Despite the cost of the Government of Jamaica debt swap earlier this year the year, National Commercial Bank results to June are just a little distance away from the 2012 profit for the similar period. The banking group reported after tax profit for the nine months at $6.8 billion down from $7.36 billion in 2012 and profit of $2.27 billion in the June quarter compared to $2.587 billion in 2012. Contributing to the results is improvement in operating income which increased by 6.3 percent, or $1.7 billion, when compared with the nine months ended June, 2012. The increase is mainly as a result of net interest income, which increased by 7.9 percent ($1.3 billion) coming from the growth in loans, and investments, net fee and commission income increasing by 11.6 percent ($618 million), primarily due to increased card transaction volumes and increased fees earned from new loans.
Premium income, increased by 143.4 percent, or $2.1 billion, due mainly to the inclusion of general insurance premiums as a result of the acquisition of Advantage General Insurance Company. This is in contrast to the six months ended March when operating income declined by $26 million when compared with the six months ended March 2012. The decline was mainly caused by a $2.4 billion reduction in gains on foreign currency and investment activities arising from the bank’s participation in the debt exchanges, which plunged income for foreign currency and investment activities to a loss of $729 million in the March quarter, compared to a profit of $1.4 billion in 2012.
Loan Loss | A $450 million increase in provision for impaired loans compared to June quarter 2012 helped to keep earnings below that quarter’s net profit resulting in the net 2013 profit falling.
The data suggest that they have almost recovered from the low interest rates they are getting on Government of Jamaica debt instruments. The results for the quarter represents a recovery from the profit of $1.744 billion reported for the March quarter when the write down of the government bond was recorded. The NCBJ group accepted the Government’s debt swap offer and exchanged $118 billion of eligible securities. The primary impact of the exchange is a reduction in coupon rates and an immediate hit was felt from the lower interest rates from new instruments, compounded by the extension of the tenure of the securities.
Expenses up | Operating expenses increased by $670 million in the three months to June over the March quarter, of which $230 million is due to loan provisioning and $400 million to other operating expenses. For the nine months, operating expenses are up by $3 billion but much of this would be due to the acquisition of the general insurance company who financials are merged into the group’s figures.
Loans and advances, increased from $128.8 billion at the end of March 2013 to $135 billion and is up from $107.6 billion at June 2012, growing by 25.8 percent year over year. Investments of $227 billion have grown, but at a slower pace than loans, which is a good thing as the former has lower yields than loans. While the provision for loan losses is up, the total non-performing loans totalled $7.5 billion as at March is now at $6.6 billion due to writing off of loans that were previously provided for.
Dividend | NCB declared a dividend of 8 cents per share payable on August 24. The stock closed at $19.51 at the end of trading on Thursday with 368,314 shares trading before the results were released.
Insider call | NCB is now an IC Insider Buy Rated stock.
Related posts | NCB cuts dividend in half | NDX slaps NCB profits | Berger holds dividend, NCB cuts
Photo via MLAArchitect.com
[…] that operations are back to normal coming out of 2013 when profits were negatively impacted by the government debt swap. Profit after tax came out at $2.856 billion versus profits of $2.786 billion and for the September […]