NCB 2014 profit trumps 2013 by a KM

National Commercial Bank net profit for 2014 hit $11.6 billion, a big jump from the NDX affected $8.58 billion in 2013. Earnings per share for the year ended at $4.73 just below IC Insider forecast of $4.80.
The 2013 profit was negatively affected by a huge $1.5 billion charge, from losses picked up when they exchanged high yielding government bonds for lower yielding ones and $680 million written off relating to the attempt to list on the New York Stock Exchange. The group is reporting net profit of $2.87 billion, for the September quarter compared to $1.8 billion in 2013, the latter was affected by a number of one off charges.
The 2013 full year was also negatively impacted by a $281 million hit from receivership expenses, an increase over the amount spent in 2012 of $172 million and a healthy rise in Technical, consultancy and professional fees of $1.09 billion compared with $846 million in 2012.
This year results benefited from a few one off items as well. Gain on acquisition of subsidiary contributed $301 million and gain on sales of shares in Kingston Wharves added $349 million but this is in lieu booking their share of profits for the quarter had they not sold. The group suffered a loss of $200 million on securities impairment and critically, although loan loss provision is up $200 million, the large increase in the final quarter is $700 million more than at the same time in 2013. For the full year, loan losses amount to $2.2 billion versus $2.1 billion for the previous year.
Salaries allowances and benefits cost was down in the quarter to $2.6 billion from $2.9 in the similar quarter, and for the year to $11.5 billion versus $11.2 billion in 2013. Other operating cost was up to $10.4 billion for the full year, from $9.4 billion in 2013 and for the quarter $3.1 billion from $2.8 billion.
Growth| For 2014, loans grew pretty strongly by 12 percent, moving from $143.6 billion to $157 billion and customer deposits of $202 billion, increased by $23.8 billion, or 13 percent, resulting in net interest income being steady, in the September quarter, for both years, as well as in the June quarter at roughly $6 billion each. Net interest income was up $1 billion for the year over 2013 to reach $24.66 billion from $23.56 billion. Fees and commission income moved up to $10.6 billion net, compared to $9.7 billion in 2013. Premium income grew to $7 billion from $5 billion in 2013. Gains on sale of debt securities and foreign exchange trading gains jumped to $2.6 billion versus $1 billion in 2013.
Segment| Segment results were mixed with strong increases in some, while other areas fell below the 2013 performance. Retail & SME, reported improved profits for 2014 of $1.56 billion versus $793 million in 2013. Payment Services climbed down from $2.1 billion to $1.57 billion in 2014, Corporate Banking ended 2014 with $500 million versus $850 million previously, Treasury & Correspondent Banking jumped from $1.87 billion in 2013 to $3.7 billion in the latest year. Wealth, Asset Management and Investment Banking moved down from $3.88 billion to $3.6 billion, Life Insurance and Pension Fund Management climbed from $2.17 billion to $2.9 billion and General Insurance income of $557 million in 2013 jumped to $1.28 billion.
NCB hiked their final dividend for the year to 96 cents per shares. IC Insider’s forecast for the 2015 earnings is $5.75 per share and with the current price at just over $18 per share the stock is severely undervalued with significant upside potential.