Mar 2015 Financial News

NCB takes asset tax hit on first-quarter profits

Mar 02, 2015

NATIONAL Commercial Bank of Jamaica (NCB) took a hit by lumping its asset tax as a one-time payment, resulting in its December 2014 first-quarter profits dipping 15 per cent year-on-year to $2.1 billion.

The bank, known as the nation's most profitable, could no longer accrue the asset tax due to adopting new International Financial Reporting Standards (IFRS) 21.

"The asset tax falls on October 1, and therefore our first-quarter reflects the entire year's asset tax for these our two largest entities [the bank and NCB Cap Markets]," NCB group deputy chief executive Dennis Cohen told the annual general meeting at the University of the West Indies, Mona in Kingston on Thursday. "Accordingly, our next three quarters we will not reflect a charge for asset tax for these two entities. Also note our insurance subsidiaries have a December 31 year end required by regulation, and their asset tax becomes due January of each year."

The asset tax absorption affected key performance indicators (KPI) of the bank including its return on average equity (net profit over equity) down to 10.4 per cent from 15.3 per cent.

"Having taken the hit for the asset tax in the first-quarter, and probably taking a smaller amount for the insurance companies in the second-quarter, we expect these [KPI] ratios to improve," Cohen said.

The asset tax for the December 2014 quarter totalled $992 million versus $498 million in the prior year quarter. Without the one-time payment (and rather accruing payment) net profit would have totaled $2.78 representing a three per cent reduction on the prior year, Cohen added.

Small shareholder Livingston Young asked for clarity on the asset tax. Cohen responded: "Its a tax levied on the total assets of the institution. There are some line items excluded, but for the most part its a rate applied to total assets. It is specifically related to regulated institutions; banks, merchant banks and securities dealers".

Over 12 months ending October 2014n NCB earned $11.6 billion in net profit compared with $8.57 billion a year earlier. Young congratulated NCB for improving its profitability following the second debt exchange in 2013, which was a precursor to the latest International Monetary Fund agreement.

"Di Government did give unno a lashing with the IMF thing. Mi si unnu a come up back little bit," Young indicated.

Source:
BY STEVEN JACKSON
Business reporter
jacksons@jamaicaobserver.com
Jamaica Obsever
Sunday March 1, 2015    

http://www.jamaicaobserver.com/business/NCB-takes-asset-tax-hit-on-first-quarter-profits_18484866