NCB Financial Group Limited (NCBFG) is gearing up for several multi-billion-dollar transactions in 2024, amidst changes to regulatory standards and in a bid to address the needs of its nearly 45,000 shareholders.

NCBFG is planning to execute an additional public offering (APO) during the year as it looks to reduce its debt pile on the company level while preparing itself for greater growth in the future. NCBFG’s current debt in the 2024 financial year (FY) is $36.84 billion, according to its most recent financial statements. As part of its plans to address the debt balance, it extracted $10.82 billion from its subsidiaries in the first quarter (October to December) and has announced the sale of NCB (Cayman) Limited, a private Class A bank in the Cayman Islands, to Berkeley Financial Holdings Limited.

“On the uses side, paying down debt is one of the priorities but would not be the exclusive priority. In terms of timing, we would continue to read the market’s appetite. We want the opportunity to do an APO, along with all of our other strategies, [so] that we can choose the opportune time to make something that actually optimises the return on equity and our capital structure. We are continuously looking at the timing and sizing of an APO so that we optimise capital allocation and returns for our shareholders,” said NCBFG Chief Executive Officer (CEO) Robert Almeida at Friday’s virtual annual general meeting. Almeida was appointed Group CEO on Friday, several months after being in the interim role.

NCBFG received approval from its shareholders in October to issue between 300 million to 450 million new shares under its planned APO. This translates to more than $20 billion based on the recent share price.

NCB (Cayman) received its Class A licence in November 2022 which made it a more attractive business, according to Almeida who referenced plans to free up more capital across the group that is geared towards capital efficiency of the business. The total consolidated assets of the Cayman banking subsidiary were US$275.47 million ($41.66 billion), with net tier one capital of US$61.40 million as of September 2022 according to a pillar-three report. Net tier one capital is used to assess the strength of a financial institution and is the core capital which it holds in reserve for use in its regular functions. NCBFG expects to record a gain on the sale of the business once the deal is complete, subject to regulatory approval.

With there being a new focus of EGC (efficiency, governance and customer experience) by NCBFG chairman and majority shareholder Michael Lee-Chin, there is expected to be further extraction of capital from some of the regional acquisitions that NCBFG made in the past. One such asset is its 50.10 per cent stake in Clarien Group Limited, which has not paid a dividend since being acquired in December 2017.

“We have achieved significant improvements in our financial performance and asset quality. The bank has achieved significant growth in its balance sheet from new sources but it’s been very prudent in the way in [which it has been] re-allocating risk-weighted assets. We presented 2024 to 2026 to the board of directors of Clarien and the financial forecast for that same period was presented and was approved, and it does incorporate a dividend payout ratio of an approved level to maintain its growth aspirations, demonstrate financial resilience, and provide a return on investment to shareholders,” said Clarien Bank CEO Ian Truran during the AGM.

Clarien Bank has managed to maintain a capital ratio above 27 per cent, brought down its non-performing loan ratio to the five per cent range, and has a return on equity in the double-digit region. Clarien Group, in turn, reported a 23 per cent increase in its revenue to $13.79 billion, with net profit climbing 99 per cent to $1.72 billion in 2023. However, Truran noted that Bermuda doesn’t have a central bank and that it operates under the Basel III requirements, which impact some moves it might want to make.

NCBFG’s crown jewel in the form of National Commercial Bank Jamaica Limited (NCBJ) is still undergoing several changes in the wake of the new directional plans. However, the most pertinent item on hand is related to Basel III, which is an international standard that impacts the regulatory capital of the bank. NCBJ’s capital adequacy ratio was above 14 per cent in Q1, with NCBFG Chief Financial Officer Malcolm Sadler noting that the bank will be ready for Basel III and is currently reporting in parallel to the Bank of Jamaica. NCBJ transferred over $1 billion to its banking reserve fund during the quarter.

“In terms of the impact on lending, it will not initially have a significant impact on lending to the extent that we look at risk-adjusted return on capital. Well, there are some changes in terms of capital weightings under Basel III and [this] could, therefore, impact the potential pricing that as a bank we’ve been looking to achieve. The bigger impacts are more when it comes to certain asset classes having a lower capital weighting, and therefore there will be an ability to look at our pricing there,” said NCBJ CEO Bruce Bowen on queries regarding Basel III’s potential impact on lending.

In Jamaica, NCBFG’s stock price closed Tuesday at $68.72, which left it with a market capitalisation of $174.91 billion. On the Trinidad and Tobago Stock Exchange meanwhile, NCBFG’s stock price closed Friday at TT$2.90, leaving it down 14 per cent.

When asked by shareholders about stock splits and share buybacks, Almeida noted that those items would have to be deliberated at the board, with a stock split possibly impacting the share price in the short term but limiting the potential of listings on larger markets in the USA. NCBFG is to consider a dividend on Friday.

NCBFG issued 78,081,784 shares to its former executives in the first quarter (October to December) and issued an additional 480,900 shares to its executives in the current quarter, as part of their settlement arrangement. Gary Brown and Bowen were elected to the NCBFG board.