NCBFG payments division grows double digits
AMID a rebound in the Jamaican economy and addition of several new products during the year, NCB Financial Group Limited’s (NCBFG) payments segment was able to grow its revenue by 19 per cent to $30.25 billion at a time when there was significant increase in costs during the period.
National Commercial Bank Jamaica Limited’s (NCBJ) core payments segment in the issuing and acquiring business was able to grow by at least 20 per cent during the year as there was an increase in transaction volumes, card receivables, and new initiatives. Some of these new initiatives included the NCB Pay mobile application, the ability to process American Express cards, and the deployment of new Verifone point-of-sale (POS) machines across its network. NCBFG’s payments segment includes NCBJ’s payments business plus TFOB (2021) Limited, which operates the Lynk mobile application.
Even with higher credit impairment losses during the year, a 38 per cent rise in net interest income and 13 per cent increase in net fee and commission income pushed NCBFG’s total operating income up 17 per cent to $16.64 billion. However, the increase in automated banking machine (ABM) maintenance and other operating expenses related to Lynk’s first full financial year (FY) pushed operating profit down by a third, from $2.25 billion to $1.50 billion —a fraction of the $3.64 billion earned in the 2019 FY.
“During the quarter, National Commercial Bank Jamaica Limited entered into an arrangement with TFOB (2021) Limited to take over the management of the Lynk mobile wallet, effective October 1, 2023. This is to capitalise on synergies with NCBJ’s ecosystem strategy and anchored [its] broadening customer base while deepening interactions between individuals and businesses. The ultimate goal is to create a centralised ecosystem platform, making it easier for all customers to access banking, insurance solutions, financial products and payment options. This expands access and lowers the cost to serve for key demographics using a digital centric model, with superior user experience for acquisition, onboarding, servicing and operations,” said recently appointed NCBFG Chief Financial Officer Malcolm Sadler at last Wednesday’s investor briefing.
NCBFG invested $2.07 billion into Lynk between 2021 to 2022, which saw the firm onboard over 200,000 customers in under a year and become the first entity to offer CBDC (central bank digital currency) acceptance while making significant headway in developing new products. However, with the change in direction under NCBFG Chairman Michael Lee-Chin’s efficiency, governance and customer experience (EGC), there was a near three-fifth cut in staff at TFOB, while its former Chief Executive Officer Vernon James was among the executives who exited the group at the end of September.
As a result, TFOB will be focusing on expanding adoption and utilisation while harnessing the synergies of NCBJ and moving towards positive returns in the 2024 FY. Lynk is aiming to launch a virtual card this quarter and expects to introduce Western Union remittance services in its partnership with GraceKennedy Limited. The Quisk Mobile wallet was also discontinued on September 30.
“We’re continuing to expand Lynk, specifically as we look at surveying the under-banked population — and again our unbanked population as well — with access. There are some distinct capabilities in terms of digital marketing, cloud native technology, that we think are going to create significant value for the core business. There are several best practices within Lynk and in the core business that we’re going to be able to leverage in order to really have that business grow at scale, as it was originally intended,” said NCBJ Vice-President of Payments and Digital Channels Danielle Cameron-Duncan on Lynk, which now falls under her purview.
Due to the attacks on security couriers and ABMs during the year, NCBJ had closed some 23 ABM locations, pushing its fleet down to 275-280 machines. Seven ABMs have been redeployed near the original locations while NCBJ will be looking to spend millions more to bolster its fleet, through capital infrastructure across the country, with an additional 80 machines to be replaced. NCBJ accounts for nearly 37 per cent of ABMs and more than 60 per cent of POS devices in issuance in Jamaica.
“We continue with our service partners as well as security personnel in order to look at and evaluate internal and external locations that we can redeploy additional machines to. At this point we’re back to having a fleet of almost 300 ABMs. We would have upgraded, in terms of the security perspective, both the infrastructure around those machines (among 60 machines), and replaced end-of-life machines as well. We continue to evaluate to look at what new locations or replacement locations we can put in place, but also to continue to do upgrades in terms of the parts…as well as new machines with new capabilities, which expands our services and availability to customers,” Cameron-Duncan added.
When asked for specifics regarding the separation costs related to the former NCBFG executive directors, Sadler noted that there would be additional details included in the group’s audited financials which are set to be released by November 29. NCBFG recorded a loss attributable to shareholders of $2.12 billion from these separation costs, relative to the $5.25-billion profit in the comparative period.
Although not committing to a specific timeline for NCBFG’s additional public offering (APO), Chairman Lee-Chin noted that it would take place with a key focus to not unnecessarily dilute shareholders. Almeida highlighted that the APO would assist in enhancing the growth capacity, provide more financial flexibility, and reduce the leverage or debt of the company.
NCBJ is currently gearing up to implement Basel III standards in 2024. At the end of June NCBJ’s capital adequacy ratio was 14.7 per cent, with NCBCM’s capital adequacy ratio at 19.1 per cent. NCBJ’s consolidated nine-month net profit was down 14 per cent from $13.53 billion to $11.62 billion. NCBJ’s Privy Council case against the NCB Staff Association will be held on December 12.
NCBFG’s equity attributable to shareholders was up 17 per cent to $170.36 billion, with its book value at $69.06. NCBFG’s stock price closed at $67.83 on the Jamaica Stock Exchange and at TT$2.85 on the Trinidad & Tobago Stock Exchange on Tuesday.