NCB Financial Group Limited (NCBFG) and its subsidiaries (the Group) are reporting a net profit of JA$20.3 billion for the nine months ended June 30, 2020, with net profit attributable to stockholders of the parent recorded at JA$14.8 billion, a 29% or $6.0 billion decline from the prior year.

The prior year’s results included one off-gains of $3.3 billion from the disposal of an interest in an associate company and $2.3 billion from the revaluation of their interest in Guardian Holdings Limited (GHL). Excluding these gains, net profit attributable to stockholders would have decreased by $350 million or 2% from the prior year.

Operating profit for the nine months increased by 28% or $4.9 billion over the prior year.

A substantial contributor to the 2020 financial performance was the inclusion of nine months of GHL’s results compared to only two months in the prior year.

During the third quarter, the economic downturn stemming from COVID-19 continued to influence the performance of the Group. The impact primarily resulted in:
• reduced securities trading activity coupled with the depreciation of the Jamaican currency resulting in reduced gains on foreign currency and investment activities;
• increased credit impairment provisions; and
• the waiver of certain digital and self-service channel user fees.

Commenting further on the Group’s performance Patrick Hylton, President and Group Chief Executive Officer noted that the focus on advancing their digital capabilities should enable the Group to adjust operations to mitigate any disruption in business.
Group Performance

He also noted that the resilience of their business segments, which led to a commendable performance for the period, due in part to their business transformation efforts over the years, which equipped them for the uncertain environment thereby ensuring stability in times of crisis.

Banking and Investment Activities

Taking a closer look at the Groups Banking and Investment Activities he reported that the net result from these activities of $58.3 billion, represented growth of 12% or $6.2 billion, primarily resulting from:

• Net interest income improving by 28% or $9.2 billion, mainly due to the consolidation of a full nine months of GHL’s results. There was also an 8% growth in interest income for the Jamaican businesses.
• Net fee and commission income increasing by 22% or $3.0 billion over the prior year, the majority of the increase being due to the consolidation of GHL; however, there was a 10% and 9% increase in fees earned by NCB Capital Markets Limited and Clarien Group Limited, respectively. The improved fees from these entities offset the reduction in fees experienced by National Commercial Bank Jamaica Limited, which was mainly due to its drive to have customers use digital channels along with the temporary waiver of some transaction fees to assist customers during the pandemic.
• The reduction in gain on foreign currency and investment activities of 72% or $6.3 billion partially offset those improvements in revenues.
• Credit impairment losses increasing by $2.0 billion or 55% due to expected credit losses from the impact of COVID-19.

Insurance Activities

The net result from insurance activities totaled $23.4 billion, an increase of $16.1 billion, or 222% due to the consolidation of GHL.

On June 30, 2020, The Group began the application process to streamline the insurance business in their Jamaican insurance entities. In this regard, NCB Insurance Company Limited (“NCBIC”) applied for approval from the Financial Services Commission to transfer 100% of its portfolio of insurance and annuities business to Guardian Life Limited (“GLL”). If approved, NCBIC will continue to operate its business as a Pension Fund Administrator and Investment Manager, while selling insurance products as an exclusive agent of GLL. The changes are part of their integration plans to improve efficiency and leverage economies of experience and scale, which are expected to positively benefit each entity’s customers and performance.

Operating Expenses

Operating expenses of $59.7 billion, represented growth of 41% or $17.4 billion primarily due to the consolidation of GHL. The additional expenses resulted in a cost to income ratio of 68.37%, up from 67.08% in the prior year.

Consolidated Statement of Financial Position

Total assets increased by $121.8 billion or 8% to $1.7 trillion, mainly due to expansion of our investment securities and loan portfolios. Customer deposits, repurchase agreements and investment contract liabilities primarily funded the growth.

Capital and Liquidity

Equity attributable to stockholders of the parent increased by 10% or $13.9 billion to $150.9 billion as at June 30, 2020.
The growth in equity was mainly attributable to increased retained earnings. All regulated entities have met the applicable capital and liquidity regulatory requirements.

NCB Financial Group Limited (NCBFG) and its subsidiaries (the Group) closed the nine months ended June 30, 2020, with reduced earnings per share of JA$6.19, down from the JA$8.49 recorded in 2019.