NCBFG focused on liquidity and capital strength for upcoming financial year

Business

NCBFG focused on liquidity and capital strength for upcoming financial year

BY DAVID ROSE
Observer business writer

Wednesday, November 25, 2020

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Despite recording a 36 per cent decline in net profits attributable to shareholders for its 2020 financial year (FY) ending September 30, NCB Financial Group's (NCBFG) stock price has rallied by 12 per cent following the publication of its annualised results against the backdrop of greater capital retention in the face of the coronavirus pandemic.

With greater uncertainty remaining in the new FY, NCBFG has decided to focus on building its liquidity and remaining sufficiently capitalised to tackle the new environment.

This was further supported by NCB's Cheif Executive Officer (CEO) Septimus Blake who indicated that the US $250 million ($35.4 billion) garnered from the securitisation of their payment rights would be a form of foreign currency liquidity for the bank.

One of the means to retain capital has come from NCBFG not paying a dividend since the pandemic started. Despite the Bank of Jamaica (BOJ) giving reprieve to financial holding companies to pay shareholders who own less than one per cent of the shares, deputy CEO Dennis Cohen revealed that the company didn't receive unanimous approval from their 11 shareholders who own more than one per cent of the issued shares. NCBFG has more than 44,000 shareholders who received part of the $5.4 billion ($2.00) paid during the financial year compared to the $8.3 billion paid in the prior financial year. AIC (Barbados) Limited sold 8.9 million shares during the third quarter which was approximately $1.3 billion.

NCBFG has been aggressively focusing on expanding its information technology (IT) deployment across the group's operations. Part of this has come from the rationalisation of NCB branches through closures while others change their format to become more aligned with the digital economy. Although there is no timeline for more possible branch closures, Blake did indicate that there would be a transitionary period to help bridge the knowledge gap for clients who are less au fait with digital solutions. Chief Information Officer Ramon Lewis explained at a recent investor that the bank is investing heavily in its IT infrastructure to stabilise the environment to support digital channels for customers to use.

NCB recently launched an e-payment platform to support its business customers while the NCBFG group launched a freelancer platform to capitalise on the digital economy for some of its operations. Guardian Holding Limited has continued its strides in this right through the implementation of more online portals and automating several tasks across the group.

Clarien Bank lagged behind the other members of the NCBFG due to the increase in non-performing loans (NPL) from their various business lines. Clarien accounted for 59 per cent of the NCBFG NPL's in the 2019 FY and recorded at least a 10 per cent drop in profits due to the increased credit losses. Clarien had a BD $4.3 million ($638.8 million) net profit for the first 6 months which was 51 per cent of its 2019 net profits. In spite of these setbacks, Clarien was able to launch its fourth online solution during the year.

“In Bermuda, we launched Iinvest, Bermuda's first and only robot-advisory solution. “Across the NCB Financial Group and 20 territories, you can expect to see the continued rollout of new digital products, new services and new processes and new business models.” replied president and CEO of NCBFG Patrick Hylton in his presentation at the investors briefing.

Although NCBFG's profits took such a sharp hit due to the one-off events and coronavirus pandemic, executive directors and connected parties have begun to buy NCBFG's stock which saw 3.1 million units crossing the JSE over 3 days for a cumulative total of $450.6 million. This confidence by the directors speaks volumes for the group's stock which peaked at $225 in August 2019.

“Whenever we return to normal, it will be a different normal. While we cannot control so much what happens to us, we can certainly control how we respond. We have acknowledged that sitting around and waiting without acting provides the clearest path to disruption.

“We have accepted the crisis, embraced the crisis and adopted the philosophy outlined by Rahm Emanuel, who once said never let a serious crisis go to waste. It is an opportunity to do things you thought you could not do before.

“We have contended with several crisis over the last 20 years and while the order and magnitude of this crisis has increased, our mindset and approach remains the same. In the face of any challenge, we remain committed to pursuing bold aspirations, finding the opportunities within the crisis and pivoting and persisting until we achieve the stated goals,“ said Patrick Hylton, the CEO of the NCB Financial Group in his closing statement to shareholders.


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