Cyber breaches down, profits up at NCB
NCB Financial Group Limited is reporting that its defences against cyber criminals are more robust, resulting in to a decline in successful hackings attempts of its network and customers. Jamaica's largest financial conglomerate, which is now approaching a trillion dollar in assets, has been investing heavily in digital banking and pushing account holders towards electronic platforms for more services.
But cyber fraud is on the increase in Jamaica and elsewhere, requiring large investments in firewalls.
"It has to be one of our three top areas of focus and attention," acknowledged NCB Financial president and CEO Patrick Hylton in response to a query at the bank's quarterly investor briefing on Friday. "We are using the best-in-world in terms of who we partner with, in finding solutions and responding to issues as they arise, and in some instances, staying ahead of the cyber security side."
NCB Financial did not disclose any provisions that it has made for cyber fraud but said that it recognised the issue as one of the costs of doing business in a digital world.
The bank's June third-quarter financial report shows that its payment services division recorded a spike in provision for credit losses, totalling $487 million over nine months, compared with actual income reimbursement of $21 million a year earlier. NCB Financial Deputy CEO and Chief Financial Officer Dennis Cohen explained that provision related to credit card activity from the prior year brought forward and not related to theft and cyber crime.
"We do not have a figure, but the fact of the matter is that there is a lot of concern for cyber crime, and that is a part of doing business now. You will never get away from it," he said.
Still, whatever its cyber challenges, they have not upset the banking group's continuous record-setting profit streak. Nine months into its current financial year, the bank has already exceeded the annual profit it made in 2017.
Security steps introduced by the bank within the past year include a pin added to new and reissued credit cards, and text alerts following each transaction on credit cards; while for the online platform, there are additional requirements for moving funds from one's account to a third party.
"For that reason, the percentage of cyber crimes has been reduced significantly, certainly over the last year," said Cohen who declined to give a figure but argued that some categories, criminal activity, dropped by half.
In the June quarter, the bank made a net profit of $6.98 billion or $2.79 per share, up 33 per cent year on year. Profit over nine months amounted to $20.9 billion or $8.42 per share. That's nearly $2 billion more than its annual profit of $19.1 billion or $7.76 per share at year ending September 2017.
"We have achieved our highest results to date and exceeded the annual results for the 2017 financial year," the bank said in its June financial report.
The financial conglomerate indicated that while it grew its core operations, some of the gains related to its acquisition of Clarien Group in Bermuda, against which it booked negative goodwill of $4.4 billion in a previous quarter. Negative goodwill is an indication that the acquirer got a bargain by paying less than the fair market value for a business.
"So all the profit for the third quarter was from core activity and none from the negative goodwill," said Cohen.
NCB Financials assets climbed to $931 billion in June, compared with $665 billion the previous year, while its net worth increased from $116 billion to $133 billion.
As to the bank's future growth prospects, the market is watching developments in NCB Financial Group's continued efforts to acquire controlling interest in Guardian Holdings Limited of Trinidad & Tobago. NCB offered US$2.35 per share for the company, but minority owners are pushing for a better price at least equivalent to the US$3.29 price initially paid by NCB to key shareholders when it bought into the company two years ago.
Talks between the parties are ongoing before the T&T Securities and Exchange Commission.
"I am not at liberty to say where we are in that, but the discussions seem to be progressing quite comfortably," said Hylton on Friday.