Home' Trinidad and Tobago Guardian : December 7th 2014 Contents DECEMBER 7 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
The National Commercial Bank
of Jamaica Ltd (NCBJ) continues
to make progress in many areas
of its operations. Its medium-
term goal is to become a more
visible financial services group
in the English-speaking Caribbean, particularly
outside of its home base in Jamaica.
Let us see how this banking and insurance
group performed in the year to September 2014.
Changes in financial position
Total assets increased from the restated
J$446.58 billion as at September 2013 to
J$499.35 billion on September 30, 2014, reflect-
ing an increase of 11.8 per cent.
Cash in hand and balances at the Central
Bank rose to J$29.8 billion from the 2013 figure
of J$24.4 billion. Here, the interest-bearing
reserves with the Central Bank rose to J$9.2
billion from the 2013 level of J$6.8 billion. In
addition, other balances with the Central Bank
increased from the previous level of J$0.9
billion to J$3.5 billion.
Reverse purchase agreements jumped from
the J$0.33 billion as at September 2013 to
J$1.62 billion this year-end.
The net portfolio of loans and advances
closed 2014 at J$157.6 billion; this represented
an increase of 11.7 per cent over the 2013 bal-
ance of J$141.1 billion. At the gross level, total
loans increased by 12.7 per cent to J$161.86
billion from the 2013 base of J$143.68 billion.
However, the provision for credit losses rose
by more than 52 per cent to J$4.9 billion from
The group s largest gross loan exposures are
personal (J$72.4 billion), tourism (J$17.8 billion),
distribution (J$16.1 billion) and J$14.9 billion
to the construction sector.
Total pledged assets increased to J$159.5 bil-
lion from the 2013 level of J$134.5 billion. The
most significant change occurred in securities
pledged as collateral for repurchase agreements,
which moved to J$158 billion from J$132.4 bil-
lion in the earlier period.
Total liabilities advanced to J$418.7 billion
from the 2103 figure of J$374.6 billion, rep-
resenting an increase of 11.8 per cent.
The largest component, customers deposits,
grew by 13.3 per cent to J$202.2 billion from
J$178.4 billion as at September 2013. As at
September 2014, J$167.3 billion or 82.5 per
cent of the total was due within one month.
This is an improvement from 2013, when 84.2
per cent or J$150.6 billion was similarly clas-
Repurchase agreements increased from
J$117.38 billion as at year-end 2013 to J$134.7
billion as at September 2014. Of the 2014 bal-
ance, J$131.3 billion or 97.5 per cent matured
in less than twelve months. For 2013, the figure
was 94.8 per cent, representing J$111.3 bil-
Higher retained earnings (J$40.4 billion)
and retained earnings reserve (J$19.4 billion)
were the main components of shareholders
equity, which advanced to J$80.6 billion from
J$72 billion as at year-end 2013; this repre-
sented an increase of 12 per cent.
Income and profits
Net interest income advanced from 2013 s
J$23.56 billion to J$24.66 billion, reflecting an
increase of 4.67 per cent. This modest improve-
ment reflected the disproportionally larger
increase in interest expense (up by 32 per cent)
versus the smaller increase (up by 12.5 per cent)
in interest income.
A similar pattern exhibited itself with the
change in net fee and commission income. This
combined figure increased by 8.3 per cent,
advancing from J$8 billion in 2013 to J$8.67
billion this year. On the one hand, the income
component rose by 8.9 per cent, while, on the
other hand, the expense element increased by
11.9 per cent.
The gain on foreign currency and investment
activities increased from J$1.03 billion in 2013
to J$2.59 billion this year. In this case, the 2013
result was reduced by J$1.53 billion due to the
effects of the government and national debt
The acquisition of Advantage General Insur-
ance Company Ltd (AGIC) boosted premium
income by almost 40 per cent to J$6.99 billion
from J$5 billion a year earlier. Almost J$1.6
billion of the total increase was classified as
general insurance contracts.
Dividend income declined to J$160.6 million
(2013: J$228.5 million) while other operating
income advanced to J$174.6 million (2013: J$141.8
The net effect of these changes saw total
operating income increase to J$43.25 billion
from 2013 s J$38 billion; this reflected an
improvement of 13.9 per cent.
