$1.2-b dividend declared
NCB shareholders to get cash for Christmas but market response shows more was expected
NCB Financial Group has declared a $1.23-billion dividend to be paid on December 18.

AFTER 2.5 years of no dividend payments to shareholders, NCB Financial Group Limited (NCBFG) will pay a $0.50 per share dividend on December 18 as Chairman Michael Lee-Chin intends to ensure the steady cashflow remains part of the conglomerate's commitment to shareholders.

NCBFG paid a $0.50 dividend in May 2021, after the Bank of Jamaica's (BOJ) year-long restriction kept the financial conglomerate from doling out the quarterly cash payment. Prior to that, NCBFG paid a $1.00 dividend in March 2020 and a record $3.40 per share, or a total of $8.30 billion, in its 2019 financial year.

Now, shareholders on record as of December 4 will qualify to receive the long-desired dividend which totals $1.23 billion. This means that investors would have to purchase NCBFG shares by November 30 in order to receive the payment a week before Christmas. No one is more elated than NCBFG's chairman who described Friday's board meeting as the most important in NCBFG's history. AIC (Barbados) Limited, which owns the majority direct interest, will receive more than $630.87 million or US$4.03 million, based on the 1.26 billion ordinary shares it owns. Lee-Chin's connected parties bring his interest to 1.47 billion ordinary shares.

"As is the case within August, we said we were going to be paying a dividend before the end of the year. So said, so done. That's the leadership you now have at NCB and that's the leadership NCB deserves," Lee-Chin said in an interview with the Jamaica Observer on Friday.

LEE-CHIN...we're confident now that we have achieved those goals, and we can now start paying a dividend. We have built into our budget to be recurring, not just a one-off event.

He added, "There are some things that we had to get done to make sure that the organisation, institution, was well-heeled in terms of what we saw as coming down the pipeline. We had to make sure our capital was robust to meet whatever economic situation that faced us. We're confident now that we have achieved those goals, and we can now start paying a dividend. We have built into our budget to be recurring, not just a one-off event. We're not here to appease anyone, we're here to build the best business possible."

While Lee-Chin was over the moon about the dividend declaration, investors on the Jamaica Stock Exchange (JSE) communicated a different reaction as NCBFG's stock price tumbled $5.50 or 7.73 per cent to $65.63, erasing more than $13.57 billion in market capitalisation. This was potentially due to investors expecting a larger dividend payment.

This price drop was in stark contrast to last Monday's reaction, when the stock price jumped 7.50 per cent or $4.95 after the dividend consideration was published on the prior Friday. The last time NCBFG's price had such a dramatic fall was on August 10 when investors did not see a dividend declared and sent the stock to $55 at market open, a seven-year low.

NCBFG traded up from TT$2.84 to TT$3.20 last week on the Trinidad & Tobago Stock Exchange following the dividend consideration news, but saw no trading on Friday after the dividend was declared. NCBFG's market cap was $161.89 billion or TT$7.89 billion.

ALMEIDA...we see wealth management as an area of growth for the business.

"The other impact of dividends not being paid was that the share price went from $225 to as low as $55. With dividends now reinstated we should now see a reversal of that. From the perspective of Portland and the noteholders, there are two great things that happened today: cashflow, and dividends will redound to an increased share price," Lee-Chin explained on the impact of no dividend payments to its stock price.

The BOJ published the unaudited summary assets and liabilities of deposit-taking institutions on Friday, which revealed the structure of the banking system. National Commercial Bank Jamaica Limited's (NCBJ) total assets grew 9.34 per cent to $912.71 billion, with its loan portfolio topping $454.74 billion. Its capital base also jumped 19 per cent to $107.87 billion, with its regulatory capital at about $86.16 billion.

When NCBFG wants to pay a dividend to its shareholders it relies on its subsidiaries who pay dividends and management fees to the parent. Historically, the bulk of the dividend income received by NCBFG has been through NCBJ, which strengthened its capital further ahead of new regulatory requirements through Basel III in 2024. Guardian Holdings Limited (GHL) also pays dividends in the respective currency of where the shareholder is based.

When asked by Sunday Finance if NCBJ was the main source of capital for the dividend, NCBFG interim Chief Executive Officer (CEO) Robert Almeida confirmed this and noted that GHL's dividends can be received by NCBFG through a variety of mechanisms.

"We paid a dividend out of undistributed profits up to NCBFG and we reinvested the majority of that capital back into the bank. Historically, we would transfer earnings to permanent reserves; we would take undistributed profits and we would transfer it into permanent capital within the bank. That actually creates some technical accounting challenges over time. The better practice is actually distributing the undistributed profits up to the parent company and reinvest it back as capital," Almeida added.

Lee-Chin's continued statement surrounding dividends before the end of 2023 comes just ahead of bondholder meetings with Portland Holdings Inc and AIC creditors. A source close to the discussion noted that one of these entities paid off a maturing note earlier this year after there were requests for potential three-year extensions. Another source noted that there are different millions in United States-dollar bonds that are coming due in 2024, and that the decline in the NCBFG stock price over the years likely warrants more securities to be pledged.

The last two years have seen Lee-Chin cut several assets in his personal and Portland Holdings portfolio. A megayacht dubbed Ahpo was sold for US$362 million, in addition to the sale of CVM Television Limited, his Cayman mansion, a golden triangle property, a new development in the Jamaican mountains, and Reggae Beach in St Mary.

"I thought it would be a good time to speak to noteholders and put things in context where we're coming from and where we're going. Over the last three years, as you know, AIC/Portland being the largest shareholder was starved of dividends, but we made sure that our needs for cashflow did not in any way impinge on NCB in terms of what it had to do to remain a strong, robust organisation. Today, dividends are now being paid so cashflow will now return, and it means that it will be more consistent for the noteholders into what they can expect," Lee-Chin added regarding the meeting which he said was called voluntarily.

NCBFG's unaudited fourth-quarter financials should be released on November 21, with an investor briefing to be held the next day at 10:00 am. This will be led by Lee-Chin, Almeida and new NCBFG Chief Financial Officer Malcolm Sadler.

BY DAVID ROSE Observer business writer davidr@jamaicaobserver.com

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