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Jamaica Best Bank: National Commercial Bank

Nov 1, 2012

Jamaica¹s economic woes have not made life easy for its banks ­ and conditions are not expected to improve soon.

After struggling through a prolonged recession, last year Jamaica¹s real GDP grew by 1.5% and is forecast to grow by just 0.5% this year, according to Fitch, which expects an average growth rate of 1.0% for 2013-2014.

National Commercial Bank of Jamaica, which had total assets of J$379.4 billion ($4.23 billion) as of mid-year ­ up by J$31.5 billion dollars from the year before ­ remains the country¹s largest player, rendering it best equipped to handle any further economic deterioration.

NCB accounts for nearly a third of the assets in the banking system. At the end of the first quarter, it held the largest market share in loans (38.1%) and deposits (38.4%) in the commercial banking industry, according to the central bank. It also has the largest branch network and capital base.

NCB has concentrated recently on developing its retail operations ­ particularly consumer credit and unsecured consumer loans, credit cards, mortgages and car loans. Small and medium-sized business (SME) lending is also growing, which is a positive sign for the bank, says Theresa Paiz-Fredel, an analyst at Fitch.

The bank has grown in spite of the country¹s poor economic activity. Loans were up by 18.4% compared to June last year, and non-performing loans stand at 7.1% of gross loans, as opposed to 7.3% the year before. Deposits were also up 13.3% from June 2011.

NCB ranks top in loan share, deposits and equity, generally dominating its market ahead of much smaller banks, Paiz-Fredel says, noting that foreign banks¹ presence has offered some competition, though not enough to knock NCB from its perch.

As of March this year, NCB was the leader in terms of loan market share, at 38.1%, and deposits 38.4% on the commercial side, according to the bank. Its size means it does not need to rely on any one specific product area. ³Relative to other banks in similar markets, NCB¹s income streams are much more diversified,² Paiz-Fredel says.

While NCB¹s loan portfolio has been highly concentrated, it is diversifying as corporate lending declines, Paiz-Fredel says. The bank has also invested in technology and IT, so its efficiency should improve down the line. NCB says it plans to continue focusing on deposit portfolio growth.

For the year ahead, it highlights strategic initiatives that include centralizing underwriting and delinquency management functions. LF



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