On October 23, 2014, the Industrial Disputes
Tribunal awarded the bank s staff increases of
8 per cent for both year 1 and year 2. These
new figures have been included in the company s
staff expenses. Staff costs rose by a modest 2.6
per cent to J$11.52 billion from J$11.23 billion
as the bank had previously factored in most of
the increase into its accounts.
Provision for credit losses rose to J$2.22 billion
from the previous year s J$2.07 billion. Although
the gross sums provided for increased by J$297
million, the level of recoveries improved by
J$136 million. Actual write-offs were also more
than J$3 billion lower than in 2013. These pos-
itives had the effect of restraining the total net
Consistent with its acquisition of AGIC, pol-
icyholders and annuitants benefits and expenses
increased to J$4.4 billion from last year s J$3.8
billion. Meanwhile, depreciation and amorti-
sation were marginally higher at J$1.25 billion
(2013: J$1.21 billion).
Impairment losses on debt securities increased
from J$87 million in 2013 to J$200 million in
Other operating expenses rose by J$1.06 bil-
lion (11.3 per cent) to J$10.43 billion from 2013 s
J$9.37 billion. Significant increases were noted
under "unrecoverable general consumption tax
and asset tax" and "marketing, customer care,
advertising and donations" line items. Referring
to the former, the figures rose from J$1.18 billion
in 2013 to J$2.13 billion in 2014. In the case of
the latter, the movement was from J$666 million
to J$938.5 million.
Overall, operating expenses rose by 8.1 per
cent closing 2014 at J$30 billion from the pre-
vious year s J$27.8 billion.
In sum, total operating profit came in at
J$13.23 billion; this was 29.9 per cent greater
than the J$10.19 billion recorded for the restated
The group recorded negative goodwill of
J$301.4 million. This reflected the excess of the
assets acquired over the cash paid for the
Trinidad-based AIC Finance Ltd, now rebranded
as NCB Capital Markets Ltd.
In relation to its sale of its 32.59 per cent
stake in Kinston Wharves Ltd, the group gen-
erated a profit of J$349 million. Meanwhile, its
share of associates profits, which still includes
26.30 per cent of JMMB, came in at J$902.7
million (2013: J$861.2 million).
The net effect of these changes saw pre-tax
profit register at J$14.78 billion, which was 33.8
per cent above the 2013 figure of J$11.05 billion.
The after-tax figures came in at J$11.62 billion
for 2014 versus J$8.58 billion for 2013. These
numbers translate into EPS for 2014 of J$4.73
The combined consumer and SME segment
showed an improved operating profit. However,
this masks the differing fortunes of its two
components. Profit at the payment services
sub-group fell to J$1.7 billion from 2013 s J$2.1
billion; this reflected higher expenses in the
card services arm. In contrast, retail & SME
delivered J$1.56 billion in 2014 versus J$0.79
billion in 2013; this largely reflected reductions
in loan loss provisions.
Corporate banking was hit by lower net inter-
est income and higher expenses. Increased loan
provisions were largely responsible for this
Not surprisingly, the general insurance seg-
ment, helped by the AGIC purchase, saw profits
increase by more than 100 per cent.
This year, the wealth segment gave up its
top profit position to the treasury and corre-
spondent banking segment.
Dividends and share price
NCBJ s shares are frequently traded and its
price exhibits regular fluctuations.
A dividend of J$0.96 will be paid on Decem-
ber 11, 2014 bringing the total for this calendar
year to J$1.98; at a recent price of J$18.12, this
gives investors a yield of 10.9 per cent. In addi-
tion, relating that share price to EPS of J$4.73
reflects a P/E multiple of 3.83.
Even in the context of further small deval-
uation in the Jamaican Dollar, those numbers
suggest that the share may be significantly
The group s main subsidiary, National Com-
mercial Bank Jamaica Ltd, had a regulatory
capital to risk weighted assets ratio of 12.9 per
cent as at September 2014. This level is mar-
ginally higher than the 12.5 per cent minimum
requirement. Improving this ratio is expected
to be one of its main priorities in the current
NCBJ continues to progress
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