Ashford W. Meikle, Staff Reporter
Christopher Williams, NCB Capital Markets' managing director. - JUNIOR DOWIE/STAFF PHOTOGRAPHER
NATIONAL COMMERCIAL Bank has announced plans for a $300 million preference share offer in its brokerage and money management subsidiary, NCB Capital Markets, saying that the move was a precursor to taking the company public.
In an advisory to the Jamaica Stock Exchange NCB said it intended to list the preferences, but gave no details of the proposed offer. Nor did it say what it plans to do with the cash once it is raised.
But NCB Capital Markets' managing director, Christopher Williams, told Wednesday Business: "It's a precursor to us going public with our ordinary share in the future. We are using this as an opportunity to introduce NCB Capital Markets to the investing public.
"We have developed into a fairly large subsidiary of the group and so the strategic plan for the group is to continue to build the balance sheet of capital markets and then to leverage it as much as possible in the future. So this is just a start to say, 'Look at what else NCB has to offer'."
The shares are expected to be redeemable after three-and-half years.
NO TIMETABLE
Although it did not declare a timetable for the offer, NCB's disclosure of the plan comes at a time when the Kingston exchange is in a downward drift, having lost 20 per cent of its value so far this year.
Despite the seeming attempt by Williams to inject a note of altruism into the proposal, the preference plan has unleashed speculation about the strategic intent of NCB's owner, Michael Lee Chin, who, since he bought the bank from the Government, has funded a raft of other acquisitions from NCB's profit and personal cash.
"We decided to go the route of preference shares as opposed to ordinary shares because of the state of the market, and it was felt a much more advantageous product for investors to participate in," Williams said.
He added: "Rather than trying to predict the future of the market we have said on a number of occasions that what the market needs is a further diversification of investment opportunities, and the preference shares is one. It's a fairly attractive instrument and it mitigates a lot of the risk you would be exposed to if you invested into the equity market."
PROFITS
However, the $300 million to be sought by NCB Capital Markets is minuscule in the context of the company's capital base of around $6.3 billion and the more than $60 billion it has under management. Additionally, the company is a highly profitable arm of the NCB Group, being responsible for over half the group's profits.
For its financial year to December 31, 2005, NCB Capital Markets' profit after tax increased 66 per cent over the previous year, to $1.9 billion. Its pre-tax profit was also augmented by the recovery of a $610 million loan, which it had previously written off.
But NCB Capital Markets suffered a setback earlier this year with the under-subscription of the Supreme Ventures initial public offering (IPO) of which it was the lead broker and underwriter. The company had to pay out $380 million for 79 million shares, or 63 per cent of the offer.
On what the company would do with the cash it intends to raise, Williams said: "There will be nothing fancy, nothing new. We don't have any new projects or anything planned. The $300 million will be invested in our regular way [in] GOJ securities and the equities market, similar to how we invest the balance of our portfolio, the mix between fixed income and the equities."
