Jul 2015 Financial News

NCB commends lower profit performance in tight economy

Jul 29, 2015

THE directors at National Commercial Bank of Jamaica (NCB) described the bank's reduced profit performance as commendable within the context of a tight economy.

The banking conglomerate, often seen as the nation's most profitable bank, made $3.15 billion net profit after tax for its June third-quarter 2015 or 7.5 per cent less than a year earlier due to slightly higher expenses.

"These nine-month results for the 2014/15 financial year reflect another commendable performance in a challenging environment as we see the resilience of our diversified business model," according to a statement from the board accompanying the financials released this week.

Although the group made less profit, its total revenues actually increased to $11.68 billion in the quarter compared to $11.1 billion a year earlier. Meanwhile, within the quarter its gains on foreign currency and investment activities dipped by one-quarter to $827 million from $1.1 billion a year earlier. In previous quarters these gains turbocharged its revenues to higher levels.

NCB is incorporated in Jamaica with 47.9 per cent held by AIC Barbados Ltd. The ultimate parent company is Portland Holdings Inc in Canada and controlled by Michael Lee-Chin, chairman of the bank.

The group registered increased profits in five of its seven banking segments over nine months. The two segments which declined included payment services and wealth, asset management & investment banking.

The segments with operating profits included its retail division at $1.28 billion; payment services at $1.07 billion; corporate banking at $952 million; treasury & correspondent banking at $3.65 billion; wealth, asset management and investment banking at $2.5 billion; life insurance & pension at $2.4 billion; and general insurance at $1 billion.

Asset tax

Profit levels dipped over nine months ending June to $8.6 billion or 5.0 per cent lower year-on-year due mainly to the first-quarter adoption of new accounting rules which effectively required booking asset taxation in one quarter. It therefore removed the ability of the bank to accrue the asset tax. The asset tax absorption affected key performance indicators of the bank, including its return on average equity. The adoption of International Financial Reporting Standards (IFRS) 21 recognised the asset tax liability in full as at October 2014 for asset-based taxes which were progressively recognised during the year ending September 2014 for amounts due and paid in March 2015.

Group companies with an assessment date of December 2014 were recognised as at January 2015, stated the bank financials.

Its loans and advances at $162.3 billion (net of provision for credit losses) as at June 30, 2015, grew by 7.0 per cent or $10.2 billion, compared to the loan portfolio as at June 30, 2014. Non-performing loans totalled $8.5 billion as at June 30, 2015 ($7.9 billion as at June 30, 2014) and represented 5.1 per cent of the gross loans compared to 5.0 per cent as at June 30, 2014.

"Our activities to manage delinquency are ongoing and remain proactive and robust, with the implementation of an automated dialler and Collections Management System. We continue to monitor the environment and respond to changes that impact us and our customers," according to the board's statement.

Source:
BY STEVEN JACKSON
jacksons@jamaicaobserver.com
Business reporter
Wednesday July 29, 2015

http://www.jamaicaobserver.com/business/NCB-commends-lower-profit-performance-in-tight-economy_19221090