May 2011 Financial News

NCB looks to list on major North American Stock Exchange. IPO aims to raise US$175 million.

May 29, 2011

NATIONAL Commercial Bank (NCB), Jamaica's largest and most profitable indigenous banking entity will be seeking to cross-list its shares on either the New York Stock Exchange (NYSE) or the Toronto Stock Exchange (TSX) beginning with an Initial Public Offering (IPO) for a transaction valued at a maximum of US$175 million.

This decision was affirmed and approved at an NCB Board of Directors meeting held on Friday, May 27, 2011. The actual number of shares that will be offered will be dependent on the IPO price of the shares. This latest news means that existing shareholders of NCB will be able to participate in the IPO as well as to trade on the selected exchange subsequent to the IPO. NCB is now in the process of selecting an investment bank to assist with the cross-listing and the transaction is expected to take place sometime during this calendar year.

NCB's Board of Directors advised the Trinidad & Tobago Stock Exchange (TTSE) that it would be looking to remove the cap on the value of the Authorised Share Capital of the Group and that this be placed before its shareholders for consideration. The increase would result in a greater than 25 per cent jump in the existing Authorised Share Capital of NCB which is insisting that the increased capital will not be issued so as to change the control or nature of the business without the approval of the shareholders in a general meeting.

Sunday Finance understands that the Board of Directors intends to seek approval for this increase from the shareholders in a General Meeting.

In 2002, Michael Lee Chin, Executive Chairman of AIC Limited (a Canadian mutual fund company) and founder and Chairman of Portland Holdings Inc, bought a 75 per cent stake in NCB for US$127 million (J$6 billion) of which US$56 million was made as a downpayment.For that year, NCB posted revenues of J$14.5 billion generating a net profit of J$1.9 billion. Last year, NCB overtook Scotiabank Jamaica as the country's most profitable bank registering an operating revenue of J$29.3 billion which produced a net profit of a record breaking J$11.07 billion. For the half year ended March 2011, operating revenues increased by 16.7 per cent to J$17.16 billion producing a 15 per cent increase in net profits which came to J$6.12 billion. It must be borne in mind that back in 2002, NCB was under the auspices of FINSAC and nine years later it may well be listed on the New York Stock Exchange.

Speaking with Sunday Finance from Toronto, Canada, Lee Chin said, "This liisting will be unprecedented in the Caribbean.For the first time in the history of Corporate Caribbean, a major company will undergo an IPO and be listed on one of the world's major stock exchanges. This will now mean that NCB will become internationally recognised."

Listing on either the NYSE aor TSX will unlock value for NCB and provide the bank with capital to exploit opportunities all over the world. If it can raise the maximum US$175 million it will undoubtedly strengthen its capital base, lower its cost of funding while increasing its revenues. Local analysts are of the view that NCB will not look to target the North American diaspora with this prospective IPO but rather look to investment banks such as Merrill Lynch, UBS, Goldman Sachs and CitiGroup.

Financial analyst and Caribbean Busines Report contributor Dennis Chung said: "This would be a good move for NCB in terms of capitalisation. It would prepare them to go international and gets there name out there. It will no doubt bolster its liquidity position. Jamaican shareholders will be very happy about this news because it will enhance their collateral position and allow them to sell their NCB shares on the New York Stock Exchange or the Toronto Stock Exchange."

Tony Minvielle, formerly of Barclays Capital added: "A key determining factor here is what are the Price/Earnings (PE) ratios of banks trading on these exchanges? In Canada they tend to be between 12 and 14 times earnings and Latin American banks are usually two and a half times book value. I do believe that NCB with its stock only trading in NCB and Trinidad is around one time book value and less than five times earnings so a move to list on either of these exchanges will strengthen NCB, give it international recognition and better access to capital."


Source:
AL EDWARDS
Jamaica Observer
Sunday May 29, 2011

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