Led by its wealth management arm, the National Commercial Bank Group (NCB), is reporting third quarter profits of $2.76 billion, a marginal $42 million increase over the corresponding period last year.

The performance of the Group was affected by the Jamaica Debt Exchange (JDX), concluded March 2010, in which the Government of Jamaica exchanged its high interest bearing instruments for those with lower yields and longer maturities. NCB participated 100 per cent in the initiative which resulted in a reduction in net interest income for the Group. However with a 36 per cent reduction in interest expense to offset the losses, the Group managed to show an increase of three per cent or $156.6 million in its net interest income over the corresponding quarters.

Dennis Cohen, NCB deputy group managing director noted that the June 2010 quarter is the first period in which the full impact of the JDX reflected on the performance of the firm. Also affecting performance, he said, is the revaluation of the Jamaica dollar relative to its US counterpart — its major trading partner. Gain on foreign currency and investment activities declined 60 per cent quarter on quarter, representing the effects of foreign exchange movements on the full suite of foreign currency exposure across the group. However, speaking at the firm’s investor and quarterly press briefing, held at the NCB Wellness and Recreation Centre on Phoenix Avenue in Kingston on Friday, Cohen said that the bank’s exposure to the translation losses in the US dollar is minimal.

Fee and commission income also increased over corresponding quarters as well. Net fee and commission income increased 24 per cent from $1.16 billion at June 2009 to the corresponding quarter of 2010. Yvonne Clarke, Group Chief Financial Officer noted that 50 per cent of the Bank’s fee income is transaction driven and earned from its card business.

Operating income increased by three per cent, along with operating expenses, 12.7 per cent, quarter on quarter. Among the factors outlined for the increased costs were the reduction in spreads following the JDX, the restructuring exercise undertaken by the group earlier this year, the increase in the base cost, the inflation rate and fuel prices.

However, Clarke said the bank would be addressing the issue of costs.

“We continue to work at our cost management and cost containment issues,” she said.

Staff costs increased 12 per cent from $1.8 billion in June 2009, to $2.1 billion at quarter ended June 2010 as a result of the redundancy and restructuring exercise which saw significant payouts to the displaced staff. However, these costs have begun to decline from the March 2010 quarter, at which point staff costs were $2.6 billion.

After acknowledging that these have been challenging times, NCB Group managing director Patrick Hylton sought to assure stakeholders that the bank remains a “financial fortress”.

“NCB has continued to demonstrate strong performance even in the context of difficult circumstances,” Hylton said. “In terms of our business model, we are focused on the right things at the right time”.

“We have a lot of work going on and there are initiatives that are being pursued. On a timely basis you will see them being rolled out,” Hylton said. “We will continue to develop and grow more products and initiatives as we see and understand better the needs and desires of our clients.”

He said solid performance has become the way of life for NCB.

“It is something we think is important to maintain our credibility and our growth as an institution,” said the NCB boss.