National Commercial Bank of Jamaica (NCB) became the first home-based listed company to report profit above $10 billion, announcing the big number Friday, even as some of its customers struggle to service their loans in the ongoing recession.

The bank reported loan losses of $1 billion for its financial year ending September 30, 2009, more than double last year's losses of $468 million, saying borrowers were challenged by the economy and that steps were being taken to help them cope with their liabilities.

But even with the write-off, NCB still made a billion dollars more in the July to September fourth quarter - $2.9 billion compared to $1.94 billion in the 2008 period.

net profit

The number that really stands out, however, is the bank's net profit for the year - $10.248 billion - off revenues of $35.46 billion, reflecting a $1.5 billion or 18 per cent growth at the bottom line.

On Friday, the bank's boss, group managing director Patrick Hylton, said he could have made even more money, but opted to play it safe.

"We in a real sense could have made more money, but we deliberately decided that in this environment, we must maintain high levels of liquidity because there was a great deal of uncertainty as to development and how it would take place," Hylton said at a briefing of investors held at the bank's corporate headquarters, The Atrium, in New Kingston.

"So in that sense, we have had some trade-off with liquidity on one hand, and earnings on the other hand. We just thought it was the prudent thing to do."

The bank will share $2.19 billion of earnings with shareholders, having declared dividend of 89 cents per share payable December 3. Roughly two-thirds of the payout will go to majority owner Michael Lee Chin's companies.

NCB was able to grow profit by growing revenue. Interest from loans brought in an extra $2.6 billion, to reach $13 billion of income at year end, and the bank's investment portfolio proved even more lucrative, with income from interest on securities growing by more than $3 billion to $22 billion.

But Hylton was also able to maximise income by keeping a stranglehold on expenses.

scored a victory

The group managing director scored a victory by spending $106 million less, reporting expenses of $13.97 billion compared to last year's $14.08 billion.

Operating profit also grew by $2.5 billion to $13.2 billion. Wealth management subsidiary NCB Capital Markets Limited contributed $2.5 billion to that result, and the insurance segment $1.8 billion.

Treasury remained the most lucrative function, contributing $3.8 billion to operating profit, but underperforming relative to its $4.3 billion contribution in 2008, while retail banking profits were flat at $3.4 billion.

Other metrics to measure progress and profitability were positive for the Michael Lee Chin-owned bank.

Hylton cut NCB's cost-to-income ratio from 50.1 per cent to 47.7 per cent; grew earnings per share 18 per cent, to $4.16; added 10 per cent to operating revenue, grew loans seven per cent, to $88 billion, and deposits three per cent to $130 billion.

non-performing loans

But non-performing loans also climbed in the period to $2.3 billion and was 2.61 per cent of the loan portfolio, compared to 2.34 per cent a year ago.

NCB also ended the year as a bigger bank, with assets of $315 billion, up from $291 billion, and an improved net worth of $41 billion, reflecting a 30 per cent growth in its capital base.

Its loan portfolio also rose from $82 billion to $88 billion, but the commercial bank's balance sheet is still more timidly skewed to investment securities, a portfolio that still doubles loan at $167 billion. The investment portfolio also grew by $13 billion, which was more than twice the $6 billion growth in loans.

In the year ahead, the focus, said Hylton, will be "on ensuring that the institution is strong, robust and that it is able to perform in a very difficult environment".

business@gleanerjm.com