Home' Trinidad and Tobago Guardian : December 13th 2015 Contents NCBJ shot into the local spot-
light when, on November
30, 2015, a joint announce-
ment stated that it had
agreed to acquire a 29.99 per
cent stake in Guardian Hold-
As yet, the detailed mechanics and purchase
price of this transaction, which is subject to
regulatory approvals, have not been disclosed.
There are also implications for the operations
of both companies which will evolve over time.
First, however, let us review NCBJ s fiscal
performance for the year ended September
Changes in financial position
Total assets rose by 4.9 per cent to J$523.8
billion from the restated J$499.3 billion as at
The combined total of investment securities
increased by 4.3 per cent to J$275 billion from
J$263.6 billion. However, the pledged assets
portion fell to J$110.6 billion (2014: J$159.5
billion) while the available-for-sale component
rose to J$166 billion from J$105.55 billion.
Net loans and advances rose to J$165.4
billion from J$157.6 billion, or by 4.9 per cent.
Among the largest recipients were personal
loans, which stood at J$75.4 billion (2014:
J$72.4 billion) and loans to the tourism sector,
which increased from J$17.77 billion to J$20.6
Loans to the distribution sector registered
at J$17.36 billion from J$16.12 billion. Inter-
estingly, loans to overseas residents jumped
by almost 95 per cent to J$10.9 billion from
Investments in associates rose to J$6.3 billion
from J$5.9 billion.
A major movement was the transfer out of
its holdings in Kingston Properties Ltd from
this category to investment securities. This
was because its shareholding fell to 10.76 per
cent from 25.17 per cent; this reduction fol-
lowed its non-participation in a rights issue
by that company. Its major remaining associate
is JMMB Group Ltd, in which it holds a 26.3
per cent stake.
NCBJ s stock of cash, due from central banks
and other banks rose to J$52.9 billion from
J$50.2 billion. The sums due from banks
climbed to J$24 billion (2014: J$20.4 billion)
while that due from other sources fell mar-
ginally to J$28.9 billion from J$29.8 billion.
Its non-interest bearing statutory deposits
with central banks rose to J$14.7 billion from
J$13.6 billion; this reflects its higher level of
Total liabilities rose by 4.3 per cent to J$435.4
billion from J$417.5 billion.
Customers deposits climbed by a robust
12.7 per cent to J$227.9 billion from J$202.2
billion. All categories, savings, current accounts
and fixed deposits registered strong increases
of 15.9, 11.1 and 8.9 per cent respectively.
The most significant movement in its lia-
bilities was noted in the massive increase in
obligations under securitisation arrangements,
which jumped from J$13.9 billion to J$44.3
billion. The largest increase was recorded under
the merchant voucher receivable segment.
Essentially, this involves the sale of the future
cash flows from its credit card operations in
Jamaica. (A more detailed explanation can be
found at note 32 on page 72 of NCBJ s 2015
Other borrowed funds fell to J$8.6 billion
from J$12 billion previously. Mostly accounting
for this decline was the repayment of its loan
to the International Finance Corporation, which
removed $3.37 billion from its books.
Stockholders equity advanced to J$88.4 bil-
lion from J$81.8 billion.
The retained earnings component advanced
to J$46.1 billion from J$41.5 billion. This figure
was enhanced by J$12 billion in comprehensive
income, but reduced by dividends of J$5.7 bil-
lion and transfers to various reserve accounts
totalling J$1.7 billion.
Excluding its ESOP, NCBJ has 2,461,468,912
shares outstanding. The book value of these
shares improved from J$33.25 as at year-end
2014 to J$35.91 as at September 2015.
Revenues and profits
Total income closed 2015 at J$47.5 billion
from the previous level of J$43.3 billion, reflect-
ing an improvement of 9.8 per cent. The main
component, net interest income, advanced by
5.3 per cent to J$25.96 billion from J$24.66
billion. Significantly, interest expense declined
to J$11.5 billion from J$12.2 billion. Despite
higher loan balances, interest income rose by
a meagre 1.6 per cent to J$37.5 billion from
Net fee and commission income advanced
by almost 13 per cent to J$9.8 billion from
J$8.7 billion. This reflected higher use of its
payment services, new loan fees together with
higher fees from unit trust transactions and
corporate financing activities.
