NCB Financial Group made $40 billion in profits last year but hasn’t paid shareholder’s dividends in over two years! What’s up with that?

The last time NCB Financial Group paid shareholders dividends was in May 2021 and believe it or not, that was more than two years ago. 

So, what’s going on? 

Well, during the height of the COVID-19 pandemic in 2020, the Bank of Jamaica ordered all financial companies to temporarily stop paying dividends.  Because there was so much economic uncertainty at the time, BOJ thought it was wise for companies to hold onto their cash for a while.

The order was lifted some months later, and NCB declared an interim dividend of 50 cents per share in May 2021.  But investors have been waiting ever since for their next payment, despite the company making $40 billion in profits last year.

Our Analysts on Taking Stock have given a couple of reasons why the company might be holding on to cash.

According to Business journalist, David Rose, NCB might be holding excess capital as Jamaica implements Basel three.  Basel three is an international regulatory standard that requires banks to hold more cash on their books.

And NCB is the Jamaica’s largest commercial bank, so it would likely be required to have a higher amount of money in reserves to meet the new standards. 

Then there’s everyone’s favourite friend, interest rates. Investment Research and Sovereign Risk Analyst at JMMB Group, Leovaughni Dillion, pointed out last year that with interest rates rising, the value of many of NCB’s longer-term assets like bonds would have changed.

Plus with talks of a recession in the air, NCBFG would want to hold onto capital. 

Dillion explained that the last thing anyone would want is for NCB to pay out dividends now and there’s a recession and they run short on cash to pay their bills.

Remember NCB is Jamaica’s largest commercial bank, and if they start having problems, other institutions will follow.  NCB is also the government’s banker, so the implications would be huge!

There are also a lot of people and companies who depend on the success of NCB. Several pension funds invest in NCB to pay pensioners. Which may play a role in why the company is being so cautious about hoarding excess cash.

But on the other hand, not paying dividends has still left some pensioners in a pinch because they depend on these payments to live. 

Sometime last year, there was an Our Today news article, and the writer blasted the NCBFG, saying that the company doesn’t care about shareholders, and they’ll only pay dividends again when chairman Michael Lee-Chin wants to buy another mega yacht.

BUT in an interesting turn of events, Lee-Chin himself said he’s vex that NCBFG hasn’t paid dividends for that long. He even told the Jamaica Observer that he had to sell his mega yacht and other assets because he’s not getting regular dividends from NCB to pay his bills

Dividends have been THE big issue at the heart of the recent NCB drama.  So it’s expected that with the new changes, the bank will resume regular payouts, making shareholders happy.  

But we’ll have to wait and see what they new board decides… and that’s the bottom line.