: $685.76 million) primarily due to “gains from the sale of property, plant and equipment,” according to NCGBFG. Credit impairment losses rose 57% to $1.83 billion in contrast to $1.17 billion recorded for 2020. Lastly, the Company’s Gain on foreign currency and investment activities fell 70% to $1.62 billion compared to $5.41 billion reported in 2020 due to “reduced gains from our securities dealings, coupled with lower net foreign exchange gains compared to the prior year,” as per Management.

Net results from insurance activities, for the three months ended December 31, 2021, increased 8% to $9.30 billion (2020: $8.60 billion). NCBFG noted that this was attributable to, “increased business activity. This was partially offset by increased claims, actuarial reserves and annuity payments.” Of this, Insurance premium income rose 16% to $42.37 billion (2020: $36.44 billion), while reinsurance commission income declined 20% to $2.85 billion (2020: $3.56 billion). Insurance premium ceded to insurers amounted to $13.14 billion (2020: $12.18 billion). Commission and other selling expenses surged to $4.57 billion compared to $4.96 billion in 2020. Net underwriting income increased 15% to close at $32.08 billion (2020: $27.82 billion).

As such, net operating income amounted to $34.01 billion for the three months ended December 31, 2021 compared to $33.78 billion booked the prior corresponding period.

Total Operating Expenses for the first quarter amounted to $26.97 billion, an increase of 6% compared to the $25.56 billion reported for the three months ended December 31, 2020. According to Management, “the higher expenses were mainly as a result of increased asset, taxes, professional fees, technical consultancy charges and investments made to digitally enable the Group as we focus on advancing the customer experience while improving efficiency.” The expenses are as follows:

    • Staff costs decreased 3% to $11.93 billion relative to $12.32 billion in 2020.
    • Other operating expenses rose by 15% to $12.14 billion (2020: $10.54 billion).
    • Depreciation and amortization grew 7% to $2.44 billion (2020: $2.29 billion).
    • Finance cost grew 11% to $463.07 million (2020: $416.41 million).

Consequently, operating profit decreased 14% to total $7.04 billion (2020: $8.22 billion).

‘Share of profits of associate’ amounted to $289.06 million compared to the loss of $67.99 million reported in 2020. Consequently, profit before taxation decreased 10% to $7.33 billion relative to $8.15 billion in 2020. Following taxation of $1.95 billion (2020: $2.30 billion), the net profit for the three months ended December 31, 2021 totalled $5.38 billion, an 8% decrease compared to $5.85 billion for the corresponding period of 2020.

Net profit attributable to shareholders for the quarter ended December 31, 2021 closed at $2.64 billion relative to $3.92 billion in 2020.

Earnings per share (EPS) for the three months period totalled $1.07 relative to $1.59 booked in 2020. The trailing twelve-month EPS amounted to $5.25.  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 $131.87 on February 3, 2022 with a corresponding P/E ratio of 25.12 times.

Balance Sheet at a glance:

Total Assets increased by 13% to $2.03 trillion as at December 31, 2021 from $1.80 trillion a year ago. This increase in the asset base was mainly due to a $340.37 billion increase in ‘Investment Securities’ which moved from $386.26 billion in 2020 to $726.63 billion in 2021. This was mainly tempered by a 51% decrease in ‘Pledged Assets’ which moved from $469.09 billion in 2020 to $230.78 billion in 2021.

Shareholders’ Equity as at December 31, 2021 closed at $163.88 billion relative to $164.98 billion a year ago. This resulted in a book value per share of $66.43 (2020: $66.88).


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