Financials 2007

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PERFORMANCE HIGHLIGHTS

The Group recorded a net profit of $6.6 billion for the financial year ended 30 September 2007, compared to $5.5 billion for the previous financial year; an increase of $1.1 billion or 20%. The improved result is driven mainly by the continued focus on our core business, which has resulted in higher earnings from our major income streams.

Earnings per stock unit for the year ended 30 September 2007 increased to $2.68, compared to $2.23 for the same period last year

Return on average stockholders’ equity for the year was 24.84%, up from 23.96% for the comparative prior year.

OPERATING REVENUE

Total revenue for the year was $33.7 billion, representing an increase of $3.7 billion or 12%, when compared to $30 billion for the corresponding period of 2006. The two largest segments, Banking and Wealth Management, contributed 70% and 23% respectively to the overall Group revenue.

The major revenue highlights for the year were as follows:

• Net interest income increased by $1 billion or 9% due mainly to the continued growth in the loan and investment portfolios.
• Net fee and commission income increased by $581 million or 18% which was mainly attributable to fees generated from card and other retail banking related products.
• Net trading income, which is comprised of foreign exchange, fixed income and equity trading gains, increased by $845 million or 36%.
• Premium income from the insurance segment increased by $134 million or 34% over the prior year due mainly to annuity premiums earned since the introduction of this product in September 2006.

OPERATING EXPENSES

Operating expenses (excluding interest and fee and commission expense) for the year totalled $12.1 billion, $964 million or 9% higher than the comparative prior year period. Staff costs increased by $1 billion or 17% mainly due to negotiated salary and allowances for the current financial year and increase in staff profit sharing. Provision for credit losses increased by $122 million or 78%. Impairment losses and depreciation decreased by $164 million and $139 million or 67% and 13% respectively.

PERFORMANCE AT A GLANCE

Comparison of Key Ratios

ASSET BASE

The total assets of the Group increased by $31.1 billion or 14%, up from $223.1 billion as at 30 September 2006, to $254.2 billion as at 30 September 2007. Investment securities grew by $19.3 billion or 16% while loans and advances increased by $14.3 billion or 34%. Reverse repurchase agreements declined by $11.5 billion or 50%.

FUNDING

The increase in the asset base was mainly funded as follows:

Securitisation Arrangements

On 20 July 2007 the Bank raised an additional US$50 million in financing backed by the securitisation of its Diversified Payment Rights.

LOAN PORTFOLIO

The banking segment continues to grow loans and advances which totalled $56.5 billion (net of provision for credit losses) as at 30 September 2007 compared to $42.2 billion as at 30 September 2006. The aggregate amount of non-performing loans was $1.5 billion and represented 2.6% of the gross loans compared to 3.7% as at 30 September 2006.

As at 30 September 2007 the accumulated provision for credit losses determined under Bank of Jamaica regulatory requirements of $2.2 billion represented an overall coverage of 151% of non-performing loans. Provisions for credit losses that exceed the amounts required by International Financial Reporting Standards (IFRS) are credited to a non-distributable Loan Loss Reserve. As at 30 September 2007 the balance in the Loan Loss Reserve was $231.2 million. The Bank’s provisioning policy is in compliance with Bank of Jamaica regulations.

CAPITAL

The Group’s total stockholders’ equity as at 30 September 2007 was $28.5 billion, an increase of $4 billion or 16% when compared to 30 September 2006, and this increase can be mainly attributed to the continued increase in the Group’s profitability. As at 30 September 2007, the Risk-Based Capital Ratio was 14.5% which exceeds the minimum requirement of 10% by the Bank of Jamaica.

DIVIDENDS

On 12 November 2007, the Board declared a final interim dividend in respect of 2007 of $0.17 per ordinary stock unit. The dividend is payable on 12 December 2007 for stockholders on record as at 27 November 2007. The financial statements for the year ended 30 September 2007 do not reflect this resolution, which will be accounted for in stockholders’ equity as an appropriation of retained profits in the year ending 30 September 2008.

BASIS OF PREPARATION

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale investment securities, investment securities at fair value through profit and loss, derivative contracts and investment property.

Where necessary, comparative figures have been reclassified to conform with changes in presentation in the current period.

All amounts are stated in Jamaican dollars unless otherwise indicated.

COMMUNITY RELATIONS

In keeping with its long-term vision of building a better Jamaica, NCB worked assiduously throughout the 2006/7 financial year, undertaking initiatives to enrich and improve the quality of life for many Jamaicans, thereby fulfilling its corporate and social responsibilities as a consistent and good corporate citizen

Education
The N.C.B Foundation contributed over $24 million to various initiatives throughout the year. The Foundation resumed its CXC sponsorship programme with revised requirements, under Phase 2 of the Jamaican Education Initiative (JEI). This will enable secondary students throughout the island to once again benefit from financial assistance with their examination fees for two business subjects; Principles of Business and Principles of Accounts. The Foundation also focused on assisting children with learning disabilities with the Jamaica Association for the Deaf benefiting from funding of $2.9 million. NCB thanks all Keycard holders whose purchases continue to allow us to fund the JEI.

Health
NCB paid close attention to the needs of the health sector throughout the year by contributing approximately $12 million to a number of health projects, touching hundreds of Jamaicans island-wide. The Bank's donation of $8.75 million towards the Heart Foundation of Jamaica's initiative to construct an Education and Emergency Cardiac Training Centre for the treatment of cardiovascular disease was one such activity.

Sports
As part of NCB’s consistent drive to promote and sustain the development of sports throughout the country, NCB lent financial support to numerous sporting clubs, leagues, federations and associations in the areas of football, tennis, netball and basketball and in some instances adopting players or allowing young aspiring athletes to attend overseas training camps that provided them with invaluable exposure. In addition, NCB has made a significant contribution to the Jamaica Football Federation.

Community Development
NCB remains focused on supporting strategic initiatives that help to strengthen our communities and transform them into more encouraging areas to live, work and conduct business. Over three hundred members of the island's police force based at the St. Catherine North Police Station in Spanish Town benefited from improved facilities following the N.C.B. Foundation's donation towards renovation efforts to their station, which enhanced their working environment and bolstered the existing benefits for the police officers.

As a proactive corporate leader, NCB embraces its responsibility to invest in the communities in which its business operate. At the end of yet another robust financial year, we reflect proudly on our commitment to not only do well, but to do good. We thank our employees for their enthusiasm and customers for their fervent support and loyalty, as together we strive to build a better Jamaica for us all.

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