NCB profit vaults to $40b, to offer remittance via Lynk
NCB Financial Group, operator of Jamaica’s largest commercial bank, said Friday that a member company has received approval to offer remittance services through the Lynk digital wallet, allowing it to tap into ‘US$3.3 billion’ market.
“The 2023 financial year has begun, and we have made bold strides going forward. The Bank of Jamaica has recently granted our subsidiary, TFOB, approval to operate a remittance service as a primary agent,” said NCB Financial President and CEO Patrick Hylton at an investor briefing on Friday.
“We will offer this service through our mobile wallet Lynk. This is a continuation of our efforts to be at the forefront of the digital revolution to drive payments,” he said.
NCB Financial, with more than $2 trillion in assets, operates one of the largest banking conglomerates in the region. Its flagship operation is National Commercial Bank Jamaica, but it also operates another banking operation called Clarien in the northern Caribbean.
The banking conglomerate, which released its results late Thursday, made a super profit of $39.9 billion for year ending September, up from $20.1 billion. It set a new high for NCB Financial.
Two-thirds of those earnings, or $27.3 billion, was attributable to shareholders, doubling the $14 billion reported in the previous year.
The rest related to portions of its subsidiaries that are owned by others. For example, insurance conglomerate Guardian Holdings makes a substantial contribution to its profit, but NCB Financial only owns 62 per cent of it, with the rest held by outside investors largely based in Trinidad.
The bulk of NCB’s banking operations is conducted through an extensive branch network but the pandemic accelerated its digital services, which includes Lynk.
Remittances are funds sent as gifts to locals from persons overseas and are mostly collected by recipients from physical locations in a market led by Western Union.
But in recent years, there has been a rise in digital transfers through foreign-owned applications such as Paypal, Venmo, Cash App, and others.
The digital apps, however, require credit card information, which rules out the bulk of the population, which is still unbanked. Lynk, while being a subsidiary of NCB Financial, targets the unbanked by allowing less stringent sign-up procedures than its parent. Since launching in 2021, Lynk has grown to more than 100,000 customers.
Lynk is the first digital primary agent to receive approval to operate remittance services, Hylton said on Friday.
“This is a significant development for us as we drive financial inclusion and bridge the gap between banked individuals and the unbanked while tapping into a US$3.3 billion industry,” he said.
The figure relates to net remittances to Jamaica in 2021, which was a historic record for the industry.
On a per-share basis, NCB Financial reported earnings of $11.89 compared to $6.25 the previous year. NCBFG nearly doubled its consolidated profit to $39.9 billion for its September 2022 year-end from $20.1 billion a year before, which resulted in the financial conglomerate netting its highest consolidated profit ever.
Of the consolidated profit, $27.3 billion is directly attributable to NCBFG shareholders and the remainder to non-controlling interests.
The near $40 billion in net profit outclassed the previous record of $31.2 billion. However, the portion relating to profit attributable to shareholders underperformed the previous record, which was just shy of $30 billion in 2019.
Consequently, the earnings per share reported by the bank on Thursday, at $11.89, fell below the previous record of $12.30.
On Friday, the market punished the NCBFG stock, sending the price down by 1.2 per cent to close at $83.56 per share. The stock once traded around $230 in 2019.
NCB Financials Deputy CEO and Chief Financial Officer Dennis Cohen linked the falling price to the hold on dividend payments since the pandemic as well as other factors.
“I think that the market has placed a heavy price on dividends at this time. But we believe that the best long-term sustainability is best served by maintaining a healthy capital base and growing the capital in light of the uncertainties,” Cohen said in response to a Financial Gleaner query on the issue.
The board has avoided paying a dividend arguing that the preservation of capital would serve to defend against looming global challenges. These include continued inflation, possible central bank interest rate hikes, and new accounting standards under BASEL III, which changes the treatment of credit risk in certain insurance and banking scenarios.
“I support the board’s decision that it is important for us to be prudent and that there are tradeoffs that we are taking, which is reflected in the stock price. But we believe in the long term, our shareholders are better served by the decisions today to hold on dividends,” said Cohen, who himself sits on the board as a director of NCB Financial Group Limited.
NCB Financial closed the year with $2.08 trillion of assets, up from $1.92 trillion. Its capital attributable to shareholders, however, fell from $161 billion to $149 billion, amid a $52 billion markdown of the value of its investment securities.
“In light of these concerns, the board of directors saw it fit and prudent to bolster capital and not pay dividends in this quarter,” said Cohen.
“Our focus has been on bolstering our capital base because as I mentioned earlier, we still anticipate strong headwinds in the year ahead of us,” Cohen said.