Lee-Chin: My hand is now on the wheel
NCB looks to pay dividends by year-end
Published:Friday | August 11, 2023 | 5:55 AMSteven Jackson/Business Reporter
Under its new leadership, NCB Financial expects to pay dividends before year-end as part of its strategy to cut some $15 billion in costs, with about 20 per cent of that relating to legacy executive compensation
“I am very happy. This is the easiest job I’ve had. We have a fantastic platform. It just has to be righted a little bit,” said Chairman Michael Lee-Chin on Thursday when asked about the path toward paying dividends. “We are working assiduously so dividends resume by the end of the calendar year.”
Lee-Chin, who will assume some executive responsibilities in the new management structure, will focus on improving efficiency, governance, and customer care (EGC) for stakeholders such as depositors, customers, regulators, shareholders, staff, the Government, the brand, and the press.
“My hand is now on the wheel, and EGC is my responsibility,” said Lee-Chin.
The interim executive team expects to save billions over the next 12 months, including through savings on executive compensation for the two departing executives, Patrick Hylton and Dennis Cohen. The compensation for both executives totalled more than $9 billion over three years since the onset of the pandemic: $3.81 billion in 2022, $3.6 billion in 2021, and $3.1 billion in 2020.
Interim CEO Robert Almeida also expects to see savings from the slashing of consultant fees and reduced spending on technology.
“A lot of money has been spent, and now it’s time to realise that spend. If we reduce costs to income from 70 to 60 per cent, we will free up $15 billion in free cash flow.” said Almedia in response to queries on funding the dividends.
While making billions in profit for its June quarter, NCB generated negative cash flow from operations of $130 billion, which worsened from negative $66 billion a year earlier. The highest cash generated from operations by the group over the last five years was in September 2020 at $103 billion. Since that time, cash generated from operations went into a negative position.
Also, since the pandemic, NCB Financial’s capital remained flat as a percentage of total assets at 11 per cent at September 2019, compared to its current 10.6 per cent at June 2023.
Its latest challenge relates to reducing its debt to equity – which climbed once excluding customer deposits and other unrelated items – from 190 per cent in 2019 to 269 per cent in September 2022. That said, it is trending downward and hovers at some 240 per cent.
Lee-Chin gave no timeline on Almeida’s tenure as interim CEO.
Dave Garcia, group counsel, said that although Lee-Chin would assume some executive roles, he would not become an employed member of the group.
“There is no acrimony,” Garcia said in response to queries on the leave of absence by the executives. “Obviously, it is unsettling, but it is being conducted in a way that is as respectful as can be under the circumstances.”
He indicated that both Hylton and Cohen are still on leave, and there has not yet, as of Thursday, been any separation from the group.
“They will not return on Monday,” said Garcia when asked if they would show up for duties next week.
The top NCB shareholder is AIC Barbados, with 1.26 billion units, or 51.5 per cent of NCB Financial’s issued shares. That block is ultimately controlled by Lee Chin. The group has not paid a dividend for the better part of three years. It last paid a dividend of $0.50 per share in May 2021 and prior to that, February 2020 at $1.00.
“I was not happy, being the largest shareholder,” Lee-Chin said. “The cost-to-income ratios, the governance, which starts with the individual, and [issues of] customer experience. I was not happy, and so for those reasons, we had to make a change.”
Just prior to the leave taken by the executives, Lee-Chin himself took a leave of absence from the board to deal with separate matters.
“When you are not in the fray you have a different perspective than being in the fray,” Lee-Chin said. “So when I stepped back, I put on my analyst cap versus my non-executive chairman cap, and it became more clear to me from an objective standpoint, as an analyst, what I would expect. From that perspective, I came to the conclusion that changes had to be made.”
The group earned a profit of $7.4 billion in the June 2023 quarter, compared to $10.6 billion a year earlier. Revenue totalled $35.6 billion, compared to $36.3 billion a year earlier. The group holds equity of $184 billion up to June 2023.