- File
Group Managing Director of NCB Patrick Hylton announced a 23 per cent increase in the bank's profits on Friday.

Ashford W. Meikle, Business Reporter

National Commercial Bank has posted a 23 per cent increase in its net profit for its 2006 financial year, which the bank's senior executives attribute to a tight lid on costs and its strategic focus on its core business activities which has resulted in higher net interest income and increased fee and commission income.

According to the audited year-end results to September 30, net profit climbed to $5.4 billion, a healthy jump over the $4.4 billion earned in the prior year.

Group revenue increased by nine per cent, to just over $30 billion compared to the $27 billion earned in 2005.

But, while NCB may have ended its financial year on a positive note, it was tempered by a 20 per cent year over year decline in its net profit for the fourth quarter ending September 30.

Net profit dragged down

The bank said a $609.7 million loan provision recovery dragged down its net profit in the final quarter to $1.6 billion, or $476.7 million less than the comparative quarter last year.

But, at the same time, the banking group is upbeat that, based on medium-term economic output, its growth is sustainable, pointing to its diversification in insurance, capital markets, as well as its flagship retail banking segment where it has signalled its intention to grow its fee income.

"The nature of our organisation - as we have said from time to time and demonstrated also from time to time - is such that it enables us to respond to changes in the economic environment as and when they occur," said group managing director Patrick Hylton.

He was speaking at a press conference on Friday at NCB's corporate headquarters at the Atrium on Trafalgar Road in New Kingston.

"Once we continue to be alert to economic opportunities ... economic challenges [and] to build, to read the signals and determine appropriate responses, then we are confident we will continue to grow," said Hylton.

He pointed to the bank's handling of its expenses as a plus: operating expenses moved marginally by six per cent, to $11.1 billion. Still, the bank suffered an impairment loss of $244 million for its investment in Supreme Ventures Limited as a result of the underwriting commitment of the IPO by its subsidiary, NCB Capital Markets.

During the year, the bulk of the group's profits came from its treasury operations, which accounted for 35 per cent of pre-tax profit, a decline from the 38 per cent treasury represented in 2005.

The biggest winner was retail banking which now accounts for 13 per cent of NCB's profits, reflecting the bank's increasing emphasis on loans.

Its insurance arm saw a slight increase, accounting for eight per cent, as opposed to seven per cent the previous year while its corporate banking business saw its contribution increase to 23 per cent over last year's 20 per cent.

Equities market

However, the equities market, which has seen a 16 per cent year to date decline in the JSE Main Index, was punishing to NCB's wealth management arm. Capital Markets saw its contribution to group profits plunge from 32 per cent in 2005 to 21 per cent in the current period.

"We have improved in all our asset base," Hylton noted at the press conference.

In fact, total assets was up by $32.8 billion, a 17 per cent increase, pushing the bank's asset base to $190.3 billion.

ashford.meikle@gleanerjm.com