February 5, 2021
For three months ended December 31, 2020, NCB Financial Group Limited (NCBFG) net interest income decreased by 1%, relative to 2019, to total $13.82 billion (2019: $13.93 billion). NCB noted, “Compared to the profitability of the prior year, the Group’s performance for the period declined on account of relatively flat revenues coupled with a 9% increase in operating expenses. These factors led to a 17% or $1.7 billion decrease in operating profits to $8.2 billion for the quarter.” Net interest income for the first three months closed at $20.84 billion, 5% above the $19.81 billion reported corresponding period ended December 31, 2019. Interest expense year over year rose 20% to close at $7.03 billion (2019: $5.88 billion).
Net fees and commission income amounted to $5.87 billion, an 8% decrease when compared to 2019’s $6.41 billion. NCBFG stated that, “this was primarily as a result of the reduced transaction volumes in our payments services business segment stemming from the general economic downturn and our continued encouragement of the use of lower cost self-service and digital options.” Of this, ‘Fee and commission income’ totalled $6.99 billon (2019: $7.68 billion), while ‘Fee and commission expense’ amounted to $1.11 billon (2019: $1.26 billion). Dividend income decreased by 17% to a total of $576.80 million (2019: $693.38 million). Other Operating Income decreased 18% to $685.76 million (2019: $836.90 million), while Credit impairment losses fell 26% to $1.17 billion in contrast to $1.57 billion recorded for 2019. Lastly, the Company’s Gain on foreign currency and investment activities rose 9% to $5.41 billion compared to $4.98 billion reported in 2019. The Group highlighted that, “The reductions in revenues were partially offset by improved gains from foreign currency and investment activities due to improving fixed income and equity market conditions.”
Net results from insurance activities, for the three months ended December 31, 2020, increased 7% to $8.60 billion (2019: $8 billion). NCBFG noted that, “There were improvements in the life, health and pension segment’s premium income as well as growth in the property and casualty insurance business mainly in the Dutch Caribbean.” Of this, Insurance premium income rose 8% to $36.44 billion (2019: $33.64 billion), while reinsurance commission income advanced 83% to $3.56 billion (2019: $1.94 million). Insurance premium ceded to insurers amounted to $12.18 billion (2019: $9.93 million). Commission and other selling expenses surged to $4.96 billion compared to $4.52 billion in 2019.
As such, net operating income amounted to $33.78 billion for the three months ended December 31, 2020 compared to $33.29 billion booked the prior corresponding period.
Total Operating Expenses for the first quarter amounted to $25.56 billion, an increase of 9% compared to the $23.35 billion reported for the three months ended December 31, 2019. According to Management, “Staff costs, the single largest operating expense of the Group, was the main contributor to the increase primarily due to the annual increases in salaries, wages and allowances coupled with incentive payments within the current period related to the prior financial year.” The expenses are as follows:
- Staff costs increased 16% to $12.32 billion relative to $10.65 billion in 2019.
- Other operating expenses fell by 1% to $10.54 billion (2019: $10.62 billion).
- Depreciation and amortization grew 15% to $2.29 billion (2019: $1.99 billion).
- Finance cost grew 391% to $416.41 million (2019: $84.79 million).
Consequently, operating profit decreased 17% to total $8.22 billion (2019: $9.95 billion).
‘Share of loss of associate’ amounted to $67.99 million compared to the loss of $201.68 million reported in 2019. Consequently, profit before taxation decreased 16% to $8.15 billion relative to $9.74 billion in 2019. Following taxation of $2.30 billion (2019: $1.97 billion), the net profit for the three months ended December 31, 2020 totalled $5.85 billion, a 25% decrease compared to $7.77 billion for the corresponding period of 2019.
Net profit attributable to shareholders for the quarter ended December 31, 2020 closed at $3.92 billion relative to $5.90 billion in 2019. Management noted that, “. The Group is executing initiatives to achieve its aspiration of becoming a world-class Caribbean financial ecosystem. As part of this transformation journey, we have defined the new “NCB Mindset”, equipping us to navigate the challenging environment and charting a path for a renewed organisation dedicated to our purpose: empowering people, unlocking dreams, and building communities.”
Earnings per share (EPS) for the three months period totalled $1.59 relative to $2.39 booked in 2019. The trailing twelve-month EPS amounted to $6.93. 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 $137.31 on February 4, 2021 with a corresponding P/E ratio of 19.80 times.
Balance Sheet at a glance:
Total Assets increased by 12% to $1.80 trillion as at December 31, 2020 from $1.61 trillion a year ago. This increase stemmed mainly from the growth in ‘Pledged Assets’ which moved from $397.56 billion in 2019 to $469.09 billion in 2020, an 18% increase. Other notable contributors to the increase in the asset base were ‘Due from other banks’ which moved from $128.30 billion in 2019 to $177.52 billion in 2020, a 38% increase. Additionally, ‘Loans and advances net of provision of credit losses’ closed the period at $461.26 billion (2019: $438.38 billion).
Shareholders’ Equity as at December 31, 2020 closed at $154.98 billion relative to $148 billion a year ago. This resulted in a book value per share of $66.88 (2019: $60.00).
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