Given the contraction in some of its business and the challenges resulting from the COVID-19 pandemic, Jamaica’s largest commercial bank, National Commercial Bank Jamaica Limited (NCB), is accelerating its digital transformation initiative.

The announcement has come as NCB reports a decline in profits attributable to shareholders for the six months ended March 31, 2020. The bank also reports that it is now experiencing the negative effects of COVID-19 on the fair valuation of investment securities, which resulted in losses on investment activities for the quarter and loan provisioning.

Speaking at Friday’s NCB Virtual Investor’s Briefing, president and group CEO, Patrick Hylton, made out a case for accelerating its digital transformation initiative and putting in place now some of the initiatives which were planned for 2024.

While not giving any specifics, Hylton asserted, “As we battle the spread of COVID-19, social distancing and personal safety have conspired to create an environment that requires digital first as a key part of the solution.”

CIRCUMSTANCES FUELLING PUSH

NCB started its digital transformation initiative in November 2015 with the objectives of enhancing customer experiences, improving organisational efficiency, and creating a viable business model for the future.

According to the NCB president, “We have the opportunity to leapfrog and bring forward at an accelerated pace many of the goals and objectives we had for the digital transformation of our business.”

Arguing that the current circumstances have conspired to create this need to accelerate the digital transformation, Hylton recounted something he read, which stated that in most of the big corporate firms across the world the back-end offices — which deal with issues like branch services and customer care — have been transferred in a matter of days and weeks to the kitchen, bedrooms, and living rooms of a number of their employees.

The NCB CEO explained that the bank has been spending a lot of time focusing on how it can better enable a higher quality service and better customer experience in the present context of social distancing, while spending less time in physical contact with customers.

NCB MARCH FINANCIALS

Dennis Cohen, NCB Group chief financial officer (CFO) and Deputy CEO, NCB Financial Group presented the latest figures for the six months ended March 30 in which the group reported a net profit of $13.4 billion and net profit attributable to our stockholders of $9.6 billion, which was a 23 per cent or $2.9 billion decline from the prior year.

He explained that the prior year’s results benefited from a one-off gain of $3.3 billion from the disposal of NCB’s interest in an associate company. Excluding this gain, net profit would actually have increased by $408 million or four per cent over the prior year.

The operating profit of $13.1 billion, represented a 24 per cent uplift over the prior year, which was significant due to the inclusion of six months of Guardian Holdings Limited’s (GHL) results in the current period with no comparable results in the prior year, given that the majority stake in GHL was acquired in May 2019.

The improved operating profit was supported by revenues, growing by $18.3 billion; this was partially offset by a $15.8 billion increase in expenses. The group’s loans and advances, net of credit impairment losses totalled $431 billion, an increase of $47.1 billion or 12 per cent over the prior year.

Non-performing loans for the group totalled $25.8 billion as at March 31, 2020 (March 31, 2019: $19.2 billion) and represented 5.8 per cent of the gross loans compared to 5.0 per cent as at March 31, 2019.

DEPOSITS

Customer deposits totalled $520 billion, a notable increase of $41.6 billion or nine per cent over the prior year demonstrating customers’ confidence in NCB. This continues to be the banking group’s largest source of funding.