NATIONAL COMMERCIAL BANK JAMAICA LIMITED
National Commercial Bank came into being in 1977 when Barclays Bank sold all of its shares in Barclays Bank Jamaica Limited to the Government of Jamaica. Subsequently, the Government renamed the institution National Commercial Bank Jamaica Limited. In the early 1980s, the Government divested approximately 50% of its shares in NCB and by 1986, NCB Group Limited was formed and listed on the Jamaican Stock Exchange.
On the formation of NCB Group Limited, National Commercial Bank Jamaica Limited became a fully owned subsidiary and holders of shares in the Bank received shares in NCB Group Limited through a swap. In addition, all previous subsidiaries of National Commercial Bank Jamaica Limited became subsidiaries of NCB Group Limited by share swap.
In 1991, Jamaica Mutual Life Assurance Society and Jamaica National Building Society formed a joint venture company called JM&N through which they purchased the Governments remaining shares in NCB Group. This transaction gave JM&N effective control of NCB. NCB Group Limited and National Commercial Bank Jamaica Limited experienced steep losses and an erosion in their capital base and sought Government assistance in 1997.
The Government, through FINSAC, has provided financial assistance to NCB Group and National Commercial Bank totaling $19.5 billion. Of this, $13.5 billion provided liquidity support through the purchase of bad debts while $6 billion was used to re-capitalize the institutions through a mix of Ordinary and Preference shares.
As a result of this support, FINSAC has acquired 40% of the outstanding ordinary shares of NCB from NCB Group Limited and 43.8% of NCB Group Limited making it the single largest shareholder in NCB Group. $1.163 billion of FINSACs investments is in 30 year redeemable preference shares at zero interest in National Commercial Bank.
FINSAC support has been through Government-backed bonds which attract interest at 1% above the latest six-months Treasury Bill weighted average interest rate. Interest is payable in cash or bonds semi-annually. FINSAC has six seats on the Board of Directors.
The goal of FINSAC is to put NCB on a profitable footing and to divest the shares acquired as soon as possible. Consequently, NCB developed a Rehabilitation Plan for the Bank which has been approved by FINSAC. Since then FINSAC has been actively monitoring the progress of the rehabilitation measures.
One condition of the FINSAC assistance is that NCBs net profit after tax must be retained in its banking reserve fund so that the bank can achieve and maintain a minimum primary capital base to total assets ratio of 8%, and a minimum capital base to risk weighted assets ratio of 12%.
Additionally, in common with other financial entities supported by FINSAC, NCB and its holding company NCB Group Limited are being returned to their core business of banking, and financial services an important aspect of Governments rehabilitation of the financial sector. Consequently, divestment of non-core business which began prior to the FINSAC assistance, has accelerated.
NCB Group Limiteds investments are primarily in entities providing financial services, but it has investments in real estate, agriculture and tourism. It has some 26 subsidiaries, including NCB with its own subsidiary.
The NCB Group reported a net profit of $405 million for the year ended September 1999, a significant turn around from its loss of $1 billion in the previous year. This was achieved against the background of the Bank:-
· Rationalizing its branch network.
· Rationalizing staff from 3,110 to 2,614
· Consistently meeting the statutory liquid assets ratios
· Moving towards capital adequacy
FINSAC, in preparation for divestment of its stake in NCB and NCB Group, has contracted a leading investment bank to undertake the due diligence and make recommendations for taking the bank to the market.
Link to NCB's Scheme of Arrangement - November 2000
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