Mon | Nov 20, 2017

Riding a profit high, NCB nixes ganja

Published:Sunday | November 12, 2017 | 12:00 AMSteven Jackson
Patrick Hylton, president and CEO of NCB Financial Group Limited, speaks at an investor briefing on Friday, November 10, 2017.

Riding high on another year of record profit of $19.1 billion, NCB Financial Group has advised investors to "stay tuned", signalling that it plans to maintain momentum into next year.

But while the banking conglomerate is refusing to disclose the specifics of its growth agenda, Group President and CEO Patrick Hylton has said it definitely will not include ganja - not now.

Amid calls for local banks to be more receptive to offering services to legal cannabis operations, NCB is holding back on fears it might find itself locked out of the global financial system.

"We cannot do anything to put the business at risk. We have to be beyond suspicion in how we engage in relationships," Hylton said Friday at NCB's quarterly investor briefing.

Hylton indicated that opening such accounts, particularly allowing overseas transfers or card transactions, would jeopardise NCB's correspondent relationship with US-based banks.

"We are going to remain constrained in the way we interact with them. So I am saying until there is clarity, and everyone is on same page, then we could be locked out of the international financial system."

Earlier this week, parliamentarians in the Public Accounts Committee reportedly expressed dismay at the difficulty that legal cannabis investors faced in attaining banking accounts. Local banks, overseas banks and the regular Cannabis Licensing Authority (CLA) continue to hold discussions on the matter, said NCB company secretary Dave Garcia at the briefing.

In February of this year, he said, NCB invited the CLA and one of NCB's leading correspondent banking partners to a meeting with the NCB board to discuss the issue of banking opportunities for ganja businesses.

 

'COMPLICATED ISSUE'

 

"This is a fairly complicated issue," said Garcia, while noting that cannabis remains illegal under United States federal law. "It means that correspondent banks that we deal with will not be able to facilitate these transactions at all. So that is the starting point for us. So foreign currency transactions, or exchanging currency will not be able to facilitate even if it falls in our risk appetite."

Garcia said local transactions could be permissible, but the entity would need to meet a very high standard of transparency and compliance.

"For Jamaican dollar services, at this time, if we are to do business with entities, it requires a high level of approval for us to proceed. And we will proceed very cautiously," he said.

NCB Financial Group on Thursday reported a 32 per cent spike in net profit to $19.1 billion for year ending September 2017.

"We are celebrating our record performance," said Hylton at Friday's briefing.

Group chief financial officer Dennis Cohen said the results contained no one-off transactions but rather represent the sustained growth of the group.

It set the new record despite a flat fourth quarter. Profit in the July-September quarter was $4.4 billion, compared with $4.5 billion the previous year, and represented a rare decline in quarterly profit, albeit marginal, at Jamaica's fastest growing bank.

Over the full year, however, NCB's bottom line growth was aided by its stake in Trinidad-based Guardian Holding Limited.

NCB's earnings per share rose to $7.76 compared to $5.87 in 2016. The stock currently trades at $107, which puts the trading multiples at some 14 times earnings in a main market that trades at roughly 12 times earnings.

NCB usually trades below market multiples, but investors are apparently bullish on market speculation about the banking group's possible plans to expand regionally. However, the bank refused to offer any signals on what to expect in 2018.

"Stay tuned," Hylton said.

NCB Financial Group now holds $694 billion in total assets, and has a net worth of $116 billion. The group's cash pile grew substantially over the past year from $48 billion to $63 billion.

The banking group will pay its usual quarterly dividend of 60 cents per share, totalling $1.48 billion, on December 8.

steven.jackson@gleanerjm.com