NCB set to approve holding company by month end

National Commercial Bank of Jamaica (NCBJ), the island's largest, is planning to seek shareholder approval this month to restructure the group to include the shares of Guardian Holding Limited (GHL) which it acquired two years ago.

If approved, it will result in the group holding $152.1 billion in assets related to banking and life insurance and facilitate the future expansion of the entity throughout the Caribbean region, the bank has indicated.

Currently, NCBJ shares in GHL, one of the region's largest insurers, are held outside the bank in an entity called NCB Finance Group (NCBFG), formed a month prior to the acquisition of GHL shares. NCBFG is not owned by the bank, but it is controlled by the bank due to its directorship which all come from the bank's board of directors.

"The directors of both NCBJ and NCBFG consider that in their respective opinions, the interests of both companies and their ordinary shareholders would be best served if NCBFG became a financial holding company, owning the whole of the issued share capital of NCBJ and being owned by the shareholders of NCBJ when the scheme is implemented, as this is the effect of the scheme," according to the scheme of arrangement notice published on Sunday on the Jamaica Stock Exchange (JSE).

VOTE FOR SCHEME

Shareholders will vote to approve the scheme at the annual general meeting set for January 27. The scheme is "naturally" conditional upon its approval by a majority in number representing three-fourths in value of the ordinary shareholders present and voting, either in person or by proxy, at the annual general meeting of NCBJ, the company said.

The scheme will become effective by April 2017, provided it is sanctioned by shareholders.

If successful, NCBFG will become the holding company with NCBJ and Summer Success Limited (Trinidad & Tobago) as its two immediate fully controlled subsidiaries. Summer Success Limited will only hold the 29.9 per cent shareholding in GHL. NCBJ will hold as its subsidiaries NCB Investments, NCB Capital Markets Limited, NCB Jamaica Nominees Limited, Data-Cap Processing Limited, West Indies Trust Company Limited, NCB Remittance Services UK Limited, NCB Remittance Services Jamaica, Mutual Security Insurance Brokers, NCB Cayman Limited and NCB Insurance Company.

The transaction will result in the cancellation of existing shares in NCBJ and shareholders will receipt new shares in NCBFG.

"Consequent thereon and in consideration thereof the holders of the existing NCBJ ordinary shares so cancelled will receive an allotment of one new NCBFG ordinary share credited as fully paid for every existing NCBJ ordinary share so cancelled," stated the notice. "As a result of the scheme, the stated capital of NCBJ will be the same as it is now."

NCBJ paid some $28 billion to acquire a 29.9 per cent stake in GHL, but it acquired the shares through NCBFG, an entity created for that special purpose. NCBFG is currently owned by AIC Barbados, according to Companies Office of Jamaica records. AIC Barbados is controlled by Michael Lee-Chin and is the vehicle chiefly used by the investor to hold majority stake in NCBJ

The directors of NCBFG are Patrick Hylton, Dennis Cohen, Wayne Chen, Sandra Glasgow and Sanya Goffe, all of whom also sit on NCBJ's board.

In November 2015, NCB entered into an agreement with the Lok Jack Family, the Ahamad Family and the International Finance Corporation to purchase the 29.9 per cent interest in GHL.

NCBJ made $14 billion in net profit for its full year ending September 2016, or 17 per cent higher than a year earlier due to increased fees from loans, commissions, and investment income.

At an investor briefing last year, the bank announced a new four-year strategic plan to make NCBJ faster, simpler and stronger by 2020. It will focus on digitalisation, regional expansion, core business and improving customer experience. The new strategy follows on the completion of a five-year plan which wrapped up the end of financial year 2015/16. It is aiming to make the group one of the top five financial institutions in the English- and Spanish-speaking Caribbean.

The strategy received mixed marks, but some of the successes included keeping the top position in Jamaica as measured by asset and profit; ranking among the top 10 financial institutions in the region, as defined by net profit, and regional expansion, with its largest acquisition being its stake in GHL.

Upon completion, NCBFG is expected to hold $152.1 billion in assets and $121 billion in shareholder equity as at March 2017 compared with $28.2 billion in assets and negative equity of $1.2 billion as at September 2016.

steven.jackson@gleanerjm.com