Jan 2007 Financial News

NCBJ Releases First Quarter Results

Jan 26, 2007

Results for the First Quarter Ended December 31, 2006
All figures quoted in Jamaica Dollars

National Commercial Bank (Jamaica) (NCBJ) produced commendable results for the first quarter ended December 31, 2006 reporting Earnings Per Share (EPS) of 61 cents. This was 32.61 per cent more than the previous period’s EPS and was as a result of strong income streams as the Group continues to grow revenue in all its major business segments.

Total Interest Income was up 10.27 per cent to $6.201 billion as Interest Income from Loans rose 9.75 per cent to $1.881 billion while Interest Income from Securities was up 10.49 per cent to $7.321 billion. This was due mainly to sustained growth in loans, advances and investment securities. Loans and Advances (net of provision for credit losses) totaled $44.908 billion as at December 31, 2006 compared to $42.219 billion as at September 30, 2006. Net Interest Income was up by a smaller margin of 4.94 per cent to $3.123 billion due to a 16.25 per cent increase in Interest Expense to $3.079 billion.

Net Fee and Commission Income was up by a healthy margin of 25.44 per cent as Fee & Commission Income rose 24.51 per cent to $1.090 billion while Fee & Commission Expense rose 20.56 per cent to $199.735 million. Net trading income increased 48.34 per cent to $704.403 million. This was most likely as a result of the positive momentum in its home market during that period. Dividend Income however fell 13.40 per cent to $35.081 million while Other Operating Income rose 136.07 per cent to $60.343 million. Ultimately, Operating Revenue increased 13.88 per cent to $4.813 billion.

With the exception of Provision for Credit Losses, the Group was able to contain its Operating Expenses as this item rose by a small margin of 5.47 per cent to $2.879 billion. The major component of these expenses was Staff Costs which rose 5.15 per cent to $1.648 billion and made up over 57 per cent of operating expenses. The Group increased its Provision for Credit Losses by 190.21 per cent to $45.380 million while Depreciation & Amortization dropped 12.93 per cent to $223.761 million. In addition, Other Operating Expenses rose 4.69 per cent to $926.311 million. There was also an Impairment loss on Investment Securities of $30.380 million.

Ultimately, Operating Profit was up 29.13 per cent to $1.939 billion. Profit Before Tax rose 30.13 per cent to $1.982 billion while the Effective Tax Rate moved from 25.26 per cent (Q1-FY06) to 24.22 per cent (Q1-FY07). Net Profit ended 31.95 per cent higher than Q1-FY06 rising to $1.502 billion.

The Directors have declared a dividend of 13 cents per share to be paid on February 23, 2007.

Given these results WISE has revised its forecast from TT$0.24 to $TT0.26. At the current price of TT$2.20 and WISE’s forecasted EPS of TT$0.26, NCBJ is trading at a price/earnings multiple of 8.46 times earnings. Given that NCBJ usually trades as high as 10 times earnings, this multiple is attractive for this share and so we recommend a BUY.

Sreshtha Tewari
WISE Research Team