Jul 2008 Financial News

NCB scores big - But Hylton expects slowdown in periods ahead

Jul 30, 2008

Nine months into its financial year, National Commercial Bank (NCB) has already chalked up another record for big profits of $6.76 billion, or $2.74 per share, to surpass its performance last year when it reported profits of $6.6 billion over 12 months.

But group managing director Patrick Hylton has signalled that profits may not be as robust in the coming periods, and that momentum was likely to slow in 2009.

The banking group will pay $740 million in quarterly dividend to its 34,828 stockholders on August 27, or 30 cents per share, bringing total dividend within this year to $2.146 billion.

Big boost

Profits grew 38 per cent in nine months to June 30, on gross revenues of $28.8 billion, up from $25 billion in the comparative 2007 period.

But the bank also said its bottomline was boosted by a one-off gain of $517 million which, when excluded, showed profits growing by 28 per cent, the bank said.

The gain related to the man-datory sale of a portion of NCB's Visa shares under the credit card company's restructuring and initial public offering.

Hoping for more success

The banking side of the group brought in the lion's share of profit, $4.6 billion, while its investment arm, NCB Capital Markets Limited, contributed $1.36 billion and insurance $435 million.

NCB is making no bets on where its profits will end up at its financial year-end in September, but according to Hylton, the last quarter could be less stellar than the first three periods,.

"For the fourth quarter, we will be looking to continue on our path of organic growth while trying to improve on our cost to income ratio, and our overall efficiency," he told Wednesday Business.

"We will be striving to exceed expectations, but given the current economic climate, we acknowledge that we face significant challenges in maintaining our momentum in the coming fourth quarter and the next financial year."

Growth in loans portfolio

Important for the bank, in an area where it trails big rival Scotiabank Jamaica, NCB's loan portfolio advanced 35 per cent year on year, from $53 billion to $71 billion, making the portfolio the largest contributor to balance sheet growth in the period.

Its loans to assets ratio rose four points, from 21.6 per cent to 25.6 per cent, as a result.

The bank told Wednesday Business that it launched a number of campaigns targeted at loan growth in the year to June, but was focused on initiatives and products that it thought would best boost its loan asset ratio.

"The increase in our loan book is due to increases in both our corporate and retail portfolios," it said.

Slow deposit growth

But NCB also boasted of beating the industry average, saying its net loans grew 28.5 per cent, well ahead of the commercial banking sector's 19 per cent.

The bank's total assets also climbed by $36 billion to $280 billion, while its capital base was weightier at $32 billion.

Deposits, though reflective of new business, grew at slower rate of nine per cent to $119 billion.

The bank, which follows second behind Scotiabank as the most profitable listed companies on the Jamaica Stock Exchange, has returned quarterly profits on average of $2.25 billion.

On that basis, assuming its fourth quarter tracks with current performance or matches the 2007 period, NCB group is set to round out 2008 with net income of about $8.5 billion to $9 billion.

NCB's nine-month results:
Net revenue $18 billion
Operating profit $8.6 billion
Net Profit $6.76 billion
EPS $2.74
Loans $71 billion
Total assets $279.9 billion
Deposits $119 billion
Capital base $32.4 billion


Source:
The Jamaica Gleaner
Wednesday 30 July, 2008
lavern.clarke@gleanerjm.com
http://www.jamaica-gleaner.com/gleaner/20080730/business/business5.html