NCB ill-fated IPO cost $680m

National Commercial Bank‘s profit took a $680 million hit from the costs relating to ill-fated Initial Public Offering (IPO) early in the just concluded fiscal year to September, according to the company’s audited financial statements.

The banking group was attempting to raise added capital in the international market during the turbulent period ahead of the country reaching an agreement with the International Monetary Fund (IMF). The amount involved was written off against income thus helping to depress profits for the year and that was not the only big hit shareholders got for their investment during the year.

Net profit for the year amounted to $8.55 billion, a decline from $10.05 billion in 2012 which translates to earnings per share of $3.47 versus $4.08. The 2013 profit was also hit with a huge $1.5 billion charge, the result of losses picked up when they exchanged high yielding government bonds for lower yielding ones. Had these costs not been incurred, earnings would have been around $4.10 per share instead of the reported $3.47 amount.

Profit also got a $281 million hit from receivership expenses, an increase over the amount spent in 2012 of $172 million. Technical, consultancy and professional fees reached $1.093 billion and is up from $846 million in 2012. Some of these fees would probably relate to the IPO issue as well. The impact of those exceptional charges helped in the directors cutting the dividend payment.

The group recorded a more than doubling in the item “Other expenses” that rose to $917 million from $449 million in 2012.

Wage related costs rose 17.25 percent in the year to $9.8 billion due primarily to a larger workforce related to the acquisition of AGIC and costs associated with the restructuring exercise carried out during the financial year, the company stated in its report to shareholders. The group’s statutory contribution remained effective flat suggesting that the bulk of the increase probably relates to redundancy payments.

Advantage General suffered a fall in profit for the NCB Group.

Revenues | Net interest income rose to $23.56 billion from $21.78, in spite of the negative impact of the NDX on interest income from the government bonds. Fees and commission income moved up to $8 billion net compared to $7.1 billion in 2012. Premium income grew to $5 billion from $1.69 billion in 2012 due partially to the acquisition of Advantage General Insurance Company in the year. Gains on sale of debt securities fell to $1.15 billion from $2.65 billion in 2012.

Loan & Provision | The group wrote off $3.6 billion during the year while making fresh provisions of $2.3 billion down from $2.7 billion in 2012 and so ended with net provision of $3.2 billion at the end of the year against loans of $143.6 billion. The impact of the above adjustments show up in the aggregate amount of non-performing loans as at September 2013 for the Group on which interest was not being accrued amounted to $6,961,388,000 (2012 $8,271,530,000).

Personal loans of $72 billion account for more than half of loans on the books and was the largest growing segment of the portfolio accounting for $14 billion of the $28 billion increase in the year.