Capital & Credit Merchant Bank (CCMB) continues to re-position its business strategy to meet the significant challenges in the local and international financial markets. The Group continues to operate in a declining spread environment, with yields locally being stable to declining, and overseas interest rates continuing to persistently increase, both in the United States and in the Caribbean region. In light of this, the Bank and its subsidiaries continue to pursue the strategy started mid-2005 of building its Non-Proprietary Income streams; combined with re-structuring its Balance Sheet, selectively acquiring higher-yielding assets, while managing the cost of acquired funds and pursuing general cost-containment. These initiatives have proven to be relatively successful as the Group has maintained its Net-Interest Income at J$252.77 million for the quarter, while simultaneously constraining the overall size of its Balance Sheet. This has occurred despite the announcement by the United States Federal Reserve Board of interest rate hikes totalling 200 basis points over the comparative quarters 2005/2006.
Another important effect of the strategy already being realized is a notable improvement in the area of Non-Interest Expenses: $422.4 million for the first six months of 2006 compared to $492.6 million in the comparative period, 2005. This 16% decrease is primarily attributable to a reduction of staff costs.
CCMB’s Loan Portfolio profile has also benefited from the change in strategic direction. Loans at the end of the second quarter stood at J$3.38 billion, a 35% increase over the comparative quarter in 2005.
For the period ended June 30, 2006, the Group generated Net Profit after Tax of approximately J$132 million, compared to just under J$394 million in the comparative quarter 2005. This is primarily due to the reduction in trading gains during the period from J$400 million in the comparative quarter, to approximately J$80 million in the current quarter.
As explained by Bank President & CEO, Curtis Martin, “It is important to state that a significant part of Capital & Credit’s earnings over the comparative period and beyond in 2005 came from the liquidation of the Equities portfolio to facilitate the Group’s banking activities. The gains realized from the sale of these shares amounted to approximately J$262.4 million last year, and we have not replicated this level of activity since. Additionally, the decline in trading gains was due to the negative impact of world events on the value of Government of Jamaica United States denominated bonds during the second quarter, which limited the trading opportunities in these securities.”
The Organization’s Total Assets increased to just over J$56 billion, compared to approximately J$54.5 billion for the comparative period 2005.
The Bank’s Capital Base as reflected in total Stockholders’ Equity was J$4.7 billion at the end of the second quarter 2006, strengthened by Net Profit Earnings of J$478 million for the first six months of 2006. The quality of the Capital Base is also enhanced by the transfer of J$432.4 million from Un-appropriated Profit to Retained Earnings Reserve.
Mr. Martin explained: “The resulting improvement in Tier 1 Capital to J$3.55 billion provides greater scope for expansion, in addition to ensuring that regulatory standards for Capital Adequacy are met and superseded.” Tier 1 Capital is the fundamental measure of a Bank’s financial strength and consists of the types of financial capital regarded as particularly sustainable, primarily equity.
Giving an update about the status of the technological transformation component of the Organization’s consolidation strategy, Chairman and CEO of the Capital & Credit Financial Group, Ryland T. Campbell, stated that “the Group has made significant progress in its implementation of new technology. It is expected that the new technology will improve not only efficiency, but also the Group’s capability, particularly in respect of customer service and access; product origination and competitiveness; as well as improved corporate reporting, planning and research.”
“Implementation of the new technological platform,” Mr. Campbell says, “is anticipated for the first quarter of 2007.”
