Hill… the quality of service that NCB now offers to customers has improved across the board.
The following questions were recently posed to Aubyn Hill, Group Managing Director, National Commercial Bank (NCB) Jamaica Limited.
Q: How has the Performance of NCB improved since AIC took it over?
A: I suppose the best place to begin this answer is with a couple of figures. Michael Lee-Chin led AIC Limited, Canada's largest private mutual fund company in which he owns over 90 per cent of the shares, to purchase 75 per cent of the shareholding in NCB in March 2002. The March 2002 figures is a good starting point for a performance comparison.
For the quarter ending March 2002, the consolidated net profit of the group was $217.156 million and the half-year to March 31, 2002 was $385.15 million.
PERFORMANCE
The nine-month performance to June 30, 2002 was $814.8 million. The consolidated figures for the quarter ending March 31 2004 was $1.14 billion and the half-year figure was $1.89 billion.
The nine months consolidated net profit to June 30 2004 was $2.8719 billion. The group assets totalled $111.49 billion at the end of March 2002 while the figure at June 30 2004 was $167.74 billion. Our loan book grew from $10.79 billion on March 31 2002 to $33.09 billion on June 30 2004.
NCB share price at the time the deal was closed in March was just over $6.00. Today the stock price is around $24.60 and it reached a high of $31 a couple months ago. Between the purchase and now the stock price has improved by almost five times at the highest point in April 2004.
SECOND QUARTER PROFIT
The figures show that the second quarter profit of the Group (January-March) 2004 is 5.2 times the profit for the same quarter of 2002 the time when AIC purchased 75 per cent of NCB's shares.
In September 2002 when I joined the NCB Group, the cost-to-income ratio (the measurement of how many cents or dollars it takes to make one dollar of operating revenue) was at 76.79 per cent while at the end of June 2004 the figure had fallen to 62.60 per cent.
This important achievement was accomplished even while the institution is going through a major transition in terms of implementing a new core banking system, as well as changing and installing other new computer systems in our major subsidiaries and in certain divisions of the banking operations.
This reduction in our cost-to-income ratio was also achieved without major reductions in our staff and while important operating procedures are being re-engineered.
However, as we seek to achieve a world-class cost-to-income ratio (generally considered to be between 40-45 per cent) we will be obliged to deploy more of our existing staff in selling and service functions (as we automate and centralise more and more of our back office operations that will be driven by the new computer system). The mix of our staff will change as we bring in new, young graduates after we put them through our intensive training programmes.
NOTICEABLE PERFORMANCES
There are two noticeable and significant areas on which I'd like to comment as we consider the ways in which NCB's performance has improved since AIC became the Group's major shareholder.
First, the NCB Group has become financially much stronger. When the purchase of NCB was completed the capital of the Group was $9.388 billion and at the end of June 2004 the consolidated shareholder's equity was $15.939 billion.
Second, the quality of service that we now offer to our customers has improved across the board and our service quality standard is constantly being raised to challenge, positively, our staff to serve our customers better.
Mike Lee-Chin, the ultimate sales and service leader, leads the building of a sales and service culture in the NCB Group. I come from a background at American Express Bank where the AMEX Group is legendary for the way it goes about providing financial services to the many customers that the Group serves, through its banking, card services, insurance and other subsidiaries.
SERVICE LEADER
At NCB we have begun to convert the approach of the Group to become a clear selling and service leader in the financial services business.
Most of our customers will have noticed the change in the approach we now take in the bank as well as in NCB Capital Markets, NCB Insurance Company, West Indies Trust Company and by the staff in the bank and its subsidiaries.
It is clear that we have a long way to go but we are committed to training our staff, monitoring their behaviour and measuring their performance against more and more detailed and well defined targets and delivery points.
HIGHER TARGETS
We know that the 'service excellence' is a moving destination because the moment we think we have 'arrived' we will begin to slide; rather, we will continue to train, continue to measure, and continue to encourage our staff to reach towards clear and ever higher targets.
We believe that our customers have begun to notice that the service quality at NCB has improved quite markedly in the two years since AIC bought into the NCB Group. Many customers tell us so.
Q: To what do you attribute this improvement in performance?
A: When a large institution such as NCB experiences a major change of ownership as happened when AIC purchased 75 per cent of the shares of the company in March 2002, one has to look first to the board of directors its composition and leadership when assessing post-purchase perfor-mance improvement.
BOARD OF DIRECTORS
The NCB board of directors is comprised of 13 experienced men and women who are entrepreneurs, accomplished business leaders of large economic enterprises in Jamaica, academicians, practising businessmen and businesswomen, lawyers and bankers. Michael Lee-Chin provides leadership to this accomplished NCB board of directors.
From the position of chairman of the board, Mike sets very high standards which the bank and all the subsidiaries in the NCB Group strive to meet.
It is an understatement to say he is 'hands-on'. By holding board meetings every month (one of the first policy decisions I supported on joining NCB although it means a tremendous amount of work for management in terms of preparation and delivery of exhaustive board papers) board members remain very informed about the affairs of the Group and are involved in policy making and the constant assessment of the overall performance of Group companies.
Mike's stated higher purpose of 'Building a Better Jamaica' and his practical and public commitment to this goal provide us as board members with a broader, better, higher principle which we use collectively and individually to guide NCB's companies 'to do well in order to do good' in the society. I have no doubt that one of the solid reasons why NCB's performance has improved is the clear commitment to this higher national purpose.
Another reason for the improved performance within the NCB Group is that at the practical level we in management are committed to hard work and changing the organisation for the better.
The change in ownership also ushered in a change in management. I was brought in officially on September 1, 2002 and since then our Group deputy managing director, Patrick Hylton, joined.
In addition, six new executives have been recruited and seven others promoted to the senior management team in the bank. Management changes have also been implemented at the subsidiaries level where Christopher Williams joined us a few months ago as deputy managing director at NCB Capital Markets (formerly Edward Gayle & Company Limited) and Ingrid Chambers was appointed as the new managing director for NCB Insurance Company Limited (formerly OMNI Insurance Services Limited) as well as the activities for West Indies Trust Company Limited and NCB Jamaica (Nominees) Limited.
SENIOR MANAGEMENT TEAM
Apart from these executives who joined or were promoted to the senior management team after I arrived, there are many others involved in the change process because it is important to recognise that changing an organisation involves a change in people's mindsets.
The senior management mix at NCB has changed significantly in the past two years and that change is an important factor in the improved performance of the organisation.
Both the board and manage-ment recognise that the culture of NCB has had to change in order to bring us the improved performance that all our stakeholders require.
See part two next week.
