NCB fraud backlog cut in half

National Commercial Bank (NCB), the largest bank in the island, said that its backlog of fraud cases under investigation was cut in half after implementing two anti-fraud measures.

Also, the parent of the bank known as NCB Financial Group defended selling a bank in the Cayman Islands 14 months after strategising to upgrade its licence to Class-A status, which would have prefaced its full entry into the local market.

“Our incidence of fraud has reduced significantly since November and as a result of new technology and additional resources, the month-or-more delay in investigating fraud cases has reduced to a maximum of two weeks now,” said NCB CEO Bruce Bowen in response to a query at the annual general meeting on Friday, which was held virtually.

Over the last six months, NCB said that it put in controls that have reduced smishing, which are infected text messages that purport to come from NCB but are designed to steal account information.

Smishing shot up in November, and NCB decided to suspend sending certain text alerts to customers, “so people would not be confused”, said Bowen.

He said that it resulted in almost an immediate drop in attacks and fraud cases.

Secondly, NCB reduced the daily transaction limits from $500,000 down to $150,000.

“More than 80 per cent of our customers never transfer more than that amount. So it’s limiting the opportunity for loss,” added Bowen.

Clients can, however, have the option to increase the limit. These measures form part of the efficiency mandate of the new executive class of NCB since chairman Michael Lee-Chin took a more active role in running the business some seven months ago.

Fraud, however, forms part of a wider conversation, with the commercial banking regulator Bank of Jamaica putting the official fraud figure somewhere around $800 million annually, based on latest 2022 figures.

That figure, however, came before a series of high-profile armoured truck robberies, ATM thefts, and smishing activities affecting the entire banking sector.

FIRST-QUARTER PROFIT

NCB Financial Group made consolidated profit of $5.9 billion for its first quarter ending December 2023, which more than doubled its earnings a year earlier. After adjusting for the portion not owned by shareholders, profit totalled $3.1 billion, compared to $1.4 billion a year earlier.

The topline revenue totalled $19.5 billion, from $18.8 billion a year earlier. The group’s growth in profit benefited from higher earnings from its loans, which generated interest income and also higher fees during the quarter.

Last week, NCB Financial announced that its wholly-owned subsidiary, NCB Cayman Limited, was sold to Berkeley Financial Holdings Limited. The sale amount was not disclosed in the first quarter ending December 2023 financials released this week. NCB Cayman Limited is a commercial bank.

At the AGM on Friday, interim CEO Robert Almedia defended its upgrade of a licence which prefaced the sale of a bank in the Cayman Islands as prudent.

“By acquiring the class-A licence we made the platform more attractive. And in so doing we increased the attractiveness of the asset,” said Almedia.

NCB said the sale would fortify its liquid capital base. NCB Financial assets are largely matched by its liabilities – the remaining amount being its capital which stood at $196 billion to December 2023. That equates to 9.6 per cent of total assets, but dips to 7.8 per cent once adjusting for the portion not owned by shareholders.

A year ago, its capital stood at 8.1 per cent, which dipped to 6.8 per cent after non-controlling interest a year earlier.

The group still mulls issuing an additional public offer (APO) to further fortify its capital base, but no precise timeline was given at the AGM.

The group still aims to grow its regional footprint and the sale of the bank in Cayman was not an “about face” shift in strategy, said Almedia. The class-A banking licence meant that NCB Cayman could offer its private banking services to residents of Cayman and local businesses for the first time. Prior to that it operated a class-B licence which only allowed business with non-residents. It was established in Cayman almost 30 years ago.

The sale relates to its banking arm which focuses on loans and lending in that territory, but not its investment bank NCB Capital Markets Cayman which provides clients with access to the capital markets.

Berkeley Financial Holdings Limited, based in the United Kingdom (UK), also has operations in Sweden and St Lucia. The company is private but checks on the UK Companies Office show financials for a few companies with the name Berkeley Financial.

NCB total assets are $2.03 trillion, up from $1.9 trillion a year earlier. Net loans totalled 621 billion, up 5.0 per cent year on year, and non-performing loans stood at 4.0 per cent or $25.6 billion at December 2023, down from 4.3 per cent in 2022 and 5.0 per cent in 2021.

The outlook for NCB sees the group aim for a cost-to-income ratio of 60 per cent or lower, consistent dividend payments, and a return on equity in the mid-teens, while improving customer service metrics, said Almedia.

That equates to making up to $25 billion in profit this financial year. The first-quarter results have arched towards that target.

Investors rewarded the stock on Friday which was the first trading day since the release of results. The stock gained 3.6 per cent to close at $68.68 or close to 2024 highs.

“Our best days are yet to come,” said Almedia.

business@gleanerjm.com