Wed | Sep 30, 2020

NCB hunts investments as profit stalls

Published:Friday | August 7, 2020 | 12:10 AM

NCB Financial Group hit record levels in revenues during the June third quarter, but profits trailed year-earlier levels.

The top banking conglomerate’s profits have been underperforming due to impacts on its financial holdings as well as credit impairments in a market that is still operating in fear of the destruction wrought by COVID.In response, NCB Financial is on the lookout for investment opportunities.

“We remain opportunistic and are constantly scanning the environment so we can respond to the opportunities that may arise even in the crisis,” said President and CEO Patrick Hylton of the conglomerate’s outlook at NCB’s quarterly investor briefing on Wednesday.

NCB Financial reported quarterly net revenue of $26.9 billion, up from $22.8 billion a year earlier.

Net profit after tax was a substantial $6.95 billion, but well below the $8.9 billion a year earlier. Unlike the March quarter, NCB Financial did not have recourse to tax credits to offset the profit decline.

Over nine months, the NCB Financial reported net revenue of $81.6 billion, up from $59.3 billion; and net profit of $20.3 billion, down from $21.3 billion.

“We are encouraged by the resilience of our business segments, which led to a commendable performance for the period. This was due in part to our business-transformation efforts over the years, which equipped us for the uncertain environment, thereby ensuring stability in times of crisis,” Hylton and his deputy, Dennis Cohen, said.

No dividends

Notwithstanding that optimism, although it has the option of paying out to persons whose stake in the conglomerate is one per cent or below – in line with the central bank’s stance that large fincos should safeguard their cash for at least a year during the pandemic – NCB Financial’s board has again decided not to pay an interim dividend. The board now includes Adrian Lee-Chin, son of Chairman and principal owner Michael Lee-Chin.

The retreat from dividends means more retained earnings flowing to the banking group’s balance sheet. In the June quarter, NCB’s capital base expanded 11 per cent year- on-year to $196 billion. Total assets grew to $1.69 trillion.

Impairment losses grew in the quarter to $2.4 billion, compared to $1.6 billion in the March quarter and $1.8 billion in June 2019.

The credit impairment is an important barometer of the likelihood of borrowers defaulting as a result of COVID-19. But it still represents a small fraction of the overall loan portfolio, which stood at $445.4 billion at the end of June.

NCB Financial operates seven business segments. Consumer and SME banking was the only segment to suffer a loss during the quarter, down from $307.3 million to $49 million.

NCB anticipates that more of its clients are likely to default.

“We are in fact preparing for the worst and, as a result, we have been fairly prudent, and making advances to contact our customers,” said Cohen, the deputy CEO as well as chief financial officer.

“Certainly, we believe we have made adequate provisions based on the trends, and we are ensuring we are ahead of the curve in terms of the credit positions of our borrowers,” he said at the briefing.