Ingram
THE MAIN JSE Index closed at 103,332.63 points at the end of September's trading, down a marginal 0.64 per cent from the prior month.
The negative investor mood in the month was primarily induced by sharp movements in the currency market, the JLP's organised protest, and high domestic inflation. Despite this, there was a distinct pattern of low volumes trading, which reiterated analysts' positions that there was not a fundamental shift in investors' appetite for stocks.
The main development that has surfaced since the start of October was Pan Caribbean Financial Services' decision to join the ranks of dividend companies with a declaration of $0.44 dividend. The dividend is payable on October 21, 2005, to shareholders on record at October 11, 2005.
COMPANY SPOTLIGHT - NCB
NCBJ reported $2.61 billion in net profits for the 9-month period to June 2005, down from $2.87 billion at the same interval last year. Net interest income increased less than one per cent to $7.52 billion against a backdrop of low interest rates. However, net operating revenue jumped 17 per cent to $11.69 billion driven by: $1.79 billion in net fee and commission income, up 31 per cent; $2.11 billion from net trading income, up 104 per cent; and $268.7 million in other operating income, up 97 per cent.
Simultaneously, operating expenses swelled 24 per cent fuelled by the provision for the impairment to its investment in Dyoll in the March quarter, 23 per cent higher staff costs arising from redundancies, and 63 per cent more depreciation charge. Consequently, operating profit surfaced at $3.54 billion, up a meagre three per cent on the previous year. Share of associated results Kingston Wharves contributed $157.93 million matched against $29.61 million last year. However, taxation inflated 83 per cent to $1.1 billion as a result of the shift in the composition of the Group's assets. Subsequently, net profits slipped nine per cent.
Customer deposits at NCBJ have grown at an annual average rate of 12 per cent over the past five years and NCBJ will be looking to its distribution advantage and highly respected brand to sustain and augment this trend.
The group also intends to balance this strategy with increased diversification toward more stable funding sources including fixed income and corporate paper. As its asset base expands, NCBJ is likely to skew greater portions of its asset base toward lending activities. The group appears to be appropriately positioned to execute this strategy as it boasts adequate capitalisation and improving loan quality. Of course, this credit expansion strategy is not unique to NCBJ and should therefore be an area of challenge.
FUTURE REVENUES
Continued growth in the wealth management and insurance divisions should also add buoyancy to future revenues. Additional support should come from the Bank's dominant position in the local foreign exchange market and its strength in fixed income and equities trading.
Moreover, NCBJ just secured US$30 million in loans from the World Bank, which it says it could use to expand its services both in Jamaica and the region, and lending to customers. In addition, NCB Capital Markets Ltd. recently recovered US$10.25 million in respect of a debt for which it had fully provided. This follows a similar recovery of J$140 million in the second quarter. Meanwhile, NCB executed two 'interesting' inter-party transactions toward the close of September (its year-end). These were the bank's sale of 105.3 million shares in Kingston Wharves to NCB Capital Markets Ltd and the inter-party trade of 14.94 million shares in Gleaner. It will be recalled that the last time NCBJ conducted similar transactions was to cover the impairment of its interest in Dyoll. Whatever the reason behind these moves, the aggregate developments of the quarter point to a very profitable final quarter for NCBJ.
RECOMMENDATIONS
The Winner's Edge recommends that investors add CRTS, RJR, LoJ, NCBJ, KW, Seprod, Gleaner, D&G, PJAM, and Goodyear to their investment portfolios. CWJA and Carreras are also good long-term option. Please contact DB&G's Stockbrokerage department at 1-888-CALL DBG for further information on these and other stocks or visit www.mydbg.com for detailed analyses.
Taken from Financial Gleaner, Friday, October 7, 2005
