Jul 2007 Financial News

NCBJ Releases Nine Months Results

Jul 31, 2007

Results for the Nine Months Ended June 30, 2007
All figures quoted in Jamaica Dollars unless otherwise stated

For the Nine Months Ended June 30, 2007, National Commercial Bank (Jamaica) Limited (NCBJ) reported Earnings Per Share (EPS) of $1.98, a significant increase of 24.53 per cent or 39 cents on the corresponding Nine Month period in 2006. Q307 on Q306, EPS grew 14.29 per cent or 9 cents from 63 cents to 72 cents while Q307 on Q207, EPS was up 9.09 per cent or 6 cents.

Interest Income from Loans, for the period under review, stood at $5.93 billion, an increase of $469.15 million or 8.59 per cent. Loans and Advances, net of provision, totalled $52.70 billion as at June 30, 2007 compared to $41.92 billion as at June 30, 2006 - an increase of $10.78 billion or 25.72 per cent. The aggregate amount of non-performing loans amounted to $1.47 billion and represented 2.72 per cent of the gross loans compared to 3.66 per cent as at September 30, 2006 and 3.9 per cent as at June 30, 2006. Interest Income from Securities rose 7.91 per cent or $920.10 million to $12.55 billion. Thus, Total Interest Income for the nine-month period amounted to $18.48 billion, an increase of 8.13 per cent or $1.39 billion when compared to the same period in FY06.

Interest Expense for the nine months increased 9.41 per cent or $772.87 million to $8.99 billion for FY07. This resulted in Net Interest Income ending the period at $9.49 billion, up 6.95 per cent or $616.38 million on the same period in FY06.

Fee and Commission Income rose a considerable 18.06 per cent or $521.55 million to $3.41 billion while Fee and Commission Expense increased by a substantial 22.67 per cent or $117.57 million to $636.16 million. As such, Net Fee and Commission Income increased 17.05 per cent or $403.98 million to $2.77 billion. Net Trading Income for the period under review was up an outstanding 42.15 per cent or $715.46 million to $2.41 billion. Dividend Income, however, fell 10.74 per cent or $9.93 million to $82.54 million. Other Operating Income increased from $93.97 million in FY06 to $614.56 million in FY07, an increase of $520.59 million or 553.98 per cent. As a result, Operating Revenue grew 17.11 per cent or $2.25 billion to $15.37 billion.

Operating Expenses for the nine-month period totalled $9.14 billion, up 11.76 per cent or $961.53 million on the comparable period in FY06. Staff Costs, the largest Operating Expense, increased by $652.24 million or 14.47 per cent to $5.16 billion mainly due to negotiated salary and allowances for the current financial year. Also seeing increases were Provision for Credit Losses and Other Operating Expenses, up 20.42 per cent or $25.67 million to $151.38 million and 20.80 per cent or $536.52 million to $3.12 billion respectively. As at June 30, 2007, the Accumulated Provision for Credit Losses determined under the Bank of Jamaica regulatory requirements of $2.13 billion, represented an overall coverage of 145 per cent of non-performing loans. The balance in the Loan Loss Reserve, as at June 30, 2007, was $168 million. Impairment Loss on Investment Securities decreased 84.74 per cent or $168.75 million to $30.38 million while Depreciation and Amortization fell 10.98 per cent or $84.15 million to $682.09 million.

Therefore, Operating Profit for the nine months ended June 30, 2007 increased a considerable 25.96 per cent or $1.28 billion to $6.23 billion. Profit Before Taxation grew 26.68 per cent or $1.34 billion to $6.37 billion. The Effective Tax Rate for the period under review was 23.37 per cent compared to a Tax Rate of 22.29 per cent for the same period in FY06. Thus Net Profit After Taxation ended the period at $4.88 billion, an increase of 24.91 per cent or $973.54 million on the comparable figure in FY06.

The Board has declared an interim dividend of $0.09 per share payable on August 28, 2007 for shareholders on record as at August 13, 2007.

NCBJ’s shares are currently trading at a price TT$1.99 on the local market. In light of these commendable results, we are maintaining our forecasted EPS of TT$0.26. At the current price and this forecasted EPS, this share is trading at a price to earnings multiple of 7.65 times. Additionally, using a multiple of 10 times and at the forecasted EPS of TT$0.26, this share has an expected return of approximately 31 per cent on the current price or a target price of TT$2.60. As such, we continue to recommend a BUY on this share.

Nancy Chen
WISE Equity Research Team