NATIONAL Commercial Bank Jamaica Limited (NCBJ) has received approval from the Bank of Jamaica (BOJ) to develop and test three proof of concepts leveraging the national identification system (NIDS) which is currently in the pilot phase.

The move comes at a time when the Government of Jamaica (GOJ) and BOJ have been seeking to improve financial inclusion in the country which has been dogged with different hurdles that restrict citizens from joining formal parts of society. NIDS should solve the identity verification issue, which tends be confirmed by a Justice of the Peace (JP), while the BOJ has been increasing promotion of Jam-Dex, its central bank digital currency (CBDC). Jam-Dex is the digital form of the Jamaican dollar.

“We fully endorse this initiative. It has enhanced financial inclusion, enhanced transparency, efficiency and productivity in countries such as Estonia and India. Our expectation is that Jamaica should have the same or even better results. As long as there’s paper there will be long lines, excessive cost and inefficiency, and reduced productivity. As long as there is inefficiency and low productivity, significant growth will elude us. We have the opportunity, it is within our hands, to change that fate. NCB Financial Group will continue its push to deliver digital first solutions,” said president and chief executive officer of NCB Financial Group Limited (NCBFG) Patrick Hylton at an investor briefing on Friday.

NIDS is the national identification system being developed by the GOJ to verify the identity of citizens through a unique number. That number will be what is now the Taxpayer Registration Number (TRN), backed by biometric information. The pilot has now expanded to 300 individuals who will sign up, through any of the 24 enrolment centres, with Jamaica Post and receive a national identification card. NIDS is aimed at reducing the need for other forms of identification and increasing inclusion in the country.

Financial inclusion hurdles have fallen in recent years, with the 2019 amendments to the Proceeds of Crime Act (POCA) regulations paving the way for low-risk bank accounts. Hylton referenced this with respect to NCBJ’s Quick Save account and the mobile wallet Lynk, which is the only approved option to use Jam-Dex to date.

As part of expanding its payments profile NCBFG has announced new partnerships with GraceKennedy and the Yello Media Group, which will improve remittance and the ecommerce reach of individuals and businesses. The Yello partnership will see Lynk integrate a digital payment platform into MSMEs’ (micro, small and medium enterprises) websites while the GK partnership will see Western Union offered on the Lynk app. Lynk received its primary agent licence from the BOJ last November and added MoneyGram as its first remittance partner in the US$3.44-billion market.

“We’ve come to an agreement with GraceKennedy Remittance Services to offer Western Union transfers through its Lynk mobile wallet. This strategic move supports the Lynk mandate of supporting customer service through its use of technology, and expands our footprint in providing remittance services to our customers. This agreement at this time currently remains subject to regulatory approval,” Hylton added in his remarks.

The GK partnership comes as a surprise due to the fact that GK is Western Union’s exclusive provider in Jamaica and owing to the recent launch of the GK One mobile application. NCBFG has invested $2.07 billion over the last two years into TFOB (2021) Limited, which operates Lynk. TFOB CEO Vernon James also noted that there would be more announcements coming shortly on expanded services for Lynk.

NCBJ will also be expanding its recently launched NCB Pay mobile app to Mastercard shortly, and intends to launch virtual cards in short order as well.

NCBFG strengthening capital base

With Basel III to be implemented later this year, NCBJ is bolstering its tier-one capital with an $8.1-billion transfer from retained earnings into the retained earnings reserve in the first quarter. There is currently feedback being received from different commercial banks on the current consultation paper for Basel III. NCBJ’s capital adequacy ratio was 13.29 per cent as of March.

This comes as NCBJ CEO Septimus Blake believes that the BOJ’s policy rate has peaked and expects loans to continue growing, albeit at a slower pace. NCBFG’s aspiration of becoming a world-class financial institution in 2024 is set to be supported by the implementation of technology, new alliances with innovative partners, and novel products and services.

NCBFG’s second quarter saw its consolidated net profit cut in half from $9.91 billion to $4.98 billion, with net profit attributable to shareholders coming in at $3.39 billion. This reduction was driven largely by the eight per cent reduction in net revenues from banking and investment activities to $26.52 billion, 24 per cent decline in net revenues from insurance activities to $5.04 billion, and higher operating expenses and taxes.

“This segment reflected a reduction in net interest income as high interest rates impacted funding costs. Additionally, the tightening by the central bank has curtailed trading opportunities for both fixed income and equity securities as these assets saw lower valuations. Liquidity challenges in the market slowed investment opportunities and increased market risk have diminished the appetite for capital raises, both of which impacted fee income,” said NCBFG deputy CEO Dennis Cohen in the Wealth, Asset Management and Investment Banking segment.

Cohen also explained that NCBFG’s financials were prepared using IFRS (International Financial Reporting Standards) 4 and not IFRS 17 which its subsidiary Guardian Holdings Limited (GHL) implemented on January 1. He highlighted that NCBFG would adopt the standard on October 1, which is the start of the new financial year, as the standard is effective for annual periods beginning on or after January 1. GHL’s net profit to owners under IFRS 17 was down 53 per cent to TT$60.77 million ($1.37 billion).

However, Scotia Group Jamaica Limited implemented IFRS 17 in its first-quarter results ending January 31, with GraceKennedy Limited also making the restatement of its financials in its first quarter ending March 31.

For the overall six-month period NCBFG’s net operating income is down 12 per cent to $61.21 billion, with consolidated net profit coming in 59 per cent lower at $6.34 billion. Net profit attributable to shareholders shrunk to $4.23 billion, with earnings per share at $1.84.

For the eighth-consecutive board meeting a dividend was not declared as shareholders continue to reel from the lack of cashflow and decline in the stock price on both the Jamaica and Trinidad & Tobago stock exchanges. NCBFG’s stock price dropped 3.83 per cent on Friday to $72.01 on the JSE, which leaves it with a market cap of $177.63 billion, while the TTSE price went down 13.37 per cent to TT$3.50.

Total assets are up four per cent over the six months to $2.14 trillion, with investment securities up to $761.98 billion and loans and advances at $595.97 billion. Total liabilities and equity attributable to shareholders stood at $1.91 trillion and $176.26 billion, respectively.

“In terms of my succession, I still look like a young man. That is well under control and I think it is a fair comment to say the way which we’ve gone about ensuring continuity in the NCB Financial Group and executive succession is exemplary. We have never had to struggle to fill any position, and yours truly is no exception. The plans are there; they’re well-made, well-structured, well-organised, and will be executed — I can give you that assurance,” Hylton responded as he laughed in response to a comment by company secretary Dave Garcia.