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NCB Financial Group's headquarters on Trafalgar Road in New Kingston, Jamaica (File photo)

Pandemic impacts five of seven NCB Financial segments

NCB Financial Group's headquarters on Trafalgar Road in New Kingston, Jamaica (File photo)

NCB Financial Group Limited says the reduction in consumer, business and trading activities due to the adverse impact of the pandemic resulted in only two of seven segments recording improved performances over the prior year, according to its annual report.

NCB Financial Group’s headquarters on Trafalgar Road in New Kingston, Jamaica (File photo)

The company’s performance is reported through banking and investment and insurance, divisions which comprise a total of seven operating segments. 
The life and health insurance and pension fund management and general insurance segments recorded increases of $5.0 billion and $3.9 billion in operating profits respectively.
This occurred primarily due to the consolidation of a full year’s results for Guardian Holdings Limited versus only five months in the previous financial year.

Meanwhile, the Group’s  commercial banking segment – which includes Consumer & SME Banking, Payment Services, Corporate & Commercial Banking and Treasury & Correspondent Banking – contributed operating profits of $11.0 billion while Wealth, Asset Management & Investment Banking contributed $6.1 billion. 

These business segments were significantly impacted by an increase in credit impairment losses, stated the report.

Management said, “Our operating environment has been partially redefined by the effects of the pandemic; however, we remain flexible to navigate to sustainably meet and exceed the expectations of our customers and employees.”

They said the company has embarked on several initiatives to improve current offerings and creating new products to meet evolving needs. 

Consumer and SME Banking recorded a net operating loss of $1.1 billion, a decline of $641 million. 

External revenues decreased by three per cent or $908 million to $29.4 billion. 

Management said the reduction was primarily driven by a 13 per cent decline in net fee and commission income due to lower credit related fees and certain fee waivers from banking services to support customers through the unexpected challenges stemming from the pandemic. 

Performance was further eroded by a 22 per cent increase in credit impairment provisions as a result of the increased credit risk given the current economic conditions. 

In the Payment Services segment – which consists of Card Issuing and Card Acquiring businesses – this area was affected by a reduction in transaction volumes and value due to the decline in consumer and business activities caused by government mandated restrictions imposed to limit the spread of COVID-19. 

Operating profits decreased from the prior year by $1.2 billion or 33 per cent to $2.4 billion. 

The decline in transaction activities coupled with waivers on certain credit card user fees caused net fee and commission income to decline by seven per cent or $428 million to $5.3 billion. 

Total operating income was $9.3 billion compared to $10.2 billion reported in the prior year. 

Results were further eroded by credit impairment losses being 135 per cent or $1.3 billion higher than the previous year due to the impact of the COVID-19 pandemic 

The Group’s Commercial Banking segment earned $2.7 billion in operating profit, a decrease of 48 per cent or $2.5 billion compared to the previous year. 

The decline in performance was primarily due to a $1.8 billion increase in credit impairment losses.

The tourism, hospitality and entertainment industries experienced the greatest fallout. This significant increase in credit impairment losses offset the 13 per cent or $1.4 billion increase in external revenues stemming from loan growth. 

Operating expenses were 60 per cent or $514 million higher.

The Treasury and Correspondent Banking segment reported operating profit of $6.9 billion, a decline of $3.0 billion or 30 per cent when compared to the prior year. 

External revenues totalled $13.5 billion, representing a 14 per cent or $2.1 billion decline compared to the previous year. 

Management said that the performance was negatively impacted by the low interest rate environment, reduction in trading activities and the depreciation of the Jamaican currency as a result of weakened market conditions. 

The group’s Wealth, Asset Management and Investment Banking segment which primarily operates in Jamaica, the Cayman Islands, Trinidad & Tobago, Barbados and Bermuda, providing stock brokerage services, securities trading, investment management and other financial services. 

The segment registered an eight per cent reduction in external revenues from $15.7 billion in the prior financial year to $14.4 billion. Overall revenue growth was hindered by the reduced volumes of securities in the market and the deceleration in the number of capital markets transactions executed. 

Consequently, the segment reported operating income of $11.2 billion, representing a $2.9 billion or 21 per cent decrease when compared to the prior year’s results. 

The weakened market conditions resulted in a decline in equity and securities trading activity and caused an 84 per cent reduction in gain on foreign exchange and investment activities to $714 million. 

At year end September 2020, NCB Financial made net profit of $27 billion but this was 14 per cent lower than last year’s record $30 billion results.