NCB Financial Group received shareholder approval on Tuesday to sell up to 450 million new shares to investors.
It puts the potential size of the additional public offering at about $27.8 billion based on the NCBFG stock’s current market price.
At the extraordinary meeting that secured the vote, NCB Financials’ new management did not reveal the indicative price of the APO, which will offer 300 million units for sale to current shareholders and other stock market investors, with the option of upsizing the offer by 50 per cent to 450 million units.
In fact, the banking group could raise the funds in multiple offerings over time.
“To be clear we do not expect to issue the authorised shares in one punch,” said NCB Financial Interim CEO Robert Almeida in response to queries at the meeting.
“We cannot say that we have a specific size in mind now. We are looking for the shareholder approval to issue shares, and it will not necessarily be in one transaction, because we are trying to minimise any unnecessary dilution,” he said ahead of the vote.
An offer of 450 million units would result in growing the existing 2.46 billion units by around 18 per cent – the implication being that the NCBFG share price shares could fall by a similar amount based on additional supply within the market. Shares are already hovering at one-year lows, closing at $61.72 on Tuesday.
The group will raise funds based on its need, the opportunity at the time, the market capacity, and the pricing. “Then we will determine and optimal size to go to market at an optimal price,” added Almeida.
NCB Financial received 79 votes in favour of the APO resolution and one vote against it.
“The goal here with respect to capital optimisation is to ultimately set the organisation in good stead to get a dividend. Because we have all been starved,” said NCB Financial Chairman and controlling shareholder Michael Lee-Chin.
Lee-Chin was decked in a brown sweater and white turtleneck which was at odds with other executives in suits and ties. The attire matched his primary concern as a disgruntled shareholder, who last received a dividend payment in early 2021.
The hiatus on dividends was meant to safeguard the banking conglomerate’s cash and capital.
“Over the past three and a half years, all stakeholders were not treated equally. And the set of stakeholders treated most unequally were shareholders,” said Lee-Chin after the vote. “We will have a dividend before the end of the calendar year,” he asserted.
Lee-Chin described the APO as the final strategy in the group’s arsenal to bolster the group, reduce its debt and increase its capacity for acquisitions, executives said.
NCB Financial Group’s total equity is estimated at $236.7 billion or about 10.6 per cent of its $2.2 trillion in total assets up to June. However, its capital dips $184 billion or 6.7 per cent of total assets, once discounting for the chunk of the group that shareholders do not control.
The bank’s capital has shrunk in recent times due to write-downs on some of its key investment assets that have declined in value similar to the overall fallout in the stock market.
NCB Financial is Jamaica’s top banking group in terms of assets. But among other financial holding companies listed on the stock exchange, it ranks second in market capitalisation at $152 billion or billions behind insurance and banking conglomerate Sagicor Group Jamaica at $174 billion.
There was a time when NCB Financial was trading at three times its current value, having achieved a market cap of $550 billion in 2019, when the stock hit a high of $220. The all-time high price wasn’t a one-day wonder, as it remained within the $200 range for six months from July 2019 to mid-January 2020, according to JSE records. The stock price gradually descended in February and gained pace with the onset of the pandemic towards current lows three years later.
The decline in asset values recorded by the banking group are mainly non-cash write-downs on investment holdings that may be restored once market conditions improve.
The write-downs were also not unique to NCB Financial but has been bedevilling the financial sector as a whole.
“What caused the stock price to tank was the withholding of dividends for an extraordinarily long time,” Lee-Chin said.