… but insurance income is up 8% to $9.30 billion

National Commercial Bank (NCB), Jamaica’s largest commercial bank, has seen a decline in profits during the December 2021 first quarter amounting to $5.38 billion, down from $5.85 billion in 2020, representing an eight per cent decline.

Net profit attributable to shareholders for the quarter in review closed at $2.64 billion relative to $3.92 billion for the same period in 2020. Profit before taxation decreased 10 per cent to $7.33 billion relative to $8.15 billion in 2020.

Taxation for the quarter under review was $1.95 billion, down from the 2020 posting of $2.30 billion. NCB saw a modest 18 per cent rise in net interest to total $16.28 billion, up from $13.82 billion posted in 2020.  

Interest income for the first three months closed at $22.11 billion, six per cent above the $20.84 billion reported for the corresponding period ended December 31, 2020. Interest expense year over year rose 17 per cent to close at $5.83 billion, compared with $7.03 billion in 2020.

Net fees and commission income amounted to $6.43 billion, an eight per cent increase when compared to 2020 booking of $5.87 billion. Of this, ‘Fee and commission income’ totalled $8.39 billion, while ‘Fee and commission expense’ amounted to $1.96 billion.

Dividend income increased by 64 per cent to a total of $944.25 million compared with $576.80 million in 2020. Other Operating Income increased 86 per cent to $1.27 billion primarily due to “gains from the sale of property, plant and equipment.

Considerable rise in credit impairment losses

Credit impairment losses rose 57 per cent to $1.83 billion in contrast to $1.17 billion recorded for 2020. The bank’s gain on foreign currency and investment activities fell 70 per cent to $1.62 billion compared to $5.41 billion reported in 2020.

This was due to “reduced gains from our securities dealings, coupled with lower net foreign exchange gains compared to the prior year.” Net results from insurance activities during the quarter increased eight per cent to $9.30 billion up from $8.60 billion in 2020. 

NCB says this was attributable to, “increased business activity. This was partially offset by increased claims, actuarial reserves and annuity payments”.

Of this, Insurance premium income rose 16 per cent to $42.37 billion (2020: $36.44 billion), while reinsurance commission income declined 20 per cent to $2.85 billion (2020: $3.56 billion).

Insurance premium ceded to insurers amounted to $13.14 billion (2020: $12.18 billion). Commission and other selling expenses surged to $4.57 billion compared to $4.96 billion in 2020. Net underwriting income increased 15 per cent to close at $32.08 billion (2020: $27.82 billion).

As such, net operating income amounted to $34.01 billion for the December 2021 quarter compared to $33.78 billion booked the prior corresponding period in 2020.

Marginal increase in expenses

Total operating expenses for the first quarter amounted to $26.97 billion, an increase of six per cent compared to the $25.56 billion reported for 2020. According to NCB’s management, “the higher expenses were mainly as a result of increased asset, taxes, professional fees, technical consultancy charges and investments made to digitally enable the Group as we focus on advancing the customer experience while improving efficiency”.

The expenses are as follows:

• Staff costs decreased 3% to $11.93 billion relative to $12.32 billion in 2020.
• Other operating expenses rose by 15% to $12.14 billion (2020: $10.54 billion).
• Depreciation and amortization grew 7% to $2.44 billion (2020: $2.29 billion).
• Finance cost grew 11% to $463.07 million (2020: $416.41 million)