NCB Financial targeting return to super profits to pay consistent dividends
Published:Friday | November 24, 2023 | 12:10 AM
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NCB Financial Group Limited, operator of Jamaica’s largest commercial bank, wants to make $20 billion to $25 billion in profit for 2024, which would triple this year’s performance. The target falls short of record profits achieved in previous years...
NCB Financial Group Limited, operator of Jamaica’s largest commercial bank, wants to make $20 billion to $25 billion in profit for 2024, which would triple this year’s performance.
The target falls short of record profits achieved in previous years, with annual earnings having twice risen above $30 billion in the past.
“We are entering 2024 at about a $20-billion run rate,” said NCB Financial interim CEO Robert Almeida at an investor briefing on Wednesday. The group needs to improve its returns in order to continue paying consistent dividends to shareholders.
NCB Financial only made $7.6 billion for its financial year that ended in September, reflecting a two-thirds reduction from its $24-billion profit in 2022, and wants to regrow profit over time, said Almeida.
“So $25 billion is the base we have in our re-engineering model and that is what we are aiming towards,” he said.
The group recently underwent its largest restructuring since Lee-Chin acquired the bank 21 years ago.
“Over the last three months this was the great reset,” he said at the briefing.
Within that time, at least seven senior executives, including CEO Patrick Hylton and CFO Dennis Cohen, were cut from the banking conglomerate’s payroll.
The exodus came in the wake of Lee-Chin, the principal owner and chairman of NCB Financial, taking more direct control of the group and the installation of his trusted partner, Almeida, to manage the business.
Since then, they have been engineering a new path for the group which focuses on cutting costs and resuming the payment of dividends. A dividend distribution will be made on December 18 at 50 cents per share, amounting to $1.23 billion and on par with the last dividend paid back in 2021. More than half of the payouts will flow to Lee-Chin and his companies.
“As of now, we are a dividend-paying cow,” he said.
The absence of a dividend for nearly two years affected cash flows for his firm, Portland Holdings, which in turn impacted the timeliness of Portland’s bond-servicing obligations.
To pay consistent dividends the group will have to reach a 15 per cent return on capital or higher, said Almeida.
The profit achieved in FY2023 is equivalent to 4.8 per cent of capital.
Regarding the banking group’s pending sale of additional shares through an APO, executives neither disclosed a precise timeline nor a price. Bruce Bowen, CEO of National Commercial Bank Jamaica, intimated that now might not be the best time.
“As you all know, there’s been a lot of things that have happened over the last three months, and in order to get a proper valuation, investors in the market will want to make sure that they understand all of that,” said Bowen at the briefing.
The APO would bring in fresh equity to buttress the company’s capital base.
NCB Financial’s capital is estimated at 10 per cent of total assets, but drops to 7.7 per cent when discounting for non-controlling interests. The ratio meets regulatory requirements but not the aspirations of the owners, who in late October voted to approve the APO.