HAVING achieved a successful turnaround in performance last financial year, NCB Capital Markets (NCBCM) plans to continue on a conservative path towards maximising return on equity for shareholders in a difficult financial climate.

NCB’s wealth management arm contributed $1.7 billion in net profits to the group over the financial year ending September 30, 2009, an increase of 121 per cent over the year prior, when the company was impacted by a $1.23-billion write-off after the collapse of investment bank Lehman Brothers. Following the debacle, the company made a commitment to rebuild its operational and risk management framework, and it seems that the strategy has been paying dividends.

“I think it has been a good year for NCB Capital Markets and all the indicators in terms of financial performance,” NCBCM Chairman Patrick Hylton told shareholders at the company’s annual general meeting on Wednesday at the Atrium.

“NCB Capital Markets has made significant progress over the last financial year, notwithstanding the challenges in the economic environment… In a real sense, the organisation has swum against the tide,” he added.

Operating revenue increased by 11 per cent year over year to $2.9 billion at the September 2009 year end. Net interest income over the same period increased by 27 per cent to $2.1 billion. However, against the background of a dampening of the bond and equity markets, gains from investment activity declined by 10 per cent to $611 million.

Going forward, interim boss Dennis Cohen — in place of Christopher Williams, who resigned at the end of January — said NCBCM will focus on holding low-risk assets and maintaining its position as a very sound financial institution, which is reflected in the capital strength of the company. At the end of the September 2009 financial year, NCBCM had a Capital to Risk Weighted Assets Ratio of 60.75 per cent.

“We are proud of the fact that this is significantly in excess of what the regulators require, which is a minimum of 10 per cent,” said Cohen, adding that “we expect to continue to hold quality assets and maintain a healthy buffer between ourselves and what is the minimum required.”

Cohen said the firm’s capital strength profile will give it an advantage in the procurement of market share.

“In this time of uncertainty, we have always been saying, internally, these are times when what is important is actually safety and security,” said Cohen. “That is an attribute which is in our favour and I expect that we will continue to make significant inroads.”

NCBCM had funds under management of $63.5 million up to the first quarter ending December 31, 2009, trailing only Jamaica Money Market Brokers, which manages just in excess of $1 billion. According to Cohen, NCBCM has a significant advantage over most institutions in the market because of its service outlet distribution. NCBCM has 24 branches across 11 parishes.

“Certainly, the growth of funds under management is something which is important to us,” explained Cohen. “Our strategy in terms of doing that is to continue to explore what we consider to be channel distribution infrastructure. We believe that other institutions don’t have that reach and scope.

“Our goal is not necessary to surpass anybody in terms of funds under management, our goal is to pretty much maximise the returns for the shareholders,” Cohen clarified.

“If that is consistent with growing the funds under management to become number one, so be it,” he said.

NCBCM continued its turnaround over the December 2009 quarter. Net profits of $622 million over the period represented a 29 per cent increase over the corresponding period last year, while net interest increased by 130 per cent. Gains on investment activity, however, reflecting the continued weak state of the market, declined by 30 per cent compared to the December 2008 quarter.