Friday 7th March, 2008

 

NCBJ executives remain hopeful despite challenges

 
 
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Patrick Hylton, group managing director of National Commercial Bank Jamaica Ltd, speaks during an investors’ briefing at the Hyatt Regency Trinidad, Wrightson Road, Port-of-Spain, yesterday. Photo: Shirley Bahadur

BY SANDRA CHOUTHI

High interest rates on investments have diminished the incentive for Jamaican investors to move capital into the island’s stock market and is one of the factors contributing to the depressed performance of the Jamaican Stock Exchange.

So said Patrick Hylton, managing director of the National Commercial Bank Jamaica Group (NCBJ), which is listed on the Jamaican and T&T stock exchanges.

“To some extent, Jamaica has had some challenges over the years, which may have people a little bit shy about going to the market,” Hylton said.

He said people are more inclined to invest in government instruments without taking on the same level of risk they’d be exposed to by investing in the stock market.

“When one looks at recent events in terms of the Central Bank having acted to jack up interest rates in an attempt to control exchange rates, devaluation and consequent inflation, it is clear that there exists some challenges in the Jamaican context and the Jamaican environment,” Hylton said.

Referring to oil prices peaking this week at US$105 per barrel, Hylton said a continuation of that trend will significantly impact Jamaica’s budget and its ability to find US dollars to pay for services.

Hylton was speaking at an investors’ briefing at the Hyatt Regency Trinidad, 1 Wrightson Road, Port-of-Spain, yesterday.

Speaking of positives, Hylton said the bank has noted the Jamaica government’s concentrated effort to manage the fiscal situation.

He also said there has been an improvement in the tourism product, one of Jamaica’s major revenue earners.

NCBJ’s stock liquidity

Christopher Williams managing director of NCB Capital Markets Ltd, said the bank’s stock has had “tremendous volume in the market,” and that its availability will keep the price down.

“It is a combination of the investor sentiment as a result of macroeconomic factors, which we obviously have no control over and then some supply issues, which again, we don’t have any control over.

“We stay focused on ensuring that good performance is there, and we think that the macro and supply issues will eventually settle off and that the price will therefore find its proper place. As a result, we think it continues to be a good buy.”

Williams said historically, Jamaica’s volatile financial periods have presented opportunities for investors to make good money.

High oil prices and PetroCaribe

Williams said today’s high oil price is a double-edged sword.

One aspect of it is the balance of payments challenge.

Another is an opportunity to create “a bit of a slush fund” with the PetroCaribe deal Jamaica signed with Venezuela.

“The fact that we do get, I believe, over $50 or $60 back from Venezuela at a 25-year, pretty much, zero coupon terms.

“That has been able to build us and give us a fund to create development projects and to move gross domestic product,” Williams said.

He said if that development fund is put to good use, Jamaica may be able to, at the very least, downplay the impact of oil prices.

“So, don’t give up on us yet,” Williams said.

NCB FINANCIALS

National Commercial Bank Jamaica Ltd’s consolidated results for the three months ended December 31, 2007:

n net profit, J$1,859 million

n net profit for the corresponding period of the previous year was J$1.5 billion, an increase of J$357.4 million, or 24 per cent

n gross revenue for the quarter was J$9.1 billion, an increase of J$1.0 billion, or 13 per cent, compared to J$8.1 billion for the corresponding period in 2006

Major revenue highlights for the quarter:

n total interest income increased by J$695.2 million or 11 per cent due mainly to the continued growth in the loan and investment portfolios

n net fee and commission increased by J$248.9 million or 28 per cent, which was mainly attributable to fees generated from card and other retail banking products

n premium income from the insurance segment increased by J$38.5 million or 58 per cent over the prior year due to increased sales of both retail and group life insurance products