The management of NCB Financial Group Limited, NCBFG, lashed out against staff fraud at the financial institution while signalling that it will compensate any client affected.
“NCB will reimburse our customers who are victims of internal employee fraud for quantifiable monetary losses. Full stop. I want to be clear about that,” said President & CEO Patrick Hylton while addressing shareholders of the banking conglomerate at the company’s annual general meeting on Friday, adding that NCB over the years has invested billions to protect its customers via technology, systems, and procedures.
“We have a zero stance on employee fraud, and all cases will be reported to the Jamaica Constabulary Force,” he said.
On Thursday, bail in the amount of $5 million was offered to Khadene Thomas, a former NCB wealth adviser based in St Ann, who is facing the court on charges of defrauding the company of $43 million.
Separately, the financial sector as a whole continues to reel from the investigation of an alleged $3 billion fraud at brokerage house Stocks & Securities Limited, which was reported by the company on January 10 to the Financial Services Commission after taking a statement from an implicated ex-employee, Jean-Ann Panton.
“[On] the matter of employee fraud in the financial sector, trustworthiness is a cornerstone of our value system at NCBFG, an essential aspect of who we are, and how we conduct ourselves as an organisation. We understand that trust is earned and not given,” said Hylton.
The NCBFG president also declared his support for stiffer penalties for office theft, otherwise referred to as white-collar crime.
“I cannot comment on the ongoing investigation, but I can say that the NCBFG fully supports the finance minister’s stated commitment to transparency and accountability, to prosecuting perpetrators to the full extent of the law, and strengthening the penalties for white-collar crime,” he said.
NCB Financial is Jamaica’s largest financial conglomerate with assets of more than $2 trillion and a net worth of $220 billion. It is in the business of commercial banking, investment banking and securities dealing, and insurance.
Hylton said that the country has come a long way in increasing financial stability with improved regulatory oversight since the 1990s. Hylton rose to prominence as the former head of FINSAC, the bail-out agency created by the Jamaican Government to rescue the financial sector. One of the banks that benefited from the rescue programme was NCB itself, which the Government later sold to Michael Lee-Chin two decades ago.
“Jamaica’s banking and securities dealer sector are strong and well capitalised. The country has come a long way since the 1990s in terms of regulatory oversight and risk management oversight in various financial institutions,” Hylton said. “The level of uncertainty will remain for some time.”
Embezzlements aside, the financial sector is facing other uncertainties relating to frequent adjustments in interest rates both locally and by other central banks in major markets worldwide and expectations that large economies could dip into recession amid continuing war in eastern Europe and untamed inflation.
NCB Financial’s outlook is for several headwinds in 2023, including geopolitical risks, global inflation, low growth, and the restrictive policy stance by central banks.
Within that mix, for the December 2022 quarter, NCB Financial recorded a dramatic fall in profit year on year, from $5.4 billion to $1.35 billion.
Discounting the portion of earnings attributable to non-controlling interests, the profit carved out for shareholders of NCBFG fell from $2.64 billion to $836 million – a level not seen since the June quarter of 2005.
The biggest drag was the life insurance segment, which declined by more than 80 per cent, due to what Deputy CEO and Chief Financial Officer Dennis Cohen said was a one-off actuarial adjustment and revision to reserve assumptions.
The decline in earnings came on the heels of “record results” for the previous quarter, July-September 2022, when NCB Financial clocked $14 billion in profit, $8.7 billion of which was attributable to its owners, against the backdrop of an “often times volatile and complex” market, Cohen said.
NCBFG’s capital as a proportion of its total assets stood at 8.2 per cent up to December 2022, from 7.1 per cent three months prior. The improvement, notwithstanding, NCB Financial continues to hold off on paying a dividend to shareholders in order to maintain its capital buffer against potential shocks.
Cohen said the group remained “well capitalised”, bolstered in part by its continued dividend avoidance.
“Despite the macroeconomic headwinds, the business outlook remains positive as our local and regional pipelines remain robust and should improve as interest rates stabilise and the possibility of a downward trend,” Cohen said at the meeting.
“Future performance is expected to be bolstered by reduced volatility at the Bank of Jamaica and the US Federal Reserve as increasingly, rate cycles appear to be closer to neutral. The bank’s strong liquidity buffers present opportunities to capitalise on the market opportunities,” he said.
business@gleanerjm.com