Date: July 27, 2018

National Commercial Bank Financial Group (NCBFG) for the nine months ended June 30, 2018 reported a Net Interest Income increase of 15%, relative to the corresponding period in 2017, to total $25.42 billion (2017: $22.19 billion), “resulting from volume growth in the loan portfolio and the consolidation of Clarien’s results”, Management noted. For the quarter, Net Interest Income improved 26% to close at $9.51 billion (2017: $7.56 billion).  Interest income for the period rose 20% year over year to $37.92 billion compared to $31.63 billion in 2017, while interest expense amounted to $12.51 billion relative to $9.44 billion for the corresponding period in 2017.

Net Fees and Commission Income amounted to $11.75 billion, an increase of 13% on 2017’s $10.42 billion. The company highlighted that “Investment management and banking, brokerage, trust and advisory fees earned by Clarien are now included in this income line. In addition to the consolidation of Clarien’s results, we continue to experience higher transaction volumes at our e-commerce channels and increased pension fee income.”

The bank also reported a gain on foreign currency and investment activities of $11.41 billion, a growth of 103% relative to $5.62 billion in 2017. The Company noted, “This performance is in the context of strong fiscal performance by the GOJ, a high level of liquidity which has created demand for assets and an accommodative policy stance by the BOJ which led to declining market interest rates.” Insurance premium income for the period increased 16% to $348.04 million (2017: $185.71 million), while dividend income increased by 87% to a total of $348.04 million (2017: $185.71 million).

Other Operating Income climbed by 213% to $513.52 million (2017: $163.99 million). Consequently, total operating income increased 27% to a total of $55.95 billion (2017: $44.22 billion). Total operating income for the third quarter recorded a 34% growth to $20.22 billion (2017: $15.05 billion).

Total Operating Expenses for the period amounted to $36.98 billion, an increase of 32% compared to the $28 billion reported for the nine months ended June 30, 2017. Expenses for the quarter rose 36% to close at $12.07 billion compared to $8.88 billion in 2017. According to NCBFG, “we continue to re-tool the organisation to bolster our capacity to innovate and improve service standards to customers.”

Of these expenses:

• • Staff costs increased 37% to $16.55 billion relative to $12.09 billion in 2017
  • Other operating expenses grew by 11% to $12.30 billion (2017: $11.04 billion).

Provision for credit losses increased 176% to $1.37 billion (2017: $497.30 million) while depreciation and amortization grew by 43% to $2.46 billion (2017: $1.72 billion). Policyholders’ and annuitants’ benefits and reserves increased by 62% to $4.31 billion relative to $2.65 billion for the prior year’s corresponding period.

Consequently, operating profit increased 17% to total $18.97 billion (2017: $16.21 billion). ‘Share of profit of associates’ declined by 18% to total $1.81 billion compared to $2.22 billion in 2017. The Bank also reported negative goodwill on acquisition of subsidiary of $4.39 billion relative to a nil in 2017. This was as related to “the acquisition of Clarien”. Consequently, profit before taxation increased 37% to $25.17 billion relative to $18.44 billion in 2017.

After accounting for taxation of $4.22 billion (2017: $3.72 billion), net profit for the nine months totaled $20.95 billion, an increase of 42% compared to $14.72 billion for the corresponding period of 2017.  Without the goodwill, net profit would have increased by approximately 13%.

Net profit attributable to shareholders closed at $20.66 billion for the nine months.

Earnings per share (EPS) for the nine months ended June 30, 2018 totalled $8.38 relative to $5.97 booked for the comparable period of 2017. The EPS for the third quarter amounted to $2.77 (2017: $2.13). The trailing twelve month EPS amounted to $10.16. 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 $96.79 on July 26, 2018.

Balance Sheet at a glance:

Total Assets increased by 40% to $931.18 billion as at June 30, 2018 from $665.01 billion a year ago.  This increase stemmed mainly from the growth in ‘Loans & Advances, Net of Provision for Credit Losses’ from $212.04 billion to $361.27 billion, a 70% increase. Other notable contributors to the increase in the asset base were ‘Cash in Hand and Balances at Central Banks’ and ‘Investment Securites’ which rose 49% and 24% respectively to $72.92 billion (2017 :$48.84 billion) and $244.68 billion (2017:$197.95 billion) respectively.

Shareholder’s Equity as at June 30, 2018 stood at $124.24 billion relative to $111.68 billion a year ago. This resulted in book value per share of $50.36 (2017: $45.28).

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