Financials 2001

The Directors of the Bank:

1. Have authorised the release of the audited accounts for the year to 2001 September 30. They are compared here with those for the year to 2000 September 30, restated as if New Banking Group had been in existence for that period.

    

   	YEAR ENDED 2001 Sept.30 J$'M	Restated YEAR ENDED 2000 Sept.30 J$'M
   REVENUE	14,527	15,298
   EXPENSES	13,021	13,406
   Profit before Exceptional and Extraordinary Items	1,506	1,892
   Exceptional items	(1,026)	(287)
   Profit before Taxation and Extraordinary Item	480	1,605
   Taxation	(37)	(36)
   	443	1,569
   Minority interest in results of subsidiaries	(48)	(53)
   Profit after Taxation and before Extraordinary Items	395	1,516
   Extraordinary items	(25)	(1)
   NET PROFIT	370	1,515
   EARNINGS PER STOCK UNIT
   Before extraordinary items	$0.20	$0.77
   After extraordinary items	$0.19	$0.77
   NET ASSET VALUE PER STOCK UNIT	$4.59	$4.71
   EARNINGS BEFORE TAXATION, EXCEPTIONAL & EXTRAORDINARY ITEMS EXPRESSED ON A PER STOCK UNIT BASIS	$0.76	$0.96

    

   The Bank has been in discussions with MoFP since March 2001 and has now accepted a proposal, effective 2001 April 01, in relation to the Finsac Bond Portfolio. It comprised J$41.7 Billion in face value of Jamaican Dollar denominated bonds and US$91.3 Million in face value of United States Dollar denominated bonds, both inclusive of interest accrued to 2001 March 31. The agreement involves the replacement of the Finsac Bond Portfolio with Government of Jamaica Local Registered Stocks with a varied mix of interest rates, maturities and currencies, which are summarised here.

    

   	REPLACEMENT LRS PORTFOLIO		FINSAC BOND PORTFOLIO
   	J$'M	%	J$'M	%
   US$ Denominated or linked Fixed - 9%, 9.75% & 10.5%	9,179	20%	4,179	9%
   J$ Denominated:Variable Rate - WATBY* minus 4% year 1, minus 2% year 2, WATBY years 3 & 4, & WATBY plus 1% thereafter	21,399	47%	-	-
   WATBY	3,573	8%	-	-
   WATBY plus 1%	-	-	41,693	91%
   Fixed - 10%,12%, & 15%	11,721	26%	-	-
   Total Face Value	45,872	100%	45,872	100%
   * WATBY = Six Month Weighted Average Treasury Bill Yield

    

   
   There are differences in quality between the Finsac Bond and Replacement LRS Portfolios, including:

   • LRS instruments are fully tradeable, whereas Finsac Bonds are not
   • Interest on LRS instruments is payable in cash whereas interest on Finsac Bonds has, to date, been paid by way of further Finsac Bonds.
   
   
   MoFP has undertaken to redeem J$10 Billion of the J$11.7 Billion Jamaican Dollar denominated securities referred to above, fixed at rates of 10%, 12% and 15% per annum at 2002 September 30 in that order of priority. J$2 Billion of the 10% fixed rate instruments will be redeemed by 2001 December 28. To the extent that said redemption does not occur on the specified dates, the securities will earn interest at WATBY.
   
   
   
   • Assuming redemption as aforesaid, the weighted average maturity of the Replacement LRS Portfolio is 7.6 years, compared to 8.6 years for the Finsac Bond Portfolio.
   • Interest due to 2001 September 30 totalling approximately J$1.4 Billion (before withholding tax) will be paid in cash by 2001 November 30.
   
   

   In accordance with the Bank's accounting policies, the Replacement LRS Portfolio has been accounted for on the basis of the lower of cost or market value. This gives rise to an exceptional expense item of J$328 Million reflected in the audited accounts. Assuming redemption as aforesaid, the provision of J$328 Million will be reversed in the accounts of the Bank for the year to 2002 September 30.

2. Announce that management has commenced a Transformation Initiative to meet and enhance product development capabilities and service delivery. This will involve, amongst other things, the acquisition and installation of a new Information Technology (IT) system, the improvement of all existing service delivery channels and the establishment of new ones, to optimise efficiency and service to customers.
   
   It is expected that this Initiative will be substantially completed by the end of 2005.
   
   A significant investment of US$40 Million, of which approximately 60% will be IT and training related expense, will see - as with other technology enhanced financial services organizations - an overall reduction in staff numbers, particularly in processing and administration. However new jobs will also be created and increasing numbers of staff retained for customer focused roles. The redundancy programme is estimated to impact 840 employees, particularly arising in the latter years of the initiative, ie., between 2003 and 2005. This has resulted in an exceptional expense item of J$668 Million in the audited accounts.
3. Announce that a second interim dividend of $0.05 per stock unit will be paid out of profit in respect of the year to 2001 September 30 on 2002 January 30 to stockholders on record as at 2001 December 28. This recognises the statement to stockholders on 2000 October 03 that not less than 15% of the post tax profits of New Banking Group for the year to 2001 September 30 would be paid in dividend dependent on financial performance and the maintenance of appropriate regulatory capital.
   
   The Directors will not be recommending a final dividend.
4. Have authorised the release of the quarterly results for the three months to 2001 June 30. These and the cumulative results for the nine months to 2001 June 30 are compared here with those for the quarter and nine months ended 2000 June 30 respectively, restated as if New Banking Group had been in existence for that period.

    

   	QUARTER ENDED 2001 June 30 J$'M	9 MTHS ENDED 2001 June.30 J$'M	Restated QUARTER ENDED 2000 June.30 J$M	Restated QUARTER ENDED 2000 June.30 J$M
   REVENUE	3,297	10,901	3,774	10,826
   EXPENSES	2,795	9,627	3,367	10,175
   Profit before Exceptional and Extraordinary Items	502	1,274	407	651
   Exceptional items	(400)	(400)	(34)	(34)
   Profit before Taxation and Extraordinary Item	102	874	373	617
   Taxation	61	(39)	(80)	(99)
   	163	835	293	518
   Minority interest in results of subsidiaries	(17)	(30)	(18)	(34)
   Profit after Taxation and before Extraordinary Items	146	805	275	484
   Extraordinary items	-	3	-	-
   NET PROFIT	146	808	275	484
   EARNINGS PER STOCK UNIT
   Before extraordinary items		$0.41		$0.24
   After extraordinary items		$0.41		$0.24

    

   As mentioned above, the Replacement LRS Portfolio has been accounted for on the basis of the lower of cost or market value which, at 2001 June 30, gave rise to an exceptional expense item of J$400 Million.

5. It is noted that on 2001 November 23, the Bank of Jamaica (BoJ) published details of unaudited assets and liabilities of commercial banks, including NCB, as at 2001 June 30.

6. As indicated by BoJ, these balances were taken from unaudited prudential returns submitted to it, and, in the case of NCB, were not attested as true and fair by the management of the Bank. No attested results for the quarter to 2001 June 30 have been released by the Bank to BoJ prior to this communication.

   The release of the quarterly results and the declaration of a second interim dividend could not be authorised or made until agreement had been reached in relation to the Finsac Bond Portfolio.

    

7. Announce that The Hon. Noel A. A. Hylton, O.J., Hon. LLD who has been a member of the Board for the last four years will become Chairman of the Bank with effect from 2001 December 01. The Hon. Oliver F. Clarke, O.J. will step down as Chairman from that date. He will remain a Director of the Bank.