The total of other income closed 2015 at
J$11.7 billion, which reflected a solid improve-
ment of 18.1 per cent over the J$9.9 billion
recorded for 2014.
The largest improvement of 44.8 per cent
was shown under the gains on foreign currency
and investment activities. This component
advanced to J$3.75 billion from last year s
J$2.59 billion, occasioned by the sales of debt
securities and higher foreign exchange income.
Meanwhile, premium income from its insur-
ance activities rose by 9.2 per cent to J$7.64
billion from J$7 billion previously.
Total operating expenses rose to J$31.5 billion;
this was 7.3 per cent greater than the J$29.3
billion recorded in 2014.
Notably, provision for credit losses fell to
J$1.8 billion from J$2.22 billion. Also declining
was policyholders and annuitant s benefits
and expenses; this line item fell from J$4.4
billion to this year s J$3.9 billion.
Offsetting these positives was other oper-
ating expenses, which climbed by 25.4 per
cent to J$12.2 billion from last year s J$9.7 bil-
lion. These costs covered a wide range including
asset taxes and irrecoverable taxes, marketing
and advertising costs and professional fees.
The net effect of these changes saw NCBJ
deliver an operating profit of J$16 billion; this
was an improvement of 15.1 per cent over the
J$13.9 billion recorded for 2014.
After including the share of profits from
associates (J$433,000) and allowing for a loss
on disposal of its investment in an associate
(negative J$507,000), the pre-tax profit reg-
istered at J$16.38 billion; this was 5.9 per cent
greater than the J$15.5 billion recorded for
At the after-tax level, the net profit of J$12.30
billion was marginally lower than the J$12.33
billion recorded for 2014.
This result translated into an EPS of J$5.00
versus J$5.01 for 2014.
All segments achieved higher external rev-
Notably, the consumer and SME segment
reported the only major profit decline. This
was mainly concentrated within the payment
services sub-group, which experienced a 21
per cent profit contraction. Expenses
increased by 18 per cent, reflecting higher loan
loss provisions and the cost of a credit card
The large increase in corporate banking was
attributed to higher loan interest, fees and
Foreign currency and investment activities
drove the treasury and correspondent banking s
At wealth, asset management and invest-
ment banking, the marginal decline was attrib-
uted to costs outstripping revenue improve-
At the life and pensions segment, growth
in both individual and group life policies under-
Higher premiums and improved fees and
commissions helped the general insurance
Dividend and share price
As recently as mid-September, one could
buy NCBJ s shares on the local market at
TT$1.63, but by November 13, the price had
reached TT$1.80. Trades of 285,000 shares
on November 20 saw the price close at
In its home market, the share closed at J$30
on October 1, 2015, from which base it has
continued to advance relentlessly. On Novem-
ber 13, it closed at J$35.00, then on November
19, it ended the day at J$37.91. This reflects
a 103 per cent improvement over the January
5 price of J$18.71.
So far for 2015, NCBJ has paid dividends
totalling J$1.35 and, on December 11, paid
another dividend of J$0.85; this brings its total
calendar year dividend up to J$2.20 (calendar
2014: J$1.98). When related to its recent high
of J$37.91, this gives investors a 5.8 per cent
Its future with GHL
(and related matters)
While this arrangement appears to provide
a tolerable exit for IFC and RBC, ultimately,
it may still be unsatisfactory to Lock Jack and
Despite their institutional value, can we see
either Arthur Lock Jack or Imtiaz Ahamad
playing "second fiddle" to Michael Lee Chin
for any extended period of time? In this deal,
who is looking after the interests of ordinary
shareholders of either company?
At this time, it might be too expensive for
NCBJ to buy the remaining 70.01 per cent of
GHL shares for its "real value". Is there a time-
frame before NCBJ is allowed to make a bid
for the remainder of GHL? It seems likely that,
over the next few years, NCBJ will probably
merge with GHL.
Several questions emerge:
Will NCBJ be required to sell its 26.3 per
cent stake in JMMB Group? Who will be the
buyer? Will GHL be allowed to acquire some
of NCBJ s insurance assets in Jamaica? Will
the two companies market each other s col-
lective investment products? The list of possible
questions is long.
In the medium-term, will the merged com-
pany be headquartered in Jamaica, or (gulp)
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 13 • 2015
National Commercial Bank
Jamaica Ltd 2015 results
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