Apr 2007 Financial News

NCBJ Releases Half Year Results

Apr 27, 2007

Results for the Half Year Ended March 31, 2007

All figures quoted in Jamaica Dollars unless otherwise stated

National Commercial Bank (Jamaica) (NCBJ) has had another successful quarter for FY07. The Bank reported Earnings Per Share (EPS) of $0.66 for the second quarter which brought the Half Year EPS to $1.27 for FY07. Half Year 07 on Half Year 06, this was a substantial increase of $0.31 or 32.29 per cent; while Q207 on Q206 the EPS grew by an outstanding 34.69 per cent or $0.17.

For the Half Year under review the Bank’s Interest Income from Loans amounted to $3.85 billion, an increase of $253.04 million or 7.03 per cent. Loans and Advances, net of provision, totaled $48.62 billion as at March 31, 2007 compared to $38.78 billion as at March 31, 2006- an increase of $9.84 billion or 25.37 per cent. The aggregate amount of non- performing loans stood at $1.7 billion and represented 3.49 per cent of the gross loans compared to 3.66 per cent at September 30, 2006 and 4 per cent as at March 31, 2006. Additionally, Interest Income from Securities saw an increase of 12.29 per cent or $924.93 million to end the period at $8.45 billion. This resulted in Total Interest Income of $12.31 billion for HY07 compared to $11.13 billion for HY06- an increase of 10.59 per cent.

Interest Expense for the six months stood at $6.01 billion and was up by 14.30 per cent or $751.60 million on the comparable period in FY06. Thus, Net Interest Income ended the period at $6.30 billion up by 7.26 per cent or $426.37 million.

Net Fee and Commission Income was up by a healthy margin of 25.64 per cent as Fee & Commission Income rose 24.58 per cent to $2.21 billion while Fee & Commission Expense rose 20.53 per cent to $443.27 million. Net Trading Income increased by a substantial 55.52 per cent to $1.58 billion on the corresponding Half Year in FY06. Dividend Income however continued to fall in the second quarter which resulted in a HY figure of $47.38 million a considerable decrease of 33.90 per cent or $24.30 million. Conversely, Other Operating Income rose by a significant 642.27 per cent or $360.00 million to $416.05 million. As a result, Operating Revenue increased 20.01 per cent or $1.68 billion to $10.10 billion.

Operating Expenses for the period amounted to $6.12 billion, up by 14.79 per cent on the corresponding period for HY06. While Provision for Credit Losses was the smallest Operating Expense, it saw the largest increase moving from $66.70 million to $112.26 million (68.32 per cent). As at March 31, 2007, the Accumulated Provision for Credit Losses determined under Bank of Jamaica regulatory requirements of $2.31 billion, represented an overall coverage of 132 per cent of non-performing loans. At the end of the half year period the Loan Loss Reserve was $251.3 million. Staff Costs was the largest Operating Expense for the period and stood at $3.46 billion, up 15.07 per cent or $452.55 million. This was mainly due to negotiated salary and allowances for the current financial year. Depreciation and Amortization was the only expense to decrease and stood at $455.48 million, after falling 11.76 per cent or $60.71 million on the corresponding figure for HY06. Additionally, the Bank had an Impairment Loss on Investment Securities of $30.38 million for the Half Year under review while there was no such loss in the comparable period in FY06. Other Operating Expenses totaled $2.06 billion, an increase of 14.79 per cent or $788.41 million on the figure for HY06.

Accordingly, Operating Profit was up by a significant 29.03 per cent or $895.83 million to $3.98 billion. Profit Before Taxation ended the period at $4.09 billion up by 30.49 per cent or $956.55 million on the comparable Half Year for FY06. The Effective Tax Rate for the period under review was 23.81 per cent compared to a Rate of 24.86 per cent for HY06. Thus, Net Profit ended the period at $3.12 billion up by an outstanding 32.33 per cent or $762.05 million on HY06.


The Board has declared an Interim Dividend of $0.29 per share payable on May 25, 2007 for shareholders on record as at May 11, 2007. The financial statements for the quarter ended March 31, 2007 do not reflect this resolution which will be accounted for in Shareholders Equity as an appropriation of Retained Earnings in the quarter ended June 30, 2007.


NCBJ’s last close on the Trinidad and Tobago Stock Exchange was TT$2.15. Given these commendable results WISE is maintaining a forecasted EPS of TT$0.26. At the current price and forecasted EPS, NCBJ is trading at an attractive price to earnings multiple of 8.27 times. Additionally, using a multiple of 10 times we estimate a Target Price of TT$2.60 or a return of approximately 21 per cent at the current price of TT$2.15. As such, we continue to recommend a BUY on this share.

Gia Singh
WISE Equity Research Team