MICHAEL Lee-Chin has declared himself “excited and happy” as he extends himself to give closer scrutiny to the NCB Financial Group. Still, shareholders were told in a highly anticipated investor briefing on Thursday that they will have to wait until the end of the calendar year before seeing a resumption of quarterly dividend payments.

“I am happy to say that today, as the executive chairman, I have my hands firmly on the wheels. Therefore, what it means, the buck stops here. I’m 100 per cent responsible as the executive chairman for the direction, the fate, and the outcomes of this organisation. That’s why I am happy, because I am responsible now,” Lee-Chin outlined.

Despite publishing $7.3 billion in profits in the quarter ended June 30, NCB Financial Group, in its published financials on Wednesday, indicated that due to the need to “maintain strong capital and liquidity positions”, the board “thought it prudent not to pay a dividend at this time.” The NCB Financial Group last paid a dividend in May 2021. The issue is seen as “vexatious” to Lee-Chin, who identified a lack of dividend payments as being one of several reasons which was making him “not happy”.

But deciding against paying an interim dividend for the June quarter, Lee-Chin marshalled his charm to set investors at ease, with his interim CEO Robert Almeida taking the lead in delving into the details of the plans going forward.

First, Lee-Chin and Almeida reiterated the three pillars on which the company’s growth will be built going forward, those being efficiency improvement, governance, and customer experience, with the NCB chairman using the acronym EGC, and indicating that all staff have been apprised of their role in helping the business to make more money by observing the three principles.

“Anything that doesn’t add value to the customer is waste,” Almeida said in relation to the EGC principles that staff now operate by.

On the efficiency side, Lee-Chin has already railed against the high cost to income ratio the company has realised. The NCB Financial Group’s cost to income ratio at the end of its financial year in 2022 was 69 per cent, meaning that for every dollar of income earned, the company spent 60 cents earning it. The NCB Financial Group chairman ideally wants that ratio to fall to about 55 per cent, a world-class standard that will also mean less cost is being incurred for every dollar of income earned.

However, fast-forward to the June 2023 quarter, and that cost to income ratio has ballooned to 77.6 per cent.

“If we were to close a 10-point gap in the cost to income ratio [to bring it down to the mid 60s], it would be worth about $15 billion, which is about $6 per share of NCB,” Almeida outlined.

In the last two weeks, Almeida said he has seen areas from which cuts could be made to give him half his initial target for cost savings.

“We have identified and actioned annual cost reductions, which would be in the $6 billion to $8 billion range, and they are actioned and we are on our way to fully implementing them,” he continued. Later he said those cuts will be actioned within the next year and hinted that the free cash will be paid out as dividend to shareholders. A full $8 billion allocated to dividend would mean another $3.24 per year, which is also doubling the $3.70 the bank paid out in its last full year of dividend payments in 2019.

Almeida said those areas include cutting executive compensation, cutting the monies spent on consultation, and pulling back some of the spending on digital innovation.

Asked to give details on how much is likely to be saved from cutting executive compensation, particularly at the very top, Almeida pointed to the current salary package of $3.8 billion plus other perks for the former CEO Patrick Hylton and his deputy Dennis Cohen as being outside “industry norms” and told the Caribbean Business Report to look at what executives in peer institutions, like Sagicor Jamaica, earn to get an idea of the level at which the executive salary of NCB Financial Group will be when a new CEO is appointed.

At Sagicor Jamaica, CEO Chris Zacca’s base salary was US$568,437 ($88 million) in 2022. Other additions bring the total compensation to US$1,633,602 ($253 million) in 2022, less than one per cent higher than it was the previous year. At Scotia Group, its financials show executive compensation in 2022 was $74.9 million.

On the issue of cutting payments to consultants, Almeida said the saving could be about $1 billion to $2 billion. This will impact global management consulting companies such as McKinsey and Company, which earns the bulk of the consultant fees paid by NCB each year. Other entities such as IBM will also be impacted.

“We spent a lot of money on consultants, and we are just not going to spend that kind of money on consultants going forward.”

Lee-Chin said the staff who see the problems often have solutions as well, and they will be tapped for solutions instead of spending on consultants.

“The third is front-end loading on digital innovation and, as we said, it’s time to stop this,” Almeida said, indicating it will save between $1 billion to $2 billion. This cut will impact NCB’s mobile wallet, Lynk, with the entity being told to start realising the benefits of the monies put into it.

Staff cuts were also mentioned, but Almeida said it is a normal part of business but added that no “mass cuts” is expected.

But Almeida said the company is building resilience by building up its capital and is seeking these distributable cash to help pay dividends.

“That could mean no trade-offs. We actually can do both. We can strengthen our capital so that we can withstand any storm, which is what we have been doing, but it will ensure we can pay dividends.”

Hylton and Cohen

Issues raised about the tenure of Patrick Hylton, the former CEO, and his deputy Dennis Cohen were also addressed.

The sticking point involving the two is over $13 billion in shares both were asked to surrender in 2021. Both men were asked to go on vacation leave for three weeks from July 18, giving the company time to come to some settlement about how much of that money the men will get as part of a separation package from the company. The leave period means they should return to work next week, but the company said that will not happen, as it was pointed out that the current status is that both are on leave. “There is no separation,” Dave Garcia, NCB’s legal counsel pointed out.

“They are still on the boards on which they have previously sat, but are not participating actively, given they are on vacation leave,” he added.

Turning to the matter of their compensation, Garcia said, “That is not something that we are going to be able to negotiate and comment on publicly at this time. The computation as to what exactly is due, that is something in which the company is very actively engaged and at the appropriate time disclosures will have to be made and have to be verified. As you would imagine, as we approach the end of the financial year, which is coming, this is something that we will have to have some specific numbers around pretty soon.” NCB Financial Group’s financial year ends on September 30.

And how long will Almeida be the interim CEO?

The company was less sure about the time frame, but said his work will be bringing down the cost to income ratio and instilling a new culture in the company.