NCBFG reports 5% decline in nine months net profit

Date: August 5, 2020

Net Interest Income increased by 28%, relative to the corresponding period in 2019, to total $41.54 billion (2019: $32.36 billion). The movement according to management was due to, “the consolidation of a full nine months of GHL’s results.” For the quarter, Net Interest Income improved 10% to close at $13.56 billion (2019: $12.37 billion).  Interest income year to date rose 28% year over year to $59.67 billion compared to $46.68 billion in 2019, while interest expense amounted to $18.12 billion relative to $14.32 billion for the corresponding period in 2019.

Net Fees and Commission Income amounted to $16.37 billion, an increase of 22% on 2019’s $13.38 billion. NCBFG stated that, “the majority of the increase being due to the consolidation of GHL; however, there was a 10% and 9% increase in fees earned by NCB Capital Markets Limited and Clarien Group Limited, respectively. The improved fees from these entities offset the reduction in fees experienced by National Commercial Bank Jamaica Limited, which was mainly due to its drive to have customers use our digital channels along with the temporary waiver of some transaction fees to assist our customers during the pandemic.”

The bank also reported a gain on foreign currency and investment activities of $2.45 billion, a decline of 72% relative to $8.75 billion in 2019. Net results from insurance activities for the period increased 222% to $23.35 billion (2019: $7.24 billion). According to NCBFG, “this was due to the consolidation of GHL.”

Dividend income increased by 116% to a total of $1.71 billion (2019: $790.69 million). Other Operating Income grew by 276% to $1.87 billion (2019: $496.35 million). Consequently, net operating income increased 37% to a total of $81.63 billion (2019: $59.37 billion). Net operating income for the third quarter recorded an 18% growth to $26.90 billion (2019: $22.78 billion).

Total Operating Expenses for the period amounted to $59.68 billion, an increase of 41% compared to the $42.28 billion reported for the nine months ended June 30, 2019. Expenses for the quarter rose 11% to close at $18.08 billion compared to $16.32  billion in 2019. According to NCBFG, “the growth was primarily due to the consolidation of GHL. The additional expenses resulted in a cost to income ratio of 68.37%, up from 67.08% in the prior year. We continue our cost optimization strategies to improve our efficiency.” Of these expenses:

Staff costs increased 38% to $29.93 billion relative to $21.62 billion in 2019.

Other operating expenses grew by 41% to $22.92 billion (2019: $16.30 billion).

Provision for credit losses increased 55% to $5.65 billion (2018: $3.65 billion), while depreciation and amortization grew by 57% to $6.82 billion (2019: $4.36 billion).

Consequently, operating profit increased 28% to total $21.96 billion (2019: $17.10 billion). ‘Share of profit of associates’ fell by 95% to total $138.63 million compared to $2.66 billion in 2019. There was no ‘Gain on remeasurement of associate investment’ reported for the period relative to $2.33 billion documented in 2019. Furthermore, there was no gain on disposal of associate year to date compared to $3.29 billion booked in 2019.

Consequently, profit before taxation decreased 13% to $22.10 billion relative to $25.37 billion in 2019.

After accounting for taxation of $1.80 billion (2019: $4.07 billion), net profit for the nine months totalled $20.30 billion, a decrease of 5% compared to $21.31 billion for the corresponding period of 2019.

Net profit attributable to shareholders closed at $14.78 billion for the nine months relative to $20.75 billion in 2019. Net profit attributable to shareholders for the quarter amounted to $5.21 billion (2019: $8.29 billion).

Total comprehensive income year to date amounted to $18.59 billion (2019: $25.25 billion). While for the quarter, total comprehensive income totaled $22.80 billion (2019: $12.67 billion).

Earnings per share (EPS) for the nine months ended June 30, 2020 totalled $5.99 relative to $8.41 booked for the comparable period of 2019. The EPS for the third quarter amounted to $2.11 (2019: $3.36). The trailing twelve month EPS amounted to $9.57. 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 $136.25 on August 04, 2020.

NCBFG noted that, “During the third quarter, the economic downturn stemming from COVID-19 continued to influence the performance of the Group. The impact primarily resulted in:

“reduced securities trading activity coupled with the depreciation of the Jamaican currency resulting in reduced gains on foreign currency and investment activities;”

“increased credit impairment provisions; and”

“the waiver of certain digital and self-service channel user fees.”

Balance Sheet at a glance:

Total Assets increased by 8% to $1.69 trillion as at June 30, 2020 from $1.57 trillion a year ago.  This increase stemmed mainly from the growth in ‘Pledged Assets from $209.24 billion in 2019 to $388.83 billion. Other notable contributors to the increase in the asset base were ‘Loans & advances, net of provision for credit loss’ and ‘Due from Banks’ which rose 8% and 10% respectively to $445.41 billion (2019: $411.79 billion) and $112.72 billion (2019: $102.29 billion) respectively.

Shareholder’s Equity as at June 30, 2020 stood at $150.89 billion relative to $137.03 billion a year ago. This resulted in book value per share of $61.17 (2019: $55.55).



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