NCB underperforms itself, profit falls to $27b under the weight of COVID
NCB Financial Group shares traded sideways, within a stable range, on Friday as the market had already priced in expectations of the lacklustre full-year results reported by the top bank ahead of the weekend.
The NCBFG stock began the week at $133.88 and closed Friday at $133.99 without breaking out of the $133 band.
Although NCB Financial once again made outsized profit, $27 billion at year ending September 2020, it was 14 per cent lower than last year’s record $30 billion results.
The group’s financial filings also showed that the direct and connecting holdings of majority owner and chairman Michael Lee-Chin were reduced by 21 million shares, or under one per cent. The value of those shares would have amounted to about $3 billion based on the average share price. Lee-Chin continues to hold 1.5 billion of the over 2.4 billion NCBFG shares in issue.
The banking conglomerate, which normally pays dividends to shareholders in interim distributions that were running at more than $2 billion per quarter, has not paid a dividend since the pandemic – opting instead to safeguard its cash.
On Friday, at NCB Financial’s quarterly investor briefing, President and CEO Patrick Hylton indicated that despite the fall in profit, the banking group remains on track to meet its five-year targets in 2024.
“We are persistent in meeting the targets that we set before the pandemic,” said Hylton in a truncated briefing due to a break in transmission in the livestreamed event. “While the future is uncertain, we do have control over our response,” he said.
In October 2019, NCB Financial unveiled a five-year plan to deepen revenues earned in the region, without stating the targeted figure. The announcement came after the acquisition of Guardian Holdings Limited, GHL, which operates insurance services in over 20 countries in the region. It’s understood that NCB will use the reach of GHL, in which it holds a majority 62 per cent stake, to deepen its financial services in the region, going forward.
Of the $27 billion in profit reported by NCB Financial, $19 billion was attributable to shareholders. That out-turn was 36 per cent lower than the shareholder profit reported in 2019.
The bank’s earnings have been softening since the pandemic, which continued into the July-September fourth quarter, with the bank’s net profit falling from $9.9 billion a year ago to $6.6 billion in the current period.
During the full year, consumer and SME banking made a loss of $1 billion, more than double the $414 million loss a year earlier. It was the only segment that reported losses during the year.
NCB Financial grew 11 per cent bigger in the year to $1.8 trillion, inclusive of a seven per cent improvement in its loan book to $453 billion. Non-performing loans climbed eight per cent to $24.7 billion, but its NPL ratio was largely unchanged at 5.3 per cent due to the increase in gross loans.
Equity increased by six per cent to $156.1 billion, mainly attributable to increased retained earnings.
“All our regulated entities have met the applicable capital and liquidity regulatory requirements,” the bank said.
The group’s loans and advances, net of credit impairment losses, totalled $453 billion or 7.0 per cent higher than the prior year. Its non-performing loans are largely “unchanged” at 5.3 per cent of the gross loans.
Shareholder equity increased 6.0 per cent or $8.5 billion to $156.1 billion as at September 30, 2020.
NCB Financial Group Limited is 52.1 per cent owned by AIC Barbados Limited, down from 53.08 per cent a year earlier, according to financial report. The ultimate parent company is Portland Holdings Inc, which is incorporated in Canada and controlled by Lee-Chin.